ARCHIVÉ -  Transcription - Hull, QC - 2000/08/15

TRANSCRIPT OF PROCEEDINGS

FOR THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

TRANSCRIPTION DES AUDIENCES DU

CONSEIL DE LA RADIODIFFUSION

ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUBJECT / SUJET:

APPLICATIONS FOR LICENCES TO OPERATE NEW PAY AND SPECIALTY

SERVICES FOR DIGITAL DISTRIBUTION / DEMANDES DE LICENCES

VISANT LA DISTRIBUTION NUMÉRIQUE DE NOUVEAUX SERVICES DE

TÉLÉVISION SPÉCIALISÉE ET PAYANTE

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

August 15, 2000 le 15 août 2000

Volume 2

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

Applications for Licences to operate New Pay and Specialty

Services for Digital Distribution / Demandes de licences

visant la distribution numérique de nouveaux services de

télévision spécialisée et payante

BEFORE / DEVANT:

Françoise Bertrand Chairperson of the

Commission / Présidente

du Conseil

Andrée Wylie Chairperson / Présidente

Jean-Marc Demers Commissioner / Conseiller

Ronald Williams Commissioner / Conseiller

Martha Wilson Commissioner / Conseillère

ALSO PRESENT / AUSSI PRÉSENTS:

Secretary / Gérant de

l'audience et secrétaire

Alastair Stewart Legal Counsel /

conseiller juridique

Peter McCallum Legal Counsel /

conseiller juridique

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

August 15, 2000 le 15 août 2000

Volume 2

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

PHASE I

PRESENTATION BY / PRÉSENTATION PAR

CTV Inc. 325

PRESENTATION BY / PRÉSENTATION PAR

BCE Media Inc. et al 562

Hull, Quebec /Hull (Québec)

--- Upon resuming on Tuesday, August 15, 2000 at 0830 / L'audience reprend le mardi 15 août 2000 à 0830

7458 THE CHAIRPERSON: Good morning. Welcome to day two of this hearing.

7459 Mr. Secretary.

7460 MR. CUSSONS: Thank you, Madam Chair.

7461 Our next applicant is CTV Inc. for CTV News Centre Nouvelles, CTV Newsnet BC, CTV Newsnet Alberta, TV.tv, The Digital Network, the Men's Entertainment Network, Discovery Health Channel, Exploration Network.

PRESENTATION / PRÉSENTATION

7462 MR. FECAN: Good morning, Madam Chair, and good morning Commissioners.

7463 My name is Ivan Fecan and I am President and CEO of CTV Inc. I would like to introduce our panel and to provide some background on the strategy of the nine exciting applications you will hear this morning.

7464 On my right is Trina McQueen, Executive Vice-President of CTV. On my left is Ken Murphy, President of the Discovery Channel. On Trina's right, is Kathie Robinson, Partner, Goodman Phillips and Vineberg, legal counsel to CTV and member of the CTV board. Next to Kathie is Nikki Moffat, Vice-President, Finance, CTV Specialty Operations. On the far right is Kathie Macmillan, President, Goldfarb Consultants.

7465 Behind me, beginning on my far left is Robert Hurst, Acting Senior Vice-President, CTV News. And his team for these applications: Vince Pons, Vice-President and General Manager, CJOH, Ottawa; Scott Hannant, Executive Producer of News, CJOH, Ottawa; Lynn Raineault, News Director, VTV, Vancouver; Reg Thomas, News Director, CFRN, Edmonton; Len Perry, News Director, CFCN, Calgary.

7466 And on the side panel, beginning on your far right are Joanne Macdonald, Managing Director, CTV News; Paul Brown, our consultant on this process; Monique McAlister of GoodMan Phillips and Vineberg; Elizabeth Duffy-MacLean, Director, Business Affairs, Netstar; John Festinger, General Manager, VTV, Vancouver; Bill Mustos, Vice-President of Dramatic Programming, CTV; Ed Robinson, Vice-President of Programming and General Manager of The Comedy Network; Paul Lewis, Vice-President of Programming, Discovery Channel. Joining us from BCE, Jim Macdonald, Senior Vice-President of Programming and Chief Media Officer, BCE.

7467 I would also like to recognize in the audience Brian Aune, our trustee. Brian, please stand. Thank you. And I would be remiss if I didn't recognize Mr. Ottawa, Max Keeping who is in the audience, and Craig Oliver, our CTV Ottawa Bureau Chief.

7468 I think it is clear -- I hope it is clear to you -- from this long list of introductions that CTV regards this as a very significant hearing.

7469 We, as an industry, the Commission and the viewers, are all embarking on a challenging, exciting adventure and CTV is delighted to be here.

7470 The digital world means a number of things: A lot more choice for viewers; real interactivity for television due to advanced set-top boxes, and the opportunity to narrowcast and thoroughly satisfy the viewer's interest in a tightly defined program genre.

7471 But digital will also mean a real test for the entrepreneurial skills of each applicant. Canada needs strong companies to deliver the results. Our team has shown the grit and stamina to take on though challenges and make them work.

7472 We have the creative and marketing skills to play our part in making digital a success and we would feel privileged to do so.

7473 Our Class One applications leverage our existing expertise, our knowledge of certain program streams, our technical infrastructure and our cross-promotion capabilities.

7474 I think you will find that our wholesale rates are among the lowest per genre, while our Canadian content levels are among the highest per genre. It all adds up to what we call the CTV advantage and how it will work for the system.

7475 We believe in Canadian television and the success of our Canadian program strategy shows a consistent ability to deliver on that belief. And at the end of the day, when you strip all the techno-talk away, digital is just a new platform to tell good stories in innovative ways. It always comes down to the content and that is what we love to do.

7476 Here is Trina McQueen who has primary responsibility for these applications to tell you more.

7477 MS McQUEEN: Good morning, Madam Chair and Commissioners.

7478 We have worked hard to choose and build applications that meet the Commission's criteria and we are proud of that.

7479 Let's start with Canadian programming. Our Canadian exhibition commitments are among the strongest of all the applications before you.

7480 On audience attractiveness, we make three points. The research shows that the demand for our services is very high, from 72 to 88 per cent positive interest.

7481 Our subscriber fees are among the lowest of all applications. These services will keep digital affordable. Our commitments to Canadian program expenditures are among the highest and that means high quality television.

7482 Our applications focus on diversity. Each one builds on a CTV strength to provide viewers with new ideas, fresh themes and real choice. And each application provides innovative use of interactive technology. Every one of our interactive ideas can be achieved with the technology available now, and each one will evolve as the strengths of digital are fully realized.

7483 Our business plans are reasonable, conservative, and we do have the ability to weather tough times.

7484 And here is a guarantee about how all of this can be achieved. It's the CTV team. Each CTV applicant that you will hear from has personally been there and done that. They have launched stations and channels and program services. They are proven creators of excellent Canadian content. They have delivered before and they are eager for the chance to deliver again.

7485 But what they will deliver, if approved, is different because this is the beginning of true interactivity, not the culmination, but the beginning.

7486 So we would like to begin with some thoughts on this next new thing, interactivity. We are positive and optimistic about interactivity and that is because we have done a lot of groundwork. CTV's Discovery Channel was the pioneer in Canada of television and the Web, and my colleague who led that pioneering effort is now the President of the channel.

7487 Here is Ken Murphy.

7488 MR. MURPHY: Good morning, Madam Chair and Commissioners.

7489 In the five short years since the Web entered our everyday vocabulary, Netstar and CTV have learned how to produce innovative, popular and distinctly Canadian Internet programming.

7490 We have developed a team of experienced professionals -- producers, journalists, artists and software gurus -- who understand what it takes to produce credible and attractive digital content on a daily basis.

7491 We launched the first television Web site in Canada and by a wide margin we produce the most successful science, nature and sports sites in Canada, and rds.ca is one of the most popular francophone Web sites.

7492 This fall, we are launching CTV News.com, en entirely new approach to on-line news which will make us a leader in the delivery of Internet video.

7493 Over the past five years, we have invested more than $15 million in Internet infrastructure and content development. We have the experience and the leadership credential when it comes to Canadian Internet programming.

7494 And we are excited about the prospect of Canadians interacting with their programs through the friendly remote control and familiar TV screen, especially the many Canadians not entirely comfortable with computers and software or more and more, and I am speaking from experience, for when the kids are hogging the PC.

7495 All of the digital channels we are about to present this morning have significant interactive components built on our experience.

7496 Let's take a look now at Jay Ingram as we walks us through some of the new features we are developing for @discovery.ca. Each of the CTV digital services will have their own versions of these programming features.

--- Video presentation / Présentation vidéo

7497 MR. MURPHY: These digital features are only available now to a handful of Canadians with advanced set-tops. But all are available through the Web, and by September 2001, they will be available through the set-top.

7498 CTV wants to build on our television and Internet programming experience to provide Canadians with attractive, sustainable and distinctly Canadian "next level" programming.

7499 MS McQUEEN: The threads of interactivity are woven through each of the channels we will present today and on the screens in front of you, the interactive sections will be identified as "The Next Level".

7500 Let's start our applications with three proposals in our of CTV's core strengths, and that is news. Our news chief, Robert Hurst, led the launch of CTV's successful Newsnet.

7501 Robert.

7502 MR. HURST: Good morning, Commissioners.

7503 We believe there is compelling need for all-news channels in British Columbia, Alberta and a bilingual service right here in the National Capital Region.

7504 People in these regions have expressed keen interest in having an all-news channel of their own. From our research, 88 per cent said they liked the idea.

7505 Now you know that news programming is always popular to Canadians and the most popular news programming of all is, of course, news from over the backyard fence, from across town and from across the region.

7506 These all-news channels will give viewers something they do not have now and that is continuous and comprehensive coverage of news and events that are important to them and to their region.

7507 We believe these regions are big enough to support all-news channels of their own in the same way that Toronto has its own all-news channel, CP24. As well RDI and Le Canal Nouvelles predominantly focus on Quebec.

7508 It is best to explain to you how these regional all-news channels will work by examples, by real examples, and as you will see on the screen in front of you, real stories, and that is why we have invited these News Directors from across these regions to come and talk to you today.

7509 First to Alberta, Reg and Len.

7510 MR. THOMAS: A few months ago, Alberta faced the possibility of a deadly meningitis epidemic.

7511 A grade 11 student at W.P. Wagner High School in Edmonton was fatally stricken with bacterial meningitis. Health care professionals urgently prepared a plan to vaccinate tens of thousands. The national news service covered this outbreak for a few days only.

7512 Alberta's existing television stations reported on scheduled news programs, but this wasn't enough. Newsrooms were overwhelmed as thousands of Albertans desperate for answers flooded the phone lines.

7513 The health crisis exposed the limitations of existing convention television news sources.

7514 MR. PERRY: Newsnet Alberta would have provided addresses of inoculation clinics. Live cameras would have shown parents which clinics had long line-ups and which didn't.

7515 Medical officers of health would have updated the public at a moment's notice putting an end to rumours that were starting to spread, and although two people died from the meningitis outbreak, 173,000 young Albertans were vaccinated. For the doctors and nurses, it was their shining hour. For the broadcast industry, it could have been.

7516 CTV Newsnet Alberta would have provided a critical service when Albertans needed it most.

7517 M. PONS: Le besoin était grand ici dans la région, comme plusieurs de nous l'ont vécu.

7518 En janvier 1998, la tempête de verglas s'est abattue sur l'Ontario et le Québec. Dans la Région de la capitale nationale les lumières se sont éteintes, l'électricité a manqué et on gelait dans nos maisons.

7519 Les bulletins de nouvelles nationales ont concentré leur couverture des événements à Montréal et ses environs. Mais aussi dans notre région, les tours de transmission se sont écrasées. Les fermiers ne pouvaient plus traire leurs vaches faute d'électricité.

7520 A CJOH, nous sommes allés en ondes en direct plusieurs fois durant la journée de la crise, mais malheureusement nous avons dû limiter la plus grande partie de notre couverture aux heures réservées aux nouvelles locales.

7521 MR. HANNANT: News Centre Nouvelles would have provided continuous updates of power outages, community alerts such as where and when new emergency shelters were opening and critical information like the location of emergency soup kitchens and food banks.

7522 CTV News Centre Nouvelles would have provided a critical service when people in the National Capital Region needed it most.

7523 MS RAINEAULT: In my region, British Columbia, politics are never dull. Consider this last year alone. Premier Glen Clark resigns, caught up in allegations of favouritism and the licensing of a gaming house.

7524 Clark is the third Premier forced to resign from office in recent years, and his successor, Ujjal Dosanjh, needs to call an election this fall or next spring.

7525 Newsnet BC would be there to engage viewers in the political process like never before at a time when voter turn out has dropped in each of the last four elections. Newsnet BC would allow voters to ask direct questions of each party leader, watch an entire speech instead of short sound bites, examine issues and party platforms page-by-page and word-for-word and would put live cameras on each campaign bus.

7526 CTV Newsnet BC would be a critical service when the community needs it, in this example, for the health of B.C.'s democratic process.

7527 MR. HURST: Commissioners, these three examples we have given you, of course, are big stories and you may be asking yourself, "Well, what about the rest of the year? What about every day?".

7528 Well, each of these News Directors will tell you that every day there are stories and issues and concerns that resonate across each of their regions.

7529 MS RAINEAULT: In British Columbia, we could tell you about the daily irritants of closures on the Lions Gate Bridge and ferry waits at Horseshoe Bay.

7530 MR. HANNANT: In the National Capital Region, we would be telling you about water quality on beaches, from Meech Lake to Mooney's Bay, or ski conditions at Vorlage.

7531 MR. THOMAS: In Alberta, we would provide live, full coverage of a news conference concerning a consumer recall or the latest medical advancement from the University of Alberta.

7532 MR. HURST: All of these channels will be 100 per cent Canadian in content and will provide an opportunity for more and more people in these regions to have their stories told and their voices heard. This comes at a time when the CBC is cutting back its local news efforts significantly.

7533 These regional services will also counterbalance the news landscape at a time when many of the news outlets in these regions will be controlled by a single owner.

7534 Telling stories about Canada and about Canadians is a core business here at CTV. We have been building our news reputation every day for 35 years. It is a reputation built on accuracy, fairness and balance and it is the kind of experience that will ensure the success of these regional news channels as an anchor channel and the success of your digital roll-out.

7535 MS McQUEEN: Commissioners, the Discovery Channel is the only television service ever to earn the Canadian government's respected Michael Smith Award for Science and from the beginning medicine has been an import ant part of Discovery's science programming. So the Discovery Health Channel is a natural.

7536 Here is Ken Murphy.

7537 MR. MURPHY: Madam Chair and Commissioners. Let's take a look at the service.

--- Video presentation / Présentation vidéo

7538 MR. MURPHY: A health channel requires a broadcaster with experience not only in television news and documentary programming but extensive experience dealing credibly with complex scientific research and technological information. Canadians have, in five short years, come to trust Discovery Channel in this role, rating us for the last three years the highest quality television service on the dial. Now, with CTV, the most watched and most trusted name in Canadian news, with our partners, Discovery International and BCE, we are ready to apply our scientific experience to the health genre.

7539 Discovery Health Channel wants to focus on issues unique to the Canadian healthcare system while never ignoring that health and wellness is vital to us all, regardless of where we live. We want to explore alternative experimental non-western and traditional healthcare, while putting all announcements and all approaches to medicine in context through expert scrutiny.

7540 We have solid, relevant experience. For example, our award-winning flagship program @discovery.ca provided Canadians with the most in-depth and insightful coverage of the recent human genome project. We have built strong links with most important research, scientific and health care organizations in Canada including: Health Canada, the Canadian Institute for Health Information, the National Research Council, and Toronto's Hospital for Sick Children.

7541 We deal regularly with a network of scientists in virtually every university in Canada, and we have very strong support from intervenors across the health field. We want to build on these important relationships.

7542 We have built a unique team of television and Internet producers and journalists able to wave through the complexities of rapidly-expanding science and sometimes exploding hype. Our team is the envy of science and documentary producers and broadcasters at international conferences.

7543 I'm very pleased to announce that beginning this fall @discovery.ca will be telecast daily in the United States. Another example of the growing international recognition of our unique expertise in the area of science journalism. Discovery Communications International has made a firm commitment to buy our Canadian health programs for distribution around the world.

7544 We want to build on our strong relationships with Canada's finest independent producers to jointly develop and produce a whole new stream of health and medical documentary programming with a clear Canadian focus. Discovery Health Channel will indeed be Canadian, delivering 70 per cent Canadian content from the start, high quality content.

7545 The flagship of the Discovery Health Channel will be a daily, one-hour program called HealthBeat. It will guide Canadians through the frequent announcements from the research and pharmaceutical communities, providing context and expert scrutiny.

7546 Our experienced team of science and health science journalists will provide understanding, insight and context beyond the two-minute headlines or the sound bytes. We will explore the complex health issues of the day as only a one-hour program can do. We will debate emerging health issues and medical ethics, and will look at the underlying and sometimes conflicting interests of the various stakeholders in the healthcare system. In summary, HealthBeat will provide a daily stream of quality, in-depth health and medical information Canadians can trust.

7547 We will create a new series of documentary strands including: 21st Century Medicine, focusing on an experimental and innovative developments in health science; Ancient Healers and Hands on Healing will explore traditional and non-western health practices; and Body Moves and Lifespan will focus on physical fitness and working toward a healthier lifestyle.

7548 Our digital journalists and producers will provide Canadians with: detailed explanations to help demystify sometimes confusing biological, scientific or technical terms; will provide quick links to national, regional and local healthcare establishments; and will provide a rapidly growing body of Canadian video health features available now through the Web and, over time, through the set top.

7549 We have the strongest interactive experience, and with BCE as a partner it will be even stronger. We have a solid business plan and in the health genre we are offering the highest expenditures on Canadian programming, $45.4 million over the license term, and the lowest wholesale fee at 25 cents. We commit to over 500 hours per year of original Canadian content, and through our partnership, Discovery Communications International, we will have unparalleled high quality program supply and we can ensure that Discovery Health Channel's programming is seen around the world.

7550 Discovery Health Channel is making a promise to Canadians. We will provide the highest quality programming, presenting health and medical information in an accurate, timely and responsible manner. We are experienced, we are qualified and we are ready.

7551 MS McQUEEN: Commissioners, as CTV's Head of Drama Programs, it's clear that Bill Mustos is behind some of Canada's best dramatic projects. There is no puzzle about that. Nevertheless, it is clear that in some ways Mr. Mustos is a man of mystery.

7552 MR. MUSTOS: Good morning, Madam Chair, Commissioners. To give you just a clue about what Shadow TV will be like here is a quick look.

--- Video presentation / Présentation vidéo

7553 MR. MUSTOS: I have been waiting for three and a half years to talk to you about Shadow TV.

7554 When I joined Baton in March of 1997, one of the first things I did was put a number of Canadian murder mysteries into development.

7555 While CTV does many forms of drama, we have come to realize that the mystery genre is a very compelling way to explore character, ethics, culture, history and matters of justice. In truth, we have a passion for mysteries, a passion which has resulted in expenditures exceeding $22 million in just the last three years. From the police drama, Cold Squad, to the Bookfair Murders, to the newly-launched series, Mysterious Ways, CTV loves a good mystery.

7556 Not surprisingly, Canadians at large are fascinated by a good whodunit. In a poll conducted by Goldfarb Consultants an overwhelming majority expressed a positive interest in Shadow TV: 86 per cent of our respondents said they would likely watch Shadow TV on a typical weekday for at least one hour.

7557 In addition to CTV's unparalleled commitment to the mystery genre, Shadow TV will also be able to turn to Discovery Channel for crime-solving expertise of the scientific kind. Discovery has explored the latest in forensic science and technology in programs like Exhibit A.

7558 CTV will commit significant resources to Canadian mystery programming: $350,000 will be spent on developing original Canadian screenplays, and at least 25 hours of original Canadian programs will be commissioned from independent producers each year

7559 Shadow TV will also develop original one-hour documentaries. The programs will highlight up-to-date forensic science techniques, from the latest in handwriting analysis to ballistics testing.

7560 But the benefits will not just be going to Canadian independent producers, screenwriters and directors. Shadow TV will also draw on the considerable talents of Canada's mystery novelists, bringing their words, their fictitious crimes and their detectives alive and onto the television screen, in many cases for the first time.

7561 You will see Gumshoe Inc., a half-hour magazine program airing Monday to Friday that will feature interviews and profiles of mystery writers and film directors. Throughout the week, viewers will be able to participate in the twists and turns of an interactive mystery game.

7562 And Case Closed, a series of one-hour documentaries highlighting the "how to" of sleuthing, including psychological profiling and DNA testing.

7563 There will also be lots of children's programming. A strong one-hour block from Monday to Friday and two hours on Saturday and Sunday. Young sleuths will match wits with their favourite detectives in Canadian productions of such classics as Nancy Drew, the Hardy Boys and The Magician's House.

7564 Shadow TV will encourage lots of interaction. For example, Cat and Mouse will allow viewers to play detective, creating their own mysteries, interacting with other mystery buffs and finding out the latest tricks in the detective trade.

7565 Over time, other interactive programs will allow viewers to select their own ending to a story or select a different camera angle to help solve the mystery.

7566 Shadow TV is unmatched in its genre: The highest Canadian content beginning at 53 per cent, rising to 70 per cent; the highest Canadian expenditure proposal as a percentage of revenue; a proven track record in the mystery genre -- over $22 million in the last three years; guaranteed program supply based on established relationships with independent producers; and, with the lowest wholesale rage of 23 cents a month Shadow delivers another plot twist.

7567 All this will require significant investment in programming to create new and original content. As the only Canadian network to have extensively developed and heavily invested in mystery and forensic programming, CTV knows what evil lurks in the hearts of men, and we can bring it to the digital screen.

7568 MS McQUEEN: Commissioners, Jon Festinger launched VTV, Vancouver's innovative all digital channel. For him that was an exciting emersion course in digital, he has never quite recovered, and that is how he led us to DGNet.

7569 MR. FESTINGER: Good morning, Madam Chair, Commissioners. Here is a look at what DGNet is all about.

--- Video presentation / Présentation vidéo

7570 MR. FESTINGER: Technology. It touches every part of our lives, and now it has given way to a new generation. The digital era is upon us and the world is embracing it.

7571 Although it can be easy to get overwhelmed, the possibilities make this a truly exciting time to be digital.

7572 DGNet will be the resource to demystify the technology, to support, to inform and to entertain Canadian families and consumers. From the Internet on your cell phone to smart appliances, Canadians need a place they can turn to when they are curious, excited and ready for this great technological adventure.

7573 With the new media strength of our partner, BCE, whose Sympatico service is the most popular Web site in Canada, we are in a wonderful position to help.

7574 Canadians love the idea of a technology network. Nearly three-quarters of those asked showed positive interest in DGNet's concepts and an even higher number, 86 per cent, felt that the potential subjects covered on DGNet are relevant to today's generation of viewers. With 54 per cent of Canadians having access to the Internet, compared to just 2 per cent a mere 10 years ago, it is no wonder that Canadians find this idea to be timely and relevant.

7575 DGNet's programming will offer a user-friendly, interactive experience that enables the entire family to not only learn and enjoy, but also to be full participants in this television experience. It will be a mix of interactive entertainment, introduction to the basics, and discussion with the experts.

7576 DGNet will present at least 13 one-hour documentaries and at least 65 half-hour series episodes in each year of the licence term from the independent production sector.

7577 DGNet will be made in Canada for Canadians.

7578 What's on?

7579 On DGNet viewers can look forward to programs like:

7580 "Digital Desk" -- DGNet's daily flagship show. "Digital Desk" will keep Canadians up to date with all the technology news of the last 24 hours. Canadians will be able to ask for help and get answers from the technology experts.

7581 "ScavEngine" is an Internet scavenger hunt, without physical or dimensional boundaries, designed for family enjoyment. Two parent-child teams will follow a trail of clues in an attempt to be the first to reach the secret web destination -- interactive family fun.

7582 "Wired Women" is a half-hour, studio-based program featuring the stories of Canadian women who are leading the digital revolution. Whether as a web master in the hottest high tech company or as a mom working out of her home, women are wired for the digital world.

7583 DGNet will be a leader in interactive applications by virtue of its genre.

7584 Being interactive will also be about enhancing the television experience, making it easy and enjoyable. Whether it is the uninitiated parent or her wired child techie, viewers will be able to play games with their families, access more information on the best buys, the "how-to's", or find the cure for those pesky system errors.

7585 The CTV advantage:

7586 At 23 cents, DGNet is the most affordable of the technology applications, and at 53 per cent, proposes the highest percentage expenditure commitment on Canadian programming in this genre. Combined with strong support to independent production and 58 per cent Canadian content rising to 75 per cent, DGNet is, in our view, the Commission's best technology choice.

7587 CTV and BCE's DGNet will bring to Canadian families and consumers a sense of confidence and amazement at the new role of digital technology.

7588 MS McQUEEN: Commissioners, before Bill Mustos came to CTV he launched the Canadian Television Fund, and that has given him an exceptional insight into the struggles and the glories of Canadian television. And that is the story of TV.tv.

7589 MR. MUSTOS: Let's take a look at what you will see on TV.tv.

--- Video presentation / Présentation vidéo

7590 MR. MUSTOS: In the digital world Canadian programming needs a venue where it can be showcased with pride. With TV.tv we feel we have come up with such a place. TV.tv offers a solution that will give Canadian viewers a roadmap and a guide to the full range of Canadian TV offerings.

7591 TV.tv is really three services in one. Its primary mission is to showcase Canadian programs, those who create them, and those who make them come alive on screen.

7592 TV.tv's second goal is to offer meaningful information about television and its place in our lives. TV.tv will engage in dialogue with Canadians about media literacy, tackling some tough issues: violence, television addiction, and children and television.

7593 Thirdly, TV.tv will offer a user-friendly program guide, searchable by every category imaginable, so that viewers can make informed choices in the 500 channel universe.

7594 How does it work?

7595 TV.tv will offer original programming in a new format; kind of a three-dimensional specialty channel. Shows will run from 5 to 20 minutes, with behind the scenes stories, outtakes, interviews and other angles that give viewers insight into the show behind the show. Scheduling would be designed to maximize exposure before the airing of an upcoming episode.

7596 We also realize that viewers need information repeated often, tuning in for short periods of time.

7597 The benefits of the service will be many, including: emphasizing Canadian priority programming from all sources; commissioning and acquiring the majority of TV.tv programming from independent producers -- stories, interviews, background pieces, trailers; accepting promotional material about Canadian television from all Canadian broadcasters at no charge to the producer or broadcaster; showcasing the work of Canadian broadcasting organizations like the Canadian Broadcast Standards Council, the Media Awareness Network and the Canadian Television Fund. And finally, bringing the next generation of viewers to Canadian fare first. In our research, people 18 to 29 led the pack in declaring their interest in this service. Eighty-five per cent of them found the idea appealing.

7598 The TV.tv day will be divided into program strands with specific audiences in mind.

7599 At the start of the day "ParentsChoice.tv" will help parents gain insight into the upcoming week, with segments like "Critic's Choice", reviewing the best in children's television, and "Best of the Medium", offering the latest in media literacy issues.

7600 In the evening, "Cdnites.tv" will make priority programming a real priority. "Dramatically Canadian", for example, will showcase Canadian dramatic production, what is in production, what is coming up and what is winning awards. And "Cancom" will prove once and for all that Canadians are truly funny.

7601 TV.tv will always display the latest local channel line-up. When viewer's click through to their choice of programming, Canadian choices will always appear first.

7602 With the power of the next generation of set-top boxes, Canadian viewers will be able to click to find their favourite actors, directors, themes and episodes, and for local and national content.

7603 They will be able to offer their views on the programs available on-line and, eventually, on screen.

7604 Further options will include searching according to language, AGVOT ratings and captioning.

7605 CTV is stubbornly determined to put Canadian choices first in the digital environment. Ultimately, it will help pave the way to making Canadian programming on all services more attractive to viewers and, therefore, more attractive to produce and broadcast.

7606 With 50 per cent original content, CTV will promote the Canadian broadcasting system by celebrating the creative forces that make it happen. There isn't another service out there like this, with benefits this broad and far-reaching. And it is 90 per cent Canadian content for only 5 cents -- a digital bargain.

7607 TV.tv is an ambitious undertaking with a very simple goal. At the heart of it all, we want to give Canadian programs pride of place within our increasingly competitive and cluttered broadcast system, showcasing with equal emphasis programming from across Canadian broadcast services.

7608 MS McQUEEN: Commissioners, Ed Robinson launched the Comedy Network, so you can blame him for Mike Bullard, Carla Collins and Tom Green. When he launches the surprising Talk TV this fall, you will have a lot more to blame him for. But today we would like to blame him for MEN.

--- Laughter / Rires

7609 MR. ROBINSON: Good morning, Madam Chair. Good morning, Commissioners. As a man I feel like I should have a remote control in my hand so that I could say "Let's role tape on MEN".

--- Video Presentation / Présentation vidéo

7610 MR. ROBINSON: Despite what men would have you believe, we don't know everything. Here are some of the things that men wonder about:

7611 What is the material of those shirts that I don't have to iron?

7612 How do I start my stock portfolio?

7613 Where can I find the woman of my dreams?

7614 Should I consider an electric car as my next vehicle?

7615 And what is egg plant and what do I do with it anyway?

7616 The Men's Entertainment Network is designed to provide help in answering these and many more questions. We will offer advice on relationships: relationships with your spouse, with your children, with your parents. We will delve into lifestyles in urban Canada, in rural Canada and our diverse cultures across the nation. And fitness tips, like how to find those washboard abs and lose those love handles in the process? We will offer career advice, like approaching your boss for a raise, or changing careers, which might actually be connected. And certainly MEN will be a place for the joy of entertainment.

7617 Our vision is a network that engages and informs, dedicated to entertainment and topics of interest to men. The magazine industry is already tapping into this market. On any newsstand today, you are bound to find a variety of magazines dedicated to men's interest and we believe that there is an equivalent demand in television for a men's specialty service.

7618 Our research has shown that nearly 8 in 10 found the proposed service appealing. Focus group participants described it as "the ultimate channel" and "one stop shopping for what men are looking for". Participants saw it as a "real life" channel.

7619 Here are the highlights of this application:

7620 MEN will launch with 42.5 per cent Canadian content in year 1, rising to 60 per cent in the last two years of the licence term.

7621 MEN will spend $2.5 million on Canadian programming in its first year and over $20 million over the licence term.

7622 MEN will make a strong commitment to the independent sector, commissioning at least half of its original programming from Canadian independent producers.

7623 And the low wholesale rate of 20 cent will make MEN an attractive hub for any digital package, with a skew to the adult male.

7624 The combination of entertainment and information is key in driving digital.

7625 So what's on this service?

7626 MEN will address the interests and concerns of men of all ages and ethnic backgrounds, from aboriginal Canadians to newcomers.

7627 The programming diversity will be a strong feature of our flagship show entitled, "For Men Only". This is a magazine show with an interactive talk component. It will be a place to share anecdotes, advice, ideas, jokes, knowledge. "For Men Only" symbolizes what MEN is intended to be: a community for men to find the information they need and a place to gather and exchange ideas and opinions and to communicate with each other.

7628 "Man, Sex and Society" will be a signature series for MEN, a one-hour exploration of man's role in Canadian society. For example, "First Generation Canada" will look at the issues facing immigrant men new to Canada; and "Rights of Passage" is a program that explores the cultural differences of men across the globe.

7629 MEN will have themed program blocks for appointment viewing, from "Gadgets and Games" to "Consumer Reports" to "how to" programming, like how to BBQ all year round, how to refinish antique furniture, how to ask for directions -- well, maybe not how to ask for directions. And there will be no sports programming on MEN. That's already provided elsewhere.

7630 MEN offers interactivity a reason for being.

7631 MEN intends to capitalize on the computer and Internet interests of its audience, as well as the unique programming opportunities that new technology will offer. At the heart of this strategy is "men.ca, the men's club". men.ca will be a club with its own privileges, including a golf club where scores can be registered -- a basic human need for every golfer.

7632 Over time, viewers will be able to pull up tickers on demand for sports, for business, find how-to information at the click of a button, have access to a library of MEN's programming. And what men's service would be complete without a trivia section, from movies to vintage cars, to first edition books.

7633 As with all of the CTV applications, interactivity in the MEN's channel will be an inherent part of the programming on the screen.

7634 We envision the Men's Entertainment Network as a virtual club for men, a place for the guys to hang out.

7635 CTV has the experience in information and entertainment programming to bring this concept to life.

7636 We know the male demographic. We have the expertise in specialty television.

7637 CTV and its specialties have the track record in developing quality Canadian programming and building Canadian stars.

7638 And CTV has the commitment and the stamina to making the new digital frontier a success.

7639 The Men's Entertainment Network will be for and about men, a community and a gathering place, and with the final word going to Red Green, "I'm a man...I can change...if I have to, I guess."

7640 MS McQUEEN: Commissioners, our last application is our Romance Channel, but the "romance" we're talking about is the romance of the land, it's about the forces that shape our beautiful country and that shape us, too.

7641 Here's Ken Murphy.

7642 MR. MURPHY: Madam Chair, Commissioners, I'd like to show you a bit of the Exploration Network. It's going to be a fabulous service.

--- Video Presentation / Présentation vidéo

7643 MR. MURPHY: In many ways, as Canadians, we define ourselves by our geography.

7644 From the coureurs de bois, to the railroad pioneers, to the bush pilots and highway builders of the last century, we have built a country over some of the most expansive and diverse geography on the planet, but we have no television service devoted to helping us explore our nearly infinite geography.

7645 This is the vision of Exploration Network:

7646 To stimulate our sense of wonder about our land and the people who inhabit it.

7647 To explore the geography of Canada, to explore our people, our stories and our connection to the land and to each other.

7648 And Canadians love the idea of watching these stories unfold and understanding our connection to the land. In fact, over 81 per cent see Exploration Network as appealing.

7649 And let me be clear and direct: Exploration Network is not a travel service focused on the ways and means of airline, hotels, resorts, handy hints and the like. Just as there is no mistaking "Canadian Geographic Magazine" for a travel publication, there will be no such confusion with Exploration Network.

7650 Exploration Network is firmly rooted in the science of geography, cartography, anthropology and demographics. We will combine science with insightful storytelling, large doses of fun, a high degree of technical innovation and a distinctly Canadian attitude.

7651 We want to build on our strong relationship with "Canadian Geographic Magazine" and the Royal Canadian Geographical Society, an institution with over seventy years of experience in making Canada better known to Canadians and the world.

7652 We want to build on our relationship with the Canadian Association of Geographers, the Royal Ontario Museum, the Canadian Space Agency and the Canadian Museum of Nature, to name just a few.

7653 We want to build on our relationships with Canada's independent production community, committing at least $1 million per year fro original documentary programming.

7654 "Exploration Today" will be our daily flagship, from the team that brought you the first daily science and technology magazine show in the world, @discovery.ca.

7655 We will track the major expeditions to the remote regions of Canada and the world.

7656 We will track young voyageurs as they retrace the steps of their ancestors, making their own connection to this land.

7657 "Exploration Today" will help us understand the massive force of a glacier, while examining its microscopic beauty.

7658 Our "Canadian Geographic Presents" anthology will showcase the best in geographic exploration, with critical story development, promotional and editorial support from the magazine.

7659 "Elder Stories" will present legends and stories from Canada's aboriginal peoples and will be produced in association with aboriginal broadcasters.

7660 And "Life on the Farm" will bring all Canadians, but especially urban Canadians, a new appreciation of the bounty and the challenge of working the land.

7661 The Exploration Network will be intensely interactive.

7662 We plan a series of digital and 360-degree cameras to showcase some of Canada's most beautiful vistas and to allow us to recapture that serene moment by the wooded stream.

7663 Viewers will help map the Trans-Canada trail.

7664 They'll be able to play along with "The Great Canadian Geography Challenge" or connect to their local nature club or heritage society.

7665 Exploration Network is a fresh, unique and very Canadian idea, meeting all of the criteria for a Category 1 licence. It is overwhelmingly Canadian, offering 80 per cent Canadian content.

7666 It will add to diversity by focusing on people, their cultures and their vantage point on this land.

7667 It has a reasonable business plan, with an affordable wholesale fee of only 15 cents.

7668 We plan a high degree of digital innovation and Exploration Network will be a natural home for high-definition television.

7669 It will be built on CTV's regional routes and will leverage Discovery Channel's documentary excellence and scientific expertise.

7670 When combined with our strategic partnerships with the Royal Canadian Geographical Society and "Canadian Geographic Magazine", Exploration Network will showcase Canada like never before.

7671 MR. FECAN: And so, in conclusion, digital is about choice, and I hope you agree that we've provided some very interesting, fun and worthy Category 1 choices.

7672 We're proud of the support that all of our services have received, from independent producers and writers, to major Canadian institutions and associations, to interactive interests. We are thrilled with the enthusiasm from all sides for our applications.

7673 We would sincerely like to thank all of these intervenors for their support.

7674 Madam Chair and Commissioners, if we are licensed, that's just the beginning. Knowledge, expertise, creative skills and guts are essential to success. And as we've seen in the past, there are, inevitably, things that don't go as planned. And when the challenges arise, all of these elements will even be more critical. And that will be doubly true in the digital world.

7675 MS. McQUEEN: And CTV is up for the challenge.

7676 As you heard this morning, we are eager, we are excited and we have a dazzling array of applications. And viewers loved our ideas.

7677 We have gone beyond the Commission's criteria time and again in our applications with high Canadian programming and expenditure commitments, low affordable rates, high consumer appeal, programming and cultural diversity, solid business plans and strong interactive components.

7678 These will be the best and most attractive services that digital has to offer.

7679 We also have the greatest team. The best ideas need the best people. And the people you see here today have the experience and skills that will make the digital roll-out a success.

7680 We have the recipe for building digital, and, with your approval, we're ready to go.

7681 And we're even ready to answer your questions. Thank you.

7682 THE CHAIRPERSON: That is near-perfect timing. Thank you, Mr. Fecan, Ms McQueen and your team.

7683 Commissioner Demers, please.

7684 COMMISSIONER DEMERS: Good morning, Mr. Fecan, Ms McQueen and the CTV team.

7685 I will be the one questioning and you will see that there is some resemblance in the plan I will follow as what you have seen yesterday from my colleagues.

7686 So I will have general corporate questions, and then I will have particular questions on each application, and please if I decide to question you twice on the same application, you tell the Chair to stop me.

--- Laughter / Rires

7687 So on the general questions, corporate questions, I will touch the selection criteria, implementation of service, interactivity, Canadian programming and a question on the DVS.

7688 You have indeed commented this morning on some of these points, but I would hope you will be able to bring your remarks and add some comments on these particular points from a perspective of comparison of applications.

7689 So the first item: Selection criteria, and let me open like my colleagues have. The Commission has indicated certain selection criteria that it will use to license Category 1 services, especially Canadian programming, exhibition levels, amount of original production, Canadian program expenditures, contribution to program diversity, attractiveness and demand for the programming genre, and use of interactivity.

7690 My question is: What criteria do you think are most important in licensing Category 1 services?

7691 MS McQUEEN: Well, we have spent a lot of time, Commissioner, studying the criteria and thinking about that because obviously we want this to work and we have, I guess, emphasized two of the criteria in which we package some of the things that you have said, and for us the fundamental thing is attractiveness to audiences.

7692 It may be obvious, but that is obviously what will make people subscribe to digital, is if they find a package of services that they like.

7693 I guess here is how we think we can make the services attractive and fulfil our fundamental objectives.

7694 We think that there needs to be a high dollar commitment to Canadian programming because we believe that that will produce the original "never seen anywhere before" content that will make these services attractive and not just more of the same thing.

7695 We have done a thorough job on market research and we think that is very important in selecting a channel, and I would like perhaps when it is convenient for you, Commissioner, to really explain how we did our market research because there is some elements of it that you may be interested in hearing.

7696 Lastly, and very important, we think that low subscriber fees are important. We have all been through the scars of price objections for cable services, and we don't want to go there again. We think that low subscriber fees are an essential component in this overall rubric of audience attractiveness.

7697 And I guess the second fundamental for us is doability. I mean, we have, we think, great ideas, but between the idea and on-screen there is a lot of work, and I guess under doability the factors that we see are reasonable business plans. And when we say "reasonable", we mean that the assumptions that we have used for revenues seem to be grounded in some sort of logic, that the expectation of costs have also an experience behind them, and I guess finally that we are willing to wait for profitability.

7698 I think that is important, that we can't expect that these channels are going to contribute hugely to our profitability initially.

7699 I guess the last thing we really believe is that in the doability factors you have to look very carefully at the team that has been assembled and decide whether they have the track record, the infrastructure and the skills to bring these things to reality.

7700 So those are two fundamentals. Are these services attractive to audiences and can they be brought to the screen and kept on the screen successfully? And if you want a tie-breaker, we would suggest interactivity.

7701 COMMISSIONER DEMERS: Diversity, where would you put diversity in your approach?

7702 MS McQUEEN: I think we think diversity comes with the high Canadian content expenditure. Obviously, that will allow for a regional programming, and I guess having programs that haven't been seen before is a key element of diversity.

7703 If we are talking about the notion of cultural diversity, for example, each one of our applications does have specific cultural reflection and is designed to do that from, for example, Elder Stories on the Geography Channel to the Health Channel's wish to explore different kinds of medicine, non-traditional forms of medicine.

7704 We have been specific in suggesting cultural reflection as an important part of the diversity of our channels.

7705 COMMISSIONER DEMERS: Probably at the bottom of your answers was original production, but would you have particular comments on that point?

7706 MS McQUEEN: For these channels with their limited revenues, original production is not an easy thing to deliver. Nevertheless, we put our minds to it and each one of our channels has made commitments to original production and they range from 90 hours for the most difficult genre, which is the drama kind of programming that will be done on Shadow Television, to over 750 hours on the Men's Channel, and each of our channels does have a specific, and we believe large for the genre, contribution to original programming.

7707 I think it is in the application, but I do have a handy-dandy run down of what the contribution is from each service, if you would like that specifically.

7708 COMMISSIONER DEMERS: Well, the questions at this point were more of a general nature and as to a criteria that the Commission could use, would use, when studying all the applications and comparing them.

7709 Exhibition levels, have you any particular comments on them?

7710 MS McQUEEN: We think that our exhibition levels are really among the highest that you will see in all the applications in front of you. They range from -- let me see here -- I think really the lowest is 60 per cent and the highest is 90 per cent. So each channel does make a very significant exhibition level commitment.

7711 Generally, it is around the 70 per cent level, but in many of our cases it is, in fact, higher than 70 per cent.

7712 COMMISSIONER DEMERS: Thank you.

7713 Maybe one point that you have enhanced you would be ready to comment was on the market research. Certainly at this point, it would be interesting to hear some general comments on your market research and points that could apply to all applications or many of them.

7714 MS McQUEEN: Yes, I often think that you must get a little bit cynical about market research because you have so many studies in front of you which prove that the Explosion Channel will be -- everybody will be willing to pay $20.00 a month for the Explosion Channel.

--- Laughter / Rires

7715 But, in fact, we love science and market research is a science and Kathie Macmillan of Goldfarb is one of the preeminent scientists in this subject.

7716 Kathie, could you explain the research that we have done?

7717 MS MACMILLAN: Thank you, Trina. Commissioners.

7718 The challenge that we had was to support interest and demand in all the genres and the approach we took was a combination of qualitative as well as quantitative research.

7719 The quantitative research typically provides non only empirical data from which you can form your recommendations, but with the qualitative with it you also get the context in which to consider the recommendations. So you get to find out and drill a little deeper in terms of what people are really feeling inside.

7720 With CTV, we used a national sample of 3,000 respondents. Now, because we had many genres that we were testing, we actually put the five permutation of the survey together so we could ensure respondents would provide the detail of only three genres, yet ensuring each concept had a very robust English-Canadian sample size of at least 1,200.

7721 The concepts were rotated so you remove any bias from that way. The questionnaire was less than 20 minutes which also is very important because you get fatigue from the respondent otherwise, and rotating the concepts evaluated in each of the five permutations also increases the statistical reliability of the data for each of the network concepts.

7722 The aggregate sample of 3,000 has a margin of error of plus or minus 1.78 per cent, 19 times out of 20, which means it is pretty darn close to being the hard number, and the margin of error per channel is approximately 2.8 per cent, again 19 times out of 20.

7723 We used fairly descriptive concept statements because we now based on the hundreds of surveys and qualitative concept evaluations that we have completed that increasing the detail and description provided clearly increases the understanding on the part of the respondent and also, therefore, allows them to make a more critical decision: "Do I really like it? Do I like it a little bit?".

7724 We also use a ten-point scale and of all the research submissions we are the only one in there with a ten-point scale, the reason being again it provides for a much finer granulation on the part of the respondent to say, "How do I really feel about this?" and in the reports we have given you the summary of those who gave very, very strong endorsement and those that give also positive interest as well as those who give negative interest.

7725 With the marriage of both the qualitative as well as the quantitative we were also able to understand at what level is that positive interest because we were reading out a statement for a concept which is highly visual in nature and also requires people to think to the future on some of the interactive components.

7726 So I would say the Commission wanted proof of demand of Canadian relevance, of viewership interest and in each of the genres we have provided you with the data to support those.

7727 MS McQUEEN: Commissioner, the results that came out of this elaborate, and fairly costly, bit of research show that each one of the services has positive interest of above 70 per cent and the leaders, I would just like to read you, are Exploration with an 81 per cent approval rating, Health with an 84 per cent positive interest, and Shadow with an 86 per cent positive interest.

7728 But in no case did less than three quarters of the respondents expressed a positive interest in these channels and I should say that they were also questioned -- I am not sure whether you mentioned this -- on pricing to make sure that they weren't just thinking that they wouldn't have to pay anything for these channels.

7729 COMMISSIONER DEMERS: Thank you. So as to criteria, attractiveness and doability would be the two main ones that you have put forward.

7730 MS McQUEEN: They would be, but I can feel from the rear seats --

--- Laughter / Rires

7731 -- and as a journalist I must earnestly apologize that in fact the leaders in this audience research were, of course, the regional news channels which scored at a level of about 90 per cent. So I apologize to my colleagues.

7732 MR. FECAN: I would add that the attractiveness of the service -- you know, I mean, people watch programs.

7733 So, you know, for me, my bias as a programmer comes out, so what else would you expect me to say. But I also believe it to be true, happily, in this circumstance.

--- Laughter / Rires

7734 MR. FECAN: But I would consider that interactivity is part of the program. I mean, I understand it's a separate category that you are looking at, but the way we look at interactivity is that it's not some sort of techie add-on. It is baked right into the show and it is part of the creation of the show.

7735 So when we talk about interactivity, it is also part of the attractiveness of the program. It's not some sort of thing that's added in the assembly line after the show gets made. It's thought through in the creative process, and we think that the most compelling forms of interactivity will be something that's developed right when the program is developed and not just kind of added on later.

7736 So we don't mean to diminish that. We just kind of assume that that's done when the show is developed.

7737 COMMISSIONER DEMERS: Thank you.

7738 I will pass on to another point, which is the implementation of services.

7739 Should the Commission impose a minimum amount of time by which the Category 1 licensee must implement its service?

7740 MS McQUEEN: We believe that it is very important, Commissioner, to have a common launch of services, absolutely. As to the imposition of a time limit for licences, it seems on the surface a reasonable thing for the Commission to accept. One always is concerned that a Draconian measure like removal of a licence should have some process attached to it, so there may be --

7741 THE CHAIRPERSON: He has lots of experience --

7742 MS McQUEEN: With Draconian.

--- Laughter / Rires

7743 MS McQUEEN: So you could think a process up for that.

7744 But we are absolutely committed to making digital work. We believe that in order to make digital work, one of the things is that we roll out the most attractive, interesting set of services, including perhaps from the eligible list, and if I may break the Chair's rule, the Category 2 services, and that that should be a spectacular rollout at one given time.

7745 COMMISSIONER DEMERS: Thank you.

7746 Yesterday, the date of September 1, 2001, was put on the table. Do you have comments on that date?

7747 MS McQUEEN: A number of our services think they could be ready earlier than that, but we will wait and hang around, let everybody catch up, and we certainly can be ready to go by September the 1st.

7748 COMMISSIONER DEMERS: Thank you.

7749 You have just touched on Category 2, I think. Should there be some time frame? Do you have comments on a time frame for Category 2?

7750 MS McQUEEN: I think it's important that the rollout of this package be, and we have set that up as one of the fundamental things, affordable, so I think that should be a consideration in the launch of all these services. It's hard for us to give you completely helpful advice, although we are trying our best, because of not completely understanding everything that might be in the rolled out package.

7751 But certainly our belief is the most attractive, most affordable package should go forward on September the 1st, if that's the right date.

7752 COMMISSIONER DEMERS: Thank you.

7753 Then I get to interactivity. You were certainly here yesterday for some part of our discussion. You have proposed and described this morning through a video what interactivity was. You have proposed services involving interactivity via the set-top box. If a CRTC licence is a Category 1 service with interactive elements via the set-top box, do you think distributors should be obliged to carry those interactive components?

7754 MS McQUEEN: I think Ivan really -- what is it -- foreshadowed, I guess, is the dramatic word, foreshadowed the answer to that.

7755 I would like Ken Murphy to talk a little bit about that. Than maybe, Ivan, you could add some thoughts.

7756 MR. MURPHY: Picking up on Ivan's point that interactive content in digital programming is inherently created as part of the development of the program, we think that the two in so many ways are inseparable. Accordingly, it's part of the value proposition for the viewer.

7757 The notion that somehow the two are separable on either a technological or business grounds is perplexing to us, especially when you consider, for instance, that most set-top boxes today allow Canadians to flip to Web pages, foreign Web pages, in many cases. There has never been any suggestion that somehow these would, in any way, be restricted.

7758 So, once again, I think the notion that the Canadian digital content, that's an inherent part of a programming service, could somehow be restricted is confusing to us.

7759 MR. FECAN: So the direct answer would be we would think that every distributor should carry the interactive component.

7760 COMMISSIONER DEMERS: In the video, you have described what is happening as to interactivity on some of your actual specialty channels.

7761 Could you or could one of your team review that, in order -- you were there yesterday, so that you could take us from either what we have heard yesterday and compare it to what you are doing or just describe in more detail what is happening right now? I understand that is what you intend to use in the new services.

7762 MS McQUEEN: Ken, if you could talk about that a little bit in the context of the discovery issues, especially the set-top lab.

7763 Then, Bob, perhaps you could talk a little bit of the launching of ctvnews.com of examples of that.

7764 COMMISSIONER DEMERS: Yes. You can start where we are -- where you are.

7765 MR. MURPHY: I'm going to start with a comment that I had to promise my colleagues not to wave my arms and get too animated because frankly it's such an exciting time. For the last five years we have been focused on Internet content development and we are right at the verge of being able to truly bring these two program streams together in an elegant and intuitive way for viewers.

7766 Let me tell you a little bit about where I think we are.

7767 We have over 1 million set-top boxes in the filed today. Virtually all of those set-top boxes have modems and have capability to access Web content, IP or Internet protocol content. We are going to, through our lab -- we have a lab back at our facility where we haver virtually all of the set tops we can get our hands on, and we are truly bringing now the interactive formerly Internet and television programming together.

7768 It's working. What has to happen is we need advance set-top boxes deployed. I think I would agree with most of the forecasts that I heard yesterday, that we are 12 perhaps 14 months away from seeing advanced set tops actively deployed; and, clearly, we are going to see, over the coming years, improvements and new generations of boxes. That will, I think, be a part of the digital landscape for years to come, much as it has been part of the Internet landscape where PCs have various ranges of capabilities and so forth.

7769 But the boxes are out there now. They can access our digital content today. And tomorrow, a year or so, 16 months from now, they will be able to do so via the set-top box in an integrated and synchronized way.

7770 MR. HURST: On the news side, in a few weeks, in September, we are going to be launching ctvnews.com, which is a Web-based product which we describe as the next generation of delivery of news over the Internet. We use the words "next generation" because it is real moving, real streaming video, plus the ability to select stories that may have happened five minutes ago or 10 minutes ago from a menu.

7771 It is, in many ways, giving news consumers the ability to set their own, what we call in the newsrooms, their own line-ups. If they want more, for example, on -- now this is at a national service at this point -- if they want more on that terrible situation going on in the bottom of the Barents Sea with the Russian submarine and efforts to go and rescue those people or if they want more on the difficult situation right now with the Miramichi over the lobster fishery.

7772 If they missed it, they can set their own line-up.

7773 So this is a product, ctvnews.com, that we are launching in September: real streaming video and selectability.

7774 In terms, Commissioner, of your question about where are we now, I was struck yesterday by a discussion about the cameras on top of the PCs. I think that somebody described it as "What is that golf ball thing and when will we be able to use it on the Webcam System?"

7775 We are using now at CTV News, every single day, this Webcam network, with individuals who have the funny little golf ball camera on top of their PCs connected to various systems. We are using that every day to talk across this web system.

7776 Just summing up briefly, we in the news division are programmers. Interactivity to us -- essentially it is what we do: go out and interact with the community. We are not technicians, but we want to seize every opportunity to employ these technical facilities, and that is where we are right now in the news division.

7777 MR. FECAN: While that is a web-based product, clearly because there are very few interactive boxes out there, this is our kind of idea that first we will get the product up and running, and when the boxes come it becomes an interactive television product as well.

7778 So we are in there developing this content right now.

7779 MS McQUEEN: There is another fundamental kind of interactivity that I think is a revolution here. Television has always been an uneasy alliance between, on the one hand, engineers and, on the other hand, journalists and artists: two groups of people who are profoundly bored by each other.

--- Laughter / Rires

7780 MS McQUEEN: The difference this time is that we are not bored by each other. Engineering has become exciting to the creative side. And vice versa, engineers themselves are being inspired by the ability to be creative.

7781 So, to me, this real interaction between technology and creativity is the revolutionary part of this -- the exciting part of this -- and we see that, for once, it is creativity that is truly driving a technology. The result will be things that people will actually enjoy and use to enhance their lives and satisfy their curiosity. Whether it is the men's club, where they really do create an on-line kind of community, to critical services such as the news people are developing, for instance, on the meningitis epidemic, or the ability to talk with your remote control to a doctor and discuss the symptoms that your child might be having, all of these things will really mean that people, instead of watching television, will actually be doing television themselves.

7782 Excuse us for perhaps being excited, but we do see this as a wonderful platform, and one of the things that is really going to drive the digital world, and we are committed to making it work.

7783 COMMISSIONER DEMERS: Could it be said that if you were licensed and when it is the 1st of September 2001 that you may have programs, but the infrastructure or the technical applications may not be in place at that time -- at the exact time?

7784 MS McQUEEN: Yes. We anticipate that we will launch, as Mr. Murphy said, first with web-based products and the very first generation of Internet set-top boxes, but very soon after that -- and we are talking months after that -- we will see true interactivity in set-top boxes.

7785 MR. MURPHY: Part of the problem with getting set-top boxes out there -- advanced set-top boxes -- is that, in fact, so far it has been driven by bits and bytes and a better picture quality and this sort of thing. Really what is going to drive demand, which ultimately will drive the manufacturers and the standards setting processes for software standards and so forth, is consumer demand, and that will come from the kind of exciting and dynamic Canadian programming that we are describing here today.

7786 That is what is going to accelerate the roll-out more than anything else. We heard that repeatedly yesterday. We see that reflected in the CCTA and the Cable Lab reports as well.

7787 We think there is a growing consensus that ultimately the boxes will follow consumer demand, and consumer demand will be driven by programming.

7788 COMMISSIONER DEMERS: Thank you. In the same way, but on a different point, the Personal Information Protection and Electronic Documents Act will come into force in January. Have you taken measures to ensure compliance with this legislation as it relates to the components of services you have proposed, where the exchange, transmission, gathering and display of personal information takes place?

7789 MS McQUEEN: We will comply with every aspect of that law. More than that, it is our personal commitment that we will pay attention to privacy concerns at all times in each one of these services.

7790 COMMISSIONER DEMERS: Thank you. Canadian programming expenditures -- and, again, this is a general question which does not relate particularly to any application.

7791 Given the competitive operating environment the new services will be operating in, and the uncertainty relating to the digital distribution and requirements related to minimum Canadian content levels, is a condition of licence requiring minimum levels of annual Canadian programming expenditures necessary for digital services?

7792 MS McQUEEN: For us it is not necessary because we are going to do it anyway, but we would willingly accept a condition of licence.

7793 COMMISSIONER DEMERS: That is a good answer.

--- Laughter / Rires

7794 MS McQUEEN: A high compliment. Thank you.

7795 I hope that is not the first good answer.

--- Laughter / Rires

7796 COMMISSIONER DEMERS: There was discussion yesterday on these points, and I am sure you have heard the fact that in competitive applications it is an important point, and the fact that we will have digital is a fact, that there is Canadian programming that should be aired on digital frequencies -- specialties. The Commission's proposed condition of expenditure used an overall average -- and you will have heard that question before -- from a seven year projection to calculate the annual spending percentage. There were concerns expressed from some applicants on this approach, given the lack of flexibility it provides.

7797 If the Commission's calculation of the percentage remained the same but compliance was based over the entire licence term, as opposed to annually, would this alleviate the concern, do you think?

7798 MS McQUEEN: In our reply, Commissioner, on this aspect we did suggest a couple of alternatives to the statement that was given, but I know that the Commission has itself suggested a number of alternatives and I would wonder if Kathie Robinson or Elizabeth Duffy-MacLean would like to comment on those.

7799 MS ROBINSON: Yes. The Commission invited comments on alternatives, and in our filing we suggested a couple of alternatives that might be worthy of your consideration. Yesterday there was another alternative that was discussed.

7800 I think I might turn it over to Nikki Moffat, if it is appropriate to comment on the individual suggestions. But at the end of the day CTV's position on the record is that it was satisfied with the condition that the Commission had originally proposed.

7801 Obviously, measures which increase flexibility are always welcome, but we wouldn't take that to the level of saying that we had concerns. We appreciate the environment that the Commission has put forward, in terms of working together for things that work and coming up with the best possible measure.

7802 So perhaps I might, with your permission, Commissioner, turn it to Nikki Moffat to comment, if you wish, on the individual provisions.

7803 MS MOFFAT: Thank you, Kathie.

7804 We put forward two recommendations with the Commission. One of the methods we propose is a calculation based on total programming expenses for the years 3 to 7 and expressed as a percentage of revenues during the same period.

7805 The other alternative we have put forward is one where the starting point for the calculation was at the break-even EBITDA level. And, again, it would be a minimum...no-minimum requirement in the first year of the licence, but the condition would apply for the second year, thereafter.

7806 And we listened to another recommendation put forward yesterday by the Commission, where you would request averaging the percentage over the licensed term, and we would also welcome that recommendation, as well.

7807 MS McQUEEN: And I should say, Commissioner, that all of these flexibility provisions still leave a very high level of Canadian expenditure. For instance, in the Health Channel, the application, if taken on the first blush, would be a 72 per cent expenditure on Canadian content, which is pretty breath-taking.

7808 If you did it some of the other ways that have suggested, it still is a very high level of around 60 per cent. But we appreciated the Chairperson's desire to make this work and not kind of line us up and have us say, "Yes." But we do say, "Yes."

--- Laughter / Rires

7809 MS McQUEEN: We do say "Yes," as we have said on the record with you, but certainly the proposal that you've put forward is very satisfactory to us.

7810 COMMISSIONER DEMERS: Thank you.

7811 A more general question on another aspect, the DVS. Will your proposed service or services be technically equipped to allow for the broadcast of descriptive video?

7812 MS McQUEEN: Could I ask Elizabeth Duffy-MacLean to take the descriptive video.

7813 MS DUFFY-MACLEAN: Good morning, Commissioners.

7814 Commissioner Demers, perhaps we're somewhat optimistic, but we're certainly sincere about DVS.

7815 And just before I get to your technical issue, I think what we've really looked at is committing to acquire the rights, wherever possible. And part of that might come from the U.S. requirement to air descriptive video on the conventional networks.

7816 And I think I might ask Ken Murphy if there are any details on the technical aspects of DVS to add to that.

7817 MR. MURPHY: Well, I think the entire Canadian, and indeed international industry, is looking for standards and an elegant approach to descriptive video. And we're part of that process, but there's nothing inherently preventing, on a technological level, from us carrying descriptive video. So there's no magic to the fact that we're digital that would prevent that from happening.

7818 COMMISSIONER DEMERS: Thank you.

7819 Madam Chair, this would be the end of my general questions. Maybe I have colleagues. It's not a monopoly. So would you want I offer my colleagues some...?

7820 THE CHAIRPERSON: Yes. And once we complete this, it may be a good time to give you a break.

7821 On the question of CPE, as the hearing progresses and applicants may become more recalcitrant and insist on their plan for CPE, do you see a need for whatever it is that is found appropriate by the Commission to be applied equally to everyone, based on the numbers that were put forward?

7822 MS McQUEEN: Yes, we do.

7823 COMMISSIONER WILSON: I just have a couple of questions. The first one, I'd like to ask Ken Murphy a question about the interactivity.

7824 And we had a discussion yesterday about whether or not and how much additional bandwidth would be required in order to provide the kinds of interactive elements that you're talking about.

7825 MR. MURPHY: Well, there's really no one answer.

7826 COMMISSIONER WILSON: But would it double the amount of bandwidth? For example, would you need an entirely additional channel?

7827 MR. MURPHY: No, not at all.

7828 COMMISSIONER WILSON: Not at all.

7829 MR. MURPHY: Not at all.

7830 I think for some of our more ambitious interactive features, like segments on demand, that we clearly see down the road, those will have greater bandwidth requirements. But some of the Internet protocol, some of the digital on-screen features and so forth, are in fact very humble in their bandwidth requirements, especially when you contrast that with the consumer value and the viewer value that that brings.

7831 COMMISSIONER WILSON: So when we're talking about whether or not we should be requiring distributors to make the interactive elements available as part of the service, you're not really...I mean, there are still some capacity issues with digital because of the speed at which it's rolling out and the different ways in which the cable companies, in particular, are developing their digital offerings. So in the initial stages you wouldn't have any major concerns about how much capacity or additional bandwidth might be required in order to offer the interactive elements that you have planned for these services?

7832 MR. MURPHY: Well, bandwidth will never be infinite. There will always be limitations. But I think the real issue is not a technological one, so much as a balancing act.

7833 Ultimately, these services have to provide Canadian viewers with something they can't get elsewhere. We have talked a lot about the attractiveness of new, innovative digital features that really mean something to people, and I would suggest that the real issue is, in the face of limited bandwidth, how that bandwidth will be allocated. And I think it a strange notion that somehow we're going to drive digital programming services, which in turn drive demand for the boxes, enabling a whole new range of businesses for the distributors by limiting the very innovation that's an inherent part of the new digital services.

7834 COMMISSIONER WILSON: To make it attractive.

7835 MR. MURPHY: I just don't understand the logic.

7836 So I think it's much more: sure, there are bandwidth limitations, but let's focus then on what services are brought to the market and make sure that they are as exciting and innovative as possible.

7837 COMMISSIONER WILSON: And are you looking at the interactive elements of your services as potentially revenue generators? Or are they simply to increase the attractiveness of the service, in terms of content?

7838 MR. MURPHY: Well, we have a lot of experience -- over five years -- in developing business models and revenue models around our Internet programming, and we would expect there would be some similar opportunities around our digital features.

7839 However, I think the e-commerce component of that will be very modest for quite some time because so much has to happen for that to become mature and robust, not only with distributors and programmers, but indeed with retailers and banking services and so forth, and that is going to take years to fall into place.

7840 MS McQUEEN: Commissioner, let me just say that interactive revenue is very definitely a substantial part of our business plan, and I think it has to be with these channels. They are not going to be able to have the subscriber revenue if they are to be affordable. There will be great competition for advertising revenue in order to do the kind of Canadian programming that will drive digital. We have to look at that kind of revenue stream.

7841 But it shouldn't be a big problem because these are the services that will enhance digital, both the distributors and the program services have equal interest in that. So we should be able, with goodwill -- and there is goodwill on both sides -- to figure out a way to do this.

7842 COMMISSIONER WILSON: Okay. I just have one other quick question, Ms McQueen and Mr. Fecan. It seems to me that in sort of developing the attractiveness of your services that you have really put the focus on Canadian content in a very significant way, and I am just wondering what your opinion is.

7843 I remember when I was thinking about the whole idea of the digital universe and there was a lot of talk about what kinds of programming we would ultimately see there and talk about whether or not there would be a lot of original programming or if there would be a lot of repurposed programming, programming that came from somewhere else and was just all brought together in thematic packages to create a niche channel.

7844 I am just wondering what your views is of channels that do that latter thing. I mean, you have clearly in your strategy taken this one approach where you are saying, "We are going to put the focus on creating new" and Michael MacMillan from Atlantis Alliance said the same thing yesterday. You have to develop something that is going to draw people to pay for those boxes besides the electronic program guide.

7845 What is your view on the channels that sort of pull together a whole bunch of mystery programming that has already been on television, but brings it all together in one place where people can find those programs?

7846 MS McQUEEN: Commissioner Wilson, I think that that is a very valuable service and it really is in harmony with the idea of digital which is the reliability of turning on a channel and knowing it is going to deliver a very focused service, whether it is in a mystery genre or a new genre or a men's genre. In fact, that is the whole approach. Men's television is to gather a wide variety of formats and direct it at a single kind of community at that time.

7847 So yes, those services are valuable and we are looking at a number of them as Category 2 services. Our feeling on Category 1 services is that because they are being given a sort of privilege by the carriage requirement, that the original programming was the contribution to the system that you make with the Category 1 service.

7848 COMMISSIONER WILSON: The quid pro quo.

7849 MR. FECAN: But you know it is a balance and while you pose the question of original versus repurposing, I think both have their place, but I think both should be in any specialty service. When you think of our experience with specialty channels, it is original content that has really helped each one of our various channels find a name, get brand recognition, make a connection with the viewer. But the nature of the fragility of particularly a digital specialty channel means that you can't have original all the time so you have to have like content, repurposed content, if you will, as well.

7850 I think it is a mistake if you just really have repurpose and I think the more original you can possibly make work through leveraging your advantages or anything else, the better for the system and for the viewers. I think that -- you know, when you think of the channels that have come before this round, the ones that stand out seem to have branded original programming that people couldn't get somewhere else and I think that is why this is really important as part of the marketing thing.

7851 In a way, what we are all doing here is trying to make attractive the sale of these boxes so that more content, more voices, more diversity, more of a lot of stuff can happen in our country. I think in that respect interactivity and originality in content, I think, are strong marketing drivers, and also discreetness of genres so that people get it relatively quickly what it is the thing that you are proposing that they pay 20 cents for.

7852 MS McQUEEN: The interesting thing about repurposing is that sometimes it can be original because of the "getting it" concept. For example, on Discovery that channel does a lot of forensic programming that relates to mystery services, but if your concept of Discovery is kind of science and technology and you are a mystery fan you might never look at Discovery. Horrible thought!

--- Laughter / Rires

7853 But you might not. However, if you put those programs on a mystery channel where they fit and everybody gets it, it introduces new audiences to that kind of programming.

7854 COMMISSIONER WILSON: Thank you for your thoughts on that.

7855 THE CHAIRPERSON: Counsel?

7856 MR. STEWART: Thank you, Madam Chair.

7857 You have referred to the role of independent producers in your presentation today, in your applications, and have you got a definition of an independent producer that you would like to suggest to the Commission that it may wish to use?

7858 MS McQUEEN: Yes, we do, and I would ask Ms Robinson to propose that to you.

7859 MS ROBINSON: I might start with the legal part of the description and then perhaps I could turn it back to Ivan or to Trina for the rationale underlying that.

7860 When we considered the issue of independent production, we understand the Commission's needs to have some definitions that are workable and as we looked at this issue, one of the things that we felt that it was important in the definition of independent production company not to define it in such a way that an investor in a production company would be precluded from having the ordinary protections that would be afforded to a minority shareholder with a signification interest and those protections we find in the provisions of the Canada Business Corporations Act which give minority shareholders the right to block the passing of a special resolution and the reason we focused on a special resolution is because it is a special resolution that can alter the fundamental capital structure of a company which can change the business and those are the sorts of fundamental changes that we feel would be inappropriate to be made where a minority shareholder has a substantial investment.

7861 It is at the level of 33.4 per cent that a minority shareholder can block the passage of a special resolution. So the definition which we are putting forward for your consideration is that an independent production company be defined in which -- let's substitute CTV because that's the company we are talking about there -- where CTV owns or controls directly or indirectly less than 34 per cent of the voting shares.

7862 So we felt that that was an appropriate balance between -- as a suggestion for your consideration that that would be an appropriate balance between the needs of -- defining "independent" but doing it in such a way that typical protections that would be afforded to minority shareholders with a substantial interest would not be prejudiced. Perhaps I might just turn to Ivan or to Trina to comment further on the rationale, with your permission.

7863 MR. FECAN: In practical terms, you know, at an operating level, the difference between 30 and 34 is negligible -- neither controls an independent producer. But, as Kathie has pointed out, there are extraordinary things that can happen, and as a minority shareholder we would just want the normal kind of capital protection, you know, that we don't get squeezed out, that shares aren't issued without us having some ability to say something about it. These are fundamental changes to the capital structure of the business rather than anything to do with the ongoing operation of the business.

7864 So while on an operational basis I don't think there is really a substantial difference between 30 and 34, on a security of investment basis, on the security of your capital basis, I think it perhaps makes a slightly healthier case for investment in a company that engages in independent production. So that is why we would put that 34 per cent definition forward.

7865 MS ROBINSON: And the specific list of protections that we think are appropriate are found in section 173 of the Canada Business Corporation Act, and that was the section that we were focusing at in arriving at our suggestion on this issue.

7866 MR. STEWART: Thank you.

7867 The actual definition that you would suggest to the Commission is sort of the simple one that you have just relayed, and the reference to the Canada Business Corporation Act, is that for sort of an explanation? I mean, if there is going to be a longer definition, I think it would be helpful if you could file it in writing. Perhaps the best thing would be if you could file just your definition in writing for the benefit of the Commission and the public file.

7868 MS ROBINSON: We think the simple definition that we suggested embraces the provisions of the Canada Business Corporations Act, and that would be specifically, then, an independent production company for these purposes, be defined as a production company of which CTV owns or controls, directly or indirectly, less than 34 per cent of the voting shares.

7869 MR. STEWART: That's the definition?

7870 MS ROBINSON: That's the definition that we are suggesting.

7871 MR. STEWART: If the Commission were to go for 30 per cent, and I appreciate what Mr. Fecan has said, would that, in your view, be a significant disadvantage?

7872 MS ROBINSON: Well, I guess as we were giving thought to this we felt that there was little difference for the elements which are of concern, which is the notion of control, between 30 and 33.4 per cent. But at the same time, there is a significant difference between a level of 30 per cent, where a minority shareholder doesn't have those sorts of protections, and a level of 33.4 per cent where they do.

7873 So as we thought about it, we thought that this might be a definition which both answered your concerns but also answered the realities of investors who are investing and putting significant amounts of money into things and don't want to have their investment diluted or otherwise compromised. So we felt that to go from 30 to 33.4 per cent really made sense in the circumstances in answering both objectives without raising any issues in terms of control.

7874 So that was the reason why we are putting that forward.

7875 MR. STEWART: Thank you very much.

7876 Thank you, Madam Chair. Those are my questions.

7877 THE CHAIRPERSON: When you speak of the protection of minority shareholders -- let's call the broadcasting undertaking CTV and the company producer -- are you talking about the minority shareholders in the producer who should not be penalized by having CTV on board?

7878 MS ROBINSON: No. We were talking about the investment that CTV would be permitted to have in a production company without that production company being considered to be something other than independent.

7879 THE CHAIRPERSON: I would have thought that it's the minority shareholders of producers who would be penalized by not being able to sell to CTV if there is a regulatory prohibition on CTV purchasing programming beyond a certain level from producers. You are talking about protecting CTV as the minority shareholder in the producer?

7880 MS ROBINSON: Yes. What we wanted to focus on for the Commission's consideration was what is an independent production company and what level of investment is CTV to be permitted to have in an independent production company without compromising that independent production company's independence.

7881 THE CHAIRPERSON: Ability to have CTV as an investor.

7882 MS ROBINSON: Yes.

7883 THE CHAIRPERSON: But you understand the other point, too, is that there is a penalty to the producer minority shareholder if he finds himself prohibited from selling beyond a certain point to CTV, Global, whoever, so there are more -- because our concern is not only control, if you use it in the sense of editorial control or programming, all looking the same, because it all comes from the same place, which is also controlled by the broadcaster, but it's the requirement of the Broadcasting Act to kind of spread the work around. Therefore, as there is concentration and vertical integration between producer and programmer, that may be the sole source.

7884 So it's not only control, it's also how much money going to producers comes right back on the screen of the programmer who has that producer as a shareholder or who owns the producer outright.

7885 That leads me to ask you whether voting shares is good enough or should it be all shares because of the last comment I made, that the flow of money to producers and back to the programmer not be a closed shop, so to speak.

7886 MR. FECAN: Madam Chair, we are not fussed about 30 or 34. We could live with either.

7887 THE CHAIRPERSON: No. But I meant voting shares as opposed to non-voting. Do you have a comment?

7888 MR. FECAN: The specific Act deals with equity, actual equity, and we are not fussed whether -- which way.

7889 THE CHAIRPERSON: Yes. But we are not too concerned about the Business Corporations Act. We are concerned about how to impose requirements on broadcasters and whether they are necessary or appropriate in certain circumstances to achieve objectives that are of interest to us as regulators under the Act, that is, try to see that the money that flows from broadcasters to the independent production industry is not concentrated in one pot to the advantage of our licensees.

7890 That's our concern. Of course, probably an argument could be made it would lead to more diversity as well. But my understanding is there is a specific section in the Act speaking to independent production, and we also want to hear whether these limitations are as important or as appropriate in a digital world where you need to put all the best possibilities of success in your basket.

7891 I was referring again to my dismay that there are 360 digital boxes in cable subscribers' homes at the moment, 359 and one in the Chairman's home.

--- Laughter / Rires

7892 THE CHAIRPERSON: We do need, then, to balance what is needed for this to work? As I mentioned yesterday, that is why we are raising this. Is it still appropriate? How should it be done?

7893 We appreciate your input.

7894 MS McQUEEN: The one thing -- perhaps we haven't gone beyond stage two of the question. Stage one is to figure out what a broadcaster affiliated company is. Stage two is to describe how that broadcaster affiliated company can have access to the broadcaster's production slate: yes or no.

7895 We have only described to you stage one, which is: How do we figure out what a real independent producer is? This is our proposal.

7896 The stuff about equity and voting shares is over my head, but certainly not over the heads of my two colleagues.

7897 That is step one: What is an affiliated company? We have proposed a definition for that.

7898 Step two is: How much access should these affiliated companies have to the licensee's production vis-à-vis other broadcasters? That is not something that we have explored yet.

7899 THE CHAIRPERSON: Yes, I take your point. My aim about trying to see whether there is a need for more flexibility could be achieved at your step two by raising the bar perhaps and finding a new equilibrium in the digital world. That is a good point. But you still need to define it, you're right.

7900 Commissioner Demers...?

7901 COMMISSIONER DEMERS: Thank you, Madam Chair.

7902 I had forgotten a question that I thought I didn't have to write down. It concerns Canadian content, or expenditures on Canadian programs. Do you think in its deliberations that the Commission should expect more from a large organization like CTV or any other which is as large and as involved in programming of different types? Should it emphasize more or expect more in comparison to another application which would not be affiliated to the type of operation you have?

7903 MS McQUEEN: I think our initial answer to that question goes back to our fundamental point, which is: Let's make digital work. Let's get the most attractive services for consumers at affordable prices. That is "job one", as they say in the advertisements.

7904 Our feeling is that when you look at this roll-out and when you look at Category 1, the attractiveness of the services and the doability of the services should be top of mind.

7905 Then I think you have to look at the contributions each one is willing to give to the system. We have taken that responsibility, I think, significantly to heart.

7906 We are proposing very high commitments to Canadian content. We are proposing very high conditions of licence in terms of expenditure. We have committed to interactive ideas and generation.

7907 Over and above that we have other things to offer to help the roll-out of digital. We have cross-promotional abilities across our platform of stations, which we think will really do a strong job for all services in helping this digital roll-out be a success.

7908 We have marketing and financial and affiliation agreement experience which we think will help it to go smoothly.

7909 I think what we are also able to do, I think if you look at our EBITDAs, is that we have been willing to make a greater contribution by taking a long-term view of the profitability of these channels. At the end of seven years -- and I hope BCE stock doesn't drop because I am saying this -- The Health Channel will have lost $6 million cumulatively.

7910 We believe that in the year after that it will come into profit and it will be of long-term profitability.

7911 But in order to make digital work we have put forward extensive Canadian content commitments which are taking a long view of profitability. We believe that these are sound business investments, but we also believe that patience is a virtue to temper our greed with.

7912 COMMISSIONER DEMERS: Thank you. If I were asking in a negative way, would you think it would be discriminatory if we were evaluating the criteria a little and thinking of higher expectations from larger organizations such as yours?

7913 MS McQUEEN: If you mean, do you get points for being small -- extra points for being small -- if that is what you are asking, I guess I would ask you to consider whether or not that promotes the best possible digital package.

7914 I guess what I would say is that big and small have no exclusivity on great ideas, exciting program plans, solid business plans, diversity and affordable subscriber rates. We both can come to the table with those things.

7915 I guess that would be my answer. What has to be considered, I guess, is the ability of the service before you to deliver on its promises, and whether you think those promises will build digital.

7916 MR. FECAN: Just to take it a step further, or maybe to emphasize something Trina said, I think that you need to look at it from the point of view of whether that size -- the leverage -- all of those things that we think we have to offer -- whether that benefits the system. By having the highest expenditures, the highest content levels and generally the lowest costs, we think we are using our leverage and putting it to work for the system.

7917 I think that is a significant factor in weighing the discussion -- the different points of view that you brought forward. I think that if we can use what we have and what you have given us, for of course our own benefit and the system's benefit, then I think that is a good proposition for viewers and for the system.

7918 COMMISSIONER DEMERS: Thank you.

7919 Thank you, Madam Chair.

7920 THE CHAIRPERSON: For fear that the CCTA drives me out of town tarred and feathered, I want to correct the record. I intended to say 359,999 boxes in cable homes as of June 2000 and one in the Chair's home.

7921 Madam Bertrand...?

7922 CHAIRPERSON OF THE COMMISSION: I have a question about interactivity. Yesterday there was some discussion about: Do you see a difference in the way you will be able to provide interactivity to the viewer, whether you will be with the cable distributor or the DTH or MMDS distributor? Does that require some content alteration in order to be able to really get interactive to the viewer?

7923 MR. MURPHY: We are going to have a dynamic system, which I think is a euphemism for: We are going to have different return path capabilities out there as a fact of life for some time to come, and you have to take that into account.

7924 We heard some discussion yesterday that perhaps you program to the lowest common denominator. I don't think that is an appropriate approach. I think that one of the key advantages of digital programming is flexibility and versioning and customization and so forth. That is the approach we have always taken with the web where we have had similar challenges in the past. Is the Discovery viewer who is visiting exn.ca using a low speed modem or a high speed modem? We have been able to successfully, over the years, balance those two while always driving and pushing and leading with our content to ultimately drive demand for higher bandwidth. I think that will be the case with, for instance, DTH and cable for some time to come.

7925 CHAIRPERSON OF THE COMMISSION: Do you see that in your business plan and the concepts you have developed as being the responsibility of the licence holder and the program provider?

7926 MR. MURPHY: Ultimately, the viewing experience and the value derived from the viewer is our responsibility. Accordingly, we think that we are in the best position to customize that content based upon the different features of the distribution systems and platforms.

7927 CHAIRPERSON OF THE COMMISSION: So the rates that you are establishing here, if you were to be granted the licence, they would include the costs of providing that type of content, whatever the platform of distribution might be?

7928 MR. MURPHY: Yes.

7929 CHAIRPERSON OF THE COMMISSION: All right. Thank you very much.

7930 THE CHAIRPERSON: Thank you.

7931 We will now give you a well deserved 15 minute break. My watch is probably not the same as the clock, but, anyway, my watch governs.

--- Laughter / Rires

7932 THE CHAIRPERSON: Fifteen minutes. Thank you.

7933 Nous reprendrons dans 15 minutes.

--- Upon recessing at 1045 / Suspension à 1045

--- Upon resuming at 1105 / Reprise à 1105

7934 THE CHAIRPERSON: Welcome back to our hearing.

7935 Commissioner Demers, please.

7936 COMMISSIONER DEMERS: Thank you, Madam Chair.

7937 I will first start with questions on the three regional news applications.

7938 The topics I will touch upon will be the fact that you have an application as a Category 1 for these three. Interactivity, if we have more to say, the nature of service, the carriage, the synergies and diversity and impact on conventional or other services.

7939 So let's start with the fact that you have applied for a Category 1 licence for those three services.

7940 Why would you have asked for a Category 1?

7941 MS McQUEEN: It is part of our fundamental belief in making digital successful. As I almost didn't tell you, the demand for those services, the news services, were the highest in the consumer research that we found. People over and over again talked about the consumer demand for the services. So given that we thought it would help make digital more attractive to put the high demand services as part of the initial roll-out.

7942 Kathie, I wonder if you could talk a little bit about the demand.

7943 MS MACMILLAN: Thank you, Trina.

7944 I would like to talk about two aspects. One, are some of the qualitative comments coming out and also some quantitative statistics behind it.

7945 First and foremost, the news overall appeal was the highest at 88 and 89 per cent for the regional stations in Alberta and B.C. In the City Centre we only did focus groups, so I don't have quantitative data for you because we wanted to explore the bilingual nature and could do that best by speaking to the respondents directly.

7946 One of the strongest areas of appeal in the quantitative is the breaking news programming at 94 per cent, and in fact that came out of the City Centre as well where people say, "I love the anytime aspect. No more waiting until 6:00 p.m. I get the updates I need on my time".

7947 I think there are significant issues that aren't currently covered and this is a way to have them covered and initiate public debate. "I like the option that I can go there to find any news item I need, more information, whenever I want to". In fact, the respondents said -- most indicated they would tune in every day for at least 10 to 15 minutes. They are looking for regional news that is relevant to them and their lifestyles. Their life is on the go. They want a digital program that provides them with the up to the minute news and flexibility.

7948 MS McQUEEN: We think these services in sum meet all the criteria that the Commission has out for Category 1 service. They do provide diversity and, as we said, we think that is especially important now with the two factors that we mentioned before, the one being the consolidation of news sources and the second is some cutbacks in existing local coverage.

7949 So given that with a very high demand, it seems to us that these services build digital and they are Category 1 services.

7950 COMMISSIONER DEMERS: Thank you, Ms McQueen.

7951 I will move along to interactivity, but we have already covered most of this, but maybe on a smaller item. You have referred to the regional services as all-news services in interactive plus.

7952 Is this what you have described a few minutes ago, Mr. Hurst or anybody else?

7953 MR. HURST: Let me just go through some more examples of interactivity because I think a lot of what I described to you is what we are doing on ctvnews.com which is, of course, our national news service.

7954 It is our plan and our expectation to break down the walls of the television newsroom. Right now in the television newsroom television, journalists are in a unique situation because they can see and they can watch all sorts of television news feeds coming in. You know, they can see pictures from helicopters, they can see pictures from the top of buildings, they can see all the material that they gather all day.

7955 There is a kind of a saying in our news organizations, in our news stations across the country, that of all the material we shoot and all the material we put to air, 80 per cent is left on the cutting room floor -- 80 per cent! We are often criticized, especially at election time, for sound-bite journalism. We have all that extra material.

7956 These news channels will provide us with an opportunity to take a lot of that material that we cannot put on air on our schedule programs. We want to make and we want to give viewers the ability to see all that material.

7957 Now specifically when it comes to interactivity, we want to be able to allow viewers directly to plug into the news sources that not only come into the television station now, but to be able to plug into our big digital file servers where all those stories are, plug in, select yourself whenever you want it.

7958 Our television screen is going to be a multi-screen that is going to give you the main window of the breaking news, the urgent, the vital news. Surrounding that are going to be data streams of local stock-market quotes from here in the National Capital Region or Alberta or British Columbia. Your local weather will constantly be on the screen -- constantly on the screen.

7959 So when we talk about interactivity -- and I want to ask Scott Hannant from Ottawa to talk a bit about our key program which is News Navigator and how on a daily basis on this program of News Navigator, how we expect to interact with the people in the community.

7960 Scott.

7961 MR. HANNANT: I suppose the News Navigator is one of the best examples of interactivity and what is interesting about the interactivity on these regional news services is that they go beyond normal interactivity, that is just going in, getting information and navigating through the Internet.

7962 These services allow people to participate. They allow people to drive the direction of the news. Let me give you an example of how people might be invited to become involved.

7963 We all remember the traffic chaos on Elgin Street. If News Navigator had been then -- if we had had these services then -- we could have connected live to our City Hall camera and got the official who was in charge of all that chaos, which looks so lovely now.

7964 We would send our mobile camera to Elgin Street and perhaps talk to people stuck in the gridlock. We could consider a live camera at the Rideau Centre where people had to go through the mess to get to, and we could activate our traffic and Interprovincial Bridge cameras which would be connected to our Web site, and also connected to our Web site would be maps that would tell people, that would provide information to them about what roads were closed, what roads were open.

7965 In other words, information that they could use and interact with and we might create Internet hot buttons to relevant sites at City Hall, the NCC and OC Transpo.

7966 So all of this would allow people not only to get the information, but also to participate, to offer opinion and offer editorial direction to the program.

7967 MR. HURST: Vince, you had wanted to add to this?

7968 M. PONS: Dans la région d'Ottawa/Hull, News Navigator va être 100 pour cent bilingue.

7969 We will give our audience an opportunity to interact with us in both official language.

7970 MR. HURST: In terms of interactivity, I want to ask Lynn Raineault. We have in our application proposed a 50-camera initiative to install cameras and the question, Lynn, is where would you want to install those? And just before you start, the idea is for the viewers to be able to be their own journalists, to be able to connect directly. Quite frankly, we will be able to do it on the Web site. We expect that within a year of launch, we will be providing live television feeds of the cameras that are now only seen in the newsrooms. We want to be able to provide three or four sources within the first year, and then grow upon that.

7971 Lynn in Vancouver.f

7972 MS RAINEAULT: I can tell you, Commissioners, that on the lower mainland, I have already been asked for a camera in the GVRD offices. The Great Vancouver Regional District is a consortium, I guess, of 21 municipalities who feel that there isn't enough coverage of municipal affairs and they are quite right, and they are already in line waiting for a camera.

7973 But we could have them in so many more places. In the Alberni-Cladquot area of the Island, there are 55,000 people. That is more people than there are in West Vancouver, but the people from West Vancouver are heard from much more often. We could install a camera there. We could have cameras in places that people want to know about like the Sea-to-Sky Highway, when everybody is going skiing and how long is it going to take them to get there as they are Whistler and Squamish.

7974 So we plan to roll-out the cameras by the third -- or have to have the full component of 50 cameras by the third year, but I can tell you that there are people who are asking for them now.

7975 MR. HURST: When we talk about the demand for this service, I think this is one of the reasons that people look at these service as, "Yeah, I'd like that."

7976 We talked about the meningitis story in Alberta. This crisis among families in Alberta last winter, when, unfortunately, one person died, and the entire teenage and youngster population was inoculated, this would be an example of a way, not only as a big story and a vital news source in a critical time, but people would be able to actually turn on their television, or through their digital box, if that technology -- we hope -- is available, or certainly through the Web site, to be able to actually see the length of the line-up at their local inoculation clinic because we would have moved one of our hot cameras to that crisis situation.

7977 And I know this is a long answer, Commissioner, but I just did want to add to Trina's comment about: why a Category 1?

7978 We are planning with these 50 cameras to do a high-quality news service. It takes a significant investment. And I just make a comment that yesterday our chair, Commissioner Wylie, talked about the risky nature of these national channels that we are proposing. These news channels that we want to do are much, much riskier than the national carriage. Our subscriber base is going to be significantly smaller than the national digital subscriber base. The risk to us on the news channels is quite significant and that's why -- and I think Commissioner Wylie also used the words "guaranteed carriage" -- we need "guaranteed carriage" to be able to make the kind of investment for the purpose...to build the kind of service, the vital service, that we proposed.

7979 MS McQUEEN: If I just say one last thing about the criteria.

7980 One of the things about the communities that we are talking about, the three communities, is that each of them has significant populations in multicultural areas. One of the continuing complaints from these communities is that they are only seen on television in aspects when there is bad news involving their members. Having a 24-hour news channel will enable us to truly represent the entire population of a city -- the good times, the ordinary times and the bad times.

7981 Unfortunately, with scheduled news there is a necessity to bring people's attention to the aberrations from the system: the crimes, the diseases, the crises. With an all-news channel in a region, you can in fact reflect much more fully the diverse nature of that particular region.

7982 Because the demand is so high for that and because it will be spread among each section of the community, I think that's why, when you look at the people who intervened in favour, they were the people whose task it is, mayors or officials, to make a community out of the places that we're talking about. And what they're talking about is the ability to make their community come together or to allow their community to come together and function as a whole community -- all of its diverse parts.

7983 COMMISSIONER DEMERS: Thank you.

7984 So if I could conclude on interactivity, it will be either from the subscriber himself or herself or you would use that as a way of broadcasting?

7985 MR. HURST: Journalists, their job is to interact with the community, and we want to use, and are beginning to use now, some of these interactive tools. We talked earlier about that funny little golf ball camera on the top of your PC. We will use every means possible, as we are starting to do now, to become interactive because that's our job: is to interact with the community.

7986 We hope it is the digital box. We are programmers. We're not technical people. We certainly know there is capability now on the Web and there will be more and more capability to take real moving pictures and select moving pictures, and we're very excited to be able to interact much more with our viewers.

7987 COMMISSIONER DEMERS: Thank you.

7988 So just to conclude on that, if the three applications were approved and you would go on the air, what we are describing could happen immediately on the first day?

7989 MR. HURST: Much of it. And then the second day more of it. By the end of the first year, we will be...we hope to be, because we know we can do it technically now, allowing viewers to plug in directly to those newsroom sources that we have. And as technology goes...but your answer is: the first day, absolutely.

7990 COMMISSIONER DEMERS: Thank you.

7991 And just to come back on the camera initiative, also, this may be...will be used by the channels themselves, and also you would make it available to the public, I understand?

7992 MR. HURST: The objective is, absolutely, to make it available to the public. I suppose to a newsperson, always trying to get new names and faces and stories, drilling deep down into the community, these will be cameras that we want the public to use. We want to create a regional community townhall, be it an issue here in this area. I understand there may be a school strike in the Ottawa Carleton area among high school teachers. We might have a public forum. We might move our cameras to various important schools. We would certainly be installing cameras at the Board of Education. So the objective is very much to have the public use these cameras.

7993 COMMISSIONER WILSON: Thank you.

7994 I will move on to the nature of service -- and there again we're talking of the three applications.

7995 The "proposed nature of service" definitions for each of the three services does not explicitly include reference to the regional nature. Would you accept a revised "nature of service" definition that includes the region?

7996 MR. HURST: Absolutely. The purpose of these services is to serve the viewers in the region.

7997 COMMISSIONER DEMERS: So this is easier when we talk about B.C., about Alberta.

7998 Now, when it comes to the national capital, what is the National Capital Region, from your point of view, in this application?

7999 MR. HURST: I'm going to ask either Vince or Scott to comment on this, although there seems to be...is there a debate about this? And I only kind of stopped because I know when you licensed a regional news channel in Toronto, CP-24, I think there was the same discussion: where do the boundaries of a region stop? With the cable company, you licensed that cable company with a defined boundary area, so....

8000 I used to live here a long time ago. Who's going to take this one?

8001 MR. HANNANT: I'll take that.

8002 As executive producer of CJOH news, we feel that we broadcast to eastern Ontario and to western Quebec, and the Outaouais in particular. We consider ourselves to be the hometown station in many of the communities in this area and we consider ourselves to be the community station in these areas.

8003 For a better defined explanation to that, I turn to Nikki Moffat, who has the actual details, in terms of the distribution.

8004 MS MOFFAT: Our business plans are predicated on carriage in the Rogers, Cogeco and Laurentian cable system.

8005 COMMISSIONER DEMERS: Cogeco. And Vidéotron?

8006 MS MOFFAT: We have Laurentian Cable in the Hull region -- in the region of Hull.

8007 COMMISSIONER DEMERS: So, in a sense, it's the cable services that were defined up to where you would go outside the core cities.

8008 Could you describe more the service in the region -- in the capital region? And by that I mean your bilingual service especially: what it will consist, how it will...what it would be like on the screen for the subscriber?

8009 MR. HURST: Scott?

8010 MR. HANNANT: I think one of the things that's so attractive about this service is its bilingual nature. We want to build a service that will reflect the bilingual nature of not only this city, but of this area.

8011 As you know, many people live and work in both official languages in the office, and often, in this area, at home, and we would like to reflect that. Our flagship show, "The News Navigator", that host of that program would be fully bilingual. That program, as we mentioned when we were talking about interactivity, we would encourage people to participate in the language in which they feel most comfortable. And if a question was asked in French, then that question that question would be answered in French. If we were looking at a breaking news story, perhaps a building collapse in Gatineau, then we might interview the fire chief in French and summarize the key points that the fire chief made. The points of when roads would be closed, danger to the public, toxic fumes, that kind of thing, they would all be summarized and encapsulated in English.

8012 We would also provide a headline news service, and that headline news service would be exclusively in English and exclusively in French, so that people would get their information and the news they needed in both official languages.

8013 The screen, we refer to it as a "rich pallet of information" and that information, weather and stocks, as well as the scrolling headlines, would be provided in both French and English.

8014 COMMISSIONER DEMERS: Let's take the headlines. Be more precise. It would be full screen English and then full screen French or vice versa? Is that our split screen or did I understand you?

8015 MR. HANNANT: We would have headlines in English, with an English anchor or news navigator, the person hosting the headlines. They would be in English and then they would be in French, so that you would be able to tune in at a regular time and be able to get your news headlines in either official languages.

8016 MR. HURST: May I just add, because I know you have a follow-up question, what the screen is going to look like. It's going to be this rich palette, multiscreen with a main news window, surrounding that various datastreams, the local stocks here and the National Capital Region at the bottom, the local weather across the region and various streamings of information, both in French and in English, of community events and community headlines. That's the screen.

8017 I know you had a follow-up, sir.

8018 COMMISSIONER DEMERS: After that it's the audio that -- you can do all that on the screen at the same time -- well, most of it -- in two languages at least. It's easier to have the weather in the Arabic language but then the sound, the audio, would be the same. You can't have both at the same time.

8019 MR. HANNANT: The nature of the service is -- the bilingual nature of the service is described as bilingual and so we would do it exclusively in English and as well the updates would then be in French. So you would be watching and listening to English and the same anchor would have the ability, being fully bilingual, to give you those headlines in French as well.

8020 COMMISSIONER DEMERS: Are we talking about 100 per cent in both languages or 50 per cent? What's the -- a full day would consist of a bilingual service, nothing more, nothing less?

8021 MR. HANNANT: The full day would consist of a bilingual service. In terms of the balance, overall we would like the balance to be 70/30. We believe that that reflects the bilingual nature of the community. But the nature on a particular day or a particular hour would be driven the nature of the news, so that if there were a story about water quality in Hull where there was a boil-water order on certain streets in Hull. That story would be driving the agenda and that story would be more in French on a given day. On another given day it might be more in English.

8022 But we believe that it is the bilingual nature of this channel that is part of its attractiveness, and it is in our best interests to keep it bilingual and for it to reflect that bilingual community.

8023 COMMISSIONER DEMERS: That would probably be my last question.

8024 If we were reversing that, would something that happened in Ottawa always be presented in English and then condensed in the description you have made into French?

8025 MR. HANNANT: I think there are a number of different ways in which news can be presented.

8026 I think there are enough people in Ottawa that -- for example, if you went to a story that dealt with a City Hall issue, many of our city officials on both sides of the river are fully bilingual. What I would envision is as well as doing the interview in English it could be done in French, if that was the person who was being interviewed first language.

8027 You know, a lot of what we do -- as Bob said, 80 per cent of what we do ends up on the cutting room floor and sometimes that consists of French interviews where we are using a smaller portion of the French interview and then trying to translate it on the English we would have opportunity to present that whole interview.

8028 COMMISSIONER DEMERS: Thank you.

8029 Now more on the content of news. You have referred to the fact the people you have interviewed or your consultant has interviewed, that they want regional news, local news. Will there be a proportion of national news/international news coverage on your channels?

8030 MR. HURST: I think we said in our application, "B.C. Newsnet is about...", "Alberta Newsnet is about...", "National Capital Region, NCN, is about this region first, this region second, and Canada and the rest of the world third." We want these channels to be hyper-region. That's the purpose and the mission of these channels. There will be, because Canadians are still interested in events from Canada and from around the world, some small percentage of news from Canada and from around the world.

8031 If you are asking me for a percentage, I hadn't really thought about it as a percentage, and if you were to ask me -- I would probably have to go and look at our local newscast now and try to figure out what international component they have, but it may be kind of a frustrating experience because we are so popular in our local markets with our local news programming because they focus on stories that are primarily of importance to their viewers.

8032 MS McQUEEN: One thing we will say, these stories will be 100 per cent from a regional perspective. There will be no national stories and no international stories on these channels. They will be stories about, for example, Alberta and Alberta's interests. Let me give you a couple of examples.

8033 It is a local Alberta story what might be happening to the Mexican state-owned oil company Pemex. That story would probably not make the national news because it's not necessarily interesting to all Canadians. To Alberta, it is a very strong regional story and one that might come from Mexico but be about Alberta, in the same way obviously in Vancouver, with its large population, there may be stories of relevance about Hong Kong and about China that are of direct relevance to the people of Vancouver.

8034 One of things that I think in this modern age is that you have to do both. The old saying: does it think globally and act locally -- I can never get it the right way, but I think you have to be able to comprehend that your own region may have national and international aspects.

8035 For example, the Premiers Conference was last week. Each premier had his own particular news story at that Premiers Conference. We would not have done the meltdown of what happened at the Premiers Conference, but we would have focused on the particular premiers for each region. So there would be no stories, national or international, unless they were of direct relevance to the citizens of the community that the channel serves.

8036 COMMISSIONER DEMERS: Thank you.

8037 On a particular point now, I thank you for the questions yesterday concerning fillers. Maybe I should just pose the question and you probably are ready to answer.

8038 You have indicated that there would be some Category 15s called filler. And you also heard that usually the Commission doesn't consider that that category should exist for specialties. Have you thought about the answer to that question now?

8039 MS McQUEEN: We are wiser now than when we wrote the application and we, for the record, withdraw Category 15 from the categories assigned to the news channels now under discussion.

8040 COMMISSIONER DEMERS: Thank you.

8041 On carriage, could you confirm your carriage assumptions for each service?

8042 MR. HURST: Yes. I'm going to ask Nikki Moffat.

8043 Nikki, you go ahead.

8044 MS MOFFAT: For the news services, we have made assumptions that we will be distributed by those cable systems that operate in the regions where the program undertakings will occur. For instance, for the service Newsnet BC, it will be carried in the cable operators that operate in the Province of B.C.; and those cable systems are Rogers and Shaw.

8045 For DTH purposes, because we have applied for a national licence and the DTH signal goes nationally, we have made assumptions in our business plan that we will be specifically operating in a region. So we haven't taken the whole national distribution. We have taken a percentage to apply it to a region specific.

8046 COMMISSIONER DEMERS: Okay.

8047 Have you had discussions with the DTH operators on that?

8048 MS MOFFAT: No, we have not.

8049 COMMISSIONER DEMERS: Thank you.

8050 Synergies -- you have described certain synergies that would exist between the proposed regional news service and the relevant local stations. Could you please elaborate on the synergies that would exist between the regional news services, the local station, and the CTV Network and Newsnet.

8051 MR. HURST: I think to make these channels possible, to bring the kind of high quality stories to the viewers in these regions, it is best to start from an infrastructure that you have that already produces quality news programming.

8052 In each of these regions we will be using the infrastructure and the staff -- adding more staff -- as a very closely knit news organization.

8053 These newsrooms now know their regions better, I would argue, than no other broadcaster in that area. They are there to serve their regions and they would be part and parcel -- integral -- to the success of these regional channels we are proposing.

8054 MS McQUEEN: The other synergies, I think, that we should mention --

8055 It isn't only CTV News, the local stations and CTV Newsnet. We have TSN, which covers local sports and local stories about sports. We have The Discovery Channel, which daily covers aspects of science and technology and nature in various regions. We have The Outdoor Life Channel. We have Talk Television, which will do feature interviews with people for those reasons.

8056 Just like the 50-camera initiative, there is a wide range of CTV platforms which are doing stories in particular regions available to these news channels. That is an advantage which I think very few operators can provide.

8057 MR. HURST: Just in terms of other news materials, adding to Trina's list, we also have a partnership -- a news partnership -- a news exchange -- with TVA which will help us in this area, and we have a negotiation and a partnership with APTN to share news materials and facilities and bureaus across the country.

8058 COMMISSIONER DEMERS: Thank you.

8059 No doubt, if the three were licensed, would there be synergies among the three licensees?

8060 MR. HURST: Among the three? Probably not, in that they will be focusing exclusively on drilling down into the communities -- and I am talking about on an everyday basis -- into their areas.

8061 However, if there is a story from Alberta where it is unique to British Columbia and something happens -- for example, the terrible diaster at the Pine Lake trailer camp. I think some of those people were from British Columbia. That would be the kind of co-operative effort where they would exchange materials. They may even send a reporter.

8062 MS McQUEEN: Bob is, of course, correct that we want to make these channels distinctly regional so that there would be occasional stories. But one of the things that is very expensive in news production is graphics, for example. We would be able to have a common look for these channels. Marketing approaches, again, would be able to be shared. Infrastructure, in terms of financial -- and there is always a legal cost somewhere involved with news -- would be able to be shared.

8063 So the whole CTV infrastructure would be at the disposal of these channels.

8064 COMMISSIONER DEMERS: Thank you. Are the three applications tied together? In other words, could the Commission license one without licensing the three?

8065 MS McQUEEN: You would break our hearts, but you could do it.

8066 COMMISSIONER DEMERS: Thank you.

8067 MR. FECAN: Clearly, from our point of view, since you are talking about 10 available slots, these three channels would fit into one of those slots.

8068 COMMISSIONER DEMERS: Thank you. On diversity -- and maybe we have already covered this, but maybe you could comment on this.

8069 Would there be some programming overlap between the proposed regional services and other services that you have? From that point of view ...

8070 MS McQUEEN: We don't think there would be any strictly duplicate programming because anything that was used from one to the other would be put in a new context, packaged in a different way, with different hosts and in a different context.

8071 COMMISSIONER DEMERS: And the reverse? What impact would the proposed services have on the local service of a conventional broadcaster?

8072 MS McQUEEN: They would strengthen the local services. The more resources you have in the community, the more cameras, the more reporters, the more sources, the better your overall news service is. It is not just the local stations. They would be the first beneficiaries, but Newsnet and CTV National News would also be able to do a better job for the viewers.

8073 COMMISSIONER DEMERS: But would you have other comments on the local service of other licensees?

8074 MR. HURST: Of other licensees, yes.

8075 Conventional television?

8076 COMMISSIONER DEMERS: Yes.

8077 MR. HURST: I think what we are proposing here -- it is a 24 hour, all-news channel. It is a new distinctive service. The objective of the service is to drill down into the diverse communities to assess all of that material on the cutting room floor.

8078 I am going to ask Reg to talk a bit about Pine Lake and maybe Hub Oil in a minute, in terms of what we would cover.

8079 Conventional television has scheduled news programs, of course. But it makes up just a small part of all the other stuff they do -- drama, sports -- all that other stuff.

8080 Right now scheduled programming requires the viewer to conform to the schedule of the television station. All-news channels are quite the reverse. When we went to do our surveys, viewers wanted the news when they wanted it, against their hustle-bustle life.

8081 I think that perhaps to explain this the best: How would this channel differentiate from the news provided in these other areas?

8082 Reg, do you want to talk about Pine Lake?

8083 MR. THOMAS: Sure. I think the most important thing here is that we are looking at a totally different service. Conventional services right now are appointment television. This is a service that would serve a niche; that is, it would be there when the bureau needed it, on demand.

8084 It would also be a service that would be there and would change its program schedule to meet the needs of the community.

8085 In the event of something as disastrous as Pine Lake, we would provide extended programming that would go on beyond what is currently the option of the conventional broadcaster.

8086 Right now, in fact, the community, while it may have fallen off the front pages and it may have dropped in the lineups of the national news services, is still in need and still seeking volunteers.

8087 This is an area where we think we can provide coverage and also provide a service to the community to be able to allow the community to ask direct questions of people who may be in charge of the clean-up there and be able to participate in making some decisions about what it is that they want in their news coverage.

8088 This is not something that conventional, traditional, appointment television newscasts can offer today.

8089 MR. FECAN: If I could chime in here, you asked how it would affect other conventional services in an area. Our experience in Toronto with CP-24, which has been around now for a couple of years, is that we have not seen any lessening in our news ratings on CFTO. So it seems that something has been added for the benefit of the public and the system without hurting the existing other news operators, and we are evidence of that.

8090 COMMISSIONER DEMERS: Thank you.

8091 That would conclude my questions, Madam Chair, on those three applications.

8092 THE CHAIRPERSON: I have one question. Putting things back in perspective, you have already a national network news service. You are present, or available, through your stations to an overwhelming majority of the people in the areas you are going to serve, albeit through distribution undertakings in many cases.

8093 If I look at the National Capital Region, I think I am right in saying that there would be in year 1 34,000 subscribers to this service, and in year 2 47,000 in the National Capital Region. Is that correct?

8094 MS MOFFAT: Yes.

8095 THE CHAIRPERSON: With penetration, as indicated, these are your forecasts. That means that -- when I heard you so eloquently talking about toxic fumes and traffic jams and ice storms and water quality -- 34,000 of us Ottawans and Outaouaisers would have the benefit of this because we would have digital capacity, in the first couple of years.

8096 What comfort can you give us that you would still meet your responsibilities in CJOH, for example? Because there has been a lot -- I heard you, Ms McQueen, say that it would probably improve the service. That's true. I also heard that you would use 80 per cent of what ends up on the cutting room floor. Is there not a danger that over time that would be your focus and it would replace your serving Vancouver or Ottawa on your over-the-air station?

8097 Reminding ourselves that there are still a number of Canadians who don't even have analog distribution, never mind digital, Is there not a danger?

8098 As you know, in the last year or so, vis-à-vis the private sector and the public sector, there have been complaints that over-the-air stations are not serving their local public, and the Commission has been criticized for saying that -- it is so important, as Mr. Fecan was saying, that they will do it for their own commercial interest.

8099 But what is the danger of that happening; that it becomes your way of serving these communities?

8100 MS McQUEEN: Some of the answers, as you have already noted, have been given. First of all, the more resources a news organization has, the better able it is to cover stories for whatever platform. That is number one: increasing the capacity to cover news in the National Capital Region or in Alberta will benefit every news platform that we have.

8101 Number two, as you have mentioned, obviously there is a strong commercial interest in making sure that CJOH news or VTV or CFRN or CFCN continues to have large audiences. That is a strong commercial interest.

8102 And we do run a conventional service that is the major contributor to our bottom line, and will be so for a long time. We are private sector people and we do behave as private sector people. To us, the news is an extremely important part of the delivery of our audiences, and that's an extremely important part of the delivery of our revenue. But over and above that, it's our brand. It's our core competency. It's the strength. It's one of the banners that we wave. The most precious thing that we have is our brand. One of the most precious parts of our brand is our news services, especially the local ones. That is a strong impetus for us to continue to be the choice of Canadians in every community.

8103 MR. HURST: Commissioner, may I just add something?

8104 THE CHAIRPERSON: You can assure me that if there are toxic fumes in Westborough in a few months, I'll see it on CJOH?

8105 MS McQUEEN: You will, indeed.

--- Laughter / Rires

8106 MS McQUEEN: And I guess when you talk about 34,000 or 47,000, the fact is that those are households, not people. So we could increase the number of toxic fume knowledgeable people a little.

8107 THE CHAIRPERSON: Sorry. Now, that I've gotten rid of my children, I count myself, not according to Statistics Canada!

--- Laughter / Rires

8108 MR. FECAN: And just further, as further evidence, just well before we made these applications, within the last year, we have been rebuilding, for example, CJOH's technological infrastructure from top to bottom. So that they have the best news tools to be here and be leaders in this community for a very long time.

8109 THE CHAIRPERSON: Thank you.

8110 Questions? Counsel...Commissioner Williams first, and then counsel.

8111 COMMISSIONER WILLIAMS: Given that Alberta and B.C. have common interests with the northern territories, like the Yukon, Northwest Territories and Nunavut -- say particularly if I just focus on the western Northwest Territories, there's oil and gas that has a lot of B.C. interest, diamonds that have international interest, and gold, and these two provinces particularly, B.C. and Alberta, for the most part, supply many of the products, employees, investors, technical expertise, to these areas -- I guess I'm curious, will Newsnet B.C./Alberta cover news from those regions and have plans been made to facilitate that? And is infrastructure and facilities in place available for your use?

8112 MR. HURST: I want to answer that, being an old Alberta bureau chief, who had spent a lot of time in the north.

8113 We have not specifically decided where we're going to place our 50 cameras and where we're going to build our lines and our links to those. But Yellowknife and Whitehorse and the western Arctic area is an important area for Alberta -- Alberta being the gateway to this area. And I suspect we will be putting cameras and reporters certainly in Yellowknife. Whether we go as far up as Inuvik or Tuk, I'm not sure about that, but I bounce it over to the local current experts. Reg? Len?

8114 MR. THOMAS: Well, just to follow up, I think it goes back to the synergy question earlier on, as well. I think certainly you're correct in saying that there is a shared interest in that area. And I think this is one of the advantages we will have in this is being able to share those resources. It is a vast area that we all cover and I think the possibilities of being able to pull together the strengths of Newsnet in Alberta, Newsnet in B.C., is going to help us in those shared areas to get more stories out and to get more voices in those areas than we ever had in the past.

8115 MR. PERRY: The 50 cameras also include feed sites, so if we install a camera in northern Alberta or the Yukon, it will allow us to use that feed site to ship stories, as well as live footage. So it will give us another avenue into these areas.

8116 The same works for southern Alberta, in the Crows Nest Pass, where B.C. has a huge interest, Alberta has a huge interest. We'll be able to open that up, as well.

8117 MS McQUEEN: And I would last reference what you've already heard about, which is our partnership with APTN. CTV has been a leader in investing and providing programs relative to the build-up of that great service, and in return APTN has kindly acknowledged that they will help us out with news stories.

8118 COMMISSIONER WILLIAMS: Great. Thank you very much.

8119 THE CHAIRPERSON: Counsel?

8120 MR. STEWART: Thank you, Madam Chair.

8121 So, for instance, CTV Newsnet Alberta will not be confined, then, to Alberta news or news seen from an Alberta perspective? And I'm asking the question in terms of trying to get an operational definition of the nature of service that the Commission will eventually have to come up with, should it license the service?

8122 MS McQUEEN: The nature of service is that every single story will be relevant to the interests of the province or the region in which this service is located -- every single story. The originating point of the stories may be outside the region, but the nature of the stories will be of direct relevance to the region involved.

8123 I don't know if that helps you with the legal definition, but I'm sure that we could work together to come up with that.

8124 MR. STEWART: Thank you.

8125 And you would be willing to accept a revised nature of definition that would reflect what you've just said?

8126 MS McQUEEN: Absolutely.

8127 MR. STEWART: Thank you.

8128 With respect to the CTV News Centre Nouvelles service, can I ask you why you didn't, in the "nature of service" definition, include the bilingual element?

8129 MS McQUEEN: We're all looking at each other.

8130 MR. HURST: Gosh, I guess we should have.

8131 In the description of the nature of the service, it is to be a bilingual service. If we did not include it in the nature of service in that description, we should have.

8132 MS McQUEEN: It should be in there. We will...

8133 MR. STEWART: I'm just specifically referring to section 7.1, where you described the nature of service.

8134 You do in subcategory (a) refer to it as "bilingual." It's simply not in terms of the "condition of licence" definition, and so, I take it, you would have no objections if it were revised --

8135 MS McQUEEN: Yes.

8136 MR. STEWART: -- to reflect the bilingual nature?

8137 MS McQUEEN: Absolutely. That was an oversight. Thank you.

8138 MR. STEWART: And can you assist the Commission to identify how the word "bilingual" should be interpreted and whether there would be any value in defining this further in the condition of licence? I see, for instance, that you have a percentage breakdown of 70 per cent English and 30 per cent French and that in your application you refer to the demographic's breakdown there. Is that how you would see the breakdown in actuality taking shape in the service?

8139 MS ROBINSON: That is how the licence is framed and written. I think the Commission can appreciate that we are covering new territory with this type of proposal. But if that was an issue that was of concern for the Commission, I think that we would be prepared to include something which would have, let's say, a floor. So it would be not less than 30 per cent. So the Commission would have an assurance that in fact this was what was proposed.

8140 That wasn't included specifically, but if certainly that was something that the Commission would like to add, I'm sure that we would be amenable to that.

8141 MR. STEWART: Thank you.

8142 Those are all my questions, Madam Chair.

8143 THE CHAIRPERSON: These questions remind me of the Commission attempting some 25 years ago to fill a position that was bilingual and the form didn't particularly say what that meant. And as it turned out, the gentleman hired spoke French and German.

--- Laughter / Rires

8144 THE CHAIRPERSON: Commissioner Demers.

8145 COMMISSIONER DEMERS: Thank you.

8146 So I would now turn to TV.tv, a few questions on the nature of service content, especially questions on the TV Guide component, interactivity and we'll end up with the filler question, which will be, no doubt, a short one by that time.

8147 In the nature of service you are proposing a service that is part TV promotion, part TV guide and part media literacy.

8148 Can you describe how these things interlace?

8149 MS McQUEEN: I would ask Mr. Mustos to help with that one.

8150 COMMISSIONER DEMERS: You probably could refer to what we have seen this morning on the screen.

8151 MR. MUSTOS: Yes. I think the easiest to think about TV.tv is to think about a full screen with promotional videos happening with 90 per cent Canadian content, 24 hours a day. There will be programs within the day that will deal with issues of media literacy and there will be program promotions that are programs that will range from 5 to 20 minutes. In addition, there will be promotional videos of 1 to 3 minutes.

8152 This is what you will see on your screen and then there will be an icon on the screen that will help you move into a search engine if you want to now get into the electronic programming guide so that you can search for subject matters or stars or directors that are of interest to you. Once you have begun that search, one of the things that I am most excited about with this service is that it always brings the Canadian choices up first and highlights them.

8153 COMMISSIONER DEMERS: Thank you.

8154 If we could take it another way. Would you comment as to why you feel TV.tv should be considered a true program service rather than primarily an alphanumeric service?

8155 MR. MUSTOS: We have proposed somewhere in the neighbourhood of 800 program segments. These are the program segments that will be running 24 hours a day, that will range from 5 to 20 minutes. They will be divided into four program strands: Parents' Choice, Canadian Nights TV, tv.info and Stars and Personalities. This is what you will see on your screen at all times, should you wish it, and within a strand, we are proposing a number of programs that will deal with specific things under that strand.

8156 So we, in fact, see the primary purpose of TV.tv to deliver programs about Canadian television and that is why we see it as a programming service.

8157 COMMISSIONER DEMERS: Thank you.

8158 From another point of view, how will TV.tv programming differ from the programming provided by StarTV specialty service?

8159 MR. MUSTOS: StarTV is a service which is committed to Canadian entertainment. In their service, they cover dance, they cover feature film, they cover theatre, they cover literature, they cover performing arts and they cover television.

8160 What we see with TV.tv is a service that is exclusively dedicated to television, 90 per cent of it Canadian television. A further point with respect to Star is that I believe their Canadian content levels are 30 per cent, rising to 50 per cent by the end of their term.

8161 When you think about all the subsets of entertainment that I just mentioned -- and imagine 30 to 50 per cent of that being dedicated to dance, theatre, feature film, literature and television -- and then you compare that to TV.tv which wants to spend 90 per cent of its schedule on Canadian television exclusively, we see the service as being quite different.

8162 With respect to the notion of Star being a service to try and help the Canadian star system, we do see shared objectives there, but I would point out to you that in the face of the avalanche of marketing and promotional material coming into Canada from the U.S., that we think the concept of having two services available in the spectrum of Canadian broadcasting service that are desiring to enhance the Canadian star system is a terrific thing. But in terms of the actual programming 24 hours a day, we don't see a lot of overlap between TV.tv and Star.

8163 COMMISSIONER DEMERS: You see no overlap?

8164 MR. MUSTOS: By that I meant the relation back to the point about entertainment and all the subsets of that versus exclusively Canadian television.

8165 COMMISSIONER DEMERS: I think you could see that my question related to the fact that one of the criteria for issuing digital licences was that it would be different from what is already on the screen.

8166 MR. MUSTOS: I think there is no question that Star will be covering Canadian television as part of its service.

8167 My point is only that amongst all the other components of entertainment that they will be looking at, and given their lower Canadian content levels, I think that the TV.tv service will distinguish itself as a very unique service that is focusing exclusively on Canadian television in terms of the showcasing of Canadian television, in terms of Canadian media literacy issues as well as the program guide which will always make the Canadian television choices the first ones you see.

8168 COMMISSIONER DEMERS: A short question on content. You have emphasized, I think, that approximately -- well, 90 per cent would be Canadian content, and that will be due to videos. Is that only in the fact that you would be providing program videos?

8169 MR. MUSTOS: No. In fact, I would say that it is almost the opposite. The program strands that we have described in our schedule -- the ones that I referred to a minute ago, Canadian Nights TV, Stars and Personalities, tv.info and Parents' Choice -- will be original programming, original Canadian content programming designed for those strands that may be 15-20 minutes in length per program.

8170 You may have noticed in our financial statements that we don't have a figure beside foreign content. That is because we think that the foreign component of our schedule that will be going in will largely come in the form of those program videos that we make available on our service at no cost to the people providing them.

8171 But in fact, it is the programming that we will be putting into the service that will be the unique nature of it and it will not be predominantly the program videos. That is not to say that there won't be many, many Canadian program videos throughout the day and our schedule also contemplates somewhere in the neighbourhood of 30 to 80 one to two-minute program videos being dropped in within each two-hour block, within each two-hour strand.

8172 COMMISSIONER DEMERS: So in a sense it is a channel that would promote what is on Canadian television, whether the programming on Canadian television is foreign or not. It is the promotion of Canadian programming.

8173 MR. MUSTOS: No. It is the promotion of Canadian content programming. One of the things that we did talk about in both our video and our Powerpoint presentation, which I would like to come back to, is that we see ourselves as an equal access Canadian programming showcase service. We will be taking programs from CBC, from Family Channel, from Star, from Teletoon and we will be taking the Canadian content programs that are on those services and we will be putting a spotlight on them through program videos and as well as through those programs that we have designed for the strands such as 245 where you go out to the set and you go to the set of DaVinci's Inquest and you talk to the star, you meet the director, you meet the producer and we will make sure that all of our programs on TV.tv reach out widely to all services and all Canadian programs within those services.

8174 MS McQUEEN: But to be very clear about it, when we say "90 per cent Canadian content", that 90 per cent will be all about Canadian programs. None of that 90 per cent will feature international programs.

8175 We left the 10 per cent in because there are some wonderful programs that often come from other countries, Germany, Australia, Britain and so on, and this would be a chance to bring them to the attention of the viewer. These programs often don't get noticed.

8176 But 90 per cent of the material will be about Canadian programs.

8177 Of course, one of the things that I personally think will be most useful about this service is its media literacy aspects. When I was involved with AGVOT and the program ratings, one of the things that we saw over and over and over again was parents' desire to have more information about the programming that their children might see, more ratings, more reviews, more guidance in how to watch television.

8178 There is really no service on television now that provides that kind of help for parents. So that is a major feature. We would be assisted with our links to the Media Awareness Network and the Broadcast Standards Council and other bodies in helping grow a generation that understands the semiotics of television.

8179 It's a really interesting fact of the research that so many young people found this so highly appealing, that's the 18 to 29 group, and my suspicion is that some of those are parents of young children in their twenties who are really looking for that kind of advice.

8180 COMMISSIONER DEMERS: Thank you.

8181 If we look at the television guide component, can you comment on how your service would differ from or improve upon the EPAs provided by distributors at the moment?

8182 MR. MUSTOS: I will begin that answer and then I will throw it to Ken Murphy to help us out on the technological side.

8183 I think the one feature that distinguishes TV.tv from any of the other EPGs that are out there is its Canadian-first approach. TV Guide has an EPG and I think it's worth noting that their sister magazine, TV Guide, that's in the newsstands, is a television guide magazine that in the course of the last 52 weeks, and we checked this, there were only two Canadian stars who are stars of Canadian programs that have ever made it onto the cover of TV Guide.

8184 As an American company, their desire is to drive readership and to -- they certainly have a predominant preference to put American stars on the cover of even the TV Guide magazines in Canada. We think that our TV.tv service will absolutely scream Canadian stars and shows. We are the biggest fans of Canadian television and we think that TV.tv is going to send that signal 24 hours a day.

8185 From a technological standpoint, Ken might want to add to this.

8186 MR. MURPHY: The first point I would like to make is there is no notion of replacing any existing program guide on anyone's set top. We think that choice is critical. If you think of the electronic program guide essentially as a browser, anyone who has used a Web browser recently knows that it's able to sift through vast amounts of data from all over the world and surface your search results in an appropriate fashion. The Canadian-first mandate of our search engine will provide pride of place using Web technology as the search engine and as the navigational tool.

8187 But, ultimately, consumers would have both program guides available to them. So I think there perhaps might be an indirect advantage here in that we think it would provide incentive for electronic program guides to be as innovative, as adaptive and as focused on the Canadian system as they possibly can be.

8188 MR. MUSTOS: I think also it might be worth pointing out that when Kathie MacMillan was doing her research, that the response that she got from respondents about the Canadian aspect of this service was very appealing.

8189 MS MACMILLAN: Correct. In fact, when asked about the specific relevance to Canadians, almost eight in ten say they agree that TV.tv is relevant to Canada and Canadians. One-quarter strongly agree to this, and that proportion increases significantly amongst the younger group, as Trina already mentioned, those 18 to 29, to 35 per cent.

8190 COMMISSIONER DEMERS: Thank you.

8191 Another subject. The interactive revenue -- I think we spoke about that at one point -- component here represents 51 per cent of the total revenue.

8192 A proposition here. If we remove the interactive component, TV.tv's PBIT margin in year 7 would approximate an 8 per cent loss.

8193 In your opinion, is the proposed service viable without its interactive component and TV Guide?

8194 MS MACMILLAN: By eliminating the revenues, we also have include cost as well for this interactive component, which over the seven-year period is also $7 million.

8195 COMMISSIONER DEMERS: I understand you would not agree to a licence for TV.tv that excludes the TV Guide component?

8196 MS McQUEEN: No, we would not

8197 COMMISSIONER DEMERS: Back to interactivity for a short while.

8198 Will the interactive elements be in place, for example, the September 2001 launch?

8199 MR. MURPHY: Quite clearly, we I think are, across the industry, achieving greater levels of confidence that Web browsing functionality will be essentially in place September 1 and that soon thereafter, months thereafter, there will be advanced capability.

8200 So, once again, if you think of this as a Web browser essentially behind the Canadian promotional programming on TV.tv, that functionality will be there day one.

8201 COMMISSIONER DEMERS: Thank you.

8202 Has TV.tv obtained any comments or agreements with distributors to carry the interactive elements of this service?

8203 MS McQUEEN: No, it has not.

8204 COMMISSIONER DEMERS: Any additional hardware necessary to do what you have described?

8205 MR. MURPHY: At the household level, no; and at the head-end level we expect not.

8206 If I might just explain, the notion is we would create a central database of all of the channel lineups, of all of the various BDU systems. We would input that data into our database once. We would then map onto that the various program schedules and program listings so that essentially the set-top box filters that data according to its location and its local channel lineup, all of which is contained in our database and really will flow through the head-end and to the set-top box with no additional hardware requirements.

8207 COMMISSIONER DEMERS: Following what you have said, is there sufficient memory to accommodate your program guide and the guide that is provided right now by the distributors?

8208 MR. MURPHY: The current guide is typically a proprietary system using resident memory on the set-top box. It's not only impractical but it is probably impossible to consider replacing that. We don't think that's desirable from a viewer's perspective; rather we want to provide choice.

8209 With our Web-based approach, our Internet protocol based approach, we don't require that resident memory that is sitting on the box, as some have suggested.

8210 COMMISSIONER DEMERS: Thank you. Would you have other comments that you could provide to the Commission to indicate that TV.tv will be able to deliver the promised interactive elements? Do you have anything to add to what you have already said?

8211 MR. MURPHY: I would draw the Commission's attention to the recent Cable Lab's report, I believe of August 4. Lord knows, we don't need another acronym, but that report does include something called the Open Cable Application Platform as clearly an essential part of the standards setting based activity that Cable Lab is involved in. Indeed it specifically spells out that such an OCAP will enable electronic program guides.

8212 That set of software standards will, in all likelihood, be available around September 01, or soon thereafter. In the meantime, though, there is clearly no question that we can deliver September 1, 2001, or tomorrow frankly, a viable, dynamic, Canadian-focused program guide and search engine.

8213 COMMISSIONER DEMERS: Thank you.

8214 Thank you, Madam Chair. Those are all of my questions.

8215 THE CHAIRPERSON: Counsel...?

8216 MR. STEWART: Thank you, Madam Chair.

8217 I just want to clarify the issue of the Internet revenues, because based on your financial projections, I believe that -- the interactive revenues, I should say -- they are a considerable percentage of overall revenues by year 7.

8218 If those revenues do not pan out as you expect, then what impact, if any, will that have on the viability of this service?

8219 MS MOFFAT: As Ms McQueen stated earlier, interactivity is a key and integral part of this service and business plan, and we would look to and draw upon our experiences of our existing Web sites that we have launched, for instance, and take that and take it further, in this service in particular.

8220 MS McQUEEN: I would add that if you look at the year-by-year interactive revenue, you would see that the bulk of that revenue -- I think we projected $19 million. Almost all of it is earned at the end of the licence term, when we believe that the interactive capacity will be significantly greater.

8221 For instance, in the first year of the licence term we have $36,000 of interactive revenue. So it is definitely a situation in which the unfolding of the full strengths of digital will help us to achieve that interactive revenue.

8222 MR. STEWART: Does that coincide with any particular increased roll-out of set-top boxes or technology deployment?

8223 MS McQUEEN: I think certainly the projection for digital subscribers by the end of that year is at 3 million subscribers, so that is a considerably larger number than the 359 adduced by the Chair of the proceedings -- 359,000.

8224 MR. STEWART: Because just looking at year 4 over year 3 revenues, there is a considerable jump there for the interactive components. Can you elaborate a bit on that?

8225 MS McQUEEN: Just to say that I think year 5 is 2006.

8226 MR. MURPHY: And I would also make reference to my earlier comment about software standards and open platform standards. We expect, as well, by that time that some of the things required for vibrant e-commerce will be beginning to fall into place across Canadian industry.

8227 That is why we have, if you will, back-end loaded our revenue assumptions, because there are a lot of things that have to take place for those revenues to manifest.

8228 On the other hand, we have been here before. We faced these same kinds of questions when we were making our initial Web investments. We have invested $15 million over the last five years, during which time we didn't have any sense of clarity on revenue. Lord knows, there were a lot more questions than answers. We have been able to develop that business case successfully, and we are very, very confident that the frequency and the reach and the value that this service will be providing to Canadians will be a tremendous platform for our revenue assumptions.

8229 MS McQUEEN: We also take note of the fact that merchandise related to television, whether it is Pokeroo dolls or Arthur books or Allie McBeal pyjamas, is a very large consumer-desirable. In fact, the merchandising of television-related material is a very strong business.

8230 So in the last years, when we hope we will have e-commerce capability, we do think that merchandise associated with television will be attractive to viewers.

8231 MR. STEWART: Without belabouring the point, I see that your cost projections tend to be pretty flat. You are fairly confident about those figures as well? Can you explain for the Commission why perhaps there shouldn't be an increase in the costs, given that your revenues are projected to increase significantly toward the end of the licence term?

8232 MR. MURPHY: We have essentially built a very robust engine room now, if you will -- digital engine room -- with extensive servers, with support technology and, fundamentally, with expertise. We are confident that we can build on that.

8233 The incremental cost to provide these services will be comparatively modest. That is why the line tends not to see wild fluctuations.

8234 Just as the initial investments we made on our Web have served us very, very well and have allowed us to grow that business without an enormous cost spike each time you achieve the next level.

8235 MS McQUEEN: As well, we don't see ourselves as setting up warehouses and fulfilment systems for these things. We see ourselves having a percentage of the revenues associated with the e-commerce facility. So that, again, does not require a huge investment by us.

8236 MR. STEWART: Thank you very much, Madam Chair. Those are my questions.

8237 THE CHAIRPERSON: Ms McQueen, I would not describe Allie McBeal's pyjamas as a large consumer item.

--- Laughter / Rires

8238 THE CHAIRPERSON: Commissioner Demers, if it is suitable, we will take our lunch break. We will be back at two o'clock.

8239 Nous reprendrons à deux heures.

--- Upon recessing at 1235 / Suspension à 1235

--- Upon resuming at 1400 / Reprise à 1400

8240 THE CHAIRPERSON: Welcome back to our hearing.

8241 Commissioner Demers.

8242 COMMISSIONER DEMERS: Thank you.

8243 We are now at DGNet. My questions will cover nature of service, programming, category 10 game shows, Canadian expenditure, Internet, revenues, independent production and interactivity. Okay?

8244 Now, I'll start with a long-winded question, but it may bring us back to the atmosphere of the room. Under "Nature of Service", you describe DGNet as:

8245 In your application, you also indicate that you will provide news, movies and mini-series and general entertainment.

8246 Will all of your programming be strictly Internet, computer and technology-driven oriented?

8247 MR. FESTINGER: Yes. Thank you.

8248 In essence, it will be. All of our programming will relate to the new world of digital technology. That world, as we have been exploring today, is a fairly broad world, in terms of having cultural aspects, virtual communities, different personalities, inventions, computer games and all manner of ideas and creativity that are expressed digitally. So we certainly can be restricted to exploring the digital world. I just would like to point out that the digital world is a broad one.

8249 COMMISSIONER DEMERS: So to take a closer look, will some of your programming be broader and more lifestyle-driven?

8250 MR. FESTINGER: Well, our programming will focus on different aspects of the digital world. "Wired Women", for example, will deal with issues -- digital issues -- that affect women in this world and will have at least once a week an interview segment with a Canadian woman who is a leader in the digital world. "ScavEngine" will be a game show. So there's an entertainment base there, but the game show itself takes place on the Internet in a virtual studio.

8251 "Digital Desk" has a number of different components. It has a news component that relates to what is happening, what's the news in the last 24 hours that relates to the world, whether it's the latest about Napster or a copyright lawsuit against a Web site or a new technological innovation that's been announced.

8252 So I don't believe our schedule is lifestyle-based, but it really relates to the culture and technology of the digital world. There will certainly be lifestyle aspects, but they are secondary.

8253 COMMISSIONER DEMERS: Okay.

8254 Well, starting from your answer, then, maybe I could indicate where I'm going.

8255 In order to make the proposed nature of service more precise, would you accept a "nature of service" definition that replaces your wording? That the service would be devoted exclusively to the fast-paced evolution of digital technology, would the wording that the service would be devoted exclusively to programming related to computers, digital technology and the Internet...?

8256 MR. FESTINGER: Yes, we would.

8257 COMMISSIONER DEMERS: Thank you.

8258 In programming now, you have indicated that there would be programs in category 7(c) and 7(d) drama. So the question would be...so you indicated that in the nature that you intend to air specials, mini-series, made-for-tv films and theatrical feature films aired on television -- so 7(d), here we are. In your schedule, you indicate that you intend to air approximately 10 hours per week, or four movies per week, of subcategory 7(c) and 7(d). Could you clarify your intensions in this regard: the type of movies and specials that you would be showing?

8259 MR. FESTINGER: Yes, I would.

8260 If you refer to the program schedule that was filed with the application, we have one movie a week, which is on Monday evenings...or its first showing is on Monday evenings. And the type of movie that we would broadcast is restricted to movies that deal with topics involving digital technology -- movies like "Hackers", things that are very directly related to the subject of DGNet.

8261 I should also point out that it's a very small component of our schedule. Our sample schedule does not include any mini-series, but we would like to have the opportunity...if there are programs that relate to our subject-matter, that we think would be of great interest to the audience -- and this is a self-selecting audience of people who are very interested in digital technology --- we'd like to have the opportunity to show those programs.

8262 COMMISSIONER DEMERS: Thank you.

8263 So would you accept a condition of licence limiting the number of hours of such programming.

8264 MR. FESTINGER: Yes, we would.

8265 COMMISSIONER DEMERS: Thank you.

8266 Game shows...sorry.

8267 MS McQUEEN: We actually did have a proposal for you on the nature of that condition of licence, if you would like it. And the reason we have come up with one is because a number of our themed applications do have movies in them. And we believe very strongly that in going to a particular niche of interest, which a channel like DGNet is, you have to have a wide variety of expressions of that interest, whether it's dramatic, whether it's news, current affairs and so on. So here's what we think a condition of licence might be: first of all, we will never run a first-run Hollywood movie; and secondly, we would limit ourselves to 10 per cent, no more than 10 per cent, of dramatic programming of any category in a week.

8268 COMMISSIONER DEMERS: Thank you.

8269 Game shows. In your schedule, you indicate that you will air a program called "The Games Show", a half-hour show aired Monday to Friday. You indicate that the program, which will provide information on the world of net games, will also allow viewers to not just play and demonstrate the games, but to actually become part of them, to run the course, fight the fight, as you indicated, or pilot the machine.

8270 Could you describe these programs more particularly?

8271 MR. FESTINGER: Well, "The Games Show" is an information-based show about the world of gaming: the world of gaming on PCs, the world of gaming on the Internet, the world of gaming on consoles, like the Sony play station. It is an information-based show about games.

8272 Because we will have a virtual studio, we have opportunities to demonstrate and immerse the audience in games, but it is not a game show as we believe the Commission defines a "game show," which has a prize at the end of it, or something like that.

8273 So no doubt this is why you didn't classify it as a Category 10 game show.

8274 MR. FESTINGER: No.

8275 COMMISSIONER DEMERS: That is exactly it?

8276 MR. FESTINGER: Yes, we would think it would be human interest or analysis.

8277 COMMISSIONER DEMERS: Thank you.

8278 In the previous application I didn't see anything about filler programs, but could we clear that for each and every one that the answer that Ms McQueen gave on the first would follow for the eight other applications.

8279 MS McQUEEN: Yes, for the record, we will accept a condition of licence or we will remove Category 15 from all the applications before you.

8280 COMMISSIONER DEMERS: Thank you.

8281 Canadian expenditures. We did discuss that from a corporate perspective, but to be more precise on this application, would you be prepared to accept a condition of licence which requires that you spend 53 per cent of the previous year's advertising and subscriber revenue on programming starting in year two?

8282 MS McQUEEN: We have committed to that. It is on the record with you. We would also be willing to accept a different condition of licence as discussed with you previously.

8283 COMMISSIONER DEMERS: Thank you.

8284 Internet revenues. On this application, you indicate Internet revenues of $6 million over the licence term which represents approximately 10 per cent of the overall anticipated revenue of the proposed service in each year.

8285 If these were not achieved, this service could conceivably run at a loss over the seven-year period?

8286 MS MOFFAT: Actually, our total Internet revenues are $6 million, but our costs are also equivalent to that. So it is break even during the seven-year period.

8287 COMMISSIONER DEMERS: Thank you.

8288 Independent production. We also raised that point from a corporate perspective, but here you indicate that DGNet will provide an opportunity for independent producers and particularly for independent news media community in that it will provide these creators unprecedented access to the conventional technology from which new fully integrated advanced TV technologies will emerge.

8289 On the other hand, you propose to co-produce and acquire what could be considered a relatively small amount of programming from independent producers. You indicate that over the course of a season, this would include 65 half-hour co-production programs and two co-produced hour-long documentaries, and you would acquire eleven-hour long documentaries produced by independent producers.

8290 How much of the programming from independent producers would be new programming?

8291 MS McQUEEN: I will ask John to answer that question. It does relate to a discussion that the Commission had yesterday.

8292 John, do you want to start with that?

8293 MR. FESTINGER: All of the Canadian independent production in Wired Women, which is a brand new show, would be new production, and we will be commissioning two documentaries and acquiring 11 other Canadian documentaries.

8294 The acquisitions will probably be new, but some of them may not be. But certainly the two that are commissioned will be, and I would think a preponderance of the other will be as well.

8295 COMMISSIONER DEMERS: Are you able to put a percentage or a number of hours in your answer? It could be approximate.

8296 MS McQUEEN: Perhaps I could? I do happen to have that number, John.

8297 First of all, let me preface by saying that the applicant previous in this genre spoke about these services as being CNNs of technology and indeed DGNet is very much a news-oriented kind of service. The major amounts of original programming will come from such efforts as digital disk.

8298 So because of our desire to do a large number of original hours -- and I think DGNet is promising one of the highest number of original hours, over 700 original hours, but those hours are done from a news base which means that on this particular application, our commitment to independent producers is lower than on others. It is about 20 per cent.

8299 However, our Canadian program expenditures overall are $35 million which is a substantial amount and our number of hours of original programming is also among the highest that we are promising.

8300 COMMISSIONER DEMERS: Thank you.

8301 Now, interactivity. It is not entirely clear from your application whether you are proposing to offer access via the set-top box to the Web-based interactivity you have described. Could you clear that one?

8302 MR. FESTINGER: Our application and the nature of the service itself is, I guess to use the techie phrase, scalable. Our intention, particularly because of the nature of this service, is to be as advanced in the use of technology as possible. The viewers of DGNet would not accept anything less.

8303 As you have heard yesterday and today, what we can do today involves uses of the Internet and building a digital infrastructure that will be adapted as boxes come on stream.

8304 So in fact, DGNet will operate in all three -- well, actually it is two mediums, but in three different ways: Standard television, on the Internet and through a digital box, and in terms of using the abilities of that box.

8305 COMMISSIONER DEMERS: Thank you.

8306 MS McQUEEN: One of the strengths of this application is our partnership with BCE and BCE is an equity partner with us in only two applications, I believe, and I wondered if Jim Macdonald would like to make some comments on the strengths that BCE might add to this channel.

8307 MR. MACDONALD: I would be delighted to, Trina. Thank you very much.

8308 Of course, BCE is in the technology business. It has always been on the leading edge of technology, and as it is a company going through many changes, it is even more so in transforming itself from its old habits as a telephone company into a much more Internet-driven, interactive communication-type company.

8309 As a result, in particular the Bell Labs are involved in all kinds of new technology, and we think that we can make a very significant contribution in that manner with the test that we have going right now, with VDSL as an example, and many of the new technologies that are on the horizon.

8310 So we feel that this is a very, very perfect fit for us.

8311 COMMISSIONER DEMERS: Thank you.

8312 Are you planning on streaming all your television programming on the Web site and vice versa?

8313 MR. FESTINGER: Yes, all of the programming that obviously we have the rights to stream on the Web site and because so much of the programming will be produced and will be ours, that will be the preponderance of the material.

8314 COMMISSIONER DEMERS: Is your caveat something of an important nature or percentage?

8315 MR. FESTINGER: No, no. I certainly wouldn't want to put a percentage to it.

8316 But in acquiring foreign programming there is always the issue of whether you are acquiring the digital rights to those foreign programming to reproduce them on the Web.

8317 COMMISSIONER DEMERS: Thank you.

8318 AFV. In your application you explained that you have plans to develop an entirely new format conversion and signal distribution method called AFV, alternate format video, which you describe as an open TV video network that uses non-proprietary Internet technology to transport broadcast quality video.

8319 How will the application of this new signal distribution method work with set-top boxes and BDUs infrastructure?

8320 MR. FESTINGER: When we began planning this application, AFV was something that one of our technology people in Vancouver was working on. It has since been accepted and has been renamed CTV VideoNet.

8321 The system itself is, right now, Web-based. We have not experimented with the next generation of digital boxes in terms of compatibility. What it allows is anybody in Canada with any kind of video camera to send a quality of picture directly to the television station, not in real time but in close to real time, that is limited only by the quality of the camera, so it will not be limited by the quality of the transmission line or the quality of the Internet connection.

8322 All anybody needs is a computer and a camera. If the camera is television quality, then a television quality signal will be received by DGNet without the need for satellite transmission, without the need of costs, of very significant costs, to get someone from -- an artist, a digital artist, from New Brunswick, for example, to send a very high quality image to DGNet for display to Canadians.

8323 We have not yet experimented with the digital box, but we know, because we are implementing the system currently, that it works extremely well on a Web-based system and we are confident that we can adapt it to digital boxes.

8324 COMMISSIONER DEMERS: Thank you.

8325 We have discussed in the previous application the rollout of interactive capabilities. Do you have anything particular on this application? In other words, what interactive capabilities are you proposing from day one?

8326 MR. FESTINGER: We are proposing our full complement of interactive capabilities. The issue really is: where will those interactive capabilities be demonstrated initially?

8327 Initially, everything that we propose can be done and will be done on the Web.

8328 As the digital boxes roll out, we will migrate, without ever losing our Web presence, I'm sure, but we will migrate the features to the digital box. That will, again, depend on which generation of digital box we are talking about.

8329 So the intention -- and particularly with a service like DGNet, which is steeped in technology -- the absolute commitment has to be to be on the cutting edge all of the time, and that's what we intend to do.

8330 COMMISSIONER DEMERS: Are you able to -- suppose we think of September 2001. Do you have an idea of what that technology will be at that time, if you were licensed?

8331 MR FESTINGER: We have commited in our application to be ready at May 1st.

8332 I wonder if Ken Murphy has some ideas about what the technology will be like in September. That may be of assistance to the Commission.

8333 MR. MURPHY: Once again, I think there is a recurring theme that come September 2001, essentially what will be happening is those Canadians with digital set-top boxes, regardless of the generation, will be able to, if you will, change channels to a Web page. What we know will have to happen is a second generation box will be required 12 months hence, two months hence, it's difficult to pin down, where those two programming streams in fact are interlaced, synchronized and overlaid.

8334 So all of the features that John described will be accessible September 2001 by, if you will, changing the channel to a Web page and soon thereafter effectively interlacing them, if you will.

8335 MR. MACDONALD: Commissioner Demers, if I may add to that? Over here -- amongst the waves.

--- Laughter / Rires

8336 MR. MACDONALD: While I can't speak for ExpressVu I can certainly share with you that ExpressVu considers the rollout of essentially second generation digital boxes to be absolutely critical to their business plan. It is my understanding that they will start to do this early in the New Year, and these will be effectively second generation boxes capable of some of the higher levels of interactivity that Ken has talked about.

8337 But not to take away from the fact that it will be a slow rollout and it will be done differently between DTH, who is 100 per cent digital today, and cable, there will be a substantial commitment starting early in the new year.

8338 COMMISSIONER DEMERS: Thank you.

8339 I'm still at the interactivity, but from a different perspective. I have asked the question of the other applicants, so I will ask this one here. There may be a different answer.

8340 Have you spoken to distributors -- I imagine you have one as a partner maybe -- have you spoken to distributors about carrying the interactive elements that you proposed?

8341 MR. FESTINGER: No, we have not.

8342 COMMISSIONER DEMERS: Okay.

8343 Have you discussed with distributors the cost? You haven't discussed anything with them?

8344 MR. FESTINGER: No.

8345 COMMISSIONER DEMERS: That would be the end of my questioning, thank you, on this case.

8346 THE CHAIRPERSON: We have no questions so you have no break.

--- Laughter / Rires

8347 COMMISSIONER DEMERS: So I can't even review my outline.

8348 Okay. So we will now turn to Shadow TV. I have namely the same points I raised. I will have questions on the nature of service, competitiveness, diversity, finance, interactivity, attractiveness, contribution to the Act.

8349 So in the case of Shadow TV, we note that you have indicated Category 14, Infomercials, in your application, but you have not indicated infomercial revenue in your business plan. Could you please state whether you intend to air infomercials?

8350 MS McQUEEN: Nikki, did you want to talk about that as part of the business plan?

8351 MS MOFFAT: Sure.

8352 Although we have included it as a category, it is not a significant source of revenue at this time in our business plan and that's why it's not included.

8353 COMMISSIONER DEMERS: Thank you.

8354 On competitiveness, the Commission is also considering two applications for specialty licences to provide justice-type programming. Since Shadow TV also proposes to offer some programming that could be characterized as justice-type programming, would you consider the application to be competitive with the justice applications?

8355 MR. MUSTOS: We don't feel that we would be competitive with the justice applications. And I would also point out to you that those applications did not indicate that we were a competing service.

8356 When you look at our representative schedule, you will note that the proportion of programming in that schedule that would pertain to justice-style programming is very, very small. In fact, the only program is the one entitled, "Justice"; that is, the first program laid out in the schedule, at six p.m.

8357 It is possible that some of the documentaries that we might commission or acquire under the strand Case Closed might touch on the subject of justice but, by and large, the law-and-order or justice component of the service will be a minority contribution to the schedule.

8358 COMMISSIONER DEMERS: Thank you.

8359 So if both the Mystery/Suspense Channel and the Justice Channel were licensed, do you feel that enough good programs would be available to sustain the programming needs of two such services, on a long-term basis?

8360 MR. MUSTOS: Well, we think that our interest in the justice programming will be very much linked to the mystery genre so -- in fact, our research indicated that many of the respondents to the survey felt that a linkage between mystery and law-and-order or forensic programming was, in fact, one of the strongest features of the Shadow application.

8361 I would also point out to you that among the three applicants for a Mystery Channel, we are the only ones who are proposing a limited non-fiction component that pertains to forensic and law-and-order-style programming.

8362 I don't know if Kathie Macmillan would like to add anything to that.

8363 MS MACMILLAN: Yes; just to say that people, in fact, said, "I'm interested in the forensic aspect of this; it isn't available. This sounds like a serious channel, something you can really get your teeth into. This is something I have been waiting for. I can get mystery programming on other channels but it isn't enough".

8364 COMMISSIONER DEMERS: Thank you.

8365 On diversity, as you are aware, similar programming is already available and quite popular on conventional television, as well as other specialty services.

8366 Please explain how the programming you are proposing for Shadow TV will be different from comparable programming offered elsewhere.

8367 MR. MUSTOS: Well, I would like to point out that I think, on the conventional side, there is nobody doing mystery programming like CTV. We have really made an incredibly strong commitment to this genre, in the last three years. When I cast my eye around the other schedules of conventional networks, I did not see a lot of mystery programming on any of the conventional networks or services.

8368 For example, I just did a quick tally of the mystery programming that we have developed over the course of the years and then licensed and, just in the last couple of years, we have done 12 MOWs -- I toss that off quickly, but these are 12 high-budget prime time MOWs that probably took a couple of years to develop and we have brought 12 of them to the CTV prime time schedule in just the last couple of years. We have got two prime time series; we have done a children's limited series; and we have got a whole slew of wonderful shows in development. I think we are the network who would be most affected by the licensing of a mystery service and I think we have a tremendous expertise, now, to bring to Shadow that we, quite frankly, didn't have even three years ago.

8369 Just to make a very quick sidebar on that point. When we have been developing scripts for murder mystery, suspense or thriller movies, it's a different animal from developing a script of a typical drama. You have to be alert to the different kinds of cues you need to be putting into your script so that you are giving hints, you are laying in a few red herrings, you are not giving too much information too soon and that you are going to offer the viewer who's really paying attention to the movie enough clues that they can solve it on their own, by the end. This takes a real skill -- and it's a skill that I think the UK has finally honed over the years. But I think that, in Canada, we have not really worked in this arena until fairly recently, in any significant degree, and I'm incredibly proud of the efforts that we have made in this genre and I would love the opportunity to push that further onto a digital platform.

8370 COMMISSIONER DEMERS: Thank you.

8371 Would there be any horror genre on your channel, on Shadow TV?

8372 MR. MUSTOS: No; I don't think it is our intention, at all, to put horror on Shadow.

8373 My concern, of course, does go the other way, that we would, in fact, find mystery or thriller or suspense programming on a horror channel, should you choose to licence one. I think that when you look at mystery in its full state, which includes thrillers and suspense and classic mysteries and, in our case, the non-fiction programming that we are proposing that is forensic or judicial in nature, that's a fairly wide net. When you look at horror it's a quite limited genre and we feel that, going the other way, we would find high likelihood of cannibalization on a horror channel into thriller or mystery. But we don't plan to do horror programming on Shadow.

8374 COMMISSIONER DEMERS: Thank you.

8375 You have referred to the network, I believe. How much overlap in programming will there be with the CTV Network schedule?

8376 MR. MUSTOS: I think the important think to point out, in this regard, is that if you are talking about programming that is on CTV in the same year as it would be on Shadow, I think very, very limited amounts of CTV programming would be in the Shadow schedule.

8377 What we hope to do is reach back into programming like the first few seasons like of Cold Squad. We are now in our fourth successful season of that dramatic series -- it is a mystery police drama -- and we have quite purposely not sold off the rights to the early seasons to that show to other specialities, to a second-tier broadcaster, because we felt that those episodes would have great value on a mystery platform like Shadow.

8378 So, if we are talking about within the same year, very, very little overlap. If we are talking about programming that had ever appeared on CTV, we might be looking at a figure of seven hours a week.

8379 MS McQUEEN: I would say that this is one of the perfect examples of synergies that you will have before you where the conventional station has a very strong commitment to the genre and where the assistance of a specialty channel will give an independent producer two windows. One-stop shopping, so to speak. The producer can get a conventional licence fee and then a second window licence fee from Shadow Television. This will make better original drama for the priority program obligations that we have and it would also give mystery lovers more of the genre that they love. So it is very much a win-win situation to have the two abilities rather than -- all these programs will have second windows somewhere. The fact that we have a channel that can use that second window really is an advantage for both operations.

8380 COMMISSIONER DEMERS: Thank you.

8381 Finance. Your application seems to be a bit pessimistic in the number of -- in the subscriber revenue, particularly after taking into account the popularity of foreign services, such as A&Es, mystery/suspense and justice programming.

8382 Do you have comments on that?

8383 MS MOFFAT: If you are referring to our subscriber levels, what we have done is looked at the forecast projected by the CCTA and the DTH cable distributors.

8384 We have also looked at achieving an affordable rate of 23 cents, which is the lowest rate offered in this genre, but we have not compromised our commitment to Canadian programming, which is at 52 per cent of our toll revenues.

8385 MS McQUEEN: Commissioner, if I read the competitive chart rightly, in fact, we are more optimistic than our competitors about the number of digital subscribers and we think that is based on a good, solid projection.

8386 What we have done is to have the lowest rate of each of the competitive applications. So that means our overall subscriber revenue is, you are absolutely right, less than our competitors at the same time that our Canadian programming expenditures are at the same level as one of our competitors and higher than the other and we have the highest Canadian content of all. So how do we do this? Simple. We have a slightly less rosy picture of profitability. That's part of our commitment to building digital: strong Canadian content; realistic subscriber rates; and an ability to get the channel on air and stick with it for a while until we do become profitable.

8387 COMMISSIONER DEMERS: So if -- especially, you referred to rates. So if you would not achieve the penetration levels projected, would this rate still apply?

8388 MS McQUEEN: The subscriber --

8389 COMMISSIONER DEMERS: The 25/27 cents per subscriber, over the proposed seven-year licence.

8390 MS McQUEEN: Well, certainly, if a BDU wishes to increase that rate, we would happily comply. But what we will have control over and what we do commit to is that our Canadian content levels will be met no matter what the subscriber revenue.

8391 COMMISSIONER DEMERS: Thank you.

8392 In fact, you are referring to Canadian content, and it was made -- I think you made that point, Ms McQueen, at the beginning, that it was a very important feature in your application, the fact that Canadian content was very high in percentage. And, in fact, it is high in most of your applications.

8393 Do you have anything more to add to why that's the -- you have decided to go that route?

8394 MS McQUEEN: Well, it goes back to building digital. We do believe that strong Canadian content will make these channels different. It won't be more of the same thing. There will be diversity. There will be viewer attractiveness. We -- you know, I just can't say it any other way -- we do believe in Canadian television. We believe that Canadian television can be successful with the commitment, the skills and the experience that we have to offer with our expertise in this genre. We think we can take higher levels of Canadian content, make that attractive to audiences and still have an affordable rate, and it's just the strategy we bring to building digital; which is: viewer attractiveness and a commitment.

8395 COMMISSIONER DEMERS: The availability of Canadian content -- Canadian programs is not a question for you having set your standards high?

8396 MR. MUSTOS: No; in fact, we think that's, again, something that Shadow will bring that will be a wonderful boon to the industry and that is -- or to our viewers, that is -- and that is to be able to bring to the schedule programs, Canadian programs, that aren't on T.V. right now. Shows like "Seeing Things". Shows like "Benny Cooperman". Episodes from "Cold Squad", from the early seasons. We are convinced that there is a wealth of programming available, as well as an ongoing train of production and development that will eventually make its way onto the screen at the main network level.

8397 COMMISSIONER DEMERS: Thank you.

8398 On interactivity, there are more precise questions.

8399 Could you explain what the following aspects of your interactive proposal will entail.

8400 Multiple-choice story endings, for example?

8401 MR. MUSTOS: I'm sorry. What about multiple-choice endings?

8402 COMMISSIONER DEMERS: What will that entail: multiple-choice story endings? This is part of your interactive proposal.

8403 And you also have an interactive series, which is "Cat and Mouse", views as a detective and ad lib style games where one viewer starts a mystery and the other adds to it.

8404 MR. MUSTOS: Right.

8405 COMMISSIONER DEMERS: Give us an overview of that.

8406 MR. MUSTOS: Sure. Sure.

8407 We think that the mystery genre is ideally suited to viewer participation via interactive programming. The multiple-choice endings that you talked about. I mean this is when you get to the end of the murder mystery and you get to choose, as a viewer, what has actually happened.

8408 We think that if you can also stop the show part way through and look at an important scene from different angles, if you can stop a show part way through and put it into slow motion so that you can help yourself try and solve the mystery as it's unfolding before you.

8409 We have a brand new series called "Cat and Mouse", as you pointed out, which we see as an entirely interactive series. It would be a drama series and it would be a flagship show and it would be commissioned from an independent producer.

8410 And then, in addition to that, we have a show called "Gumshoe Inc.", which would be our magazine format show, that would provide an opportunity for viewers to see writers of mystery fiction interviewed, directors, to go into a chat room and discuss with them the programs that are associated with the books, the movies. And we see ongoing interaction with those people, too, on the Web site.

8411 MS McQUEEN: I don't know if you, Commissioner, or any of you, ever saw the play "Tamara", which took place in a whole bunch of different rooms and you could follow one or the other of the characters around. That was great entertainment.

8412 For the first time, we now have the opportunity to have that kind of entertainment on television by using the virtual sets and different kinds of interactivity to make that happen.

8413 There's also a popular thing that goes on at resorts, where professional actors and customers -- someone comes in and shoots Ivan, for example, and --

--- Laughter / Rires

8414 MS McQUEEN: -- we are all horrified, and --

8415 MR. MUSTOS: That's on the other channel.

8416 MS McQUEEN: -- and then we find out that it wasn't, of course --

8417 THE CHAIRPERSON: -- not allowed horror.

--- Laughter / Rires

8418 COMMISSIONER DEMERS: That's on the other channel.

--- Laughter / Rires

8419 THE CHAIRPERSON: That's what Mr. Mustos said.

8420 MS McQUEEN: So there are various kinds of ways that people entertain themselves, in the mystery genre, which, now, you can actually do through interactivity, and that's one of the great features of this channel.

8421 COMMISSIONER DEMERS: So the subscriber will come in through the chat room. That, in fact, is partly the answer, from the subscriber point of view?

8422 MR. MUSTOS: Yes.

8423 THE CHAIRPERSON: You have indicated that 10 per cent of your revenues will come from e-commerce and merchandising transaction revenues.

8424 Given that this appears to be significantly higher than the industry, could you please explain your rationale behind these projections.

8425 MS McQUEEN: Why don't we let Nikki take this one.

8426 MS MOFFAT: Our total interactive revenues over the licence term are $6.4 million and that is comprised of sponsorship, advertising and some e-commerce revenue. E-commerce is not significant in the initial years of the service, but it will grow in the last three years.

8427 Just to give you some idea, the total revenue in year one for interactive is $170,000 and rising to $1.4 million by the seventh year. So it is quite reasonable when we look at our existing projections for the Web sites that we operate today.

8428 MS McQUEEN: This is one of the lowest interactive revenue numbers that we have put before you and I guess what puzzles me -- the mystery for me -- is the other applicants and why they are being so -- why they project so little interactive revenue. I noticed that CHUM has $116,000 worth of interactive revenue over the whole time and, as I say, this is a mystery to me.

8429 COMMISSIONER DEMERS: Thank you.

8430 Will the whole schedule be interactive, Shadow TV?

8431 MR. MUSTOS: I think the answer to that would be in varying degrees. When you have an interactive series like Cat and Mouse, obviously the interactive component will be huge. It will also be very high in Gumshoe Inc. When we are taking early episodes of Cold Squad or when we are going to really outstanding foreign programming like Prime Suspect or Chillers or the Australian series Twisted, those shows have already been made, so there is not quite the same capability for us to design as the show is being created these interactive components.

8432 That being said, I think with say older episodes of Cold Squad we see things embedded in the show information, more information about forensics if that particular episode was heavy in that, or perhaps referring viewers to upcoming programming on DNA testing, or perhaps there would be links to Web sites debating the usefulness of polygraph testing. Things like that would be added into older programming, so it would perhaps have a more limited interactive component than some of the original programming that we are proposing.

8433 COMMISSIONER DEMERS: But on the first, most of your schedule would be interactive?

8434 MR. MUSTOS: Yes.

8435 COMMISSIONER DEMERS: Thank you.

8436 What would be the impact on your business plans of additional delays to the launching of the new technologies or on the lower than anticipated take-up by subscribers.

8437 I will add one. Would that delay a launching date?

8438 MS MOFFAT: No, that would not delay our launch.

8439 COMMISSIONER DEMERS: Then on the other points that I have raised?

8440 MS MOFFAT: Sure. On the business plan, we believe our assumptions are realistic and it is all predicated on the digital roll-out and we believe that all the services we have before you will be drivers in any digital roll-out.

8441 If subscribers levers do not reach our expectations in our business plan, it will not change our commitment to Canadian programming in our content levels.

8442 COMMISSIONER DEMERS: Thank you.

8443 MR. MUSTOS: Just one thing to add to that. I think this is an example --

--- Laughter / Rires

8444 One of the great strengths that CTV does bring to the Shadow application is the fact that we do have a significant inventory of mystery programs so that if subscriber levels weren't at the level of our projections in the business plan, we have ourselves a high level of program that we can bring to the schedule on day one, regardless.

8445 MS McQUEEN: We would also say that our subscriber levels aren't wildly optimistic. We are saying that we will get 45 per cent of the universe in year one, and given the fact that the people who are going to be buying these services will have invested in the digital box, it seems to us logical that they will want services to go along with it.

8446 So the penetration will, if I had to bet on it, will probably be larger than that. However, we wanted to make sure that we did have a realistic business plan and that we weren't counting on it in case we were wrong. But I think most of us could argue forcefully, if not convincingly, that we have been pretty conservative in a technology, as I say, that will be purchased by people who presumably are getting it because they want to have services.

8447 MR. MUSTOS: And we hope that the Shadow Channel will be one of the main drivers in the package. The CCTA study back in 1996 pegged a Mystery Channel as the fourth most popular genre and since 1996, the first three have all been licensed. So we do feel quite strongly that the mystery service, which ever one you choose, and we hope that it will be Shadow, will be a major driver in the digital roll-out.

8448 COMMISSIONER DEMERS: Thank you. Probably a "yes" or "no" question here.

8449 Any additional hardware necessary, or software, to have the interactivity that you described?

8450 MR. MUSTOS: No.

8451 COMMISSIONER DEMERS: At the consumer level?

8452 MR. MUSTOS: No.

8453 COMMISSIONER DEMERS: Thank you.

8454 Any problems of interactivity with DTH or MDS?

8455 MR. MUSTOS: Ken, is there anything you want to add to that?

8456 MR. MURPHY: No, I think we touched on some of the differences between cable platforms and direct-to-home and wireless platforms this morning. It is a matter of scalability and focusing the features on the reality of that platform at that given point in time.

8457 COMMISSIONER DEMERS: Thank you.

8458 On attractiveness demand, the demand study undertaken by Goldfarb indicates that there is a perception that this service should provide more serious programming fulfilling the needs of the adult market to a greater extent than for children.

8459 Given this, what is your rationale for maintaining a certain emphasis on children's programming?

8460 MR. MUSTOS: Well, we feel that we can't completely ignore that part of our audience base and we hope that some of the programming that we are offering to children will be programs that adults and children will share together.

8461 MS McQUEEN: Kathie, do you have anything to add on that point?

8462 MS MACMILLAN: No. I would just say that while it skews to adult, clearly there is an interest in programs that challenge wit and intellect such as thrillers and classic thrillers and those are applicable to younger-aged viewers as well.

8463 MS McQUEEN: And I guess the other thing is as programmers we believe that if we do great children's programming people who responded to their survey will say, "Oh, yes! This is a good show".

8464 COMMISSIONER DEMERS: Thank you.

8465 I have a last question, but an important one, on contribution to the art and I believe in the presentation of Ms McQueen there was reference to that. How do you propose to ensure culturally diverse programming on this service?

8466 MR. MUSTOS: We have a number of programs already in our arsenal that we think will contribute to the cultural diversity of our programming schedule. Each episode of Cold Squad, for example, is a little mini-mystery in and of itself and we have explored in previous seasons specific cultural communities in which someone has been killed and the cultural diversity of that cultural group has been reflected.

8467 We have another series that we have just ordered and put into our schedule called Mysterious Ways. That series has a black lead in it, which we are very proud of.

8468 We have also done some documentaries and some one-half hour dramas in Halifax and in Vancouver that have dealt with the aboriginal community, and those programs we think would be appropriate for Shadow in that one deals with an aboriginal legend, and our documentary from Halifax deals with the justice system in the aboriginal community.

8469 So we feel that our approach, generally speaking, at CTV, is to always try and reflect cultural diversity on our screens and the same approach that we have taken as a conventional network, we would certainly want to continue on this digital platform.

8470 MS McQUEEN: I will add, speaking as a real mystery lover myself, that one of the things that you notice if you look at mystery books is that people who read them enjoy cultural differences, exotic locations. The mystery is a great way to introduce a whole bunch of different places or ideas or cultural issues. Through the familiar format of a mystery you can be taken many different places.

8471 So the mystery format, there are aboriginal detectives, there are Asian detectives, there are black detectives, there are all kinds of characters who solve crimes, and it seems, for some reason, in the mystery genre, that often the cultural background of the detective is part of the fun of the mystery.

8472 COMMISSIONER DEMERS: Thank you.

8473 You have indicated in your application that you would seek out authors from the different underrepresented communities of our country for their stories. Could you tell us how you would go about that?

8474 MR. MUSTOS: Did you say younger?

8475 COMMISSIONER DEMERS: No. Underrepresented communities in order to tell their stories.

8476 MR. MUSTOS: Okay. Underrepresented.

8477 Well, I think that, again, I'm going to refer to track record, and I'm going to speak specifically about the development offices that we have at CTV in Halifax, Toronto and Vancouver.

8478 We have very credible people working in our development offices. These are really highly-respected development people that have come from production and the like. It is their job, it's what they do every day, to reach out into their communities at every level and try and find the best ideas. So I think that the fact that we are I think the only network that has this kind of on-the-ground expertise, with real money, real development money, to backup that commitment, where we are reaching out to the communities in which we are placed, that we hope to have the same kind of outreach happening for the purposes of the Shadow programs.

8479 Those offices and those development people would extend that same expertise and outreach for the benefit of Shadow, as they have in the past to CTV and have done a spectacular job.

8480 COMMISSIONER DEMERS: Thank you.

8481 Thank you, Madam Chairman.

8482 THE CHAIRPERSON: The discussion with Mr. Mustos about competitiveness, which for us I think is, to some extent, the flipside of diversity, has made me think of a take-home question to give to all applicants, since program producers seem to have no difficulty differentiating between horror, murder, crime, mystery and suspense, maybe you should give the question to your accountants.

--- Laughter / Rires

8483 THE CHAIRPERSON: The question would be, which of your Category 1 proposals would you not implement together with any other Category 1 proposal that we might licence?

8484 So at the last stage of the proceeding, we may well put that question to you and see whether the distinction between murder, crime and horror still holds.

8485 Counsel.

8486 MR. STEWART: Thank you very much, Madam Chair.

8487 In your description of service you mention Category 7(g), other drama, and yet we don't see this picked up elsewhere in the application. Can you elaborate on what plans, if any, you have for other drama?

8488 MR. MUSTOS: You're quite right, there is no 7(g) in our schedule. It is just a representative schedule and we included that just for future flexibility. I think we see the vast majority of our drama falling into 7(a), (c) and (d).

8489 MR. STEWART: Just for clarification, when you mention that your wholesale rate is -- 23 cents is the lowest, I take it that you are still proposing to ramp-up that wholesale rate from 23 to 27 by year 7. There has been no change in your application from that standpoint.

8490 MR. MUSTOS: No. That's right. It does go from 23 to 27. But I would like to point out that even in the seventh year of Shadow, where we would have a wholesale rate of 27 cents, we would still be half of what the 13th Street application is proposing in year 1.

8491 MR. STEWART: Thank you very much.

8492 Those are all my questions, Madam Chair.

8493 THE CHAIRPERSON: Madam Bertrand.

8494 CHAIRPERSON OF THE COMMISSION: Just a little note to say that I cannot wait for a presentation in front of the CRTC to be fully interactive, because when you use a word that is forensic and being francophone not understanding what it means I could have gone and found out what it means.

--- Laughter / Rires

8495 THE CHAIRPERSON: Mr. Demers.

8496 COMMISSIONER DEMERS: And now we turn to your application for Men's Entertainment Network. My questions are related to the nature of programming, original series, subscriber demand and interactivity.

8497 I start with the nature of programming.

8498 Programming for and about men could be a very broad programming concept. Please explain what makes a program of interest for men.

8499 My second question will be: Please expand on what is a man's program?

--- Laughter / Rires

8500 MR. ROBINSON: We believe that there is no dedicated service that exists right now in the Canadian broadcast system that reflects the interests and programs that would be directed at a men's audience. Although it's true that men watch a lot of television, there is not a dedicated service to their interest. So what we see is kind of a multilayer channel.

8501 First of all, that we would construct a schedule that deals with topics of interest that we believe will be directed at men. We would not include sports on the service. Men are more than jocks. The nature of establishing a program listing that would attract men to the services, the first level, so that -- to engage them in coming to the channel to observe conversations about topics of interest to men is the first level, but with interactivity, we hope that that's another way in which they can participate in the topic that's being presented on the program, and beyond that through Web sites that they can actually extend the experience and add to the experience of watching what has been presented on TV.

8502 In the proposal in the application we have used the word "community" quite a bit. That's what we really believe the essence of the service is. It's a sense of community for men to go to. So just as there is, you know, WTN for women's audience and there is YTV for youth audience, this would be a service that men would understand, first and foremost, is dedicated to topics of interest for them.

8503 If this service was granted and the schedule was created, our belief is that over the course of time we would want the audience to tell us the kinds of topics that we are featuring that are of interest to them or not of interest to them, and we would respond to what the audience is telling us. That is the goal or the mission of Men's Entertainment Network.

8504 COMMISSIONER DEMERS: Your application indicates that the target audience of the proposed service would be men 18+. I understand what you have answered, but can you assure the CRTC that the proposed service would represent an identifiable genre?

8505 It is probably the same question I posed to you but in a different way, but I suppose we have to be clear on it.

8506 MR. ROBINSON: Again, I think that what we are trying to create here is a sense of identity for men. There would be a tone and attitude about this channel that would be slightly irreverent but would be informative in ways that men aren't seeing on other channels.

8507 If I look at a couple of the proposed programs, maybe that would help.

8508 "For Men Only", as the flagship show, would be a more lively, engaged conversation about topics that might not be as serious as others, where we would want to have a debate -- a dialogue -- about that topic, enhanced again by interactivity and/or Web site.

8509 "Men, Sex and Society" would be a program which would be more issue driven, maybe single parenting or a health issue that might be of particular interest to men, where again there would be a sense of awareness of the topic, a discussion about the topic, an extension of what that might mean for individuals, and individuals would be able to enhance that discussion through more information elsewhere.

8510 The topics that we present, we believe, would have to be of interest from a man's point of view and would affect a man's life. Some of it would be silly, some of it would be serious, but all of it would be about topics that we believe more directly affect a man's day-to-day life than anyone else's.

8511 I might ask Kathie MacMillan if she might add a couple of comments from the research, because I found the research very helpful in what was of interest to men.

8512 MS MACMILLAN: Thank you. It is an interesting question, Mr. Commissioner. I would like to start by reading to you the concept that we presented to males, either quantitatively or qualitatively, which I think goes to the heart of the programming description that Mr. Robinson is talking about.

8513 The Men's Entertainment Network is intended to service both the programming needs and the interests of men, but, equally importantly, the need for community within the male gender. It will include drama, science, technology, sex and society, health and fitness, and entertainment that speaks specifically to men.

8514 The top line results are: 78 per cent of men found the concept very appealing. Amongst the 18 to 29 year olds, 46 per cent were in the top box, saying "very appealing". They are particularly interested in a channel about their interests. I quote: "There is already a women's channel, so why not?" "I don't like sports, but I would love to see a men's channel with more than sports. This could deal with serious issues -- men's issues." "Even though I watch a lot of TV, I would fit this channel into my schedule. This is the ultimate channel. Where do I sign up?"

8515 Both quantitative and qualitative respondents said that the Men's Entertainment Network would provide programs not available elsewhere, particularly on broadcast.

8516 Seventy-five per cent of quantitative respondents found the programming concept unique. Specifically, there is intrigue over the focus on men and men's issues. It is seen as real-live television for men, with example issues of health, sexuality, relationships and recreation. This is programming not found elsewhere.

8517 The potential for interactivity would also increase the uniqueness and was seen as being a plus behind it, as it would allow viewers to get involved in program content, such as question and answer periods, real-time chats and up-to-the-minute tickers.

8518 One respondent said: "This would be my go-to channel."

8519 They are very, very positive and behind it.

8520 COMMISSIONER DEMERS: Thank you. They all seem to understand what the men's genre is.

--- Laughter / Rires

8521 COMMISSIONER DEMERS: We will take it from another point of view.

8522 Would the Men's Entertainment Network use programming from The Comedy Network, The Discovery Channel, The Outdoor Life Channel or any other specialty services in which CTV is involved?

8523 MR. ROBINSON: I wouldn't say categorically no, but I think the design of this channel is to find programs that currently aren't available elsewhere. A number of the programs suggested in the application are unique -- are original to our particular broadcast landscape.

8524 Again, the idea is that men have a place to go to hear topics of interest to them, topics of discussion, to find out more information about areas that would be of concern to men.

8525 A lot of the programs described in the schedule are more analysis and interpretation and human interest -- sort of leisure. Those types of programs we don't carry currently on a lot of CTV platforms.

8526 In the application we have asked for the comedy series as a program category. Conceptually what we have tried to establish is sort of a weekday, more informative schedule, where there are "how-to" programs and human interest programs and magazine-style programs, and on the weekend more entertainment shows.

8527 So I could see there being some comedy shows on the weekend, as there would be some movies on the weekend.

8528 But as I think was indicated in this morning's dialogue, one of the key points to these services is to find original programming that will engage the audience. Having gone through The Comedy Network launch, you have to find at least one show that people identify as being your flagship show, and that will bring them to see other experiences as well. But we really need to have at least one -- certainly we would prefer more than one -- show which you can identify as your own.

8529 In designing the schedule for MEN, we wanted to create as many new opportunities as possible.

8530 COMMISSIONER DEMERS: If we were thinking of the services that CTV has already, you don't have in mind a program that has some of the features that you think would be in a men's program, or in one of the men's programs that you have listed in your application?

8531 MR. ROBINSON: Again, on the comedy front there may be programs that might work on several platforms. We have used Red Green as an example in our presentation because it is sort of a unique show about men. But Red Green runs currently on the CBC and The Comedy Network. I wouldn't necessarily, from a programming point of view, want to add it to a third platform.

8532 As you were speaking -- and I didn't think I would be raising Tom Green's name again at the hearing, but I am going to.

8533 There was a special that ran last week of the Tom Green series that was called "The Tom Green Cancer Special". As you may know, he had testicular cancer about three months ago. It was devastating to him, being 29 years old.

8534 The hour special was certainly not a barrel of laughs. It was very serious about what he went through, and his way of dealing with it was to take cameras with him as he went through the ordeal of the operation and the recovery. But it made a very important point to young men about: This is a condition that you need to be aware of and that you should know more about. You need to take your own measures to make sure that you are preventing this from happening to you.

8535 Awareness and information is kind of how I would point to the importance of that show and how it might apply to men on the Men's Entertainment Network.

8536 That is an example. But, in principle, I again go back to the notion that the channel needs to create its own identity, its own attitude, its own presentation style. It needs to become familiar to the audience, that men would go to that as experience. And the more originality you have in the experience, the better off the service is and the more attractive it will be.

8537 COMMISSIONER DEMERS: Thank you.

8538 So you understand that if the Commission were to license your specialty, it would have, in a sense, to give it some kind of definition and some kind of a framework, so these questions we're trying to explore where and inside what kind of a definition you would fit.

8539 "Original series," the application lists a number of original series that would be carried on the proposed service without making a specific commitment as to the number of original hours that would be produced. Could you please specify how many hours the original series listed in this application represent?

8540 MR. ROBINSON: In the application it represents close to 750 hours, I believe. And just to be clear from the presentation, at least half of our original programming would come from independent producers. But we think, again, that a weekday daily magazine-style show is an important kind of show for this service and once you do weekday five days a week, multiply it by the number of weeks a year, you get the high volume and there would be a large number of original hours, certainly, as part of this service.

8541 COMMISSIONER DEMERS: At the initial stage of the specialty, how much of the production would be in house?

8542 MR. ROBINSON: Well, I mean, notionally, with a minimum of a half of the original production committed to independent producers -- you could say "half" -- so there is an advantage to in house, clearly, because we have infrastructures that help all of that happen. And when you are doing high volume, it's helpful. We've, you know, done weekday shows before in high volume, but, you know, I just want to emphasize again our commitment is to ensuring that we are contributing to the independent production sector by a minimum of a half of our regional hours each year.

8543 COMMISSIONER DEMERS: And that may start right at the beginning, or close to the beginning of...?

8544 MR. ROBINSON: That would start at the beginning, yes.

8545 COMMISSIONER DEMERS: Thank you.

8546 On the subscriber demand, we were talking about that. Do you have any indication of the level of subscriber demand for the proposed service, at the proposed rate, for year 1 and 2 of 20 cents per subscriber per month?

8547 MR. MOFFAT: If I could just make a reference to our business plan, in the year 1 we have total subscribers of 700,000, and rising to just over 3.1 million by the seventh year of the service.

8548 COMMISSIONER DEMERS: Thank you.

8549 And we get to interactivity. Here, again, you have proposed a number of interactive elements in your application, both through the Internet and the set-up box. What impact would you expect interactive subscriber input to have on the programming development of MEN Entertainment Network? Now, you've touched on that already, but maybe...

8550 MR. ROBINSON: Again, if I use "For Men Only" as the example, where there would be a lively debate about a particular topic, if I was a member of the home audience and wanted to participate in that conversation, I could do that in a number of ways.

8551 From the video this morning, if you'll recall, there was also the opportunity to respond to questions that were prompted by the icon on the screen. That's another way in which I could participate as a member of the home audience. And beyond that, if there was a topic in which I wanted more information or I wanted to, you know, go to a chat room, where I could extend the conversation about that topic, then the Web site would certainly be a place that would allow that to happen.

8552 So, you know, the philosophy on this channel is to keep enriching the conversation. So that I can watch a conversation happening, I can then participate in the conversation, and then, hopefully, I could extend the conversation in ways that would either make me more informed or allow me to vent whatever I wanted to vent, but a way to, you know, continue that dialogue.

8553 And the features that we've talked about today -- not to repeat what everyone has said -- but would be available by 2001, and shortly thereafter at a launch of September 1st.

8554 COMMISSIONER DEMERS: Thank you.

8555 In general, and certainly, I imagine, at the beginning, your viewer/subscriber would watch television and watch the...or be on the computer at the same time?

8556 MR. ROBINSON: If that's the technology that was available on September 1st, 2001, yes. That's the way my son watches TV right now. But eventually, when those two merge, then the experience would be one.

8557 COMMISSIONER DEMERS: Thank you.

8558 And some questions that I've asked before on other applications. Was there any consultation with distributors on this application?

8559 MR. ROBINSON: No, there was not.

8560 COMMISSIONER DEMERS: Thank you.

8561 I think I understood and understand you as saying that the interactivity that we have discussed all along is the same type of interactivity that you propose in your application, so that the questions I've asked on that point, the development of interactivity, applies here also?

8562 MR. ROBINSON: That's correct.

8563 COMMISSIONER DEMERS: Thank you.

8564 That would be the end of my questioning, Madam Chair.

8565 THE CHAIRPERSON: I have just one small question. This seems to have been taken from your application, calling it as "Revival of Men Being Men" and I want to know if Mr. Mustos would consider that a horror show?

--- Laughter / Rires

8566 MR. MUSTOS: I guess the question is: would you?

--- Laughter / Rires

8567 THE CHAIRPERSON: Commissioner Demers.

8568 COMMISSIONER DEMERS: So we move over to Discovery Health Channel, our second-to-last together. And my questions relate to nature of programming, Canadian programming...nature of service, Canadian programming and interactivity.

8569 Nature of program, nature of service, could you please specify which subcategory...okay, in your application you indicate that programming would come from category 7 -- drama, in general. Could you please specify which subcategories you propose to include in your nature of service programming?

8570 MR. MURPHY: Certainly. We propose to include a category 7(a), 7(c) and 7(d).

8571 COMMISSIONER DEMERS: Okay, ongoing dramatic series, 7(c), specials, mini-series, made-for-televisions films. Thank you.

8572 You indicate that the service will broadcast a limited amount of drama: films and dramatic series. Would you accept limits for this category as a condition of licence?

8573 MS McQUEEN: Yes, we would. And the condition of licence we propose is the following:

8574 First, we will not run any first-run Hollywood feature movies; second, all drama that we run will be directly related to the genre, that is health; and thirdly, that we will limit such programming to a maximum of 10 per cent of the service.

8575 And if we are on the subject of drama, there were views expressed in the first application about the relevance of drama to a health channel. We have some views on that ourselves, if it would assist you in hearing them.

8576 COMMISSIONER DEMERS: Certainly.

8577 MS McQUEEN: Well first, if I may talk a little bit. Paul Lewis, who is the Vice-President of Programming at Discovery -- Ken Murphy will want to talk about this as well -- was explaining to me last night some science literacy studies that he had noticed, and Paul I wonder if you could explain.

8578 MR. LEWIS: Sure. I will keep coming back to the word "science" as I talk about this channel, but we did a scientific study, along with the Royal Society of Canada, and the Ontario Science Centre, and it was a literacy survey that was built on another study that was done by the University of Calgary and what we were examining is how people gain their science literacy and what the survey strongly indicated was that people tend to get a lot of their information not just through documentaries but significantly through feature films.

8579 To give you an example of this, Jurassic Park. After Jurassic Park came out people understood a lot more about dinosaurs. They understood a lot of basic science questions about dinosaurs that they didn't understand before that movie came out.

8580 So this is a very good example of how film and drama can really raise public awareness of science issues. And I can certainly assure the Commission that we would not be broadcasting films like Frankenstein and presenting them as, you know, this is the state of medical technology today.

--- Laughter / Rires

8581 Maybe ten years from now, but not today.

8582 MR. MURPHY: I might add that we have proposed a fact or fiction panel discussion that would follow any feature airing where -- a reference was made yesterday, for instance, to a creative or artistic licence that may serve to distort some very important medical or scientific facts, and we can, I think, serve the audience very, very well by adding that fact or fiction debate and discussion and clarification, if necessary.

8583 The other point I would like to make -- and let me assure you that we have no intention whatsoever -- sorry, Ed -- of putting Tom Green on the Health Channel. But the point that Ed just made I think is a very important one, where indeed if you saw that special on testicular cancer you learned a lot, and you learned a lot in a way that perhaps is surprising when you consider that indeed a comedy show imparted some important medical information.

8584 So our intention here is not to somehow load it up with drama, but to use drama in a very selective and important way to inform and raise awareness of health issues, and drama can be very effective in that regard.

8585 MS McQUEEN: Our belief is that if you really understand how science is communicated you would want to have drama on a health channel. Northrop Frye once remarked that the dramatic form is always more satisfying to the imagination than the documentary form and the imaginative process is what makes us eager to learn. Once our imagination is aroused, then we are eager to learn.

8586 I would also point out that programs like ER receive continuing appeals from medical associations and research associations and organizations like the Kidney Foundation that their specific interest in health be exposed on that show because they have found that that leads to what Paul was saying, a dramatic awareness and interest in learning the facts about the disease.

8587 We strongly believe that medicine is not a lifestyle. We may choose to have a healthy lifestyle but at the bottom medicine is science. We will choose a healthy lifestyle more easily if we understand the basic principles of medicine and the basic principles of science.

8588 One of the expertise we have is being able to communicate scientific information not only with credibility, but with accessibility. So that although physics and chemistry may not be everybody's idea of a good time, I would say that the Discovery Channel has been able to make them so for large numbers of people.

8589 Our belief is that a Health Channel should be founded on a respect for and a grounding in science.

8590 COMMISSIONER DEMERS: Thank you.

8591 On Canadian programming, and I think this one here is 70 per cent, is it?

8592 MS McQUEEN: Yes.

8593 COMMISSIONER DEMERS: You have proposed quite a substantial commitment to Canadian programming. Is there enough Canadian content available -- I posed this question earlier -- in this type of programming to enable you to meet these commitments especially in the early years of your licence term?

8594 MR. MURPHY: Absolutely. I would like to pick up on a point made earlier. We are building our health schedule around a flagship program Health Beat, a one hour per day vehicle for dealing in a timely fashion with accurate, credible information that is of particular relevance and focused on Canadian health needs, and that really provides the anchor.

8595 We are proposing, of course, that that would be an in-house program built upon our core scientific and storytelling expertise and that would represent, for instance, 250 original hours a year as the anchor for our health schedule. We, in addition, are proposing to commission and acquire a whole series of very exciting documentaries. We have extensive experience with, and a track record with, the independent community.

8596 There is a high degree of interest in this genre and a growing expertise and we are absolutely confident that there will good, high-quality program supply from Canadian sources in-house and independent, and we are fortunate to have our partner in Discovery Communication International in the process of rolling out the Discovery Health Channel around the world at this point as a fabulous and indeed an unprecedented source of high-quality medical and health programming.

8597 MR. LEWIS: Can I just add that when we started the Discovery Channel six years ago, a lot of people thought that the idea of trying to fill an entire network of science, nature and technology programming, let alone such a high percentage of Canadian science programming, was impossible and a lot of people thought especially we were -- the word "nuts" was used a lot of times when we told them we were going to be doing a daily science program from all around the world.

8598 Broadcasters with a lot more resources than we had thought it was an impossible job and we have proven over the last five and a half years that we are able to do it and we have superseded our own expectations.

8599 MS MACMILLAN: Just one last point in terms of the demand for Canadian content.

8600 Within the research an overwhelming 89 per cent agreed that Discovery Health would provide information relevant to Canada and Canadians and the focus group participants believe that the Canadian perspective on health should not be ignored and that the Discovery Health Channel should reflect Canadian views on health and provide programming geared toward the Canadian lifestyle. Amongst women, that number increases to 91 per cent.

8601 Thank you.

8602 MR. MURPHY: And if I just might add the respondents repeatedly indicated that they saw the Discovery Health Channel as very much an anchor for a programming package and that the Discovery Health Channel would indeed drive demand for overall digital programming, but in a very material way.

8603 MR. MACDONALD: Commissioner Demers, perhaps I could add a comment as a partner in this channel.

8604 During the last round of specialties, I had the misfortune of being on the other side of Comedy and you will recall that the Comedy Channel made the first, and at that time unprecedented, commitment in the 70 per cent range -- 72 per cent exactly, as I remember.

8605 We challenged Mr. Fecan on that quite aggressively, I might add, and he explained that he is going to be nimble and indeed they have been nimble, and the Comedy Channel has fulfilled its obligations, has produced one of the best specialties that are out there, and I bring that up only because it is really a testament to one of the points underlying everything here, and that is doability, and the resources and the management team to get it done.

8606 So I have every confidence in saying to you that having worked with this team, and certainly having been on the other side of this team previously, that if they say that there is the programming to get it done, it will get done.

8607 COMMISSIONER DEMERS: Thank you.

8608 Your programming will be on a six-hour wheel?

8609 MR. MURPHY: That's correct, yes.

8610 COMMISSIONER DEMERS: On a particular program wheel, how much or how many repeats would there be either from a weekly perspective or an annual perspective?

8611 MR. MURPHY: I'm going to ask Paul Lewis in a moment to speak to that, and he can provide a level of detail to any follow-up questions you might have.

8612 But I want to make one point about repeats. Based upon our experience with Discovery Channel and @discovery.ca in particular, it is frequent to have a higher audience at our 11 o'clock airing than for our 7 o'clock airing. That is a further reinforcement that perhaps the word "repeat" historically has been pejorative and speaks to dilution of the value of a program schedule.

8613 But in specialty, and I think particularly in a genre like health, it's really a matter of convenience. You don't want to overdo it. But to have a reasonable repeat factor to give people the highest degree of access to relevant programming, I think is a true asset. I think we have struck our balance pretty good between original and alternative viewing opportunities.

8614 Paul, maybe you can just speak to some of the specifics.

8615 MR. LEWIS: Well, scheduling isn't a science.

--- Laughter / Rires

8616 MR. LEWIS: When we have repeated a program for the fourth time and it does better than the premier episode, it leaves us all scratching our heads. It's a mystery.

8617 Anyway, we are looking at a repeat factor in the health schedule of probably about -- each program would air about three or four times a year over the course of the schedule. As Ken has said, that's not that different from the Discovery Channel schedule. It works very well. Depending on the program and the mood of the audience, the repeat factor doesn't seem to have a large impact on dwindling audiences.

8618 COMMISSIONER DEMERS: So in fact, it is not an impediment to attractiveness?

8619 MR. MURPHY: That's been our experience, yes.

8620 COMMISSIONER DEMERS: Thank you.

8621 In your application you state that Discovery is looking forward to working with Canadian independent freelance producers.

8622 Approximately what proportion of your programming budget will be dedicated to independent production?

8623 MR. MURPHY: I will respond by saying that one of the key pillars of the success of the Discovery Channel has been our reliance on the independent community. We have taken our commitment very, very seriously and have spent with them over $45 million over the last five years.

8624 As we looked to develop the Health Channel service, that commitment will continue. We are prepared to commit 40 per cent of our Canadian programming expenditures to the independent community.

--- Pause / Pause

8625 COMMISSIONER DEMERS: I have already had a chance to discuss the interactivity and other areas. There is nothing here to be added or to be of particular interest to this channel?

8626 MR. MURPHY: No. And I think you have heard a refrain that our genres are particularly appropriate for interactivity, but I do feel compelled to make a similar comment with respect to health where so often there are technological terms or biological terms that are used in an interview or a documentary for which interactive explanations can be, I think, particularly effective.

8627 As well, I think links. There is an almost insatiable appetite for relevant and accurate health information and I think we can play a particularly useful role not in linking to the almost overwhelming amount of health information on the Internet but in fact to act much more as a filter, to add value, if you will, by linking to credible, accurate, relevant and Canadian sources of digital information and I think that is what resonates for me most with our interactive strategy for the Health Channel.

8628 COMMISSIONER DEMERS: Thank you.

8629 As to conversations with distributors, you will give the same answer?

8630 MR. MURPHY: We have not had specific conversations with the distribution community.

8631 COMMISSIONER DEMERS: Thank you.

8632 Additional hardware, the same answer?

8633 MR. MURPHY: Correct.

8634 COMMISSIONER DEMERS: Thank you.

8635 I have no further questions, Madam Chair.

8636 THE CHAIRPERSON: Commissioner Wilson.

8637 COMMISSIONER WILSON: Just a quick question about what proportion of your programming will come from Discovery in the U.S.

8638 They have a health channel in the U.S., do they not?

8639 MR. MURPHY: Yes, they do. The expect to have 20 million subscribers by the end of this year, and as we speak they are launching in Germany, the U.K., Latin America and other markets around the world.

8640 I'm going to ask Paul Lewis to speak to the specifics of the role that Discovery International programming will play.

8641 However, I would just like to underline that last point, that one of the strengths of the programming that will be available to us from Discovery International is that international flavour.

8642 Paul, in fact, is just back from a trip overseas --

8643 COMMISSIONER WILSON: I'm not suggesting that it's not. I'm just curious about the proportions.

8644 MR. MURPHY: But there really is much more programming than U.S.-based programming available to us.

8645 Paul.

8646 COMMISSIONER WILSON: Right. Just as it is on Discovery Channel right now.

8647 MR. MURPHY: Correct.

8648 Paul.

8649 MR. LEWIS: Well, we have in the schedule probably about five or six hours of programming from our partners at Discovery International. You know, as we said, this is not just programming from the U.S., this is programming from Discovery channels around the world, and that's really bringing us quite diversity and ideas and ways of approaching health from different cultures, which I think is important.

8650 The other side of this, I might add, is that the Discovery International Network is extremely anxious to get our programming. When I was in Germany and talking to my colleagues at Discovery Germany and Discovery U.K., they kept saying to me: When are you going on the air? When are you going on the air? They need programming. Most importantly, they were looking for programming that does not come from the United States. It has a Canadian voice to it because a lot of the health concerns, you know, the more socialized view of medicine is much more in keeping with a lot of these other countries.

8651 So we have two ways of exchanging material, which gives a wonderful opportunity for independent producers here for us to hook them up with other broadcasters around the world and give them another vehicle for their programs.

8652 COMMISSIONER WILSON: Just out of curiosity, the Discovery channels in the U.K. and in Germany, are they built around similar kinds of models as the channel that you are proposing, whereby they are essentially like a U.K. channel and they import some programming from Discovery International?

8653 MR. MURPHY: That's correct. And they also share the challenges inherent in a digital environment where one has to provide the kind of attractive evocative and accurate programming that will drive demand for the universe and then ultimately subscription, and the desire and the attractiveness therefore of sharing programming is particularly attractive because of that digital fact.

8654 I would just like to put Paul's response on five or six hours in an annual context.

8655 We expect that the total DCI programming slate would be around 100 to 110 hours per year of original hours.

8656 COMMISSIONER WILSON: So that's a fairly small proportion.

8657 MR. MURPHY: That's correct.

8658 COMMISSIONER WILSON: Okay. Thank you.

8659 THE CHAIRPERSON: No more questions so go ahead.

8660 COMMISSIONER DEMERS: No questions from counsel.

8661 THE CHAIRPERSON: I'm sure that by now everybody is wondering -- we all know what we are supposed to do here, but how do we make it interesting.

--- Laughter / Rires

8662 THE CHAIRPERSON: I'm not going to tell you the lead-up to that joke in case my grandchildren are required by their parents to watch CPAC at least half an hour a day.

--- Laughter / Rires

8663 COMMISSIONER DEMERS: Well, we are in the Exploration Network. That should bring some interest to the young people around.

8664 So I will have some questions on subscription revenue, expenses, profitability, interactivity, nature of service, diversity, competitiveness. Let me start with subscription revenues, penetration levels, subscriber rate.

8665 A review of Goldfarb's study indicates that only 9 per cent would be strongly likely to pay for the service. The research conducted by Goldfarb appears to be silent on the monthly rate for this type of service when willingness to pay is measured. Can you tell us how you have linked your research studies with the subscription revenue protections?

8666 MR. MURPHY: Just before I ask Kathie to respond in detail to that point, one of the challenges we face as programmers is we are in a position to design a service around wholesale fees. It is very difficult for us to predict how our services might be packaged and priced by the distributor. So absent that kind of information, it's difficult to get at the kind of information you are seeking. Instead, we really tried to drill down on the attractiveness of the concept and the genre of truly focusing on Canada and showcasing the geography and people of Canada.

8667 Just before I ask Kathie to fill in some details there, the one striking bit of information that Canadians told us was the more they learned about Exploration Network the more they were fascinated by the service and were truly engaged by it. I think it really captured their imagination.

8668 But perhaps Kathie can fill in some details.

8669 MS MACMILLAN: Mr. Commissioner, the issue around pricing is a complex and scientific issue, and when we looked at it around the type of demand for these types of services and the fact that we are trying to come up with programming that will ultimately drive consumers to digital services, we elected that in the qualitative we would ask about the ability to pay an additional price and we would probe the respondents to find out what sort of price they would immediately come up with.

8670 But on the quantitative, we were highly reticent to put down a price point because consumers' experience in Canada today is predominately that you buy packaged services and, depending upon your cable company, those packaged prices can change fairly dramatically. So we were unwilling to say for a 50 cent additional charge or a $1 additional charge on a per-program basis.

8671 Accordingly, we asked: What would be your willingness to pay just at an additional charge? Therefore, it would be in the mind of the consumer what that additional charge would be.

8672 When we talked about a qualitative leap, people came back and said they would be willing to pay up to $5 for this channel on its own, but they also expected it to be part of a package, and the willingness to pay more than the $5 would also depend on the quality of the package and the other types of programming found.

8673 With 9 per cent saying "strongly likely", again, only having heard a concept read to them over the telephone and not being able to enjoy the visual portions of the concept and the visual medium, we would say it is a strong response. However, I would turn to Nikki in terms of saying how the actual demand was calculated.

8674 MS MOFFAT: Mr. Commissioner, we took a consistent approach in terms of our packaging with all our services. Our year 1 subscribers are 729,000, rising to 3.1 million by the seventh year.

8675 Again, our wholesale fees are 15 cents in the first year, rising to 20 cents in the last year of the licence.

8676 COMMISSIONER DEMERS: Thank you.

8677 Just a point of clarification, Madam Macmillan. The questions on this channel were drafted in the same way, or presented in the same way, as for all the other applications that are in front of us?

8678 MS MACMILLAN: That is correct.

8679 COMMISSIONER DEMERS: Thank you.

8680 On expenses and profitability, according to your business plan, over a 7 year proposed licence term your total expenses would account for 99 per cent of the total revenue. Positive profitability is expected to be reached in year 6.

8681 Don't you expect any synergies to be derived from operating multiple specialty services?

8682 I will give it to you in bulk.

8683 If the Commission were to license more than one of your proposed digital Category 1 applications, how would this affect your business plan or profitability level?

8684 MR. MURPHY: I will ask Nikki Moffat to respond to that question, please.

8685 MS MOFFAT: Each of the services before you today is built on stand-alone with synergies from our existing services. We have managed to keep our operating costs at a minimum by building on the existing infrastructure at CTV, and that has allowed us to contribute more money to Canadian programming than some of the other services before you.

8686 In terms of break-even, we do break even at the last year of the licence term.

8687 As Ms McQueen noted earlier, not all services are going to be as profitable as we would like, but we do have a commitment to this service and we feel it is very attractive.

8688 MS McQUEEN: If there were synergies, I think one of the things we would do with this business plan is have additional marketing of the digital tier and our own digital services. So that is how we would go toward them. But it is kind of hard to know if there are synergies, unless you tell us right now that these are the channels you are thinking of licensing.

--- Laughter / Rires

8689 MR. MURPHY: I would like to speak, though, to one set of synergies that we did plan around, and that is our association with "Canadian Geographic Magazine". They are experts in this field, and I think with their expertise in the magazine industry, and with their publication and our science background, we assumed that we would be jointly developing stories and going out and acquiring those stories to really showcase Canada across multiple platforms, including print in this case. So that was one set of cost-saving assumptions that we did factor in.

8690 COMMISSIONER DEMERS: Thank you. We will get to that point also.

8691 On interactivity, is there anything else to add?

8692 Mr. Murphy or somebody else?

8693 MR. MURPHY: No. I would like to, though -- and, again, I had to promise all of my colleagues not to wave my arms --

--- Laughter / Rires

8694 MR. MURPHY: We have seen for years now a series of cameras with a very important function. They are pointing at highways and they are pointing at parking lots for security, and so forth. One of the things that is so very, very exciting about the notion behind Exploration Network, when you combine it with some of the things that we heard about earlier with respect to AFV, or alternative format video, is the prospect that now we can have a series of cameras feeding real-time daily into Exploration Central or Exploration Today, focusing on this great and vast land of ours; and beautiful pictures, not clogged highways. That is the one point I would like to make that distinguishes Exploration Network.

8695 COMMISSIONER DEMERS: Thank you.

8696 I just have a particular question -- the last one -- on interactivity.

8697 Could you please describe the assumption underlying your projected interactive revenue on this application? I understand that it is 17 per cent.

8698 MS MOFFAT: Our total interactive revenue during the 7 year period is $7 million. In the first year it is $400,000, rising to $1.6 million by the seventh year of the licence term.

8699 Again, we looked at our existing services and the Web sites that we operate, and these revenue streams coming in are from sponsorship, advertising and some e-commerce transactions, but not significant.

8700 COMMISSIONER DEMERS: Thank you.

8701 The nature of service: diversity competitiveness. Mr. Murphy, you spoke about your relationship with the Royal Canadian Geographic Society and "Canadian Geographic Magazine", and you stressed the fact that your partnership would be in programming. Would there be other areas of partnership, financial or any other? No?

8702 MR. MURPHY: No. We are really focused on showcasing Canada to Canadians, rather than a corporate formal partnership.

8703 With respect to diversity, though, we are very excited about building on CTV's relationship with APTN, because we think that they can play a key role in bringing some of the more remote regions of the country to prominence and, again, to showcase.

8704 You may have seen in our application the notion of bringing a series of digital cameras -- cameras that produce absolutely stunning images for under $5,000; images that would have cost $100,000 even five years ago for similar technology.

8705 The opportunity now to work with APTN and get those cameras out into the field is very, very exciting indeed.

8706 COMMISSIONER DEMERS: Thank you.

8707 How much programming overlap would there be between Exploration Network and Outdoor Life Network or Discovery?

8708 MR. MURPHY: Again, I will ask Paul Lewis to fill in some of the details.

8709 Just before I do that, though, one of things that we have found at Discovery Channel is a program like "Great Canadian Parks", to our eternal amazement, has almost perpetual audience interest. Two years after its debut, it can get a higher audience than when it first premiered. And we have, through that series, looked at 15 per cent of the parks in Canada. So we see a tremendous opportunity to move some of that programming from Discovery Channel to Exploration Network.

8710 Paul?

8711 MR. LEWIS: A minority of the programming on the Exploration Network would come from Discovery Channel. In fact, in the proposed schedule we have here, there's no programming, for example, from the Outdoor Life Network. I wouldn't see that kind of crossover happening. But some from Discovery Channel, from programs that have been around since Discovery was on the air, so some of these episodes haven't been seen in several years on the Discovery Channel, programs, as Ken said, is "Great Canadian Parks" and "Storm Warning."

8712 So all told, we're probably looking at perhaps about, you know, six hours of programming a week in the wheel that might come from Discovery Channel. But that's a small amount of programming.

8713 MR. MURPHY: We would in fact expect that it would be less than 10 per cent from Discovery Channel. And, as Paul has indicated, we have no intension of looking at programming from Outdoor Life.

8714 COMMISSIONER DEMERS: Thank you.

8715 We note that you are involved in a category 1 travel application with BCE -- Travel TV. It appears that some of the proposed programming on Exploration Network may overlap with applications such as Travel TV. Could you please comment on where you can see potential overlap?

8716 MR. MURPHY: Well, I think there is a fundamental distinction between the two services. Exploration Network will have a profound basis in science and demographics and anthropology and hydrology and so forth, and that, really, is the foundation, based upon our expertise in those areas. And that, really, is the characteristic of Exploration Network. So I don't think there's really any confusion between the two.

8717 And I might add that in our research not a single Canadian saw any overlap whatsoever between a travel service -- any travel service -- and Exploration Network.

8718 COMMISSIONER DEMERS: Thank you.

8719 MR. MACDONALD: Commissioner Demers, we -- putting on my Travel Channel hat for a second -- look very closely at the schedule and did talk to the folks about overlapping program and were satisfied that there wasn't any.

8720 And second of all, I think I'm correct in saying certainly we did not intervene, nor do I think any of the other travel applicants did. So I think that that provides perhaps some assurance that there's a limited overlap, at least as from a competitive point of view, as we see it.

8721 MR. LEWIS: I think the best way to differentiate travel from exploration is to say that our storytellers will be explorers, not tourists, and they certainly won't be looking for travel deals. They'll be on expeditions, stories of survival.

8722 COMMISSIONER DEMERS: Thank you.

8723 If the CRTC were to license a travel application, other than Travel TV, would you anticipate this licence to be competitive or complementary with Exploration Network?

8724 MR. MURPHY: We would not see them at all as competitive.

8725 COMMISSIONER DEMERS: Thank you.

8726 Under the "New Program Category" definition, category 11 is described as "programs primarily about the world of entertainment and its people." Please describe how this category fits in your proposed service.

8727 MR. MURPHY: Fundamentally, we are part of where we live, we're part of a geography. We're influenced by it and we, in turn, influence it. And as it's very, very difficult to consider an exciting and dynamic exploration of Canada without looking at Canadians. So our intention was really to include the human element, if you will the human geography, of Canada, and that is the principle behind that category.

8728 MR. LEWIS: Perhaps if I could give an example here. I had -- this was a little while ago -- a husband-and-wife team in my office who were planning to canoe through the Northwest Passage. And as crazy as that might sound, they were extremely serious about this. And it really captured the spirit of Canadians in exploration. And I think that's a really important facet of the channel: was capturing not just the spirit of the country, but the people, as they explore their country.

8729 COMMISSIONER DEMERS: Thank you. Thank you very much to your team, Mr. Fecan.

8730 Madam Chair, this ends my questioning.

8731 THE CHAIRPERSON: So this completes our examination of your applications. Perhaps Mr. Fecan wants a few minutes to wrap up.

8732 MS McQUEEN: We've been sitting here for a long time in this windowless room on a beautiful summer day, and, as Canadians, we treasure every single one of those days. And you will be sitting here for many more of those precious days. And we have been discussing matters complex and arcane and detailed. When we leave here, all of us must deal with the cynicism of columnists, who believe that this hearing is all about dividing up the spoils.

8733 We know that it isn't. This is likely the most significant hearing that any of us will participate in. It is, quite simply, an historic moment in our history. It is the transformation of Canadian television, the entrance to the future of the two most powerful communication means ever developed by human kind.

8734 We respect the significance of this hearing. We believe that the Commission has crafted an unusual and innovative strategy for the introduction of digital and we hope very much that you find that our commitments and our applications are responsive to your creativity.

8735 We want to say also that we are committed to making this a cooperative process. We will work with you, we will work with every distributor, we will work with the other services. We want to build digital together.

8736 MR. FECAN: I know it's late, but I would be remiss at this point if I didn't ask for the order.

--- Laughter / Rires

8737 MR. FECAN: We think we've got appealing, exciting ideas. We know our Canadian content levels are high -- comparatively -- our rates are low and we believe we leverage our strength for the benefit of the system.

8738 Most importantly, when you look around the room at this magnificent team, which I'm proud to be part of, both corporately and individually you will see dedicated, passionate, imaginative and, yes, nimble people, who have consistently delivered and who are playing at the top of their game.

8739 We believe digital is the new frontier and we really have to be there. We want to be there, both as a company and as people. We feel we have a lot to give and we really hope we are given the opportunity to participate and make digital a success. Thank you.

8740 THE CHAIRPERSON: We thank you very much for your cooperation. You certainly have managed to make things interesting right to the end of the day, despite the long day. And when the cameras are off, I will tell you who that comment -- for those of you who don't know -- was attributed to.

8741 We will be back in 15 minutes to hear the B.C. Media Travel TV application.

--- Upon recessing at 1615 / Suspension à 1615

--- Upon resuming at 1635 / Reprise à 1635

8742 THE CHAIRPERSON: Welcome back to our hearing.

8743 Mr. Secretary, please.

8744 MR. CUSSONS: Thank you, Madam Chair.

8745 Our next applicant is BCE Media Incorporated on behalf of a general partnership with Travel Co, OBCI and CTV Inc.

8746 BCE Media is proposing a new Category 1 service to be called Travel TV. There is a maximum presentation time here of 20 minutes, but not until Mr. Alain Gourd has introduced his colleagues.

8747 Mr. Gourd.

PRESENTATION / PRÉSENTATION

8748 M. GOURD: Madame la Présidente, Madame la Présidente, Commissioners.

--- Rires / Laughter

8749 This is the first single application at the end of a long day where it is sunny outside, that is, and therefore we will propose to you to travel to the salient features of our application.

8750 La première étape de notre voyage sera évidement d'introduire les membres de notre panel.

8751 Je suis Alain Gourd, président et chef de la direction de BCE Media, and I am proud indeed to introduce the other members of our team which is one of the strengths of our application.

8752 A mon extrême gauche se trouve Daniel Lamarre, président et chef de la direction de TVA.

8753 To my immediate left, Trina McQueen, Executive Vice-President, CTV. To my right is Jim Macdonald, Senior Vice-President and Chief Media Services of BCE Media.

8754 Behind me is Nikki Moffat, Vice-President, Finance of CTV's specialty Operations. To her right is David Elder, our legal counsel. To her left is Elizabeth Duffy-MacLean, Director of Business Affairs, Netstar communications.

8755 Derrière Daniel Lamarre se trouve Michel Chamberland, président de Canal Évasion.

8756 And at the side table are Ivan Fecan, President and Chief Executive Officer of CTV, and Kathie Macmillan, President of Goldfarb Consultants, our research firm.

8757 Madame la Présidente, Commissioners.

8758 This application brings together three strong Canadian communications companies: CTV, TVA and BCE. We are excited about the quality and the potential of the innovative application we are presenting.

8759 Travel TV will be a high-quality, affordable service with broad appeal to viewers. In fact, we expect that it will respond very well to the Commission's priorities making a major contribution to the launch of the new digital specialty services.

8760 Ours is the only travel application before you that offers synergies with an existing French-language service, Canal Évasion. And it will break new ground in interactive services to Canadian viewers based on the deep commitment and experience of its owners.

8761 MR. MACDONALD: Travel is vitally important to the Canadian economy, employing more than 525,000 of our fellow citizens and bringing in more than $50 billion in revenues in 1999. Seventy per cent of this, or $34 billion, is spent by Canadians indulging in their passion for travelling within Canada.

8762 One of the most exiting things about creating Travel TV has been the opportunity to design and build a truly Canadian channel that can be commercially successful. Because Canada is one of the most popular travel destinations, our Canadian programs will be highly attractive to audiences both here and worldwide. In fact, one of Travel TV's key goals is to generate content that works at home and is also exportable.

8763 In addition to a strong desire to travel, our research has found that 80 per cent of Canadians surveyed expressed a positive interest in travel television programming. In fact, travel is so attractive to head of households demographics that we believe it will strengthen any new digital package.

8764 Our application has been extremely well-received by a number of key individuals and organizations, and we wish to thank the many intervenors who have supported us. We are particularly proud to be the only travel application to earn the support of the Canadian Automobile Association or CAA.

8765 The CAA is the most important travel organization in the private sector and represents four million Canadian travellers providing them with consumer advocacy services, quality ratings, travel bookings and emergency assistance.

8766 Despite the unprecedented number of applications that the Commission has received, there can be no question that the launch of digital is a move into uncharted waters. The winning applicants must have the commitment and the resources to stay the course. Our partnership of BCE, CTV and TVA includes the management expertise to launch the service successfully and the resources to sustain its quality.

8767 Our business plan is solid and realistic, offering the optimal combination of quality Canadian programming and affordable subscription rates. We believe this will help ensure the success of our channel, as well as other channels launched at the same time.

8768 MS McQUEEN: Commissioners. Quality Canadian programming will be the hallmark of Travel TV. We will create 750 hours of new, original Canadian programming in our first year of service.

8769 We will spend $3.6 million on Canadian programming in the first year and more than $41 million over seven years, and that is a commitment of 53 per cent of our revenues over the term. This represents the highest level of Canadian programming expenditures of any application in this genre.

8770 We have also committed to the highest level of spending on independent production of any travel application. We will begin with a solid 53 per cent Canadian content, moving to 70 per cent in year seven.

8771 Travel TV has lots of categories. It is a full-service channel, offering a complete range of programming for people who travel frequently, as well as for those who just love to dream about it.

8772 We have a wonderful team in place to ensure the quality of the service: The infrastructure and experience of CTV, the interactive expertise of BCE Media and Sympatico, and the cross-cultural insights and synergies of our sister specialty, Canal Évasion, and our French-language partner, TVA.

8773 Travel TV is uniquely positioned to leverage resources and increase the quality of both Canadian and foreign programming. The valuable relationships which make this possible include the partnership with Canal Voyage, now available in France, Belgium and Switzerland.

8774 Travel TV will schedule innovative and creative new Canadian travel shows, including programs commissioned jointly with Canal Évasion, such as Romantic Destinations and Postcards From...

8775 Together, we will reveal Canada and the world from a Canadian perspective.

8776 M. LAMARRE: Depuis le lancement du Canal Évasion, nous avons beaucoup appris, à la fois de notre propre expérience et du vécu partagé de nos partenaires du Canal Voyage-France.

8777 Travel TV pourra bénéficier de ces connaissances acquises, et surtout de l'accès à un contenu non-canadien très diversifié dans les deux langues officielles.

8778 Mais beaucoup plus important que cela, nous travaillerons ensemble pour composer avec la difficile réalité d'un marché francophone exigu encore plus étroit que celui du Canada anglais.

8779 La programmation télévisuelle de qualité est très coûteuse. En conjuguant les ressources de ces deux marchés avec deux fenêtres, nous arriverons à augmenter la qualité de la programmation de part et d'autre à surmonter ce problème. Ce sont les téléspectateurs qui en bénéficieront.

8780 Cela ouvre aussi de nouvelles possibilités pour les producteurs indépendants du côté francophone et des perspectives uniques à ce projet. Les investissements considérables en programmation canadienne au cours des sept prochaines années apporteront aux téléspectateurs un produit original et crédible à un coût fort raisonnable.

8781 Ce service offrira une diversité et une profondeur de contenu uniques grâce aux forces respectives des partenaires en lice. A TVA et au Canal Évasion, nous avons bien hâte de commencer à le bâtir!

8782 MS McQUEEN: And when we build Travel TV, what will it actually look like?

8783 Our flagship show is destination.watch, a live half-hour news magazine which will expand to one hour in the second year. Every day, three times a day, destination.watch will provide up-to-the-minute travel information. Timeliness and depth of coverage will come from immediate access to local and international content from our network of local stations and international bureaus.

8784 We will explore travel destinations at home and abroad from a uniquely Canadian perspective, from urban experiences to island fantasies, from popular hot spots to roads less travelled, from personal travelogues of famous Canadians to the historical routes of our show, Famous Footsteps.

8785 Reflecting the multicultural aspects of Canadian life, new Canadians are the stars of New Style Old Country, providing intimate insider information about their homelands.

8786 Young Canadians can tune into Travel XPress for an alternative look at travel destinations.

8787 Canada's unique brand of aboriginal eco-tourism is one of our country's best-kept domestic secrets, although it has been attracting Europeans here for some time. Through our programming agreement with APTN, we will open that up for Canadians.

8788 We do indeed have Something for Everybody. That's the title of our weekly half-hour guide to family-friendly destinations, whether you are toting rambunctious toddlers or grandchildren or reluctant teenagers.

8789 Travel Magazine offers practical travel tips with special segments for seniors, women, children and the solo traveller. On Bargain Travel, viewers learn how to travel on a shoestring, share their budget tips and stories on the Travel TV Web site, and benefit from last-minute sell-offs.

8790 And for the ultimate armchair travel experience, we will screen great wanderlust films from Canada and around the world every Sunday night, like Around the World in 80 Days, Travels with My Aunt, and La Florida.

8791 All of this adds up to an exciting television service that will make a unique contribution to the system. And there is so much more. Let's have a look.

--- Video presentation / Présentation vidéo

8792 MR. MACDONALD: The Travel TV Web site featured in the video will offer a combination of interactive content that works in conjunction with programs in real time, and highly functional travel-related information.

8793 While there is no shortage of travel information on the Web, it is not organized in a way that is user-friendly to Canadian travellers. Our site will allow Canadians to use a powerful specialized travel search engine to find exactly what they want, priced in Canadian dollars.

8794 The Web site will offer a detailed interactive program guide. You will be able to ask for what you want, when you want it, in simple formats friendly to older computers, or in multimedia. If you don't want to miss a Travel TV show, you can ask for a reminder: in your e-mail or your voicemail, on computer, your pager or your cell phone. You will be able to communicate with the people who work at Travel TV, or e-mail requests for more information.

8795 The Travel TV Web site will also link to reputable information providers for real-time weather reports, airport arrivals and departures, interactive maps and last-minute travel opportunities.

8796 Our valuable checklists will cover passport information, visa requirements, medical coverage, recommended immunizations and customs information, amongst other things.

8797 We will also rely heavily on additional sources of content such as CTV's local stations, TVA's Quebec stations and BCE's city portals, such as toronto.com and montrealplus.ca.

8798 From anywhere you will be able to find out which hotels in Calgary allow pets or which restaurants in Old Montreal have wheelchair access. Very few.

8799 Travel TV will create an entirely new community of Canadians, sharing opinions and perspectives based on their personal travel experiences in a searchable database. All of this will happen on the Web in harmony with the television service.

8800 But as we discussed in this hearing, by early next year, we will begin to see the next generation of digital set-top boxes which will begin to integrate television and the Web. With this distributor capability will come truly converged interactive content.

8801 At this point, you will be able to use your remote control to say to your television set, "tell me more" or "take me there", "let me talk to so and so" -- all the things you can do now on the Web and more but with high quality full-motion video. Viewers will be able to join live chats with the show's production team, Canadian celebrities, travel professionals or fellow travellers.

8802 Finally, as we build this ground-breaking service, we will find many ways to help bridge the successful transition to new media skills and opportunities for the independent production community.

8803 MR. GOURD: Madame la Présidente, Commissioners, we are highly enthusiastic about this project because of its unique strengths. We are proposing an attractive, quality service of proven market demand and broad appeal.

8804 We project the highest Canadian content spending among the travel applications before you, generating 750 new original hours of Canadian programming in the first year alone. We are committing to spend 53 per cent of revenues over the licence term, a total of more than $41 million. Our Canadian content will increase from 53 per cent to 70 per cent over the term, and all this at the lowest average subscription rate over those seven years.

8805 Ours is the only travel application to offer an affiliation with a francophone service. This will deepen and enrich the viewer experience in both languages, while aggregating resources to quality production.

8806 Our independent productions will have strong export potential because of their quality. The appeal of Canada as a destination, and our diverse international relationships.

8807 We have proven expertise in interactivity. The Sympatico Web site is the most visited Canadian portal on the World Wide Web.

8808 We are proposing interactive features consumers can really use and enjoy, building a community of shared experience and belonging.

8809 And, finally, we are 100 per cent Canadian-owned and dedicated to a genre where the depth of content and of interest can support this. The individual partners offer a track record of success in the launch of new services.

8810 We look forward to making an important contribution to the launch of the new digital services at this crucial juncture in the history of the Canadian broadcasting system. Therefore, Madame la Présidente, Commissioners, we look forward to obtaining your approval to make Travel TV a successful Category 1 service.

8811 Thank you. Merci.

8812 THE CHAIRPERSON: Thank you, Mr. Gourd and your colleagues.

8813 Commissioner Williams, please.

8814 COMMISSIONER WILLIAMS: Good afternoon, Mr. Gourd and fellow panel members.

8815 MR. GOURD: Good afternoon, Commissioner Williams.

8816 COMMISSIONER WILLIAMS: This hearing, like most others, has attracted a familiar and usual group of applicants, if I can stretch that a bit. However well that we do know you, there are still a few corporate questions that we will have to go through in order to flesh out your application.

8817 I guess, first, I would like to thank you, on behalf of the Commission, for your concise and complete application, because this will allow us to travel fairly quickly through the questions that remain to round out your full application.

8818 So, for the first set of corporate questions, it's going to deal with selection criteria -- and the Commission has indicated certain selection criteria that it would use to license Category 1s.

8819 What criteria do you think are most important in the licensing of Category 1s?

8820 MR. GOURD: Well, Commissioner Williams, four applicants later we were kind of expecting the question -- just to show that we were paying attention.

--- Laughter / Rires

8821 MR. GOURD: And, therefore, I would like to underscore, at the outset, that the eight criteria themselves are, in our opinion, quite appropriate. They cover, comprehensively, the various issues that could be considered and, therefore, we don't really have to add to that.

8822 In terms of the most important criteria, in our opinion, I would mention attractiveness because, at the end of the day, the success of the launch of the new digital tier is what matters, the attractiveness to the viewers.

8823 Contribution to the Canadian broadcasting system lay in programming, reasonableness of the business plan, ability to implement -- and I would like Jim to present on position on these three.

8824 MR. MACDONALD: Thank you very much, Alain.

8825 What we really would like to do is to just talk, if I may, with a few sub-headings, but we certainly feel that the attractiveness of the service is a very, very important point because without, as Trina said in the last series of applications, without audience interest we really have nothing.

8826 So, demand for the genre and, therefore, the research, we think, is a very important part. Cost to the consumer is certainly important. And the ability to contribute to BDU packaging is a very important factor to us -- and let me just elaborate on that, for a second.

8827 In past launches, I think that there has been a notion of drivers -- and you will certainly hear virtually everybody here say that they are a driver -- we really think that that has changed and that, as we split the hair further and further, there aren't going to be specific categories that are capable of pushing a whole group, but they are capable of making a valuable contribution within a plan, within a package, and make a contribution, in terms of demographics and overall interest within the household and, certainly, in that area, we feel travel is an important one.

8828 Within the commitment to Canadian programming, we certainly feel that that should be the second criteria because it takes into consideration the regulatory responsibilities of the Commission and certainly takes into focus all of the aspects of the Broadcasting Act. And in order that we have it, exhibition of Canadian programming, we think, is very, very important. But, also, it's not just the quantity. We have always had that discussion whether it's quantity or quality. We think that the quality is very important, and that is reflected by the expenditures on Canadian programming.

8829 We think that in differentiating the service that the commitment to original hours is very important.

8830 And, certainly, diversity of content has to be looked at within the overall framework of all of the applications -- and, in that regard, the fact that we have a francophone component, as well as a genre that is not covered in conventional television, is very important.

8831 And, finally, under the general area of Canadian programming, once we have taken care of the regulatory fulfilment, there's clearly the interest in interactivity, which we think is a very, very important part of this going forward.

8832 The business side, I think, has to be very much taken into consideration.

8833 As we have gone through each level of licensing of specialty services, we have gotten into an area where the ability to make money, or to be at risk, has gotten greater and greater and, therefore, I think the Commission really have to look very carefully at the business plans, have to be satisfied that the various groups have the wherewithal to pull it off and, therefore, the strength of the business plan, the financial strength of the applicants, the management experience and the promotional and marketing abilities, we think, are very important -- and it's not just what's in the applications for launch and promotion, it's not just what's there, it's what else are the various parts of the applicant able to bring to bear.

8834 In other words, CTV's advertising ability is a very important part of this that is very much over and above the advertising that is included. The ability to promote the Travel TV on Sympatico, over and above, is very important. And, equally, it will be important to use some of the U.S. content on ExpressVu to help promote not only this service but all of the services.

8835 So those are the key areas, in the order that we see.

8836 Alain, do you have anything to add?

8837 COMMISSIONER WILLIAMS: Okay. Thank you.

8838 The next area I want to explore is implementation of service or "drop dead" date, launch date, and, I guess I will begin by: Should the Commission impose a minimum amount of time by which a Category 1 licence must implement its service.

8839 MR. GOURD: It is quite important, indeed, to ensure the success of the launch because this is the first step in this new digital interactive journey and it has to be successful to be conducive to many, many more steps as distributors expand their technological capability and as programmers refine their contents. So, therefore, there is, in my mind, an overwhelming advantage in having a launch of all of the new Category 1 services and many, hopefully, of the Category 2 services at the same date. This allows programmers and distributors, together, to maximize their respective contributions in order to ensure that it starts with the image of success.

8840 For example, Bell ExpressVu and Star Choice could use their local avails in the U.S. specialty services to make the promotion of these new services and other distributors could make use of their own capability to contribute, as well. So, therefore, yes, the answer is, definitely, yes.

8841 MR. MACDONALD: Commissioner Williams, just to add, our application did say that we would be ready to launch in May. However, September is certainly acceptable to us. And, in fact, quite frankly, we think it is important to do it right than to do it fast. And, also, we feel that launching into the fall, when people are back from their holidays, is probably a much smarter opportunity. But, as Alain said, the most important thing is that we launch in a co-operative and collective way so that the launch is successful.

8842 COMMISSIONER WILLIAMS: Okay. Thank you.

8843 The next question deals in the area of independent production.

8844 We have looked at your proposal. What did you mean by "independent producer"? Can you give us your definition of "independent producer"?

8845 MR. GOURD: Independent producers are a very key component of our project and, of course, it is important to know what do we mean exactly, the percentage of the level of minority shareholding, and I would like to turn to Trina to answer that.

8846 But before I turn to Trina, there is one important dimension I would like to underscore. And it is that it is important, at the end of the day, that some independent producers -- many of them, hopefully -- have as partners, as minority partners, broadcasters or other entities to maximize synergies to develop cross-fertilization, and to develop also exchange of best practices. So to have in independent producers some other minority shareholders, in my mind, is, per se, an important dimension.

8847 Trina.

8848 MS McQUEEN: And I think even if we didn't like, it's inevitable. In fact, what we are seeing is more and more takeovers and wholly-owned production companies by broadcasters. However, our notion of when true independence starts is when you have 60...sorry, I'm trying to...I can't do math in public. Let me start it the other way around.

--- Laughter / Rires

8849 MS McQUEEN: We believe --

8850 CHAIRPERSON OF THE COMMISSION: Sixty-six.

8851 MS McQUEEN: Thank you, Commissioner -- is if you have 66 per cent of your company, you are an independent producer -- or more.

8852 COMMISSIONER WILLIAMS: In your Canadian programming expenditures, your 53 per cent is proposed, and then an additional...do you have additional comments to add to your response dated May 15? We know that you suggested a couple of alternatives.

8853 MR. GOURD: Well, the Commission did request some suggestions, and we made a few, as you indeed know. However, at the end of the day, 53 per cent is the minimum. We are committed to that and we will be pleased to, indeed, deliver the goods.

8854 Trina.

8855 MS McQUEEN: I think that the commitment that we have made is on the record and stands. Again, we are interested in all the proposals, ours and the Commissions, and would be happy with a licensed condition that reflects any one of those proposals. We would probably be happier with the ones that were suggested by the Commission and the ones that we suggested.

8856 COMMISSIONER WILLIAMS: Okay, thank you.

8857 I'm intrigued by some of the comments I've heard on the importance of financial strength and capacity in order to effectively launch digital. So would your opinion then be, then, size does matter, the financially smaller applicants are at a form of disadvantage in this process?

8858 MR. GOURD: As we said, the number one criteria is attractiveness, then contribution to the broadcasting system, quality of programming. And then when we focus on ability to implement, yes, in some cases to have experience, that is the key criteria. And we believe that this partnership particularly, the programming expertise of CTV and TVA, the cross-fertilization between the francophone télévision and our project, the ability of BCE in the area of interactivity are very important features.

8859 Does it mean that a smaller group, a more focused applicant, has no creativity? On the contrary, on the contrary, we believe that each applicant, each type of application, carries its pros, its qualities, and you can have creativity and an ability to implement from every quarter.

8860 MS McQUEEN: And we would also add that big companies are capable of putting forward really dumb business plans just as easily as small companies.

8861 But I guess one of the things that we've talked about in this hearing is that you might actually lose your licence if you're not able to be up for a launch in a certain period of time. So we would suggest that given that, and given that if an applicant had won a licence in a competitive hearing and was unable to deliver, it would be a shame that the system would be, in a sense, robbed of that genre, or that category, which might have added attractiveness.

8862 So, again, we are suggesting not a look at a business plan from a big or small company, but a look, to be sure, that the people who are before you can delivery.

8863 MR. MACDONALD: Commissioner Williams, in the CTV presentation, Trina talked about the long term versus the short term, and I don't think that that can be emphasized enough.

8864 Typically, in the past, we have seen specialty applications become positive in the second or third year. In this particular round, we are, as I said in our in-chief, looking at a long time out before we are turning cash-positive. So there has to be very much an investment philosophy here and I think that we have to ensure that the companies (a) are committed, and (b) have the resources to really go the distance.

8865 COMMISSIONER WILLIAMS: Okay.

8866 I just have a couple of questions on your application. Why have you applied for a category 1 licence? And have you also applied for a category 2?

8867 MR. GOURD: Category 1, because of the attractiveness, the contribution to Canadian programming and the strength of the business plan. But let me turn to Trina now because, indeed, we have applied for category 2, as well.

8868 MS McQUEEN: We think that the category 1 applications are really going to be crucial to making digital work. And, fundamentally, I think our statement has always been that the most attractive digital package offered should be the one that the Commission licences.

8869 In category 1, you will know that they are going to be in that package. You will be able to make a judgment on all the criteria that you have. And when you make that judgment, I think that the category 1 licences before you will have to have certain things. And we believe that Travel TV has those things.

8870 It's a genre that people find very attractive. There are good sources of programming. This application has partners who are strong and partners who contribute from different cultural aspects. So for all these reasons we think that travel is a good genre from category 1 and that Travel TV is the category 1 choice.

8871 COMMISSIONER WILLIAMS: Would you agree to remove category 15, which deals with filler programming from your application?

8872 MS McQUEEN: Yes, we would be willing to remove category 15 from our application. Thank you.

8873 MR. MACDONALD: I thought that was critical to you.

8874 MS McQUEEN: It's my favourite part.

8875 COMMISSIONER WILLIAMS: I'm now going to move into the area of interactivity.

8876 If we license a category 1 service with interactive elements by a set-top box, do you think distributors should be obligated to carry those interactive components?

8877 MR. GOURD: In principle, yes, because we feel that the interactive data stream is an integral part of the program. And the data stream that is carried, in addition to that, should be respected. It should not be tampered with, it should not be changed without the consent of the programmer.

8878 Then the question is: what data stream? And there there is a component of reasonableness. Because, for example, if a few services have three times as much video on their data stream as on the main service, then you might lack bandwidth for the other services or for services that will come in the future. So it is a matter of, yes, in principle, but the number of kilobytes and the bandwidth should be discussed between distributors and programmers to ensure that it's reasonable for each service and in total.

8879 And David Elder has studied that question and I would like him to comment, if he wishes.

8880 MR. ELDER: Thank you, Alain.

8881 Again, we do consider these interactive services to be an important enhancement, but particularly for some DTH companies and, I guess in particular, we are thinking about the expense of satellite bandwidth. There has to be some concerns, some heed paid to reasonableness. Thank you.

8882 MR. MACDONALD: Commissioner Williams, we do understand, however, the difference between carrying the Internet act of content which is a very integral part of the programming and the possibility of e-commerce applications where the box is actually used in a transactional way and so I think that certainly our view is that if there is a transactional use of the interactive content that there would be a shared revenue opportunity between the BDU and the program supplier.

8883 As far as the notion of there being a program and a sort of an add-on cost, if you want to carry the interactive, in our view it is the interactive programming elements that are going to drive the whole channel. So it shouldn't be a menu selection where everything is extra.

8884 COMMISSIONER WILLIAMS: The Personal Information Protection Electronic Documents Act is a new federal legislation dealing with the exchange of personal information in the private sector which goes into effect next January.

8885 Have you taken measures to ensure compliance with this legislation as it relates to the components of services you have proposed for the exchange transmission gathering or display of personal information that takes place?

8886 MR. GOURD: I must say we were expecting that question to a certain extent and it goes without saying first that the law of the land will be fully respected by our Travel Channel.

8887 In addition to that, it is an area where BCE has a lot of expertise. It has developed policies, codes that apply to eight or nine units within the BCE family. Bell ExpressVu, for example, is covered by such a code of conduct, and again I would like to ask David Elder to expand on what we have done because it is an area that we have focused on significantly.

8888 MR. ELDER: Thank you, Alain.

8889 I think it is fair to say that privacy and protection of customer privacy has been of some importance and concern to the BCE family for some time.

8890 We consider privacy to be one of the key attributes of our brand. As Alain says, we do have a customer privacy policy and a code that meets the CSA standard referred to in the new federal legislation.

8891 We have been working quite actively at implementing this new standard and I think in the very near future, actually, you are going to be seeing from us a lot of publicity to make sure subscribers know what protections are available to them and what the BCE companies are doing.

8892 We have also appointed one of our senior executive officers to be responsible for the implementation and ongoing compliance with this legislation and our new code and policy.

8893 COMMISSIONER WILLIAMS: Good. Thank you.

8894 What distribution options have you negotiated other than distribution over ExpressVu?

8895 MR. GOURD: It goes without saying that obviously we have spoken to at least one distributer, Bell ExpressVu, and it has been a big plus in the preparation of the application because we had not only the expertise of Sympatico-Lycos pertaining to interactivity on the Web site, but we benefitted from the expertise of Bell ExpressVu relative to interactivity on the TV screen and the discussions we have had were first that every service in this new package should receive the same support, the same marketing and technical effort whether it is affiliated or not.

8896 Secondly, we discussed the importance of packaging that we all agree, whether Travel TV or ExpressVu with the position of SPTV that it should be packages, five to ten services, and there I want to relate a very interesting experience that Bell ExpressVu has encountered. As you know, it is offering thematic packages, but over 70 per cent of the subscribers, having acknowledged that they can go for smaller packages, go for one of the two major packages and that has also been discussed with Bell ExpressVu.

8897 So in a nutshell, we did not discuss specific terms about a concrete distribution agreement because we felt that it was more proper to wait until the CRTC had made its decision, but we discussed broad approaches, technical dimensions that would be available to all licensees.

8898 MR. MACDONALD: In developing the business plan, you should be aware that our clear expectation was as part of a package though.

8899 COMMISSIONER WILLIAMS: Thank you for that.

8900 Now, what are your views on the possibility of program suppliers in BDU's sharing costs for the set-top boxes or certain components or technologies that would facilitate interactivity?

8901 MR. GOURD: We clearly feel that in terms of the set-top box, it should be the responsibility, and the total responsibility, of the distributor. We don't feel that we should ask the programmer to do anything else but the critical dimension which is to develop attractive programming, including attractive interactive feature, and of course the programmer would be responsible fully for that component.

8902 MR. MACDONALD: We trust you recognize he was speaking in that regard as the CEO of ExpressVu.

--- Laughter / Rires

8903 COMMISSIONER WILLIAMS: Well maybe we could spend a bit of time on ExpressVu then.

8904 Can you describe ExpressVu's roll-out of the second generation of set-top boxes in terms of timing, and maybe spend a little bit of time on describing the advance features that these boxes will make available to Canadian viewers?

8905 MR. GOURD: Indeed, but please allow me to say, as an introduction that in addition to the comments and exchanges we might have today that the President of ExpressVu, David McLelland, and key members of his team, are scheduled to be present in front of you on August 30th to expand further any discussion we might have.

8906 As other applicants have mentioned, the deployment of interactivity relative to television will go through a series of steps and the steps, the approach, will differ from one kind of distributor like Direct Home as opposed to another like cable.

8907 I have noted, for example, that cable is more focusing on Web-based interactivity, whether on the TV set or on the computer. In the case of Bell ExpressVu, our main focus is interactivity on the TV screen because we are a broadcast distribution undertaking.

8908 However, our step one was to provide satellite-based Internet with higher speed to more remote areas. So we said, before we move to our true goal let's start by equalizing a bit the ability to have Web-based Internet. So as of March 30th of this year, we have launched, using a technology acquired from DirectTV in the U.S., Direct PC Satellite Edition which is to allow more remote areas to have higher speed Internet, to bring them a bit more at par with the main urban centres in order to have Web-based Internet. But that is the computer separated from the TV screen.

8909 Our second step, which is in motion now -- we have tested various technologies, we have even started to introduce the boxes without activating them yet -- is interactive television on the TV set and that will be non-Internet. It is interfacing with the remote control with the TV set.

8910 That will be available mid-2001. As I said, we have started to introduce boxes. We have already 100,000 as we speak out of a population of 550,000 subscribers. We will introduce another 100,000 before the end of the year, so we will have 200,000 out of 700,000. Then hopefully before mid-2001 we will have 100,000 more which will be 300,000 out of 900,000 so the percentage is growing. Then when the CRTC will have made known the services that are licensed, we will be able to partner with the programmers and decide when we should activate these boxes through a software download that will make them not only capable of interactivity but actual interactivity operational.

8911 That normally should be a few months before launched. In that sense, a September launch makes it a bit easier for us because it gives us more bidding space to have more boxes and to have the proper software download.

8912 What will these boxes be able to do? It will use a datastream that will go through the vertical blanking interval, and the kind of content that will be distributed will be basically text and still images.

8913 There will be general services that will be offered whatever programming services are licensed as part of the general service. For example, weather is certainly a general service that should be automatic with the box whatever the choice of the given subscriber relative to the specific digital services they choose. Maybe stockmarket information should be another general service, and so on and so forth.

8914 Then there would be the specific services for each of the programmers, the specific datastream for Travel Channel, Shadow, MEN and so on and so forth. That would be introduced as well.

8915 Finally, it would not be able, at this point in time, to have full motion video. It will have e-commerce capability where, for example, if you look at the sports program, you have an icon, you press the icon and you can have information about the program, like statistics about players, about a team; but you can have another icon which is the e-commerce and you press it, then to the phone line it's sent, in the modem, it's sent to a fulfilment house where the transaction can be completed.

8916 Jim has mentioned that when the box is activated you have to partner in terms of costs and sharing of revenues.

8917 So that will be step No. 2.

8918 Step No. 3 -- because we have learned the hard way from time to time at Bell ExpressVu that when we try too much, you know, at the same time, it's not always as successful as if you do it step by step -- step No. 3 would be during 2002, probably mid-2002.

8919 So each year we would introduce a new technology and take some new steps. That would be to bring the Internet interactivity to the TV set.

8920 Step 1 was to the computer; step 3 to the TV set.

8921 There we are still testing with our U.S. partner in technology, Echostar. Echostar has introduced a box with interactive Internet capability, which is Microsoft-based Web TV.

8922 There is another technology which is Linux-based.

8923 So as we speak we are examining both. We are testing both. We believe that both still have some limitations that we would wish to have some improvements, like the quality of the text on the TV screen is much different than the text on the computer screen. You take the same text, it has to be adjusted because it's not as readable on the TV screen if you don't make adjustments. We feel it isn't there yet but both technologies and the people supporting them are working very hard on it, and we believe that it will be definitely ready for 2002.

8924 These new boxes that we are envisaging for 2002 would have -- in addition to normal entertainment -- would have still interactivity outside of the Internet, Internet-based interactivity, plus high-definition TV. So that would be the new box in 2002.

8925 Later, but that has not yet been approved by our board as a possible step No. 4, we hope to be able to launch NYMIQ II where we would have broadband interactive Internet, where the interactivity would be fully by satellite and with very, very high speed. That is also at the design stage.

8926 COMMISSIONER WILLIAMS: Until that gets approved by your board and gets put into service, would the ExpressVu distribution method not be as robust as the cable network?

8927 MR. GOURD: In terms of board approval, I was referring to step No. 4.

8928 In terms of the first three steps, I would say that our Internet offering is as robust as any other Internet offering. It's working just fine. It is a bit slower than high-speed Internet in major urban centres because it's 400 kilobytes per second while cable and Sympatico can offer speed over 1 megabyte.

8929 But, you know, for not far away from here, if we are thinking about Wakefield, Maniwaki, it's quite a nice speed for markets which are relatively close to major urban centres. But it's robust. It's a bit slower, but much faster than what they used to have through the dial-up, which is 56 kilobytes.

8930 In terms of step No. 2, the ITV box, acknowledging that it is different, that it's on the TV screen, on Internet, it is robust, it's tested, it has been introduced in the U.S., it works well, and it's a matter of partnering with other distributors and the programmers to say, "Okay. We are launching, let's say, September 1, so we must activate the boxes three months before and let's agree on the datastream and make it operational."

8931 COMMISSIONER WILLIAMS: In your view, what will be the role or interplay that you consider will or should take place between the program providers and distributors and the equipment manufacturers ensuring that we have a digital full interactivity rollout, as part one of the question?

8932 Part two is: Will this apply equally to cable, DTH and MDS?

8933 MR. GOURD: First, in terms of the role of the various players, as Trina said a bit earlier, it is too soon. I think I cannot underscore enough how crucial it is because it's new territory. We know our box works in the laboratory, so the technology is there, but how do you make it successful in the marketplace where viewers will actually receive it.

8934 So it's more than technology. It's how you use the technology, how you market it, how you present it, what kind of content, what feature do you push first? Do you push first e-commerce? Personally, I don't think so. I think we should push first the enhancement to the programming, but some people might have a different view.

8935 So the partnership between the distributor and the programmers and the others, like the manufacturers, in our case, Echostar, is absolutely fundamental.

8936 It should indeed apply to cable as well. However, it appears that DTH, as one perspective suited with technology and its strength, and cable as an approach which is rooted in its technological characteristics, while there should be some exchanges and co-ordination between direct home and cable there should be a primary relationship between the various programmers in each of the two categories of distributors.

8937 COMMISSIONER WILLIAMS: If the interactive of your proposed services doesn't work on DTH or MDS, what impact will this have on the availability of the service to those subscribers?

8938 MR. GOURD: I will turn to Jim for that answer.

8939 Jim.

8940 MR. MACDONALD: I want to make sure I understand the question first, if I may.

8941 You said if the interactivity is not available through the distributors?

8942 COMMISSIONER WILLIAMS: Yes, that's right.

8943 MR. MACDONALD: Well, from a competitive point of view, I'm assuming, therefore, that everybody would be in the same boat, and therefore we would be essentially launching as a service based only on the programming that we were offering and the net enhancements that we would be offering.

8944 I'm going over this because "interactivity" is a word that gets misused a lot -- or misunderstood, more correctly. So we would launch absolutely with all of the Web-based activity that we showed you during the video and then we would start to build out the truly interactive components as it was available from the distribution. But it would not materially impact on our -- it wouldn't impact on our business plan at all, quite frankly. It would just impact on our desire to make this service a much more interesting one, which we think will happen as a result of the interactive potential.

8945 COMMISSIONER WILLIAMS: Another part of your earliest presentation -- the word "export" struck a chord with me. I guess the businessman in me sees such a tremendous potential to bring visitors to Canada from other parts of the world, given the focus of your specialty service.

8946 How much consideration, because obviously some has been --

8947 I wrote the question before your presentation.

8948 How much consideration has been given to this export opportunity and have negotiations been initiated for carriage in foreign countries? That would be the first part of the question, and I guess another question that is pretty important: Has ExpressVu explored developing a customer base in the United States, our nearest neighbour?

8949 MR. MACDONALD: Why don't I start this, and then Alain can talk about it specifically on ExpressVu.

8950 Fundamentally, we believe that as producers of Canadian programming -- and, in that instance, not necessarily are we producing it, but certainly we are working with independent producers -- we have to be looking at not only the domestic market, but how can we bring that production to the world market.

8951 In the case of Travel, we have a unique opportunity because of the interest that people have in Canada and the fact that this is such a terrific destination for people from all over the world.

8952 So we feel that although we have not consulted with anybody, we have not included any export revenue in our business plan, we certainly feel that there is an opportunity to do so. But the benefits of that will primarily accrue to our independent production partners.

8953 The benefits that we expect to generate are that by bringing more money into the production equation we will be the recipients of a higher quality program, knowing that the cost of that program is, in part, being amortized by licence fees coming in from other countries in the world.

8954 MR. GOURD: I will focus on ExpressVu, and then I will ask Michel Chamberland to expand on the benefits of the partnership with Canal Évasion, which is bringing some export capability for Travel TV in Europe.

8955 Bell ExpressVu has developed a series of partnerships with U.S. companies, primarily with Echostar, and we agreed between us, particularly because of the regulatory framework in the two countries, where direct-to-home is considered a national activity as opposed to a continental one -- we agreed that in terms of retail we would not undertake to retail our service in the U.S. by selling our small dish in the U.S. and, conversely, Echostar particularly has agreed not to sell at the retail level a small Echostar dish in Canada.

8956 However, there are possibilities at the wholesale level where we could sell some programming services, for example, to Echostar and they would re-uplink these services and put them on their own retail technology.

8957 We are discussing these possibilities as we speak and looking at the regulatory framework to see how we could achieve that with as minimum disruption as possible to the regulatory framework.

8958 Now, pertaining to the opportunity which is presented by Canal Évasion, I would like to turn to Michel Chamberland.

8959 M. CHAMBERLAND: Merci, Alain.

8960 Monsieur le Conseiller, membres du Conseil. J'étais anxieux de prendre la parole. Pour ceux qui me connaissent normalement je suis devant.

8961 Je dois dire, je veux souligner une chose à ce moment-ci, c'est l'enthousiasme qui qualifie le groupe de CTV, Trina, Jim et toute l'équipe de CTV, face à ce projet.

8962 J'ai eu le privilège de pouvoir lancer la première chaîne sur le voyage au Canada en langue française avec Évasion et je vous en remercie.

8963 On parlait de la distribution tout à l'heure. Déjà dans la distribution qu'on a faite au moment de Canal Évasion, on a déposé une entente qu'on a avec Canal Voyage-France où 52 heures de la programmation de Canal Évasion se retrouve sur Voyage-France donc par ricochet sur la Suisse, la Belgique et les territoires et les départements. Donc cette entente-là s'applique déjà.

8964 Je crois que dans la synergie qu'on saura développer avec nos collègues de Travel TV il y aura certainement des produits qu'on saura créer et qu'on pourra distribuer à l'intérieur de cette entente-là et on pourra même, avec la complicité de Georges Bonopéra et de son équipe extensionner cette entente-là, l'agrandir du même coup et je dois aussi vous dire -- et je crois qu'Alain va l'apprendre à ce moment-ci, je m'en excuse -- on travaille aussi la possibilité de créer des bouquets entre Voyage Évasion et éventuellement Travel TV et ces bouquets-là on pourrait les exporter dans d'autres marchés à travers le monde.

8965 Donc il y a déjà des discussions avec le Japon, il y a des discussions sur d'autres territoires. Donc pour nous on est emballés de voir une équipe qui se situe, parce qu'on est un peu au centre de tout ça. Quand on a fait une demande déjà Voyage-France avait un an, ils avaient 26 000 abonnés. Aujourd'hui ils en ont tout près de trois millions. Nous on a maintenant sept mois. On commence à peine à marcher et je vois mes collègues de CTV qui partent avec un projet aussi emballant.

8966 Je dois vous dire que j'applaudis et j'ai bien hâte de pouvoir travailler en synergie sur des projets. On en a identifiés déjà à ce moment-ci. On a identifié Évasions romantiques, on a identifié Cartes postales, on fait déjà sur l'hiver dernier Cartes postales en Floride. On fait maintenant Carte postale sur l'Ontario. On souhaite faire des Cartes postales comme ça à travers le pays et avec la complicité de Travel TV et les Évasions romantiques, il y en a aussi partout à travers le pays.

8967 C'est ce qu'on vous avait dit. Je pense qu'à mieux connaître on apprécie d'avantage et c'est le mandat qu'on se donnerait. On a bien hâte de pouvoir mettre en collaboration les producteurs québécois, les producteurs francophones et les producteurs anglophones et de les faire travailler de façon synergique sur l'ensemble du pays.

8968 Donc pour l'exportation, oui, il y a possibilité de participer à l'entente qu'on a nous déjà, qui est signée pour six ans avec Voyage-France et il y a possibilité de l'agrandit j'en suis convaincu.

8969 Merci.

8970 MR. GOURD: I would like to add that Canal Voyage has produced a written intervention to confirm what has just been said by Michel, and we have filed this written expression of deep interest with our application. It is in the file.

8971 COMMISSIONER WILLIAMS: Thank you.

8972 With respect to original Canadian programming, can you clarify how much of the programs it describes in its schedules as Canadian productions that will be original productions?

8973 MR. GOURD: Absolutely. We would be very pleased to do that.

8974 Trina...?

8975 MS McQUEEN: At this point we are anticipating that we will have 1,495 original hours in the schedule.

8976 COMMISSIONER WILLIAMS: Thank you.

8977 MR. MACDONALD: I'm sorry. It is actually 750 hours in year 1.

8978 MS McQUEEN: I guess I am counting the whole thing. Excuse me.

8979 MR. GOURDE: Both are right. It is how many years.

8980 COMMISSIONER WILLIAMS: That was a pretty impressive answer.

--- Laughter / Rires

8981 MS McQUEEN: Yes. I thought so.

8982 MR. GOURD: They are both correct.

8983 MR. MACDONALD: That is why we work so well together.

8984 COMMISSIONER WILLIAMS: Travel TV stated that interactivity would provide opportunities for unlimited interactive segments and enhancements. No revenue projection was included in your business plan. Can we attempt to address that?

8985 MR. GOURD: Yes. We are pleased to focus again on interactivity, because we heard this morning about the interactive capability of CTV and BCE. I suspect that tomorrow, Daniel, we will hear about TVA's interactivity.

8986 I'm sorry, Thursday.

8987 So the group, as a whole, is committed to interactivity.

8988 Jim, would you like to continue?

8989 MR. MACDONALD: Thank you.

8990 I guess if you start right from the broadest strokes within BCE, of course there is a corporate culture that is committed to interactive television.

8991 When we were putting together the application, I guess we were a bit confused as to the use of the word "interactivity". We were expecting that in the first portion of the application all of the activity would be Web-based and not true interactive television.

8992 Knowing that the boxes were coming out and knowing that the investment was likely to end up in a loss, and knowing likely that the Commission was going to ask us to make a commitment in terms of revenues, as a percentage of revenues, we chose not to fill that in because a loss would then actually reduce the amount of Canadian programming.

8993 We do have a business plan, which is very much driven on the basis of Web-based activity. Over the seven years, though, it generates a loss of approximately $1.4 million.

8994 The only number that we actually did include in our application you will find in the pre-operating costs. There is a $400,000 commitment to Web-based investments at that point.

8995 But that is the background, and that is what we expect to happen, that there will be a net loss of $1.4 million.

8996 We do not anticipate that there will be much, if any, revenue within the first licence term that comes directly from the "interactive" portions of the schedule. Although that is possible, depending on what the boxes do and what we are able to negotiate with the BDUs.

8997 It is, as an example, possible to do on-line reservations. And as I mentioned earlier, if a transaction is actually done through the box, we fully expect to share that. I hope that that explains why we didn't include it in the first place.

8998 MR. GOURD: If I may, when you talk about losses, it means that you have expenditures. And I'm looking at the sheet that is in front of Jim and we can convey to you that we intend to spend over $8 million over the period to promote interactivity.

--- Pause / Pause

8999 COMMISSIONER WILLIAMS: I was also intrigued by your comments on exploring programming ideas with Television Northern Canada and the Aboriginal People's Television Network that would feature geography, lifestyle, heritage and culture of the aboriginal areas and communities. As you know, when you were in Yellowknife, one of the companies that I owned built the television uplink for TVNC 10 years ago. So I always follow with interest the development of TVNC to APTN and I'm curious as to the types of arrangements and approaches that you're using to partner with or work with them.

9000 MR. GOURD: Indeed.

9001 And before I turn to Trina, maybe I could add one more reminiscence, and it is that in my previous incarnation we had partnered with APTN, as well, in order to distribute them -- it was at Cancom throughout the country -- and therefore, for us, this partnership, including in terms of ecotourism, is quite important.

9002 We have a programming agreement with APTN and Trina will expand further. Trina.

9003 MS McQUEEN: As we said in the beginning of the program, one of the things that we were intrigued by is the discovery that many Europeans take special travel adventures -- and perhaps you have seen this or know of it -- for aboriginal ecotourism. And it seemed to us that this, in particular, was a rich source of stories -- not exportable maybe, as you have said, but also interesting to Canadians.

9004 Most of the people who do this, they are often Germans, French, people from Europe generally, but this seems to be a little bit of a secret. So that was one of the programming ideas.

9005 We are talking to the people at TVNC and at APTN and they have told us they are enthusiastic about working out co-productions. And, obviously, they have the knowledge of the most wonderful places and the freshest ideas that we can work with them on.

9006 COMMISSIONER WILLIAMS: Have you made contact or connections with producers from the area -- aboriginal producers from the north, for instance?

9007 MS McQUEEN: We have not. We have so far worked with APTN and TVNC, but they have told us of producers. We haven't yet contacted specific producers, but if you have some names we would be very grateful. Thank you.

9008 COMMISSIONER WILLIAMS: Okay.

9009 I'm going to move now to the proposed nature of service area of question.

9010 In your application you said that any sports programming elements should be short clips, representing, at most, a few minutes within the 30-60 minute program and that the programming would be incidental to the primary focus of the program, which is travel and tourism.

9011 Would you please confirm that you would accept a nature of service condition of licence that does not include sports, specifically --

9012 MS McQUEEN: Yes.

9013 COMMISSIONER WILLIAMS: -- 6(a) or (b)?

9014 Yes. Thank you.

9015 MS McQUEEN: Yes, we did. And I believe we wrote to you and told you that we had been overzealous. We were concerned that in some travel programs, where we saw a shot of people at a soccer game, or something --

9016 COMMISSIONER WILLIAMS: Beach volley ball or something.

9017 MS McQUEEN: It's an Olympic sport -- that might count as a category. But we understand now that that isn't necessary and we are happy to drop that. There's no intention of carrying any kind of live sports on the channel.

9018 COMMISSIONER WILLIAMS: Okay.

9019 You also propose to include drama categories 7(c) and (d) so that you can air "Travel Showcase", billed as the best travel theme movies from around the world.

9020 How much drama programming per week would you intend to schedule? And would you accept a limit on the amount of drama that you could air?

9021 MS McQUEEN: Certainly. At present, we show one movie per week, and I think that works out to less than 5 per cent. So we would be happy to take a restriction of 5 per cent. But that is a very important category. I think all of us who love to travel have been turned on to a destination through a movie or through a dramatic program. So we would hope that we would be able to continue scheduling that movie. And they would all be related to travel.

9022 MR. MACDONALD: Commissioner Williams, as you know, we are running a wheel and that movie, the one movie that Trina referred to, is in prime time, just so that we are clear.

9023 COMMISSIONER WILLIAMS: Okay.

9024 Your application also includes category 8(b), music video clips, in the nature of service, but not in your descriptions of programming.

9025 Could you please describe how music videos will fit into the travel genre?

9026 MS DUFFY-MacLEAN: Commissioner, I think that, again, what we were looking at doing was offering every possible category of travel in order to ensure that we covered the entire spectrum of what interests people. And, again, anything that we did in music video would be restricted to travel.

9027 COMMISSIONER WILLIAMS: Songs on the bus and the like.

--- Laughter / Rires

9028 COMMISSIONER WILLIAMS: Okay.

9029 In Public Notice 1994-59...sorry, I've covered that one, that was the filler programming.

9030 MS McQUEEN: Again, on categories of service, there is no doubt that we did ask for quite a number of categories of service. And reason for that, again, is that if you have a niche which is oriented to a certain kind of interest -- same thing with MEN's -- I think you have to make sure that you are expressing that interest in a number of different format. It draws a lot of people to the channel who might not come if it was just documentary after documentary. But this way, with a number of categories, we can do news with "Destination Watch", documentaries, movies and it just makes the kind of lively channel that we think will help a digital service.

9031 COMMISSIONER WILLIAMS: Yeah, I agree.

9032 MR. MACDONALD: We were very concerned, as an example, in sports -- if I can just go back to that for a second. I mean, there are a number of people that enjoy going to the bug-a-boo specifically for that kind of skiing. So is that travel or sports? Or going diving in the Cayman Islands, or, my personal favourite, sailing in the Virgin Islands. But anyway, has that become sports or travel? And we just wanted to go overboard rather than underboard.

9033 COMMISSIONER WILLIAMS: Be careful if you are sailing, if that's your goal.

--- Laughter / Rires

9034 COMMISSIONER WILLIAMS: I note that some of your proposed programming will focus on adventure and outdoor travel. How much of the programming of Travel TV would duplicate or be similar to that of Outdoor Life and how much would be duplicate or similar to that of the proposed Exploration Network.

9035 MR. GOURD: Again, we were expecting that question and I would like to ask Trina to provide the answer.

9036 MS McQUEEN: First of all, there would be minimal duplication of this. Certainly the Exploration Network is not a travel service in any way; it is a science service. It would be unusual for there to be duplication. But in any case, we are happy to make a percentage commitment on that.

9037 Elizabeth, would you like to advise us?

9038 MS DUFFY-MacLEAN: Yes. Thank you.

9039 In Category 5(b) we are looking at about a 5 per cent maximum. I think you had two parts to that question. The other part was Outdoor Life. I think the overlap again, back to what Trina said, would be minimal. We have looked at that programming. As you have heard all day today, there are synergies that each of the channels can look at, but we are looking at a very significant original commitment in hours. So I see that as quite minimal.

9040 MS McQUEEN: I think the largest category that we are looking for is Category 11, general entertainment and human interest. That would be probably half the schedule.

9041 Other major categories would be news, Categories 1 and 2(a), and long form documentary, with about 20 and 25 per cent approximately. So the rest of the categories are really very small.

9042 COMMISSIONER WILLIAMS: Thank you. You propose to broadcast daily 18 hours. You have submitted as Schedule 9 a program schedule of six hours, from 18 to 24 hours. Should we conclude that your programming wheel will repeat itself twice a day?

9043 MS McQUEEN: Is this another math in public question?

9044 COMMISSIONER WILLIAMS: No.

--- Laughter / Rires

9045 MS McQUEEN: Three times a day, I think.

9046 COMMISSIONER WILLIAMS: So is that 18 hours or 24?

9047 MS McQUEEN: 18; six times three.

9048 COMMISSIONER WILLIAMS: Yes. Your math is good. There is no question your math is good.

9049 A review of Goldfarb Study indicates that only 8 per cent would be strongly likely willing to pay for the service and that 42 per cent falls under the potential likelihood to subscribe.

9050 The research conducted by Goldfarb appears to be silent on the monthly rate for this type of service when willingness to pay is measured.

9051 Can you tell us how you have linked your research study with your subscription revenue projections?

9052 MR. GOURD: Jim, to introduce, and then Kathie Macmillan.

9053 MR. MACDONALD: Well, I would like to suggest that we start with Kathie and then we will come back and show you how we put together the projections.

9054 MR. GOURD: That is okay with me, Jim.

9055 MR. MACDONALD: Thank you.

9056 MS MACMILLAN: Commissioner Williams, we formatted the questioning here the same as we did with the CTV submissions. So we deliberately did not ask a specific price point because of the package configuration that consumers currently buy and are familiar with. Instead, we probed on the qualitative front.

9057 There, we found that on a stand-alone service, people indicated that they would pay up to $5.00 for Travel TV without further information and would pay up to $15 for Travel TV as part of a package. However, the actual price point would depend on the other channels offered in the package.

9058 I would also suggest that when you look at the strongly likely, at the 8 per cent at an additional charge, it is fairly similar in terms of the proportion when compared to a competitive submission where they looked at 30 per cent of the audience who would be likely to subscribe to digital. Then amongst that 30 per cent who were likely to subscribe to digital they asked "would you be willing to pay a dollar", and they came back to approximately 30 per cent of the 30 per cent.

9059 My mental arithmetic says that it is fairly close to the same number against the total sample.

9060 MR. MACDONALD: Thank you, Kathie.

9061 Do you have any specific questions, Commissioner Williams, of Ms Macmillan before we finish answering your question?

9062 COMMISSIONER WILLIAMS: No, I don't.

9063 MR. MACDONALD: Okay. In this particular case, we built the business model before we commissioned the research. The research was used really to verify the business case, and I am glad it did verify the business case.

--- Laughter / Rires

9064 MR. MACDONALD: However, I would like to ask Nikki Moffat to share with you how our shadow TV application came together.

9065 I am teasing. It's a mystery. No, they were very specific. We went through each area, and we worked out penetration levels. I will ask Nikki to go through the details.

9066 MS MOFFAT: Thank you. Our subscriber level assumptions are similar to what we just discussed in our CTV proposals. We took a subscriber level of 822,000 in the first year of the service and rising to 3.3 million by the end of the licence term. That represents a total penetration level of 44 per cent in the first year and rising to 70 per cent by the final year of the licence.

9067 We really looked at a wholesale fee of 35 cents that is affordable to the consumer and will help facilitate the roll-out of digital.

9068 MR. MACDONALD: I think one of the things that we looked at, aside from trying to develop a reasonable business plan -- and we certainly think the penetration levels were reasonable -- was also looking at the forecasts for digital penetration that were submitted by CCTA.

9069 If you compare our total universe, which starts at -- this is not the total subscribers but the total universe -- essentially 1.9 in year one, rising to 4.8 in year seven, actually our universe was lower than CCTA's, at 2.4, and exactly spot on, therefore, at 4.8 in year seven.

9070 So we felt pretty comfortable about the universe, and we felt very reasonable about the penetration levels. That is how we put it together.

9071 MR. GOURD: If I may, in order to make sure that the figures do not appear mysterious, at least at the DTH level, for DTH penetration of course we benefited from the experience of Bell ExpressVu and the track record of the two Canadian direct to home licensees which in fact are doing much better, for example, than their counterpart in the U.S.

9072 Therefore, based on that, we have also finalized our penetration forecast in the DTH universe as well.

9073 COMMISSIONER WILLIAMS: Just further on your business plan, in your assumptions you indicated that your service would be distributed to all cable, DTH and MDS Canadian distributors. Your financial projections do not include any projection for MDS distributions.

9074 Can you tell us why you have not projected any revenues from this source of distribution?

9075 MS MOFFAT: It is actually included in our DTH assumptions. It just was not labelled as such on the scheduled that is attached.

9076 COMMISSIONER WILLIAMS: So it is combined.

9077 MS MOFFAT: Yes.

9078 COMMISSIONER WILLIAMS: Do you know the percentage --

9079 MS MOFFAT: I believe it was 20,000 subscribers in the first year, actual subscribers for the service, and rising to 150,000 subscribers by the end of the licence term.

9080 COMMISSIONER WILLIAMS: Okay; thank you.

9081 What impact do you expect interactive subscriber input to have on the programming development of Travel TV?

9082 MR. GOURD: Trina, in terms of impact on the content on the way we develop the programming?

9083 MS McQUEEN: Commissioner Williams, you have put your finger on a use for interactivity that I think is like a hidden part of the glacier.

9084 One of the things about television is that we know really relatively less about television viewers than most retailers do about their customers because of the way viewers are measured. We cannot track a single purchaser as any retailer can track a single purchaser.

9085 So although we have broad ideas and although we use surveys such as Kathie Macmillan's to underscore those ideas and give us more context, the interactivity where viewers actually tell us what they like is of considerable value to us.

9086 When we were doing the Discovery Channel -- when I was at the Discovery Channel, we would often put on programs and take them off based on our Web site and what people were telling us about programs. In fact, at one time we ran -- and I think Pay Movies does this too, where viewers would choose their own Sunday showcase from a menu via e-mail.

9087 This builds a community of viewers. And again, in making digital attractive, I think what we are all trying to do is build communities, not just kind of passive television but a kind of television that becomes part of your interests and part of your life.

9088 So the ability to understand customers and to give them control and influence, strong influence, over our programming schedule is an absolute boon for interactivity.

9089 MS MACMILLAN: Commissioner, if I might add, when you look at, you know, the evolution of how the interactivity will come along -- and there's been a lot of discussion over the past two days of what that's like -- but when we spoke to our focus group respondents, they were particularly interested in the interactivity for a travel channel and they found it highly relevant. They indicated they would like to see programming applications that include links to events, deals on travel, feedback, access to pictures of destinations, but, further, the interactive component of Travel TV intrigues participants whose interests lies in the potential for gathering further information about something they may have seen on Travel TV. Although participants recognize that interactive television technologies are not yet readily available, another revolution in the role of television is expected, and welcomed, in the near future.

9090 COMMISSIONER WILLIAMS: Thank you.

9091 A few more questions on the set-top box and then I'm done. We will see what awaits you after that.

--- Laughter / Rires

9092 COMMISSIONER WILLIAMS: Have you consulted with equipment manufacturers in preparing this proposal? And if so, who?

9093 MR. GOURD: Yes, through ExpressVu, we have consulted with our main supplier, Echostar Communication, from the U.S. Not only have we consulted but we have tested various boxes in our laboratory, in the Toronto area. We have tested ITV boxes and also, not only the box itself but also the software you use for the download, because a set-top box can accommodate various kinds of middleware or software that allow to trigger the interactivity of the box. And we have also consulted Echostar, and others, pertaining to the next generation of boxes, which would be Step 3, the box with Web TV interactivity, and these ones we are still testing as we speak.

9094 COMMISSIONER WILLIAMS: Are these boxes that you have talked to Echostar about, are they compatible for use in a cable system?

9095 MR. GOURD: The characteristics of each distribution system are such that DTH requires a box which is what we call, perhaps incorrectly, a "broadcast mode", where all the information is broadcast all the time, while cable -- and which is more oriented at the T.V. screen -- while cable is probably more oriented at Internet-based interactivity, both on the T.V. screen and on the computer.

9096 So, in a nutshell, it's two different technologies, while there is a common root, which is the interactivity -- but for the consumer, it's two different technologies.

9097 MR. MACDONALD: We did look at the G.I., the General Instruments DCT 2000 box which is being deployed by Shaw and Cogeco. But this box is really not capable of actual full-up interactive. So we have to look at the next generation of G.I. boxes.

9098 Rogers is currently looking at the Scientific Atlanta Explorer 2000 box. The current version allows some level but it really isn't there yet, so there will be a next level of box that has to come along before we get to the level that we have been talking about.

9099 MR. GOURD: It goes without saying that each distributor, including Bell ExpressVu, tries to stay at the leading edge of technology because it is one of the selling features of the new digital distributor and, therefore, boxes are tested all the time to make sure that you are always one step ahead of the other distributors, it goes without saying.

9100 MR. MACDONALD: Just to confuse it even more, I'm sure you have heard of Web TV, which is distributed by Microsoft, and, of course, that was really, I think, the first notion that most of us had about truly interactive television because they got out into the market quickly and it was the box that was positioned as interactive.

9101 We don't know how many Web TV boxes there are in Canada. Experts have guesstimated that there are approximately 10,000 boxes -- which is not particularly large -- and that probably half of those boxes are what was referred to as the "Web TV Classic" and that the "Web TV Plus" box is only probably 5,000 -- and that would be the box that would be required for the interactivity that we have been talking about.

9102 COMMISSIONER WILLIAMS: The interactivity that you are talking about in the medium to longer term -- apart from the set-top box, what other hardware or software will be necessary to use your full-service offering? For example, would a digital video camera or a remote keyboard be required? And if so, how would you propose to recover the costs of these items?

9103 MR. GOURD: Jim, would you like to answer. And then Trina.

9104 MR. MACDONALD: Well, the first piece of equipment you have to have, of course, is a television.

--- Laughter / Rires

9105 MR. MACDONALD: We want our application to be complete.

9106 I want to go back, really, to what Alain said, which is that we see the equipment as really being the responsibility of the distributor and we expect that the equipment package will be put together by the distributor. Certainly, there could be add-ons that could work in conjunction with different kinds of boxes. One, as you suggested, would be an interactive or an infrared keyboard. A camera could be added. But we don't see that as something we are likely to do.

9107 Most of the interactivity that we are talking about will be generated off of the remote, and the keyboard will allow, you know, different levels of access and to drill down in a different manner.

9108 Trina, do you have anything to add?

9109 MS McQUEEN: I don't know whether I can successfully add much about the interactivity.

9110 I guess one of the things that we talked about in the news application was the ability to send back pictures, very successfully, with these little tiny digital eyes, and it certainly is true that one of the great synergies of this application is that if you take TVA, Canal Évasion, CTV, Discovery, Outdoor Life, TSN -- I don't know, Daniel, how many crews that would be in spots around the world capable of sending back to Travel TV digital pictures, videostreaming, of a marvel of places on the planet, and in Canada -- not that Canada's not on the planet. But certainly one of our great strengths is that we have so much ability to tap into people on the ground who are capable of sending digital pictures back which, then, can give Canadians a really clear idea of what is out there on a timely basis.

9111 MR. LAMARRE: I think what we are discovering in working as a consortium here is, as you have seen for the last two days, there is a lot of questions not answered about interactivity. But the one thing which is very positive about what is happening in this forum is that a lot of people are talking to a lot of people, and we discovered, within BCE and CTV and ourselves exchanging about the kind of tests we are doing in all of our mini labs because -- just to give you an idea, LCN is probably state of the art, in terms of all the digital equipment, and that's easy to say because the latest venue in a category is always the one who has the state-of-the-art equipment. So, in the news category, we are, and so we have a lot of digital equipment which is working internally. But when all the technology will be in place, we would be in a much better position to exchange much more with CTV. We already have a lot of exchange with them on the News Channel and in all of our facilities. So, I guess the bottom line is there is a lot of ways that the consortium like the one you are having in front of you today can bring together not only a knowledge but an infrastructure in this country, and abroad, that will help to bring some more interesting interactive products for the consumers.

9112 MR. MACDONALD: And while we may have to wait a little bit for the broadband strategy to actually evolve, one of the most exciting things about what we are proposing is the opportunity bring people together and share travel experiences. I mean travel is not all just a lot of fun, these days. I mean some of it is, but we travel for a whole bunch of different reasons. And the opportunity to share experiences and routing and so on and so forth is really interesting, and hotels to go to, why you go to this place, why you don't go to that place deals that different people become aware of, and you have probably been involved in some of the mail groups, but there's a tremendous amount of very valuable information that can happen. And I think that's going to be a really exciting part of what this is all about, just the opportunity to bring the community together, the community of travellers.

9113 MS McQUEEN: And that goes to your point about bringing, Commissioner, the viewers in to be part of the channel and to give their input and their influences.

9114 One of the things that this channel is committed to is straight talk about travel. That is what Destination Watch is. It is where you will find out that something that is called the "Rose and Honey Bed and Breakfast" is actually next to a pig farm. Or it won't tell you about a secluded lake without telling you when the blackfly season is at that secluded lake.

9115 I think that in order to get that kind of information the viewers are a wonderful source.

9116 So there is a kind of creativity going on between the channel and its viewers, the best synergy of all, that produces better programs for everyone.

9117 COMMISSIONER WILLIAMS: My son just returned yesterday from three months in South America, and prior to that six months in China, and prior to that God knows where, so I know that he is a very experienced traveller for a young man now, having been to --

9118 MR. MACDONALD: Would he like to be a stringer?

--- Laughter / Rires

9119 COMMISSIONER WILLIAMS: I am certainly not promoting any form of employment for him, but I can see --

9120 THE CHAIRPERSON: Madam Chair, get your phone.

--- Laughter / Rires

9121 COMMISSIONER WILLIAMS: I can see where he would certainly be an avid viewer of a service like yours.

9122 MS McQUEEN: Just out of interest, did he communicate with you by e-mail while he was away?

9123 COMMISSIONER WILLIAMS: Yes, all by e-mail.

9124 MS McQUEEN: That is just an example of how this kind of thing ties people together in different countries.

9125 COMMISSIONER WILLIAMS: A little more on set boxes.

9126 Given that certain types of interactive television necessitate a return path which would provide viewers with instantaneous responses to their requests, will you be considering alternative forms of distribution for your service? And are there other solutions to this potential limitation to the development of interactive television that DTH current satellite technology imposes? I have heard the broadband solution coming down the road.

9127 MR. GOURD: I will ask Jim to elaborate on the approaches of the service proper, and then, if needed, I could add information pertaining to DTH distribution.

9128 Jim...?

9129 MR. MACDONALD: Oh, give me the return path.

--- Laughter / Rires

9130 MR. MACDONALD: I don't pretend to be particularly technologically driven. The return path -- obviously, the speed of the return path is going to be critical to instantaneous delivery, but we think that it is going to be more of an issue for the BDUs when it comes to their introduction of things like interactive games, which we expect to be a big part of what they will do with interactive.

9131 In other words, the ability for two people to be competing in a game at the same time from different parts of the country obviously requires that there can't be any latency in the return path at all.

9132 I think that what we have seen from certainly the discussions we have had with ExpressVu and conversations we have had with Bell, through the Bell labs, because they are certainly working on this as well, is that return path should not be an issue for us, given the bit rate of service that we have and the type of service that we have. It may be for others, but we don't anticipate that it is going to be for us.

9133 MR. GOURD: And from a Bell ExpressVu perspective, we agree absolutely with that assessment. The return path, of course, in the case of direct-to-home, for the time being, is the telephone line, whether for satellite-based Internet to the computer or interactivity on the TV screen.

9134 I have to say, however, that in terms of our second step, which is interactivity on the TV screen, a phone line is required mainly for e-commerce, because the main programming interactivity is between the remote control and the decoder, because since it is a broadcast mode all of the information is sent to the set-top box.

9135 Let's take the example of weather information. We will send all of the time all of the information -- not every second, but let's say every 15 minutes -- for all of Canada and its main localities to all of the set-top boxes. So if you are a subscriber, a view who wishes to know more about Ottawa, you would press "Ontario", and then you would press "Ottawa", and you would have the weather condition pertaining to Ottawa. Then you might need more information about the road conditions, so you would press once more and you progress into the information.

9136 But that interactivity doesn't require a phone line. It is rapid, fast, between the remote control and the set-top box and the TV set. It goes without saying.

9137 COMMISSIONER WILLIAMS: Before I hand you back to our charming Chair, my colleague Chairperson Wylie, do you feel that your application has been given a fair hearing, and do you have any information that you wish to add that we haven't been able to bring out?

9138 MR. MACDONALD: If we get the licence it will have been a fair hearing.

--- Laughter / Rires

9139 MR. GOURD: Having said that --

9140 THE CHAIRPERSON: A judge would not be impressed with that.

--- Laughter / Rires

9141 COMMISSIONER WILLIAMS: It is certainly a competitive process.

9142 MR. GOURD: It has been very comprehensive. Indeed, it has been most stimulating, most interesting.

9143 Maybe Trina would wish to add some information.

9144 MS McQUEEN: Just to go over with you the major points that we want to leave you with, Travel TV has one of the highest Canadian content rates, at 53 per cent; the highest percentage expenditure commitment; and an affordable rate of 35 cents; high original hours, even though not quite as high as I first told you.

9145 We believe that among its other strengths is that this is clearly a Canadian application. It brings together cultural diversity and insights right in the partnership of the channel. It brings together programming expertise and interactive expertise through its partnership.

9146 So it is a made-in-Canada travel channel.

9147 Those are the messages that we would like to leave you with.

9148 THE CHAIRPERSON: Before we start impeaching the Chair, we will allow her a few questions.

--- Laughter / Rires

9149 CHAIRPERSON OF THE COMMISSION: Thank you.

9150 Coming back to the issue and the concern we have over the matter of independent producer -- le montant de programmes autorisés pour les producteurs indépendants.

9151 You have established that what you consider an independent producer is anything that is above 66. "Above" or "below", I didn't know which word to use.

9152 But that answers only part of the question. What about the amount of production that would be confined to any affiliated, independent producer? Is there a percentage that you --

9153 First, there is the question: Do you think in the digital world that we should still have that concern?

9154 I repeat what our brilliant Chair has been saying all along. We are raising the question. We are not saying it has to be there; we are raising the question and we are asking: Is there a necessity in the new world to impose what we had in the analog world?

9155 I think the framework we have put together shows that we are capable of seeing that it is a different world and it takes different parameters in order to really meet those challenges.

9156 So we are not expecting and we don't want you to say yes just because you want the licence; we really want to hear what is your point of view, because you have done the studies and the business plans and you know more than we do in terms of what is really feasible and doable.

9157 Do you think it is still necessary in the digital world to impose those kinds of measures? If so, what would be for you the limit?

9158 Thirdly, the consideration of shareholders, like TVA being part, or CTV, what will be the in-house production -- the limit? Is there a limit that you see as shareholders that would come? Because it is a different thing.

9159 As partners, do you see that you will be kind of sharing between you, with your expertise, in terms of the commitments you are making?

9160 MR. GOURD: Madam Chairperson, first a general comment. Somebody said earlier that digital interactive distribution -- I think it was Ivan -- it is a platform.

9161 What is important is the programming, and the broadcasting system has been in constant evolution but building more strength in terms of programming, developing approaches, developing trends, including regulatory trends, which have served the system well. Therefore, we do not see from these regulatory/programming/production trends sudden transformations that would eliminate totally approaches that have served us well in the past.

9162 That was the general comment I wanted to make. Yes, it is an important step in the journey, but it is not suddenly a new planet or a new travel destination.

9163 Trina, on other dimensions...?

9164 MS McQUEEN: My understanding is that in the Broadcasting Act it says that there must be a substantial contribution by independent producers. Even if it weren't in the act, I think that most broadcasters need independent producers. They bring diversity, fresh ideas, funds that they raise on their own to any program service.

9165 In this digital world I think we are seeing two things happening. One is the desire for original programming, which we have talked about a great deal. The second question is, with the limited initial budgets of these channels, how can they do original programming?

9166 The answer for many of them is to develop in-house flagship shows that brand the channel and give it a consumer perception and a visibility.

9167 Most of these flagship shows can be most efficiently done in-house. So I think as we move from one stage in the evolution of television to another, the role of the independent producer increases.

9168 For example, one of the things that happens in these in-house is that they give employment to a number of producers who are starting out and more and more there are fewer and fewer places for producers to get training in television, the basics of television. Unfortunately there have been so many cutbacks in in-house programs that that doesn't exist any more.

9169 Many of the producers that we see having independent companies now started out working on this kind of in-house daily show, getting to understand the rudiments of television production and television techniques. So I think there is a place -- I don't like to call the bottom, but an entry level where a producer can come and get trained.

9170 Many, many times we will see these people go on to form their own independent production companies and go from there. We also see that many very small independent production companies like to have a place where they can actually go for three to six months and have a salary and some benefits while they are working on raising funding for their next truly independent production. So these shows do provide a forum for those small independent producers to come in and out and have some financial stability and viability.

9171 Third, there are people who do not want to work for a company, whether it's Travel TV or CTV, but who produce a kind of programming because they love to do it and are happy to do it without owning the rights to it, and it seems to us that this kind of producer often works for channels like Outdoor Life or like Travel. They are "travelholics", if that is a word, they are addicted to travel and the idea that they could get paid for doing what they love and bringing back a program is good for them.

9172 All of this long-winded answer is to say that we think the in-house flagship show does provide some benefits for people who either are or will be independent producers. It seems to us that after that, we have heard different versions of what they would like from independent producers and you will be talking to the Producers Association. Some people say they would like fewer hours with higher budgets. Others like large volume with lower budgets.

9173 So it seems to us that there should be a variety of arrangements with independent production in these channels, that it shouldn't be a kind of one size fits all, but it should relate to the genre, it should relate to the cost-base of the channel and it should relate to basically how the channel provider sees the most original hours that fit the genre of the travel.

9174 So those are some words about independent producers. Yes, we think there should be a commitment by each channel, but the commitment should vary depending on the genre and nature of the service.

9175 MR. GOURD: Thank you, Trina.

9176 Jim, about our commitment.

9177 MR. MACDONALD: Thank you very much.

9178 I think that Trina made some excellent points and I would like to just share with you some of the business side of putting this together.

9179 When we started putting the application together we knew that, as I alluded to Ivan earlier, we would really to have to be nimble that the subscription base was likely to be very skinny and how could we get the maximum amount of programming most efficiently.

9180 As Trina suggested, there was in-house programming based around Destination Watch. But our conclusion was that many of the shows we wanted to do were best done by the independent production sector, including the shows that we would be doing with Canal Évasion. It wasn't a co-production. It was a joint commissioning through the independent production sector.

9181 So at the end of the day when we finished what would work best and how it would all line up, we came to the conclusion that about 30 to 33 per cent of our overall Canadian programming budget would in fact be committed to the independent production sector. That works out to be about $13.5 million. But that is how it worked out in our particular programming and how we put it together.

9182 CHAIRPERSON OF THE COMMISSION: Thank you very much.

9183 THE CHAIRPERSON: Counsel.

9184 MR. McCALLUM: Would that translate into a certain percentage of programming, the $13.5 million?

9185 MR. MACDONALD: No, we didn't look at it in terms of number of hours because number of hours can become very confusing. We simply looked at it how we saw the overall portion of our Canadian spending going to the independent production community and, as I said, it was somewhere between 30 and 33 per cent or $13.5 million.

9186 Mr. McCALLUM: Thank you.

9187 Just on the music videos, or music video clips, Category 8(b). Would you propose any sort of limit to the amount or the number of the percentage that you would offer in this service?

9188 MS McQUEEN: Five per cent or less would be a satisfactory number to us.

9189 MR. McCALLUM: And that is related to the number of hours?

9190 MS McQUEEN: That would be 5 per cent of the number of hours of programming, yes.

9191 MR. McCALLUM: Thank you. Thank you, Madam Chair.

9192 LA PRÉSIDENTE: Madame Bertrand.

9193 LA PRÉSIDENTE DU CONSEIL: Avec l'aide de ma collègue, j'ai une question supplémentaire.

9194 About the independent producers, I understand the 33 per cent, the program budget. What has happened to the affiliate producers of TVA? Would they be considered totally independent producers or would they be --

9195 MR. GOURD: They would be covered, absolutely.

9196 CHAIRPERSON OF THE COMMISSION: So they would -- when we say program 30 to 33 per cent to independent producers, it is not affiliated -- pas affiliés ni à CTV ni à BCE ni à TVA ni à Canal Évasion.

9197 M. GOURD: Exactement, exactement.

9198 THE CHAIRPERSON: And it would not be relevant on the actual ownership proportion of TVA and Travel TV.

9199 MR. GOURD: I think it is very important that we give a clear message and if we start to make, I think you will agree, distinction between shareholders having 40 per cent, one having 10 per cent, it's not clear, it becomes ambiguous.

9200 THE CHAIRPERSON: Maybe Ms Robinson will help us with that later on in the process because this is complicated further in this case. Just off the top of my head, I would not be prepared to get into because it is a partnership as well, et cetera.

9201 MR. GOURD: But --

9202 THE CHAIRPERSON: Some work for you, Madame Robinson. Sorry, Mr. Fecan.

9203 MR. GOURD: But Madam Chairperson, behind the important legal consideration, I think there has to be a substantive message and it is that independent producers have to be independent.

9204 THE CHAIRPERSON: Exactly. But from there, if there is to be equity and fairness, we have to find some way of defining it so it is applicable everywhere.

9205 MR. GOURD: And we will definitely rely on Kathryn Robinson to shed light on that.

9206 THE CHAIRPERSON: Yes, it has been brought up with a number of applicants.

9207 MR. GOURD: Yes, certainly.

9208 THE CHAIRPERSON: I think that concludes our questioning and we thank you. We apologize for keeping you so late, but we have remained interested even though we were here at 8:30 this morning.

9209 MR. GOURD: Thank you.

9210 On espère que vous avez fait un bon voyage avec nous.

9211 MR. MACDONALD: And we would like to thank the Commission and the staff who have been fabulous throughout this whole process. They work very hard and they very rarely get acknowledged, but we thank them very much for everything.

9212 THE CHAIRPERSON: You don't know how well we treat them.

--- Laughter / Rires

9213 Alors ça complète la journée et nous reprendrons à 8 h 30 demain matin.

9214 We will resume at 8:30 in the morning.

--- Whereupon the hearing adjourned at 1835, to resume

at 0830 on Wednesday, August 16, 2000 / L'audience

est ajournée à 1835 pour reprendre le mercredi

16 août à 0830