Transcript, Hearing November 25, 2021
Location: Gatineau, Québec
Date: November 25, 2021
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Attendees and Location
140 Promenade du Portage
- Chairperson: Ian Scott
- Commissioner, Ontario: Monique Lafontaine
- Commissioner, Alberta and the Northwest Territories: Nirmala Naidoo
- Commissioner, Atlantic Region and Nunavut: Ellen Desmond
- Commissioner, British Columbia and Yukon: Claire Anderson
- Legal Advisors: Christina Maheux, Matthew Welch
- Hearing Secretary: Jade Roy
- Hearing Manager: Cédrick Lelièvre
Table des matières
Phase II – Interveners’ Presentations
4189 Channel Zero Inc.
4443 Canadian Media Producers Associations (CMPA)
4581 Miracle Channel Association
4696 Forum for Research and Policy in Communications (FRPC)
4815 BCE Inc.
5092 Documentary Organization of Canada (DOC)
5172 Beanfield Technologies Inc.
--- Upon commencing on Thursday, November 25th, 2021 at 10:59 a.m./ L’audience débute le jeudie 25 novembre 2021 à 10 h 59
4100 THE CHAIRPERSON: Bon matin.
4101 Madame la secrétaire?
4102 THE SECRETARY: Bonjour. Bon matin.
4103 We will now hear the presentation of Unifor.
4104 Please introduce yourself and your colleagues, and you will have 10 minutes for your presentation.
4105 Mr. Kitt, you may begin.
4106 THE CHAIRPERSON: Good morning.
4107 THE SECRETARY: Mr. Kitt, can you hear me?
4108 MR. KITT: Good morning.
4109 THE SECRETARY: Okay. You may begin. Thank you.
PRESENTATION / PRÉSENTATION
4110 MS. FORTIER: Thanks so much.
4111 My name is Katha Fortier. I'm the Assistant to the Unifor National President, Jerry Dias, for responsibility for the media file.
4112 And with me today is Randy Kitt, Unifor's Media Director.
4113 First, I would like to acknowledge that we are all living and working on unceded land. I am on the unceded territories of the Haudenosaunees and the Mississaugas of New Credit.
4114 Thank you for the opportunity to speak and to provide comment today. Unifor is Canada’s largest private sector union, with more than 310,000 members across Canada working in 20 economic sectors. Our union represents more than 26,000 workers in the telecommunication sector and 10,000 media workers, including 5,000 members in broadcast and film industries.
4115 Unifor supports a healthy and diverse telecommunications and media landscape. Acquisitions and mergers of this scope can create inequities in labour markets, local programming and local news coverage. Unifor would like to respectfully caution the Commission on these issues and ask that, should the Commission approve this transaction, it will consider impact on employment and local programming, and especially, local news.
4116 We are very concerned that the proposed takeover will lead to the loss of funding for local news in a number of locations including in Western Canada. The September 23rd response from Rogers does little to allay our fears. As we argued in our submission, the loss of $13 million in funding for local news provided by Corus television stations could be disastrous.
4117 Rogers responded to this concern, which was raised by a number of interveners, by saying, "Contributions that Rogers will be authorized to divert from community programming to local news will not be lost to the system as a result of this transaction."
4118 Rogers went on to say the diverted money will be used to enhance and bolster the locally reflective and relevant news that is offered on its OTA stations in its existing outlets in Edmonton, Calgary, Winnipeg, and Vancouver.
4119 Rogers argued that "this additional funding will be instrumental in helping to build CityNews’ presence and coverage in these markets." In a passage that seems troubling to us, the company claimed this move to divert funds away from a number of smaller markets would actually "enhance diversity" by ensuring that CityNews had the financial resources to compete with Corus and Bell in these markets, where Rogers is currently in third place.
4120 The purpose of local news funding provisions is not to ensure that spending is concentrated in an ever-smaller number of markets, or to funnel more money to larger markets, or to make sure that a given broadcaster can build its competitive advantage. The purpose of these provisions is to provide financial support for more markets, and especially smaller markets, so the viewing public in places like Kelowna, Nanaimo, Lethbridge, Saskatoon, Peterborough, Kingston, St. John, and Halifax, to name just a few, have access to a diverse array of local voices in their news coverage.
4121 In fact, Rogers makes no commitments to even maintain, let alone increase the levels of original local news, even on its own stations. Of note, Red Deer, with a population approaching 100,000, is one of the largest standalone urban centres in Canada not attached to a larger metropolitan area without a local TV station.
4122 From our perspective it is hard for Rogers to argue it is meeting the expectations laid out in the Diversity of Voices policy without being much clearer about what steps the company will take to mitigate the impacts of the loss of funding for the above-mentioned small markets. It’s not just about how much money is in the broadcast system overall, it's but how and where the money is spent, and on what.
4123 This brings us to our next area of concern regarding the proposed Rogers/Shaw takeover, and that is the issue of employment. We at Unifor have knowledge of the broadcast sector in Canada is facing an employment crisis. The worrying trend of chronic job loss has been worsening year after year, and we are concerned that the proposed Rogers/Shaw takeover will only make things worse.
4124 According to our own numbers, from 2014 to 2020, our membership in the broadcast sector decreased by 23 percent. And in that same time period, in-house operations, which includes studio crews, video editors, technicians, and others, saw job numbers decrease by 34 percent, and a loss of 20 percent for boots in the street in the field production.
4125 We also, don’t need statistics to remind us of colleague after colleague losing their job to the many destabilizing factors facing the broadcast industry today. Concentration, centralization, lack of regulation and funding, and foreign competition. I watch them go one by one, with a heavy heart.
4126 Over to Randy.
4127 MR. KITT: Thank you, Katha.
4128 As we noted in our written submission, we are grateful the Commission is viewing the proposed Rogers/Shaw takeover through an employment lens. We would like to note that the increasing consolidation and centralization of news production occur at both a corporate and geographical level.
4129 Corporate mergers and takeovers lead to a consolidation of voices into an ever-smaller circle of ever-larger media conglomerates. And at the same time, financial resources and staffing are moved away from smaller local markets, and centralized into a smaller number of large urban centres. Again, we are deeply concerned about the future of markets, including those previously mentioned by Katha.
4130 From a broader perspective, like a number of other interveners, we are concerned about Rogers’ long-terms intentions and commitments regarding employment levels overall. As you well know, if the takeover is approved, Rogers will be paying somewhere around $26 billion for Shaw. The company has said that the new merged entity will create 3,000 net new jobs arising from its investments in broadband and wireless technologies.
4131 However, once again Rogers has come up short in its plans and commitments for the broadcast segment of the company. What are the company’s plans to invest and grow its broadcast activities? What commitments will the company make in terms of levels of employment in the broadcast sector?
4132 The company has said it will fulfill its regulatory obligations. But we will argue that simply meeting minimum statutory obligations is not enough.
4133 Given the scale of the proposed takeover, the amount of money in play, and the nature of the quasi-monopoly that could be handed to Rogers, we ask the question, will this transaction strengthen the Canadian Broadcast System? Thirteen ($13) million may be leaving the Corus network of television stations. Those same stations will now be looking to the Independent Local News Fund, ILNF, for support, at the expense of many other small communities.
4134 And even with the ILNF funding, the shortfall cannot be made up with that alone. All the while Rogers makes no firm commitments to maintain or increase original local news programming or staffing levels. Thirteen ($13) million at an average of $80,000 per job would equal 162 jobs. Simple math, but frightening consequences, if that funding disappears.
4135 There is also the issue of tangible benefits and the value of this transaction. Unifor urges the commission to look at the fair value of the transaction. And as the Forum for Research and Policy Communications has pointed out in their written submission, this transaction may be undervalued to the tune of over $45M, depriving us of up to $17M in tangible benefits.
4136 Unifor therefore asks that, should the commission approve this sale, Rogers is mandated to continue the funding for Corus stations until such time as a hearing can be concluded to ensure that the ILNF, or other such equal funds, can be in place to support the need of these Canadian communities.
4137 Unifor asks that the fair value of the transaction is considered and that the maximum tangible benefit package suitable for a transaction of this unprecedented scale is guaranteed. These tangible benefits should be used to strengthen original local news programing across Canada and in smaller communities.
4138 In questioning on day one of these hearings, Rogers states that they will put more “boots on the street”, meaning they’ll hire more journalists, but focusing on quality over quantity and not necessarily creating more hours of programming, arguing that more hours is not necessarily better and quality journalism is more important. Then, when questioned if Rogers would support a condition of license to increase its local news and local programming commitments, they said they would not.
4139 I ask you, if Rogers had its way and could divert all of this money to its own stations, how is it possible for them to spend $13M and not commit to an extra hour of programing? How is this possible? Quality and quantity must both be factors, and clearly, they must be mandated with clear programing conditions of license.
4140 We respectfully urge the Commission to ensure that at the very least, the combined new entity should be required to maintain the same employment levels in the broadcast segment as the sum of the two pre-takeover companies.
4141 In other words, the proposed takeover should not lead to a net decrease in employment within the broadcast segment. In fact, we believe that, given the amount of money Rogers will make if this deal goes through, we should expect to see a significant increase in employment in its broadcast segment.
4142 To conclude, the Covid crisis, a snap election, and more recently, the floods in BC’s lower mainland have hit home for us, showing us how much Canadians depend on high-quality local news. Perhaps paradoxically, while our world becomes more globalized, and our problems, like the pandemic and climate change, seem to get bigger in scale, the need for local news has never been greater.
4143 Local news is an essential service and must start being treated as such. It is essential to a functioning democracy. To support it means “feet on the street”, that means local people to tell local stories. We need to talk about how many hours we program, but we also need to talk about how many people are telling our stories. And we can’t say we’re supporting it unless we are funding it.
4144 If the commission is going to approve this merger, the answer to the question, “Will this transaction strengthen the Canadian Broadcasting System?” has to be, with no hesitation, absolutely! Thank you.
4145 THE CHAIRPERSON: Sorry, getting hold of the microphone button. Thank you very much for your submission, and welcome to our proceeding. I will turn the microphone to Commissioner Naidoo who has some questions for you.
4146 COMMISSIONER NAIDOO: Thank you very much for your presentation. You mentioned that approval of this transaction will drastically reduce the availability of local news offered by Corus stations. Can you please explain how, go into some more detail than what you did in your presentation?
4147 MR. KITT: Yeah, well, we -- what we’re saying is that the $13M of funding could leave the Corus stations and that could reduce -- I think we did the math -- approximately $80,000 per full-time equivalent job could possibly lead to the reduction of 162 jobs. We’re not saying that that will happen. We’re saying that’s possibly what will happen.
4148 But without firm commitments in conditions of licence -- you know, if it’s left to the corporation to decide, “What will we do with that money?”, we’re worried that those jobs could be lost.
4149 So we’re saying that the Commission needs to put conditions on these employers for commitment, because all we’re hearing now are aspirations. “We’re going to do this,” or “We could do that.” But what we need is not aspirational statements; we need commitments, because we’ve seen it year after year, after year, the decline, and the continual decline of jobs in our industries.
4150 And without the Commission’s regulations to support and to demand commitments from these companies, we see the jobs disappear. And that’s what we’re asking.
4151 COMMISSIONER NAIDOO: And how do you think the impact will affect the quality of journalism across the country?
4152 MR. KITT: Well, quality’s important and we -- you know, there’s very few really, really good investigative reporting going on in this country currently. And there a lot of employers that are doing that work, but it’s diminishing. We see the newspapers getting thinner and thinner. We see the television investigative news is dwindling to very little.
4153 And so, you know, I think that quality is as important as quantity, if not more, but we just need those commitments. And, you know, we would rather see quality journalism and news, rather than a CNN-style, 24-hour opinion cycle, Fox News style. And we should aim for that.
4154 I’m not sure how we get there from here in today’s submissions, but that $13M that could be guaranteed by the Commission to go into the system would be a start to ensure that the money is spent on feet on the street.
4155 If we don’t put the money and ensure that the jobs are there in news creation, its journalists, and camera operators, and editors, then the quality will diminish.
4156 COMMISSIONER NAIDOO: And how concerned are you that the loss of $13M will affect the ability for there to be training grounds for journalists in smaller markets and so on?
4157 MR. KITT: Well, we’re very concerned. You know, the -- in researching for this submission, you know, we threw the Red Deer example in there, right. Like, that station in Red Deer was lost in 2009, I believe, and it’s not back, right.
4158 And so I think there’s a Shaw Cable Access Station there. That’s my understanding. And, you know, we can’t be replacing a television news station and a newscast with a cable access run-by-volunteers outlet for a community that large. It’s heartbreaking. And for a community of over 100,000 people to not have access to local television news is really disappointing.
4159 COMMISSIONER NAIDOO: You support IBG’s statement that providing Rogers with the flexibility to allocate significant new funds in news support entirely to its own local TV stations would be unlikely to maximize benefits for the broadcasting system as a whole. Can you please explain why?
4160 MR. KITT: Well, I think it’s the loss of that funding to all -- to the greater -- to all of those cities that we mentioned. And we put those cities in our brief to say, “Here are the places that could lose funding.”
4161 And I think what we said was, “Listen, if Rogers needs to continue supporting those Corus stations until such time as the Commission can create funding mechanisms for these stations” -- so we lost the local programming fund, right, the LPIF.
4162 We have the ILNF right now. We need -- we’re going to talk together, hopefully soon, on C-10, and we can’t keep taking the money from here, or there, or let’s rob from the CMF to give to local news, or to give to here, or take from community and give here. So hopefully this -- hopefully the Commission and the government can get together, and we can get money in the system to support local news and make it a real mandated commitment to put money into local news.
4163 But until such time, we can’t have money leaving the system and leaving these communities; we need the money in these communities. And so, if we’re going to say we’re going to take $13 million and put it in these smaller -- a smaller group of bigger places and forsake these other smaller communities, then that can’t be good.
4164 COMMISSIONER NAIDOO: You touched on this a little bit in your presentation, and I just would love to hear you flesh it out a little bit more, put more of a focus on it. What would you suggest to remedy the situation?
4165 MR. KITT: The funding?
4166 COMMISSIONER NAIDOO: Just as a remedy to ensure that, you know, the $13 million is not going to -- if it’s diverted that it’s not going to be impacting the broadcast industry as a whole.
4167 MR. KITT: Right. Well, I think we need a multi-prong approach. And you know, we’re not here to bash Rogers or Shaw or to -- as you’ve seen, we’ve taken no position on the actual merger. We’re saying this is a wider problem. We can’t let these events go by without saying we’re just going to let this amount of money slip out of the system. So, we need you to ensure that the money doesn’t slip out of the system. So, that’s the first thing we have to do.
4168 The answer is that these smaller communities have to be taken care of now, and I think, right now, it’s that $13 million to say, “Here’s where we need to support these communities.” And the next step is to say, “Let’s talk about funding the ILNF. Let’s expand that. What about a local news fund?” like we had previously. How are we going to fund that?
4169 We have cable contributions, but then we bring in C-10, and we say, you know, how are foreign media companies going to contribute with a portion of Canadian revenues into Canadian content? But we’re going to ask, and this is a little foreshadowing here, but that the government and the CRTC mandate that a portion of that money be supported to local news, and that’s not happened in the past. We -- and there’s going to be new money coming into the system, and I think that’s a longer term goal and solution, but it all starts here. We can’t just -- we’ve been sliding down this hill for almost 20 years.
4170 We saw it with newspapers. And we saw it coming in 1999 with the Digital Exemption and the CRTC decided not to regulate the internet. And then 2009, you had another shot at it, and the CRTC decided again not to regulate. And so, now we have another opportunity. We’ve got to make it right this time.
4171 And so, let’s start here. Let’s not say we can forsake these smaller communities or these other communities for now until something that may or may not happen. Let’s just do it right. Let’s make sure we’re protected now, and then in the future, we’re going to support, and we’re going to fund and make sure that local news is treated as it is, which is an essential service.
4172 COMMISSIONER NAIDOO: Thank you very much. Those are all the questions that I have.
4173 MR. KITT: Thank you.
4174 THE CHAIRPERSON: Commissioner Desmond?
4175 COMMISSIONER DESMOND: Good morning. And thank you for your presentation today. I just wanted to ask a question of clarification. We’ve talked a lot about the local news and supporting local news. But in your opening statement, I’m looking at your proposal at paragraph 17, and then paragraph 18.
4176 And at paragraph 17, you identified the submission made by the Forum for Research and Policy Communications and the potential undervalue of up to $17 million in tangible benefits. And then in 18, you talk about the funding for Corus stations, which is about $13 million. So, I’m just curious, are you looking for the Board -- or the Commission to consider both a $17 million adjustment and a $13 million adjustment, or is it one of those?
4177 MR. KITT: Have you ever been in union negotiations before? We want both. Sorry, a little union humour for you. Yes, so I want to talk a little bit about the value. And so, I’m going to get my head around this $45 million.
4178 I’m no accountant, so -- but I do understand that there’s a portion of the business, which I believe is a pay-per-view service that Rogers has said, “We don’t need this service. We already have the pay-per-view service. So, when we merge, should this be approved, this is a portion of the business we’re not buying and we’re not going to include it in the value of the transaction.” It’s actually like just going to disappear.
4179 But in my view, because it’s pay-per-view and it’s a customer-based thing, it’s like having two coffee shops side by side, right? So, you have Starbucks on the corner, and you have Tim Hortons on the other corner, and we say, “Okay, we’re going to merge. And so, we’re just going to become Star Tim,” and we’re saying but there’s absolutely no value to us. We’re going to buy, and we’re just going to eliminate the other, but the value is in the customers, right?
4180 So, we know that we’re going to double the customer base, and we know that there is value to that transaction and to that portion of the business. So, we’re saying that absolutely has to be counted because otherwise they wouldn’t do it. We know that the value is in the customers, not necessarily in the entity. And so, we’re saying that you have to include and increase the tangible benefits. And yes, we’re asking for money from tangible benefits, which you may not have considered before to go to local news.
4181 We need -- the house is on fire, and we need to put it out. And so, let’s start putting resources to local news in these communities that have lost their news, and let’s start rebuilding. And we can only do that with funding, and it needs to come from many sources, and that’s one pot that we’re asking for it to come from.
4182 COMMISSIONER DESMOND: Okay, thank you for clarifying that. I appreciate it.
4183 MR. KITT: Thank you.
4184 THE CHAIRPERSON: Thank you. Thank you for your submissions today and for your fulsome participation in our proceeding. Madam Secretary, please proceed.
4185 MS. LEVESQUE: Thank you. We will now take a small two-minute break to let the next participant in the room. Thank you.
--- Upon recessing at 11:26 a.m./
--- L'audience est suspendue à 11h26
--- Upon resuming at 11:29 a.m./
--- L'audience est reprise à 11h29
4186 THE CHAIRPERSON: Madam Secretary?
4187 THE SECRETARY: Thank you.
4188 We will now hear the presentation of Channel Zero Inc. Please introduce yourself and your colleagues. And you will have 10 minutes.
4189 MR. MILLAR: Thank you. Good morning, Mr. Chair, Commissioners. My name is Cal Millar. I am the president and co-founder of Channel Zero, licensee of local over the air station CHCH-TV in Hamilton, Ontario and discretionary services, Silver Screen Classics and Rewind. I'm also one of the founders of the Independent Broadcaster Group who you have heard much about this week -- and that was Tuesday -- and chair of the CAB’s Local Independent Television Services group (LITS), two members of which have intervened in this proceeding, Miracle Channel and CHEK TV from Victoria.
4190 With me today are a couple of my colleagues familiar to you, Chris Fuoco on my right, Vice President of Marketing and Sales for Channel Zero and fellow shareholder, and Peter Miller, our counsel.
4191 As a matter of record, we can start today by saying that we fully support the position of IBG that you heard on Tuesday. We also support Rogers’ application to acquire Shaw, with the safeguards IBG proposed.
4192 Our two discretionary services first received Category 2, later Category B, licenses over 20 years ago first as Moviola, now known as Rewind, and Silver Screen Classics, during the then bold CRTC experiment of letting a thousand Canadian services bloom.
4193 It was a heady time.
4194 In anticipation of the transition to digital -- and of course we're talking about digital cable now, not digital as we know it today -- the would-be services and television distributors alike participated in the potential -- anticipated the potential of the ‘500 Channel’ universe, and how we could populate it with a competitive mix of Canadian and foreign channels that Canadians would want to watch.
4195 The Commission developed a policy framework which for the time was quite frankly brilliant. It put meaningful effect to the Broadcasting Act’s call for priority to Canadian services, yet recognized new realities by creating a new class of non must carry Canadian services with significantly lower Canadian programming requirements.
4196 The policy was a resounding success. Newbie broadcast entrepreneurs got caught up in the excitement of what you might call a mini broadcasting Gold Rush. Equally important, television distributor partners, primarily then cable and satellite, knew that this was an opportunity to grow their businesses in partnership with these new players.
4197 After tough negotiations with television distributors, including, I can personally say with Ted Rogers himself, on September 7th we launched on most major Canadian systems.
4198 Contrast that era of growth and optimism with today. The traditional system is in decline and at a crisis point of transition. The new digital apps on Ignite, while being presented by Rogers as an intangible benefit, come with no firm commitments, no regulatory policies, and no guardrails. Left unchecked and unmonitored, what could possibly go wrong with that?
4199 This hearing, in which Rogers is seeking unprecedented ownership of English language BDU assets, and is required to demonstrate significant and unequivocal benefits to the Canadian broadcasting system, comes at the perfect time to switch our approach from managing that decline, to looking at stemming the losses and once again embarking on rebuilding the system.
4200 MR. FUOCO: In our time with you today we would like to expand on two issues that the IBG spoke to you about but did not get into much detail on.
4201 First, the Set Top Box data.
4202 Access to this data is vital as it helps us improve our product and to make more informed programming and operational decisions.
4203 We get audience data reported to us daily from Numeris. Streaming services like Amazon provide weekly updates and reports to their partners.
4204 On the other hand, proprietary set top box data in the hands of the BDUs has been used against independent programmers in negotiations or as justification for repackaging or for dropping channels.
4205 Consider how difficult it is to negotiate or to optimize the performance of your channel when your BDU partner has visibility to data but you do not.
4206 So big picture, what we are asking for here is to ensure that we, who don’t own and operate a BDU, get the same access to the data that the VI programmers have.
4207 Here is what we heard from Rogers on this topic during Monday’s presentation.
4208 Rogers will provide set top box data to CYNCH and by April of 2022, Rogers proposes to provide independent broadcasters on a channel by channel basis an annual report card providing some level of set top box data that would be provided at no cost. So on this second point, this might sound interesting at first blush, but it's woefully inadequate. We need current and actionable data flowing on a regular basis, not just a once a year published summary.
4209 Let’s also highlight the time frames that we are looking at here.
4210 Set top box data has been a topic of discussion since 2015’s Let’s Talk TV. And not to downplay the complexity and scope of this project, but we’re now talking about six to seven years before independents will see the first set top box data on their own channels.
4211 Interestingly, this six year window lines up with the timeframe outlined in the Boon Dog Report and the disproportionate revenue declines experienced by independent broadcasters during this same time period.
4212 And during this same window, the BDUs and VI programmers have hit the accelerator on their own data mining projects and have rolled out new Ad Tech Platforms like CYNCH and SAM.
4213 Independents, on the other hand, play catch up. We operate outside the tent, so to speak.
4214 And as Rogers clarified on Monday, independents will still have to enter into negotiated commercial agreements with the different platform providers and/or middleware vendors. Each step of the way these investments will require financial evaluation and decisions to be made. And this becomes an even more daunting task if the underlying carriage terms, distribution, and economics of your channel is uncertain and at risk.
4215 It is hard to build a bridge to the future when the foundation you are standing on is unstable.
4216 Which is why the question of set top box data or access to Ad Tech platforms or even app development is all connected back to the bigger question in front of the Commission at this hearing which is putting in place the necessary safeguards for Independent programmers such that we can grow into this future alongside the largest players in this industry.
4217 Specific to set top box data, what we seek is for you to write in as conditions of approval to this transaction:
4218 (1) That Rogers provides the independent programmer data into the Numeris and CYNCH platforms at no cost, and
4219 (2) That the independent programmer data being ported over will be from both the Rogers and Shaw systems post transaction.
4220 In addition, as it relates to the first look at this data which Rogers said it would make available April 1 of next year, as I mentioned earlier, an annual report card on our channel’s performance simply feels late and light. We look forward to seeing and responding to Rogers’ undertaking in this regard.
4222 MR. MILLAR: Thanks, Chris.
4223 Second, we would like to talk to you about local news, ILNF and Corus as an independent.
4224 A little bit off script but much of what I am going to say ion the next couple of minutes, you have just heard from Unifor, and it will mirror that.
4225 LITS focus is on how to protect or, better still, further the local news capacity of independents, recognizing that a full review of the ILNF might take place sometime in the next three years.
4226 LITS’ perspective recognizes the tough time we have had through a year and a half of COVID, which as you know caused a dramatic decline in local advertising revenue. Just to give you a sense, early on, in the summer of 2020, many LITS members experienced months where advertising revenues were off by 30 to 60 percent of what they would have been. More than half of their local retail customers were not or could not buy advertising due to public health closures.
4227 Today most of us are “only” down perhaps 10 percent from where we were before the pandemic. The pandemic recovery is a slow one.
4228 The independent local news fund, or ILNF, provides funding that allows us to maintain and to continue to invest in our local news operations. For us, at CHCH that amounts today to over 25 hours of local news each and every week.
4229 The ILNF, administered by the CAB, is the Fund you created in 2016 to support locally reflective news and information programming produced by independent local television stations. It is based on a mandatory 0.3 percent revenue contribution from all licensed BDUs.
4230 In the year ending August 31, 2020, independent broadcasters received almost $20 million from ILNF, an amount that declines along with BDU revenues.
4231 In the few minutes we have remaining, let us speak to how we believe this transaction can better support local news provided by independents, and be the catalyst for a new more solid and secure ILNF funding system.
4232 First, do no harm.
4233 You have a decision to make on Roger's plans to take the BDU local news contributions that the Shaw systems currently give to Global TV and redirect them to Citytv.
4234 If you simply allow Rogers to redirect those monies to its City stations and at the same time, classify Corus as an independent for the purposes of the ILNF, true independent stations would lose 60 to 80 percent of their ILNF funding.
4235 Needless to say, that would be catastrophic.
4236 So point number one, whatever you do, please don't allow that to happen. If you determine that the Corus stations should continue to be funded through BDU contributions, please impose it as a condition of licence on Rogers. Keep Corus out of the ILNF until the pending formal review can revisit the entire BDU news funding model.
4237 Point number two. As you rightfully pointed out in the public notice, a tangible or intangible benefit we should be expecting from this transaction is increased support for local news.
4238 I would submit to you that you are not seeing this.
4239 All Rogers has planned is increased support for local news on its own stations, but no increase in net local news support for the system as a whole, just a transfer from Global to City.
4240 With respect, that's not a significant and unequivocal benefit.
4241 On Monday, you posed questions suggesting the Commission might value the transaction for tangible benefits purposes at higher than the $57.5 million Rogers has put on the table.
4242 You pointed out that whilst 10 percent of the value of television assets is a suggested minimum policy, it is not the final word. Moreover, there has been debate about whether the value of TV assets should incorporate other elements, including the value of Shaw’s terrestrial VOD and pay-per-view assets which Rogers will indirectly or almost directly assume when they pick up those customers.
4243 We note that if tangible benefits were to be applied to the BDU part of the transaction as well, the tangible benefits on the table would be closer to $74 million, not $5.75 million.
4244 In our opinion, the only way for this transaction to result in much needed, significant and unequivocal benefits to local news is to require real incremental support for local news. Moreover, the players most in need of that incremental support remain, as the Commission determined in 2016, continue to be the existing set of local independent television stations.
4245 Thus, should the value of the tangible benefits package be increased, we would propose that a majority of that increased funding go to the ILNF.
4246 Thank you for hearing us today.
4247 Please do what you can to support independent broadcasters who bring much needed news and content diversity into the Canadian system.
4248 We look forward to your questions.
4249 THE CHAIRPERSON. Thank you. Thank you for your submission, and I will turn to Commissioner Desmond.
4250 COMMISSIONER DESMOND: Good morning, and thank you for being here today.
4251 I have a few questions that will really focus primarily on the intervention that you filed, and then with the opening statements that you provided this morning.
4252 When I was reviewing your filed intervention last evening, I noticed in your first paragraph you do say that you support all of IBG's submission in this proceeding, but now this morning, you highlighted two of those recommendations.
4253 So I'm just wondering if you could speak to whether or not all of the IBG submissions and recommendations are equally important, in your view, or if the two you have highlighted are of priority?
4254 MR. MILLAR: Okay. I'll lead off on this and maybe Chris can jump in.
4255 Thank you for the question. I hope we didn’t confuse the issue, because in fact, I would say all of IBG's priorities are our priorities. But the number one, the overarching theme to our presentation and our reason for appearing in front of you today is about the requirement for safeguards.
4256 This -- the system isn't perfect. There are problems in it. There are -- you have heard the parties talk about them. I won't enumerate them now.
4257 But those problems are about to get twice as big, because Rogers is going to now be in control of 50 percent of English Canada. I don’t need to restate that statistic.
4258 But it's -- these aren't getting easier. These don’t get solved by this transaction. Those issues get magnified.
4259 And so the biggest one is, we have talked about the safeguard of at the end of the day, none of us actually initiated this proceeding by purchasing Shaw. Rogers did. It brought it to you.
4260 They're supposed to show unequivocal benefits to the system, and we're saying, "Just don’t let us be the synergies they have told the market they will find. We just don’t want to be collateral damage."
4262 MR. FUOCO: Just to add to Cal's point, we're somewhat unique in that we operate a OTA station, CHCH, as well as our two specialty services. And we felt that, you know, in that regard, it was important for us to highlight some aspects that are specific to Over-the-air and focus on INLF. So that’s what want to spend some time today.
4263 But to just conclude with that yes, we are in support of the work that the IBG has done in the safeguards that are proposed. We just wanted to put that spotlight on those two unique aspects that we bring to the table.
4264 COMMISSIONER DESMOND: Okay. Thank you very much.
4265 Also in your written submission, I noticed through paragraphs 8 and 7 -- sorry, 6 and 7 going on to paragraph 8, you talked a lot about the history of your negotiations, in particular, as it related to Bloomberg.
4266 So I'm just -- and we have heard a lot about negotiations in the last couple of days.
4267 Has the tenor of the negotiations improved over the last six or seven years, or have you found that the negotiation process has become more stressful? What has worked? I would be curious to know what has worked through your negotiation process, and what are the benefits?
4268 MR. MILLAR: Okay. That’s a really good question.
4269 You know, I don’t want to just say nothing works, but there's an inherent imbalance. There always is. I mean, large players, small players, you go to a -- you have a plumber come in to do repairs and there's an imbalance. They know what's wrong, and you don’t -- may not know what's wrong, and you have got to -- there's got to be some trust.
4270 But there has been -- whether it's a focus on short-term profitability or the fact that the BDUs who were once our -- we always referred to them as our broadcasting partners -- have become much more absorbed in the wireless business, much more absorbed in the ISPs, and rightfully so. Those business have grown exponentially.
4271 But there is a fundamental lack of respect for other players in the system.
4272 A number of people will just cringe as I tell the story, but you know, I alluded to, you know, when we first did negotiations, all the distributors were saying they fought hard, and -- but, you know, Rogers was an interesting organization, because we heard how horrible they could be, and they beat up on everybody.
4273 And they did. They really did.
4274 But when it was over, then Head of Cable, John Tory, said, "Come on. It's time to go shake Ted's hand."
4275 And you know, as a newbie, we were pretty -- I was shaking. I'm like, good Lord, Mr. Rogers? That’s crazy.
4276 But we went, and you know, people said, "For Heaven's sakes, don’t tell him you're happy with the deal because we will beaten up afterwards."
4277 But you know, I went up and he would look you straight in the eye and say, "Are you okay with the deal?"
4278 Not are you happy with it, are you okay with the deal? Can you live with it?
4279 And it was, "Yes, Mr. Rogers. We can."
4280 And he said, "Okay, great." And we would shake hands on it.
4281 Nobody had the recording of the negotiations. We do it with the details in our heads. But 6, 12 months later, you know, the paperwork would finally get settled and be exactly as we had agreed on. And the integrity of those founders, both JR and Ted, emanated through the organization.
4282 So as bad as it could be as you got, you know, beaten up, there was a point where they wouldn't kill you just for the sake of it, just for the fun of it.
4283 And there was a respect, albeit, you know, disproportionate in terms of equal respect.
4284 But that’s something that’s been lost. And I don’t just mean to be the old guy bemoaning the past. It's just that there was a respect for what we did and we obviously respected them for the size and what they did.
4285 That part is -- tends not to be there now. And so some of what you hear when you hear about the problems with negotiation are just that. It's -- we are seeing often as an easy place to cut costs, not think about what we do for our customers. They don’t read the glowing, sometimes critical reviews we get from our viewers, but I think that’s as about far as I can take it. Chris?
4286 MR. FUOCO: Thanks, Cal. I think we spoke about Bloomberg and our experience by bringing that channel, because it’s illustrative and happened at a time before the consolidation and the size of the player that’s being contemplated being created. So, Bloomberg, in our opinion, was a missed opportunity. We worked with that organization to bring that channel to Canadianize it, to inject a different news perspective and the business news space into Canada, and we did that. We began putting original local news or national news in that case, but we put our own components into what was otherwise an international service. And Bell was not interested in carrying the channel because they had an existing business news network. And so, for obvious competitive reasons, they weren’t interested in the launch.
4287 We operated the channel and had difficulty doing so. And after a period of time, we reached a conclusion we could no longer continue. We wound down our operations, and shortly thereafter, Bell picked up the licence and rebranded BNN as BNN Bloomberg.
4288 So, that’s an illustrative story of the dynamic in the marketplace, and this transaction is going to take fewer players out and make it harder to bring in newer, diverse voices if one side says one half of the market decides, “We’re not interested in that channel. It won’t launch.” So, that’s an example that occurred several years ago when the market was already more diverse than it -- than what it could become, and that’s why we brought it up.
4289 MR. MILLER: Can I just make one other comment both as counsel to Channel Zero, counsel to other independents and someone who has worked for other broadcasters for BDUs? As -- I won’t name names, but as some of you know, when you get to a certain age, you’ve worked for different perspectives and you get -- have different perspectives, and that’s very valuable. And one of the reasons I suggested we tell a little bit of a story and the contrast between when the digital launched and today is it is night and day. That was a period of growth where our partners on the BDU side saw growth opportunity and were delighted to have more channels to offer consumers.
4290 Now, as Brad coined the term when IBG appeared, we’re not harnessing change, we’re harvesting it. We’re in a creative contraption. And sadly, I can report that the major VIs are not interested in growth anymore. They’re just interested in margin. They’re managing what they see as an inevitable decline.
4291 So, when we go in with a growth opportunity, they are not interested. It’s just about cutting costs. And none of us are negative about VI, but one of the unfortunate things now is broadcasting is such a small element in Rogers and Bell that it’s just looked at from a perspective of margin. And again, that is not to discredit fantastic people that work in broadcasting and the VIs.
4292 I mean, Rogers in particular, I don’t know if you’ve met Julie Adams that runs their local TV and radio operations, she’s a fantastic broadcasting executive. And throughout the ranks of all of those companies, they’re fantastic people. But the pressures they’re under to deliver a margin mean that they’re not growing, they’re not playing the long game; they’re playing the quarterly profits margin game, and that’s what has fundamentally changed how we are.
4293 And I want to just make one personal comment. The other thing you learn as you get older is you recognize your mistakes, and we all mistakes, and I’ve certainly made a lot. But one of the biggest made -- mistakes I’ve made in policy is when I appeared with CHUM on the Cat 1 and Cat 2 distinction, the introduction of Category 2 and Cat B licence, I said it would never work. I said it would never work because BDUs would never negotiate fairly. It would never work. And I was dead wrong. It did work then. It just doesn’t work now.
4294 COMMISSIONER DESMOND: Thank you very much. You know, I believe -- I’m sure you’re aware of the commitments Rogers has now made, the three commitments, and we’ve talked a little bit about that this morning. But could we specifically talk about those three proposals, one being the carriage of 40 independent programming programs for three years, the support for the development of the apps, and then the ad technology platforms?
4295 So, just if we could perhaps drill down a little bit on those, and in particular the carriage of the 40 independent programs? I’m just wondering if perhaps you could offer your view on that.
4296 MR. MILLAR: Sure, I would be delighted. I’ll lead off, and then Peter’s going to jump on. Chris will probably jump in, too.
4297 The Rogers commitment is a start. We’ve pointed out, I think, through IBG that 40 look through the telescope differently says that they -- on some of those systems, they’re reserving the right to drop some independents right out of the gate. So, I think it’s a start, but I don’t think it’s substantial. I think IBG came back with -- a little bit stronger and suggested 50 as a starting point. We don’t suggest that needs to be a limit by any stretch, but it was a suggestion. Peter?
4298 MR. MILLER: Let me just briefly do the comparison because, again, IBG did address this. The Rogers commitment of 40, our response to that is, “Thank you. It needs to be 50 and it needs to be combined with a no less favourable in aggregate provision that IBG has argued for as a condition of licence.” The “no less favourable in aggregate” means we don’t end up worse off than we were before, and in particular, at least during the period it’s in effect, it stops the practice of “we’re going to stop your service”, but it goes without saying if you threaten to drop someone’s service, you’re not any less favourable in aggregate.
4299 So, that’s our minimum there. You know, we note the Ethnic Channels Group’s suggestion of a slightly standard. There are different ways of doing it, but IBG’S minimum threshold is to address that for the period of time it’s in effect, and we’ve spoken about that period of time. We don’t have to repeat that.
4300 The second Rogers “commitment” was on apps. And what we’re signalling, and others have said is there’s no commitment there. They are nice words. If that is the future of broadcasting, we need to figure out what the guardrails are. And when you think about it, Rogers has offered that as an intangible benefit, which means they see it as broadcasting. How can they offer it as an intangible benefit in a broadcasting proceeding if they don’t see it as broadcasting?
4301 So, as far as I’m concerned, they’ve opened the door to regulatory requirements in that statement. And what should those requirements be? Well, first and foremost, and we’ve been thinking about this through the week, there should be a 1:1 link between Canadian and foreign apps.
4302 Now, why a 1:1 link? If you don’t have a 1:1 link, there are dozens of U.S. apps that Comcast carries that as soon as the rights can be established will flood into this country. There already are. If you look at Ignite, there already are a lot of U.S. apps. So, as an incentive to encourage Canadian apps and, more important, to ensure that Canadian apps get priority and Rogers -- it will be Rogers and Videotron, because they are the ones that’s dealing with Ignite app, this transaction, can go to Comcast and say, “I can’t carry that U.S. app unless I carry another Canadian. Speed up my development on the Canadian stuff. Let’s make this happen.”
4303 That single rule, which I submit you could apply to Rogers, and they will hate, but you can do it, will instigate a huge push to carry Canadian apps. And why should you do it? Both because they’ve acknowledged it’s broadcasting and because it is. It’s a closed system. It’s not the open internet. It’s on their platform in which they deliver BDU services. From a consumer, it’s the same perspective. A 1:1 linkage does not prevent them from carrying the most popular U.S. apps. It just means that for every one of those they carry, if available, and you can put that provision, they carry Canadian.
4304 Now, let’s figure out the wording so much -- so that that “if available” doesn’t become a truck you can drive through, but that’s a reasonable provision. The number two one would be a ratio between true independence and VIs on apps. And again, if you went by the old definition of independent excluding Corus, that could be 1:1. If we define Corus as an independent, we’re going to have to come up with a new one.
4305 But the more we think about it, if you think about simple guardrails, there’s no genre protection, right? No one gets to say, “You can’t bring in that app because they’re competing with us.” We know we’re past that. But there’s simple guardrails that give us a shot in that world and take advantage of the very thing Rogers has said is an advantage.
4306 Third thing. Sorry, I went on my rant. Third thing was set top box data. Chris is covering that.
4307 COMMISSIONER DESMOND: Okay, so thank you for that. I just have a couple of follow-up questions from your submissions, Mr. Miller. I think you said you supported the IBG 50 channels, but does that include the seven-year duration as well just to be clear?
4308 MR. MILLER: Absolutely. Can I also say -- I mean, all of us have been around hearings at various levels. Hearings have different tactics, right? I would submit that Rogers’ tactic on Monday was to offer as little as possible so that when they come back to reply, they can address stuff. That’s the tactic.
4309 We decided not to come in with a tactic to ask for the world. We decided to come in with a tactic to ask for what we think are reasonable things that you could grant with a rational reason. And we’d love a seven-year commitment. We just are not sure that you’re going to be prepared to do that, because seven years is a long time.
4310 And that’s why you heard me with IBG link, it’s a licence renewal. That’s -- make it an indefinite commitment linked to licence renewal. They come in on licence renewal; they tell you where things are; they make their case. To me, just from a regulatory point of view, balancing the interests, that makes the most sense.
4311 COMMISSIONER DESMOND: Thank you. And just a follow up question with respect to the apps. Earlier this week we heard from the Ethnic Channel and their concern about programming being carried both on an app and on a linear basis.
4312 So in your view, with the development of these apps, is it also important that the programming continue on a linear basis?
4313 MR. MILLAR: Yes, because first of all, the app space is different. Not all consumers are going to find it there. They’re integrated, so you have consumers who are used to watching a linear feed. And, you know, much has been made of the decline of the system, but looks, it’s contracting, but it’s not in irreversible or dramatic decline.
4314 There are millions of people who still subscribe to the system, somewhere around 10 million. We know on a local television station that has a catchment area of a couple of million people, we get hundreds of thousands of people tuning in to newscasts regularly. So it’s not like nobody’s out there using the existing linear service, so it’s absolutely crucial that, as Chris alluded, is that this an opportunity -- and all of us are actively engaged in this, which is we’re building the bridge to the future.
4315 We don’t exactly what it will look like, but we’re getting the bridge built, and we’ve got feet in both camps. We’ve got apps. We’ve got linear broadcasting. But the vast majority of money is still development-generated by linear, on-demand, traditional television broadcasting services.
4316 MR. FUOCO: Just to add a little more context as well, what’s really important to understand is that the economics are still developing on the app side as far as revenue and, as a broadcaster, or as an operator, what you actually earn.
4317 To give you very simple illustrative math, on a traditional television spot, or sponsorship, or something that is our core business today, once you back out a commission you might pay to a sales agency of a deduction that the agency might, for every dollar that you sell, you’re netting about 75 cents to go and cover the costs of your programming, et cetera, so it’s about -- 75 cents is where you start.
4318 In the app world, when we talk about all these middleware vendors, and third parties, and rev shares, and things like that, for every dollar that you sell in an app space -- and the overall pool for that is a lot smaller than what traditional advertisers are looking for -- because you have so many other people with their fingers in the pie, so to speak, you’re starting at the low 50, 40 cents on the dollar just to begin with.
4319 So right now, the economics are not apples to apples. So this why we say if we can have the stability with our existing business to figure, and to negotiate, and to cut the right kinds of deals so we can make that transition, because we want to get there, but you just can’t do a hard transition when you’re trading dollars that are frankly more -- there’s a higher margin, to begin with, to stuff right now that is much lower. That rapid, hard transition would be very, very problematic for anyone to manage.
4320 And that’s, again, why we’re saying we need to stabilize the business that we know right now and build to the future in partnership with the BDU carriers.
4321 COMMISSIONER DESMOND: Okay, thank you. I have a follow-up question on the set top box data, which you spoke about this morning.
4322 And in one of the interventions that I read in the last few days -- and I can’t tell you now which one -- it talked about having the access in a format that’s usable. So I’m just wondering if you could comment on that, because I -- is there a distinction between getting the data and getting the data in a way that’s usable, and what that would look like? What would be required?
4323 MR. FUOCO: Absolutely. I mean, this is where -- I mean, I think there’s been a lot of work been done by Numeris with the set top box data group, and we wait to see what that will look like and if -- you know, we’re familiar with Numeris information. We get it daily right now. We need to be careful with -- when just providing -- I mean that could be just a dump of raw information that would then require processing, and evaluating, and things like that.
4324 So it needs to be in a format that organizations of our scale can work with, that whatever software sits on top of it to allow you to run your analysis is something that we can work with, we can afford. So there is a difference. That’s why we’re very interested in seeing what Rogers will present as far as their first look that they are saying will come out in April.
4325 So we’re waiting to see what they’re undertaking on that is, and we’ll look at that closely and provide comment if we think that it’s perhaps inadequate. But yeah, there is absolutely a difference between just a raw data file and something that you can actually work with and make some decisions and projections against.
4326 COMMISSIONER DESMOND: Okay, thank you. If I could move on now to the -- I’m just going to turn over here -- to the ILNF and your comments that you provided this morning with respect to the necessity of those funds. Can you just elaborate a little bit more in terms of your reliance on those funds as an organization?
4327 MR. MILLAR: Sure, I’d be delighted. You know, the ILNF was a creation of the Commission. It was, I think, a recognition that the -- a previous program that was there was perhaps flawed, but was necessary. And we had seen a very dramatic contraction in the ad market, and -- in the early teens, 20-teens.
4328 And the ILNF created -- again, not dissimilar to what we’re talking about in terms of stability for the speciality channels, it creates a really stable base to base your year-to-year projections on in terms of what you can do in news production.
4329 So you know, in the case of CHCH News, we’re proud of the organization, acknowledging that we receive substantial support from ILNF. But we’re able to use that money to create not only the 25 hours, which is a quantitative measure, but I think, more importantly, is the qualitative measure of that news, where in the Toronto-Hamilton extended market, which is the market we operate in, CH’s six o’clock news regularly finishes second in the marketplace.
4330 We can’t beat CTV yet. We’re working on it. But we finish ahead of the CP 24s, which are considered part of the competitive major, well ahead of Global, and far ahead of CityTV News.
4331 So the ILNF gives us that stable base on which to plan, to commit to resources beyond what an independent broadcaster would otherwise be able to do.
4332 If we could just expand, take it a little off topic from what we practice, I’d like to extend that for other ILNF recipients as well. Again, you’re going to hear from Jeff Thiessen from Miracle Channel later. But in other markets it is even more crucial to be able to just contribute, to be able to manage to create news for communities that would otherwise not be able to receive news. And you heard Unifor talk about Red Deer. In our case, we create news, but we wouldn’t be able to do it as well, or as much of it.
4333 COMMISSIONER DESMOND: So I thought I heard you say earlier this morning that you supported the Unifor submission. And I know you spoke to two pieces of additional funds, the tangible benefits potential bigger pot of funds, plus the Corus monies. Is it your view that both of those remedies should be considered by the Commission?
4334 MR, MILLAR: Oh, I’m not going to make too many friends or influence people with this one, but I do. I really do. I think that in the size and scope of this transaction, $26B -- you know, if this was a broadcasting acquisition, we’d be talking about $2.6B in tangible benefits.
4335 I think that Rogers should be required to contribute more because the -- on the first level, they’re not showing any net increase or unequivocal tangible benefit to the system by simply transferring dollars from Global to City.
4336 This is a funny position for me because I’m busy defending all my competitors, and even Unifor. It’s not my usual tact. But the truth is that would be -- you know, requiring…
4337 is reviewed, is a reasonable expectation and it avoids Rogers to simply continue to pay the money to CORUS for the Global stations until such time as the entire system is reviewed, is a reasonable expectation and it avoids the unintended consequences we have been requesting -- the guardrails, the safeguards we have been asking for. We just don't want to be their synergies. We don’t want to be road kill.
4338 So that is a starting point.
4339 In terms of whether there was more money for the system, again, it’s personal, it’s corporate, and it’s on behalf of the other groups that I’m kind of here representing as well.
4340 We think that was a cute sleight of hand. As a company you are always entitled to push for what you think you're going to get. Peter alluded to this tactic and strategies, as you come into a hearing or a business negotiation.
4341 I think it is smart of Rogers to suggest that they don’t need those licences so they shan’t consider them part of the transaction, but they get all the benefit of it. And so if you are acquiring a business and you say, “Well, just shut down that.” Unifor’s analogy was good. Just shut down the coffee shop next door and all the customers who are still going to need a coffee in the area, they are still going to come to you.
4342 All of their new subscribers are still going to -- the ones that watch pay per view, the ones that watch video on demand through the licence -- and those were transactional interactions. They are all going to be using the Rogers licence. So it’s not a reasonable suggestion to say that they should have to pay tangible benefits on the gain of the business. They are simply playing the card that it -- while not acquiring licence.
4343 I’m going to be in trouble for that one.
4344 COMMISSIONER DESMOND: Okay. If I can just look at my notes for a moment, I think I have covered all of my questions, but if I could just have one moment, Mr. Chair.
4345 THE CHAIRPERSON: Actually, while Commissioner Desmond is doing that, perhaps Commissioner Anderson, you had a question? Maybe just to interject now. Thank you.
4346 COMMISSIONER ANDERSON: Thank you.
4347 Thanks again for your submission and thank you for your submission. It was really interesting.
4348 The theme of IBG’s submissions really was that they don’t want independents to be worse off than they are now; is that right?
4349 I see you're nodding. In the interest of time I’m just going to confirm that for the record.
4350 Does this proposed consolidation leaving competing BDUs worse off than they currently are or in a less desirable position? And if so, what does this mean for independents such as yourself?
4351 MR. MILLAR: Okay. I’m only going to lead off on this one.
4352 It’s difficult because I do think that this level of consolidation is unprecedented. And as a result, it leaves other BDUs -- I don’t think Bell will find itself in this scenario; they are a large enough entity. But you have heard submissions from Cogeco and Telus.
4353 So I’m not qualified to comment anymore on their business or it’s needs. But you know, the follow through on that is how does it affect broadcasters writ large in independent broadcasters specifically. I think it does because the Rogers nation scope ability to compete both with media and wireless and the backbone across the country, will allow them, to compete much more vigorously and so in certain markets that pressure -- I would liken it that -- perhaps the best analogy would be -- and again, it kind of picks on Rogers and I don’t mean it to.
4354 But when Rogers was frustrated in terms of trying to take over Aurora Cable they just moved into the -- I live in Aurora. They moved into the area, put banners up and said, “We’re coming.” And that was to apply pressure to the then-owners of Aurora Cable to sell the system.
4355 Those are the kinds of tings that while they may not be offside from a regulatory standpoint, they are absolutely the result of the size of the combined entity. They will be able to do things to those. And I think the trickle down then nis if our other BDU partners other than Rogers and its new acquisition Shaw are able to compete more aggressively with them, often the benefits of that competition don’t flow out to consumer in terms of increased or decreased costs. They typically are squeezed out from independent broadcasters looking -- and so anybody up for renewal gets the start.
4356 If I could just quickly take -- I don’t know if it needs highlighted or not. But you know, one of the biggest frustrations that grew out of the Wholesale Code was an accidental loophole that was created which -- and the rational for it kind of made sense.
4357 But this accidental loophole is that the language says, “If the parties are negotiating there will be a standstill.” There will be the right to avail yourselves of dispute resolution. It didn’t take long for some parties -- maybe it was the large VI broadcasters; maybe it was the BDUs. But they figured out the loophole which is that independent broadcasters, as they come close to the end of their term, almost always get a nice letter that says, “We want to inform you that as of X date,” a month or two in the future, “your services will be dropped or your service will be dropped. Have a nice day. If you want to call us, please feel free.”
4358 Check the box. They have accomplished -- they got through the loophole, and we are ion a position where we can’t avail ourselves. The question has come up numerous times of why haven’t you gone to the -- brought it to dispute resolution? Why haven’t you?
4359 Others have talked about the poor outcomes. I just want to talk about the fact that we have been told we can’t because they used the loophole and they said, “Hey, we’re not negotiating. Good luck. We’ll see you later.”
4360 And I don’t know if that took you far down the rabbit hole, but sorry, Commissioner Anderson, but I just wanted to get that on the record.
4361 MR. MILLER: Can I add to that?
4362 THE CHAIRPERSON: If it’s staying on the code -- well, let’s return to Commission Desmond with her questions, if we could.
4363 COMMISSIONER DESMOND: Thank you. And I have looked at my notes and I think I have covered everything. So thank you so much.
4364 THE CHAIRPERSON: Okay, sorry. Please go ahead, Peter. You wanted to add something on that?
4365 MR. MILLER: Yeah, because I am reading into that question, should we be denying this transaction outright? Because you have heard concerns from a lot of parties. And I would say there are two ways of looking at it.
4366 First of all, is your concern on a matter of principle -- i.e., is this on principle too much consolidation? Or is your concern, has Rogers not put enough on the table to satisfy you that it is going to constitute a significant and unequivocal benefit?
4367 We, as you know, are on that side. We don’t oppose it in principle. You have parties that do. We don’t oppose it on principle. It’s a matter of safeguards.
4368 You will hear in some of our language and some of the language of other independents is that we do sometime talk about independents writ large, whether you are an independent programmer or an independent BDU or an independent producer. You are always going to have similar issues of being a small player negotiating up a larger player.
4369 It was interesting, for example, to listen to Cogeco and how they talked about their difficulty with VIs. And sometimes the language may been hard to discern but what I think Cogeco was talking about was not their difficulty negotiating with us, the independents. They were talking about their difficulty in negotiating with the VIs and how the VIs always come in and say, “No, we’re not going to accept the rate reduction. It’s the same rate.”
4370 And that is their challenge, and as I think WildBrain said yesterday, all of a sudden you, a smaller independent, you become the way that a smaller independent BDU looks for synergies.
4371 So where there seems to be a commonality, if I will, between most of the independent BDUs and the independent broadcasters, and I would submit, the independent producers -- none of us are asking you to not approve this deal on principle, as far as I can tell. All of us are saying, however, as structured the deal doesn't meet the standard and as some of us have referred to, you've got the precedent of Astral and Bell where you denied it the first time because you felt they hadn’t come to the table enough.
4372 And then they came back and you decided they had come to the table enough and you approved it.
4373 So that’s all open to you.
4374 On the specific comments from the parties that oppose the deal -- I mean, the only thing I can say on that is we are effectively a duopoly, market by market in telecommunications and television distribution, terrestrially. We know that. That’s the way the system operates. There is resellers on the facilities basis. On a facilities basis we are effectively a duopoly, in the wireline facilities market for broadcast distribution and telecommunications.
4375 And there are exceptions to that. But that’s largely what it is. And you've got two of Canada’s biggest cable companies coming together to take 50 percent of the market. That may -- I doubt that’s the end of it. I mean, there is going to be more acquisitions because scale does help if it's directed in the right way. And all I would say about Bell and Telus is, you know, it would not surprise you, I'm sure, if some merger acquisition -- some merger application or some merger occurred at some point there.
4376 That’s what companies do. And what we, as a matter of policy have to decide is can we recognize the values of that national consolidation which simply mirrors the reality of the duopoly we have in facilities and put in place the safeguards that make sure than when those entities deal with independents, be it on a programming basis or any other basis, it can be a reasonable negotiation.
4377 And it's non-trivial, but I think that’s -- if it's helpful, that’s kind of one way of looking at it.
4378 COMMISSIONER ANDERSON: Yeah. Thank you for the complete answer to my question.
4379 I have one last question, and it's with respect to the submissions that you made with regard to Canadian apps. And as you may have heard on Monday, Rogers had committed to working with independents to develop apps at a cost to the independents if there is a fee to a third-party developer.
4380 Do you have any comments on that commitment? Could it be improved or changed, or is it -- well, yeah, how do you perceive that commitment?
4381 MR. MILLAR: Okay. Thanks for the question.
4382 It's hard not to take advantage of an opening, and we saw it as well, which is that, you know, on the one side, to be fair, you know, we incur costs as a business to operate. There are costs in everything. We incur costs of software development, and we have their apps that we develop, and so forth.
4383 However, if, as an additional contribution in support or in safeguards from Rogers as part of this transaction, Rogers may be listening, they may want to offer up. In fact, they could, in fact, put a fund together for the development of apps on the Ignite system, on the Comcast Xfinity system.
4384 That would not be unhelpful. It would be not unwelcome in any stretch.
4385 Chris, do you want to comment on that?
4386 MR. FUOCO: No, I think that we -- I talked earlier about it's -- you know, we understand that developing these is on the content holder to make that investment. And as a smaller player, those are more challenging, so we're going to be innovative, as far as how we do it.
4387 But once it's developed, discoverability, searchability, all of those aspects are critical. You can build the app, and we have heard from other members in the IBG who have built apps and they can't get them turned on, I guess, so to speak, within the Ignite platform, or once it is, it's maybe on the first page that you see when you hit "search", but what happens when that app environment gets flooded with dozens of apps, many of which come in?
4388 If you relegate it to the third or fourth page, you're not found. We don’t know what the controls that drive that search functionality are. Those are areas where more substantive comment, commitments, et cetera, maybe those are areas of control that the platform operator can -- Rogers, in this case -- can assist us with.
4389 COMMISSIONER ANDERSON: And then my next question was on discoverability of Canadian apps. And so do you have any comments or suggestions, if Rogers was agreeable to your one-to-one Canadian app to foreign app suggestion or commitment, do you have any further suggestions on ensuring that the Canadian apps remain discoverable?
4390 MR. MILLAR: I'll take a shot at that first.
4391 One of the things, to extrapolate a little bit -- Google, now Alphabet makes an awful lot of money every -- on paid search. And one of the things that Rogers could, in fact, commit to is not having a form of Paint search for discoverability because for instance, most consumers I know use sort of a Stingray versus -- I'm sorry, I just lost the name -- is it Excite, the American provider?
4392 You know, if somebody says, "Just play me a Taylor Swift song," or something from Red, if they don’t specify the player and they just specify the content, which is often which is often how voice-driven search works, or even typed search works, if there's an imbalance between how the algorithm selects what to prop up, the player will be different, and so the access will be different.
4393 ` So for instance, if somebody says just, "Show me the news," well, maybe they should have been a little more specific about what kind of news they wanted.
4394 But the algorithm, if it is manipulated to show the news from CNN first, it will be CNN news that comes up first.
4395 So I think that there may be something around the commitment both to the one-to-one, but also to not using a manipulation such as paid search.
4396 COMMISSIONER ANDERSON: Thank you. Those are all my questions.
4397 THE CHAIRPERSON? Thank you.
4398 Commissioner Lafontaine?
4399 COMMISSIONER LAFONTAINE: Thank you, Mr. Chair.
4400 And thank you for your presentation today.
4401 I also have two questions for you, and I'll ask that you try to answer them as succinctly as possible, because we are a little bit short on time, but I would like to ask these questions.
4402 The first one, during your submission today, you indicated that -- you know, you talked about the history, but that we are now in an environment where the bottom line is so important.
4403 And I'm wondering if you could just speak to how it is that not carrying an independent service or dropping an independent service would be helpful to a BDU's or Rogers' bottom line?
4404 MR. MILLAR: Succinctness is not my strong suit, so I'll do my best, Commissioner Lafontaine.
4405 The -- which is a very direct line between not carrying an independent and increasing margin, and that is that consumers often deal with -- when you're subscribers, that you deal with what's in front of you. You know that the X number of channels are there.
4406 And it's very easy for a BDU to say, "It doesn’t matter what your ratings are."
4407 Remember, we can't see the set top box. Often, we're presented with information that says these set top box datas, your ratings aren't good.
4408 We have publicly available information that says differently.
4409 And so you make it the scenario that we're going to drop you. In isolation, there will be customers that are upset about that and will miss it, and may even take out the flag and fight for it.
4410 But at the end of the day, it's very difficult for them to make a difference. So it's kind of low-hanging fruit. They know they can't turn to -- in the case of Rogers -- they can't turn to Bell and say, "We're removing some of your services," because there's a tit-for-tat. There's an equal market strength. We're just the easy targets.
4411 So when we ask for safeguards, we just say, "Don’t let them do that as a starting point."
4412 COMMISSIONER LAFONTAINE: Thank you. And my next question is the following. It relates to the language that you're proposing in terms of the carriage rule for independent services after the closing, should it be approved, this language of that independent services not end up less favourably than before in a situation that’s less favourable than before.
4413 How is this consistent with the Let's Talk TV policy and the surveying consumers and allowing consumers to have choice within the system?
4414 MR. MILLER: That is a very good question.
4415 I would argue it's not inconsistent in that again, this transaction is to be examined on its own merits. It's case-by-case. We're not asking for a change of policy, we're asking for an additional safeguard put on, placed on Rogers, given its increased market size.
4416 So I would submit that that debate may be won if you have a policy proceeding at some point to revisit the rules, but I just don’t think that’s a fair argument. Policy evolves.
4417 I mean, I'll give you another analogy. You have a tangible benefits package in front of you that adheres to the way the Commission outlined acceptable beneficiaries seven, eight years ago.
4418 Since that, you had a proceeding on local news where you identified local news as a policy priority.
4419 It would have been fair and reasonable for Rogers to put benefits towards news, but that wasn’t what was in the benefits policy that they went back to, so I think they decided not to, because they wanted to be consistent with the letter of the law.
4420 Policy evolves. This is a transaction. You have to look at this transaction consistent with policy, but also looking at -- unequivocal at benefits.
4421 But if I can just close with this one other thing.
4422 Oh, you want to go first? You go.
4423 MR. MILLAR: If I could just add? I'll keep it short.
4424 Commissioner, you made the point that is it inconsistent with consumer choice? I don't think that consumers are the ones that are choosing when a BDU decides to remove an independent service. Most often, it's the BDU that’s making that decision.
4425 If they were always making it with the cleanest of hands, and based on entirely publicly available information on ratings and otherwise the net would be different.
4426 But as an example, our Silver Screen Classics, whenever it’s in free preview it gets very large ratings. That suggests that people enjoy watching it but they’re not necessarily moved to pick up the phone and argue with Rogers. They don’t need a new cell package just to add Silver Screen Classics to their packaging.
4427 So I think that I would draw a distinction between BDU choice and consumer choice.
4428 MR. MILLER: And finally, I think one of those of us that represent commercial plants, one of the essential things -- and Mr. Chair, you and your colleagues would know this -- is you do have to have some commercial certainty. A party has a right to know that when come before you it is in accordance with stuff that they are aware of.
4429 We don’t believe anything we are suggesting is inconsistent with what would be a reasonable regulatory outcome. It is well within the range of reasonable outcomes and again, to repeat, well within the cost to Rogers of their breakout fee.
4430 Can I just end with this one comment?
4431 Long ago when I started in this business I remember someone saying that Canadian broadcasting is an act of political will. I have always liked that statement because it is so true and that political will ahs been severely lacking in the last 10 years at every level.
4432 We talked about the IBG panel, the foreshadowing we had coming in. Everyone I have e spoken to has taken heart from this hearing and your insight and your questioning. So our request of you is to make this decision a significant mark in turning around our system so that with this decision in 2022 and hopefully a successor to C-10 we will look back on this as the year when we got back control of the Canadian Broadcasting System.
4433 Thank you.
4434 COMMISSIONER LAFONTAINE: Thank you very much for responding to my questions.
4435 Thank you, Mr. Chair.
4436 THE CHAIRPERSON: Thank you. Thank you very much for your submissions in the proceeding, for your presence today and your fulsome responses to our questions.
4437 Thank you.
4438 Madam Secretary?
4439 THE SECRETARY: Thank you. We will now connect to CMPA. Mr. Mastin, can you hear me well?
4440 MR. MASTIN: I can, yes.
4441 THE SECRETARY: Thank you.
4442 So we will now hear the presentation of Canadian Media Producers Association. Please introduce yourself and your colleagues. And you will have 15 minutes for your presentation. Thank you.
4443 MR. MASTIN: Thank you. And good morning, Chairperson Scott, Commissioners, and Commission staff.
4444 My name is Reynolds Mastin and I am the President and CEO of the Canadian Media Producers Association.
4445 I am joined by Marcia Douglas, Senior Director, Business Affairs and Erin Finlay, of Stohn Hay Cafazzo Dembroski Richmond LLP.
4446 The CMPA is the national trade association for English-language independent producers. We represent more than 560 companies engaged in the development, production, and distribution of content made for television, film, and digital platforms.
4447 We thank the Commission for the opportunity to appear before you today.
4448 The CMPA is here because the applicant has not demonstrated that this transaction is in the public interest. The Applicant bears the burden here; it must establish that its proposed benefits are commensurate with the size and nature of the transaction, and that its application represents the best possible approach in the circumstances. The Applicant has not met this onus. It can and must do better.
4449 In our submission, first, the tangible benefits package must be increased to a level that is commensurate with the value of this transaction and that helps to preserve the diversity of voices in our system.
4450 Second, the Applicant must provide a stronger, ongoing commitment to the Shaw Rocket Fund and The Rogers Funds.
4451 And third, the Commission ought to apply competitive safeguards that preserve meaningful independence and diversity of voices in the Canadian broadcasting system.
4452 This is a $26 billion transaction.
4453 The annual incremental value to shareholders of the combined companies is reported to be $1 billion.
4454 The Applicant proposes that the public will receive $5.746 million in tangible benefits, in total, roughly one half of one percent of the annual shareholder value.
4455 To be crystal clear, under the Applicant’s proposal, shareholders will receive an increased value of $1 billion each year. And the public will only receive a couple of hours’ worth of new television programs once.
4456 Tangible and intangible benefits help ensure that a change of ownership not only serves the private economic interests of the transacting parties and their shareholders, but also that the transaction serves the broader public interest. We know very well how the Applicant’s shareholders will benefit, but fail to see how this transaction serves the public.
4457 The Applicant identifies a number of purported intangible benefits arising from this transaction. But as several intervenors have pointed out, few if any of these are incremental benefits to the broadcasting system resulting from the transaction.
4458 To compensate for the lack of intangible benefits, the Commission should require, as it did in approving the acquisition of Astral Media by BCE Inc., that the applicant provide a higher tangible benefits package.
4459 Tangible benefits advance Canada’s cultural and social broadcast policy objectives by funding the creation of new Canadian programming and supporting related educational and civil society initiatives. These benefits are quantifiable, measurable, and subject to annual reporting to the Commission.
4460 The Tangible Benefits Policy and Broadcasting Notice of Consultation state that “generally” the Applicant must commit tangible benefits that represent a minimum of 10 percent of the value of the broadcasting assets in the transaction, excluding BDUs. In addition, the policy expressly states that the Commission may choose to exercise its discretion where called for to meet the public interest. This discretion is necessarily wide, so as to enable the Commission to ensure that its determinations expressly take into account the specific facts, circumstances, and impacts of any given transaction.
4461 Ultimately, the onus is on the applicant to demonstrate that the proposed benefits are commensurate with the size and nature of the transaction and that the tangible benefits will yield measurable improvements to the broadcasting system as a whole.
4462 It is impossible for the Applicant to take the position that its proposed $5.746 million tangible benefits package is commensurate with a $26 billion merger and $1 billion in annual shareholder gains. Moreover, this inconsequential contribution will not yield any measurable improvements to the Canadian broadcasting system as a whole.
4463 Given the size, scale and impact of this transaction, the Commission should ensure that the Applicant commits to a tangible benefits package that is proportionate to the size and nature of the transaction and clearly and unequivocally benefits Canadians and their broadcasting system. As an illustrative example, the $100 million package mentioned by PIAC on Tuesday, would still only represent less than four-tenths of one percent of the total value of the transaction, quite literally a rounding error.
4464 The Applicant can, and must, do better as the Policy requires.
4465 Contrary to the claims of the Applicant, we are not asking for a “fundamental change to the Policy in the middle of a proceeding” nor are we asking the Commission to deviate from the Policy.
4466 What we are asking is that the Applicant meet its onus by putting forward a tangible benefits package that yields measurable improvements to the Canadian broadcasting system as a whole and by establishing that its transaction is in the public interest.
4467 I will now turn to Erin Finlay, who will address diversity of voices.
4468 MS. FINLAY: As with the Tangible Benefits Policy, we submit that the application does not comply with the Diversity of Voices Policy.
4469 The Diversity of Voices Policy states that, in assessing an application for a change of effective control of BDUs, the Commission will not generally allow one person to control all BDUs in any given market. The Applicant claims to meet that requirement.
4470 But the Policy also states that, in analyzing such a transaction, the Commission will be primarily concerned with preserving the diversity of programming voices in a market. The Policy goes on to say that “diversity of programming can mean several things, such as the expression of Canadian voices amidst foreign ones, the availability of different genres and formats, or the airing of content made by a variety of producers, including independent producers.”
4471 The Commission also considers the extent to which a transaction for a change in effective control could change the negotiating power of BDUs as compared to programming service providers. Market dominance raises not just economic issues like the potential for anti-competitive behaviour -- as you heard from the independent broadcasters through IBG and independent BDUs through CCSA earlier this week. But also social and cultural issues such as the impact on diversity of programming.
4472 The main vehicle through which we achieve a diversity of voices in our system is through the creation of Canadian programming.
4473 From encouraging the development of Canadian expression to reflecting a multicultural and multiethnic nature of Canadian society and the special place of Indigenous peoples to providing educational and community programs to exposing differing views on matters of public concern, Canadian programming provides an important outlet for Canadian expression and talent, and an unparalleled reflection of Canadian attitudes, opinions, ideas, values and artistic creativity.
4474 Any discussion of diversity of voices must consider not only different genres and formats, but also the full diversity of producers, creators and audiences across Canada including equity and sovereignty-seeking communities, such as Indigenous, black and racialized peoples, persons with disabilities and people across spectrums of sex, gender and sexuality.
4475 In answer to the diversity of voices concerns raised by intervenors in this proceeding, the applicant makes some motherhood statements about data and app developments and offers to assist independent programming undertakings by guaranteeing carriage for a specific period of time with certain conditions. We leave it to the independent programming undertakings to determine whether this offer is sufficient for their purposes. But for our purposes, and the public more broadly, that offer does not remotely address the policy’s aim of preserving diversity of programming for Canadian audiences, and it doesn’t come anywhere close to addressing the full diversity of this country.
4476 Marcia will speak to the specific challenges faced in kids and documentary programming in a moment, but for now, I’ll just say this. A higher quantum of tangible benefits that generates more than a couple of hours of Canadian television, content which would undoubtedly be produced by a variety of independent producers in different genres and formats that reflects who we truly are as a country, would go a long way to preserving the diversity of voices in our system. The applicant can and must do better.
4477 While the applicant claims that size and scale are necessary to compete with foreign over-the-top services, there is also a real risk that the proposed level of market power may both reduce the diversity of voices in our system and result in anti-competitive behaviour. We submit that the Commission needs to fiercely guard against those threats by strengthening and enforcing safeguards that preserve the important role that independents serve in the system.
4478 I will now turn to Marcia Douglas to address safeguards and the applicant’s contributions to the production funds.
4479 MS. DOUGLAS: If this transaction is approved, there is no question that the applicant will hold significant market and bargaining power in Canada, an already heavily consolidated market. Rogers will hold 37.4 per cent of BDU revenues, 35.5 per cent of BDU subscribers, which is 47 per cent of English-language BDU subscribers in Canada.
4480 You have heard this week from programming service providers about how this transaction may impact their negotiations with the applicant. Broadly speaking, independent producers have similar concerns about increasing market consolidation that this transaction represents.
4481 The Commission indicates in the Notice of Consultation that it will consider current and additional safeguards that restrict potential anti-competitive behaviour. It also notes that it will consider remedial actions that could be taken in case of noncompliance.
4482 Requiring independence in our broadcasting system is an important safeguard that will help to counter potentially anti-competitive behaviour. Independent BDUs, independent broadcasters and independent producers guarantee that not all programming is created and controlled by those who carry it. But to be effective, independence must be meaningful, and safeguards enforced.
4483 Meaningful independence limits self-dealing and monopolistic or oligopolistic power, and by doing so helps to ensure competition in the market. It guarantees consumers have a choice. It also promises that at least some programs are produced by entities that are different than the channels that broadcast them and the BDUs that carry them. Meaningful independence helps to both balance out the market power of excessively dominant players and ensure that the system overall exhibits a diversity of voices.
4484 As you have heard earlier in this proceeding new or improved safeguards must be put in place. The application and enforcement of the Wholesale Code has largely failed to protect independent stakeholders against overwhelming market dominance. To remedy this failure, the Wholesale Code must be strengthened, applied and enforced. In our submission, the applicant must do better by agreeing to robust competitive safeguards that preserve independence and diversity of voices in the Canadian broadcasting system.
4485 Turning now to the certified independent production funds. Documentary and children’s programming are fundamentally important genres that serve Canadian audiences. Documentaries provide in-depth and informative perspectives, illuminate a diversity of points of view, shine a spotlight on abuses of power that may otherwise remain hidden and serve as critical tools for education, dialogue, social awareness and action. Children’s programming plays a variety of key roles in strengthening our society, including helping young audiences to learn, develop socio-emotional skills, see themselves reflected on screen and become future citizens.
4486 We have seen a sharp decline in the production of programming in these genres over the last few years. As an example, in 2019/20 the volume of Canadian children’s and youth programming declined by 29.5 per cent and documentary programming declined by 26.8 per cent. Kids and documentary programming are vastly underserved by our system.
4487 The Shaw Rocket Fund and Rogers Documentary Fund have been, and continue to be, valued partners for independent producers in making programs in these genres. But these funds and these genres of programming need ongoing, dedicated support.
4488 The applicant proposes to continue making contributions to these funds but is vague on its level and length of ongoing commitment. We understand that the applicant provided an undertaking to give some clarity here. The CMPA remains concerned that, without firmer commitments today, the applicant could redirect its funding, change a fund’s mandate or shutter it altogether once the transaction closes. In our view, any of those possibilities could be the final death knell for already precarious programming.
4489 The applicant can and must do better by making a firm commitment to continue supporting these important genres of underrepresented programming for a minimum period of time.
4490 Finally, and perhaps it goes without saying, but an increase to the quantum of tangible benefits will also increase the amount of money flowing to these important certified independent production funds and genres of programming.
4491 MR. MASTIN: For all these reasons we are asking the Commission to ensure that the applicant’s proposal represents the best possible approach in the circumstances by: first, increasing the tangible benefits package to a level that is commensurate to the size and nature of this transaction, that helps to preserve the diversity of voices in our system and that yields measurable improvements to the broadcasting system as a whole; second, requiring the applicant to commit to ongoing support for kids and youth and documentary programming through the Shaw Rocket Fund and The Rogers Funds; and finally, by imposing robust competitive safeguards that preserve independence and diversity of voices in the Canadian broadcasting system.
4492 Thank you for giving us the opportunity to present our members’ views today. We welcome your questions.
4493 THE CHAIRPERSON: Thank you very much for your presentation. Pardon me, I will turn it to Commissioner Anderson.
4494 COMMISSIONER ANDERSON: Thank you very much for your submissions and thank you for your presentation. Both were very informative and we’re grateful to have it on the record -- your contribution added to the record.
4495 You focused a lot of your presentation on tangible benefits, and you started to touch upon shareholder value of the transaction. So, can I ask you a bit about whether or not you’re satisfied with the value of the transaction as proposed by Rogers, which is ultimately -- or approximately $57 million. Do you think that that is an adequate representation of the value of the transaction as a whole?
4496 MR. MASTIN: Thank you for the question, Commissioner Anderson, and in our view, it is not. In fact, given the, we’ll call it the unique, perhaps even unprecedented, size, scale and impact of this transaction, we are of the view that the Commission must exercise its discretion; a discretion that it expressly reserves to itself in the tangible benefits policy to ensure that the tangible benefits package that, if it is approved, that ultimately is approved, is one that is significant, unequivocal and yields measurable improvements to the community served and the Canadian broadcasting system as a whole. The current valuation and the proposed tangible benefits package that has been proposed by the applicant gets nowhere near that standard.
4497 COMMISSIONER ANDERSON: And I understand how you propose to increase tangible benefits through the Tangible Benefit Policy, but in terms of the value of the transaction overall, if I could just one more time ask you to specify your views on the value of the transaction and not incorporate the Tangible Benefits Policy, per se.
4498 MR. MASTIN: Apologies, Commission Anderson, my broadband suddenly has become unstable. Can you hear me?
4499 COMMISSIONER ANDERSON: Yes. So -- hi.
4500 MR. MASTIN: Hi.
4501 COMMISSIONER ANDERSON: My question was really -- I do propose to discuss the Tangible Benefits Policy, the interpretation and application of it. But with respect to the value of the transaction, do you suggest that we appraise the value of the transaction differently than as proposed by Rogers? And if so, I would ask for you to specify what the appropriate value of the transaction ought to be, or ask you to provide an undertaking to provide that response about value of the transaction at a later date.
4502 MR. MASTIN: Commissioner, given the unique size, scale, and complexity of the transaction, we’re of the view that the Commission, as the expert tribunal, is best placed to weigh the various factors in evidence that are at play in this proceeding, and arrive an appropriate number.
4503 That having been said, we would like to offer what we regard as key parts of the factual matrix, and considering the appropriate tangible benefits package and key elements that the Commission should consider.
4504 So first among those is the size and scale of this transaction. One of the challenges I will say that I faced in preparing for this hearing with my team -- and maybe this is because I got a mercy pass in Grade 12 Math -- some of these numbers are very, very big. And so what I asked our team to do to put this in a more real-world context, was to remove some of the zeros, because we believe that that actually helps in analysis of the Applicant’s proposal.
4505 So let’s take the scenario where the Applicant was acquiring these assets for $2,600. According to the Applicant’s proposal, in exchange for the private benefit that will accrue from tat purchase, it is proposing a tangible benefits package valued at 58 cents. Now, we don’t even have pennies anymore, so I will round up to 60 cents, to the benefit of the Applicant.
4506 In our view, prima facie, even before the Commission undertakes further analysis, it becomes clear that what the Applicant has proposed is inadequate as a tangible benefits package.
4507 Other factors that we would encourage the Commission to consider are the impact on the Canadian Broadcasting System, including reduced competition and the risk to diversity of voices.
4508 Another is the proposed intangible benefits package that the Applicant has put forward. Many intervenors, far more expert in some of the elements of that package than we are, have indicated that those intangible benefits are more ephemeral that intangible, and largely relate to initiatives that the two companies are already undertaking or would undertake were this transaction not to be approved.
4509 Accordingly, as we said in our opening remarks, given the lack of real and tangible benefits, as proposed by the Applicant, one way the Commission or the Applicant could balance that out is through a much more meaningful tangible benefits package.
4510 Finally, the Commission could also look at past precedents, past decisions, past approvals of previous transactions for guidance. Just to take one example, BCE’s acquisition of Astral, the previous intervenor referenced this transaction. Now in that case, the Commission ultimately approved $175M tangible benefits package in relation to a transaction 6.5 times smaller than the value of the transaction that is being reviewed in this proceeding.
4511 So we’re of the view that while you’re best to weigh all of these factors in that evidence, that those are highly relevant to an assessment of what an appropriate tangible benefits package should like.
4512 COMMISSIONER ANDERSON: Thank you. And I was wondering if you have any vies on PIAC’s proposal to include the value of Shaw’s terrestrial video-on-demand and pay-per-view undertakings.
4513 MR. MASTIN: We found the review that PIAC and FRPC undertook to be very illuminating, and we believe that it demonstrated that even taking on its face the very narrow approach that the Applicant proposed for its tangible benefits package, it turns out it was even narrower than one thought on its face. And so yes, we consider that relevant evidence as well.
4514 COMMISSIONER ANDERSON: Thank you. So going back to the Tangible Benefits Policy itself, I understand the reasoning why you propose that Rogers should not provide the bare minimum as set out in the Tangible Benefits Policy. But do you have a number or a percentage that you propose would be more suitable than the minimum 10 percent as set in the Tangible Benefits Policy?
4515 MR. MASTIN: Commissioner Anderson, we’re of the view that the Commission is best placed to make that determination given the size, and scale, and complexity of this transaction. But we hope that the factors and key facts that we think are relevant to that assessment, that that is, we hope, helpful to you in making those determinations.
4516 COMMISSIONER ANDERSON: We thank you for your unqualified, then.
4517 Okay, I’m going to move on to Certified Independent Production Funds. And can you please provide us with your views on the roles that Certified Independent Production Funds play within the industry? Specifically, how do they support independent productions in Canada and, overall, what the proportion of production costs do they contribute or offset in a given year?
4518 MS. DOUGLAS: Thank you Commissioner Anderson. The Certified Independent Production Funds are really critical to independent producers. There a multitude of pieces that producers need to sort of cobble together or pull together when they’re trying to mount a production to develop, actually, and to finance the production of those programs.
4519 And the Certified Independent Funds, they are a small but mighty bunch that actually play a really pivotal role in the productions that they relate to.
4520 So not every genre is supported by a CMF, as an example. And so there are certain funds that support those genres that CMAC doesn’t support. And even within the funds themselves, and the funds that are sort of more the focus this particular discussion -- let’s talk about children’s and youth content, for example.
4521 So if you look at CMF’s Annual Report from last year, there’s a section that talks about children’s and youth programming over the last five years, and this is for English. So over the last five years, and average of 12 percent of its performance envelopes on the English side goes to children’s and youth programming. And to bear in mind, almost 77 percent of CMF’s funding is actually in those performance envelopes.
4522 And the way those performance envelopes work is that the CMF allocated those funds to different broadcasters and the broadcasters make decisions on where to allocate those funds by different programs. The CMF lays out sort of genre targets for those broadcasters. So broadcasters have a target of approximately 21 percent of their envelopes going -- sorry, 21 percent of CMF funding going to children’s and youth programming.
4523 But, as I said earlier, according to its annual report for the last five, only 12 percent of the funding actually goes to children’s and youth. So coming back to the Certified Independent Production Funds, that’s where you can really see how Shaw Rocket Fund plays such a critical, because it is the only fund in the system that is dedicated to children’s and youth.
4524 So what it does, and how it relates on those productions is very different, and it plays a much more significant role in terms of the percentages that it contributes. And those can really vary depending on those productions, what they are, where they’re going. Like, they serve a different role.
4525 The other thing about the CIPFs is that they offer kind of more flexibility, and they also tend to support different aspects of, let’s call it, the sort of development, and production, and packaging of projects, where again, Shaw Rocket Fund as an example, they fund development, they also do marketing and packaging. They do digital. That’s some of the changes since the CRTC changed its framework for the certified funds. And some of them really have taken on this different role that is really critical for independent producers in being able to develop these projects and serve Canadian audiences.
4526 And I would just add that, you know, those numbers are a good example of how kids are actually already quite underserved in the system, and that’s where the importance of these funds and where these tangible benefits are really needed to make sure that these genres and these audiences are well served.
4527 COMMISSIONER ANDERSON: Thank you. And thank you for speaking about why the youth and children’s programming ought to have special consideration. Do you believe -- and I’m going from memory here, and so I can’t pinpoint the reference, but I recall that you seemed to speak about ongoing contributions to support other underrepresented programming; is that right?
4528 MS. DOUGLAS: Yes, I think we specifically mentioned kids and documentary as examples of programming that’s underrepresented.
4529 COMMISSIONER ANDERSON: Was there any other types of underrepresented programming or would you be limiting your submissions to those two types?
4530 MS. DOUGLAS: I think at this point in time there’s certainly the opportunity for broader discussion, especially as we go into sort of broader discussions about this system at large in terms of programming that may be challenged. For the purposes of today, our main focus has been on children and documentary mostly relating to this proceeding and the particular funds that have been mentioned in the application.
4531 COMMISSIONER ANDERSON: Okay. All right, thank you.
4532 I’m going to go on to regulatory safeguards because we’ve been discussing with several intervenors whether or not the regulatory safeguards that are in place, such as the Wholesale Code, the 1:1 rule, dispute resolution mechanisms and the standstill rule, as well as undue preference, whether or not the framework is sufficient. And I was wondering if you had any views on the sufficiency of our regulatory framework.
4533 MS. DOUGLAS: I think in terms of some of the specifics that you mentioned, Commissioner Anderson, there are certain other intervenors who may be better positioned to speak to the specifics. But generally speaking, and specific, for example, to independent production, we certainly feel that there is the need for safeguards within the system to help ensure balance in terms of market dominance and market power.
4534 Even the last intervenor spoke about the challenges for independence in the system. And for us, those are two key things that independent producers, independent broadcasters, independent BDUs are vital, and they are important to a diversity of voices in the system, and that safeguards are really needed to help in balancing the relationships between large, dominant market players and these smaller players.
4535 Independence is important because it also helps to limit self-dealing and any potential monopolistic or oligopolistic powers, and to ensure that not all of the programming from the producer’s perspective, as an example, is concentrated or created and controlled by those who exhibit or those who deliver that power. So, certainly there is a need for safeguards for Codes of Conduct, things like the Wholesale Code.
4536 COMMISSIONER ANDERSON: Thank you very much, and I do appreciate your reference to both monopolies and oligopsonies. And just for Canadians that are watching this and just a very brief amount of time, can you please explain the latter category?
4537 MS. DOUGLAS: A monopoly or monopsony is when there is one either buyer or one dominant seller. And then oligopsony or an oligopoly is when there are a few buyers or a few sellers.
4538 COMMISSIONER ANDERSON: Thank you very much. Okay, going back to the regulatory standards then, can you please provide some specific examples of when our regulatory frame -- oh, sorry. Can you provide specific examples of your dealings with Rogers when the Wholesale Code or other regulatory mechanisms did not provide sufficient safeguards?
4539 MS. DOUGLAS: So, the Wholesale Code, I think, applies more directly to independent broadcasters and carriage. For independent producers, our dealings would be more about dealing with those broadcasters directly. We have an interest and a desire to see a diversity of voices, including a diversity of broadcasters in the system, but I don’t think we have a direct relationship in terms of the BDU carriage of independent broadcasters with regard to the Wholesale Code and producers.
4540 That said, there -- it is no secret that, on the media side, independent producers struggle in their bargaining with Rogers Media, as an example, due to its massive size and scale and its bargaining power with regard to different elements of the system; where independent producers, in dealing with these large-scale broadcasters, are really challenged in their dealings to have access to even the same information or, you know, in terms of being best positioned to make deals in a fair way.
4541 MR. MASTIN: Commissioner Anderson, can I just add one point just with respect to the Wholesale Code, which is while the application of the Wholesale Code, as Marcia was outlining, does not impact our members directly, it may impact them indirectly in the sense that if there aren’t robust safeguards in place and we see a further reduction in the number of independent programming services in the system, that means even fewer doors to knock on by our members to get their programming commissioned. So, there is the potential for a knock-on effect and an anti-competitive effect that would ultimately impact our members if it resulted in fewer independent programming services in the system.
4542 COMMISSIONER ANDERSON: Thank you. Thank you very much. I was wondering then, on that note, and I appreciate that you spoke about the indirect effects, on that note, do you have any comments to make about IBG’s proposal with respect to requesting that Rogers carry 50 independent discretionary services for five to seven years? Do you have any thoughts on that?
4543 MS. DOUGLAS: I think that we leave it to the Commission and in listening to the other intervenors, including IBG, to determine what may be appropriate, but we certainly, as Reynolds has just said, support a wealth of different broadcasters, including independent broadcasters, in the system.
4544 COMMISSIONER ANDERSON: Okay. All right, thank you. I am just going to review my notes very quickly. I think that you’ve answered all my questions in your comprehensive answers.
4545 THE CHAIRPERSON: Thank you. Commissioner Lafontaine, you had a question?
4546 COMMISSIONER LAFONTAINE: Yes, thank you, Mr. Chair, and thank you to the CMPA for their submission today. This is a question that I asked of Wild Brain yesterday. I’m not sure if you had an opportunity to hear that exchange, but it is our understanding that Rogers is contemplating pooling its CIPF monies going forward, and then dividing by two, their contribution to the Shaw Rocket Fund on the one hand, and then the Rogers Documentary and Cable Production Funds on the other, which would result in about $1.2 million moving from the Rocket Fund to the other two Rogers funds.
4547 Now, I appreciate that your submission today relates to the importance of children’s programming and documentary programming, but I was wondering if you could enlighten us at all on what it would mean if -- for the Shaw Rocket Fund to lose about $1.2 million a year, what kind of impact that would have on children’s programming and the creation of children’s programming in Canada for Canadians.
4548 MS. DOUGLAS: That’s a challenging question, Commissioner Lafontaine, because, as you’ve heard, we’re -- we remain concerned about these precarious types of programming, but we also accept, and I think in our intervention have supported, the application of the tangible benefits policy as it’s laid out that said that Rogers -- or, sorry, the applicant’s decision in terms of what that might mean. So, you know, I think that there -- that equally documentary and other types of content could be well served.
4549 I would also point out that I believe Rogers stated earlier on in the proceeding that one of its funds also potentially finds children’s and youth content. So potentially there could be an understanding or sort of a clarification from the Applicant in terms of how it may also serve children’s and youth programming through its group of funds.
4550 COMMISSIONER LAFONTAINE: Right. Thank you.
4551 Well, my question, however, is -- this is not in relation to the transfer benefits proposal. It’s in relation to the ongoing contributions to CIPC and that there may be potentially a reduction of 1.2 million from Shaw Rocket Fund and moved from there to the Rogers funds.
4552 And maybe you are comfortable with that and that may -- you might want to confirm that. But what I am trying to understand is what kind of impact that might have on the creation of children’s programming if there were 1.2 million shifting from the Shaw Rocket Fund to the Roges funds on a going-forward basis.
4553 MS. DOUGLAS: I can start by at least pointing out as we sort of outlined, the precarious nature of children and youth programming at this point in time in the industry, and the concern that we have about serving those audiences. And so certainly as you have outlined, even moving $1.2 million would have a direct impact on the amount of children’s programming that would be developed or produced in a given year.
4554 MR. MASTIN: Commissioner Lafontaine, if I may just add one additional point.
4555 We know that you are speaking to the ongoing BDU contributions. But from our perspective that issue that you're raising is inextricably linked with the tangible benefits package that is proposed by the Applicant and its inadequacy because one of the reasons why WildBrain would have been concerned -- and we’re all concerned about changes to the allocation, is because we’re not going to see, based on the proposal filed by the Applicant, meaningful incremental support for those genres or programming through those two funds.
4556 And even if you take, for example, the number that PIAC mentioned in its appearance before you of $100 million tangible benefits package, when you split that between the funds using the existing splits in the policy, that amounts to $16 million for each of those funds which then, if we also follow the policy and standard practice, is $16 million spread out over seven years which works out to $2.3 million annually for each of those funds which given how massively those audiences are already underserved in those two genres, and given the cost of production, even a $100 million tangible benefits package only gets us within the ballpark and not really of measurable improvements to the communities served and to the Canadian Broadcasting System as a whole.
4557 So from our perspective, the two issues are inextricably linked.
4558 MS. DOUGLAS: And lastly I think we understand that the Applicant will be providing an undertaking relative to this question, and so we look forward to seeing that as to help inform a further response from us.
4559 COMMISSIONER LAFONTAINE: Thank you very much.
4560 THE CHAIRPERSON: Thank you, Commissioner Lafontaine.
4561 Commissioner Desmond?
4562 COMMISSIONER DESMOND: Thank you. I just have a quick question.
4563 If I understand your submission correctly, I believe there was a recommendation that there be a condition of licence requiring the filing of annual reports. So I'm just wondering if you could speak to that very briefly, what that report would look like, what kind of information you would specifically look for in that kind of document.
4564 MS. FINLAY: I can speak to that. Thank you, Commissioner Desmond.
4565 You are right. We did support other interventions and other stakeholders in their request for more transparent reporting in terms of certainly the tangible benefits spent. And my understanding is that Rogers has agreed to that.
4566 As for the specifics and what the specific reporting might look like, I'm not sure we have more to say on it. We leave that to the Commission to decide what is appropriate.
4567 COMMISSIONER DESMOND: Okay. Thank you.
4568 THE CHAIRPERSON: Thank you.
4569 Then I would like to thank you for your participation today and your fulsome participation throughout our proceeding. And I will turn it to the hearing secretary. I believe that brings us to the lunch break.
4570 Madame la secrétaire?
4571 The secretary: Yes, thank you.
4572 We will now take a lunch break and we will be back at 2:15:
4573 Thank you.
--- Upon recessing at 1:14 p.m./
--- L'audience est suspendue à 13h14
--- Upon resuming at 2:18 p.m./
--- L'audience est reprise à 14h18
4574 THE CHAIRPERSON: Good afternoon. Bon apres-midi.
4575 Madame la secrétaire?
4576 THE SECRETARY: Thank you. We will now connect with Miracle Channel Association.
4577 Mr. Thiessen, can you hear me well?
4578 MR. THIESSEN: I can, thank you.
4579 THE SECRETARY: Yes. So we will now hear the presentation by Miracle Channel Association.
4580 Please introduce yourself and your colleagues, and you will have 15 minutes for your presentation. Thank you.
4581 MR. THIESSEN: Thank you.
4582 Good afternoon, Mr. Chair, Commissioners, and staff. Thank you for giving us the opportunity to appear today at this important hearing which has far-reaching implications for the future of the Canadian broadcasting sector.
4583 I am Jeff Thiessen, Vice President; and with me is David Craig, Director of Sales and Programming of the Miracle Channel Association, the licensee and operator of CJIL, an over-the-air TV station serving Lethbridge and Southern Alberta.
4584 We are carried extensively throughout Canada carried on Telus, Shaw Direct, Bell Satellite, and many BDUs.
4585 MCA also owns and operates a new discretionary service, Corco, which was launched in August of this year and is carried on Bell.
4586 Further, we operate an OTT platform we have called Corco Plus, a robust proprietary API app utilizing AWS technology, and it's available on Apple IOS, Roku, and Android, which we carry over 12,000 television programs and movies.
4587 Now, this proposed transaction, which as other respondents have observed, is fundamentally about communications and connectivity and only secondarily about broadcasting, and certainly, it has the potential to deliver many significant benefits to Canadians.
4588 Rolling out 5G, next-generation television services, and enabling access to broadband for many Canadians who don’t currently have it, they're all extraordinarily important and expensive initiatives, and Rogers and Shaw, they should be applauded for their vision and commitment to these priorities, as well, of course, the enormous contributions both companies have made to the Canadian communications and broadcasting system and to Canada over the past several decades.
4589 Consequently, it is with regret that MCA is here today to state that we cannot support the proposed transaction in its present form. We concur with the CMPA’s position that the application is not in the public interest because there are insufficient safeguards to counter the overwhelming market dominance and guard against potential anti-competitive behaviour.
4590 However, like so many other respondents, we believe that with the addition of appropriate safeguards, this proposed transaction could be a net positive for the Canadian broadcasting system. We sincerely hope that will be one of the outcomes of this hearing.
4591 We note that the transaction is driven in part by the intention to combine and accelerate the adoption of the Comcast X1 IPTV platform/Ignite TV technology. But the application asserts that Ignite TV’s advanced features and ease of access to both Canadian programming services and OTT offerings provide an enhanced value proposition that keeps customers within the Canadian broadcasting system.
4592 However, early indications are that the “enhanced value proposition” offering will be dominated by Canadian programming services owned by Rogers and other vertically integrated companies with free and low-cost foreign OTT services.
4593 In many cases these foreign services could crowd out or substitute for Canadian independent services, damaging existing services and preventing new ones from getting started.
4594 As IBG noted in their intervention, and I quote:
4595 "Without appropriate safeguards, independents and consumer choice within the broadcasting system will be collateral damage." (As read)
4596 And as the ECG and TLN intervention notes -- again, I quote:
4597 "A combined Rogers-Shaw would have the ability to control what programming services are available in every market in English Canada." (As read)
4598 We asked to appear today in part because, after almost 20 years of successive rounds of consolidation with limited safeguards, we are gravely concerned about the future prospects for independent services.
4599 The combined effect of ongoing deregulation and unbundling, open entry for a growing number of unregulated foreign OTT services facilitated by IPTV platforms, and the unconstrained market power of a merged Rogers-Shaw means that many independent services, even as we have newly been told by Rogers they would commit to 40 channels for three years, giving some short-term guarantees of carriage, may face insurmountable challenges to their continued operation.
4600 In our view the rollout of foreign OTT through the Comcast Xfinity/Ignite TV platform endangers independent services and works directly against the Broadcasting Act objectives of putting Canadians and Canadian content at the centre of the system so as to encourage, nurture, and promote Canadian talent.
4601 We see some of the instructive parallels with the situation in the 1980s and 1990s, when specialty cable services were rapidly lighting up in the US. It probably would have been easy and profitable for the BDUs to simply make these services widely available in Canada, but that would have done nothing to advance the objectives of the Broadcast Act.
4602 So instead, the CRTC licensed Canadian services, many of which were birthed by Canadian independent producers, to occupy many of the same genres but with Canadian content and creatives at the centre of these services.
4603 And as other respondents have noted, Rogers and other BDUs welcomed and supported these services and made it possible for them to grow and flourish and make enormous contributions to the country.
4604 Looking forward, as IPTV over time becomes the dominant mode of delivery, it will be easy for BDUs, especially a combined Rogers/Shaw, to increase consumer choice through the rapidly growing array of foreign apps and OTT services, many of which are already present on the Comcast Xfinity platform.
4605 These unregulated services will likely deliver fatter profit margins to the BDUs, but will do little or nothing to reflect Canada to Canadians or ensure a diversity of voices or opportunity for Canadian creative expression.
4606 The IBG intervention sets out a series of proposed safeguards for independent services in their Appendix C, which we fully support and believe they are reasonable, proportional, and not unduly burdensome.
4607 For our part we would underline that it is not only existing independent services that are in jeopardy, but also new services that are trying to launch or may want to launch in the future. We are deeply concerned that the innovations and entrepreneurial energy of potential new services could be thwarted by access -- by denial to access before they can even gain a foothold.
4608 To continue to meet the objectives of the Broadcasting Act, there needs to be a reasonable potential for new independent Canadian services, which offer unique and popular programming, and which have evidence of some market demand and interest, to be made available to Canadians. If one entity completely controls whether or not a service can viably launch, then in our view, there need to be some safeguards.
4609 Now, IBG has suggested, in Appendix C(5)(b) of their intervention that Rogers/ Shaw be required to access, including on EPG and App Store, any independent service carried by non-Rogers/Shaw BDUs representing at least 10 percent of the Canadian English-language subscribers.
4610 To us, this seems like a good approach, but if the Commission wished to consider other possibilities, there are other ways to achieve this access objective.
4611 For example, in our intervention we proposed that if an independent undertaking negotiates carriage with a CRTC recognized BDU, that there be reverse onus on other BDUs serving the same market area to carry that service on similar terms.
4612 Another approach, which we would consider the absolute bare minimum reasonable position, would be that any independent service that is able to attain the 210,000-subscriber threshold required for an exempt service to apply for a license, should be given carriage on Rogers-Shaw on reasonable terms. Clearly a service in this situation has proven consumer demand and moreover, will have ongoing obligations to contribute to the broadcasting system through conditions of license so having certainty that the service won’t be crippled or put out of business by an arbitrary or self-interested move on the part of the dominant BDU is, in our opinion, the least that should be expected.
4613 As MCA and other independent service operators know well from recent experience, it is already extraordinarily difficult to launch a new Canadian service, and this is not because the necessary ingredients such as high-quality program content, creative talent, technological expertise, marketing skills, and financing are difficult to find. They are abundant in Canada.
4614 Rather, it is the power of gatekeeper BDUs to decide to launch a service or not, almost by whim, and often with limited reference to market demand or the importance of the said service to meeting Broadcasting Act and Canadian cultural objectives.
4615 For many years, independent services were told by Rogers and other BDUs that capacity constraints prevented the launch of more services. IPTV technology was going to be the solution to this problem. Well, it has now arrived.
4616 However, while this application states that as a result of the merger, “Canadian programming services will continue to benefit from a robust platform through which to provide Canadian audiences access to both their linear programming services and digital media offerings,” it is not at all clear that independents will really benefit.
4617 As I stated earlier, preliminary indications are that vertically-integrated owned services and foreign apps are being prioritized. Independents may well be given new reasons why they won’t be launched, perhaps based now on the upfront, per-channel setup costs flowing to Comcast which, presumably, foreign apps have already paid and amortized into their markets.
4618 Rogers, in their reply comments, suggests that many of the concerns and recommendations of the IBG are issues that involve the ongoing relationship between distributors on the one hand and programmers on the other, as if the combination of Rogers and Shaw would be just another BDU like the others.
4619 A Rogers/Shaw combination, controlling 50 percent of the English Canadian market and dominant in the GTA market that most advertisers require as a prerequisite, is not just another BDU. Hence, safeguards are required, and they can’t wait years to be considered at a broader policy hearing or renewal.
4620 We submit that this transaction of historic and unprecedented scale and impact is of a different order than past consolidation and therefore should be accompanied by targeted, appropriate safeguards.
4621 MR. THIESSEN: One final point I’d like to emphasize, is that we are completely in agreement with Rogers about satisfying consumer expectations of choice and quality. It is completely reasonable for BDUs to expect independent services to make every possible effort to build viewership through competitive, distinctive programming.
4622 I can speak for MCA, and I expect all other independent services would agree, that we don’t take the launch and operation of a service lightly and have a great deal of skin in the game, and we certainly appreciate that ongoing investment in our product, both in broadcast and digital platforms, is essential.
4623 At this time of transition, where broadcast distribution is gradually declining while streaming gains ground, in order to be viable in the Canadian market services must, as IBG said, “have one foot on both sides of this divide”.
4624 Many services, including our discretionary service Corco+, are already active in the OTT/App space. According to our developers, we could launch onto the Ignite platform in matter of weeks. All broadcasters must make this transition.
4625 With a focus on serving niche and differentiated audiences, and greater freedom to innovate and experiment, independent services have long led in fostering new Canadian voices and creative talent. This can continue to be the case even when it’s with new means of reaching audiences, but only if efforts are made now to ensure it doesn’t become even more difficult for existing independent services to survive and for new ones to launch.
4626 If the Commission is inclined to approve the proposed transaction, before doing so, we believe it is essential that the Commission require additional safeguards to ensure that independent services can continue to launch, operate, and contribute to the Canadian broadcasting system, and to the country, as they have been doing for almost four decades.
4627 Thank you again for allowing us to present today. We will now be pleased to respond to any questions you may have.
4628 THE CHAIRPERSON: Thank you. Pardon me. Thank you very much for your presentation. I will turn the microphone to Commissioner Lafontaine.
4629 COMMISSIONER LAFONTAINE: Thank you very much, Mr. Chair, and thank you very much Mr. Thiessen and Mr. Craig for your submission -- or your presentation today. I do have a few questions for you, so thank you very much for your time.
4630 You’ve raised a number of points in your presentation today, and in your written submission, and I’d like to have an exchange with you about a few of them, the first being the IBGs proposal the carriage of independent services. And you’ve indicated that you support the IBGs proposal as set out in their written intervention.
4631 Their proposal has, however, evolved throughout the week given Rogers’ presentation on Monday, and the IBG is now suggesting that 50 independent services -- a minimum of 50 independent services be carried, and that that not be, you know, a not-less-favourable situation, and that this take place for approximately seven years after the closing if it’s approved. Is this something that your organization also supports?
4632 MR. THIESSEN: It does. And thank you for asking that question. I think that’s one of the core things independent services are grappling with, and so I’m pleased to sort of respond to that comment.
4633 And I support -- number one, I do support the direction that this is going. I really appreciate it. I think that it is reasonable. I think it probably -- we’re in a different position than others. I think that’s one of the reasons why we wish to appear.
4634 We just launched Corco just in August. We’re a new player, and we’ve -- obviously, we’re celebrating our 25th anniversary of our TV service, but we’re only three-months old in this discretionary world. And so we, I think, bring a different perspective than many others do. We’re the ones who are just at the door -- knocking at the door of Rogers, or just about to, and so I’m sort of speaking not on our own behalf, but probably on the behalf of many more to come behind us, people who haven’t yet got that ability to knock at Rogers door and say, “Hey, let us in.” They’re a gatekeeper that, you know, we’ve got to be thinking a year, two years, three years, even five years down the road from here.
4635 So I guess I’d like to modify that position slightly and say, you know, 50 is a great start. I think that’s a really good one to begin at. But I think that the Commission should consider asking Rogers to instead, maybe in years three, or four, or five, maybe make that 55, or maybe make it 60.
4636 Like, for us, we believe in this Canadian dream that there is an opportunity for people to express themselves. And to limit it to 50, to me, keeps some of the new entrants out. And I guess I’m speaking on their behalf. They may not be at the hearing today, but they would like to have been if they would be here five years -- in a different time and space -- and speak on their behalf to say, you know, “Commission, imagine a little bit about how to improve the system going forward and not just try to keep it status quo.”
4637 COMMISSIONER LAFONTAINE: Thank you for that. You’ve noted in your oral remarks -- you make reference to a comment that ECG and TLN made earlier in the week that Rogers and Shaw would have the ability to control what programming services are available in every market in English Canada.
4638 And that statement does give me pause because there are markets where Rogers is competing with Bell, and Telus, and other large BDUs. And so why is it in every market Rogers would control, you know, within the broadcasting system?
4639 MR. THIESSEN: I think -- I’m going to sort of go back to the Let’s Talk hearings and sort of chat about -- a little bit about some of the comments that were made back then.
4640 If I remember correctly, there was a service, Gusto, that was a food network, a wonderful programming service, a great new entrant into the Canadian system. And if I remember correctly, they were arguing to say, “Hey, you know, it’s great that we’re on Bell. It’s great that we’ve negotiated with Telus. But we need Rogers and Shaw to help us move forward in terms creating the ability to get advertising,” the ability to build up the core of their service. And that only come through the different legs of revenue get when you get mass.
4641 And today, that service is no longer operating, and that’s because they didn’t get that mass. They didn’t get that opportunity. And it was bought up. And there was a -- you know, there was obviously a transaction that happened, but it didn’t fulfill the dream of that independent broadcaster that -- what it could have been. It’s now bought up by a vertically-integrated company and it’s obviously fulfilling great service to Canadians, but not the way it could have, not in the way it was dreamed and envisioned.
4642 So, when I say that there is a need to get the opportunity to be on Rogers/Shaw, it’s because they’re the only ones that can create the different legs that are required to really get -- make great programs. And I think if we’re going to do well in this country, if we’re going to continue to get traction with the consumers, it’s going to be investments into programs that’s going to do it, and that means the BDUs need to help us to do that.
4643 MR. CRAIG: And Jeff, if you don’t mind, I’m going to just add one more thing onto that because I think with the rising costs as well to create content that is going to be a content that consumers want to connect with, and reach, is that there is a certain threshold that we have to stay. As discretionary services are coming out, they’re going to need to be able to create new content, original content that’s going to attract people to their service.
4644 And with Shaw/Rogers’ connection controlling a majority or at least a major part of the market is that there’s a certain threshold that we’ve seen from experience that you’d want to achieve and get through where you can actually start to get the machine churning where you’re able to viably create content and continue creating that Canadian content that’s going to attract and compete with other content that keeps coming into our country.
4645 COMMISSIONER LAFONTAINE: Thank you.
4646 MR. THIESSEN: If you may, I’d like to add on to what David commented on, but I don’t want to take up the whole afternoon. There’s other guys behind us, so I’ll try to keep it brief.
4647 David and I have both gone to Toronto. We’ve had the $1,000 coffee with Rogers. We’ve tried to get more distribution for our main platform, the Miracle Channel. And we had compliments saying this is the best presentation they’ve ever seen, but no, we’re not going to put you on. And so, we’ve had that door closed. Even though we’re three months old on Corco, we’ve been -- a long time working on our normal channel, our regular television channel.
4648 And my point there is we’ve been on the other side where there’s no sense, there’s no issue other than we have a capacity problem. We can’t put you on due to capacity concerns. So, that’s real to me. I remember that vividly, and I just want to say that that is -- that’s really key for people coming after us to not have that answer happen. So, I’m just making that plea for people coming behind us now.
4649 COMMISSIONER LAFONTAINE: Thank you. Thank you for that. I do have a few more questions for you and there are some other areas I would like to explore with you. And one of them is this whole issue around the apps and the component of the Rogers proposal to service or to support the independent broadcasters with the development of apps.
4650 And I believe I’ve now heard a couple, probably more than two, but there are a couple of key issues with regard to the app development. And one of them is the access for Canadian broadcasters and independent broadcasters to actually be distributed on that platform, and I think you’ve referred to the concern that it will be for the VIs and the foreign services that will be present there. But we’ve also heard from intervenors that this will be a way to move independent broadcasters, move independent ethnic, multicultural broadcasters away from the regulated distribution platform to this OTT platform of sorts.
4651 So, I’d like to hear a little bit more from you on your concerns with regard to the app development, and also whether you support the submission of Channel Zero from this morning, you might not have had a chance to hear that, where they put forward a proposal that the Commission require 1:1 Canadian/non-Canadian apps being carried by Rogers on that platform. So, over to you.
4652 MR. THIESSEN: Thank you, and that is a future and we’re excited about it. We’ve been very involved in development of our app over the number of years, and we believe that it is really literally, in 10 years, 20 years, it will be the app, right? The regular -- I can’t think of it now, but some day the transmitters will be turned off and all of a sudden that will be our way of communicating to our communities and being able to develop that bond to consumers across both our area that we serve in Lethbridge, but literally across the country and perhaps the world.
4653 We, right now, develop programs, and those programs are being delivered to audiences in many parts of the world. We feel like we’ve got a chance to -- we’ve had a chance to leverage our small little station in Lethbridge and create programs that people want to watch, whether it’s here or in Nigeria or whether it’s in Australia, and it’s really to cool us that that happens. And included in there, we’ve built some foreign languages, and it’s really exciting what we’ve done with this little station that could.
4654 And we do it not just with leveraging relationships with other broadcasters; we also do it on -- by using technology and what we developed with the app. And I guess we wouldn’t be able to do those things without a strong Canadian base. Without that foundation happening in Canada, we would never be able to develop anything that would happen there.
4655 That 1:1 that Channel Zero was talking about today, I didn’t get a chance to hear it exactly the way I’d like to, but it sure sounds exactly what we’re looking for because discoverability is by far the hardest part for any app. And if we’re able to get that, what Channel Zero is asking for, I believe that that would answer our call that our -- what we would be looking for. So, I’d be voting in support of that for sure.
4656 COMMISSIONER LAFONTAINE: Perhaps this is something that you could elaborate upon in your final remarks to the Commission at the conclusion of the proceeding but thank you for that as well.
4657 MR. THIESSEN: For sure.
4658 COMMISSIONER LAFONTAINE: I’d also like to speak with you about the local news -- the Independent Local News Fund, the ILNF. It’s my understanding that your company is a recipient of ILNF fundings. And I was wondering if you could tell us a little bit about the extent to which this fund is important to your undertaking and to servicing your audience.
4659 MR. THIESSEN: Obviously, it was with grave concern we were understanding that Global may be part of that fund. That -- we’ve had a -- you know, we’ve been serving the Lethbridge area and the Southern Alberta area for quite some time, and we have such a strong bond and connection, because we’re able to talk about issues that are relevant to their -- to that community and to provide whether it’s weather or whether it’s farming news, like there is very specific things that Lethbridge needs, and we’re excited that we’re able to really -- we’re the only broadcasters specifically designed to produce programs right in Lethbridge that way. Other stations do it through other -- larger metro areas, and they beam it back into Lethbridge, but we’re actually in Lethbridge with a team building those programs every single day. And we just -- it’s such an honour and a privilege to be able to serve that way.
4660 But if we wouldn’t have the funding the way it is right now, we would literally shut that whole sector off. We would not be able to continue doing it without the fund. It is literally that essential. And, like, it’s incomprehendible [sic] that we would have to turn the lights off in the newsroom, because without it, without the funding, it would just be impossible to produce the program.
4661 COMMISSIONER LAFONTAINE: Thank you. I’m going to ask you this question for the public record, but I think I know the answer. Does your organization then not support Corus having access to the ILNF and be treating as -- treated as an independent service or an independent broadcaster for the purposes of the ILNF should the application be approved?
4662 MR. THIESSEN: We fundamentally believe that Corus should not receive the ILNF funding unless the funding mechanism changes. If the percentage -- like, if it is -- if we’re made whole, I have no problem. I think that that would be fine to include them. But I think I could speak on every single -- from every participant in the ILNF, the margins are so tight. COVID has been difficult. Local television is harder than ever. And I think every single broadcaster, small market broadcaster who I’m more familiar with because the Small Market Fund that preceded the ILNF, small markets in particular have the greatest challenge.
4663 And so, when we moved the Small Market Fund and moved it into the ILNF, we were concerned that the large markets would all of a sudden gobble up all of our -- the funding that the small markets did receive for years. And so, that would basically show that our concern, our -- you know the nightmare that would wake us up in the middle of the night would have actually happened, that the small market would have -- small market fund will have disappeared and be given to the largest markets, and it would be fundamental to our organization and the danger to it.
4664 Sorry, did I answer your question? COMMISSIONER LAFONTAINE: You absolutely ---
4665 MR. THIESSEN: I think I rambled ---
4666 COMMISSIONER LAFONTAINE: No, you absolutely have, and with gusto.
4667 I just want to thank you very much for your presentation today and to also congratulate you on the launch of your new specialty service Corco.
4668 MR. THIESSEN: Thank you.
4669 COMMISSIONER LAFONTAINE: And I will pass the floor over to the Chair. Thank you.
4670 Mr. Chair?
4671 THE CHAIRPERSON: Thank you.
4672 Commissioner Desmond?
4673 COMMISSIONER DESMOND: Thank you.
4674 I just have one question, and I'm wondering if you might just add a little bit more clarity or detail.
4675 So I fully understand your recommendation that there be a reverse onus on other BDUs to also -- that’s serving the same market area -- to also carry the service with similar terms.
4676 I'm just wondering if you could add a bit more detail to that?
4677 MR. THIESSEN: Yeah. Thank you for that. I don't know if it's as elegantly worded as it probably could have been. I find that the challenge that we have had in the past is that if we can -- we can have a great conversation with Bell, we can move the needle with them, and sort of help them understand our goal, our vision, or dream.
4678 And for it to really work in a market, you need both players. You don’t want to have half the city get the service and when you're marketing to the city and only get half of it to that market, get it. And you want to have the whole -- when you're putting advertising dollars out, you want to make sure that the entire market gets the chance to receive it, because it's very hard to advertise or market your service to one part of the population.
4679 And so to me, it's if we're able to persuade one BDU to say, "This is the deal we have struck with them," that there should almost be, by extension, that the other one should agree to the same terms. If it's good for one BDU, you would think that it would be good enough for the other BDU.
4680 It would be competitive enough that we're not obviously soaking Bell. Like, they're a big guy and they know how to negotiate hard.
4681 But if you -- when you think of it, Rogers should be happy with the deal that we have done with them. So if it could be done in the same -- if that would be the same opportunity, obviously, agree to one, you should be able to agree to the next guy with -- under the same terms.
4682 And again, I don't know if I'm as articulate as I need to be on this, but -- because we're sort of a new player in this area, but that’s how we sort of -- that’s how we see it.
4683 To be able to be successful, we need both BDUs, whether it's the Telco BDU side or the terrestrial -- the old-fashioned cable system to agree, those two players basically have been divided up into every market across the country, and we need their help. Both of them need to be there for us.
4684 MR. CRAIG: And Commissioner Desmond, if you don’t mind me adding onto that is that we're -- just for clarity's sake, we're not asking for free handouts or handouts for other people (audio skip). This is with the obligation of certain standards that have to be met where the consumer actually wants to consume this content, and there's quality standards, and as we said, all the other ones that come with it.
4685 So this is already -- just to reiterate, Jeff's point, if it's good for one where they feel their consumers are going to -- their watchers are going to enjoy the programming, then it would be assumed that that would be for the broader area as well for other key players that will have major market interests.
4686 COMMISSIONER DESMOND: Okay, thank you.
4687 THE CHAIRPERSON: Thank you. Thank you very much for appearing before us today and your participation in our proceeding. And I'll wish you a good rest of the day.
4688 Madam Secretary?
4689 THE SECRETARY: Yes, thank you.
4690 We will now connect the FRPC.
4691 Ms. Auer, can you hear me well?
4692 MS. AUER: Yes, I can hear you. Can you hear me?
4693 THE SECRETARY: Yes, thank you.
4694 We will now hear the presentation of Forum for Research and Policy in Communications.
4695 Please introduce yourself and your colleagues, and you will have 10 minutes for your presentation.
4696 MS. AUER: Thank you, Madam Secretary.
4697 Thank you, Madame Secretary.
4698 Good afternoon, Commissioners and Commission staff. For the record, I am Monica Auer, FRPC’s Executive Director.
4699 Joining me are Al MacKay, FRPC’s Chairperson, and Dr. John Harris Stevenson, outside consultant.
4700 Mr. Chair and Commissioners, the Forum wants to ensure that if this application is approved, it yields clear, significant, and enduring benefits for Canadians and their broadcasting system.
4701 We address several aspects of such benefits today, starting with the issue of technology, continuing with news and CPAC, and concluding with its benefits for Canadians and the broadcasting system.
4703 THE SECRETARY: You're muted, mister.
4704 DR. STEVENSON: Mr. Chair and Commissioners, Rogers’ appearance stressed the benefits of this merger for Canada’s telecommunications system. It said that investment in network infrastructure is critical to securing Canada’s future prosperity, and added that IPTV platforms will also foster competition within the broadcasting system, and that approval of the merger will provide Canadian households with access to broadband services.
4705 Infrastructure based on Internet Protocol over co-ax cables and fibre lets BDUs shift from a less-profitable video subscription model to one focused on higher-margin broadband subscriptions, allowing ISPs to sell customers a wider variety of services, and to sell to advertisers set top box and other data about those customers.
4706 Rogers has not explained why telecommunication investments are relevant to this broadcasting application, and does this relevance flow both ways? If Rogers can count telecommunication infrastructure and investment as broadcasting benefits, can the broadcasting system rely on the telecommunications sector for financial support?
4707 Rogers has also said that its business plan will bring dynamic innovation to a growing number of Canadians, that it wants the opportunity to deliver the innovation Canada needs.
4708 What it did not explain is how Rogers will actually innovate. As you have heard, much of Shaw’s business is already based on IPTV, and the Rogers’ Ignite service is essentially the Comcast X1 walled garden cloud-based TV platform.
4709 Rather than developing its own innovative technology, Rogers is trying to keep pace with current BDU and ISP business models and product offerings, at the centre of which is finding new ways to monetize customers. Approving this application means Rogers is monetizing not just its current 1.5 million BDU subscribers, but Shaw’s 1.4 million BDU subscribers as well.
4710 Improving ISP telecommunications infrastructure is laudable, but it is neither a tangible nor an intangible benefit for the broadcasting system.
4711 Licensing technology from another party is also good business, but it is not particularly innovative.
4712 What this means, Mr. Chair and Commissioners, is that approval of this application must result in other ways to ensure that it yields clear, significant, unequivocal, and enduring benefits for Canadians and the broadcasting system.
4714 THE SECRETARY: Mr. MacKay, I think you're muted.
4715 MR. MacKAY: There we go.
4716 Mr. Chairman, Commissioners, the Forum is concerned about this application’s overall impact on news in Canada, because the plan really is for to rob Peter and pay Paul by shifting the $13 million that Shaw has directed to the Corus’ Canwest stations, to “build brand awareness and audience loyalty” for its City TV stations.
4717 Our point is that for the tangible benefits to the Canadian Broadcasting System they must be seen in context. Rogers has proposed benefits of $5.6 million while it obtains $13 million for its stations at the expense of a competitor. Who really benefits from this transaction?
4718 Rogers has said it would broadcast 12 prime-time local news specials to provide a bit more context and perspective and a nuanced overview of issues for audiences. Does this mean 12 specials a year per station, or 12 spread among its stations? And for how long?
4719 Rogers has said it would create an Indigenous news team with representatives in each province. For how long? Will the team’s members be full-or part-time? Will they be fully equipped? Why limit the initiative just to the provinces?
4720 Rogers has also said it would “generally grow” its investment in the western news markets, but by how much? Will it fund more boots on the street? Is this a permanent commitment or finite?
4721 Rogers also intimates that it will not add new hours of news. Does this mean that even directing $13 million to its CITY TV stations will not result in one new hour of local news across the country?
4722 Finally, Rogers acknowledged on Monday that its TV stations now “try to do with less resources”.
4723 Meanwhile, its five annual reports from 2016 to 2020 reported free cash flows totalling $10.1 billion. Is Rogers saying that, but for this application, it is satisfied that its TV stations provide less news, with fewer resources?
4724 Mr. Chairman and Commissioners, we would also like to address CPAC. It is a unique service, a hidden jewel among the many channels available to Canadians.
4725 I should know; I worked there under a management contract from December 1997 to January 2001 and I saw close up what CPAC could do, the dedication of its staff and the loyalty of its small, but very engaged audience.
4726 CPAC provides important programming. It matters to Canadian democracy. It is a public service undertaking.
4727 Now, BDUs originally paid for CPAC’s operations and we believe they should be commended for that. But the CRTC’s own data show that since 2014 BDU subscribers have paid more than $111 million for CPAC’s service, against expenses of $99 million.
4728 And yet CPAC’s governance structure still treats BDUs as CPAC’s owners and funders. If approved, Rogers will hold 66 percent of its shares.
4730 Rogers has said that it would not exercise effective control over the undertaking or influence its programming. But how does one verify that?
4731 The Forum recommends expanding CPAC’s Board of Directors to include individuals from the academic world, public interest and other parties. Broadcasters, including BDUs, should be limited to 20 percent or fewer of votes on the Board.
4732 Changing CPAC’s governance structure is the easiest way to ensure its independence and to reflect the reality that is a service entirely funded by the public.
4733 Canadian democracy relies on dependable, unbiased news and information about Parliament and government. CPAC provides this and Canadians deserve an appropriate role in its governance.
4735 MS. AUER: Tangible benefits are relevant in this proceeding.
4736 Like PIAC, the Forum believes that the exclusion of discretionary TV services licensed to and operated by Shaw when it signed the 13 March 2021 Plan of Arrangement with Rogers underestimates broadcast tangible benefits by $17 million. We suggest that apart from any other enduring benefits that you approve, a portion of this amount be directed to the Broadcast Accessibility and Participation Funds.
4737 Rogers argues that you must ignore these programming services because of your decisions in PN 2008-77, Information Bulletin 2013-482 and Decision 2016-487.
4738 These decisions involve quite different facts, however. The CRTC’s determination which came before the current benefits policy by six years and was made using the CRTC’s streamlined procedures, offered no information about the size of the Aurora regional pay per view service, suggesting bot not stating that the service revenues were not consequential.
4739 Rogers’ supplementary brief in the 2013 decision does not mention Mountain’s Video on Demand service, perhaps because Mountain last reported fewer than half a million dollars in VOD revenue in 2011.
4740 The 2016 Bell-MTS decision, governed by the 2014 benefits policy, involved a VOD service that had suffered financial losses for each of the previous five years, making it an exception to the 2014 policy.
4741 By contrast, Shaw’s discretionary TV services reported $43 million in 2020, and no losses in the past five years. These revenues are both relevant and material to this application.
4742 On Monday Rogers told you that the CRTC should review its tangible benefits policy. We agree. But until then, the 2014 policy exists and provides that “the Commission may choose to exercise its discretion and depart from this policy where called for to meet the public interest and based on the record before it at the time.”
4743 To conclude, the Forum has paid close attention to the hearing this week.
4744 Rogers’ testimony has not persuaded us that the CRTC should approve its application unless the CRTC also applies and enforces conditions of approval that actually yield strong and enduring benefits for Canada’s broadcasting system and the people it serves.
4745 We therefore stand by our intervention’s recommendations with one exception. And that is to the point that has been made by the Independent Broadcasters Group and also this morning by Channel M which is that -- and I have read here quickly, that the Commission may have modified paragraph 13 Wholesale Code to close a gap that now exists limiting Independent Broadcasters’ ability to commence arbitration with the Commission.
4746 Thank you for the time. We welcome the chance to discuss our recommendations with you.
THE CHAIRPERSON: Thank you. Thank you very much for your presentation and your participation in our proceeding.
4747 I will turn the microphone to Commissioner Naidoo.
4748 COMMISSIONER NAIDOO: Hello and thank you for the presentation. Thank you for being here with us today.
4749 You argued that while Shaw has stated that it will at some point return two of its three programming licences, the two programming services should be included in the calculation of the value of the transaction. And then FRPC goes on to state that including the two programming services that Rogers has chosen to exclude from the transaction reveal the tangible benefit of $23.4 million which is $17.6 million more than what Rogers proposed.
4750 So my question is, can you please provide more detail for us as to why you believe the value of these services should be included in the calculation of the value of the transaction?
4751 MS. AUER: Thank you for the question.
4752 Yes, we begin with the point that this transaction was negotiated between Shaw and Rogers this past March. And in contemplating this change in ownership, the plan of arrangement that the two companies negotiated included a provision that the companies would cooperate on any reorganization prior to the end of the close of the transaction, and that also Shaw would ensure that it neither sold nor began new businesses without Rogers’ consent.
4753 In our view, it seems clear that any valuation made as of March 13th would have included the services that Shaw was already and had agreed to continue to operate. In other words, Rogers didn’t ask Shaw to stop those two services. It was content for the two services to continue.
4754 Nor has Rogers ever said, “No, we never wanted those services. We haven't paid for them. They are excluded from the transaction.” If they would like to put that on the record that would be of some interest.
4755 COMMISSIONER NAIDOO: Thank you for that.
4756 You also state that if the Commission agrees with the revised assessment in relation to the value of the transaction, that a portion of additional tangible benefits be allocated to the BPF and the BAF. Could you please explain the repartition of additional tangible benefits that you envisioned in such an eventuality?
4757 MS. AUER: Well, we were specifically thinking that if you agreed that the current benefits package is underestimated and therefore require an increase, that a portion of that increase but not the entire amount obviously, be allocated to the BAF and the BPF. And we’re content with first of all Rogers’ initial allocation of benefits. We see -- we have no difficulty with the manner in which it initially proposed benefits.
4758 And secondly, if the Commission believes that there are other worthy initiatives we would support those as well. We’re simply stating at this time we think that having had a number of decisions from the Commission which declined to grant any new funds to those two funds which are crucial for accessibility and public interest participation, it might be useful to do something with this one you approve the transaction.
4759 COMMISSIONER NAIDOO: And what would the impact on your organization be if BPF were to close without a suitable replacement?
4760 MS. AUER: Since the forum has formed, we have made over 80 submissions both to the -- mostly to the CRTC but also as well to Parliament at both the House of Commons and the Senate. The work we did in those proceedings was entirely funded effectively by the BPF. We didn’t apply to them for costs but, you know, we were able to exist and because we can exist we were able to do that additional work for free.
4761 And so for example, in thinking about C-10, one of the things that we undertook was a very long and detailed side-by-side analysis of the 1991 Act C-10 and then changes to C-10.
4762 We think that kind of work was useful to the system as a whole.
4763 COMMISSIONER NAIDOO: And what about ---
4764 MS. AUER: I actually have case law on this, but I’d have to get up really quickly, if you’d like this.
4765 COMMISSIONER NAIDOO: Yeah, sure, I would, actually, if you’ve got time now.
4766 MS. AUER: So one of the reasons I think that the Commission is always having to struggle with is that when the ‘68 Act was revised in 1991, there was no clear statement in that act to say, “You, the CRTC, shall fund public interest participation,” which doesn’t necessarily mean that anybody disagrees with the idea, because the BPF, to my knowledge, has never been challenged before the courts.
4767 And the thing is, it’s also useful to know that in fact the courts themselves recognize and acknowledge the value of what is called “public interest participation”. And I’m referring here to the Pictou Case 2014 FCA 21 in which Justice Stratas set out the criteria for public interest participation and explains why it matters, because when you have public interest participations who are not -- who don’t stand a direct benefit -- to directly benefit from a matter, you’re able to get a different perspective.
4768 And a different perspective matters to the CRTC, because otherwise you are placed in the unenviable position of having to be judge, jury, and executioner. You’re supposed to be the independent arbiter or arbitrator, and yet when you have parties, surely it’s of help to have somebody standing up and saying, “Well, we’re speaking for the public so that we can present evidence to you on which you can rely.”
4769 So we hope that that kind of interest participation brings different kinds of insights to the Commission’s work. We hope that it brings broader exposure of public and important complex matters, because many of the proceedings before the Commission are difficult. And of course, it helps to level the playing field between sometimes very large organizations, such as the ones before you today, and the general public, many of whom are unable to marshal the resources to provide deep-level analysis.
4770 COMMISSIONER NAIDOO: Okay. Aside from the BPF, what other funding supports do you have access to that would help you to that would help you to do the work that you do?
4771 MS. AUER: None. Well, I’ll qualify that and say we’ve held two conferences in the last five years. We charged a small fee for entrance. We didn’t have advertisers or -- I forget what the term is. It’s a term where people essentially market themselves by helping to fund a conference. So we don’t make -- we do much of our work in that context.
4772 You had asked some of the other intervenors what alternatives might exist. And I think one alternative that might exist, although I think it’s doubtful, is the Department of Canadian Heritage. And I say that because, although the current mandate letter to the new Minister of Canadian Heritage hasn’t been issued yet, there is a January ’21 which indicates that the government still hopes to rely on consultations with stakeholders and the public for its work, and that the government is relying on the notion of evidence analysis and expert expertise.
4773 One of the things that we’ve tried to do in CRTC proceedings and elsewhere is bring forward quantitative evidence.
4774 COMMISSIONER NAIDOO: You state that any increase in the news that Rogers offers on its CityTV stations does not mitigate a potential negative impact on Corus stations, and that Rogers should maintain the current financial support for Corus stations. And I’m just going to try phrase this in a way that’s understandable.
4775 Why would increasing news on Rogers CityTV stations not make up for the $13M shortfall to Global TV stations as far as benefitting Canadians?
4776 MS. AUER: I know that Allen would like to address this, with respect to the local news, but I’ll begin from the point that City and Rogers stations operate sometimes in different markets. They share a number of markets, but they also operate in different markets.
4777 So suppose that Rogers were to increase spending on its local news, the audiences in the stations currently served by Corus stations wouldn’t necessarily see that change.
4778 Secondly, we have no firm commitments form Rogers as to an increase in local news and, more specifically, in original hours of local news. So as you probably know, a number of television station today, we play the news the next day, so we have, over time, wound up with actually less original news than before.
4779 Third, by reducing Corus by 13, and shifting 13 to Rogers, what we’re left with is a zero sum. We’re not incrementally gaining anything. Now, it’s true that Rogers has not stated that this shift is in any way a tangible benefit. And what we’re saying is that perhaps that is a benefit that ought to be conceived and applied, or at least discussed with Rogers on Friday.
4781 COMMISSIONER NAIDOO: And so, then, do you see any benefit to consumers of CityTV content as a result of the transaction?
4782 MS. AUER: Well, as I said, Al -- I think you’re on mute, but Al was going to comment, I think. I don’t know if he can hear me. Can he hear me? Yes, there he is.
4783 But the point is that Rogers, on Monday, did not say that it was going to add content. In other words, perhaps it is getting a higher quality of content. And I guess my first question is, with the enormous capacity of the Rogers company today, why would it be starving its own stations, willingly, and relying on this transaction in order to use more BDU revenue to fund its own stations. I have difficulty with that. I don’t see it as a true commitment to broadcasting system.
4784 Al, did you want to comment on the news issue?
4785 MR. MacKay: Yes, if I may. Am I muted now, or am I on?
4786 MS. AUER: No, you’re good. You’re good.
4787 MR. MacKay: Okay.
4788 COMMISSIONER NAIDOO: We can hear you.
4789 MR. MacKay: It -- really, the whole issue of budgets, and planning, and everything for the news department, if I was sitting there in the Corus Newsroom operations, and the $13M that I’d been planning on getting from Shaw was no longer coming, I’d be happy -- I’d be probably -- have to, on the instructions of higher ups, take a look at how I could be cutting back on services. You’re not going to get that $13M, so how are you going to survive with less?
4790 And unfortunately, having spent years in the news business, and in broadcasting in general, the easiest cut is in bodies. And if you cut the bodies, you cut the quality and the expanse of your news programming. And so it just seems it could well be a lose-lose all the way around.
4791 I mean, there was some discussion the other day, if I remember the statistics correctly, that the Corus stations have about a 20 percent audience share with their news, and the City stations have about a one share. Well, it takes a lot of work to move that one share up to where you’re a viable competitor.
4792 And if we’re talking about, as I said in my remarks, that -- if I can just find them here to underline them -- bear with me, if you would.
4793 It’s going to grow it’s investment but it’s going to -- there was no indication that they would take this $13M and say, “We are going to add X number of bodies. We’re going to increase in the number of programs. We’re going to expand our coverage area to include say for example, up in the Northwest Territories and in the Yukon.” All of these things, it’s all very ephemeral at this point in time. I hope that’s helpful.
4794 MS. AUER: If I might just add, Commissioner, in 2020, according to the aggregated annual return filed by Rogers, its local TV stations spent $27.7M on local news.
4795 So if a $13M is significant to the Rogers stations, and yet Rogers has not said how much more news it’s going to produce or, as Al pointed out, how many new people it will retain or hire in those stations.
4796 It has spoken about the Indigenous broadcasting, which is fantastic, although there are outstanding questions that we already raised.
4797 Moreover, when we look at the actual losses that both Corus are incurring with respect to their conventional TV stations. Last year, in 2020, the Corus stations lost nearly $100M on local news. So another $13M matters to them. Not to say that it doesn’t matter to Rogers as well. I’m just pointing out that there are questions about this notion that you just take from one to give to the other.
4798 COMMISSIONER NAIDOO: Along those lines, then, do you have any specific measures to suggest to mitigate any of the negative impacts in ---
4799 MS. AUER: Local news particularly?
4800 COMMISSIONER NAIDOO: With global stations in general.
4801 MS. AUER: I mean, I think the idea was a really great one that you could use some of the money that had traditionally been slotted for the community channels and ship that to local TV, which was suffering and is still suffering. Is that still the best solution? Perhaps not.
4802 If this kind of approach is enough, suppose hypothetically that after this transaction in a year or two we’d see Bell coming in with a proposal to buy one of the other remaining services that actually may have some local TV stations, would we then expect it would be appropriate for Bell to take all the -- any BDU money allocated to competitor stations and allocate it to its own? I mean, this becomes self-serving at a certain point. And the tangible benefits policy, historically, has always been not so much about self-service, which is always possible, but rather public service and the notion of strengthening the system.
4803 MR. MACKAY: Commissioner, I found the line that I was looking for in my remarks, “and the money would be directed to build brand awareness and audience loyalty”. I’m not sure that amounts to boots on the ground. That sounds to me like more promotion than anything else.
4804 COMMISSIONER NAIDOO: Thank you for looking for it and finding it. I appreciate it. I just have one last question, and I just wanted to just give you a chance to clarify. In your presentation, you had mentioned at the very end it was obviously a remark that you had just added at the last minute about IBG and Miracle Channel, and I’m wondering if you could just flesh that out, because I missed a little bit of what you were saying.
4805 MS. AUER: It wasn’t so much Miracle Channel, although I would view them as one of the independent broadcasters. It was the point made by Mr. Miller with Channel Zero pointing out that there is an exploitable gap in the Wholesale Code, and I believe it is in clause -- or paragraph 13 with respect to the if you are negotiating, then you can go into arbitration from the Commission. But if you are not, if, let’s say, the BDU has simply terminated the agreement by notifying you, a letter that it’s terminating the agreement, there is a perspective that you are not, in fact, negotiating; therefore, you can’t even obtain assistance from the Commission.
4806 It seems to me that that might be a gap that could be filled in one of two ways. One would be to have a policy hearing, which will take six months, and then another three months after that. So, you’re looking at nine more months in which independent broadcasters are looking at their future and wondering whether they should just all cash out and leave the country, or you could perhaps have a condition of approval (indiscernible) specifically at Rogers. And perhaps Rogers would even be willing to offer this as -- on Friday in reply to intervenors and to further questions from the Commission.
4807 Perhaps it would be willing to explain how it it’s going to strengthen the broadcasting system. And in that vein, you know, I think we’re all conscious here of history, of the value of history of what we learn from the past. And I think other intervenors have commented about the fact that, in Canada, we simply seem to walk through history, and we keep looking forward, we never look back, we never learn from anything.
4808 But I was looking through an old transcript, and I came across this interesting quote from what was then a major broadcaster. And this person said, “The key to sustain competition is having more than one strong competitor. It would not be in the public interest to create a single entity that could dominate the broadcast and communications market across all platforms.” And that was 2000, and that was JR Shaw, and I’ll just give you the reference. It was the 18th September, 2000 public hearing.
4809 And I think even at that time, and this was a matter involving BCE gaining control of a number of undertakings, there was serious concern. And Ted Rogers, at the same hearing, pointed out that the reason for integration is to maximize opportunities across multiple platforms. That’s where competitive advantage accrues in the new economy.
4810 So, this application is not bad business. It’s great business, and it is forward thinking. The Commission’s role, though, I would very respectfully submit, is to look at where the public interest is being served. And if it is not actually being served, how to protect and mitigate that.
4811 COMMISSIONER NAIDOO: Thank you very much. That’s all -- those are all the questions that I have. I appreciate it. Thank you. Mr. Chairman?
4812 THE CHAIRPERSON: Thank you. Very impactful presentation. Thank you very much. Thank you for your participation today and throughout the proceeding, and I will turn it to madame la secretaire.
4813 MS. LEVESQUE: Thank you. We will take a 10-minute break.
--- Upon recessing at 3:22 p.m./
--- L'audience est suspendue à 15h22
--- Upon resuming at 3:30 p.m./
--- L'audience est reprise à 15h30
4814 MS. LEVESQUE: Thank you. We’ll now hear the presentation of BCE Inc. Please introduce yourself and your colleagues, and you will have 20 minutes for your presentation.
4815 MR. MALCOLMSON: Good afternoon, Mr. Chairperson, Commissioners and Commission staff. My name is Robert Malcolmson, and I am Executive Vice-President and Chief Legal and Regulatory Officer at BCE and Bell Canada.
4816 Before beginning our presentation, I would like to introduce my colleagues. To my right, Stewart Johnston, Senior Vice-President, Bell Media Sales and Sports, and Ben Keys, Director of Content Sales and Distribution at Bell Media. To my left, Jonathan Daniels, Vice-President Regulatory Law; Sarah Farrugia, Vice-President, Content and Business Intelligence at Bell Canada; and Lenore Gibson, Senior Legal Counsel at BCE.
4817 We are here today to highlight why the Commission should act in the best interests of the Canadian broadcasting system and reject the proposed acquisition by Rogers of Shaw’s licenced broadcasting operations.
4818 It is critical to take into account the negative impacts the proposed transaction will have on other industry players across the Canadian broadcasting ecosystem, the broadcasters that are dependent on BDUs to reach subscribers and audiences, and the producers, creators and distributors that in turn depend on broadcasters to make their content available to Canadian audiences. The market power that Rogers seeks to acquire will have a long-lasting negative impact that will echo throughout this interdependent ecosystem.
4819 While Rogers would have you believe there is nothing to see here, this application goes well beyond the narrow issue of one cable company stepping into the shoes of another. The merger of Rogers and Shaw would anoint Rogers as the unavoidable gatekeeper of the linear and OTT platforms that programmers depend on for access to audiences and subscribers. For English-language programmers, it will be Rogers that decides who gets carried and the terms of carriage.
4820 Today, we have a relatively balanced English-language BDU market with three large distributors that have a similar share of subscribers and revenues. More specifically, Bell and Shaw each have a 27 per cent market share and Rogers has 20 per cent. This market equilibrium ensures that access to BDU platforms is competitive, and that broadcasters seeking to reach Canadians are not unduly dependent on one dominant BDU. Approval of the Rogers application will destroy this balance. Having secured a combined 47 per cent market share, the Commission will be handing control over the market to one player: Rogers.
4821 Mr. Chairperson and Commissioners, this transaction represents the largest BDU change of control transaction in Canadian history and was recently described by one Rogers director as the “most transformative, strategic transaction in the industry’s history”. If successful, Rogers will achieve a degree of control over the broadcasting sector at levels never before contemplated with no clear countervailing benefits for the Canadian broadcasting system. Just as the Commission did when it denied Bell Media’s acquisition of Astral in 2012 due to market power concerns, the Commission should deny Rogers’ acquisition of Shaw.
4822 In Astral, the Commission stated, and I quote, “The Commission is not convinced that the transaction would provide significant and unequivocal benefits to the Canadian broadcasting system and to Canadians sufficient to outweigh the concerns related to competition, ownership concentration...vertical integration and the exercise of market power.” In our view, the concerns that caused the Commission to initially deny Bell’s acquisition of Astral are equally, if not more applicable, to the Rogers-Shaw transaction.
4824 MR. JOHNSTON: Thank you and good afternoon.
4825 Granting control to one entity over almost half of all English-language broadcasting subscribers across Canada would give Rogers control over which programming undertakings survive and thrive, and which do not.
4826 Rogers would dictate how and if that content will be shared with Canadians.
4827 Importantly, programmers, including ourselves at Bell Media, do not negotiate the wholesale prices paid for our services by geographic market. Rather, we negotiate for the entire English-language market.
4828 Today, for English programmers to have a viable business case requires distribution from at least two of Rogers, Shaw, or Bell.
4829 And this is because every channel, with a few exceptions, requires sufficient reach to ensure audiences are large enough to attract the advertisers, as well as sufficient subscriber revenues necessary to support the investment.
4830 If one of the three largest English-language BDUs refuses to carry the service or does not provide appropriate packaging and marketing support, carriage on the remaining two major BDUs should be sufficient to ensure commercial viability. This is because a programmer would count on the remaining two big BDUs and the very small to mid-sized BDUs to deliver to over two-thirds of the national market. Take that away and the business case for investment can quickly disintegrate.
4831 If this transaction moves forward as proposed, programmers will only be able to survive if they secure carriage and reasonable revenues from the entity controlling half the market. This will be the deciding factor, and it will allow Rogers unprecedented leverage as part of any negotiation.
4832 I have dealt with Rogers for many years and I say with respect that they are very good negotiators and will fully leverage their market power as effectively as possible to ensure the best deal for Rogers' shareholders. That deal will come at the expense of programmers, as Rogers will inevitably use that market power to reduce what it pays to programmers.
4833 If Rogers successfully acquires a dominant share of the English BDU market in Canada, I am convinced there will be less revenue available for programming undertakings because of the massive leverage Rogers will apply. Less revenue means less funding for CPE and PNI expenditures, and this will, without doubt, erode our ability to produce made-in-Canada original content, and the ability of many independent producers to do so as well.
4834 So fewer Canadian programs and fewer choices for Canadian consumers, resulting in weaker channels just as they have to navigate the OTT transition.
4836 MS. FARRUGIA: Thank you, Stu.
4837 In reviewing this transaction, we urge the Commission to focus on Rogers' market position as a dominant English-language BDU and as a large internet service provider.
4838 Should this transaction go ahead, there is no doubt that Rogers' dominant position in the BDU market will give it greater pricing power over discretionary programming services.
4839 It will also provide Rogers with opportunities to extend its dominant position even further by becoming the leading aggregator of OTT services on a platform designed to drive subscribers to streaming platforms dominated by non-Canadian services.
4840 Rogers is already well on its way down the path of acting as a gatekeeper with the launch of its SmartStream service. Available to Rogers' Internet subscribers only, the subscription service aggregates content from global OTT players on a single platform.
4841 This combination of a dominant market position in the BDU market combined with a focus on distributing global OTT content via SmartStream provides Rogers with economic incentives to direct less resources towards the traditional regulated BDU system, and conversely, more resources towards securing non-Canadian, unregulated content available from worldwide OTT players.
4842 I would ask that you consider the ramifications of Rogers adding American-controlled OTT services that compete directly against Canadian linear services.
4843 For example, if Rogers includes the American OTT app Discovery Plus on its SmartStream service, this could enable Rogers to remove the linear Canadian equivalent, Discovery Canada, complete with Canadian content such as the very popular and independently produced shows Highway Thru Hell and Heavy Rescue: 401.
4844 It is very clear that the transaction will result in Rogers benefiting from a dominant position in negotiations for carriage that, in turn, will lead to reduced revenues for Canadian channels.
4845 Again, more dollars exiting Canada's broadcasting ecosystem, leading to fewer consumer choices and fewer Canadian voices.
4847 MS. GIBSON:
4848 Thank you Sarah.
4849 As part of any Commission review of ownership transfers like this, it is incumbent on the applicant to explain how the transaction serves the public interest.
4850 In our view, Rogers has failed to do so. To be blunt, Rogers has not offered benefits to the Canadian Broadcasting System that come anywhere close to addressing the unprecedented market power they are asking you to confer upon them.
4851 There are no specific commitments to support policies like Diversity of Voices. There are no specific commitments applicable to all of the English programming services that will become dependent on Rogers for distribution on linear and OTT platforms. There are no commitments to maintain wholesale rates, packaging and marketing.
4852 What's left is a commitment to carry on business as usual in the telecom space, including the deployment of technology that is already well on its way to market. In any event, these intangible benefits are irrelevant to the Commission's consideration as to whether the transaction meets the public interest test under the Broadcasting Act.
4853 For broadcasting, Rogers' lone commitment is to independent programmers. The commitment is limited to not dropping a programming service for three years if that service can prove to Rogers that it is still worthy of carriage. All this commitment does is reinforce the gatekeeper role that Rogers' unprecedented market power will enable it to wield.
4854 In summary, Rogers does not provide any compelling evidence that the transaction will provide material benefits to the Canadian broadcasting system.
4855 To the extent Rogers does address possible consumer benefits, it essentially identifies how the company will make it easier for consumers to leave the regulated system, a system specifically designed to ensure Canadian voices are heard and our stories told.
4857 MR. DANIELS: Thank you Lenore.
4858 The scale of the proposed merger is unprecedented. Rogers would control 47 percent of the English-language broadcasting distribution market and 40 percent of internet connections. The level of market power sought by Rogers exceeds every relevant threshold ever established within Canada's regulated broadcasting system.
4859 For example, the Commission's Diversity of Voices decision set a market share limit of 35 percent for programming undertakings, adding that it would closely scrutinize transactions that exceeded that threshold and would deny applications to increase market shares that exceed 45 percent. These thresholds were based on Competition Bureau thresholds found in their merger guidelines.
4860 There is no reason for the Commission to apply these thresholds differently, or set them aside entirely, when evaluating this transaction, nor should the Commission ignore the standards it set for BDU change-of-control transactions included in its Diversity of Voices policy. In that decision, the Commission states that it will examine BDU market share and the change in negotiating leverage between BDUs and programmers that will result from a merger. Applying this test to this merger can only lead to the conclusion that the transaction should not be approved.
4861 Mr. Chair and Commissioners, earlier -- or last week, I should say -- Mr. Chair, you referred to the importance of regulatory certainty during a recent speech. We concur with this view and suggest that regulatory consistency is a hallmark of sound public policy.
4862 Consider, for example, that the level of market dominance that would result from this transaction is greater than that used by the Commission to rationalize its denial of Bell's initial application to acquire Astral in 2012.
4863 While that transaction was eventually able to proceed, approval only came after a second application was filed, an additional proceeding was held, and an agreed-to set of divestures were made that reduced Bell Media's share of the English-language market to the Diversity of Voices 35 percent guideline. We expect that the same level of rigour and analysis will be applied in this transaction.
4864 Now, Rogers positions their acquisition of Shaw as affecting a different market than what was before the Commission in Astral. And this is our key point. The Commission rejected Bell’s initial application to acquire Astral because of the impact it would have on the market negotiations between programmers and BDUs. And that is precisely the same issue before us today.
4866 MR. MALCOLMSON: Thanks, Jonathan.
4867 Some interveners have suggested that a combination of market safeguards and enhanced benefits can adequately compensate for Rogers' market power that would result from the proposed transaction. We strongly disagree. With the market power that Rogers will have, including its ability to act as a gatekeeper for linear and OTT content, Rogers will be able to extract unreasonable concessions from all discretionary English-language programming services.
4868 Even if the Commission is prepared to change existing safeguards or reintroduce packaging and carriage regulations, it is highly unlikely that these changes, however well intended, could ever fully address the market power that Rogers will be able to leverage.
4869 As the Commission knows very well, Canada's broadcasting ecosystem is extremely fragile as online services continue to emerge as alternatives to linear broadcasting. We also note that the Commission is planning to examine the evolution of online TV in Canada as it considers what a future regulatory framework for online BDU and OTT services should look like.
4870 Against this backdrop, we submit that the Commission should not approve a transaction that will drastically alter the BDU industry structure until an appropriate policy and regulatory framework for OTT is in place.
4871 Mr. Chair, Commissioners, what is decided here will set a precedent and chart the course for the future; it will establish the permissible level of consolidation for the industry going forward and it will set the terms for what behaviour is permitted in the BDU and OTT programming marketplace.
4872 In closing, Rogers has not demonstrated that the proposed transaction will deliver material benefits to Canada's broadcasting system. What it does demonstrate is that Rogers will have unfettered market power to dictate which English-language programming services are carried and on what terms.
4873 This horizontal merger of two of the three largest BDUs in the country will create an imbalance in the market that will cause material harm to programmers that are dependent on access to the Rogers' platform to reach audiences and subscribers. That harm will in turn extend to those in the Canadian content production business who depend on broadcasters for the display and discoverability of their content.
4874 As such, this transaction does not meet the Commission's public interest test under the Broadcasting Act nor does it meet the Commission's own analytical framework in the Diversity of Voices policy and for these reasons, it should be denied.
4875 We thank the Commission for the opportunity to provide our comments and we are ready hopefully for your questions.
4876 THE CHAIRPERSON: Thank you very much for your presentation. Your hopes will be fulfilled. I have a few questions for you.
4877 THE CHAIRPERSON: Lets’ start a little bit -- I think it was paragraph six of your opening remarks you made reference to the currently relatively equal shares of the larger BDUs.
4878 And in your various submissions and again today your submission is that Rogers will have the size and scale to enter into preferential or exclusive distribution arrangements with foreign OTT services that will help Rogers grow subscribers to its internet access service to the detriment of its BDU competitors.
4879 So taking that statement into account, explain to me what the real difference is between a combined -- you know, the current situation where we have the top four distributors with 85 percent of the market versus the combined Rogers-Shaw market share.
4880 MR. MALCOLMSON: Sure. So today the market functions well because you have -- in the English-language BDU market you have three large BDUs with comparable market shares. That ensures an equilibrium in the marketplace. It ensures that programmers like Stu, when they go knocking on doors, have three doors to knock on, each with comparable market share to offer, and he can get carriage on each of the three. He can potentially get carriage on two of the three. He can say to one BDU, “Look, I've got the other two BDUs with their market share to carry my service.” So it creates an equilibrium, a balance of negotiating power.
4881 When you pivot to the world that Rogers wants you to approve, all of a sudden Rogers is increasing its share of BDU revenues and subscribers from 20 percent to 47 percent in the case of its subscribers that’s 135 percent increase. It sets it so far apart from its next closest competitor, which will be Bell, that it will acquire a dominant position in the marketplace and it will be able to use that dominance to do the things we talked about in paragraph 6 and in our submission.
4882 It will, for example -- you asked about OTT. It will ---
4883 THE CHAIRPERSON: Exactly. That was the focus of my question; I was trying to understand that better.
4884 MR. MALCOLMSON: So it will make itself quite attractive, as you heard from the folks at Telus, to global OTT aggregators who are seeking to enter the Canadian market, are looking for one-stop shopping, and a place to acquire a platform to display their wares, so to speak.
4885 As they attract -- as Rogers attracts more and more non-Canadian OTT content, or popular content, it will make its platform more attractive to subscribers than the subscribers that are subscribers to other BDUs. The market share will constrain the ability of other BDUs, like Bell, to obtain that same content and offer it to its customers. And that will create, in our view, a bit of a vicious circle. As Rogers gets stronger and acquires market share, the other services get weaker and can’t offer the same type of programming as Rogers can.
4886 THE CHAIRPERSON: I understand the sort of theoretical construct. I’m still struggling a little bit with the notion that, you know, pick one.
4887 A foreign OTT looks at the Canadian market and says, “Great. I can go do a deal with the -- if it existed -- newly enlarged Rogers and I can get access to a little less than half the market. Or I could go visit Rogers and Bell and get two-thirds of the market. Or I can go visit the three of them, you know, the next one, and get 85 percent or 80 percent of the market.”
4888 I am still struggling a little bit with the business logic of targeting, at the most, 47 percent of the market.
4889 MR. MALCOLMSON: I will ask Sarah, because Sarah runs our BDU business, in a minute.
4890 But I think in the last part of your question you hit the nail on the head. In terms of that first knock on the door, if an OTT aggregate or OTT service wants to access Canada, wants to do it on a one-stop basis, there may only be one knock on one door and that’s Rogers’ door. And once that deal is done, it may become extremely difficult for the other BDUs in the marketplace to be able to offer that OTT aggregator the same terms that Rogers can. And why is that? It’s a function of Rogers’ market share relative to its next closest competitor, in this case Bell. We would have 30 percent less market share. That’s a real difference in relative market share and leverage.
4891 I will ask Sarah to respond as well.
4892 MS. FERGUSON: Thanks, Rob. I think Rob covered it very well. Any player with 47 percent market share is going to be the first one that any global OTT player approaches.
4893 And what I would add to what Rob says is that again, when you are a global player you are making deals across the globe. And so you might decide how deep you go in any country and you might also, you know, decide on how much effort you're going to put in in terms of integrations and contracts, et cetera. So at 47 percent market share, again, Rogers would be their first stop and would potentially be able to get preferential or exclusive carriage.
4894 MR. DANIELS: Mr. Chair, if I can just add something because I think -- I have been listening to some of this discussion that’s happening this week and I think it’s very real about the exclusive nature of it. But we also started talking about preferential treatment. And I think maybe we’re spending a minute and just talking about what that means in practice because, you know, you can have a rule that says, “No exclusive.” But p[referential gets harder.
4895 So what are we talking about here? And on the one hand, Rogers has got their smart stream service that they’re talking about. And we can talk a little bit more about that because we do have a couple of things to say about it.
4896 But putting that aside, you know, they’re talking about bringing people, let’s even say within their BDU. What they want to do -- and they are not alone. We want to do this too. Every BDU is looking at trying to bring together the OTTs and the Canadian programming undertakings and your -- basically your BDU product together and be aggregative because you want to be -- you want to keep yourself in front of the customer and have the customer pay attention to you.
4897 Now, think about this from a perspective of someone who is not as, you know, digitally savvy. We all have those people in our lives. We’ve probably all dealt with them in -- you know, over the last couple years, helping them with all sorts of different things, how does it make it easier?
4898 What the BDUs are looking at doing to make it easier for that kind of person, and -- is they are bringing -- you know, we’re putting channels, the OTTs, on the BDU. That’s another channel. In our case, Netflix is a channel, so that it makes it easier that -- because these -- you know, most of our customers don’t understand the difference between OTT and a programming undertaking. They just want to flip the channel and watch whatever product they want. We’re all doing that. There’s nothing wrong if that’s the reality, and we’re going to market together and put these things together, and that’s what Rogers was talking about.
4899 But how you -- whether we can put it on our BDU platform as a channel, whether how -- whether there are special features or content or something like that that may be there, that may be preferential treatments, those are the kinds of things that can get picked up in negotiations between a large internet service provider, because that’s really how the OTTs will look at it, and the OTTs.
4900 And so, I think what I’m a little worried about in this discussion, we are worried about exclusives, but I’m worried that the Commission will sort of think, “Oh, we can just stop exclusives by making a rule that says it’s not allowed.” It’s bigger, it’s deeper, it’s things we haven’t thought about, it’s things we have thought about in terms of the ways that -- you know, the kind of ways that it will play out, and all we’re really trying to say is don’t kid yourself, don’t be kidded by Rogers. Forty-seven per cent makes them the first door and gives them extra power even compared to
4902 THE CHAIRPERSON: Thank you, Mr. Daniels. I hope I’m not one of those ones lacking technological savvy you’re referring to. But your comment about exclusivity or other potential measures is a good segue perhaps to a slightly different -- a nuanced version of that question. Look, understanding that BCE recommends the outright denial of the proposed transaction, if you could consider for a moment, should the Commission approve it, how do you suggest, then, we address the very concerns you just raised with respect to Rogers? And I’m sure you were waiting for that question, so...
4903 MR. MALCOLMSON: Well, it’s an important question, so we want to do it justice. So, I’ll start, and Jonathan and then some of my other colleagues may weigh in if you’ll permit us, because it is an important question.
4904 But, you know, coming into this -- looking at this transaction, coming into this proceeding, preparing our intervention, we did seriously consider what’s in the public interest here. Is it in the public interest to try to come up with a list of behavioral remedies in addition to those that already exist today in order to allow this transaction to proceed and, at the same time, replicate the balance in the marketplace that I was talking about earlier?
4905 And as we went through formulating our position, it became clear to us that that wasn’t going to be realistic, practical or sustainable. And we did look back at the Astral transaction in 2012. And as Jonathan said, this transaction is really the flipside of the same coin. It’s about negotiation of the value of content between BDUs and programming providers. In 2012, you looked at what Bell proposed, and you said 42 per cent market share, no commitment to divestitures, no remedies, not in the public interest, because that level of market share was simply going to make, in the eyes of the Commission, Bell too dominant and it was going to harm the BDU ecosystem.
4906 Well, here we are now. It’s, as I said, the flipside of the same coin. There are a couple of differences. One is that Rogers is seeking to acquire a 47 per cent market share, not what we came in with in 2012. And Commission, you sent us back to the drawing board, and you said, “Not good enough. If you want to acquire Astral, you’re going to have to come back with a better package, a package of divestitures to shed some market share to get it down to the levels that are aligned with Commission policy, you’re going to have to come back with some remedies and your benefits are going to have to be significant.” So, that’s the lens through which we looked at this.
4907 We’ve followed closely the hearing, and we’ve listened to all of those who have come in front of you, the independent broadcasters, the multicultural broadcasters, the CCSA, Cogeco, Telus and others clear that they’re universally fearful of the market power Rogers is asking you to confer upon them. And I listened to the various additional remedies that they proposed. I lost count at 10 additional safeguards, there were more, but -- and I’ll just go through a couple of them: a ban on BDU/OTT program exclusives on digital platforms. That was identified as a loophole; a ban on de facto exclusives where someone uses their market power to, as we said, sort of make one door to knock on; changes -- endless changes to the Commission’s dispute resolution process; regulating wholesale fees; implementing packaging guarantees.
4908 We looked at all of those, and we said to ourselves, and I believe that this is in the public interest, that those safeguards are simply not practical or realistic. It will force upon the regulator an administrative and enforcement burden that will be impossible to meet, in our view. It will result in a never-ending cycle of new claims of abuse of market power and new pleas for a new safeguard to address a newly discovered use case, to Jonathan’s point.
4909 So, in our view, that should signal to you that the market power Rogers is seeking to acquire here can’t be fixed by a basket of remedies. That’s our position. Jonathan, I don’t know if you have anything to add.
4910 THE CHAIRPERSON: Microphone is the equivalent of the mute button on Zoom calls. Thank you. You’ve also probably saved us some time. You’ve answered the next couple of questions about some of the proposals that we have heard over the past few days, so your position is clear. I think Mr. Daniels said he wanted to talk more about the influence of foreign streaming services on the system, so let’s pick up that theme.
4911 Throughout your intervention, you’ve referenced that role, that presence. And specifically, you’ve indicated that a combined Rogers and Shaw would undermine the health, I believe was the quote, of Canadian programming services that compete with American online programming services. So, can you elaborate on that for us, please?
4912 MR. DANIELS: Sure. So, let me first start off by just talking about that what I’m about to say -- like, Rogers’ SmartStream service, they’ve talked about it, it’s something that they offer, and I think Sarah can give you a couple of examples of equivalents that they have in the market, it’s not unheard of on the market. I’m not -- I don’t want to be faulting them for their discussion, but they presented the SmartStream service as if it’s one of innovation, I’ll let Sarah handle that in a minute if you don’t mind, but more importantly, they’ve been trumpeting it as some sort of benefit that’s going to happen that -- as part of this transaction, that they’re going to somehow bring more Canadians and programmers into it. And they’ve even come to you and say, “Oh, we’re going to help with the digital transition,” which is for programming undertakings just some amorphous will help you get on to do that. I don’t know exactly what they have in mind. I doubt they do. But whether they do or don’t, I don’t really -- you know, let’s suggest whether it’s an actual benefit associated with this transaction.
4913 But if you look at it today, just on SmartStream today, we looked at the top 15 Canadian streaming apps out there, and I’m excluding Rogers, like Sportsnet NOW and so on. The top 15, today, on Rogers’ SmartStream, they carry only three. Two of them are music based. Now, contrast that with Amazon, Google, Apple. Amazon Fire Stick has 12, Google Compress has 13, Apple TV has 13. And we’re not talking about these services; I’m talking about well-known Canadian services on the American platforms. Like, these are the ones that are on all of those, Global TV, CBC Gem, Radio Canada’s 2TV, TVA PLUS, not to mention the one from Bell, or maybe I am mentioning the ones from Bell, Crave, CTV, TSN Direct, Indigo.
4914 So, Sarah, I’m wondering if maybe you could carry on.
4915 MS. FARRUGIA: Yes, I think it’s important to note that, you know, there are four BDUs in Canada who have launched a sort of lighter TV offering, if you will. And all three of the others have aggregated those OTT players alongside linear regulated content, so that’s our own Fibe TV App product, Telus’ Pik TV and Videotron’s Helix app.
4916 So SmartStream is the only one that has elected to go the route of only aggregating the OTT players and, as Jonathon mentioned, very bias towards American players today. And why is that?
4917 Since SmartStream is based on the X1 platform, apps have to be specifically developed for that platform. And of course, Comcast is the gatekeeper, so it naturally lends itself to American and Global OTT players.
4918 You know, by contract, our own streamer box runs on the Google platform. So our customers have access to all 8000 apps that are available in the Google Play store.
4919 And so that’s what really sets the product apart. They actually have far fewer apps. They’re harder for Canadian content providers to develop apps for that platform as compared to other platforms available.
4920 MR. MALCOLMSON: May I add, Mr. Chair -- and I’ll try not to be verbose, but when you look at how Rogers markets Ignite SmartStream today -- you know, Jonathan, referred to the breakdown of apps, but this is from the Rogers Website -- their description to their customers that they’re trying to sell this service to, of Ignite SmartStream, “It integrates popular streaming services like Netflix, Amazon Prime Video, Hey You, YouTube, and SportsNet Now.” So they’re marketing non-Canadian global streaming services, plus their own SportsNet Now.
4921 So I guess the point being, don’t get fooled into thinking that the SmartStream platform is some panacea for helping Canadian programming service manage the transition from the regulated ecosystem to OTT world.
4922 THE CHAIRPERSON: Thank you. So from your perspective, how are the foreign streaming services currently competing for rights to programming services?
4923 MR. MALCOLMSON: I’ll ask Stu ---
4924 THE CHAIRPERSON: No, just -- I can give you the obvious example. Prime offers their subscribers an option to subscribe to Slack TV, as an obvious example. But can you give us a sense of what’s happening with respect to the negotiation of ---
4925 MR. MALCOLMSON: So what we’re finding -- and Stu does this every day, so he should speak to it -- but as they become more omnipresent here, as they gain more subscribers here and worldwide, they are able to acquire exclusives for markets like Canada. So we find ourselves negotiating for rights for something like Crave, our streaming service, our attempt to provide a Canadian alternative Netflix -- we find ourselves negotiating with our very small Crave subscriber base vis-à-vis Netflix’s 214 million worldwide customers, over which they can amortize their programming costs.
4926 So long way of saying, the leverage rests with the US OTT services, contains our ability to acquire content.
4928 MR. JOHNSTON: Thank you, Rob. I think you described it well. I think there’s been an evolution over the last 10 years where we’ve seen more and more, in negotiations for content, that we are competing with one, two, or more global OTT players, whether it’s specifically for the Canadian territory or more as a global deal for content, as Rob said.
4929 I’m not sure if that’s answering your question, Chair, but that is simply the case.
4930 THE CHAIRPERSON: That’s helpful, thank you.
4931 Let’s move on, sideways, at least, a little bit more about the affect on competition. I think in your intervention -- and again you emphasized it today in your opening remarks where you characterize it as not a simple horizontal transaction. This deal is not about swapping out one BDU with another in a local market, and you’ve stressed your belief that they will be able to control the availability of programming services in every English-language market.
4932 But turning to yourselves for a second -- I mean, obviously BCU is a BDU of very significant size and reach on multiple platforms. So could you tell me how you can help? How can BCE provide opportunities for the carriage of programming services? And I guess to add on to that, the logical extension is, and why won’t that offset the concern about Rogers if the transaction were approved?
4933 MR. MALCOLMSON: Mr. Chair, we’d love to be able to help. We do help today in terms of the carriage and promotion and marketing of Canadian Programming Services. As you know, we’re the largest spender on Canadian content in Canada given the stable of programming service we have. So it’ in our interests to help, and we do help.
4934 You asked how we can help more in the face of Rogers market share if the transaction is approved. That’s the problem. When you upset the equilibrium that exists in the market with three comparably-sized BDUs, all the leverage over content goes to the largest player in the game.
4935 And we’ve talked a lot to this point about the impact in the OTT ecosystem. It would be, I think, useful to also talk about how that leverage, that 47 percent market share, will affect programming services, not just us, seeking to access the linear BDU system.
4936 And if I could for a minute, just to put a -- to point it out to you, currently, we generate $348M of BDU subscriber revenue per year from Rogers and Shaw. If and when those two entities combine, that’s $348M of subscriber revenue which we become dependent on the new Rogers for. That creates market power.
4937 Now, you may be sitting there thinking, “Well BCE will be just fine. It’ll be able to fend for itself.” But as you know, there’s a ripple effect throughout the system. And that’s why we said in our remarks this will echo throughout the system.
4938 That $348M of subscriber revenue goes to fund Canadian programming. Thirty (30) percent of each of our channels’ revenues got to CPE. So in a world where Rogers takes -- says to itself, “I need to reduce my costs. I’ll go to Bell and I’ll pay the 35 percent less for their content.” That would be a $37M annual reduction in Canadian programming expenditures. Money that goes to independent producers. Money that goes into the system to help Canadians voices be heard and reflected. That’s $185M over five years. And that’s just us.
4939 THE CHAIRPERSON: It’s not very often that BCE gets to describe itself as little guy.
4940 MR. MALCOLMSON: No, and we’re not pretending to be little. What we want -- the message we want to convey to you is, if this happens, here are the impacts. We’ll manage the impacts.
4941 THE CHAIRPERSON: I understand. I’m being provocative.
4942 We haven’t talked very much about Shaw Direct, with whom you compete. If we think about BDU services, for example, in Ontario and Atlantic provinces, the acquisition of Shaw Direct by Rogers would effectively reduce the number of competitors by one. In your view, what impact would that have on competitive balance and competitive choice for consumers in those regions?
4943 MR. MALCOLMSON: So the angle we’ve come at it from -- and I know the folks at Rogers would have you believe there’s a difference between terrestrial BDUs and DTH BDUs, and therefore no competitive impact -- you should consider the competitive impact separately.
4944 But the perspective we come at it from is the impact on programming services. And so the way that -- you know, when Stu goes and negotiates an affiliation agreement for the distribution of Discovery, he doesn’t go to Shaw Cable in Calgary and say, “Okay, we’re going to do an affiliation agreement for Calgary,” and then he goes and does another one Winnipeg. He negotiates nationally in the English-language market for those subscribers.
4945 So the DTH subs that Rogers will acquire and the terrestrial subs that Rogers will acquire will be combined. And that’s what creates that market share. And Stu will have to go negotiate against that. Rogers will use that to reduce what it pays us on a wholesale basis.
4946 In terms of consumer impacts, fewer BDUs means less choices for consumers. Less fully-funded Canadian programming on channels that are reliant on BDUs means less viewing options for Canadian consumers, and less choices.
4947 And that’s why we say this transaction, as structured, without divestitures, without material remedies is not in the interests of the broadcasting system.
4948 THE CHAIRPERSON: Thank you.
4949 I have a number of questions for you in relation to competitive safeguards. And bearing in mind your earlier response, it might be a short set of questions, but we will start down that path in any event.
4950 You have already drawn a number of parallels to your proposed acquisition of Astral in 2012, as we all know, initially denied by the Commission, in that it wasn’t -- simply not convinced that there were sufficient benefits, and as you point out, there were competitive market share and other competitive concerns.
4951 But since then, and following the approval of the revised proposal, the Commission has put in place a regulatory framework to deal with vertical integration of broadcasting companies, and it's developed a range of regulatory safeguards with which you are very familiar, the Wholesale Code and so on, head start rules. I won't go through them. I think we're all familiar with them.
4952 And so as I said, I had a number of questions, but you may have answered it in the aggregate. But for the record, I'll still pursue, at least, on a nominal way, my questions.
4953 So what do you think of the specific risks that the Commission should address through additional safeguards?
4954 MR. MALCOLMSON: Well, as I said earlier, we don’t think there are additional safeguards that can curb the market power that Rogers will acquire, so -- and that’s not a novel position or an overstatement by us, I don't think.
4955 I take you back to the first Astral transaction where, in the Commission's decision at paragraph 66, the Commission said, while certain interveners proposed safeguards to address these market power concerns, the significance and breadth of the broadcasting assets that BCE was trying to acquire are such that:
4956 "Safeguards to properly supervise this level of market power would be extensive and unduly burdensome." (As read)
4957 And the Commission concluded that such a level of interference would be -- not be consistent with the regulatory policy set out in the Act.
4958 So that’s what we're saying to you.
4959 Yes, in the second iteration of Astral, there were safeguards proposed, and those safeguards eventually became the model for the Wholesale Code.
4960 What I would point out to you is that when those safeguards were first put in place in the Astral case, they were accompanied by material divestitures. So it wasn’t just, "Okay. You're going to acquire 47 percent. Here's a bunch of safeguards. Off you go."
4961 It was, "No. First of all, you need to address the market power problem. You need to reduce the amount of market share you're going to have, and then you're going to have to lay out on top of that safeguards."
4962 So I'll let Jonathan walk you through our thoughts on specific safeguards, because you asked about the Wholesale Code, if you wish.
4963 THE CHAIRPERSON: Pardon me. And before you do, Mr. Daniels, I was going to -- and may do this in any event -- my next question was really going to be to try and dive down a little into, for example, the specifics around the Wholesale Code and go, well, why not? Why is it insufficient? Why would the Wholesale Code be insufficient to address the concerns that have been -- that you're raising and others have raised with respect to an enlarged Rogers, if the transaction were approved?
4964 MR. DANIELS: So when we look at the Wholesale Code -- and when I -- I should say the collection of CRTC safeguards, because it includes other things -- but the first point is that it wasn’t designed to handle a BDU having 50 percent market share.
4965 It was designed around three different things. It was designed about concerns about vertical integration. It was designed about large programming undertakings and forcing terms on small BDUs, especially, in terms of the Astral kind of issues that came up. And then the third one is about protecting customers from disputes between programming undertakings and BDUs so that they wouldn't be caught in the middle. Like, for example, they didn’t want a programming undertaking withholding -- you didn’t want a programming undertaking withholding a signal in the dispute, and so customers are left not able to watch the channel.
4966 So when you look at the rules -- and again, I'm happy to go through every single one, but I don’t propose to, you will be happy to know -- I think there are three major things that show why it won't work when you're dealing with programmers and a 47 percent Rogers BDU.
4967 The first one is interpretation. Most, if not all of the provisions that you look at that are designed to protect programming undertakings in the BDU in the rules, all come back to reasonableness rules. They're requirements that are open to interpretation.
4968 Now, I think IBG earlier gave you some examples of the problems with practice. But if you just look at, like, the terms, just, you flip through the Wholesale Code, section 10, Comparable Marketing Support; section 11, Reasonable Terms of Access; section 9, Best Available Pre-assembled or Theme Package consistent with its Theme; all of these are debatable points. They're not straightforward rules one way or another.
4969 And that really gets down to the second and what the concern about that, it gets to the second issue, which is timing, that it takes a long time to get a dispute for the CRTC.
4970 And I have heard a lot of people come here and present to you and talk about, well, if the CRTC were faster or it could be done things faster.
4971 We're a BDU. We're a programming undertaking. We're involved in all sorts of negotiations, and I can tell you from -- even I have only been in this space for a year -- I can tell you, we learn quickly, things take time. Negotiations take time. It's not just the CRTC, it's the parties, and it's all parties, big and small, for different reasons. And sometimes you make progress on one issue so something else gets held up, and then you come back and it was a thorny issue, and so on. These things take time.
4972 But the difference is that if you're a programming undertaking looking at a debatable point about oh, am I right in my interpretation that I think what they're proposing is totally unreasonable, can you really afford to give up and not give up?
4973 Because in the meantime, as time goes on, BDU doesn’t control the price. It's not always about the price, and it's not necessarily about the package, but it's all the other issues that go along with that, the marketing, the promotion. Where is it placed on the website? What's the default one when you go to your pick categories? Where is your service listed? What are they telling the call centre? What's going on with free previews?
4974 I think that TLN and ethnic channels referred -- their counsel referred to this as death by 50 cuts.
4975 It's the notion that there's all sorts of other aspects that aren't part of and can't be part of CRTC regulation, that puts a programming undertaking in the situation where they just have to concede on certain issues because they don’t have the time.
4976 So my point I was coming to, I said there's three main problems with the Code. One is interpretation. I have explained that, hopefully. Timing is the second. The third is the loopholes. Loopholes are a way that people can interpret and step away from what the actual concept is, but go by and live by the words.
4977 You have heard others talk about it. I want to raise one about a new possible commitment that came up.
4978 Rogers has come to you and said on Monday that they will carry 40 independent channels, and people have talked about this being a commitment, a significant commitment. But as IBG pointed out, Rogers also said they have 46 channels for Rogers, 38 for Shaw terrestrial, and 47 for Shaw Direct.
4979 So as IBG pointed out, there's at least seven channels, and I think possibly more -- I didn’t sit down and count because it doesn’t really matter -- seven channels that aren't being guaranteed coverage.
4980 But here's the point about market power. It's not seven channels not being guaranteed coverage, it's 47 channels being told that you're 1 of the 7, because when you go to negotiate, what are you going to hear from Rogers at the beginning of every negotiation?
4981 "I'm not carrying you."
4982 "Oh, but you have to carry 40."
4983 "But I have chosen not to carry you."
4984 And in the end, you're going to agree to concessions. You're going to have to, because you need carriage by Rogers. You agree to concessions and take less, and that’s going to affect the quality of the service.
4985 So when I come back and talk about our three concerns and how we looked at and honestly -- and I don’t mean this pejoratively -- we sat down and came up with what kind of terms could come up? What would be a Wholesale Code? We sat there and brainstormed, and this wasn’t an hour exercise. It went on for days, and so on.
4986 ` And we kept coming up with things, and then we thought, oh, but you could get around it this way. Yeah, that’s impossible to enforce because of this. And we came up and had you guys getting so involved in the marketing and the promotion and approving, change on the website, it was ridiculous. We don’t want it. We don’t want it as a programmer. We don’t want it as a BDU. We don’t want -- and I don’t think you want that level of interference either. eAnd that’s why we came back to the conclusion that it just couldn’t be done, which is not to say that if you did look at divestures that additional safeguards couldn’t work, but with 47 per cent, we just couldn’t didn’t see how it could add up.
4987 I don’t know, Rob, if there was anything else you wanted to add?
4988 MR. MALCOLMSON: If I may? I think the application in front of you puts you in a difficult, almost impossible position in the sense that you’re being to -- you’re being asked to approve an unprecedented level of market share, the type of market share the Commission has rejected in the past, and you’re being asked to sort of Gerrymander existing remedies to find a way to put enough Band-Aids on the market share to solve all the problems.
4989 And what we’re trying to say to you, and hopefully conveying, is there aren’t enough Band-Aids in the box to stop the bleeding that’s going to result. And the bleeding is not going to just flow to the BCEs of the world. The bleeding is going to flow throughout the system to the creation and presentation of Canadian programming and the funding of Canadian programming. That’s what’s going to happen.
4990 THE CHAIRPERSON: Thank you. You persuaded me not to push my last question about, come on, give me some improvements to safeguards.
4991 Just before we leave this subject, though, you’ve probably heard us, if you’ve been monitoring the hearing, ask a number of parties to provide specific examples involving Rogers and the Wholesale Code or other mechanisms relating to undue preference or a specific dispute resolution tools have not worked, and we’ve invited parties to provide a further response by undertaking, if they so desire. I should offer you the same opportunity. If you have specific cases/issues that you think would be helpful to us, I would welcome their submission through an undertaking for which you can obviously claim confidentiality.
4992 MR. MALCOLMSON: We can answer your question now if you wish.
4993 THE CHAIRPERSON: Certainly.
4994 MR. MALCOLMSON: So, Jonathan can point you to our confidential filing. I think it was at paragraph 44 where we discussed one instance vis-à-vis Rogers. But I think the more important point is Rogers doesn’t have the market share that it seeks to inquire, so it doesn’t have it today. As I said earlier, the market is balanced. The market works. People complain about the Wholesale Code, they complain about the remedies, but it works.
4995 We do have examples, in Quebec, of a BDU that has market share in the range of what Rogers is seeking to acquire. And Sarah can walk you through how that BDU has exercised its 50 per cent market share power in a manner that, in our opinion, is a detriment to the broadcasting system. And that may give you a little bit of foreshadowing of how another BDU with equivalent market share will act in the future.
4996 THE CHAIRPERSON: You can or, as I suggested, you can do it via undertaking. I’ll leave it to you.
4997 MR. MALCOLMSON: It’ll be quick if you...
4998 THE CHAIRPERSON: Fair enough. Please go ahead.
4999 MS. FARRUGIA: Sure. So, maybe just to set the context. If you’re, you know, Videotron as a BDU, adding a TV and internet subscriber brings in, you know, well over $100 of revenue a month; whereas, by comparison, selling some TV content by your distribution channels might bring in pennies or dollars depending on what that content is.
5000 So, as your market share gets hired, you reach a tipping point where keeping the content for yourself and gaining the subscriber benefits that that content exclusivity provides to you outweighs the benefit of reselling your content to others in the market. And you know, to put a real example on that for you, I think the most notable one is Club Illico and Vray.
5001 Videotron has kept both of these products exclusive to their BDU set top boxes and not other BDUs. And while they have created D2C products, I would argue that these D2C versions are really not built in a way so as to be compelling to the customer.
5002 And the way they’ve done this is by pricing these services significantly higher than they do to their own Helix customers, they offer fewer streams, and they also limit the number of endpoints over which these services are offered in a direct to consumer manner. And moreover, to purchase Vray, a customer is actually redirected to the Helix website, has to turn down an offer to buy Helix and get Vray before they are able to purchase the product direct to consumer.
5003 And I would note, in addition, that when Quebecor first launched Vray, it was made only available on their BDU platform. And it was only after we, BCE, filed a complaint that that was in violation of the HVOD licence that they launched a direct to consumer product. So, that’s, I think, one very powerful example.
5004 A couple others just to touch on more briefly. The Commission will recall, in 2019, that TVA pulled the TVA sports signal from Bell on the eve of the NHL Playoffs, an act that I think the Commission ruled was illegal. And I don’t believe they would have done this had they not had the market share that they do in the Quebec market.
5005 And then the last example that I’ll also provide is, for years, Quebecor managed to withhold TVA VOD content from Bell simply by setting a price that was untenable in the marketplace making it really unviable for us to purchase that content. Now, in that case, we did eventually decide to pay the price and purchase that content because we felt it was very important for our consumers to have that and we wanted to provide, you know, the biggest breadth of content for our customers. However, you know, the result of that is, to this day, we’re paying well above market prices for that content.
5006 MR. DANIELS: So, if I can turn it back, then, just a second for Rogers, and I’m going to come back on Videotron as well in a second. So, I think Rob mentioned we only have, I think, one thing in confidence which is our negotiations about Rogers, paragraph 44. So, you can just look at it. It describes what Rogers came in as an offer to us.
5007 I have to say when we wrote that and so on, it’s Rogers’ initial position and negotiation -- or not quite initial, far from initial, but it’s a position that they’ve taken, and I don’t want to say that, in and of itself, making -- saying I’m going to cut services or massively reduce services, your penetration to the service, in itself an anti-competitive act is a leverage point in negotiation. That’s what happens all the time.
5008 The difference between what we’re talking about here is that it’s less concerning in the case when we have some negotiating power and leverage in BCE and their negotiations with Rogers, ourselves or even anyone else would in terms of, as a programming undertaking today, because you don’t need carriage on Rogers. But even we will need carriage on Rogers because we can’t survive without Rogers and Shaw in the future.
5009 And I think to give you a real example of that, I’m going to actually, Sarah, ask you to just explain about what Videotron -- like, the impact of Super Écran, because it’s a real live example. And that’s the big problem that I just want to point out. You’re asking for real examples. I don’t think you’re going to find real examples too much about Rogers because they don’t have the market power Videotron does. And so, maybe you could briefly talk about what happened with Super Écran.
5010 MR. KEYS: I can take that, Jonathan.
5011 MR. DANIELS: Oh, I’m sorry. I’m mixing it up. That’s Ben. My apologies.
5012 MR. KEYS: That’s fine. Yes, to piggyback on Sarah’s example, the Club Illico, I think we can just describe quickly how our relationship with Videotron have been affecting us on the programming side at Bell Media as well.
5013 So, Super Écran, our premium SVOD and linear channel, in the last three years, Videotron has taken two actions to sort of harm our position in that market. About three years ago, they repackaged Super Écran reducing our subscribers and penetration. And about a year after that, they also refused to pay our commercial rates for multi-platform rights, which resulted in them no longer offering Super Écran VOD on their set top boxes.
5014 And the result of those two actions over the course of just under three years is that our Super Écran subscriber account on Videotron has declined by over 60 per cent, and our penetration for that service is now less than half of what it was before those actions were taken. And I think it’s safe to say, it’s certainly our opinion, that marginalizing Super Écran that way has definitely benefited their own Club Illico service over that same period of time.
5015 MR. MALCOLMSON: I was just going to say, Chairman, because I know you want to move on, but I think that range of examples you’ve been given, I hope, help eliminate our skepticism about the effectiveness of timely remedies when an entity has market power to that degree.
5016 THE CHAIRPERSON: Thank you. Thank you for the examples.
5017 I have just a couple of questions left. I will save this one to the end. I think I omitted it earlier.
5018 When we were talking about SRDUs, I talked about a lessening of a competitor in some regional markets. I should have also asked a couple of other questions about SRDUs. Again, as you have been monitoring the hearing you have heard from a number of parties that there is a concern specifically about the availability or the ongoing availability of particular signals or their ability to access important signals at reasonable rates.
5019 As the other SRDU player in the marketplace, what are your thoughts about how this transaction may or may not impact h SRDU? And you can guess that I might also ask you if you had any comments about -- or wanted to provide us something via undertaking about the cost of change, of switching suppliers as we have asked a number of others.
5020 So I will put both of those questions to you if I could.
5021 MR. MALCOLMSON: So to answer your second question first, we are happy to take an undertaking to provide you with that information if it’s helpful to you, maybe on a confidential basis.
5022 THE CHAIRPERSON: As you please.
5024 MR. MALCOLMSON: And then my friend, Mr. Daniels can give you our views on the SRDU market before and after.
5025 MR. DANIELS: I guess the first key point to note about it is we -- there are a lot of problems with this transaction and you might have heard that we are opposed to it. But it’s not on this basis.
5026 And what I’m worried-- I'm actually going to ask Sarah to just describe to you what actually happens in our experience in the SRD market and then maybe come back and just put it in context because I am a little worried about being misconstrued about it, and I will explain why in a second.
5027 Go ahead, Sarah.
5028 MS. FARRUGIA: Yeah, I mean, I think that to echo what Johnathan has already said, there were two players in the SRDU market before. There will be two players in the SRDU market after this transaction. Rates and prices in the market have been declining which I think signifies competition.
5029 You know, we have Bell plan to continue to offer services in this area. We plan to continue to compete. And so this is one area where we don't feel the transaction should have a bearing.
5030 THE CHAIRPERSON: Thank you. And I will let you finish, Mr. Daniels. But maybe I can just add one small point. You have also heard parties say that the Wholesale Code could be applied in this marketplace so that you might well give us your response to that which I think I can anticipate. But we should hear it from you.
5031 MR. DANIELS: Yeah. I think Sarah has explained that there is really no change in the SRDU market. And the evidence is out there that prices are falling. Our revenues have been going down year over year and we re the new entrant, if you will, and a smaller player in the market. So the notion that there should be some sort of Wholesale Code protection necessary.
5032 The other thing to just keep in mind is that the SRDU market -- part of the competitive forces that’s happening is it’s the build-out of terrestrial and terrestrial alternatives. And that is really going to pick up steam because if you think of all the programs that are out there to expand broadband, that means more terrestrial. That means more options.
5033 So I think that in the face of the facts of where we’ve seen a declining revenue and that thee is different alternatives, that there is really no need to intervene in this market. Not a reason to approve the transaction, mind you, but…
5034 THE CHAIRPERSON: Last question from me and then I will check in with my colleagues.
5035 It’s a very general one. Most of your intervention and earlier submissions have focused on the impact on the wholesale market. And I wonder -- or I should give you an opportunity to simply express what you think the impact of a transaction, if approved, would be on the retail market.
5036 MR. MALCOLMSON: Sure. I will start.
5037 So I think there will be as a result of the market power Rogers acquires there will be an opportunity and incentive on their part to increase retail rates. The argument that competition at the retail level is going to somehow govern their conduct is one that at least we don't necessarily buy. We think that there will be an incentive and a reason to increase retail rates.
5038 The incentive and reason is they will have just acquired a $26 billion company. They have taken on $20 billion of acquisition debt. The new CEO has a mandate to close the Shaw transaction and to pay down acquisition debt and the best way to do that is in two places, retail rates spread over your market share and reducing your wholesale costs. We have talked a lot about the wholesale cost reduction but I think there is an incentive to increase retail pricing.
5039 Secondly, in terms of retail impact, if we are right and that market share will result in a diminution of the money in the system to fund the creation and production of Canadian content, you will see either fewer channels or if you see the same number of channels they will be of lesser quality and there will be less Canadian voices and stories told because there will less money in the system to do that.
5040 THE CHAIRPERSON: Thank you. Thank you for your responses to my questions.
5041 I think my colleagues have some.
5042 Commissioner Anderson?
5043 COMMISSIONER ANDERSON: Thank you. Thank you very much for your submission as well as your written and your oral submissions.
5044 I just have one question. And really, so what I'm hearing is that we should not approve the proposed transaction because of the detrimental effects to the broadcast system. And then the other thing that I'm hearing is that there are so many remedies that are needed from our current regulatory framework that it just doesn't make sense to continue.
5045 So what I'm going to put to you is what we have been hearing all week from the independent discretionary service providers, is that it’s not in their interest for this transaction to not go ahead, and it’s also -- they have reminded us that time is of the essence when we start thinking or asking them, questions about regulatory framework or visions.
5046 So what would you say directly on those two points?
5047 MR. MALCOLMSON: I would say that I don’t envy the position the independents find themselves in. If you think of B.C. and its stable of programming services, relative to the independents, and you see the level of concern we are expressing here and we don’t express it lightly relative to Rogers market power, I think the independents are -- I don't know if terrified is the right word. But they are gravely concerned about their future and I'm not sure they are sharing with you their inner fears about what is going to happen.
5048 That’s what I would say to you.
5049 The second thing I would say to you is sometimes it’s okay for a regulator to say, “No” and ask for more. And I think this is one of those rare instances where you can and you should do that. And I think you can make the system healthier, more vibrant, more competitive if you say, “Rogers, go back to the drawing board. Come back with some divestitures to take your market share down. Come back with some” -- maybe there are remedies.
5050 Maybe there are safeguards that will save this thing, combined with divestitures, but they are not on the table. And I don’t think what they have put in front of you is good enough. And I think it has put you in a difficult position. I don’t envy your deliberations.
5051 MR. DANIELS: If I could just add for a second, Commissioner Anderson. In listening to people earlier this week whop came out in support of the deal -- TLN and the Ethnic Channels Group said -- and I'm paraphrasing. “We just don’t want to be worse off. Protect us from being worse off.”
5052 You heard IBG say, “Oh, we have been negotiating with Rogers up to the last minute.” And then you have seen some other independent producers suddenly change their position or drop out of participating, making deals with Rogers in order to not oppose the transaction, I think because they are forced into the position of grabbing anything while they can right now while they are negotiating, while the hearing is going on, while this issue is still in front, they’re making those deals.
5053 I don’t know for sure what is going on but that’s what I'm reading between the lines, and I'm just putting it out there to say it.
5054 So when you say that they have come forward, I have heard, “I don’t want to be worse off, but we support the deal. At best I’m hoping just not to be worse off.” That doesn't really sound like someone is supporting the deal. That sounds like someone who has made the deal to survive for the next couple of years on the condition that they don’t oppose the transaction. And again, I could be wrong. I’m not part of the negotiations. I’m just trying to read between the lines of what’s going on this week.
5055 And the real question is, well, where are the benefits coming from this transaction? I’ve heard a lot of people talk about maybe it should be this or that, but we’re talking about real harm to the wholesale system, and we don’t see how that can be solved without re-examining and re-approaching this transaction entirely.
5056 THE CHAIRPERSON: Thank you, Commissioner Anderson.
5057 Commissioner Desmond?
5058 COMMISSIONER DESMOND: Thank you. I just have a quick question. It’s with respect to paragraph 47 of your submission this afternoon. And in your comments, you’ve referred to the Astral decision in 2012, which now is almost 10 years old, and I suspect that Rogers will tell us that the market has changed considerably since that time. The circumstances are different. So I’m just curious how you would respond to that. Why should we look at Astral as sort of a precedent, or something to rely upon when things have changed significantly in the last 10 years?
5059 MR. MALCOLMSON: It’s been 10 years. I’m getting old. I had the misfortune of being outside counsel on that file and losing the case.
5060 But anyway, yes, 10 years have passed, but it’s the same -- the issue is the same. And when I say that, the market that you’re considering, the wholesale market, the relationship between the programmer and the BDU, is the exact same market that existed in 2012.
5061 And by that, I mean the exact same market. It’s the same issue. It’s the question of how much leverage does the programmer have, which was the issue in Astral, versus the BDU. And you concluded too much leverage for the programmer, too much market share that’s going to result in the smaller BDUs, the CCSAs of the world, being charged exorbitant rates for content. That was the issue then.
5062 We’ve now flipped the coin 10 years later, and the issue is a large BDU and programmers seeking access to that BDU platform. And as we said in our presentation, we think that the -- if a denial of Astral was justified in 2012, a denial of this transaction is even more justified. And I say that because of the gatekeeper role that the BDU plays.
5063 Programmers are dependent on BDUs for access to the linear system, and they’re dependent on BDU internet service providers for access to the new frontier of internet distribution. So that’s why the precedent remain relevant.
5064 And I’ll just leave you with one thought. In the US, Comcast and Time Warner tried to merge. So it was a BDU transaction. Programming services were opposed. Comcast and Time Warner were trying to acquire a 30 percent market share.
5065 And the regulators looked at it in that instance and they said that the combined entity would become a “unavoidable gatekeeper”. “Unavoidable” meaning, if you wanted to have a viable business, you needed to go to them. You needed to access to their platform. You needed them to pay your reasonable rates in order to survive. And that transaction couldn’t proceed due to concerns on the part of the regulators.
5066 This is more market share in a smaller market, and it’s the same issue. They will become an unavoidable gatekeeper.
5067 COMMISSIONER DESMOND: Okay. Thank you.
5068 THE CHAIRPERSON: Commissioner Lafontaine?
5069 COMMISSIONER LAFONTAINE: Thank you very much, Mr. Chair.
5070 And thank you very much for your presentation this afternoon. I just have a quick question for you about the SRDU TRDU. I appreciate that this in not the crux of the proceeding for you as an intervenor, but it has been raised as a key issue for other intervenors.
5071 And so, Mr. Daniels, I’m wondering if you could speak a little bit more about the terrestrial relay distribution buildout, because you’d indicated that that is coming and we shouldn’t really worry about competition in this market -- this portion of the marketplace because of this potential for buildouts.
5072 So if you could just talk a little bit about that and how -- what kind of time horizon you would see this as taking place.
5073 MR. DANIELS: What I’m referring to, they’re satellite-only communities, right, like, in terms of communities that only -- their only access is satellite in terms of them. So what you’re talking about here are cable companies who get their back-call, and because they’re in a satellite-only community, the only option that they really have is either us or Shaw Direct.
5074 And our first point was, “Well, that’s the SRDU market and things are changing” -- sorry, that our market -- like, we’re competing vigorously in it.
5075 What I was trying to say about -- in terms of that there’s dynamic changing is that more fibre is being built. So when we build fibre, it’s either us or others. There’s the UBF, the Universal Broadband Fund; there’s the CRTC Fund; there’s all these that are building fibre. In many cases, what that means is that fibre backbones be expended to communities.
5076 And I don’t want to say that’s always the case. There are cases in Northern Quebec, in Nunavut -- sorry, not Nunavut -- I’m mispronouncing the word -- but ---
5077 THE CHAIRPERSON: Nunavik.
5078 MR. DANIELS: Thank you -- so where you’re still going to have satellite as the backbone even though you have fibre within the community. But there are many, many situations where it’s a fibre backbone, and if there’s a company that’s there, that’s going to open up terrestrial backbone options for those cable companies.
5079 It’s also going to impact the DTH market, as it’s going to decrease as well. The DTH market’s going to go down because there’s going to be cable as alternatives. And that -- I mean, I can see that ourselves in Northwestel, right, where we’re building fibre to the home. In partnership and thanks to the support of the CRTC, that’s going to provide a cable alternate or a BDU alternative over fibre. That’s at the retail, but you’re asking me about the wholesale.
5080 I don’t know, Sarah, if there’s anything else I’m missing in that.
5081 MS. FARRUGIA: No, I think you covered it, Jonathan.
5082 COMMISSIONER LAFONTAINE: So it’s really a matter of -- it’s years? It’s not -- in terms of a time horizon as an alternative relay distribution service for, say, CCSA members?
5083 MR. DANIELS: Yeah. Like, it’s not tomorrow this is going to happen, or anything like that. But the difference is everyone’s been expanding, but it’s happening -- now the funds are starting to flow, and the build is happening over the next three years. This transaction and what the market dynamics -- and I’m just saying the trajectory of it suggests that there’s going to be more alternatives available.
5084 COMMISSIONER LAFONTAINE: Perfect. Thank you very much.
5085 Thank you, Mr. Chair.
5086 THE CHAIRPERSON: Thank you. Thank you for your presence today and your participation throughout the proceeding.
5087 Madam Secretary. Madame la secrétaire.
5088 THE SECRETARY: Yes, thank you. We will take a 15-minute break and come back at 10 after five. Thank you.
--- Upon recessing at 4:52 a.m./
--- L'audience est suspendue à 16h52
--- Upon resuming at 5:05 a.m./
--- L'audience est reprise à 17h05
5089 THE CHAIRPERSON: Madam Secretary, please go ahead.
5090 THE SECRETARY: Yes, thank you. We will now hear the presentation of Documentary Organization of Canada.
5091 Please introduce yourself, and you will have 15 minutes for your presentation.
5092 MS. SPRING: Thank you for the opportunity to speak with the Commission today. My name is Sarah Spring. I am the Executive Director of the Documentary Organization of Canada.
5093 I have had the pleasure of advocating on behalf of my community for just under one year, following 15 years as an independent documentary producer and found of a production company that had the privilege of being support multiple times over the years by Rogers Group of Funds.
5094 It is an honour to be able to represent just over 1000 dedicated Canadian documentary creators before the Commission today.
5095 The Documentary Organization of Canada, known as DOC, speaks for documentary filmmakers across the country. We are a national non-profit organization that advocates on behalf of our members toward an equitable, sustainable documentary film industry. Doc works to ensure that not just Canadians, but people around the world are able to enjoy high-quality original programs that reflect Canadian events, lives, and values, told from the perspective of professional independent storytellers.
5096 A thriving documentary community connects Canadians coast to coast with shared stories and values, and brings our perspective to the world.
5097 Point-of-view documentaries, or les films d’auteurs, expose Canadian audiences to ideas that question or challenge received wisdom and the status quo.
5098 The documentary genre, which Canadians did so much to develop and make popular around the world, remains an ideal tool to provide audiences with trustworthy and in-depth information. The popularity of documentaries internationally, and their ease of access through streaming services also means that non-Canadians have much greater knowledge of our country, our values, and our peoples.
5099 It is important that the Commission continues to do everything possible to ensure the continuous creation and dissemination of quality Canadian documentary programs.
5100 Every year, Rogers makes a significant contribution to Canadian documentary films through its Certified Independent Production Funds.
5101 In 2020, the Rogers Documentary Fund contributed $4 million to 48 projects, and the Rogers Cable Fund supported many of our members' one-offs and series.
5102 Rogers is a key partner for Canadian documentary producers, and the Rogers Documentary Fund is the only CIPF solely dedicated to author-driven documentary films.
5103 Documentary films are a highly sought-after form of entertainment, information, and inspiration, but their funding does remain fragile. Rogers plays an important role, an extremely important role, I should emphasize, in our industry's financial health, and documentarians' abilities to sustain themselves and their companies.
5104 Rogers Communications Inc. is proposing a tangible benefits package totalling 5.76 million, equivalent to 10 percent of the proposed applicable value of the broadcasting assets involved in this transaction.
5105 This is consistent with the guideline sent out in the Commission's Tangible Benefits Policy; however, this policy clearly states that the Commission may choose to exercise the discretion to depart from the policy, and I quote, "where called for to meet the public interest."
5106 In light of the unprecedented size and scope of this transaction, DOC recommends that the CRTC require Rogers to provide tangible benefit commitments that are commensurate with the size and impact of this transaction.
5107 DOC notes that regionally-based Canadian documentary producers are ideally suited to assist Rogers in meeting the Commission's policy goals set out in the policy framework for local and community television.
5108 DOC believes that encouraging local broadcasters such as Rogers to commission original, local, and regional programming from independent producers provides important opportunities for the next generation of Canadian documentary producers, as well as helping Rogers to fulfil its regulatory commitments.
5109 DOC would like to see the CRTC impose, as a condition of licence, that Rogers file detailed annual reports with respect to the fulfillment of any benefit commitments arising out of this transaction so DOC can monitor how our members are being supported by the corporation.
5110 DOC represents over 1,000 documentary creators across the country. Our membership has grown significantly over the last year when DOC took the decision to remove the financial barrier to entry for documentary creators who are Black, Indigenous, and people of colour.
5111 This expanded our organization by one third, and furthered DOC's mandate to put diversity and equity at the heart of all the organization's work and programs.
5112 There is no question that DOC members enable Canadian broadcasters to fulfil their own mandate and share diversity of voices with the Canadian public.
5113 Some recent notable films by DOC members include, " Kímmapiiyipitssini: The Meaning of Empathy" in which Elle-Máijá Tailfeathers turned the camera on her own -- I'm sorry, I'm in a space where the lighting just extinguished.
5114 Some recent notable films by DOC members include, " Kímmapiiyipitssini: The Meaning of Empathy" in which Elle-Máijá Tailfeathers turns the camera on her own community of the Kainai First Nation in Alberta, and how they are using empathy and compassion in the fight against the opioid crisis; "Dear Jackie", Henri Pardo's cinematic letter to baseball player Jackie Robinson and his imprint on Montreal's Black community, who share their experiences of racial inequality in Quebec; "Wuhan Wuhan", by Yung Chang that unfolds over February and March 2020 at the height of the pandemic in Wuhan City as frontline healthcare workers and Chinese physicians grappled with the terrifying new virus; and "Yinta", currently in the process of documenting Wet'suwetan land defenders in their fight against Coastal Gaslink Pipeline. And his director was arrested last week and spent a weekend in police custody for doing his job as a documentarian.
5115 Further to this point about DOC members' work, and diversity of voices, I would like to take a moment to address a point that was brought to my attention during a previous session this week.
5116 In response to a question by the Commissioner the other day regarding existing funds specifically directed towards under-represented groups, I would like to note that the former -- a former CIPF that operated as a CIFES (phonetic) for over 20 years has been repositioned as a fund for Black and racially diverse filmmakers is now called the Canadian Independent Screen Fund for Black and People of Colour Creators, the CISF.
5117 The fund is unique in its mandate to support emerging, mid-level, and experienced filmmakers from these under-represented communities and provide the perfect opportunity for Rogers to demonstrate their commitment to filmmakers from racially diverse communities across the country.
5118 Thank you, Mr. Chairman and Commissioners for giving me the opportunity to set out DOC's views and concerns with respect to this very important transaction.
5119 We are confident that the Commission will ensure that any approval will bring appropriate benefits to the Canadian public as a whole, as well as to Canada's producers of high-quality documentary programs.
5120 I will do my best to answer any questions you might have, and I do apologize for the lighting.
5121 THE CHAIRPERSON: Not at all.
5122 MS. SPRING: If you can believe it, I am actually ---
5123 THE CHAIRPERSON: Not at all. You are both -- you're audible and visible. Just think of it as you're working with a green screen. We can see you ---
5124 MS. SPRING: I know. It's ---
5125 THE CHAIRPERSON: We can see you perfectly well. Thank you very much for your presentation. I'll turn the microphone to Commissioner Desmond.
5126 MS. SPRING: Okay. Thank you.
5127 COMMISSIONER DESMOND: Good afternoon and thank you for your presentation.
5128 I just have a few questions. I'm going to start by looking at your submission that you did file with the Commission. And I'm looking specifically at paragraph 4 of that document.
5129 MS. SPRING: Okay. Yes.
5130 COMMISSIONER DESMOND: And I'm looking just in the middle of that paragraph. You do note that in your view, you don’t support the amount of the tangible benefit package as being commensurate with the size and nature of the transaction.
5131 So I'm just curious -- or I guess I could ask you to clarify, is it the value of the transaction? Do you take issue with that as it's been proposed by Rogers?
5132 MS. SPRING: Yeah. It's the small amount that goes towards tangible benefits. I mean, the Independent Screen Funds are essential at this point to the healthy ecosystem, especially for documentary filmmakers. There are not an enormous variety of places to go for support for documentary films. So the Independent Production Funds are essential. And Rogers Documentary Fund is essential, as is the Rogers Cable Fund.
5133 So such a small amount really just does not support the industry in a way that I believe this transaction warrants.
5134 COMMISSIONER DESMOND: So it sounds like it's the tangible benefits in particular that you're most concerned with?
5135 MS. SPRING: Absolutely, yes. I'm sorry if that wasn’t clear. It's the amount of tangible benefits, yes.
5136 COMMISSIONER DESMOND: Okay, perfect.
5137 And I think in your submission, you would like to see some of those benefits directed, perhaps, to your organization. Do you have -- like are you looking for a particular amount, a specific amount to be directed to your organization of the tangible benefit package?
5138 MS. SPRING: I'm not looking for money for my organization. I'm looking for financial support for our members to continue to create documentary films in a sustainable and equitable way.
5139 The important point is for these funds to continue to exist, to continue to grow.
5140 You know, I think I mentioned in my presentation that as soon as DOC removed the financial barrier to entry to join DOC, our membership exploded. We look at all of the different funds that have been set up for racialized filmmakers who are over-subscribed. we're looking at an enormous base of creators out there that if the funding is there, if those barriers are removed, there's a wealth of content that can be created, and these are the content creators that all of the institutions are saying that they are excited to work with. And this represents almost half of DOC's membership.
5141 COMMISSIONER DESMOND: Yes, thank you. I should have asked you specifically about the money flowing to the Canadian documentaries.
5142 But do you have a specific number in mind in terms of what an appropriate tangible benefit package would be?
5143 MS. SPRING: I don’t have a specific number in mind. I have been talking to a lot of our partners that work with our documentary filmmakers about how quickly DOC is growing and how this creative community of content creators are growing.
5144 So we could look at percent increase. You know, a year ago we had 750 members. Now we have over 1,000 members. There's a lot of people that are out there that are looking to create Canadian content, and fulfil broadcasters' mandates on a number of levels.
5145 So I think that we can look at proportional increases, but I don’t have an actual specific number to recommend today.
5146 COMMISSIONER DESMOND: And you spoke about the importance of the Rogers funds. Have you been following the conversation about how the Shaw Rocket Funds and the Rogers Documentary Funds would be pooled and then divided in two? And I'm just wondering if you have a view on that or if it would have an impact on Canadian documentaries, in your view?
5147 MS. SPRING: I'm sorry that I wasn’t available to monitor the conversations this week, unfortunately. So I am not aware of that. I know that the Documentary Fund is 16 per cent of their contributions. I’m not sure what the per cent of the Shaw Rocket Fund. Is it also 16 per cent?
5148 COMMISSIONER DESMOND: Okay, that’s okay. I don’t -- I just wondered if ---
5149 MS. SPRING: Okay.
5150 COMMISSIONER DESMOND: --- you’ve been following the conversation on that, and ---
5151 MS. SPRING: Yes, I apologize. I haven’t had a chance to. But I can say that there is a specialized curation of documentary films, which take a number of factors into mind. So, you know, if someone is responsible for commission -- I mean, not commissioning, but for financing a documentary film, there are a lot of factors that need to come to mind. It can’t just be someone who’s familiar with, you know, the general art of filmmaking. We’re looking at, you know, perspective, who’s on screen, what’s the relationship between the filmmakers and the subject, what is the terrain, who is making this kind of work regionally. There’s a lot of different factors that come into play.
5152 So, consolidation of funds would concern me right off the bat because I would be worried about a lack of specialization and a true rating who is accessing this funding. And there’s conversations that have really been very important in the documentary film industry around representation, and this is a key vocal and, you know, very prominent discussion right now.
5153 So, I don’t know about the sector that is supported by the Shaw Rocket Fund. I don’t know if these conversations are as prominent. So, that’s another thing that I would be flagging as something to consider.
5154 COMMISSIONER DESMOND: Okay, thank you. And I just have one -- maybe one last question. And you spoke about your request to have reports filed. Can you just expand a little bit about what you mean by that? What kind of information you’d be looking for? How often you would want to see a report?
5155 MS. SPRING: Yes. I mean, we are seeing
-- there’s a lack of data collection about -- in general, in the industry at this moment, how many documentary films are funded, who are making these films, who are the key creative teams, who are the productions teams, who owns the production company that is, you know, creating the content. So, at least annual reports that get into that level of detail would be really important. So, it’s not just about how many documentaries are created. You know, it’s about really breaking down the data of who is making those films.
5156 The Racial Equity Media Collective just came out with a document today where they were looking at data collection, race-based data collection in Canada and how there’s almost no information available at this point. A lot of organizations are just starting to do this work. So, DOC is looking at not only how many films are being supported, but also really breaking that down and wanting to really obligate every single entity in the country to be collecting that data in order to be talking about what our goals are, how do we meet these thresholds and to be able to account for where we’ve arrived in five years’ time.
5157 COMMISSIONER DESMOND: Okay, thank you so much. Those are my questions, Mr. Chair.
5158 THE CHAIRPERSON: Thank you. Commissioner Anderson?
5159 COMMISSIONER ANDERSON: Thank you for your submissions and thank you for appearing here today. I’ve got a bit of a difficult question, but I’m just going to say it anyways because I think it’s important to ask. One of the intervenors this week noticed a lack of diversity within Rogers’ and Shaw’s leadership teams that appeared before us. And you, today, mentioned a new independent fund. Was it the Canadian Independent Screen Fund for BPOC Creators?
5160 MS. SPRING: Yes.
5161 COMMISSIONER ANDERSON: So, given that there’s some discretion on what funds to contribute money to, do you think that diversity at the leadership level would perhaps affect the likeliness that a corporation would want to contribute to a fund such as the Canadian Independent Screen Fund for BPOC Creators?
5162 MS. SPRING: I mean, statistically, when you have racial equity at higher levels of decision-making, you are seeing more projects that are led by racially diverse creators getting funded. There’s both anecdotal and statistical evidence to support that. So, absolutely, I think that this is important if we’re talking as an entire industry about wanting to move towards a more equitable, sustainable industry for everyone.
5163 I think that it’s important to have multiple different funds. So, it’s important to have the Rogers Documentary Fund. It is very important to have a fund like the Canadian Independent Screen Fund for BPOC Creators. There’s the Indigenous Screen Office that is consistently oversubscribed when they have a funding program. The creators are out there and ready to make content.
5164 So, the CISF, for example, when it -- you know, it’s based on the CIFVF, the Canadian Independent Film and Video Fund that ran for over 20 years, supported many, many projects, is interesting because it doesn’t require a broadcaster trigger in order to access funding; therefore, removing a very specific barrier to entry, which filmmakers have, for example, when they’re trying to work with the Canada Media Fund.
5165 So, all of these different funds can contribute towards a healthy and equitable industry, but of course having diversity at the highest level of decision-making, I mean, this is a -- it’s a must-have. I think as a country we can’t even question whether that’s an urgent necessity right now. Of course it is. Yes.
5166 COMMISSIONER ANDERSON: Thanks very much for your response.
5167 THE CHAIRPERSON: Thank you. Thank you very much for appearing and participating in our proceeding, and I’ll turn the microphone to the secretary.
5168 MS. LEVESQUE: Thank you. We will take a small two-minute break to let the last participant come into the hearing room.
5169 THE CHAIRPERSON: Thank you, Madam Secretary.
--- Upon recessing at 5:23 p.m./
--- L'audience est suspendue à 17h23
--- Upon resuming at 5:26 p.m./
--- L'audience est reprise à 17h26
5170 THE CHAIRPERSON: Madam Secretary, please go ahead.
5171 MS. LEVESQUE: Thank you. We will now hear the presentation of Beanfield Technologies Inc. Please introduce yourself and your colleagues, and you will have 10 minutes for your presentation.
5172 MR. ARMSTRONG: Thank you. Mr. Chair, Mesdames Commissioners, and CRTC staff. This is the first time we’ve done this, so forgive us. We’re a little nervous. Good evening. My name is Dan Armstrong. I co-founded Beanfield Technologies more than 30 years ago when I was 15 years old with a spool of fibre in the Liberty Village neighbourhood of Downtown Toronto. The extensive fibre networks we operate in Toronto, Ottawa-Gatineau and Montreal are built on unceded traditional lands that are home to diverse First Nations, Inuit and Métis peoples for whose hospitality we are privileged to benefit.
5173 I would like to ask the panel members to introduce themselves, starting from your far left.
5174 MR. HOFLEY: I’m Todd Hofley. I am a community organizer who specializes in the unique needs of dense, urban and vertical communities. Two years ago, I joined Beanfield to apply these lessons to our growing residential business.
5175 MR. FERNANDES: I’m Jay Fernandes. I joined Beanfield more than a decade ago, and I’m the company’s Chief Operating Officer.
5176 MR. ABRAMSON: I’m Bram Abramson, counsel to Beanfield, and I admit it’s not my first time.
5177 MR. ARMSTRONG: Mr. Chair, Mesdames Commissioners, it’s been a long week. We appreciate your
5178 attention, and hopefully we don’t put you to sleep early.
5179 Beanfield began life in the late 1980s as a community-centred networking provider. We started connecting small businesses, then began laying fibre. In 2012, we added residential services, mostly in tall buildings because we’re good at fibering them up.
5180 To serve consumers, we needed TV. So, in 2012, we coded an IPTV platform from the ground up and launched it ourselves before scaling up to third-party technology. And, like nearly every BDU in Canada, we joined the CCSA. A BDU entrant cannot compete in this country as a stand-alone.
5181 In 2019, we accepted a major financial investment and separated Beanfield’s BDU out into a separate entity called Walnut TV.
5182 MR. FERNANDES: We compete every day with incumbents by building out fibre and selling any
5183 combination of $50, net neutral, Gigabit Internet, home phone and television. So far, it’s working. PC Magazine rates us the fastest ISP in Canada. Readers of
5184 Toronto’s NOW Magazine voted us Toronto’s favourite Internet provider. Many of our subscribers are internet-only households.
5185 But enough want TV, that offering it is the better approach to offer it. This approach is common. It’s part of the basic economics of the BDU business today, but not all BDUs are the same. Where there is vertical integration between a BDU and programming—that BDU can slow down competitors through administrative barriers to the affiliated programming
5186 services. The programming service controls launch permissions, so does the relay distributors. Rogers/Shaw would have both.
5187 With enough scope and scale, a vertically-integrated BDU can be part of an arrangement to tie access to exclusive content to a platform subscription.
5188 With enough scope and scale, the same BDU can make bulk billing arrangements that prevent competitors from coming into the building.
5189 I will start with content exclusivity because it’s been a hot topic. And for good reasons.
5190 Exclusivity for competing programming services makes sense. A CTV, Netflix, HBO Canada, or even the late great Shomi ought to go head-to-head. A consumer can easily switch between them.
5191 But content exclusivity is detrimental when it’s about driving subscribers to competing platforms between which switching requires the physical act of switching providers.
5192 We call that the difference between content exclusivity and platform exclusivity.
5193 Beanfield agrees with other interveners on this point. The scale sought by this application would let Rogers-Shaw slow down BDU competitors like Walnut, make Rogers’ own content platform-exclusive, and make deals to bring Hollywood content in, as platform-exclusive. You should impose a safeguard that prevents platform exclusivity.
5194 MR. ABRAMSON: The safeguard would be similar to paragraphs 5 and 6 of the Digital Media exemption order, but omit the word “television”. And you will see in the footnote to our presentation the detailed wording of what that looks like.
5195 That would prohibit a merged Rogers-Shaw from levering market power in the traditional closed system to tie content on the open Internet to a platform subscription, something we think today is no longer appropriate.
5196 This approach applies what Beanfield submits is an Internet-era lens.
5197 The Internet is all about innovation without permission. Market permeability and enduser choiceare two expressions of that.
5198 To start with market permeability, there are lots of ways to think about competition, but a market permeability lens looks at barriers to entry. What keeps a new competitor from coming in to innovate or to address unmet needs?
5199 MR. FERNANDES: Putting two major BDUs together under the same roof as programming that competing BDUs must offer, creates a vertically-integrated group that run competing BDUs through hoops before they can license and launch key programming at reasonable rates.
5200 The proposals our submission makes include (a) public rate cards to ensure small BDU competitors can get timely access to necessary channels to launch, and (b) standardized technical requirements to ensure securing launch permission, whether from the programmer or relay distributor, isn’t a backdoor way to slow down competitors.
5201 The second expression of innovation without permission we’re asking you to consider is
5202 end-user choice.
5203 MR. ABRAMSON: “End-user choice” is core to your rules around Multi-Dwelling Unit buildings. In this sector, those rules are set out in the Broadcasting Distribution Regulations; in your 2002-51 broadcasting decision on MDU inside wire; and in broadcast decisions applying these rules.
5204 Any BDU can fibre up a building. Anyone can interconnect with in-building coax to distribute a BDU.
5205 But there’s the following ambiguity. In a rental building, Broadcast Notice 2003-18 says individual residents exercise end-user choice in their own right. But in a condo building, end-user choice is exercised by the Condominium Corporation which typically means its board is choosing, or continuing a developer’s choice, of what amounts to a monopoly provider.
5206 The Commission first applied that distinction in finding against Novus, and for Bell, in 2003.
5207 MR. HOFLEY: Now, you finally backed away from that distinction with Beanfield’s 2013 dispute application. That decision was on the telecom side -- 2016-324.
5208 In it, the condo corporation aligned with existing service providers to keep us out of the buildings, but the Commission said no. Beanfield needs to be let in.
5209 So in line with our written submissions, we are asking today for you to specifically confirm, in your decision on this Application, that any merged Rogers must exercise end-user choice under the Broadcast Distribution Regs at the individual resident level, whether the building houses tenants, owners, or any mix of these.
5210 And here is why that matters.
5211 These bulk billing arrangements, including practices like burying the payments in condominium fees, are by far the biggest barrier to fibre investment from companies like ours. They happen within condo MDUs far more than rental MDUs, in part because of the lingering effects of your 2003 broadcast decision, and notwithstanding what we think endedthat era in your 2016 Beanfield decision.
5212 Combining Rogers and Shaw means combining the coax incumbents for MDUs across most of Canada’s largest cities, affording them the scale and scope to focus even more squarely on these bulk billing arrangements, and on strategies to continue to entrench them.
5213 That is why we are asking the Commission to state clearly in its decision on this application that end-user choice is to be exercised at the end-user level, and that the finding in its 2003-18 broadcasting decision on “the concept of end-user choice” is no longer applicable, just as it no longer applied in 2016.
5214 MR. ARMSTRONG: The Rogers-Shaw combination would nest BDU and relay distribution control over half of subscribing English-language households within a V.-I. group that controls launch permissions for must-have content like Rogers SportsNet.
5215 That creates the incentive and opportunity to handicap small and emerging competitors, like Walnut, from coming to the market unbloodied.
5216 An MDU framework that says that it’s okay to insert a condo board in between end-users and their provider choice is a recipe for locking out small and emerging competitors.
5217 So we have asked you to impose competitive safeguards that would prevent any combined Rogers-Shaw from acting on these incentives.
5218 Having done that, you should then turn your attention to the wider market. Like in 2004 when you adjudicated disputes between programmers and StarChoice but then launched a broader proceeding that led to the Good Commercial Practices Code. And in 2010 when you imposed safeguards on Shaw-Canwest and immediately launched the Vertical Integration proceeding. And in 2013 when you approved the Bell-Astral deal, the second time around, and immediately launched TalkTV.
5219 But the place to start is by attending to the real harms a merger of this scale will create for market permeability and for end-user choice.
5220 MR. FERNANDES: Before we close, we would like to note that we read this morning that Rogers has apparently acquired Clear Cable to Hamilton Technology that plays a key role in supporting many independent BDUs. This is concerning to us in terms of understanding Rogers’ market power and what it will mean to the capacity of independent challengers to enter or remain in the market.
5221 MR. ARMSTRONG: And we welcome your questions.
5222 THE CHAIRPERSON: Thank you very much for your submission.
5223 And Commissioner Lafontaine has some questions for you.
5224 I almost made it through the whole hearing without forgetting who was to ask the next question.
5225 Please go ahead, Commissioner Lafontaine.
5226 COMMISSIONER LAFONTAINE:
5227 Thank you very much, Mr. Chair.
5228 And thank you very much for your presentation this afternoon.
5229 And for a first time before the Commission there is no need to be nervous. So far, so good, I would say. So we will see how I do from here.
5230 So here we go. Again, thank you for your presentation. I have a number of questions for you today that I would like to seek some clarification on, the proposals that you have put forward.
5231 I note that Rogers has put forward proposals for independent broadcasters and I do want to get your input on a piece of that a little bit later. But they have not, to my understanding, put anything significant forward for independent broadcasting distribution undertakings.
5232 I do note in your submission, in your written submission, that Beanfield has proposed the following at paragraph 11:
5233 “That the Commission lower the entry bar to the NBDU market and establish default entry level affiliation agreements that would provide for market entry by parties meeting the necessary criteria.” (As read)
5234 I don’t believe you mentioned that in your presentation today. Is this still part of your submission, something that is important to your company? And if it is, could you just explain a little bit about how you think it might work?
5235 MR. ABRAMSON: Thank you, Commissioner Lafontaine.
5236 You know, in our written submission Beanfield talked about entry level affiliation agreements and the nature of tariffs and then in its oral submission today it talked about public rate cards. So in a sense you question is asking what is the difference between those and how far apart are they?
5237 I suppose, you know, Beanfield is certainly a company with a deep telecommunications background and is familiar with tariffs. What would a public rate car look like and how different would it be from a tariff. At the end of the day, they are both sets of standard arrangements that include both pricing, but it’s never just pricing. It’s what you get for the price. And there always have to be some sort of terms that explain that.
5238 And so, we haven’t, I don’t think, put our minds to exactly what such a public rate card or even a tariff-style arrangement might look like. We’d be happy to do so if helpful, but at this stage, we didn’t intend to revise our proposal, and I think it’s really just another expression of a similar idea.
5239 COMMISSIONER LAFONTAINE: Okay, thank you. And you’re referring to -- when you’re referring to a rate card, you’re referring to wholesale rates; is that correct?
5240 MR. ABRAMSON: Correct.
5241 COMMISSIONER LAFONTAINE: Okay, perfect. Thank you.
5242 So, my next question relates to exclusivity, which you did refer to here. And we did hear submissions from Cogeco and Telus, and I believe that your submission is in line with their recommendations. Again, I’m wondering if you could just elaborate a little bit about why this is essential for a small BDU in the marketplace.
5243 MR. ABRAMSON: Thank you, Madame Commissioner Lafontaine, and I’ll ask Mr. Armstrong to speak to that.
5244 MR. ARMSTRONG: Sure. So, I mean, the -- a BDU and the internet service that it rides on in this day and age are inextricably linked in our opinion. And when a bulk arrangement is made in a building, that locks out all competition. And what’s happening is no other service providers are building into these buildings, so essentially the building has a monopoly provider in it, and those -- they’re only required to notify 30 days before the agreement ends, and there’s no time for anyone else to build into the building. So, these exclusive arrangements have essentially thrown us back to the pre-‘80s telecom days with just a patchwork of monopolies. MR. ABRAMSON: And I suppose I should add pre-‘80s telecom days, but also pre-‘80s broadcasting days, or at least pre-2000-and-whatever it is when the inside wire rules were adopted for -- specifically for BDUs under the broadcasting distribution regulations. And I should really underline that the issue that we’re underlining today, and it gives Beanfield so much trouble, is when it was specifically adopted as a broadcasting decision. And although it certainly influenced how companies behave themselves in the telecom market, it comes from broadcast world, and we’re seeking clarification in the broadcast world.
5245 COMMISSIONER LAFONTAINE: Right. And so, when you’re -- in terms of your response, when you’re referring to exclusivity, you’re talking about exclusivity within a multiple-unit dwelling -- a multiple dwelling unit?
5246 MR. ARMSTRONG: Yes, correct.
5247 COMMISSIONER LAFONTAINE: Yes, thank you. Thank you. I -- then perhaps I might have misunderstood one piece of your submission. When I was referring to Telus and Corus -- Cogeco, rather, excuse me, I was referring to the non-exclusivity of content -- Rogers’ content. So -- that they’re concerned that Rogers would withhold their programming services, their programming to BDUs should the application be approved. Is that also a concern for your organization?
5248 MR. ARMSTRONG: Very much so. I mean, our BDU has had a really tough time competing against the two incumbents as while they’re required to make their content available, as Jay mentioned, they do make us jump through a lot of hoops for it, and they do a lot of things. Like, we’re very proud to build a 4K platform, and Rogers withheld 4K content from us for almost three years just because -- well, we don’t know why. So, we’re worried about things like that.
5249 So, absolutely. I mean, Rogers owns the largest baseball team, the Raptors. They own, you know, the largest cable company. I mean, this is going to be a real monopoly that we will not be able to operate a BDU if they become protectionist.
5250 COMMISSIONER LAFONTAINE: Thank you for that. Now, I’d like to tap into your technical expertise, if I may.
5251 So, one of the proposals, or part of the proposal that Rogers has put forward for independent broadcasters relates to carriage of X-number of independent services for a particular period of time. So, that’s one piece. But what they also talk about, and you referred to this piece in your submission, is facilitating or assisting independent broadcasters with the preparation or the creation of apps to be carried on their OTT platform, and then the set top box data.
5252 So, I’d like to talk to you about this proposal on the app side. Again, you’ve made submissions here about the importance of being able to access the -- I guess the foreign content. I’ve heard a number -- we’ve heard a number of issues that have been raised about this. One being independent services might not be distributed on the regulated cable platform, that they will be relegated to the OTT or that they won’t have access. So, anyway, I think it will be interesting to hear from you about what kind of value you think that this part of Rogers’ proposal will be to the broadcasting system and what issues it might create for a company like yourself.
5253 MR. ARMSTRONG: Sure. Actually, this is something I’m fairly passionate about. I mean, what this essentially does is this forces a lot of the independent channels to code their applications for a proprietary platform. And that proprietary platform is only run essentially by these large incumbents, and that is going to have precisely the opposite effect of what we want. Because what you’re going to do is you’re going to make them now the main gatekeeper with their application for all of this content. I mean, it really is the epitome of platform exclusivity when you think about it.
5254 COMMISSIONER LAFONTAINE: And so, the apps that are created, as you say, will be proprietary to the Comcast or to the Rogers IPTV platform, and your BDU undertakings wouldn’t be able to distribute these apps once created; is that correct?
5255 MR. ARMSTRONG: Exactly.
5256 MR. ABRAMSON: And if I may add, you know, I know that this is something we had long passionate conversations about indeed, but one of them was, you know, were really around adopting a standards-based approach. You know, whether we’re in the world of coding apps or whether in -- we’re in the world of coding TV apps, they’re typically a small number of large ecosystems. And the question is always to what extent can the activity of coding be purposed to multiple platforms at once in a way that is platform agnostic or that is standards-based.
5257 And so, certainly one conversation I know we had, and if anyone wants to add detail by all means, was really around to what extent, if this is to be the approach, does the Commission have a role to play in assuring that these efforts go towards activities that are based on standards, and open standards rather than proprietary ones, so that those who are developing apps and who have limited resources and time are able to use those efforts to make their apps available on many platforms, and not just on a proprietary Comcast one.
5258 COMMISSIONER LAFONTAINE: Thank you for that. I’m going to switch gears, and I’d like to ask you a couple of questions about satellite relay distribution undertakings, or SRDUs. A number of BDUs, including yourselves and the CCSA, have expressed concerns that Rogers may have the incentive and ability to alter the terms and conditions of service with respect to the transport of signals, withhold access to the signals on its -- as well as withhold access to its signals on its SRDU and TRDUs.
5259 I’m wondering if you could elaborate a little bit more about why this is an issue for you, for your company, whether you use the Shaw SRDU/TRDU services. If you could provide some more information about that, that would be helpful.
5260 MR. ARMSTRONG: Sure. Actually, when you think about it, that’s actually the other side of the same coin with the apps. They become the gatekeeper of all of the signals.
5261 In the internet world, we have a very open architecture. There’s peering and exchange points that are relatively democratic where people go and pick up their content. But in the video world, we have these relay distribution undertakings, whether satellite or terrestrial. And the market really has just barely enough of them there now that they’re able to regulate themselves.
5262 We actually use Bell as our TRDU, and they outright refused us for a long time, and there are still issues with getting channels from some of them, because they just won’t give them to you. So, with less TRDUs in the marketplace, I think you’re going to have an issue with people withholding content.
5263 MR. ABRAMSON: Yes, I should add, and I think a lot of these what would sometimes appear, refusals are often, you know, administrative barriers, and the slow process when you’re not the biggest customer in town, and I think Beanfield well understands that. But, you know, the -- especially, I think, seen from the standpoint of a company that’s experienced with the internet, the working of competitive market in relay distribution undertaking simply is not there for a variety of reasons, one of them is that we’re really talking about two things, the availability of signals, and then the transcoding of the signals to particular profiles, which is a somewhat fraud activity, to be honest.
5264 And I will say that when Beanfield noted the acquisition, for instance, of Clear Cable by Rogers today, one of the questions that it really has -- and we don’t have an answer. We hope that one will be placed on the record -- is how that affects the relay distribution market.
5265 COMMISSIONER LAFONTAINE: Thank you. My next question relates to one of your recommendations. And I’m going to read it. And it is as follows. I believe -- I didn’t -- I thought I’d written down the paragraph number, but I -- here we go:
5266 “The Commission should assign a separate exemption order and provide a list for transcoding services to be delivered at a tier one city for efficiency.”
5267 Can you please explain what this means?
5268 MR. ARMSTRONG: Sure. That was a little bit technical. So the way that these TRDUs are set up is they give you a video and a feed that they may be using, but every small BDU then has to invest in transcoding equipment to transcode that to what they need for their particular architecture.
5269 Now, what we would love to see is some sort of standards imposed so that these TRDUs are actually taking a standards-based and delivering them to a more publicly available exchange point. And that, I think, would allow a lot of smaller BDUs to compete. Yeah.
5270 COMMISSIONER LAFONTAINE: I think I understood that. Oh, go ahead, please.
5271 MR. FERNANDES: To add a little bit to that, oftentimes when you’re getting the signals from the TRDU, you have to go specifically to them. Whereas, what we really think would help the small independents is to get the signals to, like, where our internet connection points are in Toronto and other major cities so they’re easily accessible.
5272 COMMISSIONER LAFONTAINE: Thank you. I’d like to ask you a question about your -- the concern you raise in your submission and the recommendation that you’ve put forward regarding the security review that you -- that BDUs -- that Beanfield is required to comply with to access programming.
5273 And I’m wondering if you could just elaborate on what is the issue with regard to that for smaller players like yourself, and the remedy.
5274 MR. ABRAMSON: Thank you, Commissioner Lafontaine, and it’s a good question. With your indulgence, I’ll quickly read back a paragraph of a recent decision of this Commission, Broadcasting Decision 2021-341. It had it to do with, I suppose, a long-running complaint and dispute-resolution process initially filed by the CCSA. It’s paragraph 30.
5275 “With regard to the technical survey process, the CCSA acknowledged the need to vet BDU’s security measures. However, the CCSA noted that the master agreement includes no mention of technical surveys, and therefore does not impose a requirement for CCSA members to complete technical surveys. The CCSA claimed that this requirement has been imposed unilaterally by Bell Media, outside the framework of the master agreement,” and so on.
5276 This won’t be a new issue to the Commission, but it’s one that we would echo, as it was raised there. And of course, the suggestion is not the security reviews and the assurance that signal security is very well done. It’s not necessary.
5277 It’s a suggestion that we raised, I think, today as well in our remarks a couple times, is that BDUs have the incentive, and through measures like these, the opportunity to create red tape, to create hoops, to create the kind of slowdowns which often feel like even outright refusals. Sometimes they just take a long time. But it -- you know, it’s another hoop to jump through.
5278 And the issue here is that this another hoop to jump through with, again, no real standards. And so each major BDU runs differently, asks different detailed questions, has its own timelines, which is obviously unregulated, as to when they get back to you, and so on.
5279 And so, you know, the fear, the concern, and the experience, often, I think -- and I think my colleagues here will speak to that -- is that security review, by all means, by why don’t we try and create a standardized template so that a small BDU can provide the relevant information to the programmer, who’s also a competitive BDU with them, and both be treated fairly and be seen to be treated fairly in that way. In that fair?
5280 COMMISSIONER LAFONTAINE: And do you see -- if this transaction is approved, do you see this a problem area -- a potentially problem area for a company such as yours, or for the industry?
5281 MR. ABRAMSON: The metaphor I’ve heard a lot lately is the frog in the boiling pot. This is not a new issue that we’re talking about. You know, at what point does the temperature get so high that suddenly we really need to undertake measures? And certainly the market power here which, again, comes from market share -- and I should correct a small error.
5282 I think we talked about BDUs covering half of the Canadian English-speaking population, and RDUs -- I don’t think the intent was to suggest that the combined Rogers/Shaw would have 50 percent-ish market share of the relay distribution market. It was a bit of an unfortunate combination of concepts. But regardless, yes, I think this -- I think many smaller BDUs would submit that this is an area that already would have required a solution. But we’re living in a different world and a different marketplace, certainly, with one competitor with this much market power.
5283 And so, certainly, we would submit that like I think we suggested at the end of our remarks, first of all, that a specific safeguard be adopted. And then, second of all, as the Commission has often done in the past, it should turn its attention to whether these safeguards would now be required in this changed market, market-wide.
5284 COMMISSIONER LAFONTAINE: Thank you very much to responding to my question, Jay.
5285 Thank you, Mr. Chair. Those are all of my questions.
5286 THE CHAIRPERSON: Thank you very much for your appearance. I have one very short follow up just on the TRDU issue you were discussing with Commissioner Lafontaine.
5287 When you talked about an aggregation point bring in -- for example, at one point in a major center such as Toronto, I’m just a little unclear as to how that would be assistance to most of the BDUs that are taking advantage satellite-delivered or terrestrial-delivered signals, being smaller and not concentrated in urban areas.
5288 MR. FERNANDES: No, they would definitely be -- should be available in many multiple points throughout the country. I was just saying Toronto would be one major one, Montreal, other areas, whereas rather than going specifically to all the different locations where the TRDU and SRDUs are ---
5289 THE CHAIRPERSON: Where they have their sources signal, okay.
5290 MR. FERNANDES: Definitely not just Toronto.
5291 THE CHAIRPERSON: I understand better. Thank you very much.
5292 MR. ABRAMSON: I will add only on that, just to put on the record that the Commission has recognized the locations of certain change points for the measurement of quality of service and so on. And so I think the proposal was simply aligned with those existing locations.
5293 THE CHAIRPERSON: Understood. Thank you very much for the clarification. Thank you for your submissions and your participation in our hearing. And you did a great job.
5294 MR. ARMSTRONG: Thank you. That means a lot.
5295 THE CHAIRPERSON: So thank you. And I’ll bid you good evening.
5296 Madam Secretary.
5297 The SECRETARY: Merci, Monsieur le Président.
5298 This concludes Phase 2, and we will reconvene tomorrow at 11:00 a.m. with Phase 3. Bonne soirée.
--- Upon adjourning at 5:58 p.m./
--- L'audience est levée à 17h58
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