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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
REVIEW OF THE OVER-THE-AIR TV POLICY /
EXAMEN DE CERTAINS ASPECTS DU CADRE RÉGLEMENTAIRE
DE LA TÉLÉVISION EN DIRECT
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Portage IV Portage IV
140 Promenade du Portage 140, promenade du Portage
Gatineau, Quebec Gatineau (Québec)
November 30, 2006 Le 30 novembre 2006
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
REVIEW OF THE OVER-THE-AIR TV POLICY /
EXAMEN DE CERTAINS ASPECTS DU CADRE RÉGLEMENTAIRE
DE LA TÉLÉVISION EN DIRECT
BEFORE / DEVANT:
Michel Arpin Chairperson / Président
Rita Cugini Commissioner / Conseillère
Richard French Commissioner / Conseiller
Elizabeth Duncan Commissioner / Conseillère
Ronald Williams Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Chantal Boulet Secretary / Secrétaire
John Keogh Legal Counsel /
Valérie Lagacé Conseillers juridiques
Peter Foster Hearing Manager /
Gérant de l'audience
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Portage IV Portage IV
140 Promenade du Portage 140, promenade du Portage
Gatineau, Quebec Gatineau (Québec)
November 30, 2006 Le 30 novembre 2006
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
Shaw Communications 1089 / 5956
Bell Canada 1141 / 6261
Cogeco Inc. 1228 / 6805
British Columbia Institute of Technology 1277 / 7026
Fédération nationale des communications 1306 / 7211
Société des autres et compositeurs dramatiques 1339 / 7417
et de la Société civile des autres multimédia
Shaw Rocket Fund 1365 / 7565
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon resuming on Thursday, November 30, 2006
at 0830 / L'audience reprend le jeudi
30 novembre 2006 à 0830
5948 THE CHAIRPERSON: Order, please. À l'ordre, s'il vous plaît.
5949 Madame la Secrétaire. Mrs. Secretary.
5950 LA SECRÉTAIRE : Merci, Monsieur le Président.
5951 Avant de débuter, j'aimerais rappeler aux participants que l'interprétation gestuelle est disponible durant cette audience, et si vous voulez bénéficier de cette interprétation, s'il vous plaît m'en faire part.
5952 Also, for the information of the participants in these proceedings, we would like to indicate that we do have some additional information that was added to the public record since the commencement of this hearing. Copies are available in the examination room.
5953 In addition, we have ‑‑ nous avons une étude sur la production indépendante, mentionnée dans le mémoire du Conseil provincial du secteur des communications du Syndicat de la fonction publique, qui est le commentaire numéro 42. Cette étude était mentionnée dans leurs commentaires. Elle a été déposée au dossier public.
5954 We are now ready to proceed with the next presentation this morning of Shaw Communications Inc. Mr. Jim Shaw will introduce his panel, after which you will have 15 minutes for your presentation.
5955 Mr. Shaw.
PRESENTATION / PRÉSENTATION
5956 MR. SHAW: Thank you and good morning. I apologize, I am getting a bit of a cold, so I won't be speaking too loud and hopefully everybody can hear.
5957 It is a pleasure to have with me today Michael D'Avella; our President Peter Bissonnette; the guy we call Ken "Steinovich" ‑‑ it is really Ken Stein but we nickname him and I am sure he is familiar to all of you here. We have our trusted advisor and long‑term member of CRTC panels, Chris Johnston, with us; Cynthia Rathwell; and Mike Ferras today.
5958 So with that I think you will be pleased to know that our presentation will be quite brief, as was our ad in the paper.
5959 We are Canada's largest video ‑‑
5960 THE CHAIRPERSON: You are just giving me an opportunity because I was looking for one and I have one.
‑‑‑ Laughter / Rires
5961 MR. SHAW: I thought I had 15 minutes.
5962 THE CHAIRPERSON: I have nothing against your ad and I was told that CanWest Global and BGM are very pleased that you took that much lineage in their newspapers. So I am sure they appreciate the intent.
5963 MR. SHAW: Yes. I understand ‑‑
5964 THE CHAIRPERSON: It was also followed by emails that my colleagues and I have received and numerous other members of Parliament have also received.
5965 MR. SHAW: Right.
5966 THE CHAIRPERSON: But on behalf of my colleague Mr. French and myself, I want to say that we are pleased to see that your employees are not concerned about losing their job but they are concerned about accountability, they are concerned about ‑‑ let me read it through ‑‑ the core values of your company, which is accountable, balance, customer focus, integrity, loyalty, positive, can‑do attitude and team player.
5967 MR. SHAW: Right.
5968 THE CHAIRPERSON: Personally, I have received over 100 of them, mostly, mostly from your own employees, not from the general public.
5969 For the record, I want to let you know that we will not take them into consideration because the time to file comments was September the 27th ‑‑
5970 MR. SHAW: Okay.
5971 THE CHAIRPERSON: ‑‑ and it was known at that time that the broadcasters were to seek fee for carriage. We understand that you are quite upset by the idea of the broadcasters. That is why we are having this forum.
5972 MR. SHAW: Right.
5973 THE CHAIRPERSON: But I don't think the way the whole matter has been handled so far was the correct way.
5974 MR. SHAW: I would just like to say back that it is our view and our intention and has been for quite a while to allow Canadians to have a view. I get calls from customers every day asking me to keep them informed and involved. Now whether we did that in a right form or we did it in the wrong form ‑‑
5975 THE CHAIRPERSON: Well the thing is that wait for the decision. Obviously, if the decision was to be the one that you are asking us to make, i.e. authorizing fee for carriage, then I could understand the campaign. But so far it was not warranted. So you have in face of you members, particularly myself, who is not very happy about this campaign.
5976 MR. SHAW: Okay. Should I continue?
5977 THE CHAIRPERSON: Yes, you could.
5978 MR. SHAW: Okay.
5979 We are Canada's largest video provider, servicing over 3.1 million Canadian customers and we are here today to speak to you on behalf of those customers.
5980 We would also like to present our views on the future of the broadcasting system.
5981 Contrary to what a lot of you have heard over the past few days, we think the future is incredibly bright for broadcasters, distributors and consumers.
5982 We operate in a highly competitive environment driven by the demands of our customers.
5983 Over the past five years we have invested over $4 billion in expanding capacity, in introducing services in our cable and satellite businesses. We have also made a tremendous investment in customers, servicing, providing 24/7, 365, same day, next day. This is what we do to remain competitive, innovative and leaders in our business.
5984 We have virtually no regulatory protection, lots of competitors and a growing black market satellite problem. We have to compete every day to keep the customer.
5985 The industry does not need new layers of regulatory protection. Instead, we should use our strengths, work together and conquer all challenges of the digital world. We can do this by innovating and putting the customer first.
5986 As we face more competition, the answer will not be to increase prices without increasing value. If we do, we will lose the loyalty of our customers and everyone will suffer.
5987 Rogers and others have discussed the harm of the entire system that will result from a fee for carriage and we strongly agree with their submission and their positions but today we are here to talk about problems and we are here to talk about solutions.
5988 MR. BISSONNETTE: One of the most important elements of our vision of a bright future is a strong analog basic cable service.
5989 Local broadcasters will always be part of this service. The fact is that 70 percent of our customers take only analog services. That is why we believe that a strong analog offering is not only good public policy but great for consumers and good for business.
5990 We believe that a strong analog service is a competitive advantage to the system in a world where customers want the best programming on two, three, four or even five outlets in the home without having to buy a digital box.
5991 But make no mistake, we are committed to developing a strong digital platform as well.
5992 We are always adding new digital services, especially high definition television, and we recently made the move to simulcast, all analog services in digital, so that we could offer our customers a low cost digital box. In addition, we have also invested over $2 billion in Star Choice, our all digital service.
5993 And the strength of our digital and analog offerings are strengths for the system and for broadcasters.
5994 Broadcasters rely on cable and satellite to provide stronger, interference‑free, reliable signals throughout their coverage areas. In fact, along with the priority carriage and simultaneous substitution, broadcasters rely on cable to deliver 90 percent of their audiences.
5995 We are committed to ensuring that all conventional broadcasters receive priority carriage as part of our basic service. Broadcasters will continue to have tremendous opportunities to generate billions of dollars in advertising revenue to support their businesses. We think this is being and will continue to be an extremely fair bargain for broadcasters, consumers and BDUs.
5996 Broadcasters have the largest audiences and continue to take the lion's share of all TV advertising. They are the largest best‑known destination for the most popular Canadian and U.S. programming. Conventional TV is still the most watched service and its revenues continue to grow.
5997 We further support strengthening the system by giving broadcasters even more market‑based opportunities to generate revenue. We suggest full advertising flexibility, including removing the 12‑minute advertising limit and allowing promotions, sponsorship and product placement.
5998 MR. D'AVELLA: We would also like to discuss time‑shifting in some detail because it has been raised as problem when in reality it is one of the great strengths of the system and one that supports the ability of broadcasters to generate advertising revenue.
5999 Time‑shifting preserves advertising, unlike, for example, PVRs, it increases windows available for Canadian programming, it encourages Canadians to adopt digital technologies, and it keeps our broadcasting system competitive with unregulated options by offering more choice and flexibility to viewers.
6000 Broadcasters, predominantly large national companies, should find ways to monetize the value of time‑shifting instead of trying to eliminate or reduce choices for consumers.
6001 Large‑market broadcasters such as CanWest and CTV call for DTH to distribute all local stations to preserve broadcasters' existing advertising models.
6002 Star Choice already carries nine CanWest stations and 10 CTV stations in standard definition. We foot the entire bill for their distribution on costly and scarce national satellite transponders. In the future we are going to need capacity for HDTV services to sustain our competitive position and give our customers greater value.
6003 We also currently carry 13 small‑market broadcasters on Star Choice. Six of these broadcasters are owned by the Pattison Group, Newcap and Standard Broadcasting. They are affiliates of the large national networks and broadcasters.
6004 From a Star Choice customer perspective, they add little value outside of their local communities. Mandated carriage of even more of these services is unnecessary. For Star Choice, it is untenable.
6005 We cannot and the system cannot afford to waste scarce and expensive resources on the distribution of stations that add little value. By the broadcasters' own admission, these stations are highly duplicative and offer a limited amount of unique local programming.
6006 The CRTC has identified omnibus channels as a way to make efficient use of capacity. However, there appears to be little willingness on the part of broadcasters to explore this practical solution. Giving them more regulatory protection will only reinforce that unwillingness. We need a strong signal from the Commission or means to make omnibus channels more achievable.
6007 We also think that small markets provide excellent opportunities. Shaw has over 100 cable systems with less than 6,000 subscribers. We recently purchased some small cable systems in Whistler, Grand Forks and Kenora.
6008 These markets represent challenges but we have found ways to bring new digital services, high‑speed internet and soon even digital phone to some of these small communities. Serving small markets takes work, investment and innovation but it can be done.
6009 MR. STEIN: As business people we prefer market‑based solutions. We don't like being told what to do and we don't want to tell broadcasters what to do.
6010 With respect to the question of whether broadcasters should be required to provide an over‑the‑air digital or HD signal, that is their business decision to make. Shaw is committed to distributing the broadcasters' over‑the‑air digital services on basic, no matter how they deliver the signal to our headend, provided there is no fee for carriage.
6011 We would like to work with broadcasters to ensure a smooth transition to digital. HD provides broadcasters a fantastic new opportunity to strengthen their service and to counter the attraction of web‑based services.
6012 Yes, it will cost money to implement high definition but that is the cost of doing business. Our cost to facilitate distribution in the next five to 10 years will be in the billions for Star Choice and for our cable systems as we acquire and operate transponders and expand cable capacity.
6013 We encourage broadcasters to make the investments they need to make. Improving high definition content will be one of the ways that we will retain and even repatriate customers.
6014 We also need a regulatory framework that puts the consumer first. This means replacing complex and inflexible rules with a simple rule requiring BDUs to distribute a majority of Canadian services. This will ensure Canadian programming choices exist so that people are always able to buy Canadian.
6015 Collectively, the regulator, broadcasters and distributors will need to foster innovation, provide greater choice and ensure continued viewer loyalty to the Canadian broadcasting system. This is the only way to succeed in a digital world.
6016 MR. SHAW: Throughout the history of the Canadian broadcasting system, which you all know very well, we face many challenges. The current situation is no different. Thankfully, broadcasters and distributors are both strong.
6017 The CRTC should be wary of making important decisions based on only anticipated trends and consumer surveys and the cyclical problems of some broadcasters' business plans.
6018 We have presented a number of proposals here today that we think will provide a solid framework for the future. A strong analog service guarantees priority carriage for over‑the‑air broadcasters; provides broadcasters with full advertising flexibility, including product placement promotion and sponsorship opportunities; supports the benefits of time shifting through commercially negotiated arrangements; continues measures to support small system markets; looks at the Commission to see what they could do to remove the regulatory burden that is now placed on broadcasters, whether that is reporting on ‑‑ whether you have, what do you call it?
6019 MR. STEIN: Capacity.
6020 MR. SHAW: Capacity. We had capacity but logs and stuff like that. Is there a way that the Commission could make the load lighter rather than just look to the consumer?
6021 I'm sure there is somebody there that does that report that wouldn't be that happy with that idea.
6022 Collaboration between distributors and broadcasters to ensure an effective market and transition to digital, but only on the basis that the distributor will provide, and we will take up and do whatever we want with the signal, and they can provide it in any form.
6023 So if they want to stay analog, we are fine with analog; if they want to go to digital, we are fine with digital. If they want to work on HD, let's work on a business plan for HD.
6024 So we are very flexible there and we think that gives the ability for Canadians to have a maximum level of choice from the system today.
6025 One last comment. We love the TV business. As you know, Shaw was just able to purchase CJBN‑TV Kenora, Canada's newest superstation.
6026 Other small market stations are for sale, or maybe a network. We would ask them to please give us a call because we like the small markets. Serving over a hundred small markets now, we think that we have come up with a good plan to do it and we don't understand why they can't.
6027 With that, that ends my comments here today. Thank you very much.
6028 THE CHAIRPERSON: Thank you, Mr. Shaw.
6029 I will ask Commissioner Williams.
6030 COMMISSIONER WILLIAMS: Good morning, Mr. Shaw, gentlemen, Ms Rathwell.
6031 That's probably a good place to start, Mr. Shaw, with small market stations.
6032 You state in your submission that you do not support regulatory protections for large broadcast ownership groups with small market stations. You just said you would have some innovative solutions to challenges within the small market television industry.
6033 What measures do you consider would be appropriate to ensure these stations continue to fulfil their local programming obligations?
6034 MR. STEIN: I will start and I'm sure others will have some comments.
6035 We think that measures that we have put in place, as described by the small broadcasters ‑‑ I think they described it as a home run. We think that those measures are appropriate in terms of providing support in those areas.
6036 So I think where we have a concern primarily is when we get into excessive duplication.
6037 We think that the small broadcasters can make their own decisions, make their own investments in terms of serving the particular community. They may have in those areas substantive over‑the‑air audience, which is fine and appropriate, and where we deliver them we will make them available as part of the basic service on cable. And where we deliver them via satellite and they are linked up, then they will be made available.
6038 One of the options we would really like to explore much more is the omnibus channel because there is just excessive duplication. Looking at the omnibus channel and creative ways of advertising to support them I think would be appropriate.
6039 So far we haven't received a very positive response in that front, but that is what we would like to explore.
6040 COMMISSIONER WILLIAMS: Describe your omnibus channel proposal, please.
6041 MR. STEIN: Cynthia, do you want to take that?
6042 MS RATHWELL: Thank you.
6043 Our omnibus channel proposal would be that we would take local programming from each of the small market signals and compile it on one channel, much as the Commission envisioned in its decision regarding partial and omnibus channels that was issued to Bell ExpressVu.
6044 Ideally, we would like to negotiate those kinds of channels with broadcasters. Unfortunately, to date, we haven't sensed a great willingness on their behalf to afford any consent that would be necessary to arrive at those channels.
6045 We would be appreciative of any Commission support. We know that in the decision that was rendered on this already the Commission signified that it viewed it as an efficient and perhaps very good solution to the problem of duplication. And that is the kind of thing we would like as well.
6046 COMMISSIONER WILLIAMS: The broadcasters have recommended that all of their stations that originate programming should be carried on satellite in their entirety. The distribution of just their original programming would not be adequate, in their view.
6047 How much does it cost per year to distribute a typical local station by satellite in high definition across its market? And if you could include costs like the uplink costs, the transponder costs, receiver costs, just give us an idea of how much money is involved in this type of distribution.
6048 MR. D'AVELLA: I will start, Commissioner Williams. Thank you for your question.
6049 Right now I think we distribute about 73, including three HD broadcast television stations, on Star Choice. They occupy, I believe, about ten transponders.
6050 If we were to do all of them ‑‑ I think there are 124; that's the number we have heard in this hearing ‑‑ it would obviously require another anywhere from seven to eight transponders. And bear in mind that that is essentially standard definition.
6051 So when we move to HD, the greatest efficiency that we have been able to achieve on a transponder is essentially three per transponder, and the standard definition world is anywhere from eight to ten, depending on the content.
6052 So there simply isn't enough capacity. We don't have enough transponders. We don't own the satellite. We lease capacity from Telesat.
6053 Right now I think, Peter, we probably have one and a half transponders available probably for HD services. That is all incremental cost to us. They pay absolutely none of the costs associated with backhaul. They don't pay any of the transponder costs. It is all costs to Star Choice.
6054 MR. BISSONNETTE: And the reality also is whereas on the cable side we have the opportunity to continue to expand through upgrading and resizing our networks to provide for more services, with satellites, after the one and a half transponders are used up, there is no more capacity. The next capacity that will be available to us will be when there is a new satellite that is launched by Telesat.
6055 So we are continually looking at more creative ways of adding services that our customers really want, utilizing the capacity that we currently have in a more effective way ‑‑ and that's why omnibus really appeals to us; looking at different technological approaches to multiplexing, if you will, on transponders. We looking at 8‑QSB or 8‑PSK types of multiplexing to even use our existing transponders more effectively.
6056 So it is a continuous challenge. We just could not accommodate those additional local channels.
6057 We don't think that by providing those services that we really add more value to the system and to our customers, other than those that might be specifically in a discrete location within that community.
6058 MR. SHAW: I guess, Peter, it would be fair to say that we think that each transponder is about $20 million. So every time you add one to us, that is roughly our cost.
6059 You know, even right now, if we take TVA, we have nine channels up. Right?
6060 MR. BISSONNETTE: Yes.
6061 MR. SHAW: They are almost all duplicated and all for the Quebec region, which is only a certain part of Canada. We are glad to do that, but the duplication is so heavy. And you go and every channel has the same thing on. It just uses up all our space and we don't have any ability to offset that at all. So that is our issue.
6062 We are trying to be more efficient. We are not saying we won't show CBC. You might not get CBC Moose Jaw; you might get Regina or you might get Winnipeg. Maybe we could go by region and get a few.
6063 But the load is really heavy on this duplication. Every channel is the same except for the local news.
6064 What we were hoping is to just make a channel and we will put all the local news on it. We will just copy them all and put them all on, because that's Canadian programming. Then you can just tune to the channel and you can watch ‑‑ you know, we will do it by time zone and you can watch Toronto, then you can watch this. All the other programming is identical. You just take the network feed and move ahead.
6065 For us, it really just reduces our cost; maybe allows the ability for us to be a little more creative and do a few more things on a go forward basis.
6066 COMMISSIONER WILLIAMS: Thank you for your answers, gentlemen.
6067 In your written submission you propose a regulatory model that calls for replacement of the existing distribution framework with the simple preponderance rule: one basic requirement that distributors offer predominance of Canadian services to customers.
6068 Could you please elaborate on this concept. Are you proposing that a predominance of Canadian services would have to be offered but that subscribers could choose any combination of services they wanted, including one that might not include any Canadian services at all?
6069 MR. STEIN: Yes. What we are basically proposing is that we would have a basic ‑‑ whether it is analog or digital, there would be a basic package which would have all the priority carriage services: the CBCs, the local services. So that would be fundamentally a package that would be predominantly Canadian, quite frankly.
6070 Added to that we would also put on that basic package some of the channels that might currently be on tiers or on digital that we think would be particularly relevant to a good portion of the market.
6071 We still believe very strongly in the analog market. So we would like to make sure that the basic package is strong. That service for every consumer would be predominantly Canadian.
6072 In terms of packages, we do believe that people should be able to pick from the other services. They should be free to pick what services they wish, whether they are Canadian or international.
6073 We would think that on an overall basis, even if they picked a U.S. or foreign package ‑‑ and we would include in that things like Rye and BBC World. It is not limited to the U.S. services.
6074 But if they pick that, we still think that the overall package they would take would still be predominantly Canadian. But we would not require them to buy a strictly Canadian package.
6075 COMMISSIONER WILLIAMS: The first package that you described with the local signals and the Canadian services, and I imagine the 91H services, have you given any thought to what price point that would be offered at?
6076 MR. STEIN: Price point? The price point it would be offered at would be very similar to the price point we would offer it at now. We wouldn't see that shifting or changing.
6077 COMMISSIONER WILLIAMS: There would be no reductions or increases?
6078 MR. STEIN: No. It's popular now. We have been able to maintain our basic cable subscribers with that set of services by increasing value in that package and continuing to invest in the system.
6079 MR. SHAW: And we always have the market forces coming in to monitor us. As you know, satellite guys do different things. The black market guys come in and do different things.
6080 Our ability to continue to raise the rate is always a big subject at our firm when we go and say gee, we have 3,000 trucks right now. Well, when gas goes up three bucks or it goes up a buck, this is a big deal for us. Then of course everybody wouldn't mind getting the odd little wage increase, and stuff like that. So we have a lot of imbedded costs.
6081 We have 9,000 employees now and we are just trying to manage it. So there is a lot of that in there, Ken.
6082 We also have to be cognizant of the market.
6083 Peter, are we charging ‑‑ is it around 50 bucks? I can't remember, 40 bucks.
6084 MR. BISSONNETTE: The average is around $50, but that includes more services than just our basic services. Our basic services are priced at $23, $24.
6085 MR. SHAW: I'm talking about the seventy.
6086 MR. BISSONNETTE: Yes. So it is in that $49 for 70 channels.
6087 There is good value in there. The fact that 70 percent of our customers are quite happy to take an analog‑only service, bundled in some cases with our Internet or telephone services, really reflects the kind of value that they see in those services.
6088 COMMISSIONER WILLIAMS: Thank you.
6089 In your written submission, you state that Shaw believes the market, rather than regulatory mechanisms, is the most effective way of ensuring the production ‑‑
6090 This is in the area of Canadian programming.
"...ensuring the production, presentation and the amount of popular Canadian programming, but that the current reality is that the Canadian Television Fund is the major determinant of what Canadian programs are produced."
6091 If marketing is the most effective way of ensuring the protection of Canadian programming, why is there a need for the CTF? Why does the CTF exist?
6092 MR. SHAW: Don't everybody reach at once!
‑‑‑ Laughter / Rires
6093 MR. SHAW: Our view of the CTF is that it is not a very effective organization, that it is basically ‑‑
6094 What do you call it on the farm when you have a big thing and everybody goes and eats there?
6095 MR. SHAW: Okay. I won't call it that.
6096 I think that when we look at it, it has shown that it hasn't been that effective, even though our company this year will pay $56 million ‑‑ this year alone ‑‑ and, yet, they are having a hard time figuring out how to get us ‑‑ our satellite guys can't get a Board seat to help make a decision.
6097 It is really ineffective. When you have 25 Board members, you can't run anything effectively, I wouldn't care what it was.
6098 I think that, when you look at it, it is another thing that needs to be revamped. It might be more of an overall government issue, but, certainly, when the CBC is allowed to go in and take, automatically, 37 percent ‑‑ what for?
6099 Why is that? Why is that not a decision?
6100 Do I get an automatic right to go there? I don't.
6101 I get an automatic right to do what? I get an automatic right to pay.
6102 The only thing they ever call us about ‑‑ and they have never called me. They call Peter, I guess. I said to them: We are the largest payer in there, and yet the chairman has never even bothered to phone me once since its inception, about anything. "What do you think?" "How is it doing, Jim?" "Do you have any opinions?" "Are we doing a good job; not doing a good job?"
‑‑‑ Laughter / Rires
6103 MR. SHAW: I get judged quarter‑over‑quarter at Shaw Communications, and I can tell you that some quarters ain't that great and I get in trouble.
6104 What is the process, and what do they do with it?
6105 We are not here recommending solutions, but we do see it as not as helpful as everyone would think.
6106 COMMISSIONER WILLIAMS: As you know, Mr. Shaw, the CRTC has no involvement in how the Canadian Television Fund operates, but we do play a significant role in its funding.
6107 Could you explain why the way the CTF is funded should be re‑examined? And what changes would you propose?
6108 How can we fix this organization that, in your opinion, isn't as effective as it could be?
6109 MR. STEIN: This started with the cable industry's proposals in the early nineties, because it was felt that there was a recognition, as we developed new programming services, that we would need to invest not only in the capital expenditures that we would have to make, in terms of our distribution systems, but that we would have to make investments in the development of content.
6110 The original idea was that this would be an investment in the development of Canadian programming.
6111 Our concern, over the past number of years, has been that it is not really looked at as an investment vehicle, but much more as a vehicle to take care of special interests, and to be able to allocate funding on an ‑‑ I hate to say it ‑‑ envelope basis ‑‑ the CBC is entitled to so much ‑‑ and that winning programming, like children's programming, for example, has actually been on the decline.
6112 As well, since 1999, when the expenditure requirements were changed, it is obvious that there has been a flat line in terms of Canadian programming investment.
6113 We feel that the original intent of the fund, which was to invest in Canadian programming, to make it worldwide competitive, to put it on a sustainable basis, has clearly been an abject failure.
6114 Our changes would be: to run it more as a fund; to run it as an investment vehicle.
6115 That is what the world's broadcasting is all about. It is a very competitive environment for distributors and broadcasters, and we think that investment in programming should be treated the same way.
6116 We think that, in any industry you look at, the fact that it has to be competitive, that it has to exist without subsidies, that always strengthens the industry.
6117 A perfect example is western Canada's transportation system. We used to have lots of subsidies, and the subsidies, under a variety of governments, were eliminated, which led to a tremendous strengthening of the transportation industry, and tremendous benefits for the economy of western Canada.
6118 I think the example holds: that excessive regulation, excessive attention to allocating on an entitlement basis, is not the way to develop an industry.
6119 That is our view.
6120 COMMISSIONER WILLIAMS: Thank you, Mr. Stein.
6121 In the area of time shifting to Fee for Carriage, in your written submission you state that the provision of time‑shifted signals is beneficial to Canadian consumers, and the Canadian broadcasting system generally, as it increases the windows for viewing Canadian programming, it encourages Canadians to adopt digital technologies, and it encourages consumers to remain within the broadcasting system, rather than choosing non‑regulated options.
6122 The time shifting of Canadian over‑the‑air stations has been a significant selling point for DTH operations, such as the one you have, in attracting subscribers to the service.
6123 Why should over‑the‑air licensees be able to negotiate with DTH for the use of their distant signals?
6124 There was a proposal put forward that they would like the ability to withdraw their consent for carriage to help the negotiating process go along.
6125 Could I have your comments on that, please?
6126 MR. STEIN: First of all, the reason time shifting developed was because people demanded that we carry their signals. So the whole basis, as it evolved, on DTH was this magical development, where we started putting these signals up, and people started saying: Wow! This is terrific. I can watch this show at this time.
6127 I noticed in one of the surveys, though, that one of the advantages people saw in time shifting was watching sports earlier. I guess you could watch your hockey game an hour earlier ‑‑ before it started.
‑‑‑ Laughter / Rires
6128 MR. STEINS: You could get the result early, too.
6129 Consumers like it. Its advantages are there for people now, and it is a double advantage. One is that signals get lifted up and they get carried, and they are on the satellite; and, aside from the excessive duplication, the fact that people can choose when to watch it is advantageous.
6130 I think the surprise to us was when a broadcaster said that it wasn't of value to them, the fact that people had increased windows to watch their programs. We thought that that was a tremendous value.
6131 In any event, we were willing to negotiate with them, and we did come to a negotiation ‑‑ a commercial negotiation ‑‑ as to the carriage of their signals, and that's the way it is at the moment.
6132 MR. SHAW: I have to say that one of the main things that we find on time shifting ‑‑ and we recently started it on the cable system, because we were at such a disadvantage to all of the other providers.
6133 I think, Peter, that happened within a month or two.
6134 I think the commercial rate negotiation has gone very well, so I don't think you should be concerned about that. It is no different from any other signal we have, and any other supplier relationship, and provider relationship.
6135 We have always been able to come to some deal. You have the dispute mechanism, if that goes the wrong way down the road, and you can get involved, if you guys want, or not.
6136 We think that it is a natural progression.
6137 The one thing that is really hard for us is that Canadians love it. Other than, when you go through all of the CBC, if you get the wrong time shift and you get a whole bunch of the same programming, they don't like that, but they do like being able to watch ‑‑ I always get these numbers mixed up ‑‑ CFTO, and then Winnipeg, and then you can watch Regina ‑‑
6138 I don't know about you, but I am having a hard time staying up past 10 at night.
6139 I am waiting for the 11 o'clock CTV news in Calgary, and I can barely make it.
6140 And I am not the biggest CBC fan, because that channel seems a bit different to me.
‑‑‑ Laughter / Rires
6141 MR. SHAW: I do like to watch some news, and I can hardly make it. I am up really early in the morning, but I can't make it ‑‑ midnight is a stretch.
6142 MR. BISSONNETTE: Jim, let's not forget that five, six or seven years ago, when people thought of satellite, they thought of black market satellite, and they thought of the advantages that black market satellite provided to them, which was time shifting, the ability to look at services at different times of the day, to look at prime time kind of programming.
6143 We have now provided a product where there is no difference, if you will, in terms of the advantages that our customers, who happen to be DTH customers, will experience between the services we provide and those services that the black market might provide.
6144 The one advantage, I guess, is that the black market is free.
6145 But the fact is, in terms of programming, we have a very, very compelling series of programs that are available to our customers.
6146 As Ken said, when we weren't carrying some of the distant signals, we were written to by the broadcasters, saying: Why aren't you carrying my services?
6147 When we launched high definition television, we were asked: Why aren't you carrying CFTO? You have to carry CFTO.
6148 It is a compelling service, and based on the compelling service, we agreed that it would make a nice tuck‑in, if you will, with our other HD services on Star Choice, and now on our cable services.
6149 So the broadcasters have expressed the desire to be carried, and you don't express a desire to do something if it is hurting you.
6150 MR. FERRAS: I would add, in terms of the negotiation, that I think it is our full expectation, and we are fully committed to having a very good negotiation with the broadcasters.
6151 As you know, we didn't really have that opportunity ‑‑ no one in the industry did ‑‑ because the agreements expired in August of last summer. Then we went into this policy proceeding, and we hope to take guidance from the Commission and from the record, in terms of policy, go away and meet the broadcasters, and really sit down and work hard and try to come to a solution.
6152 Our perspective is going to be that time shifting is really valuable for the system. It keeps Canadians plugged into the broadcasting system, to the regulated platform, and that has to be good for everybody.
6153 That is our intention. We are here to listen and to participate, and we really want to take your guidance and then go and sit down with the broadcasters.
6154 MR. D'AVELLA: Just one final comment on that subject. We don't know any broadcaster or programmer who is looking for less carriage. They all want more carriage. And they are not homogenous enterprises. We are dealing with companies, some of which own 33 specialty services.
6155 So they are all interested in: What is the big deal? Give me more carriage of this, and a trade‑off for that.
6156 As Michael points out, these are all commercial negotiations that we are quite comfortable entering into, and we are very confident that we can get a deal done.
6157 COMMISSIONER WILLIAMS: Thank you.
6158 You also state that specialty and pay television services do not transmit free over the air, and, thus, consumers understand and accept the logic of an associated fee.
6159 However, the signals of Canadian television stations are available to customers free over the air. Canadians will resent and resist being forced to pay for these signals, and many will find alternative sources of programming.
6160 Describe the scenario. Would subscribers in Winnipeg not accept the logic of a fee associated with the DTH carriage of stations from Vancouver and Halifax, since these stations cannot be received over the air in Manitoba?
6161 I would ask you to elaborate a bit on that answer to describe what you view the customer/subscriber reaction would be to such fees being introduced.
6162 MR. SHAW: Currently, we use it as a digital promotion, to enhance digital, to expand the capacity across the network.
6163 Basically, most of these ‑‑ Peter ‑‑ are available at no cost. Right?
6164 That is basically it. No one is paying for it now. It is the same way we do it with the music channels. The Guide you get for free, to try and promote access to digital, which is good for us, but also good for all of the other networks that are on the digital capacity ‑‑ or in the digital category. And you have seen them go up.
6165 But what happens ‑‑ it is funny, with a subscriber, when you say ‑‑ let's see if I can think of a good example.
6166 If I went to you every day and I said, "You got 5 bucks?" and then I went to the next person and said, "You got 5 bucks?" you would say, "I'm not giving you 5 bucks."
6167 What did I get?
6168 If the answer is nothing ‑‑ and maybe a time shift is good from a consumer point of view ‑‑ the answer is nothing.
6169 The subscriber, I mean they go crazy. Like you should see the calls I get. I mean, they would make the e‑mails to the Commission look mild. I mean, you can't even believe it.
6170 By the time they get to me, it's like full‑out war. As I say, when we hurt a subscriber, we really hurt him. We knife him and hurt him and knife him and hurt him.
6171 But when you practically look at it, we have to hang our hat in our group on value and that is why we are so adamant about it that it doesn't provide any value to any Canadian and no one will understand.
6172 The same way if I try to describe to a consumer how simultaneous substitution works, it's just like you might as well have glazed in the globe because no one can figure it out, and no one wants it. They say, "Why do we have to do it?" Then I explain the reason why we have to do it.
6173 I guess those are the benefits they have, but right now, even on the simulcast, I don't know if there is a lot of value that you can go and say, "Yes, here, give me a buck or two bucks" and that kind of thing.
6174 COMMISSIONER WILLIAMS: Thank you.
6175 We will move into the area of transition to digital.
6176 In your written submission you state that:
"Fee for carriage or any other economic reward should not be linked with making the decision to broadcast in digital or offer HD programming. These are investments that broadcasters will need to incur to operate in a competitive digital world and they should not be subsidized by cable or DTH customers." (As read)
6177 In Public Notice 1993‑74 announcing its determinations pursuant to the structural public hearing, the Commission considered it reasonable that cable subscribers should bear a portion of the capital costs of implementing digital video compression, DVC, and universal addressability and to allow a portion of DVC and addressability related expenditures to be eligible for the purposes of cable operators, capital expenditure fee increases.
6178 Could it not be argued that programming services should be given the same sort of assistance that cable licensees have received in the past?
6179 MR. SHAW: Why don't I start, and then we will go ‑‑ I'm sure the boys have a bit of a comment.
6180 You know, when we go ‑‑ and I will just try to remember our capital.
6181 So four years ago it was $850 million; three years ago I'm thinking $460 million ‑‑ Peter, around there?
6182 MR. BISSONNETTE: Yes.
6183 MR. SHAW: Yes. And last year was $530 million, and this year going to $630 million a year. I mean, we are supporting and a lot of these channels have carried at no cost. We support all the uplinking, we do all this stuff. For someone to argue that Jimmy Pattison, who is one of the richest guys in Canada, can't afford to upgrade Kamloops, I just find that ‑‑ like I don't understand.
6184 Some of these guys, they are really successful guys and they are going, "Well, you don't got $10 million or $5 million or something and we are spending hundreds." We are just trying to keep the well shut.
6185 In cable TV my father always said, it's just a license to spend money. He said, we are just waiting to the day we get to make some.
6186 So, I mean, we are coming, but there are a lot of requirements on the system and on us for capacity.
6187 You know, we have to put on all the French channels as soon as we hit ‑‑ I don't know, what is it, eight‑something, 750. We have French channels that they have 40 customers ‑‑ 40, and they are on every network we have?
6188 So the burden on us is a lot to keep all this stuff going. So for a guy to come and argue that you couldn't afford to go and spend a little bit on your business, I have to say: You know what, you should maybe get out. I guess maybe they will phone us to sell.
6189 MR. BISSONNETTE: Jim, just to put it in context, we have heard numbers bandied around in terms of what it costs to move a transmitter from an analog to digital or to high definition.
6190 Given that there is even sufficient transponder space available, we are looking over the next five to 10 years what Shaw will have to invest, just in our satellite business, to provide high definition television to those broadcasters who will want to have high definition television distribution, and it is in the order of $775 million.
6191 $775 million; that is a lot of $10 a months.
6192 MR. STEIN: A comment I would like to make on it is that I found it interesting Mr. Brace's comments about the costs for CTV of about $46 million. They are willing to pay $1.7 billion for CHUM and they don't have $46 million to invest in going to HD? That would seem to me to be not a very good kind of way to put the number.
6193 I think we are spending $630 million in capital in the coming year, just as Jim says, to keep the well closed. So these are the investments that one has to make.
6194 In the high technology business, if you are a transmitter, if you are trying to depend on towers that last 20 years, that is just not the way this business is going to develop over the next 10‑15 years. There are going to be a lot of changes and everybody is going to have to make those kinds of investments, and they are going to have to make those kinds of investments in a competitive marketplace.
6195 So that's the way we see that this has to develop.
6196 COMMISSIONER WILLIAMS: All right. Thank you very much, Mr. Shaw and your panel members. That completes my line of questioning.
6197 Vice‑Chair Arpin...?
6198 THE CHAIRPERSON: Yes.
6199 Vice‑Chair French...?
6200 COMMISSIONER FRENCH: I guess this is a question for Mr. Shaw.
6201 There were 17 very small market broadcasters came to see us yesterday or the day before and one of the things they asked us to do was to eliminate the benefits policy for transfers of property where the broadcasting property's revenues were less than $10 million a year.
6202 If we did that, would that stimulate that market? Would it be the kind of market you might be interested in absorbing?
6203 MR. SHAW: You know, listen, I think our main point is that we are a large operator of small markets, right, and we have been very successful at deploying and building.
6204 So it's just we don't agree with the argument that you have no money, you can't convert, your system is in dire needs when all you do is local news that looks like community programming, you know, you have two anchors and one truck and four cameramen or something. I mean, we just don't agree with that argument.
6205 We go and say, "You know what, if you don't like that business, call."
6206 COMMISSIONER FRENCH: If we remove the benefits policy there would be more sellers and you might be a buyer?
6207 MR. SHAW: I think all you would see is there might be a little quicker consolidation. There will be consolidation across every line, no different than you see now with even telephony. There are only really two large telcos. Cablecos, there are only really three or four.
6208 You will just see a quicker consolidation where you will have, you know, Hildebrand buying them up or one of these guys, or maybe Shaw.
6209 COMMISSIONER FRENCH: I don't know if this is for you, Mr. Shaw, or not. You said there is a growing black market satellite problem.
6210 Do you have evidence and could you share it with us?
6211 MR. SHAW: Well, I don't know if we have it or not with us, but what we are seeing is a continued response from our customers. As you know, cable penetration has dropped. I think Mr. Rogers was here yesterday saying they are down 5 to 8 percent. I think we are down in that similar kind of range across the board.
6212 What is happening is that when ‑‑ maybe some of you go to Florida, maybe some of you go to California and some go to Arizona, that you have access to all these different channels, and when people come back they want them. So the only way to get them is to really take them.
6213 Now, some might pay and some might not pay, that's a different issue, but we are seeing greater pressure on us to provide everything everybody wants and then we just have to come up with how we can support the Canadian broadcasting system with that.
6214 But we are seeing a huge demand for I want, I don't know, Comedy Central, or I want, you know, Hokey‑Pokey, HBO or whatever channel.
6215 You know what, people are not as patient as they used to be. They are asking us all the time for this stuff.
6216 I'm not making a pitch for it, I'm just saying that there is a lot of pressure from general consumers that go "Why do I have to steal?" I don't have an answer. I can't offer it. What do we do?
6217 MR. BISSONNETTE: And there is evidence. In the last two weeks ‑‑ and we have worked with our other satellite competitor in this area because it is mutually beneficial to all of us, whether in the cable industry or in the satellite industry, to do something to prevent the growing black market.
6218 In the last two weeks we know that there was a coordinated bust taking place in Ontario where one satellite retailer of black market devices was arrested. All of his inventory was seized, his records were seized, and his records reflected in the most recent year how many people he has been selling black market devices to.
6219 And we know it's going on. We see if you just go to the internet and you look under some of the Bluebird/Blackbird types of devices, the number of retailers or the number of private people who are actually selling software to activate those devices continues to grow.
6220 MR. SHAW: I think if you look in Toronto, if we go to the Yellow Pages and we look under "satellite", I think we counted like 250 guys selling them. And it won't be any different in Toronto than it is in Calgary or Vancouver or Ottawa or anywhere.
6221 COMMISSIONER FRENCH: I don't think anyone contests that it exists. I was just interested ‑‑ I appreciate the anecdotal evidence, but I underline it is anecdotal ‑‑ that it is actually growing. And you believe it is and you are well‑placed to make that judgment and I appreciate it.
6222 It is very hard always for the Commission, and for broadcasters and for distributors to have concrete data and anything you have of course would be valuable.
6223 But it is your contention or your experience and interpretation of that experience that this is a "growing problem"?
6224 MR. STEIN: Well, you know, Mr. French, with all respect, over the last number of years we have filed all kinds of evidence about this problem. We have worked with the Motion Pictures Distributors Association and we have worked with the RCMP, we have done surveys, we have spent hundreds of thousands of dollars with evidence.
6225 The federal government hasn't acted, the Commission says it's not your jurisdiction, so we are left on our own, totally on our own to deal with the problem.
6226 The thing is, Mike can talk about some of the latest kind of events in terms of it growing, it is very hard to get enforcement under the current set of laws. It is very easy to get access to the system, it is very easy to hack some of the systems that are out there.
6227 We at Shaw have invested in Star Choice in a more expensive technology to make sure it couldn't be hacked, but we can't realize the advantages of that because we are still competing against the black market.
6228 We could do a survey every month to put the evidence on the table, but the evidence we have put on the table in the past hasn't led to action to deal with this problem, as contrary to the kind of actions that have been taken in the United States.
6229 Mike may want to give you some more information about what is happening.
6230 MR. FERRAS: Just quickly, I agree with everything that has been said, but I guess the point we want to make is just to understand that the problem has changed. It used to be you would go and take a satellite receiver and you would ship it or you would have a grey address. That problem, there has been great work done in the industry by our industry partners in the U.S. As Ken mentioned, we work very closely with the RCMP across the country and Canadian Motion Pictures Distributors Association, DirectTV has fixed their system.
6231 The new problem is the one that Peter talked about, which is the free‑to‑air problem where you can go and buy this box illegally that is meant to pick up satellite signals that are in the clear. There are still a few of those out there.
6232 But that box could be sold and imported with no problem whatsoever, because until it is modified it is legal. And it so easy to modify now, you just hook it up to your internet ‑‑ hook your internet into it, bang you get it, and you get all the satellite services from two major providers.
6233 Evidence is always anecdotal. It is really hard to say, "Well, the problem has gone from this much to this much, but the people that we deal with all the time on this say this is going to be bigger than the old black market problem ever was unless something is done.
6234 COMMISSIONER FRENCH: I just equally, respectfully to Mr. Stein, it is not the testimony of all the participants in this proceeding that this is a growing problem. This is the first time we have heard that it is a growing problem.
6235 We realize it is a large problem, a troubling problem, there is an enforcement issue. Other people have said this problem seems to have levelled off. I'm just giving you an opportunity to expand on your view that it is growing and I appreciate that you have done that.
6236 Thank you, Mr. Chairman.
6237 THE CHAIRPERSON: I want to come back to narrow your question that Commissioner Williams asked of Mr. D'Avella and Mr. Bissonnette and it has to do with regard to cost comparison.
6238 What we are really looking for is regarding the cost of a satellite carriage of an analog over‑the‑air signal versus the carriage of a similar over‑the‑air station but with an HD signal.
6239 You referred to the fact that only opening up a new transponder cost $20 million, but we are trying to get some information regarding a more narrow situation of what are the uplink costs of an analog service versus an HD signal transponder cost and receiving cost.
6240 MR. D'AVELLA: Well, the cost of the transponder doesn't change, it is our ability to put programming on that transponder in a standard definition form ‑‑ in satellite it's all digital ‑‑ we can compress it eight‑to‑one, so we can provide eight programming services on a single transponder.
6241 In the HD world, the current state‑of‑the‑art is two. we can provide two HD signals on that single transponder.
6242 There are technologies that will allow us to take it to possibly three services on a single transponder, so you could look at it in the sense of it is three times the cost to do HD.
6243 It also costs more money to backhaul, simply because of the fact that this is not a broader service with more information on it. I mean, we have fibre networks in place that allow us to do this.
6244 In all the HD deals that we have done, whether they are broadcast services or other types of services, we typically pay the cost of backhauling the service to an uplink. That is the way the market is kind of unfolding here.
6245 MR. D'AVELLA: Peter is asking me a question.
‑‑‑ Laughter / Rires
6246 MR. D'AVELLA: Well, the operating cost on the transponder, I think it is in the order of about $2 million a year on a per‑transponder basis, but that is in addition to the capital we have already committed to buy it.
6247 On the consumer side, on the receiver side, I think the cost of our satellite receivers is typically in that ‑‑ the HD receivers is typically in that $300 to $500 range, depending on whether it has a PBR or not.
6248 THE CHAIRPERSON: I don't know if you were following the hearing at the beginning of the week, but the cablecos that are involved with the operation of TVA and TQS are supporting a fee for carriage.
6249 Since you are operating Star Choice and you are delivering francophone signals throughout Québec, do you have different views regarding fee for carriage for the Québec market, or the one that you have expressed so far applies also for the French market?
6250 MR. SHAW: It did make us think it looked a bit self‑serving if you owned both and then you wanted one fee to just go from ‑‑ what's that commercial where they all jump up and they go ‑‑ somebody's got their hand in your pocket, this kind of hand in your pocket, hand in your pocket. You have seen that commercial. It did look a little bit like that to us. We didn't see a lot of benefit out of doing it.
6251 We certainly carry all those markets. We have a big operation in Montréal and we are supportive of that, but we still feel that there is no subscriber, no Canadian benefit to have that fee in there.
6252 THE CHAIRPERSON: Mr. Shaw, Mr. Bissonnette, Mr. Stein and the team, I want to thank you on behalf of the Commission.
6253 We will take a 15‑minute break.
6254 MR. SHAW: Super. Well, thank you.
6255 We are very positive about the future and the direction you guys are doing. So thank you very much.
‑‑‑ Upon recessing at 0923 / Suspension à 0923
‑‑‑ Upon resuming at 0952 / Reprise à 0952
6256 THE CHAIRPERSON: Order, please. A l'ordre, s'il vous plaît.
6257 Madame la Secrétaire ?
6258 THE SECRETARY: Merci, Monsieur le Président.
6259 We are now ready to proceed with our next presentation of Bell Canada. Mr. Gary Smith will introduce his colleagues. After which, you will have 15 minutes for your presentation.
6260 Mr. Smith?
PRESENTATION / PRÉSENTATION
6261 MR SMITH: Thank you, and good day, Chairperson Arpin, Vice‑Chairperson French and Commissioners.
6262 My name is Gary Smith and I am the President of the Bell Video Group, which comprises Bell ExpressVu, our DTH platform and Bell IPTV, our terrestrial broadcasting distribution undertaking.
6263 Joining me today, on my left, are Chris Frank, Vice‑President of Programming; Barry Kiefl, President of Canadian Media Research; and on my right, David Elder, Vice‑President of Regulatory Law.
6264 Bell appreciates the opportunity to participate in this important review of the regulatory framework for over‑the‑air television.
6265 We will focus today on three key issues:
6266 First, the proposal for a fee‑for‑carriage regime;
6267 Second, the impact of distant signals;
6268 And finally, the transition to over‑the‑air digital and HD transmission.
6269 We will explain to the Commission why we feel that the broadcasters do not have a case for increased funding, and why if would be inappropriate to implement fee‑for‑carriage.
6270 With regard to distant signals, we submit that the problem is not only overstated and dramatised, but also has already been dealt with satisfactorily such that no new provisions are needed.
6271 Finally we will confirm Bell's support for the hybrid distribution models suggested by several broadcasters, and that we are prepared to assume a contributing role in this respect.
6272 Turning first to fee‑for‑carriage, there are compelling reasons to reject such a regime.
6273 First, broadcasters have failed to prove that a problem actually exists. Indeed, the evidence suggests otherwise.
6274 We have no reason to dispute the broadcasters' claim that growth in advertising spent on conventional channels is slowing, but we would note that these dollars are moving primarily to the specialty channels, where advertising revenues have increased 318 per cent since 1997.
6275 Most, if not all, of the broadcasters seeking fee‑for‑carriage are already benefiting from this shift through their ownership interests in specialty and pay services.
6276 In any event, the chart in your hand‑out reveals that broadcaster PBITs for conventional services have remained consistent over the last six years and are themselves reasonably healthy, averaging 12 per cent annually.
6277 These are hardly businesses in dire need, as they would have you believe.
6278 No doubt the marketplace will continue to yield shifts in fortune between different services and between competitive broadcasters.
6279 Good and bad business decisions have been made by the broadcasters regarding such factors as their acquisitions of Canadian and U.S. programming, diversification into specialty and pay services, and the development of Internet‑based initiatives.
6280 Some have even diversified outside of broadcasting and outside of Canada. These decisions have inevitably impacted individual broadcaster profitability, yielding winners and losers.
6281 Nevertheless, the profitability of the group of broadcasters in aggregate has proven reasonably consistent over these last few years.
6282 Further evidence of the health of these businesses is the significant interest in station start‑ups and acquisitions.
6283 Conventional over‑the‑air TV programming undertakings have been added to the Vancouver and Toronto markets.
6284 CanWest MediaWorks is one of the five applicants currently vying for a broadcasting licence to serve the markets of Calgary and/or Edmonton.
6285 CHUM acquired the broadcast properties of Craig Broadcasting Systems prior to being acquired itself by Bell Globemedia.
6286 Most recently, Shaw Communications has acquired CJBN‑TV in Kenora, Ontario.
6287 Not only is there no problem to solve here, but in fact, this is a healthy industry sector worthy of investment.
6288 It is clear that the broadcasters have been evolving their businesses to meet the changes in their current business environment.
6289 For example, they have begun ad‑supported Internet content initiatives intended to exploit the revenue opportunity that this presents.
6290 CTV's recently‑launched Broadband Network is a great example.
6291 It is, in the words of its CEO Ivan Fecan:
"...part one of CTV's answer to Canadian's appetite to tap programming on emerging platforms and to provide a solution to the advertisers who want to reach them." (As read)
6292 CanWest MediaWorks has also launched its own online presence, featuring exclusive, ad‑supported on‑demand content.
6293 These early forays into online ventures continue the pattern of profitable diversification established by these broadcasters, first demonstrated via their expansion into pay and specialty.
6294 Moreover, the fee‑for‑carriage proposal itself would be bad for consumers, harmful to BDUs and would establish a damaging precedent for the industry.
6295 To ask consumers to pay a tax to receive services that they already receive is certain to be unpopular. The broadcasters' proposed fees are all over the map.
6296 However, it is clear that the aggregate fee to be faced by consumers could be significant.
6297 Consumers would react to the increase by scaling back on the number of pay and specialty service packages to which they subscribe.
6298 As well, Canadian BDUs would inevitably face subscriber losses, as we know that all price increases cause churn and a price increase with no added value such as this would be a particularly serious customer irritant.
6299 The BDUs' role is also badly misrepresented by the broadcasters in this debate.
6300 They have suggested that BDUs are getting a free ride here.
6301 This is simply untrue.
6302 Bell incurs significant expense in the acquisition and distribution of conventional over‑the‑air signals.
6303 These costs cover backhaul, signal processing, uplink and transponder costs.
6304 As you will have observed from the chart on page 3 of this statement, we are less profitable than the broadcasters who are asking that we subsidise them.
6305 We simply cannot afford to absorb a fee‑for‑carriage and would, without any doubt whatsoever, be forced to pass it on to our customers.
6306 In this debate, the broadcasters conveniently ignore the many benefits that DTH brings to them.
6307 Signal quality is enhanced significantly, while coverage is extended to many more markets, both urban and rural.
6308 Additional value is afforded those conventional broadcasters who own pay and specialty services, whose distribution benefits in the same way.
6309 Finally, in respect of fee for carriage, we submit that the proposal, if accepted, would establish an unhealthy precedent.
6310 The broadcasters would inevitably come to rely on this tax, a purely regulatory fix, in support of their bottom lines.
6311 Such a tax would be susceptible to regular requests for a rate increase, having become an entrenched and accepted component of their business planning.
6312 Fee‑for‑carriage income would also reduce their incentive to innovate in response to technological and competitive pressures.
6313 Furthermore, the U.S. is also serious about fee‑for‑carriage. U.S. broadcasters want to receive fees from Canadian BDUs for the carriage of their local signals to Canadian households.
6314 Canada has been debating an opt‑out clause to the WIPO treaty to avoid this leakage from the Canadian broadcasting system.
6315 Any decision by the CRTC in favour of fee‑for‑carriage would probably put beyond reach any such opt‑out, resulting in fees‑for ‑carriage flowing to U.S. over‑the‑air broadcasters.
6316 None of this southerly revenue flow would contribute to the production of Canadian content.
6317 I would now ask my colleague, Chris Frank, to speak briefly on the second key issue in this proceeding: distant signals.
6318 MR. FRANK: Thanks, Gary.
The availability of distant signals is a significant consumer benefit.
6319 Our subscribers across the country value the viewing choices that such signals provide, and the ability to time‑shift programming at their convenience.
6320 Moreover, the value to broadcasters of time‑shifted advertising is not lost to the fast‑forward button of a PVR, as time‑shifted programming is viewed in real time.
6321 Over‑the‑air broadcasters maintain that the time‑shifting of distant signals has had a serious, negative impact on local broadcasters.
6322 We submit that such claims are overstated and that, in fact, distant signals drive a major increase in the viewing of over‑the‑air signals.
6323 Nielsen data show that, by virtue of distant Canadian signals, DTH generates increased viewing of Canadian over‑the‑air broadcasters, which is in keeping with the policy objectives of the Broadcasting Act.
6324 Indeed, the percentage of viewing of English‑language, Canadian over‑the‑air channels is 33 per cent greater on DTH than it is on cable.
6325 This 33 per cent increase in share is a bonus audience for over‑the‑air broadcasters that would not exist without the accessibility of distant signals.
6326 It is an audience and a revenue source that has been ignored in the studies submitted by the broadcasters.
6327 DTH also provides a repatriation of Canadian audiences.
6328 U.S. over‑the‑air broadcasters enjoy less than half the viewing share in Canadian DTH homes than they do in Canadian cable homes.
6329 Thus, DTH generates additional viewing of Canadian over‑the‑air‑services at the expense of U.S. broadcasters.
6330 Some conventional broadcasters argue that they are unable to monetize the viewing of these distant signals by generating additional advertising revenues.
6331 We have learned that this is inaccurate as a general statement.
6332 Broadcasters are monetizing a significant percentage of out‑of‑market tuning.
6333 Moreover, there is nothing preventing them from changing the way that they sell ads so that they can monetize this to a greater extent.
6334 That is, seize the opportunity and adapt instead of seeing only a problem and asking for a regulatory fix.
6335 Existing distant signal arrangements are working successfully in support of the Commission's desire for a vibrant, competitive environment in the BDU sector by incenting Canadians to move to digital platforms.
6336 It is important to note that the impact of distant signals on large‑market broadcasters is not the intended focus of this proceeding.
6337 The Commission has previously approved a comprehensive deal which saw substantial benefits to both large‑market and small‑market broadcasters.
6338 Now that the deal is due to be renewed, large‑market broadcasters continue to demand additional compensation from BDUs based on what Bell considers to be exaggerated claims of financial losses.
6339 Indeed, Bell submits that the negative market impact of distant signals on all markets, major or otherwise, totals less than 20 million dollars per year, while aggregate compensation that we believe is paid by digital cable and DTH providers exceeds that figure.
6340 Bell's own contributions include more than two transponders, uplinking, encoding, encryption and back‑hauling; as well, cash compensation for the second set of U.S. networks; and commercial arrangements with small independent broadcasters.
6341 In the Public Notice initiating this proceeding, the Commission stated that, and I quote:
"...the carriage provisions and the programming fund approved in Public Notice 2003‑37 have improved the financial situation for most small market independently owned television licensees."
6342 This has been confirmed by earlier speakers in this proceeding.
6343 Further, in terms of the specific written comments of the small‑market independent broadcasters, we are prepared to discuss their suggestions in prospective negotiations regarding a renewal of this agreement.
6344 In the distant signals debate the broadcasters conveniently ignore the major benefits that DTH brings to the broadcasting system.
6345 For example, as the following chart shows by year, since its launch in 1997, Canadian DTH added many new BDU customers to the Canadian broadcasting system.
6346 The total net new subscribers added reached 1.4 million in 2005.
6347 This growth has generated an estimated two billion dollars in net new revenue for Canadian pay and specialty services, much of which flows to Canadian content producers.
6348 Additional new revenue is generated for the Canadian Television Fund and other CRTC‑approved independent programming funds.
6349 This is extra revenue with no risk or investment requires on the part of broadcasters or content producers.
6350 Since all the major over‑the‑air broadcasters own specialty services, they have directly benefited from DTH investments.
6351 All this, in addition to the more direct benefits to conventional broadcasters of added over‑the‑air viewership.
6352 We have provided further explanation of these data in the attached charts.
6354 MR. SMITH: Thanks, Chris.
6355 The third key issue is the transition to digital and HD over‑the‑air transmission.
6356 Easy access to conventional broadcast services in a digital world is vital for 100 per cent of Canadians and is clearly the business concern of the over‑the‑air broadcasters licensed to provide these services.
6357 However, we acknowledge that the cost of traditional terrestrial distribution outside major markets is prohibitive.
6358 We therefore support the broadcasters' hybrid proposals, which we understand to provide digital terrestrial distribution of signals in major markets only, leaving BDUs to assist with a solution outside the major markets.
6359 Appropriate alternative approaches supported by the BDUs should be considered.
6360 The BDU are themselves facing the need for major investments, in this case, to meet the growing demand for high‑definition services.
6361 The BDUs accept this as a cost of doing business and submit that the over‑the‑air broadcasters have to assume a similar level of responsibility for the costs associated with the hybrid solutions that they propose.
6362 There is, therefore, a need for the industry to find the synergies allowing the over‑the‑air broadcasters to avoid the need for digital transmission towers everywhere, without imposing extra costs on the BDUs.
6363 As you heard yesterday, Bell is already discussing small initiatives along these lines with APTN in northern areas of Canada and is similarly prepared to discuss alternative distribution arrangements with all interested over‑the‑air broadcasters. We would present the results of such discussions for Commission consideration and approval.
6364 In conclusion, Bell categorically rejects the conventional broadcasters' proposal for fee for carriage as the wrong solution to an unsubstantiated problem.
6365 We also dispute the exaggerated claims made by broadcasters regarding the impact of distant signals on local broadcasters.
6366 And finally, we support the consideration of appropriate alternatives to a costly transition to digital over‑the‑air broadcasting.
6367 This concludes our opening comments. Thank you for your time and we are happy to answer any questions you may have.
6368 THE CHAIRPERSON: Thank you, Mr. Smith.
6369 I am asking Commissioner Duncan to initiate the questions.
6370 COMMISSIONER DUNCAN: Good morning. Your written brief and your comments this morning are certainly very helpful as they probably answered some of my questions but I will proceed anyway.
6371 You noted that you generally agree with the analytical approach taken in the Nordicity study but that the estimates and assumptions taken in the study are Nordicity's own. So there are three areas I would like to ask you about specifically and then I have a broader request after that.
6372 I am just wondering if you agree with Nordicity that the rate could increase as much as $6.00 to $19.00 if we were to allow compensation for over‑the‑air signals.
6373 MR. SMITH: I think the wide range of fees proposed by broadcasters over the course of this hearing illustrates the fact that the range of possible outcomes could be within the ranger proposed by the Nordicity study or wider.
6374 COMMISSIONER DUNCAN: I am going to ask you more specifically about that in a minute then.
6375 Do you agree with Nordicity that we could lose as many as 900,000 households?
6376 MR. SMITH: Perhaps I could ask my colleagues Chris and Barry to comment on that.
6377 MR. FRANK: I would suggest, Commissioner Duncan, that is wholly dependent on the level of the fee.
6378 COMMISSIONER DUNCAN: I should qualify that. I actually had meant to qualify it by saying if we were at the high end of that range.
6379 MR. FRANK: It also depends on the range of over‑the‑air broadcasters who would benefit from fee for carriage. For instance, we have heard from certain private broadcasters that the fee would be restricted to strictly private broadcasters and exclude private broadcasters. So it would depend on the fee level and on the range of broadcasters, i.e. the number of broadcasters who benefited.
6380 Barry, do you have anything further to add?
6381 MR. KIEFL: No.
6382 COMMISSIONER DUNCAN: It is probably unlikely that the public broadcasters and the educational broadcasters would be excluded though?
6383 MR. FRANK: Well, that has been our experience in previous CRTC decisions. When we have arranged commercial deals with private broadcasters, the Commission has ensured that those benefits ‑‑ and I am speaking specifically of DTH over‑the‑air carriage ‑‑ also apply to the CBC and Radio‑Canada. So I take your point.
6384 COMMISSIONER DUNCAN: Uh‑huh. Thank you.
6385 They also, Nordicity, estimated that the EBITDA for the BDUs could be reduced ‑‑ would, I think they said ‑‑ would be reduced between $328 million and $426 million if we did allow fee for carriage.
6386 Is that one of the items that you disagree with or agree with in the Nordicity study?
6387 MR. SMITH: I think it is clear that fee for carriage would cause significant churn to customer bases assuming the BDUs pass it on to the customers, as we would, and that churn would have a very significant effect on the profitability of all BDUs. For us, it would be very, very serious.
6388 I would point out that a successful satellite platform such as ourselves has a churn rate of approximately 1 percent per month. In a difficult environment, you could easily see that doubling to 2 percent per month. Losing an additional 1 percent of your customers every month would cost us hundreds of millions of dollars.
6389 COMMISSIONER DUNCAN: You are losing net 1 percent a month? They are just turning on and off, so people come back?
6390 MR. SMITH: Yes. A platform such as ourselves, we decide essentially how much to invest in growth and how much to invest in acquiring new customers. So most platforms will invest enough to replace any churn that does happen on your platform and some platforms such as Bell ExpressVu is going further than that and still growing aggressively.
6391 COMMISSIONER DUNCAN: Thank you.
6392 In your conclusion you state, and I quote:
"Bell does not specifically endorse all assumptions made or conclusions drawn by the Nordicity study." (As read)
6393 I was wondering if it would be possible for you to provide us with a report or an overview of where the differences are, what your thoughts are so that we have a better picture of what your position is.
6394 MR. FRANK: The prime intent of that statement was to indicate that we agree with the trends in the Nordicity Group, not specifically each and every assumption. However, if you would like us to provide a list, we would be happy to.
6395 But I think the point we are trying to make is that we agree with the trend, we don't necessarily agree with the specific assumptions and the specific figures.
6396 COMMISSIONER DUNCAN: When I was reading your brief I thought it was very alarming but it was qualified by that but I just didn't quite understand or couldn't appreciate exactly what the degree of concern should be based on that qualifier. I couldn't ‑‑ it didn't give me a good picture.
6397 MR. FRANK: Well let me reinforce our opposition to fee for carriage. We don't think it is a good idea. It is a solution in search of a problem.
6398 Having said that, it really depends on the number of broadcasters and the level of the fee for carriage that will be determined, what kind of losses in customers and what kind of increased expenses we will have to face.
6399 COMMISSIONER DUNCAN: Okay. I think that is fine. Your position is perfectly clear. I have got that, so I don't think we would need anything else but I do have some more questions along this line.
6400 CanWest questioned the high range of $19.00 and indicated they felt an increase in the order of $2.00 to $5.00 would be more reasonable. So it is quite a difference.
6401 Would you care to comment on their projection?
6402 MR. SMITH: Well we saw a range of different fees for individual channels proposed over the course of the hearing, everything from the low end of 10 cents, I think was the lowest, through to ‑‑ I think one of the channels was proposing they would like to see a fee of $2.00 per channel.
6403 Now clearly, if you take the higher end of that range and you multiply it by the number of channels that could receive these fees, you do get to the very large numbers of $19.00 quoted.
6404 It would be unthinkable ‑‑ unthinkable ‑‑ to reach anything like those high numbers and I am sure the Commission wouldn't want to go there but our concern is more that it is establishing such a damaging precedent.
6405 Even if you were to apply a fee of $1.00, say, that you could argue would be bearable by the market, the broadcasters will be back for more and they will be back for more time and again, and I think that it is establishing a tax that has no benefit to consumers and will ultimately result in the damaging effects that we have identified in our submission.
6406 COMMISSIONER DUNCAN: Thank you for that.
6407 MR. FRANK: Commissioner Duncan, I would just like to add that I think that was confirmed by the Global panel. When asked how long such a fee would stay in place, they suggested within three to four years they would be back to look at it again.
6408 COMMISSIONER DUNCAN: Yes. Yes, they did.
6409 MR. FRANK: And our experience is those fees generally go down ‑‑ excuse me, don't generally go down.
‑‑‑ Laughter / Rires
6410 COMMISSIONER DUNCAN: Yes. I knew what you were thinking.
6411 So with respect to the other ‑‑ I mean I get your position but I am just wondering if you want to have any specific comments. I would like to give you an opportunity to comment on the specific amounts proposed by some ‑‑ the CanWest, I can take it I just got your comment on the 50 cents per signal.
6412 But TQS, for example, they suggested $1.00 for themselves and $1.00 for TVA.
6413 Others supported a flat rate that would apply to all broadcasters and that the Commission should determine that rate.
6414 CTV offered 10 cents a signal with 50 percent committed to Canadian programming and the balance to be used for other initiatives that would be approved by the Commission.
6415 Do you have anything that you want to add to any of those or just ‑‑
6416 MR. FRANK: If I could just add a few words and it goes to the comment you made a few minutes ago, Commissioner Duncan, and that is that it is unlikely that the Commission would not include public broadcasters.
6417 We note that none of the private broadcasters' suggestions to you include the public broadcasters or in fact some of the other niche over‑the‑air broadcasters and that would drive up ‑‑ even the CTV proposal, some might think 80 cents ‑‑ I think when we did the math in the Toronto market it was closer to $1.40. So these are big numbers.
6418 COMMISSIONER DUNCAN: I think Commissioner Cugini did draw that out in her questioning at the time.
6419 MR. FRANK: I am sorry, I missed that.
6420 COMMISSIONER DUNCAN: No, no, that is all right. She did ask about the extra signals, thank you.
6421 You indicate if fee for carriage was imposed BDUs must be free to decline carriage of the over‑the‑air signals or to place them in discretionary packages and you pointed out that there is no guarantee that any of the incremental revenue generated by fee for carriage would be used to create Canadian programming.
6422 CBC suggested rather than imposing a fee for carriage at this time, the Commission should entertain applications to set wholesale rates for conventional television stations at the time of their licence renewal and in that context it was suggested that the Commission could choose to link the level of fees to the amounts of Canadian programming provided by the broadcasters.
6423 Can we have your comments on that CBC suggestion?
6424 MR. SMITH: I think it would be sensible for the Commission to consider all aspects of the programmers' needs at licence renewal. So in that respect I think it is a very reasonable request but we are very concerned about the Commission sending any signals to the industry the fee for carriage will be considered as part of those licence renewals for the reasons that I think we have outlined.
6425 We are very skeptical about the broadcasters' suggestions, in various forms from the various broadcasters, that they will consider incremental commitments to Canadian content and priority content.
6426 We think that it is very clear that the broadcasters are seeking an improvement to their bottom lines. They were very clear about that objective of seeking fee for carriage, and clearly, if they are granted fee for carriage only to have it diverted into additional costs for their businesses, it doesn't achieve their objective.
6427 So I think that the broadcasters are suggesting that whilst the Canadian content and priority programming obligations may be reviewed as a part of the licence condition, the reality of their offer to provide additional programming in return for fee for carriage is an illusion.
6428 COMMISSIONER DUNCAN: Thank you.
6429 If fee for carriage was adopted as a regime despite what you are telling me, I am wondering do you think that we should continue to require distributors to provide broadcasters with priority carriage or simultaneous substitution?
6430 MR. SMITH: We would like to see the move towards the specialty world where we can change the packaging of those channels. It is not so much the must carry obligation but the packaging would be sensible to be considered. We would like to give our customers the option to choose if they are forced to pay for a service like that.
6431 Chris, I think you might have something to add.
6432 MR. FRANK: Thank you, Gary.
6433 When you think about the availability of these signals on a free‑to‑air basis in communities such as the one we are in today, the consumer does have the option of erecting an outside antenna or in fact using sophisticated inside receiver equipment to switch from satellite or cable to the free over‑the‑air signal.
6434 If we are offering that signal on a priority basis, which means it is on basic, and there is a fee for carriage and we don't give the consumer the opportunity to opt out, I think we will have a major, major irritant on our hands and I think our call centre will light up like the 1st of July.
6435 COMMISSIONER DUNCAN: Shaw had a discussion this morning. They were talking about the preponderance of Canadian signals.
6436 Did you have any comments on their suggestion?
6437 MR. FRANK: Well, we have long advocated preponderance in a digital world. We think that the technology allows customers to ‑‑ it is a hundred percent addressable and it allows the customers to pick and choose what they want. That is a huge, huge benefit and I think it is one of the major benefits driving people from analog to digital.
6438 So we would like to offer customers what they want but our view of preponderance is that we would ensure that each customer purchases more Canadian services than they do foreign services. So it is not preponderance at the distribution level but rather preponderance at the consumer level.
6439 COMMISSIONER DUNCAN: Thank you.
6440 CTV suggested that broadcasters should be able to refuse to allow BDUs to carry their signals in distant markets if they are unable to negotiate a satisfactory fee for carriage.
6441 I am wondering what your thoughts are.
6442 MR. SMITH: On the fee for carriage for distant signals, which I think was the context, if you are referring to that.
6443 COMMISSIONER DUNCAN: Yes, it was.
6444 MR. SMITH: They were establishing a precedent which would be very damaging, we believe, if implemented because if the broadcasters have the option to force us to withdraw distant signals if we are unable to agree, we would have no basis for sensible negotiation of any arrangements.
6445 Further to that, we believe that withdrawal of distant signals would be a major consumer irritant. As I think has been made clear by previous speakers to this hearing, Canadians like viewing of distant signals, particular the ability to time shift.
6446 I think Mr. Rogers and his panel made it very clear that it was a major drive to take up digital television in Canada, which we think has been good overall, and we would very much dislike any possibility of distant signals being withdrawn.
6447 Chris, would you like to add anything?
6448 MR. FRANK: I would just like to note, Commissioner Duncan, that that would be a radical departure from the current regime.
6449 First of all, in the broadcast distribution regulations there is a mechanism called dispute resolution, and it contemplates the provision of the continuation of a service while negotiations or in fact a dispute is under way.
6450 Just to reinforce what Gary said, putting the toothpaste back in the tube in terms of distant signals is going to be a major challenge for digital distributors in Canada.
6451 We have always been committed to coming to the table and negotiating with broadcasters. We have, I would like to think, a first class record in that regard. We are the company who instigated the first and second, and completed the first and second, comprehensive agreements with the CAB.
6452 In the first instance, the broadcasters had cash compensation in mind. In the second round of discussions, which led to the deal the Commission approved three and a half years ago, which is on extension, they switched from compensation ‑‑ and this is very important. They wanted carriage. They stated that right up front. They wanted more carriage.
6453 And that's what the deal ended up giving them: two and a half more transponders worth of carriage for small independents and for large market broadcasters.
6454 That deal costs us now $8 million a year.
6455 COMMISSIONER DUNCAN: I think it is very useful to have your answers to their suggestion on the record.
6456 I want to explore a little more on that.
6457 I was a little surprised yesterday when I was discussing it with the CCSA people. As they pointed out and you are mentioning the funds that you are already paying to the CAB now, I am assuming therefore that CTV was anticipating that there would no longer be this bulk CAB deal but they would negotiate individually.
6458 Would you take that to be the intent of their suggestion?
6459 MR. FRANK: I think that is correct. But if my memory is correct, the work‑around solution that was contemplated in our original licence, and I think has been captured in the broadcast distribution regulations, contemplates negotiating with an industry group. It becomes very complicated.
6460 I think it was Ms Fusca from Stornoway yesterday who explained how difficult it is to go from BDU to BDU to cut deals. It would be, I think, problematic to go from broadcaster to broadcaster. We would rather negotiate with an industry group like the CAB, but we are not firm on that.
6461 We will come to the table with reasonable suggestions to arrive at an arrangement so that we don't have to delete identical programs on distant signals.
6462 That is the essence of the problem. As Mr. Hennessy said to you yesterday, this isn't about access to distant signals; it is, rather, compensation in lieu of program deletion.
6463 Our company ‑‑ and I would imagine other digital broadcasters in Canada ‑‑ simply would not be competitive one to another or with the U.S. DBS companies if we had a menu of conventional Canadian stations that look like Swiss cheese.
6464 COMMISSIONER DUNCAN: I didn't get the impression from CTV that they were talking about that. I thought they were talking about value for their signal. They weren't talking, I didn't think, in terms of not having to delete the signal.
6465 So whether this was an additional charge or an additional reason to have a charge...
6466 MR. SMITH: Perhaps I could speak briefly before I ask Chris to elaborate.
6467 I think the submissions from the broadcasters have claimed very significant damage to their businesses caused by distant signals. They have submitted various reports to substantiate their claims, and we have read those reports with great interest.
6468 We believe that whilst the reports are obviously founded on good scientific bases, some of the assumptions in their reports are questionable, in fact just miss some important points.
6469 We have assessed the damage as significantly less.
6470 The damage that we have assessed ‑‑ and I think we alluded to it in our opening statement ‑‑ we think is capable of being addressed with regulatory intervention through negotiation.
6471 If CTV's position is that the damage is greater and that they would like to see regulatory intervention to help them negotiate a better settlement, our contention is that is not necessary. No regulatory intervention is required in the environment as it exists today. We are happy to go to the table with these broadcasters and negotiate a new settlement.
6472 We have brought Barry Kiefl with us, who has done the analysis on the reports, if the Commission would like to understand further our reasoning behind our lower estimates of the damage caused to this distant signal debate.
6473 COMMISSIONER DUNCAN: Thank you. I don't have any specific questions on the report, at least not at this time. Some of my colleagues might. Thank you for the offer.
6474 This actually leads us right into the question that I had about time and station shifting. I did read, of course, in your brief your feeling and why you felt that they were able to monetize the time shifting. And I did give them an opportunity on Monday to explain their side of it, so we don't need to go there.
6475 The broadcasters are making a distinction between time shifting and station shifting, and I didn't come away with that when I was reading your brief.
6476 I am wondering if you would care to comment on this distinction.
6477 I think, as well, you have already commented on Rogers' position yesterday that time shifting actually represents an opportunity for broadcasters and BDUs to work together.
6478 I would be curious to know if you have made any attempts. I understand from the Rogers people that they have made some approaches. Rogers, of course, explained that the most important thing was increasing eyeballs and slowing down the move to PVRs, and you touched on that as well in your comments.
6479 I guess I'm just interested to know if there is an argument there. Is station shifting another aspect of it or just another positive aspect from your point of view?
6480 MR. SMITH: I'm going to ask Chris and Barry to contribute to this answer, but I would like to start off by reminding the Commission of what I find quite an outstanding statistic: and that is that the viewing of these channels in DTH homes is 33 percent greater than it is in cable homes.
6481 The actual numbers underlying that is 43 percent of viewing in Canadian homes is of these over‑the‑air channels over DTH and only 30 percent in cable homes.
6482 COMMISSIONER DUNCAN: Can I just ask here: Is that because there are more of them and it gives them more opportunities?
6483 MR. SMITH: The obvious suggestion is that having a line‑up which includes all the distant signals gives customers a lot more opportunity to view Canadian content and the adverts that are contained on those channels.
6484 COMMISSIONER DUNCAN: Which they make use of.
6485 MR. SMITH: I think that is a fact. It's a measured fact. So it is very easy to substantiate the fact that there is an opportunity here.
6486 It does become arguable as to how extensive the broadcasters are actually monetizing that or able to monetize it. I think that was the discussion that you had with the broadcasters earlier in the hearing.
6487 Let me invite my colleagues, Chris and Barry, to contribute to this.
6488 MR. FRANK: The only thing that I would like to add before I pass the microphone to Barry is that the whole program substitution and program deletion regime is about local program rights, not about distant signals per se or the value or access to distant signals. It is to protect local rights. So with simultaneous substitution, programs from certain distant signals are substituted for local signals. Or there is a program deletion regime in place.
6489 Our comprehensive deal with the CAB addresses the issue of program deletion and our particular regulatory regime. We have put in place additional carriage and other limitations on signal shifting and time shifting to protect specifically small market broadcasters but also to protect large market broadcasters as well.
6491 MR. KIEFL: Thanks, Chris.
6492 The bonus audience that was referred to in the opening statement, and which Gary just referred to, it was about three years ago actually that Nielsen decided that it was time to break out the audience according to digital cable homes and analog cable homes and satellite homes. It was actually quite a shock.
6493 I remember the first time looking at the data. It was the beginning of the TTCs in 2003‑04. Looking at the size of the audience for Canadian broadcasters within the DTH environment ‑‑ this is in English TV ‑‑ Gary mentioned the last TTCs in 2004‑05, Nielsen put it at 43 percent. That's on a 24‑hour basis.
6494 In prime time it was close to 50 percent, which is really quite remarkable. Compared to the cable universe, it's just a little over 30 percent. So you are talking about a repatriation of the Canadian audience for Canadian broadcasters.
6495 It relates to the whole issue of monetization because clearly that bonus audience is something that if it weren't for DTH, a large part of that audience the broadcasters wouldn't have. If DTH operated like a cable in the sky, like old‑fashioned cable, and only carried local signals and so forth, there wouldn't be nearly as large an audience for Canadian broadcasters.
6496 What you are talking about is a bonus audience that has been generated by DTH that is an audience they wouldn't have had without DTH. Even if there is some part of it that they can't monetize ‑‑ and I'll spend a moment talking about the part that I think they can monetize and are monetizing right now ‑‑ there is an audience there that they wouldn't have had otherwise.
6497 So if there is a part of it that they can't monetize, it's an audience they wouldn't have had. If all of a sudden these distant signals were to disappear their audience would decline substantially.
6498 Think for a moment of CTV. CTV has some major hit shows in prime time, like CSI with 3 million viewers or more on some weeks. About 10 percent of that audience is delivered by distant signals. I doubt very much that CTV would be happy with a situation which would see 3 million drop to 2.7 million all of a sudden.
6499 The part that they can monetize, CTV in particular or CBC ‑‑ CTV said here earlier this week that about 30 percent of their revenue is from network advertising. That 30 percent is an audience that is delivered partly by distant signals. There is really no way around it.
6500 I've checked with the ACA, the Association of Canadian Advertisers, the organization that represents all of the advertising agencies, the CNTC. They confirmed that they do pay for the audience to network commercials that are delivered by distant signals.
6501 So CTV is talking about 30 percent of its revenue coming from network signals, network advertising.
6502 CBC Sales confirmed with me this week that they deliver 50 percent of their revenue with network ads. If somebody is watching Hockey Night in Canada on a distant signal, they want to catch the Toronto game in Vancouver off of CBOT on ExpressVu, that audience is counted by the measurement companies. It is delivered to the CBC. They sell the audience to the network advertiser.
6503 So you have a combination of both the network advertising and the bonus audience which, combined, represent perhaps as much as 75 percent of the monetization issue in terms of what DTH ‑‑ in particular DTH, and digital cable is doing the same thing. But DTH because it does have so many additional channels and does deliver this extremely high audience for Canadian broadcasters is primarily responsible for really delivering a new audience and an audience that is watching a lot of network commercials.
6504 COMMISSIONER DUNCAN: Thank you. Would you ‑‑
6505 MR. FRANK: Could I just add to that very quickly by giving you a quick example of one of the palpable benefits of time shifting.
6506 Barry has mentioned Hockey Night in Canada. It would seem that the national press is preoccupied with the ubiquity of Toronto Maple Leaf hockey games coast to coast. Through distant signals the local Ottawa hockey games, which are carried by the CBC and are often restricted just to the Ottawa area, are now available coast to coast to coast.
6507 So all of this, all of CBC's hockey games are available and I think that very much pleases consumers; not everybody in Canada is a Toronto Maple Leaf fan.
6508 COMMISSIONER DUNCAN: My husband certainly is. I have certainly heard about them for long enough.
6509 Yes. Would you agree with me then that this bonus audience is, in fact, only going to increase as cable deploys more of their digital service, these people buy more of their digital packages?
6510 MR. KIEFL: Yes. I think cable began offering distant signals in competition with DTH to meet the competition of DTH about three of four years ago, but they began initially by offering them as a separate package which the consumer could pay. I think it was around $5.00 a month to receive all of this package of distant signals.
6511 And then, about 18 months ago or maybe a little longer, they opted to offer them as part of the digital basic package and as digital cable continues to grow and no doubt it will, and DTH, I'm sure, is going to be trying to get more customers in addition, we are going to see more of this trend, there is no question about it.
6512 COMMISSIONER DUNCAN: Do you think that they are ‑‑ I want to keep on with this because I think everybody has made their points wo we will have to go away and deliberate, but I just ‑‑ do you think there is a distinction where you are mentioning between station shifting and time shifting or it's just ‑‑ it's all a benefit from your point of view?
6513 MR. KIEFL: Well, it's a benefit, but one of the quite interesting findings in both the Armstrong Consulting Study and in the study done by CanWest was that of the distant signal viewing that they measured in their analyses of BBM data, something in the neighbourhood of 40 to 45 per cent of all of the distant signal viewing in each of the studies was attributed to station shifting.
6514 COMMISSIONER DUNCAN: I see.
6515 MR. SMITH: And I find it interesting in that we talk about distant signals in the context of time shifting, but in reality a lot of the distant signal viewing that's going on, as measured in both of those studies, is the stations that are shifted.
6516 And I should point out that ‑‑ and I think there was a question yesterday put to Rogers about station shifting that it's not necessarily the whole station that's shifted. It can be just an individual program.
6517 For example, Global about two years ago began airing programs in the Eastern time zone so that they aired at the same time ‑‑ in the Atlantic time zone so that they aired at the same as the local station did in Toronto.
6518 So, you can actually station shift or program shift, as opposed to the whole station.
6519 COMMISSIONER DUNCAN: O.K. Thank you very much.
6520 We are looking to get some information on costs so I think it will help us with that, that would be great.
6521 Some broadcasters have provided preliminary estimates on the cost of greater existing transmitter networks to high definition. That's the replacing of the whole network and others, and also cost on constructing a system ‑‑ sorry ‑‑ a system paralleling their network and the first one on upgrading.
6522 Would it be cost effective as another alternative for a broadcaster to distribute its service in high definition across its market by satellite, with the signal being delivered free to air with your experience in satellite delivery?
6523 MR. SMITH: It's quite a complex answer I think is the preface to my answer. You can't look at the cost of distribution by satellite on a channel by channel basis because there is such large embedded cost in running a satellite platform.
6524 So I think some of the broadcasters have been the point that it is just is inappropriate for them to essentially set up their own satellite platform for distribution of over‑the‑air signals, be it SD or HD.
6525 It would make sense for them to piggyback on the back of an existing satellite platform like Bell ExpressVu and we agree with that, it's just simple economic as it costs hundreds of millions of dollars to set up a satellite platform before you put any channels up.
6526 And then, you have the incremental costs of providing additional bandwidth to carry each service.
6527 The previous panel, Mr. Shaw's panel, gave the Commission some numbers which I would broadly support that each transformer would probably cost around two million dollars a year and the number of channels you can put on that transformer is about eight or so SD channels and two HD channels are present and that may grow in the future.
6528 But I would stress the point, that is the incremental cost over adding each new signal. It does not take into account any of the core infrastructure costs that the business has. It doesn't take into account the cost of all the costs of services or security services and everything else.
6529 Another point I would like to make in answer to this question is the satellite resources are finite. There is only so many frequencies available. There is only so many over the locations available and probably more importantly, each customer with a satellite dish currently only looks at certain frequencies and certain over the locations.
6530 So, once you could theoretically, if there was bandwidth available in space for another satellite with different location, you haven't got anybody looking at it and it's a huge logistical exercise to provide dishes and set up boxes to customers which is, yes, another reason why piggyback is such a service on the back of an existing satellite platform is the right way to go
6531 COMMISSIONER DUNCAN: I'm sure you can appreciate that we are just trying to address that remaining five to ten per cent.
6532 MR. KIEFL: Yes. I think my colleague, Mr. Frank, would like to add something.
6533 MR. FRANK: I would just like to comment on some of the evidence given by previous witnesses to the effect that the two DTH companies and I should only speak obviously of ExpressVu, are bringing on new satellite capacity in the not too distance future.
6534 I would just like to point out that the next satellite that we will be acquiring will actually be a replacement satellite. So, whereas it will provide a better coverage, higher power coverage of Canada, which is more conducive to high definition TV, we are not increasing the number of frequencies at that orbital slot that are currently available to us.
So, it's replacement, it's not necessarily incremental.
6535 The first opportunity for incremental a space segment and as Gary said, will be at a different orbital location which has significant logistical challenges and significant costs associated because you have to provide a new receive end antenna won't be till after 2010. Gary, you have the ‑‑
6536 MR. SMITH: Yes, that's the right time frame, around 2010. I appreciate the intervention from Mr. Frank because these are huge costs, huge costs, the cost of any satellite exceeds one billion dollars as the commitment that we have to sign to support any satellite to expand our services.
6537 Now, that investment is a cost that we, as a BDU, are willing to embrace and we have embraced it for satellite bandwidth today and we will continue to do so, particularly in respect of the growth of HD services in Canada.
6538 We believe we have to bear our own costs for that and, you know, grow with the punches the industry charges us and HD is one of those punches great opportunities. We simply believe that the over‑the‑air broadcasters have to do the same in these respects. They have to, you know, evolve their businesses and innovate to the same extent according to our submission.
6539 COMMISSIONER DUNCAN: I appreciate your comments and then certainly that wouldn't sound to be a third possibility or alternative for them continuing over‑the‑air distribution.
6540 MR. SMITH: I would like to add that, you know, once I think satellite distribution is a very expensive option for them to pursue in isolation.
6541 I think because we will have to carry a lot of these channels anyway, as a result of the existing regime, there is an opportunity for synergies by bringing into the market a solution whereby a satellite distribution platform provides access to a limited number of high definition signals or digital standard definition signals to Canadian consumers outside the major markets, either at a reduce subscription or a subscription which is subsidized by the broadcasters over on some commercial basis that works for the industry.
6542 And we are anxious and willing to participate in those discussions.
6543 COMMISSIONER DUNCAN: Thank you.
6544 MR. FRANK: And those are the types of things we can talk about with the broadcasters in the context of a new comprehensive agreement respecting program deletion.
6545 COMMISSIONER DUNCAN: Thank you. That actually ‑‑ I jump ahead of my question because that sort of follows into one of my other questions that I had.
6546 Just dealing with these customers that will be the remaining five or ten per cent, estimated to be the remaining five to ten per cent, there is two suggestions that I am aware of, that provision of a set‑up box at low or no cost or the provision of a sub‑basic package which would be excluding, which would exclude probably the U.S. channels and these would be take it then the kinds of solutions that you're suggesting, you might be able to work upon with the broadcasters as a more cost effective delivering service to these hold‑outs if you like?
6547 MR. SMITH: In general, the types of options you've described, there are certainly the types of things that we would be welcome ‑‑ we would be happy to discuss.
6548 There are many different models, but we have to acknowledge there is a huge cost in carrying these signals and in providing the logistics and the set‑up boxes and things, so somebody has to be and if we want to bring those services for each subscriber, then there is a cost to the industry.
6549 But, you know, our ambition would be to make the costs as achievable as possible and what the broadcasters to find a way to make it work for them as well as for ourselves.
6550 COMMISSIONER DUNCAN: Thank you. I have another cost capacity related question here with regards to the ‑‑ what I understand is 124 local stations and in your brief, you indicated that you're presently carrying more than 70 I think is what it said.
6551 I am just wondering how much satellite capacity would be required to distribute the remaining local stations in standard definition and then when they convert to high definition and what kind of cost and timing you expect involved there, if you were to ‑‑ first of all, I guess we would have to assume you're going to deliver all 124, but ‑‑
6552 MR. SMITH: Well, first of all, a simple math that each transformer on the satellite carries eight, nine, ten channels, that sort of number, depending on the content of those channels. So, the simple math would say if there is 54 channels missing, then it would be five, six, seven transformers, that sort of size. I think that's consistent with the kind of ‑‑ the response to the same question that was posed to Mr. Shaw's organization as well.
6553 COMMISSIONER DUNCAN: Yes.
6554 MR. SMITH: So, that clears the simple math issue.
6555 From our business perspective, it would be a ‑‑ it would be an unreasonable demand on our business to carry all 124. There is hugh duplication in these signals and they don't bring any additional value to the majority of the subscribers and I simply don't recognize the physics of a satellite platform.
6556 Satellite platforms are really good at delivering, you know, high quality bandwidth with intensive signals across to a larger audience across a large area and I think the compromise that has been reached over the course of the last ‑‑ well, since ExpressVu was created back in 1998 where we carry two thirds of the signals, 70 or so, is an appropriate compromise for the SD world.
6557 And whilst we are prepared to look at tweaking the number of signals we carry, so for example the small independent ‑‑ sorry, the independent broadcasters serving small markets, we know are seeking another four signals, I think, and we are very happy to consider that request as part of the overall negotiation, without making any commitment to carry them across, but we need to ‑‑ we do need to discuss of other aspects of that deal.
6558 We're happy to consider tweaking with them, but a whole set increase from 70 to 124 would rob us of five, six, seven transformers as which (a) we don't have today. We are in the same position that Mr. Shaw's organization is, that there just isn't. You don't leave satellite capacity unused. So we would have to take down money earning services, revenue earning services, which would hurt potentially Canadian specialty in pay and our business.
6559 And we also need future growth of satellite resources to deal with the enormous transition to HD that we're expecting over the coming three to five years.
6560 We currently have in excess of 40 HD channels, we are expecting that to grow to more than 100 in the near future and that's going to really stretch our resources to meet that need. So, to take five, six, seven transformers, which is a substantial pushing of a new satellite to deal with signals which don't bring any incremental value to the majority of our subscribers. It just doesn't make sense, I'm afraid, Commissioner Duncan.
6561 COMMISSIONER DUNCAN: You mentioned about the satellite being replaced, a replacement satellite. So, will that give you ‑‑ does it also include an increase in capacity then?
6562 MR. SMITH: No, it doesn't. We, as Chris described, we currently have four satellites dedicated to ExpressVu services in over two different over the locations. Two of them, the 82 degree location and those two satellites are going to be replaced by the new satellite when it's launched in 2008.
6563 COMMISSIONER DUNCAN: I'm sorry, which location did you say?
6564 MR. SMITH: It's over the locations 82 degrees west. It's one of our two over the locations and the satellites of that location will be straight replaced by the new satellite that we're launching in 2008, subject to a successful launch, of course.
6565 So, we are looking at increasing capacity further, but as per described that means going to different frequencies and different over the locations and that's great and very significant logistical issue how you migrate customers to that location.
6566 COMMISSIONER DUNCAN: Now, you mentioned I think a few seconds ago that you expect that the HD signals that you're carrying are going to increase in the near term to 100. Do you have the capacity now for that?
6567 MR. SMITH: No.
6568 COMMISSIONER DUNCAN: You don't have the capacity.
6569 MR. SMITH: No. We will be achieving that through a combination of technology enhancements for the existing satellite technology ‑‑ the existing orbital locations, by making more efficient use of those locations, and by adding incremental capacity at new orbital locations not yet contracted for.
6570 COMMISSIONER DUNCAN: Mr. D'Avella mentioned compression ‑‑ or three HD services on one transponder.
6571 Is it reasonable to expect, then, that technology will evolve so that that three will increase to five or six?
6572 MR. SMITH: It is early days to say with high definition, but there is certainly potential for it to increase, and increases over the next five to ten years do factor into our satellite plans.
6573 We certainly anticipate, say, in ten years' time, being able to carry significantly more services because of improvements in technology. But in the short term ‑‑ and by "short term" I am thinking three to five years ‑‑ we will be significantly constrained by available bandwidth and current technology. So to carry another 50 SD services ‑‑ even the 50 in SD would be unreasonable.
6574 And to start to suggest that we would carry the same services in HD would be just a death blow to the DTH business.
6575 COMMISSIONER DUNCAN: On the point of omnibus channels, it seems that that would be most applicable to the small‑market stations.
6576 Am I correct in that?
6577 I am just wondering if you have actually sat down at the table with them and tried to explain your situation, and shown them that this would be an avenue for them to get their local content across the country, if that is their objective, by using an omnibus channel.
6578 MR. SMITH: I am going to ask my colleague, Chris, to speak to this in more detail, because, as Vice‑President of Programming, he is responsible for all of the discussions we have directly with the broadcasters and will know more detail than I do.
6579 The omnibus suggestion, which ExpressVu was very happy to pioneer and obtain Commission approval for, is something which could apply to any local content, not just for the independents. It could apply to any of the broadcasters.
6580 Chris, would you like to expand upon that?
6581 MR. FRANK: Yes, thank you, Gary.
6582 We have had discussions with most of the broadcast groups, and certainly with the CAB, in the discussions that led up to the last comprehensive agreement.
6583 We did float this idea at our licence renewal, and subsequently we got CRTC permission to do it.
6584 In fact, we are doing it now with CJOH.
6585 I would encourage the broadcasters and the Commission to think of this not just necessarily as an omnibus channel, because I understand the broadcasters' concern about having CTV programs mixed up with CTV programs, mixed up with Global, et cetera.
6586 We are prepared, to the extent our resources permit, to provide each local channel with its individual channel spot on our electronic programming guide, so there is not a hodge‑podge of programming on one omnibus channel.
6587 The idea would be that all of the unique local programming, market‑over‑market, would be available on a discrete channel, and those discrete channels would be placed contiguous to the same network in time zone. So for customer convenience ‑‑
6588 The broadcasters are concerned that, in an array of 1,000 channels, they will get lost.
6589 Let's use an example, because it's appropriate.
6590 Let's take CBC Kingston, which is owned by the Corus Group. If we provided the unique local programming from Kingston ‑‑ Kingston is not currently carried on our service ‑‑
6591 COMMISSIONER DUNCAN: Yes, we know that.
6592 MR. FRANK: ‑‑ near or very close to either Ottawa or Toronto, or maybe between Ottawa and Toronto, people who want CBC network programming can easily rejoin the network, without getting lost, yet people in Kingston, and expat folks from Kingston across the country, can see all of the local programming and local news from Kingston.
6593 That is the essence of our proposal. It was, I think, quite clear in our licence application some years ago. And, as I said, the Commission has approved it, and we are very interested in exploring this possibility with broadcasters, because it brings more local and regional programming to our subscribers.
6594 COMMISSIONER DUNCAN: I would think they would be more interested in exploring it with you, as well, given that it seems unrealistic to expect that we are going to be able to add all 124 channels.
6595 MR. SMITH: Absolutely.
6596 I would like to add to Chris' response.
6597 The technology that we have in a digital satellite platform is very advanced, and it brings a lot of capabilities. It is appropriate, and we want to try to bring those capabilities to the benefit of the industry, and, of course, ourselves and our consumers.
6598 Hence, we have made significant investments in, for example, interactive technology.
6599 Some of the Commissioners may be aware that we recently launched an interactive sports portal and an interactive news portal to give customers on‑demand access to more content.
6600 This technology enables broadcasters to do things like interactive advertising, or other interactive ventures that we haven't even thought of yet.
6601 Quite frankly, we are a little bit disappointed that the broadcasters are not working with us more aggressively to make use of this innovative technology that we are pioneering to overcome some of these difficulties, but are, instead, coming to the Commission for a regulatory fix to a problem that we don't think exists anyway.
6602 COMMISSIONER DUNCAN: Do you approach them on that? Do you take the initiative?
6603 MR. SMITH: Absolutely, Commissioner Duncan.
6604 We have a team of individuals within our organization looking after the technology, but also the promotion and the marketing aspects of that technology ‑‑
6605 COMMISSIONER DUNCAN: But the liaison ‑‑
6606 MR. SMITH: ‑‑ who are working with the broadcasters, and we are continually trying to persuade them to engage with us.
6607 COMMISSIONER DUNCAN: Thank you.
6608 MR. FRANK: Yes, I can confirm that the liaison through my department is fully engaged.
6609 COMMISSIONER DUNCAN: Thank you.
6610 MR. FRANK: If I could go back two or three questions to your question about the number of high definition services available on one transponder, it is our evidence ‑‑ and I think it was Mr. D'Avella's evidence, too ‑‑ that the current state of the art is two per channel, and that we hope to get to three, maybe four, in the near to middle term. But currently it is two.
6611 COMMISSIONER DUNCAN: Thank you.
6612 Do you think that the absence of an off‑air alternative would change the competitive balance in the marketplace and allow distributors to raise their rates?
6613 This is a concern from a consumer point of view.
6614 MR. SMITH: My initial reaction is no, I don't think it does affect the rates that BDUs are able to charge for the services they currently provide.
6615 I think there is a die‑hard community of people that don't see the need for the extra value that television entertainment brings. They really just want local news, for example, and I think that is an important social service. That is my personal view.
6616 As we made clear in our opening statement, we think that those services should be available to 100 percent of Canadians, and there is a place for over‑the‑air broadcasting into the future.
6617 I'm sorry; does that answer the Commission's question?
6618 COMMISSIONER DUNCAN: Actually, no.
6619 I'm sorry; I will try again.
6620 MR. SMITH: I will try again.
6621 COMMISSIONER DUNCAN: I am just thinking in an instance where the off‑air is gone because the spectrum has been taken away, or the analog transmitters are worn out and haven't been replaced, so there is no over‑the‑air transmitter.
6622 Then you are dealing with cable and DTH.
6623 Do you think, then, that we should be concerned that it would give distributors a greater opportunity to increase prices?
6624 MR. SMITH: I think, if we can find a solution whereby the BDUs help to provide a zero or a low‑cost solution for the small percentage of customers who don't want the rich content that is available on the BDUs, then I don't see any reason why it would change the existing model at all. There would be an opportunity for customers to gain access to the four, five or six signals they currently enjoy via over‑the‑air transmission through the BDUs, in some appropriate format.
6625 The customer may have to buy reception equipment, and there may be arrangements in place with the broadcasters to cover the costs, but it would be an acceptably low cost to the consumer, and it wouldn't feel like a subscription.
6626 Then, the existing regime wouldn't be changed.
6627 If you took them away entirely, then, I would still not see an opportunity for us, for example, to increase our prices, because I think we have certain access to a customer's propensity to pay for these services, and it depends on the quality of the services we bring, which is why we would continue to invest in more services, more HD.
6628 We think that, when you add real value to subscribers, by adding choice of programming and quality of programming and high definition services, then customers have demonstrated that they are willing to pay for those services.
6629 But we don't ask customers to pay something for nothing, which is the core of ‑‑
6630 COMMISSIONER DUNCAN: That is really the answer, I think, that I was looking for. Thank you.
6631 The analog shutdown date ‑‑ you indicate that you favour what you call a "date certain deadline" for the shutdown. I am wondering what factors you think the Commission should consider in determining that date.
6632 MR. SMITH: Our platforms are 100 percent digital, so we are not directly impacted by this date, which is why we have not put forward a specific date.
6633 We do favour the Commission establishing a date certain, and the reason for that is because we think that one of the biggest threats that we face is the Canadian broadcasting services falling too far behind our neighbours across the border. If there is a wealth of high definition services available either over the air, using digital terrestrial equipment, or through the BDUs in America, then more customers in Canada will migrate to sources of programming from the States.
6634 We think that our best defence against that is to continue to provide a really strong programming offering to Canadian consumers; and allowing the industry to fall behind by not setting a date certain, or setting a date certain a long time after the States, will give significant assistance to that market that Mr. Shaw and his team were referring to. You can easily go and buy a Direct‑TV Box or an Echostar Box and watch American programming today.
6635 We don't want customers to want to do that. We want them to feel that they are getting good services from Canadian BDUs and Canadian broadcasters.
6636 COMMISSIONER DUNCAN: You are probably aware of some of the other dates that have been suggested ‑‑ the end of 2010; August 2011.
6637 Do you have a date that you would like to apply to date certain, or would you just leave that to the Commission?
6638 MR. SMITH: We would leave that to the Commission.
6639 COMMISSIONER DUNCAN: Thank you.
6640 You state that if the Commission determines that a higher percentage of funding should go towards the small‑market fund, DTH licensees could contribute up to 2 percent of their gross broadcasting revenues to the CAB fund, rather than the current .4 percent.
6641 These funds, you suggest, would come from the CTF.
6642 We wanted to explore with you, given that ExpressVu is a national service which derives its revenues from subscribers across the country, would it be appropriate for this money to be directed to the 11 small markets that serve the 17 stations, at the expense of a national funding agency like the CTF?
6643 Did you consider that when you made your comments?
6644 MR. FRANK: I think the key element of that statement is "if".
6645 We certainly understand what you are saying, but it was only a question of ‑‑
6646 If the Commission saw the value that this independent fund is bringing to the small‑market independents, and if the Commission felt there was capacity within those local independents to effectively utilize additional funds for incremental programming, then we thought that would be something that you might be interested in.
6647 It is not that we are advocating that, but we would note that cable is able to divert slightly less than 2 percent ‑‑ or 2 points of its 5 points, excuse me, to community channels.
6648 There is a case to be made that local broadcasters are our community channel, and that, if we could set aside a similar amount of money, using the cable model, that money could go to incremental programming for small‑market broadcasters, or perhaps even large‑market broadcasters, if you felt, in your wisdom, that that would help make those services more competitive in the 500‑channel universe.
6649 That was the thrust of it. We weren't advocating it, necessarily, but I take it that the point of this hearing is to flesh out ideas ‑‑ or flush out ideas ‑‑ and that was the intent.
6650 COMMISSIONER DUNCAN: Thank you very much. That's helpful.
6651 There is one last question that I have. In the absence of transmitters, how should cable priorities be determined?
6652 This would apply, I think, more to your DSL service ‑‑ IPTV ‑‑ than to ExpressVu, but I would like to explore it.
6653 I am not sure if it applies as much to Bell ExpressVu, but I want to know how you think that local, regional and extra‑regional signals should be determined and defined in the regulations in the absence of over‑the‑air transmitters.
6654 MR. SMITH: I'm not sure I understand the question, I'm sorry.
6655 Let me confer with my colleague.
6656 COMMISSIONER DUNCAN: Maybe it is not something that you want to address, and that's okay too, but because they are broadcast over‑the‑air cable carriage is determined by where their signal reaches, the contours they reach, and the local signals, regional signals and extra regional signals, which all tie back into the over‑the‑air transmitter.
6657 So once the transmitters are gone, I'm just wondering how you think that carriage should be determined?
6658 MR. SMITH: I think my understanding of the broadcaster's proposals ‑‑ specifically I am referring to the hybrid proposals that we have vocally supported ‑‑ is, in the major markets, that there would still be digital terrestrial over‑the‑air broadcasting available. So in the major markets I don't think it would be an issue. It wouldn't change the existing regime.
6659 I think the Commission's foresight over the years in developing a competitive BDU market through provisioning for DTH, there are two DTH providers available to all consumers. I think in 90 percent of Canadian households there is a cable option, so Canadian consumers have a very, very wide range of options available to them for a source of services.
6660 The final question remains as to whether there needs to be a replacement for the over‑the‑air services outside the major markets. That was the subject of the hybrid discussion.
6661 Does that answer the Commissioner's question? I'm not sure.
6662 COMMISSIONER DUNCAN: That's sufficient. Thank you.
6663 That's all my questions, Mr. Chairman. Thank you.
6664 THE CHAIRPERSON: Thank you very much.
6665 Commissioner Cugini...?
6666 COMMISSIONER CUGINI: Good morning, gentlemen. Just a couple of questions.
6667 I have here your printout from your website of the lineup on ExpressVu and I notice that there is a section that says "Additional hardware required for the following channels".
6668 Are those the services that are on Nimiq 2?
6669 MR. FRANK: They are the services that come from 82.0E, yes.
6670 COMMISSIONER CUGINI: I want to look at it from the perspective of your customer and on the impact on these services that you carry that require additional hardware.
6671 MR. FRANK: Right.
6672 COMMISSIONER CUGINI: So if I want to receive CTV HD in my home, what am I required to purchase?
6673 MR. FRANK: All of our HD services come from 82.0E. The two key business drivers for adding capacity at 82.0E were (a) to be able to grow our business, but (b) to have backup in case we ran into an in‑orbit problem at 91.
6674 So the route for expansion 82.0E and all of our HD services are there, so you would need an additional feedhorn and additional wiring in your home to accommodate reception at 82.0E
6675 COMMISSIONER CUGINI: Is there an additional cost to the customer in order to receive these, in terms of hardware firstly?
6676 MR. FRANK: We have a variety of offers in the marketplace dependent on what the customer is ordering. So in some cases it is available free, in other cases there is a slight charge, yes.
6677 COMMISSIONER CUGINI: You also include some local signals on the 82.0E.
6678 MR. FRANK: That's correct.
6679 I would hasten to point out that many of those are part of the comprehensive deal that we struck with the CAB some four years ago, in those cases where customers were moved or new customers have been dealt with either on a free or highly subsidized basis.
6680 COMMISSIONER CUGINI: Highly subsidized in terms of the equipment that they will require in order to receive ‑‑
6681 MR. FRANK: Additional equipment, that's correct.
6682 COMMISSIONER CUGINI: I heard you, Mr. Smith, when you said that if we were to require the addition of all local stations it would be disastrous.
6683 I note they are your business decisions, but I am curious as to why you would carry some and not all.
6684 We heard OMNI yesterday saying OMNI 10 and 11 should be carried; we heard Global that said that Red Deer and ‑‑ it escapes me right now ‑‑ should also be carried.
6685 So why some and not ‑‑ what is the process that goes into making that decision?
6686 MR. SMITH: It is a compromise, and a very important one for the Commission to be fully aware of, that, as I explained, satellite technology is very good at delivering a signal across a wide area to a large number of customers. It is a very inefficient way of delivering a signal to a very small number of customers. A community of 10,000 or something, you just wouldn't use satellite for that unless it was a very unusual circumstance.
6687 So what we have ended up with, through both a combination of the effects of the regulatory regime that we operate under and the commercial negotiations that have taken place that Chris has referred to on a number of occasions through this hearing, we have ended at a compromise, and that compromise is that we carry 70‑plus of the local services and not 50.
6688 It is a compromise that can be adjusted, but it is the compromise between using our bandwidth for services which don't generate incremental business benefit for our business, therefore allowing us to generate incremental business benefit to fund all of the developments of the platform and the investment in, for example, new satellite services for high definition and, on the other hand, giving sufficient carriage to the broadcasters to, first of all, meet consumer demands, because the consumer is the end, the most important feature in here in many respects, and also meet their desires for local content and local advertising.
6689 That compromise has been struck and it has been successful struck for the last few years at the levels we have.
6690 Yes, I'm sure the broadcasters want the other 50 channels, but the incremental value to them in our terms would be significantly outweighed by the cost to the BDU business, and specifically the DTH business. We would not be able to carry anywhere near the amount of specialty pay and high definition services that we currently have, and it is those services as much as the local broadcasting services which are driving value into the broadcasting industry.
6691 As we pointed out earlier in the hearing, in fact in our opening statement, our profitability is still significantly less than the broadcasters that are seeking these fees for carriage from us and the additional carriage.
6692 We are not a pot of money, we can't fund all this stuff as a charity to the industry, we have to have something that works as well.
6693 COMMISSIONER CUGINI: Thank you very much.
6694 Thank you, Mr. Chairman.
6695 THE CHAIRPERSON: Commissioner Williams...?
6696 COMMISSIONER WILLIAMS: Mr. Smith, earlier this morning we received the views of Shaw Communications on the effectiveness of the Canadian Television Fund.
6697 Could we please have the views of Bell on the effectiveness of this specific funding mechanism?
6698 MR. SMITH: I'm going to ask my colleague Mr. Frank to speak to that because I think he is one of the architects of the arrangements that exist.
6700 COMMISSIONER WILLIAMS: Mr. Frank...?
6701 MR. FRANK: Thank you.
6702 I think there were two elements to the Shaw panel's comments on the CTF: (a) its effectiveness in promulgating new Canadian programs and (b) DTH's inability to get a seat on the Board.
6703 In respect of programming, I have to say that generally speaking we would like to be in a regime where we leave the programming of conventional specialty and pay services to the experts in the various companies, and the same with the independent funds.
6704 So we don't have any comment in specific, but we have noticed that there have been a number of reorganizations, new concepts at the CTF which is focusing on streamlining the Board and getting more quicker and more effective decision. That we applaud, any reorganization that would do that.
6705 We, like Shaw, are very anxious to have a seat on the Board. Currently, one Board seat is allocated to DTH and I think it is fair to say that in this competitive climate neither of the two DTH companies can agree on an equitable sharing arrangement.
6706 Perhaps I'm mischaracterizing. One of the DTH companies would like to see two Board seats and the other would like ‑‑ is prepared to share the existing Board seat ‑‑ I'm trying to be small "p" political here, it's a bit difficult ‑‑ and then work from within the system to see if we can acquire a second Board seat.
6707 So we would like to be a part of the CTF and look forward to the point at which we can actually have a seat on the Board. As it is an independent fund, we will make our comments known at the time we get on the Board.
6708 Canadian programming is important, it differentiates us from our unregulated competitors from south of the border, so we are fully supportive of the general initiative and glad to see our 5 percent is being used to promulgate new Canadian programming.
6709 COMMISSIONER WILLIAMS: Thank you, Mr. Frank.
6710 Thank you, Mr. Chair. That is my question.
6711 THE CHAIRPERSON: Thank you very much, Mr. Williams.
6712 Mr. Smith, or maybe one of your colleagues, earlier this morning when we discussed with Shaw, and again when we discussed with you and your team regarding various costs, one of the considerations that we are having here currently is the related costs of uplinking and carrying an analog over‑the‑air signal versus the carriage of an analog HD signal.
6713 Are there major differentials in these costs and what are they?
6714 MR. SMITH: As I explained earlier, Commissioner Arpin, there is a large chunk of fixed cost which is currently we do not have any pre‑established mechanism of allocating that cost on a megabyte basis or on a channel basis, so there is just a large chunk of cost that we bear as a cost of doing business. The only real costs which we can identify as being separately incremental for each channel is the satellite transponder, which we have quoted the cost to the Commission.
6715 I can certainly take it as an action to give some thought to this and provide some further information to the Commission if they would find it useful.
6716 THE CHAIRPERSON: I think we will find it useful if you could do it, please.
6717 MR. SMITH: Part of the discussion that we have had over the last couple of days had to do with the francophone market where, as you probably heard, the two major cable BDUs are supporting the idea of a fee for carriage for the francophone TVA and TQS service.
6718 Does ExpressVu have a different point of view on that than the ones that Shaw expressed earlier today? So was CCSA, as a matter of fact. They said the same thing as Shaw.
6719 MR. SMITH: To the extent that these channels, these broadcasters are seeking fee for carriage for their services, I wouldn't want to differentiate them from any of the English language services or any of the services which could fall into this category.
6720 With regard to the size of their proposed fees, I thought they were outrageous, but that is a personal view again.
6721 THE CHAIRPERSON: All right.
6722 MR. SMITH: Chris, do you have anything to add?
6723 THE CHAIRPERSON: I think for the record that is really ‑‑
6724 MR. FRANK: Well, I would note one of the two integrated broadcasters that were in front of you, and perhaps both, are agreeing to fee for carriage on the basis that there is a rebalancing of rates between specialty and pay and conventional broadcasting.
6725 THE CHAIRPERSON: Surely one is saying that.
6726 MR. FRANK: Yes, surely one is saying that.
6727 THE CHAIRPERSON: The other one we are going to hear after you and their written submission doesn't address that issue.
6728 MR. FRANK: that sounds like robbing Peter to pay Paul.
6729 I think our position, as Gary said, is that we are opposed to fee for carriage, both in principle and in actual fact.
6730 THE CHAIRPERSON: Thank you.
6731 Mr. Smith, in replying to one of the very first questions Mrs. Duncan asked you, you mentioned that the fee for carriage was some kind of a tax.
6732 Could you elaborate on the legal consideration that the fee for carriage could be a tax that will be levied following a CRTC policy?
6733 MR. SMITH: I was worried that you didn't have any questions for my colleague Mr. Elder, so I will happily pass the microphone to him.
6734 THE CHAIRPERSON: There are a few. They are coming.
‑‑‑ Laughter / Rires
6735 MR. ELDER: Because, as you can see, I'm clearly not here for eye candy.
‑‑‑ Laughter / Rires
6736 MR. ELDER: I think we can appropriate it from two senses.
6737 One, I think if you take it from a customer perspective and look at what is being proposed, to the extent we can nail down what is being proposed, I think the requirement that BDUs collect money and hand it over to another party to underwrite the activities of another party I think most people would understand to be a tax and would use the term in that sense.
6738 There is no perceived value, or additional perceived value to the consumer. In essence, it purports to apply changes to an unencrypted free over‑the‑air wireless service.
6739 And it divides consumers into two groups, the taxed, which would be BDU subscribers, and the tax exempt, which would be traditional over‑the‑air viewers, anybody who has an antenna, rabbit ears, or a coat hangar for that reason.
6740 I think it is difficult to square this with the concept of a subscription fee. If only some people have to pay the fee and others don't, I don't think that fee is clearly tied to the reception of the signal.
6741 I think looking at the legal test, I think in pith and substance the purpose is to raise revenue. As we note in our brief, I think it meets the five‑prong test outlined by the Supreme Court.
6742 Additionally, and most importantly I suppose, I think it fails the regulatory charge test or the regulatory charge exception in that test.
6743 I think if you look at the case law, regulatory charge does not mean any charge that might be levied pursuant to a scheme of regulation or that might be purportedly for regulatory purpose. They fall into very definite sort of categories where there are sort of user fees like a water supply charge or a fee for the registration of a title of land.
6744 Sometimes they have social policy elements, so they could be like a markup on imported liquor that is really designed to encourage a domestic industry, or energy conservation where the pricing or whatever is designed to disuade people from using certain types of fuels.
6745 Finally, there is this notion of regulatory charges where there is a relationship between the fee and the benefit or the need for certain services, so fees for removal of gravel I think was one that has been found as a regulatory charge and it's raised sufficient revenue to cover the costs of the regulatory scheme and the building and maintenance of the roads over which the gravel trucks would travel, or an education fee paid by developers where there was a relationship between the development and the need to build new schools and so the developers were on the hook for helping to subsidize the building of those schools.
6746 I don't see in the case law a situation like this where there is a general regulatory purpose which is the creation and presentation of Canadian programming ‑‑ I think that is where we are going on this ‑‑ and found to be a regulatory charge.
6747 In fact, there was some discussion earlier in this hearing about the Westbank case, and if we look at the Westbank case itself, there it was by way of a by‑law but it was essentially like a property tax. The intention was to levy funds in order to promote the interests of aboriginal peoples and further the aims of self‑government. That was the overarching purpose.
6748 The Court distinguished that overarching purpose from the very specific purpose, which it said was really simply to raise revenue.
6749 I think similarly here where we migh say there is an overarching purpose of filling the objectives of the Broadcasting Act or the creation and presentation of Canadian programming, I think the very specific purpose here is transferring wealth from one set of industry players to another.
6750 For those reasons I think this does qualify as a tax under Canadian law.
6751 THE CHAIRPERSON: Thank you.
6752 Mr. Smith, in your oral presentation at the bottom of page 6 this morning you mentioned the WIPO discussion in Geneva. I don't want to enter into that, but your second sentence says:
"U.S. broadcasters want to receive fees from Canadian BDUs from the carriage of their local signals to Canadian households." (As read)
6753 Other than through discussions at WIPO, do you have any other evidence that they are looking for their ‑‑ obviously they are interested in receiving a carriage fee, but do you have other evidence that they are pressing for a fee for carriage?
6754 MR. SMITH: I was certainly referring there to the discussions which were taking place around the WIPO Treaty.
6755 I would open it to my colleagues if anyone wishes to contribute.
6756 MR. ELDER: I think it mainly is through WIPO. I think popular wisdom is that in fact the current retransmission regime that we have for distant signals was provoked by pressure from U.S. broadcasters.
6757 I don't think it is ‑‑ I think it is a truth that they want access to some of our money.
6758 MR. FRANK: Commissioner, Vice‑Chair Arpin ‑‑
6759 THE CHAIRPERSON: Yes...?
6760 MR. FRANK: ‑‑ I would just reinforce the comments made by the Rogers panel when they went back to the '70s and emphasized the kerfuffle between the U.S. border broadcasters and the regulatory regime of program substitution ‑‑ well, first commercial deletion and its successor program substitution as indication that American broadcasters won't be shy in terms of representing their appetite for additional revenues.
6761 THE CHAIRPERSON: Thank you.
6762 On the copyright side, do you have any comments to make regarding specifically the argument that was developed by the broadcasters in their legal opinion regarding copyright?
6763 From your own standpoint, does the Copyright Act already cover the notion of fee for carriage?
6764 MR. ELDER: Again, it is a little difficult because trying to nail down this concept of fee for carriage is a bit like nailing jello to a wall. Even the broadcasters don't seem to agree amongst themselves.
6765 But if we look at it as being compensation for the value in this unencrypted over‑the‑air free broadcast signal, we think that is copyright.
6766 I do think, and I would agree with the telco TV panel on this front, that the federal government, the elected parliament of Canada, has considered this issue and has decided not to include in copyright legislation the recognition for this type of a signal right.
6767 So I would think it would be, well, let's say passing strange at best, for the Commission under the guise of the Broadcasting Act to second guess parliament in that regard and create such a right.
6768 THE CHAIRPERSON: But will you agree that we are talking here about two different statutes and there could be two different rights?
6769 MR. ELDER: I still don't think ‑‑ I mean, just because you don't call it copyright I don't think removes it from the Copyright Act.
6770 I think parliament, as they divide up jurisdiction and hand authority to various pieces of legislation and various regulatory boards, they have in mind what they are handing out and I think if it is about what is in essence a property right in a signal, in an intellectual property, I think that is copyright and I don't think you can do that unde the Broadcasting Act.
6771 THE CHAIRPERSON: If there was no more over‑the‑air broadcasting and all the system would be carried through BDU, will you say that then for the broadcasters rather than being Tariff 2A it will be Tariff 17 that will apply? Then it will mean that you are going to have to share the load.
6772 MR. ELDER: I suppose it would be. It is difficult to see exactly ‑‑
6773 THE CHAIRPERSON: Unless parliament amends the Copyright Act. Obviously I'm taking it from ‑‑
6774 MR. ELDER: Right. I mean, in a way it is difficult to say whether in fact that would make current over‑the‑air broadcasters specialty services, the way we currently understand the term, which have been from their inception kind of narrowcast, partly subscription fee supported services. We would be creating almost another sort of category to the extent that over‑the‑air broadcasters would maintain their kind of general ‑‑ their mass audience focus.
6775 Obviously it is going to get very complicated if they are going to continue to have separate services like that for each market rather than sort of one national service or an east‑west thing.
6776 I guess in that situation hypothetically I would agree that 17 would apply.
6777 THE CHAIRPERSON: At the beginning of this hearing the Commission announced that they had accepted and put on the record a Nordicity study that was provided to the Commission by CIEL.
6778 Do you have any comments, now that your Mr. Hansen made available some comments that he had provided to Nordicity and he has reserved the right to make further comments.
6779 Do you have anything else you want to add?
6780 MR. SMITH: I have nothing, Commissioner, offhand, but I would invite my colleagues to contribute if they feel the need.
6781 MR. FRANK: Simply to note, as Paul did I believe in an e‑mail, that the number of pay‑per‑view services are significantly overstated.
6782 THE CHAIRPERSON: Exactly, yes.
6783 MR. FRANK: I think we would like the opportunity to go through it in detail, because there was no dialogue, of if there was dialogue it was very, very limited, between us and Nordicity and the people who I think know our business plan best are ourselves. So we would like to go through it and comment to you.
6784 THE CHAIRPERSON: You will have an opportunity to file something before December 20th.
6785 MR. FRANK: Yes.
6786 THE CHAIRPERSON: Legal counsel...?
6787 MS CRUISE: Thank you, Mr. Chair.
6788 I just have one question and I believe it is for Mr. Elder.
6789 In your submission you commented on the WIPO Broadcasting Treaty and you stated that if Canada ratified the treaty and the new rights were granted to foreign broadcasters that out of necessity the rights would be granted to domestic over‑the‑air broadcasters.
6790 I just wanted to clarify if what you are suggesting is that it would be a legal requirement or if it would be some other type of requirement.
6791 MR. ELDER: I guess strictly speaking I would say it would not be a legal requirement because it is up to Canada, I guess, what treaties it wants to sign onto and whether it can negotiate any exemptions or not.
6792 I guess what we are saying here is, certainly there would be very strong pressure on Canada to allow that kind of a right. As we talked about a bit earlier, the U.S. has been exerting that pressure for some time on us.
6793 I guess we think that if the CRTC, for example, was to create what we think amounts to a signal right, in fact this could be very provacative to the U.S. in the context of the WIPO talks.
6794 If I was sitting at the negotiating table for Canada I would hate to have to try to explain that away and maintain the Canadian position that there shouldn't be signal rights and they should be exempted.
6795 MS CRUISE: Thank you.
6796 That's all.
6797 THE CHAIRPERSON: Mr. Smith, gentlemen, thank you very much for your presentation.
6798 We will take a 10‑minute break. We will get back with the next intervenors at a quarter to 12:00.
6799 MR. SMITH: Thank you very much.
‑‑‑ Upon recessing 1135 / Suspension à 1135
‑‑‑ Reprise à 1149 / Resuming at 1149
LE PRÉSIDENT: Order, please. À l'ordre, s'il vous plaît.
6800 Madame la Secrétaire ?
6801 Merci, Monsieur le Président.
6802 Nous procéderons maintenant à la prochaine présentation, qui est de Cogeco Inc., et monsieur Yves Mayrand introduira son groupe de présentation.
6803 Après quoi, vous aurez 15 minutes pour votre présentation.
6804 Monsieur Mayrand?
PRÉSENTATION / PRESENTATION
6805 M. MAYRAND : Merci, Madame la Secrétaire.
6806 Bonjour, Monsieur le Président et membres du Conseil.
6807 Nous vous remercions de votre invitation à comparaître, et nous espérons pouvoir contribuer utilement à votre examen du cadre réglementaire de la télévision conventionnelle.
6808 Je suis Yves Mayrand, Vice‑président, Affaires corporatives de COGECO inc. Me Caroline Dignard, Directrice, Affaires juridiques, est à ma droite et monsieur Éric Simon, Directeur, Planification financière, est à ma gauche.
6809 Permettez‑moi d'abord de situer brièvement notre groupe et nos observations.
6810 COGECO est une compagnie à capital ouvert dont les titres subalternes sont inscrits à la Bourse de Toronto.
6811 COGECO est indirectement l'actionnaire de contrôle de TQS, une compagnie à capital fermé qui a comparu plus tôt cette semaine et dont l'autre actionnaire est CTV Television Inc., une société du groupe Bell Globemedia.
6812 COGECO est aussi l'actionnaire de contrôle de Cogeco Câble inc., une société à capital ouvert dont les titres subalternes sont également inscrits à la Bourse de Toronto et qui constitue le deuxième plus grand câblodistributeur respectivement en Ontario, au Québec et au Portugal.
6813 Les activités de câblodistribution représentaient 83 pour cent des produits consolidés de COGECO pour le dernier exercice financier terminé le 31 août dernier.
6814 C'est pourquoi nous avons décidé de soumettre des observations séparément de celles de notre filiale de télédiffusion, et c'est pourquoi nous nous abstiendrons de commenter spécifiquement sur les représentations de celle‑ci.
6815 Notre groupe représente en quelque sorte un modèle réduit du système canadien de radiodiffusion.
6816 Je dois cependant préciser que notre groupe n'a pas d'intérêt de propriété, et encore moins de contrôle, dans des services spécialisés ou télévision payante.
6817 Les positions que nous exprimons traduisent la nécessité d'assurer un juste équilibre entre les divers intérêts présents au sein de notre système de radiodiffusion pour les années à venir, une préoccupation que vous partagez sans doute dans le cadre de cette importante audience publique.
6818 L'équilibre, l'équité et l'interdépendance entre les divers éléments et groupes d'intérêt en présence sont à la source du succès remarquable de notre système canadien de radiodiffusion au cours des 75 dernières années.
6819 Notre système a toujours réussi jusqu'à présent à s'adapter aux changements technologiques et économiques en trouvant de nouveaux points d'équilibre.
6820 Il en va de même encore aujourd'hui, et le défi n'est pas insurmontable, même sur la question des frais d'abonnement et du passage à la télédiffusion en haute définition.
6821 Nous avons clairement pris position en faveur de l'élargissement des frais d'abonnement aux réseaux privés de télévision conventionnelle, comme il en existe déjà depuis fort longtemps pour les services de télévision spécialisés, avec cependant certaines précautions dont je parlerai dans quelques instants.
6822 Nous avons réservé jusqu'à nouvel ordre notre position sur l'élargissement des frais d'abonnement aux réseaux de télévision conventionnelle du secteur public, essentiellement pour trois raisons.
6823 Premièrement, les réseaux du secteur public ont déjà accès à au moins deux sources de financement indépendantes et substantielles, soit les crédits de fonctionnement et d'immobilisations de l'État, et les recettes publicitaires, et aussi dans certains cas d'autres sources de fonds importantes, notamment des frais d'abonnement pour leurs propres services spécialisés.
6824 Deuxièmement, le problème de financement des émissions de la télévision conventionnelle privée, particulièrement dans le marché francophone, est sérieux et nécessite un correctif rapide.
6825 Troisièmement, le Conseil devrait connaître les nouveaux paramètres du mandat des chaînes publiques avant de leur attribuer de nouveaux frais d'abonnement.
6826 Ceci étant dit, il importe d'abord et avant tout de mettre rapidement fin à l'exclusivité dont jouissent présentement les services spécialisés sur l'accès aux frais d'abonnement.
6827 Si elle avait sa justification pour la phase de développement des services spécialisés, cette exclusivité n'a plus sa place dans un environnement de large choix et de maturité de ces services.
6828 Our position on fair access to subscription fees differs from the position of many cable or satellite distribution undertakings.
6829 You are probably wondering why. Here are our reasons, which we feel are, quite frankly, compelling.
6830 First, the monitoring reports and the statistical and financial data of the Commission demonstrate without a shadow of a doubt that the growth of specialty and pay television services, whose proliferation and remarkable performance constitutes unquestionably a great accomplishment, unfolds increasingly to the detriment of the audience and advertising revenue of conventional television services, which remain however the pillars of the Canadian system that bear the weight of producing the most expensive programs and providing local services.
6831 Second, the statistical and financial data of the Commission shows that the basic services of the large cable distribution undertakings and the satellite and microwave distribution undertakings, which depend in good measure on the distribution of conventional television signals, have generated direct and indirect subscription revenue of approximately 2.3 billion dollars in 2005 compared to approximately 1.7 billion in 2001, an increase of more than 34 per cent over the last five years.
6832 The growth in basic subscription revenue over that period is mainly attributable to satellite distribution undertakings, which presently distribute a comparatively smaller number of local conventional televisions to the pool available.
6833 Third, the statistical and financial data of the Commission shows that subscription revenue of the large cable distribution undertakings and the satellite and microwave distribution undertakings from their non basic services, which depend mainly on the distribution of specialty and pay television services, went from approximately 1.8 billion dollars in 2001 to approximately 2.3 billion dollars in 2005, a 30 per cent increase over the last five years.
6834 These same distribution undertakings made affiliation payments of approximately 1.2 billion dollars to specialty and pay television services in 2005, compared to approximately 873 million dollars in 2001, an increase of over 40 per cent over the last five years.
6835 While affiliation payments represented approximately 49 per cent of subscription revenue derived from non‑basic services in 2001, they reached approximately 53 per cent of such subscription revenue in 2005.
6836 Fourth, media that are not regulated by the Commission have no regulatory obstacle preventing them from using subscription revenue as well as advertising revenue.
6837 To those who argue that conventional television is `free', we can only observe that it is no longer `free' for almost nine out of every ten households in Canada, but that it otherwise remains `free' to broadcasting distribution undertakings due to pure regulatory arbitrage.
6838 To those who say that it would not be appropriate to direct subscription fees to a conventional television sector that is in trouble, we reply that the trouble of this sector is mainly due to a differential treatment which is no longer warranted.
6839 Finally, to those who say that there are possibly too many conventional television networks given the current capacity of the market, we reply that none of the existing television services in Canada would be viable in the absence of a regulatory framework, including specialty and pay television services, and that diversity of Canadian information and entertainment sources is in the public interest, including in television for mass audiences.
6840 This is why we feel it is not defensible to continue excluding conventional television from access to subscription fees via the regulatory framework.
6841 It would be a tragic and irreparable mistake, particularly in a market as confined as the Francophone market in Canada, to resign ourselves to the shrinking, and eventually the demise, of the major conventional television networks as a result of our failure to restore on a timely basis a balance in the use of financial resources available within the Canadian broadcasting system.
6842 The entire system would be seriously diminished, and Canadian viewers as well as Canadian talent would loose a common meeting place that is more essential than ever before in this highly fragmented audiovisual universe.
6843 N'oublions surtout pas que ce sont les grands réseaux de télévision conventionnelle qui soutiennent les plus grandes productions télévisuelles canadiennes pour les plus larges auditoires, que nos producteurs indépendants, nos talents et nos artistes dépendent encore largement de cet élément du système canadien pour rejoindre leur public, et que nos concitoyens dépendent encore très largement de ce moyen de communication tant pour combler leurs besoins individuels que pour soutenir les besoins de leur collectivité locale.
6844 Ce sont ces mêmes réseaux qui contribuent à la pénétration élevée et à la valeur perçue du volet de base, et indirectement des volets facultatifs, auprès des consommateurs.
6845 Bref, la télévision en direct fait partie des fondations de l'édifice, et les fondations ont un sérieux besoin d'entretien avant que les lézardes ne deviennent irréparables et que tout l'édifice ne soit mis en péril.
6846 Voilà pour le principe de l'élargissement des frais d'abonnement.
6847 Trois questions fondamentales découlent de la reconnaissance de ce principe, soit : d'abord, l'établissement du niveau approprié des nouveaux frais d'abonnement pour les services de télévision conventionnelle dans leur ensemble; ensuite, la gestion de leur incidence monétaire sur les autres éléments du système de radiodiffusion; et troisièmement, leur répartition entre les entreprises visées.
6848 Sur le niveau approprié pour l'assiette globale des nouveaux frais d'abonnement, nous avons soumis dans notre mémoire qu'il serait imprudent d'établir un tel niveau avant d'avoir une compréhension claire des facteurs d'élasticité de la demande pour les volets de service des entreprises de distribution de radiodiffusion au Canada.
6849 L'état du dossier public jusqu'à ce jour démontre selon nous qu'il faut faire des analyses économiques et financières plus poussées tant pour le marché francophone que pour le marché anglophone avant de déterminer cette assiette globale pour chacun de ces marchés.
6850 Il nous semble que le Conseil devrait commander une étude complète et impartiale sur cette question et la publier avant que les titulaires de licence des réseaux conventionnels ne soient appelés à formuler leurs demandes et à comparaître pour leur prochain renouvellement de licence.
6851 Un nouveau déséquilibre du système canadien de radiodiffusion n'est manifestement pas souhaitable, et il importe donc de bien faire collectivement nos devoirs.
6852 Quant à la gestion de l'incidence monétaire sur les autres éléments du système de radiodiffusion, nous sommes d'avis qu'il faut absolument éviter un modèle selon lequel les nouveaux frais d'abonnement pour la télévision conventionnelle sont prélevés à même les ressources financières existantes des autres éléments du système de radiodiffusion, et notamment un modèle selon lequel ce prélèvement est laissé à la discrétion des entreprises individuelles.
6853 Il en résulterait inévitablement des dérapages et des litiges.
6854 Enfin, quant à la répartition de l'assiette des nouveaux frais d'abonnement, il nous semble essentiel que cette répartition soit établie par le Conseil comme ce fut le cas pour les frais de base des services spécialisés dits analogiques, en évitant des formules complexes ou variables, comme celles qui seraient basées sur les parts d'auditoire, et en assurant un terrain de jeu à niveau entre les services concurrents une fois que ces frais seront établis.
6855 Nous n'avons pas soumis d'observations sur les autres questions soulevées par le Conseil dans son avis public, puisqu'elles sont entièrement du ressort de notre filiale de télédiffusion TQS.
6856 Toutefois, nous voudrions terminer en soulignant les deux grands thèmes de la réforme du cadre de réglementation qui devraient selon nous transparaître à l'issue de la présente instance politiques.
6857 Ces thèmes reflètent un constat fondamental : en raison des technologies numériques et des médias non assujettis à la réglementation, le pouvoir de négociation des télédiffuseurs est en déclin à la fois par rapport aux producteurs d'émissions, aux talents, aux auditoires et aux annonceurs.
6858 Il faut donc, premièrement, éviter de nouvelles contraintes structurelles sur les intrants et les activités des télédiffuseurs, et au contraire leur donner une plus grande flexibilité dans leur façon de réaliser les objectifs prévus.
6859 Deuxièmement, il faut viser un cadre de réglementation simple et d'application aisée.
6860 Ces thèmes sont non seulement très pertinents au regard de l'état hautement concurrentiel des marchés, ils sont également très pertinents au regard de la politique du gouvernement canadien sur la réglementation intelligente et des principes directeurs de l'OCDE pour la qualité et la performance de la réglementation.
6861 Voilà. Nous vous remercions de votre attention et nous sommes prêts à répondre à vos questions.
6862 LE PRÉSIDENT : Merci, Monsieur Mayrand. Je pense que votre mémoire et votre présentation orale sont très clairs, mais j'aimerais élaborer quand même sur certaines des propositions que vous mettez de l'avant, notamment relativement à l'incidence de l'arrivée d'un nouveau tarif sur l'ensemble des abonnés.
6863 Je vois que vous spécifiez que vous vous abstiendrez de commenter sur les propositions qui ont été mises de l'avant par votre société affiliée, Quatre‑Saisons. Cependant, je pense qu'on ne peut pas vivre dans un processus comme celui dans lequel on est présentement sans quand même y faire référence, de part et d'autre. C'est inévitable. C'est l'objet du débat. Donc, quant à moi, je vais certainement y faire référence, et quant à vous, j'espère que vous vous sentirez à l'aise pour commenter.
6864 La première considération, évidemment, qui vient à l'esprit, après avoir entendu l'ensemble des témoignages depuis le début de l'audience, est à l'effet que les visions sont diamétralement opposées entre les exploitants d'entreprises de distribution francophones et les exploitants d'entreprises de distribution anglophones, et même aussi diamétralement opposées, du moins, c'est ce que le CCSA nous a dit hier, avec la position des deux entreprises de distribution que sont Vidéotron et Cogeco Câble, donc, que leurs membres québécois qui sont dans des petits marchés partagent l'opinion de leurs membres anglophones.
6865 Qu'est‑ce qui vous amène à croire que ‑‑ parce que, effectivement, vous remarquez qu'il n'y a pas d'étude d'élasticité ‑‑ qu'il n'y a pas d'étude pour supporter la volonté des téléspectateurs francophones à supporter leurs stations généralistes avec un tarif?
6866 M. MAYRAND : J'avais cité, apparemment, trois facteurs.
6867 D'abord, le premier ‑‑ qui, je pense, est bien documenté dans le mémoire de TQS et le sondage qui l'accompagne ‑‑ c'est que, dans la très grande majorité des cas, les Québécois, comme d'ailleurs sans doute au Canada anglais, mais en tout cas, les Québécois dans le marché francophone très largement ne réalisent pas, pour ceux qui sont abonnés soit à un service de satellite, de câble ou de micro‑ondes, qu'il n'y a aucun paiement des frais d'abonnement qu'ils versent à leur distributeur qui sert à payer pour la réception des signaux et la qualité des signaux des services conventionnels qui font partie du volet de base.
6868 Alors, clairement, quand on leur explique ce dont il en retourne, l'attitude des consommateurs québécois a tendance certainement à être, disons‑le franchement, ouverte à considérer au moins le problème.
6869 Deuxièmement, je pense que nous avons tenté par un résumé des statistiques que le Conseil compile sur les produits d'abonnement pour les volets de base que ces volets‑là ont généré une certaine croissance de revenus, nonobstant l'introduction de la concurrence, nonobstant une foule de facteurs qui auraient pu indisposer les abonnés.
6870 Alors, c'est un autre indice qu'il y a une ouverture des abonnés à considérer un réaménagement de frais pour ces services‑là.
6871 Et troisièmement, je pense que, quand on constate le degré d'attachement des Québécois à leur télévision généraliste et la pure quantité de programmation de qualité et aussi la variété de cette programmation qui est offerte au public québécois, c'est un lieu commun qui est considéré comme extrêmement important pour eux.
6872 Alors, je pense qu'on les convainc assez facilement qu'on ne serait pas très heureux de se passer de ces services‑là.
6873 Et, en fait, il y a peu de choses dans le dossier public jusqu'à présent qui tendent à documenter quelle serait l'attitude des consommateurs si les grandes chaînes généralistes n'étaient carrément plus disponibles sur le relais de base. Nous pensons que leur réaction serait sûrement assez pointue et assez critique.
6874 LE PRÉSIDENT : Vous faites état de l'étude du sondage CROP que TQS a déposée avec son mémoire. Cependant, ce sondage mesure une perception de la part des répondants qu'il y a une valeur pour les canaux généralistes, les stations généralistes qui sont offertes, mais le sondage ne va pas jusqu'à vérifier s'ils seraient prêts à verser, en sus de ce qu'ils versent présentement, les montants auxquels leur perception se réfère.
6875 Cependant, au début de l'audience, les entreprises que sont Rogers, Shaw, Bell ExpressVu et le CCSA ont déposé une étude du Strategic Council qui a mesuré l'intérêt des Québécois anglophones par rapport au paiement d'une redevance, et si je regarde, juste pour les fins de notre discussion, il y a 129 répondants anglophones sur 1 000 personnes sondées.
6876 Donc, il y a eu 129 répondants anglophones au Québec qui ont été invités à se prononcer, et 68 pour cent d'entre eux se sont dit fortement opposés au paiement d'une redevance, alors que la moyenne canadienne, c'est 65 pour cent. Donc, en fait, c'est au Québec que le commentaire a été le plus véhément, si je regarde les résultats du sondage du Strategic Council.
6877 Qu'est‑ce qui vous fait croire que les Québécois francophones auraient une attitude distincte?
6878 M. MAYRAND : Bien écoutez, je pense qu'il est plutôt admis et compris dans la Loi sur la radiodiffusion qu'il y a une différence fondamentale entre la radiodiffusion du secteur francophone et celle du secteur anglophone. Je pense qu'il y a de nombreuses manifestations pratiques et concrètes de cette différence.
6879 Alors, certainement, je vais admettre d'emblée qu'il faut faire beaucoup plus de travail pour évaluer quelle est, justement, l'élasticité de la demande de services chez les francophones. Je ne pense pas que l'étude que vous venez de mentionner le fasse. Nous vous disons qu'il y a lieu de faire ce travail‑là.
6880 Mais ceci étant dit...
6881 LE PRÉSIDENT : Elle suggère un prix, d'ailleurs, qui est beaucoup plus élevé que celui qui est le montant le plus élevé qui a été présenté par les diffuseurs francophones.
6882 M. MAYRAND : Alors, j'allais en venir à la question de la méthodologie et des plages de redevances qui sont mentionnées dans différentes études, parce qu'il y en a d'autres aussi, qui touchent principalement le marché anglophone.
6883 Alors, sans rentrer dans les considérations de méthodologie et de ce qui constitue la plage appropriée, la position que nous avons prise, nous, c'est qu'il faut faire nos devoirs de façon plus analytique sur l'élasticité de la demande pour le marché pertinent, et en ce qui nous concerne, évidemment, le marché francophone, certainement dans le cas de notre filiale TQS, est celui qui est pertinent pour ses activités.
6884 LE PRÉSIDENT : Un des intervenants, si ma mémoire est fidèle, c'est le groupe Rogers, qui a fait référence au fait que si le Conseil adoptait une proposition de tarif de redevance d'abonnement pour les stations généralistes, on se retrouverait, juridiquement, dans une situation d'option négative par rapport à la situation juridique au Québec avec la Loi sur la protection des consommateurs.
6885 Quelle est votre position quant à cette embûche potentielle?
6886 M. MAYRAND : Écoutez, je pense... d'abord, je ne peux pas m'empêcher de constater que cet obstacle est soulevé par l'entreprise qui a peut‑être eu le plus de mailles à partir, avec ce qui était, effectivement, convenu d'appeler l'option négative, lorsqu'elle fut appliquée en Ontario.
6887 Mais honnêtement, je ne pense pas qu'il s'agisse ici d'une question d'option négative. Il n'y a pas de changement proposé dans l'offre de services. Il n'y a pas introduction d'un nouveau service qui s'ajoute ou modifie le volet.
6888 D'ailleurs, il nous semble que les règles qui président à l'établissement des volets de base devraient continuer de s'appliquer, que l'on introduise un frais d'abonnement pour les services dits conventionnels ou pas.
6889 Alors, dans cet environnement‑là, il n'est pas question de changer dramatiquement le volet de base ou d'introduire de nouveaux services. On parle tout simplement du niveau... possiblement du niveau de prix pour un volet donné, et je ne pense pas que quelque loi de protection du consommateur que ce soit n'interdise des ajustements de prix.
6890 Nous avons fait, d'ailleurs, beaucoup de travail, lors de l'adoption de la nouvelle Loi de protection du consommateur en 2002 en Ontario, sur son application, et nous arrivons très bien, comme cablôdistributeur là‑bas, à nous conformer aux exigences de la loi lorsqu'il y a des ajustements de prix et à les notifier correctement et avec franchise à nos abonnés.
6891 LE PRÉSIDENT : Lors de leur comparution, Quebecor Média, pour un, et TQS, pour l'autre, ont proposé deux modèles différents de tarif d'abonnement.
6892 Un est un modèle qui est laissé à la libre négociation ‑‑ et je vois dans vos commentaires que vous ne croyez pas que ça soit la voie à suivre ‑‑ et le deuxième modèle, celui qui était mis en relief par TQS, est d'un montant, ultimement, de $1.00 en l'étalant sur deux années.
6893 Quelle est la position de Cogeco par rapport à ce modèle et par rapport au prix?
6894 M. MAYRAND : Alors, il y a deux éléments de réponse à votre question, Monsieur Arpin.
6895 Premièrement, sur le modèle, nous sommes clairement en plein appui à la position de notre filiale TQS sur le principe que les droits doivent être établis de façon neutre et objective par le Conseil et non pas laissés à une libre négociation.
6896 Et laissez‑moi préciser que dans le contexte du marché francophone et du niveau d'intégration dans ce qui prévaut dans ce marché, et de l'ampleur des exigences du cadre de réglementation, il nous apparaît insoutenable de dire qu'il peut y avoir une véritable négociation de libre marché pour tous les joueurs.
6897 Alors, d'après nous, il nous semble incontestable que le Conseil a un rôle irremplaçable à jouer et, comme nous le disions dans notre présentation orale tantôt, il faut surtout éviter de récolter une série de problèmes indésirables et de litiges qui risquent de vous embourber, de nous embourber, et de créer énormément d'instabilité et de récriminations au sein du système.
6898 Alors, c'est pourquoi le modèle de base proposé par TQS nous semble de loin préférable à celui qui a été proposé par nos vis‑à‑vis.
6899 Maintenant, quant au niveau des droits, j'ajouterais que COGECO est parfaitement d'avis qu'il faut une introduction mesurée et progressive d'un nouveau droit, quel que soit le quantum qui sera éventuellement déterminé pour ces droits.
6900 Alors, le seul point de réserve par rapport à la position de TQS c'est sur le quantum. Alors, TQS vous a offert un quantum précis. Corporativement, nous n'avons pas soumis de quantum. Nous vous avons dit, on a besoin de faire des devoirs et puis il y a 83 pour cent de notre chiffre d'affaires consolidé, et ça va en augmentant, qui représente la câblodistribution.
6901 Alors, il faut faire très attention, il faut compléter les devoirs comme il faut avant d'établir le quantum.
6902 LE PRÉSIDENT: La période d'étalement qui est mise sur deux ans est suffisante ou devrait être plus longue que deux ans?
6903 M. MAYRAND: La difficulté que nous aurions et que je pense que vous auriez à déterminer aujourd'hui, si ça doit être sur deux ans ou trois ans, par exemple, ou peut‑être même une plus longue période de temps, c'est que nous n'avons pas de vraie mesure économétrique sur l'élasticité de la demande et l'impact qui résulterait des frais qui seraient introduits dans le système.
6904 Alors, tant qu'on n'a pas ça, c'est très difficile de dire aussi quel est l'horizon temps approprié pour arriver au résultat final.
6905 Je vous dirais, cependant, et c'est un peu subjectif à ce stade‑ci, qu'il faut aussi un degré de certitude et de stabilité dans les changements qu'on apporte à la tarification et au coût des intrants.
6906 Alors, ça militerait, d'après nous, sur une période d'introduction progressive relativement courte parce qu'on ne peut pas passer notre temps à avoir des ajustements, et on est d'accord là‑dessus avec les observations qui ont été faites par d'autres... d'autres parties présentes à cette audience‑là.
6907 LE PRÉSIDENT: Ceci étant dit, COGEGO, au cours des années, a introduit des augmentations tarifaires. Disons que ça ne serait pas quand même nouveau pour vos abonnés d'avoir à faire face à des augmentations tarifaires.
6908 Vous avez quand même eu une certaine... accumulé une certaine expertise au niveau des années pour savoir quels sont les niveaux qui sont acceptables et puis je ne sais pas si vous pouvez partager avec nous les résultats de votre vécu comme exploitant?
6909 M. MAYRAND: Si le Conseil a besoin de données qui sont plus spécifiques, nous serions certainement prêts à considérer à les partager sur une base confidentielle, évidemment.
6910 LE PRÉSIDENT: Je ne cherche pas des nombres absolus, mais je parle... je cherche à comprendre la dynamique d'une augmentation de tarif et puis la réaction du consommateur.
6911 M. MAYRAND: Oui. Mais ceci étant dit, vous avez parfaitement raison de dire que COGECO et, en fait, toutes les autres entreprises de distribution de radiodiffusion, grandes et petites, ont, au fil des années, procédé à des majorations tarifaires.
6912 Il n'y a personne qui a dit que ces majorations‑là constituaient une forme d'option négative ou un lynchage des consommateurs et le constat est dans les chiffres que nous avons résumés dans notre présentation orale et qui sont tirés de votre propre base de données.
6913 Il est manifeste qu'il y a une augmentation progressive du produit des frais d'abonnements pour la base et pour les volets.
6914 LE PRÉSIDENT: Oui, mais il y a aussi et il y a manifeste parce que vous partez sur un horizon de 2001 à 2005 et aussi l'arrivée de nombreux nouveaux services de catégorie 1 et de catégorie 2 qui, évidemment, ont fait augmenter de manière importante les redevances versées aux exploitants de canaux spécialisés.
6915 M. MAYRAND: Bien, je pense, monsieur Arpin, que c'est précisément la source de la problématique à laquelle nous faisons face aujourd'hui, il n'y a pas de doute, mais...
6916 LE PRÉSIDENT: Mais ces services‑là sont quand même offerts en bouquets à des abonnés qui choisissent volontairement d'y souscrire.
6917 M. MAYRAND: Mais revenons à la base, et dans le cas du service de base, je ne pense pas que ce facteur‑là a joué dans le prix du volet de base.
6918 Il y a, évidemment, une distribution de services dits spécialisés encore au volet de base, et c'est certainement le cas chez COGEGO, mais dans l'ensemble, c'est un volet qui comporte une majorité de services autres que spécialisés.
6919 LE PRÉSIDENT: Pour ce qui est des services francophones, ma connaissance antérieure me fait croire que les services francophones qui sont à la base chez COGEGO n'ont pas eu le bénéfice d'augmentation tarifaire pour soutenir leur développement.
6920 C'est le nombre d'abonnées, oui, qui leur a bénéficié, mais ce n'est pas l'augmentation du tarif parce que... Dans le cas des bouquets, ça peut être différents, mais dans le cas des services à la base, les décisions rendues par le Conseil avaient déterminé de maximums et ces maximums‑là sont en place depuis de nombreuses années, sinon même en certains cas, on commence à parler bientôt de décennie.
6921 M. MAYRAND: Monsieur Arpin, nous avons régulièrement un rendez‑vous avec nos fournisseurs d'émissions.
6922 LE PRÉSIDENT: Ceux qui sont sur bouquets.
6923 M. MAYRAND: Bien, qui sont sur bouquets et qui sont portés à la base également.
6924 LE PRÉSIDENT: Oui, parce que c'est souvent les mêmes personnes, là.
6925 M. MAYRAND: Voilà. Et ils ont eux‑mêmes des bouquets de services dont ils négocient les frais d'affiliation en bouquets.
6926 Alors, nous avons une négociation d'ensemble de en bout de piste, on peut facilement affirmer que les services en question, quelle que soit la distribution en partie à la base, en partie sur un volet facultatif ou carrément sur les volets facultatifs, ont connu une croissance de leurs frais d'affiliation au cours des années.
6927 LE PRÉSIDENT: Si je vous comprends bien ‑‑ et corrigez‑moi si j'ai ‑‑ Québecor Média propose que la redevance n'affecte pas le coût de l'abonnement, de manière générale, bouquets et services de base compris, pour l'abonné moyen, et que le tarif d'abonnement qui serait souscrit viendrait en majeure partie, sinon en tout, d'une refonte des tarifs d'abonnements versés à l'ensemble de ceux qui en perçoivent présentement.
6928 Si je comprends bien, ce n'est pas la position de COGECO?
6929 M. MAYRAND: Vous avez tout à fait bien compris; ce n'est pas notre position.
6930 LE PRÉSIDENT: Ce n'est pas votre position, bon. Vous nous recommandez au Conseil d'entreprendre une étude complète et impartiale avant de formuler notre politique.
6931 Quels facteurs devrions‑nous prendre en compte dans une telle étude?
6932 M. MAYRAND: J'ai peur de ne pas pouvoir vous donner une réponse détaillée aujourd'hui parce que je ne suis pas... je ne prétends surtout pas être un expert de ce genre d'étude.
6933 Je pense que nous pourrions certainement, dans notre réponse écrite, vous donner ce que nous estimons être certains critères pertinents, mais à tout événement, il nous semble capital que le Conseil soit l'organisme qui entreprenne ou prenne l'initiative de cette étude.
6934 Pourquoi? Parce qu'autrement nous aurons une prolifération d'études avec des questionnaires dont les questions et la méthodologie varient dans un cas comme dans l'autre et il sera extrêmement difficile, voire impossible, d'en tirer des conclusions pratiques et utiles pour déterminer ce que vous aurez à déterminer.
6935 Alors, il nous semble préférable que ce soit le Conseil qui prenne l'initiative, traite avec les spécialistes appropriés, s'il y a lieu, et établissent avec eux sur la base de leur expertise les paramètres appropriés.
6936 LE PRÉSIDENT: Écoutez, si vous pouvez contribuer à nous aider, c'est sûr qu'on acceptera vos commentaires et ils seront certainement bienvenus.
6937 Votre société affiliée nous a dit que la redevance... dans sa perspective, la redevance ne devrait s'appliquer qu'aux entreprises de télévision généralistes commerciales privées. Avez‑vous une position quant aux entreprises publiques?
6938 M. MAYRAND: Quant aux entreprises publiques, nous n'avons pas pris de position pour l'instant, comme je vous l'indiquais dans mes remarques en début de comparution, et il nous semble qu'il y a là un problème de définition des mandats des chaînes du secteur public, que ce soit les chaînes qui relèvent du gouvernement fédéral pour leur financement ou celles qui relèvent du gouvernement provincial pour le financement.
6939 Il y a une préoccupation réelle qu'on ait de la confusion et des difficultés d'application inutiles s'il n'y a pas une conception claire du mandat à venir de ces chaînes‑là et de ce qu'elles ont l'intention de faire avec un influx additionnel de produits d'abonnements.
6940 Alors, nous avons réservé notre position. Il nous semble que ce serait regrettable et dommageable pour le secteur privé de la télévision conventionnelle au Québec d'attendre nécessairement que cette question‑là soit réglée. Elle est en voie de discussion dans le cas de CBC Radio‑Canada.
6941 Dans le cas de Télé‑Québec, ce n'est pas clair encore, mais ce serait regrettable d'attendre que ces mandats‑là soient éclaircis pour les années à venir dans le nouvel environnement audiovisuel numérique et de ne rien faire en attendant, pour s'assurer que le secteur privé de la télévision conventionnelle est capable de remplir les obligations que vous allez lui demander à ce secteur de remplir lors de leurs renouvellements de licence qui s'en viennent très prochainement.
6942 LE PRÉSIDENT: Demain, nous entendrons les représentations de la Fédération des télévisions communautaires autonomes du Québec et un volet de leur mémoire traite de la diffusion hertzienne et de l'intention de certains de leurs membres de soumettre des projets au Conseil en vertu de la politique sur la télévision communautaire qui leur permettrait d'avoir... de détenir des licences de diffusion hertziennes.
6943 Est‑ce qu'un tarif d'abonnement pour... devrait s'appliquer à eux? Je suis sûr que ça va faire partie de leur demande.
6944 Si le Conseil dit, oui, au principe, la suite va suivre.
6945 M. MAYRAND: Mais là aussi on a, je pense, un problème de définition de mandat. La politique du Conseil a été clairement établie il y a quelque temps sur la possibilité pour les télévisions communautaires d'émettre en rayonnement hertzien.
6946 Ceci étant, il y a relativement peu de développement sur ce plan‑là jusqu'à présent, mais il y a une chose qui est sûre, c'est que le Conseil a fixé des paramètres assez clairs sur le mandat de la télévision communautaire.
6947 Alors, je ne pense pas que les télévisions communautaires sont intéressées à avoir le même genre de contenu obligationnel que les télévisions conventionnelles et, à cet égard aussi, les télévisions spécialisées acceptent de prendre à leur charge par condition de licence.
6948 Alors, je ne peux que répondre qu'il y a un problème de définition de mandat, et qu'on ne peut pas avoir le beurre et l'argent du beurre.
6949 En fait, vous savez, toute cette discussion sur les frais d'abonnement pour les services conventionnels, à notre point de vue, elle s'inscrit clairement dans la dynamique de renouvellement, à venir très prochainement, des licences des services de télévision conventionnelle et de ce qui devrait constituer une enveloppe raisonnable d'obligations de ce secteur‑là du système au regard de la programmation canadienne, du financement de la programmation canadienne, de sa mise en ondes et de l'encouragement aux talents.
6950 Alors, on peut très bien envisager un scénario qui, à notre point de vue, est extrêmement dommageable et regrettable pour tout le marché francophone, où il y a une inflexibilité totale sur l'accès aux frais d'abonnement pour les conventionnels et où tous les services conventionnels vont venir vous dire, bien, si c'est comme ça, nous, on n'arrive pas, puis les obligations qu'on est prêt à accepter sont radicalement différentes de celles qui prévalaient pour le renouvellement précédent.
6951 Alors, on ne peut pas avoir les deux. On ne peut pas maintenir un régime obligationnel important et coûteux, puis en même temps dire, bien, du côté des ressources, continuez à prendre le risque, puis continuez à voir vos marges diminuées, puis en plus investissez dans l'infrastructure de diffusion HD pour être sûr que le 10 pour cent, ou peut‑être à terme le 5 pour cent, restant de foyers puissent avoir toujours accès à vos services gratuitement. Monsieur Arpin, ça n'arrivera pas.
6952 LE PRÉSIDENT : Vous m'amenez sur... en fait, en ce qui regarde les télévisions communautaires, je pose la question parce que c'est eux qui la soulève, mais je suis bien d'accord avec vous que l'appel de commentaires pour la revue de la télévision s'appliquait essentiellement à la télévision généraliste hertzienne et, au moment où l'avis a été publié, celle qui était au moins titulaire d'une licence.
6953 Les autres dont j'ai fait état, c'est des projets qu'ils nous soumettent, et ils auront à débattre de leurs projets si jamais ils en soumettent, et le Conseil, évidemment, va prendre sa décision.
6954 Vous venez juste d'aborder la question de la transmission en numérique HD par les différents télédiffuseurs. On a entendu au cours des quatre derniers jours qu'il y avait au moins deux modèles, un modèle hybride et un modèle qui était uniquement remis au système canadien de distribution. Je sais que TQS suggère au Conseil de suivre cette voie‑là, donc, de ne pas les forcer à passer à la transition numérique, et voire même à la transmission numérique HD.
6955 Dans la perspective de Cogeco, le fait qu'il n'y aurait plus de transmission hertzienne, quelle est la signification pour Cogeco, quel est l'impact pour Cogeco d'une politique semblable?
6956 M. MAYRAND : Je ne sais pas si ça constitue en soi un impact dramatique pour Cogeco dans son ensemble. Je pense que le principal impact est dans le fond la raison pour laquelle notre filiale TQS vous a dit, écoutez, dans le marché francophone en tout cas, on devrait éviter de prendre des ressources énormes par rapport aux disponibilités financières du secteur pour assurer un mode de diffusion en direct en télévision HD.
6957 Ce que notre filiale vous a dit, c'est, écoutez, c'est hautement inefficace, et moi, j'ajouterais à ça que, depuis 1975 que je m'intéresse aux questions de radiodiffusion, on a toujours, à une occasion ou l'autre, mentionné le fait qu'il est important dans notre système de radiodiffusion de se préoccuper au premier chef du contenu, puis d'éviter de passer une trop grande proportion des ressources à la mécanique et aux équipements.
6958 Alors, dans un marché aussi petit -‑ parce que c'est un petit marché, c'est un marché potentiel d'au plus 6 millions d'âmes ‑‑ c'est une équation qui, clairement, à ce moment‑ci ne fonctionne pas. Ça suppose que Cogeco et son partenaire dans TQS seraient prêts à investir des sommes en capital énormes pour assurer une diffusion hertzienne en HD que très, très peu de gens, en définitive, utiliseront.
6959 Alors, nous appuyons la position de TQS à cet égard‑là. Certainement dans le cas du marché francophone, il nous semble que la solution devrait être comme le propose notre filiale.
6960 La conclusion peut être un peu différente au Canada anglais, qui est un beaucoup plus gros marché dans son ensemble et dont les composantes locales sont beaucoup plus grosses et prospères que ce que nous avons au Québec, et si c'est le cas, là encore, on parle de formule hybride. C'est donc dire qu'on ne parle pas d'une conversion complète et totale. Il y a toujours une portion du résultat requis qui passe par les entreprises de distribution.
6961 LE PRÉSIDENT : En fait, les principaux distributeurs qu'on a entendus jusqu'à aujourd'hui nous disent que les dépenses d'immobilisations qui concernent le passage au numérique HD sont... c'est minime et c'est le coût pour être en affaires.
6962 Vous ne semblez pas partager... en tout cas, dans le cas du marché francophone, vous ne semblez pas partager cette vision, malgré le fait que je suis persuadé que Cogeco, comme entreprise de distribution, fait des investissements dans ces réseaux qui sont beaucoup plus significatifs que les sommes dont on parle pour passer au numérique HD pour l'hertzien.
6963 M. MAYRAND : Bien, à cet égard, deux choses, Monsieur Arpin.
6964 D'abord, Cogeco, effectivement, consent des investissements considérables en immobilisations pour moderniser ses réseaux et pour leur permettre d'accommoder une pluralité de services, mais Cogeco Câble a toujours dit, et je me dois de le répéter aujourd'hui, Cogeco Câble ne peut le faire que dans la mesure où elle a les flux monétaires résultant de ses activités qui lui permettent de le faire.
6965 Le problème dans le cas de notre filiale TQS, c'est que... vous connaissez l'environnement actuel du marché francophone, vous connaissez le potentiel de l'assiette publicitaire pour le secteur francophone de télévision, vous connaissez les gains spectaculaires d'auditoires et de parts de marché publicitaire des services spécialisés francophones et des services anglophones au Québec.
6966 Alors, dans ce contexte, je pense qu'on doit reconnaître que les flux monétaires que nous pouvons attendre au cours des prochains cinq à sept ans ne sont tout simplement pas au rendez‑vous pour permettre à TQS de faire cette transition rapidement et sans créer un problème insurmontable pour son entreprise et ses actionnaires.
6967 LE PRÉSIDENT : Dans votre mémoire, d'ailleurs, vous y faites un petit peu allusion, mais surtout les autres intervenants ont assez longuement parlé de sources de revenus nouvelles pour les diffuseurs hertziens, et qui seraient basées sur l'offre du vidéo sur demande, et où la politique actuelle du Conseil peut‑être autorise la diffusion des émissions ayant déjà été diffusées en maintenant les messages commerciaux originaux, mais il y a au toute sorte d'options qui ont fait l'objet de considération.
6968 Est‑ce que l'expérience de Cogeco au Québec avec la vidéo sur demande, est‑ce que c'est une avenue qui permet à TQS et à TVA d'explorer de nouvelles opportunités d'affaires, et qui serait suffisante, du moins pendant un certain temps?
6969 M. MAYRAND : Alors, oui, il y a de nouvelles opportunités d'affaires. Oui, nous en avons fait l'expérience sur la plate‑forme VSD de Cogeco Câble, tant au Québec qu'en Ontario.
6970 Toutefois, les expériences demeurent relativement limitées jusqu'à présent à quelques produits, et ce que nous rencontrons, ce sont, entre autres choses, des obstacles au niveau des droits. Et quand je dis nous les rencontrons, au premier chef, ce sont les diffuseurs qui les rencontrent avant d'avoir la possibilité d'exploiter la plate‑forme VSD.
6971 Alors, ça, c'est le premier facteur. Il s'agit, donc, d'un phénomène émergent où les rapports économiques avec les différents ayants‑droit sont encore largement en suspens.
6972 Alors, c'est très difficile d'attendre un développement rapide de ce développement dans les circonstances, jusqu'à ce que la question des droits s'éclaircisse et qu'on ait plus de facilité à établir des modèles d'affaires.
6973 La deuxième remarque que je voudrais faire sur la plate‑forme VSD, c'est que, déjà, la plate‑forme VSD sur le câble est sous attaque par la distribution directe via internet. Alors, il faut faire très attention de ne pas avoir une expectative irréaliste ou démesurée sur le potentiel à terme de la plate‑forme VSD de constituer un atout significatif au plan des produits générés pour les producteurs et diffuseurs de nos contenus dans le marché francophone.
6974 Il reste beaucoup d'inconnus et beaucoup de défis pour en arriver là. En attendant, il y a un problème assez criant, que vous constatez aujourd'hui, mais que vous allez constater encore plus dans le détail lorsque les titulaires devront se présenter en renouvellement de licence, parce que les revenus sont en déclin.
6975 LE PRÉSIDENT : On a entendu lors de cette audience les représentations des petits télédiffuseurs, et il y en a au moins un qui est dans des territoires que Cogeco dessert. Je pense à Télé Inter Rives, et je pense particulièrement du côté de Rimouski‑Matane puisque même si la station de base est à Rivière‑du‑Loup, c'est dans les territoires de la Gaspésie ou du Bas‑Saint‑Laurent, où votre réseau...
6976 Une des considérations... et je ne dis pas que c'est monsieur Simard qui l'a soulevée, parce qu'elle a été soulevée par l'ensemble des membres du groupe, et de mémoire, je ne me souviens pas que monsieur Simard ait commenté spécifiquement sur le phénomène, mais on a parlé... et là, malheureusement, à l'esprit, j'ai seulement les termes anglophones qui me viennent à l'esprit.
6977 On a parlé de time shifting et de station shifting. Je ne pense pas qu'il y ait un problème au Québec de time shifting parce que tous les raisons francophones sont dans le même fuseau horaire.
6978 Mais, est‑ce que dans vos territoires du Bas Saint‑Laurent, est‑ce qu'il y a une situation où, finalement, vous offrez à la fois à la station de Québec ou de Montréal et puis la station de Rivière‑du‑Loup et de Rimouski pour l'un ou l'autre des réseaux et donc, potentiellement, les abonnés peuvent syntoniser un ou l'autre
6979 M. MAYRAND: Écoutez; je devrais me souvenir de la situation précise à Rimouski. Honnêtement, j'oublie quelle est notre grille de distribution précise dans ce marché‑là, mais sans doute qu'il y a des situations de présence d'un signal de réseau et de la station locale affiliée au réseau. Il est impossible d'avoir une absence totale de recoupement.
6980 Ma compréhension des choses, c'est que nous traitons de ces questions‑là avec les affiliés, nos affiliés, dans le cadre des contrats d'affiliation et que ces facteurs‑là sont pris en ligne de compte.
6981 Et, d'ailleurs, vous pourrez sans doute noter qu'il y a eu un arrangement entre la télévision MBS et TQS qui fait en sorte que la position de MBS se trouve à être consolidée dans le Bas Saint‑Laurent.
6982 Nous avions une ré‑émettrice et la proposition vous est faite d'autoriser son transfert à MBS.
6983 LE PRÉSIDENT: Je ne veux pas parler de ce dossier‑là puisque la date butoir pour le dépôt d'intervention, c'est demain et, donc, je ne suis pas en train de faire l'audience. Mais je comprends ce que vous venez de me dire.
6984 Mais par rapport aux stations qui sont, elles, membres de TVA, est‑ce que le même problème se soulève? Je sais qu'il y en a une à Carleton, il y en a une à Rimouski, je suis persuadé?
6985 M. MAYRAND: Bien, je ne pense pas que ce soit...
6986 LE PRÉSIDENT: Il y en a une à Québec, ça, je suis sûr.
6987 M. MAYRAND: Ça, c'est sûr. Je ne pense pas que je sois en mesure de commenter sur les problématiques spécifiques à TVA.
6988 LE PRÉSIDENT: Non, non, mais en fait, c'est que le diffuseur local ‑‑ prenons Rimouski ‑‑ nous dit que parce que le téléspectateur a accès à deux, trois sources de la même... du même réseau, il perd des opportunités avec sa diffusion de messages de publicité locale parce que le citoyen de Rimouski, au lieu de syntoniser la station de Rimouski, syntonise celle de Québec.
6989 Donc, lui, à Rimouski, il se trouve avec une situation d'inefficacité et c'est une des raisons qui nous... sur laquelle il nous demande d'apporter des mesures qui feraient en sorte que... où on proposerait des nouveaux mécanismes compensatoires ou qu'on créerait un forum de négociations des stations éloignées.
6990 M. MAYRAND: Bien, tout ce que je peux dire à ce stade‑ci, c'est qu'on ne peut pas s'attendre à avoir un monde absolument idéal et parfait. Je pense qu'on essaie avec... alors que se profile à l'horizon le renouvellement de licences des réseaux qui sont, finalement, les sources principales de programmation dans le marché francophone en tout cas, qui soutiennent et sous‑tendent les services locaux, on ne peut pas imaginer avoir des solutions absolument parfaites partout, en tout temps.
6991 Ceci étant dit, quand il y a un problème réel, je pense que l'attitude de notre groupe de compagnies a toujours été de s'en préoccuper et de tenter de le régler de façon intelligente dans la négociation.
6992 Alors, maintenant, ceci étant dit, dans l'environnement où la diffusion HD pour le marché francophone se ferait sur une base où les rayonnements hertziens ne sont pas étendus à ces marchés‑là, vous avez déjà une dynamique différente et peut‑être que le problème, s'il en est, devient beaucoup moins pertinent.
6993 LE PRÉSIDENT: On a fait état à plusieurs reprises d'une date butoir pour le passage au numérique. Avez‑vous une position sur cette question?
6994 M. MAYRAND: Tout ce que je pourrais vous dire, monsieur Arpin, c'est que c'est une question difficile. Pourquoi? Parce qu'à l'expérience, lorsqu'on établit dans le cas d'un changement technologique majeur, une date butoir, il y a toujours le risque que les réalités économiques ne fonctionnent pas exactement comme on le prévoit et les dates butoir ont tendance à être modifiées par la suite.
6995 Ceci étant dit, y a‑t‑il un avantage au plan de la signalisation à dire à l'industrie, écoutez, l'objectif, c'est que la transition soit faite mettons en 2011, mettons en 2012 ou quelle que soit une date indicative que le Conseil estime approprié, peut‑être qu'il y a avantage à signaler de cette façon‑là.
6996 Mais en pratique il se pourrait fort bien que la date pose problème au moment où on s'achemine vers l'échéance et je le dis particulièrement dans le contexte du marché francophone, où les services analogiques sont encore très présents et où les consommateurs ont une propension, du moins dans un segment significatif de la population à s'en tenir aux services analogiques.
6997 Alors, probablement au plan de la signalisation il y a intérêt à avancer une date, mais il ne faudrait pas se surprendre que les réalités économiques fassent en sorte que la date soit... doive être réaménagée par la suite.
6998 LE PRÉSIDENT: Avant de revenir un peu sur la redevance de distribution, est‑ce que votre position par rapport au Canada anglais est analogue à celle des autres distributeurs qu'on a entendus ou si elle est distincte?