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TRANSCRIPT OF PROCEEDINGS FOR THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION TRANSCRIPTION DES AUDIENCES DU CONSEIL DE LA RADIODIFFUSION ET DES TÉLÉCOMMUNICATIONS CANADIENNES SUBJECT / SUJET: CANADIAN TELEVISION POLICY REVIEW / EXAMEN DES POLITIQUES DU CONSEIL RELATIVES À LA TÉLÉVISION CANADIENNE HELD AT: TENUE À: Conference Centre Centre des conférences Outaouais Room Salle Outaouais Place du Portage Place du Portage Phase IV Phase IV Hull, Quebec Hull (Québec) October 3, 1998 3 octobre 1998 Volume 9 tel: 613-521-0703 StenoTran fax: 613-521-7668 Transcripts 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. StenoTran Canadian Radio-television and Telecommunications Commission Conseil de la radiodiffusion et des télécommunications canadiennes Transcript / Transcription Public Hearing / Audience publique Canadian Television Policy Review / Examen des politiques du Conseil relatives à la télévision canadienne BEFORE / DEVANT: Andrée Wylie Chairperson / Présidente Vice-Chairperson, Radio- television / Vice- présidente, Radiodiffusion Joan Pennefather Commissioner / Conseillère Andrew Cardozo Commissioner / Conseiller Martha Wilson Commissioner / Conseillère David McKendry Commissioner / Conseiller ALSO PRESENT / AUSSI PRÉSENTS: Jean-Pierre Blais Commission Counsel / Avocat du Conseil Margot Patterson Articling Student / Stagiaire Carole Bénard / Secretaries/Secrétaires Diane Santerre Nick Ketchum Hearing Manager / Gérant de l'audience HELD AT: TENUE À: Conference Centre Centre des conférences Outaouais Room Salle Outaouais Place du Portage Place du Portage Phase IV Phase IV Hull, Quebec Hull (Québec) October 3, 1998 3 octobre 1998 Volume 9 StenoTran ii TABLE OF CONTENTS / TABLE DES MATIÈRES PAGE Presentation by / Présentation par: Paul Baines 2654 Canadian Media Guild/GCM / La Guilde canadienne des médias 2689 Canadian Caption Industry Association / Association canadienne industrie du sous-titrage 2742 CIBINT, Canadian Institute for Broadband and Information Network Technologies, Inc. 2776 Bell Satellite Services Inc. 2810 CCTA, Canadian Cable Television Association / ACTC, Association canadienne de télévision par câble 2845 StenoTran iii ERRATA Volume 8 October 2, 1998 / Le 2 octobre 1998 Page Lines / Lignes 2476 19 "Saulnier Entredos" should read / devrait se lire "Sonja Smits" 2498 11 "non" should read / devrait se lire "donc" StenoTran 2654 1 Hull, Quebec / Hull (Québec) 2 --- Upon resuming on Saturday, October 3, 1998, 3 at 0910 / L'audience reprend le samedi 4 3 octobre 1998, à 0910 5 12596 THE CHAIRPERSON: Good morning. 6 12597 Madam Secretary, would you introduce 7 the first presentation, please. 8 12598 MS BÉNARD: Thank you, Madam Chair. 9 12599 The first presentation will be by Mr. 10 Paul Baines. Please proceed, Mr. Baines. 11 PRESENTATION / PRÉSENTATION 12 12600 MR. BAINES: Good morning. This 13 presentation is about control over television 14 resources. Even in today's corporate and globalized 15 culture, the mass media, and Canadian television 16 broadcasting in particular, should serve the public 17 interest and not money and power. 18 12601 I am here today because I believe the 19 Commission has sold out Canadian television, and the 20 liquidation must stop. The Commission's neglect for 21 public interest television is most clearly illustrated 22 by its treatment of community access channels offered 23 by cable operators. 24 12602 For the past 25 years the Commission 25 has heard from the public and from commissioned StenoTran 2655 1 television studies that these resources should be 2 licensed to the community. In response, the Commission 3 has lifted access responsibility from cable operators, 4 allowing the owners to do as they please. 5 12603 I have witnessed first-hand that 6 community channels are now public relations machines 7 for its operator, providing it with 24 hours of 8 explicit corporate goodwill and promotion of its 9 interests. 10 12604 In my opinion, not only should 11 community channels be mandatory under the Broadcasting 12 Act, maintaining the integrity of Canadian television 13 alongside the public and private channels, but they 14 should always be owned by the communities they serve. 15 12605 I think the Commission's neglect is 16 based on the belief that market forces and private 17 ownership are the best mechanisms to manage the 18 Canadian television system. So deep into the mindset 19 of corporate interest, the Commission now weighs 20 comments from the advertising industry in this review 21 process. 22 12606 This industry dedicates itself to 23 transform human relationships into transactions and 24 lobbies for an unregulated commercial TV system. 25 12607 Only in our hyper capitalist society StenoTran 2656 1 would such an industry be welcomed to a hearing focused 2 on improving the television system. If this 3 contradiction is not blatant to the Commission, then 4 the corporations' interest has won over the public's. 5 12608 In my opinion, advertisers should 6 wait until Canadians decide what type of system we want 7 and then try to find a place for themselves. 8 12609 Commercial television should claim 9 the identity it deserves: a marketing machine. 10 Subsidized by public resources -- those being the 11 spectrum -- commercial television offers a steady diet 12 of consumer dreams to create private profit. The 13 content is unbalanced because it cannot criticize the 14 commercialization of culture, the power structures that 15 are responsible, nor the effects of our throwaway 16 materialistic, yet empty, lifestyle. 17 12610 The channels multiply, but this has 18 not led to more diversity. Programs must fit into the 19 consumer based paradigm of passivity and happiness 20 through material acquisition. 21 12611 Power is concentrated among a few 22 large corporations, letting its staff and advertising 23 dollars do the talking and the audience do the 24 listening. These corporations want access to larger 25 markets while deny the public access to its operations. StenoTran 2657 1 12612 Competition and economies of scale 2 both work to dissolve any meaningful Canadian 3 television for Canadians or international audiences. 4 Even our largest broadcasters can't kick the American 5 program addiction to pay for their massive commercial 6 enterprises. 7 12613 Commercial television is not free. 8 Consumers pick up the billion dollar price tag at the 9 cash register, while the environment takes a hit as 10 well. The question is not who pays, but rather what is 11 the best method of paying to meet our communication 12 needs. 13 12614 The myth makers of commercial 14 television like to tell us that this system gives 15 people what they want, based on consumer demand. This 16 argument contradicts the purpose of advertising, which 17 is to control consumer demand. $6 billion was spent 18 last year on advertising. Are we still supposed to 19 believe that the TV industry gives us what we want? 20 12615 Our participation is reduced to 21 changing the channel or turning the TV off. We have no 22 control over what or how the programs are made. We 23 don't define our needs or our role. Instead, the terms 24 are pre-set for us. 25 12616 I read through the hearings this StenoTran 2658 1 summer and the 87 public submissions that were actually 2 public out of the 287 listed on the Web. What 3 Canadians want is a TV system that has more local, 4 diverse, Canadian, representative programming and 5 channels that are supportive of community projects and 6 accessible to ordinary and minority voices. 7 12617 In my opinion, community channels can 8 best deliver these needs. My opinion is not only based 9 on my experience working at two community channels, but 10 also extensive research on the failures of commercial 11 television and the potential for quality community 12 programming, both described in my written submission. 13 12618 If the Commission is serious about 14 diversifying the content of Canadian television, then 15 diversifying the ownership structures would be the best 16 start. Content which respects dissent and the 17 principles of democracy could only be produced by an 18 organization that is also democratic, that is 19 controlled over the social economic systems and 20 institutions that affect the people who have to live 21 with the decisions. 22 12619 We need to change our relationship to 23 our media and become speakers as well as consumers, 24 activating our role as citizens and our collective 25 control over the resource. No amount of policy, StenoTran 2659 1 funding formulas or corporate goodwill can balance the 2 profits of the industry and meet the needs of 3 Canadians. 4 12620 Instead of tinkering for a master 5 plan that will solve the problems of Canadian TV, I 6 recommend that the Commission diversify and 7 decentralize part of this system that makes the most 8 sense for local ownership and empowerment. 9 12621 Decentralizing television ownership 10 will bring it closer and make it more sensitive to 11 community needs. We have to start communicating 12 through ourselves before we can be successful at 13 exporting it to the rest of the world -- that is, if we 14 want our communication to have any meaning. 15 12622 I believe my opinions and 16 recommendations fit with the goals of this review, 17 which was to further the development of a strong and 18 viable programming industry. I think that diversity of 19 content, as well as ownership, is a strength, and I 20 think a strong and viable programming industry needs to 21 change access into participation. 22 12623 Another goal was to ensure that 23 Canadians receive a wide range of attractive and 24 distinctive Canadian program choices. I recommend to 25 give Canadians the tools to tell their own stories. StenoTran 2660 1 12624 The Commission wants to ensure that 2 the Canadian broadcasting systems meets the needs of 3 Canadian viewers and reflects their values. I say let 4 Canadians have some control over that content -- more 5 than just the remote control. 6 12625 The Commission wants to explore how 7 all participants in the system can work effectively to 8 strengthen the Canadian presence on our television 9 screens. I think this cooperation should start with 10 public channels, private channels and community 11 channels working together, changing consumers into 12 producers as community channels have 100 percent 13 Canadian content and they offer a new model of 14 ownership. 15 12626 Lastly, the Commission wants to 16 support a healthy broadcasting and production industry, 17 capable of competing successfully at home and abroad. 18 I think a good industry would let the community 19 channels offer grassroots learning and experimentation 20 with the medium. They would challenge the norms and 21 they would be democratic. 22 12627 To close -- I hope -- the Commission 23 can break out of its indoctrinated ideas on access, 24 diversity, competition, commercialization, 25 concentration of ownership and dissent. It is time the StenoTran 2661 1 community started controlling their own channels, and 2 that starts by putting the licence in their name. 3 12628 The licences should be given to not 4 for profit community groups, dedicated to providing 5 television and the public interest. Financial support 6 for community channels should be increased along the 7 public interest objectives of the Act, to materialize 8 in a TV system dominated by advertising and profit. 9 12629 Community television should be 10 recognized as important to the health of Canadian 11 television, just like commercial and public television 12 is. 13 12630 Finally, to protect the public 14 interest in television, the Commission should examine 15 the impact of ownership concentration and 16 commercialization, and then act upon its findings. 17 12631 The Commission should also review the 18 Peoples Communication Charter, as attached in my 19 submission -- the Charter which instills the values 20 that I have been talking about today and a hybrid of 21 human rights action for the 21st century and the 22 information age. 23 12632 Thank you. 24 12633 THE CHAIRPERSON: Thank you, Mr. 25 Baines. StenoTran 2662 1 12634 Commissioner Cardozo, please. 2 12635 COMMISSIONER CARDOZO: Thank you, 3 Madam Chair, and thank you, Mr. Baines. 4 12636 First, my compliments for coming to 5 make this presentation. We don't have many individuals 6 coming to say their own piece. We certainly respect 7 the associations and corporations that come forward, 8 but it is also refreshing when individuals come of 9 their own accord. 10 12637 You note in your written submission 11 that you would be 26 years of age by the time this 12 hearing rolled around. So whether you are 25 or 26, 13 from what I can tell, you are the youngest witness to 14 come forward. I congratulate you for that too. 15 12638 As somebody who works for a public 16 agency, I think it is very important that people keep a 17 close eye on us from all perspectives. 18 0920 19 12639 I find your stuff very refreshing, 20 especially where in one of these sections you have 21 taken part of our public notice line by line and 22 examined it for its underlying values. 23 12640 Part of this whole exercise is to 24 take a look at how television is going and where we go 25 from here, but I think you have afforded us the extra StenoTran 2663 1 opportunity of taking us a step back and looking at the 2 underlying assumptions with your issues about 3 ownership. 4 12641 I wonder if we can go to a couple of 5 things in your written brief. Paragraph 3 where you 6 say: 7 "This paper argues that the 8 Canadian Community Channels 9 should be owned by the 10 communities they represent and 11 be recognized as a third, and 12 perhaps the most, essential type 13 of Canadian broadcasting for 14 Canadians." 15 12642 I'm wondering how this thought goes 16 with the sense that, technically at least, the CBC is 17 owned by the public corporation. Unlike the private 18 sector broadcasters, it is the public sector 19 corporation. I say technically because several people 20 will believe that the public may or may not have access 21 to making the decisions as to what appears on the CBC. 22 12643 What are your thoughts as to whether 23 the CBC fulfils that function of being owned by the 24 communities and the people that it serves? 25 12644 MR. BAINES: Well, if it did, why was StenoTran 2664 1 community channels created in the seventies? Obviously 2 they were created in the seventies to fulfil a 3 particular type of objective. That was to be more 4 local, to be more community representative and to be 5 accessible to the tools to create television for 6 themselves. 7 12645 COMMISSIONER CARDOZO: Okay. I am 8 not disputing what you are saying about community 9 channels. I am thinking about the rest of the system 10 first and then I will come to community channels. 11 12646 The CBC, as I say, is a public 12 corporation, as there are some at the provincial level 13 such as TV Ontario. There's also Vision TV which is a 14 non-profit, not-for-profit, television broadcaster. 15 Does the publicly owned or the not-for-profit type go 16 part way to satisfying your interests? 17 12647 MR. BAINES: Well, judging by the 18 number of television channels that we have right now 19 and are going to be able to have in the near future and 20 based on the sort of industry created standards that 21 community channels should operate by, all the different 22 objectives that community channels set out to achieve 23 in the 1970s which they haven't, are the same types of 24 objectives that Vision or CBC or TVO has. It's quite 25 distinctive and its focus and it's not its method of StenoTran 2665 1 producing information. 2 12648 COMMISSIONER CARDOZO: Let's take a 3 community channel then, either one that you worked for, 4 one where you live, what are the kinds of programming 5 you would like to see? 6 12649 MR. BAINES: It's not about what I 7 would like to see. It's about what the community would 8 like to see. 9 12650 COMMISSIONER CARDOZO: But what do 10 you think? What do you -- 11 12651 MR. BAINES: I have talked to lots of 12 people in the community who are very frustrated that 13 when they had an idea for a television program, usually 14 what ended up happening was their original vision was 15 changed drastically to fit the time, conditions and the 16 overall sort of workings of the channel. 17 12652 They didn't have control over 18 producing it or directing it. They would be let on 19 camera, for example. A lot of community groups don't 20 even use the TV channel any more. That's been 21 documented amongst many commissions, television reviews 22 and also by independent investigators. 23 12653 The community groups are turned off. 24 They know that it's a waste of time. They are going to 25 go down to the community station. They are going to StenoTran 2666 1 get, you know, the same old sort of talk. It's not 2 going to be their program. 3 12654 When all is said and done, where does 4 the credit go? It goes to the cable operator who is 5 providing this great opportunity for all these 6 community groups. That's not where the recognition 7 should go, I don't think. I don't think it should be 8 owned by the cable operator. I don't understand why it 9 still is. 10 12655 COMMISSIONER CARDOZO: So you would 11 want a community channel that is not owned by the cable 12 operator, but owned by some kind of community-based, 13 not-for-profit entity. 14 12656 MR. BAINES: Yes. Well, I think in 15 Quebec, there's sort of a co-licence type of thing 16 where the licence is in the community's name. It's not 17 in the cable operator's. There wasn't much information 18 about that in the readings I did, but you know, yes, 19 definitely, that's the distinction. The licence is not 20 in the name of the cable operator. It's in the name of 21 a community group, but it's democratically structured. 22 12657 COMMISSIONER CARDOZO: One of the 23 advantages, I suppose, of having the community channel 24 run by the cable company is that you have got a certain 25 infrastructure there. They are covering a certain StenoTran 2667 1 amount of the costs in terms of the studio, the 2 equipment and they usually have one producer, staff 3 producer -- maybe more, but usually one or two people 4 on staff. 5 12658 I have done some community 6 programming myself and there were often up to about ten 7 volunteers who worked in various capacities around the 8 show. Do you see that as being valuable in at least 9 there is that infrastructure there for it to happen and 10 the volunteers and community groups? 11 12659 MR. BAINES: Having the technical 12 infrastructure is great. The station that I worked at 13 was very sort of high tech and looking better every 14 day. There was a problem with that, but I won't touch 15 that. 16 12660 I think it's the structure of the 17 organization which is most important where decisions 18 are made by, you know, the PR people and the managers 19 and they want a certain look and they want a certain 20 feel for the show. I mean, you don't have to be a real 21 good media critic or media analyst to know how 22 decisions are made and how gatekeepers work and how 23 topics are selected and how, you know, it all works. 24 12661 The same structure is present in the 25 community channel and the sorts of outcomes will StenoTran 2668 1 result. 2 12662 COMMISSIONER CARDOZO: Certainly I 3 think the idea of the community channel was to have 4 less gatekeeping and more access. 5 12663 MR. BAINES: Yes. Again, with 6 managers and producers deciding what goes on. You 7 know, alternative voices aren't welcomed. It's clear. 8 That's why they are not used. 9 12664 I mean I read through all the public 10 submissions that I could. Local television, you know, 11 like commercial stations out west and out east, were 12 mentioned for doing good jobs, you know. People were 13 saying that they were doing great jobs. No one 14 mentioned the community channels. Nobody said "Oh, the 15 community channel job did a real good job of this". 16 12665 No one watches the community channel 17 because it's the same format, the same idea as the 18 local channel does, but doesn't look as good and it's 19 not as up to date. I mean it's trying to be something 20 that it was never intended to be, in my opinion. It's 21 trying to copy local television. 22 12666 COMMISSIONER CARDOZO: On the issue 23 of the look and the feel, is there a valid argument 24 that when there's so much competition on the screen, 25 and most people have remote control sitting in their StenoTran 2669 1 hand -- 2 12667 MR. BAINES: No, I don't buy that. 3 12668 COMMISSIONER CARDOZO: You have about 4 three or four seconds to capture the viewer as they are 5 flicking by your channel. 6 12669 MR. BAINES: Yes. 7 12670 COMMISSIONER CARDOZO: Does it not 8 need to have a certain look? 9 12671 MR. BAINES: It does, but the higher 10 tech it gets, the less accessible it becomes. The 11 average person can't work an avid system and all the 12 technical bells and whistles that television has going. 13 12672 Do you want to keep that accessible? 14 You have got to have lots of training, which the 15 station I worked at didn't, or you got to have -- you 16 know, television doesn't take a lot of know-how to 17 produce basically. 18 12673 The station I worked at this summer 19 was very low budget and low tech, but if you assume 20 that all people want to see is sort of bells and 21 whistles and celebrities, I think you're wrong. We had 22 a whole bunch of channels. People do watch the 23 channel, not because of its look but because they know 24 the people that are on TV. They can relate to the 25 issues. StenoTran 2670 1 12674 COMMISSIONER CARDOZO: Right. 2 12675 MR. BAINES: They feel a sense of 3 ownership and power and involvement with the television 4 channel. That's why they watch. It's not the look of 5 the TV. As long as they can hear it and recognize 6 what's going on, that's what's important. I think that 7 kind of value shift has to take place on what is good 8 TV. 9 12676 The station I worked at was putting a 10 lot of resources, again into its look. Meanwhile, the 11 principles of the station were being undermined in 12 terms of access and copying and other types of formats. 13 12677 COMMISSIONER CARDOZO: You talked 14 about the show on Rogers in paragraph 19, "Plugged In". 15 You say: 16 "The format of the show strips 17 away creativity and the story 18 length makes covering complex 19 and anti-established ideas 20 pointless because they can't be 21 effective." 22 12678 Can you give us some more information 23 on that show and what you thought, sir, about it? 24 12679 MR. BAINES: Well, I mean I know 25 about concision. Right? It's a nice word to use. You StenoTran 2671 1 can't talk to people. If you have only got five or ten 2 minutes to do something, to talk about something, you 3 really can't go beyond the norm, right? 4 12680 What you are trying to do, like I was 5 trying to do today, is break out of some boxes. You 6 can't do that in five minutes. If you want to do a 7 story about a shopping mall going up on the outskirts 8 of town, you really can't get to the issues of, you 9 know, proper planning and transportation and access to 10 resources and, you know, use of farmland and the 11 highways involved. You really can't look at an issue 12 such as that, for example, in five or ten minutes and 13 do a balanced story or even try to seek out an 14 alternative opinion. 15 0930 16 12681 So I think the format and the use of 17 concision is used in all television. That was one of 18 the strengths or ideals of the community channel which, 19 you know, these alternative voices could be heard 20 because they weren't constricted by commercial 21 interest. You know you are not going to upset any 22 advertisers; or you have only got to speak between 23 commercials. That was the beauty of it. 24 12682 The magazine-type format that Plugged 25 In has chosen, it is, again, it is what is going on in StenoTran 2672 1 the local communities, like, you don't get any critical 2 voice. It doesn't fit with, you know, the attitude of 3 the hosts or the look of the show or what it is 4 following. 5 12683 COMMISSIONER CARDOZO: So you prefer 6 to see community channel documentaries type of thing? 7 12684 MR. BAINES: Whatever the community 8 wanted to produce. If somebody -- you know, yeah, like 9 a space; like a program or -- how many submissions did 10 I read where independent producers were starving for 11 access to the airways? There is so much talent out 12 there, but no one is playing their stuff. 13 12685 So, I mean, sure, like a program -- I 14 mean the cable operator could offer the public more 15 space on the community channel. But, again, it is not 16 what goes on on TV; it's the relationship of producers 17 having to go through a corporation to get their stuff 18 on the air, especially at a community channel. I mean 19 the community channel shouldn't be that way. I think 20 that line has to be said over and over again. 21 12686 COMMISSIONER CARDOZO: In the 22 community channels that you have been involved in, have 23 there been community oversight or advisory committees 24 of any kind, that look at the overall programming? 25 12687 MR. BAINES: Some stations, I think StenoTran 2673 1 it is very few, have community advisory boards. The 2 one I was met twice a year, and little information is 3 given. I spent a week on the phone and looking through 4 the web page of the corporation, looking for 5 information about how to get more information about how 6 these boards work or, you know, who is on them, or how 7 they decide. I couldn't find anything. 8 12688 If you are meeting twice a year, your 9 role isn't very large. 10 12689 COMMISSIONER CARDOZO: In terms of 11 running a community channel full time from beginning to 12 end, do you think there is enough voluntary willingness 13 out there to take it on and carry it through day to 14 day, or do you need some kind of at least coordination 15 by paid staff? 16 12690 MR. BAINES: I think you need paid 17 staff. You definitely need paid staff. Is that what 18 you are asking? 19 12691 COMMISSIONER CARDOZO: Yes. 20 12692 MR. BAINES: It can't all be 21 volunteer. 22 12693 COMMISSIONER CARDOZO: If it is a 23 community channel, then where would you get the 24 funding? 25 12694 MR. BAINES: Cable operators and the StenoTran 2674 1 new -- the old and the new cable operator should still 2 be paying for it because they are the ones benefiting. 3 12695 My submission, obviously, is light on 4 the actual implementation of my idea. But, you know, I 5 am not a professional. 6 12696 COMMISSIONER CARDOZO: That is fine. 7 12697 MR. BAINES: I think, first, you have 8 got to make a decision of: Are these stations going to 9 be part of the Canadian broadcasting system as they 10 were originally intended to be? If so, how will we 11 continue funding them? If that is coming out of cable 12 operators or, you know, taxes on télé-TVs or taking a 13 piece of the advertising pie, or licence money, or 14 whatever. There should be money available. 15 12698 COMMISSIONER CARDOZO: Have you 16 noticed any change in the last year, because we changed 17 the broadcast distribution rules and made it less 18 obligatory for them to have community programming? 19 Have you noticed a drop off, or an increase, or is it 20 the same? 21 12699 MR. BAINES: I noticed -- I mean, I 22 just started at the station two years ago, and I heard 23 that things were massively changing right then and 24 there. So, unfortunately, I didn't see how things used 25 to be. But I noticed -- I mean I have noticed more StenoTran 2675 1 advertising on them and I have read about a submission 2 that someone out west that their community channel was 3 totally breaking the rules and advertising well beyond 4 what it was supposed to have been. But, again, they 5 are just guidelines, right? 6 12700 COMMISSIONER CARDOZO: I won't carry 7 that discussion on further right now simply because in 8 about a year from now we will be reviewing the 9 broadcasters distribution regulations and that will be 10 the time to evaluate that in more detail. So keep 11 working on that paper of yours. 12 12701 MR. BAINES: What do you mean 13 "broadcast distribution"? 14 12702 COMMISSIONER CARDOZO: Essentially, 15 they are the rules that the cable companies and the 16 other distribution, like the non-cable distributors 17 operate under. Those rules will be coming up for 18 review in about a year from now. If you just keep 19 working on that paper and come back to us in a year, we 20 can look at that a lot more closely. 21 12703 MR. BAINES: This review is here to 22 adjust these same issues, though, right? 23 12704 COMMISSIONER CARDOZO: Perhaps a bit 24 more generally. We won't be -- 25 12705 MR. BAINES: Oh, the financing. StenoTran 2676 1 12706 COMMISSIONER CARDOZO: -- changing 2 those rules at this point. They sort of go on to the 3 mix of things that we are talking about, but I think we 4 are dealing with some of -- a different set of rules. 5 We are not looking at community programming that 6 closely; but that is not to say we can't talk about it 7 and raise these issues. 8 12707 I wonder if we could go through a 9 couple of other things. 10 12708 MR. BAINES: Oh sure. 11 12709 COMMISSIONER CARDOZO: On paragraph 12 33, where you have looked at one of the paragraphs in 13 our Public Notice 1998-44, and analyzed it line by 14 line. The first is: 15 "The Commissions' goals for this 16 review of its regulatory and 17 policy framework for television 18 are straightforward -- further 19 the development of a strong and 20 viable programming industry..." 21 12710 And your comment is: 22 "[Again the problem of seeing 23 culture as an industry]" 24 12711 I see the point you are making. But 25 the flip side of it is that we do have a largely StenoTran 2677 1 private sector situation with television. You have a 2 reducing amount of public funds going into television. 3 Given that, can you allow that this is a fair issue to 4 be looking at the health of this cultural industry 5 essentially? 6 12712 MR. BAINES: I want to see the 7 industry grow just as much as anybody else, and for 8 there to be Canadian jobs and create Canadian programs. 9 But I think if you just see it as an industry, then you 10 have lost it; you have missed something. I mean 11 culture and communications isn't just about that. That 12 is where the particular vision of the community channel 13 sort of differs from the norm; and also, you know, and 14 vision television as well, where you are not just 15 selling stuff. You are not just employing people. You 16 are actually communicating and you are actually 17 producing culture out of the minds and activities of 18 Canadians. 19 12713 I didn't see that mentioned anywhere 20 in the goals of the Commission's review. I just saw 21 strengthening the industry and in my mind that is -- 22 just the wording reflects -- 23 12714 COMMISSIONER CARDOZO: So you would 24 have liked to see more mention about strengthening 25 culture; is that what you are saying? StenoTran 2678 1 12715 MR. BAINES: Or at least of the 2 connection between, you know, an industry that is 3 strong and viable and a culture which is going to be 4 able to survive, you know, outside influences and 5 internal struggles, yes. 6 12716 COMMISSIONER CARDOZO: The next 7 sentence -- this is our sentence: 8 "...ensure that Canadians 9 receive a wide range of 10 attractive and distinctive 11 Canadian program choices..." 12 12717 Your comment: 13 "[Again Canadians are receivers 14 of information and our 15 participation is reduced to that 16 of consumer choice]..." 17 12718 Some would argue that encouraging 18 consumer choice is a pretty good public objective in 19 itself. 20 12719 MR. BAINES: Oh sure, having choice 21 over 100 different kinds of running shoes is nice; but 22 if you can't decide what countries those kinds of 23 running shoes are made in -- the conditions those shoes 24 are made in, that is a whole different thing 25 altogether. I think that is the kind of society -- a StenoTran 2679 1 more democratic society is a society which can choose 2 the kind of material working conditions and the kinds 3 of shoes that it wants, rather than choosing from 100 4 varieties produced by somebody else. 5 12720 Because there is a difference there, 6 you know. One is we are receiving. I am looking at 7 the language you are using in your goals and I am 8 breaking it down to sort of uncover where you guys are 9 coming from. 10 12721 COMMISSIONER CARDOZO: Okay. As I 11 say, I find this particular paragraph particularly 12 interesting and invaluable because what you have done 13 is to take it apart and -- 14 12722 MR. BAINES: I wish I would have 15 written more about that. I was trying to be brief. 16 12723 COMMISSIONER CARDOZO: Certainly, 17 feel free to do more. 18 12724 MR. BAINES: I could have written a 19 book on each one -- no, I could have written a lot 20 more. 21 0940 22 12725 COMMISSIONER CARDOZO: A few more 23 questions. What are your thoughts -- you had mentioned 24 briefly about concentration of ownership or 25 consolidation of ownership. StenoTran 2680 1 12726 MR. BAINES: My thoughts? 2 12727 COMMISSIONER CARDOZO: Yes. There is 3 two sides to it. One is the side you mentioned 4 briefly, the other side is that it allows for a 5 stronger industry and, therefore, more -- I am trying 6 to interpret some of the things in light of some of the 7 issues you have raised, but it allows for more Canadian 8 content. 9 12728 MR. BAINES: What does, more 10 consolidation of ownership? 11 12729 COMMISSIONER CARDOZO: If you have 12 stronger corporations with deeper pockets, they have 13 more resources. They can share various expenses -- 14 12730 MR. BAINES: Has that happened? 15 12731 COMMISSIONER CARDOZO: I am asking 16 you. 17 12732 MR. BAINES: I don't think it has 18 happened at all. I don't think there has been a 19 relation between larger corporations with more power 20 and more Canadian content or even better TV. I can go 21 on for days about that, but -- 22 12733 COMMISSIONER CARDOZO: Well, go on 23 for about a minute or two. 24 12734 MR. BAINES: Well, I mean if we all 25 watched, you know, CTV night and day, I don't think StenoTran 2681 1 the -- I don't see how the public gains from that. 2 Again you are consolidating power and I mean, you know, 3 I think a society is only as democratic as its 4 institutions are and I personally don't find 5 corporations democratic, which is fine, but I think 6 there should be controls and limits and that kind of 7 thing. But if you lose those controls and limits, then 8 competition and capitalism just becomes a game in which 9 the winners keep playing and everybody else is 10 watching. 11 12735 So, you have less people whose 12 interest is important and less people who are making 13 the decisions. These people have got more resources to 14 lobby their own interest and they have also got more to 15 lose. So, they are going to fight tooth and nail so 16 they don't lose what they have got because they have 17 got more, you know. 18 12736 I mean I couldn't even finish reading 19 the submission by the Canadian Association of 20 Broadcasters. It was huge. I mean they must have had 21 a staff of about four working on that thing for about a 22 month. I mean they have more and more resources, but 23 they are using those resources for public gain. I 24 don't think it has benefitted me. 25 12737 COMMISSIONER CARDOZO: In terms of StenoTran 2682 1 this whole issue that you have talked about, the public 2 good, my sense is that one of the roles that the 3 Commission plays is to balance that private good versus 4 the public good. 5 12738 MR. BAINES: See, that's the problem, 6 right. That's the problem. You are already -- like I 7 mentioned with having the industry part of this review 8 process. You are already opening up the doors for 9 problems. The public interest should be the only 10 interest which the Commission has and that public 11 interest is the primary objective, which has to balance 12 other competing interests, one of those being 13 corporate. 14 12739 COMMISSIONER CARDOZO: But you are 15 not suggesting that we shouldn't hear from people who 16 may have private interests, such as advertisers? 17 12740 MR. BAINES: No, but I think the 18 public interest should be decided first. Right? That 19 should be the primary focus and then -- 20 12741 COMMISSIONER CARDOZO: Can't we do 21 both at the same time, because it's a constant 22 balancing act. 23 12742 MR. BAINES: It's like having a round 24 table on development of a national park and everyone is 25 there, right. I mean what's the difference of having StenoTran 2683 1 that round table for a park as having a round table for 2 any other piece of land? I mean everyone's voice is 3 equal. Well, half of those voices are going to 4 individually gain financially from that. Are they 5 really thinking about the Act and what broadcasting is 6 for? No, they are not. So, I don't think they should 7 have an equal voice because they are totally looking at 8 it for personal gain. 9 12743 COMMISSIONER CARDOZO: Let me ask 10 you. You have sent a submission in based on -- how did 11 you hear about the process? 12 12744 MR. BAINES: Accidentally. 13 12745 COMMISSIONER CARDOZO: And how did 14 that accident happen? 15 12746 MR. BAINES: I am a student and I was 16 looking for a research topic and I came across the May 17 6th press release, which was buried in the CRTC home 18 page. I can't find anything on that home page. I 19 said, "Well, if I am going to do any work for school, I 20 want to make it count." Yes, I had to find it myself. 21 I don't watch much TV. The CBC had mentioned it on the 22 first day, on the 23rd, on the radio, but I haven't 23 seen anything. All throughout May and June I never 24 heard anybody mentioning it. 25 12747 COMMISSIONER CARDOZO: I guess the StenoTran 2684 1 second part of the question is the process is open 2 inasmuch as we have put a public notice out on the 3 website, so there is a certain openness to that. We 4 are not picking who the notice goes to. We haven't 5 had, as I said at the beginning, many individuals such 6 as yourself write in. A certain number have. 7 12748 Of the 287, a good proportion of them 8 are individuals, but not many of them indicated that 9 they wanted to come to the hearing, which is not 10 necessarily a cost issue because we had said we were 11 prepared to do teleconference connections and we did 12 have the round tables across the country. So, I guess 13 I am asking: Do you think in a process like this the 14 public and the average individual have enough access as 15 compared to the corporate interests? 16 12749 MR. BAINES: For this review? 17 12750 COMMISSIONER CARDOZO: Or any, yes, 18 but this review. Perhaps you are more familiar with 19 this review than any of the others that we have had. 20 12751 MR. BAINES: I think the Commission 21 should be looking solely at providing television 22 broadcasting regulations that serve the public interest 23 and to accomplish that I think you have to hear it from 24 mostly people -- people or organizations which are 25 coming from that perspective first. So, I think there StenoTran 2685 1 is a bit of a problem of how power is distributed 2 because obviously the average person doesn't have the 3 resources of the CAB or knows about it. 4 12752 So, there is an unequal level playing 5 field to begin with and I think if you are looking at 6 public interest broadcasting, then you have to actually 7 go out and seek it because you are not going to just 8 find it by saying everyone is welcome, because who is 9 going to come is going to be the vested interest and 10 money that are going to already have their foot in the 11 door. So, that's my main point. 12 12753 The review has sort of been public. 13 I'm sad to see that 200 of the submissions weren't 14 available for people to look at unless they are in a 15 major city centre. I would have expected at least the 16 executive summaries to be scanned in on the web so at 17 least I could see where the other 200 people and 18 organizations were coming from. They were due the end 19 of June. I mean it's October now. It's only 200. I 20 mean it would take a day. So, that's quite sad. 21 12754 COMMISSIONER CARDOZO: Well, at least 22 we will have -- this is post-hearing or at least post 23 each day, but, as I understand it, the transcripts of 24 each day go on the net pretty well by the next day, so 25 everything that is getting said here is available on StenoTran 2686 1 the net -- 2 12755 MR. BAINES: That's good. 3 12756 COMMISSIONER CARDOZO: -- across the 4 country and internationally. 5 12757 MR. BAINES: I enjoyed reading the 6 hearings from this summer. I read through all those, 7 the English ones. 8 12758 COMMISSIONER CARDOZO: I am glad to 9 know somebody reads these things. 10 12759 The last question. The people's 11 Charter that you have appended, could you just tell us 12 what the source of that is? 13 12760 MR. BAINES: Oh, sure. A couple of 14 years ago I went to a conference in St. Louis, 15 Missouri. It was the founding convention of the 16 Cultural Environment Movement, which is mainly -- 17 12761 COMMISSIONER CARDOZO: Sorry, the 18 Cultural...? 19 12762 MR. BAINES: Cultural Environment 20 Movement. They are one of the founding organizations 21 of the Charter and I think there was a few groups that 22 were working on it. 23 12763 COMMISSIONER CARDOZO: And this 24 Charter was developed at that meeting? 25 12764 MR. BAINES: No. It's still in draft StenoTran 2687 1 formation, as far as I know, and at this convention it 2 was sort of shown to the members because the members 3 were pretty much North American groups from backgrounds 4 of legal, health, minority, every kind of sort of 5 public interest based organization you could think of 6 that were all rallying around the need for democratic, 7 diverse media, and that's why they all came together in 8 St. Louis. The organization is for that. It's a 9 coalition of groups that are focusing on media 10 democracy. 11 12765 So, the Charter was shown by these 12 members -- I'm not sure how much it was changed -- 13 because the Cultural Environment Movement is one of the 14 members. So, it's a pretty interesting -- I think I 15 submitted what seems to be a short form of it in my 16 submission. I have a longer draft thing here today, 17 but there is the web thing. I gave the web address. I 18 mean I think it's a pretty interesting document. They 19 go back 40 years in human rights and the needs of that 20 kind of world. 21 12766 I think the world we are moving into 22 today is quite different and I think this Charter 23 addresses some of the concerns because again back when 24 I was at this convention in St. Louis there were so 25 many groups, be it religious, women, native, people StenoTran 2688 1 that were disabled, children, the elderly, health 2 professionals, legal experts, educators. I mean they 3 all had a beef with the media. They all had serious 4 problems with the way that their issues were being 5 portrayed or weren't being portrayed and how decisions 6 were being made and how the system works and they were 7 fed up and frustrated, so they came together. 8 0950 9 12767 I think the Charter is the result of 10 that sort of frustration, where people aren't enjoying, 11 aren't reaping the benefits of a communication system, 12 which they should be. So -- 13 12768 COMMISSIONER CARDOZO: Thank you very 14 much. This is my evaluation, you can pass it on to 15 your professor: The student has shown a good 16 understanding of the subject matter, has done extensive 17 research, and has determination of his convictions. 18 12769 You can pass that on to your 19 professor, and I hope you keep in touch with us. 20 12770 MR. BAINES: Oh, I will. Thank you 21 very much. 22 12771 THE CHAIRPERSON: Thank you, 23 Mr. Baines. 24 12772 Madam Secretary, would you call the 25 next participant, please. StenoTran 2689 1 12773 MS BÉNARD: Thank you, Madam Chair. 2 12774 The next presentation will be by 3 Canadian Media Guild, and I would invite Mr. Arnold 4 Amber and Ms Kathleen Petty to please come forward. 5 PRESENTATION / PRÉSENTATION 6 12775 THE CHAIRPERSON: Good morning. 7 12776 MS PETTY: Good morning, and thank 8 you in advance for your attention. We do appreciate 9 your time today. 10 12777 We are here representing the Canadian 11 Media Guild. My name is Kathleen Petty. I work for 12 CBC "Newsworld", out of Calgary. I am suffering a 13 little jet lag today, but nothing too serious. 14 12778 I work on a program called "Dayside", 15 which is a daily program on "Newsworld", Monday through 16 Friday. I am one of many members of the Canadian Media 17 Guild at the CBC. We are -- essentially, if you turn 18 on the CBC, and obviously we hope that you do, often, 19 and view the programs that we broadcast, a member of 20 the Canadian Media Guild had a hand in that program. 21 12779 The Guild represents journalists, 22 directors, producers, researchers, hosts, like myself, 23 secretaries, business employees, the sales ad force. 24 In one way or another, we all have a hand on what you 25 see, and in some cases, two hands. We are StenoTran 2690 1 multi-skilled. I'm sure that's a term that all of us 2 are hearing more and more of, cross-skilled, and that 3 is a reality just of clearly greater demands on all of 4 us, but the cutbacks of the CBC have contributed to 5 that as well. 6 12780 At the same time, I would hope that 7 it has strengthened us and made us better at what we 8 do, because clearly if we understand better what other 9 people have been doing all these years, and appreciate 10 their efforts, it can only improve the job we ourselves 11 do. 12 12781 The poster boy of cross-skilling, or 13 the poster man, might be Arnold Amber, so it seems like 14 a good time to turn it over to him. 15 12782 MR. AMBER: Thank you, Kathleen. 16 12783 I obviously am behind the scenes. If 17 you look at the two of us, you can figure out which one 18 we decided to put on camera and which one we decided to 19 keep in the background. 20 12784 I, for many years, was an executive 21 producer of something called TV news specials, which 22 covered conventions, politics, budgets, elections, 23 things of that sort, Pope's visits. More recently, I am 24 actually working on a project which is interesting in 25 light of this discussion, because I have been assigned StenoTran 2691 1 to a project about looking at the CBC archives in order 2 to get programming together which we can rebroadcast on 3 the CBC and equally sell both in Canada and abroad. I 4 think that is an interesting conception and an 5 interesting point that has to be made about where 6 television is going. 7 12785 I also should say that with my 8 advanced age I have had the opportunity to represent 9 the Union at other CRTC hearings before. I personally 10 welcome this initiative, because it is going to take a 11 new look at television in this changing environment. 12 We have a changing environment about how we do our work 13 at the CBC, but certainly the whole industry is 14 changing, and with the bold initiatives that this 15 particular version of the CRTC brought down about radio 16 a few months ago, it heartens us to believe that the 17 study, and the various studies that we will be doing 18 over the next months to years, will benefit us all. 19 12786 There is no doubt, in our view, that 20 the CRTC, in some fundamental decisions it makes, has 21 an incredible impact on what Canadians get to see, and 22 we hope that over the next little while here we will be 23 able to expand on the brief that we sent in to you. 24 12787 MS PETTY: Something that I would 25 like to address over here is local programming, not StenoTran 2692 1 because I do local programming, I do network 2 programming, but I live in Calgary. I'm not sure how 3 many people you hear from here come from outside the 4 Ontario area, although I'm sure there have been a few, 5 but probably not a whole bunch from Calgary, so I would 6 like to talk to you from that perspective, because I 7 was born and raised in Calgary and have worked most of 8 my professional life in Calgary and yet have the 9 opportunity, indeed the privilege, to work in network 10 television and yet be based there. Also, Mr. Baines 11 was talking about average viewers. Sometimes it's easy 12 to forget that even those of us who work in the 13 industry are also viewers, and I dare say some of us 14 are pretty average as well. 15 12788 When you take a look at the CBC, in 16 Calgary in particular, it wasn't that long ago that it 17 was the number one station in the market. People who 18 sort of have a view of Calgary, perhaps a right of 19 centre view, might find that surprising, because the 20 CBC typically is not viewed as a station that necessary 21 appeals to that kind of marketplace, but clearly what 22 really appeals to people is content, and some 23 reflection of who you are in the community, essentially 24 a mirror so that you see yourself reflected. Again, I 25 think Mr. Baines made that point very well in the StenoTran 2693 1 previous submission. 2 12789 Right now, the CBC, after the 3 cutbacks and the process of reinventing ourselves over 4 and over again, we are fighting for third place right 5 now. We now have four stations in the market. 6 12790 What is unfortunate about that is, 7 here I am living in Calgary, proud to be living in 8 Calgary and be from Calgary, also proud to be working 9 for the CBC and a national network, yet when I meet 10 people for the first time and they don't know who I 11 am -- and gosh, that does happen, they don't know -- 12 invariably in a social situation people say, "So, what 13 do you do for a living?", to which I respond, "Oh, I 14 work for the CBC". And conservatively, nine times out 15 of ten the response is, and this is a quote, "I thought 16 they shut you down." They don't even know we're there. 17 12791 The other response, if they do 18 recognize me, and I am always pleased when they do, 19 because it means they're watching, obviously, they say: 20 "Hi. Nice to meet you. I watch "Newsworld". What are 21 you doing in Calgary?" "Well, I live here." "Oh, you 22 commute." "No. I'm here all the time." 23 12792 The reason why I bring that up, the 24 reason why I think that is really important is that if 25 the CBC isn't a factor in the local community, you lose StenoTran 2694 1 the connection. Here we always talk about this 2 geographical area that we are all scattered across, and 3 how we are looking for something to bind us together. 4 It sounds so cliché, I know, but it's true, that if you 5 can't make that connection, it's just that much easier 6 to feel more and more separate all the time. The 7 irony, particularly with the CBC in Calgary, is that 8 even though people don't think we're there, when 9 there's an election, they look for us anyway. They 10 just instinctively know that we are going to cover it. 11 12793 Indeed, we have a municipal election 12 in two weeks, and we have four stations in that market. 13 The CBC will be covering all of it. The CTV affiliate 14 will. The other two will not. You will get it in the 15 newscasts essentially. And I wonder that if the CBC 16 were not covering it, whether any of them would be. 17 12794 MR. AMBER: If we go from a concept 18 of how important local television is and how important 19 CBC at local television is, let's go to the wider 20 picture, the picture that I think we are all facing in 21 the industry now, which is the 500-channel world. 22 12795 In that new world, the ability to 23 rebroadcast something, I mentioned before, and which 24 our paper talks about extensively at its start, is 25 really really important. StenoTran 2695 1 1000 2 12796 It would seem to me as a Canadian, as 3 a voluntary Canadian, as someone who moved away but 4 chose to move back, that the issue about rebroadcast is 5 incredibly important. I think, as we have more and 6 more channels coming into this country from abroad and 7 programming from abroad to fill up those 500 channels, 8 that Canadian television -- which is the desire of the 9 CRTC to be improved both in quantity and quality. 10 12797 To me the issue is Canadian TV is 11 indispensable. It is not just an issue of it is a 12 luxury or it is something nice to aim for; but it is 13 indispensable. 14 12798 One of the things that we would like 15 to direct your attention to that exists in our paper -- 16 but I will elucidate on it a bit -- is that we actually 17 said that the broadcaster CBC and private broadcasters 18 should have access to public funding which now exists 19 basically through independent producers. 20 12799 As you all know, independent 21 producers who apply for the money generally get to keep 22 the copyright, get to have the ownership of the 23 program, get the ability to resell broadcast rights, 24 both in this country and in other countries. 25 12800 I have sat at meetings where members StenoTran 2696 1 of the private television industry have said: "I've 2 got a great success." 3 12801 I remember at the height of the 4 success of "ENG", the programming director at CTV said: 5 "Do you realize that every time we put that to air, it 6 costs us $30,000 of red ink?" He said: "The more we 7 run, the deeper the red ink goes." 8 12802 It is because you cannot generate 9 enough money in advertising on your first play on your 10 first network to get that money back. So selling it 11 around the world is important. Selling it again to 12 specialty channels in Canada is important. 13 12803 I don't often take the claims of the 14 private broadcasters at face value. However, I know 15 enough about the way television is made and the way it 16 is financed to know that they do have a legitimate 17 concern about the costs that would be involved in 18 increasing both the quantity and quality of the 19 categories of broadcasting we are interested in here: 20 music, drama, variety. 21 12804 Therefore, we think that there is a 22 way to share the public money. We think of it in two 23 ways. At the moment, there is about $200 million a 24 year that comes out the Cable Fund. We believe that 25 about 10 percent to 15 percent of that, on a trial StenoTran 2697 1 basis, should be allotted to both the private and 2 public broadcaster to let them generate work. 3 12805 Most of that work will end up with 4 the independent producers. As we say in our paper, 5 nobody in Canada, with the exception of SRC in 6 Montreal, has any ability right now to do in-house 7 production. All the production will still come from 8 private producers. 9 12806 The issue of how the deals are 10 constructed with independent producers will be 11 different. The broadcaster will get to keep title, 12 will get to keep the ability to sell that product 13 abroad. 14 12807 We think that this is essential, and 15 we would like to see that change made. 16 12808 We also offered up another idea -- 17 12809 And by the way, our paper is full of 18 ideas. We thought that the exercise at this stage was 19 to present some ideas. We hold no belief that God came 20 down and tapped us on the forehead and said: "This is 21 the way to save Canadian television." 22 12810 But we think there are some 23 interesting ideas here. 24 12811 The other idea was to say: Canadian 25 television networks and stations now pump out about StenoTran 2698 1 $350 million a year in buying foreign product. If 2 there were some sort of -- I am going to use the word 3 levy. If there were some sort of assessment, at maybe 4 3 percent, this would result in approximately another 5 $10 million that could be added to a fund which would 6 go to the broadcasters, which would allow them, we 7 think, to increase the amount of programming and the 8 quality of it. 9 12812 In the new 500-channel universe, 10 there is no doubt that over-the-air broadcasters, 11 whether they be CBC, CTV, Global, are under an 12 incredible amount of pressure. You know this. You are 13 in the business. 14 12813 Every time a specialty channel comes 15 on the air and takes a smidgen of an audience away from 16 the over-the-air broadcasters, it doesn't seem like 17 much; but when you have a bunch of smidgens taken away 18 from you, you have declining audiences for over-the-air 19 broadcasters. 20 12814 Despite my normal reticence or belief 21 in some of their claims, maybe this is a time, in 22 looking to the future in the new century, to draw up a 23 new formula where both the private broadcasters can 24 prosper and the CBC can continue as a national public 25 broadcaster to turn out high quality content for you. StenoTran 2699 1 12815 MS PETTY: Within the context of the 2 content, the CRTC -- I am going to inform you of a poll 3 that you had commissioned, but I will remind you of it 4 again -- commissioned a poll that showed that 79 5 percent of Canadians named an American program as their 6 favourite program. 7 12816 I don't know that we even needed a 8 poll to find that out. I am sure we all could have 9 probably guessed that, or at least come close. It is 10 not surprising to anyone, although it should be 11 profoundly disappointing. I know it is to me. 12 12817 Yet at the same time I thought there 13 was encouragement in the poll that you had 14 commissioned. It also showed that two-thirds of 15 Canadians want to see more programming that reflects 16 them; programs with Canadian stories. 17 12818 I would suggest that it is human 18 nature to want to see more about yourself. It is who 19 we are. 20 12819 Michael MacMillan, head of Alliance 21 Atlantis, spoke before you, and I thought he said it 22 better than I have heard anyone say it so far -- and it 23 is so deceptively simple. The first step to having 24 Canadians watch Canadian programs is to give them the 25 chance to see them. StenoTran 2700 1 12820 MS BÉNARD: Ms Petty, you have gone 2 over your ten minutes by quite a few minutes. Could 3 you summarize your comments, please. 4 12821 MS PETTY: Actually, I was just 5 there. 6 12822 Finally, there is something to be 7 said for the law of averages. I don't think that is 8 physics, but it seems like a pretty good law to me. 9 The more you do, the greater the chance of having 10 better programs on the air. 11 12823 THE CHAIRPERSON: Thank you, Ms Petty 12 and Mr. Amber. 13 12824 Commissioner Pennefather, please. 14 12825 COMMISSIONER PENNEFATHER: Good 15 morning, and thank you for coming from Calgary. 16 12826 Did you come from Calgary too, Ms 17 Petty? 18 12827 MS PETTY: I only came from Toronto. 19 12828 MR. AMBER: It was easy getting up at 20 5 o'clock in the morning; no problem at all. 21 12829 COMMISSIONER PENNEFATHER: I want to 22 reassure you that in fact public consultations did take 23 place across the country. We were in Calgary and did 24 hear from a number of people from the community there. 25 12830 MS PETTY: I meant travelling in the StenoTran 2701 1 other direction. I was not suggesting that you have 2 not talked to people across the country. 3 12831 COMMISSIONER PENNEFATHER: I 4 understand that. 5 12832 As we discussed earlier this morning, 6 the process is one which we hope more and more will 7 allow more participation in a constructive way and in a 8 way that is on the public record. I will come back to 9 that in a moment regarding your comments on local 10 programming. 11 12833 I would like to go through some of 12 the things that you have said in your oral presentation 13 which have answered or triggered new questions 14 vis-à-vis your written submission. 15 12834 We will jump around a little bit. So 16 let's go with this as best we can. 17 12835 First, the role of the CBC; and let's 18 talk about local programming as well. 19 12836 Mr. Baines said to us this morning 20 that television should be more about allowing Canadians 21 to be speakers rather than consumers. What is your 22 reaction to that comment as regards the CBC? 23 12837 MS PETTY: I happen to think that he 24 is right. 25 12838 COMMISSIONER PENNEFATHER: How would StenoTran 2702 1 that happen? 2 12839 MS PETTY: Actually, I think it is 3 happening, particularly on "Newsworld". I think 4 "Newsworld" is a terrific vehicle for that kind of 5 thing. 6 12840 Do I think we can do a better job? 7 Yes. But the job we are doing is this: CBC 8 "Newsworld" has a fair number of open line programs, 9 first of all, from "Benmurghi Live" to "Ann Petrie's 10 Talk TV", to "Patrick Conlon on the Line". 11 12841 We are also very aggressively using 12 new medium; by that, I am talking about e-mail, for 13 example, Internet. 14 12842 I know on my program "Dayside", we do 15 something we call "Connections" every day, which has us 16 go out into the streets in different cities across the 17 country. We plan all this ahead of time so that we can 18 make sure we get from end to the other, as well as into 19 the north, and ask what we hope are questions about 20 issues that people are talking about -- since you don't 21 always want to be dictating what you think people are 22 talking about. 23 12843 We also have a segment where we read 24 e-mail from viewers who write in, and also play back 25 voicemail. StenoTran 2703 1 12844 Could we do more? Clearly. I enjoy 2 open line programs, not as some sort of exercise in 3 polling -- because they don't do that -- but as an 4 exercise in communication. 5 12845 COMMISSIONER PENNEFATHER: We are 6 talking about open line or talk-TV, the kinds of shows 7 that can edge toward voyeurism, the other day with a 8 representative from Trinity Television in terms of 9 realistic and meaningful participation by the community 10 in using television as a communication tool -- which is 11 a very different concept from a programming 12 perspective. 13 12846 In your community you have A Channel, 14 for example. 15 12847 MR. AMBER: Right. 16 12848 COMMISSIONER PENNEFATHER: We have 17 heard a lot of comments about programming and presence 18 in the community. 19 12849 Is that a role for CBC? Is that what 20 local programming is for CBC -- more of that kind, or 21 is it still one that is talk shows but a concept that 22 is in effect imposed by the corporation in terms of 23 what local programming should be? 24 12850 MS PETTY: I think all local 25 programming by stations, whether they be public or StenoTran 2704 1 private, are to some extent imposed. You have people 2 running stations who have very strong opinions on what 3 programs people want or need to see. And I think that 4 is a danger that all of us have to be very careful of. 5 12851 I think the way to at least 6 unmitigate that somewhat is to be in the community. I 7 think it is critical in local television. You have to 8 have some sense that they are there. It is not enough, 9 for example, that CBC in Calgary does a "Newscast", 10 because if people don't know it is there and if they 11 don't see you out in the community, they don't make 12 that connection that they are part of their community. 13 12852 It doesn't matter if you are doing 14 Calgary news. You can turn on a national newscast and 15 see Calgary news if it is interesting enough to a 16 national audience. 17 12853 I am not sure if I am exactly 18 answering your question. 19 12854 COMMISSIONER PENNEFATHER: It is a 20 long subject. I hear you saying news. So, for you, 21 local programming is news. 22 12855 MS PETTY: That is all local 23 programming essentially is. It is information 24 programming. 25 12856 They have morning shows, for example, StenoTran 2705 1 local morning shows. I can think of two of the 2 stations, two of the four; the A Channel and the WIC 3 station both do morning shows. They are sort of 4 entertainment, but essentially it is news and 5 information. 6 12857 My understanding is based on studies 7 done in the industry and the general prevailing wisdom 8 out there. We have no shortage of that on Canadian 9 television. 10 12858 I guess what you are saying is: Do 11 we have the kinds of programs that step beyond news and 12 reflect the community? I would say, as a viewer just 13 watching it, no. 14 12859 MR. AMBER: It was not always just 15 news. As you may recall, years ago every CBC local 16 station had a whole panoply of different types of 17 programming. But with the massive cutbacks, we then 18 shrunk back to where the basic service at the local 19 level is news. 20 12860 In my view, it is extremely 21 unfortunate. It is hard to keep up with changing needs 22 and demands and things you should do as a programmer. 23 I think elevating the citizenry to greater 24 participation on the air is one of those new needs and 25 desirable things to do. But after you have been StenoTran 2706 1 slashed and cut, you go back to a basic shell. The 2 shell at the moment is news. That does not mean that 3 we should get rid of news. We should use that as a 4 base for building up more local programming. 5 12861 COMMISSIONER PENNEFATHER: As you 6 know, we will have a process to look at a number of 7 issues more in depth. 8 12862 MR. AMBER: Yes. 9 12863 COMMISSIONER PENNEFATHER: But 10 certainly in this hearing we have raised the question 11 of complementarity and the roles of the various players 12 in providing, as you said, that Canadian TV is 13 indispensable. Canadian television is the full panoply 14 of services and public and private that we have to 15 offer in this country. So it is important to get a 16 sense of how you see this mix occurring. 17 12864 You have raised it in terms of costs, 18 because vision costs. It is in that light, as I 19 understand it, that you have proposed access to public 20 funds for public and private broadcasters, which has 21 been a major discussion, and will continue to be at 22 these hearings. 23 12865 Can we look at that for a moment. 24 12866 In terms of the CBC, I was not clear 25 from your submission -- so maybe you can clarify this. StenoTran 2707 1 It is an important point. As you know, I don't think 2 anybody here has argued against the importance of the 3 CBC, but certainly there have been various opinions 4 about even what the current access to public funding is 5 for the CBC. 6 12867 TVA, for example, suggested a gradual 7 decrease of their portion of the equity investment 8 program. 9 1015 10 12868 So, when you are saying CBC has 11 access to public funding, they already have access to 12 the equity investment program, 45 to 55 per cent of the 13 resources going to independent producers via CBC 14 broadcast licence with 50 per cent average over three 15 years being the goal. 16 12869 Are you talking about something over 17 and above that? 18 12870 MR. AMBER: What the issue is, as we 19 see it, and maybe the paper wasn't as clear upon it as 20 it should have been, was that the CBC at the moment 21 when it makes a deal with an independent producer 22 invariably does not have the rights towards 23 rebroadcast. 24 12871 When I started speaking to you today, 25 maybe I should have taken more time to do that. The StenoTran 2708 1 rebroadcast issue is a major issue. You do not make 2 back in a country with this size population the money 3 you need to cover the costs of the production. 4 12872 What we are basically saying here is 5 right now the CBC cannot have the idea about the 6 greatest drama that ever existed, the life and times of 7 the CRTC for example, and have this great script ready 8 to go. The CBC cannot apply and make that program with 9 public funding and continue to own that program. 10 12873 What would invariably happen is that 11 this program would be proposed by an independent 12 producer who would keep copyright and the ability to 13 sell it. What is happening now is there's a grey 14 market getting involved, whether it's CTV or CBC and I 15 won't go too far in this. I think some of the 16 independent producers are now being asked to make 17 agreements concerning distribution rights. 18 12874 Rather than do it behind closed doors 19 on a grey market area, our view is that the CBC in 20 order to prosper and to provide even more Canadian 21 product has to have two streams. Stream one is the one 22 you just spoke of, the traditional stream. The other 23 one is the ability to access funds so that it can 24 actually make and own a program. 25 12875 Concerning the issue of cutting back StenoTran 2709 1 on the percentage of the funds that now go to 2 productions that appear on the CBC, I don't like to use 3 a lot of figures but one I will use is that right now 4 the CBC gets 65 per cent of the fund -- you know, the 5 audience. All the money that's put into the fund, 65 6 per cent of the audience that watches those programs is 7 on the CBC, although it's approximately 50 per cent of 8 the money. 9 12876 The CBC is very successful in taking 10 money, using money from the fund, working with 11 independent producers and actually producing high 12 quality program which people watch. They certainly 13 watch more on the CBC than they are on the others. 14 12877 I think the reason why the CBC should 15 not be cut away from this percentage of public funding 16 is two reasons. 17 12878 One of them is that traditionally, 18 and every record, every statistic proves it, the only 19 network that has always wanted to do Canadian 20 programming is the CBC. That's reason number one. 21 12879 Reason number two is there was an 22 incredible reason why in the early eighties, and you go 23 right back to Francis Fox when he was the Minister, why 24 public funding was basically taken away from the CBC 25 and it was set up in these fund ways to encourage StenoTran 2710 1 independent production. 2 12880 One of them was an industrial 3 strategy. We wanted to really develop a movie and 4 television industry in this country. We have done 5 that. 6 12881 It seems to me that the issue you are 7 facing now is increasing the quality and quantity of 8 Canadian content. Part of that is, and that's why we 9 say that the CBC is the foundation of the Canadian 10 television system, is because you have a willing 11 partner here to produce more and better Canadian 12 television programming. 13 12882 We have the record. We have had some 14 very, very fine programming in the past. I think the 15 issue we are looking at today is the CRTC and people in 16 the business. It would not even necessarily be on the 17 table if years ago a CRTC from many years ago would 18 have granted the CBC the right to create a CBC2 akin to 19 the BBC2 in Britain. 20 12883 We need more outlet for the one 21 organization in this country on the national level that 22 wants to make Canadian programming, so when somebody 23 comes to you and says "Hey, let's cut away more of that 24 money so they can do less", it doesn't sound like a 25 great idea. StenoTran 2711 1 12884 The great idea, in my view, would be 2 to continue on the idea that the CBC is the foundation 3 and cannot be as -- we got very upset about the word 4 complementary service. 5 12885 The reason that we wrote a lot about 6 the CBC in this brief, because we know the CBC's issue 7 is coming up later, is we don't want the doors closed 8 so that rulings of the CRTC in this preliminary stage 9 so restrict what the CBC can do that when we get around 10 to discussing what the CBC should do, it's already 11 focused and channelled in a way that doesn't make any 12 sense. 13 12886 COMMISSIONER PENNEFATHER: I 14 understand. You have raised a couple of very important 15 points, this business of the rights and ownership. As 16 I understand it then, your proposal is for access to 17 public funds over and above what the CBC currently has, 18 and still however the ownership remains in the hands of 19 the independent producer. You also would have your 10 20 to 15 per cent new envelope include the CBC as well. 21 You said public -- 22 12887 MR. AMBER: Yes. We would be one of 23 the players. I'm not suggesting that this is money 24 just for the CBC. No. It's for everybody because I 25 think that the issue is across the board. StenoTran 2712 1 12888 COMMISSIONER PENNEFATHER: But 2 looking at across the board, looking at the system as a 3 whole and looking at your point that broadcasters, 4 private broadcasters, should have access to production 5 funds, why? How is this going to help Canadian 6 television and Canadian programming? 7 12889 Here I am speaking about the system 8 as a whole. It's a delicate balancing act. Everybody 9 said that. It's important to many that the independent 10 production sector remain vibrant. We have come a long 11 way. 12 12890 To many this is a very serious 13 threat, an evolution which some have said like in the 14 United States, would end up in the demise of the 15 independent production sector and, therefore, greatly 16 diminish the diversity of programming in this country. 17 12891 From that sense, it's an important 18 step which can lead in various directions. Speaking 19 now about not just the public broadcaster, but 20 certainly the private sector and access to public 21 funding, in a way, if I understood it, means ownership 22 of property by the broadcaster, not to say it's ideas 23 on the table. As you said, great ideas. That's what 24 we are here for. 25 12892 Don't you have some concerns in this StenoTran 2713 1 regard? 2 12893 MR. AMBER: Yes, I have. 3 12894 COMMISSIONER PENNEFATHER: If I could 4 ask you as well in answering that, if you have 5 concerns, what kind of safeguards would you propose be 6 put in place to ensure that there is not abuse in 7 preferential treatment? 8 12895 MR. AMBER: Okay. The history is so 9 bad that I could see why people would be reluctant to 10 do anything more for the private broadcasters. I don't 11 want to name names, but you can go back and look at 12 very many of the applications for new networks and new 13 stations in this country and then trace what they 14 promised to do what they have done. 15 12896 The figures and facts that we know 16 after they have been in business for a while are clear 17 cut. They don't generally do what they say they are 18 going to do. That is why in our proposal we said a 19 small amount of money. We are saying to you do not 20 change the way the funds are administered now. Try a 21 little bit of extra. 22 12897 One of the proposals would take a 23 little bit off the fund from the independent producers 24 and give it to the broadcasters. The second one would 25 actually generate new money coming from the StenoTran 2714 1 broadcasters to pay for Canadian content. 2 12898 In both cases, my answer to you is 3 this is an experiment. At a certain point I think the 4 CRTC is right in saying to the private broadcasters 5 "This time will you kindly live up to what you promised 6 to do". 7 12899 I am going to obviously be very 8 general because my union cannot handle any libel suits. 9 In a general sense, it is time to make them live up to 10 something. They have no problem about coming here and 11 pleading their own case. I won't do it for them. 12 12900 I do understand though, having been 13 in this business for 30 years, that at a certain point 14 on this particular issue, I know that they have to have 15 the ability to sell these programs. 16 12901 I happened to travel a lot in Europe 17 and in Africa recently. I see Canadian programs all 18 over the place. In fact, one of the largest buyers of 19 Canadian programs is South African Broadcasting 20 Corporation. I work with them. I could tell you that 21 they buy these things and they spend good hard currency 22 to buy them. 23 12902 The broadcasters claim they need the 24 ability to share in some of that money in order to keep 25 going the way they are going. When you look at their StenoTran 2715 1 profit sheets, you don't believe that, but there is no 2 doubt that over-the-air broadcasting is considered by 3 everyone to be the mature part of the industry. The 4 newer parts of the industry are the cable, the 5 specialty channels and new media type of ventures. 6 12903 When you get to the point where you 7 have in fact a mature part of the industry, it could 8 very well be this time that they are not selling us a 9 story. Our proposal is straightforward. It's try it 10 on an experiment and watch what they do. 11 12904 COMMISSIONER PENNEFATHER: So in 12 other words, you are looking at current requirements, 13 the current regulatory framework which have in specific 14 cases expenditure and exhibition requirements over and 15 above the 60/50. You agree then that there should be 16 both expenditure and exhibition requirements on the 17 private conventional broadcasters. 18 12905 MR. AMBER: Yes, and we think that 19 the amount of Canadian content should be increased. 20 12906 COMMISSIONER PENNEFATHER: What do 21 you mean by increased? 22 12907 MR. AMBER: Well, the percentage of 23 Canadian programming that's on the private broadcasting 24 day, 24 hours. 25 12908 COMMISSIONER PENNEFATHER: Are you StenoTran 2716 1 talking about a formula like 10/10/10 then? 2 12909 MR. AMBER: We suggested we even be 3 more explicit because when you lump all the Canadian 4 programming together, then you will get more hockey 5 games and football games. 6 12910 If the area of concern on the CRTC's 7 part is about drama and music and variety and 8 documentaries, long-form documentaries, that is where 9 the content should also increase. 10 12911 We have a four point proposal. One 11 of them is generally increase the amount. Secondly is 12 stipulate these 7, 8 and 9 as being special. One is 13 make it more in prime time, that prime time should run 14 seven to eleven. Perhaps the most controversial thing 15 we said was number four about newscasts. 16 12912 As somebody who has been in the news 17 business, I find it very aggravating that Canadian 18 broadcasters not only bring in little items of American 19 and put them on the newscasts. 20 12913 Kathleen and I both -- you know, you 21 feel it when you watch some of the private broadcasters 22 and they show you, you know, situations that exist in 23 the United States that are all about American culture 24 and the American way of life. 25 12914 Also, as we put in our paper about StenoTran 2717 1 the odd-ball stories that are used in Canada, they do 2 that because it's cheaper to do that than obviously go 3 out and get your own Canadian news. We think all these 4 four things should be dealt with in that way. 5 12915 MS PETTY: I was just going to add as 6 an example of that, we keep hearing about how Canadians 7 are afraid of increasing violence in our society. I 8 have no empirical data to back this up. It's just an 9 observation. 10 12916 We have study after study telling us 11 that we don't have a more violent society, but I would 12 suggest that the U.S. does. Because we do get so much 13 foreign news and local programming from U.S. sources, 14 and I used to work in private television, in private 15 television news, so I know where I got my material 16 from. 17 12917 You can't help but just sort of 18 absorb that and absorb that into your own sense of that 19 being the reality that you live in in this country just 20 because television by its very nature can be so 21 pervasive. 22 12918 COMMISSIONER PENNEFATHER: Yes. I 23 appreciate that. Thank you for that point and drawing 24 my attention again to what you suggest, that we serve 25 Canadian content with a little more punch. These four StenoTran 2718 1 points then are elaborating on that. 2 12919 Also, you are saying more of Canada 3 in Canadian content, which is your point about news. 4 Do you care to comment on this business of what defines 5 a Canadian program, the Canadianness, because you do 6 propose giving credit for that without a specific list 7 of credit, although we have had several suggestions. 8 12920 The Canadianness is what in your 9 opinion? 10 12921 MS PETTY: Well, to put it very 11 simply, I think it's something that you can describe 12 it, although I think you know it instinctively. It's 13 recognizing, I think, yourself. 14 12922 I know I have said this before, but I 15 will just re-emphasize it. I think it's the ability to 16 turn on the television and recognize your own 17 experiences, to not just be an observer or a 18 dispassionate observer, but to watch a program, I 19 guess, with empathy, with a recognition that if you are 20 not represented, somebody you know is represented 21 there. Those are experiences that ring true for you 22 and perhaps provide clarity for you. 23 12923 You see the communities in which you 24 live or in which friends of yours live, for example. 25 You see the people that you see on the streets. You StenoTran 2719 1 see the situations and dilemmas that you deal with on a 2 daily basis. You see Canadian licence plates and 3 Canadian landscapes. 4 12924 COMMISSIONER PENNEFATHER: I can't 5 resist asking this question then. You have raised the 6 500 channel world, you have raised the importance of 7 rebroadcast in terms of financially if not culturally. 8 How are such programs which are so localized, if I may 9 put it that way, in nature going to reach and have 10 impact on an international scale? 11 12925 MS PETTY: That's the problem right 12 there, to view it as being localized. 13 12926 In the United States, if you are 14 living in Kansas and you are watching a sitcom that is 15 based in Los Angeles, you don't go "Ha, another one of 16 those local L.A. shows". You don't. 17 1030 18 12927 We, as Canadians, do this all the 19 time; and that is something that I think we need to get 20 away from. 21 12928 In other words, if I am sitting in 22 Calgary and there is a program taking place in Toronto, 23 the temptation -- and I think just because there is not 24 enough content on the air -- is, "Oh, it's another 25 Toronto program." Sitting in Toronto -- and I don't StenoTran 2720 1 want to presume anything on behalf of Torontonians -- 2 but I would assume the same would hold true if they saw 3 a program out of Calgary, not because they can't be 4 interested; it is just because it isn't what we are 5 used to seeing. I think we have to start getting used 6 to seeing it. 7 12929 So that, you know, all these things 8 aren't odd-ball scenarios. They are a part of our 9 consciousness. They are a part of our viewing habits 10 and not what we are surprised to see but, rather, what 11 we expect to see. 12 12930 MR. AMBER: If I may just add 13 something to that? When we started today, our paper is 14 all about the future, it means, I think, readdressing 15 some of the decisions that have been made in the past. 16 And I noted that in the early 1980s from the Francis 17 Fox era, we went into this idea of creating this 18 industry. 19 12931 We think that the Canadian content 20 quotas as they are set now are still about the 21 industrial quota and we think -- and our proposal -- if 22 the other proposals that I discussed didn't come from 23 the mouth of God, these didn't even come from a little 24 angel because we are not sure that our three ways of 25 dealing with it are necessarily even close to what they StenoTran 2721 1 should be. 2 12932 What we were trying to do is put in a 3 model that would basically say to the CRTC, "Please 4 consider getting away from the industrial approach," so 5 that if there were, you know, you know what the quota 6 figures are and how it all works. Basically, if there 7 are enough Canadians working on something, it could be 8 about Timbuktu, or it could be about outerspace, and 9 generally they are, and it could definitely never show 10 anything about Canada, so Vancouver looks like, you 11 name the city in the states. We all know this, right? 12 12933 We have to break away from that. We 13 are not appearing before the Trade and Commerce 14 Department. We are not appearing before Mr. Martin's 15 Finance Department. This is about CRTC. This is about 16 culture. This is about Canadian identity. 17 12934 It seems to us that what served us 18 well in the 1980s, and I think partly in the beginning 19 of the 1990s but I think is out of place now, is what 20 we want. Because we don't want another program on the 21 air that was happily made in Winnipeg and is employing 22 people and is letting people apply their trade in 23 Winnipeg rather than in L.A. or New York. That is all 24 good. 25 12935 What we are trying to do here is StenoTran 2722 1 something more than that. We are not worried about the 2 way the industry works; and we are not worried in this 3 particular case about its benefit to the Canadian 4 economy. We are worried about culture and Canadian 5 identity and so we are saying to you here is one 6 formula. Everybody gets 50 per cent, if they make it 7 by the regular standards, it is made in Canada. It 8 could be about anything. And then we say you get 9 another 25 per cent if it actually could be even be 10 made outside of Canada but it uniquely addresses itself 11 to a portion of the increasingly diverse Canadian 12 population. 13 12936 So the examples we have put in is if 14 somebody went and took a look at Ukraine, another 15 country I have recently visited, there are so many 16 people of Ukrainian origin in Canada, it would 17 obviously qualify for another 25 per cent. The other 18 one was about Jamaica, Mr. Manley in Jamaica. There 19 are a lot of Jamaicans who have come to this country 20 and people of Jamaican origin. That is another way of 21 evaluating things. 22 12937 Finally, the play, the variety 23 program that is distinctly Canadian, it would get the 24 other 25 per cent. 25 12938 This formula is as good as you want StenoTran 2723 1 to make it and it is as bad as you want to make it. 2 The idea isn't that this formula is the answer; the 3 idea is that the question about the formula and the 4 discussion about breaking away from the industrial base 5 is at the heart of what we think we have to get to in 6 this country. 7 12939 COMMISSIONER PENNEFATHER: I realize 8 it is at the heart, and I accept that. Obviously, we 9 are all looking for solutions to not only make it 10 better but to make sure that in going forward we don't 11 throw out the success we have managed to achieve. 12 12940 Just so I am clear, I believe all 13 your remarks are addressed to the English-language 14 market as opposed to the French-language market; or 15 were you addressing both? 16 12941 MR. AMBER: In some minor cases there 17 is overlap. But, to tell you the truth, I have learned 18 as I certainly have gotten older, not when I was young, 19 that it is best to talk about what you really know 20 about. I personally cannot -- do not know enough about 21 the other area to comment on it. 22 12942 COMMISSIONER PENNEFATHER: With all 23 of that, there is a sentence here that I find 24 surprising but I am sure I am taking it out of context 25 when you say about the CBC, on page 7: StenoTran 2724 1 "...the more it pursues 2 Canadianization, the more it 3 jeopardizes its own long-term 4 survival." 5 12943 It would seem to be a troubling 6 comment. 7 12944 MR. AMBER: The context it is in is 8 about this idea of having the ability to rebroadcast. 9 It is simply -- it is in the section about 10 rebroadcasting and the necessity of being able to own 11 and sell things. It isn't in the wider -- I see your 12 point. 13 12945 COMMISSIONER PENNEFATHER: I 14 understand. 15 12946 MR. AMBER: As a matter of fact, I 16 wish you had helped us edit this because we would have 17 redone it. I told you there is no God or angels on our 18 side. So that is probably not very well done. 19 12947 But it was slowly in the idea that 20 you can keep doing the Canadian programs, but if you -- 21 if each one of them is costing you a heck of a lot of 22 money -- I could tell you, for example, that we used to 23 have a big catalogue that went with those folks that 24 went across to the South African Broadcasting 25 Corporation, and every other corporation around the StenoTran 2725 1 world that bought our stuff. The catalogue keeps 2 getting less and less and less to the point where I 3 don't think even CBC has a catalogue this year that has 4 a lot of CBC product in it because all we have left to 5 sell are things that people will dig out of the 6 archives. We are not making stuff in 7, 8 and 9 to 7 sell abroad. 8 12948 COMMISSIONER PENNEFATHER: What is 9 left of the archives. 10 12949 MR. AMBER: Yes, what is left of the 11 archives. 12 12950 COMMISSIONER PENNEFATHER: I believe 13 some of it disappeared, unfortunately. 14 12951 You have raised a point which I think 15 we have discussed with the corporation and others, and 16 it is of great concern and an issue which must be 17 discussed at length, and I understand it is being done 18 in terms of what has been called the demands of the CBC 19 vis-à-vis asking for more rights than independent 20 producers would care to relinquish to their product. 21 12952 After all, as Salter Street Films put 22 it to us and others, the ownership of your product, of 23 your creation, is key to your future as an independent 24 producer; and that is particularly true in the new 25 universe you mentioned at the very beginning of your StenoTran 2726 1 remarks. Copyright and ownership of your property is 2 key to the survival of your ability to continue to 3 create. 4 12953 So it is a dilemma which is part and 5 parcel of the discussions here, but I am sure you 6 recognize that it is not a one-way street; that the 7 production community is also very concerned, 8 particularly as the information world evolves, that 9 this is the key to the future, and I would say it is 10 the key to the future of Canadian content. 11 12954 So, in looking at this from one 12 perspective, I understand your point, but from a broad 13 perspective, it would seem important to balance the 14 needs of those who are doing the creating as well in 15 terms of the access to their product and the revenue 16 they will obtain for their product from all these 17 different distribution media. 18 12955 MR. AMBER: That is why, by any sense 19 of any judgment, our paper is not radical. It is very 20 moderate. 21 12956 The two proposals are not to 22 liquidate or change the basic rules of the funding. It 23 just says in one proposal as a suggestion is to take 10 24 per cent off. It would then mean that 90 per cent of 25 the present fund would still be controlled by the StenoTran 2727 1 independent producers, just as it is today. So what 2 you are saying is just take a little bit off to give 3 some relief to the broadcasters. 4 12957 The other one looks to the point of 5 all these profits that broadcasters seemingly make by 6 buying American programming, particularly American 7 programming, although from other countries as well, and 8 saying, "If you are spending $100 million on buying 9 American programming, put some money in which will be 10 used by you and other private broadcasters and the 11 public broadcasters to make programs which they can 12 own." 13 12958 So, on the total scheme of this, if 14 we are knocking -- if we do this on an experimental 15 basis, 10 per cent maybe, I don't think that this is 16 going to drive the creative juices, you know, to at 17 least make the creative juices end. I think just 18 another way of using some of this public money. 19 12959 COMMISSIONER PENNEFATHER: I 20 appreciate your bringing those ideas. We have tabled 21 them with some of the other intervenors and had various 22 responses which I am sure you will see. 23 12960 MR. AMBER: Yes. 24 12961 COMMISSIONER PENNEFATHER: I think, 25 too, it is important to note that in addition to these StenoTran 2728 1 two proposals you are, I think, concerned -- and what 2 you are saying is now happening is that the corporation 3 is also looking for more rights for rebroadcast in 4 programs they are currently funding through the 5 existing regime. 6 12962 With that -- 7 12963 MR. AMBER: Just so you know, I am 8 not speaking for the corporation on that. 9 12964 COMMISSIONER PENNEFATHER: I 10 understand. 11 12965 MR. AMBER: But as you wander the 12 halls, you hear things. 13 12966 COMMISSIONER PENNEFATHER: Yes, I 14 believe there is a gentleman who built a whole 15 television program around that, called the "Newsroom". 16 As you say, we should talk about what we know best. 17 12967 All right. Thank you very much. 18 Thank you, Madam Chair, that completes my questions. 19 12968 THE CHAIRPERSON: Commissioner 20 Cardozo. 21 12969 COMMISSIONER CARDOZO: Can I just 22 clarify, your membership is from public broadcasters as 23 well as private? 24 12970 MR. AMBER: The Canadian Media Guild 25 represents employees at the Canadian Broadcasting StenoTran 2729 1 Corporation who do all these production jobs. We have 2 members that work in news agencies, the Canadian Press, 3 Agence France Presse, Reuters News Agency. But, in 4 broadcasting, we are just at the CBC, the Canadian 5 Media Guild is. We are also affiliated with something 6 called the Newspaper Guild of Canada, which does have 7 some members in the private sector. But, basically, we 8 are representing the Canadian Media Guild which is at 9 the CBC. 10 12971 COMMISSIONER CARDOZO: Okay. So, in 11 terms of television reflecting the people they serve, I 12 wonder if you could just give us your sense, and I am 13 not looking for specific numbers, about how your 14 members and how the people who work for television 15 reflect the people they serve. I am thinking in terms 16 of gender, in terms of ethnicity, race, in terms of 17 disability, aboriginal peoples and so forth. 18 12972 Do you think you reflect the 19 diversity out there and through the ranks to -- 20 12973 MS PETTY: I can address television 21 news, keeping with the whole theme of talking about 22 what you know. I think that is what I better stick to. 23 12974 We are always trying, first of all, 24 to be as representative as we can. I don't think there 25 is a broadcaster or cable or over-the-air who can't do StenoTran 2730 1 better, and anyone who suggests that they are doing 2 everything that they should be doing -- 3 12975 COMMISSIONER CARDOZO: Are you giving 4 me a corporate defence here? I am not asking for that. 5 What is your sense -- -- 6 12976 MS PETTY: Do you think we are doing 7 it? 8 12977 COMMISSIONER CARDOZO: Yes. Do you 9 think it is happening? 10 12978 MS PETTY: Oh sure, I think it is 11 happening. But you still have to sort of quantify it a 12 little bit, I think. I think we can do better. I 13 think we hear from more voices and see more people, 14 certainly on "Newsworld" -- I mean only because of the 15 demands. If you are on 24 hours a day, seven days a 16 week, you have all kinds of opportunities to give any 17 number of people a voice. 18 12979 Sure, quantity -- and that is what I 19 was talking about before, I guess in a sense, when 20 talking about Canadian content, you push enough of it 21 out there, some of it works. Some of it accomplishes 22 the goals that you set out. 23 12980 There is a lot to be said for 24 quantity. Clearly, the pursuit of quality should go 25 hand-in-hand with that. But I think particularly StenoTran 2731 1 "Newsworld" just because of the sheer amount of 2 airtime. We are hungry, you know, we are ravenous. 3 There is never enough. 4 12981 COMMISSIONER CARDOZO: How about in 5 terms of the people who work in the corporation? 6 12982 MS PETTY: Individual people? 7 12983 COMMISSIONER CARDOZO: And especially 8 through the ranks; do the number of women, for example, 9 in senior positions reflect the number of women in 10 society? 11 12984 MS PETTY: Actually, we probably 12 outnumber them. A lot of women -- there is a lot of 13 women at "Newsworld" in Calgary; and, actually, we sort 14 of joke about that some times because it is rather 15 startling when you walk through the doors. We 16 definitely have no problem in that area, lots of women 17 and -- 18 12985 But I would suggest in Calgary 19 probably not as many visible minorities as we should 20 have. That is partially a reflection of the 21 demographic of the city, frankly. 22 12986 COMMISSIONER CARDOZO: How about 23 aboriginal people? 24 12987 MS PETTY: Again, I would have to 25 say, no, it is not well represented at CBC in Calgary. StenoTran 2732 1 12988 MR. AMBER: If I may, just to show 2 the democracy that exists in the union, I don't think 3 we are doing nearly as well as we should, and I think 4 there are three or four reasons for that. 5 1045 6 12989 I should tell you, by the way, the 7 CBC won an award a few years ago from the Canadian 8 Human Rights for having actually fulfilled all those 9 mandates that you spoke of. When you wander around the 10 halls of a city like Toronto, with the big building in 11 Toronto, you understand that we have a ways to go. 12 Toronto is almost reaching the point where, on the 13 racial issue, it is going to be 50/50 and we are not 14 anywhere near that in that building in the CBC. 15 12990 I think part of it is breaking down 16 old ways of thinking, number one. Number two, the 17 other issue that exists there is it's very hard to keep 18 changing the racial make-up and the demographics of 19 your work force in downsizing situations, and we have 20 been downsized nearly to death. 21 12991 However, if you go to Toronto, the 22 anchors of our news programs are both visible 23 minorities and women. I think that some of the 24 programming units make an extremely -- go out of their 25 way to make sure it's happening, but some of it's StenoTran 2733 1 slower in other units. I am very happy to see that on 2 Newsworld and on the main service we recently hired, a 3 couple of months ago, years late, an aboriginal woman 4 who is now one of our newscasters and anchors. So, I 5 think that you can go with the corporate answer and you 6 can go with the general answers. 7 12992 I myself don't believe that we have 8 done as much as we could do. I come from a family 9 where my family is interracial, so I understand the 10 sensitivity. I also agree with Kathleen the answer 11 isn't just to put numbers in, but to put numbers in, be 12 representative and have quality as well. 13 12993 COMMISSIONER CARDOZO: Sure, and the 14 trick is to find the quality people who happen to 15 represent the diversity who are there. 16 12994 MR. AMBER: And they are there. They 17 are there. 18 12995 COMMISSIONER CARDOZO: I think that 19 in terms of on-air personalities CBC probably offers a 20 reflection that's better than any other, although I 21 look at the senior management that we have seen and 22 there was rather an over-abundance of white males. 23 Considering some of them were new, the argument of you 24 have to go with what's in there because there are 25 cutbacks doesn't cut it. StenoTran 2734 1 12996 The other thing worth pointing out is 2 that among your new directors on the Board of Directors 3 of the CBC, the government has just appointed John Kim 4 Bell, the first aboriginal person, I think, to be on 5 the Board. So, maybe there will be some changes there. 6 12997 The other thing is I just wanted to 7 make a comment, Mr. Amber. You said, comparing the two 8 of you, you can guess who is on TV. If TV is to 9 reflect the people who watch it, as a person who is 10 rapidly balding, might I say there should be more of 11 you. 12 12998 MR. AMBER: You see, you are 13 misinterpreting it. What I meant was about my height. 14 Do I have a problem here? Are you telling me I have 15 another problem? 16 12999 COMMISSIONER CARDOZO: Thank you, 17 Madam Chair. 18 13000 THE CHAIRPERSON: Counsel? 19 13001 MS PATTERSON: Thank you, Madam 20 Chair. 21 13002 This morning you mentioned that local 22 programming other than news would be welcome. Can you 23 suggest some categories in which local programming 24 would be more welcome; for example, public affairs or 25 entertainment? StenoTran 2735 1 13003 MS PETTY: Public affairs is sort of 2 the same thing as news, although I can tell you that 3 there is a dearth in Calgary of -- I would love to see 4 more public affairs on local issues because you don't 5 see them in prime time because there is never an 6 opportunity in a local market, at least our local 7 market, to debate issues, except on radio. Radio 8 actually does it reasonably well, but television 9 doesn't do it -- at least in Calgary doesn't do it at 10 all and I mean not anywhere on the dial. It simply is 11 not done. 12 13004 But other programming would be -- I 13 would like to see music programming. I would like to 14 see some of the local talent. Although cable 15 television does it -- the local cable station 16 occasionally does it to some extent and the odd morning 17 show in the city and both morning shows are done by 18 private television, but a lot of people aren't 19 available to watch them at the time that they are on 20 because they are at work or getting ready for work. 21 13005 So, it's important, I think, to be 22 able to see those kinds of programs in prime time 23 during the peak viewing hours when most people are at 24 home and have an opportunity to discover the talent in 25 your community, because a great many of us aren't going StenoTran 2736 1 to nightclubs quite as often as we used to. So, you 2 don't have the same opportunity to see what's out 3 there. 4 13006 MS PATTERSON: Would you, therefore, 5 go so far as to suggest that local programming should 6 be considered a priority for the Commission to be 7 boosted through, for example, conditions of licence or 8 exhibition requirements? 9 13007 MS PETTY: Yes, without a doubt. I 10 am speaking again -- I mentioned this earlier, but I 11 will just re-emphasize this -- I am speaking about this 12 as a viewer primarily, as someone who is flicking 13 around like everyone else with my remote control 14 looking for something to watch and not finding it. 15 13008 MS PATTERSON: Thanks. 16 13009 I have one further question. One of 17 your recommendations was to remove the 100 per cent 18 designation from news programs which contain a 19 significant amount of foreign items. I wonder if you 20 have any mechanisms that you could suggest that could 21 be in place to monitor the commitments to show 22 primarily Canadian items. 23 13010 MS PETTY: It's interesting you 24 should bring this up, because we were having this 25 discussion quietly and I said to Arnold, "It's a great StenoTran 2737 1 idea, but exactly how do you do it?" It's pretty 2 tough. I wish I had a good idea for it. I'm not sure 3 that I do. 4 13011 You could never monitor all of them, 5 obviously, so the only way I could think of off the top 6 of my head is the whole spot check idea. We have all 7 worked, I think, or most of us have worked probably in 8 places where you have spot checkers, phony customers, 9 shills, who come in to see -- for example, if you are a 10 clerk in a store, to see if you are doing your job and 11 whether you are being courteous and following all the 12 store policies. 13 13012 Something along those lines, I guess, 14 you could use for local television where you just pick 15 stations at random and get some sense of how much 16 American content would be in those newscasts because 17 clearly you can't monitor every newscast in every 18 community across the country. So, I think you would 19 have to go with, I guess, the law of averages, use a 20 polling kind of approach to it in terms of coming up 21 with percentages. 22 13013 MR. AMBER: If I may just add, I 23 think really that perhaps we were reaching beyond on 24 this one because it would be very difficult. The 25 monitoring would have to be done on the local level and StenoTran 2738 1 all the way through the country. However, I believe 2 that somewhere along the line someone has to write a 3 paper or a directive that speaks to the issue, probably 4 in the end setting a fast rule. 5 13014 I don't believe you set rules that 6 you know you can't make sure that people follow and 7 this one is very, very difficult. I think it also 8 enters the strange issue of what is news and correct 9 this and correct that, but definitely some sort of 10 proposal or some sort of paper about this issue would 11 at least have some moral suasion or might have some 12 moral suasion which might be useful. 13 13015 MS PATTERSON: Just to possibly get 14 us started, would you suggest counting the number of 15 items shown or the amount of time that was devoted to 16 them or a combination of the two? 17 13016 MS PETTY: You go ahead. 18 13017 MR. AMBER: A lot of times -- you 19 know I did a lot of election work and the CBC always 20 keeps these counts saying how many items are there on 21 party one, party two, party three, party four, party 22 five, all the different parties. It doesn't ever tell 23 you whether or not the piece was a positive thing about 24 the party or was an investigation telling you that that 25 party just stole $50 million. They just kept logging StenoTran 2739 1 how many times that party was mentioned and how long 2 the item was. 3 13018 I would suggest that if you are going 4 to do this, doing the number of items doesn't work. 5 Doing the time on itself also wouldn't work. I think 6 you would probably have to do both if you actually are 7 looking to a monitoring system. I think you probably 8 have to be very careful on this. 9 13019 Both in Canada, the United States and 10 Britain and in other places in the world that I have 11 been to, there are in fact universities that go into 12 how do you actually monitor the media. Some of the 13 processes and some of the ways they actually do it are 14 totally bizarre and don't really touch reality -- I say 15 that as a practitioner -- don't really touch on what 16 you are doing. So, you have to be careful what you do, 17 but certainly the number and the time percentage of a 18 newscast that might be devoted to non-Canadian items is 19 a way of looking at it. 20 13020 MS PATTERSON: Thank you. 21 13021 Thank you, Madam Chair. 22 13022 THE CHAIRPERSON: If you look at the 23 amount of non-Canadian, even non-North American news 24 items on television on the weekend, you get the 25 impression that all the newsrooms have been closed, all StenoTran 2740 1 the newscasters have gone to the cottage, and possibly 2 all Canadians have gone home and locked the door 3 because nothing is happening in Canada until Monday 4 morning. 5 13023 MS PETTY: It's true, it's true. 6 13024 THE CHAIRPERSON: That would be one 7 good way to start. Probably if you did it from Monday 8 to Friday and then included Saturday and Sunday, the 9 numbers would be incredible where you see the CBC, for 10 example, give you all the ghoulish details of an 11 earthquake in a part of the world that you know nothing 12 about, followed by something else happening in 13 Argentina that you understand very little about. Not 14 that it's not interesting, but one wonders on Saturday 15 night or Sunday where are the Canadian journalists. 16 13025 MS PETTY: And who isn't sick of 17 Monica Lewinsky? 18 13026 THE CHAIRPERSON: And where are the 19 Canadians? Are they not doing anything, saying 20 anything that can be reported? That is something that 21 I find quite bizarre. 22 13027 MS PETTY: I used to do weekend 23 anchoring a few moons ago and I put those newscasts 24 together and I can tell you that -- I worked for 25 private television at the time, at ABC. We had a StenoTran 2741 1 reporter assigned for the weekend, the entire weekend, 2 and she or he would be working their butt off, I can 3 tell you. But, essentially, they brought back 4 ribbon-cutting kinds of stories. They were flipping 5 burgers over here, they were walking their dogs over 6 there. 7 13028 So, you go and collect these cute 8 little snippets of all the fun things people were doing 9 on the weekend and then the rest of it was death and 10 destruction according to ABC News. Literally -- I 11 can't remember the exact numbers, but I'm sure I must 12 have run in a newscast at least five Amnet stories, 13 some days more, it would just depend on what my one 14 reporter could give me in terms of a newscast. We 15 always gave sports a little more time on the weekend as 16 a result. 17 13029 THE CHAIRPERSON: So, maybe we have 18 to keep more journalists awake on the weekend and on 19 the job and Canadians, too. Maybe they should not 20 sleep from Friday to Monday and do something that the 21 journalists who are there can report. 22 13030 MS PETTY: Have something to report 23 on, that's right. 24 13031 THE CHAIRPERSON: We thank you very 25 much, Ms Petty, Mr. Amber, and have a good trip back to StenoTran 2742 1 Calgary and to Toronto. 2 13032 MR. AMBER: Thank you. 3 13033 MS PETTY: Thank you so much. 4 13034 THE CHAIRPERSON: I understand that's 5 not necessarily easy these days. 6 13035 MS PETTY: Actually, it's going okay. 7 I don't think the airport is too terrible from what I 8 hear. 9 13036 THE CHAIRPERSON: Good. I hope 10 somebody is watching here where he can get a scoop for 11 Météomedia. 12 13037 We will now take a break for 15 13 minutes. We will be back at a quarter after 11:00. 14 --- Short recess at / Courte suspension à 1100 15 --- Upon resuming at / Reprise à 1120 16 13038 THE CHAIRPERSON: Order, please. 17 13039 Madam Secretary. 18 13040 MS BÉNARD: Thank you, Madam Chair. 19 13041 The next presentation will be the 20 Canadian Caption Industry Association, and I would 21 invite Mr. Plamondon to make the presentation. 22 PRESENTATION / PRÉSENTATION 23 13042 MR. PLAMONDON: Good morning. Thank 24 you very much. 25 13043 THE CHAIRPERSON: Good morning, StenoTran 2743 1 Mr. Plamondon. 2 13044 MR. PLAMONDON: Madam Chair, my name 3 is Tom Plamondon. I am here today on behalf of the 4 CCIA, which is the Canadian Captioning Industry 5 Association. I think by default I am the interim 6 president of the Association. 7 13045 My remarks today follow our letter of 8 June 30th 1998 to the Secretary General of the CRTC, 9 Mrs. Laura Talbot-Allan, an opportunity given to us 10 this morning to speak on behalf of the CCIA. 11 13046 The CCIA is a new association formed 12 to represent the independent Canadian captioning 13 companies and provide a unified framework from which 14 issues, concerns and positions can be developed and 15 brought forward. Clearly, over the last few years, 16 with rapid growth in the industry and focus on the 17 benefits brought to the television medium through 18 closed captioning, there has been a need to bring 19 representatives of the industry together. To this end, 20 the CCIA has been established. 21 13047 My objective today is three-fold: To 22 ask the CRTC, (1) recognize the captioning industry as 23 an industry in any new CRTC policies. This follows the 24 leadership role taken by the Canadian Captioning 25 Industry internationally and demonstrated track record StenoTran 2744 1 for quality, quantity and technology. In doing so, (2) 2 we are asking the CRTC to reinforce and encourage any 3 current and new funding initiatives and granting 4 agencies to recognize captioning as part of the 5 production process, and an essential part of television 6 programming. 7 13048 For example, Telefilm Canada used to 8 underwrite the cost of captioning when it was 9 integrated into the production budget. Unfortunately, 10 most of the applications did not include captioning 11 costs in their budgets. Telefilm Canada has now ceased 12 and discontinued underwriting the cost of captioning. 13 13049 It is important to note, however, 14 that when they did, there was a requirement to provide 15 quality captioning. Third, to ask the CRTC to set a 16 new framework that puts emphasis on Canadian produced 17 captions and sets measurable quality standards for 18 captioning in Canada. The same framework should also 19 encourage captioning as part of every production 20 budget. 21 13050 Although the deaf and the hard of 22 hearing are the beneficiaries of closed captioning, it 23 is important that the CRTC recognize that our customer, 24 or consumer, is the broadcaster and the program 25 producer. As such, we are really not asking for StenoTran 2745 1 anything more than the independent production sector 2 has already asked for in the context of Canadian 3 content. 4 13051 The CRTC has recognized, through the 5 Canadian content code, the requirement for Canadian 6 programming. There is no captioning content regulation 7 that reinforces and recognizes this fact. The unique 8 identity of Canadian culture, Canada's linguistic 9 duality, expressions and flavour, contribute, in our 10 opinion, that closed captioning contributes to the 11 program content. In some environments, captioning is 12 used where audio is not possible. 13 13052 It is important that the CRTC 14 recognizes the difference between foreign deliverables, 15 where standards are different, or non-existent, and 16 expectations of the deaf and hard of hearing who are 17 entitled to appreciate the entire program from the 18 Canadian perspective. 19 13053 Under copyright law, the Canadian 20 broadcasters will pay upwards of $225 U.S. to purchase 21 the right to broadcast the American produced captions 22 of a foreign or American television programming, using 23 American spelling. These same dollars could be going 24 to the Canadian industry, where linguistic content 25 could be reflected at no greater cost to the StenoTran 2746 1 broadcaster. 2 13054 If costs are indeed comparable, if 3 not less, why not have the captions provided by 4 Canadian captioning companies? Why not support the 5 Canadian captioning industry? Why not create jobs in 6 this country that recognizes the importance of our 7 linguistic differences and contributes to the fabric of 8 our country? 9 13055 Partnerships have been developed out 10 of this rapidly growing industry. Win-win stories, 11 success stories, are being written, as demonstrated 12 through public/private partnering, particularly in the 13 area of training. Recent initiatives between private 14 sector companies working in partnership with Human 15 Resources Development Canada and Industry Canada, for 16 example, are encouraging signs that will result in the 17 creation of jobs, and provide training for Canadians in 18 a growth industry. 19 13056 Of course, the ultimate winner is the 20 deaf and hard-of-hearing community, not to mention the 21 educational value for new Canadians and youth. 22 13057 I want to mention the technology is 23 not the problem. Training must be the focus of our 24 attention, given it takes anywhere between three and 25 six months to train a real time captionist prior to StenoTran 2747 1 having the necessary skills to go on-air. There is a 2 cost associated with that, but not at the expense of 3 technology. Canadian produced captioning is vital to 4 the industry. 5 13058 In conclusion, I would like to thank 6 the CRTC for giving me the opportunity to address the 7 Commission today, and I would be more than happy to 8 answer any questions that you may have at this time. 9 13059 Thank you. 10 13060 THE CHAIRPERSON: Thank you, 11 Mr. Plamondon. 12 13061 Commissioner Cardozo. 13 13062 COMMISSIONER CARDOZO: Thank you, 14 Madam Chair. Thanks, Mr. Plamondon. That was a good 15 overview of the issues. 16 13063 Let me just start by clarifying, and 17 let me read you a couple of paragraphs of the written 18 brief from the Canadian Association of Broadcasters and 19 the transcript of when they appeared. 20 13064 In the written brief, with regards to 21 the question we had on this topic, they said: 22 "Closed captioning has become an 23 integral operation within most 24 television stations who are 25 moving towards the goals of StenoTran 2748 1 captioning most of their 2 programming, particularly news." 3 13065 In the transcript, in response to a 4 question, they said: 5 "The Commission is aware that we 6 have met just very recently the 7 closed captioning policy 8 requiring us, particularly the 9 large stations, to move towards 10 100..." 11 13066 It says "100", but I suppose it means 12 100 per cent. 13 "...closed captioning in our 14 news." 15 13067 Is that a fair statement? Are you in 16 agreement with that? I think they are talking here 17 more about quantity, as opposed to quality, and we can 18 get to that in a minute. 19 13068 MR. PLAMONDON: Yes, and I would 20 agree. Clearly, the Canadian Association of 21 Broadcasters in general terms have worked very 22 diligently and hard at providing captioning. I think 23 what we have to understand here is that you can't 24 separate the issue of quantity and quality, or it is 25 very difficult to, but I think that correctly they have StenoTran 2749 1 moved in that direction. I think that the CRTC Public 2 Notice 1995-48 which, as of September 1, required 3 broadcasters with sales -- stations with sales in 4 excess of 10 million to caption, we, as an industry, 5 work very diligently, very hard, to make sure that that 6 in fact was a reality. The real question then becomes, 7 how do you define quality? 8 13069 COMMISSIONER CARDOZO: With regards 9 to quality, you raised the issue of American spelling. 10 The other issue would be accuracy, which you haven't 11 raised. I will come back to American spelling in a 12 moment, but is accuracy a problem or an issue that you 13 are satisfied with? Do you feel that captioning 14 accurately reflects what is happening? 15 13070 MR. PLAMONDON: It's a good question, 16 and it's something that the Industry Association, on 17 its own, is trying to come to grips with. 18 13071 I can only speak for our company as 19 much as when I mentioned earlier the cost of bringing 20 in a captionist up to a skill level that we, as a 21 company, define as acceptable may not be the same for 22 all of the companies in Canada. 23 13072 To answer the question, I can only 24 speak from our company, which does set a very high 25 standard. StenoTran 2750 1 13073 The quality issue is really a 2 function of the training that is offered to the 3 individual. As such -- just to give you some numbers, 4 and these are not substantiated by anything other than 5 the records that we keep, to be hitting in terms of 6 accuracy over 99 per cent is something that is 7 achievable and is a standard that we set for ourselves. 8 13074 COMMISSIONER CARDOZO: Just so we 9 understand how this works, if you want to have closed 10 captioning, you need to have a set-top box of some 11 kind, either rented or purchased, and you press some 12 kind of button when you want closed captioning on, and 13 then you will get closed captioning of the program. 14 13075 My last question on that is, is 15 everything said verbally in writing as well? 16 13076 MR. PLAMONDON: To answer the first 17 part of the question, it wasn't that long ago that you 18 did have to buy the little black box that you would put 19 on top of your television in order to view the 20 captions. Today, televisions that are made for the 21 North American market, and I believe it is in excess of 22 13 inches, have the chip built into the television, so 23 you can go into the menu set-up of any television today 24 that is in excess of 13 inches, and I don't pretend to 25 be a master of that little remote, but I am told that StenoTran 2751 1 most 10- or 11-year-old kids can get in there and pull 2 the captioning up. 3 13077 Until I was involved in this 4 particular business, which really isn't that long ago, 5 I have to admit, I was aware that captions were 6 provided. I did not realize the degree to which the 7 television manufacturers had been asked to make sure 8 that that option was available on television. So the 9 black box, for any television built 13 inches, for the 10 North American market, since 1993 has had it built in. 11 13078 To answer the second part of your 12 question, yes, a hundred per cent of what is said is 13 captioned. It's quite an art. 14 13079 COMMISSIONER CARDOZO: With regards 15 to spelling, you are concerned about American spelling. 16 I can understand that concern a bit. When I use 17 Spellcheck on a computer, I am always frustrated when 18 it recognizes American spelling and not Canadian. It 19 tells me that I have spelled "labour" incorrectly, or 20 "colour" incorrectly. 21 13080 Is it possible -- I am trying to 22 ascertain how serious an issue this is and how much 23 people are willing to put up with American spelling. 24 Is it acceptable to have American programs captioned 25 with American spelling because, if you think of it, StenoTran 2752 1 they may be using American terminology as well, which 2 everybody puts up with, if we can use that term, but 3 that you would want Canadian spelling, at least for the 4 Canadian programs. Is that an acceptable saw-off for 5 you? 6 1135 7 13081 MR. PLAMONDON: I think in the 8 context of -- relating that to the question of quality: 9 There is no question that American programming that is 10 coming here that is captioned with American spelling on 11 it is a source of comment, certainly from the deaf and 12 hard of hearing community. 13 13082 I think the other aspect of that that 14 probably ties into that question is from the 15 educational perspective. 16 13083 When you look at the side benefits, 17 if you will, in terms of captioning and the impact that 18 it is having, clearly when we talk about Canadian 19 identity, Canadian content and the straight numbers 20 that were mentioned earlier, particularly in Toronto 21 with the non-Canadian population growing to the year 22 2003 or 2004, where it will be more than 50 percent 23 non-Canadian, those issues become more important 24 because captioning is being used as an educational 25 tool. No question about it. StenoTran 2753 1 13084 COMMISSIONER CARDOZO: By 2 "non-Canadian", do you mean non-white -- 3 13085 MR. PLAMONDON: I would say immigrant 4 population, sure. 5 13086 COMMISSIONER CARDOZO: They come here 6 to be Canadians. 7 13087 MR. PLAMONDON: Yes. But to answer 8 the question, it is an issue from both perspectives; 9 from the perspective of -- 10 13088 COMMISSIONER CARDOZO: You are saying 11 that people get taught the wrong spelling. 12 13089 MR. PLAMONDON: Correct. 13 13090 COMMISSIONER CARDOZO: I an trying to 14 figure out where one can draw the line, because there 15 is a cost involved. I am not saying that cost should 16 be the only defining factor. But is there an 17 accommodation one can reach? 18 13091 If you read American publications, 19 whether it is the "New York Times" or a book from the 20 United States, you are going to get American spelling. 21 In fact, until recently, the "Toronto Star" ran 22 American spellings. I used to write a column for them, 23 and I always found it very frustrating to read my 24 column with American spelling when I had written it 25 with Canadian spelling. StenoTran 2754 1 13092 I am wondering whether, from a cost 2 perspective, one is willing to say that overall, 3 everything being equal, there are some things you 4 really want and this is one you are prepared to live 5 with. 6 13093 MR. PLAMONDON: One of the issues 7 that I may not have raised to the level that we might 8 have wanted is simply that when you look at American 9 programming or foreign programming with American 10 captioning included on it, and you look at the cost -- 11 I mentioned a figure of $225 (U.S.), which is a number 12 that is realistic for, let's say, a half hour program. 13 13094 I can tell you that that kind of a 14 number is a very realistic number, if not less than 15 that number, for a Canadian company to be providing the 16 captioning for the same program. 17 13095 COMMISSIONER CARDOZO: And it is not 18 a lot of money. 19 13096 MR. PLAMONDON: No, it isn't. 20 13097 COMMISSIONER CARDOZO: That is more 21 in Canadian dollars than the $225. 22 13098 MR. PLAMONDON: That is correct. And 23 in the context of captioning there, I am talking of 24 real time dollars. In other words, I am not talking 25 about something that is done post-production; I am StenoTran 2755 1 talking about something that is done live. 2 13099 COMMISSIONER CARDOZO: Are the 3 American programs coming to us with captioning? 4 13100 MR. PLAMONDON: That is correct. 5 Most of them are. 6 13101 COMMISSIONER CARDOZO: What you would 7 want is to have them recaptioned, and a Canadian 8 captioning track be made available rather than the 9 American captioning track. 10 13102 MR. PLAMONDON: Correct. 11 13103 COMMISSIONER CARDOZO: Just to 12 clarify here: We are talking about English language 13 captioning overall, are we? 14 13104 MR. PLAMONDON: Yes, we are. 15 13105 COMMISSIONER CARDOZO: The French 16 language situation is a bit different. They are far 17 behind in terms of quantity, as well. 18 13106 You mentioned in your oral 19 presentation that Telefilm was not underwritten in the 20 cost, but you note in the written brief that the 21 broadcasters were not showing the amount of money they 22 were spending on captioning. In their budgeting, they 23 were not allocating for that. 24 13107 MR. PLAMONDON: Yes, that is correct. 25 There was a study commissioned that asked that StenoTran 2756 1 question: In applications made to Telefilm Canada, 2 were the costs of captioning actually included in the 3 budgets? 4 13108 Surprisingly, no, they were not. 5 13109 So that certainly raises an issue 6 with respect to the requirement of having captioning 7 included in a budget. That would be something that we 8 would, as an industry, like to see. 9 13110 COMMISSIONER CARDOZO: What you are 10 saying is that this ought to be considered as a 11 production expense. Can I say that, by that, you also 12 mean a programming expense? 13 13111 MR. PLAMONDON: Correct. And also, 14 by extension -- 15 13112 COMMISSIONER CARDOZO: And a Canadian 16 programming expense? 17 13113 MR. PLAMONDON: Exactly. There is no 18 reason why it should not be included as part of 19 Canadian content, as part of recognition of culture in 20 the country, and included when funds are being 21 allocated and distributed, for that matter. 22 13114 COMMISSIONER CARDOZO: When closed 23 captioning is done or keyboarded or typed in, does the 24 person typing the stuff in have access to the script? 25 Would that not make it a lot easier? StenoTran 2757 1 13115 In a drama, everything is already on 2 script. So can't we just sort of take that and say 3 there's the closed captioning? 4 13116 MR. PLAMONDON: Actually, you have 5 overlapped the two main ways the captioning actually 6 takes place. When you look at live programming -- 7 news, for example, is done live. 8 13117 The process itself involves taking a 9 very skilled courtroom reporter, using a steno machine 10 as opposed to a keyboard. The investment that I talked 11 about earlier, in getting them where they need to be in 12 order to actually physically be able to do what they 13 do, requires that they be able to, in real time, handle 14 up to 220, 230 words a minute. 15 13118 That process goes through their 16 computer, which has a dictionary established, and then 17 in real time gets fed back out to the broadcaster and 18 aired. The delay, when you are talking live 19 captioning, between the time the word is spoken and the 20 time you see it, runs anywhere from three and a half to 21 five and a half seconds. 22 13119 Some of the very best captioners in 23 this country, if they have an opportunity to receive 24 the audio a second before it goes out, can actually 25 correct mistakes before it actually goes to air. StenoTran 2758 1 13120 That process is the process that we 2 talk about in terms of live. 3 13121 The other process, when we are 4 talking about productions that come with a script, is 5 done off-line. That process is actually far more 6 labour intensive, but the skill levels that are 7 required in order to do that are completely different. 8 13122 In that case, the software that the 9 individual uses to create the captions is actually an 10 offshoot of the same type of software, but it is keyed 11 in on a normal -- 12 13123 COMMISSIONER CARDOZO: Why can't you 13 just use the same diskette that has the script on it, 14 and just turn that into captioning? 15 13124 MR. PLAMONDON: The reason, from a 16 technical perspective, why you just can't take the disk 17 if you have a word file, for example, a script file and 18 then plug it into a computer and generate the captions, 19 is because all of it has to be timed. It all has to be 20 blocked. 21 13125 In the off-line scenario, it actually 22 does go out perfect, 100 percent perfect. From that 23 perspective, that is just one of the reasons why you 24 just can't take the file, throw it in and expect that 25 the timing of the spoken word and what you see coming StenoTran 2759 1 up is going to automatically materialize. 2 13126 COMMISSIONER CARDOZO: It is easier 3 to have somebody type it all over again rather than sit 4 there and just adjust the timing. 5 13127 MR. PLAMONDON: The file itself can 6 be just a straight word file that gets loaded into the 7 computer. It then does have to be blocked, and it has 8 to be timed. 9 13128 COMMISSIONER CARDOZO: Two questions 10 come to mind. 11 13129 If you are typing in stuff at that 12 high speed, can you read the stuff that fast? What is 13 the feedback you get as to how fast people can read the 14 stuff? 15 13130 Or do people who use captioning 16 become fast readers or have to be fast readers? 17 13131 MR. PLAMONDON: In a sense, the deaf 18 and hard of hearing do develop a speed that does allow 19 them to read that quickly. 20 13132 What is interesting about it is when 21 people say that you have the audio going out and that 22 two, three, four, up to five second delay is what is 23 going to trouble people when they are deaf or hard of 24 hearing, it is actually a bonus in the sense that if 25 they are actually reading lips and the camera pans off StenoTran 2760 1 the individual who is speaking, it gives them a chance 2 to look down at the captioning as it is coming up. 3 13133 But their ability to read it 4 develops, as would yours or mine after a while. 5 13134 COMMISSIONER CARDOZO: It has to be a 6 skill. The Chair was telling me recently about 7 "Babette's Feast", the movie. I rented it and watched 8 it and wished I spoke Danish, because I spent more time 9 reading than watching what was a very interesting 10 movie. 11 13135 Is there a descriptive element to 12 captioning? I am thinking of descriptive video 13 service, where you have what is being talked about and 14 a description of other things. 15 13136 Does captioning include any 16 description, such as sounds that may come on, like a 17 siren or a thud, or whatever? 18 13137 MR. PLAMONDON: There is a 19 descriptive element to it, to answer your question. 20 13138 Typically, if there is time to insert 21 the symbol for music, for example, it is done. If 22 there is an opportunity to insert a sound in between 23 dialogue, it is done. 24 13139 What the captionist is really trying 25 to do is to ensure that 100 percent of what is being StenoTran 2761 1 said is captioned; and beyond that, that as much of the 2 flavour of the program, if you will -- background 3 sounds, that kind of thing -- is available. 4 13140 I am noting of interest that one of 5 the things that is happening in the industry itself is 6 the evolution of using captioning in music videos. I, 7 for one, have to tell you that I appreciate it because 8 half the time I can't understand the lyrics. It is 9 interesting to be able to sit and actually look at what 10 is being sung. 11 13141 Some of the words are -- 12 13142 COMMISSIONER CARDOZO: I'm not sure 13 the artist would like that so much. I think there are 14 a lot of artists who hope nobody can understand what 15 they are saying. 16 13143 MR. PLAMONDON: It is curious, too. 17 Where do you go with that? 18 13144 You have a responsibility to the 19 industry and to the viewer to be accurate. So what do 20 you put out there that is accurate? 21 13145 As an industry, we have wrestled with 22 that issue on a number of occasions. Certainly if you 23 change a lyric or a word -- I have to tell you that the 24 deaf and hard of hearing community are very vocal. I 25 am sure you have heard representation before this StenoTran 2762 1 Commission by them. There is certainly a 2 responsibility to ensure that it is as accurate as 3 possible. 4 1150 5 13146 COMMISSIONER CARDOZO: One of the 6 things you mentioned in the written brief is closed 7 captioned billboards. What are the billboards? 8 13147 MR. PLAMONDON: Closed captioned 9 billboards are a means by which the broadcasters are 10 able to in part pay for captioning. In actual fact, 11 closed captioned billboards have, along with the 12 industry itself, the captioning industry itself, 13 evolved to the point where credit for captioning is 14 given by a sponsor. 15 13148 That whole vehicle has gained in 16 popularity to the point where we as an industry feel 17 comfortable that the broadcasters are actually in a 18 position to more than cover their cost. 19 13149 COMMISSIONER CARDOZO: So the 20 billboard is just the announcement that comes on and 21 says this program captioned with the assistance of "X" 22 or "Y". 23 13150 MR. PLAMONDON: Correct. And the 24 broadcasters all comment. To this extent, the 25 broadcasters are very aware that the lead-in for the StenoTran 2763 1 audio on the ten second or five second captioned 2 billboard recognizes -- you are quite correct, the 3 lead-in is "Closed captioning for this program brought 4 to you by --". The recognition for a sponsor for the 5 captioning of that program is very, very important to 6 them. 7 13151 COMMISSIONER CARDOZO: So in the 8 brief you are saying that it's your feeling there are 9 some broadcasters who are taking in money with these 10 sponsorships, but not necessarily spending that amount 11 on captioning, that that money in some cases is going 12 to general revenues. 13 13152 MR. PLAMONDON: That is correct. 14 13153 COMMISSIONER CARDOZO: When you 15 mention in 3(b) Canwest Video, do you mean Canwest 16 Global? 17 13154 MR. PLAMONDON: Yes. That's right. 18 13155 COMMISSIONER CARDOZO: Among the 19 different broadcasters out there, are there some who 20 are doing better, some who are doing worse, and would 21 you care to share that with us? I hope it doesn't lead 22 to lawsuits. 23 13156 MR. PLAMONDON: I will say this much. 24 Certainly as an opportunity to recover costs for 25 captioning, the broadcasters are certainly taking StenoTran 2764 1 advantage of it. There are two ways that they do that. 2 13157 To a large degree the broadcasters 3 themselves are promoting that as a vehicle to generate 4 revenue in order to cover in part costs of captioning. 5 Some of them are doing it in-house. Other broadcasters 6 are involving captioning companies that allow them to 7 provide captioning for programming and sell the ten 8 second or five second billboard sponsorships. 9 13158 I'm really, unfortunately, at this 10 point in time not at liberty to comment on the actual 11 dollars. 12 13159 COMMISSIONER CARDOZO: Essentially 13 you represent various companies and individuals too 14 that do captioning. 15 13160 MR. PLAMONDON: Correct. 16 13161 COMMISSIONER CARDOZO: So you are 17 like the CFTPA of captioning, the Production 18 Association of Canada. Who is your Michael MacMillan? 19 13162 MR. PLAMONDON: I won't go that far. 20 The Canadian Captioning Industry Association is really 21 born out of -- it is the private companies -- born out 22 of the fact that this industry has grown so quickly. 23 To a large degree, like any growing industry in any 24 company who is trying to be responsible, they are 25 looking very much at their own bottom line and their StenoTran 2765 1 viability. 2 13163 That is something that preoccupies a 3 lot of individuals' time. Because of the growth of the 4 industry, I think what has happened is the industry 5 itself has said "We need to take a step back and look 6 at what's happening collectively". 7 13164 At this point I have to tell you, as 8 I said at the onset, I don't know if I am the 9 President, the interim President, by request or by 10 default. I am going to defer that to the people that 11 made the comment initially and said "Please, Tom, would 12 you represent us at the CRTC hearing". 13 13165 Only recognize that there certainly 14 is a need for us to be communicating. There is 15 certainly an agenda for all of us that we share that 16 needs to be expressed and brought forward and dealt 17 with. 18 13166 COMMISSIONER CARDOZO: And the 19 association is just English language. 20 13167 MR. PLAMONDON: No. No, it isn't. 21 We do have a French company in Montreal that is part of 22 the association. 23 13168 COMMISSIONER CARDOZO: Do you do any 24 captioning in other languages for the multilingual 25 television networks? StenoTran 2766 1 13169 MR. PLAMONDON: What we do in Canada 2 is English off line and the software associated to 3 doing captioning off line, un-live if you will, allows 4 us to do captioning in a number of languages. It's a 5 company in post-production. We do captioning in many 6 languages. 7 13170 What we have a problem with right now 8 and the technology isn't there is in the Oriental 9 languages, including Japanese. The generation of 10 Japanese and Chinese characters is very difficult at 11 this point in time and very expensive to do. 12 13171 COMMISSIONER CARDOZO: So you are 13 doing captioning for an export market. 14 13172 MR. PLAMONDON: Correct. In that 15 sense we do. Most of it, though, I have to tell you is 16 corporate work. It's training videos and that kind of 17 thing that we do multilanguage captioning for. 18 13173 COMMISSIONER CARDOZO: Okay. Lastly, 19 I just wanted to ask you if you have off the top of 20 your head numbers of people that we are talking about, 21 and we are talking about people who are deaf or hard of 22 hearing. 23 13174 MR. PLAMONDON: The last numbers that 24 I can substantiate -- 25 13175 COMMISSIONER CARDOZO: You can get StenoTran 2767 1 back to us too with that. It's on the record. 2 13176 MR. PLAMONDON: I can offer this. 3 There are about two and a half million Canadians who 4 are deafened and hard of hearing. That is a very 5 conservative number. 6 13177 COMMISSIONER CARDOZO: And your sense 7 is that is about the number of people who are using 8 closed captioning. 9 13178 MR. PLAMONDON: No. If you include 10 the individuals and new Canadians, if you will, 11 learning either English or French for the first time 12 and the youth of the country, and I am talking about 13 youth in terms of the pre-school to four and a half 14 five, they are using closed captioning as an 15 educational vehicle. It's probably more like seven and 16 a half million. 17 13179 COMMISSIONER CARDOZO: A lot of 18 pre-school kids are used closed captioning? 19 13180 MR. PLAMONDON: If you look at, for 20 example -- my own day care provider has television on. 21 The captioning for children's programming, for example, 22 is always on. There have been a number of studies that 23 prove children who are watching captioning learn to 24 spell far quicker and more accurately when you can see 25 the words as well as hear them. The reinforcement StenoTran 2768 1 there is just terrific. It's tremendous. 2 13181 Similarly, the educational value for 3 people who are learning this language, coming from 4 another country, is immense. Similarly, as I mentioned 5 earlier, if you are in an environment, for example a 6 restaurant, where there is a lot of background noise 7 going on and you may be watching a program on 8 television, the only way you are going to be able to 9 understand what is being said is if the captioning is 10 on. 11 13182 There are a number of very good 12 examples where it is being used as a matter of routine. 13 It's hard to put a number on that audience that are 14 benefiting from captioning, but there is no question 15 that the numbers are increasing. 16 13183 Similarly, I think there's medical 17 evidence to support the fact that if you look at the 18 baby boomers who are getting a little older and abused 19 the eardrums at many rock concerts and what have you, 20 their hearing is likely something that's going to 21 suffer over extended periods of time, so captioning 22 becomes a more valued, if you will, and I will put in 23 in terms of the commodity, to them as they get older. 24 13184 There's certainly benefits that 25 captioning in itself bring beyond the deaf, the StenoTran 2769 1 deafened and the hard of hearing. 2 13185 COMMISSIONER CARDOZO: Okay. Those 3 cover my questions, Mr. Plamondon. 4 13186 Thanks very much. 5 13187 Thanks, Madam Chair. 6 13188 THE CHAIRPERSON: Commissioner 7 Wilson. 8 13189 COMMISSIONER WILSON: I can't resist, 9 I have to ask you one question. When you talked about 10 foreign captioning, you and Commissioner Cardozo had 11 quite a long discussion about the spelling issue. 12 13190 We had one representation so far and 13 I guess we will be having another one about the whole 14 issue of descriptive video, so maybe it's not a fair 15 question to ask you because you are representing one 16 particular interest. 17 13191 While I understand your concerns 18 about the threat to the Canadian captioning industry in 19 terms of buying programming captioning already there 20 and buying the rights to display that captioning, if we 21 had to choose between placing an emphasis on Canadian 22 produced captioning or trying to move forward on 23 descriptive video for a segment of the population that 24 is nor served at all in any way, what do you think we 25 should do? StenoTran 2770 1 13192 MR. PLAMONDON: It's a good question 2 and a valid question. I would have to say that 3 obviously my focus is certainly towards the accuracy 4 and the quality of captioning that we produce and that 5 the population enjoy. 6 13193 Certainly the deaf and the hard of 7 hearing community have a right to enjoy the program to 8 its fullest extent, so obviously for me I am for 9 obvious reasons going to side on the side of captioning 10 and captioning quality and promoting Canadian 11 captioning for all programming that is coming into this 12 country. 13 13194 COMMISSIONER WILSON: I'm sure you 14 can appreciate it is quite a balancing act as a 15 regulator to try and determine whose interests seem 16 more desperate at the moment. 17 13195 Thank you for your comment, though. 18 13196 MR. PLAMONDON: You're welcome. 19 13197 THE CHAIRPERSON: Mr. Plamondon, am I 20 correct that if you have SAP facility in your 21 television you can get captioning without any further 22 equipment, you just switch that on? 23 13198 MR. PLAMONDON: That's correct. Yes. 24 All you have to do is scan into the menu function. 25 13199 THE CHAIRPERSON: You just need that StenoTran 2771 1 second audio capacity for the captioning to come 2 through. 3 13200 MR. PLAMONDON: No, no. There's no 4 second audio capacity required. Captioning actually is 5 encoded on to -- 6 13201 THE CHAIRPERSON: Of course, it's 7 writing. That's right. 8 13202 MR. PLAMONDON: Yes. 9 13203 THE CHAIRPERSON: So it doesn't need 10 that. What is it with television sets that cannot give 11 you captioning without any decoding? Are there 12 television sets that you just switch on and the 13 captioning, if it is there on the program, will come on 14 and somewhere if you don't have that capacity in your 15 television set, you have to buy a decoder. 16 13204 MR. PLAMONDON: The encoder has to be 17 built into the television set. 18 13205 THE CHAIRPERSON: Into newer sets, I 19 suppose. 20 13206 MR. PLAMONDON: Correct. What is 21 interesting is one of the events that the industry 22 sponsors, Captioning Awareness Week, actually coincided 23 with the September 1 deadline on captioning. That week 24 a number of broadcasters open-captioned, if you will -- 25 13207 THE CHAIRPERSON: Yes. StenoTran 2772 1 13208 MR. PLAMONDON: -- the programming. 2 The previous submission by the CBC raised an issue in 3 terms of Canadian content. The CBC was the recipient, 4 for example, of an award that was given, the Golden Cup 5 award that was given to a broadcaster for its 6 commitment made to captioning, given the fact that the 7 CBC doesn't have to caption to the same degree at this 8 point as the rest of the broadcast industry. 9 13209 It's curious that within the industry 10 itself, up until September 1 it's amazing the number of 11 people who didn't realize that all they had to do was 12 turn the captioning on and how easy it actually is to 13 turn it on. 14 13210 THE CHAIRPERSON: Yes. 15 13211 MR. PLAMONDON: I have to salute a 16 number of the broadcasters who when they went on air on 17 September 1 for the very first time drew attention to 18 that fact. In particular, one broadcasters whose name 19 has come up a number of times, A Channel in Alberta for 20 example, they went to captioning for the first time on 21 September 1. 22 13212 Their on-air personalities as much as 23 went over to the television monitors in their studios 24 and said "This captioning. Turn this on. This is good 25 stuff". StenoTran 2773 1 1205 2 13213 All of that contributes to raising 3 the awareness of that. The technology is built into 4 your television, if you want to turn it on, number one. 5 13214 Number two, the broadcasters are 6 actually -- have gone a long way to raise the awareness 7 of the value, and their commitment that they have made 8 to captioning. 9 13215 I think what we have to do now as an 10 industry is recognize the fact that captioning is an 11 industry, and recognize that we have gone to the point 12 and we have gone so far that we can now be looking at 13 issues like quality. We can now be looking at issues 14 like what is an acceptable level of captioning in 15 Canadian broadcasting. 16 13216 THE CHAIRPERSON: Your interest would 17 be both in the quality of the open captioning and of 18 the closed captioning? 19 13217 MR. PLAMONDON: Correct. 20 13218 THE CHAIRPERSON: That is where the 21 SAP facility would be used, for the closed captioning, 22 and that is also built in, in a lot of television sets. 23 13219 MR. PLAMONDON: That is correct. 24 13220 THE CHAIRPERSON: Just by switching 25 it, you can get that second audio that you can hear. StenoTran 2774 1 13221 When you say that the community whose 2 interests you represent have to be made aware of it, 3 there must be some role you play in that as well 4 because there must be some coherence within that 5 community, or maybe not registrations but you must have 6 member associations or connections with those who 7 represent the interests of the deaf and hard of 8 hearing. 9 13222 MR. PLAMONDON: Without question. 10 13223 THE CHAIRPERSON: You can use those 11 avenues to help make it known that it is fairly easy to 12 have access. 13 13224 MR. PLAMONDON: The Canadian Hearing 14 Society and the various provincial chapters, the 15 individual groups themselves who support the needs of 16 the deaf community are very well organized. And, as I 17 said earlier, they are quite vocal and the broadcasters 18 have, as well as our own industry, the companies that 19 provide captioning, have had no trouble at all in 20 communicating what has been happening in the industry. 21 They are very well organized, as we are, and obviously 22 it is in our best interests that we communicate with 23 them, finding out what really defines their needs. 24 13225 There is no doubt that the 25 partnerships that we talk about go well beyond just the StenoTran 2775 1 individual companies with the broadcasters. We are now 2 involving partnerships between ourselves and other 3 levels of government in order to ensure that the people 4 and the resources are made available in order for the 5 industry to continue to grow. 6 13226 THE CHAIRPERSON: Your concerns about 7 quality would go to both, I suppose. The closed 8 captioning would be the accuracy of the spelling and 9 the oral one would be whether all the words are, and 10 presumably also intonation and so on, to make it as 11 helpful as possible. 12 13227 MR. PLAMONDON: Correct. 13 13228 THE CHAIRPERSON: Rather than to just 14 have a monotone, which doesn't reflect very much what 15 the program is about. 16 13229 Thank you very much, Mr. Plamondon. 17 13230 MR. PLAMONDON: Thank you very much. 18 13231 THE CHAIRPERSON: Thank you for 19 coming. 20 13232 Madam Secretary. 21 13233 MS BÉNARD: Thank you, Madam Chair. 22 The next presentation will be by the Canadian Institute 23 for Broadband and Information Network Technologies 24 incorporated, and I would invite Mr. Hara to come 25 forward. StenoTran 2776 1 PRESENTATION / PRÉSENTATION 2 13234 MR. HARA: Thank you very much, Madam 3 Chair, commissioners and ladies and gentlemen. 4 13235 MS BÉNARD: Mr. Hara, can you turn 5 your microphone on? 6 13236 THE CHAIRPERSON: Just a moment. Do 7 the camera men need any time to readjust, or are we 8 okay? 9 13237 Okay. Go ahead, Mr. Hara. 10 13238 MR. HARA: Thank you very much, Madam 11 Chair, commissioners, ladies and gentlemen. 12 13239 My name is Elmer H. Hara, the H. 13 stands for Hiroshi, part of my Japanese heritage. 14 13240 I am currently serving as director of 15 research and development for the Canadian Institute for 16 Broadband and Information Network Technologies. It is 17 a not-for-profit institute set up by the University of 18 Regina to transfer the technology developed by the 19 Faculty of Engineering to the Canadian industry, 20 primarily to the Canadian industry. 21 13241 Today, I would like to speak on 22 the -- or recommend a policy that might be instituted 23 by CRTC regarding access or universal access for 24 Canadian programs and films under a free market policy. 25 By this I mean -- by free market policy, I mean any StenoTran 2777 1 entity who constructs a delivery system that can 2 guarantee universal access to Canadian content should 3 be allowed to operate the provision supply of content 4 on a free market basis. 5 13242 Now, free market, I really don't mean 6 it is going to be a dog-eat-dog jungle out there. It 7 will be orderly business approach, of course, of the 8 supplier, content supplier should be required to have a 9 business licence. Any corporation or business that 10 preys on the elderly, senior citizens and children, 11 well, they will promptly lose their licence. 12 13243 In the free market, competition, of 13 course, quality, plus the promotion, marketing 14 promotion will play a very important role. 15 13244 If you are a Canadian content 16 provider, with known quality, known entity, known 17 producer, with quality, if you are recognized as such, 18 known as such, then the entity that built this delivery 19 system will certainly pay you for getting, obtaining 20 your contents. 21 13245 Now, if you are an unknown producer, 22 then there will be an access fee and rates in 23 proportion to the time, length of the content, that you 24 will have to pay. 25 13246 Of course, in the free market StenoTran 2778 1 situation, the access fees and rates should become 2 competitive and fair, but maybe here is a role for CRTC 3 to play, to monitor and make sure that these rates are 4 fair and competitive. 5 13247 In the spirit of the NAFTA, 6 non-Canadian contents will also have to be treated 7 equally. This means that the Canadian contents will be 8 competing on an equal footing and, therefore, quality 9 and promotion will count. 10 13248 Now, you might ask: Is there such a 11 transmission system, delivery system that can guarantee 12 universal access? And, yes, there is. I will give a 13 brief description of the system. 14 13249 The system is based on a 15 centrally-switched fibre to the home network design. 16 The way it works is there is two fibres -- it could be 17 single fibre, too -- from a central switching centre 18 and the subscriber's premises unit has an option to 19 insert application interface cards. Whatever the 20 subscriber wishes to subscribe to, the interface card 21 is inserted and you can receive that service. 22 13250 So this would include digital high 23 definition TV, which is coming up very shortly, very 24 rapidly; and digital TV, one, two channels; and all the 25 other services to the home, like meter reading; of StenoTran 2779 1 course, home security; telephone, data services; and, 2 in the near future, Internet access through a very high 3 speed link like 6 megabytes per second. 4 13251 The subscriber premises unit is 5 replicated in the switching centre and the band width 6 required to provide this service is very low compared 7 to the other -- the broadcast-type approach that the 8 cable TV system adopts, is using, using for telephone, 9 data, and high speed Internet access, and all these 10 meter reading, digital TV, 1, 2 and high definition TV, 11 it requires less than 100 megabytes per second. 12 13252 This means that the technology that 13 this system uses is very well established. There is no 14 experimentation. It is also comparatively low in cost 15 and very reliable. 16 13253 So, the thing to keep in mind is that 17 it only requires 100 megabytes per second. 18 13254 Then the question comes up: How do 19 you guarantee universal access? That is done by a 20 switching system at the switching centre. For example, 21 if we take the digital TV-1 signal, it is supplied 22 through a switching system. Switching systems today, 23 digital switching systems today are very compact and 24 not expensive. Therefore, you can have many, many 25 sources -- 5,000 I picked here, but it could be 10,000, StenoTran 2780 1 20,000, whatever the market will support. 2 13255 This way, you can guarantee universal 3 access either if a customer comes up, wants to pay a 4 fee to supply their software content to the subscriber, 5 they are free to do so. The switching equipment can be 6 rented out from the entity that constructed the 7 delivery system, or the content supplier can install it 8 in the switching centre. 9 13256 Among these services, if you look at 10 the switching system, the important part is the 11 consumer is -- wishes to have, first of all, choice of 12 content, but then also choice of viewing time. It is 13 very annoying missing some of the currently broadcast 14 major league baseball play-offs. Now, if you can get 15 it on video-on-demand, time shift or rebroadcasting, I 16 would be willing to pay to watch, maybe $5 for a good 17 game. 18 13257 So that system is possible by 19 using -- video-on-demand system uses video disks with 20 multiple play-back heads. This is a very standard 21 technology. Already, there is Karaoke juke box 22 installed in some hotels. And, of course, the 23 extension of that is you put in a multiple play-back 24 heads on each disk. You can have your choice of 25 10,000, or more, movies, if you wish, or broadcast StenoTran 2781 1 contents, if you wish. 2 13258 So, once you have this system in -- 3 now, the entity that constructed this delivery system, 4 Guaranteed Universal Access, the earnings will 5 depend -- they start to earn more and more money, that 6 will depend on the quality of the content and the 7 largest selection that it can provide. That means 8 higher earnings; and, of course, in this choice of time 9 and content turns toward the video-on-demand system. 10 13259 Now, video-on-demand, the Canadian 11 content can be all the TV programs and films that have 12 been produced in the past; and, of course, we can 13 support, provide aboriginal TV programs and films as 14 well. 15 13260 Another interesting point is that the 16 National Arts Centre, as well as the regional 17 performing centres all across the country, can -- each 18 centre can become a provider of content. That means 19 additional revenue for the National Arts Centre, as 20 well as all the regional centres, that have quality. 21 13261 Aside from the performing arts, the 22 National Art Gallery, regional galleries could also 23 offer their contents, display their contents 24 nationally. 25 13262 Then, also, Museum of Civilization, StenoTran 2782 1 which at any given time displays less than 20 per cent 2 of its holdings. It can make its whole holdings 3 available on video disks. 4 13263 Now, continuing on with the market 5 forces. The non-Canadian content will also have equal 6 opportunity to provide -- be one of the content 7 providers, and this will contribute to the 8 multicultural diversity of our country. 9 13264 For me, I live in Regina. I miss 10 seeing Japanese movies. If there was a Japanese movie 11 made available on video-on-demand, I would certainly be 12 willing to pay $10 for a good movie. 13 1220 14 13265 So, the market is there and this 15 approach of universal access will certainly support all 16 of our multicultural efforts. Of course, other program 17 sources can equally become content providers, satellite 18 TV, the recent wireless local multi-point 19 communications system TV or the other wireless 20 multi-point microwave distribution system TVs and cable 21 TV, if they wish to do so, can also provide the signals 22 over this system, either on a real-time basis or, if 23 they wish, on a delayed basis through the video and 24 demand system. 25 13266 These sources are not limited to StenoTran 2783 1 entertainment. All educational courses can be made 2 available on university air and this becomes very 3 important in terms of today's high tuition costs. 4 University air can offer many courses to alleviate and 5 reduce the educational burden on parents and students 6 as well. 7 13267 The last point I would like to make 8 is about Canadian content support. Since this delivery 9 system guaranteeing universal access will have a lot of 10 digital traffic because it's catering to the desire of 11 the subscriber, to the consumer, to select their 12 content that they wish to see and also the time of 13 their choosing to view the content, that means a great 14 deal of digital traffic and with a very small tariff, 15 like the gas -- well, gasoline tax is a bit too high, 16 but in a similar vein, to charge a tariff on each bit 17 that goes through the system, you can produce funds for 18 production and most important of all is the funds for 19 promotion for the smaller organizations that produce 20 content. 21 13268 So, in concluding, I would like to 22 just sort of borrow from a movie and say that if the 23 CRTC builds a policy -- build a policy and they will 24 make it happen. Thank you. 25 13269 THE CHAIRPERSON: Thank you, Mr. StenoTran 2784 1 Hara. 2 13270 Commissioner McKendry? 3 13271 COMMISSIONER McKENDRY: Thank you, 4 Madam Chair. 5 13272 What today prevents a business person 6 from doing what you have set out here? 7 13273 MR. HARA: One is the CRTC 8 regulations. Technically, there is no hindrance. We 9 can do it today as long as the entity who builds 10 this -- they can build it, but in the Canadian content 11 regulations there is not a free market approach. They 12 cannot take signals in whatever they can contract or 13 buy and supply. There are roadblocks there. So, if 14 the CRTC comes out and says as a policy, "Any entity 15 that guarantees universal access, particularly Canadian 16 content," then it will be built. 17 13274 COMMISSIONER McKENDRY: What content 18 couldn't an entrepreneur who built this system buy 19 today? 20 13275 MR. HARA: I think everything. You 21 are correct, everything is purchasable, yes. 22 13276 COMMISSIONER McKENDRY: So, that goes 23 to my point. If what you are proposing is a viable 24 business idea, why wouldn't somebody do it today? What 25 do you need us to specifically change? I don't think StenoTran 2785 1 we place any restrictions on what can be offered in 2 terms of Canadian content on the -- 3 13277 MR. HARA: Plus foreign content. 4 13278 COMMISSIONER McKENDRY: The 5 distribution is here. Are you asking for unrestricted 6 access to foreign content? 7 13279 MR. HARA: That's right, just open it 8 up. Just have a free-market approach to the supply 9 provided its universally accessible to every supplier. 10 13280 COMMISSIONER McKENDRY: So, what you 11 need us to change is the ability of distribution 12 networks to freely distribute foreign content? 13 13281 MR. HARA: Yes. 14 13282 COMMISSIONER McKENDRY: Taking into 15 account the Broadcasting Act and the objectives under 16 the Act that we are required by law to implement 17 through the regulatory process, what levers would we 18 have under your system to ensure that the objectives of 19 the Act are met. For example, some of the levers we 20 use now are expenditure requirements by broadcasters on 21 Canadian content. We have exhibition requirements, for 22 example, relating around prime time and so on. What 23 levers would we have in your system to ensure that the 24 objectives of the Broadcasting Act were implemented? 25 13283 MR. HARA: I think that comes back to StenoTran 2786 1 my last point, the tariff on the bits passing through 2 the system generating funds. Then you can assist the 3 CBC and any other Canadian producer/content-provider in 4 terms of production and more important I think is the 5 promotional aspects. 6 13284 COMMISSIONER McKENDRY: So, the 7 primary lever then would be simply a tax or a tariff on 8 the transmission of data -- 9 13285 MR. HARA: Information or the bits 10 passing through. 11 13286 COMMISSIONER McKENDRY: -- or bits 12 and bytes through your network and that money would 13 flow back to Canadian program producers and you would 14 guarantee them access on your system. 15 13287 MR. HARA: Yes. 16 13288 COMMISSIONER McKENDRY: It would be 17 up to viewers then to decide what they wanted to view. 18 13289 MR. HARA: So, the entity who built 19 the system, since they have to follow universal access 20 principles, they cannot refuse entity or 21 content-provider access. Of course, as I mentioned, 22 there are two ways of access. If it's very good, the 23 entity will buy your product. If you are not known, 24 you don't have to pay an access fee, but once you pay 25 the access fee, your profits providing that is all StenoTran 2787 1 yours. 2 13290 COMMISSIONER McKENDRY: I will 3 probably come back to that in a minute. 4 13291 Help me understand what would happen 5 to the existing distribution networks we have in Canada 6 today. We have two major ones, the telephone one and 7 the cable one. One of them is a narrowband switched 8 intelligent network, the other one is broadband 9 unswitched network with less intelligence in it that 10 exists in the telecommunications network. What happens 11 to them under this scenario? Do they still exist? 12 13292 MR. HARA: There are a number of 13 paths that we can think of. One thing that I am very 14 sure of is that eventually the fibre to the home 15 switched network will be a standard delivery system, be 16 it maybe 10 years down the road, depending on what 17 policies the CRTC will follow. It might be even five 18 years from now or it could start within three years. 19 13293 The cable TV and telephone companies 20 can compete. For example, the cable TV company can 21 enter into a joint enterprise with the electric power 22 utilities. The electric power utilities have the right 23 of way to every home, so they can make use of that 24 right-of-way. There is also options through the city 25 municipality water and sewer systems. That is a right StenoTran 2788 1 of way that can be also utilized. So, there could be 2 two competing systems. Cable can compete and the 3 telephone company can compete. 4 13294 There is another scenario where the 5 cable TV, as its licensed today, instead of making use 6 or expanding or switching over to their plant that they 7 have today, they could make use of this universal 8 access delivery system and pay a tariff for the use of 9 that plant. That's another scenario. 10 13295 COMMISSIONER McKENDRY: To make sure 11 I understand, the scenario, though, that you envisage 12 is that there would be three networks, the network you 13 are talking about, the cable-based network, the 14 telephone-based network that exists today, and I 15 suppose in terms of access into my home, there is the 16 wireless network as well. So, we would have competing 17 networks. 18 13296 MR. HARA: Yes -- 19 13297 COMMISSIONER McKENDRY: Just to 20 finish, I think you talked about two fibres into the 21 home. Was it two fibres? 22 13298 MR. HARA: Yes. 23 13299 COMMISSIONER McKENDRY: Now I have a 24 coaxial cable into my home as well and I have the 25 copper pair from the telephone company and I have StenoTran 2789 1 over-the-air signals available to me from 2 direct-to-home satellite services as well. They would 3 all continue under our scenario. Your system would be 4 a new entrant, a competitor for these systems? 5 13300 MR. HARA: I wouldn't think of it as 6 a completely independent approach. It's one of the 7 approaches that the telephone companies can take. So, 8 that will be one. The cable TV companies can also take 9 the same approach. That would be two. 10 13301 There is the wireless to be there, 11 but the wireless has one cost element of the set-top 12 box, the receiver that you have to pay for. Since the 13 switching equipment is much cheaper, once the fibre 14 comes to your home, it will be much better for these 15 wireless people to also offer their signals to this 16 delivery system. So, they can widen their subscriber 17 base very easily. 18 13302 COMMISSIONER McKENDRY: Is the most 19 likely scenario under what you set out for us a 20 monopoly system where there would be the one 21 distribution system? Is that the most likely outcome 22 of this? 23 13303 MR. HARA: Yes. If you have free 24 market competition in the scenario that I speak of, 25 there is a danger that the company entity with the StenoTran 2790 1 deepest pocket will win out. Now, something like that 2 is happening in the long distance telephone. AT&T is 3 very strong in the United States. If it was a 4 completely free market, AT&T could very well become a 5 monopoly in long distance again. The same scenario 6 could happen in this case, too. 7 13304 So, the issue that the CRTC will have 8 to consider then is going back to the concept of 9 separation of carrier and content. So, the common 10 carrier concept will probably have to be revived and 11 the common carrier will have to provide service for 12 every comer. 13 13305 COMMISSIONER McKENDRY: Would your 14 system also deliver telephony signals as well as the 15 other signals we have talked about? 16 13306 MR. HARA: Yes. Telephone will be 17 such a small fraction of the total bit stream to the 18 whole, you can probably say it would be almost free. 19 13307 COMMISSIONER McKENDRY: Is there a 20 vulnerability issue for society if we just have one 21 distribution system, one fibre, in effect, distributing 22 all of these services to businesses and to homes? 23 Would a failure of the system put us at risk? Are we 24 too vulnerable? 25 13308 MR. HARA: No, the risk is very StenoTran 2791 1 small. The biggest risk is the switching centre 2 catching fire. Otherwise, there is a fibre cable going 3 from the switching centre to each home and this is 4 independent. A breakdown in a single fibre to the home 5 only affects -- the equipment breakdown will affect 6 only one subscriber and, therefore, the vulnerability 7 is very low for the system as a whole. 8 13309 Now, if you look at the concentration 9 of switching equipment and telephone switching centres, 10 then if you look at the statistics of a fire destroying 11 a switching centre like the telephone exchange, it's 12 very, very small. 13 13310 COMMISSIONER McKENDRY: But if there 14 was a failure, it would represent a significant problem 15 if we only had one distribution network? 16 13311 MR. HARA: Yes, but it hasn't 17 happened. The design is such for the prevention of 18 fire and earthquake. There hasn't been a major 19 telephone exchange fire, I don't think, in North 20 America for a long time. 21 13312 COMMISSIONER McKENDRY: But there has 22 been major telephone system failures primarily due to 23 software faults. 24 13313 MR. HARA: Software, yes, that's 25 human fallibility. But again by sharing information StenoTran 2792 1 throughout the world -- like SaskTel recently did have 2 a software breakdown. The only way they could start it 3 up again was to, as they say, reboot, reload the 4 program. I don't think they have found the bug yet. 5 These problems have been solved. 6 13314 NTT had the same problem and they 7 shut down Kobe City for 48 hours. They found the bug, 8 so that has been corrected and they corrected other 9 programs throughout the nation. I have offered SaskTel 10 help to contact NTT about that. 11 13315 COMMISSIONER McKENDRY: Your proposed 12 system would be very software-dependent and you are 13 absolutely confident that today we have resolved all 14 the software defects that exist in these systems? 15 13316 MR. HARA: Yes, since it's only 16 switching that we are talking about. Digital switching 17 has been going on for a very long time, so technically 18 it's very reliable and the software bugs -- well, 19 sometimes they come up, but it's very rare. It's like 20 arguing that one airplane crash makes flying very 21 dangerous, but if you look at the statistics, it's much 22 safer than driving your car. 23 1235 24 13317 COMMISSIONER McKENDRY: Let me ask 25 you about the table you have on page 3 of your written StenoTran 2793 1 submission. It is headed "Free Market Contents". It's 2 Table 1 on page 3. 3 13318 I'm curious. When I read down the 4 list, it leads me to a question that I would be 5 interested in having your comments on. When I read 6 down the list, there is very little on your list that 7 isn't more or less available on the Internet today. 8 13319 How does the Internet scenario and 9 the vision that the federal government has for 10 connecting homes in Canada to the information highway, 11 to the Internet -- in a sense, are we evolving a system 12 already that meets some of the objectives and goals 13 that you have? For example, there is broadcast 14 television on the Internet today in a quality that is 15 probably not acceptable to most people, but undoubtedly 16 that will change over time. 17 13320 Are we really heading already towards 18 what you are talking about? 19 13321 MR. HARA: We are heading, dragging 20 many problems -- bottlenecks -- like you mentioned, 21 quality. Once you have seen high definition TV on a 22 big screen, it's very difficult to go back to the 23 standard screen that we see today. Every time I visit 24 Japan, almost every year, I go to Akihabara, sit down 25 for a whole afternoon looking at high definition TV. StenoTran 2794 1 It's that enjoyable. So quality is the issue. 2 13322 Also, the bandwidth that is delivered 3 to the home is an issue too, because if you want high 4 definition TV plus a TV channel -- one TV channel or 5 two TV sets serviced -- the current Internet quality 6 and bandwidth speed also is an issue. For Internet, to 7 access information and waiting for the screen to fill 8 up with graphic data, it is very time-consuming. It is 9 a waste of time. If that comes up within an instant, 10 everybody is pleased. For that, you need a system that 11 I have described. 12 13323 COMMISSIONER McKENDRY: The point I 13 am trying to make is, don't we have a free market 14 policy already? Isn't the Internet a free market 15 policy? There is content on there ranging from 16 broadcast TV from South America to broadcast television 17 from North America. There is American content, 18 Ukrainian content. The Internet is a free market, so 19 isn't -- 20 13324 I guess the point I am putting to you 21 with respect to the Internet, it strikes me that it is 22 a free market policy that has happened. The logic of 23 your submission to us is, if the free market policy is 24 put in place, somebody will build it. Well, there's 25 the free market policy, the Internet. StenoTran 2795 1 13325 My question to you is, why would it 2 be built then? You have your free market policy. 3 13326 MR. HARA: The bandwidth to the home 4 is insufficient to support everything that a consumer 5 would really pay for. 6 13327 It is not clear to the enterprisers 7 that there is indeed a free market policy to put the 8 fibre to the home in, and that they are free to choose 9 whatever content they wish to supply on an universal 10 access basis. That is not clear right now. Also, 11 there is no guarantee that they will provide universal 12 access, and that is where CRTC's policy should come 13 into, in the interest on the side of the consumer. 14 13328 COMMISSIONER McKENDRY: So the 15 problem essentially is resolving the technical problems 16 associated with the Internet, more bandwidth, which 17 your network would take care of, and so on. That is 18 the missing link, really, it isn't the free market 19 policy; the missing link is the infrastructure. 20 13329 MR. HARA: Yes. Right now, to make 21 really the Internet or -- really the delivery system I 22 described is ideal for Internet, plus every other 23 service that the home or the subscriber office will 24 need. 25 13330 COMMISSIONER McKENDRY: Do you have StenoTran 2796 1 any information to help us think this through in terms 2 of financial modelling and so on, that would underlie 3 your proposal? I understand the theory of it, if you 4 like, but have you done any financial modelling in 5 terms of the capital costs that would be required, all 6 the other related expenses, the forecast revenues and 7 so on? 8 13331 MR. HARA: I have done a very basic 9 capital cost analysis, and assuming something like 10 10 per cent capital cost, interest, that sort of thing, I 11 have done the per subscriber cost. It's anywhere 12 between $2,000 -- $2,500 Cdn dollars, $2,000, fibre to 13 the home cost. In addition to that is the switching 14 system. 15 13332 Yes, I have done those analyses. I 16 included that in my last appearance when I appeared 17 here last time -- two years ago, was it? 18 13333 COMMISSIONER McKENDRY: Two years ago 19 I wasn't here, so I can't tell you. 20 13334 MR. HARA: If you wish to have that, 21 I would be glad to revise the numbers. 22 13335 COMMISSIONER McKENDRY: If it 23 isn't -- I don't want you to go through any extreme 24 amount of work -- 25 13336 MR. HARA: They will be very basic StenoTran 2797 1 numbers. 2 13337 COMMISSIONER McKENDRY: -- but in 3 order for us to properly think this through, I think we 4 have to have some sense of what it would cost to do, 5 and what the associated revenues would be. For 6 example, you indicated that the fibre to the home would 7 cost $2,500 per subscriber? 8 13338 MR. HARA: Yes. So you have to -- 9 13339 COMMISSIONER McKENDRY: That's the 10 fibre from the switch to the home? 11 13340 MR. HARA: From the switching centre 12 to the home, yes. 13 13341 COMMISSIONER McKENDRY: And that is 14 assuming what? That you will get access to existing 15 ducts that are there? 16 13342 MR. HARA: Yes. We will use the 17 available right-of-way. 18 13343 COMMISSIONER McKENDRY: Those are my 19 questions for you. It is an interesting idea, and I 20 appreciate very much your taking the time to come and 21 talk to us about it. 22 13344 MR. HARA: I appreciate the 23 opportunity to speak on technology, which not very 24 often is listened to. I am glad to have had the 25 audience today. StenoTran 2798 1 13345 COMMISSIONER McKENDRY: Thank you, 2 Madam Chair. 3 13346 THE CHAIRPERSON: Commissioner 4 Cardozo. 5 13347 COMMISSIONER CARDOZO: Thanks, Madam 6 Chair. 7 13348 Dr. Hara, just a couple of questions. 8 I wanted to perhaps just summarize your discussion, as 9 I understood it, with Commissioner McKendry. 10 13349 Are you talking about essentially 11 having a new set of wires with a higher bandwidth? 12 13350 MR. HARA: Yes. 13 13351 COMMISSIONER McKENDRY: And that 14 would carry all the services you have listed. 15 13352 MR. HARA: Yes, on a centrally 16 switched basis. That's where the -- basically, 17 infinite bandwidth comes in, or universal access can be 18 guaranteed. 19 13353 COMMISSIONER McKENDRY: Could you 20 carry hydro as well? 21 13354 MR. HARA: Electrical power? 22 13355 COMMISSIONER McKENDRY: Yes. 23 13356 MR. HARA: No. 24 13357 COMMISSIONER McKENDRY: That would be 25 separate. So at least you have two wires going into StenoTran 2799 1 the home. 2 13358 MR. HARA: You can also -- along with 3 the hydro wire, you can lash the fibre to the hydro 4 wire. You can do that. 5 13359 COMMISSIONER McKENDRY: I take it 6 with this infinite capacity you could deal with the 7 capacity problem we have with television, which is that 8 the current cable system is not able to take the kind 9 of -- not able to accommodate, say, another 50 or 10 10 channels. 11 13360 MR. HARA: That's right, particularly 12 when it comes to high definition, digital high 13 definition TV, and the new digital TV broadcast 14 standard. If I may elaborate. 15 13361 The approach that the cable TV 16 companies have to take, they are forced to have a 17 mixed -- it is basically digital in signal, but when 18 they transmit it, they have to have an analog 19 component, meaning either it is amplitude or in time. 20 That makes a set top box $500. They are having a tough 21 time bringing it lower than $500. 22 13362 When you go to the system I 23 described, it's pure digital pulse code modulation. 24 It's just 0s and 1s, nothing else. That makes the cost 25 much lower, and you are getting a lot of bandwidth that StenoTran 2800 1 way too, using fibre. 2 13363 COMMISSIONER McKENDRY: So you 3 wouldn't be able to transmit analog over this system. 4 13364 MR. HARA: The way you deal with 5 analog signals is you digitize it, the interface guard 6 take it over the fibre, and the subscriber unit inserts 7 a card and you go from digital to analog conversion. 8 So analog is handled as well. 9 13365 COMMISSIONER McKENDRY: Thanks very 10 much. That covers my questions. 11 13366 THE CHAIRPERSON: Commissioner 12 Pennefather. 13 13367 COMMISSIONER PENNEFATHER: Just a 14 quick question on the content side. 15 13368 You mentioned, for example, National 16 Arts Centre productions. Are you talking about live 17 performances? 18 13369 MR. HARA: Both ways. It could be 19 live performance, real time, and it can be record on 20 the digital video disk and offered throughout the 21 country. So you can have it both ways. That means 22 much more revenue for the National Arts Centre, or any 23 other performing centre, for that matter. 24 13370 COMMISSIONER PENNEFATHER: We assume 25 that that could be done now, assuming that people had StenoTran 2801 1 the money to produce a live performance. Why would 2 this system suddenly make it better or easier to do 3 that? Who is going to pay? 4 13371 MR. HARA: Let's say you make a 5 digital video disk and offer it for sale. It would be, 6 on an expensive side, let's say $10, $20 -- even $10, 7 $20, would be -- well, $20 would be expensive, maybe 8 $10 is all right. But when you can dial up and get 9 that for $2 or $3, then it will be much more popular, 10 and your revenue consequently will reach the mass 11 market stage. 12 13372 COMMISSIONER PENNEFATHER: So it is 13 basically a video on-demand system. For example, the 14 collection of the National Film Board could be 15 available to me on demand? 16 13373 MR. HARA: Exactly, yes. Everything 17 that the National Film Board holds now can be made 18 available. 19 13374 COMMISSIONER PENNEFATHER: Even in 20 its current analog capacity? 21 13375 MR. HARA: Yes. Conversion from 22 analog to digital format is a very standard technology. 23 13376 COMMISSIONER PENNEFATHER: And the 24 cost of that conversion would be borne by the 25 institution, if one had to place the entire collection StenoTran 2802 1 on video disk? 2 13377 MR. HARA: It will be borne 3 eventually by the subscriber. The cost to watch that 4 film contains the conversion cost as well, but the 5 conversion is only done once, and it is sold to many, 6 therefore the per subscriber cost will be very small. 7 13378 COMMISSIONER PENNEFATHER: So you are 8 saying that those revenues eventually will go back to 9 the producer, the Arts Centre, the Film Board, et 10 cetera? 11 13379 MR. HARA: It should. 12 13380 COMMISSIONER PENNEFATHER: It should? 13 13381 MR. HARA: Yes. Of course, if the 14 delivery system entity that constructed the delivery 15 system could buy the rights outright and maybe make 16 more money that way -- it's a competitive commerce. 17 13382 COMMISSIONER PENNEFATHER: Does your 18 system assure that if everybody, for example, in the 19 country wanted the same film at the same time, it could 20 happen? 21 13383 MR. HARA: Yes. That's very easy to 22 do in the switching system. It's called -- you have 23 one source, and everybody can connect up to it. 24 13384 This happens in -- some switches have 25 blocking, the same thing as your telephone, you get a StenoTran 2803 1 busy signal. You design it to make sure that blocking 2 does not take place. So within that switching centre, 3 yes, everybody could see the same program. 4 13385 COMMISSIONER PENNEFATHER: If I am 5 right, you said to Commissioner McKendry that this 6 system, to be universal access, there should be no 7 Canadian content requirements. It should be -- I 8 didn't quite understand that. 9 13386 MR. HARA: The Canadian contents 10 should be guaranteed access, but once you do that, 11 it's -- if you follow the spirit of the NAFTA, the 12 North American Free Trade Act, I think you will have to 13 provide access to non-Canadian content as well. 14 13387 COMMISSIONER PENNEFATHER: Guaranteed 15 access by whom? Who would guarantee this access? I 16 must not be understanding. 17 13388 MR. HARA: The entity that built the 18 delivery system. Everybody who comes will put your 19 signal on, either for a fee, or we like your contents 20 so much we will pay you for it. 21 13389 COMMISSIONER PENNEFATHER: So it is 22 another gatekeeper system basically. It's like a 23 gatekeeper. You will choose the content for the 24 system? 25 13390 MR. HARA: The gatekeeper is the StenoTran 2804 1 subscriber. They pick and choose what they want. And 2 since it is universally accessible -- well, eventually 3 the subscriber will decide what is shown or what is 4 viewed, of course. 5 13391 COMMISSIONER PENNEFATHER: Thank you. 6 13392 THE CHAIRPERSON: Professor Hara, 7 when you do your economic modelling of taking this from 8 slides to reality, do you take into consideration the 9 fact that, as regards investment in fibre to the home 10 and this type of ideal system for delivery, that 11 investors take into consideration the systems that 12 exist already, especially in Canada, where the coaxial 13 cable has penetrated very deeply into the country. 14 13393 Therefore, the desire to increase the 15 intelligence of the coaxial cable capacity or 16 infrastructure, and increase the bandwidth of the 17 copper infrastructure rather than find an economic way 18 of bringing a new switched fibre to the home, I have 19 never to date seen a modelling that can bring 20 fibre-optics any further than the curb. 21 13394 Do you take that into consideration, 22 that it's not only the cost of building this, it's the 23 cost of having an infrastructure which, to a certain 24 extent, delivers or works. Are you saying that you can 25 abandon that for a new structure, or abandon at least StenoTran 2805 1 part of it, and that the services you will be able to 2 deliver will be enough to then recover -- 3 13395 MR. HARA: The capital costs. 4 13396 THE CHAIRPERSON: -- the extremely 5 expensive capital costs. 6 13397 MR. HARA: Yes, but -- 7 1255 8 13398 THE CHAIRPERSON: Have you ever seen 9 a model, other than yours, that says that it is 10 economically possible to bring fibre to the home? 11 13399 MR. HARA: The one problem is the 12 broadcast type cable TV approach of fibre to the curb 13 or fibre coax hybrid that the Americans are pursuing. 14 One thing that is happening is that the brilliant 15 engineers and inventors have all gone into the computer 16 side. They always think broadcast, local air networks. 17 It is all broadcast mode. 18 13400 On the telephone side, the centrally 19 switched approach has been neglected. This sort of 20 thinking about this sort of centrally switched 21 configuration has not reached the decision-makers in 22 almost all the corporations. 23 13401 Middle management, however, from 24 their technology, they are aware of my arguments. I 25 gave a seminar at the Pacific Telecommunication StenoTran 2806 1 Conference. They agreed. They said: Your approach is 2 the best, common sense, and it is good for the people, 3 good for the country. But you have to tell your 4 management." 5 13402 No, they never listen to us. 6 13403 One thing that -- 7 13404 THE CHAIRPERSON: Perhaps they are a 8 banker. 9 13405 MR. HARA: The banker has to listen 10 to this. 11 13406 The videotape shops are making lots 12 of money. If you look at the sales in Canada between 13 1984 to 1994, in over ten years the videotape sales or 14 rentals have doubled -- and that is with very poor 15 quality tapes. In comparison, in that same period, the 16 theatre goer's income has only increased about 10, 20 17 percent. 18 13407 Videotape shops are an indicator that 19 people want choice of content and time. At SaskTel's 20 videotape trial using fibreoptics -- I had the 21 privilege of designing their transmission system -- 22 their statistics indicate that if you have video on 23 demand, even with a very small videotape shop 24 selection, the sales doubled. 25 13408 Add to that standard audio type StenoTran 2807 1 selection, the ethnic movie selection, National Arts 2 Centre performances, and also education, information, 3 Internet access, the income is going to be very large. 4 This has not been understood by management, or 5 management has not spoken to the bankers about this. 6 13409 Statistics show that it is here in 7 Canada, but more so in detail in Japan. The videotape 8 sales have exponentially grown. 9 13410 THE CHAIRPERSON: I have only one 10 more question. 11 13411 Your approach is based on this free 12 market concern. Yet you have admitted or acknowledged, 13 I think, the possibility that we would end up with one 14 system because the cost will be such that we will have 15 one infrastructure and one carrier, or possibly that 16 would happen. 17 13412 Even now there are those who have 18 concerns that as more and more money is put into 19 increasing the bandwidth of copper, increasing the 20 intelligence of coaxial cable by bringing fibre closer 21 and closer to the home -- and I am simplifying, 22 obviously. There are those who have concerns that 23 these two industries may end up being owned by one 24 party with deeper pockets. 25 13413 I find that somewhat contradictory StenoTran 2808 1 that you start with a desire for a free market 2 approach, but that leads then to a monopoly carrier 3 that one would require, I suspect, to regulate. 4 13414 MR. HARA: Yes. 5 13415 THE CHAIRPERSON: And then to have 6 another layer of the packager or wholesaler of content, 7 and then the producer of content at the other end. 8 13416 I can't see in a society like Canada 9 having -- 10 13417 Commissioner McKendry raised the 11 vulnerability of having one system technically. There 12 is also vulnerability with regard to gatekeeping, et 13 cetera. It would need intensive economic regulation. 14 So your free market approach tends to lead us to a 15 monopoly of carriage. 16 13418 MR. HARA: The free market approach, 17 the old fashioned capitalism, the strongest will 18 dominate and then become a monopoly, that seems to be 19 the progression. That is where the CRTC regulatory 20 function must come in. 21 13419 If it does indeed get to the danger 22 of a single entity controlling transmission to the 23 home, you have to do something. That is why I 24 mentioned separation of carrying content. 25 13420 We used to have that in telephone StenoTran 2809 1 service. 2 13421 THE CHAIRPERSON: This was at a time 3 when you mainly delivered voice, which was very 4 narrowcast, obviously, not broadcast. 5 13422 The separation of content had a 6 different flavour, it seems to me. It is more like 7 e-commerce or e-mail. But certainly broadcast type of 8 content does not raise the same questions, I don't 9 think, as the old style of separation of carriage and 10 content. 11 13423 MR. HARA: One thing occurred to me 12 about the bankers' interest. 13 13424 The system I described, the centrally 14 switched fibre to the home, compared to the fibre coax 15 hybrid -- fibre coax hybrid has a lot of equipment out 16 in the field to be serviced. Fibre to the home has the 17 equipment at the switching centre or the subscriber's 18 home, which is independent from everybody else's units. 19 13425 This means that the maintenance cost 20 is very low. Even today the cable TV people have a 21 difficult task in maintaining their distribution 22 amplifiers in the field in minus 40 Saskatchewan 23 weather or plus 30 or 40 weather sometimes in Ontario. 24 13426 The maintenance costs, when you start 25 including that, the fibre to the home looks much better StenoTran 2810 1 with the increased traffic. 2 13427 THE CHAIRPERSON: Thank you very 3 much, Professor Hara. That was interesting. It should 4 lead us to do some more homework. 5 13428 MR. HARA: I will do my homework and 6 I hope you will be able to read what I have to provide. 7 13429 THE CHAIRPERSON: Thank you very 8 much. 9 13430 We will take our lunch break until 10 2:00. 11 --- Recess at / Suspension à 1300 12 --- Upon resuming at / Reprise à 1400 13 13431 THE CHAIRPERSON: Good afternoon. 14 13432 Madam Secretary, would you please 15 introduce the next participant. 16 13433 MS BÉNARD: Thank you, Madam Chair. 17 13434 The next presentation will be by Bell 18 ExpressVu, and I would invite Mr. Chris Frank to start 19 the presentation. 20 PRESENTATION / PRÉSENTATION 21 13435 MR. FRANK: Thank you very much. 22 13436 Good afternoon, Madam Chair, Members 23 of the Commission. It has been a while since Bell 24 ExpressVu has appeared before you. I see a number of 25 new faces, and at least one familiar one in a new StenoTran 2811 1 position. 2 13437 Congratulations on your appointments, 3 new and not so new. 4 13438 My name is Chris Frank. I am 5 Vice-President of Government Relations and Corporate 6 Development at Bell ExpressVu. 7 13439 My main message today is that 8 Canadians definitely do have a significant appetite for 9 Canadian programming and Canadian broadcasting 10 services. Our company's success in the last 12 months 11 is a testament to this reality. 12 13440 Before jumping into the heart of my 13 presentation, perhaps I can start with an update on our 14 company. 15 13441 Bell ExpressVu is 100 percent owned 16 by BCE. Corporately, we are a division of Bell 17 Satellite Services Inc., which is also 100 percent 18 owned by BCE. 19 13442 The DTH business, along with 20 pay-per-view and SRDU -- if we are fortunate enough to 21 be awarded licences for these separate undertakings -- 22 will be operated under the name of Bell ExpressVu. 23 13443 Since we launched our service a year 24 ago, we have been fortunate enough to enjoy a warm 25 reception from consumers across the country. Our StenoTran 2812 1 subscriber brace broke through the 100,000 mark during 2 the summer, and we are now well on our way to reaching 3 200,000 customers. 4 13444 As was originally projected, the 5 majority of our early subscribers are from rural and 6 under-served Canada. Therefore, it is fair to say that 7 Canadian DTH is meeting the original public policy 8 objective envisaged for it, extending Canadian 9 programming and Canadian broadcasting services to 10 consumers who have traditionally been without any real 11 choice and variety. 12 13445 With our soon to be upgraded plant 13 and equipment, combined with a new incremental space 14 segment, our company will have sufficient satellite 15 capacity to create a service offering second to none. 16 With this next step, we will mount a significant 17 competitive challenge in all market sectors, including 18 major urban centres. 19 13446 Our current channel line-up offers an 20 impressive digital, audio and video count in eastern 21 and western Canada. In the east, we have 40 audio and 22 82 video broadcasting services; in the west, 40 audio 23 and 59 video signals. 24 13447 Later this fall, on or about November 25 17th, we will be increasing our channel line-up by 30 StenoTran 2813 1 video channels through technical improvements to our 2 digital video compression equipment. This will 3 increase our video count in the east to 103 channels; 4 and in the west, to 75 channels. 5 13448 You might be interested in knowing 6 that all of these additional broadcasting services will 7 be licensed Canadian broadcasting channels. 8 13449 Here is a breakdown: 6 pay-per-view 9 channels -- 4 English, 2 French; 7 Canadian speciality 10 TV services; 16 local off-air services from Vancouver, 11 Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal 12 and Saint John, as well as one U.S. service. 13 13450 My overriding message to you today is 14 that Bell ExpressVu's advantage in the marketplace is 15 really twofold: first and foremost, and in the context 16 of this hearing, our Canadian content. 17 13451 The main difference between Bell 18 ExpressVu and DirecTV, and other U.S. DBS service 19 providers for that matter, is that we distribute a full 20 range of Canadian services in English, French, 21 Cantonese, German, Hindi, Tamil, Punjabi, Italian and 22 other languages found across this diverse country of 23 ours. 24 13452 In the final analysis, the 25 competitive struggle between licensed Canadian DTH StenoTran 2814 1 companies and the unlicensed U.S. grey market will be 2 won or lost in the marketplace. We firmly believe that 3 our absolute best point of demarcation is Canadian 4 programming, programming not readily available on 5 foreign services. When we obtain new incremental 6 satellite capacity, and after we have added all the new 7 Canadian specialty services, we hope that the 8 Commission would authorize new foreign services for 9 digital distributors to complement this robust Canadian 10 line-up. 11 13453 The second significant advantage we 12 have is our state of the art digital 100 percent 13 addressable technology. The picture and sound quality 14 that we provide helps drive our sales. Please note, 15 for instance, that movies and sports top our 16 subscribers' "wish list" of service. 17 13454 To that end, more than 60 percent of 18 our customers currently buy Pay TV. That is six times 19 the percentage that purchase Pay TV from cable. And 20 our sports packages are in more than 90 percent of our 21 customers' homes. 22 13455 That is why CTV sports and 23 pay-per-view are at the head of the new programming 24 services we are launching next month. It is also why 25 we have applied for our own pay-per-view licence. This StenoTran 2815 1 will give us an opportunity to custom design our own à 2 la carte service for our subscribers and develop a 3 further point of product differentiation from our 4 cable, grey market and other competitors. 5 13456 Our launch of new -- to us, that 6 is -- local channels this fall means that we will have 7 service from ten of Canada's largest broadcasting 8 markets. Thanks to a mutually satisfactory and 9 beneficial arrangement between Bell ExpressVu and the 10 Canadian Association of Broadcasters, we will be able 11 to offer all these local signals without blackout. 12 13457 Perhaps I can delve into that 13 agreement a bit, because I believe it demonstrates our 14 commitment to Canadian programming and Canadian 15 broadcasting services. 16 13458 As an aside, you might be interested 17 in knowing that ExpressVu offers local broadcasting 18 services in an all-Canadian basic package which sells 19 for $7.95. This includes multiple time shifted 20 stations of CBC, Radio-Canada, TV Ontario, Knowledge 21 Network, CTV, Global, Chum, WIC, Baton, A Channel and 22 ATV, as well as the specialty services Newsworld, RDI, 23 CBC Radio and the Galaxy Digital Audio Service. 24 13459 This last service, I might add, many 25 of our subscribers believe is the digital icing on the StenoTran 2816 1 cake. CBC's unique blend of mostly Canadian and the 2 best of foreign produced music is proof positive that 3 an expanded specialty broadcasting sector without the 4 CBC would be like an ocean without fish. 5 13460 Our basic French language package 6 includes Radio-Canada, Télé-Québec, TFO, TVA, TQS, CBC, 7 CTV, as well as the aforementioned specialty services. 8 13461 For a modest increment of $1.95, an 9 English-language subscriber can add the French-language 10 basic services, and vice versa. 11 13462 So for less than $10 a month, an 12 ExpressVu subscriber can fill his or her screen with 50 13 essential and important Canadian broadcasting services. 14 13463 Our agreement with the CAB is a 15 first. By this agreement, Bell ExpressVu is committed 16 to maximize interest system simultaneous substitution, 17 offer non-simultaneous substitution, and provide two 18 streams of direct compensation, totalling as much as 45 19 cents per subscriber per month to broadcasters not 20 distributed on our DTH system in respect of subscribers 21 in their broadcast markets. 22 13464 THE CHAIRPERSON: Mr. Frank, this 23 application is still before the Commission? 24 13465 Are you referring to the agreement 25 that would allow you to not substitute? StenoTran 2817 1 13466 MR. FRANK: No. It is an agreement 2 that we have signed with the CAB. It is part of an 3 application, but the agreement itself is not in for 4 approval. 5 13467 THE CHAIRPERSON: It is not central 6 to -- 7 13468 MR. FRANK: No, it is not what we are 8 seeking approval for. It is just part of the 9 documentation. 10 13469 The agreement itself is signed and 11 sealed between us and the CAB, but it does not, I don't 12 believe, form -- 13 1410 14 13470 MR. BLAIS: It is just that it is the 15 basis of something the Commission will have to decide. 16 You know, if you could perhaps -- 17 13471 MR. FRANK: Exercise those parts. 18 13472 MR. BLAIS: That's right. 19 13473 MR. FRANK: On a prospective basis. 20 13474 MR. BLAIS: Yes. 21 13475 THE CHAIRPERSON: Yes, just to 22 forewarn you before that -- 23 13476 MR. FRANK: I'm sorry. I didn't even 24 think this would -- I understand. 25 13477 THE CHAIRPERSON: Just to remind StenoTran 2818 1 ourselves that it is before the Commission and it would 2 not be quite appropriate to go into the value of it at 3 this time, if you understand. 4 13478 MR. FRANK: We are heartened by the 5 recently made comments of the Specialty and Premium 6 Television Association in a recent intervention to the 7 Commission. This important association comment on the 8 diligence of our company in respect of the distribution 9 of Canadian specialty and premium broadcast services. 10 13479 They made special reference to the 11 multicultural services we carry and went on to note 12 that this was essentially telling in light of satellite 13 capacity challenges that we have faced since our 14 inception. 15 13480 The point of the foregoing is that 16 our recent successes across the country in the 17 extremely competitive electronics retail market are 18 based in no small measure on Canadians' obvious desire 19 to watch Canadian programming and Canadian broadcasting 20 services. 21 13481 How can Bell ExpressVu and other 22 digital distributors continue to contribute to the 23 promotion of domestic programming and broadcasting 24 services? We should be prepared first of all to 25 provide adequate shelf space so that all Canadian StenoTran 2819 1 services contemplated by public policy be carried. 2 13482 Next, we should be prepared to 3 discuss the widening of the application of simultaneous 4 substitution to include specialty channels. I 5 understand that this is not a universally supported 6 idea on the part of programmers, however, many 7 specialty services would undoubtedly benefit from this 8 voluntary negotiated extension of public policy. 9 13483 Programming siphoning is an issue, 10 however, it should be tempered by the competitive world 11 in which we now live and do business. As an example, 12 TSN is clearly benefiting from our substitution of 13 their signal over the Fox network for the current major 14 league baseball playoffs. 15 13484 This practice could be extended to 16 other specialty TV services on mutually beneficial 17 terms. In this way, those specialty services that are 18 not interested in such a practice or would not be 19 affected by the give-and-take of this public policy 20 enhancement. 21 13485 Express believes that it can sell 22 more Canadian programming and broadcasting services if 23 it is better able to harness the potential of its 24 digital delivery platform. For some time we have 25 advocated the removal of tiering and linkage rules for StenoTran 2820 1 digital distributors. 2 13486 We believe that a digital world 3 simple predominance combined in today's access 4 requirements will ensure Canadians have lots of 5 opportunity to watch the widest selection of Canadian 6 programs and services. This suggestion has not taken 7 root, so perhaps a transition plan might be a more 8 reasonable approach to this issue. 9 13487 In that vein, may I suggest, first, 10 that the five to one linkage of pay services to B list 11 items be increased to eight to one for digital services 12 and that digital BTUs be permitted to add 2B list 13 services in specialty packages and that the 2B list 14 services included in specialty packages could be 15 different from one customer to another. This is 16 possible with addressable hardware and allows for the 17 regional and time zone sensitivities of this vast 18 country. 19 13488 With respect to the first suggestion, 20 the pay-TV services should see an even greater 21 penetration of our subscriber base without erosion of 22 any other services. The first proposal would be 23 complemented by the second suggestion in that Canadian 24 specialty services would get more lift from additional 25 B list items. StenoTran 2821 1 13489 The third suggestion simply gives 2 Canadian consumers more choice in value from the 3 relevant and complementary foreign services by 4 maximizing the inherent utility of the digital 5 platform. 6 13490 In the final analysis, these 7 suggestions are about giving Canadian consumers more 8 choice and variety while assuring that Canadian 9 programmers get plenty of high visibility shelf space 10 to sell their products. After all, without 11 distribution, even the best product can fail. Plus, a 12 change in the rules for digital distributors will 13 incent other distributors to upgrade their antiquated 14 plant and equipment to remain competitive and to the 15 benefit of all Canadian consumers. 16 13491 I thank you for your attention and 17 the opportunity to make this presentation on a chilly 18 fall afternoon. I would be pleased to answer any 19 questions you might have for us. 20 13492 I do apologize if it was 21 inappropriate to mention the ExpressVu-CAB deal. 22 13493 THE CHAIRPERSON: No problem at all. 23 13494 For us, it's almost good news that 24 it's bad weather outside. Then we don't feel so sorry 25 for ourselves. Thank you for bringing us the bad news. StenoTran 2822 1 We and multimedia like bad weather news. Apparently 2 that's when they get the most viewers, when there is 3 bad weather. 4 13495 MR. FRANK: Weather uncertainty. 5 13496 THE CHAIRPERSON: We feel less sorry 6 for ourselves when there's bad weather, so thank you 7 for that. 8 13497 Commissioner Pennefather. 9 13498 COMMISSIONER PENNEFATHER: And to try 10 to be as gracious as the Chair, I hope that we can 11 offer you a warm reception if it's that chilly outside. 12 13499 MR. FRANK: Thank you very much. I 13 feel the heat. 14 13500 COMMISSIONER PENNEFATHER: We could 15 go on, but I think we better proceed. 16 13501 I would like to just take a bit of a 17 break and step back a bit and really ask you, since you 18 are here in the context of a broader policy discussion, 19 to, if you would, summarize some of your remarks, 20 comments and recommendations in light of the four 21 policy objectives that the Chair tabled in her opening 22 remarks. I will repeat them for you. 23 13502 Just a comment. I will go through a 24 number of points with you in that regard. A lot of 25 what you have said today and certainly what you noted StenoTran 2823 1 in your written submission are areas which will be 2 covered in an upcoming licensing framework proceeding, 3 so we will leave those to that point. 4 13503 Again, if we look from your 5 perspective and your side of the business at the four 6 objectives we are looking for, how can the Commission 7 assure that quality Canadian programming, particularly 8 under-represented categories, is produced and broadcast 9 to the largest number of Canadians? Question one. 10 13504 Two, how can the Commission help to 11 ensure that all players have the ability to adapt to a 12 changing environment characterized by new technologies, 13 new competitors, new corporate structures, new national 14 and international opportunities? 15 13505 The third point, and this will be I 16 think very interesting to hear your comments on, how 17 can the regulatory framework ensure the unique 18 characteristics of the French language market are 19 maintained and recognized? 20 13506 Finally, how can a regulatory 21 framework recognize the particular requirements of the 22 different elements of the system and balance the desire 23 for flexibility with the need to ensure equity and the 24 protection of the public interest? 25 13507 I do read these points within your StenoTran 2824 1 remarks. I wonder if you could comment on them and how 2 your recommendations fit these four objectives. 3 13508 MR. FRANK: The objective of our 4 company is to take Canadian programming and the foreign 5 programming we are allowed to distribute to as many 6 Canadians as possible. The ubiquity of satellite 7 offers us the opportunity to reach Canadians wherever 8 they may live, in urban Canada, in rural Canada and 9 underserved Canada. 10 13509 We know that the U.S. DBS providers 11 got to the Canadian market before us. In this context, 12 we in retrieving those subscribers from the clutches, 13 if you will, of the U.S. DBS providers, we are able to 14 offer those Canadians and Canadians who buy our service 15 for the first time the opportunity for a full range of 16 conventional broadcasting, specialty broadcasting and 17 premium broadcasting. 18 13510 We contribute 5 per cent of the 19 revenue we earn from those folks to the creation -- to 20 a production fund which aids and abets the development 21 of more Canadian production. 22 13511 Part of my message today was that by 23 bringing more Canadian services, perhaps even launching 24 some new Canadian services because of the traffic jam 25 on the current analog cable systems across the country, StenoTran 2825 1 we can provide more diverse service, better service and 2 at the same time provide incremental revenue to the 3 production of existing and new Canadian product. 4 13512 COMMISSIONER PENNEFATHER: Two points 5 on that. In so saying, and I think in your paper you 6 have also noted in paragraph 8, the pairing of 7 non-Canadian services gives lift to Canadian services 8 and yet I have noted other interveners have brought to 9 our attention that this is no longer the case. It's 10 not a thesis that is holding true today. 11 13513 I also noted in your remarks you are 12 putting a lot of emphasis on the strength and the 13 excellence of Canadian specialties and the fact that -- 14 you also say in paragraph 5 that you recognize a large 15 part of your competitive edge lies in Canadian 16 programming. 17 13514 Is this traditional assumption that 18 American services provide the lift to Canadian services 19 still true or not? Do you want to comment on this? 20 13515 MR. FRANK: Sure. It may or it may 21 not be true, depending on the individual 22 consumer/subscriber. Consumers are becoming much more 23 sophisticated every day. They know what they want. 24 13516 I think the quick answer is that some 25 customers of ours enjoy a bigger, fuller package and if StenoTran 2826 1 we are able to complement all of the Canadian services 2 with American services, that's more attractive to that 3 subset of customers. Other customers would like to 4 have smaller packages, more selective, tailor their 5 programming to their particular needs and they don't 6 wish enhanced product or add-on packages. 7 13517 As a 100 per cent addressable 8 distributor, we can tailor our packages to those two 9 universes. The quick answer is we can provide, for 10 instance, a film package with eight -- if you accept my 11 thesis this afternoon -- with eight U.S. B list items 12 or we could provide the film service on a stand-alone 13 basis. 14 13518 COMMISSIONER PENNEFATHER: Even if 15 you say that the competitive edge lies in the Canadian 16 programming. 17 13519 MR. FRANK: There's no question for 18 us that the competitive edge for us is in Canadian 19 services because that's why people buy our service. 20 It's a very direct sort of relationship. 21 13520 COMMISSIONER PENNEFATHER: But you 22 still feel you need the American programming. 23 13521 MR. FRANK: Simply because our 24 competition has it and to the extent we have shelf 25 space for it without compromising Canadian services, we StenoTran 2827 1 believe yes, we need it to be competitive. 2 13522 If you are looking at the DirecTV 3 service, for instance, they have a full range of U.S. 4 services and virtually no Canadian services. If we can 5 offer the best of both, I think that our product will 6 sell and sell like hotcakes. 7 13523 COMMISSIONER PENNEFATHER: As I 8 mentioned, one of our important policy objectives is to 9 look at the regulatory framework in terms of the unique 10 characteristics of the French market. 11 13524 What are your comments on how we 12 should address the French market in particular and in 13 relation to what you have just said about the 14 competitive edge of Canadian programming, I am assuming 15 you are approaching the French market quite 16 differently. 17 13525 MR. FRANK: Yes, we are. We have to 18 the extent possible and practicable, we have two 19 distinct linguistic streams of programming. 20 13526 I think the biggest thing that we 21 bring to Canada and the French language market 22 immediately is the opportunity to take all of the 23 conventional and specialty and premium services coast 24 to coast to coast. 25 13527 As soon as we acquire more national StenoTran 2828 1 transponder space, we will be able to take TV off, for 2 instance, the basic French service, TQS, TéléQuebec, 3 TFO, right across the country so that a customer in 4 British Columbia can see exactly what a customer can in 5 Quebec. The current terrestrial systems, I think, 6 don't offer that kind of opportunity. 7 13528 COMMISSIONER PENNEFATHER: I wanted 8 to ask you about your paragraph 6 in your written 9 submission. Part of it says: 10 "Consequently, as a general 11 principle and to reward 12 innovation, investment in new 13 programming and modern 14 distribution systems should be 15 rewarded with increased 16 regulatory flexibility that 17 stimulates program production, 18 subscriber growth and respects 19 the objectives of the Canadian 20 broadcasting policy." 21 13529 That sentence does sum up some of our 22 concerns. Could you just expand on that paragraph what 23 you mean. 24 1425 25 13530 MR. FRANK: What we were driving at StenoTran 2829 1 there is the fact that we were digital. Our 2 shareholders have made the investment to launch an 3 all-digital service. It is the service of the future. 4 It is national in scope. 5 13531 By rewarding companies that invest in 6 the technology of the future, technology that provides 7 increased flexibility, both in terms of subscriber 8 choice and operation, you will encourage those 9 distributors who aren't digital to digitize and bring 10 Canadian consumers the digital opportunity in all modes 11 of distribution. 12 13532 The more we sell, the more Canadians 13 get the opportunity, especially in the DTH context, DBS 14 context to see Canadian programming. If you go back to 15 my comments on the U.S. grey market, there is virtually 16 no Canadian programming offered by the U.S. services. 17 We fill that opportunity and, in so doing, bring 18 Canadians back to Canadian services and create money, 19 incremental money for Canadian productions. So there 20 is a direct and an indirect benefit. 21 13533 COMMISSIONER PENNEFATHER: I am not 22 sure how this benefits Canadian productions. I don't 23 follow you. 24 13534 MR. FRANK: Through our contribution 25 to the 5 per cent programming fund, and the fact that StenoTran 2830 1 we are delivering more eye-balls for Canadian 2 television programs. 3 13535 COMMISSIONER PENNEFATHER: Just an 4 editorial comment, the word "eye-balls" is banished 5 from our vocabulary here. So you should be careful how 6 you use it. 7 13536 But, in fact, speaking of viewership, 8 I would be interested to know, you mentioned a number 9 of subscribers now, if we just take a factual moment 10 here. Who are the subscribers now? Who is joining up 11 to this satellite world? Are they people new to the 12 system? Are they people who are converting from cable? 13 What is the profile? 14 13537 MR. FRANK: Mostly new to the system. 15 13538 COMMISSIONER PENNEFATHER: New to the 16 system. 17 13539 MR. FRANK: Mostly new to the system, 18 in rural and underserved Canada. Our early forecasts 19 were that that is where the majority of our customers 20 would come from. We have churned a number of people 21 out of the grey market into our service, and we are 22 making some in-roads in big cities. 23 13540 We expect that when we increase our 24 channel capacity significantly and begin to offer the 25 new services I was talking about earlier, that we will StenoTran 2831 1 be even more competitive in urban Canada, and be able 2 to join the kind of competition that the Commission 3 envisaged when it released its pro-competition 4 doctrines over the last three or four years. 5 13541 COMMISSIONER PENNEFATHER: Am I 6 hearing you right that you are going to be -- your 7 competitive edge will be American digital services in 8 the future? 9 13542 MR. FRANK: No. That would be part 10 of our competitive edge, but the major part of our 11 competitive edge will be new Canadian services, new 12 Canadian specialty services, local broadcasting 13 services from across the country, and licences that 14 have yet to be issued. 15 13543 COMMISSIONER PENNEFATHER: What I am 16 getting at is we have had a number of discussions 17 around the time-frame for digital services and digital 18 programming and the transition to digital, et cetera, 19 in this country; and, in the United States, it is our 20 understanding that we can be looking to the near future 21 for digital programming being available. 22 13544 I am curious to know what you think 23 the impact of the transition there will be on your 24 business to digital programs that will be available to 25 American viewers. Do you think Canadians will begin to StenoTran 2832 1 demand these same digital services? 2 13545 MR. FRANK: Are we talking about high 3 definition television? 4 13546 COMMISSIONER PENNEFATHER: We are 5 talking about both, high definition television 6 programming and the switch over from digital to analog 7 in the United States and how that will impact on your 8 business. 9 13547 MR. FRANK: Well, we are, as a 10 corporation, a member of the Canadian digital 11 television not-for-profit enterprise, and we are 12 committed -- we are digital now and we are committed to 13 bringing digital television to Canadians. 14 13548 We will have to work through that 15 process. I am not sure anybody fully understands how 16 quickly it is going to take off, or what kind of 17 consumer demand there is out there for it. 18 13549 Our challenge will be to ensure that 19 we can bring it -- that kind of service to Canadians in 20 a band width efficient way so that the number of 21 channels we offer doesn't shrink. 22 13550 I think Canadians have indicated to 23 us through their purchases that they want choice and 24 variety, and that will be a big challenge for us. But 25 we are committed to work with this group and committed StenoTran 2833 1 to bring high definition television to Canadians sooner 2 rather than later. 3 13551 COMMISSIONER PENNEFATHER: I wondered 4 if you could also comment for us in terms, again, of 5 the broad policy objectives we were looking at. We 6 have had a number of proposals. One is from the CAB 7 regarding the importance of viewership. I am sure we 8 all agree that viewership is very central to the future 9 of Canadian television in this country. But they have 10 proposed that viewership be the process for a 11 regulatory framework, numbers of Canadians viewing 12 Canadian television. 13 13552 What are your comments on their 14 proposal? 15 13553 MR. FRANK: As a distributor, I would 16 be reluctant to wade into the debate with both feet. I 17 would simply like to say for the record that Canadian 18 programming is very important to us. The issue of 19 quality versus quantity, I think is best left to the 20 broadcasters and the Commission to determine. 21 13554 What is clear to us is that we need 22 to have a point of differentiation from U.S. providers, 23 and we want to bring this programming to Canadians 24 before. 25 13555 Obviously, it has to be good StenoTran 2834 1 programming, or people won't watch it. The trade-off, 2 though, between the absolute amount and the dollars 3 available for quality, I am not sure that I am 4 qualified to make a judgment -- 5 13556 COMMISSIONER PENNEFATHER: Okay. 6 13557 MR. FRANK: -- as a distributor. 7 13558 COMMISSIONER PENNEFATHER: Thank you 8 very much. That completes my questions, Madam Chair. 9 13559 THE CHAIRPERSON: Commissioner 10 Cardozo. 11 13560 COMMISSIONER CARDOZO: Thanks, Madam 12 Chair. 13 13561 Mr. Frank, a couple of questions. 14 One is -- I hope this doesn't seem too blunt, but in 15 the whole discussion about distribution some people 16 have said we have a -- cable has a monopoly and ain't 17 nothing much changing in the near future, and despite 18 your numbers there is a theory that it isn't going to 19 change a lot, that cable will continue to have almost a 20 monopoly despite the other technologies. 21 13562 What is your take on that? I would 22 guess you don't agree. 23 13563 MR. FRANK: Well, it is clear that 24 cable is by far the most dominant carrier, distributor 25 of broadcasting services in this country, and I am not StenoTran 2835 1 sure over the course of our initial licence period, our 2 seven-year licence period, that we are going to make a 3 significant dent in their numbers. 4 13564 However, having said that, I think 5 there is room, over a 10-year horizon, for DTH, 6 Canadian DTH companies to capture from 1.5 to 2 million 7 customers in this country. 8 13565 COMMISSIONER CARDOZO: So your 9 figures are likely to come from people who don't have 10 cable now in the rural areas only. 11 13566 MR. FRANK: Those are clearly the 12 early adopters. But I believe, our company believes 13 that when we are able to offer a significant point of 14 differentiation, which we anticipate will start as 15 early as the middle of November this year, that we will 16 start to make in-roads in urban Canada. 17 13567 COMMISSIONER CARDOZO: Okay. The 18 other question I had was you mentioned providing 19 services in different languages other than English and 20 French. I am wondering how many of those are Canadian 21 services, such as Fairchild and Asian Television 22 Network and how many are foreign services? 23 13568 MR. FRANK: My comments were almost 24 exclusively to Canadian programming services, such as 25 the Asian Television Network and Fairchild and StenoTran 2836 1 TéléLatino and CFMT, services such as that. 2 13569 COMMISSIONER CARDOZO: The question I 3 was going to ask relates to something that was put to 4 us by CJNT, the station out of Montreal who was 5 concerned that the foreign services would not have -- 6 are not required to make -- or to carry Canadian 7 content and are not making contribution to the Canadian 8 content field but are taking customers away from them 9 and they, as a multi-lingual broadcaster, are required 10 to produce Canadian content. 11 13570 Do you have any thoughts on that area 12 or do you not see that issue affecting you? 13 13571 MR. FRANK: I think it could affect 14 us indirectly. I understand their issue very clearly, 15 and that is why we are attempting to carry as many of 16 those types of Canadian services as possible. If we 17 add American services in that genre, it would be on a 18 complementary basis, not on a competitive basis. It 19 wouldn't be either/or. That is why I was talking about 20 lift. 21 13572 COMMISSIONER CARDOZO: Just to 22 clarify in my mind, what is your brand name at this 23 point? 24 13573 MR. FRANK: Bell ExpressVu. 25 13574 COMMISSIONER CARDOZO: So Bell StenoTran 2837 1 Satellite Services is the -- 2 13575 MR. FRANK: We are a division of Bell 3 Satellite Services Inc. Bell ExpressVu is a division 4 of Bell Satellite Services Inc. 5 13576 COMMISSIONER CARDOZO: And Bell 6 ExpressVu is the brand name that will continue. 7 13577 MR. FRANK: Yes. 8 13578 COMMISSIONER CARDOZO: Thanks very 9 much. Thank you, Madam Chair. 10 13579 THE CHAIRPERSON: Mr. Frank, when you 11 speak about differentiation at the level of the 12 Canadian services offered, does that rely on services, 13 new services being licensed for satellite delivery on 14 the short term when, in most cases, only the DTH 15 providers would be able to supply those services? 16 13580 MR. FRANK: Not on a 17 contract-exclusive basis. 18 13581 THE CHAIRPERSON: No, no. 19 13582 MR. FRANK: It might be on a 20 bottleneck basis, yes. 21 13583 THE CHAIRPERSON: The reality would 22 be that the congestion on many cable systems would be 23 such that more licences granted, realistically, would 24 have to be granted on the basis of satellite delivery 25 only, at least on the short term. StenoTran 2838 1 13584 MR. FRANK: Yes, we see that as an 2 option. 3 13585 THE CHAIRPERSON: That appears to be 4 your vision of the near future. 5 13586 MR. FRANK: Excuse me, as a policy 6 option. 7 13587 THE CHAIRPERSON: Yes. But from a 8 business perspective, that would be one way to be able 9 to make in-roads into the distribution markets, by 10 offering over and above digital quality and more 11 ability to choose, et cetera, a more -- a bigger menu 12 of services. 13 13588 MR. FRANK: Correct. 14 13589 THE CHAIRPERSON: Which then brings 15 the question of, since we are now looking at -- this 16 policy hearing is to look at Canadian content on 17 television and how to improve it, would, in your view, 18 services with a similar level of Canadian content, 19 could they be licensed and survive on digital delivery 20 only on the short term; or would it require, as some 21 interveners say, an adjusted expectation or level of 22 Canadian content so that they are viable? 23 13590 MR. FRANK: I think it is the latter. 24 It would be -- 25 13591 THE CHAIRPERSON: It would require an StenoTran 2839 1 adjustment. 2 13592 MR. FRANK: Yes, I would think so. 3 13593 THE CHAIRPERSON: In Canadian 4 content, except for maybe the odd service that, 5 especially if it is incremental, to another service 6 where there would not be duplication of costs for the 7 licensee. 8 13594 You were read by Commissioner 9 Pennefather the four aims of this hearing. It is your 10 view that it is so important to be able to compete with 11 incumbent distribution systems, and I guess to want to 12 offer more narrow niche programming than we have, that 13 that -- it weighed against a lowering of Canadian 14 content is worthwhile. 15 13595 MR. FRANK: When you spoke a few 16 minutes ago about an adjustment, I was thinking in 17 terms of revenue adjustment, not in terms of adjustment 18 of Canadian content. I offer no opinion. 19 13596 THE CHAIRPERSON: I see. But the 20 level of revenue is based on the level of expenses. 21 13597 MR. FRANK: Correct. 22 13598 THE CHAIRPERSON: And on the 23 penetration. So we know one factor, at least we can 24 estimate what it is, and it will be low. 25 13599 MR. FRANK: M'hmm. StenoTran 2840 1 13600 THE CHAIRPERSON: Therefore, when you 2 look at expenses, programming expenses, are -- is the 3 major component, especially where we have multiple 4 licensees who can benefit from synergies, et cetera. 5 1440 6 13601 In that case, how would you not think 7 it would also require an adjustment in the level of 8 Canadian content? If the aim will be to adjust 9 expenses so that they are sensible in the light of the 10 revenues you can expect, but yet you want a service 11 that is appealing -- that would be the subscriber's 12 view -- the Commission's view would have to be that 13 there is an acceptable level of Canadian content in it, 14 especially since eventually, as cable eventually does 15 digitize, that service will get a wider penetration. 16 13602 I suppose you can adjust the 17 requirements at the time, but I am wondering, how many 18 DTH subscribers would you think is necessary to have 19 the aim of a high level of Canadian content in it and 20 remain viable? 21 13603 MR. FRANK: Well, there is certainly 22 a challenge there, no question. In such a proposal, 23 there may have to be some compromise with catch-up 24 later on all the way around. In the final analysis, I 25 believe it's preferable to have a Canadian service StenoTran 2841 1 offering primary service to a particular need or genre 2 of programming than simply importing a foreign one. 3 13604 THE CHAIRPERSON: Considering the 4 number of, let me just use the general term, 5 "narrowcast" services that are available when you 6 combine the Canadian licensees with the eligible list, 7 as a marketer do you feel right now that there are 8 certain genres of programming that are so important or 9 requested by a large number of people that that aim of 10 differentiation is a big item in marketing? 11 13605 MR. FRANK: Yes. We believe that 12 niche marketing is going to be very beneficial to us in 13 the future. 14 13606 THE CHAIRPERSON: Because we are 15 getting to super niche really. We have SpeedVision, we 16 have a number of cooking -- I mean are we going to get 17 into niche to the extent that it's now wok cooking or 18 sandwich-making? I am being facetious, but there is a 19 point where the demand for niche services becomes a bit 20 questionable. But you are the one who markets, you 21 think that it matters. I would have thought that the 22 big difference is the ability to package yourself, the 23 subscriber packaging. 24 13607 MR. FRANK: That is a very large 25 element, but -- StenoTran 2842 1 13608 THE CHAIRPERSON: Rather than being 2 offered a package that is preordained by someone else. 3 13609 MR. FRANK: Yes. There is no 4 question about that, but also to be competitive you 5 have to have the popular services and the not so 6 popular services that your competition has. 7 13610 THE CHAIRPERSON: Popular, of course, 8 is in the mind of the beholder. The person who wants 9 SpeedVision for that group or the golf channel, that's 10 popular, but if you measure popular by the number of 11 people who would take it if it were a choice among many 12 other services, it is measured really by viewership and 13 we know that some have very low viewership because the 14 so-called popular niches are being felt. 15 13611 To what extent do you think that a 16 major lift to DTH penetration is having more channels 17 for pay more than having more niche Canadian 18 programming? 19 13612 MR. FRANK: I wouldn't want to -- 20 13613 THE CHAIRPERSON: You may not want to 21 answer this question. 22 13614 MR. FRANK: I will give it a try, but 23 I wouldn't want to cut one off at the expense of the 24 other. Pay TV and movies are very, very important. 25 Sixty per cent of our customers buy pay TV, so it's StenoTran 2843 1 obviously a very popular service. There is no question 2 that every week our CSRs, our customer service 3 representatives, tell us that people want more movies. 4 They want more recent movies. So, there will be 5 pressure to create that window and I suppose as 6 technology improves and we can persuade the Hollywood 7 studios and the Canadian film producers and filmmakers 8 to release the movies earlier, then we will get even 9 more sales. 10 13615 But the other -- what you referred to 11 as niche programming, that's very important, too, 12 because it rounds out our thematic packages. It 13 provides us with a point of differentiation. You talk 14 about SpeedVision. It, in and of itself, is probably 15 not an integral or essential service, but it rounds out 16 our sports bar very, very nicely and it's amazing how 17 many people actually watch it. 18 13616 THE CHAIRPERSON: I suppose, to go 19 back to the pay channels, in the markets that you have, 20 which are the markets that either don't have cable or 21 have cable that is not upgraded sufficiently to satisfy 22 customers, they would be the very areas where the 23 availability of renting movies is very limited. 24 13617 MR. FRANK: Yes. 25 13618 THE CHAIRPERSON: It's either miles StenoTran 2844 1 away or it's only a few shelves. So, that would be a 2 bigger demand than in cities where there is easy 3 availability of wide choice. 4 13619 MR. FRANK: There is that. There is 5 also the digital quality of our delivery system. 6 13620 THE CHAIRPERSON: Yes. 7 13621 MR. FRANK: It's quite phenomenal how 8 many ExpressVu systems go out the door with a very 9 large brand new television set, complete with satellite 10 surround sound. That hasn't been lost on our 11 customers. It's quite impressive. 12 13622 THE CHAIRPERSON: That's another part 13 of the market, I suspect, that in urban areas would be 14 available to you, the video files or people who are 15 interested in new technology. 16 13623 MR. FRANK: And the music services 17 such as Galaxy. They also complement that market very 18 nicely and are very popular. It's a bit of a sleeper 19 service and amazingly popular. 20 13624 THE CHAIRPERSON: I guess these are 21 our questions. Thank you very much, Mr. Frank. 22 13625 MR. FRANK: Thank you. 23 13626 THE CHAIRPERSON: You have to go back 24 into that bad weather now. If anyone I know sees you 25 on the golf course, I will be dubious about -- StenoTran 2845 1 13627 MR. FRANK: Well, one place you won't 2 find me this afternoon is in the lake. 3 13628 THE CHAIRPERSON: You hope. 4 13629 MR. FRANK: Thank you very much. 5 13630 THE CHAIRPERSON: Thank you. 6 13631 MR. FRANK: I may be in the soup, but 7 not in the lake. 8 13632 THE CHAIRPERSON: Madam Secretary? 9 13633 MS BÉNARD: Thank you, Madam Chair. 10 13634 The next presentation will be made by 11 the Canadian Cable Television Association and I would 12 invite Mr. Stursberg and his colleagues to come 13 forward. 14 13635 THE CHAIRPERSON: Good afternoon, 15 Madam Beck, Mr. Stursberg, and colleagues. We will 16 hear your presentation and then we will take our 17 afternoon break, which will make more sense than 18 interrupting the questioning at 3:30. Is that 19 acceptable? Go ahead when you are ready. 20 13636 You are in a good mood, despite the 21 bad weather. 22 PRESENTATION / PRÉSENTATION 23 13637 MR. STURSBERG: Despite the terrible 24 weather. It's actually a remarkably beautiful day. 25 It's a shame to be stuck in here, but there we are. StenoTran 2846 1 13638 It's a pleasure to be back here 2 again. Comme vous le savez, je suis Richard Stursberg, 3 Président de l'Association de télévision par câble. 4 J'ai avec moi cet après-midi, ici à ma gauche, Mr. Fred 5 Wagman, qui préside notre conseil d'administration et 6 qui est président de Regina Cablevision; ici à ma 7 droite j'ai Michèle Beck, qui est vice-présidente, 8 Ingénierie et réglementation, qui est responsable pour 9 les questions techniques chez nous. 10 13639 A l'arrière, j'ai Jay Thomson, qui 11 est notre avocat responsable pour les questions 12 juridiques dans le domaine de la radiodiffusion, et 13 aussi avec nous Dave Watt, qui est vice-président 14 principal responsable pour les questions économiques. 15 13640 Perhaps I will begin by just passing 16 the microphone to Mr. Wagman. 17 13641 MR. WAGMAN: Thank you, Richard. 18 13642 Over the past 40 years the Canadian 19 broadcasting system has developed into one of the 20 strongest and most diverse systems in the world. In 21 initiating this proceeding, the Commission has 22 acknowledged that some adjustments may be required to 23 the existing regulatory framework to "ensure that all 24 players have the ability to adapt to a changing 25 environment characterized by new opportunities, new StenoTran 2847 1 competitors, new corporate structures and new national 2 and international opportunities". Certainly, we agree. 3 13643 To date at this hearing, you have 4 heard from numerous parties who have offered their 5 comments and suggestions respecting how the framework 6 and the rules for Canadian content should be changed or 7 adjusted or tinkered with. For the most part, their 8 comments have focused on the details of those suggested 9 changes and the impact their proposals would have in 10 the near term. 11 13644 Given our role in the system as 12 distributors rather than producers or broadcasters, we 13 would like to take a different approach. We would like 14 to take this opportunity to outline for you a broader 15 and more long-term perspective on where the system is 16 going and what it will take to get there. The future 17 holds many challenges for producers, broadcasters and 18 distributors, challenges we all must meet if we are to 19 maintain and build upon the strengths of our Canadian 20 system. 21 13645 It is clear to us that the future for 22 the Canadian broadcasting system and, therefore, for 23 Canadian programming is digital. In our specific case, 24 it's digital distribution. Digital distribution will 25 open up a host of new opportunities for Canadian StenoTran 2848 1 programmers and make possible a wide array of new and 2 exciting services for Canadian consumers. As an 3 industry, we are excited about the possibilities that 4 digital will create and fully embrace the movement to a 5 digital world. 6 13646 Among other things, digital will help 7 us increase channel capacity so that there will be room 8 for many new services. Since its inception, the cable 9 industry has looked for ways to increase bandwidth in 10 order to offer consumers more and more programming 11 options. In the analog world over the last three 12 decades, the cable industry has spent billions of 13 dollars on network rebuilds to increase its capacity 14 from 12 analog channels to the current 70 to 80 15 channels now available in most urban systems. 16 13647 In this decade alone, the larger 17 systems have grown from an average of 45 analog 18 channels to 73 channels, more than a 60 per cent 19 increase. With digital, we will have the tools not 20 only to continue these efforts, but to vastly expand 21 upon them. 22 13648 Digital will be terrific for Canadian 23 consumers. As the Commission well knows, our customers 24 have long been frustrated by their inability with 25 current technology to exercise real choice over their StenoTran 2849 1 programming options. Our competitors who have the 2 benefit of starting their business in digital are in 3 many ways focusing on this frustration in their 4 marketing plans. We, too, want to offer consumers the 5 control and the choices they are demanding. Digital 6 will allow us to do so. 7 13649 Digital distribution technology, 8 however, will be more than a channel expander. While 9 that, together with its navigational capabilities, are 10 currently its main selling points, in the near future 11 it will mean much, much more. With the OpenCable 12 digital system, now under development by CableLabs in 13 Colorado and expected to be available some time late 14 next year, the cable industry will soon be poised to 15 also offer exciting cost-effective interactive 16 services, such as enhanced video, video-on-demand, 17 streaming video applications, the Internet, IP Voice, 18 video telephony, and advanced transaction-based 19 services. 20 13650 Digital distribution technology will 21 provide important and sustaining benefits not only for 22 consumers but for the entire Canadian broadcasting 23 system. It will open the door to a variety of new and 24 innovative Canadian programming services. These 25 services will, in turn, create numerous new StenoTran 2850 1 opportunities for independent producers and for 2 Canadian creators, performers and technicians. 3 13651 Richard? 4 13652 MR. STURSBERG: At the same time, it 5 is clear that the movement to digital will present many 6 challenges and bring with it many new risks. At the 7 Cable Television Association we have spent a great deal 8 of time exploring the economics of the transition to 9 digital. The economic models we have filed with you 10 show that there are significant hurdles which we must 11 first overcome if we are ever to realize the potential 12 which digital represents for the Canadian broadcasting 13 system. 14 1455 15 13653 For example, a key issue in 16 introducing digital is where to find the necessary 17 analog channels to digitize. Most observers are quite 18 clear that they will have to come from the channels 19 that are currently offered as premium services through 20 the analog descramblers -- the analog boxes that are 21 currently on your television sets for the Pay services. 22 Once the premium service is digitized, say, for 23 example, at an 8:1 ratio, it will leave one digital 24 channel for the original service, that was on there 25 right now, say, for example, the Movie Network, and StenoTran 2851 1 another seven for new services. The analog descrambler 2 box is then replaced with a digital one, so that the 3 customer can continue to receive the premium service. 4 13654 We estimate that the exchange of 5 existing analog set-top units for currently available 6 digital terminals would cost $225 million in the first 7 year. To break-even, the industry will have to double 8 the current penetration of set-top units from 9 per 9 cent to about 18 per cent. It is only the addition of 10 new premium customers providing new revenue streams 11 that will make the launch of digital service 12 economical. 13 13655 In effect, what we have to do is we 14 swap out the existing analog boxes. That gives us 9 15 per cent now digitized to the base. We then have to 16 grow. We have to in effect double the number of 17 subscribers who are taking digital, to be able to make 18 the entire proposition break even. So the question is, 19 what are they actually going to take? 20 13656 As Fred said, we as an industry are 21 committed to embracing the world of digital. We both 22 want to do it and, to be perfectly frank, we have to do 23 it. As Chris Frank was mentioning to you earlier on, 24 it's a good thing that there are digital competitors 25 out there. It will force the cable industry to move StenoTran 2852 1 digital to digital, frankly whether we wanted to or 2 not. Since our digital competitors can offer their 3 customers the choices and control and the navigational 4 capabilities that digital offers, we must be able to do 5 the same thing. 6 13657 But the key questions are: Can we 7 double the current penetration of the set-top boxes? 8 Will new premium customers sign up? 9 13658 Presumably they will only do so if 10 there are attractive new services available. And yet, 11 we seem to be reaching the outer limits of demand for 12 new services. What we are finding is that the number 13 of customers taking each additional tier of new 14 channels has been shrinking. 15 13659 For example, the first tier in 16 English Canada is taken by approximately 85 per cent of 17 our basic service customers. The second tier, however, 18 has only about 65 per cent of this base, and we 19 estimate that the third tier, launched about a year 20 ago, will ultimately achieve a penetration in the mid 21 50 per cent range. 22 13660 The significance of this for digital 23 is that we will be required, as I said earlier, to 24 double our penetration of set top boxes to make the 25 economics for digital work, both for us and the StenoTran 2853 1 programming services, but we will be required to do so 2 in an environment where demand for new services appears 3 to be waning. 4 13661 Faced with these challenges, we all 5 have to recognize that this will be a very risky 6 business, for both us and the services. It will 7 require significant up-front investments, with no 8 guaranteed returns. 9 13662 Now, some people may be of the view 10 that, as we move from simple digital channel expanders 11 to OpenCable set-top boxes, the economics will be 12 better and the risks will be reduced. We certainly 13 hope this is going to be the case, but we really don't 14 have any way of knowing at this stage, since the costs 15 of the OpenCable boxes, their final functionality and 16 the new revenue streams that they may develop are still 17 unknown. When we have this information, we will 18 revisit our economic models, but we can't do it yet. 19 Nevertheless, even to the extent that the OpenCable 20 set-top boxes do improve the economics for us, with new 21 services and new revenue streams, even in the best of 22 all possible worlds, this will be a very tricky and 23 risky business both for us and for the new services. 24 13663 So what do we need? We need players 25 in the market and in the business who are both willing StenoTran 2854 1 and able to take on these risks, and to do so for more 2 than just the short term. 3 13664 L'industrie s'oriente déjà dans ce 4 sens sur la scène internationale. Des entreprises 5 médiatiques qui ont des intérêts dans le secteur de la 6 distribution, comme TCI et Time Warner aux États-Unis, 7 se réorganisent et consolident leur position, en 8 intégrant leurs activités. Elles évitent les risques 9 que pose la transition au numérique en tirant partie 10 d'événements d'actifs existants, tels des services de 11 programmation actuels, plutôt de créer de nouveaux 12 services de toutes pièces. Elles amortissent ces 13 risques en faisant appel à leur propre infrastructure 14 réseau pour offrir leurs nouveaux services et elles 15 acceptent ces risques, parce que la création de 16 services et le lancement de canaux câblodistribués 17 analogiques, au fil des années, leur ont appris à 18 prendre des risques et comment les prendre. 19 13665 Dans notre mémoire, nous exhortons le 20 Conseil à encourager la croissance de grandes 21 entreprises médiatiques canadiennes actives dans les 22 domaines à la fois de la production et de la 23 distribution d'émissions. L'allégement des 24 restrictions visant l'intégration verticale et 25 horizontale inter-médias mettra à la portée du système StenoTran 2855 1 canadien de radiodiffusion des ressources financières 2 qui profiteront à la programmation canadienne. 3 13666 La combinaison du plus grand nombre 4 d'activités possibles des domaines de la production, de 5 la commercialisation et de la distribution d'émissions 6 canadiennes permettra en effet des économies d'échelle 7 et de diversification. 8 13667 Nous savons que le Conseil, comme Mme 9 Pennefather a noté, a introduit une autre instance qui 10 portera sur le cadre de réglementation des services 11 numériques et que l'examen en cours ne constitue donc 12 pas le contexte dans lequel se pencher sur les 13 préoccupations que notre plaidoyer en faveur de 14 l'intégration verticale et du regroupement peut faire 15 naître à l'égard des transactions intéressées, par 16 exemple. Nous sommes certes disposés à étudier ce 17 genre de préoccupations, dans la mesure où elles 18 demeureront valables dans un monde numérique, dans le 19 cadre de cette deuxième instance. 20 13668 Toutefois, ce sur quoi nous 21 souhaitons attirer votre attention aujourd'hui c'est 22 qu'il est clair que les défis que suppose 23 l'implantation des techniques qui paveront la voie à 24 une croissance continue des nouveaux services canadiens 25 sont considérables. Il est par ailleurs manifeste que StenoTran 2856 1 la création du contenu et sa distribution aux 2 téléspectateurs et téléspectatrices canadiennes sont 3 des activités interdépendantes. 4 13669 Par conséquent, pour être en mesure 5 de tirer avantage des débouchés qui s'ouvrent, sur la 6 scène internationale et nationale, et assurer la 7 prestation de services numériques canadiens novateurs 8 et attrayants, il est primordial que les entreprises 9 canadiennes puissent se prévaloir des économies et 10 synergies à la disposition de leurs pendants à 11 l'étranger. 12 13670 Dans un milieu où la croissance 13 s'avive chaque jour, sur le marché national comme 14 international, il faut savoir tirer parti de ce que 15 nous avons accompli pour relever les nouveaux défis et 16 exploiter les débouchés qui s'ouvrent. La conversion 17 au numérique est un impératif pour la câblodistribution 18 et la croissance à venir des services de programmation 19 canadiens. 20 13671 Voilà. Il nous fera plaisir de 21 répondre à vos questions, après la pause, si j'ai bien 22 compris. 23 13672 LA PRÉSIDENTE: Vous apprenez vite, 24 Monsieur Stursberg, plus vite que M. Macerola avec son 25 micro hier. StenoTran 2857 1 13673 Nous prendrons une pause de 2 15 minutes. Nous reviendrons donc à 3 heures 20. We 3 will take a 15-minute break, until 20 after 3. 4 13674 It may be a good time to remind 5 parties that we are resuming at 11:00 on Monday, and 6 that we are not sitting on Tuesday, and will be back on 7 Wednesday morning at 9:00. 8 --- Short recess at / Courte suspension à 1505 9 --- Upon resuming at / Reprise à 1525 10 13675 THE CHAIRPERSON: Welcome back. 11 13676 Commissioner Pennefather, please. 12 13677 COMMISSIONER PENNEFATHER: Good 13 afternoon, again. 14 13678 I have a few questions, and I would 15 like your help in understanding some of the digital 16 game plan you have presented. 17 13679 My first question is on your written 18 submission. 19 13680 The thesis of the market-driven 20 approach uses the term giving you a free rein in 21 several instances, and we will come back to that. But 22 could you clarify for me: On one page it is spelled 23 r-e-i-g-n, and on the next page it is spelled r-e-i-n. 24 13681 Are we riding a horse or are we 25 genuflecting to the Queen here? StenoTran 2858 1 13682 MR. STURSBERG: It was a mistake. It 2 was actually a meteorological observation; it should 3 have been spelled r-a-i-n. 4 13683 COMMISSIONER PENNEFATHER: Sorry, I 5 didn't mean to rain on your parade. 6 13684 We may come back to the point, but I 7 think it is, in all seriousness, key to my question. 8 13685 Could you start by going through 9 again the box story. If I understand it, the steps 10 that you have decided on are to replace the analog box, 11 at a cost of some $225 million, for a digital box. And 12 to do so, you need to double your subscriber base. 13 13686 When these pay boxes are available, 14 what will you be able to offer? Will you be able to 15 offer high definition programming on these pay boxes? 16 13687 In your written submission, on page 17 28, you say that good programming will drive the 18 penetration of the set-up boxes; in other words, 19 doubling the subscriber base, I assume you mean, is 20 going to need good programming. 21 13688 Where is this programming going to 22 come from, especially if it is high definition 23 programming? 24 13689 MR. STURSBERG: First of all, with 25 respect to high definition programming, the digital StenoTran 2859 1 boxes that exist right now will not carry HDTV. 2 13690 One of the things that we have been 3 working on -- when I say "we", what I mean is 4 CableLabs. Let me just back up. 5 13691 CableLabs is an industry R&D 6 consortium that was set up a number of years ago to 7 focus all the work of the cable industry throughout 8 North America. So all of the large MSOs, both in the 9 United States and in Canada, are members of CableLabs. 10 13692 Over the course of the years, they 11 have been working on essentially these kinds of 12 technical problems. It is at CableLabs right now that 13 the whole standardization of high speed modems and the 14 evolution of the digital set-tops for television sets 15 and the open cable initiative are being organized and 16 being managed. 17 13693 The digital boxes that exist at this 18 moment will not carry high definition television. It 19 is a standards issue between the broadcasting 20 over-the-air technologies and the box as it currently 21 is formulated. 22 13694 Obviously, one of the things that is 23 going to have to be done is the boxes are ultimately 24 going to have to carry high definition television. And 25 they will. But we are not there yet. StenoTran 2860 1 13695 The bigger issue, however, is not a 2 technical issue, I think. The bigger issue is slightly 3 different, and it is this: High definition television 4 takes a very large amount of capacity, because it 5 carries a very large amount of information. 6 13696 Typically, we think that it will 7 require approximately half an existing analog 8 channel -- and Michelle will correct me when I get this 9 wrong. It will require approximately half an existing 10 analog channel. So whereas I was talking about 8-to-1 11 conversion compression ratios in my opening remarks, at 12 best you will be able to get a 2-to-1 compression ratio 13 to be able to insert a high definition television 14 signal. 15 13697 The difficulty, however, is as 16 follows: If you say, for the purposes of argument, 17 that we have ten channels available on the box right 18 now, and let's say for the purposes of argument we are 19 going to have ten -- say they are all full. So we 20 compress at an 8-to-1 ratio. That would generate 80 21 digital channels; ten of which we would need for the 22 ten existing channels, plus an extra 70. 23 13698 If we took those 70 -- and bearing in 24 mind that actually we would need about three or three 25 and a half of each of those to carry a high definition StenoTran 2861 1 channel -- you could not put more than, say, 15 or 20 2 high definition channels into the 70 that are 3 available. 4 13699 The problem is that a lot of the 5 broadcasters are going to say: "Well, I have made the 6 investment into the conversion. I now want you to 7 carry me on HDTV." 8 13700 I presume that that will be true of 9 the over-the-air broadcasters. People will say that 10 you should be carrying the American broadcasters on 11 HDTV. The specialties will be saying: "You should 12 carry us on HDTV." And so on and so forth. Everybody 13 is going to want this. 14 13701 You can see that if you are 15 carrying -- right now, we carry about 70 or 80 16 channels. But if you had to carry all of them on HDTV, 17 and you get a 2-to-1 compression ratio, it would take 18 40 channels to carry all that. 19 13702 But in fact the maximum number of 20 analog channels we would have liberated, using the 21 numbers that I was just talking about, would have been 22 nine. So we can't squeeze them all in. We simply 23 can't squeeze in all those HDTV channels if we did it 24 that way. 25 13703 The question that we are going to StenoTran 2862 1 have to face at a certain point is: If we took all 2 that capacity that was liberated -- even if we used it 3 all, we couldn't carry everybody on HDTV because you 4 are going to have to continue to carry them on analog 5 as well, obviously. 6 13704 Then what happens is that you have a 7 question to answer, which is: What do we do? Do we 8 put in new specialty services of one variety or 9 another? Or do we take the existing ones and put them 10 in HDTV? 11 13705 The issue, I guess, is going to come 12 down to something like this: What do you think the 13 drivers for the box are? Do you think that people will 14 spend money to buy boxes in order to be able to get 15 HDTV versions of what it is they are already getting on 16 analog? I doubt it. 17 13706 COMMISSIONER PENNEFATHER: Is it your 18 thesis then -- and correct me if I am wrong -- that you 19 are going straight through to the open cable box so 20 there is incentive to buy? 21 13707 Have I understood that correctly? 22 13708 MR. STURSBERG: I don't think so. 23 The open cable box does not change the trade-off 24 between capacity taken for HDTV versus capacity taken 25 for other kinds of new digital services. It does not StenoTran 2863 1 change that. 2 13709 The only way in which we could do it 3 would be that we would actually have to build more 4 analog capacity, which we would then digitize and then 5 use that extra analog capacity for the purposes of 6 carrying HDTV. It is the only way you could do it. 7 13710 One of the fundamental things about 8 digital that I think people sometimes become a little 9 confused about is that to make digital, as we were 10 pointing out in our remarks, you have to have analog. 11 You harvest the analog channels literally to make the 12 digital channels. 13 13711 So the amount of digital you can make 14 is completely a function of how much analog you can 15 free up. That is the problem. The digital capacity is 16 limited to the amount of analog that you can actually 17 free up for the purpose. 18 13712 Having freed it up, you then have the 19 choice: What do you want to do with it? Do you want 20 to put HDTV signals into it? Do you want to put in new 21 Canadian specialty services? Those are the kinds of 22 questions you have to ask yourself. 23 13713 The fact is that to build analog 24 channels is a hugely expensive proposition. Your own 25 numbers estimate that for us to build one new analog StenoTran 2864 1 channel and maintain it for the year costs, on an 2 ongoing basis, $15 million a year. It is a very 3 expensive proposition. 4 13714 So all these kinds of cost trade-offs 5 are what is involved in our thinking about the 6 relationship between building new analog channels, 7 digitizing them and what we put on to them as we go 8 forward. I think we have to see this against the 9 backdrop of what it is that people are actually going 10 to want to buy. 11 13715 At the end of the day, we can put a 12 digital box into somebody's house. But there is no 13 interest unless they can get new services that they 14 could not otherwise get. 15 13716 COMMISSIONER PENNEFATHER: Is that 16 what you think will drive the system: new services 17 that they could not get before? 18 13717 MR. STURSBERG: Yes. 19 13718 COMMISSIONER PENNEFATHER: Is this 20 what you mean by good programming? 21 13719 MR. STURSBERG: Absolutely. Nobody 22 buys a cable because they like beige wires. They buy 23 cable television because they like the services they 24 can get. Nobody buys little boxes to put on their TV 25 sets because they like boxes. They buy them for the StenoTran 2865 1 services they can get. 2 13720 The reason that people will subscribe 3 to digital television and be prepared to pay the extra 4 money is because they are getting services that are so 5 attractive and so interesting that they could not 6 otherwise get. 7 13721 COMMISSIONER PENNEFATHER: How long a 8 period of time are we talking about here, where you are 9 doing this conversion? 10 13722 I think you are aware of our exchange 11 at this time last week -- actually a little earlier in 12 the day -- with Mr. McEwen and Mr. Sward regarding what 13 appears to be a waiting game in terms of the 14 broadcasters advancing the conversion to digital and 15 the fact that the broadcast community is very dependent 16 on cable and the process that you are undertaking to 17 ensure that Canadians can access this digital 18 programming. 19 13723 What kind of timing are we talking 20 about here? 21 13724 MR. STURSBERG: This is what I think 22 the timing is, and this is how I think it will 23 unfold -- but who knows. As I say, it is very 24 difficult to cost technology and revenue tradeoffs. 25 13725 The Shaws have already digitized, and StenoTran 2866 1 they have used the kinds of boxes that are already on 2 the market. They are called channel expansion boxes -- 3 and we can talk, if you like, about why they did that 4 and some of the others have not yet. 5 13726 The plan for the other cable 6 companies is that they will put in open cable boxes. 7 The current estimate is that open cable boxes will be 8 available commercially at the end of 1999. 9 13727 So if you say all of the other cable 10 companies are going to follow the same path, they are 11 going swap out their analog boxes. They would do that, 12 for the purposes of the argument, in the year 2000. At 13 that point you would have a situation where 9 percent 14 of the Canadian population roughly -- it varies a 15 little bit from system to system; but say 9 percent of 16 the Canadian population -- will all have digital boxes. 17 13728 Those digital boxes, if we just ran 18 with the numbers I was talking about -- and say you 19 have, on average, ten analog channels that are being 20 harvested and you have 8-to-1 compression ratios, you 21 would have 70 digital channels available to fill. 22 13729 So you would say to yourself: What 23 are we going to put into those 70 digital channels that 24 is likely to be sufficiently attractive by way of new 25 programming services that it will allow you to pull the StenoTran 2867 1 boxes up to the 18 percent test level? 2 13730 The 18 percent level is not a level 3 where you want to finish obviously. That is just the 4 level at which we break even. 5 13731 COMMISSIONER PENNEFATHER: Right. 6 What is your answer to that? 7 13732 MR. STURSBERG: I think the answer to 8 it is that we don't altogether know. What we do know 9 is that there is demand for some kinds of services. As 10 Chris Frank was saying, we think that VOD is going to 11 be probably a very important service. 12 13733 That will take about three channels, 13 Michelle? 14 13734 MS BECK: Three to five. 15 13735 MR. STURSBERG: Three to five. The 16 trick with VOD is -- 17 13736 It is attractive because it is like 18 renting something from a video store. You can get it, 19 rewind it, fast forward it, get it whenever you want. 20 13737 I personally think that the real 21 trick to VOD will be when you can actually move the 22 release windows so that you can get the releases at the 23 same time as the video stores do. If you could do 24 that, then I don't think there is any doubt that VOD 25 would be a killer application. That would be one StenoTran 2868 1 thing. 2 13738 I think it is probably true that some 3 of what people have called ethnic channels will be also 4 big draws in limited sorts of ways. 5 13739 For example, all Chinese channels -- 6 there are a number of them that have already been 7 licensed: all Greek channels, the South Asian 8 channels, and whatnot will be important. 9 13740 But beyond that, it is difficult to 10 say. Part of the problem I was talking about earlier 11 is that we seem to be in a situation of decreasing 12 demand for new -- if I can put it this way -- 13 conventional specialties. 14 13741 COMMISSIONER PENNEFATHER: Let's talk 15 about programming. You have on page 4 defined quality 16 programming, which you said on page 28 of your 17 submission is what will really drive the penetration of 18 the boxes. 19 13742 You define quality as: 20 "...programming that both has 21 high production values and is in 22 high demand by consumers." 23 13743 MR. STURSBERG: Right. 24 13744 COMMISSIONER PENNEFATHER: Perhaps 25 VOD eventually, but that does not describe the niche StenoTran 2869 1 programming you just tabled. 2 13745 MR. STURSBERG: No. 3 13746 COMMISSIONER PENNEFATHER: Let me get 4 to the point here. Don't you think that at about this 5 time the pressure from your subscribers will be to 6 carry U.S. digital signals, and that the kind of 7 production values and high demand will be ready to go 8 from American services? 9 13747 Is this not what is going to possibly 10 drive the penetration of digital boxes, in your mind? 11 13748 MR. STURSBERG: Perhaps I could make 12 a couple of points. 13 13749 I assume here we are putting to one 14 side the issue of HDTV -- which we can come back to 15 again, if you would like to. 16 13750 COMMISSIONER PENNEFATHER: Yes, I 17 would, just so that we are clear about digital services 18 and then HDTV as a special case. I will want to talk 19 about that. 20 13751 MR. STURSBERG: Well, doubtless there 21 will be American channels that will be attractive 22 channels. 23 13752 One of the big advantages that the 24 Americans have right now is something else we have 25 alluded to in our brief, which is that they have been StenoTran 2870 1 over the course of the last number of years assembling 2 themselves into very large, very sophisticated, highly 3 integrated media conglomerates. 4 1540 5 13753 What that does is it allows them to 6 do certain kinds of things that are more difficult to 7 do in Canada. It allows them in fact to handle much 8 higher levels of risk. I mean, they face the same kind 9 of problems in terms of launching digital channels in 10 the United States as we do here. 11 13754 They are inherently very, very risky. 12 Everybody is a little bit unclear as to what's going to 13 work and what's not going to work. The Americans are 14 in a position, there's no doubt about it, to take 15 greater risks than we are, partly because of their size 16 and partly because of their media structure. 17 13755 What they will do is they will do a 18 lot of experiments. They will try things, see if they 19 work. If they don't, they will give them the hoof and 20 start new things. That's what's going to be going on. 21 They are going to lever off their existing channels so 22 that, you know, as I think Commissioner Wylie was 23 pointing out, they will start with one base channel, 24 not unlike what Discovery is starting to do in the 25 United States right now, and they will split out of StenoTran 2871 1 Discovery a whole series of niche channels, you know. 2 13756 Instead of animal plant, they will 3 have insect world and fish world and so on and so 4 forth. These channels will be relatively inexpensive 5 because they are levering off the existing 6 infrastructure base of the existing channel. 7 13757 Many of the larger companies, Time 8 Warner, TCI, et cetera, et cetera, can handle the risks 9 associated with starting up those new channels partly 10 because they own cable infrastructure. The risks 11 associated with launching a channel off of your own 12 infrastructure are less than -- you can internalize the 13 risks to a large extent -- are less than they would be 14 otherwise. 15 13758 I think it's true to say, as you 16 point out, that the Americans certainly will be at an 17 advantage in terms of developing digital channels. 18 13759 Our own feeling is if we are going to 19 keep pace with this and ensure that there are Canadian 20 digital channels that will be sufficiently attractive, 21 we are going to have to move a little bit in the 22 direction of the Americans. I personally think that 23 our problem in a digital world is going to be very 24 different from our problem in an analog world. 25 13760 In an analog world with the existing StenoTran 2872 1 access rules, you license a channel and it's boom, they 2 get on immediately. They have a guaranteed revenue 3 stream. They go black in many cases in terms of their 4 financials within the first six to nine months. These 5 are like little gold mines. 6 13761 In a digital world, it's a different 7 proposition altogether. I think John Cassaday was 8 saying the other day when you launch into a $500,000 or 9 $600,000 universe -- 500,000 or 600,000 subscriber 10 universe, you have a completely different problem on 11 your hands. There are no guarantees any more. It's 12 highly risky. 13 13762 Our difficulty is going to be not to 14 keep people off. Our people is going to be how do we 15 get people encouraged sufficiently that they will be 16 prepared to take the risks associated with launching 17 Canadian digital channels. That is going to be our 18 challenge. 19 13763 I really believe that as we think 20 about the transition that is taking place in the 21 Canadian broadcasting industry, we have to understand 22 that there is a huge divide that separates us from the 23 old world of analog and the new world of digital, that 24 the new world of digital is a world of much smaller 25 numbers. It's a world of much higher risk. It's a StenoTran 2873 1 world in which there is a genuine chicken and egg 2 problem. 3 13764 How do we get boxes out there if 4 there aren't new services and why would new service 5 people launch if we only have a 9 per cent base to 6 launch into? So when we talk about all of these 7 problems and we compound it with the fact, as you point 8 out, that the Americans have much greater capacity to 9 finance and take risks associated with these new kinds 10 of channels, we face a kind of watershed shift in a 11 way, I believe, that we have to start thinking about 12 digital services and the emergence of new Canadian 13 digital services. 14 13765 COMMISSIONER PENNEFATHER: Okay. 15 Remembering too your own comments this morning about 16 what we will reserve for other discussions -- 17 13766 MR. STURSBERG: Sure. 18 13767 COMMISSIONER PENNEFATHER: -- if we 19 take what you just described and now we go to one of 20 the other theses in your papers, for example in the 21 written submission, page 4, let's look at the distinct 22 Canadian market in light of this and keep our remarks 23 to some alternatives that we have been using 24 traditionally in this country and see how this digital 25 story works through. StenoTran 2874 1 13768 MR. STURSBERG: Yes. 2 13769 COMMISSIONER PENNEFATHER: At the top 3 of the page you say the three key mechanisms now in 4 place for defining a Canadian market which you have 5 previously noted is key. 6 13770 MR. STURSBERG: I'm sorry, are you in 7 the brief? 8 13771 COMMISSIONER PENNEFATHER: I am in 9 the written submission. 10 13772 MR. STURSBERG: Oh, the written 11 submission. I'm sorry. 12 13773 COMMISSIONER PENNEFATHER: Page 4. 13 13774 MR. STURSBERG: Yes. 14 13775 COMMISSIONER PENNEFATHER: The top of 15 the page. 16 13776 MR. STURSBERG: Yes. 17 13777 COMMISSIONER PENNEFATHER: It's a 18 point you repeat quite frequently in your written 19 submission. 20 13778 MR. STURSBERG: Yes. 21 13779 COMMISSIONER PENNEFATHER: 22 "Canadian content requirements, 23 access rules and controlled 24 admission of foreign services -- 25 should be applied so as to StenoTran 2875 1 strengthen the development and 2 viewing of Canadian programs." 3 13780 In your view: 4 "-- this result is most likely 5 to occur when market forces work 6 to achieve the best possible fit 7 between the demand of Canadian 8 consumers and production and 9 distribution of Canadian 10 programming." 11 13781 This market driven approach which is 12 fundamental to this presentation is expressed this way 13 here: What does "when market forces work" mean? What 14 are you asking for? 15 13782 MR. STURSBERG: Again, I want to 16 distinguish, and you will have to stop me if you think 17 I am talking too much about upcoming hearings, but in 18 your public notice calling this hearing, you ask for 19 people to talk about where they thought the broadcast 20 system was going and what were the fundamental, 21 economic and technological forces that were driving the 22 change. 23 13783 What we have done in our brief is we 24 have said quite clearly that we really believe that 25 there really are two worlds, as I was saying before. StenoTran 2876 1 There is the existing analog world. 2 13784 The Commission and the government 3 over the last 30 years has done a very good job. We 4 don't propose that you change any of those rules. We 5 think that the rules as they currently stand are by and 6 large very good. Tiering and linkage, authorized 7 service lists, Canadian content rules, et cetera, et 8 cetera. 9 13785 What we think you have to do, though, 10 as you think about where you are going is you have to 11 look at the level of risk associated with the new 12 digital world. 13 13786 When we say market based what we mean 14 is that the test as to whether a service succeeds or 15 fails in the new world must be a test that is uniquely 16 in the hands of Canadian customers, not in the hands, 17 frankly, of the regulator or of the cable company, that 18 the test of whether this is going to work, whether we 19 are actually going to be able to get services out there 20 that are attractive enough to drive the digital box is, 21 at the end of the day, going to be based on really 22 whether we like it or not, what it is that Canadian 23 customers are prepared to buy. 24 13787 We have some other ideas on this 25 subject that we are going to be talking to you about in StenoTran 2877 1 the next hearing, so I will not try to anticipate them 2 too much. We have said that one thing that we believe 3 is absolutely fundamental here is to allow for the 4 evolution of larger Canadian companies that can manage 5 that kind of risk, this is sort of the sine quo non of 6 being able to do this, that can manage that kind of 7 risk and that have a sufficient number of different 8 kinds of properties altogether that they can maximize 9 the economies associated with the production and 10 distribution of content. 11 13788 All we are saying here is it's a 12 different world, you are going to have to have much 13 stronger Canadian companies out there. Those companies 14 have to be able to manage that kind of risk if they are 15 going to compete effectively with the Americans. 16 13789 We recognize, I think, that in 17 putting this together you obviously have to do so in a 18 way that limits any forms of self-dealing. I know 19 there have been some preoccupations expressed by 20 various parties about self dealing. 21 13790 The good news is, I think, that in a 22 digital world, self dealing, and here I will only speak 23 about cable versus services as opposed to the other 24 forms of self dealing that have been discussed before 25 the Commission over the last little while -- the good StenoTran 2878 1 news is that in a digital world, self dealing questions 2 become much less severe. 3 13791 The reason they become much less 4 severe is precisely because it will be hard to 5 encourage companies to actually launch services in 6 those very restricted environments. 7 13792 As I was saying earlier, our problem 8 is not going to be a problem of saying we don't have 9 enough capacity, you can't get on. Our problem is 10 going to be the reverse problem. We are going to say 11 we have got 70 channels that we have to fill, will you 12 please launch a service and get on. 13 13793 If we launch services that we own of 14 our own under those circumstances a number of things 15 happen. (a) it certainly doesn't consume all the 16 capacity, but (b) what it does it ensures that 17 sufficient services get launched, that there may 18 actually be a chance to grow the box base to make it 19 big enough by way of a market that others will be 20 incented to launch too. We have to figure some way, in 21 other words, of breaking out of the chicken and egg 22 problem associated with boxes and services. 23 13794 The other thing that's different 24 about a digital world under those circumstances is, of 25 course, like channel placement issues kind of go away. StenoTran 2879 1 There are no real channel placements in a digital 2 world. There's no, you know, basic tier with low level 3 numbers. There's just channels. You can assign 4 whatever number you want to those channels on the basis 5 of your own personal preferences and code them in that 6 way round. 7 13795 A lot of the concerns that people 8 have had in the past are kind of irrelevant. When we 9 look forward into that kind of world, we think that 10 what will be required is a shift in the way in which 11 the Commission begins to think about these questions 12 with less of a focus on the details of the regulations 13 on this and that, as we have done traditionally in the 14 analog world, and more of a focus on ensuring that 15 market forces operate and the absolute sine quo non of 16 that being to make sure that we can build companies in 17 this country that are as sophisticated and as well 18 organized as what the Americans are doing. 19 13796 COMMISSIONER PENNEFATHER: Okay, but 20 you keep going to this one theme. I would like you to 21 talk some alternatives to that. 22 13797 I am confused when you say that you 23 support a framework as it is. If I listened carefully, 24 I heard you backing away from a regulatory framework 25 which would support, for example, Canadian content StenoTran 2880 1 requirements. 2 13798 The world that I heard you 3 describing, the digital world, would be one which I 4 would assume would place even greater demands on us for 5 Canadian content and support for Canadian programming. 6 I take then that you still agree that expenditure 7 requirements and exhibition requirements are crucial to 8 a distinctive Canadian market and that the free rein 9 perpetuates in fact greater choice for Canadians as 10 opposed to less choice in which we find Canadian 11 choices. 12 13799 MR. STURSBERG: I thought I was 13 actually saying something which went like this, that in 14 the analog world, the rules that have been established 15 have been very successful. That was a world in which 16 there was, if you will, abundance of product supply and 17 scarcity of channels. 18 13800 As we move into a digital world, we 19 have a different problem. We have relative abundance 20 of channel supply, of capacity supply, and scarcity of 21 product. When we ask ourself the question as Canadians 22 "How do we want to cope with what amount to sort of an 23 inversion of the way we have thought about things in 24 the past", I say we have to think about them in a novel 25 fashion, looking forward. StenoTran 2881 1 13801 If we want to have Canadian services 2 that are going to be attractive enough to drive a box, 3 then we are going to have to build the services here. 4 Two questions. 5 13802 One, who builds them? I think the 6 answer we have given in our brief is they are only 7 likely to get built by relatively large companies 8 prepared to take substantial risk. 9 13803 Question No. 2, as we grow them, how 10 do we reflect the requirements associated with being 11 able to assure that there is lots of Canadian content 12 on those services. 13 13804 I think candidly we will have to 14 begin to imagine a world in which we say the following. 15 We recognize the risk associated for people launching 16 services in small environments, 500,000 subscribers to 17 begin with, 9 per cent box penetration. We will reward 18 you for taking the risks. What we will say to you is 19 when you launch to begin with, the amount of expense 20 and cost that we are going to build into your business 21 plan is going to be as small as we can make it. As 22 your revenues increase, we will expect you to do more 23 and more by way of Canadian content. 24 13805 What we can do is we can create a 25 situation where Canadian services can flourish, StenoTran 2882 1 recognizing the financial difficulties they are going 2 to have at the beginning until we can get more and more 3 boxes and a bigger and bigger digital universe. As the 4 universe gets bigger and as the revenues of the 5 services increase, we will say in fairness now, you are 6 in a position to do it, you should put more into the 7 system. 8 13806 It's a different way of thinking 9 about the way in which you grow Canadian services and 10 you grow Canadian content on those services, but I 11 really do think we are going to have to shift our 12 mindset a little bit to recognize the risk problem I 13 have been describing. 14 13807 COMMISSIONER PENNEFATHER: We did 15 speak to another player in the digital business 16 earlier. It seems to me we are also talking about a 17 situation where you really have put your finger on the 18 cable industry's role in bringing digital services to 19 Canadians and it is not the only view and perspective 20 from which we should be looking at Canadian programming 21 and its growth in the next century whether it's 22 delivered to us by digital mechanisms, by your digital 23 mechanism or not. 24 1555 25 13808 So my concern is, indeed, the StenoTran 2883 1 resources that these systems, inclusive of the cable 2 systems, will provide to the development of Canadian 3 programming, and that many of the players who have come 4 to us, you in perhaps another hat or two this week, 5 have underlined the importance of finding mechanisms 6 and continuing to support those mechanisms which bring 7 Canadian programming to Canadian people through various 8 sources of funding. 9 13809 One of the kinds of programming that 10 I would like to get back to is high definition 11 television, and when I mention high definition 12 television I am not just referring to a delivery 13 system, I am referring to an actual product. I am 14 referring, of course, to a consumer issue -- the cost 15 of the set, the time it will take for consumers to buy 16 and be able to afford a set. 17 13810 You mentioned HDTV as a different 18 phenomenon. Could you expand on that and where you see 19 and how -- what the time-frame is for Canadians having 20 high definition sets and for Canadians having their own 21 high definition programming through the broadcasting 22 system, for example? 23 13811 MR. STURSBERG: Could I just say -- 24 because I thought it was an interesting point you were 25 making, I think it was about Chris's presentation on StenoTran 2884 1 ExpressVu, because I think that is another fundamental 2 shift that is worth thinking about as we think about 3 digital Canadian services, which is that he points out, 4 rightly, that when it comes to thinking about digital, 5 cable is not the only game in town. In fact, right 6 now, between Star Choice and ExpressVu, they have 7 200,000-plus subs, which are digital subs. Right now, 8 the cable industry with -- if Shaw were fully swathed 9 out, they have about 1.5 million subs. 10 13812 Dave, about that? 11 13813 MR. WATT: Yes, but they have 65,000 12 boxes deployed currently. 13 13814 MR. STURSBERG: So they have 65,000 14 boxes deployed. So, right now, of the competitors to 15 the cable industry have more than three times as many 16 digital subs as we do. 17 13815 I think, in a way, that is a good 18 thing, because it means that there is multiple players 19 who have digital subs who are larger, in fact, in terms 20 of the digital universe than we are right now. 21 13816 But, again, it changes the dynamic of 22 how you think about building digital services in an 23 environment where there is competitive distribution and 24 where, in fact, the previously dominant distributor is 25 now not only not dominant, he is in fact in the StenoTran 2885 1 minority position in terms of the total number of 2 digital subs in the universe. 3 13817 Anyhow, I make that point because I 4 think it is important as we think about the future for 5 digital services. 6 13818 As far as HDTV is concerned, this is 7 a great puzzle to many people. Right now, digital sets 8 will be coming on the market this Christmas, I believe. 9 They will be coming priced in at about $7,000 to $8,000 10 U.S. So, we are looking at sets that will be retailing 11 out there for $12,000 Canadian. It doesn't seem to me 12 likely that there is going to be a lot of buyers for 13 those sets to begin with. This is an exceptionally 14 pricey item. 15 13819 The Americans are, as far as I can 16 make out, all over the map with respect to what is 17 actually going to happen by way of HDTV transmissions. 18 Different broadcasters have made different undertakings 19 as to how much of their service they will put out in 20 HDTV. 21 13820 So, the proposition, if you were to 22 think about buying an HDTV set right now in the United 23 States is, "I will put out $12,000 Canadian and I will 24 be able to get a few hours per day maximum from the 25 over-the air broadcasters in the United States." I StenoTran 2886 1 think HBO has said it will also go HDTV. So there is a 2 very small amount of stuff that you will be able to 3 get. 4 13821 Presumably, if you want to get all 5 the rest of the stuff, you will stay hooked up to your 6 cable. 7 13822 In Canada, the proposition is this: 8 If you bought an HDTV set right now, you wouldn't be 9 able to get anything, except a few hours, if you live 10 close to the border, of over-the-air broadcasting. 11 That would be it. 12 13823 HDTV, at root, is a problem, I 13 believe, for the Canadian broadcasting system in the 14 following sense: It layers in a whole level of cost 15 that has associated with it no new revenues that 16 anybody can define. Now, that is a problem in the 17 United States, too. Many of the players in the United 18 States are big enough that they think they can absorb 19 that level of cost, although the broadcasters in many 20 cases are trying to get out from under it because they 21 don't understand the business proposition either. 22 13824 But in Canada it is more complicated 23 because we would be layering in all these extra levels 24 of costs, both for us and for the broadcasters, and we 25 don't see any new revenues. So it is going to be StenoTran 2887 1 creating pressure on the financial structure of the 2 Canadian industry. 3 13825 We know what happens when we apply 4 pressure to the financial structure of the Canadian 5 industry. We know what gives first. What tends to 6 give first is expenditures on Canadian content. So, it 7 is a problem. 8 13826 I honestly don't know right now how 9 this thing is going to sort itself out. 10 13827 In the United States, the other 11 problem that I mentioned earlier on, this whole 12 question about the extent to which HDTV, if you use up 13 the digital capacity on the cable to carry HDTV, the 14 extent to which that will displace the creation of new 15 digital services, whether it is VOD or the other kinds 16 of services we talked about, the extent to which that 17 will displace it and then limit deployment of boxes is 18 a serious problem. 19 13828 Right now, there is a huge debate 20 going on in the United States, it is all over the 21 American government and the FCC, about the so-called 22 must carry rules, where, you know, all the broadcasters 23 are saying you have to carry us, both in analog and 24 HDTV, and the cable industry and other people are 25 saying, well, wait a minute, why would we do that? We StenoTran 2888 1 will simply be making the future of new services 2 hostage, in a sense, to the past, which will consume 3 all the money and all the capacity. 4 13829 A lot of people in the United States 5 are also trying to understand what the social 6 consequences of this are, because I mean if you are 7 busy consuming capacity to put on HDTV services that 8 only people with $12,000 can afford to buy a receiver 9 to get, then the question is: To whose benefit is 10 this? They have argued that, in fact, that kind of a 11 policy is regressive in income terms because what it 12 does is, in effect, it means that you are creating a 13 policy which is designed exclusively for people who are 14 very wealthy, and it is because it is only the very 15 wealthy who are going to be able to benefit because 16 they are the only ones who will be able to afford HDTV 17 television sets. So, it is puzzling. 18 13830 COMMISSIONER PENNEFATHER: There are 19 differences how quickly technology will change and 20 prices go down, but I am going to go back to, perhaps, 21 what is too simplistic, step by step again. The 22 digital -- the first step in the digital equation is 23 more services available, greater capacity. 24 13831 That issue of capacity was one 25 discussed some time ago, with assurances that that StenoTran 2889 1 capacity would be up and running. It isn't, as I 2 understand it. There seems to be still the effort to 3 get the digital boxes in place just to increase the 4 capacity available to us. 5 13832 So, we are still stalled on that, and 6 you also say that we seem to be reaching the outer 7 limits of demand for new services. Why do you say 8 that? How do you know that? 9 13833 MR. STURSBERG: Well, we look at the 10 penetrations. 11 13834 COMMISSIONER PENNEFATHER: Is that 12 because people aren't interested in certain kinds of 13 services or because of the way that they are presented 14 to them, packaged, if you will? 15 13835 MR. STURSBERG: I don't know. I mean 16 right now if you are a cable subscriber, you could 17 decide I am going to take basic plus one tier. I am 18 going to take basic plus two tiers; basic plus three 19 tiers. You could pick and match any of the tiers that 20 you want. 21 13836 So, you know, you could conceivably 22 say, I will take basic plus the third tier, but I will 23 forget the first and second tiers. That could happen. 24 13837 Obviously, what the cable industry 25 tries to do is it tries to sell through. So, it tries StenoTran 2890 1 to encourage people to take the first, second and third 2 tiers, and the reason we try to do that is not only is 3 it better for us in revenue terms, but as well it 4 protects the position of the first and second tier 5 services because if we encourage people to dump then, 6 then some of the people who have services on the first 7 and second tier might rather take a dim view of that. 8 13838 When we look at the numbers, the 9 numbers are as I described. We are at about 85 per 10 cent penetration on the first tier off basic. We are 11 sitting about 65-66 per cent on the second tier. We 12 are going to settle in somewhere in the low to 13 mid-fifties on the third tier. 14 13839 So just as a measure of demand, it's 15 pretty clear that people are taking fewer of the new 16 services that we are offering now than they did in the 17 past. What is the reason for it? I don't know. 18 13840 It's -- the bills for cable -- for 19 cable subscribers, if you take the entire menu, are 20 getting pretty steep. You know, all in, with taxes and 21 everything, if you take the full gamut of services, you 22 are looking at paying, you know, 70 bucks a month. 23 13841 Those prices are good compared to 24 U.S. prices. They are substantially lower than U.S. 25 prices, but they are still, you know, a fair whack of StenoTran 2891 1 dough. 2 13842 So, I think to myself, well, if we 3 want to put more services in, and not cannibalize the 4 existing Canadian services we already have, it begins 5 to be a stretch. You are bumping up at the limits of 6 people's pocket books, at the limits apparently of what 7 they say they would like to have, just as we read it 8 through the penetration numbers. 9 13843 So that is why it is challenging and 10 that is why, again, I come back to this notion that we 11 have to start thinking about some kind of different 12 model that will allow the market to adjust more 13 effectively to what it is that customers really want. 14 The model we have now is one in which, essentially, we 15 say to the Commission, please license these services. 16 You pick and choose which ones will get licensed. Once 17 they get licensed they get on and we are reluctant, all 18 of us, including the cable industry, deeply 19 reluctant -- in our case, I am not sure if we could 20 even do it -- to say, no, I am sorry this service is 21 not performing well; it is going to get the hoof. 22 13844 We cannot do that because of the 23 access rules. But if we can can't start to make 24 adjustments so that the services reflect what it is 25 that people really want, then given the kind of StenoTran 2892 1 environment of depressed demand, and given the level of 2 risks associated with digital, I think we are going to 3 find ourselves in a more -- we are going to find 4 ourselves in a harder circumstance, if we can't somehow 5 or other get to what I was describing earlier as a more 6 market-based model. 7 13845 COMMISSIONER PENNEFATHER: So I 8 assume that the market forces and the freer rein that 9 you are discussing will largely be expanded in the 10 other process we will be dealing with, where you will 11 want to have, I am assuming as the broadcasters have 12 said about certain elements of the current system, 13 greater flexibility or something of that nature to 14 respond to what you see as the market forces at play 15 within the digital universe. 16 13846 It would appear from what you are 17 saying that you wish to deal with it in that hearing, 18 or that discussion, and that at the same time can we 19 assume that you will continue to support Canadian 20 content regulations, that you will continue to support 21 those regulations and those funding components of the 22 system which are so valuable in terms of supporting 23 Canadian production? 24 13847 MR. STURSBERG: Oh sure, for the 25 existing system, as we have said in our brief, you StenoTran 2893 1 know, we are big supporters of the existing sets of 2 rules, we think they have worked very well. I think it 3 is important to remember that a lot of this machinery 4 was dreamt up in the early days, eg. the funds and what 5 not by the cable industry, which have been partisans of 6 it. The cable industry is a very, very important 7 provider of financial support. 8 13848 We have spent about $4 billion over 9 the course of the last 10 years building channel 10 capacity so we can have Canadian specialty services. 11 We currently spend about $700 million a year in terms 12 of payments to the services directly from the cable 13 companies to be able to ensure their survival. 14 13849 I might add that the services, as a 15 financial matter, do exceptionally well. They do 16 actually much better than the cable industry. The 17 services overwhelmingly of the ones that are on the 18 first and second tier, not only as I mentioned earlier, 19 went black in terms of their financials within six to 20 nine months of launch. They are all of them making -- 21 they are all of them profitable and, in the case of the 22 cable industry, we aren't currently even making our 23 costs of capital. 24 13850 No, it is not about the analog thing. 25 I think the analog service environment absolutely is StenoTran 2894 1 fine; and I think it has worked very, very well both in 2 terms of delivering Canadian services and Canadian 3 content. 4 13851 I think it is a different point I am 5 trying to make, and the point is this: Everybody is 6 committed to ensuring that in future there will be new, 7 exciting, vibrant Canadian services and that they will 8 carry substantial quantities of Canadian content so 9 that we can see ourselves and speak to ourselves as a 10 people. 11 13852 The trick will be, however, to be 12 able to construct an industrial structure and a 13 regulatory environment that will allow that to happen, 14 and that may require some radical thinking. 15 1610 16 13853 COMMISSIONER PENNEFATHER: There is 17 no problem with radical thinking, as long as what's in 18 the equation is more than the industrial needs of the 19 system, the cultural needs of the system as well, and 20 in getting there, from here to there, you support 21 current regulation, but not any change, because on page 22 14 am I correct that when we talk about steps that 23 would increase the funding for under-represented 24 categories, you think that this is a premature move, 25 all measures supporting these categories should be StenoTran 2895 1 explored before more funding is committed, and I gather 2 you support the CAB proposal that the real test is 3 greater viewership for under-represented programming 4 receives any further support through the system. 5 13854 So, in the current environment, which 6 should be, rightfully so, a stepping stone of program 7 content and making sure the supply is there, why would 8 you pull the reins in, so to speak, on greater funding 9 for under-represented categories. Am I right in what 10 this paragraph means? 11 13855 MR. STURSBERG: I think that if -- it 12 depends on what you are saying. If you say to me would 13 we support further taxes on the cable industry, the 14 answer is "no". The reason why we say that is because 15 further taxes -- as I mentioned, people are paying -- 16 if they buy the whole enchilada right now, they are 17 paying upwards of $70 a month. If you impose further 18 costs, the costs fall straight through to subscribers. 19 I mean they fall straight through to consumers. So, if 20 you do that, then, in effect, all you are doing is you 21 are depressing demand further and, as I mentioned, we 22 are a little concerned about the relative levels of 23 demand right now. So, you are pushing demand down 24 further. 25 13856 As we look out into a new environment StenoTran 2896 1 where we are going to be asking customers to commission 2 ourselves, the new service is going to be asking 3 customers to spend more money and buy new services. We 4 don't think that it's a good plan to layer new costs in 5 in advance of doing that. So, that would be my first 6 point. 7 13857 My second point is that some of the 8 schemes that I have seen suggested so far, I'm not sure 9 that they are practicable or fair. These are 10 essentially schemes in which we would ask that the U.S. 11 services be charged a special amount of money one way 12 or another. 13 13858 Right now they indirectly contribute 14 their five per cent into the Fund because we have to 15 pay on the revenues that we pay to them, but I think 16 that the bigger problem you will run into is that they 17 would say, I think not unreasonably, "Well, wait a 18 minute now, if we have to pay into a fund, then we 19 should be offered an opportunity to draw from the 20 fund", and I think the likelihood of anybody agreeing 21 to that proposition is pretty low. But if one doesn't 22 agree to that proposition, I think that inevitably they 23 would have cause to make some complaints about fair 24 dealing in trade terms. 25 13859 Now, if there was another way of StenoTran 2897 1 getting the money and if it was possible to convince 2 the government that they should put up another $100 3 million as they did in the past from general revenues 4 for the further support of the program production 5 industry, I don't think anybody would object to that. 6 13860 COMMISSIONER PENNEFATHER: I'm going 7 to pass the questioning to my colleagues. I'm sure 8 that they have a list. I'm just glad to hear you say 9 that you agree that the funds coming into the Cable 10 Production Fund are coming from the subscriber, that he 11 and she is really paying for production in this 12 country. 13 13861 MR. STURSBERG: Ultimately, every 14 single dime that is spent on anything in this country 15 on anything is coming from citizens. I mean whether 16 you are talking about the costs of health care, whether 17 you are talking about the costs of servicing your 18 automobile, whether you are talking about anything, 19 obviously the costs are being borne by individuals who 20 are buying the service. Subscribers to automobiles, 21 people who are buying lemons, people who are buying 22 insurance policies, they are all bearing the freight of 23 all of that stuff and they are bearing the freight of 24 all the taxes and they are bearing the freight of all 25 the government programs. StenoTran 2898 1 13862 I will just say one last thing, 2 however, about the cable contribution to the Fund. One 3 thing I think it's useful to bear in mind is that the 4 level of financing to the Fund will increase over time 5 and it will increase for two reasons, one of which is, 6 as Chris again was pointing out in his presentation, 7 about 25 per cent of the country is currently not 8 served by cable. The DTH guys have been doing a very 9 good job and I anticipate will do an even better job in 10 the future in terms of servicing that 25 per cent of 11 the country that cannot get cable. 12 13863 If the total revenues within the 13 system were to remain -- the total expenditures by 14 average Canadians, which remain roughly constant, this 15 year we will put up about $51 million in terms of what 16 we pay. If they didn't put up community channels and 17 coughed in the whole lot, they would obviously put up 18 more than we do. But just say they put up the same as 19 we did and they were actually able to blanket the 20 country that way around, that would be another $15 21 million coming in. 22 13864 Now, as the number of services grows 23 and as, therefore, the revenues grow to the cable 24 companies and to the DTH guys, then what happens, of 25 course, is that the level of revenue that's yielded by StenoTran 2899 1 the three per cent tax goes up accordingly. So, one of 2 the good benefits of encouraging growth of services in 3 the system is that you automatically, because you are 4 increasing the revenues, increase the flow of revenues 5 to the fund. So, one of the things it's important to 6 bear in mind when we think about how much money is 7 available to the Fund is to think about how much more 8 will also become available as a result of DTH offering 9 services to areas we can't get to and in terms of the 10 general growth in the system. 11 13865 But it comes back to my earlier 12 point, which is I don't think you want to add further 13 taxes either to us or to them which depress demand and, 14 therefore, limit growth because the growth will, in and 15 of itself, increase the volume of revenues that are 16 sent to the fund. 17 13866 COMMISSIONER PENNEFATHER: Thank you, 18 Mr. Stursberg. 19 13867 MR. WATT: Excuse me. If I could 20 just interject back to the discussion that took place 21 about consumers' dollars paying for all the costs, 22 consumers' dollars do pay for a vast majority of the 23 costs, but we should bear in mind that the cable 24 industry is carrying probably currently about $4 25 billion in debt. That is money that was put in to StenoTran 2900 1 build the systems originally in both a combination of 2 debt and equity from owners. Then on top of that comes 3 the money from subscribers that go to pay for the 4 system. 5 13868 So, there are three sources of money 6 to keep the system going. One was the original seed 7 money that people put in to establish the business 8 before any monies were received from consumers and then 9 ongoing costs are recovered from consumers and 10 hopefully the revenues exceed the costs and that gives 11 you some internally generated funding with which to 12 expand your system, but generally that has not been 13 sufficient to pay for the capacity increases that the 14 cable industry has put in place. Those have been 15 financed by additional debt assumed by the companies 16 and equity infusions from the owners of the companies. 17 13869 COMMISSIONER PENNEFATHER: Madam 18 Chair, thank you. 19 13870 THE CHAIRPERSON: Commissioner 20 Wilson? 21 13871 COMMISSIONER WILSON: Mr. Stursberg, 22 I want to go back to the regulatory model that you are 23 proposing because I'm really not sure that I understand 24 it. In fact there was some talk earlier this week 25 about a parallel universe on a number of levels and I StenoTran 2901 1 am wondering if that's what you are suggesting as sort 2 of a parallel system, one set of rules for the analog 3 world, one set of rules for the digital world, but how 4 do you integrate those two sets of rules? 5 13872 I have just been sitting here as you 6 have been talking, looking back through your submission 7 and trying to figure out how all of this works. Let me 8 just run this by you. You can correct me if I am 9 wrong, but essentially what I see and what I hear is, 10 "Let us grow and integrate and get bigger and the more 11 sophisticated and successful we get, the more our 12 companies will be worth and the more we will be able to 13 assume the risk of building, creating that digital 14 world and, at the same time, as we grow, protect us 15 from our competitors by keeping the same rules in 16 place, the analog rules, the tiering and linkage 17 rules", because those rules affect your competitors' 18 abilities to compete with you. 19 13873 If they have to, essentially, present 20 exactly the same kinds of services, the same services 21 maybe in a slightly different kind of packaging 22 situation than yours, it is essentially the same. So, 23 if we keep all of those rules in place, then their 24 ability to -- even though they will have -- I mean you 25 talked about the difference between the analog system StenoTran 2902 1 where you say there is an abundance of product and not 2 enough channels and in the digital world there is an 3 abundance of channels and not enough product. Well, 4 the DTH providers, for example, are going to have those 5 channels. They are going to have that abundance of 6 channels, so they are going to need those services 7 before you do. 8 13874 So, in my mind, you are saying: Keep 9 the analog rules in place. That helps you, but that 10 doesn't help them. It also doesn't help the 25 per 11 cent of Canadians who don't get cable and those people 12 are potential subscribers to DTH. They could be drawn 13 in maybe more successfully. 14 13875 I actually had just written down -- 15 and maybe this is something that you don't want to talk 16 about publicly -- how many of the 200,000 subscribers 17 to DTH are a result of a loss of subscribers to cable 18 versus brand new people who have just been receiving 19 signals over air and have never had the benefit of 20 cable television and that huge menu of services that 21 has been available. 22 13876 So, on the one hand, you are saying, 23 "Let's do some radical thinking and go for a more 24 market driven approach." Certainly I think we are at a 25 critical point and we do have to look at a shift in the StenoTran 2903 1 paradigm, to use a very much over-used phrase, but at 2 the same time maintain those analog rules. Well, if we 3 are really going to go for it, if we are really going 4 to go for a completely market-driven approach, then why 5 don't we just throw it all open right now and see what 6 happens. 7 13877 I mean on the one hand there is this 8 let's be more market driven, but Canada -- I mean we 9 are so used to being regulated. That's something you 10 have said yourself many times, we are so accustomed to 11 regulation. So, it's like, "We will be this market 12 driven and this much protected." How do you marry 13 those two competing visions? 14 13878 MR. STURSBERG: I think there are two 15 or three questions that you are asking me, if I can try 16 them on one by one. 17 13879 First of all, as far as the existing 18 tiering and linkage rules are concerned, they were 19 originally constructed to assist the channels 20 themselves. So, the rules associated with how many 21 American services you can link with Canadian services 22 were designed to assist the Canadian services. That 23 was the purpose of the rules. If you were to unwind 24 the rules in an analog world, the tiering and linkage 25 rules, I think the impact would be fundamentally on the StenoTran 2904 1 existing Canadian services. 2 13880 But the second point I would make is 3 it's not clear to me, even in the current environment, 4 that there are tremendous impediments to the new 5 competitors distinguishing and differentiating their 6 product. I don't know if any of you have seen the 7 current Look TV ads that are in the papers right now. 8 One of the things that we know very well that our 9 customers are frustrated about is their lack of choice. 10 They would like to pick and choose the services they 11 can get. 12 13881 Look TV has a great big ad. You will 13 see it in the papers, I have seen it in the Toronto 14 Star, in which it says: "We offer choice." That's 15 what they offer, they offer choice and they offer you 16 an opportunity to pick and choose your own tiers, how 17 you would like to construct them. They have a tiny 18 asterisk there that says, "Subject to the CRTC's 19 tiering and linkage rules", but it still gives them, 20 even the rules as they exist today, enormous capacity 21 to allow customers to pick and choose and, therefore, 22 for them to differentiate on the basis of the existing 23 rules the product that they are offering. 24 13882 As far as the future is concerned, I 25 think that when we look to the future -- as Chris was StenoTran 2905 1 saying, the DTH guys have a certain advantage. They 2 have 200,000 subs. Right now we have 65 digital subs. 3 13883 COMMISSIONER WILSON: I was just 4 going to say 65 -- 5 13884 MR. STURSBERG: Digital subs. 6 13885 COMMISSIONER WILSON: -- thousand, 7 plus 7.6 million. 8 13886 MR. STURSBERG: That's right, but I 9 am saying if they want -- 10 13887 COMMISSIONER WILSON: But you still 11 have those subscribers. Whether they are digital or 12 not, you have still got them. 13 13888 MR. STURSBERG: Absolutely, but my 14 only point is that when you look into a digital 15 world -- his view is, he says, "I would like guys to 16 launch digital services right now. I would like guys 17 to launch into my bigger digital environment." We say 18 fine, they can launch into the bigger digital 19 environment that they have. If that gives them the 20 capacity to further differentiate their product, I 21 don't have a problem with that. I think that's a 22 perfectly reasonable thing to say. 23 13889 I think our concern is -- only 24 concern is this, and it comes back to the original 25 rationale for the rules. You are right to say that we StenoTran 2906 1 are going to leave our digital services off the 2 existing analog base. 3 1625 4 13890 Again, to come back to the example 5 that John Cassidy was using, I think yesterday or the 6 day before, where he said the reason why they can do 7 certain kinds of things is because they already own a 8 series of relatively stable analog specialities. So 9 they can share overheads with them, and so on and so 10 forth. 11 13891 I think that you are going to see a 12 lot of developments that will be similar to that, and 13 in a digital world, where people are going to say: We 14 have stable analog specialities; we now have the 15 opportunity to launch relatively inexpensive digital 16 services that lever off the existing analog specialty 17 infrastructure, whether that's by way of sharing 18 overheads, by way of sharing transmission equipment, or 19 whatever it happens to be, that's all good. 20 13892 I think that what we should do, 21 though, is -- therefore, you asked the question what is 22 the relationship between analog services and digital 23 services in that world, apart from all the differences 24 we have talked about? One of the things you want to do 25 is maintain the relative stability of the existing StenoTran 2907 1 analog world, so that you can in fact lever more 2 effectively into the digital one. 3 13893 COMMISSIONER WILSON: I think what I 4 asked you was, how do you mesh the two systems, the 5 rules? 6 13894 MR. STURSBERG: Well, the rules -- 7 no, I think the rules will be different, and I think 8 that is precisely my point, that for us to succeed -- 9 13895 COMMISSIONER WILSON: So we put a 10 parallel set of rules into place to deal with digital. 11 13896 MR. STURSBERG: They will be 12 different. They will be different rules, because I 13 think that if you were to put in place exactly the same 14 set of rules that you have right now for digital 15 services, you would make it very difficult for those 16 services to succeed, is my point. 17 13897 Again, we are sort of anticipating 18 your next hearing a little bit. 19 13898 COMMISSIONER WILSON: When you say 20 digital services, do you mean digital channels, or 21 digital distribution services? 22 13899 MR. STURSBERG: I mean digital 23 specialty services. 24 13900 COMMISSIONER WILSON: We don't really 25 have any of those. StenoTran 2908 1 13901 MR. STURSBERG: That's right, but I 2 am saying that when you think about the rules that you 3 will put in place for those new digital services, we 4 are certainly hoping we can convince you, when the time 5 comes, that you are going to have to think about them 6 quite differently from the way in which you have 7 thought about the regulation of existing analog 8 specialty services. 9 13902 The reason for that is because, as I 10 was saying earlier, the world they were launched into 11 is much smaller, it's much riskier, we face a 12 fundamental chicken-and-egg problem as to getting 13 services and boxes out there and, beyond that, we are 14 in a situation where we are exploring the sort of outer 15 limits of demand for these services, so we have to find 16 new ways of generating demand, or at least allowing the 17 services to change, to evolve and to develop in a way 18 that reflects demand. 19 13903 So I think this is going to require a 20 different form of thinking as to where we are going. 21 13904 Just one last point on your question 22 as to whether the DTH guys are taking customers from 23 us, or whether they are new customers. I don't know 24 Chris Frank's numbers -- he knows them better than I -- 25 but I take him at his word that those are principally StenoTran 2909 1 coming right now from under-served areas, which is a 2 very good thing for the broadcasting system as a 3 whole -- 4 13905 COMMISSIONER WILSON: Yes, it is. 5 13906 MR. STURSBERG: -- because you are 6 actually growing it. Maybe I will just make one last 7 general point on growing it, then I'll stop talking for 8 a second. 9 13907 COMMISSIONER WILSON: And then I'll 10 ask you another question. 11 13908 MR. STURSBERG: Okay. 12 13909 To a certain extent, when we talk 13 about a demand or market-driven system, we are talking 14 about a system in which all you are trying to do is 15 create growth under rather difficult circumstances, and 16 growth is obviously what we want, because when you 17 grow, the entire thing becomes a positive sum game. 18 13910 COMMISSIONER WILSON: We thought that 19 too. 20 13911 MR. STURSBERG: Yes. Everybody wants 21 growth, so the question is, how can we get that most 22 effectively if we are going to have new Canadian 23 services, new Canadian content. 24 13912 COMMISSIONER WILSON: Okay. I want 25 to ask you about viewership to Canadian programming. StenoTran 2910 1 Again, when I was looking through I was -- you talk 2 about the regulatory and government support mechanisms 3 that have resulted in a number of very positive things 4 for the Canadian broadcasting system -- the number of 5 television channels that we have available to us, "the 6 number and variety of television undertakings" I 7 believe is what you say, a burgeoning Canadian 8 independent production industry, Canada becoming the 9 second largest exporter in the world of English 10 language television, but in spite of all of that, the 11 Canadian audience has not grown. 12 13913 I had written down a little note here 13 saying sort of, okay, what's your point in presenting 14 those numbers, and then actually Commissioner 15 Pennefather pointed out the paragraph on page 14, which 16 ties viewership to funding, and that is that until the 17 audience grows, then let's not throw in more money at 18 Canadian content, especially not through the cable 19 industry as a mechanism. We could spread it across the 20 wider base of all taxpayers, if the government wants to 21 give another 100 million dollars, but not through the 22 cable companies specifically. 23 13914 Just on the whole topic of 24 viewership, I want to question the numbers. My 25 questions have been sort of coming up over a period of StenoTran 2911 1 time since we first started this hearing, and some of 2 the questions may not be fair to ask you, and I should 3 have asked the CAB some of the same questions. I have 4 looked at their numbers, I have looked at our numbers, 5 I have looked at your numbers, and the comment that you 6 make that one would think that the combination of all 7 of these successes would have resulted in an increased 8 Canadian audience for Canadian programming. 9 13915 Does scheduling of Canadian 10 programming have an impact on the audience? If you 11 schedule Canadian programming at a time when people are 12 watching television, would you get more people watching 13 it? 14 13916 MR. STURSBERG: If there is more 15 people watching TV when you put a program on, then just 16 as a sheer matter of statistical probability, there is 17 more probability that they are more likely to watch a 18 Canadian program. 19 13917 COMMISSIONER WILSON: And if you 20 spent more money promoting Canadian programming, would 21 more people watch? 22 13918 MR. STURSBERG: I would think that 23 would likely be true. 24 13919 COMMISSIONER WILSON: So how come 25 everybody is talking about the fact that the Canadian StenoTran 2912 1 audience hasn't grown since the 1960s, that it has been 2 relatively flat, at 30 per cent, when nothing really 3 extraordinary has happened during all that time in 4 terms of scheduling or promoting it, that no major 5 changes have taken place. 6 13920 I guess I am wondering, why is 30 per 7 cent so significant? To me, it is not really a good 8 argument, for viewing to Canadian programming remaining 9 flat at 30 per cent for almost 40 years, because 10 American programming has always been scheduled in the 11 prime time, and Canadian programming has never been 12 promoted as strongly as American programming. So, is 13 it surprising that it stayed flat? No? Not really. 14 13921 MR. STURSBERG: You are talking now 15 about English Canadian programming. 16 13922 COMMISSIONER WILSON: Yes, because -- 17 I mean, the Quebec market is quite different, and they 18 have a very different success story there, but -- 19 13923 MR. STURSBERG: You know, I'd like to 20 help -- 21 13924 COMMISSIONER WILSON: It just seems 22 to me a pretty weak argument for the fact that Canadian 23 programming has not succeeded, and to tie it to 24 viewership, because maybe it hasn't been given the 25 chance. StenoTran 2913 1 13925 MR. STURSBERG: I don't know that it 2 would be altogether appropriate for us as the cable 3 industry to comment on that. We don't buy programming, 4 we don't schedule it. We -- 5 13926 COMMISSIONER WILSON: But you do talk 6 about viewership in here, and you do tie it to funding. 7 13927 MR. STURSBERG: The only general 8 point that we are making there is that a lot of money 9 has gone in, and viewership levels have not increased 10 dramatically. 11 13928 The question I think that we would 12 ask ourselves is this: Is there a better way of 13 allocating the money, which is the question the Fund is 14 asking itself in a way that it will get a better bang 15 for its buck in terms of viewership, and is there a 16 better way of thinking about the way in which the 17 regulations work, which is, I presume, the purpose of 18 this hearing, in a way that it will give a better bang 19 for the bucks that are available. 20 13929 So we make that same general point, 21 and we make that point also because, for the other 22 reasons that I mention, we don't think it would be a 23 good idea to impose further taxes to levy the money. 24 13930 I think that it's difficult for the 25 cable industry to say anything terribly helpful to you StenoTran 2914 1 about issues of scheduling or that kind of question 2 just because, as I say, we don't buy programming, we 3 don't schedule programming, and we don't have any 4 particular expertise in those areas, or we can't really 5 bring very much to the party by way of expert 6 information on that. 7 13931 I think that is the great challenge. 8 Surely the great challenge is to not just make Canadian 9 shows, but to make Canadian shows that Canadians want 10 to see, and that they watch, and that the two -- 11 13932 COMMISSIONER WILSON: But maybe they 12 do. Maybe they do want to see them, but they just 13 don't have the same opportunity that they have to see 14 Canadian programs that they have to see American 15 programs. That's what I -- 16 13933 MR. STURSBERG: That's the purpose of 17 the hearing. 18 13934 COMMISSIONER WILSON: Right. That's 19 why we are sitting here. 20 13935 MR. STURSBERG: Exactly. 21 13936 COMMISSIONER WILSON: I prefaced it 22 by saying maybe it wasn't a fair question to ask you, 23 but it was on my mind, so -- 24 13937 MR. STURSBERG: Maybe it's a fair 25 question to ask Dave Watt. StenoTran 2915 1 13938 MR. WATT: I was just going to make 2 two observations. One, I would think actually that -- 3 I don't know this answer, that it's really an empirical 4 matter, what the promotion spending has been on 5 Canadian programming. I guess without having looked at 6 the numbers, I would have thought there would be more 7 dollars spent today than there were 30 years ago. On 8 the other hand, I -- 9 13939 COMMISSIONER WILSON: But it may be 10 relative. The number of dollars spent on promoting 11 Canadian programming may be relative to the amount of 12 money that was spent on producing that programming. 13 13940 MR. STURSBERG: That may well be the 14 case. 15 13941 The other point I would make is that 16 another way to look at the 30 per cent number is to say 17 that things had gone quite well for Canadian content, 18 because at the same time as there has been additional 19 Canadian outlets brought to air, there has also been 20 greater competition faced coming from the United States 21 in terms of over-the-air broadcasters and specialty 22 channels, so that the Canadian viewership has been 23 holding against greater choices from the south. 24 13942 COMMISSIONER WILSON: And I guess one 25 of the things that I would like to look at is what has StenoTran 2916 1 the viewership been to specifically American 2 programming over the last 40 years? That's the flip 3 side of the 30 per cent, so -- 4 13943 MR. STURSBERG: I think you'll find 5 that the majority of the other 70 per cent is American. 6 13944 COMMISSIONER WILSON: So that has 7 been pretty flat too, over the last 40 years. 8 Anyway -- thank you. 9 13945 THE CHAIRPERSON: Commissioner 10 McKendry. 11 13946 COMMISSIONER McKENDRY: Thank you, 12 Madam Chair. 13 13947 There were just a couple of things 14 you referred to that I wanted to clarify. 15 13948 You mentioned that one of your 16 members, Shaw, is proceeding more quickly than your 17 other members with digital roll-out, and when Mr. Shaw 18 appeared before us earlier, he said that his company is 19 spending more than 50 million dollars annually for the 20 conversion to digital, which would be about 10 per cent 21 of their revenues, maybe a little less. 22 13949 You indicated you were prepared to 23 elaborate as to why they are pushing ahead and 24 seemingly the other members are waiting for the second 25 generation. Could you please do that. StenoTran 2917 1 13950 MR. STURSBERG: Sure. I think there 2 is -- we can show you some numbers, if you are 3 interested in seeing them, which we brought along 4 today, but I think there is an answer on the cost side, 5 and there is an answer on the revenue side. 6 13951 On the cost side -- 7 13952 THE CHAIRPERSON: And how do we 8 relate it to Canadian content? 9 13953 MR. STURSBERG: With respect to the 10 digital boxes, at this particular point in time I'm not 11 sure that there is a tight relationship on these costs 12 and revenue matters. I thought what you were trying to 13 get at is why has Shaw moved now and the others are 14 waiting, is your question. 15 13954 When it came time to launch the third 16 tier in Calgary, the Shaws faced a problem, which was 17 whereas the analog boxes in most of the other cable 18 systems would accommodate the third tier, and theirs 19 would not. So for them to offer the third tier, they 20 were going to have to replace the analog boxes in any 21 event, so -- I don't know what they cost, $150 a piece, 22 $200 a piece -- US. 23 13955 The alternative was to put in digital 24 boxes, knowing they were going to have to go there in 25 any event, so in fact the box cost fell for them in a StenoTran 2918 1 way that it didn't fall for anybody else. That would 2 be point number 1. 3 13956 Point number 2 is that, as our model 4 shows, the model is highly sensitive on the revenue 5 side. When we look at potential revenue streams to 6 drive the box, one of the streams that we put into it 7 is a stream which is not real revenues but is retained 8 customer based. In other words, the customers that we 9 would otherwise have lost to the competitors we treat 10 as revenues for the purposes of justifying the box 11 investment. 12 13957 I think it's fair to say that people 13 can differ as to how many customers they think they 14 would otherwise lose by not moving ahead. As that 15 number goes up or down, then obviously the case for the 16 investment in the box changes accordingly. And I think 17 it is probably fair to say that Shaws are greater 18 partisans of the potential effects of competition from 19 satellite than some of the other cable companies might 20 be, so that their view of the likely erosion would be 21 greater than the view of the likely erosion from the 22 other cable companies, and therefore the amount of 23 money that you would draw in by way of avoided losses 24 would be higher, so it makes it easier to justify the 25 business case. StenoTran 2919 1 13958 Dave, you may want to comment on 2 this. 3 1640 4 13959 MR. WATT: The only other issue that 5 comes to mind is that in a decision to move forward 6 with a digital box, you would have to decide what you 7 thought the useful life of the first generation box 8 would be. 9 13960 In the case of Shaw, they have a 10 number of various sized systems spread out across the 11 country that perhaps give them greater flexibility in 12 redeploying those boxes to smaller locations as open 13 cable boxes came forward in the next couple of years. 14 13961 Beyond that, I don't think we should 15 speculate any more on their motivations. 16 13962 MR. STURSBERG: We actually did bring 17 some slides, and we would be happy to show you how the 18 numbers move around as a percentage of the total costs 19 and total revenues with respect to making the business 20 case, so that you could see what the impact of what we 21 are talking about would likely be. 22 13963 COMMISSIONER McKENDRY: I was 23 primarily interested in the strategic reason as to why 24 one company would be proceeding while another one is 25 not. But if you feel you would like to file that StenoTran 2920 1 information with us, we certainly would not object. 2 13964 MR. STURSBERG: You have it. We 3 filed it with you. It is in the models. 4 13965 I think those are the strategic 5 reasons. One is they faced the swap-out costs 6 associated with their analog boxes inevitably in 7 Calgary already. 8 13966 Number two, as I said, they are 9 obviously partisans of satellites. They have invested 10 a great deal of money in Star Choice, so they believe 11 that it is going to do well. They are more likely to 12 believe that cable companies that do not convert to 13 digital are more likely to lose more customers faster. 14 Therefore, the revenue stream that you bring in by way 15 of the customers that you have not lost, so to speak, 16 is bigger. 17 13967 And finally the point that Dave makes 18 is that when you are thinking about whether to invest 19 now in the existing boxes or whether to invest later 20 when the new open boxes come on the market, the 21 critical variable is: How long do you think the useful 22 life of the box is going to be? 23 13968 If you think the useful life of the 24 box is only going to be a year and a half to two years 25 until the open boxes are available, obviously you would StenoTran 2921 1 not do it. But if you have a way of redeploying those 2 boxes so that they can extend their useful life to a 3 full seven or eight years, that is a different matter 4 altogether. You get out from under that problem. 5 13969 As Dave was saying, they can do that 6 just because of the nature of the systems that they 7 own. 8 13970 COMMISSIONER McKENDRY: Thank you. 9 13971 The other matter I wanted to see if I 10 could get some more information about is the issue of 11 why, in your Association's view, one needs large 12 organization in your industry. 13 13972 I think you offered two reasons for 14 that. One was economies of production and 15 distribution. The other reason that I took down in my 16 notes while you were speaking was that companies in 17 your industry that are going to incur the risk of 18 marketing new digital services to customers need to be 19 big to incur those risks. 20 13973 Are those essentially the two 21 reasons? 22 13974 MR. STURSBERG: I actually have a 23 little talk on this, if you would like to have it. 24 13975 We filed a piece that we did on the 25 economies associated with vertically integrated StenoTran 2922 1 companies, that is an appendix to our document. We 2 looked at the nature of the kinds of large companies 3 that are being formed internationally. So we looked at 4 Time Warner, Disney, TCI, and so on. They tended to 5 draw some general conclusions, and I don't think the 6 conclusions are terribly controversial. 7 13976 The reason why people are investing 8 all of this money to be able to buy up all of these 9 companies and form them into large media groups is 10 associated essentially with the question of risk that I 11 was talking about earlier. 12 13977 What large companies allow you to do 13 is they allow you to manage risk essentially in three 14 or four different kinds of ways. 15 13978 One is that obviously what it means 16 to have a lot of risk is that you are going to have a 17 lot of losers, and you hope a lot of winners to offset 18 the losses. Your capacity to be able to deal with that 19 is a function of your financial capacity. So the 20 greater the cashflows that you have available at your 21 disposal, the easier it is going to be for you to deal 22 with that. 23 13979 Secondly, it becomes clear that there 24 are certain kinds of new economies associated -- which 25 are almost scale economies. I guess not quite scale, StenoTran 2923 1 but they look -- 2 13980 Whether you call them scope economies 3 or scale economies, there are certain kinds of 4 economies of content production that people are 5 beginning to realize now that they were not able to 6 realize in the past. 7 13981 For example, if you make a product in 8 one medium, you can then repurpose it through a series 9 of media. If you make a movie, you can sell it to a 10 cinema; then you sell it to a video store, to a pay 11 system, and then on to conventional television. You 12 can support it with a website, and you can have a 13 spinoff in collateral properties of one variety or 14 another associated with it. 15 13982 To the extent that you are involved 16 in the various different revenue streams associated 17 with the product, you can maximize the revenues that 18 you realize from it. 19 13983 I think the third, and probably the 20 most important from our point of view, is that if you 21 own both the distribution infrastructure and the 22 service, then obviously the risks associated with 23 building and launching the service are smaller than 24 they would otherwise be. 25 13984 As I mentioned earlier, I think in a StenoTran 2924 1 digital world -- 2 13985 It will be difficult to encourage 3 people to launch digital services, so it will therefore 4 be difficult to get people to buy the box. And because 5 it is difficult for people, because people will not 6 want to buy the box, there will not be a big market for 7 people to launch digital services into. 8 13986 One of the questions is: How do we 9 deal with this? The answer is, in part, that you are 10 going to want the cable companies to launch digital 11 services because then they will be deeply incented at 12 the same time to take the risks associated with the 13 box. So you lay off your risk on both sides. 14 13987 I think that the long and the short 15 of the answer is that as you move to greater risk with 16 these kinds of products and services, then you are in a 17 better situation for cash reasons, for reasons of 18 maximizing the extent of the value of your product, and 19 for reasons of being able to deal with the synergies 20 between distribution and production, if you can 21 organize yourself into larger companies. And that is 22 why they have done it in the United States. 23 13988 COMMISSIONER McKENDRY: With respect 24 to the risk that your members will incur with respect 25 to the marketing of new digital services to customers, StenoTran 2925 1 who really incurs the risk? Is it in fact the cable 2 operator, or is it the person who owns the new service? 3 13989 For example, I recall in the last 4 launch that the services contributed a substantial 5 amount of marketing money to the effort of launching 6 these new services. 7 13990 Where is the risk? Is it really in 8 fact with the cable operator or is it with the owner of 9 the new service? 10 13991 MR. STURSBERG: We qualified the risk 11 in digital. The risk for us is $225 million of swapped 12 out boxes, that if we cannot grow the base, is a dead 13 loss. 14 13992 There is just no way of recovering 15 that money. That is the size of the risk that 16 confronts the industry. And that is a quantifiable 17 risk. 18 13993 I think, in fairness, with respect to 19 the launch of the last tier -- which is what I think 20 you are referring to -- the measure of the extent of 21 which risk was loaded or unloaded by the cable industry 22 under the services can only be measured, I think, as to 23 when did the services go black versus when does the 24 cable industry go black in terms of the third tier. 25 13994 What we did, in an attempt to try to StenoTran 2926 1 understand this question, is we took the business plans 2 of the services as filed with the Commission; we looked 3 at the amount of money we were giving them and the 4 costs that we were -- including the costs that were 5 being taken up by way of the extra marketing money, 6 which they were contributing. And we said: When will 7 they become profitable, at what penetration levels of 8 the third tier? And are those penetration levels 9 higher or lower than the penetration levels for the 10 cable company? 11 13995 The answer is, in almost all cases -- 12 and we filed these models with you as well. In almost 13 every single case the services became profitable at 14 lower levels of penetration than the cable industry's 15 third tier. 16 13996 The issue here is: Was that a fair 17 allocation of risk? And I think the answer, in 18 quantitative terms is: Probably not. Probably the 19 cable industries bore too much of the risk associated 20 with the launch of the third tier. 21 13997 The third tier was not unlike what is 22 going to happen in digital. It is a bit of a chicken 23 and egg, as well. It was a positive option tier. You 24 had to get people out there to buy it if everybody was 25 going to succeed. StenoTran 2927 1 13998 The same thing will be true on the 2 digital side. If everybody is going to succeed, then 3 the services are going to have to take risk. We are 4 going to have to take the $225 million plunge. 5 13999 What is the fair allocation of risk 6 under the circumstances? I think in financial terms 7 you would have to say the fair allocation of risk was 8 that we would become profitable at about the same time, 9 in penetration terms, as they became profitable -- 10 which, as I mentioned earlier, was not the case with 11 the third tier. In fact, they became profitable ahead 12 of us. 13 14000 COMMISSIONER McKENDRY: It is this 14 evolution of new risks that drives you to say that we 15 need to think about a new set of regulatory rules with 16 respect to Canadian content in the digital world. 17 14001 MR. STURSBERG: Yes. 18 14002 COMMISSIONER McKENDRY: A number that 19 came up earlier in this hearing with respect to the 20 conversion to digital came from Mr. McCabe of the new 21 digital organization that has been set up -- 22 14003 MR. STURSBERG: Mr. McEwen? 23 14004 COMMISSIONER McKENDRY: Mr. McEwen, 24 who sets up the new digital organization that has been 25 set up to deal with digital TV in Canada. I think he StenoTran 2928 1 gave us a number, as I recall, of a $1 billion price 2 tag to convert the cable network to be able to deliver 3 digital broadcast signals into homes. 4 14005 Do you agree with that $1 billion 5 number? 6 14006 MR. STURSBERG: We have actually 7 filed numbers in our brief. If you turn to page 29, 8 you will find the filed numbers. 9 14007 The cost to the cable industry of 10 converting to high definition television is a function 11 of two things: how many channels do you have to carry 12 on high definition television; and what is the 13 compression ratio. 14 14008 What we did in order to calculate the 15 number is: The Commission's number is that the cost of 16 a channel is 16.2 cents per sub. That is an all-in 17 cost, including the cost of capital. So for every 18 channel that we have to build out to all of our 19 subscribers, it costs about $15 million a year. 20 14009 We looked at it that way and said: 21 So what happens if we have to carry a whole bunch of 22 new channels, and we have to carry them at different 23 compression ratios? Obviously, if you have a higher 24 compression ratio, you need fewer analog channels to be 25 able to carry them; and if you have a lower compression StenoTran 2929 1 ratio, you need more. And it costs you more money. 2 14010 The estimates that we have put in 3 front of you are that if we can get very good 4 compression, 3 HDTV channels per 1 analog 6 megahertz 5 channel, we have to carry 30 HDTV channels; it will 6 cost us about $900 million. 7 14011 If we can get only two stuffed into 8 each 6 megahertz analog channel, and we have to carry 9 60 -- as you know, right now we carry about 70 or 80 10 channels on the dial -- then it is going to cost us 11 about $2.7 billion. 12 14012 So the range of costs for the cable 13 industry, using the Commission's own numbers, varies, I 14 think it is fair to say, from a low of a billion 15 dollars upwards, depending on the number of channels 16 and the compression ratios. 17 14013 MS BECK: I would like to clarify 18 that the first numbers that were quoted, at about $900 19 million, are based on a national representation. We 20 indicated that there were about 30 channels that had to 21 be supported. 22 14014 If you think about it, in the ten 23 major markets, that is about three broadcast channels 24 per major market. So we are not talking about 30 25 signals per system; we are talking about three HDTV StenoTran 2930 1 signals per system across the ten major markets. 2 14015 COMMISSIONER McKENDRY: My 3 understanding is that digital broadcast television is 4 not necessarily high definition digital television. 5 14016 MR. STURSBERG: That is absolutely 6 right. 7 14017 COMMISSIONER McKENDRY: You seem to 8 have focused your numbers on the assumption that there 9 is going to be widespread high definition digital 10 television. 11 14018 The discussion from the broadcaster 12 seems to be more along the lines of the conversion to 13 what is called digital television, with the possibility 14 that there may be some high definition television. 15 1655 16 14019 MR. STURSBERG: You are exactly 17 right. Just to be absolutely clear on it, the model 18 that we have provided to the Commission as part of this 19 filing is a model that looks at the costs of converting 20 just to digital, not the high definition at all. 21 14020 The numbers I'm citing now would be 22 in addition to those costs because you have to have 23 these extra channels that Commissioner Pennefather and 24 I were talking about earlier on. You have to have all 25 these extra channels to cover the HDTV signals. Those StenoTran 2931 1 are the additional costs associated with that. 2 14021 COMMISSIONER McKENDRY: Thank you 3 very much. 4 14022 Thank you, Madam Chair. 5 14023 THE CHAIRPERSON: Commissioner 6 Cardozo. 7 14024 COMMISSIONER CARDOZO: Thank you, 8 Madam Chair. 9 14025 I have just got two or three quick 10 questions which require quick answers. 11 14026 The first is just on the issue of set 12 top boxes as it relates to this hearing. Is it not 13 fair to say that with set top boxes, whether you look 14 at it as a channel expander or digitization that we are 15 talking about, more channels and therefore more 16 Canadian content, more avenues for Canadian content. 17 14027 MR. STURSBERG: Absolutely. 18 14028 COMMISSIONER CARDOZO: Thank you for 19 that short answer. 20 14029 MR. STURSBERG: I took it that you 21 were chastising me. 22 14030 COMMISSIONER CARDOZO: No, no, I 23 wasn't. Far be it from me to even think to assume that 24 role. 25 14031 I just want to make sure I understand StenoTran 2932 1 your recommendation with regard to contributions to 2 production and quote a recommendation from ACTRA who 3 are appearing next week. In their written brief they 4 said that the Commission should begin to increase the 5 contributions to a new benchmark of 7 per cent and 6 should limit to 2 per cent the amount which BDUs can 7 reduce their contribution in respect of spending on the 8 community channel. 9 14032 I would take it you are not in favour 10 of that. 11 14033 MR. STURSBERG: Well, I am not in 12 favour of it with respect to the reasons which I 13 mentioned earlier which I think that will only serve to 14 make, you know, the future hostage the past and I don't 15 think that's wise. I don't think it's wise for the 16 depressed demand, but I think as well, you know, for 17 the reasons that I was mentioning earlier that the 18 overall level of contribution to the fund will 19 certainly grow as a result of growth in the system and 20 it will grow, I think, substantially. 21 14034 On the community channel, maybe I 22 will just ask Fred Wagman to make a comment on that. 23 14035 MR. WAGMAN: I think that would be a 24 drastic impact on the system as has the already 25 contribution been addressed an impact on the system, StenoTran 2933 1 Commissioner. 2 14036 In our particular case, I can tell 3 you what is happening in our area. Broadcast is 4 becoming more regional. The community channel is 5 picking up more of the things that they did on a local 6 basis and really the community is more dependent on the 7 community channel than ever before. 8 14037 If we don't have the funding to be 9 able to do that, and it was redirected somewhere else, 10 all of that local expression would go out the window. 11 I think when you look at what is being done at the 12 present time, the number of hours that are being 13 produced, the involvement of community in community 14 television, I think it would be a step in the wrong 15 direction to take more of the system and literally 16 eliminate community channels. 17 14038 COMMISSIONER CARDOZO: Thanks for 18 introducing that because that was my third question. 19 It was regarding local programming. 20 14039 As you will know from the round 21 tables we had in various parts of the country and some 22 of the submissions that we have received, there is a 23 growing concern that local reflection is reducing in 24 both news, I suppose community affairs and drama. 25 14040 What do you do, Mr. Wagman, as a StenoTran 2934 1 cable company in Regina? What does your community 2 channel do? You mentioned that the conventionals are 3 going more regional and you are doing more local. What 4 kinds of -- 5 14041 MR. WAGMAN: We are moving into the 6 gap obviously, Commissioner, filling in with news and 7 styling our programming in such a way that what was 8 important to community before continues to be 9 important. That's obvious. 10 14042 In terms of doing news coverage and 11 local coverage now, we have moved in to fill into that 12 spot and do more direct news coverage, et cetera. 13 14043 I made a comment while we were 14 talking about this earlier that you used to be able in 15 Regina call a press conference and you would have about 16 four cameras there, one from each of the networks and 17 an independent as well. Now when you call a news 18 conference, you can hold it in a telephone booth. They 19 are not there. 20 14044 COMMISSIONER CARDOZO: Are you there? 21 14045 MR. WAGMAN: We are there. 22 14046 COMMISSIONER CARDOZO: Were you 23 outside the telephone booth? 24 14047 MR. WAGMAN: We're there. 25 14048 COMMISSIONER CARDOZO: Okay. StenoTran 2935 1 14049 MR. WAGMAN: The point they make, and 2 I can give you another example. Last week our newly 3 ordained head of the university in fact made his first 4 public representation. We were the only ones on the 5 site to pick it up. 6 14050 That's what's happening out there in 7 different regions. I have noticed when I have been in 8 some of the major centres, you don't experience the 9 same thing, but in some of the other provinces and some 10 of the other areas, that's what's happening. 11 14051 The community channel has become far 12 more vital to the community than it ever has been 13 before. 14 14052 COMMISSIONER CARDOZO: When you say 15 news, you don't have an actual news hour. 16 14053 MR. WAGMAN: No. What we do is 17 approach news in what I think what is a little softer 18 way. We cover what are the highlights of the day from 19 a news point of view, be they political or what have 20 you, but try to have the people involved on and have 21 them discuss their point of view and their topic and 22 try to relate to the community why they have taken that 23 kind of a position and, of course, try to balance that 24 with other people who have a different view. 25 14054 It's a different approach to news StenoTran 2936 1 than one might see someone sitting behind a desk giving 2 the hard punch for ten minutes. 3 14055 COMMISSIONER CARDOZO: How is that 4 show set up? What time does it run? 5 14056 MR. WAGMAN: We set it up at a 5:30 6 time and then a repeat time at 9:30 in the evening. 7 14057 COMMISSIONER CARDOZO: Do you have a 8 host who runs this? 9 14058 MR. WAGMAN: Oh, yes. 10 14059 COMMISSIONER CARDOZO: Okay. 11 14060 MR. WAGMAN: In fact, we contract 12 some of the professionals in the community to come in 13 who have worked in this field and have more experience 14 at it, but we have community people totally involved in 15 the operation so that we have people doing camera and 16 producing and all the rest of it that are, you know, 17 doing other jobs and do other things. 18 14061 COMMISSIONER CARDOZO: Do groups like 19 community groups and charities and sports groups get 20 access as well? 21 14062 MR. WAGMAN: Right across the board. 22 The variety that is there I can assure you of ethnic 23 groups, aboriginal groups, I mean our door is open to 24 sit down -- we have always looked at ourselves as 25 animatours. Those people come with an idea, a program StenoTran 2937 1 that they would like to do. Obviously we have the 2 professional help to sit down with them and help them 3 and produce a program that is of interest to their 4 group and conveys the message that they want conveyed. 5 14063 It's not our program. It's a 6 community program and their program. 7 14064 COMMISSIONER CARDOZO: We had a 8 witness on this morning who was of the view that 9 another cable company exercised too much control in 10 terms of what went on the air. You are saying you 11 don't do much of that. 12 14065 MR. WAGMAN: Well, I think you have 13 to do a certain amount of control. Let me put it this 14 way. If someone comes along just with an idea, I mean 15 we could be doing programs with nice ideas and I could 16 cite an example. 17 14066 You have a group that comes and some 18 celebrity is coming to town to make a speech. "Oh, 19 let's do that and cover it and put it on cable 20 television." Hardly is that very interesting for cable 21 television. I think that what we have to do is produce 22 programming that has that professional air about it. 23 That's what people are used to in terms of watching 24 programming. 25 14067 When I differentiate and say that we StenoTran 2938 1 do have to have some control on it, if you went ahead 2 and produced, say, some important person, let's say 3 Wayne Gretzky, and I am not trying to be hard on him, 4 but if he was in town to make a speech to the local 5 Rotary group or what have you and you covered it and 6 put it on the air, he really didn't come there to do a 7 television production. He came there to speak to an 8 audience in a particular hall. I'm not certain that's 9 worthy of the time and effort and resources that we put 10 into it. 11 14068 On the other hand, you could take 12 another group that was doing something locally. It 13 might be the Humane Society who has a particular need 14 this week with respect to the animals that are in the 15 shelter. It would seem better if we put the resources 16 that way than use them in the first instance, but you 17 have to make decisions like that as you go through any 18 given day in production or any given week in 19 production. 20 14069 COMMISSIONER CARDOZO: In an average 21 day, how many hours of first run programming do you 22 have? 23 14070 MR. WAGMAN: We do 60 hours a month 24 of first run programming, so on average that would be, 25 you would say, two hours a day. StenoTran 2939 1 14071 COMMISSIONER CARDOZO: A couple of 2 hours a day. A lot of that is repeated so people get 3 to see it. 4 14072 MR. WAGMAN: The repeat time is not 5 included in that 60 hours, but certainly the news break 6 is repeated at a later time in the day. 7 14073 COMMISSIONER CARDOZO: Okay. From 8 your knowledge as the relatively new chair of CCTA, are 9 you doing more than your fellow members? 10 14074 MR. WAGMAN: Our company started off 11 that way with a definite commitment to the community 12 channel and the programming that was done. I think in 13 fairness you have to look across the country at each 14 particular situation and the kind of programming and 15 the amount of programming that's done and its 16 importance to community. 17 14075 I think that varies from system to 18 system. I don't it's, you know, we copy anybody, nor 19 does anyone copy us in the way we do it. 20 14076 COMMISSIONER CARDOZO: The question 21 facing us that has been put to us is people are not 22 seeing enough local programming and that we should do 23 something about it. Should we or should we not? 24 14077 MR. WAGMAN: Well, one of the 25 difficult things, Commissioner, that we are faced with, StenoTran 2940 1 of course, as I said is we have had, and I don't mean 2 this in a negative way, but our 3 per cent contribution 3 to the production funds means 3 per cent that we don't 4 have any more. It had to come out of what we were 5 formerly using in community programming. 6 14078 I can tell you within our system that 7 was going to look like ten cuts on staff and a reduced 8 number of hours. We have made the commitment to carry 9 on and continue with an excess of 5 per cent 10 contribution as well as the contribution we make to the 11 programming fund and we are going to continue to do 12 that and that's just our decision because I mean 13 everybody has to do that, but we are going to continue 14 to do it because we think it's important. 15 14079 MR. STURSBERG: Can I just make one 16 comment on that, Fred? 17 14080 MR. WAGMAN: Yes. 18 14081 MR. STURSBERG: I think it's 19 important to understand also a little bit about the 20 difference about the financial structure of Cable 21 Regina and the financial structure of some of the 22 others. 23 14082 Cable Regina is a co-op. They have 24 an opportunity to be able to make greater investments 25 over and above the 2 per cent the Commission has StenoTran 2941 1 mandated which for other companies, particularly 2 publicly traded companies, would be very difficult to 3 make. 4 14083 On the more general question, as the 5 broadcasters retreat from local broadcasting, then the 6 community channels are -- my general sense of the 7 industry as a whole -- enthusiastic and happy to step 8 into that role. In fact, there isn't anybody else who 9 can step into that role. They are the only ones with 10 the facilities and the experience and the staff to be 11 able to do it. They would love to do it. They would 12 love to do it. 13 14084 There will be, as Fred has mentioned, 14 financial constraints which in his case, because his 15 financial structure is somewhat easier to deal with 16 than it will be the case of others, so we would like to 17 do that, we would like to step up to that, but we are 18 going to have to think a little bit about how, you 19 know, to get a little bit more revenue into it so it 20 can be a quality service that will be a service to the 21 community that will genuinely replace, if not more so, 22 the kind of local broadcasting service Canadians have 23 come to depend on. 24 14085 COMMISSIONER CARDOZO: In response to 25 the people who are asking the Commission to do StenoTran 2942 1 something about the lack of local programming, do you 2 have any suggestions beyond what Mr. Wagman said, 3 unless you want to add something more, Mr. Wagman. 4 14086 MR. WAGMAN: No. 5 14087 MR. STURSBERG: Yes, we will have 6 some suggestions for you. 7 14088 I do think that we would like an 8 opportunity to -- you know, we have obviously been 9 following this hearing. It's no secret that the 10 broadcasters have been withdrawing from local 11 broadcasting for years now. I understand why that is 12 and I understand that's where they are going. That is 13 what it is. 14 14089 We have been thinking very hard about 15 the community channel over the course of the last two 16 or three years. We have done a great deal of work 17 recently to try to improve the community channel, to 18 strengthen it. You heard from the Shaws what they were 19 doing. It's quite innovative. Rogers has done a great 20 deal of work. Videotron is just putting in a new 21 strategy right now. 22 14090 Fred's community channel I think is 23 certainly one of the most important in the country in 24 the sense that it is absolutely central to the life of 25 Regina. We have been doing a lot of studies of the StenoTran 2943 1 community channel to try to find out what things are 2 working well in terms of changes, how do customers 3 respond to it. We have learned some things there. 4 14091 One of the things that I have learned 5 which is probably the most interesting for me, in any 6 event, is that obviously the community channels are 7 most important in the smallest media centres. 8 14092 In Toronto, you know, they are doing 9 a good job with their community channel at Rogers. In 10 Ottawa they are doing a good job, but it's not 11 obviously as important to the community because there 12 are other sources. There are other sources of 13 television news. 14 14093 If you look at a place like 15 Chicoutimi or Trois Rivieres or Moose Jaw or Penticton, 16 then the community channels become exceptionally 17 important and they will take on more and more 18 importance, even in mid-size centres like Regina 19 because, as Fred says, there is nobody left in Regina 20 and there's nobody left in Saskatoon. 21 14094 MR. WAGMAN: The people are there. 22 14095 MR. STURSBERG: No, no. Sorry. I 23 meant there are no TV guys from the networks. 24 1705 25 14096 So it is going to become more StenoTran 2944 1 important and we would like an opportunity to come back 2 to you to talk to you some more about the community 3 channel. 4 14097 COMMISSIONER CARDOZO: In the context 5 of this hearing or next year with BDU? 6 14098 MR. STURSBERG: Our thinking was 7 this, that once you have concluded this hearing, I 8 think you will draw some conclusions to the effect that 9 there is an issue about local programming, and it is 10 going to be difficult for the broadcasters to deal with 11 that. 12 14099 You know, however -- however you want 13 to move forward after that, if you would like to have a 14 further discussion about local programming, or the role 15 of the community channel, we would welcome that. 16 14100 COMMISSIONER CARDOZO: Okay. So if 17 you have any more suggestions within the context of 18 this hearing, you will let us know by the famous date 19 of October 15. 20 14101 MR. STURSBERG: We will. 21 14102 COMMISSIONER CARDOZO: Thank you. 22 14103 Thank you, Madam Chair. 23 14104 THE CHAIRPERSON: Commissioner 24 Pennefather. 25 14105 COMMISSIONER PENNEFATHER: My StenoTran 2945 1 question was asked, Madam Chair. Thank you. 2 14106 THE CHAIRPERSON: I have very few 3 questions, but I do have some questions related to this 4 hearing. I am glad to see that at page 13 you say 5 that: 6 "...it is unlikely that changes 7 in the existing regulatory 8 mechanisms, including increases 9 in Canadian content quotas, will 10 change this pattern." 11 14107 Of 30 per cent, or whatever level of 12 viewing, to Canadian content. 13 14108 You have calculated, and at 4.3, 14 which is just one paragraph, two paragraphs lower, you 15 note that: 16 "According to the CBC research, 17 three types of programming -- 18 news, public affairs and 19 sports -- account for about 20 three-quarters of Canadian 21 viewing of Canadian 22 English-language programs." 23 14109 I take it from your response to 24 Commissioner Wilson that, indeed, there are some 25 regulatory mechanisms available to improve that, StenoTran 2946 1 contrary to what you say here, that: 2 "...it is unlikely that changes 3 in the existing regulatory 4 mechanisms...." 5 14110 If you mean exhibition requirements, 6 spending requirements, scheduling requirements, that 7 they could, indeed, change that pattern. 8 14111 MR. STURSBERG: Yeah, I didn't mean 9 to imply that there was no way of improving the 10 machinery that is in place. 11 14112 THE CHAIRPERSON: Because the two, if 12 you put the two together, that three-quarters of the 13 viewing is to news, public affairs and sports, and if 14 you did try to improve the availability and the 15 scheduling of those other categories that are not 16 watched, possibly you would have watchers, you would 17 have viewers. 18 14113 MR. STURSBERG: Yes. As I was saying 19 earlier to Commissioner Wilson, as you are struggling 20 with this from a regulatory point of view, changing 21 hats, we are obviously struggling with that question 22 from a financing point of view. 23 14114 Obviously, I think what everybody 24 would like to be able to do is, if at all possible, to 25 find machinery that would allow better viewership for StenoTran 2947 1 the unrepresented categories and drive the numbers up. 2 14115 Our only point here is this is a 3 challenge, this is hard, and that I think Dave's point 4 is right, it is an accomplishment to have been able to 5 hold at 30, but we seem to be a bit stalled so we are 6 going to have to use some imagination whether on the 7 regulatory side, and you have heard a gazillion briefs 8 at this point, but whether on the financing side; and, 9 as I mentioned yesterday, we have been doing a lot of 10 work to try to figure out how to help lift those 11 numbers. 12 14116 THE CHAIRPERSON: At page 28, you 13 say, when you discuss digital capacity, that: 14 "...the model adopted by the 15 Commission for the launch of new 16 digital services should give 17 customers' wishes regarding 18 Canadian programming services 19 absolute precedence, and allow 20 customers to determine what 21 services they do, and do not, 22 want to receive." 23 14117 And, at page 38, in the fourth 24 bullet, that: 25 "The Canadian content rules StenoTran 2948 1 should be put on a more market 2 driven basis;" 3 14118 Are you saying here that customers 4 should -- that programming should be -- services should 5 be made available to customers in a manner that they 6 can choose not to receive any Canadian programming at 7 all? Is that what you mean by market "driven" and 8 "customers' wishes should take precedence" altogether? 9 14119 If it means that, how do you marry 10 that, to use Commissioner Wilson's expression, to the 11 mandate that we have to ensure that we keep a viable, 12 vibrant programming -- Canadian programming sector with 13 a diversity of high quality programming made available? 14 Do you mean here that -- 15 14120 MR. STURSBERG: No. 16 14121 THE CHAIRPERSON: -- you would want 17 the, for example, the one-to-one ratio changed, or that 18 the precedent -- at least as many Canadian services 19 being offered as non-Canadian, that all that should be 20 market driven, and that Look TV should take that little 21 asterisk comment at the bottom of the page and say, "We 22 will sell you 15 American channels, if that is what you 23 want"? 24 14122 MR. STURSBERG: I think we are 25 anticipating a little bit the framework hearing that is StenoTran 2949 1 coming up. 2 14123 THE CHAIRPERSON: Oh, it is not like 3 we haven't today. 4 14124 MR. STURSBERG: Have there been a few 5 words about it already today? 6 14125 THE CHAIRPERSON: You have had a 7 pretty fair earful. 8 14126 MR. STURSBERG: We haven't got to the 9 really good proposals that we have sitting back at the 10 office to offer. 11 14127 THE CHAIRPERSON: I am surprised that 12 you would raise that. 13 14128 MR. STURSBERG: But I think that is 14 an admonishment; I think I am chastised. 15 14129 THE CHAIRPERSON: Not that you didn't 16 get any help. 17 14130 MR. STURSBERG: I am trying to walk a 18 fine line here. 19 14131 No. I think the short answer is no; 20 that obviously that our proposal is not going to be 21 that people should be able to receive uniquely just 22 exclusively American services. How the linkage rules 23 will work in a future digital environment will depend 24 on part, of course, on what happens to the authorized 25 services lists, and people have different views about StenoTran 2950 1 that. 2 14132 I think our point is a slightly 3 different point. Our point here is this: There has 4 been a lot of discussion by some of the services that 5 they are worried about moving into much more customer 6 friendly distribution environments where the customers 7 get to pick the services they want. You have heard 8 some observations by some of the services saying, "No, 9 no, you shouldn't allow that to happen in a digital 10 world. You should force them to be all packed up 11 together in tiers. You should never let customers take 12 full advantage of the technology." 13 14133 Now, our view would be different. 14 Our view would be that we understand that customers are 15 frustrated by their lack of choice. It is one of the 16 reasons we must go into digital. We would like them to 17 be able to enjoy the maximum level of choice possible 18 consistent with ensuring that there are strong Canadian 19 services available. 20 14134 THE CHAIRPERSON: So you would agree 21 with the view that the mandate of the Commission in the 22 act is an active one; it is one that says, try to find 23 some ways that will ensure that quality and diverse 24 Canadian programming is available and, hopefully, 25 encourage the knowledge of its existence and the -- to StenoTran 2951 1 encourage people to get to know what it is, and there 2 have been various proposals put forward on conventional 3 television, which is really what this hearing is about, 4 is how do we improve that system? 5 14135 Considering what this hearing is 6 about, those comments would lead me to believe, 7 perhaps, that you would endorse, if you had a choice 8 between the CAB and the CFTPA view, you are speaking 9 here not with the same hat as you spoke yesterday, that 10 looking at viewership would be, indeed, a very good 11 idea because that is how people express what it is they 12 want to watch in the greatest number. 13 14136 MR. STURSBERG: I have been following 14 this hearing with great interest, and I know that a lot 15 of the questions that you have put to people have been 16 questions about quality versus viewership. I think 17 myself that this is a kind of false dichotomy. 18 14137 THE CHAIRPERSON: I don't mean 19 quality. I think I made it clear that I don't mean 20 quality of a program. I mean quality in the sense of 21 the quality of the system and the extent to which it 22 matches the directions that are given to the regulator 23 in a Broadcasting Act which is still on part of the 24 legislation. I think I am -- if you did watch the 25 hearing, I am not talking about the quality of a StenoTran 2952 1 series, of a program, of a soap opera. I am talking 2 about the quality of the system in the sense of its 3 diversity and the hours at which Canadian programming 4 is available so that people get to know and develop a 5 loyalty towards certain Canadian program quality in 6 that sense. Because it is very difficult to take a 7 program and say, "This is quality". But that is 8 exactly what you would be doing if you use viewership. 9 You would say, that which is the most watched is the 10 best program to offer the public to satisfy the 11 dictates of the Broadcasting Act. 12 14138 MR. STURSBERG: I don't think we 13 would take that view. I think we would take a slightly 14 different view, which would be this, that the way the 15 system is structured right now is one that is designed 16 to encourage radical levels of diversity. We have more 17 diverse programming in Canada than practically any 18 country in the world. 19 14139 THE CHAIRPERSON: Canadian 20 programming. So you don't think we have 21 underrepresented categories of programming, then. 22 14140 MR. STURSBERG: No, I didn't say 23 that; that what is a great program for a specialty 24 channel may be a different test for a conventional 25 broadcaster. So what you would say on the History StenoTran 2953 1 Channel or on the Life Channel or on Bravo, you would 2 expect those services to put on programs which would 3 perform very differently in terms of viewership. 4 14141 I wouldn't even say viewership was 5 the gigantic test in those circumstances; but for 6 certain kinds of programming, I think we would all 7 agree that when it comes, for example, to mainstream 8 popular Canadian drama, we would like to see dramas 9 made, promoted and scheduled in a way where they are 10 watched more. That is the beginning and the end of it. 11 14142 I am not sure that anybody that has 12 been here so far would necessarily disagree with that. 13 Certainly, I don't detect anything that the producers 14 have said that they would like to see Canadian dramas 15 watched less. I think they would like to see Canadian 16 dramas watched more, too. 17 14143 THE CHAIRPERSON: Yes, but they were 18 not the ones who put forward the idea that we should 19 measure success of how we meet -- 20 14144 MR. STURSBERG: That is not our 21 proposal either. 22 14145 THE CHAIRPERSON: -- the mandate of 23 the Broadcasting Act. 24 14146 So there has been two different views 25 put forward, one which would measure success or quality StenoTran 2954 1 of the system, perhaps I shouldn't use that word any 2 more, but the extent to which it matches what it is we 3 are supposed to strive toward, and a different view is 4 spend enough money on the programming, put it on when 5 people are watching and you may see that 30 per cent 6 increase and a loyalty being developed, et cetera. 7 14147 So that was my question, which is not 8 entirely free market. If you say, "I will take the 9 BBMs and I will see what it is people like to watch, 10 that is what I will offer." You get a different result 11 altogether. 12 14148 It isn't as managed a system, but I 13 don't know just what room there is considering all 14 kinds of factors you are aware of to not have some 15 management, and it is a question of how you do it. 16 14149 MR. STURSBERG: I agree completely. 17 14150 THE CHAIRPERSON: I know that there 18 is one area where the CCTA's proposal and the Shaw 19 proposal are identical. That is at page 8 where Shaw, 20 as you heard the question yesterday, also made a very 21 similar chart, identifying the total value of cable 22 industry contributions to Canadian programming. I 23 would be repeating myself if I went down the list to 24 end up with the same proposal that I would set up that 25 list differently. StenoTran 2955 1 14151 MR. STURSBERG: Yes, I heard their 2 answer. 3 14152 THE CHAIRPERSON: Because you are in 4 the business of selling product that you purchase. 5 14153 MR. STURSBERG: Yes. 6 14154 THE CHAIRPERSON: And your 7 contribution, your largest contributions are the 8 payments you made to Canadian specialty services. 9 Those are not donations. 10 14155 MR. STURSBERG: Correct. 11 14156 THE CHAIRPERSON: Okay. So, anyway, 12 you know what my point is. 13 14157 MR. STURSBERG: Yes, and I still 14 disagree with your point. 15 14158 I mean, for example, the broadcasters 16 point out that they make very substantial contributions 17 to Canadian content, and they make it in two forms. 18 14159 THE CHAIRPERSON: And so do you and I 19 have not raised the CPAC matter. 20 14160 MR. STURSBERG: No, but content. 21 14161 THE CHAIRPERSON: Or the Production 22 Fund contributions, even though they come from the 23 subscribers. 24 14162 MR. STURSBERG: If you don't mind my 25 just carrying on for one second longer because I think StenoTran 2956 1 this is a little unfair. 2 14163 The broadcasters buy programming and 3 they spend money hiring people to make programming. 4 That is a genuine contribution on their part to 5 Canadian programming. We do exactly the same thing. 6 We are buying channels of Canadian programming and 7 making them available to Canadian customers. There is 8 no difference. 9 14164 I think that that -- to look at it 10 that way around puts us on exactly the same footing as 11 the broadcasters for purposes of comparing who is 12 making what contribution to Canadian programming. This 13 $700 million that we spend on Canadian channels -- 14 Canadian channels -- is 25 per cent, pretty well, of 15 our total revenues. This is far and away, aside from 16 debt and just simply putting cables in the ground, the 17 biggest component of expense. And that is as surely a 18 contribution to Canadian programming as the 19 broadcasters buying programs from independent 20 producers. We are buying them from the channels. 21 1725 22 14165 If we didn't pay this money to them, 23 if we didn't go out and market those services so that 24 we would have the money to pay to them, there wouldn't 25 be any Canadian channels. Overwhelmingly, the Canadian StenoTran 2957 1 channels depend on this source of revenue. This is 2 about depending on the channel, but on average between 3 80 and 85 per cent of the total revenues go to the 4 Canadian channels. That's quite apart from the amount 5 of money, which we mentioned earlier. We have sunk $4 6 billion into glass and copper in the ground so that 7 those channels can exist. 8 14166 THE CHAIRPERSON: I quite understand 9 and I did mention during the presentation of Shaw 10 Communications as well that the specialty services 11 would not get to the customer but for you, but when the 12 specialty services come before us, quite possibly in 13 many cases their programming service would look quite 14 different if the Commission didn't impose spending and 15 exhibition requirements on Canadian content, and that's 16 what they call the contribution. 17 14167 I understand sufficiently how this 18 works to know that that's not perfect, either, but then 19 they bring to you those services where they contributed 20 to Canadian content and you retailed them to your 21 subscribers. Of course, without you, it's true, they 22 wouldn't get there, but it's a bit bizarre -- 23 14168 MR. STURSBERG: No, no, sorry, it's 24 more than that. 25 14169 THE CHAIRPERSON: Anyway, I don't StenoTran 2958 1 think it's worth -- 2 14170 MR. STURSBERG: No, I think it is 3 because I think that it's really important to 4 understand the role of the cable industry with respect 5 to the support of Canadian programming. We have spent 6 a fortune building those channels and we have spent a 7 small fortune marketing the third tier. The amount of 8 money that we have spent marketing the third tier 9 dwarfs anything that has been put into it by the 10 channels. If we didn't build those channels, if we 11 didn't market those tiers, they would have no business. 12 14171 Now then what happens is -- 13 14172 THE CHAIRPERSON: I have already 14 acknowledged that. 15 14173 MR. STURSBERG: I know, but why is it 16 unfair to say that this $700 million that we pay to the 17 Canadian channels is an illegitimate contribution to 18 Canadian programming when, if the broadcasters go and 19 buy programming from an independent producer, that's a 20 legitimate contribution. I don't understand the 21 distinction. 22 14174 THE CHAIRPERSON: That is not the 23 distinction I was going to make. The one that I made 24 yesterday and make today is that these columns of a 25 different sort and your contribution, for example, to StenoTran 2959 1 cable in the classroom and to CPAC is not of the same 2 type. I would put them both on the page, it's quite 3 legitimate to, it's just that there is a distinction to 4 be made between some of these lines and others. 5 14175 My last question or comment is, I 6 suppose, part of my contribution to the rehearsal for 7 the next process. This morning on my way to the 8 hearing I crossed the Eddy bridge, as I do every 9 morning when I come to work, and I could see that 10 Cirque du Soleil was setting up. I think for most 11 citizens who have seen the Cirque du Soleil, perhaps 12 what you remember the most is the contortionists and I 13 thought that's a bit where we are at now, isn't it? 14 14176 We have throughout your oral 15 presentation and in this presentation a situation that 16 is going to take a lot of patience and cooperation to 17 get into some uncontortioned status. In 1996, when 18 many channels that were supposed to be digital channels 19 were licensed and only four channels were to be given 20 access, the Commission had been told, of course, that 21 there were very few channels to be used. 22 14177 Lo and behold, 16 channels were used, 23 some to carry these digital intended services and many 24 to carry American services. In the process, my 25 understanding is that many channels were harvested from StenoTran 2960 1 the premium services. If I remember, there were as 2 many as 18 or 19 channels in Toronto devoted to premium 3 services and certainly many in Ottawa, which have been 4 reduced drastically in most large cable companies. Is 5 that correct? 6 14178 MR. STURSBERG: Yes. 7 14179 THE CHAIRPERSON: So, those channels 8 were harvested for that purpose. Now we are saying 9 that to move to digital we have to have analog channels 10 to harvest and we can't do that because they are being 11 used to carry all these services. So, there is my 12 imagery of contortion. 13 14180 Then at page 6 you talk about using 14 the premium services customers to move into the digital 15 world and yet the premium services' appeal is greatly 16 reduced. So, I assume by that, in large part, it's 17 your pay customers to which, presumably, you will 18 increase -- how will you increase the appeal of what 19 you consider is the part of the service that will allow 20 you to move into digital if you take away these analog 21 services to offer other services and get a full house, 22 so to speak, with a greatly reduced premium service 23 number of channels? It's a contortion that has no end. 24 14181 MR. STURSBERG: What we harvested was 25 some pay-per-view channels. StenoTran 2961 1 14182 MR. STURSBERG: Yes, and that's the 2 core of your premium service. 3 14183 MR. STURSBERG: I don't know that I 4 would call that the core of the premium service. 5 14184 THE CHAIRPERSON: Well, what is it 6 then? 7 14185 MR. STURSBERG: It's the pay 8 television service itself. 9 14186 THE CHAIRPERSON: Yes, but that's 10 what is less appealing when there are fewer channels. 11 14187 MR. STURSBERG: No, it's because -- 12 in most cases, what happened was they were pay-per-view 13 channels, so they were not the pay channels themselves. 14 They were the pay-per-views. 15 14188 THE CHAIRPERSON: Well, pay-per-view 16 would be part of the premium service, too, in the 17 regulatory -- 18 14189 MR. STURSBERG: Yes, it's part of it, 19 but, on the other -- 20 14190 THE CHAIRPERSON: -- environment. 21 14191 MR. STURSBERG: I think you are 22 partly right, but not because of the pay-per-view 23 channels. I think the way in which the pay service was 24 diminished was, frankly, by the moving of the Family 25 Channel and WTBS onto the third tier. I agree with -- StenoTran 2962 1 14192 THE CHAIRPERSON: That's also a 2 choice. I am simply questioning how we will ever get 3 out of this contortion of: We don't have enough 4 channels, so then we won't license too many that you 5 can't carry because we are going to wait for digital. 6 Then those are carried by Choice, as well as American 7 services. Then we have no analog channels left. Then 8 you say today that it's the premium customers that will 9 make it easier to go to digital, but at the same time 10 you talk about the need to have analog channels to 11 harvest. 12 14193 MR. STURSBERG: Let me try to help 13 this out. I will do my best. 14 14194 Right now the premium channels are 15 analog. Those are the ones that we propose to harvest 16 for digital. So, they are there right now. We have 17 those channels to harvest for digital. 18 14195 THE CHAIRPERSON: You have not used 19 any of these channels since 1996 to put any of the 20 Me-16 on or the new American and Canadian. 21 14196 MR. STURSBERG: What happened to 22 build the third tier was there was some channel 23 capacity available already. In certain systems to get 24 enough channels to accommodate the relatively large 25 tier, what they had to do was kick out exempt services StenoTran 2963 1 and/or harvest some of the pay-per-view channels. 2 14197 THE CHAIRPERSON: Yes. Well, that's 3 my point. 4 14198 MR. STURSBERG: Right. So, we did 5 that. 6 14199 Now, having done that, we still have 7 the premium service and sufficient analog channels on 8 it. On average, about 10, I think. 9 14200 MS BECK: Yes. 10 14201 MR. STURSBERG: About 10. 11 14202 MS BECK: And they are scrambled. 12 14203 MR. STURSBERG: But we have about 10. 13 So, we say, "All right, those are the 10 we are going 14 to take and that we are going to digitize and put the 15 boxes in and swap out the boxes." Now, that's where 16 you would want to do it, in any event. So, we have 17 enough channels because you figure that the first 18 people who are going to take it are the people who are 19 most interested in television; i.e., those who take the 20 most already. 21 14204 As far as the third tier launch is 22 concerned, there is -- you are absolutely right, there 23 is a very complicated trade-off associated with this. 24 Are we better off culturally, are we better off as a 25 broadcasting system for us to have harvested the StenoTran 2964 1 pay-per-view channels, which I tell you right now are 2 basically American movies, that's all they are, and 3 boxing matches. Are we right to have taken those 4 channels and made them available for a whole bunch of 5 digital Canadian services that otherwise wouldn't have 6 gotten launched? 7 14205 My own view would be I think that was 8 a good choice. I think it was a good choice in terms 9 of making sure the third tier was a strong tier that 10 people would want to take. The numbers have been very 11 good. They have held up between 12 and 15 per cent 12 shares since launch and, secondly, it has been very 13 good because it allowed a whole bunch of Canadian 14 channels to get on, the digital ones -- 15 14206 THE CHAIRPERSON: And American. 16 14207 MR. STURSBERG: Oh, yes, and some 17 American channels, too. In fact one of the things that 18 has done very well for us is TBS. TBS has taken 19 typically a two and a half to three share. It has been 20 a very powerful driver of that channel, there is no 21 doubt about it. So, we got a package out there that 22 was good for the analogs and it was good for the 23 digitals. Has it been hard to sell it? You bet. 24 14208 THE CHAIRPERSON: I am not 25 criticizing your choice, I am talking about how do we StenoTran 2965 1 get out of the contortions. I'm not criticizing what 2 choices you make. If you say that was better for 3 Canadian content, that was your choice, but then each 4 time -- how many analog channels does Ottawa have, for 5 example, that are supposedly required to be harvested 6 to move into the digital world? 7 14209 MR. STURSBERG: Can I ask you a 8 question, though. I mean in fairness, you know, 9 wasn't -- okay, I won't ask the question. But I think, 10 in fairness, everybody would agree that when we 11 launched the extra digitals onto the third tier, the 12 Canadian digitals -- in fact, as you know now MuchMusic 13 is getting up and "Sports Desk" is getting up, and so 14 on. Once we did that, that was a good trade-off from a 15 public policy point of view and a Canadian cultural 16 point of view to say it's more important to have 17 Canadian specialty services than American pay-per-view 18 movies. I make that point. 19 14210 As far as the sufficient capacity to 20 be able to do analog is concerned -- I mean digital, 21 right now we have about 10 channels on the premium. It 22 varies from system to system. Some still have more 23 pay-per-views that we could take out, but, 24 nevertheless, we still have about 10 that we could 25 shift over. Will we have to build more analog capacity StenoTran 2966 1 to be able to handle HDTV? You bet. We are going to 2 have to do that. We don't have enough capacity. 3 14211 THE CHAIRPERSON: That's 4 contortioning way too high. We haven't even gotten to 5 digital. Mr. Sward and Mr. McEwen agreed that there 6 will not be a whole lot of movement towards HDTV until 7 cable is digital. That's the first step. 8 14212 MR. STURSBERG: Well, until we are 9 not only digital, but we have enough capacity to handle 10 it. I mean all these trade-offs between -- this is 11 exactly what we were saying before. The trade-offs 12 between Canadian services, on the one hand, versus 13 duplicate Canadian services or duplicate American 14 services in HDTV is going to be a fundamental issue 15 with respect to the utilization of digital capacity in 16 the future. 17 14213 The other fundamental issue that 18 confronts us is this. As the Commission has ruled 19 already, these channels cost 16.2 cents per channel. 20 So, we have to find services that will cover those 21 costs so we can pay the debt that Dave was referring to 22 at the bank. Now, if we get only 50 per cent 23 penetration on one of those channels, we don't need 24 16.2 cents, we need to have 32.4 cents revenue coming 25 from the customer per channel to be able to cover the StenoTran 2967 1 costs. 2 14214 So, there are very complicated cost 3 revenue trade-offs as well that I think we all confront 4 collectively -- the Commission, the services, the cable 5 industry -- to be able to ensure that we can build that 6 capacity and guarantee that there is going to be more 7 room for new Canadian services as we move forward. 8 14215 THE CHAIRPERSON: We will obviously 9 have more chance to discuss all this the next time, but 10 within a span of two years the environment shifts 11 dramatically and doesn't necessarily see us going 12 towards our goal of presumably giving more choice to 13 the subscriber by having more capacity. I just don't 14 see at the moment how the contortions allow us to get 15 back into a straight shape. 16 14216 Mr. Watt, when you talk about 17 harvesting analog channels, that's a timing problem, is 18 it? At a certain point you would have to shut down 19 certain services, harvest those channels, do the 20 compression and presumably then you release more 21 channels. It's a timing problem. 22 14217 MR. WATT: It is a timing issue. I 23 think the point you are getting at is that in order to 24 take the analog channel, you have to shut down whatever 25 else was on that channel previously so that -- StenoTran 2968 1 14218 THE CHAIRPERSON: For how long? 2 14219 MR. WATT: It is gone forever. 3 14220 THE CHAIRPERSON: Presumably you shut 4 down service X on analog channel X and then you 5 compress and release more channels. So, service X 6 presumably could then be put on the release channel. 7 1740 8 14221 MR. WATT: It can be put on -- let me 9 back up. Let's say if you take -- say take the most 10 constrained system today and say there is only one 11 pay-per-view offered, you would -- that would be the 12 easiest one to take and then you would say, "Well, we 13 now have eight channels that we could put digital 14 services on," but what that means is that no one could 15 take in that system and that one analog pay-per-view 16 channelling. So, in other words, that system is gone. 17 14222 THE CHAIRPERSON: But for your -- 18 14223 MR. WATT: Service. 19 14224 THE CHAIRPERSON: For your premium 20 services, you would not have a digital box, that is 21 fine. 22 14225 MR. WATT: That is right. 23 14226 THE CHAIRPERSON: Because if you are 24 a premium service the problem I understand is that not 25 everybody is going to have a box. You are going to StenoTran 2969 1 have a duplication. But there is a timing problem. It 2 is not a completely -- maybe there would have to be 3 some shutdown or whatever, but you always get the 4 impression that somehow or other we are going to 5 compress from eight to one and nothing helpful is going 6 to come out of this. You need dozens of analog 7 channels harvested to do it. There are other ways of 8 looking at this so that this timing problem is managed. 9 14227 Because it can't be that you are 10 going to compress and release channels and not have 11 anything at the end of the day that is more -- where 12 there is more space left for the same number of 13 services. 14 14228 MR. STURSBERG: Can I try it on to 15 see if we can -- the problem is that when we take the 16 existing analog channels, say we have got 10 premium 17 channels, and then we convert them over to digital, 18 that is fine. You are right to say that what happens 19 at that point if we are running on eight to one is we 20 get 80 channels, so we keep back 10 for the 10 services 21 that are already on there, and you are left with 70 new 22 ones. Those 10 services that were already on there are 23 now available in digital. Fair enough. 24 14229 What you can't do, however, is 25 simultaneously run both an analog and a digital network StenoTran 2970 1 infrastructure. In other words, if you would be saying 2 to us, "Keep the analog premium boxes in," and then 3 take a bunch of other analog capacity that you would 4 get from somewhere or other, say you built it, and 5 digitize that capacity, then people would say, "It's 6 impractical both economically and technically to do 7 that," because we would effectively be running two 8 systems and make ourselves completely crazy in the 9 process. 10 14230 So, I don't know if that answers your 11 question, but I think that the reason why we keep 12 looking at it this way around about, taking out the 13 pay, premium analog channels is because that is the 14 simplest, most practical and most economic way of going 15 at what is quite a difficult proposition. 16 14231 But if we duplicated the 17 infrastructure so we are running both analog and 18 digital simultaneously, we will make the costs even 19 worse and the technical complexity of managing the 20 network just too great. 21 14232 THE CHAIRPERSON: More services, of 22 course, could be moved to the premium that are not 23 analog -- now analog and not offered on analog. 24 14233 MR. STURSBERG: Yes, but if we moved 25 more services up from the tiers on to the premium, I StenoTran 2971 1 think that we would have problems with our customers. 2 14234 THE CHAIRPERSON: It is not like you 3 don't have some now when you can't have the third tier 4 penetration as high as it was hoped for. So, nothing 5 it perfect. That is why I am talking about 6 contortions, but there has to be some -- any way, we 7 will have lots of time to look at all this. But there 8 are various views as to how this can be done. 9 14235 Certainly, what has been obvious in 10 the last few years is that what the needs are and the 11 ability or the capacity is appears to be one thing, and 12 then it is another, and then it is another again, 13 within a very short span of time. 14 14236 So somehow or other, hopefully, we 15 will be able to address this in a manner that can move 16 us forward with the goal that we are looking at in this 17 proceeding, which is to offer as many Canadian services 18 as possible, and other services to the public, at good 19 prices. 20 14237 I think everybody is agreed that 21 having more channel capacity is central to that. We 22 are not -- I think we have gotten ourselves into more 23 knots in the last two years than there were before. 24 There is a shift of what the needs and the capacity is 25 and, in the end, it is related to a large extent to StenoTran 2972 1 what the goals are. 2 14238 Counsel. 3 14239 MR. BLAIS: Thank you. I realize it 4 is late in the day and everyone is a bit tired, but 5 there are just two points I want to clarify with you. 6 With a bit of trepidation I would like to bring you 7 back to page 8 and the contribution. In fairness to 8 you I really want to understand your point here. 9 14240 On the first line you say, "Payments 10 to Canadian cable specialty channels". So this is the 11 gross amount that all cable companies are paying 12 specialty channels? 13 14241 MR. STURSBERG: Yes. 14 14242 MR. BLAIS: And on the "Payments to 15 Canadian cable pay-TV channels" it is a gross amount 16 being paid. 17 14243 MR. STURSBERG: Yes, as far as I 18 know. Dave, you will have to help me out here. 19 14244 MR. WATT: That is correct. 20 14245 MR. BLAIS: You will agree with me 21 that both cable specialty channels and pay-TV channels 22 are not 100 per cent Canadian, that in fact the 23 programming, Canadian programming is less than 100 per 24 cent. 25 14246 MR. WATT: Yes. StenoTran 2973 1 14247 MR. BLAIS: I put it to you that even 2 the broadcasters are not suggesting that their entire 3 programming expenses, whether Canadian or non-Canadian, 4 are contributions to Canadian programming. Is that 5 correct, Mr. Stursberg? 6 14248 MR. WATT: That is fair. 7 14249 MR. BLAIS: Would you agree with 8 that, Mr. Stursberg? 9 14250 MR. STURSBERG: Yes, I would agree 10 with that. 11 14251 MR. BLAIS: So, in fact, if you were 12 to use your philosophy to make an equation, the numbers 13 ought to be reduced by the actual amount of Canadian 14 programming being presented on those specialty and 15 pay-TV channels? 16 14252 MR. STURSBERG: We can do that 17 calculation, if we can get the numbers from the 18 services themselves. We would be happy to do it for 19 you. 20 14253 MR. BLAIS: It is not the exact 21 number that was -- 22 14254 MR. STURSBERG: No, but these are the 23 numbers that we know. 24 14255 MR. BLAIS: I realize that. But it 25 was the methodology that I wanted to get to. StenoTran 2974 1 14256 The second area I would like to 2 clarify with you is on page 15. Here, we are talking 3 about the contribution by the unregulated elements of 4 the Canadian broadcasting system, you refer to them as 5 U.S. satellite services. I think I understand your 6 point, and I do understand your point. You are saying 7 that the revenues that -- the 5 per cent you are 8 contributing, in a sense, already accounts for the 9 American U.S. services and their good packaging 10 partners and provide some lift. But, as you know, 11 other parties in the proceeding have, like the CAB, 12 have suggested that the contribution on an ongoing 13 forward basis, and we will be hearing that from them a 14 little later on. As well, the CFPTA has suggested that 15 there be a condition to being added to the eligible 16 list not to buy North American rights. 17 14257 I was intrigued by your -- the point 18 there where you say: 19 "First, as the providers of 20 these services are not regulated 21 by the CRTC, there is no 22 practical means of compelling 23 such a contribution." 24 14258 Are you saying here that the 25 Commission couldn't do it; or that it is a bad idea to StenoTran 2975 1 do it? 2 14259 MR. STURSBERG: We are saying that if 3 you decided to do it, we would think that because you 4 don't regulate the U.S. services the only practical way 5 in which you could extract the money would be from us. 6 So that the way it would work as a practical matter is 7 you would say, "That is worth whatever it is worth. So 8 the cable companies now have to cough it up; and what 9 we would like you to do is to go back to the American 10 services and renegotiate your affiliation payments with 11 them to reflect the new costs". 12 14260 Therefore, we think that the danger 13 from your point of view is that this will simply turn 14 back into a tax on top of the cable companies and then 15 we will be back in the problems I was talking about 16 before. 17 14261 MR. BLAIS: Okay, thank you. I 18 appreciate that. 19 14262 You also mention the possible trade 20 disputes. I was wondering if you have had the 21 opportunity to raise this either with U.S. services or 22 foreign trade representatives? 23 14263 MR. STURSBERG: No, I don't believe 24 we have. 25 14264 MR. BLAIS: Thank you. Those are my StenoTran 2976 1 questions. 2 14265 MR. STURSBERG: I haven't. 3 14266 THE CHAIRPERSON: Thank you very much 4 for your patience. You have been sharing quite a bit 5 of your weekend with us. We are expecting great things 6 from the phase two of the coming process. If you 7 haven't seen the Cirque de Soleil, I recommend it 8 greatly. You will see what I mean. 9 14267 MR. STURSBERG: Well, if we felt like 10 contortionists over the last two years, I guess my 11 feeling is that things will be even more complicated as 12 we move forward and that the impact of these 13 technologies, changes in markets, globalization, the 14 shifts we have been talking about today will make the 15 past seem simple by comparison. Thank you very much 16 for your time. 17 14268 THE CHAIRPERSON: Do remember that 18 some of us are aging and contortions are very 19 difficult. 20 14269 MR. STURSBERG: Exactly. Thanks very 21 much for your time. 22 14270 THE CHAIRPERSON: As I mentioned 23 earlier, we are resuming at 11 Monday morning and not 24 sitting on Tuesday. 25 14271 Alors, nous reprendrons à 11 heures StenoTran 2977 1 lundi, et nous ne siégerons pas mardi, mais nous serons 2 de retour mercredi. 3 14272 Bon week-end à tout le monde. 4 --- Whereupon the hearing adjourned at 1750, to resume 5 on Monday, October 6, 1998 at 0900 / L'audience 6 est ajournée à 1750, pour reprendre le lundi 7 6 octobre 1998 à 0900 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 StenoTran
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