ARCHIVÉ -  Transcription - Hull, QC - 1998/11/26

TRANSCRIPT OF PROCEEDINGS

FOR THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

TRANSCRIPTION DES AUDIENCES DU

CONSEIL DE LA RADIODIFFUSION

ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUBJECT / SUJET:

PUBLIC HEARING EXAMINING NEW MEDIA /

AUDIENCE PUBLIQUE SUR LES NOUVEAUX MÉDIAS

HELD AT: TENUE À:

Place du Portage Place du Portage

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

November 26, 1998 Le 26 novembre 1998

Volume 4

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

Public Hearing / Audience publique

New Media / Nouveaux médias

BEFORE / DEVANT:

David Colville Chairperson / Président

Martha Wilson Commissioner / Conseillère

Cindy Grauer Commissioner / Conseillère

Joan Pennefather Commissioner / Conseillère

David McKendry Commissioner / Conseiller

ALSO PRESENT / AUSSI PRÉSENTS:

Carolyn Pinsky / Commission Counsel /

Karen Moore Avocates du Conseil

Ted Woodhead Hearing Manager / Gérant de

l'audience

Carol Bénard

HELD AT: TENUE À:

Place du Portage Place du Portage

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

November 26, 1998 Le 26 novembre 1998

Volume 4

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

Presentation by / Présentation par:

Sun Media Corporation 966

Torstar Corporation 1019

Canadian Newspaper Association / Association 1062

canadienne des journaux

Media Awareness Network / Réseau éducation- 1103

médias

Concerned Children's Advertisers 1146

Electronic Frontier Canada 1174

Legal Group for the Internet in Canada 1209

I. Hoffman & Associates Inc. 1235

Hull, Quebec / Hull (Québec)

--- Upon resuming on Thursday, November 26, 1998

at 0903 / L'audience reprend le jeudi

26 novembre 1998 à 0903

4284. THE CHAIRPERSON: Good morning, ladies and gentlemen. We will return to our proceeding now, looking at the issue surrounding new media, which seem to be getting lots of attention, both inside and outside this room these days.
4285. Madam Secretary.
4286. MS SANTERRE: Thank you, Mr. Chairman.
4287. The first presentation this morning will be by Sun Media Corporation.
4288. THE CHAIRPERSON: Good morning, Mr. Parrish.

PRESENTATION / PRÉSENTATION

4289. MR. PARRISH: Good morning, Mr. Colville and Members of the Commission.
4290. Thank you for the opportunity to appear this morning. My name is Wayne Parrish. I am Vice-President of Strategic Development for Sun Media Corporation. I also am Chairman of Canoe. With me this morning is Graham Duffy, to my left, who is President and Chief Executive Officer of Canoe, and we have legal counsel not at the table but in the room, Tony Keenleyside, who is a partner at McCarthy Tetrault.
4291. What I would like to do is, as part of our presentation, have Graham speak for a little bit of time about Canoe. We included some background in our Phase I submission, but I think it might be useful, given our relatively strong position in the early development of new media in Canada, if Graham takes you through a little bit of the background, and then I will speak more particularly to the issues before the Commission.
4292. Graham.
4293. MR. DUFFY: Thanks, Wayne.
4294. Canoe is 60 per cent owned by Sun Media Corporation. Canoe's minority interest is held by a division of BCE Inc.
4295. Canoe's mandate is simple: to become the best consumer of on-line services in Canada. Canoe provides users with a wide range of information, news, entertainment and on-line services that it creates and also offers links to third party content providers. Although it is just over two years old, Canoe employs more than 40 people, and that number is growing.
4296. Frankly, we are quite proud of Canoe. It has been recognized both within and outside Canada by its peers. In 1997 it was judged Site of the Year in Canada by the world's leading source of information about the Internet, Mecklermedia. It has also been recognized by Strategy, the Canadian marketing report that is published every two weeks, as the top Client of the Year for 1998 in the media category; and I should point out that that is all media.
4297. In addition, Forrester Research, a leading U.S. research firm, in its recent report entitled "Media's Global Future" included Canoe in a list of 30 world players alongside such names as Disney, Yahoo, AOL, BBC and Time/Warner, to name a few.
4298. Canoe has been very successful in achieving a large national Canadian audience with more than 1 million regular users generating over 40 million-page views per month. That's the audience that we are targeting and that's a leverageable strength, being Canadian.
4299. Canoe is a free service to Internet users, currently offering two types of services: a portal gateway service and a group of content-based on- line media products. As a portal service, Canoe offers Canadian users e-mail, search functionality, shopping or e-commerce, chat and personalization. You can personalize your news, your information, and that's through Canoe. As a content provider, Canoe offers a broad range of Web-only products that it has created: "SLAM! Sports", "JAM! Showbiz" or entertainment, CNEWS and national news products, "CANOE Money", a personal finance business information product; "C-HEALTH", health product; and "CANOE Travel" for the travel market.
4300. Canoe also provides links to third party content services such as on-line editions of the Sun newspapers, the Halifax Herald, the CFL, autonet.ca, a leading Canadian automotive site, Country Music Television Canada and magazines such as Chatelaine and Maclean's. Canoe also provides users with other services, including national TV listings, movie listings, national events listings -- it is what I call "C-LIVE" -- lotteries across the country, horoscopes, crosswords, weather and a host of other services.
4301. Canoe's business model is predicated on deriving a large share of its revenues from advertising. We are also actively looking at additional revenue streams, including e-commerce, transaction by services and premium-priced subscription products. To that end, I should point out we launched a service, "Hockey Plus", which is one of the first subscription services in Canada -- it was launched just recently -- providing the real hockey aficionado with all the information on hockey.
4302. Thank you.
4303. MR. PARRISH: Thank you, Graham.
4304. Over the course of this public hearing you will hear from many people on a variety of issues related to new media. In an effort to be of assistance, Sun Media's presentation today will distinguish between new media content and new media distribution, a common theme I know over the previous three days. We will also attempt to be as focused as possible on three specific issues: number one, offering a useful approach, we hope, to a definition of "new media content" for the purposes of this proceeding; number two, encouraging you to resist, in fact strongly resist, the temptation to regulate new media content as we define it; and, number three, encouraging you to adopt a regulatory regime for the distribution of new media content that is light-handed but one that will ensure that Canadian new media content is easily accessible by all Canadians.
4305. As a starting point, we believe that much of this proceeding is really about uncertainty and how to reduce it. We agree fully with Commissioner McKendry's statement in the context of the CTV SportsNet decision in his dissent that regulatory certainty is a contribution that the Commission should make to today's complex communications environment.
4306. Having embarked on this proceeding, we respectfully submit that it is incumbent upon the CRTC to issue a very clear statement of its position on the whole question of the definition of new media content and the degree of regulation of new media content and distribution that it envisages. For purposes of this proceeding, we think that this can best be done by saying what new media content involves rather than attempting to produce an overly precise definition that will inevitably have to be amended as the underlying technology evolves. The service that meets all criteria in such an approach and that is not obviously captured by established and intuitively understood definitions of "broadcasting" would qualify as new media content.
4307. The Canadian Newspaper Association, which you are hearing from later this morning, has proposed four criteria: unscheduled, interactive, user controlled and on demand. I understand that there is, within each of those, some area of greyness and some area of debate. However, we agree with these and would only add, for greater certainty, electronic and digital.
4308. With respect to the particular subset of true VOD, we are flexible. We do see a distinction between a true VOD service in which the end user connects as the movie-on-demand but whose interactive control is really limited to VCR-like activities; and, alternatively, a true VOD service in which the end user can engage in substantive interactivity. The ones that are most often cited are being able to change the ending of a particular piece of content or being able to drill down from the video image, with various technologies, to get at underlying information, biographies, backgrounds, et cetera.
4309. We believe that the latter would be much more like new media content and much less like broadcasting.
4310. If the Commission finds our approach to the definition of "new media content" at all useful, we believe that this makes it relatively easy to determine what new media content is not. Our submission is that, as we approach it, new media content is not broadcasting as defined in the Broadcasting Act. In order to constitute broadcasting, three criteria must be met: there must be transmission, there must be transmission of programs, and the transmission of programs must be for reception by the public. We don't think that new media content meets any of these criteria.
4311. We have detailed our reasons in our reply comments, but essentially we think that transmission involves pushing traffic from a point of origin to one or more destination points. New media content must be sought out and pulled in by the end user on an individual basis. Second, the definition of "program" in the Act excludes visual images that consist primarily of alphanumeric text. Although at a given point in time a screen may be filled entirely with a visual image, when one considers an on-line service, which is what the user of Canoe or another service obtains, as a complete service, a complete experience, it is quite clearly, at this point in time, predominantly alphanumeric text.
4312. As parties have noted, Web sites, including, as one of the submissions I think noted, the CRT Zone (ph.) site, offer the option of clicking for text only. At some point in time surely the bandwidth issues will change, and that position may need to be reviewed, but I guess to that I would point out that we have been waiting for the roll-out of digital boxes for several years as well.
4313. Third, new media content services are not intended for reception by the public; they are available for access by the public, but they are not transmitted for reception by the public.
4314. Sun Media acknowledges that the nature of new media content can be expected to evolve over the coming years. This means, as I have stated earlier, that our approach may require review as that happens. However, we think that it would be a great service to the new media industry in Canada if the CRTC were to state unequivocally that, on the basis of development of new media to date, and as defined above, new media content does not fall within the definition of "broadcasting".
4315. We have noted in our reply comments that you took an analogous step in the telecommunications arena in 1993 when you expressed the view that resellers that were subject to your jurisdiction under the old Railway Act would not be Canadian carriers as defined in the replacement Telecommunications Act.
4316. Today Canada has a vibrant telecommunications resale industry that is benefitting all Canadians, both through direct services and through price and service pressure on facilities-based carriers. We expect the same result in new media content if you give us a similar strong signal now.
4317. We do not, at this point, view an exemption as a fruitful alternative given a number of issues that others have pointed out.
4318. In conclusion, we believe that you have the discretion to define new media content as it currently exists in such a way as to take it outside the definition of "broadcasting" and that this is by far the preferable approach. It creates far greater regulatory certainty and avoids any lingering difficulties that an exemption order approach might cause.
4319. In sum, we agree that the sentiments of the Wall Report that the new media industry is still a fledgling force and it is essentially complementary to existing conventional media, including broadcast. No one is cancelling their cable service at this point for access to the Internet; quite the reverse, the offering of new media content services by cable companies has enhanced their attractiveness to many Canadians.

0915

4320. This brings us to our third and concluding point, which is the question of access by new media content to new media distribution.
4321. To be blunt, we have concerns that new media content distribution could be impeded by old media distributors. In our reply comments, Sun Media offered three alternative approaches to the issue of new media distribution: the first was that we work with the existing telecommunications regulatory framework; the second was that we define new media distribution as a particular class of telecommunications service provider as defined in the Telecommunications Act in recent amendments contained in Bill C-17 and which are now in force; and, thirdly, that we permit a self-regulatory regime to continue subject to certain expectations to be established by the Commission as conditions precedent.
4322. Sun Media believes that there is very real potential for undue discrimination and preferential access to distribution undertakings and/or Canadian carriers. On the broadcasting side, we note that the CRTC has very clearly expressed its concern regarding issues of access to dominant cable company facilities in the recent CTV SportsNet and Sportscope decisions. We have our own experience of that within Sun Media based on our partnership with CHUM Limited in CP24 and the relationship that entity has with the principal carrier in the Toronto region, Rogers.
4323. Accordingly, Sun Media believes that a degree of regulation of new media distribution is required at this time. This was the first alternative offered in the reply comments. Whether new media distribution is carried out by Canadian carriers -- and by this we include the telephone companies and the cable undertakings -- or entities who obtain their underlying telecommunications services from such carriers, we believe that a light regulatory regime can be imposed.
4324. New media content clearly falls within the definition of telecommunications as set out in the Telecommunications Act. Therefore, it would be relatively straightforward, in our view, to approach the distribution of new media content within the context of the existing regime.
4325. Accordingly, we urge the Commission to require that Canadian carriers include in their tariffs, or, in the case of tariff-forborne carriers in their standard contracts, a provision dealing with the distribution of new media content. There is some precedent for this approach, notably with respect to questions of confidentiality and customer-specific information.
4326. What do we seek in such a regulatory regime? Essentially, non-discriminatory access for Canadian-based new media products to Canadians. Therefore, we recommend that the CRTC mandate the tariffs or standard form contracts for new media distribution include a requirement that new media distributors provide a preponderance of links on their home sites to sites of Canadian new media content providers and that such links be adequately and predominantly presented.
4327. Finally, in light of the rapid pace of development in this area, we suggest that any regulatory regime established by the Commission as a result of this proceeding should explicitly be made subject to a review that would take place five years after the release of the decision.
4328. Thank you for your attention. We would be happy to respond to any questions that you might have about our presentation or our Phase I and Phase II submissions.
4329. THE CHAIRPERSON: Thank you, Mr. Parrish and Mr. Duffy. I will turn the questioning over to Chair Françoise Bertrand.
4330. THE CHAIRPERSON OF THE COMMISSION: Good morning, gentlemen, and thank you for participating in this proceeding and helping us on our learning curve about this exciting and very important new environment. I was really interested in hearing the progress of Canoe, and your experience will certainly help us.
4331. I would like to know, in an ideal world, where you see this universe going in the sense also of its "flourishment" and to be a good business proposal. I am not discussing at this point here a conclusion about what is broadcasting and not and what kind of measures can be brought to the telecom approach, but rather where you see the real possibility, given your own interest.
4332. MR. PARRISH: Are you asking about how the market might develop in Canada?
4333. THE CHAIRPERSON OF THE COMMISSION: Yes, but with you in the centre of it.
4334. MR. PARRISH: Okay.
4335. THE CHAIRPERSON OF THE COMMISSION: You will have difficulty forgetting about that anyway.
4336. MR. PARRISH: As we are sitting here.
4337. I guess I would say that our company is well known within our traditional media for being very big on free enterprise and allowing market forces to determine how things fall out. I guess, as an overview, I believe that is the case.
4338. We have had some success in creating what is today a fairly large media company starting from very humble beginnings. When the Toronto Sun was created in November of 1971, no one gave it much chance of lasting beyond a few months. We have proceeded to carve out in traditional media second niche products in the markets of Edmonton, Calgary, Ottawa as well as Toronto, and I guess in all of those situations we have gone into a market in which there is a dominant newspaper, a monopoly newspaper in the lexicon of some, and, by hook or by crook, and we think by being a little more cost conscious, perhaps a little more innovative, we have managed to gain a toehold and then a foothold and develop franchises from there.
4339. Our approach to developing Canoe several years ago and the concept, which essentially Graham and I, through a lot of sweat and agony within our company, were able to bring to fruition, was that new media was going to be a fundamentally different medium than all that existed. In fact, as we tried to understand it in the early days of 1993 and 1994, when what we were looking at was primarily the Internet on the one hand -- there was no World Wide Web -- and proprietary on-line services on the other, we felt that the characteristics that potentially made this medium unique were every bit as radical as the characteristics of radio were in the late teens and as the characteristics of television were in the late forties.
4340. That underpinning, which seems quite basic I am sure, has driven the entire strategic approach and the philosophy behind building Canoe. We were able, over some period of time, to convince other people at our company that it made sense, if this was a new medium, if we were correct in that assessment, and it was fundamentally different from the others over time, that we had some opportunity to get in on the ground floor.
4341. We felt that it would move to a medium in which visual images played a significant role, but it wasn't there in 1994, and that gave us a window of opportunity as a publishing-based company to get into the game, to learn about it, to develop skills and perhaps have a place as the medium developed. What we didn't know at that point in time, and no one really knew, was whether this medium would ever develop enough reach, enough mass that it could represent a sustainable business opportunity.
4342. So we invested -- and I guess many in our company thought of it as not R&D. In fact, Graham had the title at that point in time I think it was of Director of Research and Development, but between the two of us and some others we felt that it was more than that, but we needed to sell it on that basis. The newspaper industry doesn't do research and development, they don't expend any dollars in that area, and this was somewhat new.
4343. I know it is a bit of a long-winded backdrop, but I think it is important for what I am about to say.
4344. We think we have at this point only a foothold, it is very early days, our analogy is that the modest success that Canoe has had to this point has -- we are in the starting game, but the gun hasn't really sounded yet. But we have a position at the starting gate and we are willing to let our success be completely dependent upon our ability to innovate, to be creative, to find paths to capital if that's what is required.
4345. We think that, in doing that, we will have a place in the game at the end of the day. Whether it will be a significant position, a small position, we are not sure.
4346. I guess, to be a little more prosaic, we think that the medium will develop in Canada, it is in its nascent stages today, it trails the U.S. Over the previous three years we have talked in terms of -- in fact, our range is one between 12 and 24 months. Today it trails the U.S. by the higher end of that scale, that range in our mind, but we do see signs that it is developing.
4347. Graham will appear I believe next week as part of the Internet Advertising Bureau which has recently released a study; I am sure you are familiar with it. It shows there will be $20 million of advertising revenue in the marketplace in Canada in 1998; they have projected a number for next year and I think it is $36 million. That's $20 million behind the number that they projected only six or eight months ago.
4348. So it is nascent, it is early, it has been slow to develop, and there are a number of reasons for that, but we think it will develop. We do not think it detracts from conventional media or traditional media at this point in time. The possibility exists, in five years' time, that it may. It may take advertising dollars, it may take eyeballs and users, audience's time. We don't have enough understanding at this point to know from which medium, whether it will be from broadcast or print that would come.
4349. I have gone on a long time. I am not sure if I have answered the question.
4350. THE CHAIRPERSON OF THE COMMISSION: No, it is helpful.
4351. Tell me, the life of Canoe is not an R&D strictly now, it is a business venture and it is substantially based on advertising dollars.
4352. Has it affected the Sun businesses, the traditional ones, or has it been more -- can you help us understand at the stage we are at whether it has been an enabler or been kind of about the same?
4353. MR. PARRISH: I will ask Graham to speak to that.
4354. THE CHAIRPERSON OF THE COMMISSION: Thank you.
4355. MR. DUFFY: Canoe is a business. It has moved from an R&D project to a business, and that is in fact what, really, Sun Media runs all of its operations as. The advertising is the dominant revenue vehicle for us right now; in fact it accounts for almost 100 per cent of all revenues.
4356. Has it had an impact on advertising revenues across the road at Toronto Sun and the Sun Media newspapers? No, it has not. The Canadian advertising market is, by estimates, a $10 billion market. As Wayne mentioned before, the new media market is going to be about $20 million. We are taking such a small pie.
4357. The other part is too that this is totally a different medium altogether and to sell in this medium is totally different from selling in a traditional medium. We have, since day one, allowed our sales force and encouraged quite frankly our sales force in the Sun newspapers to sell on-line and to do joint buys. To date, we have not done one buy where it is a joint buy because advertisers, like a lot of people and like this Hearing here, are trying to get an understanding of this medium and how to buy in this medium and what are the measurements in this medium. They are totally different from the newspaper medium.
4358. When we go to traditional advertisers, those traditional advertisers understand exactly the measurements and the accountability of newspapers. New media is different for them. So we have not completed any buys there. It has not had an impact at this stage on our advertising.
4359. THE CHAIRPERSON OF THE COMMISSION: But you are saying at the same time it is early to say.
4360. MR. DUFFY: Very early days.
4361. THE CHAIRPERSON OF THE COMMISSION: From your knowledge, in the States, what has been the situation when there has been a comparative situation?
4362. MR. PARRISH: The situation in the States has been, to our understanding at this point, very similar to Canada. There is an area of vulnerability for our traditional media revenue, and it is the area of classified advertising.
4363. Newspaper advertising is broken down into three components: national advertising, which is very much the same client base that broadcasting would traditionally access, retail advertising, which is basically local retailers, and classified advertising.
4364. Classified is the little liners of Mrs. Stone in Etobicoke putting her ad for her couch in the paper, but more precisely it is some very big segments; principally real estate new homes, secondly automotive, third careers and jobs. Those areas of our traditional media are very vulnerable.
4365. There are various projections in the U.S. that show, over a five-hear horizon, 1998 to 2003, some 10 to 15 to 20 per cent of the classified advertising base of daily newspapers migrating to this media -- not only migrating, but some of the dollars migrating, some of the dollars disappearing because of the costs pressures or the pressures on CPMs brought about by this.
4366. We think that is going to play out in Canada as well. We don't have a sense, because it is such early days -- we have had our classified from the newspapers on-line since we were launched in March of 1996, but we extract no revenue from them or no incremental revenue.
4367. So there is a vulnerability there on the part of newspapers.
4368. In terms of the more traditional if you will, if you can call it traditional when that's three years old, advertising in new media, which is banners and sponsorships and things like that, we don't really see at this point any long-term or any mid-term erosion of the national advertising base in print. We think that they are highly complementary, which goes back to the point that this is a completely distinct medium.
4369. Leon's would never take their entire advertising budget and put it in print, or take their entire advertising budget and put it in television; they do television ads on Don't Pay a Cent Event, and then if you want to know exactly what is on sale, you go to the newspapers and look at the prices. That kind of complementariness between mediums and among mediums is something that we see prevailing, and we think that new media will ultimately be complementary to the broadcast and to publishing or print media.
4370. THE CHAIRPERSON OF THE COMMISSION: Talk to me about the element of subscription. That's an element that has some importance in the media world, the print. How do you foresee the presence, because you were saying that you have some -- I am sorry I didn't take it down; it was sports -- subscription service that is starting and you are confident that it will be interesting.
4371. What are your hopes and how do you see it develop in other services in comparison to the print? I would be interested in that.
4372. MR. PARRISH: I will turn it to Graham after making just one remark, and that is that the incredibly elusive subscription revenue -- we had done projections out five years that show our subscription revenue at 1 or 2 per cent of our total revenue. Derive from that that all the rest is advertising; there are others, e-commerce and so on, but it is pretty elusive at this point.

0930

4373. MR. DUFFY: Exactly, it is very elusive. It really, for us -- and "Hockey Plus" is our subscription service.
4374. THE CHAIRPERSON OF THE COMMISSION: "Hockey Plus". No wonder it is elusive.
4375. MR. DUFFY: Hockey is Canada. If you can't do hockey, you can't ---
4376. For us, it really is research. For us, we need to investigate and understand if there is revenue potential here. We don't know if it will come. Certainly it is very tough right now. We have had this service up for about a month, it is very early days. We are getting such minute money from it at this stage, especially when you consider that most of the content on the Internet that you see is free, so you are competing against that. So you have all for a very strong, compelling value-added product that you can only get by going on to this service and paying some money.
4377. I know in the U.S. a number of sites have had various fits and starts in that whole area, so it is a very difficult one. The only areas that I think that they are actively doing it on right now is in the financial area on certain exclusive products there.
4378. MR. PARRISH: There is an opportunity certainly in the financial area, on a consumer basis, there is an opportunity when you are reaching a business client, but we think it is very difficult in terms of consumer-based subscription services.
4379. THE CHAIRPERSON OF THE COMMISSION: Thank you.
4380. We have heard a lot about different points of view, but there seems to be many intervenors thinking that there is a very good supply of Canadian pages and sites that were there, that we have a presence that is very accessible, that there is no problem with access.
4381. What is your view in terms of what is the situation now in terms of the Canadian presence and its array of expressions and what you see as its development, whether you see it flourishing? Would you agree with many that the supply is great and that that's fantastic?
4382. MR. PARRISH: You mentioned in your question, Madame Bertrand, access, and I will deal with that separately; I will try to just talk about presence to begin with.
4383. We think there is a significant presence. What is interesting is that we are not sure that that presence of content -- and, Graham, today, Canoe has what number of pages?
4384. MR. DUFFY: Well over 100,000 pages. When we started it was about 7,000 pages.
4385. MR. PARRISH: As Graham was saying, Canoe has well over 100,000 pages. There are many Canadian sites.
4386. Interestingly enough, we don't think that necessarily the awareness of those sites has sort of crashed through the public awareness, the general public consciousness, to the same extent it has in the U.S. We are not sure precisely why that is. Part of it may be the marketing dollars that we haven't expended because we don't have the same access to those wonderful venture capitalists in Silicon Valley, but the presence certainly is there. We do believe that, by continuing in the current approach, an unregulated environment, that presence will only flourish and grow.
4387. I would offer I guess a single anecdote -- and Graham touched on this earlier. We were visiting some people in the industry that we respect greatly -- this would be probably four years ago -- in Raleigh, North Carolina. They had just launched a site called Nandonet (ph.) that has developed a following in the U.S. We talked about the issue of what could we do, what right did we have to play in this game, if any right at all, as a relatively small at that point Canadian newspaper company.
4388. We went on the Web and for the first time Graham and I, with the individual, sort of looked around and then decided to look for hockey sites. There were two hockey sites. There was the one that Nandonet did and there was one based in Honolulu. We thought, okay, as Graham said, if we can't, as a media company in Canada with a very strong emphasis on sports, do a better hockey site than the guys in Raleigh, with all due respect to the gentlemen sitting in the room, and someone in his or her basement in Honolulu, then we don't deserve to be in the media business.
4389. Out of that came our entire rationale. We realized that, to be able to play in this game where there were no borders, we had to develop content that was uniquely attractive to Canadians, and that has driven every single thing that we have done.
4390. We talk to people every week and several times a week who have ideas that will target or address a particular Canadian interest. We recently acquired a controlling interest in a small start-up company called "Autonet". We have the option, as others had, of partnering with Autobuytel (ph.) or some other major U.S. automotive on-line product, but we found that there were some Canadians who had found a need, had addressed that need, and now had progressed to the point that they needed capital, or some capital, and could no longer do it themselves. So we work with them to do that.
4391. So the presence is there, and because the only thing in a free market for media and information and content that drives people to use it is the worth and the value and the creativity of that information, we think that it will flourish. We just have no doubt on that score.
4392. THE CHAIRPERSON OF THE COMMISSION: What about branding? You talk about marketing, finding the proper niche, to bring what people want and what we know best; that's one aspect, but what about branding? It is something that we have heard and we have read about. What is your point of view on the necessity of --
4393. MR. PARRISH: Madame Bertrand, could you be a little more specific in the question? I am not sure that I understand.
4394. THE CHAIRPERSON OF THE COMMISSION: In comparison with the U.S. There have been points that Canadian sites could never compete, for example, with the Disney or the branding --
4395. MR. PARRISH: I understand. I understand.
4396. I don't concur. I think that it is a question of marketing and marketing dollars and marketing strength and marketing wisdom too. NBC has had a wonderful brand in the U.S. for many years, but CTV in Canada has a wonderful brand, Baton had a wonderful brand, CHUM has a wonderful brand.
4397. THE CHAIRPERSON OF THE COMMISSION: And Global.
4398. MR. PARRISH: Global.
4399. THE CHAIRPERSON OF THE COMMISSION: We have Global friends in the room.
4400. MR. PARRISH: Global has a wonderful brand too, not to leave anyone out.
4401. THE CHAIRPERSON OF THE COMMISSION: And the specialties.
4402. MR. PARRISH: And there is still WIC somewhere. Right?
4403. So Disney is somewhat unique because it is an entertainment content company. The closest thing we would have in Canada would probably be Alliance Atlantis.
4404. Branding is critical. Branding is important, but branding can be developed. What you need is a good product, a good product concept and work behind it, and then you need the marketing to put that product before the public.
4405. There will not be a Canadian equivalent to Disney, but there is today a Canadian equivalent to Time/Warner, a Canadian equivalent to NewsCorp, a Canadian equivalent to whoever else. So branding is important, but each of us needs to find the best way to market our brand to get it out there.
4406. When we launched Canoe we made the decision fundamentally that we would brand it with a new brand, we would not make any reference to the Sun papers or to other papers that we owned or to the company. We wanted to come up with a brand that was unique and we came up with the acronym of Canadian On Line Explorer that became Canoe, which seemed to us uniquely and distinctly Canadian. Everything that we have done since then plays off of that brand. We would like that brand to be much better known in Canadian households than it is today, and we think it will be over time.
4407. Each of the products that underlies, or each of the constituent products, "SLAM! Sports", "JAM! Entertainment", are all uniquely branded, and we have invested dollars -- not nearly enough at this point -- to promote and develop those brands.
4408. Branding is critical, but there is no reason that well-conceived and well-promoted brands, uniquely Canadian brands, can't succeed. They will succeed.
4409. THE CHAIRPERSON OF THE COMMISSION: There have been some intervenors who have proposed different mechanisms to support, like either tax incentives used to create some joint ventures that would kind of help the marketing to create that branding. The CBC has even proposed to be like the Canadian aggregator, the site of all sites.
4410. It is something that you have not really mentioned in your written presentation and neither this morning. Is it because you thought that the elements will be talking about why you feel it is not broadcasting and why in telecom you feel that there is an analogy to be driven -- and that would be helpful, but before we get there, why is it that you haven't talked about other mechanisms?
4411. MR. PARRISH: I guess it goes back to what I said at the outset. We function today in an unregulated industry. We live and die, and particularly in our company -- and this will be the last reference to the newspaper industry I will make, but in our company our Toronto Sun, which is our largest newspaper, love it or hate it, is unique in North America in that six days a week there is no home delivery; only on Sunday is there home delivery. The other six days of the week 250,000 individual people walk into a store or walk up to a box and put their 50 or 60 cents on the counter.
4412. We live and die by how creative we are every 24 hours in putting that product together. If the front page is boring, our sales will go down by 10,000, and that's a significant impact on revenue. If the front page is well done, it will go up -- and it doesn't mean well done purely in a sensational sense. So I guess, because we live and die by our wits on a daily basis, that's the culture of our company.
4413. It is interesting that the CBC, as the mother of broadcasting, would put forward such a proposition. We don't think there is any need for that.
4414. We think that the way this world might unfold is that there will be several networks in Canada, on-line networks, if you will, but we don't see any need to create artificially anything like that at this point in time.
4415. In reference to the other question, we spent time figuring out the nuances of the Broadcasting and Telecommunications Act, things that we hadn't delved into before, in preparing for this proceeding, but we are delighted to talk about these areas and in act have enjoyed that part of it.
4416. THE CHAIRPERSON OF THE COMMISSION: Tax incentives. Newspapers don't count on this, but by the nature of you business, you are local -- not to say that there are -- I like when we use "foreign newspaper" because often it means U.S. newspaper, but there are some others that get into Canada. Newspaper, by its very nature, is closer to home, but there is in the print business the magazine situation.
4417. Why would tax incentives -- well, not why, but do you think it is something to be considered down the road or have you excluded it totally?

0945

4418. MR. PARRISH: We struggled with this one. Obviously, corporately we are not overly fond of foreign ownership restrictions within the newspaper industry. As you know, under section 19 of the Income Tax Act, there is an implicit preference, a strong preference for newspapers to be Canadian owned.
4419. Because newspapers are intensely local, that local being your Toronto or Ottawa or Canada, whoever is going to be successful in that industry needs to create content that everybody wants to read and everybody wants to look at. That's the mechanism that creates the discipline.
4420. We have reviewed the Wall Report, and there are several things in there that just run against the grain of our company. There are some things that we have some interest in, and not because they would be subsidies or anything or incentives to us or other players who are in the business of being successful at media businesses, but things like some of the support mechanisms suggested for training.
4421. One of the things -- and Graham can speak quite eloquently to this -- is that access to skilful and talented people in this new media is very challenging in Canada today. When we lose an HTML programmer who is making $30,000 a year but has developed within our company over a period of a year or two, it is very difficult to find a replacement who can get up to speed in any kind of time.
4422. So some of those things that are relatively benign we think probably make some sense, but in terms of incentives to incent us or incent others, people that we compete with, we don't think it is necessary.
4423. The one caveat I would put on that is that we are concerned -- and you will hear from Torstar later on this morning. In their Phase II submission they talk about section 19 of the Income Tax Act. For our concerns vis-à-vis foreign ownership, we don't think that is perhaps the best way to go.
4424. Having said that, we do have concern about the opportunity for American-based Web sites to access Canadian advertiser dollars and target those dollars back, through the wonders of technology, to a specifically Canadian audience. We honestly don't have a specific approach that we have determined at this time that would effectively deal with that, but we raise it only as an issue.
4425. THE CHAIRPERSON OF THE COMMISSION: That would be along the same kinds of preoccupation sin the magazine world and the analogy there.
4426. MR. PARRISH: It would be similar.
4427. THE CHAIRPERSON OF THE COMMISSION: We will come to your suggestions vis-à-vis the regulation. You talk about the necessity to bring certainty. What would be the two or three greater benefits from certainty in your point of view? Is it access to capital?
4428. When you say -- and we have heard that, certainty is coming back every time, and at the same time we are hearing that we are still in the first steps of a totally different world and we hear the word "certainty" when, of course, no one has the crystal ball to exactly describe where it is going.
4429. So what would be the benefits, if we were to make a determination not knowing everything that has to be known because, even if we spent another year in a hearing, the future cannot happen before it happens. So what would be the benefits if we were to balance out things?
4430. MR. PARRISH: If you would indulge me with a hockey analogy again, what we are looking for is semi-finals certainty. We think that there is a fear, there has been a fear, concern -- perhaps "fear" is a little strong -- in our new industry over the last couple of years of how the regulatory body may insert itself into the development process. We don't know everything at all. We think that five years from now all of us sitting around this room will have much greater clarity in our own minds about what the issues are and how things will develop.
4431. I guess we see value in moving forward, over the next five years, in a certain environment, in an environment where we know what to expect from the regulatory side.
4432. The issue I guess for us is that this is a hugely uncertain world, the world of new media and, as we move toward convergence, it is a hugely uncertain world. So if we are able to have one thing that we can put a pin in the map and say, okay, that's the regulatory environment that we are dealing with for the next five years -- and you know our strong preference as to what that would be -- then it is one less thing I guess that we need to concern ourselves with over that period.
4433. The benefits of certainty in that period are quite wide. Access to capital is one. I wouldn't necessarily say it was the only one, but I guess any time you can reduce the global uncertainty you have a much better chance to plan your business and develop your business knowing that an investment here in 1999 is going to potentially bring fruit in 2001 or 2002.
4434. So I guess we are looking for certainty over a period of time so that we can take a deep breath, move forward to the five years, and then perhaps in the year 2003, 2004, when we think things will be much more defined, revisit the issues.
4435. THE CHAIRPERSON OF THE COMMISSION: Let's talk about broadcasting or what is not broadcasting.
4436. MR. PARRISH: I was afraid you were going to get around to that.
4437. THE CHAIRPERSON OF THE COMMISSION: I will give you some comments that came to my mind reading your brief and hearing you this morning, and I would like you to comment. It is not an opinion that is arrêtée, it is just that I am trying to get some understanding.
4438. My impression from reading your position was that your opinion comes a lot from the world of newspaper, where freedom of expression is an absolute. Interestingly, you talk about content and distribution and you talk about content in broadcasting. There is some content in telecom as well in my point of view, but you associate broadcasting -- and I saw that since you have that freedom of expression which is central to the newspaper and also the democracy we live in, it was a no-touch at all because of that kind of culture engrained and which we all subscribe to in that sense, not necessarily looking at what is really broadcasting and what will become of what is the new media universe, that it was like an a priori that was done. That was my impression, and I would like to hear your comments about that.
4439. MR. PARRISH: I think that's a fair impression. I guess it is touched on in one of I guess our Phase I submission and more strongly perhaps in the Canadian Newspaper Association submissions.
4440. Coming to this, we are relatively new players in this arena. Our interest in CP24 was our first exposure, and this is our second, and we are certainly hopeful there will be many others, particularly as media begin to converge.
4441. I guess our sense of broadcasting -- I am sorry, I have just lost my train of thought. Could you just --
4442. THE CHAIRPERSON OF THE COMMISSION: I was wondering whether your position is really inspired by the assimilation to content and that content is an absolute in terms of freedom of expression from the culture of the --
4443. MR. PARRISH: Yes, I recall now.
4444. I guess our sense is that this entire media world is changing, that the broadcast world will change too. It is not just new media that is changing and evolving. We think broadcast is changing and evolving, and the two may become more similar as time goes on.
4445. When we have tried to speak to why new media should not be broadcasting, we have fallen back I guess on the specifics of the Broadcasting Act in terms of the definition of the transmission of program and reception by the public.
4446. The reality is that we think the definition of "programming" from the broadcast perspective may well change, but I don't believe any of us can see today where it might change. So we look out five years and say, okay, in five years new media will be more defined, and we think also broadcasting, traditional broadcasting, will be at least differently defined than it is today.
4447. So, Madame Bertrand, you are right in saying that our freedom of speech, free enterprise background, we betray our roots throughout our submission, I think, and it goes to the start of the company, it goes to the 250,000 sales every day, et cetera, et cetera. So, you are absolutely right, we are that way and that informs much of our thinking.
4448. THE CHAIRPERSON OF THE COMMISSION: When you are talking about, in the future, a meeting of the print and the broadcasting, we have been told by some that new media is not about broadcasting, it is not about media, it is about computers. Do you think that's a correct perception or assumption? Do you think that's where it is going?
4449. MR. PARRISH: I will let Mr. Duffy deal directly with that one.
4450. MR. DUFFY: No, absolutely not. It is not about computers. When we started Canoe up, there are really three disciplines that we have there. there is content, there is marketing and advertising and the third discipline is technology.
4451. For us, we have always seen -- and it really is the backbone of Canoe, is that it is content, that compelling content built for this medium is critical because those boxes will change over time and what people are after -- I know when I go on my TV I couldn't tell you if it is a Hitachi or a Sony or whatever, but I do know the programs that I like to watch, and that is the same for this type of medium. It is very much about content, building content for this particular medium.
4452. THE CHAIRPERSON OF THE COMMISSION: Pursuing that idea of content -- and we come to the telecom ideas you have -- we were told that this business is very much about content but also very close to what the consumer wants. Because of that we have been told by many that there is no need to import from the broadcasting universe or the telecom universe any idea of prédominance of Canadian content because there wouldn't be a business of Internet in Canada if it wasn't for the necessity to, in a global universe, have some reflection of who we are and the needs we have in our daily lives -- and those are closer to home, so there is a need, an absolute need in terms of turning the key or opening the screen, that it is to be Canadian.
4453. What is your opinion on that?

1000

4454. MR. PARRISH: We agree. We do believe that, in order to find an audience -- that's what I talked about using even the hockey example, but to find an audience we need to create products that are very and uniquely attractive to Canadians. Our concerns around access, perhaps we have transported from our understanding of the cable side of the broadcast world; our industry has strived through many years with the CRTC to find equality in terms of access to the cable system, and within the last couple of years that was granted. While there aren't a lot of examples of take-up of that for some interesting reasons, it was granted, and that's good.
4455. Our biggest concern -- we think it is in the best interests of ISPs to promote Canadian content. Our concern, I guess -- and it goes back to our experience over the last 20 years as an industry -- is that that content that is directly promoted through the pipe into the home, not necessarily or not be solely proprietary content to the individual or the company that owns the pipe into the home. This is more of a concern in the high speed world than it is in the dial-up world that we are in today, although it is a concern for us in the dial-up world.
4456. I am not sure if that helps, but our concern around access is, we think that they will and should promote Canadian sites and content because it is in their best interest to do so and we think the market can deal with that. We would just like it to be a situation where they don't promote only their Canadian content.
4457. THE CHAIRPERSON OF THE COMMISSION: It has been said many times too -- I am just like a haut-parleur here -- that there is not a problem of scarcity in the digital world. What we have heard is, au contraire, the Internet providers, the more they have to offer, the better business position they have.
4458. MR. PARRISH: There is some merit to that. Our concern still is -- and we differentiate between the virtual and the physical, if you will. If there is a single pipe into the home, be it in the narrow band or the high speed world, that there is the potential for undue preference based on that being the only access in the home.
4459. Today, in my area -- I live in Scarborough -- I can't get high speed access, but when I can, the only place I will be able to get it from will be from Shaw, and we think it is important that in that situation, when my computer is booted up at home, the interface provides access to Canadian content and Canadian sites that are not necessarily owned by or predominantly owned by the person providing the pipe into the home, that being Shaw.
4460. THE CHAIRPERSON OF THE COMMISSION: Do I understand correctly that it is not really the ISP you are concerned about, it is more like the greater chain being the carrier at the same time as being the Internet provider?
4461. MR. PARRISH: I know others have made it in these hearings, but I have not been able to appreciate the difference between a carrier and someone who leases the facilities of that carrier. I have not been able to appreciate that difference. I understand to some extent, but essentially we view them as ISPs, we view them as owning the pipe into the home.
4462. Now, in a narrow band world, this is not as problematic because you can go to IBM or Sympatico or AOL for your narrow band access. It becomes more problematic in the high speed world to the extent that those high speed carriers make their plants -- and I know that it is their intention to do so based on the CRTC's decision, but I don't think there is any time frame attached to that decision. To the extent that they make their plants fully available to alternate providers of that service, then we would have less concern. But, to the extent that they are the exclusive provider of high speed access, as certainly will be the case in my neighbourhood, we would have significant concern.
4463. THE CHAIRPERSON OF THE COMMISSION: Because the way you are talking about it in your brief, you talk more about the Internet providers, the 700 that have been up to now kind of décomptés. Many have said that it would be really impairing their capacity of being active here in Canada if they were to be regulated and that would be complicated; many of them are still small enterprises of less than $1 million. So, to have obligations, it would be problematic.
4464. MR. PARRISH: We don't look for obligations to be put on them. I guess that's why we have tried to stress in our remarks today a very light regime, so there would be no financial obligations, et cetera, et cetera, but there would be -- and we have offered a couple of alternatives, one which is self-regulation with some direction from the CRTC that would simply make it important in their view to provide access to Canadian sites.
4465. The small ISPs, we are not concerned about. The large ISPs in the dial-up business, the narrow band business that exists today, we have some concern about, but our real concern is in the high speed and broadband side. So I guess it is graduated levels of concern.
4466. We are not looking to create any financial obligations in any way, shape or form for those ISPs. We think that would be anathema to the development of new media in this country.
4467. THE CHAIRPERSON OF THE COMMISSION: You are quite, comment dire, coherent in that sense because it is true that it is your concern that is transcribed there, but you say self-regulation could be parameters with which you would feel more confident and that would be sufficient.
4468. MR. PARRISH: Yes, that is our view.
4469. THE CHAIRPERSON OF THE COMMISSION: Thank you very much. It has been very helpful. Thank you.
4470. MR. PARRISH: Thank you very much.
4471. THE CHAIRPERSON: Counsel Pinsky I believe has a question or two.
4472. MS PINSKY: Thanks, Mr. Chairman.
4473. I would just like to follow up on the definition that you have proposed for "new media". In your submission you have stated that there is a need for greater precision in the definition of "new media" and, to this end, you have proposed one. It seems to me that a key component of that definition is that the service be interactive in nature -- I am quoting your words -- and subject to substantive manipulative access initiated by the recipient and user.
4474. To the end of providing greater precision, I was wondering if we could just discuss a bit in terms of what you would consider to involve substantive manipulative access and how you would -- well, firstly, if you could just describe that generally and how you would measure that.
4475. MR. PARRISH: I guess on this one we are trying to have it both ways because, while we said that in our written submission, in the remarks this morning we have suggested that there may be danger in trying to provide an overly precise definition. That shift, if you will, has been occasioned by some of what we have understood the Commission has heard over the last few days.
4476. This is so intuitive and yet things that are intuitive are so difficult to catalog. A VCR capability, or what a VCR can do, is not interactive in our sense. What is interactive, conversely, is the ability -- the classic one, I am not sure if it has ever existed, although Tony Keenleyside this morning did tell me that it existed, is the Czech Pavilion at Expo '67 where you could vote on the end of -- there were several endings or point in the plot of a film of the Czech Pavilion where the audience could choose the way the plot went. I guess they were ahead of their time.
4477. I guess for us interactivity -- changing the ending of something, but it also includes the ability, with technologies that are being developed, to move from a video image, let's say, of a baseball game and the batter is at the plate, and you click on the batter's figure and you get his stats up to that moment in a readout alongside, then you click another button and you get the most recent feature article from Sports Illustrated on that player and it comes out of the printer on the side.
4478. That's how we think of true interactivity, and I guess what this is is there is a continuum; at one end you have absolute non-interactivity and at the other end you have complete interactivity, and intuitively somewhere in that continuum -- and I know this is what you are trying to define and I am not being very helpful, but somewhere in that continuum, intuitively you know that this is interactive. When you have worked in this medium I think you have a sense of that.
4479. The other thing I would say is that the interactivity can be tied to the notion that each of us creates his or her own product, his or her own content. A page view of Canoe has a videoclip and audioclip, interactive text, access to a database, and then you can call up a personal page of Canoe that basically pulls all the bits out of the servers and creates a page uniquely yours. That's clearly interactive and perhaps defines what we mean by "interactivity"; this is by way of example as opposed to a precise definition, but that defines best how we see it.
4480. MR. DUFFY: Probably the best example that we operate with every day is, not to flog the hockey analogy to death here, but when you get the stats for hockey games, in the traditional medium you get it a certain way. You get the statistics of who the highest goal scorers are and that; every day they change but they are in a similar format.
4481. Interactivity for us is very much complete searchable stats where the user decides how he wants to search those stats, and we have 20 or 30 options that a user could go through and he can search those stats to find out who is the left-handed shooters, how many goals did they get shooting left handed in overtime -- how many hockey fights they got in, penalty minutes, all of those types of things. So the user is deciding what type of information and he is manipulating the information.
4482. At the back end of that information is a database where we provide that to him. We also provide him with some guidelines on that, but he is ultimately interacting to get content that he wants his way.
4483. MR. PARRISH: I guess, to summarize, it would be content that is significantly unique. It probably doesn't work in grammatical terms, but significantly unique to me or to you as the user, or substantially unique.
4484. MS PINSKY: I would just like to try to clarify another proposal of yours. You talked this morning about the proposal that non-discriminatory access be given to Canadian content and that prominence be given as well. More specifically in your written submission you talked about imposing the obligation specifically to provide a preponderance of the links on the home sites of ISPs to the sites of Canadian content providers and that such links must be adequately and predominantly presented.
4485. I wonder if you could just sort of elaborate in terms of, from a practical point of view, how that would actually work. Would a home page actually have to set out all the links? Would that just be in terms of when a search is requested, that the search be directed at Canadian sites?
4486. MR. PARRISH: I will take a crack at it and then ask Graham too as well, because it is a very salient point.
4487. We don't have a prejudgment around this. One thing we thought about is a prominent button -- obviously, you don't want to hamper the creativity of the ISPs in terms of their interface by forcing them into a scenario where they have 84 links on a page. Perhaps a large button that says, "Access to Canadian Sites", then you click on that button and that's what you have; you have all of the Canadian sites in some sort of rotating order based on something objective. That would be one approach.
4488. I go back to the answer earlier in terms of, our biggest concern is that the ISP -- and this is only really with the major ISPs that this is a strong concern, but that within their page, particularly in the high speed world, when their page comes up and that 90 per cent of it is their content that they own, and then there is a little thing down in the corner that says, "For more Canadian sites, click here."
4489. So practically, perhaps a Canadian button prominently displayed on the home page is a methodology. I am sure others will have more creative suggestions than that, but I guess it is the overall philosophy that we think is important, and I understand your need to get to a practical application.
4490. MR. DUFFY: One of the suggestions I have in the practical applications is, right now, in the early days of this whole medium, a lot of ways that people find you are through search. From the statistics that we see right now, a sizeable number, but less than 50 per cent, have booked-marked us or know exactly how to get to us, or we are the home page for them, because we are not an ISP that it automatically defaults to; you have to find us and reach us.
4491. So we use innovative marketing, and part of that marketing, though, is very dependent on search and how you define your pages and how you make sure that you come to the top of search engines, because a lot of people find you that particular way. To have Canadians head straight down to the U.S. and search and find you U.S. sites first is always a challenge for us, and we have an individual there that works on that very much to make sure that Canadian sites come to the top for Canadians when they are searching on products, and that is also extremely helpful to us.
4492. Yahoo Canada, when we built -- Canoe was the builder of Yahoo Canada. That was part of the design right off the top for building Yahoo Canada, to build it so that Canadian sites would come to the top and when you searched down "sport", Canadian sports sites would be there. There would be Canadian content at the top of that particular site. So we have a Canadian feel to it.
4493. If you wanted to go down to the U.S. and if you wanted to look at U.S. sites, by all means, but here is a good starting point and here are some great Canadian sites there.
4494. MS PINSKY: Thank you very much. Those are all my questions.
4495. THE CHAIRPERSON: Thank you, counsel.
4496. Thank you very much, gentlemen. We appreciate your appearance here today.
4497. MR. PARRISH: Thank you very kindly.
4498. MR. DUFFY: Thank you.
4499. THE CHAIRPERSON: Madam Secretary.
4500. MS SANTERRE: Thank you, Mr. Chairman.
4501. The next presentation will be by Torstar Corporation.

1015

4502. THE CHAIRPERSON: Good morning, gentlemen. The microphone is yours.

PRESENTATION / PRÉSENTATION

4503. MR. ROSSI: Good morning, Mr. Chairman, and thank you very much for this opportunity. I am Rocco Rossi, Vice-President of New Media and Strategic Planning for The Toronto Star. With me today is Eric Rothschild, President of Rothschild & Co., who provides us with assistance on regulatory matters.
4504. It is a pleasure to be here today to discuss issues surrounding New Media. At Torstar we believe new media holds great promise. We have made a substantial financial commitment to new media primarily in the area of Internet-based services. We know that for our company to thrive and to grow new media has to be a vital part of the mix. We see these businesses as complementary to our core business, which is, and will remain, newspapers.
4505. We have a wide variety of new media services. They include everything from the Harlequin Books Web site to The Toronto Star On-line. Our Torstar site include services like Auto Extra, Lost Connections, On-line Travel and many more. Through our toronto.com site, in partnership with Tele-Direct, we provide the most comprehensive interactive guide and directory for the Greater Toronto area. We have also invested heavily in a variety of start-up new media companies -- "heavily" relative to what else is happening in Canada.
4506. Let me say at the outset that if the purpose of this process is to stimulate the new media content industry, the answer is quite simple. Develop incentives which reward Canadian companies which take risks in investing in these new businesses. Incentives are needed not only to encourage investment but also to help ensure the long term viability of Canadian new media. In our view, effective incentives will be critical to helping to ensure that the Canadian new media industry will be sustainable.
4507. This morning we want to speak to several specific issues: how to define new media; why new media services should not be regulated; the value of incentives to stimulate the new media industry; and whether new media competes with traditional broadcasting.
4508. Today new media services consist primarily of alphanumeric text and graphic images. That's because technology doesn't allow us to practically deliver what we would call richer services. As technology evolves we will add other components like sound and video to enrich the services.
4509. There has been considerable debate in the written submissions as to whether new media constitute broadcasting. The vast majority of submissions support our view that new media content services do not meet the definition of "broadcasting" and they wouldn't meet the definition, in our view, even if they included more audio and video.
4510. Public policy can make extremely strange bedfellows. We can't think of many times when newspapers, cable companies and telephone companies have been on the same side of an issue. Given today's environment, I would also add that it would be unusual to find Torstar and Sun Media on the same side of issues. Yet we all agree that new media isn't broadcasting. Stentor says that most services aren't programs. Rogers goes further in saying they aren't programs, the services aren't transmitted and they aren't for reception by the public. We agree.
4511. We support the Canadian Newspaper Association,s proposed definition of "new media". New media are interactive, on demand, user controlled, and unscheduled. Others have suggested that digital and electronic delivery should be included in the definition, and we can certainly support those elements as well. Such a definition would clearly distinguish new media from traditional broadcasting.
4512. The underlying rationale for the regulation of broadcasting included scarcity of spectrum and spectrum management. This simply does not apply to new media.
4513. We think it is a mistake to try to regulate an industry simply because it happens to be distributed electronically. That's what a few participants seem to suggest, and we feel this is flawed logic.
4514. Our concern about regulation is that it has the potential to put Canadian services at a competitive disadvantage to foreign services. It raises the possibility that artificial costs could be imposed that foreign services do not incur. Our challenges are great enough already. Anything which increases those competitive challenges would be counterproductive.
4515. We are not competing with Canada's broadcasters, we are competing in the new media global marketplace. We are competing not only for Canadian eyeballs but for eyeballs everywhere. We are competing against players from around the globe. We are competing against players from south of the border, who enjoy economies of scale which the Canadian market can never match.
4516. Our challenge is to make our new media services so attractive that Canadians will want to visit our sites and use our services. We have to focus on our unique selling proposition. We have to offer them services they can't get anywhere else and certainly not from offshore services.
4517. Some participants have put forward the notion that new media should be regulated because they represent a clear and present danger to traditional broadcasters. The prospect of full-length movies or drama programming being delivered over the Internet has been raised as a potential threat to licensed broadcasters. Coupled with this is the notion that the Internet will soon become an alternative delivery system to go around the conventional broadcasting system.
4518. Both scenarios are raised to support the argument that new media services are, or will soon be, no different from traditional broadcasting, that new media will compete directly with broadcasters and that's why they should be regulated.
4519. Mr. Chairman, I submit that this is fantasy. Nothing we have seen or heard in all our research or travels leads us to believe that the Internet will be capable of supporting the delivery of anything near broadcast quality video in the foreseeable future -- by that we mean within the next decade. What video delivery, even on cable modem, is and will allow is rudimentary and limited to the equivalent of a single channel. It is disingenuous to suggest that delivery of video over the Internet could in any way threaten traditional broadcasting.
4520. You do not need to regulate new media content services today to level the playing field with traditional broadcasters. As the Wall Report points out, today new media are primarily the domain of early adopters. Traditional broadcasters have, and will continue to have for the foreseeable future, tremendous advantages over new media -- full-motion video, ubiquitous penetration and tradition to name just a few.
4521. if at some future point this appears to be changing, that would be the appropriate time to review the issue of regulation. The question that will then have to be addressed is, if the Internet constitutes a viable alternative delivery system, does that mean new media should be regulated to match traditional broadcasters?
4522. At that point we think you will have to decide whether traditional broadcasters need to be relieved of their regulatory obligations to remain competitive. That's because at that point traditional media will then be competing against the world, just as new media players are today. At that point regulations may constitute a competitive hindrance to traditional broadcasters. At that point the type of incentives that are being put forward for new media content services may be invaluable to traditional broadcasters.
4523. We believe that the best way the government can help Canadian new media to flourish is to establish incentives that make it attractive to invest in Canadian new media services and for advertisers, importantly, to use these Canadian services rather than foreign services.
4524. Advertising is critically important because we believe ad revenue will drive new media services and make them viable. As you may be aware, the Internet has its own form of simultaneous substitution. Sites equipped with software from DoubleClick, an American company that operates here in Canada with a subdivision, means that Canadian Internet users see a Canadian ad even when they visit an American site. So Canadian advertisers can spend their ad dollars with Yahoo and still reach the Canadian market.
4525. That's why we recommend an amendment to section 19 of the Income Tax Act to encourage Canadian advertisers to spend ad dollars on Canadian sites, much as print advertising is protected in this country. This would help to direct more cash to Canadian new media services and thereby allow us to develop more attractive services and to compete more effectively.
4526. A number of other useful suggestions have been put forward which we would also support. These include: a refundable tax credit for employee training; allowing research and development in Canadian content to qualify for Scientific Research and Experimental Development credit; a tax credit for capital expenditures and other issues that have been raised in the Wall Report.
4527. We realize that some of these changes are outside your jurisdiction, but we think these ideas should be brought back tot he federal government for their consideration and hopefully, hopefully, with your endorsement, as the best way to move forward.
4528. In summary, our message is quite simple: Don't try to regulate new media content services. It isn't necessary. If you want to encourage the development of new media industries in Canada, there is a range of incentives before you which may help. Obligations certainly won't.
4529. We believe incentives will meet the federal government's objectives. They will encourage growth, job creation, exports and consumer access to a wide range of new services at competitive prices.
4530. Incentives will encourage investment and innovation. They will help to encourage the development of distinctly Canadian content, content which draws on Canadian resources and reflects the diversity of our country.
4531. In short, incentives are the most effective mechanism to encourage the development of a sustainable new media industry and thereby ensure that there are Canadian new media voices.
4532. We would like to thank you for this opportunity to appear before you. We think the review will have a profound impact on the development of new media content services and the development of new media in Canada. We would be pleased to try to answer any questions that you might have for us.
4533. THE CHAIRPERSON: Thank you for your presentation this morning, Mr. Rossi. I guess, when I had read all of the submissions -- I take your point about there has been nothing like this proceeding to focus the mind of the cable industry and the telecommunications industry and the newspaper industry to have a common point of view. I noticed an even more common threat between Sun Media, Torstar and CNA. In fact, originally, we had contemplated that this might be one panel, but, because of some of the realities of the marketplace being unfettered as it is --
4534. MR. ROSSI: We hope it is one panel at some point in the future.
4535. THE CHAIRPERSON: -- we thought it might be better to have three separate presentations today and understood that that was your preference as well. But I am not sure that hasn't a little bit hindered us in the sense that we are ending up covering a lot of the same issues with three different groups here.
4536. In that respect, I guess maybe we can start with the same sort of question that the Chair did with Mr. Parrish in terms of where you see this business going, not in terms of in general where the Internet is going to go or whatever, but where you see it going relative to your particular operation.

1030

4537. MR. ROSSI: I think there is an important point of distinction that Torstar has with many of the submissions and oral presentations that have been made, including that of Sun Media's this morning, and that's with respect to the current health of the Canadian new media industry.
4538. I notice that AOL Canada made a strong case around -- look it, there is plenty of diversity, there are plenty of voices, and in fact Canada represents 5 per cent of all of the Web sites in the world, which is pretty amazing given our relatively small percentage of the world's population. What he didn't add is we also, in terms of Canadian content, have the most sites in the world representing a single woman -- it happens to represent Canadian content as well -- and that's Pamela Anderson, who is on more sites than any other woman in the world, but that doesn't make it a business.
4539. What is fundamental is that in 1997 in the United States in excess of $900 million U.S. was spent in on-line advertising. In Canada in that same time roughly $9.5 million Canadian was spent on advertising on Canadian sites. So that's less than 1 per cent. It is nowhere near the ratios that our traditional media have vis-à-vis American media in terms of advertising dollars, and certainly the developments that have occurred in 1998 and the relative growth rates would not suggest that we are coming anywhere close to narrowing that gap even on a percentage basis.
4540. So we believe very strongly that, while there has been a flourishing of activity, today, with a few notable exceptions, there are more Internet hobbies in Canada than there are Internet businesses. So that is why we feel so strongly about the need for incentives to ensure the long term prosperity of this industry in Canada.
4541. What was also interesting, in the submission from IBM the other day they spoke about the recent BCG shop.org report on electronic commerce. BCG made the comment that they didn't include any Canadian statistics because, quite frankly, it wasn't a significant enough number at the retail level; I distinguish retail from business to business because, at the business-to-business level, there was significant activity even in Canada. But, of the $13 billion that BCG points to in electronic commerce at the consumer level for 1998, an insignificant number of that would have been spent on Canadian e-commerce sites. So, in both cases, there is a significant gap in the development.
4542. We don't agree with a notion, as Mr. Parrish raised earlier, that we are 24 months behind or 18 months behind or 12 months behind because that would suggest that in 24 months, in 12 months, we will be at the same level, and the American sites aren't stopping for us to catch up. So we do feel that's a fundamental difference and it is why we are driving on the issue of incentives.
4543. Certainly we share with Sun Media's hesitation on the issue of incentives; it is not something that typically the newspaper industry comes to government about. But newspapers developed in a time when geography and proximity to a market was sufficient protection in terms of building a sustainable business, and by the time global competition became more of a force, we had entrenched businesses in Canada.
4544. This is clearly different in that we are dealing with -- if ever there is an argument to be made about a nascent industry and nascent industries requiring government assistance to prosper, then this is the industry where it should apply to.
4545. MR. ROTHSCHILD: If I could just add something, Mr. Chairman, just for clarify, the BCG Report is the Boston Consulting Group Report that IBM referred to yesterday.
4546. THE CHAIRPERSON: Why do you think we are behind, then, if we are behind the Americans in the whole development of this business, whether it be simply the development of on-line sites and the development of electronic commerce? To what do you attribute the lack of having caught up, and if we are 24 months -- or pick the number wherever we are behind -- and given the pace that they are developing I suppose we could be even falling farther behind. What do you think is the problem?
4547. MR. ROSSI: I think there are three critical elements. One is the far more robust venture capital community that exists in the United States. If you take a look at companies like Yahoo, companies like AOL, companies that quite frankly didn't exist five, six, seven years ago and have become multibillion-dollar market cap companies, their initial funding came from a very strong venture capital community in the United States which we do not have in Canada to anywhere near the same extent.
4548. Secondly, although the emphasis, when people talk about the World Wide Web, is on world and global, the reality is that it is still a very powerful local and national medium. So having a large domestic market over which to amortize investments in technology is very important and it has certainly been used to great effect by the Americans.
4549. Thirdly, to give credit where credit is due, this is a medium that was largely invented by Americans in terms of development around the two major commercially available browsers in the world, the Netscape and the Microsoft browsers, American browsers. If you look at the top ten sites in the world on the Web today, they are the search engines, which were all developed in the United States and which, as was mentioned earlier, point and did in the initial instance -- and no sort of conspiracy around it but pointed to American sites because that's what people knew, that's what people went towards, and reversing that is going to be difficult.
4550. Perhaps a subset issue is also that a lot of the initial money in advertising that's coming from the non-sort of computer-based companies, the more traditionals of auto or consumer packaged goods companies in the United States, are using dollars not so much from their regular advertising pool of dollars, but from R&D dollars because they are looking at a new medium, they are investigating how best to use it, how best to exploit it. Typically, those R&D dollars tend to be at the headquarters and not at a division in Canada. So those initial dollars are being spent on U.S. sites.
4551. You couple all of that with an advance in technology through DART (ph.) and the DART look-alikes, the Double-Click software, where -- two weeks ago I happened to be on the U.S.A. Today site, which is a wonderful information site, but I clicked on to the site and I was shown ads from Toronto Dominion Bank and Bank of Montreal because the ad server software behind that site identified the fact that I was coming from a Canadian IP address and, therefore, could target a Canadian ad to me.
4552. When you consider that, for instance, yahoo.com, which is the most popular Web site on the Web in the world today, has more page views, more visits, if you will, on a monthly basis than all of the world's newspaper Web sites combined -- just a second. What that means is that in any given local market they are likely to have more people going to yahoo.com than are coming to the star.com or to the Ottawa Citizen or to the Global or any other. So that's a very, very powerful base on which to derive further traffic.
4553. Again, to their credit Yahoo has developed far beyond simply a search engine and is growing its content aspects to in effect keep the viewers, keep the users within a close circle within Yahoo, to the point that today over 60 per cent of Yahoo's traffic is not search related but is actually people staying there for "Yahoo Finance", "Yahoo News", "Yahoo Sports" and other content features.
4554. THE CHAIRPERSON: Is that in your mind some sort of a trend that we are likely to see in the development of this marketplace?
4555. MR. ROSSI: It is certainly a strong trend today. It is difficult to say what will remain a trend because things do move very, very quickly, but I think at a minimum looking at section 19 and thinking, hey, we thought it was a real problem when it came to newspapers and magazines, it is small dollars today in the Internet, but with the technology and with the simultaneous substitution this is a huge potential problem in the future for Canadian new media content sites and should be something that's looked at and acted upon sooner rather than later.
4556. THE CHAIRPERSON: I wonder, given what you seem to characterize as a significant magnitude to this problem, whether the kinds of incentives that you have put forward, if I can be accused of sort of a pejorative comment, seem rather timid, I would think, given your characterization of how big this problem is.
4557. MR. ROSSI: I think at the end of the day that the companies still have to make businesses out of this and the market will prevail. And to try to sort of artificially create another Yahoo is not the solution.
4558. I believe there will be global beaters that come out of Canada. Just to take an example out of Torstar's history, no one ever believed that a Canadian company would come to dominate the world's romance fiction market, and yet Harlequin Romance, a very small company started in southwestern Ontario, now has the dominant global share in romance fiction. There will be examples of that on new media as well, but allowing for the types of incentives that we have provided we believe goes a long way towards encouraging companies and bringing a level of certainty, as M^me Bertrand alluded to earlier, so that even more investment occurs without the feat that suddenly the rules may change and one is going to be faced with additional obligations that you hadn't counted on in the initial business plan, that with certainty and with some assistance, then companies need to find their way in this market and will find their way.
4559. If I can use one example because it is quite current in the newspapers, three years ago a woman was having dinner with her boyfriend in Palo Alto and she was a collector of pez dispensers. I don't know if you know what a pez dispenser is; they are those wonderful little candies that have colourful heads on top. Her boyfriend happened to be a programmer and was interested in the Web. So he put up a Web page about pez dispensers where people could come and talk about pez dispensers, could trade pez dispensers and could buy and sell pez dispensers.
4560. Within three months this had grown so far beyond the initial page that this fellow had put up that he decided to build a business out of it. He worked very hard on it and developed very interesting auction technology behind it, with some venture capital assistance. Two weeks ago that company went public. It went public at about $10. It ended this past week at about $197 U.S., making an instant billionnaire of this man, and the company is called "ebay".
4561. There would be no way, through a sort of guided national policy, to create the next ebay. We just want to make sure that the industry is ticking, that people are allowed to be creative, that we assist in training, and these opportunities are there to create really, really wonderful companies.

1045

4562. THE CHAIRPERSON: Speaking of electronic commerce, then, selling pez dispensers, I wonder what your thoughts would be on the development of electronic commerce. How do you see getting into it? Mr. Parrish I think made a brief reference to it, but we didn't pursue it, and I am curious about how you see perhaps your role in the world of electronic commerce, whether in fact you see a role there, and whether the problems or constraints are the same as the non-electronic commerce aspects of this business; and, if so, what one would need to overcome those problems.
4563. MR. ROSSI: If we focus on the newspaper industry itself, one example where maybe we have a little more knowledge than in others, and you look at classified advertising, which was also mentioned by Sun Media, the tradition of classified advertising is really -- you post the little liner in the newspaper or on the Internet and hope to get a response of someone buying the service.

[ What we believe that will migrate to on the Web and what we are spending real dollars on and will continue to are more of what will become buying services. So it won't simply be a matter of you going to a site and seeing listed all of the used cars available in the Greater Toronto area that day. Instead, what you are going to have are services where you go and you not only are able to search by whatever parameter you put in, but also you are going to be able to get information, reviews of those cars from newspapers, magazines and elsewhere; you might find out from blue book or red book the values, what you should expect to pay for it so you can do research right there; you can see what consumer reports or other people examining the automotive industry think about that particular model that you might be investigating; you could finance that purchase; you could obtain insurance.

4564. It is that kind of full service which will make, for the user, a very compelling offering and for the companies that put those things together a very compelling business. We certainly are working both through investments that we have made in companies like Autoheb.com and Electric Classifieds, developing the software and developing the sites that would provide that kind of service.
4565. From our perspective the Internet in some respects, in classified, far from being a threat, becomes a huge opportunity to expand into an area that was largely taken away from us in the eighties and early nineties. Used auto listings in classified used to be a significant part of the classified revenue at the Toronto Star, and we woke up one day and the Auto Trader magazines were everywhere and they had taken 80 per cent of newspaper linage away. They can do that because they don't have the same fixed costs that we do. They are not producing newspapers for a million readers, they are producing 10,000 copies of the Auto Trader to be sold to potentially the 10,000 people who are interested in buying a car that week. So they can price that advertising at a level that we simply find very difficult to compete with.
4566. With the Internet, we no longer have the cost of newsprint. We can go after those dollars again in a way that in our traditional media we have not been able to do.
4567. THE CHAIRPERSON: In your written submission and again today you mentioned that you are concerned about regulation as we put Canadian services at a competitive disadvantage, but you have also talked about the American situation and in both cases used a language that Canadian companies will not have the same economies of scale as their American counterparts.
4568. I am curious to know what you see as the economies of scale here with respect to this business. We keep hearing now for the last three days and in written submissions that we have been reading for some time that virtually anybody can set up an ISP, virtually anybody can create a Web page, you can make it interesting, there are no barriers to entry, costs are relatively low.
4569. So what is the issue you see here? I am curious to know. I take it you would see that in fact there exists today a competitive disadvantage.
4570. MR. ROSSI: The Internet is, in my mind, really a tale of two cities. On the one hand there are no barriers to entry; on the other hand there are gigantic barriers to entry. It doesn't cost anything to run a hobby, it costs very little to develop a very marginal business; it costs a lot to create a real business, it costs a lot in terms of technology investment and ongoing R&D and in marketing and promotion to continue to grow a business.
4571. When I made the comments in the written submission and today and specifically -- and I do want to be specific about this -- the Canadian market does not have the economies of scale of the American market. I am looking at the local domestic market as an initial basis for amortizing investment. But in this medium the globe is your market; so Canadians can develop and Canadian Internet offerings can and will develop the same economies of scale as they make the globe their market.
4572. There will be services such as toronto.com, which, by their intensely local nature, obtain all of the economies of scale they require within a more precise or niched market, and there will be lots of niche businesses that we can create.
4573. I think of one example. In the space industry we didn't develop NASA in Canada and yet we were able to develop a very successful robotic arm technology, the Canada Arm, which plays a significant role in the space industry. We can develop all kinds of very important niche markets and have the scale, technology and wherewithal to do so. But, to give you a sense of where some of the scale fears and concerns come from -- we talk about classifieds once again.
4574. In the United States eight of the largest newspaper chains, most of whom are significantly larger than Torstar -- and they include Ganett, Knight Ridder, The Tribune Company, The New York Times Company, The Washington Post Company, Times Mirror, McClatchy and Central Newspapers -- have put together a company called "Classified Ventures". The original three partners committed to $30 million U.S. each over the next two years and each of the additional partners has come in with double-digit millions of dollars investment to develop one thing and one thing only, and that is classified businesses on the Internet.
4575. So they are not going to take on the search engines to be search engines, they have put together about $200 million U.S. over the next two years to develop, market and promote classifieds technology and businesses on the Net. That's probably, I would venture to guess, in excess of, just in that one area, what the entire Canadian industry and content will spend on the Internet.
4576. So to say that scale is not important is deluding oneself, but to say that scale is all encompassing is also a mistake because then you have the ebays of the world, then you have, quite frankly, the Yahoos and the AOLs and the rest of the world. These are brands that didn't exist, companies that didn't exist a handful of years ago.
4577. So you can overcome it.
4578. THE CHAIRPERSON: You can overcome it in the marketplace without significant government intervention, setting aside the issues you have raised about the section 19 and the Tax Act and so on.
4579. I must say I couldn't help but think, as I was reading through your submission and thinking about this issue of economies of scale and the competitive disadvantage that you seem to think that we have today, whether that might be not unlike what many people have characterized as the situation in the film business in Canada relative to the U.S, which isn't defined as broadcasting either, by the way.
4580. I am wondering whether you would see any parallels there between our relative strengths in the film industry in Canada relative to the U.S. and this business relative to the U.S. Again, I underscore neither one of them are, right now, defined as broadcasting or likely would be -- certainly not film.
4581. MR. ROSSI: I think it is fair to say there are parallels but I think the important distinction is that we are a fair ways down the road in terms of the development of the film industry in terms of as a mature industry globally, and I think where the parallel breaks off is that we are really here at the start of a revolution, so the rules aren't set and the doors have not been closed and there is still a huge opportunity to go out and take the world on on its own terms.
4582. I think that there is some help that will assist that, but I think that it has to be kept within a market and business discipline. Certainly, for instance, we wouldn't be supporters or we wouldn't be proposing set funds that are distributed out to new media companies. We wouldn't be looking for handouts of that nature. We are looking to see our investments encouraged through the tax system in what we feel will be a more efficient way, a non-administrative way to encourage Canadian companies to grow and compete in this market.
4583. MR. ROTHSCHILD: Mr. Chair, if I can just add one thing, I am sitting here listening to the analogy to the film business. One of the distinct differences between this and the film business and one of the complaints of filmmakers in Canada has always been access to Canadian distribution which is a real problem in the film business. They just don't get screen time in Canada. That's fundamentally different from the Internet.
4584. THE CHAIRPERSON: I am glad you raised that, because that's what I wanted to turn to.
4585. I guess historically we have understood at least three problems there, if not more. One would be access to capital, if I can call it that, in terms of production dollars; that's been addressed with funds, and you have just commented on that. One has been relative lack of marketing -- and I don't think anybody doubts that we have the skills in terms of being able to bring the stories and the production values. And, as you said, another one is access to screens, which has been a huge problem in this country going back many years to decisions that were made back in the thirties, I guess.
4586. Now, in the previous submission that we have heard this morning and in yours, you raised the issue about dealing with ISPs under the Telecommunications Act, and I take it that's intended to get at or address access issues. Is that correct?
4587. MR. ROSSI: Yes. I think we want to be clear on this because, quite frankly, we were a little sloppy in our original written draft, written submission.
4588. Our concern is not the regulation of the ISPs, our concern --
4589. THE CHAIRPERSON: It wasn't my intention to embarrass Mr. Rothschild.
4590. MR. ROSSI: Our concern is that we believe it is early days enough that to forbear on the issue of carriers, specifically where carriers have the opportunity and ownership of content companies themselves, where there is the potential for preference being given, we believe would be premature.
4591. Secondly, for greater precision, we believe that where it is really required and where the supervision is most important is with respect to high speed access, that the dial-up business in Canada has grown extremely well. There were issues raised by the Internet service providers the other day, the UUNETs and others, so certainly if they are seeing continuing problems even on the dial-up side, we would certainly encourage that those be looked into.
4592. We at Torstar know the problem about access and dealing with the cablecos and the telcos. As you are well aware, we fought for years in terms of access of third party licence-exempt services on television, on cable, and even with the intervention of the CRTC and your rulings, we were very pleased to see Rogers and Shaw come to the table and we have been able to come to terms with that.
4593. Over a year after we have launched with Rogers, we have still not been able, even with the sort of limited oversight that the CRTC has in this area, to come to terms with Cogeco. So we think that to just allow things to be self-regulated when it comes to access, certainly the parties have not proven themselves able to do it without quite a firm hand and assistance from the CRTC, and we would encourage that to continue.
4594. You asked earlier what are some of the things that can be done. Quite frankly, to assist the growth and health of the Canadian new media industry, quite frankly, becoming the most wired country in the world would be a huge benefit. And, to the credit of the cable companies that have invested significant dollars in the development of high speed access in this country, we in Canada have actually taken the lead when it comes to cable modem distribution.
4595. If you take a look at @home in the U.S. versus Canada, on a per capita basis on a home's past basis, Shaw, Rogers, Cogeco have done a far better job than the cablecos in the United States. At one point, of the 200,000 subscribers to cable modem service in North America, some 80,000 of them were in Canada.
4596. Building on that kind of advantage making high speed access affordable and ubiquitous would give us a huge advantage in terms of the development of even more sophisticated Internet content, new business opportunities; that then we would be the incubator for the world because when the world finally catches up to where we are, we would have the business ideas and expertise to be able to take advantage of those distribution systems in other countries.
4597. So it is a huge opportunity that I hope we will take full advantage of, and one of the keys is to ensure that we have fair and equal access to high speed and that everything is done to encourage the propagation of this technology throughout Canada.
4598. THE CHAIRPERSON: It just raises a couple of issues in my mind, I guess.
4599. First of all, assuming we had this high speed access -- I am taking up the point that you have just raised -- do you think that that would encourage the sort of development of the kinds of services that would then begin to differentiate us from those American sites that you have talked about earlier, and overcome this economy of scale? To some extent I recognize we don't have the population base, particularly if you are more of a local type service, but do you think that that would allow the kind of innovation and development of the service if one has that platform to build on?
4600. MR. ROSSI: I think it would be a huge advantage and I think we should do all we can to encourage it because we would then be developing -- it is interesting, as all media that have been introduced develop, new opportunities arise. So, from an advertising perspective -- a story that I am always amazed by is that when television was introduced, the then President of Proctor & Gamble was asked, "How much of your radio advertising are you going to shift to television?", and he said, "Well, you know, TV is really radio with pictures, and quite frankly, with the snowy TVs available, radio with bad pictures. So we don't ever see spending more than 3 or 4 per cent of our annual advertising budget on television." Well, that changed, and the man lost his job a few years later.
4601. Having better tools and a better medium, you are then able to customize the content and the business offerings to that better medium, and that's what will give a very rich, compelling business case that then we would be in a position to populate throughout the world quickly thereafter as high speed access becomes available elsewhere to the same extent it would be available in Canada.
4602. THE CHAIRPERSON: Now, I understand, or think I do, the issue that we pursued yesterday with UUNET folks, the ISPs. I am not sure I quite understand the access issue from your point of view as a content creator in terms of getting the access, because the analogy that you have made to the access or the specialty channel isn't quite the same. So could you explain what the access issue is from your point of view?
4603. In their case, as a carrier, as a deliverer of the infrastructure, they want that access, and I understand that. I don't quite understand it from your perspective.
4604. MR. ROSSI: The difference really occurs with respect to high speed access as opposed to dial-up. As you are aware, in dial-up, if I am a Sympatico subscriber and I am a dial-up subscriber, the first time I boot up my machine I will have the Sympatico home page. With dial-up service I can very easily change what my home page is and I could put it on to thestar.com. So there is no real ability for the carrier to give really preferential treatment to his content because very quickly I can change screen.
4605. The same is not true with respect to high speed access, and in particular with cable modem, because cable modem at a consumer level is not high speed access from each home directly to the Net, it is high speed access from the home to the series of servers that the cable companies create close to the home wherein resides content that, in some respects, is especially produced to take advantage of the speed enhancements.
4606. If you are not cached and you are not put on the @home service, an @home subscriber coming to you does not really experience you as a high speed service because, once they get beyond those servers that are close to the home, and if there is a lot of traffic, then the pipe from those servers to the Net basically will reproduce the same experience I get with a 28.8 model or a 14.4 modem.
4607. Again, to their credit, to the credit of the cable companies, the development of @home and this issue that, look it, the way that we can make the most of the bandwidth is to try to place as much content close to the consumer as possible so I am not always making demands on the rest of the pipe. But if you then suddenly -- this is why, when we say that we believe it is fantasy to think that you are going to get full-motion broadcast quality video mass available, we don't believe it is the case because the pipe simply will not sustain that. And if and when we get the compression technology breakthrough -- and it would have to be a phenomenal breakthrough -- to be able to put full-motion video mass availability, that same compression technology would be available to regular broadcasters, and the broadcast spectrum itself would be significantly multiplied, and we would be in a new world.
4608. The assumption is that somehow the Internet is going to keep evolving and broadcast is in some standstill. Well, that's simply not true. Any further advance in compression technology will be to the benefit of the broadcasters as well, and if they are smart and intelligent -- and they are -- they will be able to take advantage of that and stay on top.
4609. MR. ROTHSCHILD: To come back to your question again, if I can, Mr. Colville, I think what you are asking is where is our concern. It is having fair and equal access to that infrastructure that Rocco is describing and saying that, even just being able to use your cable modem but to go somewhere else. If you don't have third party access to that infrastructure, then you won't really experience the benefit of high speed cable modem. Similarly, there is a concern that that could happen with digital telephone service.
4610. So that's what we are talking about. We are saying that we think it is premature at this point to forbear from having regulatory oversight of that infrastructure, so we believe that you have a supervisory role to play in ensuring that there is no undue preference conferred on their own related companies like @home or a Sympatico or Medialinks. So it is a carrier-owned content services that might have an inherent advantage.
4611. MR. ROSSI: I have to laugh sometimes when I hear people saying, this is such a tremendous threat to the broadcast community. If you take a look at the advantages that broadcast has, and particularly as and when video becomes a bigger component, broadcast has two tremendous advantages. One is that they have huge current reach to promote their service if they choose to invest in new media, and with notable exceptions the major broadcasters have not made significant investments in new media; but, secondly, if and when video is a huge component of the Internet, who has access to video archives? Who has access to the production capability in video that we all know is such an expensive process? They do, not us.
4612. THE CHAIRPERSON: Mr. Rossi, I take your point on that. I wanted to finish pursuing this other issue before I get a lot of requests around here to take a break.
4613. I want to go back to this access issue because I don't understand -- I mean, I understand what you say your concern is; I don't understand how we overcome the particular problem.
4614. I take it your point is, as Mr. Rothschild said, you don't want us to forbear or deregulate with the telephone companies and/or the cable companies in this area. My reading of your submission goes beyond that; in fact, you are suggesting we should include the ISPs under the Telecommunications Act and regulate them --
4615. MR. ROTHSCHILD: I think that's the sloppiness Mr. Rossi was referring to in the written submission. We do not feel that you should be trying to regulate the ISPs.
4616. THE CHAIRPERSON: Well, let's pursue that.
4617. Let's assume we do what the UUNETs and the others suggested yesterday and that we have access to high speed capacity either through XDSL technology through the phone companies or high speed cable modem technology at the cable companies. I don't know, frankly, how many players that sort of access is going to allow in any given market. I simply don't know that.
4618. Assuming it is still somewhat a small number and assuming that it is these ISPs who come in and have this access to that capability -- and we talked yesterday about whether or not they may be carriers, just like the telephone companies are, and if they were Canadians there is no reason why they couldn't be -- it isn't clear to me how we still overcome what your real concern seems to be, and that is not the question of how many different pipes there are but what is at the end of that pipe when I turn on the on button.
4619. Your concern seems to be more the question of, once I flick the on button on, what I see at the end of the pipe is a certain screen, and what I am trying to understand here is how you think we should overcome that problem because that is the kind of problem that relates to the cable kind of world that you and others have been struggling with, but I am trying to understand how one deals with that problem in this Internet world.
4620. MR. ROSSI: And I think the really important part of that question was your preface, where you were saying, I am not sure how many of these guys will end up being there, so how ubiquitous would it be; so, if there is still kind of a monopoly situation and they are the only front end to the pipe and they are putting their content up --
4621. THE CHAIRPERSON: Let's assume it is not a monopoly -- not to cut you off, but let's assume it is not; maybe there are six or eight of them, but each of the six or eight has their own page I default to, because most of these players aren't just in the pipe business, right, they are in the pipe and the content business. This is the real convergence here.
4622. MR. ROSSI: Yes.
4623. THE CHAIRPERSON: So if we have eight in a community but all eight I default to their page, does your problem still exist?
4624. MR. ROSSI: Again, in dial-up, it doesn't exist because I can change the home page in the infrastructure. In high speed, my problem would exist.
4625. THE CHAIRPERSON: So how would we deal with it? How would we overcome your problem then?
4626. MR. ROTHSCHILD: I think, while the problem might still exist if there were eight players, Mr. Chair -- it is most profound when we are sitting in a monopoly situation. When you have competition and you have a number of players you can go to so that there is a choice and then everybody is in a position to be dealing with those different players in terms of being part of their home page or being part of their portal, I think it is much less of a problem than when we are in a situation where there is one player and they are the only game in town.
4627. I think when you are in a situation where you have competition, where you have choice, you have much less of a problem.

1115

4628. THE CHAIRPERSON: So, if we can summarize, then, it would be your view that if we can deal with the access to the high speed pipe, your access issue will resolve itself?
4629. MR. ROSSI: We are hopeful that that will be the case, but again, we are asking you not to forbear, and certainly that would be an issue that we would want to revisit at a later point in time if competitive result does not occur.
4630. THE CHAIRPERSON: Just by way of concluding, then -- and I took your point on the relationship to the broadcasters or the so-called threat there. From your comments today, your view is it is at least ten years out before one would even think about considering some sort of concern there.
4631. Let me just raise another issue, though, just as a sort of final clarification.
4632. Notwithstanding all the concern you have raised about don't even think or attempt to regulate the Internet and particularly don't extend that to thinking that you can regulate the newspaper business by getting us through the Internet --
4633. MR. ROSSI: I think we are calling that the Rothschild doctrine.
4634. THE CHAIRPERSON: It isn't paranoia if they really are out to get you. Right?
4635. Just to clarify your point, though, I take it from your submission and the others here is you think we need to more than just not do something, we need to do something, and that is clarify the situation with respect to this whole definition or question of whether this stuff fits in a clear statement of what is in and what is not in coming out of this proceeding to give the kind of certainty that you have been talking about.
4636. MR. ROSSI: I absolutely agree and I think each time I hear IBM saying, "Well, we might have invested and we ended up investing in Barbados instead because we weren't sure that the regulatory environment was going to be fine", or UUNET saying, "Facts to facts, technology over the Internet, I have to do it out of the U.S. because I don't know whether I am going to get tariffed on it in Canada", those are huge concerns.
4637. We have enough of a challenge already, and if we are stopping a lot of potential private investment from encouraging growth and training people and developing critical mass in Canada, then that's a horrible thing, and we should redress it as soon as possible by eliminating the uncertainty to the extent that we can.
4638. MR. ROTHSCHILD: If I could add something there, Mr. Chair, we have put forward and support the definition or description of "new media" that the Newspaper Association has developed -- unscheduled, on demand, user controlled --
4639. THE CHAIRPERSON: Right after the break.
4640. MR. ROTHSCHILD: That's right.
4641. You said, do we need to do something? I am not sure you do need to do something other than accept the notion that this isn't broadcasting.
4642. THE CHAIRPERSON: No, but that's what I include in "doing something", is that --
4643. MR. ROTHSCHILD: That would be the simplest way. Another way may be to go the approach you were talking about in the Convergence Report, where you say "clarifying the definition of a program and incorporating these types of elements into the definition of what is not a program". That may be another way.
4644. THE CHAIRPERSON: We have tried that.
4645. Thank you very much. We appreciate your being with us here today.
4646. MR. ROSSI: Thank you.
4647. THE CHAIRPERSON: We will take our late morning break now and reconvene at twenty-five to twelve.

--- Short recess at / Courte suspension à 1121

--- Upon resuming at / Reprise à 1137

4648. THE CHAIRPERSON: Madam Secretary.
4649. MS SANTERRE: Thank you, Mr. Chairman.
4650. We will now be hearing the presentation by the Canadian Newspaper Association, l'Association canadienne des journaux.
4651. Messieurs, madame.

PRESENTATION / PRÉSENTATION

4652. MR. CHARLEBOIS: Good morning, Mr. Chairman and Commissioners. My name is Marc-André Charlebois. I am President and CEO of the Canadian Newspaper Association.
4653. I wanted to say something first about my tie. I deliberately chose this tie this morning not because it matched particularly well with the rest of my clothes but because it reflects the nature of the business of the new media, which I think is global. So I have flags of the world and you have a backdrop of Canadian flags. I thought it was suitable to say that at the beginning.
4654. I have with me this morning Ms Anne Kothawala. She is CNA's Vice-President of Policy. Also with us at this table is Mr. Wayne Parrish. As you can see, we are a tightly-knit family. Mr. Parrish is with the CNA as Chairman of the New Media Committee. Also, to my immediate right is Mr. Stuart Robertson, partner in the law firm O'Donnell, Robertson and Sanfilippo.
4655. L'Association canadienne des journaux défend les intérêts des quotidiens canadiens. Plus de 100 quotidiens, tant français qu'anglais, comptent parmi nos membres. Au nombre des grandes sociétés propriétaires de journaux que nous représentons on retrouve entre autres Thomson Newspapers, Hollinger Inc., Sun Media Corporation, Quebecor Inc., Southam Inc., Trinity Holdings, Torstar et la Halifax Chronicle-Herald.
4656. Nos membres sont à l'avant-garde de l'évolution des services de contenu destinés aux nouveaux médias. Ils sont parmi les plus grands rassembleurs et distributeurs d'information au Canada. Leur engagement envers les nouveaux médias, et l'inforoute en particulier, n'est qu'un complément naturel à leur mission d'origine, qui est d'offrir aux Canadiens des informations fiables et précises. Que ce soit par le biais de la presse écrite ou de l'Internet, leur responsabilité première est de fournir de l'information aux Canadiens.
4657. Bien avant l'émergence de l'autoroute électronique les quotidiens canadiens se sont démarqués dans la distribution électronique de l'information. Aujourd'hui nos quotidiens exploitent des sites Web d'avant-garde. Ils ont été parmi les premiers au Canada à investir dans le réseau Internet. C'est d'abord et avant tout pour rester fidèles à leur raison d'être qu'ils ont fait d'énormes investissements dans les nouveaux médias, qu'ils ont créé des emplois et contribuent à établir une présence canadienne sur le Web. C'est aussi, bien évidemment, pour des raisons commerciales.
4658. CNA members believe that the regulation of these service would be no more appropriate, or necessary, than regulation of their traditional activities. They oppose any suggestion that their businesses should be regulated simply because they are provided in electronic form.
4659. There has been the suggestion that regulation is the best way to ensure that new media content services contribute to Canadian culture. Our members ask why?
4660. Canadian newspapers make a vital contribution to the maintenance and promotion of Canadian culture. Indeed, they are perhaps the preeminent showcase for Canadian culture. They reflect the communities they serve. They tell Canadian stories. They inform Canadians about one another as well as the world at large.
4661. Newspapers foster a sense of nationhood. They do this in the absence of regulation of any kind. This holds equally true for our new media services. They provide a vital service to Canadians and serve as a means to expose Canadian ideas and values to the world at large. They already make a valuable contribution to Canadian culture.
4662. There has been the suggestion that new media should be regulated because it is simply another form of broadcasting. We don't see how. While new media content services may contain some of the attributes which fall within the definitions of "broadcasting" and "program", overall they are quite different from broadcasting. We note that the vast majority of written submissions as well as those who have appeared before you in the last couple of days share this view.
4663. We have suggested that elements which would help define new media content services should include: unscheduled, interactive, user controlled, on demand. Others have suggested that electronic and digital should also be defining attributes of new media. We also think it may be useful to include them in the definition.
4664. Taken together, these attributes clearly distinguish new media from broadcasting as we know it or as it is defined in the Broadcasting Act. Let's consider the example of true video-on-demand. It will be unscheduled, allow interactivity, be user controlled and will be on demand. We believe true video-on-demand as we envision it will meet the definition of "new media" and fall outside broadcasting.
4665. By comparison, near video-on-demand, which is all that is available with the current technology, does not meet our definition of "new media". It isn't unscheduled, interactive or user controlled. We think it is appropriate that you consider near video-on-demand to be broadcasting.
4666. Falling under the Broadcasting Act means that obligations could be imposed on Canadian new media services. These could range from content quotas to financial obligations. Our members say that that's not acceptable.
4667. Regulation worked in an environment which the Commission could control, one where you could limit domestic competition as well as foreign access and foreign competitors. That's simply not the case with new media. We have to compete with the world, and that's an expensive challenge. We have already shown that we are up for it; we fail to see how regulation could help us. We see regulation as something which would simply make our challenges more complicated and probably more expensive.

1145

4668. Again, our view seems to be shared by a great many others who have or will appear before you. A great many feel most new media services don't qualify as broadcasting. Those who believe certain services might qualify as broadcasting recommend that you exempt those services from regulation. However, as the Wall Report points out, ownership is a real problem with exemptions. How would you deal with foreign-owned services, which cannot be exempted? Our members feel this reinforces their argument that this is simply not the best route to follow, and with very few exceptions, we don't see people clamouring for regulation or protections.
4669. MS KOTHAWALA: Let's just for a moment reconsider the objective of this process. If the goal is to find the most effective and appropriate means to encourage the development of a Canadian presence in new media, do we really need, or want, regulation? We believe that there are more useful ways to achieve this goal.
4670. Here again there is substantial consensus amongst those who have appeared before you or have filed written submissions. A broad range of possible incentives have been put forward by various participants in these proceedings. Many would be quite workable.
4671. In our written submission we gave examples of ways in which governments could support, an encourage, the development of Canadian new media services. One method might be for governments to become model users of both new media services and programs, to encourage the use of Canadian new media products in classrooms as well as institutions like libraries, museums, art galleries.
4672. To the best of our knowledge, the federal and provincial governments have done none of these things. Surely these would be simple measures to help encourage and support a nascent industry.
4673. Let us be clear, though. Our members do not believe in hand-outs. They simply encourage companies to false rely on subsidies that could exist today and be gone tomorrow. What we are saying is that there are many creative and useful ways the government could encourage the development of Canadian new media. Regulation isn't the best or the most useful.
4674. That said, the regulation of distribution would serve a useful purpose. Telephone and broadcast carriers have recommended that you should forbear from regulating the distribution of new media. They say there is no shortage of capacity and that distribution is already highly competitive. We respectfully disagree.
4675. We believe it is premature for the Commission to forbear from regulation in this area. Today, high speed distribution facilities remain scarce and valuable. ISTN or ADSL services are not yet widespread even for businesses. High speed cable delivery is becoming more widespread but is only now beginning to be offered to business customers. We still don't know how, when or on what terms third parties will gain access to the facilities of cable carriers. Both telco and cable carriers have developed sophisticated new media content services which they aggressively promote. In the case of cable's Internet services, the focus of their marketing is the unparalleled speed which they offer.
4676. Our members do not want new media to face the access challenge which we have seen with cable. Our members feel that there is a very real threat that carriers could confer undue preference on their content services, especially in the area of high speed distribution.
4677. We believe the Telecommunications Act provides you with an established and effective regime for dealing with access and undue preference. We suggest that you should apply the Act for now, monitor the situation and reconsider forbearance at some later date.
4678. MR. CHARLEBOIS: As you have already heard this morning, Canadian newspapers have invested in new media services knowing they are at the vanguard of something new and exciting. In the absence of any incentives or obligations, they have established a significant Canadian presence in new media on the Internet. Through their new media services, they reinforce Canadian sovereignty and cultural identity. There is no reason to presume this will change.
4679. The issues under review are of vital importance to Canada. The decisions taken in this policy review could have a serious impact on the willingness of Canadian companies to continue to invest in new media services and, by extension, the presence of Canadian voices in the new media.
4680. The real challenge is to build new media into healthy, sustainable businesses. A healthy industry will allow Canadian new media to showcase Canada to the world.
4681. If the Government of Canada believes it is useful to encourage the development of Canadian new media content services and Canadian new media voices, our members can support incentives but must oppose regulation. Under no circumstances should new media content services be subject to content requirements or regulation.
4682. We thank you for this opportunity to appear today and would be pleased to answer any questions which you might have for us.
4683. Merci beaucoup.
4684. THE CHAIRPERSON: Thank you, Mr. Charlebois.
4685. Given the two presentations we have already had, you can appreciate it is a little bit difficult to come up with something exciting and interesting and new here in terms of questions.
4686. MR. CHARLEBOIS: I am ready for anything.
4687. THE CHAIRPERSON: However, you have raised a few issues.
4688. If we go back to this notion about broadcasting and the definitional question, and whether or not this is included, I guess, if I hear you and some others -- and we talked about it just at the close of the discussion with Torstar -- I take it it is your view it would be helpful and positive for the Commission to have some sort of clear statement as to where this all fits relative to broadcasting and I take it that one way of doing that could be perhaps to provide an interpretation, if you will, of certain elements of the Broadcasting Act or the definition of "broadcasting" and perhaps the definition of "program".
4689. In your submission, for example, you raised the issue about -- you have said at the bottom of page 4 that we not define what it considers to be reception by the public.
4690. I guess this raises the issue -- because there has been a debate within government, it was raised I think with the IHAC Committee when it was working at this issue, and I think there was some in government who had been wondering about this issue about whether or not we should be attempting to come up with a new definition of "broadcasting" so as to exclude this. Now, some people argue that even with the current definition it wouldn't be caught anyway.
4691. I am wondering what your view would be on us attempting to clarify some of the critical elements in terms of an interpretation of some of those elements like reception for the public and so on as an outcome of this proceeding.
4692. MR. CHARLEBOIS: I think that attempting to have as a precise definition as you can of either "broadcasting" or "new media" is always a precarious exercise, especially when you are dealing with a moving target. New media will evolve; broadcasting has evolved since the definitions in the Act have been written.
4693. Since I am not an expert in this field, I would call upon my colleague here to maybe attempt to provide some insights into our position on that.
4694. Mr. Robertson.
4695. MR. ROBERTSON: Thank you.
4696. "Broadcasting" is defined, "program" is defined in the Act, and I guess everyone can take what they like from that. I guess the issue here would be this, that some obviously do disagree as to what the appropriate interpretations may be.
4697. For the Commission to identify an area of activity such as we will call it new media which has certain particular characteristics, which in that view would take it outside the definition of "broadcasting" would be an enormously helpful thing for everybody concerned. So then we are looking to a public notice coming out of this or some document you may issue that would say that, to the extent that something would be the four points that we have in our definition -- I can take you to that again -- to the extent that something would fit within that, in the Commission's view it is pull not push, and interpret at least to some extent what you feel the definition of "broadcasting" does not include.
4698. I don't think that's beyond your authority to do that and it certainly would be helpful to everyone if you did.
4699. THE CHAIRPERSON: I understand your view on that, and in your oral submission this morning you talked about this issue of video-on-demand versus near video-on-demand. I guess no matter how we come at this we are always going to end up with some sort of grey area here.
4700. As you know, we have already issued licences for -- well, we had pay television and pay-per-view, which, depending on how many channels you have of pay-per-view and bloat up the movies you get nearer and nearer to near video-on-demand. But, in addition to that, we have licensed video-on-demand where the program would reside on a video server, in digital format, be accessible.
4701. So I guess, when I heard your presentation this morning and read it, I thought that we had probably already licensed, as broadcasting, what your definition of not broadcasting is intended to build a fence around, if you will, because I would have seen what we have licensed as video-on-demand, none of which are operating yet as far as I know; it is unscheduled, interactive, user controlled and on demand.
4702. Is there a way we can sharpen the focus more to draw that line?
4703. MR. ROBERTSON: If I could start, and then I think Anne Kothawala perhaps could pick up on this to redefine the difference between true video-on-demand and near video-on-demand, but let me just at least begin by saying this: It would be a sorry state if we got stuck on the words. It is perhaps more significant to look to what you have actually licensed, its characteristics, because what we are asking you to do is then to look to new media and all its various characteristics as well.
4704. So, with that in mind, perhaps someone else could pick up the distinction between pure video-on-demand and near video-on-demand.
4705. MS KOTHAWALA: I think the distinction that we are making is -- and this example I think was raised in some other presentations where, in true video-on-demand. If you look at the elements that we have talked about in terms of unscheduled, allow interactivity, one of the examples was where you take a movie and you have true interactivity because you can change the ending. I can go into a program at whatever point I want to, I can watch it, I can change the ending, start and finish wherever I want to. You don't have that with near video-on-demand, and I think that that's one of the real fundamental differences.
4706. You also have the notion of scheduling. The true video-on-demand will be unscheduled, totally unscheduled. I can go and get at it whenever I want to; it wouldn't have to be at 7:30 I have to watch this certain video.
4707. So I think those two elements are really important and crucial to make the distinction between what we may have in the future and what we have today.
4708. THE CHAIRPERSON: I suppose, when one thinks about it that interactive nature of this thing, if one had to pick one of those elements, would probably be the more critical one here in terms of what one might see as the development of this.
4709. Mr. Rossi was mentioning this morning, and I guess Mr. Parrish had mentioned as well -- we can have a discussion about what the timing is, but anybody's guess is right or wrong, I suppose -- that we are not likely to see this sort of capability or functionality as to what we would typically understand as broadcasting for quite some time over the Internet in any event. Would that be your view?
4710. MR. CHARLEBOIS: That's our view, sir.
4711. THE CHAIRPERSON: Notwithstanding that, we should still come to grips with this issue coming out of this proceeding to provide the kind of certainty that you believe is needed in order to help develop this business on a going-forward basis.
4712. MR. CHARLEBOIS: Absolutely.
4713. THE CHAIRPERSON: We have, I think, pursued that issue with you and others.
4714. I was intrigued by your notion -- and somebody else mentioned this earlier in the week, this business of encouraging the use, as one of the incentives, if you will, of Canadian new media products in classrooms as well as institutions like libraries, museums, art galleries and science centres.
4715. I am wondering whether you have thought that through more beyond just the statement in terms of how best one would go about doing that.
4716. MR. CHARLEBOIS: I have to admit we haven't. It is quite a generic incentive. In terms of the logistics behind it, I think it would have to be mapped out and I think that that should not come from our industry necessarily. We could certainly be consulted on it, but I think that it is a measure that the government could initiate. And we are not talking just at the federal government level, we are talking about provincial and municipal levels as well.

1200

4717. THE CHAIRPERSON: I understand that. Having worked at a provincial government and having seen one level of government develop a program and kick it off where another level has to sort of take over and run the operation afterwards, not having any money to do it, I guess we can see the situation now which I think we would all acknowledge has been excellent in terms of getting computers into classrooms and allowing access to the Internet. I am not sure the percentage of classrooms or students that reaches now, but I take it your point is it is one thing to get the hardware into the classroom and it is another thing to get this kind of functionality and usefulness in terms of Canadian programming and that we could probably create a greater incentive to develop that if we were able to sell that to the Departments of Education or school boards or whatever.
4718. I guess the problem today is most of them would argue it is one thing to provide those computers in our classrooms, but we don't have the money to buy that programming and pay for that sort of access.
4719. MR. CHARLEBOIS: In our suggestion, we don't intend to mean that governments would have to become content providers. We see governments promoting the use of what exists or stimulating a demand for Canadian content to the point where Canadian companies and individuals would be attracted to that business.
4720. THE CHAIRPERSON: Do you think we have to do something more than simply put the computers in the classroom in order to do this? Do you think, by getting the computers there, this other business would follow?
4721. MR. CHARLEBOIS: I think it is interesting that you provide the tools -- the hardware, certainly, is a huge dimension. If the hardware is not there, don't even think of new media; and we are not just talking Internet here, we are talking CD-ROMs and disks and technology. Certainly I think it is a good first step to make sure that the schools are equipped with the proper tools to either work on new media or access it.
4722. MS KOTHAWALA: I was just going to add to that I think our point is really this is a situation where the government would be leading by example, and where there is choice in terms of whether you are going to buy Canadian products and services as opposed to American or whatever else, the choice should be made to buy -- so we are talking about decisions that have already been made for people to invest in CD-ROMs or in the classroom or whatever it may be, and that the government would encourage those institutions to use Canadian products and services as opposed to others.
4723. THE CHAIRPERSON: What is the experience of your own members in terms of products that you may be developing, whether it be products around Canoe or other services that some of your members may have developed? I would presume there is a potential market in schools and libraries given the information business that you are in in terms of selling that material to schools, libraries, museums, whatever.
4724. What kind of experience have you encountered in terms of being able to do that?
4725. MR. CHARLEBOIS: I will ask my colleague Mr. Parrish to respond to this.
4726. MR. PARRISH: To my knowledge, certainly within Canoe, we have not developed products at this point that are targeted at the classroom or at the other institutions that are noted in this oral submission.
4727. Newspapers have an extensive history in this country, through the NIE Program, the Newspapers and Education, of making newspapers available for educational curriculum within the classrooms, and perhaps some sort of extension of that could be contemplated. But, to this point in time, the industry and our development efforts I guess have been very mass targeted at consumers in general. I am sure that those kinds of projects will develop over time, but there is nothing specifically targeted that we or I believe any of our fellow members have developed at this point that takes the NIE Program and converts it to a Web-based kind of interactive education.
4728. THE CHAIRPERSON: The mass of students in Canada is a considerably large mass too, I guess, at almost any level. Is that something that you would see as a target market?
4729. MR. PARRISH: Certainly it is a target market. I guess we come back to the business fundamentals here too. The development efforts that we have made to this point in time are predicated upon a return at some point in time that's primarily based on advertising. Advertising is probably not an acceptable vehicle within the classroom. That would certainly be my sense. So I think we would have to look at this pretty carefully in terms of what kind of funds we could make available for the creation of unique programs.
4730. The reality, though, is that a lot of the services that we have, whether it be canada.com, toronto.com or Canoe, provide, to the extent that individual classrooms have on-line access, a wonderful Canadian overview of world events and current events. And, to the extent that those classrooms have on-line access, to build that into the curriculum would make a tremendous amount of sense.
4731. I am not sure that we would have to create special programs within the interactive world to do that.
4732. THE CHAIRPERSON: I am wondering, given your comment, whether there would be concerns in general around a business case to provide that sort of programming for the education environment.
4733. MR. PARRISH: It is tough to be more specific than I have, David. The total amount -- I think it was referred to earlier -- of dollars that are developed, whether they are devoted to development of content in this country is relatively modest at this point, and each of our companies has challenges internally to continue investing at the levels that we are.
4734. I think, in the same way that newspapers have contributed to the NIE Program over the years on both sides of the border, there is great value in doing that because you are preparing a young audience who will be the consumers, and the consumers of advertising of tomorrow. Maybe this is something that we could explore further through conversations with the NIE people at our various newspapers. Certainly, as an association, coming out of this, I think that would be something that would be a worthwhile endeavour for us to consider.
4735. THE CHAIRPERSON: Just switching subjects and going back to a subject we have discussed earlier with the Torstar folks, on page 9 of your presentation this morning you say:

"We believe the Telecommunications Act provides you with an established and effective regime for dealing with access" [and we have talked about that] "and undue preference."

4736. I guess it is not clear to me that the undue preference part of this thing, you would expect us to deal with under the Telecommunications Act.
4737. MR. ROBERTSON: The reference there relates to distribution, not to content, firstly. We are not dealing here with ISPs per se, we are dealing with those who provide the telecommunications facility.
4738. It is my understanding that the Commission has certain powers under the Telecommunications Act to deal with undue preference given by a carrier to the overall services that it provides in the marketplace.
4739. THE CHAIRPERSON: Can you be a little more specific, though, what you observe as the undue preference problem?
4740. MR. PARRISH: Maybe I will just tackle that.
4741. We talked about it a little bit in our presentation this morning and Torstar did in theirs. This is primarily an issue as we move toward a high speed access world. It is more an issue to the way that you phrased the question earlier, it is more an issue in an environment where there is a monopoly or a near monopoly in terms of the high speed access into the home as opposed to a situation in which there are eight providers of that access.
4742. We don't have an association position on this, but one thing that we put forward this morning as a media was the notion of a Canadian sites button or something of that nature.
4743. The key here is that we do not feel it is appropriate that we are in a situation where the owner of the pipe provides undue preference to his or her own content. Beyond that we don't, as I say, have a specific industry position on how you avoid that situation, but we think it is important that that be avoided.
4744. THE CHAIRPERSON: Would it be fair to say, then, the association's view would be similar to what we heard from Mr. Rossi in terms of, if you dealt with the access issue in terms of getting more alternative access to high speed capacity, your concern about the default to a particular home page, or default screen if you will, that gets you into the Internet would be at least diminished if not totally overcome?
4745. MR. CHARLEBOIS: Yes, sir, we believe that, clearly.
4746. MR. PARRISH: I think I would just add to that the caveat to the extent that that situation played out in the real world, in other words that those alternate ISPs did take advantage of immediate access to the infrastructure as opposed perhaps to the situation where there was prohibitive pricing or something of that nature that prevented them from doing so. That just goes to the issue of whether there are one or there are eight, and again it is a continuum and, intuitively, I think we have a good sense on where on that continuum it begins to break down.
4747. Certainly, I think our association position is, as Marc-André has said, to the extent that that is policy and it is implemented by the various players, that would be acceptable to us.
4748. THE CHAIRPERSON: I don't have any other questions because I think we have covered off a lot of the issues this morning with Sun and with Torstar, unless you have anything else you would like to add in terms of elaboration on any of the issues that we have either covered earlier today or which you feel we haven't covered in terms of your submission, I would invite you to do so.
4749. MR. CHARLEBOIS: I would just like to say that, at the heart of content and the ability of content to compete worldwide is the distinctiveness of your content. You want to access some foreign information or foreign content, you do that, but what will allow Canadian content providers to be successful is the degree to which they relate to their local and regional and national public first and foremost. To us, this is vital. As an industry in Canada, to come back to flags, I think we can proudly wrap ourselves in the Canadian flag as an industry. I think that what makes us successful is that we are so close to our readers, and the same notion applies to content providers on the Internet.
4750. THE CHAIRPERSON: I think Madame Bertrand has a question she would like to pose.
4751. THE CHAIRPERSON OF THE COMMISSION: Yes. I am concerned that there is no francophone representing any paper that has made any intervention during this proceeding, and I am wondering, we know that the francophone content on the Internet is a very small portion. I was just wondering, by the fact that you represent an association where there are francophone newspapers, they are not as involved either in terms of their presence on the Net, like the Sun and the Star.
4752. Is there any comment you would wish to bring to our attention on the difference between the francophone and the anglophone in Canada, something that we should be more careful about or aware of, or that you would have probably the same answers in terms of the approach, but maybe something that could be worth sharing with us.
4753. MR. CHARLEBOIS: First, I would like to make one point very clear: Our francophone members have contributed in large part to the positions that we have taken. They are very active within the association in many areas and they are active on the new media front as well.
4754. That they chose not to present separately I think speaks to the notion that they felt that the association's position properly presented their views and that they didn't see a need to come and intervene on their own behalf. But certainly, if you look at what exists on the Web now, you have very strong Web sites managed by some of our larger French newspapers. So I don't think that there is a lag at all there and I think that their concerns are a close match to ours.
4755. LA PRÉSIDENTE DU CONSEIL: Merci beaucoup.
4756. THE CHAIRPERSON: I think those are all our questions. Thank you very much.
4757. Before we take our lunch break, the representative for Palestine Heritage Canada had requested if he could appear earlier in the day than last on the agenda. So we will do that now and then take our lunch break.
4758. Good morning.

1215

4759. MR. KAFIEH: Good morning and thank you. I want to thank the Committee Members for being so helpful in terms of allowing me to jump the order.
4760. I would like to thank the Commission for the opportunity to present on behalf of Palestine Heritage Canada. The presentation that we are focusing on is specifically with regard to the Internet itself.
4761. Palestine Heritage Canada is a registered Canadian charity which, since 1992, has been educating Canadians about the Palestinian heritage and identity. Our primary methodology has been communication through the development of travelling exhibits. However, we have an immediate interest and stake in the Internet and associated communication technologies.
4762. PHC is greatly concerned that the CRTC is being pressured by groups working to restrict the freedom of speech of Canadians as exercised on the Internet. PHC regards the alleged dual justification for regulation -- to protect children from pornography and to fight the spread of hate propaganda -- to be intrinsically without merit.
4763. PHC believes that the Internet does not require regulation in its capacity to accommodate and reflect diverse Canadian interests and opinions. With regard to protection of children, PHC believes that responsibility for restricting a child's access to information, whether on the Internet or elsewhere, must ultimately lie with the child's parents. Indeed, new software and V-chip type technologies, already available on the market, have empowered parents with the ability to regulate their children's access to the Internet.
4764. Parenting responsibilities are not part of the CRTC's mandate. If the CRTC were to regulate the content of the Internet, then it would inevitably be engaged in censorship. In fact, if the CRTC were to restrict the flow of information on the Internet for children, it would be doing the same to adults. The CRTC in effect would be reducing all adults to the level of children by abrogating the prerogative of adult Canadians to decide for themselves what information they will allow into their homes for themselves and what information they ultimately make available to their children.
4765. The call to fight pornography is not rooted in any genuine concern to protect children from accessing such material since, as noted above, parents already have this power. Rather, it is an effort by special interest groups who wish to force their personal systems of morality on other Canadians. The CRTC has no business facilitating this special interest objective.
4766. With regard to fighting hate propaganda, the alleged fight against the promotion of hate on the Internet is regarded by PHC as a ruse to justify an attack on the democratic right to free speech by Canadians. Canada presently has adequate legislation in place to protect society from hate groups. Ultimately, PHC believes actions, and not opinions, should be regulated.
4767. The free exchange of information in the context of a free market of ideas and opinions is critical to the integrity of our democratic system. The damage censorship does to Canadian values and interests dramatically outweigh any perceived benefit from silencing dissident opinions. Indeed, the interests of vulnerable communities are protected more by Canada's democratic system and right to free speech than it could ever be by censorship.
4768. The government, in a free society, has no legitimate role in restricting the free exchange of ideas and opinions. The primary responsibility of Canadian governmental institutions, including the CRTC, is to support democratic practices, including freedom of speech, in Canadian society.
4769. PHC speaks on this subject with the benefit of firsthand experience. Canada's Arab and Muslim communities have routinely been subjected to what is widely regarded as hate mongering. PHC is aware of several organizations that use the Internet to spread false news, false history and general misinformation about these peoples. Today, the other form of anti-Semitism, that directed against Arabs, is still largely socially acceptable in Canada. However, we do not believe that regulation of the Internet, or censorship, is the best or even an acceptable response to this problem.
4770. If the CRTC were to become responsible for censoring hate groups on the Internet, the predictable result would be a flood of politically-motivated hate propaganda complaints filed by interested parties for the sole purpose of silencing opponents. Whether the CRTC acted or failed to act, it would be subjected to a barrage of lawsuits and unwinnable Charter challenges. The CRTC would be the first institution to be damaged by its taking on the role of censor.
4771. PHC believes that the best protection for relatively vulnerable people such as Arab Canadians is an educated Canadian society instilled with democratic values. The assertion that a dissident opinion flowed on the Internet can threaten our societal values is more an indictment of our societal values and the efficacy with which Canada annually invests tens of billions of dollars on education rather than a coherent argument for censorship.
4772. Opinions that many Canadians find to be poorly researched or outright offensive still have their place on the Internet in that they define the widest possible envelope for free expression and general discourse. The expression of unpopular opinions is precisely what our right to free speech protects.
4773. Freedom of speech is not a relative value; either you are for it or you are for censorship. Opening the Pandora's box of censorship only undermines our democratic system, which is our ultimate guarantor of individual and collective security.
4774. With regard to the CRTC's regulatory role, at its beginning the CRTC had a legitimate role in regulating television and radio broadcasts and their content as both media who were limited in their capacity to accommodate differing interests and opinions in Canada. Additionally, the CRTC needed to monitor issues relating to concentration of ownership.
4775. The Internet has demonstrated its ability to efficiently enhance communications capacities of individuals and organizations. However, Internet communication is not a form of broadcast; it is a collection of volitional private and one-on-one communications, the content of which is protected under the Canadian Constitution. As capacity to accommodate Internet sites and browsers in cyberspace is virtually unlimited, regulation to ensure equitable access to Internet services is presently unnecessary. For many Canadians, a non-restricted Internet provides the only affordable means, especially when compared to the cost of television or radio time, to respond to very powerful and well-financed interests.
4776. Today the Internet is the ultimate democratic instrument of communication in that it levels the playing field of public discourse. The rights of Canadians to free speech and freedom from gratuitous regulation, intrusion and surveillance are of paramount importance as they are fundamental to our democratic system. The creation of a mandate for the CRTC to act as big brother, to define political correctness for all Canadians and legislate morality would be an act that would subvert Canada's democratic values and policy of multliculturalism.
4777. In a time of unprecedented concentration of print and electronic media ownership, it is all the more critical to ensure that the Internet remains free from regulation. The Internet is the natural alternative source of information to the traditional sources that have tended to propagate the views and interests of Canada's economic and political elite.
4778. If the CRTC has any role regarding the Internet, it would be to limit concentration of ownership and to ensure that it remains totally unrestricted and readily accessible to all Canadians.
4779. That concludes the presentations. If there are any questions, I would be happy to answer them.
4780. THE CHAIRPERSON: Thank you very much for your presentation.
4781. Commissioner McKendry.
4782. COMMISSIONER McKENDRY: Thank you, Mr. Chair.
4783. Thank you for your presentation and for coming to Hull today to provide that to us.
4784. I just wanted to get a comment or your views on the role of the Internet with respect to the spread of false news and the other items that you identify. You say that your association is aware of several organizations that use the Internet to spread false news, false history and general misinformation about certain peoples.
4785. Does your organization use the Internet or does it have a Web site? I tried to look for a site under the Palestine Heritage Canada and didn't find one.
4786. MR. KAFIEH: No, we do not. We are designing one presently; in that sense, we have an immediate interest in it. We are not participants in that sense, but we are speaking on principle; we want to protect the opportunity that all Canadians have to present views that even we find deeply offensive.
4787. COMMISSIONER McKENDRY: My question really was -- and perhaps you have answered it by saying you are going to establish a site.
4788. I was wondering whether or not you saw the Internet as a useful tool to counter the kinds of issues that you are concerned about, because I notice later on you refer to the importance of Canadians being educated in order to deal effectively with these issues. So perhaps the fact that you are going to establish a site means that you do see the Internet as a valuable tool to counter these kinds of things.
4789. MR. KAFIEH: I think it is extremely valuable, but I think making use of the Internet doesn't necessarily have to be strictly for the purpose of responding to others. I think it is important that Canadians have an opportunity to decide for themselves. What I find offensive isn't necessarily something that you would find offensive, but I respect your opportunity to make that determination for yourself.
4790. In any case, I certainly believe that this is one opportunity that exists for Canadians, individually or collectively, to put together a presentation to their fellow Canadians on what they believe in, what they think is important, that they share with other Canadians. This is in fact a unique opportunity, especially when you view the costs of alternatives.
4791. COMMISSIONER McKENDRY: In conventional broadcasting we have a regulation that deals with this area. I am just going to read briefly from it. It says -- and I am quoting:

"A licensee shall not broadcast any abusive comment that, when taken in context, tends or is likely to expose an individual or a group or class of individuals to hatred or contempt on the basis of race, national or ethnic origin, colour, religion, sex, sexual orientation, age or mental or physical disability."

4792. What is it about the Internet in relation to convention media -- and I am assuming that you would find that regulation useful in the conventional media environment. If you don't, I would appreciate hearing about that as well.
4793. What is it about the Internet that makes that kind of regulation not useful whereas it presumably is useful in the conventional media?
4794. MR. KAFIEH: In the conventional media I don't have an opportunity, because of the costs involved and certainly access to facility, to respond to views that are presented that I find offensive. No practical opportunity really exists to respond point for point. That opportunity does exist through the Internet.
4795. The other aspect of it is that, by its nature, there are only so many television stations; they are finite at this point, with our technology. On the Internet, that's not the case. The fact that I have a Web site on the Internet doesn't preclude anyone else from establishing one or developing one more elaborate than mine, but right now there is a fixed capacity with regard to forms of broadcasting.
4796. COMMISSIONER McKENDRY: Thank you. I just wanted also to ask you about your concluding comment where you hold out, I suppose, the possibility of a role for the CRTC with respect to limiting concentration of ownership and also to ensure that it remains totally unrestricted and readily accessible to all Canadians.
4797. What is your concern with respect to concentration of ownership as you look at the Internet today?

1230

4798. MR. KAFIEH: There are a combination of concerns that I have. One is, it is popularly said that the Internet cannot be regulated, that the Commissioners may say what they want and do what they want, but ultimately it is impossible. I am not confident that that's the case. I am sure that, with new technologies, new approaches, it is possible to regulate the Internet, it is possible to use coercive measures to make servers responsible for content and the like. That would be a concern that I would have.
4799. I am concerned that ultimately -- and with regard to new directions and how the technology will unfold in the future, I am not certain as to what new technology will come out in the future and what abilities to control might take place at that point.
4800. Right now, with the present systems that are there, there is no real role for the CRTC with regard to the Internet. However, if new technologies came out and they were cost intensive, or because of concentration of ownership and the ability of servers to simply say, "I am not going to carry your Web site any longer", you will get bumped from the system, and if you don't have alternatives, then I would be very concerned about that.
4801. Simply, if there is any purpose in regulation, it might be to absolve carriers of responsibility for their content; in other words, just as a phone company might not be responsible for the private conversations I have with somebody else, you wouldn't hold them necessarily responsible for the words I utter to a friend of mine, whether it is down the street or around the world, maybe the servers should be regulated in that one respect in that they are instructed to be blind to what is actually going on in the site, that they are not to discriminate on that basis and that they must provide the service free from that scrutiny.
4802. COMMISSIONER McKENDRY: In terms of developing the Web site that you are developing and having it hosted somewhere, as an organization such as yours, a non-profit organization or a not-for-profit organization, are there any problems you are encountering that you think are inhibiting your ability to get your site developed and hosted?
4803. MR. KAFIEH: No. I think it is simply more fundamental, more mundane questions of, how can I put it, getting around to it. I think it is a question of making it a priority. We are very late in that respect.
4804. But I am here not so much to discuss our own case but really to speak out of concern to the bigger picture.
4805. COMMISSIONER McKENDRY: Thank you very much. Those are the questions I had for you. We appreciate you taking the time to put your views in front of us.
4806. MR. KAFIEH: Thank you.
4807. THE CHAIRPERSON: Thank you, Commissioner McKendry.
4808. Thank you very much. We appreciated your contribution.
4809. We will take our lunch break now and reconvene at two o'clock.

--- Recess at / Suspension à 1232

--- Upon resuming / Reprise à 1405

4810. THE CHAIRPERSON: Good afternoon, ladies and gentlemen. We will return to our proceeding now.
4811. Madam Secretary.
4812. MS SANTERRE: Thank you, Mr. Chairman.
4813. We would like now to introduce Media Awareness Network, le Réseau éducation-médias à faire leur présentation.

PRESENTATION / PRÉSENTATION

4814. M. FRASER: Merci beaucoup.
4815. Chairman Colville, Madame Bertrand, Mesdames et Messieurs les Commissaires, my name is Fil Fraser and I am happy to be here. I am honoured to be Chair of the Media Awareness Network, and I would like to thank you for giving us the opportunity to make a few comments on the challenges of the new media world that we are all falling into.
4816. I would like to introduce the panel. Next to me is Jan D'Arcy, co-Director of the Media Awareness Network. Next to her is Anne Taylor, and holding down the other end of the table is Al MacKay, well known to you. Behind me is Linda Gervais, Vice-President, Federal Government Relations at Bell Canada; next to her is Sandra MacDonald, the Government Film Commissioner and Chairperson of the National Film Board; next to her is Ken Goldstein, who wears many hats, but he is President of the Communications Management Incorporated organization.
4817. Our presenters bring a considerable wealth of experience to the table. For example, Al MacKay is the current Chair of the Ontario Regional Broadcast Standards Council, a consultant to the television industry on the issue of television violence. Sandra MacDonald, at the helm of the Film Board, has guided that organization as it undertakes Web-based delivery of its outstanding Canadian learning materials. Linda Gervais serves as Director of the Governor General's Performing Arts Awards, and Ken Goldstein is no stranger to anyone here, being one of Canada's preeminent Internet experts.
4818. We have some other board members who couldn't be with us, including Heather Shaw, the Vice-President of Shaw Communications, Serge Carrière, Chief Executif Officer of one of Montreal's largest new media production houses, MicroIntel, and Heather-Jane Robertson, Director of Profession Development Services of the Canadian Teachers' Federation.
4819. I want to begin, before I step aside virtually, by saying that we all come here only wearing our Media Awareness Network hats. Between us we wear many hats, and sometimes we don't agree on some positions. So don't ask me questions about Vision TV.
4820. Cette délégation des membres du conseil du Réseau représente plutôt un comité de réflexion composé de Canadiens qui travaillent ensemble pour trouver des solutions, à travers l'éducation, aux défis potentiels des nouveaux médias. Nous partageons tous la conviction qu'il serait futile de se demander si, oui ou non, l'Internet doit être réglementé au sens traditionnel du terme. Nous croyons surtout que nous devons concentrer nos efforts sur la façon d'aider les enfants canadiens à tirer profit de l'Internet de manière sécuritaire.
4821. So, with that, I would like to step aside and introduce you again to the two women next to me, who really make this thing work -- first Jan D'Arcy and then Anne Taylor.
4822. MS D'ARCY: Thank you, Fil.
4823. Monsieur le Président, Messieurs et Mesdames les Commissaires, j'aimerais mettre l'accent cet après-midi sur l'influence de l'Internet sur les consommateurs, particulièrement les enfants et les jeunes.
4824. We will also outline this afternoon the educational strategies we are urging the Commission to support, to ensure that young people make the best, and safest, use of the Internet. We will conclude our presentation with a short CD-ROM demonstration of our work.
4825. Due to its limitless and borderless nature, we feel that we cannot approach the Internet and its regulation as we have approached broadcasting and telecommunications in the past. We feel that regulation, in this traditional sense, is both impractical and unmanageable.
4826. That being said, we see three developments relating to the management of Internet content on the horizon: a fundamental shift in the responsibility for content and control from the regulator to the user; a move towards international agreements regarding standards and legal enforcement; and a move towards industry self-regulation.
4827. We endorse the move towards industry self-regulation, particularly that which addresses on-line marketing to children. The value of industry self-regulation, however, can only be realized if the consumer is well informed and has access to a user-friendly complaints process. We all know that voluntary codes, or the use of technologies such as filtering software, can only go so far in protecting children.
4828. In response to the unregulated, borderless nature of the Internet, there is an urgent need, in our opinion, for education -- a new kind of education that we call "Web literacy". To help Canadians understand and manage this new medium, we are suggesting two main approaches:
4829. First, we need to help young Canadians develop the critical thinking skills that they will use for the rest of their lives -- for filtering, analysing, understanding and learning how to authenticate on-line information. And we need to teach them how to use this powerful tool for a better democracy.
4830. Secondly, we need consumer information and education, so that Internet users know what laws, standards and voluntary codes address on-line content, and what actions, as consumers and citizens, are available to us when we note infractions of the existing laws and codes.
4831. In 1994, when the Media Awareness Network was created in response to the CRTC's children and television violence initiatives, the World Wide Web was in its infancy. As an organization, we have grown up with the Web. We have watched its potential being realized and we have monitored the risks and the concerns associated with its use.
4832. We realized early on that public concern regarding easy access by children to inappropriate content could only increase. It was clear that the traditional media education topics -- bias in reporting, gender stereotyping, minority representation, violence, ownership, cultural sovereignty -- would have, if anything, greater significance with the advent of the Information Highway.
4833. M^me TAYLOR: La volonté du gouvernement canadien de brancher les écoles au réseau Internet est soutenue par les gouvernements provinciaux. Au cours des six derniers mois, le Réseau éducation-médias a rencontré les représentants de sept ministères de l'Éducation afin de revoir avec eux la place de L'éducation aux médias au sein des programmes scolaires. Nous avons également discuté de l'impact des nouvelles technologies. Puisqu'on retrouve désormais l'Internet en classe, les professionnels de l'éducation sont confrontés à de nouveux problèmes, tels que:
4834. - les politiques en vigueur quant à la supervision, la responsabilité et l'utilisation appropriée d'Internet pour les protéger contre tout éventuel litige;
4835. - l'accès le plus égalitaire possible aux technologies nouvelles pour tous les enfants, y compris ceux qui sont marginalisés; et, finalement
4836. - la gestion des contenus indésirables de certains sites et la création de logiciels pour filtrer ces contenus.
4837. Une des solutions que nous développons activement avec les ministères et les commissions scolaires est l'intégration de l'éducation aux nouveaux médias dans les programmes d'études. Nous arrivons à point nommé car l'éducation aux médias et aux nouvelles technologies devient un sujet brûlant à travers les milieux de l'éducation au Canada.

1415

4838. Dans le cas du Québec, par exemple, à la suite de l'Énoncé politique sur la réforme éducative au Québec, le ministère de l'Éducation est en pleine reformulation de ses programmes. L'éducation aux médias devient une compétence que les jeunes devront acquérir dans le cadre de ce nouveau curriculum. Le ministère a donc mis sur pied un comité de réflexion afin de discuter des orientations de cette nouvelle discipline. Des membres du conseil d'administration du Réseau éducation-médias ainsi que des employés font partie de ce groupe.
4839. It is obvious that a medium with millions of publishers from around the world is going to demand a whole new range of skills -- skills for distinguishing fact from opinion, for spotting privacy invasions, for decoding on-line marketing messages and, for children and adolescents, skills for dealing with on-line anonymity and staying safe.
4840. It is a fascinating time, with all kinds of new questions opening up for media educators and their students -- questions about authenticity and copyright, the tension between free speech and offensive content, the nature of on-line community and the potential of electronic democracy.
4841. The Media Awareness Network's Web site offers Canadians, at no charge, a wealth of resources for media education and a quickly growing collection of tools for Web literacy. Nigel Williams, director of Childnet International, told us on a recent visit that no one else in the world is producing Web literacy resources like those of the Media Awareness Network.
4842. In order to secure our organization as a stable Canadian institution, the Media Awareness network requires ongoing funding. Ideally, our funding would come from both private and public sectors. Currently, we receive core operating support from Shaw Communications, Bell Canada, CTV, and the CBC, and we are very grateful for this. However, since our incorporation in 1996, although we have received contracts for work, we have not received core funding from government.
4843. The Commission's recommendations to government and stakeholders in the system, which will follow this hearing, are critically important to the Media Awareness Network and other media education initiatives. We urge the Commission to include support for Web literacy as an integral part of any overall new media policy for this country.
4844. Time is short, but we would now like to give you a flavour of the Media Awareness Network Web site, with an emphasis on our games and resources for Internet education.

--- CD-ROM demonstration / Démonstration CD-ROM

4845. MS D'ARCY: The Media Awareness Network/Réseau éducation-médias site is one of the largest educational content providers in Canada, at over 320 megabytes. Designed for four user groups, including teachers and parents, this site now receives over 700,000 hits a month, and we serve over 46,000 individual users on a monthly basis.
4846. We offer 250 teaching units in both official languages designed to fit core curricula. The teaching units are supported with copyright-cleared student hand-outs, classroom activities and topical background information for teachers.
4847. Our Web literacy framework for Grades 1 to 12, which is now being reviewed by ministries of education, will provide us with a template for our research and production in this exciting new area.
4848. Media education needs to begin in the home and in the community, and we have responded to this by designing both home and community media education activities.
4849. One of the advantages of producing on-line resources is that the information that we put on-line can be kept up to date and relevant to our user groups. We offer a news service on media developments, information new legislation, industry codes, and studies and reports are constantly being added to the site.
4850. MS TAYLOR: Nos dossiers sur les enjeux des médias offrent un portrait des plus complet: les documents sur la place des minorités dans les médias, la concentration des médias et la vie privée sont devenus des outils de référence dans les universités. Des professionnels du gouvernement et des universitaires nous ont d'ailleurs dit que nous étions la meilleure référence pour obtenir des informations à jour sur les statistiques, les lois, les nouvelles de l'industrie et les récentes recherches reliées aux médias.
4851. We have mapped out an ambitious Web literacy program for 1999. We are preparing a primer on Children and the Internet which will address hate, on-line talking, marketing to children and privacy concerns, and we are working on an extensive learning package for the junior high level which we are calling "Savvy Surfers".
4852. We would now like to show you two short demos of our two multi-media games which have been produced for children between the ages of 7 and 11.
4853. The first is called "CyberSense and Nonsense" and it addresses netiquette, bias, stereotyping, and finally hate on the Internet. In this game Les Pig participate in a skateboarders chat room and is eventually drawn into a We Hate Wolves site. The game stresses the differences between fact and opinion, and has been designed to make children aware, before they surf the Web, that just because it is on the screen doesn't mean it is true.
4854. In "Jouer sans se faire jouer" the CyberPigs go looking on the Internet for a clubhouse. This game helps young children learn to spot invasive and deceptive on-line advertising techniques and stresses the importance of protecting personal information, and that of family and friends, on-line.
4855. Both games are accompanied by extensive teachers guides. The games have been internationally recognized as unique, highly valuable teaching tools to help children become "Savvy Surfers".
4856. MR. MacKAY: Just a closing thought, Mr. Chairman.
4857. Canadians have achieved a very enviable international reputation because of our approach to children and their use of media. We are known around the world for our innovative and non-violent children's television programming, Canadian broadcast codes on children's programming and advertising to children are unparalleled. The media violence debate in this country focused on where it should be, which is the protection of young children.
4858. The Media Awareness Network is the most recent example of this Canadian tradition -- offering the world another sterling example of how Canadians have developed our Child First policies, this time focusing on new media education.
4859. The network's programs, we believe, are yet another vibrant and imaginative demonstration of the Canadian way, and it is essential that the means be found to allow us to continue to set an example for the rest of the world.
4860. We are available for any questions.
4861. THE CHAIRPERSON: Thank you, Mr. MacKay, ladies and gentlemen.
4862. I will turn the questioning over to Commissioner Pennefather.
4863. COMMISSIONER PENNEFATHER: Good afternoon, and thank you all for being here.
4864. As you said in the beginning, Mr. Fraser, the board represents a unique gathering of experience in world media in this country and internationally, but, as you have so rightly said, we should focus on the Media Awareness Network itself. We are very glad you are here because in a way that's what this hearing is really about, awareness, enhanced exploration of this new media and the Internet, and your observations and the information you brought us about your approach to media awareness is very important to these discussions.
4865. I would like to begin by just revisiting some of the basic concepts for the existence of the Media Awareness Network. It is in essence, if I am summarizing -- if it is too much, let me know, but it is in essence Web literacy.
4866. Media literacy, I think you have mentioned in your remarks today, pre-exists the Web; media literacy itself is not something new. What is it about cyberspace, what is it about the new media and Internet which you advise makes media literacy even more important, or is it just a continuation of the media literacy we have come to know?
4867. MS TAYLOR: I think it is partly a continuation. Part of its importance rests on the fact that there is greater access than ever before to materials which may or may not be appropriate for children, and we feel that, in a way, the armour we can send children out into the world with is education. I am talking about slightly older children. Of course, we protect little children, but as soon as children develop the ability to think critically, that's when we should begin addressing what is on the Internet and help them to recognize hate, for instance, when they see it, recognize what is behind hate propaganda, understand that they are being marketed to, to understand that they are being drawn into games and clubs and fun interactive activities and drawn into characters being made their friends, who talk to them personally. This doesn't happen in the world of television. So we do see it as more important than ever before.
4868. COMMISSIONER PENNEFATHER: In a way, you are helping us define new media. What is it for you, new media? What does it mean?
4869. MR. FRASER: Perhaps Ken Goldstein can take a run at that one. He is up to his armpits in it.
4870. MR. GOLDSTEIN: New media is hard to define precisely because we have chosen to call it "new media". Seventy-five years ago radio was new media, but it was pretty clear what that finally became, and then television was new media, and I think the reason we are calling it "new media" is a manifestation of the fact that we are having a lot of trouble defining it because it blurs all of the traditional boundaries.
4871. I prefer not to talk about detailed definitions involving one or another pieces of technology. What has happened now is we are moving from a period that very recently was an oligopoly, a regulated oligopoly -- you had a very small number of players and you had a regulator -- to an unlimited number of players, essentially not regulatable. That might be more important than any technical definition.
4872. COMMISSIONER PENNEFATHER: I will come back to that perhaps, but I was interested in the experience of the user and that user's relationship with the media because when Ms Taylor was answering my first question, she used the phrase "protection", and that is in the opening letter that accompanies your submission, that protection is moving from the regulator to the user.
4873. It would appear from that, in your submission, that one of the main features of new media from the point of view of the user is an invasive one. You use the term "protection" a great deal. In, therefore, describing what this new media is as a different kind of media experience, what is it in particular that the Media Awareness Network would want to bring to our attention -- and we can focus on children, if you would like.
4874. MR. GOLDSTEIN: Let me begin just for a minute, and then I will transfer to others.
4875. Invasive I think is perhaps not exactly the right word to use here because it implies that it is there at someone else's selection. What we really have here is perhaps more ubiquitous is maybe the better word, because the people choose to select what they are seeing. It is very much an individual choice, and the issue of protection arises because it is very hard to know what anybody is choosing; you can block some sites and you can educate about something, but something can come in a different way. So we have to start arming our children with a whole new set of skills.
4876. At the outset you mentioned that this grew out of regular media literacy education. The fact is that media literacy education, in most countries of the world, including our own, has not been nearly enough attended to. If you take a look at what happens when any of our children graduate from high school, they can look at the prospect of spending about 30 per cent of the rest of their lives with the media -- radio, television, the Internet, books, movies, newspapers and so on -- and yet in the preceding 12 or 13 years of schooling they will have received very, very little education about the media.
4877. The Internet adds an urgency to that.

1430

4878. COMMISSIONER PENNEFATHER: I think that was what I was getting at with my first question. Why does the Internet add urgency? What qualities of the Internet add this urgency?
4879. And maybe I could ask you to answer it by -- and this is perhaps a bit selective on my part, but you list a number of questions on page 10 of your submission, paragraph 3.13, which are a list of questions that say:

"If we are to optimize the strengths and minimize the pitfalls of the new media for young Canadians, we must be prepared... to explore new questions..."

4880. I am assuming that new media, because of certain of its qualities -- and we can bring those back into our discussion -- really affect our lives very differently.
4881. For example, you ask the question:

"How do we ensure that we do not create information-haves and have-nots, particularly among young Canadians?"

4882. Can I ask you that question?
4883. MS MacDONALD: Yes. I would like to take two avenues, first to deal with the question of what is different about new media and then get to the question of the information rich and information poor and other matter.
4884. In addition to everything Ken has said and Jan has said about the difference, to my mind it is the fact that it is indeed much less mediated than the media that children normally have access to; that is to say that a child alone in a room with a computer does not have a teacher keeping an eye on what he is doing, does not usually have a parent keeping an eye on what he is doing, does not have the intrinsic restrictions that broadcasters have placed on them or placed upon themselves so that they do not alienate their advertisers with respect to offensive material and other kinds of content which is the focus of the education needs that are now emerging.
4885. So the fact that a child who goes on the Internet has far far fewer restrictions and far far fewer guides at hand is one of the reasons why the need for education for how to use this new tool falls much more heavily on the child himself or the user himself, and these things cannot be expected, obviously, to emerge full blown. Some base needs to be set, guidance needs to be provided, and, like many other things, where they need to be provided is at the home at an early age and in the school at an early age.
4886. These are the places where, of course, the Media Awareness Network tries very hard to interact with the people who can help.
4887. Now, the question of the information rich and information poor is a question of different order because we are talking in that case in part about the cost of the technology, the personal cost of the technology to have the apparatus available for people wherever they are, in home or school, and also about whether or not the pipelines, the networks that permit them to use that technology to link to the information, education, entertainment resources are equally available to all or available at reasonable prices to all.
4888. Those are questions which, obviously, have some relationship to the role that the Commission plays in its telecommunications function, and I won't presume any expertise with respect to that. However, I think that the broad question of the access to tools is a societal question, broadly, much more than a question for the regulator. It is a question for all of us who pay taxes to support schools, for all of us who believe that preparing the children of today to be the workforce of tomorrow requires societal investments.
4889. I believe that that is far, far too large a question for the Commission itself, although I believe that governments at every level must apply their minds to it.
4890. MS GERVAIS: I would also like to, with regard to the issue of access, just make reference to the SchoolNet initiative that Industry Canada has in place. The objective there is to connect all the schools of the country to the Information Highway this year, by the end of the school year. Many of the telephone companies are subsidizing access to this through, for instance in Ontario and Quebec, elimination of long distance access fees, where they still apply, to the Internet for schools and libraries and through providing high speed access through services like DirectPC.
4891. These are issues that have become the focus of the government through its SchoolNet initiative, through its Computers for Schools initiative and through the establishment of federal-provincial mechanisms to mobilize and harness the various ministries of education to work co-operatively together to ensure that the schools are connected. There is also the issue of what they call "community access points".
4892. So, increasingly, you have locations or communities that would be considered remote that do have community gathering spots for Internet access where they are equipped with distance learning initiatives, where they have a number of tools that are being put in place, and this has become a major focus of the government.
4893. So I think that the government has been addressing the issue of access to a considerable extent as well as looking for partnerships with the private sector and with the provincial governments to help move this forward.
4894. I think that's a very important part that this is happening today and it is not such a critical issue. I was meeting recently with someone who is working in Nunavut -- it is one of our newest provinces. To your question earlier about media literacy versus Web literacy, the point that this woman made for me was very startling. She said, "This is a society where Web literacy will precede media literacy." They communicate, they use the Web and they use it to an extreme amount. When the server goes down -- and it is rather amazing to think of the server going down up north as being a very critical issue. I think we would have thought if the mail doesn't get through, but so much of their information, their communication, who they are is how they use the Web.
4895. I think this is where an organization like the Media Awareness Network, which is accessible to whoever and wherever you are, provides people with the tools to help children as well as adults, because I think in terms of Web literacy we are all learning. So it is not just the children, it is also myself as a parent, we are all learning. So you can access this information quite easily, and that is one of the major values.
4896. I think that issue of new media is that the information comes to me when I want it on my terms, and that is the biggest change from anything that preceded it.
4897. MR. FRASER: I am just going to interject for half a second, Commissioner Pennefather, to say that I hope you don't mind that we are fairly free form about this; we have some very well informed people on the panel --
4898. COMMISSIONER PENNEFATHER: Please.
4899. MR. FRASER: -- and I should have suggested to you that you can direct your questions to any one of them, and any one of them might want to answer.
4900. COMMISSIONER PENNEFATHER: No. We are here to listen to you, so please proceed as the inspiration takes you or as the intuition takes you -- a very important phrase that was used this morning that it is sometimes the best approach, although sometimes difficult.
4901. I am glad we brought the access point around. There has been important discussion here today and through our hearings so far, and I am sure it will continue, on access to what is on the Internet, to the content.
4902. Do you feel that there are any barriers to access to what is on the Internet for Canadians?
4903. MR. FRASER: I don't think so. I think that one way of defining new media in large terms is that new media, as we are experiencing them today, are media in which access is really not an issue. There are economic issues, of course, you have to be able to afford the technology, but, given that, anyone has access anywhere in the world to this facility.
4904. COMMISSIONER PENNEFATHER: But, previously, we had a comment I think, when Torstar was talking with Commissioner Colville, that that is true, but the reverse is also true; it can be very difficult to have access. There is the cost of putting up a site and competing. I think the discussion was in the context more of electronic commerce, but it raises the issue, and I am wondering if you have some comments on where you see the future in terms of our ability to have access to in fact the diversity of content, if in fact there is a potential for some degree of control of new media.
4905. Since you are in the business of awareness of how the system works on the premise that knowing that will assure that the user -- I am talking a great deal about the user, as you have -- will be aware that there is diversity and demand it if it is not there.
4906. MR. FRASER: I think, just before Jan talks about content, I should underline that there is a considerable difference between the access available to individuals who just want to get on and find out what is there and use the facility -- that's a considerably different question than the access available to information providers who actually want to provide information or have sites to a whole range of things on the Net, although access is pretty broadly available to both sides I think, but at the individual level, clearly the trend is toward the technology becoming more and more affordable. It can be found free in schools and libraries. So the trend is it is becoming almost, at some point in the future, like the black telephone where almost everyone could have one.
4907. MS D'ARCY: If I can just pick up from your questions about access and relationship to content, and if I understand your question properly, there is clearly a range of issues that we are facing in terms of what is on the Internet, what content is available. There are issues that have to do with language -- most of it is English-language content; there is less French content, and that's a public issue in this country.
4908. I think that there is still a wide open debate in terms of how content is presented on the Internet. The newspapers and the traditional media in this country have, in varying degrees, begun to use the Internet for content. Ken can talk about this in more detail than I. In terms of the media and newspaper industries in the United States, they have applied more resources to developing of content on-line than we have in Canada.
4909. The educational content is all over the map, and some of it is better than other content.
4910. We, interestingly, had an award bestowed upon us by the North American World Wide Web Courseware Developers Association, and it was the second year in a row that we won a first prize in this prestigious education contest or in terms of judgment of educational material on-line. This year we beat out the World Bank and the American Fidelity Assurance Company for the content that we have.
4911. When we asked the Chairman of that Committee why we had won, he said, "Content. Breadth and depth of content. It is unmatched by the other applicants."
4912. Those kinds of issues of content are still wide open. There is no easy answer that's simple.
4913. COMMISSIONER PENNEFATHER: In talking about content, we have also heard a variety of views that there is a great deal of content, somewhat in the lines that you were referring to, Mr. Fraser, and others who have said that it is hard to find content that is -- and I am referring to Canadian content here.
4914. To follow up on what you have said, Ms D'Arcy, do you think that we should, in this country, have funding mechanisms or other kinds of mechanisms to encourage the creation of Canadian content on the Web, or is it a problem? Do we need to be concerned about that?
4915. MS D'ARCY: I would like to make a few comments and then toss it behind my shoulder to Sandra, actually.
4916. I think when we talk about content on-line there is not a clear definition of what that means any more than if we talk about content on television. We can talk about news, we can talk about entertainment, we can talk about children's programming; those are all very different kinds of content, and the funding mechanisms, if they are being funded outside of advertising or with advertising, are often different within any given delivery mechanism.
4917. So, just to lump the content question in terms of funding into one pot I think brings us on to slippery territory.
4918. I also fear that, if we set aside a pot for public sector funding of content on the Internet that was not strategically thought out, we could find ourselves spending a lot of money for little 10-page sites for all sorts of well-meaning organizations that in the end had very little impact in terms of making a difference or using the technology smartly or strategically in this country.
4919. When, as we all know in this room, film was first brought into this country as a technology, the National Film Board was set up, and a lot of public resources went into developing an application that was unique to this country. I am not suggesting any one institution be set up to develop content, but I do think that there should be some strategic thinking attached to public sector funding of it.
4920. Sandra.

1445

4921. MS MacDONALD: The experience in every media we have had in this country -- well electronic in any case, starting with radio and moving forward -- has been that certain kinds of activities can be self-sustaining. News and sports have tended to that direction; certain other kinds of activity, depending on their cost in relationship to the number of potential users, are not self-sustaining, and in those cases we have opted, whether through the creation of the CBC or the invention of ways to support independent producers or a variety of other public mechanisms, to make up for what we have tended to describe as a market failure. That's looking at the commercial sense. Of course, for education, we have always supported education from the public purse.
4922. Societies always -- and our society has always had the ability to use the spending power of governments at all levels to do the things it thinks necessary, and I have no doubt that there are certain uses of the spending power that would be appropriate in this case.
4923. Now, for example, for the last year and a half -- well, it completed itself about six months ago -- there was a federal government-wide task force on the digitization of the information holdings in the federal government. There is a wealth of information that everyone believes ought to be available on-line to the citizens, who have paid for this. The thing that emerged, of course, from that was that, going forward, we don't think that having that information on-line will be a problem. Mostly everyone is making it available in such a way that it will be available on a going-forward basis. The problem is what do you do with anything that's older than, say, three years old? How much do you go back and recapture?
4924. The price tag on this is absolutely staggering. For what were considered minimal uses, simply in the holdings of the federal government to do with things like medical research information, information regarding consumer health and safety -- never mind entertainment or things that could be regarded as optional for people -- the starting figure, just to begin to put the most basic back information of the federal government on-line was $50 million, but of course there was no limit.
4925. This is a very expensive thing to do, and anyone building up any valuable Web site is spending a minimum of half a million dollars to do it and then they have to maintain it. So they have to have a minimum of $50,000 to $100,000 every year going into simply maintaining something that's there. The cost of having breadth of service is an enormous public policy issue if we want to go down that path.
4926. So I would say, again, that Jan's position that, yes, there is a need -- it is almost impossible to quantify; and certainly you could be extremely wasteful in this area. So the issue of where is the need greatest and where do we apply those resources I think is one where we have to have a social consensus.
4927. COMMISSIONER PENNEFATHER: I have so many questions I want to ask you, but that brings to mind, if I can just, like you, go a little with the flow along here where I see this heading, I wanted to relate this discussion to this point to this: You are raising major issues, policy issues, social issues, cultural concerns, if I may impose that on the discussion about what content potential we have from the new media, let alone what the new technology will render the old media so-called -- what it will do in terms of its accessibility. These issues bring to mind to me your position on new media and the Broadcasting Act and the Telecommunications Act.
4928. In your submissions and today you repeat your concerns in this regard, and it is your consideration that applying the Broadcasting Act to new media is inappropriate and unmanageable, impractical, but you have raised a number of concern which remind me of the fact that the Broadcasting Act is not just about technology, it is also about our society and who we are as a country, our cultural identity, and in fact you have named some of those points here.
4929. If, then, we do not apply the world of the Broadcasting Act per se to new media, what is your recommendation on how we bring all these issues to bear on this discussion?
4930. MR. FRASER: Madam Commissioner, you will recognize that the diversity of voices and representations in this group might give you different answers to this question, and I think I want to underline that the Media Awareness Network is not anxious to get into that arena. We are not concerned about the Broadcasting Act in any direct fashion.
4931. However, if anyone wants to have a run at it --
4932. COMMISSIONER PENNEFATHER: I raise it because you have it in your submission as an important recommendation that we in fact take great care not to apply the Broadcasting Act to new media.
4933. MR. MacKAY: I think one of the things that strikes me as being different on this is that, with the traditional media, there is an accepted range of options that you know you are going to be consuming. If you subscribe to cable, you have a knowledge of what services are coming in and what programs are going to be there. This turns the paradigm all the way around. When you start out on the Internet, you have no idea where you are going to end up.
4934. The other interesting element is that, when people are going in the Internet, they are using it to search for information or to fulfil a particular need. One of the things you see, particularly among the kids, is if they can't find it, they will build it themselves, which is another whole difference to the two mediums.
4935. So sort of saying we want to have Canadian content in the Internet and if we fund it and we will build it, they will come, I don't know if that works under this particular set of rules and regulations.
4936. COMMISSIONER PENNEFATHER: It is really that that I was getting it. There is a number of arguments, and you are not the only intervenors to raise this point and to raise considerable concerns about the Broadcasting Act, but I was interested in your reasons for your approach.
4937. MR. GOLDSTEIN: Perhaps I might add a very few words on the subject because, obviously, parsing each word in the Broadcasting Act is something that can go on and on and on, and it is not a place I want to go particularly.
4938. I think that when we step back from the Act -- some have encouraged you to step back all the way to day one, and of course, if I remember correctly, I think 3(1)(b) still talks about the airwaves being public property; so, presumably, one might argue that, since we are not talking about the airwaves here, it is not broadcasting.
4939. I think more to the point are a couple of very important practical considerations that might make the definition moot, and that is that there are no geographic boundaries and that the thing that will strike us very much about this as it develops and as it starts to look like a bunch of other things is two words: sheer volume. Sheer volume.
4940. The nature of the economics, the nature of the audience experience all change when you move from a small number of players to an unlimited number of players, and the ability to regulate changes, when you move from three television stations or 50 television stations to something that is akin essentially to telephone calls, to that kind of volume of transaction.
4941. So, quite aside from definitions, just the numbers will be greater. There is an old very, very silly little story about somebody putting a feather on a wooden box to test what it would be like to sleep on feathers. He laid down on the wooden box and immediately jumped up and said, "If it is this uncomfortable to sleep on one feather, think of how it would be to sleep on thousands of feathers."
4942. The fact is that the nature of the experience changes, the fundamental nature of the business changes.
4943. There was a very interesting conference held recently by journalists in the United States, and I think we can draw a lesson from what they were discussing. They say, we need a new vocabulary for the new media, and I think that the time we spend trying to apply the old vocabulary to the new media will be time we will wish we would have spent on developing a new vocabulary for the new media.
4944. COMMISSIONER PENNEFATHER: Let's turn back to your young audience and your preoccupations about young Canadians in this country, because I am sure they would agree that the vocabulary is odd that we use compared to what they use when using the new media or the Internet, and the creativity that it offers and the opportunities that it offers.
4945. Switching to that side, I have just a couple of specific questions about what you have observed on two points.
4946. You mentioned self-regulation, industry standards as appropriate when it comes to certain very serious potential problems in protecting children -- and the theme of protecting children is very key to your thesis about the importance of media awareness.
4947. Why are you comfortable with industry self-regulation? How does that work in the overall strategy that you are talking about?
4948. MR. MacKAY: I think we are comfortable with it because we have tried it here in this country and it has worked pretty well for us, driven to some extent by the experience of the broadcast industry and the Commission in dealing with the issue of violence on television.
4949. One of the things that, when I am asked how we do things here differently than in the United States, is that the United States, for example, has put all its eggs in one basket in dealing with issue of content, and that's their on-air rating system. Here, we have a whole range of things. We have industry codes, we have rating systems, we have watershed hours, we have the Broadcast Standards Council, which involves both the industry and the public. That regime I think has been very successful on a whole range of fronts.
4950. So I think there is a tradition here, we have tried it and we have gone out on a limb, and it has worked pretty well.
4951. As to the mechanics of how you move that to the new media, that's subject for I think a whole other series of long thinks. I don't have any instant answers for you, but I think we can build on that experience.
4952. If we look at the way some of the broadcast codes and things like rating systems were developed, there could be a model there that I think, with some tweaking, might be able to move to this new media. It may have to be applied in an entirely different manner, and again I don't think we have had any instant answers to that.
4953. COMMISSIONER PENNEFATHER: That's partly what I am asking. You have very well explained that this is a very new world and that it is not the same as the broadcasting world. So I was curious as to what particular parameters this new medial world brought to this discussion about codes of conduct, self-regulation. When you say it is mostly in the hands of the user now to handle this, how does the industry's self-regulation fit into this?
4954. MR. GOLDSTEIN: I will come at it from two directions.
4955. In this world of this vast multiplicity of choices, who do you trust is going to become a more, not a less important question, and it will be in the economic interest of legitimate players to want to build that kind of a framework.
4956. So that's part of it. But then, because we are going to see a very fundamental shift to parental and household responsibility here, the Media Awareness Network is really a very important link in the who do you trust because you have to give people the skills to help them make that decision. So the self-regulation and the education have to go hand in hand.
4957. MS GERVAIS: Could I just add to the point?
4958. The Media Awareness Network has been supported, in fact kept alive, by the private sector, and not just by one industry within the private sector but by a number of industries that you may not traditionally expect to see sitting at the same table supporting the same organization. You have the telephone companies, you have the cable industry, you have the broadcasters, you have producers, you have a variety of interests who all believe that ti is important to ensure education. It goes to the story give a person a fish and you feed them; teach them how to fish and you equip them for life.
4959. This is essentially the purpose of the Media Awareness Network, and I think it is because the industries who are working in this environment really believe it is important.

1500

4960. MS TAYLOR: I would just like to add that, when most of the people in this room were in school, there was no education about the institutions which were in place in our country to support culture, to monitor standards. We had no idea at all. I was well into my adulthood before I had any idea about all this, and one of our aims is to make children in school aware of what is in place in our society.
4961. Now, connected with this is the ease of response on the Internet. There are some wonderful things about the Internet, and I think one of the most wonderful things is the extent to which small people can get together on big issues. I think there is more hope for voluntary self-regulation than ever before, because you don't have to write a letter, put it in an envelop, find a stamp and get to a postbox; it used to be that I could never do that. When fax came I got a little more active; I quite often will send a fax off. If my computer, as it will be in a few years, is all over the house and all I have to do is click and give my opinion, then I think we are going to hear a lot more from consumers.
4962. So it is very important that we educate our young people -- we have quite a few teaching units. At the moment it is about the CBSC, about the codes, and we have exercises where we get high school kids to pretend they are members of the CBSC, to read a letter that came from a complainant and then to judge -- it is called "You Be the Judge", actually. It is a series of teaching lessons called "You Be the Judge".
4963. I think there will be some international standards and voluntary codes in the future, and if people are aware of this and if they know the power they can have as consumers, then maybe we will have a more engaged population than we have had to date.
4964. MR. FRASER: Let me add a footnote on the subject of regulation, and that's to say simply that the laws of the land haven't gone away. The criminal law is still in place, the libel laws, the hate laws are still in place, and they apply to the Internet and its use. So it is not entirely an unfettered and just a wild thing. If people do bad things on the Internet, they can get caught.
4965. MS D'ARCY: Just as an explanation, one of the new sections that we are developing right now is called "Challenging On-line Hate". We are working with the RCMP Electronic Crimes Unit, with the Canadian Association of the Chiefs of Police, with the Canadian Race Relations Foundation, with the Canadian Association of Internet Providers, a range of teachers and parents and legal experts, and we are just creating that environment very specific to that one topic that will be a central, user-friendly, easy-to-use place on the Internet for parents and young people, students, teachers, to be able to go and understand what that issue is, what the rights are, what the laws of the land are, and how to take citizen action.
4966. We are planning on doing the same on a range of other Internet issues as well.
4967. COMMISSIONER PENNEFATHER: Thank you very much for your submission and our discussion today. There are a number of areas where awareness and education, not just about new media but about the issues you are discussing, are very important, and we appreciate your coming today.
4968. THE CHAIRPERSON: Thank you, Commissioner Pennefather.
4969. Thank you very much. I suspect a lot of adults could probably learn from this as well.
4970. MR. FRASER: Thank you.
4971. MS TAYLOR: I am just going to say one more thing.
4972. THE CHAIRPERSON: Sure.
4973. MS TAYLOR: When the environment people wanted to change the way Canadians treated their environment, they went to the schools, and the kids went home. I predict the same thing will happen with the Internet. The kids are ahead of the parents and they are going to take the messages home.
4974. M. FRASER: Merci beaucoup.
4975. LA PRÉSIDENTE DU CONSEIL: Merci à vous.
4976. THE CHAIRPERSON: Madam Secretary.
4977. MS SANTERRE: Thank you, Mr. Chairman.
4978. The next presentation will be done by Concerned Children's Advertisers.
4979. THE CHAIRPERSON: Good afternoon, Ms Loblaw.

PRESENTATION / PRÉSENTATION

4980. MS LOBLAW: Good afternoon. I have no phones, there is one of one, I can move seats to keep it moving and keep things exciting, but otherwise I will do my best to hopefully provide some useful comments and insights today as part of the discussion.
4981. THE CHAIRPERSON OF THE COMMISSION: We are sure you will.
4982. MS LOBLAW: Thank you.
4983. Thank you very much for the opportunity to be here today. When the CRTC first issued its public notice our initial response was one of interest but not necessarily participation. We initially felt that perhaps, as marketers who largely advertise our products and services to children through television, that this was outside our area of focus.
4984. As we read the public notice in greater detail and we began to engage in discussion with our member companies, we quickly came to the conclusion that the traditional lines between television and new media are blurring, merging and perhaps even disappearing. While television very much remains at the centre of children's media landscape, with a penetration of 96 per cent, the Internet is rapidly growing in influence and use by kids, often quoted at a rate of 11 per cent a month.
4985. How we respond to these changes, both individually and collectively, will certainly require some very careful consideration and thoughtful action on all of our parts. I will not pretend to be the expert, nor to have all the answers today, but I hope to share with you a longstanding record of responsible advertising to children and a demonstrated commitment to helping children make healthy life and media choices.
4986. I would like to begin today by telling you a little bit about Concerned Children's Advertisers, who we are and what we have done to date. From there I would like to share with you our model for shared social and business responsibility, with specific application to the Internet and children, and where we feel there are opportunities for synergy and growth. Then I would like to close with what we feel are the core components to creating a healthy new media environment for our children.
4987. As you know from the written submission, Concerned Children's Advertisers is a non-profit organizations. We are a consortium of 20 companies who largely market to children through television. Our members range, on the broadcast side, from Shaw Communications to YTV, Global, CanWest and Baton Broadcasting, Westcom Television Group, to, on the advertiser side, everyone from McDonald's to Mattel to Kellogg's, to General Mills, Irwin, Hershey, and the list goes on.
4988. Our members came together in 1990 from the perspective that we wanted to ensure that there was an umbrella organization that would set the highest standards of ethics and responsibility in marketing to children through television on the business side, and on the social responsibility side, to make sure that there was a mechanism in place to contribute to the well-being of children and to help children build healthy lives and make those median life choices that are increasingly more challenging.
4989. As advertisers, as broadcasters, as parents and as citizens, we recognize that children are a very special audience and that each of us has a role to play in contributing to their well-being.
4990. As you know, the centrepiece of our business to marketing to children is the Broadcast Code for Advertising to Kids. That code ensures that we speak to children in a manner that is respectful, that is ethical and is sensitive to their vulnerabilities and developing set of characteristics. Certainly our record of achievement is one that we are most proud of. In the last four years, most recently, over 8,000 commercials have been cleared. There have been a total of seven complaints, of which only two are substantiated. That's a record of achievement that we take great pride in and are very committed to.
4991. On the social side, it stood to reason that if we could use our collective skills we could really make a big difference and that with the media that we had at hand, being television, we had a wonderful vehicle to help kids.
4992. What I would like to do is take just a couple of moments to share with you a couple of our commercials -- that wouldn't be an advertiser presentation if there weren't a few -- to demonstrate to you the kind of work we are trying to do to help kids in the area of substance abuse prevention, child abuse prevention, self-esteem, and most recently media literacy. You will see four or five commercials that address different age groups, different topics, and hopefully it will begin to demonstrate what we hope to bring to the Internet discussion.

--- Video presentation / Présentation vidéo

1515

4993. MS LOBLAW: That concludes hopefully an entertaining but informative sample of the kinds of products that we produce that, through our broadcast partners, are broadcast daily in children's programming right across the country and are delivered with a powerful reach in frequency.
4994. Our commitment to kids does not end there, though. In addition to that, we have taken many of our commercials, we have developed educational modules that surround them and created a program called "TV & Me" that goes into the classroom across the country, extends the learning potential of the television and really gets at the heart of healthy life coping skills and media literacy skills.
4995. All of this leads us to where we are today and brings the question what does this mean to kids and the Internet. Certainly, what it means for us is that in the past 10 years we have been gaining knowledge, insight and ability in how to help children manage their life and media choices.
4996. We have developed a circle of support that has emerged as a respected model of shared social and business responsibility for kids and television; a model where advertisers, broadcasters, government, agencies, parents and children work together to ensure that there is self-regulation and social responsibility in helping our children to build healthy lives; a model that we now believe has tremendous relevance and use when we talk about the Internet and children; a model that very much, at its core, understands that we cannot expect children to make healthy media choices if they do not have the ability to make healthy life choices; and a model that resists the temptation to address the symptom and instead goes to the core causes; and a model that we believe can serve as an important framework for our discussions and moving forward in the area of the Internet. In fact, we believe it can easily be argued that, when you look at the Internet, in many ways it is a direct delineation of television broadcasting to one child at a time.
4997. If we think of the model like a wheel and the children are at the spoke, the centre, the common bond, we then perhaps put the verbiage around it that suggests that we have a shared desire and commitment to protect, respect and enrich children's life on the Internet. Surrounding that bond there are several components that we feel are imperative to a responsibly new media environment for children.
4998. The first is content. The Internet must be rich with content that inspires, that educates and entertains the lives of the children who spend time there. We must ensure that we provide the funding and the incentive to support the development of strong Canadian content.
4999. Secondly, there is no question that advertising will play a significant role in launching and sustaining a new media system and providing a crucial part of that funding support. With Internet revenues having gone from $1.6 million in 1996 to $56 million projected for next year, it is not a question of whether there will be advertising; the question is, how do we ensure that that advertising is responsible, ethical and respectful of the child audience that we are serving.
5000. It is our belief that the core values of the Broadcast Code for advertising to children can deliver in a self-regulatory environment very much to that point. I won't go through the specifics of the code, as I have outlined them in my presentation, except to say that from a factual presentation price and purchase, and safety and social values, what is true in protecting children on television is true in protecting children on the Internet, and we feel very strongly that there is tremendous relevance and use for that code in our initiatives on the Internet.
5001. It is also important that we be reminded that there are already governments and laws in place that exist with respect to advertising to children, that at the federal level alone we have the Competition Act, the Criminal Code, the Packaging and the Food and Drugs Acts. These extend to the Internet and provide protection for our children.
5002. We also have a very comprehensive self-regulatory code of conduct for the Canadian code of advertising Standards. There are tremendous opportunity to identify the Internet as part of that and extend those.
5003. When you consider the borderless environment of our medium, there is no question that we must look also to the United States and we must look to what they are doing as well. They have embraced a self-regulatory model and have already put in place some of the initiatives that we are speaking about here today.
5004. The issue of electronic commerce and data collection are perhaps two of the most important issues when you talk about children and the Internet. We are not directly involved from an advertising perspective, but we are working very closely with the Canadian Marketing Association, who have proactively established guidelines and are moving forward in a self-regulatory-driven initiative that we are participating in to ensure, again, that there are self-regulatory mechanisms in place to garner how we talk to children and where.
5005. Our fourth component centres on the role of the private sector to address the needs and concerns of parents. There are filtering technologies such as Net Nanny and specialized Internet service providers. When you consider the diversity of community standards, even with respect to children, we must have laws in place and technology and look to the private sector to provide the tools that will allow us to speak to children in a way that works for our home and our individual choices.
5006. We also must look to having individual companies have policies. Just as individuals have morals and ethics, so do companies. In your packages I have included some samples of the privacy policies and codes that our member companies are embracing and moving forward with in a self-regulatory approach.
5007. Lastly, but most importantly, we come to the core of what we believe is at the centre of this discussion, which is media literacy. While all of the initiatives are important in terms of self-regulation, private sector technologies, what we have to have are educated consumers, and children and adults. We must invest the time to help children think critically, to conduct themselves carefully and to better understand and cope with the new media world that is a part of who they are. Access and education are at least 50 per cent, if not more, of the solution to this issue.
5008. When we look at how media literacy has to move forward, sometimes in moving forward one has to look back. We participated quite strongly in the CRTC hearings on the issue of media violence. We had tremendous learnings coming out of those hearing, and they came back strongly saying that 80 per cent of the solution lies in media literacy. I believe that is as true in television in media violence as it is on the Internet.
5009. Because of the borderless nature, because of the way the freeform themselves on the Internet, because they are so far beyond us in many ways in terms of how they access this medium, we have to give them the tools to think carefully, to conduct themselves in a way that protects themselves and helps them to get the most out of this medium.
5010. I would like to close today by just summarizing what we feel are the key components: quality content, responsible advertising, new self-regulation specific to e-commerce and data collection, private sector development of tools and technologies, corporate company policies, all of this laid in the foundation of media literacy, a foundation that will provide the lasting and long-term solutions to serve our children.
5011. Thank you.
5012. THE CHAIRPERSON: Thank you, Ms Loblaw.
5013. I will turn the questioning over to Chair Bertrand.
5014. THE CHAIRPERSON OF THE COMMISSION: Good afternoon, and thank you very much for your very interesting presentation and your participation in our proceeding. I am quite impressed with the way, comment dire, you really have a sense of being very devoted and passionate about your content to the point that you don't need to read it. So you seem to be very convinced. That was an excellent presentation.
5015. MS LOBLAW: Thank you.
5016. THE CHAIRPERSON OF THE COMMISSION: You are a good communicator.
5017. I would like to understand, before we touch any specifics, the model you are presenting about advertising over in broadcasting came about because of the kind of society we are, the kind of values we have and some pressures and some lobbying --
5018. MS LOBLAW: Absolutely.
5019. THE CHAIRPERSON OF THE COMMISSION: -- and then we get together and we adopt codes that are in fact often the reproduction of what we were saying in a non-manifest way; it is not something new, it is much more kind of putting it on paper and making consensus around it.
5020. MS LOBLAW: Right.
5021. THE CHAIRPERSON OF THE COMMISSION: Where would you see that it is more important or less important -- you are saying that something similar ought to be done for the world of new media. Where would you see the distinction and the kind of signals that you are seeing there that kind of caught your attention? I can see that self-regulation, you prefer to any regulation, but other than that, I am just asking here why the worry and why do you feel that it has to be done?
5022. MS LOBLAW: When you are serving the child audience as we do -- we produce products and services for children -- we respect that they are a very special audience and that you sometimes have to step outside the traditional forms to have extra layers of protection that provide comfort to parents and that allow all of us to talk to children in a respectful way.
5023. The Internet, as it is developing and growing so quickly, interacts with children in a very personal way, in a very one-on-one way. It provides a new type of interaction for advertising that perhaps wasn't available before.
5024. Because for many of us as parents we are not as familiar with the Internet as perhaps we are with television and teaching our kids about TV or teaching our kids how to cross the street, we want to try to give parents that level of comfort that they know that when their children are on the Internet, certainly from a corporate perspective, we are doing everything we can to contribute to that being as safe and enriching time as possible.
5025. I think that, as part of that, we started to look at how we can contribute in a positive way to this side of the solution, and self-regulation has a role to play and I think it is an important role, but where it may have played a larger part of the role in television, I think on the Internet it plays a smaller role but it still needs to be there.
5026. There are certain benchmarks of the community support that have to be out there. There needs to be a level of self-regulation, but our ability to apply it is somewhat different in the new medial world than it is in the broadcast world. That's where so much of the research and speaking to experts such as the Media Awareness Network and others spoke to the need for media literacy. We have to give our kids the tools to better interpret, cope and understand the media world they live in.
5027. That really is the basis of where we are going. We feel that there are standards of self-regulation that we can embrace, and we will. We can't necessarily ensure that every organization around the world is going to have our same standards, but what we can ensure is that our children have the education that, whatever they come up against, they have the ability to navigate their way through it, they have the ability to protect themselves, they are savvy enough to know not to be mislead in certain arenas.
5028. I think that's where the whole area of media literacy becomes so important. It is an area that has been bantered about quite a bit in the last five years and talked a lot about, but whether there has been the social policy, the political will and the funding to really take it to the level we need to take it to really arm our children becomes the question, and I think it is paramount, particularly when we talk about content. The best way to ensure we have strong Canadian content on that Internet is to have the brightest and best kids coming out of Canada developing it and creating it. And if they have the education and they have the access, we are going to go a long way in positioning ourselves as the world leaders that we are.
5029. THE CHAIRPERSON OF THE COMMISSION: Isn't there a difference, a major difference in the approach in advertising through broadcasting and the one in new media. -- you were talking about the blurring between broadcasting and new media.
5030. MS LOBLAW: Absolutely.
5031. THE CHAIRPERSON OF THE COMMISSION: Isn't there a blurring between advertising and the commercial transaction?

1530

5032. MS LOBLAW: Absolutely because now you have the ability to present a commercial to children, the ability to immediately provide information, the ability to interact with them; and you get into privacy issues, you get into a whole electronic data area. That's where we have partnered with and started to work with the Canadian Direct Marketing Association to ensure they proactively were establishing industry self-regulatory guidelines that ensured that how we speak to children is appropriate to the new media and that parents have the kind of advance notice and awareness, that we are not talking to children in the way that we shouldn't and that we are not taking advantage of the medium and the opportunities that present themselves.
5033. So it very much is a new area for us, and while Concerned Children's Advertisers' traditional focus has been in television and talking to kids respectfully, we are now moving into these new areas, and that's where we are looking to other industry groups to work with us and to help us in developing those codes and regulations.
5034. THE CHAIRPERSON OF THE COMMISSION: But could it go as far as, for children, kind of creating a demarcation between advertising and kind of attracting the transaction? Could i be as far as that?
5035. MS LOBLAW: I think that certainly the example that comes to mind is, when I look at the United States and they have the Children's Advertising Review Unit, which is a division of the Better Business Bureau. What they have done to date is they have taken guidelines which are similar to a point to our guidelines, although ours go a little bit farther, and they have added electronic media, so that that guides the traditional advertising in terms of what you say and how you say it if you are presenting a commercial.
5036. Then, if you go the next level, say to actually try to engage in an information exchange, whether it is a child providing their name and information for a contest or for more information, then there are another set of self-regulatory guidelines that govern what you can say and what you can't say, how you can move forward in that arena and how you can't, and the parental consent that you must get in order to have that kind of dialogue. Then, if you move in to the next layer in terms of actually a contract for sale in electronic commerce, there are another set of specific guidelines that govern that.
5037. That very much is what the Canadian Marketing Association is dealing with what I understand they are going to be presenting when they see you next week -- recommendations and guidelines that are specific to the privacy issues in electronic commerce.
5038. THE CHAIRPERSON OF THE COMMISSION: But won't it be difficult -- I am thinking for example of some advertisers in Quebec, who have been quite silenced by the provincial law there where you cannot advertise while you are doing children programming.
5039. MS LOBLAW: Right.
5040. THE CHAIRPERSON OF THE COMMISSION: I suppose at the same time there is some kind of new heaven for advertisers to talk directly to children in such a way that they can -- what I am trying to assess is, is the situation really the same? Is it only a prolongation or is it a different case where you would need to maybe not go out of a self-regulation approach but maybe think of a more demanding kind of code given the immediacy with the child?
5041. MS LOBLAW: You mean in terms of having something that was beyond or deeper than self-regulation?
5042. THE CHAIRPERSON OF THE COMMISSION: Yes.
5043. MS LOBLAW: In our experience, and certainly in our exposure today, what we are looking at with the Internet is the opportunity to extend our ability to speak to children, but as responsible and ethical as we want to be and must be in television, that has to extend to the Internet.
5044. Certainly, when you look in the province of Quebec -- and you bring up the example where advertising to children in the province is not permitted -- I think the reality there is that children are seeing advertising, they are just not seeing it presented in their own language and they are not seeing presented in their own quality programming. They are seeing English-language advertising, they are seeing border advertising and they are not being protected in the manner that they could be with a self-regulatory system that ensured we were speaking to them in a responsible and ethical way.
5045. So, when you talk about the Internet and advertising, we are certainly in our infancy of beginning to explore it. I don't think it has been explored anywhere near the way that it will be explored as time comes. Television still remains the primary medium for many of the companies that make up CCA. The Internet at this point is a vehicle that we are using to be able to provide more information, more insights and to increase our dialogue and exchange with children.
5046. So I don't see the need to go beyond self-regulation. I think that if we take self-regulation and we marry it with education, you have as strong a system as you can possibly have to ensure that you are responsibly and ethically presenting your products and services but you are also giving the kids the tools to think critically, to watch carefully and to make informed media choices.
5047. That's what we ultimately want to have happen, and as children become more educated and as we invest in programs and initiatives that give them that base of education, they will demand more in terms of how we speak to them and they will demand a product that continues to increase in respect and what it can contribute to them.
5048. So certainly, based on what we know to date and the work that we have done we feel very strongly that the self-regulatory mechanism that we have is a very effective one, but because its application is different and is not as controllable, if you will, with the Internet, it needs to be layered with very strong media literacy initiatives so that kids are protected on all fronts.
5049. THE CHAIRPERSON OF THE COMMISSION: It is not clear to me in your view -- and maybe it is my understanding of the delineation that is not there, but it is not clear to me whether you see the new media and the Internet as being broadcasting or not being broadcasting.
5050. Do you have a view on this or are you avoiding the question --
5051. MS LOBLAW: No, I am not trying --
5052. THE CHAIRPERSON OF THE COMMISSION: No, no, just saying it is not our expertise, in that sense.
5053. MS LOBLAW: Right, the direct question being do we feel that advertising on the Internet is a direct fit with the Broadcast Act in every way. Is that what the question is?
5054. THE CHAIRPERSON OF THE COMMISSION: Well, not in every expression necessarily, but I guess I am asking to understand, where you talk about delineation --
5055. MS LOBLAW: Right, that the television --
5056. THE CHAIRPERSON OF THE COMMISSION: Is a direct delineation of television broadcasting to one child at a time.
5057. MS LOBLAW: Right, okay. Sorry.
5058. THE CHAIRPERSON OF THE COMMISSION: So do I infer from that that for you it is broadcasting?
5059. MS LOBLAW: Sorry, I apologize for not catching on more quickly.
5060. THE CHAIRPERSON OF THE COMMISSION: No, no.
5061. MS LOBLAW: Absolutely. What our sense is is that in many ways, as the Internet grows in technology, the traditional 30-second commercials and type of advertising that we have in television may be very applicable to the Internet, the difference being that you are broadcasting one person at a time as opposed to mass broadcasting. So it becomes narrow-casting, if you will, it becomes individual casting.
5062. So, in that respect, we feel that what is true in terms of how we present our products and what we say to kids in a mass audience is as true in what we say to them in an individual audience. So where the Broadcast Code for Advertising to Children specifies how we speak to children in terms of product size, in terms of safety, in terms of social values, we feel that those very principles are just as applicable on the Internet when we are talking to a child one on one as to when we are talking to a child in a mass audience.
5063. So when you look at the Broadcast Act in its entirety, is every component of that applicable to the Internet, that's beyond my expertise to be able to comment on, but specific to children and specific to the Broadcast Code for Advertising to Children, do we feel that is applicable and do we feel that the Internet is a form of broadcasting, absolutely. It is just an individual form as opposed to a mass form.
5064. THE CHAIRPERSON OF THE COMMISSION: Given the delineation, as you call it, and the analogy you can draw, and given what we were talking about, the blurring, what kind of elements could you see in a code that would be safeguards enough to kind of protect and ensure the pérennité of social values that seem to be present in your model as we speak, in the more traditional universe, were kind of carried to the Internet?
5065. MS LOBLAW: I think that when you look to the Broadcast Act it lays out very specifics in terms of safety -- you know, you cannot present a product in a way that would suggest the child would imitate unsafe acts, if you are presenting a product you can't go in with a camera that shows it this big and then the child goes to the store and it is this big, you can't have Mickey Mouse selling a Mickey Mouse watch because it may confuse the child. I think all of those different components are very true in terms of advertising to children on the Internet as they are to television and that you have to be clear and ethical and direct in your communication to them
5066. I also think that when you get on to the Internet you have two other layers that add on to it that we don't have in television, and that's where you get into the privacy and the opportunity to interact and that's where you get into electronic commerce and the opportunity to actually conduct a sale.
5067. Those are the two new layers of self-regulation where we were looking to the Canadian Marketing Association because, as the traditional direct marketers who have been direct-marketing with children and families for years without and before the Internet, now, as they are taking that to the Internet, we are looking to their expertise and guidance in terms of how we can best match that and bring that component into responsible advertising to children.
5068. THE CHAIRPERSON: Thank you.
5069. Do you see in that kind of approach a role for the Commission? Do you see if we can be of assistance?
5070. MS LOBLAW: I think the Commission can always be of assistance; certainly by your guidance, certainly in providing the framework for all of us to operate in, I think the issue of media literacy, bringing that forward and highlighting that as an important initiative, not a nice-to-do but a must-do.
5071. If the agenda truly is to protect and enrich our children and to make sure that their Internet time is as meaningful and safe and productive and entertaining as possible, they can only do that if they have the tools and the skill and the know-how to manage this new media world that they are presented in.
5072. I think there is a tremendous opportunity for the Commission to raise awareness and profile of this issue and to ensure that there is the social policy and the funding and the political will to support those initiatives.
5073. THE CHAIRPERSON: In which manner?
5074. MS LOBLAW: The how I guess is a hard question to answer. Just in terms of the final report, and obviously saying where we feel the key components are and what those key components are.
5075. There are a number of different departments that are doing a number of different initiatives related to the Internet; there is data collection on one side and privacy on the other side, there is e-commerce and there is the discussion here, and I think there is a real opportunity for government to coordinate those efforts, to bring them together and to look at the different sectors that we are trying to serve.
5076. Obviously, our focus is children, and how that is done is a question that I am not in a position to offer complete comments on, but certainly I feel it is something that needs to be done and that we need to, as a country, really step up to the plate in this area.
5077. THE CHAIRPERSON: A last question for me would be, with your knowledge of this situation, do you think that advertising for children on the Internet will be a big thing, a big portion of the pie? Do you think it will take away a lot of the revenues that are presently into the traditional universe of broadcasting -- away from that universe into that new environment?
5078. MS LOBLAW: That's a $64,000 question.
5079. I don't know for the future. I know that for today television remains at the centre of children's media landscape, that there is a 96 per cent penetration rate, that children spend a lot of time with television and that we will continue to communicate through television.
5080. But the Internet is growing at such a pace and so quickly, and largely driven by children, who are that much more literate and advanced than we are, that certainly I think you will see two things: you will see a shift of advertising dollars to include the Internet; so, if you take that same pie, I think it will start to move over to the Internet as well. Whether you will see an increase in the pie or not is hard to say and it is different for every company. But certainly dollars will continue to go there as cost efficient and effective and meaningful vehicles are presented that we can speak to children, and as the programming presents itself and the children are there. But we also see a merging of it. We see things like YTV, who are our nation's largest kid broadcaster, with a YTV site.
5081. They tend to work hand in glove in many cases at this point, so how it will actually fall out and how that pie will shift is something that I don't know for sure today but it is something we can certainly get back to you on in terms of speaking with our members and getting some insights from them.
5082. THE CHAIRPERSON OF THE COMMISSION: Thank you very much.
5083. MS LOBLAW: Thank you.
5084. THE CHAIRPERSON: Thank you, Ms Loblaw. We appreciate your participating in our proceeding.
5085. MS LOBLAW: Thank you.
5086. THE CHAIRPERSON: We will take our afternoon break now and reconvene at four o'clock.

--- Short recess at / Courte suspension à 1545

--- Upon resuming at / Reprise à 1600

5087. THE CHAIRPERSON: We will return to our proceeding now, Madam Secretary.
5088. MS SANTERRE: Thank you, Mr. Chairman.
5089. Now I would like to introduce David Jones, who will be making the presentation for Electronic Frontier Canada.
5090. THE CHAIRPERSON: Welcome, Mr. Jones.

PRESENTATION / PRÉSENTATION

5091. MR. JONES: Thank you, and thank you for the opportunity to speak to you today.
5092. Electronic Frontier Canada was founded in January, 1994 and is this country's premier on-line civil liberties organization. We are a non-profit organization supported by several hundred members drawn from all provinces and territories and from a diversity of ages, backgrounds and professions.
5093. Our principal aim is to protect fundamental rights and freedoms as new computing communications and information technologies are introduced into Canadian society.
5094. My name is David Jones, and I am currently President of Electronic Frontier Canada. I am also a computer science professor at McMaster University, where I teach in McMaster's Theme School on Science, technology, and Public Policy.
5095. It seems to us irrelevant to worry about what kinds of technologies are captured under the arbitrary term "new media" which, after all, to our knowledge, carries no particularly special meaning in relation to the CRTC's regulatory authority. The real question to us is, should the CRTC regulate the Internet? More specific versions of that question might be should the CRTC regulate content on the Net? Should the CRTC license Internet service providers? Should new taxes be levied on Internet users or service providers? Our answer to all of these questions is no.
5096. Before I begin with my more serious remarks, I would like to begin with a tongue-in-cheek top ten list. We solicited some opinions from our members across the country and have collected some of them here. These are the top ten changes that Canadians would notice if the CRTC were to begin regulating the Internet.
5097. No. 10: Within minutes, Canadians start transferring their Web pages to unregulated offshore computers. Electronic Frontier Canada's Web site moves to Australia.
5098. No. 9: Web pages with adult content are disabled until after 9:00 p.m., when the kids are in bed. To avoid chaos and confusion, all of Canada will have to adopt a single time zone.
5099. No. 8: Canadian Internet guru Jim Carroll publishes a new book entitled, "How to send encrypted audio and video over the Net", subtitled, "Why the CRTC doesn't know can't hurt you." It is a bestseller.
5100. No. 7: The CRTC subsidizes new media technology companies to develop software that automatically filters Web page content and converts to Canadian spellings for words like colour, neighbour, and honour.
5101. No. 6: Through a policy of government-approved censorship known as "simultaneous substitution", Internet service providers are forced to replace all banner ads on American Web sites by Canadian ads as the data crosses the border. CNN Time/Warner takes the government to court.
5102. No. 5: The CRTC determines that 90 per cent of all personal home pages in Canada are not of sufficiently high quality and gives 60 days notice either to comply with generally accepted audience standards or else be shut down.
5103. No. 4: Microsoft's Internet Explorer is given exclusive control of the Web browser market in Canada in exchange for a default home page populated with links to Canadian pop culture icons, such as Celine Dion, Bryan dams, Sarah McLachlan and Wayne Gretzky.
5104. No. 3: Sheila Copps creates 20 million Web pages, each displaying a Canadian flat. No one visits them.
5105. No. 2: The RCMP are unable to cope with a million Canadians watching unregulated WebTV on their pirate satellite dishes.
5106. And the No. 1 change Canadians would notice if the CRTC were to begin regulating the Internet: It becomes illegal to have a Web page that says -- "Screw the CRTC".
5107. This is being broadcast. We have standards, you know. I didn't want to be prevented from delivering the rest of my remarks.
5108. If I may become a little bit more serious, we do not believe that a CRTC-regulated Internet would be desirable or even constitutional. We take note in particular that it has been in the absence of heavy-handed government regulation and control that the Internet has flourished. The development of killer applications like electronic mail and hyper-link Web pages has attracted a growing proportion of the population to participate in a never-ending worldwide conversation in a virtual community known as cyberspace.
5109. With traditional media, such as newspaper, radio or television, Canadians must rely largely upon intermediaries to tell their stories, to convey their opinions, to tell them what their fellow Canadians are thinking and doing in distant parts of the country, and we have very little recourse if these intermediaries do a poor job of it. These are media from the few tot he many. The economic barriers to entry in traditional media are often enormous.
5110. But on the Internet everyone can be a publisher. And even though the telephone allows direct one-to-one conversation over great distances, the Internet offers one-to-many and many-to-many communication to an unprecedented degree.
5111. In the U.S. court judgment overturning unconstitutional provisions of the Communications Decency Act, Judge Stewart Dalzell wrote:

"... the Internet may fairly be regarded as a never-ending worldwide conversation. The Government may not... interrupt that conversation. As the most participatory form of mass speech yet developed, the Internet deserves the highest protection from government intrusion."

5112. Electronic Frontier Canada's primary concern at these hearings is protecting freedom of expression on the Internet from undue government interference.
5113. As the late Supreme Court Justice John Sopinka said in a speech given at a conference organized by Electronic Frontier Canada at the University of Waterloo in 1994:

"We must be very careful not to unduly restrict free speech simply because it is difficult to control the illegal use of information technologies. Systems such as [the] Internet can enhance an individual's ability to promote truth, political and social participation, and self-fulfilment. Since these goals lie at the core of free speech, one might expect that it would be very difficult for the government to legitimately pass any regulations prohibiting [or limiting] the use of Internet."

5114. The Charter of Rights and Freedoms guarantees Canadians "freedom of thought, belief, opinion, and expression, including freedom of the press and other media of communication".
5115. Before the CRTC can begin to meddle with content on the Internet, it must satisfy a heavy burden of proof to show that such an intrusion is justified. The proof must include several elements. It must be demonstrated, for example, that there is a compelling problem to begin with; that solutions provided in the Broadcasting Act are relevant and appropriate; it must also be demonstrated that the solutions offered do not bring with them greater economic and social harms than the harms that they aim to correct.
5116. And yet, in its initial public notice, the CRTC suggests that some degree of regulation would be appropriate for certain kinds of controversial content.
5117. We think it is important to recognize that there is no need, and indeed we think no authority, for the CRTC to enforce content restrictions with respect to obscenity, hate propaganda, defamation or copyright infringement, since these issues already fall under the Criminal Code and other laws. The CRTC is not authorized to make determinations, for instance, about whether or not something is legally obscene, and the CRTC is ill-equipped to investigate and prosecute criminal offence. In contrast, Canadian law enforcement agencies and our justice system have already demonstrated their effectiveness at enforcing these laws and obtaining convictions in court.
5118. In its public notice, the CRTC seems to suggest that some of the restrictions it has traditionally imposed on broadcasting should be applied to Internet content, such as offensive or discriminatory material, portrayals of violence, gender stereotypes, or depictions of minors consuming alcohol.
5119. As an illustration, as you know, in a television beer commercial, CRTC regulations dictate that a 23-year-old actor who simply looks young cannot appear; you can't actually depict someone consuming beer, and you can't even make swallowing sounds off camera.
5120. Perhaps in a passive broadcast medium such as television Canadians tolerate such paternalistic restrictions on what the government will allow us to see, but when it comes to the Internet, we don't think such limitations would survive a constitutional challenge -- in much the same way that the American CDA's prohibition against indecent Internet content was struck down.
5121. Although the CRTC claims it enhances diversity and doesn't censor programs, in some instances the record shows differently. In 1994, for example, the CRTC ruled that the Dalhousie University radio station, CKDU, could only broadcast lesbian poetry after 9:00 p.m. By the CRTC threatening to withhold licence approval, programmers are compelled to censor content until the CRTC is satisfied. As a consequence, CKDU has been prohibited from airing its "All Day All Gay" special programming to celebrate gay pride.
5122. The rationale used was section 3(1)(g) of the Broadcasting Act, which simply states that programming originated by broadcasting undertakings should be of high standard". In the case of CKDU, the Commission ruled that frank and realistic depictions of gay sexuality "do not meet the high standard required by the Act" and offend "generally accepted audience values".
5123. We find these terms unreasonably vague and we think that this kind of restriction would certainly be unacceptable if applied to the Internet.
5124. In addition to concerns about restricting content, we are also concerned about content being imposed upon us. On the radio airwaves, it is feasible to impose prescribed amounts of Canadian content upon listeners. The required content displaces other programming because of the inherently linear nature of radio programs and the limited broadcast spectrum. But on the Internet, there is an essentially unlimited capacity, and because of its interactive, non-linear, asynchronous nature, people will always be able to access the content that interests them rather than the content the government wishes them to see.
5125. There are already millions of Canadian households connected to the Internet, each able to produce and distribute their own story and their own point of view. This is truly Canadian content on a grand scale. In our view, the proper way to facilitate and ensure high quality Canadian content is available on the Internet is through the promotion of universal access and the promotion of Canadian cultural industries involved in new media. We don't, however, think this should be funded through taxes on Internet users or service providers, and we think it should come from an independent agency or perhaps a tax incentive, not directly through the CRTC.
5126. In the time remaining, I would like to touch briefly on some of the other points we tried to make in our written submission.
5127. We believe the transfer of digital audio and video data over the Internet does not fall within the definition of "broadcasting" for the purpose of CRC regulation.
5128. We believe the arguments traditionally used to support regulation of broadcasting do not apply to Internet communication.
5129. CRTC regulation of content, licensing of internet service providers, or imposing new taxes on Internet services would likely do irreparable harm to the growth and development of the Internet in Canada, along with its potential for developing the Canadian conomy.
5130. On a somewhat more constructive note, I would like to offer two observations.
5131. First, the United States is already two steps ahead of Canada in exempting Internet service providers from liability for illegal content, including copyright infringement, distributed over the internet by their customers. The absence of such legal protection in Canada has saddled the Canadian industry with a great deal of uncertainty and places it at a significant competitive disadvantage. Parliament should act to level the playing field.
5132. Second, we do believe that the CRTC may continue to play a useful role in ensuring competition and fair business practices among providers of basic telecommunication services and in facilitating universal access.
5133. Thank you very much for the opportunity to speak to you today, and I would be happy to answer any questions you might have.
5134. THE CHAIRPERSON: Thank you, Mr. Jones. Just to clarify the one paragraph you didn't read, when I made the suggestion about tax policy, research and development, or manpower training, it was that we would recommend to the appropriate government department that they might wish to take action in those areas.
5135. MR. JONES: It was my recognition of that that I chose not to say it.
5136. THE CHAIRPERSON: I will turn the questioning over to Commissioner Pennefather.

1615

5137. COMMISSIONER PENNEFATHER: Good afternoon.
5138. MR. JONES: Good afternoon.
5139. COMMISSIONER PENNEFATHER: Thank you for being here and for sharing with us your point of view on these important questions.
5140. I think, in summarizing today's presentation and the written submission, it would be fair that we could focus on the two themes of content and access to that content, if you agree. Before we get to the role of the CRTC one way or another, I would like to understand more where you are coming from on those two areas. I don't have a 10-best, my best of 10; I may have 10 questions, though.
5141. MR. JONES: I would be happy to answer them.
5142. COMMISSIONER PENNEFATHER: We will summarize them into fewer because I think I would like to go in depth rather than go through several smaller points.
5143. On access and your understanding of the Internet, I think in your written submission you say the Internet is an extraordinary medium of communication and widely accessible at low cost. I understand from that that you see the primary function of the Internet and from your comments today is a conversation, is a connection between individuals, is a way to communicate, and also that there are no barriers to that communication.
5144. Do you foresee a time at which there may be barriers to that communication, that access to what I think another intervenor called electronic commons, where there would be a gathering of thoughts and a diversity of opinion available through this new medium?
5145. If we focus on it as a communication vehicle, to which, as I understand your comments, everyone has access -- everyone can be a publisher but also everyone can reach each other. Do you foresee any problem -- because you understand this medium and you understand its technology, would there be any control on that, any interference in that freedom? I am not talking about what you assume a regulator may or may not do, but there are a lot of players out there involved.
5146. Do you have any concerns about that?
5147. MR. JONES: I think, in the presentations you have heard today, we have heard the term "access" used several times, and in my mind I would like to make a categorical distinction between two kinds of access. This morning we heard about access by large corporations to households and wanting to make sure that other big corporations in key positions in the infrastructure were not able to block that access. So I think that's the first category of access.
5148. In my submission, when I use the term "universal access", not representing a big corporation, I am speaking in terms of those Canadian households being able to have access going in the other direction, being able to access the information that they would like to connect to. And although the Internet offers great promise that in principle everyone can be a publisher and in principle everyone can get on-line, in practice, it is actually a minority of Canadian households that are connected to the Internet today.
5149. I don't know if it is still true, but some of my colleagues in Nova Scotia have told me that in the rural areas the only telephone service available is a party line. If that's no longer true, that's good news, but I think that illustrates -- we heard this morning about low bandwidth and high bandwidth access to the Internet, and if as a society we decide that citizens having access to the Internet and government services and electronic commerce and information is a good thing, then when I say "universal access" I would like Canadians not just in major cities but in rural areas to have an equitable level of access, an equal opportunity.
5150. I don't know if I have started to address your question, but those are the two areas of access that I think.
5151. COMMISSIONER PENNEFATHER: If at any time you could see that there was that interference -- as you say already, not everyone has access to the Internet. Is there a question of costs? What tools do we have to make sure that that universal accessibility is a reality?
5152. MR. JONES: I think cost is one factor. To buy a moderately-priced computer, modem, the appropriate software, it can set you back say $1,500, $2,000. So, for some households, that would be a factor. But I think for a lot of households it is not the limiting factor. We have heard a lot today about education, about media literacy. There are households in Canada that have computers and choose not to connect to the Internet partly because they don't have the skills to know what tools they need and how to use them, how to navigate.
5153. So I think, in terms of facilitating access, we have to have a broader view that it doesn't always have to come from the household, it can come from libraries, from the government's community access program, where there can be additional trained staff and facilitators that can help provide some of that training and education and media literacy that we have heard about today.
5154. COMMISSIONER PENNEFATHER: You have mentioned the government's access program. I am looking at your presentation today and you talk about your primary concern at these hearings is protecting freedom of expression on the Internet from undue government interference and you quote the late Judge Sopinka, that we must be careful not to unduly restrict free speech.
5155. The kind of program you just mentioned, I assume, then, is an appropriate action by government to assure access? I want to understand what you mean by "undue government interference".
5156. MR. JONES: If the government is facilitating rural communities getting on the Internet, I don't see how that in any way interferes with freedom of expression. If anything, it is the opposite, it is facilitating, it is providing greater opportunity.
5157. When I use the modifier "undue", I am just being aware that I have just given a list of forms of expression that are criminal in Canada, and when the government prevents someone from uttering death threats or distributing criminally obscene material, we have decided in our society that that is not undue interference and that that is a reasonable restriction.
5158. As I continued in my presentation I think, when we move beyond things that are criminal to things that are merely offensive, things like gender stereotypes or portrayals of violence, things that upset many people and offend many people -- they are not criminal, and I think we have depictions like this and stories like this and news reports like this that are in the newspapers, they are in books, and I think, if you can print it in a book, you should be able to print it on a Web page.
5159. Because of the distinctive nature of broadcast medium like television, we have over the years come to accept some rather severe restrictions on what can be broadcast over the airwaves and into the home. I am not going to argue about whether they are appropriate or not; I think they would not be appropriate if simply transformed and applied directly to the Internet unchanged.
5160. COMMISSIONER PENNEFATHER: So your point is that this government interference is not undue when it comes to criminal activity, but otherwise it should be hands off. How, then, do we deal with -- you mentioned gender portrayal, you mentioned stereotyping. We just went through a TV policy hearing at which many people came to discuss the inappropriate presentation of many different groups in our society, the lack of presence on television, the lack of access to production capabilities and to presenting their point of view.
5161. In other words, where is the balance going to come from in terms of total hands off and yet providing a way to assure that -- let's talk about the current broadcasting system for a moment really represents the country, really gives fair access to different points of view, really does not interfere with freedom of expression by the great variety of our society.
5162. How do you manage that if we don't have regulation and we don't have any other approach?
5163. MR. JONES: I think television as a broadcast medium is quite distinctive from the Internet. If there is a particular gender stereotype or presentation of a particular people or background or culture in that medium, because of the enormous barriers to entry, minority groups or disadvantaged groups are unable to reply or respond or critique those portrayals in the same medium to the same audience. As a society we have sort of agreed, because of this extreme imbalance and the fact that the medium is one way, from a very small number of very influential actors to the larger community, and it is a very passive medium -- because of those particular characteristics, we are accepting of these rather stringent limitations.
5164. I think when it comes to the Internet, because in a sense everyone can be a publisher, you have the right of reply in the same medium, without delay, to the same audience. The playing field is much more level. So the need for government assistance is less.
5165. COMMISSIONER PENNEFATHER: So in the current environment then, or in broadcasting as we know it now, are you saying that anything that's done to improve access for those who are not able to see themselves on our screens across the country is inappropriate? We don't have to be concerned about that?
5166. MR. JONES: If I hear your question correctly, you are talking about broadcasting.
5167. COMMISSIONER PENNEFATHER: For the moment I am. I want to understand --
5168. MR. JONES: When I hear "broadcasting", I am hearing "not the Internet". Whether or not you agree with that -- so I am responding in terms of broadcasting.
5169. COMMISSIONER PENNEFATHER: Yes. We will get to the Internet.
5170. MR. JONES: I think it is a good thing if the government facilitates access to this special medium, broadcasting, for groups that would otherwise not have access. I think it is a very good thing. In addition to just financial considerations, there is technical knowledge, about how to do it and how to connect all the pieces you need to put together to put on a television production and get access to facilities and so on. I think it is a good thing that the government facilitates a diversity of voices and representation of different points of view and so on.
5171. COMMISSIONER PENNEFATHER: That's why I was curious about your comment, because your submission does talk about current broadcasting environment as a backdrop to your comments on the Internet. I was curious why you say that CRTC regulation of broadcast media -- and, correct me if I am wrong, I believe you are referring to now -- contrary to CRTC claims, minimize diversity and homogenize content.
5172. So I am interpreting that to say that you feel strongly that regulations which promoted Canadian content which looked to increasing the amount of Canadian drama, news, whatever on our screens are inappropriate. In fact, they have turned us backwards into homogenized screens.
5173. MR. JONES: Let me clarify that.
5174. I think it is a good thing to have programs to get voices to broadcast medium that would otherwise not make it. At the same time the CRTC has prevented other voices from being broadcast. The example I gave was the CKDU radio station, lesbian poetry broadcast in the afternoon. You said "no". That's an example of what I mean by homogenization or reduction in diversity.
5175. I think, if we listen to political talk shows or documentaries, we have a level of diversity, but there are some extreme, small minority points of view that are simply not represented. I think the Internet, because it doesn't have the same kind of capacity limitations of a specific number of channels or limited broadcast spectrum, these smaller groups of people, smaller interest groups, have a voice, and their having a voice doesn't displace anyone else who wants to have a voice.

1630

5176. COMMISSIONER PENNEFATHER: When it comes down to the Internet, your interpretation of what you mean by "content regulation" is censorship. You do not mean what I was referring to before, which is support for Canadian production, Canadian presence, Canadian programming, Canadian Web sites -- regulation which is designed to, in the current environment, amongst other efforts, really assure diversity. You are seeing it from a completely different point of view, which is censorship. Is that correct?
5177. MR. JONES: In a word, yes.
5178. COMMISSIONER PENNEFATHER: I wanted to be sure because I read at the same time what appeared to be a critique of content regulation, as I just described it, in terms of 60 per cent Canadian content, conditions of licence which asked players in the current environment to carry Canadian content.
5179. MR. JONES: Instead of using the one word "regulation", I would like to take it apart into two pieces. One would be facilitation in terms of giving organizations or groups or people tools to allow them to gain access to a medium that they wouldn't otherwise have. On the other hand, separate from facilitation, we are opposed to censorship, that is blocking certain content, or compelling content.
5180. If I have a Web page, I would like to have freedom of choice to put on that Web page whatever I want. I don't want to be compelled to have to have hyper-links to someone else's content, which may not be representative of my views.
5181. COMMISSIONER PENNEFATHER: I understand. I think some of the proposals we have heard are to promote Canadian presence or Canadian Web sites as opposed to necessarily seeing it as forcing me as a user to go to someone else's comments, but rather to assure that -- for example, there were some proposals that ISPs commit to carriage or profiling of Canadian sites. Would that kind of action, that kind of encouragement, be appropriate, do you think?
5182. We are now on the Internet.
5183. MR. JONES: I would prefer not to have that tool be used where you are now, if I hear you right, compelling a private company to carry content that's not necessarily of their choosing, it is of the government's choosing. I would prefer to see that somehow high quality Canadian content be created through tax incentives or programs or whatever mechanisms that is so good that the private Canadian company would choose to highlight that and profile it and make sure it is there in front of their customers, because that would be good for business.
5184. COMMISSIONER PENNEFATHER: Why do you say "of the government's choosing"? Are you assuming that, because we --
5185. MR. JONES: I mean the government as a whole, including all of its departments. I don't mean the government of the day, if that's what you are suggesting.
5186. COMMISSIONER PENNEFATHER: So you are interpreting anything that would say that we would like to assure, in whatever form we can, a preponderance or access to Canadian content on the Internet screens as government choosing instead of the individual choosing what they want to watch. So anything we would do as a country, be it the private sector or the public sector, to encourage Canadian content would be interfering with freedom of choice of the user?
5187. MR. JONES: If the Canadian government, through whatever mechanism, facilitates small companies or large companies that create high quality new media content and it is out there and available, because of the unlimited or practically unlimited capacity of the Internet, having that out there in no way limits my choices, it gives me greater choices. So I don't see how assisting the creation of high quality Canadian content in any way infringes on my choices or my ability to access what interests me, it gives me more opportunities.
5188. I draw the line where a private organization might be compelled to carry specific content that's not of their choosing, that is of someone else's choosing.
5189. COMMISSIONER PENNEFATHER: One thing I was intrigued by in today's presentation and written was your comment that there should not be -- and correct me if I am saying it wrong -- funding support for the creation of new media content, but rather support for institutions. I think you mentioned the National Film Board, which support Canadian producers, and who are the creators of media.
5190. Could you explain that? I am not quite sure if I understand.
5191. MR. JONES: I think you are referring to our written submission.
5192. COMMISSIONER PENNEFATHER: Yes, I am, and I think you mentioned it again today.
5193. MR. JONES: Today, just maybe to amplify the point I was trying to make. We are very concerned about taxation, we are very concerned about new fees being levied on Internet users or Internet service providers. We are very sensitive that there is still only a minority of Canadian households that are on-line. There are a lot of costs that families have, and if there is an incremental cost added to Internet access, I think that inhibits the growth of this tremendous medium.
5194. There are many hundreds of Internet service providers, companies in Canada, but most of them are just struggling to get by. It is very competitive. The technology is moving very quickly. If there was an additional layer of fees imposed or bureaucracy or regulation, it could crush many of these companies.
5195. I think we have to keep in mind that just south of the border there are competitors to our Canadian companies that are ready and are able to capture Canadian households as their customers.
5196. So our real main concern in talking about funding is that it not be on the backs of Internet users themselves or Internet service provider companies themselves in the form of taxes. If it is in the best interest of the Canadian society as a hole, then I think there is a great deal of sympathy or Canadian taxpayer support for the cultural industries collectively, which I think today include new media.
5197. I am not an expert on the business world, I don't know whether tax incentives or a pool of money or grants would be appropriate. I think there is a lot of room for creativity, and I view all of those measures as being kind of a catalyst, enabling and unleashing the imagination of Canadians to create new and exciting content.
5198. Certainly, I don't want to give any impression that I am -- as a free speech advocate, I don't want to do anything to silence Canadians. Anything the government does to amplify their voice I think is tremendous.
5199. I think I draw the line where it ends up trampling on choices to have it be done or imposing the cost of that development unduly on just a segment, namely this minority of Internet users and Internet service providers.
5200. COMMISSIONER PENNEFATHER: On the content side, I understand what you are saying. Getting back to access, I think you actually mentioned today a proposal to assure access by Canadians to the Internet. I am referring to:

"Second, we do believe that the CRTC may continue to play a useful role in ensuring competition and fair business practices among providers of basic telecommunication services and in facilitating universal access."

5201. Could you expand on that for me?
5202. MR. JONES: Yes, certainly, I would be happy to. I have a number of points I would like to make on that.
5203. First of all, I am a computer scientist, I have a great deal of expertise in computer technology and the Internet and I am aware that I am a small minority among Canadians. As I said earlier, a lot of Canadian households can't afford the equipment and they maybe don't have the skills to make use of Internet access and new media, or make good use of it.
5204. I think there is a very important role for our public libraries, our schools, for the low income fraction of the Canadian society, to get access to the equipment, but also for even those who have access to equipment, access to the training and the knowledge of how to use it effectively.
5205. I know in the telecommunication field if you are a successful corporation, it is very easy to justify the costs for telecommunication. If you are a non-profit library or public school and you want to wire up a whole classroom, the costs can be prohibitive in terms of telecommunication.
5206. I think one thing the CRTC probably is doing and I would recommend it do is to evaluate whether it would be in Canada's interest to allow reduced rates for telecommunication services for specifically targeted areas such as education, medical information systems, access to libraries, and so on.
5207. So that's an example I would see of the CRTC facilitating universal access in allowing a greater proportion of the population to get meaningful connection to the Internet.
5208. In terms of fair business practices, I have a lot of colleagues that work in the Internet service provider industry and they are very cognizant of the fact that a large proportion of their costs are telecommunication costs. Many of their customers dial in over telephone lines. The telephone company, through no fault of their own, has access to a great deal of information about this Internet service provider's customers, how often their telephone lines are busy, how often their customers get busy signals, who the customers are, where they are dialling in from and so on. That's unavoidable. But there is a concern in the Internet service provider community that this information could be taken advantage of in an inappropriate way to capture customers away from Internet service providers, to know more about the marketplace in terms of just generally where customers are, what time of day they dial in, and so on and so forth.
5209. So the telecommunication industry is already regulated, and I see, as I said, helping to maintain fair business practices and making sure there is not unfair competition for telecommunication providers who are also in the Internet service industry.
5210. So those are the two main points I wanted to make.
5211. COMMISSIONER PENNEFATHER: Thank you for that. So you do see a role for the CRTC in that regard. Do you have any other suggestions of other steps that could be taken to assure access, or is that the principal suggestion that you have for us?
5212. MR. JONES: Those are the main ones that come to mind.
5213. COMMISSIONER PENNEFATHER: I wanted to go to the question of children. You mentioned kids as -- I will just turn the words around -- that the presence of kids on the Internet would inhibit adult programming and that all adult programming would go after nine o'clock because of the concerns of some that the material is offensive.
5214. In a more constructive mode, I think what you are saying is, we should be careful how we address the concerns of some members of our community that some programming would be offensive.
5215. What is your reaction to how to handle that? Some have suggested blocking tools, which as you know exist; there are various tools available to do that. We just had a long discussion with Media Awareness Network that, in addition to that, awareness and education about media, about diversity of opinion is important.
5216. Is this an important area where action of some kind is required and is there any role for a regulator in that regard?

1645

5217. MR. JONES: I think we have to acknowledge that it is a genuine and reasonable concern that parents and everyone has about young children and what kinds of controversial and confusing information is out there. I think we certainly have to acknowledge that.
5218. I think we have enormous libraries that have books in them that we would describe as adult books, and most libraries have a policy that children can go anywhere in the library and look at whatever books they want. You don't have to dumb down the library to only have children's books because of our reasonable concern for our children. We still have books that most people agree are not appropriate for children nevertheless available in libraries.
5219. I think, as many people have said, it wouldn't be appropriate to dumb down the Information Superhighway so that now it becomes Sesame Street only.
5220. So the tools that exist, such as filtering software, I think they are actually, in practice, relatively ineffective. I think a great deal more success can be had with education and awareness, and we saw tremendous examples of this today, very compelling emotional television advertisements and multimedia presentations.
5221. I am biased because I am a professor, I am an educator; so, of course, I think education plays a very significant role.
5222. This is one of the challenges of living in a free and democratic society where we have freedom of expression. If it is illegal, we can lock the person up. If it is merely offensive, then in fact it is protected by the Charter. So part of living in a free country is having and cultivating a level of tolerance for other people's views that you find offensive and learning to live with them.
5223. So I think, at various stages in a young person's life, there are different levels of control that are appropriate. In very junior grades in school I know a lot of public schools simply choose to have very restrictive filters on Internet access and have the students' use of the Internet be very goal directed. It is hard to argue against that.
5224. I think, for teenagers though, in their mid-teens especially, we have to start educating them and equipping them to make intelligent decisions for themselves because they are about to become adults, and then they are on their own. It would be unfair and I think inappropriate to just keep them sheltered and then suddenly let them loose and be unable to cope and ill-equipped.
5225. COMMISSIONER PENNEFATHER: Yes, it would seem to counter your very strong support of freedom of expression; even if I am 9 or 90, it should be equally a strong tenet, I agree with you on that.
5226. MR. JONES: There is nothing wrong, I think, with older people sharing their wisdom with young people and giving them guidance. I am very encouraged by what I see with the Media Awareness Network, Children's Advertisers, and the steps and the programs they have. I think they can be very effective and very educational.
5227. I think, in the end, as long as there is choice, I am happy that there is freedom of expression. Let me give you an example.
5228. In Burlington, Ontario, a community near where I live, the public libraries there have been struggling with this issue of access to the Internet, should it be filtered, should it not be filtered; there are parents' concerns, it has been going on for a year.
5229. They have recently launched a pilot project and they have decided to have software filters on half of the terminals in the library and the other ones are completely unfiltered.
5230. To me, I have sort of an uneasy but accepting view of this program. I see that it accommodates many of the reasonable concerns of some families who would direct their own children to the terminals that have filtering software, and that would suit that family's needs. There is certainly no way I want to interfere within a family unit and be telling people what is appropriate for their family. But, at the same time, other families could advise their young children "You can use whatever you want", plus children that are becoming somewhat more independent -- and I guess it varies from family to family whether that's 12 or 16 or 9 -- there is no policy that says the librarians must prevent those children from getting access to the whole uncensored, unregulated Internet.
5231. Because there is that element of choice in the end, we are satisfied.
5232. COMMISSIONER PENNEFATHER: Thank you very much.
5233. That completes my questions, Mr. Chairman.
5234. THE CHAIRPERSON: Thank you, Commissioner Pennefather.
5235. Thank you very much, Mr. Jones.
5236. MR. JONES: Thank you.
5237. MS SANTERRE: Now I would like to introduce Mr. Segal on behalf of Legal Group of the Internet in Canada.
5238. THE CHAIRPERSON: Good afternoon, Mr. Segal.

PRESENTATION / PRÉSENTATION

5239. MR. SEGAL: Good afternoon.
5240. My name is Greg Segal, and I am pleased to represent the Legal Group for the Internet in Canada.
5241. Our group is a conduit for the exchange of information and ideas about policies concerning emerging communication and information technologies. Our group exists to ensure that new laws and regulations have no detrimental effects on the free and interactive communication of information.
5242. This presentation is divided into three general parts. In the first part I will set out an introduction. In the second part I will look at the often talked about issue of spectrum scarcity. In the third part I will deal with Canadian content.
5243. As Canadians we often hint at greatness and then end up falling short against international competition. However, the time is right for Canadians to become global technology leaders. We must not pass up this opportunity. Canadian high tech companies, including manufacturers of telecom hardware and graphic solution hardware, and producers of interactive multimedia and animation systems are becoming internationally renowned. Canadian financial institutions are also leading the way with Internet banking solutions.
5244. As the Internet continues to grow the demand for these and other high tech products will increase. The Commission must realize that the Internet is more than entertainment; it is a tool for promotion, for business, and most importantly for the free flow exchange of information. It is a means of advertising, a way of accessing securities portfolios, of purchasing a computer, of booking a vacation and of escaping into a world of imagination. It is not akin to what we would consider today as our traditional broadcast system.
5245. It is imperative to realize that a highly regulated framework is not the way to progress; rather, it is a way to regress. To regulate a multi-purpose tool such as the Internet under the Broadcasting Act would be detrimental to the Canadian Internet industry and contrary to the historical origins of the Act.
5246. When the Commission requested comments regarding regulating the Internet, I posed three simple questions: Why now? Why the CRTC? And how? Regulating a medium which will become an essential part of the economy for Canadian content purposes is not logical. The Internet is beyond multimedia, it is multi-purpose. That means that the cultural aspects of the Internet are no more important than electronic commerce. We do not need different government bodies enacting different legislation and each attempting to control an aspect of the Internet.
5247. In our written submission we set out the view that the term "new media" is synonymous with the Internet and that the Internet is currently the sole form of relevant new media. We stressed that the rational of the Broadcasting Act and its regulation of Canadian content should not apply to Internet technology. We also noted that there should be no more stringent standards imposed upon new media than on traditional media.
5248. I have since realized that the definition of "new media" for the purposes of these hearings is irrelevant. In my mind, this has become a debate about the Internet and only about the Internet. Last month, the federal government introduced legislation dealing with privacy protection. While this legislation is not ideal, it makes any discussion about the CRTC regulating privacy irrelevant.
5249. As you can tell, I have chosen to focus solely on the issue of regulating the Internet via the Broadcasting Act. Our group believes that the CRTC must take into account the differences between traditional broadcasting and the Internet. In doing so, it should recognize that the justifications for regulating content in broadcasting do not apply to the Internet.
5250. There are two dominant rationales supporting the regulation of broadcasting; the first technological the second sociopolitical. Technological refers to the frequencies that are transmitted through the spectrum, and sociopolitical refers to the preservation of Canadian culture, or Canadian content regulations.
5251. These rationales were relevant in the early part of the century, when interference from foreign stations resulted in a shortage of usable frequencies. At that time, many Canadians had no access to broadcasting service, and the programs were of questionable quality. These conditions do not exist with respect to the Internet.
5252. Indeed, the number of broadcast frequencies is limited. It is a scarce resource, and that is why the government allocates them through the licensing process. Spectrum scarcity has most often been used in support of regulating broadcasting. However, interestingly, it is the one rationale most directly affected by new developments in technology. As noted, traditional broadcasters require licences mainly because spectrum is scarce. This is not the case when dealing with the Internet.
5253. Despite predictions, the days of a 500-channel television universe have not arrived. The arrival of digital cable nas not provided a television revolution. Unlike broadcasting, the Internet spectrum is indeed unlimited. Forcing any Internet entity to obtain any sort of licence by comparison to traditional broadcasting is unjustifiable.
5254. The rationale of cultural preservation is also outdated. It has been superseded by technology, both here at home and abroad. As a country, Canada aspires to have universal access to new media. If achieved, every Canadian will be able to connect to the Internet and anyone connected to the Internet is instantly and easily capable of being an on-line distributor of new media. Thus, the technology and access to it makes cultural content protection irrelevant. It is unfortunate that Canadians fail to realize, or at least some Canadians fail to realize, that we as Internet users are in essence all content creators.
5255. Proponents of content regulation for cultural reasons fear that, as streaming technology is improved, the distribution of Canadian-made audiovisual content will be severely overshadowed by American content. The problem with this argument is that it fails to take into account the fact that Internet distribution provides these very same creators with an unlimited market. Television and radio cannot achieve such a distribution channel.
5256. I would like to conclude by reiterating that no licences and no regulations should be imposed on any entity for any activity solely by virtue of its relation to the Internet.

1700

5257. We as a country regulate for Canadian content because we can. Because we can control the spectrum, we are able to control then content. Instead of charging money for a licence, we invoke a sense of Canadian pride and attach content regulations as conditions of the licence. As we do this, the largest Canadian market receives approximately 45 Canadian television stations. On the Internet, Canadians from large and small markets have access to thousands of Canadian Internet sites. In essence, the Internet is beyond a simple outdated mode of protection. It is a new economy, something which is foreign and should be beyond the jurisdiction of the CRTC.
5258. If we have an abundance of Canadian sites, why then are we here looking at the broadcasting model for culture on the Internet? There is, as I submit, no compelling reason.
5259. Subject to any questions you may have, this concludes my oral presentation. Thank you.
5260. THE CHAIRPERSON: Thank you, Mr. Segal.
5261. I will turn to Commissioner Wilson for a few questions.
5262. COMMISSIONER WILSON: Good afternoon, Mr. Segal.
5263. MR. SEGAL: Good afternoon.
5264. COMMISSIONER WILSON: Thanks for coming and joining us.
5265. As I have been sitting listening over the last few days to the presentations before us and the number of people who read our notice and perceived that it had quite a clear intent to regulate, I thought that at least the one very positive thing that's flowed out of that is that we have attracted a lot of people to this process who have never been part of our process before, and that's a very good thing. I think our previous presenter talked about the never-ending conversation, and I think we are in the process of having one about the Internet, and it is very helpful to us to have people like yourself come and share your views.
5266. I want to talk to you about your written submission. Maybe I could just start, though, by asking you to describe to us a little bit more about your group. I thought the name for the group was quite appropriate considering the technology that underlies it --
5267. MR. SEGAL: Yes.
5268. COMMISSIONER WILSON: -- but I was just wondering if you could tell us a little bit more about that.
5269. MR. SEGAL: The Legal Group for the Internet in Canada, which is also dubbed Logic, I guess taking the first letters, was founded by a few law students I think at the end of 1994 at the time or beginning of 1995. Basically, it has mostly become a way to exchange ideas over e-mail listers as to what is going on with respect to Internet laws and Internet technologies and how the Internet technologies are affecting the laws. That's mostly what it is about.
5270. A few articles as well are posted on our Internet site which have been written by the co-founders and some other people on censorship, on privacy, all on different issues dealing with the Internet.
5271. COMMISSIONER WILSON: Thank you.
5272. On page 2 of your submission, I guess it is paragraph 5, you state that the term "new media" is synonymous with the Internet and that the Internet is currently the sole form of relevant new media.
5273. MR. SEGAL: Yes.
5274. COMMISSIONER WILSON: I appreciate the distinction that you are making when you list the various forms of new media that you do. Yesterday we had presentations from some independent service providers who made a similar kind of comment although for different reasons and basically said there is no new media, there is only the Internet, and they distilled it all down to the binary code.
5275. You go on to say that it is incomprehensible that we would use the term "new media" when the term "Internet" would suffice.
5276. I don't know if you have been following the presentations that we have been having over the last few days, but there is quite a range of labels being attached as we are trying to figure out what all of this means. Even one of the quotes that you used in your submission on page 7 I think it was, William Gibson saying -- there have been a lot of quotes that have been used in the submissions, and this I thought was really one of the best: "There is no there there." They taught that to children explaining cyberspace. It really does capture the sense that it is something quite amorphous almost.
5277. I just wanted to know why you think it is so incomprehensible that we would use the term "new media" instead of "Internet".
5278. MR. SEGAL: One of the things is, when I first saw the public notice and I read it, I thought initially that it was an excuse, using the term "new media", to try to --
5279. COMMISSIONER WILSON: Regulate the Internet?
5280. MR. SEGAL: -- regulate the Internet --
5281. COMMISSIONER WILSON: That was very suspicious of you.
5282. MR. SEGAL: -- and try to make it less so that it doesn't sound as negative to the public.
5283. I read a lot of submissions that I was able to grab on-line and I noticed that a lot of them as well as the Internet site that was set up -- a lot of them call for -- or quite a few of them state that this basically is the Commission trying or in some way trying to regulate the Internet. That was my first gut instinct.
5284. Then I went out and decided, what is a good definition for "new media"? I went and I looked at a definition set out by a legal author, Leslie Ann Harris (ph.) in a book entitled "Digital Property", and she set out what I thought was an excellent definition. Basically it was a media that didn't exist in the eyes of the general public more than five years ago as well as tomorrow's media. Then she lists some different criteria, like some different kinds, DVDs, Web sites, electronic magazines.
5285. Then I took that definition and said, what can I think up? I thought up video-on-demand, something which the Commission has already licensed I believe to was it Shaw and Alliance Atlantis Communication, something like that; satellite television, it is already done; so ExpressVu, Star Choice; digital cable, that's new; HDTV, that's becoming big in the U.S. now because they just rolled that out; 3-D video games, that's really becoming big with the new hardware that's being created; the Internet; virtual reality.
5286. Basically, looking at the mandate of the CRTC, looking at those which can be transferred via either the airwaves or by cable or any of those things, the only one left really was the Internet that I can think of.
5287. Now, I am sure there are probably more out there, but for now, really, I think the Internet is the only relevant form of new media.
5288. COMMISSIONER WILSON: We have been accused of thinking sort of inside old paradigms; in fact, one of the presenters yesterday referenced what he called the "broadcasting mental model", probably because he thinks that our paradigm is nuts, but I think that, at least my understanding -- I have been at the Commission for six months -- was that we were looking at new media as the content and the Internet as the infrastructure. That was the distinction for us.
5289. So this has been a fascinating process to hear from people who are involved in the content creation and production, because there are many people who work in that field who look at new media as content and who look at the Internet as the delivery infrastructure. So I was very interested by the way that you came at that.
5290. In paragraph 11 you quote a Masters in Law thesis which says that there are two dominant rationales supporting the regulation of broadcasting.
5291. MR. SEGAL: That's paragraph 10. Right?
5292. COMMISSIONER WILSON: Paragraph 10, paragraph 11.
5293. MR. SEGAL: "Indeed these deficiencies"?
5294. COMMISSIONER WILSON: "The deficiencies included" -- no, not that, sorry. You are talking about -- the quote that's in the first line:

"There are two dominant rationales supporting the regulation of broadcasting; the first technological, the second sociopolitical."

5295. You actually mentioned this again today in your oral comments.
5296. MR. SEGAL: Yes.
5297. COMMISSIONER WILSON: These are, I think a number of people have called them the first principles on which we are to rely in addition to the definitions that are defined in the Broadcasting Act.
5298. Then you go on to talk about the technological principle being basically scarcity of spectrum and the sociopolitical principle being the cultural objectives.
5299. So your argument for not regulating is really based on the legal side, which of course is where you are coming from, but what is your philosophical approach to it?
5300. What I am trying to get at is, you made the comment that you are 25 years old --
5301. MR. SEGAL: Yes.
5302. COMMISSIONER WILSON: -- and that you are a member of the age group that will be most affected by any decision we make.
5303. I hate to have to admit that I am not a member of your generation, but what is at stake for your generation?
5304. MR. SEGAL: That's one of the things we have to take it in context with the other thing you were just talking about -- just briefly, for one second, off track.
5305. I quote from that Masters thesis. I basically had in mind spectrum scarcity and I had in mind cultural preservation, and I just liked the terms that this person had put on them. That's just an aside.
5306. COMMISSIONER WILSON: Yes.
5307. MR. SEGAL: As for my generation, one of the things is, any laws created now -- as I said, really, the only form of new media I was able to find was the Internet if I defined it as content and distribution in one. Who knows what's going to happen in five, ten, fifteen, twenty years? I think it is redundant almost to go through this process every three years to try to figure out what is new media now, what is new media now.
5308. So any decisions made now, especially those which would regulate new media, we don't know what new media is going to be defined as in five or ten years.
5309. COMMISSIONER WILSON: Because that list that you provided to us will have changed.
5310. MR. SEGAL: Yes.
5311. COMMISSIONER WILSON: Because it would be anything that had been invented within the past five years.
5312. MR. SEGAL: Yes. So a lot of it revolves around that.
5313. So if a decision is made next year that the CRTC is going to impose some sort of licensing issue with respect to Internet service providers, or some other Canadian content rules outside of Internet providers so that it would be new media neutral, it would apply to all new media, then that might be detrimental five or ten years down the lien when some new form of media comes out. We don't know what that is now.
5314. By then, especially even the younger generation behind me, they will be the ones most affected by that and it will just mean that the Commission will have to go through this process again and again and again, which becomes tedious.
5315. COMMISSIONER WILSON: I have not found this tedious, I have to tell you. I found this very interesting.
5316. MR. SEGAL: I don't mean the first time. It is definitely not the first time.
5317. COMMISSIONER WILSON: If we did it in three or four years, I probably wouldn't be here; it would be some other group of people. That's a different story.
5318. I guess one of the things that I was trying to get at is -- and you actually raised it. You answered part of the question when you said that regulating a medium which will become an essential part of the economy for Canadian content purposes is not logical. You sort of pointed to the whole economic impact of this, and I think that you said it much more clearly when you said that the Internet is a new economy all its own, that it presents -- I assume that this is what you mean, it is presenting all sorts of opportunities for Canada.
5319. MR. SEGAL: Yes. I believe, first of all, it presents a lot of opportunity for Canada. There is a lot of Canadian companies that are investing -- they may not be creating actual content, but they are behind the technology, like Northern Telecom, Newbridge, all the companies like that, and then you see the other people who create hardware that go in your computer, like ATI or Matrox (ph.) or people like that who are creating the hardware behind the software, as well as other content creators like Digital Renaissance and some of the broadcasters as well.
5320. COMMISSIONER WILSON: I think we have heard one figure -- I mean, the statistics are a little hard to pin down, but one figure we have heard is 15 million Web pages of Canadian content, 60,000 Web sites.
5321. MR. SEGAL: That's a lot of Canadian content.
5322. COMMISSIONER WILSON: Well, it is kind of hard to figure it out when you are not sure just what the total amount of content is that's out there and what other countries are doing.
5323. MR. SEGAL: One of the things we see a lot is people, especially when they are talking about economy in general, they are saying how entrepreneurial spirits -- how you should become your own manager and take charge and create your own business. I think the Internet provides us all with the opportunity to be content creators. I think I made reference to that, that we, if we wanted to, could all be content creators. I have a 12-year-old cousin who created his own Web site, and all it cost him was basic Internet access and he got a free host to host his site.
5324. Ironically, he shut it down when he received a letter from U.S. counsel to Fox Corporation basically stating that he was violating their intellectual property rights. So it was quite funny.

1715

5325. COMMISSIONER WILSON: I want to move into the area of cultural preservation.
5326. MR. SEGAL: Yes.
5327. COMMISSIONER WILSON: You give some interesting background on the public policy reasons for the Canadian content requirements in traditional media. I am just going to ask your opinion on a couple of these things. I am quite sure you probably have one.
5328. At the various times that these policies were introduced for the different traditional broadcast media, do you think that they were useful? Do you think that they played any purpose?
5329. MR. SEGAL: I know that many Canadians believe they played a purpose.
5330. The problem is I don't know what television was like when it first came out. I don't know what it was like even --
5331. THE CHAIRPERSON OF THE COMMISSION: Don't rub it in!
5332. MR. SEGAL: -- 15 years ago, so I can't comment.
5333. COMMISSIONER WILSON: I was very, very young when it was first introduced.
5334. THE CHAIRPERSON: Mr. Jones was worried about us getting peed off. You didn't have to insult us even more by reminding us how old we are.
5335. COMMISSIONER WILSON: When Mr. Jones made the comment that some older people might like to pass their wisdom on to younger people, I thought, gee, I don't even have any grey hair yet.
5336. MR. SEGAL: But, at least looking at it from a recent standpoint, I think what you end up seeing with content regulations is a bunch of television broadcasters taking news from 6:00 to 7:00, and then you end up seeing them take it again from 11:00 to 12:00 and then end up buying U.S. programming to fill up the bulk of the schedule, and they meet part of the requirements, and the other requirements are dramatic requirements. But I think it is far more effective to create good Canadian television shows and good Canadian content than to force television stations to play that Canadian content.
5337. For example, I think "Traders" is an excellent show and it is really well done, and that's something that I think would be on the air regardless or whether or not there are content regulations as long as there are financial incentives given to Alliance Atlantis, or whoever creates that program specifically.
5338. COMMISSIONER WILSON: I guess that's one of the questions that we are struggling with right now. We did a review of TV policy this fall, but ---
5339. I guess I am curious when you say that it is not an issue in this new world, not only from a legal perspective but from the notion of geographic boundaries and technology as it passes over those boundaries and doesn't recognize them.
5340. What I am trying to explore is that in that digital world, do you not think that there is still some kind of notional sense of national identity? I was talking with someone earlier today, and she said, "You know, when you are on the Internet here, you don't turn around from that experience and say, oh, I talked with someone on the Internet today, you say, I talked with someone in Germany or I talked with someone in Australia or someone halfway across the world" and you name the country. Probably, when you are on the Internet, you are identifying yourself as a Canadian.
5341. Would you agree that there is some kind of --
5342. MR. SEGAL: I definitely think there is. When I go on-line, I usually go on-line for a purpose. I just don't launch up and I am going to go surf the Web. I usually go on because I want to check something, or I will be at work and I want to see what is happening in the news or something to that extent. I don't go to usatoday or cnn.com, I go to Canoe. Now I am in Toronto, but I am originally from Montreal, so I go to the Montreal Gazette or something like that on-line to see what is going on in Canada. That's number one.
5343. Number two is, even though we are a small country relative to the U.S., there is still a demand for Canadian content. I will give you an example. When I finished my first year of law school, I found a summer job at an advertising company that specialized in recruitment advertising. So, when you look at the career section of your newspaper, what they do is design many of the ads in that career section. Their parent company is a giant U.S. advertising company, and the U.S. company had released an Internet site called "careermosaic", which was an on-line job fair, basically, for people in the U.s. to find jobs.
5344. They hired me to call different Canadian companies and see if they would be interested in creating human resource sites and posting Canadian jobs on-line. I would call these places, and the number one thing I would get was, "Oh, this is an American site. It has nothing to do with me."
5345. We accepted that because we were in the process of creating a Canadian version of that site, distinctly Canadian, because the market demanded it. So what we did was we took the basic look of the American site and we, instead, added Canadian links and created what we thought were proper conditions to try to get Canadian employers to advertise on this site and to post jobs.
5346. Now it is successful, and that was completely driven by the market and the demand by these human resource professionals in Canadian companies.
5347. COMMISSIONER WILSON: that certainly echoes some of the views that were expressed yesterday by the Internet service providers, who said that there is consumer demand, a lot of consumer demand for Canadian content, so there is a business model for it.
5348. I guess the other thing that came up yesterday during our conversations was sort of an alternative definition of Canadian content, and one of them said that the real Canadian content problem we should be dealing with is the whole issue of brain drain, that many Canadians are moving out of the country. So certainly that has given us a lot to think about.
5349. How do you react to that?
5350. MR. SEGAL: I think with Canadian content as well, especially when you look at the broadcasting scene, there are two kinds of Canadian content, at least from my point of view; there is Canadian content that creates all the jobs, and we create a show that looks like an American show but it was filmed in Canada, so we get our people working, and then we have other shows where it is distinctly Canadian with respect to the subject matter that's going on there.
5351. As for the brain drain, when I was working at this recruitment place, we definitely saw that as a trend. You had companies coming to us saying, "We need to hire more, we can't hire enough, people are leaving." So what they did was they decided they would come on-line not only to attract the Canadians, but because the Internet was accessible in Asia and in the U.S. and in Europe, to try to see if they can attract either Canadians who are living in the U.S. back home or to attract people from Asia to come to Canada, or people from Europe to come to Canada.
5352. That was another aspect of looking at it -- and Canada, of course, is a multicultural society, so ---
5353. COMMISSIONER WILSON: Now, I am going to ask you one final question about your area of expertise, which is the law. And it is really just a short question of clarification.
5354. On page 7 of your submission you say:

"We submit that for every issue of privacy, sufficient law exists and applies." (As read)

5355. Then you say the same thing that you said this afternoon in your comments. You said:

"... there should be no more stringent standards imposed upon new media than on traditional media."

5356. MR. SEGAL: Yes.
5357. COMMISSIONER WILSON: Well, I am an English Major, that's my area of expertise, and to me that kind of suggests that we should not impose standards which are more stringent but we could impose standards which are as stringent.
5358. Could clarify that for me --
5359. MR. SEGAL: Could I clarify what I was referring to?
5360. COMMISSIONER WILSON: -- because I thought it was inconsistent with your position.
5361. MR. SEGAL: Yes. What I was referring to was, if we look at my paragraph 31 for example, I was pointing at all these things in the Criminal Code which are technology neutral and apply both with respect to regular --
5362. COMMISSIONER WILSON: So you weren't talking about content standards.
5363. MR. SEGAL: No, exactly. What I was saying was we don't need special laws to say, okay, hate on the Internet is illegal if we have one that says that hate propaganda is illegal in our Criminal Code.
5364. So perhaps I misphrased that.
5365. COMMISSIONER WILSON: Okay. It is because I thought, you know, if I took you at your word, I could probably squeeze through there.
5366. Anyway, thank you very much for coming and joining with us today.
5367. MR. SEGAL: Thank you very much.
5368. THE CHAIRPERSON: Thank you, Mr. Segal.
5369. Madam Secretary, our last presenter for today.
5370. MS SANTERRE: Yes, it will be Gail Henley on behalf of I. Hoffmann & Associates Inc.
5371. THE CHAIRPERSON: Good afternoon, Ms Henley.
5372. MS HENLEY: Good afternoon.

PRESENTATION / PRÉSENTATION

5373. MS HENLEY: Good afternoon, ladies and gentlemen. My name is Gail Henley and I am vie-President, Business and Legal Affairs at I. Hoffman + Associates. If you hear me say H+a, that's the acronym we are commonly known as.
5374. I am appearing here today on behalf of Isabel Hoffmann, the President of CEO of H+a, who regrets very much not to be here today.
5375. Our head office is located in Toronto, Ontario, and our corporate Web site is h-plus-a.com and our award-winning children's Web sites are nikolai.com, cbs.nikolai.com and netscape.nikolai.com.
5376. Thank you very much for this opportunity for us to appear here today. We have given you written submissions in Phase I and today we just want to add a few comments.
5377. In an effort to be consulted again and again in this process or any other process you have, I would like to give you a little bit of a profile of our company and the history of our company.
5378. We are a Canadian Internet-based content provider and e-commerce company. We provide interactive entertainment and education programming as well as product-related merchandise worldwide. The shareholders of our company include Mitsubishi International Corporation and Corel Corporation.
5379. We are possibly, unless anyone else can give me information to the contrary, the only Canadian company that has direct links from two of the world's largest portals. We have a direct link from cbs.com and we have a direct link from netcenter@netscape.com. We are the creators, managers and host of the kids site at cbs.com and at netcenter.com
5380. We began in the new media industry when the new media industry began, in the 1990s. We forged our reputation as a publisher and developer of a Canadian product for the Internet. First, we started as a Canadian product for multimedia distribution but moved that to the Internet. Our series is called "The Nikolai Adventure Series". It now has eight titles in the series and is going to be developed and produced by Cinar for animation.
5381. We started at the back end. For other people, they start with animation and go to the Internet; we started with the Internet and have gone back to television.
5382. We are possibly the only company in Canada, or we tout ourselves as the only company in Canada that has done major acquisitions of multimedia lines. We picked up Corel's home multimedia line and their medical series multimedia line when they went out of multimedia and we also picked up Bill Gates' Corbis Corporation multimedia line when they decided to devolve themselves from multimedia.
5383. We did this because we wanted to have digital content for the Internet. We knew that the age of multimedia as a new media was going to be over; we believe it died in and around 1997.
5384. In about 1997 we started moving our product into high speed network. We have agreements with Bell, Telus, MT&T and in various international telephone companies like Telia in Sweden.
5385. One other component of our industry is that we train people in digital media. We started the Apple Design and Modeling Centre, the Information Technology Design Centre and the Digital Media Studios. These three multimedia and digital media training centres are in Toronto.
5386. It is this context that generates the position we take today with respect to your hearings.
5387. H+a is strongly against any regulation of the Internet by any government body, whether arm's length or not, including the CRTC. H+a does not believe that regulating an industry is a step towards creating a healthy, thriving industry.

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5388. We have already voiced publicly this opposition. In 1998, H+a was a strong opponent to the Ontario government's propositions in its report entitled "Playing to Win: The Digital Media Industry in Ontario". This report was done by the Digital Media Champion Group and it was released in January 1998. At that time H+a issued its own press release saying that the Digital Multimedia Champion Group was not truly representative of the industry players.
5389. H+a was a successful entrepreneurial player in this industry. The Digital Media Champion Group stated in its report that "to succeed in Canada and abroad, Ontario's digital media industry must develop a strong relationship with government at all levels." This is diametrically opposed to H+a's philosophy.
5390. In its public rebuttal, H+a wrote that statements such as this ignore certain fundamental facts about the digital media industry in Canada. H+a is one of the strongest and leading players in the digital media industry, and its point of view was not heard at that time. While other digital media companies may be looking to government regulation to give them a model for survival, H+a found its model for survival in the marketplace, without any government subsidies and without any government regulation.
5391. H+a has created its own 100 per cent Canadian content and it is this 100 per cent Canadian content which provides the mainstream of revenue for H+a. It is an economic model that functions and it is revenue generating.
5392. Less than a year ago H+a did not have any exports of its products. Now, 30 per cent of H+a's revenue comes from exporting H+a's products. This is a Canadian success story. H+a is living proof that vision, hard work and an understanding of this industry can merge to create an independent company which is a successful player in this global international business.
5393. We believe that programs that need government help to be made or seen are programs that do not have market demand and that do not make sound economic sense in a free marketplace. The new media industry is influenced by global factors and has international interest. The very mobility of digital media businesses in Canada would be put in jeopardy by national regulations. To establish regulations in a rapidly changing field is an oxymoron. Such a goal can never be reached.
5394. Canadian Internet companies would be severely constrained if they had to abide by regulations of any regulatory body. H+a believes that if a given medium or industry is regulated by a government body, even if at arm's length, it will restrict its audience to a relatively smaller segment and will not be able to profit in the marketplace. H+a is therefore objecting to any committees or subcommittees with government representation or any regulatory body, arm's length or otherwise, to regulate the new media industries.
5395. Like various other groups which have appeared before this Panel, we have four positive recommendations to make and we are encouraged that the following four recommendations have been made over and over again before this Committee during these proceedings.
5396. Our first recommendation is -- and we hope that our recommendations do not become the thin edge of the wedge -- that the new media industries could in some ways be encouraged by incentives such as tax measures and suggest that the Commission should put forward in its recommendations that the federal government should be nudged to bring in tax measures to assist this industry.
5397. Another recommendation, the second, is that there is definitely a brain drain of talent from this country. All the talent that we have trained in our three training facilities have been hired away to companies in California. We cannot afford to retain them. Usually they come on in interim jobs for us just after training, but after their training they immediately leave our company and go to the States. We have had the highest turnover of skilled talent that we have trained. So we suggest some way that this Committee could make a recommendation to the federal government that there must be a way to lower taxes or have incentives to train and keep talent in Canada in this industry.
5398. Our third recommendation -- and this was a recommendation, I was pleased to hear, that was made by Electronic Frontier, the presentation before the one before mine, on the piracy of intellectual property. Our software has been pirated and all our popular titles are being pirated by Russian counterfeiters. We have approached the government to help us with this. We are losing revenue in our exports, and we have had no assistance. So we feel that there is another recommendation that could come forward from here that the software industry needs stronger intellectual property regulation.
5399. The last and fourth recommendation that H+a would be willing to put forward is that we believe the Internet industries can be self-regulating with respect to issues like privacy and children's advertising issues and we are self-regulating. We have done it without anyone nudging us into that area. For instance, H+a has children's Web sites and it has a privacy statement on each of its Web sites. It follows the guidelines set forth by CARU, the Children's Advertising Review Unit formed by the Better Business Bureau in the U.S. and the Federal Trade Commission policies on children's advertising in the U.S., and we would accept similar self-regulation guidelines from a similar Canadian association if they should come into play.
5400. Those are the four recommendations that we would be prepared to live by.
5401. In conclusion, I would like to thank you for listening to our comments today and I would be pleased to answer any questions that you have.
5402. THE CHAIRPERSON: Thank you, Ms Henley.
5403. I will turn to Commissioner Grauer.
5404. COMMISSIONER GRAUER: Thank you.
5405. Thank you very much. I would just like to say that your submission and your presentation are clear, concise and unambiguous. I don't think I need to ask you too many questions of clarification with respect to your position regarding whether or not you think it is appropriate for us to be regulating the Internet.
5406. I would also like to thank you for your offer and your willingness to participate in any ongoing consultations we might engage in with respect to the area of new media. I think, when there is a company that has been as successful as you have over a period of time, you have a lot to offer to us and to a lot of others. So I appreciate that and I am sure that we will be taking you up on it.
5407. I guess my first question is, with respect to some of the questions of clarity, or certainty perhaps is a better way to put it, part of the momentum for this hearing were a lot of concerns in the new media marketplace that a lack of regulatory certainty about any intentions we may or may not have as a regulatory body with respect to the whole area of new media was inhibiting investment and creating uncertainty in the marketplace, having a chilling effect.
5408. I just wonder if you could offer any comments on that, whether that was something you experienced or witnessed.
5409. MS HENLEY: We haven't experienced it because there is no regulation in place, but I can tell you that just the thought that there was going to be regulation or that this consideration would come forward, for instance in January 1998, when the Digital Media Champion Group put out its report and one of its recommendation at the end was, should the CRTC be considering these types of issues and should they be involved in any regulation and does it fit under "broadcasting", when they even made an innuendo that this type of thing might be a hearing in the future, it had a devastating effect on everybody in the Internet business and it sent a chill that could be felt for miles. It frightened everyone to death.
5410. So I guess, to answer your question, it hasn't had a chill because there is no regulation in place. The thought of it coming into play has a very chilling effect.
5411. COMMISSIONER GRAUER: I guess maybe it is a different way of answering the same question. We were hearing, "What are you going to do? Tell us, because in the absence of strong signals, it is chilling." That's exactly what you are saying, in a different form, it seems to me.
5412. The threat or the possibility or the lack of clarity from us about whether or not it was within our jurisdiction was chilling.
5413. MS HENLEY: If I can answer the question from another point of view to give you another insight into it, I was thrilled to hear one other panellist make the comment a little earlier today, I am not sure which one, that in fact a lot of businesses have thrived in this new media simply because there was no regulation, because there were no barriers to entry, there were no worries about were you fitting into a policy or were you not.
5414. For those companies that were thriving or were trying to make it, the only factor that mattered was the marketplace and could they make revenue and how could they make revenue from the Internet. So they weren't looking for clarification of rules and regulations because the marketplace was defining if they were going to make it or not and defining the guidelines. And it is still being clarified where the models are for revenue.
5415. Our business was started in 1990 and was incorporated in 1992. We started with multimedia products and have moved our digital content to the Internet. It is constantly in flux, changing. Even when we went on to the Internet, I am Vice-President, Business and Legal Affairs; I had to make a decision for our company, do we or do we not need a privacy statement up on our site? Do I or do I not have to go to the Advertising Standards Council to find out what I need to do with respect to children's advertising? We are selling advertising on our site. Those issues did not have to come into play because we knew that we could operate.
5416. We put in self-regulatory things; we had to ultimately put on a privacy statement because our partners, Netcenter and CBS, have to have privacy statements and they have certain guidelines in the States and we had to follow those. So there is a certain model already for self-regulation in this area.
5417. I guess what I want to be clear here is that if some people are looking for clarification of where or where you won't regulate within this sector, they may need that clarification and you may need to say, "Well, that's not our game", but there are lots of companies that were thriving simply because there was no regulation, and that's where the chilling factor came.
5418. COMMISSIONER GRAUER: I understand, thank you.
5419. In your written submission you say:

"Government efforts to support and encourage the digital media industry are crucial because digital media skills are extremely mobile." (As read)

5420. I don't know if you have seen or heard earlier this week IMAT was here.
5421. MS HENLEY: I didn't hear them but I know a bit about their presentation.
5422. COMMISSIONER GRAUER: You do. They had what they called four pillars of support: support for research and development, for content development, education and training support, support for marketing and promotion, and access to capital for investment in interactive new media products and companies. Those are not all government efforts, but certainly research and development -- tax incentives are. Sorry, I am a little mixed up here.

1745

5423. MS HENLEY: Well, we don't support IMAT's position totally. We don't, because they are looking for some sort of subsidization. Their model seems to be a lot like the television model, to help them get started in businesses.
5424. We thought about IMAT's position. I haven't read their paper very well, but we thought about it, and they represent a lot of very small shops, the one- or two-person -- like the person who spoke before me.
5425. Everybody is a publisher in the Internet and everybody is a content provider. I mean, we are a content provider but our revenue is generated by our e-commerce. Not everybody has a store. We have a store. We sell. We sell at Netcenter, we sell at CBS, we sell at h-plus-a.com. All our revenue is generated by sales. So we are a publisher, but we are a publisher to sell our product, the merchandise. But everybody is a content provider.
5426. So what IMAT is representing are those one- or two-people businesses that want to develop a multimedia product, want to put up a Web site, but not all of them are going to have on-line stores and be in commerce.
5427. We employ 180 people. We are a mid-size -- no, we are not as big as AOL or Netcenter, but we are not one or two people. There may be a place to support the one or two persons, if you want; if you want to think about the way you did it in television, where you have these small independent producers and then you have the big production houses. So you put in all the resources for the little independent producers. It didn't really create an industry, but it kept people employed.
5428. That's not really what worries us when we talk about regulation.
5429. COMMISSIONER GRAUER: I guess maybe the best thing to do is to say, when you talk about government efforts to support and encourage the digital media industry being crucial and then you elaborate a bit today in your oral submission -- maybe what I will do is, Torstar was here this morning and they had three initiatives: a refundable tax credit for employee training, some specific initiatives allowing research and development in Canadian content to qualify for scientific research and experimental development credit, and the tax credit for capital expenditures.
5430. Are those the kinds of initiatives --
5431. MS HENLEY: Yes.
5432. COMMISSIONER GRAUER: Okay, thank you.
5433. You also make reference to the public statement you gave in which you said -- I am sorry. When you talk about government efforts to support and encourage the media industry being crucial, you then say:

"Statements such as this ignore certain fundamental facts about the digital media industry..."

5434. That's on page --
5435. MS HENLEY: Yes, I see it here.
5436. Well, the point is that the Digital Media Champion Group made a statement that, in order for digital media industries to survive in Ontario, they needed to develop partnerships with the government. They got that anyway. We are not going to redress what has already been done. The Ontario government has already put in the fund; that's going to happen, and they got that. They got their partnership with government and they are going to go do it. They are going to build infrastructures for the digital media industry, even though we didn't support that initiative.
5437. Then it says:

"Government efforts to support and encourage the digital media industry are crucial because digital media skills are extremely mobile."

5438. What they were referring to here, and this is the one we do support, is that the training skills and the brain drain -- it is very curious, what is happening, you see. Even us, who are a Canadian Internet company -- you would think CBS has all the money in the world to build their media site. They needed to launch a site by September 1998.
5439. THE CHAIRPERSON: Bill Gates has all the money in the world.
5440. MS HENLEY: Bill Gates, yes.
5441. In any case, they needed to launch their site by September 1998. They had a New Media Division, CBS had a New Media Division in place for almost eight months and they hadn't got a site ready to launch for September 1998. That's where we came in. We had an agreement within six weeks so that in eight weeks we had a site launched for the, in September, because we had the expertise and skill here.
5442. So when I heard a previous panellist speak about how it takes $500,000 -- someone said it took $500,000 to build a site and then each year to maintain it, et cetera, et cetera. The interesting thing is that Canada has a lot of skills, and even when you have the money and the maintenance to do it, like CBS had, they were taking it from us.
5443. We didn't move because our industry is here and we have other elements to our industry, but if we were a one-person publisher/developer, like these small companies are, they would have gone. They would have gone holus-bolus.
5444. We are seeing it because we are training people, the programmers, our Web masters and everything, and as soon as they get good or as soon as someone finds out who is doing that site or who is doing that, they are gone. We have lost people to Atlanta, to California. We have lost about 30 good people already.
5445. COMMISSIONER GRAUER: You talk about specific tax measures to retain these employees. Did you have anything in mind? You talk about tax measures, not specific --
5446. MS HENLEY: Well, there are two things. One is the incentives that you said Torstar has put forward, to get back some of that for expenses and that, tax credits, so that you can put your money more into it, but the second is -- we don't know what exact recommendation to make to the government, but it is obvious that the high salaries and the low taxes in the U.S. attract our personnel there whereas we do not have the reverse situation. We can't attract U.S. people back here.
5447. So it is always a one-way street down. It is not that we can sort of invite someone back here because they are not going to come for our dollar at our salaries with our high taxes.
5448. So we are just showing that that illustrates where one of the problems is without saying what the recommendation is.
5449. COMMISSIONER GRAUER: Okay. So, when you talk about this federally organized committee, you mean us, do you?
5450. MS HENLEY: Well, any committees, subcommittees that may regulate -- you taking it back, yes. We are saying that something has to come out of these hearings.
5451. COMMISSIONER GRAUER: Yes.
5452. MS HENLEY: The fact is, something will come out of these hearings. Something will.
5453. COMMISSIONER GRAUER: Right. Yes, something will.
5454. MS HENLEY: And we are saying that --
5455. COMMISSIONER GRAUER: No, no, I understand. I just wanted to make sure that when you referred to this federally organized committee, you meant us.
5456. MS HENLEY: Yes. I know that you are not really federally organized --
5457. COMMISSIONER GRAUER: Oh, no, we are very much a federal --
5458. THE CHAIRPERSON: We're feds.
5459. COMMISSIONER GRAUER: We're feds. I just wanted to make sure you weren't referring to some other task force or whatever. I just wanted to be clear. That's very helpful.
5460. Also, with regard to the piracy issue, do you have anything more specific other than you, again, would like us to recommend to the government that they take measures?
5461. MS HENLEY: We recognized, when we were drafting this, that we were putting on the table four recommendations that may be outside your jurisdiction or that may be something that you could just suggest but could not make kind of positive policy proposals. We recognized that. But what we wanted to identify were the sort of main areas where we felt that there were gaps that needed to be addressed, and if you wanted to recommend something back that would be positive coming out if, you could say these were also issues that were tabled or addressed and need clarification.
5462. For instance, on the piracy issue, I am finishing my Masters in Law in intellectual property and I am aware of all the different treaties and protocols and all the intellectual property kind of amendments that have taken place. Even those, even the next one that's coming up, the Database Treaty, nothing still helps really address the piracy in countries like Russia.
5463. This is a very, very serious problem because all our games -- we have 90 titles. We sell our titles, in the first three months, $29.95 and then, after the next three months it is under $20. They do 300,000 a run, they sell them at $2 and they do them out of -- I think we found out it is coming out of Hungary or Bulgaria or some place, in through Russia and then distributed -- it is coming right through Europe.
5464. Thirty per cent, I told you, of our revenue is coming from licensing to Europe. So the thing is they are cutting into our market through the back door of Russia, and we could not get any help on this. I was going to the government for the last six months saying, "What can we do about this?" We have no treaty with Russia. There is no way we can enforce -- we could hire a very expensive firm, that would take all our revenue for three years, and who would we get our damages from? From some pirate that nobody can trace. Where would we get our damages?
5465. So what I am suggesting to you is that there are serious issues in the digital media. When other people say there are lots of issues here that are even outside -- there are such serious issues within the Internet thing about how you even generate revenue or anything, let alone information distribution and the user -- and just another nice television set.
5466. There are lots of things the Internet is; this multi-purpose idea was a wonderful concept. It might be the greatest photocopier in the world or the greatest library in the world or the greatest new television in the world, but over and above all of that, for those people who are using it as a means for commerce -- and that's where we are coming from -- there are serious issues, like these issues that I present you today, like the brain drain and the piracy issues and the tax incentive issues. Those are serious issues that are not getting addressed in any forum.
5467. I know it may be out of your jurisdiction, but since we have very few forums to put that forward, I thought, this is the forum to put it forward in.
5468. COMMISSIONER GRAUER: I was going to say, you are exactly right about what it is we are going to do, which is to look at this and then there may be issues that are raised that are outside our jurisdiction which we may well make recommendations to government on. So, in fact, these are all welcome.
5469. Really, what I was trying to do was to see if you had anything more specific than what is in your proposal. I think it is interesting that you have this enormous expertise in the area of intellectual property and the fact that you have in fact made your views known to government and have been working with them is very helpful to us to know.
5470. In fact, what I would like to know is what has been the response from government to your discussions with them over the piracy issues?
5471. MS HENLEY: I dealt with two or three very high-placed officials who just put me on to the next high-placed official, and they couldn't do anything because we do not have a treaty with Russia and they said it is a private matter, that is the end of the line, and we would have to hire Gowling's or some other firm that has a Russian legal office, but that's just nowhere because that just doesn't make economic sense.
5472. So what I am suggesting is that there are problems here -- and I know we have not put forward specific proposals and we can't, because we didn't realize -- that's why I suggested at the very beginning that, because we are a player in this industry, we started out and we grew up with the digital new media in this country because we were the party that took over -- Corel developed multimedia titles, they were the first big company to develop them. All the small independent producers that IMAT is representing went to Corel. They are all our library now.
5473. We realized there isn't revenue in multimedia so we have used it and we still have all our channels, we sell CD-ROMs, but we are in the Internet business, we have moved to that business.
5474. So we just have suggested here that we would like to stay in the consultation aspects of this --
5475. COMMISSIONER GRAUER: Absolutely.
5476. MS HENLEY: -- so that we could help define it in whatever way, wherever it is going. We don't know, there may be a task force on tax incentives. I don't know what branches are going to come from these hearings, so it is hard to speculate on that.
5477. COMMISSIONER GRAUER: No, and that's very helpful, thank you.
5478. My next question was, you have experienced great success in the new media area, and I am very interested to hear of your involvement in e-commerce. We heard yesterday that in fact there is not much e-commerce happening in Canada relative to the United States. In fact, the Boston Consulting Group has recently done a report on e-commerce and couldn't include Canada because there isn't enough happening here.
5479. I would be interested to know two things. First of all, what can we and others learn from your experience? And, secondly, if you could shed any light on what the factors are in this country that are inhibiting the growth of e-commerce, if there are any that you are aware of. If not ---

1800

5480. MS HENLEY: E-commerce is anything you make money of on the Internet. That's the sort of one-line thing. We make money off the Internet in three ways -- this is the Internet side of our business, the e-commerce side, because obviously we have the CD-ROM business -- selling on our on-line store merchandise-related product, and that could be anything from our plushes that go with our -- well, it is our CD-ROMS and it is our plushes and it is anything else that goes with that.
5481. Secondly, banner advertising. Other people have talked about that. The advertising sponsorships, that's how AOL has decided it is going to make its business after they did this -- and none of our models are any different from AOL Netcenter's or CBS' model. They are all the same model.
5482. The third thing is selling kind of links or driving traffic selling links or doing pay-per-play activities or modules or some kind of download, some areas like that.
5483. We are strong in two of those three. We only got strong when we took -- we have a partnership with AOL, we have a partnership with Netcenter -- this is before they merged -- and we have a partnership with CBS. In each of those partnerships -- we had an on-line store at nikolai.com, but it was only by joining that we could drive more traffic to nikolai.com.
5484. So, yes, we were making some on-line sales, but it was only when we got the huge traffic coming through these portal agreements, these portal sites, to drive the traffic to our sites, and now we are making stronger sales.
5485. What we are finding and why we were so keen on appearing here -- the thing that set off all the red lights and all the red flags was you talking about Canadian content and how will we regulate Canadian content, how are we going to put Canadian content on the site. It is our Canadian content that's selling and driving all this e-commerce because it doesn't even matter what your content is on the sites, as long as you get the traffic to it, they will be entertained whether it is Canadian or American or Russian.
5486. Do you know what I mean? As long as you can drive the traffic there, and what drives the traffic there are the big portals.
5487. It is a big lesson, e-commerce, and we are learning the lesson every day. It is just a big discussion on its own.
5488. COMMISSIONER GRAUER: Well, I hope we can have it some day not too far in the future.
5489. I have a couple of other questions which -- I don't think they are particularly helpful. I guess the main thing I would like to know from you is, if we end up recommending that we not regulate the Internet and if our goal is to foster and create a climate of innovation in Canada, you have given a number of recommendations here and suggestions for us and other government departments.
5490. Is there anything you would like to add with respect to things that may not be within the purview of government or may be within the purview of the government that need to happen to create that climate of innovation?
5491. MS HENLEY: Without going into my personal history, I worked for three years as senior legal counsel at a major broadcaster in Canada. I wrote all the interventions and all the policy statements for this broadcaster before this Committee three years before I joined H+a, and I joined H+a s year ago.
5492. I felt, every time I wrote these submissions to the CRTC for the broadcaster, that we were just going backwards. I felt that it didn't matter what we said, nothing was ever going to be created except what needed to be created to keep the commission quiet to keep the revenue coming in. It was like -- I put it to someone the other day -- it was damage control, keep the lid on the policy. That was my job with this broadcaster.
5493. So when I got into the Internet business and I saw this content creation policy coming into play again, all I could see before me was this blot that everybody would now be scrambling to make the regulations, to just do the bare minimum to satisfy -- it would be just what someone else had said on the committee, a complete and absolute waste of time cause it would be going in a different direction.
5494. So the innovation -- even though this broadcaster used to always say, "Look what we created" and "Look at this program and look at this one", it became maybe the one little golden light, but after that it was derivative upon derivative upon derivative, so there was never an innovation, it was just derivative.
5495. I am interested in innovation markets and I understand that there is a shift to the market-driven competition, law driven, sort of, even when they were doing the new Copyright Tariff Board hearings, there was this shift to the market driving the tariffs. So there are certain shifts, and I think the market has to drive it and not the regulation because once -- if the broadcasters or even the Internet producers, if they don't have to make their product for the regulator, they will make the product for the market because they have to make it for the market.
5496. There are other problems with broadcasters, but I am answering your question about the innovation --
5497. THE CHAIRPERSON: We don't want to go there. All right? It is six o'clock.
5498. MS HENLEY: I am trying to answer your question about the innovation markets. I am suggesting that regulation doesn't necessarily open more innovation.
5499. COMMISSIONER GRAUER: Oh, no. My question -- and you have answered it quite sufficiently -- was outside of the area of regulation. We want to create, foster a climate of innovation. We have talked about some tax incentives and we have talked about some other things. That's very helpful, and I just wondered if you had anything to add.
5500. I am sure we will see you again. Thank you very much.
5501. MS HENLEY: Thank you.
5502. THE CHAIRPERSON: I think maybe you and Commissioner Grauer should go and have a beer together. I am wondering whether we should have had you at the last hearing that we just completed to perhaps provide us with an insider's view.
5503. Thank you very much for your contribution this afternoon, Ms Henley.
5504. MS HENLEY: Thank you.
5505. THE CHAIRPERSON: That concludes our work for today. We will reconvene tomorrow at nine o'clock.

--- Whereupon the hearing adjourned at 1805,

to resume on Friday, November 27, 1998

at 0900 / L'audience est ajournée à 1805,

pour reprendre le vendredi 27 novembre 1998

à 0900