ARCHIVÉ - Transcription, Audience du 22 mars 2012

Volume 1, 22 mars 2012

TRANSCRIPTION DES AUDIENCES DEVANT LE CONSEIL DE LA RADIODIFFUSION ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUJET:

Procédure accélérée de règlement des questions de concurrence - Demande de radiodiffusion

TENUE À:

Centre de conférences

Phase IV

140, promenade du Portage

Gatineau (Québec)

22 mars 2012

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.

Conseil de la radiodiffusion et des télécommunications canadiennes

Transcription

Procédure accélérée de règlement des questions de concurrence - Demande de radiodiffusion

DEVANT:

AUSSI PRÉSENTS:

TENUE À:

Centre de conférences

Phase IV

140, promenade du Portage

Gatineau (Québec)

22 mars 2012

- iv -

TABLE DES MATIÈRES

PAGE / PARA

- v -

ENGAGEMENTS

PAGE / PARA

Gatineau (Québec)

--- L'audience débute le jeudi 22 mars 2012 à 0903

1 THE CHAIRPERSON: Good morning. There is no gavel and I will continue to say "there is no gavel" until someone gives me a gavel.

--- Rires

2 THE CHAIRPERSON: Good morning and welcome. My name is Len Katz, Acting Chairman of the CRTC, and I will be chairing today's hearing.

3 I am joined today on the Panel by my colleagues Vice-Chairman Broadcasting, Tom Pentefountas; Commissioners Rita Cugini, Tim Denton, Elizabeth Duncan, Peter Menzies and Michel Morin.

4 I would like to introduce the CRTC staff who will be assisting the Panel today. At the table, on my left, is:

5 - Steve Millington and Emilia de Somma, Legal Counsels;

6 - Gerry Lylyk, Director, Dispute Resolution;

7 - Kathleen Taylor, Manager, Dispute Resolution; and

8 - Claude Brault and Jean-Pierre Lefebvre, Senior Analysts.

9 During the course of the hearing please address any administrative or procedural matters in the hearing to Lynda Roy, our hearing secretary.

10 As you know, the Commission has decided to hold this expedited hearing with a view to making determinations on the request for dispute resolution that was submitted by CIDG on the 17th of January 2012.

11 I will now ask the Commission's Legal Counsel, Emilia de Somma, to continue to outline a few key points.

12 MS DE SOMMA: Thank you, Commissioner.

13 Before we begin, I would like to say a few words about the administration of this hearing.

14 On the 1st of March both parties received a copy of the Agenda that will be followed today. The parties will be asked to introduce the members of their respective teams and the applicant, followed by the respondent, will each have 15 minutes for their opening remarks.

15 Following those remarks the Commission will question the applicant and the respondent on matters related to the application and both the applicant and the respondent will have 20 minutes to question each other. The Commission will then ask any additional questions it may have.

16 The Commission will not entertain final written arguments; rather parties will have 15 minutes at the end of the hearing, following a short recess, to make their final submissions.

17 Les parties sont encouragées à parler dans la langue officielle de leur choix.

18 Des services de traduction en français et en anglais seront fournis au cours de l'audience. Les appareils sont disponibles à l'arrière de la salle.

19 Veuillez noter que l'audience est diffusée en direct, dans les deux langues officielles, sur le site Web du Conseil par moyen d'un service audio.

20 There is a verbatim transcript of this hearing being taken by the court reporter. In order to ensure that the court reporter is able to produce an accurate transcript, please make sure that your microphone is turned on when speaking, simply by pushing the button under the microphone.

21 We would like to remind you that cell phones and pagers should be turned off at all times while you are in the hearing room.

22 We will begin with opening remarks by CIDG, which will have 15 minutes to make its presentation.

OBSERVATIONS PRÉLIMINAIRES

23 MR. MAYRAND: Thank you.

24 Good morning Acting Chairman Katz, Vice-Chairman Pentefountas and Commissioners. My name is Yves Mayrand and I am Vice-President Corporate Affairs at Cogeco Cable, one of the members of the Canadian Independent Distributors Group or CIDG.

25 With me on the CIDG Panel are, to my right: Ann Mainville-Neeson, Director Broadcast Regulation at TELUS;

26 Jean Pierre Caveen, Director Affiliate Relations at Cogeco; and

27 Blair Miller, Vice-President Content at TELUS.

28 To my left are Jennifer Salmon, Vice-President Contracts for CCSA; and

29 Natalie MacDonald, Vice-President Regulatory Matters at EastLink.

30 The dispute between Bell and CIDG raises some fundamental issues relating to the implementation of the Commission's vertical integration policy. Bell continues to refuse to recognize the principles adopted by the Commission in that policy.

31 The Commission determined it necessary and appropriate, after an extensive public hearing, to adopt some safeguards to protect consumers and competition from the adverse effects of massive consolidation, concentration and vertical integration in the broadcasting industry. Specifically, the Commission indicated that it wanted to ensure that consumers:

"...will not have to subscribe to several distributors in order to view the most popular programming..."

32 And that they will have:

"...more choice and flexibility in the services they can subscribe to, while at the same time providing them with the ability to only pay for the services they want to watch."

33 Vertical Integration creates the incentive and the opportunity for a vertically integrated company to use its market power to impose excessive terms and conditions on access to its programming. There is no down side for the vertically integrated company. Any refusal by other distributors to accept the excessive terms proposed by the vertically integrated company merely drives consumers to its affiliated distribution arm.

34 Ensuring reasonable choice for consumers at reasonable prices is at the heart of the dispute between CIDG and Bell. The affiliation agreement proposed by Bell to CIDG would prevent CIDG members from providing more choice to consumers. Bell's proposal, is in many respects the antithesis of consumer choice and here's why.

35 By requiring that no packaging changes can be made for any of its 29 specialty services, Bell is preventing CIDG members from responding to consumer demand for more choice and flexibility to subscribe and pay for only the services they want to watch.

36 For its sports services, Bell is seeking very high minimum penetration guarantees that would force consumers to take the service whether or not they wanted it.

37 By refusing to include multi-platform and non-linear rights as part of this agreement, Bell is refusing to allow other distributors to respond to the threat of over-the-top services in the manner that they consider will best help keep Canadians within the broadcasting system.

38 The Commission must make clear in its decision resulting from this expedited hearing that it will uphold the rules and safeguards established as part of the vertical integration policy. The importance of the policy becomes even greater with the announced acquisition by Bell of Astral Media. The disappearance of Astral means that there will no longer remain any large independent programming service company to provide insight into truly arms length independent negotiations for the distribution of programming services.

39 Let's now review each of the specific issues to be considered by the Commission in this expedited hearing.

40 First, packaging flexibility. In Bell's proposals to the individual CIDG member companies, it has insisted that all of its 29 services be distributed exactly as they were on January 1, 2011. If any member of the CIDG wants to change their packages or offer new ones, they must seek Bell's prior approval. This means that Bell, our direct competitor in the retail distribution market, would have a veto on how we deliver services to our customers.

41 CIDG is not asking for "complete control over packaging" as suggested by Bell, just a reasonable opportunity to adapt its packaging in the course of a 4 to 5-year agreement to meet evolving consumer demands. CIDG needs to have the freedom to be able to make packaging changes incorporated in this agreement, because after the deal is signed there will be no incentive for Bell to agree to any repackaging unless it is to increase Bell's profits. Unlike the other vertically integrated companies, the CIDG members have no leverage to pressure acceptance of a repackaging proposal mid-contract.

42 CIDG presented a fair proposal. We propose to replace Bell's veto power with a safeguard to protect penetration, namely a grandfathering clause. We undertook not to move existing customers to any new packages that we might offer unless they explicitly asked for them. Given the relative stability of CIDG's customer bases, this would provide Bell with certainty that they would not see precipitous or dramatic changes in the revenues of their services. They need not, therefore, fear that there would be any significant financial damage to them over the near and medium term.

43 Bell's proposal, on the other hand, would allow Bell to make changes to its packaging to respond to consumer demand and yet prevent CIDG members from making similar changes. This is anti-competitive and, if not appropriately dealt with by the Commission, will inevitably result in a decrease of competition and increased incentives by vertically integrated companies to raise the cost of their services to Canadian consumers.

44 CIDG disagrees that increasing packaging flexibility will result in revenue erosion of the programming services. CIDG members are in the business of selling programming services. We have no incentive to lower penetration for any service. To the contrary, we simply want to be able to make normal business decisions to make adjustments as the market evolves. We want, in fact, to be able to adjust so that we can sell more programming services and have satisfied customers.

45 The services for which Bell especially seeks to protect penetration, namely the Category A services, are well established and have had many years to build loyal viewership. If the CIDG members make any packaging changes which would make these services more difficult or more expensive to access, consumers may well take their subscriptions elsewhere, like to Bell TV or the other vertically integrated distributors.

46 The CIDG proposal is fair. The grandfathering arrangement ensures that there would be no immediate drop in subscriber penetration as a result of any repackaging, if there is any repackaging and penetration drop at all. We suggest that this is totally speculative at this time.

47 Now, Bell has also asked for very high minimum penetration guarantees for its sports services. These requirements exceed the consumer demand for sports in general and would force some members of CIDG to move TSN to basic, taking it out of the sports theme pack. That is exactly what the Commission was concerned with in paragraph 30 of the VI Policy last sentence.

48 Bell claims it needs to maximize its revenues to meet its regulatory obligations to support Canadian content. Well, no sports or news channel has ever had problems meeting its Canadian content obligations. That is why sports and news programs are not considered "Programs of National Interest", or PNI as it's known, which are subject to an expenditure requirement. Creation and acquisition of sports programming is simply a good business decision which does not require regulatory support, or indeed a penetration guarantee from distributors.

49 The sports services on which Bell seeks to impose a minimum penetration requirement, are outside the group licensing regime which determines the overall expenditure requirement towards PNI. Quite simply, the revenues of the sports services go straight to Bell's bottom line and do not result in increased expenditures on PNI, as noted indeed by the CMPA in their submission.

50 Now, second, the non-linear rights.

51 Bell has refused to negotiate these rights for Bell specialty services as part of its affiliation agreement. They say they will negotiate them separately, sometime in the future.

52 The concept of "TV Everywhere" is becoming the established strategy for all distributors. Whether in the U.S. or Canada, distributors are increasingly required to offer their customers access to the programming services they buy whenever and however they want to consume them. Customers are not prepared, as the Commission has noted:

"...to have to subscribe to several distributors in order to view the most popular programming."

53 It is common practice in the industry for all rights to programming on all platforms be negotiated as part of a bundle. Almost all other channel suppliers recognize that the right approach is to make all the rights to their services available to the distributors. This was the principle that has also been endorsed by the FCC in the U.S.

54 Bell itself has recognized that this is the appropriate way to proceed. When it negotiated the terms of trade with the independent Canadian producer association, the CMPA, it insisted that all exhibition rights to platforms be sold to them. When they buy a show or a series, they get all the rights for the term of the licence; when they produce the show or series themselves, they clearly own all the rights.

55 It is very important that the Commission reinforce its conclusion that there be no exclusivities on television programs. Bell must provide all platform rights, wireless, broadband and video-on-demand. If they do not have all the rights -- and they would certainly have them to all for their Canadian programs -- they need to make them available when they obtain them and to do so at commercially reasonable rates.

56 Certainly Bell understands the value of being able to offer all of its channels on all of the available platforms. Its advertising emphasises precisely this point. This is one example which we have referred to in the public record in our March 7th submission, a two page add in La Presse, advertising Canadiens hockey games on all platforms, with the end quote "La vie est belle".

57 Now, the same argument is touted over and over again by Bell in its acquisitions, the CTV acquisition, the MLSE acquisition and now Astral.

58 Now, turning to the penalties issue.

59 Bell has indicated that penalties should be paid to Bell by CIDG members to compensate for the delay in reaching an agreement. This demand is highly inappropriate.

60 Bell sought to strong arm the CIDG members into signing its agreement prior to the release of the Commission's policy on Vertical Integration and prior to any dispute resolution. The members of CIDG have refused to capitulate to Bell's disregard for the Commission's regulatory framework and should not be made to pay a penalty for doing so. Bell's penalties are designed to prevent independent distributors from availing themselves of the regulatory safeguards that the Commission has put in place, including this very dispute resolution process.

61 Apart from their unfairness, the penalties sought by Bell are remarkably large. They would amount to 20 percent of the value of the contract. This is tantamount to a full year's additional fees on a 5 year contract.

62 CIDG members are the ones that have suffered hardship throughout this protracted process to seek a commercially reasonable deal from Bell. Since September 2011, Bell has refused access to some of its signals, providing an undue preference to Bell's own distribution services. This is of course the subject of a separate undue preference complaint for which CIDG continues to await a decision.

63 So in conclusion, in the vertical integration decision the Commission created a regulatory framework designed to ensure that vertically integrated companies could not advantage themselves to the detriment of their competitors, Canadian consumers or the broadcasting system as a whole. It is a balanced framework that positions Canada well to meet the challenges of the future. By emphasizing vigorous competition and consumer choice, it will make it easier to satisfy Canadian demands and resist the encroachment of unregulated Over-The-Top television suppliers.

64 Over the last few months, the Commission's VI Policy has become even more important. Bell now owns not only CTV, but half of Mapleleaf Sports and Entertainment, and will shortly be approaching the Commission to approve its acquisition of Astral Media. Bell is not just big, it is enormous and enormously powerful.

65 It is important, therefore, that the Commission decide:

66 First, to ensure that the members of CIDG have the flexibility to offer attractive and compelling service packages to its customers going forward. Bell cannot have a veto on CIDG members' packaging decisions for the next several years. Our 'grandfathering' proposal is an excellent compromise.

67 Second, there must be no minimum penetrations for sports services. They are unnecessary and they may be inimical to the health of the broadcasting systems as a whole.

68 Third, all the rights to all the platforms for programs of the Bell services must be made available on commercially reasonable terms as part of this agreement.

69 Fourth, there should be no penalties for disagreeing with Bell, particularly when the penalties are designed to thwart the Commission's policies and its dispute resolution process.

70 This is a very important proceeding. It is essential that we put the right terms of carriage in place. If we do not, we will see reduced consumer choice, crippled competition and erosion of the broadcasting system. On the other hand, if we do, we can anticipate a much strengthened Canadian culture and much happier Canadian public.

71 Thank you.

--- Pause

72 MS DE SOMMA: Bell Media may now make its presentation.

OBSERVATIONS PRÉLIMINAIRES

73 MR. BIBIC: Good morning, Mr. Chairman and Commissioners.

74 Before I introduce my panel I just wanted to situate a couple of documents that I will be using and just explain what they are, if that's okay with Madam Secretary.

75 So first, I have handed out to the Commission and to the CIDG a tabbed package that looks something like this. Just so everyone understands what this is, it simply is a compilation of all the exhibits Bell has filed thus far in the proceeding over the course of three submissions. We thought it would just be easier as we refer to them to have them in one package rather than flipping through various submissions. So that's all that is.

76 The Commission has the confidential versions, CIDG has the same copy except the versions that they have access to in some cases are redacted.

77 Then I'm going to hand out to CIDG our opening statement. The opening statement is to be read, which I will do in a second. It also has a few exhibits.

78 The last one, Exhibit 5, which is in blue, is basically a proposal for further concessions that we will make, and all I ask is that -- I mean, CIDG has access to it, the Commission has access to it. It is confidential, so if we have general discussions about it, if we do, rather than very specific, we would appreciate it. If we would like to get very specific about it, then I'm happy to go in camera.

79 But the point is, everyone has access to the same documents, except the public.

80 And that is only the last exhibit, Exhibit 5.

81 THE CHAIRPERSON: How would you propose that we question or test your concessions if they are confidential?

82 MR. BIBIC: Some numbers or some of the specifics are confidential. I think we can do it. We can talk to them.

83 Feel free to ask your questions, and I think that we will -- if we really, really, really think it's confidential, we will point it out. Otherwise, we are not going to refuse to answer every single question.

84 I think we should just try it. We will give a lot of scope to it. There are just some aspects, given the nature of the fact that there are 164 BDUs, and some concessions are being made here that haven't been made to others, and we are just a little bit sensitive to that.

85 THE CHAIRPERSON: Okay. Let's get through your opening remarks, and then I can ask CIDG for their views, as well. But let's get through it first.

86 MR. BIBIC: Thank you, Mr. Chairman.

87 Introducing my panel, I am Mirko Bibic, for the record, Senior Vice-President of Regulatory and Government Affairs for BCE.

88 I have, to my left, Kevin Crull, the President of Bell Media.

89 To Kevin's left is Bart Yabsley, Executive Vice-President of Content Sales and Distribution.

90 To my right is Kevin Goldstein, Vice-President of Regulatory Affairs.

91 Over to Bart's right, back to the left, is Paul Solymos, Vice-President of Content Sales and Distribution.

92 And to the extreme left is Ben Keys, Senior Director of Content Sales and Distribution.

93 Mr. Chair, Vice-Chair, Commissioners, our objective today is to obtain clarity on the packaging parameters which will form the basis of the subsequent final offer arbitration, preferably in cooperation with CIDG or, failing that, with the Commission's guidance.

94 In formulating our affiliation agreement proposals thus far with all other BDUs, including the CIDG, we have been guided by the following:

95 First, the interests of the viewer -- without the viewer, frankly, we all know that none of us are here and there is no Canadian broadcasting system. We are mindful of that.

96 Second, a willingness to cooperate with BDUs, including the CIDG members -- we recognize that we are partners with BDUs in serving viewers.

97 Third, working with our BDU partners -- we want to balance our need as programmers for a reasonable degree of revenue stability with the BDUs' desire for flexibility to respond to the marketplace.

98 And, fourth, we want to maintain the Commission's stated preference for allowing the market to operate, except when the Broadcasting Act's objectives could be compromised or when the VI Code of Conduct is not being respected.

99 Ultimately, the resolution of this dispute should be driven by the best interests of the Canadian broadcasting system and the proposals which best fulfil the objectives of the Act.

100 Our market-based proposals do that. They strike the required balance between revenue stability for Analog Category A and C services and flexibility for BDUs. They support the Act's objectives and they fully respect the Code. Our market terms, we feel, should guide the outcome here.

101 For a bit of context, the vast majority of Bell Media's agreements expired on December 31, 2010. The planning for their renewal began long before Bell announced its intention to acquire CTV, and long before the Commission's VI hearing.

102 So this dispute is not actually about vertical integration. It is a commercial dispute on long-expired agreements, where Bell Media is seeking well-accepted market terms based on industry practice, and which Bell Media would have requested if it had remained independent.

103 Beginning in 2011, Bell Media began sending renewal proposals to BDUs. Over many months, we concluded renewal agreements with all BDUs except the CIDG members -- large, small, vertically integrated, and in every province.

104 Bell Media made significant concessions from our initial requests. The large BDUs forced these concessions, given their leverage. The standstill that the Commission put in place in VI further reduced any leverage that we might have had. And, then, these concessions flowed through to all other BDUs, including the CIDG members.

105 This is a crucial point. We are not asking CIDG members to pay more for our services because they are independent, nor are we asking them to agree to different packaging terms. Throughout this dispute, in fact, we have offered more concessions to CIDG members than to any other BDU thus far, and have done so again in Attachment 5 to this opening statement.

106 Contrary to their claims, the large VI BDUs clearly are part of the relevant market, as actually the Commission makes rather clear in section 2(d) of the VI Code of Conduct.

107 We understand that the Code is in place to assist in resolving disputes like this, and our proposals fully respect all relevant aspects of the Code. We have a detailed assessment of that in Attachment 1.

108 Let me now go to Issue 1, the packaging issue.

109 Our differences with CIDG relate to Analog Category A and C services. These services are core to the Canadian broadcasting system in terms of their popularity with viewers and their massive investments in Canadian programming.

110 There are only 32 English specialty Analog Category A and C services in Canada. They represent 24 of the top 25 most popular services, and all but one are in the top 40. We show those in Attachment 2.

111 We at Bell Media own 12 of these, 13 if you include RDS in the French language.

112 And they are, actually, the services that Canadians want to watch. You can see from Tab 2 of the Book of Exhibits the popularity of the viewership of these services.

113 I point that out because, in paragraph 3 of the CIDG statement, they go to great lengths to say that the Commission indicated in VI that consumers should have to pay for the services they want to watch. These are the services that they want to watch, and these are the services that this dispute is really about.

114 What CIDG members seek is the unprecedented, unilateral flexibility to package our Analog Category A and C services as they please, without any consultation with or consent from Bell Media.

115 The revenue model which underpins the system has always been based on the wholesale price being a function of unit rate times the subscriber volume -- rate times volume.

116 CIDG wishes to eliminate the longstanding volume side of the equation, but wishes to pay the same or lower rates than every other BDU who has made volume commitments. Their offer to grandfather existing packaging is not reasonable. As shown on the record already by Bell Media, and again in Attachment 3 of this opening statement, the impacts of such grandfathering on core services will be far from slow and gradual, or slow and modest, as the CIDG alleges, as if somehow a slow and gradual decline were in the best interests of the system in any event.

117 We, of course, need to be mindful that this hearing is not to establish new broadcasting policies and frameworks. It is not about rewriting the VI decision, which is what the CIDG opening statement was about. It is supposed to be to resolve a commercial dispute.

118 CIDG's proposals, if accepted, will have that effect, as the precedent will dramatically change how business is done and damage the health of all Canadian Analog Category A and C services, whether owned by Bell Media or other broadcasters, vertically integrated or not.

119 This is not the way to fundamentally alter how packaging will be done, given what is at stake.

120 The other BDUs in Canada who have signed our agreement -- all 159 of them -- and it is on the record with the Commission -- understand and accept that unit rates are tied to volume. They believe that they are afforded the flexibility they need. Their acceptance is proof positive that our packaging terms are commercially reasonable and entirely consistent with the VI decision. Indeed, section 2 of the Code draws a direct link between packaging and rates as a commonly understood business principle.

121 The key terms of our negotiated agreements, all of which, as I said, have been filed with the Commission, are as follows:

122 First, the cornerstone principle is that the BDU agrees ahead of time to set packaging of our Analog Category A and C services, which ensures the volume of subscribers that these core services need to maintain their high quality and Canadian programming commitments. Repackaging of them is permitted with our consent, and in exchange BDUs receive set wholesale unit rates.

123 Two, significant packaging flexibility has always been provided for our Digital Category A and B services. Nothing at all changes in this regard.

124 Three, nominal rate increases have been requested for our non-sports specialty services -- and I appreciate that that is for FOA, but the Commission did ask an interrogatory question on that earlier on.

125 Four, we asked for rate increases and penetration assurances for our Category C sports services that reflect current penetration levels, the popularity of these services, relevant market comparisons, historical rates, and the new regulatory environment for Category C.

126 None of these terms prevent the CIDG members from offering more choice. Here is why.

127 For our 12 English Analog Category A and C services -- again, 13 with RDS -- packaging changes can be made either during renewal negotiations or during the term of the agreement.

128 Let me stop here for a second. CIDG mentioned -- Mr. Mayrand mentioned that our agreement says: You must package our services as they were packaged on January 1, 2011.

129 Yes, the contract that we sent to them says that. This is a contract going back to the beginning of the negotiations. We have said time and again on the record -- and we have told the CIDG: Come to us with the packaging changes you want to make, and let's have a discussion. If we agree, that's what gets locked in for the duration of the contract for these 12 Analog Category A and C services.

130 We have done it with other BDUs, we are prepared to do it with the CIDG.

131 In fact, as I say, many BDUs have done so by working together with us as partners. We consented because it was commercially reasonable to do so and, in aggregate, beneficial to us and the BDU. This happens all the time as part of the commercial relationship between a product supplier and a distributor. But CIDG has been unwilling to engage in this manner.

132 Now, we also have 14 Digital Category A and B services. For those, significant flexibility, as I said, has always been provided. The key point is, all CIDG members take advantage of that already.

133 We have taken a look at every single one of their packages. They are permitted to do theme packaging services, they offer them. They are permitted to offer them standalone, they do that. They even have "pick a pack" rights. None of them have used those "pick a pack" rights in English Canada, but our contract gives them "pick a pack" rights for our 14 Digital services.

134 So we are not locking in packaging for all 29 services, as this opening statement says of CIDG.

135 The third point is that BDUs can flexibly package most of the other English, French, multicultural and foreign specialty and pay services available in Canada, which number over 400.

136 A very small number of our agreements -- four in total -- vary slightly from the others, and we are prepared to offer similar modifications to the CIDG members.

137 None of these modifications, however, alter the cornerstone principle: set packaging; set rates.

138 You have heard this morning, quite clearly, that CIDG considers our terms to be unacceptable.

139 In response, we offered an alternative -- a penetration-based rate card, or a PBRC, which offers flexible packaging at flexible rates. This allows BDUs who deliver high penetration to pay a lower rate, and those that offer lower penetration a higher rate.

140 This is a commercial practice firmly established across virtually all industries, and especially media in Canada and other developed markets.

141 The CMPA, in its submission, noted that:

"Typically, these apparently competing interests..."

142 -- and they were referring to the balance between more consumer packaging choice and their desire to have a wide range of quality Canadian services --

"...have been reconciled through packaging arrangements which balance flexibility with price through a 'make whole' approach."

143 The PBRC option provides CIDG members with unprecedented packaging freedom, while providing our services with the revenue stability they require in order to fulfil their obligations under the Act.

144 CIDG members that choose this approach could repackage services in various ways without our consent, as long as penetration didn't drop below 50 percent. Any penetration below 50 percent would be devastating to the survival of core Analog Category A and C services.

145 We were actually encouraged a few weeks back to read in a recent article the comments of TELUS' Ann Mainville-Neeson, speaking on behalf of CIDG, who also endorsed the PBRC concept. The article is Attachment 4.

146 In the article, Ms Mainville-Neeson stated that:

"...consumer demand for more flexible programming packaging is driving a need for carriage agreements that will allow channel owners to charge broadcast distributors based on penetration levels."

147 A further quote:

"...the CIDG..."

148 -- not just TELUS --

"...is open to considering a penetration-based rate card."

149 And a further quote:

"...neither TELUS nor the CIDG objected to the principles of Bell's proposed penetration-based rate model..."

150 In that case, Commissioners, if that remains the case, all we need is for the Commission to confirm the appropriateness of the concept, and we can move to FOA.

151 Now, to be fair, the article does note that Bell Media had not yet provided BDUs with proposed rates under the PBRC model, and that is true, other than for one service. But this, of course, is an issue for the subsequent FOA.

152 CIDG members now have two options available to them. Option 1: set packaging terms in exchange for set wholesale rates, and our willingness and commitment to discuss any packaging changes they wish to put forward.

153 Option 2: flexible packaging terms, with flexible rates.

154 And we are prepared today, yet again, to offer further adjustments to each model. That is what the blue appendix is about.

155 Curiously, in direct contradiction to CIDG's public endorsement of the PBRC concept, the CIDG's members have rejected our proposals thus far. They still seek flexible packaging terms, but at the set rates that other BDUs have received.

156 They refuse to make packaging commitments for the most central of Canadian specialty services, while routinely making similar commitments to U.S. specialty services who contribute nothing back to the Canadian system, and who, in fact, continue to grow at the expense of Canadian services.

157 Their objective can only be to achieve what they could never do in a commercial negotiation -- lower content costs, increase average revenue per subscriber via their complete retail pricing freedom, and thus expand their profitability, all without consideration for the potential impact on viewers, programmers, producers, or the system as a whole.

158 Issue 2 -- Non-linear rights.

159 You have heard CIDG ask for the ability to exploit our specialty programming on non-linear platforms, and in their initial complaint they asked to do so for free.

160 None of the agreements that Bell Media has entered into include non-linear rights, nor do they have to. Where Bell Media has rights to distribute programming on non-linear platforms, we are acting as an unregulated program rights supplier, no different than Universal, Disney or E-One. These rights are separate from linear rights.

161 We recognize the appeal of non-linear services to our viewers, and we understand their attractiveness to our BDU partners. We have an obvious commercial interest in making them available on commercial terms, and will do so in the future. At that time, we will make them available to CIDG's members on reasonable commercial terms.

162 And if we do that, the VI issue is put to bed. The VI decision simply says: If -- if -- not you must, but if you distribute on non-linear platforms regular TV content, you cannot do so exclusively.

163 We will not, so that puts to bed the vertical integration issue, which this was about this morning.

164 I am happy to talk about the TV ad about the Canadians on our DS, but we can do that later.

165 Issue 3 -- Pricing incentives.

166 Throughout the spring and summer of 2011, as we were successfully negotiating with most BDUs, certain of them refused to come to the table in any material way. As a result, we sought administrative charges or re-contracting fees from those BDUs who delayed signing new agreements, who refused to accept market terms, and who continued to benefit from carriage of our specialty services, in many cases for 15 months now, and counting.

167 The result is to grant a pricing incentive to those BDUs who have not delayed.

168 It is entirely commercially reasonable to offer price incentives to those parties who do not delay, cause us financial risk and increase our administrative costs.

169 Issue 4 -- The FOA process.

170 Section 12 of the BDU Regulations requires the CIDG members to engage in FOA on an individual basis.

171 While CIDG presents itself as a group, the reality is that each member has its own unique self-interest and they are only acting as a group for the purpose of negotiating with Bell Media.

172 While we have willingly dealt with CIDG for the convenience of this expedited hearing, we feel that the formation of the group has impeded, not facilitated, negotiations. We believe that individual negotiations between our business people and their business people leading up to FOA present the best chance for market settlements.

173 Mr. Chairman, Vice-Chairman, Members of the Commission, while this hearing is to resolve a commercial dispute, it is also broadly about what is best for the viewer and the system, and for that you have to look to that Act.

174 Section 3(1)(s) of the Act provides that, as a programmer, we at Bell Media should, to an extent consistent with the financial and other resources available to us, contribute significantly to the creation and presentation of Canadian programming, and we want to do that. But the financial resources upon which we depend to meet this obligation flow from the wholesale rates and packaging terms provided by BDUs.

175 That is why section 3(1)(t)(iii) imposes an obligation on BDUs to provide reasonable terms for the carriage, packaging and retailing of these programming services.

176 That certainly cannot mean that CIDG members can unilaterally do whatever they want with the Analog Category A and C services, which are at the heart of the system.

177 We actually question whether two CIDG members -- TELUS and MTS -- fulfil those obligations today.

178 The Act itself recognizes, as I said, that carriage, packaging and retailing are inextricably linked. So, too, does the Code. Our two proposals, set packaging for set rates and flexible packaging for flexible rates, as well as the further modifications that we are presenting today, have been designed to perfectly reflect the specific guidance in the Code.

179 So our requests, Commissioners, are this:

180 That you find, one, that Bell Media's set packaging terms and PBRC proposals are both commercially reasonable and consistent with the Act and with the Code. As such, in FOA, it would be appropriate for Bell Media to make wholesale unit rate offers based both on the set packaging terms and the PBRC.

181 Two, the wholesale unit rates imposed at FOA should apply retroactively, together with interest.

182 Three, confirmation that Bell Media is entitled to license non-linear rights separately from linear rights, and to seek separate commercial terms for them.

183 Four, that we are entitled to provide pricing incentives to BDUs who sign early, and to request re-contracting fees and other administrative charges from BDUs that unreasonably delay.

184 And, five, FOA should proceed with each BDU -- and we would count the CCSA as one -- individually, but on a concurrent basis.

185 Thank you, and I would be remiss if I didn't end by thanking Commissioner Cugini in her last hearing for her contributions to the media and communications systems over the years, and on behalf of all of Bell, thank you.

INTERROGATOIRE PAR LE CONSEIL

186 THE CHAIRPERSON: Thank you very much.

187 Before we get into anything substantive, I want to ask the CIDG group, have they seen the additional Bell Media concessions before?

188 MR. MAYRAND: The answer, Mr. Chairman, is no, certainly not this document.

189 I just want to make it clear that we underwent mandatory mediation prior to coming to this hearing, and we are not at liberty to discuss anything that might have been explored or discussed during that mediation.

190 But, certainly, the document that was handed to us today is new, and we are a little surprised that we would get this at the opening of the hearing.

191 I think we would be happy to comment on it in writing. That would probably be the most appropriate way to do it, because it contains specific comments on specific affiliation terms and, as you know, this is a public forum, and other distributors, including other vertically integrated distributors, are listening.

192 Now, if this document has been put to us, we certainly would want to have the ability to put to the Commission, and to Bell as well, a document on packaging that would constitute our current view, as we speak, of what the packaging solution and trade-offs and compromises might be.

193 Certainly, we don't think that it would be appropriate for just the Bell concessions, as they are called, which are on the table here.

194 We are prepared to do that right now.

195 We are prepared to file, as well, what would be the exact wording that could be considered for the making of the availability of non-linear programming rights.

196 THE CHAIRPERSON: I feel compelled to give you folks the opportunity to respond to this, and to come up with your bookend, so to speak, given that this is Bell's bookend; I am not prepared to delay this proceeding indefinitely.

197 We have scheduled two days for this hearing, today and tomorrow. I am prepared to consider, subject to everybody here agreeing -- and the Commission agreeing after that -- to adjourn this hearing at this point, allow you folks to go off for the rest of the day and caucus, and come back with something tomorrow morning, at the same time, and if you choose to talk to the Bell folks and get clarity on this, that is purely amongst yourselves, I guess.

198 But when you ask the CRTC -- when both parties ask the CRTC to get involved in this type of dispute resolution, it is a public proceeding, and we attempt to be as transparent as possible. You have come to us because we are that vehicle for transparency, as well.

199 So, in the spirit of fairness, first of all, I would ask each one of you whether you think that is reasonable, to go away and come back tomorrow with your response to this, first of all, because there is no point in testing these things when someone hasn't had the opportunity to digest them.

200 MR. BIBIC: Mr. Chairman, if I may, we actually put this forward --

201 First of all, the issues here -- there are no new issues. They all touch on the four issues that are on the table. If you look at the second page, "Non-linear Rights" -- we make the commitment that I say in the opening statement, which is to make them available at the same time. So there is nothing new there.

202 If you look at what we say on pricing incentives, I don't think that CIDG needs too much time to agree to --

203 Well, it says, "If agreement is reached on packaging, we are prepared to waive the pricing incentives." So that means that the magic lies in packaging.

204 If you look at packaging, we are really not adding any new terms. There are still links between set packaging and the PBRCs, and we are talking about the four clauses that are at issue.

205 We didn't mean to create this stumbling block. We were putting this forward in good faith. We would really rather not adjourn this hearing. If that is the price to pay for putting this forward, I would actually prefer to withdraw it and just have the decision made on the basis of what is already on the table.

206 THE CHAIRPERSON: You have had the flexibility of sharing this with the CIDG group on numerous occasions, whether through mediation or at some other point in time. You chose not to, and tabled it here.

207 We, the Commission, haven't had a chance to look at it either. You are offering concessions. I am not sure how far you have gone in these concessions relative to the other end. I think that we need some time here, as well, to understand them and test some of these things.

208 You are obviously indicating that they are concessions; the question is whether they are full and complete concessions to what CIDG wants, or whether there is still an area of dispute, and it is important for us to get a handle on that, as well.

209 MR. BIBIC: Then we will withdraw the concessions, and let's proceed with the hearing.

210 I think that Bell has the right to withdraw a concession that it is otherwise prepared to make, since it's in our control. I think that is probably the best way, because this should not sidetrack the discussion that we are supposed to have about the commercial reasonableness of the terms we have already put forward to the CIDG, and we would rather have the hearing on that case.

211 THE CHAIRPERSON: Let me hear from CIDG.

212 MR. MAYRAND: Mr. Chair, I guess, certainly, my initial concern was that this document was clearly titled "Additional Bell Media Concessions", and as you have aptly pointed out, there were many opportunities for this to be discussed between the parties before this public hearing.

213 Our key concern, I think, would have been that this document would be considered to be placed, somehow, on the record, be it on the confidential record of this proceeding.

214 I hear Mr. Bibic now saying that, after handing it over in multi-copies to all of the Commission and staff, he wants to withdraw it. If that is his call, and if you are happy with that, we can't object to Bell withdrawing what it has attempted to place on the record.

215 If that is the case, we are certainly prepared to proceed further with this hearing, without this document. If the Commission feels that there is any interest in considering this document, my only point earlier was that we also have a document that would respond immediately to these things that are mentioned as Bell Media concessions in this document.

216 THE CHAIRPERSON: When you say that you have them, are you prepared to put them forward today, as well?

217 MR. MAYRAND: Absolutely. We could do that right here and now.

218 THE CHAIRPERSON: Okay, because you have not attached them to your opening remarks.

219 MR. MAYRAND: No, we have not, and very simply because we didn't think it was up to us to introduce any new document, position or evidence, unless this was fully discussed and agreed as between the parties and the Commission.

220 THE CHAIRPERSON: But you do have such a document that you are prepared to distribute?

221 MR. MAYRAND: We do. As I mentioned, we have two documents which, serially, would address the packaging flexibility item that is on this additional Bell Media concessions document of this morning, and the non-linear rights, on the second page of the Bell document.

222 THE CHAIRPERSON: Just so I understand, you both waited until the opening of this proceeding to table new offers to each other.

223 MR. BIBIC: I think I definitely agree with Mr. Mayrand. He said when he first responded to your question on this document that he wasn't at liberty to discuss what we discussed at mediation, and the same goes here.

224 So, to answer your question, we kind of need to get into some of the mediation discussions, which are confidential.

225 THE CHAIRPERSON: Okay. Let me suggest this. Can I ask the CIDG group to provide us with the material that they are prepared to table here, and to provide it to Bell, as well, after which we will take a recess for half an hour, and we, the Commission, can deliberate over this issue, as well.

226 At least both of you will have exchanged revised offers to each other, amongst yourselves, and we will see where we go from there.

227 We are adjourned until 10:30 a.m.

--- Suspension à 0954

--- Reprise à 1032

228 THE CHAIRPERSON: CIDG group, have you got any comments at all to make?

229 MR. MAYRAND: Mr. Chairman, I don't think so, other than to say that, you know, we await to hear what the Commission has decided to do in connection with these documents. We are definitely prepared to carry on with the hearing and are fully prepared for that.

230 If the Commission has decided that there is merit in considering the documents, that you have looked on both sides, obviously they go to very specific affiliation terms and it would seem to us that we couldn't do that in an open forum.

231 So you might consider one of two things, having an in camera discussion at the end of the question periods and cross-examinations to deal with that or perhaps written comments by each party filed in confidence.

232 THE CHAIRPERSON: Okay.

233 Bell, any comments?

234 MR. BIBIC: We would agree with either one of those options -- well, the three, in the proceeding.

235 And, two, if there is a discussion on the specific terms, we are prepared to address that as well in camera at the end, no problem there, or in writing.

236 But we are prepared to address the CIDG document as well at the appropriate time. No issues there for us.

237 THE CHAIRPERSON: Okay. The Commission has deliberated, and with consultation from legal counsel, we are prepared to go forward at this time.

238 We will accept the submissions of both parties and I fall back on what you said, Mr. Bibic, with regard to the blue sheets being able to be tested and you would not be religiously married to the fact that if there is something there that we want to extract and get on the record that we can.

239 So there won't be any in camera. I'm not sure why CIDG would be that concerned about it anyway. I can see the concern by the Bell group more than anybody else since they have those contracts as well. So we will continue on and we will see where it all takes us.

240 MR. BIBIC: Thank you, Mr. Chair.

241 THE CHAIRPERSON: Okay. We will continue with the examination by the Commission and I will lead off. I'm sure all my Commissioners have some questions as well.

242 I actually want to go back one step and get an understanding, I guess from the Bell group initially.

243 Prior to Bell acquiring CTV, CTV entered into their own agreements with BDUs, including members of the CIDG group, and what I would like to know is whether these conditions that seem to be being debated here today were in those agreements as well, and that is: Could the BDUs repackage services without seeking the approval of then CTV or even the Bell Media group to the extent you had media holdings then without getting approval from them?

244 MR. YABSLEY: The answer is yes, we had set packaging terms which did the same thing with the members of CIDG. In other words, they agreed to have the same packaging and we got the volume commitment which allowed us to offer the unit rates.

245 THE CHAIRPERSON: So if they chose to want to repackage into themes or whatever, they would have to seek CTV's approval?

246 MR. YABSLEY: That's right

247 THE CHAIRPERSON: Okay.

248 I will ask the CIDG group, first of all, to comment on that, if that is in fact the case with your members.

249 And secondly, did you have any agreements with any other media companies, content providers, where you had that flexibility without getting their approval?

250 MR. MAYRAND: I will ask certainly Jean-Pierre and Jennifer to provide insight on that. First, Jean-Pierre, if you want to go ahead.

251 MR. CAVEEN: Yes. Actually, I would say that even with CTV we had set packaging language in our agreements but we also had the possibility to launch additional packages, theme packs, I would say, for Cat A services, without prior approval.

252 THE CHAIRPERSON: This is Cat B services?

253 MR. CAVEEN: No, Cat A.

254 THE CHAIRPERSON: Cat A services.

255 MR. CAVEEN: Yes, the analog services.

256 THE CHAIRPERSON: So you were able to repackage your theme packages without their approval?

257 MR. CAVEEN: We would have been able to add theme packages or an additional offering with theme packs without getting prior authorization as long as we maintained the distribution of the existing package, our big analog pack.

258 THE CHAIRPERSON: So if you maintain the existing one, you could actually offer other theme packs with the same services in there?

259 MR. CAVEEN: That's correct.

260 THE CHAIRPERSON: Does that cause you folks a problem, Bell?

261 MR. YABSLEY: Those rights weren't exercised, number one.

262 THE CHAIRPERSON: But they had the right to do it.

263 MR. YABSLEY: They had the right to do it; correct.

264 THE CHAIRPERSON: Under agreement.

265 MR. YABSLEY: Under agreement.

266 THE CHAIRPERSON: Okay. And now you're saying they shouldn't have that right?

267 MR. YABSLEY: Right. What we have seen is -- with the digital evolution and the damage that we've seen by theme packs, we have tightened up the language; correct.

268 THE CHAIRPERSON: Can I ask the Bell group whether -- I don't know what it's called -- Bell TV has the flexibility to create their own theme packs with products that come from either the Bell family or other providers without getting approval?

269 MR. BIBIC: Bell TV has signed on to the terms to which CIDG objects.

270 What happened in the case of Bell TV is, as I mentioned in my opening statement, there was a discussion with Bell TV, between Bell Media and Bell TV, as to how Bell TV wanted to repackage.

271 And the reason I bring this up is simply that you may know that on February 19 -- so a month ago -- Bell TV initiated -- launched a new form of packaging. That required the consent of Bell Media. There were accommodations made on both sides.

272 Once that was agreed to, Bell TV agreed that for the duration of the affiliation agreement no changes would be made without Bell Media's consent.

273 Interestingly -- you know, I have the flyer here -- but interestingly, what Bell TV did is it moved towards packaging that looks more like what the cable companies are doing. We can explore that.

274 But to answer your question rather directly, Bell TV has signed on to the terms to which Bell media objects.

275 I would also -- in the spirit of being open with you, there are four agreements that I said where there are minor adjustments. Bell TV's would be one of those. But they don't affect the cornerstone principle, set terms going forward.

276 THE CHAIRPERSON: Let me ask, beyond the Bell Media family, Bell also distributes products that aren't part of the Bell family. If you want to redistribute some of those products from whomever you acquire them, do you need their pre-approval to repackage them?

277 MR. BIBIC: I distribute -- you have to forgive me here, we distribute 400 or so services, so I can't answer with certainty for all 400, but I can assure you that there are many services were we need consent, and including some major U.S. services, and we can't, on the Bell TV side, move packaging around without getting their consent.

278 Now, I can't go further than that because I just don't have all the details, but I can tell you I know of examples, yes.

279 MR. CRULL: If I may, Mr. Chairman, because a big part of my history was running Bell TV and I can tell you that as a distributor one of your primary goals is to move packaging around so that you can lower your content costs.

280 It's a massive objective of a distribution operator and there is no question that distribution agreements, both contractual commitments and regulations, prevented packaging changes of this sort. So absolutely, Bell has many agreements that would prevent Bell TV from doing that.

281 And then just secondly, to clarify, if Bell TV wants to change its packaging, as Mr. Bibic said, they do have to come back and get consent.

282 THE CHAIRPERSON: So not looking at the foreign content but the Canadian content that you purchase from presumably in some cases competitors, in some cases partners -- you're symbiotic -- do you need their approval in order to repackage?

283 MR. BIBIC: There are cases with some important services that would be very well known to all of us where we would have to agree to minimum volumes, minimum revenue guarantees and status quo packaging, which means we have to keep the packaging we have agreed to unless we get consent, absolutely.

284 THE CHAIRPERSON: Are there other ones where you don't and you can unilaterally alter the packages at your discretion?

285 MR. BIBIC: For the Cat A's, I don't know.

286 THE CHAIRPERSON: Could you find that out --

287 MR. BIBIC: I could find that out.

288 THE CHAIRPERSON:  -- for later on today?

289 MR. BIBIC: Yes.

290 THE CHAIRPERSON: Please?

291 MR. BIBIC: Okay, I will.

Engagement

292 THE CHAIRPERSON: I want to move on to this notion of pick-and-pay. As you are well aware, the Commission is on record as saying that we are strong supporters of consumer choice and allowing consumers to choose their products that they wish to pay for as well.

293 Are there currently -- we know some, I guess, BDUs, particularly in Québec, who do offer pick-and-pay, and it's on the public record. I mean Vidéotron offers a pick-and-pay package as well.

294 To the extent that -- and I will use Vidéotron since they are public -- to the extent that they actually offer a pick-and-pay service, how are they able to do that and get around the issue of pre-approval from Bell Media for those products that they acquire from Bell Media?

295 MR. BIBIC: So it's just nomenclature. Just so we are all on the same page, what Vidéotron does in Québec and other providers in Québec do, including Cogeco, I believe, is pick-a-pack.

296 THE CHAIRPERSON: Okay.

297 MR. BIBIC: So when you said pick-and-pay, just so we make sure we are on the same terms.

298 THE CHAIRPERSON: Yes.

299 MR. BIBIC: So pick-a-pack. So you get to pick -- you need to buy 10 channels, pick the ones you want. So, okay, if that's the question.

300 MR. CRULL: Yes. I think that in Québec market, you know, there's no question that the Québec market is different and the Act recognizes that there are unique characteristics and we have offered -- the CIDG members in the Québec market do have the ability to do pick-a-pack, as Vidéotron has offered.

301 Our main dilemma, Mr. Chairman, is absolutely that all of these Cat A services are highly penetrated today and are packaged in ways that none of them are below a 70-percent average penetration and they go up to 87-percent penetration.

302 We are very much on the side of the Commission's desire for feedback on customer choice and on CIDG's desires for more customer choice, but we are dreadfully fearful of a penetration decline that would wipe out revenues that are necessary to support the obligations of these services, and we think, Mr. Chairman, that what we are trying to propose is a balanced solution to that.

303 So in the Québec market, where it already exists, Vidéotron committed to our set packaging. So they would not make further packaging changes.

304 We have offered other operators in the Québec market the ability to package similarly.

305 THE CHAIRPERSON: I guess I was always of the belief that a Canadian is a Canadian no matter where they live. What I hear you saying is there is a difference in how Canadians in Québec consume content versus how Canadians in the rest of Canada should consume content.

306 MR. BIBIC: Mr. Chairman, there is undeniably -- and there is evidence on the record we can go through -- undeniably, there will be a potentially dramatic penetration drop, and hence volume drop and hence revenue drop, as repackaging moves along the continuum to, you know, set packaging all the way to standalone. That's undeniable.

307 So when you're talking about allowing pick-a-pack rights in the Québec market, which is a largely Francophone market, for 12 English-language services, it's quite a different financial dimension than doing so in the English-language market.

308 And, you know, in terms of allowing the English market to evolve towards that kind of model, the neat thing is that the penetration-based rate card would allow things like theme packs to evolve, and so the flexibility would be there or more flexibility would be permitted under the penetration-based rate card for CIDG members and BDUs to start modifying their packaging in ways that they felt they needed to do while maintaining the revenue stability that the system needs for these core services.

309 All we are saying is that choice and flexibility shouldn't come at the expense of the regulated system for 30 or so services which are at the very heart of the specialty system.

310 THE CHAIRPERSON: I guess the question is whether there is a differentiation between the system and the individual players in the system, and what I hear you saying is perhaps there is a need to protect the individual players in the system, and I am not sure whether that is what is intended under the Broadcasting Act.

311 MR. BIBIC: Well, let me take a stab at that. So we all know -- God knows I can't be the one kind of giving a lecture on the different categories of services in broadcasting, but in terms of the universe of analog Cat A's and C's in the English language there are 32, 47 if you include the French-language analog Cat A's and C's.

312 So you are talking about 47 channels which are the most viewed. It is not about 12 only. I am talking about 12 Bell Media services because we are here today on a commercial dispute which relates to our services.

313 But if CIDG were to get its way, really what we are saying is that it's fair game and let's put 47 core services at risk and the programmer has no ability on its side to say for these services which are absolutely core, I can't be assured of any stability and we have to give BDUs volume discounts even though they don't deliver the volumes, and we just don't think that that is a balanced system.

314 Now, for all the other services, including our own, that are digital, the CIDG members already offer theme packs and they already offer them on a standalone basis. That is the ultimate in choice.

315 If you want Juicebox from Bell Media, any CIDG member can say to the consumer, go buy Juicebox at this price and that's it, and if you don't want it, don't sign up.

316 MR. CRULL: I would just, if I may, Mr. Chairman -- I think what you picked on -- and I particularly caught your comment that the objective of the Act is to protect the system and not individual players.

317 And what we are absolutely -- we believe we have conclusively illustrated is that repackaging without revenue protection against that will harm broadcasters, producers and consumers, all to just the benefit of the distributor.

318 Having walked on both sides of this fence, I can absolutely tell you that it will benefit the distributor. Viewers will get lower quality programming, less variety, less choice.

319 Broadcasters will be precipitously harmed in the one part of the business, specialty, that actually is healthy in broadcasting.

320 And independent producers will be tremendously harmed because a relatively seemingly small drop in penetration on one of these Cat A services, a 10-percent drop in penetration, if as a business operator I am to hold the profitability level of that channel, I am going to have to take out almost 20 percent of the costs, and any of our programming guys will tell you that channel will not look anything like it does today if you take out 20 percent of the programming costs.

321 THE CHAIRPERSON: But what I hear you saying is the only way to create viable products is for consumers to subsidize them by paying for something that they may not want in order to get the penetration up, in order to sustain the Canadian programming.

322 MR. CRULL: Mr. Chairman, what is curious to me is that today we enjoy a tremendously successful broadcasting system.

323 By the Commission's very own monitoring report that was recently issued, Canadians have the highest penetration of pay television services out of the eight developed countries that are monitored.

324 We have the lowest ARPU, the lowest cost of pay television services, and every Canadian in Canada watches almost four hours of TV a day. Sometimes it shocks some of us, but every Canadian is watching almost four hours of TV a day.

325 The system, with its current structure, is working, and so we are dreadfully concerned that a major shock to the way the industry has always operated, which is to provide Category A services as the Broadcasting Act commands, to provide them with wide distribution, and that is what makes Canadians watch these shows.

326 We produce -- as Mirko said, I want to implore how important these are to our Canadian spend. Of all of our programming spend on specialty, 45 percent of our programming is spent on Canadian services, and as the Commission knows --

327 THE CHAIRPERSON: I am fully aware of it because the obligations are there for them. So I am fully aware of that.

328 MR. CRULL: That's right.

329 So that is massively overindexed compared to where we spend everywhere else. And Canadians discover these programs because we make the channels available in their homes. If they are not available in their homes, they are not going to watch the programs.

330 MR. BIBIC: Mr. Chairman, you have asked a broad philosophical question, but if I could dial it back or reel it back to the narrower issue of the dispute.

331 I guess from a business point of view what we would disagree with is the notion that a BDU can get ultimate flexibility in packaging one of our core services, yet pay the very same rate that 159 BDUs who have stepped up willingly to the volume commitments pay.

332 Now, to achieve the ideal that you are exploring with us, we have put on the table the penetration-based rate card and the concept is rather simple. If the BDU wants flexibility in the packaging to give that customer more choice and the penetration drops, then the unit rate changes because the volumes go down.

333 So we are not standing here saying we refuse to entertain the notion that you put to us. We actually have a model to address it.

334 THE CHAIRPERSON: But you also have an obligation at this point in time that they come back and get your approval as well.

335 MR. BIBIC: No, but on the flexible penetration-based rate card, they would not need our consent for packaging changes. None.

336 THE CHAIRPERSON: Okay. Well, I will come to that with them in a few minutes.

337 I want to come back to the pick-a-pack, as you call it, as it is obviously referred to.

338 In Québec, what I heard you say is there is a pick-and-pack capability that can be done unilaterally by Vidéotron, I guess, and by Bell as well?

339 MR. BIBIC: So the answer to that is both a yes and a no. So all the providers in Québec that I am aware of, certainly the major ones, offer pick-a-pack models in Québec, but I believe that if you want to change your packaging structure going forward you still need the consent. Is that right?

340 MR. YABSLEY: If we are dealing with pick-a-pack, the Québec market, we have acknowledged and accepted that. I don't believe that is the issue.

341 THE CHAIRPERSON: What I am trying to understand is from Bell's perspective you offer pick-a-pack in Québec?

342 MR. BIBIC: Yes. So does Cogeco. So does Vidéotron.

343 MR. YABSLEY: And we aren't objecting to others doing that.

344 THE CHAIRPERSON: Do you offer it in Ontario, Bell?

345 MR. BIBIC: No.

346 THE CHAIRPERSON: You don't offer it in Ontario?

347 MR. BIBIC: No.

348 THE CHAIRPERSON: So if a customer calls you up, Bell Canada, and says, my brother's got it in Montréal, I want it in Toronto, the answer is we don't offer it?

349 MR. BIBIC: It's not offered. In fact, no BDU offers it in Ontario. There was a Rogers trial that ended, in London, Ontario, but that's it.

350 THE CHAIRPERSON: Okay. Can I ask Cogeco, Mr. Mayrand, you offer pick-a-pack in Québec?

351 MR. MAYRAND: Cogeco certainly offers pick-a-pack in Québec, as described here, on Bell services.

352 Jean-Pierre, do you want to expand on that? And perhaps I would ask other members to comment on that as well.

353 MR. CAVEEN: Yes, we do offer Pick Packs in Québec. It's a minimum of 15 services on top of basic obviously and it goes up by increments, then up to 30 services.

354 THE CHAIRPERSON: And you -- sorry, go ahead.

355 MS SALMON: We do not offer pick-a-pack in Quebec yet, but it certainly would be an option we want to keep.

356 I wasn't aware that Rogers' trial was over. I am actually a subscriber in the London, Ontario, Rogers market and I do subscribe to pick-a-pack in London.

357 THE CHAIRPERSON: Okay. Cogeco, do you not offer the service in Ontario?

358 MR. CAVEEN: We do not.

359 THE CHAIRPERSON: You do not, okay. Have you asked to offer the service in Ontario and been denied?

360 MR. CAVEEN: It has been very difficult to get the rights from CTV. I mean we never had those rights in our old CTV contracts. There's beginning to be an opening now with certain service providers for full flexibility but it comes with varying rates.

361 THE CHAIRPERSON: Now, CIDG, you want the flexibility to create packages or repackage during the term of the contract, and Bell is basically saying no at this point in time.

362 Do you have agreements with other content providers that allow you to do that without getting their approval?

363 MR. MAYRAND: Yes, we do.

364 THE CHAIRPERSON: Are they Canadian programmers?

365 MR. MAYRAND: Yes, they are.

366 MR. CAVEEN: If I may add a precision. Even in some U.S. it is true that the U.S. services, the language, the packaging language is usually more restrictive. However, it is usually restricted to you shall not move me from where I am. It doesn't prevent us necessarily from adding, you know, putting that service in different other packages.

367 MS SALMON: I would like to also offer that the language that we tabled today with you, we would like to be clear that this offers more assurances to Bell for their programming services than we offer to any other Canadian programming service.

368 THE CHAIRPERSON: Okay.

369 Bell, just to pick up on what I just heard, you are still opposed to the CIDG group being able to create additional packages while maintaining the package that already exists for the consumers?

370 MR. CRULL: Under our set packaging for the set rate, we require a negotiation to agree and lock in packaging changes.

371 And as we have done with many BDUs, Mr. Chairman, they came to us and they said we want make changes, we want to introduce new packages, and we were able to negotiate -- where there were downward pressures on our services, we were able to negotiate equitable offsets and so we made packaging adjustments and then we set them.

372 See, the whole purpose of -- and Mr. Caveen mentioned that yes, you do have the capability to do pick pack and to do other packaging changes, but it is a variable rate, and so we have moved to recognize that.

373 I think if I simplify our set packaging, it's because the only way we can offer a set rate for the term is to have some comfort of some volume stability, and absent requiring them to sign a contract that gives us a volume commitment, our only comfort can come from saying don't change your packaging.

374 And so if you do want to change your packaging, it is very common practice and it happens all the time at the beginning of contract negotiations and in the middle of a contract that we negotiate changes that are equitable for both parties.

375 But in order to allow for theme backpacks to be added, as have been proposed, we would require a move to the penetration-based rate cards.

376 Because whether -- and I recognize and appreciate Mr. Mayrand's opening statements that maybe the penetration won't fall as we are concerned. We have experience, we think, with CIDG members and with others and operating a BDU. We have great experience of how a BDU's behaviour and packing changes can cause dramatic and rapid changes in penetration. But I don't think I will dispute that maybe the packaging changes.

377 Because they have admitted they don't have any that are immediately in mind and it is going to take time to design them. You know, and frankly, interestingly, the term of this contract we have mentioned, with the complexity of what is before the Commission and the parties, we are willing to discuss a shorter term where it is not likely that many of the packaging changes would even, you know, be dramatic in the term.

378 But rather than us guessing and them saying, no, if we introduce theme packs and if we grandfather it won't be dramatic as you fear, and me saying well I think there is evidence that it will be dramatic, the penetration-based rate card is then a perfect solution because their rate doesn't change if penetration doesn't change under that rate card.

379 THE CHAIRPERSON: Can I hear from CIDG with regard to their views on the rate card, the penetration-based rate card?

380 MR. MAYRAND: Certainly, Mr. Chair.

381 Let me first preface our remarks by noting that all we have on the record at this time on this penetration-based rate card is a general concept with a curve for one of the Bell services.

382 Now, that is all we have to discuss here as opposed to having full language and full terms and conditions for what Bell describes as the set packaging model, and which we would describe ass being the traditional affiliation agreement model, which they have used extensively in the past.

383 Now, on this PBR model and based only on what we have on the record, which is very little indeed, we are still able to determine three very very important fundamental flaws with this -- what is touted here as a great alternative.

384 The first flaw is that, you know, this model actually stops at 50 per cent penetration. That is rather odd, because it is a penetration-based model. Why does it drop dead at 50 per cent?

385 Second, it is a model, if we look at the curve that has been provided to us as an example, for just one of the I think 12 services to which this model would apply. You know, we can see that it is not just a make whole kind of curve, but it is more than double make whole. And it grows increasingly steep as the penetration drops.

386 And I think Bell has made no mystery that in fact in that model what they are seeking is compensation not just for the lower subscription revenues that go with lower penetration, but compensation as well for lost advertising revenues that they think they would suffer as a result of lower penetration.

387 So clearly, that is a huge problem. And if the Commission does the math on that particular example that was provided by Bell, which is really all we have to work on on the public file, and does a similar model -- and we have been told, you know, this is as good as an illustration as you will get for that time -- but if the Commission works it out for all the 12 services that would be under this wonderful alternative, you will find that the fees are so extraordinarily high and increasingly high as you go down the penetration table that they are punitive.

388 THE CHAIRPERSON: But we are not here to discuss the fees, the fees are for the next round.

389 MR. MAYRAND: I understand that.

390 THE CHAIRPERSON: So I understand what you are saying --

391 MR. MAYRAND: I understand that, I am just discussing the model.

392 THE CHAIRPERSON: And that is what I am interested in, is the model.

393 MR. MAYRAND: And thirdly, our understanding is that this model is, again, a take-all or leave-all model. You know, for those services to which it would apply, it has to apply to all the services or to none.

394 MR. CRULL: Mr. Chairman, if I may?

395 THE CHAIRPERSON: Yes, if you want to comment on it, fine, but I have some specific questions on what he just said as well. So maybe if I ask the question you can then elaborate and add whatever you want to it.

396 I would assume that the 50 per cent penetration was simply an example on the model and that is for discussion at the later stage anyways. I am not here to sort of discuss whether the floor should be there, what the numbers should be associated with the floor at this point in time.

397 MR. CRULL: Right. Well, we think a floor is absolutely mandatory. And the reason is, again, we are talking about the Category A services that support the vast majority of Canadian spending.

398 And the reason the floor is, in fact, in our internal deliberations -- and I would offer, Mr. Chairman, that we created the PBRC voluntarily and with a real willingness to be creative.

399 In our internal deliberations we would have set the floor much higher for the protection of the business, but went to 50 per cent to provide a lot of range. These services are all in 70 per cent or more of the households today.

400 I don't think anybody in the system would feel that it is acceptable for Category A services to fall to 50 per cent of Canadian households when they average 75 per cent today.

401 THE CHAIRPERSON: But isn't that a decision that consumers should make?

402 MR. CRULL: Well, the reason is because -- and there has been extensive research on this, the reason is because the cost of that channel, we really did and we are willing to be open kimono on our math, and it is not a make-whole. In fact, Mr. Mayrand suggests it is more than make whole, and we are below our neutrality point.

403 But what happens in the curve is the math, at its extreme, I think everybody would understand. If I spend $80 million programming the Comedy Channel and one subscriber has it, at its extreme on the PBR it is $80 for that customer if I want to break even and if I wan to make anymore.

404 So then when you work your way down the curve -- there is a mass market effect of programming -- and when you work your way down the curve, at 50 per cent the curve starts to get really steep. And we just don't think it is acceptable for the system.

405 Now, we also think in a decision of a change that is of this dramatic magnitude we really suggest incorporating some further flexibility than set packaging, but doing so in a controlled manner. And that is why the 50 per cent floor is a very important principle.

406 THE CHAIRPERSON: Okay. The issue of advertising revenues?

407 MR. CRULL: Well, again, when you look at the revenues available, as the Act says, that to the extent of the resources available, the revenue available, we need to support Canadian spending.

408 Revenues from these services come equally, it is almost 50/50, and depending on the services, from subscriber revenue and advertising revenue. And what the Commission -- I would implore the Commission to appreciate is that if the service isn't in the home, it can't be watched.

409 And that most of us don't drive home at night and say, I'm going to watch Comedy Channel tonight. Most of us surf. And so these Canadian channels have to be available to get the viewing and to get the advertising dollars.

410 And in the simple premise that a viewer -- we would say that a viewer of Discovery Channel today who enjoys Discovery Channel, and it is currently in 75 per cent of Canadian households, we would say that that viewer shouldn't be harmed if the penetration drops by 10 per cent. It is currently 7.5 million households. If it drops to 6.5 million house holds, we think the same programming should be available.

411 And, Mr. Katz, if we don't recover the advertising that is lost from this model, then we are going to have to cut programming, and that will harm the 6.5 million remaining viewers.

412 And, you know, there has been extensive work and I know I have shared in various forums years of work. Packaging flexibility for distribution services isn't a new debate in our industry and there has been years of work on this topic. And it was found that that this kind of packaging flexibility without the revenue make wholes would be very harmful to consumers.

413 THE CHAIRPERSON: But getting back to the advertising. Where is the skin in the game I guess from the content provider's perspective if things change and people just don't watch certain specialty programming because the world has evolved and what was on one channel is no longer as relevant?

414 What you are proposing here is there is still a mandatory obligation to -- I won't call it make whole, because you're saying it is not make whole, but certainly subsidize the system when in fact the eyeballs are gone, people don't want to watch it. But yet, there is still an obligation under your proposal to continue to pay for it.

415 MR. CRULL: So if I may direct the Commission to Tab 13 in our deck of the filings that we have already made, Mr. Chairman, that presupposes that a customer who doesn't have the service in their home doesn't want to watch it.

416 And I would like to use an example. And this would apply to every single one of our Category A services. But TSN, so highly valued, highly watched, highly appreciated specialty channel. That service is in 87 per cent of Canadian homes today.

417 And we looked at the monthly viewing and we provided a table on this for all of our Category A services. Ninety-three percent of those homes watch it every month. And we did this, I would tell the Commission so you are aware, it is a half hour of viewing or more. So we didn't look at casual just flipping through the channel. Ninety-three percent watch it for a half-hour or more.

418 So this means that every single Canadian household in English Canada is at that 81 per cent viewing, yet one of the distributors, as you can see on the CIDG, packages it in such a way and isn't supporting the channel such that it is in a much smaller per cent. And I don't know if in the public version that number is available, so I won't say it. But I think the bar illustrates.

419 So, Mr. Chairman, even for sports, if it is not made available to viewers, then they don't watch it. But when it is available in the package these are watched. And I think it is far unfortunately, and others who have studied this, it is far too simplistic to say with a range of 400 channels that viewers really know what it is that they watch and what they want to watch and that they are going to select it.

420 And we are just saying for a very small subset of vital Canadian services that we need to be far more cautious than we do with the other hundred of channels.

421 THE CHAIRPERSON: Okay.

422 MS MAINVILLE-NEESON: If I may respond to some of that.

423 First of all, it is clearly in a theme pack environment which consumers love. It is a model that has been adopted by some CIDG members and is being adopted. So a simple very small basic package and then customers choose the themes that they want. So they still have discoverability, they may know one of the services within that theme.

424 For example, in a theme pack of sports, they know TSN, they are also going to discover the other sports-related services within that packet.

425 Similarly, in other theme packages there is still that discoverability. They know one service that they want to subscribe to, they discover the other ones around that theme.

426 The theme pack model obviously is one that allows consumer choice. Consumers are choosing at a level that is somewhat lower than what Bell would like for its Category A services.

427 However, they are choosing other services, the Category B services, at a higher level than what is seen on the traditional cable model where you have tiers and your diginets, your new services are not as penetrated because it does require a lot more consumer expenditure in order to reach that level where you can purchase the diginets.

428 So first off, the model, the PBR model is not a solution for some services which offer our systems within the CIDG, that offer a theme pack model because of that floor. That floor makes the PBR model completely inaccessible for a service like TELUS where we cannot reach 50 per cent of our subscribers because consumers are not choosing at that level.

429 So that leaves the set packaging terms, which are on the table, and which we are perfectly willing to work with and have simply some changes that we would like and changes which are quite reasonable.

430 Let's recall that CIDG has the same incentives with respect to packaging that we had before in our original agreement and agreements before. We want to sell more services Our incentives have never changed.

431 However, with vertical integration, other incentives have changed and that is why some of the differences in this contract, which was adopted by 80 per cent of the subscriber market, so the BDUs that represent 80 per cent of the subscriber market are by and large the vertically integrated companies. They have no problem in agreeing up to the high floor of penetration that Bell is requiring.

432 However, those CIDG members who want to provide choice at affordable rates for consumers are not able to accept those terms.

433 THE CHAIRPERSON: Okay.

434 MR. MAYRAND: Mr. Chairman, could I add just one brief comment as well?

435 I think it is critically important, because there was some discussion of what packaging flexibility was allowed in earlier CTD agreements with any number of distributors, including CIDG member distributors, and there was no CIDG at that time.

436 And we realized that there were certain things that were there that had been clawed back, allow me the expression, in the proposal that we now have from Bell on what they refer to as the set-packaging term.

437 In other words, there are clearly more restrictions in the language than we used to have.

438 Now, there has been a capital change that has occurred in the marketplace since a time when we used to negotiate our agreements with CTV qua a pure-play programmer with no interest, and certainly no material interests in the retail distribution market. That has changed.

439 The whole context in which we are looking at prior approval rights and what we, I think, are totally entitled to describe as veto rights in the language that was proposed to us by Bell, is that we are dealing with vetoes and prior approval rights of our chief competitor in the distribution market. That is an absolutely new dimension that has to be acknowledged and dealt with.

440 THE CHAIRPERSON: Well, that is why I asked the question initially; have the old agreements been changed in such a way as to become more restrictive or not since the acquisition by Bell?

441 And, like I said, I haven't seen the older agreements and maybe it is something Bell can address. But to what extent have you tightened up, if I use the words without being derogatory to any party here, tightened up that agreement by limiting some flexibility as you've gone forward?

442 MR. CRULL: Well, can I say -- and we will provide the old agreements for the record, whether it is confidential or however we should do it.

443 I would tell you what has also changed since the last time that these were negotiated, is we see providers -- if I could direct the panel to Tab 4 -- the unprecedented change is that we do have providers who are dramatically under-serving these services at the time that we were negotiating the previous agreements. So we are talking four or five years ago I suspect would be at the point. We were really dealing with cable operators that had large cable tiers and there wasn't the same exposure.

444 I think we would acknowledge as Bell Media the industry is evolving, digital platforms are allowing providers do to things that they couldn't do before, technically.

445 And what you see here on Tab 4, that precipitous decline in penetration forces us to say that our position has nothing to do with VI, and that is my word against somebody else's word and nobody is going to -- it is purely a business person's understanding of the economics of the business.

446 And in fact, it is a precedent in our industry and in every industry that rate times volume equals the price. And that the kinds of packaging changes that CIDG is proposing is going to be damaging to the volume. And so VI has nothing to do with it, it is the fact that there is a precedent.

447 And the view that it is in their interest to keep penetration high is unfortunately not borne out because they control retail pricing. And when you control retail pricing, first of all, if you look at -- we put on the file as well, when they sell packages that have a fewer number of services, the rate per service is dramatically higher. And it is not a new concept to any of us as consumers. If you buy less as a consumer, you pay a higher rate per unit.

448 And every CIDG member and then non-CIDG members, Bell, Rogers, Videotron, we look at their curves for really big packages versus really small packages all the way down to à la carte for Cat Bs. And the cost per service is dramatically higher.

449 I would just finally --

450 THE CHAIRPERSON: Before you go any further. I mean, I look at this page, but the reality is unless you can tell me why anybody would not want to maximize profit and maximize revenues, I would be willing to listen.

451 But the reality is here it appears as though there may be a reason why consumers either don't want the product, aren't choosing the product as well, because it is a win/win. I mean, when I look back you guys, both of you, are symbiotic; you either live together and survive and thrive, or you both lose at the end of the day.

452 And so I am trying to understand the fact that someone's penetration isn't as high or low, maybe they've got to focus on it, I don't know. I don't regulate these services, I don't want to get into the regulation of these services by any means at all.

453 And the reality is if you are saying that there is a disconnect here and you want to help them, presumably they would be willing to be helped. But if they don't, that is their prerogative I would tend to think.

454 MR. CRULL: Mr. Chairman, I would direct you to Tab 5. And I would just say that I am afraid that the conclusion you have reached is inconsistent with the facts and inconsistent with operations of a broadcast distribution undertaking.

455 TELUS has the highest ARPU of any of these providers. And that is in an environment where when you control retail pricing. The number one dream, you wake up in the morning as a BDU is to lower your content costs and making packaging changes is the way, taking stuff out of the packaging that consumers won't notice and they will continue to pay the ARPU. Raising ARPU and lowering your content costs.

456 And the evidence shows with Videotron as well. We have a chart on when Videotron went to pick-pack, that their ARPU, the penetration of our services dropped precipitously when they went to pick-pack and their ARPU increased dramatically.

457 So it is incorrect to conclude that our interests are perfectly aligned. The fact is the reason that high penetration for Category A services exist is because of packaging, it is because of the historical packaging model.

458 And as digital capabilities come about and as our desire as an industry to break the large cable tier model exists, we just have to adapt in a balanced way. To adapt in an imbalanced way, I submit the evidence is clear, consumers will lose, producers will lose, broadcasters will lose, and the distributors are fine as evidenced here.

459 MR. BIBIC: Mr. Chairman, again we are having a very philosophical discussion around the extent to which consumers should have more choice for all services, including the analogues.

460 And we are putting aside the financial dimension of it. That could lead to a reduction in volume and that needs to be addressed through a change in the unit price. It is basic economics, rate X volume.

461 What Ms Mainville-Neeson said five, 10 minutes ago was TELUS can't live with a 50 percent floor on the PBRCs because for some of our theme packs we will never get there, including other CIDG members, and that's not right.

462 But Ms Mainville-Neeson left to the side the unit rate part of it, which means that they want the ability to stay at the low penetration that's indicated in some of these charts, while paying the same rate that every other BDU is paying who is delivering far higher volume.

463 We can't lose that.

464 MR. CRULL: And we think that in fact when they design their packages, they should have the input of the unit cost -- the real unit cost to deliver these programming services when they design their packages, so that if TELUS is designing packages that deliver this low a penetration and consumers like it, in order for the system to be balanced then they probably do have to charge more of a premium. I don't think it's appropriate that they charge the exact same price as another provider whose content costs are reflecting all of these services that are included.

465 So it's inconsistent with the market.

466 THE CHAIRPERSON: You may not think so, but they have a separate Board of Directors than you do and I guess they have different strategies. I don't want to get into that.

467 I'm also going to stop as well now, because I have a bunch of questions on these blue pages, but before I do, to get views of each of you, I think my fellow Commissioners have been waiting patiently here and I think I should pass the baton on to Vice-Chairman Pentefountas.

468 COMMISSIONER PENTEFOUNTAS: Well, thank you.

469 Chairman Katz really covered an awful lot of ground, but just briefly a question of Madam Mainville-Neeson.

470 Is it the floor that's the problem with the PBRC model?

471 MS MAINVILLE-NEESON: That's one of the problems but, as Mr. Mayrand has clearly indicated, there are numerous problems. There's the floor, there is the more than make whole, the double make whole rates that are proposed based on the curve that we have seen for that one single model.

472 COMMISSIONER PENTEFOUNTAS: Just on that point -- and I think we got off track a bit earlier during Chairman Katz's questions -- I don't want to do to the math and I don't want to talk dollars and cents, it's not the appropriate forum. Just on that issue, we will deal with that under FOA. You will deal with it hopefully.

473 MS MAINVILLE-NEESON: Right. So there are three issues, three main issues.

474 So the rates, which is an issue that we will deal with later, but that curve is pricing out of the market any of the services so we would no longer be able to offer choice to consumers.

475 The second is of course that floor, because we do believe in consumer choice and obviously consumers are enjoying that choice and which is why our subscribership is going up.

476 The third though is the tied selling aspect of their PBR model. They have indicated to us -- I believe it's on the record -- that we would have to move all -- all of those 12 services to the PBR model and not simply the one that we might choose to repackage. So there are some fundamental flaws which would need to be addressed.

477 Let's be clear that there is already a PBR model embedded in the agreement that we have on the table. Some of the services do have step-ups which relate to penetration and we take no issue with those kind of incentives for higher penetration on a philosophical basis.

478 MR. MAYRAND: Commissioner Pentefountas, maybe you would like to hear from Jennifer on what that PBRC model, as we understand it, really means for a lot of systems that we are representing here.

479 COMMISSIONER PENTEFOUNTAS: Maybe before you get to that if we can ask Bell on the tied selling aspect that was mentioned by Madam Neeson.

480 MR. CRULL: Right. As I described earlier the principles by which we designed it, at the outset when a distributor decided, "We will either go with set" -- and we recognize dramatic differences on the members of CIDG. We think that the PBRC is an excellent solution for some providers, in fact they would save a fair amount of money, and we think set packaging is an excellent solution for others.

481 As we designed it, we initially said we want a distributor to choose all services go to the PBRC at once or stick with set packaging and the reason is because the way we did the math to try and support the revenue flow, it's averages. We didn't want them to just pick, okay, a provider could say, "Okay, on these four services we are above the average penetration so we will save money, but on these five we will keep set packages." So we were concerned about that kind of gaming so we said, "No, at the outset you should either choose" -- and also packaging changes usually involve multiple services, I don't think you decide to create a theme pack on four services out of the 12 and not the others. So that was our principal.

482 But I would say very fairly in the spirit, I had more than 30 meetings with executives at various BDUs and I tabled last fall the pen-based rate card as a concept and sought feedback and engagement. And if that was one of the really big stumbling blocks, as we have considered other alternatives, I think that we can work with the team on that.

483 We want to make sure that the system works for both of us, but it was the first that we kind of heard in our various discussions that that was a big deal and so that's the rationale for why it was an all or nothing on the specialty services.

484 COMMISSIONER PENTEFOUNTAS: So I detect some flexibility on that issue.

485 MR. CRULL: Well, you know what, I don't want to commit for my team, but we thought of some concepts. Again, it's one that came to us.

486 The area where we felt like flexibility was easier is we said: If they choose set packaging and the BDU brings us a packaging change on theme packs that we say, "You know what, we're not getting sufficient offsets", because BDUs, typically they want to make packaging changes, they bring us offsets and we agree to it.

487 If we are unable to agree with one of the CIDG members and they were on their set packaging, we said, "Hmmm, then they can go to the PBRC immediately, or if one of their services drops by 10 percent they can go to the PBRC." I think in that scenario we felt like they could go one at a time and it would be consistent.

488 So there probably are some modifications in the language that could be worked together on that term.

489 COMMISSIONER PENTEFOUNTAS: Okay.

490 I want to get some substantive questions, but I would look at Tab 4 and it struck me. My question is: How did penetration rates sort of fall off the cliff on those services? When and how? I don't see a time line on that tab.

491 MR. MAYRAND: Commissioner Pentefountas, I take it you're referring to Tab 4 of --

492 COMMISSIONER PENTEFOUNTAS: Bell's Tab 4.

493 MR. MAYRAND:  -- the Bell document, right --

494 COMMISSIONER PENTEFOUNTAS: Yes.

495 MR. MAYRAND:  -- of this morning, yes, which was indeed attached to one of their submissions.

496 COMMISSIONER PENTEFOUNTAS: Yes. The Bell document, Tab 4.

497 MR. MAYRAND: Now, it is a confidential page and exhibit, but it does mention that it is a comparison of penetration rates for certain services on one BDU.

498 COMMISSIONER PENTEFOUNTAS: That's right.

499 MR. MAYRAND: Okay.

500 COMMISSIONER PENTEFOUNTAS: I'm not going to get into details, but I just --

501 MR. MAYRAND: So just to be clear --

502 COMMISSIONER PENTEFOUNTAS: If someone can explain to me, if possible, why and how those rates literally fall off the cliff in some services, without getting into details of specific services?

503 MR. MAYRAND: May I please finish my explanation here?

504 So there are two sets of bars. There is a national average for each of these services and then there are the actual penetration rates for that distributor versus the national average.

505 Now, it goes without saying that if the national average -- and that's what the bar codes show here -- are always higher than the ones for that particular distributor that was selected in this example, clearly there are distributors that exceed the national average. I think we would agree to that.

506 So the reality is that this chart really shows just one distributor having offered a certain type of packaging in a totally digital environment. Now, that is certainly not the universe that we are talking about here and that universe that provides the revenue flows that Bell allegedly relies on to meet its programming and Canadian expenditure commitments.

507 I just want to make that absolutely clear for the record here.

508 MR. BIBIC: Mr. Vice-Chairman, can I respond?

509 COMMISSIONER PENTEFOUNTAS: That was the purpose of my question, so yes, you sure can.

510 MR. BIBIC: So what you have is Mr. Mayrand accurately described this blue bar of national penetration for all our -- well, it would be our 13 analog Category A and C services and the far inferior penetration on one system.

511 What the CIDG has asked for is the unilateral right during the term of the contract for these services to repackage them however they wish without consultation with Bell Media, perhaps to do exactly what the one distributor has done and mirror that, and if everyone's penetration were to drop to those levels as a result of these unilateral repacking, which their request would allow them to do, you can see the dramatic financial impacts for just these services.

512 Now, compound that across the system with the 47 analog Cat As and Cs and you can see -- oh, at the same rate, by the way -- at the same unit rate for these services -- you can see why we are saying for Bell Media it's a problem -- not that we are opposed to it, we just want the flexible rate card to accommodate that, and for the system as a whole.

513 MS MAINVILLE-NEESON: Vice-Chair Pentefountas, if I may also add?

514 The exhibit that is provided by Bell provides very select services, the Category As. However, let's remember there are numerous services now in the Canadian broadcasting system. The Commission has authorized a whole new set of new services, the Category Bs, where, in cases of digital services, those Category B services are a lot more better penetrated than the national average.

515 We provide that in our submission from March 6th as an exhibit as well.

516 THE CHAIRPERSON: I understand that, but these are sort of the core services that we are discussing today.

517 MS MAINVILLE-NEESON: Yes. So with respect to the core services, if the question was why are those services less penetrated than the national average, it has historic reasons. The traditional cable environment, which had the larger tiers that have been maintained, and of course various other business practices that just led to how those services were launched.

518 When you launch, as we have, in a fully digital consumer choice environment, that is what consumers are choosing. They like choice and they are choosing those themes, those areas of interest to them. So there are some services which traditionally have done very well in multi-interest packages which, when given consumer choice, will result in lower penetration and I don't think that is something that is harmful to the system when you look at the plethora of choice that we are offering on all the services. There is no rationale for protecting those Category A services anymore in a group licensing environment.

519 COMMISSIONER PENTEFOUNTAS: Mr. Bibic, briefly?

520 MR. BIBIC: Okay, briefly.

521 So first of all, Bell TV in an all digital world, its penetration for these services is way higher. So it's not the digital conversion that has caused this drop.

522 But what Ms Mainville-Neeson just said at the end is, in this group licensing environment these categories don't deserve protection anymore. We're not asking for -- almost the exact words.

523 All we are saying is this: Yes, these services are the most popular, they have the highest subscribership and the highest viewership and there's a lot of reasons, including traditional packaging, absolutely. Don't deny it. Absolutely.

524 But they are also being watched because they are popular and they are also spending a lot on Canadian programming and here is what we are saying: In a balanced environment let's not just yank the rug out from under these services in one fell swoop without accommodating the rate side of the equation. That can't be a balanced model.

525 There is a regulatory bargain here, these services deliver significantly to the system. In exchange the BDU provides reasonable terms of carriage and packaging and retailing for them. We can't just go from here to here in a nanosecond and expect that these services will just flourish.

526 COMMISSIONER PENTEFOUNTAS: We understand how PBRC works.

527 Back to Bell. Why aren't you negotiating non-linear services today, or a year ago? What's the problem?

528 MR. CRULL: I think, first of all, we are negotiating to get the non-linear rights and then developing business models and technology capabilities to make them available.

529 COMMISSIONER PENTEFOUNTAS: The non-linear rights that you have, they are already available on Bell services. Why aren't those in play and why haven't they been in play over the last year?

530 MR. CRULL: No, the non-linear rights are not available on Bell that we are talking about. We haven't rented them to others.

531 That's exactly our point, we have not gone out to the industry with a comprehensive strategy and Bell doesn't have those rights.

532 COMMISSIONER PENTEFOUNTAS: So they are not available to anyone?

533 MR. CRULL: Correct.

534 COMMISSIONER PENTEFOUNTAS: Okay.

535 MR. CRULL: That's exactly what we are doing, trying to figure out how to best do this within an evolving fast-paced market. We have made the commitment that we will offer them at the same time to these --

536 COMMISSIONER PENTEFOUNTAS: I'm not sure that's CIDG's understanding.

537 I will let you respond to that.

538 MR. MAYRAND: Well, you know, we specifically quoted a very cogent example of --

539 COMMISSIONER PENTEFOUNTAS: I saw the newspaper.

540 MR. MAYRAND: I exhibited the ad and unless I have lost my French, and I doubt that --

--- Rires

541 MR. MAYRAND:  -- it says what it says, you know.

542 COMMISSIONER PENTEFOUNTAS: You have been spending too much time on the dark side, Monsieur Mayrand.

543 MR. MAYRAND: Yes.

--- Rires

544 MR. BIBIC: Can I see the ad?

545 MR. MAYRAND: Of course. We specifically referred to it in our March 7th submission. Hold on for a second here while I just retrieve it.

546 COMMISSIONER PENTEFOUNTAS: He has also spent too much time on the dark side. Lis pas "La Presse."

547 MR. MAYRAND: Please bring it back.

--- Rires

548 COMMISSIONER PENTEFOUNTAS: D'habitude, on fait des copies, Yves.

549 While Mr. Bibic is consulting, do you want to add something to that, Monsieur Mayrand?

550 MR. MAYRAND: So clearly, Commissioner Pentefountas, Bell does control rights, multi-platform rights, to a significant amount of content. Our argument is that they do control that certainly for all the programming that they themselves produce.

551 Second, as we pointed out, they do insist, according to the terms of trade, when they acquire programming from independent producers they do insist on getting those rights.

552 Third, they do advertise them.

553 Fourth, we see content being exhibited and advertised for multi-platform exhibition on the TV everywhere principle period.

554 COMMISSIONER PENTEFOUNTAS: To that point, is there a value to those non-linear rights, Mr. Mayrand?

555 MR. MAYRAND: Our view is, Commissioner Pentefountas, that those rights are negotiated as between Bell and independent producers as part of a package and the value is in the package. I think what we have been saying from day one is, we want to make sure as we distributors are in the process of getting licensing of exhibition rights from the Bell services that we want to have these rights included and we consider that they ought to be included in the same package rates when Bell disposes of the rights and has the ability to tell us what they are.

556 Now, we haven't compromised or agreed on any specific rates, we are not at that stage. What we are trying to do here I think, in this expedited hearing -- and we sure hope that that's going to be the real outcome of this hearing -- is that once we come out of this and the Commission issues a decision as a result of this hearing, both sides will know exactly what has to be included or not included by way of packaging restrictions, veto rights, repackaging options, non-linear rights and penalties and interest, which is something that's been added in the course of this whole process.

557 COMMISSIONER PENTEFOUNTAS: Yes. We are going to get there, but just to be clear, you don't think those rights are free?

558 MR. MAYRAND: Well, our view is that if they are offered for free by Bell, certainly it's because they do consider that there really isn't any value to them because they are offering them for free. And if they are offered for free by Bell to other distributors, well, obviously they should be considered as having no distinct value.

559 COMMISSIONER PENTEFOUNTAS: Well, Madam Mainville-Neeson might have a --

560 MS MAINVILLE-NEESON: Yes. If I may just add -- and this will be a quote from the Terms of Trade Agreement between broadcasters and the independent production community. I think it's important because this is the principle that we believe, is that for a fair market value license fee --

561 COMMISSIONER PENTEFOUNTAS: Exactly.

562 MS MAINVILLE-NEESON:  -- and then certain rights are included. So for that fair market value license fee you get the linear broadcast rights, you get the linear streaming rights on all platforms, simultaneous and non-simultaneous; you get the free to consumer non-linear on demand exhibition rights on all platforms, and the subscription-based non-linear on-demand exhibition rights on all platforms. Those are the types of things that we believe should be included in the fair market value that we will pay for the linear services in question in this agreement.

563 COMMISSIONER PENTEFOUNTAS: Okay. Would you be able to come to an agreement on linear rights, or is that a condition sine qua non to an agreement?

564 MR. MAYRAND: I think we are struggling here, Mr. Pentefountas, with trying to have a basis of comparison where we can actually present to you, and Bell can present to you rate proposals that are directly comparable for the same thing.

565 And, frankly, I have great concern and I have a great problem with this so-called wonderful alternative that the PBRC model would offer to that extent because it is still subject to certain limitations that Bell has not spelled out and, guess what, we will find those out once we get their offer and we are going to be talking apples and oranges again.

566 COMMISSIONER PENTEFOUNTAS: I understand your difficulty with PBRC.

567 Just briefly, Bell's response on the -- I won't call them allegation, but the contention that you have rights that are available on non-linear Bell services that are not available to others.

568 M. BIBIC : Donc, c'est... Monsieur le Vice-Président, c'est faux. Je commence avec l'annonce.

569 L'annonce indique :

« Qui m'aime me suive. Avec Bell, vous avez accès à du hockey sur quatre écrans. Les quatre écrans de télévision. » (Tel que lu)

570 Well, what that refers to is the Habs games are available in RDS and every CIDG member has access to RDS.

571 THE CHAIRPERSON: Okay.

572 M. BIBIC : Vous avez accès sur ordinateur.

573 The reference to online is this. What we are talking about here is early access to content that is otherwise found on the Montreal Canadiens website, which give you practice and locker room clips and such, which is purely online content which has nothing to do -- the VI rules say that can be exclusive.

574 THE CHAIRPERSON: That's not the issue.

575 Next...?

576 M. BIBIC : Téléphones mobiles et tablettes. Wireless phones and tablets.

577 What that refers to is, you can stream RDS on your phone, wireless or tablet. We have offers for that product to every mobile provider in Canada who wants to buy those rights. Cogeco doesn't have a wireless service, Vidéotron has it because they bought it, Bell Mobility has it because they bought it, Rogers doesn't have it because they haven't bought it, and TELUS has chosen not to buy it.

578 So this has nothing to do with the debate we are having here today or the non-linear rights that we are talking about here today.

579 In terms of those, I think what Monsieur Mayrand is doing is conflating all kinds of non-linear rights. There are some non-linear rights available on CTV.ca for example. You can watch the last two episodes of Grimm for free. Those are limited catch-up viewing rights.

580 That's not what we are talking about here. Categorically we have not made available the non-linear rights to the stable of specialty programming to anyone else. We commit categorically that we will make them available to CIDG at the same time as any other BDU, including Bell TV. A categorical commitment.

581 MR. CRULL: Mr. Vice-Chairman, if I could, just because I think that -- and I do apologize for back-stepping a bit, but it's important for the deliberations and in our negotiations with other providers this comparison of Cat A and Cat B.

582 I do appreciate that Cat B penetrations are improving in the TELUS system vis-à-vis what some of the averages -- and I haven't seen the numbers and contemplated it, but I don't doubt that that may in fact be true.

583 The fact is, these services are so dramatically -- our spend on Canadian content for Cat A's is $350 million a year. Our spend on Cat B's is $25 million a year. And the Cat B's wouldn't exist -- like Comedy Gold wouldn't exist without Comedy; MuchMore wouldn't exist without Much and so I think just the point I'm making, in all fairness, is that a percent increase in a Cat B is nowhere near a percent decrease in a Cat A. They are really dramatically different value propositions and I just wanted that on the record.

584 MR. PENTEFOUNTAS: I understand that.

585 Just to go past sort of I think the third issue that's raised by CIDG. You want to be a group going forward under FOA and people at Bell have a certain problem with that.

586 Would you be jointly and severely responsible following an agreement as a group?

587 MR. BIBIC: Mr. Pentefountas, I think the model exists already and it's been there for many, many years and the model is CCSA.

588 CCSA enters into a master affiliation agreement with all programmers --

589 COMMISSIONER PENTEFOUNTAS: I understand. The answer is no.

590 MR. MAYRAND:  -- and the answer is, we are looking forward to that model, very simply.

591 COMMISSIONER PENTEFOUNTAS: Just to be clear, you would sign individual agreements with Bell. There wouldn't be one agreement.

592 MR. MAYRAND: There are, I guess, two mechanical possibilities for doing it. The same way CCSA does it, there is a master affiliation agreement and there is an individual assumption agreement by each individual BDU, or simply, if Bell is still not satisfied with the mechanics -- and I don't see why they would not be, because they have been applying it for ages on all of their programming services with the CCSA people.

593 But the other option is for the same, because they claim that, for example, the set package agreement is really a master agreement that everybody is signing, with some minor modifications.

594 I think that is what I have seen on the record, and I think that is what Bell has said again today.

595 Well, if that is the case, there is nothing preventing Bell from putting the very same agreement to all of the members of CIDG, who will sign the agreements individually.

596 So either way it works. Either way it's not complicated. Either way there is no policy issue.

597 And, frankly, I find it somewhat surprising -- and I shouldn't say amusing, because it's not amusing -- that this largely integrated broadcaster/distributor/producer of the Canadian broadcasting system, in fact the largest, would object to negotiate with a buying group, such as ourselves here, that has no greater share -- in fact, no materially greater share than the retail distribution share that they own themselves.

598 COMMISSIONER PENTEFOUNTAS: Collectively you mean.

599 MR. MAYRAND: Collectively.

600 COMMISSIONER PENTEFOUNTAS: I don't want to get into name-calling or laundry washing here.

601 One hundred and fifty-nine other groups have -- getting back to the set contract that was signed with 159 groups, with perhaps some modifications or amendments, if the exact same offer is on the table, and 80 percent or more of -- the companies that control 80 percent or more of Canadian subscribers are in agreement with those terms and conditions, why is it so difficult for CIDG to come on board?

602 And I say that in the sense that -- I read your initial document today, and I would suggest that it is somewhat dated, given the developments that have come forth since then.

603 I understand that everyone starts at a certain place and they sort of move closer together oftentimes.

604 MR. MAYRAND: Why is it so difficult? Well --

605 COMMISSIONER PENTEFOUNTAS: I will make it even easier for you.

606 I understand that one of the arguments you have made is that some of them are vertically integrated, some of them are not. I understand that the majority of them are, and there is some kind of horse trading that may have gone on. That is part of your argument, or may be part of your argument.

607 How do we regulate horse trading, firstly?

608 Secondly, why isn't that agreement good enough for CIDG members?

609 MR. MAYRAND: Sir, if you may allow me, I don't think we are asking you or the Commission, at all, to regulate horse trading.

610 What we have said to the Commission, as far as the VI policy hearing, is that there definitely will be horse trading, extensive horse trading, between VI entities who happen to represent 81 percent of the total retail distribution market in Canada. That's a fact.

611 So, indeed, we said that there is going to be extensive horse trading between these guys, and that horse trading will benefit only this select club of vertically integrated groups that have the advantage of striking deals at the expense of their competitors, which are the remaining 18 or 19 percent of distributors in the market -- at the expense of those independent distributors, at the expense of independent programmers, and at the expense of consumers.

612 And, frankly, that is the problem we have. That is the situation we are dealing with now. The horse trading has already gone on, and we know that there are some differences that have been accommodated for these, guess what, four specific agreements that involve the entities that represent approximately 80 percent of the total distribution market.

613 COMMISSIONER PENTEFOUNTAS: And if that accommodation was made available to CIDG...?

614 MR. MAYRAND: Well, what is the accommodation? We are not sure, because we are not presented with it. We are not given the opportunity to review what it's about.

615 And, frankly, the accommodation may not be relevant, because it involves quid pro quos, including, "You put my service on your basic, and I will put this service on my basic," that we cannot match.

616 COMMISSIONER PENTEFOUNTAS: We are back to regulating horse trading.

617 MR. MAYRAND: I beg to differ. We are not back to horse trading. What we are saying is, forget the horse trading for a moment. That's what they do, that's what they will do, and economics will predict that's what they will do.

618 Now, what we are dealing with here is trying to reach a reasonable agreement with the remaining 18 percent of the market represented at this table, on reasonable terms that fit the bill under your VI policy and the Code of Conduct. That's what we are asking for.

619 MS SALMON: We will not have a future lever. You asked why would this potentially be acceptable. I have no insight into the horse trading, and we are not asking you to regulate it.

620 We are asking you, within the policy, to recognize that the horse trading occurs, and therefore we can't be held to the standard of what they have accepted, because in the future, if we want to move toward the Shaw Plan Personalizer, which is a very flexible customer service option, which currently none of our operators offers, we have no guarantee that we will be allowed to.

621 It offers customer choice. It may be something that our customers want, and we have no guarantee, or no lever to say: Bell will accept that.

622 What we have proposed is language which will protect Bell through grandfathering, no immediate decline in penetration will occur, but which would allow us to adopt the Shaw Plan Personalizer or another customer choice option available.

623 COMMISSIONER PENTEFOUNTAS: Briefly, because I want to get to grandfathering with Bell, volume times rate as a business principle, you don't have a problem with that?

624 It's a pretty common practice.

625 MS SALMON: Here is where the problem may come in. Currently we have penetrations of between 10 and 100 percent on most of their services. Right now we have all been offered a set rate for that volume.

626 Why should someone be penalized just because they want to repackage, if they are going to lower in volume because customers are not choosing that service, even if they remain higher in penetration than someone who has chosen the set packaging rate?

627 So if someone in a set packaging rate is at 60 percent, and they paid 30 cents, and I am someone who is at 70 and I want to go to 65, and now I am paying 35, my concern comes from: How is that fair?

628 COMMISSIONER PENTEFOUNTAS: Briefly, in answer to Ms Salmon's response, and I also want to understand what Bell's problem is with CIDG's grandfathering proposition.

629 MR. BIBIC: I will turn that over to Kevin, if I may.

630 I promise to be really quick, and I think this might help.

631 In terms of four customized deals, they weren't all VI BDUs, by the way.

632 And in terms of the horse trading, look, yes, there could have been horse trading that motivated us to say, okay, on one of our clauses we will go -- the re-opener clause, for example -- we will go from 5 percent to 10 percent. We are saying: If you want that, let's discuss it.

633 So those benefits, to the extent there was horse trading and it resulted in a favourable customization, without attacking our principles, for a particular BDU, here, we are willing to talk about it.

634 I thought that might be helpful.

635 Over to you on the --

636 COMMISSIONER PENTEFOUNTAS: I think I made that point with CIDG, and I think they answered that.

637 MR. CRULL: With respect to Shaw's Plan Personalizer, I was at the table negotiating, and there were offsets, really significant offsets, which, again, we are happy to discuss.

638 We were able to look at the penetration impact of Plan Personalizer and say: Okay, if you move this into the package, move this to basic, make these moves, then we are going to be comfortable with the stability of the A's overall, and we have said many times that that's how we go to it.

639 Now, on the traders, also -- again, for the record, the Commission considered this in VI, and, boy, I have not studied many documents in my time as tightly as I have VI.

640 Paragraph 20 points out that, in fact -- and I experienced this after months of negotiating with some of the big providers in the country -- it points out that there is actually more motivation for the vertically integrated operator to accrue value to their distribution than to their programming, and there was actually the opposite concern. Distribution for the cable companies has higher margins -- it's their dominant profit source -- and they have lower regulatory contributions.

641 I can tell you that in my negotiations, there wasn't a penny of benefit that was accruing into the broadcast -- actually, the opposite is true -- that I felt like on both the rate and the packaging flexibility. I gave much more than the market -- than I felt like the market should have borne, and CIDG is benefiting.

642 To grandfathering -- the turnover -- we pointed out in a document that is attached --

643 Mirko's opening comments had a document attached -- I think it's Attachment 3. I would ask members of the panel to look at that.

644 Grandfathering is so painful because the turnover in our customer base is very high, and turnover in customer base for packaging occurs for two reasons. One is, a customer moves from Bell to Cogeco. Bell loses a customer. That would be "Customer Churn", at the bottom. Or, a customer moves from Cogeco to Vidéotron. That would be customer churn.

645 And this is an annual number.

646 And, by the way, in transparency, these numbers are a BDU that I know very well, and may not be reflective perfectly of the other BDUs, but I think that they are not far off.

647 And customers call all the time to make packaging changes. So that is the 25 percent a year, customers who just call to make packaging changes in their portfolio.

648 So, in the extreme -- and I admit to the panel that this is in the extreme -- if all 45 percent of the customers -- even though we grandfathered the old packages, if all 45 percent of the new customers took the theme packs, then you can see after two years that we have only protected 30 percent of the base.

649 Now, what I also go to is, we can sit and debate: Kevin, you are being really extreme. You are taking the maximum here, it's not going to be that extreme. And our churn isn't that way.

650 I don't think it matters, because what we have said is that the market with set packaging has said, "We will give you volume commitments for set rates," and I don't think that a slow and gradual decline in our business is acceptable to me, versus my dramatic and fast decline, which I think is mathematically possible.

651 That is why grandfathering -- it took me 12 seconds, Mr. Vice-Chair, as an operator, to know that grandfathering wasn't a protection in any regard.

652 COMMISSIONER PENTEFOUNTAS: Mr. Mayrand, I would like to ask a question, before you answer the question, on penetration and flexibility -- and the whole issue of flexibility, I think, is at the core of what we are trying to decide here today.

653 The term and the duration of the term would constrain your ability to mix and match and move and compete with what the market calls for.

654 Is that correct, that is part of your argument?

655 MR. MAYRAND: It is only part of the problem that we are facing.

656 Again, let me specify that the new circumstance we have here is that this group that we are facing is not just a program supplier, and, in fact, the biggest single program service supplier in the country, which is about to get bigger, but it is also a very large distributor, which directly competes with us for customers.

657 COMMISSIONER PENTEFOUNTAS: Okay.

658 MR. MAYRAND: Okay? So that is a problem. No matter the length of the agreement that we are looking at, what it means is that, under the set of requirements that we have very specifically outlined in our application, in an exhibit to our application, these packaging obstacles -- okay -- and the veto right that Bell keeps on any packaging change, no matter the length of the term, can play directly against us, as independent distributors, because Bell remains free to shake hands with itself and make any packaging changes that it wants, and we are not without their prior approval.

659 COMMISSIONER PENTEFOUNTAS: What if they allowed the same flexibility that they allow themselves to the CIDG group?

660 MR. MAYRAND: Flexibility is the issue, and we have indicated very clearly what the problems are for us, representing here the vast majority of all independent distribution in the country, and we have seen no movement on that.

661 So the point in time has come where we need a resolution of that. We have provided language.

662 We are waiting for the Commission to rule on what is appropriate in the so-called set packaging scenario, which Bell is not pulling out. They are saying: Oh, it's still out there. It's still out there.

663 We have this wonderful PBRC alternative model, which, of course, we haven't seen the details of.

664 The set packaging terms are still out there, but they don't appear to be ready to move to that extent, so we have to ask the Commission to deal with that, so that when we get to setting, or trying to set the rates that go with that set of terms, we both know exactly -- and the Commission knows -- what we are talking about here.

665 MS MAINVILLE-NEESON: To be clear, certainly the principle -- or the concept that if they can offer it we should be able to offer it too, is one of the principles that we did set out as -- or the parameters in our proposal.

666 COMMISSIONER PENTEFOUNTAS: I read your proposal.

667 MR. BIBIC: Mr. Vice-Chair, if I may, again, very quickly --

668 COMMISSIONER PENTEFOUNTAS: Briefly.

669 MR. BIBIC: I will be, I promise.

670 I mean, I could fake this righteous indignation. I have heard it four times now.

671 The fact is, what I have heard four times is: These folks here, on this side of the table, are going to receive a packaging request and are going to run over and give it to Bell TV.

672 It doesn't work that way. We don't operate that way. There is a process, even, through VI on NDA obligations. We have NDAs in our contracts. It doesn't happen.

673 They have to deal with Rogers and Vidéotron all the time. It doesn't happen.

674 MS SALMON: We haven't had tremendous success negotiating with Bell. I think that's why we are here.

675 What we hear today is Bell saying: Just come and talk to us and we will be reasonable.

676 There is nothing in that document that says they will be reasonable.

677 What we have done is tried to set out parameters that are reasonable.

678 We are saying: Listen, if we want to re-launch the service in a customer friendly package that is theme based or preset, we shouldn't have to come and ask your permission.

679 That is being done by Shaw today. It's being done.

680 So why do we have to come and talk to them? Presumably it's because they are saying: We just want the decline to be gradual.

681 Well, the fact of the matter is, if our customers don't want that service, it is not something we can do. The remaining customers are the ones who are going to -- under their model, the customers who do want to watch it are the ones who are going to be penalized, because we may have had artificially high penetrations due to a traditional analog model, where our services were launched and a whole group was put in at once, because there weren't options.

682 There are options today. Our members have had technological advances since, even, the last contract, where our members can now offer digital. We have had some who have been analog and now have digital capabilities, and I can tell you that requests to change packaging to allow for customer flexibility have been denied.

683 That is what we are afraid of. We need to set out the parameters where we do not need to ask permission of Bell, because their only interest is to continue to protect their bottom line, and there is nothing in this agreement that protects the distributor.

684 COMMISSIONER PENTEFOUNTAS: Mr. Crull, do you want to speak to that quickly?

685 MR. CRULL: I appreciate that, Ms Salmon.

686 I am fairly new in my role, the panel knows this, and I appreciate the technological advances and that there is a historical analog structure that created the funding to support these services that created the high penetration.

687 I have often commiserated with these guys, as I have looked at the digital migration and looked at satellite -- and satellite penetration is actually quite good. It is really telco TV's digital platforms that have scared us the most.

688 So, as others move to that -- we acknowledge that there is a transition, and that is why we really feel -- and I refute that we haven't been forthright about the limitations. I have to say that we have been. That has been discussed, and there is a document that has been provided.

689 And I also refute that they are unreasonable -- we will get into rate later, but we are prepared to discuss that.

690 As for the veto rights, I would just add that we are big, sophisticated companies, and Cogeco buys a lot of telco services from Bell at wholesale and competes with Bell at retail wholesale. We do this all the time.

691 So it's inappropriate -- in our approval of packaging changes, it is merely to have an equitable trade, and that is what Shaw did on their Plan Personalizer.

692 And CIDG members can package, by the way -- they can package today exactly the way Bell packages under set packaging. In Quebec they can package exactly the way Vidéotron packages under set packaging, and in Ontario and Quebec they can package exactly as Rogers packages under the set packaging.

693 COMMISSIONER PENTEFOUNTAS: I think it's break time, Mr. Chairman.

694 THE CHAIRPERSON: Yes, I am going to recommend that we take a health break for 15 minutes, and we will reconvene at 12:25 p.m.

695 My plan is, at this stage anyways, to have the completion of Commissioner examination done by, hopefully, one o'clock, break from one to two, come back at two o'clock, and then the parties will cross-examine each other for the time that has been allotted.

696 Hopefully that will get us to around three o'clock or so. We will take another break at that point in time, and then parties will do summation.

697 And somewhere in there, I'm sure, Commissioners will want some follow-up questions, as well.

698 That's the plan, and hopefully that will work.

699 We will reconvene at 12:25 p.m.

--- Suspension à 1209

--- Reprise à 1227

700 THE CHAIRPERSON: Just before we start again, there was a document that was put on my desk before called "What Bell's 159 agreements actually represent." Is there a number to this? I don't know who even brought it in. Put it on the record.

701 THE SECRETARY: There is no number, Mr. Chairman. We just put it on the public record.

702 THE CHAIRPERSON: Whose document is this?

703 THE SECRETARY: It is from CIDG.

704 THE CHAIRPERSON: Well, why don't we give it a document number.

705 THE SECRETARY: We will give it Exhibit A, Mr. Chairman.

706 THE CHAIRPERSON: Is this confidential? No, it's not. So let's give it Exhibit A and put it on the public record.

EXHIBIT A: Document entitled, "What Bell's 159 agreements actually represent," tabled by CIDG.

707 THE CHAIRPERSON: Okay, we will continue with Commissioner questions. We will start on my far left with Commissioner Menzies.

708 COMMISSIONER MENZIES: Thank you.

709 One thing I have managed to get from today is I now understand why TSN is on basic in Shaw Calgary in terms of that.

710 My biggest question, though, is very early on everybody said, well, this happens in Québec because Québec is different and then it just kind of got accepted that it was and I don't understand why it is.

711 I would like you to explain to me please why competition at this level is available in Québec and is not acceptable in your business model in the other 75 percent of the country.

712 MR. BIBIC: Commissioner Menzies, I think we are talking here with respect to the pick-a-pack model.

713 COMMISSIONER MENZIES: Yes, pick-a-pack.

714 MR. BIBIC: Okay. So for pick -- I will turn it over to Kevin in a second. But pick-a-pack, we permit pick-a-pack packaging for our digital Category A and Category B services. So that is permitted if a BDU wanted to entertain that with those services.

715 With respect to the core Cat A's and C's, analog Cat A's and C's, Kevin, do you want to...?

716 MR. CRULL: I wish I could be more organized with all the paper. I think --

717 COMMISSIONER MENZIES: I don't need to understand the details so much as it's the --

718 MR. CRULL: Well, it goes to the Québec market really is different. The penetration of English services, Cat A's, is lower. When I showed the average penetrations on the TELUS chart, that was in the Anglo market and the market is very different. So you already have much lower penetration of Cat A's.

719 When we saw Vidéotron, long before my time, go to the pick-pack, we saw that those low penetrations even got much lower.

720 And so, you know, it is frankly one, Commissioner Menzies, where we can't absorb the same action, which is mathematically destructive to the services. Many of them would go out of business if they were at that penetration level.

721 And so we have learned and we have adapted and we are welcome to do it in the English market but in a balanced way with the PBRC.

722 COMMISSIONER MENZIES: So it is because the English-language penetration is so low that it isn't really commercially viable anyway? Like it would obviously be below 50 percent, which is --

723 MR. CRULL: Well, English-language penetration of the Cat A's is so high -- oh, in the French market, penetration is so low already, yes. So it is just a different market. The penetration was already low, and as our chart would show, it dropped by 10 points, which in many cases is a 20- or 25-percent drop of penetration when they went to pick-pack.

724 COMMISSIONER MENZIES: So it was below 50 before in many cases?

725 MR. CRULL: I would have to look at the chart.

726 COMMISSIONER MENZIES: Because you said 10 points was 25 percent. So, you know, 25 percent of 40 is 10 points.

727 MR. CRULL: Yes. I think there was a group of three that were below 50 and a group of three that are above 50 in the particular chart we put on the file.

728 COMMISSIONER MENZIES: How does it work in regards to French-language services?

729 MR. CRULL: We don't have any French-language Category A's. We have RDS, which is frankly -- in the Province of Québec, the Habs are impossible to compare to anything else. The penetration of RDS is very high but that is very different than any of the English-language Cat A's.

730 COMMISSIONER MENZIES: Forget that rate. Because the penetration of English-language Cat A's is so low, it is possible to pick-pack, however we want to call it, the French-language offerings as well.

731 MR. CRULL: Pick-pack was approved by CTVglobemedia five-six years ago. It was approved for Vidéotron in a massive negotiation that involved lawsuits, mediations, arbitrations and a massive dispute, and coming out of that, pick-pack was approved. In hindsight --

732 COMMISSIONER MENZIES: This essentially happened because Vidéotron just went ahead and did it.

733 MR. CRULL: In hindsight, I wish that horse could be put back in the barn. It can't. If that horse leaves the barn in the English-language market without us adapting, then I would submit it is simple math, it is massively destructive to the system.

734 MR. YABSLEY: I was around in those days and that is what happened.

735 COMMISSIONER MENZIES: Okay, thank you.

736 The other question. Mr. Crull, you mentioned to us earlier that the system within its current structure is working. Accepting that, my question is how will it work in -- you know, will it work two years from now?

737 Because what I am getting from the other side of the room is they are looking for increased flexibility so that they can respond in a sense to OTT services and others because of consumers' desire to the usual watch whatever they want, wherever they want, however they want.

738 I understand that you are defending your short-term interest. I am just wondering if this position is in the best interest of yourself as part of the overall system and others as part of the overall system in the long run.

739 MR. BIBIC: Commissioner Menzies, we have heard that argument from CIDG. We heard the pick-a-pack argument. We heard, you know, we need to adapt to OTT, both those arguments. So we said, okay, what is it that you want to do? Tell us and let's talk about it.

740 And the answer is there's nothing, it's not about that. It's about you not having a veto, and God knows where the world will be in five years. And we say, okay, let's shorten the length of the agreement.

741 But beyond that, we went through a fact-finding exercise with the Commission only six months ago and it was about should regulation be imposed, and if so, how and why.

742 And the Commission said that the evidence does not demonstrate that the presence of OTT providers in Canada and greater consumption of OTT is having a negative impact on the ability of the system to achieve the objectives of the Act or that there are structural impediments to a competitive response by licensed undertakings to the activities of OTT providers.

743 So ultimately, it was, look, it's too early to make structural regulatory changes due to OTT. That was the finding.

744 And what we are saying is if that is the case, it is certainly not too early and not the right forum in this kind of forum to make structural changes to the packaging model because of some, you know, predictions of where OTT might take us five years from now.

745 But I think, to get very commercial and answer your question quite specifically, if that is an issue, let's discuss what they want to do or let's shorten the contract length.

746 COMMISSIONER MENZIES: Okay. One more question for you guys.

747 I was curious about Mr. Crull's response when he talked about if penetration -- part of the argument that if penetration falls to certain levels that consumers will be less well-served because there will be less choice and less quality programming.

748 When you said if penetration falls -- I think you used the Discovery Channel for an example -- to 6.5 million, you said we are going to have to cut programming.

749 I am trying to understand that response because in some areas of competition, and certainly we all understand this is quite unique, this structure, but in many areas of competition if your audience falls, your first response is to make better programming and try to get the audience back, and your comment seemed to indicate that the first response would be to just shift that down and I am just curious about the business model that initiates that first response.

750 MR. CRULL: It is an indisputable truth and I would ask the Panel to really consider this, that the penetration of these services is not the result of individual customers saying "I really want the Discovery Channel.

751 Again, it's the history, it's the way it's worked. They picked Tier A, Tier B or Tier C and two out of three of those had the Discovery Channel in it along with another 80 channels. So the penetration of these Cat A services is a result of packaging history and it's not a result of individual choice.

752 And the U.S. I mentioned -- and, you know, I don't always like to look to a different market, but they studied this quite extensively and they found conclusively that the packaging, the large packages have served all participants very well by making the mass spread of costs and making mass variety available.

753 So the reason that we would have to cut costs is because if penetration of Discovery fell by 10 points there is nothing I could do promotionally. I could buy a ton of billboards, I could promote it on CTV, I could buy more programming, there's nothing I could do that would offset the pressure of that packaging change that's driving down penetration.

754 I mean certainly TSN has high quality programming that people want to watch as evidenced by the fact that 81 percent of every Canadian human being in English Canada, whether they have it or not, watch it and yet you can see the packaging suppresses the viewing by a third.

755 COMMISSIONER MENZIES: I would just like CIDG to comment basically on Bell CTV's assertion that giving consumers enhance flexibility -- you and consumers of your product enhanced flexibility -- will lead to that lower quality programming and less choice. I would just like to hear your response to that.

756 MR. MAYRAND: I can start, Commissioner Menzies.

757 I think that certainly quality of programming is a multi-faceted concept. Certainly it is not driven by any particular point in time or any particular metric, it's based on, you know, the nature of the service, the historical way in which it was provided to consumers, the alternatives that consumers have or don't have compared to that particular service and many, many more factors.

758 I think what we are being portrayed here by Bell is really a doomsday scenario where the fact that Bell would relinquish absolute control over packaging will result -- I think they have used that term in their filings, really destruction of a number of what they call cornerstone services for the system.

759 Quite frankly -- and they have argued and referred to what could possibly happen under a certain churn scenario. And to that extent I can't help but use the opportunity to say, you know, in terms of natural churning certainly customers that churn from one distributor don't completely disappear out of the system, they churn and basically go to another distributor. And that's part of the competitive environment that we have in the system that we have here in Canada and it would be the same in the U.S.

760 And, frankly, to say that, you know, a program provider that has agreements with essentially all distributors across the land would actually be facing imminent death because of this churn process doesn't make sense, because those customers move to another distributor, including Bell TV and, guess what, all these distributors have agreements and pay fees, substantial fees to the Bell Media Group.

761 So, frankly, I have a little trouble seeing why, you know, programming quality would have to suffer, given what we have exposed here and what we are asking the Commission to deal with.

762 Now, another factor that we have pointed out in our earlier submissions is that certainly for the Category C services -- which by the way are the ones that generate certainly the greatest inflows of rents to the Bell Media Group -- those Category C services, you know, have always been extremely successful.

763 I think I heard Mr. Bibic saying that, you know, RDS is the Habs, you know, Montréal Canadiens. There is enormous marquee power in those services. The same goes as well for TSN. These services -- and particularly talking of TSN, it is, if my memory serves me right, the oldest specialty service around in the history of the system. It's been around, if my memory serves me right since 1982 wasn't it -- '84.

764 So I mean, you know, this service has done extremely well and no doubt will continue to do extremely well and does not have to cut on its programming investment, indeed it's doing investment as they claim in many press releases on acquiring content.

765 COMMISSIONER MENZIES: Okay.

766 MR. MAYRAND: So I have no doubt they will continue to do that and I have no doubt that they will not be contemplating any drastic scenario.

767 Now, the discussion seems to tilt only on some Category A services. We are all understood that it doesn't appear to be a problem for the digital Cat B services, but only some Category A services.

768 Well, I would posit to you, sir, that certainly making an assumption that all this group here of independent distributors will single-handedly, at the same time and with the same awful objective of driving margin at the expense of our program suppliers, will drive penetration down for all these Cat A services through packaging changes simply does not make sense.

769 COMMISSIONER MENZIES: Thank you.

770 Those are my questions.

771 MS MAINVILLE-NEESON: May I just add one point, though, with respect to comments that were made about RDS.

772 I believe it was Mr. Crull that indicated that in fact RDS has a significantly high penetration rate in Québec. It is a well loved service, mostly because of the Habs. Quebecers love their Habs.

773 The point is, in an environment where there is a lot of choice Québec has been given the opportunity for almost full consumer choice with the pick-a-packs and still RDS is succeeding extremely well because of the programming that they have.

774 So the argument that if you -- the doomsday scenario that they have presented that when you provide that choice that it will automatically lead to a decrease in penetration simply doesn't hold. For some services it may be, but the cherry-picked services on the example that they have provided does not show all of the services, there are Cat A services even on TELUS' service that do exceed the national average.

775 MR. BIBIC: Okay. So if a customer moves from Shaw where TSN is on basic, you just indicated at the beginning of your questions to TELUS and they decide not to take the sports theme pack, there is an immediate drop in penetration for us. So they have churned from one system to another. Now, that's choice, et cetera, I'm not debating that whole point, I just want to make a financial point.

776 In our case don't get paid for TSN anymore; customer has moved. Okay, that's what happens. And if you take the pick-a-pack example, if it were in English Canada and now the customer went to TELUS, imagine it had pick-a-pack and said, "I'll take five services and it's not TELUS or it's not any of the Bell Media Services", we don't get paid for that anymore.

777 But what happens on the BTU side? It's pretty simple, you know, they are indifferent because they have the customer, they have the customer on basic, they drive -- they up-sell the customer to a pick-a-pack. If it's a 5-channel pick-a-pack, the cost per channel to consumer goes way up. Meanwhile, the BDUs drop massively the content costs because they don't have to pay for TSN anymore. They still have the customer and they have the retail pricing lever that if their ARPU somehow suffers -- and it won't, their margin is actually going to go up -- you still increase the price.

778 So that side of the table is protected, this side isn't. And I'm not trying to say there shouldn't be choice or anything like that, but that's just the financial dimension to this.

779 So what we are saying is, okay -- and the second point is, now let's take TSN. In a forum like this we are going to say no minimum penetration levels anymore for TSN, full pick-a-pack for TSN because the RDS experience showed us that it's going to be okay, there is a competitor that TSN deals with. Are we going to change their packaging? Because if they get to continue to do whatever they are doing in the marketplace to protect themselves, but this service doesn't, in a forum like this, not a policy hearing, we are going to tip those -- and this is not the forum to do this is I guess what I'm trying to say and there's a lot of moving parts to it -- all we are saying is orderly, balance and if there is going to be a drop in volume then that needs to be addressed with an increase in unit rate.

780 MR. CRULL: I think it's well documented, too, the cost of sports rights. Any of the members can launch a sports channel tomorrow, it's now an available market to go into and the cost of sports rights are going nuts and, sadly, the rights holders of sports don't respect obviously the regulatory control of the wholesale rate.

781 So we have a very real challenge that we are not regulated on our input costs and yet facing this very difficult effort of just trying to sustain the output.

782 But the other point is, look, I'm immensely -- I hate that we are debating in front of the Commission whether it's doomsday or it's not doomsday. I appreciate Mr. Morin's description that the fact that we would all repackage and cause doomsday overnight...

783 What we have wrestled with is the only way we can be comfortable in stability of volume for a set rate is set packaging, because none of us really know. We have evidence that we have put on the record, but none of us really know what penetration would happen with theme packs that are introduced alongside the big cable tiers, but we do have some evidence that we think, but I won't tell you I have a crystal ball.

784 The only way that we could see set volume, volume consistency, was to say, "Don't make packaging changes unless we agree mutually and we have offsets. But then that's why we introduced the PBRC. If the penetrations don't fall precipitously, then everybody is happy and everybody is good. And so it is difficult to me because it seems so rational to either or solve the solution.

785 MS SALMON: The horse is out of the barn, to borrow your phrase. Customers expect choice that is in the market and our customers want choice.

786 THE CHAIRPERSON: We are all repeating ourselves here. We have heard this all morning.

787 MS SALMON: Yes, well I appreciate --

788 THE CHAIRPERSON: So at the point -- I want to move on because we are never going to finish it, we are going to keep repeating ourselves again and again.

789 I just have one follow-up question on the pick-a-pack as it relates to Quebec, because I heard the conversation between Commissioner Menzies and Bell.

790 It appears as though this pick-a-pack is limited to terrestrial BDUs, or does it include satellite as well?

791 MR. YABSLEY: Includes satellite.

792 THE CHAIRPERSON: So can Bell ExpressVu offer pick-a-pack in Quebec?

793 MR. YABSLEY: In Quebec and to us.

794 THE CHAIRPERSON: Can it offer it in Ontario?

795 MR. YABSLEY: No.

796 THE CHAIRPERSON: So we are sitting here in Gatineau, and if I called them up right now I could subscribe to pick-a-pack. But across the bridge where I live, on Bronson Street, if I called up, you would say no?

797 MR. YABSLEY: That is the way the two markets have evolved. But we are changing that under the PBRC.

798 THE CHAIRPERSON: Okay.

799 And there is another satellite provider as well.

800 MR. YABSLEY: Same rights.

801 THE CHAIRPERSON: And they have the same thing? They can do it in one province but not --

802 MR. YABSLEY: We try to be consistent with our distribution partners.

803 THE CHAIRPERSON: So we have done the major carve out just for Quebecers?

804 MR. BIBIC: In fact, Commissioner Katz, the April 19 -- sorry, the February 19 launch of Bell TV in English Canada, is something that more closely resembles what cable does. Is there is three large tiers with the services that we think people want in those three large tiers as they step up.

805 And the reason we did this is in English Canada Bell TV was finding that the whole theme pack structure, this used to be like a four-page foldout, is confusing customers, how many theme packs, which services are in the theme packs.

806 And our experience was it was driving a lot of confusion and dissatisfaction and calls to the call centre, so we went to this very simple model; pick 1, 2 or 3 and you are done. A little bit of add-on packs in the back.

807 So it is the competitive process. We felt to be more competitive with the providers we compete with in English Canada, we needed to go to the streamlined version. And years ago, given what Videotron has done in French Canada, it evolved differently.

808 THE CHAIRPERSON: Okay. Let me pass the baton on. I am going to start at the far right and ask Commissioner Denton to ask any questions he has, followed by Commissioner Morin if he has any, Commissioner Cugini, and then wrapping up with Commissioner Duncan.

809 COMMISSIONER DENTON: We seem to be dealing with the financial implications of choice here. And my first question will be for Mr. Mayrand or his side. Is a penetration-based rate card acceptable if it has no -- if it is without that condition that less than 50 per cent is a no-go?

810 MR. MAYRAND: I will just I think refer again to the comments we made. From what we can see, and frankly we haven't seen much on the PBRC on the record so far, from what we can see is that there are three very big problems with that, which make it in fact a phony choice and in fact a punitive choice, not just for members of this group, but also consumers.

811 So I can't certainly say that this group feels that it is a real choice and a real option the way it is presented by Bell.

812 COMMISSIONER DENTON: Not a real choice as presented by Bell. But if -- that is not really quite my question.

813 MS MAINVILLE-NEESON: Right.

814 COMMISSIONER DENTON: Bell is saying, if you have fixed rates, you are going to have greater choice. But if you are going to have uncertain revenues coming to them, they are going to have greater rights than would otherwise be, right? They want to have..? Right?

815 Okay, so the penetration-based rate card is a way of addressing the question of choice. And I'm not asking whether Bell's particular formulation is acceptable, is it unacceptable in principle if you have a penetration-based rate choice?

816 MR. MAYRAND: I think that certainly we have said, and I know in opening remarks certain comments reported in the press and quoted back to us, and that is philosophically we don't have a philosophical problem with the fact that, you know, there can be taken into account the penetration factor.

817 Indeed, in expired agreements for some services that has been the case, and those agreements were correctly negotiated between the parties.

818 COMMISSIONER DENTON: Okay, thank you.

819 So, Mr. Bibic, I heard you saying and I just want to check that you actually said this, that the choice and flexibility should not come at the expense of the system. Did you really say this and what do you mean by that, that choice and flexibility should not come at the expense of the system? Whose system? What?

820 MR. BIBIC: Well, the regulated broadcasting system. But the premise was there are 47 some odd analogue Category A, which are at the heart of the system. And what I was saying is the following.

821 What CIDG's formulation of choice and flexibility is is provide us with the unilateral right to repackage regardless of what that repackaging might do to the services. And through that, we will provide more flexible packaging to consumers. That is the CIDG formulation.

822 And by the way, please give us the same rates that you otherwise would have given us if we had given you stable volumes.

823 Our view of that is the following. Choice and flexibility means a couple of things. Choice means a wide breadth of services available to consumers to choose from, Canadian services.

824 And flexibility is, yes, let's work together to provide ways if consumers are demanding it to allow them to, for example, pick-a-pack of things like this. But let's do it in a way that doesn't put all the financial risk on one side, and that would be the flexile penetration-based rate card.

825 Because if you yank the rug out from under the 47 analogue As and Cs immediately and the penetration drops as it did in some of these charts that we've shown, which are real marketplace examples, these services are in peril.

826 If we do it in an orderly way that has balance with the flexible rate card, then it is a question of economics; low volume, higher unit rates. If the volumes stay the same because these services are so great and people love them, then everybody is happy.

827 And, you know, if we want to have a broader discussion as to whether or not analogues remain at the heart of the system or should continue to benefit from genre protection or whether or not these should continue to be must-carries, well, we should have that discussion.

828 But it shouldn't be like this, because it's going to -- the decision here could potentially, depending on what it is, reverberate across the entire industry, not just Bell's 12 analogues, but all 47.

829 MR. CRULL: If I may, Commissioner Denton, just because I very much appreciate the question. We took paragraph 31 in the vertical integration to heart, that the Commission is concerned the lack of choice and flexibility could motivate consumers to leave the regulated broadcast system.

830 And I think our big point is the unintended consequence of this packaging flexibility that would suppress penetration on Cat A services, will damage the very services that keep them in the broadcast system. And so it is like the cure is worse than the disease.

831 The disease today, the evidence in the fact-finding mission and in reported results, people aren't leaving the regulated Pay TV system. Subscriber counts for Pay TV providers are at record levels. So there is no evidence. And here our very real fear is the cure is way worse than the disease in damaging and causing people to leave the regulated broadcast system.

832 COMMISSIONER DENTON: If they are getting a greater choice, indeed complete choice in their packaging, and they are paying a volume of money commensurate with that choice, how are you affected?

833 MR. CRULL: The long-standing rate X volume equation would allow me to continue to program Comedy Channel, Bravo, Discovery, E!, Much Music, as long as we adapt the system to that choice. So if volume falls, then the rate goes up and the programming services can be sustained.

834 COMMISSIONER DENTON: We are in agreement about that. It seems therefore that you have said that in relation to this at paragraph 21:

"CIDG members that choose this approach could repackage services in various ways without our consent, as long as penetration didn't drop below 50 per cent."

835 And this is my point, are you making the argument that too much uncertainty is introduced into the system too quickly by a failure to have such a provision?

836 MR. CRULL: I think that is true. I think that absolutely, as Mr. Bibic said, it is a real concern to me, that I believe we are fundamentally reshaping the economic model that the industry operates on. And by an FOA process, that is hard to get in everything you want to say in such a short time, this is a massive change.

837 And we are saying that within our structure we think moving the pendulum all the way from one side to the other is far too extreme and we think some safeguards on this step are necessary. And we don't think, under reflection, anybody in the system, independent producers, the Commission, consumers, broadcasters or distributors, would want these 32 Category A services to fall below 50 per cent.

838 COMMISSIONER DENTON: Though we wouldn't want it, it might be what consumers want. But the major point I am trying to get at is if you people were allowed to negotiate this to a conclusion with us indicating -- are you seeking from us some indication that we are ready to allow a full negotiation of all outcomes, not just a controlled set of outcomes?

839 MR. BIBIC: Could you elaborate a bit more on that? Sorry.

840 COMMISSIONER DENTON: Well, what I am trying to say, is if we indicated that we were not concerned whether penetration fell below 50 per cent, is that a useful outcome to you? Does that allow you to negotiate better or more clearly knowing that we are not going to backstop unsuccessful stations?

841 MR. BIBIC: Well, I think ultimately what we need is guidance that, you know, the concept of flexible packaging ought to come with a notion of flexible rates, would give us the guidance we need to go to FOA.

842 And I think I could see two hypothetical scenarios. Bell puts a penetration-based rate card forward that follows the flex packaging equals flex rate model. And let's say we put in a floor of 50 per cent as we indicated in our opening statement. CIDG may say, well okay, we will put in an offer with no floor or we will put in a floor at 20 per cent or whatever it is. And then we will make our pitch to you and you will choose which one it is.

843 You know, we will try to convince you that 50 per cent floor is appropriate and they will try to convince you that it is not. But, you know, the threshold issue is guidance that we require is the concept of flexible packaging, flexible rates, is it commercially reasonable and fully in accordance with the VI code of conduct is what we need.

844 COMMISSIONER DENTON: Thank you.

845 THE CHAIRPERSON: Thank you.

846 Commissioner Morin.

847 MR. BIBIC: Just for the record, if I may, and it is just only because in our transcripts in three weeks from now we may not know what we -- when Kevin said Pay TV providers I believe he meant BDUs.

848 MR. CRULL: I did.

849 THE CHAIRPERSON: Commissioner Cugini.

850 COMMISSIONER CUGINI: Thank you.

851 Just a couple of areas that I want to cover. And I do have a couple of questions with regard to Exhibit 4, and that is where you show us the penetration drops with a certain distributor.

852 I assume that this, the carriage of your services that are shown on this exhibit, are the result of an affiliation agreement that was entered into with this particular distributor, correct?

853 MR. CRULL: That is correct.

854 COMMISSIONER CUGINI: So you knew that these services would be carried in this manner. Did you anticipate when you entered into that affiliation agreement that the penetration rates would drop?

855 MR. YABSLEY: No, we did not.

856 COMMISSIONER CUGINI: When does that affiliation agreement expire or has that..?

857 MR. YABSLEY: It is expired.

858 COMMISSIONER CUGINI: It is expired.

859 MR. YABSLEY: Just prior to this process, yes.

860 COMMISSIONER CUGINI: If the CIDG group enters into the agreement that you have before us today, by how much do you think the penetration -- or I guess I mean the average penetration of these services -- by how much would that increase? Or I guess the better way of asking the question is what effect would the new version of your affiliation agreement have on these services?

861 MR. YABSLEY: Are we talking about the particular distributor that is in red?

862 COMMISSIONER CUGINI: Yes.

863 MR. YABSLEY: I guess my answer would be it would depend on what they do to the packaging. If they introduced even more flexible packaging, they would probably drop lower. And if they maintain consistent set packaging, depending on what they do with their marketing, a good chance they stay stable I guess, but --

864 COMMISSIONER CUGINI: Okay, I am trying to understand how --

865 MR. YABSLEY: The intent of set packaging is that we would anticipate they would stay stable.

866 COMMISSIONER CUGINI: They would at least stay stable, at a minimum?

867 MR. CRULL: Yes.

868 MR. YABSLEY: What we tried to do is give them two options. One to say, okay, if your penetrations are bad, we are not going to force you to change them. What we would love to do is say, you must go to large packages, like Bell TV has done. We haven't done that. We said, you can definitely have the option to stay and doing what you want.

869 We may or may not like your penetration right now, in this case we don't, but rather than try to tell them they have to change, we said you can stay where you are. So we would expect them to be stable if they didn't change their package.

870 MR. BIBIC: So the model works like this; stay where you are, keep your packaging the way it is, at least we have some comfort that your penetration will stay around where it is.

871 So we are not saying to red BDU, get yourself up to the blue number. We are saying just stay there.

872 Now, if that penetration -- you have kept your packaging the way it is and now, for reasons that we can't fathom, it drops, the penetration happens to drop 5 per cent, then let's have another discussion because clearly there is something we need to do.

873 Some BDUs, you see in the evidence as well, have that number at 10 per cent. We are willing to discuss that with CIDG, but that is the model. It is not get yourself up, you know, BDU red to the BDU blue.

874 COMMISSIONER CUGINI: Okay.

875 MS MAINVILLE-NEESON: May I add to that though?

876 COMMISSIONER CUGINI: Of course

877 MS MAINVILLE-NEESON: I believe, in at least one instance, there is a request with that set packaging model. There is an obligation that one of the services would have to go up.

878 MR. BIBIC: That is correct.

879 MS MAINVILLE-NEESON: Packaging changes would have to occur because TSN is being required to go at a higher penetration than what it currently is at.

880 MR. BIBIC: So let's discuss that. So there is one service -- well, there is two services, RDS and TSN, these are the only two services where we have minimum penetration floors.

881 In the case of the red BDU, that would require -- only in that case that would require the red BDU for only one of those two services to get up to that floor. But the option there would be PBRC, yes.

882 COMMISSIONER CUGINI: Okay.

883 I heard you repeatedly talk about the business regulatory and consumer benefit to support of course your position for the carriage of your Category A and C services.

884 Do you use that same argument to support the carriage on Bell TV of all other Category A and C services regardless of ownership?

885 MR. BIBIC: Yes, actually. What we are talking about here is the analogue Category A and Cs. Now, when we repackaged for Bell TV there were a lot of puts and takes, and obviously we didn't just repackage Bell Media Services, we repackaged everyone else's services.

886 And the analogue Category As and Cs that weren't owned by Bell Media we use the same philosophy.

887 Now, we demanded, I have to be totally up front, and there is one Commissioner here who was actually a mediator, for the digitals we requested as a BDU more flexibility. And but that is the exact same flexibility that Bell TV would get from Bell Media and other BDUs would get from Bell Media on the digital.

888 So for the analogues, absolutely yes.

889 COMMISSIONER CUGINI: Thank you very much, those are my questions.

890 THE CHAIRPERSON: Thank you.

891 MR. BIBIC: Oh, and just a minute, and no analogue services came forward and filed complaints about the repackaging, and one digital did and we resolved it.

892 THE CHAIRPERSON: Commissioner Duncan.

893 COMMISSIONER DUNCAN: Thank you, I have just a few questions.

894 Just continuing on with all of the discussion about the TSN and RDS penetration levels. And I know that you said those -- just now you said those are the two services that you are requiring a minimum penetration level. Did I understand that correctly?

895 MR. BIBIC: Correct.

896 COMMISSIONER DUNCAN: And so the minimum penetration level I see is described as being their current level.

897 Given the significant increase in the rates for those services, is that necessary? I am just wondering when you decided on the rates for those services didn't you anticipate in this current environment of offering more choice to consumers that there would be an amount allowed in there for the fact the penetration may fall off? Bearing in mind that I can't imagine that TSN is going to drop too significantly, but...

898 MR. BIBIC: So I will answer the first part and I will let Kevin answer the rate issue.

899 So every single BDU in the country but one is above the penetration floor that we require, all but one. So that is why we said, you know, it is not that they are at it, they are actually above it.

900 MR. CRULL: And I would just say that sports are by far the most expensive programming service we offer. The cost of operating TSN today, before I face down Mr. Bettman and the Habs and a number of renewals that are coming, it is five times more than our next closest channel.

901 It is not unreasonable or unusual to require minimum penetration on a service like that. That is true for our competitor in the market and it is true for every other sports service that we know of.

902 As to the rate, we worked long before I arrived, I was a BDU when Mr. Yabsley came to me and said, look, we are going to be renewing TSN with you and here is the rate you should have in your mind. And through the negotiations that rate came down 40 per cent.

903 What we did, in listening to the BDUs, and I met with the CEOs of several of the companies there, three of them, and they said, verbatim:

"Look, we don't deny that the market justification for the rate on TSN is there. We don't want you to go there overnight. Work in over time."

904 And so we actually took four or five years to get to the rate that we initially started talking about in the market.

905 You will see, we took great pains on all of our proposals, and you will hear this from Mr. Bibic when he concludes. Page 2 of the two-page code gives great direction on the appropriate way to establish a fair market value for wholesale rates. And we provided Appendix A to show exactly how we concur with that.

906 COMMISSIONER DUNCAN: So in the table that you gave us, I just don't know where the reference is, but you will know the table I am referring to, where you set out the amount of the increase for the various services for each of the four, in each of the four columns.

907 So that increase that is in there for TSN, for example, it is not the high point, it is the low point and it is going to get an even larger increase over the term of the contract?

908 MR. CRULL: It is typical for when programming renewals occur, that there is annual increases. So there is an initial jump and then there is annual increases through the course of the term.

909 COMMISSIONER DUNCAN: And so then my question was did you allow, in coming to that increase, to recognize the fact that penetration may fall off when consumers are given more --

910 MR. CRULL: We set the floor below every single BDU in the country, except one.

911 COMMISSIONER DUNCAN: Okay, all right. Thank you.

912 MR. BIBIC: And the model was, given the exorbitant sports rights costs, we need this rate at this penetration to make the model work. Now, if penetration were to drop... So in fact, I think your first question was in that rate did you factor in the impacts of potential drops?

913 No, it was assuming that everyone is at the minimum level at least, then we can make that particular rate work. Now, if the rate was going to drop, then we would need to inquire into the or look into the flexible rate card model whether the rates are going to have to increase.

914 COMMISSIONER DUNCAN: Okay, thank you.

915 I am just wondering, and I don't want to repeat anything that has already been asked. But in your opening remarks you say that you are going to offer the same agreement to CIDG group as you have offered all the others. You have standardized four, for the four changes.

916 But when will CIDG and the Commission, for example, know exactly what those changes amount to?

917 MR. BIBIC: It is a really critical question. So thank you, Commissioner Duncan.

918 If you turn to Tab 3. So this is the list of 159 BDUs, and really there are four clauses that are under debate. The first column, if you look on the right-hand side of the page, entitled "set packaging terms," the first one packaging clause, this is the one that says, "continue to package as you are packaging."

919 Then there is a 5 per cent renegotiation clause, a third clause, and then there is the minimum penetration. You can see, for example, in the first column every single BDU, every single one has agreed to that clause.

920 I guess what I'm saying is, it's not hard for the CIDG to say -- they know what four clauses are and there are some changes. Like for one BDU the 5 percent number was modified to 10. So we are prepared to do that. For others the minimum penetration floor for TSN was waived, but the point is that BDU is already well above the floor and promised to keep the packaging the way it is.

921 So we are willing to have that discussion here.

922 We are willing to do this: We are willing to say that whatever deal Bell TV has, if they want to sign it right now, we're good, no negotiation. And if VI was about anything, wasn't it about that? We are committing here that they will get the Bell TV deal. No bogeyman, no conspiracies, that's it, that deal. We are prepared to do it.

923 COMMISSIONER DUNCAN: No comment, then, then from CIDG on that?

924 MS MAINVILLE-NEESON: In fact, that wasn't the only bogeyman with respect to the VI policy, right.

925 The concern of course is that it's not just getting the deal of Bell TV, but rather the fact that all of the vertically integrated distributors -- let's recall, that's over 80 percent of the subscriber market -- might have incentives to ensure that all of their services are packaged in such a way so that independents who seek to offer choice to consumers are not able to do so because of the way that the vertically integrated companies have decided that this is how the market shall be -- how it shall be drawn.

926 Essentially the VI companies are able to make policy by establishing what shall be the only offer in the market. That's the problem.

927 MR. BIBIC: I really didn't understand that.

928 Here we are talking about four packaging clauses, that's all we are talking about. If there were -- let's say there was a trader between Bell and Shaw and Bell said to Shaw, "We will allow you to do the plan personalizer if you put TSN on basic" and they say, "We will do that, but you have to put Food Network on basic". And as a result we let them do the personalizer and we increase the 5 percent number to 10 percent.

929 We are not saying to any of these folks, "You know, you don't have a Food Network to hold over us so too bad for you." We don't care that they don't have any programming services at all, you know. Shaw may have -- hypothetically speaking, Shaw may have used Food Network, a great service, as a hammer over us and got a better deal. We are saying, "Good, take it. We know you don't have any programming services, it doesn't matter, you can have that arrangement." In fact, we're saying, "Take the Bell arrangement".

930 So this traders issue is a red herring because whatever the result was on these four clauses we will pass along.

931 In fact, this is not about rates, but we are prepared to make the same commitment on rates. They will get the best deal on rates for similarly situated BDUs. By that I mean volume.

932 MR. MAYRAND: If I may, Commissioner, I just want to again -- we quoted that I think in our opening remarks, but really I think what we have all seen here is that as economic theory would have predicted, you know, VI entities have a very great incentive and the opportunity to include many of their own services on the basic service of their own distribution arms and, of course, to try and force that on the only distributors that they do not control.

933 So I have to say, Commissioner, and all of you Commissioners, I think Canadian consumers are going to be watching this very carefully because they are seeing what's going on and certainly if the rule of the land here in this vertically integrated universe is now that, you know, all these services should gravitate to basic and never come out of basic or never be offered in any more flexible packaging option and the price goes up, as we have dutifully noted with a huge step up each time an agreement is renewed, plus annual substantial compounded increases, particularly for these Cat C services, which are the most expensive sports ones which not all Canadian consumers necessarily want to watch, well, we will all have a big problem.

934 THE CHAIRPERSON: Why don't you save your comments until you wrap up, because I'm hearing it again and again, the same thing back and forth, gentlemen and ladies.

935 Continue on, Commissioner Duncan.

936 COMMISSIONER DUNCAN: I presume, then, in your remarks you will tell us what you would like to see is a solution specifically to that.

937 And I don't have too many more questions.

938 I wanted to know, because I know from reading the CIDG submissions that they are very concerned that they won't be dealt with fairly by the Bell Group and because the Bell Group will have knowledge of what their packaging changes are going to be. We have heard Mr. Bibic say that they have nondisclosure agreements and the example that they sell telephone services or deal telephone services with Cogeco and all that works fine.

939 I'm just wondering, are you satisfied now with that explanation? You had said in your submissions that nondisclosure agreements weren't sufficient.

940 MS SALMON: We are not satisfied with the assurances they have offered us in any way, because we need the packaging flexibility. There is no guarantee that has been presented to us that we can repackage in the manner that existing services are being -- we are not able to offer customer choice without going and asking for permission and there is nothing that I have seen that has said they will provide this permission.

941 MS MAINVILLE-NEESON: And with respect to the specific issue of disclosure, the Commission has had a whole proceeding on that and, in fact, the level of agreement on having an NDA, Bell has been, you know, particularly adverse to having any, you know, structure whereby we would be protected.

942 But in any event, one major tenant is that some information is so competitively sensitive that it cannot be shared because it's being -- it's at the level of -- these are large, large agreements and therefore it is the Presidents of companies, it is the high senior management who -- it's not a question of disclosure, it's a question of use. So among the boardroom table of Bell for example, you will have, I believe, Mr. Crull, Mr. Cope and others and around that table it's not a question of disclosure but rather what happens if that information gets used. "Well, I think it might be a really good strategy to do this", which they know in the back of their mind is something that their competitor has considered.

943 MR. CRULL: We still compete with -- I think that Rogers, Shaw and Vidéotron are pretty sophisticated players in the market and we compete with them.

944 This hearing is about the commercial reasonableness and the market precedent of our offer and they have accepted the terms.

945 COMMISSIONER DUNCAN: Thank you.

946 One last -- sorry.

947 THE CHAIRPERSON: Go ahead.

948 COMMISSIONER DUNCAN: I just have one last one, unless you were to ask something now.

949 One last question, and that's to do with the paragraph 24 in your submission or your comments this morning, CIDG, where you talk about:

"Apart from their unfairness, the penalties sought by Bell are remarkably large. They would amount to 20 percent of the value of the contract."

950 Which is tantamount, you say, obviously:

"...to a full year's additional fees on a 5 year contract."

951 So I'm just interested to have that calculation confirmed by Bell. I didn't come across it in what I looked at.

--- Pause

952 MR. BIBIC: In the document that caused the kerfuffle this morning that we filed, you know, if we can reach an arrangement on packaging we are prepared to waive the penalties.

953 COMMISSIONER DUNCAN: All right.

954 Thank you very much, Mr. Chair. That's all.

955 Thank you.

956 MR. YABSLEY: And I should point out, because it was my document, that there's actually an error in that. I think they have calculated it the way we worded it, but it was intended to be the incremental amount, not the full amount of the monthly fees. So there was actually an error, but we are going to waive it anyway, assuming packaging gets worked out.

957 THE CHAIRPERSON: I believe Commissioner Morin has a question.

958 CONSEILLER MORIN : Merci, Monsieur le Président. Une question.

959 Il semble que, au Québec, il n'y a pas de problème, mais curieusement, Vidéotron, à l'onglet numéro 4, ne divulgue pas l'entente. Par contre, Rogers a divulgué l'entente. C'est-à-dire que le CRTC a en main les conditions qui ont été négociées avec Bell Media.

960 Est-ce que votre groupe ne serait pas rassuré, n'est pas rassuré par le fait que nous avons l'information qui a été négociée avec Bell, comme l'a dit monsieur Crull, qui a été négociée avec Bell?

961 Ce sont des joueurs sophistiqués dans le marché, et eux, ils acceptent les conditions imposées par Bell et ils ont testé dans le marché de London, ils ont testé le marché au niveau de l'accessibilité suivant la décision que nous avions rendue dans l'intégration verticale.

962 Alors, je dois dire que quand je vois Rogers qui signe littéralement avec Bell, Vidéotron qui signe avec Bell, même si on n'a pas les conditions, mais il ne semble pas que ça soit un problème au Québec même pour Cogeco, j'ai un peu de difficulté à ne pas reconnaître un certain nombre d'arguments qui ont été mis de l'avant ce matin par Bell. Il me semble qu'il y a là une assurance que vous ne serez pas passés aux pertes et profits par une discussion avec Bell.

963 M. MAYRAND : Monsieur Morin, franchement, nous faisons face, nous, les distributeurs indépendants, à une situation qui est à peu près intenable, et la situation est la suivante.

964 Nous avons quatre grands groupes intégrés qui sont propriétaires de grandes parties du système de distribution de radiodiffusion au Canada, en fait, 81 pour cent, et ils sont aussi propriétaires de la grande partie des services de programmation canadiens que nous sommes en mesure de distribuer et auxquels on s'attend qu'il y ait distribution sur nos réseaux.

965 On sait, semble-t-il, qu'il y a des ententes qui interviennent entre ces quatre grands groupes, mais nous n'y avons pas accès.

966 Alors, ce que vous nous dites, c'est est-ce qu'il suffit que le CRTC ait accès aux ententes qui interviennent entre grands groupes intégrés, et on sait qu'ils ont des intérêts qui concordent et qu'il y a des échanges particuliers qui sont possibles entre eux et non entre des entités intégrées verticalement et des non intégrés verticalement comme nous le sommes.

967 Vous êtes en train de nous dire, vous devriez vous satisfaire que le CRTC soit au courant de ces arrangements-là.

968 Moi, je vous dis, honnêtement, nous avons des clients, nous avons des consommateurs au Québec, en Ontario, dans toutes les provinces canadiennes, et nous essayons de conclure des ententes négociées qui reflètent la situation de nos membres et le fait que nous sommes des indépendants, et le CRTC a un mécanisme en place qui permet de régler des différends lorsqu'il y en a et qu'il est impossible d'arriver à une entente sur la base d'une négociation libre.

969 Nous en sommes rendus à ce point-là, et le problème que nous avons, c'est que nous devons établir au moins un canevas clair et concret des modalités de groupement de services de packaging et la nature exacte des droits qui sont inclus dans ce package-là dans ce que nous avons essayé de négocier depuis des mois et n'avons pas pu réussir à faire.

970 Alors, si vous me dites, est-ce que ça suffit que le CRTC soit au courant des ententes intervenues entre quatre grands groupes pour conclure que c'est automatiquement ce qu'on devrait signer, je vous dis non et je vous dis, ça constitue en fait un contrat d'adhésion que nous n'avons pas la liberté de négocier et auquel nos abonnés seront tenus par ricochet.

971 MME MAINVILLE-NEESON : Et si vous permettez d'ajouter, ça nous rapporte exactement à tous les principes établis dans la politique sur l'intégration verticale. En particulier, dans le Code de conduite, la clause 1e), où on parle des contrats entre les compagnies intégrées verticalement ont certaines incitatives qui n'existent pas, qui sont anticoncurrentielles, qui pourraient donner lieu à des circonstances qui ne seraient pas bonnes pour le système, pour la concurrence et pour les consommateurs. C'est exactement ça qu'on a déterminé dans la politique sur l'intégration verticale.

972 CONSEILLER MORIN : J'ai du mal à comprendre que les consommateurs de Rogers seraient maltraités par l'entente qui vous est offerte par Bell, similaire à celle qu'ils ont signée avec Rogers, parce que Rogers doit obligatoirement, impérativement, suivant la décision qu'on a prise, offrir cet accès, et ils testent le marché à London.

973 Alors, ils ont le même désir, finalement, d'offrir plus de choix, plus de services, plus d'opportunités, moins d'imposition de services, à leurs consommateurs, et je ne pense pas que Rogers est la compagnie qui passerait à côté de plein de conditions. Je pense que Rogers veut aussi souscrire à l'objectif du CRTC, que le CRTC a élaboré dans sa décision sur l'intégration verticale.

974 Il me semble que les... Et on voit que c'est la même chose -- et il y a le 5-10 pour cent maintenant là -- c'est la même chose qu'ils vous offrent. C'est ma compréhension.

975 MS MACDONALD: If I may?

976 M. CAVEEN : Monsieur le Conseiller Morin, on ne pourrait pas... Selon le contrat qui a été déposé devant les membres de CIDG, on ne pourrait pas faire le test de London. Tel qu'il est libellé présentement, on ne pourrait pas faire le test que Rogers a fait.

977 Je ne peux pas en dire plus. Je n'ai aucune idée de ce qu'il y a dans ce contrat-là. On ne le connaît pas, bien entendu, mais c'est clair. C'est écrit noir sur blanc.

978 CONSEILLER MORIN : Mais Bell vient de vous dire, si j'ai bien compris, qu'ils vous offrent les mêmes conditions, qu'ils sont prêts à offrir les mêmes conditions. Puis vous, vous me dites que, d'une manière opérationnelle sur le terrain, vous ne pourriez pas, que ça mettrait en péril votre rentabilité, le service que vous offrez actuellement.

979 M. CAVEEN : Ce que j'ai compris de ce que Bell nous a dit, c'est qu'ils étaient prêts à discuter de certaines des clauses qui sont à l'annexe que vous avez mentionnée, c'est-à-dire la clause de renégociation, et caetera.

980 Je n'ai pas entendu Bell dire qu'ils seraient prêts à nous laisser faire un test du type de celui que Rogers a fait à London, parce que ça, c'est défendu par le libellé du contrat tel qu'il a été soumis à CIDG présentement.

981 CONSEILLER MORIN : Si l'interprétation de monsieur est juste, parce que, évidemment, ce n'est pas le même contrat que celui que vous offrez, moi, ma compréhension, c'était, grosso modo, la même chose.

982 MS MACDONALD: If I may, I would like to just clarify. In listening to everything that has been described here I want to clarify what may be an issue of confusion.

983 Bell is describing deals that they have made with the four vertically integrated entities and they are telling us and the Commission here today that we can have those same rights. So they are talking about the outcomes of the terms of those agreements that have allowed these vertically integrated entities to get this flexibility.

984 What we are saying is, the outcomes may be fine for those entities, but the language of the agreement still requires us to go ask for approval in an agreement that also has terms in it that says you cannot make a change that has any impact on the penetration. And after hearing Mr. Crull today say explicitly that even a gradual decrease in penetration is a problem for us.

985 Knowing our current experience -- and we have evidence of it -- that when we have sought packaging changes under the terms of the existing arrangements we have had with Bell we have had challenges. Jennifer can speak to numerous examples of that.

986 So the difference that we need to make clear here is that while they may tout the terms of this agreement as being the same and suggest that we would have those same negotiation rights, we have to ask for those rights, ask for that approval and ask, knowing that everything we have heard today has to do with no gradual change, no change in penetration. That's why we have a concern, because there is nothing written into it that gives us any assurance that we will really have such a right.

987 THE CHAIRPERSON: Mr. Crull, do you want to respond?

988 MR. CRULL: Yes, thank you. I think I would put on for the record that 155 of the deals are not with vertically integrated and four are with vertically integrated and we will address that further.

989 The provider in Ontario, Rogers, signed the agreement that Mr. Bibic has showed that committed them to set packaging. They signed the agreement. We had negotiated a full-on agreement and then they came to us and they said, "We want to do a trial".

990 And just like we say, "Come to us and talk" and we agreed to terms for a trial in London, we agreed to length, we agreed to specific packaging, we agreed to information flow, and they agreed to a concept -- they agreed that they did not have the capability to do it under their agreement so they needed to have some special approval for it. We granted it with conditions that were private between the parties and, as we have said, we would absolutely -- but the most important thing is, they came to us and worked to do a commercial deal. We negotiated a commercial agreement first.

991 M. BIBIC : Monsieur Morin, je pourrais clarifier.

992 Bien, premièrement, les quatre contrats qui ont été modifiés, il y en a trois qui sont avec des compagnies intégrées verticalement; un des contrats, c'est avec un EDR indépendant. Donc, ce n'est pas toutes les quatre compagnies qui sont intégrées verticalement.

993 Mais pour répondre à la question et les propos que j'ai faits déjà, qu'on serait prêt à offrir au CIDG le contrat de Bell, tout ce que je voulais clarifier, c'est le suivant.

994 Si vous allez au tableau à l'onglet 3 -- et le nom des EDR est confidentiel -- mais si vous regardez à la rangée numéro 6, l'EDR en question, pour cette EDR-là, ce qu'on a fait, c'est qu'on a accepté de modifier la deuxième clause, 5 percent renegotiation clause, et d'augmenter le 5 pour cent à 10 pour cent, et on a aussi éliminer les minimum penetration requirements pour TSN et RDS, par exemple.

995 Là, si on va -- je continue -- à l'EDR numéro 110, quatrième page, pour cette EDR-là en question, on a aussi augmenté la deuxième clause, le 5 pour cent à 10 pour cent. On a éliminé la clause numéro 3, adverse economic harm, mais cette EDR a accepté les garanties de pénétration pour TSN.

996 Tout ce que je veux clarifier, c'est qu'on ne dit pas on n'offre pas au CIDG, qu'ils peuvent dire, bien moi, je veux le 10 pour cent pour la deuxième clause, je ne veux pas accepter le adverse economic harm, et je n'accepte pas les garanties de pénétration, parce que là, c'est une question de choisir... en bout de ligne, il faut choisir la combinaison qui a déjà été offerte, pas dire, lui, il n'a pas signé la deuxième clause, donc, je ne l'accepte pas, un autre n'a pas signé la troisième clause, donc, je ne l'accepte pas, et le troisième n'a pas accepté l'autre clause, donc, je n'accepte pas ça, puis en bout de ligne, on n'aurait rien.

997 Mais on offre n'importe quelle combinaison qu'ils recherchent qui a déjà été établie dans le marché. C'est ça l'offre, et incluant l'offre de Bell.

998 COMMISSIONER MORIN: As far as the experience in London is concerned, it's a commercial agreement I understand, but do you think it will work if there is a positive result about this test in the London market?

999 MR. CRULL: Well, I will leave it to the Commission's proceeding to hear back from what each BDU is providing for choice.

1000 Rogers knows that if they continue or I will leave it to the Commission's proceeding to hear back from what each BDU is providing for choice.

1001 Rogers knows that if they continue or expand the trial that they have to negotiate that and that that would be a commercial negotiation that would introduce exactly the penetration-based rate card. They have no interest in expanding or continuing the trial at this point and so that hasn't become a discussion, or at least none that we are aware of.

1002 COMMISSIONER MORIN: Thanks.

1003 THE CHAIRPERSON: Okay. I'm going to have a break now until 2:45, but before we do, can I ask CIDG, either in writing or in their oral summation at the end of the day in reply, to take this blue sheet of paper here, the two pages of blue, add a column on the other end saying "CIDG position" and identify for each one of these items whether you are prepared to accept that position or you want a different position and identify exactly what it is you would like for each one of these on both pages, please.

1004 Like I said, whether it's in writing or orally, I want to go through it all. I want to make sure we all understand what your formal position is in reply to these.

Engagement

1005 Okay? And we will break until 2:45.

1006 Thank you very much.

--- Suspension à 1337

--- Reprise à 1453

1007 THE CHAIRPERSON: Good afternoon. We will now continue with questioning, and we will start with questioning by the CIDG group to Bell.

INTERROGATOIRE PAR CIDG

1008 MR. MAYRAND: Mr. Chair, I thought you had requested that we provide CIDG's response to the Bell blue sheets here.

1009 THE CHAIRPERSON: I did. I was suggesting that you do it in your closing remarks. If you would rather do it now, that is perfectly fine. You are going to have to send it across to the other side, and they are going to need some time to digest it, as well.

1010 What I was hoping was, after each one of you examines each other, there would be another break before you go to reply, and you could perhaps pass that across and Bell could deliberate on it during the break as part of their reply.

1011 But if you have a different idea, I am open.

1012 MR. MAYRAND: Could we have a brief discussion?

1013 THE CHAIRPERSON: Sure.

1014 MR. MAYRAND: We don't be long.

--- Pause

1015 MR. MAYRAND: We have a little logistical problem. Obviously, we weren't equipped with the ability to produce 40 copies of this position, so --

1016 THE SECRETARY: We can do that, Mr. Mayrand.

1017 MR. MAYRAND: Okay. So it would be, then, a little bit later. I am quite happy -- I just wanted to inquire, though, whether -- we are providing additional comments to the document filed by Bell this morning, let's call them the blue sheets. We did file two very short documents, both one page, one on packaging terms and one on non-linear rights language, and we were wondering whether there would be, as well, some reaction or comment by Bell to those two documents that we filed.

1018 THE CHAIRPERSON: They may choose to ask you questions about that.

1019 I just wanted to try to standardize things. I know that we have your two pages, and our staff is fully capable of interpreting them and trying to align them with Bell's, but rather than us doing it and drawing inferences, we thought it would be better if you put them side-by-side for us, and then we would have your official view as to the comparison that you feel is reasonable, or unreasonable, vis-à-vis Bell's proposal.

1020 MR. MAYRAND: Then, I think that we ought to get this photocopied.

--- Pause

1021 MR. MAYRAND: If it is all right with you, Mr. Chair, I think we will get the number of copies that is required for the Commission, for the other side, as well, and staff, and we are prepared to address it.

1022 We do not, at this juncture, intend to use our time for cross-examination. We certainly noted that the Commission has done a very thorough job in asking questions to both parties, and we certainly would not wish to unduly prolong the hearing and get into repetition.

1023 I think that all of the factual bases are there and well understood, so we will not be using cross-examination time.

1024 THE CHAIRPERSON: Okay. So why don't you pass the documents to our secretary, who will then make photocopies, and let me ask Bell if they have any questions that they want to ask of you prior to reviewing the documents.

1025 MR. BIBIC: We do.

1026 THE CHAIRPERSON: Okay. So why don't you go ahead then. Once the document has been handed over, we will do that.

INTERROGATOIRE PAR BELL

1027 MR. BIBIC: We have three or four questions.

1028 In our experience as a BDU, I think it takes around 12 to 18 months from initial conception or design to actual launch date to get a repackaging done.

1029 Do any of you have any reason to disagree with that timeline? Is it too aggressive, too long?

1030 MR. MILLER: I would say, in speaking on behalf of TELUS, that that would be true for a large scale, sweeping change to packaging.

1031 If it was of a more targeted nature, then, no. I think, as we have seen, parties can react faster than that.

1032 But, again, if it is a large, sweeping change, that timeline seems reasonable.

1033 MR. BIBIC: Fair enough. That's our experience, as well, and I agree with you.

1034 Anyone --

1035 MR. CAVEEN: Yes, we would agree with that, as well.

1036 MR. BIBIC: Do any of the CIDG members have any repackaging plans in the works -- and let's call them large scale -- now or within the 18-month period that we have talked about?

1037 MR. CAVEEN: We do, actually. They are not finalized, but we do. We are looking at repackaging plans, yes, within that timeframe.

1038 MR. BIBIC: So in the case of Cogeco, within that timeframe, you do. So 18 months is fair?

1039 MR. CAVEEN: Yes. I would even say, probably, 12 months.

1040 MR. BIBIC: Have you shared that with the Bell Media team?

1041 MR. CAVEEN: Not yet, because we are not at that stage yet.

1042 MR. BIBIC: Okay. TELUS?

1043 MR. MILLER: We do not currently, subject to any other significant shifts in market. We may have to re-evaluate that, but there are none currently planned with respect to Optik TV.

1044 MR. BIBIC: EastLink?

1045 MS MacDONALD: I would like to just clarify that -- to your first question, you had inquired about how long it takes, and estimated about a 12-month period.

1046 MR. BIBIC: I said 12 to 18.

1047 MS MacDONALD: Twelve to 18, yes.

1048 Typically, for our company, we don't make decisions that long. It doesn't take that long.

1049 I mean, obviously, we have about 500 systems, so there are different times that we have to make analyses, but I am just saying that when we need to make a decision, we make it quick.

1050 So I wouldn't resign myself to a 12 to 18-month period.

1051 MR. BIBIC: Well, that wasn't my question. My question wasn't how long it takes you to decide. My question was you have decided to do a packaging change, then you need to get it into market and that requires billing changes, technical changes, marketing material, call centre rep scripts, et cetera, et cetera, et cetera.

1052 MS MacDONALD: So, to be clear, it would be less than 12 months for us to do that.

1053 MR. BIBIC: Okay. So it's question number two. Do you have any such plans in the works? I will start with EastLink.

1054 MS MacDONALD: We are working through plans. We have a number of systems. We have some newly upgraded systems. So we are working on plans.

1055 MR. BIBIC: Have you shared any of those with Bell Media?

1056 MS MacDONALD: No, not to date.

1057 MR. BIBIC: CCSA?

1058 MS SALMON: We actually have a number of repackaging requests in with CTV. They have all been denied during this process. So we are waiting on those.

1059 One is a system that has gone from purely analog to digital. The response from CTV was as long as your digital offering entirely mimics your analog offering, we will allow that, but if you want to introduce new packaging scenarios, that will not be allowed.

1060 So those are in the works. Yes, we have shared them with you.

1061 We have had members request to change the packaging of certain services to meet competitive threats in their market. Those have been denied.

1062 And we also have members who have asked me whether they can send in a launch form to change the packaging of TSN because they have been aware of what that rate may go to and they know that in the competitive market that they operate within they will need to move TSN off of basic because they cannot --

1063 MR. BIBIC: Okay. That's fair. I was talking about large-scale changes rather than discrete.

1064 MS SALMON: That is a large-scale change.

1065 MR. BIBIC: I mean I was just using the dichotomy that was raised by TELUS, with which I agree. There are discrete change requests; that is what you are talking about. And then there are whole-scale change requests, which is what I was asking about.

1066 Okay.

1067 MR. MILLER: Mirko, if I may?

1068 MR. BIBIC: Yes, for sure.

1069 MR. MILLER: We have actually -- I should note that there are some changes that are large in nature that are contemplated in the agreement. We have discussed those with Bell respecting the terms asked for in the agreement, more specifically around HD.

1070 I think that is about all I can say publicly.

1071 MR. BIBIC: Okay, thank you.

1072 I'm curious, is CIDG negotiating as a group with any other Canadian programmer?

1073 MR. MAYRAND: No. We started getting together, as you well know, in December. We notified Bell and our objective is to reach a suitable agreement with Bell.

1074 MR. BIBIC: Do you plan to negotiate with others as your deals come up with the others?

1075 MR. MAYRAND: We have not made any commitment to negotiate with other suppliers at this time. It may or may not transpire. Our focus is a buying group that will get the issue that we have --

1076 MR. BIBIC: Your focus is Bell?

1077 MR. MAYRAND:  -- no, get the issue that we have resolved as to packaging flexibility. Thank you.

1078 MR. BIBIC: Okay. It is what I thought.

1079 Mr. Mayrand specifically, could I turn you to Tab 7 of this book, which is the book of Bell exhibits?

1080 MS MAINVILLE-NEESON: Mirko, can we just add one clarification as well on that last question?

1081 MR. BIBIC: No, it's okay, that was -- well, yes, you should. I thought it was a Cogeco only question. Go ahead.

1082 MS MAINVILLE-NEESON: The point is that in the other circumstances CTV was the only one that had all these agreements that were expiring --

1083 MR. BIBIC: No, no. I totally get that. That is why I asked the follow-up question do you plan to, and I heard not necessarily.

1084 So Tab 7 for Mr. Mayrand or Mr. Caveen. This is the sample penetration-based rate card for Discovery Channel and I do want to be totally fair with you. This is the only Bell analog Category A for which you have the detail of the specific curve with the specific rates.

1085 What I would like to know is if Cogeco has -- well, you have seen this, correct? Okay.

1086 So what I would like to know is if Cogeco has assessed how much money it would save on an annual basis if it adopted this curve tomorrow for Discovery?

1087 MR. MAYRAND: You know, all you have provided is a curve that stops at 50 percent. What you are saying is if we adopted this, in the particular circumstance of Cogeco how much money would we save.

1088 Well, of course, we have looked at what it might mean. The problem is that we don't know what it means for all the services.

1089 MR. BIBIC: Oh, I agree, but I am just wondering for --

1090 MR. MAYRAND: And you prefaced your question by saying that it was a very specific one that you have picked out of your portfolio of 12 services.

1091 MR. BIBIC: Okay, well, if you just -- I will let you answer the general question but I would like and appreciate an answer to Discovery.

1092 Our assessment is you would save money, Cogeco, using this curve for Discovery if you adopted it tomorrow. Yes or no? That is our assessment.

1093 MR. MAYRAND: I cannot answer yes or no because you have said in your own filings, and I can quote you the exact paragraph, and you have restated that in your blue sheets this morning, that this is subject to certain limitations which we have not seen.

1094 MR. BIBIC: Okay. Mr. Chair, I would like an answer.

1095 We can play the game. I will never disclose what was said in mediation but you know what the limitations are. We set them. So you are well above the 50-percent penetration floor for Discovery on the Cogeco system.

1096 And Mr. Caveen then, our assessment is you would save money, Cogeco, if you adopted this curve. Do you disagree with that? I am not going to share the number obviously.

1097 MR. CAVEEN: Well, obviously if we are -- you mean if we are above we would save money. Yes. We haven't really looked at it. There have been some preliminary calculations but I would be unable to give you a number.

1098 MR. BIBIC: No, that is fair enough. But in our assessment you would save money.

1099 So the next question is to Mr. Caveen or Mr. Mayrand.

1100 It is well established, is it not, that on the Cogeco systems the penetration of the 12 English-language analog Category A's and C's is well, well north of 50 percent?

1101 MR. CAVEEN: That's correct, it is well north of 50 percent.

1102 MR. BIBIC: Okay. So why for Cogeco -- and you are all different, but for Cogeco, on a penetration-based rate card, why is the 50-percent penetration floor such a fundamental flaw?

1103 MR. CAVEEN: Nowhere have we said it was for Cogeco. We are above. So obviously there is not as much concern to us as there is to other CIDG members.

1104 MR. BIBIC: Okay, thank you. That's fair.

1105 And then my last question. To your knowledge, is TSN the only Canadian Category C service that has a penetration or a volume commitment?

1106 MR. CAVEEN: That has a penetration or a volume commitment?

1107 MR. BIBIC: Yes, one or the other.

1108 MR. CAVEEN: The answer to that would be no.

1109 MR. BIBIC: Okay, thank you.

1110 Those are my questions.

1111 THE CHAIRPERSON: Yes, go ahead.

INTERROGATOIRE PAR LE CONSEIL

1112 COMMISSIONER PENTEFOUNTAS: I have a question following maître Bibic's question.

1113 If the floor is not a problem for Cogeco and the floor is a problem for TELUS -- because I asked this question earlier -- how do you go about negotiating as a group?

1114 MS SALMON: That is the CCSA model. We don't enter into deals that would disadvantage a party at the advantage of another party. We have all the same concerns and the same problems and what we are looking for is a fair deal that would work for all of our systems.

1115 So what Bell potentially has done is offered a solution where one member would say let's jump on it and it is at the detriment of another member.

1116 It is the CCSA model too. We can come to a fair solution that works for all of our -- we have systems who are similar to TELUS, especially in penetration, we have systems that are similar to Cogeco in penetration, and the deal that we need on the table is one that works for everyone.

1117 COMMISSIONER PENTEFOUNTAS: We discussed a question with Mr. Chairman. I will let him ask it.

1118 THE CHAIRPERSON: But the only deal that is going to work for everyone is the lowest common denominator, is it not?

1119 MS SALMON: No. The deal that we have tabled is essentially we want to know that we can package the way we want. We are not trying to reinvent the model. Bell is introducing a new model. We are working with the agreement that they have in place with everyone else.

1120 What we are trying to do is say, listen, we are not vertically integrated and we don't have a hammer to come back. You know, we don't have a Sportsnet renewal coming up where we could say maybe now is a good time to enter into a discussion with you because we want this from you and you want this from us.

1121 So we don't have that coming up in the future, but all of us know that we are going to have to react to our customers' needs and wants, and we need to have some sort of assurance that the agreement we enter into allows us to package in a manner without us having to go and ask them for permission, which there is nothing that says they will grant us that permission.

1122 We are not necessarily asking to go to their model. This is a whole new model that they have introduced. It is not something we have introduced.

1123 We have said, you have the packaging and here are some minor variations to your packaging language that we think would give us the flexibility that we can then go and enter into this discussion.

1124 MR. MAYRAND: I think I have to table another question open to this whole room and that is I can state as a fact that this PBRC model was not offered to Cogeco in its previous discussions as a single party with Bell. So, of course, I can't help but ask myself -- and I will keep just asking myself -- why is it that Bell has come up with this model and the consequent questioning that it might be specifically advantageous for Cogeco at this particular juncture?

1125 MR. BIBIC: The answer to that is rather simple. We were brought before the Commission on a dispute resolution proceeding on something that is fundamental to our business. So we did what prudent businesspeople do, is we tried to come up with a solution that addresses the concerns of the CIDG, addresses some of the issues that we thought might be raised by the Commission in a way that would achieve our need for stability as well. That is clearly why we did it after the complaint was filed.

1126 MR. CRULL: Yves, I appreciate that and agree and acknowledge that you didn't have them. It was probably in October-November that we started working on this. It has been a long process. By then talks had broken down unilaterally with you guys and so we tried to float it with other guys and get some progress.

1127 But it is because, Jennifer, we don't see -- the packaging language you want of introducing theme packs and grandfathering, we don't see that as a minor variation.

1128 And the hard part is, that's where I say, "Look, you can have your opinion, we can have our opinion as to the detriment", but that's why we created the PBRC, because it allows you to make that change and if it really is a minor variation then it's no big deal.

1129 MS SALMON: Are you aware, Mr. Crull, that most CCSA members would be unable to take advantage of your PBRC because you have tied a penetration requirement and all of the 12 services together and most of our members, which there are over 100 of them, carry one of the 12 services to less than 50 percent. So none of them can have this new flexible packaging arrangement.

1130 MR. CRULL: Well, that is why for those members we would say that set packaging then should be a perfect solution. If they already have really low penetration, then they should take set packaging. Like we always thought for TELUS that it would be --

1131 MS SALMON: They only have low penetration on perhaps one of the services is the distinction I'm trying to make.

1132 MR. CRULL: Yes.

1133 MS SALMON: You have entered a new model that has a lot of ifs and it's not a clear, clean -- you are presenting it as here is a great solution for packaging choice and flexibility, but we have analyzed it and in our numbers we have said, "Well, wait a minute, does everyone have to have every one of these services above 50 percent and that knocked out a great percentage of our members. It definitely knocks out TELUS.

1134 MR. CRULL: Yes. What we contemplated there -- and, you know, this really a negotiation, but I want to demonstrate that we have been so forthright and open.

1135 What we contemplated there is two solutions -- and this is for FOA -- that the Commission and the system would say, "You know what, 50 percent is the right floor and we shouldn't -- we really shouldn't have BDUs -- I'm going to use an inflammatory word, but abusing the system by taking advantage of low, so we will have them pay to 50 percent.

1136 If in the Commission's wisdom it says, no, that's not a solution -- again we are getting into policy, but let's talk about a different solution. But it goes to, I think, a little bit of what Mr. Caveen said. You know, we did lay this on, I don't know, six weeks ago that this has been filed -- I don't know the date, so the PBRC has been in front of teh CIDG and in from of Cogeco for some time and the fact that we really haven't looked at it. We really haven't calculated it. Because we developed it, man it's so good for you guys. It's so good for Cogeco, not really great for TELUS.

1137 We are trying to adapt because, to the Chairman's idea, there is no one solution that we can present.

1138 Your members are somewhat homogeneous. The CIDG is not homogeneous at all.

1139 MS MAINVILLE-NEESON: So if I may just address, Mr. Crull, because you were going to say, you know, that's why set packaging is -- that's why you expected TELUS to accept set packaging, but it's not set packaging to the extent that with the minimum penetration that you have imposed on your sports services we would have to repackage. We cannot continue to offer the packages the way they are. So you can't say it's set packaging.

1140 MR. CRULL: That's true.

1141 MS MAINVILLE-NEESON: Under those terms --

1142 MR. CRULL: I agree.

1143 MS MAINVILLE-NEESON:  -- the terms of these agreements we can't avail ourselves of PBRC, nor can we avail ourselves of set packagine.

1144 MR. BIBIC: But it just shows that we have one issue with TELUS -- one. PBRC's work with Cogeco and CCSA is an entire dimension and here we are in a bilateral commercial dispute actually debating fundamental policy issues. That will be for my closing I guess.

1145 MR. CAVEEN: I would just like to reply to Mr. Crull's comment.

1146 First, you filed this on, I believe, February 21st, so it's about a month ago. And then you filed on March 6th additional information. So it hasn't been tabled that long ago, I think that's fair to say.

1147 We did look at it -- I did look at it and the thing that struck me -- and I agree with you, based on this service we probably save a bit of money, at least as long as we don't repackage.

1148 But what struck me is, if I understand your February 21st reply or proposal correctly, is if our penetration was ever -- what I see as between your threshold -- I don't know if I can say the number or not, but the star there. For a 25 percent decrease in penetration I see the price doubles basically. It's a 50 percent increase.

1149 Now, what I understand of your proposal is basically if we ever get to that 50 percent, we will pay double the price that someone who has chosen to pay set packaging, even though they may have comparable penetration rates.

1150 COMMISSIONER PENTEFOUNTAS: Mr. Crull, on ne fera pas le débat sur le prix aujourd'hui.

1151 I think that's something we made clear earlier and I would rather not get into the pricing.

1152 The PBRC model, why doesn't it work for TELUS, briefly? Is it the floor again?

1153 MS MAINVILLE-NEESON: It's the floor.

1154 COMMISSIONER PENTEFOUNTAS: Okay.

1155 MS MAINVILLE-NEESON: In the floor and of course the curve to the extent that we don't --

1156 COMMISSIONER PENTEFOUNTAS: The pricing of the curve we will deal with in FOA.

1157 MS MAINVILLE-NEESON: Right. So what --

1158 COMMISSIONER PENTEFOUNTAS: But the PBRC as a concept and volume times rate giving you a price, no one can be against that. Are we in agreement with that?

1159 MS MAINVILLE-NEESON: Right. And the tied selling aspect of course, right in the same -- which is the same issue as Jean-Pierre has raised, in that we would have to move all of our services there and so there is no way to valuate whether or not it can actually work, but fundamentally it is the threshold at this point that is the problem.

1160 COMMISSIONER PENTEFOUNTAS: Okay. Fine.

1161 THE CHAIRPERSON: I have one question and I'm trying to understand this.

1162 With regard to non-linear rights -- and this is the Bell blue sheets here that I'm looking at so I will be very cautious.

1163 Is it CIDG's position that all non-linear rights should be included free with the linear rights?

--- Pause

1164 MS MAINVILLE-NEESON: The idea is -- sorry.

1165 MR. MAYRAND: I think you already answered that.

1166 MS MAINVILLE-NEESON: Yes. I mean the concept is we are talking about the fair market value of the product that we are buying, which is the linear service, would include certain rights in the same way that Bell insists -- and it was really Bell that pushed in the Terms of Trade to have certain rights included in their grant of rights. Because it affects the value of the linear service if you are not able to provide it on different platforms and at the convenience of consumers.

1167 So it's not that we want it for free, we want it included in the fair market value of the --

1168 THE CHAIRPERSON: So just let me understand something. We are talking about multiple screens here and people are talking about four screens. Cogeco doesn't have a wireless service. Is Cogeco prepared to pay effectively the same amount as TELUS for the same access rights from all the multiple screens, recognizing they don't offer one of the screens?

1169 Because somewhere you are paying for a value and the value is -- if it's going to be one price for everybody, then some of you obviously don't offer wireless services perhaps, I don't know, but so if you are one buying group you are buying it based on one price, if that's your position.

1170 MS SALMON: Yes.

1171 MR. MAYRAND: Yes. Mr. Chair, we are very conscious of that. Now, certainly what we are talking about here is a multi-year agreement so you are right to say that right now Cogeco does not have a mobile platform, it does, though, have a VOD platform and it is starting its broadband video platform. It has those platforms. It has the interest in ensuring that its rights are not restricted in such a way that it has even less ability to exploit a non-linear programming exhibition than it had, you know, in earlier circumstances and certainly wants to make sure it has the ability to access these rights going forward.

1172 Now, you know, we don't know what the price of these rights ought to be because essentially Bell has told us, "Well, we are not ready to negotiate". And in fact I can state for the record that when Cogeco -- qua Cogeco alone was discussing this issue, Bell said, "We will not negotiate these rights."

1173 THE CHAIRPERSON: No, I understand that. But I'm saying this Commission is going to be making a decision coming out of this proceeding and if we decide that there shall be a price including all platforms, are you going to say basically you don't offer the same platforms, therefore you shouldn't be paying the same price as the person sitting to your right?

1174 MR. MAYRAND: I think I ought to read you in the record, because it is a clear description in three paragraphs of what we have in mind -- "we" being the entire group here. There are three paragraphs for non-linear rights that we tendered to the Commission and to the other side this morning. If you wish I will read them on the record and I don't think that they will cause any difficulty to the Commission in terms of any pricing decisions.

1175 May I do that?

1176 THE CHAIRPERSON: All I want to know is -- well, you can do that, but all I want to know from Cogeco is: Recognizing you don't have currently the same number of screens that other players within the CIDG group have, are you prepared to work under a common rate structure?

1177 MS SALMON: Here is what we are asking for because it will answer -- it will answer your question, because I would say CCSA even more so than Cogeco is in this boat. We have some people who don't even offer video-on-demand. The point is, they may and we would like those rights.

1178 So what we have asked for with non-linear rights is if those rights are available and in the market that they be available to us. If there is a rate -- we negotiate rights for VOD with all other programming suppliers and we know what suitable rates may or may not be. Some of them are free and some of them have a very, very nominal increase. They are paid by the people who use them. So we have it on a member-by-member basis by the people who use it. They are paid for in that scenario.

1179 We are saying that if these non-linear rights are being available in the market, whether it be to another BDU, whether it be to a Bell BDU or whether it be to an end user, and this is being provided for free, that it should be provided for free to us, too.

1180 In the absence of that, if these rights are being made available in the market and there is a charge for them, we will enter into a commercial negotiation for a commercially reasonable rate for those rights.

1181 Have I covered the --

1182 MR. MAYRAND: So it's up to you, Mr. Chairman, but I think the answer is clearly and very specifically outlined in the proposed language re non-linear multi-platform rates that we provided this morning.

1183 THE CHAIRPERSON: So what I hear you saying is you will all enter into individual agreements for those platform rights that you offer and you won't offer the other ones obviously because you don't have the platforms for them and therefore you will only pay for the market value for that platform?

1184 MS SALMON: We pay for the right if there is -- you pay for the right if there is a cost associated with that right, which there may or may not be, and you pay for it when you use it.

1185 THE CHAIRPERSON: But you want individual rights for each of your member?

1186 MS SALMON: You can set that up. CCSA does it with other programmers all the time. I think we have added an exhibit which says we have non-linear rights and they are available to everyone. And in the case where there is a separate charge for non-linear rights it is the BDUs who avail themselves of those rights that pay for them.

1187 MS MAINVILLE-NEESON: It's in fact no different than the rate card that is currently provided for the linear service. It's a payment model. So you have the agreement and some members may choose to offer the service on basic, to which one rate applies, other members choose to offer it on discretionary, that rate applies, based on the number of subscribers and an audit -- you know, that payment is calculated based on the number of subscribers, and so forth.

1188 The same thing would happen here, where the payment is based on number of subscribers, too, and if there is no VOD then they just don't pay for that portion of the rate card. It's quite simple.

1189 THE CHAIRPERSON: Can I ask Bell, what I thought I heard CIDG say is they are prepared to pay commercial rates where there is commercial competitive pricing I guess in the marketplace.

1190 Is that acceptable to you?

1191 MR. BIBIC: Well, for our collection of non-linear specialty program rights that we will go out to market with we will be going out with fresh offers. There are no such offers and no such deals yet.

1192 So if CIDG's position is that because you have no such deals yet you can't establish a market price, therefore it's zero, then we can't accept that.

1193 If the notion is that they were prepared to accept that there is a fair market value to those rates, to those rights -- and we will go to market and we will negotiate deals, including with them at the same time, and they will get the market deal, then of course that's what we said from the very beginning.

1194 MR. MAYRAND: It seems to me, Mr. Chairman, if Bell would care to comment on the language they provided us -- just three short little paragraphs -- let them do so.

1195 MR. BIBIC: I don't think we should be negotiating and redrafting clauses, I think we should be at the level of principles. What we need to go to FOA is a principle from the Commission and the principle we want of course, as you heard, established is that non-linear rights being unregulated don't have to be forced into this negotiation, recognizing that we have made a formal commitment that when we go out to market we will offer these rights to the CIDG and we will offer the same terms and conditions as we are offering to others.

1196 MS MACDONALD: So to be clear, then, what Mr. Bibic just described is what we presented for the draft of the agreement. It actually establishes that in the agreement when the time comes these are the terms that would give us those rights, with the opportunity to negotiate if they are made available at a set fee in the market.

1197 MR. CRULL: Look, I think at the principle level, I think that we trip up a little bit on the one-pager. It seems short, but I think we trip a little bit.

1198 So on the principle I think commercial terms and we are absolutely anxious. I think as a business we are behind in developing some of these products, but they are not in market for anybody yet.

1199 What I don't want, and I get slightly concerned on some of the sentences, is I don't want to presuppose the way I have to design the product before I have gone to market because of this agreement. I don't think that we can do that.

1200 So it may need to be more simple. I think the principle is nothing will be made -- we can't do it because of our ban on exclusivity, we will have nothing in market for anybody before we make it available to you under the same commercial terms.

1201 MS MAINVILLE-NEESON: I think one of the principles that is of concern to us is that the take-to-market approach on these non-linear services, you may have a different take-to-market approach, you know, offering a separate subscription for example for the TV viewing, because we know you have mobile TV viewing, life linear channels, we have seen the ads on TV, so we know that offering is there, and your model is that it is a completely separate subscription.

1202 But this prevents us -- the way that it has been presented to us -- and we do acknowledge that it has been presented as an offer -- the concern is that we may have a different take-to-market approach, which we think is very valid, which is that the TV subscriber buys TV everywhere, which is a concept that I think is used even by your own CEO.

1203 And so we would like to be able to offer a service whereby if you are, in our case on optic TV subscriber, you to get access to that service on TV, on linear, on your mobile phone, on your tablet and it makes -- there is no difference. The broadband screen that you are watching makes no difference and we would like to make sure that we have the opportunity to take that approach.

1204 COMMISSIONER PENTEFOUNTAS: But CCSA and Cogeco would not pay for all four platforms, because they don't have one or two of those platforms. Is that correct? So you would separate the linear from the non-linear?

1205 MS SALMON: We have yet to see a deal that -- and CCSA actually has done a number of deals that include all non-linear rights, including mobile, and we have yet to see a deal which offers that distinction, but if there is one in market and it's a commercially reasonable offer that everyone is paying, then yes, we would assume that's on a user basis.

1206 COMMISSIONER PENTEFOUNTAS: You would pay for a platform that you could not exploit?

1207 MS SALMON: I was saying it would be -- no, it would be on a per-subscriber basis. But those are unusual, we are not seeing those deals in the market.

1208 MR. MAYRAND: Mr. Pentefountas, we filed, as part of our submission of March 6th, a completely detailed exhibit on availability of non-linear rights. It has six pages and it has extensive evidence of availability of these rights as part and parcel of the affiliation agreements which are in fact rights licensing agreements. We talk about affiliation agreements, but it starts "Grant of Rights" and it's a licensing agreement.

1209 So the evidence is there on the record. It is abridged for obvious reasons, because it involves specific terms of specific service providers, but the list is complete, it's six pages long and it is extensive and pervasive throughout the industry and that's where the whole industry is increasingly headed it seems, with the exception -- notable exception I should say, of Bell.

1210 COMMISSIONER PENTEFOUNTAS: I have read every submission and the question that the Chairman and I are basically asking is: As a group once these rights -- if they are on the market or they are not on the market, that's not the issue, will you as a group be buying those rights collectively? Yes. But you will set a specific rate for the various platforms depending on what services you have or you don't provide. That's all were trying to understand. Okay.

1211 MS SALMON: It works with exactly how we would be paying and how it has been acknowledged we will be paying.

1212 They have offered a dual model, right, a penetration base and a set packaging.

1213 COMMISSIONER PENTEFOUNTAS: Yes.

1214 MS SALMON: That's on a system-by-system basis. If Cogeco decides to move it, it doesn't mean that CCSA members all have to move it. Very similar concept for these rights. If there is a fee for them it's the people who are going use them, but we can negotiate it together.

1215 COMMISSIONER PENTEFOUNTAS: Use them, okay.

1216 MR. CRULL: Mr. Vice-Chair, we are willing to make broadband rights, VOD rights available on a system-by-system basis. I don't think that that's -- I think that's consistent.

1217 I think I would want to add, Ms Mainville-Neeson, that the way you retail shouldn't be our concern. If you want to do TV everywhere and include mobile rights for free in your bundled package, you should be free to do that. The way we wholesale to you is going to be different, because I can't imagine every provider in the country may agree with you on your model of going to retail. So we need to have a wholesale agreement that can be retailed differently by different providers.

1218 MS MAINVILLE-NEESON: What we are asking is that that wholesale agreement, that we can actually purchase from -- for optic TV subscribers at this point we have only been offered for our entire mobile base, which is a different wholesale negotiation. So it does prevent us from our go-to-market and we should be able to establish our strategy.

1219 MR. CRULL: I don't think it prevents that. It's perfectly -- and that's the way we go to market. These rights cost a lot of money. To suggest these rights don't cost money is naïve and out of touch with the business.

1220 THE CHAIRPERSON: Okay. Let's leave the negotiations for the next round.

1221 Have those copies been photocopied now? Do we have copies?

1222 THE SECRETARY: Yes. I will distribute them now and we will call them Exhibit B.

1223 THE CHAIRPERSON: Okay. Can I suggest, then, to CIDG that it gets distributed. I want your approval first and then you discuss it now, we would then take a break and then we would come back with reply argument so that the Bell Group would have an opportunity to comment on it and you can summarize your final position as well.

1224 Is that reasonable? Okay, great.

1225 MR. MAYRAND: Yes, indeed.

1226 So I take it then that we will go through, before the break, the layout of our response to the Bell blue sheets of this morning verbally and we will break after that and we will hear from Bell at reply stage?

1227 THE CHAIRPERSON: That's right.

1228 Is that okay, Bell?

1229 MR. MAYRAND: Should I start now? Oh, I'm sorry.

1230 THE CHAIRPERSON: These are confidential documents so they are going to remain confidential I guess as well, other than your general comments on them.

CONCLUSION PAR CIDG

1231 MR. MAYRAND: Yes. Yes.

1232 Well, actually the way we have dealt with them is by point number, of course using the same point numbers as Bell. I think if we have done sufficiently a good job it may be that -- maybe we have not done a sufficiently good job in that there are some particular percentages that might not end up on the public record. But anyway, I will try and do my best to go through this and avoid getting into confidentiality issues.

1233 To start with, the Bell document of this morning is titled "Additional Bell Media Concessions". It's not exactly clear how additional they are to what point of reference, but anyways we will leave that besides.

1234 It has four sections, one that is "Packaging Flexibility"; another one that is "Pricing Incentives", the other one "Non-linear Rights"; and the last one "Term". I will deal with those in the same order.

1235 First, on the "Packaging Flexibility" section.

1236 Well, we have provided this morning specific terms for packaging flexibility which provide what we consider to be further safeguards for Bell. They are spelled out on a one-pager that the Commission received this morning and that Bell received as well. That being said, we're happy to comment on the points that Bell put in its two-page blue document this morning.

1237 The first point, again, always on the package flexibility section, CIDG would accept a dual offer, provided that first set packaging does not include a Bell veto right.

1238 B, the flexible packaging is not actually the PBRC modelled on the Discovery Channel curve that is on the record. And I stress again that the only curve we have with two reference points is a curve for the Discovery Channel, not the 12 channels for which Bell would envision that model being made available.

1239 Now the second point. The Bell PBRC option to us is not a real option because it has three fundamental flaws, and we expressed those this morning.

1240 First one: It has a 50 percent penetration floor.

1241 Second: From what we see of that single curve for the example that was provided, it provides for more than double make-whole, with therefore a complete transfer of all risks of any penetration variation to the independent distributors and their customers that are bound by this formula.

1242 I was kind of encouraged to hear Bell this morning say that they thought this was a shared-risk business. The problem we have is that they have not so far behaved that way. And the curve that we received clearly shows that their intent is to recover any potential downside risks that Bell might incur, including any lost eyeballs and any lost advertising revenue. I hope that I've made that clear.

1243 Now, the third problem with the Bell PBRC option, as they call it, is that it is clearly a formula that involves mandatory tied selling for all the 12 Bell Media services Cat A and C's that would be subject to that option. And that, we think, is a problem. We think that is unreasonable. We think that is not commercially reasonable, and that's not in the spirit of the VI policy in the Code.

1244 Now, the last point of comment on Bell's so-called concession is that we still see language there for the PBRC that says that this is subject to certain limitations. And our problem is, we're still trying to find what these "certain limitations" are. They're certainly very uncertain to us.

1245 And I should use this opportunity to say that I am somewhat baffled that this model was introduced only on February 21st, way, way after countless negotiation episodes between individual members of our group and Bell and certainly well after CIDG was born out of utter frustration.

1246 THE CHAIRPERSON: We got that message a number of times today. Thank you.

1247 MR. MAYRAND: Now, point 3: CIDG would agree to the penetration threshold that Bell is mentioning, and I'll refrain from indicating the precise threshold, which, if there was such a penetration drop for any individual one of the Category A or C services that are subject to this tripping point, that then there would be a re-opening of the agreement but for that service.

1248 Again, we have trouble with the notion that if penetration falls below the trip point just for one of the whole slew of Bell services, everything else ought to be opened up and renegotiated entirely from scratch.

1249 Now, if, you know, such a circumstance should occur, we would be prepared to either negotiate a new arrangement for that service that has fallen below that trip point, or, in the alternative, we would be amenable to move to a suitable penetration-based model, but the Bell model as we can see it from that discovery curve would not, definitely not, be the right one, and for the reason that I've already expressed.

1250 Point 4: CIDG would agree with the flexibility offered, provided that this means that CIDG members can develop and offer new packages without Bell Media prior approval. We think we have spelled out quite clearly and quite happily, I hope, the amount of flexibility that we are prepared to live with, we as the entire group here, in that appendix template that we provided this morning, which includes additional safeguards for Bell.

1251 Point 6, always in the Packaging Flexibility. CIDG has proposed, again, on the same one-sheet document that we provided this morning, very specific approval and prior notification commitments. And you can find in that document. And of course we agree with the principle of notification, but we've spelled that out.

1252 Now, there is one thing on which the blue document is silent but we can't help but comment on. And, very interestingly, the additional Bell Media concessions don't say anything about the minimum penetration requirements for the Category C sport services, i.e., TSN and RDS. We think and continue to believe that these minimum penetration requirements for these services should be removed.

1253 Now we turn to what Bell characterizes as "pricing incentives" and what really we view as penalties. And I hope the record is very clear that only some of the members of CIDG present here have actually been threatened by monetary penalties such as re-contracting fees, step-up fees, or additional fees, not all of them. So, clearly, we have not all been treated equally in that respect.

1254 CIDG would not agree to interest payments at any rate. As to retroactivity, CIDG would agree to retroactivity, provided it would not go back to before September 1st, 2011. And of course we understand that these so-called "pricing incentives" would possibly be out of the way, assuming that other conditions that Bell is proposing are met by us; but, again, we find these requirements to start with unequal, uneven, and objectionable and unreasonable.

1255 This leaves us then, on linear rights. We agree with the principle that Bell has put forward. Again I express the view that we had crystallized in three very short, concise paragraphs, which are not rate-related; they don't involve any rate decision from the Commission. They involve very simple principles of what we envisage to be the framework for obtaining those rights as part of the language that we will get in these agreements.

1256 MS SALMON: You skipped over this one.

1257 MR. MAYRAND: I'm sorry, I'm reminded that I may have skipped the response to paragraph 5, and it's an important one, so I correct myself.

1258 Point 5 again of the Packaging Flexibility Bell additional document this morning: CIDG would not agree to just a narrowing of what has been referred to in some exhibits and in discussions this morning as "adverse economic harm" clause. And we would say that we'd rather not get into having even a somewhat narrower clause because we think we provide additional safeguards to Bell in the packaging language that we've provided to you and to Bell this morning.

1259 I apologize for skipping over that section. And I think I have addressed non-linear rights, which leaves only the term.

1260 And on that score, chairman, Commissioners, CIDG would agree to a four- to five-year term. Our concern there is that we, believe me, don't want to go through this very laborious, very frustrating, and very expensive process every second year or so.

1261 THE CHAIRPERSON: Thank you. I am going to ask a couple of questions, and maybe my counterparts on the Commission here also have some clarification questions, just to see if we can -- where you have some "subject to's," what the views are of Bell in those regards. So if we can do this one page at a time.

1262 To Bell, the first page, Packaging Flexibility, there was a "subject to" in the first response and they will accept a dual offer as long as set packaging does not include a Bell veto right. Do you contemplate a Bell veto right on set packaging?

1263 MR. CRULL: So I'm sorry, Mr. Chair. Would you like us to respond to these now, or was there going to be a break to respond? I have my notes and my reaction, but I probably should confer.

1264 THE CHAIRPERSON: Okay. If you want to confer first, okay, let's break.

1265 MR. CRULL: Yeah, I'm sorry.

1266 THE CHAIRPERSON: Okay. Not a problem. Let's break until about 3:15? That give you enough time?

1267 MR. CRULL: Yeah.

1268 THE CHAIRPERSON: Okay. Great. Thank you.

1269 Oh, sorry. 4:15. I apologize.

--- Suspension à 1547

--- Reprise à 1616

1270 THE CHAIRPERSON: Okay. Let's resume. Mr. Crull, you had some time to caucus with your team?

CONCLUSION PAR BELL

1271 MR. CRULL: Yes, thank you, Mr. Chairman. And so, first of all, let me applaud everybody's stamina for the day, and I appreciate the time investment that the panel and all the participants have made.

1272 So let me go point by point. We have had a chance to review the CIDG response, and on the first point, page 1, CIDG would accept the dual offer, provided that set packaging does not include a Bell veto right. I want to come back, and I think I have some constructive things on the veto right; but I just want to say, what that really says in A is, again, it's a way of saying: We really want flexible packaging at set rates. And again, that's just our principle that that can't apply.

1273 And let me say why the term veto is a mischaracterization; that I understand how, in a VI, you know, emotional term that it comes up, but it's a mischaracterization. It's a negotiated consent that, if a repackaging of our services caused our revenue to go down by a dollar, we'd like to have offsets that make it go back up by a dollar.

1274 And I don't think that that's an unusual business precedent. If you want to keep paying the same flat rate and you make changes that make our revenue go down by a dollar, we'd like to negotiate offsets that bring it back to neutral. And that's the principle, and that's what works in practice.

1275 I think, Jennifer, with all respect, if revenue goes down by a dollar and the offset is back up by 20 cents, that we're not going to reach agreement. And if revenue goes down by a dollar and revenue comes back up by 85 or 90 cents, I think we have a deal. And that's how we got stuff done with a number of the guys who signed deals.

1276 So I think that this principle -- you know, it's how we ensure, first of all, that our interests are aligned, because then there's an obligation for offsets that, in exchange for the set rate, that give us the business stability. And that alliance our interests.

1277 Going to Theme Packs, even in grandfathering on set rates, doesn't give us the stability, and we can debate: Is that a decline of 3 percent or 10 percent or 20 percent? But it just doesn't give us the stability.

1278 So that's what our consent right in set packaging is meant to do; it's always worked in the business. It's what 159 deals are based on. But I have heard the concern o. I think that I'm a reasonable person, and I think that these are reasonable guys; but I can understand and have heard a lot of the push-back that there's concern we won't be reasonable.

1279 I think what we contemplated is that the real art in that discussion is, when you do a repackaging, and we say, okay, well, now you've going to Theme Packs, we think over the term of the agreement that this is going to cost us X out of our current packaging; and then, you know, we propose: Well, why don't you move this to basic, and why don't you pick up this service and package it this way? And it would be an offset.

1280 If we have a dispute about the offset, like, if we say it's going to go down a dollar and up 30 cents, and you say, no, Kevin, you guys are crazy, it's going to go down 50 cents and up 50 cents, we're willing to commitment to a quick cycle of agreeing to that analysis and then we're willing to commitment go to an arbitration. It should be pretty simple analysis that we say, you know what, to a packaging is going to cost us $500,000; you're offering $200,000 back.

1281 And so really what that says is, the only way we can say no and object is if then the arbitrator agrees with you that you're offering us an offset. Well, if the arbitrator says that, then you get it. Then you get to do it. If the arbitrator says, no, the gap is too big, you're clearly not offsetting so Bell's not kept whole; then you have the choice to not do the packaging change or go to the PBRC and still do the packaging change.

1282 So I mean, I really think that is the ultimate expression of what that clause is meant to mean.

1283 As for B, that's really for FOA. I mean, I think that we've talked about the value of the PBRC a lot and the slope of the curve is for FOA.

1284 On the next page, the three fundamental flaws in the PBRC. I think that what we heard on the 50 percent floor is that for some members it's not a flaw. For some members it's not a flaw at all, and for other members it is a flaw. And so I think that we would contemplate that that's going to be also an FOA issue; that we probably should both submit, either with/without floors or with a remedy, if you're below the floor, that's reasonable. And I think that's for FOA.

1285 Number 2 is, again, the rate, and I think that's for FOA on the penetration-based rate card.

1286 Number 3. We have spent a lot of time contemplating this, and if you are in the penetration-based rate card and one of the 12 services drops -- I'm sorry. So this is not the 10 percent drop. This is at the beginning. We will put in front of you an option that doesn't require all 12 at once, but we have to think about that. It may be a sports and a non-sports split, and I don't know how much further that we'll likely want to go, but I think that that may be the way that we'll go on the initial set-up of the PBRC.

1287 And then, finally, let me spell out the certain limitations, Yves. It is a 50 percent floor. Both Pick-a-Pack and Theme Pack are committed, so we may not have been clear for the panel, but under the PBRC, Pick-a-Pack can be done nationwide. So it can be done anywhere. And there was a lot of discussion about Quebec and not-Quebec.

1288 The size of the Pick-a-Packs and the Theme Packs is to be negotiated. I think that we would all say A on Theme Pack of one is stand-alone and we would not permit stand-alone in the PBRC. And so we think that there's a minimum size for Theme Packs and Pick-a-Packs that is sufficient not to be too damaging.

1289 On point 3. So if penetration falls by 10 percent, if one service falls by 10 percent, we're willing to discuss that service moving to the PBRC, but not re-opening individual services.

1290 So, the reason we thought that this was really good, I think we had a lot of discussion about rate times volume equals price. If volume falls by 10 percent, we don't want to be a in a position where you come back and you say: We want a lower rate. If volume falls by 10 percent, the rate has got to go up. And we think, by providing the penetration-based rate card, as business people, it gives you that certainty. You don't have to negotiate, you don't have to go through that. And we don't want to open contracts for one service at a time. So we are willing to make it available on a service-by-service basis, but not to re-open.

1291 Number 4, CIDG. Yeah, so you know, number 4 really goes back to number 1, in set packaging. We offer -- we heard in previous discussions that when we talked about our desire for set packaging, you said, no, no, no, no, here are some examples where that's just unreasonable. And so we tried to capture those examples where, you know, it was felt to be unreasonable if you're adding services to a package, if you're harmonizing channel lineups. And we gave pre-approval to do those.

1292 But that doesn't mean, you know, you can't kind of twist that and say, okay, well, let's just add that set packaging really doesn't mean set packaging. So I don't think number 4 on the response adds any value; it just tries to again ask for set rates at flexible packaging.

1293 Number 5, on the adverse economic harm. Mirko took the Commission panel and the team through the list of agreements that we've done, and we said that, you know, any combination of the four clauses that give us comfort on the set packaging that another BDU took that the CIDG members individually would have access to; so we'll waive the adverse economic harm completely for any member that takes set packaging and a minimum threshold. And that's exactly like BDU 110, which, I can tell you, is one of the vertically integrated BDUs that has been oft-talked about, so we'll, consistent with our other things, we'll waive that in the event that the others are met. And that's how we have negotiated with others.

1294 On number 6. Yeah, so, again, number 6, this was a timing. And I think in my offer earlier on set packaging and that process, we need to agree to timing. You bring us a packaging proposal; I think we should be able to turn around a quantitative analysis in a week or two, and then I think that we should be able to negotiate offsets and, you know, we'll get to a timeline that really works for both of us.

1295 I think that was Mirko's probing earlier that: Look, we all do a lot of planning for packaging changes that take time. If our process of give-and-take is 30 to 60 days, I don't think that that interferes at all; that's kind of consistent with the internal process.

1296 So, anyway, so that's the timing. But I don't think 6 -- no A -- I don't think 6 adds anything. And it really just again says we want set rates for flexible packaging.

1297 On 6A, there's a clear market precedent that was confirmed by CIDG that in the Canadian market, another category, C, sports service, has volume commitments over a minimum threshold. Our threshold is not inconsistent with the theme or the price point. There's no way it can be inconsistent whenever every BDU in the country but one meets it.

1298 And so we are quite committed to the necessity of the threshold on our sports services.

1299 I'm going to pass to Mirko for the next two.

1300 MR. BIBIC: okay. On pricing incentives, the concept of retroactivity, I think is, I would have thought, non-controversial; even the draft regulations that the Commission put out for comment on the VI decision acknowledges that FOS decisions rendered are retroactive back to terminate -- expiration of previous contracts.

1301 On the issue of interest, it's a commonly understood business principle; I don't think I'll spend too much time on it. If any of you in this room pay your Hydro bill late, there's a charge and an interest charge. If you pay your credit card bill late, there's a charge. It's a cost-of-money issue, basically; I think business people understand that.

1302 On non-linear rights, it's -- God, I wish I was comforted to say that it looks like we have an agreement in principle on the non-linear rights. I found the discussion right before the break kind of confusing. The principle for us is the same as I have always expressed throughout the day, rather. We have -- we will make non-linear rights available. They will not be for free. There will be commercial value assigned to them, and we promise that CIDG will get that offer.

1303 On Ms Mainville-Neeson's point about, well, you know, they may wish to do something in the retail market, perhaps they want to include it in their subscription price at no extra charge, that's for Telus, in that case, to do what they want in the retail market. We wouldn't dictate that.

1304 I'm trying to think through of an analogy, and here's one that's à propos our industry. I think most people have probably seen the Rogers ads. I don't know if they saw the promotion; I don't know if it's still in place; but it was very recent. If you buy a bundle, a particular bundle of Rogers service, you get a free Samsung Galaxy tablet. Free. I don't think anyone believes that Samsung just simply handed a truckload of Galaxy tabs to Rogers for free. Maybe they had, but that would have been in exchange for value. They probably didn't. Rogers paid for those tablets and decided to hand them over as a promotion, free to customers who signed on. And Telus can do the same, but our non-linear rights will come at a fair market value.

1305 And on terms, Kevin, back to you.

1306 MR. CRULL: Yeah, I guess I would just reiterate with Mirko that I think more effort is required on linear, because we seem to have agreement in principle but the devil's in the details from some of that discussion.

1307 On the term, we thought that we were being really constructive to protect all of us, because clearly neither of us are comfortable. And I think that we are still distances apart in our desires.

1308 I don't often do this, but I sympathize with the panel for the decision that's going to have to be made. One of us is not going to be happy -- probably neither of us are going to be happy.

1309 And so we propose three years, which is really like 16 months or 17 months from now, so it would be 2011, '12, and '13.

1310 And look, when I read the CIDG response, if they got what they asked for, I don't blame them for wanting a long-term deal because it is immensely below the market. It is so far from any agreement they could ever achieve through a market negotiation, I'd want a long-term as well.

1311 So I think in this case I can't gamble where the procedure is going to come out. I have a lot of anxiety. And I think that we should execute the decision and see how it goes. And that means 2011, '12, and '13, a three-year term, which is really only 16, 17 months.

1312 Thank you.

1313 THE CHAIRPERSON: You are still each going to have 15 minutes for wrap-up because I think you might want it, but I think some of the Commissioners here may have some questions. I certainly do.

1314 I just want to take them one at a time, without getting into detail, and making sure I agree where there are still issues on the table and where they're off the table.

1315 So, with regard to 1A, it's still on the table because there is still a view that Bell is looking for set packaging with a negotiated consent, and CIDG are basically saying they want set pricing with no floor.

1316 On the item of B, you're saying the slope is an FOA item, so it's not an item for this discussion at this point in time, as I read it, anyway.

1317 MR. BIBIC: Mr. Katz, just can I go back to 1A.

1318 THE CHAIRPERSON: Yeah.

1319 MR. BIBIC: It's not -- CIDG has been asking for set packaging, no floor or minimum threshold.

1320 THE CHAIRPERSON: Whatever it is.

1321 MR. BIBIC: Well, CIDG's ask -- Bell is saying -- Bell's position on CIDG's demand is that it's tantamount to saying: Give me set rates, flexible packaging rights.

1322 THE CHAIRPERSON: Yeah.

1323 MR. BIBIC: In other words, no veto.

1324 THE CHAIRPERSON: Okay.

1325 MS MAINVILLE-NEESON: but, Commissioner Katz, in fact, that's not the case, right? What we propose had some significant safeguards and concessions were made that certain packaging would not be offered without Bell's consent. So we are providing some veto rights in our proposal as well.

1326 So the types of packaging that most concerned Bell that we have heard we have agreed in the document we've provided this morning.

1327 THE CHAIRPERSON: Okay. So maybe in your final wrap-up, when you get to reply, because you're the last ones replying, can you tell us under what specific conditions you're prepared go to Bell to get approval, and under which ones you want unilateral right to do what you want.

1328 MS MAINVILLE-NEESON: Yes, we could do that, I'm just thinking about the confidentiality issues, and which is why it might be best on paper, and it is fairly clear, and we might be able to just point to --

1329 THE CHAIRPERSON: Okay.

1330 MS MAINVILLE-NEESON: Those specific provisions.

1331 THE CHAIRPERSON: Point to it --

1332 MR. CRULL: Can I just ask CIDG, because this is an exhausting process, and I just ask you to hear, because I've listened. I've listened to everything for many of these meetings. Theme Packages under set rates provides us no assurance, whether you grandfather or not. And so you might think it does; I just want you to know that we won't respond that that provides any assurance to the volume.

1333 THE CHAIRPERSON: If at the end of the day the Commission has got to intervene, we will. I just want to understand where we have to intervene and where you either are kicking it into an FOA situation and don't have to at this point in time, and/or whether there's an agreement to leave you folks to finalize the issues where you have an understanding and in place.

1334 When you get to number 2, 2, item number 1: I understand from Bell you see that as an FOA issue. I understand number 2 you see as an FOA issue. You said, with regard to number 3, that you will come back with an option that does not have necessarily tied selling. I'm not sure when you said you'll come back with an option, when that is, because once we leave here today, the ball's in the Commission's court to make a decision.

1335 So you may want to think about that as well.

1336 With regard to number 4, you defined what those certain limitations are. You said they were the 50 percent floor. You also said something about pick-a-pack can now be done nationwide, and I didn't quite understand what you meant by that.

1337 MR. CRULL: Yes, I'm sorry. So this shows the complexity of the issues we're dealing with because it seems so simple to us.

1338 Penetration-based rate card, that option of the dual choice option, that allows pick-a-pack or Theme Pack, you know, by any provider. Pick-a-pack is a perfectly acceptable packaging solution, subject to the size of the pack, as I mentioned, under PBRC.

1339 And, Commissioner, may I offer -- then I'll confer with my team, but if we get back language on point 3 that would provide some further clarification on how we would allow individual selection of those channels, if we do that by Monday, is that acceptable?

1340 THE CHAIRPERSON: I'll let our legal people think about that --

1341 MR. CRULL: Okay.

1342 THE CHAIRPERSON:  -- until we complete here, because there's a process, and if we allow you, then we've got to allow them.

1343 MR. CRULL: Okay. Fair enough.

1344 THE CHAIRPERSON: So let our legal counsel caucus on that issue, and we'll come back to it.

1345 Number 3: It appears as though there is agreement to the number, and the issue of this tied selling, I guess, is still an outstanding issue? Is that right?

1346 MR. CRULL: No, I offer, Mr. Chairman, that what we said is, if a single service falls by 10 percent, that it can move to the pen-based rate card but not re-open for negotiation.

1347 THE CHAIRPERSON: Okay. So we'll hear back from CIDG as to their views on that.

1348 Number 4, I think clearly you said there's a disconnect there at this point in time.

1349 Number 5, again, same sort of thing: You mentioned the adverse economic harm, but you also mentioned a set package amendment threshold would be waived. I thought I heard you say.

1350 MR. CRULL: We said that the market precedent in our deals, as Mirko showed and in that one chart which is really clear, set packaging is provided by some combination of those four terms. The first one which all 159 signed is the set packaging. Then there's some combination of the 10 percent or 5 percent adverse economic harm in the threshold.

1351 We have a BDU that we did waive the adverse economic harm, and so, as we have said all along, we would offer what we've done in the market so far. That BDU provided us a comfort of the minimum threshold on Cat C, sports, and they provided us set packaging with our language as we've described it.

1352 MR. BIBIC: Here is the net effect of the CIDG response on these blue pages.

1353 So our first clause, if you just look at tab 3, which is an exhibit with all our deals.

1354 THE CHAIRPERSON: Right.

1355 MR. BIBIC: Okay. So if you just go to page 4 of 5 of that exhibit.

1356 THE CHAIRPERSON: All right.

1357 MR. BIBIC: BDU number 110.

1358 THE CHAIRPERSON: All right.

1359 MR. BIBIC: Four clauses. Here's the net effect of the CIDG proposals, in our view.

1360 The first clause is the set clause, set packaging clause. CIDG has said, no, we want flexible packaging still. So they're not prepared in their offer to agree to that. They would like the next clause, the 5 percent re-opener, to go 10 percent. They ask for adverse economic harm.

1361 THE CHAIRPERSON: They said they wouldn't --

1362 MR. BIBIC: They wouldn't agree to it, so they don't want that. And they don't want minimum pen requirements for TSN and RDS.

1363 So, basically, they've said no for the first, 10 percent for the second, no, and no. And what we're saying is, oh, wait a minute, no other BDU has that kind of model. We will agree, though, to what BDU 110 has, which is agree to set packaging for set rates. We'll give you the 10 percent. We'll waive the adverse economic harm. We do want the pen floor, penetration floor, GTS and RDS, and of course we got the whole PBRC concept in the flipping back and forth, which no one else has.

1364 THE CHAIRPERSON: Got it. Number 6, item number 6, we still issue -- got the same issue with set rates for flexible pricing is the CIDG position, and it's still at odds with yours.

1365 The timelines, though, regarding the delay for repackaging, I guess that was your question you asked with CIDG. And I guess we'll wait and hear what CIDG says in regard to that as well, in terms of timelines.

1366 6A, I think, is clearly still outstanding. Price incentives, there's a financial disconnect. It's probably a dollars-and-cents issue here as well. And I think that one, at the end of the day, we'll have to deliberate on, but it may be an FOA issue as well at the end of the day.

1367 And with regard to non-linear rights, we'll hear from CIDG as to whether there's a meeting of the minds there, and I guess we'll wait, CIDG, with regard to your three-year proposal as well.

1368 So that's my reading of it at this point in time.

1369 MR. CRULL: That's an accurate summary.

1370 THE CHAIRPERSON: Okay.

1371 MS MAINVILLE-NEESON: May I just add one point of clarification?

1372 THE CHAIRPERSON: Certainly.

1373 MS MAINVILLE-NEESON: It's with respect to the minimum penetration on sports services. Mirko, in questioning you did ask whether or not any other minimum penetration existed, and I think it's important to clarify for the Commission here that this is the first agreement that is requiring a penetration requirement that would force one of the CIDG members, and it's not just Telus that has this problem, that would force us to kill our Sports Pack or, you know, dramatically alter our sports package.

1374 So it's the level of that threshold that's the issue. And just to be clear, you know, there might be a meeting of the minds on a lower penetration on sports if it's absolutely required.

1375 THE CHAIRPERSON: Okay. I just have one question to ask, and I'm not sure whether I can ask it here or not, so I'll ask it to Bell, and if you can't answer it publicly, maybe we can figure out a way of getting the answer.

1376 Do you currently have any outstanding agreements with anybody that has an MFN clause in it?

1377 MR. BIBIC: Outstanding, you mean agreement currently in effect?

1378 THE CHAIRPERSON: In force.

1379 MR. BIBIC: So we have, we have no agreements that have packaging MFNs. So and that's what we're talking -- on the issues that we're debating today, there are no MFNs. There are a very, very small number of pricing MFNs, but on pricing what we've said is, it shouldn't be an issue because we have two rates; we have a rate applicable for BDUs who deliver a high volume -- so the larger BDUs -- and then a second rate which is based on, derived from that first rate for the smaller-volume BDUs. All the small-volume BDUs get the same rate; all the high-volume BDUs get the same rate.

1380 THE CHAIRPERSON: Do you see CIDG as high-volume clients severally and individual -- and totally? Individually and totally? Or do you see them differently, depending on whether they're individuals or total groups?

1381 MR. BIBIC: Neither individually or collectively do we consider them large BDUs.

1382 THE CHAIRPERSON: Okay. Okay. Those are my questions. Any other Commissioners want -- Commissioner Duncan?

1383 COMMISSIONER DUNCAN: I just have two questions. First of all, just one on clarification. Mr. Crull, I missed your point at the end of the non-linear rights. Mirko made the comment that you had come to a fair market value; that's what you would be offering. But then you added a statement; I think you said something that you need more discussion. And I just missed what that applied to.

1384 MR. CRULL: Well, I think that what Mirko was saying is that the level of discussion on this was a little bit confusing. We have said that we'll make available all non-linear rights that we take to market to CIDG members at the exact same time on commercial terms.

1385 I was worried that dialogue, when we seemed to have agreement with Ms Mainville-Neeson on -- I was worried that the idea of this "TV everywhere" was getting back into, there should be no extra cost. And I thought some of the language was, well, we buy linear rights; we should have these digital rights included.

1386 And that concerned me just that we'll need clarification to make sure that's not our interpretation.

1387 MS MAINVILLE-NEESON: I actually did get that impression as well.

1388 THE CHAIRPERSON: Yeah.

1389 MS MAINVILLE-NEESON: Yeah. I don't know. Ann, did you want to just consider what Kevin was -- sorry about that.

--- Rires

1390 MS SALMON: We can clarify. We will come to an agreement if -- it's probably easiest just to say what we're looking for. We're looking for if the rights are made available to another BDU, they be available to us. If the rights are being made available to a BDU or end-user -- example, a customer of ours can receive it for free because they're able to go on the website and receive it -- it significantly diminished the value of that for us to pay for it if they can already get it for free.

1391 So in that case, or in the case when they're providing it to other BDUs for no charge, we would expect no charge.

1392 In the event that they charge everyone for access to this content, we would enter into a commercial negotiation.

1393 And the only other point we want to make is, we have been held to what we call an undue preference; in this entire process we have not been able to launch HD service. And we would hate for it to turn into the same thing with non-linear rights.

1394 So what we are asking, as part of this agreement, is that they be made available to us when they're made available to someone else. And if a separate commercial negotiation is required, we will enter into it and we will come to a conclusion, but we can't be held from getting access to that content, because, as you've seen, it can take us a very long time to come to a deal.

1395 And all the while, if our competitors are out there with this product, we are going to be harmed.

1396 MS MAINVILLE-NEESON: And we want access to those rights as part of this deal because, if we want -- if -- we want to have the ability to buy the rights as attached to the television subscriber. We don't want another separate type of offer that forces us to buy a much larger bulk deal when we have no intention of making that type of offer.

1397 MR. CRULL: Commissioner Duncan, "Houston, we have a problem."

--- Rires

1398 COMMISSIONER DUNCAN: It's okay. I understand.

1399 MR. CRULL: And we aren't going to market with our non-linear rights in the fashion that Ms Mainville-Neeson is requesting. And we would agree in any case that we make non-linear rights available to any BDU; affiliated/non-affiliated, vertical/non-vertical, we'll make it available.

1400 If we decide as a business matter to go direct to the customer, that's our choice. And that is not cannibalizing the product that they're buying linearly, because non-linear is a different product.

1401 MS SALMON: If our customer wants to watch a program, and they can watch it for free because you have offered it for free, and you are holding us to all of these standards that you are telling us, we don't want our penetration to drop; we would be devastated if our penetration dropped. But then you're going to be able to offer an alternative method for our customer to access that programming.

1402 We need the ability to make it as part of our offering as well, so that our customers don't go to just free off-the-air.

1403 MR. BIBIC: I think ultimately, here's -- you know, you can't negotiate language like this in a form like this. I'll give you an example.

1404 We make -- you know, if you go on CTV.ca, there's probably the two recent episodes of Grimm on-line, available to you for free. It's no the whole library, it's two episodes, the last two, for free.

1405 So does that mean now -- and that's a conventional service so it's not even applicable here, I'm just giving you an example.

1406 So imagine if it were a specialty service. You go on one of our specialty sites, and there's two latest episodes of one of our shows. Does that mean that the CIDG members get the entire back catalogue for free because two episodes are available for free?

1407 See, that's why that language is just too expansive for us to just say: We sign on to what sounds like a common-sense principle. It's more complicated than that.

1408 MS SALMON: We would be asking for those two episodes. We would not be asking -- we are not asking for your entire back catalogue.

1409 MR. BIBIC: It's not what the language says, and that's why we wanted to stay at the level of principles rather than language.

1410 MS SALMON: Okay. Well, we think the language says that. But --

1411 MS MAINVILLE-NEESON: But if that's the principle, then we agree that, you know, the principle is, of course, what you make available free should be available free to --

1412 MR. CRULL: If we decide to go direct to consumer, that's a business model that we'll choose. Your consumers have a lot of viewing options that are different products, and these are different products. So, I think, Mr. Chairman, that this does illustrate -- I'm glad, Commissioner Duncan, you asked -- that sometimes easy language is a lot harder.

1413 COMMISSIONER DUNCAN: I have one other question. Thank you. So it certainly clarified for me what it was you meant there.

1414 I have one other question. If I'm understanding what you are saying -- this is with regard to the packaging flexibility -- if they introduce, CIDG introduce, a new package and it results in a loss, subscriber loss, for you, you want to be compensated for that.

1415 So you're saved. You're made whole. Sorry. You're made whole.

1416 But what if the result is because consumers no longer are interested in that service? Like, how do you justify being made whole? I mean, you have a responsibility then to say: Oh, well, we'll give them this. They'll like this. We've done surveys. They'll like this kind of program.

1417 MR. CRULL: So it can fall as far as 10 percent now. So it can -- so we negotiate a set packaging, a packaging change, and we agree, and we go on. And then the market behaves and consumers are not picking the package. Penetration falls. It can fall up, all the way to 10 percentage points.

1418 And that's where we just say: It's logical that the volume being delivered is very different than at the time of the agreement, and so there's -- that provide a lot of movement.

1419 COMMISSIONER DUNCAN: Okay. Thank you for that explanation. Thanks.

1420 THE CHAIRPERSON: Commissioner Menzies.

1421 COMMISSIONER MENZIES: I understand the -- I just want to follow up on that.

1422 What that's doing is, the less popular the program is, the more people have to pay for popular programming. And I just don't understand -- I understand your business interest in that, but I just don't understand that as a workable concept in a healthy system. If something is bad, and it's not well-received by the marketplace, why should it have these parachutes that pop out when it's dropping like a stone?

1423 MR. CRULL: Commissioner Menzies, is TSN in your opinion a bad service?

1424 COMMISSIONER MENZIES: No. It's not --

1425 MR. CRULL: Is TSN generally --

1426 COMMISSIONER MENZIES: I won't get into it, but that's not the answer to my question.

1427 MR. CRULL: No, I'm getting there. I wanted you to know.

1428 I've tried very hard to convey, it's very dangerous to be so simplistic to say, boy, if penetration falls, that means it's a bad service. That's not really how the industry works.

1429 I point you to the document I took you through with Telus. TSN is not a bad service, but Telus' penetration is suppressing viewing --

1430 COMMISSIONER MENZIES: Okay. But just help me out --

1431 MR. CRULL:  -- by more than a third, and so packaging and penetration, we did a co-correlation on ad dollars, which is a good indication of viewers. Over 80 percent correlation between penetration and viewing. And these are popular programs. So, again, the way people consume television is, they surf on the dial, and we want them to see these channels.

1432 COMMISSIONER MENZIES: No, I get that, but it's not quite addressing the question in terms of if there's a particularly unpopular service, in terms of that. Because, I mean --

1433 MR. CRULL: If we --

1434 COMMISSIONER MENZIES:  -- it's the tied selling concept, right? You've got TSN, which is extremely popular, and RDS, which is extremely popular, and if everything else was just as popular, you wouldn't have tie the sell.

1435 It's like, you know, if I'm a publisher, and I've got Harry Potter, and I'm selling you Harry Potter, I'm going to make you buy, you have to buy ten other books that go along with it.

1436 MR. CRULL: Commissioner Menzies, we're not tying our selling, so that's inaccurate. We're not tying our selling.

1437 COMMISSIONER MENZIES: All right.

1438 MR. CRULL: We are saying -- and I would agree with you if I came and I said Fashion Television or Book Television or Much Punch or Comedy Gold. I would agree with you if I was asking for high-penetration commitments on those services.

1439 We're talking about a very small subset: 32 out of 400 channels are these As, and they're the cornerstones of the system.

1440 COMMISSIONER MENZIES: Okay. I don't want to divert it into a philosophical discussion, I --

1441 MR. CRULL: And by the way -- and by the way, they're the most popular. 24 out of the 25 top services. They deserve not to be destroyed by packaging changes.

1442 It's not going to be consumer choice that destroys them, it's going to be packaging changes.

1443 MR. BIBIC: Can I just touch on what I was --

1444 COMMISSIONER MENZIES: Are you open to a model that allows consumer choice in that term, that allows consumers to assess the value -- pass along their assessment of the value of the various --

1445 MR. CRULL: This penetration-based rate card was designed to allow for pick-a-packs, Theme Packs.

1446 COMMISSIONER MENZIES: Okay.

1447 MR. CRULL: And to allow for that kind of choice, but to allow a revenue offset that keeps the system stable and doesn't introduce that to the benefit of only one party.

1448 The consumer will ultimately be harmed -- I know you've heard me say this a number of times.

1449 COMMISSIONER MENZIES: Yeah, yeah, I don't want to --

1450 MR. CRULL: Programming will suffer.

1451 COMMISSIONER MENZIES: I don't want to go too late into it, and I'm beginning to be sorry I brought it up.

--- Rires

1452 MR. BIBIC: There is one point, and I wrote a note to myself when chairman Katz was talking -- repeating the words of CIDG, "tied selling." "tied selling" means something very specific. It means if you want one of my services, you got buy them all.

1453 We don't do and a half. We're not doing that. They have at their disposal the service -- we have 29 services. They get to choose the ones they buy.

1454 When CIDG uses the term "tied selling," what they're actually saying is: Under our PBRC model, we're saying if the 10 -- for example, if the 10 percent re-opener kicks in, all of your services have to move over into the PBRC. That's what they mean when they say "tied selling."

1455 It's not tied selling -- we are not tied-selling. We have a menu of services, take the ones you want; and the ones you want, these are the prices and these are the set terms.

1456 And in fact, if we were doing that, we'd be in violation of the Code. And we're not.

1457 MS MAINVILLE-NEESON: I'm sorry. If I could just interject that we've been trying to negotiate an agreement with respect to one news/sports service, RDS2, and have not been able to negotiate that agreement on its own without negotiating the rest of the agreement.

1458 So, to us, that is tied selling. We've been unable to launch that service, unable to reach an agreement, because they refuse to negotiate on the service.

1459 MR. BIBIC: Not true.

1460 MS MAINVILLE-NEESON: And it's been denied to us since it was launched in September, 2011.

1461 MR. BIBIC: Well, with respect, Ms Mainville-Neeson is trying to argue a different case than that's before you.

1462 THE CHAIRPERSON: Okay. We've now, I think, gotten clarification of -- Bell's clarification to CIDG's response.

1463 We're in the final phase, now, of reply, I guess, and I'd look to -- who am I looking to first to reply to Bell? So if you guys want to sum up first, please feel free.

1464 MR. BIBIC: Okay, thank you. A lot of this has been covered so I'm going to be pausing every once in a while to figure out if I need -- you know, try not to repeat myself.

1465 For a moment before I start -- well, as I start, what I'd like to do is kind of brings us back to, really, to first principles, and I'm going to sound an awful lot like a lawyer, so please bear with me.

1466 This is a quasi-judicial tribunal, and you kind of need to define the issue and you need to examine the evidence, and then you need to, obviously, look at the relevant law, the act, and the public interest dimensions because that's what you have to do as a Commission.

1467 So what's the issue?

1468 And we've had a broad, broad discussion over a very long day, but the issue is this: Are Bell Media's packaging proposals commercially reasonable? That's it. That's the issue before you. And we all know that there's a multitude of proposals that we could all craft; probably every person in this room can craft something that could be arguably commercially reasonable. And there's probably a wide spectrum of commercial reasonableness.

1469 But what's on the table are two Bell Media -- well, one Bell Media proposal with two options, and that is commercially reasonable. That's what you have to decide on.

1470 You know, CIDG, I would submit to you, CIDG is putting all of us in a very difficult position because they want a favourable ruling, but giving them that favourable ruling will actually topple the market-based deals that we've reached and immediately alter the longstanding industry packaging mold, all of that without actually undergoing a proper policy hearing.

1471 So that's the difficult position I think you find yourselves in. But we don't need to go through, because if we focus on the core issue, bilateral commercial dispute on the Bell Media proposal, I think it gets a lot simpler when looked at that way.

1472 So that's the issue; so let's look at the evidence now, starting with what we've put on the table.

1473 You've heard a lot about the set terms. And I'm not going to go through everything that I had on these notes because you've heard it too many times, but let's start with -- and this I have to say -- there are 159 deals and they do, they really do, represent the market.

1474 Now, when CIDG says they don't and they filed that chart earlier on, that pie chart, they're going back to the submission that many of them made at the VI hearing last year, where they put forward a proposed code, and actually, many elements of their proposed code made it into the final Code.

1475 And I went back to that, their draft code, I went back to it. And one of the principles that they ask you to put in the Code was that no deals between VI companies should count for anything. The Commission considered that and rejected it.

1476 And when the Commission rejected it, it's rather clear, because if you go to section 2D of your Code, it says, when you are assessing fair market value, you should take into consideration the following factors: Rates paid by unaffiliated BDUs for the programming service. It doesn't say "rates paid by independent BDUs who aren't vertically integrated." So it's obviously part of, these deals are obviously part of, the market.

1477 Now, given that they are part of the market, the market has obviously spoken, and we have committed here that CIDG will get the best deal.

1478 So there isn't any competitive inequity. We are saying: You get the best deal. Cogeco competes with Bell. Take the best deal. You know, Telus competes with Shaw. Take the best deal.

1479 In fact, I think what they want is a competitive leg-up over all the others, in other words, kind of the lowest common denominator, Chairman Katz, as you said an hour or so ago.

1480 And then Ms Mainville-Neeson pointed to 1(e) of the Code and said, well, you're imposing on us deals that you've reached with others and that somehow is a breach of 1(e). Let's think of the implications of that.

1481 That would be like saying, well, you know, Rogers, Bell, Shaw, Vidéotron, SaskTel, and everyone else deliberately entered into our terms in order to harm their subscribers so that then Bell could foist those evil clauses on CIDG members.

1482 That doesn't make any sense. These companies are sophisticated and they're not in the business of making Bell any favours. They're doing what they need to do to respond to their consumers, to respond to their competitors, and the clauses we've given them allow them to do that, and we're saying to CIDG: You can have them too.

1483 And ultimately, as we've said, with set packaging and consent to trades, CIDG can package like Shaw, they can package like Bell -- in fact, they already do -- they can package like Vidéotron and Bell do in Quebec.

1484 So that's on the set terms. Now we also have the PBRC.

1485 We think it gives them great packaging control. I mean, Kevin's dealt with, you know, the veto has been a big issue, and Kevin, I think, has dealt with that in terms of some of the modifications we're prepared to give, but we just can't give flexible packaging set rates. And if we can agree that flexible packaging means flexible rates and set packaging means set rates, then I think we've got ourselves a path forward to going straight to FOA.

1486 And I think Kevin's also -- well, I have a whole bunch of notes here but we've addressed it in these blue pages so I'm going to skip -- ultimately what I'm trying to say is, based on the evidence we have put forward, I think we've got an approach that's balanced, sensible, and commercially reasonable.

1487 So now let's move away from Bell's evidence and look at what the CIDG put forward. And I think their case boils down to this.

1488 Of course it would be better for CIDG if adjustments were made for CIDG, but we've got a market that's been established and that's not the issue before us.

1489 Flex packaging can't come with set rates, but let's go through some of the issues -- no, bear with me here; I had some of the issues but they're covered in the blue pages. Sorry to do it this way.

1490 Grandfathering we've discussed. The veto we've discussed. You know, again, on the -- I do want to touch on this. Just because we are a vertically integrated company does not mean, it just doesn't mean, that sitting at the executive table, that Kevin is going to tell Wade Oosterman, who runs Bell TV, what Cogeco or Telus are going to do. It doesn't work that way.

1491 Bell and Telus, for example, have a longstanding, extremely sophisticated commercial relationship on telecom. We are each other's biggest telecom customers. Nobody at Telus has ever accused Bell of telling the fellow who runs business markets what Telus plans to do in the enterprise space when they buy services from our wholesale unit and vice versa. We understand how this works.

1492 On the penetration guarantees, I can't stress enough that other Category Cs have them, and we've got that on the record.

1493 And the last point I'll make on the CIDG positions -- I had a whole bunch of notes based on this but to not repeat -- there was a whole flavour to the CIDG position about: Look, we can't tell you what we're going to do, or you can't have a veto, Bell, because God knows where this is going to go; there's over the top, and we can't bind ourselves to always coming back to you for four to five years, and let's go back to the length of the contract.

1494 So we said: Let's go to the end of 2013. Kevin kind of gave you his take on why end of 2013. I'll also give you my take. I asked a whole bunch of questions about their packaging plans. And I asked, and there was agreement that it takes 12 to 18 months to have packaging plans in the works. Here's why I was asking those questions.

1495 Cogeco does have plans in the works, apparently. So our position would be to Cogeco: Let's do what we did with Shaw; let's do what we did with Bell. Tell us what they are. Let's sit down, let's agree, based on the traders, lock it in and go. So that's how we would deal with a Cogeco situation, exactly like we've dealt with the others.

1496 Telus has no big packaging plans in place, and, you know, CCSA has no big packaging plans in place. Yes, there are some, you know, adjustments that Jennifer talked about, but it doesn't sound like there are huge packaging plans.

1497 So for Telus and CCSA, for example, if think don't have major packaging plans in place now, and it takes about 18 months to get them in place, then this agreement won't impede anything they want to do, because they don't have anything in the works.

1498 So that was my kind of gloss on why we should have a shorter term to add to Kevin's perspective earlier on.

1499 So, you know, I don't think CIDG's done, on balance, a credible job discrediting the Bell proposal and showing that it's not commercially reasonable, and they certainly have no evidence to establish that it's commercially reasonable to put forward the proposition that it should be flexible packaging/set rates.

1500 So then, I think, they then devolved to, well, the Act and the Code. So first on the -- or the CRTC's VI decision and the Code.

1501 On the VI decision, they say, well, look, the Commission is pushing us towards more flexibility. What the CRTC said in the VI decision, and I'm not gilding the lily is, it said, you, BDUs, and particularly VI BDUs, says VI BDUs, please explore how you can give more choice to customers, choice and flexibility, and report back to us. For example, can you do things like pick-a-pack? And we heard you loud and clear, because there were a lot of questions on pick-a-pack. That's what the CRTC asked. And they asked VI BDUs only to report back on April 1. And we're all going to tell you what we're doing.

1502 You may think we're doing a great job. You may think more work needs to be done. And if you think more work needs to be done, you are going to issue a notice of consultation, and we're going to have a policy hearing. That's how it works.

1503 Doesn't work where you decide these fundamental issues in a hearing, in a hearing like this.

1504 And I'm actually pretty encouraged that the VI BDUs will demonstrate that there is a lot of choice and flexibility out there, but I'm going to leave that to you. And ultimately the PBRC does, would, allow the BDUs in question here to implement pick-a-packs in English Canada like they have in Quebec.

1505 Then on the Code. So I think the Code is pretty clear. If you go to section 2 of the Code, there can't possibly be any way that our proposal, either one of them, violate this Code. Section 2 couldn't be more explicit that there is a direct linkage between packaging and rate. It says that if you need to even go there and you need to establish the fair market value of the whole wholesale rate, you look at (b), penetration levels and volume discount. It couldn't be any more clearer. In (c), it says you look at the packaging of the service. You look at the rates paid for programming services of similar value to consumers.

1506 You know, all these things draw that direct link. And that's what we've done here, in both models. There's a direct link between rates and packaging. And so I'd be remiss if I didn't ask you to look attachment one of our opening statement.

1507 And you'll see how each element of section 2 of the Code, (a) through (h), is met by our proposals, both set terms and PBRC.

1508 You know, I'm not going to read every single elements, but on rates, I don't want to belabour here, because of course that's for FOA, but the rates are justifiable. Penetration levels and volume discounts, well, we're tying our rates directly to that issue, on packaging as well. I've talked about (d), which is obviously, the VI BDUs are part of the market, and I don't see why the CIDG wouldn't want it because they're benefiting from it. And we go down the list, but I would urge you to -- almost plead with you, to take a look at this attachment.

1509 So then to conclude, I'm going conclude again a little bit where I started, which is what we're here to decide.

1510 I would submit to all you have, respectfully, that it wouldn't be in the public interest, actually, and certainly not in the interests of good regulatory process to use a form like this, an expedited one the less, to reshape fundamentally how packaging is done in this country for Category A services, which are at the heart of this system.

1511 I don't diminish the debate that we've had and the importance of it; I think there were hugely critical issues you've asked us. You asked us, you know, very important questions: How much choice is enough? How much flexibility do we need to offer? How should Category As be treated going forward, you know? Is it time? Well, that's a good question. Whither OTT? These are big, big policy questions, and many of them will actually be resolved in other places and in procedures that you've actually already kick-started.

1512 And that's why we say: Let's go to the end of 2013. That will allow for an orderly transition to new pack -- to a potentially new packaging world if we have to go there for services that are at the heart of the system. And we really are talking about 32 English-language 47 overall, 13 of which are Bell Media's.

1513 Thank you.

1514 THE CHAIRPERSON: Thank you. Final reply from CIDG.

1515 MR. MAYRAND: Thank you, Mr. Chair and Commissioners and Commission staff. First of all, let me also thank you on behalf of all CIDG members for your attention throughout this fairly lengthy day of exploration of the issues that we have before you.

1516 Basically, I think we've expressed that in our written submissions but I think it's important to state it again. What we hope to come out with of this process, this expedited hearing, is a clear template for the terms and conditions of the renewal agreement for the Bell Media services and the options that they purport to put on the table.

1517 All of that being with a view that we're not here to discuss rates, but if we're going to have an intelligent discussion on rates, and if the Commission is going to be able to understand what these rates mean, not just for the distributors that we are, but for their customers, which are Canadian consumers, and there's 2.1 million of those out there, we need to have a clear understanding of exactly what the carriage terms are going to be.

1518 So that's our expectation, and we know it's a difficult task, Commission, but frankly we've tried every which way to narrow down the issues, and it's a bit unfortunate that we're at this very last eleventh hour still trying to narrow them down, at the end of this hearing.

1519 We feel that we've basically outlined the level of flexibility in future packaging that we're prepared to live with for the next four to five years, and we have actually tried to be not only reasonable and make concessions but also be as specific as possible to help the Commission. And I think, at this point, bear with me, I will just go through them very quickly.

1520 On this appendix template which we proposed and filed this morning, and it applies, by the way, to all service, whether they're Cat. As, Bs, or C, here's what we said.

1521 The service must be distributed and packaged on the same basis that it was distributed and packaged on the set date that we've proposed, unless otherwise agreed to in writing by network.

1522 Distributors shall provide 30 days' written notice of any proposed packaging change, and, where applicable pursuant to a subsection that I will come to, network she have 10 days to provide its written consent to proceed with the repackaging or object to the repackaging in question in writing. Sorry.

1523 Then we say a basic rate, if there is one, it applies to a system where a hundred percent of consumers or customers in that system receive the service in question.

1524 Now, what are the caveats? They're very simple and very limited.

1525 A distributor can add new reassembled packages consisting of a minimum of X services in which the service in question is included, without requiring prior approval of the network, if existing packages are maintained. That's the existing packages that Bell already fully knows about and which are out there in the market.

1526 2. Distributor may not launch the name service on a stand-alone, à la carte, add-on, customer-selected pick-a-pack or other similar basis of distribution unless distribution on this basis has been authorized by network for any other BDU or satellite distributor. Where network has authorized such other basis of distribution, distributor may seek approval to match the offering available in the market and such approval shall not been unreasonably withheld by network.

1527 The (iii), notwithstanding what I've just quoted inside the Province of Québec: Provided distributor continues to distribute and package the service in accordance with all distribution and packaging terms that I've just mentioned, distributor may also offer the service in question in customer-selected pick-a-packs comprised of no less than X programming services.

1528 Distributor shall be entitled to make changes to packages in order to harmonize packages among its systems.

1529 And, finally, if the service is packaged in a genre-based package and network materially changes the programming mix of the service such that it is no longer consistent with the service current genre, distributor may move this service into another more genre-appropriate package without consent from network.

1530 On packaging, Commissioners, this is what we are proposing. There is nothing destructive in that proposal. There is nothing that will bring imminent Armageddon to Category A services. There is nothing that's unreasonable. There is nothing that's scary.

1531 Frankly, we don't see how we can be more accommodating in how this very simple set of principles -- and they are principles -- that I've just stated for the record would deserve the whole so-called set packaging option being put into question. I frankly don't see how they could be.

1532 Now, obviously, we've made some, we think, very significant concessions on packaging flexibility, and it's important to note that we are committed to continuing to offer existing packages. It is not in our interest, any of us here, to upset customers who have an existing package and enjoy it and wish to continue to enjoy it. We would be suicidal if we thought that it would make sense to upset our customers. We won't do that.

1533 We have agreed to a renegotiated threshold relating to drops in penetration on an individual Bell Media service. Bell has actually quoted the percentage drop that they have in mind, so they said it's a 10 percent threshold; I guess it's on the record now.

1534 We agree that we are prepared, on a service-by-service basis, to consider that trip point or that renegotiation point.

1535 Now, frankly, if that is not a package that ensures balance within the broadcasting system and that allows both the programmers that are on this other side of the room and ourselves, the distributors, that are on this side of the room, to adapt to increased consumer choice, I really don't know what we can do. And I think we have a very, very serious problem.

1536 We propose to include now, with respect to the granting of non-linear programming rights, so principles -- and I insist they are very simple principles -- that will ensure that these rights are going to be made available to us on a timely, non-discriminatory, and commercially reasonable basis.

1537 Now, we've provided language to that effect, and again, let me provide what we've stated here for the record.

1538 Non-linear rights: Where network makes available the programming, directly or indirectly, on a non-linear basis to any party, including but not limited to its affiliates or to other BDUs or their affiliates or any end-users, at no separate fee, then network shall make such programming available on a non-linear basis to distributor at no separate fee from the wholesale fees, which will be set by FOA.

1539 Subject to the foregoing, where network makes available the programming on a non-linear basis for a fee, then network shall provide that programming on commercially reasonable terms and at non-discriminatory price, terms and conditions to distributor on a non-linear basis.

1540 And the last principle, also very straightforward: To the extent that the network owns or controls the rights to make the programming available on a non-linear basis, it shall do so no later than the date that the programming is made available by network to any other party, including but not limited to network's own affiliates, either BDUs or their affiliates or end-users.

1541 That's the extent of our ask on non-linear rights. Again, I beg to argue that these are extremely reasonable terms, particularly in light of the principles that you have laid out in the VI policy in the Code.

1542 Now, as to the question of whether we would even be precluded from raising these slight accommodations because VI groups have, it seems, possibly agreed to a standard set packaging set of terms, although we understand that there are some variations, I've heard that the Code does not address that issue. Well, I'm sorry to say, and I need to come back to that; I have the Code here in front of me. BRP2011, 601-1, which is the corrected version of the code.

1543 1(e): It is very clearly stated that it is not acceptable for a programming undertaking BDU or new media-exempt undertaking to impose on an independent party a most-favoured-nation clause or any other condition that imposed obligations on that independent party by virtue of the vertically integrated entity or affiliate thereof entering into an agreement with any vertically integrated entity or any affiliate thereof, including its own.

1544 I have to read this thing in plain English language, and it says what it says. So this little pie chart that we filed, which you have seen, says that Bell has concluded agreements with other VI entities representing roughly a little over 80 percent of the total distribution market in Canada. The remaining part of the pie, except for a 1 percent little sliver, is the distributors present here at this table.

1545 Now, another interesting element of the Code, and I think we all need to remind ourselves of it, is in 1(b): It is not acceptable to require minimum penetration or revenue levels that force the distribution of a service on the basic tier or in a package that is inconsistent with the service's theme or price point.

1546 Those are the principles. The Commission has said that it would use these principles in assessing disputes when there is such a dispute and it's up for resolution. And unfortunately this is the situation we're in.

1547 Now, we insist that our members, nor their customers not be penalized for exercising their legitimate rights under CRTC policies and regulations. And frankly, we are stunned by Bell's dogged insistence on charging potential penalties as well as interest, in addition to seeking retroactive payments since the expiry of the agreements. I can tell you, certainly speaking for Cogeco, when we were negotiating alone, that we have tried to negotiate terms with CTV before it was acquired by Bell a number of months before some of our agreements did actually expire. We did not get any negotiation session going. So, frankly, why should we be penalized for the passage of time until we are forced to come to this Commission on a dispute resolution in the legitimate exercise of our rights to get a determination? We have a big problem with that.

1548 Now, you know, I think we need a strong signal from the Commission that the requirements that you have set in terms of consumer choice, added flexibility, commercially reasonable terms, are indeed in force and have practical meaning for us and for consumers who will be in the end paying the bill.

1549 And we are concerned that if the Commission does not issue a clear signal, there will be any number of other problems that will arise. It will be inevitable, and the solution is certainly not trying to punt these problems to some kind of future policy hearing. I think the Commission has all the ingredients that are required at this juncture to make the determination on the three issues that are up for determination in this expedited hearing.

1550 And in closing, I have to thank Commissioner Cugini for all the many hearings that she has attended and all the work that she has done during her tenure. I certainly appeared before you, Rita, quite a few times and sometimes in fairly complicated proceedings. I think this hearing has been interesting, although quite shorter than a number of the ones you've attended in the past. So, again, thank you very much.

1551 Thank you. I think that concludes our remarks.

1552 COMMISSIONER CUGINI: Thank you.

1553 THE CHAIRPERSON: It may be shorter but it feels longer.

--- Rires

1554 THE CHAIRPERSON: On behalf of the Commission, I'd like to thank all the parties for their patience and their diligence and the hard work that's gone into this file. I particularly want to thank the staff. I'll come back to Legal before we close completely. I want to thank the staff as well, and Legal as well, I'll thank them now.

1555 And I'll also take the opportunity to echo what both parties have said about Rita Cugini's contribution to the CRTC. It has been remarkable; it has been phenomenally well-received, and I think the industry is a lot stronger for her participation on this Commission over the last seven years as well, so I thank her for that as well.

1556 And now I'll pass it on to Legal.

1557 MR. MILLINGTON: Okay. We have a couple or three undertakings, but before we get to that.

1558 As I understand it, Bell Media would like to put another proposal on with respect to the "tied selling," as it's described in CIDG's document, is that correct?

1559 MR. CRULL: Yes.

1560 MR. MILLINGTON: Okay. In terms of meeting our own internal timelines, we would ask that that be done by -- and the undertakings as well -- by end of day tomorrow, Friday, and then we'll give CIDG 'til noon on Monday to reply.

1561 MR. CRULL: Great. So, for clarity, that is 2.2 on page --

1562 MR. MILLINGTON: 2.3. 2.3, I think.

1563 MR. CRULL: 2.3, I'm sorry. Thank you.

1564 MR. MILLINGTON: Yeah, 2.2.3.

1565 MR. CRULL: Yeah.

1566 MS DE SOMMA: Yeah. 2.2.3.

1567 MR. MILLINGTON: And Emilia's got a couple of undertakings.

1568 MS DE SOMMA: There are two undertakings from this morning's session. First, Bell Media is to provide a list of Category A services where repackaging is possible without prior consent.

Engagement

1569 And second, Bell Media is to provide old affiliation agreements signed between CTV and CIDG members prior to the recent BCE acquisition.

Engagement

1570 MR. BIBIC: On the first one, I thought the question was: Name a list of the services which Bell TV needs consent from the programmer before making packaging changes. But it's like on the flip side.

1571 MR. CRULL: Yeah, it's the flip side.

1572 MR. BIBIC: It's the flip side.

1573 MS DE SOMMA: Okay. I can check transcript and get back to you.

1574 MR. BIBIC: Okay.

1575 MS DE SOMMA: Thanks. Thank you.

1576 THE CHAIRPERSON: Madam Secretary, does that conclude this proceeding?

1577 THE SECRETARY: It does, Mr. Chairman.

1578 THE CHAIRPERSON: Thank you all very much.

--- L'audience s'est terminée à 1730

STEacute;NOGRAPHES

Johanne Morin

Sue Villeneuve

Jean Desaulniers

Monique Mahoney

Date de modification :

2012-03-22