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                       SUBJECT / SUJET:


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



Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.


                 Canadian Radio-television and
                 Telecommunications Commission

              Conseil de la radiodiffusion et des
                télécommunications canadiennes

                  Transcript / Transcription

              Public Hearing / Audience publique

              Canadian Television Policy Review /
               Examen des politiques du Conseil
             relatives à la télévision canadienne


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


Jean-Pierre Blais       Commission Counsel /
                        Avocat du Conseil
Margot Patterson        Articling Student /
Carole Bénard /         Secretaries/Secrétaires
Diane Santerre
Nick Ketchum            Hearing Manager / Gérant de

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



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



                           Volume 8
              October 2, 1998 / Le 2 octobre 1998

Page    Lines / 

2476    19      "Saulnier Entredos"
                should read / devrait se lire
                "Sonja Smits"

2498    11      "non"
                should read / devrait se lire



 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.
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


 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


 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.


 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


 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,


 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.


 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


 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.


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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


 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


 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


 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


 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.


 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


 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?


 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


 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.


 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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.
 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


 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


 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


 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


 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


 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.


 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


 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


 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


 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.


 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.


 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


 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


 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.


 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


 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,


 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


 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. 


 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


 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


 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


 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.


 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.


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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:


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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.


 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?


 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


 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


 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


 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


 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


 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


 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


 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.
23  13042                MR. PLAMONDON:  Good morning.  Thank
24     you very much.
25  13043                THE CHAIRPERSON:  Good morning,


 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


 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


 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


 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


 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


 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


 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.


 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


 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,


 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.


 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.


 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


 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


 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?


 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.


 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


 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


 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


 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


 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


 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


 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


 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?


 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


 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


 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


 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?


 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


 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.


 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".


 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.


 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


 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.


 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


 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


 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


 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,


 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


 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,


 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


 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.


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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. 


 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.


 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


 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


 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.


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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.
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


 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


 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


 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


 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


 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


 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?


 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


 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


 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


 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.


 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. 


 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


 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


 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,


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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.


 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


 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 --


 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


 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


 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 --


 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.
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.


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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?


 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


 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.


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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. 


 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


 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


 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. 


 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


 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.


 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,


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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. 


 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


 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


 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.


 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


 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.


 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


 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.


 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


 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.


 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


 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


 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


 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,


 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


 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,


 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


 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.


 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


 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


 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


 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


 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


 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,


 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


 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.


 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


 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


 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


 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.


 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,


 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


 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


 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


 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


 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


 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                            " 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,


 1     contrary to what you say here, that:
 2                            " 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


 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


 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


 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


 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


 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


 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


 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


 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.


 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


 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


 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


 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


 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


 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.


 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 --


 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


 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


 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


 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


 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


 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 --


 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


 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


 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


 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


 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.


 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.


 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


 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


 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


 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
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