TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
MULTIPLE BROADCASTING AND OWNERSHIP APPLICATIONS/
DEMANDES DE SERVICES DE RADIODIFFUSION MULTIPLES
ET DE PROPRIÉTÉ MULTIPLE
||Centre de Conférences|
|September 18, 2000
||le 18 septembre 2000|
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Multiple broadcasting and ownership applications/
Demandes de services de radiodiffusion multiples
et de propriété multiple
BEFORE / DEVANT:
||Chairperson of the|
||Commission / Présidente|
||Commissioner / Conseillère|
||Commissioner / Conseiller|
||Commissioner / Conseillère|
||Commissioner / Conseillère|
ALSO PRESENT / AUSSI PRÉSENTES:
||Hearing Manager and|
||Secretary / Gérante de|
||l'audience et secrétaire|
||Legal Counsel /|
||Centre de Conférences|
|September 18, 2000
||le 18 septembre 2000|
TABLE OF CONTENTS / TABLE DES MATIÈRES
|APPLICATION BY / APPLICATION PAR|
|1406236 Ontario Inc.
|INTERVENTION BY / INTERVENTION PAR|
|Canadian Cable Television Association (CCTA)
|Canadian Cable Systems Alliance Inc.
Hull, Quebec / Hull (Québec)--- Upon commencing on
Monday, September 18, 2000
at 0900 / L'audience débute le lundi 18 septembre
1 LA PRÉSIDENTE DU CONSEIL: Bonjour mesdames et messieurs. Good morning.
Welcome to the public hearing to consider an application by BCE Inc. to acquire
2 This hearing will also consider an application by CanWest Global
Communications Corp. to acquire the assets of Montreal television station
CJNT-TV, and an application to renew the broadcasting licence of Toronto Campus
Radio Station CIUT-FM.
3 Je m'appelle Françoise Bertrand, Présidente du CRTC et je présiderai cette
4 Se joignent à moi pour former le comité d'audition David Colville,
Vice-Président, Télécommunications -- je n'ai pas besoin de vous dire qu'il est
sur le podium. Vous le reconnaissez immédiatement. Andrée Wylie,
Vice-Présidente, Radiodiffusion que vous avez vue pendant quatre semaines lors
de l'audience des signaux numériques. Martha Wilson, qui faisait aussi partie du
panel, qui est conseillère pour l'Ontario, ainsi que Mme Andrée Noël,
conseillère pour le Québec.
5 J'aimerais également vous présenter le personnel du CRTC qui nous assistera
pendant l'audience. Lynne Poirier, Gestionnaire de l'audience et Secrétaire;
Karen Moore, Conseillère juridique principale; Gino Grondin, Conseiller
juridique; Robert Ramsay, Coordonnateur de la demande de BCE; André Campeau,
Coordonnateur des demandes concernant CJNT et Steve Parker, Coordonnateur des
demandes de CIUT. Diane Richer sera responsable de la salle d'examen. Veuillez
vous adresser à eux si vous avez des questions sur la procédure.
6 Nous sommes tous conscients du fait que partout dans le monde, l'industrie
des communications subit une restructuration profonde. L'innovation
technologique a permis d'abolir les frontières intérieures et inter-sectorielles
qui existaient jadis entre les secteurs des télécommunications et de la
radiodiffusion. Nous assistons donc à une vague proposée de fusions et
7 Nous sommes donc ici aujourd'hui pour examiner le projet d'acquisition de
CTV par BCE. Il s'agit d'un jalon important pour l'industrie de la
radiodiffusion canadienne puisque c'est la première fois qu'une compagnie de
télécommunication canadienne, Bell Canada Entreprise, demande l'autorisation
d'acheter un radiodiffuseur conventionnel, CTV.
8 The proposed change in ownership would give Canada's largest
telecommunications company withholdings and broadcasting, satellite
distribution, a direct-to-home service and a satellite relay distribution
undertaking, effective control of one of Canada's largest privately owned
English language national television groups with conventional television
operations across Canada and a significant presence in the pay and specialty
9 Approval of this application would result in the consolidation of
telecommunications and programming undertakings under the corporate umbrella of
10 Consequently, this is an important proposal with many ramifications for
the communications sector. If approved, it would affect Canadian consumers,
viewers, broadcasters, creators and telecommunications companies alike.
11 At this hearing, we will try to determine what the potential impact of
this proposed transaction would be on the Canadian broadcasting system. Will the
combination of broadcasting and telecommunications under one corporate umbrella
support and enhance Canadian broadcasting choices and voices, and if so, how? We
have questions concerning the effect of this transaction on CTV itself. How will
this transaction affect CTV's conventional television service and specialty
services with respect to both programming and transmission? How will the
proposed priority programming benefits impact CTV's Canadian programming? What
are the implications for Canadian programming as well as national and
12 At this hearing, the Commission will also examine the issues of
cross-media ownership and vertical integration, and we will consider the
advantages and disadvantages of strong, vertically integrated communications
companies, their impact with respect to distribution and specialty services and
how to best use the benefits to the system from those consolidations.
13 In summary, as could be expected, given the overall context of rapidly
changing technologies, a trend toward mergers and conversions, and given the
significance of the proposed transaction before us, this panel will have many
14 But as we consider the proposed transaction, our most pressing concern as
ever is how to best serve the Canadian public interest now, in the year 2000 and
15 Le comité d'audition examinera ensuite une demande présentée par une
filiale de CanWest Global Communications Corporation en vue d'acheter la station
CJNT-TV de Montréal. Canwest Global continuerait d'exploiter cette station de
télévision suivant la formule ethnique mais à l'égard des conditions de licence
de CJNT, elle propose des modifications et des suppressions.
16 Ces modifications sont énoncées dans l'avis public annonçant la présente
audience et portent sur le pourcentage d'heures consacrées à des émissions à
caractère ethnique. La diffusion de films étrangers, le nombre de groupes
ethniques et linguistiques distincts desservis et les niveaux de contenu
17 La requérante a aussi demandé que la distribution de CJNT-TV soit
obligatoire et soit intégrée au volet numérique des entreprises de
radiodiffusion titulaires de Classe 1 et 2 et à celui des entreprises de SRD et
de SDM de toute la province de Québec.
18 Le Conseil aura certaines questions à poser à la requérante au sujet des
modifications proposées, notamment comment elle prévoit refléter les
préoccupations et les questions locales dans la programmation de CJNT, combien
d'émissions originales CJNT a-t-elle l'intention de produire et de diffuser et
quel sera le niveau de contenu canadien.
19 Le Conseil voudra aussi discuter de l'ensemble des avantages intangibles
du projet de distribution obligatoire et du sous-titrage.
20 Finally, this hearing will consider an application to renew the licence of
CIUT-FM, a Toronto Campus community radio station. The licence expires on
February 28th, 2001.
21 The Commission notes the apparent non-compliance of CIUT-FM with radio
regulations concerning the amount of Canadian music content as well as the
provision of logger tapes and music lists. The Commission expects the licensee
to show cause at this hearing as to why a mandatory order requiring the licensee
to comply with the radio regulations 1986 should not be issued.
22 J'aimerais maintenant aborder certains aspects de la procédure. L'audience
devrait durer trois jours. Nous commencerons par examiner la demande de BCE puis
celle de CJNT-TV et celle de CIUT.
23 Each of these three applications will be heard in the following order. In
the first phase, we will hear the applicant's presentation. This will be
followed in Phase II by the questions from the panel members. In the third
phase, we will hear from the interveners.
24 Finally, in the fourth phase, we will hear the applicants' replies to the
interventions. Further questions from the panel may follow.
25 De façon à entendre le plus grand nombre d'intervenants possible, le panel
pourra ne pas engager des discussions avec les intervenants favorables ou leur
poser des questions. Toutes les interventions sont néanmoins considérées
importantes aux yeux du Conseil et seront inscrites et versées au dossier
26 Now, I would like to go over some housekeeping matters with you. The
proceedings will be transcribed and placed on the public record. I ask that you
turn off your cell phones and pagers when you are in the hearing room. I have
done mine. I got caught twice in the past hearing. They are an unwanted
distraction for both applicants, interveners and commissioners also. Your
cooperation in this regard would be greatly appreciated at all times. I will do
my very best to comply!
27 CPAC will be covering the portion of the hearing concerning the
application by BCE to acquire CTV via their web site. We will sit for three days
beginning at nine. Today, the hearing hours may be extended to allow to hear
28 If we have to make other changes to the hearing schedule to finish on
time, I will keep you informed.
29 I will now call upon the Hearing Manager and Secretary, Mme Lynne Poirier,
to explain the procedures to be followed.
30 MS POIRIER: Thank you, Madam Chair. I don't think I have much to add. You
have covered most of it. Except make sure you use your microphone in front of
you when you talk.
31 I would like to introduce the first item, which is an application by
1406236 Ontario Inc., a wholly-owned subsidiary of BCE Inc., on behalf of CTV,
to effect a change in the effective control of the licensed broadcasting
undertakings currently under CTV.
32 Mr. Monty, if you want to start the presentation.
33 Thank you.
APPLICATION / APPLICATION
34 M. MONTY: Merci, Mme Poirier. Madame la Présidente, mesdames et monsieur
les conseillers, je suis Jean Monty, Président du Conseil et Chef de direction
35 I am pleased to present our application for a change of ownership of CTV.
We believe your approval of this application will allow us to contribute
positively to the Canadian broadcasting system and to our country's public and
36 Let me first begin by introducing the members of our panel.
37 In the front row, centre, is Ivan Fecan, President and CEO of CTV. I am
very pleased also that Ivan has accepted to become President and CEO of BCE's
newly created Media Division.
38 A la droite d'Ivan se trouve Alain Gourd, président et chef de la
direction pour les médias et Jim Macdonald, Senior Vice-President and Chief
Media Services Officer of BCE Media.
39 To Ivan's left are Trina McQueen, Executive Vice-President of CTV, and
Sheridan Scott, Chief Regulatory Officer of Bell Canada.
40 In the second row, beginning on your right, are Robin Fillingham,
Executive Vice-President and Chief Financial Officer of CTV; Kathy Robinson of
Goodman, Phillips and Vineberg, our legal counsel and a member of BCE -- excuse
me, of CTV's Board.
--- Laughter / Rires
41 MR. MONTY: And Martine Turcotte, Chef principal du service juridique de
42 With me here at this table is Allan Beattie, Chairman of the Board of CTV.
43 In the audience with us are Brian Aune, the trustee of this transaction,
and two members of BCE's Board, Donna Soble-Kaufman and Judith Maxwell.
44 The need for connecting people, for storytelling and shared experience is
as old as humanity itself. It is the very basis of culture and of commerce.
45 So what has changed today? Well, at least two things, speed and control.
People want more choice in what they see and how they get it. They all want some
room to tell their own stories. Whether they are professional creators or
concerned citizens, Canadians need Canadian voices and choices and Canadian
windows on the world.
46 For a century, BCE and its predecessors supplied telephone services and
manufactured equipment, but with the distribution of our stake in Nortel to our
shareholders, BCE is becoming a very different company. We will keep providing
Canadians with robust, reliable and innovative communications services, but we
will do much more. We will bring the world to Canadians and Canadians to the
world through communications. It is that simple and it is ambitious.
47 With this in mind, BCE wishes to contribute to the continuing excellence
of CTV as a broadcaster of high quality, compelling Canadian content. We are
determined to create a future where English-language Canadian programming is as
commercially successful as U.S. programming.
48 Vendredi dernier, nous faisions l'annonce avec Thomson et Woodbridge de la
création d'une nouvelle entreprise média. Nous ne pouvions démontrer de façon
plus claire notre engagement envers le contenu canadien. Malgré que cela ne
change pas le contrôle des entreprises dont il s'agit ici, nous tenions à rendre
public nos projets avant le début de cette audience. Nous tenons à vous
présenter l'ensemble de notre vision.
49 Today we will set out our vision of the future in which CTV is the
cornerstone of our media activities.
50 BCE and CTV have much more to offer each other. The CTV talent pool brings
storytelling, programming and marketing skills to leverage their creativity of
our own distribution experts, application developers and business strategists.
51 The result will be deeper, richer content in the evolving interactive
broadcasting world, a wealth of new choices for Canadian consumers, and
empowering new platforms for Canadian creators.
52 I would now like to turn our presentation over to the panel, beginning
with Ivan Fecan.
53 MR. FECAN: Thanks, Jean.
54 For CTV and for the future of Canadian content, this application
represents the best possible outcome, a stable base from which to remain
innovative, nimble and creative, an infrastructure to support and add value to
Canadian stories. That enhances immeasurably CTV's chances of making a
successful transition to the digital interactive world.
55 Before BCE made its offer to acquire all of CTV's shares, nearly 20 per
cent of those shares were in the hands of two competitors. With no controlling
shareholder, that effectively puts CTV in play.
56 Many wanted various pieces of the company and so we face a distinct
possibility that a prospective buyer would want to break up CTV. It is far from
certain that the aspects of CTV that make it a valued national broadcasting
institution would have survived that scenario.
57 Instead, the arrival of a strong, committed, controlling shareholder makes
it possible to realize our dream and create a wealth of Canadian content. In an
age where broadcast players are consolidating with each other, this application
actually brings diversity in the form of effectively a new player to
58 This is great news for the system, for Canadian creators and for Canadian
59 I would like to take a moment to describe our dream.
60 Think of a future where Canadian writers and producers can work on what
they do best in an appropriate timeframe, knowing that their work will be
properly financed, marketed and showcased.
61 Think of an environment in which their productions can be developed with
interactivity from the beginning, not as retrofits and add-ones.
62 Think of audiences deeply loyal to excellence, high resonance Canadian
choices, and to Canadian windows in the world from the intensely local to the
wider world beyond our borders.
63 This application creates conditions which make a huge difference to the
realistic expectation of that dream coming to life.
64 Through a history of Commission work, including the convergence decision,
you set out a policy framework which allows telecommunications companies to
become major contributors to the broadcasting system. Now the time has come to
bring that dream to life.
65 This is a critical moment in the history of the Canadian broadcasting
66 Dans le monde multi-médiatique émergeant, il devient indispensable d'avoir
des entreprises canadiennes fortes et efficaces dans la diffusion du contenu
67 Notre force chez BCE, c'est la création de nouveaux services, la gestion
de réseaux fiables et avancés, le service à la clientèle. Mais si nous voulons
être une entreprise intégrée en information, communication et divertissement,
nous avons besoin d'expertise en contenu, à savoir le développement, la
programmation et le marketing pour attirer les auditoires.
68 Avec sa marque respectée, ses racines communautaires à travers le Canada,
son personnel créateur, sa longue tradition de service aux Canadiens semblable à
la nôtre, et bien sûr, sa grande force en programmation canadienne, CTV est le
partenaire idéal pour nous.
69 CTV's conventional television stations are crucial to attract audiences
and generate revenues in the broadcasting system. They still provide the
foundation financing for new Canadian content, especially drama. CTV's specialty
channels have been designed and managed with imagination and flare.
70 In the last three years its cross-Canada development team has become a
valued resource for independent producers hoping to make it in broadcasting.
More than 600 supporting intervention letters came from the creative community
alone. They emphasize the importance of dealing with experts in the creative
process. We feel this talent pool is critical to our future in a converged
environment where Canadian content is key.
71 MS McQUEEN: This application includes a benefits package of $230 million
and that is the largest in history. More than 92 per cent of it is for the
72 We set out to do something bold and innovative. We wanted to develop a
benefits proposal that would make a profound and lasting difference. That was a
tall order, but we are very pleased with the results and with the reaction.
--- Video presentation / Présentation vidéo
73 MS McQUEEN: It's true, in the beginning and in the end it is about the
viewer. As the Chairperson said in Vancouver this summer, that is the heart of
the system. Viewers, as diverse as DNA and snowflakes, each one unique but all
of them sharing humanity and sharing Canada. What do they want from television?
All of humanity and plenty of Canada.
--- Video presentation / Présentation vidéo
74 MS McQUEEN: The ambition of this benefits package is also worthwhile and
it is clear: We want to make successful Canadian television. We define that as
popular television, watched, talked about, sought after and, yes, commercially
75 Canada has no shortage of talent and no shortage of stories. The only
thing against us is the force of the North American marketplace, but that is a
powerful force and the best and the most loyal are tempted.
--- Video presentation / Présentation vidéo
76 MS McQUEEN: This is our chance to change that reality, a chance to give
our talent the tools that they need and have not had. And, at last, to allow
them to connect with viewers through the sheer force of their skill.
77 Connection, it is a fundamental image in our civilization. No man is an
island. I am a part of all that I have met, and as the fox told le Petit Prince:
c'est une chose trop publiée, ça signifie créer des liens.
78 It is a fundamental theme in this application too. A great company that
has connected Canadians for 120 years now comes before you seeking to make a
creative connection between the artist and the viewer, the journalist and the
citizen, the present and the future.
79 The first connection: the artist and the viewer.
80 We asked program creators across the country how we could help make that
connection. Here is the consensus. They appreciate and they depend on the
numerous funds that help them make television. They do not want another one.
They don't want conflicting deadlines, contradictory guidelines, uncertainty,
and a patchwork pylon of small pieces of funding.
81 Here is what they do want, as you see on the screen: one-stop funding with
substantial licence fees, development assistance, special attention to drama
programs and regional programs and lots of promotion.
82 Here is how the benefit package responds. We are proposing $140 million
for priority programs with exceptional one-stop funding, $7 million for
development, half of the priority programming money goes to drama, $23 million
or 10 per cent of the entire package for specific regional programming, and $10
million for promotion and much more.
83 For the viewer this means 175 new original hours of high quality Canadian
programming, movies, series, featured documentaries, ground-breaking regional
programs, and every year one terrific Canadian party, a spectacular television
showcase of our best stars and music.
84 Now for the second connection: the journalist and the citizen.
85 News has always been one of this country's great television strengths and
now it is time to make it stronger.
--- Video presentation / Présentation vidéo
86 MS McQUEEN: BCE sees the need for stronger journalism at every level, more
foreign bureaus, essential information for our international activities and an
encouragement to open-mindedness, and better local journalism and an
unprecedented commitment for 15 new local journalists specializing in health,
science and technology with a training budget for each one of $30,000 a year.
87 BCE also sees the need for inclusive journalism that reflects this complex
and diverse country.
--- Video presentation / Présentation vidéo
88 MS McQUEEN: Our diversity training benefits will encourage journalists
like Sachin in their pursuit to the new Canadian stories. They will support a
ground-breaking interactive current affairs program for teenagers and young
adults and they will strengthen the Aboriginal Peoples Television Network and
its unique voice.
89 MS McQUEEN: Here is the third connection: the present and the future.
90 First, with education, research and development. That connects with a
future that could be a generation away. BCE has always been a significant
supporter of Canadian research and education. Now, as you will see on the
screen, our benefits will create a new knowledge map of Canada.
--- Video presentation / Présentation vidéo
91 MS McQUEEN: And there is another connection between the present and
future, and that is making sure that there is lots of Canada in our innovative
--- Video presentation / Présentation vidéo
92 MS McQUEEN: As you can see on the screen in a second, the application does
embrace convergence with support at every point, from academia, the first ever
chair in convergence, and a centre of excellence in new media, and the historic
alliance of the Content Innovation Network, regional ITV specialists who help
producers make the transition to interactivity, new resources for the Bell
Broadcast and New Media Fund, and with interactivity embedded in every on-screen
benefit this application connects with new media.
93 The artist and the viewer, the journalist and the citizen, the present and
the future. These are the connections that can transform Canadian television,
not just for seven years, but for generations.
--- Video presentation / Présentation vidéo
94 MR. FECAN: The stories and the people. It is always about the content.
95 Our application received more than 3,000 positive interventions, words of
encouragement from all across Canada and from every group imaginable. We look
forward to many partnerships and connections as CTV, with your approval, joins
the BCE family.
96 Canada needs strong, competitive, multi-media companies with national
commitments and global capabilities -- BCE and CTV. Together we will offer far
more than the sum of the parts of this transaction. And faithful to our long
histories of serving the Canadian people, we will build on the dream of
transforming Canadian television for many years to come.
97 Madame la Présidente, mesdames et messieurs les conseillers, merci pour
cette occasion de présenter notre vision de BCE et de CTV. Nous sommes prêts à
répondre à vos questions.
98 LA PRESIDENTE DU CONSEIL: Merci de cette présentation. C'est presqu'un son
et images. Merci.
99 Je vais avoir le plaisir d'entamer la discussion avec vous. Je vais
adresser mes questions d'abord à M. Monty concernant la stratégie de BCE pour
qu'on comprenne un peu mieux. Par la suite, j'aurai des questions concernant
l'impact sur le stystème de radiodiffusion et je vous suivrai en termes de qui
mieux pourra répondre. C'est à vous de choisir.
100 Par la suite, madame la Vice-Présidente Wylie poursuivra avec des
questions concernant l'impact sur CTV lui-même; qu'arrive-t-il et pour bien
comprendre tant en termes des stratégies de CTV dans sa diffusion et dans sa
production. Par la suite, madame la Conseillère Wilson s'attardera aux questions
liées aux canaux spécialisés, aux nouveaux médias et à la télévision
101 Par la suite, M. Colville parlera avec vous des bénéfices tangibles
relatifs à la programmation. Madame Wylie reviendra pour vous parler des
questions de propriété croisée et Mme Noël complètera sur les questions de
bénéfices liés aux éléments, par exemple, de recherche et d'autres éléments que
ceux liés directement à la programmation.
102 Alors c'est notre programme qui, je l'imagine, prendra une partie de la
103 Alors tout d'abord, M. Monty, votre stratégie pour BCE, c'est ce qu'on
aimerait comprendre. Evidemment on ne veut pas aller dans les secrets des
conseils d'administration, mais c'est important, je pense, si on veut bien
comprendre l'impact qu'aura cette acquisition sur le système de radiodiffusion,
de comprendre ce qui anime BCE dans cette transaction, et pourquoi le contenu
devient si intéressant dans l'an 2000.
104 M. MONTY: Merci, madame la Présidente, Mme Bertrand.
105 I guess where we have to start is -- start with two fundamental precepts
or beliefs that we have. The first one is that we want to be a portal. We don't
only want to be a connection -- an ISP -- an Internet service provider.
106 You have probably seen in our transaction with Lycos -- and we were
criticized for having taken so long to put it together -- that the ISP is not a
part of that relationship with Lycos. We created a content portal with Simpatico
and Lycos. And that is a very strong belief that connectivity is part and parcel
of our core competency. But as we evolve we very much believe that we want to be
more than just an ISP.
107 I will give you a few more thoughts about that in a second.
108 The second belief is that a broadcaster is a fundamental critical
ingredient for us in our quest to be a full participant in the evolutionary
process of the Internet.
109 Let me say a few more things about both of these, if I may; first, on the
ISP and the desire for us to be more than just an ISP connectivity element of
the structure -- of the communications structure of Canada -- and be a content
provider, a portal.
110 There is a shift that is occurring among three fundamental elements: one,
connectivity, the other one content, and the third one being commerce. If you
look back 20 years, connectivity was way up there, where the functionality of
the system for decades and decades has been the capability for us to connect and
interconnect, give permutations -- a mesh network for people to communicate with
each other, whether around their communities, around the nation or
111 The value of that connectivity, because it didn't exist before, was such
that by itself it was worth significant value.
112 As we moved over time we added to that the capability on that traditional
network -- narrow band network -- facts. Some did connections of thousands of
bauds, thousands of bytes per second, and it still had that value. But over
time, with the shift in the capability -- the price performance capability of
technology -- and then you add to that the capability to compete with that basic
infrastructure. And we have gone through these manifestations here in this room
as a company, and it was very difficult for us to move in that new environment.
But the price performance of technology has forced all of us to consider that a
competitive infrastructure is probably the best way for all of us to get this
new technology to consumers.
113 Now, as this occurs connectivity becomes a lesser value and the balance
to shift -- the balance of power, the balance of value -- in favour of content
and commerce is moving. You only have to look at the market capitalization of
media companies, of .coms, of electronic commerce companies, and you look at
that in relationship to the straight connectivity players and you see that shift
114 Now, that does not mean that connectivity is not important any more. You
know from the data that you have at your disposal that this year we will be
close to spending $3 billion on continuing to invest in the connectivity system
of Bell Canada.
115 In addition, we have just invested over $6 billion to purchase the
remaining shares of Teleglobe that we didn't own.
116 We will commit -- and we have committed -- to spend on building that
global data broadcasting content connectivity of Teleglobe another $5 billion
117 This is not to mean -- and some people, when I give those comments, turn
immediately and say: Geez, connectivity is not worth anything any more. That is
not what we are saying. We are saying that connectivity is shifting in the
relationship of its value to content and commerce. And maybe in 10 or 15 years
from now content and commerce will be a lot more valuable than connectivity,
even though it isn't yet necessarily today.
118 That is the first reason for us; the first precept underlying the
strategic framework of the enterprise.
119 Now, why a broadcaster? Once you say that you want to be a portal -- and
not all companies in the world in the telecommunications business, by the way --
and I should have said that initially -- have decided to be a portal. A lot of
American companies in our connectivity world have not decided to be a portal
yet. Many Europeans have decided to be a portal however: France Télécom, Dirtcha
Telecom -- many others have decided to be in the portal world as well.
120 But once you make that decision, how do you bring content? What is going
to be the element of content that will be so important to you? We believe that
broadcasting is at the centre of that, even though not exclusive to
121 Why is that? You look at the data in Canada right now as the Internet
starts to evolve. Unfortunately -- and maybe I shouldn't say unfortunately, but
I will say unfortunately -- a lot of Canadians -- the majority -- the large
majority of Canadians connect directly to the American portals, not to our
122 Now, if you look at our portal, Sympatico, versus other Canadian portals,
we are way ahead. But if you put Sympatico in the context of a Yahoo!, an AOL,
an MSN and others, we are behind. So the reflection goes this way: What are we
going to do to make Sympatico, our portal, more relevant to Canadians? Our
answer: Make it more Canadian.
123 Canadians want this international connection. That is the Sympatico-Lycos
connection. They want the global applications. They want to have the first --
the most leading applications that they can get on the net. We will give that.
124 But how do you differentiate our offering from a Yahoo!, an AOL or an
MSN? We give them local content, we give them national content, as well as the
125 Now you are starting to see why content media, and then evolving to a
broadcaster, becomes so important to the strategy I am outlining.
126 Now, obviously, as you move forward, you know today that a lot of the
content of the web is written content. It is information. We believe -- and many
others, if not everybody else -- that this will move increasingly toward video.
The reason for that is that as we see the capability of technology, it is
increasingly going to be capable of providing a very interactive world in the
video sense. So from an information data Internet world, we are gradually moving
to interactive TV -- to a video component. We will bring the net from the home
office, the bedrooms of the kids who do their work -- connect with their friends
on their PCs from the bedroom, to the living room. As we do that, the centre is
going to be a video interactive world.
127 We are not there yet. But for a company like ours, wanting to position
itself, not only in connectivity but also in content, and wanting to be the
prime ingredient of the content piece of its own service and not somebody else's
content coming from other places in the world, we need tools to bring that
content to our portal.
128 But we need something as well. As you build that capability, how do you
bring the consumer to associate you with content, thinking that content is going
to be video? You have to get them to think that your brand is synonymous with
content and video. And that is where the broadcasting aspect -- that is where
CTV is really taking all of its meaning for us in our strategy.
129 How can we learn to bring that content to these tools -- these
technological platforms -- and at the same time build the broadcasting system
and associate our brand with the broadcasting system, so that the consumer
associates with us as they would with any other content provider, and at the
same time build this Canadian connectivity that the broadcasting system does?
130 I was struck re-reading the Broadcasting Act last night, section
--- Laugher / Rires
131 CHAIRPERSON OF THE COMMISSION: You really want that licence, eh?
132 MR. MONTY: I will read it for you, so you don't have to go to the
Broadcasting Act. It says something that, really, we could have said in
describing the sort of thing we are trying to do.
"The Canadian broadcasting system should ..."
and that is where we get to (d)(ii):
"... encourage the development of Canadian expression by providing a wide
range of programming that reflects Canadian attitudes, opinions, ideas, values
and artistic creativity by displaying Canadian talent and entertainment
programming and by offering information and analysis concerning Canada and other
countries from a Canadian point of view." (As read)
133 That is what we believe in the end is going to be our differentiation
against the U.S. portals, and that is the reason why CTV is so much a part of
134 CHAIRPERSON OF THE COMMISSION: Thank you, Mr. Monty, but why do you have
to own that content? I guess that is the question that is on everybody's lips
135 Certainly the Commission has the authority and the responsibility to
carry the objectives of the Act in the broadcasting system to make sure that it
136 Certainly, we will agree with you that it is important, and certainly, we
are there for the Canadian broadcasting system and the Canadian values.
137 But why do you have to be the content owner, the content producer? Why
can't you be strictly a distributor, like you were already with Bell ExpressVu,
138 MR. MONTY: I think what I'm going to say applies not only to this sort of
relationship, but my business relationships. Alliances are inherently unstable.
139 If you are going to produce a service that, over time, will be part and
parcel of the value that you deliver to your customers and you do that through
alliance relationships and the next day you wake up and somebody else buys your
partner, and you build value, you have created a very interesting offering to
your consumers, your customers. You have lost significant value that you spent a
lot of money and time to create and you have built in your brand that value, and
all of a sudden, you have destabilized your environment by having set up
strictly an alliance. This is true of building technology platforms with an
alliance partner and somebody else buys it. In this case it is content.
140 So if we really believe that it is not only platforms, it is not only
connectivity, it is really going to be content, and we do, you have to be part
of that content and be involved in developing that content to really change the
offerings that you have for your customers, and at the end of the day, you have
to own it in order to be able to really say to your stakeholders that this is
something that will be part of your proposition and it justifies the time and
energy and money required to develop the offerings and the services.
141 THE CHAIRPERSON OF THE COMMISSION: But Mr. Monty, isn't it that the
downside of that approach is whatever content is not owned by BCE will not be
well served by the BCE infrastructure and the capacity of reaching the
Canadians, better serving in the telecom business?
142 MR. MONTY: As we have done in telecommunications, we are both the
retailer and the wholesaler. I will give a first example of pure telecoms.
143 We compete with AT&T on the ground and they are our best customer. We
supply them telecom capacity. We do that in Telesat. We own 100 per cent of
Telesat. But we don't specifically say to others, you can't use Telesat to
manage your barge, you can't use Telesat transponders. Only ExpressVu will use
them, so go see somebody else. That is against the interest of the shareholder
to maximize the value of the investment that has been put out there in
developing that connectivity element.
144 So you spend hundreds and millions of dollars to build a satellite, you
need 20 per cent of the capacity, who else is going to get the 80 per cent?
Well, hopefully, as many people as possible to have a very good asset.
145 So what I am saying here is the same when you get to owning a piece of
the content. We are not saying that only our content is going to go on our
network. We are not saying that we will provide connectivity to only our portal
to customers. As you know, our portal high capacity capability -- or our
connectivity, rather, not our portal, but our high capacity connectivity is
available to others. We do offer that capability to AOL.
146 So that is not, in the end, going to exclude the capability of others to
connect to our network, but it will permit us, in the minds of the retail market
level, in the minds of our customers, to see us as part and parcel of the
content and see the value proposition, both in the connectivity and in the
147 Let me give you one last example. The genius of AOL and why all of this
Internet play has become so predominant, in my opinion, -- and it is not only
AOL, but AOL is a very good example -- is to have been able to bundle the
connectivity in the experience.
148 What we are doing here, -- and the customer says, I don't want to know
the differentiation between all of that. I love the idea of having one, and if I
have a problem with one side, I talk to the same person as if I had a problem
with the other side of that equation.
149 For us, the connectivity between the media enterprise we are trying to
create, with CTV at the centre and Bell and its other connectivity players
inside our family, is basically the brand, the Sympatico brand. That does not
exclude -- and Sympatico, the NISP is Sympatico, the portal in the mind of the
customer. So we are in effect stealing a page in AOL's book when we offer the
customer a Sympatico service. It is border portal and NISP. That does not mean
that another portal could not connect to our connectivity system.
150 THE CHAIRPERSON OF THE COMMISSION: But in the content that you will be
owning and that you will be kind of having a closer relationship with, what kind
of elements are you pursuing to make it an added value for BCE? You know, what
is the intent...
151 You are talking about interactivity as if it was tomorrow. We have spent
four weeks hearing about the digital specialty hearing, and given all the
projections we have seen, it doesn't seem it is something that will really be
happening tomorrow. It might be any time between the three and seven years of a
licence that would be granted out of that hearing. So I suppose that you have
about the same kind of crystal ball in terms of seeing when it is going to be
152 But in the meantime, you will be a kind of inspiring, I suppose, the
content in the sense of making that interactivity happening.
153 So what kind of change will it bring in the meantime to the screen, to
154 MR. MONTY: As I said in my comments, initially, Madame Bertrand, I see
this very much as an evolutionary process. This is not an event. We are very
much like you and probably most everybody else in the world. We don't really
know how all of this is going to end.
155 Hopefully, it never will end and there will always be manifestation of
improved services and capability for everybody in the world, whether we are
Canadians or others.
156 So for us, the issue is not to say we know today what the end-game is
going to be. But how do we position ourselves today to be able to participate in
the evolutionary process of the Internet, how it evolves from being a print data
inter-exchange system to a new communication systems that we all work with, but
it is more for data and print, if you will, information, evolving to something
probably more immediate than interactive TV is going to be gaming. Simple games
is something that is really very close to being something that a lot of people
will use on an interactive basis, using the Net and a TV capability.
157 Moving into full interactivity of shows and content, as members of the
panel that will be participating in this in a few minutes will describe, we
don't even know how it is going to end. But for us to be able to participate in
developing the broadcasting element, associate our brand with it, and over
years, if not a couple of decades, really be part and parcel of our reflex as an
enterprise and how we deal with our customers is really essential, so that we
don't say, well, wait 20 years from now and we will really know what it is, we
will go and make an acquisition. I believe it will then be too late.
158 THE CHAIRPERSON OF THE COMMISSION: I understand what you are saying and I
guess, probably everybody in this room who is watching relates to what you are
159 But somehow, you are, by this acquisition, considering to buy one of the
important group in broadcasting. We have the responsibility, given the
objectives of the Broadcasting Act, to have an idea of what will be happening to
that undertaking in terms of the screen and the viewer, but also, knowing the
importance of that undertaking, what it is going to create in terms of impact on
the system itself. You know, competition becoming certainly more actual or more
severe than it used to be, there will be an impact in terms of looking alike and
competing head to head. So that will have a direct impact on the nature of the
system. It might be positive, it might be negative or it might be both at the
160 So we cannot just say, we will consider your suggestion that we will go
along because you will be learning and it is going to be evolving every day. You
certainly have -- Mr. Fecan talked about a dream. You certainly have one and
your shareholders too, but you have ideas of what you want CTV and the
relationship with that infrastructure to become, and I guess that is what we are
trying to get, a better sense that we know what is going to happen to us when we
sit down in our living room, waiting for that one-to-one relationship with our
broadcaster. In the meantime, what is going to happen?
161 MR. MONTY: I will give the floor to my colleagues in a minute.
162 But just one more comment from me, if I can. We definitely first have in
mind to build the best system -- continue to build the best system we can.
163 This starts with the benefits package we have put in front of you. That
is a key ingredient of what we intend to do in the very short term with our
participation through CTV in the broadcasting system in this country.
164 We have never been part of the broadcasting system. Definitely the
capability that we bring as a group, whether it is with technology, financial
resources, support, the capacity that the Thomson organization that is going to
be part of our partnership, as a minority, a small minority player, will bring,
we believe is going to be very strong support for the CTV broadcasting system to
165 But at the very simple level we would like to think that a local TV
station in one of the markets of CTV will improve its programming as it proceeds
and participates with us to the point where we build our brand at that local
community along with other capabilities that we are providing in developing the
Internet world that we want to create, whether it is an Internet connection in
Calgary with calgaryplus.ca, and a Calgary TV station.
166 How can we get the consumer to see the value of the programming, however
enhanced we can put it together in competition with others? How can we build
that capability so that it becomes so appealing and compelling that it is great
Canadian content and it differentiates our position in the marketplace?
167 Maybe Ivan could add something to what I have just said.
168 MR. FECAN: You have heard from Jean the visionary, strategic and
philosophical framework that he has set this particular transaction in and
really, I guess, to just focus us to the more immediate, what we are looking at
is the impact of moving control of CTV from the market to a strong controlling
shareholder and what benefits come forward to the system and to CTV.
169 The biggest benefit I have to tell you: Stability.
170 CHAIRPERSON OF THE COMMISSION: I don't want to be on the territory of
Madame Wylie at this point in time, she will be having an exchange with you on
the benefit to CTV. I am still at the systemic approach at this point in time,
starting with BCE is kind of really trying to achieve through that acquisition
and trying to understand what will be the change to the system as a whole.
171 MR. FECAN: I think the system as the whole benefits by having strong
competitive players. I think with what we have all seen and what we have all
been part of, the CanWest-Hollinger-WIC group and the Rogers group and the Shaw
group, this enables CTV to be a strong contributing player in that system by
giving us stability. It is a bit of both and I appreciate the overlap.
172 It puts a lot of resource on the table through a benefits package, which
I think we will get into as well -- I take your note -- and it really propels us
into cross-media innovation through having the connections with an entity such
173 I think the system is a beneficiary of all of those things because it
adds a forward-looking visionary, long-term committed player, who hasn't been in
broadcasting before in any substantial way, at a time when media players,
television and broadcast players are consolidating with each other. I think that
is kind of an important point. Effectively it becomes a new voice.
174 I think all of this will benefit viewers. I think it certainly benefits
producers with the ability of us to not just continue but further our dream and
some of the specific things that we will, I am sure, get into later in terms of
how that will really benefit producers.
175 You know, the stability thing I have to keep coming back to because I
think the system would have been poor if CTV had not survived.
176 CHAIRPERSON OF THE COMMISSION: Thank you.
177 As you point out, we will come back on those, as we will come back at the
time of the renewal. I think I didn't make it clear at the outset that we would
be talking about maybe the latest transaction that BCE has achieved much more in
the renewal of the licence.
178 Here what we are really trying to focus our attention on is really a
drastic change. You are pointing out, a telecom company acquiring a broadcasting
company, there has to be reasons for it. It is not out of interest strictly of
content per se. It is definitely because it fits in the strategy of the future.
179 I guess that is what we are trying to understand.
180 Mr. Monty, when you go back to your board, either in a year from now, 18
months, three years, what will be the indicators that will make you say -- and
that they will all applaud -- that you have made a good decision in acquiring
181 What are the elements for you that helped you sell it to your board and
the shareholders, but also, at the same time, that will allow you every six
months to go back and say "See, there is progress and we are moving in the right
182 MR. MONTY: First, that CTV remains number one in the categories it is
number one in now, and hopefully even improves further in the categories where
they might not be number one today.
183 So how is the broadcasting system that we are putting together behaving
in the marketplace against its competitors? How are the viewers -- which is the
test of whether you are number one in certain categories or not -- how do the
viewers see CTV by itself?
184 Because if we don't build a good broadcasting system with Ivan and his
team, how can you then jump to the conclusion that consumers will see it
positively in building the brand that BCE and Bell Canada represent?
185 So the first test is going to be: How successful is CTV with its
consumer, its customers? You could call that customer satisfaction. We call it
that in the rest of our system.
186 At the same time: Is CTV working well with creators, journalists?
187 Is there embedded in what we are creating something where the forces of
play together become a contributor to our evolution as an enterprise here in
188 The second test is going to be: Are we growing the business?
189 In my view, anything that doesn't grow, dies. So if Ivan and his team are
not successful in increasingly becoming a growth enterprise with specialty
channels, with other tools to bring in front of the customer, it is to prove
that they are not relevant. The customer goes somewhere else. Somebody else is
190 So the capability to grow the system, to increase its capability to
reach, through content, greater audience and grow the base of its business is
going to be a second test.
191 Obviously the third test is whether we have been able to help CTV through
all of this becoming an even more profitable enterprise.
192 We all know that CTV is a fine enterprise today, but on a profitability
basis there is another one system in Canada that is much more profitable than
CTV, and through the first two elements that I have just described, the
relationship with its stakeholders, journalists, creators, the customer; and
with growth can CTV become a more profitable enterprise in order to deliver on
its promise, on its dream?
193 That is basically the way we will assess the success of our operation.
194 Now, I have to add to that that as we see that developing, the other test
-- but I think I see that as a subset of growth -- is: How does CTV participate
in the other elements of the media enterprise we are putting together in helping
them grow their business and how do the others help CTV grow its business?
195 That is the Sympatico/Lycos portal. The 19 Internet sites -- not only the
Sympatico/Lycos portal itself, there is actually 19. There is probably -- in a
year or two or three years -- I think you used three years as a timeframe, there
might be 50. Frankly, at this stage I'm not sure how many that is going to be.
But how do they work together to improve each other's capability to serve
something in a very differentiated way to consumers?
196 I guess the Globe and Mail capability of how we can work the system
together and providing even better products and services to enhance the
broadcasting capability and service I think will be an interesting set. But I
would use that as a subset of the growth of the system.
197 CHAIRPERSON OF THE COMMISSION: But that approach is one that is in line
with also -- I read in your deficiencies, and I was a bit shocked:
"Broadcasters will develop the ability have one-to-one relationships with
their viewers using methods such as e-mail to communicate directly with
viewers... (As read)
198 For example when their favourite programs are on.
199 I thought, isn't this strategy somehow speeding up the breakdown of what
is mass media to get into more narrowcasting and eventually almost bringing back
the individuality of a telephone conversation?
200 MR. MONTY: Ivan is a much better spokesperson on that topic than I am. He
has convinced me that the conventional broadcasting system is far from death.
The numbers prove it.
201 However, at the same time as we grow the conventional broadcasting
system, there is no question that there is something else brewing out there
called the Internet, where a one-to-one broadcasting capability is in the
offing, where each one of us could become a broadcaster. But at the same time
that this is developing, we think that all of these things are complementary to
each other and there is a significant market out there that will continue to
request a conventional broadcaster as a source of information and entertainment,
and we are convinced of that.
202 CHAIRPERSON OF THE COMMISSION: What kind of content will you be more
interested in, because I suppose it is not all content that is equal in terms of
creating the kind of growth and participation you would like with other
components of BCE from CTV? I suppose there is some specific content that is
more susceptible, at least in the first stages of what you see as your dream.
203 MR. MONTY: There are four or five that we see as critically important:
entertainment, drama, movies, number one; sports; news. These are the top three.
Then you very quickly come to a group of three or four.
204 Career is very, very important as you move forward, finance.
Functionalities such as those to help people handle their daily lives. That is
pure functionality. But the first three are the fundamental ingredients that we
can see moving forward, and that a broadcasting system does extremely well.
205 CHAIRPERSON OF THE COMMISSION: In order to really make sure that the
relationship with the consumer is there or the user or the viewer or the user of
the Internet, it seems that local content is very important, and the way we have
seen it described many times, it is really around weather, traffic, sports,
206 What is the real interest you have in developing what has been difficult
to develop in Canada? We have to admit, considering our neighbours and their
great talent and their great marketing potential -- what is the commitment and
your view on the necessity of the content on drama and variety to be developed?
What is the link in terms of what you see as the general business of BCE in
207 MR. MONTY: If we are going to be successful in being a participant in the
portal, the content side of the Internet, it is going to be because we have
differentiated our product in being a Canadian participant, and that is
fundamental. I said that in my introductory remarks at the start of your first
question. That is both by being a local participant, a national participant, as
well as bringing the interconnectivity to the rest of the globe, applications
and content from our partner Lycos and others.
208 So when we look at building this electronic marketplace that we are
trying to create -- and we now have eight or nine sites -- we want to connect
that to event sites and content sites at the local level. That will involve the
connection to the local TV station in the system of CTV.
209 But then at the national level there is something that can be done to
bring those communities together, the interest that is broader than just the
local interest brings the national interest in play -- that is something that
again CTV does extremely well -- then the rest of the connectivity, the rest of
the content coming from other sources to make sure that Canadians are open to
the world as well as having the world look at what Canada is.
210 CHAIRPERSON OF THE COMMISSION: If I am watching this morning CPAC, I may
just be concerned about what you just said because when I think about CTV as a
viewer I think of an over-the-air type of station, and it is free. When I think
of BCE's strategy of an electronic marketplace, I think: electronic market
transaction, I will have to pay.
211 MR. MONTY: Don't forget that the broadcasting system as it is evolving
right now is profitable as it is. The platform that they have in generating
revenue to support their activities is advertising. That is not going to go
away. Quite the opposite.
212 We think we can enhance the capability of advertisers to see that
platform as a very capable platform to continue to reach their audiences in
their segments of the market. So there will be, in our system, in the media
enterprise we are trying to create, some segments where there will be a
subscription price, a service, where there is going to be less advertising but
much more functionality and the consumer is free to buy it or not to buy it.
213 At the same time, we think the conventional broadcasting system, with the
advertising base, if we do our job properly, if Ivan and his team does his job
properly, we will be able to convince the advertisers that this is something
that is really good for their business and will continue to support the
broadcasting system because the product that we will have created will be
attractive to audiences.
214 CHAIRPERSON OF THE COMMISSION: So as a viewer that means that I will be
transformed from being strictly a viewer on the screen to the potentiality of
becoming a consumer and I won't have to go and shop elsewhere. I can kind of
make my choices. That is what you are --
215 MR. MONTY: That is exactly right. The choice is going to be the
consumer's choice. Some will say, "I would rather not get involved and do all of
these things that this company is offering. I would rather just sit and look at
what CTV has to offer for me, for my entertainment, and I'm not going to use a
lot of functionality and I don't want to interact and participate in an
interactive broadcasting environment nor use the functionality of the system to
the extent that it is being offered." In that environment, we are quite happy to
make sure that CTV is the number one network so that we continue to attract the
revenues to support the broadcasting system.
216 CHAIRPERSON OF THE COMMISSION: From what we have seen in the hearing on
digital specialties, we have seen that the enhanced set-top box will be in in 18
months, so that would bring an enhanced type of Web site and a start on
interactivity. Is that the kind of projections you have yourself in terms of
what can be happening in interactivity?
217 MR. MONTY: In that respect our competitors have a significant advantage
over us because the capability for us to connect to as a wide a market as they
have with these different set-top boxes is going to be greater than what we
have, because the limitations we have is a rather -- even though growing, and we
are quite pleased with the investment, ExpressVu has limited access through DTH,
the Canadian segment. The best forecasts are something like 20-25 per cent
penetration. If we get 50-60 per cent of that, we will reach maybe between 10
and 15 per cent of Canadians, and right now it is not at that level. I'm talking
about the maturity level of DTH.
218 So in that respect, the conventional television system that CTV
represents is going to have access to these set-top boxes but not necessarily.
It is going to have to be on the basis of how good the value that they create is
going to be.
219 Hopefully, our competitors will have the same view as we have, that they
accept being a retailer as well as a wholesaler. So, in that context, we will
wholesale to them, if you will, in quotes, "through their distribution
networks", the content we will create, and we will have our different means to
distribute what they will create.
220 So, in that respect, maybe the set-top boxes will occur or will be on the
horizon in the 18-month time frame that you talk about. We are totally convinced
that our ExpressVu service today provides a significant value and capability to
be enhanced, but I think that is something that we will want to work with with
our competitors, as they become partners, given the access that we would like to
have to their distribution networks.
221 CHAIRPERSON OF THE COMMISSION: But in terms of interactivity, the plans
you are having when I talk about that scenario where you go back to your
boardroom, are you counting essentially on the Internet itself to kind of bring
that additional component --
222 MR. MONTY: We have to right now, because being realistic on our
capability through ExpressVu to go directly on high speed and interactivity, the
rest of the system -- we are trialing, for instance, right now a VDSL capability
on high-speed interconnect for the MDUs, the multiple dwelling units. That is
another aspect of how we can reach another segment of the market. Thirty to 40
per cent of the cable market is in MDUs. How can we participate bringing the
satellite connection through a high-rise building, an apartment building, and
connect with a VDSL type of capability to the units in that MDU system? That
would give us the capability to bring a direct connectivity where we could
package our proposals -- not our proposals but our offerings.
223 But there again, this would not be exclusive. This would be, in effect, a
cable-like type of system with the interactive set-top box that you are
referring to permitting us to reach on the connectivity side, but the economics
of that proposition are going to be based on the value of the connectivity. What
we build in terms of offering, we certainly hope that even if it is not our
connectivity system, that Sympatico, CTV, and the other elements of our media
proposals and offerings are going to be reached through other distribution
channels and not only ours.
224 CHAIRPERSON OF THE COMMISSION: Tell me, if I was to be looking at this
proposal from my living room, I would think of a telecom company acquiring a
television -- wouldn't there be a concern about technology driving and finance
driving the transaction? What real value will it have for me?
225 Because even when we talk about the electronic marketplace -- and you are
kind of reassuring me about the fact that I will not be the one paying, at
first, because through advertising we eventually end up paying. But yet, if I
think of the other aspect, aren't technology and finance not necessarily taking
care of my taste and my needs in terms of what I watch on television?
226 MR. MONTY: I think the key is two things, maybe. First, we provide
choice. We believe that we will improve the array of choices to consumers by
developing -- having the capability -- Ivan calls it stability -- to create. In
the end, stability permits creators to provide more choice. We believe that we
will be a capable provider of choices against our competition.
227 But, secondly, something which is fundamental to our company -- we do and
we have done a lot of research -- we continuously do market research on how
customers see us.
228 Interestingly, you are right, we do provide technology, but customers see
us mainly as a trusted supplier. Integrity -- strong integrity -- that is the
number one attribute of our company. And I believe that if I were a consumer, I
hope -- and I am a consumer in certain respects, but I hope that consumers
looking at us today -- they say: I trust these people. That is what they tell us
now. Maybe they will be a great contributor to the broadcasting system because
of the trust we have in them.
229 We do not want to let that go, because at the end of the process the
trust brings us the loyalty, and loyalty means multiple purchases -- repeat
purchases. And that is how we are in business. Having that trust permits the
consumer to buy our product with safety of mind.
230 CHAIRPERSON OF THE COMMISSION: If this transaction is allowed by the
Commission, it is very significant in terms of -- for BCE certainly, but for the
system. It is a first. It may be a sign of the times, but it will certainly,
given the more ferocious competition we are observing -- and I am sure we have
not finished observing -- certainly create, by emulation but competition as
well, very important changes to the scene.
231 I would like, with your help, to understand better, and I think the only
way to understand is -- what you are intending to do, in a sense. Where is your
232 I would like to come back to content. And certainly the benefits are
something and we will come back to this. Will your drive be on some content
especially? And will that content be thought about with the sense of creating
that loyalty with your consumers, the ones of BCE, where it is more the
necessity of creating -- based on that trust, I recognize, but still it is to
create additional services and additional transactions.
233 MR. MONTY: Certainly. In the end I come back to what I said before. If we
believe that the only way to differentiate ourselves --
234 We are a rather small market. Scale is not part of our capability,
compared to the market south of us. And other systems, whether they are
broadcasting systems, whether they are Internet systems, provide more capability
on a pure economics basis -- economies of scale -- to reach the consumer at a
235 We think that at the end of the day, if we are to survive and thrive in
this market of providing Canadians services, it is going to be through Canadian
differentiation and broader scope, so that consumers come to us and come to
respect us and trust us for a much wider array of services than straight
telecommunications services. That is what we are trying to create here.
236 So we will have, in order to differentiate, through the Canadian
pictures, stories that we are trying to put together to invest in that
differentiation. That means investing in a broadcasting system and in content
237 CHAIRPERSON OF THE COMMISSION: But couldn't we imagine in the new media
environment or the new interactive environment, the new digital one, a world
where the best of every world can live together, like it was in the broadcasting
system of the 20th century?
238 We have always had the Canadian components as well as foreign components,
which are the majority -- the American ones. Can't we imagine that going into
the digital universe the value will still be Canadian like it was for the
broadcasting system, yet it might not be on every note, that you may have some
notes that would be purely Canadian and others will be of another nature?
239 MR. MONTY: Very much so.
240 I certainly believe that over time CTV, as a system, by itself, will
continue to create programming and distribute programming that will be from
other sources around the world. I certainly believe that we need to have the
connectivity on the Internet for other types of products coming from other
places in the world. That is why the Lycos relationship has been established.
241 And I think that is true of any media. Canadians want to have a window on
the rest of the world, but we also, maybe, want to go the other way. And how do
we provide the rest of the world with a window on Canada?
242 That is part of that statement that I made, bringing the world to
Canadians and Canadians to the world through communication. How do you do both?
How do you position yourself, not strictly with a limited window on a region or
strictly the country, but a window on the world?
243 And I totally subscribe to what you just said. That will continue. But in
order to be able to do that, if you strictly limit yourself to providing a
window on the world without providing a Canadian story, a Canadian picture, a
Canadian sense of community, in the way you interact with our system, with our
marketplace that we are trying to create, I think we would be limiting content
and we would go head on with somebody else's capability, who is a lot better
than ours at this stage, in building a product and having the economics to do so
very competitively against us.
244 So we want to have that Canadian participation as well to differentiate
the product, but we will have both.
245 CHAIRPERSON OF THE COMMISSION: Do you think that regard on the fact that
it gives a Canadian presence on the global scene -- it is not, as you can see in
the objectives of the Broadcasting Act, very specified. Why do you think it is
so important today, in proposing today that we should take that into
consideration in the assessment of whether this acquisition is value added to
the broadcasting system? Why is that important?
246 MR. MONTY: The Internet has changed the communication systems. I was
going to say that it has changed everything, but that is going a little too far.
But it has changed the communication systems so much that the world is at the
doorstep. It is a connection away. And if we do not provide a connection to the
world -- I think those who limit themselves to strictly a Canadian asset, or a
Canadian contribution, will find that the consumer wants to have access to the
world as well.
247 So I think the winners will be those who own the relationship, but are
capable of building a relationship in both directions: a Canadian relationship
and a global relationship.
248 CHAIRPERSON OF THE COMMISSION: Is your dream one to kind of have a unique
and privileged relationship with your consumer; that you are capable of offering
all of the services that the communication world, as we define it, starting this
new century, is --
249 Is that what you are proposing to do?
250 MR. MONTY: I don't think that is feasible, but it is certainly part of
the dream. We think our competitors are going to try to do that. We think that
in the end that is the most efficient way for a smaller market to be served by
one supplier, to be able to have a larger scope in order to have a one-stop
approach to the supplier. And at the end of the day, we think that others will
see the same approach to the Canadian market -- other Canadians -- and I believe
that is what our competitors are going to do, and we are trying to position
ourselves to be able to be a good competitor.
251 CHAIRPERSON OF THE COMMISSION: But if I go back to l'allégorie du Petit
Prince et du renard, c'est bien beau tisser des liens, but too many ties at one
point make for a kind of golden cage, in a sense.
252 MR. MONTY: Hopefully Canada will never be a golden cage.
253 CHAIRPERSON OF THE COMMISSION: Is there merit -- if you consider
diversity of choice, for the Commission, in the objectives of the Act and the
necessity to have, really, a wealth of content -- choices for viewers -- that
they can really tune in or tune out, decide on which platform they will go, and
be free to do this at a reasonable cost.
254 MR. MONTY: I believe that is not going to change. I think what we bring
here is the capability to enhance that.
255 You know that we are not in broadcasting today. Therefore, we are not
limiting choice by acquiring CTV. We support CTV in continuing to be a voice.
And in that respect we are not limiting choice.
256 Secondly, in an Internet world, it would be naive on our part if we said
that we are so powerful that we will limit what consumers can do via the
Internet. We all know that that is not possible.
257 Lastly, in a 500 channel environment, there is no way that we can think
that we will be so powerful that whatever proportion of those 500 channels we
would have in our corporate umbrella, that that 500 channel environment would
focus the consumer toward our portion of the 500 channel environment.
258 So for us, in this new technology capability that that environment
provides, as well as the Internet, as well as the fact that we don't provide --
we don't represent increased concentration at this stage because we are not in
the broadcasting system as it is today. I don't believe we limit choices and we
say this gilded cage is going to be part of the BCE system. It is basically
going to be a contribution to improve choice that we are making as opposed to
259 THE CHAIRPERSON OF THE COMMISSION: Mr. Monty, when you are talking this
way, I can follow, but I can also be kind of taking another view.
260 When you are saying you are not limiting choice and you are talking about
repurposing content, somehow, it might be limiting choice because if you were
putting other contents than the one of CTV there, maybe I would have two choices
rather than one that is repurpose.
261 Secondly, when you are saying you are not so powerful in the broadcasting
universe, well, you are the largest company in Canada and you are in the
communication environment at a time where we have seen how the frontiers are
blurred and that vertical integration is occurring everywhere. You are even
mentioning it yourself. You are alluding to what is happening elsewhere in
Canada and outside of Canada, and that famous universe of 500 channels, that is
when we talk about digital capacity.
262 But if we talk about Internet capacity, then you talk about eventually a
trillion of possibilities, and sometimes, for the consumer, then, what you need
-- and you have recognized it yourself about the necessity of branding, you need
like a trust somewhere -- somebody you trust that will take you by the hand and
kind of guide you. I guess that is what you are trying to offer to the consumer
with the combined strength of BCE-CTV.
263 So, you know, there are some concerns, certainly, of what I am kind of
taking as a counter point.
264 MR. MONTY: Well, let me continue the counter point, if I can. In order to
repurpose content, you have to own some. If we didn't have content as part of
our corporate umbrella, the repurposing of content, I am not going to take
somebody else's content to repurpose it on something because I don't offer
265 So when you say, wouldn't it be better if I repurposed somebody else's
content, well, I'm not going to be in that game if I'm not in content to start
with, so I'm not going to repurpose somebody else's content because I have no
platform to provide it for. So that, to me, would be a difficult proposition to
266 To say that others who compete with us wouldn't want to repurpose their
content on different platforms, that, they would do. In that environment, if we
didn't participate in the contents side of the evolution of the communications
network -- I call it the Internet communications world -- we would be a
wholesaler. We basically say we are going to provide connectivity and others
will connect to our system and they provide content.
267 So for us to be repurposing somebody else's content, I make the point one
last time, I really don't think we could do it if we didn't have a content
platform of our own.
268 Now, when you look at how big we are, Canadians think we are a very large
company, and we are in Canada. I just looked at the numbers recently and we
barely make the 30 top communications companies, and that doesn't include the
pure communications players, like AOL, Vivendi and others, even if we include
the size of Teleglobe as part of our -- because that transaction has not closed.
If you include that, we may be on the 27th or whatever.
269 So you talk size. How does this globalization world, with immediate
access to all sorts of communications content for Canadians, play if we don't
have a certain number of players that have a certain size to be able to justify
the investment required in producing the content and producing the platforms
that Canadians will hook up to? I believe that since, even though we are part of
the G-7, the largest communications company, being maybe not in the top 30,
makes me reflect on how big we are as a company, even though relatively, in
Canada, we are the leading communications company, certainly the leading telecom
company at this stage.
270 THE CHAIRPERSON OF THE COMMISSION: I recognize that, but given the
Canadian ownership rules in Canada and the communications system, still, the
presence and the value of BCE is looked within Canada, and in that respect, you
are presenting a very large company.
271 I guess the Commission is considering that transaction in terms of
vertical integration and certainly, a degree of consolidation definitely and
concentration as well and saying, well, we can certainly consider that, but
what's in it for the Canadian broadcasting system? That Canadian broadcasting
system has to be able to be strengthened. It cannot only be for a strategy of
BCE or even CTV per se. It has to contribute to the necessary evolution that we
will have to accomplish together, but also, immediately.
272 So maybe we can transfer our attention to understanding better what are
your strategies on what you see. Not necessarily the benefits, because that is
very quantitative and we can measure that. But to the system, what will it
change? The fact that it's BCE acquiring CTV today instead of another type of
company like une compagnie d'aluminium or whatever. A large company that would
come and give the financial solidity that CTV needs. What difference will it
273 MR. MONTY: Why don't I go ahead and pass it to Ivan.
274 MR. FECAN: I understand your question and I will certainly try to answer
your question fully.
275 The aluminum company wasn't interested in acquiring CTV.
--- Laughter / Rires
276 THE CHAIRPERSON OF THE COMMISSION: They didn't want to come to the
hearing, I guess!
--- Laughter / Rires
277 MR. FECAN: I think the issue of whether a telecommunications company does
have something to give in the broadcasting system, I think, was one that was
examined very thoroughly in the conversions report.
278 I would like to turn to Alain, because I think, to a very large degree,
this possibility was foreseen before, and I think it's useful to re-visit that
and then to bring it to the future in this particular situation.
279 MR. GOURD: Thank you.
280 Indeed, in addition to the conversions report, there was also a change in
the Bell Canada Act, which allowed BC, Bell Canada, to become a player in
281 At the time, if we look at the debate in the House of Commons, there was
a perception that such presence of a new player from the telecom field could
benefit viewers, could benefit the players in the system themselves, both
broadcasters and independent producers, particularly by having new technology
products, and benefit also the new generation of creators because they would be
trained not only in producing content proper, but be trained also with the new
282 So very rapidly, if I focus first and foremost on the viewers, and you
have invited us not to focus too much on the net benefit package, but there will
be new Canadian content there. But that Canadian content could be of a different
nature or could be complementary to the traditional, conventional broadcasting
or specialty services proposal by the interactivity. Interactivity would
complement in terms of new different contents, new different angles, new
information that can be produced to support a program. It could be complementary
in terms also of the form -- la forme et la substance, comme dirait
St-Thomas-d'Aquin -- in terms of the form with new camera angles, with new
visual additions, for example.
283 Also, it would be positive for the viewers because this enhanced Canadian
content would be offered to a greater diversity of platforms. Of course, it will
be offered to conventional terrestrial transmission. That will continue. Of
course, it will be offered through satellite to cable.
284 But again, the expertise that BCE brings to the interactivity could be
useful in terms of the CTV content being offered through these platforms
controlled by others. It would be content offered by direct broadcast satellite.
285 And again, as we have said during the digital specialty services
hearings, the viewers of both Bell ExpressVu and Star Choice will benefit from
interactive boxes, interactive capability. There is already a fair number of
them in the market place, there will be new ones.
286 But what is a capability without the ability to use and the ability to
put the proper content in the proper format in these capabilities? Again, the
synergy will be there for the DS platform. Jean mentioned video cell and Jean
mentioned the Internet which has a very important distribution capability
287 But if we take also the impact on emulation, -- I think you use that word
-- the impact in terms of the competitive nature of the market place, it is
absolutely certain that if BCE-CTV improve the product lines, improve the
ability to deliver Canadian content to the viewers, there will be a response
from the others, from the other groups which have a similar mix of capability at
both the content and the technology level, whether those like Shaw who is both
in cable and broadcasting, subject to your approval, maybe Vidéotron and
Quebecor, Rogers and so and so forth.
288 So the competitive nature of the system will trigger continuing
innovation, continuing progress for the viewers.
289 Of course, the Canadian producers will benefit from that, because they
will be invited by these competitors to produce additional content and to
produce it differently. To support the producers, then you have to train the
creators in order for them not only to continue to produce these fine Canadian
stories, to produce these great images of our country, but to produce them also
with the new tools that are being introduced in the Canadian broadcasting system
by companies like ours as well as by other companies.
290 THE CHAIRPERSON OF THE COMMISSION: But Mr. Gourd, if I'm sitting in my
living room today, watching CPAC and I listen to you, am I not kind of dragged
into a digital world, interactive world by the proposal in a more -- comment
dire -- plus vitement than I would have been otherwise? Am I not forced, then,
to make some investments in order to get full access to what is the proposal
that is offered here? I have to at least have a computer, eventually get to a
digital distribution, eventually change my television set. You know, isn't
there, in what you are proposing, a factor of acceleration toward digital and
interactivity, and what is the benefit for the viewer and the consumer? Am I not
then dragged into extra expenses? It will cost me more, it will be more
complicated. I had already lots of difficulty getting my VTR programmed.
291 You know, what you are proposing and the dream you are talking about is
very -- très séduisant, très intéressant. But you know, on a very practical and
pragmatic basis, if you are my mother -- and I'm sure she is watching and I
won't tell her age. She has asked me not to say it any more. But she is at an
age where a VTR is not really what she likes very much. So anything beyond the
VTR is complicated.
292 Isn't what you are proposing challenging in terms of the viewer as we
know it today?
293 MR. FECAN: I think anything that enhances the viewer experience is a
potentially very good thing.
294 While we have been hearing a lot of visionary futuristic thinking, I
think one of the other things that needs to be said is that while BCE may have
come to the dream from one particular approach, the dream that I have personally
had, and many of those in CTV have had, is for breakthrough distinctive Canadian
content. This is a dream that we live every day. This is a company with BCE that
shares that dream.
295 I think job one for us is to make compelling television programming in
prime time. That doesn't change from what it was before, but it is strengthened
because we have a controlling shareholder who says "Yes, that is the first thing
you have to do. You have to win in the priority programming area, you have to
change the paradigm so that the Canadian programming is the thing that drives
the broadcast business and is in the forefront."
296 I think that this particular controlling shareholder, matched with this
particular team, that is the first job that we really are getting the tools to
approach and to do without distraction.
297 You know, we have tried to make it look easy in the last few years, but
waking up every day and reading that somebody else is going carve your company
up does find a way of splitting your focus a bit. This allows us to refocus our
efforts in really working for that system and for the viewer.
298 So while I think it is incredibly important that there is this visionary
perspective that BCE brings, and I think it is refreshing to hear that kind of
visionary perspective from a Canadian company, we are not saying "Oh, you know,
the world is going to pass us by. Everybody else is doing everything else." Here
is a company that says "Look, we can take our place in the world. We can take
it, but first we really have to do a good job for Canada".
299 That company sees content, Canadian content as an integral part of that
strategy. And yes, there are dreams of the interactivity, which is 18 months or
so away, and enhancing the viewer experience through Internet connections and
everything else, but all of that rests on successful Canadian priority
programming and news, of course, and sports as well. All of that rests on that.
300 If we don't have that and if we don't break through there -- and sure we
are having our successes. I would be remiss if I didn't point out that last week
was a pretty amazing week for us. We had a large number of shows in the top 10
that were Canadian.
301 What is unfortunate about it is there was a game show or two that was up
there and there was a certain golf event that was up there, but it takes the
focus away from the fact that there was a dramatic program, the two-part
miniseries Nuremberg that was also in the top 10 and that the second episode of
that program was the highest rated Canadian dramatic show that we have had as a
network since 1996 or something. A tough subject, but the viewers were there.
302 All this stuff rests on working harder for the viewers and distinguishing
ourselves with really strong Canadian content.
303 That is why there is this really interesting confluence of intention, of
strategy that I think is a real benefit to the system, because none of the other
stuff is as good if the basic thing that we are here to do with Canadian content
isn't breaking through.
304 There are other companies that are strong as well, of course, and that is
a good thing. We welcome the competition. But it all rests on the content.
305 I mean, I think that is what we tried to say in our presentation, it is
what we live, it is what we believe, and now we have a committed shareholder,
controlling shareholder who, for I think the right reasons, says "Yes, it does.
And if you break through there in more significant ways there are all kinds of
other good things that can happen for the benefit of the viewers, but first you
do your job and you break through there."
306 MR. MONTY: Madame Bertrand, if I could just add one comment.
307 I understand what you are trying to get at, and maybe the word
"transition" is important in our vocabulary and in our strategy. We fully
understand that we are in a transition mode. It takes generations to move the
current behaviour, cultural patterns, adaptation to technology.
308 I also have a mother. I didn't tell her I was going to be on the CPAC,
and she doesn't even use voice mail. She refuses to use voice mail and a few
years ago she decided she would be on touch tone and I was very pleased about
--- Laughter / Rires
309 MR. MONTY: For us, the key element of this is realizing that it is a
transition. It is a journey. That is why I emphasize the words "evolution
process of the Internet".
310 Connectedness is fine, connectedness is unbelievably important for Canada
at the cultural level and at the business level, but we fully realize that not
everybody wants to have 1.5 megs to their residence. That is why the old system
is still there. That is why we have been used to introducing technologies as we
move forward. That is why the conventional broadcasting system will remain for
those who really don't care about the ITV system that we all talk about for the
311 How does a company like ours position itself in that transition, to
evolve with it so that ultimately at the end of the journey -- the journey never
ends, but at a stage where the ITV system is reality.
312 We are the key component in that play as a participant in Canada.
"Transition" is maybe a word that we should use more often in the way we talk
about the evolution of our strategy.
313 CHAIRPERSON OF THE COMMISSION: So transition towards transaction is what
314 Coming back to the idea of the broadcasting system, the same way I was
asking Mr. Monty about 18 months from now or three years from now what would be
the elements or the indicators for him to explain what had occurred, for you,
Mr. Fecan, I will have another question, given your vast experience in the
broadcasting system here and in the U.S. as well and in the public and private
sector as well, it might not be to your board, but to yourself.
315 In three years from now, if this transaction was allowed, what would be
the elements that you would feel would have occurred in the broadcasting system
where you would take great pride?
316 MR. FECAN: Well, you know, when I came back to Canada for my third tour
of duty at the CBC, I faced the question of: Did I want to try -- you know,
everybody has a solution to fix the CBC and I got my opportunity. The question
was: Did I want to fix the system or did I want to put some programs on that
might make a difference? I chose to put the programs on that might make a
difference. As I look back on it, it is what I value the most.
317 I think I would give you the same answer, that what I would measure
accomplishment by the most is whether this transaction, or any transaction, has
a realistic opportunity of creating new things, giving rise to compelling
programs that touch people, giving other creators an opportunity to step up and
say their piece.
318 Whether you accomplish that and whether you accomplish it in a
significant way -- and significant for us is reaching as many people as
possible, making a real impact, possibly even changing how some people think
through those programs.
319 That is my bias. One believes fervently that through that kind of
programming and through shifting the system so that that kind of programming can
better compete and pay its own way, that it is also good for all of the
ancillary things Jean was talking about and that it is also good for our
shareholders. That is very much the belief I have.
320 My own personal measuring stick, should you approve this, is going to be,
you know, improving the quality of what we put on the screen. I think that is
what it's all about for our viewers and our people.
321 You know, the Nuremberg example is a good example about how something
that is a very difficult subject was able to reach a lot of people. And, you
know, whether people had Internet access in their home or not, whether they had
a digital box or not, it still had a terrific impact.
322 If they had Internet access perhaps -- you know, let's pretend Nuremberg
happens three years from now, this particular production, Trina I think would
have some ideas about how to enhance the experience so that it might actually be
more effective than it was, and it was pretty effective for us on any level.
323 If you would permit me to just go sideways for 30 seconds to give you how
we would, in three years if we were doing that particular show, maybe make a
difference with the kind of skills that being part of the larger BCE family
would give us.
324 MS McQUEEN: One of the things that is crucial to the success of the new
strategy is in fact that there are very strong, compelling programs that give
people the desire to learn. To me, dramatic programming, documentaries, what you
have identified as priority programming, are the programs that are best suited
to stir your imagination and incite your curiosity.
325 Because a compelling drama like Nuremberg can do that on many levels and
in different ways for many people, it then is a perfect example of how you can
translate it into a strategy for new media.
326 For instance, if I watch that program, I have a different experience than
the rest of my family or than you would. I might be intrigued, for example, if
-- some of you, I'm sure, are lawyers. You might be intrigued by the notion of
the legal background, how the Nuremberg trials were set up, and in fact what the
issues were in the legal system that have now contributed to that.
327 Other people, like me, might have a simpler reaction. I thought Brian Cox
was just one heck of a great actor and I would like to find out what other
movies he has been in and whether I can rent them.
328 Other people who are historians might like to know where they can buy
other books about Nuremberg.
329 All these are not kind of, "We are going to get you out and make you buy
something." It is because your curiosity has been stimulated and because your
imagination has been stirred that you want to make the experience more
satisfactory for yourself and you want to make it personal to yourself.
330 So it seems to us that great drama, compelling documentaries, lead
naturally to a strategy where interactivity works. We all want to know the
weather, and we all want to know the traffic patterns, but there is more than
that. I think as human beings we want to have personal, satisfying experiences
which are stimulated by great works of art. That is why I think successful
priority programming will be an absolute requirement for this new strategy that
we are coming into in the future.
331 CHAIRPERSON OF THE COMMISSION: But from the system point of view, the
money we put into developing those interactive components, isn't it money taken
away from creating more content, more diversity in the content, offering more
332 If we look at it from a CRTC kind of more general type of approach, isn't
there, in that proposition, some concern that could be justified by, you know, a
kind of -- money is not elastic and although BCE is the largest company in
Canada, not so big, we have heard from Mr. Monty, in comparison to others in the
world, I suppose there will be limited access to money and that you will have to
generate money by yourselves. So money that will go into the interactivity will
not go into something else.
333 MS McQUEEN: I can see how that question can be asked because, you are
right, it is very difficult to produce drama and it is very expensive.
Nevertheless that is what the whole basis of this strategy rests on: Is there
compelling programming to start with? If you don't invest in that, all this
stuff about cross-promotion and repurposing and multi-platforms and all these
kind of jargony words doesn't work, because when you get to whatever you
cross-promoted or cross-purposed, or whatever the words are, there is nothing
334 So I think it is only sensible as an investment to make sure that the
core of your product is of the very highest quality. Our belief, our commercial
belief, is if that is of the highest quality it will stimulate consumers to want
to add to their experiences by making other purchases. That in turn will pay for
the interactivity down the road -- not immediately but down the road.
335 Again, if you have something that is so valuable to you that you want to
enhance the experience, then maybe you will choose to put some of the money you
have into enhancing that experience rather than doing something else.
336 CHAIRPERSON OF THE COMMISSION: But can we expect the different players in
the system, if we were to allow such a transaction, to kind of duplicate that
kind of approach and, thus, kind of changing the different orientations or the
order of priority that have been the ones that have prevailed up to the last
337 MS McQUEEN: Only if the consumer wants that.
338 You know, whatever happens, and Mr. Monty said that none of us knows, and
I certainly don't, what is going to happen, but whatever happens we can be sure
that the consumer will make the decision among a variety of experiences that she
is offered. Our job is to make sure that we have what we are talking about in
the system, that there are large players who can invest in a suite of
experiences that the consumer will then choose from.
339 My belief is that the consumer will always, at the bottom, want
compelling images and high quality content and then will want to enhance that
experience. But I could be wrong. Maybe, in effect, it will be the other way
340 CHAIRPERSON OF THE COMMISSION: I guess my question is, what I'm asking is
-- if, for example, some years ago I had a black and white screen and all of a
sudden CTV comes with a colour screen, then it forces, it seems to me, more
rapidly everybody to get into the colour screen.
341 So I'm asking, by that kind of transaction that you are proposing today,
there will be an acceleration of going digital, of going interactive, is it to
the benefit of the viewing experience for the consumer? I guess that is what we
are trying to assess.
342 MS McQUEEN: Why did we all go to colour? We went to colour -- and I can
remember as a kid, we just begged our parents to give us colour television --
because we saw that that was an enormous value. Our parents eventually agreed it
was an enormous value. But it was a consumer-driven thing. I mean, we all had
black and white sets. If we thought that that was wonderful we could have used
343 We saw ourselves, and we made the decision to take whatever experiences
we had: a choice among would we go camping or would we get colour television. We
decided to get colour television. I think that the viewers will decide for
themselves, that Canadians will decide for themselves, whether this is valuable
enough that they want to invest their own resources in it.
344 If we don't provide an experience that has value they won't change. If we
provide an experience that has value, great, it will be accelerated. It will
have proven itself and it will become something that everybody has.
345 Like cell phones, for example. We didn't have to have cell phones, but we
saw them as value and that accelerated the production and, unfortunately, the
use of cell phones in hearings.
--- Laughter / Rires
346 MR. FECAN: If I may just add a couple of things.
347 I think the other proposition we are putting forward is if the viewing
experience is enhanced, the foundation programming, the priority programming,
and the news and the sports, and to use Trina's example of the Nuremberg
miniseries, we fervently believe that maybe more people will take a chance on
that kind of Canadian drama the next time because their satisfaction may be
higher than what it would have been before. But it doesn't diminish the
opportunity for anybody who doesn't want to take part in that to still enjoy it.
348 It is a transition and we want to provide an enhancement to the viewers
that are interested in that. Certainly, you know, if you watched the Emmy's or
the pre-show to the Emmy's, ABC had an interactive element to it where they
polled what the viewers thought, who should win, and all of that kind of thing.
Some people took advantage of it, some didn't. We need to do our thing in that
space as well.
349 When you look at the players forming in Canada, the CanWest-Hollinger-WIC
group has their canada.com portal, and the Quebecor-Sun Media potentially
Videotron group has their Canoe portal, Rogers and Shaw have their Excite
portal. Everybody has the capability, in one form or another, to at least
provide some form of links or interactivities through their own proprietary
portal sites. How people choose to, you know, move forward is going to very much
depend on what they feel their best proposition is to the viewers.
350 That I thought was the greatest aspect of the new television policy, that
we are going to set up a system where the various players each kind of find
their own personality and find a way of trying to get the viewers to connect the
351 I think this is really something that enhances our ability to play in
352 I think Alain had something...
353 MR. GOURD: Yes. If we take these realities and we transpose them at the
systematic level for the Canadian broadcasting system, you are absolutely
correct, it will have an effect of acceleration, but not a burden for the
consumer. And I will focus on both dimensions.
354 For example, with digitization, if and when Bell ExpressVu introduces
high definition TV, followed by Star Choice -- and that will probably arrive
before Christmas -- then, of course, we will need product in the high definition
TV form and with stories which are attuned to that way of distributing the
355 Cable will be under pressure and will consider accelerating, indeed, its
digital penetration in order to have a similar product line offered to a
sufficient number of subscribers. Therefore, the total viewing experience is
enriched, but it's a choice.
356 Some consumers will believe that the regular TV product is the right one
for them, and they may choose to watch only news, as opposed to going to drama,
like Trina suggested, but others will believe that it is a valid choice and,
indeed, the viewing experience should be enriched. Therefore, they will choose
to adopt this new product line and the relevant content that will be on it.
357 So the total choice of the system is richer, without a burden on any
specific consumer, because it is optional.
358 CHAIRPERSON OF THE COMMISSION: Thank you very much. It has been helpful.
359 We will take a break now before we go to the understanding of the
proposal by CTV itself.
360 We will come back in 15 minutes.
--- Upon recessing at 1105 / Suspension à 1105
--- Upon resuming at 1127 / Reprise à 1127
361 LA PRESIDENTE DU CONSEIL: Alors, bonjour. Nous poursuivons notre examen
de la requête visant à faire que BCE acquiert CTV. Nous allons poursuivre
maintenant l'audience with Vice-Chair Wylie, who will be exploring the impact on
362 Madam Wylie...
363 COMMISSIONER WYLIE: Thank you. Welcome to you all.
364 As Vice-Chair of Broadcasting, I was really comforted, Mr. Monty, to find
out that you were indeed reading the Broadcasting Act last night, so you could
appreciate all of the niceties of the regulatory landscape in broadcasting. I
hope you didn't get as far as the section that talks about suspension and
revocation of licences, because that could have given you a nightmare.
--- Laughter / Rires
365 COMMISSIONER WYLIE: I would like to discuss with you the added value for
CTV that would flow from the approval of this transaction, and particularly from
the perspective of the Canadian viewer, apart from the significant benefits
which my colleague will address later.
366 I will have questions regarding the potential impact of this transfer, if
it were approved, on (a) the historical role of CTV as a conventional
broadcaster, (b) the local programming and the added value to the viewer from
Bobcageon, Ontario, or North Battleford, Saskatchewan, where Mr. Monty would own
retransmitters if this deal were approved, and (c), what can we see in the near
future for the over-the-air coverage and distribution of the group of CTV
367 CTV, as a national broadcaster, has been described, as you have probably
been told over the years, as a provider of a varied, balanced mix of
programming, comprising many elements, including information, public service,
the arts and entertainment programming, and to a very -- almost total --
English-speaking audience in Canada. We are interested, of course, to know
whether you think this role is still relevant for CTV; to provide a balanced mix
of elements of information, public service, the arts and entertainment
programming over the list of transmitters and retransmitters that are in
Schedule 1 of your application.
368 MR. MONTY: I definitely believe that it is still relevant. On the one
hand, I suspect that some of these aspects of the array of services provided --
not only do I suspect, I am convinced -- are related to what viewers --
Canadians -- want to see, and at the same time that is the capability for us to
work with the system.
369 We have been used through the history of our corporation on the
telecommunications side of the communications network to working with public
service issues, whether it is on who should get access to the system, or how far
the system does reach through the different aspects of our business, and we are
familiar with the responsibilities of ownership that that entails. So we have,
actually, nothing but support for the evolution of the system as it is, at the
same time making sure that the system evolves as customers and viewers want the
system to evolve.
370 COMMISSIONER WYLIE: I heard you say this morning that Mr. Fecan had
convinced you that the conventional broadcasting system is far from dead, and of
course our question is: Did he convince you before you consummated this deal or
--- Laughter / Rires
371 MR. MONTY: Both.
372 COMMISSIONER WYLIE: Because it is a lengthy list of broadcasters and
rebroadcasters which provide programming to some 99 per cent --
373 MR. MONTY: Let me allay your fears. Excuse me for interrupting, but I
just said "both" and I should have added a little bit to it.
374 We pay $2.3 billion for the right to own CTV, with your support -- with
your approval -- and given the current economics of the system it would be quite
foolhardy for us to think that we can convert the system to something new, build
a field of dreams, in effect, and hope that customers and viewers will come to
375 The current system is quite healthy as it is and we have to make sure
that not only do we maintain this health, but improve it even further, as the
system transforms itself in the new environment we have described for a couple
of hours this morning.
376 COMMISSIONER WYLIE: So we should take some comfort, then, that this is a
role that you would see BCE continuing and keeping as one of its objectives.
377 MR. MONTY: Certainly.
378 COMMISSIONER WYLIE: Now, assuming that you were convinced before you
consummated the deal that conventional broadcasting is not dead, will the viewer
continue to have the same service as before? Or, is there a possibility that
with the stability that is brought to the system, as Mr. Fecan discussed, there
may be even some improvement to what the viewer gets from the transmitter, even
without the future injection of interactivity and connection to other platforms?
379 MR. MONTY: The answer has to be yes.
380 We can't see how, with the capability that the system has today, it can
stay static. It has to evolve with the needs of customers and viewers, and in
that respect any purchaser who would come before you to take control of CTV and
at the same time say that they would like to maintain it as it is today, and
strictly as it is today, would never get the benefit of the value of their
investment if they didn't continue to improve on it and better the product,
because that is what competition is all about.
381 Others will improve it and try to add a better product and develop a
better product than ours, and our competitive instincts are going to be to do
the same. I believe that is the support that we provide to CTV in the change of
control hearing that we are into.
382 COMMISSIONER WYLIE: Now, this improvement, and we heard Ms McQueen this
morning in the discussion with the Chair, and of course, if you look at the back
of the package of benefits, it has some direction to it.
383 In large part, the type of programming that is more likely to be
complementary to new platforms or new ways of providing information or that is
more suitable to repurposing may become the type of content that CTV moves
toward and away from the type of content that is of great value to the Canadians
who only get TV, of which there are between 20 per cent and 25 per cent, from a
transmitter and the others who don't want to participate or take as long as your
mother to get into the new world.
384 Is there not a danger that the repurposable material will gradually take
more importance from the CTV group of stations and away from the service that is
still of great value to the Commission in enhancing the achievement of the
objectives of the Act that you so gleefully read last night?
385 MR. MONTY: I believe if we did that, we would be at great risk of
undermining the massive investment we have made into the system, because the
current system's economics and model is very much conditioned on making sure
that what we have today remains and continues to thrive.
386 But on that, I would suggest that maybe, Ivan, you could participate in
this discussion as well.
387 MR. FECAN: I think what our greatest interest is is in serving our
viewers, Ms Wylie, and serving them with what our viewers feel they need.
388 We feel that that mission is such that it is central to the program
choices we make and have made. I think that's the essence of what a good
389 I don't see this additional element available to some people as something
that can detract us from our main mission. I see it and believe that it is
something that can enhance our main mission for some people.
390 I mean, I appreciate, you know, we may not want to disenfranchise people
by moving from one to another too fast. On the other hand, you don't want to
disenfranchise the children and the young adults who are already in that new
world and want to find a Canadian connection in it. So you have to find that
391 But I think you would very much have our assurance that in terms of our
conventional service, our objective is to serve as a conventional mass audience
broadcaster. The fundamental nature of our business as a conventional
broadcaster is to have universal reach, as close to universal as possible and to
provide a value proposition.
392 Interestingly enough, both the viewers and advertisers have a shared
experience of a mass nature. That's what conventional does and specialty does a
different kind of thing.
393 So our business case and our philosophical case and conventional rest on
to continue to provide that shared mass experience in the program categories
that you, along with the industry, have determined are in the public interest
through the Canadian program hearing, and that represents the kind of balance
that you describe when you read that list.
394 So I think it's very much our intention to be there, but not
disenfranchise either end of the attitudinal spectrum.
395 MS McQUEEN: The thing that I would add to that, Commissioner, is that as
we were talking, I was trying to think of, in my mind, something that we do on
Canadian television, on CTV that would be something we would move away from
because it isn't repurposable -- if that is a word.
396 What I wanted to convey earlier this morning is that most people who
write about this write endlessly about news and sports as being the only kind of
content that is important to interactivity or to the Internet. In fact, we don't
believe that. We believe that any form of programming that is arresting and
compelling to any viewer can also be used in interactive ways.
397 So I think that this too inevitably is an investment in compelling
programming of all kinds which can be delivered to people at the end of the
spectrum that our mothers are at. You know, some of us probably have mothers who
are right now writing furious e-mails saying that...
398 But we will be...
399 COMMISSIONER WYLIE: Saying she doesn't like your outfit.
--- Laughter / Rires
400 MS McQUEEN: That would be what my mother would say, yes.
401 MR. FECAN: My mother has learned voice mail!
--- Laughter / Rires
402 MS McQUEEN: But they will be compelling to people who choose not to
participate in all the enhancements that can be found.
403 So again, I think that the funny thing about this is that it will mean
that conventional content will be enriched, not only because it is important for
us to deliver to the people who actually pay the bills, but also, because that
kind of compelling content is the best kind of content to use in other ways.
404 MR. GOURD: If I may, I would like to complement what Trina has said from
405 Do we have evidence that the platform other than conventional
transmission are demanding different kinds of content than what is popular on
406 Well, what Trina has said has been confirmed by research. As Jean has
indicated this morning, research focus groups have shown that whether on DBS or
Internet, what is the demand of the viewers are entertainment, including drama,
news, sports, both at a national and local level. Of course, these contents have
to be formatted in accordance to the characteristics of the distribution
mechanism, but at the beginning, the stories are there and the stories are the
407 COMMISSIONER WYLIE: My question was more, once you have all these
platforms and you move toward a vision of the future which is, of course,
important to the Commission, in the meantime, is it not possible that the
provision of conventional programming which is not easily re-purposed -- for
example, local news rather than national news, more local or regional
information as opposed to more easily repurposed, more national information, the
local regional may be disadvantaged -- if it proves to not be as rewarding from
a business perspective because of the multiple platforms that you have and that,
at the end of the day, perhaps only regulatory expectations will require that
the local and the local regional in all these areas where Mr. Monty just bought
--- Laughter / Rires
408 COMMISSIONER WYLIE: ...where that viewer is.
409 MR. MONTY: I think we are coming at it in a way that I think will allay
your fears. We not only want to participate in supporting the CTV broadcasting
system as it stands, but we also are investing in local Web sites, event sites
that can, in effect, reach the population of these local markets and will
require more local content to satisfy this additional platform.
410 So the platforms we are talking about are not only national platforms or
interactivity with the rest of the world, they are very much local. The Calgary
site that I referred to, the Quebec City sites, the Toronto.com, the
Montrealplus.ca, the Edmonton site, and we are going to announce the Vancouver
site soon, the match of that capability at the local level we think is going to
be a very strong differentiator of our product in our capability to reach
customers and viewers.
411 COMMISSIONER WYLIE: It's interesting that you didn't mention Bobcageon or
--- Laughter / Rires
412 COMMISSIONER WYLIE: One thing that intrigued me is, in your supplementary
brief, at page 5, there is a paragraph there that says:
"Although CTV can count on BCE for strength and stability in planning and
resources, it will also have to meet BCE's standards of financial performance."
413 In a deficiency question, you were asked to explain what this meant. At
page 5 of the response to the large deficiency letter which is dated June 28th,
2000, you answered:
"CTV would be expected to provide a contribution commensurate with its
business and regulatory environment." (As read)
414 Do I take it from that that the need to make a contribution will not only
take into consideration the business rewards that may come from it, but also the
regulatory environment and those lovely sections of the Broadcasting Act you
415 MR. MONTY: I'm sure Mr. Fillingham would have written that and our CFO
would also have written it. By the way, any shareholder would have done the
same, whether it's BCE or anybody else or the public shareholders of CTV before,
and that's both in the context of what the return would be on the investment as
well as whether the CTV system met the regulatory environment.
416 Because in the end, if you build a system in the framework that Canada
has allowed the system to be built into, if the management of that system
doesn't meet that framework and the regulatory agency's requirements for that
framework, we are out of business.
417 So for me the issue is not whether BCE is a shareholder, it is whether
management is running it appropriately given the framework given to them, not
only by shareholders but also by the regulatory body and the demands of the
viewers and customers.
418 COMMISSIONER WYLIE: Then in conclusion, the business and commercial
imperatives will be tempered by the regulatory imperatives with regard to --
what the Commission has to be concerned about is the group of CTV stations owned
and operated by CTV or connected through some contractual arrangement -- which
we have up to now called affiliates but may morph into something different, but
nevertheless takes the CTV programming into areas -- we can take some comfort
that for the foreseeable future that responsibility is one that BCE accepts.
419 MR. MONTY: Commissioner Wylie, you can rest assured that we do accept it,
but I would like to add, if you will allow me, that we have always seen the
regulatory process in Canada and this Commission as both a regulator and a
partner, and in that partnership we not only look at the type of services,
public services and products that we produce and deliver, but we also look at
the other side of the equation: How much can be asked of investors if there is
not a proper retribution on their capital?
420 I think the Commission has always been conscious of these considerations
and we would hope that that will continue irrespective of the ownership of CTV.
421 COMMISSIONER WYLIE: It's unfortunate we can only be your poor cousin
partners since we can't hold your shares. We have to get all our thrills from
the regulatory side of the partnership.
--- Laughter / Rires
422 COMMISSIONER WYLIE: So that goes for content and what the Canadian viewer
in Bobcageon and North Battleford can expect from this transaction.
423 You will discuss later in the "Significant Benefits" the improvement on
that side from this transaction if it is approved and what we were talking about
now is the perhaps less enticing for the new world content that is still
important for the consumer to receive.
424 Also I mentioned earlier that the CTV voice can now reach more than 99
per cent of the population because of numerous transmitters, retransmitters, as
well as the contractual arrangements where there is no CTV-owned station and
distribution of course.
425 Do you see in the foreseeable future a different way of getting the voice
of the transmitter to the consumer or can we expect over-the-air transmission to
still be with us for some time yet?
426 MR. MONTY: I would like to pass that to Ivan or a member of his panel to
be more specific than I could be on the pure technology aspects of distribution.
427 MR. GOURD: Of course there are new complementary ways of reaching a
consumer and some have been mentioned during the course of this morning.
However, indeed for the foreseeable future, conventional transmission will
continue to be a very important and integral part of the total distribution
428 COMMISSIONER WYLIE: You would still see over-the-air transmission, at
least for the foreseeable future, as the means to reach those more remote
regions we were speaking of?
429 MR. GOURD: Yes, indeed. Many CTV viewers are off-the-air viewers,
over-the-air, and for many of them that will continue for quite a long period of
time. We have evidence, for example, that there are some viewers, many viewers,
who wish to receive a few conventional TV stations by off-the-air transmission
and that indeed will continue.
430 MR. FECAN: We will always look at whatever new technological means may
exist to continue to serve the public, with the objective of as close to
universal reach as possible.
431 COMMISSIONER WYLIE: Are you ready this morning to speak to us about what
those alternatives could be, what the timeframe could be, what the costs to the
consumer could be?
432 MR. GOURD: If I may, we are aware that in the U.S. there was a timeframe
given to conventional broadcasters to go digital. In Canada the federal
authorities have not taken such a position pertaining to what timeframe. There
is no position either on whether or not dual analog and digital distribution
would continue in parallel.
433 So what we are saying to the Commission is that you have our commitment
that we intend to service the off-air viewers at each step of the way. We will
assess the various technical means to continue to service these viewers, in full
consultation with the government which has to develop the framework, indicate
which standards, which timeframe and, of course, in full consultation with the
rest of the industry, because at the end of the day it is an industry process,
an industry challenge and we would interface, for example, with DTV, headed by
Mr. Michael McEwen, to adjust to the various industry approaches.
434 What is important is that these viewers will continue to be serviced,
most probably for quite a long time, through analog transmission and eventually,
probably in a complementary fashion, through additional digital service, whether
digital conventional transmission, eventually digital wireless, of course
digital cable and digital direct-to-home. But the service will be maintained
through the best approach possible each step of the way in consultation with
government and industry.
435 COMMISSIONER WYLIE: My question was not so much the type of transmission,
whether it is digital or analog, but whether you see a day when the over-the-air
transmission won't be the widespread means of reaching the consumer, be it in
Sydney, Nova Scotia or Bobcageon, Ontario? That is not where my mother lives.
436 MR. GOURD: Well, already if you put together the various subscribers to
cable and direct-to-home, it represents, I believe, a significant percentage of
the total all sold. But at the end of the day it is important for us, for the
system, that viewers have the option, they have the option of either subscribing
to cable, subscribing to direct-to-home or continue to subscribe to conventional
transmission, conventional distribution, and that is why we believe it is
important for us to continue to offer that mode of distribution.
437 COMMISSIONER WYLIE: Yes?
438 MR. GOURD: So therefore I don't personally -- personally I don't see in
the foreseeable future where there would be no conventional transmission.
439 COMMISSIONER WYLIE: There is a paragraph in your response to the
deficiencies questions that I am sure was not written by Mr. McEwen, which says,
"We believe that within the next seven years the technological changes taking
place will be significant and that the television industry will be fully
digitized, even if it does not migrate to an over-the-air digital system." (As
440 Do I take if from that that you are foreseeing the possibility that the
signal -- the production and post-production and master control would be
digital, but that the signal emitted would be analog and transformed to digital
by distribution systems?
441 MR. GOURD: Indeed it is probably what will happen.
442 Actually, many studios are already digital, more and more because there
are some cost advantages, there are also some product quality advantages, some
flexibility advantages. Gradually indeed the largest studios would go digital,
but for the foreseeable future analog conventional transmission terrestrially
443 So that is -- I believe your comment is a correct one.
444 COMMISSIONER WYLIE: There is a an even more scary sentence for Mr.
McEwen, which is:
"We believe it makes a lot more sense for broadcasters to provide cable in
DTH with a digital signal while maintaining analog over-the-air capability." (As
445 So you would see CTV as transforming its production, its editing, its
master control room equipment, but possibly not the signal it emits from its
446 MR. GOURD: We have to take it from the perspective of the viewer. For the
viewer, if at the beginning of the process there is improved quality, then when
it makes its way to the viewer, either through cable, through direct-to-home or
through conventional transmission, the system benefits from that.
447 Therefore, as Jean has said, it's a transition, it's an evolution. It
won't suddenly be a prairie fire where all the rebroads will become digital and
all the studios will become digital. It will be a gradual evolution. Probably
the bigger studios first and then moving to regional production centres, and so
on and so forth. The same with the digitization of the terrestrial
448 Gradually, the studio will become almost totally digitized. And, yes, in
terms of analog transmission, partially because the federal government is still
assessing the options, analog transmission will continue for quite a number of
449 COMMISSIONER WYLIE: Your proposal to digitize the production facilities
of CTV are of course of importance to us because if that is the way the future
is we certainly want the programming to be able to conform to new platforms, et
cetera. What is the time frame or the strategy that CTV is envisaging in moving
450 MR. FECAN: In terms of our actual master controls, is that what you are
speaking of in this --
451 COMMISSIONER WYLIE: Is this happening now? Is it going to be accelerated
by the push from Mr. Monty or do you have a time frame for moving towards that
-- and, I presume, also pressing producers as well to produce in that format?
452 MR. FECAN: The actual backbone of most of our large stations and our
network systems have moved from analog to digital or are migrating currently
453 If your specific question has to do with the HDTV part of that, that is
not something that we are really looking at all that carefully at this time, in
that, you know, there isn't even a North American standard that people can agree
to on that. So we are watching that.
454 Certainly, a lot of the major films are done in the aspect ratio that is
HDTV, and so the source negatives often are now compatible with that. But until,
as Alain described, the standards are settled -- I mean, even in America there
is a very large debate about whether in fact the American standard actually
works for transmission of HDTV digital or whether the European one is better.
455 So this thing is in flux and we watch it carefully.
456 COMMISSIONER WYLIE: Now Mr. McEwen will really be depressed.
--- Laughter / Rires
457 MR. MACDONALD: Commissioner Wylie, though, if I could just bring you back
to the point that you were talking about earlier with concern about the
458 I think what Ivan has referred to is exactly what was referenced in that
area, which is a concern that the over-the-air transmission of digital is not
going well in the United States. It will cost billions to do it, to service the
20 to 25 per cent of the audience that still gets it over the air.
459 So what we were referring to was a caution. There is no question that we
will produce in digital. There is no question that the plant will be digital,
but it's only that last step.
460 As Ivan said, and I think it's very, very important, the roll-out of
digital over-the-air transmission in the United States has not gone well so far
and the Canadian strategy has been to follow behind at a careful distance so
that we did not get caught way behind, but by the same token we remember the
461 COMMISSIONER WYLIE: It still confuses my recipes. You wouldn't believe
what we eat at home.
--- Laughter / Rires
462 COMMISSIONER WYLIE: So if we can get, then, a level of comfort, I can
conclude that the viewer in the more remote areas and the less than the big
cities/areas of the country will still be able to get choices and voices from
the CTV group of companies in the foreseeable future, and that is a
responsibility that BCE endorses as it applies for this transfer.
463 MR. MONTY: Yes.
464 COMMISSIONER WYLIE: Now, that is from the perspective of the viewer.
465 From the perspective of CTV itself, Commissioner Colville will discuss
the significant benefits and the extent to which a lot of it will end up on the
screen. But one of the other areas that will presumably be an enhancement or an
added value to CTV itself is the capacity to cross-promote across different
466 Could you expand on how that will be specifically of added value to the
CTV group of stations resulting from that ability to cross-promote with
additional platforms under your control?
467 MR. FECAN: As you know, we constructed the company you know as CTV with a
mix of conventional and specialty channels, and very much a part of the value
proposition to what we hope is our viewers and the system is the ability to
cross-promote, to tell people on one about something they may find of interest
on another. That is something that we have been working for the last few years,
and I think we are getting better at it.
468 What this provides is an additional dimension. It provides an additional
dimension because we would now have the ability to do so with some of the
Internet properties that BCE would bring to this particular new media company,
and it allows us to do likewise, to cross-promote areas of interest. We think
that is a good thing for us.
469 We worry a lot of the time about the amount of hours, particularly our
youth, are spending on the Internet, so I think it is valuable to the system to
have on Internet more promotion for the broadcast system. It is a two-way
street, but I think strategically that is a useful point to have.
470 So I think clearly that is a benefit, all of these different platforms or
vehicles under one roof, the ability to kind of let people know about like
content or: if you are interested in this, there might be this. I am glad you
pointed to that, because I think that is a benefit of this particular
472 MS McQUEEN: I would also add that it is extraordinarily important to us
in promoting Canadian programs.
473 As you have remarked on before, American programs are supported by tidal
waves of promotion which inevitably makes its way onto Canadian platforms and
the ability, as we are already finding with the NetStar-CTV alliance, to be able
to cross-promote Canadian programs is extraordinarily valuable to us when we add
the possibility of Internet cross-promotion with the Internet's ability to
select viewers and possibly send e-mails and do all the other kinds of
personalized promotion that the Internet is capable of. It gives us one more
weapon against -- I shouldn't say "against", but one more weapon on the side of
making viewers understand that Canadian programs are out there and available.
474 COMMISSIONER WYLIE: Thank you for your co-operation.
475 I thought it would be important to give Mr. Monty a foreshadow of renewal
hearings where you really get down to the 3(1)(iii) and a few dollars and a few
hours of regulatory commitments.
476 I will now pass you back to the Chairman for the continuation of what I'm
sure is one of the most exciting mornings of your career.
--- Laughter / Rires
477 MR. MONTY: Actually, it's not bad.
478 COMMISSIONER WYLIE: Look at Mr. Fecan's hair since he joined the
--- Laughter / Rires
479 MR. MONTY: Don't look at my hair.
--- Laughter / Rires
480 CHAIRPERSON OF THE COMMISSION: Yes. Mr. Monty lost his in telecom.
--- Laughter / Rires
481 CHAIRPERSON OF THE COMMISSION: Now we will pursue, before breaking for
lunch, with Commissioner Wilson, who will be exploring specialty channels, its
impact on the specialty channels and the new media strategy.
482 COMMISSIONER WILSON: Thank you, Madam Chair.
483 Good morning to all of you. Welcome. Nice to see you again. I have seen
you so many times in the last four weeks.
484 I guess what I wanted to do was try to get a little bit more detail from
you about the specific benefits of the transaction in terms of the specialty
services that CTV already has interest in.
485 There has been a lot of talk this morning about the conventional
television network and sort of peripheral mentions of the specialty services,
and I am a little bit curious as to why there wasn't more discussion in the
material that you filed about the specialty services and what kind of a role
they will play in this new broadcast paradigm where we have the largest
telecommunications provider owning the largest private conventional network.
486 So I guess, just sort of as a general opening question, I wonder if you
could talk about the benefits of the transaction in terms of what could be
described as some of the most successful specialties in Canada.
487 MR. FECAN: Before I turn to Trina, I want to say that we look at it from
the point of view of Canadian content. We understand that there are good reasons
for looking at it at this hearing from a focus on specialty, a focus on
conventional, but when we talk about Canadian content we really are platform
agnostic in terms of broadcasting.
488 You know, there is Canadian content that we feel is very appropriate and
good on conventional, and we feel equally passionately about some of the
programming that we have developed and have going on our specialty platforms. In
fact, we often use a specialty platform to develop something that can grow and
migrate to the conventional. And there are things on the conventional that --
let's use the Bell Canadian Open example, where the very top day of the golf
tournament -- the last two days are on CTV, but a lot of the other stuff, the
pre-events and the qualifying rounds and the replays, are on specialty. So we
have an integrated approach toward Canadian content.
489 It is also how we have structured much of our development of content. I
mean, we have people who are experts in and have passion for particular
disciplines within Canadian content, and they have various outlets within the
family where they can deploy the programming. So if we left you with the
impression that we care about one form of the service and not the other, it was
a failing on our part, in terms of how we explained our position.
490 We really do see content as the key of what we do, and there are various
venues where that content has its best possible exposure and the best possible
connection to that audience.
491 So when we look at the benefits of why we think this is good, the
benefits are in some cases very similar to what you have heard before, and I
just kind of want to touch those bases quickly before we drill down.
492 The benefits are stability -- I think stability and the ability to keep
this particular family functioning and growing and together, including the
benefits of being able to cross-promote and cross-pollinate programming between
specialty and conventional -- I think that is one of the benefits.
493 COMMISSIONER WILSON: More than you would now?
494 MR. FECAN: No, as much or more as we do now. But certainly more than if
we had been broken into pieces.
495 COMMISSIONER WILSON: Because we don't need the transaction to
cross-promote. You already have CTV conventional and specialty services, so --
496 MR. FECAN: Right. But that's not what we were facing. We were facing,
largely, a break-up of the company, where we would have lost that for the
497 In this particular transaction, I think you are also facing the wonderful
possibility of a controlling shareholder who is committed to the excellence and
committed to improving that excellence. And one always has to improve.
498 You have heard a little bit about the cross-media innovation, and I think
that some of that may, initially at least, be something that might be more
fruitful in the early days with some of our specialty services than some of our
500 MS McQUEEN: I was thinking, Commissioner, that it is an interesting
observation that we have talked mostly about conventional. And Ivan is right, it
wasn't from any "Sophie's Choice" kind of consideration. But I think, in many
ways, most people see that specialty television is healthy and growing and
producing revenue, and that what needs, I guess, stability perhaps most is
conventional television, which has probably the biggest challenge. It has been
more fragmented, and it has, in some ways, been a mature business.
501 But when you ask me about the specific benefits that come from this
transaction to the specialty channels, I guess one of the things -- if you are
on a spectrum of how people have experiences, specialty television and
interactive or new media are notionally closer together than perhaps big
conventional television in attitudes, in experiences and so on. To me, the big
benefit is to have actual people who work in new media who will be our
colleagues and our creative partners.
502 COMMISSIONER WILSON: You mean on the conventional side.
503 MS McQUEEN: No, I'm talking about with BCE.
504 What BCE brings is a store of creativity. Technological creativity.
Technological innovation. People who have a really in-depth understanding of how
consumers are getting the new media and what is happening. And that is, I guess,
a human resources or a set of people skills and marketing skills that CTV does
not have a huge group of. So that, to me, is one of the benefits that you have:
technological creativity and innovation -- that can help inform the specialty
channels and can help them do a better job of what we are already doing very
well on Discovery and TSN, but --
505 COMMISSIONER WILSON: I was going to say, by the same token, I guess what
surprised me when I went through your material was that the specialty services,
from a broadcasting point of view, have really been very much on the leading
edge of developing the interactive elements in the new media, and we heard a lot
of talk about that during the digital specialty hearing. I was surprised --
506 I understand what you are saying about the contribution that BCE brings
in terms of that mindset and the fact that specialty and ITV, new media, would
be closer together in terms of mindset than conventional. What surprised me was
that there wasn't more discussion about the synergies between the specialties
bringing some of that mindset -- I realize that the acquisition of NetStar and
the services that came with that is fairly recent, so maybe, with all of the
activity, including this transaction, you haven't had time to explore those
synergies. But I would have thought that there would be some talk about the kind
of experience you have had on the specialty side, bringing that to conventional
television, and then the other side, sort of this two-pronged ability -- the
synergies that you can develop among all three areas.
507 I don't know if I am explaining myself --
508 MS McQUEEN: No, I was just thinking that it was too bad you weren't there
to help us write the application.
--- Laughter / Rires
509 COMMISSIONER WILSON: Because I know that the Discovery site and the TSN
site -- you talk about the popularity of the TSN site in Canada and
internationally, and RDS as well, so I was just surprised that there wasn't some
discussion of the cross-pollination.
510 MS McQUEEN: You are right that cross-pollination exists, and it can only
be improved by the relationship that we now have with BCE, where we are
511 I think on TSN and Discovery we have been great at developing content for
our sites, but, proud as I am of everything we do on our CTV sites, I have to
acknowledge that there is a depth of technological creativity and technological
innovation at Sympatico/Lycos that can do nothing but benefit us, and already,
in fact, has made some contributions on a kind of informal basis of exchange.
512 I guess that the melding of those two kinds of creative resources and
creative ways of thinking is perhaps one of the greatest benefits to the
specialty channels that this acquisition -- this transaction brings.
513 COMMISSIONER WILSON: Just out of curiosity, you were talking about the
growth in specialty services -- and I know this is probably a really picky
question, but in your July 4 deficiency letter you included some assumptions for
your specialty services in terms of growth. It was on page 5 of that letter. The
reason I am asking you about this is because you talk about the split between
conventional and specialty, in terms of revenue generation for the company: 79
per cent or 82 per cent for conventional and 18 per cent for the specialties.
You are showing some double-digit growth on that chart. I didn't know if that
was a mistake or not. In a couple of years there are some really huge growth
514 Mr. Fillingham obviously knows what I am talking about. It's like: Do you
know something about this environment that no one else knows?
515 MR. FILLINGHAM: No. I think if you go to those assumptions, the double
digits are really shifting categories a lot. And I think if you really deal --
and I went right down to total revenues from these NetStar forecasts, and you
are back into normalized growth. But at those initial years -- I think you are
shifting between basic, discretionary and DTH.
516 COMMISSIONER WILSON: Okay, so that's the notes some services may move
from the discretionary tier to basic.
517 MR. FILLINGHAM: Right, but if you come down to the total, you have more
of the normalized kind of growth in sub-revenue. Although back to it, certainly
the DTH side has been showing higher growth but not, I don't think, those kinds
of numbers in year one there.
518 COMMISSIONER WILSON: I just thought, boy, if this is the kind of growth
we can expect, then it's all the more surprising that you didn't spend more time
talking about the specialty services and the role that they will play in all of
519 I want to go back to a comment that you made a little earlier, Mr. Fecan,
about programming and content in your approach to programming.
520 You mentioned exactly the point that I had noted in my notes about using
the specialities as the farm team or giving birth to something on the
specialities, and then when it grows up, you move it to the conventional
521 In terms of nurturing talent, I suppose if you are throwing $230 million
at something, you don't have to spend quite so much time nurturing. You can just
give birth to a fully formed thing on the conventional network and you don't
have to nurture it on the specialty channels.
522 But I did want to ask about the programming commitments in this
transaction, primarily focus on the conventional network, the 175 incremental
hours. Are we going to see anything on the specialities? Any programming
benefits? Going back to the comment that you made about you know, you look at
content and it's not necessarily just conventional, it's the whole stable of
services that you have to offer. Is there a benefit in terms of the programming,
what's going to be on-screen? Because again, there is nothing specific that I
recall from what I read.
523 MS McQUEEN: One of the things that we have done in the priority
programming category which may not be completely obvious to you was to set up a
kind of one-stop shopping method that would allow producers to receive a very
large percentage of the budget from these benefits. Included in all that is a
specialty channel licence fee. So there would be a licence fee for both the
conventional and for a specialty in that.
524 Now, it would be the producer's choice whether or not she wanted to take
advantage of a specialty channel belonging to us. But certainly, that was a
525 Our hope is that the producers will all choose to have the appropriate
programs licensed to our specialities and the benefits do make provision for
526 COMMISSIONER WILSON: Or to other specialties?
527 MS McQUEEN: Well, it would kind of be nice if it were ours because we
presented the money as a benefit.
528 COMMISSIONER WILSON: But not absolutely necessary?
529 MS McQUEEN: Not absolutely necessary, no. It's their choice.
530 COMMISSIONER WILSON: In the June 28th deficiency letter, in the
discussion about vertical integration, and there was some description of various
companies in Canada and the holdings that they have, including BCE, there was a
reference to Corus having a virtual dominance in the children's genre and,
unless I am mistaken, they only have two services in that genre. CTV has... And
I know, this is an issue that was certainly looked at in the transfer of NetStar
531 But looking at the licensing of digital specialties, which is the last
time we spoke, is that something that we should be concerned about? Considering
the number of services that you have that are primarily focused around sports in
English and French, is that a concern that we should have on a going forward
532 MS McQUEEN: Well, I'm trying to look for the specific reference to Corus
533 COMMISSIONER WILSON: It's on page 17 of the June 28th letter.
534 MS McQUEEN: Right. I think, in our digital applications, one of the
things we said is that we thought that was a good thing, that we said that we
had refrained from making applications, for example, in the music genre and in
the children genre, because we believed that it was a great thing, not a bad
535 COMMISSIONER WILSON: For people to specialize.
536 MS McQUEEN: For people to specialize.
537 So we do have some knowledge and expertise in the sports genre, and
that's why we put forward one of our applications as a sports genre. But when we
did that, we went far away from traditional mainstream sports into a new kind of
sports. I think our expertise in sports allows us to become more innovative in
538 But we don't think it's a bad thing for Canadian companies to specialize
in one or the other genre, as long as there is some competition for that genre,
and we acknowledge that CBC and TVO also do children's programming, for example.
It's a specialty, of course. They have been very good at it. And I think, when
we talk about a dominant position, it's a market dominant position, because YTV
is certainly -- I think it's the second, after TSN, most popular Canadian
539 MR. FECAN: And the other part of the value proposition, I think, in the
digital hearing was, yes, we thought specialization is a good thing, and we felt
that by leveraging what we acknowledged we had and the expertise that we had, we
could create better value for the viewer in the system by higher expenditures
and content, more content and all of those other things.
540 So part of our approach is that by specializing, there's more in it for
the viewer in the system, and that was part of the value proposition that we put
forward at that time.
541 MS McQUEEN: In the same context, that informed our choice of digital
ideas because we think we are maybe pretty good at science -- I'm trying to be
modest, here. I'm not saying we could be terrific...
542 COMMISSIONER WILSON: You don't mean to be modest, basically.
543 MS McQUEEN: We think we have done a credible job in science reporting and
we think it's to the benefit of the viewer that if there are other -- that we
can make our best contribution to the viewers in areas where we have an
expertise and a basis of knowledge. That's what informed our digital
applications and, I think, what will inform our going forward position on
specialties, that we have something to offer through expertise and
544 COMMISSIONER WILSON: Do you think that this transaction in particular,
that it gives BCE considerable advantages over other distributors? I'm not sure
who will want to answer this question, because I'm going to go into just a
couple of questions on the notion of distribution and distributor equity with
reference to programming services.
545 But does this give BCE too much of an advantage in terms of being a
distributor, in terms of having the most valuable Canadian content properties in
terms of specialty services, whereas other distributors will end up having
equity only in the digital specialty services, which all of us acknowledge are
going to take much longer to become successful and to be valuable in the
546 MR. FECAN: To answer your question, it will be Alain that, I think, will
have the pleasure of discussing that section with you.
547 But you know, CTV existed before this transaction. And so, I guess what
you are really focusing on is the link within the corporate family, the related
link to the ExpressVu digital service. That, I think, would be the focus that
Alain would bring to this.
548 MR. GOURD: Indeed, if we take a look at the broadcast universe, we have a
certain number of important groups which have a menu of services and activities.
Some are in distribution, and we are in broadcast distribution at the digital
level with Bell ExpressVu. We have 5 per cent of the total subscriber base, and
in the digital world proper, we have less than 50 per cent, in fact, 40 per cent
of digital base.
549 Other groups are also very present. For example in radio, I have in mind
Rogers and Shaw, for example, or Astral, and we don't have any radio outlet even
though radio is a very important part of our system.
550 In conventional television, we are aware that CTV has a very good
competitor. Not as good as CTV -- and I'm saying that objectively from the
outside, but there is a global...
551 COMMISSIONER WILSON: Their shareholders might disagree.
552 MR. GOURD: There is a global which is very much present, which has a
relationship with the printed media.
553 More recently, we have witnessed the emergence of a new group in Québec,
subject to CRTC approval, which would wish to have two conventional TV stations,
some specialty services, very strong Internet presence, and a very, very
significant broadcast distribution base.
554 In terms of broadcast distribution, in fact, we are pretty much the
555 So what I am trying to say is that it is for the -- it is to the benefit
of the system that you have these various groups competing, developing
innovative products, developing new ways to reach the consumer, developing
cross-promotion, developing marketing, cross-marketing, and to have CTV as a
contributor to the emulation is indeed a good thing as opposed to having a CTV
which, as Ivan said, might have been balkanized in different pieces.
556 So the transaction in total, because CTV has its integrity and it can
expand, that transaction is to the greatest benefit of the system and the
various players have advantages and disadvantages, but this group is not a
dominant one in the broadcasting system, whether in programming or in
distribution. It is simply a group which wants to contribute to the innovation
by having its ability to compete and to offer innovation and, of course,
relevant Canadian content.
557 COMMISSIONER WILSON: Okay. Well, let me ask you this question. I guess
what I think I hear you saying is that for the analog specialties, which are the
specialties that I'm asking about, the ones that you have which are some of the
most popular in the country, that you don't really think that it is an issue
because those services are launched on analog right now and they are going along
and that is fine.
558 So let's look at the digital world.
559 You say throughout the material that you filed with the application that
you are a non-dominant distribution undertaking through Bell ExpressVu. On page
23 of your June 28 deficiency letter, for example, you say:
"Because of its small subscriber base a new entrant like Bell ExpressVu
cannot launch a new programming service on its own." (As read)
560 But, in fact, in the digital universe and in the context of the hearings
that we just finished for digital specialty services, you are the dominant
distributor and you hold in your hands the ability of those services to make a
future and make a contribution to the broadcasting system.
561 So I guess what I'm -- this is my first question, I will go back to the
analog specialities in a minute.
562 Should we have any concerns about how you will treat affiliated services
versus non-affiliated services? Maybe you are going to come back and make the
argument that you are not dominant in digital, but none of those programming
services will be able to survive without you, so in my mind that makes you very
important at the very least.
563 MR. GOURD: We understand the concern. We appreciate the Commission's
point on this issue of a perception that Bell ExpressVu would be quote/unquote
"a dominant player". The Commission, in its July 14 Public Notice, has mentioned
that it was an issue to be discussed and therefore we are very pleased to
provide clarification and reassurances on that front.
564 I would like to focus, if you agree, on indeed whether or not Bell
ExpressVu is dominant, because I think it is an important point that has been
made by others and that you have underscored.
565 If we take a look at our subscriber base, which is 570,000, it is, as I
mentioned, 5 per cent of the total households, but in the digital universe it is
around 40 per cent because there are 1.4 million digital subscribers, as we
speak, in Canada.
566 Of course, MMDS has some digital subscribers, but the bulk of the digital
subscribers who are outside of our 570,000 are in fact directly or indirectly
controlled by cable. Star Choice is controlled by a cable operator and they have
something like 450,000 subscribers, and of course you have some 350,000 cable
subscribers proper. So, therefore, we have in front of us some 800,000
subscribers which are directly or indirectly controlled by cable.
567 But of course your question is still valid, whether we are dominant and
568 We are pleased with our growth and we feel we are important but we also
feel we are not dominant.
569 But at the end of the day you are saying: Is it problematic? Whether it
is 40 or 50 or 30, is it problematic?
570 What we are saying to you is that it is not really problematic, even
though we would wish to give you reassurances. It is not problematic because of
the inherent characteristics of the digital environment as compared to the
571 In analog you indeed have scarcity, you have limitations. Therefore,
there is a gatekeeper role.
572 In the case of the digital market two things can be said: First, capacity
is not really an issue. Not only isn't it an issue now, but the technology has
an ability to improve through ever better compression ratios. So the capacity
will grow over time and each of us are contemplating moving to higher
573 In addition to the capacity, the competition. Nobody, and certainly not
Bell ExpressVu, can make a service -- can alone support an affiliated service.
We don't have the subscriber base and, also, we are facing very significant
competition, not only from Star Choice and digital cable, but also from the U.S.
574 So, therefore, out business motivation is to have -- as we have said
repetitively to the Commission -- more and more content and more and more
Canadian content. Many times we have come to the Commission asking for the
licensing of more Canadian specialty services, whether digital or analog, in
both official languages.
575 But then you might say "Okay, you will probably indeed offer all the
Canadian services that will be licensed."
576 COMMISSIONER WILSON: Regardless of who owns them.
577 MR. GOURD: Exactly.
578 But you might say "Well, you will offer all of them, but maybe through
the back door you will treat the affiliated services better, provide them better
terms and conditions than you would the non-affiliated services."
579 Therefore, if we take a look at that situation, we wish to refer, of
course, to section 9 of the broadcast distribution regulation, which is there.
We would wish to refer also to another provision that you have proposed, which
has been supported by industry, and supported enthusiastically by us, which is
to have a similar provision for the programmers to prevent affiliated
programmers to offer undue preference to the affiliated broadcast distribution
580 I could focus also on certain specific provisions like relative to the
over-the-air broadcaster where these regulations oblige Bell ExpressVu to
distribute as part of its basic service all the national networks. We have also
the "must carry" regulation for the analog services.
581 However, you might say "Okay. You have a regulatory framework, but if you
do nevertheless not respect the regulatory framework what can the programmer
which has been mistreated do?" Well, again, you provide this programming with a
complaint mechanism that could be used.
582 But then you might say "Well, it's a difficult process. What else could
you propose to make certain that in addition to the pressure of the marketplace,
the regulatory framework plus the complaint mechanism, we could then be certain
that you will provide the similar terms and conditions to the non-affiliated
programmers as well as the affiliated programmers.
583 COMMISSIONER WILSON: That would be the code of ethics?
584 MR. GOURD: It is one of the answers indeed. As you know, we have proposed
a code of conduct. We have been the only broadcast distribution undertaking to
have proposed that. It covers the largest components of distribution, it covers
packaging, it covers pricing, it covers respecting the data stream of the
various specialty services, and so on and so forth.
585 But again you might say, "Yes, you have a code of ethics. SPTV has
recognized that the track record of Bell ExpressVu is impeccable. The CAB has
indicated that if the past is an indication of the future the behaviour of Bell
ExpressVu will continue to be fair and equitable, but maybe the current managers
of ExpressVu, you might be replaced, something might happen to you and we might
have other managers who would not behave as well try to go around the code, and
so on and so forth."
586 Therefore we have another suggestion to provide additional reassurance.
587 COMMISSIONER WILSON: Structural separation?
588 MR. GOURD: No. No, we believe --
--- Laughter / Rires
589 MR. GOURD: We believe --
590 COMMISSIONER WILSON: Just a suggestion.
591 MR. GOURD: No. We believe that there is merit in allowing a programmer to
have not only the regulatory tools but the contractual tools to ensure fairness
in the terms of condition.
592 I remember at CANCOM I had introduced the concept of systematic
reciprocal most favoured nation provision in the contracts, plus a complementary
measure where one of the parties could have also the right to third party audit,
to check if there is indeed contractual respect of that clause.
593 We have also tried it at Bell ExpressVu with some programmers. Some
affiliated to us like Canal Évasion, some non-affiliated, for example, like some
Astral services. It is working well.
594 Therefore, we could propose, in addition to the regulatory framework, in
addition to the code of conduct, a systematic, reciprocal, most favoured nation
provision plus a systematic, reciprocal periodical right to third party audit to
check if indeed the code and if indeed the contractual obligations are met.
595 With all that we feel that we have been, if I may say, the best of class,
the only one to have a code, the only one to propose these measures, and that it
should indeed reassure the non-affiliated programmers that they will continue to
be treated fairly.
596 COMMISSIONER WILSON: Thank you for that.
597 If I could just ask you one final question with respect to specialty
services vis-à-vis the distributor equity question, and this has to do with the
analog services. I want to come back to TSN and RDS and all of those services.
598 Now, you mentioned having a similar provision for the programmers so that
they wouldn't confer an undue preference on certain distributors. Considering
that these services now will have this added perspective of a distributor owning
them of course -- going into contract renegotiations the services would
obviously try to get the best possible deal, get the most money for their
services from the distributor -- do you think the fact that a distributor is now
going to own these services is going to have any effect on how those contract
renegotiations might roll out?
599 MR. GOURD: No, I don't believe -- absolutely, not.
600 First, BCE is now an integrated information, communications and
entertainment company, so it is more diverse than only distribution.
601 Secondly, I mentioned the regulatory safeguards, existing and to come.
602 I mentioned code of conduct and I mentioned also the ability of a
programmer to check if indeed there is a renegotiation of the affiliation
agreements between the affiliated BDUs and programmers which implicitly would
tend to favour the affiliated programmers.
603 So for all the reasons I have explained, that will absolutely not take
place, and it would not be also -- again, I'm coming back to the marketplace, to
the competitive nature of our industry -- it wouldn't be to the best interests
of Bell ExpressVu nor the programmers to do that, because it is a small family,
it's a small world. At the end of the day, pretty soon everything is known.
Therefore, if I am a programmer from -- a non-affiliated programmer, I would
become very suspicious about the distribution methods of ExpressVu.
604 Conversely, if I'm a distributor -- and again the specialty services of
CTV cannot survive with 570,000 subscribers, they need the other distributors,
they need Star Choice, they need digital and analog cable -- these other
distributors would react also quite negatively if they were to perceive that the
CTV specialty services were providing an undue preference to Bell ExpressVu.
605 So there is an internal in addition to the various safeguards, the
regulatory ones and the ones we have proposed. There is a regulatory mechanism
or a regulation mechanism inside of the marketplace to also make that more
difficult, at least when you are a distributor which has only 5 per cent of the
606 COMMISSIONER WILSON: I want to turn now to the issue of ITV. You will
forgive me if I sound like I'm struggling with some of this. I guess we all are
to some extent because we don't really know exactly how all of the interactivity
vis-à-vis television is going to roll out or in what time frame, or how quickly
data will turn into video on the Internet. There is a lot of uncertainty, and I
perceive that uncertainty in some of the language used to describe these
initiatives. It is a little bit nebulous.
607 You say that ITV will help bring Internet users back to television and
foster a closer connection between conventional and new media environments. Ms
McQueen, this morning you talked about using compelling drama and documentaries
and storytelling, essentially, to do that. I guess I'm still a little bit
unclear about how exactly you see that happening.
608 MS McQUEEN: I hope I can bring some clarity to it because, as you say, it
is based on kind of what you see happening.
609 I guess one of the things that we see about the Internet or interactive
experience is that it is personal or intimate and it is specialized to the
individual who is using it. People who use that form are presumably people who
enjoy and love experiences like that. They want to get what they want, that
suits their interests, when they want it.
610 Right now, although conventional television in the main provides
experiences that are compelling, stir the imagination and so on -- that's it.
You get the same information from television as I do, from conventional
television as I do. What we are suggesting is that if we can offer enhanced and
interactive elements to conventional television, the people who love the
interactivity and that kind of enhancement will be more motivated to watch
television than they would if those elements were not present.
611 COMMISSIONER WILSON: I certainly take your point. But if the only
information they are going to get by drilling down -- as we all say, it's the
new lingo -- is something they could get that is on the Web anyway without
watching the program -- I mean, theoretically they could get it directly from
the Web without ever having watched the program.
612 What I'm curious about is how do you drive these kids -- the next
generation, who are spending all these hours on the Internet -- how do you drive
them to conventional television or even to the specialties?
613 MS McQUEEN: I think it's by providing a way for them to do the kinds of
things that they like to do in response to something that stirs their
imagination and creativity. We know that happens.
614 For instance, as I'm sure you have heard many times from TSN, people who
are watching a hockey game will do things, mysterious sports things that they do
--- Laughter / Rires
615 COMMISSIONER WILSON: I know exactly what you mean.
--- Laughter / Rires
616 MS McQUEEN: So there is the kind of notion that people like to have both
experiences at once. A lot of conventional television now does not provide that
kind of Web-enhanced experience even, but in the future we will be able to do it
not only through the Web but through interactive.
617 I think there is, even among the youngest, savviest Webhead, every one of
them watches television, and the research bears that out. But Sheridan can
probably help me with --
618 COMMISSIONER WILSON: They are not abandoning television altogether.
619 MS McQUEEN: They haven't abandoned television completely but they look to
the Internet to provide them with the intimate, personalized, specialized
experience. When television can also provide that, I think it will give both
sides of the house a reason to stay with television.
620 MS SCOTT: Commissioner Wilson, maybe I will just add a few observations
coming, in part, from the Bell Broadcast and New Media Fund where we are looking
at exactly this issue. We are trying to figure out the relationship between
broadcast and new media and how people go back and forth. We ask for things like
tracking reports: Do you find that after people finish watching a television
show they go immediately to the Internet? We actually find very odd traffic
patterns. They aren't predictable. So we are looking further into those things.
621 You are wondering about the traffic in the opposite direction, where
people come back from the Internet, so to speak. ITV means different things to
622 For now, when we are talking about interactive TV, we are really talking
about television and the Internet on separate screens. We find there is some
623 Now, if I look at some of the sites that have been supported with money
from the Bell Broadcast and New Media fund, it's very much as Trina describes.
There is interaction, the types of activities that young people like to engage
in. So there is chat, there are quizzes. There is a growing use of video. That I
find quite interesting. You will have some copyright-cleared material from the
main program; it will be available for kids to create their own program. They
can insert themselves into the program and e-mail it to someone.
624 But we have found that in some of them, they will actually have a section
where they go and describe the programs that are going to be aired later on for
the balance of the season, and so the kids will be aware of the development of
characters. You know, tune in next week and this is going to happen with such
and such a person.
625 So while they are on the Web site enjoying interacting with the
characters, the storyline, the personality, however that Web site is created,
there is also this cross-promotional thing because many of the producers want to
have that traffic back and forth between the two.
626 Now, that is in the area of dramatic programming or some of the
627 I found it interesting, I was reading a study by Canners In-Stat Group,
it was called. They were looking at some of these new models: how do you put new
media and broadcast together? This was a report called "Streaming Media Done
Right, Internet Broadcasting Systems".
628 I hesitate to bring this up because this is actually CanWest Global
strategy and I'm now going to tell you it's working very well. So I hesitate to
629 COMMISSIONER WILSON: So you will be copying.
630 MS SCOTT: Yes. But I did think it was interesting.
631 The report says that the emergence of streaming media on Web sites is an
important trend to watch, adding that IBS has a unique business model for the
632 This is what they conclude. They say:
"This is an example of the model done right. IBS appears to have put it all
together and is well positioned to lead selected prominent local TV stations
into the Internet with a streaming media presence that accomplishes two key
tasks. First, the IBS Web sites have been shown to draw viewers back to the
local TV channel during prime time. Second, the Web sites are designed to become
profitable Internet destinations." (As read)
633 Everyone is pursuing that one, of course.
634 But I thought it was interesting that you would find people on the
Internet. If you go on their Web sites, and there are many, many of these new
sites, they have partnered with a number of local broadcasters.
635 There is news and information. They partner with the radio stations as
well. But they are promoting the main channel. They want people back on that
main channel, and they are having success.
636 COMMISSIONER WILSON: One of the interesting things that we heard during
the digital specialty hearing was the idea that you would use Web cams that
would be distributed to your viewers and that way involve them in the
programming; that that would be a good way to draw them to your channel.
637 Have you looked at plans like that?
638 MS SCOTT: My imagination is just going crazy here, thinking about what
they will do with those Web cams, and whether Trina's violence code might kick
in, and you are going to have to have new standards in place.
639 It is interesting, these Web cams. I would say that at the last meeting
of the board of the Bell Fund this idea of having young people equipped with
these digital cameras, so they can create their own content, and then become --
640 COMMISSIONER WILSON: Become part of the traditional broadcast program.
641 MS SCOTT: Yes, become part of the channel.
642 And I found it fascinating, this issue of copyright-cleared material that
they can play with.
643 For example, my son, who engages in that funny sports talk as well, has a
number of favourite sites he goes to where he can become part of a sports
broadcast. There is footage from sports events and he provides the voice
commentary, and then he takes that, creates a file, and he sends it to a friend
644 Now, you can just imagine, once he gets a Web cam in his hands, he can be
an on-air personality as well, and he does want to do sports journalism.
645 But it shows that really, in this new area, you are only limited by your
imagination, and the combination of your own personalized inserts and the
traditional conventional --
646 And I shouldn't just focus on conventional because, quite frankly, we
have numerous specialty services that apply to the Bell Fund as well. But this
sort of traditional linear programming that you would see on conventional and
specialty will be married with this greater sense of personalization that the
647 MS McQUEEN: In fact, on Talk Television we are already doing some
experimenting with that, where we have given people Web cams -- one of them,
just for interest, being one of the Mulroney children; not the one who got
married, but Ben, who lives in Quebec City now and has a Web cam in his
apartment and is a contributor to Talk TV through the Web cam, which obviously
you can also visit on the site. That is just one kind of small example of how
these Web cams and specialty television are enhancing each other.
648 COMMISSIONER WILSON: Certainly, it makes a lot of sense in terms of the
specialty services, and ZDTV in the States is doing this. They have people who
are contributing to their programming through the use of Web cams. I guess I was
more interested in whether or not you saw a role for that in conventional
television and how that might drive the next generation, the Web generation, to
conventional television as part of your strategy.
649 MS SCOTT: If you would like to hear another example -- I find it
fascinating to see these cross-overs between conventional and new media. A
recent example out of the American market is the Drew Carey show, where they had
an episode on television where Drew Carey comes to the office, and then they
have a Web cam at his home, his character's home, and you have to go to the Web
site to see what is happening at his home. And at his home, Ed McMahon
apparently arrives with a million dollar cheque, but Drew Carey is at the
650 Now, only if you are looking at the PC screen and the television screen
do you see the complete story. Still and yet, you could just tune to the
television show if you wanted, and you would hear about this --
651 COMMISSIONER WILSON: You would miss all of that.
652 MS SCOTT: -- but you wouldn't participate. You would have a
different viewer experience depending on whether you chose to be a converged
person, an ITV person, or not.
653 But, again, if you were at the Drew Carey site, you would then think of
tuning in to the main station, and it would take you back to that program on the
main station, because that is going to be part of the experience that night, a
complete and converged viewer experience.
654 COMMISSIONER WILSON: A comment was made this morning by Mr. Monty about
how critical differentiation is on the Internet, and that being Canadian is part
of this differentiation, and that the CTV properties, all of them -- the
conventional network and the specialty networks -- will assist in defining that
differentiation, if you will. And yet you talk in the deficiency letter about
the popularity of U.S. sites, and I think that Sympatico is ninth on a list of a
number. How do you stem the tide? If people are going to those sites in such
great numbers, how do CTV and specialty service brands -- how do those brands
really help you drive traffic through the Sympatico site?
655 MS McQUEEN: In some ways that is the essence of this application, to
create a media company that will be able to have a strong enough presence, not
only in Canada but internationally, that will be able to stimulate the creation
and the use of Canadian content, that will be able to market and promote
Canadian content in all of its aspects that will stem the tide. It all comes
back to the issue of the creation of valuable programming and content.
656 And yes, Canadian content has an edge if it is, first of all, well done,
and secondly, marketed and promoted effectively so that people know it is there.
657 Mr. Monty used the words "it's simple", and that's true, that's what you
do, but it is also very ambitious, because you are competing against somebody
who is stronger and better financed than you.
658 I think of the young man, Mr. Whitfield, who won the Olympic gold
yesterday; someone who came from a small country that maybe doesn't finance its
athletes as well as other countries, but became the best in the world through
the sheer force of his personal talent. That is what we want to be able to do:
allow Canadians to use the sheer force of their personal talent to make sure
that Canadian content is as compelling as any in the world.
659 COMMISSIONER WILSON: You have to have money to do that too, though.
660 I mean, in sports maybe it is just sheer talent, but in television, as
you talked about, the promotion machine south of the border and --
661 MS McQUEEN: Right. But, you know, I think that Gordon Pinsent said it
well: You do have to have money. And Mr. Whitfield, presumably, had some
investment made in his training and made in his ability to compete in other
events. He may not have as much as anywhere else, but it allowed him to use his
662 And that, again, is what having strong, well-resourced media companies
will be able to do: give Canadians the opportunity to use their talents.
663 COMMISSIONER WILSON: Vice-Chair Wylie this morning asked the question
about whether or not the money that you devote to ITV and new media initiatives
takes away from the conventional broadcasting system, and your answer was that
you need to find a balance. But what percentage of your benefits are targeted at
664 I went through it, but I wasn't able to come up with a big total.
665 MS McQUEEN: That is a piece of math that we would have to get back to you
666 COMMISSIONER WILSON: I know you don't like to do math in public --
667 MS McQUEEN: No, but privately I find it very enjoyable.
--- Laughter / Rires
668 MS McQUEEN: We can certainly get back to you. As we said, all of the
priority programming has Web enhancement in it. And, as well as that, there are
specific benefits directed. So we would try to get back to you, but it is a
large percentage of the benefits package that has some relationship to
convergence. I think we used the word that we embraced convergence in the
669 MR. FECAN: But aside from the -- and we will get back to you after lunch
with that number -- but I would also say that the specific stuff for
convergence, the ITV specialists and development officers, for instance -- a lot
of the rest is an à la carte kind of situation that producers can choose to take
advantage of or choose not to take advantage of. So it still, within our way of
looking at it, is something that -- we wanted to empower the producer to have a
bunch of options. So there are those that are specifically targeted to ITV, the
ITV development specialists, and those that are part of this package but not
mandatory if some producer says: You know what? I just want to do my documentary
and I don't really want to do any of that other stuff.
670 COMMISSIONER WILSON: Thank you. Those are my questions, Madam Chair.
671 CHAIRPERSON OF THE COMMISSION: Thank you very much.
672 We will now break for lunch and we will come back at 2:30 p.m.
--- Upon recessing at 1300 / Suspension à 1300
--- Upon resuming at 1430 / Reprise à 1430
673 LA PRÉSIDENTE DU CONSEIL: Bon après-midi à tous. Nous poursuivons
l'audience et nous sommes dans la Phase I concernant la transaction de BCE pour
674 Nous étions à l'étape où nous examinerions les bénéfices en matière de
675 Mais avant, I think Ms McQueen has something to add on the record.
676 MS McQUEEN: Thank you, Madam Chair.
677 This is in answer to Commissioner Wilson's question just before lunch,
and I believe it was about the nature of interactive components in the benefits
678 Just to make sure we are clear, there are no elements in this package
that are exclusively for Web site activity or exclusively for new media
activity. There is a grant of $10 million to the Bell Broadcast and New Media
Fund, which, as you know, produces broadcast projects with new media related
679 There are also a number of program projects that could have interactive
elements to them, but again, are designed for the screen.
680 As well, there are a number of research and education activities aimed at
convergence, I guess. I think we used the word "embracing convergence",
encouraging convergence. These are the Content Innovation Network, $5 million.
ITV specialists in development offices, these will work on broadcast proposals
but will work with producers to develop interactive elements.
681 On the educational side, there is Ryerson's Chair in convergence.
Creative use of Advanced Technologies is the full title of that Chair. And there
is a Centre of Excellence at the British Columbia Institute of Technology which
is called the New Media Centre of Excellence.
682 I should have said that the Ryerson Chair is $2.5 million. The New Media
Centre of Excellence is $2.5 million. We have included a grant of $500,000 to
Mnet as part of this, although we weren't sure where that should go. But since
it is in fact a web related activity about broadcast, we thought it fit in the
683 Those are the benefits that are exclusively, or I should say that are
aimed at educational activities to do with convergence. Thank you.
684 THE CHAIRPERSON OF THE COMMISSION: Thank you very much.
685 Now, to Vice-Chair Colville.
686 COMMISSIONER COLVILLE: Thank you, Madam Chair. Good afternoon, Mr. Fecan,
and the rest of the team.
687 I want to go through a few issues related to the priority programming
benefit this afternoon. I will start off with a little bit of the philosophy
behind, and I think, through some of the questions that the staff had sent to
you. You have a sense of a bit of a concern on our part that while this is an
unprecedented amount of money being put into the benefits package, and in
particular to priority programming, one of the key issues for us is the base
against which you would measure this as being incremental and how we, together,
would figure this out on a going forward basis to ascertain that it's indeed
incremental and how one would measure that.
688 I would like to start by taking one of the last questions that was posed
to you first. It was the question related to this issue of why spend the money
over seven years as opposed to a fund. In starting out with this, I'm not
particularly looking for that precise answer at the outset.
689 But I guess in reading your answer to that and in seeing a couple of
statements out of the presentation this morning, and also, the statements in the
supplementary brief that you had filed with this, and it may touch a little on
some of the discussion you had with the Chair and the Vice-Chair this morning. I
would like to get a bit of a sense of this in the context of that question about
where this is going to take programming.
690 So perhaps to start with, if I can just throw a few quotes back at you,
and then we can get in the discussion.
691 In answer to question 29 that staff imposed, you had started off by
"This question goes to the heart of the ambition of this benefits package.
That ambition is to use this extraordinary opportunity to develop commercially
successful Canadian television programs. If the wise and creative use of these
benefits can accomplish that goal, Canadian programming and the broadcasting
system will be enhanced, not for seven or 10 or 15 years, but forever." (As
692 And you went on later on in that answer to say:
"It would make no fundamental change in the ongoing complexities of producing
Canadian content." (As read)
693 That was if there was a fund set up. Your comment was that.
694 And in the start of the last paragraph there, you said:
"In the end, the opportunity to make a real difference seized our
imaginations." (As read)
695 This morning, in presentation, what you were saying, Ms McQueen, they,
being producers that you had talked to -- this is at page 6:
"...appreciate and depend on the numerous funds that help make television.
They don't want another one, they don't want conflicting deadlines,
contradictory guidelines, uncertainty and a patchwork pile-on of small pieces of
funding. Here is what they do want: One-stop funding with substantial licence
fees, development assistance, attention to drama and regional programs and lots
of promotion." (As read)
696 And you said a similar thing on page 17 of your supplementary brief under
the heading "Enhancing Canadian Content Now and for the Future":
697 "BCE and CTV reach millions of Canadians every day and in these millions
of contact points, it's possible to envisage a unique set of opportunities to
ensure that Canadian voices and choices have every possible opportunity for
favourable exposure. Executing such a strategic capability meaningfully would
take Canadian broadcasting and Canadian content to a completely new level." (As
698 I guess I would like to get a sense from you to sort of what that new
level is going to be. You know, if you look at the seven years, we put $140
million or $20 million more per year. What is it about that that is going to
radically change the system at the end of seven years?
699 MR. FECAN: I would like to start, and then I would turn to Trina, and I
will take you up on your invitation of doing the wise shot first.
700 I think I have been in front of you more than probably any other
broadcaster for over the last six years, something like 18 major hearings. It's
a long journey we have taken together, and in every case, I hope I have been
able to convince you that what I really believed in and what our team believes
in is quality Canadian content, making a difference with it.
701 We have travelled that road together, moving from a station group to a
network of national reach moving to the specialty channels and all of the
relationships that back and forth promotion developed with relationships that, I
think, we covered with Commissioner Wilson. And in every case, we wanted to push
that agenda forward.
702 What this opportunity here represents for us and why we chose the
benefits proposal we put forward -- and by the way, there's nothing inherently
wrong with the fund. But why we chose a different road is because we really felt
there was an opportunity to shift the paradigm. Because despite all of our best
efforts, there is still a pretty large amount of difficulty for a producer to
get programs made. There is still, for the broadcaster, a fairly large
cross-subsidization between foreign and Canadian purchase in airing forward and
financing of Canadian programming. I think while we are improving, I think our
quality of programming is better.
703 What we are going for is to try and shift this and shift it a bit by,
instead of asking our producers to spend -- and this is the reality of the scale
of our country -- to spend a long period of time figuring out how to assemble
the various little pieces of financing to try and get something going and then
hurry up and get it going, we wanted to give them an opportunity to just focus
on creating highly popular Canadian programming, to just go for that main big
target and by providing the ability to have one-stop financing for various
program initiatives in the categories that we have laid out.
704 And that -- you know, so much time is spent assembling the little pieces.
And I know they are grateful for the pieces, but it often takes away from the
time that they would have in really focusing in on making the difference on the
screen and just really putting all of their efforts on the creative aspect and
on the marketing of the show and on connecting with that audience. And so, we
felt that if we could have that kind of larger audience breakthrough -- which we
see now and again, with various shows, but not consistently enough -- then that
shifts the business paradigm. It creates a better track record of ratings for
priority programs that we can sell to advertisers. It takes us further down the
road toward being self-sustaining, much like many other countries that don't
have the influence of the U.S. to contend with -- and, of course I'm speaking
more specifically of the English Canadian market, that if we can just make that
work that it becomes a virtual circle, that we do shift the paradigm. And we
think that by demonstrating it, by demonstrating it consistently, a lot more
consistently, as an industry, we have been able to, that that's going to make a
real difference, and a lasting difference, and that was our ambition in
approaching the opportunity this way. Because any way you slice it, I mean, $230
million is a huge amount of money. And, you know, as I said, on the theory of
it, on the face of it, you know, we don't have any dispute with the fund except
that, you know, that's not what, really, the producers want, they want to be
able to make a difference, and we want to be their co-conspirators in making
that difference, and that's how we approached it, philosophically, and that's
why we came up with this particular approach which, if executed successfully --
and execution is always everything -- we think will make a difference.
706 MS McQUEEN: Well, I would like to go a little further back than Ivan --
and I can because I'm older.
--- Laughter / Rires
707 MS McQUEEN: From the beginning of television, Canadian television has
been bedeviled by the fact that the kinds of programs that are the most
culturally important to us do not produce an economic return that is high, and
there is -- you know there is basically no other problem with Canadian
television. There just isn't. We have got talented people. We have got all kinds
of fascinating stories, as we always say. But there is an economic problem.
708 In most countries of the world, the most popular genres of programming,
like drama, are just commercially successful, and they are done for that reason,
because of the business motivation.
709 In this country, because of our accident of geography and because of how
few of us there are, that hasn't worked and we have set into place, as
Canadians, something quite wonderful which is we have determined that even
though it's not economically useful for us to make these cultural programs, we
are going to do it anyway, and we are going to do it through a whole bunch of
different ways, and there have been public funds and there have been private
funds inspired by philanthropic gestures or inspired by benefits, policies. And
through it all, we have, in English Canada -- and I am speaking of English
Canada because the situation is completely different in French Canada -- through
it all, we do have a body of Canadian programming, and I guess our belief is
that, through all the investments that have been made and all the funds that
have been made and through all the work of the CBC, all of this has led to a
wave which is about to crest, and we believe that this benefit money can push
that wave to the point where maybe we can make a breakthrough so that popular
drama and popular documentaries and variety programming become good business
ideas as well as good cultural ideas. And if we do that, it will be a very
stunning accomplishment in Canadian broadcasting. And that's what we are trying
to do here. It is a big risk and, you know, if you ask us, are we going to be
able to do what nobody has been able to do for 50 years, we will say, "Yes, we
are going to" but, you know, there's a little voice in the back that says, "Yes,
we are going to -- comma -- we hope". But that's the advantage that this package
of benefits did to -- gives to us, is the opportunity to really make a profound
and fundamental change in the way things happen. And if we did it, it would mean
a whole bunch of things.
710 First of all, it would mean popular Canadian programs. But, secondly, it
would mean that the kind of higher level of Canadian programming, the arts
programming, the risky drama, the money that we have been subsidizing popular
drama with maybe could be put into that kind of programming. So we would have
the best of all possible worlds.
711 That's the kind of dream. And that's why we wanted to come through with a
package that focused on creativity and removed every single barrier that we
could think of to pure creative force and gave every advantage, at the beginning
of the process, in development money, and, at the end of the process, with
promotion and accessibility and that enabled -- and I think this is really
important -- the creator of the programs to have a direct relationship with the
broadcaster -- and many of the intervenors spoke about: our development team and
our programming team and working with together as partners between broadcaster
712 This gives us the opportunity to do that, rather than to have several
different creative voices that are in the mix.
713 We think it fits, responds well, and we wanted it to do this to your
emphasis on priority programming and to your Canadian policy framework which, in
fact, gave us the flexibility to say, "Here's the way CTV is going to contribute
to the system" -- and that's kind of a long-winded explanation of the
714 And I want to -- there's one thing that I want to say because we say a
lot of negative things about funds, but the dedication and the commitment of the
people who work at these funds is absolutely undeniable, whether it's Peter
Cadadotis or Gary Toth or Robin Mirsky or Andrew Schaefer, these are heroes of
Canadian culture and we don't mean to disparage that in any way; it's just that
if you are giving money away, you have to have rules, you have to have
guidelines, you have to have deadlines, you have to all the other things which
are good fiduciary responsibilities but, in the end, we have got so many of them
and they are so cobwebbed and linked and snarled, like Alzheimer's kind of brain
nerves, that sometimes they get in the way of the creative process.
715 We support, entirely, the funds and we will depend on them for our eight
hours of priority programming. But for this benefits package, our idea was:
let's take away every impediment we can to the creative folks.
716 COMMISSIONER COLVILLE: In asking the question I'm not trying to make a
case for funds or against funds; I'm really trying to understand how this money
-- and because of the nature of our rules and the purchase price -- this amount
of money falls out and then you have got to sit back and figure out, "Okay, how
are we going to spend this most profitably" -- "most profitably", in the sense
of the system.
717 I'm still wrestling with this issue, in my own mind -- and I don't know
the answer to this; I didn't look it up. A hundred and forty million dollars is
for priority programming.
718 How much would CTV spend on priority programming, say, in this current
719 MS McQUEEN: Our projections are $25 million this year.
720 COMMISSIONER COLVILLE: Twenty-five million.
721 So, in answer to one of the questions, you had indicated that if this
money had been invested in a fund it would have produced six to eight million,
on an annual basis.
722 So, if we are looking at 100 -- I know you would rather do numbers in
723 MS McQUEEN: Right.
--- Laughter / Rires
724 COMMISSIONER COLVILLE: -- and the 140 over seven years represents
about $20 million a year. So the difference we are looking at is about 12 to 14
725 I guess I'm having trouble, in my own mind, trying to get a sense of how
this 12 to 14 million is going to make this profound and fundamental change and
take us to the next level; how, all of a sudden, $12 million a year difference
between a fund and this way of spending it is going to just so radically change
this system and, more importantly, change it such that, at the end of the seven
years, presumably, that's going to just still be there and ongoing.
726 In reading through all of this, I had trouble getting my mind around --
what happens at the end of seven years and this money is gone? Are we right back
to where we were before? If not, why not?
727 What has changed, in the meantime, that somehow it overcomes the problem
that we have been talking about?
728 MS McQUEEN: Well, I think what we are looking to be able to do is create
models and, hopefully, have enough time -- have enough research and development
that, by the end of the seven years, we will have a model. For instance, on
television movies, we have got 14 chances to find a model that works, during the
729 Fourteen chances of, I guess, putting together a successful modus
operandi of doing these things, of the development process, of the funding
process, of the promotion process and of the export process, which we haven't
included in here because most of that will be part of the producer's
730 I would like also to add, however, that even if this doesn't work as a
strategy of breaking that bedeviling problem of Canadian programming, it will
add $140 million worth of priority programming and it will probably add more.
731 One of the things that we have done is -- plan to do, is take equity
investments in these programs and to provide distribution advances. We assume
that there will be some overall return on these investments and we have
committed to track that money and to commit it to further incremental priority
programming in the years after the expiration of the benefit.
732 So it won't all end after seven years. We will have some other chances.
733 But that is entirely -- I'm not exactly an expert on R&D, but my
understanding is that is what you do, you build models and you try them out and
at the end of it you find something that works and you stick with that. That is
734 MR. MACDONALD: Commissioner Colville, perhaps I could underscore the
nature of CTV's commitment here because it is a commitment that is pretty
735 It is not just a commitment to spend $140 million, it is a commitment to
produce 175 original hours of programming, but that original 175 hours is going
to mean that 175 hours of U.S. -- in all likelihood U.S. -- programming will
come off the screen.
736 As Ivan and Trina both said, the possibility of putting money into a fund
is there, it is always there, but it certainly does not carry with it the level
of incrementality or commitment that I think is embodied in this particular
737 COMMISSIONER COLVILLE: Yes, it is certainly a lot of time. I guess it
works out, depending on repeat factor, to about an hour a week.
738 MS McQUEEN: It works out actually to a half an hour of extra -- of
priority programming per week if you don't repeat any of it at all, and then
from there every time you repeat it it's an extra half hour per week.
739 COMMISSIONER COLVILLE: Well, like I say, if I broke down the money and
the difference between what a fund would have been and just putting the money in
on an annual basis and the time, I just find it --
740 MS McQUEEN: Well, first of all -- okay.
741 COMMISSIONER COLVILLE: Which is great. It's wonderful. Don't get me
742 I was just trying to see, as a result of that, where was that profound
change coming in the system such that at the end of the seven years we would
have overcome this problem we have faced for 50 years of television in this
country, in English Canada anyway.
743 MS McQUEEN: We don't come to this lightly and saying this is possible,
but I think the conditions are present for it to be possible.
744 We really think that just this last week we have seen -- I don't know
whether you would call it a change, but we are certainly seeing an evolution in
the ability of Canadian broadcasters and programmers to deliver Canadian content
that is very, very popular.
745 People can say what they want about Canadian Millionaire in terms of
whether it really is Canadian, but in fact it made a difference. It made a huge
difference in audience that it was Canadian. The highest American Millionaire,
the one with all the celebrities in simulcast, got a million less -- I think
approximately a million less than the Canadian Millionaire. That told us that
people are willing to see -- many more people are willing to see it just so an
ordinary guy from Regina or a librarian from Kitchener and Pam Wallin makes a
difference, makes a huge difference, makes a 30 per cent difference in the
people who want it.
746 Nuremberg, another Canadian drama with an audience level of two million,
which is often better than the biggest audiences that American programs get.
747 We are seeing -- I don't know what the metaphor is, but there are spikes
there that are telling us something. They are telling us that the conditions are
present for a successful experiment and that if we can push a little harder, if
we can push $140 million harder, and if we can develop these models, we may have
actually a chance of breaking it.
748 But in the end if it doesn't happen there is $140 million being spent on
priority programming, there are increased hours of Canadian content.
749 If we put it into the fund, none of that would necessarily have been
true. What you would get is no increase in the system in priority programming
hours necessarily, no increase in Canadian content, and certainly no possibility
of breaking the paradigm, and even worse crises when inevitably the funds ran
out, which they would tend to do at a certain point, and then we would be back
to square one.
750 So a fund probably would have been a lot better for us. It would have
been very simple, no accusations of self-serving, no responsibility for
guaranteeing that the programs will be produced, no increase over and above our
commitments for eight hours and, inevitably, some of the cash would have come
back to us to finance the eight hours of priority programming.
751 But in the end what you would have had is a system that delivers eight
hours of priority programming per station group every year. And that's just
great. Some of the programs would have been enhanced by the fund, but we thought
that we could do something a little bolder and a little more innovative and that
was our choice.
752 COMMISSIONER COLVILLE: When do you think we will know? Sitting here today
looking out seven years seems like a long way away, but I remember sitting in
this room seven years ago when we thought digital set-top boxes were going to be
just around the corner.
--- Laughter / Rires
753 COMMISSIONER COLVILLE: So how far down the road do you think it will be
before we have a sense that this experiment is working?
754 MS McQUEEN: Gee, that's an interesting question and it is a very hard one
755 COMMISSIONER COLVILLE: Because with this much money you think if we find
out a few years down the road we should change the mix?
756 MS McQUEEN: You would have the opportunity to do that.
757 Year one I think would be mainly a development year when we were putting
a lot of these pieces into place.
758 COMMISSIONER COLVILLE: Is that next year, 2001/2002?
759 MS McQUEEN: Yes. So it would be a development year. You would see some
programs on the screen for sure, but you wouldn't see the full range of priority
programming on the screen in year one.
760 Year two you would probably see -- by then we would be up to speed,
hopefully, let's say 90 per cent up to speed.
761 Year three probably would be the year in which we could say this looks
like it is working.
762 But boy, I'm thinking that I hope I am not in front of you in three years
with you reading that back to me because it is the kind of question that I feel
like saying "I have no idea" to, but that is not a responsive thing.
763 I think by the third year you should be able to say to us, "Well, what
did you really do?"
764 COMMISSIONER COLVILLE: What would you want to know to be able to answer
765 MS McQUEEN: What would I want to know?
766 COMMISSIONER COLVILLE: How will you know whether you think it is working
or not? What will you look for?
767 MS McQUEEN: Commercial success, by which we mean that we can take a
program to an advertiser and have that advertiser willing to spend money on the
program that equals or -- well, that gives us a commercial margin, a
satisfactory commercial margin.
768 COMMISSIONER COLVILLE: So in about year three we should -- probably by
the end of year three we should have a sense of --
769 MS McQUEEN: I think there would be a sense then.
770 COMMISSIONER COLVILLE: -- of that question. Okay.
771 MS McQUEEN: But you can see me perspiring as I answer that question.
772 COMMISSIONER COLVILLE: Well, I'm not trying to trick you in any way --
773 MS McQUEEN: I know.
774 COMMISSIONER COLVILLE: -- it's that, as you noted yourselves, and
Mr. Monty noted this morning and has been noted throughout this exercise, this
is an extraordinary amount of money. It is unprecedented and it is a new
approach to dealing with the issue. We all hope that it could and would be a
success, turning, as you pointed out, a system around, taking us to that next
level, to use your words.
775 But if it looks like it is not going to do that it comes under the
heading of "It seemed like a good idea at the time", one might want to change
the approach somewhat to take another approach to try to overcome that.
776 MR. FECAN: But you also don't want to be the Avro Arrow, just on the
brink of breaking through and then pulling back. It is really tough on the
R&D phase at what point to call it a day, at what point to push the extra
777 COMMISSIONER COLVILLE: I take your point.
778 MS McQUEEN: The fact is that the very least you would get is an
unprecedented commitment by a broadcaster. I don't think any broadcaster but the
CBC has appeared before you agreeing to increase its Canadian programming
commitment, so at the very least you would have that and you would have 170
hours of excellent -- 175 hours of excellent priority programming, plus all the
other benefits that --
779 COMMISSIONER COLVILLE: What I was getting at was more the issue -- and I
take your point on that, that you are going to get this extra half hour or hour,
depending on how you measure it, of programming per week for seven years, and
given it is going to start out slow and later on it will be more than that in a
given year. But if halfway through the system you got a sense that, well, when
the seventh year runs out we are right back to where we were seven years ago,
then you might want to say "Well, that experiment didn't work, let's try a
780 But I wouldn't want to do it so soon that -- it's like experimenting with
a new TV series or whatever sometimes. Some of the programs don't do well the
first year or so, and then all of a sudden they catch on.
781 MS McQUEEN: You are right in the sense that we have no intention of
782 COMMISSIONER COLVILLE: Switching gears a little bit, then, and figuring
out how we are going to measure this, prior to answering Question 23 you said
you wanted to provide a bit of an overview of the philosophy.
783 You said:
"CTV believes the Commission's legitimate concern about the incremental
nature of the benefits can be satisfied and has provided specific answers to the
question presented to us."
784 This was a bit of a preamble before answering Question 23.
"CTV also notes that:
a) It has committed to a defined number of hours over and above the 8-hour
b) The hours noted are all original. No repeats are included. Each program
will have a specific title for easy tracking.
c) No `bonusing' will be used in the calculation of drama hours."
785 Then you went on to outline a few others.
786 I guess my problem/our problem in dealing with this issue is there is
little doubt that it will be easy to identify the specific programs that the
money is spent on and indicate the program, how long it was, the amount of money
that was spent on it. The problem becomes: what is the base against which we are
going to measure that?
787 As you know, from several of the questions that staff had posed to you,
we are wrestling with some different alternatives to be able to figure out how
to do that, because it is difficult to know what would be the minimum.
788 I appreciate the answers that you have given in some of the questions.
The difficulty we are going to have in dealing with this issue, particularly in
light of the new TV policy where we have gone to the eight hours deliberately to
provide more flexibility for the broadcaster to be able to satisfy the
particular market, and, Mr. Fecan, as you indicated this morning, in order to be
able to provide variety across different private broadcasters as well so you
could find your own sort of niche in the marketplace -- having said that, it
seems to me it is still going to be difficult for us to figure out how we arrive
at what is the base now, what would that base have been on a going-forward basis
and therefore determine what is really incremental to what CTV would have
already been doing in any event.
789 I don't know whether you want to answer that in a general way or we can
go through sort of specific scenarios here, but I thought I would just give you
the opportunity because the questions have already been put to you, in any
event, about looking at alternatives.
790 CTV had in the past this expectation, particularly as it relates to
drama, of original-to-repeat of 70 per cent, which the numbers have shown that
you haven't quite reached that level over the past number of years. One approach
might be to use that as a base, assuming that it was going to be 70 per cent.
You can start by commenting on that, but I will give you the opportunity to
provide perhaps a more general comment on how we deal with this.
791 MS McQUEEN: Well, first of all, we understand that this is a critical
issue and it is our duty to satisfy you that in fact these benefits are
incremental. That's the key question.
792 We did note the comments that the staff made before the application was
filed. We obviously looked with care at the deficiency questions, and we have
also read in the intervention that there is concern about this. So certainly the
incrementality of this proposal is something that we have to reassure you.
793 I guess there are a couple of issues that you have identified. First, the
175 hours itself. I think that you have indicated that that is fairly simple in
terms of a reporting mechanism, that we can guarantee you and we will guarantee
you that we could even use a special code, for example, to log those programs so
you can track them by title. And there are no repeats. It's all original. No
bonusing. So it should be fairly clear and easy to do that.
794 But the second issue that you have raised is the effect of these benefits
on our priority programming commitment and how we might, in some way, I guess,
do less priority in the eight hours than we would have because of these
795 I would like to start by saying that we welcomed and have always welcomed
the new policy framework for Canadian programming because it does give us
regulatory equity among station groups and, most important, as the decision of
the Commission said, it provides flexibility for each station group to keep its
own identity, to make its own statement about Canadian broadcasting.
796 I don't know whether the Commissioners appreciate enough the shrewdness
of the decision that they made. I'm sure that they do. But by tightening prime
time, the two hours of prime time, and making us put our priority programming in
that, what you have, in effect, created is about 30 per cent of the schedule
that has to be these priority programs, and there is a built-in, huge business
incentive to put original high quality programs into those hours. We do believe
that that reduces any incentive that we would have had to in any way put more
repeats into those hours or cheaper programming, or any of those things, because
it is the heart of our prime time and the heart of our ability to earn revenue.
797 However, we do understand that the Commission does need more assurances
than that belief, than our belief that it is not in our business interest to do
798 We have thought about an expense monitoring mechanism, which we took from
the CanWest Global proposal. We would be willing to do that based on priority
799 We have filed -- haven't we Robin? I think we have filed our priority
program projections with you, both hours and dollars with you. We would --
--- Pause / Pause
800 MS McQUEEN: Okay. Apparently not hours but dollars. Anyway, we have
submitted those expenditure projections to you. We would be willing to be
measured against that as the baseline, since this is the first year of priority
programming. It's the only year we have. And we would be willing to make annual
reports to you that showed you that the expenses on priority programming had not
been reduced from the baseline.
801 MR. FECAN: And it's a year in which BCE has had no influence in the
setting of our schedule or how we decided to try and create our own unique
identity in the market that you have given us.
802 COMMISSIONER COLVILLE: That's the current year.
803 MR. FECAN: Yes, 2000-2001.
804 COMMISSIONER COLVILLE: 2000-2001. Right.
805 MR. FECAN: Yes.
806 COMMISSIONER COLVILLE: You have also filed the hours of priority program
for this current year. Would one presume that CTV, on a going-forward basis --
and I'm mindful of the problem we deal with here. This isn't your licence
renewal. That will be another opportunity for you, Mr. Fecan, to appear in front
of the Commission in another year or so. You just can't get away.
--- Laughter / Rires
807 COMMISSIONER COLVILLE: But I am struggling with this issue about what we
use as the base. Even with the eight hours, would one presume -- which was
outlined as itself a baseline as sort of a minimum -- that the eight hours would
be eight hours for seven years into the future, and that this outline of hours
that we have for 2000-2001, that's more or less what it would be for the next
808 MS McQUEEN: I assume that it would be whatever the license renewal
process comes up with. Wouldn't it?
809 COMMISSIONER COLVILLE: I take your point. This is what I'm wrestling
810 Absent this deal, what would CTV have been doing on a going-forward basis
to be able to know how much of this $140 million for priority programming is
incremental to what CTV would have otherwise been doing?
811 On the face of it, what I see is CTV would be doing on a going-forward
basis what it is doing this broadcast year and no more any year going on into
the future, and/or would do eight hours of priority programming each and every
year for the next seven years and would do no more than that.
812 So we will assume that this is all incremental on that.
813 But I have to wonder in my own mind, or we wonder, whether, absent this
deal, CTV would have in fact done some more programming than the minimum eight
hours or than the schedule here shows.
814 MR. FECAN: It is very hard to predict what the future brings us.
815 But what we do know is -- just to kind of go over some of the ground you
have touched on, we do know that the dollars proposed are clearly incremental.
The hours are identifiable and clearly incremental. And it is clearly
incremental to what we are doing in our first year of priority programming, as
we all, as an industry, regulators and broadcasters and producers, try to figure
out what our niche is, how successful it becomes --
816 It is kind of hard to judge because we are even new in the priority
program policy regime.
817 So I understand your difficulty, I really do. And I am sure you
appreciate ours, because we are trying to do something a little different, a
little more of what we think might be more interesting for the system, and we
felt that this was the best way of accounting for and demonstrating the
incremental dollars and the incremental hours. What else could we use but the
first year of this new policy? And we will all see where it goes from there.
818 COMMISSIONER COLVILLE: And assume that that would be a flat line.
819 MS McQUEEN: I guess you could -- there is so much imagination involved in
this process that it is hard, but let's say this transaction had never taken
place. We would have appeared before you for our licence renewal, and at that
time there would have been a decision on what our conditions of licence would
be. That licence renewal will still take place, those conditions of licence will
exist, and this commitment will also exist.
820 So I am not sure where the opportunity for the Commission to talk to us
about other things is diminished by this particular application.
821 COMMISSIONER COLVILLE: So would your view be that, depending on how we
approach that at licence renewal time, the base could be adjusted at that time?
822 MS McQUEEN: We are not at the licence renewal hearing yet, and we haven't
really started to consider it.
823 I am just saying on a kind of theoretical basis that whatever was going
to happen at that licence hearing could still --
824 I mean, nothing has happened to stop that process from taking place,
whatever it produces. So if you had expectations for that renewal process, that
is what we would come before you to discuss still.
825 MR. FECAN: All we can do is try to demonstrate the incrementality now.
But if the baseline shifts up or down, depending on whatever takes place at the
group licensing hearings, not just what we appear in front of you with, but what
CanWest-WIC will appear in front of you for and what TVA will appear in front of
you for, it seems to me that that would be a really good time to look at the
whole situation with some quality, because everybody is in front of you at the
826 We are trying to isolate this situation with the facts we know today.
827 COMMISSIONER COLVILLE: I understand that, and I understand that there is
a number of moving parts here, one of them being this, and the other being the
fact that we have a new TV policy, you are at the end of your licence term next
year and so on.
828 As was said at the outset, the struggle was trying to figure out whether
this was money being spent on things that CTV would have otherwise done anyway,
as opposed to being incremental.
829 MS McQUEEN: If we went through the benefits one by one, I think in
totality you would see that no broadcaster in the world -- or no broadcaster in
Canada -- no broadcaster in English Canada would have come before you with
benefits that are remotely like this.
830 And look at the numbers. We are going to spend $25 million on our eight
hours of priority programming. We are going to spend $20 million per year on 175
hours. So what we are doing is saying that there is a special category of
programming here which we are using to build models and to develop that is far
above the normal licensing policies and practices of any private network -- of
any English Canadian network. It just is of a magnitude that prima facie -- I
think that is the word -- is incremental. Nobody would do this if it weren't for
this kind of benefits policy. It just wouldn't be done.
831 Then you want to find out: Is it incremental to the money that we are
spending. And we are saying, yes, we will do this expenditure of monitoring
mechanism, so you can ensure that the eight hours won't lose by the 175 hours.
But the way we funded the 175 hours and the programming that we have chosen and
the ads to it, in terms of development, in terms of promotion, are quite simply
unprecedented. It is different from anything that has been before you before,
and that is recognized in the intervention.
832 People are worried about whether it is incremental. Absolutely. But there
is a genuine excitement about these particular 175 hours, as you will hear from
833 COMMISSIONER COLVILLE: I have no doubt about being able to identify the
175 hours, the $140 million, by program name and by genre. I think that is going
to be relatively easy to do, and you have committed to file a report which will
identify all of that. The problem is going to be determining what is the base
against which we measure whether or not this is incremental.
834 Staff, for example, had raised the issue with you about this percentage
of original to repeats, and particularly in drama, that the last licence
expectation had been 70 per cent and in actual it ranged between 50 per cent and
60 per cent, I gather. So then the question becomes: If we had assumed that your
base was really going to be what it is at 70 per cent, then instead of the 209
hours that showed up on your schedule, it perhaps would have been 230 hours. So
maybe we should be considering that the base is 230 hours and not 209, and
therefore the 175 is incremental to that.
835 Do you want to comment on that?
836 MR. FECAN: I think what we filed with you is what we are actually doing.
837 In terms of the 70:30, I think that was many years ago, if I am not
mistaken. And I believe that in the Canadian program policy hearing you heard
evidence that in most cases the repeat factor is three or four times for
dramatic programs. Ours is much lower than our colleagues in competing networks,
or station groups. And this is a concern of ours, to try to refresh it as much
838 But I think you heard from both other broadcasters and other producers
that the repeat factor is way higher than that generally.
839 So, in the context of that, I think it was wise all around that it was an
expectation. I think we performed well ahead of our peer group.
840 MS McQUEEN: One of the things that we are -- we are happy with the
expense monitoring, because we think that is the heart of the matter: How many
dollars go out to the production community to spend. We have to do the eight
841 The question is: What will the quality of those eight hours be?
842 In order to make this kind of model work, one of the things that we want
to be able to do is to present a schedule that is the best possible schedule
that we can present. If we can take one of these 175 hours that is really
terrific and repeat it several times, that is better for the viewer than being,
I guess, put in a situation where we can't repeat that and we have to repeat
something else that maybe hasn't been as attractive.
843 So we are concerned that the repeat factor really is a scheduling issue.
In other words, it is looking at how the viewers want things and putting our
best foot forward with the viewers. Whereas the expenditure commitment is really
a commitment that, I guess, puts money into the system in an incremental way.
And if you develop a great program that people want to see two or three times --
and people really are now -- and you have heard this over and over again --
there is so much television that repeats are becoming a service to viewers.
844 So I am just saying that in the creative aspects of this, which is to
turn Canadian television into very popular television that viewers want, we
would like to be able to have the flexibility to choose the most attractive
845 MR. FECAN: When you look at it as a programmer, what you very much try to
do is, the highest quality ten out of ten programs that you can possibly get,
you want to repeat. You want people to see as much of it as possible. It's the
things that don't work that you don't want to repeat.
846 You know, you don't want to discourage repeating what actually does work.
847 COMMISSIONER COLVILLE: No, and we don't want to undermine the flexibility
that we provided in the new policy, either, for the sake of being able to come
up with a way to measure the incrementality of the benefits package at the same
time. That is what we are struggling with here.
848 MS McQUEEN: If I could just say one more thing about this repeat factor,
it goes back to the American model, where they throw out hundreds of more hours
than they ever screen. But the ones that they do screen you see over and over
and over again: Star Trek, Seinfeld -- if something is a hit, you are going to
see it over and over again. But they get rid of their failures fast. They
disappear. And that is a luxury that we have never had in the Canadian system.
We kind of are stuck with what we have that didn't work. That is why we are
concerned, really, about going back into that old mold, where we have to repeat
each program in a kind of lock-step way, whether it is a great program or
whether it isn't a great program, to make an administrative commitment.
849 As I say, it seems to me that what producers are probably -- and you will
hear from them -- are concerned about is whether we are going to be spending the
dollars that we would have spent anyway.
850 COMMISSIONER COLVILLE: So I take it that at the end of all of this your
position is that we should take the current year's schedule for hours and
expenditures and use that as the base, and the 175 and $140 million should be
considered to be incremental to that.
851 MR. FECAN: Yes.
852 COMMISSIONER COLVILLE: And depending on what your proposals are for
licence renewal, I suppose that one could perhaps rethink some of the
incrementality at that time.
853 MR. FECAN: It is not very far away, the licence renewal.
854 COMMISSIONER COLVILLE: Another suggestion that was put forward was, if
you think about the 25 hours, and taking your points about repeats, you would
perhaps repeat, on average, each hour once, and that might work out to be
another hour a week. The CTV commitment would simply be nine hours instead of
eight hours with this new --
855 MS McQUEEN: We would be okay with eight and a half hours, but I guess --
I don't want to say the same things about repeating again, but we don't
necessarily think it is a great idea, in a research and development model, that
we have to repeat every single thing, and some of them won't be capable of being
856 For instance, the documentaries that we are doing may be very topical.
The Big Canadian Party, the variety special may not stand up to a repeat,
depending on what it is, whereas others might be able to be repeated several
857 So I guess, as I say, the eight and a half hours, obviously, if it were
averaged over the seven years would be no problem. But kind of being ordered to
858 COMMISSIONER COLVILLE: But how would handle the eight hours, then, in
859 MS McQUEEN: Well, in the eight hours, it would be situation normal. Life
would go on as if the BCE transaction hadn't happened. Except if the BCE
transaction hadn't happened, CTV probably wouldn't be around in its present form
to do any of this stuff.
860 But my understanding is that we would spend our $25 million, do the
programs in the priority program genres, repeat them as we thought was great for
our schedule and -- normal process.
861 MR. FECAN: And for the hours that are identified, the 175 that are
identified as incremental, that does work out to an average of half an hour
over, especially if you allow us to average over the seven years.
862 When it merits, we will repeat. And clearly, if it works, we are going to
want to repeat. And if it doesn't, we won't, and I guess we are just feeling
that it's unnecessary to have a situation where you have to repeat something
that is fundamentally R&D.
863 COMMISSIONER COLVILLE: Okay, switching subjects just a bit. On the
question of preferential treatment in terms of access to the fund, how do you
propose to deal with that question in terms of Landscape Entertainment or Dome
Productions or any of the other production companies that are either directly or
indirectly affiliated with CTV.
864 MS McQUEEN: We looked at the interventions on this respect and their
suggestions, and the suggestions on how we decide what an affiliated production
company is range widely. We all heard about those at the digital specialty
865 Our proposal is that a company is affiliated if we own 34 per cent or
more of it. There are other numbers in there. I think Alliance Atlantis was 30.
So some number like that that you would mandate would then become the affiliated
866 So that would take care of Landscape and Dome and so on and so forth,
about whether they were affiliated or not. And at that level, either 30 or 34,
we would have no affiliated production companies.
867 Our suggestion is that there is only one actual percentage. I think the
French Producers Association said the number that should be produced by
non-affiliated producers was a preponderant number, and the English Producers
Association said that there should be a number, and the Directors' Guild said it
should be 100 per cent.
868 So our number is, let's say, 80 per cent of the programming should be
produced by non-affiliated companies. The reason we are carving out a small bit
is because number one, if a production company that we are affiliated with -- if
we have one during the period -- has the rights to a wonderful book or some
talent or something, we don't want to be absolutely barred from ever doing
business with an affiliated company.
869 Secondly, some of these are documentaries over which we might like to
extend journalistic control in respect of investigative documentaries or other
kinds of subjects.
870 And thirdly, the big variety show, on occasion, might be something that
involves coast-to-coast mobiles and would be more effectively -- that we would
find it useful and would give us the opportunity to put more money on the screen
if we used the Dome Production company.
871 So that's how we came to a sort of 80 per cent non-affiliated level.
872 COMMISSIONER COLVILLE: Non-affiliated would include anything less than
873 MS McQUEEN: Anything less than 30 or more than 30?
874 MR. FECAN: No, I think what Trina proposes is a definition of at what
point are you an affiliate, and the definition that we put forward was 34 per
cent is the line. Alliance Atlantis, I think, put forward 30 per cent. At what
point a production company is affiliated to the broadcaster, so above that, you
are below that, you are not.
875 COMMISSIONER COLVILLE: What company gets caught between 30 and 34?
876 MR. FECAN: Pardon me?
877 MS McQUEEN: It's an actual financial thing in which, if you are at 34 per
cent, you have certain protection as an investor. You don't have control, but
you can't be squeezed out, and there are some other aspects at 34 that you don't
have below 34. So that's why we like 34.
878 MR. FECAN: And at the end of the day, we are not fussed if it's 30. But
we have a choice and you are asking us for what our choice might be. It would be
879 COMMISSIONER COLVILLE: So it's 80 per cent of the money would go to
companies of less than 34 per cent, affiliated or no affiliation whatsoever.
880 MR. FECAN: Yes, and I think what you have to keep in mind is, certainly
in our case, over the years, we have non-controlling portfolio investments in
just about every publicly traded Canadian production company. Canwest, I know,
through their public disclosure, has 21 per cent of the vote of Alliance
Atlantis. You know, you can't possibly make an argument that Canwest controls
Alliance Atlantis at that level.
881 So I don't think it would be fair to those companies to prohibit them
from accessing on the best ideas basis that part of the funds we are suggesting.
882 COMMISSIONER COLVILLE: And so, as a result of that, I presume you
wouldn't want to make a commitment to have a certain proportion of this go to
companies where you had absolutely no involvement in.
883 MR. FECAN: If that's what you wished, we would certainly consider it. I
think you will hear a lot of consternation from every publicly traded company,
and I think Alliance Atlantis would certainly be concerned about whether they
could be getting benefits from the Canwest funds, because, you know, production
companies need capital and in small ways, we, among other broadcasters have been
investing in those companies. We have no control of them, of course.
884 COMMISSIONER COLVILLE: Final point. Part of the money that you have
proposed here is for third-party promotion, $10 million. I guess part of the
question that arises from that is to what extent should we be considering that
normal course of business and that money spent on promotion shouldn't be
considered to be incremental. You have $3 million for Movie of the Week, which
is a new priority Movie of the Week, and $7 million for general third-party
885 MS McQUEEN: Commissioner, I think you would have to... As I understand
the test, one of the tests is benefits that would not have occurred except for
this transaction. There is a council of perfection which says that broadcasters
should put huge amounts of money into promotion.
886 The fact is, in the normal course of business, broadcasters have not
chosen to do that because of their other commitments and their other
expenditures. Although we all know that we should promote our programs and we
all want to promote our programs, often that just doesn't last past the budget
887 I think you would want to satisfy yourself perhaps by asking interveners
whether in fact this kind of promotion budget had, in the normal course of
business, ever been attached to a program project. We believe that answer is no,
it hasn't been.
888 COMMISSIONER COLVILLE: So could you satisfy us in the benefits report,
then, that this money is incremental and being spent to promote the incremental
programs that $140 million is funding?
889 MS McQUEEN: Yes, we could.
890 COMMISSIONER COLVILLE: You would be able to do that, okay.
891 All right. Thank you. Those are all my questions, Madam Chair. Thank you
892 THE CHAIRPERSON OF THE COMMISSION: Thank you.
893 Madame Wylie?
894 COMMISSIONER WYLIE: Do I understand, Ms McQueen, that whereas in 2001,
you will spend $25 million to produce eight hours of priority programming, you
will spend $45 million in 2001-2002 to produce eight and a half hours of
895 MS McQUEEN: Yes.
896 COMMISSIONER WYLIE: So what is your comment to the posit that there is an
advantage accruing back to CTV because those hours of programming are likely to
be more exportable -- I understand that you would re-invest that money -- but
are more likely to draw bigger audiences to Canadian programming, which, of
course, is great. But by drawing better audiences and coming closer to making
money with Canadian programming, a benefit is accrued to you.
897 Mr. Fecan is very anxious to...
--- Laughter / Rires
898 COMMISSIONER WYLIE: That is maybe a kitchen argument, but there it is.
899 MR. FECAN: And it's an excellent argument. But the other part of it is
that the money replaces the money that would have been spent by the public
funds. So we do hope that the quality is higher and I think, you know, that's
part of the risk reward continuum in the thing.
900 But the largest part of the difference is that what we are doing is we
are substituting the money that, you know, in such a program might have normally
come from Telefilm and the Canadian Television Fund, and other export
distribution guarantees and other kinds of things in one-stop shopping.
901 So it's not entirely to just improve the quality. Yes, we hope it will,
but it also substitutes a whole bunch of other funds.
902 That was one of the things that the interveners really said to us. You
know, whatever you do, don't screw up the fragile system that there is. If you
are going to do stuff, don't make it harder for us by putting more pressure on
the existing funds. And so, when we said, "Okay, well, we would like to see more
actual priority programming on the air", how do we do it without pushing the
other funds into tilt, which would impact negatively on other producers, other
broadcasters, a whole bunch of people, and so, part of how we figured out that
we are going to design this is so, you know, that it is neutral to the other
broadcasters and producers and doesn't hurt by putting more pressure on a very
fragile funding situation.
903 MS McQUEEN: And if I may add to your question, which I think concerns,
"Well, isn't this self-serving because these programs are going to be so great
that advertisers will put more money into them?", and I think the answer to that
is what we are going to have to take off to put those programs on. Because if
you look at our commitment to Canadian content, the 60-40, and the eight hours
of priority programming, our choice is to take off sports -- which is very, very
lucrative programming -- or to take off American programming -- again, very
904 So, the idea that a Canadian program, even though it is well funded and
well created, will draw as much revenue as an American programming, in the first
couple of years.
905 I mean that's the whole problem with the system that we are trying to
solve is that Canadian programs don't have as good an audience margin. Maybe by
Year 6 or 7 it will be true. But if it's true, it will mean that we have found
the model, and that will be a benefit to every single broadcaster in the system
and to every single viewer, because it will mean that we have found the way to
produce popular Canadian television as a good business deal.
906 COMMISSIONER WYLIE: But you would agree that to get around this question
of incrementality -- which, of course, has a certain artificiality to it -- one
has to believe that the quid pro quo will be your success in Year 3, and I can
see why you would be perspiring.
--- Laughter / Rires
907 COMMISSIONER WYLIE: Because, otherwise, what we are doing is where you
raise the long debates we had when we hammered out a new policy and the fact
that one of the goals was to create equity and so, now, we are back to, "To do
this, I have to lose a half hour, which is costly, and my competitor doesn't
have to" --
908 MS McQUEEN: Well, absolutely.
909 COMMISSIONER WYLIE: There is a simple, at least apparent, equity to --
that the system would be skewed back to possibilities of inequity.
910 Now, is that the price that the Commission and the broadcasting system is
prepared to pay for the possibility that you will be very cool in Year 3 because
911 MS McQUEEN: Well, you know, I think it's more than that. I think we are
kind of saying to ourselves, "We are going to do this", even though it would
have been so much simpler to put it into a fund and then we wouldn't have to
have these arguments. We think we are stepping back from the kind of regulatory
equity because we will be coming -- we are coming before you with extra priority
programming and we are taking in expense monitoring mechanism for our priority
programming. So, already, we kind of have stepped away from the simplicity, the
beautiful, elegant simplicity of the priority programming.
912 But, you know, we want to satisfy you that it is incremental. And we want
to do this because we think it's a chance to change the system. But we can't
deny that it would have been a whole bunch simpler to put it into a fund and
forget about it. You know, there's a joke, "We will pay anything, as long as we
don't have to put it on the screen, about the funds". We do want to put it on
the screen. We want to guarantee you that this money will be on the screen for
viewers. We are taking personal responsibility for that. We are not putting it
into a fund where we never have to worry about how many hours of programming it
delivers. We are saying, "We are going to deliver this, as incremental funds".
Yes, I guess when you do something a little out of the road, we give you
problems, and we are trying to solve the problems, and we understand that we
have to give you these reassurances.
913 COMMISSIONER WYLIE: Yes, well, lack of regulatory equity doesn't usually
stem from this side of the bench.
--- Laughter / Rires
914 MS McQUEEN: I will ponder that.
915 COMMISSIONER WYLIE: No, but it's usually the -- it's usually the
licensees who say, "My competitor is allowed to get away with this and look at
how little he's doing for it; even though he's not very intelligent, does he do
it well --"
--- Laughter / Rires
916 COMMISSIONER WYLIE: " --"there's so much lack of equity.
917 By the way, I can't resist but to warn Mr. Monty that he has to instruct
Miss Scott, if this is approved, that she can't be citing from Global studies.
Anything Global says, does, is neither relevant, interesting or of any value
whatsoever; even if they only commissioned it.
--- Laughter / Rires
918 COMMISSIONER WYLIE: In the reply, I believe -- yes, in the reply, where
you commit yourself to putting back into funding additional Canadian priority
programming any money that may be generated from export, which may be another
advantage if it's better programming because you spend 45 million rather than
25, or additional priority programming that would go to Canadian pay or
specialty services would also be used as additional funding.
919 Would that also be true if that programming ends up on one of your
specialty services, that there would be an accounting that would consider that
additional funding to be reinvested?
920 MS McQUEEN: We have offered a kind of bouquet of licence fees.
921 Let's take the movies, as an example. There's a $500,000 sum that's been
set aside for a conventional licence, a specialty licence, and Internet rights.
The producer has an option which of those -- well, he has to take the
conventional licence fee, of course, but may or may not choose to take the two
others. Obviously, if it's a program that's relevant to one of our specialty
channels, we would like to take that specialty channel licence for ourselves.
922 Is that the question that --
923 COMMISSIONER WYLIE: Maybe my question wasn't clear.
924 I'm looking at paragraph 19 of the reply -- although it's perhaps a
little ahead of the game since we haven't heard intervenors -- but where you
say; and I quote:
We will redirect any and all profits derived from the distribution of
additional priority programming to foreign broadcasters or to Canadian pay or
specialty services into additional Canadian priority programming. (As
925 My question was: If such programming ends up, for example, on the
Discovery Channel, would you do an accounting that would say that the value of
that window also goes back into additional funding?
926 MS McQUEEN: Yes, we would.
927 COMMISSIONER WYLIE: Okay. Because some of them are your own and some
other programming would be quite suitable.
928 Thank you.
929 CHAIRPERSON OF THE COMMISSION: Given that I was interested in the impact
on the broadcasting system, as a whole, in three years, if we were to grant you
the permission to do that acquisition -- or I shouldn't say to Mr. Monty because
it's not the other way around yet; although --
--- Laughter / Rires
930 CHAIRPERSON OF THE COMMISSION: -- you are looking for a profitable
model, it's not that way yet.
931 So let's say that, in three years, you found the secret of the magic
potion and you have it. What does that mean for the other components of the
system? Especially your competitors. Does that mean that they have to find
another generous company like BCE in order to create that envelope of benefits
in order to be capable of making that breakthrough? What does it -- you know,
what will be the lessons learned that it will be profitable to CTV, on a
short-term basis, but more so in the long run, as you are aiming at, and also
for other players into the game?
932 MR. FECAN: If we demonstrate and make the case that we can create popular
Canadian programming, pay for it through advertising and through a little bit of
export, not rely quite as heavily, or at all, on the funds, that's a model that
everybody can use.
933 If we make this work, it is not proprietary, in any sense. It is out
there as evidence for everyone to replicate. So I mean that's, you know, the
thing we are trying to change is not just for our own little, you know, piece of
the world; it's for anybody that plays in this area.
935 MS McQUEEN: I think that says it all.
936 CHAIRPERSON OF THE COMMISSION: But the ingredient you have in order to do
that research and modelling is still $140 million -- which is a very significant
amount of money.
937 So, can it be said that unless you have that kind of extra money to do
the research or to do the exploration and the trial and errors that it cannot be
achieved? You know, that's --
938 MS McQUEEN: Well, I think what we have always said to ourselves is that
we had better not put this money in, $2.5 million dollars, into a movie because
we will never get it back out. No advertiser will ever pay for it. So you don't
939 If any broadcaster has a feeling that they can put $2.5 million in and
they will get $3 million out, or $3.5 million out, they will do it.
940 Somebody has to be the first one to line up, to make the investment and
to figure out a way to get a return on it. That's what this transaction gives us
the opportunity to do. It would be, in other circumstances, wrong for our
shareholders to go out and invest this kind of money in a Canadian product.
941 We are treating this benefits transaction money as an R&D that will
allow us to invest. And I guess that is how all kinds of inventions and models
come to the market, is that somebody figures out how to do it, puts it on the
market and a model is born. That is the simple thing.
942 It is not a really big thing. It is how much goes in and how much comes
back to you.
943 What our problem is, we have always put very little in because of our
belief that none of it will come back to us. Hopefully we will find a way, by
working directly with creative people, by putting in the proper development
money, by having a real relationship through the whole process, by exquisite
promotion, that we will get that money back. But it is who is going to take the
first step, and this transaction gives us the opportunity.
944 CHAIRPERSON OF THE COMMISSION: Thank you. Thank you very much.
945 COMMISSIONER WYLIE: I'm just wondering how quickly your competitors are
going to look for that mythical aluminum company to buy them, get a fund.
--- Laughter / Rires
946 MR. FECAN: Well, they should hope the aluminum company cares as much
about content as BCE.
947 CHAIRPERSON OF THE COMMISSION: Thank you.
948 We will take a break for 15 minutes and then we will come back and
complete the questioning of the Phase I by exploring the cross-ownership issues,
although we have touched upon it a bit, and then the rest of the benefits.
--- Upon recessing at 1555 / Suspension à 1555
--- Upon resuming at 1610 / Reprise à 1610
949 PRÉSIDENTE DU CONSEIL: A l'ordre, s'il vous plaît.
950 Nous sommes maintenant à la dernière phase de la Phase I.
951 Alors, avant de donner la parole à madame la Vice-Présidente Wylie qui va
poursuivre sur le cross-ownership issue.
952 I would like to give the information for many of you who have asked: We
will complete this part and then we will take a short break and we will start
953 I am told that there are three intervenors who want to appear tonight.
There is the CCTA, the CCSA and the union, the CEP. So those will be the
intervenors we will hear today and tomorrow morning we will pursue with that
phase at nine o'clock.
954 Madam Wylie.
955 COMMISSIONER WYLIE: Thank you.
956 You have discussed a little bit with Commissioner Wilson the question of
undue advantage, et cetera, and I have the responsibility or job here, assigned
by the Chair, of discussing with you the level of concentration, cross-ownership
and anti-competitive behaviour that may result from this transaction.
957 To set the stage, if I look at page 16 of your deficiency response, and
the pages following, you list examples of consolidation outside and within
Canada that have created what you described as major spheres of influence
combining a variety of content sources with multiple carriage possibilities.
958 Now, could we conclude that approval of this transfer would create such a
sphere of influence for BCE?
959 MR. GOURD: If we take a global look, if we take a look at foreign
entities -- and Jean has said this morning, these foreign entities, whether
AT&T, British Telecom, whether AT&T and Liberty Media, they are of
course significantly bigger, significantly more diversified geographically than
BCE-CTV would be.
960 Another example would be Seagram Vivendi with very significant diversity
by activities. For example, they are in music, they are in film production and
also they are diversified geographically as well, servicing many foreign markets
and at least two continents.
961 However, we would have one more Canadian player which would have a much
smaller size globally but the ability, nevertheless, in Canada to compete
against these foreign entities in the Canadian market and provide Canadian
962 Because one of the consequences of the new technologies, whether
satellite to cable, which brings a diversity of U.S. programs on our cable
systems; whether DBS that does not necessarily follow in their footprint
national boundaries, and we know that there is a significant grey market in this
country and, as Jean has mentioned, more and more the Internet which will bring
hundreds if not thousands of voices from many countries into the Canadian market
while facing this massive arrival which is an enrichment in terms of viewer
963 As we said in our presentation, we need stronger entities which can
compete not only against each other in the Canadian market in innovation, but
compete also against the foreign entities which provide services.
964 So, therefore, BCE-CTV would be one of these bigger Canadian entities,
more diversified, which would be able to compete indeed and offer Canadian
965 COMMISSIONER WYLIE: I have here a number of pie charts illustrating a
BCE-CTV combination in Canada, and I quite understand the other side of the
coin, which is competing against the world as technology makes the world a
village -- that sounded good, almost as good as paradigm.
--- Laughter / Rires
966 COMMISSIONER WYLIE: But I find that the characterization of sphere of
influence quite interesting -- and it is, of course, what raises concern for
some regarding the impact of the market power of a BCE-CTV combination could
yield, more particularly the undue advantage that could result for BCE or CTV;
the impact on the state of competition in the area of communications as a whole;
the impact on the diversity of voices and choices from consumers which could
flow; and possibly the impact on the independent producers since your sphere of
influence or the BCE-CTV combination includes producers of both programming,
music, publishing, et cetera.
967 The question I would ask is: Even though when we raised a vertical
integration problem, undue advantage, et cetera, you raised the relatively small
number of subscribers that BCE has as a distributor of programming now that they
would own, if this were approved, compared to the terrestrial operators, the
cable companies. But would it not be, nevertheless, a power one-stop shop for
the provision of information, communications, entertainment that could have an
effect on controlling rights to access and -- to content and access to
customers, in that for at least one advantage that would flow, regardless of the
number of ExpressVu subscribers, would be the ability to bundle or to create a
one-stop provider of a number of services?
968 MR. GOURD: If you agree, I will give a general comment and then focus on
the broadcast distribution market and then ask Sheridan to expand to other
969 The general comment I would like to make is that indeed the landscape has
changed very significantly since we even started our journey with CTV. For
example, Jean has mentioned the divestiture of Nortel, which has changed the
size of BCE and indeed has provided an incentive for BCE to be effectively an
integration information, communication and entertainment services company
offering, hopefully, over time a one-stop shopping approach.
970 What has been noticeable as well is that others have pursued that journey
and, for example, subject to your approval, Quebecor/Vidéotron would be of a
size that would be closer to BCE than it was before, and would be also more
important in broadcasting proper than BCE-CTV would be at least at the level of
971 We can refer to Global-Hollinger as another example. We have also Corus,
Shaw and Rogers.
972 Then the question is: this entity, BCE-CTV, competing against the other
entities I have mentioned, is that entity, BCE-CTV, in a position to exercise
market power to stifle competition, to even have abusive behaviour that would
not backfire on it from a business perspective because it would be big enough to
survive it? The answer is no. The answer is no in the various markets that it
973 Let me focus secondly on the broadcast distribution market.
974 We have a chart, I don't know if we can put it on the screen, which
indicates the percentage of subscribers that Bell ExpressVu has as compared to
others. You can see that if you take a look at the total market, Bell ExpressVu
has 5.3 per cent of the subscribers in Canada. With 5.3 per cent, you cannot
exercise, quite frankly, a market dominance of any kind. And we can notice
others: Shaw has 19, Rogers 23.8, and Videotron, 16.5. So in the video market we
do not exercise dominance.
975 In the programming services market, again CTV, which is a leading
broadcaster, is one of many, has very strong competitors, we believe,
subjectively speaking, is the best one, but others have their strengths too. So
there again, we are not a dominant undertaking.
976 Let me turn to Sheridan for the other markets.
977 MS SCOTT: Thank you, Alain.
978 Maybe I will just come back briefly on what Alain has said, because when
we look at this question, Commissioner Wylie, we look at the range of activities
that we are involved in and the range of activities our competitors are involved
979 I have always seen it kind of as a continuum that could go from content
creation through to broadcast per se, specialty services, portals, ISP and some
of the telecommunications services. If we look at that continuum which reflects
this emerging converged world, the information communications and entertainment
communications company, we see that this is absolutely the direction that other
large corporations are moving in around the world.
980 If I stay at home for now and look at Global CanWest, I see, going across
the list, that they would be in print media, they would be in television
production, they would be in broadcast TV, specialty channels, new media, Web
portals. They have a presence in all those areas.
981 Quebecor similarly: print media, television production, TV broadcasting,
specialty channels, new media, Web portals, and they are also in ISP and engaged
in transport through their BDU activities. They will become a CLEC, a
competitive local exchange carrier, and an interesting backbone provider.
982 The whole range of activities that we will be offering to customers, they
will be involved in as well.
983 As Alain has done, I think it is exactly the right question he has asked,
and you have asked Commissioner Wylie, which is: do we have market power in any
of these activities?
984 We may be very large, some of these other companies are large in terms of
revenue, but when one looks at regulating activities, when one talks about
dominance, it is not all being large as a reflection of dominance. It is: are
you dominant enough to exercise market power?
985 If I look through some of these marketplaces, and Alain has talked about
the distribution market, he has talked about the broadcasting market where there
are a number of vibrant competitors -- and I'm not going to mention, Mr. Monty,
the name of that other competitors, I have been told not to do that, but there
986 COMMISSIONER WYLIE: As long as you said Global.
--- Laughter / Rires
987 MS SCOTT: Touché!
988 So there is extensive competition in those areas.
989 If I look at new media and the portals, my goodness, that's an area where
there is absolute competition.
990 We are very proud of the portal that we have, but if we look at the time
spent, the amount of time that Canadians spend on portals, portals both foreign
and domestic that have similar content, in the month of July 6 per cent of
surfers' time were spent on the Sympatico portal. It's hardly any sort of
dominance where we would be able to exercise market power.
991 So, Commissioner Wylie, just to come back on your question, I think it is
important to try to analyze each of those separately before one goes to the
whole bundle and say, "Okay. So maybe you are not dominant in any of those
separate markets that make up the offering to the consumer, but you are awfully
big." I must say, that is never a way that economists have come at it, and it's
not even the way that the Commission has come at it.
992 If we look at your activities on the telecommunications side of the
jurisdiction, you have had to come to grips with this question before with
respect to the bundling of our services. You have heard from our competitors
over the years that it is unfair because we could bundle services like our local
service where we have market power with other services like wireless or long
distance. The Commission has had a tradition, since 1994 actually, of figuring
out how to regulate this.
993 What you have addressed your mind to is market dominance in each of those
markets that made up the aspects of the bundle. You have concluded that it is
acceptable for us to bundle without any further regulatory intervention. You
have very clear and concise rules, and the rules centre around those aspects of
our business where we retain market power, and that would be in the residential
and business service to consumers. But nowhere else have you concluded that we
would have sufficient market power, such that additional regulatory requirements
would be put in place, other than, as I said, the basic bundling rules which I
think in a broadcasting hearing you really don't want to hear about.
994 COMMISSIONER WYLIE: You raised Global in comparison, but as far as --
995 MS SCOTT: I'm not allowed to any more.
996 COMMISSIONER WYLIE: As far as I know. But, heaven knows, by the time we
go for our break --
--- Laughter / Rires
997 COMMISSIONER WYLIE: Global has no wire, ADSL or otherwise, digital or
otherwise, or coaxial cable into anyone's home, so they may have platforms,
portals, but they don't have an infrastructure that reaches the home.
998 I understand the ExpressVu argument, but the world doesn't stand still.
We have spent four weeks looking at applications for digital services and both
the cable operators and you were applicants. So if you are lucky and we give you
three licences more than you applied for --
--- Laughter / Rires
999 COMMISSIONER WYLIE: -- added to the possibility of putting the
duplication on digital, the analog services you already have, I think there is
some clout there as to making your digital distribution system appealing if you
can play games as to how you offer the popular programming.
1000 I presume that that is what Global would say -- and I am entitled to say
anything -- and that they would also say about cable companies, which they have,
is: what games can be played to advantage the services that you own when you
have the distribution mechanism or the promise perhaps of one that will be more
effective in the future?
1001 And, in Abitibi-Témiscamingue, it may be a small place, my colleague
will remind me, but you already own the cable -- BCE does.
1002 MR. MONTY: Subject to --
1003 COMMISSIONER WYLIE: But you have bought it.
1004 MS SCOTT: I would like to go back to Alain, just to explore further this
notion of the distribution undertaking, programming undertaking, because I think
that is a separate and discrete part of the debate where you can raise issues as
to the regulatory framework that the Commission has put in place. But I would
1005 COMMISSIONER WYLIE: Oh, yes, but BCE didn't own CTV when we put it in
1006 MS SCOTT: No. That's correct. We will look at whether those are rules
that address your concerns.
1007 But in terms of the range of our activities, I think it is important to
look at each and every one of those markets separately when you try to assess
market dominance. The issues that you would look at with respect to specialty
services and the broadcast distribution undertaking, those are issues that you
have had to grapple with for Shaw, for Rogers, for the other cable companies,
and now for the first time with BCE because of this DTH business.
1008 So I know Alain has a number of things to say to you with respect to how
that particular aspect of the business is regulated.
1009 COMMISSIONER WYLIE: Those are the rules you would like imposed?
1010 MS SCOTT: Pardon me? Section 9 of the cable regulations, in particular.
1011 COMMISSIONER WYLIE: But there have been other regulatory mechanisms that
have been found necessary. Some will raise the possibility that they may be
necessary here too with the stable of services that you would have to push
digital distribution of the same family of companies.
1012 MR. GOURD: Three comments, if I may, Commissioner Wylie.
1013 Of course we understand the focus the Commission is putting on that
issue. It is an important issue. We have to reassure the Commission, as we have
now said on another matter, that there will not be an interest an incentive and
a possibility of undue preference.
1014 Let's start, if you agree, with the size of ExpressVu as compared to the
distribution universe, not only today because we have established with the chart
that it was 5.3 per cent of the total subscribers, but what can we project five
years from now.
1015 And Jean mentioned this morning that our most optimistic projections are
that direct-to-home will capture a maximum of 25 per cent of the households,
which doesn't mean that cable would stop growing, because it has grown a bit in
recent years, and partly because some subscribers will have some TV sets on
cable and a TV set on direct-to-home.
1016 But let's say it is 25 per cent of the market. We may have a bit more
subscribers than Star Choice, so it is 15 per cent, let's say, of the market --
12 per cent to 15 per cent for us.
1017 We have universal coverage, so our subscribers are not concentrated in
Ottawa-Hull, they are across the land. They are well distributed. Therefore,
that means that in no market would we probably have a dominant position.
1018 Nevertheless, answering a question from Commissioner Wilson, we have
tried to give additional reassurance to the Commission, in addition of course to
the regulatory requirements.
1019 Sheridan has mentioned section 9 of the Broadcast Distribution
Regulations, and I have referred to the other provision, a similar one you would
wish to impose on programmers, and all the members of the industry, including
us, are extremely supportive.
1020 I have referred to the code of conduct, which is being circulated as we
speak in draft form. And if intervenors or other participants, or the
Commission, wish us to expand a section or to add a section, that is the purpose
of the exercise, to make sure that we have a code which is acceptable and which
will indeed reassure the Commission and the programmers that there will be fair,
equitable, reciprocal treatment.
1021 And I have also added that despite the fact that two associations, at
least, have recognized the impeccable behaviour of Bell ExpressVu, we were
willing to go one step further and introduce reciprocal contractual
possibilities for the parties to use the tribunals to monitor the situation, in
the form of the most favoured nation provision, which we have tested, which
works, and which we could generalize, plus the right of the various parties to
have third party auditing of the implementation of that provision on a regular
1022 As for cable -- and Jean is perhaps in a better position than me to
expand on that -- in certain smaller markets, on an exception basis -- and we
have in mind, for example, Northwest Tel, in addition to Télébec -- it may make
sense to have an investment in cable, for reasons specific to these smaller
markets. And being from Abitibi myself, and having been a broadcaster there, I
could see the cable operator and the telephone companies operating and, quite
frankly, I think it does make sense. But that is free support for Télébec.
1023 However, in terms of the delivery of entertainment by BCE, the strategic
investment has been made in direct-to-home. It has been a massive investment. It
is close to $1.5 billion. When the government decided to go for a Canadian
solution, after toying with the notion of a U.S.-Canada partnership that didn't
work, because the Americans were asking for major concessions in terms of
programming, two companies decided to take the risk, and BCE was one of those
companies. Two years later, barely two and a half years, the category has
reached $1 million, but after a very significant investment, a satellite
problem, a technology challenge, BCE is there as the Net, and we have 517,000
1024 But despite that very significant progress, we will never, ever be able
to have a dominant position across the country, because we will plateau and we
will, as well, be always universal and, therefore, a disperse population of
1025 COMMISSIONER WYLIE: I understand that Abitibi-Témiscaming is still
before us, but in those situations where it seems to make more sense, like in
the north and in certain areas, for you to expect the Commission to accept the
integration in that market of the delivery of entertainment and telephone, and I
suppose ExpressVu as well, do you think there is any need for additional
1026 MR. GOURD: I don't believe --
1027 COMMISSIONER WYLIE: To protect the consumer, if not the competitor.
1028 MR. GOURD: I believe that the safeguards that exist, and which we have
mentioned, are sufficient. Because there is in a way a great, great difference
between markets like Ottawa, Montreal and Toronto, where there is a very
significant level of competition at all levels.
1029 If we take a look, let's say, at Abitibi, or Rimouski, or Yorkton, or
Thunder Bay, you would see, for example, that in some cases the market is so
small that you have triple stakes in television. You have one undertaking that
has three TV stations. And let me tell you, they ain't making a lot of money. If
you compare these three stations with one in Ottawa or Montreal, you would
rather be operating one station in Ottawa or Montreal.
1030 If you take a look at the ability of small cable to sustain the level of
investment which is needed to digitize, you discover, again very easily, that if
you had your druthers you would rather operate one cable system in Montreal, as
opposed to the telephone system plus the cable in Amos, where I was born, or
1031 And it is the same thing with radio stations. The only way to sustain a
radio station in these regions is to have a certain degree of competition but
clusters of AM and FM stations operated by the same entity.
1032 So in a way it was the genius of the Canadian broadcasting system and
the flexibility of the regulator that allowed these special responses to be
given for these smaller markets, not only in telephone and cable but in radio
and TV broadcasting as well.
1033 But should we try to import these recipes for smaller markets where
there is basically very little competition possible into bigger markets where
there is fierce competition? I feel that that is not probably the appropriate
way to do it. The other approach we have proposed is, in our opinion, more
1034 COMMISSIONER WYLIE: To come back to the larger markets, your position
would be that BCE would not be in a position to discriminate against
unaffiliated programming services with respect to access, packaging, marketing
-- in other words, preferring CTV services in the drive toward conversion to
1035 MR. GOURD: It is, indeed, our position that the code -- the other layer
over it, the regulatory framework -- the existing one and the proposed one --
and under it the ability of our contractual partners to use additional
contractual provisions to make sure that it won't happen -- that will be,
1036 Plus, as well, the realities of the marketplace, because with 5.3 per
cent of the subscribers, if we start to discriminate against certain programmers
it will be known. Everything is known early enough in our system. And these
programmers, they can survive without us, but we cannot survive without them.
1037 So at the level we are --
1038 MR. MONTY: Another point, Alain, to be underlined is, not only would it
be known, but we would go broke.
1039 You don't put a billion and a half in an ExpressVu, which is the amount
of money that -- before we break even -- even if we go to 10 per cent market
share of the Canadian market, and that would be a very good achievement.
1040 You can't get a return on investment by saying that we will privilege
CTV in its content and exclude others to the very juicy parts of that
programming system and still intend to make a return on that investment of a
billion and a half dollars.
1041 So I think that point goes to the point that I was making this morning
regarding retail and wholesale. Our network is open. Whether it is the Telesat
system, whether it is the terrestrial system, it is open to other providers.
1042 I will give you a very good example. We have a browser system on
wireless, and it is not exclusive to the Sympatico system. It has Yahoo! on it.
It has other portals. That is, in a way, a way for us to justify the billions of
dollars we have invested in infrastructure. You couldn't limit it to our own
services and still justify the investments we have made.
1043 And let me add one other point, referring to your first point,
Commissioner. When you look at prospects -- you are saying the world changes,
and you are quite correct. Do we know the future? No more than anybody in this
room, I suspect, and anybody else outside. But it is true that over time we are
going to try to get a bigger share of some of the market segments that we are
very small in right now, the Internet being one of them.
1044 Let's assume that we were successful with the combinations that we are
putting together with CTV and other services that we are trying to put together.
And let's assume that we were encouraging more than 5 per cent or 6 per cent of
Canadians to come to our system. And, in total, 20 per cent of Canadians come to
Canadian portals at this stage. The rest go to U.S. portals directly. Let's
assume that we grow that from 20 per cent to 40 per cent or 50 per cent coming
to Canadian portals, along with others who are going to do something similar to
what we are trying to do.
1045 Wouldn't the result be a positive circumstance for the Canadian system?
I would say yes.
1046 So to me, at the end of the day, the fact that we have to be, for
self-interest reasons, a retailer and a wholesaler, the fact there are all the
rules and systems in place that Alain and Sheridan have mentioned, and on top of
that, the fact that we are looking prospectively at a new world out there called
the Internet and we are trying to make sure that Canadians have room on that
system for Canadians, I think, speaks very highly of the fact that the system is
dynamic and it's got all sorts of self-protections in it.
1047 COMMISSIONER WYLIE: What is your answer to someone who expresses concern
about the ability to bundle services, the fact that you control Telesat and it's
of great importance for the delivery of communication services to existing
players, that that's a concern unless there were some safeguards put in place?
1048 MR. GOURD: Let me start with Telesat, if I may.
1049 Telesat would not naturally be part of a bundle of services to consumers
because Telesat is basically a business-to-business company.
1050 Nevertheless, let's address maybe some potential concern about Telesat's
ability to convey undue preference to an affiliate.
1051 My first response there would be Sections 27 and 28 on the telecom side
which covers Telesat, and in Section 28, there is a specific subsection that
addresses the situation of satellite and the order list and the fact there
cannot be undue preference on that front.
1052 In addition to the regulatory requirements of Sections 27 and 28, I
would like to come back to the reality of the market place, the business
reality, because all of our non-affiliate clients are on fixed satellite.
1053 As we know, the exclusivity of Telesat on fixed satellite has come to an
end, it's behind us. And moreover, the World Organization's new rules allow
Canadian satellite services to compete in the U.S. and foreign entities like
U.S. Satellite to compete in Canada.
1054 So therefore, the clients of Telesat have a choice. If they believe that
Telesat does not treat them well, provides undue preference to Bell ExpressVu as
compared to Star Choice, for example, they will vote with their feet. They will
transfer their business to other satellite entities, and again, as Jean said,
Telesat, as the old sailor, will not be able to survive in the market place.
1055 So you have those two realities: The regulatory requirement and the
realities of the market place that, in our opinion, will drive the conduct of
Telesat which has been impeccable.
1056 As per Bell ExpressVu, again, I would like to say that first, it's still
very much in the broadcast distribution side to the consumer. It's very much an
analog world. For quite a number of years, it will remain predominantly delivery
on analog cable.
1057 Bell ExpressVu, trying to develop its space in that very competitive
environment will be driven by the requirements of the market which is more
products from all subscribers and subscriber demand. So again, there will be
built-in discipline for Bell ExpressVu as well.
1058 COMMISSIONER WYLIE: And what is your response on the second part of the
question, which is, despite the fact that if you look at if from a distribution
environment as it exists today and is so significantly analog, that as the
future develops, BCE- CTV-ExpressVu combination allows the offering of telephony
services along with video distribution services, and that's a concern because
not everybody has that opportunity.
1059 MS SCOTT: Again, Commissioner Wylie, if I could go back to the approach
that the Commission has taken on the telecommunications side, the question that
it's asked itself is, in terms of bundling an offer to the consumer, which part
of the bundle can a competitor put together from a variety of sources? These,
you might put it into your bundle, because you either have a relationship with
the service you created yourself, whatever.
1060 Is it possible for any given competitor to provide the same service
bundle? Your rules have been addressed toward making sure that the bundles of
services that we offer, others can offer comparable bundles.
1061 And so, to the extent that we have services in our bundle that would be
characterized as utility services, the Commission has ordered us to unbundle
those essential services so that our competitors can replicate those parts of
1062 Now, if you look at the various services that are in this bundle, we can
offer wireless. Many others can offer wireless as well. There's Cantel, there's
Microcell, there's Clearnet that offer these services. If you look at long
distance, there's competition there. If you look at Internet service, there's
much competition in that area where we act as both a wholesaler and a retailer.
1063 With respect to broadcast distribution and the provision of programming
services, again, there are a number of service providers. There's Star Choice,
there's ExpressVu and there's a cable company, generally speaking, in the market
1064 So it is possible for people to put together these bundles.
1065 Now, there may not be may competitors. In the wireless world, the
Commission decided that the market place was sufficiently competitive when there
were just two service suppliers. The question is whether there is a possibility
for a competitor to put together these service bundles.
1066 I think that's a good starting point for the Commission when it looks at
this question as well; who is involved in the range of activities. It might not
be everybody and everybody might not choose to offer up the full service bundle.
1067 But I guess, when we look at what we can offer, I would say to you that
there are a number of others who could put together a comparable bundle, either
through partnerships or because they have members of their corporate family that
have those services.
1068 COMMISSIONER WYLIE: It's not a question of impossible to put the bundle
together. It's the facility with which one can do it if this were approved, the
question of the strength of the incumbency of cable because of the large number
of subscribers that they have in one agglomeration as opposed to ExpressVu
subscribers right across the country. People raise the question of incumbency,
the fact that Bell Canada's wires are also, in large parts of the country, in
the same type of concentration, and to say that bundles can be created by others
as easily is perhaps too easy.
1069 MS SCOTT: I would never want to underestimate our competitors. When I
look at the other partners that they have, you know, Rogers has strong partners
in AT&T and Microsoft. Shaw has strong partners in Liberty. Each and every
one of these sort of spheres of influence, I would say, they have different
strengths and weaknesses that are present. We may be the incumbent local service
provider in Ontario and Québec, we aren't in the balance of Canada. In British
Columbia and Alberta, we are not the incumbent.
1070 Everyone brings different things to the table, and I don't think I would
want to underestimate the ability of others, like Rogers or Shaw, to put
together service bundles that would be equally appealing to consumers, and in
fact, we see that they are embarking in exactly that direction.
1071 If one looks at the transactions, this activity in the market place
that's emerging, it appears that others are coming to exactly the same
conclusion that we are coming to, that a range of these services in the
communications sector, in the "I" sector, going from content creation through
the telecommunications transport is indeed a market place where people want to
be so that they can provide what consumers want.
1072 It's not that we are making this up because we think it's a swell idea.
It's that we believe consumers are actually interested in receiving these
services on a one-stop shop basis from us, from some of our competitors. Not all
consumers. Other consumers may well want to deal with niche providers of these
1073 But we believe that we are responding to a real consumer desire and that
there are others that will compete with us in these large bundles and that this
is very responsive to the market place.
1074 I think the Commission has done a good job, as I said, on the
telecommunications side, addressing how you put these service bundles together
in a fair and equitable fashion so that you do not allow for any type of abuse
of market power.
1075 COMMISSIONER WYLIE: I'm not entirely sure that, despite Mr. Colville's
great frameworks, that we are not dealing with something entirely different or
partly different, at least, here, where there's a combination of a very large
broadcaster with a very large telecommunications services provider.
1076 So you can get some comfort for the safeguards that have been put in
place in other so-called spheres of influence, but they will only take you so
far because this is -- we are looking at something new and what are the
possibilities of diminishing voices and choices by marketing and packaging in a
manner that serves your interests, either in the short or medium term. I know in
the long term, Mr. Monty won't do anything silly. You get the pockets by being
smart. But sometimes, being smart is not exactly what the regulator wants at the
beginning of the cycle.
1077 MS SCOTT: Sorry. I would like to keep the difference between the
broadcast distribution market and specialty services as a separate debate
because the issues there are issues of program suppliers finding their way into
1078 When I talk about bundling, I'm talking about what consumers want to
receive by way of a service bundle, and I think the issues are different.
1079 Clearly, we are not dominant in the broadcast --
1080 COMMISSIONER WYLIE: Yes; they are two questions, yes.
1081 MS SCOTT: Yes. So I would like to keep those very separate and distinct.
1082 And I would say, with respect to this "One-stop shop", "Gee, you are
big" and "Gosh, you are in a lot of lines of business", that's true.
1083 So, let's look at it from a consumer perspective and are there adequate
safeguards there and let's look at it from the supply side, as well, and see if
there's adequate safeguards there. And I would suggest to you, Commissioner
Wylie, that, with respect to the consumer and their ability to receive services
in a way that doesn't allow us to exercise market power, I believe the
Commission has already started down a very positive pathway with respect to the
bundling rules and the telecommunication service -- and, by the way, this
transaction doesn't really change much on that front because ExpressVu was
already one of the services we offered, on a retail basis, to consumers.
1084 So what has changed is that, now, there is a broadcast distribution
undertaking and some specialty services. And I would say to you, on that front,
that, with respect to consumers, again, there are -- we are not dominant in that
1085 And then, with respect to the supply side, I would say to you that, when
we are talking about service suppliers trying to get into homes -- the services
are largely analog now, to start with; they are going to be analog for a while
-- we are not the ones that can guarantee the success of these services.
1086 And with respect to digital, I think Alain has gone over that, in great
detail, and I'm not sure that needs to be revisited.
1087 COMMISSIONER WYLIE: On a more immediate basis, if you were a competing
broadcaster, over-the-air broadcaster, would you not have some concern that the
purchasing clout of BCE, at purchasing program rights, could, on the short term,
disadvantage you as a competitor?
1088 MR. FECAN: I think --
1089 COMMISSIONER WYLIE: At least on the short term. Because I know, on the
long term, Mr. Monty won't do anything silly, but maybe he would on the short
--- Laughter / Rires
1090 MR. FECAN: I think, in the short term, Mr. Monty won't do anything silly
--- Laughter / Rires
1091 COMMISSIONER WYLIE: You know what I mean: Being able to pay so much for
the rights to programming that you are at a competitive advantage vis-à-vis
1092 MR. FECAN: Well, I think it's been made very clear to us that we are to
operate a responsible business. We have within this entity a minority partner
that, also, is very interested in operating a responsible business. And I think
that's what we will do: we will operate a responsible business. We have to
deliver responsible returns on the capital invested. That was the situation
before. That's still the situation now.
1093 In terms of having an advantage, I think you know it is certainly my
point of view, and our point of view, that having a lot of shelf space is an
advantage, and our competitor is the one that has two streams of shelf space on
conventional television -- and conventional rights are different from specialty
1094 So, I really feel that if there is an advantage, it's that which
CanWest-WIC has -- and we hope they will behave responsibly. We certainly intend
1095 COMMISSIONER WYLIE: So, in your view, you don't think that there is any
particular safeguards that have to be put in place? Or, if there were, what
would they be?
1096 MR. FECAN: I think the market is the safeguard. I think we must run a
1097 I think, in a very key respect, both CTV and CanWest are legitimately
concerned about the amount of money we leave in Hollywood every year -- I don't
think that particularly is a benefit to the system -- and so, at the same time,
we strive to be competitive for audiences. We will find different ways of doing
it. We have to. I mean that's part of the great aspect of the program policy.
But I think the marketplace will determine that. And I think it is in both of
our interests to behave responsibly because both parties have, I think, the
ability to push, and I don't think that serves either one of us well, in the
short term or the long term.
1098 COMMISSIONER WYLIE: Yes, I hope you remember, Mr. Fecan, that some of
these arguments don't come from me.
1099 MR. FECAN: No, and I appreciate that.
1100 COMMISSIONER WYLIE: In other circumstances, they were expanded on, at
length, as to the effect purchasing clout one may have when trying to buy the
product that, then, you are going to sell to advertisers.
1101 I don't have Alzheimer's yet.
--- Laughter / Rires
1102 COMMISSIONER WYLIE: So, you think, in that case, the market will take
care of it.
1103 Now, before I leave distribution, to look at the last area I want to
look at, which is the producers not with regard to the priority programming but
with your normal broadcasters' activities, Mr. Gourd, you come back to the code
that you put forward during the last hearing for digital licences. So that is
the type of code of conduct that you would recommend to institute what you call
reciprocal good behaviour between the players?
1104 MR. GOURD: It is, indeed, a key tool that we are proposing. We will
benefit, as we circulate the code, from the enrichments that will come from
various parties but, indeed, it is a key tool in addition to the regulatory
requirements and the contractual proposal that we have made.
1105 COMMISSIONER WYLIE: When you speak of reciprocity, who is the other
side? When you use that phrase.
1106 MR. GOURD: It was the program suppliers.
1107 We feel that a healthy relationship is one where the distribution
undertaking treats fairly, on an equity basis, both affiliated programmers and
non-affiliated programmers; and, conversely, that programmers which are
affiliated to another distributor treat similarly Bell ExpressVu equitably, as
well. And that notion of reciprocity in the fairness of the treatment, I have to
say, has been very well received.
1108 COMMISSIONER WYLIE: I asked you, then, and I ask you now, do you think
that for that to work you would have to co-opt to other distributors, as well?
Or is the relationship with the programmer sufficient to provide an additional
safeguard that minimizes the need to come to the Commission and use its
regulations to arbitrate disputes or decide whether there was, indeed, a breach
of the regs prohibiting undue preference?
1109 MR. GOURD: For the code to apply, it requires the involvement of us, as
a distributor, and of a supplier, the supplier of a program service.
1110 So, in order for the code to be applied to Bell ExpressVu's behaviour
proper, I don't see, prima facie, the need to involve other distributors.
1111 If other distributors believe that it would be a good thing to have a
similar code, well, quite frankly, since we have proposed one we would not
object to that, obviously. But it is not a necessity for this code to apply to
1112 COMMISSIONER WYLIE: If I recall, the code required that the treatment
that a distributor and a programmer arrived at -- another distributor and a
programmer arrived at, would be the arrangement that should be arrived at with
you, given numbers, I suppose, and obvious differences between the two.
1113 MR. GOURD: Indeed, it requires that similar terms and conditions that
similar fairness and equity be present in the relationship between Bell
ExpressVu and an affiliate as well as between Bell ExpressVu and a
1114 COMMISSIONER WYLIE: With regard to producers, you discussed with
Commissioner Colville the question of non-arm's-length and arm's-length
producers, with regard to the priority programming.
1115 Have you thought about how that would be addressed, with regard to other
production of the other eight hours? Because I think your -- isn't your
relationship with producers increased?
1116 MR. FECAN: By and large, most of our priority programming for the eight
hours comes from independent producers, with a few exceptions. Of course, W5 is
produced by our news department. And I think E Now, which is our entertainment
magazine show, is produced by our entertainment unit. But, by and large, very
little of it has been produced by any kind of affiliated producer -- and I don't
see that particularly changing.
1117 MS McQUEEN: I don't see any real difference in this transaction
vis-à-vis producers except for the priority program area that we have taken care
of already. So I'm not sure what else -- Bell doesn't -- BCE doesn't produce any
1118 COMMISSIONER WYLIE: But it is quite possible that at renewal some
questions may be asked. It has been a subject of discussion during the four-week
hearing we just went through, and depending on the situation of each broadcaster
there may indeed be some discussion, as there may be, of course, about the type
of safeguards that may be required with other acquisitions that may not have --
such as newspapers, may not be, but indirectly may be of concern to us.
1119 So you won't be surprised if some of these issues are raised when you
come back, if this transaction is approved?
1120 MR. FECAN: We are forewarned.
1121 COMMISSIONER WYLIE: Thank you very much.
1122 CHAIRPERSON OF THE COMMISSION: Merci.
1123 Commissioner Wilson has a question on that subject.
1124 COMMISSIONER WILSON: Just a very quick question on the code.
1125 You presented the code as a distributor at the digital hearing and again
here, but if this deal is approved you will be a program supplier.
1126 Commissioner Wylie asked you: Do you think other distributors should be
parties to your code? I guess as a program supplier you would be looking for a
code from them?
1127 MR. GOURD: Thank you, Ivan.
1128 COMMISSIONER WILSON: Potentially you are wearing two hats.
1129 MR. GOURD: Well, as I said a bit earlier, since we are proud of the
code, we believe it is a good thing, we would not object if Ivan and Trina, as
programmers, had the benefit of a similar code with other distributors.
1130 COMMISSIONER WILSON: Do you think that a code is required for services
that are already launched on analog or just for the new services that are coming
1131 It's a competition to answer the question.
1132 MS McQUEEN: Yes, I do think that it would be more peaceful in the valley
if a code were instituted that took account of services, both present and
1133 Obviously there are contract renewals and other situations in which
there are disputes. I'm sure that the distributors as well as the program
services would like to have simpler ways of dealing with those and a code seems
to be a good idea.
1134 COMMISSIONER WILSON: Thank you.
1135 CHAIRPERSON OF THE COMMISSION: Merci.
1136 Now I will ask Commissioner Noël to complete with the questions
1137 COMMISSIONER NOËL: Well, you had the benefit of philosophical questions
all day and you will have to bear with me because I have been assigned the task
of asking you the "la dissection" of your "brochette" of tangible benefits. But
don't worry, I will not question every one of them. There are too many.
1138 There are a number of tangible benefits with which we don't have any big
questions arising but, on the other hand, we have a number of non-priority
programming tangible benefits that do raise some issues. I will just list them
so that you know exactly where I am going.
1139 There is the Regional Specialist Journalist of the Future and it is $14
million that you have committed to; there is Diversity in News Initiatives, $3.5
million; there is the Two-Way Hat, $11 million; the New Links, $10 million;
APTN, $3 million, and the level of our anxiety is very variable also you will
see from the question.
1140 The Content Innovation Network, $5 million; ITV Specialty and
Development Offices, $3 million; the Bell Broadcast and New Media Fund, $10
million; Ryerson, the BCE Chair in Convergence and Creative Use of Advanced
Technology, $2.5 million; BCE New Media Centre of Excellence in Collaboration
with B.C. Institute of Technology, $1.5 million; Community Journalism
Initiatives, $2 million; and, finally, the Canadian TV Image Bank for $3.5
1141 I will take them in that order.
1142 So if we go back to Regional Specialists, Journalism of the Future. It
seems that in your answer to the deficiency letter of June 28 you seemed to
worry that you would lose a number of those highly trained, at a high cost,
journalist to competition. Have you thought of some sort of strings to keep them
on board. Like let's think of what the military does. I mean, I don't want to
get into --
--- Laughter / Rires
1143 COMMISSIONER NOËL: -- muddy grounds here, but they have a tendency
to keep their people on board for a number of years after they have paid for
their training. So have you given any thoughts to a way of keeping them on
board, at least for some time to recover the investment in their training?
1144 MS McQUEEN: I think that our feeling is that if they do leave they will
probably go to another news organization, so another journalist organization
would get the benefit of the training. Because these are benefits, I don't think
that we could resist that and insist that the investment be, so to speak, paid
1145 COMMISSIONER NOËL: So far from you the thought of self-serving benefit
1146 MS McQUEEN: Right.
1147 COMMISSIONER NOËL: Okay.
1148 Now, will you be able to quantify the improvement in the reporting of
coverage of events as opposed to the amount of money that you will put in that
1149 MS McQUEEN: I think the only way one could do that would be to ask
journalistic experts whether to review the programs and see whether there was an
1150 I don't know how otherwise the enhancement could be quantified in any
particular way. There is an assumption there that there are certain issues in
this country that are complicated but very relevant to local interests.
1151 There is an assumption that if we are able to bring journalists into a
community and that these journalists really do have expert knowledge that they
will produce more informed journalism. But I am unable to think of a way to
measure that improvement, except to ask experts in the field to say whether or
not these people are performing at a higher level than journalists who haven't
had that kind of training.
1152 COMMISSIONER NOËL: Do you think that -- we are talking about 15 new
people per year. Do you think that they will be placed in locations where the
real issues are happening and that the proper training will be given? You know,
you are talking about medicine and other technical trades. Will you have the
right person at the right place at the right time or would it better to have
them on your national news crew and just dispatch them where events take place?
1153 MS McQUEEN: In fact, I think some of the journalistic intervenors have
said to you that in fact it is better to have them in the local newsrooms.
1154 We see often that these issues arise in almost every city where there is
a water safety problem, a construction safety problem, environmental issues,
hospital issues, care of the aging, issues that relate to technology and the use
1155 In fact, many of these issues do take place at the local level.
Obviously we will have a coterie of people who are informed and if there should
be something -- Walkerton is the one we always talk about -- if there should be
a Walkerton, we could send two or three people to that area who had training in
1156 But, no, I think that the uniqueness of this benefit is to give local
communities the same excellent standard, or even in this case a higher standard
of reporting than might be available from the national. It is not a centralist,
it is a belief that local communities deserve a high standard of excellence in
1157 COMMISSIONER NOËL: And local doesn't mean remote all the time.
1158 MS McQUEEN: Well, local, I guess it is the communities where we have
stations. Some might call some of them remote, some might not.
1159 COMMISSIONER NOËL: Yes. Well, there is a difference between being local
and being located in the bush.
1160 MS McQUEEN: Absolutely.
1161 COMMISSIONER NOËL: Abitibi is remote.
--- Laughter / Rires
1162 COMMISSIONER WYLIE: Mr. Gourd, I see you have already fallen on the
--- Laughter / Rires
1163 COMMISSIONER NOËL: Did you ever try to fly there when there is some fog.
1164 Another initiative is the diversity in news initiatives, and you are
going to spend $3.5 million on that.
1165 Our only concern in that respect is whether this is really incremental
or if this is something that you would normally do in the course of a business.
1166 Could you elaborate on that particular initiative?
1167 MS McQUEEN: Yes. I think, Commissioner, that one of the things we could
do is report to you on what we had spent that money on, and I think you would be
satisfied if we fulfilled our intentions.
1168 What our intentions are is to, I guess, do two things. The benefits
allow for enhanced news and current affairs programming and they also talk about
things that would not happen without a certain transaction.
1169 It is unheard of in broadcast news to be able to give reporters -- I
don't know if you would call it the luxury, but the ability to be involved in
events without the necessity of making reports and providing air time. These
diversity benefits in fact would allow things, for example, reporters to
actually go to a community when nothing particular is happening there and live
in the community and become much more familiar with the routines, the customs
and the ideas of that community.
1170 They would allow reporters, for example, to spend time at conferences
and other kinds of events, which general consists of a lot of people talking and
debating and having workshops, not considered particularly good television but
as an enrichment of the attitudes and the intelligence that will then be
directed towards a story when something does happen, extremely valuable.
1171 So what we are looking for in this event is the ability to allow
reporters time away from deadlines, to understand -- it's as simple as that, to
really understand some of the diversity issues in this country and not always
being reporting on crimes or conflicts or headline-type news, but in fact being
able to go into a conflict and understand it more thoroughly because they had
been there when the conflict was not taking place.
1172 It will also allow a little bit of extra travel to, for instance, home
countries where you can understand a little bit more of what Canadians who have
just come here have come from. That is valuable to certain communities. You
know, if you have a large population in your city and a report has never been to
the homeland, this would be a very enriching experience to allow somebody to
travel to that homeland.
1173 COMMISSIONER NOËL: The other initiative that I would like to ask you a
few questions on is the Two-Way Hat.
1174 MS McQUEEN: Yes.
1175 COMMISSIONER NOËL: That is the teenagers and young adult program.
1176 What we are interested in knowing is what is the schedule that you have
in mind for that program. Will it be a weekly program? Where will it be placed
on your grille horaire? Will it be at prime time or other?
1177 MS McQUEEN: Yes.
1178 COMMISSIONER NOËL: If it is not popular, if it doesn't work, will you
run it still for seven years or do you have alternatives?
1179 MS McQUEEN: To answer the last part of the question first, in all these
programming benefits the notion is if it doesn't work it disappears, but then
something else like it takes its place.
1180 So if the first idea for a current affairs show directed at young people
didn't work, we would take that one off the air and then we would look for new
producers and new ideas to have a new program.
1181 So hopefully we will hit it right the first time, but that money will
continue to be spent on that general objective, although the name of the program
may change and the style of the program may change over the seven years.
1182 It is envisaged as a half hour program and at this point we have not
come to a conclusion about how or where to schedule it, perhaps 7:00 p.m., but
we would have to look at the nature of the program before we made a final
decision on that.
1183 COMMISSIONER NOËL: Or is it like discotheques, after 10:00 only?
--- Laughter / Rires
1184 MS McQUEEN: That's who is staying up late, certainly.
1185 COMMISSIONER NOËL: The other initiative that I want to talk about is the
News Link. As well, I forgot to mention the other one is --
--- Off microphone / Sans microphone
1186 COMMISSIONER NOËL: Sorry. I always forget this thing.
1187 The 2-Way Hot was 11 million and the News Link is another 10 million.
1188 Our concern is about the potential conflict of interest with Telesat as
the provider of services. Could you tell us how you will -- I guess I'm coming
back to Mr. Gourd -- how you will resolve that potential conflict of interest.
1189 I know that in response to deficiencies you said that you would commit
to a non-BCE satellite provider but that you think the public interest would be
better served by using the best overall provider at the best price regardless of
1190 MR. GOURD: Indeed the award process or the bid process would be an open
process with various providers being able to offer the best bid. Of course, if
we talk about international links, it would be perhaps more a Teleglobe than a
Telesat, whose mandate is more the Americas, but the principle would apply.
1191 COMMISSIONER NOËL: Thank you.
1192 The next one is APTM and this is not -- we recognize the benefits there,
but we would like to know if -- and it is $3 million to open news offices in I
guess it's six locations.
1193 Is there a reciprocity? Will you air some of these newscasts that will
be produced by EPTN or is it straight money given?
1194 MS McQUEEN: Basically, there is no deal that they have to supply us with
news. We do have a good co-operative relationship with APTN. Our hope is that
they would provide news reports and that their reporters might, on occasion,
help us out in our news programs. That's not an obligation on their part, but it
is something that we would very much hope will happen. As I say, we do have a
good working relationship with them and we think it can happen.
1195 The money is given to APTN. APTN will control it and will use it in
whatever way seems beneficial to them in starting news bureaus in cities across
1196 COMMISSIONER NOËL: Talking about who controls what, our next area of
concern is the Content Innovation Network, for which you are putting in $5
1197 In the answer to deficiencies, you did mention:
"It is anticipated that in the third year of this initiative we will be in a
position to invite additional Canadian new media training organizations into the
network." (As read)
1198 Who is "we"? Is it "we" Bell, BCE or is it the regal "we", the royal
1199 MR. MACDONALD: It would be, if approved, the new company.
1200 COMMISSIONER NOËL: If approved it would be...? Sorry?
1201 MR. MACDONALD: It would be the new company.
1202 This is the BCE Content Innovation Network. When we said "we", we are
establishing it initially with the Canadian Film Centre, the Banff New Media
Institute -- and then it would grow from there.
1203 COMMISSIONER NOËL: But the control would not rest with those people, but
with the company. That's the way the funds are spent.
1204 MR. MACDONALD: No. We are providing the funding. This is the group that
will really be administering it, the "we" in that particular case. The funding
comes from us, but the administration will be with them.
1205 COMMISSIONER NOËL: That's what I wanted to hear. Thank you.
1206 Now, the next one is "ITV Specialist and Development Offices". That is
an initiative of $3 million. We are not sure we understand if these people will
be incremental staff in your offices or if you will train people in that field
that are already on your payroll.
1207 Could you give us a bit more of what you mean by --
1208 MR. MACDONALD: They would be all incremental positions.
1209 As I believe Trina mentioned earlier, what we have experienced from
producers is a great interest in ITV but not really an understanding of how it
goes together. We certainly identified that it can't be a bolt-on. It has to be
developed. The ITV components have to be developed at the same time as the
program itself is in development. They are very, very different disciplines.
That came directly out of our consultation with the producers. It has certainly
been also reflected through the information we got in consultation with the Bell
New Media Fund.
1210 So the idea of having three people specifically selected because of
their expertise in interactive is what started that process, and they are
incremental and they will be co-located with the existing development officers
in the CTV development offices which are in Halifax, Toronto and Vancouver.
1211 COMMISSIONER NOËL: But they will not be CTV staff?
1212 MR. MACDONALD: No.
1213 COMMISSIONER NOËL: So the benefits will go to the outside producers
eventually when those people, after being trained, go back into their normal
1214 MR. MACDONALD: No. I apologize. They would be CTV staff. My apologies.
1215 COMMISSIONER NOËL: They would be CTV staff?
1216 MR. MACDONALD: Correct. And they would be hired incrementally to the
1217 COMMISSIONER NOËL: Wouldn't that be a self-serving benefit in a way?
1218 MS McQUEEN: The specialists are there really to serve producers. An
independent producer might come to the development office with a project and in
order to get that project going the producer needs some interactive element, but
isn't knowledgeable about that. The ITV specialist would take a look at the
script and the idea and help that producer get the program ready for an
interactive component. The producer would then own that interactive component
and would licence it to the respective broadcaster, hopefully us.
1219 So it really is like a training resource in the CTV offices so the
producers could have some assistance in, as Jim said, from the beginning,
getting the interactive elements.
1220 I believe that this would be really the next logical step. The original
development offices themselves came as a result of one of the CTV benefit ideas,
benefits packages awhile ago, and this is just adding on to that benefit in a
new kind of way. But it really is to work with producers. It is a resource for
1221 COMMISSIONER NOËL: It would not be for the sole benefit of the Internet
side of your business?
1222 MS McQUEEN: It would be for the benefit of making a broadcast program
able to have an interactive enhancement, but there would be no -- nobody could
come and say, "Help me design a Web site" or "Help me put out a CD." It has to
be related to a broadcast project.
1223 COMMISSIONER NOËL: Now, let's turn to the Bell Broadcast and New Media
1224 You do explain in your supplementary brief that this is a one-shot deal,
$10 million investment.
1225 Then, not in the letter itself but in the attachment to your Response to
Deficiencies where you list -- let me get to that piece of paper -- it's page 60
of the chart there. There is a line which says "Bell Broadcast and New Media
Fund" -- it's not the last one, the one before. It is $2 million in each of the
first five years with a total of $10 million.
1226 Could you explain the difference, if any, or if that is mathematics that
we should do in privacy?
1227 MS SCOTT: I will do my math publicly. I'm ready.
1228 If you look in the Response to Deficiencies, actually, it indicates that
the final allocation of the $10 million was going to be subject to discussion
with the Board of Directors of the Bell Fund. I can talk to you a little bit
about that because I sit on that Board.
1229 Quite frankly, the $10 million was just taken -- it was taken spread
over five years as a proforma presentation of the $10 million because there was
no final determination by the Board members as to how they would like to receive
1230 I guess there are a couple of models. One could take it and spread it
out over many years. One could take it over a shorter period of time, and then
be in a position to create something like an endowment, which would generate
interest that could be used for the purposes of augmenting some of the
activities of the Bell Fund.
1231 So the point was that there would be a total of $10 million in the
benefits that would be made available, and that would ultimately be the
determination of the board, as to how that money would be best used.
1232 COMMISSIONER NOËL: Talking about an independent board, can you confirm
that the board of the fund is independent from the BCE or Bell --
1233 MS SCOTT: Yes, I can. We have been certified by the CRTC to be eligible
to receive 1 per cent of the gross revenues of BDUs that make those
contributions. We filed our guidelines and our articles of incorporation with
the CRTC and we have the clauses in there that indicate that no more than
one-third of the members of the board would be representatives of a BDU.
1234 So that is meant to respond to the Commission's concern about
independence and, as I have said, we have been certified by the Commission for,
I think, over a year now.
1235 COMMISSIONER NOËL: Thank you.
1236 Now let's turn to the Ryerson-BCE chair in convergence and creative
views of advanced technology -- $2.5 million.
1237 The only concern we have is, is this related to broadcasting or is this
technical, in a larger sense?
1238 MR. MACDONALD: No, it is very much related to broadcasting. Everything
that we have tried to develop in this package is related, one way or the other,
to broadcasting we think. And we have to be looking not only at today, but
tomorrow. And Ryerson, certainly through their radio and television arts
program, is producing some of the finest students in the industry, and we feel
that by developing a chair in convergence, which is essentially new media
related to broadcasting, the school really moved the sticks forward.
1239 So it is very much related to broadcasting.
1240 COMMISSIONER NOËL: Thank you.
1241 What about the BCE New Media Centre of Excellence -- BCIT -- $1.5
1242 MR. MACDONALD: The same thing. We were looking -- one of the other
things we have tried to do in this package is to provide a balance. BCIT -- and
they may not like me saying this -- but, essentially, it is the Ryerson of the
west. They have done an outstanding job in their training. They are moving
aggressively into the new media area, so this was a very similar type of program
for western Canada.
1243 COMMISSIONER NOËL: You have also an initiative of $2 million for
community journalism initiatives. There is a host of scholarships. There is a
whole list of them. Some are in journalism; some are somewhat more related to
broadcasting. Could you tell us how they would fit in as a benefit to the
1244 MS McQUEEN: These proposals were made by the heads of the CTV stations
in various communities, and we asked them to look for opportunities to help out
institutions that might provide local journalism and local community programming
with resources for the future.
1245 So all of the benefits are related to that. We would provide to these
institutions, in each locality, funds which would enable them to enrich or
strengthen or give scholarships to young people in areas that, again, would
hopefully lead to better community and local journalism in the future.
1246 And you are right, there are a host of them, and I think it is one of --
1247 COMMISSIONER NOËL: Yes, there are many. I don't want to go through and
mention every one of them.
1248 MS McQUEEN: No.
1249 COMMISSIONER NOËL: But, as I said, some of them are more oriented toward
journalism -- a school of journalism -- than to broadcasting studies, per se.
1250 MS McQUEEN: Yes, but in many cases that is where most of the local
community journalists come from, from those schools. They go for the basic
journalistic training and then they come to the television stations and become
journalists there. So they would all be related to the future of the
broadcasting system in some way.
1251 And we were very pleased at some of the ideas and the ability that this
benefit package gave us to spread resources among so many important institutions
in this country, so that so many Canadians will in fact have a chance to improve
the broadcasting system.
1252 COMMISSIONER NOËL: The final question that we have is on the Canadian
Television Image Bank, and we are talking about $3.5 million to digitize
archives, more or less, before they disappear by themselves. Your supplementary
brief started with the death of Maurice Richard and the fact that all of the
images we had were sort of worn out.
1253 Will these archives -- and let me go back to where I have some little
notes here --
1254 Do you consider that this will be available once digitization is made?
Do you plan to make this material available to other broadcasters where there is
a scarcity of images of Canadian icons or heroes?
1255 MS McQUEEN: We have said that we will make it available to non-profit
and community groups for their use, and to preservation societies, museums, and
so on and so forth.
1256 What we will also commit to do is to make them available at a standard
fee to other broadcasters and to reinvest the profits from that into priority
programming. In other words --
1257 I guess there are two issues here. One is that there are a number of
rights issues in these digitized archives. Some we control and some we don't. We
feel quite comfortable in making them available, where we can, to educational
and non-profit institutions. For-profit institutions, I guess -- for
profit-making institutions we would have them like any other archives, available
at a reasonable price, and we would not make any profit on them. We would
reinvest the profit. And, again, we would be happy to provide you with reports
on how that occurs.
1258 COMMISSIONER NOËL: Would there be conditions set across the board for
access to this material, or would it be on a negotiated basis?
1259 MS McQUEEN: We would have a rate card, if that is what you are asking,
and it would be able to be compared to similar rate cards for stock material,
1260 COMMISSIONER NOËL: Thank you. Those were my questions. I will give back
the microphone to the Chair.
1261 CHAIRPERSON OF THE COMMISSION: Commissioner Wilson has a few additional
questions before I turn your attention to our legal counsel.
1262 COMMISSIONER WILSON: I just wanted to clarify your commitment with
respect to the $2 million that goes to NBRS. You have said that you are going to
provide descriptions for all of the 175 hours of priority programming that you
have proposed to do over the course of your new licence. But in cases where that
is an extension, where you are extending a series from 13 to 18, what about the
first 13 instalments? Are they described, or are you just going to describe the
1263 You are looking around to try to figure out who is going to answer.
--- Laughter / Rires
1264 COMMISSIONER WILSON: Who was the architect of this commitment?
1265 MR. MACDONALD: I think the intent is to work with NBRS on what is the
best way to invest the money overall.
1266 Our intent is certainly to take the 175 hours as a base.
1267 As we have said in our presentation, we wanted to try to make sure that
as many hours as possible were generated, and that also we were able to lower
1268 So I think that, to your point, we would have to review with NBRS what
made sense. It would seem to make very little sense just to do the last four
episodes. So I think that our position would be to include all of our hours on
those extended programs and to take them out of the 400 that we would hope to do
as part of this overall benefit.
1269 And if we can open up those programs to the vision impaired from the
beginning, I think that is a much better benefit than just doing a few hours at
1270 COMMISSIONER WILSON: Is the 175 hours in addition to the 400 hours that
you are committed to? Is it a total of 575 hours?
1271 MR. MACDONALD: No, it would be part of the 400 hours.
1272 But I again indicate to you that we hope that that will be more hours,
ultimately, if the cost per hour comes down.
1273 In our consultations with NBRS, they think that this is a quantum of
commitment that they can, in fact, get the per hour rate down.
1274 They felt very confident that we could say that a minimum of 400 hours
would come from this benefit.
1275 COMMISSIONER WILSON: Okay, thanks.
1276 CHAIRPERSON OF THE COMMISSION: Counsel...
1277 MS MOORE: Thank you, Madame la Présidente.
1278 With respect to incrementality, are you committing that your proposed
benefits will not only be incremental to current exhibition and expenditure
levels, but that they will also be incremental to all ongoing benefits from all
previous transactions relating to CTV?
1279 MR. FECAN: Yes.
1280 MS MOORE: To further clarify, some of the proposed benefits will be
incremental to expenditure requirements in relation to specialties. Is that
1281 MR. FECAN: Yes.
1282 MS MOORE: There was a discussion with respect to licence fees, for
example, earlier today.
1283 So, in your view, the licence fees that were referred to earlier, there
wouldn't be any possibility of double counting for those licence fees?
1284 MR. FECAN: That's correct.
1285 MS MOORE: And you have committed to, if necessary and required, report
to the Commission, and it would be possible to break out those licence fees as a
1286 MS McQUEEN: Yes. The specialty licence fee would, in fact, be charged to
the specialty channel using the program. So they would count it as part of their
expenditures. However, the revenue would come back and be added into the
priority programming envelope.
1287 MS MOORE: Thank you.
1288 Would you be prepared to file with the Commission, no later than next
Monday, your understanding of the current and ongoing benefit requirements from
previous transactions affecting CTV, including an itemization of the
transactions, the related benefits, and the timing of the roll-out of what
remains to be fulfilled?
1289 MR. FECAN: Yes.
1290 MS MOORE: Thank you.
1291 At page 50 of your 28 June response to deficiencies you stated that in
the event that any of the proposed benefits are found to be unacceptable, you
would propose to file with the Commission, for approval within 90 days of the
decision, a revised package for amounts found to be unacceptable.
1292 What if instead the Commission were to require that any disallowed
amounts be redirected to specific benefit proposals that are found to be
acceptable in the course of this proceeding?
1293 Do you have any comments?
1294 MR. FECAN: We would be pleased to do that.
1295 MS MOORE: The order of magnitude of disallowed benefits wouldn't affect
your view? You wouldn't have a preference?
1296 MR. FECAN: These are clearly designed to be incremental benefits, and we
have tried to create the best possible menu, but the Commission will rule.
1297 MS MOORE: Could you just state for the record the level of CTV's
interest in Landscape Entertainment?
1298 MR. FECAN: At the moment it is about 50 per cent. So at the moment it
would not qualify as an independent production company.
1299 MS MOORE: You say "at the moment". Are there any --
1300 MR. FECAN: They are looking for other investors, and it is our intention
to be at around the one-third level. But we may stay at the current level. It
may go down. It depends on how well their business grows. This was not intended
to be our in-house production company. I guess the best example would be
Fireworks, with CanWest. This is not intended to be our "Fireworks".
1301 MS MOORE: If the transaction were approved and the Commission were to
accept the proposal that BCE report annually on the incremental nature of the
benefits, are you prepared to work with Commission staff, with respect to the
content and form of that reporting?
1302 MR. FECAN: Of course. We would be pleased to.
1303 MS MOORE: Thank you.
1304 With respect to some of the contractual protections that Monsieur Gourd
referred to, is it my understanding that you are committing, now, to include,
systematically, an MFN clause in all your contracts with all programmers, as
well as a right to third-party audit?
1305 MR. GOURD: We are proposing to offer to every programmer such a
contractual obligation; however, it will be their choice to accept it or not --
and we would be pleased to file a model provision with the Commission.
1306 MS MOORE: With respect to the third-party audit, would this include a
right to scrutinize not only any renegotiated contracts with affiliates but any
1307 MR. GOURD: Yes. The idea is that that third-party auditor -- normally,
the auditor of the programmer -- would come in, would have a question in mind,
"Is the contract between my client, the programmer, and Bell ExpressVu such that
it benefits from the most favoured nation provision?"; the auditor would look at
all the relevant material and we would report back to both Bell ExpressVu and
the programmer, but, indeed, the auditor would be allowed to look at all
1308 MS MOORE: With respect to the draft code of conduct, are you in a
position to file that for the record of this proceeding?
1309 MR. GOURD: Yes. We have already filed a draft during the digital
specialty services proceeding, and we would be very pleased to file the current
version during this proceeding.
1310 MS MOORE: Would you be in a position to file that for tomorrow morning?
1311 MR. GOURD: Yes.
1312 MS MOORE: Thank you.
1313 With respect to expenditures for party programming for this year, for
2000-2001, there was some confusion as to what had been filed.
1314 It's our understanding that, at this time, we do not have a breakdown,
on the basis of categories, for that.
1315 Would you be in a position to file that information for tomorrow?
1316 MR. FILLINGHAM: Yes, we can.
1317 MS MOORE: Thank you.
1318 And, finally, some charts were referred to, this afternoon, and I'm
wondering if you are in a position to file those for the record, as well?
1319 MR. FECAN: Yes, of course.
1320 MS MOORE: Thank you.
1321 Those are my questions, Madame la Présidente.
1322 LA PRÉSIDENTE DU CONSEIL: Merci beaucoup.
1323 Alors, nous arrivons au terme de la Phase.
1324 I would invite you to answer any question that we haven't asked because
we have really come to the end of our questions for this point in time of the
1325 MR. FECAN: I would just, in summation of the closing of this section,
say, as we have said many times before, and again many times today, we believe
this application is about content.
1326 It's about making sure the Canadian broadcasting system of the future
can provide Canadian viewers with a high-quality Canadian content we need at
home and that we would love to export around the world.
1327 It's about making the transition to the future with the best possible
strategy and resource base to make sure we build on what we have and move it to
a sustainable new economic paradigm.
1328 It's about making sure that, in a world of multi-media giants, we have
strong, effective Canadian competitors. This will ensure that Canadian stories
can be told with a degree of excellence that will build loyal audiences and
1329 In other words, share of mind and share of heart for Canada.
1330 In real terms, this application is also about the survival of CTV -- and
make no mistake about it, BCE is the white knight here. BCE doesn't just bring
us stability; it brings us a future. But it also brings us a commitment to build
on more excellent Canadian content married to the will and expertise to help us
innovate in a whole new sphere of creativity and cross-media activity.
1331 Instead of CTV being broken up, CTV will be the cornerstone of BCE's
media activities. We will be storytellers and the programmers and the marketers
and we will be delighted to work with BCE's experts to make sure Canadian
viewers have every advantage in getting access to the drama, news, sports, they
want and need.
1332 The benefits package we have tabled, the largest in the history of our
country, $230 million over seven years, we really feel will help strengthen the
system tremendously. One hundred and seventy-five hours of new, original and
incremental Canadian priority programming. A whole new range of opportunities
for independent producers to respond to what they want and work the way they
dream of working and measures to nurture a generation of Canadian creative
professionals and Canadian audiences into the future so that, collectively, we
are all ahead of the curve rather than being left behind.
1333 I have got to tell you we are really tremendously excited at the promise
this transaction holds for us, for CTV, for the Canadian broadcasting system and
for Canadian viewers, and we thank you for the opportunity of presenting our
case. We hope that you will be able to share our belief in this vision of a
healthy future in which both Canadian creators and Canadian viewers find that
the whole new world has opened up for them.
1334 Thank you very much.
1335 LA PRÉSIDENTE DU CONSEIL: Merci beaucoup, mesdames et messieurs. Merci
infiniment de votre collaboration.
1336 Thank you very much for your patience with all our questions.
1337 Now we will be entering a new phase of this hearing.
1338 Thank you very much.
1339 MS McQUEEN: Thank you.
1340 MR. FECAN: Thank you.
1341 CHAIRPERSON OF THE COMMISSION: We will, first, take a pause before we
move into the intervention phase. Fifteen minutes.
--- Upon recessing at 1750 / Suspension à 1750
--- Upon resuming at 1805 / Reprise à 1805
1342 CHAIRPERSON OF THE COMMISSION: Before we introduce the next phase of the
hearing, I would like to correct what I said earlier. We will be hearing only
two more intervenors. There will be the CCTA, first, and then the CCSA. Union
will be coming tomorrow.
1343 Madame la Sécretaire, s'il vous plaît.
1344 LA SÉCRETAIRE: Merci Madame la Présidente.
1345 We are now entering Phase II of this hearing.
1346 Each intervenor is given 10 minutes to present its intervention, and it
might be followed by questions from the Panel Members.
1347 The first intervention will be presented by the CCTA, with Janet Yale.
1348 I would like you to introduce your panel for the Court.
INTERVENTION / INTERVENTION
1349 MS YALE: Thank you.
1350 Good afternoon, Madam Chairperson, Commissioners.
1351 My name is Janet Yale and I'm President and CEO of the Canadian Cable
1352 Joining me, today, on my immediate left, is Ted Rogers, President and
CEO of Rogers Communications inc. On my right is Jim Shaw, President and CEO of
Shaw Communications Inc.
1353 In the back row, from left to right, are Ken Englehart, Vice-President,
Regulatory Law, with Rogers Communications; Ken Stein -- last I looked -- Senior
VP, Corporate and Regulatory, Shaw Communications; Phil Lind, Vice-Chairman,
Rogers Communications; and Michael Hennessy, CCTA's Senior Vice-President for
Policy and Planning.
1354 Madam Chairperson, let's be clear. This hearing is not just about
another corporate transaction. This takeover is the most significant transaction
in Canadian broadcasting and communications history, and even before it's
approved, comes yet another unprecedented transaction. Together, the CTV and
Thomson deals will reshape broadcasting, telecommunications and print media in
1355 Obviously, all of us as Canadians should be concerned about this amount
of power being concentrated in a single entity.
1356 En fin de compte, si vous approuvez la stratégie de BCE, il faudra que
les autres joueurs bénéficient de cette même occasion de croître, de s'intégrer
et de mieux concurrencer. Autrement, nous perdrons au change au niveau de la
diversité de l'information et de la concurrence. Donc, si l'on permet à BCE de
s'approprier les meilleurs éléments du contenu canadien, on devrait aussi le
permettre à l'industrie du câble, si l'on considère le besoin de concurrence et
de diversité, ainsi que la nécessité d'assurer l'équité.
1357 MR. SHAW: The key to sustained competition is having more than one
strong competitor. It would not be in the public interest to create a single
entity that could dominate the broadcasting and communications market across all
1358 As you know, Shaw strongly believes in the need for strong, competitive
broadcasting and communications companies. This Commission has encouraged that.
1359 We have seen great success in the broadcasting system over the past few
years, including the introduction of a vast menu of new programming services,
the development of alternative distribution means, including MMDS and satellite,
and the roll-out of high speed Internet services to all Canadians.
1360 We believe that we have built, over the past number of years, a strong,
competitive system that has increased the choice for Canadian consumers and
greatly increased the opportunity for Canadian voices.
1361 If this deal is approved without significant changes in CRTC policies
and practices, the remarkable growth and competition that has taken place in
recent years would be jeopardized. BCE, with the broadcasting, communications
and Internet entities it controls, will be in a unique position to offer and
market services across a whole range of platforms to the detriment of the
competitive environment we have all worked together to build.
1362 Unless the Commission removes all regulatory barriers to cable company
ownership and control of programming services, the result of approving BCE's
application may well be the creation of a single enterprise with an overwhelming
market advantage. Giving BCE a regulated lead would, we believe, work against
the long-term prospects for a dynamic, competitive Canadian communications
sector, ultimately denying consumers real choice.
1363 MR. ROGERS: Madam Chair, by any measure, BCE will be the predominant
player in the market and, of course, the Commission is here for the Canadian
market, not the world market, and a number of the comments that were made
referred to the share that BCE would have in the world. Of course, most
consumers are concerned with the share that one has in Canada and it would be my
information that no company in the United States would have anywhere near the
dominance that BCE will have if this application is approved.
1364 To state that Bell ExpressVu, the number one digital distributor, is not
dominant in analog distribution misses the point. The reason for integration is
to maximize opportunities across multiple platforms. That is where competitive
advantage accrues in the new economy. That is BCE's advantage. So we need to
assess the position of the integrated entity itself.
1365 BCE, as an integrated enterprise, will have significant clout across all
sectors. It already controls a massive distribution network, consisting of the
largest telecommunications, largest Internet and largest satellite providers in
Canada. They subsidize some products, such as high speed Internet service, by
pricing other products, such as long distance, at retail prices less than their
wholesale charges. It is impossible to compete with that.
1366 For example, Bell offers to drop their existing LD monthly charge of
approximately $20 to $5 if the customer drops rogers@home high speed service and
buys Bell's high speed Internet service. That is what we face.
1367 As Jean Monty recently stated, BCE is going to package and cross-market
all of this content across a national network of 24 million -- 24 million
telephone, wireless and broadband access points. All the key sources of content
in Canada delivered through 24 million individual accounts. That is super market
power! Unheard of in this history of this country. That is three times the total
number of all cable customers across Canada.
1368 CTV brings with it the country's largest private television network,
reaching 99 per cent of English-speaking Canadians. It also includes one of the
strongest stables of specialty and pay channels. Collectively the CTV services
accounted for almost 30 per cent of total revenues in the English-language
television market in 1999. That is formidable market power.
1369 Add to all of this the Thomson properties, including the Globe and Mail
and the 50 per cent ownership in RoBTV and the wealth of the individuals who are
in the partnership.
1370 In this context, compared to BCE even the largest cable companies are
small. With its market capitalization of almost $30 billion, BCE is more than
four times the size of Rogers or Shaw and our market capitalizations. In terms
of profitability, of course, there is no comparison.
1371 Even with this unprecedented scale of customer reach and market power,
we are not asking the CRTC to stop the deal or force divestiture of assets. We
are prepared to compete as long as BCE does not add a regulatory head start to
its already formidable war chest.
1372 We ask for a condition of any possible approval be that the cable
companies have no higher degree of regulation than Bell.
1373 Thank you.
1374 Mme YALE: Il faut aussi considérer la nécessité de mettre en place des
mesures de contrôle appropriées qui feront en sorte que l'entreprise intégrée
n'accordera pas de préférence indue à ses sociétés affiliées.
1375 l'ACTC continue à croire que la Section 9 de la réglementation des EDR
suffit amplement pour traiter les questions relatives à la préférence indue.
1376 However, CCTA is fully prepared to work with programmers and other
distributors on a reciprocal industry code of conduct that would apply to all
programmers and distributors in an equitable fashion.
1377 In our view, the Access code tabled by Bell ExpressVu at the digital
licensing hearing is a good start, although we need commitment from programmers
that this code will be a two-way street.
1378 In conclusion, the CRTC should approve the BCE-CTV transaction only if,
at the same time, it issues a clear policy statement that removes any remaining
regulatory restrictions on the ability of all others, including cable companies,
to proceed immediately with similar integration initiatives.
1379 The key is to encourage integration and ensure that, for regulate
sectors like broadcasting and telecommunications, the regulatory framework
allows the growth of more than one strong player with the opportunity to compete
on a fair and equitable basis.
1380 Thank you.
1381 We would be pleased to answer your questions.
1382 CHAIRPERSON OF THE COMMISSION: Merci.
1383 I would ask Vice-Chair Colville to ask our questions.
1384 COMMISSIONER COLVILLE: Thank you, Madam Chair.
1385 Good afternoon, Ms Yale, gentlemen.
1386 In your written brief, I guess you are implying in it today when you
talk about the equitable treatment here -- at paragraph 23 of your written brief
you talked about:
"... replacing the current rule of prohibiting increased ownership of analog
specialty services with a simple set of a priori rules." (As read)
1387 I think you understand that rule came out of our convergence report and
there were a couple of conditions associated with that, putting the rule -- or
that is put in place associated with actually doing away with the rule in terms
of cable's ownership of specialty channels that would be delivered in an analog
1388 I guess I would ask you to comment on whether or not you think those two
criteria have been satisfied?
1389 MS YALE: Well, maybe I can kick it off and I'm sure my other panellists
may want to contribute.
1390 In terms of the convergence report, it seems to me that there were two
key conditions that were identified in terms of -- preconditions, if you will,
that were on the Commission's mind, and they had to do with capacity and access
issues. Perhaps they are not unrelated.
1391 From a capacity perspective, the concern at the time related to the fact
that there were going to be additional analog services licensing concerns about
whether or not all of those services would find a window.
1392 I guess our feeling is that all of the analog services are launched and
out there, so from a capacity perspective the issue that underlay concerns about
ownership of analog services seems to me to have been addressed purely from a
1393 I take it you are referring primarily to analog. We can have a separate
conversation about digital.
1394 Secondly, with respect to access rules, as we have indicated in our
written and our oral comments today, we are very committed to ensuring that any
issues with respect to access can be addressed through a code of conduct rather
than limits on our ability to own programming services, so that we are past the
stage where we need prohibitions or policies that make it very difficult to own
services and that behavioural safeguards are more than adequate to deal with the
kinds of issues that may be left to deal with.
1395 MR. ROGERS: It is a complex subject and a difficult one when we talk
about capacity of analog, of course. We, until our rebuild is finished, are
using some of that analog for being digitized so that it is not possible to deal
with one without the other.
1396 I think any cable operator who would wish to unduly prefer his own
service at the risk of not being able to own the services would be out of his
mind. I mean, I searched my mind for what can be said to absolutely guarantee
that there cannot be undue discrimination. My only conclusion, and I know it's
not a perfect one, is equality. In other words, if you have a service in news
that you own and somebody else has another one, you put them both on the same
tier, you put them both on basic, and put them either side by side or no more
than one away from one another and obviously there can be no undue
1397 So I searched my mind but I don't believe anybody wants to endanger
convergence, which is really the issue we are talking about. I mean, look at the
applicant. I mean, the convergence that they have in absolutely every field if
this application is approved. That is where people want to be, and to be denied
convergence would be absolutely crazy for any cable operator.
1398 So speaking for Rogers, we are quite happy with almost any rule that
people can make. It's not a question of a code. A code is fine, but I mean for
this I think there has to be a rule or something to have an absolute guarantee.
1399 COMMISSIONER COLVILLE: Presumably, Mr. Rogers, the analog services that
have already been licensed that Ms Yale referred to are already packaged in a
way that you would feel is in the best interest of your system, the service
provider, and your customers.
1400 MR. ROGERS: No, sir. I wouldn't ever claim that. The packaging was an
historical accident, that the Commission in different years licensed a number of
new services and they all were launched together. The creator of the tiers, I
guess, really was the Commission in licensing those services at that time.
1401 We don't have in Canada theme tiers, you know, like all information and
news, or sports, or music, and that sort of thing. It's just because of this.
Maybe after the digital results are known there will be theme tiers. But until
now there are three separate tiers, at least in our systems, and they are the
tiers that the Commission licensed basically on a certain day. There may be some
exception to that movement through the years, but I don't think there is much.
1402 MR. SHAW: I would think, Commissioner Colville, that if we could go back
and change things we would be glad to go and do it. If we could make digital
more of a success, we would be glad to do that.
1403 We are in a situation, though, where we have an analog system out there
that is in the process of converging. We are competing against new digital
offerings with digital products who have more advantage on the pick-and-pay, yet
we are also dealing with a huge programming resistance coming to us saying, "We
don't want to offer any pick-and-pay system into the Canadian marketplace
because they are worried what that will do to them.
1404 Our role as a distributor and our role as carrying Canadian content, we
find it very hard to come back and try and change the system now. Essentially,
when you look at it, many companies have adopted a policy that no signals can be
dropped. There can never be a dropped signal. They just can't deal with that
type of customer reaction or profile any more. Maybe it was a long time coming
and maybe we were slow to learn some of these early lessons.
1405 But I think now we are in a situation where if we can realign some of
these rules and make equality our theme -- and various competitors are going to
have different advantages. I look at a Rogers who are more integrated with a
wireless solution. I look at a Shaw with cable distribution and some satellite
assets. I look at Quebecor with newspapers, Internet, now some cable, maybe some
broadcasting assets. I see BCE with no cable assets but lots of telephone assets
and some broadcasting assets. All are going to meld and have different
1406 If we can just come up with a situation where we weren't hindered,
that's all we are asking to do here.
1407 COMMISSIONER COLVILLE: If we were to put a code in place to deal with
the Commission's concern about preferential treatment, what would you offer as
the key elements of that code?
1408 MR. ROGERS: We would sign it.
--- Laughter / Rires
1409 MS YALE: The Bell ExpressVu code gets at a lot of the basic issues that
you would want to cover in any kind of code of conduct, so there are some
obvious issues that you would want to deal with from a preference perspective,
whether it's issues around preference in terms of packaging or marketing. The
code was tabled primarily in the context of the digital proceeding where issues
of channel placement aren't obviously a concern.
1410 So there are some issues that come up in terms of analog, even though
all the services are launched, that you might want to deal with slightly
differently because they are where they are on tiers, and channel placement
issues do figure more heavily in the analog world. That is why I say that it
seems to me that concerns around those sorts of issues can be addressed through
a code that deals with the issue of preferential treatment in those various --
1411 COMMISSIONER COLVILLE: When you say "channel placement", do you mean
channel or package placement?
1412 MR. SHAW: I guess it could be a combination in the new world. It depends
on whether we are talking the digital side or the analog side.
1413 On the digital side, if you select a certain number of channels, they
could be packaged on any number you select and you could probably even pick the
number if you wanted. I mean, you could pick your favourite, you give preference
where it comes up in the line-up, you could do all sorts of things.
1414 So I see if access is the main issue and access has mainly been dealt
with by the Commission over time, and now will be dealt with again one more time
when they licence a new round, then I think a lot of that discretionary stuff
moves to the consumer as the cable platforms get strong enough. They have to get
strong because the satellite platform is strong and expanding all the time.
1415 MR. ROGERS: But I think our vision, at least at Rogers, is that analog
is bulk, and it's because of the nature of analog you can't offer it channel by
channel or tiers of two or three or four. It's basically bulk. I think that it
is a bit hard for the CSRs to describe the composition.
1416 Certainly, in our company, and I think others, there is a trend towards
offering basic and expanded basic. It doesn't apply to existing people who want
to keep what they have.
1417 I think you will find that particularly with digital coming, that analog
will be bulk, you know, all of them, and that digital will be more selective,
that they can pick and choose. I think therefore that the program suppliers,
their wish and our wish is probably the same now, that on analog we should
probably leave it alone. It is working well and it's physically not possible to
have a lot of different traps, and it gives the choice on the digital side.
1418 That certainly would be my thought at this point, and I think it is
quite similar to most of the program suppliers.
1419 COMMISSIONER COLVILLE: So if we were to take that position, Mr. Rogers,
that on analog we were to leave it alone, then would you accept that the cable
operator, should you own any analog channel, would in fact leave it alone and
leave it where it already was when you bought it?
1420 MR. ROGERS: We would do as directed, sir. We would do as directed.
1421 In our particular interest, one of these services is, in our area, on
basic and another is on Tier 1. So under my thesis of equality, we would move
one to either the tier or to basic as you wish, as you direct.
1422 MR. SHAW: I don't think that would be any issue at all. I mean, our goal
is not to be totally dominant here and to control, it's just to be able to match
what's happening in the marketplace. I mean, with the realities of the companies
that we run, our role in the system, we just need to match what's happening in
the marketplace. To do that, we need to have all the tools in our tool belt.
1423 MR. ROGERS: I guess what is happening is that more and more people are
taking the whole package. Therefore, the distinguishment between basic and Tier
1 and Tier 2 and so on is less and less. We have 500,000 customers out of 2.2
million who take V.I.P. cable, which is basic and all the tiers and a second
outlet. I think that's the trend. We give them a discount for that because we
don't have the truck rolls or any of those things.
1424 COMMISSIONER COLVILLE: What is the penetration of Tier 2 and Tier 3?
1425 MR. ROGERS: You mean individually? Somebody who buys just Tier 2? It
would be almost non-existent. I'm going to guess 10,000 out of 2.2 million.
1426 Tier 1 would have more. It might have 145,000. I'm guessing at these
numbers. Tier 1 was the first one.
1427 And Tier 3 would be quite big.
1428 MR. SHAW: Are you talking overall or are you talking --
1429 COMMISSIONER COLVILLE: Cumulatively.
1430 MR. SHAW: Overall would be: Tier 1 is going to run in the 90 per cent
range, Tier 2 is going to run, I think the last time I looked, in the 66 per
cent range, which I mean given its time in the marketplace I think is a great
accomplishment, and it came out, you know, under some pretty tough horrendous
times in the marketplace. It had some marketing restrictions. No negative
option. It had lots of things. We had to call everybody in BCE. We had to call
them twice. I mean, you know, it had some things that we just couldn't deal
1431 So I think that overall, though, the services have banded together and
look well, you know, now as the product gets out there, now that the product
starts feeding it, of course, and we are able to package a bit better.
1432 People that take standalone Tier 3, I mean, which would not be our
choice at all, just because of the horrendous technical trapping that happens in
the network, I mean, I think in our company is maybe 15,000 people, maybe
twenty. We offer it but it certainly wouldn't be our preferred mode.
1433 MR. ROGERS: But there seems to be a trend towards them taking the whole
package. In other words, Tiers 1 and 2 that are sixty-five used to be fifty-five
and used to be forty-five.
1434 So I think you will find analog will be bulk and hopefully they will
take pretty well -- maybe we will move them all up to 90 per cent. Who knows?
That is certainly our objective, not to confuse them by saying: Tier 1 has this
and Tier 2 has this and Tier 3 has that.
1435 COMMISSIONER COLVILLE: So your position is, you would be prepared to
work on a code until such time as we get through the migration of analog to
1436 MR. ROGERS: We would be prepared to do that and to give equality, or
whatever is fair, so that there is no suggestion by anybody that there is any
undue preference. Or any preference, never mind undue.
1437 COMMISSIONER COLVILLE: At the outset of your oral comments this
afternoon you indicated that this hearing is not just about another corporate
transaction, your point being that it is a big transaction, but in fact the
hearing is about that corporate transaction. It is not about this policy issue.
And you would appreciate that while you are raising this issue here, there are
many parties who are not a party to this proceeding who would have an interest
in this issue that you have raised today.
1438 So we wouldn't be in a position to change this policy coming out of this
1439 MS YALE: Let me kick that one off.
1440 I think the public notice that you issued when you called for a hearing
on this transaction does suggest that you recognize yourselves that the
transaction is about more than the transaction in isolation, and have asked
parties to address the broader implications of the transaction for the
broadcasting system overall.
1441 So it was that invitation on the public notice, in fact, that led to the
kind of intervention that we put forward, because we do think that it is very
important not to look at this transaction in isolation.
1442 Time is passing, and one of the things that we want to be able to do is
to be in a position to participate fully in the opportunities in the marketplace
as they arise. That is why we have urged the Commission, coincident with
whatever decision it makes in this proceeding, to make it clear that the policy
that currently restricts our ability to integrate in a similar way to what BCE
is doing with CTV should be changed so that we are not waiting for another
hearing and dealing with marketplace delays and that kind of head start that
they have in the marketplace. We do think it is incumbent on the Commission to
move, and to move quickly.
1443 MR. ROGERS: I think that we didn't want to oppose. We didn't want to
1444 If there were no hope of a change and we couldn't own them, and they are
coming here and asking to own eight, then we would obviously oppose, because it
is not fair.
1445 That is basically what we are saying, it is just not fair. And they are
a distributor, and a massive distributor of all products to Canadians. To
suggest for a moment that they should own eight and Rogers should own none, I
can't think of anybody who would think that is fair.
1446 MR. SHAW: I was, like many people, a few weeks ago watching the Canadian
Open with Tiger Woods and great play by various players around the country, and
some great Canadian players, and I noticed that while this is a great event for
Canada, Mike was on there a lot -- Mike Bullard from the comedy network -- and
we were watching the Cable Land commercial over and over and over again. I
couldn't help but wonder how that related to ExpressVu and how that related to
CTV and how that wasn't cross-promotion if they are all siloed off and no one
1447 Now, I understand that anybody can buy programming on there. I wasn't
fortunate enough to watch The Sopranos last night, and maybe there was nothing
on there, on the new CTV special that is out, but it did lead me to believe that
you need to have this equality so that the promotion of products is fair for
all. And if you decide not to get in it, you are not restricted from coming in,
owning part of this and being part of the promotion going forward.
1448 We haven't asked Mike Bullard to produce an anti-satellite commercial
yet, but we are thinking about it.
--- Laughter / Rires
1449 MR. SHAW: So that is the kind of equality we are looking for here.
1450 COMMISSIONER COLVILLE: Mr. Shaw, actually, I just became one of your
subscribers, and I was struck by seeing that same commercial. But I was also
struck by the fact that immediately after that commercial I saw a red bowl of
1451 Do you know what I am talking about?
1452 MR. SHAW: I might.
1453 Yes, I do. I do.
1454 COMMISSIONER COLVILLE: It happens to be the Star Choice ad.
1455 MR. SHAW: I do.
1456 COMMISSIONER COLVILLE: Immediately after the ExpressVu ad.
1457 MR. SHAW: Right. And that would have been one we purchased. I was just
looking at the frequency in the number and the cross-ownership.
--- Laughter / Rires
1458 MR. SHAW: So, you know, we pay for what others get for free. No, I don't
1459 I am saying that we need to be careful, and everybody would like to have
the same tools, so we are asking for your help in creating some equality here,
and we think the safeguards are such that would be in place and the stuff you
have and the powers you have in front of you to manage this competition as it
gets bigger and broader all the time.
1460 MR. ROGERS: I think that applies to television as well. We are very
small in television, but I think that people just want a feeling of some
safeguards, because this is a real elephant in the room. I mean, this is a real
big guy. If they start bidding for programming, like they bid for CTV, when most
people got off the train at $25 and they paid $38 or something -- if they bid
for programming the same way, they are going to own it all, put a number of them
on the shelf that won't ever be seen, and that is the sort of thing that
television broadcasters, as you know, fear; that this massive buying power is
used in a way to weaken and ultimately destroy competitors.
1461 It has happened in long distance. I mean, AT&T are gone. They are
out of it. Sprint Canada is a walking corpse. Bell utterly dominates that area.
It has happened. It can happen in the others as well. And I think it is a
legitimate concern for people to come here and express it, and it is a
legitimate concern for the federal regulator to take into account.
1462 COMMISSIONER COLVILLE: Of course it is a legitimate concern, and the
concerns you have raised here today are legitimate. My only point to Ms Yale was
that, notwithstanding the broad wording of the public notice, I am not sure that
most people would understand that this hearing was all about bringing in a code
of conduct that would apply to the cable industry in an analog world, and if the
Commission were to pursue that issue it would be difficult, if not impossible,
for us to do it in this proceeding. It may be something appropriate for us to
deal with, so that we can get the broader interest public comment in a separate
1463 MR. ROGERS: My particular thing was broader, of course, in that my
request was that, as a condition of any possible approval, the cable companies
have no higher degree of regulation than Bell, just as a general statement.
1464 COMMISSIONER COLVILLE: And do you consider that you have a higher degree
of regulation now?
1465 MR. ROGERS: Absolutely. Absolutely. We can't carry programming that they
1466 I mean, Mr. Lind could go on. He is more knowledgeable than I am. But
they have all sorts of opportunities that we don't have, and we don't like that.
We don't think it is fair.
1467 MS YALE: I mean, we are very focused, obviously, in the context of this
transaction, on the one particular policy, which relates to our ability to
vertically integrate. And it has come up, both in the digital proceeding and in
this hearing, this issue of behavioural safeguards as an alternative, if you
will, to policies that limit opportunities for integration, and, in particular,
cable equity in programming services, digital or analog.
1468 So the Commission's framework in the context of the digital hearing has
expressly recognized that in the digital environment cable equity is
appropriate, subject to certain kinds of safeguards, and there was a lot of
discussion as to whether or not, in addition and over and above that, a code of
conduct would be appropriate.
1469 And we have indicated that we are prepared to work on one, and in that
context we believe it is appropriate that the code be reciprocal, because, as a
result, for example, of this transaction, CTV will be in a position to favour
its affiliated distributor.
1470 So we are very concerned that whatever we talk about be a two-way set of
1471 So if as a result of this proceeding the Commission feels that
behavioural safeguards of the sort that are being discussed are appropriate,
then it just seems that, since there isn't an outright prohibition on cable
companies owning programming, it is more of a policy, that it is more just a
question of giving a signal so that we can operate in the marketplace on the
same terms as others who are interested in acquiring these undertakings to give
a signal that these safeguards are sufficient for all distributors in the
1472 COMMISSIONER COLVILLE: Okay. We thank you for the offer and thank you
for your presentation.
1473 CHAIRPERSON OF THE COMMISSION: I have one question, and I know it
belongs to another proceeding that is still open, in the sense that we are still
working on the analysis and making the decisions, but I recall from the previous
hearing on digital that your position then was not very encouraging in terms of
the possibility of a code of ethics, saying that you had sat down and you had
tried to figure out what could be safeguards that could be pragmatic and could
really work, and you ended up doing that work with the conclusion that there was
really nothing more you could add.
1474 So I would like to understand, other than the discussion you have had
with the Vice-Chair Colville, what's your view of a code of ethics this
afternoon that could be workable, that could be, you know, sound and a good
basis for really establishing rules that could bring the safeguards that would
1475 MS YALE: Since you are referring to an exchange that we had very
recently, let me just kick it off, and then I know my colleagues want to jump in
1476 I think I may have given the wrong impression if I suggested that it was
not possible. We were struggling to come up with a code that the programming
services would find meaningful. But as I say, the Bell ExpressVu code which has
been tabled seems to have been met with a fairly positive reaction on the part
of the CAB and other programming services. And as I say, we are very supportive
of that code. We think it's a very good start.
1477 The only thing we feel is missing from it, in fact, is the reciprocal
piece, the commitments back from the programming services to distributors.
1478 So I think I may have left you with an impression I didn't intend.
1479 CHAIRPERSON OF THE COMMISSION: You have. So I will go and correct the
record from the other file as well, it seems.
1480 MR. ROGERS: I want to maybe just take it from an altitude of maybe
30,000 feet. I think that what's happening now is that the Commission has been
successful in converging the video business from a monopoly business to a
1481 If you were to go into any retail store, I think you would just be
amazed at what is going on in the market place, particularly in the Maritimes,
but all over. I spent a lot of time in those stores.
1482 There's a tremendous active market. And I think what maybe we haven't
really thought through is that the power, the regulatory power is moving to the
consumers and the consumers are local. They are your alderman or the mayor or
people that you meet in the store when you are buying groceries. They have
1483 My perception is that the regulations will tend, over the years, to go
to more general regulations, where the Commission and the government wishes us
to go in general principle rather than a lot of detailed ones. People in the
communities will be able to get satisfaction by phoning us and telling us to
change things and provide more services.
1484 So if you have that philosophy, which I have, really it's going to
depend on, I think, the consumers. We are not going to take research that, let's
say, 65 per cent of our people want certain types of programming. We are not
going to take that and ignore it.
1485 So some of our program suppliers may wish us to ignore it if they come
out on a short shift of that research as we go forward in the years. But I think
that it will be very hard for a federal regulator -- and you know this better
than I -- to have the same sort of rules across the whole country. We don't have
the same -- francophone and in English. Northern Ontario has problems and
interests and demographics and the make-up of the people racially requires a
different treatment. We find that even within some of our systems, that you have
large proportions of Chinese people in one area and you tend to put something on
Basic on Tier 1 that is foreign language because there's a demand for that.
1486 So I don't think you will have any trouble with us on any code of
conduct that is centred around the theme that the public will be the boss on
those sorts of issues, always subject to the Commission being the boss on the
rules that you choose to make.
1487 CHAIRPERSON OF THE COMMISSION: As long as you agree that the Commission
is the boss on regulation, we are fine.
1488 Thank you very for your participation this afternoon. Thank you so much.
1489 MS POIRIER: We will now hear the intervention presented by the Canadian
Cable Systems Alliance Incorporated. If they want to come forward.
INTERVENTION / INTERVENTION
1490 MS TOWNSEND: Good afternoon, Madam Chair and Commissioners. My name is
Alyson Townsend and I am COO and General Counsel to the Canadian Cable Systems
Alliance, a company that represents 94 small and medium sized independent
broadcasting distributors throughout Canada.
1491 CCSA's primary focus is the conclusion of commercial arrangements for
the benefit of its member companies through master contracts with suppliers.
CCSA offers its member companies economies of scale purchasing while offering
suppliers the business efficiencies of dealing with one corporate body, contract
administration as well as billing and collection of amounts owed under these
1492 CCSA exists to assist smaller independent companies to remain viable and
competitive in markets where they serve rural Canadians.
1493 CCSA appears here today to register our opposition to the transfer of
CTV to BCE. The Commission has requested public comment concerning the potential
market power that BCE would wield should this transfer be approved. CCSA is here
today to provide an example of the results of concentration of ownership and the
imbalance of power that flows from such concentration.
1494 CCSA appeared before the CRTC 10 short months ago to express to you its
concern regarding the transfer of NetStar to CTV. CCSA was very explicit in its
address and identified the precise relief it was requesting from CTV: Re-opening
of the TSN/CCSA member contracts which CCSA maintains were entered into under
duress; and a master contract with CTV which allowed CCSA companies to aggregate
subscriber numbers to take advantage of TSN's volume based rate card.
1495 Both CCSA's oral comments and TSN's volume based rate card are attached
for your convenience.
1496 CTV made the following commitment at the December 7, 1999 hearing:
"We are definitely sensitive to the difficulties of facing a sole source
supplier with a must-have product. That said, we, at CTV have had a positive
relationship with the CCSA and we have recognized it as an agent for its members
for the purpose of negotiating affiliate agreements and, if this application is
approved, TSN will do the same. Prior to the expiry of current agreements, we
will be happy to open dialogue with them to resolve any outstanding problems."
1497 CCSA was naively satisfied. As CCSA had master agreements in place with
all other CTV programming services, CTV's assertion was accepted as an
undertaking to immediately proceed in the same fashion, enter into a master
agreement and treat CCSA companies in the aggregate. "Prior to the expiration of
TSN contracts" was understood to mean the voidable contracts would be reopened.
1498 It's now apparent that CTV's response was disingenuous. CTV has
categorically refused to reopen contracts or treat CCSA companies collectively.
The comment in the reply of BCE-CTV before you today, September 11, 2000, that
TSN commenced negotiations with CCSA for a master affiliate agreement is
completely incorrect. Please see the attached copy of the most recent
correspondence of TSN dated August 25th, 2000.
1499 What does CCSA want? History has taught us that we must be extremely
specific. We wish immediate reopening of CCSA member contracts with TSN; a
commitment to treat CCSA companies in the aggregate for the purposes of the
volume based rate card, and in order to address any other issues that might
arise to allow the TSN service to once again avoid its commitments, an
undertaking to use the agreement entered into with Fundy Cable on January 12th,
1998 as the form of the master contract, as it was intended when it was
1500 For the record, CCSA will commit to the terms and conditions of this
agreement here and now.
1501 Why are we before the CRTC dealing with what must seem to be minor
issues in the grand scheme of the transfer of control between two major powers?
Because of the total disregard and cavalier attitude of a critical supplier
toward small independent companies. This situation exemplifies the imbalance of
power that may result from market consolidation. The imbalance becomes even more
complex when the proposed owner of the programming service also owns a
competitive distribution mechanism such as DTH.
1502 The fact that TSN and then CTV have consistently refused our requests,
which mean nothing to them financially, and have reneged on commitments made
before the Commission is an abuse of dominant position. It will be exacerbated
by making the large even larger.
1503 What can the Commission do? Of course, the Commission might not approve
the transfer of control to BCE. Practically, we doubt CCSA's intervention would
have this impact.
1504 An alternate solution is to grant our request as part of a very
significant benefits package offered by BCE.
1505 BCE is proposing a tremendous benefits package that assists almost all
areas of the Canadian broadcasting industry, except the distribution of
programming to smaller urban and rural communities at competitive rates.
1506 Our proposal would increase the proposed benefits package by a minuscule
amount and would benefit the broadcasting system, as a whole, by assisting to
maintain a competitive market in rural communities served by CCSA companies.
1507 Another solution is to make our requests a condition of transfer. The
Commission retains wide jurisdiction over the broadcasting system and the
provisioning of programming to Canadian subscribers. This includes commercial
arrangements for distribution. We submit our requests are within your wide
1508 The least favoured option is to ask TSN/CTV the following specific
1509 Is it prepared to reopen the TSN contracts immediately after this
1510 Is it prepared to aggregate CCSA subscribers for the purposes of its
1511 Is it prepared to use the Fundy Agreement as the master agreement,
without varying other terms?
1512 If TSN's comments are negative, or vague, it will illustrate our thesis
and relief will be denied to small independent companies that will be enjoyed by
1513 As an addendum to this presentation, we should advise the Commission
that correspondence was received by CCSA, last Friday, September the 15th, and
we were able to review it yesterday.
1514 Ostensibly, this was an offer to do a master contract with CCSA, but
offered no accumulated benefits.
1515 In reality, this correspondence appears to have been intended to cure
CTV's erroneous position in their reply that they had entered into negotiations
with CCSA for a master agreement. More smoke and mirrors. With the deep pockets
of CTV or Bell, this behaviour could go on indefinitely.
1516 As a final note, TSN has suggested that CCSA is inappropriately using
this hearing to conclude commercial arrangements.
1517 To this we respond: It is a sad fact that the only time TSN responds to
CCSA and small independent operators is when it is under direct scrutiny by the
Commission. To CCSA, this proves our point. Thank you.
1518 LA PRÉSIDENTE DU CONSEIL: Merci, Madame.
1519 I would ask Vice-Chair Wylie to address our questions.
1520 COMMISSIONER WYLIE: Ms Townsend, your position is clear. I really have
1521 You have questions of the applicant. There is a Phase III reply, and I'm
sure you will keep track of whether they respond to them.
1522 MS TOWNSEND: Thank you.
1523 CHAIRPERSON OF THE COMMISSION: Thank you very much.
1524 That concludes our work for today. To all, thank you, have a good
evening and we will see you at nine o'clock tomorrow morning.
1525 Thank you.
--- Whereupon the hearing adjourned at 1855, to resume
on Tuesday, September 19, 2000 at 0900 / L'audience
est adjournée à 1855, pour reprendre le mardi
19 septembre 2000 à 0900