ARCHIVÉ -  Transcription

 

 

 

 

 

 

 

              TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

 

 

 

 

             TRANSCRIPTION DES AUDIENCES DEVANT

              LE CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

 

 

                      SUBJECT / SUJET:

 

 

 

Further to call for applications for a broadcasting licence to

carry on an over-the-air digital/high definition (HD) television

programming undertaking to serve locations across Canada /

Suite à l'appel de demandes de licence de radiodiffusion visant

l'exploitation d'entreprises de programmation de télévision

numérique/haute définition (HD) en direct pour desservir

l'ensemble du Canada

 

 

 

 

 

 

 

 

 

 

 

 

HELD AT:                              TENUE À:

 

Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

140 Promenade du Portage              140, Promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)

 

February 13, 2008                     Le 13 février 2008

 

 

 

 

 

Transcripts

 

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

 

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

 

 

 

 

Transcription

 

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

 

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

               Canadian Radio‑television and

               Telecommunications Commission

 

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

 

 

                 Transcript / Transcription

 

 

 

Further to call for applications for a broadcasting licence to

carry on an over-the-air digital/high definition (HD) television

programming undertaking to serve locations across Canada /

Suite à l'appel de demandes de licence de radiodiffusion visant

l'exploitation d'entreprises de programmation de télévision

numérique/haute définition (HD) en direct pour desservir

l'ensemble du Canada

 

 

 

 

BEFORE / DEVANT:

 

Konrad von Finckenstein           Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Len Katz                          Commissioner / Conseiller

 

 

 

 

ALSO PRESENT / AUSSI PRÉSENTS:

 

Cindy Ventura                     Secretary / Secretaire

Peter Foster                      Hearing Manager /

                                  Gérant de l'audience

Jean-Sébastien Gagnon             Legal Counsel /

                                  Conseiller juridique

 

 

 

 

HELD AT:                          TENUE À:

 

Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

140 Promenade du Portage          140, Promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)

 

February 13, 2008                 Le 13 février 2008

 

- iv -

 

           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

PHASE II (Cont'd)

 

 

INTERVENTION BY / INTERVENTION PAR:

 

Crossroads Television System                     242 / 1451

 

CanWest MediaWorks Inc.                           258 / 1536

 

Rogers Communications Inc.                        286 / 1677

 

CTVglobemedia Inc.                                309 / 1859

 

CHCR Limited                                      335 / 2005

 

Bell ExpressVu                                    350 / 2076

 

CFTPA                                             364 / 2153

 

 

 

PHASE III

 

 

REPLY BY / RÉPLIQUE PAR:

 

YES TV Inc.                                       389 / 2264

 

HDTV Networks Inc.                                395 / 2295

 

 

 

 

 

 

 

Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Wednesday, February 13, 2008

    at 0904 / L'audience débute le 13 février 2008

    à 0904

LISTNUM 1 \l 1 \s 14451445             THE CHAIRPERSON:  Good morning.

LISTNUM 1 \l 11446             Madam Secretary, whom do we have today?

LISTNUM 1 \l 11447             THE SECRETARY:  Thank you, Mr. Chairman, and good morning to everyone.

LISTNUM 1 \l 11448             We will now continue with Phase II in which interveners appear in the order set out in the Agenda to present their intervention.

LISTNUM 1 \l 11449             We will now proceed with the presentation by Crossroads Television System.  Appearing for Crossroads Television System is Mr. Stewart.

LISTNUM 1 \l 11450             Please introduce your colleague, after which you will have 10 minutes for your presentation.

INTERVENTION

LISTNUM 1 \l 11451             MR. STEWART:  Good morning, thank you.

LISTNUM 1 \l 11452             Mr. Chairman, Commissioners Katz and Arpin and Commission Staff, thank you for allowing CTS to appear before you today.

LISTNUM 1 \l 11453             My name is Glenn Stewart, Director of Sales and Marketing and with me is Matt Hillier, our Corporate Controller and Privacy Officer.

LISTNUM 1 \l 11454             The important issues outlined in our written submissions appear to be shared concerns for most over‑the‑air broadcasters.

LISTNUM 1 \l 11455             CTS opposes both these applications in general terms for most of the same reasons articulated and well documented by our colleagues at CAB and the larger broadcast groups.  However, we felt it necessary for CTS as a small truly independent and not‑for‑profit broadcaster to put our concerns on the public record and to appear at these proceedings.

LISTNUM 1 \l 11456             In our view it would be prudent and in the best interests of the Canadian broadcast system to ensure that all over‑the‑air broadcasters have the opportunity to fully transition to digital by 2011 before services such as these are licensed.

LISTNUM 1 \l 11457             Furthermore, we believe that it would be unfair to existing broadcasters, the BDUs, as well as the applicants themselves to approve these applications in advance of the very crucial CRTC hearings commencing April 7th.

LISTNUM 1 \l 11458             We have serious concerns about the applicants' expectations regarding channel placement, priority carriage, simulcast opportunities and distant signal status, given the specifics of their application, especially due to the lack of local content to be offered in each market.

LISTNUM 1 \l 11459             It would be unfair for HDTV to be accorded the same rights and privileges as existing over‑the‑air broadcasters who provide significant local program content and other community services in the markets in which they operate.  Permitting dual status would be inappropriate in these circumstances.

LISTNUM 1 \l 11460             To be clear, however, the two issues that would most negatively affect CTS would be:

LISTNUM 1 \l 11461             One, the introduction of a new HD TV services into Calgary and Edmonton so soon after granting three new licences in the late spring of 2007; and,

LISTNUM 1 \l 11462             Secondly, the addition of a new service, either HDTV or YES TV in Toronto.  Toronto is a saturated and extremely fragmented market, a new entrant will, by necessity, take advertising revenue from existing stations.

LISTNUM 1 \l 11463             MR. HILLIER:  To illustrate, we would like to walk you through the potential impact on CTS.

LISTNUM 1 \l 11464             In HDTV's Appendix 4A, there were planned 650‑million in national sales in the first licence period.  This contained a ramp‑up from 2.5‑million in year one to 176‑million in year seven, a massive growth curve.

LISTNUM 1 \l 11465             The Applicant has said they would garner three per cent of the national sales market, but the critical questions for us:  Whose market and whose sales?

LISTNUM 1 \l 11466             The markets relevant to CTS are Toronto, Ottawa, Calgary and Edmonton, representing by our best estimate about 50 per cent of national sales.  So, about 325‑million of HDTV's projected revenues would come from these three markets.

LISTNUM 1 \l 11467             HDTV's assertion that 35 per cent of its revenues would be new spending is aggressive, especially in the mature Toronto market.  But let's assume that their assertion that revenue taken from existing off‑air stations of 15 per cent plays out.

LISTNUM 1 \l 11468             The result of 15 per cent of 325‑million is about 49‑million, or 7‑million per year.  Year seven itself would be 13‑million from these markets.  Again, who would the 7‑million per year, or 13‑million in year seven come from?  Likely not the major national broadcasters with their top 20 programming, therefore, it would be stations like CTS that these amounts would most impact.

LISTNUM 1 \l 11469             Though to some it may not seem like big dollars, but even 7‑million in revenue taken would eclipse CTS' total commercial revenues from these three markets.

LISTNUM 1 \l 11470             So, despite HDTV's assertion that their strategy would "build a wall to protect the local broadcasters", or "protecting those that are most precarious", CTS would precisely be that kind of local broadcaster most impacted in our three markets.

LISTNUM 1 \l 11471             MR. STEWART:  As a small independent broadcaster, we would likely lose commercial revenue in much the same way as Sun TV, which is Quebecor, A‑Channel, now it's CTVglobemedia, and perhaps even OMNI.1 and .2, which is Rogers.  The difference, of course, is that we are not part of a larger media empire and, therefore, may suffer the greatest harm.

LISTNUM 1 \l 11472             We launched our local commercial religious stations in Calgary and Edmonton on October 8, 2007.  CanWest has fired up its re‑broadcast transmitters for Red Deer and now has a second successful brand which is E! in these markets.  Rogers has yet to launch its OMNI stations, but once launched they too will have a second set of stations to go along with their newly acquired Citytv brand.

LISTNUM 1 \l 11473             We are asking the Commission to allow time for these markets to more fully digest these new stations and appearings before considering a new entrant.

LISTNUM 1 \l 11474             For these reasons and others outlined in our written submission, we respectfully request that the Commission deny these applications.

LISTNUM 1 \l 11475             However, should either of these applications be approved, at the very least we ask that dual status be withheld as a condition of licence in order to minimize the negative impact on existing local over‑the‑air stations, and CTS specifically, as they make the transition to digital by August, 2011.

LISTNUM 1 \l 11476             We'd be pleased to answer any questions at this time.

LISTNUM 1 \l 11477             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 11478             I notice that you make the point that HDTV will have no local programming and no community involvement.

LISTNUM 1 \l 11479             What is the local programming or community involvement of your station?

LISTNUM 1 \l 11480             MR. STEWART:  We were licensed as local over‑the‑air stations in both Calgary and Edmonton and have been that in Toronto for 10 years now.

LISTNUM 1 \l 11481             We produce a lot of local programming, perhaps more than many broadcasters.  "The Michael Coren Show" is a flagship show, "On The Line" with Christine Williams, "Faith Journal".  Matt, you could probably mention more offhand.

LISTNUM 1 \l 11482             MR. HILLIER:  Yeah.  "Behind the Story", and we also commission some single faith, multi‑faith programming and "Real Life" is another show that we produce out of the Toronto office and in Calgary and Edmonton we have flagship programs called "Top Story" and we have "Close‑Up" and "The Priest, the Monk and a Rabbi", and...

LISTNUM 1 \l 11483             THE CHAIRPERSON:  And they are locally produced, however, I was thinking in terms of local, of relevance to the community; is there some station in Toronto that Torontonians would identify with or it takes issues there of interest to Torontonians but not necessarily to Vancouverites or the same thing with Edmonton, et cetera.  Do you have local programming in that sense?

LISTNUM 1 \l 11484             MR. STEWART:  Absolutely, Mr. Chair.  Michael Coren is a well‑known local Toronto broadcaster, Christine Williams features local issues and stories.  They may be of national scope, but all the guests on her show and on Michael's show are from the region.

LISTNUM 1 \l 11485             MR. HILLIER:  And for "Real Life" as well, they get out into the community, around the Golden Horseshoe area and they also have field reporters in Calgary and Edmonton as well that try to report stories from those local communities as well.

LISTNUM 1 \l 11486             THE CHAIRPERSON:  Secondly, you mentioned you are preparing for migration by 2011 like everybody else.  Exactly what are you doing in terms of that and are you going to be there by 2011, or are you going to be there earlier than 2011?

LISTNUM 1 \l 11487             MR. HILLIER:  Thank you, Mr. Chair.

LISTNUM 1 \l 11488             For the Toronto, main Toronto market we actually launched our digital signal on January 7th of this year ‑‑ and correct me if I'm wrong, Glenn ‑‑ but we have probably about true HD, probably about 15 hours on our schedule, 15 to 20.

LISTNUM 1 \l 11489             MR. STEWART:  Actually we have two and a half hours of true HD, the remainder are SD converted ‑‑ up converted, but we have very little to do in the Burlington operation in order to go true HD.

LISTNUM 1 \l 11490             And without twisting our controllers' arms, I would expect that we'd be fully digital in Ontario or at least from the Burlington studios by this time next year.  We already have installed HD cameras in the studios and we just have to change over our switcher at this point and, of course, I'm not an engineer, but there's not a lot left to do in Ontario.

LISTNUM 1 \l 11491             THE CHAIRPERSON:  And in Alberta?

LISTNUM 1 \l 11492             MR. STEWART:  In Alberta, we are fully digital in terms of operations.  We work with independent local producers and part of our contracts are that they be delivered HD capable.

LISTNUM 1 \l 11493             Our challenge in Alberta is the installation of HD transmitters, which we will have by 2011.  We would like to do it earlier, but if we continue to face challenges such as what we have before us today, then it will in all likelihood be at the end, at 2011 before we can do that.

LISTNUM 1 \l 11494             THE CHAIRPERSON:  Well, I'm just trying to get a hold on the comfort factor you want here, because Mr. Bitove tells us that he will be up in a year at the earliest and then he'll be a fledgling station ‑‑ network, station, whatever you want to call it and it will take him some time to get there, et cetera.

LISTNUM 1 \l 11495             So, you are established, you are already on the way up to migration.  You are already ready in Ontario, you tell me, and you are operating digitally in Alberta but you don't have transmissions yet.

LISTNUM 1 \l 11496             Where is ‑‑ I mean, this is after all not a totally regulated market.  We still have a free economy.  There is some certain competition, et cetera.  Where is the threat that you see from Bitove given that he is new, that he is not going to be there for another year and you are already well established from what I gather on the way to migrate to digital?

LISTNUM 1 \l 11497             MR. STEWART:  Certainly, in Ontario, Mr. Chair, we are.  Our larger concern is Alberta.  We are facing challenges in start up.  Omni has yet to start up.  We would like for, if at all possible, the Commission to give us a little breathing room ‑‑ and the other broadcasters.

LISTNUM 1 \l 11498             If I take us back to 2005 the first or the most recent applications were denied in part because, I believe, the Commission felt that the markets were not back to where everyone hoped they would be.  But you also gave a lot of thought with respect to CHUM's argument about giving them some room when they took over the former Craig stations.  And in that instance we were talking about stations already in the market.

LISTNUM 1 \l 11499             In this instance in 2007, going into 2008, we are talking about three new entrants going into the market at one time.  And we would be very grateful if we had time to have the market digest these three new stations and see what happens once we come out of the April hearings, whatever determinations are made at that point in terms of what the new playing field will look like.

LISTNUM 1 \l 11500             At that point presumably there will be new entrants coming thereafter, but at least we will all know.  Existing broadcasters, BDUs and everyone will know what the ground rules are.  We likely won't be having the debate about whether dual status is applicable or warranted or the proper thing to do, based on current regulation.

LISTNUM 1 \l 11501             THE CHAIRPERSON:  And the fact that you are a specialty station, you know primarily a religious station, you still ‑‑ what impact would Mr. Bitove's network have on you?  I mean he himself said he does not plan to do any religious broadcasting yesterday.  So the audience presumably that he attracts will be quite different than what ‑‑ the audience that you are serving.

LISTNUM 1 \l 11502             MR. STEWART:  Well, Mr. Chair, we are a niche broadcaster.  We are special in the sense that we are a niche broadcaster but we are not a specialty service.  We don't enjoy pass‑through subscription fees, et cetera.  Our sole revenue sources are block programming sales and commercial spot sales.

LISTNUM 1 \l 11503             And while Mr. Bitove, with respect, says that they are only going to peel off 3 percent of the market, our belief and our experience has been that it's always the stations at the lower end that suffer the greatest setback.  Once the advertising pool is whittled down and you get through your CTVs, your Globals, your Rogers, formerly the CHUM group of stations, then the remainder of the money kind of filters down to the rest of us.

LISTNUM 1 \l 11504             And if you peel off another layer off of that money there is less for those of us at the bottom end.  We don't expect that CTV and Global will.  Yes, they will see reductions in dollars in terms of pure amounts.  As Matt stated earlier, in our opening comments, our total revenues are not that large but in the circumstance of another entrant coming in we will feel the brunt of that most likely.  And with respect to Toronto, either of the services will have somewhat of an impact on what we do.

LISTNUM 1 \l 11505             THE CHAIRPERSON:  In your last paragraph where you sort of as a plan B say if we approve it we should not give them dual status, just so I understand exactly what you mean, that we will give them mandatory carriage for their digital only but not for the analog; is that the idea?

LISTNUM 1 \l 11506             MR. STEWART:  Correct.  I mean, we are not anticompetitive.  We believe in the open market system and CTS is a niche religious broadcaster, you are quite right.  We cater to a fairly specific audience and get support from that group.

LISTNUM 1 \l 11507             But by the same token, every day we have to go out and compete in the national spot sales market.  So if the new entrant has all the rights and privileges that existing broadcasters have including ourselves, it will make our job that much harder.

LISTNUM 1 \l 11508             Now, whether or not the HDTV business plan can go forward based on not having analog carriage, that's not for us to determine.  But certainly we would ask that the Commission pursue that line of questioning because that's really the thing that is going to affect us the most.

LISTNUM 1 \l 11509             THE CHAIRPERSON:  Okay, thank you.  Those are my questions to you.

LISTNUM 1 \l 11510             Do my colleagues have any questions?

LISTNUM 1 \l 11511             COMMISSIONER KATZ:  I just have one question.  You run through a financial scenario on here as well.  At the same time, you say that if the Commission is to licence the HDTV application Calgary and Edmonton are particularly sensitive given the timelines since the last time licences have been awarded.

LISTNUM 1 \l 11512             The argument that you make is equally applicable five years from now as it is today; the fact that Edmonton and Calgary have just been licensed in the last two years or so.  Notwithstanding that one can make the same financial arguments you have made here at any point in time, because what you are looking at here is the impact on your business and you are saying you will be impacted negatively by someone else coming in, but it's irrespective of when the previous person was licensed or not.

LISTNUM 1 \l 11513             MR. STEWART:  With due respect, Commissioner Katz, not really in our instance.  We will ‑‑ all we are asking for is time to get our legs in these markets.  CTS has a habit of not coming before the Commission asking for help in that regard.

LISTNUM 1 \l 11514             We will make our business model work if given the appropriate amount of time to allow the market to digest these three new entrants.  To lump another one on top of, in short order, isn't something that in our view will be healthy certainly for us.  And I can't speak for the other broadcasters.

LISTNUM 1 \l 11515             But again I draw your attention back to the fact that we are a truly independent small operator.  We don't have a fallback position with respect to a corporate synergy, if you will, and revenue from other markets, et cetera.  And we only ‑‑ we only play in really the one arena which is spot national sales.  And that's what will be likely most effective in those markets.

LISTNUM 1 \l 11516             We are not asking for a five year moratorium or anything of the kind.  This just comes on the heels of the start‑up system.  And I guess if I think back to Mr. O'Farrell's comments yesterday, it is the timing more than anything else that will harm CTS in the near term.

LISTNUM 1 \l 11517             COMMISSIONER KATZ:  If this was a cat 2 application would you be as concerned with it being ‑‑

LISTNUM 1 \l 11518             MR. STEWART:  No.

LISTNUM 1 \l 11519             COMMISSIONER KATZ:  You would not?

LISTNUM 1 \l 11520             MR. STEWART:  No, no.  Our concern is that it will be conventional over‑the‑air and have all the rights and privileges of a conventional station when indeed our belief is the premise of the application is to take us higher to the next level, new technology, et cetera.  And the Commission has put the onus on existing broadcasters to come up to that same level by 2011.  And I think many are doing it even quicker.

LISTNUM 1 \l 11521             But this is just one more challenge added on to the top that, frankly, we don't need at this time.

LISTNUM 1 \l 11522             COMMISSIONER KATZ:  So it's the rights and the privileges?

LISTNUM 1 \l 11523             MR. STEWART:  Yes.

LISTNUM 1 \l 11524             COMMISSIONER KATZ:  Specifically which ones are most vulnerable to you?

LISTNUM 1 \l 11525             MR. STEWART:  Channel placement, priority carriage, low on the band, simulcast opportunity ‑‑ not because we enjoy simulcast opportunities.  We are not in that game.  But I think Mr. Johnson referred to, in his comments, about you know looking for that one hit that CTV and perhaps Global miss or that sleepy hit.  Well, if they get that then they have got to show that that capitulates them into the Top 20 programming arena.  And that alone siphons off a large amount of money.

LISTNUM 1 \l 11526             So it's a question of really those of us at the lower spectrum who don't have simulcast programming, big U.S. programming, commanding the largest chunk of the advertising revenues.  We are the ones who suffer.

LISTNUM 1 \l 11527             Similarly, and I don't want to get off topic but you know we are able to go to 14 minutes an hour and then 15, and so on and so forth.  Again, for a little station like CTS and those who don't have the larger programs that is of a little comfort because there is a lot more money that is going to get shifted by the advertisers into those bigger shows because there is more veil in those bigger shows.

LISTNUM 1 \l 11528             So again, as a small, independent broadcaster we are the ones who don't benefit directly from those kinds of measures.

LISTNUM 1 \l 11529             COMMISSIONER KATZ:  Those are my questions.

LISTNUM 1 \l 11530             THE CHAIRPERSON:  Okay, thank you.

LISTNUM 1 \l 11531             MR. STEWART:  Thank you.

LISTNUM 1 \l 11532             MR. HILLIER:  Thank you very much.

LISTNUM 1 \l 11533             THE SECRETARY:  I would now invite CanWest MediaWorks Inc. to come forward.

‑‑‑ Pause

LISTNUM 1 \l 11534             THE SECRETARY:  Appearing for CanWest is Ms Charlotte Bell.

LISTNUM 1 \l 11535             Please introduce your colleagues, after which you will have 10 minutes for your presentation.

INTERVENTION

LISTNUM 1 \l 11536             MS BELL:  Thank you.

LISTNUM 1 \l 11537             Good morning, Chairman, Vice‑Chairman, monsieur le vice‑président, Commission staff.

LISTNUM 1 \l 11538             For the record, my name is Charlotte Bell and I am Senior Vice‑President of Regulatory Affairs for CanWest.

LISTNUM 1 \l 11539             I am joined today by a number of my colleagues.  Beginning at my immediate right, which is your left, is Barb Williams, Executive Vice‑President of Content.

LISTNUM 1 \l 11540             To my immediate left is Kathy Gardner, Senior Vice‑President of Integrated Media Research and Corporate Promotions.

LISTNUM 1 \l 11541             And next to her is Brad Kubota, Senior Vice‑President, Revenue and Inventory Management.

LISTNUM 1 \l 11542             We appreciate the opportunity to appear before you today.  As you know, we filed a detailed written intervention on January 24th and it's not our intention to repeat all of our written comments here today.

LISTNUM 1 \l 11543             We followed the deliberations that took place yesterday and we note the undertakings of both applicants to ameliorate their proposals to somewhat mitigate certain shortcomings that were raised by intervenors.  But the fact remains that regardless of these changes, the conventional television marketplace is not growing and it continues to experience significant pressure from a variety of competitive forces.  In our view whatever benefits might result in licensing these services at this time will be outweighed by the impact it will have on the system.

LISTNUM 1 \l 11544             While we oppose both applications, we are particularly concerned with the HDTV proposal to establish what appears to be a super station that would enjoy the same carriage and other benefits as a national network without incurring the high costs of operating a network.

LISTNUM 1 \l 11545             HDTV suggested that incumbent broadcasters were self‑serving in opposing their proposal.  If we operated in a free market environment absent of significant cultural and social obligations I think that might be a fair statement.  But that simply is not the case.

LISTNUM 1 \l 11546             It is also why the Commission's licensing criteria requires applicants to clearly demonstrate that there is a market and demand for the proposed service.  It is also why the Commission typically ensures that the licensing of a new entrant will not impede on the ability of incumbents to continue to meet their obligations.

LISTNUM 1 \l 11547             As you know, conventional broadcasters carry significant regulatory obligations ranging from high levels of local programming in each market, and for CanWest this represents well in excess of 30 hours per week in a number of markets.  For us it is also 16 hours per week of primetime priority programming, investments to provide close captioning and described video as well as the costly transition to digital technology and high definition.

LISTNUM 1 \l 11548             Our ability to continue to meet these obligations is directly tied to our ability to maintain and grow our revenues in a shrinking advertising marketplace.  And I would like to add that if we could somehow cut $100 million from our news and infrastructure costs our business model would look very different too, and that might be attractive to us.

LISTNUM 1 \l 11549             Chairman, in your speech at the CAB convention last fall you stated that the Commission continues to see OTA television as the cornerstone of the Canadian television system.  You further stated that one of the Commission's challenges will be to ensure that OTA television is properly funded.

LISTNUM 1 \l 11550             We wholeheartedly agree on the importance of funding.  In fact, we think it is critical.  However, we also believe that fragmentation is an equally important factor that has a direct impact on our financial capacity to contribute.  Every new entrant chips away at our viewing share and revenue base and this is something the Commission has very long considered.

LISTNUM 1 \l 11551             MS GARDNER:  In 1998, in response to a Order in Council, the Commission conducted a public proceeding to evaluate whether the addition of new national networks would serve the objectives of the Broadcasting Act.

LISTNUM 1 \l 11552             Following a public hearing the Commission concluded that for any new network to be truly national new local stations affiliated to the network would have to be licensed.

LISTNUM 1 \l 11553             The Commission further determined that there are few, if any, markets in Canada that could sustain the licensing of new local stations without seriously impinging on the ability of existing licensees to fulfil their obligations under the Broadcasting Act.

LISTNUM 1 \l 11554             Commissioners, this was at a time when conventional advertising revenues were still growing and profitability had reached 16 per cent the previous year.  Today's picture is even more precarious and one of the applicants under consideration is proposing to establish a national service minus the cost of meeting local programming requirements in markets in which it seeks mandatory carriage.

LISTNUM 1 \l 11555             We think the Commission's determination in 1998 was wise.  In the last 8 years three English‑language conventional television groups have been sold, WIC, Craig and CHUM.  Under new ownership Toronto One continues to struggle in Canada's largest television market.

LISTNUM 1 \l 11556             Most recently we have witnessed the demise of Québec's second private OTA network, TQS.  As you already know, profitability for the conventional television sector has declined sharply in the past few years as a function of a shrinking advertising market coupled with rising programming and infrastructure costs.  These are strong indications that the conventional television marketplace neither needs nor can sustain the addition of another national network.  What was true 10 years ago in a much less competitive media environment is even more so true today.

LISTNUM 1 \l 11557             MR. KUBOTA:  Commissioners, to some extent the HDTV proposal has been positioned as a response to consolidation or a means of adding diversity as well as demand for more high definition programming and we would like to address each of these issues.

LISTNUM 1 \l 11558             The first question is:  What would be the impact of adding a new national player to the marketplace?

LISTNUM 1 \l 11559             With one more viewing choice audiences will further fragment and in turn this will impact advertising revenues in two ways.

LISTNUM 1 \l 11560             First, by further fragmenting viewing our ability to deliver the same audience levels will be reduced and will in turn impact on revenues.  We already have excess inventory and we are not typically sold out in prime time in most of our markets.

LISTNUM 1 \l 11561             Second, by adding more national advertising inventory in an already saturated marketplace, there will be pressure to lower rates and this will impact national advertising sales which represents more than 80 per cent of our overall conventional revenues.

LISTNUM 1 \l 11562             MS WILLIAMS:  It is difficult to assess how much diversity or plurality of editorial voices will be added by a network that will not provide local programming as part of its mix, but in a 300‑plus channel universe it does appear to be a risky proposition with more downside than benefit to the system.

LISTNUM 1 \l 11563             In terms of diversity the question is:  What is being added to the system that's not already there and at what cost?

LISTNUM 1 \l 11564             The reality is, the new national player will add another bidder for national programming rights and the likely outcome is that it will drive programming prices up.  When coupled with the impact a new entrant will have on viewing and revenues, this means we will pay more to deliver less.

LISTNUM 1 \l 11565             I want to add something else here that we have been thinking about since hearing the presentation yesterday.

LISTNUM 1 \l 11566             We do understand that the core benefit is free HDTV where none is available now.  Further, they suggested yesterday that that represents about 3 million Canadians, essentially the 10 per cent of viewers that currently watch TV off‑air.  Yet, we know that the majority of people that watch TV off‑air are in non‑urban settings.

LISTNUM 1 \l 11567             In fact, research tells us that fully two‑thirds of those 3 million people would be outside the CMA that their transmitters would reach.  So we are down to 1 million.

LISTNUM 1 \l 11568             Further, one then needs to speculate, of the 1 million how many are likely to be owners of HDTVs and will invest in an HD antenna?  Are people who haven't even invested in cable or satellite really likely to be early adopters of HD?

LISTNUM 1 \l 11569             So what is that 1 million really, 300,000, 200,000?  Is an entire national network being contemplated to satisfy the need of potentially only a few hundred thousand viewers?

LISTNUM 1 \l 11570             Or is this position and notion of free HD really a front for a completely different network with quite different objectives?

LISTNUM 1 \l 11571             In terms of meeting the demand for high definition, I think it is fair to say that Canadian broadcasters have made great progress in the past year alone working towards the 2011 shutoff date.

LISTNUM 1 \l 11572             While the cost of making this transition is significant and promises little to no financial return, CanWest supported the establishment of a target shutoff date at the TV Policy Review to ensure an orderly market transition in line with the U.S.

LISTNUM 1 \l 11573             In fact, we have been moving ahead with our digital rollout plans and have already begun the conversion of all of our newsrooms to digital technology, and later this year we will be launching high definition transmitters in Toronto, Hamilton and Vancouver and will soon be filing applications for HD transmitters in Edmonton and Calgary.

LISTNUM 1 \l 11574             We will also be discussing the transition in more detail in the upcoming BDU review, as well as our licence renewals next year.

LISTNUM 1 \l 11575             We can also confirm that all of our newly commissioned dramatic priority programming is HD and most of our documentaries are being produced in high‑definition as well, and we are acquiring HD rights for the vast majority of our foreign programming schedule.  In short, if the program is available in HD, we are acquiring HD rights automatically.

LISTNUM 1 \l 11576             Commissioners, CanWest has had a long history of smart risk‑taking, innovation and entrepreneurship.  We believe that a healthy marketplace includes vigorous competition and, regardless of your decision, we will continue to meet our challenges head on and invest in programming and technology to remain relevant in this changing environment.  But the extent and timing of those investment will largely depend on our financial capacity to do so.

LISTNUM 1 \l 11577             In a number of decisions and policy statements over the past year alone the Commission has recognized the challenges faced by conventional broadcasters.  We trust that you will carefully consider the impact of further licensing on our ability to continue to meet our important public policy objectives.

LISTNUM 1 \l 11578             MS BELL:  Commissioners, thank you for your attention and we will be happy to answer any questions you may have.

LISTNUM 1 \l 11579             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 11580             I notice you didn't say one word about YES TV.  I gather you are not terribly concerned about them getting a licence?

LISTNUM 1 \l 11581             MS BELL:  I think we are concerned about any licensing of conventional players at this time, but clearly we have a bigger concern with the impact of the HDTV proposal.

LISTNUM 1 \l 11582             Brad, would you like to add anything about local sales or the impact of YES?

LISTNUM 1 \l 11583             MR. KUBOTA:  Yes.  I think the question ‑‑ and we experienced this a little bit with the creation of Dose ‑‑ the 18 to 34 crowd on one hand very hard to hit and if you can find them it would be great.  Very fickle people to find.  We have had a tough time actually finding programming that will consistently hit them on a regular basis.

LISTNUM 1 \l 11584             So it's actually a very small amount of money for the market to sustain and we just haven't been able to find them on a consistent basis.

LISTNUM 1 \l 11585             THE CHAIRPERSON:  The other thing, the same question I asked CTS, I mean you are already in HD in Toronto, Hamilton, Vancouver, you are applying in Edmonton and Calgary next year, I guess that leaves Montréal and Ottawa of the stations where HDTV wants to broadcast.  They aren't on the air for at least another year.

LISTNUM 1 \l 11586             So is your anxiety justified?  I mean, are they really going to be meaningful competition?  You have quite the head start, you have the audience, you have the loyalty of the viewers, you have HD in five out of the seven markets already by the time they come on the air.

LISTNUM 1 \l 11587             MS BELL:  You know, I think what's going to happen is that if you do license this network with the obligations that they have proposed, let's just not look at today and what the environment looks like today, let's take a look at five years down the road when we still have the obligations that we have and we are competing and everyone is HD at that point, so now you have this different type of network, this different model that seems to be a hybrid of a specialty and a conventional network without most of the obligations that are tied to either of those types of licences.  I think we will be absolutely at an unfair disadvantage at that point.

LISTNUM 1 \l 11588             THE CHAIRPERSON:  So it's more the conditions that they are asking for than the fact that they are being licensed that you are concerned about?

LISTNUM 1 \l 11589             MS BELL:  I think it's both.  I think it's both.

LISTNUM 1 \l 11590             I think we are and we continue to be very concerned about the future of conventional television and its business model.

LISTNUM 1 \l 11591             Quite frankly, you know, I mean we respect the entrepreneurship.  I mean we come from a long line of great entrepreneurs who would probably say "Good on you for trying, it's a great business idea", but the fact is, we have very high obligations that are tied to our national network and if we are going to contemplate a new business model ‑‑ because in fact I think what this is doing is it's confirming the fact that the existing model is under stress and probably will not remain viable in the future unless we do something about it soon.  I think that's what it's telling you.  If the existing model worked, that is probably what  Mr. Bitove would have applied for.

LISTNUM 1 \l 11592             THE CHAIRPERSON:  Michel...?

LISTNUM 1 \l 11593             COMMISSIONER ARPIN:  Thank you, Mr. Chair.

LISTNUM 1 \l 11594             Ms Williams, in your oral presentation you spoke about non‑BDU subscribers and you mentioned a number of 3 million and suggesting that 2 million of those were living outside the major CMAs.

LISTNUM 1 \l 11595             It's interesting what you say because it is contrary to what we were told last year when we had the OTA review where the major argument that was made to make sure that we maintain an over‑the‑air transmission in a digital world is that close to 15 to 17 and sometimes 20 per cent of the non‑BDU subscribers were living in the major CMAs like Toronto, Montréal, Vancouver, Calgary, et cetera.

LISTNUM 1 \l 11596             So where did you get your information and could you elaborate on that?

LISTNUM 1 \l 11597             MS WILLIAMS:  Well, I will ask Kathy Gardner to because it was her research team that came up with the number.

LISTNUM 1 \l 11598             But I would want to be clear, I believe what the suggestion was yesterday was that there was a total of 10 per cent of all viewers that are currently watching TV off‑air, which is that 3 million number that they provided yesterday.

LISTNUM 1 \l 11599             I'm not sure what you are suggesting as to whether 20 per cent of that 3 million is actually in the urban area.

LISTNUM 1 \l 11600             COMMISSIONER ARPIN:  No, what I'm saying is of the total viewership in major markets ‑‑ well, the average number that was used during the OTA Review was something like between 12 to 15 per cent of households of those living in major markets were not BDU subscriber's.

LISTNUM 1 \l 11601             Now, what you have said in your oral presentation, and it is outside of your text, was that your evaluation is there are about 3 million non‑BDU subscriber's all across Canada and 2 million of them are living outside the major markets, which is, for me, contrary to what has been said during the OTA Review.

LISTNUM 1 \l 11602             MS WILLIAMS:  I'm going to ask Kathy to speak to that because it was her team yesterday that was working on this.

LISTNUM 1 \l 11603             MS GARDNER:  I think there are two areas that we have to identify first and foremost.

LISTNUM 1 \l 11604             In the HDTV application, their licence is specifically designated to the central market area.  All of the data that would have been pulled for the OTA argument last year would have been based on the full coverage area.  So we were looking at central market area and that's how we derived the figure that Barbara Williams was referring to.

LISTNUM 1 \l 11605             All of this data is based on the fall 2007 central market versus rest of English Canada percentages.

LISTNUM 1 \l 11606             COMMISSIONER ARPIN:  As you know, yesterday I did raise the question that in some markets they were using low‑power frequency.

LISTNUM 1 \l 11607             MS GARDNER:  Exactly.

LISTNUM 1 \l 11608             COMMISSIONER ARPIN:  But they are saying that even in using low‑power frequencies the coverage in digital was much broader than analog and that was stated by their own consulting engineer, not by the applicant or ‑‑ well, we had the technical people at least making the argument.

LISTNUM 1 \l 11609             But what I am hearing from you is that the comments that you have made, you are basing it on what was said yesterday rather than a specific research that CanWest has done.

LISTNUM 1 \l 11610             MS GARDNER:  Well, the research that we did access was just based on the BBM diary data and taking the central market.  So it wasn't anything beyond that, just using the pure facts and figures that would be available to us through the diary data for those eight markets versus the rest of English Canada.

LISTNUM 1 \l 11611             MS BELL:  And we are using the central market, because that is what they are proposing.

LISTNUM 1 \l 11612             COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 11613             You have also, Mr. Kubota, referred to it that the business is not what it used to be.  But aren't you going through a good year now?

LISTNUM 1 \l 11614             MR. KUBOTA:  We had a not bad start.  You know, without trying to give away all, you know, the secrets, no, quite frankly we are not.

LISTNUM 1 \l 11615             COMMISSIONER ARPIN:  And I will ask the same question to other English‑speaking ‑‑ well, I have here a table that has been made available to all of you because you are a member of TVB.  And obviously, I can't divulge the numbers but I can surely see that network sales are really improving and somehow even the specialty services are still doing well and keep doing well.  But the conventional broadcasters are not doing bad either.

LISTNUM 1 \l 11616             MR. KUBOTA:  Commissioner, I think you are referring to the TSS report, are you, that is published ‑‑

LISTNUM 1 \l 11617             COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 11618             MR. KUBOTA:  And is that the November report that you have or is that ‑‑

LISTNUM 1 \l 11619             COMMISSIONER ARPIN: Yes.

LISTNUM 1 \l 11620             MR. KUBOTA:  That is right, it just came out.

LISTNUM 1 \l 11621             COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 11622             MR. KUBOTA:  Well, the data we have here, and I think it is good to keep in mind that currently CanWest plays in the spot market.  We are an unwired network, we don't play in the network playground.  The spot market, there you will see year‑to‑date, fiscal 2008 season to date is .5 per cent year over year.

LISTNUM 1 \l 11623             COMMISSIONER ARPIN:  Yes, well, that one is a bit slower than the networks.  Who is doing the network?

LISTNUM 1 \l 11624             MR. KUBOTA:  To the best of my knowledge, the network includes everything there. The network includes specialty, it includes conventional networks, so CTV would be in there, CBC would be in there.  And while I don't have the network numbers there, I do know the total TV season today is 4.6 and specialty is, as you said, is just shy of 9 per cent ‑‑

LISTNUM 1 \l 11625             COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 11626             MR. KUBOTA:  ‑‑ year over year.  It is extremely healthy.

LISTNUM 1 \l 11627             But our concern is the spot market.  Our concern is where we play on a day to day basis is the regional market.  And I might take this opportunity too to ask for some clarification on ‑‑ and it has been great they have said they will stay away from local sales ‑‑ we would like to know how they define local sales, particularly in a market like Winnipeg, is MTS considered local sales in a market like Vancouver?

LISTNUM 1 \l 11628             Is the B.C. Government, is BCLC considered local?  They are locally generated accounts and yet they are, of the 20 per cent of sales for us, the local sales, they are probably 80‑90 per cent of the money that we see on a local basis.  So when they say they won't touch local sales, what do they mean by that?  We would be curious to know.

LISTNUM 1 \l 11629             COMMISSIONER ARPIN:  Well, I think, surely, it is a good question and I would hope that they clarify that when they will come with their reply, because the notion of national and local sales, particularly in this country where there is, because of the size of the country, numerous regional players like the B.C. players that you mentioned, sometimes some broadcasters will consider them as being national because they are sold through agencies and others would consider them local and that definition varies from one broadcaster to the other that have been around long enough to know.

LISTNUM 1 \l 11630             Ms Bell, in your written presentation, because in your oral presentation you didn't refer to it that much, but in your written presentation you are making an argument about diversity of voices and you are not suggesting that there is enough diversity of voices, but you are quoting the Commission's last decision suggesting that overall there is a good balance of voices and at the end obviously you are concluding that, all being considered, we may not need to have distinct new voices through HDTV.

LISTNUM 1 \l 11631             Would you agree with me that the contrary argument could be made and that there is never enough diversity of voices?

LISTNUM 1 \l 11632             MS BELL:  Vice‑Chairman, you know what, I think, and I think you will appreciate this comment, we appreciate the fact that everything you have to do is to balance different interests.  Diversity for the sake of diversity, if it is going to have a negative impact on what is already in the system, is probably I would say not a good use of added diversity and I think that is usually how the Commission approaches these things in licensing new entrants, is to weigh and balance in the interest of the system.  And we are telling you we don't think it is in the interest of the system.

LISTNUM 1 \l 11633             And I would add one point, and I apologize for interrupting, but I find there is something I just cannot compute in my mind.  If you are arguing that we need to do this to add over‑the‑air free HD service and that is your selling point, why are you asking for mandatory carriage?  Why are you asking for mandatory carriage on DTH when we don't even have it?  Thirty hours of local programming doesn't warrant mandatory carriage on DTH, but zero local programming and six hours of priority programming does?  And, I am sorry, but I disagree.  I think the Broadcasting Act is very clear about the importance of local and we take that very seriously and we know you do too.  So, yes, we have some issues with that.  Barb.

LISTNUM 1 \l 11634             MS WILLIAMS:  Well, and if the whole point is that you want to provide it to those that are not buying cable or satellite, then why do you care if you are carried on those?  There is not a consistency of logic to that.

LISTNUM 1 \l 11635             COMMISSIONER ARPIN:  Finally, and you alluded to their priority programming plan, yesterday at the hearing we had a new scenario that was presented to us making use of the same financial envelope, providing eight hours of priority programming starting with year four and adding more hours of also priority programming right from the start.  I know that it is part of your written submission.  I don't know, do you have any comments to make on the fact that they introduce an amended proposal regarding priority programming changes your conclusions in your written submission?

LISTNUM 1 \l 11636             MS BELL:  I don't think it does.  I think that the fact is the impact is still going to be what the impact is going to be.  I would say, in terms of the priority programming, and I haven't done the math here, but for all multi‑station groups, if you reach 70 per cent of Canadian homes, you are considered a multi‑station group and it is Commission policy that we should be doing eight hours, that all of those groups should be doing eight hours of priority programming.

LISTNUM 1 \l 11637             And again, I think to go back to the Chairman's question yesterday is why does this warrant exceptions to policy?  What are you bringing to the table that warrants all of these exceptions to current policy?  And I am just not sure that that has really been answered here and I think that is very much at the crux of your dilemma.

LISTNUM 1 \l 11638             COMMISSIONER ARPIN:  Thank you very much, Mr. Chair.

LISTNUM 1 \l 11639             THE CHAIRPERSON:  Commissioner Katz?

LISTNUM 1 \l 11640             COMMISSIONER KATZ:  Thank you, Mr. Chairman.

LISTNUM 1 \l 11641             I have got two questions.  Ms Bell, on page 3 of your submission this morning there is reference made to HDTV seeking to become the equivalent of a super station that would enjoy the same carriage and other benefits as a national network.  And we heard Mr. O'Farrell yesterday from the CAB make a similar point about a national network.  Can someone explain to me what a national network is and what a non‑national network is?

LISTNUM 1 \l 11642             I heard Mr. Kubota talk about  spot purchasing, not national purchasing.  And maybe there is a distinction without a difference, I don't know.  But if someone can clarify for me what defines a national network and are there certain obligations inherent in being a national network operator versus being something other than that?  Is Global a national network operator?

LISTNUM 1 \l 11643             MS BELL:  We are not licensed as a national network per se, but we are national in scope, and so we are considered a multi‑station group and we are national in scope.

LISTNUM 1 \l 11644             And I think what you have here is an application to serve all the major markets in Canada without having to serve a lot of the smaller ones.  I agree with that.  But I think if you are hitting over 70 per cent of the Canadian population you are pretty much national.  And I don't know from an advertising standpoint, Brad?

LISTNUM 1 \l 11645             MR. KUBOTA:  From an advertising standpoint it is really about ease and simplicity. It is do I have the ability to book one spot that runs across the country and you can send me one invoice?

LISTNUM 1 \l 11646             But I will take this a little bit further as well and perhaps there is one other question we would like clarity on.  They say that there will be a network and yet they imply that they have the ability to stream different signals into individual markets.   Would they take regional signals?

LISTNUM 1 \l 11647             If it was to be considered a specialty station, we don't currently have the ability right now to regionalize our signal, we don't currently have the ability to take Western Canada advertisers and only broadcast them to Western Canada.  If they are a super station with that ability, they truly are in a class by themselves.

LISTNUM 1 \l 11648             THE CHAIRPERSON:  When you say you don't have the ability now, are you talking about technical ability or you don't have the licence to do it?

LISTNUM 1 \l 11649             MR. KUBOTA:  The licence, specialty stations do not have that licence.

LISTNUM 1 \l 11650             COMMISSIONER KATZ:  So you are not a national network licensee today?

LISTNUM 1 \l 11651             MS BELL:  We are not, we don't have affiliates, no.  We are not licensed as a national network.

LISTNUM 1 \l 11652             COMMISSIONER KATZ:  From the HDTV perspective in their application, you are not suggesting that they could have anything different?

LISTNUM 1 \l 11653             MS BELL:  You know what, I think I am using the term loosely and it does get used loosely.  I think that when we say a national network I think what we are trying to say here is that there is a national presence.  And certainly if you are in the Vancouver and Alberta and in most of the provinces you have a national footprint and those are all the major advertising markets also would consider that.

LISTNUM 1 \l 11654             COMMISSIONER KATZ:  The continuation of that statement, "without incurring the high costs of operating a network," what are those high costs that they would not be incurring that you are incurring today?

LISTNUM 1 \l 11655             MS BELL:  We have to provide local programming in every single market in which we operate, so does CTV.  We are also at eight hours of priority programming, so is CTV.  In fact, we have 16, but that is because we have two national footprints let us say.  We have the infrastructure of stations across ‑‑ this is a hybrid model, in my view, between a conventional and a specialty.  You don't have the infrastructures, but you have the carriage.  So there is a very high cost, obviously, in terms of infrastructure.

LISTNUM 1 \l 11656             And I would point out, you know, I would love to be in a position where we only had eight transmitters.  We have about 90 that we somehow have to figure out how we are going to convert in order to reach all of the people that we reach now, which is, you know, part of the challenge here.  This is a very very different beast than what we are dealing with and there is a high cost there.

LISTNUM 1 \l 11657             COMMISSIONER KATZ:  What percentage of the Canadian population do you reach today?

LISTNUM 1 \l 11658             MS BELL:  Cathy.

LISTNUM 1 \l 11659             MS GARDNER:  We reach about 97 per cent of the population.

LISTNUM 1 \l 11660             COMMISSIONER KATZ:  My only other question is to I guess Mr. Kubota.  You referenced in here on page 8 you already have excess inventory.  Is that programming inventory?

LISTNUM 1 \l 11661             MR. KUBOTA:  Yes.  Actually, anyway you want to look at it in terms of excess capacity in response, excess capacity audience.  And I think the key there is, you know, the more options that advertisers have, or as one of their references pointed out, the more doors to knock on, the more options advertisers have the less demand that is placed on that inventory.

LISTNUM 1 \l 11662             The more options they have to tackle a market, you know, through a network execution, through a specialty execution or through ‑‑ and CTS was inferring earlier, you know, the big guys, that Global and CTV wouldn't be affected and, in fact, we are.  The less demand you have on your inventory the more pressure you have on your CPRs and your CPMs.

LISTNUM 1 \l 11663             And yesterday, HDTV alluded to the fact that they would and they had to, had no choice, would target the mark with specialty efficiencies.  I would suggest that they are a conventional broadcaster coming in with specialty efficiencies.  There couldn't be a heavier stone to put on or drag down efficiencies in the conventional markets.  It will leave is with excess capacity and lower rates.

LISTNUM 1 \l 11664             COMMISSIONER KATZ:  Thank you.

LISTNUM 1 \l 11665             THE CHAIRPERSON:  Vice‑Chairman Arpin.

LISTNUM 1 \l 11666             COMMISSIONER ARPIN:  From one of the answers that you gave to Mr. Katz I need to have a clarification.  You said you are not a network and you don't have affiliates.  But I know that there are private broadcasters that are carrying Global's programming, particularly the Pattison stations and NBC.

LISTNUM 1 \l 11667             Since they are not affiliated, it is because you have an output deal with them?

LISTNUM 1 \l 11668             MS BELL:  That is correct.

LISTNUM 1 \l 11669             COMMISSIONER ARPIN:  And how many other ‑‑ do you have a good number of those stations or is it..?

LISTNUM 1 \l 11670             MR. KUBOTA:  Yes, we have two in B.C., we have a bit of an output deal with Thunder Bay and CJON and they don't carry the complete schedule, it is just bits and pieces.

LISTNUM 1 \l 11671             COMMISSIONER ARPIN:  Okay, thank you.

LISTNUM 1 \l 11672             THE CHAIRPERSON:  Okay, thank you very much.  That is all of our questions.

LISTNUM 1 \l 11673             I think we will take a 10‑minute break before hearing the next one.

‑‑‑ Upon recessed at 1000 / Suspension à 1000

‑‑‑ Upon resuming at 1013 / Reprise à 1013

LISTNUM 1 \l 11674             THE CHAIRPERSON: Okay, Madame Secretary, I think we are ready to proceed.

LISTNUM 1 \l 11675             THE SECRETARY: I would now invite Rogers Communications Inc. to make their presentation.

LISTNUM 1 \l 11676             Appearing for Rogers is Mr. Rael Merson.  Please introduce your colleagues, after which you will have 10 minutes for your presentation.

INTERVENTION

LISTNUM 1 \l 11677             MR. MERSON:  Thank you.

LISTNUM 1 \l 11678             Good morning Mr. Chairman, Mr. Vice Chair, Members of the Commission.

LISTNUM 1 \l 11679             My name is Rael Merson and I am the President of Rogers Broadcasting.

LISTNUM 1 \l 11680             With me today are, starting on the far left, Susan Wheeler, our Vice President of Business and Regulatory Affairs, and David Purdy, the Vice President of Video Product Management with Rogers Cable.

LISTNUM 1 \l 11681             On my right are Ken Engelhart, Vice President, Regulatory for Rogers Communications, and Alain Strati, Vice‑President, Specialty TV & Development for Rogers Media.

LISTNUM 1 \l 11682             Thank you for making the time for us.

LISTNUM 1 \l 11683             We would like to use the time afforded us today to make five specific points.

LISTNUM 1 \l 11684             Firstly, the high‑definition nature of these applications is not a distinguishing characteristic.

LISTNUM 1 \l 11685             Secondly, the applicants have not demonstrated a demand for their programming.

LISTNUM 1 \l 11686             Thirdly, that these applications fail to meet the obligations of an over‑the‑air licence and risk unbalancing the playing field.

LISTNUM 1 \l 11687             Fourthly, this is not the time to licence a new over‑the‑air entrant.

LISTNUM 1 \l 11688             And lastly, that mandated analog distribution is a very inefficient use of spectrum.

LISTNUM 1 \l 11689             So, starting with the first point:  that HD is not a distinguishing characteristic.

LISTNUM 1 \l 11690             Contrary to the assertions made by each applicant, we do believe in the business case for HDTV.

LISTNUM 1 \l 11691             Citytv in Toronto is already providing high‑definition content.

LISTNUM 1 \l 11692             All of our local Canadian programs like Breakfast Television, Cityline and CityNews are all produced and broadcast in high definition.

LISTNUM 1 \l 11693             OMNI Toronto will operate fully in high definition, including production and transmission facilities, by mid‑2009.

LISTNUM 1 \l 11694             The HD investments that we have already made are essentially all that HD Networks is proposing to do.

LISTNUM 1 \l 11695             In essence, they want to operate a single broadcast facility, with a network of retransmitters across the country.

LISTNUM 1 \l 11696             Ultimately, HD is just a technical format.

LISTNUM 1 \l 11697             It is not a factor in program diversity, and it is not a relevant contribution to the system.

LISTNUM 1 \l 11698             HDTV claims that they will provide free, over‑the‑air HD services to Canadians who do not wish to obtain a BDU service.

LISTNUM 1 \l 11699             But their transmitter in Vancouver will only be 300 watts, while Toronto and Montreal will be only 160 and 450 watts respectively.

LISTNUM 1 \l 11700             You would have to live near the transmitter to receive the signal.

LISTNUM 1 \l 11701             HDTV Networks claims that its HD broadcasting format will distinguish its service from the services offered today.

LISTNUM 1 \l 11702             But, in our opinion, that is simply not enough.

LISTNUM 1 \l 11703             The second point we would like to make is that HD has not demonstrated a demand for its service.

LISTNUM 1 \l 11704             In our opinion, the HD Network ‑‑ HDTV Networks' application must be evaluated on the basis of its programming and service commitments.

LISTNUM 1 \l 11705             And on those grounds, their application is entirely deficient.

LISTNUM 1 \l 11706             There are surprisingly few details with respect to their proposed programming strategy.

LISTNUM 1 \l 11707             Although we know they intend to offer non‑U.S. foreign and Canadian acquired programming, we do not know where that programming will be sourced from, what genres they intend to offer, or whether it will all be in high definition.

LISTNUM 1 \l 11708             We only know that there will be no local programming, and a commitment to less than eight hours of priority programming per week.

LISTNUM 1 \l 11709             In addition, we cannot assess how their proposed network will impact our stations.

LISTNUM 1 \l 11710             They have not provided any information for their revenue projections, making it impossible for us to examine the assumptions and methodology they have used.

LISTNUM 1 \l 11711             A new entrant must be required to demonstrate demand for its service.

LISTNUM 1 \l 11712             Implicit in this requirement is the commitment to bring something different, and of consequence, to the Canadian viewing public.

LISTNUM 1 \l 11713             We fail to see how HDTV can support its claim of offering diversity in the system with so few details on its proposed program offering.

LISTNUM 1 \l 11714             The third point we would like to make is that the applications fail to meet the standards of an over‑the‑air licence.

LISTNUM 1 \l 11715             The fundamental distinguishing characteristic of an over‑the‑air broadcaster is our ability to reflect the communities that we serve.

LISTNUM 1 \l 11716             We do that through local programming and local involvement.

LISTNUM 1 \l 11717             Our priority status derives from this local contribution.

LISTNUM 1 \l 11718             But HDTV Networks wants over‑the‑air status without any commitment to local programming or the local community.

LISTNUM 1 \l 11719             That contradicts the very nature of service for an over‑the‑air broadcaster.

LISTNUM 1 \l 11720             HDTV Networks is trying to establish a national network with only one broadcast facility in Vancouver, and Digital retransmitters in Canada's eight largest markets.

LISTNUM 1 \l 11721             But without local programming or local stations, they are not really proposing to establish a true network of broadcasting services.

LISTNUM 1 \l 11722             They are instead proposing a "superstation", a regulatory construct that does not exist in Canada.

LISTNUM 1 \l 11723             To put it simply, HDTV Networks wants access to the over‑the‑air sector without having to pay the price of entry, and that price of entry is an investment in local and priority programming.

LISTNUM 1 \l 11724             We note too that HDTV argues it has no obligation to offer local programming because it will not solicit local advertising.

LISTNUM 1 \l 11725             This commitment is completely disingenuous because, as everyone knows, most television advertising is national.

LISTNUM 1 \l 11726             With respect to the YES application, while we applaud its goal of empowering marginalized youth, we believe it simply fails to meet the standards of an over‑the‑air broadcaster.

LISTNUM 1 \l 11727             While YES has at least recognized the obligation to offer local and priority programming, much of this programming will be user‑generated.

LISTNUM 1 \l 11728             It is doubtful that user‑generated programming is in keeping with the Broadcasting Act requirement that programming be of a "high standard".

LISTNUM 1 \l 11729             In addition, it clearly provides little benefit to the Canadian independent production sector.

LISTNUM 1 \l 11730             The fourth point that we would like to make si that now is not the time to licence a new entrant in the over‑the‑air market.

LISTNUM 1 \l 11731             Market conditions must be supportive for a new entrant.

LISTNUM 1 \l 11732             Given the regulatory commitments of over‑the‑air broadcasters, there is a need to ensure the broadcasters can continue to meet their requirements by assessing the economic health of the sector.

LISTNUM 1 \l 11733             A test of market readiness should focus on the health of the market in general rather than on the profitability of individual broadcasters.

LISTNUM 1 \l 11734             We believe factors such as PBIT margins for the sector, sales growth above inflation, stability of pricing and sell‑out rates provide a helpful insight into the economic health of the sector.

LISTNUM 1 \l 11735             We submit that none of these factors currently supports the introduction of a new over‑the‑air entrant.

LISTNUM 1 \l 11736             David?

LISTNUM 1 \l 11737             MR. PURDY: Our fifth point is that the applicants propose inefficient use of spectrum.

LISTNUM 1 \l 11738             We at Rogers Cable were troubled by HDTV's request that it be distributed as part of an analog basic service, on a mandated basis.

LISTNUM 1 \l 11739             Both the Commission and Industry Canada have developed a number of policies to encourage and support the transition of the system from analog to digital, and ultimately HD.

LISTNUM 1 \l 11740             At Rogers, managing the transition is an expensive and difficult process.

LISTNUM 1 \l 11741             We are aggressively marketing our digital services and we have over 58 per cent of our customers have digital set‑top boxes in their home, the most in Canada.

LISTNUM 1 \l 11742             That number is growing at an impressive rate, around 10 per cent a year.

LISTNUM 1 \l 11743             However, during the transition, we are required to carry many over‑the‑air services three times:  in analog, in standard definition digital and high definition.

LISTNUM 1 \l 11744             And as a result, even though we have made massive investments in capacity, we are facing a serious bandwidth crunch.

LISTNUM 1 \l 11745             The result is that we have to make more investments to increase capacity during this transitional period.

LISTNUM 1 \l 11746             And even with these investments, there are finite limitations.

LISTNUM 1 \l 11747             Accordingly, we were pleased when the Commission announced that it would only license over‑the‑air services on a digital basis, on a go forward.

LISTNUM 1 \l 11748             New digital services will attract customers to the digital platform and will not use up our valuable capacity.

LISTNUM 1 \l 11749             For every analog channel, Rogers can carry 12 standard definition services or two to three HD services.

LISTNUM 1 \l 11750             Granting mandatory analog carriage to these digital services, however, would be a troubling step backwards.

LISTNUM 1 \l 11751             It would not provide the same encouragement for customers to migrate to digital, and it would also exacerbate the bandwidth shortage.

LISTNUM 1 \l 11752             Granting HDTV's analog carriage request would also reduce Rogers Cable's ability to use this capacity to distribute new and innovative services, including other HD services, video‑on‑demand services and third‑language programming services.

LISTNUM 1 \l 11753             Rael?

LISTNUM 1 \l 11754             MR. MERSON: In conclusion, we believe that both applicants have proposed services that are more appropriately licensed as Category 2 digital specialty services.

LISTNUM 1 \l 11755             In our view, the applicants' proposals are simply not sufficient to receive the regulatory privileges afforded over‑the‑air television stations.

LISTNUM 1 \l 11756             We thank the Commission for the opportunity to appear today and would be pleased to answer any questions you may have.

LISTNUM 1 \l 11757             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 11758             I would like to follow up on point number five.

LISTNUM 1 \l 11759             In your submission, you suggest that you will probably carry U.S. signals in analog format even after 2009, when they have converted to HD.

LISTNUM 1 \l 11760             MR. PURDY:  Hm‑hmm.

LISTNUM 1 \l 11761             THE CHAIRPERSON: A, I don't understand why you do it; and B, if you can do it for U.S. services, why can't you do it for HDTV?

LISTNUM 1 \l 11762             MR. PURDY:  Good question.  Thank you very much, Mr. Chairman.

LISTNUM 1 \l 11763             We, at Rogers, are reviewing and that decision right now.

LISTNUM 1 \l 11764             So, one of the things that we are discussing is whether or not we would in fact, post‑2009, carry the U.S. signals in analog, and it is something that we debate and discuss internally.

LISTNUM 1 \l 11765             If we did carry them, it would be to manage the transitional period and to minimize any customer disruption.

LISTNUM 1 \l 11766             It would only be done if we felt that it would be disruptive to our customer base and hurt our subscribers.

LISTNUM 1 \l 11767             But it is something that we are reviewing internally now and it is something we are discussing ‑‑

LISTNUM 1 \l 11768             THE CHAIRPERSON: So it is not cost issue.  It is a customer convenience issue.

LISTNUM 1 \l 11769             MR. PURDY:  It is a customer convenience issue, and it is ‑‑ you know, our intent is to, as we migrate, go through this digital migration, that we minimize customer disruption.

LISTNUM 1 \l 11770             Certainly, the over‑the‑air signals from the U.S. stations are something that we are discussing right now.

LISTNUM 1 \l 11771             MR. ENGELHART:  If I could add, Mr. Chairman, I think I would answer that, your last question, by saying there is a trade‑off between cost and the customer impact.

LISTNUM 1 \l 11772             As we explained in our in‑chief remarks, there is ‑‑ you know, bandwidth is all we have to sell. So, obviously, bandwidth is important to us

LISTNUM 1 \l 11773             And managing the bandwidth during the transition period is difficult, and David's team is looking at what to do about the American signals in 2009.

LISTNUM 1 \l 11774             That having been said, you know, if we have 68‑70 per cent of our homes have digital boxes, so 30 per cent of the people (that don't have that digital box) lose those American signals, they might be annoyed.

LISTNUM 1 \l 11775             I mean, it has been part of their television service for their entire lives, and they are going to wonder where it went.

LISTNUM 1 \l 11776             So there is going to be a consumer reaction and we have to figure out what the impact is on us and weigh that against the bandwidth issue.

LISTNUM 1 \l 11777             With the new service, you have the same bandwidth issue, but you don't have the same consumer reaction because it is not something that they have grown up with their whole lives.

LISTNUM 1 \l 11778             THE CHAIRPERSON:  Okay.  Thank you.

LISTNUM 1 \l 11779             Mr. Katz?

LISTNUM 1 \l 11780             COMMISSIONER KATZ:  Thank you, Mr. Chairman.

LISTNUM 1 \l 11781             I want to focus on two areas.

LISTNUM 1 \l 11782             The first one has to do with the reference you have made, both in your submissions this morning as well as in your evidence that you filed, you comments you filed as well, regarding whether user‑generated content fits under the definition of, I guess, high standard, as you called it in your submission this morning.

LISTNUM 1 \l 11783             You didn't allude to it as being a high standard issue in your actual submission, but you alluded to that notion, anyways.

LISTNUM 1 \l 11784             Can you expand upon that notion because all we are seeing right now in the new media area is much more, obviously, user‑generated content, and if what you are telling the Commission is that anything that is user‑generated does not fit under the Broadcasting Act, I think it is something that needs to be further pursued.

LISTNUM 1 \l 11785             MR. MERSON:  Thank you, Mr. Vice Chair.

LISTNUM 1 \l 11786             You know, there is ‑‑ we sweat programming and programming decisions every day, and ultimately the choices that we make are on the breath of the appeal of the services and whether the services have appeal to broad enough audience to really build the advertising base that you think might be available from over‑the‑air television.

LISTNUM 1 \l 11787             And we have spoken about it in the past.

LISTNUM 1 \l 11788             Look, our vision for over‑the‑air television is that it becomes the most ubiquitous, most widely dispersed medium out there.

LISTNUM 1 \l 11789             And in that very ubiquity you can build a business case, because we know we have taken on a fairly difficult business case in Citytv.

LISTNUM 1 \l 11790             But you can build a business case if you believe that ultimately over‑the‑air television will become the mass medium and that everything else will devolve into smaller niches that people pay for.

LISTNUM 1 \l 11791             So, when we look at user‑generated content, you know, there are a couple of levels.

LISTNUM 1 \l 11792             One is YouTube.  You know, YouTube is the ultimate expression of user‑generated content.

LISTNUM 1 \l 11793             The magic of YouTube is not in the content itself, but it is in its searchability, the fact that you can go in because these are all very, very niche audiences that are looking for something in particular.

LISTNUM 1 \l 11794             You can go in and specify and identify what it is that you do.

LISTNUM 1 \l 11795             It is the antithesis of a mass market strategy.  It is a highly‑differentiated, massive searchable database that YouTube has created.

LISTNUM 1 \l 11796             So, as a concept, I can't see, and we can't see, how it is that user‑generated content, which by its nature has this very, very niche appeal, has applicability to a mass medium like over‑the‑air television.

LISTNUM 1 \l 11797             Where it does have applicability is how you see us using it at this point in time, which is, to the extent that we solicit content from our viewers to add to what it is that we have on the air.

LISTNUM 1 \l 11798             So, you know, in the midst of a snow storm, we look to our viewers to provide clips of their cars covered in snow.  In the midst of sort of an event that is happening, we get that content from them.

LISTNUM 1 \l 11799             So there is tons of applicability within, particularly as you want to get your viewership more involved in what it is you are doing, in building the content on your local programming.

LISTNUM 1 \l 11800             But as a mass market strategy, it is the concept that we have difficulty with.

LISTNUM 1 \l 11801             Does that answer your question?

LISTNUM 1 \l 11802             COMMISSIONER KATZ:  Yeah.

LISTNUM 1 \l 11803             Thank you.

LISTNUM 1 \l 11804             The second question relates to the BDU side of your business as well.

LISTNUM 1 \l 11805             The CRTC, as you are well aware, are getting an awful lot of applications for carriage, one of them being YES TV here, HDTV.  There have been a lot of applications for 9(1)(h), as well.

LISTNUM 1 \l 11806             Is one of the reasons for that inundation by the Commission that a lot of these programmers are having trouble getting carriage from the BDUs, and so they are turning to the CRTC and saying "We can't get on, so give us these licenses in order to incent the BDUs to actually put us on."?

LISTNUM 1 \l 11807             MR. MERSON: I would ask David to answer that.

LISTNUM 1 \l 11808             MR. PURDY:  I would say, in the case of Rogers, it would be hard to make that argument.  We have launched virtually all of the channels that have been licensed.

LISTNUM 1 \l 11809             Certainly, our policy is to carry anything that we feel our customer base would find compelling.

LISTNUM 1 \l 11810             I think what is probably at issue here is broad‑based carriage lower down the dial, and it is really preferential carriage that they are seeking.

LISTNUM 1 \l 11811             You know, I think that is something that really is earned, rather than something that should be asked for upfront.

LISTNUM 1 \l 11812             You know, you talk about user‑generated content in channels that have launched, and we carry BITE TV, which is a user‑generated service, or much of the content on BITE TV is user‑generated, but it has failed its sort of garner much in the way of market share, either for viewers or for advertising revenue.

LISTNUM 1 \l 11813             So we give everybody a fair shot, but I think the preferential carriage is ‑‑

LISTNUM 1 \l 11814             COMMISSIONER KATZ:  When you say you give everybody a fair shot, anybody who wants to seek access to the Rogers Cable systems can get on as a Cat 2?

LISTNUM 1 \l 11815             MR. PURDY:  The vast, vast majority of the Cat 2s that have been licensed in this country have gotten carriage from us.

LISTNUM 1 \l 11816             The only ones I can think of are some of the hi‑fidelity services which, as I mentioned earlier, we're desperately trying to figure out how to provide spectrum and launch those services as well.

LISTNUM 1 \l 11817             And the reason we're doing that is because they're currently carried by our competitor and we want to maintain a parity or have a better product than our competitors.

LISTNUM 1 \l 11818             COMMISSIONER KATZ:  And you don't have the capacity for these types of providers right now?

LISTNUM 1 \l 11819             MR. PURDY:  We are in a spectrum crunch and we're busy trying to launch switch digital which would allow us to have even more spectrum, but until switch digital is up and running, which should be some time at the back half of this year, we're in a really tight spectrum crunch.

LISTNUM 1 \l 11820             But it's our intent to carry most of the services that are licensed, certainly those that have compelling content and we think would be compelling to our customer base.

LISTNUM 1 \l 11821             COMMISSIONER KATZ:  Do you do consumer research to find out when someone comes to you with programming whether it's something that will sell basically, or do you make that decision internally based on your experience?

LISTNUM 1 \l 11822             MR. PURDY:  We do constant consumer research.  So, we go to our customer base at least four times a year on a quarterly basis and ask them what programming genres are of greatest interest; when they look at our digital line‑up, when they look at our total television line‑up, where they see deficits or deficiencies or where they'd like to see more types of content.

LISTNUM 1 \l 11823             And we've got the programming genres mapped out, both from a total perspective and on a segmented basis, so, we know what segments of our customer base are looking for.

LISTNUM 1 \l 11824             So, of particular interest right now, obviously, is, you know, young people and how to make the television product more relevant to young people and, so, we're doing constant consumer research.

LISTNUM 1 \l 11825             COMMISSIONER KATZ:  Okay.  Thank you.

LISTNUM 1 \l 11826             THE CHAIRPERSON:  You are both a broadcaster and a BDU.  How are you doing in terms of broadcasting with your newly acquired network and with OMNI in terms of transition to 2011?

LISTNUM 1 \l 11827             MR. MERSON:  It's a ‑‑ you know, Citytv was the first to launch pure hi‑def through its entire system, so, all of City's local programming in Toronto is produced in hi‑definition and transmitted in hi‑definition, all the major shows:  the news, "City Line", "Breakfast Television".

LISTNUM 1 \l 11828             OMNI, we have ‑‑ we're in the midst of the process.  We are ‑‑ we've held back on building the production facilities because we are in the process of building this new production facility to cover both City and OMNI in Toronto, but if you go to OMNI you'd see the cameras are all hi‑definition.

LISTNUM 1 \l 11829             What they haven't yet put in place is a hi‑definition switch and they're in the process of launching their hi‑definition transmitters that will be up and running in July of this year.

LISTNUM 1 \l 11830             Across the country ‑‑ but by July of 2009, it will be ‑‑ OMNI as well will be completely hi‑definition throughout the system.

LISTNUM 1 \l 11831             So, both City and OMNI in Toronto will be completely hi‑definition by early next year.

LISTNUM 1 \l 11832             The rest of the country, the roll‑out, we've planned the roll‑out on a staged basis.  As you've heard everybody explain, it's an expensive proposition and, to some degree, as business people what we try to do is match the expenditure with the adoption of the new technology by the consumers.

LISTNUM 1 \l 11833             So, we're in the process of sort of rolling this out in an organized fashion.  We will be fully hi‑definition capable across the entire system by 2010.  So, we'll be ready for 2011.

LISTNUM 1 \l 11834             THE CHAIRPERSON:  In terms of your answer to Vice‑Chairman Katz in terms of carriage and that you're trying to get everybody on, et cetera, and I have no doubt to question your statement, all I can say, an awful lot of licensed Cat 2s have appeared before us and have told us we can't even get a meeting with the BDUs never mind having a fair shot at getting on.

LISTNUM 1 \l 11835             That's obviously a different perception here, let's just leave it at that.  But it was a number of people who appeared before us that suggested that the problem with the BDUs is really quite large.

LISTNUM 1 \l 11836             MR. PURDY:  Mr. Chairman, I would be surprised if they're referencing Rogers Cable.  I think ‑‑

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11837             MR. ENGELHART:  In fact, Mr. Chairman, I've heard some of them say, "We're only on Rogers".

LISTNUM 1 \l 11838             We carry just about everything.  We can ‑‑ happy to provide you with a copy of our channel line‑up.  There's virtually no Cat 2 that we're not carrying.

LISTNUM 1 \l 11839             THE CHAIRPERSON:  I only repeat what was told to me and I sort of pass it on to you.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11840             THE CHAIRPERSON:  They did not qualify it as to one BDU, they said all, so that's...

LISTNUM 1 \l 11841             MR. ENGELHART:  As I say, Mr. Chair, we're happy to give you a list of the launched Cat 2s and the ones that we're carrying and the ones that we're not, because there are precious few that we're not carrying.

LISTNUM 1 \l 11842             MR. PURDY:  And I'd be willing to meet with any of them.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11843             THE CHAIRPERSON:  I will pass your offer on.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11844             MR. PURDY:  A lot of them are in the audience today.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11845             COMMISSIONER ARPIN:  Among the Cat 2s that you have launched, some have succeeded, some have failed, at least to our knowledge.

LISTNUM 1 \l 11846             Do you have any specific experience regarding failure and the reasons why they fail?

LISTNUM 1 \l 11847             MR. PURDY:  Thank you, Vice‑Chairman.

LISTNUM 1 \l 11848             The specialty channels that we've shut down, and there's only been a handful, are the ones that largely seem to have a flawed business model or no strong source of programming.

LISTNUM 1 \l 11849             So, when we ‑‑ WTSN I think was the first of the Category 2 specialty channels to shut down, and I think they would say ‑‑ and they're here today, so, I probably shouldn't speak for them ‑‑ but I think they would say that the production costs associated with live sports is what ultimately brought that channel to its end.

LISTNUM 1 \l 11850             The other channels that we've shut down typically didn't have a strong source of programming and they didn't garner either ratings or really much in the way of advertiser interest.

LISTNUM 1 \l 11851             COMMISSIONER ARPIN:  And was it the case of High School Television Network?

LISTNUM 1 \l 11852             MR. PURDY:  We launched High School Television Network and I think in the end they had trouble meeting their financial commitments and it was a strong source of programming.

LISTNUM 1 \l 11853             I point to ‑‑ and I don't mean to pick on Byte TV ‑‑ but I point to Byte TV and at the end of the day it comes down to having strong stories, great story tellers, great production partners and, you know, truly compelling content, and what format the content is in and how stylishly it's shot doesn't make up for the fact if you don't have strong producers producing strong stories.

LISTNUM 1 \l 11854             COMMISSIONER ARPIN:  Thank you.

LISTNUM 1 \l 11855             THE CHAIRPERSON:  Okay, thank you very much.

LISTNUM 1 \l 11856             Thank you.  Your submission was very much to the point and, therefore, easy for me to grasp.

LISTNUM 1 \l 11857             THE SECRETARY:  I would now invite CTVglobemedia Inc. to come forward.

‑‑‑ Pause

LISTNUM 1 \l 11858             THE SECRETARY:  Appearing for CTVglobemedia is Mr. Kevin Goldstein.  Please introduce your colleagues, after which you will have 10 minutes for your presentation.

INTERVENTION

LISTNUM 1 \l 11859             MR. GOLDSTEIN:  Thank you.

LISTNUM 1 \l 11860             Good morning, Mr. Chair, Members of the Commission.

LISTNUM 1 \l 11861             For the record, my name is Kevin Goldstein and I am Vice‑President of Regulatory Affairs for CTVglobemedia.  Before we begin, I'd like to take the opportunity to introduce my colleagues.

LISTNUM 1 \l 11862             To my right, your left, is Brian McLuskey, Sr. Vice‑President Revenue Management for CTV, a 25‑year veteran in the advertising industry.  Brian is responsible for market positioning, defining market objectives, establishing broad pricing strategies and developing business strategies that reflect long and short‑term industry trends across all broadcasted digital platforms.

LISTNUM 1 \l 11863             To my immediate left, your right, is Rick Lewchuk, Sr. Vice‑President CTV creative agency and brand strategy.  Rich has worked in television broadcasting for nearly three decades and has held a number of senior roles with CTV in the areas of programming and program promotion.  He currently oversees the marketing, promotion and brand creative for all CTVglobemedia television networks and stations.

LISTNUM 1 \l 11864             Finally, to Rick's left is Steve Armstrong, President of Armstrong Consulting, one of Canada's top economic research consultants specializing in media who prepared the impact analysis we filed with our interventions.

LISTNUM 1 \l 11865             We will now begin our presentation.

LISTNUM 1 \l 11866             The Canadian broadcasting system is a system that has been carefully constructed over a series of decades based on the principles outlined in the Broadcasting Act.

LISTNUM 1 \l 11867             At CTVglobemedia we have had the privilege of operating in this system for over 45 years.  However, this privilege has not come for free, it has involved significant obligations, obligations relating to Canadian programming and obligations to make a significant contribution to local reflection in the communities in which we operate.

LISTNUM 1 \l 11868             We continue to fulfil these obligations which are not inexpensive.  This is the regulatory bargain that we and other licensees have committed to.

LISTNUM 1 \l 11869             Yesterday morning the Commission heard a proposal from HDTV Networks to bypass significant obligations.  HDTV Networks believes it should be given unprecedented flexibility and be permitted to cherry pick the policies it should have to adhere to.

LISTNUM 1 \l 11870             As the Chairman alluded to in his questioning, HDTV is not proposing certain exceptions to existing policies, they are essentially proposing a whole new class of undertaking.  As we will discuss today, in our view, there is no merit to such a proposal.

LISTNUM 1 \l 11871             Brian.

LISTNUM 1 \l 11872             MR. McLUSKEY:  Whether you call it privileges but not obligations, benefits but not the responsibilities, cherry picking or skimming the cream, that is what this application is because, unlike all other over‑the‑air broadcasters, it does not have a local commitment.

LISTNUM 1 \l 11873             The Broadcasting Act mandates that your regulation of the sector be readily adaptable to technological change, however, the Act does not say that you should do so when it would have a negative impact on existing players and their ability to fulfil their obligations.

LISTNUM 1 \l 11874             Make no mistake, approval of this application will result in increased competition for national advertising.  Given the severe challenges already affecting conventional broadcasters, anyone who thinks this will not affect their ability to continue their current contributions, including local programming, is dreaming in HD.

LISTNUM 1 \l 11875             Any comprehensive analysis of the conventional television model, both here and around the world, will note that advertising‑based over‑the‑air television is in decline and suffering from fragmented audiences and changing advertising patterns.

LISTNUM 1 \l 11876             The numbers over the last five years are clear and the Commission has seen the numbers for '06‑'07.  In fact, the Commission recognized this in Public Broadcast Notice CRTC 2007‑53 when it noted that:

"This sector faces a number of challenges with audience fragmentation and technology changes, over‑the‑air stations will continue to experience a decline in audience share, major changes in the form and delivery of advertising and additional costs related to the digital transition.  (As read)

LISTNUM 1 \l 11877             PBIT for this sector has dropped to historic lows and one of the major players, TQS, has filed for bankruptcy protection.

LISTNUM 1 \l 11878             On all accounts, the business model for conventional television and, hence, the ability of the sector to continue to deliver a wide range of programming, and specifically local programming, is under siege.  Any further licensing will only fuel this crisis.

LISTNUM 1 \l 11879             In essence, HDTV Networks is looking for a version of a Vancouver super station with priority carriage.  It is the equivalent of CTV applying for an over‑the‑air licence for CFTO with eight re‑broad stations in the top Canadian markets with no local commitment but wide‑spread cable and satellite distribution.

LISTNUM 1 \l 11880             To be blunt, a great licence if you can get it, but this is not a long‑term recipe for increasing diversity in the system.  In fact, recent history has shown us how damaging poorly executed new licences can be to the marketplace.

LISTNUM 1 \l 11881             HDTV Networks has provided no rationale why it should be given such flexibility where others have not.  Moreover, we can guarantee that if they are licensed with these conditions, other investors in the over‑the‑air sector will want equitable licensing treatment.

LISTNUM 1 \l 11882             Rick.

LISTNUM 1 \l 11883             MR. LEWCHUK:  At the end of the day what HDTV Networks is proposing is to solve the problem that doesn't exist.  The Canadian broadcasting industry is already at the forefront of the HD revolution and CTVglobemedia is amongst those Canadian television broadcasters that are strongly committed to the growth of HD programming.

LISTNUM 1 \l 11884             Today virtually all of our prime time programming on the CTV network is available in HD.  CTV's entire slate of Canadian scripted programs is presented in HD, this includes "Corner Gas", "Degrassi:  The Next Generation" and "Instant Star", and all of our Canadian Movie of the Week titles, such as "Would Be Kings" and "Mayerthorpe" which had its world premiere on CTV on Sunday night and generated 1.3‑million viewers, notwithstanding the fact that it was scheduled against the Grammys.

LISTNUM 1 \l 11885             From a specialty perspective, TSN, RDS and Discovery Channel were among the first to launch in HD and each has grown tremendously since.  In 2006 TSN's HD line‑up featured more than 1,500 hours of HD programming and in September of that year it became the first Canadian broadcaster to launch a daily newscast in HD.

LISTNUM 1 \l 11886             Meanwhile, Discovery launched Canada's first 24‑7 HD service with Discovery HD.

LISTNUM 1 \l 11887             Yesterday morning HDTV Networks indicated that all of their programming will be in HD, even if they must up‑convert some unknown amount of their programs.  Up‑converted programs are not true HD.

LISTNUM 1 \l 11888             In addition, HDTV Networks has also asked for analog distribution so that viewers that do not have digital cable will be able to receive its service.  This requires programs to be down‑converted.  What is clear from all of this is that HDTV will not be offering a true HD service, notwithstanding their name.

LISTNUM 1 \l 11889             We should also highlight that what HDTV Networks is looking to provide is not a free service.

LISTNUM 1 \l 11890             First, for large portions of Canada, including Saskatchewan and three of the Atlantic provinces, this service will not be available over‑the‑air.

LISTNUM 1 \l 11891             Second, in markets where the signal is receivable someone who has invested upwards of a thousand dollars in an HD television with a built‑in tuner will still have to spend extra on an antenna.

LISTNUM 1 \l 11892             Third, and finally, it's naive to assume that today's consumer is interested in investing in an HD set and being satisfied with the few over‑the‑air channels that are available, let alone what HDTV Networks will offer.

LISTNUM 1 \l 11893             Over‑the‑air HD tuning is not and will never be the 10 to 12 per cent of the population HDTV Networks referenced yesterday.  The overwhelming majority of Canadians get their HD television today and will continue to get their HD television in the future from Canadian BDUs, and that does not come free.

LISTNUM 1 \l 11894             HD for the sake of HD is not a reason to approve an application, particularly when doing so will cause significant harm to an already challenged sector.

LISTNUM 1 \l 11895             In fact, what was clear from HDTV Networks' presentation is that they're proposing a transitional solution for a couple of years until such time as all over‑the‑air stations have made the transition.  At that time, any novelty associated with this application is removed and HDTV Networks becomes the same as everybody else.  Consequently, this application is no different than any other application for an over‑the‑air licence and should be evaluated on the same basis.

LISTNUM 1 \l 11896             MR. GOLDSTEIN:  Before we conclude, one short note about YES TV.  We listened to their presentation with interest yesterday.  In our view, it would be more appropriate to licence what YES TV is proposing as a community television station or a digital specialty service.

LISTNUM 1 \l 11897             We seriously question whether their business model is viable as an over‑the‑air station, nor does it merit using valuable over‑the‑air spectrum for this purpose.

LISTNUM 1 \l 11898             Yesterday, HDTV argued that there is a messiness if their service is not treated in the same way as the other incumbents on certain accounts, except they want to pick and choose their regulatory requirements, taking the privileges but not the obligations.  That's not messiness, we would say it's unfairness.

LISTNUM 1 \l 11899             In conclusion, what is the HDTV Networks' application really about?

LISTNUM 1 \l 11900             One, what is being applied for by HDTV Networks is unprecedented and, in effect, requires a new category of licence.

LISTNUM 1 \l 11901             Two, to license such an application would allow HDTV Networks to have privileges but not the obligations that all conventional broadcasters adhere to.

LISTNUM 1 \l 11902             Three, the approval of this application will undermine the ability of licensees to fulfil their obligations, particularly disturbing given the severe challenges already affecting conventional broadcasters.

LISTNUM 1 \l 11903             Four, the cost to the system of licensing HDTV Networks outweigh the benefits, in fact, there is no net benefit to the broadcasting system.

LISTNUM 1 \l 11904             Five, what HDTV Networks is looking to provide is not a free service.

LISTNUM 1 \l 11905             And, six, to be blunt, the rules either work for all of us or for none of us.

LISTNUM 1 \l 11906             For all of these reasons we believe the HDTV Networks' application should be denied.

LISTNUM 1 \l 11907             We would like to thank the Commission for the opportunity to appear before you today and we welcome any questions you may have.

LISTNUM 1 \l 11908             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 11909             A couple of clarifications first of all.

LISTNUM 1 \l 11910             You say up‑convert is not true HD.  What exactly do you mean by that?

LISTNUM 1 \l 11911             MR. GOLDSTEIN:  Up‑converted programming, and I'll ask Rick to add to it given his programming background, up‑converted programming simply makes the signal technologically compatible, it does not make the programming in 16 X 9 ratio with the crisp, clear picture that HD TV is known for.

LISTNUM 1 \l 11912             What it essentially does is allow you to watch something that's in standard definition through an HD TV signal.

LISTNUM 1 \l 11913             MR. LEWCHUK:  There's actually a great example that Rogers Cable has on the air right now.  They've got a commercial and there's a gentleman watching his ‑‑ what he thinks is an HD television set and he thinks he has HD but, in fact ‑‑ and he talks about the goalie being squished and he's not watching real HD.

LISTNUM 1 \l 11914             THE CHAIRPERSON:  Oh yes, right.

LISTNUM 1 \l 11915             MR. LEWCHUK:  You need to have a true HD signal to see HD.  If you're just taking a standard definition signal and up‑converting it to HD, it does not have the quality of an HD signal.

LISTNUM 1 \l 11916             THE CHAIRPERSON:  Do you get the squishing with that Roger signal, let's say, in its commercial when you up‑convert?

LISTNUM 1 \l 11917             MR. LEWCHUK:  I'm sorry?

LISTNUM 1 \l 11918             THE CHAIRPERSON:  Do you get the squishing, as you call it, of the signal when you up‑convert?

LISTNUM 1 \l 11919             MR. LEWCHUK:  You can, it depends how the up‑conversion happens.  You'll see a good example of that on Score TV and much of the programming they put on Score HD where they up‑convert basketball games and such, it's very much different than when they have a true HD basketball game.

LISTNUM 1 \l 11920             MR. McLUSKEY:  The bottom line on that, beyond aspect ratio, is you can't create detail where none exists.

LISTNUM 1 \l 11921             THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 11922             MR. McLUSKEY:  And that's exactly what the analog formula is trying to do when it takes that SD signal and covert it up to HD TV.  There's basically information that's missing.  You can't make that appear.

LISTNUM 1 \l 11923             THE CHAIRPERSON:  Secondly, you question HDTV's assumption that people will want to watch HD free over‑the‑air, suggesting because of the availability people won't go that way.

LISTNUM 1 \l 11924             But isn't it true that HD over‑the‑air is actually a better signal than you get over the BDU because it's not compressed?

LISTNUM 1 \l 11925             MR. GOLDSTEIN:  I'll ask Rick to comment on that.

LISTNUM 1 \l 11926             MR. LEWCHUK:  I've seen both.  The fact is, you know, the HD signal ‑‑ I'm most familiar with Rogers, that's what my delivery is through and I do see ExpressVu as well.  You could say I have a trained eye looking at it.

LISTNUM 1 \l 11927             I've seen over‑the‑air and I've seen it through both ExpressVu and Rogers and there's very, very little difference in quality to my eye.

LISTNUM 1 \l 11928             THE CHAIRPERSON:  Okay.

LISTNUM 1 \l 11929             MR. GOLDSTEIN:  I think I would also add that if a significant amount of your programming is up‑converted in the first place, it doesn't really matter whether it's compressed through or you're receiving it over‑the‑air, it's still not going to give you the crisp quality that a true HD signal would offer.

LISTNUM 1 \l 11930             THE CHAIRPERSON:  Now, you heard HDTV yesterday argue that really their application was meant to jump‑start the adoption of HD in Canada and proper produce a programming, et cetera.

LISTNUM 1 \l 11931             I gather you don't buy this argument.

Is it because you think this is just marketing, or is it because, in effect, time has overtaken the HDTV application because when they filed their application we hadn't set the deadline for 2011 yet and so, therefore, you know, the need to adopt a strategy and get there wasn't as urgent as it is now for every other broadcaster?

LISTNUM 1 \l 11932             MR. GOLDSTEIN:  I think we'd probably agree with that.

LISTNUM 1 \l 11933             THE CHAIRPERSON:  So, basically it's an application that's been overtaken by time?

LISTNUM 1 \l 11934             MR. GOLDSTEIN:  Yeah, I think, as we indicated in our opening statement, you know, this is ‑‑ essentially the main thrust of this application is, is that it's over‑the‑air HD.  Once everyone else moves in  that direction, it loses its novelty.

LISTNUM 1 \l 11935             And the other thing I think that Mr. Lyons noted yesterday and some of the other people on his panel is that, you know, because of the transitional framework that's in place some of these licences are low power and, at least in the interim period until 2011 or until Industry Canada finalizes its digital allotment plan for HD TV, there's going to be difficulties in certain areas receiving this over‑the‑air.

LISTNUM 1 \l 11936             So, technically, you know, you're going to have trouble in the interim period receiving it over‑the‑air and then ultimately, once it becomes more full power, everyone is going to be in that space.  So, essentially, I'm not exactly certain how that would kick‑start the process even though it's already been kick‑started essentially.

LISTNUM 1 \l 11937             THE CHAIRPERSON:  What about timing?  I mean, presume the Americans are going to be there by 2009, you like everybody else are now under deadlines imposed by us, you're also presumably worried about losing audience to the U.S. signal, et cetera, so you're going to try to be there before 2011 presumably in some key market.

LISTNUM 1 \l 11938             So, to what extent is HDTV going to be the jump‑start or be there ahead of you?  I'm trying to figure out, you know, to what extent their argument, we'll be there across the board, is actually in reality, given the timing, come true?

LISTNUM 1 \l 11939             MR. GOLDSTEIN:  Well, we're already and have been for some time in the two largest English language markets in the country over‑the‑air, Toronto and Vancouver, which covers off a significant portion of the population that HDTV Networks is seeking to serve.

LISTNUM 1 \l 11940             And, you know, yes, we're working on comprehensive plans.  One of the problems we're dealing with at this point is that we are dealing with, you know, a transitional model that Industry Canada has put in place.  Our understanding is, is that come this summer there will be a finalized plan.  Given the time frame between now and then, you're going to want to move to the final, you know, wait for the final situation as opposed to investing in a transitional situation.

LISTNUM 1 \l 11941             So, we intend to come forward, you know, following that, the finalization of that plan with, you know, as required under the policy with a comprehensive plan to meet the roll‑out obligation.

LISTNUM 1 \l 11942             THE CHAIRPERSON:  Now, you object to both effect, that HDTV is asking for a licence without having any obligation for local content, and also to the effect that they're asking for re‑transmission in all three modes, HD, digital and analog.

LISTNUM 1 \l 11943             Of those two, which one ‑‑ and you think it's unfair.  Of those two obligations, the local content, local commitment and the benefit of re‑transmission, which one is more objectionable to you?

LISTNUM 1 \l 11944             If I said to you, we are going to licence them, take your pick, one of these two they're going to lose; which one would you pick?  Which is more significant to you, let's put it that way?

LISTNUM 1 \l 11945             MR. GOLDSTEIN:  I think they're both significant.  You know, as we indicated in our opening statement, no other over‑the‑air broadcaster has ever been licensed without local programming obligations.

LISTNUM 1 \l 11946             And, you know, we also find it somewhat offensive that if you're applying for a service that the whole rationale for it is, is that you're going to jump‑start the HD process and provide HD programming, that you would require analog distribution of that service, because to us that sort of cheapens the experience that you're trying to offer.

LISTNUM 1 \l 11947             Maybe I'll ask Brian to comment on what potentially the impact could be in either situation.

LISTNUM 1 \l 11948             MR. McLUSKEY:  Well, basically you're kind of presenting us with a "Sophie's Choice" and no matter which kid we choose the family's going to be devastated.  That analogy just carries right through.

LISTNUM 1 \l 11949             The fact of the matter is that even if they were to meet local commitments, the system simply can't afford another player, there is already too much fragmentation and we're going to have more failure on our hands.

LISTNUM 1 \l 11950             We've seen TQS, this would just invite more.  There simply isn't enough money there in the advertising base to support it.

LISTNUM 1 \l 11951             THE CHAIRPERSON:  Okay.  Let me ask the question a different way to avoid the "Sophie's Choice" analogy.

LISTNUM 1 \l 11952             Both CanWest, Rogers and you have really called this a super channel, that's what it is, and it is a format that we don't have and a licence that we don't grant in Canada.

LISTNUM 1 \l 11953             If we said, actually the super channel makes sense but you can't treat it like the other over‑the‑air, so, super channel, fine, you can do this, but no re‑transmission because a re‑transmission doesn't fit into it.

LISTNUM 1 \l 11954             I mean, if you want to be a super channel and appeal over‑the‑air, if you can get carriage rights from the BDUs, bully for you, but you're not going to have a mandatory one and, in effect, we create a new category of licences like that, would you see that in the interests of the broadcasting system or not?

LISTNUM 1 \l 11955             MR. GOLDSTEIN:  Quite frankly, with the challenges we face, I don't know that there's the stability in the system to make any conclusive decision about that.  I would certainly want to wait until after the hearings and to see how the conversion to HD TV and the whole world basically, the advertising community, the support of conventional TV unfolds before I'd opine on that.

LISTNUM 1 \l 11956             MR. McLUSKEY:  I think advertising is only one side of it too.  I think Rick wants to comment on what the potential impact may be on a programming expense side as well.

LISTNUM 1 \l 11957             MR. LEWCHUK:  There would be an equal impact from the side of purchasing, acquiring programming, both Canadian programming and foreign programming if there is a super channel model that comes in because they would, in fact, be another purchaser of national rights to programming.

LISTNUM 1 \l 11958             And from what I can tell from their program schedule, they're looking to compete with exactly the same type of both Canadian and acquired programming, and that drives our costs up.

LISTNUM 1 \l 11959             We've seen every new entrant into the over‑the‑air field drive our costs up, even if it is as small a player as Sun TV, it does have an effect on our programming costs.

LISTNUM 1 \l 11960             THE CHAIRPERSON:  Okay.  Thank you.

LISTNUM 1 \l 11961             Do my colleagues have any questions?

LISTNUM 1 \l 11962             Michel?

LISTNUM 1 \l 11963             COMMISSIONER ARPIN:  In your oral presentation you only had one paragraph about YES TV, but I note that you have a fairly extensive submission regarding YES TV and we had the discussion earlier regarding user‑generated content.

LISTNUM 1 \l 11964             Are you making use of user‑generated content in the CTV programming?

LISTNUM 1 \l 11965             MR. LEWCHUK:  Most of our user‑generated content tends to happen on our specialty channels particularly in the youth market with MuchMusic and MTV.  There is more access and we make use of that.

LISTNUM 1 \l 11966             We have also integrated our web component very much on our CTV side with youth‑generated content and a great example of that is Degrassi:  The Next Generation which fits right into that core audience that YES is talking about.  We have had a very substantial web presence with that show since we launched it seven years ago.  That website continues to invite user content.

LISTNUM 1 \l 11967             We just had an interesting small comparison with some user‑generated content with two promotions that ran at the same time; one for the Super Bowl which invited people to upload their game face, the pictures of themselves cheering for the football, and we actually put those pictures of those winners right on television during the Super Bowl.

LISTNUM 1 \l 11968             At the same time we had a promotion called "Degrassify Yourself" which allows people to go on and they can put themselves, their picture with stars from the show.  It was quite pleasant to see that the promotion for Degrassify Yourself had more than 10 times as much uptake as the Super Bowl promotion did.  So people are already getting involved with doing those sorts of things.

LISTNUM 1 \l 11969             So there are those sorts of things that you can do.

LISTNUM 1 \l 11970             COMMISSIONER ARPIN:  What was the quality of the content that you did receive?  Was it sufficient for you to ‑‑ did it meet your needs and could you program a full schedule with user‑generated content?

LISTNUM 1 \l 11971             MR. LEWCHUK:  You could definitely not program a full schedule with the content and even with ‑‑ you know, we were dealing largely with still pictures and there were many even just simple still photos that were not of high enough resolution, high enough quality that we felt comfortable putting on our website let alone on television.  And even the ones we put on television we embellished and enhanced through digital process and put some bells and whistles around them to make them more palatable on television.

LISTNUM 1 \l 11972             COMMISSIONER ARPIN:  Thank you.  Thank you.

LISTNUM 1 \l 11973             THE CHAIRPERSON:  Commissioner Katz.

LISTNUM 1 \l 11974             COMMISSIONER KATZ:  Similar to yesterday I didn't want consultants to get a free ride here.  So Mr. Armstrong, I have got a couple of questions for you on your analysis.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11975             COMMISSIONER KATZ:  On the first page I guess of your analysis, you summarize the sources of revenue that HDTV have suggested will provide them with the revenue sources they are looking for.  And then a little lower down you said:

"The available evidence suggests the approval of HDTV and YES TV applications will not result in a significant increase in television advertising revenues and likely to derive all of its advertising revenue from existing English‑language conventional TV broadcasting services."  (As read)

LISTNUM 1 \l 11976             COMMISSIONER KATZ:  Yet, up above in the five bullets, if I look at those five bullets, the first two are basically generating revenues from existing television stations.  Then the third one is over‑the‑air radio transition and the last two seem to be new revenues into the system.

LISTNUM 1 \l 11977             So can you explain how ‑‑ the evidence suggests something different than your comments saying it's likely that all the revenue will be derived from existing?

LISTNUM 1 \l 11978             MR. ARMSTRONG:  Commissioner, the bullet points are from the HDTV‑N application.

LISTNUM 1 \l 11979             COMMISSIONER KATZ:  Yes.

LISTNUM 1 \l 11980             MR. ARMSTRONG:  That's where they said their sources would be.  When I looked at what happened in local markets where new over‑the‑air televisions had been introduced which I set out in figure 1 on the next page, I tried to see if there was a pattern where a new station was introduced; could we see an increase in revenues that differed from overall trends in the market?  And when I look at that figure I don't see any identifiable pattern.

LISTNUM 1 \l 11981             Then if we look at '99 and 2003 there were new stations introduced in those years and there was an increase in revenue, a really significant increase in revenues in those years in the market in which those stations were introduced.  But there were also significant increases in other markets where there were no stations and there was a good jump in the industry as a whole.

LISTNUM 1 \l 11982             And we know that television increase in advertising revenues tends to come in a clump, at least that has been the pattern over the past 10 years, that there is a structural adjustment.

LISTNUM 1 \l 11983             In '99 and 2003 there is evidence that there was that structural adjustment.  If we look at the other years in which new stations were introduced ‑‑ excuse me, the structural adjustment was '98.

LISTNUM 1 \l 11984             If we look at '99 and 2002 and 2004 and we look at the markets in which new stations were introduced, which are highlighted there, the growth in revenues in that year ‑‑ in fact, in some years it's negative ‑‑ looks like it's tracking with the market in general, the overall television market, which is the last row in that column.  There doesn't seem to be any perceptible bump.

LISTNUM 1 \l 11985             So what I conclude from that is, notwithstanding the claims of new entrants that they will bring new revenues into the market, there is no clear evidence to suggest that that happens.  So my conclusion is then that if the Commission were to licence these television stations they would attract all of their revenues from the existing conventional English‑language television stations as apparently has been the case in the past.

LISTNUM 1 \l 11986             COMMISSIONER KATZ:  So you have invoked a notwithstanding what they say clause.

LISTNUM 1 \l 11987             MR. ARMSTRONG:  Yes.

LISTNUM 1 \l 11988             COMMISSIONER KATZ:  Okay.

LISTNUM 1 \l 11989             Can you just confirm what was said yesterday as well, the growth rates that you have assumed here for the year of your growth from 2009‑2015, I think someone mentioned you used 2.4 percent.  Is that correct?

LISTNUM 1 \l 11990             MR. ARMSTRONG:  I used the ‑‑ yes, 2.2 or 2.4 percent from my study of where I projected the future growth in television advertising revenues.

LISTNUM 1 \l 11991             COMMISSIONER KATZ:  So that future growth was from years 2012 through 2015?

LISTNUM 1 \l 11992             MR. ARMSTRONG:  I used the rate from my study that the CAB filed that was for 2007 to 2011 and I extended it forward to 2015 for this.

LISTNUM 1 \l 11993             COMMISSIONER KATZ:  So the rate between 2007 and 2011 was?

LISTNUM 1 \l 11994             MR. ARMSTRONG:  I will just confirm that for you.

‑‑‑ Pause

LISTNUM 1 \l 11995             MR. ARMSTRONG:  For private English‑language conventional television the growth rate in revenues was 2.2 percent.

LISTNUM 1 \l 11996             COMMISSIONER KATZ:  2.2, okay.

LISTNUM 1 \l 11997             Thank you.  Those are my questions.

LISTNUM 1 \l 11998             THE CHAIRPERSON:  My colleague's question about user‑generated content sparked something in my mind.  You heard before Rogers very eloquently stating the difference between user‑generated content and program TV and suggesting that user‑generated content is very useful to go in a specific niche market, et cetera, but they didn't see a place for it on TV, on regular TV.  He put it in much better words than I can but you heard him.

LISTNUM 1 \l 11999             Do you share that view?

LISTNUM 1 \l 12000             MR. LEWCHUK:  Yes.

LISTNUM 1 \l 12001             THE CHAIRPERSON:  Okay, that's clear enough.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 12002             THE CHAIRPERSON:  Thank you.  Those are all our questions.

LISTNUM 1 \l 12003             MR. GOLDSTEIN:  Thank you.

LISTNUM 1 \l 12004             THE SECRETARY:  I would now invite CHCR Limited to come forward to make their presentation.

‑‑‑ Pause

INTERVENTION

LISTNUM 1 \l 12005             THE SECRETARY:  Appearing for CHCR Limited is Ms Marie Griffiths.

LISTNUM 1 \l 12006             Please introduce your colleague, after which you will have 10 minutes for your presentation.

LISTNUM 1 \l 12007             MS GRIFFITHS:  Yes.  First, I want to advise the Commission that I will be cutting short the written presentation just to make sure that I get everything in.  So there will be some going from one paragraph to another.

LISTNUM 1 \l 12008             Bonjour, mesdames et messieurs.  Good morning, Madam Secretary, Mr. Chairman, Vice‑Chair of the Commission and staff.

LISTNUM 1 \l 12009             I am Marie Depaeris Griffiths, the principal of CHCR Limited, the owner and operator of 105.1 and 106.3 FM in Montreal.

LISTNUM 1 \l 12010             I am joined by Stephen Zolf, partner at Heenan Blaikie and my legal counsel.

LISTNUM 1 \l 12011             We are here today to express our concerns about the application by HDTV Networks.  Our interest in this application is based on our experience as local broadcasters with experience in producing the local television programming for audiences dating back to 1976 on Montreal's first community channel 9, belonging to national cablevision.

LISTNUM 1 \l 12012             In the late 1980s CHCR helped to create Télévision Ethnique du Québec, a third‑language specialty channel.

LISTNUM 1 \l 12013             In 1995 I spearheaded the application for CJMT, an ethnic multicultural over‑the‑air television station.

LISTNUM 1 \l 12014             As we noted in our written comments, we have several principal concerns with respect to HDTV's application.

LISTNUM 1 \l 12015             First, the application does not comply with the Commission's 2007 call for licensing new digital over‑the‑air television stations, nor would the applicant's proposed service meet the policy objectives identified for programming undertakings in the Broadcasting Act.

LISTNUM 1 \l 12016             Second, the applicant's proposal both ignores and distorts the regulatory framework for the licensing and distribution of high‑ definition digital television signals.

LISTNUM 1 \l 12017             Third, if licensed its service would threaten the contributions of existing licensed services that have finally stepped up to the plate to produce high quality content, Canadian HD programming.  It would also threaten the multicultural development of Canadian productions across this country.

LISTNUM 1 \l 12018             First, in the call for applications the Commission required applicants to provide clear indication that there is a demand in the market for the proposed service.  The applicant has to demonstrate the contribution that the proposed service will make to achieving the objectives in the Broadcasting Act, in particular to the production of local and regional programming.

LISTNUM 1 \l 12019             The expected audience of the proposed service, the proposed expenditures and the means by which the applicant will promote the development of Canadian talent including local and regional talent and an indication as to the amount of high definition programming and details with respect to local, regional, Canadian and foreign programming, we submit that the applicant has failed on all counts.

LISTNUM 1 \l 12020             There is no evidence of demand for its proposal.  It has not addressed the potential negative impact on existing over‑the‑air broadcasters.  There is no meaningful commitment to priority programming.  There is a complete absence of local programming.

LISTNUM 1 \l 12021             The last deficiency was striking to us given CHCR's roots in establishing over‑the‑air television and radio stations in the local market.

LISTNUM 1 \l 12022             The applicant claims that it will not be seeking local advertising but rather will limit itself to national advertising.  It describes itself as no threat to local over‑the‑air stations.  Effectively, this has allowed the applicant to avoid expending significant resources for new, original, local programming which are the core responsibilities of an over‑the‑air station, particularly a network.  Yet, at the same time, the applicant is seeking the benefits of priority carriage and access.  This fundamental benefit is rooted in the Act.

LISTNUM 1 \l 12023             As the Commission noted in Public Notice 2002‑32, requiring BDUs to distribute digital signals, digital television services is wholly consistent with the objective of section 3(1)(t)(i) of the Act which provides that BDUs should give priority to Canadian programming services and in particular to the carriage of local stations.

LISTNUM 1 \l 12024             The applicant yesterday explained that they are not seeking the quid pro quo of local programming, namely the right to sell local advertising.  But with all due respect, we submit that this misses the point.  The Commission's June 2007 call clearly stated the criteria for licensing of new over‑the‑air digital high‑definition services.  It required applicants to address the contributions that the proposed service would make to achieving the objectives in the Act, and particularly with respect to the production of local and regional programming.

LISTNUM 1 \l 12025             Even apart from the local issue, the entry of a network in eight major urban markets will surely come out of the existing advertising pie.  Nor has the applicant provided any meaningful evidence of demand for its service.  The applicant described yesterday its research as a bottom‑up approach in which it explored the general idea for a TV network in the works.  But without specifics on its proposed programming schedule, experience tells us that Canadian viewers will only embrace a new service if the content is of high quality.

LISTNUM 1 \l 12026             It is quality content, not technology that drives demand.  It is not enough to offer low‑quality content in HD particularly when much of the content is merely upconverted from standard definition format.

LISTNUM 1 \l 12027             We have already identified our concerns about the applicant's proposed programming in our written submission.  For example, the applicant's proposed news format which involves user‑generated content and internet‑based video services is much more appropriate for an internet television station or a Category 2 digital specialty service.  It is not appropriate for a general interest free television from coast to coast as a network.

LISTNUM 1 \l 12028             In summary, the applicant has not clearly explained its plans, how it will add to diversity in the system or how it can coexist with other broadcasters.  Yet, what is clear is that it will introduce new risks into an already precarious environment.

LISTNUM 1 \l 12029             Second, a significant amount of the applicant's proposed service will be repurposed programming upconverted into HD.  Not only that, the applicant is seeking mandatory distribution of its service on the analog basic service of BDUs.  This means that a significant amount of its programming will be downconverted from 480i standard definition format.

LISTNUM 1 \l 12030             CHCR submits that nothing in the digital migration framework or in any other CRTC policy mandates the distribution of a new entrant's channels on analog basic.  The applicant has not applied for analog transmitters nor is it clear in any case how analog carriage of an HD service will contribute to the overall objective of making the transition to a fully digital broadcasting environment.

LISTNUM 1 \l 12031             Several intervenors have already pointed out that now that the Commission has set August 31st, 2011 as the shutdown date for existing analog transmitters it will only consider applications for new over‑the‑air services using digital broadcast facilities.

LISTNUM 1 \l 12032             In our submission licensing the applicant's service as proposed risks driving a truck through a nuanced and sophisticated DTV migration policy.  This policy was formulated to balance the interests of Canadian viewers, existing analog over‑the‑air services and BDUs.  The policy provides interim support measures to those services that have had longstanding distribution rights on the analog platform.

LISTNUM 1 \l 12033             The applicant is effectively clothing itself as a transitional analog service even though it is applying for a licence for the first time.  As a prospective new digital over‑the‑air entrant it cannot, by definition, be in transition so it should be able to benefit from the interim distribution framework.

LISTNUM 1 \l 12034             Our third point is that granting the application would effectively jeopardize the rollout of HD programming currently underway among licensed Canadian services.  This is taking place in a challenging environment.  There are many threats whether from the internet, broadcasting on cell phones and other substitutes or from digital piracy.

LISTNUM 1 \l 12035             The applicant claims that it understands that there are business risks facing a new entrant to the broadcasting sector, but what about the impact on existing services?  Among the risks are the potential threat to the plans of existing stations to ramp‑up new Canadian high‑definition programs.

LISTNUM 1 \l 12036             There will also be downward pressure on ad rates from the entry of another over‑the‑air service which will permit advertising agencies to play each broadcaster off again.  This will threaten the overall contributions made by all services.

LISTNUM 1 \l 12037             Also, given our experience as ethnic broadcasters, this service would setback dramatically the current inroads we have made with national advertising agencies who are still reluctant to try something new.

LISTNUM 1 \l 12038             We believe that the Canadian broadcasting industry is currently in a delicate and precarious state.  Yet, it is moving ahead sure and steady.  Therefore, it would be prudent to let existing licensees complete their transition to HD rather than licence a new applicant that is offering no local programming commitments and no apparent programming diversity for new and original content.

LISTNUM 1 \l 12039             CHCR submits that the recent wave of consolidation has now set the stage for the existing players to devote greater resources to programming with more local reflection.  The Commission will of course have to remain vigilant to ensure that broadcasters make the necessary contributions to the benefit of the entire system.  The benefits of these mergers need to be realized by all elements of the Canadian broadcasting system including viewers and independent producers.

LISTNUM 1 \l 12040             Given the glaring deficiencies in this application we submit that it would be more appropriate to treat the applicant's proposed service as a discretionary service rather than it being considered as a proposal for a new, over‑the‑air service with mandatory carriage across Canada.

LISTNUM 1 \l 12041             The applicant even conceded yesterday that his proposal had many similarities to a digital Category 2 service even though it clearly seeks the distribution and programming benefits that come with a general interest over‑the‑air licence.

LISTNUM 1 \l 12042             In summary, the applicant has not offered the evidence necessary to assess the actual impact of what would be a destabilizing service both from a programming standpoint and from a distribution standpoint.

LISTNUM 1 \l 12043             In conclusion, and with all due respect, this is neither the time nor the circumstance to roll the dice with the Canadian broadcasting system.  I appreciate this opportunity to raise these concerns and I would welcome any questions from the Commission.

LISTNUM 1 \l 12044             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 12045             Earlier in your presentation you made the following statement, and I wrote it down, that this:

"...licensing HDTV would threaten the multicultural production in HD across the country."  (As read)

LISTNUM 1 \l 12046             THE CHAIRPERSON:  How did you get there?  I didn't hear anything in HDTV speaking about multicultural production.  Why do you feel licensing this network would threaten multicultural production in HD across the country?

LISTNUM 1 \l 12047             MS GRIFFITHS:  Chairman von Finckenstein, one of the problems that I have been having since I did hear the applicants is I am trying to sort of nail down what exactly the application is.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 12048             MS GRIFFITHS:  And at one point I was very surprised to hear that they have looked into airing multicultural programming, third‑language programming.  My good friend, Shan, we discussed it yesterday and the Asian/Chinese programming from Fairchild and also some Latino programming.  But these are foreign programs, probably great quality productions.  Our countries of origin can produce quality programming but I fail to see what benefit it would give the Canadian broadcast system.

LISTNUM 1 \l 12049             So you know we throw in a bit of this and a bit of that, but I have some concerns how much ethnic will there be.  Do they plan to do any local ethnic programming?  In the case of Quebec it is very important that ethnic is reflected with the French language.

LISTNUM 1 \l 12050             So there is a lot of questions that are unanswered that are at the basis of some of our concerns.

LISTNUM 1 \l 12051             THE CHAIRPERSON:  I see.  Okay, thank you.

LISTNUM 1 \l 12052             Michel.

LISTNUM 1 \l 12053             COMMISSIONER ARPIN:  The only thing that your oral presentation doesn't contain in your written submission is that you have yourself contemplated applying for an HDTV licence to serve the Montreal market and for business reasons you have passed because you needed to put all your resources behind launching your second FM station, at least that's what is stated here.

LISTNUM 1 \l 12054             Now, coming back to the question earlier or the first question that the Chairman did ask to you and the reference that you made to some ethnic programming from other sources, is your basic concern the service that HDTV is contemplating for the Quebec market, particularly for Montreal and the consequence it will have on your own plan to eventually apply for an ethnic HD service?

LISTNUM 1 \l 12055             MS GRIFFITHS:  Definitely.  We had our own plans on the drawing board and I am not here to whine about that.  You know, I didn't make it to the gate on time and that was brought up.

LISTNUM 1 \l 12056             But yes, my concerns are that this is not a complete ‑‑ what we consider a complete, you know, high end network licence; what it means for us anyway.  And changing it now at this point in time raises concerns and creates opportunities that could end up being so negative and detrimental that it would slow down the development of what we in Quebec see as an opportunity to create programming as the French production section does.

LISTNUM 1 \l 12057             French original productions are very popular in Quebec.  Anyone who knows our industry ‑‑ the English part of the industry scratches its head and go, "How do you do it?"  Well, we did it out of necessity because we didn't have the neighbour that gave us, right, the big choice of the American English‑language programs.  Well, the ethnics across this country have that same opportunity.

LISTNUM 1 \l 12058             Et pour le développer des émissions avec le contenu canadien qui reflètent ce qui se passe dans ce pays d'une région à l'autre.  Et pour le faire, ça nous prend une place à nous.  Donc, la raison, qu'on a avancé avec une demande pour HDTV pour Montréal est ‑‑ in our vision of an HDTV network it is to drive.  It should be the thrust of getting their HDTV sets in your house, which meant we don't want to be carried on analog.  And we knew that the ethnics ‑‑ we come from a specialty service, Vice‑Chair Arpin.  Vous le connaissez.  Mon père a fait ça 40 ans.

LISTNUM 1 \l 12059             26,000 members were paying to get a special service.  The content was there.  It was relevant.  It was high quality.

LISTNUM 1 \l 12060             And there is a chance now for ethnic programming across Canada to develop like French programming does in Quebec, which would give us original creative high‑quality shows and series and movies.

LISTNUM 1 \l 12061             Well, if you licence this applicant who will be in Quebec with certain third‑language programming that is foreign; as they stated yesterday, with three partners that they have mentioned, no local productions, no reflection of French at that point since there is no local or regional, I am sorry.  I know their application is different.  That's what they said. But to me different means better and it's not better.

LISTNUM 1 \l 12062             COMMISSIONER ARPIN:  Thank you very much.

LISTNUM 1 \l 12063             THE CHAIRPERSON:  Thank you very much.  Those are all our questions.

LISTNUM 1 \l 12064             MS GRIFFITHS:  Thank you.

LISTNUM 1 \l 12065             THE CHAIRPERSON:  Madam Secretary.

LISTNUM 1 \l 12066             THE SECRETARY:  I would now invite Alliance of Canadian Cinema Television and Radio Artists to come forward if they are in the room.

‑‑‑ Pause

LISTNUM 1 \l 12067             THE SECRETARY:  I would now invite Canadian Film and Television Production Association to come forward if they are in the room.

LISTNUM 1 \l 12068             And I would now invite Bell ExpressVu to come forward if they are in the room.

LISTNUM 1 \l 12069             THE CHAIRPERSON:  Well, I guess they are not in the room.  We are obviously ahead of schedule.  So let's have an early lunch and maybe you can contact the parties and we will start in an hour, okay?

LISTNUM 1 \l 12070             Thank you.

‑‑‑ Upon recessing at 1127 / Suspension à 1127

‑‑‑ Upon resuming at 1129 / Reprise à 1129

LISTNUM 1 \l 12071             THE CHAIRPERSON:  Sometimes we are early.  We are ahead of schedule so you are on right away, out of turn.  But thank you very much for coming.

LISTNUM 1 \l 12072             Madam Secretary.

LISTNUM 1 \l 12073             THE SECRETARY:  We will now proceed with Bell ExpressVu.

LISTNUM 1 \l 12074             Appearing for ExpressVu is Mr. Chris Frank.

LISTNUM 1 \l 12075             Please introduce your colleagues, after which you will have 10 minutes for your presentation.  Mr. Frank.

INTERVENTION

LISTNUM 1 \l 12076             MR. FRANK:  Thank you very much.

LISTNUM 1 \l 12077             Good morning, Mr. Chair and Commissioners.  My name is Chris Frank and I am Vice President of Programming for the Bell Video Group, which includes Bell ExpressVu.

LISTNUM 1 \l 12078             With me today is Susie Lindsay, on my left, Regulatory Counsel for Bell Canada and Counsel to the Bell Video Group this morning; and Paul Armstrong, Director of Regulatory Affairs for the Bell Video Group.

LISTNUM 1 \l 12079             We thank you for this opportunity to share our thoughts on the two applications before you today.  We also apologize for holding you up for the last few minutes.

LISTNUM 1 \l 12080             Bell does not oppose the granting of licences to HDTV Networks per se, but does object to the proposed carriage terms in which the application rests.

LISTNUM 1 \l 12081             HD Networks intends to focus almost exclusively on national programming with regional inputs from eight cities.  While it intends to broadcast 100 per cent HD programming, HDTV Networks requests that the Commission direct BDUs to distribute its signals in both standard definition and HD digital formats.  As well, with specific regard to ExpressVu, HD Networks asks the Commission to, I quote:

"Ensure distribution of HD Networks service in standard definition on Nimiq 2(sic)."  (As read)

LISTNUM 1 \l 12082             "On Nimiq 1", excuse me.  Freudian slip.

LISTNUM 1 \l 12083             Bell notes that, as the Chair pointed out yesterday, the application does not fit into an established licensing category.  Like specialty services, they wish to compete only for national advertising.

LISTNUM 1 \l 12084             Yesterday, in the context of explaining their lack of local programming commitments, HDTV stated that they see themselves as similar to a specialty channel.  Its plans to operate eight separate transmitters appears calculated to ensure compulsory carriage as part of cable operators' basic service and to gain equitable treatment with established national station groups for carriage of multiple signals on DTH distribution platforms.

LISTNUM 1 \l 12085             Moreover, its proposal to offer a down converted SD service calls into question its commitment to 100 per cent HD network and suggests that its actual intent is to gain access to Canadian households as rapidly as possible through basic cable and DTH.

LISTNUM 1 \l 12086             ExpressVu has long supported the licensing of more and varied services and is a strong proponent of HD.  We strive to be Canada's leading leader in providing our customers a comprehensive set of HD programming.  To that end, ExpressVu would give reasonable commercial consideration for carriage at its discretion of this service.

LISTNUM 1 \l 12087             Essentially, if licensed, HD networks should be granted the discretionary access privilege on DTH, the same as Category 2 digital specialty services.

LISTNUM 1 \l 12088             Therefore, ExpressVu opposes granting HD Networks must carry status on DTH.  Currently only CBC, Radio‑Canada, CTV and TVA enjoy must carry status under section 37(b) of the regulations.  And there is nothing in this application that would justify giving the applicant greater DTH access rights than those established for other conventional TV services.

LISTNUM 1 \l 12089             ExpressVu questions the need for it to distribute more than one same time zone feed of HD Networks, inasmuch as by the applicant's own admission it is focused almost exclusively on national audiences.  Individual feeds would appear to have little or no unique local content.

LISTNUM 1 \l 12090             Accordingly, the carriage of duplicate feeds would waste scarce satellite resources and would represent a roadblock for other valued HD services seeking distribution.

LISTNUM 1 \l 12091             Further, ExpressVu opposes any compulsory order to carry a down converted SD version of the service.  This application is, after all, predicated on being HD‑specific.  The special provisions established for analog services to transition to digital simply do not apply.  There is no justification for compulsory carriage of the SD signal.  If the signal is approved, then carriage of a down converted version should be at the distributor's discretion, as is the case for Category 2 digital services.

LISTNUM 1 \l 12092             Bell also opposes HD Networks request that the Commission direct ExpressVu to carry the service on a particular satellite of the applicant's choosing.

LISTNUM 1 \l 12093             In renewing the licences of ExpressVu and StarChoice in 2004 the Commission considered and denied similar requests in Broadcast Public Notice CRTC‑2004‑19.  In that Public Notice the Commission stated that, and I quote:

"As to the choice of satellite on which the signals of particular television stations are distributed, the Commission considers that this decision is best left to the DTH licensees."  (As read)

LISTNUM 1 \l 12094             ExpressVu finds no compelling evidence in this application that Commission's prior determination should be reversed.  Indeed, bandwidth is tighter than ever due to the accelerating conversion of HD of existing services and the need to carry a full range of standard definition services.

LISTNUM 1 \l 12095             If the Commission did set the precedent of dictating which satellite were to be used by ExpressVu for which service, it would be inundated with requests for similar treatment by other services.  ExpressVu would lose its ability to plan its satellite use in order to offer maximum value to its subscriber base.

LISTNUM 1 \l 12096             Therefore, should the Commission license HD Networks and should ExpressVu elect to carry its HD feed, then ExpressVu would select where and how that service would be distributed.  All things being equal, it would likely be carried on a satellite located 82 degrees west, where all ‑‑ I repeat all ExpressVu's HD services are currently located.  If ExpressVu elected to carry a down converted version of an HD Networks feed, then ExpressVu would decide at which orbital spot to locate the service.

LISTNUM 1 \l 12097             The second application before the Commission is from YES TV.  For the same reasons I cited earlier, Bell opposes granting YES TV must carry status on DTH.  If the Commission elects to license this service, Bell suggests that it be granted the same access privileges as a Category 2 specialty service.

LISTNUM 1 \l 12098             This concludes our opening remarks.  We thank you for your attention and welcome any questions you might have of us.

LISTNUM 1 \l 12099             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 12100             I understand your reluctance to being told on which satellite to put a specific service, et cetera. but maybe there is a bit too much inside baseball here for me.

LISTNUM 1 \l 12101             Can you explain to me what is so special about Nimiq 1 and why HDTV wants to be on that and what would be the difference of putting it on that satellite as opposed to the one which you mentioned at 82 degrees WL?

LISTNUM 1 \l 12102             MR. FRANK:  Absolutely.

LISTNUM 1 \l 12103             First of all, we should probably get away from designating satellites as 1, 2 or 3.  What we are really referring to here are orbital locations.

LISTNUM 1 \l 12104             91 degrees west longitude is where Nimiq 1 currently resides.  It won't be there forever because satellites have a shelf life of 12 to 15 years, if we are lucky.  So 91 degrees is where our service started and it is chockablock at the present time with standard definition services.  All 1.8 million plus of our customers can see 91 degrees.

LISTNUM 1 \l 12105             At 82 degrees west longitude, where Nimiq 2 is currently located but won't be located there for too much longer because we will be launching a new satellite, hopefully this summer, into 82 degrees which means that Nimiq 2 will probably be redeployed.

LISTNUM 1 \l 12106             But the point being, at 82 degrees west longitude is where we locate all of our high definition services and the new satellite that is going into 82 degrees west longitude this summer is specifically designed, all the transponders are high‑power, which means we can provide greater throughput, in other words carry more signals, and provide greater quality of service because all transponders are high‑powered.

LISTNUM 1 \l 12107             So 82, in a nutshell, is for high definition and 91 degrees is where all of our existing standard ‑‑ excuse me, the lions' share of our existing standard definition services are located.

LISTNUM 1 \l 12108             THE CHAIRPERSON:  I gather fewer people get the signal from 82 than from 91?

LISTNUM 1 \l 12109             MR. FRANK:  Yes, that's correct.  I'm sorry, I left that off.

LISTNUM 1 \l 12110             But that is accelerating and we hope that's going to be like a hockey stick curve, Mr. Chair, as HD becomes more and more popular and we get more and more services.  It's kind of like the cable guys going from analog to digital.  When you have a compelling customer proposition at 82 people will flock there an increasingly our customer proposition at 82 is getting richer and richer.

LISTNUM 1 \l 12111             THE CHAIRPERSON:  But if we acceded to HDTV's request, we would be effectively kicking somebody off the satellite, if I understand you Correctly.

LISTNUM 1 \l 12112             MR. FRANK:  We would have to make adjustments, yes.

LISTNUM 1 \l 12113             THE CHAIRPERSON:  Okay.  Thank you.

LISTNUM 1 \l 12114             Len...?

LISTNUM 1 \l 12115             COMMISSIONER KATZ:  Thank you, Mr. Chairman.

LISTNUM 1 \l 12116             Back to the notion of a network.  In your submission on January 24th in paragraph 3 you indicate that:

"It is the company's view that HD Networks has not presented an application for a national conventional network." (As read)

LISTNUM 1 \l 12117             Can you, in your terminology, explain to me what a national conventional network is and who is a national conventional network operator today in Canada?

LISTNUM 1 \l 12118             MR. FRANK:  I believe in regulatory terms in the context of our licence and our operation, the national networks that we carry are CBC, Radio‑Canada, CTV and TVA, so four in number and they have must carry status on our service.

LISTNUM 1 \l 12119             COMMISSIONER KATZ:  And they are the only ones?

LISTNUM 1 \l 12120             MR. FRANK:  Yes, sir.

LISTNUM 1 \l 12121             COMMISSIONER KATZ:  Okay.  All right.

LISTNUM 1 \l 12122             Next question.  You say in your submission this morning in paragraph 10:

"Should the Commission license HDTV Networks and should ExpressVu elect to carry this HD feed..."  (As read)

LISTNUM 1 \l 12123             Can you explain to us what thought process you go through in deciding who to carry and not to Kerry?

LISTNUM 1 \l 12124             MR. FRANK:  Certainly.

LISTNUM 1 \l 12125             Our initial predilection would be to carry all quality services who come to us asking for carriage, but because DTH does have bandwidth limitations there are only ‑‑ physical science only supports so many transponders and so many signals in the sky and satellites are very expensive.  We don't have ‑‑ and we can't adjust quickly as terrestrial distribution undertakings can.  We are bandwidth limited.

LISTNUM 1 \l 12126             So when we look at a new service for distribution, we are focused almost entirely on the programming that that service offers.  We are looking for programming that will add to our customers' choice, broaden the depth of programming and enrich our customer proposition.

LISTNUM 1 \l 12127             COMMISSIONER KATZ:  It's purely an analysis done internally by Bell?  There is, I guess, no opportunity for programmers to negotiate anything, you decide whether you will or will not carry him based on what you just enunciated?

LISTNUM 1 \l 12128             MR. FRANK:  I heard testimony this morning about distributors ‑‑ excuse me, service providers having difficulty getting meetings, getting their propositions considered.

LISTNUM 1 \l 12129             To the best of my knowledge, we have never turned down an opportunity to discuss with a potential service provider the attributes of his or her service.

LISTNUM 1 \l 12130             I note for the record that neither of the applicants in front of you today approached us to talk about what they might be offering us in terms of new and enriched programming.

LISTNUM 1 \l 12131             COMMISSIONER KATZ:  I can only speak from experience that the CRTC have licensed an awful lot of Cat. 2s and an awful lot of them aren't on the air.  So you sit back and say "Someone has made an investment, got an idea, there is an entrepreneur out there, they have sought a licence, they have incurred costs, they have come to the CRTC and we have licensed it, and yet it is laying their dormant.  In some cases they are reapplying for extensions as well.  It sort of behooves us to sort of try and understand whether the vast majority of these ‑‑ and it is probably in the 75 to 80% range that never see the light of day and are just doing it on a whim and leaving or whether they are just having trouble getting carriage.

LISTNUM 1 \l 12132             MR. FRANK:  Well, if we go back in history, Commissioner Katz, to 2001 when the first wave of Category 1 and Category 2 services were introduced into the marketplace, I think history tells us that ExpressVu was a leader in the distribution of services.  We had all of the Category 1 services signed up, affiliated first.

LISTNUM 1 \l 12133             I believe ‑‑ I stand to be corrected on this, my friends at Rogers may wish to argue this point ‑‑ but I believe we launched the most Category 2 services of any distributor.  If we weren't the most, we were only one or two services behind.  Since then we have added Category 2 services as capacity permits.

LISTNUM 1 \l 12134             I would underscore in that process the need for us at this point to have a full array of standard definition services and also high definition services, in some cases dual illuminating the same service in high and standard definition.

LISTNUM 1 \l 12135             So the point I'm making is, we have a capacity challenge and we are doing the best we can with the bandwidth we have.

LISTNUM 1 \l 12136             The question you asked me initially was:  How do you choose a new service?  Well, we are looking for new and different and quality programming at an affordable price.

LISTNUM 1 \l 12137             COMMISSIONER KATZ:  The last question I have is:  You mentioned that the satellite at 91 degrees WL has a reach in the 90s and you said the 82 degrees is a hockey stick and it is moving up.  What is it at today in terms of reach?

LISTNUM 1 \l 12138             MR. FRANK:  I would be happy to supply that to you within the next 24 hours in a confidential undertaking.  We don't release that figure typically, but happy to share it with the Commission.

LISTNUM 1 \l 12139             MR. ARMSTRONG:  That information is filed in confidence in the context of the BDU regs proceeding in our August answers to the Commission's questions on HD, providing in confidence the proportion of our subscribers that have access to 82.

LISTNUM 1 \l 12140             COMMISSIONER KATZ:  Can we get it on the record for this proceeding as well?  Could you just file in confidence?

LISTNUM 1 \l 12141             MR. FRANK:  Absolutely.

LISTNUM 1 \l 12142             MR. ARMSTRONG:  Of course.

LISTNUM 1 \l 12143             COMMISSIONER KATZ:  All right.  Thank you.

LISTNUM 1 \l 12144             MR. FRANK:  We will send it to you as quickly as we can.

LISTNUM 1 \l 12145             COMMISSIONER KATZ:  Thank you.

LISTNUM 1 \l 12146             That are my questions.

LISTNUM 1 \l 12147             THE CHAIRPERSON:  Okay, thank you very much.  We appreciate you coming.

LISTNUM 1 \l 12148             MR. FRANK:  Thank you very much.

LISTNUM 1 \l 12149             THE CHAIRPERSON:  Madam Secretary, do we have another intervenor or do we break for lunch?

LISTNUM 1 \l 12150             THE SECRETARY:  I would now invite the Canadian Film and Television Production Association to come forward.

‑‑‑ Pause

LISTNUM 1 \l 12151             THE SECRETARY:  Appearing for the CFTPA is Mr. Guy Mayson.

LISTNUM 1 \l 12152             Please introduce your colleagues after which you will have 10 minutes for your presentation.

INTERVENTION

LISTNUM 1 \l 12153             MR. MAYSON:  Mr. Chair, Vice Chairs, CRTC staff, my name is Guy Mason and I am the President and CEO of the Canadian Film and Television Production Association.  With me today are two prominent Canadian producers.