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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:
Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /
Révision des cadres de réglementation des entreprises de
distribution de radiodiffusion et des services de
programmation facultatifs
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)
April 14, 2008 Le
14 avril 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
Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /
Révision des cadres de réglementation des entreprises de
distribution de radiodiffusion et des services de
programmation facultatifs
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Michel Arpin Commissioner
/ Conseiller
Leonard Katz Commissioner
/ Conseiller
Rita Cugini Commissioner
/ Conseillère
Michel Morin Commissioner
/ Conseiller
Ronald Williams Commissioner
/ Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Chantal Boulet Secretary
/ Secretaire
Cynthia Stockley Hearing Manager /
Gérante
de l'audience
Martine Vallée Director,
English-Language
Pay,
Specialty TV and
Social
Policy / Directrice,
TV
payante et spécialisée
de
langue française
Annie Laflamme Director,
French Language
TV
Policy and Applications/
Directrice,
Politiques et
demandes
télévision langue
française
Shari Fisher Legal
Counsel /
Raj Shoan Conseillers
juridiques
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)
April 14, 2008 Le
14 avril 2008
- iv -
TABLE
DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
Cogeco Câble 933
/ 5236
Pelmorex Communications Inc. 1010 / 5653
Score Media Inc. 1094 / 6113
Canadian Media Guild 1130 / 6315
Coalition of Internet Service Providers 1150 / 6429
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon
commencing on Monday, April 14, 2008 at 0900 /
L'audience
débute le lundi 14 avril 2008 à 0900
5230 THE
CHAIRPERSON: Good morning.
5231 Madam Secretary,
whom do we have today?
5232 LA
SECRÉTAIRE: Merci, Monsieur le
Président.
5233 Bonjour à tous.
5234 Nous procéderons
ce matin avec la présentation de Cogeco Câble. Monsieur Louis Audet va nous
présenter ses collègues, après quoi vous aurez 15 minutes pour votre
présentation.
5235 Monsieur Audet.
PRÉSENTATION / PRESENTATION
5236 M. AUDET : Merci, Madame.
5237 Cette présentation
sera livrée à la fois en français et en anglais.
5238 This presentation will
be delivered In French and in English.
5239 Monsieur le
Président et Conseillers, bonjour.
5240 Merci de nous
donner l'occasion de vous donner le point de vue de COGECO Câble à l'occasion
de cette importante audience sur le système de distribution.
5241 Mon nom est Louis
Audet, je suis le président et chef de la direction de l'entreprise.
5242 Maître Yves
Mayrand, vice‑président affaires corporatives est assis à ma droite et
maître Lori Assheton‑Smith, une avocate en droit des communications bien
connue du Conseil et qui nous a aidés dans la préparation de nos mémoires, est
assise à ma gauche.
5243 Nous allons
parcourir, au cours des 15 prochaines minutes, les questions auxquelles vous
nous avez demandé de répondre dans notre présentation.
5244 Il va sans dire
que nos mémoires comportent un exposé à la fois clair et plus détaillé de nos
points de vue sur ces questions. Donc il est facile de s'y référer.
5245 This proceeding,
as we understand it, is about change, change from prescriptive regulation to greater
reliance on market forces, change from ex ante protection to exposed
remediation on actual as opposed to potential problems, change from empowerment
of a few large integrated broadcasters to empowerment of program end users,
change from more to less regulatory arbitrage and cross‑subsidization for
the benefit of selected players and their shareholders.
5246 Some of the
parties appearing before you are trying to turn the objectives of this
proceeding into the exact opposite.
Please do not allow the thrust of this proceeding to turn into the
preservation of the status quo with a few cosmetic touch‑ups or, worse
even, an exercise in new or more prescriptive regulation.
5247 Cogeco Cable is
routinely lumped together with other large integrated Canadian BDUs for
regulatory purposes. I should point out
from the outset a few key differences.
5248 First, we are pure
cable telecommunications company with absolutely no ownership or financial
involvement in any specialty program service or any other competing content
distribution technology such as direct to home satellite or such as cellular
phone.
5249 We serve only
parts of two provinces, namely Ontario and Quebec. We have a non‑dominant position in
these broadcasting distribution markets and lastly we compete head to head with
larger integrated BDUs as well as incumbent telephone companies for customers,
human resources, capital and content.
5250 Our success
depends on delighting our customers every day of the year, and since our shares
are listed on the Toronto Stock Exchange, we must publicly report to our
shareholders every quarter to share our results and receive reactions and just
listen in to our quarterly conference calls with analysts and see that any
characterization of our business as a cozy monopoly or an oligopoly is utterly
disingenuous.
5251 Il y a bientôt
deux ans, nous avons fait l'acquisition d'une entreprise de télécommunications
par câble au Portugal et là aussi, tout comme au Canada, nous n'avons pas de
position dominante et nous sommes en concurrence féroce avec les grandes
entreprises établies, tout comme au Canada également.
5252 Ceci nous permet
de comparer les cadres réglementaires des deux côtés de l'Atlantique. En Europe, on préfère nettement se fier aux
forces du marché lorsqu'il est question de communications électroniques, y
inclus la câblodistribution.
5253 Les services
portugais sont distribués tout aussi bien par tous les distributeurs, sans
réglementation détaillée a priori.
5254 Je vais maintenant
passer la parole à mon collègue Yves Mayrand qui va vous parler des principes
directeurs qui nous apparaissent importants.
5255 Yves.
5256 Me MAYRAND : Merci Louis.
5257 We have put
forward for your consideration a balanced, fair, transparent and effective
updated framework based on eight fundamental principles.
5258 First, a
preponderance of Canadian services.
5259 Second, a standard
minimum basic service with a buy‑through requirement.
5260 Third, the
continued carriage of minority language services.
5261 Four, the
maintenance of a distinct Canadian rights market.
5262 Five, continued
financial contributions to Canadian programming.
5263 Six, a stronger
undue preference rule, both for BDUs and for discretionary services.
5264 Seven, improved
reporting and disclosure by licensees, particularly where market power and
related party transactions are involved.
5265 And eight, a more
effective, transparent and fair dispute resolution process.
5266 Notre proposition
de cadre de réglementation comporte également une seule classe d'EDR assujetties
aux licences avec le même ensemble de règles communes, quelle que soit la
technologie de distribution utilisée.
5267 Toutes les autres
EDR seraient exemptées de licence au moyen d'une seule ordonnance d'exemption.
5268 Dans notre premier
mémoire, nous avons produit en annexe un modèle de règlement qui montre
précisément comment le nouveau cadre de réglementation peut être mis en
place. Notre modèle démontre qu'il est
possible d'alléger le règlement actuel de manière importante sans compromettre
aucun des principes fondamentaux.
5269 We fully support a
requirement that BDU customers receive a preponderance of Canadian
services. While we do not see the need
for adding a further preponderance test for services offered to but not
actually received by the customer, we are not opposed to this proposal.
5270 We do, however,
strongly object to the notion that services carried on the basic tier should be
excluded from the preponderance calculation.
5271 We also disagree
with a proposal that each package should have a preponderance of Canadian
services. These proposals would only
serve to unduly restrict customer choice.
5272 We also fully
support the maintenance of a basic tier with a standard minimum set of services
comprising that tier irrespective of the distribution technology used by the
BDU. However, we strongly disagree with
the idea that the basic tier should be limited to Canadian services only,
whether in analog or digital.
5273 The idea of an all‑Canadian
services basic tier was floated around more than 30 years ago, before the
adoption of the first distribution regulations.
It was never implemented by the Commission or its predecessors in the
successive versions of the regulations.
The reason is very simple. Basic
service customers in Canada have always had U.S. network signals in their basic
service package since the first beginnings of cable in 1949. Canadians have grown up with these signals,
and if we try to take them away we will likely face the worst consumer revolt
in the Canadian broadcasting system's history.
5274 If the Commission
is at all serious about reliance on market forces and recognizing the autonomy
of consumers, then BDUs must be allowed to compete on the size, service
diversity and pricing of the basic tier.
The only thing you need to ensure, in our view, is that all licensed
BDUs carry the same minimum set of mandatory Canadian television services
including 9(1)(h) services.
5275 In our written
submissions we advocated for the elimination of all existing access rules. Having listened to the discussions over the
past week, we remain of the view that there should be no guaranteed access for
pay and specialty services other than 9(1)(h) services, of course. We note in this regard that Canada appears to
be the only country in the world that mandates access for discretionary
services. In light of the market
incentives to carry as many services as possible, the access rules clearly go
well beyond what is required to achieve the objectives of the Broadcasting Act.
5276 Category 2
services, for example, are continuing to receive carriage and their businesses
have grown without the benefit of access rules applicable to analog and
Category 1 services.
5277 Toutefois, si le
Conseil se préoccupe du traitement des services indépendants ou de la
possibilité de transactions non à distance par les EDR qui ont des services de
programmation apparentés, nous vous représentons que ces préoccupations seront
mieux gérées au moyen d'une application rigoureuse des règles sur les
préférences injustifiées et, lorsque nécessaire, d'une ordonnance de
distribution sous l'article 9.1.h.
5278 Bien que nous ne
voyions pas la nécessité d'avoir des mesures de transition, si le Conseil se
préoccupe de l'incidence du retrait immédiat des règles d'accès, nous sommes
disposés à appuyer un modèle qui prévoirait que les droits d'accès des services
analogiques et de catégorie 1 actuels seraient préservés sur toutes les EDR
titulaires de licences jusqu'au 31 août 2011.
5279 With respect to
the issue of genre protection, we believe that the Commission should eliminate
genre exclusivity for all Canadian discretionary services. The current system of protected formats is
not sustainable. It has also clearly
outlived its stated purpose, which was the successful deployment of Canadian
discretionary services.
5280 Using broader
categories would not change that basic reality and would only serve to
perpetuate, in our view, unnecessary regulatory protection for large integrated
Canadian broadcasters and their shareholders.
What is truly important for the Canadian broadcasting system is the
preservation of a distinct Canadian market for program rights. Non‑Canadian programming services
should be allowed for distribution by Canadian BDUs on the condition that they
not acquire or hold exclusive rights for the broadcasting distribution of
programs in Canada.
5281 On the question of
new advertising revenue opportunities, we believe that BDUs should have the
flexibility to insert advertising on the VOD platform and on the avails of U.S.
specialty services. While the ability to
insert targeted advertising on linear channels is still a ways off, we think
this technology holds substantial promise for increasing the value of
advertising content and for keeping advertisers in the Canadian broadcasting
system.
5282 In all cases and
on all platforms we believe that the ad insertion process is a manner of
commercial negotiation between the program rights‑holders and the BDUs.
5283 Après réflexion
sur les représentations faites au cours de l'audience, nous proposons que les
EDR titulaires de licences soient autorisées à vendre ou utiliser 50 pour cent,
la moitié des occasions publicitaires sur les services spécialisés américains,
et que l'autre moitié soit utilisée pour les promotions des services canadiens
de programmation spécialisée indépendants.
5284 On ne devrait plus
accorder de privilèges spéciaux aux groupes canadiens de radiodiffusion qui
contrôlent un portefeuille de services de programmation ou encore leur propre
plateforme de distribution de radiodiffusion et qui ont, par conséquent, les
moyens de faire leur propre promotion sans l'aide des autres intervenants du
système.
5285 In a more
streamlined regulatory environment there should be greater reliance on a fair
and efficient dispute resolution process.
We therefore support a strong rule against undue preferences or
disadvantages applying to both BDUs and programming service suppliers, together
with a more effective and transparent process for dispute resolution.
5286 There is no
reasonable justification for having a less effective, efficient, transparent
and timely disposition of disputes under the Broadcasting Act as compared to
under the Telecommunications Act. This
entails, in our view, that there must be clear evidentiary rules supported by
improved disclosure of material information from parties with market power and
integrated activities and that the ensuing decisions of the hearing Panel must
be clearly motivated based on the evidence on record.
5287 On the matter of contributions
to Canadian programming, some say that BDUs should be called upon to contribute
even more money to Canadian programming than what is presently the case. We take great issue with this suggestion.
5288 When you calculate
the total of what the BDUs paid to Canadian discretionary services, spent on
Canadian community programming and remitted to Canadian programming funds in
2007, based on the Commission's latest published statistical and financial
summaries, BDUs are already the largest financial contributors to Canadian
programming overall, spending over $2 billion annually. This contribution is growing with each
passing year as a result of increasing revenues derived from broadcasting
distribution activities.
5289 Finally, on the
issue of fee for carriage for conventional over the air television signals, we
submit that the record of this proceeding completely fails to demonstrate that
such a hefty new charge payable by all Canadian cable and satellite BDU
customers is actually required in the circumstances, that consumers are willing
to pay for it or that the proceeds of such a charge will truly benefit Canadian
program production in exhibition in the end.
5290 In fact, the
Commission's statistical and financial summaries show very clearly that the
real issue is a disproportionate increase in the spending of conventional
broadcasters on the acquisition of foreign programs.
5291 In 2007 Canadian
private broadcasters spent almost $722 million on foreign programming,
representing an increase of 4.9 per cent over 2006, while their spending on
Canadian programming decreased by 1.2 per cent, to $616 million.
5292 A new tax on all
cable and satellite customers across Canada will not solve that problem. It will only compound it and it will put at
risk the 2 billion‑dollar pipeline from broadcasting distribution that
feeds Canadian television program production and exhibition.
5293 In today's
broadcasting system, conventional over the air television services are
essentially integrated with discretionary programming services within four
large public and private media groups:
CBC, CTV Globemedia, CanWest Global and Qubecor. These groups already get the lion's share of
the more than $1.8 billion in affiliation payments made by Canadian BDUs in
2007 to Canadian programming services out of subscriber fees. These payments are increasing with each
passing year.
5294 It is therefore no
longer appropriate to look at conventional TV in isolation and irrespective of
the groups' overall performance from television activities. These four large media groups, who are the
main advocates of a new tax on all cable and satellite customers, want to keep
at the same time all of the benefits of the present regulatory bargain,
including their own over the air distribution platform, a monopoly on local
advertising revenue, guaranteed carriage on the basic tier of BDUs, program
substitution and more compensation for distant signals.
5295 And what do they
propose to offer in return as a public benefit?
Well, we still don't know exactly two hearings after this issue has been
discussed.
5296 Louis...?
5297 M. AUDET : Merci, Yves.
5298 Le Conseil a
conclu, il y a moins d'un an, que les télédiffuseurs hertziens n'avaient pas
vraiment justifié l'établissement d'un nouveau frais d'abonnement.
5299 Ces mêmes
diffuseurs n'ont produit aucune preuve nouvelle pour justifier une conclusion
différente.
5300 En fait la preuve,
telle qu'elle est déposée en ce moment, n'est pas crédible.
5301 One last
comment. BDUs consume a tremendous
amount of capital to support their activities and keep their distribution
facilities competitive within the digital communications space. The Commission's statistical and financial
summaries show gross fixed assets of $19.25 billion and net fixed assets of
$12.8 billion as of the end of 2007 for all BDUs lumped together. This huge investment is entirely supported by
BDUs alone and it is funded entirely from private capital sources.
5302 This capital must
be fairly remunerated and it is therefore not the least surprising that retail
rates have progressively increased despite fierce competition between BDUs, not
only in Canada but also throughout the world.
5303 To summarize, this
proceeding constitutes a unique opportunity for the Canadian broadcasting
system to adapt and be able to prosper in the new digital world. It is an opportunity that should not be
squandered. If we collectively fail to
face reality and adapt on a timely basis, we could lose the hearts and wallets
of Canadian consumers and hence lose the ability of our regulated system to
yield lasting benefits as it should for our people, our talents and our
culture.
5304 Thank you and we
would be happy to answer any questions you might have on our submissions.
5305 THE
CHAIRPERSON: Thank you very much for the
very clear presentation.
5306 On page 7, halfway
through, when you talk about program rights you say:
"Non‑Canadian programming
services should be allowed for distribution by Canadian BDUs on the condition
that they not acquire or hold exclusive rights for the broadcasting
distribution of programs in Canada."
(As read)
5307 Can you elaborate
for me what is behind this idea?
5308 MR. MAYRAND: Yes.
In our view, the central consideration that we collectively face here in
Canada is preserving the integrity of a domestic rights market. Evidently the rights issue has always been
part of the test in order to allow non‑Canadian services for distribution
here in Canada.
5309 So I think what we
are saying is that we should really focus on the central issue which is, in our
view, absolutely key and totally important, as opposed to having a much more
complicated test that deals with the notion of some competitiveness, some
overlap to varying degrees. We think
that we have to focus on the central issue.
5310 That's why we are
saying, you know, the question of whether when an application is made to add a
service on the eligibility list, the central issue is whether that service
holds or intends to hold or acquire exclusive rights to the Canadian market to
the detriment of licensed Canadian programming services.
5311 THE
CHAIRPERSON: If I understand you
correctly, you say no access right, no genre exclusivity. So this is even with regard to foreign
service.
5312 The only thing is
when foreign service comes here, they do not have exclusive rights to the
Canadian market.
5313 So as long as it's
a non‑exclusive right, they can come in?
Is that the basic result: that any foreign programming becomes eligible
as long as the rights to serve the Canadian markets are not exclusive to them?
5314 MR. MAYRAND: They key issue is that foreign services that
would try to gain distribution in Canada would not engage in a practice that
prevents Canadian licensed programming services from acquiring any rights to
any programming that they wish to acquire.
5315 So hence the
notion of non‑exclusive rights.
5316 And you are quite
right in saying that our position is that really having genre protection has
outlived its purpose, as we said in the presentation, and is really, in our
view, unsustainable.
5317 Why? Well, first of all let's remember that the
most prosperous Canadian specialty and pay services were introduced without the
benefit of access rules. We tend to
forget that. But when they launched,
they didn't have access rules; these came afterwards.
5318 And the stated
objective of the access rules has always been to ensure the deployment of the
maximum possible number of Canadian licensed services.
5319 Now we are at a
stage where we have a mature system with a large spectrum of licensed Canadian
programming services, and that policy has been effective in achieving the
objective of deployment.
5320 We say it has
outlived its purpose because now we are not so much into deployment of new
Canadian services, and the ones that do show up once in a while are usually
proposed by integrated groups that have a strong entrenched position in the
system.
5321 And as you go and
as you get further and further into detail and refinements and variations of
sub‑formats and sub‑models, it becomes almost impossible to apply
correctly.
5322 THE
CHAIRPERSON: Yes, but I think you are
the only one so far at least who has come before us who suggests that there be
no kind of genre protection vis‑à‑vis foreign services. That is the only thing you focus on, is the
availability of the rights. As long as
the rights from a foreign service are also available to other Canadians, then
they should be let in.
5323 MR. AUDET: Yes.
We have come to you with this position after careful consideration. Today, after many years of development, there
is full‑fledged competition in all telecommunications services, whether
it is telephony, whether it is cellular, whether it is services to business.
5324 In broadcasting
distribution there is full competition, satellite, cable, some cable
overbuilding others, some ‑‑ there is competition
everywhere. IP TV soon to be launched,
existing in some markets today.
5325 To be true, the
only remaining monopoly in the Canadian broadcasting system today is genre
exclusivity, and there is no valid reason in economic theory for that to
continue.
5326 That is our basic
position and Yves has correctly described how we consider how this works, what
are the mechanics of it. But the
fundamental of it is that this is the last remaining monopoly in the system and
we fail to see why it is allowed to continue.
5327 THE
CHAIRPERSON: Before I pass you on to my
colleagues, one other question that fascinates me.
5328 In your opening
remarks you point out that you are the only true BDU. Everybody else owns specialty formats; you
don't. You obviously made a conscious
business decision, business strategy not to acquire specialty services.
5329 May I ask
why? I mean, obviously you are following
a different business model here. It
seems that all of your competitors feel that they have to be in both.
5330 MR. AUDET: Well, I will answer this with extreme care.
5331 We did apply to
this Commission in 1994 and were chastised for being cable operators, and
thereafter we did not come forth.
5332 Now, the other
reason is that I think very wisely the regulatory system in this country says
that programming should be available to all distributors, so there was no real
strategic need. We have decided to focus
instead on what we do best, and what we do best is cable.
5333 We have decided
that we would be delighted to apply our expertise in cable in Canada as much as
we can, but to the degree opportunities are not there that we would use our
expertise elsewhere.
5334 THE
CHAIRPERSON: All right. Len, I believe you have some questions.
5335 COMMISSIONER
KATZ: Thank you, Mr. Chairman.
5336 Good morning. I want to come back to the notion of basic
service and what defines a basic service.
5337 You clearly
identified that the BDUs should, within the confines of protecting the 9(1)(h)s
and those services that are deemed to be truly Canadian and the four‑plus‑ones,
the control of what goes in should be at the beck and call of the BDUs.
5338 I read with
interest ‑‑ this is out of your Executive Summary, the first
page on basic service where you state, and I quote:
"While Cogeco Cable is on the
record as supporting a smaller minimum basic service package, a smaller maximum
basic service package is both impractical and unwarranted." (As read)
5339 Which leads me to
believe that you want to retain the status quo and even though you are
supportive of the smaller one, you don't see it in the best interest of BDUs or
of Canada.
5340 I guess I put the
question to you: What would be wrong
with having a smaller basic package as well as a basic‑plus package that
allows the BDUs to offer whatever they want to offer, including the four‑plus‑ones
or whatever else you think your customers would want to see?
5341 MR. MAYRAND: Perhaps I can answer your question,
Commissioner.
5342 Our view is that
what has always made the strength of distribution in our Canadian system is the
packaging and the value perceived by customers to be derived from each
package. That applies absolutely to the
basic service as well. So we are in a
situation nowadays where we have basic packages that can go up north of 40
channels with a pricing that is well accepted and appreciated by the market and
can be as low as, you know, some 20‑odd channels in smaller systems that
are non‑interconnected.
5343 So let's not
forget that we have a multifaceted existing situation where the actual
composition of the basic and the actual retail pricing of the basic is not
uniform. Even within our own company it
is not uniform as between our various systems for various historical, technical
and market reasons. So there is no such
thing as the ideal composition of the basic tier. It is a reality that is adapted to each
specific market, and underlying all of this always the key notion for the
consumer and his or her motivation to remain a subscriber to that basic package
is the perceived value of the package.
5344 So what's wrong in
having a minimum set of things, or signals I should say, that have to be on
that basic tier throughout the regulated system and then saying there is a
market reality that's far too complex to set a general rule across the board
for Canada and let's let the BDUs do what they do best; that is, respond to the
specific conditions of each of the markets they serve?
5345 COMMISSIONER
KATZ: I guess I would turn that question
around and ask you, sir: What is wrong
with the CRTC establishing what we believe within our mandate should be what
Canadians should watch, and then you set the price in a competitive market as to
what that price should be and anything else you want to offer Canadians, you
are free to offer Canadians?
5346 MR. MAYRAND: If I may, I think that consumers would be
concerned if you put it to them that it is the Commission that decides what
they should watch and for what price.
5347 COMMISSIONER
KATZ: That's not what I'm saying.
5348 MR. MAYRAND: Well, I sort of heard that that is where it
was getting too.
5349 You know,
consumers nowadays have a variety of options to consume their programming
information and entertainment and the regulated system is only one of them.
5350 Now, they have
over the top distribution over the Internet that is readily accessible and
increasing year after year and, don't forget it, there is a black market. It is substantial and that one is also
growing.
5351 So I think our
concern is we have a system we think that works as best as it can be in terms
of the basic.
5352 I haven't
seen ‑‑ and we have checked on our logs. We haven't seen any complaints by our
customers that the basic service does not provide value in any of our
markets. We don't get those complaints.
5353 So if it's not
broke, why try to fix it?
5354 MS ASSHETON‑SMITH: I would just like to jump in here for a
second as well.
5355 I think we heard
Bell Canada say last week they did offer a very small skinnied‑down basic
service package a few years ago and they mentioned that there were very few
takers for that package.
5356 A bigger problem
at that time ‑‑ and I remember one of the problems with people
who were taking it were taking it to get their local signals and then getting
all their discretionary services from the black market satellites.
5357 So it was used as
a tool by those who were wishing to just get their local services on a small
inexpensive basic service. They could
get them that way and could get the rest of their discretionary services on
black market.
5358 This was of great
concern, both to BDUs at the time, as well as to pay and specialty services,
and there was a lot of discussion among the industry at the time to try to
increase the size of the basic service because of the detrimental impact on pay
and specialty services in Canada.
5359 So I think, you
know, a good point. We have been through
a long history on trying to find out what the proper size of the basic service
is and it's one of those things that you really figure out as a distributor in
response to what is happening in your market.
5360 COMMISSIONER
KATZ: I guess my concern stems from the
fact that five years ago basic cable was $17, $18, $19. It's now up in the low $30, I would guess, in
virtually everywhere across the country.
A lot of it is because, as I have heard in the last week, the industry
has correctly said they have provided more value to consumers as well.
5361 The question is if
we are looking at consumer choice, then let the consumers decide on the value
proposition. Let's perhaps get back to a
situation where there is an obligation by BDUs across the country to provide a
uniform basic level of service as well, notwithstanding the fact that you can
continue to offer your packages to your customers so they are not
inconvenienced. If they want to get
those services, they are free to get them, but at the same time there are free
to roll back as well and get something less than that.
5362 MR. AUDET: Well, I think on the principle, we are not
opposed to the idea of uniformity. What
we are saying is that the uniformity should be restricted to local and regional
over the air, provincial education, one SRC, one CBC and whatever the
Commission classifies as being in the 9(1)(h) rule.
5363 So we don't oppose
to the uniformity. What we do say is
that beyond uniformity, you should leave it to market forces. And market forces are doing, we think, a fine
job now.
5364 Now, the reason we
have suggested this limited set is that we have been faced for ages with
varying competition rules as between satellite and cable which have made our
life extremely difficult. We had an arm
tied at our back.
5365 This would ensure
that the essentials are covered and thereafter there is flexibility.
5366 I would also like
to add to what my associates have said here this morning.
5367 You have seen the
study by Blackwell Globerman ‑‑ a study provided by our
competitors, but still it is a valid study despite that. It says that there is about 2.8 per cent of
illegals in the Canadian system.
5368 Our own
observation ‑‑ and I say this because we are present in these
markets day in and day out. We have
1,800 people there distributed across the markets reviewing the situation every
day. There are between five and 6 per
cent of Canadians who are active in the black/blue market. There were, at the height of the wave of
illegal equipment that crossed the Canadian border in our territories, between
12 and 13 per cent of consumers who had in fact actively decided to opt out of
the system through. Thanks to the
Commission I must say, improved sensitization with the satellite owners, better
encryption methods were developed and brought about and so it was reduced from
the 12 that it was to about six.
5369 But I would like
to point out that most of these homes still have their equipment. It's up there; it's ready to be used. And anything that we do, or anything that you
do for that matter, that the consumer judges to be beyond the limit of what they
consider reasonable ‑‑ and today they consider reasonable to
do pretty much what they please ‑‑ you will see these illegal
installations get lit up all over again.
5370 And don't rule out
the possibility that there might be more than 12 per cent if people get fed up.
5371 So I think this is
a reality we have to deal with, this is a reality our country has to deal with.
5372 COMMISSIONER
KATZ: I'm going to move on to the issue
of access and genre protection.
5373 We heard last week
from Allarco that they were having difficulties getting up as a must carry.
5374 Do you carry
Allarco today?
5375 MR. MAYRAND: Yes, we do.
We have an affiliation agreement in place and we carry them.
5376 COMMISSIONER
KATZ: Thank you.
5377 With regard to the
issue of genre protection, I believe last week we heard Rogers say that if
there was to continue to be some degree of genre protection, a fallback
position would be broad categories or themes of genre protection.
5378 What is your view
on that?
5379 MR. MAYRAND: Well, as we said in our oral remarks this
morning, we are not too enamoured with that proposal. The reason is that, first of all, you have
already heard some debate last week as to how many broad genres there should
be. Is it four, is it five, is it six or
more?
5380 So that's going to
be a tough nut to crack. You know, what
are the key categories or broad genres and how should they be defined?
5381 Then you get into
the whole dynamics of seeing how the various smaller sub‑genres, you
know, have to be "migrated" to these broader categories and what that
does to their conditions of licence.
5382 In our view, you
are getting to a very, very complicated, cumbersome process and, frankly, we
don't see what the public benefit is of going through that whole process.
5383 Let's face it, the
key genres are now well entrenched in the marketplace insofar as Canadian
programming services are concerned.
Certainly if we are talking about analog services, you know, some of
them go back to the 1980s. They are so
well entrenched and so completely positioned in their respective format that
there really isn't, I would think, and I would submit to you, any cause for
being concerned that their position could be seriously eroded by some smaller
independent services trying to expand their programming offering.
5384 Frankly, all the
established services have a bank of program rights which they have acquired in
their format. So there really isn't any
incentive on one side or the other of the system to get into wholesale free‑for‑all
hodgepodge change in formatting.
5385 Frankly, we don't
see that happening at all.
5386 COMMISSIONER
KATZ: How would you see the Commission
undoing the genre protection in light of the fact that there are so many
different conditions and obligations by genre on all these specialty
programmers today?
5387 MR. MAYRAND: Well, we think that basically once you signal
that the genre protection system is going to go away, you will have obviously
licence renewals with each and every one of the services concerned and each
service will come up with their plans.
They will come up with their proposed conditions and you will have their
business and financial plan and their projections.
5388 I really don't
know how you can deal with all the particular aspects of each programming
service ‑‑ and there are a number of them now ‑‑
without looking at them individually for that purpose at licence renewal.
5389 But I would add
something more. I think, Commissioner
Katz, you put the finger on a very important reality that we are all facing
today and that is that, you know, there is pretty much a television market that
includes specialty and conventional television and that that market is
essentially controlled or concentrated, I should say, in the hands of very few
players.
5390 So I think you
ought to look at the individual licence renewal applications and the group
performance of those who ultimately control the licences.
5391 COMMISSIONER
KATZ: That would probably work or could
work for the bigger players, but clearly the smaller players and the
independents would be caught by the big paintbrush that would go across the
page, would it not?
5392 MR. MAYRAND: Well, I don't know if they would. Just get me right. Cogeco Cable totally understands the concerns
of independent Canadian discretionary program suppliers.
5393 It is not too
clear how independent should be defined, but in our mind it is those services
that are not part of a large integrated group, and we have named a few of
those.
5394 It is quite easy I
would think for the Commission to say from the outset, as it has done for cable
regulatory purposes, who are the large players and who were not.
5395 But that being
said, we are concerned about the fate of the independents. We certainly are the last people around who want
to see them suffer or experience a loss in market share. The reality is, though, that they Cat‑2s
do not have genre protection, do not have access and are still developing.
5396 I'm not sure what
the universe is of services that could possibly suffer tremendously on the
independent side from the relaxing of the genre protection. I can see, though, that if you remove the
genre protection system that these small independents will have the opportunity
to broaden their offering to go after more innovative or appealing programming
and not face the objections of the entrenched groups that it is part of their
protected turf.
5397 COMMISSIONER
KATZ: I noticed as well you are very
strongly supportive of the notion of a dispute settlement process as well. We haven't heard yet I guess but Astral are
coming forward with one proposal, which is the baseball proposal for
arbitration as well.
5398 You talked about
the reverse onus and the strong support of it.
Have you got any views at all as to what would be the solution at the
end of the day to this arbitration process?
5399 MS ASSHETON‑SMITH: Yes. I
don't think Cogeco put this on the record, but we have discussed this
issue. I think there is a real concern
about the continuation of the use of the final offer arbitration approach in
the sense that it removes the ability for flexibility on the part of the
Commission to find a fairer response based on the evidence.
5400 I think the real
concern, and Cogeco is not the only company that has expressed this concern, is
the lack of predictability and transparency on the broadcasting side. It's a bit of a guessing game as to what kind
of process will be used in any particular kind of dispute and I think we are
strongly in agreement with those who suggest that a more formalized approach, a
more predictable approach would be good for everybody.
5401 We suggested going
something along the lines of a Part VII application on the telecom side where
there is a public record of the application, the response, the reply and any confidentiality
claims are put on the record and justified and the decision on the
confidentiality is put on the public record by the Commission so the parties
have a better sense of what is going on.
Because, frankly, on the broadcasting side it can be very, very
difficult for parties to get a handle on what's on the record and what's not on
the record and where they stand.
5402 So I think that is
the main thrust of the Cogeco concern and the Cogeco proposal.
5403 COMMISSIONER
KATZ: And you see that telecom Part VII
process as a more transparent process than a two‑party dispute with
binding timelines and then a final settlement?
5404 MS ASSHETON‑SMITH: Yes, well, it depends. The Part VII works for a lot of
disputes. Where there is a factual
dispute that needs to be resolved, I think we said that the expedited oral
proceeding is an excellent one. I think
it has worked very, very well on telecom.
We think it has great potential on the broadcasting side. It hasn't been used very often but it's more
transparent. It's not behind the
scenes. It's all on the public
record. The facts are there. The parties have an opportunity to cross‑examine
each other and the facts are there before the Commission with a public decision
on the facts.
5405 So I think that's
all we are saying.
5406 The concern about
final offer arbitration goes more ‑‑ not so much to the
transparency of it as to the limitation the Commission puts on itself to find a
middle ground between the two parties.
5407 COMMISSIONER
KATZ: So you are suggesting that the
final decision by the CRTC even within that context could be not just an
either/or but something in between?
5408 MS ASSHETON‑SMITH: Yes, exactly.
5409 MR. AUDET: In fact, we very strongly suggest that it may
be something in between. This has been a
subject of much frustration within our company that at times we were entering
what looked like a black box and didn't know what would come out at the other
end and we were told in advance it will be either black or white. And that's not real life. Real life is sometimes there is some grey in
there and it should be reflected in the decision.
5410 If something is
fair and true then there should be no objections to the facts having been found
duly, systematically made public and the decisions have been justified in
writing clearly as to why this was considered and why this other thing wasn't
and what the outcome is. That's just an
issue of fairness.
5411 COMMISSIONER
KATZ: Okay, thank you.
5412 I want to move on
to the issue of additional revenues, the VOD, SVOD issue as well. And I need to get a better understanding and
maybe you can provide it.
5413 The difference
between SVOD and the addition of advertising revenue should the Commission deem
it to be in the public interest vis‑à‑vis specialty programmers,
what is the difference between those two distinct units if advertising is
overlaid onto SVOD?
5414 MR. AUDET: Well, as we understand it SVOD is just the
ability for us to re‑use for our consumers to access programs that had
been taken out of a pay service.
5415 However, when we
talk about VOD in the context of our presentation what we mean is programs that
have been aired on a specialty service or on an over‑the‑air
broadcaster which would be for consumer convenience, recorded at the headend
and replayable at their option when they want to. And there of course the commercials that are
already embedded in the programming, of course, are credited to the broadcaster
and we derive no benefit from it.
5416 But to the degree
in the future a broadcaster would want us to refresh the advertisements in that
program or, even better, dynamically target advertisements to specific
categories of viewers in that program, then of course it's the broadcaster's
advertising revenue. But all we would do
is in the freely‑negotiated commercial agreement agree to some sort of
service charge for performing that function.
5417 COMMISSIONER
KATZ: When I look at ‑‑
and I'm sorry. I don't have the Cogeco
lineup.
5418 But we pulled off
over the weekend Rogers has got an on‑demand service called Howard TV,
Howard Stern, and it's a monthly subscription SVOD service that allows the
consumer on a monthly basis to pay what is identified here as $16.95 a month to
get Howard Stern on TV in perpetuity on a monthly basis. If you piggyback onto that the ability for in
this case Rogers to put advertising on there as well, how different is that
from a regular specialty TV broadcast?
5419 MR. AUDET: We do not carry that service. I'm sorry, I don't know.
5420 COMMISSIONER KATZ: Okay.
5421 MS ASSHETON‑SMITH: Okay.
Can I just add one thing there?
5422 The SVOD
functionality has been used primarily to this point by Canadian BDUs to extend
the brand and the channel and the reach of Canadian pay and specialty services.
5423 I think if you
look at a service like TMN On Demand it's a tremendous example of how SVOD can
be a real tool to extend these services.
And the Howard Sterns of the world, to my knowledge, are not very well
subscribed to and they are comprised of programs that are not available on any
other Canadian station. So it's not a
matter of competing or overlapping rights there.
5424 But in any event,
the vast, vast majority of SVOD viewing is to Canadian SVOD brands.
5425 COMMISSIONER
KATZ: If it was limited to just Canadian
brands would you see a problem?
5426 MR. AUDET: Well, we have to be careful with whatever
goes on the specialty services with whom we have by way of private
negotiations, access to minutes, advertising minutes and conceivably these
could be replayed on a VOD platform as well.
5427 So I would just be
careful about that because, as Yves has explained in our introductory
presentation, as a matter of principle these minutes of advertising are really
part of a commercial negotiation. We pay
them a fee and in exchange for that fee we get to distribute the service and
our cable franchise, and along with that as a quid pro quo for the fee come two
minutes of advertising per hour.
5428 So you can
understand that from a cable operator's point of view he would say, "Well,
these minutes really they belong to us, you know, commercially speaking."
5429 As part of this
proceeding we as a gesture of good will said, "Well, why don't half of
these actually be used for the promotion of the independent specialty channels?" So it's really a gesture of good will. But if you looked at it from a strict
commercial standpoint this should be a non‑issue.
5430 That being said,
if some of these programs were recorded for VOD use subsequently, what you just
said would be very difficult to apply.
5431 MS ASSHETON‑SMITH: Commissioner Katz ‑‑
5432 COMMISSIONER
KATZ: Yes.
5433 MS ASSHETON‑SMITH:
‑‑ just to respond specifically to the restriction of SVOD
offerings.
5434 I think one of the
reasons why the VOD platform holds such great promise and has developed the way
it has is because of the foresight of the Commission not to impose restrictions
in advance of seeing any problem on the platform and to allow the service to
develop and grow in an innovative fashion.
And that's exactly what has happened on the VOD service. It has not developed into a competitor for
linear channels. It has developed into
an extension, a complement to the linear channels.
5435 And I think the
point we would make would be just to be very cautious in putting fences around
how the VOD offering can be put together in the absence of any demonstrated
issue whether it's Howard Stern or others.
I think the allegations that SVOD is acting as a competitor to the
linear channels is overblown and there is really very little evidence that it's
causing any financial harm or impact at all on those channels.
5436 So in the absence
of a real demonstrated problem we just urge you to continue your course which
is maximum flexibility and if something does evolve in a way that isn't
beneficial to the system you have the power to step in and change it. We are saying there is nothing to suggest
right now that that's happening.
5437 COMMISSIONER
KATZ: Have you folks experimented with
this Invidi service, the targeted ad service at all?
5438 MR. AUDET: No, we have not.
5439 COMMISSIONER
KATZ: So you don't know how far away it
is from reality, basically from live application?
5440 MR. AUDET: We think it is theoretically very appealing
to extend the life of broadcaster's properties, but we have not to date spent
time analyzing it.
5441 COMMISSIONER
KATZ: Thank you.
5442 Those are my
questions, Mr. Chairman.
5443 THE
CHAIRPERSON: Michel.
5444 CONSEILLER
ARPIN: Monsieur Audet, monsieur Mayrand,
je voudrais vous ramener sur la présentation orale que vous avez faite un peu
plus tôt et si je prends le texte français je vais me référer aux pages 10 et
11 où vous dites que les EDR sont les principaux bailleurs de fonds de la
programmation canadienne dans son ensemble avec une contribution de plus de
deux milliards de dollars annuellement.
5445 Je présume que
vous avez additionné les coûts versés aux différents services plus votre
contribution à l'expression locale et au Fonds canadien de la télévision pour
arriver à ce montant de deux milliards ?
5446 Me MAYRAND: C'est exact et c'est pour tous les secteurs
de la distribution, dont câble et satellite.
5447 CONSEILLER
ARPIN: Est‑ce que vous allez
agréer avec moi que cet argent‑là ne va pas nécessairement tout à la
programmation canadienne ?
5448 Me MAYRAND: Je suis entièrement d'accord avec vous,
monsieur Arpin, et peut‑être que c'est la grande question de ces
audiences publiques.
5449 Vous savez, pour
nous les distributeurs, nous faisons la distribution de services de programmation,
nous collectons des frais d'abonnement, des frais d'installation, nous payons
pour toute l'infrastructure requise pour faire cette distribution, tous les
systèmes d'exploitation, tout le ‑‑ en bon français ‑‑
back office requis pour faire fonctionner le système, et c'est énorme.
5450 Et à partir des
frais d'abonnement que nous percevons, nous versons un montant ‑ je
dis nous collectivement, tous les câblodistributeurs et les opérateurs de
services par satellite et les opérateurs de services par micro‑ondes ‑
nous versons collectivement plus de un virgule huit milliard de dollars à des
services canadiens qui ont obtenu une licence du Conseil comme services
canadiens titulaires de licences.
5451 CONSEILLER
ARPIN: Et c'est...
5452 Me MAYRAND: Si vous me permettez de terminer l'exposé là‑dessus
brièvement. Par la suite, le pourcentage
de cette somme d'argent qui arrive dans le système canadien de programmation
qui est effectivement utilisé pour de la programmation canadienne ou pour de la
programmation américaine ou étrangère, nous n'avons aucun contrôle sur cette
répartition et c'est là que l'efficacité de la contribution commence à varier.
5453 Ce n'est pas au
niveau de l'entrée du pipeline, c'est dans les portes de sortie du pipeline que
l'efficacité diminue.
5454 Et je vous dirais
qu'on a le même problème avec l'autre pipeline d'alimentation du système
canadien de radiodiffusion qui est les recettes publicitaires pour la
télévision conventionnelle.
5455 Là aussi vous avez
une masse d'argent qui entre dans le pipeline et il y en a une partie, et en
fait maintenant une partie croissante, qui s'en va au sud de la frontière pour
l'acquisition de droits d'émissions américaines et les distributeurs n'y
peuvent absolument rien.
5456 CONSEILLER
ARPIN: Et une partie de l'argent des
canadiens qui rentre dans le pipeline de Cogeco s'en va au Portugal et en
Europe de l'Est ?
5457 M. AUDET: Absolument pas.
5458 CONSEILLER
ARPIN: Non ?
5459 M. AUDET: Non, absolument pas.
5460 Toutes nos
dépenses qui sont passées à la dépense le sont... des entreprises canadiennes
vont vers les entreprises canadiennes.
5461 Nous avons fait
des emprunts pour réaliser notre investissement au Portugal, c'est vrai, mais
ça n'a rien à voir avec les abonnés canadiens qui n'ont pas à supporter
ça. Ce sont des financements distincts.
5462 CONSEILLER
ARPIN: Mais, je veux dire, ce sont les
bénéfices des opérations de Cogeco, faits à partir de revenus canadiens qui
vous ont permis... puis ce n'est pas interdit là de prendre de l'expansion internationale,
même c'est bénéfique, et malheureusement, les entrepreneurs canadiens sont très
peu présents sur le marché international.
Donc, au contraire, je suis d'avis que votre présence sur le marché
international est, à mon avis, un geste extrêmement positif.
5463 Mais de dire que
l'argent qui rentre dans le système canadien de radiodiffusion, soit par les
revenus publicitaires, soit par la redevance, devrait exclusivement rester au
Canada m'apparaît un petit peu difficile à gérer, compte tenu de l'historique
de notre système canadien de radiodiffusion.
5464 Ça m'amène à me
poser la question, quand vous faites le plaidoyer pour qu'il n'y ait plus de
protection des genres par rapport aux services étrangers, est‑ce que
c'est là pour vous un élément de votre équation pour corriger ce que vous
appelez cette iniquité de fonds qui rentrent dans le système et qui s'en vont à
l'étranger, donc, pour éventuellement pouvoir offrir que des services
étrangers, puis ne plus avoir d'entreprises canadiennes qui auraient la
capacité de se déployer?
5465 M. AUDET : Si vous
me permettez, j'aimerais vous donner mon point de vue sur les deux questions,
et je suis sûr qu'Yves voudra compléter ma réponse.
5466 Premièrement, nous
n'avons pas exprimé le point de vue que les entrées de fonds dans le pipeline
du système canadien de radiodiffusion devraient être exclusivement dépensées au
Canada. Nous n'avons pas exprimé cette
idée, tout d'abord.
5467 Deuxièmement,
je...
5468 CONSEILLER ARPIN :
Mais vous avez...
5469 M. AUDET : Je n'ai
pas fini ma réponse, excusez‑moi.
5470 Deuxièmement, de
suggérer qu'il y a une adéquation entre nos investissements au Portugal et le
fait que les télédiffuseurs canadiens envoient une part croissante et
supérieure à 60 pour cent de leurs fonds aux États‑Unis, de suggérer
qu'il y a un parallèle entre ces deux choses, je m'excuse, mais c'est faux, et
nous n'avons pas à être caractérisé de cette façon‑là. Ça m'apparaît absolument injuste.
5471 Maintenant, cela
étant dit, les dépenses effectuées par les télédiffuseurs traditionnels sur de
la programmation canadienne au cours des sept dernières années ont cru au total
de 21 pour cent. Les dépenses de ces
mêmes télédiffuseurs sur la programmation américaine ont cru au total au cours
de ces sept dernières années de 63 pour cent.
5472 Donc, c'est un
taux de croissance qui est de l'ordre de trois fois, de telle sorte
qu'aujourd'hui, les dépenses des télédiffuseurs généralistes sur la
programmation américaine représentent 60 pour cent de leurs frais et sur la
programmation canadienne représentent 40 pour cent de leurs frais.
5473 Alors, ce que
maître Mayrand vous a dit, c'est il n'y a pas de problème, de l'argent dans le
système, on en envoie. Là où vous...
vous, je ne dis pas ça d'une façon désagréable, mais là où nous comme société
avons une décision à prendre et vous comme corps réglementaire avez une
décision à prendre, c'est où voulez‑vous que l'argent que nous envoyons
soit dépensé, et ça, j'ose espérer que ce sera une des décisions qui émergera
de cette audience.
5474 Nous, pour notre
part, nous avons une suggestion constructive à faire à cet égard, et nous
aimerions proposer qu'une possibilité pour vous serait de dire aux
télédiffuseurs généralistes, lorsque tu as un dollar de programmation canadienne,
bien, tu pourras dépenser un dollar de programmation à l'étranger, et ça serait
une façon très simple de vous assurer que ce qui rentre dans le pipeline est
utilisé aux fins que vous souhaitez.
5475 Maintenant, pour
ce qui est de la protection des genres, la protection des genres, dans notre
esprit, n'est pas directement reliée à la question sur laquelle on vient
d'élaborer. La protection des genres,
c'est... La fin de la protection des
genres, c'est simplement une question de gros bon sens.
5476 Quand vous avez
une économie qui est essentiellement une économie compétitive pour le bénéfice
des citoyens canadiens de A à Z et que le dernier monopole qui subsiste au
Canada est la protection des genres de certains services spécialisés qui ont
obtenu ces privilèges‑là il y a 30 ans, bien, vous conviendrez avec moi
que pour nous qui sommes intensément compétitifs dans toutes nos activités et
pour le citoyen canadien qui travaille pour des entreprises qui
compétitionnent, il y a de quoi à se poser des questions. C'est simplement ça.
5477 CONSEILLER ARPIN :
Maintenant, sur la question de la protection des genres, et je reviens
particulièrement à votre proposition de l'abolition de la protection des genres
pour les services étrangers, et vous le mettez quand même dans une équation de
protection des droits de radiodiffusion.
5478 Qu'est‑ce
qu'on fait si, effectivement, on ouvre la barrière et, effectivement, on
découvre, après un an, cinq ans, 10 ans, que certains services étrangers ne
protègent pas les droits de radiodiffusion, l'accès aux droits de
radiodiffusion pour les entreprises canadiennes? Est‑ce qu'on les retire du système?
5479 M. MAYRAND :
Monsieur Arpin, je vous soumettrais qu'à l'heure actuelle, nous avons un test
plus complexe et sujet à beaucoup plus d'interprétations, mais nous avons quand
même un test, et la sanction ultime demeure la même.
5480 C'est‑à‑dire
que si vous avez un service étranger qui est mis sur les listes de signaux
éligibles et qui, un moment donné, se met à se comporter de façon que les
conditions du test qu'il a rencontrées à l'origine ne sont plus rencontrées
maintenant ou ne seront plus rencontrées clairement à l'avenir, le recours
demeure le même, c'est de les retirer de la liste des signaux éligibles.
5481 CONSEILLER ARPIN :
Maintenant, vous avez dit vous‑même en réponse à des questions ou dans
votre présentation que, finalement, c'est le consommateur qui vous fait
vivre. Si je retire un service que vos
abonnés regardent parce qu'il ne répond plus aux exigences minimales qui ont
été imposées, vos abonnés vont réagir comment, et vous, par rapport à nous,
vous allez nous appuyer ou appuyer vos abonnés?
5482 M. MAYRAND :
Écoutez, je crois que notre entreprise, et je ne peux parler que pour notre
entreprise, a toujours été très soucieuse de respecter le cadre de
réglementation dans toutes ses formes et dans toutes les phases de son
évolution. Alors, il est clair que ce
que nous proposons dans un cadre de réglementation allégé, nous avons parfaitement
l'intention d'y adhérer pleinement et de le faire honnêtement.
5483 Maintenant, pour
ce qui est de la réaction des abonnés, je vous dirais qu'il faut toujours
s'attendre à une réaction des abonnés, des consommateurs lorsqu'un ou des
services sont modifiés ou supprimés.
5484 Toutefois,
j'exprimerais pour notre entreprise avoir beaucoup moins de préoccupation à
devoir éventuellement agir sur un ou quelques services étrangers délinquants
lorsqu'il est nécessaire de le faire, plutôt que de changer radicalement la
composition du service de base et d'affecter l'univers total des abonnés du
câble et du satellite partout à travers le Canada.
5485 C'est beaucoup
plus préoccupant, à notre point de vue, que d'avoir à utiliser, le cas échéant,
la sanction qui doit s'appliquer un moment donné parce qu'il y a un service
étranger qui n'a pas respecté les conditions de la liste des signaux éligibles.
5486 CONSEILLER ARPIN :
Monsieur le Président, ce sont mes questions.
5487 M. AUDET :
Monsieur le Président, pouvons‑nous nous concerter un moment, s'il vous
plaît?
5488 LE PRÉSIDENT : On
prend une pause de cinq minutes.
‑‑‑ Upon recessing
at 1009 / Suspension à 1009
‑‑‑ Upon resuming
at 1018 / Reprise à 1018
5489 LE PRÉSIDENT: O.K.
Monsieur Audet.
5490 MR. AUDET: Yes.
5491 LE PRÉSIDENT: Vous vouliez dix minutes de conférence, vous
avez eu vos dix minutes?
5492 MR. AUDET: No, I think we are done.
5493 If this is an
opportunity to make a last statement, then I will make it.
5494 THE
CHAIRPERSON: No, no, not yet. We have more questions.
5495 MR. AUDET: Okay.
Thank you.
5496 THE
CHAIRPERSON: Madam Cugini.
5497 COMMISSIONER
CUGINI: Thank you, Mr. Chairman.
5498 I want to take you
back to your model for basic service. If
I understand you correctly, there would be a number of mandated services, as
you have proposed, and then we would allow the BDUs to add whichever services
they feel are appropriate for their market.
5499 My question is,
should we prohibit BDUs from adding affiliated services to basic in your model?
5500 In other words,
should Shaw be able to add all of its Corus services to basic, or should Rogers
be able to add all of its specialty services to basic?
5501 MR. MAYRAND: I don't think it is really appropriate for
us, having said that we don't own any services ‑‑
5502 COMMISSIONER
CUGINI: But I think, in a competitive
market, I mean, if you were to have ‑‑
5503 You know, you have
Star Choice in your market, and they offer all of these specialty services on
basic. Is that not a competitive
disadvantage to you?
5504 MR. MAYRAND: I think we have spelled out as best as we
could in the model regulations that we attached to our initial submission what
the rules governing the composition of basic should be, and we certainly didn't
put in an exclusionary affiliate rule.
5505 Really, I don't
feel that it is for us to comment on whether the Commission should deal with
situations.
5506 In fact, if I hear
your question correctly, it has to do with a dominant position in the
marketplace, and a high level of integration.
5507 It seems to me
that the remedy we proposed, or we submitted to you for those situations,
whether it is something that arises in connection with basic, or a tier, or
packaging, or anything that has to do with the activities ‑‑
the broadcasting distribution activities of the BDU, or the program supplier,
as the case may be, that, really, you ought to look at the issues, as, if and
when they arise, in connection with the undue preference or discrimination
rule.
5508 We support the
notion that there should be a reverse onus when there is discrimination of
preference.
5509 I think that is
probably the best rule that you can have, and it is probably the most
effective, rather than ‑‑
5510 And I can't
emphasize this enough. Our whole
thinking in connection with this reconsideration of the framework for
distribution is to say: Let's spell out
clearly what is allowed. Let's spell out
clearly what is not allowed. And then, let's
not try and cover in detailed regulations all possible other issues or
scenarios that might happen.
5511 COMMISSIONER
CUGINI: That usually is our job. That's why we try to cover as much ground as
we possibly can in these proceedings.
5512 MR. MAYRAND: If I may, I think your job is evolving, in
line with the system. It has to evolve,
because as the system becomes increasingly complex and multi‑faceted, I
don't think the Commission can keep on adding layers of more detailed
regulation. You have to scale back and
re‑focus on key fundamental principles.
5513 Really, that is
what we tried to do, as well, on the test for approving the distribution of non‑Canadian
discretionary services, putting them on the eligibility list.
5514 We are not
advocating the abandonment of a test in a point of entry and control thereof,
what we are saying is: Let's focus on
the one key criterion, and let's apply that one effectively and properly.
5515 That's just
another example.
5516 COMMISSIONER
CUGINI: The bottom line answer to my
question is that the undue preference rules, reinforced, will take care of any
dominant position ‑‑
5517 MR. MAYRAND: That's what we submit to you.
5518 COMMISSIONER
CUGINI: Okay. On the issue of the access rules, one of the
areas that it seems most people agree on is the elimination or the relaxation
of the distribution and linkage rules.
5519 Bearing that in
mind, what harm is there in keeping the access rules as they are today?
5520 Because, in the
context in which I am asking the question, if it is true that you want to offer
your customers ‑‑ and I believe that it is true ‑‑
as much choice as you possibly can, and they are in complete control, provided
that they meet the preponderance test, what is the harm in offering everything
that you possibly can within your capacity constraints?
5521 In other words,
how does the elimination of the access rules make your life easier?
5522 MR. MAYRAND: I would like to submit to you that the access
rules don't apply to everybody in the system, to start with. I think we agree with that.
5523 I think what we
are saying is, if the market dynamics were such that the Canadian services, the
so‑called analog and Category 1 services, which have the benefit of
access rules, do actually have access throughout the distribution system, are
distributed, and are well entrenched in the marketplace, really, there is no
use to keep these distinctions and these rules.
5524 If there is no use
to keep them, then why should we keep them?
5525 We thought the
exercise here was to try and update the regulatory framework and make it
correspond to the realities that we are in today in 2008, as opposed to ten
years ago, when the current version of the regs was put into force.
5526 COMMISSIONER
CUGINI: This is going to be another
"Yes, but this might happen" question, so you might not like it, but
bear with me.
5527 Based on your
answer, going forward, what incentive will the Category 1 services and/or the
analog services have to ‑‑ I won't even venture to say
increase their Canadian content obligations or contributions, but maintain
their current level of Cancon.
5528 The regulatory
bargain: High Canadian content, high
CPE, you get must carry status.
5529 That is certainly
true for Category 1 services.
5530 Will not all of
these Category 1 services and analog services come back to us and say, "We
can't make it. You have to lower our
Cancon contributions"?
5531 Why would we say
no?
5532 MR. MAYRAND: As, if and when they do come back to you and
say that things are not working at all ‑‑ and I presume that
would be at licence renewal, or even before, by way of an application to amend
the existing Conditions of Licence ‑‑ I would venture to say
that you would still be looking at their actual distribution within the system,
and their actual financials and their projected financials.
5533 That is where we
have conceptually a hard time imagining, as a matter of fact, that any of the
so‑called analog services ‑‑
5534 I say "so‑called"
because they are not only distributed in analog format now, but also
digital ‑‑
5535 COMMISSIONER
CUGINI: I understand.
5536 MR. MAYRAND: They have extremely pervasive distribution.
‑‑ or the Category 1
services, for some reason, in the absence of access rules, would be dropped by
distributors in Canada.
5537 Certainly this
company has absolutely no incentive or reason to drop services.
5538 I think the issue
that you might face with some of the players that don't have the same level of
bargaining power at renewal time for affiliation agreements ‑‑
and we are talking about the independents ‑‑ there is perhaps
a concern ‑‑
5539 What we said in
our opening remarks was: Fine. If there is a concern with the independents,
let's make sure, then, that the access rules remain ‑‑ not the
access rules, I should say carriage privileges remain in effect for a period
leading to the full digital transition.
5540 But I have a lot
of difficulty ‑‑ and I think it is part, really, of our
company's whole thinking ‑‑ in seeing Canadian services, even
Category 2 services, which don't have access privileges, being dropped in the
current competitive context. There is no
reason to drop them.
5541 I think what you
might be concerned about is what happens when there is a dispute and there is
an issue of related party transactions or a preference, and then we get back to
the central rule, which, in our view, can address the specific problem at hand.
5542 Furthermore, I
should say that the real concern is not so much services being dropped during
the currency of an affiliation agreement, because that would be a breach of
contract, it is really upon affiliation renewal time, and we certainly hold the
view that, when there is a dispute, the parties, whether on the distribution
side or the programmer side, should not be denying service completely until the
dispute is resolved.
5543 So I think, unless
I misunderstand your question, that really addresses the concerns you might
have.
5544 COMMISSIONER
CUGINI: I do enjoy it when participants
answer the follow‑up question as well, so I thank you for that.
5545 One final
question. In response to Vice‑Chairman
Arpin's question regarding SVOD, you said that you do not carry the Howard
Stern on‑demand service, but you do carry Anime! On Demand, do you not?
5546 And that is not an
authorized service on the list of eligible satellite services. Correct?
5547 MR. MAYRAND: I must admit to you that you've got me here. I will check that.
5548 COMMISSIONER
CUGINI: That's great. You can always address that in the reply
phase.
5549 MS ASSHETON‑SMITH: Yes.
Just to clarify, the way programs are acquired on the on‑demand
platform is not the same as taking a channel. Those programs are programs for which
typically ‑‑ and I'm not confident about Anime‑on‑demand. But those programs are typically programs
that there is no other Canadian programming service that has acquired the
rights to those programs.
5550 COMMISSIONER
CUGINI: No, I understand that, but you
do become the aggregator of those programs on that one dedicated on‑demand
channel?
5551 MS ASSHETON‑SMITH: Yes.
It is an aggregator service, though, not a channel.
5552 COMMISSIONER
CUGINI: Like I said, we will look
forward to your comment in reply.
5553 MR. AUDET: Yes.
Well, I think we have replied. We
purchased programs to put on our VOD platform and yes we have bought a series
of programs from Anime and we show them.
5554 I think there is
not much more to be said. It's paid for.
5555 COMMISSIONER
CUGINI: I thought in reply to Vice‑Chairman
Arpin's question you said that on VOD you only had programming that was
available on linear broadcasting, unless I misunderstood your response to his
question.
5556 MR. MAYRAND: We appreciate the point on Anime. We'll certainly address specifically that
issue in the written reply.
5557 I am the first one
to admit that, you know, I could not possibly go through each and every one of
the services that we provide and remember exactly what the terms were in
setting them up. All I know is that the
principles we put forward to you are exactly what they are. There may be an exception but we will certainly
deal with that in written reply.
5558 COMMISSIONER
CUGINI: Thank you very much.
5559 Thank you, Mr.
Chairman.
5560 THE
CHAIRPERSON: Thank you.
5561 Michel.
5562 CONSEILLER MORIN:
Oui, bonjour.
5563 Merci, Monsieur le
Président.
5564 Il y a une
entreprise concurrente, Quebecor pour ne pas la nommer, qui a identifié pas moins
de 550 dispositions réglementaires et 80 en programmation, enfin, c'est le
fameux livre rouge. Je ne l'ai pas lu,
je dois vous le confesser.
5565 J'aimerais vous
demander avec le modèle que vous proposez, combien il y en a qui vont
disparaître de ces règles‑là?
5566 Me MAYRAND:
Écoutez, monsieur Morin, je n'ai pas fait d'exercice à partir de la liste de
Quebecor Media. Tout ce que je peux vous
dire, c'est que le règlement que nous avons produit en annexe, le modèle que
nous vous suggérons comporte la moitié moins de texte que le précédent et ipso
facto, si vous acceptez notre modèle, il y a toute une série de documents
connexes sur les règles d'accès, par exemple sur l'application des règles
d'exclusivité, sur une série d'autres sujets, qui tombent ipso facto.
5567 Maintenant, je
n'ai pas fait l'exercice de prendre toutes et chacune des exigences
réglementaires que mon ami Édouard Trépanier a colligées avec autant de
diligence et, je dois dire, beaucoup plus de patience que moi.
5568 CONSEILLER MORIN: En
ce qui concerne maintenant le service de base qui se trouve... enfin on en
parle souvent, j'aimerais d'abord savoir, le service de base que vous offrez à
vos consommateurs, quel est le pourcentage des consommateurs qui réduisent leur
achat, si vous voulez, ou leur abonnement, qu'au service de base?
5569 J'ai entendu
depuis une semaine qu'il semble que le service de base, il n'y a pas beaucoup
de gens qui ne prennent que le service de base.
5570 Est‑ce que
c'est la même chose chez vous?
5571 M. AUDET: Oui, oui, chez nous c'est environ 19 pour
cent de nos clients, tant au Québec qu'en Ontario qui ne prennent que le
service de base,
5572 CONSEILLER
MORIN: Qui ne prennent que le service de
base.
5573 Donc, quand on
parle de piratage comme vous en avez parlé, qui semble être un problème assez
important pour vous, est‑ce que vous pensez qu'il y a une relation avec
le service de base qui est plutôt réduit ou vous n'imposez pas, autrement dit,
un service de base très lourd?
5574 M. AUDET: Nous, notre service de base au Québec, il est
de l'ordre de 39 canaux et en Ontario il est de l'ordre de 50 canaux.
5575 La question qui a
été soulevée et mentionnée tout à l'heure, c'est plutôt de savoir si le service
de base était réduit, comme les entreprises satellite l'ont proposé, à presque
rien, c'est‑à‑dire dix chaînes qui coûteraient un prix dérisoire,
c'est un encouragement à s'abonner à ce service et ensuite voler le reste de la
programmation une fois qu'on a la plateforme.
5576 C'est cette
inquiétude‑là à laquelle nous avons fait référence plus tôt.
5577 CONSEILLER MORIN:
Donc, vous êtes intéressés, comme entreprise de distribution, à offrir aux
consommateurs un service de base plus élargi.
5578 M. AUDET: Je pense
que c'est un service qui a un succès puisque tous nos clients le prennent, 100
pour cent de nos clients le prennent, et en plus ils y ajoutent autre chose.
5579 CONSEILLER
MORIN: C'est tout. Merci.
5580 THE
CHAIRPERSON: Thank you.
5581 I would like to
come back to the question that Commissioner Cugini posed because I am not quite
sure I understand your submission.
5582 You say no genre
protection, no guaranteed carriage, no protection from foreign services except
that they would have to be non‑exclusive.
5583 We have created
this elaborate system, maybe too elaborate, but our mandate is to foster
Canadian content and we provide that you get guaranteed carriage and you get
genre protection in return for which you have very high Canadian content and
guaranteed access. Alternatively, you
are a Cat 2 when you have a relatively low.
5584 If you now take
these protections away, aren't we reducing the whole system to Category 2
services?
5585 And on what basis
could we possibly insist that existing Category 1 services or analog maintain
the existing Canadian content requirement of CPEs?
5586 I mean, I just do
not understand. Out of sheer regulatory
fairness, we could say no, you started that way, you stay that way; you started
as a Cat 2, you stay at a Cat 2. I mean,
surely as a regulator we would lose all credibility.
5587 MR. MAYRAND: Well, if I may say, Mr. Chair, the services
that have the benefit of the access rules at present have an entrenched
position in the marketplace and are not going to be dropped. That is clearly the position we are coming
from.
5588 THE
CHAIRPERSON: Yes, but I'm not talking
about being dropped. I'm talking about
the obligation they have to live up to.
5589 MR. MAYRAND: If I may continue the reasoning, these
services have business models that show growing revenue and growing returns. So I think in the end really we are back to
the fundamental part of the regulatory bargain, which is you are imposing
conditions including CPE conditions that relate to the ability of a licensee to
deliver on those expenditures and the other commitments that you set by
condition of licence.
5590 We don't see why
the ability of the services that have access now and genre protection is going
to be in any way transformed radically because you are moving away from that
model. If there is a concern, we don't
see the concern for services that are part of a large portfolio of specialty
and/or pay programming services.
5591 Why? Because I can tell you we go through these
negotiations for the whole portfolio of the services, or the better part of it,
and it is a take all situation and we negotiate on the whole package. There is strength in packaging even on the
programming affiliation side.
5592 So frankly, I
don't see that the financial resources of your licensees must, of necessity,
change dramatically if you are evolving the regulatory framework, certainly not
for the integrated groups.
5593 Now there might be
a concern with the independents and we are saying fine, let's keep the access
for them.
5594 THE
CHAIRPERSON: We are talking past each
other here.
5595 I am positing a
world à la Cogeco where we implement what you say. We are now in this new universe: no genre protection, no guaranteed package,
no genre protection against foreigners, only an insistence on non‑exclusivity.
5596 Now here we have
existing Cat 1s who have the CPE of whatever, 50 per cent let's say. The Cat 2 has one of 30. Licence renewal comes and you suggest we say
you stay at 50 because you have an existing business case. You have shown you can make money at that
rate, so you stay at 60 while the Cat 3, he goes on 30.
5597 How as a regulator
can I treat them differently? Do I have
to apply the same rule to everybody?
That is the problem I am proposing.
5598 MR. MAYRAND: I understand your point. I would still venture to say that in the face
of access rules applicable to analog services and Cat 1 services, you are still
making differences between services and essentially those differences are in
fact based on their financial capacity in the end when you look at it.
5599 You look at the
performance of each licensee at their license renewal ‑‑ and I
have been to a number of those hearings ‑‑ irrespective of the
fact that there is this framework in place.
5600 MR. AUDET: May I add, what we have suggested is a
uniform minimum threshold of 35 per cent Canadian expenditures. But that is really a minimum because it is
the market that decides what people will spend.
5601 So if you are
offering a news service, you are going to be, you know, for all intents and
purposes spending 100 per cent of your money or close to delivering that
service, if you are delivering a local news service.
5602 So really it is
the minimum 35 per cent threshold which we have advocated, knowing that there
are market realities and the market realities will dictate where people
eventually land.
5603 We have spent the
last four years scouting a part of the world, which is Europe. We must have visited 15 countries to date,
have spent considerable time wondering where the system is going, where are we
going, where is the rest of the world going.
And what we see everywhere else are very limited set of constraints.
5604 When we sit down
with a cable operator in a number of countries and tell them where we're coming
from, they are ‑‑ they just can't believe what we tell
them. They think we've descended from
Mars with all the accumulation of rules that we have.
5605 I don't mean this
as criticism; I'm just telling you a fact.
I'm just conveying to you a fact of what we hear.
5606 What we think is
that the future portends of massive influxes of information and video content
over the Internet with increasing quality, improved in the negative sense
attack by pirate satellite systems. The
system, our Canadian system, must adapt or else will happen to it what happened
to the economies of the Eastern bloc once the barriers fell. It was a total disaster. It was a slaughterhouse.
5607 Why? Because they were so protected that when the
barriers fell ‑‑ and eventually they do fall, they always
fall ‑‑ their economies were a shambles. It was a disaster.
5608 I think we have to
adapt proactively.
5609 Is adapting
painful? Yes, it is.
5610 Does adapting
entail a risk? Yes, it does. It does entail a risk.
5611 But if we don't
face this risk now, it could be a lot worse later.
5612 THE
CHAIRPERSON: Okay. But then from this, I take that at the end of
the day if we implement a new Cogeco‑type rule, et cetera, we are in
effect going to have a 35 per cent Canadian content across the board. That is going to be the net result.
5613 There may be
higher ones depending on what the market suggests, but that's really what we
are looking at.
5614 MR. MAYRAND: Well, Mr. Chair, I still think that in the
end, no matter which way you set up the regulatory model, you really have to
consider services at licence renewal.
5615 The one component
we think is missing in the equation is the group analysis, because in our
mind ‑‑ and I think Commissioner Katz raised that very
interesting issue ‑‑ you know, clearly there is a television
market now that involves not just the conventionals but the specialties and
that involves group players that are in both.
5616 And you see a lot
of programming that is used, adapted or recycled, on the multiple platforms,
which is good, but it's the new reality and I think you have to add that
component in the analysis, but you still have to deal with the licences that
you issue and their renewal.
5617 That is an
inescapable fact of life.
5618 MS ASSHETON‑SMITH: Can I add, I think one of the things we are
trying to do is delink the assumption that access should mean higher CPE
because, it's not really the advantage that it appears to be. The advantage is really an incumbency. And that's what were saying.
5619 Those analog
services that were licensed over 20 years ago, TSN, MuchMusic, YTV, services
like that in fact for the first decade of their existence had no guaranteed
access, they were optional carriage for cable companies. They grew.
They grew stronger, they were distributed, because they are good
compelling services that Canadians wanted to watch.
5620 I think what we
are suggesting is that the assumption that greater access, privileges or rights
should automatically equate to higher CPE or vice versa isn't necessarily the
link that needs to be made, and that may be the proper link, as Yves has been
mentioning, is actual distribution as opposed to access.
5621 Bearing in mind
that you have the ability to craft, tailor situations where you think it is
appropriate to do so.
5622 I can see a
question coming.
5623 COMMISSIONER
CUGINI: Yes, I just want to follow up on
that.
5624 The example has
been brought up a couple of times in these proceeding on the TSN and the others
that were licensed at the time.
5625 Sure there were
carried; there were only three of them.
There wasn't the choice that we have today of the number of specialty
services that can be carried by BDUs.
Point number one.
5626 Point number two,
on CPE and Cancon, here is our dilemma:
The specialty services that have must‑carry status today were
licensed, for the most part, in a competitive process, right, where there were
two or three competing, or four or five competing applications all in the same
genre and, in most cases, in the vast majority of cases, those services with
the highest levels of Cancon and CPE were awarded a licence, and they were able
to commit to those levels of Cancon and CPE because they knew they would get
must‑carry status.
5627 That's the 25
words or less history of the licensing of those specialty services.
5628 We are not linking
higher CPE with access; it's the other way around. The higher CPE's and the higher Cancon
obligations were linked to must‑carry because that is what they based
their business plan on at the time of licensing.
5629 MS ASSHETON‑SMITH: I guess my response to that would be that
there are some Category 2 services that are showing much greater returns than
Category 1s, they have been much more successful. And again, the fact that they don't have
access maybe doesn't mean they should be let off the hook.
5630 So getting back to
the notion of a minimum standard expenditure that's fair for everybody, some
can step up to the plate a bit more, over time I agree, you are going to have
to rationalize the licences I think as you move forward and you get away from classes
of specialty licences. There may have to
be a transitional period to get to that point.
5631 MR. AUDET: What you have just said, if I may, and I hope
you will forgive me for over simplifying, you have just said that a monopoly is
always profitable and I think everyone would agree with you. But what about creativity? What about the benefits of competition? What about what gets produced out of the
money when you are forced to be more creative because you have
competition? That's what our economies
now are built on and that's what makes us a successful country as a country and
we are arguing you could do the same thing here.
5632 THE
CHAIRPERSON: I was dealing with quite a
different point. I was taking your idea,
applying it and saying 35 per cent across‑the‑board was what you
say would come out. But then Mr.
Mayrand, if I understood him correctly, said:
Well, but you can then have different CPE requirements depending how
well they are doing over what they can ‑‑ and I don't know as
a regulator on what basis I discriminate and say you pay more than you, et
cetera.
5633 I just have no
basis on doing that. Why would I
penalize somebody because it was more successful than others?
5634 Once you start you
say delink, no carriage, no CPE because everybody has ‑‑ you
say people have grown up, the infant industries have grown, they all have their
place in the market, treat them the same.
Even if I accepted intellectually, then the next step which you say is
the divergent CPE requirement, I don't know on what basis you would impose
those.
5635 MR. MAYRAND: Well, if I may comment on this, Mr. Chair, I
still think that no matter which way you slice it and dice it, you know, each
specialty service has indeed filed a business plan in order to obtain their licence
and that business plan of course referred to ‑‑ in the case of
Cat 1s and analogs as the case may be ‑‑ access privileges.
5636 But that's not
some esoteric notion. That carriage was
related to a certain percentage penetration in the distribution market and I
certainly think there is nothing wrong in the Commission tailoring expenditure
commitments based on not just a theoretical rule, but on the actual threshold
of carriage.
5637 THE
CHAIRPERSON: Michel une dernière
question?
5638 CONSEILLER MORIN :
Dans la Loi canadienne sur la radiodiffusion, je pense qu'on parle de
programmation canadienne. On parle
aussi, enfin, pas de contenu, le mot " contenu " n'est pas, mais on
ne parle pas de libre marché et je ne pense pas qu'on parle de consommateur comme
tel. Ce n'est pas dans la Loi canadienne
de la radiodiffusion.
5639 Nous, on doit être
les fiduciaires de la Loi canadienne sur la radiodiffusion.
5640 Les objectifs de
la Loi canadienne de la radiodiffusion sont peut‑être plus politiques et
sociaux que le marché et le consommateur.
5641 J'aimerais avoir
vos commentaires là‑dessus.
5642 MS ASSHETON‑SMITH: If I may, this notion has been raised by a
number of parties, that the Broadcasting Act doesn't refer to market forces,
it's not an objective, competition is not an objective. That's true.
5643 The Federal Court
of Appeal, however, has recognized the ability of this Commission to use market
forces as a tool to achieve the objectives of the Act. It explicitly said competition may be relied
on by the Commission as a tool to achieve its objectives. You have that discretion.
5644 That's not to say
that you are required to, and certainly it is within your purview to decide
when and where market forces will be useful for achieving the objectives of the
Act.
5645 So we are not
saying it's an objective that you should be trying to achieve. Market forces for market forces, I think
everyone would agree, is not something that you should be trying to achieve. However, it is within the mandate of the
Commission under the Broadcasting Act to use market forces where appropriate to
achieve those objectives.
5646 COMMISSIONER
MORIN: Thank you.
5647 THE
CHAIRPERSON: Thank you very much. I think those are all our questions. Thank you.
5648 Madam
Secretary...?
5649 THE
SECRETARY: Thank you, Mr. Chairman.
5650 I would now invite
the next intervenor to come to the presentation table, Pelmorex Communications
Inc.
‑‑‑ Pause
5651 THE
SECRETARY: I would now invite Mr. Pierre
Morrissette to introduce his colleagues, after which, Mr. Morrissette, you will
have 15 minutes for your presentation.
5652 Thank you.
PRESENTATION / PRÉSENTATION
5653 MR.
MORRISSETTE: Good morning. My name is Pierre Morrissette and I am the
Chairman and CEO of Pelmorex Communications Inc., the parent company of The
Weather Network and MétéoMédia.
5654 With me today,
sitting on my right, is Gaston Germain, President and Chief Operating
Officer. On my left is Paul Temple,
Senior Vice President, Regulatory and Strategic Affairs. Next to Paul is Luc Perreault, our Vice
President, Affiliate and Government Relations.
5655 We bring a unique
perspective to these proceedings as a broadcasting panel that collectively has
more than 60 years experience working as cable and satellite distributors.
5656 Mr. Chairman,
Commissioners, we believe the real opportunity in this review is to build an
even stronger, more successful Canadian broadcasting system. Ensuring access to diverse high‑quality
Canadian content is a fundamental objective that underlies the Broadcasting
Act, as valid today as it was 40 years ago.
It's not about simpler rules, it's about the right rules.
5657 Ce matin, nous
voulons discuter avec vous de notre vision d'un nouvel environnement
réglementaire et vous adresser nos commentaires sur les questions mises de
l'avant par le président dans son allocution au début de l'audience.
5658 Nous nous
attarderons aussi sur l'impact de la déréglementation telle que proposée par
les EDR.
5659 Our starting point
for a revised regulatory framework is today's success. The Canadian broadcasting system is the envy
of the world because of the number of domestic television services and the
quality, quantity and diversity of the Canadian productions they broadcast.
5660 The current
regulatory regime has built this system.
We won't repeat the CAB's presentation on this point, except to say that
we are proud of the contribution we have made to that success.
5661 Our vision of the
future is a Canadian broadcasting system that can meet the challenges of new
technology and competition without ever diminishing its contributions under the
Broadcasting Act. It is based on the
ideas contained in the Statement of Broadcasting Principles put forward by a
large number of independent programmers in this review. These principles ensure a system that
reinforces Canadian culture and identity, where Canadians have a broad choice
of Canadian programming and where Canadian content and diversity take pride of
place.
5662 Gaston Germain
will now provide our responses to the Commission's questions and proposed model
within this context.
5663 MR. GERMAIN: Thank you, Pierre.
5664 First, the size of
basic service.
5665 We do not see how
the public interest and the objectives of the Broadcasting Act would be
furthered by limiting the basic service to priority over‑the‑air
television stations and 9(1)(h) services.
5666 Rather, we see
value in proposals that would require BDUs to also distribute on basic those
specialty services that make a significant contribution to the objectives of the
Act in terms of the exhibition of Canadian content and their expenditures on
Canadian programming.
5667 The Commission has
also raised the concern of offering basic at the lowest possible price. The cost of basic has particularly become an
issue since it was left to the discretion of BDUs. As the following table from our February
filing shows, the rates have skyrocketed since rate regulation in 2001
independently of programming costs. It
is clear that the affordability of basic is largely unrelated to its size.
5668 With respect to
access rules, our position outlined in the Statement of Broadcasting Principles
is that analog and Category 1 services should be considered core services and
guaranteed access to the digital broadcasting system. Also, any licensed Category 2 service that
agrees to match Category 1 contributions should be added to the rank of core
services.
5669 As major cable
operators have indicated in this proceeding, capacity will cease to be an issue
in a digital world, so there is no reason to limit access by licensed Canadian
services to distribution networks or to limit access by Canadian consumers to
Canadian services.
5670 It clearly
furthers the policy objectives of the Act to ensure the Canadian services that
make strong contributions to creating and showcasing Canadian content should
have greater access privileges than foreign services that make almost no
contribution.
5671 Services that are
licensed by the Commission and that are deemed to be valuable contributors to
the system, should not have to go through a second arbitrary licensing process
at hands of the BDUs.
5672 Our proposal on
genre exclusivity is to maintain it both between Canadian services and with
respect foreign services. We would base
it on niche categories and not on broad categories, and here is why. We feel that all the drivers that
necessitated genre exclusivity in the first place still exist: strong foreign services, a relatively small
domestic market and the need to finance significant regulatory obligations.
5673 Without niche
categories our distinctive Canadian services will slowly blend into homogenous
offerings like so many American services have done. Major broadcasters and BDUs would benefit but
the broadcasting system and consumers would be the losers with a loss of
programming diversity and independent voices.
5674 Genre exclusivity
rules are needed to ensure a diverse array of programming choices, strong
Canadian content and diversity in broadcasting players.
5675 Now, on the issue
of advertising we do not believe BDUs should have access to advertising
revenues from on‑demand services or from local avails. Access to advertising by BDUs undermines the
business model for programming services.
It only serves to escalate the conflict of interest of BDUs in their
dual roles as distributor and programmer.
5676 And with respect
to local avails, the two minutes per hour on foreign services should only be
used to promote Canadian services. That
was the original intent when the use of foreign ad avails was approved. It's an important contribution to the
broadcasting system by foreign services and should not be watered down.
5677 BDUs should
absolutely not be able to demand and sell advertising on Canadian
services. Few services are ever able to
negotiate a rate increase after launch, leaving advertising as the only means
to finance new and innovative programming.
5678 BDUs have far too
much bargaining power for a fair negotiation of advertising inventory,
especially with independent services or services seeking carriage.
5679 Finalement, je
voudrais vous entretenir sur le sujet de la prépondérance.
5680 Dans le but de
simplifier la réglementation actuelle, nous avons proposé de remplacer toutes
les règles d'étagement et d'assemblage en les simplifiant via une obligation
simple de prépondérance des services canadiens.
5681 Notre énoncé de
principes de radiodiffusion recommande que les deux tiers de tous les services
discrétionnaires offerts par les EDR soient canadiens et que les deux tiers de tous les services
reçus par les consommateurs soient aussi canadiens.
5682 Cette
prépondérance de deux tiers sera essentielle afin de maintenir le succès du
système canadien de radiodiffusion lorsque les filtres analogiques et les
règles d'assemblage seront disparus.
5683 Dans l'univers de
500 canaux, l'accès par lui‑même n'est pas assez pour assurer la
prédominance des services canadiens.
5684 MR.
PERREAULT: The BDU regulatory model that
Rogers and Bell presented last week largely ignores Canadian content, diversity
and the objectives of the Broadcasting Act.
Their proposals are anchored on the scare tactics supported only by
anecdotal evidence that Canadians are leaving the broadcasting system for the
internet. In fact, the internet is not a
threat to the BDUs.
5685 At the same time
as they increase broadband subscribers, BDUs are also increasing basic cable
and satellite subscribers. This is a
long term trend as the following table from our February reply submission
shows.
5686 As subscribers who
have both internet and broadcasting services decide where to spend their time,
it is broadcasters and not the BDUs who must innovate and face the internet
competition. If the internet is a threat
to the system then, in our view, the best strategy is to strengthen the Canadian
programming services. Denying Canadian
services access, removing genre exclusivity and eliminating promotional avails
on foreign services only weaken Canadian services.
5687 MR. TEMPLE: Commissioners, the BDU model will cause
lasting harm to the Canadian broadcasting system. Pelmorex strongly believes that the market
forces that should sustain deregulation are rendered ineffective by the
excessive market power that BDUs command within the broadcasting system.
5688 Mr. Chairman, you
correctly remind us that what business needs is certainty, predictability and
less arbitrary decisions. We can't think
of a model that adds more uncertainty to programming services than the regime
proposed by BDUs.
5689 On each of the key
issues the BDUs' proposal solidify and expand their already excessive market
power at the expense of diversity and Canadian content. In a digital world viewership information
from their set‑top boxes tilts this imbalance even further in their
favour.
5690 BDUs argue for a
strict minimum of mandatory services on basic, according them with the power to
package and tier the remaining services as they see fit. This proposal completely decouples
contributions to the broadcasting system from carriage on basic for specialty
services. It has the potential to leave
valuable Canadian services without the resources to meet their regulatory
obligations.
5691 Likewise, BDU
access proposals set them up as a regulator deciding which services are, in
their words "worthy of launch or continued carriage". This gives them an incentive to deny access
and distribute cheaper American services or to launch their own house
brands. This access policy does not
empower the consumer. It empowers the
BDUs.
5692 Without genre
rules BDUs can launch or threaten to launch competitive services. Again, these include their own directly
competitive house brands for which they would have an overwhelmingly unfair
advantage.
5693 Under proposed BDU
genre rules of broad shifting categories, services can morph into just about
anything. The example of the Nashville
Network becoming Spike TV, a men's service, would become more common under the
BDU model. It's customer unfriendly and
results in a loss of diversity of programming and voices and is inconsistent
with the BDUs own packaging strategies.
5694 BDU VOD proposals
amount to approving a parallel and competitive broadcasting system under the
control of cable. VOD is essentially a
monopoly service. It's generally
available only through one supplier in a market and should be regulated
accordingly.
5695 Like an iceberg
many of the consequences of relaxing VOD rules are hidden below the
surface. Cable operators control menus,
the programming guide, marketing and promotion.
They enjoy a powerful competitive advantage to their ability to extract
subscriber behavioural profiles from the digital platform. If left unchecked they can use this business
intelligence to identify top programming, acquire it directly, counter program
with on‑demand content and undermine the specialty programming and over‑the‑air
sectors.
5696 Pelmorex calls for
a moratorium on VOD rules or the expansion of those services until a separate
proceeding can be held to better understand and deliberate the long term
implications of VOD to the Canadian broadcasting system.
5697 M.
MORRISSETTE: Monsieur le Président, nos
recommandations ont pour but de préserver et de construire sur ce que nous
avons atteint en termes de contenu canadien de haut niveau, de diversité et du
caractère distinct des services que des Canadiens peuvent regarder.
5698 Pour nous, comme
pour tous les services indépendants, la composition du service de base, l'accès
et la protection de genre sont les sujets les plus importants de cette
instance.
5699 Ces trois sujets
représentent d'immenses enjeux pour nous et pour tout le système de
radiodiffusion.
5700 Following the
proceedings the result of your deliberations will be felt for years to
come. We have argued for evolution, not
revolution because the system is working extremely well for all stakeholders
and regulatory change can produce irrevocable consequences.
5701 We have tried to
craft our proposals to offer a balance in the broadcasting system where all
parties can benefit and prosper; consumers, broadcasters of all sizes;
producers as well as distributors. And
we believe that our proposals will offer a strong legacy to Canadians by
ensuring an already great broadcasting system becomes even better.
5702 We have left
untouched in our oral comments some important issues such as dispute resolution,
undue preference, packaging of French‑ language services, satellite
uplink payments and many others. As time
permits we would be glad to discuss our detailed proposals or answer any
questions you might have on our presentation.
5703 Thank you.
QUESTIONS BY COMMISSION / QUESTIONS
PAR LA COMMISSION
5704 THE
CHAIRPERSON: Thank you very much for
your presentation. Let me go through the
points with you so I understand them correctly.
5705 First of all, on
the size of the basic service that chart that you have put in there is
fascinating. It is that since the date
of deregulation how the fees have increased and presumably the size of the
basic package has increased as well.
5706 Do I understand
that you want us to go back to prescribing a minimum basic package that every
BDU has to offer? Is that the
implication I am to take from this?
5707 MR.
MORRISSETTE: No. Our presentation outlines the fact that the
affordability of the basic package has little to do with price increases on the
programming side.
5708 THE
CHAIRPERSON: Yes.
5709 MR.
MORRISSETTE: Since deregulation the
price of basic has escalated and there is little correlation to increasing
programming prices.
5710 I will pass it
over to Paul to add to this.
5711 MR. TEMPLE: Just on that specific matter, one chart we
didn't include in our oral presentation but was included in one of our filings
was also relating to the cost, the increases in basic to the increases in
programming costs. And I believe that
showed, again, the same point.
5712 The increase
in ‑‑ I'm looking desperately for the chart. But what it said is that the cost of
programming on services on basic had risen by a few pennies a year whereas
obviously the rate increases were typically in the range of a couple of dollars
a year.
5713 MR.
MORRISSETTE: I might add that for the
Weather Network, MétéoMédia, specifically and most specialty services to my
knowledge, the rate increases have been negligible. In our case for 20 years we have been
offering our services at exactly the same rate.
So it's no correlation whatsoever with respect to the cost of basic.
5714 THE
CHAIRPERSON: So on basic package,
basically you see us saying a basic package must include the following and then
leave it up to each BDU to structure how big the basic package would be?
5715 MR.
MORRISSETTE: I will ask Mr. Temple to
outline our proposal on the composition of basic service.
5716 MR. TEMPLE: Yes, there would be a minimum mandatory
element over‑the‑air and whatnot.
5717 The main point of
difference between ourselves and, I think, the BDUs is that we agree that
additional services should be permitted to be carried on basic. The point of difference is who decides and in
our view it's a matter of the Commission deciding which services are eligible
or the BDU. And I might point out you
know there is a lot of talk about consumer choice, but in either case the
consumer probably doesn't have an awful lot to say about it.
5718 And so our view is
what is best for the system? What is
best ‑‑ what approach is best to support the objectives of the
Broadcasting Act? And we would much
rather rely on the Commission establishing criteria, whatever they may be, that
are going to further the objectives of the Act rather than BDUs deciding on
some other basis. I'm not sure what
basis they would decide and I am not going to go to their motives. But we would be much more comfortable with
the Commission establishing those criteria.
5719 MR. GERMAIN: Mr. Chairman, if I can just add one point to
that, I think Paul is quite right that there is not a lot to distinguish
between what we are proposing and what I think most of the BDUs are proposing.
5720 But we do
emphasize that some of the core services ‑‑ we recognize that
there is ‑‑ at some level there should be an access and a
distribution recognition that is commensurate with the contribution that some
services make, measured however the Commission determines that it should but
the presumption at least that Cancon and expenditures would play a role. But those are directly derived from the
obligations under Act and the objectives of the Act.
5721 THE
CHAIRPERSON: But different criteria than
the 9(1)(h) criteria, I gather?
5722 MR. GERMAIN: Yes.
5723 THE
CHAIRPERSON: And on access I am
fascinated. Basically you are suggesting
we keep the present access formula but you also provide that any Category 2 can
become a Category 1 if they live up to the required content and CPE rules, if I
understand that correctly.
5724 MR.
MORRISSETTE: That's correct.
5725 Well, just a starting
point on access, this is a fundamental for any specialty service whether it's a
long service that has been in the system for a lengthy period of time or a
brand‑new entrant. Without access
you just simply don't have a business.
5726 Even if we are an
established services such as ours or other independent services, because it's
not just ourselves; it's all independent services, access is so fundamental
that to not have it when you enter in negotiations you always have this level
of uncertainty as to whether it could be removed. It's a hammer in negotiations that is just
there.
5727 And so it's just
one of those elements that we think there is no capacity issue and it's just
one of those fundamentals that must be preserved.
5728 THE
CHAIRPERSON: Operationalize this for
me. How would we actually do this? Would we have annual hearings, every three
years or something and saying any Cat 2 that's there who wants to become Cat 1 can
make an application? I mean I ‑‑
5729 MR. TEMPLE: No. We
have a very specific plan. Our proposal
is that Category 2 licensed services ‑‑ so that would include
only services that have launched ‑‑
5730 THE
CHAIRPERSON: M'hm.
5731 MR. TEMPLE: ‑‑
would have the opportunity within some timeframe that the Commission might
establish, to file and make a case that they can increase their Canadian
content and exhibition commitments to warrant access; in effect, migrate to
Category 1.
5732 The fundamental
rationale behind that is our belief that if the Commission is going to issue a licence
it has got to mean something. You are a
regulatory body that has a great responsibility and if you deem a service is
going to make a contribution to the Canadian broadcasting system then it should
be carried.
5733 And so if there is
a criteria ‑‑ if there is a benchmark that warrants being
licensed, if that is Canadian content or whatever, then people will have to
step up to the bar but they should have access.
5734 And in terms of
new applicants, not necessarily existing licensed Category 2, but if anyone
else wants to offer a service then they have to bring forward an application
just as people do for over‑the‑air or radio and it will be judged
on its merits. And that repatriates the
significance and the meaning of holding a broadcasting licence as a specialty
service.
5735 And that's where
we are coming from.
5736 THE
CHAIRPERSON: So you mean not only
Category 2s can become Category 1s but some brand new service can make an
application to become a Category 1 too, according to you?
5737 MR. TEMPLE: Why would we want to limit the number of
Canadian services, that there could be new wonderful service ideas? Why do we want to close the door? You know, they may be fewer in coming.
5738 I don't know, but
surely the Commission would want to leave itself open to receiving applications
and enable Canadians. And that's what
the Broadcasting Act is about. It is
encouraging new voices, new expression, new content.
5739 THE
CHAIRPERSON: But do you want to maintain
genre exclusivity as it is right now?
5740 MR. TEMPLE: Yes; yes, we do. We believe that's fundamental to the whole
package and we have a detailed proposal on that as well.
5741 MR.
MORRISSETTE: On the question of genre
exclusivity there are two, perhaps three make or break policies in our view. One has to do with composition of basic; two
has to do with genre exclusivity and the third is access. And this is not just for MétéoMédia and the
Weather Network. It's for all
independent services.
5742 In the area of
genre exclusivity we have a very large number of specialty niche television
services in this country today and the system has worked very well. The Canadian market is very small and when
you segment it further by niche categories it becomes even smaller.
5743 And the only way
that many of these services can exist and provide quality programming at an
affordable price to subscribers with high Canadian content is to be able to
exploit this particular niche category in a successful way. Once we segment that niche category we are
segmenting something that's already very small and it's only going to have one
effect. It's going to push down the
ability to invest in the quality programming that is available.
5744 I could go at
greater length to explain why it is very important to preserve genre
exclusivity; many other reasons as well.
5745 THE
CHAIRPERSON: You have heard Rogers'
proposal suggesting that we broaden the categories of genres into basically
classes, one of them lifestyle, one of them sports, et cetera, and at least for
Canadian services allow for competition among genres.
5746 Now, you suggest
that would be a bad idea and it would lead to homogeneity and sort of everybody
centring at the mass rather than having the discrete genres that we have right
now. I mean couldn't it be just the
opposite? I mean, that the more you have
that people have to try to differentiate themselves and therefore you don't
have a blending in the middle but you want to standout, and therefore people
will go to discrete markets for which there is appeal?
5747 MR.
MORRISSETTE: Well, I will just kick it
off and have Paul give a more detailed response.
5748 In our case our
business model is broad reach and in every region of Canada. We serve 1,300 communities.
5749 Now, it's
important to appreciate the fact that our business model allows us to cross‑subsidize
and sustain a French service which is barely breakeven on its own. It enables us to not just focus on the large
markets in this country but to extend our local content; 100 percent Canadian
content, I might add, to 1,300 small communities across the country.
5750 If there were
another entrant and it would dilute our revenues, potentially dilute our
carriage and certain service unless access is maintained; it would inevitably
reduce our ability to spend and cross‑subsidize our markets the way we do
today. It would push us to focus on the
larger markets which contribute the most to our service.
5751 Paul, if you can?
5752 MR. TEMPLE: The Rogers' model, as I understand it, is
that there would be some number of broad categories and if you met the criteria
of that category then you could launch a service. I guess there is a ‑‑ and
they seem to allude to the fact that, you know, in the U.S. market there is no
genre protection and there is still distinct genres.
5753 But if you look at
the U.S. market genre is largely limited to the name of the service. We actually looked at this evening's
schedules and Arts & Entertainment; presumably focused on arts, has Cold
Case, CSI Miami and Intervention playing this evening. Lifetime which was one time oriented towards
women's programming has Frasier, Will & Grace and they have got the Golden
Girls. MTV, once the music video service,
has America's Top Model, The Hills and The Paper. And a little ironically, even the weather
channel in the U.S. has Storm Stories and When Weather Changed History.
5754 So to us, without
some kind of meaningful genre regime, services are going to change their
programming strategy.
5755 With regards
to ‑‑ the problem with genre protection ‑‑
not the problem but with eliminating it, is that all the reasons we established
genre exclusivity are still in effect, as Pierre mentioned, small markets, a
market again and a smaller market serving Quebec; English Canada beside a large
U.S. market. These factors are still
there. The Canadian market isn't any
bigger than it was awhile ago. So if you
are going to say, as Rogers is proposing, "Well, let there be
competition" it is just going to drive people to lower prices and whatnot.
5756 The other issue,
though, is that we have created a problem now where distributors are
programmers and that is going to give them a tremendous advantage. They are going to be able to counter‑program. When they ‑‑ I don't think
people realize the power that the digital set‑top boxes have given
BDUs. They can monitor everyone's
viewing. They know who is watching what,
when those programs are on. They know
that by geographical area. That gives
them a tremendous advantage to counter‑program against everyone else.
5757 So once we open
those or eliminate genre exclusivity it's just going to have the consequences
that Pierre suggested earlier.
5758 MR.
MORRISSETTE: If I can just add one very
real experience? In the 1990s we
launched a weather network in the U.K. and we were fighting for
distribution. But very shortly after
that there was another weather service that launched concurrently. So we were fighting each other, not just for
distribution but on the basis of price as well as the number of systems that
would carry us. It was a distributor's
delight. They could beat us up on rates
which they did. It drove the rates down
like crazy. It fragmented the
market. It split the market to the point
where neither service was sustainable.
5759 About six months
later we both realized that we were doomed, that we didn't have enough
subscribers; the rates were too low to carry a level of quality
programming. We merged but it was too
late. You know, the rates were already
way too low and within another six months both of those services closed
down. And to this day, about 12 years
later, there is still no weather service in the U.K.
5760 THE
CHAIRPERSON: And the fact that you have
now established a very powerful brand and are well known and have a loyal
following is not enough to protect you?
5761 MR.
MORRISSETTE: We have evolved over the
last 20 years and we have built up our service and, yes, we do appreciate the
fact and are proud of the fact that we have been successful. But you know, everyday in every market across
this country we face direct competition for weather impressions and probably
one of the bigger sources of weather impressions in this country is still
radio.
5762 So we are
constantly fighting for market share from all platforms and it's a fight for audience. Our business is not about big audience
numbers. It's about a large reach which
translates into a small share. It's our
challenge after we have competed for audience share, competed for our share of
weather impressions to monetize that through advertising. And we know that there are many, many
different alternatives for advertising.
Our rates are fixed.
5763 So it's all about,
you know, developing market share and the advertising ultimately.
5764 MR. GERMAIN: Mr. Chairman, if I could add one thing, I
think, to your question and the answer to your question; what underlies that is
some notion of how ‑‑ what the dynamics of market forces are,
where a specialty service such as ours operates.
5765 And there has been
a very dramatic change in that landscape in the last 10, 15 years. Programmers have consolidated, BDUs have
consolidated and BDUs are also in the programming gig. And laterally we have got other platforms that
are coming into play, internet and mobile platforms, which we think are more of
a threat to the programmers than they are to the BDUs.
5766 But those four
factors have had the effect of shifting market power to a few groups. So there are market forces at play but market
forces that would allow ‑‑ that would suggest that levels of
protection whether they be access or genre can be removed and let people with
the strongest brands fight it out with others, I don't think necessarily apply
here when market power is localized in a few groups in the system.
5767 And the way it's
likely to play itself out for us is we will be competing against either a BDU
programmer or one of the existing groupings of programmers, strong players, who
would focus on our genre in the large urban markets. We would end up overserving those markets but
to the loss of the sparsely populated markets and including probably the French
market because we would have difficulty sustaining that level of service as
well.
5768 So the market
forces, I think, aren't working as well as everybody would like to think that
they are.
5769 THE
CHAIRPERSON: I notice in your submission
you say nothing about fee‑for‑carriage. Do you have any views on it?
5770 MR.
MORRISSETTE: I guess it is more the
issue for conventional broadcasters. Our
concern is the trickle‑down effect from the issue of fee‑for‑carriage. If it were to be allowed, we have heard a
certain number of BDUs express the fact that they would pass on the cost to
subscribers. I think that they would
also very much try to reduce the cost of existing programming services.
5771 That is ever
present in our environment and it is an issue that we face regularly in terms
of our particular subscriber fees and those of other independents and other
services as well. So that is one of the
concerns we do have.
5772 THE CHAIRPERSON: From that I take it you have no issue with
the concept, you are just worried about the economic effect it will have on
you?
5773 MR.
MORRISSETTE: Rather than no concerns
over the issue, I guess, we have not focused on that particular issue because there
are three others which for us could have catastrophic effects versus this one.
5774 THE
CHAIRPERSON: Then on the issue of VOD
and BDUs advertising on VOD, you sort of make a strong point in saying this is
an unexplored area and we should have a special hearing on it to understand the
long‑term effects.
5775 I would like you
to elaborate on that because you have heard Rogers and others and there is the
whole idea of how does the whole broadcasting system keep its viewers,
especially for advertising purposes, rather than seeing them migrate over to a
new media and one way of doing this obviously is through targeted advertising
and dynamic ad insertion. The persons
best placed to do that are the BDUs.
5776 Now we can talk
about whether they can do it on their own or if they should share with the
broadcasters but that is clearly one way that Rogers and others see that we can
make sure that advertising remains relevant and the broadcasting system is a
generator of great revenue and serves a need for advertisers to really target
and reach these particular micro‑audiences that they want to reach.
5777 In effect, it is a
way of growing the advertising pie rather than redistributing it, et cetera,
and the BDUs suggest that is why they should have rights to advertise on VOD,
et cetera.
5778 Do you see that as
a potential, do you see that as something that should be explored or do you see
that mostly as a danger to you, et cetera?
I am not quite sure from your presentation where you come out on this.
5779 MR. MORRISSETTE: We view the whole area of VOD as having great
potential. The development of new
technologies that contribute and support targeted advertising also has great
potential. In fact, there is more and
more of a trend in that direction whether it is through the internet or other
platforms. So to be able to accomplish
that via cable is a great opportunity.
5780 The issue becomes
programming rights and advertising revenues and whose domain is that and also
the kinds of agreements to be reached with BDUs to take advantage of their
technologies that could allow targeted advertising.
5781 I would like to
pass it over to Paul Temple to elaborate.
5782 MR. TEMPLE: As Pierre said, we are quite excited, we
think it is a wonderful opportunity. It
just simply boils down to who gets that new piece of the pie and this is a
turning point because now is the time to get the rules right.
5783 We have used the
analogy of ad avails because we see the same trend happening. When ad avails on U.S. services were first permitted
to be used by cable operators, they were to be free to Canadian services. Then they became cost recovery. Now they want to take those and use them and
generate revenue for themselves.
5784 So we want to make
sure that the rules that apply to VOD advertising are firmly established,
everyone understands what is going on, and the proposal, I think, of Rogers was
well, we will do it kind of at a cost recovery and then we will maybe kind of
share any profits and whatnot.
5785 It is a monopoly
service. They are tremendously excited
about VOD because they know their main competitor can't offer that
service. So what is the cost ‑‑
all these issues, what is the cost going to be to transcode the
programming? Who is going to do
that? Can I do that or will they have a
monopoly to transcode programming?
5786 Because right now
it is weak. They won't let us do it and
it is too expensive to have them do it, so we don't have programming on
VOD. Will they be able to counter‑program? Will they be able to bid on rights of
programming?
5787 All these issues
have to be resolved before we open the door to these new services, otherwise we
could get the system wrong and it will be very difficult to turn back. So excited we are but we are worried that it
be done properly.
5788 MR.
MORRISSETTE: This is going to become a
major broadcasting component in our system.
It will be a parallel broadcasting system to our traditional channels.
5789 It is programming
à la carte, individual programs through VOD offerings and it is very, very
important to determine the role of traditional programmers in that whole
environment, and as opposed to everything ‑‑ we have used the
term "morphing" a lot in this hearing ‑‑ morphing
towards the BDU at the expense of the domain of programmers.
5790 THE
CHAIRPERSON: So your suggestion is we
basically hold a totally separate hearing on VOD, the future of VOD and the
rules on VOD before we allow any advertising by BDUs on VOD?
5791 MR.
MORRISSETTE: It is too important an
issue to deal piecemeal, ad hoc, without having examined the full ‑‑
all the big picture aspects and ramifications of VOD programming in Canada
today, next year and five years from now.
5792 THE
CHAIRPERSON: And I presume when you talk
about VOD, you include SVOD?
5793 MR. MORRISSETTE: Yes, we do.
5794 THE
CHAIRPERSON: Okay, thank you.
5795 Michel.
5796 CONSEILLER ARPIN :
Merci, Monsieur le Président.
5797 En parlant
justement de publicité, mais seulement sur la vidéo sur demande, mais une des
questions qui est dans cette audience‑ci, c'est l'élimination des règles
de limitation de publicité sur les canaux spécialisés.
5798 Quelle est votre
opinion sur cette question‑là?
5799 M. MORRISSETTE :
Monsieur Arpin, je crois qu'avoir une limite sur le nombre de minutes de
publicité sur un service spécialisé comme le nôtre, ça s'applique plus ou
moins. Je crois que les forces du marché
dans ce contexte‑là viennent s'appliquer.
5800 Pour nous, dans
notre cas, on a décidé il y a longtemps que de dépasser 12 minutes à l'heure
nuirait à notre habilité d'augmenter nos cotes d'écoute, et donc, on se limite
nous‑mêmes à 12 minutes. Alors, on
est satisfait avec ça. Alors, pour nous,
nous sommes indifférents à l'augmentation de cette contrainte.
5801 CONSEILLER ARPIN :
Maintenant, Rogers, dans son projet, propose qu'ils aient accès à des minutes
publicitaires sur les canaux spécialisés canadiens. Je sais que dans votre mémoire vous avez
commenté cette question‑là. Alors,
peut‑être que pour...
5802 M. MORRISSETTE :
Pour le record, nous sommes catégoriquement opposés. On négocie déjà des termes d'accès, et pour
venir davantage, venir négocier des minutes de publicité qui réduiraient, que
ça soit directement ou indirectement, notre habilité de vendre notre plein
potentiel de nos minutes publicitaires irait à l'encontre de notre habilité de
générer les revenus nécessaires pour rencontrer toutes nos obligations et de
continuer à croître.
5803 Et puis ça, c'est
le transfert d'une poche à l'autre de rendement économique qui vient tout
simplement à cause de market power et l'habilité d'avoir un levier extrême face
aux titulaires de licence pour venir exproprier des recettes des poches du
programmeur au distributeur.
5804 CONSEILLER ARPIN :
Maintenant, si le Conseil dans sa sagesse arrivait à la conclusion qu'il
acquiescerait à la demande des exploitants d'entreprises de distribution et
leur permettrait d'avoir accès à du temps publicitaire sur vos services, est‑ce
que ça soulèverait des enjeux particuliers, commerciaux particuliers, par
exemple, solliciter les mêmes clients que vous avez?
5805 M. MORRISSETTE :
Absolument. Ça ouvre toute une situation
où notre distributeur devient un concurrent direct à notre service via le
secteur de revenus publicitaires sur lequel on dépend entièrement pour maintenir
nos obligations actuelles et pour continuer à croître. C'est intenable.
5806 CONSEILLER ARPIN :
Monsieur Morrissette ou Monsieur Germain, puisque c'est vous, dans le texte,
qui en avez fait allusion.
5807 Vous avez parlé de
la prépondérance et vous avez dit que votre position, c'était que deux‑tiers
des services discrétionnaires offerts devraient être canadiens et deux‑tiers
des services reçus devraient être canadiens, et à la toute fin du même
paragraphe, vous dites, dans l'univers des 500 canaux.
5808 Deux‑tiers
de 500 canaux, ça en fait beaucoup de services canadiens. Est‑ce qu'il y a l'économie de marché
canadien pour être capable de soutenir deux‑tiers de services canadiens?
5809 M. GERMAIN :
Pardon, Monsieur Arpin. On pourrait se
poser la même question à 250 aussi ou à 350.
C'était tout simplement un exemple que le niveau de capacité et les
plates‑formes augmentent grâce à la technologie et les niveaux de
compression et tout ça. Mais le principe
se livre entièrement à ce que nous croyons sont les objectifs de l'Acte sur la
radiodiffusion, et c'est tout simplement de réaliser...
5810 Je recule un
peu. On pense, en fait, que ce que nous
proposons simplifie un peu la réglementation qui existe aujourd'hui, parce
qu'on ne propose pas de le faire au niveau du packaging. Alors, c'est au niveau de l'offre et au
niveau de la recette.
5811 CONSEILLER ARPIN :
C'est pour ça que, enfin, je pose la question, parce que certains nous ont dit
que ce qui était important pour eux, c'était le nombre de canaux auxquels les
gens souscrivaient plutôt que le nombre de canaux offerts.
5812 Vous, vous dites,
vous avez une règle double, nombre de canaux offerts et nombre de canaux
souscrits, et vous nous parlez d'un univers de 500 canaux. Un calcul mental rapide là, ça en fait 330...
5813 M. MORRISSETTE :
Ça en fait pas mal, oui.
5814 CONSEILLER ARPIN :
Ça en fait pas mal.
5815 M. MORRISSETTE :
Monsieur Temple a une très bonne réponse à votre question.
‑‑‑ Rires /
Laughter
5816 MR. TEMPLE: The reference to 500 channels, of course, is
a reference to a song. I don't
think ‑‑ it is just a saying, however many channels.
5817 COMMISSIONER
ARPIN: Well, the CAB in ‑‑
Glenn O'Farrell wrote a paper saying that there is currently 430 something
channels available here in Canada. So we
are not far from 500.
5818 MR. TEMPLE: It is the count. Our proposal is specifically based on ‑‑
our preponderance proposals are specifically based on licensed discretionary
specialty services and our point is that applied to licensed discretionary
specialty services, both as to distribution and those received by a subscriber,
it should be the 66 percent.
5819 We are not
including all of the audio channels, all of the VOD and all of those channels,
we are just looking at the ones that relate to specialty services.
5820 COMMISSIONER
ARPIN: So you are even making ‑‑
5821 MR. TEMPLE: We are focused.
5822 COMMISSIONER
ARPIN: You are quite focused, but you
are even making the pool much smaller than I was understanding from your oral
presentation.
5823 My concern is, is
that pool ‑‑ is it realistic to think that there could be two‑thirds
Canadian services on the total offering?
5824 MR. TEMPLE: Currently, I think, that is not a problem
with the number of Canadian discretionary licensed services.
5825 There is no issue
there.
5826 The reason we
proposed this in terms of services being distributed, as well as being
received, is that we don't want a world where BDUs decide ‑‑
and, basically, they alone decide what services will be added. The menu will simply grow full of U.S.
services.
5827 If the discretion
to add services is left solely to the BDU, we may see a world in five years
where all of the new additions are U.S. services. We don't feel that that meets the objectives
of the Broadcasting Act, so we are trying to create a simple incentive that
says: You want to add foreign services?
There is an incentive to add Canadian services.
5828 COMMISSIONER
ARPIN: Okay. Let's take your answer for what it is for the
English market, but, at the end of his oral presentation, your president, Mr.
Morrissette, suggested that there might be issues specific to the French market
and the availability of French services to subscribers.
5829 Could you expand
on that?
5830 MR. TEMPLE: Our proposal is based on ‑‑
in our written brief, which is a little more extensive, the preponderance
proposal that we make is applied to services, domestic and foreign, in the
language of the market.
5831 In English Canada
we are focusing on English‑language specialty services to foreign‑language
specialty services in English. So the
same principle would apply to the French market.
5832 COMMISSIONER
ARPIN: That means, if I am following you
and I hear what you say, that Videotron will have to remove from their current
distribution over 50 services in English.
5833 MR. TEMPLE: No.
No, it wouldn't apply to English services carried in French‑language
markets.
5834 What we are saying
is, focus on the main language of the market in question.
5835 If you are dealing
with English Canada, you have to have two‑thirds English services to
foreign‑English services.
5836 In a French‑language
market, you would have to have two‑thirds French‑language services,
and you couldn't have more than one‑third French‑language foreign
services.
5837 COMMISSIONER
ARPIN: That's exactly what I understood.
5838 Currently, I would
guess that Videotron is offering some 250 services, altogether, 200 of which
are in English.
5839 MR. TEMPLE: They wouldn't be in our count.
5840 They wouldn't be
on either side. That's fine.
5841 And we hope that
distributors in English Canada carry francophone services, but it doesn't go to
our count.
5842 COMMISSIONER
ARPIN: We all hope that, particularly
when we go to hotels.
‑‑‑ Laughter /
Rires
5843 COMMISSIONER
ARPIN: Mr. Temple, in the discussion
that you had with the Chairman on access, you dealt with the Category 2 that
could migrate to Category 1.
5844 I wonder what is
the interest.
5845 I think the sole
benefit of having been granted a Category 1 licence a couple of years ago was
that you had access. But the very day
you launched, when you started to build your brand ‑‑
5846 I mean, you may
legally have a right to access, but the reality is that you are there.
5847 And BDUs are
saying that it is very hard to remove a service when they have done that, and
it is even hard to move a service from one tier to the other.
5848 So why would a
Category 2 come up and ask us to grant them ‑‑ which is
already launched. That is what you say
in your statement, an already launched Category 2.
5849 What would be the
benefit in migrating from Category 2 to Category 1 when he has already
launched? He is there.
5850 To get the
branding, Category 1 means that it is going to cost him more money, and he will
have to program more Canadian content.
5851 MR. TEMPLE: We propose that Category 2 services be given
the opportunity, but not the requirement ‑‑
5852 COMMISSIONER
ARPIN: No, no, I heard that, but I am
trying to find out where is the opportunity.
5853 He is there. He is launched. He is across the board.
5854 And there are good
numbers of Category 2 services that currently are carried by all of the BDUs,
or at least the major BDUs. There still,
probably, are smaller ones on which they may not be there, but there are a good
number of Category ‑‑
5855 Okay. I can understand that there are some Category
2s that are on one or two BDUs, but there are also Category 2s that are on all
of the major BDUs.
5856 MR.
MORRISSETTE: Two significant
incentives. If they are not carried
across all systems, this would enable them to be carried across all systems.
5857 In addition, when
it comes time to renegotiate, they cannot be dropped.
5858 COMMISSIONER
ARPIN: But, then again, the same BDUs
are saying that it is very hard to remove a service.
5859 MR. TEMPLE: I have been negotiating affiliation
contracts, both as a distributor and as a programming service, for, probably,
25 years, and whenever someone tells me, "Don't worry, I will do it
anyways," I always say, "Great.
Let's put it in the contract just to be sure."
5860 If they are going
to do it anyways, there is no harm, let's just put it in the rules anyways, and
we can move on.
5861 I think that we
are spending, collectively, so much time on an issue that, quite frankly, we go
back to the kind of ‑‑
5862 If you have a
licence, and it comes from a regulatory body that has determined you are making
a contribution to the Act, you should get access.
5863 It has nothing to
do with issues related to, "Well, if they don't have access, it will keep
them on their toes," and, "They are getting a little sloppy and not
very innovative."
5864 Every programming
service struggles every day to be as attractive and as innovative as it can be,
because it relies largely for its future on advertising revenues, and you are
not going to get that if you are not appealing to the market.
5865 So there is lots
of innovation. There is lots of hard
work in maintaining these services as attractive as they can be.
5866 And arguments
against access, quite frankly, are just not realistic at all.
5867 COMMISSIONER
ARPIN: Thank you.
5868 Those are my
questions, Mr. Chair.
5869 THE
CHAIRPERSON: Commissioner Katz?
5870 COMMISSIONER
KATZ: I am going to follow up on that
question, and then I have one or two others.
5871 Let's try to call
a spade a spade. Is your greatest fear
that, by eliminating access and genre protection, vertically integrated BDUs,
who today have the incentive to enter The Weather Network, like the Rogers of
the world who are on radio and TV, will now have the open access to go right
into that marketplace and compete with you?
5872 MR.
MORRISSETTE: In this whole proceeding, a
service like ours ‑‑ and I would venture to say every other
independent, but they will have to speak for themselves ‑‑ has
nothing but downsides.
5873 Our starting point
is that we have the privilege, but also the responsibility of being on basic
service across the entire country.
Ninety‑nine percent of the households that subscribe to television
in this country subscribe to our service.
5874 We all know that
the distribution market is heavily concentrated. All it takes is one ‑‑ maybe
more, but one to move our service to a tier ‑‑ and we have
experienced that threat in the past ‑‑ and, all of a sudden,
the number of households that we serve declines significantly.
5875 We are a fixed‑cost
business, and this would have, immediately, a material impact, not just on our
subscription revenues, but on our advertising revenues because of reduced
audiences.
5876 Couple that with
loss of genre exclusivity, and then we face a further decline in market share,
perhaps with even some systems opting for their own local weather service,
versus ours, maybe even having it dropped.
5877 I know it would be
very difficult because of the strength of our brand, but the bottom line is, at
the very least, an alternative weather service would significantly impact our
audience levels and, hence, our advertising revenues.
5878 So the end result
would be, in a fixed‑cost business like ours, that a 15 or 20 percent
drop in revenue would go right to our profitability, and that would have a
major material ‑‑ I would even use the word
"catastrophic" effect on our business.
5879 First of all, like
most businesses that are run efficiently and are reinvesting in extensive capital ‑‑
HD TV is a major commitment that we have facing us ‑‑ then we
are in the situation where we could very quickly face a material adverse change
clause in our loan agreements.
5880 This is real, and
this is true ‑‑ every independent service would have that
threat.
5881 The large players
don't have those levels of risk. They
don't have those levels of downside. But
for an independent, that is our reality.
5882 So basic carriage
for us ‑‑ fundamental.
5883 Genre exclusivity
is fundamental.
5884 And access is also
fundamental, because we just don't want anybody having that hammer over us to
extract, theoretically, if it were allowed, a few minutes of advertising from
our existing resources.
5885 COMMISSIONER
KATZ: You have been very successful in
evolving ‑‑ and I commend you for it ‑‑ into
the internet space, as well. How has
that evolution impacted your core business, if I can call it that, on
television?
5886 Have you seen
eyeball shifting to the point where your advertising revenue has been impacted to
a negative extent on the TV side of it, or has it become a win‑win on
both sides because one has supported the other, if I can call it that.
5887 MR.
MORRISSETTE: For some services the
internet represents a threat. It could
be a substitute, it could be challenging to have the rights carry over onto the
internet, because there are no borders for the internet.
5888 In our case, it
has been significantly complementary.
People use different screens to access the weather content. There is the television. It's the flagship. It's the dominant. It continues to grow. We have experienced record numbers in audience
this past year.
5889 The internet is
also rapidly growing, and that has also, for us, been a success story.
5890 The new frontier
is wireless platforms, and we think that that will follow where the consumer is
going to go, and that is another very attractive platform over time.
5891 But they are all
complementary in our case.
5892 For a regular
specialty programmer who requires rights from Hollywood or some other source,
then there is a whole set of different issues and they may not be able to take
advantage of the internet, and there it poses a significant risk.
5893 But, for us, it is
complementary. We have been an early
entrant. We have been extremely
innovative in that regard. We spend
significant amounts on technology to take advantage of these new opportunities.
5894 But, at the end of
the day, the entire success of our business hinges on the strength and success
of the flagship, which is our two television networks.
5895 COMMISSIONER
KATZ: But you do see them as
complementary, as opposed to substitutes; where other people have come before
us and have talked about the fact that the internet will be a substitute and
will cause erosion of the network and their business.
5896 MR.
MORRISSETTE: We view it as
complementary, and other broadcasters can, too, depending on the programming
right that enables them to use those platforms as complementary opportunities.
5897 That is where we
all have to be open and mindful in terms of future negotiations.
5898 I can't speak for
a conventional broadcaster or a non‑information specialty programmer. We
have our own business model as an information programmer.
5899 MR. TEMPLE: I would like to add that, as Pierre
suggested, for some programming services the internet is a threat. You can't access rights or ‑‑
I won't get into all of that.
5900 The proposals that
we have tried to put together, we have tried to propose that they would apply
to all. I am sure that everyone looks at
their own best interest, but we have tried to put forward rules that we thought
would work for everyone.
5901 So while the
internet may be less of a threat for us, we recognize it for other services.
5902 The main point in
our filings is, if you want a Canadian expression, if you want a Canadian
presence on the internet, then the best way to do that is to have strong
programming services.
5903 I don't think we
need strong BDUs, we need strong programming services, so that they can have
that Canadian presence on the internet, and that is the focus of our points, in
terms of whether the internet is a friend or a foe.
5904 COMMISSIONER
KATZ: My last question has to do with
renewals.
5905 You mentioned that
in the number of years that The Weather Network has been around your rates have
never changed. If anybody has leverage
amongst specialty programmers, I would think it would be you folks, given your
brand, and the reach you have as well.
5906 Can you give us
some insight as to how negotiations take place, and why you haven't been able
to lever, to some extent, your best interest?
5907 What I hear you
saying is that you have one hand tied behind your back when you walk into
renewals with the BDUs.
5908 MR. TEMPLE: Historically, as a dual service, at our
option, we are carried on basic, and we have treated every BDU the same and
have sought distribution on basic.
5909 As Pierre
suggested, our business model is being able to have as broad a reach as
possible. People don't ‑‑
some watch us for hours at a time, God bless them, but most people don't. They are in and out, so we have to be there
and be constantly convenient.
5910 It is fundamental
to our business model to be there.
5911 If the rules
change ‑‑ and we have experienced this in terms of
distribution undertakings that aren't required to carry us on basic ‑‑
5912 In one case we
were moved, and it was only through a long and awkward and, I think,
distasteful process, probably for both sides, that we were put back on basic.
5913 In a going forward
world, if a BDU has an opportunity to launch a competitive service, sure, we
might be put in a news and information package, along with ‑‑
probably the channel beside us would be their service. That is going to create significant
harm. Just the threat of doing
that ‑‑
5914 I mean, what
leverage do we have? Unless we create a fight in public, what leverage do we
have?
5915 If a BDU comes and
says, "You can stay on basic, I know it's really important to you. I was thinking, maybe, of giving you
half," what are we going to do?
What resources ‑‑
5916 We don't have ten
other channels where we can say, "Why don't we do a package deal."
5917 If the BDU says,
"I am moving you," you are gone, because "I get to decide
now" and I am gone.
5918 What am I going to
do? Other than, maybe, raising a stink
in the press and the media, and trying to mobilize subscribers and whatnot to
phone in, or raise a stink, what is my leverage?
5919 Are we just going
to kind of have all of these fights in public now, because small independent
services have no leverage?
5920 MR.
MORRISSETTE: The end result of that
scenario, which we have experienced by the way, is that the resources that we
have ‑‑ our profitability, gets immediately transferred to the
BDU, and does not find its way, whatsoever, to the subscriber. It is just a shift of resources.
5921 In that context,
the quality of our service is diluted, and, at the end of the day, our ability
to meet our contributions to the Canadian broadcasting system is also diluted.
5922 The end game is a
significant loss for us and the consumer.
5923 MR. TEMPLE: I think your original question was: Why didn't we raise the rate.
5924 We didn't raise
the rate because it is set by the Commission, and the Commission hasn't
increased it since 1980‑something.
5925 MR.
MORRISSETTE: 1990.
5926 MR. TEMPLE: 1990.
So, being on basic, we can't raise the rate.
5927 MR.
MORRISSETTE: A quick calculation ‑‑
23 cents 20 years ago may be worth about 40 percent of that today, so that's,
what, about 10 cents today.
5928 So relative to
purchasing power, our rate has significantly declined, yet we have gone from
125 employees in 1993, when we acquired the business, to about 400 today, and
that is despite a fixed rate.
5929 That is because we
have been doing the job in a very competitive environment to increase our share
of audience and monetize it through advertising.
5930 COMMISSIONER
KATZ: Those are my questions. Thank you very much.
5931 THE
CHAIRPERSON: Thank you.
5932 Rita?
5933 COMMISSIONER
CUGINI: I have a couple of follow‑up
questions.
5934 On the issue of
genre exclusivity, the CAB, when it was before us, on behalf of its members,
suggested that all programming categories should be a free‑for‑all
for all specialty services.
5935 Do you agree with
that position?
5936 In other words,
should you be able to show "Twister" ‑‑
5937 I was going to say
"The Wizard of Oz", but I thought that would be too cute.
‑‑‑ Laughter /
Rires
5938 MR. TEMPLE: We think that there should be some
flexibility, or some additional flexibility.
We recognize that.
5939 That, hopefully,
would get rid of a lot of the problems associated with making applications to
the Commission because you want to have a sports game show and you don't have
any sports or game show categories.
5940 Some
flexibility. I am not sure that we would
just have it go away, because, in the extreme then, we could theoretically
become a network devoted 100 percent to weather‑related movies, and I
don't think that would be a good business proposition. We wouldn't do it anyways, but some
flexibility is warranted.
5941 COMMISSIONER
CUGINI: And that goes to, however, the
criticism that genre exclusivity, really, is a broad term and it is not applied
to the literal sense of the word.
5942 I know, Mr.
Temple, that you cited U.S. examples, but for every U.S. example, we could
probably cite a Canadian example, where one title might be seen on five or six
different specialty services, both Canadian and U.S. titles.
5943 How do we come to
some kind of compromise?
5944 MR. TEMPLE: I think that genre exclusivity has to have
some flexibility in it, in the sense that if you are a science fiction‑based
service, yeah, you are going to have movies.
Does that mean that you are a movie network?
5945 There has to be a
common sense test, but our proposal is that the Commission look at the nature
of service definition. I think it is
possible ‑‑ I mean, the Commission has, in a sense, been doing
it, and has modified it slightly to accommodate sub‑genres.
5946 I don't think it
has been a big problem. I think it is
just something that requires some work.
5947 We have proposed
some specific guidelines to assist the Commission, which I would be happy to
read to you if you want, but they are already on the public record.
5948 Overall, it would
be beneficial to the system. I don't
think it would be that hard to manage.
5949 COMMISSIONER
CUGINI: Thank you.
5950 Thank you, Mr.
Chairman.
5951 THE
CHAIRPERSON: Commissioner Morin?
5952 CONSEILLER
MORIN: Merci.
5953 Un des paragraphes
qui m'a le plus frappé dans votre présentation orale ce matin, c'est en page 9,
la déclaration, c'est monsieur Temple, je pense, qui lisait ce paragraphe, et
vous parliez des EDR et vous disiez :
« They enjoy a powerful
competitive advantage through their ability to extract subscriber behavioural
profiles from the digital platform. If
left unchecked, they can use this business intelligence to identify top
programming acquired... »
5954 Et donc, lancer
leur programme.
5955 Si le Conseil
devait toucher à la politique du genre, est‑ce qu'il y aurait une mesure,
à votre avis, qui pourrait être prise pour diminuer l'importance que les EDR
ont dans le système avec ces nouvelles technologies et qui leur donne un
avantage que personne, finalement, n'a dans le système?
5956 Autrement dit, je
songe, par exemple, dans cette hypothèse évidemment, est‑ce que ces
données que les EDR sont les seules à posséder, que certains pourraient dire
que c'est de l'information privilégiée, est‑ce que ces données devraient
être rendues publiques, enfin est‑ce que vous avez une position là‑dessus
si jamais, comme je le dis, le Conseil devait changer les règles ou, en tout
cas, changer l'exclusivité du genre, se distancer de l'exclusivité du genre?
5957 MR. TEMPLE: With regard to the information collected
through the set‑top box, whether genre exclusivity is maintained or
eliminated, we have called for any information that is being collected by the
BDU to be made available to the programming service, so quite separate from the
issue of genre protection.
5958 We have proposed
that in our filing, and that is also one of the points in the Statement of
Broadcasting Principles that a number of other services have supported.
5959 For instance, if
they are not collecting the information, then there is no requirement to
provide it, but if they are collecting information, say, on who is watching our
service, or some other service, then it doesn't matter whether there is genre
exclusivity or not, they should be providing that information to that service.
5960 We are not
suggesting that we get information on other services, but just information on
our own service.
5961 We have to
understand ‑‑ and it is an important issue that I don't think
people are aware of ‑‑ that they are capable of monitoring all
of this information.
5962 If you go to the
U.S., a number of U.S. services, as part of their terms and conditions and
privacy statement ‑‑ I mean, you can get it on the internet,
and it is pretty powerful stuff.
5963 Indulge me ‑‑
the comcast terms of service under customer privacy ‑‑
5964 When you use our
interactive or transactional services, such as video‑on‑demand, for
example, our systems will automatically collect certain information about your
use of these services.
5965 This may include
information required to change your television channel, review listings in the
program guide, to pause or fast‑forward through certain demand programs,
or invoke a calling feature, among other things.
5966 It may also
include information such as the time you actually use our services and the
other features of our services and which menus and menu screens are most often
used and the times that you are using them.
5967 Some of our
systems might collect limited anonymous aggregate information using set‑top
boxes and other equipment we use as aggregate information to determine which
programs are most popular, how many people watch a program through its
conclusion and whether people are watching commercials, for example.
5968 I can read you
charters and a few others but that is the issue. So if they are going to collect information
about us, we would like to be able to see it.
We think that is only appropriate and helps.
5969 It doesn't level
the imbalance in market power but at least it gives us a little something and
that should be applied irrespective of the genre rules but arguable even more
so because of any elimination of genre exclusivity.
5970 COMMISSIONER
MORIN: So perhaps we will have to
consider a new sort of rights to the programmers?
5971 MR. TEMPLE: Well, the fundamental issue is that when
distributors were allowed to become programmers, safeguards were put in place
and some of those safeguards are a little out of date. With the transition into video on demand, we
don't believe the safeguards have kept up, and so we are very anxious about the
lack of safeguards.
5972 That is one of the
reasons why we have suggested a separate proceeding on VOD because what are the
safeguards that will address this issue.
5973 MR.
MORRISSETTE: In addition, as we move
towards targeted advertising, dynamic display advertising, if programmers are
to market‑sell this opportunity to their advertisers, obviously, you
require access to that data, that information in order to present a compelling
buy to the advertisers.
5974 So it is part of
the deal and I think it is a great opportunity.
Yes, I think that there ought to be some kind of rate card to access
that kind of opportunity and that becomes a partnership then between the BDU
and the programmer.
5975 However, that
partnership starts to wane when the BDU may exclude certain information or not
make it fully available, use it for its own purposes to develop their own
programming rights and opportunities and sell the advertising themselves,
perhaps against the same advertisers that we would be targeting. That is where all of a sudden it starts to
get into very tenuous territory.
5976 CONSEILLER MORIN :
Tout à l'heure, vous avez parlé du contenu canadien et des dépenses de
programmation comme étant des critères extrêmement importants.
5977 La semaine
dernière, j'ai évoqué au moins trois fois un modèle auquel je pensais. Je ne veux pas revenir là‑dessus, mais
l'essentiel de ce modèle, ce serait de considérer le contenu canadien et la
programmation canadienne, mais aussi de considérer le prix, et plus le prix
serait bas du service, plus ce serait déduit, si vous voulez, du contenu et de
la programmation dans un système de pointage.
5978 Est‑ce que
sur le plan des principes, évidemment, en ce qui vous concerne, votre prix a
été assez maintenu au cours des dernières années, mais est‑ce que vous
pensez que dans les autres secteurs de la programmation, pour les indépendants,
par exemple, est‑ce que vous pensez qu'un tel système aurait un certain
sens?
5979 M. MORRISSETTE : Si
on comprend bien ce que vous avez énoncé, premièrement, c'est simple, c'est
prévisible, ça indique clairement les règles du jeu, ça favorise des systèmes
qui contribuent de façon excellente aux objectifs du système de radiodiffusion
canadienne, et la question de tarifs est aussi impliquée.
5980 C'est un système
qui semble autoréglementé, en même temps, et aussi, c'est un système qui motive
les différents services à rencontrer les objectifs de l'Acte afin d'atteindre
un niveau de distribution qui est plus avantageux.
5981 Alors, pour toutes
ces raisons‑là, ça semble être un système qui semble être quelque chose
qu'on doit considérer favorablement.
L'expression anglaise, the devil's in the details, c'est évident qu'il
doit y avoir beaucoup d'analyse pour s'assurer que oui, c'est favorable.
5982 Mais aussi, si je
comprends bien, ça permet au CRTC d'ajuster les normes du jeu au cours des
années pour s'assurer que les niveaux maintiennent les niveaux de programmation
canadienne de dépenses de programmation au cours des années, que ça va en
contribuant davantage.
5983 Alors, c'est
quelque chose que je crois qui est favorable et devrait être considérée.
5984 CONSEILLER MORIN :
En tout cas, si je dépose, à la fin des audiences, ce système de pointage,
j'aimerais obtenir beaucoup vos commentaires là‑dessus, parce que je
pensais, notamment, aux indépendants, et j'ai oublié de le demander ce matin à
Cogeco, mais, évidemment, je sollicite l'avis des EDR sur ce système que je
pourrais déposer à la fin des audiences.
5985 Je vous remercie.
5986 THE
CHAIRPERSON: Ron.
5987 COMMISSIONER
WILLIAMS: Thank you, Mr. Chair.
5988 Good morning, Mr.
Morrissette and panelists.
5989 How do your
wholesale rates compare with, say, a company like The Weather Channel which
would supply Americans similar weather programming through television?
5990 MR.
MORRISSETTE: Quite frankly, The Weather
Channel, even though they are a minority shareholder in our company, they are a
very private company and I am not privy to their wholesale rates. My guesstimate ‑‑ well,
first of all, I am aware that they serve 95 million households ‑‑
it might be 98 million households.
5991 COMMISSIONER
WILLIAMS: Yes, 18,000 locations or
something. Yes.
5992 MR.
MORRISSETTE: Yes. But at the end of the day it is about 10
times the subscriber levels that we serve and it is only one service, English‑language
service across the vast U.S. market, and I would guess that their rates maybe
are about half of ours but let's not lose sight of the fact that 10 times the
subscriber households.
5993 In the Canadian
market we serve two markets. It is an
English service and a French service. We
are very labour‑intensive, everything is live, and also capital‑intensive.
5994 We have chosen to
offer the same rate for everybody and by so doing we are one of the only
services in this country that offers the same rate for the English and the
French service. Typically, every other
similar French service in the Quebec market is about double, if not more, the
rate. So it is significantly different.
5995 As Paul says, and
I agree with him, it is a bargain. Our
rate has been low and continues to be low, and compared to other specialty
services in this country it is a very low rate.
5996 COMMISSIONER
WILLIAMS: Thank you, Mr. Morrissette.
5997 That's my
questions, Mr. Chairman.
5998 THE
CHAIRPERSON: On that positive note I
think we will break for lunch. Thank you
very much. We will resume in an hour
from now.
‑‑‑ Upon recessing
at 1223 / Suspension à 1223
‑‑‑ Upon resuming
at 1330 / Reprise à 1330
5999 THE
CHAIRPERSON: Madam Secretary, who do we
have now?
6000 THE
SECRETARY: Thank you, Mr. Chairman.
6001 Before we proceed
with the next presentation, I would just like to indicate for the record that
CBC Radio‑Canada and the Canadian Association of Broadcasters have filed
a joint letter to the Commission on April 11th objecting to Bell Canada's
filing in confidence with the Commission empirical evidence regarding the
effect of price increases on subscriber rates for its BDU service.
6002 The Commission has
today written to Bell Canada asking for its position on this letter
and requesting that they comment, if they can, by April 18th.
6003 Parties wishing to
reply to this information can do so by Tuesday, April 22nd.
6004 These letters will
be placed on the public record. We
have copies available ‑‑ or will have copies available in
the examination room this afternoon.
6005 Thank you.
6006 We will now
proceed with the next presentation by TimeScape Productions, Ms Catherine
Edwards will be presenting.
6007 Ms Edwards, you
have 15 minutes for your presentation.
6008 Thank you.
PRESENTATION / PRÉSENTATION
6009 MS EDWARDS: Hi. My
name is Catherine Edwards. I run a
Canadian independent television production company called TimeScape and I'm known
to four of you I think through my participation in the Diversity of Voices
hearing.
6010 Although the focus
document for this hearing states that community TV will be reviewed at a later
time, as the Fédération des télévisions communautaires autonomes du Québec
stated on Friday, the survival of the community programming tier is intimately
related to both the Canadian Television Fund through common financing and to
this hearing which deals with the composition of the basic BDU tier.
6011 Therefore, I would
like to comment upon paragraphs within 2007‑10 which will inevitably set
the parameters for later discussions of the community tier.
6012 My interest in
community TV dates from working for Shaw's community TV channel in
Calgary. I left in 1997 when Shaw
eliminated the public from program production.
We sent thanks but no thanks ‑‑ sorry, thanks but don't
come back letters to more than 400 volunteers who had donated their time, some
over a 20‑year period, to the production of a vibrant local programming
service which they felt was their own.
That's an experience that I'm not going to forget quickly.
6013 This picture of
community TV being gradually stripped of its community participation in favour
of a corporate‑run and commercially‑driven model has happened
across Canada, with the exception of a few pockets in Québec and in other parts
of the country where cable cooperatives are still holding out.
6014 At the diversity
hearings I provided DVDs to the Commissioners to show the difference between
what we once called community TV and what it is today. On it was a clip made by aboriginal children
in 1996 in Vancouver's lower east side championing their right to dress up on
TV as superheroes, and a clip from a Shaw's flagship Vancouver program today
which is called "Urban Rush".
It's a ripoff of commercial breakfast programs that promotes everything
from cars to internationally distributed beverages.
6015 As the Canadian
Institute for Policy Initiatives pointed out in their submission to these
hearings, the community channel has become an increasing source of income for
cable companies.
6016 In an effort to
better understand the potential of community TV, since 2001 I have
been documenting models of community television around the world for a
series for Canadian Learning TV and Access Alberta.
6017 Finally, although
it didn't exist when I wrote my submission to this process in October, I
represent the newly formed Canadian Association of Community Television or
CACT(us).
6018 As I'm sure the
Commissioners are aware, the overwhelming majority of interventions to 2007‑10
by the Canadian public dealt not with the issue of fee for carriage nor the
make up of cable tier packages, but with paragraph 73, the proposal to remove
the requirement that the community channel be carried on the basic tier.
6019 CACT(us) was
founded to represent the views of that public.
Its members include members of the Community Media Education Society of
Vancouver, such as Michael Lythgoe who spoke at the diversity hearings, as well
as a growing list of independent and cable co‑op community TV groups.
6020 CACT(us)' goal is
to form a consensus about the policies needed to restore the community
broadcasting tier to the dynamic service it once was and to develop it in the
future to world standards. We aim to
present these views at the policy reviews in 2009.
6021 To put my comments
in context, consider the relative resources and airtime that are devoted to the
three tiers that make up Canada's broadcasting system under the Act, public, private
and community. The Act makes clear that
Canadians should own and control their broadcasting system and that access to
that system should be as broad as possible.
6022 At present, the
public and community tiers are mandated to respond to the needs of the general
public and to serve the public good. The
licences sought on the private tier and granted by the CRTC on behalf of
Canadians have the primary purpose of creating profits for license holder
shareholders.
6023 That being the
case, it's telling that such a small part of the enormous bandwidth now
available via digital cable and satellite are available for use by the public
and community tiers. The public tier
includes both French and English CBC, CBC Newsworld, CBC Country Canada, CPAC
and provincial educational broadcasters.
6024 As the number of
channels available has increased, so has the public broadcasters footprint,
although it still represents a tiny percentage of channels available to
Canadians. The community tier, on which
the average Canadian is supposed to find expression within the system that he
or she owns, comprises a single channel, if it is even available. The bandwidth for community use has actually
shrunk since the Act was written, from one channel among 30 to one channel among
hundreds, if the cable BDU even offers it since it has been optional since
1997.
6025 For satellite
customers, there is no community TV channel at all.
6026 During the same
period that the community tier has lost so much ground here at home, it has
gained importance around the world. As
other western countries who formerly had limited cable penetration began
offering satellite and digital services, the majority recognized that some of
the new bandwidth ought to be available for use not just by private and public
broadcasters, but by ordinary citizens, local governments and educational
entities.
6027 In the U.S. it is
common for there to be five, six or more public access channels in a city,
offering a rich, local educational mix.
One is typically programmed by municipal government and links city
administrators and policymakers with residents, including the cable casting and
council meetings, traffic zoning and by‑law information, emergency
response directives and the availability of local services. We have no equivalent in Canada, other than
the coverage of municipal council meetings on the community channel.
6028 Another two or
three of those channels might be programmed by high schools, colleges and
universities offering courses in education.
Some of this programming already exists in Canada, such as closed‑circuit
TVs within universities, but other than a few instances on provincial broadcast
they do not have distribution to the community at large.
6029 Under the U.S.
formula the community tier occupies a percentage of total
bandwidth as it grows. This is not
a monetized entertainment platform serving consumers, to use phrases that I
kept hearing last week, but a communication platform for a society that thinks
good communications among its many parts is important.
6030 The U.S. also has
two national services, Free Speech TV and Deep Dish, that make available the
best and most nationally relevant of alternative programming from the country's
public access channels. They enable communities
across the U.S. to know one another and to share views on issues that affect
all.
6031 Australia, in
addition to local, urban and aboriginal community TV, has a national aboriginal
channel Imparja distributed by satellite that shares programming produced by
tribal community television channels throughout the outback. Australia, like Canada, is vast and the
sharing of community television from place to place enables communities to feel
less isolated, to know one another and to develop a sense of common identity.
6032 Israel, in
addition to local community TV, has a national community TV service offered in
parallel through cable which shares nationally relevant program beyond the
community of origin. Like the U.S.
model, much of the programming on local community TV is supported by
municipalities to ensure that there is communication between
administration and residents. Like the
telephone and the internet, it enables two‑way interactive
communication that promotes the growth of community and linkages between
residences, their locality and their nationality.
6033 The U.K. has a
national community TV service that airs videos produced by the non‑profit sector. Again, not a monetized entertainment
platform, but a platform for the sharing of publicly beneficial information.
6034 So the community
tier in Canada has fallen into decline since 1997, during the same period in
which both the public and private tiers have vastly expanded and nationalized
their programming and in which the community tier is being given increasing importance
in other countries.
6035 With this in mind,
it is of concern that several of the proposals in 2007‑10 would further
weaken the community tier and cripple its ability to provide the only effective
access by ordinary citizens to the Canadian broadcasting system.
6036 The decline of the
community tier is of equal concern as a substantial source of local programming
genres other than news, often producing five to six times as much programming
as a local private broadcaster in the same market.
6037 The proposals that
represent a threat to the community tier include of course
paragraph 73. Allowing community
channels to be relegated to an upper cable tier that would be accessible to
even fewer Canadians would be a final nail in the community channel coffin. It would make a mockery of the Broadcast Act
statements that our lone community channel represents a tier at all.
6038 To catch up to
world standards, this tier in fact needs to be developed and expanded. This brings us to paragraph 75.
6039 A step in the
right direction, and which would equalize the treatment of cable and DTH BDUs,
would be for DTH basic service to include a national public access channel that
would carry the best or most nationally relevant of programming made by
community channels, as well as additional programming from independent
producers, for example feature films and documentaries. Many of these under represented key cultural
programming categories actually have content that never finds an airing in the
commercial system.
6040 As with cable
BDUs, 2 per cent of the DTH BDUs gross revenues could go to the
maintenance of this channel and to a national organization to provide training,
program bicycling, lobbying, an awards program and licence application
assistance to community TV groups across the country.
6041 Since the
dissolution of the CCTA such a central coordinating body has been missing. Most sectors of the Canadian public are no
longer aware they have a right to access cable‑operated community
television channels, let alone how to put together a community TV licence
application or run a channel. This
infrastructure is crucial for this tier to survive.
6042 We note that the
Dunbar‑Leblanc report endorses DTH contribution to a national public
access channel and both Shaw at the diversity hearings and Bell ExpressVu have
advanced the idea of a national public access channel program through
2 per cent of DTH gross revenues.
Such a channel should be operated as an independent entity, however,
much like CPAC, and be carried on the basic tiers of both DTH and cable.
6043 Paragraph 57. There should not be advertising on the
community channel which is meant to be programmed according to the needs of the
community, not those of advertisers.
6044 The Broadcasting
Act recognizes that for the healthy functioning of the modern democracy its
communication system must be more than a monetized platform for mass
entertainment. It must be a marketplace
of ideas, which implies diversity and the right of even the unpopular, unusual
ideas to be heard.
6045 The Broadcasting
Act stipulates that access should be as broad as possible and defines three
different tiers because it recognizes that different kinds of programming arise
from different funding models already.
6046 Since advertising
rules have been loosened for the community channel, the so‑called
community programming being produced by the big cable BDUs looks like a low‑budget
version of what we used to think of as local private broadcasting. It's predominately soft local news with little
that is innovative or challenging.
6047 The same principle
holds for the CBC. The more it has to
rely on advertising, the more its programming looks like that of a private
broadcaster.
6048 As Commissioner
Langford said at the diversity hearings:
Why is the CBC doing hockey? The
private broadcasters would do it on their own.
6049 The community
Channel is by its nature and niche cast, meant to serve groups ignored
by the mainstream. If members of
the public are willing to make the effort, they can program for their own
community, whether that community is the 10 per cent of the
population who are gay, the 3 per cent who are aboriginal, or the
minute fraction of a per cent who might want to see the local primary
school basketball game.
6050 On a community
Channel, with minimal investment because the programs are made by volunteers,
those programs can be made and shared.
This is why it is inappropriate to deregulate the community tier and let
its future be determined by market forces.
Market forces are just one model for creating television
programming. The Broadcasting Act
envisioned three.
6051 Paragraphs 64 and
677 suggest the removal of class distinctions for cable licences. This raises two concerns for the health
of the community TV sector.
6052 The first is that
the class distinctions for cable BDUs currently determine what is spent on
community TV, 2 per cent in large systems, Class 1, and
5 per cent in smaller systems.
This distinction continues to be necessary. Although in 1997 51 decreased required
spending on community TV in Class 1 systems from 5 to
2 per cent, with recent reductions in costs of production equipment,
2 per cent I would say is just about adequate in large cities.
6053 Five per cent
or more ‑‑ it used to be 10 ‑‑ is still
needed in small communities however.
There are many small systems where this amount might fund a single
person to train, maintain equipment and schedule a channel. There is a minimum number of paid bodies you
need, even with volunteer‑driven television, to coordinate the public to
produce it.
6054 The cable licence
areas have grown as well, causing many community TV channels to be closed and
their programming regionalized. This is
not just an issue of relevance of the programming, whether it's really about
your town or about someone else's, but also about access. Is there some where you can get to in a
reasonable amount of time and access a camera?
6055 In conclusion, the
Broadcast Act recognizes that different funding models result in different
kinds of programs, different genre, content and audience; state‑funded,
privately funded by advertising, and community funded.
6056 The community
funded model is unique, it uses seed money provided by BDUs, which it magnifies
in programming power by the training and enabling of large amounts of volunteer
labour. As steady decreases in both
private and state‑funded local programming shows, the volunteer‑driven
model may be the only one that is viable in such a geographically dispersed and
small market as Canada.
6057 So we ask that you
protect the place of the current lone representative of the community tier on
the basic BDU tier, as has been requested by so many Canadians who intervened
in this process, and we ask that going forward you work with the new organization
CACT(us), with the Fédération, and with independent community TV channels to
revitalize and expand this tier, including finding independent and stable
forces of funding and including expanding their bandwidth and presence so that
not just cable subscribers but all Canadians can share the rich local
programming mix that these channels can so cost‑effectively generate.
6058 Where once we did
set an example for the world with the enlightened policies of the CRTC, in this
tier we would do so again.
6059 Thank you.
6060 THE
CHAIRPERSON: Thank you for
your presentation.
6061 As you noted in
your opening, we will have a special hearing on community channels and really
the key contribution you make to this is what should be in the basic package.
6062 MS EDWARDS: Right.
6063 THE
CHAIRPERSON: I gather you feel community
channels should be part of the basic package?
6064 MS EDWARDS: That's right.
On cable as community TV exists now, but I also think that DTH should be
including a community programming service on the basic tier.
6065 THE
CHAIRPERSON: Okay.
6066 Ron, you had some
questions on this?
6067 COMMISSIONER
WILLIAMS: Good afternoon, Ms Edwards.
6068 MS EDWARDS: Hi.
6069 COMMISSIONER
WILLIAMS: As our Chair stated and you
stated in your opening remarks, this is really going to limit what we have to
talk about based upon your presentation.
6070 I think what I
will do is I will ask you the four remaining questions that Chair
didn't deal with in regards to the five main issues that we are interested
in gather information on during this hearing.
6071 So you have talked
about ‑‑ actually I will do all five.
6072 What should the
size be of the basic service package and what you think should be in basic
service?
6073 MS EDWARDS: You know, I don't want to talk here about
things that I really haven't thought through. My main goal in appearing today was just, as
the Fédération stated on Friday, that the structure that you are setting in
place for the system as a whole can have long‑term impact on the community
programming tier.
6074 I mean, I do have
opinions on some of those things, but my main area of expertise is the
community tier.
6075 COMMISSIONER
WILLIAMS: Okay. Do you think the community tier should
be included in basic service?
6076 MS EDWARDS: Absolutely.
That's the main reason I'm here.
6077 COMMISSIONER
WILLIAMS: Okay.
6078 MS EDWARDS: Because it's the only representative of the
entire tier and if those three tiers are meant to together be part of the
Canadian broadcasting system, it doesn't have much meaning if representatives
of all three of those tiers are not on the basic tier.
6079 COMMISSIONER
WILLIAMS: So do you think the basic
model, the basic tier or should be a large wide offering of channels or a
relatively small number of channels that are accorded basic service?
6080 MS EDWARDS: I don't think I'm in the best position to
comment on that.
6081 COMMISSIONER
WILLIAMS: Okay.
6082 MS EDWARDS: I'm here representing the interests of the
community tier and the average Canadian's access to the system. They ought to have presentation on the basic
tier because that's the only place where they get to directly participate.
6083 COMMISSIONER
WILLIAMS: Okay. You may answer the same to the rest I guess,
but I will go through them.
6084 MS EDWARDS: Okay.
6085 COMMISSIONER
WILLIAMS: Should there be guaranteed
access for certain Canadian specialty and pay services and, if so, which ones
and what terms?
6086 MS EDWARDS: I mean my general ‑‑ there
was a paragraph for a shortage of time I didn't include here. One of the paragraphs in the original policy
document wanted to know whether provincial broadcasters should be on the basic
tier.
6087 I have the same
feeling about that as about the community tier, that because there are so few
public channels, as well as community channels in those two tiers in the system
as a whole, that they should definitely have representation on the basic tiers
of both DTH and cable subscribers.
6088 What other
specialty services should be there I don't really have an opinion about. I think that's better for other people to
comment on.
6089 COMMISSIONER
WILLIAMS: Okay.
6090 We have talked in
this hearing about genre protection.
Do you think there should be protection from other Canadian services or
only from foreign services?
6091 MS EDWARDS: I think that there should continue to be
genre protection. I have been watching
Bell ExpressVu for the last four months and noticing, as everyone else has,
that they often have five different, you know versions of the same thing on
different channels that are supposed to be genre specific but are becoming more
and more similar because they are owned by the same people and it's cheap to
replay the programming.
6092 I have already
noticed that kind of convergence even with the rules that we have in play
today, so as a viewer giving you a gut reaction, we are already going too
general with all those common ownerships.
So in no way would I encourage a decrease in the genre protection rules.
6093 COMMISSIONER
WILLIAMS: What are your views on a fee
for carriage?
6094 MS EDWARDS: Again, I don't feel that I have thought
through that particular issue in enough detail.
6095 COMMISSIONER
WILLIAMS: I think that concludes my
questions, Mr. Chair. Thank you.
6096 Thank you very
much. I did read your full written
presentation and your responses to interventions and it's a very well thought
out piece of work that I think we will find quite valuable when we actually do
deal specifically with the topic of the community channel.
6097 Thank you.
6098 MS EDWARDS: Okay.
Because as I point out here, there was a few other ‑‑ I
mean the issue of license classes could have a negative impact on community TV,
it just depends what the funding formula ends up being. So it's just to make sure that those things
are kind of in the back of your minds as you go forward with these other
decisions.
6099 COMMISSIONER
WILLIAMS: Thank you once again.
6100 Thank you, Mr.
Chairman.
6101 THE
CHAIRPERSON: Well, thank you for your
contribution. I appreciate especially
you being so succinct on the points of interest to you.
6102 So I think we got
that and we have it on our mind.
6103 Thank you.
6104 MS EDWARDS: Great.
Thank you very much.
6105 THE
CHAIRPERSON: Madam Secretary, who's
next?
6106 THE
SECRETARY: Thank you, Mr. Chairman.
6107 I would now invite
the Canadian Media Guild to come forward to the presentation table.
‑‑‑ Pause
6108 THE
SECRETARY: I see they are
not present in the room. I know
they were here earlier today.
6109 So we will proceed
with the next intervenor and come back to the Media Guild after.
6110 I would now ask
Score Media to come forward to the presentation table.
‑‑‑ Pause
6111 THE
SECRETARY: I understand Mr. John
Levy will be introducing his colleagues, after which you will have 15 minutes
for your presentation.
6112 Mr. Levy...?
PRESENTATION / PRÉSENTATION
6113 MR. J. LEVY: Thank you very much.
6114 Mr. Chairman,
Members of the Commission and staff, my name is John Levy and I am the Chairman
and Chief Executive Officer of the Score Television Network Limited.
6115 On my far left is
David Errington, who is the Executive Vice President and Co‑Chief
Operating Officer of The Score. David
has been with us since the inception of the network.
6116 Next to David is
Benji Levy, also Executive Vice President and Co‑Chief Operating
Officer. Benji's primary area of
responsibility is the development and integration of new media properties and
strategic growth opportunities.
6117 On my right is
Grant Buchanan of McCarthy Tétrault, our outside counsel.
6118 Mr. Chairman and
Members of the Commission, over the years I have had the privilege to grow
successful independent businesses in the Canadian broadcasting system, first as
a cable operator and now as a specialty network owner. As such, we believe that we bring a
completely different perspective to this very important hearing.
6119 Our position from
the outset has been quite clear, this is not the time to make dramatic
wholesale changes to the core of the Canadian broadcasting system.
6120 We make this
assertion based on the following rationale. The current rules, regulations and policies
are working. The broadcasting industry
in Canada is healthy and growing, with broadcasters and distributors enjoying
on average PBITs in excess of 20 per cent. Without any additional regulatory
intervention, the Canadian broadcasting industry is well positioned to continue
to grow and embrace new technology.
6121 We have heard from
some during this proceeding about how the growth of the
internet looms as a threat to the system and how in response
the foundation of our broadcasting system should be dismantled.
6122 This could not be
farther from reality. The internet is
not a threat, rather it's a major opportunity.
Broadcasters are able to connect with their audience in ways never
before possible, and distributors, who now sell access to the internet, are
able to generate an entirely new revenue stream.
6123 Two, there is no
consumer outcry to justify the changes being proposed. Where is the evidence of consumer
dissatisfaction?
6124 The truth is that
the Canadian viewer has more choices, better programming and greater in‑home
entertainment value than any other consumer probably anywhere in the world.
6125 Contrary to the
unsubstantiated rhetoric of the large BDU gatekeepers, the existing rules are
working.
6126 Market
forces. Market forces will not provide
an acceptable solution to the Canadian broadcasting system. It has been suggested by the BDUs that
by eliminating guaranteed access and by abandoning genre protection market
forces will fill the void to the benefit of the Canadian broadcasting
system. However, we ask where is the
proof that this will occur?
6127 Certain parties
would have the Commission believe that it will be consumers who will decide. However, the truth is that consumers will
have no say in the matter. The six big
BDUs who control access to over 90 per cent of the Canadian
television households will decide the fate of every Canadian specialty and pay
service.
6128 Accordingly, we think
those who want to alter the status quo in such a manner should have put
concrete evidence to the benefit to the broadcasting system on the table. Those who want to preserve the status quo
have already placed evidence on the Commission's files for over 40 years.
6129 When you hear us
arguing for the status quo, it's not as if we are standing still. Quite the contrary. We are today in the midst of one of the
biggest transitions in the industry's history as we migrate from analog to
digital distribution and from standard definition to high‑definition
broadcasting.
6130 Through its
digital migration and HD framework, the Commission set out explicit rules to
guide this transition. Indeed, as
recently as the summer of 2006 the Commission promised must‑carry status
and continue genre exclusivity to the HD versions of specialty services that
upgraded their plants such that more than 50 per cent of their
programming was in HD.
6131 By September of
2008, at a cost of over $15 million and a reliance on the Commission's promise,
over 80 per cent of The Score's content will be broadcast in HD. We certainly hope that the Commission is not
now going to reverse itself and say that must‑carry status is not
available for our HD service after we relied on the Commission's policies in
making our investment decision.
6132 Five, there is a
complex web of specific rules that must be considered in their entirety if
anything substantive is to be changed.
The economic viability of any service is dependent upon the relationship
of its nature of service, its ability to be seen, and its promises of
performance, and all this must also be balanced against those of its
competitors.
6133 Indeed, in 2004
The Score asked for a rate increase in order to allow it to be more
competitive and more effectively compete with TSN and Rogers
SportsNet. The Commission substantially
denied The Scores request, effectively saying we were not in the same
business and that we only needed the much lower $.14 rate since we were a
sports, news and information service and not a full‑fledged sports
service.
6134 Notwithstanding
all the foregoing, if the Commission determines that some changes as proposed
need to be implemented, then as the CRTC has already recognized, there must be
specific mechanisms to protect the interests of the viewers and owners of
independent services.
6135 Our thinking here
is quite simple. While the apparent
assumption underlying the market forces argument is that big distributors and
big programmers are strong enough to be able to fight it out and achieve
some form of equilibrium, such is certainly not the case with respect to the
independent specialty services. The 130‑pound
fighter simply stands no chance whatsoever against a 300‑pound
heavyweight, no matter how fit or talented he or she may be.
6136 We would now like
to address the five specific questions posed by the Chairman in his
opening remarks.
6137 Question one, size
of the basic tier.
6138 Since there is no
evidence of the record to the contrary, we suggest the current rules are
working to assure a relatively inexpensive entry‑level basic
service. In addition, the high
penetration levels of discretionary service tiers today suggest that very few
customers actually purchase only the basic tier.
6139 Question two,
guaranteed access for specialty and pay services.
6140 We believe that
there should continue to be guaranteed access for all analog and
Category 1 digital specialty and pay services. The most fundamental issue in this hearing is
the need for services to have continued access to their subscriber base.
6141 When you speak of
getting rid of the current access rules and allowing market forces to play a
greater role, you are effectively abdicating to the BDUs the choice as to what
services get carried.
6142 There has been a
great deal of discussion in the last week about letting the consumer
decide. This simply is a BDU
smokescreen. The primary concern of
publicly traded BDUs is shareholder return and, unless the Commission orders
otherwise, carriage choices will be dictated by which programming service can
create the largest profit margin for the BDU.
It will have nothing to do with the goals of the Broadcasting Act.
6143 On the one hand
BDUs preach the mantra of consumer choice; on the other hand they have said that
they are very reluctant to remove services or even change packages.
6144 Even if what they
claim is true, what will happen is a radical change in the economics of
access.
6145 For BDUs, this
proceeding is fundamentally about lowering their costs and increasing their
profits. Affiliation payments to
programming services represent a significant cost. By being able to threaten services with
removal or relocation to a low‑penetration tier, BDUs will benefit from a
significant change in negotiating leverage.
6146 Instead of getting
access because the regulator decided they would benefit the system after a
competitive licensing process, programming services will now have to buy their
way onto BDUs. They will do so either
through lower affiliation payments or through tied purchases of airtime or
advertising in media owned by the BDUs or in extreme cases just by outright
cash payments.
6147 This is not a
hypothetical scenario. This is what
market forces have produced in the United States.
6148 What would this
shift in access rules do for furthering the goals of the Broadcasting Act? Absolutely nothing. It would simply result in money being taken
from programmers and given to the BDUs.
While big corporate programming families may have other levers to pull, small
independent services like ours will become collateral damage.
6149 That is why it is
so imperative that if the Commission were to remove access guarantees, it must
establish special access rules for independent services that ensure not just
access but access to a significant number of subscribers through carriage on
digital basic.
6150 This latter point
is key since in a digital environment, a BDU could satisfy its access
requirement by carrying an independent service but then relegate that service
to a very low‑penetration package which would be tantamount to not
carrying the service in the first place.
6151 So why do we
believe we are worthy of must‑carry status?
6152 First and
foremost, the Commission's entire diversity of voices proceeding showcased the
value and the need for diversity of voices in the system. At this point there are actually only three
English‑language independent services that began life back in the analog
days. The other two are The Weather
Network and Vision.
6153 For purposes of
this policy we would define an independent service much like the Commission did
in exempting small cable systems from certain regulatory requirements.
6154 An independent
programming service would be one that is not controlled by Rogers, Shaw,
Cogeco, Videotron, Bell, Astral, CanWest, CTV, CBC or Corus.
6155 In addition, must‑carry
status was part of our regulatory bargain.
The Score has a high CPE and Cancon exhibition requirements and a low
wholesale rate. That combination
reflects and requires deep penetration on BDUs.
6156 Indeed, based on
the point system proposed by Commissioner Morin, our 80 percent Cancon
exhibition requirement, 40 percent CPE and 14‑cent basic wholesale rate
results in a score of 111, one of the highest in the industry.
6157 In the event the
Commission implements changes to the access rules, we believe guaranteed access
on digital basic, as described above, will ensure that diverse voices are able
to thrive. This approach would include all
three of the analog independent English‑language services.
6158 In the case of The
Score, we live in an ultra‑competitive sport genre. Our two principal competitors are TSN, owned
by Canada's largest programming conglomerate, and Rogers Sportsnet, owned by
Canada's largest communications company.
6159 Notwithstanding
that both of these networks have substantially higher subscriber rates,
millions of more subscribers, lower Canadian programming exhibition levels and
large corporate families upon which they can depend, we have demonstrated throughout
our history that if we can reach subscribers, we can excite them and get them
to watch us. We love to compete but we
need access.
6160 Finally, we are
heavily advertiser supported. Over the
years the Commission has encouraged services to be less reliant on subscriber
revenues and to compete in the marketplace for advertising revenues. We have taken this to heart. Sixty percent of our revenues are earned this
way and if our access to high penetration disappears, so does our chance to
compete in the marketplace for these advertising dollars.
6161 Question 3, genre
exclusivity.
6162 We believe that
genre exclusivity should be maintained in its current form for analog and
Category 1 digital specialty services with respect to both other Canadian services
and foreign services.
6163 While admittedly
imperfect, the existing system for genre exclusivity has served the Canadian
broadcasting system well and has resulted in Canada having access to a diverse
selection of programming services that is unparalleled in the world.
6164 The impact of
altering the genre exclusivity model is particularly severe on small
independent broadcasters like us.
6165 As an example,
assume that the Commission were to broaden the categories or to eliminate genre
protection entirely, a programming conglomerate with vast resources like
CTVglobemedia could with relatively little effort launch a new sports news and
information service. Let's just call it
TSN News. Then as part of the BDU
negotiations for their flagship TSN service, they could offer TSN News to the
BDU at a discounted rate or even for free.
6166 In a digital
environment, even with guaranteed access, The Score could be relegated to a low‑penetration
tier by the BDU and replaced in its existing slot by TSN News. This is what some participants in this
hearing would call market forces. We
call it snuffing out an independent voice.
6167 Accordingly,
should the Commission elect to alter the genre protection rules, the need for
guaranteed access for independent services to a meaningful number of
subscribers is magnified.
6168 And obviously, our
concerns regarding genre protection extend equally to non‑Canadian
services. We already compete with the
biggest communications companies in Canada but even they are small compared to
some of the non‑Canadian services.
6169 As a further note
on genre exclusivity, there has been substantial discussion during this process
about creating five broad genres, one of which would be sports. We would like to discuss with you in the
question period why this process is fraught with issues. Nobody has proved any specifics to date on
how the structure would be implemented.
When we tried, we ran into a number of practical issues, some of which
we have outlined in the attached Schedule 1.
6170 Question 4, fee‑for‑carriage
for over‑the‑air broadcasters.
6171 Fee‑for‑carriage
is a secondary issue for us compared to retaining access to our subscribers and
genre exclusivity.
6172 Question 5, BDU
access to advertising revenue from on‑demand and local avails.
6173 For a service like
ours that generate a significant portion of their revenues from advertising,
watching BDUs try to muscle in on advertising is disconcerting. It is bad enough that these services are
starting to look like linear specialty services, allowing ad sales would add
insult to injury.
6174 In addition, they
should not be in the market selling ads for U.S. specialties. The purpose of bringing these services into
Canada was to support Canadian specialty services, not to compete with them for
ad dollars. The advertising pie will not
grow and instead those dollars will be siphoned from us.
6175 And should the
Commission ever allow them to advertise on specialty services, you will simply
be mandating the donation of two minutes an hour of our precious airtime to the
BDUs.
6176 In conclusion, we
see no reason for the Commission to undertake the types of changes being
proposed at this time.
6177 If, however, the
Commission is of the view that it is appropriate to make changes to the fundamental
underpinnings of our broadcasting system, then it is imperative to take steps
to ensure that small independent voices like ours have continued access to a
significant enough volume of subscribers that we can compete in the marketplace
on a sustainable basis.
6178 It is critical if
diversity in the system is to flourish that small independent programming
services like ours have the possibility to continue to grow and to contribute
to our broadcasting system.
6179 We would now be
pleased to respond to your questions.
6180 THE
CHAIRPERSON: Thank you for your
presentation.
6181 I must say you
take me somewhat by surprise with your position on genre exclusivity. Knowing that you have had particularly
problems with genre, you know, where it goes, et cetera, I would have thought
Rogers' proposal saying let's have one bucket called sports and you can
compete, you can become the TSN of tomorrow or the Sportsnet, et cetera, you
would see this as an opportunity. Instead,
you see this as a threat. Can you explain
to me why?
6182 MR. J. LEVY: Notwithstanding that I like how that sounded,
the reality is that it is impossible and it would never occur.
6183 I am going to turn
it over to Grant in a moment to ‑‑ because we have done a lot
of thinking about this in the context of the bucket philosophy.
6184 At 60,000 feet our
service of sports news and information service, our fee is 14 cents per
month. If the genre opened up, for
example, and allowed us to compete with TSN, even if I was good enough to
convince my investors and our bank to pour money into this company and allow us
to go and try and buy rights at $700,000 or $800,000 a game, which is what it
cost for hockey or major sporting events, we would have no assurance that we
would be able to recover any fee close to what would be necessary to be able to
compete on that basis (a) because the distributor would not allow us to
negotiate at that level and (b) they probably wouldn't let the programming off
their networks in any event.
6185 The interesting is
the corollary is not necessarily true.
While we can't go into their camp, it is very easy for them to come into
our camp. At 78 cents a basic subscriber
or more on a tier, which is what they get, or a dollar something plus more on a
tier for what TSN gets, with very little additional capital they would be able
to launch a TSN to use their position of strength ‑‑ or a
sports news and information service to use their position of strength and lever
into our genre.
6186 So what is good
for the goose is not necessarily good for the gander in our particular
case. Unfortunately, we are the gander
and the reality of the situation is that open bucket doesn't work for us.
6187 Now, at a more
specific level I would like to turn it over to Grant because it is not just a
problem for us in sports. I mean that is
a specific problem we have but we really don't think this works
altogether. So, Grant, can you
elaborate?
6188 MR. BUCHANAN: Well, there are two components of what I
would like to say to you and the most interesting and immediately
comprehensible is the money.
6189 I have tried to
create a list of the services that would go into such a sports bucket should
you go that route. They are Sportsnet,
TSN, RDS, Leafs TV, The Fight Network, The Score, Infosports, World Fishing,
ATM Cricket, Outdoor Life, Game TV, Goal TV, Raptors NBA, Fox Sports, World
Canada, HPL TV, The NHL Network, ESPN Classic and Extreme Sports.
6190 They spend $260
million a year on Cancon. The average
weighted percentage is 48.
6191 What number did we
hear this morning? We heard 35.
6192 The delta, what
you lose for Canadian content if you move to a common 35 percent is $70 million
a year in Canadian content expenditures.
6193 The big winner,
this will surprise you, is Rogers. Half
of that is a savings they get on Rogers Sportsnet because they go from 54 with
a very high Cancon expense to 35. That
is how we move to the middle.
6194 Just by way of
figuring it out, about 1.7 million is what each of their points of Cancon is
worth. So if you move to 40 percent, it
comes to 40 million, they save 20.
Everybody else moves around accordingly but it is ‑‑ we
will file this in reply but it is fascinating when you see it.
6195 THE
CHAIRPERSON: No, but I mean that depends
on where you set the ‑‑
6196 MR. BUCHANAN: Sure.
6197 THE CHAIRPERSON:
‑‑ bar for Canadian content on CPE.
6198 MR. BUCHANAN: Yes.
And if there is no suggestion that that changed, then we have the
situation we have now.
6199 Because in 2004
when The Score asked for a rate increase because it wanted to compete with
those two services, they were told very clearly by the Commission: No, you are not in the live sports
business. That isn't what you do. You can live in your particular kind of
sports genre, sports news and information. You can live there at 14 cents. The fellow with $1.07 and the fellow with 78,
they are going to do the live sports.
6200 Now they want to
remove that and put us all in a common bucket.
That doesn't work.
6201 Quite apart from
that, we now ‑‑ if you actually get into the mechanics, sports
you think of as being quite homogeneous but it is not.
6202 You have got live
sports. You have got taped sports. You have got ESPN Classic, of course, which
would then get dropped into the same bucket but it can only do old sports and
yet, it will get brought up to a higher level presumably. You have got French, you have got
English. You have got amateur, you have
got professional.
6203 Each one of these
has really different dynamics associated with it and each one of the sports
services has a series of conditions of licence that preclude elements of it
from being aired on its service compared to the other fellows. So it has all been designed not with this
common bucket in mind. It has been
designed like this and now we are going to try to put it in a box that goes up
and down.
6204 When we started
trying to do it after we first heard about it, it became so messy for us that I
thought we should probably share this with you because if you think you are
simplifying matters by creating five genres, we picked what we thought was the
easiest, sports, and what a dog's breakfast!
6205 Let alone when you
start thinking about the money, if you made a common CPE, somebody has to go up
and somebody has to go down and everybody has a budget that their last licence
renewal was based on. So it looked all
pretty difficult to us when we actually got into the mechanics of it.
6206 THE
CHAIRPERSON: Okay, thank you.
6207 Ron, I believe you
have some questions.
6208 COMMISSIONER
WILLIAMS: Thank you, Mr. Chair.
6209 Good afternoon,
Mr. Levy and panellists. Welcome.
6210 So if I have got
your presentation down here, it is not broken, so don't fix it. PBITs are 20 percent or more. The internet is not a threat but it is an
opportunity. In the market forces
scenario, your perception is the reality that the BDUs will be deciding the
fate and whatever we do, there should be some special access rules for
independents and must‑carry as part of your bargain and what you based
your business plan on and any changes could result in the snuffing out of
independents.
6211 That is kind of
what I got from you and our Chair talked about genre exclusivity. I have just been reading through your
Schedule 1, the issues relating to the creation of the sports genre.
6212 Your presentation
has been very clear and it certainly limits what I have to ask you.
6213 You did talk about
fee‑for‑service and it looks like in your presentation you answered
that the fee‑for‑service is ‑‑ how it would affect
you. You viewed it as a secondary
concern but what are your views on fee‑for‑service for the over‑the‑air
conventional broadcasters? Should they
be allowed a fee‑for‑service?
6214 MR. J. LEVY: Well, as I indicated in our ‑‑
6215 COMMISSIONER
WILLIAMS: Sorry, it is fee‑for‑carriage. I keep saying service, I mean carriage.
6216 MR. J. LEVY: Fee‑for‑carriage.
6217 As I indicated, I
think, in our response, anytime you add potentially other layers of costs on,
it potentially will impact the decision‑making of the consumer in the
marketplace, and every indication that we have heard is that if there is a fee‑for‑service
coming across from the over‑the‑air broadcasters, you can be sure
it is going to be passed on and we have heard numbers to the extent of $2 to
$3, even more, $5, $10, we don't even know what it is, on a monthly basis.
6218 It was not
something that was of primary concern to us in responding to the questions but
anytime you increase the fee coming across, that potentially could have some
negative impact.
6219 Having said that,
as long as we have access, as long as we have the ability to continue to talk
to a substantial number of subscribers, we feel, as part of our regulatory
bargain that we made when we got our licence, by being high CPE, high Cancon, low
rate, as long as we get access to those consumers, we are going to be able to
compete.
6220 So it may have
some negative impact on us if the additional charges flow through because of
the over‑the‑air guys or it may not.
6221 COMMISSIONER
WILLIAMS: Thank you, Mr. Levy.
6222 That is my
question, Mr. Chair.
6223 THE
CHAIRPERSON: Michel.
6224 COMMISSIONER
ARPIN: Mr. Levy, you are saying that you
are going to be providing the service by early next fall and even late summer,
I would say ‑‑ I hope it is still summer at that time ‑‑
at the beginning of September.
6225 I am sure with the
time that is left before launching that you have already initiated negotiations
for carriage of your service in HD with the BDUs?
6226 MR. J. LEVY: We have some carriage for our HD service with
the BDUs. We don't have complete
carriage.
6227 Our whole effort
to launch an HD service is really twofold.
Number one, because it is the right thing to do. Sports in HD is magnificent. You watch a hockey game, you watch a football
game, you can't watch it any other way.
If we are going to be in this business, we have to stay in this
business. However, we can't be silly
about how we spend our money and how we deploy our capital.
6228 What the
Commission said to us was that if you are willing to push this perhaps faster
and further than you otherwise may have ‑‑ and for a company
like ours to spend $15 million in that short a period of time is a lot of
money.
6229 Basically, the
Commission said two things.
6230 Number one: As long as you are over 50 percent, you are
going to be guaranteed access.
6231 And you have heard
a lot this morning about the fact that what the Commission says and what you
are able to tuck into your pocket when you are negotiating is very strong.
6232 And when we
approach our distributors and they see that we are already doing some HD and
they already see our plans ‑‑ and I can elaborate on our plans
a little bit because they are very exciting ‑‑ they know we
are serious and they know that we are going to be providing and they know they
are going to have to give us access. So
I think the fact that it is there was a strong ‑‑ and the fact
that the rules were in place.
6233 There was one
other aspect to it too. The Commission
also said that if you don't do it, there is a possibility that you may lose the
ability to continue with your service.
That is another ‑‑ we respond well to threats like
that.
6234 This is our
lifeline. We want to do it anyway. We are doing it in a way that no other
service is doing, by the way, and it is not just about our HD, it is about our
whole HD presence, which hopefully, next time you are in Toronto, we will be
able to show you.
6235 COMMISSIONER
ARPIN: Last week we heard some
intervenors talking about HD carriage and the issues of uplinking the signal on
satellite.
6236 Is it for you as
well an issue or is it something that has already been dealt with?
6237 MR. J. LEVY: Again, I think that they know we are going to
have our HD service, they know they have to provide it for us. We are presuming there is going to be
bandwidth available for us to be carried and every indication we have had so
far, as recently as the last few days actually and perhaps in anticipation of
this hearing, is that assuming we get to where we are going to be, there will
be bandwidth available for us to provide the HD service.
6238 COMMISSIONER
ARPIN: Well obviously, that is the
channel capacity but the issue that was raised by some intervenors had to do
with uplinking costs where they ‑‑
6239 MR. B. LEVY: Commissioner Arpin, we make our HD service
available to the BDUs who are carrying it today from downtown Toronto and they
pick up the signal from there.
Currently, we don't uplink our HD signal.
6240 COMMISSIONER
ARPIN: Okay. So they pick up your signal from your master
control?
6241 MR. B. LEVY: Correct.
6242 COMMISSIONER
ARPIN: Thank you. That was my question.
6243 THE
CHAIRPERSON: Rita, you had a question?
6244 COMMISSIONER
CUGINI: Yes, thank you.
6245 I just want to
focus a little bit on your suggestion on page 8 of your oral presentation and
that is guaranteed access to the digital basic tier for independent programming
services.
6246 If I look at your
definition, one that is not controlled by, and you list them, this would
include Category 2 services and it would include ethnic services as well, would
it not? Are you suggesting that all of
those services be carried on digital basic if we take your definition?
6247 MR. J. LEVY: No. We
were just referring basically to the three analog services.
6248 COMMISSIONER
CUGINI: So only to the three analog
services?
6249 MR. J. LEVY: Correct.
6250 COMMISSIONER
CUGINI: Not even to Category 1 services?
6251 MR. J. LEVY: Correct.
6252 COMMISSIONER
CUGINI: And they qualify for carriage on
digital basic simply by virtue of ownership, no other consideration, no other
Cancon, CPE? Based on what you have
said, I mean that would be the bar, just by virtue of ownership?
6253 MR. J. LEVY: Well, the answer to that is yes but a
qualified yes because the other matters that you are referring to are already
part of our licence, they are already part of basically the negotiated or lack
thereof, the negotiated deal.
6254 We already come in
with a high CPE, we already come in with a high Cancon and we also have a very
low rate and if you use the formula that Commissioner Morin ‑‑
6255 COMMISSIONER
CUGINI: It does happen to work in your
favour, so I am not surprised.
6256 MR. J. LEVY: If it didn't, I would be coming up with
another rationale but it happens to work very well for us.
6257 And again, maybe
just to go back to why we just did the three analogs was because, again, the
Category 1s came in a different time, they have different business models, they
have different expectations of carriage and the whole approach for them is
different.
6258 We grew up in
a ‑‑ we have over 6 million subscribers, so a little less than
some of my other associates in the sports business, and we can go into the
reasons why that is at a different time, but our whole business model is based
on that sort of access.
6259 COMMISSIONER
CUGINI: But your initial business model
wasn't based on basic, on carriage on basic.
This is going a step further?
6260 MR. J. LEVY: Correct.
But again ‑‑ first of all, we do have some basic
coverage, by the way.
6261 COMMISSIONER
CUGINI: Right.
6262 MR. J. LEVY: It is still less than half‑half, I
think, half on a tier, half on basic.
6263 But again, it was
in the context of the fact that we did have mandatory carriage and we did have
genre protection.
6264 And just to be
clear, if the rules don't change, we are not asking for anything. If the rules do change and you are tinkering
with access and genre protection and this, then I am saying, well, everything
is out on the table, we need some regulatory safeguards.
6265 And just one other
thing to think about in the context of risk versus reward for what we are
talking about. We are talking about
three services with wholesale rates of less than 50 cents, two of which are
already on basic, ours, 50 percent of the universe is on basic. In the context of the overall cost structure
to the BDUs, we are not talking about a lot.
We are talking about a lot to us on an individual basis but to them we
are not talking about a lot.
6266 The risk on the
other side if you don't give us that level of protection is that there is a
very high possibility, notwithstanding what you have heard, that we could get
steamrolled or at least negotiated, as you heard this morning, to much lesser
rates or pushed to a lower tier.
6267 So we are only
asking for it because we are here responding to the fact that there is a
potential for some serious changes happening.
If none of those changes ‑‑ if you buy our argument
that let's wait five years, let's let this digital path roll out, let's come
back to this when we are a little more certain and when there is some evidence
as to why we need to make these changes in the first place, which we haven't
heard, then we can relook at it and we will deal with it at that point in time. But if you are going to do something now,
then we need what we are talking about.
6268 COMMISSIONER
CUGINI: This is the minimum requirement?
6269 MR. J. LEVY: Minimum requirement.
6270 COMMISSIONER
CUGINI: Thank you.
6271 Thank you, Mr.
Chairman.
6272 THE CHAIRPERSON: Thank you.
6273 Michel, you had a
question?
6274 COMMISSIONER
MORIN: Yes. I am more than happy that you have passed the
test with the 100 threshold but beware because, as I explained, this threshold
can move up, of course.
6275 I am wondering if
you have done more than your little homework per se but for the whole
system. As a matter of principle, can
this model, in your view, make sense for the system as a whole and do you think
that such an access model will decrease the diversity in the system? And diversity is an objective of what we are
looking for.
6276 MR. J. LEVY: I am going to start and then I am going to
turn it over to Grant because we have done work on the modelling and, in fact,
have a list of all the services and how they ranked and we are available to
make that available as part of the reply or to the Commission.
6277 COMMISSIONER
MORIN: I would like to.
6278 MR. J. LEVY: Okay.
But just in the context of the general question on how we view it,
obviously, we view it very highly because we rank very highly. But that wasn't a surprise to us because, as
I said before, we know we are a high value service with huge commitments and we
can live with that, and not only can we live with that, we love that. It allows us to develop our product, create
programming.
6279 I think we would
want a little more time before we would say it is that criteria which dictates
the whole universe of where coverage is.
As I think was suggested this morning, I think it is one very helpful
element in making the decision as to who has coverage and who gets access but I
also think it has to be taken in the context of who the player is, what genre
are they in.
6280 I think there are
other factors here that also should be looked at and I am trying to be objective
about it because based on where we place, we would be almost at the top of the
list. I think, Grant, we ranked like
fifth or seventh or something on the entire list, very high, very strong.
6281 But again, in the
spirit of trying to be objective about it, I think it is a very neat way to try
to categorize it. I think it would ‑‑
certainly in the context of the small independents, it would continue to
provide diversity of voice and diversity of programming.
6282 COMMISSIONER
MORIN: Even with your scores?
6283 MR. J. LEVY: I believe, yes. Yes.
But again, I just would caution to say I would like to think about it a
little more. I would like to think about
it in the context of broader considerations but it certainly seems to be
providing, again, a helpful guidepost.
6284 Grant, do you want
to comment on it?
6285 MR. BUCHANAN: Well, it is a bit of a strange discussion
since I have the list and nobody else does.
‑‑‑ Laughter /
Rires
6286 THE
CHAIRPERSON: Why don't you file it with
your reply comments.
6287 MR. BUCHANAN: Yes, I was ‑‑
6288 THE
CHAIRPERSON: As you know, there will be
14 days for people to file replies and I think it would be the
appropriate ‑‑
6289 MR. BUCHANAN: Perfect.
6290 THE
CHAIRPERSON: Since we don't have the
list, it would be of relatively little use to us right now.
6291 MR. BUCHANAN: That's fine, Mr. Chairman.
6292 THE
CHAIRPERSON: Okay.
6293 MR. BUCHANAN: I will do that. I would make two general comments.
6294 One, you might
expect it's skews towards news because they have high Cancon, high CPE, low
cost. You would expect the services at
the top of the list to be the news‑based services. And sure enough CTV Newsnet is first, Slice
is second because they have such high Cancon, then Pulse 24, Canal Nouvelle,
Weather Network, CPAC, the Score, Argent, Bold, BNN, the Business News Network
and Vision TV. Those services are all
100 or higher and they are the only ones, and this includes Category 1 and
analogs. Category 2s will never make
it. They are too low on their Cancon. At least I don't imagine they will. I didn't finish running it.
6295 The other thing
you find, and the reason we didn't present it with our submission today, some
of it requires a little bit of massaging; for example, if you have something
with 80 percent Cancon for the broadcast day, 60 percent primetime, which
number do you use?
6296 And there is a
number of services that have differentiated Cancon obligations depending on the
time slot. We use the highest one for
every service in each case even though some have higher primetime and others
have higher broadcast days.
6297 So you have a few
judgment calls to make. Also, some don't
have regulated rates. So you need to do
a calculation dividing three years' expenditures by three years' CPE or the CPE
by the revenues to come up with a guesstimate or an actual but a number that
isn't regulated by you.
6298 But with those in
mind, as John said, I think it's a very interesting way to look at it. It's different than what we have done
before. It encapsulates exactly what you
would expect, low cost, high Cancon.
That's part of the answer to Commissioner Cugini's question as to why we
thought these services ‑‑ it wouldn't be strange for them to
be on basic anyway because the three that we were talking about; the Score,
Vision and Weather are already on basic and they are already low cost and they
are already high Cancon. They all have
scores over 100. In other words, it's
not such a leap and you take care of the independent problem at the same time.
6299 So it's another
way of looking at the same issue but I think probably we will refine this a
little bit, Mr. Chair, and put it in with our reply comments.
6300 COMMISSIONER
MORIN: But do you think that it's
workable with the third variable, the price, if we want to increase in the
future the Canadian content and to give the access to those who are investing
in Canadian content and Canadian programming of course?
6301 Do you think that
this model is ‑‑ this point system is good for the channels
which are under the threshold?
6302 MR. BUCHANAN: Well, you are now out of the rate business so
you won't be setting rates anymore. So
I'm not sure how you measure the subtraction from the Canadian content.
6303 And the Cancon,
CPE and Cancon exhibition requirements aren't tools that are immediately
flexible. I can't decide that I want to
have a higher one in order to get there without coming to you and going through
a process that won't happen quickly. So
it's not the kind of tool that I can decide, "Oh, well, next year I need a
higher" ‑‑ "I need to be on basic" or I want to
do this, I want to do that.
6304 So it lacks a
certain flexibility.
I'm not sure. I need to think about it. We have two weeks.
6305 So I think
now ‑‑ we needed the numbers, I think, to start the process
going as to how you could work with it.
But you know it's interesting as far as it goes so far but that's
as ‑‑ you know we haven't taken it any further to be able to
generate the scores to trigger the thing.
6306 COMMISSIONER
MORIN: Thank you.
6307 THE
CHAIRPERSON: Okay, thank you very much.
6308 Let me just say
this is not a Commission proposal or anything.
This is an idea that Commissioner Morin has evolved and he has floated
and it's an interesting idea and obviously everybody needs to reflect on
that. And if you have some views on it
or have done some thinking of some calibrations by all means share it with us.
6309 Thank you.
6310 Madam Secretary,
who is next?
6311 THE
SECRETARY: Thank you, Mr. Chairman.
6312 We will now call
to the presentation table the Canadian Media Guild, please.
‑‑‑ Pause
6313 THE
SECRETARY: Mrs. Lise Lareau will be
introducing her colleagues after which she will have 20 minutes for ‑‑
I'm sorry ‑‑ 15 minutes for your presentation.
6314 Please go ahead.
PRESENTATION / PRESENTATION
6315 MS LAREAU: Good afternoon. My name is Lise Lareau and I am National
President of the Canadian Media Guild.
6316 I am joined by
Karen Wirsiq, the Guild's Communications Co‑ordinator and Brian Olsen of
Olsen Enterprises who has provided the technical research behind much of our
work and our presentation.
6317 Thank you for
giving us the time to present to you today.
6318 Our primary
concern in this proceeding is the survival of local TV programming and broad
access to it. Our statements to the CRTC
have been consistent on this issue and we certainly don't need to reiterate all
of our concerns and arguments here today.
What we can do is address the relevant questions that you have asked during
this proceeding through the lens of what will best ensure that local television
survives and thrives.
6319 Local TV was once
a cornerstone of this industry. Now,
it's little more than an afterthought or, worse, a costly inconvenience at
least from the perspective of those who sit around boardroom tables. Simulcasting, timeshifting, video‑on‑demand
these are all creatures of a continental TV system that largely distributes
foreign content to Canadians and income to Canadian TV licence holders.
6320 Even the Canadian
Television Fund, as it is currently structured, prioritizes the financing of
productions that are national in scale.
The regulatory system is increasingly supporting a model that is sucking
the life out of smaller‑scale local TV production.
6321 Nonetheless, over‑the‑air
licences continue to be a key element of overall broadcasting regulation and
the primary means of ensuring Canadians have access to at least some locally or
regionally‑relevant TV programming.
Looming large, though, is the real possibility that the transition to
digital TV will put the local building blocks of the system in danger while
cutting off hundreds of thousands of OTA viewers in nearly 1,000 communities.
6322 OTA broadcasters
have been trying to limit their local programming obligations and are suggesting
that they will not fully replace their analog transmitters or do it at
all. And by not addressing these issues
in the proceeding key opportunities to protect local TV could be lost.
6323 So what can be
done?
6324 With respect to
the issues at stake in this particular hearing we can recommend three
strategies:
6325 One, ensure that
broadcasters who maintain an over‑the‑air presence after the
transition to digital TV enjoy privileges and benefits that the others don't;
6326 Two, create
opportunities for new, local and regional players using new transmission
technology and;
6327 Three, use BDUs'
subscription revenue to finance an increase in the production and airing of
local programming.
6328 MS WIRSIG: So I will continue here.
6329 In terms of
incentives for OTA broadcasters, incentives to maintain an over‑the‑air
presence would include mandatory carriage and priority placement on BDUs. OTA broadcasters would form the core of a
basic cable package that would also include provincial broadcasters, the Aboriginal
Peoples Television Network ‑‑ we believe up to three Canadian
all news channels that have their own newsgathering capacity ‑‑
CPAC, a Canadian all weather channel, a Canadian sports channel committed to
airing a certain amount of amateur sport and even a specialty service devoted
to Canadian drama.
6330 The basic Canadian
package in our view should be a zone on the dial where viewers would know they
could count on finding Canadian programming, quality Canadian programming in
various genres.
6331 We support the
principle of the proposal put forward by the independent specialty broadcasters
for a Category A group of channels that would include those specialty services
that commit a certain amount of their schedules and gross revenues to airing
and commissioning or producing Canadian TV.
6332 However, we
believe the minimum requirement under such a system for airing and spending on
Canadian TV should be closer to 65 percent and not the 50 percent being
recommended. Time of day restrictions
would be necessary to ensure that the bulk of the broadcasting requirements
were not met during overnight hours.
6333 So‑called
conventional broadcasters without over‑the‑air service in the area
served by a cable company would not have mandatory carriage or priority placement
on that cable service. They would also
not have a right to simultaneous substitution.
In addition, only broadcasters with local programming should have access
to local advertising revenue.
6334 MS LAREAU: Now, in terms of new opportunities for local
and regional players, new technology presents an opportunity to enhance and
diversify local TV in smaller markets, those markets not currently seen as a
priority in the transition to digital TV.
We had talked about this exciting possibility before you last year and I
believe even earlier than that, and it's all about multiplexing.
6335 Multiplexing
allows a single digital transmitter to broadcast up to six stations at standard
definition. In countries such as the
U.K. and New Zealand multiplexes have been created by partnerships among
broadcasters to provide extensive free TV service. It also provides a possibility for cost
sharing among broadcasters. Perhaps best
of all, unlike the big cable and satellite companies and the technologies they
use, multiplexing is based on local transmission so it could present new
opportunities for smaller, local and regional players to enter the scene.
6336 Take the City of
Kamloops. It is a city of nearly 100,000
people where viewers currently have access to only three stations over‑the‑air. Two are private English stations carrying
CanWest programming while the third is Radio‑Canada's main network
station which is broadcast by a repeater out of Vancouver. CBC is no longer available for free and there
is only one local news show on TV.
6337 From what we know
right now, it's not clear there will be any local TV free or otherwise left in
Kamloops after the switch to digital TV in 2011.
6338 We believe
multiplexing presents important possibilities for viewers, broadcasters and
small advertisers in that city and cities like it. A partnership among the two existing private
operators, CBC/Radio‑Canada, the Knowledge Network and perhaps APTN or
even a new community station would actually improve TV service there. It would also ensure that the local cable
service had a decent local and regional element after the transition to
digital. We can talk about further ideas
to address this in a pilot project in the Q&A after this.
6339 And we must note
that Kamloops is only one city among nearly 1,000 communities to be cut off
from free TV after the transition to digital if we follow the current,
admittedly vague, plans provided by OTA broadcasters.
6340 Of the 970 cities
and towns we have determined would be cut off, about 90 percent currently have
fewer than six TV stations available over‑the‑air.
6341 Multiplexing then
not only represents an opportunity to save free TV in those communities, it
stands to improve access to free TV and local programming in smaller cities and
towns across the country, the very places that have been hurt most by the
centralization of TV production and newsgathering.
6342 MS WIRSIG: So finally in terms of financing for local
programming, we are persuaded that it would be advisable to explore new sources
of revenue for quality local programming and believe that BDU subscription
revenue is a reasonable source. When we
appeared before the CRTC in late 2006 we proposed a broadcaster programming
fund be created from a small increase to BDU subscription fees. The principles behind that fund are still
sound but we now believe that the money should be used exclusively for local
programming provided by OTA broadcasters.
6343 We are proposing
that OTA licensees apply for a per‑subscriber amount during their next
licence renewal to provide a new and additional block of local programming in a
particular licence area. The application
would include a business case for the new programming, an estimate of costs and
a proposed monthly amount per local BDU subscriber in the market to be served.
6344 Given that cable
providers end up with more obligations with mandatory carriage and simultaneous
substitution rules than their satellite counterparts, perhaps satellite
companies could be required to provide a slight premium per subscriber towards
the funding of local programming.
6345 Satellite
subscribers may not have access by a satellite to the local program they are
paying for. However, those subscribers
would continue to have the option to hook up an antenna in order to receive
local TV service without an additional subscription fee and we believe that
satellite subscribers already do that in many cases, hook up a TV for local
programming.
6346 We believe our
proposal would further allow the broadcasting system to meet important public
objectives while providing a clear rationale to BDU subscribers. Unlike with many BDU fee increases,
subscribers would actually be able to see what they are newly paying for.
6347 We should point
out that we flatly reject any fee‑for‑carriage proposal that
excludes OTA public broadcasters or grants subscriber fee revenue to OTA
broadcasters without any additional programming requirements.
6348 So just to sum up,
we are proposing ‑‑ what we are proposing is a couple of new
ways to look at making sure the infrastructure and means are there to continue
providing what Canadians fundamentally expect and deserve from their
broadcasting system, local TV. It may
not always be sexy or stunning but it should always be there to provide a
window into local events, politics; issues and let's not forget local
emergencies.
6349 We thank you very
much for your time and would be pleased to answer your questions.
6350 THE
CHAIRPERSON: Thank you.
6351 You have me at a
disadvantage. You say that in previous
hearings you explained multiplexing. I
wasn't here in previous hearings.
6352 MS WIRSIG: M'hm.
6353 THE
CHAIRPERSON: So maybe you can tell me
what you are talking about.
6354 MS LAREAU: Well, perhaps the best person to do that is
Brian Olsen.
6355 MR. OLSEN: In the new high‑definition digital
environment, we would have for instance a digital transmitter that might put
out one signal in high definition. That
transmitter also has the capability through a multiplex scheme to actually provide
six standard definition signals simultaneously.
So the same digital technology can do one HD, six SDs, or in the U.S. we
have seen instances where broadcasters have put up one HD and a couple of SDs
on the same transmitter.
6356 THE
CHAIRPERSON: But they will be all
digital signals?
6357 MR. OLSEN: They are all digital, all standard
definition.
6358 THE
CHAIRPERSON: I see. And then your proposal therefore is ‑‑
how does this tie in to your proposal ‑‑
6359 MS WIRSIG: Well ‑‑
6360 THE CHAIRPERSON:
‑‑ that those present OTA broadcasters will put ‑‑
in effect reward those who provide a digital signal in the future; those who
will say "no, we are not prepared to provide a digital signal. We will just provide our digital signal via
cable companies" will effectively be penalized?
6361 MS WIRSIG: Right, that's our proposal, to maintain the
over‑the‑air capacity, yes.
6362 THE
CHAIRPERSON: And to provide them an
incentive to provide it?
6363 MS WIRSIG: I mean if we look at what the plans ‑‑
and maybe Brian can speak further to this, but if we look at what the plans
suggest right now or what the broadcasters said back at the hearing in 2006,
there would at best be a hybrid system and at worst no over‑the‑air
broadcasting from some broadcasters apparently.
6364 THE
CHAIRPERSON: Yes.
6365 MS WIRSIG: It's not clear exactly what is going to
happen.
6366 But if we assume
the hybrid case those people who live in large urban centres would likely have
over‑the‑air HD service and those people living in about 970 or 977
smaller cities, but cities that are up to the size of 100,000 people, would
have nothing anymore over‑the‑air.
They would be forced to subscribe to satellite or to cable and likely
then ‑‑ it's not clear how local programming would survive in
a place like Kamloops anymore because what would the basis of a licence be and
would it even be required anymore? Would
you be able to require it of somebody that is not in effect a local broadcaster
anymore because they don't have a signal?
6367 See it becomes a
bit of a regulatory problem.
6368 THE
CHAIRPERSON: Yes.
6369 MS WIRSIG: In our view.
6370 THE
CHAIRPERSON: Yes. So you want to encourage them to use
multiplexing, to put out a digital ‑‑ and in return for that
they will get what?
6371 MS WIRSIG: Well, they will get some of the things they
continue to get today which is the rules that currently support OTA
broadcasters like the simultaneous substitution rules, like the priority
carriage rules, right?
6372 THE
CHAIRPERSON: Right.
6373 MS WIRSIG: Which is, I think, what is sort of on the
table today anyway. But what we think
the multiplexing would do is just increase ‑‑ actually
increase even from today the numbers of local stations available in a lot of
smaller locations at standard definition.
6374 THE CHAIRPERSON: And if we bring in a fee‑for‑carriage
they will get the fee‑for‑carriage too presumably.
6375 MS WIRSIG: If they propose to do ‑‑
well, our view is if they propose to do new local programming that met the test
that the CRTC thought contributed to the goals of the Broadcasting Act, then
they might get a piece of local subscription fees in order to do specifically
that local programming, yes.
6376 THE
CHAIRPERSON: Okay, thank you.
6377 Michel, I believe
you have some questions.
6378 COMMISSIONER
MORIN: Merci.
6379 You agree with the
Dunbar‑Leblanc Report that the CRTC must ensure a basic cable service
that exhibits a high level of Canadian programming? CBC‑SRC have said that the basic
service must be minimal, but we know that in the real world the consumer buys
packages and bundles instead of only the basic service.
6380 This morning
Cogeco said that less than 20 percent of the clients are choosing only the
basic service.
6381 So what is your
position? Are you in favour of a small
basic package as suggested by CBC/Radio‑Canada or a bigger one with
Canadian content?
6382 MS LAREAU: Our overall view is that there should be a
cluster of quality Canadian programming that people know how to find in one
place. That's what is really guiding our
principles here.
6383 If it's as small
as the CBC or larger than ours, I mean you can quibble over one or the
other. There needs to be a place that is
identifiable and is based on quality programming as opposed to quantity of
minutes of Canadian programming.
6384 COMMISSIONER
MORIN: You are saying that the fee‑for‑carriage
must be invested in new original, local programming. It sounds great but the problem, as the
broadcasters have explained, is not the provision of new content but the
maintaining of the local services as they are.
These fees for carriage are a lifejacket for the industry. They claim that they have to cope with
obligations and if they aren't able to do that the crisis will stay if they
don't get fee‑for‑carriage.
That's their argument. This is
why they are asking for new revenues.
6385 So are you
sticking to your point that 100 percent of the new revenue must be invested in
new original local programming?
6386 MS WIRSIG: Yes.
6387 COMMISSIONER
MORIN: Yes, good.
6388 So if the BDUs are
not in a position to increase local programming with fee‑for‑carriage
should the Commission refuse to grant fee‑for‑carriage rights?
6389 MS WIRSIG: If the BDUS are ‑‑ you mean
if the OTAs?
6390 COMMISSIONER
MORIN: Are not in a position to increase
the local programming even if they get the fee‑for‑carriage. Should the Commission refuse to grant those
fees‑for‑carriage?
6391 MS WIRSIG: Do you mean if the local conventional
stations ‑‑
6392 COMMISSIONER
MORIN: Yes.
6393 MS WIRSIG: ‑‑
aren't able to increase local?
6394 COMMISSIONER
MORIN: Yes.
6395 MS WIRSIG: Yes.
We don't think that they should be getting something for nothing.
6396 Now, in our
original proposal back in 2006 what we suggested was a broadcaster programming
fund as a bit of a counterweight to the Canadian Television Fund because you
may know that ‑‑ probably do know that the CTF does not allow
broadcasters to produce their own programming.
And in some cases it's the most economical way of producing quality
Canadian programming is to do ‑‑ especially news and current
affairs programming ‑‑ is for the broadcaster to do it
directly, right?
6397 So we thought BDU
subscription revenues could be used as a counterweight to create a new fund
that would be open for use by broadcasters.
6398 This time we are
saying, you know, even in the last two years we have seen local programming
more and more at risk. So now if the
money ‑‑ if there is a small amount of money there it's also
easier to sell because it's not a diffused question.
6399 In Windsor you are
going to get two new 30‑minute shows on this station and you are paying x
amount to help finance those shows. It's
very clear. It's very transparent what
you are getting. It's not like yet
another cable bill increase that you can't explain, right?
6400 So I mean I think
that's our rationale; is we understand this question is extremely
controversial. It is opening up a big
can of worms. But from the point of TV
viewers, if we know what we are paying for it's more likely to be
acceptable. And we do know that quality
local news is something of value to people and the more competition there is in
local news the higher the quality gets.
So the more people doing local programming, local news programming and
local current affairs; cultural programming, the likelier it is to be higher
quality.
6401 THE
CHAIRPERSON: Is what we are talking
about local news?
6402 MS WIRSIG: Sorry, no; not exclusively. I mean on CBC for example, I mean, there is
the living in Toronto. There is a number
of local shows where ‑‑ we live in Toronto. There are different local shows across the
country. Certainly, I don't think any
type of local show would be excluded.
6403 COMMISSIONER
MORIN: Following the discussion, in your
January comments you refer to a Nanos poll which states that 77 percent of
cable and satellite subscribers place a high value on local news.
6404 Did this poll ask
the same question for drama, children's programs and documentaries and if
"yes" what were the results?
Was the local news always the consumer's first choice?
6405 MS WIRSIG: We piggybacked on, I think, it was a CTV
Global TV joint survey in that case. So
I'm sorry but you will really have to ask them about the broader survey.
6406 It was just based
on something they put out into the news ahead of these hearings about the
survey. I am not exactly sure what the
full list of questions was but the highlight in that report was the local
aspect. And that is consistent with
other studies we have seen.
6407 MS LAREAU: And notably too, coming at a time where local
news is in jeopardy right across the country.
I mean you know this; the amount of local news shows across the country
is decreasing year after year after year as operations centralize. And so it was in that context that we wrote this
brief and our previous ones as well.
6408 So in some ways
it's a good question, but it's not entirely relevant to our concern which is
with our local news and trying to save both local programming and free TV
6409 COMMISSIONER
MORIN: Of course.
6410 MS LAREAU: At the same time.
6411 COMMISSIONER
MORIN: You say that both public and
private broadcasters must have access to the fee‑for‑carriage. You are still being generous, but just as a
matter of principle wouldn't it make more sense to give the CBC commercial
publicity rights to the private sector and fee‑for‑carriage, right,
to the CBC?
6412 Have you just as a
matter of principle without discussing the issue of fee‑for‑carriage
but generally as a whole picture ‑‑ for the whole picture?
6413 MS WIRSIG: In other words, CBC/ Radio‑Canada would
get fee‑for‑carriage.
6414 COMMISSIONER
MORIN: Yes.
6415 MS WIRSIG: And give up commercials for that program?
6416 COMMISSIONER
MORIN: As they have done with the radio.
6417 MS WIRSIG: Right.
6418 COMMISSIONER
MORIN: It's not the object of this
hearing but you know ‑‑
6419 MS WIRSIG: It's a bit of a touchy question for us. I think in principle there is nothing wrong
with it.
6420 And in fact, what
we said in our programmer ‑‑ in our 2006 proposal is that the
public broadcasters would in fact get access to this money for programming that
would run without commercials, so as a way of ‑‑ you know
private broadcasters might get access to the money if they were doing
incremental Canadian programming. They
would still run commercials but the CBC, Radio‑Canada and the provincial
educational broadcasters would do so without commercials.
6421 So it's certainly
something that we have talked about, yes.
6422 COMMISSIONER
MORIN: Thank you.
6423 MS WIRSIG: It seems reasonable.
6424 MS LAREAU: With the CBC, it is always a question of
being incremental on this question. It's
the reason why it's touchy for us because it's not like anybody would propose
take one thing away entirely and substitute with another. There is a lot of risks attached to that, but
obviously providing funding for programming that would be without commercials
would certainly be a start, an incremental start, and that's important.
6425 COMMISSIONER
MORIN: Thank you.
6426 THE
CHAIRPERSON: Okay. Well, thank you very much then for your
presentation.
6427 I think we will
take a five‑minute break before going to the next one. Thank you.
‑‑‑ Upon recessing
at 1500 / Suspension à 1500
‑‑‑ Upon resuming
at 1511 / Reprise à 1511
6428 THE
CHAIRPERSON: A familiar face.
PRESENTATION / PRÉSENTATION
6429 MR. DENTON: Yes, for your crimes, I'm back again.
6430 I can see, by the
increase in the number of commissioners, that we can recognize the relatively
greater importance of broadcasting to telecom.
6431 Good afternoon,
Mr. Chairman; good afternoon, Commissioners.
My name is Timothy Denton. I
represent the Coalition of Internet Service Providers, and it is now time for
something completely different.
6432 The intervention I
am making today relates to the role of Bell Canada as a distributor of high‑definition
television programming, which, in CRTC lingo, is referred to as a Satellite
Relay Distribution Undertaking, an SRDU.
6433 The particular
hook that I am hanging my hat on is paragraph 40 of your Broadcasting Notice of
Public Hearing that started this proceeding.
6434 I will quote your
words:
"Finally, the Commission asks
the parties to comment on any changes to its policies with respect to Satellite
Relay Distribution Undertakings and Terrestrial Relay Distribution Undertakings
that might be required as a result, for example, of possible changes as to who
is responsible for the delivery of signals or the capacity requirements for the
delivery of high‑definition signals." (As read)
6435 THE CHAIRPERSON: Mr. Denton, I am somewhat puzzled. You say that you represent internet service
providers and Xittel, neither of which are BDUs or broadcasters. How do you fit into this proceeding?
6436 MR. DENTON: They are exempt BDUs, sir.
6437 When Xittel
submitted its paperwork to the CRTC to be a BDU or to be exempt, the paperwork
was sent back saying, as long as we control the head end, we are an exempt BDU,
when they act in that capacity.
6438 THE
CHAIRPERSON: Okay. Proceed.
6439 MR. DENTON: That's a good question, though.
6440 My clients wish to
have the CRTC emphasize the importance of the obligations it has imposed on its
licensees in relation to their carriage obligations as SRDUs and TRDUs. Here is why.
6441 The primary path
to the survival of independent ISPs lies in the provision of triple‑play
services: internet, telephony and
broadcasting.
6442 The CRTC has
established rules in its recent Essential Facilities Proceeding that allow ISPs
to start to deploy more infrastructure.
So far so good.
6443 If the ruling in
the Essential Services Decision stands, then ISPs will have a planning horizon
and a feasible path on which to take action.
6444 The second part of
the equation concerns access to Canadian programming. ISPs need to have access to long‑haul facilities,
which includes the use of satellites, across standard, non‑proprietary
interfaces, such that ISPs can deliver programming to their customers across
private IP‑based networks.
6445 That brings me to
the observation that protocol interfaces are the new bottlenecks.
6446 The focus of the
coalition is, for the moment, confined to relationships with Bell and its
subsidiaries and affiliates. There are
several obstacles to negotiating a successful outcome with Bell ExpressVu in
this regard, and we want to talk about them in this presentation.
6447 First, in rural
markets in Quebec, Xittel, one of the members of the coalition, has serious
plans for the deployment of fibre to the home technology. For this purpose, it needs to be able to get
access to dedicated long‑haul transmission at a minimum of 100 megabytes
per second.
6448 The need for
bandwidth rises to 500 megabytes per second on more reasonable commercial
assumptions.
6449 Access to the
facilities of incumbent cable and telephone operators is not available on an
economic basis. The result of this
situation is that access to satellite‑delivered programming signals is
the most economically efficient way to solve this problem.
6450 Second, the ISPs
must adapt their engineering to fit the requirements of a Satellite Relay
Distribution Undertaking, the SRDU, which is Bell ExpressVu in this case.
6451 Likewise, we
submit that Bell ExpressVu has to make some adjustments to its SRDU operations
to make them useful to those companies that the SRDU concept is supposed to
benefit.
6452 This has not been
the case so far, as Bell ExpressVu has been focused on its own operations, as
Mr. Bibic testified in the proceeding on Public Notice 2006‑14.
6453 The coalition
understands that whatever adjustments both parties need to make should be
arrived at by negotiation, but the attention of the CRTC to realizing the SRDU
concept would certainly assist the process.
6454 The main point we
are trying to make is that Bell ExpressVu has licence obligations to make its
carrying capacity available to others without undue preference. CISP members operate as forborne from
regulation if they control their head ends.
Hence, Bell ExpressVu is obliged to make its service available to the
CISP members that so qualify.
6455 The obligation to
make this capacity actually useful to potential customers is necessarily
implied by the non‑discrimination clause.
6456 Technical
decisions can make interconnection to the SRDU economically unjustifiable. We use the term "interconnection"
because that, in substance, is what affiliation means in this context.
6457 We would like the
CRTC to remind Bell ExpressVu, in whatever way the Commission thinks best, to
think about how it can achieve this goal of actually being useful to its
customers.
6458 Here is an example
of what we are talking about. Bell
ExpressVu provides access to its programming through content access modules,
which are the white chip decryption cards.
Currently, our information from the makers of these chip cards, which is
a company called Nagra, available on the internet, is that we can decrypt four
channels per crypto card, and not two, as Bell ExpressVu maintains.
6459 The use of these
cards has a decisive effect on the economic case for establishing IP TV
service.
6460 Under current
arrangements Xittel has to build four head ends in each of the four regions it
serves in order to pick up Bell ExpressVu signals. This is so because access to terrestrial
service facilities at economic cost is not available.
6461 In addition to the
costs of those head ends, Xittel also faces significantly increased costs,
depending on the number of decryption devices that are needed per head end.
6462 These costs can
vary in two ways. The first way, as we
mentioned above, is when Bell ExpressVu insists that commercially available
decryption cards can only decrypt two channels per card rather than four, as
the manufacturer maintains.
6463 The second way
these costs can vary occurs when ExpressVu reassigns channels without prior
notice to new transponders for which descrambling equipment has not been
fitted.
6464 This is a matter
that could be fixed by what is called a Service Level Agreement, if Bell
ExpressVu had an incentive of any kind to negotiate one.
6465 So far, the SRDU
has never had to account for the cost structure that these decisions and others
impose on its customers. This is the
fundamental point of our presentation.
6466 The problems of
interconnection standards and agreements never go away. These standards and agreements could be more
speedily and readily arrived at by the Commission reminding the SRDU of its
licence obligations, by enforcing them if necessary, and by encouraging the
SRDU to come to mutually acceptable agreements with people who desire to use
its carrying capacity.
6467 CISP members want
to come to mutually acceptable arrangements with Bell ExpressVu about the use
of these facilities. Our question
is: Will the Commission help us in this
regard.
6468 Thank you.
6469 THE
CHAIRPERSON: Thank you.
6470 I don't think we have
any questions for you. This is really
not on the table for discussion.
6471 You have taken
this opportunity to remind us of an issue that you have. We take cognizance of it. Obviously, you can invoke the Commission
process if you want to, should you have a problem with Bell or anybody else.
6472 But as far as the
subject of this hearing, which is clear, I don't think it relates to it at all,
so we have no questions for you. Thank
you.
6473 MR. DENTON: Thank you.
6474 I hope that having
attained your attention on this matter we will be able to make progress with
them, because this is a key portion of the commercial strategy of independent
ISPs.
6475 THE
CHAIRPERSON: I have no doubt about
it. I think you should have invoked the
proper process, and I don't think this hearing is it.
6476 Let's go on to the
next intervenor, Madam Secretary.
6477 THE
SECRETARY: Mr. Chairman, this is the
last intervenor for today. We can resume
tomorrow morning with Quebecor Media Inc. at nine o'clock.
6478 Thank you.
‑‑‑ Whereupon the
hearing adjourned at 1521, to resume
on Tuesday, April 15, 2008 at 0900 / L'audience est
ajournée à 1521,
pour reprendre le mardi 15 avril
2008 à 0900
REPORTERS
____________________ ____________________
Johanne Morin Monique Mahoney
____________________ ____________________
Jean Desaulniers Fiona Potvin
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