ARCHIVED - Transcript, Hearing 19 September 2014

Volume 10, 19 September 2014

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

SUBJECT:

Let's Talk TV: A Conversation with Canadians

HELD AT:

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

Transcription

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

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

Canadian Radio-television and Telecommunications Commission

Transcription

Let's Talk TV: A Conversation with Canadians

BEFORE:

ALSO PRESENT:

HELD AT:

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

- iv -

TABLE OF CONTENTS

PAGE / PARA

PRESENTATION BY:

Gatineau, Quebec

--- Upon resuming on Friday, September 19, 2014 at 0832

20888   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

20889   Madame la Secrétaire.

20890   LA SECRÉTAIRE : Merci.

20891   We will now start this morning with the presentation of Netflix.

20892   Please introduce yourself and you may begin.

--- Redacted

21569   THE CHAIRPERSON: We will -- I can just imagine what the journalists will do now, so why don't we take a break till 10:30? Thank you.

--- Upon recessing at 1016

--- Upon resuming at 1030

21570   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

21571   Madame la Secrétaire.

21572   LA SECRÉTAIRE : Merci.

21573   We will now hear the presentation of the U.S. Television Coalition.

21574   Please introduce yourself and your colleagues and you may begin.

21575   THE CHAIRPERSON: It's broadcasting, you have to press the little button so we hear you.

PRESENTATION

21576   MR. LAWLOR: There we go.

21577   My name is Brian Lawlor. I'm the Senior Vice President Television with the E.W. Scripps Company.

21578   Seated to my right Rebecca Duke, Vice President of Distribution for LIN Media.

21579   To her right is Frank Schiller, the Secretary of our working group.

21580   To my left, your right, would be Jane Marshall, Associate General Counsel for the Graham Media Group.

21581   And at my far left would be Ryan Vandewiele, the Associate General Counsel for Hubbard Broadcasting.

21582   So, good morning, Mr. Chairman, Commissioners, Commission staff. Thank you for the opportunity to participate today.

21583   As I just said, my name is Brian Lawlor and I serve as the Senior Vice President for Television at the E.W. Scripps Company. I serve on the boards of the National Association of Broadcasters and The Broadcasters Foundation of America. I'm the past President of the NBC Affiliates Board and a current member of the ABC Affiliates Board.

21584   I am here on behalf of the U.S. Television Coalition, a working group of American television station owners, with my counterparts who we just introduced.

21585   As our time is short, we will get straight to the point.

21586   As owners of American television stations with signals and programming imported and retransmitted to TV subscribers across Canada, we are here seeking your support for reforms that will result in a fair and equitable treatment of our signals and content in Canada.

21587   Our working group includes some of the oldest and most widely distributed American TV stations in Canada, including stations that originate from Detroit, Buffalo and Minneapolis.

21588   We are here in good faith. Our government representatives have informed us that this is the forum for our concerns to be heard and we appreciate the courtesy that you have extended us to discuss these issues.

21589   For decades, the retransmission of American TV signals has subsidized the profitability of Canadian cable and satellite TV services.

21590   Over time, that subsidy increased with an expanding CRTC list of available free American TV channels authorized for distribution.

21591   Along the way, our American stations have been there for Canadian pay TV distributors and Canadian consumers with each technological development, from microwave to satellite relay, from analog to digital and now high definition broadcasting.

21592   As the technology evolved, so did Canadian broadcasting distribution regulations.

21593   The list of American stations authorized for distribution grew beyond border stations and the conventional networks to include stations from Los Angeles to New York City to Atlanta. In most cases, this was done without consent.

21594   Canadian distributors are now established multibillion dollar enterprises. To the extent that they ever were in need of building their businesses on the backs of our stations, the free use of our signals can no longer be justified.

21595   Our stations are more than just network affiliates. We also produce 30 to 55 hours of local programming per week, from news, weather, sports or entertainment programming. And this is growing.

21596   The current economic and technological realities, including digital multicasting, HDTV, mobile TV and over-the-top services, require a new regulatory approach.

21597   This new reality is reflected in changes the Commission implemented to the list of authorized non-Canadian programming services, which now provide declarations that they agree with sponsorship and they hold the necessary rights for distribution.

21598   These changes did not apply to our stations. Grandfathering provisions should not be used to sidestep important issues when it comes to our redistribution in Canada.

21599   We urge you to consider reforms that would rectify the disparate treatment, taking into account our shared history, our core values, our borders and our excellent bilateral relations.

21600   To achieve these goals, we offer a four-point plan.

21601   First, we support and encourage the adoption of the all-Canadian basic proposal. Not all Canadian markets have off-air U.S. stations available, and American stations are not local stations in Canada. Allowing Canadian TV subscribers to choose what American stations they want is positive. It is essential that as part of this offering U.S. stations require affiliation agreements. Affiliation agreements between BDUs and American TV stations will provide the appropriate mechanism to address all the related distribution issues, including the relevant terms and conditions, rights issues, commercial substitution in overlapping markets, and more.

21602   Second, negotiation, not regulation, offers the most robust and customer-focused solution for the challenges of simultaneous substitution. Within the appropriate terms and conditions, affiliation agreements would extend into new offerings and services such as TV Everywhere.

21603   Third, with respect to the list of non-Canadian services authorized for distribution, the process for maintaining, adding or removing has to be open, transparent and equal, including notice, consultation and consent. There should also be proper reporting and audit requirements.

21604   Fourth, American TV stations must be provided with equitable and non-discriminatory remuneration opportunities on the retransmission of distant signals, including under the Broadcasting Distribution Regulations.

21605   Just as Canadian distant stations have consent rights, and like the de facto consent rights enjoyed by the vertically integrated Canadian broadcasters, so to should we have them.

21606   Building on our positive trade relationship means fair treatment under the existing rules and conventions.

21607   Unlike value for signal, our 4 Point Plan does not require the Commission to reach beyond the scope of its legal authority.

21608   The Supreme Court recognized the Commission's authority under 10(1)(g) of the Broadcasting Act to make regulations respecting the carriage of any foreign programming services by BDUs.

21609   Our plan deals with the practical matters of administration in support of the Commission's cultural mandate.

21610   Canadian TV subscribers do not experience benefit from the American TV subsidy. Canadian TV bills rose as the number of American TV stations included in the channel packages increased. Suggestions the 4+1s are free for Canadian TV subscribers are not based in evidence or past practices.

21611   Implementing our 4 Point Plan will contribute to an environment where TV subscribers will receive what they want to watch and will provide a check on the costly oversupply of what they do not want to watch.

21612   While recognizing that copyright and the compulsory licence is not within your jurisdiction, the interrelationship between the regimes is obvious. Simply put, it is broken.

21613   The situation is so bad that American stations are paying around $8 million for distribution in Canada. It is not working, and poor data for Canadian viewing of American stations is part the problem.

21614   We support the proposal for a working group on a set-top box audience measurement system provided the group includes representation from the American television stations. Accurate viewer data for American stations in Canada is essential.

21615   We would propose to extend the scope of the mandate for the working group to include work on the relevant issues necessary for the implementation of the affiliation agreements between the BDUs and the owners of the American stations.

21616   In conclusion, fairness, due process, and open dialogue are key to moving forward. By positively working together, regulators, distributors and broadcasters, including American station owners, we can renew the Canadian television framework for consumers into the future.

21617   We thank you again. Our committee is happy to answer any of your questions.

21618   THE CHAIRPERSON: Thank you very much. So I will start this off.

21619   I know one of the members of your Coalition filed an application and I'm inviting you to keep well away from that application in this line of questioning.

21620   I'd like you to elaborate because at this point it's not obvious to me how your proposals actually advance the policy objectives that Parliament has given us as our marching orders, and obviously if you're here asking for us to do something you have to frame it within section 3(1) and I guess 5(2) objectives of the Broadcasting Act.

21621   MR. SCHILLER: While I think that --

21622   THE CHAIRPERSON: Your microphone please.

21623   MR. SCHILLER: Oh, pardon me.

21624   If the Commission determines in its collective wisdom that Canadian TV subscribers should have access to American television stations, then that's the framework from which we're approaching these discussions.

21625   Obviously, the availability of American television stations goes back to the very formation of the Canadian distribution system and the Commissions in their collective wisdom over the years have accepted that this is within their cultural mandate. And I believe the Supreme Court also reaffirmed that in the value for signal decision.

21626   So obviously, we defer to the Commission's decisions in making the stations available and the group is seeking a renewed framework to make that sustainable moving forward.

21627   THE CHAIRPERSON: I get the point that one of the objectives of the Broadcasting Act is to ensure that Canadians have access to a wide variety of content, including non-Canadian content. I mean they obviously, as I do and many others, appreciate foreign content, including American content like any other, but I'm not sure how your proposal of actually requiring specific consent actually leads to that. In fact, one could argue it leads quite to the opposite because you would then have a regulatory tool to prevent the distribution of the content.

21628   MR. SCHILLER: If I may, I think that right now the current system is contributing to the oversupply of duplicate American programming at a cost for the Canadian consumer, and the proposals being put forward are to provide a check on that by ensuring a dialogue between the distributors and the station owners.

21629   THE CHAIRPERSON: But isn't your real plan to negotiate affiliation agreements and get payments for consenting to being distributed, and that therefore creates an additional cost to distributors and therefore ultimately to subscribers?

21630   MS DUKE: If I could just jump in, Rebecca Duke, Vice President Distribution, LIN Media.

21631   I think one of our concerns being here, I mean part of it may be remuneration but a lot of it is also we need to minimize our risk. And we are being distributed throughout Canada. We don't know where our stations are distributed. We don't know if we're in compliance with your regulations. We don't know what potential liabilities we may face.

21632   So, in my mind, on behalf of my company, the big issue is minimizing our risk and our potential liabilities and we thought this was the right venue to step forward and say we have some issues and if we're talking TV, we would like to bring that to your attention as part of this proceeding.

21633   THE CHAIRPERSON: It is the right venue, it's just you still have to make your case and I'm having difficulty -- earlier we were talking about the need for evidence but, you know, we combine our legislative mandate with our ability to gather evidence and we bring those two elements together to come up with our decisions.

21634   In this case, what I'm asking you is I'm not sure why your proposals actually advance the policy objectives of the Broadcasting Act. In fact, they may actually go contrary to it.

21635   MR. LAWLOR: If I could elaborate on Ms Duke's point.

21636   You know, I don't think we're shy in saying that we do think that with consent we would be interested in negotiating agreements with the BDUs that would allow us to be paid for the content that we create. But beyond that, I think that there's a lot of services that we can provide that make the Canadian consumer, especially on our television stations, a better experience.

21637   And, you know, I can just give you a case in point. This morning I woke up in a hotel probably five miles from here, I turned on the television and I watched WXYZ, a station I oversee in Detroit, and, quite frankly, the signal was terrible. It was probably every minute and there was digital pixelating, there was audio drops.

21638   We work very hard to, you know, build a brand that represents the quality of what our company expects, and clearly, if we had a relationship, if we had a contractual agreement with a cable provider here, we would be able to have conversations with them and work with them cooperatively to improve the signal, the quality of what people would be receiving.

21639   In addition to that, obviously, the ad substitution that happens on many of our channels is something that, while I don't live here, has been described to me as technically challenged. There's times where shows are overlaid and commercials are overlaid that, you know, provide gaps. You may see the first few seconds of a show or, you know, maybe even 30 seconds of a show and then all of a sudden it drops out and then the new show drops in. When people are setting their DVRs to record the shows, they may be losing the last 30 seconds of a drama because of the time-shifting.

21640   If we were fortunate enough to have contractual agreements, we would be able to have our engineers' network and their engineers communicating to be able to understand the timing of when things are going to hit and align those things. So it would be a much cleaner experience that would allow for the programming to hit distinctly and succinctly, to time up to people who might be recording the show, and we expect that there would be a much better experience.

21641   Beyond that, I would just add -- I was just going to add there's other services that we do, you know, ultimately in the United States, you know, discuss with the cable companies we work with, VOD services and now OTT, you know, being able to deliver our services to mobile and portable devices.

21642   Again, we don't have those rights in this country but if we were successful in getting affiliation agreements it would be our intention to go back and negotiate those rights with our networks. I know ABC was in here earlier in the week and you asked them that question.

21643   We necessarily don't have the rights with our syndicators and so -- Ms Duke spoke of the risk -- there's risk in the fact that our programming is being distributed to places we don't know. Where we have not given consent, we have liable risk.

21644   So the ability for us to know where it's going, to know who's consuming it, to, as I said, know how many people are consuming it, and then be able to manage those risks and provide a better technical experience as well as better services, we think should be incentive for regulatory reform here.

21645   THE CHAIRPERSON: Right. You talk about quality of signals, liable risk. I put it to you that what you really want is a financial compensation.

21646   MR. LAWLOR: Yeah. I am not going to disagree.

21647   THE CHAIRPERSON: And that compensation will have to be passed down through the distribution line and ultimately to the Canadian subscribers.

21648   MR. LAWLOR: Well, we've gone through that similar experience in the United States where we're negotiating for the value of the eyeballs that are consuming it, and obviously it's important here that we --

21649   THE CHAIRPERSON: That's not the regime in Canada.

21650   MR. LAWLOR: Excuse me?

21651   THE CHAIRPERSON: That's not the regime in Canada for over-the-air signals.

21652   MR. LAWLOR: Understood.

21653   THE CHAIRPERSON: Why would we import just this fraction of your system? The representative from Disney in fact described our system as very innovative with simultaneous substitution and described it as a successful model. Why change that?

21654   MR. SCHILLER: If I may just jump in, Mr. Chairman.

21655   You know, I think that your core question was what value does the U.S. Television Coalition proposal bring to the Commission in achieving its mandate under the Broadcasting Act, and I think that, very clearly, one of the objectives of this hearing was to look at providing a more cost-effective television service for Canadians, a more affordable television service for Canadians, with bundles that they want.

21656   Obviously, the current regime has been deemed to be not what the Commission has in mind, at some level, because of the initiation of the review.

21657   We think that what is being proposed here will assist the Commission to achieve its objectives.

21658   First of all, we think that currently the proposals that Canadians aren't paying for U.S. stations -- there is no evidence on the record to suggest that Canadian consumers are not buying U.S. stations in their cable bills.

21659   If you look, anecdotally, as the number of U.S. services have increased in the cable packages offered to Canadians, the TV prices have also increased. Since 2002 cable bills have increased 70 percent in Canada. Between 2009 and 2013, they increased 20 percent, twice the rate of cable bill increases in the U.S.

21660   So one of the proposals --

21661   THE CHAIRPERSON: You are actually making the point that I was making. By getting an affiliation agreement, you will just inflate the cost.

21662   MR. SCHILLER: I do not think we are in a position right now to actually say what the cost of an affiliation agreement would be, because right now these parties aren't even able to get to the table to talk with the distributors that are taking their signal.

21663   I think that we have to take a step back. It is really quite ironic and interesting that this group is following Netflix, because, in many ways, the Commission is dealing with the challenges of new over-the-top distribution models, and at the same time the system is also dealing with legacy issues from the old analog era.

21664   What these groups are trying to do is work in an open and transparent way, to talk with the distributors that are taking their signals, to put in place deals that work for consumers.

21665   Right now consumers, on a Thursday night -- last night you could watch The Big Bang Theory up to 35 times, depending upon your TV package, and Canadians pay for that right now. If you watch it once, you will pay for all 35 viewings that are available on your TV service.

21666   It is kind of like asking somebody that goes to a movie to pay for tickets to all-day airings, even if they just want to see the matinee.

21667   So we are trying to turn it around and put in place a regime that will work for the Commission in achieving its objectives, that will work for distributors, and that will work for Canadian consumers, most importantly, who right now are paying for services they don't necessarily watch.

21668   THE CHAIRPERSON: I know you followed the presentation by Disney earlier in the hearing because you tweeted about it. My take-away from their presentation -- because they were speaking on behalf of ABC Network, as well -- was that the affiliates actually don't have the rights.

21669   So I am wondering about your status here, your standing, to ask for financial remuneration outside your service area.

21670   MS DUKE: We are not here asking today for financial remuneration, we are asking today --

21671   THE CHAIRPERSON: But that is the natural consequence, isn't it?

21672   MS DUKE: We are asking today to be part of a process, so that we have a voice at the table. And if we get that voice at the table, then perhaps we can go back to our networks and say: All right, this is something we want to negotiate with you. We want to have network programming distributed outside the U.S. Can we do that?

21673   We could have a discussion.

21674   Right now we can't have the discussion because we don't even know where we are distributed.

21675   Secondly, I would like to point out that our programming is more than network programming. Network programming takes anywhere from, maybe, two to six hours a day. The remainder of the hours we fill with syndicated and, in the case of our stations in Buffalo, many, many hours of local news.

21676   So I think our value, the value we bring, is more than network programming, it is also the local programming, the sports, the live events.

21677   THE CHAIRPERSON: And you are suggesting that Canadian audiences see value to local news in Buffalo?

21678   I mean, we have been following -- a lot of our hearing we were online -- consultation forums -- people value local news, but I am not sure they are saying that they are valuing local news from another country, in another place, quite the contrary.

21679   MS DUKE: We don't know, because we don't have ratings information, so I can't tell you what are the ratings of our Buffalo stations.

21680   THE CHAIRPERSON: You have no evidence to support --

21681   MS DUKE: No, and we would love to get that evidence. We would love to be able to get information as to the ratings --

21682   THE CHAIRPERSON: Isn't this your chance to provide that to us?

21683   MS DUKE: We don't have it.

21684   MR. SCHILLER: We don't have the data available to us to be able to provide that evidence.

21685   THE CHAIRPERSON: We had some players in this proceeding that intervened that aren't necessarily driven by advertising, but they still did some market studies to test whether people saw value.

21686   MS DUKE: We don't know where our stations are carried. I will just say that. We don't know which distributors are carrying our stations, where in Canada. I believe they are being carried in the Greater Toronto Area. I don't know if they are farther north or west than that.

21687   So it is very difficult for me to answer the question of --

21688   THE CHAIRPERSON: I will just take the case of Toronto, then. Could you have done a survey of people living in Toronto, to find out if they value local news coming out of Buffalo?

21689   MR. SCHILLER: If I may jump in --

21690   THE CHAIRPERSON: If you think it has value and somehow --

21691   MS DUKE: I think if there were a negotiation with the BDUs, part of that negotiation could be: Is local news coming out of the United States of interest to people in Toronto. Would there be an interest in having a local news bureau to do targeted stories that are of regional interest.

21692   There are a lot of issues that we could put on the table if we had this discussion and this negotiation.

21693   What benefit can we bring to the area? What would viewers be interested in hearing about the Buffalo region, or sports in Buffalo, or the Buffalo Bills, or whatever the case may be?

21694   But right now we can't even get to the table to start that discussion, and that is all we are asking for today, let us get to the table and have that discussion and be a party.

21695   MR. LAWLOR: Mr. Chairman, I would add that while we don't have the data, because we are not able to be rated, there are stories that we are doing along the border that have great relevance. In the last month or two the future of the Buffalo Bills was a huge story in Buffalo.

21696   As you know, there was one group that had an interest in bringing it to Toronto, and we had significant coverage about the opportunity and the implications of something like that.

21697   In Detroit, a year or two ago, there was the second bridge provision, so the impact on Windsor.

21698   So we do believe that much of the content we create has an impact on the people on the other side of the border and is relevant, but we are void of that data.

21699   THE CHAIRPERSON: In your presentation, you made reference to what is a very solid and valued bilateral trade relationship between Canada and the United States. The retransmission regime, in fact, was born -- the current retransmission regime in Canada was born from that very solid relationship.

21700   I recall the famous Shamrock Summit in Quebec City between Prime Minister Mulroney and late President Reagan that laid the groundwork for the retransmission regime that finally made it to the Free Trade Agreement.

21701   We didn't have one of those before, it was as a result of that legislation, the Free Trade Implementation Act, that we have a regime whereby broadcast distribution undertakings, if they take over-the-air local signals, it is not a copyright infringement, and when they take distant signals, to the extent that they pay the retransmission regime, it is not a copyright infringement there.

21702   I put to you that we have a full code on how foreign over-the-air services are remunerated in Canada. It is in the Copyright Act. That is not our jurisdiction. And what you are asking is to create a regulatory proprietary right, so that you can extract a rent from BDUs, a right that you don't otherwise have under the copyright legislation.

21703   MS MARSHALL: Mr. Chairman, if I may respond to that, the compulsory licence regime in Canada is broken, and I understand that, historically, that was the fix in the analog era.

21704   Right now the American border stations are part of a collective BBI, and at this point we are not getting remuneration from it, we are actually having to pay back into the system. We have been ordered to pay, approximately, $8 million in adjustment payments, and it will probably take over the next seven to eight years for that to transpire.

21705   In addition, our share of the pie, if you will, has gone down over the last tariff proceeding.

21706   So there are things, in terms of receiving compensation -- that system is not working for the American border stations.

21707   Having said that, there is, I guess, a dual avenue. What we are looking at with the CRTC is looking at your -- under your cultural mandate, you have the ability, through your administrative process, to fix the listing system to allow the border stations to receive a fair listing process, in terms of being notified, being consulted and, most importantly, providing consent or not providing consent to having our over-the-air signal captured and bundled and sold in Canada.

21708   I think it is important -- again, in the hotel today I saw WDIV, our local Detroit station, and the last time I was in town, meeting with you in your office, our station was there.

21709   It seems to be a prominent -- our local news was on, and I don't know all of the numbers, in terms of how widely we are viewed, but it seems that, in the Detroit market, in the Windsor market, in our area, it is something, I guess, of national importance. Within Canada, the Detroit market seems to be something that is widely viewed, and I wish we had the numbers to share with you.

21710   I think that Susan Fox, when she testified, said that how we are handled is an anomaly, that the Detroit stations, the Buffalo stations, are not compensated, where the specialty U.S. stations are.

21711   We are looking to have that same treatment. We think that it is going to benefit the Canadian consumer.

21712   THE CHAIRPERSON: But the big difference is that the specialty channels are not over-the-air channels.

21713   MS MARSHALL: Correct.

21714   THE CHAIRPERSON: We have a perfect code under the Copyright Act.

21715   I understand your business concern, but I am struggling with whether we are the ones who should fix the Copyright Act.

21716   You would agree with me that, despite our jurisdiction being wide in matters of communication, we have no powers to amend the Copyright Act.

21717   MS MARSHALL: Right, and we are not here to ask you to do that. We are here today --

21718   THE CHAIRPERSON: You may not be asking us to do it directly by amending the Copyright Act, but what you are asking us to do is to do it de facto, by creating some sort of regulatory regime that provides you a de facto regulatory right, which then gets turned into a remuneration, which is a matter of copyright, is it not?

21719   MS MARSHALL: We are asking to be able to get all interested parties to the table. If we have the ability to consent or to not consent to have our signal carried, then we can get conversations started and we can get all of the different interests of the Canadian consumers addressed through what we want to have, which is affiliation agreements.

21720   THE CHAIRPERSON: Right. But for us to intervene from a regulatory perspective, we have to be persuaded that it meets the objectives of the Broadcasting Act, section 3(1) and 5(2). That is why I started off there, because that is our prime area of consideration.

21721   As I said, I am still struggling a little bit. I understand your point about diversity of programming, but I am also concerned about the impact it might have on affordability.

21722   MR. SCHILLER: If I may supplement Ms Marshall's reply, the compulsory licence was intended to be a shield for program right owners in the analog era, it was not intended to be a sword to be turned against U.S. services in a new digital frontier.

21723   We think that, obviously, the Commission has acknowledged that there are rights issues that have to be addressed in terms of the non-Canadian programming services, as the Commission, in its collective wisdom, amended those procedures to provide new parties the ability to affirm that they support sponsorship for distribution in Canada, as well as requiring affirmations that they have the necessary rights for distribution in Canada.

21724   We think that dealing with those basic elements of fairness in the listing of non-Canadian programming services is consistent with the Commission's mandate under the Broadcasting Act.

21725   Having a fair system that is sustainable for Canadian TV subscribers is core to your mandate, and I think that these groups here are trying to put forward that there are solutions required to make the system sustainable.

21726   You are quite right about the Free Trade Agreement. One reading of the Free Trade Agreement, though, is that these parties are entitled to equitable and non-discriminatory remuneration, based on conditions set out in the retransmission of distant signals.

21727   Canada, if they are still on the books in 2011, there are retransmission consent rights for Canadian stations. We appreciate that the vertical integration of the industry has made redundant, in some ways, those provisions, but they are still there. We think that those were put there to provide some form of compensation for broadcasters, and we think that there is an opportunity here to look at how American stations are being treated.

21728   There are, also, just a couple of other small points that I would like to highlight for the Commission's benefit.

21729   When these groups say that they don't have the data on Canadian viewing of American stations, it's not because of any deficiency of their own. The Canadian system does not provide viewing data of American stations in Canada. And that is really critical to appreciate for the Commissioners as they are doing their business here.

21730   In your last communications report, you noted a change in methodologies on how viewing was tracked in the last year. It wasn't noted this time, but the problem remains that under this new people-meter viewing method, most of the U.S. stations are not coded.

21731   So it's easy to say that viewing of American stations has dropped when you stop tracking American viewing of stations in Canada. That doesn't mean there has been any change in consumer behaviour.

21732   In part, some of the challenges that they have had before the Copyright Board relate to the fact that they just changed the way they are viewing their methodologies, and that has resulted in some of the shifts we have talked about.

21733   I think it is really critical for Commissioners to appreciate that the American station groups are not looking for any special treatment, they are just looking for fair treatment, and right now there is a set of inconsistent rules that are applied to different non-Canadian programming services in different ways.

21734   And you are quite right, Ms Fox, when she appeared, talked about the importance of the Canadian market, and how international rights and distribution are growing, and she also said that the Canadian market itself was an anomaly, and it is what it is.

21735   So what we are trying to say is: Let's bring the parties together, put in place a regime which allows for conversation, and which allows for parties to agree on what is best for the Canadian consumer as they are viewing their content.

21736   Part of this is looking at the affiliation agreement model. We acknowledge that there are over-the-air stations, that's true, but they are not local in any conventional meaning in Canada. They are not local in the sense that they are not transmitted in Canada, they are not licensed in Canada. When they are retransmitted, even in areas of local over-the-air availability, they are modified in terms of commercial substitution. The multicasting broadcast is deleted. There are also punitive tax measures.

21737   So there is no commercial benefit currently being derived in the current system by the American station owners.

21738   Who is benefiting right now are the BDUs. The BDUs have used the availability of these services to package and sell them to Canadians for pure profit.

21739   And the Commission knows better than all that the availability of American services was to grow and develop the Canadian distribution networks -- and mission accomplished. Now it's time that we look at what is right and fair and put in place requirements that these parties deal with one another face-to-face.

21740   You made reference to some of the technical problems. There was an American station that started receiving complaints, randomly, from northern Ontario over closed captioning, and they approached the BDU, who just denied that they were even carrying the station.

21741   That kind of environment is not conducive to a consumer-friendly framework moving forward.

21742   THE CHAIRPERSON: Right. We have heard your arguments.

21743   First of all, in Canada treaties are not self-implementing. That may be the case in France and elsewhere, but in our tradition, the fact that we have a Free Trade Agreement is not enough, it actually has to be adopted by legislation, and, my understanding is, it is fully codified in our Copyright Act.

21744   Where your problem is, is that you don't think our Copyright Act properly reflects the current environment.

21745   We have no jurisdiction over that, so it's a bit difficult you coming to us to ask for this.

21746   And in terms of not treating -- which is another aspect of your argument -- not treating everybody equally, aren't we treating all over-the-air signals equally?

21747   You just want to be treated as if you were a specialty broadcaster, as opposed to an over-the-air broadcaster. All over-the-air broadcasters are subject to the same regime, and all discretionary specialty services are subject to the same regime. That is because the Copyright Act provides two bundles.

21748   MR. LAWLOR: I would respond by saying that I do not believe everybody is being treated fairly, that the American stations are not able to be measured for their audience, and it is my understanding that everybody else is.

21749   THE CHAIRPERSON: I meant from a rights and regulatory perspective.

21750   MR. SCHILLER: If I may, again, just to supplement Mr. Lawlor's comments, with respect to the notion of being treated fairly, as the number of American stations has increased in Canada, remuneration for American stations has decreased.

21751   So the idea that all of the stations are being treated fairly, just at the most basic level of accounting and administration, is questionable, sir.

21752   There is a pool, and that pool of available copyright is not -- the amount that is accessible to the groups is diminishing, as the number of services is increasing.

21753   There are a number of reasons for that -- linkage regulations, preponderance rules -- there are all kinds of reasons for it.

21754   THE CHAIRPERSON: Then make your case to the Copyright Board.

21755   MR. SCHILLER: But I think, sir, when the BDUs want to add a programming list -- or a service to the list of non-Canadian authorized services, they don't go to the Copyright Board, they come to you.

21756   When the BDUs wanted to add an additional set of high-definition channels, so that they could sell that to Canadian consumers, they didn't go to the Copyright Board, they came to the Commission, quite appropriately.

21757   That is what this group is looking for. They are looking to work within the accepted administrative authorities under your cultural mandate to put in place a regime that will work moving forward into the future.

21758   THE CHAIRPERSON: Okay. Thank you.

21759   The Vice-Chair has some questions.

21760   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

21761   Good morning, ladies and gentlemen.

21762   On the measurement front, given the fact that you do not have an audience measurement system in place, you are devoid of that currency, how do you go about selling ads into the Canadian market?

21763   MR. LAWLOR: We don't.

21764   COMMISSIONER PENTEFOUNTAS: No cross-border station has ever sold an ad by a Canadian company for the purchase of Canadian goods and services in Canada?

21765   MR. LAWLOR: I am sure there has been.

21766   Our television stations currently are not doing that.

21767   COMMISSIONER PENTEFOUNTAS: By yours, you are referring to all of the stations, coast-to-coast, or simply --

21768   MR. LAWLOR: No, I am speaking for my company.

21769   MS DUKE: And the same for my company, we are not selling advertising.

21770   I think that is also something that perhaps might be of interest, if we got to the table, because perhaps there would be an interest in advertising products on either side of the border, but that is something we are not doing right now.

21771   COMMISSIONER PENTEFOUNTAS: You are aware of that practice, though?

21772   MS DUKE: Am I aware of that? No.

21773   But, in response to your question, that is a good question, and perhaps there is a benefit to consumers: If you live near the border, would you be interested in seeing advertising from perhaps south of the border, versus north of the border.

21774   COMMISSIONER PENTEFOUNTAS: We are already getting that advertising, from south of the border and north of the border, firstly.

21775   You also must have advertisers that are advertising to a Canadian audience for the purchase of goods and services in the U.S.

21776   MS DUKE: Actually, I think it's the opposite. When we talk about the risks, that is one of the risks that I see.

21777   We have advertisers, for example, in Buffalo, and perhaps those advertisers are looking for the Buffalo market.

21778   As an example, what if we did some sort of a direct response ad and that advertiser was then getting inundated with calls from somewhere they couldn't sell the services? That is imposing an additional cost on the advertiser.

21779   We are not even able to tell our advertisers where their advertisement is being seen, and that gets us into problems with our advertisers.

21780   So when I talk about risks and liabilities that my company faces, that is one of the buckets I put it in, is that we have issues with our advertisers of not being able to assure them when and where their ads are seen.

21781   COMMISSIONER PENTEFOUNTAS: Do your advertisers object to having southern Ontarians cross the border to buy their goods and services?

21782   MS DUKE: Some of them may. We don't know where they are being shown, and some of them may and some of them may not, but since we don't know exactly where the stations are being shown, or we don't have any control over that, we can't say to the advertisers: Oh, there are going to be 2 million subscribers that can see your advertising, how do you feel about that? Can we make that a part of -- are you aware of that? Are you agreeable to that?

21783   That is not even in the scope of the discussions, because we don't even have the information to have that discussion with the advertiser, which is why I lump it into that bucket of it's a risk and a liability, in terms of what does our advertiser want and expect.

21784   COMMISSIONER PENTEFOUNTAS: Your advertisers ask for ID at the door, otherwise they won't sell to Canadian citizens? Is that how it works?

21785   MS DUKE: I don't know, because we don't sell advertising outside of the market.

21786   What I am talking about are American advertisers -- in some cases they may say: We don't have the ability to sell.

21787   Maybe there are tax implications about selling in Canada.

21788   That is a whole plate of issues that I haven't --

21789   COMMISSIONER PENTEFOUNTAS: Cross-border shopping is a multi-multi-billion-dollar event between our two borders, so I find your answer completely unacceptable.

21790   MR. LAWLOR: Well, what we can never represent to any customer -- and, again, we are not doing business with -- you know, we are not actively selling into the Canadian market, so we are dealing with U.S. advertisers, and if a U.S. advertiser would be interested in having our message extend into Canada, we can't represent what kind of audience they would get. We couldn't talk about demographics. We couldn't --

21791   COMMISSIONER PENTEFOUNTAS: You have never had an advertiser ask you to extend their message into Canada, in an attempt to attract Canadian shoppers into Detroit, Buffalo, or Plattsburgh?

21792   MR. LAWLOR: All we can do is broadcast our signal on our station that covers our viewing area of Detroit or Buffalo.

21793   We are well aware that it goes over the river and into Canada, but what we can't do is have a specific conversation with them about audience guarantees, targeting the kinds of shows that would reach Canadian audiences.

21794   So, clearly, it's a --

21795   COMMISSIONER PENTEFOUNTAS: You could do that with audience measurement, you wouldn't need a fee, the retran consent fee.

21796   MR. LAWLOR: We could if we had audience --

21797   COMMISSIONER PENTEFOUNTAS: Just audience measurement would be enough.

21798   MR. LAWLOR: To be able to do business in Detroit and Buffalo and extend into Toronto and into Ontario. Beyond that, for the rest of the country, for all of the different BDUs that are carrying our signal, having consent rights with them to understand, first and foremost, what markets are we even serving. We don't know that.

21799   COMMISSIONER PENTEFOUNTAS: And have you commissioned studies to see what potential revenue there would be if you had that viewership information?

21800   MS DUKE: No.

21801   MR. LAWLOR: No.

21802   COMMISSIONER PENTEFOUNTAS: Thank you.

21803   MR. SCHILLER: If I may just jump in, though, I think it is important to acknowledge that there is a comparative difference between the broadcasting model in the United States and here in Canada. The advertising-only model for broadcasting in the United States is no longer the norm. Increasingly, other outside fees beyond advertising-only are what are fuelling their programming and their local spends, and their investments in technology.

21804   In many ways, it must be refreshing for the Commission to have a group of broadcasters come before you not seeking to close down their transmitters, or not seeking to reduce their local content requirements.

21805   Part of the success and growth that has been happening south of the border is, in part, an acknowledgement of the shifting of the business model for broadcasting, and unlike in the past, where you had station owners in Canada claiming they couldn't unload a station for a dollar, in the U.S. they are not having those problems.

21806   COMMISSIONER PENTEFOUNTAS: We have been following closely the explosion of retransmission consent fees amongst our neighbours south of the border, and the added value to conventional broadcasters, rest assured.

21807   Thank you.

21808   THE CHAIRPERSON: Thank you for participating in the hearing. We have no other questions at this stage.

21809   MS DUKE: Thank you.

21810   THE CHAIRPERSON: We will take a quick five-minute break, so the next party can get settled in. Thanks.

--- Upon recessing at 1114

--- Upon resuming at 1119

21811   THE PRESIDENT: Order, please. Madame la secrétaire.

21812   LA SECRÉTAIRE: Merci. Nous entendrons maintenant la présentation de Impressions Soleil. S'il vous plaît vous présenter et vous avez cinq minutes pour votre présentation.

PRESENTATION

21813   M. GÉNÉREUX: Madame, messieurs les conseillers, je vous remercie de me permettre de comparaître devant vous ici aujourd'hui.

21814   J'aimerais préciser que je comparais à titre personnel et au nom de mes entreprises.

21815   Mon nom est Bernard Généreux, je suis propriétaire d'Impressions Soleil, imprimerie située à La Pocatière, de Katapulte Communication et de Gigrafe, deux firmes de communication marketing situées à La Pocatière et à Rivière-du-Loup dans le Bas-Saint-Laurent.

21816   Le monde des communications change à une vitesse très rapide, vous le savez beaucoup mieux que moi. En tant qu'imprimeur, je constate tous les jours l'évolution de nos façons de faire et de produire.

21817   Les procédés d'il y a 20 ans ont changé drastiquement et il nous faut sans cesse nous adapter sans délai, comme dans presque tous les domaines.

21818   Par contre, ce qui demeure pertinent, c'est le besoin à l'information. Et pour moi, aujourd'hui, ce qui m'importe pour mon coin de pays qu'est le Bas-Saint-Laurent, c'est l'accessibilité à de l'information et à du contenu régional.

21819   La diversité de notre pays doit être exposée par le biais de divers canaux, tout le monde en convient. La télévision régionale est un élément essentiel de cette diversité de par son contenu, sa diffusion et par le biais du reflet qu'elle est de nous-mêmes.

21820   Les règles et les approches doivent s'adapter aux nouvelles réalités et c'est très bien ainsi.

21821   Cependant, je veux seulement apporter à votre attention que la loi des nombres joue en défaveur des régions comme la nôtre, tant par le nombre d'annonceurs pour les stations, donc les revenus potentiels, que par le nombre de téléspectateurs de télévision et de radio et de son vieillissement.

21822   C'est pourquoi je considère que ceux-ci doivent être protégés à l'intérieur des changements que vous devrez faire pour permettre à toute l'industrie de pouvoir concurrencer le monde.

21823   La diversité de notre pays se doit d'être vue, connue, comprise et surtout diffusée, de sorte à ce que tous les Canadiens, même en milieu rural (et c'est en souligné ou en gras), soient informés de sa complexité, afin de permettre sa compréhension ainsi que sa beauté.

21824   Mesdames et messieurs, je suis un citoyen du monde, du Canada, mon pays, de ma province, le Québec, de ma région, le Kamouraska et de ma ville, La Pocatière. J'aime mon pays, ma province et ma ville. J'apprécie qu'elle me soit expliquée par mes pairs. Je parle ici de notre télévision régionale.

21825   Aussi, j'aime que ma région soit promue par des productions locales de qualité et en quantité. Encore faut-il que les entreprises télévisuelles régionales soient en mesure de le faire.

21826   Dans la prochaine vague de changements que vous devrez faire pour permettre à toute une industrie de survivre et même de se développer, je vous invite à ne pas négliger les impacts que ces changements pourront avoir sur la vie des Canadiens dans les régions comme la nôtre, ainsi que toutes les régions du Canada qui comptent sur des artisans de la première heure, qui ne demandent qu'à continuer à faire encore mieux pour les téléspectateurs que nous sommes.

21827   Si vous me le permettez, j'aimerais vous exposer un exemple tout récent, mais simple, où l'implication de la télévision régionale est bien sentie et qu'elle sert les intérêts communs.

21828   J'ai été l'instigateur d'un match de hockey entre deux équipes de la Ligue junior majeure du Québec il y a deux semaines à La Pocatière.

21829   Notre partenaire majeur de l'événement était la station de télévision régionale de Rivière-du-Loup qui, par la diffusion des annonces du match, aura fait en sorte d'en faire un succès important puisqu'elle a permis à deux organismes du milieu de se séparer une somme de plus de 15 000,00 $. Chez nous, c'est beaucoup d'argent.

21830   Cela peut sembler anodin comme histoire, mais la présence d'une station de télévision régionale fait une différence importante dans nos milieux.

21831   N'oubliez jamais que l'on peut être ouvert sur le monde comme on le voudra, mais que notre identité, on la puise à la racine de nos pas.

21832   Je vous remercie de votre écoute. Il me fera plaisir de répondre à vos questions.

21833   Merci pour votre bon travail.

21834   LE PRÉSIDENT: Merci beaucoup, monsieur Généreux. Monsieur le vice-président va avoir des questions.

21835   CONSEILLER PENTEFOUNTAS: Merci, monsieur Généreux, d'avoir pris le temps d'être parmi nous aujourd'hui; beau coin La Pocatière. Sainte-Anne va toujours bien?

21836   M. GÉNÉREUX: Absolument. On s'en occupe.

21837   CONSEILLER PENTEFOUNTAS: On s'en occupe? C'est bien.

21838   Je comprends l'idée derrière votre présentation ainsi que pour votre intervention brève de ce printemps, mais est-ce que vous avez pensé à des mesures précises?

21839   Vous savez que les représentants d'Inter-Rives étaient ici ainsi que RNC plus tôt cette semaine, la semaine passée.

21840   M. GÉNÉREUX: Oui.

21841   CONSEILLER PENTEFOUNTAS: Mais vous précisément, est-ce qu'il y a des mesures qui vous semblent plus nécessaires que d'autres?

21842   M. GÉNÉREUX: Je ne connais pas nécessairement le monde de la télévision dans son ensemble et de façon objective.

21843   Je dois avouer que ma préoccupation, moi, en tant que citoyen et devant vous et d'avoir la possibilité d'exprimer, puis je pense que je peux me considérer comme un porte-parole de gens ordinaires, comme je le suis, d'avoir la possibilité d'être vraiment exposé ou, en fait, recevoir le miroir de qui nous sommes régionalement par le biais de notre télévision régionale.

21844   Et, bon, on sait que les télévisions régionales comme celles de Télé-Inter Rives sont des télévisions indépendantes. Donc, ces télévisions-là, je pense qu'elles sont quand même assez restreintes à travers le Canada et, comme je le disais, ce sont des artisans de la première heure.

21845   Et, pour nous, il est important qu'on puisse recevoir le miroir, encore une fois, de qui nous sommes, par le biais de ces gens ou de ces artisans qui nous ressemblent et qui nous... et qui communiquent avec nous de façon d'une très grande qualité et je pense que, pour nous, c'est nécessaire.

21846   Les gens, ils ont un taux de pénétration de leur écoute très très très important.

21847   Maintenant, les moyens, pour répondre à votre question, je sais qu'il a déjà existé certains programmes ou certaines façons d'aider ces télévisions régionales là dans le passé.

21848   Est-ce que c'était la bonne façon? Je ne peux vous le dire parce que, encore une fois, je ne suis pas dans cette industrie-là, mais est-ce qu'il y a une façon de supporter ou de faire en sorte que ces entreprises indépendantes-là, parce qu'on sait que la globalisation fait en sorte que ça devienne de plus en plus dur de... plus difficile de se démarquer.

21849   L'offre de service, on l'a entendue ce matin, est de plus en plus grande. La pénétration de cette offre de service-là est encore aussi beaucoup de plus en plus grande.

21850   Donc, il doit, je pense, y avoir une façon au Canada de pouvoir maintenir régionalement, et j'insiste sur le milieu rural, parce que nous sommes en milieu rural, malgré que La Pocatière est une très grande ville de 5 000 habitants. Donc, il y a cette appartenance qui nous habite puis qui est extrêmement importante pour nous.

21851   CONSEILLER PENTEFOUNTAS: Certains diront 6 000 si on inclut les 1 800 élèves qui représentent...

21852   M. GÉNÉREUX: Avec la paroisse.

21853   CONSEILLER PENTEFOUNTAS: ... la paroisse et le Cégep.

21854   M. GÉNÉREUX: Oui, c'est ça.

21855   CONSEILLER PENTEFOUNTAS: Qui attire des écoles très... pardon, l'école secondaire privée qui attire près de 2 000 élèves par année.

21856   M. GÉNÉREUX: Oui. Plus maintenant, mais... Plus maintenant, et votre exemple est intéressant parce qu'il y a déjà eu jusqu'à plus de 1 000 élèves dans un collège privé.

21857   CONSEILLER PENTEFOUNTAS: Bien oui.

21858   M. GÉNÉREUX: Dans le Cégep, là, je parle du collège privé dans une école comme le Cégep de La Pocatière, aux alentours de... il y a déjà eu 1 500 élèves qui se sont amenés, autour de 1 000. Et à la Polyvalente où j'ai étudié, on était 1 200 et ils sont 300.

21859   Et, inévitablement, la loi des nombres, c'est ce que je disais tout à l'heure, la Loi des nombres joue contre nous, c'est-à-dire qu'il y a une diminution, il y a un vieillissement de la population qui est déjà même plus actif ou, en tout cas, plus hâtif chez nous qu'ailleurs.

21860   Donc, inévitablement, ça fait en sorte que des stations comme les stations de Rivière-du-Loup ou en Gaspésie sont en danger ou, en fait, potentiellement en danger.

21861   CONSEILLER PENTEFOUNTAS: Nous avons très bien noté votre préoccupation. Ils sont indépendants, ils ont des défis.

21862   M. GÉNÉREUX: Hum, hum.

21863   CONSEILLER PENTEFOUNTAS: Ils font du beau boulot, ils font bien leur travail.

21864   M. GÉNÉREUX: Tout à fait. Tout à fait.

21865   CONSEILLER PENTEFOUNTAS: Ils reflètent bien la communauté. Ça a été noté et vous avez bien réitéré les points qui ont déjà été soulevés par les diffuseurs de votre coin.

21866   Les wagons continuent à quitter La Pocatière?

21867   M. GÉNÉREUX: Tout à fait.

21868   CONSEILLER PENTEFOUNTAS: Ça marche bien?

21869   M. GÉNÉREUX: En espérant qu'il y aura d'autres commandes par la suite.

21870   CONSEILLER PENTEFOUNTAS: Alors, merci beaucoup. Merci, monsieur le président.

21871   M. GÉNÉREUX: Merci beaucoup.

21872   LE PRÉSIDENT: Merci beaucoup pour votre présence et de vous être déplacé pour participer à notre invitation.

21873   M. GÉNÉREUX: Ça me fait plaisir.

21874   LE PRÉSIDENT: Merci bien. Bonne journée.

21875   Madame la secrétaire.

21876   THE SECRETARY: I would now ask the Association of Canadian Advertisers and The Canadian Media Directors' Council to come to the presentation table.

--- Pause

PRESENTATION

21877   MR. LUND: Good day, gentlemen and madam. We are very pleased to have this opportunity to participate with our comments at this very important consultation.

21878   My name is Ron Lund, I am the President and CEO of the Association of Canadian Advertisers. With me, also, is on my right hand side, Bob Rheaume, our Vice President of Policy and Research.

21879   The ACA is the only professional trade association solely dedicated to representing the interests of our client members that market and advertise their products and their services in Canada.

21880   Our group here today represents, however, two different organizations: Anne Myers to my left, who is President of MediaVest, but today is representing the Board of directors for the Canadian Media Directors' Council; and over to my right there is Janet Callaghan who is the Executive Director of the Canadian Media Directors' Council, known as the CMDC.

21881   MS MYERS: The CMDC is an independent organization of media professionals representing advertising agencies and media management companies, working to advance the effectiveness of media advertising in Canada. Our members account for approximately 80 percent of the total $15 billion in media ad spend transacted annually in Canada.

21882   Both of our organizations' interests are aligned on these matters, and so we have chosen to jointly file and present our comments today.

21883   Advertising is a significant economic force in the world. In virtually all developed countries, advertising is considered an important and necessary component of the communications infrastructure.

21884   In Canada, advertising is one of the primary resources sustaining the broadcasting system. Net advertising media spend in Canada was estimated to represent $15 billion in revenue flow to media companies in 2013. Of this total, almost $4 billion is invested annually in television advertising.

21885   MR. RHEAUME: Considering these substantial revenues, the role of advertising is still critical to a healthy and robust broadcasting system in Canada. It is advertising that pays for many of the programs that inform, entertain, and educate Canadians.

21886   In return, advertisers have a vehicle to communicate with their customers. This relationship between broadcasting and advertising has yielded many mutual benefits since the advent of broadcasting. But what we call "TV" is rapidly changing.

21887   We applaud this commission for putting Canadian consumers first, and for wishing to maximize choice and flexibility. These are worthy goals, but as an investor in this supply and demand marketplace, we caution that choice means customization and flexilibity means bending the rules -- both of which come with a premium price quite often.

21888   It is an understatement to suggest that telecommunications and media are undergoing massive and dynamic change, with new technology, new competitors and empowered consumers. All stakeholders who have appeared here are adapting their business models to capitalize on their assets, maintain a competitive presence and limit job losses in a volatile and increasingly global marketplace.

21889   Respectively, we look to the Commission to strengthen the system which they have created to date and to adapt regulations where there is a clear benefit to Canadians both culturally and financially.

21890   Mr. Chairman, Commissioners, we would like to comment specifically today on the areas of "pick-and-pay", simultaneous substitution, removing barriers, and a set-top-box-based audience measurement system.

21891   MS CALLAGHAN: First, Pick-and-Pay. It is our opinion that the ideal of more consumer choice through a pick-and-pay system will ultimately result in less consumer choice. With fewer subscriber fees, many of the specially TV channels simply would not survive the transition.

21892   This will create an overall decline in quality programming due to financial pressures and ultimately the loss of audiences and funding by advertisers.

21893   The Canadian regulated specialty channel system supported by cable and satellite services is an important one for advertisers. In the early years of these channels, advertisers were hesitant and slow to invest due to the vastly smaller audiences on the first tier of channels when compared with broadcast TV.

21894   As well, repetitive program loops and lower quality fare was typical at the time as these channels had to build a subscriber base.

21895   This initial hesitancy by advertisers changed, however, as the CRTC gradually licenses more tiers of specialty channel genres in a controlled agenda, which didn't flood the market, but allowed time for development of these brands, better quality programming, and distinct audiences. Over time, these channels and their viewers increased in size and value for advertisers. In addition, due to the sheer number of channels and the larger viewing base, it allowed advertisers to build reach of audiences without commercial saturation.

21896   Our concern is that an unfettered pick-and-pay or an à la carte system is not going to be cheaper for the consumer because of the economic model for cable/satellite and media companies. They will do what every business must do to remain profitable: cut costs and charge more where there is highest development.

21897   Of concern for advertisers in particular, is that this will lead to the disappearance of channels, especially channels which attract the light TV, the discerning viewers in favour of heavy viewers attracted to popular programming.

21898   Consequently, this will cut investment to program content and the opportunities for Canadian made branded content and sponsorships. In turn, with fewer choices, the specialty channels tier will become less attractive to advertisers, resulting in lower investment and subscribers will be required to pick up the slack or lose even more choice.

21899   The current advertising expenditure on these channels is almost 40 percent of total TV advertising revenue, accounting for over 50 percent of viewing and that revenue is growing. If there are less channels there would be less advertising revenue invested in television, and likely more invested in online.

21900   We do not believe, either, that over-the-top non commercial online video services will ever render the current system obsolete. These services still must acquire content from somewhere.

21901   And as advertisers, we recognize that things will change. But what doesn't change is the viewers' insatiable appetite for quality programming, the funding of which has always been driver by the marketer/advertiser in some form or another.

21902   A move by the regulator to unreservedly disrupt the current funding formula for television will significantly diminish the richness and the diversity of Canadian audiences and with it, the support of advertisers.

21903   We believe that the Commission should reconsider an unrestrained pick-and-pay option to avoid going back to the days of channel scarcity now that consumers have been exposed to a landscape of plenty.

21904   MS MYERS: Second, a view of simultaneous substitution.

21905   This long-standing Commission policy has benefited the entire Canadian broadcasting system. It is critical that it be maintained in order for advertisers to be able to continue to access Canadian audiences and provide the financial underpinning of the Canadian broadcast industry.

21906   In Canada, consumers have incredible choice in programming and quite often choose to view American shows. U.S. programs acquired by Canadian broadcasters for exhibition in Canada usually account for the highly coveted top 10 to top 20 rated programs in this market, largely due to their simultaneous substitution.

21907   Already, it is estimated that almost 20 percent of all TV viewing in this country is to signals that cannot currently be accessed by advertisers in Canada -- U.S. conventional an cable channels, international channels, on-demand, pay, educational, and others.

21908   Therefore, approximately one-fifth of our valuable Canadian audiences currently go untapped.

21909   By virtue of their size of viewership, simultaneous substitutions are usually the programme audiences most in demand by advertisers in order to achieve substantial reach of Canadian consumers in a cost effective way.

21910   It is important to remember that though these shows may be American in origin, their audiences are 100 percent Canadian; the very kind of audiences that advertisers in Canada are seeking to reach.

21911   Removing this substantial amount of inventory from the marketplace will only create increased cost pressures for what little TV audiences that are left, and force advertisers to consider transferring ad budgets to other media.

21912   Therefore, to remove simultaneous substituted audiences from advertiser access would severely restrict advertisers' use of the television medium, and severely diminish the flow of advertising revenue overall to the Canadian broadcasting system.

21913   We would strongly urge the Commission to retain this successful policy, which represents an opportunity for advertisers, and not only protects broadcasters, but the Canadian broadcasting system. The idea of jeopardizing and destabilizing the entire broadcasting and advertising system is really quite unimaginable to us.

21914   MR. RHEAUME: Third, a word about removing barriers.

21915   An impediment that Canada's advertisers have had to cope with over the years is our restricted access to Canadian audiences. As previously mentioned, advertisers in Canada already do not have access to approximately 20 percent of Canadians' TV viewing.

21916   In fact, it is important to recognize that it is the audience to a programme that holds value that can be monetized, not the programming itself. If we can mobilize the industry's efforts toward recapturing this lost 20 percent of Canadian audiences that are currently not monetized, many millions of much needed dollars could be injected into the Canadian broadcasting system.

21917   Thus, the opening of "local availabilities" to access by advertisers would begin to repatriate some of these lost Canadian audiences, and could slow the erosion of television advertising revenues to other platforms in Canada like the Internet, and could do this all without creating any new fragmentation.

21918   Several past proposals to the CRTC to monetize local avails and non-simultaneous substitution certainly have merit and could be a direct benefit to the whole broadcasting system in Canada. We suggest that these proposals be re=examined as part of a CRTC review process.

21919   Importantly, the Commission removed the VOD barrier many years ago, and increasingly many advertisers are experimenting and taking advantage of this unique opportunity and its growing potential. As consumers' television consumption habits evolve, advertisers will always be interested in following and fining them where they choose to consume content.

21920   In addition, targeted dynamic ad insertion capabilities of advanced television could also provide benefits not only to advertisers, but to broadcasters and BDUs as well. In particular, when dynamic targeted advertising is in widespread use, it will provide the broadcast medium with the capability to compete with the personal targeting strengths of video on the internet.

21921   MS. CALLAGHAN: Finally, an STB-based audience measurement system.

21922   Television is changing rapidly and the tools and metrics we need to continue to support it must change as well. Canadians have access to not only many licensed services distributed through alternatives such as cable, satellite and telecommunications, but many unlicensed services such as Netflix, YouTube, etc. It has evolved into a complex structure, and one that needs a better measurement system and more data points.

21923   An enhanced national measurement system using set-top-box data could dramatically improve the accuracy and information available to broadcasters, distributors, content providers, and yes, to advertisers as well.

21924   Advertisers rely on measurement information as a trading currency to assess audience size and therefore to price advertising time on television, but they require much more depth and breadth of data. A Set-Top-Box-based measurement system has the capability to provide significant enhancements and insights such as commercial audiences, that will benefit not only the sellers of TV time, but the buyers as well.

21925   The Commission has asked for suggestions on governance models to oversee the operation of a Set-Top-Box-based measurement system. We would strongly suggest a Joint Industry Committee, a JIC to be used, consisting of sellers, buyers and media management companies and payers being the advertisers. JIC's are currently employed for this purpose in several countries around the world.

21926   We did want to state however, that while we welcome the CRTC's support to develop such a system, in a free market commercial economy we do not believe that an advertising driven measurement system and its funding model should or could fall under the CRTC mandate. Client advertisers must have the right to determine what they are willing to pay and what data and metrics are most important to them in evaluating their advertising investments.

21927   MR. LUND: For over sixty years, ad-supported television has been an essential marketing tool for advertisers while at the same time financially underpinning the broadcasting system. This has kept the cost of television to Canadian viewers manageable while providing excellent choice. We think it should, and continue to do so.

21928   As such, and in summary, the advertising and media community:

21929   Does not support a move to an unfettered pick-and-pay or à la carte channel offering;

21930   We do, however, support the following:

21931   We support the maintenance of current simultaneous substitution regulations;

21932   We do support the removal of barriers to non-simultaneous substitution and access to local avails; and, of course,

21933   We do support, as Janet was just saying, the exploration of a set-top-box-based audience measurement system.

21934   So, with that, we thank you again for the opportunity to participate in these deliberations and we would be more than happy to take any questions you might have.

21935   THE PRESIDENT: Thank you very much. I'll hand you over to Commissioner Simpson.

21936   COMMISSIONER SIMPSON: Thank you very much. Good morning.

21937   First off, I am very pleased that you've acknowledged that audiences -- the consumer is the king, not necessarily the content, but content is the delivery system for the audience and in the changes we are looking at right now, you know, the mass media properties of television are escaping us because it's becoming more pragmatic than ever and television is getting harder to buy.

21938   But by the same token, the sales are getting more precise because while you are not getting mass audience, the technology is such that you can get better audience, albeit you have to work harder to reach them and work harder to understand who they are and to taylor messages that are more appropriate to that audience.

21939   My first question is, before we get into the other details, is your industry working to -- I don't want to say "automate", but use more technology yourself to help match the difficulties and the hard work associated with having to do more targeted buys, you know, and many more, to reach the same audiences?

21940   MR. LUNG: Well, we are not where we need to be. I mean, I think the kind of key to this whole thing will be in terms of being able to target digitally as we have talked about.

21941   So, we haven't certainly been in discussions with the broadcasters to start to utilize systems such as Black Arrow, in VD, to start to use that to deliver the ads because that is, in fact, going to be, you know, the arrow that really targets things quite finally for us.

21942   COMMISSIONER SIMPSON: Uh-huh.

21943   MR. LUND: Are we there, yet? No.

21944   COMMISSIONER SIMPSON: And I find it interesting too that while the technology is looking for different ways to deliver the content, even though it's advertising supported, the industry hasn't been really keeping up with ways to parallel the delivery of the advertising message in a similar manner. At least, you know, it's -- third party sources are having to do that.

21945   So, first question on the -- I want to deal with simsub because it has been on the table with the industry. It made things easy, but we've heard from the consumer that they would like changes in that.

21946   You have already commented on what you think would be the effect of the removal of simsub, but I would like to ask more precisely.

21947   If simultaneous substitution was to be looked at being taken up the table, would your industry to have it done on a graduated basis so that you can come to terms with the implications, because you have never mentioned time lines? You have just said you've had hard stop yes or no as in your support?

21948   MS MYERS: And I think it's partly because really we are a little bit unsure as to why lack of exposure to American commercials should be a major concern for the Commission. I mean, the beauty of the simsub the reason it's worked so effectively from a business perspective is that it gives Canadian advertisers access to Canadian audiences.

21949   And any, you know, any stoppage of that, whether it's a hard stop or whether it's a phasing-out is going to remove those Canadian audiences from our ability to use them and to monetize them for Canadian broadcasters. So, we don't -- we don't see any benefit to that.

21950   COMMISSIONER SIMPSON: From a percentage standpoint of the total spend in television, what percentage would you estimate is spent on simultaneous substitution as a percentage of total spend, either on a station or an industry basis?

21951   MS MYERS: I think that's really hard to -- I don't have a figure available.

21952   Certainly, in this day and age obviously there is no simultaneous substitution that happens on specialty stations. It's only on conventional broadcast. But they do tend to be the highest rated programs. So, it would be substantial.

21953   COMMISSION SIMPSON: So, it would not be a stretch to say that because these programs represent up in the highest ready point delivery that it would probably represent a higher percentage of the total budget?

21954   MS MYERS: Yes.

21955   COMMISSIONER SIMPSON: Okay.

21956   With your point about why would we be preoccupied with substituting American ads, I think it's been pretty well put on the record that, aside from technical difficulties, a lot of the irritant with the Canadian consumer has to do with live events, and television is finding live events as a model they're going more and more to capture and hold audiences. I think that is an area where simsub has created an erosion of their fan base of that kind of a concept.

21957   But if simsub was taken away, would you find yourself -- tax implications put aside -- finding yourself having to look at making American buys to reach and to get into those kind of event sell programs?

21958   MS MYERS: I don't think that would be economically viable, just from the perspective of the inventory that the U.S. networks sell is obviously priced to reach the American audience. To be trying to pay those kind of rates to reach the Canadian portion of that audience wouldn't economically make sense.

21959   COMMISSIONER SIMPSON: Okay.

21960   MR. LUND: Just to add to that, if I may --

21961   COMMISSIONER SIMPSON: Yes. Yeah.

21962   MR. LUND: -- when you mentioned sports and live events, they're actually -- when you talk highest rated shows, they're the highest of the highest. So that would be hitting it as hard as you could possible hit it if simultaneous substitution were to leave.

21963   MS MYERS: I mean certainly one of the things is we know it's primarily about the Super Bowl, if we're all honest. One of the developments in the last couple of years has been that American TV commercials that are going to appear in the Super Bowl are now available online in the week leading up to the event.

21964   So there is an opportunity for Canadian audiences still to get exposure to what those commercials are going to be even if it's not during the event.

21965   COMMISSIONER SIMPSON: Okay.

21966   Yes?

21967   MR. REAUME: I would just like to add that one of the consequences, we think, is that money, ad spend, would drift, leak, out of the broadcasting system and perhaps go into, let's just say, online video.

21968   Online video doesn't represent a large category yet, it's about -- I think on Thursday it was released in Toronto, the latest figures -- almost $150 million a year in online video advertising.

21969   But that has great potential. I'm not equating the two, but I think that, faced with less opportunities in traditional broadcasting, some of that money would leak over.

21970   COMMISSIONER SIMPSON: Hmm.

21971   Have any of you wrapped your head around something you haven't addressed in your presentation, which is one of the things we're looking at, which is an all-Canadian basic? Because, by pure math, every cable subscriber, then, would have Canadian basic as the first offering on their television. And if, in talking to the group just before you, the American affiliates were to be put onto a discretionary tier, would that not help the simultaneous substitution issue because of the possibility that they would watch the Canadian offering first without accidentally putting themselves onto a distant signal and watching that Canadian offering simultaneously substituted?

21972   MS MYERS: I don't know that we can speak to it exactly, but my understanding of some of the research that has been done is that the BDUs don't expect that probably more than 15 per cent to 20 per cent of the total universe would actually be limiting themselves to the --

21973   COMMISSIONER SIMPSON: Hmm.

21974   MS MYERS: -- to the basic package.

21975   COMMISSIONER SIMPSON: Okay.

21976   On your points about pick and pay, you're essentially saying that it has a whole raft of negative connotations, potentially damaging reach and the like.

21977   Now given that everything we've been seeing, and I'm sure you've been seeing, specialty is watched heavily and it's packaged. Now would not -- going back to the issue of going more vertical, which is what television is doing -- would pick and pay not give you a better quality of viewer by virtue of knowing who they are and what they're ordering? It's harder work, again, because you're not able to do a mass buy, but won't pick and pay have some dividends in terms of a more targeted audience?

21978   MS CALLAGHAN: I think the targeted audiences are there already, with lighter television viewers looking at something like Book TV.

21979   COMMISSIONER SIMPSON: M'hmm.

21980   MS CALLAGHAN: What advertisers want is less waste. And, you're quite right, we would target more efficiently, but our concern is light television viewers are not a big priority --

21981   COMMISSIONER SIMPSON: M'hmm.

21982   MS CALLAGHAN: -- in terms of programming, and these stations will probably disappear. Because with having -- with bundling, there are economies of scale.

21983   COMMISSIONER SIMPSON: Yes, there are.

21984   Actually, it ties a lot into reporting methodology, too, though: that if set-top box information and more interactive information is available to you, it may evolve into that anyhow, because, essentially, that's what you're getting with an OTT kind of configuration: is that you are getting a pick, not necessarily a pay, because of the subscription service.

21985   But anyway...but to the next question I have on spend, you referenced that $4 billion out of $15 billion is going to television right now.

21986   Is that still growing or is it holding its own or is it forecast to decline?

21987   MS CALLAGHAN: I think it's basically holding its own, although there is a decline. But some of the ways the numbers are reported, online TV may not be in those numbers --

21988   COMMISSIONER SIMPSON: Yeah.

21989   MS CALLAGHAN: -- and yet it is still -- it's video, but the numbers -- legacy media is incorporated in a lot of those numbers.

21990   COMMISSIONER SIMPSON: Yeah. We had GroupM in last week --

21991   MS CALLAGHAN: Yes.

21992   COMMISSIONER SIMPSON: -- who are one of the bigger players, duly understated -- who are forecasting that in 2014-15 there's going to be a decline globally.

21993   Do you want to comment on that?

21994   MS MYERS: A decline in advertising overall or broadcast?

21995   COMMISSIONER SIMPSON: In television advertising as a percentage of total spend.

21996   MS MYERS: I think it -- you know, it is challenged. A lot of the movement to digital, as Janet just said --

21997   COMMISSIONER SIMPSON: M'hmm.

21998   MS MYERS: -- has been growing, but digital incorporates other legacy media. So online video to, you know, broadcaster sites is incorporated within video -- or online spending, not in broadcast spending per se.

21999   COMMISSIONER SIMPSON: M'hmm.

22000   MS CALLAGHAN: Not only that, you have to look at some of the major events that happen in the world, the World Cup soccer, Olympics in different years. So spending goes up and down. It's quite cyclical, although, potentially, there is a decline. But I don't know that it's that significant.

22001   MR. REAUME: Could I just add one comment to that, too?

22002   COMMISSIONER SIMPSON: Yeah, please.

22003   MR. REAUME: I don't know quite what you're trying to get at, but we are not going to see the kind of damage or reduction that we have seen in print media, in terms of advertising spend. Television seems to be a little bit inoculated against that kind of thing happening.

22004   Search advertising on the Internet has hit newspaper classified very hard, but television, although we could see minor declines, it has weathered the last five to 10 years --

22005   COMMISSIONER SIMPSON: M'hmm.

22006   MR. REAUME: -- of the Internet's onslaught.

22007   COMMISSIONER SIMPSON: Well, I'll tell you where I'm going with this, if it's not obvious. You're saying that you don't believe that OTT non-commercial online video will ever render the current system obsolete. Yet we've heard repeatedly through the last two weeks, from the industry and from others, that the TV industry is under attack by this very system, and growing.

22008   So which is it?

22009   MS MYERS: Let me start.

22010   I think one of the reasons we say that is because content has become so key to the whole system. Consumers want content. They want quality content. Although OTT may be starting to produce some of their own content, they are still acquiring content. And where are they acquiring it from? They're acquiring it from, you know, the broadcasters, who are producing volumes of content across their variety of venues.

22011   COMMISSIONER SIMPSON: Who commission, who commission the productions.

22012   You know, the thing is that content -- the broadcaster is an aggregator for the most part. Now the content comes from third-party producers, and what we're hearing is that the broadcasting industry is under attack because there may be a dotted line becoming a solid line between production and delivery, and that delivery might be Over the Top and it might not be an environment where commercials come with that content. I'm trying to struggle with how you're going to deal with that.

22013   MS CALLAGHAN: I think you have to look at the system as a whole. Advertising has supported content for 75 years or more, so whatever happens with, say, an Over the Top or broadcasters, we will have access to audiences. So I don't think we're worried about the little categories right now, our concern is access to eyeballs, access to viewers.

22014   We support a system that has viewers and Over the Top will eventually become commercial in one form or another.

22015   COMMISSIONER SIMPSON: You think so. Oh, that's interesting.

22016   MS CALLAGHAN: I do believe so.

22017   COMMISSIONER SIMPSON: That's interesting. In --

22018   MS CALLAGHAN: That's the jury of one here.

22019   COMMISSIONER SIMPSON: But in the conventional sense --

22020   MR. REAUME: Two.

22021   COMMISSIONER SIMPSON: -- of buying spots or in product placement in adjacencies, in program sponsorship --

22022   MS CALLAGHAN: There may be product placements already in some of the programs that they buy --

22023   COMMISSIONER SIMPSON: Yeah. Yeah.

22024   MS CALLAGHAN: -- in terms of branded content.

22025   COMMISSIONER SIMPSON: But you think that the advertising model will still endure, even in an Over the Top world, because it may allow certain OTT services -- I'm putting words in your mouth here, so stop me if you don't agree, but are you saying that --

22026   MS CALLAGHAN: Well, we have to let the market --

22027   COMMISSIONER SIMPSON: -- it won't be the entirely the subscription model, that it might be advertising-supported?

22028   MS CALLAGHAN: This is a market economy. And, you know, Netflix has a certain dominance right now, but, as there are more competitors coming in, as there's more binge viewing --

22029   COMMISSIONER SIMPSON: Yeah.

22030   MS CALLAGHAN: -- who knows what's going to happen in terms of habits or that broadcasters may accommodate -- they're now accommodating some of the binge viewing by running certain series all at once, like "Breaking Bad." So it will evolve.

22031   COMMISSIONER SIMPSON: There will be variations on the --

22032   MS CALLAGHAN: But that's why I think making statements or saying how should the Commission go ahead introducing pick-and-pay, it's a delicate ecosystem and when you make those kinds of decisions there will be an effect.

22033   COMMISSIONER SIMPSON: We understand that, believe me.

22034   My last question is on the area of set-top boxes. I remember from my days in the business being very frustrated with a lot of hash marks where there should be audience figures or rating points, and with the digital universe it brings about a lot of precision with respect to information.

22035   Now, you've been very thorough and very helpful in saying you would like to participate in a solution that would be useful for your industry, but I'm curious as to how fast you need that because of the very issue that we're seeing the industry morph and you are finding it fragmented, and more targeted, useful, precise information would be of value.

22036   Would you like to see a set-top box audience measurement system happen as fast as possible or do you feel that it must take time to evolve?

22037   MS CALLAGHAN: I think we feel that you have to go ahead with caution. The set-top box is an element, along with PPM, which is currently in place in Canada and, you know, there would be some kind of collaboration. These things take a little bit of time, but we would like it as quickly as possible.

22038   COMMISSIONER SIMPSON: And --

22039   MS MYERS: I think one of the challenges at the moment is that because the BDUs are largely regionally based, they all have their own information, but there's no system currently in place to take all that disparate information and make it into one set of national data that we can use.

22040   COMMISSIONER SIMPSON: Right. So you would prefer to see it aggregated and come at you through a recognized authority that you can trust because there's that --

22041   MS CALLAGHAN: No, through universal software.

22042   COMMISSIONER SIMPSON: Yeah. Oh, okay.

22043   MS CALLAGHAN: I believe that is what --

22044   COMMISSIONER SIMPSON: Yeah. I was thinking more in terms of a vendor relationship like Numeris.

22045   MS MYERS: So we think it has to be some combination of that, yes.

22046   COMMISSIONER SIMPSON: Okay. Thank you. That's it for me.

22047   LE PRÉSIDENT : Monsieur le Vice-président.

22048   COMMISSIONER PENTEFOUNTAS: Thank you, Monsieur le Président.

22049   The 20 percent of Canadian viewership not being monetized, how do you arrive at that figure? Is that strictly two minutes an hour of ad avails or are you adding something else into that pot?

22050   MR. REAUME: No. That is all of the viewing that Canadians do to stations that we cannot advertise on.

22051   COMMISSIONER PENTEFOUNTAS: Okay.

22052   MR. REAUME: Now, you've heard this morning the American broadcasters say that they don't even -- their stations don't even get monitored and reported on. So that 20-percent figure is a little bit old, when Numeris was BBM and when BBM was still monitoring border U.S. stations.

22053   I think you will also find it in Mr. Dilworth's presentation, which I think was on Tuesday of last week. He uses a 21-percent figure. So that's what that is.

22054   COMMISSIONER PENTEFOUNTAS: Based on Canadian audience measurements --

22055   MR. REAUME: Exactly. Yes.

22056   COMMISSIONER PENTEFOUNTAS: Okay. Thank you, Mr. Chairman.

22057   THE CHAIRPERSON: Thank you.

22058   Just a quick question about the Super Bowl. Why haven't we seen the same sort of effervescence in very creative Canadian ads in Canada concurrently when the broadcast of the Super Bowl in Canada occurs?

22059   MR. LUND: Well, I think our creative agencies would think they do have that, but one of the biggest drawbacks is budget. I mean those commercials are multimillions of dollars and we can't justify that. No marketer in Canada has those types of budgets for a single commercial. So budget is a big part of it.

22060   THE CHAIRPERSON: So budget is. Is it also that ad dollars are getting siphoned elsewhere at that particular point because it is such a -- and you're right, they're available sooner online and so forth. Is it just the budgets are going all there?

22061   MS CALLAGHAN: Actually --

22062   THE CHAIRPERSON: Yes.

22063   MS CALLAGHAN: -- our budgets might go towards the Stanley Cup Playoffs versus Super Bowl. Super Bowl, while it's important here, is not one of the top-rated programs.

22064   THE CHAIRPERSON: Right. And so the more creative subjects to budget obviously would be going to higher-drawn audiences. But during the Super Bowl, you're saying it's not as attractive to Canadian audiences and that's maybe why Canadian advertisers are not as interested?

22065   MS CALLAGHAN: Well, it's big for Budweiser in the United States but most beer advertisers don't want to spend all their money in January.

22066   THE CHAIRPERSON: They're waiting for the hot weather.

22067   MS CALLAGHAN: You're not as thirsty in January.

--- Laughter

22068   MS MYERS: But I think it is still -- you know, it is a major event and I know -- I believe it's Bell that's announced sort of a --

22069   THE CHAIRPERSON: Yes, I saw that.

22070   MS MYERS: -- contest to try to encourage Canadian marketers to produce something spectacular for the Super Bowl.

22071   THE CHAIRPERSON: Right, and that's interesting.

22072   Someone also told me that the reason we see a lot of promotion for Canadian and non-Canadian programming on CTV at that particular time is because the unpredictability of the breaks during the game makes it easier to slip in a 15- or a 20-second promo as opposed to a more standard advertising. Do you think that's the case?

22073   MS MYERS: Could be. I couldn't really comment.

22074   THE CHAIRPERSON: You have no views, okay. Thank you. Those are our questions. Thank you very much.

22075   Madame la Secrétaire.

22076   THE SECRETARY: I would now ask the Documentary Organization of Canada to come to the presentation table.

--- Pause

PRESENTATION

22077   MME FITZGIBBONS : Bonjour.

22078   Juste avant de commencer, je tiens à vous signaler que, parfois, il y a trop de technologie puis pas assez de sommeil. Alors, on vient de vous soumettre un document révisé parce que la copie distribuée manquait un paragraphe essentiel.

22079   Et, par ailleurs, j'aimerais demander la permission au Conseil de soumettre au dossier une étude que nous avions mentionnée dans notre soumission écrite, qui est l'étude « Learning from Documentary Audiences », publiée par Hot Docs.

22080   LE PRÉSIDENT : D'accord. Est-ce que c'est un document qui était disponible avant le mois de juin?

22081   MME FITZGIBBONS : Non, mais on y faisait référence dans notre soumission écrite.

22082   LE PRÉSIDENT : Et les grandes conclusions...

22083   MME FITZGIBBONS : Ont été publiées la semaine dernière.

22084   LE PRÉSIDENT : ...on en faisait déjà état dans votre... Non?

22085   MME FITZGIBBONS : Non. On les annonçait. C'est-à-dire qu'on disait, on attend...

22086   LE PRÉSIDENT : Vous aviez dit que ça c'en venait?

22087   MME FITZGIBBONS : ...on attend cette étude...

22088   LE PRÉSIDENT : D'accord.

22089   MME FITZGIBBONS : ...et on espère avoir des données à partager avec vous au moment des audiences.

22090   LE PRÉSIDENT : D'accord. Et c'est la raison pour laquelle vous demandez de déposer en retard?

22091   MME FITZGIBBONS : En effet.

22092   LE PRÉSIDENT : Donc, on va prendre votre demande en délibéré. Merci.

22093   MME FITZGIBBONS : Merci.

22094   Bonjour. My name is Lisa Fitzgibbons and I'm the Executive Director of the Documentary Organization of Canada.

22095   Barri Cohen, DOC member, and Executive producer with Allscreen Entertainment is with me today.

22096   Thank you for extending the invitation to appear.

22097   In the last few years we've seen the regulatory system make great strides to redress an imbalance in support of Canadian dramatic series and the results have been very good. That success points to what is possible, but the success formula has yet to be applied to other types of programming, including children's programming, local programming, Canadian features and Canadian documentary, which are types of programming that are struggling under the current framework. Today as the whole sector looks to the future, we offer recommendations we believe will help remedy the situation.

22098   In past hearings the Commission has asked us questions about the demand for Canadian documentary and whether an audience for the genre really exists. In our written submission we referenced a documentary audience study undertaken by Hot Docs that was released just last week. This critical research unequivocally demonstrates the important value that Canadian consumers put on documentaries, while highlighting the difficulty they have in accessing them.

22099   Dans l'étude « Learning from Documentary Audiences: A Market Research Study », on apprend que les auditoires canadiens consomment plus de documentaires aujourd'hui qu'il y a trois ans. La majorité des répondants indiquent qu'ils regardent au moins deux documentaires ou plus par mois, peu importe la plateforme de visionnement. La vaste majorité, soit 95 pour cent des répondants, visionne ces documentaires à la maison sur une variété de plateformes, et l'on note l'important rôle de Netflix dans la livraison du contenu documentaire. Soixante pour cent des répondants disent que l'accès à des documentaires canadiens est important, mais seulement 7 pour cent les trouvent facilement.

22100   L'étude note également, « Participants were passionate about the impact of documentaries on their lives as tools of information, for entertainment and for learning », une citation faisant écho aux objectifs visés par la Loi sur la radiodiffusion.

22101   MS COHEN: This year, an important debate about the criminalization of the mentally ill was sparked by John Kastner's "NCR: Not Criminally Responsible." Ric Esther Bienstock's "Tales From the Organ Trade," nominated for an Emmy, has been instrumental in reviewing international policy on the organ trade; and Angad Singh Balla's "Herman's House," also nominated for an Emmy, propelled the debate around solitary confinement in the U.S. and around the world.

22102   These documentaries and many others help us, as a society, wade into complex social issues. Not all docs seek to stir such debates. Others seek to inform and entertain. There are nature docs, culture docs, funny docs, and yes, sometimes sad docs.

22103   With this research, we once again have to ask: Why isn't consumer demand for Canadian documentaries being sufficiently met?

22104   Documentary producers sure want to, but the difficulty in securing a Canadian broadcast licence in the current environment and assembling a production's financing is truly like rolling a rock up a hill that just keeps getting steeper.

22105   As we have demonstrated before, few Canadian broadcasters are commissioning documentaries. Most notable by their absence are the large conventionals. From a high of $427 million in 2008-2009, documentary production declined to $344 million in 2012-2013.

22106   This downward trend has been exacerbated by the Group Licensing Policy that has allowed group broadcasters to allocate most, if not all, of their PNI expenditure requirements to big budget drama and foreign formats. Currently, if it weren't for the independent niche broadcasters like Super Channel or Documentary, there would in fact be very little documentary production in Canada. Unfortunately, these niche broadcasters can only manage small licences for very few projects.

22107   In the current system, Canadian broadcaster licences trigger all other funding sources. On average, these licences account for about 10-30 percent of a documentary budget, with the remainder of the money having to be raised by the producer -- an onerous task. Without this crucial trigger, Canadian broadcast documentaries cannot get made because there are no other viable sources from which to build sufficient production budgets in the current ecosystem.

22108   MS FITZGIBBONS: These are tough times for doc producers and producers need a framework which allows them to say "no" to broadcasters who demand more and more rights for fewer and fewer dollars and that's why Terms of Trade are important.

22109   At the same time, it is unfair to ask producers, who are taking the bulk of the risk, to give up revenue streams that would compensate for that risk. More often than not, the documentary producer is put in the position of having to pay out of pocket in order to finance their production. When it comes to documentary production, being paid a living wage for work done isn't the norm.

22110   Out of necessity, documentary producers are forced to find alternative means of financing, such as crowdfunding or foundation support, as detailed in DOC's "Growing the Pie," which was included with our written submission. To date, these revenue models are very limited and have costs attached. At this point in time, these alternative forms of financing and methods of distribution can't come close to matching even a small broadcaster's licence or its audience reach, nor do they trigger critical CMF funding or tax credits.

22111   We've said it before, the Canadian documentary sector is at a critical juncture. We recognize the measures taken by the Commission to address our sector's uphill battle, but the inclusion of documentary in PNI and the creation of the 11(b) reality category have been insufficient to reverse the serious decline in production.

22112   In our written submission, we spoke of platform neutral regulations, but we wonder whether true platform neutral regulations will only be possible when the Telecommunications Act and the Broadcasting Act are one and the same.

22113   MS COHEN: As we transition to a new system, these are the topics we encourage the Commission to consider.

22114   The proposal to include revenue and expenses from Canadian broadcasters' digital programming in the calculation of CPE is, in our opinion, a significant first step in acknowledging all broadcasting platforms and reflects how Canadians consume content. We hope this will encourage broadcasters to commission digital only -- many of them have the assets, frankly -- or digital first, Canadian programming. However, these digital programs will have difficulty finding financing as the productions won't qualify at the current time for CMF or tax credits. We encourage the Commission to address this issue. Otherwise, rollout of this type of programming will be limited in the future.

22115   We further recommend that the definition of a licensed broadcaster be reviewed. Extending the definition to include domestic and foreign OTT as an eligible broadcaster would diversify the players who can trigger Canadian financing and better reflect the current environment in which content is created and delivered.

22116   DOC shares the view held by others that OTT services are akin to VOD. This is why we believe that a VOD-style contribution from foreign and domestic OTT services in the form of a 5-percent contribution to existing production funds would be an approach that acknowledges the important role these services play. We would further recommend that all OTT services be required to include a set percentage of Canadian titles in their catalogue. Finally, we would like to see a proactive approach to promote these titles to consumers alongside all the other content that is available to them. So if they're paying into it, they should also be able to get something out of it too in terms of being able to trigger programs that they can partner on.

22117   In order to redress one of the unintended consequences of the Group-Based Licensing Policy, DOC supports CMPA's proposal that there should be a PNI subquota for long form documentaries.

22118   The Commission has asked participants to state their favourite and least favourite proposal in the Working Document.

22119   DOC's least favourite proposal would be the removal of nature of service. We believe that an enforced nature of service allows audiences to have some degree of certainty that they will get the kind of programming that they signed up for. Our criticism is not aimed at independent broadcasters that spend their limited resources building up their brand, but rather with large corporate groups. These large broadcast groups are all chasing the same audience, in our view, and airing licensed programming across their conventional and specialty services for little more consideration than what would be paid for one service alone.

22120   MME FITZGIBBONS : Un des grands enjeux de ces audiences est celui du système à la carte. Pourtant, lorsque ça vient aux amateurs de documentaires canadiens, on pourrait dire qu'ils sont déjà dans un système à la carte puisqu'ils doivent se tourner vers d'autres pourvoyeurs de contenus, hors du système télévisuel traditionnel et réglementé.

22121   Les enjeux sont de taille et, comme plusieurs l'ont souligné, lourds de conséquences.

22122   Yet, as stated in our written submission, consumers and citizens are well served by the social and cultural policy objectives set out in the Broadcasting Act. If we let absolute market forces decide, then we're left to wonder what purpose holding onto the Broadcasting Act serves. How will we inform, educate and entertain Canadian audiences with Canadian stories?

22123   One final note. We've engaged with this in previous Commission consultations to the best of our ability and have invested considerable resources out of a very limited budget. We have come to this proceeding with all the openness and optimism we can muster when looking to the future for Canadian documentary programming.

22124   But truth be told, we're not optimistic. Documentary makers in this country are frustrated, angry, and in some cases they're broke. In spite of all the hearings where documentary issues have been brought forward over the years, in spite of evidence that has been presented on the genre's serious decline, the dire situation persists. We're at a loss to see what role we can play in future Commission proceedings.

22125   To those who accuse us of being self-interested, we'd like to counter and say that we're not self-interested but passionate about the stories we have to tell and we're passionate about finding a way for them to connect with Canadians. We are de facto the champions and defenders of what was once a proud cinematic legacy in this country. Canadians have certainly demonstrated they want Canadian docs but we wonder whether the regulated system now and in the future will provide us a fair chance.

22126   That is the question we leave you with today and are happy to answer your questions.

22127   THE CHAIRPERSON: Thank you very much. Commissioner Molnar will start us off. Thanks.

22128   COMMISSIONER MOLNAR: I am happy to say "ladies."

--- Laughter

22129   COMMISSIONER MOLNAR: Sixty percent of our membership are women.

22130   MS FITZGIBBONS: You're welcome.

22131   COMMISSIONER MOLNAR: I am sorry that you are not optimistic but you've made clear your issues and I have read your full submission and your attached study that you did on alternative forms of financing. You've now done a survey that we won't be referencing here, just until we've had a chance to review that.

22132   MS FITZGIBBONS: I would love to take credit for it but I do want to put credit where credit is due and it is the Hot Docs Films Festival that produced the study. So I just want to be clear.

22133   COMMISSIONER MOLNAR: Okay. Just as I was listening to you and trying to follow, I caught your least favourite part of the framework and I'm not sure I caught what you determined to be the best.

22134   MS FITZGIBBONS: The best is the first one, which is the inclusion of digital expenditures as part of CPE. So we think that's a positive first step.

22135   COMMISSIONER MOLNAR: Okay. I had been reading up on some of this before the proceeding, and tell me, is your experience -- I know overall there has been a decline in the amount of money within the PNI pot that's kind of been going to documentaries, but is that general amongst all of the broadcasters or are you having success with some and not others? What's the story behind that?

22136   MS FITZGIBBONS: So, I think it's a two-part answer and the first part would be that it's an overall decline. The success is with some broadcasters and we mentioned the independents that we really are connected to.

22137   There are natural allies, I think, to documentary: the public broadcaster, the educational broadcasters. And then we have other allies, whether it be Documentary Channel or Super Channel.

22138   But it's interesting to note that in the CMF's Point-of-View Program, which is there intended to support point-of-view English-language documentary, the vast majority of the projects that are greenlit are currently being supported by Super Channel.

22139   So our point has been that we have one small specialty broadcaster that is supporting the vast majority of Canadian broadcast documentary production. Our points have often been about the over-the-air and the conventionals. In our view, there is a role for them to play when it comes to documentary production and they've stepped back.

22140   So if I may also just briefly on the pick-and-pay.

22141   Because at the heart of pick-and-pay there will be the conventionals and regardless whether it's a skinny basic or a larger package, if the conventionals are not carrying documentary, then with pick-and-pay there's a very definite possibility that the documentary programming just won't be available and people will have to go outside of the regulated system to find it.

22142   COMMISSIONER MOLNAR: Okay. You have touched on this a little bit but I want to make sure that I am understanding your concern with eliminating genre. How would this make your problem worse? I'm not sure I understand.

22143   MS FITZGIBBONS: Actually we had quite a bit of a conversation amongst members to talk about genre protection. And out of genre protection and enforce nature of service I think it's not an either/or proposition, I realize, but we discussed it and with -- the smaller broadcasters are going to invest money in building up their brand. So in a sense it's built-in. Maybe genre protection is built into the market, but where we are not so sure that there's a built-in safety mechanism is around nature of service. So that's why we feel strongly about the enforced nature of service and maybe not as strongly anymore after we have had deeper conversations around genre protection.

22144   So I know that in our paper we had suggested both, but when we discussed it further we really landed on the fact that enforced nature of service is more important to documentary.

22145   MS COHEN: I would just add that we -- this also comes out of just witnessing the creep away from nature of service with especially some of the speciality channels clearly.

22146   COMMISSIONER MOLNAR: Are there particular natures of service you are concerned about?

22147   I mean, when I think of the genres, what are called Cat A's today, what are the natures of service that you are concerned could be removed through this?

22148   I'm sure you don't carry if there's competition --

22149   MS FITZGIBBONS: Well, we keep coming back to an old example by now, which is the bravo example. So bravo was once about arts and culture and isn't anymore, so that's a concern to us.

22150   MS COHEN: In fact, you don't see arts programming very much at all anywhere in the system as a consequence and very little on the CBC either for that matter. That has been allowed to happen.

22151   Certainly consumers, when I have been reading through the forum, the various questions, and I have been reading from folks who have been writing in to you -- and I think a lot of us watch TV, too, so we're not just filmmakers, we are also consumers, too -- and you hear this echoed and echoed again as well that it's like, "Well, if I'm paying for the History Channel why am I not seeing history", as an example, I don't want to single them out because some of our members also work with them.

22152   By the way, with the folks who aren't able to do regular documentary, one of the ways in which they are staying alive, too, is by trying to keep pace with the broadcaster market demand in reality programming and in lifestyle programming and all of that and this is not necessarily what everybody got into the game to do in terms of the kinds of storytelling that they want to do.

22153   COMMISSIONER MOLNAR: Related to that issue, it has been explained to me as job docs I guess, where one might question whether the intent of what a documentary is to deliver and what is being considered a documentary maybe are aligned, you know, at all times. Is there some solution that you see to that?

22154   MS FITZGIBBONS: Well, I think in past one of the things that we have put forward is that series are often where the issues of nuance and loss of documentary perspective is most apparent.

22155   So if we were to express a wish it would be about, you know, let's look at supporting long-form documentary where the distortion of documentary is less apparent and not so easily done.

22156   We have also mentioned this at the CMF, because we have done thorough analysis of the CMF policies, and there you will see that the vast majority of investment is going to series. Again, we are not trying to say this isn't programming that shouldn't be on the air and shouldn't be done, that's not the point. The point is, what kind of program do we want to support? Our view is that the series often can find market support and don't need the help that the long-form docs need.

22157   COMMISSIONER MOLNAR: so PNI, when it was created, was intended to really support at-risk programming, if you will.

22158   You believe that is the appropriate objective for PNI?

22159   MS COHEN: Yes, we do.

22160   COMMISSIONER MOLNAR: You believe that there might be some test to see whether the programming you were just talking about is truly at risk?

22161   MS FITZGIBBONS: Just to clarify, meaning the series or the long --

22162   COMMISSIONER MOLNAR: Like the series. Yes, like the series type of thing.

22163   Is there some kind of test that could be put in place or something else to ensure PNI is properly targeted to that which is most at risk?

22164   MS COHEN: Well, I think in our recommendation -- correct me if I'm wrong, Lisa -- is this the CMPA's proposal to have a sub quota in part.

22165   COMMISSIONER MOLNAR: Right. But a sub quota doesn't change the fact. I think which you have just suggested is some PNI is being used to support programming that's not truly at risk.

22166   MS FITZGIBBONS: Yes. One of the things that I would -- I'm trying to think of what would be a fair test and certainly in the past one of the things that we have wondered aloud is, when you are on season five of something, do you still need -- is it really at risk?

22167   So I think there are questions like that that we could certainly come up with.

22168   But again, when talking to people in the milieu, whether they be on the production side or in other places at policy levels, certainly the preoccupation seems to be with the long-form documentary. The series do tend to stand on their own.

22169   COMMISSIONER MOLNAR: Okay. Just one more question. I'm still focused on PNI because I think that is perhaps the area that is of greatest focus to you.

22170   You support including children's programming?

22171   MS FITZGIBBONS: We would.

22172   I think our view is that it's not a genre, it's a market and it's a market that can be served by drama and documentary. But I think the complexity or the reality is that there is an absence there right now and it has to be addressed.

22173   I'm not sure if including it within PNI is the only way to address it, but certainly that has been what has been put forward here and discussed primarily, but it is not a genre

22174   COMMISSIONER MOLNAR: Yes. I think it's fair, but it might be programming at risk.

22175   MS FITZGIBBONS: Yes.

22176   COMMISSIONER MOLNAR: Yes, okay. Thank you.

22177   Those were my questions.

22178   THE CHAIRPERSON: Thank you.

22179   Mr. Vice Chair...?

22180   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

22181   Just briefly, I understand your ask for a subcategory on long-form docs under PNI.

22182   MS FITZGIBBONS: Features, I think.

22183   COMMISSIONER PENTEFOUNTAS: Features?

22184   MS FITZGIBBONS: Yes. The CMPA's proposal is about feature films of which documentaries are a part.

22185   COMMISSIONER PENTEFOUNTAS: So it would be feature film and documentary? That would be the subcategory?

22186   MS FITZGIBBONS: That would include documentary, because there are feature film documentaries.

22187   COMMISSIONER PENTEFOUNTAS: Okay. Because here you refer to the CMPA's proposal that there should be a PNI sub quota for long-form documentaries.

22188   MS FITZGIBBONS: Jay...?

22189   I'm sorry. I'm turning to the back of the room to check with Jay, but he's not there or I didn't see him, but I should know this.

22190   COMMISSIONER PENTEFOUNTAS: I think he's there.

22191   MS FITZGIBBONS: He's still there?

22192   COMMISSIONER PENTEFOUNTAS: Yes.

22193   MS FITZGIBBONS: You know what, now I'm questioning or doubting my --

22194   COMMISSIONER PENTEFOUNTAS: Okay.

22195   MS FITZGIBBONS: If we wrote down "long-form docs" chances are that's what they said and we want to echo what they said, but that should be --

22196   COMMISSIONER PENTEFOUNTAS: Okay. I appreciate that.

22197   MS COHEN: The single one-offs.

22198   MS FITZGIBBONS: Yes, it's the single one-offs, which is the long-form docs, which would include --

22199   MS COHEN: Feature length.

22200   MS FITZGIBBONS: -- feature films.

22201   COMMISSIONER PENTEFOUNTAS: Because the CMR data shows that since PNI and CPE -- sorry, it has been a long two weeks -- PNI and group-based licensing has come into effect, spend on long-form docs is up.

22202   So I will just let you consult the CMR data.

22203   MS COHEN: I think that might be because the long-form docs may have included series in that. We would have to check that and I think some of the data reporting. I know there has been some concern with some of the reporting, but I think that's because it may be including the series, documentary series.

22204   COMMISSIONER PENTEFOUNTAS: We will have two take a look at that and if you have some additional information --

22205   MS COHEN: Which could be anywhere from 8 to 13 hours in a season.

22206   COMMISSIONER PENTEFOUNTAS: They would categorize that as long-form doc?

22207   MS COHEN: Potentially. We will have to check that.

22208   COMMISSIONER PENTEFOUNTAS: Let's check. Yes, you will check it and we will check it and we will see if that's the case.

22209   MS COHEN: I seem to recall that in some of the research I did, but we need to follow that up, yes.

22210   COMMISSIONER PENTEFOUNTAS: Okay.

22211   And just to make it clear, your ask is that there be a PNI sub quota for long-form docs --

22212   MS COHEN: Correct.

22213   COMMISSIONER PENTEFOUNTAS: -- as a consequence of the fact that your feeling is that PNI has not driven resources to long-form docs.

22214   MS FITZGIBBONS: Right.

22215   COMMISSIONER PENTEFOUNTAS: And contrarily it has driven resources to 11(b) reality.

22216   MS COHEN: And drama.

22217   COMMISSIONER PENTEFOUNTAS: And drama, yes.

22218   MS FITZGIBBONS: Well, actually primarily I think to dramatic series.

22219   MS COHEN: But also just --

22220   COMMISSIONER PENTEFOUNTAS: I'm just referring to your uphill battle in your document --

22221   MS COHEN: Well, yes. And because of group licensing they have been allowed to pool resources to create Canadian branch plant form of American and foreign reality format programs.

22222   COMMISSIONER PENTEFOUNTAS: I understand all that.

22223   MS COHEN: Yes.

22224   COMMISSIONER PENTEFOUNTAS: But for the purposed of the record and the purposes of your ask it would be great to have a clear indication as to where long-form doc spending is since the advent of group licensing. Thank you so much.

22225   Thank you, Mr. Chairman.

22226   MS COHEN: Thank you.

22227   THE CHAIRPERSON: Thank you very much, those are our questions.

22228   MS COHEN: Thank you very much. Thanks for your time.

22229   THE CHAIRPERSON: Thank you.

22230   We will take a break until 1:30.

--- Upon recessing at 1234

--- Upon resuming at 1330

22231   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

22232   Madame la Secrétaire...?

22233   LA SECRÉTAIRE : Merci.

22234   We will now hear the presentation of Entertainment One.

22235   Please introduce yourself and you may begin.

PRESENTATION

22236   MR. MORAYNISS: Good afternoon, Mr. Chairman, Commissioners.

22237   My name is John Morayniss and I'm here today representing Entertainment One and Les Films Séville. I am the Chief Executive Officer of eOne's Television group. Today, I will address the panel on behalf of President and CEO Darren Throop and the whole organization.

22238   Headquartered in Toronto, Entertainment One is a global entertainment leader in independent content ownership and distribution of film, television and music. eOne has 1600 employees worldwide, with offices in eight countries, including over 800 employees across Canada. In the most recent year, eOne invested more than $500 million in film and television content and, as a result of our investment, we employ thousands of people across Canada in the television industry.

22239   Last year, eOne's film division released 275 films to theatres around the world and our television production division delivered more than 200 episodes of original programming, which amounted to a production spend in Canada of over $250 million. We expect to deliver nearly twice that amount this year.

22240   We have numerous longstanding partnerships and relationships with independent producers, writers and creators from Canada, the U.S. and around the world, including the television producers behind such eOne series as "Rookie Blue", "Saving Hope", "Bitten", "Haven", "Heartland", "Call Me Fitz", "Hell On Wheels", "Klondike" and "The Walking Dead", who rely on category leaders like eOne to invest in them and the content that they produce.

22241   It is worth highlighting that in our most recent fiscal year, 74 percent of eOne's overall annual production spend was spent on Canadian content and nearly 70 percent of the revenue from our global television business, close to $300 million, was spent on Canadian content production.

22242   Finally, as a truly global company in both outlook and reach, we attract significant foreign capital into the Canadian media sector.

22243   Our industry peers have addressed various aspects of the Commission's "Working Document", and related matters over the past two weeks. I will focus our remarks today on the aspects of the value chain that we know best as developers, producers, financiers and global exporters of Canadian content.

22244   eOne agrees with the Commission and others who have appeared that a strong production and broadcast environment is essential for the continued success of the Canadian television and film industry in its objective to create and produce compelling and diverse Canadian television, film and non-linear digital programming and it is the shared mandate of the regulating bodies and our industry that such programming is made available across multiple platforms and delivery systems and is effectively marketed and promoted to ensure that Canadians are able to discover programming that is made in Canada and that resonates with Canadians.

22245   However, in an age where Canadians have unprecedented access to a vast array of programming services and on-demand content from all over the world, all competing for the viewer's time, attention and dollars, an infrastructure that supports a steady supply of compelling Canadian programming just isn't enough, especially when it comes to high-end dramas that need to generate significant international revenues in order to support ever-increasing production budgets.

22246   Therefore, what is needed is policy that supports the development and production of hit content; not just hits in Canada but hits around the world. In this age of digital disruption and seemingly unlimited content choices where regulation has less of an impact on what Canadians watch, supporting a system that encourages the development of home-grown hits that Canadians and the rest of the world demand to watch and which can thus return real and significant profits back into the Canadian broadcast and production industries is one way of ensuring a healthy production and broadcasting ecosystem in Canada.

22247   The good news is that we are moving in the right direction and towards the production of higher-quality drama series, which are also getting traction in the U.S. and around the world, including shows like "Rookie Blue", "Orphan Black" and "Flashpoint".

22248   However, an unfortunate trend is that the asset value of some of the highest quality and most highly-supported Canadian drama series is being extracted from Canada, and is ultimately being owned and controlled by non-Canadian distributors and U.S. studios. I will expand on that shortly, but would like to point out that not only are we seeing the asset value of our content leaving Canada, our creative talent is leaving too.

22249   As articulated by Irene Berkowitz in her remarks to the Commission:

"... while Canada is not yet branded an exporter of global hits, we have for decades exported world-class creators."

22250   This talent-drain has primarily flowed to the U.S. where Canadians have created and/or made significant contributions to some of the biggest worldwide film and television commercial hits of all time, generating billions of dollars for the owners of those hits, most of whom are the major studios.

22251   To be clear, these U.S. studios have spent, and lost, vast sums of money year after year on script and pilot development to realize these global hits. In essence, they recognize that in order to create hits one must take significant risks in the R&D process.

22252   But that's not all. The studios demand complete flexibility in choosing the creative ingredients that go into that hit recipe, and even then it is very much about trial and error. However, if you bake enough cakes using the finest ingredients from around the world, eventually you will produce a winner.

22253   If we want to remain competitive in the development and production of world-class highly profitable TV drama that Canadians will choose over programming from the U.S. and the rest of the world, it will mean amping up our level of risk-taking. It will mean making bigger investments, it will mean utilizing the best creative talent from around the world and placing sizable bets that these artists can make up the necessary ingredients to deliver a hit. In other words, Canada needs to be a world-class creative hub, attracting the best from around the world and keeping our home-grown talent in Canada.

22254   In our opinion, the way to do this is to ensure that first and foremost Canada's brand is a creative brand. Creative, as opposed to being known primarily as a country with a strong below-the-line production infrastructure and good financial incentives, but with no track record of producing real global hits. In other words, our shared opportunity is to craft a system in Canada where we are a mecca for not only the manufacturing of content at a good price point, but where global hits are created and supported through both investment and access to top-tier talent from around the world.

22255   Canadian consumers are sophisticated and will watch Canadian content, not because it's available to them, but because they want to, because it's world-class programming with a Canadian sensibility or voice that speaks to them.

22256   To survive and flourish as an industry, not only must we be able to create content that has real commercial value in the international marketplace, the system must safeguard Canadian ownership in order to ensure that the worldwide profits derived therefrom stay in Canadian hands.

22257   While the government has a role to play in the Canadian content production, distribution and broadcast ecosystem, we no longer live in an analog three channel universe where the regulations and policies governing the Canadian production and broadcasting sectors can have the same level of impact they once had.

22258   With the proliferation of channels on a worldwide basis, the supply and demand for high-end content has never been greater, which in turn is contributing to significant growth and consolidation among the bigger media players, particularly the major studios, as well as the well-capitalized so-called "super-indies". These companies control all aspects of the value chain from the creation of the content to the worldwide exploitation of the content.

22259   Additionally, many large media companies are not only locking up the most talented creators and the most sought after intellectual property, they now own and control channels globally. This affords them incredible leverage and, in effect, full control and ownership over the most valuable content assets.

22260   Thus, it is our strong belief that in order to ensure a vibrant Canadian content industry, we need an infrastructure with strong integrated well-capitalized globally-focused Canadian-based media companies and a regulatory environment in Canada that supports and promotes meaningful growth of media businesses that can invest in innovation and compete on a global scale, not just within Canada.

22261   Furthermore, at a time when we are seeing a new uncharted competitive landscape and changing consumer viewing habits, it is eOne's firm belief that a strong and well-capitalized Canadian-owned and controlled content export industry is crucial in creating stability, growth and opportunity within the Canadian content production and programming sectors.

22262   Allow me to briefly explain: A global distribution business sees first monies coming in on a worldwide basis, a strong and relevant worldwide distributor has market intelligence and channel and platform relationships, a well-capitalized and relevant distributor reinvests its profits back into new content creation, a well-capitalized distributor invests in writing and producing talent and a strong, diversified and well-capitalized distributor takes a portfolio approach to its content, allowing it to ride out the ebbs and flows of market and economic fluctuations, the inherent risks of our business, technological change, and changing consumer tastes and habits.

22263   Now, take everything that I stated above and layer those compelling attributes onto Canadian-based, Canadian-owned and controlled global distribution enterprises with a mandate to nurture, invest and monetize the best Canadian content, as well as the best global content, and you end up with a strong independent Canadian studio system where ultimately the most valuable content stays in the hands of Canadians.

22264   Unfortunately, the current Canadian content funding regime supports a one-off production infrastructure where copyright ownership is more important than distribution ownership. Thus, many of the best Canadian shows end up, in essence, owned and controlled by non-Canadian studios and distributors who have no meaningful ties to Canada or whose ties are tenuous at best.

22265   This emerging trend will only see the long tail of the production and distribution value chain prematurely severed, leaving our talent and industry bereft of revenues that would otherwise be reinvested to create and deliver more high-quality Canadian content to consumers.

22266   In my remarks today, I have made a number of observations around the current Canadian content system that pose challenges to ensuring a vibrant, dynamic, strong, growing and commercially viable industry within today's rapidly changing and unpredictable landscape.

22267   The two key observations that I want to highlight as I conclude are:

22268   One, the value of distribution ownership; and

22269   two, the value of transforming the Canadian content brand from discount manufacturer to premium hit-maker.

22270   While it's not easy to get there, we thought it would be worth presenting a regulatory proposal that, while not meant to deal with all of the challenges highlighted in my remarks, would hopefully, at the very least, ignite thought and discussion around what we perceive are underlying systemic issues within the Canadian content system.

22271   The broad terms of our proposal are as follows:

22272   establish a more flexible Canadian content point system that can be made available to Canadian producers and broadcasters on a certain number of qualified high budget television programs each year, provided that the worldwide distribution rights are retained by a bona fide global content exporter who has demonstrated a track record of investing a significant and material amount into Canadian content programming.

22273   This more flexible point system would be set up alongside the current system as an incentive to Canadian producers, broadcasters and distributors to take more creative and financial risk, invest more dollars and work towards developing and producing in Canada the next big billion dollar global hit.

22274   We believe this proposal would result in:

22275   the strengthening of Canadian owned and controlled export businesses;

22276   a more attractive environment for the best creative talent from around the world to want to work in a Canada.

22277   Looking to the future, we wholly support maximizing choice for Canadian consumers. However, we need to ensure that Canadian content can compete in this crowded multichannel universe.

22278   eOne would welcome the opportunity to participate in a roundtable and share our data and discuss case studies with interested industry stakeholders in order to further discuss what we have presented today.

22279   Finally, I would like to acknowledge that eOne is member of the CAFDE, who will be presenting later today with additional remarks related to the Canadian film industry.

22280   I appreciate the opportunity to appear before the Panel and happy to answer any questions you may have.

22281   THE CHAIRPERSON: Thank you very much, Mr. Morayniss.

22282   It sometimes takes several days in these hearings for us to have refreshing ideas brought forward that aren't -- how do I say this -- fixed on protecting certain entitlements and protecting the status quo.

22283   I know what you are suggesting wouldn't be without controversy, wouldn't be without some pain to certain business as currently shaped, but I take it what you are proposing, however, is a strategy to get us to actually address the technological and consumer habit changes that are occurring worldwide, a bit like a roller -- no, not a rollercoaster -- I'm too tired I'm forgetting my words now -- un rouleau compresseur --

22284   COMMISSIONER PENTEFOUNTAS: A steamroller.

22285   THE CHAIRPERSON: That's the one I'm looking for -- a steamroller that's coming down at us quite quickly.

22286   In fact, your oral presentation here is substantially more detailed than your written presentation so there is a lot of content here.

22287   MR. MORAYNISS: Exactly. I realize it was too long, so I just this morning --

22288   THE CHAIRPERSON: Yes, I saw you spoke to it.

22289   MR. MORAYNISS: Yes.

22290   THE CHAIRPERSON: The first question I have for you: You have specific ideas about how we can improve for the future, but beyond those ideas is it your view that we, the CRTC or other players within the government construct in Canada, are creating barriers for the sort of future you think would be ideal for us, that is a system that encourages development of home-grown hits that Canadians and the rest of the world demand to watch.

22291   MR. MORAYNISS: Yes. You know, the system is very complicated because we live right next door to the U.S. and so Canada is unique. It's hard to look at other countries and do an exact comparison and say, "This is the way France is doing it, this is the way Sweden is doing it and we should do it the same."

22292   There is no question that our rules have built up a really significant infrastructure on the production side and there is no question that the rules have also been put in place to protect Canadian culture and to ensure that the program that's created in Canada is not the same as the U.S. and somehow speaks to Canadians in a way that a U.S. program can't.

22293   But I think we are at a stage now where those rules, as I said in the presentation, they just don't have that level of impact, there's just too many channels, too much content, too much content that's easily accessible, too much noise.

22294   So what's happening now is, the only way, in our opinion, that we can really move Canadian content forward is to create a system where we can be as noisy as anyone else, and particularly the U.S.

22295   So it's almost like these rules were put in place, and obviously they have evolved over time, but it was there to protect us from the border, it was to protect us from an influx of U.S. content from Hollywood, the biggest entertainment exporter in the world.

22296   We kind of can't do that anymore, not certainly in the same way that we could in the '60s and '70s and '80s. So in a way we also have an opportunity because Canada, English-speaking Canada, same language, similar culture, we have the best opportunity to export our content back into the U.S. and that is the way that we can create, in my opinion, the best, most vibrant content, because when you can export it back into the U.S. you ultimately get financing back from the U.S. into Canada.

22297   The truth is that a lot of these shows just take a lot of money. If you are seeing what's happening right now around the world, budgets are going up. So I think we have to sort of look at a less insulated approach to how we develop and produce content in order to be competitive on a global basis.

22298   THE CHAIRPERSON: What I'm hearing, though -- tell me if I'm wrong -- is that we need to in fact put more of our money behind fewer numbers of production, and what I got from certain producer groups and so forth, and creative groups, is they want to protect the same tonnage of production, whereas you're advocating it's not so much tonnage, it's you got to really take the money you have and concentrate on a few potential hits, understanding that it's a very high-risk business?

22299   MR. MORAYNISS: Yes and no. I mean there's no question that we feel that there is a need for diversity in the marketplace, and there's a need for, you know, smaller content that necessarily targets a smaller group of consumers. And there's got to be a way to make that content make sense, because we do believe that consumers, you know, should be served not just with the big mass hits, but with the more niche programming.

22300   What we're saying is, by creating those --

22301   THE CHAIRPERSON: There's room for documentaries and kids and that sort of thing --

22302   MR. MORAYNISS: Absolutely. And so it's --

22303   THE CHAIRPERSON: -- but you're still saying -- okay.

22304   MR. MORAYNISS: I don't necessarily thing that the pie's going to get smaller. What I'm saying is if we focus on a certain kind of quality, and allow the rules a little more flexibility when it comes to how we creatively put together these shows, to hopefully create these bigger hits, there'll be way more money coming into the Canadian system.

22305   So it's not necessarily about a reduction of volume, it's really about saying: How do create home-grown big hits in Canada that actually deliver significantly more money that we are currently deriving from our Canadian shows, even our big drama series?

22306   I mean, as an example, you know House was created by Canadian, David Shore, but it's owned by, I believe, Universal, and was on Fox. A lot of show owners, talented Canadian show owners, have left Canada because they just don't feel they -- you know, that there's enough going on and there's enough opportunity to really make a global hit and a lot of these creators, these talented creators, want to play on a world stage. But that show could have been developed in Canada if there was slightly more flexible rules. I mean, at the end of the day, they had a British lead playing, you know, a North American character.

22307   Alliance Atlantis -- I was writing television at the time -- we ended up acquiring CSI because every studio passed on it because no one thought it was good. So that was a situation where a Canadian company did, ultimately, acquire a hit, but they didn't develop it. What I'm saying is you can combine those two things in Canada, where you can actually create an environment where you really are focused on development of these big shows and a scenario where you have the capital infrastructure to invest in those shows and take that risk. Then you're talking about billions of dollars back into the system.

22308   THE CHAIRPERSON: Other than the categories -- you know, how we define Canadian-made content, which, by the way, the point system goes back to the 1926 Imperial Conference, if I'm not mistaken, in one way or shape, or even before talking pictures, it's quite an old system, other than that point system, what other barriers do you think we should be thinking of removing to allow the outcome you're talking about to occur?

22309   MR. MORAYNISS: I think it's very complicated and I don't have all the answers. I think that there may not be necessarily a significant amount of barriers, especially given that we're playing in a North American marketplace, not just a Canadian marketplace.

22310   THE CHAIRPERSON: Right.

22311   MR. MORAYNISS: I do think -- you know, the focus, I don't want to simplify it, because I know that, ultimately, when you unpack this there's a lot of detail and a lot of stakeholders and interested parties, and they all -- you know, there's gainers and there's people are that have something to gain and people who have something to lose. I think, ultimately, if the Canadian system is stronger, everyone will gain.

22312   But the truth is it really is a focus on creative. It really is. If you look at the marketplace, and the perception of Canada -- and I've spent a lot of time, you know, talking to buyers all over the world and selling shows, mostly Canadian shows, but also selling shows like Walking Dead, so, you know, I can see the value and sort of the process that goes into making hits -- there is a perception that, you know, because of the creative regulation in Canada, which, by the way, makes sense in certain situations, there is a perception that a big drama, and Canadian content, which is very good, just isn't, you know, as good as it could be.

22313   You know, it's good enough, but not as good as it could be, and I think that's where the opportunity lies. If we figure out a system that allows more creative flexibility, you'll bring more capital into these shows, you'll make better shows, and, ultimately, the system will be healthier.

22314   THE CHAIRPERSON: The head of Corus, Mr. John Cassaday, used to often describe his company, in part, as 95 per cent core and 5 per cent explore. But in that spirit, do I read your recommendation is that we should create sort of a test case, a R and D test case, where we could explore a hits-based strategy and see if it works before we load up to the entire content production system? Is that what you're suggesting?

22315   MR. MORAYNISS: Absolutely. This is something that can evolve, and will evolve. It's not going to change overnight, I recognize that.

22316   The challenge with the test is you have to be patient --

22317   THE CHAIRPERSON: Right.

22318   MR. MORAYNISS: -- because, as we all know, when you're in the R and D business, it's not a business, it's a means to an end, and sometimes you have a lot of misses before you have a hit.

22319   THE CHAIRPERSON: Right.

22320   MR. MORAYNISS: And that's the nature of development. You have to sort of recognize that, if you're going after these big hits, you're going to be doing lots of tests.

22321   And you may be lucky right out of the gate, or it may take several years. But, absolutely, this is something that will evolve.

22322   THE CHAIRPERSON: Because the economics in this particular business, it's not like in car manufacturing, where you finally get a car, and then you replicate hundreds of them, each production, whether it's TV or movies, is a prototype.

22323   MR. MORAYNISS: Correct. But once you find that hit prototype, that one show, whether it's a CSI or a Walking Dead, will go on for years and years and years and years, and pay dividends far in the future.

22324   THE CHAIRPERSON: And feeds the next wave, the risk-taking wave.

22325   Is it not quite similar to some discussions I was aware of, where perhaps even in our co-productions we would allow more flexibility in terms of key creative talent, but as long as the budgets were bigger, thinking that if your budgets were bigger there's greater chance that you'll have a better production value, and therefore greater audience appeal in the longer term? So it's a similar sort of an approach you're proposing?

22326   MR. MORAYNISS: It is. It's a means to allow more creative and diverse input into your project, and obviously treaty co-productions allow for that, and the more flexibility you have, the more -- you know, that you're creating this likelihood that you will find that big hit.

22327   THE CHAIRPERSON: The same thing with -- nobody else has this. The CRTC has a joint venture -- co-venture rules.

22328   A similar approach could be applied to those?

22329   MR. MORAYNISS: Absolutely.

22330   You know, we're so used to looking at the border as something we need to protect ourselves from, but the truth is there's many possible partnerships with U.S. studios that could, ultimately, reduce exposure of this level investment, but still, ultimately, you have a huge share in the hit.

22331   In fact, that's what Alliance Atlantis did with CSI --

22332   THE CHAIRPERSON: Right.

22333   MR. MORAYNISS: -- they ended up co-venturing, in essence -- it wasn't an official CRTC co-venture because it didn't meet the point system requirements -- with CBS.

22334   THE CHAIRPERSON: Okay.

22335   It's very refreshing that there's rare self-confidence in your presentation that I didn't always -- self-confidence, from a nation-building, production, creation, all that. It was very positive, and I -- I'm always struck that that's rare in our hearings. I don't know why that is, but it certainly is.

22336   I certainly do invite you to continue to participate in the next stage. I know you're running other things and doing other business, but it's -- once I find somebody who has original ideas, I always invite them to keep participating in the next stages of our proceedings.

22337   MR. MORAYNISS: Well, I would welcome it and love that. This is something that's obviously very important to me. I hope you could sense the passion that I have when I have spoke.

22338   THE CHAIRPERSON: Absolutely. Very interesting. Thank you.

22339   Those are our questions.

22340   MR. MORAYNISS: Thank you.

22341   THE CHAIRPERSON: Thank you.

22342   So we'll now go to the next presenter, which is TCPub Media Inc.

22343   Madam Secretary.

22344   THE SECRETARY: That is right.

--- Laughter

22345   THE CHAIRPERSON: That's what happens when you step out of the room.

--- Pause

PRESENTATION

22346   MR. CARON: Hello. I'm François Caron, president and CEO of TCPub Media Incorporated.

22347   I would like to begin by thanking the Commission for allowing me to participate in the "Let's Talk TV" hearings. I would also like to thank the Commission for allowing me to present my intervention in the form of a video.

22348   After listening to over 100 interventions during the last two weeks, most of them presented by industry representatives with very specific business plans, I believe the Commission now requires a different perspective on the subject of Canadian television, and how we can make it better.

22349   So let's get started.

22350   Roll it.

--- Video presentation

22351   THE CHAIRPERSON: That's it?

22352   MR. CARON: That's it.

22353   THE CHAIRPERSON: Excellent. Good.

22354   It's rare that you hearing applause at a CRTC hearing, but I think it was testament to your creativity and your originality, which, frankly, adds a little life to a hearing in the --

22355   MR. CARON: Thank you.

22356   THE CHAIRPERSON: -- last day of the second week.

22357   So I'll pass you to the Vice-Chair, who may have some questions for you.

22358   COMMISSIONER PENTEFOUNTAS: Thank you very much.

22359   Very briefly, because your presentation was quite clear. I think we went from the "propless" wonder this morning to the over-the-top prop job here, over-the-top in the impressive and not Internet sense of the word.

22360   So congratulations. It was really, really well done, obviously.

22361   MR. CARON: Thank you.

22362   COMMISSIONER PENTEFOUNTAS: But just briefly, I mean you've heard -- I think you've been following our hearing, and you've certainly been reading our working document, and you've heard --

22363   MR. CARON: M'hmm.

22364   COMMISSIONER PENTEFOUNTAS: -- a lot of opposition as it regards the proposal on simsub --

22365   MR. CARON: M'hmm.

22366   COMMISSIONER PENTEFOUNTAS: -- and pick and pay, in that, inevitably -- and I saw that you saw that it'd be a balancing act, from what you proposed --

22367   MR. CARON: Right.

22368   COMMISSIONER PENTEFOUNTAS: -- in your video and your presentation. But many intervenors disagree and think that inevitably the pie will shrink and we'll have much less in terms of resources to produce Canadian content. You seem to be pleading the opposite.

22369   I'm going to give you a chanced to sort of address further some of the concerns that you've heard over the last couple of weeks as regards simsub and pick and pay, and sort of they go hand in hand in depleting the resources Canadian producers have.

22370   MR. CARON: Well, my opinion is based on both my personal experience, along with comments I keep reading on the Internet at various places about the state of Canadian television, and also the state of the Canadian cable system as well.

22371   Essentially, a lot of people are getting very fed up with the idea that they have to buy not only just a whole theme of channels to get the one channel they want, but now they're being put into a position where they may need to buy multiple channels just to get one show out of each channel.

22372   It's sort of spread in a way that very often what I've seen in certain scheduling is that a good channel that was on -- a good television show that was on a good channel sometimes gets moved to the bad channel, forcing people to actually have to get the bad channel along with it and it gets to be a bit of a problem. And sometimes that bad channel is in another package.

22373   COMMISSIONER PENTEFOUNTAS: In a bad package as well, yeah, so you get a double-whammy, and you get to pay for it.

22374   MR. CARON: Yeah.

22375   COMMISSIONER PENTEFOUNTAS: And part of the thinking, obviously, in the reading of our document was that, if you create a skinny basic, that would certainly help the situation, yet you didn't address the skinny basic issue in your document of the day.

22376   Would you maybe speak to that issue?

22377   MR. CARON: Well, what I brought up in the video is that I would prefer a pick-and-pay system, where every single channel was a pick and pay, for this is because the problem with a skinny basic is that viewers are counted -- well, the channels, they're rated based on how many subscribers they get on cable. The problem is nobody has the option of saying, "I don't want that channel," and to have that number removed from the total.

22378   My idea of a pick and pay completely inclusive is that it gives people the opportunity to get out of a channel that they don't want at all, even if it's given for free.

22379   COMMISSIONER PENTEFOUNTAS: So even OTAs would be excluded from -- there would be no skinny basic.

22380   MR. CARON: There would be no skinny basic.

22381   COMMISSIONER PENTEFOUNTAS: Even the OTAs would be --

22382   MR. CARON: The OTAs are free. You have the cable companies just charge a base rate to get just the cable, and then they can start adding the channels they want and they can choose to add the channels, even the free ones, that they want to have on their system. This way it gets tabulated. It gets tabulated which free channels are actually worth something, while the other ones are not.

22383   COMMISSIONER PENTEFOUNTAS: Right. So you get the cable for free, and --

22384   MR. CARON: No, not the cable for free. You get it for a specific --

22385   COMMISSIONER PENTEFOUNTAS: For a base price.

22386   MR. CARON: -- amount per month. Yes.

22387   COMMISSIONER PENTEFOUNTAS: But no channels included in that.

22388   MR. CARON: Right.

22389   COMMISSIONER PENTEFOUNTAS: And then you pick -- including your OTAs?

22390   MR. CARON: Exactly.

22391   Because a lot of people right now, we can get -- like I showed in the video -- and I even created a two-minute video called Surviving the Canadian Digital Transition, where I actually showed assembling an antenna out of coat hanger, and actually demonstrating that it works perfectly.

22392   COMMISSIONER PENTEFOUNTAS: Yes, I saw that.

22393   MR. CARON: Oh, you saw that video.

22394   COMMISSIONER PENTEFOUNTAS: But here's the other point, and we heard it from Mr. Morayniss a few minutes ago, in that American productions are of a certain quality, they have certain budgets, and they'll always attract viewers, in Canada and around the world.

22395   How do you compete with that, given our small market?

22396   MR. CARON: Not quite. It's not all in terms of quality. There is also one important factor that isn't taken into consideration, and it's the quality of storyline. That is what's starting the lack more than anything else.

22397   In fact, I've been dropping a lot of shows in recent years, just abandoning a lot of shows just because I got fed up with the lousy storylines. That's when I realized -- in fact, I have a tendency to watch mostly British shows these days, because I find them much better quality, in terms of the storyline.

22398   In terms of production, it's nothing magical. I know that third-year students at Concordia can do these levels -- produce material at this level of quality perfectly, but it's the storyline that always gets them in the end that actually determines if the shows succeed or not.

22399   COMMISSIONER PENTEFOUNTAS: Right.

22400   MR. CARON: I mean if quality was that important, a silly movie in the States like Sharknado wouldn't have been as successful as it was if it wasn't so campy to begin with.

22401   COMMISSIONER PENTEFOUNTAS: Right.

22402   And the francophone market, there was also some mention made earlier in the hearing that there are even threats there, even though there's a bit of a linguistic barrier, which is less and less present amongst the younger generations of Quebeckers.

22403   You don't see that star system changing once the linguistic barrier is no longer there, as mentioned in your video?

22404   MR. CARON: Hmm. What I would say -- you mean in terms of the English market?

22405   COMMISSIONER PENTEFOUNTAS: Yes, the --

22406   MR. CARON: Right.

22407   COMMISSIONER PENTEFOUNTAS: -- the American -- the desire for American content --

22408   MR. CARON: M'hmm.

22409   COMMISSIONER PENTEFOUNTAS: -- finding its way into the Quebec market as well.

22410   MR. CARON: Well, I wouldn't worry too much about that because already people are complaining about the fact that primetime has become "crimetime." People are getting a little bit fed up, not only for the crime shows, but also for the reality TV shows, which are done on the cheap.

22411   COMMISSIONER PENTEFOUNTAS: In Quebec?

22412   MR. CARON: Not only -- not in Quebec, but in --

22413   COMMISSIONER PENTEFOUNTAS: Okay.

22414   MR. CARON: -- in North America. In Quebec, it is starting to become a bit of a problem. There have been a few more imports. Like Le Banquier, which is a top-rated show, is actually an import of Deal or No Deal, but it is --

22415   COMMISSIONER PENTEFOUNTAS: It's a concept, yeah.

22416   MR. CARON: Yeah. But still it's been heavily turned into a Quebec format, so it actually grabs an audience just by the cultural aspect.

22417   It's the same thing with the show Tout le monde en parle. While the sets may look similar to the original French production, which has been cancelled, the French-Canadian production still is very heavy on the French-Canadian culture, and it helps promote its own material very well.

22418   COMMISSIONER PENTEFOUNTAS: Well, even Quebec material prime time is quite -- Crime Time, as well, if you look at --

22419   MR. CARON: Yes, but it doesn't have the habit of always being like that. When I checked my data, I found that a lot of soaps are still among the top-rated shows.

22420   And some of them are not, like, heavy soaps where they are depressing. I know that Les Parent is still popular, and it is not a depressing type of show. It actually has some humour in it, while having some serious subject matter.

22421   COMMISSIONER PENTEFOUNTAS: We appreciate your time today. We really appreciate it.

22422   Mr. Chair.

22423   THE CHAIRPERSON: You invested a lot of time in doing that, and it's very effective. So thank you very much. Those are our questions.

22424   MR. CARON: Thank you.

22425   THE CHAIRPERSON: Madam Secretary.

22426   THE SECRETARY: I would now ask PBC21: Renewing Public Broadcasting for Canada in the 21st Century to come to the presentation table.

22427   You may begin. Please introduce yourselves.

PRESENTATION

22428   MS WILKINSON: Mr. Chairman, Commissioners, Commission Staff, my name is Kealy Wilkinson. I drew the short straw this afternoon, but I assure you that my colleagues are on the hook to respond to questions.

22429   On my right is Paul Gaffney, whose career with the CBC included television producer/director, Director of Television at CBOT, across the river, and in the corporate hierarchy is Director of Strategic Planning, and Senior Director of Corporate Affairs, responsible, as it happens, for regulatory matters.

22430   On Paul's right is Jeffrey Dvorkin, whom you met previously, as you have Wade Rowland, who is to Jeff's right.

22431   Another of our colleagues, Eric Koch, had been planning to participate as well, but he ran into a conflict with the launch of his 16th book. He figures that at 95 he may not be publishing too many more, so, with apologies, he opted for the party.

22432   My colleagues and I are here to wave the flag for our national public television service. We were somewhat bemused that it wasn't mentioned in any of the background materials to this process, but we were very reassured to find that, in fact, just over half of the intervenors in this phase have, on their own initiative, registered the importance of CBC Television, CBC News Network, Radio-Canada TV, and RDI.

22433   So that's reassuring.

22434   Now, let's begin with the key principles that a public broadcaster, any public broadcaster, must sustain. They were clearly defined by the World Radio and Television Council in May of the year 2000 as: "Universality, diversity and independence remain...essential goals for public broadcasting. To these three principles must be added a fourth, particularly important when the public broadcaster exists side by side with commercial broadcasting: distinctiveness."

22435   Does Canada still need a national public television service with these characteristics? Our answer is: Yes, more than ever.

22436   But change, of course, is essential.

22437   When the CBC adopted the operational approach of the private sector, where ratings and profit are the principal determinants of quality and success, it inevitably deformed the values that we believe must underpin a public service.

22438   So, yes, the CBC is in trouble. CBC Television is scrambling for survival, struggling to meet a public service mandate with budgets that can sustain neither the quality nor the quantity of distinctive original programming that Canadians have the right to expect.

22439   In order to reshape CBC/Radio-Canada into a contemporary national public broadcaster, we endorse a review and updating of Canada's broadcasting legislation, following a comprehensive consultation with Canadians, that addresses the following issues.

22440   One, affirming that the special role of the National Public Broadcaster is to serve its audience as citizens, and that it must be universally available to facilitate equitable participation in the national life of Canada.

22441   We know that your Working Document has proposed that local TV stations be permitted to shut down their transmitters. Because of the special nature of the national public broadcasting service, we respectfully suggest that this should not, at this time, apply to the 27 television stations operating by CBC/Radio-Canada.

22442   Two, establishing performance expectations of the services of the National Public Broadcaster through a Memorandum of Understanding with the Government of Canada or designated federal agency, reviewable every five years.

22443   Three, creating a more accountable and transparent Board, distancing members' appointments from the government of the day through an arm's length selection process based on qualification.

22444   Four, giving the newly constituted Board of Directors the power to hire and dismiss the President and CEO.

22445   Five, reinvigorating CBC Television with the development and delivery of distinctive, compelling programming that reflects all regions of the country.

22446   Six, eliminating all commercial activity from the National Public Broadcaster's radio and television networks, and from its online services.

22447   Seven, eliminating the current Canadian content requirements for commercial broadcasters, to allow them to choose their own level of domestic content, while maintaining a commitment to the carriage of local and regional news.

22448   And, finally, eight, updating the funding mechanism for the National Public Broadcaster, perhaps by capturing a small proportion of revenue from BDUs and ISPs, to ensure that resources are predictable and sufficient to achieve the objectives defined in its revitalized mandate.

22449   With this exercise, the Commission has taken the first step to determine how Canadian television will evolve over the next several decades. We understand that not all of the recommendations we have made here fall within your jurisdiction, but we have enormous confidence in the power of regulatory encouragement.

22450   We thought it might be useful to have some public sector-specific recommendations on the table, and while we certainly don't have all of the answers, we will do our best to respond to your questions.

22451   THE CHAIRPERSON: Thank you very much for that. Indeed, a lot of your ideas here are a little beyond our authority. It is not that we are not sympathetic to your concerns about the role of public broadcasting, including the national public broadcaster in the broadcasting system. In fact, not that many months ago we had two weeks of hearings, doing the renewal of the CBC, and I recall that you participated in that process.

22452   So, in view of the fact that a lot of your recommendations are targeting a fundamental review of the legislative mandate of the CBC -- with some inspiration, by the way, if I am not mistaken, from some of the governance changes that occurred in the U.K. some time ago.

22453   You have been influenced by that, as well.

22454   MS WILKINSON: Indeed.

22455   THE CHAIRPERSON: Is there anything in this list, within the context of the current hearing, that you think we should turn our minds to, that is within our jurisdiction?

22456   MR. DVORKIN: I would be happy to talk to a couple of these ideas.

22457   My experience has been at the CBC for 20 years, and then at National Public Radio for 10. I am now back teaching at the University of Toronto.

22458   My sense is that television in general, and the CBC in particular, is suffering from a serious crisis that is, to a certain extent, self-inflicted.

22459   Part of it is the unwillingness or the inability, or the paralysis, of the CBC to make the hard choices that are necessary in an environment where the demands of the audience and the nature of the service being provided have changed.

22460   THE CHAIRPERSON: So what do we do?

22461   I get legislative changes, perhaps a mandate review. These were large reviews in the U.K. It took 10 years, I believe, over there.

22462   MR. DVORKIN: Yes.

22463   THE CHAIRPERSON: What, in the context of this hearing, do you think we should do?

22464   MR. DVORKIN: In the context of this hearing, I think it is worth discussing that the nature of a public broadcaster is to serve its audience as citizens first, and as consumers second.

22465   THE CHAIRPERSON: I see.

22466   MR. DVORKIN: And I think part of that essential impression or forcefulness is that you, as a Commission, might be able to encourage that, without necessarily having the authority to mandate it.

22467   But I think that your influence is quite broad, it may be even broader than you may suspect, and that there is a lot of anticipation about what your recommendations will be coming out of these two weeks of hearings.

22468   The issue of how the CBC can operate to its strengths to serve Canadians in the most effective way is, I think, to understand the essential DNA of the CBC, which, in my experience, is about information, and the providing of information that allows the viewers and the listeners, and the readers online, to see the role of the CBC as an agency of citizenship, and that's not what it is right now.

22469   THE CHAIRPERSON: Right.

22470   MR. DVORKIN: The other thing that I think is very important -- and my experience in the U.S. has reinforced this -- is the role of the Board. The question of governance of the CBC is, to me, I think, one of the first things, if not the first thing, that needs to be addressed.

22471   THE CHAIRPERSON: But, again, that is not something that we have direct power over.

22472   MR. DVORKIN: I understand that, but a serious concern among people who care about the CBC, and who are still working at the CBC, is the failure of the governance model. That needs to be acknowledged at some point. I am not sure how or where, but it has become a critical issue.

22473   And the final thing I would talk about is this issue of -- and, again, this is governance, as well, and I realize that this is beyond the mandate, but the CBC may be the only not-for-profit in Canada where the Board does not have the power to hire and fire the President.

22474   Boards, activist Boards, are ones that engage senior management in a way that allows for some essence of accountability. That seems to have been lost at the CBC, and I would urge you to find a way to express that, even if you feel it is beyond the remit.

22475   THE CHAIRPERSON: As a matter of fact, though, it is not completely abnormal for federal Crowns to have that model.

22476   To my knowledge, the NAC may be the only exception --

22477   MS WILKINSON: I believe so, yes.

22478   THE CHAIRPERSON: -- in terms of cultural Crowns.

22479   From a past life.

22480   MS WILKINSON: Mr. Chairman, if I may, you are in the process of defining a new future for Canadian television in which there are two sectors, the public and the private, obviously, and it was our sense that, in fact, while you were principally dealing with many of the issues around public sector delivery and the production sector, in the process of that redesign there had to be a sense of how and where the public sector was going to be finding itself and reinventing itself as this other migration from analog, digital, online -- whatever -- took place.

22481   Our sense was that there had been very little discussion, or there has been very little discussion over the past couple of weeks -- oh, there has been lots of talk about a lot of things, but not too much about where public television, public broadcasting, fit into the overall scheme of things.

22482   So while we recognize that, obviously, many of the recommendations that we are bringing forward are, as you say, quite beyond your remit, the fact is, as I said earlier, that regulatory encouragement is a powerful tool, and we, ourselves, have been making quite a great effort, given the size of the organization, to meet with current and hopeful members of the political establishment, and as the electoral process moves forward over the next year, it is our intention to step up that process.

22483   So we will be hoping to come in behind whatever recommendations and activity you might see fit to generate.

22484   THE CHAIRPERSON: Okay. Thank you very much, and you do well to remind us, by your participation in the hearing, of the role of the public broadcaster in the reinvention that we are undertaking in this process. So thank you very much.

22485   MS WILKINSON: You are welcome.

22486   THE CHAIRPERSON: Madam Secretary.

22487   THE SECRETARY: I would now ask the Canadian Association of Film Distributors and Exporters to come to the presentation table.

22488   THE CHAIRPERSON: When you are ready, please.

PRESENTATION

22489   MR. RAPKOWSKI: Good afternoon, Mr. Chairman and Commissioners. My name is Richard Rapkowski, and I am here today to represent the Canadian Association of Film Distributors and Exporters, otherwise known as CAFDE.

22490   I will address the panel today in English.

22491   CAFDE is a non-profit trade organization that serves to represent the Canadian film distribution industry and its members on matters of national interest.

22492   Current membership includes d Films, Elevation Pictures, Entertainment One/Les Films Séville, IndieCan Entertainment, Kinosmith, Métropole Films, Mongrel Media, Pacific Northwest Pictures, and Search Engine Films.

22493   Members of CAFDE are responsible for the vast majority of theatrical releases in Canada, and are actually responsible for two and a half times more theatrical releases in Canada than the six major Hollywood studios combined.

22494   Most importantly, for present purposes, CAFDE members are responsible for a whopping 70 percent of theatrical releases of Canadian films.

22495   We at CAFDE believe that a strong production and broadcast environment is absolutely critical for the continued success of the Canadian film industry, and we believe that the objective of the Commission to support the creation of compelling and diverse Canadian programming must include Canadian film specifically.

22496   We appreciate that this public and industry consultation and the submissions of most parties appearing before the Commission are focused on the Canadian broadcast and television ecosystem.

22497   I am appearing today before the Commission to remind and emphasize that Canadian feature films are an important part of that ecosystem, and that the decisions which flow from these consultations may have a profound impact on the production and distribution of Canadian films, and the creation of vital feature-length Canadian content.

22498   The regulating bodies and the industry both share the objective of ensuring that Canadians have access and exposure to Canadian content. Accordingly, CAFDE welcomes the opportunity to discuss the current and future landscape of the television and broadcast industry, and we support and thank the Commission for its holistic approach and the inclusion of a diversity of voices in this consultation process.

22499   CAFDE is particularly encouraged by the Commission's steadfast commitment to ensure that the system supports the availability of Canadian programming, including Canadian film, to Canadian consumers, as we believe that film plays a vital and distinct role in Canadian culture and identity.

22500   CAFDE agrees with the associated guiding principles and commends the Commission for detailing the factors that they believe contribute to the Canadian television system, achieving the stated intent of Objective No. 2, specifically with respect to: the commitment to focusing on the production and availability of high-quality Canadian programming; the promotion of diverse programming in order to appeal to niche, underserved audiences, as well as large audiences; the advancement of Canadian programming at home and abroad; and the removal of barriers within the broadcasting system in order to allow diversity of programming from a wide range of sources, including new and independent sources.

22501   As this Commission knows, Canadian cinema has faced formidable challenges throughout its history. For most of the 20th Century, Canadian feature films struggled to get produced, and even when they did, Canadian films faced an uphill battle in order to find a place on our cinema screens.

22502   This was largely due to the unfettered domination of the major U.S. studios, which paternalistically viewed Canada as part of the American domestic market.

22503   This changed in 1988, however, as the federal government introduced a new distribution policy, which significantly shifted the landscape in building the Canadian-owned and controlled feature film distribution sector.

22504   This policy was an unequivocal success, resulting in the strengthening of this sector, which was now finally able to invest in new Canadian feature films and have the market strength to market and distribute them properly and sustainably.

22505   Unfortunately, despite these marked advancements, Canadian films still achieve only a minor share of the overall Canadian box office, and many films struggle to reach audiences across the country.

22506   In order to demonstrate the dominance of the major Hollywood studios, let us consider the most recent complete dataset from the Rentrak Box Office Essentials, which shows total Canadian box office revenues of approximately $970 million. Of that, $748 million, or 77 percent of the market share, went to the six major U.S. studios.

22507   The independent studios, meanwhile, accounted for $223 million, or 23 percent of the market share.

22508   Yet, while enjoying the dominant share of the market, the major Hollywood studios do not distribute any Canadian films.

22509   Canadian distributors, which are largely made up of CAFDE members, are responsible for 100 percent of the Canadian content films that are enjoyed domestically. CAFDE distributes 70 percent of that Canadian content, with the remaining 30 percent distributed by small domestic distribution companies.

22510   In 2011, a mere 3 percent, or $37 million, of the total box office revenues at Canadian theatres was Canadian content, and in 2012 it actually decreased to 2 percent.

22511   During 2009 to 2011, recent industry data shows that 87 percent of theatrical releases in Canada were international content. Consequently, the ability of CAFDE members and other small domestics to provide Canadian content to the Canadian market is directly dependent on the volume of international films that they are able to acquire.

22512   As such, CAFDE members are responsible for two very critical distribution functions. Firstly, in order to achieve the revenue necessary to maintain a viable business, CAFDE members handle the distribution of international content across all platforms and windows in Canada, when available, in accordance with the principles set forth in the 1988 Distribution Policy.

22513   Secondly, CAFDE members also provide Canadians with the majority of domestically produced filmed entertainment. CAFDE's commitment to providing Canadians with quality Canadian content, while sustaining business operations in this competitive marketplace, is largely contingent upon the Hollywood studios abiding by the Canadian Film Distribution Policy, and having a government enforce the policy when it is breached.

22514   It is also contingent on the support of the Canadian funding agencies and broadcast industry.

22515   Canadian filmmakers and distributors are faced with undue and unprecedented pressure, due to the increasing production and marketing budgets of Hollywood films, and the unfortunate emerging trend of 1988 Distribution Policy violations.

22516   CAFDE is eagerly anticipative that through this process Canadian broadcasters will be given significant encouragement to increase the support of Canadian film through licence fees and marketing initiatives.

22517   Without the support of the Canadian broadcast industry, we will not be able to maintain the current level of Canadian film production. Their support is vital, and we need their continued strength in the face of market challenges, so that they can continue in their integral role in the ecosystem, which brings compelling Canadian feature films to Canadian audiences.

22518   The importance of the opportunity for Canadian film to reach Canadians via the broadcasters cannot be overstated. Broadcasters airing Canadian film is a competitive advantage that mitigates some portion of the many threats that distributors and exporters face from beyond our borders, particularly with respect to the U.S.

22519   And yet, despite all of the challenges and hurdles faced by the Canadian film industry, Canadian talent has never been more visible than it is today. 2014 has been one of the strongest years for critical acclaim of Canadian film in recent history.

22520   This past year at the Cannes International Film Festival, a record three Canadian films were in official competition. There we witnessed a standing ovation for Atom Egoyan's film "The Captive," acting awards for Julianne Moore and David Cronenberg's "Maps to the Stars," and a Jury Prize for Xavier Dolan's film "Mommy."

22521   As the previous examples make clear, there is no question that Canadian talent is recognized and celebrated on the international stage. We believe that this tremendous international success is inherently compelling and that Canadians would benefit from a broadcast system that showcases and supports this remarkable work. What remains to be seen is whether domestic broadcaster support for Canadian feature film will match the international acclaim our industry is receiving.

22522   In order to fully build upon this success and foster a vibrant domestic industry, CAFDE believes that we must act in concert -- funders, filmmakers, distributors and broadcasters -- so we can build locally and compete globally.

22523   CAFDE members rely on a continuing ability for Canadian broadcasters to commission and acquire content. This creates new opportunities to meet our own cultural and business objectives and the objectives of our creative partners.

22524   CAFDE members are producers, distributors and exporters of content and we wholly support maximizing choice for Canadian customers and viewers. CAFDE is hopeful that through this process broadcasters will be encouraged to put forth meaningful initiatives to Canadian talent, producers and distributors to fulfil their licence obligations.

22525   CAFDE supports the laudable objective of the Commission to encourage compelling and diverse Canadian programming. We believe that the inclusion of Canadian feature film is paramount to achieving this identified public interest outcome.

22526   The members of CAFDE thank the Panel for the opportunity to provide these remarks and I'm certainly available for questions.

22527   THE CHAIRPERSON: Thank you very much.

22528   Commissioner Simpson will start us off.

22529   COMMISSIONER SIMPSON: Thank you. Welcome to the afternoon session of a long day.

22530   Just before we get into questions, how is your organization doing with respect to its relaunch? I know that the focus of CAFDE is very much now designed to try and deal with the digital evolution and revolution and I was wondering if you could give me a brief overview of how that is going.

22531   MR. RAPKOWSKI: Well, we did feel that the organization required a new focus, required new membership, and we have worked very hard to try to increase our membership and to make sure that we are representing the interests of all distributors in the country.

22532   It is a time of increased change, dramatic change, disruptive change, and we do feel that there is a strong need for us to band together and have a common voice in the face of these challenges, particularly in situations like this when they present themselves, that we come in with a common voice so that we are not all off running in different directions and working at cross-purposes.

22533   So there is a renewed vitality in the organization, a renewed focus. We are encouraged by this process and we are looking forward to continuing to approach the issues that we face with the government and with the CRTC with one common voice.

22534   COMMISSIONER SIMPSON: Thank you.

22535   We had a pretty effective and innovative presentation from Entertainment One, Mr. Morayniss, just before you. Being that he is a member of your organization, I was curious as to why you didn't co-present, or does his view of what is needed to be considered as part of the whole restructuring of the system, if that's necessary, does he differ from the view of you or your members?

22536   MR. RAPKOWSKI: Well, he does. You know, John is representing Entertainment One. Entertainment One is just one member of CAFDE and I think the focus of most of Mr. Morayniss' comments were focused more on the television production sector.

22537   We at CAFDE are an association of film distributors, so our interests are slightly different, and obviously we wanted to have our own voice as film distributors.

22538   A lot of the emphasis of this Panel has been on television production and broadcasting and I think what is often lost in that is that feature film plays a significant role in that and relies on the Canadian broadcasting system for its support.

22539   So we did want to come in here with an independent voice to remind the Commission that feature film is an important stakeholder in this and as regulation changes and there are shifts in the industry that it can have a real collateral impact on the film industry, which is perhaps not the primary focus of this Commission.

22540   COMMISSIONER SIMPSON: Do your members also take a distribution role with television properties as part of their basket of services?

22541   MR. RAPKOWSKI: Not all do.

22542   COMMISSIONER SIMPSON: Some do, though?

22543   MR. RAPKOWSKI: Entertainment One does.

22544   COMMISSIONER SIMPSON: Yes.

22545   MR. RAPKOWSKI: Most other members do not.

22546   COMMISSIONER SIMPSON: Okay.

22547   Help me then. I want to fill out the record a little more. Like Mr. Morayniss, you came in with an oral presentation. It was deeper than your written one and I want to make sure that the record gets filled out.

22548   In your first page you had said that:

"...these consultations may have a profound impact on the production and distribution of Canadian films -- and the creation of vital feature length Canadian content."

22549   Now, just from what you said earlier, these are parallel industries but what happens in one affects the other and I'm wondering if you can broaden out that statement, unpack it a bit for the record, please.

22550   MR. RAPKOWSKI: Sure. You know, we have a delicate ecosystem that has been built up over a number of years through regulation and when you start to modify or change, you know, some of the regulations it does have an impact that ripples throughout.

22551   So, in particular with Canadian feature films, without the support of broadcasters and the licence fees that they provide in advance to help finance Canadian features, most of those Canadian features -- maybe not most, a good number of them would not get produced at all. It's less investment flowing back from the broadcasters into the system and so the reality is that less Canadian films will be made, which is just less diversity of voices and the loss of an important artistic voice in Canada from some of our most important Canadian voices.

22552   There is also the issue of we spend so much money, tax dollars in this country helping to promote the production of Canadian films and if there is nowhere to see those films, in some ways, you know, what's the point of investing all that time and effort?

22553   The landscape has changed quite a bit. You know, 10 years ago films were mostly shown in theatres and then on physical home video and then they ended up with Canadian broadcasters further down the chain.

22554   But now, with almost a collapse of the physical video business and most of that migrating over to the BDUs and their VOD channels and through pay TV and with services like the SVOD services and the Netflix' of the world, increasingly, Canadian consumers are consuming Canadian feature film on their television sets.

22555   So it is a changed landscape and in order to have eyeballs on Canadian films and to have people benefit from the efforts that are being made both by the government and the production sector, they need to be able to be seen by Canadian consumers and the Canadian broadcasters obviously play a significant role in bringing those stories to Canadians.

22556   COMMISSIONER SIMPSON: We had heard this morning from the representative from Netflix that their business model is built on films and television episodic shows basically.

22557   Have you had a chance to -- because you haven't really touched on simultaneous substitution here, because it is, again, a television issue, but we had a couple of very effective presentations, including Mr. Caron just a minute ago, his video, where the thesis is that the production of Canadian films and television product is largely inhibited by our continued use of simsub and that if we got out of that habit of using it, even though it produces revenue, it would create the primetime holes that would have to be filled by more Canadian productions and it's logical to assume part of those holes would be filled by Canadian films, either the second or third window. So have you thought about that or talked about that amongst your members?

22558   MR. RAPKOWSKI: That has not come up among our members. I would be happy to consult with the members and understand our collective view on that and submit that to the Commission at a later date. So I don't really have a unified view. I have perhaps personal views, but I don't think that's relevant.

22559   COMMISSIONER SIMPSON: There isn't much of a later date. Unfortunately, if it is to be included in this hearing there is a cutoff point of the 19th.

22560   THE CHAIRPERSON: But you certainly could address it in your final comments.

22561   COMMISSIONER SIMPSON: Yes, absolutely.

22562   MR. RAPKOWSKI: Okay.

22563   COMMISSIONER SIMPSON: And it might be quite smart to do that.

22564   The last question I have is to do with -- on the broader scope. Mr. Morayniss again had made an observation that I think does pertain to your members, that we may be self-limiting by virtue of the point system or the criteria that's used to be eligible for funding for Canadian productions and that it may be necessary to broaden the scope of the content -- I don't want to say lessen the Canadian storyline but broaden the scope and interest of the content, which would create bigger budgets and bigger markets. Do you have an opinion on that?

22565   MR. RAPKOWSKI: I mean, we certainly feel that we want to make quality content and that quality content rises to the surface, and with so much noise being out there, as Mr. Morayniss mentioned, that it is important to have quality first.

22566   It is a challenge in the face of having such a large neighbour that is so strong in the film production sector. It is very difficult to get a distinct Canadian voice out there without the regulation that we enjoy in Canada.

22567   And, you know, feature film is distinct I think from broadcast in that it really comes about through a lot more individual artistic expression, and television programming is often more the result of corporate activities and larger broadcasters, and Canadian films can come out through independent unique voices and we want to support all of those voices.

22568   We do obviously try to emphasize voices that will have commercial appeal because, you know, we are in the business of trying to produce films and distribute films that Canadian consumers will enjoy, but we are not trying to just focus on hits.

22569   We think that there is also a need to have diverse voices and some of them are not as loud as some others or perhaps don't have the same commercial appeal as some others, but we think that it is an important endeavour to support them nonetheless for Canadian cultural value purposes.

22570   COMMISSIONER SIMPSON: Okay. Thank you very much.

22571   THE CHAIRPERSON: Thank you very much. Those are our questions.

22572   MR. RAPKOWSKI: Thank you very much, I appreciate it.

22573   THE CHAIRPERSON: We will take a short 10-minute break until 3 o'clock. Thanks

--- Upon recessing at 1448

--- Upon resuming at 1500

22574   LA PRÉSIDENT : À l'ordre, s'il vous plaît.

22575   Madame la Secrétaire...?

22576   LA SECRÉTAIRE : Merci.

22577   We will now hear the presentation of First Mile Connectivity Consortium who is appearing by Skype.

22578   Welcome.

22579   MR. McMAHON: Yes, hello. Good afternoon. Can everyone hear me?

22580   THE SECRETARY: Yes, we can hear you clearly.

22581   Please introduce yourself and you may begin.

PRESENTATION

22582   MR. McMAHON: Okay. Great, thank you.

22583   I'm getting a little bit of echo so apologies if sometimes I have a little -- okay, it's gone now. It was just on the speaker there.

22584   So good afternoon, Mr. Chairman and Members of the Commission. My name is Rob McMahon and I represent the First Mile Connectivity Consortium and also work as a Postdoctoral Research Fellow with the First Nations Innovation project at the University of New Brunswick.

22585   We do thank the Commission for the opportunity to speak today and also to appear by Skype remotely, which of course is a key concern for the members of the communities and organizations that we work with.

22586   The First Mile Connectivity Consortium is an independent not-for-profit national association. Our members are First Nation and Inuit broadband service providers and our associate members are researchers and other interested parties. Our work focuses on developing digital infrastructure and services with and in Indigenous, remote and rural communities.

22587   Our common interest is in showcasing how digital infrastructures and services, including television content, can be leveraged to support economic and community development. Along with highlighting innovations at the First Mile, we also research barriers to such work. The First Mile approach confronts the telecommunications industry's references to "last-mile" challenges to establish equitable, scalable and affordable broadband connectivity in remote communities. It is about working directly with communities to secure the resources they require to be economically and socially contributing members of society.

22588   During these hearings, the Commission raised questions regarding the production and distribution of local and Canadian content. Indigenous organizations can help address this issue. Many are already involved in producing and distributing locally, regionally, culturally and/or linguistically specific digital media. These organizations support a diversity of channels and programming. They provide residents with opportunities to be compensated for their creative work and to work as administrators and technicians of services and infrastructure.

22589   Such activities also contribute to economic development efforts to circulate revenues inside communities. The First Mile website highlights more than 80 of these projects across Canada. Today, we will provide four examples.

22590   In Atlantic Canada, the First Nations Help Desk and Mi'kmaw Kina'matnewey launched The Red Road Project in 2012. The "Red Road" refers to being on the right path in life and in harmony with the Creator. This project invites First Nations youth to produce and share digital media on the dangers of substance abuse. Importantly, these videos are then distributed over local and regional digital networks operated by Indigenous service providers. The Red Road project remains vibrant today, over two years later, with new content contributed on a regular basis.

22591   In Quebec, the First Nations Education Council established Permanent Studios as a means for their 22 member communities to produce and distribute digital media. Along with creating short films, Permanent Studios provides training opportunities at studios in Wemotaci and Kitcisakik, and through mobile workshops that focus on remote communities. Permanent Studios has produced 11 films created by young filmmakers from the Atikamekw, Anicinabe and Innu nations. Teachers also use these videos as resources in their classrooms.

22592   In Nunavut, the Cannes Film Festival award-winning IsumaTV production unit established the Digital Indigenous Democracy network. This project provides low-bandwidth communities with opportunities to access high-definition digital media housed on local servers and connected to community TV and radio channels. This system also supports interaction among viewers through social media and other channels.

22593   IsumaTV's network allows people facing limited and costly satellite bandwidth to access a local library of 5,000 films and videos in more than 50 oral Indigenous languages at no added cost in terms of bandwidth.

22594   Finally, the Wawatay Native Communications Society, founded in Northwestern Ontario in 1974, has since grown to incorporate a range of media production and distribution services, including for digital content. Wawatay's print, radio, TV and digital content is presented in Ojibway, Oji-Cree, Cree and English languages. It reaches more than 30,000 Aboriginal people in the Nishnawbe Aski Nation and Treaty 3 area of Ontario over terrestrial and satellite networks, including systems developed and managed by Indigenous service providers including KO-KNET.

22595   However, despite all their promise, these First Mile initiatives face substantial barriers. The first is access to stable and secure funding. So all four of these projects must cobble together funding from disparate sources, including private sector organizations, various government departments and subscriptions from users. In the words of Wawatay's acting Executive Director:

"We are one of the many small Aboriginal content producers that would not survive in a market-driven environment".

22596   That is because small, dispersed and isolated communities are not attractive markets for private sector investment and therefore public sector funding and other supports are required.

22597   In the area of digital content, distribution, infrastructure and services, this might include access to funding distributed by the Commission, such as the National Contribution Fund for the provision of telecommunications in high-cost service areas.

22598   The second barrier is technical. Without affordable and accessible links to transport networks, these organizations cannot develop and deliver local content. As the Commission recognizes, Canadians are increasingly using platforms like Internet-based video and mobile services to access broadcast content. We are concerned that limited and expensive infrastructure and services restrict the ability of Indigenous peoples to produce and access broadcast programming.

22599   We have already pointed out the need for reliable and affordable bandwidth in our interventions in CRTC 2012¬669, the Northwestel Modernization Plan, and CRTC 2014-44, the Satellite Inquiry, and we note that this access is also critical in this proceeding. This issue will only become more important as producers and distributors increasingly rely on emerging applications like streaming video, cloud computing and support for mobile devices.

22600   The third barrier and final barrier we will talk about today is the lack of participation in digital policy and regulation. We do thank the Commission for the opportunity to present in these and other hearings, but we do emphasize that the process of digital regulation can and should engage affected communities.

22601   As the examples above demonstrate, community organizations are capable of local innovation and can work with regional organizations to partner with public and private sector groups. However, they require voice in decisions regarding the funding programs that shape their activities and it is our opinion that Indigenous and northern communities are best positioned to articulate how public sector funding is used to support their development needs and therefore should be provided substantial opportunities to do so.

22602   We also note that we received several expressions of support for our intervention beyond the four organizations highlighted today. For example, the Aboriginal Peoples Television Network told us that our proposal is very compelling for its constituent communities and noted that it seeks to start filling a gap identified by Aboriginal Peoples, communities and APTN in the past.

22603   In conclusion, as we have shown today residents of Indigenous, remote and rural communities are limited in their ability to produce and access digital broadcast programming. The production and distribution of digital media can be led by community-based organizations in partnership with the private and public sector, but provided the appropriate supports are in place.

22604   We believe this process can contribute to a Canadian broadcast system that reflects the special place of Aboriginal peoples in society. We thank the Commission for the opportunity to present today and are pleased to answer any questions you may have.

22605   Thank you.

22606   THE CHAIRPERSON: Thank you very much for that presentation.

22607   Commission Simpson will start us off. Thanks.

22608   COMMISSIONER SIMPSON: Thank you very much.

22609   I guess I would like to start with asking you for more information regarding section 5 of your oral presentation.

22610   You said that:

"During these hearings, the Commission raised questions regarding the production and distribution of local and Canadian content. Indigenous organizations can help address this issue."

22611   Now, you went on to cite several examples of what is being done, but in a more global context what did you mean by that: Indigenous organizations can help us address this issue of producing Canadian content?

22612   MR. McMAHON: Well, I think as well -- sorry, I'm getting a little bit of feedback -- producing and distributing, so in that sense that in a lot of these remote northern communities there in fact isn't robust infrastructure available right now. So I was trying to draw that link that in an area of convergence, at a time of convergence in the sense of distribution and content, that these types of organizations often may begin in one area and then filter into the other.

22613   For example, IsumaTV began as a content producer, now it has generated its own locally based distribution method.

22614   Or in a case like Permanent Studios with the First Nations Education Council, it began on the distribution side and then started producing.

22615   COMMISSIONER SIMPSON: So taking the two categories apart, production and distribution, my limited knowledge of what has been happening in rural communities has been the creation of Aboriginally controlled, for the sake of argument, infrastructure, the broadband infrastructure that will take something off of the satellite for example and distribute it throughout the community using a variety of means, including line of sight and fibre and the like. So that is the distribution side that you are referencing, that type of model?

22616   MR. McMAHON: Yes, in the sense of so you would have a point of presence in a community, so some kind of bulk bandwidth, whether terrestrial or satellite, would enter into a point at the community and then get redistributed locally, similar to a community radio station or television station.

22617   COMMISSIONER SIMPSON: Yes. So given that this kind of concept is happening, and it's good because it's self-actualized, you know, the communities are taking their limitations -- it's almost like living under a very large power line and being able to figure out how you can tap into it and get it into your community.

22618   But given that this is happening already, as part of your presentation are you saying that more funding is needed for that or are you keeping your funding requests and observations strictly designated to the production side? I wasn't quite clear.

22619   MR. McMAHON: No. Sure, yes.

22620   Well, we highlighted -- okay. So in terms of the funding what we saw was -- even looking at these four examples, right now for the production side it's a very disparate, so these community-based organizations are applying to things like the Canadian Media Fund, but also to places like Aboriginal Affairs and Northern Development Canada, Canadian Heritage, so it is very -- I would say that is a barrier in the sense of it's hard to map that landscape, but where these kind of funding opportunities for producers are available.

22621   We see similar things on the distribution side, of course that will be an issue that we may raise at a different hearing more focused on sort of the broadband distribution telecommunications side.

22622   COMMISSIONER SIMPSON: Yes. Well, it's just that -- I'm no expert on the funding side of things, but that whole area lies well outside of the scope of this hearing and possibly even well outside of our reach in trying to influence or suggest or create conditions for building more of these type of systems. I'm glad that you realized that there are other telecom processes upcoming that can better address that.

22623   So let's just stick with the production side, if you don't mind.

22624   MR. McMAHON: Sure. Could I just add one point to that, though, because I just wanted to raise that if we look to the history of the APTN, Aboriginal Peoples Television Network, in the 1980s and '90s, like the CRTC and government did have a strong role there in articulating a northern broadcasting strategy, a policy statement as well as the northern native broadcast access program. So actually APTN, Wawatay, a lot of these native communication societies and then leading rate up to the national aboriginal broadcaster had their kind of basis in similar questions around production and distribution.

22625   COMMISSIONER SIMPSON: Yes. But I was just trying to make an observation that from the pure money side there are other agencies CanNor through other northern programs and, as you correctly identified, Heritage, and so on, that better address the actual sources of money for that kind of initiative.

22626   But on the production side, first off I'm pleased that you are acknowledging that APTN is making strides in this area. That has been, at least my impression, that they are working harder to reach deeper into the smaller communities and more specific areas of need and interest in program production, but of course, you know, they can't do it all.

22627   So I'm curious as to in section 11 where you are saying that one of the prime areas of concern -- and we are not surprised, we hear this all the time -- is access to secure funding.

22628   Where is the funding for the kind of projects you have referenced in your presentation today coming from now? Where is it coming from now?

22629   MR. McMAHON: Yes. So now it is very disparate sources, right. So you get Canadian Heritage, you get the Canadian Media Fund. So from the production side it would be like from those areas.

22630   Similar kind of multi-sources from the distribution side or the broadband infrastructure side.

22631   COMMISSIONER SIMPSON: Well, you are confusing me here, because first you are saying that they are coming from the predictable sources of the Canadian Media Fund and Heritage, but then you swing over to a telecom example. Sorry, we live in compartments.

22632   MR. McMAHON: I'm sorry. Sorry.

22633   COMMISSIONER SIMPSON: We live in compartments in this world here.

22634   MR. McMAHON: Sorry, yes.

22635   COMMISSIONER SIMPSON: But I'm trying to identify where the existing sources of money are coming from now that helps me better understand the rationale for your argument that there is either not enough money in those funds by apportionment or whether because of that new funds are required.

22636   That's again outside of the scope of what we are doing here at the hearing, but you are bringing the issue to the fore and that's important.

22637   So talk to me about existing funding sources, deficiencies and whether or not you are looking for a new fund or funding, which are quite different.

22638   MR. McMAHON: Okay, I see what you're saying.

22639   So right now in terms of existing funding, like as well as sort of those sources you had talked about --

22640   COMMISSIONER SIMPSON: For production, yes.

22641   MR. McMAHON: For production, yes, Canadian Heritage, these sort of things, and as well Aboriginal Affairs and Northern Development Canada. I think it's very much -- like it's --

22642   COMMISSIONER SIMPSON: It's all over the place.

22643   MR. McMAHON: Yes. Like that's kind of the point I think I was stressing. I'm more involved on the distribution side so I would have to do more -- I would be happy to do more directed research on sort of that type of --

22644   COMMISSIONER SIMPSON: Well, yes. Because as our Chair is fond of saying, this is an evidenced-based hearing and when you come forward with a suggestion, what we operate on is -- the grist for our mill is the data that we can churn and see hard evidence that allows us to make recommendations.

22645   So let me move to the third part, which is the third barrier, because the second is technical and I told you that's out of scope.

22646   The third barrier is the lack of participation in digital policy and regulation.

22647   Now, you are saying -- I can see you saying a lack of policy with respect to aboriginal content or aboriginal productions, but when you say lack of participation in digital policy and regulation, would you unpack that for me, please?

22648   MR. McMAHON: Yes, sure. And I think things are getting better in this sense. Like for example the CRTC in stating a technical means to participate, for example using things like Skype or videoconferencing and that sort of thing, but I think historically there have been some challenges there that are linked into that lack of availability of the infrastructures.

22649   COMMISSIONER SIMPSON: And what you are really asking for is, you're saying that your constituency would like to come to the table during the decision-making process to be able to better lay out the need and the value that would be given.

22650   But again, this is not a funding exercise that we're doing here in the hearing, what we are trying to do is look at the existing distribution system.

22651   So I guess with that I'm finished my questions.

22652   Thank you.

22653   MR. McMAHON: Thanks.

22654   THE CHAIRPERSON: Thank you very much, Commissioner Simpson.

22655   So thank you for participating in our hearing through Skype, a very informative presentation. Thank you very much.

22656   MR. McMAHON: Okay. Thank you.

22657   LA PRÉSIDENT : Madame la Secrétaire...?

22658   LA SECRÉTAIRE : Merci. I will now ask, Mr. John Roman to come to the presentation table.

--- Pause

PRESENTATION

22659   MR. ROMAN: Monsieur Blais, Members of the Commission, thank you for having me today.

22660   When you started this hearing on September 8th, you focused on four points which are the framework of my presentation: change, thinking globally, the future, and fostering Cancon.

22661   This hearing is about the future of Canadian Television, updating the late 20th Century model for the early 21st Century. Most of the other submissions have talked of the next two to four years, I'm here to talk about the longer-term future, from 2018 and beyond because, frankly, the early part of the 21st Century will soon be over.

22662   Interveners have asked for protections for themselves and more regulation of others as a means by which to save the industry. But globalization and online content will eventually erode the ability of the CRTC to protect Canada's broadcast or production industries. Imposing regulatory minimums of Cancon will not be effective.

22663   Further, such regulation might put us in the company of bedfellows like China, Syria, and Iran.

22664   I'm really hoping you don't shoot the messenger here. I have to tell you, regulation can't save the industry; not really. We can try and protect ourselves and maybe buy a few extra years, but change is coming. Canadians online want good content and aren't focused on its point of origin.

22665   Canadians support public broadcasting and, since CBC management claimed at its last licence renewal hearing that its main television service is not a public broadcaster, I suggest we should create a new, contemporary one online.

22666   Canada is going to need a bastion, as Ms Berkowitz said 'a Can-Brand' online. I'm talking about an Alternative Programming Service.

22667   Can we compete with the entire world, the best of America, Australia, the U.K. and everywhere else? If nothing is done, Canadians will simply be consumers of online foreign content and culture and lose their only remaining opportunity to become an important and creative source. Over the next decade, jobs will decline and disappear; production expertise and creativity will be lost or leave the country.

22668   As others have noted, by 2020 there will be a shift in the landscape of Canadian Broadcasting. OTT will become more dominant; OTA broadcasters, and independents in particular, will likely be the hardest hit. Some independent and specialty channels could morph into content producers rather than broadcasters and they will need a distributor. The APS could be that place if the content meets its mandate.

22669   Since the APS could procure all of its content from independent producers, it will sustain employment in the Canadian production industry that we may well otherwise lose. Graham Spry once said:

"It's a choice between commercial interests and the peoples' interests."

22670   If we don't have the APS, eventually there will be no industry and no voice for the Canadian people.

22671   The APS must be a Non-Commercial Public Telecaster that operates as an exclusively online streaming service, acquiring and posting initially only two hours per day of new, fully funded Canadian Programming. The APS will gradually build a national inventory of unique programming in a variety of mediums. This content should be available in both French and English, with minority language access to be provided as content develops.

22672   If we do create the APS, Canadians will be able to enjoy an advertising-free service designed to challenge, engage and entertain them.

22673   How is challenge and engage different from the existing requirement to inform and enlighten? To inform and enlighten is to present facts, like "a plane was shot down" or "Pandas eat large amounts of bamboo because of their short digestive tracts". It's content that has done the thinking for the viewer, allowing it to be easily absorbed.

22674   To challenge and engage is to explore ideas, not necessarily arriving at any single conclusion or consensus. Challenging and engaging content posits possibilities so that audiences can draw their own conclusions. In short, it encourages critical thinking.

22675   In closing, I would urge you to consider not just the present market, but that of the quickly emerging future. If we fail to plan for it now it will be too late to do so later. Canadians need the APS to provide what's not going to be otherwise available to them, high quality Canadian content on-demand in a programming streamed globalized, commercial-free market delivered via the Internet.

22676   I will be happy to answer any of your questions.

22677   THE CHAIRPERSON: Thank you very much, Mr. Roman.

22678   I will pass the floor to Commissioner Molnar.

22679   COMMISSIONER MOLNAR: Mr. Roman, I am not going to shoot the messenger.

--- Laughter

22680   COMMISSIONER MOLNAR: May you could tell me, I read your submission and clearly you follow regulatory proceedings, you have a lot of information and have done a lot of research as it regards what's going on in the industry, and so on.

22681   Tell me a little bit about your background, just so I know better who I'm speaking with here.

22682   MR. ROMAN: Certainly. I sort of come by this through mixed means. My father created PIAC which came before you earlier, I think last week, and you saw my mother here before you a few minutes ago actually, she was here PBC21, so I come from a parentage where I couldn't avoid this even if I wanted to at the dinner table.

--- Laughter

22683   COMMISSIONER MOLNAR: And are you in the industry in any way yourself?

22684   MR. ROMAN: I do consult to my mother for regulatory issues, in particular dealing with new technology.

22685   COMMISSIONER MOLNAR: So, your mother is a firm supporter of public broadcasting and so are you?

22686   MR. ROMAN: Yes.

22687   COMMISSIONER MOLNAR: Yes. Okay. Well, that helps to frame this a little bit.

22688   Have you listened to these proceedings over the last couple of weeks?

22689   MR. ROMAN: Aside from yesterday when I was driving down, yes.

22690   COMMISSIONER MOLNAR: Okay. You say at the end that we should consider the quickly emerging future. Are you concerned from what you heard, that we haven't been considering the future?

22691   MR. MORAN: The evidence that was given before you has generally been of the two to three years sort of future. It has not been the longer term and I took this hearing to be kind of a lead into opening the Broadcasting Act, which since I don't presume the CRTC will have a Broadcasting Act for a total of three years, the longer term future might be -- maybe to be considered, which is why I decided to make the submission.

22692   COMMISSIONER MOLNAR: Uh-huh. And those who have told us nobody has a crystal ball and we don't actually know the future, so we should take measures that are cautious steps. You are not into that kind of a plan. Do you think we know the future or not us, but as an industry through this?

22693   MR. MORAN: Not having a 100 percent understanding of the future is no means not to prepare in any capacity.

22694   COMMISSIONER MOLNAR: Uh-huh.

22695   MR. MORAN: So, if we don't start takings steps now, much as Rogers with their description of the video service where they said: It was suddenly too late and everything was gone.

22696   We need to make sure it doesn't happen to CanCon on the whole and if we just plan for 1, 2, 3 years, we might wake up one day and go, oh! we had our chance and there it goes.

22697   COMMISSIONER MOLNAR: Right. So, I better understand now that you tell me about your background and your parents and so on, why your focus has been on the public broadcasting.

22698   But you seem to indicate that the commercial broadcasting industry is really in a state of crisis and it doesn't quite appear like they're going to make it into the future. I had to say what I've heard over the last couple weeks.

22699   While everybody is quite cautious and want to maintain what's here, there is a lot of steps being taken, both on the commercial side of the broadcasting system as well as the CBC.

22700   You don't appear to believe that our public broadcaster can take us into that next stage?

22701   MR. MORAN: That's certainly correct, yes.

22702   COMMISSIONER MOLNAR: And you think -- let me see if you still -- if you have changed your view in any way.

22703   In your submission you thought that this new broadcaster about $600 million a year could be done through a fee on Internet and possibly cell phones?

22704   MR. MORAN: That was one possibility. I also, I believe in my second submission, posited a funding mechanism based on what was proposed by PVC-21 and as a result of the hearings, I came up with another option as well, at least for the early stages while getting VAPS off the ground, since CBC at its last licence renewal hearings said it was a -- what was it -- a not publicly subsidized commercial broadcaster, that we could perhaps take some of the regulatory funding away from that and put it towards a truly public broadcaster.

22705   There are a number of options out there, like you've said, crystal balls and all that, so I am not willing to say what is necessarily the best option, but I am positing possibilities.

22706   COMMISSIONER MOLNAR: Right. I am not sure that I have more for you, but I can tell you personally it seems a little -- it seems a little difficult to say: CBC you failed and we're going to start a new one and we need another $600 million that really they take from you or add it on top.

22707   That's just my personal opinion, but I appreciate you bringing something new to the table. Thank you. Those are all my questions.

22708   THE PRESIDENT: Did you have something to add?

22709   MR. MORAN: Yes. I am not saying that CBC fundamentally has failed altogether. I don't want to make that impression.

22710   I am simply saying that I don't think that CBC online is the way to go forward, but that CBC, for instance, for television services with news current affairs and documentary, it does still our job.

22711   If you wanted to focus on those services and be a world class leader on that regard, that would make complete sense in the current framework.

22712   But when it comes to entertainment, that's my understanding of where it sort of struggles and especially as it's in an entertainment driven market, and if that's where its bleeding resources for CBC television, not Radio-Canada, that seems a way to take some of the load off CBC as it's struggling.

22713   THE PRESIDENT: Okay. That's all. Well, thank you. Thank you for your perspective on these issues. Thank you.

22714   COMMISSIONER MOLNAR: Thank you.

22715   LE PRÉSIDENT: Madame la secrétaire.

22716   THE SECRETARY: I would now ask the last intervener for today, VMedia, to come to the presentation table.

-- Pause / Pause

PRESENTATION

22717   MR. TCHERNOBRIVETS: Good afternoon. Thank you, Mr. Chairman, Mr. Vice-Chairman, and Commissioners.

22718   My name is Alexei Tchernobrivets and I am the CEO of 2251723 Ontario Inc., a licensed Class 1 terrestrial BDU which carries on business as VMedia.

22719   To my right is VMedia's advisor, George Burger.

22720   VMedia is grateful for the opportunity to participate in this important and most timely process.

22721   At this point, virtually everything that can be said about the important matters raised in the Notice, and then refined in the Commission's working document, has been said, and given this late stage of the proceedings, VMedia will focus our comments on a) the first three items in the working document relating to choice and flexibility, and b) enabling a more dynamic market for BDUs.

22722   VMedia recently launched its BDU service seeking to provide Canadians with an affordable, technologically advanced platform.

22723   An important part of that mission is to provide Canadians with the greatest amount of choice and flexibility that we can, within the limits of regulation and our contractual commitments to content providers.

22724   At the core of these proceedings are the first three proposals in the working document. VMedia fully endorses these proposals, which are also set at the core of VMedia's business model.

22725   Indeed, in planning the ideal line up, VMedia, as an innocent new player in the BDU game, believed we would be able to offer a variation of "Small Basic Option A", one which would include the 4+1 US networks.

22726   However, our first exposure to a major provider's rate card quickly set us straight. Compromises had to be made, but even so we have stayed as close to our vision as rational economics allow.

22727   The result can be seen in the exhibit at the back of our written submission. As you may note, VMedia's Basic package is $24.95, and while VMedia does not support "Option B", our pricing would fit well under that plan.

22728   In addition, we offer a wide selection of theme packs, economically priced to augment our Basic service.

22729   Finally, many channels which might even better satisfy our subscribers' desire to customize are available in our UChoose store, where over 60 channels can be purchased on a pick-and-pay basis, and over 40 of those can be packaged at even lower prices.

22730   Clearly, we embrace these proposals, with the caveat that "Option A" should include the 4+1 US networks. Our reasoning is that we do not believe consumers would be pleased with having to pay a further amount for services which they perceive to always have been free, thrown in with their basic packages.

22731   They expect to receive these services, and we believe they would not support suddenly being made to pay for them in a separate package. In addition, for many people considering other delivery options, like an OTA antenna, this might be the last straw, and this is no time to give consumers further inventive to cut cords.

22732   And there are, of course, concerns about the new pricing structure which would accompany this transition, and we support a strengthened approach to ensuring as much fairness in pricing and access to multiplatform rights as possible in dealings by independent BDUs with VIEs.

22733   MR. BURGER: Regarding our second topic, BDUs comprise the revenue generating engine of the television system, with nearly $9 billion in revenues in 2013. Of that amount $2.7 billion was distributed to Canadian programming services, and an additional $466 million was distributed to various entities, including the Canada Media Fund, to finance Canadian programming.

22734   VMedia submits that as go the fortunes of the BDUs, so go the future prospects of the programming services and the Canadian production sector.

22735   In the face of the changes that the industry is experiencing, VMedia believes that unless BDUs find ways to remain relevant to consumers, and ways to continuously engage them, BDUs will begin a decline that will dramatically change the Canadian television system.

22736   For that reason, VMedia believes that enabling a more dynamic market for BDUs is a crucial element of the Notice.

22737   This more dynamic market can be achieved two ways:

22738   First, the Commission should ensure more competition in the sector, further encouraging the development of more alternatives to the duopolies which serve vast segments of the Canadian market.

22739   New competitors not only bring more choice and better prices to consumers, they also can bring new perspectives and approaches to the BDU experience, while adhering to the objectives of the Act.

22740   Such competitors launch at their peril, taking on the largest companies in Canada. In the case of VMedia, and other independent BDUs, we are in the uncomfortable position of depending on our competitors for our survival.

22741   With regard to VIE content, we are potentially at a severe disadvantage in terms of pricing, and fair access to multiplatform exploitation of that content. We share that disadvantage with all non-VI BDUs.

22742   The problem is greatly compounded when it is taken into account that those same VIEs entities control much of the wholesale Internet service in Canada, as well as the wireless business, both of which must be regarded as key elements in solving the complications that affect our television system, and which are central to today's content delivery business.

22743   We understand that those matters are being addressed in concurrent proceedings, but in VMedia's view, while procedurally it is necessary to maintain three distinct silos, video is the killer app for Internet and wireless platforms, and the growth engine for revenues generated by them.

22744   With TV no longer taking place on an expensive piece of wallpaper, as someone else put it at the hearing, those three silos in fact comprise the Canadian TV experience we are here to talk about.

22745   If the Commission indeed seeks to encourage such new entrants, these issues need to be addressed, in a coordinated way in all three proceedings.

22746   Second, VMedia believes that a key function of BDUs, in order to maintain their relevance, and continue to engage their subscribers, is to re-imagine themselves as potential aggregators of all forms of content, and develop ways to enhance the ability of consumers to access that content.

22747   The fundamental issue facing the television system is very similar to the one that confronted the music business fifteen years ago, when consumers discovered a way to buy a song, not an album, and carry it with them in any device, including ones that fit in their pockets.

22748   The music industry was slow to adapt to that new reality and clung to its business model. In doing to, it faced decimation until itunes arrived and provided consumers with exactly what they wanted, and technologies to enjoy them in new and wondrous ways. Apple became the biggest player in the music industry, and by many accounts saved it.

22749   Moreover, other new platforms arose, like Songza, Pandora and Google Music, creating a vibrant new distribution channel. Instead of being destroyed by file-sharing and new technology, the music industry survived, and its business model evolved into one which was not as lucrative, but was able to go on and prosper.

22750   And the biggest player was the one that first succeeded in becoming relevant to the consumer, and engaging it, through the reinvention of the distribution experience.

22751   The issues the Commission is dealing with here are directly analogous, in that there are many ways that consumers are now able to pay for exactly what they want, and enjoy it on a myriad of devices at great convenience.

22752   In the meantime, content is being created, not just distributed, by Google, Amazon, Netflix, and any other online business with a vast consumer network and the deep pockets necessary to fund content production.

22753   It is virtually certain, however, that with the current limitations on choice and flexibility in our television system, some of which are imposed by regulation, others which are adopted to maximize revenues, BDUs in their current form, with their current business models, will have a greatly diminished role as content aggregators.

22754   VMedia believes that a key function of BDUs, in order to maintain their relevance, and continue to engage their subscribers, is to re-imagine themselves as potential aggregators of all forms of content, and develop ways to enhance the ability of consumer to access that content.

22755   A recent article in WIRED Magazine asked the reader to imagine a service that encompasses video on-demand, subscription pay-TV channels, pay-per-view, a-supported broadcast TV, and emerging internet-based content, stored in the cloud, and deliverable to televisions, tablets and smart phones. All that is needed is one app.

22756   Recently, DIRECTV's president commented about evolving to online video: "If you can, avoid cannibalizing your core business".

22757   Unfortunately, the TV operators do not heed Steve Jobs' advice: "If you don't cannibalize yourself, somebody else will."

22758   In this case, if we are not crisp in addressing these challenges, that cannibalization will come from the US in the form of ever-increasing streaming services.

22759   VMedia, in providing its subscribers with a set top box that allows them to access more than just the content made available through conventional means, seeks to sustain the relevance of the BDU sector by enhancing the experience of consuming video, moving toward a more content agnostic approach, enabling consumers to more easily access the various sources of video that are available to them in a way that will better tie the consumer to the BDU.

22760   This movement is already afoot in the US and other markets, where BDUs are adding Netflix to their offerings, and the desire to move in this direction has been expressed earlier in these proceedings.

22761   VMedia believes that the more BDUs focus on doing so, the more they will be able to remain important in the lives of their subscribers, and retain the loyalty that will give them the means of carrying on their important role in the Canadian television system.

22762   We are most grateful for the opportunity to be able to contribute to this process, and look forward to your questions.

22763   THE PRESIDENT: Thank you very much. Commissioner Simpson.

22764   COMMISSIONER SIMPSON: Welcome. End of the day.

22765   MR. TCHERNOBRIVETS: Thank you.

22766   COMMISSIONER SIMPSON: Mr. Tchernobrivets, your business model, is it based -- it is principally based on offering choice, not just choice of content, but choice of what content you can acquire and how?

22767   MR. TCHERNOBRIVETS: Well, it's both. At the core, our business model is the choice in terms of selecting packages. Of course, we are bound to certain rules of packaging content, so --

22768   But in doing so, I think we have been able to achieve a so-called "skinny basic" even in the current model and we have a variety of theme packs to -- after that skinny basic package and we took it further by allowing customers to, at pick-a-pack channels and even put them together into so-called "UChoose-packages".

22769   COMMISSIONER SIMPSON: Right.

22770   MR. TCHERNOBRIVETS: Where we further reduced the price per channel if they are purchased in bundles of six and twelve.

22771   COMMISSIONER SIMPSON: Yes. I'll get to those, but I am just curious. On paragraph 6 of your oral submission you've said, and you've said it in such a way that although your "mission is to provide Canadians with the greatest amount of choice and flexibility that we can, within the limits of regulation."

22772   What regulation is limiting choice from -- with respect to that business model?

22773   MR. TCHERNOBRIVETS: Well, the regulation is to sell basic package as a first package is one.

22774   COMMISSIONER SIMPSON: Okay.

22775   MR. TCHERNOBRIVETS: I mean, there are certain technological regulations that are in place.

22776   COMMISSIONER SIMPSON: But on the choice side, you know, there is -- granted that there are -- you know we haven't --

22777   MR. TCHERNOBRIVETS: And that's the number one for us.

22778   COMMISSIONER SIMPSON: -- the 9(1)(h), you know, mandatory carriage obligations. But so does everyone else.

22779   MR. TCHERNOBRIVETS: Yes.

22780   COMMISSIONER SIMPSON: So, I am trying to understand why you feel that that's limiting?

22781   MR. TCHERNOBRIVETS: But we have been able to achieve that same model at lower margins.

22782   COMMISSIONER SIMPSON: Okay.

22783   MR. TCHERNOBRIVETS: And by doing that, allow our consumers to deploy the remainder of the balance of the difference in price, to get theme packs or individual channels of their choice.

22784   COMMISSIONER SIMPSON: Yes. And on the contractual commitment caveat that you put in there, am I to read through that that's -- when you are negotiating with a vertically-integrated company, they're pushing content on you that perhaps you would prefer not to have in your basic bundle?

22785   MR. TCHERNOBRIVETS: Certainly.

22786   COMMISSIONER SIMPSON: Yes. Okay. You describe yourself as an "innocent new player in the BDU game". Is it wise to be innocent in a business of very sharp players?

22787   MR. TCHERNOBRIVETS: I only meant to say that we are a start-up.

22788   COMMISSIONER SIMPSON: Okay.

22789   MR. TCHERNOBRIVETS: And we don't know our -- you know, penetration levels, we don't know where we'got to grow into, so --

22790   COMMISSIONER SIMPSON: Okay. On your observation, you know, and again I am trying to understand the language or the sort of printing through here, you've said when you got into the game, you believed that you would be able to offer a variation on a Small Basic Offer.

22791   MR. TCHERNOBRIVETS: Yes.

22792   COMMISSIONER SIMPSON: I presume that's getting back to your previous answer, that you had a goal in mind, but regulation and contractual limitations kind of screwed that up?

22793   MR. TCHERNOBRIVETS: This was more in terms of contractual agreements than regulation.

22794   COMMISSIONER SIMPSON: Okay.

22795   MR. TCHERNOBRIVETS: We understand the regulation points here.

22796   COMMISSIONER SIMPSON: Yes, yes.

22797   MR. TCHERNOBRIVETS: But I mean, if we had a choice at that time, we would have launched a cheaper --

22798   COMMISSIONER SIMPSON: Yes, yes.

22799   MR. TCHERNOBRIVETS: -- a more cheaper basic package.

22800   COMMISSIONER SIMPSON: It's still because your overhead is being smaller, more flexible and able operator, you still I think are saying that in spite of the impositions that were coming at you, you were still able to come close to your price point?

22801   MR. TCHERNOBRIVETS: Yes. That's right.

22802   COMMISSIONER SIMPSON: Okay. When it comes to, you know, the options, you got this Option 1, 2 thing going on and the one is an all Canadian and Option B is something that targets price points, but gives the BDU a little more flexibility to add into it and sort of modify their basics, as long as it's within the price point or points, modify their basics so it concludes things like 4+1.

22803   You say that you embrace proposal Option A, but it seems to me that what you would like to do is Option B and that you would like to add the 4+1, which is what Option B indicates that you can do. And I am just wondering why A wins out over B?

22804   MR. BURGER: Excuse me, if I can just take that. In fact, my understanding and our understanding of Option B is that it also allows other specialties to be included in the package as well. And so, I thought that it would be easier to modify Option A by adding the 4+1 than B, by only adding them and suggesting that everything else should not be permitted.

22805   COMMISSIONER SIMPSON: Yes, okay. Well, it may have been from the time this document was drafted to where we are today, that Option A has been described more and more as an all-Canadian service and that may be where it came from, and adding the 4+1 to it maybe where we get into a little bit of friction on the idea.

22806   Whereas Option B, when I was reading it, you know, it says: And then he gets the services selected by the BDU and in other words, it seemed like it was a more open concept, but it had its restrictions and limitations on price rather than offer. Okay.

22807   So, this is the one I really wanted to get to, which is, you know, you say you are offering 60 some odd channels right now on a pick-and-pay basis.

22808   How are you doing that, given that we've heard all kinds of -- well, we have seen all kinds of here on fire regarding the fact that it's just not economically viable because service costs would have to be renegotiated, everything would go stratosphere like in terms of costs. And yet, you are operating a service that has 60 different services, most of which I recognize, and you know, you are saying from $1.50 up.

22809   How are you doing that and the other guys don't seem to make it.

22810   MR. TCHERNOBRIVETS: Well, first of all, I think that, like you've said, we do operate on a lower margin, margins.

22811   COMMISSIONER SIMPSON: Yes.

22812   MR. TCHERNOBRIVETS: To begin with Second, I think this has been achieved due to the automation processes that we've put on place. So, unlike, I mean, the other players, we provide a convenience of doing a checkout online. We actually encourage and force -- force people to do those selections and changes of the so-called you-choose channels online.

22813   COMMISSIONER SIMPSON: M'hmm, m'hmm.

22814   MR. TCHERNOBRIVETS: This way we save costs of, you know, a call centre, processing, and, you know, and all of that. Through that, we, I guess, achieve certain efficiencies --

22815   COMMISSIONER SIMPSON: Yeah.

22816   MR. TCHERNOBRIVETS: -- and are able to operate at even further lower margins.

22817   COMMISSIONER SIMPSON: I'm seeing channels like History, Showcase, Teletoon, Food, BBC, you know, all pretty recognized brands. I may have missed the memo, but in the last two weeks I kept on hearing from a lot of other intervenors that these kind of, you know, individual selection options, you know, would just throw the whole industry into a tizzy.

22818   It started off with negotiations, and I got the general impression that a lot of the services, you know, wouldn't want to see themselves on a singular-offer basis. I'm just curious as to how you pull this off.

22819   MR. TCHERNOBRIVETS: Well, the channels that we have are the ones that allow us to do it --

22820   COMMISSIONER SIMPSON: Yeah.

22821   MR. TCHERNOBRIVETS: -- through contracts.

22822   COMMISSIONER SIMPSON: Okay.

22823   MR. TCHERNOBRIVETS: So, of course, there are none of them that would not. And we wish we had more channels there --

22824   COMMISSIONER SIMPSON: M'hmm, m'hmm. No, 60 is a --

22825   MR. TCHERNOBRIVETS: -- and looking forward to that.

22826   COMMISSIONER SIMPSON: -- 60 is a good start.

22827   Let's move into the dynamic BDU market.

22828   Mr. Burger, you can answer if you wish, or -- wow, you know, anyways, at the end of the day, a new idea.

22829   You know, we've been talking these last two weeks about more channels, offered more ways, and you're actually saying that what the industry needs and what the consumer needs is not only more channels, and more choice of channels, but more BDUs, more offerings.

22830   I'm presuming that's because you feel that smaller BDUs such as yourself can provide a better pricing and more flexibility. Is that the proposition?

22831   MR. BURGER: It's partly regarding pricing. Certainly it's a desire to offer more flexibility within the context of the -- call them -- conventional broadcasting services, but I also think that there's a general need for some way of rethinking this relationship.

22832   Because we're finding that, with people being relatively prepared to change their loyalties from either a BDU to an antenna on their roof, or nothing, or Netflix, or online, there has to be something else that connects us to our customers.

22833   I think that, in order to expand on that, one of the areas that we work on very hard is to create a very compelling way of presenting the content, a compelling way of allowing them to move from one form of enjoyment to another, from a linear channel, to a VOD, and so on, in ways that are pleasing. We actually find that people appreciate that.

22834   COMMISSIONER SIMPSON: And that's the interface you're talking about --

22835   MR. BURGER: Yes.

22836   COMMISSIONER SIMPSON: -- that IPTV can provide?

22837   MR. BURGER: That's right, yeah.

22838   COMMISSIONER SIMPSON: Okay.

22839   MR. BURGER: And then beyond that, we also have a capability, through our VBOX, to be able to encourage our consumers to funnel their various interests through our service. We believe by doing that, and by facilitating their ability to access, for example, the content they have in their home on their appliances -- on their other appliances, on their hard drives, or to access content they might otherwise choose to get on their laptops, through our TV or through a box, we think that's been appreciated.

22840   The feedback we've gotten, especially with our initial marketing push through social media, the feedback we get directly from people on forums and everywhere else is that that's much appreciated.

22841   So whether it's a step that's going to completely stop the obvious proliferation of online services that are stealing away so much of the BDU's thunder and just prolong things by a day or a month or a year or a decade, I don't know --

22842   COMMISSIONER SIMPSON: M'hmm.

22843   MR. BURGER: -- but I think that we need to give something else, something else back, and recognize the realities of what the content environment is like today.

22844   COMMISSIONER SIMPSON: M'hmm.

22845   The VBOX you talk about, this is your Android operating system device that -- is it proprietary? Is this yours or is this something that is off-the-shelf? Where did it come from?

22846   MR. TCHERNOBRIVETS: No, this is ours. We built it.

22847   COMMISSIONER SIMPSON: Wow. Okay.

22848   I'm trying to envisage a box that is bringing content with a whole new user interface that, as you say, makes it easy to move from content form to content form.

22849   You're also an IP provider, right?

22850   MR. TCHERNOBRIVETS: That's correct.

22851   COMMISSIONER SIMPSON: The traditional BDU continuum and the IP continuum are starting to slowly arrive on the same screen, and your box does that, I gather.

22852   MR. TCHERNOBRIVETS: That's right.

22853   COMMISSIONER SIMPSON: Okay.

22854   So moving over to the OTT side of things, you know, everything from the CAD videos, in the Google world, to Netflix, does your -- do you -- well, first of all, if you're an IP, it's obvious that I can access -- if I have a subscription, I can access Netflix through the IP side of your service, right? So does your box actually bring the Google/Netflix experience together with your BDU-side experience, so it's relatively seamless?

22855   MR. TCHERNOBRIVETS: Yes, that exactly what it does. It serves as a -- basically, we provide access to the Google Play store, where our customers can choose to install any apps that they want.

22856   COMMISSIONER SIMPSON: M'hmm.

22857   MR. TCHERNOBRIVETS: They can also do it off a USB key or hard drive, so the choice is theirs. So we basically -- the box is also a media player, so -- and running on the Android operating system, it gives certain capabilities to its owner.

22858   COMMISSIONER SIMPSON: Hmm.

22859   MR. TCHERNOBRIVETS: So it's not that we invented that, it's -- you know, the Android operating system's been around for --

22860   COMMISSIONER SIMPSON: Yeah. Yeah.

22861   MR. TCHERNOBRIVETS: -- a number of years.

22862   COMMISSIONER SIMPSON: Yeah.

22863   MR. TCHERNOBRIVETS: We simply made it convenient for our BDU customers to also have access to that on the same device.

22864   COMMISSIONER SIMPSON: Hmm.

22865   MR. TCHERNOBRIVETS: And, in doing so, I guess get their appreciation for the choice and flexibility.

22866   COMMISSIONER SIMPSON: In closing, I just want to move into the little bit of the future, and your vision of the future, because you seem to be creating it, from what you've said, but I was really taken by paragraph 26, when you said, "BDUS, in their current form, with their current business models, will have a greatly diminished role as content aggregators."

22867   Is that statement actually magnified when you consider that BDUs are actually part of a VI system, and the fact that aggregation really starts at the network, and trickles down to the BDU level? So is more than just the BDU in peril here with the future you see?

22868   MR. BURGER: Yeah, well, particularly since you refer to it especially in the context of a VI environment, if we can focus on that for a second, our view is that the reality is that the BDUs are not really in peril themselves, or at least not the VI BDUs, because the money is really going to shift from one pocket to another, and possibly even more of it.

22869   COMMISSIONER SIMPSON: Because they're just distributors?

22870   MR. BURGER: Well, that, but -- well, by "one pocket," I mean going from the BDU side to the Internet side -- to the Internet service side.

22871   COMMISSIONER SIMPSON: Oh, yeah. Okay, same thing.

22872   MR. BURGER: My recollection is that, in a disarmingly frank comment, Rogers commented on the fact that, in fact, on the BDU side, they only have a 70 per cent margin -- I say "only" -- that should be our problem -- but on the ISP side they have a 100 per cent margin.

22873   So as content gravitates more and more towards streaming services, inevitably what happens is that the cost of the Internet services are going to continue to go up, so there's going to be a very clear shift in the amounts, but they're going to, really, stay within the same family.

22874   COMMISSIONER SIMPSON: Yeah.

22875   MR. BURGER: So I think that there isn't that -- they aren't -- as an entity, they aren't at a great risk going forward.

22876   COMMISSIONER SIMPSON: Okay. So your thesis then is -- because, again, you said greatly diminished as content aggregators. I now understand what you mean, not as distributors per se, but -- so who are the aggregators? Well, they're the networks, which, to draw an analogy to paragraph 24, were sort of like the music industry, you know the Sony Records and the EMIs and so on, who would commission work, produce the work and distribute the work.

22877   And when pick and pay, or whatever the model you want to call the music industry is today that Apple helped architect, it was the big music companies, the big record companies that were the roadkill in that exercise.

22878   Is that the parallel you're drawing, though? I mean are they in peril? Because I'm trying to understand how, in your vision of how all this -- I'm trying to get away from the technical issue for a second --

22879   MR. BURGER: Sure.

22880   COMMISSIONER SIMPSON: -- and look at the structure. You've made an observation about the BDUs, based on your experience. I'm trying to now understand whether you have a point of view on the networks themselves.

22881   MR. BURGER: So the term "content aggregator," in that context --

22882   COMMISSIONER SIMPSON: Yeah.

22883   MR. BURGER: -- was really intended to mean a content packager --

22884   COMMISSIONER SIMPSON: Okay.

22885   MR. BURGER: -- in the sense of channels, many channels --

22886   COMMISSIONER SIMPSON: Okay.

22887   MR. BURGER: -- delivering many channels to your home. So it was strictly a BDU as that kind of content aggregator.

22888   As far as channels are concerned, that really is, I think, a very different, and perhaps much lengthier conversation than to have at the end of two weeks of hearings, but --

22889   COMMISSIONER SIMPSON: (Indiscernible).

22890   MR. BURGER: -- but the Canadian content aggregators as channels --

22891   COMMISSIONER SIMPSON: Yeah.

22892   MR. BURGER: -- definitely are facing issue that are probably unique even in comparison to U.S. channels.

22893   COMMISSIONER SIMPSON: Okay.

22894   Well, I hope your slingshot works.

22895   MR. BURGER: The VBOX.

22896   COMMISSIONER SIMPSON: Well, no, your slingshot. I'm not thinking about the slingbox, I'm thinking slingshots. I'm thinking David and Goliath here.

22897   Thank you very much.

22898   MR. BURGER: Thank you.

22899   MR. TCHERNOBRIVETS: Thank you.

22900   THE CHAIRPERSON: Commission Molnar.

22901   COMMISSIONER MOLNAR: Thank you.

22902   I had a question, and I may have answered it myself, but I'll let you confirm this.

22903   In looking at your packages and pricing, I just wanted to know if this was TV only. Is this a stand-alone price or it's contingent on having broadband access?

22904   MR. TCHERNOBRIVETS: Well, you have to have our high-speed Internet in order to be able to get TV.

22905   COMMISSIONER MOLNAR: Right. And so you have to --

22906   MR. TCHERNOBRIVETS: So the pricing, $24.95, is the price of TV service only.

22907   COMMISSIONER MOLNAR: Over and above your --

22908   MR. TCHERNOBRIVETS: Over --

22909   COMMISSIONER MOLNAR: -- your Internet.

22910   MR. TCHERNOBRIVETS: You would still have to pay for high-speed Internet.

22911   COMMISSIONER MOLNAR: And it can't be anybody else's Internet, it has to be your Internet?

22912   MR. TCHERNOBRIVETS: Currently we operate two models, basically, one where you would have to have our high-speed Internet, or through partnerships with other ISPs, where other ISPs are a delivery --

22913   COMMISSIONER MOLNAR: Right. So just a example, and I'm quite certain you're not partnered because TekSavvy wouldn't have been coming here looking for a solution, but you could be the solution for TekSavvy?

22914   MR. TCHERNOBRIVETS: We could, if they chose to.

22915   COMMISSIONER MOLNAR: If they chose to partner?

22916   MR. TCHERNOBRIVETS: Yes.

22917   COMMISSIONER MOLNAR: Okay. But only in you partner? It's not --

22918   MR. TCHERNOBRIVETS: No. We don't allow them -- or their customers to get access to BDU content otherwise.

22919   COMMISSIONER MOLNAR: Okay. So would it be fair to say then that this $24.95 reflects the content and administrative costs of the BDU, none of the fixed infrastructure costs?

22920   MR. TCHERNOBRIVETS: There's still some costs.

22921   COMMISSIONER MOLNAR: You've got your set-top box in there -- or I mean, I guess you don't have a set-top box but you have an interface of some sort, a device.

22922   MR. TCHERNOBRIVETS: Well, it's more than that. I mean you have to maintain your -- you know, the business. You have to support it. You have to get orders. You have to maintain your infrastructure of getting channels in, processing them, sending them out. You have to maintain your VBox interface and the features that customers want and improve that. So there are some overheads.

22923   COMMISSIONER MOLNAR: Yes. Yes. I'm sorry, I didn't mean to diminish them when I said administrative. You're right. And operating costs of the media platform?

22924   MR. TCHERNOBRIVETS: Yes.

22925   COMMISSIONER MOLNAR: Okay. Thank you.

22926   MR. TCHERNOBRIVETS: Thank you.

22927   THE CHAIRPERSON: Vice-Chair?

22928   COMMISSIONER PENTEFOUNTAS: Thank you.

22929   Just on that fixed cost subject, your $24.95, you've got the OTAs, you've got the 9(1)(h)'s in there, you've got the 4+1. Above and beyond that, what else in that $24.95?

22930   MR. TCHERNOBRIVETS: We have some more channels. We have TSN channels in it, TSN1 and 2. We've got E. We've got MuchMusic and MuchMoreMusic in it.

22931   COMMISSIONER PENTEFOUNTAS: So how would you be able to off that package if you didn't have all the TSNs, the E's, the MuchMusic's of this world in there, you simply had the OTAs, the 9(1)(h)'s and the educational?

22932   MR. BURGER: Well, that's -- certainly for less, definitely for less. But I don't -- I can suggest that the cost of the OTAs and the 9(1)(h)'s are relatively small but it's --

22933   COMMISSIONER PENTEFOUNTAS: Well, let's take your option A and the 4+1's as an example.

22934   MR. BURGER: In terms of the cost?

22935   COMMISSIONER PENTEFOUNTAS: Yes. What would that be offered at?

22936   MR. BURGER: What would it be offered at --

22937   COMMISSIONER PENTEFOUNTAS:

22938   MR. BURGER: -- or what is it costing us now? Because I can tell you, that group of channels, I haven't done the numbers recently but I think that they're in the neighbourhood of about 3 bucks, 4 bucks.

22939   COMMISSIONER PENTEFOUNTAS: Okay. So what would you be able to offer that?

22940   MR. BURGER: Okay. So that's what I wanted to get to. So the drop might definitely take into account that we wouldn't have the other specialties --

22941   COMMISSIONER PENTEFOUNTAS: M'hmm.

22942   MR. BURGER: -- but whether it would go right down to, for example, a margin where if they were $4, we'd give them for $9.95, it's doubtful because it's that first basic package that winds up paying your rent and your overhead and your equipment and a lot of other stuff to a great deal. And then after that you have incremental costs that go with specialties --

22943   COMMISSIONER PENTEFOUNTAS: Yeah.

22944   MR. BURGER: -- but the margin really starts to grind.

22945   COMMISSIONER PENTEFOUNTAS: Right.

22946   MR. BURGER: So --

22947   COMMISSIONER PENTEFOUNTAS: Well, let's set the specialties and the incremental costs aside and just sort of speak to the question that was raised by my colleague Commissioner Molnar.

22948   MR. BURGER: We wouldn't like to be held to it but, you know, we could see a $14.95.

22949   COMMISSIONER PENTEFOUNTAS: Ballpark $14.95?

22950   MR. BURGER: Yeah.

22951   COMMISSIONER PENTEFOUNTAS: Okay. It would be pretty hard to --

22952   MR. BURGER: Subject to a competitive market obviously.

22953   COMMISSIONER PENTEFOUNTAS: Right. Yeah. On the idea of partnering up with TekSavvy, I think they said that it would be a $98 a month cost for them, so that might be a difficult partnership to offer these prices, but that's a different topic.

22954   So the $24.95, you've got all those channels plus the apps. I mean your VOX is kind of an accelerator for a dumb TV, it makes it a smart TV automatically. You've got --

22955   MR. BURGER: Every TV is a smart TV.

22956   COMMISSIONER PENTEFOUNTAS: Yeah. It becomes a smart TV coupled with a traditional set-top box BDU service, right? So you've got -- basically just about everything that you mentioned in your wired report ask is in that VBox, including Netflix obviously?

22957   MR. BURGER: It's pretty close.

22958   COMMISSIONER PENTEFOUNTAS: I think that's all. Thank you, Mr. Chairman.

22959   THE CHAIRPERSON: Thank you very much. Those are our questions.

22960   Don't move. I just have a few closing comments to get to.

22961   There are a couple of issues around documents that people wanted to add to the record and we had taken under advisement. So this is the Commission's ruling on those.

22962   Le Conseil accepte de déposer sur le dossier public deux documents qui avaient été pris en délibéré, notamment, premièrement, un rapport daté du 2 juillet 2014 de TELUS, intitulé « Regulation of Access to and Affordability of Programmation Services, An International Survey », and, two, une étude datée du 2 décembre 2014 de l'Association des documentaristes du Canada, intitulée « Learning from Documentary Audiences ».

22963   Le Conseil accepte aussi de déposer sur le dossier public les résultats du sondage de l'Union des consommateurs, attaché à sa présentation du 9 septembre et portant sur la « Satisfaction des abonnés vis-à-vis leur service de distribution ». Le Conseil note, toutefois, que ce sondage n'est pas disponible intégralement, ce qui diminue la valeur de la preuve transmise par l'Union des consommateurs.

22964   So that's the ruling on the documents presented under advisement.

22965   Avant de conclure cette audience, j'aimerais remercier un certain nombre de personnes qui ont contribué à son bon déroulement.

22966   Premièrement, je voudrais souligner le travail des interprètes et celui des sténographes, qui nous aident à nous comprendre et à nous souvenir de ce qui a été dit pendant l'audience.

22967   Je voudrais aussi souligner le travail de l'équipe de CPAC qui est à travers la salle d'audience et surtout remercier les opérateurs de caméra.

22968   As well, not everyone can attend our hearings or participate in them directly, so it's important that we thank the journalists, bloggers and the people in the Twittersphere who bring our hearings to a larger audience.

22969   The "Let's Talk TV" conversation started in October 2013 and I would like to thank everyone who participated in one way or another over the course of the conversation. Close to 14,000 Canadians have provided their input, whether by appearing at this hearing, participating in our online discussion forum, filling out the "Let's Talk TV" choice book, submitting comments in writing, organizing or participating in a flash conference or responding to our telephone survey.

22970   As I mentioned at the beginning of the hearing, we would not be able to fulfil our legislative responsibilities without your views and your participation.

22971   I would like to take this opportunity to remind you that the discussion forum will remain open for comments until 5:00 p.m. tonight Pacific time.

22972   Je voudrais aussi reconnaître la contribution des employés du CRTC. Que ce soit à partir de cette salle d'audience, du quartier général ou de nos bureaux régionaux, ils fournissent des conseils d'expert afin de soutenir le rôle décisionnel du panel et nous aident de façon quotidienne de diverses manières.

22973   Finalement, je voudrais remercier mes collègues au sein du panel, qui, de façon évidente, consacrent beaucoup de temps à la préparation et au déroulement de ces audiences.

22974   I want to remind interveners of the next steps in the proceeding.

22975   Undertakings, for the most part, are due by the end of the day and final submissions must be provided by October 3rd.

22976   We will make our decision known in due course. We will do so based on the record before us. In fairness to all participants and in light of our mandate, which is defined by statute and by properly adopted policy direction, we will decide based on that and nothing else.

22977   Thank you again. This hearing is now adjourned.

--- Whereupon the hearing concluded at 1608

REPORTERS
Lynda Johansson
Jean Desaulniers
Madeleine Matte
Monique Mahoney

Date modified:

2014-09-21