ARCHIVÉ -  Transcription

 

 

 

 

 

 

 

              TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

 

 

 

 

             TRANSCRIPTION DES AUDIENCES DEVANT

              LE CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

 

 

                      SUBJECT / SUJET:

 

 

 

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 24, 2008                        Le 24 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:

 

Cindy Ventura                     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 24, 2008                    Le 24 avril 2008

- iv -

 

           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

PRESENTATION BY / PRÉSENTATION PAR:

 

 

Corus Entertainment Inc.                         2709 /15710

 

PIAC - Public Interest Advocacy Centre           2767 /16074

 

6166954 Canada Inc.                              2791 /16195

 

Fairchild Television Ltd.                        2816 /16357

 

Asian Television Network International Limited   2825 /16404

 

TLN Telelatino                                   2834 /16449

 

Communications, Energy and Paperworkers Union    2862 /16592

  of Canada (CEP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Thursday, April 24, 2008

    at 0904 / L'audience débute le jeudi 24 avril 2008

    à 0904

15705            THE CHAIRPERSON: Madame Secretary?

15706            LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous.

15707            I would now invite Corus Entertainment Inc. to make a presentation.

15708            Appearing for Corus is Mr. John Cassaday.

15709            Please introduce your colleagues.  After which, you will have 15 minutes for your presentation.

PRESENTATION / PRÉSENTATION

15710            MR. CASSADAY:  Thank you.

15711            Mr. Chairman, members of the Commission, my name is John Cassaday. I am the President and CEO of Corus Entertainment Inc.

15712            To begin I would like to introduce my colleagues who are with me here today.

15713            To my immediate right is Gary Maavara, Vice‑President and General Counsel.

15714            To Gary's right is Gerry Makrell, Vice‑President, Corus TV Sales.

15715            And to my left is Sylvie Courtemanche, Vice President, Government Relations.

15716            Corus welcomes this opportunity to participate in this important review of the regulatory policies for specialty and pay television and distribution undertakings.

15717            In our written submissions, Corus has proposed a comprehensive package of measures that, taken together, are designed to respond to the goals set out by the Commission when it launched this proceeding.

15718            More importantly, however, our proposals address what we believe should be the underlying objective:  simply put, to build on the success of the Canadian broadcasting system during this time of unprecedented change, challenge and opportunity.

15719            The Canadian broadcasting system is a tremendous success made possible by a supportive carriage model that has nurtured new services and fostered their growth and development.

15720            Yes, it is a complex and layered system, but it has worked. It has been the right approach to further the objectives of the Broadcasting Act.

15721            The proof is in the number and diversity of Canadian services we have today and the enormous contribution they collectively make to the creation and exhibition of Canadian programming.

15722            Add to this the large number of complementary foreign services that are available in Canada, and the result is that we have access to more programming choices per capita by far than any other country in the world.

15723            The transition to a purely digital environment starts from this existing structure.

15724            All players in the system ‑‑ both the regulators and the regulated ‑‑ must proceed with great care to preserve our strengths as the digital borderless environment emerges.

15725            Corus is privileged to play a role in the success of the Canadian broadcasting system.

15726            Our television assets include three over‑the‑air stations, two pay television services and 11 analog and digital specialty services.

15727            Corus has developed strong brands more particularly in the children's, women's, and the long form dramatic programming sector.

15728            Corus is unique.

15729            That said, every intervener before you in the past three weeks is unique.

15730            We all have different perspectives, mandates and markets.

15731            Our collective challenge is to find a regulatory structure that can reconcile this diversity of interest.

15732            MR. MAKRELL:  Since its inception in 1999, Corus Television has provided significant support to the independent production sector.

15733            For example:  we have commissioned over 4,600 hours of original Canadian production from independent producers through our pay and specialty services; we have spent more than $267 million on licence fees paid to independent producers;  and we have triggered over $900 million in original, independent Canadian productions.

15734            Corus is particularly proud of its support for children's programming, through our specialty services YTV, YTV VOD, Treehouse and Treehouse VOD, our 50 per cent ownership stake in Teletoon, Teletoon Retro and the VOD platform, Discovery Kids and through Nelvana, which is one of Canada's biggest producers and exporters of Canadian entertainment content.

15735            Consider that YTV is celebrating its 20th year on air.

15736            Since 1988 YTV has commissioned more than 2,400 hours of original Canadian production, spent more than $185 million in licence fees and triggered over $1.1 billion in independent Canadian production.

15737            Treehouse, since its launch, has spent more than $36 million in licence fees and triggered more than $137 million in independent Canadian production targeted to a preschool audience.

15738            And Nelvana, over the last 5 years, has spent over $360 million in production costs.

15739            MS COURTEMANCHE:  These are the contributions that have been possible under the current regulatory framework.

15740            Although we agree that this framework should be simplified where possible, we must be careful that we build on our successes.

15741            To do so, Corus believes that this policy process involves three distinct steps.

15742            First, a streamlining of the rules for distributors, focusing on the key measures needed to promote the goals of the Broadcasting Act.

15743            Second, in the event we redesign the distribution framework, the Commission must also address the licensing framework for discretionary services.

15744            This symbiotic relationship is the essence of the regulatory bargain.

15745            Obligations need to match the privileges awarded to the services.

15746            This is how discretionary services meet their high Cancon exhibition and expenditure obligations.

15747            Access rights, packaging and preponderance requirements are key elements of the carriage model that support the high contributions to the Canadian system made by discretionary services.

15748            Alteration or removal of any of the carriage rules will affect the business model for discretionary services and their ability to sustain their current levels of contribution.

15749            Even without any changes to current carriage rules, the evolution to all‑digital cable distribution and the offering of more customized cable packages will lead to lower penetration in the future, particularly for today's analog services.

15750            A service‑by‑service comparison of DTH and cable penetration is ample evidence of this.

15751            Third, to move from today's licensing and distribution framework, the Commission needs a logical transition framework with clear milestones.

15752            Corus provided such a transition model in its written comments, and we would be pleased to elaborate on this during the question period.

15753            MR. MAAVARA:  We would now like to respond to the five key questions identified by the Commission at the outset of the hearing.

15754            First, all BDUs should provide a basic service that includes the CBC‑SRC, local over‑the‑air Canadian stations and the Section 9(1)(h) services.

15755            A BDU should have the flexibility to add to its basic package any Canadian specialty services, with their agreement, plus the traditionally carried US stations.

15756            In a competitive market, this allows BDUs to differentiate themselves and to provide a level of service that, in their judgement, best meets the needs of their subscribers.

15757            Corus would be concerned that a lifeline basic service package would exclude key program categories, including and importantly programming to children.

15758            Second, we believe that access privileges should be granted to those services that make requisite contributions to Cancon exhibition and CPE.

15759            We have called these Class 1 services.

15760            Corus does not suggest that all existing analog and Category 1 services should automatically become Class 1 services.

15761            Instead, all existing discretionary services would default to a Class 2 licence with no CPE requirement and no access privileges, similar to today's Category 2s.

15762            Any service wishing to obtain access guarantees would have to apply for a Class 1 licence with incremental obligations respecting Cancon and CPE.

15763            As for the CPE obligations for these Class 1 licences, the Commission should specify a fixed percentage of revenue but without bracketed increases through its licence term.

15764            The current practice by which required CPE percentages are subject to increase depending on historical PBIT levels is a tax on success and has no place in a competitive broadcasting environment.

15765            Third, with respect to genre exclusivity, Corus proposes an open entry approach based on the principle of genre identification rather than genre protection.

15766            We support the establishment of a limited number of broadly defined genres for this purpose.

15767            This would serve to increase the diversity and promote dynamic competition within the Canadian broadcasting system.

15768            Corus believes that, after more than 20 years, it is more than prepared to compete in the children's programming sector.

15769            Any service within a given genre would also be free to adjust programming formats without the need for prior Commission approval, provided that its nature of service remained consistent within that genre.

15770            A service proposing a more fundamental change that would move it into a new genre would have to apply for prior Commission approval.

15771            The purpose of such an application would not be to administer genre protection policies.

15772            Rather, it would be to put all existing services in the new genre on notice of the imminent arrival of a new competitor, giving them a chance to develop appropriate competitive responses.

15773            It would also allow distributors to manage the transition.

15774            We believe that this approach fosters competition and stimulates the creation and exhibition of high quality content, while avoiding the potential free‑for‑all that could otherwise result if all genre identification policies and application requirements were eliminated.

15775            While we advocate an open entry approach respecting the licensing of Canadian services, let us be clear that this approach is not appropriate for non‑Canadian services.  The Commission needs to ensure that each new non‑Canadian service authorized for distribution in Canada contributes true diversity to the system and does not undermine the program rights and business models of Canadian services.

15776            To this end, Corus advocates an objective two‑part test.

15777            First, no more than 25 per cent of the program titles on a prospective service should already be available in Canada.  Second, where a prospective service currently has a program supply agreement with a licensed Canadian service, no assessment of eligibility should occur for 36 months to ensure that the non‑Canadian service does not restrict access to its programming.

15778            As for the possibility of a previously authorized non‑Canadian service morphing into a new format that might infringe on a Canadian service, Corus suggests that the Commission simply apply the 25 per cent program overlap test when such a situation is brought to its attention on a complaint basis.  Failure to pass the program overlap test would result in the service being removed from the lists of non‑Canadian services authorized for distribution in Canada.

15779            MR. CASSADAY:  The fourth question relates to fee for carriage.

15780            Notwithstanding our position as an over‑the‑air broadcaster, Corus remains opposed to the imposition of any fee for carriage for three reasons.

15781            First of all, at least a portion of the problem can be addressed by stopping the leakage created by the problematic execution of the distant signals policy.

15782            Second, there is an absence of compelling or independent evidence to demonstrate that there will be no harm to the system as a result of fee for carriage, no harm in terms of lost subscribers to black or grey distribution alternatives, and no harm from consumers reducing their existing packages, much like we understand consumers today are adjusting to higher gasoline prices by reducing their food‑away‑from‑home occasions.

15783            And third, it creates a regulatory imbalance for specialty operators unless we are compensated in turn with mandatory signal substitution, which has proven to be an extremely lucrative revenue source for over‑the‑air operators.

15784            In any event, all we ask here is that you prove us wrong or make us whole.

15785            Fifth, with respect to distributors' access to ad revenues, whether through their on‑demand platforms or using the local avails of U.S. satellite services, our position is again clear.  Advertising activity must remain the sole domain of programmers.

15786            Local avails and U.S. satellite services already play the vital role of promoting Canadian programming services.  Activating this substantial inventory for commercial application would trigger material advertising price deflation.

15787            In addition to the potential impact on the television advertising market, the sale of local advertising by distributors would also have a significant impact on local radio stations in each market.

15788            With respect to the on‑demand platform specifically, Corus supports flexibility and an opportunity to work with distributors to explore the possibilities of video on demand and dynamic ad insertion.  However, any such activity must be done only in accordance with the terms of a negotiated agreement between the broadcaster supplying the programs and the distributor providing the VOD platform, consistent with the principle that the broadcaster retains responsibility for the sale of all advertising.

15789            Mr. Chairman, there are of course many other issues that have been raised in this proceeding and we have included with these opening remarks an attachment that summarizes our recommendation on all the matters under discussion.

15790            That completes our presentation.  Thank you for your attention and we would be pleased to respond to your questions.

15791            THE CHAIRPERSON:  Thank you very much for your very balanced presentation.  I appreciate that.  Having heard presentations all over the scope, yours is sort of as balanced as I have seen so far, and I appreciate that effort by you to put both sides on the table.

15792            MR. CASSADAY:  Thank you, we appreciate that.

15793            THE CHAIRPERSON:  Tell me, just out of curiosity, I didn't know you owned any OTA stations.  Which ones are those?

15794            MR. CASSADAY:  Yes, we have three stations that are affiliated with the CBC: one in Kingston, one in Peterborough and one in Oshawa.

15795            THE CHAIRPERSON:  I see.

15796            Now, on your suggestion of their being sort of one category in the digital universe, Class 1, and you also suggest that all existing analog and Cat 1s default to Cat 2 and then we have a process for that.  In terms of transition, I presume you suggest that we do that between now and 2011 when we enter the digital, and in the meantime obviously people have their grandfather status.  But we would hold these very difficult hearings in between on the assumption that all of you will resort to Cat 2 unless in this proceeding you become a new Class 1 carrier.

15797            Is that the idea?

15798            MS COURTEMANCHE:  I will answer that.

15799            Yes, the idea is that everybody would remain as they are for the next several years.  In 2013 would be when you actually implement the new Class 1 and Class 2 licences.  You would be processing the applications as of September 1, 2012.

15800            So the status quo would continue for existing services up until at the earliest 2013, at which point you would then have your newly licensed Class 1s and Class 2s.  That's where your evolution would have occurred.

15801            So that is why we provided a detailed transition schedule to sort of explain how you get there step‑by‑step.

15802            THE CHAIRPERSON:  I know you did and that's what surprised me, because I mean business doesn't like uncertainty and basically until we hold that hearing, the existing Cat 1s or analog 1s don't know where they are going to wind up, et cetera.

15803            Wouldn't there be a need to do that at an earlier date in order to remove that element of uncertainty?

15804            MS COURTEMANCHE:  Perhaps the point that is not clear is the fact that you have ‑‑ there is no debate as to whether or not you would become a Class 1 or not.  The Commission would establish the parameters upon which a Class 1 would operate.  It would specify for everyone if you are a Class 1, your Cancon is at this level and your CPE is at that level.

15805            Once you are prepared to commit to those levels of Canadian content and CPE, it would be an automatic process; you would get your Class 1.

15806            THE CHAIRPERSON:  So it is an entitlement program.  There is no element of discussion any more.

15807            MS COURTEMANCHE:  There is a discretion for the operator to decide, you know, whether you want to do Class 2 or Class 1.  But the Commission, yes, your discretion is determining right up front what is the level of contribution that will entitle you to be able to operate at that level.  So that is where your discretion comes in.

15808            But after that, the operator has a very clear picture as to what he has to do going into the future.

15809            THE CHAIRPERSON:  I'm confused here.

15810            We hold these hearings whenever, you suggest 2012 or something like this.  Existing Cat 1 or existing analog says okay, those are your requirements.  I'm prepared to meet those.

15811            So they automatically become a new Class 1 or do we as a Commission have a say in it in saying no, we don't want you for whatever reason?

15812            MS COURTEMANCHE:  The Commission always has a discretion, absolutely.  I mean, the Commission cannot legally bind itself, you know, and you can't bind legally a future Commission.  So that is absolutely clear.

15813            What it would say is it would set out that, you know, basically speaking unless we have a problem with what you are proposing to do, this is the level at which we would expect you to come in at, and nothing less, and that level of obligation will translate into access privileges.

15814            So you are setting a bar and people will be able to plan accordingly.

15815            But yes, absolutely, you have a discretion to say, you know, at the end of the day even though you are meeting the bar, we don't think your proposal should get access.

15816            It certainly sets out the rules of the game very clearly from the start.

15817            THE CHAIRPERSON:  Well, this is why I'm asking you, because you are trying to marry two contradictory principles: one of saying the expectation that this is entitlement; if you do it, you get Cat 1.  And then at the same time you very quickly backpedal and are saying just a second, no, you can't bind yourself; you always have the discretion to let people in, et cetera.

15818            It is going to create either expectations that are not going to be met or, alternatively, a process which is very akin to rubber stamping.

15819            MS COURTEMANCHE:  Your alternative would be to just say come in and have a process that says if you come in with great obligations in Cancon, we will examine whether that is a level of Canadian exhibition and/or Canadian expenditure that we think in our mind warrants access in a digital environment, guaranteed access.  That would be your alternative, is to say okay, don't determine the level today and look at it on a case‑by‑case basis.

15820            MR. MAAVARA:  Mr. Chairman, when we looked at the original PN calling this process, one of the objectives that the Commission set for itself was streamlining the regulatory process because of the huge number of applications and that sort of thing.

15821            What we tried to set out in the transition scheme, of course making some assumptions as to how it would work, we see this as part of a broader process which will include other elements, for example, you recently published diversity policy.  At that time, that may be a situation where it is not so much a rubber stamp but the Commission has to apply other policy as well.

15822            For example, if an applicant has hit certain thresholds, that is a time when that sort of thing would be looked at.  The other aspects that you will have to look at at that time ‑‑ and again, we made assumptions as to dates ‑‑ but what is the actual penetration of the new technology?  Who are the players at that time and that sort of thing?

15823            So we felt that there would be elements of the process that would be streamlined, but at the end of the day, as Ms Courtemanche said, you make the decision.

15824            THE CHAIRPERSON:  No, don't get me wrong.  I like the streamlining.  I just pointed out the potential problem that I see here.

15825            Ms Courtemanche partly answered my concern.

15826            Just one other question.  When you talk about protecting against foreign services and you have this two‑part diversity test before you let somebody in, the second part I'm not quite clear how that works and what are you trying to achieve on page 9 with your second bullet:

"Where prospective service currently has a program supply agreement with a licence service, no assessment of eligibility should occur for 36 months."

(As read)

15827            MS COURTEMANCHE:  We just want to make sure that a program service, Canadian programming service that has a relationship with a U.S. service provider doesn't see his program supply arbitrarily cease just because that ‑‑

15828            THE CHAIRPERSON:  Make a concrete example.  Walk me through how this would work.

15829            MR. MAAVARA:  Let's use the example of Home Box Office.

15830            THE CHAIRPERSON:  Yes.

15831            MR. MAAVARA:  They license a number of programs to our pay service Movie Central.  Someone decides to make an application for Home Box Office carriage in Canada and that is something that Home Box Office is interested in doing, and they terminate our program supply agreement.

15832            Our concern about the incursion of foreign service is really based on two things, as you have heard I think a few times over the last few weeks.  One is the loss of access to programming, which in many cases can be fundamental to the success of the Canadian service; and second, of course, is the competition for subscribers and viewers.

15833            What we are looking at here is a circumstance where if there was such an application made, in a sense we would establish a statutory moratorium or regulatory moratorium for three years before you applied the test.

15834            In a sense, it is a bit of a stop sign from a regulatory perspective that allows the Canadian operators to plan for that and also hopefully to convince Home Box Office that they don't need to come here.

15835            THE CHAIRPERSON:  I'm always interested in the mechanics.  Take your example, Home Box Office applies; they come before us.  So we then say we will deal with your application and 36 months?

15836            MR. MAAVARA:  Yes.

15837            THE CHAIRPERSON:  Okay, so we do that.  Thirty‑six months are up and everybody had notice.  At that point in time we either let them in or not, depending whether you have a 25 per cent overlap.

15838            MR. MAAVARA:  That's correct.

15839            THE CHAIRPERSON:  Having told everybody else in the meantime if you want to continue to get supply from HBO, you better tie them up right now.

15840            Is that the idea?

15841            MR. MAAVARA:  That's correct.

15842            THE CHAIRPERSON:  Okay.  Thank you.

15843            Len, you have a lot of questions?

15844            COMMISSIONER KATZ:  I have a few questions, Mr. Chairman.

15845            Can you tell me the current ownership of Corus?  What per cent of Corus does Shaw own today and what per cent is public?

15846            MR. CASSADAY:  There are two ways of looking at the ownership of Corus.  The important way, from a regulatory point of view, is the control block.

15847            The Shaw family controls approximately 83 percent of the voting shares of Corus Entertainment.

15848            Corus is a publicly traded company.  There are approximately 42 million shares outstanding, and the Shaw family controls approximately 6 percent of the outstanding equity in Corus.

15849            I guess that is the distinction.

15850            I guess the other important thing that I would say is that there is no ownership in Corus by Shaw Cable or Shaw Communications, the ownership is at the family level.

15851            COMMISSIONER KATZ:  On page 6 of your submission this morning you indicate that you are not opposed to a more broad ‑‑ the current basic package that exists today.  You seem to be opposed to a basic lifeline package, and you identify in there that one of the key reasons is perhaps that children's programming would be excluded.

15852            Can you make the same argument for the U.S. stations, the four‑plus‑one, or the multiple four‑plus‑ones that may be in basic?

15853            MR. CASSADAY:  The same argument in terms of their lack of children's programming?  Is that what you mean?

15854            COMMISSIONER KATZ:  Either lack of children's programming, or the reason why the U.S. programming should be included in the basic package.

15855            MR. CASSADAY:  The basic argument for maintaining it is that it has been an entitlement to the consumer.  We start and finish our whole thinking with what is the impact on the consumer.

15856            I think there has been an expectation that those services are available.

15857            I think we need to be mindful of the fact, when we start talking about a very limited basic service, about who is to complain.  We would be concerned that if there are certain groups that are excluded from having participation in television viewing, that that would be an issue.

15858            We have a broader issue about a slimmed down basic service, and that is the impact that it has on our access to viewer eyeballs, if, in fact, this results in a significant reduction in the penetration of a number of our services.

15859            We would like the opportunity to be able to appeal to distributors to include us in a basic service, and we think that, from a competitive point of view, it is a compelling way for various distributors to differentiate themselves from one another by being able to mix and match the appropriate services within a basic service that they offer to their customers.

15860            COMMISSIONER KATZ:  How many of the Corus services are in the basic package today?

15861            MR. CASSADAY:  Four services ‑‑ Treehouse, YTV, W and Telelatino.

15862            I think that covers it, Gary?

15863            MR. MAAVARA:  It depends a little bit on the market, but that's roughly it.

15864            In the children's area, one of the concerns that we would have from a consumer standpoint, and obviously our enlightened self‑interest is that most over‑the‑air broadcasters have abandoned the children's area in the same way as they have abandoned other segments of programming, which have been replaced by specialty or pay services.  The result would be that if you had a very slim basic service, then those viewers would not be getting access to that Canadian program.

15865            COMMISSIONER KATZ:  So of your 11 analog and digital specialty services, four of them are in the basic package?

15866            MR. CASSADAY:  That's right.

15867            COMMISSIONER KATZ:  The only other question I have, Mr. Chairman, is a quick one.

15868            On page 8 you talk about your model and the notion that anybody else coming in under your broad genre model would apply to the Commission, and you say that would give the incumbents a chance to develop the appropriate competitive response.

15869            If we are looking at a competitive market, why is there a need for new entrants to give the incumbent time to adjust to a new entrant coming in?

15870            If anybody is disadvantaged, it is probably the new entrant who is going to be disadvantaged.  He is coming in with nothing, as opposed to the incumbent, who is already there.

15871            Wouldn't this give the incumbent an opportunity to lock up the business, or the programming, or whatever, at the exclusion of the new guy coming in?

15872            MS COURTEMANCHE:  We thought that it might be chaotic if, from one day to the next, there was no notice given, whether it is to the distributor or even the consumer.

15873            I think there are a number of people in these elements that you need.  I understand what you are saying.  Perhaps this gives the incumbent a leg up, but it is also meant to manage the confusion that would happen if formats changed one day to the next and neither the distributor nor the consumer was part of the process.

15874            At least this gives a number of people an opportunity to be told in advance that they are going to lose their service and they are going to participate in the process.

15875            It probably wouldn't change the outcome, as long as the person would agree to have the nature of service.

15876            Competitively speaking, yes, it does allow you an opportunity for the incumbents to prepare themselves, but it also manages the other elements of the system, which is what we were more concerned about at that point, rather than just giving the incumbent a leg up.

15877            MR. CASSADAY:  It is true that it does give the incumbent an advantage, but I guess the question to ask is, why would that not be appropriate.

15878            It is akin to allowing the incumbent the opportunity to avoid being ambushed.

15879            If you have what we call in the industry a tent‑pole program ‑‑ and most specialty services succeed or fail on the basis of having, really, one or two outstanding shows that drive their schedule ‑‑ and if through ambush an incumbent planning to change their approach to competing in a genre decided to get into a new form of programming ‑‑ let's say, for example, that Food decided that instead of focusing entirely on lifestyle, they were going to become actively involved in drama ‑‑ and before they made that move they secured the rights to a "tent‑pole" show from W, that would have a very significant impact on W, which has made a great contribution to the system, to be able to maintain that level of contribution going forward.

15880            It just allows an appropriate time for people to adjust to a change in circumstances.

15881            The essence of our idea, though, is that we believe that Canadians deserve more freedom of choice, and that that choice should come from Canadian services.  So we have simply tried to provide a framework where we could encourage more diversity in the system through the encouragement of Canadian players to compete more broadly.

15882            COMMISSIONER KATZ:  Thank you.

15883            THE CHAIRPERSON:  Michel?

15884            COMMISSIONER ARPIN:  Thank you, Mr. Chair.

15885            My colleague asked you the good questions.  I was supposed to make the initial interrogatories, but some of the questions I am looking at have already been asked.

15886            I want to come back to your timeframe ‑‑ the timeline that you have put as an appendix to your submission, which you discussed earlier with the Chair.

15887            I was wondering, during that almost five‑year period that will bring us to September 1, 2013, the existing analog and Category 1s, can they do anything they want in the meantime?

15888            Can they reduce their Canadian content, reduce CPE and ‑‑

15889            MS COURTEMANCHE:  No, they couldn't change the way they are operating until the proceeding had occurred.

15890            You can't just arbitrarily change your licence, you would need to continue within the framework that we are operating in today.

15891            At the time, when the Commission would say "Now it is time to process these applications," that is when the change would actually occur.

15892            MR. MAAVARA:  Mr. Vice‑Chairman, you are probably going to see analog services come in as circumstances change for them.  They will come in looking for changes, but, again, that would be at the discretion of the Commission.  You would manage that according to the circumstances that they are facing.

15893            They couldn't do it as a right.

15894            COMMISSIONER ARPIN:  As you say in your oral presentation, the experience so far ‑‑ the various analog services that are handed up one day on satellite, I would guess that most of them, if not all, have been packaged in a different fashion, and somehow, rather than attain up to 90 percent penetration, at best they would be in the mid‑sixties.

15895            Obviously, through digital migration, they are also living a very similar experience.

15896            That is why you are saying that there might be some analog services which may consider having their conditions changed.

15897            Is that what you are saying, Mr. Maavara?

15898            MR. MAAVARA:  Yes, that's correct.

15899            There was considerable evidence filed with the Commission during the digital migration process, and the reality is that whenever something gets into a more discretionary mode, the penetration levels fall off.

15900            Of course, our challenge, from a marketing standpoint, is to try to entice consumers to keep picking them, but it is very difficult to maintain 100 percent carriage.

15901            COMMISSIONER ARPIN:  That being said, in most instances services have been able to negotiate with the distributor a make‑whole or a close to make‑whole rate, so that, in terms of revenues, they have been able to maintain their revenue level.

15902            In terms of eyeballs, more than likely, there were viewers that were not ‑‑

15903            Well, if I don't have any children, the likelihood that I will watch a children's channel is rather slim.

15904            But if you have been able to negotiate your rate, then, in terms of revenues, you are keeping your bottom line.

15905            MR. MAAVARA:  There are a number of impacts of a transition from a pure analog carriage into a more discretionary environment, and one of the things that tends to happen is, if you are no longer part of that channel sequence ‑‑ and I think that Gerry Makrell could speak to this ‑‑ what you also lose is sort of the drive‑by viewer, so that a program that might have got some viewership before no longer gets that, simply because it is no longer part of the package.

15906            For example, in the example you used, a program on YTV that is targeted for family viewing in the evening, if you don't have the channel because you don't have children, then, obviously, you didn't think that channel was important to you.  In the current circumstance, we get viewers who watch those shows because they are interesting programming, and we lose that in a discretionary environment.  As a result of that our advertising potential drops.

15907            Then, on the subscriber side and on the make‑whole side ‑‑ we have heard a lot of perspectives from the BDUs over the last three weeks, but I think that people would generally agree with the observation that the days of a make‑whole environment are probably behind us.  The challenge for all services will be finding the right combination of attractive rate to the BDU and customer, combined with the ad potential, in order to make the business plan feasible.

15908            MR. MAKRELL:  I think you are right on, and I think that Gary's response was pretty accurate.

15909            From an advertising perspective, you are not hurt by losing households who wouldn't watch you anyway.  Conversely, you are probably going to have a relatively high success rate in recruiting core viewers.

15910            The devil is in the detail, I guess, in that it is the occasional viewer that you would get, on a fairly routine basis, tuning into your channel, just because they come across programming that is interesting to them, who will no longer have that opportunity.

15911            So you are right in that it is not a linear relationship.  Distribution does not linearly relate to the advertising piece, but there certainly is a directional relationship.

15912            COMMISSIONER ARPIN:  Would that be more true for certain kinds of services, rather than all services?

15913            After having worn another hat in a previous life, I know that, obviously, on music channels, from time to time you have a special star or whatever, and obviously, if you haven't subscribed to the music theme pack, but you are interested, it is an opportunity missed.

15914            But if you are on the much broader tiers, or on basic, then you may have the odd viewer that will otherwise not have watched, but will give you a much better rating for that program.

15915            Are you suggesting that all of the services, or that all of the genre services benefit from these extra viewers from time to time, or is it more specific to some genres?

15916            MR. CASSADAY:  All services benefit, to some extent, from drive‑by viewing.

15917            We have a very large adult audience on YTV, which we monetize in special packages to advertisers, and yet, by the suggestion you are making, that would not have been intuitive to you, and yet it is an important part of our marketing plan.

15918            Certainly, as we see it going forward, there's going to be a lot more onus on the programmers to market their services.

15919            The most important thing for us coming out of this hearing is that we continue to have access to eyeballs, but we are prepared to get that in two ways:  Through mandatory access as a Class 1 service, or through marketing efforts as a Class 2 service.

15920            We recently were given the opportunity by the Commission to launch Cosmopolitan Television in Canada.  We're going to do very well in terms of distribution on that service because of the compelling offer that we have.

15921            We've got a great brand name, we invested heavily in programming, we are spending a lot of money on marketing that brand, including a broad array of media not just our own services, and when we talk to distributors, even in French Quebec, they found it appealing as an offering to their subscribers.

15922            So, it ended up being a win/win, despite the fact it was a Category 2 service.  And you've heard lots of complaints about access, with the right package, it is possible to get access to those eyeballs and do very well.

15923            MR. MAAVARA:  If I can just add to that.   And, Mr. Chairman, you mentioned that you are a subscriber to Star Choice, and I think in knowing that I could probably predict that your behaviour in how you look at channels is different than someone who's a subscriber to a traditional cable system.

15924            And the reason is that as we move into this digital environment, a variety of factors result.

15925            One of the issues is the change in packaging and access and that sort of thing, but the other thing that happens is simply just channel position and the way the service is ‑‑ the BDUs cluster their services.

15926            And the result is, that changes how you look at television and the reality of anybody who is a satellite subscriber or who subscribes to the huge cable packages, is that you can't scroll through ‑‑ unless you're a middle aged male ‑‑ you can't scroll 500 channels because the people who are in the room with you will probably take ‑‑

15927            THE CHAIRPERSON:  Speak to my wife.

15928            MR. MAAVARA:  Exactly.  And that changes the viewing issue.

15929            And as Gerry talked about, you know, the occasional viewers, that's another thing that we have to deal with through things such as Mr. Cassaday mentioned on marketing, but that is an unescapable aspect of the digital environment.

15930            The channel may be there, it may be carried, but it's somewhere much more greatly remote from where it used to be.

15931            And one of the things that we were pleased with, with how the BDUs are dealing with the basic digital tiers, is that they're basically replicating how it is on analog and the result is that consumers understand the channel relationship and the line‑up relationship and that's maintained viewing.

15932            COMMISSIONER ARPIN:  While you were talking with the Vice‑Chair and when he was asking you regarding the services that you may have or could have from BDU to BDU on basic, I noted that CMT is on basic on ExpressVu, I don't know if it is.

15933            So, it's a fifth service that you have that has benefitted from being distributed on basic.

15934            MR. CASSADAY:  That's correct.

15935            COMMISSIONER ARPIN:  The ‑‑

15936            MR. CASSADAY:  In the words of ‑‑ who was it, Roger Clemens, I misremembered.

‑‑‑ Laughter / Rires

15937            COMMISSIONER ARPIN:  Now, I know that your position is rather clear on fee‑for‑carriage, but assume that at the end of the proceeding the Commission comes to the view that the fee‑for‑carriage should be granted.

15938            In your view, since you are an operator of three television stations ‑‑ well, first, should the CBC get any money out of fee‑for‑carriage; and, second, should the money go to the network or should it go to the local station?

15939            MR. CASSADAY:  Well, I guess we look at the question of fee‑for‑carriage in a broader context, and I'll come back to your specific question about a graduated fee structure.

15940            But the first thing that we suggest, and that is something that we raised in our opening remarks, is to stop leakage.

15941            And we think there is an opportunity to generate increased revenue by a real thoughtful strategic approach on the part of all the players in the system to try to stop this leakage through distant signals which either CanWest or CTV, I couldn't tell from the minutes, suggested was in the neighbourhood of $90‑million.  Not an insignificant amount of money.

15942            Secondly, I think there are other opportunities that the Commission will want to look at.  One is the general framework for the hearing was, let the market decide or let market conditions dictate, and one of the tools at your disposal is to allow exclusive distribution, and this would allow an operator, like a network to say to Cogeco, I would like a fee, for Cogeco to make a decision and then for that operator to go to ExpressVu and perhaps even get a dollar a month.

15943            And then the question would be:  Would I rather have a dollar a month or free carriage on Cogeco depending on whether or not I want access to those eyeballs and the ability to derive advertising from them?  But I think it's, again, an alternative.

15944            To your specific point, I think there is a couple of issues that have to be addressed, is in fact a government‑sponsored agency like CBC or SRC entitled to the same fee as a network like CTV?  Within CTV, is A Channel entitled to the same fee as the CTV network itself?

15945            If, in fact, the right number's 50‑cents, should it be in one fell swoop or should it be graduated over a period of time?

15946            All of these questions are complicated and I don't think there is a right answer.  Obviously, the toughest challenge that you all are going to have is to use your best judgment to determine what is the appropriate answer.

15947            Just looking at the Toronto market, in my view, if you looked at the 50‑cent rule you're looking at at least a $5 wholesale and at least a $10 retail rate, and that scares me from the standpoint of being a pure play specialty operator because I don't know what the implications are going to be on the consumer.

15948            We used the analogy of the consumer response to rising gas prices being a reduction in the number of times per week that they are apparently eating food away from home.

15949            I think that it's a natural inclination on the part of all of us to adjust our spending in light of increased expenditures from, you know, another part of our spending base.

15950            I mentioned the importance of independent research, and I'm not suggesting any of the research that you've seen has been dishonest, but the answer you get in research depends largely on the way the question's asked and the sequence in which the questions are asked.

15951            And I think that it's fair ball that the parties in this system contribute to an independent study to try to get some idea about the receptivity to fee and also the receptivity to various price points.

15952            And then, finally, another ‑‑ and I think another tool that we have to use here is just to ensure that the dollars that are going to the web right now, which are substantial in Canada, are adhering to the guidelines that exist as it relates to tax deductibility.

15953            I have a concern, and many of our customers have a concern, that there are many U.S. websites benefitting from Canadian advertising and perhaps not without ‑‑ with the penalty of no tax deductibility.  So, I think there's a lot of money leaking out of the system there that could be brought back in.

15954            And then, finally, I think there needs to be some objective assessment as to why there is profitability problems in these networks.

15955            Markets are still growing.  In this last broadcast year we've seen over‑the‑air television markets grow at 1.3 per cent.  From the world I came from, which was packaged goods, a one per cent market growth was reason for high fives and breaking out the champagne.

15956            So, I think that there needs to be a very clear understanding as to why, in fact, there are issues here and I would encourage you, as President of a programming company, to look specifically at the line item on the P&L called Program Amortization and to make sure that these decisions are being made thoughtfully and that they're, in fact, not stockpiling programming and paying the price and reducing their opportunity to be profitable while they capitalize on the opportunity to be dominant.

15957            And, as I said, it's a broad range of considerations.  We don't envy you, but all we're saying, from our selfish point of view, we think the risks are high for the piece of business that we're in if people migrate away from us to gray or black market dishes.

15958            And I also quite frankly wonder why the two largest operators in specialty television, CanWest and CTV, are less concerned about that than we are, because that's clearly where the growth's going to come from and I wouldn't throw that fish off the boat until I was sure that the other one was going to be able to swim.

15959            So, that's just a long answer to what was probably a hope that I would have a quick response for you.

15960            COMMISSIONER ARPIN:  Or a more specific answer.

15961            MR. CASSADAY:  Well, the specific answer is, there is no answer.  I mean, I don't know how you decide what SRC's worth relative to TVA.

15962            COMMISSIONER ARPIN:  Exactly.

15963            MR. CASSADAY:  It's pure judgment.

15964            COMMISSIONER ARPIN:  And you're leaving it to us, but...

15965            MR. CASSADAY:  Well, actually I'm recommending you don't do it, but...

‑‑‑ Laughter / Rires

15966            MR. CASSADAY:  So, I am being very specific.  But if you do do it ‑‑

15967            COMMISSIONER ARPIN:  Absolutely.  But if we were to do it, should the money go to the network, or should the money go to the local stations?

15968            MR. CASSADAY:  Well, there are so few local stations, that's the least of these issues.  All the beneficiaries are really owned and operated.

15969            COMMISSIONER ARPIN:  Yes.  But they are affiliates, like you are.

15970            MR. CASSADAY:  Yeah.  But, you know, we are such a small piece of the pie, I think ‑‑ you know, I mean, 98 per cent of the dollars are going to go to five key players and I just don't think it's a big enough issue to make that a concern here.

15971            COMMISSIONER ARPIN:  Now, you have made the point regarding distant signal but, again, in the distant signal situation, if we were to go to a consent regime, who should give the consent; the broadcasters that you want to export or the broadcaster that is coming into your market?

15972            Say, take Peterborough, so it would be CBC Vancouver who says, yes, I want to be in Peterborough, so it would be the affiliate in Peterborough who says, okay, I agree to the CBC Vancouver as long as I'm compensated.

15973            Because the argument that I have heard so far, particularly from CTV and CanWest, is obviously the Vancouver stations say that we'll agree to be exported to Toronto or Halifax, but the damage is done locally.

15974            MR. CASSADAY:  Mm‑hmm.

15975            COMMISSIONER ARPIN:  I don't know if you have any specific ‑‑

15976            MS COURTMANCHE:  But the model that we looked at is basically the same model that the CAB said, but it's the entity that controls the rights within that market should have the determination as to whether that programming content is made available in another market, which means we would decide in Peterborough if our content could be made available in Vancouver, Vancouver would not have the opportunity to object to its coming in.

15977            COMMISSIONER ARPIN:  But if you're never asked to ‑‑ if no carrier thinks that they are interested ‑‑ no distributor are interested to have the Peterborough signal but all the broadcasters that are, say, in Vancouver, Calgary, Toronto are interested to go into Peterborough, you're going to be hurt by the distant signal.

15978            MR. MAKRELL:  Well, that's correct, but I could reframe the question, because this really is about programming rights and the ability to control the territories that you've licensed.

15979            And it hasn't come up very much over the last three weeks, but there were submissions made with respect to the concept of geo gating and, in many ways, we're hanging our hats from both a business and regulator perspective on the notion that the Internet is not going to be as big a challenge because of the potential for geo gating.

15980            But when you think about it in a digital environment, what we're really talking about with respect to the distant signals is really the same thing.

15981            It boils down to:  Is the rights holder in that community holding both the regulatory and legal rights to be exclusive in that territory?

15982            So, I guess on the ‑‑ to repeat what Sylvie Courtmanche says, it comes back to the test that the CAB was promulgating.

15983            And I think that it really sets a very strong precedent for how we look at the broader environment going forward.

15984            If we can't control this, then we're not going to be able to control the broader environment.

15985            COMMISSIONER ARPIN:  In your written presentation, and again in your oral remarks today, you didn't talk a lot about VOD, and I have seen nowhere SVOD or transactional VOD.

15986            Is it because transactional VOD and SVOD are not an issue?

15987            I know that you have an opinion on pay‑per‑view.  It is not in your oral remarks but it is in your written presentation, where you were saying that pay‑per‑view, when renewal time will come, they shall be renewed as a VOD operation rather than pay‑per‑view.

15988            But what are your views regarding SVOD and transactional VOD, if you have any?

15989            MR. MAAVARA:  From a regulatory perspective, our submission was very similar to what the CAB had said with respect to all of the elements relating to acquisition of programming and sale of advertising, and that sort of thing.

15990            Our view on VOD ‑‑ and we have heard over the last three weeks a variety of points of view starting with Mike Lee on where we are going with that technology.

15991            We are trying, as a company, to understand and be involved in kind of every area of that, so we are really delighted to work with the BDUs on experimenting with whatever uses we can make in, call it traditional VOD or SVOD.  Any way that we can deliver our programming and derive benefit from that delivery, because the audience is interested in doing it, we will be there.

15992            From a regulatory perspective, I hope that our position on that is clear.  It was the CAB's position.  And basically what we are saying is we would like to be able to control the flow of that programming into those new technologies and control the revenue flow as well, albeit understanding that we are going to have to share with that BDU because of course they are making the investment in the capital to make it all work.

15993            MR. CASSADAY:  From a business perspective, we think it is a good opportunity for us as partners to work together.  We were one of the first programmers in North America to get involved in the VOD business with Comcast and that is an ad sharing revenue sharing model.

15994            There is very little revenue even in that marketplace at this particular point in time, but we think that will grow.  We also look at it as a way of enhancing the value of our brand to the distributor.  So where possible we offer VOD offerings of our core brands, even though we know that they can't be monetized at this particular juncture, as a way of again adding value to their system.  We are typically negotiating VOD rights along with the broadcast distribution rights when we renew our agreements with the various studios.

15995            COMMISSIONER ARPIN:  You are saying that you are doing VOD with Comcast, obviously where they are free to do dynamic advertising, targeting advertising, and you say for the time being it is still a marginal operation.

15996            Here in Canada do you think the fact that you are restrained to the actual advertising in the program is one of the reasons why you are not able to monetize your programming through VOD platforms?

15997            MR. CASSADAY:  It's an emerging platform.  It is going to take time to develop.

15998            The SVOD offering on our pay service in is really never going to be an ad driven model, but it is going to add value to the service and we think will contribute to a reduction in churn.  So that is as valuable to us in that regard as ultimately advertising will be on Rogers or Shaw going forward.

15999            Gerry, I don't know if there's anything you want to add in terms of advertiser interest at this point.

16000            MR. MAKRELL:  Yes.  To build on that point, it is an interesting arena in that there is relatively high advertiser interest, largely driven by the notion of reaching a highly targeted audience and a highly engaged audience.

16001            The flipside and the mitigating factor is it is also a very small audience.

16002            So the ability to monetize it really lies in the hands of the broadcaster who can marry a VOD advertising solution as a component part of a larger campaign that runs across multiple platforms, including a traditional on‑air program, perhaps online, and also bringing the advertising campaign through the VOD platform as well.

16003            So that in and of itself as an advertising medium is very limiting today.  It has big potential and the best way to monetize it is to exploit it as a component part of a larger program.

16004            COMMISSIONER ARPIN:  In your model obviously the broadcaster belongs to the broadcast right and the programming rights, but who is going to be selling that advertising, the broadcaster?  And each and every broadcaster or the BDUs?

16005            MR. CASSADAY:  The broadcaster.

16006            COMMISSIONER ARPIN:  The broadcaster.  So in your model it has to be the responsibility of each broadcaster that makes use of the VOD platform to negotiate and sell with ads into VOD?

16007            MR. CASSADAY:  Right.  And then split the revenues on a predetermined basis.  That would be a negotiation.

16008            COMMISSIONER ARPIN:  And a negotiation obviously that hasn't yet taken place.

16009            MR. CASSADAY:  Well, it has in some regards but, as Gerry said, it is so small at this particular point in time that there have been no go to the barricades negotiations over the split on the ad revenues at this point in time.  It is going to become an increasingly more important part of our ongoing dialogue with our key customers in future.

16010            MR. MAAVARA:  One of the aspects of all of this, Commissioner Arpin ‑‑ and we have said this on a number of occasions ‑‑ when we have these discussions about branching programming rights onto new platforms and deriving revenues, and whether we are sharing them or not, the key issues of course are do we have the rights and are we going to develop any revenue.

16011            But another thing that tends to get forgotten in this discussion, which we have talked about before, is the enormous complexity of all of this.

16012            I'm just back from the National Association of Broadcasters convention in Las Vegas and I characterize this year as the devil in the details.  Last year was sort of a lot of this new stuff, and this year it was about the equipment and the software suppliers saying this is how I am going to make all of this work.

16013            So for example, if you have a program that is going to end up on four or five platforms that has 52 different rights‑holders associated with it who are sharing in that, you have to invest in it, not only at the BDU level, but also at the broadcaster level, in enormously complex systems to track that usage so that you in turn can report back to the people who license the programming to you.

16014            That is an important aspect of this discussion: the ability of the Canadian player to have the capital to continue to be a meaningful player in that sector, because you have the systems in place that when you acquire the rights to manage them and also where you are selling advertising, having the ability to understand what your advertising is doing and to report back to the advertisers that this is what I did, that is enormously expensive.

16015            I just wanted to make that point because we tend to focus on the technology and the rights side, and we tend to forget about the practical aspects of it.

16016            COMMISSIONER ARPIN:  Thank you, Mr. Maavara for that.

16017            Your submission is very clear so it is very hard to find good questions.

‑‑‑ Laughter / Rires

16018            MS COURTEMANCHE:  We will take that as a compliment.

16019            COMMISSIONER ARPIN:  Yes.

16020            COMMISSIONER KATZ:  I asked for the good ones.

16021            COMMISSIONER ARPIN:  It is true.

16022            Regarding dispute resolution, you are taking a very similar position than other broadcasters which is based on the reverse onus.

16023            Based on your own experience so far, will having a reverse onus demonstration have been helpful for Corus to get either distribution or help into the negotiation, or from a pure Corus standpoint you have been successful because all your service ‑‑ and you just mentioned Cosmopolitan, which is no access guaranteed where you had been successful in getting distribution deals all across the country at least with the major BDUs.

16024            So my question is basically while you are supporting the broadcasters that we have heard so far ‑‑ and I can understand why.  But will it really be a greater benefit for Corus in the future than it is so far?

16025            MR. CASSADAY:  I don't think so.  We take a different view than many of our competitors.  We think it is a partnership and we feel as a broadcaster it is important that we support our colleagues in this area because some of them feel that they need a process.

16026            A lot of people come to me and buy me breakfast on the misguided assumption that I can somehow make things happen for them with a particular distributor.

‑‑‑ Laughter / Rires

16027            MR. CASSADAY:  You know, one of the things I ask is:  When was the last time you were out there?  And the answer is almost invariably "Never".

16028            And it is not surprising to me that some programmers have such a miserable time achieving what they want to achieve with the distributors.

16029            In our case, we find that constant contact, understanding what their issues are and trying to provide value is the way to get things going.  I cannot imagine a scenario where we would ever be in front of you asking for any arbitration over a dispute that we have with a programmer.  I cannot imagine that.

16030            COMMISSIONER ARPIN:  Well, Mr. Cassaday, those were my questions.  Thank you very much.

16031            THE CHAIRPERSON:  Rita, I believe you had a question?

16032            COMMISSIONER CUGINI:  Yes, just a couple.

16033            I'm looking at the Appendix that you attached to your oral presentation this morning.  On the issue of preponderance you said that it:

"... should require that a preponderance of discretionary services received by a subscriber (excluding over‑the‑air signals) must be Canadian."

16034            Do you mean they are excluding what is carried on basic must be Canadian?

16035            I am thinking of the 9(1)(h) services.  Of course, they are not over the air.

16036            MS COURTEMANCHE:  Right.  I guess that is an oversight, yes.  So you would include those, yes.

16037            COMMISSIONER CUGINI:  Okay.  Mr. Maavara did just say the devil is in the detail.

16038            MS COURTEMANCHE:  Yes, absolutely.

16039            COMMISSIONER CUGINI:  I just wanted to be absolutely sure.

16040            MS COURTEMANCHE:  Absolutely.

16041            COMMISSIONER CUGINI:  Now on the issue of distant signals, of course we have been hearing all of the challenges with distant signals and a few of the opportunities.

16042            I know that for YTV and W, and there may be others, cable carries both your western feed and your eastern feed.  I know it's not the same thing; it is not necessarily the same issue.  But what I want to ask is are you able to monetize the carriage of the western feed in eastern Canada of those services, or do you just simply see this as an alternative viewing opportunity for the people watching your networks?

16043            MR. CASSADAY:  It's a convenience for our viewers.  Obviously time shifting is important, particularly as it relates to preschool programming.  To have preschool programming going into a time zone at an inappropriate time obviously makes no sense.

16044            What we are able to do, we are not competing against foreign signals so it is, as you say, less of an issue.  We sell national advertising only.  This is not an issue for us, but rather an opportunity that we take advantage of because of the need to support our audiences.

16045            In the case of W, we have different problems and that is time appropriate material, not just in terms of content but also delivery.  Clearly putting a movie into Vancouver at 5 o'clock makes no sense when you are trying to serve a female audience.

16046            So it's not the same for us as it would be for local broadcaster.

16047            COMMISSIONER CUGINI:  Right.  So there is no way to monetize the carriage of those feeds?

16048            MR. CASSADAY:  Not separately.  We aggregate the audiences, and of course our national advertisers pay for a service that goes into every market regardless of what time it is watched.

16049            COMMISSIONER CUGINI:  Well, thank you very much.

16050            Thank you, Mr. Chairman.

16051            THE CHAIRPERSON:  Okay, two very quick clarifications so that I understood you.

16052            On page 8 where you were talking about this genre morphing by Canadian and you are asking for periods of notice, which in it is implied, at least to me, that the genre morphing will be allowed once the notice period is over.

16053            There is no question it will happen; it is just a time delay.

16054            MS COURTEMANCHE:  That's right.  It will happen.  It is just a question of notice, that's right.

16055            MR. CASSADAY:  As it relates to Canadian services.

16056            THE CHAIRPERSON:  Yes, absolutely.

16057            MS COURTEMANCHE:  Yes.

16058            THE CHAIRPERSON:  Second, with your whole idea of us holding hearings for you, what you call Class 1 licences, you have suggested by 2013.

16059            Why so late?  Why not by 2011 which is the switchover date?

16060            MS COURTEMANCHE:  Well, we looked at the fact that the OTAs were going to have to switch off analog transmission in 2011 and we just thought that there should be, you know, sort of not everything happen at the same time, to sort of give you a couple of year grace period before you make the transition into a fully digital environment.

16061            But our model does accommodate, though, the fact that if somebody does come in and becomes fully digital earlier, then at that point obviously you would need to treat with those services that find themselves in that situation.

16062            For instance, if Rogers was completely digital by 2011 and didn't have an analog tier any more, then you would have to treat those applications earlier.  That was our thinking.

16063            To answer your question, based on the progression of digital and when people do shut off, you might have to, in a couple of years time, advance that date and say, you know, it's 2010, not 2011 or 2012.

16064            THE CHAIRPERSON:  On the assumption I buy into your model, I would have thought that the sooner we hold those hearings the better, so people know as of 2011 that is going to be my status.  That's where I have to be.

16065            MS COURTEMANCHE:  Absolutely.  That is another way of doing it.

16066            We just thought that ‑‑ we were looking at all the work that you had.  But you know your point is do I want to start planning right away to where I'm going to be?  Absolutely, you could do those hearings earlier and that would help in the planning, absolutely.

16067            THE CHAIRPERSON:  Okay.  Thank you very much for your submissions.

16068            I think we will take a five‑minute break before we do the next one.  Thank you.

‑‑‑ Upon recessing at 1017 / Suspension à 1017

‑‑‑ Upon resuming at 1030 / Reprise à 1030

16069            THE CHAIRPERSON:  Madam Secretary...?

16070            THE SECRETARY:  Thank you, Mr. Chairman.

16071            I would now invite the PIAC, Public Interest Advocacy Centre, to make a presentation.

16072            Appearing for PIAC is Mr. Michael Janigan.  Please introduce your colleagues, after which you will have 15 minutes for your presentation.

16073            Thank you.

PRESENTATION / PRÉSENTATION

16074            MR. JANIGAN:  Thank you very much, Mr. Chair.

16075            On my left is Esteban Uribe and on my right is Mani Taheri, who has assisted with this presentation.

16076            Public Interest Advocacy Centre is appreciative of the opportunity to address the Commission on the regulatory frameworks for broadcast distribution undertakings.  PIAC has done so on the previous two occasions that such a review took place, in 1993 and in 1997.  That experience informs some of the comments here today.

16077            Before we address several of the questions among the five pivotal questions set out in the Commission's communication of April 7, 2008, there are a number of observations we wish to make in order to set the context for our submission.

16078            Our principal concerns on the regulation of BDUs have historically revolved around the affordability of the service and value for service for customers.  We strongly oppose the deregulation of cable basic service under the threshold forbearance levels set out by the Commission in 1997 as we believe there would be insufficient competition to discipline price and provide consumers with efficient service.

16079            As we have noted in our comments, and others filed in the proceeding, our fears were well‑founded.  Fees for cable basic service instead of being reduced with the effects of competition escalated beyond CPI levels and more services were crammed into the so‑called basic package.

16080            Freed from regulatory oversight, cable companies moved to scuttle involvement with the Cable Standards Council.  That was an industry body that helped resolve customer disputes.  Soon the central association CCTA itself collapsed, partly because of consolidation, but also because there was little need to present an industry position to the regulator and policymakers outside of the relationship with individual customers.

16081            It is hardly the case that the new competitive environment has engendered popularity of the industry with BDU customers.  The excerpts from the 2005 survey contained in our comments that PIAC conducted in tandem with Bell Canada and TELUS on that year show persistent problems with price, choice and quality of service expressed by Canadians.

16082            If one is familiar with the generally high marks that Canadians give to major industries, if one has looked at the National Quality Institute surveys, for example, this was a pretty poor showing.  There seems little reason to believe that these difficulties will be ironed out in the current market for BDU offerings.

16083            How is it that there seems to be so much activity by industry stakeholders in seeking to identify needs and services of customers?  Isn't this proof that the market is working and the customer is king?  Yes?

16084            While the actual level of competition between BDUs is remarkably tamed and non‑existent on issues of price and service, BDUs are careful to ensure that a sufficient percentage of their customers are not pushed beyond their ability and willingness to pay.

16085            At the same time, few opportunities are missed to garner more revenue from customers.  This does involve interaction with the market and nimble positioning to bring out more value for the BDU shareholder.  This activity should not be confused with firms operating in a genuinely competitive environment.

16086            More realistic expectations of how the industry operates are likely unnecessary for the purpose of fulfilling the Commission's mandate.  There are competing interests in the mix, but they are not always capable of enabling the discipline of competition.

16087            Distributors clearly have a duty to their shareholders to maximize the value of their service offerings and subsequent profits.  Their success at these endeavours may or may not ensure the objectives of the Broadcasting Act and Regulations are met.

16088            As well, not every solution to delivering important Canadian broadcasting services should involve new and creative ways to extract more money from customers of BDUs.  There must be ways for consumers of BDUs to escape the role of shock absorber for every perceived shortcoming in the delivery of broadcasting services.

16089            We would like to now turn to the five key questions that have been identified as revealing the issues that the Commission will have to determine.  In so doing, we intend to confine the ambit of our submissions to the areas of BDU operations and service delivery that reflect our prime concerns of affordability and value for service.

16090            The first question is:  What should be the size of the basic service package?

16091            We have a sub‑heading:  Well, what is basic service?

16092            In PIAC's view, it first must be understood what is intended to be accomplished by defining basic service.  For some stakeholders, the basic service package is a kind of starter kit that reflects a combination of what an ordinary subscriber might want, what is mandated by the Regulations and what can be crammed into a basic package without setting off the customer scream index.

16093            From a regulatory standpoint, it is tempting to be convinced that the BDUs are in the best position to assess what the customer wants and to deliver it at the best price.

16094            In reality, since easy forbearance was approved, the basic service package has proved elastic in its ability to accommodate more channels and substantial price increases.  As many have noted in this proceeding, the high levels of concentration and a lack of competition exists among the major BDUs.  This state of affairs is an enabler of the subversion of the concept of basic service through its treatment by forborne providers.

16095            In PIAC's view, whatever the formulation and the initial approach to BDU regulation, it is time to try to match the concept of basic service with the broadcasting goals associated with BDU regulation rather than the commercial concept of a starter kit.

16096            To that end, section 3(1)(a)(t) of the Broadcasting Act can give guidance to the key features of that package which gives priority to Canadian local stations and requires efficient delivery under affordable rates.  Other key objectives associated with strengthening the cultural, political and social economic fabric of Canada and the development of Canadian expression should be the building blocks of a basic service package.

16097            It should not be a grab bag of whatever can be successfully sold, but a reflection of the societal importance of BDUs in general.  That is what should be part of any offering to connect the subscriber to a range of services that best fulfils the intent of the Act.

16098            In our view, the CBC's formulation of a streamlined basic service offering that includes only Canadian local over the air television services and services deemed of significant importance by the Commission represents an appropriate model.

16099            We note that the public survey that accompanies the proposal and the CBC reply comments shows wide support for a smaller Canadian basic service.  It would appear that the adoption of the model would present a rare opportunity to the Commission to fashion a solution that is both popular and coincident with the objectives of the Broadcasting Act.

16100            Second, we would like to deal with the redesign of basic service to meet the needs of over the air subscribers.

16101            The elimination of over the air broadcasting in 2011 will affect some 4 million Canadians by potentially removing their important medium of information and connectivity they enjoy to the communities that they live in and the world around them.  This is particularly important among Canadians whose literacy or household income prevents ready access to print media or Internet resources.  This is not only a cultural problem, potentially one of public safety and education as well.

16102            Without OTA services, a significant number of Canadians may be disadvantaged and absent an affordable basic package from a BDU in accordance with section 17 of the current Regulations, these Canadians may be unable to access television signals that for them may be an essential public service.

16103            While some providers may continue analog transmission, the digital switchover will require, at a minimum, the purchase of a set‑top box digital converter to be able to receive any television signal on non‑digital television sets.

16104            As PIAC noted in its initial comments, only 37 per cent of respondents receiving over the air television in 2007 were willing to purchase BDU services to replace over the air television 2011.  That survey may not have been posted with our original comments so we have included it with these remarks at the end of the remarks.

16105            Note, as well, the survey found that 30 per cent felt that $10 per month was the limit for BDU charges they would pay and another 20 per cent felt that $20 per month was the limit.  Unless these Canadians are to be written off as collateral damage in the move to digital world, or are to be offered some kind of cable lifeline package, this is an opportune time for the development of a new approach to basic service.

16106            There is also compelling reason to insist that basic service providers provide a mandatory ombudsman service to resolve customer complaints in the same fashion that is occurring in the telecommunications sector.  Our initial comments noted that public support for this service ‑‑ 65 per cent of respondents favoured the establishment of a federally appointed public ombudsman to resolve complaints in cable service and 57 per cent in satellite ‑‑ seems to support this measure.

16107            As we noted in these comments, Canadians and suppliers are increasingly expecting symmetry in the regulation of telcoms and BDUs.  In 2006 and 2007, at the behest of Canada's largest telephone companies, the government moved swiftly to remove perceived advantages enjoyed by competitors in an effort to level the playing field.

16108            In PIAC's view, there is little justification for holding telcoms to higher customer standards than BDUs.

16109            Dealing with the price of basic service, we have earlier suggested that the redesign of basic service should true up service offerings with broadcasting goals.  In PIAC's submission, this basic service package should be accessible for the lowest possible price to meet the goal of affordability referenced earlier and to concurrently promote accessibility to the Canadian programming.

16110            The contention of BDU stakeholders is that the customer is now in charge.  However, it is difficult to contend that the customers are in charge today.  They are paying for a basic package crammed with extra services that must be purchased before any service is to be accessed.  While BDUs may suggest that the customer is buying and receiving value, the value is largely derived by the supplier maximizing revenue at the entry point.  Whatever the merits of such an approach from the standpoint of the BDU shareholder, cramming is not a principle that is advanced as a policy objective under the Act.

16111            However, if a streamlined stand‑alone basic service package could be identified, could BDUs deliver the same in a forborne market?  The answer is likely no.  There could be no confidence that market forces can deliver the requisite basic service package at an affordable price.

16112            As the CBC study showed, the take‑up of basic service has largely been impervious to price increases, a phenomenon which is highly indicative of a highly concentrated industry with patterns of market dominance.  High levels of concentration in the broadcast distribution industry may produce results that are only intermittently satisfactory across a broad spectrum of interests.

16113            It is no surprise that the results for the BDU shareholders have been highly satisfying.

16114            Turning to the earlier theme, profit maximizing duty of distributors to their shareholders must be balanced with the policy objectives of the Act and must be brought within the confines of the affordability objective drafted by Parliament.

16115            In our view, basic service rates must be costed, reviewed, approved and capped by the Commission and they must be offered on a stand‑alone basis for the same reasons that local basic service is capped in forborne local exchange telephony.  Any amendments should be approved by the Commission.

16116            In PIAC's view, such action would serve to both ensure affordability and value for the basic service package.  It would also encourage greater responsiveness in the design of packages for extra services now that there are fewer opportunities to pick the low hanging fruit of upping basic service or cramming in more services.

16117            Should there be a fee for carriage for over the air broadcasters; and, if so, how much?

16118            The case for and against a new set of additional charges for OTA services offered by BDUs to be included in customer rates is largely one built on the need to staunch the bleeding associated with diminished or slow growth advertising revenue for over the air local broadcasting.

16119            PIAC notes that the readiness to volunteer funding is usually in inverse proportion to the proximity of that funding to one's own bank account.  That having been said, the heartfelt concern expressed by providers about overloading BDU charges with yet another cost can charitably be characterized as a reluctance to slay the goose that's laying the golden eggs.

16120            We are hardly mollified by the extrapolation based on the CBC research that the market is so non‑competitive that any new charge will fly.

16121            We are also concerned about the fee for carriage for formerly free over the air broadcasting in the context of the current negotiations surrounding the latest draft of the World Intellectual Property Association, WIPA's Broadcast Treaty dated April 20, 2007 and released on May 1, 2007.  The treaty may have as one of its consequences mandatory payment for carriage of signals by BDUs and signatory nations.

16122            The possible creation of a dual payment system, one for copyright or broadcast content and one for retransmission, is of concern to numerous public interest groups.

16123            There has also been great concern expressed by those groups about the chilling effect of attempting to overlay signal protection on top of intellectual property rights associated with copyright law.

16124            PIAC suggests that there should be a reluctance to adopt funding mechanisms that may have the effect of encouraging policy support for propositions that go well beyond what is at stake in this hearing.

16125            PIAC submits that the consideration of the share of the pie that OTA broadcasters may receive in a restructured basic service package is likely premature.  A more comprehensive examination of the underlying economics is needed and may be done in tandem with the suggested cost review of basic service in line with our recommendation for more streamlined package.  It is far too soon to make such a significant departure from current practices.

16126            With respect to questions 2, 3 and 5, PIAC has made some observations in the context of its comments and its supplementary submissions on the general ability of the current market and players to deliver on the promised objectives under the Broadcasting Act.  We are, however, reluctant to embark upon speculation to answer the questions that it is divorced from the reality of business plans and expert analysis of revenues, expenses, take‑up and positioning of the Canadian broadcasting services.

16127            We do believe that any transition of market forces is wholly dependent on the ability to maintain level playing fields in terms of the ability of stakeholders to negotiate fair consideration for their dollars on products and services.

16128            From a consumer end, it is apparent that there is a rather profound lack of bargaining power in most areas of consumer transaction.

16129            In conclusion, in PIAC's view the interests of the ordinary BDU customer have been insufficiently protected in the regime of forbearance put in place in 1997.  Going forward, the Commission should put in place a streamlined affordable basic service package containing Canadian local and national services of importance with price protection and guaranteed stand‑alone availability.

16130            A mandatory service or dispute resolution should also be part of a BDU's basic service package.  The implementation of such a package would serve to ameliorate problems associated with customer transition from OTA broadcasting in 2011.

16131            Consideration of a fee for carriage for current OTA broadcasters is premature and should not be contemplated in the current environment for policy and practical reasons.  A more thorough examination of revenue for local programming is called for without an inevitable conclusion that customers must pay more.

16132            Thank you.

16133            THE CHAIRPERSON:  Thank you very much for your submission.

16134            On page 5, third paragraph, you said:

"However, if a streamlined stand‑alone basic service package could be identified, could BDUs deliver the same in a forborne market?  The answer is likely no."

16135            Then you give the explanation:

" There could be no confidence that market forces can deliver the requisite basic service package at an affordable price."

16136            And you quote the CBC.

16137            I'm sorry, that is quite a jump.  I don't quite follow this.

16138            What evidence ‑‑ let me just finish my question.

16139            MR. JANIGAN:  Sure.

16140            THE CHAIRPERSON:  What evidence do you have that this is a failure of the market system?  Maybe there is a lot of price elasticity in the basic package.

16141            I mean, you jump to the conclusion here that the market can't produce an answer and I don't see what evidence you have in support of that.

16142            MR. JANIGAN:  In dealing with this, what I have done is effectively separate the contents of the package from the price of the package.

16143            What I am saying here is that once the package has been identified and the services that are services to be offered, we are not confident that given the history of the increases to the basic service package, separate and apart from the issue of cramming that have been illustrated by, among other things, the CBC submission and in our submission, that it would necessarily ‑‑ the market forces would necessarily be able to ensure that an affordable basic price would be able to be maintained.

16144            I mean, in our view we think that you have to set the price and cap it.

16145            THE CHAIRPERSON:  I understand where you are coming from.  I'm just trying to understand how you get there.

16146            You are saying the requisite ‑‑ CBC says:

"The take‑up of basic service has largely been impervious to price increase, a phenomenon which is indicative of a highly concentrated industry."

(As read)

16147            I agree it could be, but it could be indicative of all sorts of other things.  It is not only a concentrated industry that would produce that result.

16148            I mean, it could be, but as I say, it could also be that in effect the price is quite elastic.  And consumers do want cable television and they are willing to pay for that.  The fact that the price goes up every year doesn't seem to have any impact on consumer demand for cable television or the basic.

16149            I don't know why you automatically ‑‑ it may be just that we haven't hit the sensitivity point at which point consumers say okay, that's enough, you know.  I do like my cable television, but there is a limit to how much I'm willing to pay for it.

16150            MR. JANIGAN:  Certainly from the standpoint of the cable provider, it shows that there is an ability to enforce a price increase which is ordinarily indicative of a market dominance.  In that circumstance, there would seem to be at least not competitive alternatives which can be interned to moderate those kind of price increases.

16151            Price increases seem to be taking place year after year and it has no effect upon the take‑up on the customer.

16152            So our conclusion is that, frankly, there is still market dominance and we can't rely on market forces in order to discipline the price behaviour of the BDU operators.

16153            THE CHAIRPERSON:  Right.  The persons before you, I don't know which one made reference to gasoline prices, and you know we have seen a steady increase.  We haven't seen any consumer reaction in terms of less use until the prices started to hit what is by now fairly astronomical heights compared to where they traditionally used to be.

16154            So clearly there was an awful lot of room before you really hit a sensitivity that consumers say well, at that rate I will take the bus or I will take the bike, et cetera.

16155            Does the same thing apply here?

16156            MR. JANIGAN:  Well, that is one measure of market discipline is associated with the absolute price that a customer, that a consumer will pay for a given article.

16157            In reality, having a competitive market must go beyond that.  There must be an ability for alternatives to exist that will discipline those price increases.  In the case of gasoline, of course, we have at the one end, at the producer end, you have the world's most effective cartel that is impervious in many respects to all competition, with the exception of reducing demand.

16158            So in our view, there is an insufficient ability to price discipline BDU providers in the event that a basic service package is provided in what we would see ultimately is an escalation of that package beyond what would be considered affordable.

16159            THE CHAIRPERSON:  Okay.

16160            Len, you had some questions?

16161            COMMISSIONER KATZ:  I want to continue that line of thought as well.

16162            The CRTC has a Client Services Group.  We manage customer complaints.  I think we heard from a number of parties this week that customers aren't calling to complain, notwithstanding the fact that I think it was Mr. Bissonnette yesterday from Shaw that said their basic cable rate went from $20 to $32 over the last seven years.

16163            If customers aren't complaining, why is there a need to fix a problem that may not exist?

16164            MR. JANIGAN:  Well, I would question, first of all, whether or not that is an accurate reflection of customer views in relation to price of BDU services.

16165            For example, if you look at the 2005 survey that we filed in our initial comments, you come to another kind of conclusion in relation to price.

16166            In our view, looking at it from an objective fashion, if it was intended that the forbearance of regulation of basic cable rates would best achieve the goal of disciplining the price of the BDU offerings through market forces, one could only see a consistent escalation of those prices without any drop of market share.

16167            In that circumstance, what we conclude is that effectively what we have is the characteristics of a market dominant industry, and from a public policy standpoint the Commission is obliged to take steps to ensure that the customers are protected.

16168            The fact that people aren't calling the CRTC to complain about basic service rates I think is only one indicia of that problem.

16169            COMMISSIONER KATZ:  What would be ‑‑

16170            MR. JANIGAN:  Nobody is encouraging ‑‑ I mean, we have long stopped asking the people that complain to our office to call the CRTC to complain about it.  Frankly, if the market is forborne, I don't know what you can do about it.  The answer they get customarily for anyone who is informed in the industry is that the CRTC is forborne from regulation.  So why complain?

16171            COMMISSIONER KATZ:  On page 3 of your presentation this morning, up in the first full paragraph, the second sentence, it says:

"There must be ways for consumers of BDUs to escape the role of shock absorber for every perceived shortcoming in the delivery of broadcasting services."

16172            Then later on you talked about the transition to digital and the impact as well.

16173            We have had various people come to us ‑‑ including the OTA broadcasters obviously, who were suggesting fee for carriage is one solution ‑‑ identifying the digital transition as being one of the major cost components that they are looking to recover through this process as well.

16174            We have also seen in other countries of the world various ways of addressing this issue.  In the U.S., for example, I think at the consumer level the FCC are giving out coupons for boxes and stuff.

16175            Is there any role here to be played by any other agency of government or government itself in trying to bridge that gap?

16176            MR. JANIGAN:  I think there is and I think it flows from the standpoint that broadcasting is an important service and its receipt has implications beyond simply ensuring a flourishing broadcasting industry as it has economic, social, cultural, whatever circumstances.  I think it is something that the government as a whole in a public policy matter may have to invest in kinds of remedies in order to assist, particularly those segments of the population that probably won't be able to adapt swiftly to the new regime.

16177            COMMISSIONER KATZ:  Those are all my questions, Mr. Chairman.

16178            THE CHAIRPERSON:  Michel...?

16179            COMMISSIONER ARPIN:  Yes.  It's only a comment rather than a question.

16180            You are referring in your oral presentation to the desperation of over the air transmission.  Obviously it is not the desperation of the over the air, but it is a change in technology obviously.  But you will still be able to get the signal, but a digital signal, but you will require either a converter or a new television set which is digitally equipped to receive the signal.

16181            So it is only a matter to make sure that the record refers to what is currently happening, both in the U.S. and eventually here in Canada.

16182            MR. JANIGAN:  Over the air analog is disappearing with digital, yes.

16183            COMMISSIONER ARPIN:  Exactly, and replaced by over the air digital transmission.

16184            THE CHAIRPERSON:  Let me just take you back to your opening.

16185            You suggest there should be a similarity in approach to BDUs and telephony and we should be consistent because basically they are both common carriers, I guess is what your underlying thought is.  Yet, then you could turn around and say we should prescribe and mandate the fee for basic carriage.  We don't do that in telephony.

16186            Isn't there a little bit of inconsistency here?

16187            MR. JANIGAN:  Oh, I think you do do that in telephony.  Effectively in forborne local exchange markets there is a ceiling that has been placed on the price for basic service and that continues to be capped even in the forborne circumstance.  You can't exceed that in the forborne regions.

16188            So what we are suggesting is a similar approach in relation to basic cable service.

16189            THE CHAIRPERSON:  Oh, you equate those two.

16190            Thank you very much.  Those were all our questions.

16191            Madam Secretary, who do we have next?

16192            THE SECRETARY:  I would invite 6166954 Canada Inc. to come forward.

‑‑‑ Pause

16193            THE SECRETARY:  Appearing for 6166954 is Mr. Brad Danks.

16194            Mr. Danks, you have 15 minutes for your presentation.  Thank you.

PRESENTATION / PRÉSENTATION

16195            MR. DANKS:  Thank you very much.

16196            Our presentation today will be presented by our Chair, Joy MacPhail.

16197            MS MacPHAIL:  Thank you very much, women and men.

16198            Actually, the number is the number of the company of our network OUTtv, and I am the Chair and Brad Danks is the Chief Operating Officer of OUTtv.

16199            I will start by presenting our case and Mr. Danks will summarize our recommendations.

16200            Our presentation today is on behalf of OUTtv.  It is a Category 1 licensed specialty service that provides programming specifically to Canada's gay and lesbian community.  Our presentation today is going to focus on the issues that we feel are most important to a small, independent service like OUTtv as they relate to our experience in the industry.

16201            Our key recommendations are summarized as follows:

16202            One, it is absolutely critical to maintain current carriage, access and packaging rules for services like OUTtv that provide programming to a distinct group in our society.

16203            Two, genre protection remains essential for independent programming services like OUTtv that have high CPE and Canadian content programming requirements.

16204            And three, sustain a stable and predictable broadcasting environment where the regulatory rules balance the interests of all parties, and are clear, equitable, and protected by meaningful enforcement mechanisms.

16205            Our service, OUTtv, was launched in 2001 as the first channel in the world licensed specially to service the gay and lesbian community.  The main goal of the service was to provide programming from the perspective of the gay and lesbian community, and, in particular, to provide a positive image to counter the still negative attitudes toward this community.

16206            OUTtv has faced significant challenges in establishing itself over the course of the last seven years.  Some of these challenges are familiar to any start‑up business, and a number of them are the result of being a standalone service and one that caters to a group that has historically been discriminated against.

16207            Other challenges include gaining fair and equitable treatment by BDUs in the area of carriage, marketing, and packaging, while at the same time dealing with the business realities of being a start‑up in a genre with limited available programming, and limited access to advertising and other potential revenue sources.

16208            Despite all of these challenges, it is fair to say that, after seven years, success is within reach.  Many BDUs have finally embraced OUTtv as an attractive service, and provided us with packaging and marketing in a manner consistent with current regulatory rules.

16209            This, together with programming changes that we have made, has led to a rapid increase in subscribers and increased revenue for OUTtv.

16210            In turn, these revenues have been poured right back into the acquisition of the production of more and better programming, including award‑winning programs such as the Emmy Award‑winning "Sugar Rush", the Bafta Award‑winning series "Bad Girls", and Canadian content programs like the CFTPA‑nominated series "Chris and John".  I highly recommend them to everyone.

16211            Subscribers to OUTtv have more than doubled in the past two years, and our ratings reflect that we have more viewers than many specialty channels with more than twice our subscription levels.

16212            Nielsen reports that our top 10 programs in a two‑week period garner more than between 20,000 and 30,000 viewers, more viewers now than we had subscribers five years ago.

16213            Advertising sales remain small, but are growing on a consistent basis.

16214            Notwithstanding this success, of which we are very proud, the service is not yet profitable.

16215            The bold experiment that the CRTC licensed less than seven years ago stands on the verge of being an international success story as the first viable service of its kind in the world.

16216            OUTtv is now a prime example of Canadian leadership in the world due to its licensing by the CRTC, in the face of much controversy.

16217            Canadian‑produced gay and lesbian content is now being exported to many countries around the world, with a major sale of more than 60 hours to here! Network in the United States alone.

16218            Just last week OUTtv launched a joint venture that has established a partnership in The Netherlands, where Canadian content is the backbone of the programming lineup for the Dutch service.

16219            In addition, our website and online content offerings have been viewed in more than 75 countries in the past month alone, including many countries where homosexuality is now considered a crime.

16220            The forging of these foreign partnerships and the continued development of new foreign opportunities for programming sales and licensing opportunities bodes well for OUTtv and the Canadian production industry that we support through our commissioning of original production.

16221            The major threat to OUTtv's continued expansion and success is the possibility of deregulation posed by these proceedings.  The push for deregulation is driven primarily at the expense of the public interest.  There has been no evidence that the changes being proposed or suggested by some at these proceedings will serve the interests of the Canadian public.

16222            Deregulation would cause programming services to consolidate further in order to gain market leverage against the BDUs.

16223            Furthermore, deregulation assumes that free markets exist in the industry.  Free markets do not exist when one industry controls access to the consumer and acts as gatekeeper.

16224            We do not see how further deregulation, positioned as streamlining, would serve the objectives of the Broadcasting Act.

16225            We turn now to the questions asked by the Commission as they relate to OUTtv.

16226            In response to the Commission request for the definition of a core service, we would submit the following criteria:  Does the programming service contribute to diversity of voices in the Canadian society?

16227            Does the programming service provide programming to a demographic or group in Canadian society that is otherwise unrepresented in the broadcasting system?

16228            Does the existence of the programming service and its licensing conditions contribute to the development and production of Canadian content programming?

16229            It is our position that OUTtv meets all of these criteria, and should be considered a core service, because it represents a unique constituency in the Canadian mosaic that crosses all ethnic, racial, religious and cultural lines.

16230            Another important consideration in these proceedings is the potential elimination of genre protection.  In OUTtv's case, this would be substantially harmful.

16231            One of the primary goals of the Broadcasting Act is to encourage diversity and offer different perspectives.  OUTtv is the only Canadian programming service that is specifically licensed to offer programming from the perspective of the gay and lesbian community.

16232            Genre protection offers us the exclusivity necessary to invest the significant dollars that are necessary to produce sufficient original Canadian content programming for our service.

16233            Original Canadian programs produced by OUTtv, such as the CFTPA‑nominated "Chris and John to the Rescue", or "Bump!", which is the best‑selling gay and lesbian travel program in the world, would not be financially viable to produce without genre protection.

16234            There is no other Category 1 service with higher Canadian programming expenditure requirements than OUTtv.

16235            OUTtv recently requested some relief in this requirement, to bring us into line with other Category 1s.  This request was denied, and we can only hope that, in doing so, the CRTC is indicating that it understands the need for genre protection to ensure that services remain financially viable in order for OUTtv to continue to meet its licence requirement.

16236            Genre protection does not mean that we are not without competition.  Basic channels, such as Showcase, Citytv and Bravo, have far larger budgets than we have, and they force up the bidding for premium foreign dramatic content, such as well‑known series like "Queer as Folk" and "The L Word", along with movies like "Brokeback Mountain".

16237            Another key issue under consideration is the potential elimination of the Category 1 licence conditions, including those rules relating to the must carry status, access, and fair and equitable marketing and packaging.  The elimination of these rules would be very harmful to OUTtv.

16238            Paragraph 26 of Hearing Notice 2007‑10 notes that the pay and specialty industry is healthy and mature, but it does not reflect the fact that the majority of Category 1s are only now stable because of the access and genre protection rules, and that these licensees made the investments in these services and Canadian programming based on those rules.

16239            Certainly, in our case, OUTtv is not yet healthy, and the market for gay and lesbian content is far from mature today.

16240            Access and mandatory carriage have been critical to the growth of subscribers, and will be equally so to the ultimate financial success of OUTtv.

16241            On average, our subscribers range between 7 to 15 percent of the digital subscribers on most major BDUs, but we still lag on many, and on one major cable provider in particular.

16242            OUTtv subscriptions remain at less than 50 percent or more of the subscription level of most Category 1 services launched along with it in 2001.

16243            The issues regarding the impact of SVOD and VOD services are also relevant to OUTtv.  These services may have the effect of undermining our service, as they remove our ability to negotiate affordable or, for that matter, any deals for premium programming from abroad.  The services contribute nothing to the production of Canadian programming, make no investments in the Canadian broadcast system, and approving them effectively hands a broadcasting licence to a foreign company through the back door.

16244            Our COO, Brad Danks, for OUTtv will now summarize and reiterate our conclusions.

16245            MR. DANKS:  In summary, what does OUTtv need in order to continue its growth and continue as a Canadian success story?

16246            We need a clear set of regulatory rules that offer a stable environment, that allow for long‑term investments in order to secure capital, programming commitments, and establish long‑term relationships.

16247            Building a successful television brand takes years, and sometimes decades.  Even the premium brands in the U.S. television industry, such as HBO, Showtime and others, took decades to become successful, and required the investment of hundreds of millions of dollars.

16248            In addition to maintaining the access, carriage and genre protection rules, we also feel that a number of other considerations should be adopted, including:

16249            Maintain or increase the 50 percent plus 1 preponderance rule.

16250            Adopt the Dunbar‑Leblanc recommendation to consider the issue of channel placement.  This is an important issue, in our opinion.  We do not understand why Canadian services that invest heavily in Canadian content programming do not have better placement positions than foreign services.  More than ever, Canadians use the electronic programming guides to check schedules, so placement is indeed important.

16251            We would like to secure access to the U.S. avails made available to Canadian programming services.

16252            We firmly agree with the recommendation in the report to establish a reverse onus on BDUs who change their channel lineup and packaging arrangements.  This is something we have experienced frequently.

16253            The BDU owns the customer relationship, and they should have to justify that their changes are based on reasonable, objective considerations.

16254            It is extremely difficult to build a case against a BDU, because we rely on anecdotal information from public interaction with the BDUs and customer service representatives.

16255            The inequity in the current system in this respect forces OUTtv to maintain constant vigilance just to monitor the changes by BDUs in packaging and marketing.

16256            In our experience, the commercial practice rules regarding notification are mostly ignored.

16257            Furthermore, once a change has been made, we are not able to gauge the impact for at least three months, because that is how long it takes to get our subscriber reports, and often much longer.

16258            By the time a trend has been established, the damage is done, and the BDU's changes are firmly entrenched.

16259            It is imperative that the programming service be properly notified of the changes, and that proposed changes are frozen if the programming service objects.  Once implemented, it is very difficult to get these changes corrected.

16260            Furthermore, the CRTC requires remedial power, which should include specific performance and financial damages for rule violations.  In our experience, the inequitable packaging of OUTtv by some BDUs has cost us hundreds of thousands of dollars, and deprived us of the opportunity of investing this money into more Canadian content programming.  Without penalties, there is no incentive for rogue BDUs to properly comply with the rules and maintain the integrity of the system.

16261            A bright future for the Canadian broadcasting system requires strong programming services.  In this digital age, it will be more important than ever that we have strong programming services producing content that is relevant to and popular with Canadian audiences.  It makes no sense to weaken the programming service's ability to meet this requirement.

16262            We want to thank the Commission today for allowing us to appear, and we welcome any questions you may have.

16263            THE CHAIRPERSON:  Thank you very much for your submission.

16264            Let me take you to paragraph 12, where you say at the bottom of the page:

"Genre protection offers us the exclusivity necessary to invest the significant dollars that are necessary to produce sufficient original Canadian content programming for our service."

16265            MR. DANKS:  Yes.

16266            THE CHAIRPERSON:  I would have thought, given your clientele and given your programming, that genre exclusivity is the one thing you don't need.

16267            You have a very defined, clear‑cut audience that you are trying to attract, and either you put the programming on that interests the gay community or it doesn't.

16268            Why do you need genre exclusivity?

16269            I could see it if people appeared to be diffusing the market, or were trying to create a market, et cetera, but one which is so clearly categorized as yours, I would have thought that genre exclusivity would be the one thing you don't need.

16270            MS MacPHAIL:  I will start, sir.

16271            There are many who encroach on the exclusivity.  Networks such as Showcase and Bravo are encroaching substantially on appeal to the genre of the gay and lesbian community.

16272            There are no other opportunities around the world ‑‑ except perhaps for here and the United States, and they often don't meet the Canadian content rules ‑‑ there are no other opportunities to buy this kind of genre programming.

16273            We lead the world in this, so genre exclusivity is very important for us to actually be able to produce Canadian programming, and then perhaps market it worldwide.

16274            And, again, those marketing opportunities are limited, as well.

16275            MR. DANKS:  I would say that the fundamental reason is that the scope or the degree of investment that needs to be made in programming requires stability, and genre protection exclusivity provides us with that.

16276            Because of the enormous amount of money that needs to be invested in programming, combined with the long amortization periods when you are dealing with an exclusive community such as the one we deal with, without genre protection it is difficult to acquire rights in certain cases, and it is difficult to get additional financing.

16277            When we finance a lot of our programming, we have to do so with partnerships.  Having that exclusivity gives us that understanding, that stability for a period of time.  It gives us the window that we require in order to make that investment.

16278            To give you a very simple real example, we make a series of movies that we do in conjunction with a U.S. network, the here! Network that we mentioned.  These movies are a gay detective series, called the "Donald Strachey Mysteries".  The actual budget for these movies is well in excess of the total revenue that OUTtv receives in a full year, so what we need to do is, we need to bring in other partnerships.

16279            For those movies, for example, we brought in our friends at Allarco.  They have taken the first window.  We have taken the window behind them.

16280            In order to establish a relationship with here!, and in order to establish the foreign relationship with MGM, who is the distributor, having that exclusivity really ties the knot for us, and that's why we feel it is important.

16281            THE CHAIRPERSON:  Okay.  Thank you very much.

16282            Ron, I believe you have some questions.

16283            COMMISSIONER WILLIAMS:  Good morning, Ms MacPhail and Mr. Danks.

16284            Tell me a bit about your typical viewer.  What is the demographic profile of people wishing to subscribe to your service?

16285            How many, and have you identified who your customers are?

16286            MR. DANKS:  Our customers are, roughly, 60 percent male, 40 percent female.  Of that, approximately 80 percent are openly gay and lesbian.  We know that a certain percentage are straight female viewers, probably in the range of 10 to 20 percent of our viewers.

16287            The age demographic ‑‑ because we are a digital channel, we believe that we skew a little older, probably over the age of 30, but some of our shows, like the one that was mentioned, "Chris and John", is very popular with the under‑25 crowd, so we are getting more of those viewers, as well.

16288            MS MacPHAIL:  As is "Sugar Rush" for young females.

16289            MR. DANKS:  That's correct.

16290            COMMISSIONER WILLIAMS:  And the size of the market?

16291            What is the potential marketplace?

16292            MR. DANKS:  If we talk just about the gay and lesbian community, depending on the statistics you look at, it could range anywhere from 6 to 10 percent of our population.

16293            We know from our U.S. partner and from other people that, typically, we can expand the reach of that to, maybe, 15 to 20 percent of the population, depending on social mores, social attitudes toward these programs, but we believe that it is more expansive all the time.

16294            COMMISSIONER WILLIAMS:  In your written submission you make the point that BDU competition has not increased the negotiating power of services like yourselves trying to negotiate with the BDU.

16295            Could you provide us with some examples of that?

16296            MR. DANKS:  We are from Vancouver.  We are the only group here, I think, nationally anyways, that does a lot of its work and is headquartered in Vancouver, and Toronto.  In our office, for example, we can only get the Shaw cable service.  We can't get anybody else, unless we go to DTH.

16297            What we have found in our experience is that the two leaders in the industry, Rogers in the east and Shaw in the west, really set the trends for everybody.

16298            What we heard in the west, for example, from all of the cable companies, was that they look to Shaw:  How is Shaw doing their packaging?  How is Shaw providing leadership?  We are going to follow that.

16299            It took a lot of work for us to get some of them around and thinking otherwise.

16300            It is the same in the east.  A lot of them look to Rogers for their leadership.

16301            We are fortunate that we have a very good relationship with Rogers in this respect, and that serves us well.  We don't have as good a relationship with Shaw, as you are well aware.

16302            We have turned the corner with a lot of Shaw's competitors, that's true.  TELUS has been terrific to us.  They are amongst our largest advertisers, and they really have been good to us.

16303            SaskTel has been fabulous.  They have just invited us to their customer service representative sites.

16304            And MTS has put new packaging together.

16305            So that works, but it doesn't change the fact that in most areas, in most jurisdictions, those particular players continue to be dominant.

16306            It is also difficult to imagine ‑‑ we imagine that people are going to change their entire subscriber over because of one channel?  That is not realistic.

16307            The reality is that competition remains, in our view, very nascent in the BDU situation.

16308            COMMISSIONER WILLIAMS:  You talked about two of the larger BDUs, namely, Rogers and Shaw.  Are your dealings with them similar?

16309            I would like to hear a bit more on that.

16310            Which channels are you placed on, say, in Toronto or Calgary?

16311            Is channel placement an issue?

16312            MR. DANKS:  Channel placement is a significant issue.

16313            Do you want to handle this one?

16314            MS MacPHAIL:  I do, and I think we should be cautious here, Mr. Chair, because we have filed a complaint with the CRTC on a matter such as you describe with our positioning with Shaw.

16315            THE CHAIRPERSON:  Why don't you stay away from that subject, then, because we are going to deal with it ‑‑

16316            MS MacPHAIL:  Yes.  That's why I wanted to be cautious about it.

16317            However, I will say that the network itself has fought in the past the view that we are somehow an adult channel.  Maybe I could approach it from that point of view.  And, of course, we are not adult content at all.  We meet all of the requirements of the Ontario Censorship Standards for not being adult content.  In fact, we are family oriented ‑‑ lifestyle and family oriented.

16318            That is the challenge that we have faced in the past, and in most situations the BDUs have taken that into account of our changed perspective, our changed offerings, but we do have challenges elsewhere.

16319            MR. DANKS:  To answer your question specifically, at Rogers, I believe, we are on Channel 269 in their package right now.

16320            At Shaw, we were moved from 100 to 200 to 370, all in the course of 18 months, with no discussion.

16321            Channel 370 puts us directly in the adult channel category, right between, I think, the Playboy and Hustler channels; not where we would like to be, clearly.

16322            COMMISSIONER WILLIAMS:  You talked about packaging partners.  Who, typically, is a packaging partner with your service?

16323            MR. DANKS:  Typically, we are with the lifestyle channels, Fashion Television and channels like that.

16324            We believe that is the appropriate placement for our channel.  It's the one we asked for.  And, more often than not, especially with our really good partners ‑‑ SaskTel, MTS ‑‑ Vidéotron recently repackaged us and put is in that package.  We believe that's appropriate.

16325            COMMISSIONER WILLIAMS:  Is the retail price for your service the same amongst all BDUs?

16326            MR. DANKS:  No, there continue to be some BDUs that carry us on a standalone only basis, some smaller BDUs, so they charge a higher price.  But, generally, it is uniform when we are properly packaged.

16327            COMMISSIONER WILLIAMS:  You talked about exporting programming and international partnerships in your presentation today.  What percentage of your revenue comes from the activities of exporting programming and international partnerships?

16328            MR. DANKS:  It would be certainly less than 10 percent.  I would think it would be less than 5 percent, without the figure.

16329            MS MacPHAIL:  We have just started to market internationally.

16330            MR. DANKS:  One of the challenges we have is the extraordinary cost of production.  A lot of companies are able to amortize those costs against foreign sales.  We are in a position where there are very few people to sell to.

16331            There are two networks in our genre in the U.S.  We have now sold a lot of programming to one.  There are no channels, officially, outside in the world, so we are working hard to help cultivate that.

16332            Last year we worked with a service in Australia, for example, that went on for about nine months, and we provided them with a lot of content.  They went out of business.

16333            The service in The Netherlands is new.

16334            There was a service in France a year and a half ago that launched, which has now failed.  We sold them a lot of programming.

16335            It really is so nascent and such a new area ‑‑

16336            We believe in the future ‑‑ our web traffic is extraordinary.  We have a huge amount of people from Turkey, Russia, and a lot of other middle eastern countries, and so on, that come to the channel because they can't get their offering.

16337            We think that the long‑term potential is outstanding, but getting carriage ‑‑

16338            We get called all the time ‑‑ somebody in Germany wants to launch a channel.  Somebody in Switzerland wants to launch a channel.

16339            But it is still very early.  We are working hard to help develop that market on a worldwide basis, but it is not going to be a big revenue‑maker for us for a while.

16340            COMMISSIONER WILLIAMS:  In paragraph 13 of your presentation today you say that there is no other Category 1 service with higher Canadian programming expenditure requirements than your service.

16341            Is this not needed because of the lack of existing programming?

16342            If you are building programming for export markets and other uses, would it not be a good thing to be producing more programming?

16343            MR. DANKS:  Absolutely.  It is a key component of what we are doing.

16344            From our perspective, maintaining those numbers is fine for us, so long as the other requirements ‑‑ the access rules, genre protection and so on ‑‑ are maintained.

16345            We are quite happy to continue to make the investments that we are.

16346            You are exactly right, we do need to do that, and we will continue to do that.

16347            Good question.

16348            COMMISSIONER WILLIAMS:  Thank you, Mr. Chair.  That concludes my line of questioning.

16349            THE CHAIRPERSON:  Okay.  Thank you very much for your presentation.  I think those are our questions.

16350            Madam Secretary, I think we can do one more intervenor before lunch.

16351            THE SECRETARY:  We will now proceed with the next three intervenors:  Fairchild Television Ltd., Asian Television Network International Limited, and TLN Telelatino.

16352            Could you please come forward.

‑‑‑ Pause

16353            THE CHAIRPERSON:  Madam Secretary, go ahead.

16354            THE SECRETARY:  Thank you, Mr. Chairman.

16355            We will hear each presentation which will then be followed by questions by the Commissioners to all interveners.

16356            I would now invite Fairchild Television Ltd. to begin their presentation.

PRESENTATION / PRÉSENTATION

16357            MR. CHAN:  Good afternoon, Mr. Chair and Mr. Commissioners.

16358            My name is Joseph Chan, President of Fairchild Television Ltd.  With me today is Connie Sephton, Fairchild's Assistant General Manager.

16359            We are pleased to be here today on behalf of Fairchild Television, licensee of both Fairchild Television and Talentvision to present our views in this important proceedings.

16360            My comments today will focus on why Fairchild believes that it is crucial to maintain the buy‑through requirement that was put into place for the five analog third language specialty services less than three and a half years ago.

16361            In particular, I will address three issues.  First, the Commission has stated that it wishes to move away from detailed regulation and take a revitalized approach that reduces regulation to the minimum needed to achieve the objectives of the Act.

16362            Fairchild believes that reducing regulation should not be accomplished at the expense of fulfilling the objectives of the Act.

16363            I should also note that the buy‑through is consistent with the Commission's desire to streamline regulation.  It is clear and transparent and does require your ongoing involvement.

16364            Second, the Commission has questioned whether the rules respecting the distribution of third language services should be maintained.

16365            In our view, there are powerful public policy reasons for retaining these rules and, in particular, the buy‑through for third language services.

16366            Finally, the Commission went through a prolonged process, the revised distribution and linkage rules for third language services in 2004.  We believe it is premature and potentially disastrous to eliminate these rules barely three years after they were put into place.

16367            In Public Notice 2004‑96, the Commission acknowledged the importance of the role the third language services play in the Canadian broadcasting system, stating:

"The Commission considers that the Canadian services are the most efficient and effective vehicles for meeting the needs and interests of Canadian or of Canada's third language ethnic communities and fulfilling the objectives of the Act."  (As read)

16368            MR. CHAN:  Third language services contribute to the Canadian broadcasting system through Canadian program expenditure and exhibition of Canadian content.

16369            For example, Fairchild and Talentvision together have spent more than 55‑million on original Canadian programming over the last seven years.  We are also proud to play an important role in the life of our communities.

16370            Since 2003, Fairchild and Talentvision have helped non‑profit organizations in Toronto and Vancouver raise more than 7‑million through telethons and promotions.

16371            We have run more than 11,000 public service announcements and we regularly sponsor community events.  These are just some of the tangible ways in which our services help to safeguard and bridge and strengthen the cultural, political, social and economic fabric of Canada.

16372            Add the diversity of views, attitudes and ideas to the system and reflect multicultural and multiracial nature of Canadian society, all specific objectives of the Act.

16373            In December, 2004, the Commission revised its approach to adding new non‑Canadian third language services to the digital eligible lists.  It established a more open entry model that virtually eliminated genre protections for Canadian services vis‑a‑vis non‑Canadian services.

16374            In recognition of the detrimental impact that this could have on Canadian general interest third language services, however, the Commission created the buy‑through.  Put simply, any subscriber wishing to purchase a non‑Canadian third language service would first have to subscribe to the analog service operating in the same principal language where one existed.

16375            The mechanism to created to ensure that Canadian third language general services are in the position to continue to fulfil the condition of licence and other regulatory obligations.

16376            The buy‑through which has only barely started to come into play will offer a minimal but critical layer of protection.  If it is removed, there is no guarantee that services like Fairchild and Talentvision will continue to survive, let alone maintain the level of contribution to the system.

16377            We believe that the buy‑through is a straight forward process that is simple to administer and that it should be enshrined in the broadcasting distribution regulations.

16378            We also agree with the independents that a simplified one‑to‑one rule should be adopted so that if a BDU distributes a non‑Canadian third language service he should also distribute at least one Canadian service in the same language, unless he can also show that there is no such service available.

16379            Third language Canadian services like Fairchild and Talentvision serve the needs not only of the long‑standing Chinese Canadian community, but also of the new immigrants to this country.  No other programming services, be it a Canadian English or French language undertaking, or a non‑Canadian third language service can fulfil this mandate to help translate the Canadian experience, particularly to newcomers.

16380            Accordingly, Canadian third language services play a crucial and unique public policy role.  Given this unique role in the system, we fail to see any public interest to weakening licensed Canadian services in favour of foreign services that make no contribution to the cultural objectives of the Broadcasting Act and that may compete with Canadian services for programming rights.

16381            Given the number of new non‑Canadian services that have been added through the eligible list in the wake of PN 2004‑96, we also believe that any move to eliminate the buy‑through would be both premature and potentially disastrous for Canadian third language services like Fairchild and Talentvision.

16382            Since the adoption of the Commission's new open entry approach, 15 new Chinese services have been added to the eligible list, 12 Mandarin and three Cantonese.  But these services are only now being launched by BDUs.  For example, Rogers launched its Great Wall package of eight Mandarin services just a year ago and many of the other services that have been authorized for distribution have not yet launched.

16383            Yet, before this new policy has even become solidly established, the Commission is already considering eliminating the buy‑through.

16384            In light of the number of competitive non‑Canadian Mandarin language services that have been approved, elimination of the buy‑through could be seriously detrimental for Talentvision which has been slowly improving its financial performance.

16385            This is not as the Dunbar Leblanc Report claims about the financial viability of Canadian services.  It is about the potentially disastrous impact of changing the rule midstream.

16386            The open entry approach was deliberately coupled with access rules that recognize the primacy of Canadian third language specialty services and the obligation that they have to the Canadian broadcasting system.

16387            Even though the five analog services subject to the buy‑through are established in Canada, not one of us can compete against a foreign service that has no obligations to the Canadian broadcasting system.

16388            In a purely market‑based environment, BDU will have even more power to dictate terms of carriage than they do now.  Since foreign services have already recouped their costs in the homeland market, their cost to enter Canada are minimal, meaning they can offer services at a much lower wholesale rate than any Canadian services.  How can we compete, let alone continue to fulfil our regulatory obligations?

16389            Even under the current access regulations, Shaw is not carrying Talentvision on a number of its systems.  Star Choice does not carry Talentvision at all, supposedly because they lack the band width.

16390            In the absence of the buy‑through, BDUs will have no incentive to carry any Canadian third language services at all.

16391            Finally, I just want to make a few comments about our submissions that may have been made in these proceedings.

16392            Certain BDUs have advocated the complete elimination of the buy‑through, access and linkage rules for third language services, claiming that the must‑carry requirement for the five analog third language services is unnecessary.  They say that market forces will ensure continuing carriage of these services.  They argue that the rules drive consumers to unregulated platforms.

16393            We are not convinced of any of these points.  First, the access rules set out in the broadcasting distribution regulations ensure that the five third language services with the highest regulatory obligations to the system are carried by a BDU.

16394            Even Bell, which argues for the elimination of this rule, concedes that there was a clear and direct connection between the objectives of the Act and the regulation.

16395            The must‑carry rule ensures a basic level of diversity in the system overall.  As third language communities grow in Canada, this requirement will become more important, not less.

16396            As for the BDUs' arguments that market forces should rule the day, well, we are certain that market forces will ensure continued carriage of third language services, but if all of the access and distribution and linkage rules are eliminated, will any of them be Canadian?

16397            As for unregulated platforms, we believe that this is simply fear mongering.  Jump TV, for example, offers little in the way of Chinese programming and, in any event, there is no evidence that its subscriber levels are high enough to have a material impact on the broadcasting system.

16398            We believe that those who wish to use the Internet will do so whether or not there is a buy‑through requirement.  The supposed threat of consumes fleeing the system because of the buy‑through is, we submit, a straw man.

16399            In conclusion, we believe that maintaining the buy‑through is crucial if Canadian third language services are to continue to fulfil the objectives of the Broadcasting Act in any meaningful way.

16400            We appreciate the opportunity to appear before you today and look forward to answering your questions you may have after Shan and others may  their presentations.

16401            Thank you.

16402            THE SECRETARY:  Thank you.

16403            I would now invite Asian Television Network International Limited to begin their presentation.

PRESENTATION / PRÉSENTATION

16404            MR. CHANDRASEKAR:  Good morning.

16405            Mr. Chairman, Vice‑Chairman and Members of the Commission, my name is Shan Chandrasekar, I am the President and Chief Executive Officer of the Asian Television Network International Limited.

16406            With me today are our Vice‑President of Programming, Jaya Chandrasekar and Mr. Prakash Naidoo, Vice‑President and General Manager.

16407            I am pleased to be here today on this auspicious last day of this public hearing to tell you why this proceeding is so important to niche specialty services such as ATN and to the small, unique Canadian audiences you have licensed us to serve.

16408            This will follow up on our written submissions dated October 18th, 2007 and February 22nd, 2008.  We want to profoundly thank you for giving us this opportunity.

16409            Jaya will now set out our position on issues affecting third language services.

16410            MS CHANDRASEKAR:  As you know, ATN International owns and operates one analog service, unfortunately, with no analog carriage, it is offered as a digital specialty service.

16411            With Category 2 licensing, we have created an array of 22 other niche services to provide value added choice to our subscribers at a small add‑on price.

16412            Most of our services are aimed at Canada's growing population of South Asian origin.  We provide services in Hindi, Punjabi, Tamil, Urdu, Bengori, Gujurati and other regional languages and provide public affairs, news, music, bollywood movies, sports and other entertainment.  Fourteen of our services have been launched mostly by Rogers Cable.

16413            We want to use our time before you today to lay out the critical reasons why ATN believes that today's regulatory instruments for third language services must be kept in place and cemented into the new regulatory environment of the future.

16414            It is the only way to ensure that truly unique, truly distinctive and truly necessary multilingual and multicultural services such as ours continue to be viable and able to provide what is an essential service to our Canadian subscribers.

16415            In our written submission to you back in October, 2007 we emphasized the important role we play in providing Canadian programs to Canada's South Asian communities.  We describe the economically fragile environment in which Canada's third language services exist where we compete for audiences with imported third language services which have no responsibility for acknowledging the unique Canadian environment or providing that audience with any Canadian touchstones in their programming.

16416            We compete with other specialty television services with multilingual OTA services, and with BDU third language VOD and pay‑per‑view offerings.

16417            This is a crucial crossroads for us because the regulatory instruments you select for the future will determine whether third language Canadian specialty services live or die, survive or starve.

16418            The rules for third language services were determined just recently after extensive public consultations.

16419            Our company and other ethnic broadcasters have made numerous business decisions and investments in programming and new Category 2 services on the basis of this new regulation.

16420            To remove these rules as proposed by the BDUs, will completely undermine the fledgling business case we have built.

16421            We respectfully request that you retain three critical access and linkage rules which apply to our flagship service, ATN and to the four other analog ethnic services.

16422            ATN is the foundation upon which all our services are based.  It needs these rules to maintain its level of quality Canadian content and the health of all our regional language Category 2 services also depends on ATN.

16423            First, today's rules include a one‑to‑one linkage policy between Canada's five analog third language services and corresponding foreign services.  In our case, this means that a general interest foreign service that is 40 per cent or more Hindi language can be offered when it is packaged with our flagship service ATN.

16424            This linkage rule is substantially less protection than the genre exclusivity that English and French language analog services have needed for years against their foreign counterparts and ATN has only been on cable since 2001.

16425            Without linkage rules, ATN would compete head on with foreign services that have recovered all costs in the Indian sub‑continent markets of 1.3‑billion in population, but make no contribution to the expression of Canadian views or Canadian identity, as we do.  It is far better that we partner with these foreign networks in a winning combination for Canadian consumers.

16426            The second linkage rule that must be maintained is that if a general interest Category 2 service offers 40 per cent of its programming in the language of an ethnic analog service, then the subscriber must first take the analog service.  In our case, a Canadian general interest Hindi service can be offered to the subscribers of our flagship ATN.  The rule does not apply to niche services such as a Hindi music or movie service.

16427            Joint packaging is a win/win.  It ensures enough viewership to make quality Canadian programming affordable.  If you remove it, you will splinter a micro‑niche market.

16428            Finally, today we benefit from an access rule for analog third language services.  If 10 per cent or more of the population within a licensee's area is one of a combination of the South Asian origins to which ATN is targeted, the BDU must offer ATN to the residents in that area.  Without this access rule, we believe our ATN would not be carried at all in certain cable systems, in spite of market demand.  This access must be preserved for the benefit of Canada's South Asian community who are eager for Canadian context in a television service that also serves their information and entertainment needs in their mother tongues.

16429            Commissioners, these rules may be complex but they fully support the social and cultural objectives of the Broadcasting Act, allowing Canadian third language services to foster national identity and the expression of Canadian views.

16430            MR. NAIDOO:  The Commission has asked us to comment on several issues.

16431            Regarding advertising avails on foreign services, we believe they should be used solely  to promote Canadian programming services including Canadian third language services.

16432            As you heard earlier in this proceeding, programmers would lose our best tool in negotiating programming partnerships with foreign third language services if BDUs could sell commercial avails on them.

16433            With respect to advertising avails on Canadian services, we are completely against them.  Small players like us are not in a position to negotiate otherwise, so the Commission's help is required to put an end to this practice.  BDU ad avails are not practical from a financial perspective.  We need to be able to re‑invest all advertising revenues in our programming.

16434            With respect to advertising avails on VOD services, we do not believe the BDUs should have any right to commercial avails on broadcaster programming, nor should they be allowed to sell advertising on their own third language VOD programming.

16435            The dangers of this new frontier are just being understood and these BDU virtual channels sound like a parallel broadcasting system.

16436            You have also asked about the size of basic service.  We support a small basic service because we are concerned about the cost that is passed through to subscribers to third language pay services.

16437            While we do not oppose the over‑the‑air broadcaster's fee for carriage proposal, we believe it should only be considered if an inexpensive basic service is offered.

16438            As a small, unaffiliated licensee, we are highly dependent on distributor good will for our survival and growth.  The current dispute resolution process is difficult for small broadcasters with no access rights.

16439            We have listened and learned in these proceedings.  We face the same one‑sided contract negotiations as other independents.  We believe that standard affiliation agreement terms negotiated with the help and authority of the CRTC would make a major difference to our negotiating power with the BDUs.  It would cover things such as fair revenue split, what can and cannot be deducted from our share, use of advertising avails.

16440            MR. CHANDRASEKAR:  Finally, we would like to comment on the concerns the Commission has voiced about Internet broadcasting services.

16441            Internet services such as Jump TV have had no significant effect on our subscriptions at all.  But this said, there are several ways to ensure that third language subscribers stay tuned to the Canadian broadcasting system.

16442            First, BDUs play an extremely important role in competing with the Internet when they offer a rich variety of third languages in markets with potential subscribers to those services.

16443            We are keen to explore new marketing ideas in collaboration with BDUs, including pre‑paid annual subscriptions to reduce churn rate and other marketing initiatives.

16444            The second way to ensure third language Canadians do not go off the system is within your control, it is maintaining today's regulatory framework which ensures that Canadian third language services are very strong services.  We must be able to invest in competitive programming so we can offer better, more relevant, more exciting programming than the Internet services.

16445            It is absolutely vital that the relevant distribution and linkage rules for third language services are not swept away.

16446            Mr. Chairman, Vice‑Chairman and the Commission, our future is in your hands.  We will be happy to answer any questions after Mr. DiFelice.

16447            THE SECRETARY:  Thank you.

16448            I would now invite TLN Telelatino to begin their presentation.

PRESENTATION / PRÉSENTATION

16449            MR. DiFELICE:  Good morning.

16450            Mr. Chairman and Commissioners, I am Aldo DiFelice the President of Telelatino Networking.

16451            Thank you for the opportunity to appear before you today.  I would like to speak to the current CRTC approach to ethnic TV channels in this country.

16452            TLN has always faced challenges, but in December, 2004 a change in CRTC policy made our market much more competitive and difficult.

16453            The introduction of Rai International Channel created an immediate competitor and also meant the permanent and complete loss of access to their Italian programming.

16454            At the same time, since 2004, 21 Spanish language foreign services have been allowed unrestricted access to Canada.  So, TLN knows what a borderless digital world can mean.

16455            TLN has replaced the Italian prime time programming previously provided for two decades by Rai Italy and our Italian Canadian viewers support us like never before.  On the Hispanic side of our business, recently we have launched TLN Espanol, an all‑Spanish Category 2 channel.

16456            But we can't be complacent.  We continue to come up with new ways to serve our viewers, our communities and our advertisers.

16457            There are three parts to what I would like to present to you today.

16458            First, I want to review the circumstances in which the CRTC's revised policy direction was established.

16459            Second, I would like to highlight certain important failings of the Commission's current ethnic specialty TV rules.

16460            And, third, I would like to outline some changes which the Commission should make and changes which the Commission should not make, so as to reduce the present and future negative effects of these rules.

16461            In December, 2004, the CRTC established a new open entry framework for permitting foreign ethnic TV services into Canada.  This new policy was borne under extreme and unusual circumstances.  Simply put, the abrupt reversal in policy was motivated by relatively open, yet nonetheless appropriate, foreign and domestic political interference in the Commission's independent regulatory process.

16462            We recognize the pressure under which you were forced to make this decision.  The sudden and complete exclusion of third language Canadian channels from the cornerstone protection of genre exclusivity that has helped build the entire Canadian specialty TV sector ought not to have occurred in the way which it did.  So be it.

16463            However, the danger is that if we don't understand why these changes were made, they will be used as a precedent for future decisions.

16464            Let me highlight certain important negative consequences of the Commission's revised approach and outline specific changes which should be made now to improve the way these rules fit together.

16465            The practical reality is that foreign ethnic services have complete freedom to circumvent the letter and the spirit of the few restrictions and guidelines imposed by the CRTC's new rules.

16466            The CRTC really has no method of regulating this behaviour, we understand that.  For example, since foreign services enjoy a zero cost structure in Canada, they can dump their channels at predatory prices.

16467            Rai International, for example, sells for between 10 and 13 U.S. dollars monthly to consumers in the U.S.A.  In Canada, however, Rai International launched at what it calls a political price of $2.49.

16468            This pricing strategy has ensured that no Canadian Category 2 Italian channel, such as the three operated by TLN, could compete with them.

16469            Another problem with the current rules is that there is unpoliced and unchecked non‑compliance by foreign ethnic services with the few undertakings to the Commission regarding program supply and program rights.

16470            We know and we have directly experienced Italian and Hispanic foreign channels dealing exclusively and preferentially in program rights.  They impeded TLN's access to third language programming because it would allow us to compete with their foreign channels now freely available in Canada.  Practically speaking, we have no recourse.

16471            So, in this context, let me address the matter of access policy.  Firstly, we need to ensure consumers' ability to access new Canadian Category 2 ethnic services; and, secondly, there's a clear need to maintain the carriage rules directly applicable to what have been called Canada's legacy ethnic services, Telelatino, Fairchild, Talentvision, ATN and Odyssey.

16472            We support an improvement to the CRTC's rules that would give Canadian Category 2 ethnic channels a chance to take root by actually being offered to consumers as a choice.  We remind the Commission of its statement in December 2004.  In adopting your revised open entry approach you stated:

"The Commission remains of the view that Canadian third language ethnic services are best positioned to provide the most attractive non‑Canadian programming alongside quality programming reflecting Canadian perspectives, experiences and values.  It thus considers that Canadian services are the most efficient and effective vehicles for meeting the needs and interests of Canada's third language ethnic communities and fulfilling the objectives of the Act.  The Commission therefore continues to support and encourage alliances between Canadian and non‑Canadian services."  (As read)

16473            With that statement in mind, if a carrier distributes multiple foreign services in a particular third language, like the 21 foreign Spanish channels admitted to Canada, then it is reasonable to suggest that both existing Canadian Category 2 Hispanic services be offered to consumers.  Under the current rules only one of those Canadian services must be offered, and any other Canadian Hispanic services are potentially left out in the cold.

16474            Another participant in this hearing has suggested a one‑to‑one access rule between foreign ethnic services and Canadian Category 2 ethnic services in the same language.

16475            We agree and propose that reasonable changes be made by the CRTC that will ensure Canadian consumers have the opportunity to choose a Canadian ethnic channel when foreign channels in that same third language are being carried.  But this will require a monitoring and enforcement.

16476            As to the carriage rules directly applicable to Canada's legacy ethnic services, the only logical conclusion under the new ethnic framework is that the current must‑carry and buy‑through rules remain in place.  Let's remember that we, Canada's legacy ethnic services, have continued to honour and meet our substantial commitments to you and to our ethnic communities, despite being the only specialty sector operators to completely lose genre protection.

16477            Foreign services have huge competitive advantages over Canadian services because foreigners are completely unregulated.  They have no regulatory incentives to partner with Canadian programmers.  They make no financial commitments to any Canadian ethnic programming fund or otherwise.  They have no cost structure related to operating in Canada and you have no way to hold them to account on their undertakings or on their anti‑competitive business practices.

16478            We understand this but suggest that it is very much in the public interest to maintain current carriage and buy‑through rules when foreign services have been granted free access with these advantages.  We know that foreign genre protection is not in the political or regulatory cards, but you can use your powers over ethnic access policy firstly to give new Canadian ethnic channels an opportunity to flourish and, second, to give legacy Canadian ethnic services the possibility of maintaining and maybe even growing our long‑standing valuable community contributions.

16479            In conclusion, we support the Commission making specific studied improvements to the rules for ethnic specialty services and committing to periodic monitoring of the real impact of what has been a 3‑1/2 year experiment in ethnic TV regulation.

16480            Thank you for this opportunity to express our views and, together with my colleagues, I welcome your questions.

16481            THE CHAIRPERSON:  Thank you very much for your presentations.

16482            We have heard over the last three weeks a lot about video on demand and subscription video‑on‑demand, and the other programmers all see it I suppose as an opportunity but also as a great danger and especially they see that subscription video on demand has the potential of becoming a linear service and being offered by the BDU as a linear service and basically bypassing the broadcasters with the BDU going and buying the programming directly from source offering it in some fashion and through the back door in effect offering a linear service under the name of SVOD.

16483            Listening to them and their suggestion, they basically say we should address this issue head‑on.  We have to make a clear demarcation of what is video on demand and what is not, and how you can acquire those rights.  Essentially they suggest the rights should be via the broadcaster; that you couldn't go directly to the source.

16484            Now, as I was listening to you I figure that problem must be even more acute for you because in whatever language you transmit, those broadcasting rights exist in a foreign country and the BDU going directly to that source, buying the programming and then putting it on as an SVOD right in competition with ATN or with Telelatino or Fairchild.

16485            So what advice do you have to give to us on this whole issue of VOD/SVOD?

16486            What policy should we adopt and what should we do ‑‑ is this a real issue and what measures should be taken to avoid SVOD or VOD becoming a back door to introducing linear service by the BDUs?

16487            Any one of you.

16488            MR. Di FELICE:  Well, VOD and SVOD, as I see it, is both an opportunity and a threat simultaneously.  In the case of the languages that we serve, there is no significant VOD or SVOD offering that I know of right now, although I do know that in other languages, certainly in Chinese, there are VOD offerings.

16489            Joe can speak to the impact of those.

16490            It is a threat for the reasons that you just pointed out.

16491            It is an opportunity, however, in niche markets, in niche ethnic markets.  In particular where a linear channel might not be sustainable in Canada, a new linear channel, a VOD offering or an SVOD offering provided by a Canadian broadcaster or a Canadian provider could serve that market and could create Canadian benefits.

16492            To that end Telelatino, for example, has been preparing for that potential and accumulating VOD rights in very much not seen, unseen European feature films, in particular Italian feature films, classics and contemporary films with English subtitles.  And there is the potential to make that available to Canadian audiences through a VOD offering.

16493            There are other issues of course now regarding encoding and costs and things like that, but that is the opportunity.  The opportunity is that if Canadian programmers are given some privileges or preferences to become the providers of ethnic VOD and ethnic SVOD, and in particular to monetize any potential advertising potential within those offerings, then it could be a way to correct what is an imbalance right now in the equation between foreign services and Canadian ethnic services.

16494            So it could be a way for us to compete.

16495            Joe...?

16496            MR. CHAN:  Perhaps I would like to share with the Commission our experience with the VOD.

16497            Fairchild Television actually 80 per cent of our Cantonese programs are coming from reputable TV producers in Hong Kong.  It is called TVB.  The term of programming licensing with them that we are supposed to broadcast what they call the second window, which is one year after the first broadcast in Hong Kong.

16498            The way of doing it is actually for them to protect the VOD market.  Okay, we have been doing it for almost 20 years by doing the second window market, and recently we understand that the BDUs started to launch the VOD services, started to go straight to the source of our program, to go to TVB directly and obtain the VOD rights.

16499            The VOD right is what is called the first window.  In other words, there are actually simulcasting, say like the most popular dramas of Hong Kong.  So, in other words, they are showing on the VODs the programming one year ahead of us.

16500            So this has a very detrimental effect on us showing the second window, which is the first problem we have.

16501            Fortunately, they are not doing too well at this moment, but if they are marketing it probably the effect will be disastrous.

16502            Second, reading all these documents during the proceedings, if the BDUs are allowed to sell advertising into it, the effect will be even worse.

16503            MR. CHANDRASEKAR:  In our case, to be honest with you, sir, we have not fully understood the scope and the magnitude of the VOD/SVOD platform yet.  We do realize that there is a potential there and we are seriously exploring in a very positive way how we can truly collaborate with the BDUs in terms of meaningful exploitation of the VOD/SVOD rights.  We have actually gone ahead and acquired some of them as well.

16504            In some cases they don't even exist because in the older contracts they never had such technology and so they didn't exist.

16505            Our concern would be that many years ago Rogers took leadership in launching in the analog platform a concept called rebroadcast on Channel 33 when the general convertors first came out in the market, when they were moving from only Channels 1 to 13 the television sets could receive and they introduced these great general convertors in the analog mode that went up to 70 channels, and they didn't have enough channels to fill.  So they were rebroadcasting Canadian channels on a time shifted basis, which brought tremendous benefits for us.  This was a great brainchild of Mr. Ted Rogers and Phil Lind in those days.

16506            This was a great move for Canadian content.  This was a great step in terms of getting a greater exposure.

16507            If similar philosophy can be followed in the implementation of VOD and SVOD, we would welcome that very much.  But the problem has been in terms of communication with the only BDU who had contacted regarding VOD so far, it's like nailing jelly on the wall.  We really don't know what exactly they want from us.  They want to sign away everything but we really don't know what we are getting in return.

16508            THE CHAIRPERSON:  Okay.  Thank you.

16509            Len, you have some questions?

16510            COMMISSIONER KATZ:  Yes, I do.  Thank you, Mr. Chairman.

16511            Just a general comment first, I guess.  I see a common theme in the last several days regarding the contribution or the lack of contribution that foreign programming is making to the Canadian system, and we hear you loud and clear in that regard.

16512            I want to come back to your particular situation, though, and the notion of this buy‑through.  I guess I need each one of you to answer a question for me:  Is there an implicit regulatory bargain with this buy‑through that the marketing aspect of your business now is at the beck and call of the foreigners who, if they want to have their service carried, market service; you get the automatic buy‑through but the quid pro quo is that you have to provide to Canadian content?

16513            So your marketing costs presumably are lower because you were getting the buy‑through from somebody else's marketing, but the offsetting savings that you get is put into Canadian programming.

16514            Is that the situation at hand?  Is that reality or is that just a figment of my imagination?

16515            MR. Di FELICE:  That sounds correct, although what I would point out is that our business models here, although we are being grouped together as ethnic specialty channels, we are serving very distinct audiences that are very different in size, nature, demographics, et cetera, and our business models are also very different.

16516            So this buy‑through would affect a service that is mostly subscription‑based in terms of its revenue model, such as ‑‑ and I won't put words in anybody's mouth ‑‑ maybe ATN and Fairchild are more primarily subscription‑based.  But certainly for TLN we are primarily advertising based.  So it would have a different impact on each of us.

16517            But as to your description of the put‑and‑take between the two, that sounds relatively fair.

16518            MR. CHAN:  In the case of Fairchild, I think the situation is not exactly what you described.

16519            First of all, the Chinese broadcasting, the market is sort of well established.  We have been in the market for almost 20 years and we are glad to say, and we are proud to say, that our presence ‑‑ we are all on premium pay and our present penetration is over 50 per cent.

16520            We don't see the foreign programming, the foreign services coming in and by their marketing technique they could help us.  On the other hand, we think that we are helping them because of our high penetration and we are spending ‑‑ as you know, our contribution is relatively very high in comparison with the other third language services and they are contributing nothing to the industry.

16521            We feel that we are actually helping them rather than they are helping us.

16522            COMMISSIONER KATZ:  Okay.

16523            MR. CHANDRASEKAR:  I agree with Joe.  The buy‑through requirement is, frankly, a mutually beneficial arrangement between ourselves and the foreign broadcaster.

16524            You are right to the extent where we get good quality content from them, we produce the Canadian content, and we are able to market and they get a benefit from our subscription advertising revenue, as well as aggressive marketing that we already do.

16525            But the buy‑through is almost an essential part.  Without buy‑through it would be very hard for these services to progress, even in an adequate way.

16526            MR. Di FELICE:  Just to add to my initial answer, what I was expressing was that we derive very little benefit at this stage because of the nature of our business model.

16527            But specifically relating to your description of marketing as a driver that we are benefiting from, foreign service marketing, in our case there is no benefit to us because there is no marketing.  RAI International does not market its service in Canada specifically, nor do any of the Spanish foreign services actively market their services.

16528            In fact, maybe the converse is true.  We marketed Italian prime time programming for almost 20 years in Canada in millions of homes and we set up the market so that that programming could be stripped out and then provided by foreign service.  We developed that market.

16529            COMMISSIONER KATZ:  Don't the BDUs also market to RAIs of the world as well and by virtue of them marketing it, you automatically become a beneficiary as well because of the buy‑through?

16530            MR. Di FELICE:  Like I said, in the case of Telelatino we don't benefit directly or substantially in an material way because we are a low‑cost mass market network that has been delivering programming into these homes for many years.  So we wouldn't benefit.

16531            Virtually every Italian viewer, Italian language viewer in Canada that wanted to watch television programming already has Telelatino.  So we're not piggybacking in that way.

16532            I think there was a suggestion that effectively ethnic services in Canada, the legacy services, are piggybacking on efforts by foreign services and I don't think that is the case.  I am pointing out that perhaps it is the converse.

16533            COMMISSIONER KATZ:  So you feel you are reaching the entire Italian community now and your market share is basically mature; it is not growing any more?

16534            MR. Di FELICE:  Yes, for many years the Italian language market in Canada has been in decline in terms of the number of Italian speakers.  The Italian ethnic origin market, on the other hand, has been growing.

16535            COMMISSIONER KATZ:  Okay.

16536            MR. CHAN:  Perhaps, if I may add one more point, our understanding is the BDUs are not actually promoting this kind of buy‑through positively.  What I mean by positively is they are not saying okay, you can buy a certain foreign service and you could get a benefit of having a Canadian service.  Rather, on the other hand, they are selling it negatively.

16537            For example, if you want to say, they will tell the consumer if you want to buy a foreign channel for $20, actually the foreign service actually by itself is only $10 and our Talentvision is $10.

16538            They are selling it is $20.  Then when the consumer asks what do I get for $20, oh, you get this foreign service and you have to get Talentvision as well.

16539            When the consumer asks why do we have to get Talentvision, I am asking for this foreign service, then they will say it is not ‑‑ if you have a problem, you go to check with the CRTC.

16540            So in actual fact they are actually marketing it in a negative way rather than a positive that you get more value for $20.

16541            COMMISSIONER KATZ:  okay.

16542            Mr. Chandrasekar, I have a question.  You say in your remarks this morning that you have been very successful in partnering with Rogers Cable and 14 of your services have been launched mostly by Rogers cable, which I'm sure is a tribute to your marketing skills and Rogers seeing a win‑win here as well.

16543            Obviously you have been less successful in some of the other markets as well.

16544            Is that simply a function of the lack of the citizenship that you are looking for, the audience that you are looking for, or is it simply a matter of difficulty in reaching a negotiated settlement?

16545            MR. CHANDRASEKAR:  Sir, I think it is an extremely significant aspect for us because the market demand is there.  We have never really demanded, we have never called a small system somewhere who is a member of the Canadian Cable Systems Alliance in Sault Ste. Marie or Collins Bay and say that we want to be carried.  But at the same time we feel very hurt when we don't get response from a system like Cogeco not carrying us, where we have an incredible population of ours living just on the west side of Erin Mills Parkway, you know, just on the borderline of Rogers.

16546            And a similar thing in Montreal with Vidéotron.  It has been very unfortunate that we have had very great difficulty in getting any access at all.

16547            Just one service out of the 14 has been carried there for a long time.

16548            Now, take a look at the scenario and the number of ‑‑ in fact, you know, what would be very nice is that we were going to suggest the Commission should hold hearings, maybe every six months, because three months before your hearing everybody is nice to us, by the way.

‑‑‑ Laughter / Rires

16549            MR. CHANDRASEKAR:  So we actually get calls returned.  At least they return our phone calls, which is a nice step for us.

16550            So what really happens?  We have somebody living on the east side of Erin Mills Parkway where we have a fabulous total population of Metro Toronto and suburbs is close to 780,000, which is almost close to a million right now because of still people being processed for immigration, for that matter.  It is one of the fastest‑growing communities.

16551            Statistics Canada's latest figures have come out in 2006.  What we predicted earlier in our previous appearances are true.  Research has reinforced what we knew was going on.  So with that kind of a population growth, there is a substantial population that we have in the West End of Toronto, in Mississauga, you know, Oakville, Brampton, Bramalea, in all those areas.

16552            Now, where in Rogers Cable we have 14 of our channels, on the west side of Erin Mills Parkway is Cogeco in which we have a substantially large population but the cousin who lives across in an MDU, multiple dwelling unit across the other side, is not able to see any of our auxiliary services, whereas people on the side of Erin Mills Parkway are getting a lot of our services.

16553            And people are extremely happy when they have these multitude of services.  It's not only for us.  Even our competing services, for that matter, even our competitors' services are only distributed on Rogers.  They are not distributed in other platforms.

16554            So our feeling is the 10 per cent rule that we said earlier is an extremely important rule for us for survival because if we did not have the 10 per cent rule in those days, we probably would have not been able to launch even one service of ours on Cogeco or on Vidéotron or on Shaw at that time in the early days.

16555            Now, Shaw was proactive in the early days, you know, when they were in Ontario.  You have to understand that because we have been in this business long enough, in our time, my God, we have seen so many changes going back and forth between cable systems and things like that.

16556            So sometimes good guys have turned into bad guys, bad guys have suddenly turned into good guys with us.  So there is no consistency in pattern in terms of our dealing with BDUs.  So we cannot generalize.  When we talk about BDUs, frankly it is a bit difficult for us to say all BDUs were bad all the time.

16557            So occasionally some BDUs have been good to us and some BDUs have been nasty to us.

16558            COMMISSIONER KATZ:  But what I'm hearing is you are not being carried by ExpressVu either right now.

16559            MR. CHANDRASEKAR:  No.  ExpressVu is carrying eight of our services, but unfortunately not all 14 of our services.  That is again ‑‑ you know, we understand the reality is different from fantasy because when ExpressVu was first formed, you know, my God, what these great promise of performance was all made and, you know, cable companies went in first complaining by saying these death star guys are going to kill us.  Don't allow them to come into the market at all.  Competition is going to kill us.

16560            And there was hardly any ‑‑ in the early days there was great competition because Bell ExpressVu's basic package was only $7.95 when it came in the market.  Cable companies were charging $19.95 at that time for basic.  So there was a good take‑up for us in the early days.  But then ‑‑

16561            THE CHAIRPERSON:  Let's concentrate on the question.

16562            COMMISSIONER KATZ:  Yes.

16563            MR. CHANDRASEKAR:  Sorry.

16564            COMMISSIONER KATZ:  What I'm trying to understand is the notion of market forces.

16565            What we have heard from a number of the BDUs is the market will take care of itself.  If there is a demand out there and if there are 700,000 people who are all of a certain ethnic religion and are interested in certain programming, why wouldn't the market take care of itself?  Why wouldn't Cogeco sign you up?

16566            I'm just trying to understand their logic.  They are business people; they are astute business people.  There is a buck to be made.

16567            MR. CHANDRASEKAR:  I'm not too sure, sir, about that.  I used to think they were very good business people, but I'm not 100 per cent convinced.

16568            You know, making a profit alone doesn't make a person a very good business person, because I think, you know, they really lack insight in terms of long‑term gains that they would make, because the truth is the proposition that you say is absolutely correct.  If they really make those prudent business decisions, I think we would have had, you know, a wonderful relationship still continue going on and they would launch more services; if not all of them, at least the important ones.

16569            Second, I must clarify, there are not 700,000 people of South Asian origin living in Cogeco area.  There are 700,000 people in the total metropolitan surrounding areas but a substantial amount of that population lives in that area.

16570            COMMISSIONER KATZ:  But this isn't a question of self‑dealing.  You are asking us to step in and tell an entrepreneur, a business person, how to run his business.  He is independent and there is nothing there in terms of self‑dealing or undue preference or anything.  It is simply a decision, a business decision they have made that you and they have not been able to reach a compromise, and you are asking us to step in and guarantee a certain level of access.

16571            I'm trying to understand what role we play.

16572            MR. CHANDRASEKAR:  Sir, we are not asking you to step in there at all to ask for anything else.  We are very confident.  I think you know, there is some ‑‑ because of one phone call we got returned, we think within the next 10 to 15 years we will get at least a couple of more channels launched with them.

‑‑‑ Laughter / Rires

16573            COMMISSIONER KATZ:  Thank you very much.  Those are my questions.

16574            THE CHAIRPERSON:  Okay.  One last question before lunch.

16575            Michel...?

16576            COMMISSIONER ARPIN:  Yes.  My question is with regards to the Telelatino presentation.

16577            At the bottom of page 6, Mr. Di Felice, in the last sentence of your long paragraph you say:

"This will require monitoring and enforcement."

16578            I wonder what you are meaning with that.  Are you asking the CRTC to do something or is it an indication that you are on the verge of filing a complaint or what?

16579            MR. Di FELICE:  No, we have no complaints.  However, I think I wanted to underline the fact that putting rules in place and then not monitoring compliance, whether it is compliance domestically or compliance by foreign participants in our system, and then enforcing compliance, are necessary second and third steps to putting rules in place.

16580            COMMISSIONER ARPIN:  Obviously I don't think the Commission has the means to make enforcements so that is why we are relying on a complaint system regarding all of our activities.  Not only foreign programming but all of our activities are based on a complaint system, if at some point in time you think that there is really a need for enforcement.

16581            MR. Di FELICE:  I realize that it is difficult to ‑‑ and I have made the point that it is difficult to both monitor and enforce, in the case of foreign participants, foreign participants, whether or not they are actually doing what they told you they would do when they asked for permission to enter the country without restrictions.

16582            But I am underlining the fact that in the effort to streamline the system and to simplify it, simplifying and streamlining shouldn't include dropping, monitoring and enforcement.

16583            In fact, perhaps monitoring and enforcement of the remaining rules is more important than ever.

16584            COMMISSIONER ARPIN:  Thank you very much.

16585            Thank you, Mr. Chair.

16586            THE CHAIRPERSON:  Thank you very much for your presentations.  You have given us a lot of food for thought.

16587            We will break, Madam Secretary.  There are a couple of other things we have to do over lunch, so we were resume at 2 o'clock.

16588            Thank you.

‑‑‑ Upon recessing at 1228 / Suspension à 1228

‑‑‑ Upon resuming at 1400 / Reprise à 1400

16589            THE SECRETARY:  Thank you, Mr. Chairman.

16590            I would now invite Communications, Energy and Paperworkers Union of Canada to make a presentation.

16591            Mr. Peter Murdoch, you may now begin your presentation.

PRESENTATION / PRÉSENTATION

16592            MR. MURDOCH:  Thank you, Madam Secretary.

16593            Commissioners, it is good to be here.  I know we are the last ones up and ninth spot on the batting order is not clean up, I'm afraid.

16594            THE CHAIRPERSON:  Well, you're the last one to leave an impression with us, so it is a privileged position.

16595            MR. MURDOCH:  Okay.  For the record, my name is Peter Murdoch and I am the Vice‑President of Media of Canada's largest Union of Communications, Energy and Paperworkers.

16596            We have 25,000 members across Canada who work in television, specialty radio stations, newspapers and independent production.  Appearing with me today are Robert Lumgair, to my right, CEP's National Representative in Vancouver; and Monica Auer, CEP's legal counsel in this proceeding.

16597            CEP appreciates the opportunity to appear before you today.  Commissioners, our presentation today is very focused.  We intend to deal with the proposal that BDU subscribers pay a fee for each local television station that BDUs provide or subscribers receive.

16598            As we understand it, the CRTC may require BDUs or the subscribers to pay a fee to each local television station that BDUs provide or which subscribers receive.  At first blush, the notion of a regulator demanding that customers pay for a service which they now get for free is, I might say, unique, but in the broadcast market a fee for carriage is on the table because other issues are at stake and a quid pro quo over carriage fee might be a pragmatic solution to some tough choices.

16599            Making trade‑offs among competing interests is probably the main reason we had a Federal Communications Regulator.

16600            In this proceeding we have heard that the quid pro quo for a carriage fee is or may be local news.  Broadcasters are now saying that ensuring high quality, locally produced local news is such an integral part of a station's broadcast schedule that the CRTC should require subscribers to begin paying for it.

16601            Although we think there is enough money in the OTA system today to support local news, and also believe that broadcasters, especially large broadcasters, should provide this content in exchange for the many legislative and regulatory benefits they receive, we are offering conditional support for this new deal of fees for local news.

16602            As you know, CEP has been raising concerns about local news for more than a few years.  We have watched the steady erosion of TV news and stations across Canada, the most recent of which happened yesterday when the prospective buyer of TQS announced it was eliminating all newscasts this coming September and laying off more than half of its staff, 271 people, in the process.

16603            CEP's bottom line is that cuts to local news have made some communities, some cities and indeed some regions second‑class citizens when it comes to news and information, but in our democracy every Canadian should have access to what the Supreme Court in 1988 described as a competitive marketplace of ideas which will enhance the search for the truth and that, quote "is essential to intelligent and democratic self‑government".

16604            Canada's broadcasting system is becoming a collection of have and have not communities in so far as news is concerned.

16605            So our first point is that whatever else this new fee for carriage does, it must ensure first and foremost that all cities and communities are treated equally when it comes to news and information because, as we understand it, every subscriber in those communities will be paying these fees.  The Internet may some day offer real alternative to mainstream professionally produced original news, but we aren't there yet.

16606            Since we have been expressing our strong concerns about the erosion of local programming for years, we also welcome the attention that the carriage fee has brought to local news in particular.  It is critical to remember in these discussions that local news has changed fundamentally from what it was 20, 10 or even five years ago.  Now stations, including Citytv and Channel M, simply add voiceovers to other stations' local footage.  Canwest has outsourced its sports content in Toronto to The Score and the local newscasts aired by Canwest's Halifax and Montreal stations are produced in Vancouver.  Weather aired by Canwest's Halifax station is actually presented from Red Deer.

16607            A regional local news production in smaller markets has either disappeared or is fading to black.

16608            The reality is that what was once clearly local has morphed almost beyond recognition.  Major job cuts in the last few years have left many stations trying to fill the same airtime with fewer hours of original news.  Some stations no longer even produce the local newscasts they broadcast to their local communities.

16609            As long as local news is unregulated, broadcasters have cut and will continue to cut local newscasts to save money.

16610            But news and information matter to Canadians, to local communities and to our members.  We were therefore somewhat encouraged to hear CTV and CanWest reaffirm their commitment to local TV news.

16611            Today we haven't seen any clear evidence that each and every station is in financial distress, indeed that any of them are, or that their problems are caused by local news or that ‑‑ sorry.

16612            What we do know is that private broadcasters are looking for some $300 million in additional revenue.  Before they get this money, several fundamental matters must be addressed to ensure a net benefit to our broadcasting system and the subscribers who pay the fee.

16613            First, to ensure that a fee for carriage doesn't simply flow through the private broadcasters' bottom‑line, new revenues from a fee for carriage must be tied to Parliament's objective for our system.

16614            Second, a fee for carriage must demonstrably improve over the air television services.  This means that TV stations must not be able to replace their existing spending with fee for carriage income.  This money must be added to stations' program expenditures if subscribers are actually going to get benefit from strengthened and improve local news.

16615            To ensure that fee for carriage money is meaningfully incremental to existing local programming expenditures, the CRTC should publish historical local programming expenditures by programming category for the past two licence terms of any station that seeks a fee for carriage, so that a fee for carriage is not granted for what may only be a temporary downwards blip in a station's spending on local news.

16616            Third, if a community's subscribers pay their local broadcasters a carriage fee, this money must be used to improve the local news that is broadcast to that local community.  CEP is focused on local news of Canada's mainstream television broadcasters, not just because news is the bedrock of Canadian democracy, not just because consolidated ownership has weakened and continues to weaken local newscasts, and not just because cutting local news spending also eliminates opportunities for young Canadians to gain experience and work where they live, but because, as CTV and Canwest's own survey shows, Canadians place a high value on local news.

16617            If it is properly directed and audited, a fee for carriage will not only increase local employment and incomes, but will provide local communities with the original high‑quality Canadian local reflection that our broadcasting legislation mandates.

16618            The alternative, to give a station a fee for carriage without any regulatory requirement for local news at all, will effectively transform over the air television stations into a programming service that are, for all intents and purposes, indistinguishable from pay and specialty services.

16619            A fourth problem is tied to enforcement.  Because mainstream TV broadcasting is not a competitive marketplace but a regulated sector with limited entry, subscribers need the CRTC to regulate a fee for carriage regime.  Commitments and expectations simply don't work.

16620            Since Parliament has clearly said that stations that breach the CRTC's regulations or their own conditions of licence can be prosecuted, these are the tools to use.  So if the CRTC decides to tie a local TV station's receipt for carriage money to improve hours of original local news, for instance, the improvements must be substantial, incremental, measurable, set by condition of licence at licence renewals and enforced.

16621            Fifth, as Ivan Fecan told you earlier last year, you can't manage what you can't measure.  Similarly, the CRTC can't regulate and can't enforce things it doesn't measure.  If broadcasters apply for a fee for carriage tied to specific expenditures on specific hours of original local news, they must be prepared to provide more detailed information about their news to ensure the fee for carriage is yielding real benefits to those who have paid for it.

16622            Could a station, for instance, take a few hundred thousand dollars of carriage fee revenue to pay another station in a different market to produce their newscasts?

16623            Clear measurement will enable you to ensure subscribers' interests are being met and will make the fee for carriage regime accountable.  Since the CRTC publishes the financials of individual pay and specialty services each year, because these companies obtain subscriber revenues, we also assume that the CRTC will publish the financials of over the air conventional broadcasters that receive a fee for carriage as it now does for discretionary programming services.

16624            Enforcement.  A sixth issue that should be considered now before we reach an implementation phase is enforcement.  Having more details about enforcement is particularly critical because Canwest said last week that a fee for carriage will only fix its problems for the next three to five years.

16625            What will we do if a station receives a fee for carriage but either simply maintains or reduces its original local news spending?

16626            What about stations that lay off all their news staff or simply decide to eliminate their local news altogether, like TQS?

16627            All these questions matter, but the most important from our perspective is identifying just what could receive a fee for carriage because clear, measurable definitions that we all understand are fundamental to smart and effective regulation.

16628            If the fee is granted to local over the air television stations, we need to know what these are.  Unfortunately, Parliament has not defined either television station or local television station.

16629            In our view, over the air television stations that receive a fee for carriage must produce and broadcast complete original local newscasts for and about their local community.  These are Canada's local TV stations.  Stations that can't control their signal or do not produce their own local newscasts, or stations that have been downsized into news bureaus are not local TV stations.

16630            If local monies from the local community are supposed to yield measurable improvements to local service for that community, stations that produce their local news outside the community, or that do not produce local news at all, should not receive the fee.

16631            That said, if the CRTC imposes a fee for carriage for television stations to maintain and improve local programming, it should amend its television and BDU regulations to define a local television station as a licensed television station that originates locally produced programs reflective of the local community, including original locally produced news and information.

16632            Conclusion.  In conclusion, Mr. Chair, let me say this.  If Canada's over the air stations want new money from subscribers, they must give something back.  Replacement revenue, as Mr. Asper once described it, is not in the cards.  The CRTC is not here to backstop shareholders.

16633            Our main focus has been the relationship between a fee for carriage and local news.  If you approve a fee for carriage, you must also ensure that:

16634            (1) we all know what we mean by local news;

16635            (2) new subscriber fee money will only be used for new original locally produced news programs;

16636            (3) an auditing regime will be created to determine whether original local news commitments are indeed being met;

16637            (4) this auditing machine will be accountable and transparent so that Canadians who are subsidizing local stations get what they are paying for; and

16638            (5) a system will be created to penalize those broadcasters who do not live up to their commitments, including the opportunity for new applications to be made for existing licences whose stations do not meet their commitments.

16639            News is the lifeline of democracy.  I recently had the opportunity to speak with Iraqi journalists in Baghdad, and it made me very appreciative of the fact that without a vigilant and diverse media a country can quickly find itself in dangerous difficulty.

16640            I believe in Canada.  The alarm bells are already ringing.

16641            We will be happy to answer your questions.  Thank you.

16642            THE CHAIRPERSON:  Thank you very much for a very concise and pointed submission.

16643            You raise the whole issue of local content.  You are primarily focusing on local news.  As you know, in terms of over the air stations, one of our requirements is that they have local content, which of course includes news.  Local news is a large part of local content but it is not all local content; you can have other aspects which qualify as local content which are not news.

16644            I think our position on this is quite clear.  As you know, we had the Diversity of Voices hearing where one of the rules that we insisted on, that you can't own all three sources of editorial news in one city with the radio and television and journalists.  That clearly shows our concern about news.

16645            When City was bought by Rogers, in this very room ‑‑ you were here, Mr. Murdoch ‑‑ I gave Rogers quite a hard time about the lack of news in Vancouver and as part of our approval, there is an expectation that at renewal time they had better address the issue of news in Vancouver.

16646            Then very recently we turned down the HDTV network application, basically because it didn't have local content.  There was lip service to local content, but it wasn't going to be locally produced.  As you suggested, it would have been bought somewhere and really amounted to a Super Station model from the United States, like a Vancouver station being retransmitted across the country.

16647            We said no, that is not what the broadcasting ‑‑ so I think the Commission has been consistent and very strong and agrees with you.  News is important.  Over the air stations is one of the primary sources for news.  It has to be there.  And we look at every application through those eyes.

16648            On top of that, we have said we will have separate hearings on community broadcasting because of course community stations is another source, a different source of local news, but also very important so citizens know what is going on in their community.

16649            So I think in terms of principles, aims and direction we are ad idem with you.  Now, let me ask you some specific question of what you said.

16650            One of the issues that I put to Messrs. Fecan and Asper was who should get this money.  Should it go down to the station or does it go to the network or what?

16651            I gather from what you are saying here you feel it should go to the actual station?

16652            MR. MURDOCH:  Right.  Our view is ‑‑ and you can just see it by the very brief examples that we pointed out ‑‑ that the problems are originating in the local stations.  They are probably being directed by the networks for cost‑saving measures and a whole variety of other reasons, but the effect is in the local community.  That's where local news production, local programming has been drastically reduced.

16653            So if there is going to be a benefit for subscribers, particularly in each community across the country so that we don't end up with winners and losers, it seems to me that that money goes to the communities that are paying for it.

16654            THE CHAIRPERSON:  Okay.  You suggest that money should be incremental so in effect at the end of each fiscal year a network ‑‑ let's take CTV ‑‑ would have to account saying we got so much for fee for services.  Here are our local stations.  This is how much money we have appropriated to them from our budget, and then from the fee for carriage we divided it on this basis between those stations, if I understand you correctly?

16655            MR. MURDOCH:  Right.  We want to see net additions to the system.

16656            It alarmed me a little to hear Mr. Asper talk about this money was for maintenance.  I think you might recall him using that word.

16657            Well, that's not on.  If we are going to ask subscribers to pay for something that they already get for free, they want to see real improvements, not simply maintenance.

16658            The question will be of course ‑‑ and we have made some efforts to pin that out ‑‑ is how do we audit these improvements?  How do we ensure that they are not just replacement money.

16659            THE CHAIRPERSON:  Yes.  I think you will recall CBC said the same thing.  They said it was really replenishment money to bring things back to standard, and I pushed both the CBC and Canwest CTV on the fact, you know:  What does a subscriber get for it?  Surely it has to be recremental.  It has to be something new; it can't be just money for this.

16660            Now the mechanics, as you point out, is going to be very difficult to establish if we go that way.

16661            You have one other requirement, which is basically ‑‑ I don't want to put words in your mouth, but you say improved over the air television services.  You are really talking about an improvement in quality of local news, if I understand you correctly.

16662            MR. MURDOCH:  Right.

16663            THE CHAIRPERSON:  How do I measure that?  I can measure where the money is being sent in a local station, whether it's incremental, but how do I measure quality?

16664            MR. MURDOCH:  Well, I mean, one of the things ‑‑ yes, let's look at the things we can measure.

16665            We can certainly measure the amount, we can measure employment, the amount of money that is being spent and a number of people are doing it.  We know that given the recent layoffs ‑‑ let me just give you an example off the top of my head.

16666            In Montreal, for instance, at the Global station in Montreal where we have I think it is now three reporters covering the city Montreal, I think we can assure you that if you even double that number, there is going to be higher quality of service to people in the Montreal community watching Global Television.

16667            In terms of being able to produce it locally, that becomes very important because it is reflective.

16668            I might let Mr. Lumgair actually speak a little bit to the production and what it means to have quality television.

16669            MR. LUMGAIR:  Thank you, Peter.

16670            Commissioner, I think one of the measures in terms of the quality and what's happening in a particular market with respect to news, certainly a measure would be the quantity of local coverage.  One of the first casualties of moving toward centralization production centres or sort of the super stations, plural rather than singular concept, has been the amount of local coverage.

16671            The regional and national coverage is pretty easy to pick up and repeat and feed into that newscast, either in a sort of cookie‑cutter format if you like from all kinds of sources.  But what suffered immediately and demonstrably, in our view, at this point in stations where those kinds of changes are happening, is the local coverage.

16672            I think it needs to be some measure of that.

16673            THE CHAIRPERSON:  Exactly, and that is what I'm asking.

16674            I mean, we all want better local news coverage, but quality is one of these concepts like love or souls.  Everybody knows it but nobody can define it.  So all we can do is use proxies.

16675            Mr. Murdoch gave me one proxy.  He says number of employment.  I guess you have given me a second one of saying number of locally recorded news events.

16676            MR. LUMGAIR:  That's right.

16677            THE CHAIRPERSON:  Do you have any other proxies?

16678            MR. MURDOCH:  Well, original hours of local stories I guess is the same thing.

16679            MR. LUMGAIR:  I think it's the same thing.

16680            MR. MURDOCH:  You know, what's interesting, though, is that in terms of Cancon we have a system to sort of measure Cancon.  And you're right, it doesn't measure quality, as I guess Mr. Shaw points out sometimes a little aggressively.

16681            But there is a system in place there that does measure Cancon.  So I think there are a number of ‑‑ and we can perhaps address a little more.

16682            But simple employment, which has really been hit hard, is a big measure because I think once these broadcasters say if they start paying me a wage to go out and get stories, guess what, they're going to put them on air.

16683            THE CHAIRPERSON:  What about the CBC?  You didn't mention them at all.  As you know, they were here before us and they argued just as strongly and just as vociferously that they should be entitled to a local fee for carriage.

16684            MR. MURDOCH:  I would agree with that.

16685            THE CHAIRPERSON:  What about the second cousin of distant signal, that very much when you listen to Canwest and Global in the same breath they talk about fee for carriage and compensation for distant signal.

16686            MR. MURDOCH:  Just so you know, we didn't really spend a lot of time looking at any other issue than local news, and we wanted to stay singly focused on that issue because we think it is the issue of the day.

16687            And sadly, nothing could highlight that more than the announcement yesterday by TQS.

16688            THE CHAIRPERSON:  As you know, TQS will come before us so I cannot comment on it.  Only I can tell you we will look at it, as we have done on all other licence applications, to what extent you meet the purpose and requirements of the Broadcasting Act.

16689            One of them is clearly local content and local content includes local news, and that applies to TQS the same way as any other licence holder.

16690            You give me a definition of local, and I have actually underlined it here.

16691            You said:

"Local television station is a licensed television station that originates locally produced programs reflective of the local community, including originally local produced news and information."  (As read)

16692            That's on page 8, paragraph 29 of your submission.

16693            MR. MURDOCH:  Yes, got it.

16694            THE CHAIRPERSON:  If I applied that today, Global wouldn't qualify.

16695            MR. MURDOCH:  Global would what?

16696            THE CHAIRPERSON:  Global Ontario would not qualify because Global essentially for the purposes of Global licence grossly exaggerating, local means regional and their newscast to a large extent is for Ontario and is repeated in their stations.

16697            COMMISSIONER ARPIN:  Same in Quebec.

16698            THE CHAIRPERSON:  The same in Québec.  My colleague knows much more about this.

16699            MR. MURDOCH:  Right.  Montreal, yes.

16700            THE CHAIRPERSON:  But the principle is the same.

16701            So I would say the definition that you offer me would disqualify them.  So should I disqualify them or should I amend the definition so as to include what Global does today?

16702            MR. MURDOCH:  Right.  Well, I guess the sort of obvious answer for us is that if these stations make the effort and devote the resources to local content and local news and programming, they should qualify.

16703            THE CHAIRPERSON:  That is too Delphic for me.  I don't know what that means.

‑‑‑ Laughter / Rires

16704            MS AUER:  Do you want me to answer?

16705            MR. MURDOCH:  Go ahead.

16706            MS AUER:  Mr. Chairman, I guess the point is Global is licensed as a regional station in Ontario, in Toronto, similarly in Quebec.  There were good reasons at the time for the Commission to offer a regional licence.  If it should be reconsidered, that is certainly up to Global to make an application.  Nothing prevents it at this point.

16707            THE CHAIRPERSON:  I don't think they want us to reconsider, so we are just following your logic.  You basically say treat them for what they are.

16708            MS AUER:  Well, I guess the alternative is ‑‑

16709            THE CHAIRPERSON:  ‑‑ sort of a grandfathered exception.

16710            MS AUER:  The alternative is to have maybe a separate kind of thing, a regional subscriber programming fee.  That is getting very complicated.  It doesn't ‑‑ I don't know if it will be as effective as just having a simple, straightforward smart rule.

16711            THE CHAIRPERSON:  We are going to have, as I mentioned, a separate hearing on community stations.  But just share with me, if you would, your view.  You obviously attach great importance to local news.

16712            What role do you see the community stations playing as opposed to the commercial station and how do they differ?

16713            MR. MURDOCH:  Well, I guess the significant way they differ is in resources.  You know, it's clear that the conventional broadcasters have the resources and, as we mentioned ‑‑ and I know I am sort of echoing an old refrain here ‑‑ those resources that they have, which are substantial, are there because of all sorts of benefits through legislation policies, tax systems, et cetera.

16714            So I don't think, first of all, there is a problem in terms of public policy demanding that these broadcasters that benefit from public policy to devote resources back into those communities and, first and foremost, is local news and information programming.

16715            In terms of community broadcasting, we would like to see some more of that.

16716            You know, it wasn't that long ago that we had ‑‑ when we were here at the last licence renewal for these major broadcasters, we brought in pages and pages of local programming that was being done.  And we have a whole list of stars and news anchors and heaven knows what, of people that began in local stations.  That was in Timmins or Kelowna or whatever.

16717            So there was a history almost of apprenticeship before you became Peter Mansbridge.  Now that is being taken away from us slowly at the conventional side.

16718            What we want to do is if this fee for carriage can restore and add to that, then by all means let's have another step in the rung at the community base to give ‑‑ we are graduating all kinds of young people out of radio arts and television and journalism programs, and as we are graduating them we are decreasing the amount of opportunities they have to follow their careers.

16719            THE CHAIRPERSON:  Mr. Murdoch, the fee for carriage that you advocate, is there sort of a triggering threshold because local stations provide local news in varying degrees.  A varying amount of money is being spent, resources, et cetera.

16720            Even if you have a very minimal one, are you entitled to a fee?  Is the fee tied to the amount that you ‑‑ or how do you see that?

16721            Obviously it would be nice if we had licensed all stations to produce the same amount of local news or local content.  They don't, unfortunately.  It is all over the place.

16722            That's why I'm wondering, have you thought of whether that (a) should be a threshold amount and (b) should there be some proportional relation between the amount of the fee that you get and the amount of local content that you put in?

16723            MR. MURDOCH:  Right.  First of all, I think we tried to make the case at the beginning of our presentation, is that what we do have to ensure is that there are no second‑class regions or cities in the country, so that regardless of how many resources come out of Halifax, regardless of how much money, the people and Halifax deserve the same ‑‑ I'll use this word again ‑‑ the same quality, not the same quantity of news and the same attendance to news coverage, I guess, as stations across the country should.

16724            And that goes for every other community across the country.

16725            It is very difficult for us to put a threshold of spending in the sense that we don't have the information now ‑‑ and we were suggesting it in our presentation again ‑‑ about how much is being spent now and how much was spent five or 10 years ago and how much savings has been generated by these hundreds and hundreds of job losses.

16726            We just don't have that information and if we could, we might be able to make a submission to you.

16727            THE CHAIRPERSON:  What about the second part, the entitlement?  Should that be proportional?

16728            MR. MURDOCH:  In other words, the entitlement to the carriage fee is dependent on ‑‑

16729            THE CHAIRPERSON:  What you spend.  I mean, should there be some sort of reward or some sort of incentive that you see or is it only to make absolute that everybody comes up to the same level?

16730            MR. MURDOCH:  Go ahead.

16731            MR. LUMGAIR:  Mr. Chair, I think that we would adopt or opt for the approach that there be a minimum level regardless of the community and regardless of the market.

16732            In some markets obviously that would be exceeded.  You get into larger stations that you simply have more meat on the bones for every daily newscast, there is no question about that.

16733            But I think that perhaps certainly the fairest way to ensure that in the smaller markets they get at least a level of coverage that is deemed, whatever that might be ‑‑ we are getting down to the quantitative approach ‑‑ whatever that might be, that ensures that there will be some adequate reflection of that community.

16734            MR. MURDOCH:  Were you suggesting that, in some ways, we might think about using a carrot, not a stick; that if a broadcaster sort of went over the top on local news programming, they would be rewarded for that initiative?

16735            THE CHAIRPERSON:  Exactly.  Or, at least, a portion of an incentive built in.

16736            I am just exploring ideas here, because you are the only ones before me who seem to have spent an awful lot of time thinking this through and trying to approach the mechanics of what to do about it.

16737            MR. MURDOCH:  Our concern, of course, is that that is happening right now a bit.

16738            They are not getting rewarded for it, but it is clear that broadcasters are spending, even proportionately I would argue, more in some centres, and in some cities, than they do in others.  So we end up with have and have‑not cities, and the winners‑and‑losers system.

16739            It is a bit difficult, because I think what you will see is, they will end up spending a lot of money where they think the money is.  They will chase the money.

16740            THE CHAIRPERSON:  So an incentive would actually be counterproductive to your idea of no second‑class citizens.

16741            MR. MURDOCH:  Yes, I think it holds some very dangerous consequences.

16742            THE CHAIRPERSON:  Okay.  Thank you very much.

16743            Michel?

16744            COMMISSIONER ARPIN:  Thank you, Mr. Chair.

16745            Over the last couple of days we have heard from the Quebec unions, and one of the things they said to us, which I want you to comment on, is that for the first three years of fee for carriage ‑‑ and it is at the wish of the broadcaster ‑‑ the money could be used for digital transition before being used for local programming.

16746            Do you have any comments regarding such an alternative?

16747            MR. MURDOCH:  I am going to answer it, but I just want to make sure what the question was.

16748            Are you saying that the unions suggested that, for the first three years, a portion of the fees ‑‑

16749            COMMISSIONER ARPIN:  Or even all of the fees.

16750            MR. MURDOCH:  ‑‑ all of the fees should be used for, essentially, capital costs related to digital?

16751            COMMISSIONER ARPIN:  Yes.  That was the proposal that was put before us by SCFP, CFTU and the Syndicat des employés de Radio‑Canada.

16752            MR. LUMGAIR:  Commissioner, we haven't thought about percentages.  We certainly had some discussion about the need, in stations where there is no financial incentive to move to digital ‑‑ and one of the examples today is Global moving into the production centre, and one of the arguments is that there is no financial rationale for moving, and that the cost of moving to digital is prohibitive.

16753            I think it is fair to say that our view is that we don't object to some of those fees being allotted to capital costs in order to make that transition in markets where it is clearly a difficult task financially to move there.

16754            MR. MURDOCH:  I would say, as we know, that the digital world just didn't come up yesterday.  They have had a lot of time to think about this, and I think in other sectors of the economy companies realize that renewing capital infrastructure is part of the cost of doing business.

16755            I am not sure whether consumers help pay for that.  That is just a kind of ideological stance for me.

16756            The other thing is, I would add that while it is clear that in some markets the digital cost might be ‑‑

16757            What is happening now and what will happen over those three years is that we will see the continual erosion of local news and local programming, even while digital is being put in in some markets.

16758            So the suggestion that all of it should go for three years is prohibitive.  The answer to that would be a very firm no.

16759            MR. LUMGAIR:  Might I add, Commissioner, that in the markets that broadcasters are indicating currently are difficult to make that transition, and therefore are moving to the broadcast centres, and simply having finished news items broadbanded to those production centres, we would hope that if there is some decision about capital costs and some money going toward that, that the quid pro quo for that would be to clearly move those productions, and move the production of that newscast back to that local station in any particular example where it has been moved to another production centre.

16760            It would have to, most certainly, be part of the equation.

16761            COMMISSIONER ARPIN:  You are also a member of the CCAU Coalition, and the CCAU and the guilds that have appeared before us, as well as the CBC ‑‑ and I am not saying that the CBC is part of the Coalition, but they made the same type of argument, that fee for carriage should go to drama.

16762            Obviously, we also have the CFPTA saying that ‑‑ that added that, obviously, drama produced by independent producers.

16763            You are advocating local news, but you are a member of the CCAU.  That is why I am asking you that nice question.

16764            MR. MURDOCH:  That is very kind of you, Mr. Arpin.

‑‑‑ Laughter / Rires

16765            MR. MURDOCH:  As you know, CEP has a number of different folks.  We have people involved in independent film and television production, as well as thousands of people who work at the broadcasters.

16766            If it is an either‑or choice, that is kind of a Sophie's choice.  That is a choice that we not only would not like to make, we won't make.

16767            What we are saying is that today we are coming because we firmly believe there is a crisis in local news and information programming, as highlighted by recent decisions.

16768            The system does have in it a number of methods of encouraging and supporting prime time drama, whether it is through the CTF or the benefits program or ‑‑ there is a whole variety of reasons, even in commitments and obligations from broadcasters.

16769            We haven't had that same regulatory approach to local news and programming, and a crisis is brewing in the country.

16770            So that is why we are focusing on it, but it's not a Sophie's choice that we would accept.

16771            COMMISSIONER ARPIN:  Thank you very much.

16772            Thank you, Mr. Chairman.

16773            THE CHAIRPERSON:  Thank you very much.  I think that concludes our questioning, and I think that concludes these hearings in terms of intervener.

16774            Thank you very much.

16775            I should announce at this point, in the spirit of total transparency ‑‑ people love to write to us, apparently, while we are holding hearings.  Today I got another letter from Bell Canada, making some procedural objections, basically saying that parties should not be able to introduce further evidence that hasn't been filed with us.

16776            In the interest of transparency, that letter will be put on the record, and it will be available for the public in the public room.

16777            Thank you very much.

16778            Everybody has heard throughout this hearing my colleague Michel Morin refer several times to a model which he basically describes as "A+B‑C", and we would like to have public reaction to it, but in order for people to be able to fully understand it, Michel will now explain his model in detail.

16779            Michel Morin?

16780            CONSEILLER MORIN : Merci, Monsieur le Président.

16781            Bonjour. Mon nom est Michel Morin, et je suis conseiller au CRTC.

16782            Au début de ces audiences, le président m'a offert de présenter un modèle d'accès qui n'est pas celui de la Commission.

16783            Ce modèle,  dont je n'ai retrouvé aucune similarité dans les 9 000 pages qui ont été mises à la disposition du public au cours ce ces audiences.

16784            Je suis donc devant vous aujourd'hui avec une proposition qui devrait fait faire 26 pages dans son texte français, et 25 pages dans la traduction anglaise.

16785            Ce texte, qui sera déposé aux fins de l'audience et qui sera rendu disponible sur le site du CRTC probablement en début de semaine prochaine.

16786            Rassurez‑vous, il se fait tard après ces trois semaines d'audiences et je déposerai dans quelques minutes le document complet, mais je n'ai pas l'intention de le lire entièrement.

16787            Toutefois, avant de lire une certaine partie du document, je voudrais avec vous faire un bref survol des tableaux et des simulations qui sont présentés sous forme d'annexe à partir de la page 11 dans le texte français, et à partir de la page 10 dans la version anglaise.

16788            En page 11, et en page 10 dans la version anglaise, on trouve dans le tableau 1 une trentaine de services spécialisés de langue anglaise avec le score de chacun.

16789            Si on applique le modèle de pointage que je vais vous présenter et vous suggérer dans quelques minutes, CTVNewsnet occupe le premier rang avec 148 points, et le canal spécialisé de CTVglobemedia, TSN, occupe le dernier rang avec ‑8 points.

16790            Comme on peut le voir, le modèle n'a pas de parti pris.

16791            À la page 12 du texte français, et à la page 11 du texte anglais, on a les services de catégorie 1 de langue anglaise.

16792            Dans les deux pages, plus de 20 services sont à moins de 30 points du score de 100 points à partir duquel les services pourraient hypothétiquement se qualifier pour être sur le service de base.

16793            En page 13, et 12 dans le texte anglais, on retrouve les services spécialisés et les services de catégorie 1 de langue française.

16794            Comme c'est le cas avec le marché anglophone, le Groupe Quebecor obtient la plus forte cote avec les 118 points du service d'information continu LCN, et la plus faible cote avec le service Mystère.

16795            Je vous l'ai dit, ce modèle n'a pas de parti pris.

16796            Toutefois, avec la cote de 100 points, à peine deux services francophones pourraient passer le test, le test du contenu canadien, de la programmation canadienne et du coût au consommateur.

16797            Il serait toujours possible au Conseil de baisser ce seuil à 70 points dans le marché francophone de manière à provoquer un mouvement d'ensemble vers le haut.

16798            En page 14, et 13 dans la traduction anglaise, sont présentés les forfaits de base dans cinq marchés et chez les deux entreprises SRD de satellite de radiodiffusion directe.

16799            En page 15 du texte français, et 14 du texte anglais, vous avez peut‑être les cinq grands volets dans cinq grands marchés.

16800            Enfin, les simulations. C'est la partie peut‑être la plus intéressante. C'est en page 16 du texte français, et 15 du texte anglais.

16801            Nous avons l'offre de Shaw Communications à Calgary.

16802            Avec le seuil de 100 points, on voit que Shaw Communications n'aurait qu'à ajouter trois services sur le service de base, et l'entreprise pourrait toujours maintenir sur son service de base les huit services qui seraient retirés de ce service de base si le seuil de 100 points était retenu.

16803            Dans notre esprit, il a toujours été clair que les entreprises EDR auront toujours l'opportunité d'ajouter des services au service de base, comme c'est le cas actuellement.

16804            Si le seuil n'était que de 90 points, c'est cinq services de plus qui se retrouveraient sur le service de base de Shaw Communications.

16805            L'exercice a aussi été fait pour 80 points ‑‑ et cela dans les marchés non seulement de Calgary, mais de Montréal, Halifax, Toronto, Vancouver, de même que pour les entreprises Express‑Vu et Star Choice.

16806            Grâce à ces tableaux en couleur, grâce à ces tableaux, les participants peuvent se faire une meilleure idée, avoir une meilleure vue d'ensemble des résultats possibles de son application dans les grandes villes du pays.

16807            Revenons maintenant au texte principal.

16808            Je vous fais grâce des six premières pages du texte. De toute façon j'ai déposé auprès du secrétariat, un exemplaire de mon exposé.

16809            On trouve dans ces six premières pages, un certain nombre de déclarations, d'extraits législatifs, qui supportent, à notre avis, l'objectif de ce modèle.

16810            En page 4, nous avons la fameuse formule à laquelle faisait allusion monsieur le président et que j'ai évoquée plusieurs fois au cours de ces audiences, une formule qui se traduit par un certain nombre de points, une fois pris en compte le contenu canadien, et la programmation canadienne, duquel nombre est soustrait le tarif de gros fixé par le CRTC.

16811            Enfin, nous retrouvons en page 7 les certains arguments défavorables qui pourraient être évoqués contre l'adoption de ce modèle.

16812            Je vais maintenant tenter d'y répondre.

16813            C'est en page 6 dans le texte anglais.

16814            À première vue, certaines personnes pourraient faire valoir des arguments contre ce modèle. En voici quelques‑uns.

16815            Un.

16816            Le modèle tient‑il compte de la demande des consommateurs pour ces services ?

16817            C'est une question importante, à laquelle je répondrai par une autre question... A‑t‑on déjà fait la preuve que les EDR ajoutent des services facultatifs sur le service de base à la demande des consommateurs ?

16818            Je crois que cela n'a pas été démontré.

16819            De toute manière, la question est revenue à plusieurs reprises au cours des audiences, et les EDR, les unes après les autres, sont venues nous dire qu'en finale, très peu de clients s'abonnaient au service de base.

16820            Par ailleurs, il est clair dans mon esprit que ce modèle donne aux EDR toute la souplesse nécessaire pour ajouter les services qu'elles désirent au service de base. Le modèle ne menotte pas les EDR dans leur offre de services.

16821            Enfin, comme je crois l'avoir dit au cours des audiences, pour être placé sur le service de base, un service facultatif doit impérativement tirer le tiers de ses revenus de la publicité commerciale.

16822            Après le contenu et les dépenses de programmation, cette quatrième variable nous assure que le service facultatif trouve une audience certaine auprès des téléspectateurs, puisque son plan d'affaires prévoit la vente de messages publicitaires à la hauteur de 33 pour cent de ses revenus.

16823            Deuxième argument possible.

16824            Au cours des audiences, Rogers a fait allusion à la tendance d'offrir de plus en plus de bouquets thématiques dans le monde numérique.

16825            Je reconnais que dans les faits, cet accès au service de base donne un pouvoir de négociation au service facultatif par rapport aux EDR.

16826            Mais rien n'empêche les EDR de négocier un étagement thématique avec le service en question.

16827            Grâce à un meilleur prix, le service facultatif pourrait investir davantage dans la programmation canadienne et, de ce fait, conserver la cote qui lui permettait d'accéder au service de base.

16828            Enfin, soyons clairs : les bouquets thématiques ne sont pas prévus par la Loi canadienne sur la radiodiffusion.

16829            La Loi parle de programmation et d'émissions canadiennes, mais pas de bouquets thématiques.

16830            Le forfait le plus populaire chez Rogers est le forfait VIP, constitué d'une offre abondante tous services confondus, une offre qui semble bien lointaine des bouquets thématiques.

16831            Troisième argument.

16832            Le modèle proposé ne risque‑t‑il pas de provoquer une augmentation du prix du service de base ?

16833            À cette question, je répondrai qu'on a démontré au cours des audiences que le service de base des EDR avait monté d'environ 300 pour cent depuis six ans et, dans un second temps, que la hausse n'avait pas grand‑chose à voir avec l'augmentation des prix de la programmation.

16834            Autrement dit, l'augmentation du prix du service de base à la suite de la déréglementation est le résultat des décisions des EDR.

16835            À moins que le Conseil ne veuille réglementer le service de base, voilà un autre argument qui ne tient pas la route, compte tenu de l'expérience des dernières années.

16836            Par ailleurs, veut‑on nier aux EDR la possibilité d'offrir un service de base à la mesure de l'offre de base qu'elles veulent offrir à leurs clients dans un marché concurrentiel ?

16837            Le modèle ne le dit pas, mais la majorité des consommateurs semblent avoir déjà répondu, car en effet, même avec un service de base élargi, la vaste majorité des consommateurs optent d'ores et déjà pour des bouquets supplémentaires.

16838            Quatrième argument.

16839            D'autres diront qu'un service de base élargi ne s'inscrit pas dans la foulée des décisions récentes du CRTC visant à éliminer le double statut pour les services facultatifs et l'introduction des services 9(1)h) sur le service de base.

16840            À cela, je dirais tant mieux si l'aboutissement est le même, mais on ne peut pas demander à un nouveau modèle, quel qu'il soit, d'assimiler toutes les règles introduites avant sa création.

16841            Par ailleurs, il ne faut pas confondre l'arbre et la forêt, ou la plomberie et la maison.

16842            Ce modèle est empirique et dynamique. Il repose sur les fondements mêmes de la Loi canadienne de la radiodiffusion, les recommandations du rapport Dunbar‑Leblanc, l'appel des commentaires dans le cadre des présentes audiences et les déclarations du président von Finckenstein.

16843            Cinquième argument.

16844            Pour certains, le modèle ne tient pas compte du prix de détail des forfaits de base.

16845            Rappelons que les prix du service de base au détail sont déréglementés depuis le début de la décennie et que personne n'a demandé au cours des audiences qu'ils soient à nouveau réglementés.

16846            Sauf que, lorsqu'un service est positionné sur le service de base, c'est le tarif du CRTC qui s'applique dans le cadre du forfait aux abonnés.

16847            Bien sûr, il est possible que le forfait de base aux abonnés d'un ou de plusieurs services soit facturé à un coût supérieur, mais cela était vrai avant l'introduction du modèle qui, s'il était adopté, ne changerait rien à la situation actuelle.

16848            Dans mon esprit, les EDR restent maîtres du jeu une fois l'accès au service de base réglementé par un système de points.

16849            Sixième argument.

16850            Afin d'accéder au service de base, certaines entreprises pourraient être tentées d'augmenter leur contenu canadien par voie de répétitions ou d'ajouts de programmes canadiens de qualité douteuse.

16851            Voilà une question qu'on est en droit de se poser lorsqu'il y a modification de la grille horaire.

16852            Sauf qu'à chaque renouvellement de licence, le détenteur de licence est tenu de présenter une grille horaire type.

16853            S'il y a trop de répétitions, le CRTC peut refuser le renouvellement.

16854            De la même façon, en vertu de l'article 9, le Conseil a le droit de s'assurer de la qualité du service.

16855            Enfin, le Conseil peut en tout temps demander au détenteur de licence de déposer sa grille horaire pour en vérifier la diversité et la qualité.

16856            Septième argument.

16857            Selon certains, le modèle ferait l'impasse sur les coûts d'acquisition, souvent supérieurs, de certaines programmations.

16858            On pense ici aux dramatiques ou aux émissions pour enfants qui pourraient être désavantagées par rapport à d'autres services dont le coût d'acquisition de la programmation est inférieur.

16859            Si, dans sa sagesse, le Conseil décidait que les dramatiques, les documentaires ou les émissions pour enfants constituent des émissions prioritaires et qu'elles sont effectivement désavantagées en raison de leurs coûts d'acquisition, rien n'empêcherait le Conseil d'accorder des primes de démarrage de 20, de 30 ou de 40 points sur une période définie (à court, moyen ou long terme), pour ces types d'émissions à prioriser.

16860            La diversité aurait alors meilleur goût et le modèle pourrait englober, grâce au système de primes, tous les types de programmation prioritaire.

16861            Huitième arguement.

16862            Certains n'ont pas manqué de souligner que cinq des six services analogiques qui bénéficieraient d'un accès au service de base en vertu du modèle, c'est‑à‑dire les services ayant obtenu 100 points et plus, appartiendraient à la catégorie des « nouvelles et information ».

16863            On cite, à titre d'exemple, du côté des services anglophones, CTVNewsnet, Pulse 24, Weather, The Score et RobTV.

16864            Je soulignerai tout d'abord que ces services sont au coeur de l'identité canadienne.

16865            Je vois mal comment on pourrait, au nom de la diversité, refuser à CTVNewsnet l'accès au service de base, tout en privilégiant le service public Newsworld de la CBC.

16866            On mentionne également l'exemple de YTV (un service dédié aux adolescents) qui, avec ses 60 points, ne franchirait pas le seuil des 100 points.

16867            Dans ce cas‑là, je donnerai la même réponse qu'à la question précédente.

16868            Pour peaufiner ce système de pointage, on pourrait accorder une prime de 30 points aux émissions semblables à YTV qui visent un public d'adolescents.

16869            Qui plus est, ce service est en grande demande. L'EDR à elle seule pourrait toujours avoir l'option d'ajouter YTV à son service de base.

16870            C'est d'ailleurs ce que fait Shaw Communications à Calgary et à Vancouver, Eastlink à Halifax et Vidéotron à Montréal, pour ne mentionner qu'elles.

16871            Neuvième argument.

16872            Pour être certain que la diversité trouve sa place sur le service de base ‑‑ comment être certain ?

16873            Cette diversité est du ressort, au premier chef, du CRTC lui‑même, de sa loi constituante, de la Loi  sur la radiodiffusion.

16874            Les EDR sont associées et complémentaires à la réalisation de ce grand objectif, d'où la nécessité d'un service de base élargi pour les EDR.

16875            Dans cette optique, on ne saurait toutefois pas confier aux EDR, dans le cadre législatif actuel, le soin de gérer seules l'offre des services sur le service de base.

16876            Dixième et dernier argument.

16877            Le modèle est‑il vraiment aussi simple à gérer qu'il le semble, compte tenu de la déréglementation des prix du gros ?

16878            Les tarifs de gros établis par le CRTC s'appliquent en toutes circonstances quand le service est offert sur le service de base.

16879            Comme je l'ai dit plus tôt relativement aux tarifs payés par les consommateurs, ces tarifs ont été déréglementés il y a plusieurs années et, somme toute, un marché de nature concurrentielle comporte plus d'avantages qu'un marché réglementé.

16880            Loin de moi, donc, l'idée d'introduire par la porte d'en arrière de nouveaux règlements ou, pis encore, de réglementer à nouveau tous les prix du gros, que les services soient ou non sur le service de base !

16881            Enfin, comme conclusion, je crois que ce modèle stimulera les acteurs du système à dépenser davantage en programmation canadienne.

16882            Ultimement, il favorisera la création de champions en contenu canadien, non seulement sur le marché domestique, mais également sur les marchés d'exportation.

16883            Selon moi ce modèle sera moins tatillon et plus dynamique, puisqu'il sera possible de le modifier avec le temps dans le respect de la Loi sur la radiodiffusion.

16884            Comme je l'ai dit tantôt, je vous invite tous à commenter le modèle proposé.

16885            Je prendrai note de vos commentaires, longs ou courts, favorables ou défavorables, avec le plus grand respect.

16886            Rien n'est coulé dans le béton.

16887            Si le modèle vous plaît, qu'il passe la rampe comme on dit, et qu'il pourrait être bonifié, c'est bien tant mieux !

16888            Je vous remercie d'avance de vos contributions, tout comme je remercie notre président de m'avoir permis de partager avec vous une ma vision de l'avenir de notre système de radiodiffusion.

16889            Merci, Monsieur le Président.

16890            THE CHAIRPERSON: Thank you, Michel.

16891            I look forward to the response from our participants in this hearing to your very original idea.

16892            Madame Secretary, you have some announcements to make?

16893            THE SECRETARY: Thank you, Mr. Chairman.

16894            It is regarding the final submissions.

16895            As noted, an opportunity will be given for interested parties to make final submissions in order to elaborate on questions asked by the panel or respond to questions or issues raised.

16896            The deadline for final submissions will be Thursday, May 8, 2008.

16897            Final submissions should be limited in length to no more than 15 pages.

16898            Parties are reminded that no new evidence should be introduced in their final submissions with the exception of data requested by the Commission during the course of appearances.

16899            Some parties indicated that they will also submit any information referred to during the course of their appearances which had not yet been filed.

16900            Any such submissions of additional information (which the Commission discourages) will be received and put on the public record but the Commission will attach no weight to them.

16901            While parties are welcome to comment on any issues raised in the context of the hearing, the Commission requests that parties specifically address regulatory approaches to VOD (video on demand) and SVOD (subscription video on demand) in their final submissions.

16902            In particular, the Commission requests that parties clearly delineate:

16903            a) those features which distinguish VOD and SVOD from linear programming services; and

16904            b) the appropriate rights and obligations which should accrue to both broadcasters and BDUs in the VOD and SVOD environment.

16905            The Commission also seeks additional information respecting NPVRs (network personal video recorders) and its potential impacts on CRTC policies.

16906            All evidence submitted during the final submission phase will be accorded the appropriate evidentiary weight given potential time and resource limitations of participating parties.

16907            No further replies following the final submission phase will be permitted.

16908            Thank you, Mr. Chairman.

16909            THE CHAIRPERSON: Thank you, Madame Secretary.

16910            Ron, you want to make an announcement?

16911            COMMISSIONER WILLIAMS:  Thank you, Mr. Chair.

16912            As many of you know, this is my last time in this hearing room, as my term as commissioner ends in two weeks.  It has been an honour and a privilege to help regulate the broadcast and telecom industries of Canada for the past nine years.

16913            I salute the dedicated staff and commissioners of the CRTC, and I wish all the broadcasting and telecom executives in Canada all the success in the future.

16914            As some of you know, I purchased a small resort in Alert Bay in the northern part of Vancouver Island a little over a year ago, and I will hang my hat there until the next opportunity presents itself, as I am probably a little bit too young to retire yet.

16915            Anyway, thank you all very much.

16916            THE CHAIRPERSON:  Thank you, Ron.

16917            It is very sad, what you just announced.  Your contribution to the Commission has been enormous, and we will miss you.

16918            We will miss your comradeship, your constant good humour and the way you have managed to keep up level.  Thank you very much for all your contributions.

16919            And I would also like to take this opportunity to staff, our secretary and all.

16920            This has been a very long and difficult hearing, and it has gone very smoothly, on time, et cetera.

16921            And that can only come from the phenomenal amount of work the staff has done before hand in preparing this hearing, in digesting and synthesizing the numerous submissions that we had.

16922            As you see, behind me, all these blue binders are full of submissions that we have received.

16923            To make some sense of them, put them in order, to schedule it and to have a kind of hearing as we have has, which was very fruitful, I think, and from which we will all benefit, can only be thanks to your work.   So I want to, all, each and everyone of you, thank you very much for what you have done.

16924            Thank you.

16925            I think that is the end of the hearing.

‑‑‑ Whereupon the hearing concluded at 1501 /

    L'audience se termine à 1501

 

                      REPORTERS

 

 

 

____________________      ____________________

Johanne Morin             Sue Villeneuve

 

 

 

____________________      ____________________

Jean Desaulniers          Fiona Potvin