TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
BROADCASTING APPLICATIONS AND LICENCES/
DEMANDES ET LICENCES EN RADIODIFFUSION
HELD AT: TENUE À:
Vancouver Trade Vancouver Trade
& Convention Centre & Convention Centre
Room 8-15 Salle 8-15
999 Canada Place 999, Canada Place
British Columbia (Colombie-Britannique)
February 25, 2000 Le 25 février 2000
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
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.
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
Conseil de la radiodiffusion et des
Transcript / Transcription
Public Hearing / Audience publique
Broadcasting Applications and Licences/
Demandes et licences en radiodiffusion
BEFORE / DEVANT:
Françoise Bertrand Présidente/Chairperson
Présidente du Conseil/
Chairperson of the
Andrée Wylie Conseillère/Commissioner
Stuart Langford Commissioner/Conseiller
Cindy Grauer Commissioner/Conseillère
Barbara Cram Commissioner/Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Lori Assheton-Smith Legal Counsel/
Michael Burnside Hearing Manager/ Gérant de
Michelle Edge Secrétaire de l'audience/
HELD AT: TENUE À:
Vancouver Trade Vancouver Trade
& Convention Centre & Convention Centre
Room 8-15 Salle 8-15
999 Canada Place 999, Canada Place
British Columbia (Colombie-Britannique)
February 25, 2000 Le 25 février 2000
TABLE OF CONTENTS / TABLE DES MATIÈRES
PHASE II - INTERVENTION BY/PAR
Craig Broadcasting Systems Inc. 1327
LOOK Communications 1338
PHASE III - INTERVENTION BY/PAR
CFJC Television 1342
Steven Chan 1368
Surrey Public Library 1375
New Media B.C. 1386
Smooth Productions Incorporated 1392
Tsleil-Waututh Nation 1400
PHASE IV - REPLY BY / RÉPLIQUE PAR
LOOK Communications 1403
SkyCable Pacific/Craig Broadcasting Systems Inc. 1412
PHASE I - PRESENTATION BY / PRÉSENTATION PAR
Alliance Atlantis Communications 1416
PHASE II - INTERVENTION BY/PAR
Association of Canadian Advertisers 1494
PHASE IV - REPLY BY / RÉPLIQUE PAR
Alliance Atlantis Communications 1507
Vancouver, British Columbia / Vancouver (B.C.)
--- Upon resuming on Friday, February 25, 2000
at 0910 / L'audience reprend le vendredi
25 février 2000 à 0910
7152 CHAIRPERSON OF THE COMMISSION: Alors, good
morning everyone. This is the last day of our hearing. We will start by
introducing the next applicant.
7153 We are in Phase II, I believe.
7154 MS EDGE: Thank you, Madam
7155 I understand that, at first, Craig would like
to clarify a matter that was discussed yesterday.
7156 MR. CRAIG: Yes, thank you.
7157 Yesterday, I incorrectly stated that we gave
5 per cent of our revenues to the Canadian Television Production Fund. Actually,
it is a total of 6 per cent and 2 per cent of the total goes to a regional
7158 CHAIRPERSON OF THE COMMISSION: Thank
7159 MS EDGE: We are now entering Phase II. I
understand that Craig is ready to begin his presentation.
INTERVENTION / INTERVENTION
7160 MR. CRAIG: Thank you.
7161 Madam Chair and Members of the Commission,
this is our intervention against LOOK's MDS application.
7162 Our intervention is based on our firm belief
that LOOK has failed to develop a service offering that can compete successfully
7163 The LOOK offering has several flaws -- the
main one is its high price.
7164 We just don't see why B.C. cable consumers
would switch to LOOK's higher-priced service plus pay $125 installation charge.
A few customers may switch out of exasperation with the cable companies, or DTH
providers, but no amount of marketing and packaging will convince the average
consumer to pay a high switching fee to move to an, essentially, similar service
with higher monthly rates.
7165 To provide a better sense of the pricing
issue, I would like to ask Tim Kist to review our current and proposed BDU price
levels in Vancouver.
7166 MR. KIST: Thanks, Boyd.
7167 We have done a comparison of BDU prices in
the Vancouver market. Two charts summarizing that comparison are attached to the
written copy of our interrogatory. I will focus on the one marked, "Net of
7168 The first thing you will notice from the
chart is the absence of asterisks, conditions and fine print for our service,
compared to all other BDUs. We have provided a simple, easy-to-understand and
consumer-friendly proposal. We think that sells best.
7169 Now, let's look at the key prices that
consumers will focus on.
7170 The basic monthly cable rate for Rogers, in
Vancouver, is currently $19.17 for a package of 33 T.V. channels.
7171 SkyCable proposes to offer about the same, 32
basic channels, at a more competitive price of $17.99.
7172 LOOK, on the other hand, proposes to offer
fewer basic channels -- 27 -- for a higher price: $20.95.
7173 Now, let's look at prices for customers who
take basic plus discretionary service.
7174 Rogers offers 63 basic and discretionary T.V.
signals for $37.89 per month.
7175 SkyCable offers 62 T.V. plus audio signals
for a very competitive $33.98 -- a saving of over 10 per cent.
7176 LOOK, once again, charges a price that is
higher than cable: $40.95 for a package of 71 video and 30 audio
7177 Now, it is interesting to note that LOOK is
also proposing higher rates than both DTH operators currently charge. Expressvu
charges $36.95 for a basic plus discretionary package of 75 video and 43 audio
signals. Star Choice charges about the same: $36.99 for 67 video and 30 audio
signals. Both provide more signals for a lower price than LOOK.
7178 Now, let's go to installation
7179 LOOK's own market research, conducted by
Angus Reid, indicated that only 12 per cent of consumers would consider
switching to MDS if they were charged an installation fee of $125, and only 3
per cent would definitely switch at that level.
7180 Despite this market evidence, LOOK has chosen
to charge an installation fee of $125 for single family dwellings and $45 for
multi-unit dwellings. At this hearing, it appears that LOOK has now proposed to
drop its $45 installation fee for MUDs -- a move that we calculate would cost
them $3 million, which doesn't appear to be accounted for in their business
plan. But the main point is this: based on LOOK's own Angus Reid research, a
$125 installation fee to non-MUD subscribers will doom LOOK's service to
oblivion in the minds of the overwhelming majority of consumers. They simply
won't switch -- especially to a higher priced service.
7181 The Commission may want to conduct similar
price comparisons in other B.C. cable markets. We have done that, and found the
same result: LOOK's service will simply not be price competitive with cable or
other DTH providers.
7182 Now, there are several non-service price --
non-price service attributes, as well.
7183 LOOK's presentation made a point of saying
that price alone will not assure success in the BDU market, and that quality and
service are also important.
7184 We agree completely. However, we would draw
to the Commission's attention that LOOK has provided no evidence that its
service offering would be superior in other areas to SkyCable's service. In
fact, the evidence supports the opposite conclusion. Consider the
7185 First: LOOK stated that customer care would
be a key consideration for them. In fact, they made a big point of this.
However, they provided no evidence that they are providing a high quality of
customer care in their current operating areas. SkyCable, on the other hand, has
provided results of its industry-tested customer satisfaction survey, which
clearly demonstrates very high levels of customer satisfaction with its quality
7186 Second: LOOK's presentation seems to suggest
that it will provide a larger package of services than SkyCable. This suggestion
seems to be based on the inclusion of a few additional low-tuning T.V. signals,
including distant signals, that are not on SkyCable's program line-up. But we
must keep channel capacity in perspective. The MDS spectrum licensed to LOOK and
SkyCable will be identical; that is, 15 carries -- and both of us have access to
the same compression technologies. In other words, we can provide exactly the
same number of channels.
7187 The only difference is that LOOK has chosen
to fill its pipe immediately, in some case, with channels that are not
particularly attractive or are problematic, from a contractual or regulatory
perspective. For example, there have been complaints from local T.V. licensees
about LOOK carrying new distant signals, such as some Vancouver signals and
CITY-TV, into the B.C. interior. We note that the City of Kamloops has joined
local broadcasters in opposing this move. A similar problem exists with LOOK's
carriage of Detroit signals, which will cause serious problems with simultaneous
substitution. These approaches blatantly disregard the role and rights of local
broadcasters in the Canadian broadcasting system.
7188 In addition, we have been advised that WIC
has not authorized LOOK to carry Movie Max on a discretionary tier -- something
it proposes to do.
7189 Rather than fill our pipe immediately with
U.S. channels, we have chosen to leave capacity for future services,
particularly the Canadian specialty services which the Commission plans to
license. We think these could be very attractive and we don't want to limit our
flexibility to add them. As the Commission knows, it is very difficult to drop a
channel once you are carrying it.
7190 Next, LOOK's presentation implies that its
service will succeed because of its strong marketing initiatives. We agree with
LOOK that brand-name advertising is important in creating consumer awareness.
But let's look at the evidence of who will do this best.
7191 The applications indicate that SkyCable's
advertising budget is actually about three times as high as LOOK's, over the
seven-year licence term. Specifically, SkyCable's seven-year advertising budget
is $14.7 million and LOOK's is only $5 million. In calculating that amount, we
have counted LOOK's actual advertising budget and included sales expenses, which
may include commissions and multi-level sales schemes. We are focusing on actual
7192 MR. CRAIG: Now, let me turn, briefly, to a
few other points of intervention.
7193 First, I will look at a possible driver of
LOOK's high service prices; LOOK's cost structure.
7194 At SkyCable, we pride ourselves at being a
high quality, but efficient, MDS operator. We know we need to be lean and mean
to provide an attractively priced MDS service in today's markets. In comparison,
we think that LOOK is spending far more money on numerous cost elements than a
careful and efficient operator would ever spend. Consider the following
7195 LOOK proposes to spend approximately $11
million over the licence term to acquire fibre optic trunking services from
Telus. This is many times more costly and less efficient than SkyCable's
approach of using proven in-band trunking technologies.
7196 LOOK is proposing $10.7 million on IT
expenditures. Based on our operating experience, this budget proposal is highly
inflated. We don't know how an operator could spend that much.
7197 LOOK proposes to spend about $212 on
installation costs -- and amount about twice as high as SkyCable. SkyCable's
proposal is already considerably higher than its actual installation costs in
7198 More examples of LOOK's high cost structure
are set out in a written reply to LOOK's written intervention.
7199 We simply don't understand why LOOK is
proposing to build such an expensive system, with huge expenditures on items
like IT or fibre optic networks. These may be useful for providing other non-MDS
services, but they would not be part of the plans of an efficient MDS
7200 Next, we have compared the service coverage
maps filed by LOOK and SkyCable in support of their applications. We have
provided an overlay comparison of the proposed service coverage areas with our
7201 As you will see, LOOK's proposed coverage
does not appear to be as good as SkyCable's. In particular, the maps indicate
that LOOK will not be serving the heavily populated Saanich Peninsula area north
of Victoria, the City of Nanaimo and surrounding areas and a large area of the
Okanagan Valley that will be served by SkyCable.
7202 MS EDGE: Excuse me. You have just exceed the
10 minutes. Could you wrap up, please?
7203 MR. CRAIG: Finally, we oppose the licensing
of LOOK's MDS service in B.C. because we believe that there should be more than
one DS operator in Canada over the long run. We truly believe in MDS technology.
We think that it has the potential to provide Canadians with an increasingly
wide range of attractive T.V., audio, Internet and data services at a price that
will be very competitive to cable and telco offerings.
7204 LOOK's proposal would marginalize SkyCable
and move toward a policy of licensing a single MDS operator in Canada. Such a
policy would stifle technical and service innovation and reduce price
competition. The U.S. has licensed more than one MDS operator and there is no
reason Canada should opt for a monopoly.
7205 The MDS technology and opportunities are too
important to entrust to one company. We think that LOOK has plenty of challenges
ahead to complete a successful roll-out of its services in central Canada.
LOOK's representatives, yesterday, indicated that they have built transmitters
to reach 4.2 million homes. Since there are over 6 million homes in their
licensed area, LOOK has a long ways to go to fulfil its present licence
7206 We don't think it would make good business
sense, or good policy, to license LOOK in B.C. and to turn down a proven western
MDS provider like SkyCable at the same time.
7207 Thank you very much for your time and
attention, Madam Chair and Members of the Commission. That concludes our
7208 CHAIRPERSON OF THE COMMISSION: Is there
elements you would like to add?
7209 MR. CRAIG: No. Thank you.
7210 CHAIRPERSON OF THE COMMISSION: I am looking
at my colleagues; I don't think we have any more questions.
7211 Our legal counsel would have
7212 MS ASSHETON-SMITH: Thank you.
7213 Just two brief questions following up from
yesterday just to complete the record on two items.
7214 You have also asked for a condition of
licence relieving SkyCable of distributing all local stations under section 22
of the Broadcasting Distribution Regulations, and it looks like this is a matter
7215 Do you anticipate that there would be
sufficient capacity over the course of a licence term to distribute these
7216 MR. CRAIG: Definitely there are great strides
being made every day in compression technology. At the moment, it would take up
too much of our valuable spectrum. It is a very difficult question to ask; I
know it is a hypothetical question. But if it ever became possible to put the
local radio stations on our system, we would be the first to do that.
7217 MS ASSHETON-SMITH: Thank you.
7218 One final question. NBRS was here earlier in
the week to talk to us about descriptive video services.
7219 Is there any technical impediment to carrying
the DVS technology and signals on SkyCable's system?
7220 MR. CRAIG: I don't -- no, there is
7221 MS ASSHETON-SMITH: Thank you.
7222 CHAIRPERSON OF THE COMMISSION: Thank you very
much, madam, gentlemen.
7223 MS EDGE: Thank you, Madam
7224 The next presentation will be by LOOK
Communications. If they would like to come forward.
7225 CHAIRPERSON OF THE COMMISSION: Welcome. Good
7226 MR. PARKES: Bonjour.
7227 CHAIRPERSON OF THE COMMISSION:
7228 MR. PARKES: Shall I begin?
7229 CHAIRPERSON OF THE COMMISSION: Yes,
INTERVENTION / INTERVENTION
7230 MR. PARKES: Good morning. As the Commission
is aware, LOOK submitted a detailed written intervention to SkyCable's MDS
application. Here, we merely wish to touch on the most critical elements of that
7231 At the end of the day, the reason for
licensing a new MDS service in British Columbia is to provide a viable,
sustainable, rigorous competitor to incumbent cable and DTH operators, thereby
giving Canadians the benefits of greater choice, innovation and
7232 To do that, an MDS operator needs to
establish a number of things: first, a reliable network with generous channel
capacity; second, a realistic and well-funded financial plan; third,
comprehensive programming and packaging choice; and, fourth, a dynamic and
proactive marketing strategy.
7233 In our view, SkyCable's application does not
contain these necessary elements and, therefore, cannot deliver the benefits of
a true competitive alternative to British Columbians.
7234 On the technical front, we note that SkyCable
has not clearly indicated its choice of equipment suppliers, manufacturers or
7235 Now, this omission makes it impossible for
LOOK, or the Commission, to properly analyze SkyCable's system architecture or
its business plan.
7236 LOOK also seriously questions SkyCable's low
spending on head-end equipment and technology and its decision to employ in-band
trunking to interconnect its distribution sites.
7237 Based on our experience, this latter decision
will cause interference problems and signal degradation.
7238 With respect to the business plan, we believe
SkyCable has underestimated and omitted significant costs. This calls into
question the viability of SkyCable's business plan and their ability to provide
an effective alternative in this highly competitive market.
7239 Turning to programming. We note that
SkyCable's proposed channel capacity is only 120 channels due, directly, to
their choice of technology. This will simply not be enough to adequately compete
with cable and DTH offerings going forward and, furthermore, it allows little
room for the addition of the new Canadian and foreign services yet to
7240 Likewise, as the Commission has heard from
many sources, the British Columbia marketplace is ethnically, culturally and
linguistically diverse. SkyCable's omission of several key multi-cultural
networks will prevent them from effectively marketing their service to certain
large cultural communities.
7241 And, finally, it is our belief that
SkyCable's marketing approach and relatively low levels of spending would simply
not allow them to build a strong brand, support multiple distribution channels
and fund realistic customer acquisition costs.
7242 As a result, we don't believe they can
achieve their subscriber projections or their business plan.
7243 In addition, SkyCable has not prepared a
realistic business strategy to enter the increasingly competitive B.C. MDU
7244 As this sector represents over 30 per cent of
all households in the coverage area, success in this arena is absolutely
7245 Once again, this makes it clear that SkyCable
will fall short of providing a viable, competitive alternative.
7246 After all, increased choice, value and
innovation for consumers is what it is all about. The successful applicant in
B.C. needs to have the plan and the resources to provide true competition to the
7247 I thank you for your attention and we would
be pleased to answer any questions you may have.
7248 CHAIRPERSON OF THE COMMISSION: Thank you. I
don't think my colleagues have any. Legal counsel may have -- no, we don't have
7249 Thank you very much.
7250 MS EDGE: Thank you, Madam
7251 We will now enter Phase III with the
7252 Our first intervenor today is CFJC
7253 Would you like to come forward.
7254 CHAIRPERSON OF THE COMMISSION: Good
7255 MR. ARNISH: Good morning, Madam Bertrand,
7256 CHAIRPERSON OF THE COMMISSION: We apologize
that you had to stay until this morning.
7257 MR. ARNISH: Well, we had a good night's sleep
last night, as well.
7258 CHAIRPERSON OF THE COMMISSION: Yes, and I
hope a pleasant dinner.
INTERVENTION / INTERVENTION
7259 MR. ARNISH: That, too. Thank you.
7260 Good morning, Madam Bertrand, fellow CRTC
Commissioners, Madam Secretary and Commission personnel.
7261 My name is Rick Arnish, President of The Jim
Pattison Broadcast Group, as well as President and General Manager of CFJC
Television, with main studios in Kamloops, British Columbia, providing local and
regional programming to 170,000 viewers in our broadcast area. With me, this
morning, is Mr. Dave Somerton, CFJC Television's Operations and Program
7262 We appear before you today to explain that
the application by LOOK Communications Inc. for approval to bring distant
signals into our marketplace has the very serious potential of putting
Kamloops/Cariboo's only local domiciled television station out of
7263 As stated in our written intervention
regarding LOOK's application, the Commission has, on a number of occasions,
recognized the fragile economic balance that exists in the interior and northern
television markets of British Columbia. It is imperative to CFJC-TV and the
other B.C. CBC affiliates that the Commission continues to recognize this
fragile balance and the steps that are needed to be taken to preserve this
7264 LOOK Communications, according to their
application, seeks Commission approval to distribute in Kamloops distant
Canadian signals CHAN-TV, CKUV-TV, CIVT-TV from Vancouver, as well as KSTW (UPN
in Tacoma/Seattle) and KVOS (Bellingham independent). They state the incumbent
cable distributor offers these same services on basic cable and LOOK would be at
a competitive disadvantage if it could not distribute these signals as part of
their basic package as well.
7265 Again, I must reiterate this is simply not
true. None of these stations are offered by Shaw Cable in Kamloops/Cariboo or
the Okanagan Valley. I submit if the Commission did approve LOOK's station
line-up as requested, it would be followed immediately by the incumbent cable
operator for approval to offer the same line-up.
7266 Approval of the distance signals CFJC
Television is opposed to will severely exacerbate the future viability of our
television station. As the Commission is well aware, our audience ratings, along
with our airtime revenue, have declined significantly from fiscal 1998 to
7267 In fact, our advertising revenues have
declined by some 16.6 per cent due to the addition, over the last three years,
of significant numbers of specialty and pay T.V. channels in our broadcast
region, which has seriously fragmented the television audiences in the B.C.
Interior. The Commission also knows that over the last two to three years the
majority of regional/national advertising has moved exclusively to the major
markets and specialty, much to the detriment of the secondary markets like
7268 Clearly, LOOK Communications' application is
confusing as to what they are really after.
7269 On one hand, their written application states
they are to be in competition with the local cable distribution undertaking
while, on the other hand, their written response to CFJC Television's
intervention has them stating they are in competition with DTH providers. Which
is it? If they want to compete with DTH services, then LOOK should be applying
for a DTH license, which has a totally different set of criteria set down by the
CRTC for the launch and establishment of direct-to-home satellite television
services in Canada.
7270 I must point out that Kamloops/Cariboo, as
well as the Okanagan, are not under-served television markets with an already
full complement of Canadian and American services.
7271 LOOK states, in their written intervention,
that the addition of CKVU, CIVT, KVOS, KSTW, would be attractive to viewers in
the Interior. Having worked in the Kamloops television market for over 30 years,
I, to this day, have not heard or seen a built-up desire for these distant
signals to be available in our marketplace.
7272 Indeed, other than local Lower Mainland
programming, CFJC-TV, BCTV and American stations are able to provide the vast
array of non-Canadian programming these stations would provide.
7273 LOOK states, in their written response to
CFJC Television's intervention, that the inclusion of CIVT, CKVU, KVOS, et
cetera, have built-in safeguards, such a promise not to solicit local
advertising and the substitution and deletion requirements adequately safeguard
local broadcasters clearly shows they don't understand the television market in
British Columbia. I say "so what" to their proposed safeguards as CIVT, CKVU,
KVOS, et cetera, don't care about Kamloops/Cariboo local advertisers, but what
they would focus on is national/regional advertising.
7274 If LOOK's application is approved, these
distant Canadian and American stations will throw in, as added value, the
Kamloops/Cariboo market for national/regional advertisers shutting out CFJC-TV
from this revenue stream that is equivalent to approximately 60 per cent of our
total sales budget.
7275 As far as substitution deletion requirements,
CFJC won't have to worry about requesting simulcasts because the proposed
distant signals will purchase regional program rights which, once again, shuts
the door to our ability to purchase programming that helps supplement our
revenue budgets which generates local Canadian programming in our
7276 How can all this be in the best interest of
serving the public and the future viability of Kamloops' only local television
7277 If this were to happen, we would have no
other alternative but to significantly reduce our local and regional
programming, cut our overheads and considerably reduce staff levels to balance
our loss of audience and advertising revenues.
7278 LOOK communications is quoted in one of the
Kamloops newspapers that they hope to pick up about 15 per cent of households in
7279 Surely, for 15 per cent market share, the
Commission does not want to destabilize the delicate structural balance that
exists in Kamloops/Cariboo and, for that matter, all of the B.C.
7280 I note, with interest, that the Lower
Mainland/Bellingham stations have given LOOK approval to carry their signals in
our marketplace. My response to their approval is, if CKVU, CIVT, KVOS or KSTW,
or any other Lower Mainland, Victoria or Bellingham station desires to extend
their signal into the B.C. Interior television market, they should be prepared
to invest heavily on rebroadcasting sites and perhaps partner with the B.C. CBC
7281 An agreement with the five CBC affiliates,
similar to the one that CHAN-TV has had with us for over 30 years, would then
allow these same stations to apply to the Commission for domiciled
rebroadcasting transmitters throughout the Interior, as is currently the case
with ourselves and BCTV.
7282 For over 40 years, CFJC Television has spent
millions of dollars on maintaining our own, as well as community-owned,
rebroadcasting sites to provide local service to smaller communities in our
broadcast region. This commitment that we have maintained year over year will
cease to exist if Lower Mainland stations are simply allowed to come into our
marketplace without having invested millions of dollars to provide over-the-air
rebroadcasting sites like ourselves and BCTV.
7283 In conclusion, I noted, with interest,
yesterday, that LOOK Communications also states, in front of the Commission, for
the public record -- and I wish to have this on the public record, as well --
that, in a question to counsel, they did not want to offer local radio services
in the Kamloops market, or Vancouver, or the Okanagan market, as well, because
there was no desire -- according to LOOK -- from the stations in those local
markets to be on their system.
7284 Just for the public record, The Jim Pattison
Group has stations in Vancouver, Kamloops and Kelowna and, at no time, was there
any request from LOOK Communications for approval, from our radio division, to
have our stations on their system.
7285 We respectfully request the CRTC to deny LOOK
Communications Inc.'s application for carriage of distant Canadian signals
originating in B.C.'s Lower Mainland -- including Victoria -- and Bellingham
television stations on their proposed multi-point distribution system for
Kamloops/Cariboo, as well as the Okanagan, for the reasons we have stated in
writing, as well as publicly at today's CRTC hearing.
7286 Thank you. We are now open for any questions
you may have.
7287 CHAIRPERSON OF THE COMMISSION: Thank you very
7288 I would ask Vice-Chair Wylie to ask our
7289 COMMISSIONER WYLIE: Good morning,
7290 MR. ARNISH: Good morning.
7291 MR. SOMERTON: Good morning.
7292 COMMISSIONER WYLIE: My understanding of the
reply is that the CHAN issue has disappeared. No? That LOOK confirms that they
don't seek to offer CHAN?
7293 MR. ARNISH: That is correct.
7294 COMMISSIONER WYLIE: And so, that
7295 MR. ARNISH: Yes. They are now saying that the
repeaters of CHAN, in the Okanagan Valley and Kamloops market, will be offered
on their services, not the CHAN signal from Vancouver.
7296 COMMISSIONER WYLIE: Does that give you a
level of comfort at least?
7297 MR. ARNISH: Yes, it does. It keeps our
agreement with BCTV intact that we have had for over 30 years.
7298 COMMISSIONER WYLIE: Because I notice you
still have CHAN on your intervention -- on your intervention this morning. I
assume that LOOK intends to do what it said in the reply, which is not to offer
7299 MR. ARNISH: That is our
7300 COMMISSIONER WYLIE: Now -- I understand your
point -- what I find puzzling is considering the likely penetration that it
would be able to destabilize the delicate structural balance that exists in
Kamloops/Cariboo and in all of the B.C. Interior and I would like you to comment
on the extent to which the actual penetration of MDS would do that or if your
concern is that if the Commission lets this happen, the cable operators will
want the same thing and will say yes.
7301 MR. ARNISH: Yes, I would be glad to respond
to that, Commissioner Wylie.
7302 In actual fact, if you gave approval to LOOK
to bring in the distant Canadian signals, or KVOS from Bellingham and the UPN
station in Seattle/Tacoma, to our marketplace, irrespective of the fact that
they suggest that they are going after a 15 per cent market share, if you
allowed them to do that, then the local cable operator, Shaw Communications,
would have no other alternative but to offer the same distant signals as well
and our biggest concern here is, we are not concerned about LOOK coming into the
marketplace, there has to be competition, obviously, but when we went through,
about four years ago, a huge, big dispute with the Canadian Broadcasting
Corporation over regional sales, that is the essence of why we are here again
today. Four years ago, the CBC decided, when the Government offered to them the
fact that they were going to cut back their revenue allocations year over year,
the CBC came up with a strategy to bring into British Columbia a regional sales
perspective to their Vancouver television station. We fought them tooth and
nail, the B.C. affiliates, it cost us hundreds of thousands of dollars, even
going to court, to deny them the permission under our -- what we felt was our
agreement that we had with CBC, at the time, to get into regional sales. Had CBC
been successful in that -- and the affiliates fought them tooth and nail; B.C.,
at that time, also stated that if CBC is allowed to offer regional sales in
British Columbia that they were going to cancel their gentlemen's agreement, in
a sense, with the B.C. CBC affiliates; they were going to start selling regional
and national advertising, on a full-coverage basis, in the Interior of British
Columbia -- and that is exactly what will happen here, as well, if CIVT and CKVU
and KVOS, in particular, are allowed to come into our marketplace. Our biggest
concern is that -- two things -- the regional sales perspective will happen
again in the Interior and, also, we are going to be shut out of being able to
buy programming, as well, that supplements our budget for Canadian programming
in our local market.
7303 The BCTV agreement, as we have stated, has
allowed us to, on an annual basis, sell about 40 per cent of our budget as
coverers of local, Vancouver and regional spots on the BCTV feed that comes into
7304 COMMISSIONER WYLIE: But my understanding is
that LOOK has agreed to that.
7305 MR. ARNISH: Yes, that --
7306 COMMISSIONER WYLIE: That part is going to be
preserved because, they say, they told us, at least on the written record, that
they will not carry CHAN, therefore, that particular agreement will not be
7307 MR. ARNISH: It will --
7308 COMMISSIONER WYLIE: And neither would it
encourage cable operators that you expect we would agree to, to do the same
7309 MR. ARNISH: It will be totally impaired. I am
sorry. I disagree. It will be totally impaired if KVOS, CIVT and CKVU are
brought into our marketplace because they will sell spill into the
7310 COMMISSIONER WYLIE: Oh, yes, I agree with
7311 MR. ARNISH: And then BCTV will say to us, "I
am sorry. Our long-term 30-year agreement is over and we are now going to start
selling spill", and then our partner, CBC, is going to start selling spill and
we are back into the CBC regional sales dispute again.
7312 COMMISSIONER WYLIE: So, there will be a
spill-over effect even if they don't carry CHAN, if they
7313 MR. ARNISH: Basically, we might have five or
six stations selling spill into our marketplace.
7314 COMMISSIONER WYLIE: Now, my question,
initially, was: Do you -- you expect that this would happen even if it were just
MDS and cable was precluded? For example, what is your view of the number of
channels that Shaw would have to put these services --
7315 MR. ARNISH: Oh, I believe -- I will give you
my vision of the world.
7316 If you approved the LOOK application to bring
these signals into our marketplace, I bet you a dollar that within a month Shaw
7317 COMMISSIONER WYLIE: A dollar is not good
--- Laughter / Rires
7318 MR. ARNISH: Okay, let's make it a 50-dollar
bill, then. Okay? I will make it 50.
7319 -- that Shaw, within a very short period
of time, will add those stations to their line-up, in the Okanagan/Kamloops
market, and then they will come back to the Commission to seek approval of
7320 COMMISSIONER WYLIE: Hopefully, they will come
7321 MR. ARNISH: Hopefully, they will, but I don't
think they will. I think they will say --
7322 COMMISSIONER WYLIE: Are you going to bet a
dollar on that, too?
--- Laughter / Rires
7323 MR. ARNISH: Sure. I will bet another
7324 COMMISSIONER WYLIE: I think we hear
7325 So I think we understand better now that the
removal of -- that dropping CHAN doesn't get you home.
7326 MR. ARNISH: No, it doesn't, ma'am.
7327 COMMISSIONER WYLIE: We hear what you are
7328 Now, I don't have the line-up of Craig in
front of me. You didn't intervene against them so I assume that their line-up is
satisfactory to you.
7329 MR. ARNISH: Their line-up addresses our
concerns 100 per cent.
7330 COMMISSIONER WYLIE: So that they feel they
can get their penetration without this.
7331 MR. ARNISH: Absolutely.
7332 COMMISSIONER WYLIE: Either that, or they have
got your dollar.
--- Laughter / Rires
7333 COMMISSIONER WYLIE: Thank you very
7334 MR. ARNISH: Thank you.
7335 COMMISSIONER WYLIE: Thank you for the
7336 CHAIRPERSON OF THE COMMISSION: Thank
7337 No more questions. Thank you very
7338 COMMISSIONER LANGFORD: Our legal counsel,
though, may want to change the last "C" in "CRTC" to "Casino" rather than
"Commission" after this one.
--- Laughter / Rires
7339 MR. ARNISH: I don't think I will bet on that
7340 Thank you very much, Madam Chair.
7341 CHAIRPERSON OF THE COMMISSION: Thank you very
7342 MS EDGE: Thank you.
7343 Our next intervenor is CHBC-TV.
7344 CHAIRPERSON OF THE COMMISSION: Bonjour. Good
INTERVENTION / INTERVENTION
7345 MR. WILLIAMS: Good morning, Madam
Chairperson, Commissioners, ladies and gentlemen.
7346 My name is Keith Williams. I am the General
Manager and Vice-President, Finance, of CHBC, Okanagan Valley Television. On my
right is Jennifer Strain, WIC's Director of Corporate and Regulatory
7347 We are intervening on the narrow but very
important issue of LOOK's proposal to carry certain distant Canadian and U.S.
signals in the B.C. Interior should it be granted an MDS licence.
7348 We will not revisit all the points raised in
our written intervention but would like to focus on LOOK's proposal to carry
KVOS, CIVT and CKVU in the Interior.
7349 We would also like to address LOOK's response
to our intervention, and then we would be happy to answer any questions you may
have, Madam Chairperson.
7350 This week, we have all heard a great deal of
information about the sorry state of the Vancouver extended market. Interior
broadcasters have not been immune to the changes impacting conventional
broadcasters across the country. CHBC's airtime revenues shrank 16.5 per cent,
from 1998 to 1999, which resulted in a 35 per cent drop in operating
7351 The forecast for this year is a further
1 per cent reduction in airtime sales, which means we will be slightly
below the airtime sales we realized in 1995.
7352 However, the state of the Interior
advertising market is even more precarious. Its health depends very heaVily on
the long-standing agreement that local broadcasters in Kelowna, Kamloops, Prince
George and Terrace/Kitimat have had with BCTV.
7353 Under this arrangement, BCTV permits the
Interior broadcasters to substitute their own local and regional accounts over
regional accounts on BCTV. So, for example, a regional advertiser, with store
outlets in the Interior, does not get commercial carriage into the Interior if
he buys time on BCTV. If that advertiser wants the Interior market, he has to
buy it from the local Interior broadcaster. This arrangement results in a
separate, distinct advertising market, which is sold by CHBC and CFJC as B.C.
Interior Television -- BCI-TV.
7354 We have estimated that close to 40 per cent
of our revenues could be wiped out if this agreement were to collapse -- as it
inevitably would if CIVT, CKVU and KVOS were widely available in the Okanagan.
These stations would offer advertisers commercial carriage into the Interior and
eliminate the need for regional advertisers to buy the Interior market from the
local broadcasters. A similar agreement with the CBC regarding advertisers who
have outlets in the Interior would also be in jeopardy soon after the collapse
of the BCTV arrangements.
7355 The very foundation upon which CHBC has been
built and which has enabled us to offer strong and vibrant local programming
would, very simply, collapse.
7356 Against this backdrop of the significant harm
that would result to local Interior broadcasters if LOOK's proposals were
approved, LOOK has not provided one shred of evidence of programming diversity
that carriage of these signals would bring to the market.
7357 To the best of our knowledge, the primary
focus of the Commission's distant signal policy is to expand programming choices
for consumers in markets that are under-served. The Okanagan is not an
under-served market. LOOK has provided no evidence of consumer demand and no
information as to the extent, if any, of new programming that would be available
on the signals LOOK proposes to carry or how it would be relevant for audiences
in the Okanagan.
7358 LOOK has stated incorrectly that KVOS is
already available in the Interior It isn't -- not on cable and not on
7359 Moreover, the Commission recently announced a
moratorium on the addition of new foreign services until it has licensed new
Canadian specialty services.
7360 In light of all these factors, this proposal
to carry KVOS in the Interior must be rejected.
7361 While LOOK has now agreed to carry the local
transmitters of BCTV -- which in Kamloops and Kelowna are CHKM and CHKL,
respectively -- instead of CHAN from Vancouver, it still has completely failed
to acknowledge the existence of the BCI market and the advertising insertion
agreements I referred to earlier. Instead, LOOK seems to take the position that
the mere fact of having greater carriage capacity, by virtue of its digital
technology, ought to entitle it to add additional distant and U.S. signals to
fill up the pipe. If the only criteria to be considered is whether a distributor
has room, then we may as well just do away with the Commission's distant signal
policy and not concern ourselves with the wellbeing of the local broadcasters,
7362 The incumbent cable company in Kelowna,
Penticton and Vernon is Shaw. It, too, has rolled out digital boxes in the
market. If LOOK's proposals are approved, Shaw will apply in a heartbeat for the
privilege of carrying the same signals. We believe the Commission would find it
very difficult to deny that request.
7363 Finally, we note that LOOK has not agreed to
carry local radio signals. If capacity is an issue, LOOK should not be filling
up the pipe with unnecessary distant signals.
7364 LOOK's other argument is that it needs these
signals to compete with DTH.
7365 CIVT and CKVU are offered by DTH
distributors. However, DTH services are inherently different from those offered
by terrestrial distributors, such as cable and MDS. DTH services are national in
scope; they are not regional services, as are cable and MDS. As regional
services, cable and MDS offer local, regional and extra regional signals and
adhere to the same rules regarding the carriage of distant signals. MDS is
routed/rooted in the local community. DTH is a different animal. MDS is more
akin to cable than it is to DTH.
7366 More importantly, we have heard the MDS
applicants talk about all the reasons consumers find MDS services attractive:
price and customer service, to name a few. LOOK will be able to compete
effectively with DTH without the distant signals. The great danger, as noted
above, is that approval of LOOK's proposals will result in the dominant cable
distributor asking for the same privileges. Contrary to LOOK's assertion that
the Commission can always deny any subsequent applications by cable, common
sense tells us that the precedent would be set and it would be very difficult to
justify treating cable differently.
7367 Madam Chair, Commissioners, the approval of
LOOK's request would devastate the Interior advertising market and the local
service that CHBC currently provides. That service now includes almost 15
original hours per week of locally-produced news, weather and sports. As the
only television broadcaster in the Okanagan, we stress the presentation of
Okanagan news, and if we carry any regional or national stories, we strive to
present the local angle.
7368 We also produce and present a variety of
human-interest programming: "Pioneers & Places", about the history of the
region; "People of Vision", about people who have made their mark on our
community; "Young Achievers" and the "Scholastic Athlete of the Month" focus on
our youth; and other relevant information programming, such as "Tax Talks",
"Mugshots" and "Crimestoppers".
7369 In addition to this, on a weekly basis, we
provide over two and a half hours of community access programming to inform our
viewers about what is happening in their communities. This programming takes
many forms, such as on-location interview, with "Roberts on the Road"; free
community calendar airtime; plus subsidized production and airtime for
non-profit organizations or events.
7370 During this year, in the neighbourhood of 400
different organizations and individuals will be profiled.
7371 Madam Chairperson, all of this costs money
and would be in jeopardy if these requests by LOOK are approved. So we ask you
to please consider these very significant risks to the local Interior
broadcasters and local service in the Okanagan and weigh these risks against the
so-called benefits of allowing LOOK to add a few distant signals with virtually
no new programming, no local programming and no benefits to the Canadian
7372 We thank the Commission and Commission staff
for indulging us towards the end of what has been a busy week and would be
pleased to answer any questions you may have.
7373 CHAIRPERSON OF THE COMMISSION: Thank
7374 I would ask Commissioner Cram to ask our
7375 CHAIRPERSON OF THE COMMISSION: Thank
7376 Welcome. Mr. Williams, you heard
Mr. Arnish on, I believe, the same issue, except we are talking about the
Okanagan here as opposed to Kamloops area and we are also talking about WIC as
opposed to CBC affiliates. Have I got it correct?
7377 Is there anything you would like to add, in
terms of what Mr. Arnish said?
7378 MR. WILLIAMS: Well, it affects both of us.
Because of our BCI arrangement, most of the sales runs on both markets. Any
programming we buy runs in both markets, at the same time. So it is more than
just the Okanagan or Kamloops; they both would be affected.
7379 COMMISSIONER CRAM: It is the cumulative
effect. Am I right?
7380 MR. WILLIAMS: Yes.
7381 COMMISSIONER CRAM: You talked about 40 per
cent of your revenue -- losing 40 per cent of your revenue.
7382 How did you come up with that number? Is that
the total amount of advertising that you get to insert in the
7383 MR. WILLIAMS: No. It is higher than that that
we would sell on a regional or national basis. But if it is flowing through from
one of the Vancouver stations, the only extra we would pick up would be somebody
wanting to heavy up in the Okanagan; the rest would already flow through. Right
now, they don't get through on CBC or the BCTV signal, and we cover that and
sell it. If it is coming into the market, we lose all that and it is only what
we can get that is a little extra. So it could be 50 per cent coming back to 40,
because we recovered a little bit.
7384 COMMISSIONER CRAM: If we licensed LOOK and we
allowed them to -- and I know you don't like the idea -- but if we licensed LOOK
to carry the -- and left their carriage where it is at, and then put our foot
down with cable operators, would your -- your revenue loss, obviously, would be
a lot less?
7385 MR. WILLIAMS: We would still be losing. I am
already hearing that they are on the street, in Vancouver, saying, "We are going
to be in the Okanagan, on one of these other stations; so if you are going to
buy with V-TV or CKVU, you are going to get to the Okanagan, eventually. So why
are you buying extra in the Okanagan? Why are you buying on BCTV? Buy it over
here." That is the philosophy that is already starting to be promoted, in the
Vancouver market, which is a little over -- probably 30 per cent of our regional
is out of the Vancouver sales.
7386 COMMISSIONER CRAM: What is your coverage area
7387 MR. WILLIAMS: Geographically?
7388 COMMISSIONER CRAM: Yes -- no; how many
7389 MR. WILLIAMS: Three hundred and fifty, I
7390 COMMISSIONER CRAM: Thousand?
7391 MR. WILLIAMS: Thousand.
7392 COMMISSIONER CRAM: I take it you haven't
intervened against Craig?
7393 MR. WILLIAMS: No. Specifically, because they
weren't bringing in the Vancouver and the KVOS those distant signals that are
the ones that are going to hurt us dramatically.
7394 COMMISSIONER CRAM: Thank you very
7395 MR. WILLIAMS: Thank you.
7396 CHAIRPERSON OF THE COMMISSION: Thank you very
7397 MS EDGE: Thank you, Madam
7398 Our next intervenor is WIC
7399 Would you like to come forward? Oh, I
understand they are not here.
7400 The next intervenor, then, is Michael
7401 Would you like to come forward?
7402 CHAIRPERSON OF THE COMMISSION: Good
INTERVENTION / INTERVENTION
7403 MR. CHAN: Thank you.
7404 Members of the Commission, I am replacing
Michael Gurstein who couldn't come.
7405 My name is Steven Chan. I am a community
representative. I am intervening on behalf of LOOK-TV, with, expressly, the
community channel. So I hope to actually give more details about what an MDS
community channel could offer and, also, the issues that we have with community
channel over digital, in general.
7406 Basically, I am representing the Vancouver
Community Network, which is a non-profit and charitable organization,
established six years ago, in Vancouver. It is part of a network of free nets in
Canada and it tries to become a non-profit Internet service provider and it
tries to give equitable access to the Internet. It also tries to use the
Internet as a tool for community development.
7407 We service about 700 community groups in the
Lower Mainland and about 8,000 individual people, mostly of whom are low income
and without home equipment.
7408 In the time that we have been working in
Vancouver, we have developed a strong relationship with the community sector
across many, many different disciplines. We have also have worked with the
Government, especially Industry Canada, in trying to bring together the Internet
to the non-profit sector.
7409 So, with that in mind, we were approached by
LOOK to look at their application, with respect to the community channel. We
wrote a letter to the Commission pointing out the benefits of such an
application of the MDS to community channelling.
7410 Basically, I just want to point out the kind
of content that would be available from the community. Maybe there seems to be a
kind of a lack of confidence on the communities that provide content on this
kind of a medium but, in fact, I want to perhaps adjust that. There is quite a
vibrant and diverse and fairly comprehensive source of material in the community
that could be unleashed because it uses digital as a technology.
7411 We all know that digital cameras are becoming
a very easy and relatively inexpensive equipment and that many people in the
community are actually experimenting with it. So, in time, with good training
and with good access sites, production centres, actually, there would be
probably quite a good -- probably, I am just guessing, but probably a very good
content coming from the community, which would include quite a diverse content
and format, including public education materials, learning materials,
straightforward community service information and, also, a great deal, probably,
of information and content from the arts and culture area because many, many
people are actually training themselves to use the new digital equipment -- and
so, you can ask more questions about that, if you want.
7412 I mentioned access centres. This is an
interesting point. Actually, there is, in Vancouver, in the Lower Mainland, a
very good effort to put a number of public access sites into the stations inside
the community, and this would be outside of libraries and schools and the more
institutionalized settings but in more community-oriented gathering places,
neighbourhood houses, community centres, NGO -- non-governmental organization --
drop-in centres, and, in time, some of these could be strategically located and
serve as production centres for digital video and digital sound
7413 So, a vision that the community -- some of
the community members have is that a number of these would be located and
decentralized in the Lower Mainland of Vancouver and they could actually serve
as digitization post-production centres for digital material that would then be
delivered on the Internet to the broadcast centre. So, a model of this could
actually work to help the unleashing, again, of the material.
7414 The Vancouver Community Network, one of its
goals is to increase the public space on the Internet and, again, we would argue
for an increase in the public space on the community channel, as well, and what
that would mean would be sort of an arm's-length administration/co-ordination
amongst the community for the community channel, good training, a good community
liaison between LOOK, or whatever digital broadcaster would be given the
7415 We believe that given the right
infrastructure and given the right community control structures there would be,
probably, a very interesting community channel operating in the Lower Mainland,
and elsewhere, wherever the broadcast footprint would be.
7416 It is very difficult to really convey the
sense of cohesiveness and co-ordination that occurs at the community level but
it is what the community sector is about and we know that already there is a lot
of work been done already in unleashing and just being creative amongst members
of the community.
7417 The co-ordination would probably most benefit
if it was closest to the people who feel passionate about community issues and
closest to the people who actually are close -- or are working on community
issues and activism and leadership. So, hopefully, the Vancouver Community
Network and a consortium of community groups would work very closely with
LOOK-TV to ensure that would happen.
7418 We understand that LOOK-TV is asking to not
do anything with audio and that comes as a surprise to me because in the
material that I read, I wasn't aware of that. But, in fact, I heard them
yesterday and they say that they want to be waived the need to do that, and I
understand the technical difficulty of that because they are operating digital
and, at the moment, it is mostly an analog environment. I would suggest that
perhaps that a replacement substitute or a substitution policy be done rather
than waive the right because of technical difficulties or some such thing as
that, that there be a pilot project made to try to perhaps expose -- use the new
medium, which is digital, to broadcast a digital version of some of the public
radio stations in Vancouver and elsewhere and, in that way, perhaps use it as a
kind of testing pilot endeavour and evaluate it in a few years to see what would
7419 So, for example, in the Lower Mainland, there
is public radio station, there is one of the few English public radio program --
radio station co-operative radio broadcasting on 102.7 FM which would be an
interesting -- which could provide interesting content on a digital MDS. So that
is just a suggestion. There is also the campus radio, a UBC campus radio, as
well. So both of them could benefit from some such exposure.
7420 There is a lot of -- there is probably a lot
of details to be worked out of how a community channel like this would work
because it differs -- it probably differs dramatically from the way we know from
cable and the model that has been used. Digital offers a greater opportunity for
decentralization -- for decentralizing the content, the production, the access
of the signal to the community. So there probably would have to be a lot of
creative thinking and a creative co-ordination between the community and the
licensee on that but, you know, with work and with a lot of understanding, a lot
of really good stuff could come from that.
7421 So, that is really all I have to say, for
now. I can answer any questions you want to ask.
7422 CHAIRPERSON OF THE COMMISSION: Thank you very
much. We have no questions. Thank you.
7423 I would like to remind everybody of our
approach to interventions. We are more in the listening mode and we ask
questions only when we need to clarify vis-à-vis either the written intervention
or what is being presented orally if we need to push our questioning in order to
make sure we understand what is the basis for the intervention.
7424 So, it was clear. Thank you.
7425 MS EDGE: Thank you, Madam
7426 Our next intervenor is the Surrey Public
7427 Would you like to come forward.
7428 CHAIRPERSON OF THE COMMISSION: Good
INTERVENTION / INTERVENTION
7429 MR. REDDINGTON: Good morning. My name is
Michael Reddington. I am the Chairperson of the Board of Trustees of the Surrey
7430 First of all, I would like to take this
opportunity to thank you for allowing myself and the Surrey Public Library to
make our views known.
7431 As we have stated, in a letter to the
Commission, we are supporting the LOOK application.
7432 The Surrey Public Library, like its
counterparts in other urban areas of Canada, sees itself playing a number of
roles in serving to build and maintain a strong community.
7433 Again, like many of its counterparts, Surrey
Public Library has embraced the concept that it must serve as an electronic
information centre for the citizens of the city. Why should a library take on
this role? Many of us still have the mistaken impression that public libraries
are simply physical depositories of books and that libraries provide access only
to those physical products in their collections. While libraries do hold and
circulate many books, as organizations, they are increasingly about people --
about helping people to find and access information outside the walls of library
buildings. This new role of virtual information centre is something libraries
have increasingly embraced, as libraries are subject to fiscal/physical
restraint and have realized that electronic access to information for the
communities represents a positive cost-benefit service decision. More and more
information is published in electronic form rather than in print. Telephone
books, now, are available on a CD-ROM format for the entire North American
continent. More and more information is being stored in data form. For example,
a service known as EBSCO(ph) HOST(PH), a private supplier of constantly upgraded
searchable database of 2500 publications is accessible via library Web sites.
Obviously, the costs of that would be prohibitive for most libraries, in
physical form. And, finally, governments are mounting more and more information
and services on line.
7434 Surrey Public Library serves a community of
333,000 citizens in which nearly 70 per cent hold library cards. It is
anticipated that the library system in Surrey, in the year 2000, will be home to
1.7 million foot-count in-person visits, in addition to 4 million electronic
visits to databases held by the Surrey Public Library.
7435 This not only makes the library the most used
civic service in Surrey but also reflects the changing reality of the use of
electronic services offered by the library.
7436 The Surrey Public Library, like all
libraries, is concerned with the principle of equality in our society. There is
no doubt that the information society is here to stay, but it is apparent that
not all segments of society are able to participate on an equal footing.
Libraries, therefore, are concerned about creating the means to give people
equal access to information.
7437 We know the digital divide exists. We note it
in the U.S. The digital divide between certain groups of Americans has increased
between 1994 and 1997 and there is a widening gap, for example, between those of
the upper and lower income levels.
7438 As more emphasis is placed on electronic
means for business and government services, this gap will have increasingly
significant effects on the community.
7439 One example of such effects if the finding of
the College Board, in the United States, which says: Advantage magnifies
advantage; while education is a great equalizer, technology appears to be the
new engine of inequality.
7440 Here, in Canada, a national research project,
conducted by Industry Canada, in 1998, known as the EKOS Survey, found that
almost half of those accessing the Internet from home represent the advanced or
upper class communication households and there will exist numerous structural or
class barriers for many marginalized and lower income Canadians. In 1998, they
found that only 16 per cent of lower income Canadians had Internet
7441 Libraries are responding to this phenomenon,
just as they have in the past to the introduction other delivery technologies.
For example, in the ECOS Survey, 11 per cent of Canadians claimed that they used
libraries for their Internet access. Recent research, in the last six months,
found that 7.9 per cent of library patrons in Burnaby use the library for
Internet access and, more recently, in Vancouver, 27 per cent of patrons in
Vancouver went to the library specifically to use the Internet. This is not a
surprise to libraries, having the experience of responding to the expansion of
the television channel universe, in the past, by building extensive collections
of videos and music CDs and, more currently, DVDs. For example, Surrey Public
Library currently holds 18,000 videos and 15,000 music CDs in its collection,
while other libraries hold much larger collections. Burnaby, for example, holds
more than 25,000 video titles.
7442 It is our view that the LOOK-TV proposal --
and, in particular, the InfoLOOK channel -- may provide the public and libraries
with another means to share as well access information. Specifically, we are
excited by the prospect of: (1) for the first time, working together with a
provider to develop ways and means to ameliorate the digital divide that the
introduction of wireless technologies may add to the community; (2) LOOK has
said that it would provide connectivity to their service and a multimedia
computer in libraries so that community groups could generate information
locally for the InfoLOOK channel, as well as offering the public -- especially
the lower income public -- the opportunity to access community
7443 We see this prospect of community
self-expression and access as empowering the community to create its own unique,
multi-language information network -- very much as Steve, from Vancouver
Community Network has discussed previously.
7444 In summary, the Surrey Public Library is very
concerned about the digital divide that may prevent many members of our society
from being able to adequate access and/or disseminate information. Surrey Public
Library believes that it plays an important role in the community by providing
access to information through whatever cost-affected means available. Surrey
Public Library views positively the LOOK Communications application because of
LOOK's desire to work with libraries to meet the information needs of the
residents of Surrey.
7445 Thank you.
7446 CHAIRPERSON OF THE COMMISSION: Thank you very
much, sir. Thank you for coming as an intervenor. Thank you.
7447 MS EDGE: Thank you, Madam
7448 The next intervention is to be made by
7449 Would you like to come forward, please? They
don't appear to be in the room.
7450 We have Maria Antidormi to
7451 MS ANTIDORMI: (Off mic...)
--- Laughter / Rires
7452 MS ANTIDORMI: Thank you.
7453 I am actually here on behalf of personal
interests, as well, and that is why I questioned the announcement of
7454 CHAIRPERSON OF THE COMMISSION: So you are
7455 MS ANTIDORMI: More so along the lines as an
individual, as well as a representative of the Institution.
7456 CHAIRPERSON OF THE COMMISSION: Okay,
7457 MS ANTIDORMI: But a very small part of the
Institution. The Business Administration Department.
INTERVENTION / INTERVENTION
7458 MS ANTIDORMI: So, good morning, Madam
Chairperson and Commissioners.
7459 My name is Maria Antidormi. I work as an
independent management consultant providing services, such as business planning
and Web site design. I also work full time at BCIT where I support the
development and the delivery of business courses on line.
7460 I was quite pleased when Boyd Craig invited
me to sit on their board for their proposed community access channel, Sky
7461 My career focus is currently in the areas of
education and information technology.
7462 As a member of the board, I feel that I would
be helping to make a positive contribution to educational opportunities and
information access to British Columbians. Sky Channel will increase educational
opportunities for British Columbians as it will provide distance learning
programming. For example, several BCIT courses currently include the delivery of
course material on videotape which is purchased and delivered to each student
individually. A more cost effective method would be to deliver this information
on Sky Channel, in conjunction with its interactive Web site. Also, the speed of
SkyCable is faster, allowing for more media-rich content to be delivered on
7463 SkyCable will also give students taking
on-line courses more flexibility in accessing and completing their course
7464 I have spoken to many students who actually
find it difficult to keep up with their work on line, due to the lack of
opportunity to have time or access to the Internet. For example, with a laptop
and a SkyCable connection, students could access their course any time,
anywhere; for example, on their commute, on their breaks at lunch hour, et
cetera, et cetera.
7465 Most importantly, SkyCable would allow
students living in remote areas of British Columbia to access a wider variety of
courses. Geographic location would no longer determine the educational options
for British Columbians.
7466 I also believe that SkyCable will make it
easier all British Columbians to access information any time and
7467 I am also currently working on a business
plan for a project that would help to promote Vancouver's arts and cultural
events. Included in this plan is the idea to provide event information using
touch-screen computer monitors. The hardware would be placed in a kiosk-type
structure, with the monitors displaying information that would be relayed from
the main server. With SkyCable this service would be easier to provide, as the
information could be relayed in a wireless network format. With cabling not
required, terminals could be placed simply and cost effectively in any location
7468 This idea is similar to SkyCable's plan to
have kiosks with Internet access to their Web site in the community.
7469 SkyCable is in unison with our vision to
allow the entire community to obtain information simply and easily.
7470 Access to education and information should be
made available to all British Columbians, not only those who have the geographic
or situational advantages.
7471 I am confident that SkyCable will accomplish
this, therefore, I fully support Boyd Craig and his team. SkyCable will be a key
factor in helping British Columbians capitalize on the future of
7472 Thank you. I am now open to any questions you
7473 CHAIRPERSON OF THE COMMISSION: Thank you very
7474 Commissioner Langford has a
7475 COMMISSIONER LANGFORD: I do have a question I
want to try and steal a little of your expertise, but I want to introduce this
by saying it is perfectly legitimate, what you are doing, to come in support of
one intervenant and if you can't answer my question, it is not going to weaken
your support in any way --
7476 MS ANTIDORMI: Okay. That is fine.
7477 COMMISSIONER LANGFORD: -- I am just trying to
get a little bit of free consulting here.
7478 MS ANTIDORMI: Okay.
7479 COMMISSIONER LANGFORD: So, again, repeating,
there is nothing more legitimate than your support of one, that is fine, but is
there anything in the Craig or SkyCaBle application, technically, which makes
you feel it is better, from a sense of the sort of advantages for distant
learning and whatever you are trying to -- that you are excited
7480 Could you not recognize exactly the same
advantages the LOOK application, or have you studied it or are you familiar with
their technology? Is there anything different about it?
7481 MS ANTIDORMI: I think the difference is the
MDS technology that they have pioneered and developed and I think the fact that
it is being used in Manitoba, currently, shows that there is a precedence that
it works and I think that is what we need to go with if we are going to
experiment with delivering something in wireless format; we want something that
is proven, and I am not sure if LOOK technology's application involves the
current use of their technology. I am not quite certain about that. But I like
the fact that it is being used and it is working and that it is a two-way
7482 COMMISSIONER LANGFORD: So SkyCable's works,
as far as you are concerned --
7483 MS ANTIDORMI: That is right.
7484 COMMISSIONER LANGFORD: -- and you are not
entirely sure about the LOOK one?
7485 MS ANTIDORMI: Not too sure. That is
7486 COMMISSIONER LANGFORD: Okay. That is
legitimate. Thank you very much.
7487 MS ANTIDORMI: Thank you.
7488 CHAIRPERSON OF THE COMMISSION: Thank you very
7489 MS EDGE: Thank you.
7490 Apparently, our next presenter,
Mr. Burnett, will not be appearing today, so we will move on to Gate West
7491 Would you like to come forward. Is
Mr. Ochoko(ph) in the room?
7492 Okay, the next presenter on the list is New
Media B.C. Is Jane Green in the room?
7493 Would you like to come forward?
7494 CHAIRPERSON OF THE COMMISSION: Good morning.
INTERVENTION / INTERVENTION
7495 MS GREEN: Good morning, Madam Chair and
Members of the Commission.
7496 I am Jane Green and I am speaking on behalf
of New Media B.C., a non-profit association founded in June, 1998, to promote
the development of the new media industry in British Columbia.
7497 We are a spin-off of an initiative that
happened around APEC 97, when 14 of B.C.'s top new media companies representing
the various sectors that make up new media participated in a number of
activities designed to shine the spotlight on this emerging sector of B.C.'s
economy. Today, New Media BC has approximately 75 member companies, representing
all aspects of new medial, including the digital delivery of e-commerce,
education, communication, entertainment and information services and
7498 One of the first tasks of the association was
to define the needs and the scope of the industry. The 1998
PricewaterhouseCooper's survey, commissioned by the association, confirms that
the province is home to a young, vibrant industry with potential for phenomenal
growth. The survey found that more than half of the companies surveyed planned
to double their workforce over the next 24 months. At the time of the survey,
approximately, 1800 people were employed in new media in B.C. Companies engaged
in B.C.'s new media industry could employ thousands of British Columbians in
highly skilled jobs, creating content, providing services and developing
software and hardware for local, national and international markets. Studies
indicate that access to capital is the main barrier to achieving that goal. With
few exceptions, B.C.'s new media companies are under-capitalized and are
actively seeking either project or corporate financing. Without financing,
B.C.'s new media companies will be concentrating on providing services rather
than developing content. In effect, we will be hitchhikers looking for a ride on
someone else's information highway project.
7499 More importantly, our electronic delivery
pipes will not contain British Columbia content. The multimedia curricula
materials used in B.C.'s schools will come from outside the province -- most
likely from the U.S.
7500 The digitized content delivered to B.C. homes
and businesses over the Internet will also feature someone else's
7501 In effect, we will have failed to seize the
opportunity to provide our ideas, our talents and our services to provincial,
national and international markets. Our companies want to realize the
opportunities in the new economy by owning the content rather than producing it
for contractors outside of B.C. To meet these challenges, New Media BC has made
it a priority to create and support initiatives that deliver economic and
employment benefits to B.C. new media companies.
7502 In January of this year, New Media BC was
approached by SkyCaBle in regards to the application to launch a digital
wireless cable service in British Columbia. SkyCable promises to work with New
Media BC to ensure maximum benefit from SkyCable's commitment to support local
expression and new media production upon approval of the application.
7503 The board of New Media BC considered in some
detail the application and we are particularly interested in the commitment
within that application to dedicate 2 per cent of estimated gross revenues to
launch an open Access Network for community-based development and learning. A
large component of the programming on this channel will consist of local new
7504 In our discussions with the company, we have
come to an understanding that New Media BC will have an advisory role regarding
this investment and we believe this close partnership between New Media BC and
SkyCable will significantly enhance the growth of the new economy in
7505 B.C. must be on the leading edge of new media
content development to benefit fully from the new economy. The Telefilm New
Media Fund is an excellent fund, well accessed by B.C. producers, as is the
Telus New Media Broadcast Fund, but they have little access to other funding for
new media content production.
7506 SkyCable's application, if successful,
expands the opportunity for B.C. companies to participate in the development of
7507 Unquestionably, B.C. has the talent to
develop and sustain a dynamic new media industry. That has been well
demonstrated by companies such as Electronic Arts, Mainframe Entertainment and
Rainmaker Digital Pictures.
7508 A large number of smaller companies also have
developed successful world-class digitized products for the international
marketplace; among them are Brainium, Credo Interactive, DNA Productions, ETI
Entertainment Technologies, Ingenuity Works and Blue Zone.
7509 In regards to the kind of interactive content
that could be offered on the Open Access Network, Blue Zone has already, in
their own words, crossed the platform. They have a proprietary product called
"Media BZ" that is designed to reposition T.V. stations at the center of the
interactive universe and it makes possible the immediacy of television, combined
with the depth of information the Internet offers, all at the same
7510 But even without these advances in technology
that allow for true interaction of television and the Internet, the Open Access
Network can be used for cross platform promotion of B.C. new media production.
There are 23 million households in the world that have a television set and an
Internet-connected PC in the same room. So what we are talking about is enhanced
television program, personalized information on demand, simulcast interactive
content on air and on line. Forrester Research predicts enhanced broadcast
program guides and T.V.-based browsing will generate $11 billion in advertising
and $7 billion in e-commerce by 2004 -- and we would like to be part of
7511 New Media BC wants to ensure that the
creation, development, marketing, production and distribution decisions for
B.C.'s new media industry will be made within the province. We want B.C.'s new
media industry to fulfil its potential and become a leader rather than a
follower in the new economy. SkyCable has made a commitment that will enable
this goal to be reached. New Media BC supports the application of Skycable and
looks forward to jointly working on the proposed initiative of an Open Access
Network for community-based development.
7512 Thank you.
7513 CHAIRPERSON OF THE COMMISSION: Thank
7514 We have no questions for you. Thank
7515 MS EDGE: Thank you.
7516 Our next presenter is Jake
7517 Would you like to come forward.
7518 He doesn't appear to be in the
7519 Is Smooth Productions Incorporated in the
room? Okay. Thank you. If you would like to come forward.
7520 CHAIRPERSON OF THE COMMISSION: Good morning.
7521 MR. DONNELLY: Good morning, Madam Chair,
INTERVENTION / INTERVENTION
7522 My name is John Donnelly and you heard from
me earlier this week when I intervened on behalf of Craig Broadcast's A-Channel
on the island --
7523 CHAIRPERSON OF THE COMMISSION: You have been
7524 MR. DONNELLY: That is me.
7525 I spoke for A-Channel in my capacity as a
Vancouver-based concert promoter, performer and I guess I kind of consider
myself a rock-and-roll entrepreneur and I worked many years in the music
business and I have got quite extensive experience in television productions,
having worked with the Craigs for many years, as well as the CBC and Y-TV and
7526 For six years, I produced a series of
Canadian talent development programs and during that series was when I developed
my relationship with the Craig family; so, therefore, I was honoured when Boyd
Craig asked me to consider sitting on the board for the proposed community
access channel called Sky Channel.
7527 I know, firsthand, that the Craigs are just
excellent operators. Their commitment to the local markets just never falls
short. The record stands an example for what this company can achieve. The plans
they are putting in place for SkyCable, as well as Sky Channel, will provide an
integrated framework for innovative community-based programming.
7528 Basically, the plan is to utilize the funding
and resources provided by SkyCable to Sky Channel to create community
programming, which does more than just broadcast local amateur sports. Training
and education will be made available to developed a community-based production
team and to provide opportunities for young people wishing to learn more about
television and multimedia productions. Marketing initiatives will reach out into
the community to find exemplary talent and provide a chance for new artists to
be featured on community television.
7529 We will create innovative children's
programming to serve families in our communities. We will also create
educational programming which can be featured and broadcast on Sky Channel as
well as backed up on the station's interactive Web site.
7530 Community news segments, coverage of local
and civic events, issues related to public health -- these are all important
community programming features which Sky Channel will deliver.
7531 As a member of the Sky Channel board, we will
ensure the community groups are well served. They need to be provided with
tools, facilities and training in order to utilize the Sky Channel and integrate
Sky Channel's technologies and services into the services they in turn provide
to the communities.
7532 We will also monitor the Web activities to
ensure opportunities are there for community access and that relevant material
is presented to the community.
7533 By establishing standards and then providing
opportunities for the community to create their own content and allowing the
public access to broadcasting through Sky Channel's interactive Web site,
SkyCable and Sky Channel are effectively providing a new and innovative approach
to community programming.
7534 I am a father of three young children and I
am active member of the community I live in. I believe SkyCable will be a great
addition to the B.C. landscape. It will provide new choices in the marketplace
and new technologies: wireless cable and wireless high-speed Internet
7535 I especially appreciate the potential to
subscribe to high-quality and low-cost cable selections which I will receive in
my home which will allow me to better screen the television choices I provide
for my children.
7536 I am aware of the tremendous work that was
undertaken by the Craig family -- in particular, by the late Stewart Craig -- in
pioneering this technology and I am proud of the results they have
7537 SkyCable is an exciting new concept and it is
an important part of the future broadcasting.
7538 So, in closing, my personal experiences with
the Craig family have been nothing short of fantastic and they provided many
opportunities to me and, therefore, I am pleased to provide my support to Boyd
Craig and Craig Broadcast's SkyCable team.
7539 As a member of their advisory board, I pledge
to do my personal utmost to insure the highest levels of community service and
support are provided should the CRTC choose to grant this new licence. I know
SkyCable and Sky Channel will serve our community well. Thank you.
7540 CHAIRPERSON OF THE COMMISSION: You must be
out of breath.
--- Laughter / Rires
7541 CHAIRPERSON OF THE COMMISSION: It must be the
rock-and-roll rhythm here.
7542 MR. DONNELLY: I guess so.
7543 CHAIRPERSON OF THE COMMISSION: Commissioner
Langford has a question for you.
7544 MR. DONNELLY: Sure.
7545 COMMISSIONER LANGFORD: Thanks for that
7546 Again, I don't want to appear to be coming at
this from a negative point of view; I am just trying to pick, again, as I said
to an earlier intervenor, from your experience.
7547 But what I thought I heard from the
applicants, the Craig applicants, with regard to the community channel, was that
this was very much a brand new start from the ground and work up
7548 MR. DONNELLY: Yes.
7549 COMMISSIONER LANGFORD: -- which is great, but
everything starts everywhere and great oaks come from acorns, and all of those
7550 But from your experience working in this
area, how long do you think, based on what they proposed -- I think it was 6.6
million over seven years, and the type of technology, I think they are starting
with one edit suite, I think they said, and one or two digital cameras and they
are going to use a lot of community volunteers -- how long before, in your view,
we really see what we might call and up and running and working full-time
7551 MR. DONNELLY: You know, I am not sure how
long it is going to take, really. I know, you know, you have to start with the
resources that we provide. I know that we will find -- like the community
channels like Delta Community Channel where I live is a small operation but it
is well used in our community. I don't think it really would take that long to
get us operating to the level that they are at. You need to provide a space; you
need cameras; you need to have somebody who can control and make some decisions
as far as what programming is available. It could be that we start with some
acquired programming and some created content but, you know, I am sure the
SkyCable plan is to, when they open the doors for SkyCable to be ready and up
and running with Sky Channel and have it grow as the service grows.
7552 COMMISSIONER LANGFORD: And do you think that
the sort of community input that they expressed their hope would be there is
there? I mean you know these communities. Is there enough energy, enough
volunteer interest out there to get something like this going?
7553 MR. DONNELLY: You know, I think there
7554 In the community that I live in, a friend of
mine owns the nursery business, but she produces a show which educates people in
our community about gardening and flowers and things in her business. She uses
the community channel as an opportunity to promote her business.
7555 Another friend of my family -- or a friend
through kids we met at school runs a computer program, "Dotto(ph) and Data" it
is called. So he started as a community-access channel that was then picked up
by the Learning Network and it is now carried on a number of services. But,
again, it is a fellow utilizing the community-access channel and the services
provided to create something that he can take out to the community that is
actually been successful and well received.
7556 So I think that there are people out there
that could use the service to their advantage that will help serve the community
that they live in.
7557 COMMISSIONER LANGFORD: Thanks very much.
Those are my questions.
7558 CHAIRPERSON OF THE COMMISSION: Thank you very
7559 MR. DONNELLY: Thank you.
7560 CHAIRPERSON OF THE COMMISSION: Thank
7561 MS EDGE: Thank you.
7562 Our next presentation is made on behalf of
the Tsleil-Waututh Nation -- I hope I have got that right, Chief George? Thank
7563 CHAIRPERSON OF THE COMMISSION: Good morning.
INTERVENTION / INTERVENTION
7564 CHIEF GEORGE: Thank you, Madam Chair. Thank
you for this opportunity.
7565 I am the spokesperson, the chief
spokesperson, of the Tsleil-Waututh Nation, which is a part of 56 different
Sailish(ph) groups in the Lower Mainland and one of the largest linguistic
groups in British Columbia.
7566 I am here to speak in favour of SkyCable and
Boyd Craig's application for the SkyCable, more on a practical matter than
7567 All the industries and all of the uses and
benefits that have been created from out of the use of our traditional
territory, in the past, have more or less all been done without our
participation -- and I am not here to complain about that, but I only mention it
because I am excited about the conversations that I had with Mr. Craig on
the First Nations in British Columbia being included in the concepts of
programming in SkyCable that we, as First Nations, would be able to not only
participate but manage directly in some of our areas in northern B.C. in pulling
us more together and working together and providing opportunities that we
normally wouldn't ever have access to or wouldn't have thought of having access
to right at this current time.
7568 My excitement comes more so that, for the
young people, especially, I think it is imperative for them to have this kind of
opportunity to be a part of the growing industry of cyberspace and electronics
because I think that is the future and so, in having this access and providing a
licence to the Craig family would not only be providing a service to them but to
directly back to us as First Nations in a healthy use of our Aboriginal title on
rights -- which by the way, conforms with our current status in our negotiations
with the federal and provincial government that any new developments that happen
land, air and sea, has to consult with us -- and the Craigs I don't think fully
understood that and realized that when they came to speak to us but in doing so,
have fulfilled that obligation in a healthier manner because it was more
envisioned rather than a have to.
7569 I am also working with the West Van City
Municipality, the City of North Vancouver and the District of North Vancouver
and Ports Canada and we are just in early stages of trying to implement a fibre
optic line across North Shore. The purpose was to allow greater access to our
whole North Shore community and the Lower Mainland and Vancouver Greater Region
on Internet and have some competition for the existing cable systems and
telephone lines. This SkyCable will accelerate that and, in our opinion, create
a greater freedom that we would normally have to work longer and harder and more
expensively to get in place, merely through co-operation and
7570 So I thank you very much for this
opportunity. I don't have a lot to say on it other than what I have said because
I think a lot of the applications speaks for itself and the intervenors prior to
myself have also said a lot of what I feel. Thank you.
7571 CHAIRPERSON OF THE COMMISSION: Thank you very
much. We have no questions for you. Thank you very much.
7572 MS EDGE: Thank you, Madam
7573 I would like to just check whether some of
the other presenters are in the room that I missed earlier.
7574 Is anyone here from Gate West Communications.
7575 Is Jake Sheridan in the room?
7576 That appears to complete the intervenors for
7577 CHAIRPERSON OF THE COMMISSION: What I would
propose is we take a break of 10 minutes to allow for the other phase. Thank
you. And we will be hearing, before lunch, the Alliance application before we
break for lunch. Thank you.
--- Recess at 1050 / Suspension à 1050
--- Upon resuming at 1115 / Reprise à 1115
7578 CHAIRPERSON OF THE COMMISSION: Alors, could
you please introduce this phase of the hearing.
7579 MS ASSHETON-SMITH: Thank you.
7580 We now move to Phase IV of the public
hearing, which is rebuttal by the applicants, and there will be a maximum of 10
7581 The first applicant in this phase is LOOK
7582 LA PRÉSIDENTE DE LA COMMISSION: Alors à vous
REPLY / RÉPLIQUE
7583 MR. PARKES: Merci. Madame la Présidente,
Commissioners, ladies and gentlemen.
7584 Once again, I am David Parkes, President and
CEO of LOOK Communications.
7585 Let me begin by thanking the over 2,800
intervenors who endorsed our application. This support has come from many
sources -- the business community; television networks; educational
institutions; volunteer organizations; and individuals throughout British
Columbia -- who simply want a strong and viable distribution alternative, a true
competitor to the powerful and entrenched cable incumbents and DTH
7586 Of course, we would also like to thank Mike
Reddington of the Surrey Public Library and Steven Chan for their support of our
proposed InfoLOOK Community Expression Channel.
7587 We believe this innovative channel proposal
provides a level of grassroots public access that has never been possible
7588 At this time, I would like to ask Mansell
Nelson to respond, briefly, to the interventions by CFJC and CHBC.
7590 MR. NELSON: Thank you, David.
7591 First of all, we don't want to put local
broadcasters out of business. We want to partner with them and we acknowledge
the challenges they face and we have begun building relationships with
7592 Second, our application is about putting our
best competitive foot forward. We compete with incumbent cable but we also
compete head-to-head with DTH. We created a channel line-up that we believe will
allow us to attract customers from these powerful incumbents.
7593 Third, the Commission has the discretion to
approve or deny the carriage of distant signals on a case-by-case basis. It has
fairly distinguished among distribution alternatives, in the past, and can
continue to do so, in the future.
7594 We also wish to clear up a
7595 SkyCable does, in fact, propose the addition
of certain distant signals in the Okanagan Valley. In its application, SkyCable
stated -- and I quote:
"We intend to add three authorized distant Canadian signals to the basic
package in order to offer viewers an attractive range of programming options. We
plan to choose from among the following services: CIVT, KSTW, ITV or
7596 As SkyCable only indicated their intention to
serve the Kamloops market yesterday, we cannot determine what distant signals
they intend to carry in that market
7597 Finally, Point 5, we acknowledge that there
are a number of policy considerations surrounding the carriage of distant
signals. We believe that our ability to provide these signals will allow us to
offer additional choice to consumers and will position us as a vigorous
competitor to incumbent cable and DTH. However, should the Commission decide
that the carriage of these signals is not appropriate, we remain confident in
our ability to provide a strong alternative.
7598 I will now call on Gary Kawaguchi to further
respond on the SkyCable intervention.
7599 MR. KAWAGUCHI: Thank you, Mansell.
7600 Overall, our pricing for services and
installation is based on a model that works today in our two other
7601 Having said that, we researched B.C.
interests and are very encouraged by those results.
7602 We know that these prices and fees position
us to be a real competitor. Yesterday, we focused on the creation of real value
as the focus of our marketing efforts to drive competition. We offer real
choice. The icing on the cake is the ability to change any station chosen in a
quick call to our customer care group. It takes us five minutes to reset the
individual subscriber's set-top box. This is the ultimate use of addressable
7603 With respect to installation fees,
particularly in the MDU marketplace, to set the record straight, our application
clearly stated, in our business plan, that we have not accounted for any MDU
installation fees in Year One of activating any building. This is the period
where we expect to gain 30 per cent penetration of the building. I refer the
Commission to Item 2.3 in our revenue schedule supplied November 26th,
7604 Furthermore, with respect to installation
fees, we still do not see this as an issue. In fact, we are very encouraged by
our research. The 12 per cent switching number referenced this morning actually
translates into 32 per cent of all of those who expressed an interest in our
7605 This is an excellent research number for a
company that had little overall awareness at the time of the
7606 In addition to that, we also offer a
"satisfaction guaranteed" program. A 60-day installation refund. To date, only
one -- two per cent actually redeemed. This generates real commitment to our
service and reduces term.
7607 With respect to technical channel capacity,
SkyCable's plan for 120 channels using 8-to-1 digital compression technology --
yesterday they said 10-to-1 is on the horizon. Our plan includes 10-to-1 today
-- that is what we use in our other systems. That means we have current
additional capacity for 37 more video channels versus the SkyCable plan which
allows capacity for 14 more video channels.
7608 With respect to costs, on the IT front, 10.7
million over seven years: 4.5 million of that goes to telephone costs for the
call centre; 2.1 million for software fees for a billing system; 2.1 for
conditional access system software. It is unclear to us where these call centre
costs are in the SkyCable plan. Yesterday, we heard the SkyCable costs were, in
fact, included in the sales and marketing budget -- which brings me to the sales
and marketing budget quoted this morning.
7609 SkyCable claimed 14.7 million of their total
budget would be spent on brand advertising. There is really only so many ways
you can spend that budget. Today, we heard the 14.7 million would be spent on
branding; yesterday, we heard 7 million on T.V., with the balance on direct mail
telemarketing and other miscellaneous expenses.
7610 With respect to customer satisfaction, we
conduct research annually and are scheduled to be in field again this
7611 Regular follow-up contact through our call
centre continues to be very positive, as we call customers during their
7612 With respect to coverage, SkyCable has stated
our proposed coverage does not appear to be as good. Quite simply, we disagree
since the coverage contours are based on theoretical engineering
7613 And, finally, granting LOOK a licence in B.C.
is not about establishing an MDS monopoly; it is about creating a vigorous
competitor to cable and DTH, providing consumers with the benefits of innovation
7615 MR. PARKES: Thank you, Gary.
7616 At the start of this hearing, the Commission
indicated three particular areas of interest for those seeking and MDS licence
for British Columbia: the ability to provide more competition to cable; the
provision of more consumer choice; and furthering the goals of the Broadcasting
7617 As our application makes clear, LOOK has
carefully planned its application with these exact goals in mind. We have a
strong and experienced team here before you this morning. We know what it takes
to compete with cable and DTH head on. We know what it takes to build a reliable
network in this environment and we have put together a powerful service
offering. We know how to build a brand and what it takes to build a national
communications force. We know how to market this offering to SFUs and we know
how to get into those critically important MDUs. And, lastly, we know a local
understanding of the B.C. marketplace is critical. LOOK's long-standing presence
in the British Columbia marketplace, over 50,000 current Internet customers and
a bustling local office and call centre, just a five-minute walk from this very
room, places us in a unique position to provide a competitive alternative
7618 Madame la Présidente, Commissioners, this
concludes LOOK's reply. Thank you for your attention and we would be pleased to
answer any questions.
7619 CHAIRPERSON OF THE COMMISSION: We don't have
any questions for you. Thank you very much.
7620 MS EDGE: Thank you, Madam
7621 The next presenter will be Craig for its
7622 CHAIRPERSON OF THE COMMISSION: They sent you
7623 MR. INTVEN: Yes, Madam Chair. They figured
they would finally get their lawyer to do something for the money they are
--- Laughter / Rires
7624 CHAIRPERSON OF THE COMMISSION: Given your
expertise, of course.
7625 COMMISSIONER WYLIE: We have many
--- Laughter / Rires
7626 COMMISSIONER WYLIE: Especially on
7627 MR. INTVEN: The questions I don't handle.
7628 COMMISSIONER WYLIE: You should have brought
--- Laughter / Rires
REPLY / RÉPLIQUE
7629 MR. INTVEN: Thank you.
7630 I am here, as you know, to present SkyCable's
reply to the LOOK intervention.
7631 The main point I would like to make is that
LOOK's oral intervention simply repeated points that were made in its January
27th written intervention and there were no new points. All of those points were
fully answered in SkyCable's reply which was filed on February 7th -- and I
would refer you to that. The points made in reply were disregarded, essentially,
by LOOK, so let me repeat just the main points raised by LOOK and the replies
that were made by SkyCable.
7632 First, LOOK suggested that there is a problem
with SkyCable's decision not to name the specific suppliers and equipment
vendors for its system.
7633 SkyCable's reply was clear. Unlike the early
days of MDS, there now is a competitive supply industry for MDS components. As a
result, SkyCable described its network design but has left some of the specific
decisions as to the set-top boxes it will use, the antennas it will select,
until it gets a licence, if it is fortunate enough to do so, and, at that time,
it will select the best state-of-the-art technology available for the best price
and it will be in a better position to negotiate that price having not specified
a specific -- that it is bound to a specific supplier, and I expect any prudent
applicant, frankly, Members of the Commission, would do the same
7634 LOOK's second major point was that they
repeated a statement that there may be problems with in-band
7635 As SkyCable's written reply and its evidence
clearly indicates, SkyCable has perfected in-band trunking techniques. It is the
only form of trunking that SkyCable uses and, to quote Boyd Craig, the system
now runs like a charm. Imagine Wireless, the Saskatchewan MDS licensee also
relies exclusively on in-band trunking.
7636 If LOOK is still experiencing problems with
in-band trunking, as it suggests, then that implies that it is LOOK that has the
technical problems, not SkyCable.
7637 Third, LOOK repeated its suggestion that it
will have more T.V. channels than SkyCable.
7638 Now, this issue is addressed completely in
SkyCable's intervention. The MDS spectrum capacity will be identical for both
licensees. They both have access to the same compression technologies and,
therefore, the channel capacity is the same. LOOK has simply chosen to carry a
relatively small number of additional channels, at the outset, most of them with
relatively low viewership or channels that, as we have heard in the hearing,
raise contractual, regulatory or local broadcasting problems, as you have heard
from some of the other intervenors -- and on that point, I should make it clear
that SkyCable will not be carrying distant signals into the B.C. Interior, as
was clearly indicated by SkyCable during the deficiency process of this
proceeding, and the deficiencies are on record.
7639 Finally, LOOK has suggested that it has more
resources and will spend more on marketing than SkyCable.
7640 On the marketing point, SkyCable has
indicated that its advertising budget and its total advertising for all direct
mail image -- sorry -- brand name advertising and other advertising will be
three times as high as the advertising line that appears in the financial plan
submitted by LOOK.
7641 Now, LOOK does propose to spend some more on
sales. But I think it is fair to say that the jury is still out on whether sales
techniques, such as multilevel marketing, are really a viable approach to
selling a higher priced product with a higher installation fee to T.V.
consumers. We just don't know whether that is going to work.
7642 Finally, it has not been ruled to date, in
the Canadian broadcasting system, that mid-sized regional players will be denied
new marketing opportunities whenever a national player or a player with
potentially deeper pockets makes an application for the same market. Regional
smaller players have often proven that they are closer to their consumers, they
know the markets better, they can innovate faster, they can operate more
efficiently and they can satisfy their customers better. It would be a sad day
for Canadian broadcasting if the Commission were to adopt a policy, explicitly
or implicitly, that would foreclose mid-sized regional players from
7643 And, then, finally, SkyCable wold like to
thank the 264 intervenors -- which I think compares to 193 interventions
accepted on behalf of LOOK -- for their supporting interventions for the
SkyCable application. We are pleased to see them and, particularly, to have the
appearing intervenors at the hearing.
7644 We were also impressed with the two appearing
intervenors that supported LOOK, Vancouver Community Network and the Surrey
Public Library, and simply wanted to reply that the approach of these
intervenors is entirely compatible with the community channel approach that
SkyCable is proposing and that SkyCable will certainly be prepared to speak with
them and co-operate with them if SkyCable should be awarded the licence -- and
that concludes our reply.
7645 Thank you, Madam Chair.
7646 CHAIRPERSON OF THE COMMISSION: Thank you very
7647 MS EDGE: Thank you, Madam
7648 The last appearing application at this
hearing is by Alliance Atlantis Communications, on behalf of a company to be
incorporated, for a broadcasting licence to carry on an English-language
national programming undertaking -- a television specialty service -- to be
distributed on a discretionary basis via DTH satellite and cable broadcasting
distribution undertakings in either analog or digital mode. The service would
provide programming about food and nutrition.
7649 Please come forward while I continue
7650 Television Food Network, which owns the
American Specialty Service Food Network, has committed to request removal of its
service which is currently carried by some broadcasting distribution
undertakings from the eligible lists of satellite services once the proposed
Canadian service launches.
7651 According to the applicant, the proposed
service is in the same genre as, and is intended to replace, the Food Network
from the U.S.
7652 CHAIRPERSON OF THE COMMISSION: Well, I guess
I already have my introduction for my CW speech on Monday, that the number of
women on panels is improving depends on the topic, I suppose.
7653 For your benefit and the benefit of the
people in the room, what we will do is we will hear your presentation and then
we will stop for lunch and then come back with the questioning and the other
phases to conclude.
PRESENTATION / PRÉSENTATION
7654 MS YAFFE: Madame la Présidente, Commissioners
and Commission staff, good morning.
7655 I am Phyllis Yaffe, President of Alliance
Atlantis Broadcasting and with me here today: to my right, Michael MacMillan,
Chairman and CEO of Alliance Atlantic Communications; and from our broadcasting
division, and to Michael's right, Rita Middleton, Vice-President of Finance; to
my left, Barbara Williams, Senior Vice-President, Programming; and to her left,
Kristen Jordan, Vice-President of International Develop, Scripps Network; behind
me and to my far left, Janet Eastwood, Senior Vice-President, Marketing,
Communications and Creative Services; Brad Alles, Vice-President of Sales; Rita
Cugini, Vice-President, Business Development; Kathleen Brown, Vice-President,
Business and Legal Affairs, Doug Barrett, our outside legal counsel; and
Kathleen McNair, Vice-President, Regulatory Affairs, Corus
7656 Today marks the culmination of a concept
originally conceived in 1996 -- a concept which provided for the addition of
Food Network U.S. to the lists of eligible non-Canadian services and its
ultimate replacement by Food Network Canada, owned and controlled by Canadians,
with high-quality Canadian programming designed for our audiences.
7657 Food Network Canada will allow Canadians to
watch programming that they have grown to love on Food Network U.S. while adding
new Canadian programs to this already popular mix. These shows will highlight
Canadian culinary traditions, regional flavours, restaurants and markets, our
country's ethnic diversity and our nation's holidays and events. These programs
will ground the network in our reality, celebrating Victoria Day BBQs, Grey Cup
parties and our nation's birthday on July 1st. To the viewing public, we will
celebrate the addition of these new shows while making sure that their current
favourite shows remain available.
7658 As a Canadian specialty service, Food Network
Canada will have 50 per cent Canadian content, with 175 original hours being
commissioned in the first year, rising to 350 in Year Seven. This is a
significant number of new hours that the independent production community is
very excited about. The many letters we received in support of this application,
from producers, testifies to that enthusiasm.
7659 For the Canadian broadcasting system, this is
also an important opportunity. Whenever a Canadian programming service is
launched, the broadcast system is made stronger in this country. To Canadianize
a genre that is being served by a popular foreign analog service with the
co-operation of the foreign partner is a new and exciting moment in Canadian
broadcast history. We, with our partner, E.W. Scripps, have for many years
planned this moment. We both believe a Canadian Food Network will be a superior
service for Canadian viewers and we are both delighted to present our vision for
the network today.
7660 Food Network Canada will, with the complete
co-operation of Food Network U.S., replace that service. Food Network Canada
requests that the access rules apply to the current analog carriage arrangements
of Food Network U.S. and that it be carried as part of the same highly
penetrated discretionary analog tier on which the foreign service is currently
7661 Upon the launch of the Canadian service, Food
Network U.S. requests that the Commission remove it from the list of eligible
satellite services. This will, in effect, repatriate scarce analog capacity to
the Canadian-owned sector of the broadcast industry.
7662 In replacing the U.S. signal, Food Network
Canada will further enhance the viewing pleasure of Canadians by providing the
best off and nutrition programming from Canada, the U.S. and the world. This
programming combination and business arrangement makes it possible for Food
Network Canada to offer its viewers a high quality scheduled comprised of 50 per
cent Canadian content.
7663 We will combine the most popular programming
already on the network with Canadian content that reflects the rich culinary
culture in Canada and in so doing, provide a seamless transition from a foreign
service to a Canadian one.
7664 The benefits of licensing Food Network Canada
are: increased ownership and control of the Canadian broadcasting system by
Canadians; an increased amount of Canadian programming available to Canadians --
programming that is relevant to Canadians; increased employment opportunities
for Canadians; and increased activity in the Canadian independent production
7665 We would like to show you a tape that will
give you a brief overview of Food Network Canada -- and if you are hungry, this
--- Laughter/ Rires
--- Video presentation / Présentation vidéo
7666 MR. MacMILLAN: In her opening, Phyllis Yaffe
introduced representatives of our two partners in Food Network Canada who are
here with us today: the E.W. Scripps Company and Corus Entertainment.
7667 Alliance Atlantis and the E.W. Scripps
Company are currently partners in the Canadian specialty service HGTV Canada --
a partnership which began in early 1996. We had launched Life Network just a
year earlier and we found that there was an increasing demand for lifestyle-type
programming, so we began to search for suitable partners who could help us
launch a programming service that was complementary to Life Network.
7668 Scripps had recently launched HGTV, in the
U.S., and we were convinced that such a format would work well in
7669 In Scripps, we found a partner who was
experienced in specialty broadcasting and eager to find a suitable Canadian
partner with whom they could share their experience and expertise.
7670 In 1996, in partnership with Scrips, we were
granted the licence for HGTV Canada and we had launched that channel in October,
7671 Since forming this partnership, we have had
the opportunity to work with Canadian independent producers who have produced
seven series for HGTV Canada and HGTV U.S. HGTV U.S. is available in over 50
million homes in the United States and we are very proud of the fact that seven
series produced in Canada and originated for HGTV Canada have indeed been
licensed by HGTV U.S.
7672 In the fall of 1996, we agreed with Food
Network U.S. to embark on a new venture. We decided on a two-part strategy.
First, we would support the addition of Food Network U.S. to the lists of
eligible satellite services; and, second, we would submit an application, when
the regulatory environment permitted, for a Canadian food network. Upon the
Canadian Food Network being licensed Food Network U.S. would agree to be removed
from the lists.
7673 As a result, in December, 1996, in
collaboration with the CCTA, Alliance Atlantis endorsed the inclusion of Food
Network U.S. on the lists.
7674 Today, Food Network U.S. is effectively
controlled by the E.W. Scripps Company -- our partners in HGTV
7675 Upon the licensing of Food Network Canada,
Food Network U.S. will acquire 29 per cent of Food Network Canada, of which 19.8
per cent is a voting interest.
7676 To launch Food Network U.S. in Canada, we
also agreed that we would provide all distribution and marketing support to the
U.S. service for as long as it was carried by BDUs in Canada.
7677 In addition, at the time that the business
arrangement was first struck, in 1996, Alliance Atlantis and Food Network U.S.
decided that the carriage of the U.S. signal in Canada should create benefits
that flow to the Canadian production community and we, therefore, agreed that we
would earmark one-third of all the subscriber revenue generated by the carriage
of that U.S. service in Canada for the production of Canadian
7678 This arrangement has now generated over
$700,000 in a programming fund -- Barbara Williams will speak later as to how
this fund will be used to produce Canadian programs.
7679 Based on our positive experience with HGTV
Canada, we are looking forward to the opportunity to commission series that
would run on both the Food Network U.S. and the Food Network Canada
7680 Our third partner in this venture is Corus
7681 Corus has a diversified portfolio of
specialty television services with a focus on children's programming and music.
The breadth of experience in the field of specialty television services
represented by the combined holdings of Alliance Atlantic and Corus will help to
ensure that Food Network Canada is successful in its desire to be an active and
significant contributor to the Canadian broadcasting system. Corus will acquire
a 20 per cent interest in Food Network Canada, of which 10 per cent is a voting
7682 MS YAFFE: We are sure you will agree that the
strength of this partnership will provide Canadians with a programming service
that speaks directly to their needs and desires.
7683 Food Network Canada's programming will be
contemporary and responsive to the growing interest in food preparation and
nutrition. We will work with this country's top restaurateurs, nutritionists,
dietitians, farmers, food growers and chefs to provide the most up-to-date
7684 As I mentioned previously Food Network Canada
will have Canadian content of 50 per cent throughout the term of the licence.
The commitment to original Canadian programming will be over $2.4 million in the
first full year, rising to over $5.5 in the final year. Over the term of the
licence, our total commitment to original Canadian production is over $24
million. An additional 3.8 million has been allocated to acquiring
7685 The Food Network audience has been enjoying
the food genre for over two years now, through the carriage of Food Network U.S.
Food Network U.S.'s total share of hours tuned has averaged approximate 0.5
since it launched in October of 1997 -- making it the second highest ranked U.S.
service on the third tier of specialty services.
7686 An independent research study, conducted in
late January, 2000, found that 77 per cent of Canadians who are aware of Food
Network agree that some Canadian programming should be added to the
7687 A similarly large proportion of Canadians --
74 per cent -- think it is important for Food Network to have programming that
celebrates Canadian events, like Canada Day and Canadian
7688 We are also delighted to learn that a full 95
per cent of Canadians who knew of Food Network said that they would watch the
same amount, or more, of the network if Canadian programming was added to their
favourite U.S. shows.
7689 MS WILLIAMS: Food Network Canada and its 175
hours of original Canadian content in the first full year, rising to 350 hours
in the final year of the licence term, will reflect the values, attitudes and
experiences of Canadians as they engage in pursuits and celebrations that enrich
7690 Food and its enjoyment is a common thread
throughout society. The sharing of a meal in one of the country's foremost -- is
one of the country's foremost forms of entertainment, whether it is in a
friend's home, a four-start restaurant or a local diner. Food Network Canada
will feature programming that explores the local food scene that exists in
Canadian cities and towns.
7691 One of the defining aspects of any culture is
its food. In wave after wave of immigrants to Canada, we have seen markets
spring up with new vegetables, new sauces, new spices, followed shortly
thereafter by new restaurants serving new styles of cuisine. Food Network Canada
programming will explore and celebrate that diversity.
7692 Food Network Canada will also showcase the
many food and wine festivals that are held across the country every year. The
Niagara Region, in Ontario, is home to one of the biggest grape and wine
festivals, matched only by the one in the Okanagan Valley right here in British
Columbia. Niagara-on-the-Lake celebrates the harvest of some of the country's
most delectable fruits, as does the Annapolis Valley.
7693 At least 75 per cent of the programs produced
by Canadians will be produced by unaffiliated independent producers and our
commitment to working with them is strong. Through Life Network and HGTV Canada,
the Lifestyle Programming Department is already working with a number of
producers from across the country.
7694 Michael has mentioned the programming fund
that will be used to produce programs in Canada for distribution on our channel
as well as on Food Network U.S. and I just want to explain a little bit about
how that fund will work.
7695 In co-operation with our partner, we will
choose to license projects that will be produced by Canadian independent
producers. These programs will air on our channel and, as well, Food Network
U.S. will have the opportunity to license the program from the independent
producer for broadcast on their channel. This is a win-win opportunity: the
Canadian channel benefits from additional dollars spent on original programming;
Canadian producers have an opportunity to license their programs into the
American market; and Food Network U.S. will benefit from some great new shows
for their service.
7696 This fund is a one-time special opportunity
to kick-start our service with some great new shows. But even when this fund is
finished, we will continue to license programs from Canadian independents that
will be licensed for air on the U.S. service with incremental and separate
7697 To date, this fund has already committed to
two shows that will be produced by a Vancouver independent producer: DV
7698 International food competitions are exciting,
dynamic events and we have chosen as our first joint project to produce a
documentary series that explores two of them.
7699 The first program gives of a
behind-the-scenes look at two top-notch chefs -- Chris Mills from here in
Vancouver and Tracey O'Grady from Washington, D.C., as they prepare for and then
compete at the National Restaurant Association Show -- a precursor to the most
prestigious of all food competitions: the Bocuse D'or, in Lyon,
7700 In the second show, we catch up with those
same two chefs, this time in Lyon, at the Bocuse D'or, and, there, get a unique
behind-the-scenes peek into all of the excitement and tension of that
competition; ultimately, revealing the winners.
7701 And discussions are ongoing with our partners
and a variety of independent producers on more specials and series that this
fund will support.
7702 MS YAFFE: Every once in a while, there is an
opportunity to do something that makes sense, in every way. We hope you agree
that bringing more Canadian programming in this popular genre to Canadian
audiences through a Canadian Food Network is just such an
7703 We thank you for allowing us to present this
to you today and we will answer your questions.
7704 CHAIRPERSON OF THE COMMISSION: Well,
certainly, that helps to bring the appetite and we will break for lunch. We will
be back at 1:15. Thank you very much. Bon appetit.
--- Lunch recess at 1155 / Déjeuner à 1155
--- Upon resuming at 1320 / Reprise à 1320
7705 CHAIRPERSON OF THE COMMISSION: Please tell us
where we were when we went to lunch.
7706 MS EDGE: All right. We are still on the
application for Food Network Canada and we were just about to move on to the
questioning of the applicant.
7707 CHAIRPERSON OF THE COMMISSION: I would ask
our Vice-Chair Wylie to be doing the questioning for the Commission.
7708 COMMISSIONER WYLIE: Good afternoon, ladies
7709 If you are agreeable to this, I will refer to
the parties as follows -- which will be easier, unless there is a need to be
more precise -- we will talk about the American network or the U.S. network and
Alliance and Corus, unless there is a need to be more specific.
7710 I have two -- four areas of questioning. One,
programming -- the expenditures, the Canadian content levels, the use of films;
independent production and foreign programming; and ownership and control --
pretty well together; and then distribution.
7711 So, if we start with programming questions,
the first one is: the proposed nature of the service, which is defined fairly
broadly and could lead, of course, to significant overlap with other services,
it includes many categories, some of which are not apparent in the schedules
that you filed showing us the categories of programming that you would actually
broadcast or air, so I would like a little more clarification, perhaps, on the
rationale behind having so many categories.
7712 If it is helpful, you can focus on Schedule
B, for example, where most of -- the programming categories there is 5(b),
almost completely. There are certain categories that you have in your
description of nature of service and the promise of performance that just don't
show up anywhere.
7713 MS YAFFE: We would be happy to answer that
for you, Commissioner Wylie, but I think maybe it is important to start by
saying, I think we have said, and certainly intend, to have every single program
that is on the network relate to the food subject matter. We do not see it as a
generalist service and we do not see it expanding beyond food, nutrition and
entertaining with food as the subject matter of the programming.
7714 I am going to ask Barbara Williams to take
you through some of the ideas we have for those other genres that may or may not
be on the draft schedule you saw before you.
7715 COMMISSIONER WYLIE: With a focus on the
nature of service and the need for these categories to be there.
7716 MS WILLIAMS: We really see the programming as
falling into three main categories. The first one -- and maybe the most
important one, honestly -- is the cultural category because it is here where we
think the service will be most distinct from its current American form. It is
here where the programming will have an opportunity to travel across the
country, to reaCh out to the communities that are doing their own food thing,
with their own ingredients, with their own chefs, their own restaurants, their
own festivals. So programs that will travel across the country, reach out to
those people, find out what's going on in the kitchens of Canadians right across
the country, that is a very important category -- and, in
7717 COMMISSIONER WYLIE: But that is not a
category that has a number for us: cultural programming.
7718 Can you relate it to a specific
7719 MS WILLIAMS: Oh, you want me to deal with the
7720 MS YAFFE: Yes, we can. I guess it is,
generally, information and documentary programming. That is what it would
7721 COMMISSIONER WYLIE: Yes. I am sorry. The aim
was simply to look at the description of your nature of service where there are
a lot of categories included in there that we are not sure appear to show up in
your Schedule B, or A, and we are looking at the possibility of narrowing down
your description of the nature of service, or not, if you don't think that that
7722 Let me be more specific. For example, in your
proposed nature of service definition, you include Category 7(c), which is
specials, mini-series, made-for-T.V. feature films. And in your application, you
say that you will do one film related to food a week and there is no mini-series
7723 Are these categories necessary in your nature
of service is what I want to know because that is something that is part of your
promise of performance and you are bound by. We want to know whether there is
any need for those which have overlapped with other services.
7724 MS YAFFE: We do actually show a film on the
Saturday night -- I think it is at 9 o'clock -- "Food on Film". And that was the
intention, that we would show no more than one film. It could
7725 COMMISSIONER WYLIE: So let's lay this one to
7726 Would you a accept a condition of licence
that you do no more than one film per week?
7727 MS YAFFE: Yes, we would.
7728 COMMISSIONER WYLIE: Okay. So we have got film
7729 MS YAFFE: Right.
7730 COMMISSIONER WYLIE: What about mini-series,
specials, which is also in Category 7?
7731 MS YAFFE: I think we would be happy with a
condition that allowed us to just show one film a week, but I am not -- I don't
know if you can actually divide that category, which is why we just said "7". If
you can, we would be happy to live with one film a week.
7732 COMMISSIONER WYLIE: Well, my understanding is
that there is 7(c) and 7(d(.
7733 MS YAFFE: Okay. Fine. We would be happy with
one film a week. And we do not need the mini-series.
7734 COMMISSIONER WYLIE: And you don't need these
other categories --
7735 MS YAFFE: Yes.
7736 COMMISSIONER WYLIE: Does anybody have before
them the nature of service categories?
7737 MS YAFFE: Yes, we do.
7738 COMMISSIONER WYLIE: And other question is
whether -- now that we have revised some of them, whether anyone has looked at
whether that changes what you want?
7739 MS YAFFE: I think, actually, Kathleen Brown
did look at that, so I will ask her to answer that.
7740 MS BROWN: I don't think we have substantially
changed what we are looking for because the nature of the service is really
broken down into the food -- food programming that is informational, educational
and entertaining, but within these categories, I don't think there have been
substantial differences in the ones that are relevant to the nature of the
programs that we are going to be dealing with.
7741 COMMISSIONER WYLIE: Are we now saying that
you don't need 7(c), specials, mini-series and made-for-T.V. feature films, if I
am right that 7(d) will cover theatrical feature films aired on television for
which you are prepared to be bound to do one a week?
7742 MS YAFFE: Yes.
7743 COMMISSIONER WYLIE: And it will be a theme
7744 Perhaps what you can do, while the
intervenors are here and before reply, is have another look at your nature of
service and see if there's anything else that could be pared down.
7745 For example, are you going to do game
7746 MS YAFFE: I will let Barbara answer
7747 MS WILLIAMS: There is a history of great
success with game shows in the food genre, actually. The American service has
experimented with a couple of them that have been very successful. It is a fun
way of sharing information in this genre and I think the programming has proved
to be successful.
7748 COMMISSIONER WYLIE: So the answer is, yes,
you would want the possibility of keeping that.
7749 "5" is informal education, analysis and
interpretation, I guess would be....
7750 Reporting and actualities. And human
7751 So 7(c) which would be one, perhaps, that
would confuse matters if you want to be committed to one film to then have 7(c),
7752 I have confused things, counsel will fix it
and, in the meantime, you have a chance at reply after having had a few minutes
to look at it to see whether it could be pared down further or whether that is
7753 Now, expenditures on Canadian content. I have
focused on your Schedule 24. Is there somebody here who is familiar
7754 MS YAFFE: Yes. Rita Middleton.
7755 COMMISSIONER WYLIE: -- the
7756 MS MIDDLETON: Yes.
7757 COMMISSIONER WYLIE: Where there is a
breakdown, and then try to tally that up with the breakdown of programming
expenditures, which is nowhere as broken down in the 9.2.1 which, I think, is
the schedule showing expenses on programming.
7758 So it is a bit difficult to really understand
how they work together. And I think there appears to be a calculation error in
the totals. So the first page of Section 24, at the bottom, where you have
eligible Canadian programming expenditures, these numbers don't tally up to the
total from which, I guess, calculations are made for percentages. And if you
remove the closed captioning, you get it right.
7759 Is it because we should remove the closed
captioning rather than adding it? Or is it because closed captioning is then
inserted in costs directly related to the development or original Canadian
7760 Take just one year. Take your first full year
-- maybe you don't have a calculator -- but it just doesn't add up to the total
eligible Canadian programming expenditures.
7761 MS MIDDLETON: Yes, you are correct, that the
closed captioning should be added to the total of the Canadian program eligible
7762 COMMISSIONER WYLIE: Okay. So, somehow or
other, in the transcription, this is what happened.
7763 What is in costs directly related to the
development of original Canadian programming?
7764 MS MIDDLETON: These are --
7765 COMMISSIONER WYLIE: And closed captioning is
not in there.
7766 MS MIDDLETON: Right.
7767 COMMISSIONER WYLIE: You just simply take the
closed captioning, add it to the total, for all seven years?
7768 MS MIDDLETON: Yes.
7769 COMMISSIONER WYLIE: And then you would get it
7770 MS MIDDLETON: Costs directly related to the
development of original Canadian programming are such costs as executive
producers that are directly involved in the development with the producers --
with the independent producers.
7771 MS YAFFE: Or script concept ideas.
7772 MS MIDDLETON: Yes.
7773 MS YAFFE: It is the development of the
concept behind the --
7774 COMMISSIONER WYLIE: Well, isn't that the
7775 MS MIDDLETON: That is separate. That is over
7776 COMMISSIONER WYLIE: Yes. So it is not
7777 MS MIDDLETON: No.
7778 COMMISSIONER WYLIE: Script costs and
development is the 50,000 line, in the first full year?
7779 MS MIDDLETON: Yes, you are
7780 COMMISSIONER WYLIE: Okay. And then these
other costs are in costs related to Canadian programming. Right?
7781 MS MIDDLETON: Yes.
7782 COMMISSIONER WYLIE: Now, what happens if I
try to relate that to the breakdown in the expenses 9.2.1, where, yes, the total
Canadian programming amortization is there and then script and costs and
development, and then I have a large figure, other programming, operating
expenses and so on. What am I supposed to do with this figure to make it match
to that Schedule 24 we are looking at?
7783 MS MIDDLETON: The costs directly related to
the development of original Canadian programming line is incorporated within the
program and production other operating expenses. And the closed captioning costs
are incorporated in the operating expense schedule, as well. They are not
included in the programming amortization line.
7784 COMMISSIONER WYLIE: In here?
7785 MS MIDDLETON: Yes.
7786 COMMISSIONER WYLIE: So the 686, I think we
should always look at -- I may mistake, as we go along, and say -- when I say
Year One, I mean first full year, because it is complicated if we use the
five -- so if you look at what is Year two, which is the first full year,
the 686 there would be if I took the 274 from Schedule 24, subtracted it, then
the rest would be non-Canadian expenses?
7787 MS MIDDLETON: Non-Canadian or costs that are
not directly related to the development of programming -- of Canadian
7788 COMMISSIONER WYLIE: Okay. Now you propose to
-- so we have cleared up that difficulty of what this means.
7789 Now, you have proposed to spend, on an annual
basis, 40 per cent of the previous year's total revenues on Canadian content.
But unlike what often happens with specialty services, you break it down, in
Section 24, a lot more finely than -- by showing an amortization figure for
Canadian programming and an amortization figure for original Canadian
programming. Do you follow me? That is on Page 2 of Section 24 -- which I
probably won't find. But 40 per cent, then, on expenditures, since you have done
that, would you feel -- what would be your reaction to using a percentage of the
Canadian programming amortization line which, if you tally it up across the
seven years and then spread it, would be about 32 per cent.
7790 Would you see any advantage in having that as
a condition of license instead?
7791 We are just exploring.
7792 MS YAFFE: If I understand, you are suggesting
that the only -- the percentage of revenue for Canadian expenditures would be
for original Canadian programming?
7793 COMMISSIONER WYLIE: Well, no, instead of
being previous -- all expenses on Canadian programming, you would use, instead,
a percentage and apply it to the Canadian programming amortization line instead.
Take that instead of all the expenses and divide it by the revenues.
7794 Do you see any advantage to us doing it that
way? It is just another way --
7795 MS YAFFE: It just simplifies it.
7796 COMMISSIONER WYLIE: -- of saying how much of
your revenues --
7797 MS YAFFE: Yes. Sure. I think it just
7798 COMMISSIONER WYLIE: It would be simpler than
using 40 per cent of all revenues.
7799 MS MIDDLETON: Yes. Yes.
7800 COMMISSIONER WYLIE: And what about if instead
we took the programming amortization Canadian original line -- and that, if you
do it across, is about 29 per cent.
7801 MS MIDDLETON: Yes, that would be
7802 COMMISSIONER WYLIE: Could you tell me why you
feel it would be advantageous? Just so we can look at whether we would do that
or not. Not advantageous but simpler is, I think, what I heard you
7803 MS MIDDLETON: Yes, just that, that it would
be simpler in the presentation on an annual basis.
7804 COMMISSIONER WYLIE: Simpler from an
accounting -- from an accounting perspective, it would be simpler?
7805 MS MIDDLETON: Yes.
7806 COMMISSIONER WYLIE: And, presumably, there
would be no disadvantage to the regulator because you have done this breaking
7807 MS MIDDLETON: Right.
7808 COMMISSIONER WYLIE: Do you have any
preference, if you had a choice?
7809 MS YAFFE: I think simpler is always
7810 COMMISSIONER WYLIE: Yes?
7811 MS YAFFE: Yes.
7812 COMMISSIONER WYLIE: And of the two
amortizations, which one is simpler?
7813 MS MIDDLETON: Canadian original is probably
7814 COMMISSIONER WYLIE: Okay. So we will take
that into consideration. We don't always see it broken down in that
7815 Now, Canadian content levels. I notice that
right off you feel that your first years you feel you will be able to do 50 per
cent Canadian content and that it can be achieved right away.
7816 Is that because you feel there is a fair
amount of food-related programming already available having -- with HGTV and
Life, et cetera?
7817 MS YAFFE: I think that I will ask Barb to
comment on how we are going to get to that 50 per cent -- and, certainly, there
are programs available from other sources, but I think one of the fundamental
differences is that since the launch of Food U.S., we have been creating this
unique fund that is set aside to help us jump-start the Canadian programming
right away, as soon as we are able to turn the service into a Canadian service,
and that, by the -- if we were launch -- right now, I think we said it is about
$700,000. If we launch this service sometime in the fall, September-ish, it
would be somewhere around $1.3 million, and that will give us the extra funds
required, above and beyond our commitments in this schedule, or in the
schedules, or in our projected plans, to actually get that much programming on
the air for a launch in September.
7818 MS WILLIAMS: I think it is a combination of a
lot of things.
7819 For sure the programming fund is a tremendous
opportunity for us to get that first wave out there.
7820 We also know, from our experience in the
Lifestyle television world, we are very aware of all the food programming that
is available to acquire and have our eyes on some of it already. We have been
sort of planning and dreaming about this station for quite a while, so we have
got some ideas.
7821 We have already got in development a number
of Canadian programs, original programs, because, again, just in terms of our
sort of excitement about being ready for this network's launch, we have got
three programs already in development. So we are in good shape to be at 50 per
cent right off the bat and we think it is very important to be at 50 per cent
right off the bat so that Canadians really see the advantage clearly from the
beginning of this being a Canadian service.
7822 COMMISSIONER WYLIE: That is, of course, a
wonderful invitation for the regulator to say, if you can do 50 per cent in Year
One, why is there not a ramp up?
7823 I do acknowledge that your repeats will be
lower. They will be 15 the first full year, going down to 10 in Year Seven,
which is 60 per cent original to 80 per cent. But apart from that answer, if you
are already ready and there will be more production, et
7824 MS YAFFE: Well, I think one of the answers is
not just the lower repeat factor but also the creation of more original hours.
We do really ramp up Canadian but we don't ramp up the overall percentage, we
ramp up the hours of original programming that we are creating for the network,
so. We are committing to 175 in the first year and we go all the way to 350 by
the end of the year and that is a doubling of the number of hours of original
7825 MR. MacMILLAN: By the end of the
7826 MS YAFFE: By the end of the term, sorry, by
the end of the licence, we would be at 350. So that is a huge commitment, not
just in terms of working with independent producers and getting more hours on
the table but working to find those people, the talent out there, that will
create those hours.
7827 COMMISSIONER WYLIE: So would those be
7828 MS YAFFE: Yes.
7829 COMMISSIONER WYLIE: -- you would keep the
same percentage whether we do it on amortization or total expenditures on
Canadian programming, they would be commitments that you would move your repeats
down, from 15 to 10, and your original Canadian programming 60 to 80 over the
term. So that is your ramp up.
7830 MS YAFFE: Yes. And I think we would commit to
the 175 original hours and the 350 by the end of the licence.
7831 COMMISSIONER WYLIE: Which would give us those
60-80 figures. Right?
7832 MS YAFFE: Yes. Right.
7833 COMMISSIONER WYLIE: So you would consider
that another way of saying, I am ramping up my 40 per cent or my 32 or my
7834 MS YAFFE: Right.
7835 COMMISSIONER WYLIE: Independent production --
and this would be out of these 175 and 350 hours -- you say, in your
supplementary brief, that you will -- it will be 75 per cent to independent
producers and 25 per cent in house.
7836 Now, having been before us before, you know
that we have discussed with you that considering, in many cases, the equity and
voting power of companies, such as Alliance, that puts it in a favourable
competitive position to supply programming to service and we have tried to use
some means of ensuring ourselves that this is not -- it is not unfavourable,
then, to independent producers.
7837 Would you be prepared to commit to this 25
per cent of the production to not be produced by you or any of your affiliates
as a condition of licence?
7838 MS YAFFE: Maybe I need to just get some
7839 Are you asking us to commit to the proposal
we have before you? Or an alternative?
7840 COMMISSIONER WYLIE: Well, is there any
--- Laughter / Rires
7841 MS YAFFE: Well...
7842 COMMISSIONER WYLIE: In your supplemental
brief, Page 16 -- it is in a number of places.
7843 MS YAFFE: Yes.
7844 COMMISSIONER WYLIE: Page 16 of your
supplementary brief -- or maybe I should call it Schedule 27.
7845 MS YAFFE: Right.
7846 COMMISSIONER WYLIE: (d), 75 per cent of all
Canadian programming will be produced using independent producers and 25 will be
produced in house by Food Network Canada.
7847 So that is a commitment --
7848 MS YAFFE: Yes.
7849 COMMISSIONER WYLIE: -- that only 25 per cent
would be produced in house?
7850 Now, of the 75 per cent, would it be a
commitment that it not be produced in house or by related or affiliated
7851 MS YAFFE: Yes. Yes, that was our
7852 COMMISSIONER WYLIE: And what is your
understanding, Mr. MacMillan, of an affiliated producer? Or one that is
not? -- and would, therefore, give us the mechanism to see where you are abiding
by this commitment or condition of licence.
7853 MR. MaCMILLAN: Sure. We are saying that up to
25 per cent could be produced by an affiliate or internally. An affiliate or an
arm's-length -- or the difference between it is whether or not we control that
producer in question. So if we are not the majority shareholder of that, that is
sort of how we would see whether we are affiliated or not.
7854 COMMISSIONER WYLIE: But even if you held 49.9
per cent, it would not be an affiliated --
7855 MR. MacMILLAN: That is how we would look at
whether we are related or not.
7856 We do have a couple of minority stakes in
other production companies in Canada -- two, I think -- and they are in about
the 20 per cent range -- the 10 to 20 per cent range, around there. We don't
have any 49, which would be an odd number to be at, but, anyway, our approach
would be, do we control that other company or not.
7857 COMMISSIONER WYLIE: And if not, production by
that company would fit in the 75 per cent?
7858 MR. MacMILLAN: In your other -- in the
conditions of licence and other services where you are related, did we define
what an affiliate is?
7859 MR. MacMILLAN: I don't know if we did. I can
recall having this discussion before --
7860 COMMISSIONER WYLIE: But nobody did it
7861 MR. MacMILLAN: I am not sure that it
7862 COMMISSIONER WYLIE: And so, you would want --
if we were to do that, you would want it to simply be a question of control? But
if it is below control, then it is not an affiliate, for the purpose of this
condition of licence?
7863 MR. MacMILLAN: That is what I would
7864 COMMISSIONER WYLIE: That is what you would
7865 MR. MacMILLAN: Frankly, I would imagine --
not to speak for the programmers -- but it strikes me that, by and large, the
programming that we would be producing, in any event, would be some
in house material made by the channel itself, in all likelihood. For that
25 per cent.
7866 COMMISSIONER WYLIE: And you would find
anything below control too severe? You know. Thirty per cent, let's
7867 MR. MacMILLAN: That is another
7868 COMMISSIONER WYLIE: Would it be a
7869 MR. MacMILLAN: No, not really.
7870 COMMISSIONER WYLIE: Foreign programming, now.
It is not clear whether it is 40 per cent -- at least not clear to me -- 40 per
cent or 45 per cent of the foreign programming that will be supplied by the
American Food Network.
7871 If I look at different places -- like if you
look at Page 11 of your deficiencies, the answer is 45 per cent. And if I look
at Schedule C, it is 40.
7872 MS YAFFE: I think the answer is, it changes,
but I will ask -- over time, as we buy from combined sources.
7873 COMMISSIONER WYLIE: If you look at Schedule C
of Part II, under (b) program sources, third paragraph, you propose that 40 per
cent of Food Network Canada's programming be supplied by Food Network U.S. And
if you look at Page 11 of your deficiencies, I think you say 40 -- or you say
7874 MS YAFFE: I am going to ask Rita to explain
how that goes.
7875 MS MIDDLETON: It is actually 90 per cent of
the foreign programming is supplied by our partner, which equates to 45 per cent
of the schedule.
7876 COMMISSIONER WYLIE: Forty-five per cent of
the schedule, not 40?
7877 MS MIDDLETON: Yes.
7878 COMMISSIONER WYLIE: Is the right answer.
7879 We will go back to programming when we look
at the issue of ownership and control.
7880 And you say, then, that 10 per cent will --
so it is 10 per cent of the 90 and 5 per cent of the 45 will come from other
7881 MS MIDDLETON: Yes, that is
7882 COMMISSIONER WYLIE: Do you see the amount of
programming from the American service to decrease as a proportion of your
foreign programming over time? Or, conversely, do you see the letter agreement
as contractually binding you to this level of foreign programming from the
American service? Because I think what -- well --
7883 MS YAFFE: I think the essence of the
relationship is we believe it is a wonderful supply of programming for the
network. It has certainly been so to date, as we watch the network coming
straight from the United States.
7884 But our relationship there is that over the
period of the agreement, we would need to -- we would be offered 440 hours of
programming, on an annual basis, which is the minimum that would be offered to
us, perhaps more, and we would need to select 330 hours to fill our foreign
content. However, if we chose not to run it, we would merely acquire it and
leave it not to be run. So it is our choice as to what goes on the network. You
know, our view, at this point is that this is, first of all, all original
programming created and never seen anywhere else before; high quality, as we
have seen; and, clearly, growing in popularity in Canada; and a good supply of
90 per cent of the foreign program. We would also be able to shock the rest of
the world, as we have, for instance, as you would see on the network soon,
obviously, programs like "Two Fat Ladies", which is clearly not created by Food
Network U.S. but appropriately on that channel and we would hope it would be on
our channel as well.
7885 COMMISSIONER WYLIE: But the answer, then, is
that you are bound, on an ongoing basis, to purchasing that number of
7886 MS YAFFE: We are bound to purchase, not to
7887 MR. MacMILLAN: Just to make very clear one
point, one of the reasons why the agreement contemplates that Scripps has to
make available significantly more hours to us than the amount that we
contemplate that we need is that we never wanted to be in the position where we
had to run any particular program; therefore --
7888 COMMISSIONER WYLIE: Yes, but you would rather
be in a position, wouldn't you, that if you didn't want to run it you didn't
have to purchase it?
7889 MR. MacMILLAN: Oh, that would be great, but
unlikely, because what we want to make sure is that we do get our hands on the
best and the most popular programming that the U.S. Food Network has and so, the
quid pro quo is making a promise that we will spend at least X dollars per year;
and that is why we are -- why we know that we will get "Emerald"(ph) or "Two Fat
Ladies" or the shows that really are going to be popular and that Canadians
7890 COMMISSIONER WYLIE: Well, we can discuss that
a bit later when we discuss control -- which I guess will be no surprise to you
that it has a possible impact on one's choices if one is bound by one's
shareholders, contractually, to purchase that amount of programming of some
importance in the schedule from one purchaser.
7891 But before we leave programming, I would like
to look at your commitments for closed captioning.
7892 In the promise of performance part -- Part II
anyway of your application, at 6.3.1, where you were asked what your services to
the hearing impaired is, you say that you are committing to ensure that 90 per
cent of your original Canadian hours are closed caption by the end of the
license term. And I think in your supplementary brief you repeat the same thing,
at Page 7, yes, committing to caption 90 per cent of original Canadian
7893 As you know, the Commission has adopted a
general approach, that it be 90 per cent of all programming by the end of the
licence term, if I remember for services that have revenues of 10 million --
gross revenues of 10 million.
7894 MS YAFFE: Yes, that is what we have in
7895 COMMISSIONER WYLIE: You will have that,
certainly, by the end of your seven.
7896 MS YAFFE: Yes.
7897 COMMISSIONER WYLIE: So would it not be
reasonable to have the same expectation --
7898 MS YAFFE: Yes, and I think that was the
intent. I think, at some point, we suggested that the acquired programming,
although we may not caption it ourselves, would captioned; and as we are going
forward, we are seeing more and more programming delivered to the network
already captioned. So our commitment would certainly be to be 90 per cent of the
total schedule captioned.
7899 COMMISSIONER WYLIE: Of all programming;
rather than simply original --
7900 MS YAFFE: Right.
7901 COMMISSIONER WYLIE: -- programming? And
you would be prepared to --
7902 MS YAFFE: Yes.
7903 COMMISSIONER WYLIE: -- commit to
7904 MS YAFFE: Yes.
7905 COMMISSIONER WYLIE: Now, ownership. My
understanding -- it is not clear whether it is Alliance Atlantis Communications
Inc. who will be the 70 per cent owner of the shares or whether it will be
Alliance Broadcasting Inc.
7906 MS YAFFE: Kathleen will answer.
7907 MS BROWN: I think when we prepared this
application, we hadn't gone through our restructuring to rename and move our
broadcast entities all under Alliance Atlantis Broadcasting. So that is why we
submitted this application under the name Alliance Atlantis Communications Inc.
It would be our intention to have this company operated by Alliance Atlantis
Broadcasting and it would be Alliance Atlantis Broadcasting that would take up
7908 COMMISSIONER WYLIE: Okay. Because one of --
that has led us to make a calculation of Alliance Atlantis Communications Inc.
board of directors, which is 19, and it would put you 1.05 per cent above what
is the 20 per cent of a holding company the direction requires. Mr. Barrett
is looking at me. I have no intention of telling you which 1.5 it is --
--- Laughter / Rires
7909 COMMISSIONER WYLIE: -- that you will drop off
any one but it has to be from an American director if that were the
7910 But what you are saying is it will be
Alliance Broadcasting Inc. that will be the shareholder.
7911 Now, we have -- just so that we speak from
the same -- my calculation says that the American Food Network will have 29 per
cent of the equity, 19.8 per cent of the voting shares and 53.4 per cent of the
non-voting. Sounds right?
7912 MS JORDAN: Yes.
7913 COMMISSIONER WYLIE: That Corus will have 20
per cent of the equity -- or it is proposed -- and 10 per cent of the voting
shares and 46.6 per cent of the non-voting shares. And Corus would be able to
convert some of its non-voting shares to a maximum of 20 per cent and the
American network, should it be able to under law, to 29 per cent, so that
Alliance always remains with 51 per cent of the shares.
7914 And in the application, it is understood by
the parties, also, in the letter agreement, that all conversions of non-voting
shares to voting shares are subject to CRTC approval. You agree amongst
yourselves, the three partners, that that will be the case.
7915 As you know, the Commission has expressed
concern about vertical integration between distributors and programming services
and the Regulations limit to 10 per cent what BDU voting shares you can have in
a specialty programming service.
7916 Considering that you have already agreed that
any conversion would be to a -- subject to our approval, would you accept a
condition of licence whereby Corus could not acquire, directly or indirectly, or
through conversion, any voting share in excess of the 10 per cent of the voting
securities of the licensee company, as has been proposed in the
7917 MS YAFFE: Can I just ask if that -- are you
suggesting by that that if the CRTC were to change its view Corus would be
limited by this condition, even --
7918 COMMISSIONER WYLIE: Well, if I understand the
letter agreement properly, at Paragraph 38, you are saying -- the parties are
saying that the arrangement between them, once it is enshrined and signed
documents, such as a unanimous shareholder agreement, will say that Corus --
let's speak of Corus because the American partner can't do any more than the
Government permits under the direction -- that you agree, okay, both TVFN and
Corus shall be entitled to convert all or a portion of their non-voting shares
into holding shares subject to first obtaining CRTC approval for such
conversion. That is the agreement between the two parties.
7919 I am saying, would you accept that we convert
this, with regard to Corus, to a condition of licence?
7920 MS YAFFE: I think we would, yes.
7921 COMMISSIONER WYLIE: Okay. Now, would you
accept a licence if, as a condition of its issuance, Corus not be able to hold
any of the voting shares of the proposed licensee?
7922 MS YAFFE: Right. Obviously, what we feel is
this is a very strong partnership -- we are delighted to have all three
shareholders at the table with us today -- and our proposal to you is formulated
that way. Clearly, you know, we will live with the view of the Commission on
this issue, but to be clear and to be -- to maybe over emphasize, we think this
is a very strong partnership and it brings value to the network.
7923 COMMISSIONER WYLIE: So, the answer is, yes,
but you wouldn't like it?
7924 MS YAFFE: That is correct.
7925 COMMISSIONER WYLIE: Okay.
7926 MS YAFFE: Regretfully, yes.
7927 COMMISSIONER WYLIE: Now, control. At
Paragraph 11 of the letter agreement, it says there will be five directors, but
-- with a quorum of three and majority vote -- Schedule 3 that you have given us
has eight directors.
7928 MS YAFFE: Yes.
7929 COMMISSIONER WYLIE: So, which is
7930 MS YAFFE: Actually, we just looked at that
ourselves and -- I had it here a second ago. I don't think it actually -- I
think we may just have confused you and us by doing it that way. What we have
there is both a schedule of directors and officers and we have a Secretary and
we have a Treasurer who are officers but not directors, as well as a President
who is an officer and happens to be a director. So our commitment and our
agreement says there will be five directors, three will be from Alliance
Atlantis, one from Corus and one from E.W. Scripps. That would be the board of
7931 COMMISSIONER WYLIE: So the confusion comes
from the fact that under directors you filled in --
7932 MS YAFFE: We built --
7933 COMMISSIONER WYLIE:
7934 So which ones are the directors? Which
7935 MR. MacMILLAN: For Alliance Atlantis, the
directors would be Phyllis Yaffe; I would be a director; and also Judd Martin.
Since the time of the application Lewis(ph) Rosa(ph) left the company and Judd
Martin is our CFO and he would be the third Alliance Atlantis
7936 COMMISSIONER WYLIE: And Mr. Cassidy
would be the nominee for Corus?
7937 MS YAFFE: Yes.
7938 COMMISSIONER WYLIE: And --
7939 MR. MacMILLAN: And Ken Lowe(ph).
7940 COMMISSIONER WYLIE: Pardon me?
7941 MR. MacMILLAN: Ken Lowe(ph).
7942 COMMISSIONER WYLIE: Oh, Ken
7943 MS YAFFE: No. John Cassidy, for
7944 COMMISSIONER WYLIE: Yes. And
7945 MS YAFFE: And Ken Lowe(ph) for
7946 COMMISSIONER WYLIE: -- Lowe(ph) for the
7947 MS YAFFE: Yes.
7948 COMMISSIONER WYLIE: Now, control. Obviously,
there is no problem with the voting shares, the number of directors, the
nominees and the fact that Alliance, on the face of it, has the control. And if
I look at various sections of the letter agreement, Paragraph 17, for example,
management is to make all decisions regarding programming; 24, regarding
business plans and capital budgets; 30, regarding debt in excess of 4.5 million
-- that is (f); and 30, Paragraph (g) contracts in excess of 250,000 and
contracts outside of the range of the ordinary business, if I recall.
7949 MS YAFFE: Yes.
7950 COMMISSIONER WYLIE: -- contract which is
outside of the ordinary course of business of half a million or more.
7951 And I understand that Paragraph 2 will assess
that this binds the parties. And when we have asked for a draft unanimous
shareholder's agreement that reflects this, you have told us that you are not
going to draft any until you have a licence. So this is the document we
7952 It also addresses the programming arrangement
with the Food Network, and I have already alluded to the fact that it is a very
big chunk of your programming. And it raises the question with regard to the
American partner, as to what the actual de facto role will be.
7953 When you actually draft this agreement, I
presume that it will, at a minimum enshrine in it what is in the letter
agreement, which will include the need to purchase the programming, et cetera.
And, also, there is a paragraph in it that say that you will give, to the extent
possible, a say to Corus and to the American network about programming decisions
-- it is 24, where you deal with the fact that five-year business plans and
capital budgets will be prepared -- will be approved by the majority of the
board. But lower down in that paragraph, you say the corporation will extend to
TVFN and to Corus as extensive a right of consultation in regard of these
matters as possible.
7954 What is intended here.
7955 MR. MacMILLAN: Well, before I answer that, I
wouldn't mind commenting on the likelihood of doing long-form
7956 Currently, our view is that we are not
inclined to do longer-form agreements -- this letter agreement binds us -- and
that, speaking frankly as a controlling shareholder, longer-form shareholder
agreements tend to just give more rights to the minority shareholders. And we
don't know why --
7957 COMMISSIONER WYLIE: You are doing well here,
--- Laughter / Rires
7958 MR. MacMILLAN: We love them dearly, but I
don't know why we need to give them more rights than are ensconced in this
document. So we are inclined -- we don't, frankly, intend, now, to enter into a
7959 Having said that, the absolute power of the
board to make virtually all decisions -- certain things under CBCA it can't do,
of course -- but the power of the board, which we control, is pretty obvious. So
the purpose of Paragraph 24 was to give some comfort to Corus and to Scripps
that at least we would talk to them and at least we would listen to what they
had to say. They are both very knowledgeable players. They ought to bring good
suggestions to bear. We certainly hope they will; that is why they are our
partners. But, at the end of the day, we don't have to listen to them. We will
listen, but we don't have to take their advice -- and they know that, and they
know that is the voting structure of the board.
7960 So Paragraph 24 was to give them some comfort
that least they would have an arena to speak to mind.
7961 COMMISSIONER WYLIE: Now, remind me, either
Ms McNair or Mr. Barrett, is there -- I don't remember if there is any
section in this letter agreement that binds you to having a long-form unanimous
7962 MR. BARRETT: Not bound.
7963 COMMISSIONER WYLIE: No. Would it be possible,
then, for the Commission to conclude that this is it and that is the basis on
which we give you a licence?
7964 MR. MacMILLAN: We would prefer that. In fact,
the last -- on Page 12 of the letter agreement, it says that the parties agree
that this letter agreement will be replaced by one of our long-form, but unless
or until such time --
7965 COMMISSIONER WYLIE: Where are you reading
7966 MR. MacMILLAN: At the bottom of Page 12 of
the letter agreement.
7967 COMMISSIONER WYLIE: Ah, so there
7968 MR. MacMILLAN: Yes. -- unless or until
such time, this agreement is binding.
7969 So, unless --
7970 COMMISSIONER WYLIE: We could say that this is
-- but it is not signed, the copy I have -- signed by Corus and signed by
Alliance but not by the American network.
7971 You have a signed copy?
7972 MR. MacMILLAN: It is in
7973 COMMISSIONER WYLIE: And, of course, it would
mean, then, that I don't have to get into a whole lot of questions as to what
else we would want limited -- you limited -- the American network limited to
because it raises questions -- well, what about this; what about that; what else
may be in the long-form agreement -- and if we were to decide to give you a
licence, do we say, we will give you a licence subject to this and that and the
other thing not being in the agreement? It is far easier if you say, this is
7974 MR. MacMILLAN: That is right because any
improvements, in quotation marks, to this document would be to give Corus or
Scripps more rights -- which we don't propose to do.
7975 COMMISSIONER WYLIE: Is that something that
has been discussed and have they expressed any fear that that is what would
7976 MR. MacMILLAN: No; they understand that, and
they are sitting here with us today.
7977 COMMISSIONER WYLIE: Okay. Now, it still
leaves question marks about the dependence of the licensee on the foreign
programming from the U.S. and by your own calculations, I think, in the
deficiency at Page 20, it is between 92 per cent and 94 per cent foreign
programming per year that will go to the U.S. So, if you look at Page -- is
there such a -- yes; in deficiencies, yes, Page 20. At the very top of the
"Approximate percentage of foreign program expenses which will represent
payments to the FN is between 82 per cent and 94 per cent per year over the term
of the licence." (As
7978 So, this is 82 to 94 per cent of the amount
of your foreign programming, which is 50 per cent -- the foreign programming is
50 per cent.
7979 Is this going to be tied any way to revenues.
For example, suppose you don't do as well -- we still have to discuss
distribution terms -- as you proposed, do you still have to divvy up that amount
of money and have to reduce your performance on Canadian programming?
7980 MS YAFFE: Well, to be clear, we would never
reduce our commitment on Canadian programming, it is firm and we would stand
7981 We have the right to renegotiate the price,
as time goes on. That is part of the agreement, as I understand it.
7982 MS BROWN: On two occasions during
7983 MS YAFFE: Two occasions throughout the term
of the agreement, in the document we were just talking about.
7984 So, if we found ourselves in dire straits, I
think we would go back to our partners and suggest the pricing was
inappropriate. But I think it -- I mean I appreciate that it is always a
concern, in terms of a single source of supply for so much
7985 We don't feel uncomfortable about it, at all,
because it is very, very similar to the arrangement we have with Scripps on Home
Garden Television and it has given us the base, on the foreign programming side
of that service, for a great number of excellent programs we are very proud to
broadcast in Canada.
7986 But I think more importantly, it is part of,
in this case, a unique opportunity that this particular arrangement gives us;
and that is, that Scripps continues to have a place for some of its programming
in Canada -- obviously not as much as it did before -- and we are delighted to
have it because we have seen how successful it is.
7987 There aren't a lot of other sources in the
world for high-quality original food programming, except for what you would see
on a food network, and to have that as part of our package of suppliers gives us
a very good feeling of comfort as we go forward into launching this Canadian
7988 So we have done it before, with this very
partner; we have been delighted with the arrangement.
7989 We have often been offered many, many more
hours than we have chosen. We are always in control of what we do choose. And,
of course, it is in their interest, at Scripps, to make sure we have the best
programming to have on the network, as a shareholder. So we feel very
comfortable with the program supply, particularly because we do have the ability
to renegotiate the price, at least twice during the term of the licence, if we
are not able to meet the business plan we have projected.
7990 COMMISSIONER WYLIE: When you say price can be
renegotiated, this is, if I recall, the arrangement here is for the first three
years. Is that it? And then there is a chance to go back on price.
7991 MS YAFFE: Yes.
7992 COMMISSIONER WYLIE: That is how you calculate
7993 MS YAFFE: Yes.
7994 COMMISSIONER WYLIE: Now, when asked, as well,
what is this program supply agreement going to look like, what would be your
American partner's reaction if we said this is it?
7995 MS YAFFE: I think they would be happy with
that, but I will ask Kristen Jordan to comment.
7996 MS JORDAN: Yes, we would, and the basis for
that answer is, as it has been referenced, the history of the relationship of
this partnership, in terms of Home and Garden Television Canada.
7997 We found that working with a document such as
this allows for maximum flexibility to respond to the market and programming
conditions that our partner faces in Canada, and I think it also indicates the
degree of trust and good faith that we have in this partnership.
7998 COMMISSIONER WYLIE: So we could say, then, no
long-form agreement, this is it, because, again, in a program supply agreement,
there are possibilities of clauses that confer more power on the provider and
tie down the flexibility of the Canadian partner and puts into question your
comment in the covering letter, Mr. MacMillan, that I quote:
"Unequivocal editorial control will be in the hands of Canadians. It can be
exerted --" (As
And anyway. So, if we were to issue a licence that said, these are the terms,
we don't expect anything else that would be satisfactory.
7999 MR. MacMILLAN: Absolutely.
8000 COMMISSIONER WYLIE: Otherwise it is more
8001 So that brings us to distribution.
8002 Now, the approval of this application raises
two major issues for some interested parties. One is the issue of fairness, the
jumping the queue of equity of licensing action, at this time, given the
Commission's approach to licensing additional specialty services since 1996. And
you address this issue, at some length, in your application and in reply to
8003 And Number Two, it is the approach to the
distribution of the service should it be licensed, which is put forward in your
application. And I must warn your lawyers that my approach to the interpretation
of statutes is very pedestrian and not as imaginative as theirs.
Mr. Barrett is not even smiling.
--- Laughter / Rires
8004 COMMISSIONER WYLIE: In the reply to
interventions, you have put to rest a number of the concerns expressed by
intervenors, with respect to this issue of how the regulations would work for
you, and I have a copy of your reply here, but I notice that there seems to be
some backtracking in your oral presentation where, at Page 3, you say:
"The Food Network Canada requests that the access rules apply to the current
analog carriage arrangements of Food Network U.S. and that it be carried as part
of the same highly penetrated discretionary analog tier on which the foreign
service is currently carried." (As
And I would say that is recidivism to imaginative interpretation of statutes,
or of regulations.
8005 Now, I don't want to spend a whole lot of
time on this, so let me ask you -- and I am, of course, not the last word on how
to interpret our legislation, by far: Is it your understanding that if you are
licensed, you would be licensed as a specialty service required to be carried by
Class 1 and 2 licensees operating in an anglophone market, to the extent
available, on an analog channel, unless you agree to digital distribution and
that, in either case, it would be on negotiated terms?
8006 MS YAFFE: No, I don't think. That is our
8007 COMMISSIONER WYLIE: But is it -- I want to
know whether -- this is not what you want. But the Regulations, 18(5) of the
Regulations says exactly that.
8008 MS YAFFE: Right. It is our view that it is in
the Commission's hands -- certainly, we have suggested that -- to indicate in a
licence, a particular licence, what expectations you have of access and carriage
for a particular service or a particular licensee, and what we have done is
taken that regulation and, I think, put a finer point to it where we are willing
to only accept analog carriage on Class 1 operators where they were already
carrying the U.S. service.
8009 So we have -- obviously, we have taken the
view that, although 18(5) does exist and does create that kind of decision about
carriage, we would accept a subset of that, as a condition of this
8010 COMMISSIONER WYLIE: But the carriage
conditions are not placed on specialty services. For the first time, the
Commission has said, in the digital environment, that it will call certain
specialty services in the future digital services. That will be their status.
But, right now, that is not how it works.
8011 Short of a change to the Regulation, there, I
don't see how, in a condition of licence on your service, we can exempt certain
Class 1 and Class 2 licensees from carrying you.
8012 MS YAFFE: Well, first of
8013 COMMISSIONER WYLIE: You would have to say
that in the Regulations; you would have to amend the Regulations -- which I
don't think you have agreed is not a good idea. And I don't see how, in your
service, we could address all the BDUs and say, Number One the "shall" doesn't
apply to you unless you have a condition of licence on the BDU, or a change to
the Regs; it doesn't apply to you, you don't have to carry it -- well, they have
to carry it -- and then you must carry it on a particular channel and the
Commission has left that to negotiation between the parties, subject to
8014 MS YAFFE: Right. And we haven't asked for any
particular channel. I think we corrected ourselves. We may have -- it may have
suggested that we, earlier, looked like we wanted a channel with a channel
8015 COMMISSIONER WYLIE: Well, that is where the
recidivism is on Page 3 of your --
8016 MS YAFFE: No --
8017 COMMISSIONER WYLIE: -- be carried as part of
the same highly T analog tier. Even that.
8018 MS YAFFE: Well, you know, the way to look at
the tiers is: Food Network is carried on the third tier. That is the lowest
penetrated of the tiers. For it to move to the second or first would only
improve its carriage. So, all we were really saying was, we would be happy with
the place we have right now -- and to be even clearer, we don't really say, and
we don't really intend to say, if we have, at some point, we regret it because
it does -- I think it isn't in our purview to suggest we would like to be
Channel 57. We are not suggesting that. All we are saying is: carriage; the way
it is today. And we haven't asked to move up a tier, to a more highly-penetrated
8019 I guess we thought about this from three
points of view. You certainly asked us, in the deficiencies, if we felt that
this request required amendment to the Regs, and our view was that is an
approach, but we suggested that a condition on the licence was an appropriate
way for you to go -- and I hear Commissioner Wylie suggesting that that isn't an
alternative or in your --
8020 COMMISSIONER WYLIE: Well, may not
8021 MS YAFFE: May not be.
8022 COMMISSIONER WYLIE: As I said, I wasn't, yet,
the last word on how to interpret our Regulations.
8023 MS YAFFE: Right. And so -- and, of course, we
always knew it may not be the ultimate way to go, although we think it is quite
a clear statement of what we would be willing to do and how we would use the
dispute resolution mechanism, which is really how one would find oneself in
trouble if we didn't achieve the results we wanted with distributors.
8024 Amending the Regulations, in our view, is a
slow and arduous process, although we realize that Regulations will need to be
amended as we go forward into the digital framework and there are amendments
that need to be made there -- maybe those are upon us.
8025 We suggested, or another suggestion was that
the distributors, the BDUs themselves, apply for a condition of licence, as
regards Food Network Canada, which would be a very straightforward one-page
thing that they would request, if they were willing -- if they were in a
position where they couldn't live with the carriage of Food Network because it
would be using up analog capacity they didn't have or we had not used previously
and could not negotiate.
8026 Under those circumstances, if a BDU came to
you and said, "We don't want to carry it. We weren't carrying it before and we
don't want to carry it on analog now and we would like to have an exception made
to this carriage rule", we would support them. That is our view of the rights
and the privileges this service deserves.
8027 So, it is another alternative. It may be a
little more cumbersome, in terms of asking them -- I think I should add, though,
that it is important to know that the CCTA itself has endorsed this application
and endorsed this approach, in general -- they certainly, you know, raised the
question of, "We want the same number on the dial" and we said, no, that we are
happy to change that. But the CCTA itself has approved and endorsed our approach
as -- and we have a commitment, now, a commitment in writing, from Rogers Cable
Systems, that they would be happy to add Food Network Canada on the same tier at
the rate we have suggested in our business plan, for at least four years going
into the future at that rate -- and that would be perfectly acceptable to us. So
8028 COMMISSIONER WYLIE: Why is it that you would
welcome Class 1s or 2s that don't carry you to come and ask us to give them an
exemption from carrying you? Is it because you wanted to alleviate the jumping
the queue? Or is it because it is something you want?
8029 MS YAFFE: No; I think it was what we thought
was fair and realistic to ask of people.
8030 If they had used up all their analog capacity
and there really was nothing else --
8031 COMMISSIONER WYLIE: Then there is no
responsibility, because it is always subject to available channel capacity but,
as you know, that includes all the American channels that were put there after
8032 MS YAFFE: Right.
8033 COMMISSIONER WYLIE: So it is just welcoming
more difficulty. Either -- well, I posit that either it is fair to do this and
we do it according to the Rules, or it is not fair and we don't get into these
complications. I am talking about the two concerns I expressed earlier that have
been expressed by interested parties jumping the queue and the other one is the
difficulties of the proposition you put forward to us, as a regulator, for
8034 So it is either in the public interest to lay
to rest the jumping the queue and then you fall within the Rules.
8035 Now, I am looking at your reply, Page 2,
reply to the CCTA, channel placement.
"The CCTA has expressed concern that Alliance
Atlantic --" (As
8036 I am quoting:
"-- requests that BDUs be expected to carry Food Network Canada on the
same unscrambled analog channel. The CCTA believes that cable BDUs should retain
control over the channel placement of services which they carry, subject only to
existing regulatory obligations and any arrangements negotiated with individual
programming services." (As
8037 Can you live with that?
8038 MS YAFFE: Yes.
8039 COMMISSIONER WYLIE: And that would be -- if I
am right that 18(5) says Class 1/Class 2 have to carry it, and you
negotiate, as best you can, where you are, using the available channel rule,
would that be something that would alter your business plan, cause
8040 MS YAFFE: I don't actually think so and I --
I suppose I don't think so because we certainly don't think that there is a
cable operator today hear in Food Network U.S. that would happily remove
8041 As a matter of fact, of course, because it is
an American service, they could do that at any time, if they chose -- and we
seem them not doing that. As a matter of fact, we see them adding Food Network
U.S. whenever it is possible.
8042 So, (a) we don't see it happening, from the
distributors' point of view; it is not in their interests, it is not in the
viewers' interest. Obviously, they have a popular service that is the second
most watched of the American services on the tier.
8043 Secondly, of course, with Rogers' commitment
already in hand, we feel very confident that the other distributors will feel
that this is an appropriate solution to the negotiation and we are hopeful that
it will become a common solution.
8044 And, third, of course, we believe that we
came up with a maybe more refined view of what the Regulations will allow,
compared to your view, Commissioner Wylie, but --
8045 COMMISSIONER WYLIE: I said imaginative.
--- Laughter / Rires
8046 MS YAFFE: Imaginative. And that is our task.
But I also think that we have --
8047 COMMISSIONER WYLIE: I was being polite, by
--- Laughter / Rires
8048 MS YAFFE: As am I.
--- Laughter / Rires
8049 MS YAFFE: But I think that when we sit back a
step -- I realize we all live in the Regulations, and, of course, that is
important to all of us, and we intend to live up to them, but we also have to
take a step back and just look at the opportunity that exists with this
8050 If we were to accept a licence that said we
had analog carriage as a Canadian speciality and it was up to us to negotiate
and go away and there you go, of course, we would be delighted with
8051 Our view was we had an imaginative solution
to the capacity issue.
8052 On the other hand, I think imaginative is how
we got here, in the first place, because what we said, right from the beginning,
is Life Network has a lot of food programming on in 1995-1996; people are adding
American services to the eligible list. What was our response? Our response was:
Is there a solution to bringing American services into Canada and creating value
from those services to the Canadian system and, actually, at some point, my
grading those services to Canadian-owned/controlled and Canadian majority
programming on those services -- and that is how we got here.
8053 So I would suggest, humbly, that we have --
that what we were doing was working with an approach that we thought brought
both public policy value as well as value to all of the elements of the
broadcast system and whether we choose to, you know, accept the suggestion you
are making is -- clearly, would have been our first preference. It would have
always been our preference to have unlimited carriage and have all rights of
8054 We were concerned that others would feel that
that was taking advantage of the system -- and, in our view, it isn't. I think
we feel it is a legitimate service.
8055 COMMISSIONER WYLIE: That is speaking to the
first concern, the jumping the queue, the equity, whatever.
8056 The second concern is the difficulty of
binding BDUs via your service with a generally applicable regulation and whether
-- not only is that too complicated and too long but is that fair to have a
regulation that says, "Thou shalt do X with the Food Network", which is
basically what it would indirectly do, because you will recall that even in
1996, we eventually had to enshrine that in the BDU Regs because that where we
speak to the BDUs.
8057 Now, digital. You have also made the comment
that you want the same right to digital access. I suggest that, quite possibly,
there is -- no one has any such right, right now.
8058 MS YAFFE: Well, timing is everything. We
submitted this before the digital framework came up and I say --
8059 COMMISSIONER WYLIE: Yes, it
8060 MS YAFFE: -- same access rules; they aren't
8061 COMMISSIONER WYLIE: Exactly. So your
imagination is being tempered, as well.
8062 MS YAFFE: Right.
8063 COMMISSIONER WYLIE: Madam Chair, these are my
8064 CHAIRPERSON OF THE COMMISSION: Thank
8065 COMMISSIONER WYLIE: Thank you very
8066 CHAIRPERSON OF THE COMMISSION: Alors, the
legal counsel, Madam Assheton-Smith has a few questions for you.
8067 MS ASSHETON-SMITH: Thank you.
8068 I just want to clarify a couple of
8069 Your proposed condition of licence on
independent production. I just want to read it back to you the way we would
probably phrase it to make sure that it reads correctly. This is your proposed
Condition No. D on Page 16 of the supplementary brief:
"Seventy-five per cent of all Canadian programming will be produced using
unaffiliated, independent producers and 25 per cent will be produced
in house by Food Network Canada. Sixty per cent of all Canadian programming
will be original in Year One, rising to 80 per cent by the end of the licence
8070 Is that correct?
8071 MS YAFFE: Yes.
8072 Can you just give us one second? We are just
8073 MS ASSHETON-SMITH: Sure.
--- Pause / Pause
8074 MS YAFFE: Thank you. Carry on.
8075 MS ASSHETON-SMITH: Okay. It is all cleared
8076 MS YAFFE: Yes. I think so.
8077 MS ASSHETON-SMITH: Okay. Coming back to the
proposed nature of service. Again, I just want to clarify for the record a
couple of things.
8078 Can you confirm -- when you were talking
about food films, can you confirm whether you intend to air programs from 7(d)
-- is it both 7(c) and 7(d)? Sorry. Is that correct?
8079 MS YAFFE: Our concern -- our request was to
air feature films, and I am not sure which --
8080 MS ASSHETON-SMITH: You are not sure which
category it fits into, but it is only one that covers feature films and not the
8081 MS YAFFE: That is right.
8082 MS ASSHETON-SMITH: Okay. The Commission
released Public Notice CRTC 1999-205, in December.
8083 Can you tell me whether any of the categories
set out in your nature of service need to be modified and --
8084 MS YAFFE: We don't --
8085 MS ASSHETON-SMITH: -- new definitions that
were set out?
8086 MS YAFFE: We don't think so, no.
8087 MS ASSHETON-SMITH: You proposed a wholesale
monthly fee of 12 cents, even though no basic distribution is
8088 Can your share your views on what -- how you
would react if the Commission remained silent on the fee?
8089 MS YAFFE: I think we have danced this dance
before and we didn't like it.
--- Laughter / Rires
8090 MS YAFFE: If the opportunity to be placed on
basic arrives, we would only burden the Commission with coming back and asking
for you to come up with a basic rate. So, for expediency sake, I would say just
it would help both of us, and so that is why we have requested it -- although
you are absolutely right, we don't have any basic carriage.
8091 MS ASSHETON-SMITH: If we did decide to deal
with this issue, what is the lowest whole sale rate that you would be prepared
to live with?
8092 MS YAFFE: Twelve cents is how we have done
our business plan, and we think it is appropriate. Whether we adjust it for
basic carriage or tier penetration, it all generally comes to about the same
8093 MS ASSHETON-SMITH: Thank you.
8094 Ad revenues play a pretty important role in
your business plan.
8095 If you have proven to be a little over
optimistic in your projections, in terms of your revenues, how would you handle
8096 MS YAFFE: In terms of our commitment to
Canadian content --
8097 MS ASSHETON-SMITH: Yes.
8098 MS YAFFE: -- we would soldier on and live up
to our commitments, as we have on all our licences, but we feel that it is a
realistic plan and although Brad would tell you it is always a struggle, I think
it is a very achievable target.
8099 MS ASSHETON-SMITH: But it wouldn't impact
your expenditures on Canadian programming?
8100 MS YAFFE: Not at all.
8101 MS ASSHETON-SMITH: I think those are all of
our questions. Thank you very much.
8102 MS YAFFE: If we can just ask your indulgence,
I think Kathleen McNair wanted to raise one point with you, if she
8103 MS McNAIR: I wasn't absolutely clear about
the condition of licence and Corus and non-voting or voting ownership
8104 So what I think -- after discussing it with
Michael and Phyllis -- that the Food Network Canada would be willing to accept
is that Corus' ownership of voting shares accord with regulatory requirements.
So that, for instance, I do not --
8105 COMMISSIONER WYLIE: We haven't decided what
the regulatory requirement is going to be.
8106 MS McNAIR: No, I know, but in the existing
specialty regulations, the ownership triggers, if this --
8107 COMMISSIONER WYLIE: Well, yes, unless, there
is a change as a condition of licence.
8108 MS McNAIR: Yes.
8109 COMMISSIONER WYLIE: But as -- if you didn't
understand, let's go back to what it is that the -- now, I am going to have to
find the section of the agreement where the parties themselves bind
8110 MS McNAIR: We would certainly agree. Corus
supports the Food Network in that if we wanted to increase our ownership
interest, or convert non-voting to voting, that that would trigger prior
8111 COMMISSIONER WYLIE: Yes, but that is an
agreement between the parties.
8112 What I was suggesting is, as a regulator,
would the proposed licensee have a problem in converting that to a condition of
licence which would be our mechanism, as opposed to the shareholders, as between
8113 MS McNAIR: We think it is appropriate if it
is a condition of licence.
8114 COMMISSIONER WYLIE: And the second question
that I asked Mr. MacMillan, as the proposed controlling shareholder of the
licensee, if the Commission chose to say, "We will give you a licence on the
condition that there be no Corus involvement", his answer was...?
8115 MR. MacMILLAN: We wouldn't like it one bit.
But if that were the only possible outcome, then we would accept it. We would
have an issue to deal with our fellow shareholders in the channel to work that
out, but --
8116 COMMISSIONER WYLIE: Because this is a
corporation to be -- it is to be incorporated, so we are not talking about the
best -- we are just exploring the hypothesis because that is what we do
8117 Are you satisfied now, Counsel?
8118 MS McNAIR: Yes, I mean Mr. MacMillan
speaks for the majority shareholder --
8119 COMMISSIONER WYLIE: No, but it is important
that you understand what we are talking about. If I was confusing, we are
interested in making sure that you understand. You may not like the questions,
but whether you understand them and understand the answer.
8120 MS McNAIR: No; I think if -- as
Mr. MacMillan stated, if the Commission imposed some sort of condition that
Corus cannot participate in this service, that is a matter that the shareholders
are going to have to work out at law, I would say.
8121 COMMISSIONER WYLIE: So, you are satisfied you
understand what the conversation was? Okay. It is Friday; I was trying to make
--- Laughter / Rires
8122 COMMISSIONER WYLIE: Thank you.
8123 MR. MacMILLAN: Thank you.
8124 CHAIRPERSON OF THE COMMISSION: Thank you very
8125 We will not go for the second phase of this
hearing, but we will take two minutes before we do. Thank you.
--- Recess at 1435 / Suspension à 1435
--- Upon resuming at 1445 / Reprise à 1445
8126 CHAIRPERSON OF THE COMMISSION: Alors, Madame
8127 MS EDGE: Thank you, Madam
8128 The next stage is Phase II and we have an
appearing intervenor from the Association of Canadian Advertisers. If you would
like to begin, sir.
8129 MR. REAUME: Thank you.
8130 CHAIRPERSON OF THE COMMISSION: Good
INTERVENTION / INTERVENTION
8131 MR. REAUME: Good afternoon.
8132 Madam Chair, Commissioners, Commission staff,
I am quite aware that it is late on a Friday and you have been here many more
days than I have and you perhaps want to wrap up, so I will try and be as brief
8133 Thank you very much for the opportunity to
appear at this intervention, we wish you well in your deliberations and are
pleased to be able to appear today and contribute the advertiser perspective to
8134 Allow me to briefly introduce myself and the
8135 I am Bob Reaume, Vice-President, Media and
Research, at the ACA.
8136 Since 1914, the Association of Canadian
Advertisers has been the only association representing the interests of
advertisers of all products and services in this country. We are the voice of
the Canadian advertiser.
8137 Our members represent a wide range of
industry sectors, including manufacturing, retail, package goods, financial
services and communications. They are the top advertisers in Canada, with
collective annual sales of close to $250 billion.
8138 Advertising is the primary resource
sustaining the Canadian broadcasting system. In all its forms, advertising is
estimated to represent an annual $10 billion investment in the Canadian economy.
Of this total amount, about 2.3 billion is invested, annually, in television
advertising. Fully, 51 per cent of that 2.3 billion comes directly from airtime
sales, making advertising the single largest contributor of funds to the
Canadian television broadcasting system. No other contributor to T.V.'s revenues
comes close. The second highest contributor is public funding, at 24 per cent of
8139 Advertisers are significant stakeholders in
the support of Canadian television broadcasting. Our community's views on the
development of television licensing has direct impact on not only our individual
and collective businesses but, consequently, on the growth of Canadian
television. That is why we are so pleased to have the opportunity to speak today
in support of the licence application that is before you.
8140 The Association of Canadian Advertisers
supports the Alliance Atlantis application for, essentially, two reasons:
Advertisers welcome and actively support the growth of all specialty channels;
and, two, the Alliance Atlantis propose would help repatriate Canadian viewers
and provide access to those viewers for Canadian advertisers.
8141 Allow me to elaborate on the first of these
8142 It seems quite clear that Canadians and
Canadian advertisers have warmly embraced specialty services. The most
pronounced growth in Canadian television has taken place in specialty
8143 According to the Television Bureau of Canada,
specialties showed 31 per cent revenue growth last year and a phenomenal
increase in revenue over the past five years of 220 per cent.
8144 In comparison, conventional television showed
an increase of 8 per cent, in 1998, and 24.5 per cent over the past five
8145 Advertisers have embraced and supported the
many and varied specialty channels that the Commission has licensed. The ACA
supports Alliance Atlantis' application because such a licence, if granted,
would represent a further expansion of specialty offerings for advertisers. It
would deliver to advertisers yet another qualified, highly-targeted consumer
audience for products and services of a particular kind: those interested in
programming related to food.
8146 We also support this application in light of
the growth in viewership by Canadians of U.S. specialty channels, channels which
Canadian advertisers not now have access to. Neilson(ph) Media Research tells us
that U.S. cable shares of Canadian, English-language viewing have gone from 3.3
per cent, in 1996, to 14 per cent, in 1999. This is a significant amount of
Canadian television audience that is completely, continuously and irretrievably
lost to the U.S. It is also a remarkable jump in viewership to which Canadian
advertisers have no access.
8147 It is interesting to note that only 10 U.S.
cable stations attract the substantial 14 per cent viewership. Listed most
popular to least popular, they are: A&E, WTBS, the Learning Channel, the
Nashville Network, CNN, the Food Channel and four others.
8148 A&E is by far the most popular, garnering
close to 5 per cent of English-language viewing on its own.
8149 In contrast, some 31 Canadian specialty
channels attract 37 per cent of English-language viewing. Yet even the most
successful of these, TSN, does not reach the share of A&E. In fact, TSN
comes in at a 3.8 per cent share, followed by Y-TV and SportsNet, each at 1.8
per cent, and Discovery, at 1.4 per cent, and so on.
8150 Particularly pertinent to this hearing,
however, is the approximate .6 per cent share that the U.S. Food Network
8151 If the applicant, Alliance Atlantis, is
granted a licence for the Food Network Canada, this will serve to repatriate a
substantial portion of lost viewing hours back to Canada and allow Canadian
advertisers the opportunity to reach these viewers while supporting a Canadian
8152 In summary, Canadian embrace specialty
channels. Both the Canadian public and Canadian advertisers who support these
specialty offerings welcome new services and expanded range of specialty
services is desired. More Canadian licences means more Canadian viewers are
repatriated from competing U.S. product and more advertising dollars to support
8153 For the welcome expansion in services and for
the opportunity to reach more Canadian audiences watching more Canadian
specialty programs, the ACA wishes to indicate its support for this unique and
8154 On behalf of Canadian Advertisers, I want to
thank the Commission for this opportunity to present their views, and if there
are any questions you may wish to ask -- although I am quite aware, again, that
this is late on Friday -- I would be happy to try and answer them.
8155 CHAIRPERSON OF THE COMMISSION: Thank you very
8156 I would ask Commissioner Grauer to ask the
questions -- and we are quite pleased it is Friday, rather than
--- Laughter / Rires
8157 CHAIRPERSON OF THE COMMISSION:
-- because that was the original plan, so we have all the time to ask all
the questions and really make sure we are taking full advantage of you being
here with us. Thank you.
8158 COMMISSIONER GRAUER: I don't have too many
questions but we would like to take full advantage of your being here because,
as advertisers, you do play a very important role in the broadcasting
8159 You stated that the revenues have grown with
both conventional and specialty television in recent years, with the most
pronounced growth taking place in the specialty sector.
8160 I would be interested to know how much the
advertising pie has grown, generally, with the introduction of these, you know,
new services and new mediums.
8161 In other words, how much is, like, a lot of
reallocation and how much is new?
8162 MR. REAUME: I think the -- I don't have the
figures with me, but I think, from 1998 to 1999, it is projected that the growth
is going to be about 8.5 per cent, that the pie has grown that much. How much of
that is related to inflation, how much of that could be apportioned by
individual medium is very difficult to say. But the pie continues to grow, and
has grown -- I don't believe I am mistaken to say it has grown at least a little
bit every year. Even in the recession years of 1981 and 1991, the advertising
pie still continued to grow.
8163 COMMISSIONER GRAUER: Again, I don't know if
you can help with this, but when there is a new genre, like food, does it bring
new advertisers into the medium?
8164 MR. REAUME: Unequivocally, yes. Because
advertisers will now take advantage of the content link. I am not speaking for
these specific advertisers but you can imagine advertisers like Kraft and
Nestle, food advertisers who can now discuss with the Food Network and others
imaginative campaigns and tie-ins with shows and the content on the network. So
it does bring new money and new advertising.
8165 COMMISSIONER GRAUER: But when you talk about
Kraft, or a large food company, they would, presumably, be advertising on
conventional. So, is this a migration of dollars from conventional to specialty?
Or is it new -- a new niche?
8166 MR. REAUME: Well, we get back to the question
of: would they reallocate internally. But I suspect that most advertisers --
just like the pie of advertising, most advertisers have an increase annually.
And, again, it is quite difficult to try and discover what portion of it would
be relatable to just a reallocation internally or creating new dollars for new
8167 COMMISSIONER GRAUER: I know you gave us the
growth figures for both conventional and specialty for, I think, up to 1998, and
the most pronounced growth in revenues was taking place in the specialty
8168 Do you have 1999 figures per
8169 MR. REAUME: I think I do. They come from the
Television Bureau of Canada and I could easily leave a copy with the Commission,
if you wish. I haven't computed the per cent increase but, as I said before, 8.5
per cent increase over 1998, I think, sticks in my mind. But we can get those
8170 COMMISSIONER GRAUER: I just have one last
8171 You have talked about the, I suppose I can
call it frustration of advertisers at not having access to these services and,
in particular, the U.S. services.
8172 To your knowledge, what is the extent, if
any, of advertising by your members to U.S. services, conventional or
8173 MR. REAUME: Specialty, I would say virtually
none. I am not aware of any Canadian advertiser accessing a U.S. specialty
channel just to reach the Canadian audience because the scale -- the scale is
not right. You would have a national specialty -- or a U.S. satellite service
covering the United States with rates that would reflect that geography. It just
is cost prohibitive to cover Canada in that way.
8174 However, conventional, there is a certain
percentage of Canadian advertisers who still use border U.S. stations,
particularly, the smaller markets, to reach a larger Canadian market -- I am
thinking of KVOS in Bellingham; Washington, to reach Vancouver; Buffalo stations
in Buffalo, New York, to reach Toronto; et cetera.
8175 Again, the scale, in that case, makes
economic sense because the rates that a small U.S. market can command are quite
attractive to the larger metropolitan Canadian areas, notwithstanding Section 19
tax advantage of the Income Tax Act, so. It is not huge, but advertisers will
still purchase some U.S. conventional television media weight to cover Canadian
markets because, even with the tax disadvantage, it still makes economic sense
for them to do so.
8176 COMMISSIONER GRAUER: So it is price
8177 MR. REAUME: Yes.
8178 COMMISSIONER GRAUER: Well, I don't think I
have any more questions. Thank you very much.
8179 MR. REAUME: Thank you.
8180 CHAIRPERSON OF THE COMMISSION: I do. When do
you think the market share that the specialty channels in this country has been
able to achieve over the last few years -- very few years, indeed -- will meet
with real advertising dollars so that it is not the subscriber who is supporting
the cost of programs so much?
8181 MR. REAUME: Is there a chance that specialty
channels will give up that revenue sometime in the future?
8182 CHAIRPERSON OF THE COMMISSION: No, well, is
there a chance that advertisers will pay more for the market shares
8183 MR. REAUME: Yes.
8184 CHAIRPERSON OF THE COMMISSION: -- are
getting through these specialty channels is my question.
8185 MR. REAUME: Yes, certainly there will,
because we see more and more Canadian viewers watching specialty services. The
audiences aren't -- with a few exceptions, the audiences are not huge. There are
a few exceptions in a few particular programs where the audiences are high. But
all of them will grow. And as they grow, advertisers will not have to purchase
hundreds and hundreds of spots on these specialty channels. Sometimes you get
actually frustrated watching the same commercial on specialty channels; it is
because in order to get any kind of critical mass, in terms of audience delivery
and rating delivery, they have to repeat it so often. But there will come a time
when the ratings and the audience sizes are of substantial size that the revenue
will just follow that.
8186 CHAIRPERSON OF THE COMMISSION:
8187 MR. REAUME: A particular year, I couldn't say
8188 CHAIRPERSON OF THE COMMISSION: Thank
8189 Oh, pardon me, there is legal
8190 MS ASSHETON-SMITH: Sorry. Just to clarify.
The TVB data, did you say that you had it with you and you can file it
8191 MR. REAUME: I looked at it and I don't have
it in my folder, but we will certainly get you a copy of it.
8192 MS ASSHETON-SMITH: Could you file it by
sometime next week? Would that be --
8193 MR. REAUME: By Friday next week,
8194 MS ASSHETON-SMITH: By Friday next week. Thank
8195 CHAIRPERSON OF THE COMMISSION: Thank you very
8196 MR. REAUME: Thank you.
8197 MS EDGE: I would like to find out whether
Paul Audley is in the room, the Directors Guild of Canada. Apparently
8198 That takes us into Phase III. So, if Alliance
Atlantis would like to come forward and respond to the interventions.
8199 CHAIRPERSON OF THE COMMISSION: Les phases
8200 MS EDGE: I beg your pardon?
8201 CHAIRPERSON OF THE COMMISSION: Terminal
phases. The conclusion.
REPLY / RÉPLIQUE
8202 MS YAFFE: Thank you very much.
8203 I want to thank Mr. Reaume for those
remarks and all the intervenors that supported our application in written
8204 We don't have an oral rebuttal, as we did
reply to interventions at an earlier stage, so we will not be making any formal
8205 We do have two things to add and, I guess, a
8206 Just to be clear, I don't think we got an
opportunity or thought of saying that the very same sort of understanding,
letter of understanding, that governs this channel is the full agreement that
covers HGTV with Scripps and we have not entered into a long-form agreement with
them for years, and have no intention of doing that. So, just background
information for you.
8207 And another point to the access rules. Not to
belabour the point but in your deliberations, no matter how one structured how
the access rules applied to Food Network Canada, we do not have any intention of
relying on the dispute mechanism, even if we are entitled to, for further analog
carriage other than in those systems carrying Food U.S.
8208 And I guess, lastly, it has just been -- it
is such an amazing opportunity to sit at the brink of something that we think
creates a public policy precedent that we hope others will follow; we hope we
will be able to use it again; and we hope that it allows the Canadian
broadcasting system to repatriate programs, viewers, advertisers and,
importantly, control over the system, as we have suggested.
8209 So, thank you for listening to us
8210 CHAIRPERSON OF THE COMMISSION: Thank you very
much. Thank you.
8211 Well, that concludes --
8212 MS EDGE: Actually, I just wanted to note for
the record that even though there is no oral presentation -- just moving on for
the other ones -- of the applications listed in Pages 16 and 17 of the Agenda,
they are, nevertheless, part of this public hearing and, as such, they will be
considered by the Commission and a decision will be rendered at a later
8213 CHAIRPERSON OF THE COMMISSION: Thank you very
much. I had forgotten about the non-appearing items.
8214 Well, that concludes our work for the week.
Thank you very much everybody, Madame, and all the intervenors who came forward,
the ones who wrote to us, and thank you for staff and my colleagues of the
8215 Thank you and have a great weekend.
--- Whereupon the hearing concluded at 1505 /
L'audience se termine à 1505