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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)

November 12, 1998                      12 novembre 1998

                           Volume  1
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

              Applications for Broadcast Licences
           Requêtes pour licences de radiodiffusion


Andrée Wylie                           Chairperson / Présidente
                                       Vice-Chairperson, Radio-
                                       television / Vice-
                                       présidente, Radiodiffusion
Joan Pennefather                       Commissioner / Conseillère
Andrew Cardozo                         Commissioner / Conseiller


Geoff Batstone                         Commission Counsel /
                                       Avocat du Conseil
Dylan Jones                            Policy Co-ordinator (BSSI)
Morag York                             Policy Co-ordinator (TVNC)
Mike Burnside                          Hearing Manager / Gérant
Diane Santerre                         Secretary / Secrétaire

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)

November 12, 1998                      12 novembre 1998

                          Volume  1


Presentation by / Présentation par:

Bell Satellite Services inc.                                 7
Viewer's Choice Inc./Canal Indigo SENC                     176
3216195 Canada Inc.                                        232
WIC Premium Television Ltd.                                262

Reply by / Réplique par:

Bell Satellite Services Inc.                               302

Presentation by / Présentation par:

Television Northern Canada Incorporated                    320



 1                               Hull, Quebec / Hull (Québec)
 2     --- Upon commencing on Thursday, November 12, 1998 /
 3         L'audience débute le jeudi 12 novembre 1998 à 0900
 4  1                    THE CHAIRPERSON:  Good morning,
 5     ladies and gentlemen, and welcome to the hearing on the
 6     applications by Television Northern Canada Incorporated
 7     or TVNC and Bell Satellite Services Incorporated or
 8     BSSI.
 9  2                    Bonjour, mesdames et messieurs, et
10     bienvenue à l'audience publique sur les requêtes
11     déposées par Television Northern Canada Incorporated,
12     ou TVNC, et par Bell Services Satellite Incorporated,
13     ou BSSI.
14  3                    My name is Andrée Wylie.  I am the
15     Vice-Chair of Broadcasting for the CRTC, and I will be
16     presiding over this hearing.
17  4                    Allow me to introduce my colleagues
18     and fellow Commissioners.  To my left is Joan
19     Pennefather and to my right is Andrew Cardozo.
20  5                    TVNC, Canada's only aboriginal
21     television programming network, has applied for
22     national distribution of an aboriginal television
23     programming service.  TVNC has said that national
24     distribution of this service, to be called Aboriginal
25     Peoples Television Network or APTN, would achieve a


 1     number of the Broadcasting Act's goals, including:
 2                            (1) that the Canadian
 3                            broadcasting system should serve
 4                            the diverse needs and interests,
 5                            as well as the special place of
 6                            aboriginal peoples within
 7                            Canada; and
 8                            (2) that the system should
 9                            provide "through its
10                            programming, a public service,
11                            essential to the maintenance and
12                            enhancement of national
13                            identity, and cultural
14                            sovereignty".
15  6                    This application is for a
16     conventional television network licence.  In it, TVNC
17     states that APTN would provide a first level of service
18     to Canada's diverse aboriginal population, like that
19     originally provided by Canadians by CBC/Radio-Canada
20     when radio and television were first introduced.
21  7                    TVNC propose que sa chaîne diffuse
22     des émissions en langues anglaise, française et
23     autochtone.  La programmation viserait tout aussi bien
24     les autochtones que les non-autochtones, vivant dans le
25     nord comme dans le sud, alors que présentement seuls


 1     les téléspectateurs dans le nord du Canada ont accès au
 2     réseau TVNC.
 3  8                    This applications stems partly from
 4     the Commission's public hearing last November on the
 5     appropriateness of a third national network.  In that
 6     proceeding, TVNC emphasized the need for a national
 7     service that would meet the demands of aboriginal
 8     people across the country.
 9  9                    Le Conseil a reconnu depuis longtemps
10     l'importance du rôle unique que joue TVNC dans notre
11     système de radiodiffusion en tant que service
12     autochtone sans but lucratif subventionné à même les
13     fonds publics et destiné à desservir les intérêts
14     publics et les objectifs de la Loi sur la
15     radiodiffusion.
16  10                   In its report to the government on
17     the issue of a third national network, the Commission
18     said that it would consider any application to make
19     TVNC widely available throughout Canada to meet the
20     needs of Canada's various aboriginal communities, as
21     well as the needs of other Canadians.
22  11                   The hearing will consider issues
23     related to the appropriate licensing framework for APTN
24     including its request for mandatory distribution, its
25     programming plans, its financing and marketing plans,


 1     and the impact of the application on Canadian
 2     consumers.
 3  12                   In addition to the APTN application,
 4     we will also consider an application by Bell Satellite
 5     Services Incorporated, or BSSI.  BSSI has applied for a
 6     licence to operate two pay-per-view services, an
 7     English and a French language service.  The proposed
 8     services would be an integral part of the direct-to-
 9     home service offered by BSSI already.
10  13                   BSSI also asks that it be permitted
11     to offer up to 10 percent of its programming on the
12     English service in languages other than English and
13     French.  In its application BSSI states that it wants
14     to distinguish its service by offering increased
15     children's and multicultural programming.
16  14                   The Commission will examine a number
17     of issues and concerns related to BSSI's application;
18     in particular, issues relating to satellite capacity
19     and the impact of licensing on consumers and existing
20     competitors.
21  15                   Now for the administrative and
22     housekeeping matters regarding the conduct of this
23     hearing.
24  16                   Over the next two days the Commission
25     will hear a number of oral presentations by interested


 1     parties.  In addition, written submissions have been
 2     filed with the CRTC and will form part of the public
 3     record.
 4  17                   The proceedings will be transcribed
 5     as usual and filed on the public record.  In order that
 6     people responsible for the recording of the transcripts
 7     can provide an accurate record, I would ask that when
 8     you speak, you press the famous little red button --
 9     it's not red, it's green -- the green button on the
10     microphone, which will then become red and indicate
11     that "you're on".
12  18                   When you are not speaking, please
13     ensure that you remove it; otherwise, there is
14     eventually feedback in the system.
15  19                   CRTC staff who will be assisting us
16     during these hearings are our legal counsel, Geoff
17     Batstone; policy co-ordinators, Dylan Jones for BSSI,
18     and Morag York for TVNC; hearing manager, Mike
19     Burnside; and the hearing secretary, Dianne Santerre.
20  20                   Please don't hesitate to call on Ms
21     Santerre regarding matters of process.
22  21                   This hearing, as I said, will run for
23     two days, we expect.  We will sit until approximately
24     5:00.  And you will know what approximations of the
25     Commission have been:  5:00 has become 8:00.


 1  22                   But we will try to divide the two
 2     days reasonably.
 3  23                   Tomorrow we will start at 9:00 a.m.
 4     and sit until we have heard all parties.
 5  24                   I thank you and welcome you all to
 6     this hearing.  Madam Secretary, would you call the
 7     first participant, please.
 8  25                   MS SANTERRE:  Thank you, Madam Chair.
 9  26                   First, I would like to address the
10     procedure for the hearing.
11  27                   In Phase I, the applicant will have
12     20 minutes maximum for their presentation, of course
13     including audiovisual or other material.  Questions
14     will follow by the members.
15  28                   In Phase II, each appearing
16     intervenor is given up to 10 minutes for their
17     presentation.  Questions again by members of the CRTC
18     panel may follow.
19  29                   In Phase III, the applicant is given
20     an additional 10 minutes to comment or rebut
21     interventions filed to its application.  Again,
22     questions may follow.
23  30                   This is the procedure that will be
24     followed at the hearing.
25  31                   I would like now to invite the


 1     application by Bell Satellite Services Inc. for a
 2     broadcasting licence to carry on a national direct-to-
 3     home pay-per-view television programming undertaking.
 4  32                   All the details of this application
 5     are in the Order of Appearance for today.
 6  33                   Please proceed.
 8  34                   M. GOURD:  Madame la Présidente,
 9     Madame et Monsieur les Conseillers, mon nom est Alain
10     Gourd et je suis président-directeur général de la
11     société Bell Services Satellite Inc.  M'accompagnent
12     aujourd'hui M. Michael Neuman, deux chaises à ma
13     droite, président-directeur général de Bell ExpressVu,
14     notre service de radiodiffusion directe par satellite,
15     ainsi que, à ma droite immédiate, M. David McLennan,
16     vice-président des opérations et principal
17     administrateur financier et, à la droite de Michael
18     Neuman, Chris Frank, vice-président des relations
19     gouvernementales et du développement corporatif. 
20     Enfin, nous avons aussi avec nous, sur la table d'en
21     arrière, M. Tony Keenleyside, un associé du cabinet
22     McCarthy Tétrault, qui est notre avocat-conseil
23     extérieur pour les questions réglementaires.
24  35                   Madame la Président, Madame et
25     Monsieur les Conseillers, nous sommes réunis ici ce


 1     matin, mes collègues et moi, pour présenter les
 2     avantages des services de télévision à la carte par
 3     radiodiffusion directe par satellite de langue
 4     française et de langue anglaise que nous proposons.  Si
 5     vous le permettez, et avant que mon collègue M. Neuman
 6     ne vous donne un aperçu de notre soumission, j'aimerais
 7     vous décrire brièvement notre nouvelle structure
 8     corporative et l'orientation que nous voulons lui
 9     donner à l'avenir.
10  36                   Comme vous le savez, la société Bell
11     Services Satellite est une filiale à part entière de
12     BCE et elle se propose trois objectifs de base:  le
13     premier et le plus évident est notre service de
14     radiodiffusion directe par satellite, que dirige fort
15     bien M. Michael Neuman.  Ce service, avec son équipe de
16     gestion distincte, a la responsabilité de faire croître
17     au Canada la distribution par satellite de services de
18     programmation, en particulier canadienne.  Cet éventail
19     comprend, nous l'espérons, notre proposition de
20     services de télévision à la carte par RDS Express
21     Choix/Express Choice, laquelle constitue l'objet de la
22     présente audience.
23  37                   BSSI's other two areas of focus are
24     business-oriented satellite services and broadcast and
25     multimedia programming services.


 1  38                   Briefly, in the former we are in the
 2     process of developing a broad portfolio of fixed and
 3     mobile satellite services directed at Canadian and U.S.
 4     businesses.  These include such services as business
 5     television, high speed data services, including
 6     Internet-based services, and other value added fixed
 7     and mobile satellite services on Canadian facilities.
 8  39                   As to the latter, we are currently
 9     involved in certain specialty programming ventures,
10     applications which are currently before the Commission
11     and therefore will be discussed publicly at the
12     appropriate time.
13  40                   In essence, we hope to be a
14     comprehensive services-based satellite company to grow
15     a domestic, North American and international business
16     which will capitalize on free trade and Canada's
17     enviable international reputation, especially in
18     satellite communications.
19                                                        0910
20  41                   Cependant, le service de
21     radiodiffusion directe par satellite que nous proposons
22     aujourd'hui a pour mission de desservir la population
23     canadienne.  Ce ciblage du marché domestique est
24     évidemment exigé par la réglementation mais est aussi
25     renforcé par nos ententes contractuelles avec une


 1     société américaine de RDS, par les exigences du
 2     commerce international et par les limites qu'impose
 3     l'achat des droits de programmation.
 4  42                   Maintenant, en ce qui concerne le
 5     sujet qui nous intéresse directement, la télévision à
 6     la carte, permettez-moi de vous dire, en ce début
 7     d'audience, que la présente demande pour des services
 8     de télévision à la carte par radiodiffusion directe par
 9     satellite s'est méritée l'appui entier de notre
10     actionnaire.  En sa qualité d'entreprise canadienne
11     basée au Québec, la société BCE appuie évidemment sans
12     réserve les services proposés dans les deux langues
13     officielles du pays.  En effet, il est important pour
14     notre entreprise que ces deux services de programmation
15     distincts soient aménagés de telle façon que nos
16     clients d'expression française et anglaise reçoivent le
17     meilleur service possible dans leur langue.
18  43                   Je sais que dans le passé le Conseil
19     a pu exprimer certaines préoccupations à l'effet qu'un
20     service français de télévision à la carte par RDS ait
21     pu sembler avoir une importance moindre dans certaines
22     demandes.  Permettez-moi de vous rassurer que tel n'est
23     pas le cas ici.  La société Bell ExpressVu comprend
24     qu'il faut s'assurer que les besoins de tous nos
25     clients soient bien desservis.  C'est la raison pour


 1     laquelle nous avons déjà rassemblé un éventail complet
 2     de services pour les deux groupes linguistiques
 3     officiels.  Si nous obtenons la licence demandée, nous
 4     appliquerons vigoureusement cette politique aux
 5     services de télévision à la carte par radiodiffusion
 6     directe par satellite.
 7  44                   La programmation du service français
 8     de télévision à la carte par RDS que nous proposons
 9     sera conçue par des francophones pour des francophones. 
10     De plus, des ressources suffisantes, y compris la
11     capacité du satellite, seront disponibles afin
12     d'assurer le développement d'une entreprise de
13     programmation francophone à la fois compétitive et de
14     première classe.
15  45                   La participation de BCE nous a permis
16     d'adopter une stratégie à long terme pour l'entreprise. 
17     Bell ExpressVu a donc pu démontrer la ténacité et
18     l'engagement voulus pour surmonter les défis majeurs
19     qui ont ponctué l'essor de l'industrie domestique de la
20     radiodiffusion directe par satellite.  En vérité, n'eût
21     été la société BCE, notre compagnie n'aurait
22     probablement pas survécu à ses expériences initiales.
23  46                   Maintenant, grâce à l'appui entier et
24     à l'encouragement de notre actionnaire, nous sommes
25     capables aujourd'hui de présenter un projet qui, nous


 1     l'espérons, renforcera l'éventail des services que nous
 2     offrons et appuiera notre bilan financier, alors que
 3     nous aborderons un avenir compétitif plein de défis, un
 4     avenir offrant par ailleurs une diversité et des choix
 5     véritables aux consommateurs canadiens.  Nous espérons
 6     aider à transformer cet éventail de choix en réalité.
 7  47                   Nous vous demandons votre approbation
 8     pour faire démarrer cette entreprise.
 9  48                   Maintenant, j'aimerais inviter
10     Michael Neuman à vous présenter les points saillants de
11     notre demande.
12  49                   Michael.
13  50                   MR. NEUMAN:  Thank you, Alain.
14  51                   Good morning.  It is a real pleasure
15     for me, Madam Chair and Members of the Commission, to
16     have the opportunity to speak with you this morning
17     about our DTH pay-per-view plans.
18  52                   We would like to think that our track
19     record thus far in DTH has well illustrated our ability
20     to meet our commitments when we have made them.
21  53                   We intend to devote the same tenacity
22     to our pay-per-view proposal, thus delivering exciting
23     à la carte programming services in both French and
24     English, which will enrich our subscribers' viewing
25     experience and contribute to the growth and development


 1     of the Canadian broadcasting and program production
 2     industries.
 3  54                   An interesting aspect of our proposal
 4     is that we propose English language service which will
 5     include multicultural programming.
 6  55                   In order to understand our future, I
 7     believe it is very important to understand our past. 
 8     This industry has been built on the cusp of change:  a
 9     change that is sweeping away yesterday's monopoly
10     structures and injecting in their stead competitive
11     alternatives which are now offering Canadians
12     unprecedented programming choice and variety.
13  56                   In my estimation the clear winners in
14     this process are the customers of these new services
15     and the suppliers of the programming product.
16  57                   In our case that is Bell ExpressVu
17     subscribers and the Canadian program production
18     industry which makes the creative product that we sell.
19  58                   Bell ExpressVu's business is built
20     for and around increasingly sophisticated and
21     knowledgeable consumers who have been conditioned by
22     U.S. DBS or grey market companies which occupied the
23     market prior to our arrival.  Of course, it is buoyed
24     by the Canadian public which is quickly realizing that
25     a new digital television opportunity beckons; a digital


 1     opportunity that includes impulse pay-per-view in both
 2     official languages.
 3  59                   It is also built on a comprehensive
 4     regulatory framework developed by this Commission and
 5     reinforced by licensing precedent over four separate
 6     licensing hearings.  These proceedings have resulted in
 7     the authorization of five DTH and six DTH pay-per-view
 8     licences.  Of those six DTH pay-per-view licences, two
 9     were integrated DTH and DTH pay-per-view licences
10     granted to Power DirecTV and AlphaStar.
11  60                   We are involved in a business which
12     has been created in a competitive crucible.  The
13     industry is expected to provide a competitive
14     alternative to the unauthorized or illegal U.S. grey
15     market companies, owned by such companies as General
16     Motors, Rupert Murdock's news corporation and TCI,
17     America's largest cable conglomerate, and Canadian
18     cable with an entrenched market of over seven and a
19     half million subscribers.
20  61                   In such an environment Bell ExpressVu
21     has, from a standing start on September 10 last year,
22     created a very dynamic competitive environment in the
23     BDU marketplace.  We have grown from zero to over
24     140,000 subscribers in that period of time.  We have
25     distributed nearly 200,000 digital set-top boxes.  We


 1     have packaged and promoted programming in ways that
 2     consumers clearly find compelling, and the result is
 3     that Bell ExpressVu and the programmers we carry enjoy
 4     the highest average subscriber revenue in Canada,
 5     despite the fact that we offer subscribers the
 6     opportunity to purchase the smallest basic package in
 7     the industry.
 8  62                   And finally, Bell ExpressVu has
 9     enjoyed unprecedented success in the selling of pay-TV,
10     where we have achieved penetration in the range of six
11     times that ever achieved in cable, despite the
12     significant length of time the monopoly pay-per-view
13     providers and cable BDUs have had to promote services
14     in a manner that consumers might find more appealing.
15  63                   Notwithstanding these early
16     successes, if we wanted a challenge, my colleagues and
17     I, we have found one.
18  64                   I am happy to say that we have taken
19     a small rump of satellite capacity and turned it into a
20     high performance digital platform that generates over
21     100 high quality video and audio signals.
22  65                   Our competitive edge is the array of
23     Canadian services that we provide.  Within our 140,000
24     subscriber base is a significant number of U.S. ex-grey
25     market subscribers and ex-cable subscribers.  With the


 1     advent of Nimiq, our DBS satellite, next spring, we
 2     will migrate to a high powered DBS platform with at
 3     least twice our present capacity, which will let us put
 4     this company into high competitive gear.
 5  66                   We have clearly joined the
 6     competitive fray.  We have demonstrated that there can
 7     be no competition without an effective competitor.  We
 8     have effectively slowed, if not stopped and reversed
 9     the sale of U.S. grey market satellite dishes.  We are
10     changing the way Canadians view the delivery of
11     television.  In short, we are pleased with our progress
12     to date and would note that, in combination with Star
13     Choice, we have surpassed the estimated number of U.S.
14     grey market subscribers in Canada.
15  67                   With the imminent arrival of more
16     satellite capacity now and the increased programming
17     flexibility that this will bring, we will repatriate
18     more of these subscribers and become an even more
19     effective alternative to cable in major urban markets.
20  68                   Nevertheless, we are a long way from
21     profitability, so we must simply continue to grow our
22     business by increasing and improving our service,
23     including seeking all the technical and financial
24     efficiencies that might be possible.  Please bear in
25     mind that this is a business with very large upfront


 1     costs, combined with all the business and technical
 2     risk normally associated with the satellite industry.
 3  69                   An obvious efficiency available to
 4     us, if licensed, is a DTH pay-per-view service which we
 5     can integrate into our existing DTH business; an à la
 6     carte programming service which we can customize for
 7     our customers within the prescribed policy and
 8     regulatory framework by packaging, pricing and
 9     promoting in ways consumers are demanding but the
10     incumbent pay-per-view monopolies have not yet seen fit
11     to offer.
12  70                   Our own pay-per-view service would
13     enable us to provide a competitive alternative to help
14     differentiate and streamline our business and improve
15     our bottom line.  A pay-per-view licence is essential
16     as we strive for continued success in meeting our
17     commercial and public policy objectives and
18     commitments, not to mention achieving the pinnacle of
19     customer satisfaction that we have always sought to
20     achieve.
21  71                   Our DTH pay-per-view proposal
22     contemplates the licensing of a national service with
23     two integral components:  a French language DTH pay-
24     per-view service programmed, as Alain has said, by
25     francophones, for francophones; and an English language


 1     service with a multicultural element compromising no
 2     more than 10 per cent of its programming.
 3  72                   Our minimum commitment to the French
 4     language service is five channels of DTH pay-per-view
 5     programming, which would grow proportionately with the
 6     English language service, which is to say, at the
 7     proposed level of 30 channels, that 25 per cent or
 8     eight channels would be allocated to the French
 9     language service.
10  73                   However, as I have said, the minimum
11     number of French language channels would be five,
12     irrespective of the number of English language
13     channels.
14                                                        0920
15  74                   Your approval of this application
16     will provide us with the opportunity to program DTH
17     pay-per-view with our customers foremost in mind.  It
18     will finally give Canadian consumers a real choice in
19     respect of both pay-per-view and BDU provider.  It will
20     also bring to the fore unprecedented programming
21     formats such as multicultural, children's and special
22     events.
23  75                   Over and above our commitments
24     contained in our licence application -- commitments
25     designed to ensure that we are at the same commitment


 1     level as the other licensees, thereby ensuring fair
 2     competition -- we are pleased to note the following
 3     strategies we would like to utilize.
 4  76                   Our DTH pay-per-view service would
 5     begin high definition transmissions within its first
 6     year of operation.  It would be our intention to begin
 7     high definition exhibition as soon as possible to place
 8     us on the same competitive footing as the U.S. DBS
 9     services that have similar plans, and to ensure a
10     Canadian response to this emerging technology. 
11     Moreover, we would ensure that Canadian programming is
12     featured prominently in high-definition format.
13  77                   We would also like to trial
14     made-in-Canada "described programming" in order to make
15     our DTH pay-per-view programming service more
16     accessible to sight-challenged Canadians.
17  78                   We would program our DTH pay-per-view
18     service, to the extent practicable, in a complementary
19     fashion to our off-air, specialty and Pay-TV
20     affiliates.  This makes good business sense for both
21     our affiliates and our DTH service; in addition, it
22     ensures greater choice and variety for customers.
23  79                   In respect of the 5 per cent
24     contribution of gross DTH pay-per-view revenue which we
25     make available to stimulate the Canadian program


 1     production industry, we support the notion that this
 2     seed money should benefit the Canadian feature film
 3     industry.  Therefore, we would readily contribute a
 4     minimum of 80 per cent of the 5 per cent contribution
 5     to a separate envelope of funds -- either inside or
 6     outside the CTF -- as determined in consultation with
 7     the industry and the current government feature film
 8     policy review.
 9  80                   As well, as suggested to us in
10     discussions with the CFTPA and the ATPFQ, we would be
11     prepared to provide suitable shelf space for our
12     English language DTH pay-per-view service for new
13     French language feature films which have been dubbed
14     into English.  We would also be prepared to reciprocate
15     on the French language DTH pay-per-view service in
16     respect of recent Canadian films shot in English.  This
17     would, of course, in no way dilute or alter any of our
18     commitments in our application.  It would be over and
19     above those commitments.
20  81                   In concluding, given our track
21     record, we hope that the Commission is satisfied that
22     Bell ExpressVu has delivered on our promise to deliver
23     dynamic competition in the BDU business, against great
24     odds and very formidable competition.  We further hope
25     that the Commission shares our enthusiasm over this


 1     pay-per-view proposal.
 2  82                   Our goal is very clear.  We would
 3     like to provide Canadian consumers with more choice and
 4     variety as well as the economic benefits of competition
 5     such as better service and pricing.  It will also
 6     provide us with a more efficient and effective
 7     corporate vehicle and the additional margin dollars to
 8     more aggressively promote our service in rural and
 9     underserved Canada, as well as financially
10     strengthening our competition stance in urban Canada.
11  83                   A pay-per-view licence will help us
12     take on the U.S. DBS providers which currently employ
13     integrated DTH pay-per-view operations that help them
14     penetrate the Canadian market as well as their home
15     market.
16  84                   Thank you very much for your
17     attention.  My colleagues and I will not be pleased to
18     respond to your questions.
19  85                   THE CHAIRPERSON:  Bonjour et merci,
20     Monsieur Gourd, gentlemen.
21  86                   I will address my questions to you
22     generally in English, but feel free to respond in
23     French since I will not know who will respond to them. 
24     That will be true throughout the process.  You can
25     answer us in French or engage in conversation in


 1     French, as is comfortable.
 2  87                   I will have first a number of
 3     questions for you with respect to the licensing
 4     framework aspect of your application.  Then my
 5     colleagues will have some questions on technical
 6     aspects, distribution aspects, competition aspects,
 7     programming and finance.
 8  88                   As is obvious from your application
 9     and from the interventions that have been filed in it,
10     we are looking at an application in the context of a
11     number of policies or even legislative instruments,
12     regulatory instruments that are in place.  I would like
13     to pursue further with you the importance or impact or
14     limitations that may or may not be contained in these
15     instruments.  This would include the Direction, which
16     is still on our regulatory books, that was issued by
17     the government in 1995 with regard to DTH pay-per-view,
18     government and CRTC policy statements that have been
19     referred to, and in the last analysis, what licensing
20     action may be, in light of the circumstances that exist
21     today, in the public interest.
22  89                   As we examine these other
23     instruments, there always seems to be discretion there
24     to find public interest in various ways, depending on
25     which end of the telescope one is looking into, whether


 1     you are an applicant or intervenor.
 2  90                   I would like to first look at the
 3     direction with you and ask you what, in  your view, is
 4     the meaning of "dynamically competitive market," which
 5     is referred to in the preamble of the direction, as
 6     well as in Section 3.
 7  91                   At Section 3 it directs the CRTC to
 8     promote, through licensing, a dynamically competitive
 9     market for DTH pay-per-view.  Would you see that as
10     meaning that there should be competition between DTH
11     pay-per-view services?
12  92                   MR. NEUMAN:  Madam Chair, our view of
13     dynamic competition, as I said briefly in my opening
14     remarks, is that in order for there to be real
15     competition, there has to be a competitor, a viable
16     competitor that has an opportunity to package, price
17     and promote in ways that the consumer might find more
18     appealing.
19  93                   Our view with respect to this
20     application is that, as there is currently no
21     competition either in eastern Canada or western Canada
22     in the DTH pay-per-view business, the advent of an
23     ExpressVu-sponsored DTH pay-per-view business would be
24     that new competitor.  The competition would give rise
25     to new ideas in the market, new ways of promoting


 1     product, new ways of packaging product, not necessarily
 2     the same product, but in some cases the same product
 3     packaged or promoted differently or even priced
 4     differently.
 5  94                   We found this in our existing
 6     business in BDU.  Simply by being there, oftentimes
 7     offering the same programming but packaged differently,
 8     gives rise to higher penetration.  For instance, both
 9     ourselves and the cable companies offer pay services in
10     eastern Canada.  For instance, we offer TMN, the same
11     service, packaged differently, promoted differently.
12     The result is that consumers within our service
13     purchase TMN in greater quantities than do consumers
14     within cable services.
15  95                   There is a reason for this, and it
16     has to do with marketing, including pricing, packaging
17     and promotion.  That kind of dynamic competition, until
18     Star Choice entered the market and later ourselves,
19     didn't exist.
20  96                   We demonstrated that competition is
21     good, and we propose that it would also be good in the
22     pay-per-view business.
23  97                   THE CHAIRPERSON:  Do you have a
24     different interpretation to the use of the promotion of
25     a dynamically competitive market that is in the


 1     preamble of the direction?  For example, would you say
 2     that possibly this addresses competition not between
 3     two DTH pay-per-view services, but between perhaps
 4     pay-per-view delivered by cable and pay-per-view
 5     delivered by DTH?  Do you think that there is a
 6     different interpretation to be given to the use of that
 7     phrase in the preamble rather than the various ones in
 8     Section 3?
 9  98                   MR. NEUMAN:  I will ask my colleague,
10     Chris Frank, to comment on that after I have said this.
11  99                   The very fact that there is already
12     competition now with respect to BDUs, although not
13     competition with respect to pay-per-view, only meets
14     half the test of a real competitive environment.
15                                                        0930
16  100                  THE CHAIRPERSON:  You would add
17     another layer, which would be competition between pay-
18     per-view and pay-per-view -- DTH BDUs and DTH BDUs.
19  101                  MR. NEUMAN:  Yes, we would.
20  102                  THE CHAIRPERSON:  Would you go as
21     far, as I asked earlier, as saying that it may also
22     address competition between DTH delivery of pay-per-
23     view and cable delivery of pay-per-view?
24  103                  MR. NEUMAN:  I think our existence in
25     the pay-per-view business will provide that level of


 1     competition.
 2  104                  THE CHAIRPERSON:  No, my question
 3     was, do you think the direction could be read in that
 4     fashion.
 5  105                  MR. NEUMAN:  Chris?
 6  106                  THE CHAIRPERSON:  I would like you to
 7     have an opportunity to expand further on what you think
 8     these words mean because we have had various
 9     interpretations of what they mean and what their import
10     is.  That phrase is in the preamble of both the pay-
11     per-view and the BDU direction.
12  107                  MR. FRANK:  The thrust of our
13     application this morning, Madam Chair, is to create for
14     our company and for our business the best possible
15     opportunity to bring a wide range of services to the
16     Canadian public.  We think that both inter and
17     intramodal competition is in the public interest.  We
18     think through a competitive DTH pay-per-view service we
19     can offer Canadians more variety, more choice, and
20     essentially real competition.  We believe that's in the
21     public interest.
22  108                  I think the specifics of your
23     question have a legal connotation, and Tony Keenleyside
24     would be prepared to provide those.
25  109                  Thank you.


 1  110                  MR. KEENLEYSIDE:  Thank you, Chris.
 2  111                  Vice-Chair Wylie, the recital that
 3     you are referring to, I think your question is
 4     basically do we read the direction as saying that the
 5     direction contemplates not only DTH pay-per-view
 6     competition with cable pay-per-view, but does it also
 7     contemplate DTH pay-per-view with DTH pay-per-view as
 8     well.
 9  112                  Am I getting the question correctly{
10  113                  THE CHAIRPERSON:  It could mean all
11     three.  It could mean it is in the public interest to
12     have competition in DTH pay-per-view licensees; it
13     could mean that you would want competition in the
14     delivery of DTH pay-per-view, so you would want to have
15     more than one DTH distributor, but could it also mean
16     that a dynamically competitive market with regard to
17     pay-per-view may mean competition between pay-per-view
18     delivered by different types of BDUs?
19  114                  MR. KEENLEYSIDE:  I see.
20  115                  THE CHAIRPERSON:  So I would see
21     three possible arguments as to what this preamble would
22     raise.
23  116                  MR. KEENLEYSIDE:  Of course, as you
24     know, there are the two directions, and this one just
25     deals with the issue of pay-per-view itself by DTH.  If


 1     you look at the entire recital that you are referring
 2     to, it says:
 3                            "Whereas pay-per-view television
 4                            programming undertaking should
 5                            operate through licensing in a
 6                            dynamically competitive market,
 7                            subject to appropriate
 8                            requirements, including their
 9                            contribution to the development
10                            of programming, in order to
11                            provide to their subscribers,
12                            [and here is the key phrase] in
13                            competition with each other, the
14                            widest range of Canadian and
15                            foreign feature films and other
16                            programming" (As read)
17  117                  The "in competition with each other"
18     goes to the heart of your question, which means that we
19     need to understand what the direction meant by "pay-
20     per-view television programming undertakings".  That's
21     a defined term in the actual order, and the defined
22     term means a pay television programming undertaking
23     that provides a pay-per-view service.  Then there is a
24     subset to that called a DTH pay-per-view television
25     programming undertaking, which is also defined.


 1  118                  So the way we read it, if they had
 2     intended there not to be competition within the DTH
 3     pay-per-view industry but just as between DTH and non-
 4     DTH, it would not have said the all encompassing pay-
 5     per-view television programming undertakings, the whole
 6     set, including cable and DTH.
 7  119                  THE CHAIRPERSON:  So your answer is
 8     that that phrase may exhort us to try to ensure that
 9     all three of the layers I mentioned be competitive.
10  120                  MR. KEENLEYSIDE:  That's correct.
11  121                  THE CHAIRPERSON:  Now, given the
12     importance of that phrase expressed both in section 3
13     and in the preamble, would you say that under certain
14     circumstances it would be possible that vertically-
15     integrated companies would limit competition and work
16     against the exhortation to a dynamically competitive
17     market?  Is that possible?
18  122                  MR. NEUMAN:  Madam Chair, I think
19     that in the current environment that is possible.  To
20     the extent that there are one or more pay-per-view
21     businesses in operation that provide a diversity of
22     programming for consumers, that possibility is reduced. 
23     That, of course, is one of the benefits that we believe
24     licensing of ExpressVu as DTH pay-per-view operation
25     will bring to bear.


 1  123                  MR. GOURD:  If I may add, as we
 2     speak, cable subscribers represent I believe around 8
 3     million subscribers.  Bell ExpressVu has around
 4     140,000.  We were reading in the newspaper this morning
 5     that Star Choice has 125,000.  Therefore, I do not see
 6     for quite a long time the possibility of DTH pay-per-
 7     view reducing competition by impacting significantly
 8     another pay-per-view licensee which has as its main
 9     subscriber base the cable subscriber base.
10  124                  THE CHAIRPERSON:  My question was
11     slightly different.  Let me repeat it.
12  125                  My question is, is it possible that
13     achieving competitive services in pay-per-view, that is
14     having two or more, the effect that this would have in
15     producing competition would be reduced if that second
16     service was licensed to a vertically-integrated company
17     such as yours?
18  126                  You are aware, obviously, that this
19     is the argument that has been made.  Do you see the
20     possibility that arriving at a dynamically competitive
21     market would be slowed, less likely to occur, if we had
22     an integrated BDU -- DTH BDU and DTH pay-per-view?
23  127                  Do you see my question now?
24  128                  MR. NEUMAN:  Yes, I do now, thank
25     you.


 1  129                  The answer is we do not think
 2     competition would be slowed.  We think it would be
 3     spurred on.
 4  130                  THE CHAIRPERSON:  I am talking about
 5     degree.
 6  131                  MR. NEUMAN:  I think competition
 7     would be enhanced dramatically.
 8  132                  THE CHAIRPERSON:  Of course, getting
 9     another service -- you can't have competition if you
10     have only one service.  My question is, is it wise for
11     the Commission to license that second service rather
12     than wait until a non-integrated company applies for
13     one if the aim is to achieve a dynamically competitive
14     market?  What may be the effect of that vertical
15     integration as opposed to a licensing framework where
16     two different companies would own the BDU and the pay-
17     per-view{
18  133                  MR. NEUMAN:  My response would be,
19     Madam Chair, that I can only speak to our experience to
20     date, thus far, in the DTH BDU business.  We have
21     demonstrated a propensity to promote products in a very
22     efficient fashion.  I would expect that we will take
23     the same view with DTH pay-per-view; in fact, we commit
24     to do that.
25  134                  So I believe that having the


 1     efficiency of integration, having it under the
 2     direction of management that has already demonstrated a
 3     propensity to promote and enhance services in a very
 4     dynamic fashion will give rise to such an outcome.
 5  135                  I do not personally believe that a
 6     non-integrated pay-per-view business has the same
 7     propensity to achieve the efficiencies as between the
 8     existing services of the BDU and its own services as we
 9     would have.  So I think our integration actually gives
10     rise to a more efficient approach and, as our past
11     would demonstrate, we certainly have a vested interest
12     and a propensity to sell more pay-per-view, which gives
13     rise to more program revenue and all the knock-on
14     benefits that we have described.
15  136                  MR. GOURD:  May I add a comment?
16  137                  I would like to echo what Michael has
17     said from another perspective.  You can have
18     competition in pay-per-view from a horizontal
19     perspective and/or from a vertical perspective.  First,
20     the horizontal perspective.
21                                                        0940
22  138                  In the future, you might have two
23     pay-per-view licensees which are supplying with the
24     same stream of product, both cable and direct-to-home. 
25     So, therefore, they compete against each other, but


 1     using the same distribution mechanism, the same BDUs. 
 2     Or, in addition -- and both could be complementary, you
 3     could have both kinds at the same time -- you could
 4     have, also, in addition, a horizontal competition where
 5     a direct-to-home BDU program is a pay-per-view for its
 6     market, for its subscriber and it will inevitably be
 7     programming differently than a pay-per-view licensee
 8     which has 95 per cent of its subscribers in cable.
 9  139                  So the main programming thrust of the
10     licensee which is rooted basically in cable will be
11     around cable subscribers because that is where the
12     growth is.
13  140                  So our view is that to achieve
14     program differentiation, in order to achieve different
15     packaging, in order to achieve even different
16     acquisitions of product, more children, more
17     multi-lingual, more special events, to have dynamic
18     competition as the direction goes for their
19     subscribers, it is preferable to have as many forms of
20     competition as possible and there is very little chance
21     that an integrated DTH pay-per-view licensee can impact
22     in a significant fashion a pay-per-view licensee which
23     has also the cable subscriber base.
24  141                  We could take a look at other
25     jurisdictions.  For example, in the U.S.  For example,


 1     in France where we have both TPS et LCS, qui se
 2     concurrencent l'un l'autre.  And there, the integrated
 3     pay-per-view approach has been retained with great and
 4     dynamic competition as opposed to lesser competition.
 5  142                  THE CHAIRPERSON:  So your position
 6     would be premised on the unlikely possibility that
 7     there would be in Canada two DTH pay-per-view and both
 8     of them not be also providing pay-per-view to cable. 
 9     You are making that assumption?
10  143                  MR. GOURD:  Our application is
11     clearly to provide --
12  144                  THE CHAIRPERSON:  No, no.  I am
13     trying to discuss with you why it is that in light of
14     the dynamically competitive exhortation, to create a
15     dynamically competitive market theoretically, theorists
16     would say that an integrated system may in usual
17     circumstances be anti-competitive and you are giving
18     the answers as to why that theoretical danger is
19     balanced by the advantages of having integration and
20     that, in your view, the advantages are so great as to
21     eliminate the theoretical possibilities or the
22     potential.  Intervenors will tell us a different story. 
23     They will say that the potential is so bad that it
24     outweighs the efficiency.
25  145                  So one argument is efficiencies, that


 1     I have heard today, and all the public interest
 2     advantages that can flow from it.  The other you are
 3     giving me, Monsieur Gourd, is that a DTH pay-per-view,
 4     integrated with a DTH BDU will differentiate itself
 5     because it will have a different market, it will have
 6     different aims.  But you are basing that on the fact
 7     that the other DTH pay-per-view licensees are now also
 8     offering pay-per-view to cable.
 9  146                  MR. GOURD:  Exactly.
10  147                  THE CHAIRPERSON:  So if they were
11     both offering pay-per-view via DTH, if you had two
12     licensees, then you would not have that answer.  So I
13     am asking you, are you premising your position on the
14     argument that it is impossible to have two purely DTH
15     pay-per-view services in Canada and that necessarily
16     one of them will also be offering cable and, therefore,
17     your differentiation argument.
18  148                  MR. GOURD:  It is difficult to say,
19     Madam la Président, what the other DTH licensee will
20     do.  However, the two arguments are integration and
21     product differentiation.
22  149                  In terms of integration, we are
23     facing two integrations here but a different kind.  The
24     first integration is the current licensee which have
25     integrated pay-per-view undertaking supplying both


 1     cable cable and direct-to-home.  So it is a form of
 2     integration because they have a central programming
 3     point and they feed a variety of distribution
 4     mechanism.  And they have some efficiencies there, too. 
 5     They have some financial and economic advantage. 
 6     Another integration is the one we are proposing where
 7     we tailor the pay-per-view offering towards our
 8     direct-to-home subscriber and that brings indeed the
 9     second argument which is product differentiation.
10  150                  But we do not believe that we would
11     be interpreted and the other competitor would not be.
12     Both would be integrated from a different perspective
13     and in a different fashion.
14  151                  At the end of the day, as Michael
15     said, dynamic competition means competitors and means
16     competitors having different approaches, different
17     programming perspective, different background and so on
18     and so forth.  If all the competitors are of the same
19     kind, both are integrated.  To some extent it will
20     represent more similar product as if you were to allow
21     different approaches like DTH and pay-per-view
22     licensees or licences combined in one entity.
23  152                  MR. FRANK:  Madam Chair, perhaps I
24     could provide an answer at a macro economic level.  I
25     think the issue here is one of materiality or, plainly


 1     spoken, one of market power.
 2  153                  Both DTH companies, ExpressVu and
 3     Star Choice, in their original licensing hearings
 4     predicted at full maturity a subscriber base around
 5     600,000.  That may or may not be accurate.  But I think
 6     everyone agrees that the DTH business will be always,
 7     at least for the foreseeable future anyway,
 8     non-dominant.  If you accept the present market split,
 9     it is approximately 50-50.
10  154                  If a DTH BDU integrates into a DTH
11     pay-per-view, as we are proposing, I do not think there
12     will be a material impact on the competitiveness of the
13     industry.  I do not think the issue of integration at a
14     macro level will be significant because we will always
15     be non-dominant and, more to the point, probably no
16     more than 50 to 60 per cent of the marketplace.
17  155                  THE CHAIRPERSON:  Would be your
18     optimum goal.
19  156                  MR. FRANK:  Our optimum goal, I
20     think, is to have a dish on every house in Canada and
21     two cars in every garage and maybe even a chicken in
22     every pot.  But dreams do not always come true.  We
23     have to be realistic.
24  157                  I think the bottom line is that cable
25     is very well entrenched in this country.  Cable is


 1     going to digitize.  There is going to be fierce
 2     competition in the years to come.  DTH will be
 3     non-dominant and I truly believe that in terms of macro
 4     economic competitiveness, that an integrated DTH
 5     pay-per-view undertaking addressing just the
 6     pay-per-view market is not a competitive force that is
 7     going to upset the current balance.
 8  158                  THE CHAIRPERSON:  I quite understand
 9     your comment about wanting two cars in the garage, one
10     chicken in every pot.  The regulator is well aware. 
11     Sometimes it ends up with turkeys when it wanted
12     chickens.  Sometimes it ends up with a featherless
13     goose.
14  159                  MR. FRANK:  I hope you see no turkey
15     here, madam.
16  160                  THE CHAIRPERSON:  Let me ask the
17     question very simply:  Is it your belief that a DTH
18     pay-per-view service that would be for DTH only and,
19     therefore, likely to differentiate itself by focusing
20     on that market and that market alone, possible in
21     Canada without vertical integration with the BDU?
22  161                  MR. NEUMAN:  Madam Chair, such an
23     outcome is possible, but we believe not the best
24     outcome.  The reason I say that is because the
25     realization of the efficiencies that we have spoken to


 1     in the last few minutes would be much more difficult to
 2     realize on the cost side of our infrastructure.
 3  162                  On the upside, on the revenue side,
 4     as I said earlier in my owning remarks, we also seek to
 5     achieve the higher margin dollars and, of course,
 6     through selling within our customer base which we have
 7     done with pay television, thus achieving five to six
 8     times the penetration of pay television within the DTH
 9     subscriber base as compared to cable, higher
10     contribution margins to our business which can be used
11     for -- to achieve ever-greater penetration of the
12     subscriber base, both cabled and uncabled.
13  163                  All this gives rise to a couple of
14     benefits from my perspective:  More subscribers in
15     Canada, fewer DTH grey market installations in Canada,
16     more programming sold in Canada, more Canadians
17     watching Canadian programming.
18                                                        0950
19  164                  To me, those are natural offshoots of
20     our application.
21  165                  THE CHAIRPERSON:  We have been
22     reminded in numerous instances in the written material
23     that has been filed to date in this application that
24     paragraph 5(f) of the Direction says that the
25     Commission is not to refuse to issue a licence to an


 1     applicant for the sole reason that the applicant holds
 2     a licence to carry on a DTH BDU.
 3  166                  Is it your view that the Commission
 4     can nevertheless properly consider issues of vertical
 5     integration between a DTH BDU and DTH pay-per-view if
 6     it had lingering concerns?
 7  167                  MR. NEUMAN:  Madam Chair, we believe
 8     that it is within the purview of the Commission to take
 9     into account all the matters that you have already
10     described, including this matter, in consideration of
11     our application.
12  168                  I would fall back on the answer of my
13     colleague Mr. Frank with respect to our view that there
14     really is no reason, given our relative market power
15     and even our proposed market power, to be concerned
16     about integration.
17  169                  I would add one further thought in
18     that regard.  We have been involved in the DTH business
19     now for a few years and as a live service now for some
20     14, 15 months.  There has been a learning curve, but
21     there has also been an evolution in the cable side of
22     the business.  For a long time cable has been proposing
23     to roll out digital set-top boxes.
24  170                  One might assume that as cable does
25     roll out digital set-top boxes at some point in the


 1     future in more vast numbers, that working together with
 2     the existing pay-per-view companies, they may begin to
 3     achieve a vastly higher penetration of pay-per-view
 4     within the cable base.  Hence, the prospect of their
 5     being vastly dominant in the provision of pay-per-view,
 6     in conjunction with the existing pay-per-view
 7     operators, becomes a very real prospect, and possibly
 8     within the next couple of years.
 9  171                  So while Chris talked about there
10     being, in our hopes and dreams, significantly more
11     dishes in homes than there are today -- and we
12     certainly hope that is the case and that with a pay-
13     per-view licence we could achieve that faster and more
14     efficiently.  Even as we are successful, we expect that
15     there will be vastly more pay-per-view provided by the
16     incumbent pay-per-view operators within cable than has
17     ever been seen before as well.
18  172                  So integration, we think, is really a
19     non-issue.
20  173                  MR. FRANK:  Maybe one further point
21     to that is that the existing companies, the existing
22     pay-per-view licensees, integrated as they are both in
23     cable and DTH -- and MMDS for that matter -- also have
24     significant other broadcasting holdings.
25  174                  I think Alain made the point that


 1     there is significant horizontal integration.
 2  175                  These are big companies.  They are
 3     experienced.  They are well positioned to compete. 
 4     Dynamic competition in the broadest sense is very much
 5     in the public interest, and that is what we represent
 6     here today.
 7  176                  THE CHAIRPERSON:  Mr. Neuman, you
 8     think that that would be one good way of getting
 9     feathers on our golden goose, or boxes on our
10     televisions?
11  177                  MR. NEUMAN:  I would say that whether
12     or not it puts feathers on our goose, it would
13     certainly help put boxes on TVs.  In fact, I would
14     suggest that our very existence as a competitor to
15     cable, speaking of our BTU business, has been a major
16     impetus to get cable to digitize.
17  178                  Likewise, our existence as a
18     competitor in the pay-per-view business, I believe,
19     will cause the incumbent pay-per-view companies to
20     become more creative in how they package, price,
21     promote and work together with their existing customers
22     to put more pay-per-view out in the market and hence to
23     put more Canadian films into the marketplace and to
24     propagate the services which to date have not been
25     particularly successful.


 1  179                  I think it will give rise to that
 2     conclusion, whether you are a DTH customer or a cable
 3     customer.
 4  180                  THE CHAIRPERSON:  Having agreed that
 5     paragraph 5(f) does leave some discretion to the
 6     Commission in addressing concerns it may have about
 7     vertical integration, would you go so far as saying
 8     that the Commission would have the power to impose
 9     conditions of licence to meet these concerns if it
10     still has them?
11  181                  I hear you that we should not.  But
12     we are not always as wise as applicants.
13  182                  If we had lingering concerns, would
14     you agree that the direction does not take away the
15     power of the Commission to address by regulatory means
16     concerns about the effect of vertical integration?
17  183                  MR. FRANK:  Yes, we would agree with
18     that.  We have seen that in previous DTH pay-per-view
19     licensing decisions.  We certainly agree with that.
20  184                  However, as you pointed out in your
21     question, we would be reluctant to agree with
22     conditions of licence that don't impact our
23     competition.  As Michael said in his opening statement,
24     fair competition and sustainable competition I think
25     means that everyone plays by the same rules.


 1  185                  THE CHAIRPERSON:  Even if not
 2     everyone is constructed in the same manner?
 3  186                  MR. FRANK:  There are tradeoffs --
 4  187                  THE CHAIRPERSON:  Because is you say
 5     that, you could get yourself into a corner very
 6     quickly.
 7  188                  MR. FRANK:  I take your point, Madam
 8     Chair.  But I would fall back, to use Michael's phrase,
 9     on the fact that we are non-dominant, we are new in the
10     marketplace.  Whereas we might have, if we are
11     fortunate enough to be licensed, vertical integration,
12     our competitors are well horizontally integrated.
13  189                  For competition to be effectively and
14     sustainably joined in the marketplace, we believe that
15     the same rules should apply to all players in this
16     regard.
17  190                  THE CHAIRPERSON:  Applying the same
18     rules to everybody without regard to particular
19     circumstances may not be what you want.
20  191                  MR. GOURD:  If I may, we are talking
21     about the regulatory framework.  Each company, each
22     licensee being different, details and specifically
23     tailored conditions inevitably would differ.
24  192                  THE CHAIRPERSON:  Or even policy
25     framework at a very generic level, it seems to me,


 1     would have to look at the circumstances of each case,
 2     and that there would be room in the Commission's
 3     discretion to find something in one circumstance and
 4     something else in another.
 5  193                  Let me ask you, for the purpose of
 6     allowing you to expand on the record, what your
 7     reaction is to the following mechanisms that would
 8     possibly --
 9  194                  I tried to pull out the ones that
10     would be the most obvious to meet problems that may in
11     the view of some flow from vertical integration as
12     proposed in this case and see what your reaction is.
13  195                  And let's not at the moment look at
14     what the exact mechanism would be, because I quite
15     understand that you are before us for a pay-per-view
16     licence and that some of these proposals would require
17     addressing the distribution undertaking.
18  196                  Nevertheless, there is always a way,
19     if the remedy is required.  So let's talk about what
20     the remedies could be.
21  197                  They would be obviously aimed at
22     limiting or prohibiting undue preference or anti-
23     competitive behaviour or any behaviour that may lead in
24     the short or long term to a reduction in competition.
25  198                  What would be your view, for example,


 1     of a rule that would say if you distribute your own,
 2     you have to distribute your competitor as well; and in
 3     the same breath, if that were the case, giving the same
 4     number of channels to each?
 5  199                  MR. NEUMAN:  Madam Chair, we
 6     considered this with respect to other programming that
 7     we carry, and we run into an interesting thing. 
 8     Starting from the finite satellite capacity for a
 9     start, you can envisage a situation where if those
10     rules are taken to an extreme, we end up carrying too
11     much of the same genre, the same type of programming,
12     which may give rise to a scenario that we meet the test
13     but we don't provide the consumers with what they are
14     really looking for.  You end up with, if not
15     duplication of the exact programming, a degree of
16     duplication within programming of a very similar genre.
17  200                  I think that that runs contrary
18     certainly to what we intended when we suggested that we
19     would like to  help create a dynamically competitive
20     environment.
21  201                  In a competitive environment I would
22     look to the consumer first -- and I use that word
23     broadly.  I would look to the marketplace to see what
24     it is the marketplace is demanding of us that we carry,
25     and then carry that product.


 1  202                  We already carry services on
 2     ExpressVu's DTH service that are owned by our
 3     competitors, for instance.  We carry them in some cases
 4     because we have access obligations.  But I can think of
 5     cases where, access obligations aside, we would carry
 6     them because they are very highly rated services that
 7     are in tremendous demand by the public.  And we would
 8     be competitively disadvantaged, frankly, if we did not.
 9  203                  So we package them and promote them
10     in a manner that guarantees their broadest possible
11     distribution.
12  204                  I would not want to -- if the goal is
13     to really create dynamic competition, I would not want
14     to find ourselves somehow hemmed in with conditions
15     that would cause us to have to add Channel A because we
16     added Channel B.  I would rather look to the consumer
17     and say:  "What channel are you finding most attractive
18     and how would you like to receive it and at what price
19     would you like to receive it?"  And then package
20     accordingly.
21  205                  Our experience in doing that thus far
22     has yielded, as I said earlier, tremendous customer
23     satisfaction.  It has yielded a scenario where 92
24     percent of our customer base is very, very satisfied
25     with our product, so much so that they would recommend


 1     our overall service to family members and friends when
 2     we surveyed our base this summer.
 3  206                  It certainly yielded -- if we can say
 4     that the consumers had voted with their chequebooks, it
 5     has yielded the highest average subscriber revenue in
 6     Canada because we have not --
 7  207                  I think you have left us thus far
 8     enough flexibility to really create something that
 9     consumers find new and different, such that they want
10     to buy more of it.
11  208                  THE CHAIRPERSON:  I fail to see how
12     for the consumer having two services to pick from isn't
13     better than one.  Therefore, I have a bit of a problem
14     walking with you from the question of why should we not
15     impose a requirement that if you carry your own, carry
16     another to the consumer being better off having one
17     rather than two.
18  209                  But I do hear you saying that it
19     would make little sense to devote that many
20     transponders to pay-per-view because of the limited
21     differentiation possible.
22  210                  And that is why it would not be wise
23     to say you have to carry two.
24  211                  MR. GOURD:  There is no objection in
25     principle, from a business perspective as opposed to a


 1     regulatory perspective, to having two.  The proof of
 2     the matter is that when Nimiq is launched, Bell
 3     ExpressVu will have two, because an agreement has been
 4     entered with Astral and I believe an agreement in
 5     principle with Premium Services to carry indeed their
 6     pay-per-view service --
 7  212                  THE CHAIRPERSON:  For a time.
 8  213                  MR. GOURD:  For a period of a few
 9     years.  Therefore --
10  214                  THE CHAIRPERSON:  It may be a few
11     months by then.  Anyway, we can discuss that further.
12  215                  MR. GOURD:  What we want to say is
13     that from a business perspective, indeed it is all a
14     matter of what kind of product the supplier would offer
15     and how it could be complementary with the product
16     differentiation that on top of that first pay-per-view
17     our own pay-per-view can offer.
18  216                  However, we do have some experience
19     with must carry because there is one service that you
20     have already introduced the notion in another
21     programming category that if a licensee has his own
22     service, it must carry the other.
23  217                  There is a bit of a risk in there
24     because it introduces program rigidity.
25  218                  If as a supplier I am guaranteed


 1     equal number of channels, if I am guaranteed a specific
 2     presence on the BDU, why should I program differently
 3     than what I offer cable?  I don't have to to be
 4     necessarily creative.  I have guaranteed distribution.
 5  219                  So we believe that the preferred
 6     approach is to let the parties discuss and then each
 7     side has to develop creativity in order to make sure
 8     that the two pay-per-view offerings are complementary. 
 9     If not, you will have the first one and it will be
10     homogenized toward all distribution mechanisms, and
11     then we have less room to achieve product
12     differentiation.
13                                                        1005
14  220                  THE CHAIRPERSON:  I would expect that
15     if there was a rule -- a must-carry rule -- that if you
16     carry your own you have to carry your competitor, your
17     competitor would attempt to differentiate itself.  Or,
18     even more, is your answer that it would likely do that
19     if it was at your option that you carried two rather
20     than one?  Otherwise it would be non-differentiated
21     because it would be geared toward cable.
22  221                  MR. NEUMAN:  That is correct.  In
23     fact, many elements of the offer could become different
24     if there wasn't an assumption that they get carried no
25     matter what.


 1  222                  They could become more efficient. 
 2     They could propose to package differently.  They could
 3     propose to work with us in co-promotion.
 4  223                  But if there is simply a right on
 5     their part and an obligation on their part, really they
 6     will realize they have a right to it and we have an
 7     obligation that they won't do anything any differently
 8     than they ever have for their dominant customer.
 9  224                  THE CHAIRPERSON:  So the bottom line
10     is:  you are not against carrying two, but you want to
11     make that choice based on what is offered to you and
12     the economics of it and the number of transponders
13     available.
14  225                  MR. NEUMAN:  That is correct.
15  226                  THE CHAIRPERSON:  And so you would be
16     against any requirement --
17  227                  MR. NEUMAN:  That is correct.
18  228                  MR. FRANK:  Madam Chair, I would
19     simply add the comment that the condition of licence
20     which precludes DTH pay-per-view companies from
21     acquiring programming on an exclusive basis sets the
22     stage for fair and sustainable competition, and we are
23     in full agreement with the Commission's finding of 1995
24     that in an environment where pay-per-view companies
25     acquire product on a non-exclusive basis, the


 1     requirement to carry more than one pay-per-view
 2     undertaking could result in program duplication and
 3     wasted satellite space, which could be used for new
 4     Canadian services, both broadcasting services and, I
 5     suppose, new emerging multi-media services, to better
 6     satisfy our customers.
 7  229                  THE CHAIRPERSON:  If I go down the
 8     rest of my list of possible mechanisms or remedies to
 9     meet the concerns of the effect of vertical
10     integration, the idea has been raised that there should
11     be -- or do you think it would be necessary to have a
12     prohibition against BSSI purchasing North American
13     rights for programming, without going into the alleged
14     effect that that would have on the competitor?
15  230                  MR. FRANK:  We think that is
16     unnecessary for two reasons, Madam Chair.
17  231                  First of all, we are not a North
18     American-wide DTH company.  In that context, we note
19     that we are actually, by commercial contract, precluded
20     from selling our product in the United States.
21  232                  Secondly, the acquisition of film and
22     other programming on a non-exclusive basis effectively
23     means that -- it renders the issue, I think, moot,
24     because we wouldn't be acquiring product and we
25     wouldn't have an opportunity to discriminate.


 1  233                  In fact, we would be somewhat like
 2     Saul on the road to Damascus on that issue because we
 3     are very, very strongly supportive of the non-
 4     exclusivity provision, as you would imagine for a non-
 5     dominated, non-allied company.
 6  234                  MR. GOURD:  But if in its wisdom the
 7     Commission -- we don't believe it is necessary, but --
 8  235                  THE CHAIRPERSON:  Your view is that
 9     it is moot, it would have no effect.
10  236                  What about the -- I know it has had a
11     checkered history, but the condition of licence
12     requiring a three-way split as between the BDU, the
13     program holder and --
14  237                  Is there a need to possibly attach
15     this condition of licence because there is vertical
16     integration?
17  238                  MR. NEUMAN:  Madam Chair, we believe
18     that in the normal course of operating our business we
19     have demonstrated a propensity to follow normal
20     business principles, one of which would be to maximize
21     revenue and ensure the lowest possible cost.  We do
22     that throughout our business and we hope to do that as
23     well in pay-per-view.
24  239                  That gives rise to a scenario where
25     we would hope to keep the highest possible margin after


 1     paying for the rights to events and movies that we
 2     would carry in our pay-per-view service.
 3  240                  So we have a natural propensity to
 4     maximize margin and, therefore, keep, as opposed to
 5     split anything more than we have to.
 6  241                  I think that will be the case.  It
 7     has been the case in other product areas and that will
 8     be the case in pay-per-view.  So I don't think there is
 9     any reason to believe that a condition would need to be
10     imposed in order to require us to do something that our
11     normal business propensities would cause us to strive
12     to do in any event.
13  242                  THE CHAIRPERSON:  So that the three-
14     way split would be followed whether or not there is a
15     condition of licence attached.  Therefore, would you
16     have a problem with a licence condition requiring it?
17  243                  MR. FRANK:  It might preclude us from
18     acquiring product if it is mandated.
19  244                  As Michael said, we have a natural
20     propensity to bargain and earn as much money as we can.
21  245                  I believe that the Commission found
22     in a recent previous proceeding that the removal of
23     those splits would allow the DTH pay-per-view industry
24     to move ahead smartly and acquire product and provide a
25     service.  I would be a little afraid that imposing that


 1     on us might block our access to product.
 2  246                  I note also, Madam Chair, that it has
 3     been suggested in a written intervention that somehow
 4     without this or a similar condition there might be a
 5     sleight of hand which would reduce the amount of money
 6     available to independent production funds.  Clearly,
 7     our intention is to play by exactly the same rules as
 8     the other licensees and provide 5 per cent of gross to
 9     the applicable production fund.
10  247                  That is our position.
11  248                  THE CHAIRPERSON:  One more item that
12     has raised concerns and may be of importance because of
13     vertical integration -- would you have a problem with
14     the Commission establishing -- or to what extent do you
15     think it would be required for the Commission to
16     establish very specific accounting separation and
17     allocation of cost requirements because of the
18     vertically integrated status of pay-per-view, should
19     this licence be awarded?
20  249                  MR. NEUMAN:  Madam Chair, I think
21     that if the Commission has a belief that such
22     protections are required, then that would be a more
23     appropriate way to ensure that accounting happens in
24     such a fashion so as to maximize, for example, the
25     payment of the 5 per cent.


 1  250                  So we would be more disposed to that
 2     kind of a solution if you believe that such a solution
 3     is required.
 4  251                  THE CHAIRPERSON:  I will discuss it
 5     further with my colleagues and explain further how your
 6     proformas have been set up and whether they do lead one
 7     to the conclusion that a remedy or some type of
 8     different accounting separation is required.
 9  252                  Now, if we go back to the direction,
10     the preamble also has an exhortation to the Commission
11     not to refuse to issue a DTH pay-per-view television
12     programming undertaking licence on the basis of a
13     concern of economic viability.  That is in the third
14     "whereas".
15  253                  Whose economic viability is intended,
16     in your view, in this paragraph?
17  254                  Would it be that of the applicant;
18     that of the incumbents?
19  255                  MR. FRANK:  We believe, essentially,
20     that it is both; both the applicant and the DTH pay-
21     per-view incumbents.
22  256                  THE CHAIRPERSON:  So the Commission
23     should not be concerned as to whether you will make a
24     go of this or not, and neither should it be concerned
25     about the effect it may have on the incumbent.


 1  257                  MR. FRANK:  We would like to note
 2     that our shareholder is 100 per cent in support of this
 3     undertaking and that we will have the resources
 4     necessary to raise a first-class system, and also --
 5  258                  THE CHAIRPERSON:  That is exactly the
 6     fear of the incumbent.
 7  259                  Now, having assured me that you will
 8     have economic viability no matter what, what do you
 9     think we should do about the incumbent?
10  260                  MR. FRANK:  This goes back to the
11     issue we spoke about a few minutes ago, Madam Chair;
12     the issue of materiality.  We are non-dominant.  We do
13     represent, at this point, only slightly more than 50
14     per cent of the DTH marketplace.  The incumbents do
15     have the available cable market and the available MMDS
16     market.  Judging from recent reorganizations in the
17     broadcasting business, it seems like they will have
18     approximately 50 per cent of the DTH business as well.
19  261                  We think that they are in a good
20     position -- an excellent position in fact -- to compete
21     very effectively with us.
22  262                  MR. NEUMAN:  I would add, Madam
23     Chair, as I mentioned earlier, that we think their
24     market potential is going to expand very dramatically
25     for reasons that Mr. Frank has just mentioned, but also


 1     for reasons of the further digitization within the
 2     cable market, within which they currently have a
 3     monopoly.
 4  263                  Cable companies are going to be
 5     digitizing at a fabulous pace.  We have seen recent
 6     news reports from Vidéotron that Vidéotron has plans to
 7     put IP over its network, to roll out new services, and
 8     we would assume including a vast array of pay-per-view
 9     of all kinds.
10  264                  We have seen certainly a discussion
11     by Rogers, of its plans now and by mid-1999, to
12     dramatically expand the availability of digital and, as
13     a result, make a market, if you will, for pay-per-view
14     of a size and shape that has never before been
15     contemplated by the existing company.
16  265                  So I think there is a tremendous
17     upside available to the incumbents that will in no way,
18     shape or form be impacted by us, either at our current
19     size or our proposed size in the next few years.
20  266                  MR. GOURD:  If I may, as well ...
21  267                  If we take a look at the "whereas",
22     it does not refer to the economic viability of the
23     applicant; it is economic viability generally.
24  268                  Secondly, in concrete terms, as it
25     has been said, the two incumbents are very sizeable and


 1     strong groups, with a diversity of ownership, both
 2     actual and also potential.  Therefore, it is our
 3     reading that all competitors would have significant
 4     resources because they are a diversified group,
 5     particularly in terms of the current incumbents.
 6  269                  MR. NEUMAN:  I would add just one
 7     further comment to that, that there is a third
 8     incumbent, CTV, which itself is a formidable company
 9     with considerable resources to withstand a competitive
10     environment, an environment that they in fact
11     contemplated at the time of their own licensing.
12  270                  THE CHAIRPERSON:  You are now
13     explaining to us how we shouldn't worry about the
14     economic viability, but is it your view that you have
15     an onus to actually -- not prove, but illustrate to us
16     that that will be the case or won't be the case, or do
17     you think that this "whereas" removes any such onus on
18     the applicant or the incumbent?
19  271                  MR. NEUMAN:  Madam Chair, there are
20     no facts in the future.  So, I suppose, depending on
21     who you ask and whose proforma financial statements you
22     examine --
23  272                  THE CHAIRPERSON:  Oh, yes.  You are
24     telling me that you will achieve certain efficiencies. 
25     If there weren't facts in the future we wouldn't have


 1     these hearings.  The question is, they don't always
 2     come to pass.  But one makes them with the best -- puts
 3     his or her best foot forward, and we then try to sort
 4     out what to use as potential facts or developments to
 5     licence.  They don't always come to pass.  There go the
 6     feathers.
 7  273                  But theirs is a different question
 8     from whether someone -- either the applicant or the
 9     incumbent has an onus to demonstrate, in a credible
10     way, whether or not it will harm the viability of the
11     incumbent to licence an integrated competitor.
12                                                        1020
13  274                  That was my question.  You are giving
14     argument as to why it won't affect the economic
15     viability, but is it your view that you have an onus to
16     demonstrate that?
17  275                  MR. NEUMAN:  It is not our view that
18     the onus is on us to demonstrate the economic
19     viability.  Therefore, we have not taken pains to
20     forecast the financials of the incumbents going
21     forward.
22  276                  However, our discussion of our view
23     as to how the market will evolve, particularly the
24     market within which the incumbents currently enjoy a
25     monopoly, reasonably suggests that their market


 1     potential two years, four years, six years from now
 2     will be dramatically greater than it has ever been.
 3  277                  As I said earlier, the fact that we
 4     are in the marketplace as an alternative pay-per-view,
 5     albeit within the DTH realm, will cause them to be more
 6     competitive and take advantage of that larger market
 7     size like never before.  We will see healthy incumbents
 8     in the years going forward.
 9  278                  MR. GOURD:  Madam Chair, perhaps I
10     could approach what Michael has said another way.
11  279                  We may have our own legal
12     interpretation of the first whereas as a whereas. 
13     However, we do agree with all parties, including the
14     Commissioners, that the purpose of this hearing is to
15     put the facts on the table, and all facts, including
16     the facts about which number of subscribers each
17     applicant believes it will obtain and so on and so
18     forth.
19  280                  Putting the legal interpretation
20     aside, we feel two things.  First, the facts kind of
21     speak for themselves in terms of the number of
22     subscribers we can obtain as compared to the number of
23     subscribers cable can obtain, and secondly, our
24     application is not tailored at competing against
25     pay-per-view proper on cable.


 1  281                  Our vision in our application is to
 2     have the best programming possible, including
 3     pay-per-view, in order to obtain the greatest number of
 4     subscribers possible.  In fact, we're competing against
 5     other BDUs as opposed to competing against a
 6     per-per-view service on cable.  Therefore, if you
 7     compare the respective potential of the various DBUs
 8     three years from now, we feel that even in our best
 9     dreams our penetration would not represent a
10     significant impact on the other BDUs and, therefore, on
11     the other pay-per-view services on these other BDUs
12     partly because they will have a great increase in terms
13     of digitization of cable.
14  282                  THE CHAIRPERSON:  You have applied
15     for one licence with two distinct services in the
16     French language and English language.  You have given
17     some reasons for that in your written presentations or
18     written material.
19  283                  This morning in your presentation you
20     have also emphasized:
21                            "... deux services de
22                            programmation distincts aménagés
23                            de telle façon que nos clients
24                            d'expression française et
25                            anglaise reçoivent le meilleur


 1                            service possible dans leur
 2                            langue."
 3  284                  That goal could be achieved with two
 4     separate licences, could it not?
 5  285                  MR. FRANK:  Yes, it could.  We
 6     applied for one licence as a matter of simplicity and
 7     to demonstrate to the Commission that it was an
 8     integrated undertaking, that we were after one to
 9     service our French-language customers and our
10     English-language customers equally in terms of
11     benefits, choice and variety of programming.
12  286                  THE CHAIRPERSON:  Is there not, from
13     a regulatory perspective, some possible confusion?  For
14     example, when you look at compliance, you will have
15     different conditions of licence that you are prepared
16     to accept on the French side or the English side, but
17     it's one licence.  If you're non-compliant on one,
18     doesn't that create a regulatory problem for the
19     Commission?
20  287                  I am trying to raise some issues. 
21     Would it not be more simple to have two licences from a
22     regulatory perspective?
23  288                  MR. FRANK:  If the Commission feels
24     that there are certain difficulties with one licence as
25     opposed to issuing two separate licences, we would be


 1     delighted to receive two licences.
 2  289                  THE CHAIRPERSON:  In the deficiency
 3     question which you answered on July 17, it is the
 4     response to Question 26, which asks you to comment on
 5     why the Commission should issue only one licence
 6     instead of one for each service.  You say, as you said
 7     this morning, that if the Commission chooses toward two
 8     separate licences, the company would initiate business
 9     under them as issued.
10  290                  What I am curious about, though, is
11     your response to Question 4 of the same letter.  The
12     question was:
13                            "In your supplementary brief,
14                            you stated that this application
15                            seeks authority to operate an
16                            English and a French language
17                            DTH PPV programming undertaking
18                            with a separate barker channel
19                            for each service."
20  291                  It asks you if your applications are
21     severable, which is a different question from having
22     two, and to provide two sets of financial projections.
23  292                  There is a very lengthy answer which
24     ends up saying that in Attachment 1 you are supplying
25     standalone financial statements predicated on the


 1     denial of a French language DTH pay-per-view licence
 2     and Attachment 2 predicated on the denial of the
 3     English one.  Rather than look at two services and
 4     getting two licences, your answer there says that they
 5     are severable, we'll accept one without the other.
 6  293                  Is that true for both languages that
 7     you would initiate your undertaking if we didn't give
 8     you the English language licence, as well as if we
 9     didn't give you the French language licence?
10  294                  MR. FRANK:  I hope our intent is
11     clear here.  We would like to provide service in both
12     official languages.
13  295                  THE CHAIRPERSON:  Oh yes.  Applicants
14     always want everything they ask for.
15  296                  I am now asking you what is it that
16     you would accept that is less than, and it is a bit
17     confusing.  When you look at the last sentences of the
18     long response to Question 4, it sounds as though you
19     would accept, for example, the French language one,
20     even if you didn't get the English language one.
21  297                  MR. FRANK:  I would like to ask my
22     colleague, David McLennan, to comment on the financial
23     implications of that.
24  298                  Basically, having been at a number of
25     these DTH and DTH pay-per-view hearings, we didn't want


 1     to use the word "deal breaker."  We want to be
 2     responsive to the Commission's --
 3  299                  THE CHAIRPERSON:  What if I used it
 4     and asked you to respond?
 5  300                  MR. GOURD:  Quite frankly, Madam
 6     Chair, we don't make a difference between the
 7     importance of a pay-per-view service in French and the
 8     importance of the pay-per-view service in English.
 9  301                  As I said, both BCE and Bell
10     Satellite are national companies.  Both of them have
11     their head office in Quebec, so they are both Canadian
12     companies.  For us, the privilege to offer a
13     pay-per-view service in English and a pay-per-view
14     service in French are equally important from a national
15     perspective.
16  302                  Being national, we would wish to
17     have, of course, pay-per-view offering in both official
18     languages.  But having said that, we wouldn't take the
19     position that we would accept only as a standalone the
20     English pay-per-view service, and we would not do the
21     same for the French one.
22  303                  Having said very strongly that being
23     national companies with national offerings we would
24     wish to have both, our position would be the same.  We
25     would accept with great chagrin only one in French or


 1     one in English, because we know that you know that we
 2     strongly wish to have both.
 3  304                  MR. NEUMAN:  I would add, Madam
 4     Chair, that the benefits that we talked about -- the
 5     marketing benefits, pricing, packaging, promotion --
 6     that would be unique to our service, we would like
 7     those to accrue to both services and not find ourselves
 8     in a situation where one of the languages that we
 9     offered as a pay-per-view service was significantly
10     better than that offered in the other language.
11  305                  I believe that what is good for a
12     French language service, for example, is also good for
13     an English language service in terms of our
14     propensities to improve service for consumers.
15  306                  I would like to add that something
16     will occur early next year which will happen for the
17     first time with respect to French language services,
18     and that is with the advent of our Nimiq satellite,
19     which has national beams as opposed to the east and
20     west beams that have been the case with ANIK-E II, we
21     will for the first time be in a position to take all of
22     our French language services all over Canada, whereas
23     you may know in the current case, because of a lack of
24     satellite capacity and the fact that the satellite is
25     configured with east and west beams, we are only


 1     allowed to take most of the French services just to
 2     eastern Canada.
 3  307                  For the first time, with all of our
 4     French services -- and we would, of course propose this
 5     for our French pay-per-view services, should you
 6     licence us -- these will be available to
 7     French-speaking Canadians everywhere in Canada, not
 8     just in eastern Canada.
 9  308                  MR. McLENNAN:  From a financial
10     perspective, we would certainly consider both licences
11     to be the most preferential one.  That is simply
12     because the infrastructure investment required to put
13     the business in place is better spread over the whole
14     market as opposed to a subset of that market.
15  309                  THE CHAIRPERSON:  With regard to
16     whether you have one licence or two licences from a
17     regulatory perspective, I haven't seen anything earth
18     shaking as to what advantages there are to the company
19     in having only one licence.  Can you expand on that?
20  310                  Given that one problem I have raised,
21     for example, is compliance, suppose from a regulatory
22     perspective -- the regulator has to look at it from all
23     sides -- there is a non-compliance in the French part
24     of the service which, as I have said, will have
25     different divisions of licence, that jeopardizes the


 1     English side; suppose there is a need to give, in the
 2     future, a shorter term to one than the other, it is
 3     very difficult to do.
 4  311                  I am not saying it is impossible, but
 5     you can see where, prima facie, it seems more
 6     complicated.  Therefore, from your perspective, as the
 7     licensee, what else do you have to add as to why it was
 8     a good idea to apply for one licence rather than two?
 9  312                  M. GOURD:  Madame la Présidente, on
10     pourrait peut-être rapidement clarifier cette
11     situation.
12  313                  On n'a pas vraiment donné une extrême
13     importance au principe d'une licence par rapport à
14     deux.  On comprend mieux maintenant la perspective de
15     la Commission, et si...
16  314                  LA PRÉSIDENTE:  Non, non, ce sont des
17     questions.
18  315                  M. GOURD:  Alors laissez-moi patiner
19     par en arrière, vu que l'hiver s'en vient.
20  316                  Nous serons disposés évidemment,
21     comme M. Chris Frank l'a dit, à avoir deux licences
22     plutôt qu'une avec des particularités différentes.
23  317                  LA PRÉSIDENTE:  Et, je répète, ce
24     sont simplement des questions pour essayer de nous
25     assurer que le dossier est complet et que nous vous


 1     avons donné l'opportunité de nous indiquer quelles
 2     seraient vos inquiétudes si nous choisissions une
 3     direction plutôt qu'une autre.
 4  318                  Maintenant, Nimiq.  Évidemment, 
 5     things were slightly different when the material that
 6     was filed in writing was filed with regard to the
 7     launch of Nimiq, but there is, nevertheless, an
 8     indication in your written material that the deployment
 9     of the service, should the licence be granted, would be
10     when Nimiq is launched, and that's contained in a
11     variety of places, one of which is in Schedule 31 and
12     also, I believe, in the deficiency letter that I was
13     looking at at Question 23, that the company would work
14     closely with Telesat to see a placement on the DBS
15     segment and it would lead to successful deployment for
16     commercial purposes by October of 1998.
17  319                  Is it still true that, should we
18     grant this licence, its implementation would be
19     concurrent with the launch of Nimiq?
20  320                  MR. NEUMAN:  Madam Chair, as you
21     noted, circumstances changed very dramatically.  I got
22     up on the morning of September 23rd and found that
23     Nimiq, in fact, did not launch.
24                                                        1035
25  321                  We plan that it will launch in the


 1     April-May time frame and be available to us in the May-
 2     June time frame to broadcast nationally.  We very much
 3     hope that will be the case and are assured by our
 4     suppliers that there is a high likelihood that it will.
 5  322                  However, the vagaries of launching
 6     satellites, readying satellites for launch are such
 7     that we won't know that it happened until it is up
 8     there.  And, if it should come to pass that there is a
 9     failure, which is a remote but real possibility, we
10     would seek to use other satellite space that is
11     additional to the satellite space that we currently
12     have.  So we would propose that a pay-per-view licence,
13     should you decide to grant it, would come into effect
14     now and that we would use it to broadcast pay-per-view
15     either when Nimiq becomes available or some other
16     additional satellite capacity that we may find becomes
17     available.
18  323                  THE CHAIRPERSON:  So you are looking
19     at the possibility that you may indeed be on Anik E2 or
20     Anik F?
21  324                  MR. NEUMAN:  No.  We are very much
22     planning to migrate to Nimiq, but, as I say, the
23     vagaries of satellite capacity being --
24  325                  THE CHAIRPERSON:  Well, the beginning
25     of my question was, should Nimiq be launched now as


 1     planned in the second date, are you going to aim to go
 2     on Nimiq and not implement the service before then?
 3     That's one question.  And would it only be if there is
 4     an indication that Nimiq has not been launched or there
 5     is a further wait that you would go on the non-DBS
 6     satellites?
 7  326                  MR. NEUMAN:  That's correct.  We
 8     would propose to launch a pay-per-view service when
 9     Nimiq is launched, and only if it turns out that Nimiq,
10     for some reason, is not launched would we consider
11     moving to another satellite, in which case we would
12     want to launch the pay-per-view service on that
13     successor satellite.
14  327                  THE CHAIRPERSON:  What if, instead of
15     May of 1999, which is what you hope now, it is another
16     year?  Would you then wait for the DBS?  Because there
17     are problems in launching on the other satellite as a
18     transition, are there not, technical problems with
19     replacement of -- are there not problems for the
20     subscriber if you launch on one type of satellite, with
21     the equipment?  You can just transit then from the non-
22     DBS to the DBS without any changes technically?
23  328                  MR. NEUMAN:  We are currently on an
24     FSS satellite, so migration to an FSS satellite is very
25     doable for us.


 1  329                  THE CHAIRPERSON:  No, I mean when
 2     Nimiq launches, to go from wherever you are at that
 3     time to Nimiq, does that not cause technical problems,
 4     costs?
 5  330                  MR. NEUMAN:  We have undertaken to
 6     incur the costs of replacing what is known as the LNB
 7     for every customer that migrates from --
 8  331                  THE CHAIRPERSON:  At your expense.
 9  332                  MR. NEUMAN:  At our expense, that's
10     correct.
11  333                  THE CHAIRPERSON:  What do you think
12     the cost of that would be per subscriber?  Just a
13     ballpark figure.
14  334                  MR. NEUMAN:  We have never disclosed,
15     that I am aware, in a public forum what those costs
16     will be, but --
17  335                  THE CHAIRPERSON:  Even a ballpark
18     figure?
19  336                  MR. NEUMAN:  -- I can assure you they
20     will be --
21  337                  THE CHAIRPERSON:  Surely I can get a
22     list and find that myself.  I don't want the 95 cents,
23     I just want a ballpark figure.
24  338                  MR. NEUMAN:  The ballpark figure, of
25     course, changes as time goes on because we have more


 1     subscribers, but against our current forecast, it will
 2     be in the range of $25 million in total.
 3  339                  THE CHAIRPERSON:  Oh, so you are not
 4     prepared to say per subscriber, because that is a
 5     moveable fee depending on the numbers, but how do you
 6     arrive at the 25 million, then?  You have to multiply
 7     it by subscribers.
 8  340                  If I ask you 25 millions, how many
 9     subscribers, I will get my calculator and I will have
10     the answer.
11  341                  MR. McLENNAN:  There is a number of
12     components here --
13  342                  THE CHAIRPERSON:  Even women can do
14     that.
15  343                  MR. McLENNAN:  There is a number of
16     components to the migration to the new satellite.  One
17     component would be the physical replacement of the
18     hardware, which would be in around the $40 to $50 mark,
19     and then there would be also the cost of actually doing
20     the replacement.
21  344                  THE CHAIRPERSON:  All that to lead to
22     the question of the desire or the incentive to wait for
23     Nimiq, even if there were a further delay, would be
24     fairly high and to my question of, could one say that
25     your application is premature now, in light of what has


 1     happened.
 2  345                  MR. FRANK:  We are positing a
 3     successful launch of Nimiq in the late April-early May
 4     time frame.  We have every reason to believe that
 5     that's the correct time and we have our fingers crossed
 6     that it will go successfully.
 7  346                  To your question about the
 8     application being premature, we would note that many
 9     other DTH applications have been successful when there
10     have been, shall we say, less probable space segment
11     alternatives.  We think we have a very solid transition
12     plan to Nimiq and we look forward to a successful
13     migration in the early to mid-summer of next year.
14  347                  MR. GOURD:  If I may add, Madam
15     Chairman, our application is not premature because,
16     first, we are told by our supplier that the odds are 97
17     per cent now that Nimiq will be launched, and as you
18     get closer it increases all the time.  However, if
19     Nimiq doesn't launch, we have alternative plans and,
20     therefore, we would have every intention to launch the
21     pay-per-view offerings for what we call cottage season
22     whether on Nimiq or on another satellite., including
23     E2 -- because you did ask a technical question.
24  348                  There is no technical impediment to
25     have our own pay-per-view offerings on E2 and we


 1     continuously improve the compression ratios, creating
 2     more breathing space for new programming services.  For
 3     example, we were, when we launched, I believe, at seven
 4     to one; we have moved to better compression ratios, and
 5     as technology improves we will continue to do so.
 6  349                  Therefore, our conclusion is we would
 7     wish to launch as soon as the licence is obtained.  It
 8     might coincide with the launch of Nimiq.  If for some
 9     reason, some very unfortunate reason, Nimiq is not
10     launched, we wouldn't wish the Commission to interpret
11     our position as meaning that we would not launch the
12     pay-per-view offerings.  We would undertake indeed to
13     launch it.
14  350                  THE CHAIRPERSON:  You have indicated
15     in the written material that you have achieved an
16     agreement with Viewer's Choice and Canal Indigo for
17     carriage for I think a period of time.
18  351                  Is the end of that contract by
19     reference to a date certain or by reference to the
20     launch of Nimiq, and therefore the launch of BSSI if it
21     is licensed?
22  352                  MR. FRANK:  There is certainty to the
23     end of the contract.  The contract is tied both to an
24     FSS probability and a broadcast satellite Nimiq
25     possibility.


 1  353                  THE CHAIRPERSON:  But that's not a
 2     date certain.  By "date certain" I mean does the
 3     contract expire on the 30th of November or whatever, or
 4     does it expire when those satellites become available?
 5  354                  MR. FRANK:  There is certainty to the
 6     expiration of the contract in one context, and that is,
 7     if Nimiq doesn't launch, the contract will run 30
 8     months from the 17th of November, on or about the 17th
 9     of November, whenever the service is successfully
10     launched.  If Nimiq launched successfully, it is two
11     years from the date when DTH pay-per-view service from
12     Viewer's Choice and Canal Indigo was provided from
13     Nimiq.  To the extent that Nimiq could launch on the
14     25th of April or the 5th of May, there is not absolute
15     certainty, but there is relative certainty.
16  355                  So, to be clear, if a high power
17     satellite isn't in our future, it is 30 months on Anik
18     E2, and if Nimiq launches, it is two years from the
19     date when pay-per-view services are carried on that
20     high power satellite.
21  356                  THE CHAIRPERSON:  Now, the contract
22     with Viewer's Choice and Canal Indigo -- well, the
23     contract with Viewer's Choice allows the sale of DTH
24     pay-per-view in eastern Canada.  What is the situation
25     in western Canada, west of the Ontario-Manitoba border?


 1  357                  MR. FRANK:  We have reached a
 2     successful arrangement with all three companies, with
 3     Viewer's Choice, with Premium Television and Canal
 4     Indigo, and the terms and conditions are similar.
 5  358                  THE CHAIRPERSON:  Are they identical
 6     in the area I just asked you about, that is,
 7     termination?
 8  359                  MR. FRANK:  Yes, they are.
 9  360                  THE CHAIRPERSON:  These are my
10     questions.  We will take a break for 15 minutes, and my
11     colleagues will have questions for you as well.  I
12     thank you for your co-operation in the meantime.
13  361                  So we will resume at 11:00.  Nous
14     reprendrons à 11 h 00.
15     --- Short recess at / Courte suspension à 1046
16     --- Upon resuming at / Reprise à 1105
17  362                  THE CHAIRPERSON:  Welcome back.
18     Commissioner Pennefather, please.
19  363                  COMMISSIONER PENNEFATHER:  Thank you,
20     Madam Chair.
21  364                  Gentlemen, good morning.  I should
22     like to ask a few questions in the areas of technical
23     distribution and contribution.  The chair has covered a
24     number of my points and, in fact, I have your responses
25     fairly clearly marked down, but there are some aspects


 1     in each of those areas I just wish to confirm or ask
 2     you different questions about.
 3  365                  On the technical side, both in this
 4     morning's presentation and in the material, written
 5     material, we have talked about the capacity of the ANIK
 6     E2.  What I understood from our conversation earlier --
 7     and I was going to ask you as well -- is the
 8     relationship of launch to the Nimiq and its
 9     availability.  But that is assuming that that
10     availability is not as you hope and certainly if we
11     look at the current situation.
12  366                  Could you just from a technical point
13     of view clarify for me the current capacity of the E2,
14     what you meant by taking a small rump of satellite
15     capacity -- I will not tell you what image came to mind
16     -- and turn it into high performance digital platform
17     which sounds like a very positive approach and which,
18     in fact, I think intervenors such as WPT mentioned
19     regarding your newly increased channel lineup capacity
20     as a questionable situation. I do not want to confuse
21     the issue in terms of the current agreement, so let us
22     just keep it on a technical side.
23  367                  What are the capacity probabilities
24     for the ANIK E2?  What are its limitations?  Is this
25     satellite not nearing the end of its life, et cetera?


 1     What are these other satellites that you would depend
 2     on should the Nimiq not be available?
 3  368                  MR. NEUMAN:  First of all, maybe I
 4     should define what I meant by "a small rump".
 5  369                  COMMISSIONER PENNEFATHER:  Yes.
 6  370                  MR. NEUMAN:  I guess, if you think
 7     back to when we and Star Choice first began our
 8     businesses, we actually went into business before we
 9     knew that we had any satellite capacity.  We, in
10     particular, lived through the loss of ANIK E1 and then
11     really had to scramble to find on a
12     transponder-by-transponder basis, largely through the
13     resale market, enough capacity to put up the service.
14  371                  At some point, I think we had cobbled
15     together enough capacity to have the prospect of
16     launching about a 45-channel service.  And we looked at
17     each other and took a deep breath and decided that that
18     was enough capacity to be a rural service but that we
19     had enough faith in the prospect in the future that
20     either more capacity could become available through
21     digitization of existing analogue signals that
22     co-resided on the satellite, or through new satellites,
23     et cetera, that we should, in fact, start the service. 
24     Because the grey market was expanding at an exponential
25     rate at that point and there was nothing to stop it so


 1     we decided to go ahead.
 2  372                  We announced that at a certain point
 3     ahead we would do just that and we would launch that
 4     summer -- that was in early 1997 -- on that small rump
 5     of capacity.
 6  373                  We then built a digital broadcast
 7     centre and that is the reference, I suppose, that I was
 8     making that referred to turning it into a digital
 9     platform because up until that point it had been
10     largely used for the broadcast of analogue signals.
11  374                  So on an integrated basis, ANIK E2,
12     together with our digital broadcast centre, which is
13     filled with digital video compressed systems which at
14     the time of our launch were state-of-the-art, gave rise
15     to an integrated digital platform and gave rise to the
16     distribution nationally of the first ever national
17     digital programming lineup other than what you may have
18     seen on cable in the shape of a smaller digital tier
19     which, of course, is local in any event.
20  375                  So that is how we started.  We
21     started without much and then gradually got more.  But
22     you heard us also allude to new channels without the
23     benefit of new space.
24  376                  In anticipation of Nimiq, because
25     Nimiq is a very expensive undertaking no matter which


 1     way you slice it, we decided to upgrade.  Even though
 2     we had only been in business for one year, we decided
 3     to do a complete upgrade of our digital video
 4     compression systems with a one-year newer version at
 5     great expense because it would give us that much more
 6     efficiency on the new satellite and lower, if you will,
 7     our cost per television channel on the new satellite.
 8  377                  And when the new satellite was
 9     delayed, and you might recall that at the time it was
10     delayed, we did not know exactly when the new date
11     might be, we decided to bring forward the upgrade of
12     our digital video compression technology and do it
13     earlier in order to have an even more competitive
14     channel offering nation-wide in advance of having that
15     expanded capacity that Nimiq would have provided us.
16  378                  So we then scrambled, frankly, to
17     acquire that digital video compression.  It is now
18     being installed and it is installed in roughly half of
19     our plant and it is enabling us to launch new channels,
20     including, as has been discussed earlier by Alain and
21     Chris, the WIC Premium Television pay-per-view and
22     Viewer's Choice pay-per-view and Indigo as well as
23     specialty channels and off-air channels and the like to
24     create a balance and to make us more competitive in
25     advance of Nimiq.


 1  379                  COMMISSIONER PENNEFATHER:  Thank you.
 2     One of the reasons I wanted to pursue that point was
 3     obviously during our discussion about competition and
 4     some of the concerns registered by the intervenors that
 5     certainly, when it many comes to access to satellite
 6     capacity, this is one of the areas where we might
 7     assume from a different point of view that there would
 8     be anti -- the potential for anti-competitive behaviour
 9     or reduction to competition.
10  380                  And it is important to understand,
11     then, that currently you have increased your satellite
12     capacity and are saying to us that if the Nimiq does --
13     is delayed further, you feel that you will remain with
14     the ANIK E2 or will you move to ANIK F, or what are the
15     other satellites you would use?
16  381                  And I understand earlier from your
17     discussion with the chair that how this will affect
18     your agreements with the VCC and Canada Indigo and WPT. 
19     It is not clear to me yet how all of this is going to
20     work out.
21  382                  MR. NEUMAN:  Well, of course, as I
22     think Chris pointed out, we are very actively planning
23     Nimiq.  And the probability is so high that -- and we
24     are so sufficiently confidence that we are going to
25     move to Nimiq that we are not frankly planning an


 1     alternative other than status quo.
 2  383                  However, it is clear to us that there
 3     are other satellite alternatives.  There are satellites
 4     that exist on the ground or in the air that could, if
 5     we were able to, if we did not have Nimiq and we were
 6     able to successfully negotiate space on other
 7     satellites, could become available to us thereafter. 
 8     But they are in the back of our mind but not something
 9     that we are actively planning.  We are not in
10     negotiation with someone else for satellite capacity
11     because we are so significantly confident in Nimiq at
12     this time.
13  384                  Just to come back to something you
14     said, I hope I did not mislead you.  It is not that we
15     have got new satellite capacity, it is, in effect, that
16     we have created new satellite capacity through digital
17     video compression that has enabled us to increase our
18     channel lineup.
19  385                  So I would suggest that once again,
20     because this market is so competitive, at great expense
21     we have reinvested or actually duplicated our
22     investment in the short space of time that we have been
23     in business to once again offer more channels and a
24     diversity of channel to be competitive in this market. 
25     That is why I made the reference earlier about our


 1     propensity to, once we are licensed, in this case the
 2     BDU license, to really do our utmost to really create a
 3     dynamic and competitive environment.
 4  386                  MR. GOURD:  If I may, Madame la
 5     Commissaire, Télésat nous assurés, sans nous donner de
 6     nom, si pour quelque raison que ce soit Nimiq n'était
 7     pas lancé, que Télésat avait définitivement d'autres
 8     alternatives très rapides, peut-être plus coûteuses
 9     mais très rapides, pour nous offrir un satellite à
10     haute puissance.
11  387                  That would be my second comment.  So
12     there are backups to Nimiq, according to Telesat.
13  388                  The second one, the life of E2 is
14     probably at least 2003.  Now, let us talk about
15     satellite capacity.  First, because of compression
16     ratios, as Michael has said, the current pay-per-view
17     services will be on E2 and, therefore, their
18     distribution is assured as of the end of November. 
19     With or without Nimiq, they will be offered.
20  389                  However, if for some reason there was
21     a bit of a slippage in getting DBS heard, the
22     compression ratios could continue to improve on Nimiq
23     and would allow greeting space for additional new
24     services, including our pay-per-view offerings.
25  390                  THE CHAIRPERSON:  I take it you do


 1     not mean on Nimiq.
 2  391                  MR. GOURD:  What I am saying is that
 3     --
 4  392                  THE CHAIRPERSON:  Are you saying the
 5     compression ratio would improve on Nimiq?
 6  393                  MR. GOURD:  And E2.
 7  394                  THE CHAIRPERSON:  You mean E2.
 8  395                  MR. GOURD:  That's correct.  Thank
 9     you, madam la président.
10  396                  THE CHAIRPERSON:  When I am confused,
11     I think I don't understand.  So, sorry.
12  397                  COMMISSIONER PENNEFATHER:  That is
13     fine.  It is important to understand.
14  398                  MR. FRANK:  Madam commissioner,
15     perhaps I could help by discussing the absolute numbers
16     in terms of ANIK E2 at this point.
17  399                  We have the equivalent of 11 RF
18     channels in the east around 8 RF channels in the west. 
19     Our competitor has the equivalent of 12 channels in the
20     east and 11 in the west.  In terms of how the current
21     satellite situation is constructed, we are actually
22     behind in total channel count on ANIK E2.
23  400                  COMMISSIONER PENNEFATHER:  What is,
24     in fact, the minimum and maximum desired channel
25     requirements for your DTH pay-per-view service?


 1  401                  MR. FRANK:  That really depends on
 2     the marketplace and how much capacity we can afford
 3     relative to our subscriber base and relative to where
 4     we want to grow the business.  I think it is a matter
 5     of public record that we have signed up with Telesat
 6     for 17 channels on Nimiq, 17 transponders, which
 7     effectively increases the amount of capacity we will
 8     have available in the east from 11 to 17, and from 8 to
 9     17 in the west.  So it is a considerable jump.
10  402                  COMMISSIONER PENNEFATHER:  Just
11     before we leave the technical area, you mentioned this
12     morning high definition transmissions in the first year
13     of operation.  I am assuming it is the Nimiq that is in
14     operation when you say that, or is that also going to
15     be possible with the increased capacity of the E2?
16  403                  MR. NEUMAN:  Good question.  We
17     tested high definition this summer on channels that we
18     had been holding open, and I mean satellite capacity
19     that we had been holding open, in anticipation of the
20     possibility of reaching pay-per-view incumbents for
21     pay-per-view.  And we had some very interesting and
22     successful tests that led us to the conclusion that we
23     are able to outline today that we would be able to,
24     that when space became available through Nimiq, offer
25     high definition service within the first year of Nimiq.


 1  404                  Interestingly, we will have an HDTV
 2     compatible set up box available to us in the second
 3     quarter of 1999 and that is one of the -- that and
 4     satellite space are some of the impediments to actually
 5     being in the HDTV business.  So we are actual actively
 6     pursuing that.  We have placed orders for those boxes.
 7  405                  COMMISSIONER PENNEFATHER:  You
 8     mentioned, just on this high definition exhibition, to
 9     place this on the same competitive rung as the U.S. DBS
10     services, which is a theme that comes up often in your
11     written material and today, and to ensure Canadian
12     response to this emerging technology.
13  406                  Where is this high definition
14     programming coming from and when will consumers be able
15     to actually watch this high definition programming in
16     their homes?
17  407                  MR. NEUMAN:  There is a bit of a
18     chicken and egg problem with high definition
19     television, a bit like colour television a long time
20     ago.  The cost of a high definition set is expensive.
21     You will not see them in every living room in the near
22     term.
23  408                  And, of course, without there being a
24     critical mass of television sets, I do not think you
25     will see programmers rushing into it.  But I think it


 1     is crucial that each of us do what we can to create an
 2     infrastructure that will at least make it possible.
 3  409                  So to the extent that the U.S.
 4     mandates migration to high definition television ahead
 5     of us, to the extent that we put an infrastructure in
 6     place that makes it possible for Canadian programmers
 7     with whom we are talking right now about getting
 8     together on this, it will happen faster than if we did
 9     not.
10  410                  We have taken the view that being
11     part of the high definition world is yet one more thing
12     that we can do, given the investments that we have made
13     in infrastructure and satellite space, to make us that
14     much more competitive and leading edge and that
15     attracts the kind of customers that want that sort of
16     thing.
17  411                  COMMISSIONER PENNEFATHER:  This
18     matter was discussed at some length during the
19     television policy hearings for a number of reasons, but
20     certainly one of them was looking at it from the
21     consumer point of view.  And there was considerable
22     discussion around specific dates when consumers would
23     be interested, have access, can afford to view either
24     current programming, 35-millimetre current programming
25     for the United States in their homes or not.


 1  412                  In other words, time lines were very
 2     important.  And I assume, since we were discussing
 3     competition earlier, that you were looking at time
 4     lines in terms of digital programming, not just
 5     delivery.
 6                                                        1115
 7  413                  MR. NEUMAN:  To the extent that there
 8     is digital programming available, in this instance in
 9     the pay-per-view sphere, for middle of next year, we
10     will be broadcasting it in the middle of next year.  It
11     will come together with Nimiq; it will come together
12     with the availability of our set-top boxes.  It will
13     just be a question of whether or not it comes together
14     with people actually having the sets.
15  414                  A gentleman in our audience, Terry
16     Snazel, our Vice-President of Technology, has informed
17     me that he will have one of those sets coincident with
18     that middle of next year timetable.  So I know at least
19     one person that will be watching HDTV in Canada.
20  415                  COMMISSIONER PENNEFATHER:  Well, it
21     won't be me.  And that's my next line of questioning,
22     if you will, even just in terms of not digital
23     programming but what I receive in my home as a
24     consumer.
25  416                  Let's look at this competition issue


 1     from the consumer's point of view, which I don't think
 2     we have touched on this morning yet.
 3  417                  What effect will approving your
 4     application have on consumers?  Is it possible for a
 5     consumer really to benefit from this competition if in
 6     fact once I have invested, for example, in DTH, that's
 7     it, I will have the DTH delivered to my home?
 8  418                  How then can I benefit from
 9     competition if there is only one form of delivery?
10  419                  In other words, wouldn't the consumer
11     really benefit from competition if I had different
12     services available to me through a DTH BDU, as opposed
13     to just one service?
14  420                  MR. NEUMAN:  We believe that there
15     are several benefits to the consumer.  You are right,
16     we did not go into great detail about how we would
17     package, price and promote.  But I did speak to the
18     marketing issues in general terms earlier.
19  421                  I suppose one of the reasons I didn't
20     get into any more detailed discussion of that is the
21     fact that this is a competitive environment.  We don't
22     propose that there be exclusive programming available. 
23     So the things that we have left at our disposal, the
24     tools that we have left at our disposal to compete with
25     the incumbent pay-per-view operators, as is the case in


 1     our BDU licence to compete with the existing BDU
 2     operators, have to do with pricing, packaging and
 3     promotion.
 4  422                  I left out something else under
 5     promotion: just the selling of services.
 6  423                  I happened to mention earlier that we
 7     have about six times the penetration -- because we
 8     don't carry pay-per-view, at least until the 24th of
 9     this month, I can't use it as an example.  But when it
10     comes to discretionary services like pay television, we
11     have about six times the penetration of pay television
12     as compared to the average cable company in this
13     country, and yet it is the same pay service.
14  424                  So we have promoted and sold through
15     our call centre and through other means, through
16     advertising in co-promotion with our other services,
17     our package, our hardware, and so forth, these services
18     in a very aggressive fashion.  As a result, from the
19     perspective of the pay companies, we look a lot like a
20     cable company that is five times our current size, just
21     by virtue of the relatively greater number of pay
22     packages that we have sold.
23  425                  That seems to illustrate the point
24     that if you package services in a way that consumers
25     like and you promote it in a manner that is compelling


 1     to them, they will buy more.  I think we have
 2     demonstrated that.
 3  426                  I don't want to be vague.  I would
 4     like to give you at least one illustration of something
 5     that we might do.  Now that I give it to you and
 6     everyone else in the room, I suppose we might see it in
 7     the next month or two from one of the incumbents.
 8  427                  Let me speak to something like
 9     children's programming.
10  428                  When my daughter was growing up, she
11     would ask me to get her a video from the video store. 
12     She would put it in the machine and watch it once, and
13     sometimes I would watch it too.  Then every time I came
14     downstairs I would see her watching it again and again
15     and again.  Of course, that gave rise to a video sell-
16     through market because rather than rent it 25 times,
17     you buy it and your kids get to watch it as often as
18     they like.
19  429                  And it seems that, as I speak to my
20     colleagues, their kids do the same thing.  Not much has
21     changed in the 15 years since she was doing it.
22  430                  That is the problem with pay-per-
23     view, the way pay-per-view is currently offered.  At
24     $3.99 a go, you sure wouldn't want to buy it again and
25     again and again.  So one could envisage, from the


 1     perspective at least of some parents, that they might
 2     be better off buying packages of children's pay-per-
 3     view in a chunk or with multiple views or more views
 4     during a period of time.  And that might be more
 5     appealing, given the way that their children like to
 6     watch the movies or the events, as the case may be.
 7  431                  That is something that we would do. 
 8     We would promote it as such, and we think it would be
 9     that much more appealing to our subscribers.
10  432                  We know this from our personal
11     experience, but we also know it because since we have
12     been in the BDU business nationally for some 13 or 14
13     months now, we are across the country every week.  We
14     are in towns and cities in Canada.  People are not shy,
15     as I am sure is the case with the CRTC, about telling
16     us what is wrong with our existing service and what
17     they want from our existing service.  They send me
18     letters.  They e-mail me, as they do my colleagues.
19  433                  One of the things that they speak to
20     is packaging:  Why do you package this with that?  Why
21     don't you do this?  Why don't you that?  We know you
22     have an addressable system.  Why don't you unlink that
23     and give it to me differently?
24  434                  Our innate desire is to give it to
25     them the way they want to buy it.  The best way we know


 1     to find that out, other than just going and observing
 2     and listening and getting the letters, is to survey
 3     them, to listen very carefully to try to interpret, as
 4     would any marketing organization, what they are asking
 5     for; and then package it in a way that would give rise
 6     to a greater volume of sales.
 7  435                  It has worked for us thus far, as I
 8     said, in pay.  Both we and the pay companies and their
 9     suppliers have enjoyed vastly greater penetration than
10     has ever happened before, and we think we can duplicate
11     that success in pay-per-view.
12  436                  COMMISSIONER PENNEFATHER:  Thank you. 
13     So when it comes down to it, one of the angles of this
14     point that I was getting at was from the consumer's
15     point of view.  If I have DTH in my home, do you feel
16     that I will have greater choice?
17  437                  I believe what one of your arguments
18     has been is that on the delivery of DTH you would offer
19     only your own pay-per-view service.  Whereas wouldn't
20     it provide me as a consumer with grater choice to have
21     access, through DTH BDU ExpressVu, to different pay-
22     per-view choices, not just packaging within your pay-
23     per-view service, but a different pay-per-view service?
24  438                  We did speak earlier about the
25     importance of program differentiation.  I would like to


 1     see that advantage described in terms of the consumer.
 2  439                  MR. NEUMAN:  I see your point.
 3  440                  As Chris mentioned a moment ago,
 4     certainly for a period of time there would be two pay-
 5     per-view services on our service.  I think that is
 6     going to be an interesting time, because then you are
 7     going to see competition, not because it is mandated
 8     that they must get carriage if we are there, but
 9     because we are both there.
10  441                  So the kinds of things that I have
11     just described they would then be struggling to
12     provide.  They would then be wanting to have a dialogue
13     with consumers that pointed to their superiority over
14     other means of getting pay-per-view, albeit on our
15     service, or on Star Choice for that matter.
16  442                  We have always said we are talking
17     about non-exclusive rights, which gets us down to how
18     we price, promote, sell and deliver other marketing
19     advantages that give rise to higher sales.
20  443                  I think we are not averse to seeing
21     both services there.  We think it is going to make
22     their service better.  That is what competition is good
23     for.  That will bring benefits not only to the
24     ExpressVu subscriber, at least in the early days that
25     we carry both services for certain -- because that is a


 1     certainty at this stage -- but beyond that there will
 2     be a knock-on effect or benefit for subscribers of
 3     cable because the incumbent pay-per-view company will
 4     have become creative by virtue of competition with us.
 5  444                  When we reach the point that I think
 6     we reached a little while ago when we discussed the end
 7     of those agreements, I would hope that the advent of
 8     competition would have made them sufficiently
 9     competitive that they may have decided to package in a
10     way and enhance their brand sufficiently that, as I
11     said, as is possibly the case with another service, we
12     would be loathe to take them off, because people will
13     really demand it and that might give rise to even
14     greater sales.
15  445                  Or they would have found a niche. 
16     And instead of going and trying to boil the ocean with
17     all programming that comes available, they may be super
18     strong in children's programming or have a dramatic
19     advantage in multicultural programming that is not a
20     slant that we have put on our particular service.
21  446                  That is what should drive whether or
22     not they find their way on to the Nimiq satellite
23     beyond the end of their agreement.
24  447                  We are very good customers right now
25     of WIC and Astral.  I see not reason for that to


 1     change.  As is the case with all suppliers, I just want
 2     them to continuously have an incentive, a market
 3     incentive to do better, not sort of an entitlement
 4     incentive to remain.
 5  448                  M. GOURD:  Si je peux compléter ce
 6     que Michael a dit, on a dit plus tôt qu'on a aucun,
 7     aucun problème philosophique, théorique, pratique à
 8     avoir deux services de pay-per-view, mais il est
 9     préférable que ce soit dans le cadre d'une
10     programmation optimale pour le client plutôt qu'à
11     travers une rigidité additionnelle qui viendrait de la
12     réglementation.  Par exemple, dans le cas des services
13     américains, ExpressVu avait le choix de les prendre,
14     Prime Time 24; on aurait pu les monter nous-mêmes à
15     partir de liaisons ascendantes aux États-Unis.  Cancom
16     a fait une offre intéressante et sans obligation
17     réglementaire ces services sont présents.
18  449                  Michael a parlé de plusieurs produits
19     qu'on achète de Shaw, même si Shaw contrôle de fait
20     Star Choice, notre compétiteur.  On peut parler de
21     l'ensemble des produits, des autres produits que la
22     télévision à péage et le pay-per-view, qu'on prend
23     d'Astral, parce qu'avec 17 transpondeurs et un taux de
24     compression de neuf, notre intérêt est d'avoir les
25     meilleurs produits, mais on se dit que c'est très


 1     important que l'offre totale soit la meilleure pour le
 2     consommateur et que tout le monde programme dans cette
 3     perspective-là pour le client du direct-to-home plutôt
 4     qu'avoir une offre homogène qui serait relativement la
 5     même pour le MMDS, pour le direct-to-home ou pour le
 6     câble.
 7  450                  Alors à la fin de la journée, vu
 8     qu'Astral et WIC vont être déjà présents sur notre
 9     système de distribution, il y a une pression réelle de
10     la part du souscripteur, qui n'aime pas voir des
11     perturbations, que cette offre-là continue, surtout si
12     elle est excellente.
13  451                  COMMISSAIRE PENNEFATHER:  Merci.  En
14     effet -- I am sorry, I should continue in English.  But
15     we may of course respond in either language, as we
16     wish.
17  452                  I really want to pursue the point
18     that Viewer's Choice, Canal Indigo and WPT have opposed
19     your application, as you know.  They argue in fact a
20     different story: "that your service will replace their
21     own; that your service will contribute nothing new to
22     the system".
23  453                  Would you care to comment on that? 
24     What will your service contribute to the system?  Why
25     in fact are they making this comment?


 1  454                  MR. NEUMAN:  I think it is clear to
 2     us at least that in a monopoly environment, when there
 3     is the prospect of a monopoly going away, one of the
 4     natural actions of the incumbent is resistance of that
 5     change.
 6  455                  I have always said that I don't like
 7     monopolies; but in my next life, I want to be at the
 8     front of the line when they are giving them out.  As
 9     long as you don't have to compete, it's a pretty
10     comfortable environment.  They have no incentive.  You
11     can understand why they would have no desire to see us
12     disrupt that cosy situation.
13  456                  However, as I said a few moments ago,
14     I think it is clear that at least we have demonstrated
15     through our actions in other programming genres that we
16     carry that we have an opportunity here to package in a
17     manner that consumers will find attractive.  If they
18     find it attractive, they will buy more of it; and if
19     they buy more of it, it has knock-on economic benefits
20     throughout the broadcast system, including the
21     production community.
22  457                  I think this is one of the reasons
23     that we have been so supported by intervenors that are
24     not enjoying the benefits of monopoly, as are the
25     intervenors that you have described.


 1  458                  Coming back to the perspective of
 2     consumers -- because it is our perspective, first and
 3     foremost, as we operate Bell ExpressVu -- the knowledge
 4     that we have gained by speaking to consumers is that
 5     they want diversity.
 6  459                  Again, I wish I could speak in the
 7     context of pay-per-view; but, as I say, we have not
 8     carried it so I cannot.  So I keep referring back to
 9     pay, for instance.
10  460                  Right now, we offer a pay service in
11     eastern Canada which is, as you know, different than
12     the pay service that we offer in western Canada.  I am
13     asked all the time:  Why don't you give us both?  Why
14     don't you let us have both so we have a choice?
15  461                  One offers services packaged in a
16     certain way, and one offers them packaged in another
17     way.  They have different names.  They take different
18     marketing approaches, and so forth.  Consumers would
19     like to have that choice.
20  462                  To use this as a hypothetical
21     illustration, if I may, if they did have that choice, I
22     would put it to you that one would succeed over the
23     other -- or at least they would strive to succeed over
24     the other and garner a larger share of their respective
25     subscriber bases within what was a monopoly up to that


 1     point.  Consumers really like that choice.
 2                                                        1130
 3  463                  One thing that we found when we gave
 4     them choice -- and when we gave consumers choice -- and
 5     we were the first in the country to package it in such
 6     a way that gave customers a lot more choice, with this
 7     very small $7.95 basic service -- is that customers
 8     have fed back to us "We really like that you offered us
 9     the choice", but large numbers of them don't take it. 
10     They tend to take our larger bundled packages because
11     they like those too.
12  464                  But they like to be offered the
13     choice.  It is a matter of freedom.  In every other
14     respect of their commercial lives they are offered
15     choice.  When you walk into a Kmart store and you want
16     a bottle of Windex, when you are checking out they
17     don't force you to take three cans of 10W30 motor oil
18     because that is the way that Kmart wants to package it. 
19     You would never go back.
20  465                  So the same thing is true in
21     programming.
22  466                  Now that they realize we can offer
23     them more choice, they are really demanding it.  They
24     are a more sophisticated customer group and I think
25     that we, through our pay-per-view application,


 1     represent a real opportunity to show them what can be
 2     done in terms of distinguishing one pay-per-view
 3     service from another and giving them more to choose
 4     from.
 5  467                  COMMISSIONER PENNEFATHER:  As long as
 6     I do have access to one choice over another, not just
 7     of individual programs, but I am always concerned about
 8     the fact that there are different approaches to
 9     packaging, that is where the choice is also very much
10     made for me, as a consumer or not.
11  468                  On another point regarding an
12     important discussion we had this morning, I just wanted
13     to bring one further point to the discussion on what
14     you have described as the benefits of an affiliated
15     integrated national service operation, and one of them
16     was the matter of efficiency.  I think you say that it
17     would be the most cost effective and competitive
18     business structure to grow and develop this nascent
19     industry, namely, the DTH pay-per-view industry, and
20     yet opposing interventions don't see this.  In fact,
21     they argue that it makes little business sense from an
22     operational perspective.
23  469                  This is Viewer's Choice, page 3,
24     paragraph (vi), saying that your economies of scope are
25     vastly overstated.


 1  470                  Would you care to comment on that
 2     point?
 3  471                  MR. NEUMAN:  Yes, I would.
 4  472                  Again, my reading of it is that you
 5     would expect them to say that, but I think the
 6     operational facts that we face are clear and contrary,
 7     and they have to do with the fact that we can house the
 8     service in the same place; that we can get some
 9     synergies between the various people that operate and
10     have roles within our existing organization that,
11     coincident with those roles, could work on the pay-per-
12     view service.
13  473                  But I would go beyond what are our
14     hypothetical or our planned approaches to operating our
15     business, as opposed to the structure of the industry
16     at present, and talk about my observations in other
17     businesses.
18  474                  I have had the opportunity over the
19     last two years, particularly before we started our
20     business, to visit satellite TV companies all over the
21     world, to visit cable companies like TCI, at their
22     headquarters, and to discuss various ways and means of
23     organizing the business.  As a result, Bell ExpressVu
24     has organized its business in such a way which is
25     unique, but the sum of those experiences and


 1     observations.
 2  475                  One of the things that we have done
 3     thus far is to integrate all of our operations.  So if
 4     you visit Bell ExpressVu, you will note that we are
 5     unique in that all of the means of our production are
 6     under one roof.  We have our call centre, our
 7     management, our technical operations, our uplink, our
 8     digitization centre, our marketing and our sales all
 9     under one roof, and the synergies are amazing.
10  476                  It means that we can be in closer
11     touch with what customers are saying to us in the call
12     centre and make changes faster and implement them
13     faster and be more responsive to consumers that way.
14  477                  Our competitor has to travel many
15     hours by air to get from their headquarters to their
16     call centre and isn't in day-to-day touch.  We are
17     cheek to jowl with them in our business life day to
18     day.
19  478                  Can I quantify that for you?  No. 
20     But I would describe to you the impact -- our
21     observation that our having organized in that way has
22     had on other operators.
23  479                  Echo Star, for example, in the United
24     States, used to have their call centre very far afield,
25     and after they saw our experience, when they built


 1     their new headquarters they brought a very large chunk
 2     of their call centre back inside, because it is the
 3     heartbeat of the organization.  You learn so much ...
 4  480                  I have a call centre phone on my
 5     desk, beside my regular phone, that puts me in much
 6     closer touch than the president of any other BDU that I
 7     can think of in this country and many in the United
 8     States, in terms of understanding what is happening
 9     with the customers.
10  481                  Those kinds of synergies are
11     difficult to quantify in a proforma financial
12     statement, but I would argue that, in a truly
13     competitive environment, being in touch with your
14     market to that degree is very, very important.  It is a
15     vastly more important and beneficial thing than being
16     non-integrated.  That is why we are seeing a trend
17     toward further integration in the call centre, as I
18     mentioned, but also in pay-per-view.
19  482                  When I visited the new MMDS operator
20     in Los Angeles last year, one that was just sold to a
21     cable company -- and it was started by PacBell -- they
22     operate a 100-channel MMDS service in the Los Angeles
23     area and a 40-channel near-video-on-demand system,
24     integrated.  It was a fabulous system.  I really
25     enjoyed using it in their demonstration centre, and I


 1     asked to see the video-on-demand department, fully
 2     expecting, because of my Canadian experience with the
 3     existing operators, to see legions of people and
 4     systems and space and management, and what have you. 
 5     He took me into a room and showed me a Sun server,
 6     which was sitting on a bench, and he introduced me to
 7     the person who is responsible for liaising with the
 8     studios and buying the events and so forth.  I asked
 9     him:  "Is this it?"  His response was:  "No, there are
10     other people involved, obviously".  But having it
11     tight, close and integrated gives them an opportunity
12     to be responsive.
13  483                  I realized he was feeding me back all
14     of the things that were the same kinds of things that I
15     had ascertained when I decided to have our call centre
16     integrated.  It made sense for all of the same reasons
17     and it gave rise to lower costs and more efficiency --
18     more responsiveness in the market.
19  484                  MR. McLENNAN:  Pardon me.  I would
20     like to add a bit more about the financial perspective
21     on that.
22  485                  The vertical integration allows us to
23     really maximize revenues as well.  So it is not only on
24     the cost side but on maximizing revenues.  From a
25     decision-making process we had to invest -- make


 1     capital expenditures to put together the infrastructure
 2     to start this business, and we also incur operating
 3     costs that we wouldn't incur if we were buying from a
 4     third party.
 5  486                  But offsetting that is that we keep
 6     more of the revenue stream.  We keep approximately two-
 7     thirds of the revenue, for argument's sake.  That is a
 8     positive financial trade-off in our minds.  We incur
 9     costs, we incur some business risk, but we are
10     compensated for that by keeping more of the revenue
11     stream as well.
12  487                  So we believe, from a financial
13     perspective, on an integrated basis, that we are better
14     off doing this ourselves.
15  488                  COMMISSIONER PENNEFATHER:  Thank you
16     very much.
17  489                  Thank you, Madam Chair.
18  490                  THE CHAIRPERSON:  May I ask, given
19     the co-operation and co-operative arrangements between
20     Viewer's Choice and WPT, how much more transponder
21     space was required to accommodate WPT?  What
22     incremental space was required?
23  491                  MR. FRANK:  Viewer's Choice and WPT
24     offer us an integrated national service.  So the answer
25     is --


 1  492                  THE CHAIRPERSON:  Was there any
 2     incremental at all?
 3  493                  MR. FRANK:  No.
 4  494                  THE CHAIRPERSON:  None at all.
 5  495                  MR. FRANK:  No.
 6  496                  THE CHAIRPERSON:  Now, Mr. Neuman,
 7     you have given me a golden opportunity to give you a
 8     commercial or a tip which I gave to Mr. McEwen when he
 9     appeared about HDTV.
10  497                  You differentiate yourself by saying
11     that you are transmitting in HDTV.  It may well be that
12     it is not relevant whether people have the receiver.
13     The fact that they see it on the screen and that you
14     say it is, they may believe they are getting HDTV
15     without buying the receiver.
16  498                  You are raising your eyebrows, but
17     the story is that you related it to the change from
18     black and white to colour.  When my children were
19     small, in the early sixties, ABC displayed on our black
20     and white TV a big peacock and announced that this
21     program would be in living colour.  My kids got very
22     excited and told me "Come and see this one.  It will be
23     in colour".  Granted, the story has a sad end, which is
24     that maybe my children were a bit slow.  Hopefully they
25     won't watch CPAC in the next two weeks, because I may


 1     not get any Christmas presents.
 2  499                  Commissioner Cardozo ...
 3  500                  COMMISSIONER CARDOZO:  Thank you,
 4     Madam Chair.
 5  501                  Good morning.  I have a few questions
 6     that I will pursue on the issues of programming, and
 7     then some financial questions too.
 8  502                  Let me start with a couple of
 9     specific issues, the first being the number of Canadian
10     feature films, which you have address in section 4.1 of
11     your supplementary brief.
12  503                  With regard to the English language
13     pay-per-view component you have noted that a minimum of
14     12 Canadian feature films, including "all new" Canadian
15     feature films that are suitable for pay-per-view
16     exhibition, will be aired, provided that they meet the
17     pay television standards and practices codes.
18  504                  I look at that number of 12 and I
19     look at the number of "all new" and, on the one hand,
20     12 doesn't look like a whole lot and, on the other
21     hand, "all new" looks like quite a lot.
22  505                  My question is:  If you just did 12,
23     do you think that is a reasonable amount, in terms of
24     the area of Canadian feature films?  On the other hand,
25     how would you determine which films meet the pay


 1     television standards and practices codes, because there
 2     are a lot of things that get produced?  What are the
 3     kinds of movies that would meet your standards?
 4  506                  MR. FRANK:  I think the quick answer
 5     to this question is that 12 is a minimum and it is what
 6     our competitors are offering.
 7  507                  Clearly, we would offer as many
 8     Canadian films as we could.  We want to provide a
 9     competitive service, and we would be very sensitive to
10     offering the widest range of choice possible.
11  508                  COMMISSIONER CARDOZO:  At this point
12     do you have any sense of how many you would end up
13     with, or is it too early to tell in advance?
14  509                  MR. FRANK:  I think it is probably
15     the early days.  We intend to program a very
16     competitive, robust service.
17  510                  COMMISSIONER CARDOZO:  With regard to
18     the French language pay-per-view, you note a minimum of
19     20 Canadian feature films, similarly including "all
20     new".  You are also talking about dubbing English
21     language films into French.  In the application, and
22     today, you have talked about dubbing in both
23     directions.
24  511                  With regard to the French language
25     component, do you think that 20 -- and I don't want to


 1     be going back to my first question, saying that 12
 2     wasn't that many -- is 20 a reasonable figure, given
 3     that the French language production industry is not as
 4     numerous as the English language?
 5  512                  MR. FRANK:  Again, this is a standard
 6     that has already been set and we wish to meet all of
 7     the conditions that our competition would be meeting.
 8     And we would develop over and above that if it was
 9     possible to do so.
10  513                  MR. NEUMAN:  I would just add that in
11     your question you raised an interesting point, and that
12     is that the volume of available films has some bearing
13     on our ability to do that.  I think that with our
14     proposal of dubbing either way, as you outlined, which
15     I mentioned in my opening remarks -- our hope with that
16     is that we would expand the universe of Canadians who
17     would be able to see and enjoy the film, despite it not
18     having been originally produced in their native
19     language.
20  514                  So we intend to create through that
21     kind of mechanism -- and this also touches on my
22     comments earlier about packaging, doing something that
23     hasn't been offered before in quite the same way -- we
24     intend to try to promote Canadian films, be they French
25     or English, to the population that wouldn't otherwise


 1     have seen them and broaden the universe.
 2  515                  If we are successful at that to some
 3     degree, or if the fact that we simply do it has an
 4     impact on the competitive environment and causes others
 5     to do it, I think that does a couple of things.  It
 6     creates a more robust -- let's use the French film
 7     industry as an example -- a more robust environment
 8     financially and gives rise to the possibility of more
 9     productions, and gives rise to the possibility of even
10     more people watching them, both English speaking and
11     French speaking.
12  516                  I think that those are the kinds of
13     knock-on effects that we were thinking of when we made
14     the assertion that that would be something that we
15     would very much want to do.
16                                                        1150
17  517                  MR. FRANK:  I think it's important to
18     note that this was a suggestion that was made in our
19     consultation with the industry.  It made eminent sense
20     to us because it makes more new Canadian product
21     available coast to coast.
22  518                  COMMISSIONER CARDOZO:  Which is a
23     suggestion in your consultation.
24  519                  MR. FRANK:  As you characterize it,
25     the reverse dubbing suggestion, and it's over and above


 1     our baseline commitments.
 2  520                  COMMISSIONER CARDOZO:  Certainly if
 3     you approach the dubbing issue from merely meeting a
 4     numerical target, I have one fear that it will be the
 5     French component that will have a lot of dubbed
 6     material just because of numbers.  I don't think that
 7     French language viewers would be that interested in new
 8     service if it contained a lot of dubbing films.
 9  521                  But if you're looking at dubbing in
10     both directions, and the other point you made was
11     people being able to watch films that have been
12     produced in the other official language, that is
13     certainly a very strong reason to do it because there
14     is a lot that goes on in this country in one language
15     that the other language group might never know about.
16  522                  MR. FRANK:  Just to be clear, it's
17     not our intent to use this reverse dubbing to meet our
18     minimum commitments at all.  This is over and above.
19  523                  COMMISSIONER CARDOZO:  Let me ask you
20     also about the percentage of English-to-French
21     channels.  You've outlined on page 11 of the oral
22     presentation today the 25 per cent with a minimum of
23     five French channels.
24  524                  Would you be prepared to accept that
25     as a condition of licence, if the licence was granted?


 1  525                  MR. NEUMAN:  Yes, we would.
 2  526                  COMMISSIONER CARDOZO:  The sports
 3     coverage, how would the sports coverage differ from
 4     everything else that happens in sports coverage?  What
 5     events would you be focusing on?
 6  527                  MR. NEUMAN:  Again, without making
 7     reference to whether we might, for example, focus on
 8     boxing in the hopes that someone else would focus on
 9     hockey or football or what have you, I think it would
10     be premature for me to suggest what our strategy might
11     be in that respect.  I certainly wouldn't want to do it
12     in front of my prospective competitors.
13  528                  What I would like to convey with
14     respect to sports coverage is that there are vast
15     markets in sports, but there isn't a sports market per
16     se.  It's a segmented market.
17  529                  I was out west last week and everyone
18     but everyone was asking me about curling.  Yet, in
19     other markets I don't hear any mention of curling.  I
20     hear nothing but hockey in other markets.  Well,
21     actually, I hear about hockey in every market, but
22     that's another story.
23  530                  I suppose what we would like to have
24     the flexibility to do is to meet consumer demand and to
25     not be hemmed in in terms of the flexibility that we


 1     might need to respond on the fly to such demand,
 2     whether that means that in a particular season we would
 3     like to put up football; in another season we would
 4     like to put up a particular kind of package of
 5     out-of-market games in Highlife, for that matter, or
 6     through the rightsholders we would like to bring
 7     cricket in a package or a single game, for that matter,
 8     a finals game.
 9  531                  We would like to have the flexibility
10     to do that because once we have a pay-per-view service
11     we do cover the whole country.  We are not a localized
12     service or even a regional service; we cover the whole
13     country.  We have a vast array of different likes and
14     needs to respond to.  So, our view at this stage is
15     that we would like to be able to offer sports as and
16     when we determine a demand for a particular kind of
17     sport, wherever that may be in Canada.
18  532                  MR. GOURD:  In view of the fact that
19     in our head office building we have a skating rink 12
20     months per year, le patinage de fantaisie serait
21     également intéressant.
22  533                  COMMISSIONER CARDOZO:  But you're not
23     going to be showing the skating that happens right
24     there as part of your sports component.  You've always
25     got a back-up then.


 1  534                  Essentially, in terms of your sports,
 2     is it just going to be like the others?
 3  535                  MR. NEUMAN:  Sorry?
 4  536                  COMMISSIONER CARDOZO:  In terms of
 5     your sports coverage, is it going to be like the
 6     others?  I think there was some reference to premium
 7     sports events which I thought may be the sports where
 8     people get paid the most, so that's okey -- hockey and
 9     basketball.
10  537                  MR. NEUMAN:  They all get paid a lot. 
11     The word "premium" is simply utilization of the word as
12     it applies to all things other than the conventional
13     television really, I think, pay-per-view sports that
14     are packaged to meet the needs of a particular group
15     like those segments of our country that are crazy for
16     cricket.
17  538                  We have people in our office -- two,
18     as it happens -- that would take days off to watch
19     cricket.  I know that they aren't alone in this
20     country.  We would seek to define the groups nationwide
21     that are desirous of packaged cricket matches from
22     wherever they happen in the world, and put together
23     packages to meet that need.  We'd like to do that
24     across all types of sports, and I can anticipate it
25     could include, and we're very excited about the


 1     prospect of it including hockey, it including football,
 2     cricket, and a broad range of sports in a manner that
 3     they haven't been packaged before.
 4  539                  This speaks to my comment earlier
 5     about packaging.  It's interesting what happens when
 6     you package things differently than consumers have been
 7     used to receiving them before.  Sometimes simply the
 8     availability of them in a more convenient way at a
 9     price point that makes sense is a spur to sales. 
10     That's something certainly consumers have told us:  To
11     use my last week example in Kamloops, as it happens,
12     why don't you put together a package of curling from
13     across the country because I'd buy that.  I hope that
14     wasn't a market survey of one and, of course, we
15     wouldn't put up such a package until we did a more
16     significant market survey, but that's the kind of thing
17     I would be thinking of.  That would distinguish our
18     pay-per-view service from others that might be in the
19     market.
20  540                  MR. FRANK:  Also, we're very much
21     focused on programming in a complementary way so that
22     we complement the sports programming services of our
23     conventional television affiliates, our specialty
24     television affiliates in such a way that we have a more
25     comprehensive package.


 1  541                  I'm thinking of hockey, for instance. 
 2     It's well known that off-air signals -- TSN and CTV
 3     Sports -- have very robust hockey packages, but there's
 4     a bigger package available in the United States and we
 5     hope, for instance, very soon it will be available in
 6     Canada.  That's the kind of programming service we hope
 7     to offer, amongst others.
 8  542                  COMMISSIONER CARDOZO:  I'll bet you
 9     won't do cricket because cricket matches last two or
10     three days.  If your employees took two or three days
11     off, it would cause major economic problems for the
12     economy.
13  543                  MR. FRANK:  We do understand a little
14     bit about cricket, sir, and I understand that ten over
15     cricket is becoming increasingly popular.  So, maybe
16     that will speed the game up.
17  544                  COMMISSIONER CARDOZO:  Could be.
18  545                  Let me ask you about one of the
19     suggestions that is being put forward by one of the
20     intervenors, namely CTV Sports pay-per-view.  They've
21     suggested that we impose a condition of licence of 10
22     per cent sports coverage on your licence.  What are
23     your thoughts about that?
24  546                  MR. NEUMAN:  If we're really striving
25     to create a dynamically competitive environment here,


 1     since we are of course proposing that there not be any
 2     exclusivity in programming, I think each participant in
 3     this marketplace should do their utmost to acquire
 4     programs and package them in a way that is compelling,
 5     and that should apply to CTV Sports is my thought.
 6  547                  I would also fall back on the comment
 7     I made earlier about the prospect of not so much CTV
 8     Sports, but the idea that both the incumbents in
 9     general pay-per-view also be carried irrespective of
10     whether they offer the right packaging and pricing and
11     promotion.  There shouldn't be a "must carry" or a
12     limitation on our carriage of sports, but the
13     competitive environment should determine those factors
14     for all participants.
15  548                  MR. FRANK:  I would offer two further
16     thoughts on that, Commissioner Cardozo, and that is
17     that at their original licensing hearing, they spoke
18     specifically this issue and made it real clear, I
19     thought, that they wouldn't require a "must carry,"
20     that because of their size and their involvement in the
21     sports market both in Canada and worldwide, that their
22     product would stand on its own merit, as Michael has
23     just said.
24  549                  COMMISSIONER CARDOZO:  That's in
25     relation to the "must carry" issue.  In terms of the


 1     percentage of sports coverage that you would have,
 2     would you accept any other percentage or do you think
 3     that's just wrong for the market?
 4  550                  MR. NEUMAN:  We believe that that's
 5     not going to give rise to the kind of dynamic
 6     competitive environment that I think consumers would
 7     wish to see.  I say this beyond our position on our own
 8     application.  I would not want to see any pay-per-view
 9     operator in Canada prevented from carrying sports if
10     that pay-per-view operator has determined that there's
11     a market that they can serve in conjunction with the
12     BDUs that carry them to bring more diversity to
13     consumers.
14  551                  So, I think that would be an
15     inappropriate conclusion if, in fact, the goal is to
16     create a dynamic competitive environment.
17  552                  COMMISSIONER CARDOZO:  With regards
18     to events, you've talked about a ratio of one to seven
19     Canadian to non-Canadian events.  Could you give us
20     some examples of the kinds of events you're talking
21     about here?
22  553                  MR. NEUMAN:  There are all sorts of
23     things that have been done.  Of course, the event of
24     all events are sporting events.  I understand that Mike
25     Tyson has his licence back now and that's an event that


 1     everyone in the pay-per-view business worldwide is
 2     looking forward to, if only for the prospect to witness
 3     another ear biting.
 4  554                  But, again, that speaks to the run of
 5     the mill or status quo kind of event.  There are other
 6     kinds of events -- cultural events -- that aren't often
 7     available to all Canadians that we will have an
 8     opportunity to broadcast from wherever they happen in
 9     Canada.
10  555                  One of the unique opportunities that
11     we have --
12  556                  COMMISSIONER CARDOZO:  How about CRTC
13     hearings?
14  557                  MR. NEUMAN:  I think we would like to
15     survey the market on that one and see whether or not
16     there is demand.
17  558                  Let me see if I can tie this into an
18     interesting technical anecdote for you.  We are in the
19     process now of building a nationwide fibre backhaul
20     network because, as you know, we broadcast from Toronto
21     to a satellite and then our signal is cast down
22     nationwide.  By having that fibre network in place,
23     we're able to do very clean, crisp, inexpensive signal
24     gathering from many, many parts of Canada.  We're not
25     everywhere in Canada with that signal gathering at this


 1     stage, but it's going to expand as our channel capacity
 2     expands on the satellite.
 3  559                  But it gives rise to another
 4     interesting opportunity for us again that is a unique
 5     advantage that we built into our infrastructure, and
 6     that is to gather cultural events from those places
 7     inexpensively that it would be impractical for others
 8     to carry because they hadn't gone to the trouble of
 9     building such a backhaul network.  So, I can envisage
10     making on-the-fly programming decisions to bring a
11     cultural event from Vancouver to Toronto, putting it on
12     the satellite, and making it available certainly to
13     people in Vancouver but nationwide that wouldn't have
14     otherwise been possible had we not built that fibre
15     backhaul network.
16  560                  I think that that raises a very
17     interesting opportunity to us but, more importantly,
18     for consumers to see things they just couldn't see
19     before.  In a similar vein, although not with respect
20     to events, that, for example, is what gives rise to our
21     ability to take all French programming and all French
22     pay-per-view nationwide.  We can gather it from where
23     it happens and put it on the satellite and take it to
24     wherever it wants to be consumed.
25  561                  MR. GOURD:  Michael mentioned that


 1     our fibre optics gathering system would allow us to
 2     show events that would not be seen otherwise.  In
 3     addition, we would be able to present shows that would
 4     be seen but from a different perspective, particularly
 5     a technical perspective.
 6  562                  Let me refer to the Céline Dion last
 7     show, le spectacle d'adieu de Céline Dion, which is
 8     supposed to be broadcast December 31, 1999 and it will
 9     go until minute 001 of Year 2000.  Of course, a lot of
10     distribution undertakings would present that show
11     because of the personality and the popularity of Céline
12     Dion.  However, because of our decision to have high
13     definition TV, we are discussing as we speak, in the
14     event that we would have a licence, with other parties
15     to broadcast it in high definition TV.  Therefore, that
16     way we could also have an additional contribution in
17     terms of a show which would have been seen anyway, but
18     we can bring another dimension.
19  563                  COMMISSIONER CARDOZO:  With regards
20     to the carriage of special events, the commitment I've
21     just mentioned was made with regards to the English
22     language component.  I may be wrong, but I didn't see
23     it made with regards to the French language component. 
24     Does it apply in both?
25  564                  MR. FRANK:  I believe it does.


 1  565                  COMMISSIONER CARDOZO:  This is in
 2     regard to Section 4.1, the two sections there.
 3  566                  MR. GOURD:  While my colleagues are
 4     looking, as a francophone, obviously, yes, it does.
 5  567                  COMMISSIONER CARDOZO:  That's fine. 
 6     That's good enough.
 7                                                        1205
 8  568                  COMMISSIONER CARDOZO:  That's fine. 
 9     That's good enough.
10  569                  Let me ask about children's
11     programming.  It seemed a bit unusual that a pay-per-
12     view service would have children's programming.  So
13     tell us about it.  What is going to be special about --
14     why would people want your service for children's
15     programming when there is quite a bit of other fairly
16     good children's programming out there?
17  570                  MR. NEUMAN:  I think you hit the
18     keyword.  It is quite unusual that there be children's
19     programming associated with pay-per-view.
20  571                  COMMISSIONER CARDOZO:  And you want
21     to be unusual.
22  572                  MR. NEUMAN:  In fact, we would like
23     to be unusual in the sense that we would like to create
24     viewing opportunities that people will find new and
25     refreshing.  I gave one example of how that might occur


 1     and the market driver that might cause parents on
 2     behalf of their children or children themselves to wish
 3     to use pay-per-view as a means of getting programming
 4     that they haven't otherwise had an opportunity to view,
 5     in a way and at a price point that they haven't
 6     otherwise had an opportunity to acquire it.  That's one
 7     example.  And I think that we may change the paradigm a
 8     little bit with respect to opportunities to view
 9     children's programming through marketing approaches
10     like that.
11  573                  So the very fact that it is unusual
12     suggests to me that there has been no incentive thus
13     far for anyone to really be very creative in going
14     after what has become a very, very significant market
15     and for which there is a great deal of production
16     occurring in Canada with a limited number of ways to
17     get the programming to the consumer in Canada.  We
18     represent another potential way, and the only thing
19     separating us, in terms of exercising that opportunity
20     to do that, from others is the desire to do it and a
21     belief that, if we understand the consumer well enough,
22     we will find products and packages of products that
23     will cause them to consume more of that programming.
24  574                  I gave an example earlier of how that
25     type of marketing approaches worked with respect to,


 1     for example, pay programming.
 2  575                  MR. GOURD:  If I may, Michael
 3     referred to his daughter, I could refer to my
 4     grandchildren.  We all started young.  That's why I
 5     have grandchildren at my age.
 6  576                  Having said that, yes, they like to
 7     see again and again "Mme Champagne", "Anne of Green
 8     Gables".  Therefore, it is not because a children's
 9     program has been shown on, let's say, YTV or Teletoon
10     that it would not find an audience if repeated on an
11     another distribution undertaking.  Therefore, whether
12     it is original programming or whether it is programming
13     that has been shown already and is repeated, we believe
14     very, very strongly that we have a good potential there
15     if programmed at the proper hours and also if packaged
16     differently.  As Michael said, they could buy three
17     passes of "Carmen Champagne" or "Anne of Green Gables"
18     or they could buy a grouping of different programs, and
19     so on, and so forth.
20  577                  COMMISSIONER CARDOZO:  Since we are
21     airing family stories, let me tell you that I would
22     have reluctance ascribing to this channel because it
23     means I would have to increase my kids' allowance in
24     order for them to watch more of these programs, but I
25     assure you I have long since learned that my family


 1     practices shouldn't govern my decisions at the
 2     Commission, so I don't hold that against you.
 3  578                  I haven't told my kids that the
 4     average child in Canada watches something like I think
 5     it is 17 or 22 hours a week, because it is far, far
 6     lower at my home at this point.  I hope they don't
 7     watch CRTC hearings either because they might find out.
 8  579                  Let me ask you about multicultural-
 9     multilingual programming that you have talked about. 
10     In various places you refer to it differently.  It is
11     being referred to as -- in section 1.1 you say that the
12     applicant also seeks authority to offer up to 10 per
13     cent of its foreign programming in the English language
14     in the English language service component and languages
15     other than English and French. *  You have talked about
16     it as being a multicultural service.
17  580                  So I would just like an idea of what
18     it is we are talking about here.
19  581                  MR. NEUMAN:  Yes, of course.
20  582                  When we first got into the business
21     of DTH on the BDU side we did a lot of market surveys
22     trying to understand what were the segments of the
23     market.  I suppose, if you are a cable company, there
24     is less requirement to do that because you have a
25     geographic territory and you just do your best to serve


 1     everyone that lives in that territory with a
 2     homogeneous group of offerings.  In our case, we are
 3     marketers first and foremost, so we take the view that
 4     we must understand who is out there and what they want
 5     to consume, and then try to deliver just that.  That's
 6     the simple marketing equation that we pursue.
 7  583                  Of course, in the course of that
 8     research we learned that there are a great many people
 9     in Canada who would have a desire to view programming
10     in their native tongue, which is often different than
11     English and French, as well as English and/or French
12     programming.  As a result of that, even though we
13     weren't, and still aren't until the 24th of this month,
14     carrying pay-per-view, you will note that we were the
15     first in Canada to broadcast nationally Asian
16     Television, for example.  We put Fairchild on the
17     satellite at the same time.  We recently launched a
18     service to meet the needs of German-speaking people
19     nationwide and we remain the only service to offer such
20     a service nationwide; Deutsche Velle is that one.
21  584                  Now we are just about tapped out in
22     terms of our satellite capacity, but you know that we
23     have made plans to do something about that.  To the
24     extent that there are markets for such programming,
25     multicultural programming in the language of those who


 1     would like to receive it other than English or French,
 2     we want to be the supplier.
 3  585                  So, to the extent that you have seen
 4     us behave that way in our existing service right from
 5     the beginning of that offering on September the 10th
 6     last year, you could expect us to behave in a similar
 7     fashion with respect to pay-per-view.  We would look to
 8     the marketplace, try to ascertain demand and then find
 9     distributors in Canada that have product that meets the
10     needs of those groups, and then promote with cultural
11     organizations, for instance, to find where are those
12     people, how do we communicate with them properly, how
13     do we let them know that we have this programming that
14     they wouldn't otherwise have available to them on
15     another pay-per-view service because we have taken the
16     strategy to go after them as a market.
17  586                  So that would be the underlying
18     reason for doing it and an illustration of our
19     background in actually carrying it out.
20  587                  COMMISSIONER CARDOZO:  So would you
21     probably do it in a language other than English,
22     French, as well as other than the other language
23     channels that you carry, namely, other than the South
24     Asian languages, Chinese and German?
25  588                  MR. NEUMAN:  Yes.  As it happens,


 1     those are, as you know, very large populations within
 2     the country but they aren't unique in the sense that
 3     they are the only market opportunities.  We have been
 4     approached by many other cultural groups to carry
 5     certain programming, and, in anticipation of additional
 6     satellite space next year on Nimiq we are undertaking
 7     negotiations right now with other groups, other
 8     rightsholders that would give us an opportunity to
 9     broadcast pay-per-view programming in languages other
10     than English and French and other than the ones you
11     mentioned.
12  589                  COMMISSIONER CARDOZO:  I just want to
13     ask you about where that programming would come from. 
14     I note in your submission you have talked about
15     negotiating with European and Asian distributors.  The
16     Canadian Jewish Federation and the Federation of Jewish
17     Community Services in Montreal in their intervention
18     note:
19                            "The aspect of the application
20                            that intrigues me the most is
21                            Bell Satellite's plan to provide
22                            foreign-language programming. 
23                            My understanding is that this
24                            will be a combination of
25                            domestic programs and signals


 1                            broadcast from countries around
 2                            the world." (As read)
 3  590                  So I am wondering whether you have a
 4     sense at this point of how much of that other language
 5     programming would be Canadian made.  In the
 6     intervention you seem to suggest it would be all
 7     foreign programming, but these people are of the view
 8     that some of it would be Canadian made in other
 9     languages.
10  591                  MR. NEUMAN:  I think their assertion
11     is correct and I hope we haven't given the impression
12     that it is all imported.  It somewhat depends on the
13     language we are talking about because, obviously, some
14     of them, there is more programming domestically in
15     language for which there is a larger population in
16     Canada.
17  592                  One of the things that we have
18     learned through some of the programming that we have
19     already distributed is that, while Canadians that are
20     speaking a mother tongue other than English or French,
21     do like to hear programming that is simply in their
22     language, they also like to hear and listen to
23     programming that actually comes from their home
24     country, not filtered by a Canadian, albeit Canadian
25     speaking in their own language.  It is an interesting


 1     distinction and one that I wasn't frankly aware of
 2     until I had Canadians for whom English or French isn't
 3     their mother tongue say this to me.  So I think to be
 4     successful we would have to offer a combination of the
 5     two.
 6  593                  In some cases there is a wealth of
 7     Canadian-made programming in those languages that we
 8     could access, and it would be easier for us to access
 9     it and co-promote with those that have the rights
10     because they are here; in other cases we would have
11     difficulty finding it and we would have to look
12     elsewhere for it.
13  594                  The very fact that we would have as a
14     part of our mission to do that might give rise to
15     people that are interested in promoting such product --
16     it might give rise to them looking for product that
17     they could then bring to us with a view to creating
18     markets for it in Canada.
19  595                  COMMISSIONER CARDOZO:  Have you given
20     any thought to the issue of dubbing in this regard, if
21     you have a Canadian epic like a Kamouraska or something
22     that has a really interesting cultural historical
23     component that people in other languages would be able
24     to experience it or through subtitles, that type of
25     stuff?


 1  596                  MR. NEUMAN:  In particular -- and I
 2     am not sure, thinking back, in our documentation
 3     whether we have actually mentioned this, but it is of
 4     interest to us to offer programs, be they in English or
 5     French, or for that matter a program produced in a
 6     language other than English or French and then have it
 7     dubbed for speakers of the other languages.  I think
 8     that, to the extent that we could put up another track
 9     that is offered to us by the producer of the film, that
10     could be a very exciting opportunity both for the
11     rightsholder and for the consumer.
12  597                  COMMISSIONER CARDOZO:  One of the
13     issues -- obviously, you are looking at all your stuff
14     in English and French to see whether it meets the basic
15     standards.  Do you have a plan in place as to how you
16     would review the other language films for
17     appropriateness, to make sure they meet your standards?
18  598                  MR. NEUMAN:  In some cases we have
19     among us employees either on our staff or we would
20     propose to have employees on our staff in the broader
21     used languages, the languages that you might expect --
22     that is already the case.  For instance, we have
23     employees that subscribe to the services that we
24     already carry, not pay-per-view of course but services
25     that we already carry in those languages, but we would


 1     have to take pains to ensure that they were viewed and
 2     understood in the language that they are offered before
 3     we would play them.
 4  599                  COMMISSIONER CARDOZO:  You just have
 5     to make sure that the employees who are doing that are
 6     not the ones who are going to watch the cricket game or
 7     you have a bit of a bottleneck problem.
 8  600                  One of the issues we were looking at
 9     in the previous hearing on television policy was the
10     reflection of Canadian diversity in the general
11     conventional specialty channels.  Rather than just
12     looking at the multilingual broadcasters, we were
13     asking broadcasters like CBC and CTV and Global, in
14     their programming news and so forth, how did they
15     reflect the diversity, the cultural and racial
16     diversity of Canadians.
17  601                  Is that an issue that you have given
18     thought to in terms of the kinds of things you will be
19     airing?
20  602                  MR. NEUMAN:  It was interesting, when
21     we set up our first lineup -- as I said, we are
22     marketers first and foremost, but one thing to be a
23     successful marketer is you have to understand the
24     market.  So when we first got into DTH we spent a lot
25     of time with promoters of programming, in this case


 1     usually specialty TV, to learn what it is from them,
 2     what the market looked like, how they would address the
 3     market, how they would work with us to address the
 4     needs of that market.  So we have come up a learning
 5     curve, I have to confess, over the last 14 or 15
 6     months, that wasn't available to us before that.
 7  603                  Having come up that learning curve,
 8     it is really that learning curve which gave rise to our
 9     assertion that we would like to offer up to 10 per cent
10     of our English pay-per-view programming in languages
11     other than French or English because we are now a big
12     believer in that marketplace.  So, while we are not a
13     producer, we don't propose to produce programming and,
14     therefore, don't have any control, if you will, over
15     what ends up on network television or specialty TV,
16     through our pay-per-view licence we would have an
17     opportunity to offer pay-per-view that met the needs
18     that we have identified.
19  604                  COMMISSIONER CARDOZO:  I am talking
20     specifically about the programming in English and
21     French.  There were a number of community groups, for
22     example, which were asserting that the diversity, their
23     experience, et cetera, just doesn't get viewed, get
24     reflected in terms of the English and French
25     programming.  So what I am asking is whether you would


 1     be giving that issue -- you are not producing stuff,
 2     but you are selecting stuff.  So you have the choice of
 3     selecting between different kinds of programming to see
 4     whether your English and French programming reflects
 5     the aboriginal diversity as well.
 6                                                        1220
 7  605                  MR. GOURD:  If I may, Commissioner
 8     Cardoso, as I said earlier, both our company and our
 9     holding company are national companies with head office
10     in Quebec and servicing all of Canada.  And for us,
11     indeed, diversity is very important.  In terms of the
12     nature and the vision of the service that we want to
13     offer.
14  606                  And it will happen, indeed, because
15     we are a national company.  Just to give you an
16     example, I just spent four and a half in Mississauga. 
17     And on my local cable, I had four francophone services
18     and then suddenly it dropped to three.  But with the
19     kind of distribution mechanism we have, a francophone
20     outside of Quebec will basically, partly with Nimiq,
21     receive every francophone service available because we
22     would do it anyway and also to ensure the rule of
23     preponderance of Canadian services.
24  607                  Conversely, in Chicoutimi or Amos, in
25     Abitibe, where I was born, every anglophone service


 1     will be basically offered, including ethnic and
 2     multilingual service.  So, therefore, it is not only
 3     the -- a good business approach for us to offer great
 4     diversity of programming services, it is, in addition,
 5     an objective we have in mind.
 6  608                  COMMISSIONER CARDOZO:  Okay.  With
 7     respect, I do not think I am getting an answer to what
 8     I am asking about and that is with regards to the
 9     English and -- I see what you're saying in terms of
10     providing services in both official languages and other
11     languages and so forth.
12  609                  But in terms of the English and
13     French language programming, when you are selecting
14     movies, do you select movies that have in their
15     characters, in the people, in their themes and the
16     issues a sense of the diversity?  And if I can use
17     television programs as an example -- and I know you are
18     not dealing with programs -- Degrassi Junior High, for
19     example, had a multiracial cast as reflective of what
20     Toronto schools were like then and are today.  It was
21     not in another language, it was not directed at a
22     specific group, but it just talked about Canadian
23     society as it exists in one component, namely, in
24     schools.
25  610                  On the other hand you get a lot of


 1     programming that tends to ignore or portray Canadian
 2     society or society as not having that kind of
 3     diversity.  Is this an issue of importance to you or
 4     have you given it much consideration?
 5  611                  MR. NEUMAN:  You will appreciate that
 6     because we are not yet selecting movies for
 7     pay-per-view, there are issues that we have not
 8     encountered yet.
 9  612                  So I would be -- I do not want to be
10     quick to say that we have thought -- have spent a great
11     deal of time thinking about that issue.  But I think
12     one of the things that we can say at this stage is that
13     we would endeavour to -- it is very important for us
14     not to be offensive in the context of programming that
15     we offer.  We have not yet established a policy with
16     respect to the issues you raise and -- or a framework
17     for measuring the degree that they might be -- that a
18     program might find itself offside because it
19     misrepresented or presented a view that was offside
20     with the status quo in Canadian society in terms of its
21     mix.
22  613                  But I think it is a noble and
23     desirable approach to take that we would take into
24     account that.  And I think -- those issues -- and I
25     think the very fact that we were first in raising


 1     programming already, prior to pay-per-view, is some
 2     indication of our sensitivity in that respect.  So
 3     while we do not have a policy, I think you should
 4     expect us to have a sensitivity.
 5  614                  MR. GOURD:  If I may, commissioner,
 6     when I answered a bit earlier, I was talking about the
 7     diversity of the total programming offering and, as you
 8     noted, your question was more focused at the choice of
 9     movies and events that would be on our pay-per-view
10     offering.  Michael mentioned that we do not have a
11     policy yet, but we will focus on it and develop one. 
12     And what I would like to add is that we would be very
13     pleased to file it with the commission.
14  615                  COMMISSIONER CARDOZO:  I am not
15     suggesting that I want to have just numbers or measure
16     it sort of in an exact science.  But, if you were
17     covering events, would you cover the Caribana parade,
18     for example, which is sort of a major Toronto festival
19     as well as the Santa Clause parade or a hockey game or
20     whatever.  Those are the types of issues.  I will leave
21     that at that.
22  616                  Let me go to closed captioning and
23     just clarify what your commitments are with regard to
24     closed captioning.  I cannot locate it right now, but
25     somewhere you note that you will have a captioned


 1     service.
 2  617                  Our policy with regard to captioning
 3     has been for broadcasters with over $10 million
 4     revenue, we expect by the end of their licence that
 5     they would have 100 per cent in news coverage, which I
 6     guess you do not have, and 90 per cent in the rest of
 7     their coverage.
 8  618                  So the question is, what is the
 9     closed captioning commitment that you are making?
10  619                  MR. FRANK:  We are prepared to
11     acquire all of the -- let me start again.
12  620                  When a film or an event or other type
13     of programming has closed captioning, we commit to
14     carry it, to provide it.
15  621                  COMMISSIONER CARDOZO:  And if it does
16     not?  Are you prepared to make a commitment in terms of
17     a percentage of overall closed captioned programming?
18  622                  MR. FRANK:  We are certainly prepared
19     to meet what is currently required of other
20     pay-per-view licensees, yes, sir.
21  623                  COMMISSIONER CARDOZO:  Another issue
22     that was raised by the NBRS was with regard to DVS,
23     descriptive video service.  They, in their
24     intervention, the NBRS suggests that BSSI advised NBRS
25     that if its application is approved at trial during the


 1     initial term of license, the exhibition of DBRS in
 2     Canada, they note in their view that the applicant is
 3     assuming a significant leadership role in terms of
 4     descriptive video service that is the described video
 5     service for people who are blind or hard of seeing.
 6  624                  I am thinking of the CAB's position
 7     which is evolving which seems to be that it is just too
 8     expensive to do, we will not be doing much of it.  What
 9     is your position on described video service?
10  625                  MR. FRANK:  This group has approached
11     us, and we said to the extent that it makes sense for
12     our subscribers, we would be prepared to trial it. 
13     That is exactly what we agreed with them.  We are going
14     to work with them and in the first year of operation
15     provide a market trial and see how it is accepted.
16  626                  COMMISSIONER CARDOZO:  So you are not
17     making commitments in terms of expenditures.
18  627                  MR. FRANK:  Not at this point.  We
19     did agree that we would work with them and that we
20     would, within the first year of our operation, provide
21     film and other material in that forum and measure its
22     market acceptance and how our subscribers reacted to
23     it.  On the face of it, it seems to make sense, but I
24     understand what you are saying about --
25  628                  COMMISSIONER CARDOZO:  There are


 1     various views.  The NBRS is of the view that the CAB is
 2     not looking at it in its economic forum, but has an
 3     exaggerated view of the cost.  The CAB feels that it is
 4     out of line or that they cannot afford it.  So perhaps
 5     there is something there in the middle that we need to
 6     find out.
 7  629                  MR. FRANK:  We are going to approach
 8     this with an open mind and, as I said, in the first
 9     year of our operation trial it and see how it works.
10  630                  COMMISSIONER CARDOZO:  Okay.  With
11     regard to the codes on gender portrayal and violence,
12     you noted in section 4.1 that you will be adhering to
13     those codes.  Would you be looking at seeking a
14     suspensive condition of license at some point and
15     joining the Canadian Broadcast Standards Council?  It
16     would not necessarily be at this point, but as I
17     understand it, the CBSC does allow it, has encouraged
18     membership from pay-per-view but does not have any
19     pay-per-view members at this point.
20  631                  MR. NEUMAN:  We have been active on a
21     consultation basis with that group and we would be
22     prepared to give that active consideration.  To be
23     honest with you, they have not approached us on that
24     front other than to say could we discuss it and we
25     said, yes, we certainly would.


 1  632                  COMMISSIONER CARDOZO:  Okay.  In your
 2     oral presentation there is one thing that popped out to
 3     me, it is a technical issue, I just wanted you to
 4     clarify it for me.  On page 8, you note that we have
 5     grown from 0 to 140,000 subscribers, we have
 6     distributed nearly 200,000 digital set-top boxes.  And
 7     I thought the number should be the other way around. 
 8     Or how come you have distributed more but have less
 9     subscribers?  Are those Christmas gifts, the other
10     60,000?
11  633                  MR. NEUMAN:  That is a good question.
12     One of the interesting nuances of our business is that
13     because we distribute through retail, there will always
14     have been more dishes distributed than are actually lit
15     or being used by subscribers and paying subscribers. 
16     And here is how it works.
17  634                  Right now, as we go into the
18     Christmas season, that number will go up quite
19     dramatically.  It is called the float.  The float is
20     the number of boxes out there that are not yet lit. 
21     And that float, for example, includes boxes that we
22     have -- we call them boxes or dishes that have been
23     sold but not yet installed, that are on trucks on their
24     way to retail that are in distributors' hands but not
25     yet at the store, that are in the store, for instance,


 1     because coming into the Christmas season there will be
 2     in this case some 60,000 out there, but in some stage,
 3     about to get sold, about to get authorized so customers
 4     can subscribe.
 5  635                  And, in fact, it is our plan to have
 6     many 175 -- actually it is 176,250 subscribers by
 7     Christmas morning.  I do not think we ever discussed
 8     that goal, but, hey, it is out there.  And we plan to. 
 9     And to do that you have to have the boxes in the
10     pipeline.  So it follows that on Christmas morning, if
11     we do not buy any more, using those numbers, we would
12     have something just slightly less than 25,000 in our
13     float going into the sort of post-Christmas time-frame.
14  636                  COMMISSIONER CARDOZO:  Okay.  Lastly,
15     on programming, let me ask you this question.  In your
16     submission you said that programs will be drawn from
17     all categories of item 6 of schedule 1 of pay TV regs
18     1990, which includes everything in the category.  So
19     you are planning to show a bit of everything.
20  637                  I am not clear at this point about
21     the description of the service that we would be
22     licensing if we were to licence it.  So my question is: 
23     Should I be concerned about that?  In a sense, it is
24     going to be everything.  You had mentioned the relation
25     to one question that choices would be made as and when


 1     we can.  Could you summarize what your service is as
 2     distinct from the others if there is a distinction from
 3     the others?
 4  638                  MR. FRANK:  Our programming is
 5     generally intended to be movies, events and sporting
 6     events.  And we will draw from other categories, as
 7     Michael has said, as requested and as confirmed by our
 8     subscribers.  But we are a general interest, we would
 9     like to be a general interest pay-per-view service.
10  639                  COMMISSIONER CARDOZO:  So it is a
11     general interest.  What you would be providing is
12     similar to what your would-be competitors are
13     providing, all of them, plus the multilingual and
14     children's, is that --
15  640                  MR. NEUMAN:  That is correct.
16  641                  COMMISSIONER CARDOZO:  And then you
17     have got the English and French.
18  642                  MR. NEUMAN:  English and French, you
19     mentioned multicultural.  And, of course, we have also
20     referenced our plans to move to high definition as well
21     because we believe in the future of the high definition
22     market.
23  643                  But I would like to come back to my
24     comments earlier about what distinguishes us from the
25     existing incumbents.  And what distinguishes us are


 1     business practices and marketing approaches, pricing,
 2     the actual promotion and packaging of the products that
 3     we will bring to bear for consumers in a way that they
 4     find more compelling and in a way that the existing
 5     pay-per-view providers have, for a variety of reasons
 6     known only to them, decided not to do.
 7                                                        1230
 8  644                  If you have a monopoly, there really
 9     is no need to go into the marketplace and try to better
10     understand what consumers want.  We would argue that,
11     in a competitive environment, there is a very
12     compelling need to go and understand what consumers
13     want, because if you are not providing it to them they
14     will go to someone else.
15  645                  You could expect us to have an
16     offering that cuts across the kinds of programming that
17     Chris just mentioned, but to offer it in ways that
18     consumers will find more compelling.  Packaging is a
19     big part of that.
20  646                  As is the case in other very dynamic
21     marketing environments, often there are many players
22     and the components of their products are often very
23     similar.  Yet one will have a dramatically higher
24     market share than the other simply due to differences
25     in their packaging, promotion and pricing.


 1  647                  I should have mentioned that there
 2     are many subsets of those marketing issues.  But
 3     branding is also important and the promotion of it.
 4  648                  I think it is clear from our pay
 5     distribution efforts and the success we have enjoyed
 6     there that a lot can be done, beyond that which has
 7     already been done, to make this a very distinctive
 8     service indeed.
 9  649                  COMMISSIONER CARDOZO:  I have some
10     more questions on the financial issues.  I am looking
11     at another 15 minutes for those of us whose stomachs
12     are growling.  The quicker, more to the point you are,
13     the quicker we will be through.  And I will try and be
14     to the point too.
15  650                  We have talked about the Nimiq quite
16     a bit.  From what you have filed, that changes your
17     business plan as well.
18  651                  Let me just ask you if the delay so
19     far has meant a major change in your business plan; and
20     if it is to be delayed further, would that continue to
21     be a change to your business plan?
22  652                  MR. NEUMAN:  The short answer is yes,
23     it has changed our business plan.  The most fundamental
24     change is that the whole purpose of Nimiq was to enable
25     us to be more competitive than we were before.  On the


 1     fly, when we realized it was delayed, the big thing
 2     that we did was reorganize our capital upgrade program
 3     to put in the DVC equipment sooner than would have been
 4     the case, so that we could, without Nimiq, still add
 5     significantly more channels and have channel
 6     superiority over our various competitors, particularly
 7     going into the Christmas season.  This was going to be
 8     very crucial to us.
 9  653                  We have just announced this week that
10     we have done that.
11  654                  So it did dramatically upset our
12     apple cart and cause us to have to reorganize on the
13     fly and consider the marketing and the financial
14     implications of the delay.
15  655                  Businesses like certainty.  There is
16     no question about that.  It makes it easier to run a
17     company when there is more certainty.  Our whole
18     industry has been plagued with lack of certainty in a
19     lot of cases, including Nimiq.  Now that we are quite
20     confident that Nimiq will go up in the spring and be
21     available to us in June, we are beginning to plan in
22     more concrete ways, including financial forecasting,
23     exactly what that means to us going into the future.
24  656                  Needless to say, we are quite excited
25     about the prospect of having it.


 1  657                  COMMISSIONER CARDOZO:  But you woke
 2     up one morning and it wasn't there.  So how can you be
 3     sure it is going to be there with your spring date?
 4  658                  MR. NEUMAN:  You are very right.  You
 5     can never be absolutely certain.  There is no
 6     certainty.
 7  659                  Alain mentioned 97 percent certainty. 
 8     I would also attribute that level of certainty to it.
 9  660                  COMMISSIONER CARDOZO:  So the key
10     difference is that without Nimiq you have less channels
11     --
12  661                  MR. NEUMAN:  That is correct.
13  662                  COMMISSIONER CARDOZO:  And that could
14     affect your attractiveness.
15  663                  MR. NEUMAN:  Absolutely.  It
16     absolutely could.
17  664                  COMMISSIONER CARDOZO:  With regard to
18     revenue streams, you have noted that there are three
19     revenue streams:  namely movies, annual events and
20     premium sports.
21  665                  What would be useful to us is to have
22     a breakdown by those three streams over the seven-year
23     period like you usually project on your financial
24     issues.
25  666                  Is that something you could provide


 1     us with -- not in the next minute, but in the next few
 2     days?
 3  667                  MR. McLENNAN:  If I understand the
 4     question correctly, it is contained in Attachment 4.1,
 5     which delineates movie revenues, event revenue and
 6     premium sport revenues.
 7  668                  That would be an attachment to our
 8     response to the July 17th CRTC letter.
 9  669                  COMMISSIONER CARDOZO:  Okay.  I think
10     that will be sufficient.
11  670                  On the matter of financial
12     contributions to production of Canadian programming, I
13     just want a clarification of the point at which the 5
14     percent contributions would be made.
15  671                  Would it be both at the BDU level and
16     the pay-per-view service level?
17  672                  MR. FRANK:  Yes.
18  673                  COMMISSIONER CARDOZO:  And on gross
19     revenues?
20  674                  MR. FRANK:  Correct.
21  675                  COMMISSIONER CARDOZO:  Let me take
22     you to one of the interventions with regard to income.
23  676                  I will put that aside for now.  We
24     may come back to it.
25  677                  Revenues from exhibition of films,


 1     you have noted that the licensees shall remit to the
 2     rights-holders of all English language Canadian feature
 3     films 100 percent of the revenues earned by licensee
 4     from the exhibition of these films.
 5  678                  With regard to the French component,
 6     you say -- and I think this is in Section 4.1 of the
 7     supplementary.  It is a bit different for the French,
 8     where you say that:
 9                            "...the licensee shall remit all
10                            gross revenues derived from the
11                            broadcast service of French
12                            language Canadian feature films
13                            to distributors and providers
14                            with a minimum of 60 percent to
15                            the program providers."
16  679                  Could you explain the difference and
17     why the difference between the two?
18  680                  MR. FRANK:  We are in the
19     Commission's hands on this one.
20  681                  The intention is the same as on the
21     English side.  We understand that there was a different
22     condition of licence for Canal Indigo because of
23     concerns or a difference in the marketplace relative to
24     the rights-holder and the distributor.  That was the
25     point of the difference in the condition of licence.


 1  682                  But the intent, as far as we are
 2     concerned, is the same.
 3  683                  If you would like to impose on a
 4     prospective licence identical wording, that would be
 5     acceptable to us; or keep the wording as it is.
 6  684                  COMMISSIONER CARDOZO:  The difference
 7     you are saying is because you understand that Canal
 8     Indigo has a similar system for the French language.
 9  685                  MR. FRANK:  That is correct.  We have
10     attempted, Commissioner, to build our conditions on a
11     par with the competitors to foster fair and equitable
12     competition.
13  686                  COMMISSIONER CARDOZO:  When you are
14     remitting 100 percent of the revenues earned from
15     Canadian feature films back to the rights-holder, you
16     are not making a profit on Canadian feature films.  Is
17     that right?
18  687                  MR. FRANK:  That is my understanding.
19  688                  COMMISSIONER CARDOZO:  And you are
20     okay with that.  I guess you make the money on the rest
21     of what you carry.
22  689                  MR. FRANK:  It is an industry
23     standard we are pleased to commit to.
24  690                  COMMISSIONER CARDOZO:  Finally, with
25     regard to the annual events, my reading of it was --


 1     you talk about the revenues from the annual events, and
 2     I don't have the precise location here.
 3  691                  You say that you would be remitting
 4     revenues to the people who held the event in English,
 5     but you did not make that same component for the French
 6     language component.
 7  692                  I assume it would work in both
 8     languages?
 9  693                  MR. FRANK:  We will meet the industry
10     standard on that.
11  694                  COMMISSIONER CARDOZO:  My question is
12     that what you have said here is that you would do it in
13     the English.  You have not said about the French.
14  695                  Can I read from that that --
15  696                  MR. GOURD:  As I said earlier on a
16     similar question, the answer is yes.
17  697                  COMMISSIONER CARDOZO:  Okay.  That
18     covers my questions; thank you very much.
19  698                  Thank you, Madam Chair.
20     --- Short pause / Courte pause
21  699                  COMMISSIONER CARDOZO:  Let me come
22     back to the question and put it in a fairly general way
23     in terms of one of the interventions that suggested --
24     and I think this is quite an important point about your
25     finances.


 1  700                  It was suggested that in a sense by
 2     allocating the transponder costs to the DTH pay-per-
 3     view as opposed to the BDU operation, through a kind of
 4     tax shelter you would have a considerable windfall.
 5  701                  You may know the reference I am
 6     making.  Do you have any response to that?
 7  702                  MR. McLENNAN:  I think the
 8     characterization in both the interventions from WIC and
 9     VCC, when they took a look at both the BDU and the pay-
10     per-view entity and added the two up, I think their
11     characterization is a fairly accurate one in terms of
12     the total financial picture.  And in fact I think it
13     supports our view that it is financially beneficial for
14     us to have an integrated pay-per-view offering as
15     opposed to buying from third parties.
16  703                  In terms of having a tax windfall
17     specifically, the plan that we put forth to you did not
18     have any specific tax monetization plans in it.  We are
19     working on that, but those plans are not in place. 
20     They certainly would not be any sort of unusual plans
21     that would be put in place.
22  704                  COMMISSIONER CARDOZO:  Is it normal
23     for you to be allocating the transponder costs to the
24     pay-per-view as opposed to the BDU?
25  705                  MR. McLENNAN:  I am not sure about


 1     "is it normal".  But from looking at this business in
 2     its entirety, and if you add the two entities up, you
 3     capture all of those costs.
 4  706                  The total picture is very much
 5     looking at both the financials of the BDU and the
 6     financials of the pay-per-view entity, which in between
 7     the two would have transponder costs included in them.
 8  707                  MR. GOURD:  It is a pure accounting
 9     decision.  Whether you put it in one place or in
10     another place, it is the same corporation.  So we can
11     present financial reporting any way the Commission
12     wishes.  It does not need any change in terms of the
13     financial viability of the corporation.
14  708                  We would be pleased to adjust to any
15     accounting reporting the Commission would wish to
16     propose to us.
17  709                  COMMISSIONER CARDOZO:  I appreciate
18     that answer.  I wanted to put it in the general
19     context, because it is not my role to do other people's
20     arguments.  But it is an issue that I did want to hear
21     your views on.
22  710                  So thank you for that.  And that is
23     my last question.
24  711                  Thank you, Madam Chair.
25  712                  THE CHAIRPERSON:  Commissioner


 1     Pennefather?
 2  713                  COMMISSIONER PENNEFATHER:  A quick
 3     clarification.
 4  714                  In this morning's presentation, on
 5     page 12, you refer to the Canadian feature film
 6     industry, and you say:
 7                            "...we would readily contribute
 8                            a minimum of 80% of the 5%
 9                            contribution to a separate
10                            envelope of funds -- either
11                            inside or outside the CTF..."
12  715                  Could you clarify what you mean by
13     that?
14  716                  MR. FRANK:  Simply we were attempting
15     to indicate that we would be flexible and forward-
16     thinking, as would the rest of the industry.  If there
17     is a movement to establishing a separate fund, we are
18     indicting to you that we would be favourable to that;
19     if there is not, we would continue to channel the funds
20     the way we are channelling them now.
21  717                  COMMISSIONER PENNEFATHER:  Thank you.
22  718                  Thank you, Madam Chair.
23  719                  THE CHAIRPERSON:  Legal counsel?
24  720                  MR. BATSTONE:  Thank you, Madam
25     Chairperson.


 1  721                  You indicated earlier today that you
 2     have no philosophical problem with carrying more than
 3     one pay-per-view service.  Would you be prepared to
 4     accept a condition of licence stating that your pay-
 5     per-view service may not be carried unless a second
 6     additional service is carried?
 7  722                  MR. NEUMAN:  When we touched on that
 8     general area briefly this morning, I tried to indicate
 9     that we believe that market forces should dictate that. 
10     Then in fact we will start life carrying two pay-per-
11     view services -- three, actually, counting Indigo, as
12     well as our own if we are granted a licence.
13  723                  Throughout that period, there would
14     be a lot of competition happening.  We will do things
15     of the type that we have described here, that will make
16     us very competitive.  I think you will see a
17     competitive response from the incumbents, and it will
18     go back and forth like that; each trying to outdo the
19     other for subscribers.
20  724                  That will be a healthy thing, one of
21     the healthy benefits of competition in my view.
22  725                  At the end of that period, one may
23     have achieved penetration in certain market segments,
24     the other in other market segments.  And the result
25     could be that there would be a compelling reason to


 1     keep more than one pay-per-view service on our service.
 2  726                  That should be something that flows
 3     from competition.
 4  727                  As an illustration of that, when we
 5     look at our friends at Echo Star in the United States
 6     -- and again, I won't use pay-per-view as an example
 7     but in this case pay -- they carry 16 different pay
 8     services, not just one.  In fact, all those pay
 9     services fish from the same pool, as it were, for
10     programming and yet have found their own niche; have
11     created their own brand that customers identify.  And
12     they promote it differently.
13                                                        1250
14  728                  So in fact there is a demand for Echo
15     Star to carry that many pay services because some
16     customers like one or two over the other, and subscribe
17     to them at the expense of the other.
18  729                  So I believe that it is crucial that
19     we not create, through the imposition of a condition of
20     licence, an entitlement mentality that would destroy
21     that propensity that a competitor would have to improve
22     in order to be carried by virtue of his knowledge that
23     he would just get carried by virtue of a condition of
24     licence.
25  730                  MR. FRANK:  Also, counsel, we are


 1     mindful of the decision that was made in 1995 by the
 2     Commission, that when you have a programming sector
 3     that has non-exclusive rights as a condition of
 4     licence, and you have relatively scarce satellite
 5     capacity, and the possibility of much program
 6     duplication, it was found that it was only necessary to
 7     distribute one.
 8  731                  PowerDirect Ticket was licensed at
 9     that time and it proposed a general interest pay-per-
10     view service that was predicated on 50-plus channels.
11  732                  So, as Michael said, we would prefer
12     a competitive solution.
13  733                  Finally, I would note that it is,
14     arguably, not competitively dynamic if you are required
15     to carry another pay-per-view service in that context.
16  734                  MR. BATSTONE:  To clarify that,
17     because at the end of this process if the Commission
18     considers that there are competitive aspects which need
19     to be addressed, and this is considered as one
20     potential option to do that, notwithstanding your
21     argument that that potentially could detract from a
22     dynamically competitive market, what I am hearing you
23     say is that carrying more than one service may in fact
24     work to the advantage of BSSI, in the sense that they
25     may differentiate services and different customers may


 1     pick them up for those reasons.
 2  735                  Are you saying, then, that you would
 3     not want the condition -- or you would refuse to have
 4     the condition imposed?
 5  736                  I just want to clarify exactly --
 6  737                  MR. FRANK:  Our position is that we
 7     wouldn't like to have such a condition imposed on us.
 8  738                  MR. BATSTONE:  But would you be
 9     prepared to accept one if the Commission felt that that
10     was appropriate to address the types of vertical
11     integration concerns which are being addressed in the
12     context of this hearing?
13  739                  MR. FRANK:  We would very reluctantly
14     accept that as a condition of licence.
15  740                  MR. BATSTONE:  All right.  I will
16     move on.
17  741                  MR. FRANK:  I would note
18     parenthetically that if the Commission does go down
19     that road they might wish to think about the flip-side
20     of the argument, and that is that our DTH pay-per-view
21     service would be carried by our competitor as well.
22  742                  MR. BATSTONE:  Thank you.  I
23     understand your position on that.
24  743                  Turning now to the question of CTV
25     sports specials pay-per-view, in the intervention --


 1     and you spoke to Commissioner Cardozo a bit about
 2     this -- they raised two potential conditions.  One was
 3     the limitation of 10 per cent programming.  Another was
 4     that BSSI be required to carry CTV sports specials.
 5  744                  I am just wondering what the effect
 6     would be on your service if the Commission were to
 7     require you to carry the CTV service as well, and
 8     whether you would be prepared to accept that as a
 9     condition of licence.
10  745                  MR. NEUMAN:  I think some of the same
11     threads of Chris' response would apply here.
12  746                  When I discussed this earlier I had
13     hoped to convey that I believe that carriage should be
14     based on demand and quality of programming, and all of
15     the good things that normally you would look for in a
16     supplier relationship, whereas an entitlement approach
17     gives rise to an environment where quality is not
18     necessarily assured.
19  747                  That is how we feel about the must-
20     carry approach.
21  748                  With respect to limiting us in a
22     licence to only 10 per cent, I think that takes away
23     from the level of competition that could otherwise
24     exist in the environment we are in.  It runs contrary
25     to our view of what we consider to be a dynamically


 1     competitive environment.  It would severely limit our
 2     ability to supply the diversity of programming that we
 3     believe Canadian consumers would like to enjoy.
 4  749                  In effect, it sets up yet another
 5     monopoly, this time in sports programming.
 6  750                  MR. FRANK:  Also, I would just add
 7     that when PowerDirect Ticket was licensed in 1995, they
 8     had the opportunity to access pay-per-view services
 9     from a U.S. satellite, from one of the Hughes
10     satellites, which has a vast array of sports on it. 
11     This condition wasn't imposed then, and we believe it
12     is not the right way to go at this point.
13  751                  MR. BATSTONE:  Thank you.  Again,
14     these are hypothetical questions.  I appreciate your
15     position, but I would still like to get your response
16     to these specific questions.
17  752                  If the Commission were to require
18     carriage of more than one pay-per-view service, can you
19     give me some indication as to whether it would be
20     appropriate to set a minimum amount of capacity that
21     would be provided to the alternative pay-per-view
22     service and, if so, how much capacity that should be?
23  753                  MR. FRANK:  As you said, these are
24     hypothetical questions, and they are very difficult for
25     us to respond to because, quite frankly, we had not


 1     contemplated the requirement to carry another pay-per-
 2     view service because of the Commission's previous
 3     rulings.
 4  754                  But you raise a very good question. 
 5     There is the issue of satellite capacity.  Would there
 6     be enough satellite capacity to carry a second service?
 7  755                  I note in the 1995 decision that was
 8     one of the reasons why the Commission rejected the
 9     required carriage of a second service, that and the
10     amount of program duplication there would be.
11  756                  There would also be the issue of the
12     substantial costs associated with the carriage of a
13     second DTH pay-per-view service and, in the fullness of
14     time, it might persuade a company not to have one's own
15     DTH pay-per-view undertaking, which I think would be
16     unfortunate for all of the reasons and the benefits
17     that we have cited already.
18  757                  MR. NEUMAN:  I might just add, again
19     from a competitive perspective, that I think it sets up
20     a trend.  It sets up an incorrect direction, at least
21     in my view, if the direction is toward more, not less,
22     competition.
23  758                  I know that when we were setting up
24     our channel offering initially we were approached by
25     everyone -- and, of course, I am talking about pay-per-


 1     view -- and some were must-carries, but others were
 2     discretionary on our part.  It was very interesting for
 3     us, from a business perspective, to get the sales
 4     pitch; to hear what the program provider was planning
 5     on putting on the air and to make a conscious business
 6     decision against the markets that we wish to serve, as
 7     to whether or not that programming met the needs of the
 8     markets we were going to serve and whether or not it
 9     would ultimately be in the best interests of our
10     service in terms of making our overall service more
11     competitive.
12  759                  It was actually through the sales
13     pitches and conversations like that, and the analyses
14     that flowed from those conversations, that gave rise to
15     us putting Asian Television, for example, on our
16     service when no one else in the country did.
17  760                  If there is a requirement that we
18     must carry something else, all of that goes out the
19     window.  It is just:  Here is the service.  Here is the
20     price.  Put it up.  And I don't think that gives rise
21     to the kind of competition that one would envisage in
22     the future.
23  761                  MR. BATSTONE:  Assume for a moment
24     that the Commission does make that decision, that there
25     should be more than one carried.  What nature of


 1     service would you suggest is the maximum that you
 2     should have to carry in that situation, in terms of
 3     size?
 4  762                  MR. FRANK:  Could we approach this
 5     hypothetical question, again, in the 1995 context,
 6     where, although the Commission rejected it in DTH pay-
 7     per-view, they did embrace it in pay-audio and, as I
 8     recall, as a condition of licence, the Commission
 9     required that the competitive pay-audio service pay 100
10     per cent of the satellite transmission costs:  that is,
11     uplink and coding and transponder costs.  So I think
12     that would be our starting point for that discussion.
13  763                  MR. BATSTONE:  Any service that you
14     were obliged to carry, the costs would have to be paid? 
15     You wouldn't have to pay the transponder and uplink
16     costs?  Is that what you are suggesting?
17  764                  MR. FRANK:  In dealing with a
18     hypothetical question I look back to 1995 and I see a
19     precedent and if the Commission goes that route -- and
20     we hope they don't, for all of the reasons that Michael
21     has said -- that would seem to be a reasonable request
22     from our point, because we would be bearing the
23     satellite costs associated with our DTH pay-per-view
24     service, and they would be competing one against the
25     other.


 1  765                  This is a different type of
 2     programming service than pay TV, specialty and
 3     conventional.  It is an à la carte -- as one of the
 4     intervenors said, it is more like a distribution
 5     offering than it is like a programming offering.  It is
 6     an elective, à la carte, discretionary service.
 7  766                  MR. GOURD:  May we come back to you
 8     during the course of the day, counsel?
 9  767                  MR. BATSTONE:  Sure.
10  768                  I think I will turn now to a couple
11     of conditions of licence.
12  769                  There is another condition of licence
13     in some of the other DTH pay-per-view licences, which
14     is to say that the licensee shall not acquire, or seek
15     to acquire, by any means, exclusive or preferential
16     rights to distribute any programming.
17  770                  Would you be prepared to accept the
18     same condition?
19  771                  MR. FRANK:  Yes, very much so.
20  772                  MR. BATSTONE:  Similarly, there is a
21     condition in those licences referring to commercial
22     messages, saying that the licensee shall not sell or
23     accept compensation for any commercial message on the
24     service.
25  773                  Would you be willing to accept that


 1     as a condition of licence as well?
 2  774                  MR. FRANK:  Provided that that allows
 3     us to carry sports feeds that contain, yes, we would.
 4  775                  MR. BATSTONE:  And I believe there is
 5     another condition in those licences which addresses
 6     that particular situation.
 7  776                  Thirdly, you spoke with Commissioner
 8     Cardozo about the nature of the service itself and the
 9     nature of French programming versus English, and the
10     amount, and I understand that you would agree to a
11     condition of licence requiring 25 per cent of the
12     channels to be French --
13  777                  MR. FRANK:  With a minimum floor of
14     five channels.
15  778                  MR. BATSTONE:  That is what I was
16     getting at.  Exclusive of the barker channel.  Is that
17     correct?
18  779                  The barker would be on top of the
19     five channels.  Is that correct?
20  780                  MR. FRANK:  Actually, in
21     discussion -- and we have had extensive discussions
22     with our competitors in the last month or so.  We have
23     been busy working on a satisfactory affiliation
24     agreement.  They have made it real clear to us that the
25     barker channel is an integral part of a pay-per-view


 1     service.  So we would hope that it would be inclusive
 2     of barker, but --
 3  781                  MR. BATSTONE:  Is it five channels of
 4     French programming plus the barker channel?  Or do
 5     those five channels of French programming include the
 6     barker channel?
 7  782                  MR. FRANK:  It is inclusive of the
 8     barker channel.
 9  783                  MR. BATSTONE:  So, in effect, four
10     channels plus the barker.  Is that correct?
11  784                  MR. FRANK:  Yes, that's correct.
12  785                  MR. GOURD:  Yes, but it is at par
13     with the English one.
14  786                  MR. BATSTONE:  The only reason I am
15     asking is that it was my understanding from the
16     application that it was five channels plus the barker.
17  787                  MR. FRANK:  And I stand to be
18     corrected.
19  788                  Counsel, we will check that.  If I am
20     mistaken, if we have said that it is five channels plus
21     the barker in a licence, that is the commitment we will
22     stand with.  We are not trying to change on the fly
23     here.
24  789                  MR. BATSTONE:  All right.
25  790                  You referred in your opening remarks


 1     and again in response to questions to a program supply
 2     agreement with a U.S. company.  I was wondering if you
 3     would be prepared to file that on the record.
 4  791                  MR. FRANK:  I think there might be
 5     some confusion here.  We don't have a program supply
 6     arrangement with any U.S. DBS entity.  What we have is
 7     a contractual requirement that we not sell our service
 8     in the United States.
 9  792                  MR. BATSTONE:  And that is in
10     exchange for what?
11  793                  MR. FRANK:  A broad range of
12     technical and hardware related benefits.  It is a
13     technical hardware agreement; it is not a programming
14     agreement.
15  794                  It is basically a technology DVC-DTH
16     driven agreement.
17  795                  MR. BATSTONE:  Would you be prepared
18     to put that on the record, notwithstanding my
19     misunderstanding of what it is about?
20  796                  MR. FRANK:  We would be prepared to
21     file it with the Commission in confidence, yes.
22  797                  MR. BATSTONE:  Sure.  All right.
23  798                  Similarly, the agreement with Premium
24     TV and Viewer's Choice with respect to the interim
25     arrangement, would you be prepared to file that?


 1  799                  MR. FRANK:  Yes, we would, as I am
 2     sure the other parties would too.
 3  800                  MR. BATSTONE:  Turning to the
 4     question of accounting in general, would you be
 5     prepared to accept a condition of licence to the effect
 6     that any annual return which you have to file would
 7     also include a supplementary schedule reconciling both
 8     the DTH and the DTH pay-per-view revenue?
 9  801                  MR. FRANK:  Yes, we would.
10                                                        1305
11  802                  MR. BATSTONE:  Going back to the
12     issue of the carriage of two services on a
13     going-forward basis for, depending on which satellite,
14     I guess a certain period of time, at the end of that
15     period of time, in the model that you're putting
16     forward, you would be able to decide at that point
17     whether or not to continue carrying an alternative
18     pay-per-view service.
19  803                  My question is:  At that point, would
20     BSSI not be in a fundamental conflict of interest
21     situation in that why would you necessarily -- I guess
22     I'm not convinced that you would necessarily continue
23     to carry a second service when it is a direct
24     competitor to your own service.
25  804                  MR. NEUMAN:  By way of an example,


 1     because there is no way other than to ask you to trust
 2     me about what I might do in the future, but I might use
 3     an example from the past as an illustration.
 4  805                  On the music side, we carry Galaxy
 5     Music.  We don't own Galaxy Music, but we carry it; our
 6     customers enjoy it.  We're also in the midst of
 7     considering carrying DMX, which comes from Shaw, which
 8     owns just as of this morning -- subject to CRTC
 9     approval, of course -- I believe 52.6 per cent of Star
10     Choice.  So, it isn't so much a question of where it
11     comes from.  They're both music and they're both 30
12     channels and they have many genres of music in common. 
13     It's more a question of what consumers demand.
14  806                  In our view, in that particular case,
15     the way they have programmed many of the genres of
16     music that they've chosen, they don't offer the full
17     dynamic range musically on DMX and, therefore, there
18     are cases where certain genres of their music is more
19     applicable for commercial environments, whereas some of
20     our genres of music are not applicable to commercial
21     environments.  Just as I've described is possible with
22     pay-per-view, they've differentiated their service in
23     such a manner that we believe that there's a compelling
24     competitive reason to carry it.
25  807                  They approached me.  I was very


 1     interested.  They're now in the throes of demonstrating
 2     their product to us, and we're discussing the
 3     possibility of bringing them on.  I think that we are
 4     actually living the same approach that we would apply
 5     to pay-per-view.  If the pay-per-view provider sharpens
 6     their pencil, makes a good proposal, demonstrates their
 7     ability to attract customers against packaging, pricing
 8     and promotion which is unique to their service, then
 9     they could make a very strong case.  One thing is for
10     sure.  If they have a guarantee of carriage without
11     doing anything to their product, they won't be making
12     any sales pitch to us or sharpening their pencil or
13     trying new things in pricing, packaging, promotion
14     because they won't have to.
15  808                  If history repeats itself, I think
16     they have a shot.  It would be good and healthy for the
17     competitive environment if they took that shot.
18  809                  MR. GOURD:  Please allow me very
19     quickly to table two additional comments that will
20     reenforce what Michael has said.
21  810                  Our strategic business plan has two
22     priorities:  Number one, maximum subscriber
23     penetration; number two, maximum revenue per
24     subscriber.  It's not the success of a given segment or
25     the penetration of another piece.  We go for the total


 1     picture around these two priorities.  If it makes more
 2     sense to have more subscribers and more revenue per
 3     subscriber to carry both DMX, which is owned by Shaw,
 4     and Galaxy, owned by CBC, we'll simply do it.
 5  811                  If it makes more sense, when you have
 6     the two offerings, in a few years from now to carry
 7     both Astral and our own pay-per-view, we will do it if
 8     it achieves more subscriber penetration and more
 9     revenue per subscriber.  There might be a case where
10     you might say indeed, to have two pay-per-view
11     offerings will maximize revenue per subscriber because
12     more will take pay-per-view and they will take more
13     pay-per-view.
14  812                  What we're saying is that it has to
15     be because the concrete offerings are conducive to
16     maximum subscriber penetration and maximum revenue
17     penetration that we would do it.  However, as we said,
18     if the Commission believes that it's a condition of
19     licence, with great reluctance, because it would
20     introduce rigidity in the system in the total offering,
21     we would accept it.
22  813                  We will come back to you further
23     pertaining to the complimentary question you have
24     posed, which will be the respective treatment of the
25     two offerings if, unfortunately, you choose to have


 1     that as a condition of licence.
 2  814                  MR. FRANK:  You did throw it out as a
 3     hypothetical, and perhaps we can throw into the hopper
 4     the opportunity for us to have greater exposure of our
 5     DTH pay-per-view service by gaining a "must carry"
 6     status on our competitor system.
 7  815                  MR. BATSTONE:  My final question is a
 8     clarification question with respect to the revenue
 9     forecast.
10  816                  In the forecast you disaggregated the
11     revenues for movies and for events, but then there was
12     just a single aggregated line for the premium sports. 
13     I was wondering if there's a particular reason for
14     that.  What I mean by disaggregated is there was a buy
15     rate in the price which gave the revenues for the
16     movies and the events, and there wasn't the same for
17     the sports.  I was wondering if there's a particular
18     reason for that and, if not, if we could get some sort
19     of analysis of it in a more disaggregated form?
20  817                  MR. McLENNAN:  The underpinning
21     assumption, if I recall correctly on the sports
22     packaging, was a percentage of the subscribers taking
23     the sports events and then a yearly fee of I believe it
24     was around $180.
25  818                  MR. BATSTONE:  So it's not premised


 1     on a particular event by rate the way the others are. 
 2     Is that correct?
 3  819                  MR. McLENNAN:  That was the modelling
 4     assumption behind the sports, yes.
 5  820                  MR. BATSTONE:  Thanks very much. 
 6     Those are all my questions.
 7  821                  COMMISSIONER CARDOZO:  Thank you. 
 8     Merci, Monsieur Gourd, gentlemen.  We will probably see
 9     you back in reply, but first we will send you to lunch. 
10     We will be back at 2:15.  Nous reprendrons à deux
11     heures et quart.
12     --- Recess at / Suspension à 1310
13     --- Upon resuming at / Reprise à 1415
14  822                  THE CHAIRPERSON:  Good afternoon. 
15     Bonjour.
16  823                  Madame la Sécretaire.
17  824                  Mme SANTERRE:  Merci, Madame la
18     Présidente.
19  825                  The first intervenor will be Viewer's
20     Choice Canada Inc., Canal Indigo SENC.
22  826                  MS de WILDE:  Good afternoon, Madam
23     Chair, members of the Commission.
24  827                  My name is Lisa de Wilde.  I'm the
25     President of Viewer's Choice Canada and I'm a member of


 1     the Board of Directors of Canal Indigo.
 2  828                  Before I start this afternoon, I want
 3     to extend a sincere thank you to Michael Neuman for his
 4     many incredibly complimentary remarks this morning
 5     about pay television and TMN, in particular.  I agree
 6     enthusiastically with Michael about the successes that 
 7     have already been achieved by ExpressVu in the DTH
 8     market.
 9  829                  So, you may wonder why are we here
10     today?  In a nutshell, we believe that Bell Satellite
11     can be as successful in pay-per-view as it has been
12     with pay TV by working with the existing licensees,
13     namely Canal Indigo and Viewer's Choice.
14  830                  Before we begin our intervention this
15     afternoon, I would first like to introduce the members
16     of our panel.  I have with me today Rene Bourdages, the
17     Vice-President et Directeur-General, Canal Indigo; Vash
18     Ramnarace, who is the Director of Finance for TMN
19     Networks.  Vash also has another claim to fame, which
20     is that he has brought cricket to Canadian pay-per-view
21     for the last three years, whether it's cricket at the
22     World Cup level or the Sahara Cup level, which is
23     running out of Toronto.  Lastly, we have Stephen Zolf,
24     who will hopefully keep me from falling back into
25     previous areas of some expertise.


 1  831                  I have to apologize that the document
 2     that you have in front of you this afternoon was a
 3     noble effort to give you a clean copy of what we wanted
 4     to say to you this afternoon.  But this morning was a
 5     pretty interesting one, and so I hope that you will
 6     bear with me when I depart from the text.  Usually it's
 7     that I've chopped out a paragraph and sometimes that
 8     I've added in something that I think is more
 9     interesting.
10  832                  With all of those caveats, we are
11     appearing today, Madam Wylie, to highlight our
12     opposition to Bell Satellite's DTH pay-per-view
13     application.  Bell Satellite claims that its
14     application is simply about competition, diversity and
15     efficiency.  Simply put, we disagree.  We believe that
16     their application raises a much more fundamental issue
17     about the role of DBUs in programming undertakings.
18  833                  This is an issue that has been
19     subject to much Commission attention over the last few
20     months.  In fact, the Commission recently decided to
21     defer its consideration of a number of licence
22     applications for new programming services until a
23     number of really big issues, including the issue of
24     distributor participation in the ownership of
25     programming services could be resolved.


 1  834                  These issues are to be addressed in
 2     an upcoming licensing framework hearing.  We submit
 3     that Bell Satellite's application raises similar
 4     issues, as well as a whole host of other issues about
 5     market structure.
 6  835                  The Commission should, in our view,
 7     give serious consideration to all of these big issues
 8     before making any determinations with respect to this
 9     particular application.
10  836                  Our intervention will address five
11     key issues.
12  837                  Bell repeatedly argues that its
13     proposed service will bring about "real competition and
14     choice and diversity of service," as well as giving
15     Canadian consumers an alternative to the pay-per-view
16     services offered by cable and those in the U.S. grey
17     market.  It has persuaded several parties to support
18     its application on the basis of this supposed increased
19     choice and diversity for DTH customers.
20  838                  In fact, Bell Satellite's
21     pay-per-view service will not enhance the level of
22     programming diversity in the least.  Let's be clear
23     about what it is we're dealing with here.  Viewer's
24     Choice, Canal Indigo, as well as the proposed Bell
25     Satellite service, are all general-interest


 1     pay-per-view services, whose offering, by definition,
 2     is the same core of movies and events.  Michael Neuman
 3     acknowledged this fact this morning.
 4  839                  But the reality also is that with 22
 5     channels that Bell Satellite has proposed for its
 6     English service, Viewer's Choice would also be able to
 7     provide that same level of diversity.  But Bell's BDU
 8     controls the number of channels that we have at our
 9     disposal to address and to delivery against diversity.
10  840                  When our DTH pay-per-view service
11     commenced operation last spring with Star Choice, Bell
12     Satellite refused to carry our service, probably in
13     anticipation of its pending application for its own
14     licence.  It was only after seeking Commission relief
15     to order Bell Satellite to provide access to VCC and
16     Canal Indigo that we were able to force a negotiation
17     and to achieve carriage.
18  841                  But this access is, to say the least,
19     severely limited, with only four channels for Viewer's
20     Choice and a mere two channels for Canal Indigo, with
21     no barker.  Bell Satellite has been content to
22     constrain our service to a minimum channel offering,
23     and we reluctantly agreed to these terms because, on
24     balance, we thought that it was important to make our
25     service available to all DTH subscribers.


 1  842                  But even these arrangements will be
 2     short lived.  Despite all the talk this morning, Bell
 3     Satellite's position on the record is that our services
 4     will be dropped in a mere 30 months if Bell receives a
 5     licence.
 6  843                  This morning Bell Satellite was asked
 7     if they would agree to carry existing unaffiliated
 8     pay-per-view services in addition to their own.  Based
 9     on their responses today, it's painfully clear that
10     Bell wants to have free reign to confer any manner of
11     undue preferences on its affiliated pay-per-view
12     service, whether it's through the number of channels,
13     who pays for the satellite transponder, whether it's at
14     the level of the marketing, the packaging, the
15     promotion, you name it, and, finally, they get to
16     decide whether or not they'll keep up.
17  844                  Based on the posture that they had
18     this morning, I'm just not sure that there really is
19     any amount of Commission involvement that could prevent
20     Bell Satellite's BDU from favouring its own
21     pay-per-view service.  We're not convinced that there
22     are enough conditions of licence out there that could
23     provide a complete fix, when you have a deep-pocketed,
24     integrated competitor.
25  845                  Our conclusion is we would always be


 1     the second-class citizen who got to pick up those
 2     portions of the programming mix that Bell decided it
 3     didn't want.
 4  846                  Bell Satellite has repeatedly
 5     suggested that its proposed pay-per-view service will
 6     also allow consumers to enjoy more choice.  This, too,
 7     in our view, is misleading.  A consumer will never have
 8     more than one general-interest pay-per-view service to
 9     choose from.  The reason for that is simple.  An
10     integrated DTH company will always bundle its own
11     pay-per-view service to its customers, notwithstanding
12     what you've been told this morning.
13  847                  The diagram that we've attached to
14     our intervention illustrates the programming choices
15     that would be available to viewers under two scenarios,
16     the status quo called today, and the scenario if Bell
17     Satellite receives a licence from the Commission.  As
18     you can see from the diagram, under either scenario,
19     after having made a commitment to the technology of
20     either ExpressVu or Star Choice, the DTH consumer would
21     receive only one general-interest pay-per-view service.
22  848                  Bell is asking the Commission to take
23     an unprecedented action.  What's unprecedented is to
24     allow an existing BDU to drop an existing licensed
25     programming service and to replace them with its own


 1     fully integrated undertaking.  Let's be clear. 
 2     Competition is a means to an end, and that end is
 3     greater choice and greater welfare for consumers.  It's
 4     not competition if the result is simply to replace one
 5     programming service with another more anti-competitive
 6     one.  In the end, the ExpressVu DTH customer will have
 7     no greater choice than he has now or will have at the
 8     end of November.
 9  849                  Surely this was not the intent of the
10     government's DTH policy.  The government directions to
11     the Commission were permissive, rather than mandatory. 
12     They were issued at the time not for the purpose of
13     requiring the Commission to licence an integrated
14     undertaking.  Rather, they only directed the Commission
15     not to refuse to license such a service under the
16     appropriate circumstances.  We believe those
17     circumstances do not exist.  For the ExpressVu DTH
18     customer, there would be no competition from which he
19     or she would benefit.  Thus, allowing Bell Satellite
20     into the pay-per-view sector would not ensure the
21     continued integrity of the Canadian broadcasting
22     system, as the Commission is required to do under both
23     directions.
24                                                        1425
25  850                  As I said earlier, the implications


 1     of Bell Satellite's application go far beyond the DTH
 2     sector.  Notwithstanding all the buzzwords we hear of
 3     competition, choice, diversity, this application raises
 4     squarely the question of whether BDUs should own
 5     programming undertakings.
 6  851                  It is our view that Bell Satellite's
 7     application represents the thin edge of the wedge. 
 8     Giving a licence to Bell Satellite would surely cause a
 9     move to integration in the entire DTH sector. 
10     StarChoice would obviously come seeking its own pay-
11     per-view licence.  To put it simply, our DTH pay-per-
12     view licences would be shortly without a home, and
13     there is every reason to believe that cable would also
14     be there applying for their own pay-per-view services. 
15     In the CCTA's own intervention, they are
16     enthusiastically asking the Commission to approve this
17     application so that they can come to the Commission and
18     ask you to approve similar ones.
19  852                  Bell Satellite tente de persuader le
20     Conseil qu'une entreprise nationale de SRD intégrée
21     serait rentable et concurrentielle.  Elle soutient
22     aussi que seule l'intégration est en mesure d'assurer
23     la viabilité du secteur canadien de la SRD.
24  853                  Aucun de ces arguments ne peut être
25     valablement soutenu.  Tel que nous l'avons noté dans


 1     notre intervention écrite, Bell Satellite a arrangé ses
 2     prévisions financières en imputant ses coûts principaux
 3     de telle manière qu'ils dépeignent la nécessité
 4     économique au niveau du secteur SRD.  Ce jeu de
 5     chiffres détourne le Conseil de ce qui apparaît comme
 6     une évidence dans le secteur de SRD aujourd'hui:  La
 7     rentabilité du secteur SRD ne requiert pas
 8     l'intégration.  Ce secteur est viable, même si les
 9     entreprises de distribution par SRD, incluant Bell 
10     ExpressVu, continuent de s'associer avec des services
11     indépendants de télévision à la carte par SRD.  Bell
12     Satellite a donc qualifié à mauvais escient le secteur
13     SRD comme vacillant au bord du gouffre financier afin
14     de justifier sa demande de service intégré.
15  854                  Bell Satellite a aussi soulevé la
16     taille du marché de SRD en se qualifiant de
17     distributeur non dominant qui n'occupe qu'une infime
18     partie du secteur de la distribution au Canada. 
19     Cependant, ses propres projections la contredisent et
20     font état d'un bassin de plus de 750 000 abonnés
21     adressables pour son EDR, et ce, au premier terme de sa
22     licence.  Pour mettre ce chiffre en perspective, cela
23     équivaut approximativement au nombre total d'abonnés de
24     câblodistribution adressables au pays.  Donc, en
25     réalité, Bell Satellite a de loin sous-estimé la portée


 1     du secteur de SRD dans son ensemble.
 2  855                  Selon les propres hypothèses de Bell
 3     Satellite, le secteur de SRD atteindrait au total,
 4     donc, 1,5 million d'abonnés adressables d'ici à la fin
 5     de sa période de licence.  Ceci est confirmé par le
 6     fait que les services de SRD s'enrichissent
 7     actuellement de près de 35 000 abonnés par mois.  Et,
 8     contrairement au secteur de la câblodistribution,
 9     chaque client SRD est adressable.
10  856                  On peut également douter de la
11     sincérité de Bell Satellite lorsqu'elle décrit l'impact
12     du service proposé sur les marchés de langue française. 
13     Selon elle, ses abonnés de langue française ne
14     représentent que 1,5 pour cent du marché total de la
15     câblodistribution.  Mais ceci ne tient pas compte,
16     encore une fois, de la vraie question, à savoir le
17     nombre d'abonnés au câble adressables comparativement à
18     celui des abonnés SRD.
19  857                  La demande de Bell Satellite indique
20     que le nombre total d'abonnés SRD adressables dans les
21     marchés de langue française excédera celui des abonnés
22     du câble adressables dans ces marchés.  Le fait est
23     qu'au Québec le marché actuel du câble ne peut suffire
24     par lui-même à soutenir la viabilité d'un service de
25     langue française.  Si l'un des principaux objectifs de


 1     la politique du Conseil est de faire en sorte qu'un
 2     menu complet de services de programmation de langue
 3     française soit mis à la disposition des Canadiens,
 4     alors l'accès de Canal Indigo aux abonnés de SRD est
 5     fondamental.
 6  858                  De plus, si Bell Satellite venait à
 7     enlever l'accès de Canal Indigo à ces abonnés, cela
 8     compromettrait les engagements actuels de notre service
 9     de consacrer 10 pour cent de nos recettes brutes à la
10     production indépendante, ce qui représente le double de
11     ce que Bell Satellite propose.
12  859                  MS de WILDE:  Finally, Bell Satellite
13     has noted that integration is a common practice in the
14     more established U.S. DBS market, but they have
15     neglected to mention that in that integrated U.S.
16     market, where there is a two-way split of revenues, as
17     much as 60 per cent, and not the one-third that
18     Mr. McLennan mentioned today -- 60 per cent of all
19     retail revenues flow to the rightsholders.  By
20     contrast, under the current non-integrated DTH market
21     structure in Canada, rightsholders for feature films
22     generally receive the one-third of the total retail
23     revenues.
24  860                  The Commission recognized the
25     particular problem of upward pressure on splits when it


 1     imposed a revenue splits condition in previous DTH
 2     licensing decisions in 1995.  That condition would have
 3     ensured that retail pay-per-view revenues earned on
 4     feature films were split three ways -- among the BDU,
 5     the pay-per-view provider and the rightsholder.  The
 6     condition was designed to prevent integrated DTH pay-
 7     per-view licensees from paying increased revenue shares
 8     to foreign rightsholders.
 9  861                  Of course, the Commission has not had
10     to remove the revenue splits condition, and without
11     that condition, and despite Mr. Neuman's propensity to
12     pay low prices, Bell Satellite's pay-per-view service
13     will face severe pressure from foreign rightsholders,
14     seeking at least one-half of the revenues because he
15     will be perceived as the integrated undertaking that he
16     is.  In the end, gross margins that would have remained
17     in Canada through existing DTH pay-per-view licensees
18     will flow inevitably to non-Canadians.  Moreover, even
19     the non-integrated pay-per-view services will be forced
20     to meet these more onerous split conditions.  The
21     result will be a far poorer DTH sector.
22  862                  That concludes my intervention.
23  863                  THE CHAIRPERSON:  Good afternoon and
24     thank you, Ms de Wilde and gentlemen.
25  864                  Commissioner Pennefather.


 1  865                  COMMISSIONER PENNEFATHER:  Thank you.
 2  866                  Good afternoon.  I guess I will start
 3     by working from your presentation, which, as you said,
 4     brought some nuance and some additional comments to
 5     your written intervention.
 6  867                  In summary, if I am right, the basic
 7     issues you have raised -- correct me if I am wrong --
 8     which are fundamental to your request that we deny this
 9     application were first and foremost that you feel
10     strongly that the existing licenses should be used by
11     the BDU as opposed to a new service, that you object to
12     the non-use of an existing pay-per-view licence;
13     secondly, your concerns about integration; and,
14     thirdly, access to satellite capacity to distribution
15     and even to program rights.
16  868                  These seemed to me, as I looked
17     through and listened this afternoon, to be central to
18     your concerns, and you have added a few highlights
19     today.
20  869                  Perhaps, then, I could begin by
21     starting where we started this morning with the Pay-
22     Per-View Direction and ask you as well to expand on
23     your views about what is inferred by paragraph 3, where
24     it says:
25                            "The CRTC is directed to


 1                            promote, through licensing, a
 2                            dynamically competitive market
 3                            for DTH pay-per-view television
 4                            programming undertakings."
 5  870                  Could I ask you to expand on that and
 6     what market you think is being referred to there, and
 7     what in fact such a direction means for this process?
 8  871                  MS de WILDE:  We would be happy to. 
 9     Stephen Zolf will address this.
10  872                  MR. ZOLF:  Thank you, Lisa.
11  873                  Commissioner Pennefather, as we have
12     said on the record to date, in our view, a close
13     reading of the direction suggests that in fact it is
14     permissive in terms of licensing an integrated provider
15     and, rather, it is not mandatory.  In fact, nowhere in
16     that direction is there an express requirement that
17     directs the Commission to award a licence to a
18     vertically-integrated DTH provider.  Therefore, that in
19     turn suggests that the onus is on the Commission, if
20     you will, to look at a number of issues and the
21     appropriate circumstances to determine whether in fact
22     licensing that entity is indeed warranted; and, for the
23     reasons we have set out on the record, we feel that it
24     isn't.
25  874                  The direction itself does ask, in


 1     terms of dynamic competition, that the Commission
 2     should look at whether this will be dynamic competition
 3     within the DTH pay-per-view sector and in fact that
 4     analysis alone, that narrow calculus alone, we submit,
 5     is the only relevant criterion for then going on to
 6     determine whether in fact the DTH market will indeed be
 7     dynamically competitive.
 8  875                  That's it in a nutshell.
 9  876                  COMMISSIONER PENNEFATHER:  Good. 
10     And, remember, this is not a lawyer speaking to you, so
11     I may be fairly simple in my comments here, but just
12     let's pursue that for a moment.
13  877                  You do agree that, under 5(f), it is
14     clear that the CRTC is directed not to refuse to issue
15     a licence for the sole reason that the applicant holds
16     a licence to carry on a DTH distribution undertaking.
17  878                  MR. ZOLF:  Yes. 
18     Commissioner Pennefather, that's the permissive aspect
19     we referred to.  You are not precluded from going ahead
20     and licensing for that sole reason, but the other side
21     of that coin is you are not required to license, and in
22     fact there are a number of circumstances at play that I
23     think you need to consider.
24  879                  We also, of course, put on the record
25     that the chronology, if you will, has changed since the


 1     time that the directions were issued, which in turn
 2     leads to a conclusion that, really, you can't fetter
 3     your discretion.  You do have to look at all the
 4     circumstances before you and determine whether in fact
 5     licensing the integrated player is indeed justified.
 6  880                  COMMISSIONER PENNEFATHER:  Good. 
 7     That's what I would like to pursue with you, what are
 8     the various circumstances which lead you to your
 9     conclusion and look at this from your perspective.
10  881                  If I may summarize, certainly this is
11     a direction to promote a competitive market, which I
12     don't think you would disagree with, but on the other
13     hand you are very convinced that the proposal which is
14     before us is, if I may coin a phrase, anti-competitive.
15  882                  Could you expand on why you say the
16     model proposed by Bell Satellite Services is anti-
17     competitive?
18  883                  MS de WILDE:  Our view turns on the
19     fact that it is an integrated competitor, and it is an
20     integrated competitor that also happens to have
21     extremely deep pockets.  I think that it is very
22     important to understand our position through that
23     prism.
24  884                  We are here to talk to you today and
25     to say that, in the facts that are before you of this


 1     precise applicant, the down sides, the risks the ugly
 2     sides of licensing them are so much more significant
 3     than any possible benefits that it is not worth putting
 4     at stake, really, the structure of the pay-per-view
 5     sector in DTH, but frankly the whole structure of the
 6     system in terms of the relative roles of programming
 7     undertakings and distribution undertakings.
 8  885                  So our concern really is, we have an
 9     integrated competitor.  Well, you can't have dynamic,
10     fair competition with an integrated competitor.
11  886                  COMMISSIONER PENNEFATHER:  Could we
12     go through that point, then, with some specifics, and
13     not for the moment talk about the broader scope, which
14     you have also mentioned this afternoon.
15  887                  Specifically, what are the aspects
16     which bring you to that conclusion that this is an
17     approach which is so anti-competitive that it should be
18     denied?  I understand you generally, but what are some
19     of the specifics?
20  888                  MS de WILDE:  I guess I would come at
21     that from two different tracks.
22  889                  First of all, there is no commitment
23     to carry our service on ExpressVu if they get a
24     licence.  That's the sort of simple temporal one.  Our
25     agreement expires in a maximum of 30 months, and then


 1     we are toast.
 2  890                  Coming at it from the slightly
 3     broader, more down in the dust of the arena, if you
 4     want to put it that way, when we sit and listen to all
 5     of the wonderful things that ExpressVu wants to do in
 6     terms of packaging and marketing and promoting, you
 7     start to get a sense of exactly all the levers that
 8     would be at their disposal to favour their own service
 9     and to disfavour any other service.  So, even for the
10     period of time when we are carried on ExpressVu, we are
11     going to be in the second class seats on the train.
12  891                  The discussion this morning went so
13     far as to suggest that transponder costs, they wouldn't
14     pay them for the second service, that they would pay
15     them for their own, to say nothing of the fact that we
16     couldn't even get a clear sense that the number of
17     channels, which is a pretty basic and transparent way
18     of measuring fairness -- there was no commitment there.
19                                                        1440
20  892                  So, I mean, if you summarize it, it
21     is from the beginning of will they carry you?  Well,
22     not for long.  To the number of channels, to the
23     promotion, the marketing, the packaging, will they do a
24     direct mail campaign for you?  Will they not? Where
25     will they put you on your electronic programming guide? 


 1     I mean, you can think -- actually, I fear that you
 2     think that I might be paranoid as I rhyme off this
 3     shopping list of things, but I think having sat through
 4     the discussion this morning that the opportunities for
 5     those undue preferences are just endless.
 6  893                  COMMISSIONER PENNEFATHER:  So you
 7     feel undue preference would follow through and nothing
 8     you heard this morning changed your opinion that the
 9     opportunity for you to be carried would still remain. 
10     You are referring to an agreement, I believe, which was
11     repeated this morning in terms of the 30-month period
12     after that, as you say, to quote, you would be toast. 
13     Why would you be toast if you are also be carried on
14     cable?
15  894                  MS de WILDE:  We would be toast with
16     ExpressVu, that was my point.
17  895                  COMMISSIONER PENNEFATHER:  I see. 
18     But as DTH pay-per-view service, would you still be
19     viable, would you still survive?
20  896                  MS de WILDE:  As I have alluded to, I
21     cannot believe that if the Commission were to make such
22     a fundamental decision as to licence an integrated
23     pay-per-view undertaking, every other distribution
24     undertaking will want their own.
25  897                  So the cable guys have been, quite


 1     frankly, incredibly clear about their views on what you
 2     should do and they are exhorting you to run for it,
 3     license ExpressVu, and then they have been honest and
 4     said they will be lining up for licences.
 5  898                  COMMISSIONER PENNEFATHER:  So it is
 6     this aspect of the integration, be it DTH, be it cable,
 7     that is as a pay-per-view service is your concern?
 8  899                  MS de WILDE:  That's right,
 9     Commissioner Pennefather.  And I think that over the
10     course of the last several months, we have all had a
11     lot of experience as to what are the levers the
12     distribution undertakings have at their disposal.  And
13     I think there is a pretty fundamental question that
14     faces all of us.  You know, how can programming
15     undertakings be successful if they do not have BDU
16     shareholders?
17  900                  And our argument to you is we should
18     be putting in place a framework that allows that to
19     happen, that there are a lot of advantages to not
20     having simply integrated undertakings.
21  901                  COMMISSIONER PENNEFATHER:  What did
22     you think of -- I think there was a discussion this
23     morning about vertically integrated situations and
24     horizontally.  And I believe you were described as
25     horizontal-vertical integration.  In other words, are


 1     there aspects in your ownership that include
 2     distribution undertakings and is it different from what
 3     you are describing?
 4  902                  MS de WILDE:  Well, in the case of
 5     Viewer's Choice, as well as in the case -- to a
 6     different degree in Indigo we do have a cable
 7     shareholder.  But I can tell you that it is a small
 8     interest, less than 25 per cent.  And I do not feel
 9     integrated.  When I say I do not feel, I do not mean I
10     personally.  I mean the way in which the business is
11     run, the way in which channels are allocated, the way
12     in which our service goes to market, I do not feel
13     integrated.
14  903                  COMMISSIONER PENNEFATHER:  I would
15     appreciate it if you expanded more on that.  I believe
16     you raised that in your written comments as well in
17     terms of describing the economies of scope and the
18     positive side of integration in terms of efficiencies
19     in that regard which would be as I have described. 
20     Whereas you are saying that is not the case, that is
21     not the way it works in an operational sense.
22  904                  What does that mean in the day-to-day
23     operations?  What does that mean in terms of the
24     results of the success, for the success of the
25     programming service and for, in fact, what the consumer


 1     will receive?
 2  905                  MS de WILDE:  I will take a run at it
 3     and Vash can jump in and fill in the gaps.
 4  906                  I think that it is important to get a
 5     sense of what exactly running a pay-per-view
 6     undertaking involves.  And while the technology is very
 7     seductive and the size of servers continues to shrink
 8     -- you know, I sometimes embarrass my technical people
 9     by saying they look like refrigerators.  We are not
10     talking about huge broadcast operation centres.  But to
11     me that is the front end, that is how it happens to get
12     out to our BDUs.
13  907                  What is really interesting and
14     exciting about undertaking an undertaking like that is
15     what happens before it ends up in my two refrigerators. 
16     There it really is a question of understanding how you
17     can deliver customers, maximum convenience and choice. 
18     And, of course, movies and big-ticket events are the
19     core offerings of pay-per-view.  But what I am most
20     proud of, quite frankly, are when we find niche events.
21  908                  And, you know, we have an in-house
22     joke about cricket.  Because it is something, when we
23     first launched it, we were not really sure how much
24     demand there would be.  Well there are a lot of people,
25     especially in Toronto, who will sit in front of their


 1     TV even if the match starts at 2 in the morning.  And
 2     they will sit there for the 8 or 12 hours of that
 3     match.
 4  909                  So I think it is really --
 5     pay-per-view offers you the opportunity to target those
 6     niche audiences.  We also have had successes with
 7     concerts.  We had Sarah McLachlan's first pay-per-view
 8     concert -- or first televised concert. And we also had
 9     the Spice Girls.  So you can see the gamut of what
10     pay-per-view can offer.  That is the exciting part of
11     it.  How do you go ahead acquiring those rights,
12     putting them together in a schedule that is compelling
13     and then marketing them to customers.
14  910                  COMMISSIONER PENNEFATHER:  That is
15     what I am coming at, too.  What you have described and
16     what you have brought up in terms of the diversity is,
17     in fact, for the consumer, pay-per-view service X would
18     be presenting perhaps, yes, movies, sports, events,
19     that is the nature of the game, and perhaps adding
20     other elements.  But is that not where the challenge
21     is?  Also, the challenge in terms of packaging, picking
22     and choosing and so on.  And yet you claim that the
23     Bell Satellite pay-per-view service will be exactly the
24     same, that, in fact, they will not offer any diversity. 
25     But what you have just described is the capacity for


 1     different pay-per-view services to, in fact, be very
 2     different whether they are integrated or not.  Because
 3     you are very different, and you are not, as you say,
 4     suffering under integration.
 5  911                  MS de WILDE:  What I am trying to
 6     explain is that, at the end of the day, pay-per-view is
 7     going to be in terms of the percentage of time largely
 8     about movies.  And it will have the same, you know,
 9     core, big-ticket events that are made available from
10     rates holders.
11  912                  But the capacity to offer a better
12     pay-per-view service whether it is more convenient
13     start times for movies, or to add more concerts or
14     niche programming into the mix is a function of the
15     number of channels that we have at our disposal.  And,
16     you know, right now, quite frankly, in the cable
17     market, we are like lots of other people waiting for
18     digital.  And so waiting for digital means that we are
19     living in a very constrained channel world.  But if we
20     had the 22 channels that ExpressVu wants to devote to
21     their English channel pay-per-view, there is nothing
22     that they could do that we could not do.
23  913                  COMMISSIONER PENNEFATHER:  You
24     mentioned the satellite capacity and that is key, a
25     very specific point, I just want to come back to that. 


 1     So that, in terms of the consumer, is it not better for
 2     a consumer to have a choice of different pay-per-view
 3     services?
 4  914                  MS de WILDE:  As you were alluding to
 5     this morning, the fundamental choice that the consumer
 6     makes when it comes to how they are going to consume
 7     television programming in Canada is they decide:  Am I
 8     going to become a new DTH subscriber? If that is the
 9     case, they have two choices.  Do I go to Star Choice or
10     do I choose ExpressVu?
11  915                  If I choose not to be a DTH
12     subscriber, I have a couple of other options out there. 
13     But once having made that equipment decision and having
14     that, you know, beautiful dish installed on the side of
15     your house, you are locked in.  I mean, you have made
16     your commitment at that point.  As my diagram tries to
17     show, there is no incremental choice in the scenario
18     that would see the licensing of ExpressVu.
19  916                  COMMISSIONER PENNEFATHER:  Just as an
20     aside, I assume the diagram is a sort of generic
21     person?
22  917                  MS de WILDE:  It is what I call a
23     guy, which is it is gender-neutral.
24  918                  COMMISSIONER PENNEFATHER:  To get
25     back to that, once one is locked in with respect to


 1     ExpressVu or Star Choice, should the viewer not then
 2     have a choice of the pay-per-view services within that? 
 3     What does competition mean for I the consumer in the
 4     end?
 5  919                  
 6  920                  MS de WILDE:  Well, I think what we
 7     were trying to explain to you was that, from the
 8     consumer's point of view, the service, the pay-per-view
 9     service, will be stronger, more appealing, more
10     compelling when more channels are put at its disposal. 
11     And the proposition that you have before you today from
12     Bell Satellite does not involve any incremental choice
13     for a customer.
14  921                  COMMISSIONER PENNEFATHER:  All right. 
15     So specifically, then, what are you're assumptions
16     regarding channel capacity?  What is the minimum
17     requirement for a pay-per-view service to operate in a
18     viable fashion?  This seems to be one of your main
19     concerns about the result of integration, an integrated
20     approach, is restriction to yourselves or other
21     competitors in terms of channel capacity.  What is the
22     minimum?  What is the maximum?
23  922                  MS de WILDE:  In a scenario where
24     there was an integrated pay-per-view service and that
25     BDU that had the integrated pay-per-view service was


 1     also offering a second pay-per-view, that is your
 2     scenario?
 3  923                  COMMISSIONER PENNEFATHER:  Yeah, from
 4     the point of view of saying that -- you just said the
 5     problem is that you do not have enough channel capacity
 6     to present the viable service to compete.  And one of
 7     the reasons you do not, forgive me if I am putting
 8     words in your mouth, is that the integrated
 9     pay-per-view service has control of that channel
10     capacity and is limiting by virtue of that limitation,
11     putting you at a disadvantage, a second-rate player, as
12     I think you said earlier.
13  924                  Just to be clear, what is a realistic
14     minimum number and realistic maximum number of channel
15     capacity that would make it fair?  And we are looking
16     at the current and perhaps the future in terms of the
17     Nimiq satellite.  This was discussed earlier as well. 
18     I was not entirely clear on that.
19  925                  MS de WILDE:  Okay.  I am sorry that
20     it was taking me so long to grasp.  I think the answer
21     is not one of numbers, it is a question of equality. 
22     You need the same number of channels in order to have a
23     reasonable chance of competing.
24  926                  COMMISSIONER PENNEFATHER:  So this is
25     the 22 channels referred to on page 3?


 1  927                  MS de WILDE:  That is correct.
 2  928                  COMMISSIONER PENNEFATHER:  However,
 3     this access to say the least is severely limited with
 4     only four channels, et cetera, which is an example you
 5     are using of how that limitation can affect your
 6     ability to compete, correct?
 7  929                  MS de WILDE:  That's right, and how
 8     preferences are granted.
 9  930                  COMMISSIONER PENNEFATHER:  Okay.  So
10     this to you is one of the anti-competitive effects of
11     your competitor being an integrated service?
12  931                  MS de WILDE:  If I was -- if I had
13     the opportunity to compete head-to-head with them in
14     the sense that if I -- if they had made the decision to
15     keep me on, which they have not made, that is right.
16     With that assumption, yes.
17  932                  COMMISSIONER PENNEFATHER:  Now, given
18     the -- you are talking about the effect on your
19     service, your pay-per-view service.  But given your
20     existing distribution on cable, I will go back to this
21     question, again.  Is it really realistic to suggest
22     that approving this application will have a profound
23     impact on your situation?
24  933                  MS de WILDE:  I think, Commissioner
25     Pennefather, the most helpful I can be on that is to


 1     simply point you to the CCTA intervention where there
 2     really was no ambiguity in the words that they used to
 3     describe what their next steps would be.
 4  934                  COMMISSIONER PENNEFATHER:  Oh, I see.
 5     You are referring to the potential for integration and
 6     that side.  What I was referring to specifically was in
 7     terms of subscriber base, your subscribers through your
 8     cable access -- through cable to your pay-per-view
 9     service is substantial.  The comment was made this
10     morning that the number of subscribers or the potential
11     of subscribers through DTH would be so minimal as to
12     not cause you that much financial concern.
13  935                  MS de WILDE:  Well, it is
14     interesting.  There are a lot of changes going on in
15     the Canadian broadcasting market right now and it is
16     really quite hard to have a crystal ball and understand
17     how fast digital will roll out in cable.  We can all
18     pray every night that it is fast, but the experience of
19     the last several years suggests that it will not be all
20     that rapid.
21  936                  Already DTH is starting to be, you
22     know, a significant player, as was alluded to this
23     morning, in our pay television business.
24                                                        1455
25  937                  I think it would be in error to focus


 1     on the cable market and say that the cable market is
 2     going to suddenly explode.  It has been our experience
 3     over the last couple of years that in fact it has
 4     shrunk by factors of 20 percent and 30 percent at the
 5     level of the number of homes that we access, which is
 6     the number of customers that we can potentially sell
 7     something to, and that it has also shrunk in terms of
 8     the number of channels.
 9  938                  I think that we have to be quite
10     prudent in terms of how fast that market will develop.
11  939                  COMMISSIONER PENNEFATHER:  This goes
12     back to the question about the direction and what is
13     understood as the competitive market.  This morning we
14     talked about basically several layers within the pay-
15     per-view DTH, within pay-per-view DTH cable, with BDU
16     distribution.
17  940                  Do you agree, as was stated this
18     morning, that the directions really concern all those
19     layers of competition?
20  941                  MS de WILDE:  Yes.  And I think to
21     step back, the directions are there.  But more
22     fundamentally, the Commission is looking at what kind
23     of a Canadian broadcasting system it wants to shape for
24     the years ahead.
25  942                  Competition is one of the policy


 1     objectives, but it is one of a number of objectives.  I
 2     think we really need to keep our eye on the ball and
 3     make sure that we end up with strong Canadian
 4     programming services that can deliver on the
 5     contributions and support what we are supposed to be
 6     here to do -- which is to build a strong Canadian
 7     programming sector, whether it is the independent
 8     production or the window for people to get to see
 9     Canadian stories on BDUs.
10  943                  COMMISSIONER PENNEFATHER:  Turning it
11     around to that positive side, turning to page 6 what
12     you have said regarding the direction is:
13                            "Rather, they only directed the
14                            Commission not to refuse to
15                            license such a service, under
16                            the appropriate circumstances. 
17                            We believe those circumstances
18                            do not exist."
19  944                  What would the appropriate
20     circumstances be?  You must agree with me that the idea
21     is, for some of the purposes you have mentioned --
22     programming, development of Canadian services -- that
23     competition will be important, and competition in pay-
24     per-view services will be important.
25  945                  What are the appropriate


 1     circumstances if these are not they?
 2  946                  MS de WILDE:  I think the test is
 3     more in the direction of:  Do we have a net improvement
 4     in the Canadian broadcasting system?  Is the licensing
 5     of a second pay-per-view player going to produce more
 6     dollars that flow into this system and produce Canadian
 7     programming?
 8  947                  To me, that is the test.  It is not a
 9     question of:  Do we achieve competition per se?
10  948                  In figuring out whether the
11     competition is truly competition and not simply
12     licensing one player to replace another, you are going
13     to look at what is the impact on consumers?  Are they
14     truly better off?
15  949                  COMMISSIONER PENNEFATHER:  So it is
16     your contention that this is licensing one player to
17     replace another?  And I think in several points you say
18     that there is no additional contribution to the
19     broadcasting system as a whole as a result of issuing
20     this.
21  950                  Is that right?
22  951                  MS de WILDE:  That is correct.
23  952                  COMMISSIONER PENNEFATHER:  Why?  Why
24     do you say that?
25  953                  MS de WILDE:  Because I am focusing


 1     on the DTH market and specifically ExpressVu.
 2  954                  COMMISSIONER PENNEFATHER:  Even with
 3     the contribution to programming as was discussed this
 4     morning, which is programming funds to potentially have
 5     support for feature films?  That is not a contribution?
 6  955                  MS de WILDE:  If one were to take the
 7     scenario where ExpressVu was working with Viewer's
 8     Choice and Canal Indigo, those same contributions would
 9     flow.
10  956                  In fact, in the case of Canal Indigo,
11     there is a commitment to drive 10 percent of the gross
12     revenues back into the production sector.  So my answer
13     has two parts:  In the case of the French language pay-
14     per-view service, I believe that we in fact represent a
15     larger contribution; and the second part of my answer
16     is that we could drive and generate the same
17     contribution if we were on ExpressVu with 22 channels,
18     having the benefit of Mr. Neuman's marketing
19     brilliance.
20  957                  COMMISSAIRE PENNEFATHER:  J'aimerais
21     en fait aborder un paragraphe dans l'intervention de
22     Canal Indigo, le paragraphe 34, à la page 17, qui est
23     répété en anglais aussi.
24  958                  Pourriez-vous faire un commentaire
25     sur ce paragraphe qui dit qu'une seconde entreprise à


 1     pénétrer le marché serait contraire à la politique, et
 2     caetera, de se concurrencer dans un même marché, et que
 3     VCC/Indigo considère qu'il n'existe aucune
 4     justification de s'éloigner de cette politique,
 5     particulièrement dans le marché précaire de la
 6     télévision à la carte par câble de la langue française.
 7  959                  Me DE WILDE:  Est-ce que vous pouvez
 8     juste nous indiquer le paragraphe?
 9  960                  COMMISSAIRE PENNEFATHER:  Le
10     paragraphe 31, sur la page 17.
11  961                  Me DE WILDE:  Merci.
12  962                  M. BOURDAGES:  Écoutez,
13     Madame Pennefather, j'aimerais dire que, malgré les
14     succès qu'on enregistre, malgré l'adhésion des abonnés
15     de Canal Indigo, Canal Indigo essuie toujours des
16     pertes d'opération après deux ans.
17  963                  Je pense que la rentabilité du
18     secteur de la télévision à la carte de langue française
19     va passer par une plus grande base adressable parce que
20     ce n'est pas au niveau des taux d'achat en ce moment
21     qu'on sous-performe, c'est simplement qu'il n'y a pas
22     suffisamment de foyers qui ont la technologie
23     adressable pour profiter de la programmation.
24  964                  Donc, pour nous, c'est essentiel
25     d'avoir ces ailes-là qui vont nous permettre de prendre


 1     notre envol, c'est-à-dire le secteur SRD.
 2  965                  COMMISSAIRE PENNEFATHER:  Merci.
 3  966                  Pour les deux, Canal Indigo et
 4     Viewer's Choice, j'ai remarqué qu'il y a plusieurs
 5     organisations du secteur de création, secteur de
 6     production de film, et caetera, qui a supporté cette
 7     demande... Canadian Directors' Guild, CHUM, National
 8     Film Board TV or Friends of Canadian Broadcasting.
 9  967                  Seeing this as a plus, do you have
10     some comments on this?
11  968                  MS de WILDE:  Well, I think it is in
12     fact also interesting who is not there as an
13     intervenor.  There are other extremely important
14     players in the production sector:  La PFTQ, the CFTPA,
15     who did not see the advantages of licensing this
16     service.
17  969                  I will be brief.  I don't believe
18     that it does represent choice, and I don't believe that
19     it represents a strengthening of the system.
20  970                  COMMISSIONER PENNEFATHER:  I am
21     coming to the last question, and it comes back to what
22     you said this afternoon, which was to the point and
23     very clear.
24  971                  If I am quoting you right, you said
25     nothing the Commission can do can prevent this.  I


 1     think it was the undue preference and the nefarious
 2     results of this application if it were to be licensed
 3     as proposed.
 4  972                  In terms of licensing this specific
 5     application, there is nothing you can suggest which
 6     would alleviate your concerns?
 7  973                  MS de WILDE:  I think my answer or my
 8     statement this afternoon has to be seen in the
 9     following light.  The Commission has a certain amount
10     of regulatory resources, and you have a huge agenda. 
11     It is not my sense of where the Commission has been
12     headed over the last several years that you want to
13     enter into an extremely detailed regulatory regime
14     where there would be reporting requirements that would
15     be so detailed that you would probably be creating a
16     new boutique within the Commission.
17  974                  The takeaway that I had after the
18     discussion this morning kind of put into graphic relief
19     all the niggles that you have in the pit of your
20     stomach about how you would compete with an integrated
21     player.  They run the gamut from channels to how I am
22     invoiced.
23  975                  I can't envisage a regulator in 1998
24     willing to become involved in every detail of the
25     business.  And yet I can't understand how we could


 1     compete fairly without being on an even footing.  I
 2     think there are too many levers that the BDU has at its
 3     disposal for us to have a level playing field.
 4  976                  COMMISSIONER PENNEFATHER:  In terms
 5     of the pay-per-view licence being discussed today,
 6     though, we discussed some possible remedies this
 7     morning.  None of those you feel have any merit in
 8     terms of alleviating some of your concerns?
 9  977                  MS de WILDE:  Quite honestly, I was
10     listening very carefully this morning, and on key
11     variables that affect our business and our ability to
12     be successful -- things like channels; the number of
13     channels; whether you have a barker; how you appear on
14     the electronic programming guide; how you are marketed,
15     packaged, promoted; who pays for the satellite
16     transponders.
17  978                  The list is long and I don't want to
18     repeat it.
19  979                  The fact is that that is a fair sense
20     of how many levers they have, and I did not get any
21     comfort that they were willing to come to the table and
22     say:  "Yes, we will compete fairly."
23  980                  In fact, I think they were quite
24     honest in articulating what their objective was, which
25     was to maximize the efficiencies and to have the


 1     flexibility to use those levers the way that they want
 2     to.
 3  981                  COMMISSIONER PENNEFATHER:  Thank you
 4     very much.  That helps me understand your perspective
 5     on this.
 6  982                  Thank you, Madam Chair.
 7  983                  MS de WILDE:  Thank you.
 8  984                  THE CHAIRPERSON:  Ms de Wilde, how
 9     many channels do you have on Star Choice now for your
10     pay-per-view service?
11  985                  MR. RAMNARACE:  Four plus one; four
12     channels plus one barker channel.
13  986                  THE CHAIRPERSON:  Is that for both
14     Viewer's Choice and Indigo?
15  987                  MS de WILDE:  In Indigo we have two.
16  988                  THE CHAIRPERSON:  Two for Indigo and
17     five?
18  989                  MR. RAMNARACE:  Five for Viewer's
19     Choice.
20  990                  THE CHAIRPERSON:  Five for Viewer's
21     Choice.
22  991                  How many channels do you have for
23     pay-per-view on cable currently, for example in
24     Toronto?
25  992                  MS de WILDE:  On average, four.


 1  993                  THE CHAIRPERSON:  In Calgary?
 2  994                  MS de WILDE:  I am not in Calgary.
 3  995                  THE CHAIRPERSON:  Do you know what
 4     your friends have?  Or I could ask them.
 5  996                  MS de WILDE:  To be honest, I don't.
 6  997                  THE CHAIRPERSON:  I will ask them. 
 7     In Ottawa?
 8  998                  MR. RAMNARACE:  There are three
 9     channels in Ottawa.
10  999                  THE CHAIRPERSON:  Would you oppose an
11     application by a company for a pay-per-view DTH licence
12     that was no more vertically integrated with the BDU
13     than your own?
14  1000                 MS de WILDE:  Probably not.
15  1001                 THE CHAIRPERSON:  Probably not.
16  1002                 MS de WILDE:  It is hard to give a
17     blank cheque, Madam Wylie -- and I am not trying to
18     dodge.
19  1003                 THE CHAIRPERSON:  I am just trying to
20     find out how we go about getting a dynamically
21     competitive market if we can't have a competitor.
22  1004                 If a vertically integrated competitor
23     comes forward, you say you can't license them.  But
24     what if we met your concerns by some regulatory
25     measures -- and you say it is impossible; you don't


 1     have enough powers to do that.
 2  1005                 Do we ever have but one DTH operating
 3     pay-per-view service?
 4  1006                 You say probably not.  So if it were
 5     25 percent owned by Bell, you would not have a problem.
 6  1007                 If the direction stays on our books
 7     and it says it is supposed to be dynamically
 8     competitive, how do we get that competitiveness?
 9  1008                 For example, at the end of this
10     hearing, would there be competition if we denied the
11     application?  The answer is no, because there would not
12     be another service.
13  1009                 I agree with you that the Commission
14     has the discretion.  But surely it would have to say: 
15     The evils of this are so bad that we can't have another
16     service licensed.
17  1010                 Of course, you say probably not.  If
18     it were 25 percent owned by Bell, you would have no
19     problem.
20  1011                 If not, how do we ever get to
21     competition in the DTH pay-per-view market?
22  1012                 MS de WILDE:  I think there is an
23     interesting example already licensed by the Commission
24     which does provide competition when it comes to sports,
25     and that is the CTV Sports Special Line.  It may well


 1     be possible that there are completely unintegrated
 2     players out there who would look for niches in the pay-
 3     per-view market and seek licences.
 4                                                        1510
 5  1013                 So to reframe my answer, when I say
 6     "probably not", it is that it is tough to give, in a
 7     sense, a blanket answer without understanding what the
 8     application represented.  I would want to understand,
 9     for example, what it would do to program splits, which
10     are the economic driver of pay-per-view.
11  1014                 Forgive me if I am being too
12     cautious.  For me to say "probably not" is a pretty big
13     "yes".
14  1015                 THE CHAIRPERSON:  That you would not
15     oppose?
16  1016                 MS de WILDE:  That's correct.
17  1017                 THE CHAIRPERSON:  Now, we have
18     pursued one solution, which is not readily easy to
19     handle, but to somehow or other find a regulatory means
20     of forcing BSSI to carry both.  Suppose they were given
21     the same number of channels.  They would give you the
22     same number of channels as they use for themselves. 
23     Would you then oppose or support Mr. Frank's
24     application to compete with you on cable for DTH?
25  1018                 Suppose a solution was to say:  "Yes,


 1     you can have your own", but if you have your own you
 2     have to carry Viewer's Choice and you have to give them
 3     the same number of channels, and then Mr. Frank says he
 4     will come and apply to put his service on cable.  Would
 5     you oppose or support that?
 6  1019                 MS de WILDE:  I haven't really
 7     thought that through.  I am not sure.  I think those
 8     are really tough "what ifs" and I would like to suggest
 9     that what we are really wrestling with here is whether
10     there is an upside to the Canadian system and that
11     competition really has to be seen as an objective --
12     one objective.
13  1020                 But I think that we are doing
14     ourselves and the system a huge disservice if we turn
15     it into the be all and end all.
16  1021                 THE CHAIRPERSON:  You said that in 30
17     months you would be toast.  Do you expect Star Choice
18     to continue having a similar penetration of the DTH
19     market as ExpressVu -- as BSSI -- as we go forward in
20     the short term and the medium term?  Or do you expect
21     Star Choice to lose completely to BSSI?
22  1022                 MS de WILDE:  Since Star Choice is
23     one of my favourite customers, I sincerely hope that
24     they are as successful as ExpressVu.
25  1023                 THE CHAIRPERSON:  Yes.  I am asking


 1     whether you feel that there are indices that this would
 2     not be the case.
 3  1024                 Do you expect Star Choice to ever
 4     voluntarily carry BSSI's service in eastern Canada,
 5     rather than your own, if it were licensed?
 6  1025                 MS de WILDE:  My sense of the more --
 7  1026                 THE CHAIRPERSON:  If it had a choice
 8     between anyone but Bell's service, which one do you
 9     think it would carry?  Are there any indices that Star
10     Choice, that has national coverage as well, and that
11     you expect to keep up with BSSI -- would Star Choice
12     likely drop Viewer's Choice and carry BSSI in eastern
13     Canada if it were licensed?
14  1027                 MS de WILDE:  I think the more likely
15     scenario is that they would apply for their own
16     service.
17  1028                 THE CHAIRPERSON:  Yes, but the
18     Commission decides that.
19  1029                 I understand the idea of the
20     precedent.  You can do anything here because you are
21     going to do it there as well.  But we spent a good part
22     of the morning discussing the fact that the Commission
23     is well able to determine what are the circumstances
24     surrounding each circumstance:  whether there is
25     dominance; whether there is not; what the situation


 1     really is.
 2  1030                 So to say that if you do this you
 3     will definitely do that next year only takes you so
 4     far.
 5  1031                 MS de WILDE:  But I would submit
 6     that, dealing with two DTH BDUs, it would be very hard
 7     to find reasons to distinguish between them when it
 8     would come to the question of whether they should have
 9     pay-per-view licences.
10  1032                 THE CHAIRPERSON:  What do you mean? 
11     To distinguish whether you would allow DTH pay-per-view
12     to be owned by a cable company --
13  1033                 MS de WILDE:  I am focusing --
14  1034                 THE CHAIRPERSON:  -- to come forward? 
15     What you are saying is, if you allow this, Star Choice
16     is going to drop me and come forward and get a licence
17     of its own.  Well, there is a long row to hoe for that.
18  1035                 MS de WILDE:  It is the same row
19     that --
20  1036                 This time last year I didn't think
21     ExpressVu would apply for their own licence.
22  1037                 THE CHAIRPERSON:  Well, the
23     Commission had already licensed two integrated DTH pay-
24     per-view services, so there were better indices that
25     this had been done before than there are indices that,


 1     if we say yes to this, integration is in everywhere, on
 2     all counts, which is what you are suggesting.
 3  1038                 When you say you are toast, I look at
 4     this and I say, "As the world exists now in eastern
 5     Canada, would Star Choice carry BSSI or Viewer's Choice
 6     on its BDU service?", which is your assumption.  And
 7     then you would also --
 8  1039                 So you would keep Star Choice, which
 9     may be 50 or 40 per cent of the DTH market.  You would
10     also be in the cable market and, hopefully, sometime
11     with digital.  To conclude from that that you will be
12     toast in 30 months is a stretch.
13  1040                 MS de WILDE:  My "toast" scenario is
14     with regard to ExpressVu.  If I misspoke myself, excuse
15     me.
16  1041                 THE CHAIRPERSON:  Okay.  Let's
17     discuss that.  What would, in fact, be the effect on
18     Viewer's Choice if we were to license BSSI?
19  1042                 I find it very difficult to believe
20     that tomorrow Star Choice, however owned, would carry
21     BSSI instead of another service.
22  1043                 It is not impossible, but --
23  1044                 MS de WILDE:  Madam Wylie, it is not
24     my contention that Star Choice would carry a Bell
25     service --


 1  1045                 THE CHAIRPERSON:  No, no, but so you
 2     would keep half of the country on DTH and all of the
 3     country on cable.
 4  1046                 So what is the undue harm?  I would
 5     like you to expand further on the level of undue harm
 6     that is such as to say no to a competitive application
 7     just because it is integrated.
 8  1047                 MS de WILDE:  If we start to move
 9     down the road to integrated pay-per-view undertakings,
10     I believe that is the first step toward a fundamental
11     restructuring of the way in which pay-per-view is
12     offered.
13  1048                 THE CHAIRPERSON:  We go back to your
14     assumption that that approval, necessarily, takes us
15     down the path of saying "We have lost all power to
16     address vertical integration, no matter what the
17     circumstance".
18  1049                 MS de WILDE:  In the case of trying
19     to create a competitive DTH market at the level of the
20     distribution undertakings, my appreciation of that
21     market is that they would be looking to equalize the
22     advantages that they would each have, and that it would
23     be difficult to constrain one and say "No, you can't
24     have a pay-per-view service of your own" if you had
25     decided to give their competitor that powerful tool.


 1  1050                 THE CHAIRPERSON:  Do you mean a DTH
 2     pay-per-view?
 3  1051                 MS de WILDE:  Yes.
 4  1052                 MR. ZOLF:  Madam Wylie, if I may add
 5     to that, in terms of the Commission's regulatory
 6     framework, obviously you would still have your
 7     discretion to examine every subsequent application that
 8     comes before you.  Nonetheless, it may be an unprovable
 9     assumption that the market would somehow crystallize
10     upon licensing BSSI.
11  1053                 In fact, right now the BDU market is
12     fairly competitive and the Commission has recently, for
13     example with respect to 4+1 rulings, acknowledged that
14     the level of competition and the need to be treated
15     equally amongst BDUs warrants an equitable playing
16     field.
17  1054                 So, I think, as we submitted in our
18     oral presentation today, it would be difficult for the
19     Commission to make that distinction.
20  1055                 THE CHAIRPERSON:  In percentage, what
21     is the current percentage of penetration of DTH in
22     English Canada?
23  1056                 MS de WILDE:  I don't think --
24  1057                 THE CHAIRPERSON:  The current
25     penetration when you compare it to cable or to


 1     potential homes.
 2  1058                 MS de WILDE:  The penetration of pay
 3     television?
 4  1059                 THE CHAIRPERSON:  No, no, DTH.
 5  1060                 MS de WILDE:  I don't have access to
 6     those numbers.
 7  1061                 THE CHAIRPERSON:  No, but when you do
 8     the calculation of the market right now, when is it
 9     that it is going to be other than a very non-dominant
10     purveyor of video?
11  1062                 MR. RAMNARACE:  Chairman Wylie, if we
12     were to look at the numbers that BSSI has submitted in
13     their projections, as we have indicated in our oral
14     presentation, their projections by year seven show a
15     DTH market size of 1.5 million subscribers.
16  1063                 THE CHAIRPERSON:  Of what, eight
17     million in English Canada?
18  1064                 MR. RAMNARACE:  Of eight million
19     cable households.
20  1065                 Now, in all cases BSSI has
21     successfully drawn the comparison as between DTH
22     subscribers and basic cable, while in front of the
23     Commission requesting a pay-per-view licence.  So to
24     run the comparison what we need to do is to look at the
25     current cable pay-per-view base, which is in fact the


 1     addressable base.
 2  1066                 The addressable base, as it stands
 3     today in all of Canada, is approximately between
 4     700,000 and 800,000.  Even if we were to assume digital
 5     roll-out at a 15 per cent level, as is projected, that
 6     takes the market size to 1.1 million.
 7  1067                 So, in aggregate, the non-dominant
 8     player, as has been indicated here, by year seven, in
 9     fact, exceeds the total digital projected market by
10     over 40 per cent.
11  1068                 THE CHAIRPERSON:  You are looking, of
12     course, on the basis of addressability.
13  1069                 MR. RAMNARACE:  But pay-per-view is
14     offered only to addressable subscribers.
15  1070                 THE CHAIRPERSON:  No, but on the
16     basis of suddenly having digital and more channels --
17  1071                 MR. RAMNARACE:  Which is probably
18     more far-fetched than we can see.
19  1072                 We have been looking at projections
20     that talk about digital roll-out which was supposed to
21     start back in 1996.
22  1073                 THE CHAIRPERSON:  Would that not be a
23     good way of getting your digital on cable, if you put a
24     bit of pressure into the system?
25  1074                 MS de WILDE:  But I think that the


 1     way Vash has set out those numbers shows that, even
 2     with an aggressive digital roll-out over the course of
 3     the next few years, by year seven of the ExpressVu
 4     projections they would be ahead in terms of the number
 5     of addressable households -- ahead of the cable
 6     sector -- by about 400,000.
 7  1075                 THE CHAIRPERSON:  Except that there
 8     are a lot of other decisions to be made by the consumer
 9     before that.  You know, one doesn't make one's decision
10     on cable versus DTH just based on pay-per-view.  So it
11     is not necessarily in lock step because cable is
12     suddenly -- whether or not cable is addressable, people
13     don't make their decision completely on the basis of
14     whether it is addressable, whether they disconnect
15     their cable and take DTH at the moment.  There is a
16     whole lot more in that decision than just that aspect.
17  1076                 Now, the consumer -- I am puzzled by
18     the fact that you say there would be no choice for the
19     consumer.  I understand that once you have bought your
20     hardware you are stuck with it, unless you buy a second
21     set of hardware.  But, initially, could it not be said
22     that if you have a different DTH pay-per-view service
23     on one than on the other you have an initial choice,
24     which is better than yesterday, if you were to license
25     a competitor?


 1  1077                 In other words, when the consumer --
 2     the problem now is lack of differentiation.  The
 3     consumer has no choice after he has made his initial
 4     choice.  But his initial choice is going to be broader
 5     if there is a different purveyor of pay-per-view on DTH
 6     than on cable.  That, initially, is going to be an
 7     increased choice.
 8  1078                 MS de WILDE:  What we are suggesting
 9     is that, in fact, there will be the same number of
10     choices.
11  1079                 As to the diversity, the sort of
12     depth of the choice, what we have argued is that
13     diversity is really a function of how many channels the
14     BDU decides to dedicate to the pay-per-view service. 
15     There is not new diversity simply by virtue of
16     licensing A over B.
17  1080                 The core offering of the movies and
18     big ticket events will be constant and the capacity to
19     round out the service is driven simply by the number of
20     channels that we would have access to.
21  1081                 We can be as diverse as the proposed
22     applicant.
23  1082                 THE CHAIRPERSON:  You have made the
24     argument that there would be nothing incremental to the
25     broadcasting system as a whole as a result of BSSI, and


 1     concurrently you have made the argument that there are
 2     going to be wonderful efficiencies and savings because
 3     of integration.
 4  1083                 To make your argument that they are
 5     exaggerating the benefits that will flow from
 6     integration you have gone through an exercise of
 7     showing just how high those benefits will be.
 8                                                        1525
 9  1084                 I ask myself if it's true that it is
10     going to be more cost efficient, could it not be true
11     that there will be an advantage to the system because
12     there will be more takeup, there will be less video
13     rentals, there will be perhaps less DBS, et cetera. 
14     The fact that the integrated company will achieve cost
15     efficiencies may make it more efficient in selling more
16     pay-per-view; therefore, more Canadian films are shown
17     and more money flows to the programming funds and so
18     on.
19  1085                 If I recall your written intervention
20     and again today, you say that there's not going to be
21     anything added, but that is not evident.  If it's such
22     a good deal, could it not then create better prices,
23     more consumption of the product; therefore, more money
24     flowing to the fund?  I don't understand the argument
25     that they're going to save money and have a great deal


 1     out of this from tax purposes reasons, et cetera, and
 2     there will be nothing incremental to the system.  You
 3     may not have said tax reasons, but the flow of money
 4     between the two and the efficiencies and so on are
 5     raised.  Those efficiencies could lead to incremental
 6     value to the broadcasting system by allowing more
 7     efficient marketing, more takeup of DTH pay-per-view.
 8  1086                 I don't want to put words into your
 9     mouth, but you say in writing and today that what's in
10     it for anyone, there's not going to be choice, but more
11     choice for the consumer, and there's not going to be
12     any incremental benefit to the broadcasting system.
13  1087                 Yet, it appears that because it's
14     integrated it's going to do well financially and be
15     able to achieve efficiencies, which could be passed on
16     in various indirect ways to the consumer and to the
17     fund by increasing consumption.
18  1088                 MS de WILDE:  I can only go on the
19     business plan that they filed.  I can understand the
20     price points that they're suggesting to consumers are
21     the same in the case today.  So, the individual
22     consumer isn't going to see a difference.
23  1089                 The point, Madam Wylie, that we
24     really tried to make when we did that rather lengthy
25     financial analysis was to simply try to give the


 1     Commission comfort that in fact BSSI doesn't need this
 2     licence in order to be viable, and that they can have a
 3     viable business and a viable pay-per-view business
 4     dealing with a non-affiliated player.  That's the core
 5     conclusion of that analysis.
 6  1090                 Whether there will be efficiencies
 7     that will be passed on to the system, I don't know. 
 8     All I can say is that the contribution will be taken at
 9     the level of the gross revenues.  If we're in there
10     selling our product, you can be confident that that's
11     where the contribution will flow from.  If we are
12     simply being replaced by another player, I don't get
13     it.
14  1091                 THE CHAIRPERSON:  What if it's a
15     player that is more efficient by virtue of integration? 
16     That can end up having benefits flowing from it, can't
17     it?
18  1092                 MS de WILDE:  Then I would simply say
19     ExpressVu has been extremely efficient in the context
20     of selling pay television.  They're arguably six times
21     more effective, to quote Michael Neuman, than the cable
22     guys are today.
23  1093                 I would be pretty happy if we could
24     be that successful with ExpressVu in the pay-per-view
25     market.  Maybe the missing ingredient is not that he


 1     needs an integrated service.  He just needs to get on
 2     with getting out there and marketing pay-per-view.
 3  1094                 THE CHAIRPERSON:  Your pay-per-view.
 4  1095                 MS de WILDE:  Of course, yes.
 5  1096                 THE CHAIRPERSON:  Counsel.
 6  1097                 MR. BATSTONE:  Just one quick
 7     question.  In your intervention you referred to
 8     coordination between WIC Premium Television and VCC.
 9  1098                 I was just wondering if you could
10     clarify for me:  Does that coordination extend to
11     acquisition and scheduling of programming?
12  1099                 MS de WILDE:  No.
13  1100                 MR. BATSTONE:  What exactly does it
14     relate to, then?
15  1101                 MS de WILDE:  It makes sure that they
16     end up on the transponders in a way that can be
17     received across the country in a way that is
18     efficiently using satellite capacity.
19  1102                 MR. BATSTONE:  That's fine.  Thanks.
20  1103                 THE CHAIRPERSON:  Thank you very
21     much.
22  1104                 Madam Secretary.
23  1105                 MS SANTERRE:  The next intervention
24     will be by 3216195 Canada Inc.
25  1106                 THE CHAIRPERSON:  Good afternoon, Ms


 1     Steeves.
 2  1107                 MS STEEVES:  Good afternoon.
 3  1108                 THE CHAIRPERSON:  Go ahead when
 4     you're ready.
 6  1109                 MS STEEVES:  Madam Chair, members of
 7     the Commission, staff and legal counsel, my name is
 8     Suzanne Steeves, and I am Senior Vice-President of the
 9     CTV Sports Group.  Seated beside me are Nikki Poulos,
10     Vice-President and Controller, CTV Sports Group, and
11     Robert Malcolmson, a partner in the Toronto law firm of
12     Goodman, Phillips & Vineberg.
13  1110                 CTV is strongly opposed to the Bell
14     ExpressVu application for a national DTH pay-per-view
15     licence.  Let me explain why.
16  1111                 This application gives rise to the
17     very same issues regarding distributor ownership of
18     programming that the Commission has recently dealt with
19     in the cable sector.  Indeed, many of the same factors
20     that prompted the Commission's recent denial of cable
21     ownership positions in specialty services apply to the
22     Bell ExpressVu application.  Bell ExpressVu operates in
23     an environment of scarce channel capacity, has
24     significant market power, and is a gatekeeper with
25     respect to programming services licensed for DTH


 1     distribution.
 2  1112                 Unless Bell ExpressVu is prepared to
 3     fully address the concerns that flow from its position
 4     in the DTH market, its application should be denied.
 5  1113                 When CTV Sports Specials was licensed
 6     as a DTH pay-per-view service in 1995, it was
 7     anticipated that there would be numerous DTH
 8     undertakings.  For CTV, this meant that there would be
 9     multiple options for carriage.  Unfortunately, these
10     distribution options have not materialized.  Despite
11     the licensing of five different DTH BDUs between 1995
12     and 1997, only two are in operation today -- Bell
13     ExpressVU and Star Choice.
14  1114                 Despite its assertions to the
15     contrary, Bell ExpressVu is clearly a dominant player
16     in the DTH sector today.  Bell ExpressVu controls
17     approximately 50 per cent of the total DTH subscriber
18     universe.  This market power is particularly potent
19     given the relatively small size of the DTH market, with
20     a total DTH subscriber base of approximately 250,000.
21  1115                 CTV Sports Specials is not licensed
22     for analogue cable carriage.  Consequently, CTV's
23     pay-per-view business is completely dependent on the
24     DTH and digital cable subscriber universe.  As the
25     Commission knows, digital cable is just now being


 1     rolled out and only by some cable operators. 
 2     Consequently, access to ExpressVu's DTH subscriber base
 3     makes or breaks CTV's Sports Specials.  This
 4     marketplace reality confers a substantial level of
 5     control and influence on Bell ExpressVu.
 6  1116                 If the applicant is permitted to
 7     offer its own integrated DTH pay-per-view service, it
 8     will have no incentive to distribute arm's length
 9     pay-per-view services.  To the contrary, it will be in
10     Bell ExpressVu's competitive self-interest to exclude
11     competitive arm's length programming undertakings from
12     accessing its DTH subscriber base.  As the DTH
13     gatekeeper of 50 per cent of the market, Bell ExpressVu
14     will be unique positioned to control the customer base
15     of its pay-per-view competitors.  Moreover, with
16     guaranteed distribution on Bell ExpressVu's DTH
17     service, its pay-per-view undertaking will have the
18     ability to confer on itself unwarranted competitive
19     advantages, particularly in the acquisition of sports
20     pay-per-view programming.
21  1117                 In our view, these competitive
22     advantages will undermine the creation of a
23     "dynamically competitive" DTH pay-per-view market
24     mandated by the government in its 1995 direction to the
25     Commission.  Dynamic competition will not develop if


 1     Bell ExpressVu has the ability to deny its competitors
 2     access to 50 per cent of the consumer base.
 3  1118                 Recent events in the marketplace
 4     substantiate CTV's concerns regarding the Bell
 5     ExpressVu strategy.  On two recent occasions, CTV has
 6     been involved in discussions with Bell ExpressVu
 7     regarding carriage of pay-per-view programming.  In the
 8     first instance, CTV sought a pay-per-view carriage
 9     arrangement with Bell ExpressVu and Star Choice for
10     English premier league soccer games.  Bell ExpressVu's
11     response was that it had no desire to carry the CTV
12     pay-per-view programming, as it was developing its own
13     pay-per-view initiative.  By way of contrast, CTV
14     reached immediate agreement with Star Choice.
15  1119                 Similarly, CTV and Bell ExpressVu had
16     occasion to consider a potential pay-per-view joint
17     venture with ExpressVu for a major new package of
18     sports pay-per-view -- NHL hockey.  Bell ExpressVu's
19     position was that it was not interested in any joint
20     venture and would pursue the initiative on its own in
21     its dual capacity as distributor and content provider.
22  1120                 Bell ExpressVu's strategy is clear
23     and unequivocal.  Upon licensing, it will create a
24     fully integrated DTH BDU pay-per-view service that will
25     aggressively pursue sports pay-per-view properties for


 1     its own account, with no corresponding obligation to
 2     distribute arm's length DTH pay-per-view services.  In
 3     doing so, Bell ExpressVu will shut its competitors out
 4     of 50 per cent of the market and make it difficult, if
 5     not impossible, for them to mount any kind of
 6     competitive pay-per-view offering.
 7  1121                 There are solutions to the problem. 
 8     First, the Commission could deny the Bell ExpressVu
 9     application.  Clearly much has changed since DTH
10     services were first licensed in 1995.  At that time, it
11     was anticipated that there would be multiple DTH BDUs,
12     which meant multiple distribution options.  Neither has
13     materialized to date.  Instead, we operate in an
14     environment where Bell ExpressVu controls half of the
15     total market that CTV is licensed to serve.  Bell
16     ExpressVu's desire to become an integrated
17     distributor/content provider must be evaluated with
18     these new marketplace realities in mind.
19  1122                 We are not asking the Commission to
20     deny the application strictly on the basis that Bell
21     ExpressVu will be an integrated undertaking.  Instead,
22     we are urging the Commission to recognize that in
23     today's DTH market, Bell ExpressVu is a gatekeeper in
24     its own right.  In our submission, the application
25     should not be approved unless conditions of licence


 1     limiting Bell ExpressVu's gatekeeper role are imposed.
 2  1123                 For example, conditions of licence
 3     requiring Bell ExpressVu to distribute arm's length
 4     services could be imposed.  This will limit Bell
 5     ExpressVu's market power by ensuring that arm's length
 6     competitors have access to Bell ExpressVu's subscriber
 7     base, thereby allowing third parties to pursue a viable
 8     business strategy.  A condition of licence to this
 9     effect accompanied CTV's written intervention.
10  1124                 Bell ExpressVu's refusal to make any
11     commitments to carry CTV's pay-per-view service stands
12     in stark contrast to its commitment at the time that it
13     was seeking a DTH BDU licence.  At that time, in
14     response to concerns from Viewer's Choice and Allarcom
15     that they would not be carried by Power Direct TV's
16     integrated DTH pay-per-view service, ExpressVu
17     committed to carry the Viewer's Choice and Allarcom
18     pay-per-view services.
19  1125                 It appears Bell ExpressVu is no
20     longer prepared to abide by this commitment.  While
21     Bell ExpressVu is seeking a general interest
22     pay-per-view licence, it is clear from both the
23     application and its conduct in the marketplace that
24     sports events properties will be significant components
25     of its DTH pay-per-view service.


 1                                                        1540
 2  1126                 As described in our written
 3     intervention, Bell ExpressVu's financial projections,
 4     while vague, place a heavy emphasis on sports with
 5     approximately 30 per cent of total revenues appearing
 6     to come from this programming category.  With this
 7     focus on sports, Bell ExpressVu will have little, if
 8     any, incentive to carry an arm's length service while
 9     its own sports pay-per-view needs can be met through
10     its own integrated operation.
11  1127                 Again, there is a solution to this
12     problem.  The solution is to impose conditions of
13     licence which limit the amount of sports event
14     programming that Bell ExpressVu is permitted to
15     broadcast.  We believe such restrictions are fair and
16     reasonable as the applicant is seeking a general
17     interest pay-per-view licence, not a sports licence. 
18     Accordingly, CTV has suggested a condition of licence
19     to this effect as part of its written intervention.
20  1128                 We are asking the Commission to
21     recognize that, as a fully integrated
22     distributor/content provider, Bell ExpressVu will
23     become the new gatekeeper.  Its subscribers will be
24     captive to the DTH pay-per-view programming that Bell
25     ExpressVu sees fit to offer, and its competitors will


 1     be shut out of 50 per cent of the market.  While this
 2     may be in the corporate best interest of Bell ExpressVu
 3     and the BCE Group, it is not in the interest of the
 4     Canadian broadcasting system; it will not achieve the
 5     dynamically competitive DTH pay-per-view market
 6     mandated by government policy and it will not result in
 7     the distribution of the widest possible array of high
 8     quality pay-per-view programming to DTH subscribers. 
 9     Absent conditions of licence that limit the gatekeeper
10     role, this application should be denied.
11  1129                 We appreciate this opportunity to
12     appear before you and we would be pleased to answer any
13     questions that you have.
14  1130                 THE CHAIRPERSON:  Thank you,
15     Ms Steeves.
16  1131                 Commissioner Cardozo.
17  1132                 COMMISSIONER CARDOZO:  Thank you,
18     Madam Chair.
19  1133                 Good afternoon.  Let me just go over
20     some of the issues that you have talked about, which
21     are at the core of today's discussion and which were
22     also addressed by BSSI.  If you don't mind, I will put
23     to you a paragraph that was in the replies by BSSI.  It
24     is a general one and I just want your response to that,
25     but it is sort of the crux of what BSSI feels, and I


 1     put that to you to get your intervention, not to say
 2     that I agree with this or the opposing view.
 3  1134                 In paragraph 8 in the Executive
 4     Summary of the reply it says:
 5                            "When all is said and done, none
 6                            of the opposing intervenors has
 7                            dealt with the essential
 8                            question:  how can a
 9                            competitively dynamic
10                            marketplace for English- and
11                            French-language DTH PPV
12                            undertakings evolve within an
13                            industry structure based on
14                            regional monopolies for the
15                            former and a single national
16                            monopoly for the latter?"
17  1135                 And they are not talking here, from
18     what I can tell, about your service, but what are your
19     views on the issue of the competitively dynamic
20     marketplace?  Do you think they have a case that they
21     ought to be able to enter the market?
22  1136                 MS STEEVES:  I don't believe that
23     dynamic competition could possibly mean that customers
24     are captive to their distributor.  Instead, it has to
25     mean that they have choice, and I think that, based on


 1     our own recent experience in discussions with them,
 2     that will not be the case.
 3  1137                 COMMISSIONER CARDOZO:  Is there an
 4     argument that if a subscriber wants your service,
 5     which, according to BSSI's plan will be discontinued in
 6     30 months, they would simply go to their competitor?
 7  1138                 MS STEEVES:  We do not have an
 8     arrangement with BSSI.  We do not have a contract with
 9     BSSI.
10  1139                 COMMISSIONER CARDOZO:  Oh, sorry. 
11     Okay.  So what is your current status of --
12  1140                 MS STEEVES:  Our pay-per-view service
13     is more of an up-and-down, per-event, per-package type
14     service.  It is not a continuous service, a general
15     interest service.  So what we do is we find packages,
16     we work with rightsholders then to take those packages
17     to either DTH or digital cable, the latter being
18     somewhat lacking in terms of availability.  So, in our
19     case, we would take the packages to them and discuss
20     them with them.
21  1141                 We have done that on two occasions
22     with no success.
23  1142                 COMMISSIONER CARDOZO:  And you are
24     concerned that, if they have their own sort of multi-
25     service, they will then not need your service.


 1  1143                 MS STEEVES:  I think that's quite
 2     apparent when the answer is, both times we have
 3     discussed it, that they would wait to see if they got
 4     their own licence and then they would do the package
 5     themselves.
 6  1144                 MR. MALCOLMSON:  If I could just add
 7     to that point, Commissioner Cardozo, this particular
 8     licence, the CTV licence, is somewhat unique compared
 9     to the other pay-per-view licensees that are
10     intervening here today as well.  Unlike the other pay-
11     per-view licensees, the CTV licence is not licensed for
12     analog cable carriage, it has a DTH licence and a
13     digital cable licence.
14  1145                 When we are talking about CTV's
15     access to a subscriber universe, we are strictly
16     talking about the DTH subscriber universe and the
17     digital cable universe that is slowly rolling out.  So
18     there is a difference in terms of order of magnitude
19     when we are talking about the impact of the denial of
20     access vis-à-vis CTV sports specials as compared to
21     some of the other pay-per-view interventions that you
22     have heard.
23  1146                 COMMISSIONER CARDOZO:  So, when BSSI
24     doesn't carry you, you are saying that's pretty well 50
25     per cent of your market whereas with the others it is a


 1     much smaller proportion.
 2  1147                 MS STEEVES:  And it is 50 per cent of
 3     a very small market.  So it is one thing to have 50 per
 4     cent of the analog cable market lost to you, but it is
 5     a completely different matter to lose 50 per cent of
 6     250,000 subscribers.
 7  1148                 COMMISSIONER CARDOZO:  In terms of
 8     undue preference, what you have suggested is that --
 9     well, your first preference is that we not license, but
10     if we were to license, that we place two conditions of
11     licence:  one is that they limit their sports coverage
12     to 10 per cent and the other is that you would have a
13     "must carry" status.
14  1149                 As I understand it, when you were
15     licensed, you didn't ask for the "must carry" status at
16     that point.
17  1150                 MS STEEVES:  That is correct, but
18     that was in I believe 1995, at which time it was
19     anticipated there would be multiple operations, DTH BDU
20     undertakings in existence, and the forecast at that
21     point for roll-out of DTH was much more aggressive than
22     where we are today because those operations started
23     later than was originally anticipated.  So we were, I
24     think, in a completely different environment or a
25     projected completely different environment at that


 1     time.
 2  1151                 COMMISSIONER CARDOZO:  I see what you
 3     are saying, but surely, a business plan ought to have
 4     different scenarios, and while nobody can project the
 5     future, you could have projected that one scenario
 6     would have been two DTH BDUs as opposed to five.
 7  1152                 MS STEEVES:  I should add that at
 8     those particular hearings concerns were also raised by
 9     the CTV Group at that time about a fully-integrated
10     situation for precisely these reasons.  So, on one
11     hand, while they did not seek mandatory carriage, they
12     did raise serious concerns at that time about a fully-
13     integrated situation precisely for the reasons that we
14     are dealing with today.
15  1153                 COMMISSIONER CARDOZO:  With regard to
16     the 10 per cent that you are suggesting, why 10 per
17     cent?  What is the reasoning for coming to a figure of
18     10 per cent and not 25 per cent or some other figure?
19  1154                 MS STEEVES:  I think what we did was
20     we looked at, realistically, how many options currently
21     exist in the marketplace for this type of programming. 
22     Clearly, there are a lot of sports available on over-
23     the-air and on licensed specialty services as well.  So
24     we looked at the number of options and we felt that
25     that type of a limit would leave room, then, for two


 1     players, or possibly three or more, because in fact our
 2     other competitors, Viewer's Choice and Allarcom, both
 3     also carry sports.  So we felt that that would leave
 4     some room in the marketplace and it would not create a
 5     situation where they then would be in complete control
 6     of the marketplace.
 7  1155                 MR. MALCOLMSON:  If I could just add
 8     to that, when we looked at this we didn't want to come
 9     forward and appear to you as if we were attempting to
10     create a sports monopoly by seeking to restrict our
11     competitor.  What we are saying is ExpressVu has
12     applied for a general interest licence, that
13     contemplates some sports, they have not been specific
14     or very specific in their application in terms of
15     disclosing their programming plans, but we do know
16     that, based on our calculations, they may generate
17     about 30 per cent of their revenues from sports.
18  1156                 We believe that if they can skew
19     their programming focus towards sports and don't have
20     any obligation to carry CTV, then we will quickly find
21     ourselves in a position where we are very limited in
22     terms of our subscriber universe to the other DTH
23     player and the digital cable universe.
24  1157                 COMMISSIONER CARDOZO:  With regard to
25     the other DTH player, isn't one of the arguments that,


 1     in order to have competition between the two BDUs, a
 2     differentiation of product is useful?  If they are both
 3     presenting the same options to consumers and their
 4     prices are roughly the same, what makes a consumer pick
 5     one over the other?  So, if one did evolve into a
 6     situation where BSSI had its pay-per-view and didn't
 7     have all the others, that would give the consumer a
 8     choice between one or the other.
 9  1158                 MS STEEVES:  I guess there are a
10     couple of points.  The first would be economic
11     viability of a certain product, and as you look at your
12     options with a product, with a sports package, there
13     are certain fixed costs that are applicable whether you
14     are distributing to one or two.  I mean, there are just
15     certain fixed costs.  So the issue for us will become
16     the economic viability of a package if we only have
17     access to one of the companies.
18  1159                 COMMISSIONER CARDOZO:  The economic
19     viability of your service.
20  1160                 MS STEEVES:  That's correct.
21  1161                 I guess, when I look at it, the real
22     benefit our particular licence plays in the Canadian
23     marketplace is that we are not licensed for analog
24     carriage, and the biggest competition right now, I
25     would assume, will be between DTH and cable.  There is


 1     a certain point where you are no longer just attracting
 2     consumers from the rural and remote areas of the
 3     country that previously haven't had access to cable,
 4     you are now into cannibalizing in other parts.  So
 5     that's actually one of the benefits of our licence, is
 6     that many of the offerings we will make will be unique
 7     to DTH.
 8  1162                 COMMISSIONER CARDOZO:  You mentioned
 9     earlier you don't want to be a monopoly in the pay-per-
10     view market, but if we were to limit them to 10 per
11     cent of sports coverage, wouldn't that make you almost
12     a monopoly minus 10 per cent?
13  1163                 MS STEEVES:  I don't believe it
14     would, particularly when you have to also bear in mind
15     that both Viewer's Choice and Allarcom have access, and
16     I don't believe there are any restrictions on their
17     licences.
18  1164                 I think basically the same concerns
19     that were raised by CTV in 1995 during the hearings
20     have become validated in the recent experience in the
21     marketplace.
22  1165                 COMMISSIONER CARDOZO:  So what is the
23     reason you wouldn't want us to put that same 10 per
24     cent on VCC?
25  1166                 MS STEEVES:  Because they are not an


 1     integrated -- they are not going to keep us from
 2     access.  We are on a level playing field at that point. 
 3     When we are going and offering our product and the
 4     promotion, marketing and packaging and delivery and all
 5     of the things that we bring to the table, we are on a
 6     level playing field.  We are not on a level playing
 7     field with someone who has access to gate.  That's just
 8     completely different.
 9  1167                 COMMISSIONER CARDOZO:  Essentially,
10     what you are asking us today, with these two suggested
11     conditions of licence, or to deny BSSI, is you are
12     asking the Commission to protect your interests for a
13     period of time, or indefinitely, but I am wondering, if
14     that's a period of time issue, if cable were to roll
15     out in some significant fashion say in five years,
16     would your concerns change if digital was to roll out,
17     because at that point you would have much more digital
18     and then your DTH would be a smaller part of your
19     operation.  Is that right?
20  1168                 MS STEEVES:  That's correct, and I
21     would suggest that if in fact we could predict that
22     with any certainty we would not be as concerned as we
23     currently are.
24  1169                 COMMISSIONER CARDOZO:  It is a
25     question we wonder about too.


 1  1170                 What is the capacity you need for
 2     your services?  How many channels?
 3  1171                 MS STEEVES:  Our services vary from
 4     package to package.  For instance, with something like
 5     an NHL out-of-market package, you could be talking
 6     about 10 channels within a very finite period of time
 7     on certain days of the week.  With things like our
 8     English Premier League soccer, we are talking about one
 9     channel on Sunday mornings dedicated for less than
10     three hours.
11  1172                 So it really is on a package-by-
12     package basis.  Again, we don't operate like a
13     continuous service of programming.
14  1173                 COMMISSIONER CARDOZO:  And, on
15     average, how many hours a week are you broadcasting?
16                                                        1555
17  1174                 MS STEEVES:  Well, we just, just
18     literally launched a week ago.  So we launched with our
19     English Premier League soccer package which Bell
20     ExpressVu refused to carry, and that is just a couple
21     of hours a week.  And we are in current discussions
22     with a number of other rights holders.
23  1175                 COMMISSIONER CARDOSO:  How many hours
24     do you anticipate your needs to be?
25  1176                 MS STEEVES:  It will be in the


 1     thousands and thousands of hours.  I mean, on an annual
 2     basis.
 3  1177                 COMMISSIONER CARDOSO:  Okay.  Per
 4     week?
 5  1178                 MS STEEVES:  Per week?  What are our
 6     latest numbers?
 7  1179                 COMMISSIONER CARDOSO:  And are we
 8     talking six to ten games a week?
 9  1180                 MS STEEVES:  There will be overlaps,
10     but, I mean, again, it is by package, so it will vary
11     and it will depend on what we --
12  1181                 COMMISSIONER CARDOSO:  And the number
13     of packages will be three to ten, in that range?
14  1182                 MS STEEVES:  Yes, for the most part,
15     on an average.
16  1183                 COMMISSIONER CARDOSO:  Do you have
17     any suggestions, if we were, one of the questions --
18     one of the issues this whole series of questions raises
19     is whether we should have access or carriage rules for
20     pay-per-view service.  Do you have any ideas for us in
21     that regard?
22  1184                 MS STEEVES:  I think that there is no
23     question that the minute you have a situation where
24     someone has control over access and also has a
25     competitive service that the issues start to raise


 1     their heads and as we have seen in this particular
 2     instance and as we have seen in others.
 3  1185                 So I think that, you know, I do not
 4     think -- I think for most of the pay-per-view
 5     operations, competing has not been an issue when,
 6     again, it is a level playing field and you are not
 7     dealing with someone who has also the distribution
 8     access under their control.  So I think it has to be
 9     addressed.
10  1186                 COMMISSIONER CARDOSO:  Okay.  Lastly,
11     let me just close off by getting a clear understanding. 
12     Are you looking or have you had discussions with BCC --
13     BSSI about having an agreement of the kind that BCC and
14     WPT and --
15  1187                 MS STEEVES:  We have had two
16     discussions.  One about a package of soccer games that
17     we launched with Star Choice about a week ago.  That
18     discussion was met with a flat out "no" because they
19     were applying for their own licence.  And a subsequent
20     conversation between the NHL, Bell ExpressVu and
21     ourselves to talk about the NHL's package called Centre
22     Ice.
23  1188                 There was a suggestion that I made in
24     that meeting that we should be exploring a three-way
25     partnership.  I mean, what CTV brings to a partnership


 1     like that is formidable in terms of promotion and
 2     cross-promotion opportunities, which would be of great
 3     benefit, I would think, to Bell ExpressVu.  But it was
 4     made very clear in that meeting that there was no
 5     interest in that discussion, that they were applying
 6     for their own programming licence and would seek the
 7     product on their own at the time they got the licence. 
 8     Now, if they did not get the licence, of course, they
 9     would be more than happy to take the product as a BDU,
10     I assume.
11  1189                 COMMISSIONER CARDOSO:  And what is
12     the connection or relation between what you carry and
13     what you do not between the pay-per-view service and
14     SportsNet.
15  1190                 MS STEEVES:  And SportsNet?
16  1191                 COMMISSIONER CARDOSO:  Yes.
17  1192                 MS STEEVES:  There is not necessarily
18     any connection.  I mean, because they are different
19     products and different rights.  You know, for the most
20     part, because we do not have a situation where we
21     negotiate a deal with the BDU that is just a guaranteed
22     carriage, it is done on a package-by-package basis. 
23     That is really the way our service works.  So we
24     basically have the discussions with the distributor and
25     the rights holder and then, you know, see what can be


 1     worked out.
 2  1193                 COMMISSIONER CARDOSO:  So one is not
 3     the overflow container for the other?
 4  1194                 MS STEEVES:  Not at all.
 5  1195                 COMMISSIONER CARDOSO:  That covers my
 6     questions, thank you.
 7  1196                 THE CHAIRPERSON:  Counsel?
 8  1197                 MR. BATSTONE:  I just have a couple
 9     of questions in relation to the conditions which you
10     have proposed in your written intervention and
11     specifically the second condition with respect to
12     mandatory carriage.  I am just trying to understand.
13     You have discussed this to some extent with
14     Commissioner Cardozo, the amount of capacity, if you
15     will, that would be required on differing occasions
16     would differ quite a bit, I gather, depending on the
17     event that is being shown.
18  1198                 In the condition that you have
19     proposed, it basically boils down to the BSSI
20     pay-per-view would not be able to put its signal up
21     unless it was also carrying the CTV sports specials
22     signal; is that a fair characterization?
23  1199                 MR. MALCOLMSON:  That is correct.
24  1200                 MR. BATSTONE:  So how would it work
25     from an operative standpoint if -- I mean, I can see


 1     where this might work if you are talking about a
 2     continuous signal that is programmed and scheduled.
 3  1201                 But here you have got particular
 4     events which are put up at various different times.
 5     Would this condition sort of drive -- would BSSI be
 6     forced by this condition to sort of every time it wants
 7     to air a sports special ensure that the same sports
 8     special is aired by CTV?  I am not sure how it would
 9     work.
10  1202                 MR. MALCOLMSON:  That was not the
11     intention of the condition.  And the wording, quite
12     frankly, may not be perfect.  The intention of the
13     condition was to ensure that during those times that
14     CTV sports specials was offering a sporting event, a
15     boxing match or a football game, that it would know it
16     would have access to Bell subscribers, BDU subscriber
17     base.
18  1203                 So those times that it is offering a
19     particular event, it would not be refused carriage, it
20     would know it would get carriage.  Obviously, the
21     ExpressVu pay-per-view service is a full-time, fully
22     dedicated pay-per-view service and that makes a
23     logistical difference.  But the purpose of the
24     condition is guaranteed access at the time the signals
25     are going up on CTV.


 1  1204                 MR. BATSTONE:  So you would be
 2     contemplating sort of an automatic carriage with
 3     respect to the CTV signal; is that correct?
 4  1205                 MR. MALCOLMSON:  That is correct.
 5  1206                 MR. BATSTONE:  Anytime you had a
 6     particular event which you wished to air, BSSI would be
 7     obliged to air it?
 8  1207                 MR. MALCOLMSON:  That is correct.
 9  1208                 MR. BATSTONE:  I see.  I guess the
10     next logical question from that is should that
11     obligation, if it were imposed -- I assume it would
12     have to be tempered with respect to capacity concerns
13     or something like that?
14  1209                 MR. MALCOLMSON:  Yes, it would.
15  1210                 MR. BATSTONE:  Okay.  The only other
16     question I had -- yeah, I guess I should clarify, then. 
17     How would you propose, then, to sort of -- to include
18     that exception in it with respect to the capacity? 
19     Would it just be that BSSI as the pay-per-view is only
20     obliged to carry the CTV sports special signal where it
21     has adequate capacity or something like that?  Is there
22     a minimum number of channels, for instance?
23  1211                 MR. MALCOLMSON:  I may have
24     misunderstood your question earlier.  If you are saying
25     that Bell ExpressVu's commitment to carry sports


 1     specials should somehow be qualified by them
 2     determining that they have capacity at a certain point
 3     in time, that is not our position.
 4  1212                 Our position is that if and when we
 5     launch a specific sporting event, there should be
 6     capacity made available to us to be able to broadcast
 7     that event.  Otherwise, ExpressVu becomes the
 8     gatekeeper and can simply say "no" and under its
 9     general from licence, program its own sporting events.
10  1213                 MR. BATSTONE:  Are you assuming that
11     there would always be sufficient capacity available,
12     then, to carry those events?
13  1214                 MR. MALCOLMSON:  There would need to
14     be some standard of reasonableness.  I would agree with
15     you that in the short term before Nimiq is launched,
16     there may be a capacity issue.  But we think the amount
17     of capacity that sports specials -- which is really an
18     occasional use service -- would occupy is not going to
19     raise the same capacity issues that a full-time,
20     dedicated pay-per-view service like a Viewer's Choice
21     or an Allarcom would raise.
22  1215                 MR. BATSTONE:  Although, if you are
23     talking about ten signals for -- was it hockey or
24     football?  I am not sure which one it was.  It seems to
25     me that is a fairly significant capacity.  Maybe you do


 1     not understand exactly how it goes up, but --
 2  1216                 MS STEEVES:  I would agree that it
 3     may sound so.  I think that my understanding of the
 4     Bell ExpressVu application is they have dedicated 22
 5     channels for their own use.
 6  1217                 So I mean, obviously, we would be
 7     prepared to accept an upward limit of how many channels
 8     on any given day at any given time would be dedicated. 
 9     I think that is reasonable.  So, I mean, if it is a
10     question of coming up with a number, we can do that.
11  1218                 MR. BATSTONE:  So do you have a sense
12     at this point of what that number would be?
13  1219                 MS STEEVES:  Just give me one minute.
14  1220                 Yes, I think we would be prepared to
15     live with a maximum of ten at any given time.
16  1221                 MR. BATSTONE:  And what about a
17     minimum?
18  1222                 MS STEEVES:  A minimum could be as
19     low as one.  I mean, it is quite possible that with
20     certain niche events that you are bringing in just --
21     or a very large event like a boxing match, it may be on
22     uniquely in its own time.
23  1223                 MR. BATSTONE:  Okay.  I think -- so
24     you are saying it should be up to ten.
25  1224                 Okay.  We will leave it that at that.


 1  1225                 Would you be happy with up to five?
 2     Is ten designed to address that particular situation?
 3  1226                 MS STEEVES:  Ten is designed to deal
 4     with a very large out-of-market package.  I mean it may
 5     be eight.  I would be concerned at five, just because
 6     there are certain packages I am aware of where five
 7     would not cover them.
 8  1227                 MR. BATSTONE:  Okay.  The only other
 9     question I had, then, was with respect to the mechanism
10     by which these conditions would be imposed.  And by
11     that, I mean, these would be conditions of licence,
12     presumably, on the pay-per-view licence and so you can
13     see where it is somewhat indirect.  Is it your view
14     that that is an appropriate way to do this?
15  1228                 MS STEEVES:  I do not profess to be
16     an expert in these matters.  And I am sure that Mr.
17     Malcolmson will want to address them.  But my sense is
18     that it relates to the distribution undertaking given. 
19     But they are an integrated company, so I will let Mr.
20     Malcolmson answer that question.
21  1229                 MR. MALCOLMSON:  That is one of the
22     reasons the condition you have in front of you is
23     generally worded requiring mandatory carriage at all
24     times.  We are seeking to impose the condition on the
25     pay-per-view service that is in front of you, seeking a


 1     licence, we are not asking you to impose a condition of
 2     licence on ExpressVu's BDU service, because they are
 3     not here, their licence is not in front of you.
 4  1230                 You asked the question as to whether
 5     the commission can impose indirect conditions of
 6     licence.  And I think the answer, the answer is clearly
 7     "yes".  And to give you an example, CTV sports specials
 8     itself has a condition of licence applicable to it that
 9     says it shall not enter into an affiliation agreement
10     with the licensee of a DTH BDU unless the agreement
11     incorporates a prohibition against the linkage with
12     non-Canadian services.
13  1231                 That gives you an example -- a
14     condition of licence which has an indirect effect on
15     another licensee.  So I think mechanically you can
16     accomplish what we are asking you to accomplish here by
17     imposing the condition on the pay-per-view licences in
18     front of you today.
19  1232                 MR. BATSTONE:  Thank you.  Those are
20     all my questions.
21  1233                 THE CHAIRPERSON:  Mr. Malcolmson, you
22     want to make a comparison between this last example and
23     imposing a condition of licence that is addressed to
24     one licensee by imposing it on another licensee?
25  1234                 This is an indirect effect, if you


 1     say you cannot enter into exclusive contracts, well, a
 2     whole lot of people are affected indirectly but the
 3     condition is nevertheless imposed on the licensee
 4     before the commission.  But you have a high level of
 5     comfort that jurisprudence, et cetera, shows that the
 6     commission can address the licensee that is before it
 7     and effect the licensee, directly?  That is not -- in
 8     fact, the prohibition is you, BDU, shall not do X and
 9     you are saying that to the pay-per-view.  You think
10     that that is comparable?
11  1235                 MR. MALCOLMSON:  I think --
12  1236                 THE CHAIRPERSON:  When you have two
13     licences, it does not really -- or does it matter that
14     it is the same corporation?  It has two different
15     licences.  That is not an indirect.  It is through one
16     applicant that is before you arguing its case where you
17     have a choice between saying, "No, this is not good",
18     or it would be better if I could catch you here.  Do
19     you think that the commission can do that?
20  1237                 MR. MALCOLMSON:  Well, I think we
21     must deal with the application that is in front of you. 
22     I mean, you have an application for a pay-per-view
23     licence.  To go back to general principles, your powers
24     under the act, specifically under section 9 of the act,
25     empower you to impose such conditions on a licensee as


 1     are related to the circumstances of the licensee.
 2                                                        1610
 3  1238                 THE CHAIRPERSON:  Not hearing it at a
 4     public hearing.
 5  1239                 MR. MALCOLMSON:  But we are here
 6     asking you to impose conditions of licence on the pay-
 7     per-view licensee that is here before you seeking that
 8     approval.
 9  1240                 THE CHAIRPERSON:  Without hearing the
10     BDU.
11  1241                 MR. MALCOLMSON  That is correct.
12  1242                 THE CHAIRPERSON:  Okay.
13  1243                 MR. MALCOLMSON:  In my view, Section
14     9 gives you very wide latitude and very wide discretion
15     to achieve indirect effects on other parties, whether
16     they be other licensees, whether they be related
17     parties to effect their conduct through a condition of
18     licence on, in this case, a pay-per-view service.
19  1244                 THE CHAIRPERSON:  Thank you, Ms
20     Steeves and your colleagues.
21  1245                 MS STEEVES:  Thank you.
22  1246                 THE CHAIRPERSON:  Madam Secretary?
23  1247                 MS SANTERRE:  Thank you, Madam Chair.
24  1248                 The next intervention will be by WIC
25     Premium Television Ltd.


 1  1249                 THE CHAIRPERSON:  Good afternoon,
 2     gentlemen.
 4  1250                 MR. BUCHANAN:  Good afternoon, Madam
 5     Chair, Members of the Commission and Staff.
 6  1251                 My name is Grant Buchanan, and I am
 7     the Vice-President, Corporate Affairs of WIC Premium
 8     Television Ltd. ("WPT").  With me today on my left is
 9     Luther Haave, Vice-President and General Manager of
10     WPT; and on my right is Ric Davies, WPT's Vice-
11     President, Programming.
12  1252                 We are pleased to have an opportunity
13     to share some thoughts with you today regarding DTH
14     pay-per-view.  Within the past week, as you heard
15     today, an agreement was signed with Bell that confirms
16     that they will provide a minimum of 10 channels on
17     Nimiq for the carriage of DTH pay-per-view services
18     provided by WPT, Viewer's Choice Canada and Canal
19     Indigo for a 24-month period.
20  1253                 In addition, the agreement will see
21     Bell offer an interim English-language pay-per-view
22     service that will consist of four channels plus a
23     barker, beginning next week -- or maybe in two weeks,
24     as we heard this morning.
25  1254                 We outlined in our written


 1     intervention why we feel that the application should be
 2     denied, and you will be relieved to learn that, despite
 3     not being persuaded by Bell's reply arguments, we do
 4     not propose to revisit all of those issues here. 
 5     Rather, there are four points we wish to highlight.
 6  1255                 First, the entire rationale for this
 7     application is hinged on the economic efficiencies of a
 8     combined DTH and DTH pay-per-view operation.  There are
 9     none, of course, and despite the "where's the beef?"
10     questioning in our intervention, Bell's reply in this
11     regard was sorely lacking in detail.  This is not
12     surprising.  It is clearly cheaper to rent than to buy
13     a complete programming operation "especially in the
14     early years when subscribers re low", to use Bell's
15     phrase.
16  1256                 The Commission's current model
17     embraces the notion that licensed programming
18     undertakings serve a wide variety of distribution
19     undertakings.  It makes no sense for each distribution
20     undertaking to go out and spend money on duplicative
21     infrastructure to satisfy its programming needs.
22  1257                 Nevertheless, that is the Bell model. 
23     Rather than horizontal integration, it militates in
24     favour of vertical integration.
25  1258                 Thus, each BDU, in Bell's view, is


 1     entitled to it own pay-per-view undertaking, which in
 2     turn will beget duplicative programming departments,
 3     who will each then trundle off to Hollywood and
 4     elsewhere to make their programming deals.
 5  1259                 How can this possibly be economically
 6     efficient?  It isn't.
 7  1260                 What is efficient is having Ric
 8     Davies and his programming department look after the
 9     procurement of product for variety of programming
10     services which are then distributed to a wide variety
11     of BDUs.
12  1261                 In a country like Canada, we need to
13     be as streamlined as possible in order to ensure that
14     the maximum possible resources are devoted to product
15     that is seen on our screens.  Duplicating
16     infrastructures is not part of that equation.  In
17     short, we believe the Commission has already set up the
18     correct regulatory structure.
19  1262                 Second, the CCTA's intervention
20     suggested that Canada's cable operators are watching
21     this proceeding very closely.  They may even be getting
22     their "me, too" applications ready as we speak.  Bell
23     wants you not only to rubberstamp the application
24     before you, but also suggests that you can slam the
25     door shut as soon as they get through.


 1  1263                 One marvels at the chutzpah of
 2     Canada's largest company.
 3  1264                 While the DTH licensees have been
 4     portrayed as struggling start-up operations, the
 5     Commission will be interested to know that Bell and
 6     Star Choice combined already have more addressable
 7     subscribers in our licensed territory than Shaw and
 8     Rogers combined.
 9  1265                 This is very important, because we
10     have been hearing this morning about this numbers game
11     and the comparison of 8 million to a much smaller
12     number.  The real comparison is between homes that can
13     get pay-per-view on DTH and homes that can get pay-per-
14     view on cable.
15  1266                 By the time you get to deciding this
16     matter, the number will be larger in our licensed
17     territory for DTH than it is for cable.
18  1267                 As you are aware, the number of
19     addressable households in our licensed territory has
20     been virtually stagnant over the last 15 years.
21  1268                 One would think that there must be a
22     limit to how long Bell can go on seeking special
23     privileges for itself in some areas (i.e. integrated
24     PPV undertakings) while arguing that it must have the
25     identical conditions as cable whenever it finds cable


 1     regulatory attributes that it likes.
 2  1269                 Our strong suspicion is that in a
 3     universe where the number of DTH addressable subs
 4     exceeds the number of cable addressable subs, it is
 5     going to be very difficult to hold back the floodgates
 6     and deny applications from any and all cable, wireless
 7     or DTH BDUs for the same regulatory treatment as Bell
 8     seeks before you today.
 9  1270                 In the competitive distribution
10     environment that is emerging, it would not be
11     surprising to see other BDUs feeling compelled to
12     follow Bell's example and use the Federal Court to
13     challenge the Commission's decisions in order to
14     achieve their version of regulatory symmetry.
15  1271                 Thirdly, the so-called "disputed
16     conditions" (that is, the "non-proprietary rights
17     condition" and the "splits condition") were crafted to
18     give teeth to the Cabinet directive regarding
19     "exclusive or other preferential rights" within the
20     context of an integrated undertaking.
21  1272                 As the Commission is well aware, we
22     at WPT believe that these two conditions would render a
23     licence difficult to implement, even for Canada's
24     largest company.  But without these or similar
25     conditions, if the Commission were to give Bell the


 1     licence it wants, one can easily envisage pan-
 2     continental program buying scenarios, crafted to avoid
 3     the "exclusive and other preferential rights"
 4     prohibition.
 5  1273                 Frankly, we don't have any
 6     alternative suggestions to those conditions which would
 7     serve the same purpose in complying with the very
 8     explicit requirement contained within the Cabinet
 9     directive.  Our suggestion, as noted above, is to deny
10     the application.
11  1274                 Finally, there is no need for this
12     service at this time.  Consumers don't need it.  And
13     since our agreement of last week, even Bell doesn't
14     need it.
15  1275                 There is nothing that has been
16     proposed in Bell's cookie cutter application that
17     couldn't (and indeed wouldn't) be delivered by existing
18     DTH pay-per-view licensees if they could only get
19     access to the same kind of shelf space that Bell will
20     undoubtedly offer itself, if licensed.
21  1276                 The model that Bell has created for
22     the next two years following the launch of Nimiq
23     involves a 20-channel pay-per-view offering, of which
24     10 channels will be offered by the incumbents and 10
25     channels by Bell.  Some would argue that this is also


 1     an in efficient way to run a pay-per-view service.
 2  1277                 Will not both of the licensed DTH
 3     pay-per-view undertakings be acquiring, for example,
 4     the next Mike Tyson fight and will not both of them be
 5     running the same movies, probably at the same time?
 6  1278                 Would it not make a lot more sense to
 7     have one 20-channel pay-per-view offering, especially
 8     when Bell's purported enemies (i.e. U.S. DBS services)
 9     run even larger pay-per-view operations?
10  1279                 From a subscriber's perspective,
11     either the carriage of two 10-channel DTH pay-per-view
12     services is a good idea or it is a bad idea.  If it is
13     a bad idea, then the Commission should, at a minimum,
14     delay the implementation of Bell's proposed licence at
15     least until the expiry of our recently signed
16     agreement.
17  1280                 We would be more than willing to
18     supply the extra channels during that period,
19     obviously.
20  1281                 If, on the other hand, carriage of
21     two DTH pay-per-view services is a good idea, then the
22     arrangement could be made perpetual with the carriage
23     of two competing services with an equivalent number of
24     channels being made an ongoing obligation.
25  1282                 In conclusion, however, as the


 1     Commission will have gathered from our previous
 2     comments, it is our respectful view that neither of
 3     these possibilities is anything but a second-best
 4     alternative to denial of the application.
 5  1283                 That concludes our remarks, and we
 6     look forward to your questions.
 7  1284                 THE CHAIRPERSON:  Thank you, Mr.
 8     Buchanan.
 9  1285                 I am sure some of the questions that
10     I might ask will be very repetitive and you will
11     respond immediately.
12  1286                 So let me ask you whether, in all
13     fairness, you want to put something on the record at
14     this intervention stage on the general questions that
15     have been asked of the applicant and of intervenors,
16     such as what is your understanding of the meaning of
17     the direction as to what "dynamically competitive"
18     addresses; whether it addresses pay-per-view only, DTH
19     pay-per-view versus cable pay-per-view, or even DTH
20     versus cable.
21  1287                 If you don't feel that there is
22     anything else to add, that's fine.  But if you want to
23     address what that competitive dynamic market is
24     intended to be, and the extent to which the denial of
25     the application will push forward this goal, if you


 1     have anything to add, you are welcome.
 2  1288                 You have heard the conversations to
 3     date as to how the various parties interpret those
 4     words in the direction.
 5  1289                 MR. BUCHANAN:  We see "dynamically
 6     competitive" as broad in the directions -- anything you
 7     license -- and the economic viability as narrow.
 8  1290                 THE CHAIRPERSON:  The economic
 9     viability of the incumbent?
10  1291                 MR. BUCHANAN:  Limited to the
11     licensee applying in front of you.
12  1292                 THE CHAIRPERSON:  So of the
13     applicant?
14  1293                 MR. BUCHANAN:  Of the applicant.
15  1294                 THE CHAIRPERSON:  Whether the
16     applicant will succeed or not, not whether an approval
17     would affect the incumbent.
18  1295                 MR. BUCHANAN:  Right.  So all of the
19     shell game that went on in this application as between
20     the applicant as a BDU and the applicant as a putative
21     BDU pay-per-view undertaking is in a way irrelevant if
22     you decide that they may or may not make money.  That
23     is not important to you.
24  1296                 Listening to the conversation today,
25     one of the central features is the fact that what we


 1     have here is our retailer now going to enter into
 2     competition with us at the wholesale level.
 3  1297                 I would like to ask Ric Davies to
 4     pick up on that, because some of the very practical
 5     problems have not yet come to light as we have heard
 6     the discussion unfold so far today.  As to the actual
 7     mechanics of how you acquire a program, how you set up
 8     your marketing, we have heard lots of smoke: price,
 9     promotion and packaging, and so on.
10  1298                 The applicant's panel was unburdened
11     by a programmer and we thought it might be helpful to
12     you to have somebody speak to you who is actually gone
13     and acquired programs, and explain our view of some of
14     the problems it creates having them perform both
15     functions.
16  1299                 MR. DAVIES:  Thank you, Grant.
17  1300                 The first thing I would like to say
18     is that Mr. Neuman mentioned this morning the example
19     of being in Los Angeles and going to see a pay-per-view
20     operation, and he referred, if I recall correctly, to
21     the guy who goes out and gets the rights from the
22     studios.
23  1301                 In our case, I'm that guy.  I have
24     the dubious distinction of having negotiated the very
25     first pay-per-view rights ever for the country of


 1     Canada back in eighteen -- 1989 and 1990.
 2  1302                 Sorry, not that long ago; 1989 and
 3     1990.
 4  1303                 THE CHAIRPERSON:  Don't tell me you
 5     were giving pay-per-view before you had a licence.
 6  1304                 MR. DAVIES:  We would never, Madam
 7     Chair.
 8  1305                 THE CHAIRPERSON:  Thank the lord I
 9     wasn't around.
10  1306                 MR. DAVIES:  As we all know, of
11     course, in the U.S. -- and we have heard it today
12     repeatedly -- it is typically 50 percent to 60 percent
13     that goes to the Hollywood studios.  As we also know,
14     as the Commission is well aware, and as we have heard
15     today, that is not the norm in Canada.
16                                                        1625
17  1307                 If someone wanted to go out, like
18     this purported guy in Los Angeles, and pay 50 to 60 per
19     cent to the studios, it is actually quite easy and it
20     is quite quick, and you can go down and pick them up.
21  1308                 If, on the other hand, you want the
22     deals like we have in Canada, which happen to be the
23     envy of the world I should add, it takes time and a lot
24     of effort and a lot of work.  This isn't the kind of
25     thing where you just drop by and say "Oh, yeah, we will


 1     take two of those and three Titanics".  It doesn't work
 2     that way.
 3  1309                 There are huge differences, not only
 4     in the regulatory model between Canada and the United
 5     States, but in the pricing model between Canada and the
 6     United States, and we hope that we can maintain that
 7     pricing model differentiation between the two countries
 8     because that is what allows us to fulfil our regulatory
 9     obligations in this country.
10  1310                 Another interest point that came out
11     is that we are, in essence, in full partnership with
12     our distributors -- with our BDUs -- in offering pay-
13     per-view, and it creates a very interesting situation
14     when your full partner also happens to be your
15     competitor.
16  1311                 To take a very simplistic example, if
17     a movie is selling for $3.99 on our service, to use the
18     traditional example of one-third to the supplier, one-
19     third to us and one-third to the BDU, that would mean
20     that in this example ExpressVu would sell that movie,
21     whatever it may be, and they would get $1.33 out of
22     that movie.
23  1312                 Now, if they happen to be running on
24     their own service at the same time the same movie, they
25     could offer that movie instead of for $3.99, say,


 1     perhaps they could offer it for $2.99.  They would
 2     still give the distributor the same $1.33, and
 3     ExpressVu, as a whole, would come out ahead.  And
 4     certainly Bell has the deep pockets to do this.  But
 5     they would get their own $1.33 and the additional 33
 6     cents.  They would come out ahead by undercutting us
 7     completely and very easily.
 8  1313                 There are a number of other shell
 9     games that are possible.
10  1314                 It was mentioned this morning that it
11     makes no difference where they put the money, whether
12     it goes to the distributor or to the pay-per-view
13     operation, but it certainly does make a difference in
14     terms of the 5 per cent contributions.  There is a 5
15     per cent contribution that is taken at the BDU level. 
16     There is a 5 per cent contribution that is taken at the
17     programming undertaking level.  If the BDU level were
18     to take a higher split, and therefore give less to the
19     programming undertaking, the second 5 per cent
20     contribution would be correspondingly lower.
21  1315                 We heard today that, of course, the
22     application is based on a 50:50 split, but I certainly
23     didn't hear any guarantees that that is the way it
24     would be.  Mr. Neuman mentioned things that would be in
25     his natural interest.  Certainly, it is in any


 1     businessman's natural interest, I suppose, to do those
 2     things that would increase their own profitability.
 3  1316                 Finally, while I am rambling on this
 4     subject I would like to say that Mr. Neuman himself
 5     referred this morning to a sense of entitlement that
 6     could lead to a sense of apathy or complacency.  I
 7     cannot imagine any situation that would lead to a
 8     greater sense of entitlement than owning the store that
 9     is selling your own product, or owning the product that
10     you are selling in your own store.  It is controlling
11     the shelf space entirely with your own product.
12  1317                 If that sense of entitlement leads to
13     complacency, then on that basis alone I think this is a
14     bad application.
15  1318                 MR. BUCHANAN:  Can we get a question
16     now?
17  1319                 THE CHAIRPERSON:  Are you of the same
18     view as previous intervenors that none of these
19     concerns can be fixed?  Is this just impossible?  We
20     just don't have the regulatory levers that are
21     sufficient to stop this evil from occurring if we were
22     to license BSSI?
23  1320                 Or are you advocating that we
24     rejuvenate the three-way split as a condition of
25     license, if we were to license them?  That would meet


 1     one of your concerns, would it not?  It may open the
 2     floodgates though.
 3  1321                 MR. BUCHANAN:  Well, you would.
 4  1322                 THE CHAIRPERSON:  And all of you may
 5     end up with it again.  Wouldn't that be fun?
 6  1323                 MR. BUCHANAN:  I'm sorry?
 7  1324                 THE CHAIRPERSON:  That three-way
 8     split condition.
 9  1325                 Are you saying that if you are
10     integrated, then you should be subject to it?
11  1326                 MR. DAVIES:  I would think, Madam
12     Chair, at the very least -- and this won't solve all
13     the problems, but in terms of the split condition, at
14     the very least, a condition should be imposed regarding
15     the 50:50 split between the BDU operation and the pay-
16     per-view programming operation.  That would, at least,
17     protect the contributions that are going to the
18     Canadian television fund.
19  1327                 MR. BUCHANAN:  The answer is that,
20     yes, we are of the same mind as Viewer's Choice.  It is
21     very hard to try to keep figuring out where the next
22     problem is going to occur, the next preference, the
23     after-the-fact finding of some kind of undue
24     preference.  I mean, you and we don't want to be tied
25     up forever trying to figure out whether something is


 1     abusive or not.
 2  1328                 That long litany of things that Ms de
 3     Wilde outlined as pressure points in the relationship
 4     between a BDU distributor and a BDU pay-per-view
 5     undertaking just highlights all of the possible areas
 6     where you could have problems, and we don't see them as
 7     being "fix-uppable".
 8  1329                 MR. HAAVE:  Perhaps to add a little
 9     detail to that an example might help.
10  1330                 I suspect that both BSSI and
11     ourselves would be interested in offering the next
12     Tyson fight, for example, at the same time.  BSSI
13     subscribers would have two possible choices of who they
14     could purchase that event from, if they were both being
15     carried for this at least 30-month period.
16  1331                 When you think of it from a pay-per-
17     view perspective, after making our business
18     arrangements to carry the Tyson fight we would be
19     obliged to share the information on the price, the
20     splits, the marketing conditions that are required by
21     that provider, et cetera, with BSSI our customer, who
22     would immediately be able to go and talk to that same
23     supplier and make either the same deal or a better
24     deal, and then offer the consumer the choice of getting
25     the Tyson fight from them instead of from us.


 1  1332                 We note, for example, that we have
 2     included a 10 per cent marketing budget to make sure
 3     that people know it is available from us.  They have a
 4     1 per cent budget.  Maybe they are relying on our
 5     marketing efforts getting them the business.  Maybe the
 6     service they could provide would include a 1-800 number
 7     to offer people who have ordered from us to switch to
 8     them and save $5.
 9  1333                 How we would ever craft conditions of
10     licence that could stop that kind of thing would, I
11     think, be an incredible burden for the Commission.  I
12     think Ms de Wilde had it exactly right.
13  1334                 THE CHAIRPERSON:  And it is
14     impossible.  But to achieve dynamic competition -- and
15     I asked this question of Viewer's Choice -- would you
16     have a problem with a non-integrated competitor?
17  1335                 MR. BUCHANAN:  Philosophically?
18  1336                 THE CHAIRPERSON:  Or would some of
19     these problems also surface?
20  1337                 MR. HAAVE:  We already have one, in
21     the form of CTV sports, where we will both be competing
22     sometimes, I am sure, for sports events.
23  1338                 So if something like that were to
24     come forward, we would have to judge it on the merits
25     of what was before us, I suppose, as to whether we


 1     would find it problematic or not.
 2  1339                 THE CHAIRPERSON:  So you are of the
 3     view that there is no control that we can exercise. 
 4     But there are some things that raise questions.
 5  1340                 For example, at paragraph 69 you talk
 6     about North American program rights.  You have heard
 7     the applicant suggest that that is not possible with a
 8     non-exclusive contracting condition of licence.  Is
 9     that an answer to paragraph 69, that there is
10     nothing -- in the last sentence, that, were a licence
11     to be issued to Bell without a condition against
12     acquiring exclusive or other preferential rights, they
13     could get North American programming rights?  But in
14     their application they accept that condition of
15     licence.
16  1341                 Is that an answer to that problem?
17  1342                 MR. BUCHANAN:  There were several
18     possible answers.  I will let Rick fill in if I miss
19     anything.
20  1343                 It wasn't necessarily the idea that
21     they would go out by themselves.  They can act in
22     concert with someone in the U.S. --
23  1344                 THE CHAIRPERSON:  No, I suspect not,
24     with 200 -- whatever number of subscribers to amortize
25     your cost over.


 1  1345                 MR. BUCHANAN:  That's right.
 2  1346                 THE CHAIRPERSON:  There is a limit to
 3     what one can do, including buying Hollywood studios,
 4     even if one has a big wallet.
 5  1347                 MR. BUCHANAN:  Yes, I saw that
 6     interpretation in the reply.  It wasn't meant to buy
 7     the studios; it was simply to enter into an output
 8     agreement with a studio.
 9  1348                 THE CHAIRPERSON:  No, but there is a
10     limit.  Would you agree, Mr. Davies, in your
11     experience, that there is a limit to what one can
12     actually accomplish, short of one throwing one's funds
13     into the river when one has a quarter of a million
14     subscribers or less?
15  1349                 MR. DAVIES:  Absolutely.  But what we
16     were contemplating here was the very real possibility
17     of Bell or an affiliated company -- we heard this
18     morning that their ambitions certainly are to become
19     more North American and more international.  So it is
20     Bell and/or an affiliated company, and/or a partner
21     company, and/or any other kind of arrangement, looking
22     at the possibility of North American rights.
23  1350                 This was the issue that we visited
24     very thoroughly back in 1995 regarding the differences
25     between DirecTV and Power DirecTV.  In that case very


 1     affiliated companies were entering into arrangements to
 2     gain North American rights and winding up getting
 3     preferential rights through a back door for Canada
 4     without the Canadian licensee ever doing anything that
 5     was overtly preferential.
 6  1351                 That was what I think led to the
 7     splits condition in the first place.  It was an effort
 8     to remedy that situation where the Commission had
 9     absolutely no control over the U.S. part of that
10     partnership.
11  1352                 MR. HAAVE:  For example, even if BSSI
12     wasn't itself selling its service in the United States,
13     if it teamed up with somebody who was operating a DBS
14     service in the United States to collectively go to one
15     studio, say Paramount, and say "We want to buy your
16     product exclusively, so make sure that no other DTH
17     competitors in our two respective territories that we
18     operate have those titles", there would be nothing to
19     stop that.
20  1353                 THE CHAIRPERSON:  And your view is
21     that the condition of licence that was imposed at the
22     time -- your view is that both of these conditions that
23     have since been removed were to address DirecTV.
24  1354                 Suppose you are right.  Are you of
25     the view that, as it solved the problem then, it would


 1     solve it now if it were reimposed?
 2  1355                 MR. DAVIES:  I am not sure, Madam
 3     Chair, that I would say --
 4  1356                 Would it solve it?  It would
 5     certainly solve it for us were it imposed on Bell,
 6     because I think it would be very unlikely that they
 7     would be able to launch with those conditions in place.
 8  1357                 I am sure the Commission is well
 9     aware of our feelings on those conditions through the
10     application we made last year.
11  1358                 MR. HAAVE:  But I think the point we
12     were making was that we thought the direction required
13     the Commission to deal with that problem and, as long
14     as the potential exists for an integrated undertaking
15     to behave in that fashion, if that door hasn't been
16     closed, is there perhaps a hole in --
17  1359                 THE CHAIRPERSON:  Yes, and what you
18     are saying is that the condition of licence that the
19     Commission has imposed on all licensees, which BSSI is
20     prepared to accept with regard to exclusive rights, was
21     not a sufficient instrument to meet the requirement of
22     the direction.
23  1360                 MR. DAVIES:  That is exactly what we
24     are saying and that is why we believe that the other
25     two so-called disputed conditions came into being


 1     several years ago.  It was specifically to address the
 2     fact that the non-preferential rights clause did not
 3     solve all the problems.
 4  1361                 THE CHAIRPERSON:  Ergo, an integrated
 5     undertaking is impossible is what you are saying.
 6  1362                 MR. DAVIES:  In fact, Madam Chair, in
 7     our application to remove those two conditions, the
 8     Commission may recall that at that time there were no
 9     operating integrated undertakings and at that time we
10     felt that we had an agreement with ExpressVu about the
11     carriage of our service, and we had no reason to
12     believe there would be one.
13  1363                 THE CHAIRPERSON:  Now, you criticize
14     in your intervention BSSI's proformas.  It wasn't clear
15     to me whether you were criticizing them on the basis
16     that their flow of revenue and their cost allocations
17     were not in keeping with previous licensing decisions
18     when there was no integration -- that is, that the BDU
19     should pay -- or whether your concern was that it
20     helped BSSI make its argument on the financial need for
21     integration and that that was not demonstrated, or, I
22     gather from your comments today that your concern may
23     be instead that it leads to an improper allocation of
24     gross revenues and, therefore, reduces the 5 per cent
25     that has to be paid as a benefit.


 1                                                        1640
 2  1364                 MR. BUCHANAN:  The answer is (d), all
 3     of the above.
 4  1365                 THE CHAIRPERSON:  I know what your
 5     view is, that there are no solutions, but you don't
 6     always convince the Commission of what is the right
 7     thing to do.
 8  1366                 Suppose the Commission were to
 9     licence BSSI and try to at least meet some of these
10     concerns, could cost separation or some accounting
11     rules cure that to ensure that gross revenues from both
12     services are properly accounted for and that the amount
13     to which the 5 per cent is applied is the correct one?
14  1367                 MR. BUCHANAN:  On that narrow issue,
15     you can probably go some way down the road to fixing
16     that particular problem.  I didn't see them tripping
17     over themselves to volunteer to say yes to those types
18     of conditions.
19  1368                 THE CHAIRPERSON:  I heard them say
20     they would accept a condition of licence to that
21     effect.
22  1369                 MR. BUCHANAN:  On split?
23  1370                 THE CHAIRPERSON:  No, no.
24  1371                 MR. BUCHANAN:  I thought that was
25     what you just asked me.


 1  1372                 THE CHAIRPERSON:  We're talking about
 2     cost allocation and your concern about how their
 3     proformas are constructed, how the costs are allocated
 4     between the two and the flow of revenue.  Mr. Davies
 5     suggested I think in writing and certainly today that
 6     the effect of that would be to reduce the amount to
 7     which the 5 per cent is established.
 8  1373                 My question was:  Can that not be
 9     cured by a rule as to how they do this allocation.  I
10     thought I heard yes, as I say.
11  1374                 MR. DAVIES:  Yes, that is the splits
12     condition.
13  1375                 MR. BUCHANAN:  That is what the
14     splits condition does.
15  1376                 MR. DAVIES:  Or it could be a
16     modified splits conditions just applying to the BDU
17     portion and the programming portion.
18  1377                 THE CHAIRPERSON:  Your concern was
19     also that they were allocating their transponder costs
20     on the pay-per-view side rather than the BDU side.
21  1378                 MR. BUCHANAN:  But that doesn't enter
22     into the equation when you're dealing with a percentage
23     of revenue condition.  That doesn't enter into the
24     equation.  Revenues are revenues.  These are cost
25     allocations.


 1  1379                 THE CHAIRPERSON:  But that is one of
 2     your complaints, isn't it?  You're talking about the
 3     amount of money that is given to one and the other, I
 4     understand that's one issue, whether the split is three
 5     ways or how it's done.
 6  1380                 MR. BUCHANAN:  Maybe I can answer the
 7     question.
 8  1381                 THE CHAIRPERSON:  But there is
 9     another problem, isn't there, which is whereas the
10     Commission, in past DTH decisions, has said the BDU has
11     to bear the cost of uplinking the DTH pay-per-view
12     service, you seem to have a concern with the fact that
13     BSSI is attributing those costs on the other side.
14  1382                 MR. BUCHANAN:  We were not going to
15     let this go through with an application that ran
16     contrary to ExpressVu's existing licence, which says at
17     its own cost and, yet, in this application misallocated
18     those costs over to the pay-per-view side.
19  1383                 THE CHAIRPERSON:  What I want to know
20     is for you to demonstrate to me that that problem, the
21     allocation of transponder costs to one or the other of
22     the undertakings, is a problem.
23  1384                 MR. BUCHANAN:  It's not a problem,
24     other than the perception that it creates that this DTH
25     pay-per-view undertaking is a struggling little


 1     enterprise that only the depocketed Bell can sort out.
 2  1385                 THE CHAIRPERSON:  But you said all of
 3     the three concerns, and one concern I put to you was: 
 4     Is it because you're concerned that there will be less
 5     funds flowing, the 5 per cent will be a tad smaller?
 6  1386                 MR. BUCHANAN:  That is a concern of
 7     ours, but it does not flow from the allocation of the
 8     transponder costs to the wrong entity.  That flows from
 9     that fact that once you've got both operations in
10     house, you can allocate the sharing of revenue as
11     between them in an artificial way.
12  1387                 Acting logically, the first thing you
13     would do is immediately shrink the portion that the
14     pay-per-view operation got of the revenue stream.  You
15     would hike up the percentage for the BDU and shrink the
16     percentage for the pay-per-view.  If you own both
17     sides, what do you care?  All it does is it minimizes
18     the amount on which you're going to have to pay the
19     second 5 per cent.
20  1388                 THE CHAIRPERSON:  But the other is
21     larger.  It's always gross revenues that flow from the
22     retail.
23  1389                 MR. DAVIES:  Madam Wylie, if you take
24     in the $100 at the retail level and pay the 5 per cent
25     on that on the retail level, as the BDU would do, that


 1     would be the first $5.  Then it's only the portion of
 2     that that is passed through to the DTH pay-per-view
 3     undertaking that the second 5 per cent is triggered on.
 4  1390                 So, if the pay-per-view undertaking
 5     were to take a smaller proportion of the gross, the
 6     second 5 per cent would be much smaller.
 7  1391                 MR. BUCHANAN:  This is very
 8     important.  If we haven't made this clear to you, we
 9     can have another run at it.
10  1392                 But the system gets shortchanged
11     because of the ability to allocate revenues as between
12     the two undertakings and approach the U.S. model, where
13     of course they squeeze the middle man into oblivion.
14  1393                 THE CHAIRPERSON:  Your intervention
15     also looks at the effect of the way in which costs are
16     allocated in between and raises tax concerns and so on. 
17     To the extent that the Commission can ensure that the
18     returns that it may require or the allocation that it
19     may require, my question to you is is this not fixable
20     with some ordered accounting?
21  1394                 MR. BUCHANAN:  That particular
22     problem ought to be able to be fixed.
23  1395                 THE CHAIRPERSON:  I fail to see why
24     or do you think the Commission should be concerned
25     about whether or not they can manage their business in


 1     a manner that provides efficiencies?  It should not be
 2     a concern of ours.
 3  1396                 MR. BUCHANAN:  This was presented as
 4     a money loser, this application.
 5  1397                 THE CHAIRPERSON:  Yes, but that's
 6     another issue.
 7  1398                 MR. BUCHANAN:  The only point we were
 8     making was to correct that part of the record, and that
 9     ought not to be your concern whether they get taxed --
10  1399                 THE CHAIRPERSON:  And your argument
11     there is they are showing this as a money loser by
12     sleight of hand, and they're using this argument to
13     say, "I need to be integrated."
14  1400                 MR. BUCHANAN:  Exactly.
15  1401                 THE CHAIRPERSON:  That's one problem. 
16     The other problem is is this sleight of hand also
17     shortchanging the system by reducing the amount of
18     money that flows to the system rather than into Bell's
19     coffers.
20  1402                 MR. BUCHANAN:  That's correct, but
21     they are two different things.  One affects revenue,
22     one affects costs, and the conditions of licence only
23     relate to the revenue.
24  1403                 THE CHAIRPERSON:  Should the
25     Commission be concerned about the first if it feels


 1     that it's in the public interest for other reasons that
 2     integration is going to originate advantages?
 3  1404                 MR. BUCHANAN:  If you decide after
 4     looking at this, despite everything we have said and
 5     others, that this is a licensable application and you
 6     want to go ahead and do it, that ought not to be your
 7     fundamental concern worrying about the tax side of
 8     things.
 9  1405                 The problem that we tried to correct
10     there by showing that this was a contravention of the
11     licence is more like what you heard later when you got
12     into the positing of imagine two services being
13     carried, and they hit the mic and say, "Yes, if they're
14     paying their own costs."  You see, they've moved it
15     over to their own side now on their wholly-owned
16     service.  So it doesn't matter if they don't have to
17     carry a second service, they can allocate as they want.
18  1406                 But if they then say to a second
19     service, "We load the costs onto our pay-per-view
20     operation.  If you expect us to carry you as well, then
21     you're also going to have to pay your own costs."  That
22     isn't the scheme that was set up in 1995, after
23     listening to everybody.
24  1407                 THE CHAIRPERSON:  Remember the
25     parties that were before us when this was addressed. 


 1     There were parties with different technologies and the
 2     Commission in the end said the DTH BDU is going to pay
 3     for the costs of transforming the service into a
 4     technology that works with theirs.  That was the reason
 5     for it.  I don't think it had anything to do with
 6     vertical integration and the way that the revenues
 7     flowed, as long as the 5 per cent is calculated in a
 8     manner that gives all that it should give to the
 9     system.
10  1408                 But I don't remember it as a
11     condition of licence.  It was simply you have to carry
12     all these services and you, at your cost, BDU, must
13     transform them for the benefit of the specialty that
14     brings the signal to you into your chosen technology
15     because you chose it.  That was the aim, if I recall.
16  1409                 MR. BUCHANAN:  As you know, it was a
17     very heated discussion point at the hearing.  ExpressVu
18     volunteered to pay the costs, and it was written into
19     their licence that it was at its cost.
20  1410                 THE CHAIRPERSON:  And it was imposed
21     on DirecTV, had it uplinked its service or implemented
22     it.  It was a question of all these services, whatever
23     technology they're in, you must carry them and you must
24     transform them yourself at your cost, speaking to the
25     BDU.


 1  1411                 But I fail to see why this is such a
 2     problem here if it does achieve cost efficiencies.  You
 3     also say at paragraph 43 that nothing would be
 4     accomplished by this application that couldn't be
 5     accomplished by the status quo.  The same question was
 6     asked of Viewer's Choice, whether it's necessarily true
 7     that the cost efficiencies that you are so anxious
 8     about will not eventually generate advantages for the
 9     DTH market and the consumers that purchase it.
10  1412                 MR. BUCHANAN:  You've started using
11     the word "efficiencies" in this discussion.  There are
12     no efficiencies.  Whether you allocate transponder
13     costs to one entity or another, it's not a question of
14     efficiencies.  It's simply a question of accounting. 
15     There are no efficiencies.
16  1413                 What we were saying is they have to
17     go out, they have no programming.  Somebody has to go
18     out and be hired to go and create a programming
19     department, a whole programming infrastructure to do
20     what we already do.  We can't see how that's efficient. 
21     It's not like they can stretch their existing
22     programming department to now do this.  When we get a
23     new licence, we don't have to hire anybody new.  We're
24     already there.
25  1414                 THE CHAIRPERSON:  But we just had a


 1     discussion that the fact that the transponder costs can
 2     be dealt with in a different manner for financial
 3     purposes will be beneficial to them, which is as a
 4     result of integration, which can lead to efficiencies.
 5  1415                 MR. HAAVE:  It costs the same amount
 6     for the transponders, regardless of whether the BDU
 7     pays or the BDU pay-per-view.
 8  1416                 THE CHAIRPERSON:  So why do you have
 9     a problem with it?
10  1417                 MR. HAAVE:  The only reason we raised
11     it was in the context of their presenting this
12     application to you as a poor little money losing
13     operation.  As long as you strip that away and realize
14     that that isn't the case, that's all.
15  1418                 MR. BUCHANAN:  Picking up from that,
16     then we need to talk about where the efficiencies are,
17     because we don't think there are any efficiencies.  If
18     there are any, we certainly don't think they're being
19     passed on to the consumer.
20  1419                 Certainly all the price points and
21     things they used in their application were exactly the
22     same things we charge now.  So, we're confused by how
23     there is a notion of efficiencies here.  The word
24     sounds great, just like competition.  But when you
25     actually get to analyzing it, where are the


 1     efficiencies?
 2  1420                 They showed a hiring of 16 people,
 3     including six in traffic, which we didn't quite
 4     understand.  But they have to go out and do that.  They
 5     have to go out and pay Hollywood; they have to go out
 6     and do the same things.  Far and away your biggest
 7     costs are going to be identical.  Where are the
 8     efficiencies?
 9  1421                 MR. HAAVE:  So, without hiring those
10     16 people, we could provide the same number of channels
11     of pay-per-view to them without that incremental cost
12     that would not otherwise have to be spent.
13  1422                 From the very beginning we have
14     customized the pay-per-view service that we provide to
15     BDUs to the amount of capacity that they are prepared
16     to dedicate, whether cable Regina was prepared to put
17     up 15 channels, whether Rogers Vancouver 19, Shaw
18     Winnipeg nine.  We will provide whatever amount of
19     capacity the BDU is prepared to allocate to
20     pay-per-view.  We'll fill it for them and give the
21     customer the full benefit of different choices at all
22     times on every channel that they will dedicate to
23     pay-per-view.  That could happen right now.
24  1423                 We don't give them the same service
25     as one of their other competitors.  Whatever they are


 1     prepared to dedicate to pay-per-view, we would fill for
 2     them in an instant.
 3  1424                 MR. DAVIES:  If I could expand on
 4     that for two seconds -- I'll be very quick -- going
 5     back to our original sign-on in 1990, September 20th, I
 6     believe, 1990, we programmed only three small cable
 7     systems at that point and each headend, each cable
 8     system was programmed individually for that cable
 9     headend.
10                                                        1655
11  1425                 We have kept that practice ever
12     since; we treat each headend separately and
13     differently.
14  1426                 The other thing I should point out --
15     and there was a huge misnomer and I think a very wrong
16     impression given that somehow we would cater to this
17     big behemoth that's cable and the poor DTH side would
18     suffer and have to accept what was good for cable.  As
19     Grant pointed out earlier, it is certainly going to be
20     within the year, if not within months, that our DTH or
21     potential DTH customers in western Canada outnumber our
22     potential cable customers.  It would be absolutely
23     silly to cater to one side rather than the other, which
24     we wouldn't do anyway.
25  1427                 THE CHAIRPERSON:  So your view is you


 1     can't fix the damage or remedy the problem of vertical
 2     integration and you have no belief that there will be a
 3     differentiation of services that will allow the
 4     consumer then to choose between two DTH providers.
 5  1428                 MR. HAAVE:  In fact, during this
 6     short period where they propose to carry both, the
 7     consumer would probably have less choice because they
 8     would have one channel tied up with a Mike Tyson fight
 9     from BSSI, another channel tied up with a Mike Tyson
10     fight from our service, another channel, the same
11     Paramount movie that's running on ours whereas instead,
12     if they had the one service that we had originally
13     thought they were going to carry, the consumer could
14     have those duplicative channels offering different
15     choices for people who didn't want to buy those at the
16     time.
17  1429                 So it is a very strange idea, and we
18     think it was one they came up with only when they
19     realized that this key fall selling time wasn't
20     coincident with when there might be a decision in this
21     process.
22  1430                 MR. BUCHANAN:  The availability of
23     product for pay-per-view that will draw an audience,
24     that will encourage you to pull out your wallet and
25     part with cash, is going to be extremely similar for


 1     the overwhelming percentage of the product that will
 2     ever show up on a pay-per-view service in this country.
 3  1431                 THE CHAIRPERSON:  So this is a
 4     misguided application, and hopefully we will see in
 5     reply whether Bell has been convinced that this is a
 6     poor idea that will not make them any money and will
 7     only create headaches when they can purchase what is
 8     there without having to construct it themselves.
 9  1432                 MR. BUCHANAN:  Well, ask yourself the
10     question:  If you ceased to be a cable subscriber and
11     became a DTH subscriber, would you want to be
12     programmed to differently on the pay-per-view side?  I
13     mean, you are the same person.  What is the difference
14     between a Canadian cable subscriber and a Canadian DTH
15     subscriber?
16  1433                 THE CHAIRPERSON:  As a consumer, if I
17     wanted to buy DTH and I saw the lineup of programming
18     now when I was deciding whether to purchase BSSI or
19     Star Choice, and I saw the list of services that are
20     carried, which by regulation are all the same, and at
21     the end I saw that there were two different pay-per-
22     view services, I would say, well, at last, I have one
23     little bit of choice here.  Would that not be true?  I
24     will take this DTH or that DTH because I have more
25     faith in what they will offer me in pay-per-view, which


 1     is one of the big items that encourage change to DTH,
 2     isn't it, movies?
 3  1434                 So you don't think that this is of
 4     any value at all as even a small choice when the
 5     lineups, right now, are not differentiated?  And I
 6     know, once you have made your choice -- I agree with
 7     Viewer's Choice -- unless you want to spend a lot of
 8     money, that's the equipment you have; it is not a large
 9     increment, but you are saying it is not an increment at
10     all because they will be the same.
11  1435                 MR. HAAVE:  Let's carry that one step
12     further.  Let's say that you have two DTH competitors
13     who both are prepared to dedicate 22 channels to pay-
14     per-view.  One of them is BSSI, who is going to carry
15     one and ten of another competitor who are going to be
16     highly duplicative, two versions of the Mike Tyson
17     fight, two versions of the Paramount movie of the week,
18     two versions of the Fox movie of the week, whereas the
19     other DTH provider has 22 channels, all different
20     choices.  Which one would you pick?
21  1436                 MR. DAVIES:  I also think it was a
22     bit disingenuous this morning, it seemed to be implied
23     that perhaps, as long as we were having both services
24     carried on the BSSI system, perhaps we would agree that
25     maybe we would take one movie and they would take one


 1     movie; having negotiated with BSSI, I can see that this
 2     would be -- well, ExpressVu will have the Mike Tyson
 3     fight and we will take the Scotty Olson fight, and
 4     ExpressVu will tell you they will run Titanic and we
 5     will run some other movie.
 6  1437                 There is no way that that can work.
 7  1438                 THE CHAIRPERSON:  My question was one
 8     DTH pay-per-view that is carried by Star Choice and the
 9     other, the scenario I was maintaining was
10     differentiation as between the two DTH BDUs and
11     differentiation between one DTH BDU and cable.
12  1439                 Now, of course, for the first time it
13     is so prominent that the numbers now that are being
14     compared are not cable delivery but boxes and cable --
15  1440                 MR. HAAVE:  Those are the only homes
16     that can get --
17  1441                 THE CHAIRPERSON:  -- that I used to
18     compare against DTH.
19  1442                 MR. HAAVE:  They are the only homes
20     that can get our service.
21  1443                 MR. BUCHANAN:  If we have convinced
22     you of nothing else, we are delighted, because that is
23     the real comparison.
24  1444                 THE CHAIRPERSON:  We will take a ten-
25     minute break and then see how persuasive the


 1     interveners have been when we hear BSSI in reply.  We
 2     will then hear TVNC, at least its presentation -- oh,
 3     counsel, yes.
 4  1445                 MR. BATSTONE:  I just have one
 5     question and it relates to the government's Convergence
 6     Policy Statement.  You raised the issue of that policy
 7     statement in your intervention, specifically the aspect
 8     of it which says that programming undertakings should
 9     be structurally separate from BDUs and telcos.
10  1446                 How do you reconcile those statements
11     against the statements in the direction.
12  1447                 MR. BUCHANAN:  They were made later. 
13     Is that what you mean?  The Convergence Policy came
14     along after the --
15  1448                 MR. BATSTONE:  But are you suggesting
16     that the Convergence Policy is the operative regulatory
17     instrument in this case?
18  1449                 MR. BUCHANAN:  Do you take the
19     temporal view or do you take the specific overrule in a
20     general view?  I don't have a legal opinion to offer to
21     you.
22  1450                 Our problems, significant problems,
23     with this application flowed from the structural
24     integration, but that's a mechanical issue.  Could you
25     reapply in a different guise or on behalf of a company


 1     to be incorporated -- it would have solved all the
 2     problems.  I didn't want to dwell on that as being the
 3     central pillar on which you should deny the thing.
 4  1451                 MR. BATSTONE:  I guess what I am
 5     getting at is, obviously the directive has directory
 6     effect with respect to the Commission; the policy
 7     statement, presumably, is just a policy.
 8  1452                 I just wanted to be clear of your
 9     position, whether it has any sort of regulatory effect
10     for the Commission in making its decision.
11  1453                 MR. BUCHANAN:  No, other than it
12     flowed from a very long Commission process.  I hope we
13     weren't wasting our time in participating in that
14     process.
15  1454                 MR. BATSTONE:  Thanks.
16  1455                 THE CHAIRPERSON:  Thank you very
17     much, gentlemen.
18  1456                 We will be back in 10 minutes.
19     --- Short recess at / Courte suspension à 1705
20     --- Upon resuming at / Reprise à 1715
21  1457                 THE CHAIRPERSON:  Order, please.
22     Madam Secretary.
23  1458                 MS SANTERRE:  Thank you, Madam Chair.
24  1459                 Now I would like to invite BSSI to
25     comment on intervention files to its application.


 2  1460                 MR. KEENLEYSIDE:  Thank you, Madam
 3     Secretary.
 4  1461                 Members of the Commission, if I could
 5     just start by responding to a question that counsel
 6     raised this morning related to the carriage or must
 7     carriage of, in effect, competing or unaffiliated
 8     pay-per-view service.
 9  1462                 We used the phrase "extremely
10     reluctant" a number of times.  I think it was frankly
11     more the fact that we were caught by surprise that this
12     issue was raised because you had ruled fairly clearly,
13     we thought, in '95 in the licensing framework that this
14     was not a requirement to duplicate services at the same
15     time that you made quite a different decision in the
16     pay-audio framework.  So frankly we were not prepared
17     for this.
18  1463                 But we did caucus over lunch to try
19     to come up with a solution and we think that we have
20     combined a couple of models that you have put into the
21     original licensing framework that will meet what you
22     are looking for.  Just as a starting point, we would
23     prefer an expectation rather than a condition of
24     licence.  These are -- someone said this morning --
25     early days in terms of an integrated service actually


 1     operating.  And conditions of licence are obviously
 2     more serious than expectations in terms of their
 3     potential consequences.
 4  1464                 So with that in mind, that is our
 5     preferred way to go.  But if you do want to go by way
 6     of a condition of licence, we think that we would like
 7     to offer the following as a solution you might like to
 8     consider.  And it draws on two of the models you have
 9     in the licensing framework and it really consists of
10     six points.  And the first five come out of the
11     pay-audio approach.
12  1465                 We are proposing an approach that
13     would apply equally to English and French services. 
14     The approach would apply to one national, unaffiliated,
15     general interest DTH pay-per-view service.  By
16     "national", we would regard the current VCC WPT
17     seamless arrangement as being national.  So we are not
18     playing games with that word.
19  1466                 General interest, we do mean that.
20     That is what we have applied for.  We have not applied
21     for a niche pay-per-view licence.  So we think it is
22     appropriate that this apply in that context.  The third
23     point is that the independent undertaking that would be
24     carried would pay all uplink and transponder costs. 
25     And I would just quote, if I may, the phrase from your


 1     licensing framework and pay-audio that that entity pay
 2     the satellite uplink and transmission costs associated
 3     with the distribution of a signal.  Exactly that
 4     wording would be acceptable.
 5  1467                 In terms of where the costs for
 6     satellite would be borne internally, I understand Mr.
 7     Frank will be speaking to the 50/50 split and that
 8     should be resolved as between pay-per-view and BDU.  So
 9     that should not be an issue.  We agreed this morning
10     that any accounting separation techniques that you
11     think are appropriate we will comply with.  So the
12     issue of what does a transponder cost should not be
13     problematic.
14  1468                 The fourth point would be that the
15     transponders would be obtained from the existing Bell
16     ExpressVu inventory.  Clearly, it has to be a seamless
17     service, it cannot be on different satellites or
18     different types of satellites.  And we would suggest a
19     limit of parity.  I notice that Ms de Wilde said it is
20     not really a question of numbers, it is a question of
21     parity.
22  1469                 So because it applies to English
23     and/or French then parity would apply.  To take a very
24     specific example, if the English independent or
25     unaffiliated group wanted carriage, under the current


 1     proposal, it would be 11 to them, 11 transponders to
 2     them, 11 transponders to Bell ExpressVu, and five to
 3     the Bell ExpressVu French service if Indigo did not
 4     want to share it.  So we would do one or both of the
 5     different languages.  So that is the pay audio model.
 6  1470                 The sixth point which I think is
 7     probably as critical would be the program deletion
 8     model that you proposed in the licensing framework
 9     originally which essentially says you have to do the
10     foregoing unless the parties affected may mutually
11     agree on other terms.
12  1471                 And we think that should be a safety
13     valve that would be allowed for the parties to work out
14     their own arrangements.  That, in fact, did happen. 
15     Bell ExpressVu did work a deal with the Canadian
16     Association of Broadcasters.  So that avenue is a
17     realistic alternative, as well.
18  1472                 Thank you.
19  1473                 MR. NEUMAN:  Madam Chair, Members of
20     the Commission, thank you for this further opportunity
21     to rebut.
22  1474                 As we stated in our written reply
23     comments, Madam Chair, we believe, and as you have just
24     heard, there are no issues just raised by the
25     intervenors this afternoon.  In fact, those of us who


 1     have been in and around the industry since 1995 have
 2     not only heard these arguments before but have seen the
 3     commission's response which is framed in today's public
 4     policy and regulation.
 5  1475                 We have heard essentially two
 6     versions of dynamic competition this afternoon as
 7     compared to our view of dynamic competition this
 8     morning.  One where there is no competitor to the
 9     incumbents at all and the other wherein the competitor
10     is there but hobbled.
11  1476                 I would like to leave you with the
12     following positive thoughts, as we attempted to do this
13     morning, regarding our proposed service.  One is we
14     believe competition is a good thing.  It will make our
15     business more efficient, as we described, certainly
16     provide the additional margins to our business, which
17     certainly seems to have been concurred with by some of
18     the intervenors that would endeavour us to be more
19     competitive in the marketplace on the whole.
20  1477                 And perhaps more importantly, it will
21     directly benefit Canadian consumers through better
22     service, more choice and variety as well as obvious
23     economic advantages derived from improved technical and
24     financial efficiency.  I am referring here specifically
25     to the faster roll-out of digital technology and real


 1     price competition which are positive byproducts of our
 2     application I believe and in the public interest.
 3  1478                 I believe it is clear that while DTH
 4     may, in fact, have more digital boxes in Western
 5     Canada, for instance, and maybe at some point in
 6     Eastern Canada than in the five-year time-frame than
 7     are currently there for cable, I think what is clear is
 8     that cable plans to and certainly with the advent of
 9     DTH digital boxes now on the market, has an impetus or
10     an incentive to put more digital boxes out there and no
11     doubt will have 30 or 40 per cent of their base
12     digitized in the five-year time horizon.  So there
13     clearly will be a very large market for the incumbents
14     to enjoy as they have enjoyed with their monopoly to
15     date.
16  1479                 First and foremost, I suppose it is
17     clear after hearing everyone that there can certainly
18     be no competition unless there is a competitor.  And a
19     competitor that is unfettered by rules or conditions of
20     licence that would blunt the benefits of competition to
21     consumers.
22  1480                 Other important beneficiaries are the
23     Canadian broadcasting and program production industries
24     of our licence.  With respect to the former, please
25     note that that a wide cross-section of support has been


 1     generated and these, you will not, are not form
 2     letters, but rather straight-from-the-heart
 3     testimonials about the benefits of a competitive
 4     domestic DTH industry in the pay-per-view application
 5     that we propose.
 6  1481                 We live in a competitive environment
 7     characterized by cable control or at least significant
 8     participation in monopoly pay-per-view licensees.  And
 9     with the recent news today or yesterday regarding the
10     Cancom Star Choice announcement, we have a pay-per-view
11     provider under the common control of a dominant cable
12     competitor that also controls our BTH competitor.  If
13     ever there was an opportunity for a monopoly
14     pay-per-view licensee whose major customer will always
15     be my competitor to treat a BDU like a second-class
16     citizen, this is it.  You can only imagine negotiating
17     in such a circumstance.
18  1482                 You need a really narrow definition
19     of integrated or integration to be able to construe
20     Viewer's Choice and WPT as not integrated, in my view.
21  1483                 Broadcasters, film-makers and the
22     cultural community understand this.  And you only have
23     to look south of the border where DTH and DTH
24     pay-per-view integration is a structural and beneficial
25     fact of life.


 1  1484                 In closing, I would like to note the
 2     support of the government film commissioner in the NFB,
 3     the Canadian Congress of the Arts, the Friends of
 4     Canadian Broadcasting, CAFTI, a major player in the
 5     feature film industry in this country, among others,
 6     have supported us and we thank them for that.
 7  1485                 We are heartened by the wide range of
 8     support that our application has garnered and we think
 9     it serves us all well and certainly you in trying to
10     make the decision.
11  1486                 Madam Chair and members of the
12     commission, we understand and are ready, willing and
13     able to deliver on our commitments to you as we have
14     under the aegis of our DTH BDU pay-per-view
15     application.  DTH pay-per-view will make us stronger so
16     that we can compete more vigorously with the
17     well-entrenched cable industry.  It will also help
18     immeasurably in our quest to repatriate grey market
19     dishes and staunch the flow of millions of programming
20     dollars going south of the border, dollars lost to
21     Canadian broadcasters, program producers and the
22     independent funds that stimulate home-grown film and TV
23     product.
24  1487                 To reiterate, the diversity of
25     product that we will bring to bear, particularly the


 1     approaches to packaging promotion which clearly are not
 2     going to be the case if we are both showing exactly the
 3     same product, but we find those niches, those segments
 4     that we wish to address as I outlined this morning.
 5  1488                 Compelling children's packaging and
 6     programming, competition for sports programming, high
 7     definition television, a trial of described programs
 8     that we have proposed.  Certainly, our proposal to
 9     provide movies and cultural events in the mother tongue
10     of Canadians other than French and English is new and
11     underserved in this country, I believe.  And, of
12     course, a better return to Bell ExpressVu by taking the
13     middle man out of the equation that currently does not
14     provide sufficient value added to maintain that
15     position going into the future.
16  1489                 Thank you for the opportunity to
17     appear this afternoon and I thank you for your interest
18     in Bell ExpressVu.
19  1490                 I am going to ask Mr. Frank to add
20     any comments he may still have.
21  1491                 MR. FRANK:  It falls to me to answer
22     some of the specific -- rebut some of the specific
23     allegations made by the contrary intervenors today.
24  1492                 With respect to Madam Chair's
25     question about -- to Astral and WPT about their


 1     concurrence with the licensing of a non-vertically
 2     integrated BTH undertaking, I understand and I hope my
 3     memory is correct here, it has been bolstered by a
 4     couple of my colleagues that both companies actually
 5     intervened against CTV sports specials back in 1995.
 6  1493                 With respect to VCC's comment about
 7     undue preference, I would like to be clear about our
 8     current agreements with both WPT and VCC.  They at the
 9     two licensees' suggestion and readily agreed to by us,
10     there is an undue preference clause in the agreement
11     whereby we cannot confirm upon ourselves any special or
12     undue treatment.  And we would be happy to, with their
13     concurrence, to file these agreements with you.
14  1494                 Ms de Wilde stated that the CFTPA and
15     the ATPFQ did not support our application.  That is
16     true.  Neither did they intervene against us.  I would
17     like to say that we met with them and you have the
18     benefits of their comments to us in separate meetings. 
19     Those comments were contained in Michael's opening
20     statements this morning.
21  1495                 Finally, VCC states that our
22     application is predicated on 1.8 million subscribers.
23     That is actually double the number and then some that
24     we predicted and that is over seven years.  So we are
25     talking in the 800,000 range and that is over seven


 1     years.  And I know there are no facts in the future,
 2     but I think it is fair to assume that cable will be
 3     well and truly digitized by that point.  So Mr.
 4     Neuman's comments on that, I think, were well taken
 5     earlier today.
 6  1496                 Now, moving on to the WIC premium
 7     television, I would like to be clear about the 5 per
 8     cent contribution.  We are paying the 5 per cent on
 9     gross and I believe that is consistent with current
10     practice.  However, if a belt-and-suspenders approach
11     is required here, we would agree readily to Mr. Davies'
12     point about the 50/50 split as between the BDU and the
13     DDH pay-per-view undertaking.
14  1497                 And finally, in respect of WPT, we
15     are heartened by their characterization of our
16     application as a cookie-cutter, because that carries,
17     of course, the connotation that our conditions are
18     exactly the same as theirs and VCC's, which would mean
19     that we are 100 per cent symmetrical with the current
20     regulatory and public policy framework respecting DTH
21     and DTH pay-per-view.
22  1498                 I will finish quickly with CTV sports
23     which I will note is involved in cable, MMDDS and DTH
24     pay-per-view through their licence.  They comment --
25     they characterize us as a gatekeeper.  Heavens, we


 1     thought that only applied to cable.
 2  1499                 But I would like to point out that we
 3     have only got 50 per cent of the DTH market.  And with
 4     respect to our competitor, Star Choice, which is also
 5     owned by a company of substantial means, they currently
 6     have four more RF channels on ANIK E2 than us.  They
 7     have just inked a deal with Telesat Canada for 30
 8     transponders.  That is 13 more than we have in our bag
 9     with respect to Nimiq.
10  1500                 So I think that we are anything but a
11     gatekeeper.  We are not dominant and we have no
12     particular control over satellite or satellite space
13     segment.
14  1501                 I would like to note that Ms Steeves
15     has conceded that the other two general interest
16     pay-per-view companies are not encumbered by the
17     conditions of licence that she would like to impose on
18     us.
19  1502                 As a final point, I am somewhat
20     confused by her comments on Premier League English
21     soccer, a wonderful support, I watch it all the time.
22     But at no time do my colleagues or I recall discussing
23     the distribution of that on a pay-per-view basis.  And
24     with respect to the meeting we had, the three-way
25     meeting we had with the NHL, I would like to tell you


 1     that that meeting was held at the behest of the NHL and
 2     it was concerning the orderly development of the NHL
 3     Centre Ice package in Canada.  A centre ice package
 4     that will not be able to be provided at least by a BTH
 5     pay-per-view on Star Choice or ExpressVu until next
 6     year because there simply is not enough space segment. 
 7     There will not be enough space segment available until
 8     next hockey season.
 9                                                        1730
10  1503                 However, I would note that that
11     product is available on DirecTv, which is one of our
12     competitors.
13  1504                 I would also note that we were
14     referred to as the biggest DTH company in Canada.  It
15     is very flattering.  Unfortunately, DirecTV still has
16     more subscribers than us, and by a good margin.
17  1505                 But God willing, we will close that
18     gap and move on and make this a successful business.
19  1506                 Thank you very much.  And thank you
20     very much for hearing us today.  It was a pleasure to
21     be here to bring to you our application.  We hope you
22     are as enthusiastic about it as we are.
23  1507                 THE CHAIRPERSON:  With regard to this
24     allocation of revenues as between the two if you were
25     licensed, would you, in a few sentences, put on the


 1     record how you actually did the split for the basis of
 2     the pro forma.
 3  1508                 MR. McLENNAN:  What we did in the
 4     calculations was that the 5 percent that the DTH pay-
 5     per-view kept was based on about 68 percent of the
 6     total revenue stream.  So the 5 percent was based on
 7     that.
 8  1509                 Then of course, being the BDU
 9     operator as well, we would pay 5 percent on 100 percent
10     of the retail revenues.
11  1510                 THE CHAIRPERSON:  To make it clear,
12     you say you would be prepared to accept whatever
13     allocation the Commission required.  The Commission
14     would be, if you were licensed, especially anxious to
15     see how it is done.
16  1511                 Would you accept a condition of
17     licence that would be imposed on the licence, should it
18     be granted, to the effect that any type of return that
19     may be required from the pay-per-view service would
20     also include a supplementary schedule reconciling both
21     your BDU and your DTH revenues, and the basis for the
22     allocation of the revenues signed off by your auditors?
23  1512                 MR. NEUMAN:  Yes, Madam Chair, we
24     would.
25  1513                 THE CHAIRPERSON:  Thank you.  I


 1     believe these re all of our questions.
 2  1514                 We thank you for your participation,
 3     as well as that of the intervenors.  It provided for
 4     lively discussion, and hopefully every company is going
 5     to go home smarter than it was when it came in.
 6  1515                 We wish you a good evening.
 7  1516                 I would like to indicate that we will
 8     sit until 7:00.  Therefore, we will hear TVNC's
 9     application and we will begin the questioning.
10  1517                 Before we call the next applicant, in
11     light of the very many parties that were not here
12     before, I will go very quickly over the opening remarks
13     and the procedure as it relates to TVNC.
14  1518                 I don't think we need to introduce
15     ourselves at this time to the new participants.  I am
16     chairing the hearing, and my colleagues are
17     Commissioner Pennefather and Commissioner Cardozo.
18  1519                 We will her today TVNC, which is
19     Canada's only aboriginal television programming
20     network.  We will hear its application for national
21     distribution of an aboriginal programming service.
22  1520                 TVNC has said that national
23     distribution of this service, to be called Aboriginal
24     Peoples Television Network, or APTN, would achieve a
25     number of the Broadcasting Act's goals, including that:


 1                            "the Canadian broadcasting
 2                            system should serve the diverse
 3                            needs and interests, as well as
 4                            the special place of aboriginal
 5                            peoples within Canada; and
 6                            (2) that the system should
 7                            provide "through its
 8                            programming, a public service,
 9                            essential to the maintenance and
10                            enhancement of national identity
11                            and cultural sovereignty"."
12  1521                 The application is for a conventional
13     television network licence.  In it, TVNC states that
14     APTN would provide a first level of service for
15     Canada's diverse aboriginal population, like that
16     originally provided to Canadians by CBC/Radio-Canada
17     when radio and television were first introduced.
18  1522                 This application stems partly from
19     the Commission's public hearing last November on the
20     appropriateness of licensing a third national network. 
21     In that proceeding, TVNC emphasized the need for a
22     national service that would meet the demands of
23     aboriginal people across the country.
24  1523                 TVNC proposes to broadcast in
25     English, French and aboriginal or first languages.


 1     Programming would be aimed at both aboriginal peoples
 2     and non-aboriginal people who live in the north and the
 3     south of the country; whereas presently only the
 4     audiences in the north of Canada have access to TVNC.
 5  1524                 The Commission has of course long
 6     recognized the importance of the unique role that TVNC
 7     plays in our radio broadcasting system as an aboriginal
 8     service which is non-profit, subsidized by public funds
 9     and which aims at serving the public interest and the
10     objectives of the Broadcasting Act.
11  1525                 This hearing will then consider
12     issues related to the appropriate licensing framework
13     for APTN, including its request for mandatory
14     distribution, its programming plans, its financing and
15     marketing plans, and the impact of the application on
16     Canadian consumers.
17  1526                 As for housekeeping, regarding the
18     conduct of the hearing, we will sit until 7:00 tonight,
19     as I indicated, and resume at 9:00 tomorrow morning.
20  1527                 We will hear during that time a
21     number of oral presentations by interested parties, and
22     we plan to conclude the hearing tomorrow.
23  1528                 In addition, as you know, written
24     submissions have been filed with the CRTC and form part
25     of the record.


 1  1529                 The proceedings will be transcribed,
 2     as well as all interventions, and filed on the public
 3     record.  In order that the person responsible for
 4     recording the transcripts can provide an accurate
 5     record, we ask all participants, including the
 6     intervenors, to make sure that they activate their
 7     microphone before speaking and specifically that they
 8     de-activate it to prevent feedback.
 9  1530                 We have staff assisting us.  Diane
10     Santerre is our hearing secretary, and I am sure will
11     be pleased to help any of you with procedural matters
12     as they arise.
13  1531                 We are now ready to ask Madam
14     Santerre, when she has distributed your presentation,
15     to officially invite you to present your proposal.
16  1532                 MS SANTERRE:  Thank you, Madam Chair.
17  1533                 The application is by Television
18     Northern Canada Incorporated for a broadcasting licence
19     to operate a national aboriginal television programming
20     network, to be called Aboriginal Peoples Television
21     Network, upon surrender of the current licences to
22     TVNC.
23  1534                 THE CHAIRPERSON:  Good evening to you
24     all.  We will ask you to present your team.


 1  1535                 MR. TAGALIK:  Thank you.
 2     --- Opening comment in native language / Commentaire
 3         d'introduction en langue autochtone
 4  1536                 Good evening, Madam Chairperson and
 5     Commissioners, and people in the audience.  We had a
 6     lot more people here this afternoon.  I hope they do
 7     get a chance to come back during the course of today
 8     and tomorrow.
 9  1537                 My name is Abraham Tagalik, Chairman
10     of Television Northern Canada.
11  1538                 Before we begin, I would like to
12     introduce our team.
13  1539                 On my right is Patrick Tourigny,
14     TVNC's Director of Regulatory Affairs.  Next to Pat is
15     Joanne MacDonald, TVNC's Secretary and our board member
16     representing Northern Native Broadcasting Yukon.  Next
17     to Joanne is Gary Farmer, Chairman of our Southern
18     Advisory Group and a busy actor and publisher of
19     Aboriginal Voices magazine.
20  1540                 At the back table behind me is Linda
21     O'Shaughnessy, who coordintes TVNC's programs.  Next to
22     Linda is Roman Bittman.  Roman is also a member of our
23     Southern Advisory Group and an independent producer. 
24     Next to Roman is Glenn Suart of Price Waterhouse
25     Coopers.  Alanis Obomsawin is another member of our


 1     Southern Advisory Group and a producer with the
 2     National Film Board, just coming back from New York.
 3     Sylvie Courtemanche is our legal counsel.  And Patty
 4     Hutton is our financial coordinator.
 5  1541                 At the side table is Gerry Giberson,
 6     our Director of Operations with TVNC.  Also, we have
 7     Debra McLaughlin of Price Waterhouse Coopers.
 8  1542                 In the audience are our board
 9     members.  I would like them to stand up.
10  1543                 From Okalaqagit is Selpa Edmonds. 
11     Selpa is an Elder lady who spent time here today but
12     had other things to do.
13  1544                 From TNI is Sammi Duncan, from
14     northern Quebec.
15  1545                 From IBC is Pat Lyall.  Pat also had
16     other things to deal with.
17  1546                 J. C. Catholic is from Native
18     Communications Society in Yellowknife.
19  1547                 From Yukon College is Dudley Morgan.
20  1548                 From GNWT is Peter Crass; and our
21     member at large, Edward Mesher.
22  1549                 From Inuvik ICS is Debbie Gordon
23     Rubin; also a member of our Southern Advisory Group,
24     Jim Compton.
25  1550                 We have a group here from Missinipi


 1     Broadcasting, also our associate member Marie Wilson
 2     with CBC.
 3  1551                 Also, the young people on our right
 4     are with Nunavut Sivuniksavot.  I am really glad that
 5     they could come here today.
 6  1552                 There were quite a few people here
 7     today from Ottawa and around the area that really care
 8     about our application.
 9  1553                 Madam Chair and Commissioners, this
10     is an historic opportunity.  It is about breaking with
11     the past and building for the future.  It is about
12     Canada, through the powers invested in the Commission,
13     demonstrating a commitment to improving the quality of
14     life of native Canadians.  It is about providing a
15     window on aboriginal life and culture for all Canadians
16     to see and share.
17  1554                 It was last November when Gary Farmer
18     and I appeared before this Commission to tell you about
19     our dreams for a national aboriginal television
20     service.  That was during the Third Network hearing. 
21     We told you of our plans for a nation-wide service
22     supported by a modest subscriber fee.
23  1555                 We were extremely gratified when the
24     Commission subsequently announced last February, in
25     Public Notice CRTC 1998-8, that it recognized the


 1     important role that TVNC played in serving the needs of
 2     aboriginal people in the north; that such a service
 3     should be widely available throughout Canada; and that
 4     TVNC was invited to submit an application for a
 5     national aboriginal service.
 6  1556                 This was sweet music to our ears.  We
 7     immediately began planning our application by
 8     undertaking extensive consultations with all the
 9     national and regional aboriginal organizations and with
10     over 150 independent aboriginal film and television
11     producers.
12  1557                 We have been overwhelmed by the
13     support for this application across the country, from
14     native elders and aboriginal youth, non-native groups
15     and individuals, endorsements from other broadcasters
16     and industry players.
17  1558                 No one has denied the need for APTN. 
18     We have also had inquiries from interested parties in
19     South America, Mexico, Germany, Australia, New Zealand
20     and many states in the U.S.
21  1559                 Clearly, people are keenly interested
22     in t his public hearing and its outcome.
23  1560                 The Aboriginal Peoples Television
24     Network will be the first of its kind anywhere.  By
25     granting APTN an opportunity to meet this challenge,


 1     the Commission will demonstrate its leadership and
 2     foresight to the rest of the world.  Receipt of the
 3     prestigious Carl Bertelsmann Prize is testimony to the
 4     international recognition of the Commission's vision
 5     and accomplishments.
 6  1561                 Many nations around the world have
 7     indigenous people who are marginalized and under-
 8     served.  These countries are looking to Canada for
 9     leadership, because Canada has always been a model of
10     tolerance and inclusion, of diversity and acceptance.
11  1562                 MR. FARMER:  Our goal with APTN is to
12     present a celebration of our rich heritage and a
13     sharing of our ideas and storage within the native
14     community and with fellow Canadians.  This historic
15     initiative is about an investment in Canada's future
16     and a Canada that includes an aboriginal community as
17     an integral and vital part of this nation.
18                                                        1745
19  1563                 It is about our founding nations
20     finally getting access to a dedicated and broadly
21     available television service so that our stories, our
22     dreams, our history and our cultures are made available
23     for all to hear and see.
24  1564                 As Canada's founding peoples we want
25     to be given the chance to remove the barriers of


 1     misunderstanding that often exist between our community
 2     and the rest of Canada.  We want Canadians to know
 3     about aboriginal people from a native perspective.
 4  1565                 MR. TAGALIK:  Over the past two
 5     decades there have been many studies and reports on the
 6     need for better communications systems for aboriginal
 7     people.  Most recently, the Royal Commission on
 8     Aboriginal Peoples examined the situation in southern
 9     Canada and recommended:
10                            "The Canadian Radio-television
11                            and Telecommunications
12                            Commission be mandated to
13                            establish fee structures and
14                            provisions for joint ventures as
15                            part of licensing conditions to
16                            ensure a stable financial base
17                            for the production and
18                            distribution of Aboriginal
19                            broadcast media products,
20                            particularly in southern
21                            Canada."
22  1566                 While the wording of this
23     recommendation may be somewhat opaque, we believe the
24     intent is quite clear.  First, the RCAP report
25     recognized that a stable financial base is essential to


 1     support the production and distribution of native-
 2     provided programming and, second, the report looks to
 3     the Commission to resolve this funding issue.
 4  1567                 The aboriginal people need a vehicle
 5     to exchange ideas, stories, news and information.  The
 6     issues facing the aboriginal community are large and
 7     complex and affect the very soul of Canada as a
 8     country:  self-government, health, healing, language,
 9     housing, substance abuse, education and training,
10     employment, identity, racism and many more.  There is
11     currently no single vehicle to examine and discuss
12     these issues.  Consequently, the potential social value
13     of the service is immense and goes well beyond the mere
14     delivery of programs.
15  1568                 MS OBOMSAWIN:  The issues of the
16     urban Indian are different from those on the reserve or
17     living in remote areas.  The needs of our elders, many
18     of whom don't speak English or French, are different
19     from our youth, many of whom speak only English or
20     French.
21  1569                 APTN will put together a
22     comprehensive programming schedule that will meet the
23     divergent needs of the aboriginal community.  APTN will
24     provide positive role models for our youth.  It will
25     provide much needed employment opportunities for our


 1     artists, journalists, storytellers and technicians. 
 2     But most important, it will be a celebration of our
 3     culture, our rich heritage and our accomplishments.
 4  1570                 We are confident that non-natives
 5     will be amazed at what they see.  They will marvel at
 6     our stories, our value systems and our sense of humour. 
 7     They will become much more knowledgeable about our
 8     culture and the issues that affect our lives.  APTN
 9     will contribute to a cross-cultural environment of
10     mutual trust and respect.
11  1571                 Nous faisons partie intégrante d'une
12     nouvelle culture, la culture du cinéma et de la
13     télévision.
14  1572                 La force de l'image est omnipotente.
15  1573                 Depuis le début du siècle, et pendant
16     les 50 premières années, des milliers d'histoires
17     mensongères ont été véhiculées par les films de cinéma
18     et, plus tard, au travers de différents média, dont la
19     télévision, sans oublier les nombreux livres d'histoire
20     enseignés dans nos écoles.  Certains ont appelé cette
21     période "La conjuration du silence".
22  1574                 C'est l'époque de la naissance d'une
23     nouvelle tribu:  la tribu d'Hollywood.  Notre peuple
24     devint alors la tribu invisible.
25  1575                 Depuis le début des années cinquante,


 1     beaucoup d'entre nous ont oeuvré afin d'établir des
 2     changements nécessaires dans le système éducatif, puis
 3     éventuellement dans le monde du film documentaire.
 4  1576                 De nos jours, un vivier de talents
 5     confirmés se révèle capable de travailler dans tous les
 6     secteurs professionnels de la réalisation de films et
 7     de vidéos, et de la radiodiffusion.
 8  1577                 Le besoin de créer une chaîne de
 9     télévision aborigène est vital.  Cela signifie que nous
10     pourrons finalement accéder à un espace de pouvoir.  Ce
11     pouvoir, transféré sur notre peuple, sera notre porte-
12     parole sur l'ensemble du pays.
13  1578                 MS MacDONALD:  Our market research
14     clearly demonstrates that a large majority of Canadians
15     embrace the idea of a national aboriginal channel.  In
16     January of this year TVNC participated in an Angus Reid
17     omnibus survey which revealed that nearly four in five
18     Canadians indicated that they would watch the service. 
19     Nearly two-thirds of those surveyed supported the
20     national distribution of an aboriginal television
21     network on the basis that it would encourage
22     understanding between aboriginal and non-aboriginal
23     communities.
24  1579                 In a separate and more comprehensive
25     study conducted by Pollara in May, over 80 per cent of


 1     the general population felt this service would be a
 2     positive addition to the Canadian broadcasting system. 
 3     When consumers were asked if they would pay an extra 15
 4     cents per month to support this service, 68 per cent of
 5     the general population said they would and 84 per cent
 6     of the aboriginal population also indicated their
 7     willingness to pay for the proposed service.
 8  1580                 MR. BITTMAN:  The one thing that will
 9     define APTN and differentiate it from other services is
10     programming.  APTN will be programmed by and about
11     aboriginal people.  The majority of the programming
12     will appeal to all Canadians.  Like any general
13     interest television service, APTN will provide a mix of
14     all types of programming categories targeted to all age
15     groups and interests.  It will serve as a cultural
16     bridge between the native and non-native communities,
17     and as a conduit among aboriginal peoples from coast to
18     coast to coast.  The vast majority of the programming
19     will be acquired from aboriginal producers.
20  1581                 Our programming day will begin with
21     an opening prayer.  There will be 63 different
22     prayers -- 63 episodes -- one for each aboriginal
23     language, and they will be filmed on location.
24  1582                 This will be followed by our morning
25     newscast, which will be an update of the previous


 1     evening's newscast.  Our focus groups told us that news
 2     and information programming was very important to them.
 3  1583                 It is also vitally important that we
 4     reach out and embrace our young people in order to give
 5     them a sense of where they fit into the native way of
 6     life and to reinforce their sense of identity and pride
 7     in being aboriginal.
 8  1584                 As you will see in our program
 9     schedule, we intend to provide a richly diverse
10     collection of unique and compelling programs.
11  1585                 More than anything else, we will be
12     distinctively and proudly Canadian, with a Canadian
13     content level of 90 per cent, both overall and in the
14     critical and crucial evening broadcast period.
15  1586                 MR. TOURIGNY:  The very heart of the
16     APTN service is its devotion to serving the national
17     public interest.  It is intended to be a core service,
18     joining those other priority services that form part of
19     the basic or first level of service.
20  1587                 APTN should not be marginalized by
21     being stranded on an expensive discretionary tier,
22     whether analog or digital.  We feel that the service is
23     just too important to the country to treat it as
24     anything less than a core service.
25  1588                 As you know, we filed our application


 1     on the basis that the requisite mandatory carriage
 2     would be accomplished through the provisions of
 3     subsections 17(5) and 37(b) of the BDU regulations.
 4  1589                 In Notice of Public Hearing
 5     CRTC 1998-6-2 the Commission proposed an alternative
 6     mechanism of accomplishing mandatory carriage.  We
 7     fully support your suggested alternative of employing
 8     paragraph 9(1)(h) of the Broadcasting Act and we
 9     believe that this mechanism will fully achieve our goal
10     of national distribution and availability.
11  1590                 We also note and applaud your recent
12     landmark decision involving the TVA network.  In the
13     TVA decision the Commission emphasized the benefits
14     that would result for Canada's broadcasting system as a
15     result of its ruling on the mandatory, national
16     distribution of the TVA service.
17  1591                 The news release accompanying the
18     decision emphasized the diversity of programs in all
19     categories offered by the TVA network and its very high
20     Canadian content.
21  1592                 The Commission also noted that there
22     would be no subscriber charges associated with the TVA
23     service.
24  1593                 APTN will similarly provide
25     substantial benefits for the broadcasting system.  Our


 1     programming will be highly distinctive and will add
 2     much diversity to the system.  At 90 per cent Cancon,
 3     it even exceeds TVA.
 4  1594                 But where TVA and APTN differ is the
 5     cost factor.  TVA is a highly profitable commercial
 6     undertaking.  Their profits will likely increase as a
 7     result of the mandatory national distribution the
 8     Commission intends to implement.  TVNC can therefore
 9     understand why the Commission would want to take the
10     necessary steps in order to ensure that its public
11     service decision to provide an equitable level of
12     service to francophones across the country does not,
13     through a subscriber fee, result in a financial gain
14     for the commercial network.
15  1595                 APTN is a non-profit entity.  The
16     existence of APTN is dependent on a subscriber fee. 
17     There is no business case that can be made for APTN to
18     be solely advertiser supported.  There are no
19     additional public funds available.
20  1596                 TVNC's budget has been cut by 30 per
21     cent in the past few years and we have been
22     unsuccessful in our numerous attempts to have these
23     funds restored or augmented.  Although everyone in
24     government applauded the efforts of TVNC in
25     establishing a new national aboriginal television


 1     service, it is not reasonable to assume that a steady
 2     source of financing will be made available to APTN
 3     either in the short or long term.
 4  1597                 TVNC was cognizant of the public
 5     funding restrictions when it appeared last fall before
 6     the Commission during the third network hearing.  It is
 7     precisely for this reason that the discussion last fall
 8     regarding the proposed service also raised the issue of
 9     the subscriber fee that would be required to support
10     such a service.
11  1598                 MR. TAGALIK:  For 15 cents per month
12     Canadians will receive a core service, rich in its
13     distinctiveness and programming diversity.  One dollar
14     and eighty cents per year will support an essential
15     service that will provide social dividends for
16     generations to come.  Just think, for less than the
17     cost of a Coke and a chocolate bar a year our First
18     Peoples will finally achieve their rightful position
19     within the Canadian broadcasting system.
20  1599                 We think Canadians will agree that
21     this is a bargain.  This is a minor investment to fill
22     an enormous gap.  The social benefits go well beyond
23     the programs themselves.  APTN will continue to improve
24     the quality of life of native Canadians and will
25     provide a bridge of understanding for all citizens.


 1  1600                 Commissioners, we submit that APTN is
 2     of vital, national public interest and deserves being
 3     licensed under the terms set out in our application.
 4  1601                 Just before we show you a short video
 5     I will quote from a positive intervention from a woman
 6     in Regina who foresees the immense public benefits of
 7     APTN:
 8                            "As a parent of young aboriginal
 9                            children that are growing up in
10                            mainstream society, I have
11                            always tried to instill a sense
12                            of personal pride in their
13                            cultural identity as well as
14                            pride in their community.  As it
15                            happens, most of their community
16                            is non-aboriginal and therefore
17                            it has always been up to me to
18                            integrate both societies so that
19                            they are equal rather than one
20                            or the other being the `norm'. 
21                            This has been an upward battle
22                            since we do live in a society
23                            that often sees colour before
24                            anything else.  It seems that
25                            what is being shown on the


 1                            television is either
 2                            sensationalized, romanticized,
 3                            or plain lies when it comes to
 4                            aboriginal people.  APTN is a
 5                            chance to ensure that all
 6                            Canadian children will be
 7                            exposed to the aboriginal
 8                            perspective before they are
 9                            socialized to believe the often
10                            negative stereotypes that are
11                            out there about native people. 
12                            Closer to home, I believe that
13                            APTN will unconsciously teach my
14                            children pride and belonging in
15                            not only our community, but in
16                            the larger one in Canada."
17  1602                 We now have a video presentation for
18     you.
19                                                        1800
20     --- Video Presentation / Présentation vidéo
21  1603                 MR. TAGALIK:  That concludes our
22     opening remarks.  We would be pleased to answer any
23     questions you may have.  Thank you.
24  1604                 THE CHAIRPERSON:  Thank you, Mr.
25     Tagalik.  We welcome you all, of course, and thank you


 1     for your presentation.
 2  1605                 We will have some questions on your
 3     programming proposals in this order:  On the licensing
 4     framework, although it seems to have been simplified
 5     somewhat by your presentation; and your financial
 6     presentations; then on distribution, a few technical
 7     questions; and eventually a few questions in marketing.
 8  1606                 We obviously will not achieve all of
 9     this this evening, but we will start with programming
10     questions that Commissioner Cardozo has for you.  We
11     will try to find some intelligent spot to adjourn and
12     resume in the morning.  You must feel comfortable that
13     you have all the time you need between this evening and
14     tomorrow to feel that you've had a chance to make a
15     full presentation to us.
16  1607                 Commissioner Cardozo.
17  1608                 COMMISSIONER CARDOZO:  Thank you,
18     Madam Chair.  Welcome all of you.
19  1609                 I certainly share the sense of the
20     historic initiative that Gary Farmer mentioned.  As a
21     Commissioner, I am bound to approach this hearing and
22     the decision we have to make with an open mind.  It is
23     going to be your task to make your case today as you
24     will in the public record, as the Chair mentioned,
25     through all the letters that have come in and the


 1     intervenors.
 2  1610                 I have to say that I can't help but
 3     feel awed and humbled by the issue that we are going to
 4     be dealing with today and tomorrow.
 5  1611                 I also want to make a special note of
 6     the young adults who are here today, those who are in
 7     the room with us now and who were here earlier this
 8     afternoon.  It's not often that we see that the age
 9     range extends that young at the CRTC hearings.  So it's
10     a particular joy to have you here, and I hope you find
11     this as interesting as we all find it.
12  1612                 A couple of points on the questions I
13     would like to raise about programming is that the
14     questions that I'll be raising more have to do with
15     trying to get information that either I'm not clear
16     about or I would like more information or information
17     on the record.  If there are certain issues I don't
18     address, it's probably because we have enough
19     information that we're comfortable with, but feel free
20     to add in any points that you think would help us in
21     understanding the issues and making our decision.
22  1613                 Secondly, I should also say quite
23     openly that I'm not an expert on aboriginal issues at
24     all.  I've had the privilege in my previous life in the
25     last 10 or 15 years of working with aboriginal


 1     organizations and people on a number of issues.  So,
 2     feel free to correct me, educate me along the way,
 3     especially as it relates to aboriginal issues.  Now, if
 4     you want to correct me on regulatory issues, I would
 5     suggest you do that at your own peril.
 6  1614                 With regards to the programming that
 7     reflects the diverse needs, Mr. Tagalik mentioned that
 8     in our report on the third networks of February 1998. 
 9     Let me quote a couple of sentences from that report
10     which sets the stage for the question I have for you.
11  1615                 We said, in responding to TVNC's
12     request:
13                            "Such a service should be widely
14                            available throughout Canada in
15                            order to serve the diverse needs
16                            of various aboriginal
17                            communities, as well as other
18                            Canadians."
19  1616                 In the next paragraph we said:
20                            "The Commission expects any
21                            application by TVNC to
22                            demonstrate how it will adapt
23                            its programming service to
24                            reflect the diversity of the
25                            needs and interests of


 1                            aboriginal peoples throughout
 2                            Canada."
 3  1617                 That is what I would like to go
 4     through in a bit of detail, perhaps using the schedule
 5     -- this beautifully-coloured schedule -- as looking at
 6     the programming, as well as any other issues you want
 7     to tell us about in terms of the people involved,
 8     issues involved and so forth.
 9  1618                 What I would like to do is break it
10     down into four ways of looking at it.  There's cross
11     over among these, but the first is the diversity of
12     aboriginal peoples, First Nations, Inuit, Métis, and
13     the diversity within those.  So, I want to talk about
14     how the programming responds to reflect the three
15     groups, as well as the diversity within that.  Second,
16     how the programming reflects northern and southern
17     residents or responds to their needs; third, a sense of
18     across Canada from southern coast to southern coast;
19     fourth, the non-aboriginal Canadians which we have, I
20     think, all agreed are also part of your target
21     audience.
22  1619                 Let me start with the diversity of
23     aboriginal peoples.  Perhaps we can look at First
24     Nations, Inuit and Métis.  Maybe I'll start with Métis
25     because, in a sense, it's a newer group for your


 1     clientele.  Correct me if I'm wrong, but my sense is
 2     that with your programming being in the north where the
 3     Métis population is not very high, you might have
 4     focused more on Inuit and First Nations.  So, perhaps
 5     we can start with Métis and if you can tell me some of
 6     the things in the schedule that respond to the needs of
 7     Métis people.
 8  1620                 MR. TAGALIK:  If I may start, when
 9     you look at our schedule and what we're proposing to
10     do, we want to look at the aboriginal community as a
11     whole.  I think that includes not only Métis but Inuit
12     and First Nations.
13  1621                 What we're looking to do is set up a
14     basic level of service.  We're looking at providing a
15     new service that each day would tackle some of the
16     issues that are out there today.  That's not really
17     specific per group, but it includes everyone.
18  1622                 If you look at the schedule, this is
19     a proposed schedule that is very adaptable to the needs
20     of the aboriginal community, including the Métis. 
21     Maybe if I hand it over to Linda to go over the
22     structure of the programming as it relates to APTN.
23  1623                 COMMISSIONER CARDOZO:  Or maybe we
24     can look at all three together, if you like, if that
25     will be easier.


 1  1624                 I agree with your point about
 2     addressing aboriginal people as a whole, but part of it
 3     will be ensuring that everybody feels part of it,
 4     whether it's through issues that cover everybody or
 5     particular programming.
 6  1625                 MS O'SHAUGHNESSY:  What I've got
 7     established on this schedule consists of 121.5 hours
 8     per week.  Of the 11 CRTC program categories we have in
 9     here, I've used all but Reporting in Actualities and
10     Game Shows.  Again, I would just like to note that this
11     is a sample schedule.  It was based on the submissions
12     that we received from the southern aboriginal
13     producers, as well as what we currently have with TVNC
14     and our NNBAP members.
15  1626                 How did you want me to run through
16     this?
17  1627                 COMMISSIONER CARDOZO:  Maybe we could
18     take a day or if you want to pick a particular day,
19     just pick any one of the days and just go down that and
20     give us a sense of what some of the different
21     programming does.
22  1628                 MS O'SHAUGHNESSY:  If we start with
23     Monday, first of all, Environment Canada will be the
24     wrap around alphanumeric service with weather.
25  1629                 We start off at 6:30 with the opening


 1     prayer, and that would be for a half hour.  The opening
 2     prayer will come in 63 aboriginal languages.
 3  1630                 COMMISSIONER CARDOZO:  How many would
 4     you air in one day?
 5  1631                 MS O'SHAUGHNESSY:  One per day.  So,
 6     it goes on a 63-day cycle.
 7  1632                 COMMISSIONER CARDOZO:  Within that,
 8     then, you've got a fair amount of diversity covered?
 9  1633                 MS O'SHAUGHNESSY:  Yes, we do.  Then
10     followed by that will be our 7:00 a.m. news.  That
11     would be the rerun of the previous nights 2200 All
12     Nations News; 7:30, we start getting into children's
13     programming.  This will be a French-language program,
14     Jeux les enfants, followed by Tales from the Longhouse,
15     which is an animated live action-type show with
16     animals, followed by A Paddle Song Called Memem in
17     Squamish, the Squamish word meaning children, followed
18     by Beading with Bernelda, KSB Presents, the Kativik
19     Schoolboard, the Aboriginal Public Show.
20                                                        1820
21  1634                 COMMISSIONER CARDOZO:  So what is the
22     KSB?
23  1635                 MS O'SULLIVAN:  KSB is the Kativik
24     School Board.
25  1636                 COMMISSIONER CARDOZO:  Okay.


 1  1637                 MS O'SULLIVAN:  A member of Northern
 2     Television Northern Canada and the programs are
 3     various.  It could be documentary, it could be
 4     educational.
 5  1638                 COMMISSIONER CARDOZO:  Okay.
 6  1639                 MS O'SULLIVAN:  With the Kativik
 7     School Board programming, too, they do alternate
 8     between, they will use English, French and Inuktitut.
 9  1640                 At 10 o'clock we have the Aboriginal
10     Puppet Show in various aboriginal languages.
11  1641                 COMMISSIONER CARDOZO:  So would that
12     be each day it may be different, or within a show will
13     there be variety?
14  1642                 MS O'SULLIVAN:  It could be most
15     likely within a show for that particular.
16  1643                 Then we have the best of Takuginai,
17     which is produced by the Native Broadcasting
18     Corporation.  It is in the Inuktitut language.
19  1644                 And then we get into current affairs,
20     current events, Qaggiq.  Again, the Inuit Broadcasting
21     Corporation's program.
22  1645                 Labradorimiut, programming for
23     Labrador.  That comes in English and Inuktitut.
24  1646                 And at 12, for one hour, the network
25     will do a live noon talk show in English.


 1  1647                 COMMISSIONER CARDOZO:  And can you
 2     tell us a bit more about that show?
 3  1648                 MS O'SULLIVAN:  Yes.  This new talk
 4     show will be produced with -- by the news team for the
 5     in-house productions and it would be for viewers all
 6     across Canada, discussing -- we would have different
 7     topics each day.
 8  1649                 COMMISSIONER CORDOZA:  So it is an
 9     hour-long talk show.  Would you have like a panel each
10     day or would there be a variety of items?
11  1650                 MS O'SULLIVAN:  It would be an
12     individual dealing with -- it would be a different
13     topic each day and just callers calling in on that
14     topic.
15  1651                 COMMISSIONER CARDOZO:  So it is a
16     phone-in show.
17  1652                 MS O'SULLIVAN:  Yes.
18  1653                 COMMISSIONER CARDOZO:  By the way, if
19     things are in early development, I understand that.  I
20     understand what you are saying about it being a
21     proposed schedule.  Carry on.
22  1654                 MS O'SULLIVAN:  At 1300, we have
23     Suangaan, which is from the Innuvialuit Communications
24     Society, in the Inuvik, Fulfort Delta region.
25  1655                 At 1330, we have an hour long of


 1     community show case and we are hoping to collect
 2     various programs from local cable companies to go
 3     within this, from all across Canada.
 4  1656                 1430, is Yukon Outdoors.
 5  1657                 1500, Seasons of Change.  This is a
 6     U.S. acquired program.
 7  1658                 And 1600, First Perspective.  It
 8     would be -- it was submitted by Brenda Chambers.
 9     Celebrating Design --
10  1659                 COMMISSIONER CARDOZO:  The First
11     Perspective, would that be --
12  1660                 MS O'SULLIVAN:  It is a talk show.
13  1661                 COMMISSIONER CARDOZO:  -- First
14     Nations?
15  1662                 MS O'SULLIVAN:  Yes, it will be.
16  1663                 COMMISSIONER CARDOZO:  Sorry, go
17     ahead.
18  1664                 MS O'SULLIVAN:  And then Celebrating
19     Design is arts and crafts.
20  1665                 COMMISSIONER CARDOZO:  Okay.  An
21     aboriginal version of Martha Stewart?
22  1666                 MS O'SULLIVAN:  Exactly.
23  1667                 COMMISSIONER CARDOZO:  Maybe we can
24     beat her in the ratings, too.
25  1668                 MS O'SULLIVAN:  At 1700, we have a


 1     youth show called Hey You!  We start getting into youth
 2     programming before supper, now.  And Hey You! is fast
 3     paced, you know, it would be intriguing for the youth
 4     audience.
 5  1669                 COMMISSIONER CARDOZO:  Okay.
 6  1670                 MS O'SULLIVAN:  1730 we have
 7     Qaujisaut, another youth program.  It is produced by
 8     the Inuit Broadcasting Corporation.  It is geared
 9     toward the youth of Nunavut.
10  1671                 At 1800, is CBC's news program
11     Iqalaaq.  It starts off with the first ten minutes of
12     news in Inuktitut followed by segments and it could be
13     in various languages, either English, Dene or
14     Inuktitut.
15  1672                 1830, Métis Perspective.  This was a
16     program submission by an aboriginal, southern
17     aboriginal producer.
18  1673                 Wawatay Presents, Wawatay, Northern
19     Ontario.  It alternates between Cree and Oji-Cree as
20     well as English.
21  1674                 At 1930, Kippinguijautiit.  It is the
22     Inuit Broadcasting Corporation's entertainment program. 
23     It could be on funny stories or anything entertaining.
24  1675                 Mind Your Own Business is a half-hour
25     show dealing on economic business issues.


 1  1676                 COMMISSIONER CARDOZO:  Are you going
 2     to call it that?
 3  1677                 MS O'SULLIVAN:  It was submitted as
 4     Mind Your Own Business.
 5  1678                 COMMISSIONER CARDOZO:  A lot of
 6     people would tune in just to find out what it is about.
 7  1679                 MS O'SULLIVAN:  Circle of Knowledge,
 8     is a half-hour exposing aboriginals who have excelled
 9     as people, professionals and ambassadors to aboriginal
10     culture.
11  1680                 COMMISSIONER CARDOZO:  So you will
12     have profiles of people there.
13  1681                 MS O'SULLIVAN:  Yes.  Followed by
14     Chiefs, which is a one-hour long human interest series
15     and I would like for Roman just to give a brief
16     description of that.
17  1682                 MR. BITTMAN:  I am at this point
18     involved in that particular production.  It is a
19     revisionist history, if you like, of the great chiefs
20     in North American aboriginal history.  The other side
21     of Custer, you know, that sort of thing.  But we will
22     use a dramatic re-enactment as well as dramatic
23     re-enactors, groups, and this sort of thing right now
24     both from the European as well as from the aboriginal
25     point of view.


 1  1683                 MS O'SULLIVAN:  Followed by Chiefs, I
 2     have got All Nations News, which would be the network's
 3     news.  This would be the original time slot, Monday to
 4     Friday, 2200.  And within the newscast, what you will
 5     see is the 10 minutes -- the first 10 minutes of the
 6     first half-hour will be in the English language.  The
 7     next 10-minutes would consist of two or three feature
 8     stories and then the last 10-minutes would be French
 9     language news.
10  1684                 COMMISSIONER CARDOZO:  Okay.
11  1685                 MS O'SULLIVAN:  I also have, followed
12     by that at 2230 is CBC's Northbeat.  This program, the
13     news portion is in English, the first 10-minutes or so,
14     followed by segments.  And, again, they could be in
15     English, they could be in a Dene language, a Dene
16     language or in Inuktitut.
17  1686                 At 2300, I have Nedaa-Your Eye on the
18     Yukon, which is produced by the Northern Native
19     Broadcasting Yukon.  It is geared more to -- it is for
20     the Yukon region.  Followed by Haa Shagoon.  Again, it
21     is a Northern Native Broadcasting Yukon production.
22  1687                 I would just like to also ask Alanis
23     to describe the puppet show which I mentioned we have
24     at 10 o'clock each morning.  It is on Monday to Friday
25     and she is the one who did the submission so she can


 1     give you an idea.
 2  1688                 COMMISSIONER CARDOZO:  Okay.  Thanks.
 3  1689                 MS OBOMSAWIN:  It would be in the
 4     form of story-telling in having a continuity and with
 5     the relationship of animals and people, but all in the
 6     form of puppets where children could look at these
 7     programs and identify themselves with the characters
 8     and it would be in the form of teachings for children
 9     to be good children and be part of those stories which
10     would be a continuity day after day.
11  1690                 And I think it would be mainly to
12     develop the sense of so many animals have gone, but the
13     ones that are remaining, to develop the respect that
14     our people always had for the animals and give them a
15     place and a history, because we always believe that
16     each animal has its own history and it would be a
17     continuity where it will be teaching at the same time.
18  1691                 COMMISSIONER CARDOZO:  And what
19     language will that be in?
20  1692                 It could be done so that the language
21     could differ from places.  It would be just in the form
22     of voice-over to do the different languages, it would
23     be very easy.
24  1693                 COMMISSIONER CARDOZO:  Right, thank
25     you.


 1  1694                 MR. TOURIGNY:  I think, Commissioner
 2     Cordoza, to go back to your initial question, what is
 3     in our schedule that reflects the interests of the
 4     Métis, I think on Monday there was one specific
 5     program, but more importantly is in our news and public
 6     affairs, our daily news cast and the new phone in show
 7     which would be a public affairs show.  Those are the
 8     only two in-house programs.  They will be produced by
 9     our news department and they will cover the full range
10     of issues.
11  1695                 Also, you know, out of the 150-odd
12     independent aboriginal producers that we have been in
13     contact with, I don't know how many were Métis.  They
14     didn't identify themselves when they submitted
15     proposals.  But I would suspect it would be
16     proportionate to the population.  So their ideas, their
17     stories, their story-telling will find a way on to the
18     network.
19  1696                 COMMISSIONER CARDOZO:  Okay.  So if
20     you take whether it is First Nations, Inuit or Métis,
21     do you have a sense that you will be covering all three
22     over a period of time through your productions as well
23     as what is on the -- on your news programs? Is it going
24     to happen automatically, or will you have to also keep
25     an eye on that?


 1  1697                 MR. TAGALIK:  You know, I think what
 2     we are trying to do through APT, and it is also to
 3     preserve some of our languages and some of that culture
 4     related to Aboriginal peoples.  And we, I think, stand
 5     very fairly in front of everyone and say that they all
 6     have opportunity to make use of APT and anything we can
 7     do to help enhance language, preserve language and, you
 8     know, make the use of the language, we will, you know,
 9     definitely do that.
10  1698                 COMMISSIONER CARDOZO:  In terms of
11     the southern and northern residents, one of the
12     concerns, of course, is that because TVNC was primarily
13     northern and is now going to be serving the whole
14     country, how do you respond and reflect the needs of
15     people in the south?
16  1699                 And from what your description is, I
17     am taking it there is two things, one is that you have
18     got certain new programs and the other is some of your
19     existing programs like your news get refocused more to
20     be more inclusive; is that fair?
21  1700                 MR. TAGALIK:  Yes.  And currently we
22     do not do news on TVNC.  This is one of the
23     cornerstones we are trying to entrench into APT is a
24     newscast and the sharing of ideas and information which
25     does not exist today.


 1  1701                 MR. TOURIGNY:  I think the ratio --
 2     Linda can correct me if I am wrong -- about 30 per cent
 3     of the weekly schedule is existing TVNC programming. 
 4     The other 70 per cent is new and fused programming from
 5     all regions of the country, predominantly from the
 6     south.
 7  1702                 COMMISSIONER CARDOZO:  Sorry, could
 8     you say that again?  How much is new?
 9  1703                 MR. TOURIGNY:  Roughly 30 per cent of
10     the existing schedule is existing TVNC programming.  In
11     other words, northern-based programming.  The remainder
12     of the schedule is new and fused programming.
13  1704                 COMMISSIONER CARDOZO:  So about 70
14     per cent is new?
15  1705                 MR. TOURIGNY:  The bulk of which will
16     come from the south.  There will be new programming in
17     the north, from independent film producers located in
18     the north.
19  1706                 MR. FARMER:  Excuse me, doing a quick
20     evaluation of the program schedule, and having been in
21     contact with the program producers, I would say at
22     least 30 per cent of this schedule has the potential to
23     have Métis content in it specifically, and that the
24     Métis producers are very active in the southern regions
25     of Canada and have been for -- and one of the biggest


 1     issues that we face as a native community, of course,
 2     is our identity and who we are, and the mixed heritage
 3     that many of us come from.  So it is a huge issue with
 4     the Aboriginal Voices magazine has been a priority for
 5     us and I am sure it will be reflected in the television
 6     program that is brought forward.
 7                                                        1835
 8  1707                 COMMISSIONER CARDOSO:  As I move on,
 9     certainly as far as I am concerned, I have my answer
10     about how you are also serving Inuit and First Nations. 
11     If there is anything else, feel free to add.
12  1708                 MR. BITTMAN:  Perhaps I could speak
13     as a Metis producer from Alberta.
14  1709                 I spent a lot of my career learning
15     how to work when there wasn't the resources available
16     as now and certainly not the resources that will be
17     available to aboriginal producers if APTN is indeed
18     licensed.
19  1710                 I think what was previously said was
20     exactly right:  there are a lot of very active Metis
21     producers, and they will be very active in proposing
22     projects to the Network Programming Committee.
23  1711                 COMMISSIONER CARDOSO:  Let me just
24     ask you the flip question; which is when you go from
25     serving one area to serving a large area, the people


 1     who were part of the first system are going to feel a
 2     bit crowded out.  This is a possibility.  When you
 3     bring more people into the circle, there are some who
 4     feel they are going to get crowded out.
 5  1712                 Is that a concern at all among
 6     northern producers and people?
 7  1713                 MR. TAGALIK:  What we have tried to
 8     do is we are looking at a break-away.  In the north, if
 9     we have program, like a phone-in show for the Inuit
10     from the Inuit Broadcasting Corporation, that will not
11     be seen through the whole network.
12  1714                 We also break the feed between the
13     east and the west, so that it is not all seen at the
14     same time across the country.
15  1715                 We have also the north which might
16     cover the Nunavut Legislature or the NWT or the Yukon
17     Legislature which only really relates to the north. 
18     That we try to build in --
19  1716                 What is the term?
20  1717                 MR. TOURIGNY:  A split feed?
21  1718                 MR. TAGALIK:  Yes.
22  1719                 COMMISSIONER CARDOSO:  So you have
23     three feeds then?
24  1720                 MR. TOURIGNY:  Yes, because a lot of
25     our programming is time sensitive, particularly the


 1     news and the children's block.  So typically what YTV
 2     and a number of the specialities do is they have a
 3     split feed.  They have a three-hour delay.
 4  1721                 The identical schedule is not needed. 
 5     The only thing that is a challenge, then, is the noon
 6     talk show because it is live across the country.
 7  1722                 COMMISSIONER CARDOSO:  You might have
 8     to call it something else.
 9  1723                 MR. TOURIGNY:  It will be the 10:00
10     to noon or the noon to 2:00, whatever.
11  1724                 COMMISSIONER CARDOSO:  Mid-day.
12  1725                 MR. TOURIGNY:  The mid-day.  But in
13     order to maintain the integrity of the existing
14     northern service, TVNC has been running the coverage of
15     the Legislature.  They don't sit all the time.  But
16     when they do, TVNC has historically been covering that. 
17     And the Legislatures look to TVNC to continue that.
18  1726                 TVNC has also carried distance
19     learning programs from the various educational
20     institutions.  That programming has been cut back in
21     recent years due to funding situations.  But should it
22     come back, the northern feed would be able to
23     accommodate that.
24  1727                 And then with the new territory of
25     Nunavut, there would be another legislative thing.


 1  1728                 And any long-form programming -- like
 2     you said, if IBC is doing a phone-in show, that could
 3     be just discrete to the north because our receivers are
 4     agile.  They are addressable.
 5  1729                 MR. BITTMAN:  If I may add to that,
 6     with regard to the existing and now the bigger group,
 7     this will also be addressed in our programming criteria
 8     when we have completed them and they are approved by
 9     the new APTN Board.  It will have a regional criterion
10     that we have to be representative across the country in
11     terms of where programs are originated from, as well as
12     culturally representative.  And then we talk about high
13     quality.  So those criteria will address this as well.
14  1730                 COMMISSIONER CARDOSO:  If you are
15     talking about, for example, the Mi'qma who are probably
16     not numerous in the north, you try to find a way to
17     ensure that they are included?
18  1731                 MR. BITTMAN:  Yes.  We would --
19  1732                 COMMISSIONER CARDOSO:  And I don't
20     mean to pick on them; but in general, there are various
21     nations in the south.
22  1733                 MR. BITTMAN:  Yes, they are a
23     southern nation.  We would of course not look to the
24     north for them.  But if they are not being proactive,
25     we would be proactive in trying to find someone.  And


 1     this breaks out in terms also of the way our boards
 2     will be set up with regional representatives.  We will
 3     make every effort to get all of the regions involved
 4     and all the nations.
 5  1734                 COMMISSIONER CARDOSO:  In terms of
 6     non-aboriginal Canadians, are there --
 7  1735                 I look at this and it is hard to
 8     think of programs that would not be of interest.  But
 9     are there programs that perhaps would be of more
10     interest or that you want to make sure that non-
11     aboriginal peoples are watching?
12  1736                 MR. TOURIGNY:  Maybe as a non-
13     aboriginal person, I can start that one off.
14  1737                 COMMISSIONER CARDOSO:  Go ahead.
15  1738                 MR. TOURIGNY:  I would love to
16     experience going out on an ice floe.  I would love to
17     experience some of the -- I guess this is showing my
18     age, but some of the traditional healing and
19     traditional medicines that are all of a sudden becoming
20     of more interest to mainstream society and different
21     herbal remedies, and so on and so forth that might ease
22     some of these problems that came on to people of middle
23     age.  I would be keenly interested in that.
24  1739                 I have seen some of TVNC's
25     programming, and believe me, it is riveting.


 1  1740                 Also, being a news and public affairs
 2     junky, it used to be there was a half-hour radio
 3     program called Our Native Land, so that people could
 4     tune in for half an hour or an hour a week, whatever it
 5     was.  And there was a platform -- albeit it a small
 6     platform -- for a discussion of native issues, current
 7     affairs.
 8  1741                 That disappeared.  CBC said:  "We
 9     will sprinkle it throughout our schedule."  So I stayed
10     up all night, day after day after day.,  It didn't work
11     for me.
12  1742                 COMMISSIONER CARDOSO:  So you still
13     haven't heard it yet?
14  1743                 MR. TOURIGNY:  No.  You hear them as
15     it happens.  You hear a bit here and a bit there, but
16     there was no focus.  What we are providing is a common
17     vehicle for all sorts of things, not just news and
18     public affairs but human interest and so on.
19  1744                 I probably won't be interested in
20     children's programming as an adult, non-aboriginal
21     consumer.
22  1745                 But most of the other stuff, in
23     looking at the schedule, I would certainly give it a
24     try.  I might not tune in.  The tuning levels -- and we
25     can get into the marketing on what we expect there.


 1  1746                 There is going to be a lot of
 2     crossover potential for an awful lot of this
 3     programming.
 4  1747                 MR. TAGALIK:  I think, too, there is 
 5     real hunger out there for different unique programming. 
 6     That is what we bring to the table today.
 7  1748                 If you tune in to the channels and
 8     Mr. Clinton is on, he is on 20 channels all at the same
 9     time.  And you get that.  No matter if you start
10     switching, it's all the same after a while.
11  1749                 COMMISSIONER CARDOSO:  He wants a
12     Clinton channel too, which might be very popular.
13  1750                 MR. TAGALIK:  We do also provide
14     sports.  Junior A Eagles Hockey is on TVNC right now.
15     There is great interest in hockey not only in the north
16     but I think also in the south as well.
17  1751                 I think people look to APTN to see
18     something different, something unique, something real,
19     not just a commercial that is on for half an hour.
20  1752                 I certainly can't wait to see some of
21     this programming myself.  I think we have a lot to be
22     proud of in what we have on the schedule here.
23  1753                 MS O'SHAUGHNESSY:  For the English
24     audience, my breakdown for language on what is on this
25     sample schedule, I have 84 hours of English.


 1  1754                 MR. BITTMAN:  I would add to that in
 2     terms of actual programming:  For example, Chiefs will
 3     have an NET and probably a German licence as well.  It
 4     is one of the things that I think will be really
 5     interesting to non-native peoples as well as to native
 6     peoples, to get a true perspective from the aboriginal
 7     point of view of aboriginal history, which has so far
 8     been mostly written by non-aboriginals and portrayed in
 9     a different way than aboriginal people will do it.
10  1755                 I also know that there is a lot of
11     interest in the export market for films which are about
12     Canadian and other aboriginal peoples.  This is
13     expressed to me in co-production conferences that I
14     attend as a producer.  For example, ZDF right now wants
15     me involved in trying to get a co-production on an
16     Inuit story.
17  1756                 COMMISSIONER CARDOSO:  I had a
18     question later on on export, but let me ask you now.
19  1757                 Do you think there is a lot of this
20     programming that will be of export potential, both to a
21     general audience in other countries and to indigenous
22     peoples in other countries?
23  1758                 MR. BITTMAN:  I firmly believe that
24     there is going to be a huge audience for very well
25     produced stories, universal stories and also stories


 1     specific to native history or culture, that will have a
 2     huge interest because it is different and told
 3     differently from a different perspective.  I think the
 4     international market is saying that already to us.
 5  1759                 COMMISSIONER CARDOSO:  As Ms
 6     Obomsawin talked about Hollywood, it doesn't have to be
 7     aboriginal stories à la Hollywood.
 8  1760                 MR. TOURIGNY:  I think if you look at
 9     Australia and why they are successful in their film
10     export market, it is because they are distinctly
11     Australian.  They are not watered down Australians.
12  1761                 The British film industry isn't doing
13     as well as it has in the past, but British dramas excel
14     in television because they are seeping in 
15     "Britishness".  They are distinctive and that's what
16     makes them sell.  They are not diluted.
17  1762                 If you look at the aboriginal
18     cultures and the aboriginal perspectives, it is going
19     to have a similar type of selling factor.  I think in
20     Europe there will be a tremendous acceptance for it.
21  1763                 COMMISSIONER CARDOSO:  Let me talk
22     about languages.  There are some who believe that there
23     are only three aboriginal languages which are not
24     endangered and which will live a long time, which are
25     Cree, Ojibway and Inuktitut.


 1  1764                 But there are many other languages. 
 2     Certainly if you look at the larger groups by StatsCan
 3     figures, Montagnais, Naskapi, Dene, Mi'qma are all
 4     languages that also have significant populations.
 5  1765                 I was looking at the intervention by
 6     CBC and they were talking about some of the languages
 7     that they broadcast primarily in the north.
 8  1766                 Let me ask you first what languages
 9     TVNC currently provides services in.
10  1767                 MS O'SHAUGHNESSY:  We have English,
11     Inuktitut, French, Inuvialuktun, various Dene languages
12     which could be in North Slavey, South Slavey.  We also
13     have Gwi'chen.
14  1768                 In the Dene languages there is also
15     Chipewyan.  There is also Gwi'chen.
16  1769                 COMMISSIONER CARDOSO:  And Cree?
17  1770                 MS O'SHAUGHNESSY:  And Cree,
18     Inuvialuktun.
19  1771                 COMMISSIONER CARDOSO:  Do you think
20     you need to expand the number of languages with APTN?
21  1772                 MS O'SHAUGHNESSY:  Yes, we would.
22  1773                 COMMISSIONER CARDOSO:  Have you
23     identified those as yet?
24  1774                 MS O'SHAUGHNESSY:  We will have up to
25     63 aboriginal languages on APTN.  On TVNC right now, we


 1     could broadcast up to as many as 15 aboriginal
 2     languages for the region that we serve.
 3  1775                 COMMISSIONER CARDOSO:  That is quite
 4     a challenge with 63.  I guess people could look at the
 5     schedule, but how do you get the message out there
 6     about when certain languages come up?
 7  1776                 In parts of the north especially,
 8     there will be people who just speak one language and
 9     will not be reading English, for example.
10  1777                 MS O'SHAUGHNESSY:  That could be part
11     of our marketing plan and just getting people familiar
12     with the type of schedule that it is, and promote for
13     languages in the language so that they know when the
14     language they understand is available.
15  1778                 MR. FARMER:  If I could add,
16     Commissioner, with the languages and recovery in my
17     community, there were less than eight speakers under
18     the age of 40 with six of our languages.  I have had
19     success in producing half-hour dramatic programs where
20     one leading character out of four would speak about 70
21     percent in Kiyuga language and the story would still
22     have a thrust of English language.
23  1779                 COMMISSIONER CARDOSO:  So mixed
24     languages?
25  1780                 MR. FARMER:  So a creative mix of


 1     indigenous language in English or indigenous language
 2     in French is going to be the way that we are going to
 3     restore our confidence in our language and build on
 4     that.  So maybe in 10 or 15 years we could have more
 5     characters, or 50 percent of the program may appear in
 6     Kiyuga and have a wider acceptance of that and
 7     following through on the story.
 8  1781                 I think it is a creative issue.
 9  1782                 COMMISSIONER CARDOSO:  Do you think
10     TV is a good medium for language recovery, especially
11     those language groups that are becoming very small in
12     number?
13  1783                 MR. FARMER:  I think it has great
14     potential and is something that we are going to have to
15     explore.  Of course, radio is a much more solid medium
16     for language development.  But certainly TV has a great
17     potential.  And I think that TVNC has been successful
18     in doing that, trying to help recover languages in
19     certain specific regions.
20                                                        1850
21  1784                 MR. BITTMAN:  From the programming
22     perspective, this will fall under, again, being
23     inclusive and trying, in fact, to make an effort to
24     program languages that aren't usually programmed in now
25     and will be among the group that will be extended to


 1     when we are in full production.
 2  1785                 As far as motivating by television,
 3     what the network can do is provide a whole positive
 4     environment on the tube, which is in fact a great part
 5     of where young people get culturized and become more
 6     enthusiastic and accepting of their own language, even
 7     if it's a very endangered one.  That is another way
 8     that it will be helpful, not only in producing but also
 9     in preserving and encouraging the development of
10     languages that are near extinction.
11  1786                 MR. TOURIGNY:  I can't speak too much
12     for preserving language, but what I can say is that in
13     most cases, English is sort of a common language, if
14     not the first language then the second language.  That
15     is reflected in our schedule.  It's well over 80 per
16     cent or around 80 per cent would be in the English
17     language.  So that you would be building up gradually
18     and finding which of the 63 -- I mean, the daily prayer
19     covers a total of the 63, but our programming committee
20     will have to look and see and work maybe with educators
21     and people that are experts in language preservation as
22     to how we can tailor our programming to help bring
23     those levels up.
24  1787                 COMMISSIONER CARDOZO:  Just in terms
25     of languages, can you tell me a little bit about the


 1     process you've had.  I understand you put our requests
 2     for proposals for programs, which is how you put the
 3     schedule together.  Was language part of that thinking
 4     in terms of getting more languages in your programming?
 5  1788                 MR. FARMER:  I think it's always a
 6     priority about how we're going to integrate language
 7     into our programming.  It's certainly an effort that's
 8     being worked on by producers currently as a
 9     prerequisite even to get funding.  Oddly enough, even
10     with the telephone portfolio, language has to become a
11     priority even to receive the funding in order to
12     produce.
13  1789                 It's been a great initiative.  But I
14     think there's also percentages of content that we could
15     work to fulfil starting with something that's
16     acceptable that we could work with and gradually
17     increasing that content to improve the development of
18     languages in the country.
19  1790                 COMMISSIONER CARDOZO:  Have you
20     looked at issues of translation and dubbing and
21     subtitles?
22  1791                 MR. TAGALIK:  Yes, we have.  Within
23     our programming budget, we have allocated for
24     versioning into either English, if it's an aboriginal
25     language, or from English into an aboriginal language


 1     or between English and French.
 2  1792                 Let's say you're watching Inuktituk
 3     programming.  Underneath there would be English
 4     subtitles to it.
 5  1793                 We also are trying to encourage
 6     programmers to do an English version of the aboriginal
 7     language production so that it's in two languages.  So
 8     much today English is the working language because it
 9     is so universal.  We will make a real strong effort to
10     do the programs in original language of choice.
11  1794                 COMMISSIONER CARDOZO:  Lastly on
12     languages, let me ask you about French language.  I say
13     "lastly" because there's a whole lot of things we're
14     trying to work out.  One is English language is the
15     language spoken by most aboriginal people.  Then you
16     want to increase the amount of aboriginal languages
17     across the schedule.
18  1795                 I notice some of the programs here
19     are in French, and I'm thinking of both French-speaking
20     aboriginal people and other non-aboriginal
21     French-speaking people.  What are your thoughts about
22     whether you will be able to go beyond the 7.5 per cent
23     in French?  One of the interventions has talked about
24     that and I wonder if you have any thoughts about that.
25  1796                 MR. TAGALIK:  What we really try to


 1     do is serve the underserved portion of the native
 2     population.  There are French program networks, and CBC
 3     does a lot of French programming.  So, for us, although
 4     it was important, it wasn't a priority.
 5  1797                 We do have Alanis here, who speaks
 6     very good French.  I didn't understand it, but --
 7  1798                 COMMISSIONER CARDOZO:  It was good. 
 8     Trust me.
 9  1799                 MR. TAGALIK:  We will certainly
10     encourage use of the language if that's what the native
11     people use in that area.  Perhaps Linda or Roman, from
12     the programming side, can speak to this a bit more.
13  1800                 MR. BITTMAN:  Yes, we will have a
14     certain amount of French language programming as part
15     of what we will do.  But in the idea of
16     underrepresented, the aboriginal languages really is
17     where our market is and where our focus must be in an
18     area that's been underrepresented up till now.
19  1801                 COMMISSIONER CARDOZO:  In your split
20     fee, the two fees, where is the line?  Is it
21     Ontario-Manitoba?
22  1802                 MR. TOURIGNY:  Probably.
23  1803                 COMMISSIONER CARDOZO:  Would you be
24     providing the identical in both or do you have the
25     ability to --


 1  1804                 MR. TOURIGNY:  We're going to crawl
 2     before we walk.  It would be a three-hour delay, full
 3     schedule three-hour delay.
 4  1805                 MS COURTEMANCHE:  May I say something
 5     here?
 6  1806                 COMMISSIONER CARDOZO:  Please.
 7  1807                 MS COURTEMANCHE:  French is a very
 8     important language.  If you think of Quebec, for
 9     instance, where all the Montagnais people, their second
10     language is French and it's a very special French that
11     they speak.  The accent that they have, because of
12     where they are located, I believe, much of it is very
13     old French and very, very beautiful.  They are unique
14     in the way they speak the language.
15  1808                 When you look at the Atikameg people,
16     their second language is French.  The Montagnais
17     language and the Atikameg language and the Cree
18     language in Quebec is very much alive.  Everybody in
19     the community speaks their own language, but they also
20     have a second language.  I think you really have to
21     consider that aspect of the life of our people in the
22     province of Quebec.
23  1809                 French really, as we go along, is
24     going to have to have a good content so that the rest
25     of the province, if there is a place that there is a


 1     need for better understanding, Quebec is certainly
 2     number one.  We really need badly to have good programs
 3     in French that reaches not only our people, certainly
 4     the number one is them, but the rest of the population.
 5  1810                 COMMISSIONER CARDOZO:  Let me ask you
 6     about the board.  I notice that you've increased the
 7     size of the board.  You've kept the northern component
 8     the size it is now and you've added another nine people
 9     for the south.  Then, as I recall, it's three
10     additional members at large.
11  1811                 Could you just outline that for us in
12     terms of what you're trying to do there?
13  1812                 MR. TAGALIK:  We're looking at a
14     21-member board.  We really tried to reflect the north
15     on there; we tried to reflect the south, and the east,
16     and the west so that we get a really good blend of
17     representation across the country.  We're looking at 11
18     members from the south and ten from the north.  North
19     also will include the Hemlin line, Wawatay.  For us, we
20     consider that south, but for the purposes of APTN,
21     we'll be representing the northern board members.
22  1813                 That's one area that our current
23     board is very concerned about.  We are going to deal
24     with it more through workshops and our board meeting
25     happening after the hearings this weekend in Ottawa. 


 1     Although we don't have APTN, we have to be ready for
 2     APTN, and that is one area that is very crucial in this
 3     whole thing.  We really believe that there should be
 4     fair representation for everyone across the country on
 5     the APTN board.
 6  1814                 COMMISSIONER CARDOZO:  Within that
 7     21-member board, will you be doing it province-by-
 8     province or is that yet to be worked out?
 9  1815                 MR. TOURIGNY:  The model that was
10     used to develop for this application and the
11     information in here was there would be eight from the
12     north, and that would include Wawatay and all the NNBAP
13     members that currently produce television programming. 
14     So that would be Wawatay and NCI.
15  1816                 COMMISSIONER CARDOZO:  So the
16     northern members have primarily been producers.  Is
17     that right?
18  1817                 MR. TOURIGNY:  Yes, the NNBAP members
19     produce the programming for TVNC.
20  1818                 COMMISSIONER CARDOZO:  So, will the
21     others also be producers?
22  1819                 MR. TOURIGNY:  They could be.  The
23     southern ones could be producers or they could be
24     representatives of other cultural organizations and so
25     on.


 1  1820                 In the north there will be eight
 2     members that will be most likely comprised of the
 3     existing NNBAP members who produce television.  There
 4     will be another northern member that will represent the
 5     independent production community in the north and a
 6     member at large from the north.  So, that's ten.
 7  1821                 In the south, the model we developed
 8     was practically province-by-province.  It worked out to
 9     be British Columbia, Alberta, Saskatchewan, Manitoba,
10     Ontario, Quebec, Maritimes and Atlantic Canada, and two
11     sort of members at large representing the independent
12     community but not tied to any particular region, and
13     then a third member at large.
14  1822                 COMMISSIONER CARDOZO:  I understand
15     that they would all be aboriginal.  Has consideration
16     been given to having any non-aboriginal people on the
17     board?
18  1823                 MR. TAGALIK:  Not really, no.
19  1824                 COMMISSIONER CARDOZO:  Do you think
20     that could help in terms of what you want to do to
21     understand the others?
22  1825                 MR. TAGALIK:  I think we have enough
23     problems just having an aboriginal and to throw another
24     twist in there, we are looking at how do we select, how
25     do we elect a person from the south.  What we don't


 1     want to do is set up an incredible amount of
 2     infrastructure that would take away from programming
 3     and getting the producers to make the network happen.
 4  1826                 So, that's part of our challenge to
 5     either use the Friendship Centres or something existent
 6     that is widely based aboriginal in the south.  That was
 7     one thing we have a few options on this weekend to
 8     really go which direction.
 9  1827                 COMMISSIONER CARDOZO:  Let me ask you
10     one more question for today, and that flows from this
11     one regarding the independent program committee. 
12     You've indicated that you have five high-profile or
13     well-known people on it.
14  1828                 I'm wondering if you could tell us
15     what the role of the program committee would be.  If
16     they are five prominent busy people, you probably won't
17     get a lot of their time.  Do they look at the schedule
18     season-by-season or on a day-to-day basis?
19  1829                 MR. TAGALIK:  We've had a few people
20     working on that very issue.  Roman has worked on it a
21     bit.
22  1830                 We know that we can't have the board
23     deciding what will be on in terms of programs. 
24     Somewhere all of our members at one time or another
25     produces programming that will be on here.  We really


 1     tried to make the program selection more independent
 2     away from our board working with a program director and
 3     developing programming that way.
 4  1831                 I think Roman would want to speak to
 5     this issue.
 6  1832                 MR. BITTMAN:  Yes, it is an issue of
 7     busy people.  So, the program director will really be
 8     the front door to the network and will do a lot of the
 9     initial filtering and relationships with producers. 
10     But three or four or five times a year, the program
11     selection committee will meet and make the big
12     decisions.
13  1833                 There's also, of course, a small
14     program development fund which will allow us to develop
15     eight or ten or more new program ideas each year
16     initially, and probably a lot more will come from the
17     initiatives of the independent producers who have their
18     own means as well.
19  1834                 All of that will work together.  It
20     works in other provincial agencies, for example, in
21     that way as well quite successfully.  I've had some
22     experience myself in that area and it can work and it
23     will work.
24                                                        1905
25  1835                 COMMISSIONER CARDOZO:  There is an


 1     old adage that if you want a job done, give it to a
 2     busy person.
 3  1836                 MR. TOURIGNY:  If I could interject,
 4     the first schedule -- the first season -- will be the
 5     busiest one because we will be expanding into this
 6     totally new animal.
 7  1837                 After that -- programmers tend to
 8     fine-tune on a seasonal basis.  So I think that after
 9     that initial hurdle it will be saying "Has this program
10     been successful?  Did it meet the objectives and
11     mandate of the network?"  Or it has run its course. 
12     Its 13 or 26 episodes are over and "What are we going
13     to select to replace it?"
14  1838                 I think that then becomes a less busy
15     function for the -- or there will be less volume of
16     stuff to deal with once we get into our second season.
17  1839                 COMMISSIONER CARDOZO:  What is the
18     relationship between the programming director and the
19     independent programming committee?
20  1840                 MR. BITTMAN:  The programming
21     director will be the instrument of the programming
22     committee, to some extent, but both are instruments of
23     the board.  The rules and guidelines and structure
24     within which they work will be set up by the board
25     initially.


 1  1841                 COMMISSIONER CARDOZO:  And would you
 2     have a connection between the board and the programming
 3     committee?
 4  1842                 MR. BITTMAN:  There will be a yearly
 5     review of the efforts and success of --
 6  1843                 COMMISSIONER CARDOZO:  But you
 7     wouldn't have an overlap between the board and the
 8     programming committee?
 9  1844                 MR. TOURIGNY:  They will be
10     independent members.  A board member will not also sit
11     on the program selection committee, no.
12  1845                 COMMISSIONER CARDOZO:  There is logic
13     to that.  The flip side is:  What if the program
14     committee has a different mind than the board?
15  1846                 MR. TOURIGNY:  Then the board can
16     change the program selection committee.
17  1847                 COMMISSIONER CARDOZO:  All right. 
18     That is on the record.
19  1848                 MS MacDONALD:  Excuse me, may I make
20     a comment?
21  1849                 I just wanted to add to what Abraham
22     and Patrick were saying about the board.  I think that
23     one of the main things we have to recognize is that in
24     the north the organizations and the board members are
25     representative of the aboriginal communities.


 1  1850                 One of the criteria of TVNC was to
 2     make sure that the aboriginal communities were
 3     represented across the north.  That is the same type of
 4     model and the same type of thing that we wish for the
 5     southern members as they come on board with APTN, and
 6     within that this current board has experienced a lot of
 7     things, growing and everything like that, and it is
 8     willing to share that expertise on how to bring people
 9     in so that the south will be representative of the
10     aboriginal communities as well.
11  1851                 As far as that goes, I think that it
12     is very important to recognize that what is in place
13     now will only be growing further; that we are not going
14     to try to change things around so that the aboriginal
15     communities will not be represented.  That is the main
16     focus of all of this.
17  1852                 I just wanted to add that.  Thank
18     you.
19  1853                 COMMISSIONER CARDOZO:  Are there any
20     other comments on the independent programming
21     committee?
22  1854                 MR. TOURIGNY:  Not unless you have
23     more questions.
24  1855                 COMMISSIONER CARDOZO:  No, I don't. 
25     I have other questions on programming which I will ask


 1     tomorrow.  Thank you very much.  That was very helpful.
 2  1856                 Thank you, Madam Chair.
 3  1857                 THE CHAIRPERSON:  Thank you, Mr.
 4     Cardozo.
 5  1858                 Ladies and gentlemen, we will adjourn
 6     for today and resume at nine o'clock tomorrow morning.
 7     --- Whereupon the hearing adjourned at 1907,
 8         to resume on Friday, November 13, 1998 /
 9         L'audience est ajournée à 1907, pour reprendre le
10         vendrdi 13 novembre 1998 à 0900

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