TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
APPLICATIONS FOR LICENCES TO OPERATE NEW PAY AND SPECIALTY
SERVICES FOR DIGITAL DISTRIBUTION / DEMANDES DE LICENCES
VISANT LA DISTRIBUTION NUMÉRIQUE DE NOUVEAUX SERVICES DE
TÉLÉVISION SPÉCIALISÉE ET PAYANTE
HELD AT: TENUE À:
Conference Centre Centre de Conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
August 22, 2000 le 22 août 2000
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
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
Conseil de la radiodiffusion et des
Transcript / Transcription
Applications for Licences to operate New Pay and Specialty
Services for Digital Distribution / Demandes de licences
visant la distribution numérique de nouveaux services de
télévision spécialisée et payante
BEFORE / DEVANT:
Françoise Bertrand Chairperson of the
Commission / Présidente
Andrée Wylie Chairperson / Présidente
Jean-Marc Demers Commissioner / Conseiller
Ronald Williams Commissioner / Conseiller
Martha Wilson Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Peter Cussons Hearing Manager and
Secretary / Gérant de
l'audience et secrétaire
Alastair Stewart Legal Counsel /
Peter McCallum Legal Counsel /
HELD AT: TENUE À:
Conference Centre Centre de Conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
August 22, 2000 le 22 août 2000
TABLE OF CONTENTS / TABLE DES MATIÈRES
PRÉSENTATION PAR / PRESENTATION PAR
GLOBAL TELEVISION NETWORK INC.(OBCI/SDEC) 2070
PRÉSENTATION PAR / PRESENTATION PAR
ASTRAL TELEVISION NETWORK INC./
GLOBAL TELEVISION NETWORK INC. LIMITED PARTNERSHIP
(OBCI/SOCIÉTÉ EN COMMANDITE (SDEC) 2247
Hull, Quebec / Hull (Québec)
--- Upon resuming on Tuesday, August 22, 2000
at 0830 / L'audience débute le mardi
22 aôut 2000 à 0830
16739 THE CHAIRPERSON: Good morning and welcome to the seventh day of our hearing. Bonjour tout le monde.
16740 I heard some tentative jingling in the back. I remind people to turn off their pagers and their cellular phones, please, when they are in the hearing room. Thank you.
16741 Mr. Secretary.
16742 MR. CUSSONS: Thank you, Madam Chair.
16743 We will now hear applications by Global Television Network Incorporated (OBCI) for six new Category 1 services which means, of course, that Global will have 45 minutes to make its presentation.
16744 These new services are Canadian Travel Channel, DesigNation, Vital TV, Digital1, Your Money and VIOLET. We have Mr. O'Farrell and colleagues.
16745 Mr. O'Farrell.
PRESENTATION / PRÉSENTATION
16746 MR. O'FARRELL: Thank you, Mr. Secretary.
16747 Good morning, Madam Chair, Madam Vice-Chair, Commissioners and members on the Commission staff and to the millions of viewers watching us on CPAC this morning. My name is Glenn O'Farrell and I am Global's Senior Vice-President, Specialty Services and New Media.
16748 With me today are Leonard Asper, President and CEO of CanWest Global Communications Corp, as well as Kevin Shea, President of Global Television Network. You know Kevin was involved in the first round of specialty hearings in the mid-seventies, which speaks to his grey hair. He later launched YTV, Life Network and more recently, Prime TV.
16749 Charlotte Bell, our Director of Public Relations and Regulatory Affairs is here as well. We also have Greg Treffry, Director of Planning and New Media Development; Katherine Browne, our Senior Financial Analyst, who was formerly a Vice-President of Finance at YTV and TreeHouse.
16750 We also have Pat Douey, a key member of our Specialty Group. Pat is appearing before the CRTC for the first time in approximately ten years. She has been a participant in many firsts in Canadian broadcasting and cable. However, for the last few years, Pat ran a number of specialty services in the U.K. We are very proud that she has joined the Global team.
16751 We also have Catherine Thompson of Affiliate Relations. In addition, we have Heather Hatch-Dinel, a design and art professional, who has played a central role in the development of DesigNation, Anne Marie Varner, a well known independent producer who led the development of Digital1 and Bill Hunt, a cable TV pioneer and now General Manager of Prime TV who will outline our plans for Your Money.
16752 Also assisting us with today's presentation are Angela Marzolini, Vice-Chair of Pollara, our public opinion firm; Judy Tapp, the Prime TV sales and advertising dynamo that put YTV on the map and is now doing the same for Prime. We are pleased to have Deirdre McMurdy of Prime Business with us along with Mary Ito, Global's dedicated health reporter, and finally and not least, of course, Lisa de Wilde of Astral.
16753 With that brief introduction, I would like to pass the baton -- no pun intended -- to CanWest Global's President and CEO, Leonard Asper.
16754 MR. ASPER: Thank you, Glenn. I hope all those people paid their own way here. We didn't pay for them, did we? It's just a bus check.
16755 You can see I have been relegated to the back row and I'm sure by group licensing I will be watching on CPAC with call-in features only.
16756 Madam Chair, Madam Vice-Chair, Commissioners, it is indeed a pleasure to have this second opportunity this year to appear before you. We thank you once again for your speedy and bold decision on our WIC application earlier this year.
16757 When I last appeared before you in Vancouver in April, I described to you CanWest's vision of creating a media company that would marry content with cross-platform, promotional and exhibition capabilities to offer Canadians the best services and maintain a strong Canadian presence in the rapidly evolving media environment.
16758 We were pleased that you gave us the opportunity with your decision on WIC to put a major strategic piece of this picture in place with the completion of Global Television's national network.
16759 Following that decision, as you know, we have taken some modest steps to further strengthen our capabilities. The most significant of these steps, the proposer merger with Hollinger's Internet and print media, will provide us with both additional cross-media platforms and a wealth of additional content.
16760 We are delivering on the vision of a Canadian media company that will be able to compete on the world stage and ensure the presence of a Canadian voice. Now, CanWest is poised to take a leadership position in media convergence, technological revolution and interactive new-media.
16761 Today we are presenting to you a series of applications to you that we see as an essential next step in realizing our vision. As you know, Global operates only one Specialty Service licence, Prime TV. As a company, we are far too dependent on advertising revenues in a fragmenting market rather than the more predictable subscription revenues many other companies enjoy.
16762 The services we are proposing today will enable us to address this shortcoming by adding exciting new digital services that will exploit our growing cross-platform capabilities, lever our investment in content and offer exciting new services to Canadians, services that we think will be important drivers for the digital tier of services.
16763 We have the resources to make this channel work and the staying power to see them through the initial lean years. We stand behind them and will ensure that they present a vibrant new choice for Canadians. With over 1.2 million addressable digital homes in Canada, the train is now ready to leave the station. The whistle is blowing and as the train rides down a sparkling new digital track, you can count on Global to make sure that the cause on its trains is Canadian and can withstand the twists, turns and switches along the way.
16765 MR. SHEA: We are enthusiastic about the applications that we present to you today. These applications match, and in many cases surpass the Commission's selection criteria. And we believe that they will drive consumer demand for distribution technology.
16766 Consumer research that was conducted by Pollara on our behalf demonstrates significant demand for our services that we are proposing and a strong willingness by consumers to purchase these services.
16767 These services will be unmistakably Canadian. Our proposals make significant commitments to the development and exhibition of original and diversified quality Canadian programming.
16768 Finally, each service will make innovative use of the digital medium. However, in the end, it is compelling content that will make our proposals real winners. Consumers will not concern themselves with the technology. It will be about the experience and the programming that they receive.
16770 MR. O'FARRELL: Thank you, Kevin. Madam Chair, with that overview, we would like to turn our attention and your attention to the individual applications this morning, starting with Vital TV - Canada's Health Channel. Pat Douey played a key role in developing this much-anticipated service, so I would ask her to introduce the concept.
16771 MS DOUEY: Good morning. There has never been a better moment or a greater need for Vital TV - Canada's Health Channel. Today we are here to tell you that we are ready, able and eager to seize that moment and to meet that need.
16772 We polled Canadians extensively for this application and what they told us was very compelling. Ninety-two per cent expressed concern about the standard of health care in Canada and Canadians consistently name health care as the most important issue currently facing this country. More than one-half believe the health care system Canadians value so dearly is coming apart at the seams.
16773 Our market research found that 84 per cent felt that a service like Vital TV - Canada's Health Channel would be a positive addition to the Canadian television system. Two in three Canadians surveyed said they or a member of their household would be interested in watching Vital TV.
16774 Among those who might consider buying or renting a digital terminal, fully 40 per cent said the availability of Vital TV would make them more likely to invest in a digital receiver. Just under 75 per cent of the digital market said they would be prepared to pay as much a dollar more a month to receive Vital TV.
16775 Vital TV is 100 per cent Canadian owned and when it is launched, it will air at least 75 per cent Canadian content.
16776 Global already has an excellent track record in medical journalism. Linda Boyle is an award-winning health journalist and one of the country's most respected health reporters. May Ito, whom we are fortunate to have with us today, hosts a daily segment -- Health Matters -- that updates viewers on the latest advances in medical research, treatment and disease prevention.
16777 MS ITO: Thank you, Pat. Madam Chair and Members of the Commission, the perspective that I bring today is not just that of a health reporter, but as someone who comes in contact with the public every day and hears the concerns and the questions that they have about their health.
16778 What has really struck me, as Pat has mentioned, is the insatiable desire that people have for health news. I get many calls every day from people. Most of the calls I receive are requests for more information on the stories that I cover. People really want to know the nitty-gritty about health. They want to know the pros and cons of new treatment and drugs. They want to know where new types of surgeries are available and who is doing it.
16779 It's frustrating for me that there is currently no venue that can clarify and explain a lot of the complex health issues that they are interested in. I think that a health channel could do this.
16780 As well, I find that people are quite confused about health issues today and it's not surprising. One week they are told beef is good for them, the next week it's bad because they hear a report. Vitamin E was considered good for the heart and hormone replacement therapy was the answer to menopause.
16781 But now people aren't sure because they hear negative findings and I think what they are looking for is a forum to put these issues in some kind of meaningful context.
16782 Interestingly, I find that another service that a health channel can provide is support. Most of the viewers who contact me are women, which is the target audience of Vital TV, and many of them are young mothers who have small children and they ask me for advice and sometimes reassurance and I think with families so far apart today, people are looking for other ways to get advice that was once handed down by their parents and by their grandparents.
16783 So I think that Vital TV can also fill this need. I don't think we can stress enough that a health channel must be Canadian. A lot of health news that we get today comes from the U.S. and elsewhere and it is crucial that we determine how new treatments, drugs, and health trends affect us here because we are different.
16784 We are often quick to applaud the achievements that are made across the border. I find that Canadian scientists tend to be a rather modest bunch of people, but they are making incredible discoveries, and they have been making wonderful discoveries that are recognized around the world and that affect millions of people.
16785 There is some research that has shown people who are better educated about their health can fare better. They can make better recoveries, they can have improved quality of life, and I think that if Vital TV could be a part of that education process, then it would provide a very valuable service to Canadians.
16786 MS DOUEY: Global has also signed on some very dynamic partners to share with us in this service, beginning with Medbroadcast Corporation which owns and operates the largest Internet medical Web site in Canada and brings considerable medical expertise to this application.
16787 We are also delighted to have formed a strategic partnership with Flextech Television of the United Kingdom, a multichannel company which has been developing an interactive health channel in the U.K. with the National Health Service.
16788 Global is equally committed to working closely with Canada's large network of health service organizations to ensure Vital TV's programming responds to the concerns of their constituents. These organizations will participate in an advisory council that will provide input and expertise to the channel. We consulted widely with these organizations in the preparation of this application and many of them are already actively involved in providing advice on the proposed programming content for the channel.
16789 Interactivity will be an important component of Vital TV from day one. Viewers will be able to display an onscreen menu offering supplemental information, including definitions of terms, upcoming shows on related issues, and other resources such as links to health resource and support organizations.
16790 As interactive technology is refined, more sophisticated on-line applications will become available.
16791 Our video speaks the vision we have had to head the way in becoming Canada's principal video source for health and wellness information. Let's take a look.
--- Video presentation / Présentation vidéo
16792 MR. O'FARRELL: We would now like to turn your attention to another application that we call Your Money.
16793 You know, Commissioners, there are many things that everyone in this room has in common including an untiring appetite for regulatory hearings in the summer.
--- Laughter / Rires
16794 But perhaps more to the point, we all have to pay taxes and we all have to manage our money. I would like Bill Hunt to introduce Your Money - The Personal Finance Channel.
16796 MR. HUNT: Thank you. Good morning.
16797 The world of personal finance can be a confusing place -- and so can this microphone.
--- Laughter / Rires
--- Pause / Pause
16798 MR. HUNT: Thank you, Mary.
16799 It can be like a jungle where you fight just to survive with no question of a million dollars at the end -- which, by the way, you can see Survivor tomorrow night, eight o'clock on Global.
16800 Your Money - The Personal Finance Channel will be Canada's first and only television service that focuses exclusively on personal finance and investing, and delivers accurate and current information on personal finance planning. And it will give answers to viewers through a direct part in programming through the innovative use of interactive media.
16801 Your Money's programming content will be overwhelmingly Canadian -- at least 83 per cent -- when it goes on the air. During the course of the licence, over $38 million will be spent on Canadian programming.
16802 Research conducted for this application indicated that Canadians are keenly interested in a television channel that examines personal finance from a Canadian perspective.
16803 Our polling revealed that more than 75 per cent of Canadians feel that a personal finance channel would be a positive addition to the Canadian television system. Two-thirds of the digital market would be interested in subscribing to Your Money. And more than one-half of Canadians liked the prospect of getting additional financial information through the channel's interactive functions.
16804 Your Money will help Canadians find their way through the maze and help them make sense out of all the complexities and confusion surrounding financial planning. Global is uniquely positioned to provide this service. For example, our specialty network, Global Prime, produces an excellent extended daily program, Prime Business, hosted by the respected financial journalist Deirdre McMurdy, which profiles the business newsmakers of the day from across Canada.
16805 Deirdre is with us today and has some interesting insights into the need for Your Money.
16806 MS McMURDY: Good morning.
16807 I don't think there is any question really right now that a strong economy and very buoyant capital markets have created an unprecedented cycle of prosperity, and more specifically a very personal wealth and that, of course, has fostered a very heightened awareness of -- and I guess interest in --financial news and reports among much broader cross-section of the population than we have ever seen before. At the same time computer technology -- everything from on-line trading to chatrooms -- have really empowered individuals to a new extent and they are able to take charge of their own portfolios and take, I guess, a new kind of grip on their own finances.
16808 And also for the past decade, I don't think there is much argument that the message from government and from corporations has been very clear. In redefining themselves, they have redefined their role and their sense of responsibility towards individuals and I think they have made it abundantly clear that individuals have to take on a much more direct responsibility for their own financial future.
16809 Canadians have done a pretty good job of making that psychological shift and accepting that change in mindset. They have taken on that greater responsibility for their own financial futures, but as they look around right now, they see a lot of scattered information. There is lots of information out there, but it's not very focused and there is no really, I guess, clear one focused authoritative analytical voice on the subject, and I think we really need that source, certainly in Canada.
16810 As Mary mentioned in the health case, we also do get a lot of financial information from the U.S. There is a great need for sort of an indigenous source here, and I think that Your Money could really educate and inform and inspire Canadians on this topic.
16811 Thank you.
16812 MR. HUNT: Thank you, Deirdre.
16813 Your Money will take full advantage of the digital interactive revolution so that viewers will have a brand new way to get fast and reliable financial information. So, for example, viewers will be able to register for regularly updated financial information, including personalized stock tickers and updated financial market information. Through on screen icons, viewers will also be able to access menus offering information on a range of personal financial services, including mortgages, automobile loans, educational savings and insurance.
16814 To conclude, Global believes that Your Money will fill a critical void in Canadian specialty programming and at the end of the day, it will help enhance the lives of Canadians.
16815 Thank you.
Video presentation / Présentation vidéo
16816 MR. O'FARRELL: We now turn to DesigNation.
16817 Canadians live in a country of endless vistas and breathtaking natural features. Therefore, it should not be surprising that we have developed a reputation for design and art that reflects the wonder of our natural environment.
16818 Heather Hatch-Dinel will tell us about how DesigNation -- Canada's Arts and Design Channel -- celebrates and builds on these accomplishments.
--- Technical difficulties / Difficultés techniques
16820 THE CHAIRPERSON: That is one minute off, Mr. Secretary.
16821 MS HATCH-DINEL: Thank you.
16822 Good morning. DesigNation is an art and design channel that celebrates the visual arts and design and the many talented people that work in these fields. More specifically, DesigNation celebrates the best in Canadian art and design and Canadian artists and designers. Our goal is to demonstrate the power of appealing design and the thinking behind it, in an entertaining and informative manner.
16823 There are many Canadians of international stature working in various design disciplines who are considered leaders in their fields. Think of Karim Rashid, Linda Lundstrom, Robert Bateman, Brian Gluckstein, Jack Diamond, Phyllis Lambert and Martha Sturdy, just to name a few.
16824 Evidence of design's popular appeal can be found all around us: on the magazine racks full of Canadian titles about design and its related disciplines; in the thousands of Canadians who attend the annual interior design show and the one of a kind shows and similar events across the country; and also in the high attendance at art museums and galleries (over 23 million people a year), and in their tremendous appeal as tourist attractions.
16825 Our recent Pollara survey showed that fully two-thirds of Canadians were interested in this concept and felt it would be a positive addition to Canadian television. DesigNation responds to this demand.
16826 DesigNation will spend $38 million on Canadian productions over the term of the seven-year licence.
16827 DesigNation's programming is unlike anything that has been done before. This is a first for Canada. From Urban Decoder, the architecture and urban planning show, to Enter Stage Right, which will take viewers behind the scenes of Canada's leading theatrical productions, viewers of all interests will find something fresh and exciting.
16828 Several of the shows planned for DesigNation incorporate a "digital" theme. For example, Visual Impact's interactivity will allow viewers to access information that complements the programs -- information such as biographies of artists, artisans and designers, galleries where their work is displayed, and close-up details of actual individual pieces.
16829 There will even be a DesigNews show, which will feature interviews with design celebrities, profiles on up-and-coming Canadian design stars, and up-to-the-minute reports on Canadian and international art and design events, exhibits and trade shows.
16830 Our strategic partners on DesigNation are Canadian Interiors magazine, one of Canada's top design publications, whose publisher Jack Ruttle is here today in the audience; plus the Design Exchange in Toronto and DXNET, Canada's premier Internet design information provider.
16831 We have prepared a video presentation that will show you how we envision this new interactive specialty television service devoted to Canadian art and design issues.
--- Video presentation / Présentation vidéo
16832 MR. O'FARRELL: Turning now to the Canadian travel channel.
16833 Canada is a country on the move, and in Canada we travel between our widely distanced cities and we travel to vacation spots in all corners of the land.
16834 I would like to ask Charlotte Bell to tell you about the Canadian Travel Channel.
16835 MS BELL: Good morning; bonjour.
16836 As Canadians are increasingly bombarded with information from foreign sources about foreign places told from a foreign perspective, we think it's time for a Canadian voice to be heard to make us aware of what our options are, while ensuring that Canadian travel opportunities are championed.
16837 Making full use of interactive and participatory tools, the Canadian Travel Channel will allow Canadians to share their perspective on places they have visited -- to share their travel experiences.
16838 The proposed Canadian Travel Channel would be distinctively Canadian. The channel will launch with a schedule that boasts 71 per cent Canadian content, maintaining that level throughout the course of its licence term.
16839 Over the course of its licence, the Canadian Travel Channel will spend over $37 million on the Canadian programming that will comprise the vast majority of its broadcast schedule.
16840 At the heart of our schedule, Destinations Canada will present in-depth profiles of over one hundred different Canadian travel destinations.
16841 The Canadian Travel Channel is ideally suited for interactive applications, enabling viewers to access a wealth of complementary material in addition to that presented by the program itself.
16842 Our market research found strong public support for a dedicated Canadian travel channel. In fact, our survey found that:
16843 (1) 80 per cent of Canadians thought that the Canadian Travel Channel would be a positive addition to the Canadian broadcast system; and
16844 (2) 62 per cent of households would be interested in watching the channel.
16845 In short, the demand for Canadian travel and related information is on the rise. As baby boomers hit retirement age and enter into their leisure years, many are turning to travel as a major component of their leisure activity.
16846 We believe the Canadian Travel Channel is an innovative platform that will provide Canadians with the travel information they want.
16847 We have a short video to give you a better idea of what we have lined up for the travelling public.
--- Video presentation / Présentation vidéo
16848 MR. O'FARRELL: Next we turn to Digital1.
16849 These hearings are about new services made possible by technology. Anne Marie Varner will introduce Digital1 to you, Canada's first channel devoted exclusively to the delivery of factual, interactive programming on technology issues.
16850 Anne Marie.
16851 MS VARNER: Technology is dramatically changing the way Canadians communicate. it is transforming business, it's transforming the way we govern, and it's also transforming the way society interacts. In our opinion, there is no better time for and there is no question that Canadians are ready for a channel that is devoted exclusively to the technology that is changing their lives.
16852 Digital1 will be that channel. It will present a clear picture of technology that often seems too fantastic to even believe.
16853 In the spirit of the digital age, Digital1 will be designed to drive traffic across platforms and connect Canadians from coast to coast. It will focus on the real world applications of technology that we encounter every day, showing us how to enrich and even simplify our lives.
16854 It will be a service that is shaped by the Canadian experience. The new online generation is a primary target of the channel. However, the profile of Internet users is changing. As we know today, 50.4 per cent of Internet users are now women. Older people too are becoming more and more a part of the online users. There will be programming for all of these groups.
16855 Digital1, though, is geared specifically to those in the 18 to 35 year old demographic who are the highest users of Internet, and, according to the latest Angus Reid poll in Red Herring magazine, they are the most interested in interactive television.
16856 We want to create something unique, something new, something just for Canadians. At launch, our schedule will boast over 77 per cent Canadian content, and we will maintain that level throughout the period of licence. By investing close to $42 million in Canadian programming over the term of the licence, we will provide valuable content to a Canadian audience in a truly Canadian context.
16857 Digital1 will be an interactive service, drawing on the in-house expertise of Global's New Media team. The Digital1 Web site will be a key interactive element of the Digital1 brand. It will allow viewers to interact with shows on air in real time through online discussions and chat groups.
16858 We have strong partners for this channel in the Banff New Media Institute and particularly Astral Television Networks. In fact, Astral has already proven the concept of a technology channel with the success of its Canal Z service in the French-speaking market.
16859 Our Pollara study found that an astonishing 91 per cent of men and 87 per cent of women under 35 said that Digital1 would be a positive addition to the Canadian television system.
16860 You have heard our vision for a channel that will shape our understanding of technology as a thoroughly Canadian experience. Now let's have a look at what Digital1 will look like in action.
--- Video presentation / Présentation vidéo
16861 MR. O'FARRELL: Madam Chair, our final application is called VIOLET -- the only Canadian service on matters of the heart. I will ask Katherine Thompson to introduce it to you.
16862 MS THOMPSON: Thank you, Glenn.
16863 Canada has had its share of great love and relationship stories, stories that have enthralled and fascinated us over the years.
16864 Remember: Pierre Trudeau and Margaret Trudeau; Pierre Trudeau and Barbara Streisand; Pierre Trudeau and Liona Boyd; Margaret Trudeau and Mick Jagger; Matthew Barrett and Anne-Marie Stein; Michael and Marlene Cowpland; and, of course, another great Canadian, Mackenzie King and his beloved dog.
16865 We read about them and we yearn for more because we have an insatiable appetite for matters of the heart.
16866 Love is a hot topic in Canada. Canadian authors like Michael Ondaatje and Margaret Atwood are universally famous for their stories of love. Canadian magazines such as Chatelaine and Flare dedicate a section every issue to relationships. And Canada is home to perhaps the most recognized icon of romance, the Harlequin novel.
16867 According to our recent Pollara survey, 44 per cent of Canadians indicated that they or a member of their household would watch a channel dedicated to love and romance. Sixty per cent of the public believe that VIOLET would be a positive addition to the Canadian television system. Fifty-seven per cent of the digital market would be willing to pay one dollar per month in order to receive VIOLET. VIOLET's formula is simple -- everyone loves to be in love.
16868 So to satisfy the romantic side of Canadians, Global and Astral Television Networks are proud to bring you VIOLET -- Canada's premier television service dedicated to matters of the heart. We think that Canadians will be captivated by our unique combination of entertainment and information programming on the topic of love.
16869 VIOLET's program mix offers love-themed content in a variety of formats. Some examples include: Ask Violet, featuring a panel of experts fielding relationship questions from viewers; Love on the Half Shell, a fast-paced and fun-filled half hour magazine show that explores the lighter side of love; along with Canadian documentaries; and, a selection of romantic movies and love series from Canada and around the world.
16870 From the day of its launch and throughout the seven-year licence period, VIOLET will feature a minimum 50 per cent Canadian content. And that's not all. By establishing a Script Development Fund for Canadian romantic screenwriters, VIOLET will be investing up to $3 million in new Canadian dramatic programming, new programming which will be featured in prime time.
16871 Proving that love thrives in the digital age, VIOLET will be interactive from its launch. Interactivity will add an extra dimension of education, entertainment and fun for viewers. For example, an on-screen icon will take viewers to Arts of the Heart, suggestions for the little things that we can do to show a loved one, particularly grandmothers, that we care. Another icon would present recipes guaranteed to win someone's heart, themed to special holidays and the current season.
16872 Visitors to the violet.com Web site will find a wealth of reliable relationship information at the click of a mouse. The site will offer expert advice, articles and updates on VIOLET's programs. We are particularly excited about the addition of a new dramatic series exclusive to violet.com -- the first Canadian virtual soap opera!
16873 As you can see, VIOLET represents an innovative, refreshing and attractive addition to the range of specialty channels offered to Canadian viewers. VIOLET embraces technology by extending its brand name and love-themed content to a dynamic and interactive Web site. Most importantly, it is committed to developing and promoting Canadian programming, which will benefit the entire Canadian broadcasting industry.
16874 On that note, with love in our eyes, romance in our hearts, and a digital driver on the drawing board, we would like you to experience for yourselves the irresistible attraction of VIOLET -- Canada's love and romance and channel.
--- Video presentation / Présentation vidéo
16875 MR. O'FARRELL: Madam Chair and Commissioners, we sincerely believe that the services that we are applying for today represent a very big part of our future.
16876 We believe that our proposals are the best choice open to you because they are both imaginative and entertaining. They are backed up by realistic business plans. They feature innovative Canadian content that will attract consumers and promote adoption of the digital technology and subscriptions to digital services.
16877 Global is absolutely determined to play its part in ensuring that Canadians continue to see themselves and their experiences reflected in the new world of digital media. This will require strong owners with the necessary resources to see this endeavour through to success.
16878 We are committed and dedicated to this task. Frankly, we have been anxious to arrive at this hearing and stand by ready and willing to launch.
16879 That concludes our presentation. We would be pleased to answer any questions you may have.
16880 THE CHAIRPERSON: Thank you.
16881 Welcome, Mr. Asper, Shea, O'Farrell and your team.
16882 We are very impressed by the number of young women on your team. So I'm kind of curious, Mr. Asper, whether Global is trying to match the Commission's gender composition --
--- Laughter / Rires
16883 THE CHAIRPERSON: -- I dare not say age -- or if you are just better at finding the real talent.
16884 MR. ASPER: Well, there is just a lot of love and romance in the air generally today.
16885 THE CHAIRPERSON: Commissioner Wilson, please.
16886 COMMISSIONER WILSON: I assume that is not the only reason they are there, is for the love and romance.
16887 Good morning, Mr. Asper, Mr. O'Farrell and Mr. Shea.
16888 I enjoyed the comment about Survivor, but I'm quite sure that I can say I won't be watching it tomorrow night, I will be too busy surviving the hearings.
16889 Before I begin, I have to offer Mr. O'Farrell an opportunity to redeem himself with his boss with respect to the comment about Mr. Shea's hair.
16890 In your opening remarks you said that Mr. Shea was involved in the first round of specialty hearings in the mid-70s and that that is the reason for his grey hair. If I recall correctly, it was actually the mid-80s when those hearings were held, which means that he is not as old as he looks.
--- Laughter / Rires
16891 MR. SHEA: Never one to dispute, but the first hearing was actually held in this great city in 1977 and we were the first to get an experimental specialty licence for a children's channel, a consumer channel and a multicultural channel.
16892 COMMISSIONER WILSON: Oh, I stand corrected.
16893 MR. SHEA: Now, I was eight at the time --
--- Laughter / Rires
16894 MR. SHEA: -- and I was appearing on behalf of the children's channel.
16895 COMMISSIONER WILSON: I was a little older, I was just finishing high school.
16896 THE CHAIRPERSON: Commissioner Wilson was just a gleam in her mother's eye.
16897 MR. SHEA: But there was a lot of romance in the air.
--- Laughter / Rires
16898 COMMISSIONER WILSON: I don't know, I was the seventh. I wouldn't say that that was a very romantic time after all those kids.
16899 As you know, we have a little routine that we go through here. I have given up trying to make the general questions more interesting, I have given up on the word association idea, although I'm still convinced it would be more efficient.
16900 But what I'm going to do is take you through the general questions. Just so that you know, I have gone through all of your applications and as much as possible where I have found commonalities in your approach to things I have pulled questions up into the general question area. So there may not be as many questions associated with each of the individual applications if I have seen sort of similar approaches across all of the applications and felt that I could get the information that we need on the record just by asking you sort of one broad question.
16901 The first question, of course, is the criteria. I'm just wondering if you could -- Mr. O'Farrell, of course, you have been through this before with 13th Street, 13e Rue, but maybe you could give us an idea from the perspective of these six applications what criteria you feel are the most important in terms of choosing the services that will drive the penetration of digital into the home.
16902 MR. O'FARRELL: Thank you, Commissioner.
16903 I think the criteria that the Commission articulated in the call are all important -- there is no doubt about it -- however, we would advocate that if one were to prioritize which ones should be viewed as having more weight or give more consideration to, we would be suggesting that the question of the attractiveness of the proposed service should be top of mind.
16904 The reason we suggest that is because we know that this environment is going to require quality Canadian programming and quality services to help the roll-out of digital. We have heard this term before and I apologize for the cliché, but we do think that the digital driver concept really and truly does have to be top of mind, the attractiveness of the proposal and indeed how it will assist in driving digital as a tier and the take-up factor.
16905 The second issue, and they are really on quasi-equal footing, and that is how that proposed service that has attractive features is also making what we would call an innovative contribution to Canadian programming.
16906 The call reflected a need to incorporate interactive elements into the programming proposals that applicants would submit to the Commission, and we feel that the contribution to new original Canadian programming, and not only for the Canadian marketplace, although that is obviously very important, but also where this new original Canadian programming has export opportunities and potential tied to it, where there really is an opportunity to take Canadian creative works and find new markets for them.
16907 Finally, we would say to you that over and above those two issues there has to be some consideration given to the reasonableness of the plan that the applicant has put before you, not to quarrel with assumptions or how people or applicants have put together their applications technically, because I think that you have very good applications overall, there is no doubt about it.
16908 But I think at the end of the day the Commission has to be convinced that they are reasonable, they are realistic and that the applicants that are suggesting that they be licensed have the wherewithal and the track record to make them successful.
16909 COMMISSIONER WILSON: On the question of attractiveness, what elements would you include in that? I mean, we say it has to be an attractive service, but what makes it an attractive service in the digital environment. Actually our Chair, the high Chair, Madame Bertrand yesterday asked one of the applicants a question: Is attractiveness something that we look at differently in the digital environment.
16910 MR. O'FARRELL: I think it is, but I think it goes back to the fundamental research that is submitted in support of the applications.
16911 I think Angela Marzolini can speak to this issue and add comments about how our research was conducted.
16912 Just as a heads up, I don't believe that any other applicant in this process submitted research that spoke to two issues: (a) the appetite for buying or renting digital boxes and, separate and distinct from that issue, the appetite that consumers had for the various proposed services that were being considered.
16913 So I would like to turn it to Angela to add her comments, please.
16914 MS MARZOLINI: Thanks, Glenn.
16915 As Glenn mentioned, we took what we feel is a very realistic approach to assessing consumer demand and in many cases it was in fact on the conservative side.
16916 The way we looked at this is, we understood, we recognized at the outset that a majority of Canadians would not be renting or buying digital boxes within the next few years so it would be unrealistic to assess consumer demand among all Canadians, although we did ask about some general interest questions among all Canadians.
16917 So what we did is we isolated the digital market and we asked them how likely they were to subscribe at different price points. So we feel that this is very solid, hard data that can be relied upon in assessing consumer demand.
16918 As Glenn also mentioned, the data, the research was extremely thorough as well. We conducted a number of different studies which looked at a very wide range of indicators of interest among the public, things like how -- the impression of the addition of the service to the Canadian television system, whether they thought it would be a positive or negative addition; the interest of households in watching the service; the impact on price on likelihood of subscribing; and also, as Glenn mentioned, the extent to which each service is a digital driver, which is obviously a very, very important criterion.
16919 We found that each of the applications was a very strong digital driver. I won't repeat the numbers that have been gone through in the presentation, but the numbers hold up well and are very, very positive and present a very compelling argument for these services.
16920 COMMISSIONER WILSON: Thank you. Maybe while we are on the topic of research I can just have you go through some of this for us because when I was looking at the research studies that you submitted with your applications -- I will give you an example with the Canadian Travel Channel.
16921 You did a thousand interviews. Fourteen per cent said they were very interested in having access to digital cable and 27 per cent somewhat interested in having access. Of these, 60 per cent say they would be very or somewhat likely to purchase.
16922 You are sort of getting down to pretty small numbers. I guess what I'm trying to get at and you will know if you have been watching the hearing that I explored this issue with one of the applicants who didn't submit traditional research but gave us some other indicators. You have done the same thing as well, given us some sort of anecdotal evidence of interest in the genres of the channels that you have applied for.
16923 When you are getting down to numbers that are that small, how do you extrapolate and on that base the assumptions for a business plan and feel confident that your plan is solid?
16924 MS MARZOLINI: Well, this is the reason that we went with very significant large sample sizes, so that we could break it down and segment out the digital market. The sample sizes in each case are very robust and reliable when we break it down by the digital market.
16925 As you mentioned, 41 per cent for the Canadian Travel Channel were very or somewhat interested. Among that group we asked their interest in buying or renting a digital box and it was 28 per cent. The sample sizes, I don't have them in front of me, but they are reliable. The sell sizes are not too small to be able to make this conclusion.
16926 COMMISSIONER WILSON: And what's your view about how valuable the anecdotal evidence is? I mean obviously since you have given some of it, you are using it as an indicator.
16927 MS MARZOLONI: Well, on its own without any hard data to back it up, I have to say I'm not a big fan about anecdotal evidence. I'm not a fan of qualitative research on its own as evidence of consumer demand.
16928 Really, qualitative research is intended to give a range of attitudes and opinions which exist. They don't tell you -- they can't possibly assess in a hard factual way the demand for a service like this. You can't take results of a focus group or the results of anecdotes and say that 80 per cent are interested in the service. You just can't do that.
16929 What we have here is very hard data, large sample sizes, very reliable, that presents a very compelling argument for each of the services.
16930 COMMISSIONER WILSON: I guess at the same time though, if you are an experienced television operator, you have some kind of instinct about what genres are going to work better than others and what genres will make or be most attractive to subscribers.
16931 MR. SHEA: Commissioner Wilson, I think the best anecdotal evidence is what's happened with Specialty Services in Canada from an historical perspective and that is they are very successful. Whether it's tier 1, 2 or 3, Canadians have shown a huge appetite for more and better services.
16932 I think you're right. We looked at what was happening around the world in other markets where we operate with respect to new specialty services, which is why 13th Street came about, which is an application you heard last week.
16933 We polled consumers. We looked at what was driving the Web in terms of why consumers were using and going to the Web. You will see a number of our channels are Web based. We started out actually with about 25 different programming concepts and whittled down what was best in terms of what consumers said to us.
16934 To your key question about attractiveness, and that is -- you will note that our applications offer a significant level of Canadian content, which is about the diversity. Unless the content is different, new and fresh, people are not going to subscribe to it, if it's just a replication of what they already have. I think that's a common theme throughout all of our applications.
16935 We do know with respect to the history of Specialty that Canadian content works. That's what we see as the best marketing trick, if you will, that the content will be unique.
16936 MR. O'FARRELL: Commissioner Wilson, if I may just add. There is some additional data that we haven't put on the record that came out last week that I'm sure you may not probably be aware of.
16937 It speaks to the appetite of Canadians for Canadian content and particularly in this context where we are talking about Specialty Services that have to have interactive components, i.e. Web site and so on.
16938 The Angus Reid survey shows of the thousand Canadian Web users, overwhelmingly Canadians want Canadian Web sites, particularly they identify with the content of Canadian Web sites. Eighty-three per cent said they see Canadian sites when looking to make a purchase, for financial news. Thirty-six per cent prefer Canadian sites for sports news. There's a litany of other information.
16939 The Angus Reid survey I think makes the point that Kevin is making and that we are making in this presentation, which is we have identified some fabulous, in our view, program concepts that we have researched on a variety of levels, including the data to which Angela was making reference.
16940 We know the Canadian content works historically from the experience of Specialty. We believe that these service proposals tied with smart, intelligent, well-defined Web sites and interactive components will continue that, even in the very challenging environment of the digital universe initially and for the first couple of years.
16941 COMMISSIONER WILSON: Mr. Asper.
16942 MR. ASPER: Yes. Just to add to Glenn and Kevin. You know, at one point four million homes, it doesn't look terribly exciting from a financial perspective. At three million homes it starts to look exciting or two million homes. At five million homes it looks exhilarating. I think that's what we are all betting on.
16943 I would urge the Commission to seek any ways it can to incentivize the distribution undertakings and the programmers who can promote the existing programmers like Global and CTV, to promote the use of digital -- the purchase of digital boxes by the consumer.
16944 Any policy that does that is going to make this whole environment better for all of us. It's a bit of a chicken and egg. People don't buy digital boxes unless there's something different that they can get on their system other than the analog. The timing of this hearing is impeccable, but now it's time to incentivize the programming services and the distributors to put the digital boxes in the homes and to create demand for them.
16945 That's where this gets exciting in terms of the new services that can be offered.
16946 COMMISSIONER WILSON: I am familiar -- I saw Ms Douey speak at a panel at a conference on the U.K. experience and it occurred to me that there might be some similarities when we are looking at the small number of subscribers available in the Canadian digital universe and the experience in the U.K. where wrestling people away from their four dear channels and getting them to buy other channels must have been quite a challenge.
16947 I was wondering if you had any comment on that.
16948 MS DOUEY: I think the U.K. experience is interesting, but it's primarily a DTH digital experience at this stage because cable has, for one reason or another, not been able to get its digital act together.
16949 The example there is really Sky television, which has been the market leader certainly in multichannel television. Sky is very, very committed to moving analog, their analog universe, over to digital as well as to attract new subscribers to the service. They have been extremely aggressive about doing that.
16950 Recent information from the U.K. shows them at 3.5 million digital subscribers. They are out-performing all of the predictions in that market. They are expected to be at five million subscribers by the end of this year.
16951 The ways in which they have done this, they have enriched the digital offering over the analog offering by the addition of some new services, some new attractives, also by enhancing existing services offering multiplexes and enriched content. The price points are quite similar to analog, but the offerings are a lot better. There is a real value situation there.
16952 In terms of -- the regulator in the U.K. encouraged Sky to offer more choice to consumers in terms of packaging because you always had to buy one big basic package in order to be able to buy movies and sports. They have done it primarily through offering one smaller, less expensive package of a few channels and then a much larger big basic package. Then you can combine with any number of different pay-TV type services.
16953 The reasons that consumers cite for being attracted to digital subscribing is primarily because of more choice, they say, and better value, but because of the way that Sky has marketed the services, because of the way they have structured their packages and because of their very aggressive upselling of the small package to subscribers, they have managed to maintain big basic subscriptions in digital at 97 per cent. They have been extremely successful in that regard.
16954 On the issue of interactivity, because it's DTH and they don't have the same return pack capabilities that cable has, they have had to be a bit imaginative in terms of how they structure some of their interactive offerings. The experience there has been that interactivity has not been so much of a driver of the market, but it has been extremely important in reducing churn and in the U.K. that has certainly been a big problem in multichannel television.
16955 Sky's churn has reduced if you compare the analog to digital from 10 per cent in the analog market to 3 per cent in the digital market and interactivity has been seen to be an important factor.
16956 Just one final point on that. The interactive services that are currently available tend to be supporting entertainment channels. Research has indicated that as the interactive offerings expand and start to expand more information-based services, they expect that interactivity is going to become a much more important factor in terms of digital take-up.
16957 COMMISSIONER WILSON: Thank you for that perspective. It seems from what you are describing that it's a combination then of the attractiveness of the service and the flexibility that digital offers the subscriber and how they can put packages together that are going to be the most appealing combination.
16958 A couple of other questions just relating to the criteria that I wanted to ask you about. One is about your Canadian content commitments because generally speaking they are very high compared to the other services in same genres, and the other is about the rates which are also generally higher than the similar services in the same genres.
16959 I am just wondering on the issue of Canadian content, when you are saying for Travel 71 per cent or DesigNation 73 per cent, Vital TV 75 per cent to 80 per cent, how are you getting there? I mean, how are you getting to that level? How many repeats are you doing in order to be able to broadcast that level of Canadian content?
16960 Obviously, it must be part of your programming strategy if that is the case, but if you could talk about that first and then about the issue of rates because I think the issue of portability is one of the attractiveness elements, is one that is certainly of interest to us.
16961 MR. O'FARRELL: Well, we are very proud of the way we have framed these applications in terms of not only matching, but as Kevin said in the oral presentation, surpassing in many respects the Commission's stated criteria in the public notice and the reason we are proud is not simply to have surpassed the criteria. We are proud because we think we have done it in a smart, innovative way in each of these programming genres.
16962 Fundamentally, we have two kinds of service proposals before you here today. We have entertainment-based services and we have information-based services. But I am sure you have noted that in both categories our Canadian content levels, in terms of commitments from year one through to the end of the licence term, as you have noted, are significantly higher than applicants competing in a similar genre, and the reason why we are particularly excited about that is because what we found as we have developed these concepts are some brand new innovative programming ideas to incorporate into these schedules.
16963 The second factor that I think you have to take into account is not just the content level per se expressed in percentage terms, but I think we have put our money where our mouth is in terms of spending. In other words, if you look at the Canadian spending commitments that each of these applications have, they too, if not surpass match, but in most cases I believe surpass competing applicants in the same genres.
16964 So we are not suggesting that this Canadian content is necessarily going to be cheap. It has to be compelling, it has to be good, it has to be strong, it has to be attractive or otherwise the service just won't attract viewers and, you know, if you go for instance in the Vital TV application that you referred to, I think what you will see is a truly Canadian, 100 per cent Canadian solution, to a health channel concept, and that is reflected in all the programming.
16965 If one thing is clear about Canada -- if I can dwell on health for a moment -- is that we seem to, from a public policy perspective, put health at the top of the list. It's one of those things that defines us in our identity, and so on, and yes, the system is a little bit suffering from duress right now, but as the First Ministers' gather in a couple of weeks to meet on the whole topic of the 21st century and the health care system for Canada for that century, there probably isn't a better time to supplement their work with a health channel that is made in Canada, that has these kinds of programming solutions that are not imported from other sources, and it's not to dismiss the value of other sources of programming because we too have non-Canadian, albeit less than others, but our non-Canadian is from primarily non-U.S. sources where there is more a similarity in our thinking, in our concepts about the health care system, and we did that intentionally.
16966 Speaking to the rate, well, Katherine Browne can walk you through how we arrived at our rates individually on an application per application basis. I would just like to say one thing. We have made conservative distribution assumptions and equally conservative penetration assumptions to be as reasonable and realistic as possible as we sat before you today and defended our proposals. Hence, the wholesale rates that are tied to those applications are the ones that you have in front of you, but as I say, based on a low distribution universe and a lower penetration universe than others have.
16967 And just before I pass it to Katherine, we based that on the information that was available to us at the time of filing, primarily through CCTA sources which, as you know, has since been revised which is not reflected in these business plans. So there is an upside there.
16969 MS BROWNE: As you can probably appreciate, the subscriber revenue projections that we put together are extremely sensitive to the assumptions, the underlying assumptions. So in our case, as Glenn mentioned, we took a very conservative approach to subscriber growth and also a very conservative approach to the penetration levels.
16970 We subsequently looked at some of the other applicants' assumptions and reran our business models accordingly and determined that we could, in fact, in some cases drop our rates as much as 20 cents depending on the subscriber assumptions that you used in building the plans.
16971 We also looked at the revised CCTA projections that came out and determined again, using the revised subscriber growth projection, that they released we would be able to drop our rates as much as 15 cents per application. So as you can understand, as I said before, the subscriber projections are very sensitive to the underlying assumptions within these business plans.
16972 MR. SHEA: Commission Wilson, if I may just a few quick points.
16973 To echo Glenn's point and to, I think, highlight again the elements of research, our four Canadian information services, namely Health, Your Money, Travel and Design are what we just said: they are Canadian information services. If they are not high in Canadian content, then we don't think they would be terribly relevant or diverse to a viewer.
16974 You asked about our repeat factor. It is on average about 10 to 12 per service which is in keeping with most specialty services that exist today. It's identical to what Prime is, for example.
16975 On rates, it's an interesting topic. We have all been around negotiations with the cable industry for a number of years and our business models pick a point in time, a subscriber-based, a cost of programming, but interestingly enough our rates are right in keeping with what StarTV, for example, which is currently a digital service, is currently getting on the marketplace and that is a range of about 50 to 75 cents per service.
16976 Obviously those rates will come down and they will come down for two reasons. We know from history when you negotiate with the cable industry they come down. Secondly, they will come down as a consequence of penetration and the success of digital take up, and certainly our business ethic is to get these channels launched, and our business ethic will be to negotiate rates that enable a service to get off the ground, but that also makes sense to the consumer.
16977 COMMISSIONER WILSON: Thanks, Mr. Shea. That's helpful.
16978 I want to move now to the question -- sorry for rattling all these papers -- of implementation, and we have been having some interesting discussions on the issue of implementation of the Category 1 and Category 2 services. Some of the suggestions that have been floating around -- I think Ms Douey will be fairly familiar with some of these suggestions since it was one of her colleagues who sort of set out this idea that Category 1s would launch before Category 2s or at least simultaneously and that negotiations on terms of carriage would be completed six months prior to the launch and that we would set a date certain for the launch of the services.
16979 I guess what I would like to do is just get your views on how prospective you think the Commission should be in this environment or should we be looking at it as a new world, should we be taking a step back as a regulator and letting the market sort of sort out all of these things?
16980 MR. O'FARRELL: Kevin may want to add some comments here, but I think that we agree in a large measure with the position that you just described that was advocated last week.
16981 The only other comments perhaps that we could add are that first of all --
16982 COMMISSIONER WILSON: So you do think that we as a Commission should set a timetable?
16983 MR. O'FARRELL: I think that ultimately it may have to go there. That is what I am about to say. I think that the industry has an opportunity to set an agenda for itself that deals with the issue of distribution for both the Category 1 and Category 23 issues and frankly sit back for a moment and look at the way we are going to launch digital in this country and try to make it the success that it has been, as Pat has told you, in the U.K.
16984 France is another example where digital is well ahead of the pace of other European countries.
16985 I think this Commission should look to the industry first and foremost to try to come up with some consensual views on how to launch these services, in what context, using which resources, and finally on what date. That is, I guess, the key issue.
16986 COMMISSIONER WILSON: I am assuming that you think a common launch is the best way to go.
16987 MR. O'FARRELL: Absolutely.
16988 COMMISSIONER WILSON: Would you like to see both Category 1 and Category 2 services included in that launch?
16989 MR. O'FARRELL: The Category 2 services, we are not committed to that idea at this point in time. We are committed to the idea of a common launch of Category 1 services but have not really convinced ourselves that it would be appropriate or feasible to launch Category 2s at the same time.
16990 In fact, it might be best to try to segregate them.
16991 COMMISSIONER WILSON: Well, why is that?
16992 MR. O'FARRELL: Well, depending on which services are -- you see, we are speaking today on the basis of what you have told us are ten new Category 1 licences to be awarded. We don't really know how competitive issues are going to -- where we are going to land on these competitive issues that relate to Category 2.
16993 So there are significant unknowns there as it relates to the number or the types of Category 2s that would ultimately be launched with Category 1s.
16994 We are not saying that it is something that is offensive or that we are hostile to. It is just that there are uncertainties there that we would like to have a bit more information about before feeling comfortable with that position.
16995 COMMISSIONER WILSON: I guess as a consumer who has a digital box, I think: What would inspire me to go out and pay the extra $11 a month for that box? Is it going to be just for ten services? Probably not.
16996 MR. O'FARRELL: I have one last comment, and then Kevin wants to add something.
16997 We have heard that you would license ten. But then maybe in your wisdom and based on representations such as our own where we say you might want to license more than ten, you end up with more Category 1s than was initially anticipated. That is the first consideration.
16998 The second consideration is that without having a little bit more of a clear understanding of where we are going to land on Category 2 genres and numbers, it is a little bit difficult to really come down and be specific on this.
16999 Your point I agree with 100 per cent. The take-up of digital will be based on the perception of value by the consumer, and there will always be a larger perception of value in a larger package than a smaller package.
17000 COMMISSIONER WILSON: Or just a larger number of choices.
17001 MR. O'FARRELL: Correct.
17002 COMMISSIONER WILSON: If there are 30 or 40 services, brand new services that are not available on analog, I might go running out and sign up for another box, for another TV set, thinking that would be great; I can get it all.
17003 I guess that is not just as a consumer, but as a regulator I am sitting here thinking: What is the best thing to do in terms of protecting the programming services or creating this excitement around the fact that there are all of these new Canadian choices?
17004 MR. SHEA: If I may, Commissioner Wilson, you might have noted that Mr. O'Farrell has a new title. He is making the transition from regulatory lawyer to marketer.
17005 I think I have a bit of a different view or different take; and that is, you must set the date for implementation.
17006 I would say once all Category 1 licensees have indicated to the Commission that they have either successfully completed negotiations with the cable industry and with DTH and/or they have decided not to launch -- but one of those two things should happen -- the Category 2s should then be immediately available for launch.
17007 I think we need to go to the market with the 16 or 20 Category 1s that you are going to license, and then a host of Category 2s. We have to get these services off the ground fast because, if we don't, history tells us that foreign services tend to dominate.
17008 Foreign services will also be added to the list this time around; that is tradition. And I think you want to give Canadian services every opportunity out of the gate.
17009 So the criteria might be --
17010 COMMISSIONER WILSON: That is what I am thinking.
17011 MR. SHEA: The criteria then might be to ensure that the Category 1s have found their way to success vis-à-vis negotiation. Once that is done -- and hopefully it is done by September 1st of 2001 -- the Category 2s should be allowed to flourish.
17012 COMMISSIONER WILSON: You say hopefully that will be done by September 1, 2001. The suggestion that we had was that we actually set a deadline for when negotiations would be concluded.
17013 MR. SHEA: I think we are on the same plan.
17014 COMMISSIONER WILSON: Okay. Just one other question with respect to implementation. Do you also think the Commission should impose a minimum amount of time by which a Category 1 licence has to launch; and if they don't then some -- I think we had it described by Trina McQueen as some Draconian process would take place and the licence would lapse.
17015 MR. O'FARRELL: Yes, we do.
17016 COMMISSIONER WILSON: Okay. I want to look now at the issue of independent production. I am sure that you will have some views on this.
17017 As you know, we have had a number of different definitions offered of what an independent producer is, and then on top of that we have layered affiliated independent producers and non-affiliated independent producers.
17018 Obviously where I am going with this is to determine: Across your applications when you use the term independent producer, is this someone who is affiliated with you or unaffiliated? And then I have a couple of other areas.
17019 Maybe you could start off by telling me what the definition of an independent producer is, as far as you are concerned.
17020 MR. O'FARRELL: Madam Commissioner, we would suggest that you consider a new definition for the digital world. We talked about this a little bit with the panel on the 13th Street application last week and perhaps didn't get a chance to flesh it out.
17021 I think what we are offering you as a view on this is that it would be most useful to provide licensees who walk away from this proceeding with the prize maximum flexibility to work with the difficult circumstances of digital environment, at least for the first licence term, and then you can review it.
17022 Basically, the flexibility is to allow them maximum access to programming sources that may not be arm's length parties that one would qualify traditionally as an independent producer.
17023 So for the purpose of a definition, what we would suggest is an independent producer would be a company, a production company or person who is not controlled by the licensee. The control would be controlling voting equity in that company.
17024 COMMISSIONER WILSON: When you say allow the applicant's maximum flexibility, let's say in one of your applications -- I haven't memorized the numbers off the top of my head. Let me see if I have it.
17025 Your Travel Channel, $38 million total in Canadian programming, $10 million to independent production.
17026 When you say maximum flexibility, are you saying you should be free to spend all $10 million with the production company that happens to be affiliated with you?
17027 MR. O'FARRELL: No, we are not.
17028 COMMISSIONER WILSON: Okay.
17029 MR. O'FARRELL: In fact, I think we would like to refine the rule a bit so that you see it in the context that we see it in; and that is services that are information-based versus services that are entertainment-based.
17030 For services that are information-based, we would suggest that up to 25 per cent of the programming that we have committed to commission from independent production companies could come from affiliated production companies.
17031 Of course, in the information genre, you will see much more in-house production by the very nature of the service.
17032 So the flexibility in the information category would be to say where indeed the service does commission from third parties, up to 25 per cent of that amount it would be allowed to acquire from an affiliated party under the definition I just gave you.
17033 COMMISSIONER WILSON: And what about the entertainment?
17034 MR. O'FARRELL: Well, for entertainment services we would suggest that the flexibility be larger and that we be allowed to acquire up to 50 per cent of the programming that we have committed to acquire from third parties from affiliated parties.
17035 COMMISSIONER WILSON: And why is that?
17036 MR. O'FARRELL: It is basically a programming strategy that we have developed to try to own as much of the content as possible for the repurposing uses that we see, both on the web and in the interactive applications.
17037 COMMISSIONER WILSON: This ties into your sort of cross-platform and export strategies?
17038 MR. O'FARRELL: Precisely.
17039 COMMISSIONER WILSON: Do you think we should be, in the digital world, concerned about limiting how much of your programming comes from an affiliated producer?
17040 Obviously, if you sort of set these limits yourself, you still think that we should be.
17041 We have been asking all of the applicants this question: Should we be taking a different approach? Should we be concerned at all?
17042 MR. O'FARRELL: In an ideal world, one would say that perhaps the affirmative action policies of the Commission and of government for the independent production sector are largely no longer required for the bulk of the industry.
17043 But we recognize that there are smaller producers out there for whom those policies are still useful.
17044 What we are suggesting is that in the digital environment it still is probably appropriate to maintain some level of vigilance in terms of access for production companies to the schedules of licensees that the Commission has awarded, but we think that, at least for the initial term, you should be looking at it with a view to providing more flexibility than less so that we can make this transition into digital more successful than less successful.
17045 The bottom line is that we think that it is still useful, but tempered or mitigated to the extent that we are offering you these proposed rules that we would be prepared to comply with.
17046 COMMISSIONER WILSON: Thank you, Mr. O'Farrell.
17047 I want to talk now briefly about your interactivity strategy, just recalling that Ms Douey said that interactivity seems to be a very important element in terms of driving the services in the U.K. Your general approach to interactivity for all of the services basically is to start with a Web site that's highly integrated with the content of the service and ultimately move to simultaneous view content via a set-top box.
17048 The only variance on that, actually, was in your VIOLET application, where you didn't actually talk about those two elements, you just talked about having a Web site for the channel. I don't know, are you planning on moving to simultaneous view for that as well?
17049 MR. O'FARRELL: We have interactive applications above and beyond the Web site for VIOLET as well, yes.
17050 COMMISSIONER WILSON: Right off the top.
17051 MR. O'FARRELL: No.
17052 COMMISSIONER WILSON: Eventually, I think is the word that turns up in most of the applications. In the initial stages it will be the Web site and eventually it will be --
17053 MR. O'FARRELL: But I think it would be helpful for the Commission if you allowed me to ask Greg Treffry to add some comments on this.
17054 As an opening statement, what we want to leave you with as an impression is that, first of all, we have developed these applications with a view to incorporating interactivity as much as possible, depending on technology.
17055 COMMISSIONER WILSON: Okay. That would be great.
17056 Then, after that, I want to talk to you a little bit more about distribution of those interactive elements.
17057 MR. O'FARRELL: Certainly.
17059 COMMISSIONER WILLIAMS: It looks like the back table is out of sound.
17060 Okay. We have it. Okay.
17061 MR. TREFFRY: I like buttons.
17062 COMMISSIONER WILSON: Why doesn't that surprise me.
--- Laughter / Rires
17063 COMMISSIONER WILSON: You are the interactive guy and you like buttons.
17064 MR. TREFFRY: If I could just provide the framework to you that we used to develop all of our interactivity strategies for each of our services, that might help you understand better the examples that we have already provided and the examples that we will probably provide further when we go into each of the services.
17065 We envision two main components of interactivity for each of the services that we are planning, one being a companion Web site, and the second one being what we call true interactive programming.
17066 Basically, true interactivity programming is content that is designed to be watched or viewed or interacted with while watching the program on the service. Our companion Web sites will be launched to create an online community and generate greater audience loyalty. Some of the features that our research has indicated that viewers will want to see is reliable schedule information, information about the shows they enjoy, opportunity to provide feedback to the channel and opportunity to find out how to subscribe for the channel itself.
17067 Specific features that we would offer on these sites are e-mail reminders, customized schedules so that you can set your own schedule of the shows that you like on the service, what's on now -- so what's showing on the channel now -- and of course compelling content.
17068 The second component of our interactive strategy is interactive programming. Quite simply, if a viewer is watching a program on the service and there are other areas of subject matter around or behind what they are watching, they can use a remote control or wireless keyboard to click on an icon and go through and have that information appear while they are watching the show.
17069 We plan to be able to offer this type of programming when the services are launched. So the interactive programming that you were just speaking about, VIOLET, we would be able to offer interactive programming September 2001.
17070 Through our discussion with distributors and our service providers, we have determined that we will be able to offer true interactive programming.
17071 COMMISSIONER WILSON: Right off the top?
17072 MR. TREFFRY: Right off the bat.
17073 COMMISSIONER WILSON: So not as stated in your application -- eventually -- it will be immediately.
17074 MR. O'FARRELL: I can maybe add to that.
17075 Commissioner, this has been a dynamic process, and we learn things along the way. What we have learned recently is that there are service providers who would be able to supply us with that kind of programming right off the top. So it sounds like a contradiction to our application, but it's a good contradiction because it's moving the clock up. We were excited to find that out because --
17076 COMMISSIONER WILSON: No, I'm not concerned about it at all. I'm just interested.
17077 MR. TREFFRY: During the application process when we talked to distributors, everybody was still working on setting up their platforms and trying to determine how the roll-outs will occur. As recently as the last few weeks, in a further discussion with distributors, we have learned more about the time frames when these type of programming initiatives will be offered or be able to be offered.
17078 COMMISSIONER WILSON: Quite to the contrary, Mr. O'Farrell. We saw from the CTV NetStar presentations at their applications that there would be true TV interactivity available for their services immediately. So I'm interested to see that you are saying the same thing.
17079 You said that you have had discussions with distributors about what they are going to be able to offer you through their set-top box. Do you have any agreements or commitments from distributors to carry the interactive elements of the proposed service?
17080 MR. TREFFRY: Not yet. That will be a process that we will have to go through to work as industry broadcasters and distributors to determine what will be available, how it will be provided and how we can ensure that the services receive the interactive content.
17081 COMMISSIONER WILSON: Now, Pelmorex had an interesting suggestion yesterday. I don't know if you were listening, but they said that they considered that the interactive elements of their proposals were integral and that distributors should be required to carry those; and, further, that the revenues that they generate through those interactive components could be considered part of the regulated revenues of the service, which is I guess an interesting way of sort of ensuring that the interactive element of the programming service is delivered to the subscriber intact.
17082 I know I'm kind of springing this on you, but what is your view on that?
17083 MR. O'FARRELL: I'm not sure we would agree with that, at this point. I think that we talked about the broadband issues of interactivity last week in the context of the 13th Street application. In that context, I believe we left it as a suggestion that others have echoed as perhaps a reasonable suggestion which was perhaps a separate proceeding would be required to deal with that from a policy perspective, and those issues that surround that very question.
17084 COMMISSIONER WILSON: So questions like whether or not you should have to share revenue from transactions that you might generate through your interactive applications or the additional bandwidth that might be required to deliver simultaneous view programming, those would all be negotiated as part of this separate process.
17085 MR. O'FARRELL: That's correct.
17086 COMMISSIONER WILSON: When would you see that process taking place? Obviously, before launch.
17087 MR. O'FARRELL: Absolutely. It would have to take place immediately post licensing.
17088 COMMISSIONER WILSON: The discussions that you had with the distributors, did you talk to all of them: cable, DTH, and MDS?
17089 MR. O'FARRELL: Greg?
17090 MR. TREFFRY: Yes.
17091 COMMISSIONER WILSON: Okay.
17092 I guess the one final question I'm going to ask you on interactivity is, and this goes back again to the point that Ms Douey raised in terms of attractiveness of the service, is how direct an impact the viewer participation, through these interactive applications, will have on what you deliver on the service. Will the viewers be able to affect what they see on the channel through their interaction with the channel?
17093 MR. O'FARRELL: I think that Pat Douey, who you referred to, probably can talk to that subject in the context of Vital as one of our service proposals here with interactive components.
17094 One of the ideas that is one that we are pursuing, for instance, on the interactivity level, just to give you an example of the added value of interactivity, relates to Vital -- it's somewhere down the line, we are not sure exactly when but we are anxious to make it part of Vital TV -- and that is, if you were at home at night and were, God forbid, faced with a sick parent or child that required medical help you could go to the Vital TV service and interactively call up the closest hospitals in your immediate vicinity and determine where the shortest queue was for the emergency needs that you would have.
17095 That is the kind of value-added that we are looking to incorporate into these services and that is an example such as Vital.
17096 Before I pass it to Pat maybe to comment --
17097 COMMISSIONER WILSON: Maybe I can just explain a little better what I'm trying to get at.
17098 Yesterday when we heard from Stornoway they talked about The Issues Channel and how they showed an example of canadasbraindrain.ca and this proprietary software they have for surveying the Canadian public on various issues. I think they talked about using the same software for The Issues Channel and programming the channel to reflect what was going on in the Web site.
17099 So what I'm trying to get at is -- and I'm seeing a nodding head in the back row, but what I'm trying to get at is -- I'm seeing two nodding heads in the back row -- is whether or not the viewers will have an impact on your programming decisions. Will you alter your programming schedule to respond to information that is coming to you through the Web site or through your true TV interactivity.
17100 MR. O'FARRELL: I'm sorry, I understand now.
17101 COMMISSIONER WILSON: Is that one of the ways of making the service more attractive and driving digital? I'm sort of --
17102 MR. O'FARRELL: I think Greg can speak to that issue.
17103 MR. TREFFRY: I know our programmers hate to hear this at times, but through the Web site, as I mentioned, viewers will be able to e-mail us and interact and they can make suggestions on what type of programming they may want to see.
17104 COMMISSIONER WILSON: I guess you do that on-air as well through your interactivity?
17105 MR. TREFFRY: Yes. Through the interactive components we can use polling, on-screen polling. Instead of having the user have to use a wireless keyboard and type a suggestion, you can put suggestions in front of them and all they have to use is the remote control to click one of the answers. Or, through their interactive program we can offer them e-mail and chat simultaneous as the program is being viewed.
17106 MR. ASPER: Commissioner Wilson, if I can just add, an experience we have already with an investment we have in a U.S. Internet company. Alliance Atlantis is also an investor in this company and it is called Lifeserve.
17107 They started out with two portals, or vortals as they call them, which were babyserve and wedserve, so services for people having babies and people getting married. The next idea was to do, I guess homeserve, which was for people buying homes. But the overwhelming response from the users of the site was they wanted to know more about pets, so the next site that got launched became petserve.
17108 Then they found out that the next most popular one was college, you know, university selection and things, so they launched collegeserve before they launched -- they finally did get around to the next one. Now, they haven't got divorceserve yet, but -- I'm hoping that never becomes in demand.
17109 But the point is the beautiful --
17110 MS MARZOLINI: Well, there are probably as many people getting divorced as getting married.
17111 MR. ASPER: That's true. I don't know that statistic, Angela, but we will leave anecdotal evidence on that one.
17112 But the point is, the beauty about the Internet is you get instant reaction from the users and viewers and the people out there, the consumers. So that is what is going to propel these services.
17113 I think in looking at the programming schedules hopefully you will allow the flexibility to, I guess, derogate from what is presented before you as long as the general themes are continued, because it is going to be a product of what people want, it truly will be, unlike what we do now. Well, we do --
17114 THE CHAIRPERSON: Mr. Asper, the modern --
17115 MR. ASPER: Let me rephrase that.
--- Laughter / Rires
17116 THE CHAIRPERSON: The modern word for divorce now is "spousal upgrade".
--- Laughter / Rires
17117 MR. ASPER: Or maritally challenged I suppose.
17118 THE CHAIRPERSON: I am advised that there are problems with the microphone systems which are apparently increasing and will increase, so we will take a 20-minute break to give them a chance to recheck them, which is better than having us or you interrupted.
17119 In the meantime, Mr. O'Farrell can get a rear-view mirror so he can get the nods from the back.
--- Laughter / Rires
17120 THE CHAIRPERSON: So we will be back in 20 minutes, unless we are advised that the problems have not been solved.
17121 Thank you.
17122 Nous reprendrons dans 20 minutes quand les problèmes techniques auront été corrigés.
--- Upon recessing at 1015 / Suspension à 1015
--- Upon resuming at 1035 / Reprise à 1035
17123 THE CHAIRPERSON: It looks like our technical problems have been resolved. I don't know if we are fully interactive, but we will be able to hear each other at least.
17124 So proceed, please, Commissioner Wilson.
17125 COMMISSIONER WILSON: Thank you, Madam Chair.
17126 I'm going to give you two easy questions, and I will give you a hint, they are one word answers.
17127 The first is with respect to the Personal Information Protection and Electronic Documents Act and whether or not you will comply with that legislation.
17128 MR. O'FARRELL: Yes.
17129 COMMISSIONER WILSON: The second has to do with filler programming.
17130 MR. O'FARRELL: No.
--- Laughter / Rires
17131 THE CHAIRPERSON: It's working.
17132 COMMISSIONER WILSON: Yes. Maybe we can play that word association game.
17133 The next area that I want to explore with you is Canadian programming expenditures.
17134 I guess the first question is whether or not in this new environment a condition of license requiring minimum levels of Canadian programming expenditures is necessary.
17135 MR. O'FARRELL: It probably isn't, but we would be prepared to comply with one if the Commission decided to impose one.
17136 COMMISSIONER WILSON: Why do you say "It probably isn't"?
17137 MR. O'FARRELL: Again, under the heading of flexibility we know that we have to make these services compelling, strong Canadian, unique and innovative in their programming. I think the onus is on us in any and all events, but if the Commission felt that it was still required to have a condition of license, we would comply with it.
17138 COMMISSIONER WILSON: With the exception of Digital1, for which you did state in your supplementary brief that you would spend an average of 48 per cent of gross revenues over the license term, you didn't make any actual percentage commitment and I believe through our deficiency process we came back to you and we had calculated levels of Canadian programming expenditures for each of your applications and asked you if you would accept those levels as conditions of license.
17139 From what you have just said I'm assuming that the answer is yes to that as well.
17140 MR. O'FARRELL: That's correct.
17141 COMMISSIONER WILSON: Maybe I will just stipulate for the record what those levels are. For Canadian Travel Channel, it is 46 per cent, for DesigNation it is 45 per cent, for Vital TV it is 46 per cent, for Digital1, 48 per cent, for Your Money 48 per cent and for VIOLET 41 per cent.
17142 You also suggested that -- do those numbers correspond with the numbers that you are familiar with?
17143 MR. BROWNE: Yes, that's correct.
17144 COMMISSIONER WILSON: Okay. You also suggested in your response to the deficiency questions that the formula be amended so that surpluses could be carried forward and applied to subsequent years. I'm wondering if you could just comment on that.
17145 MR. O'FARRELL: Well, we have heard a lot of discussion on the topic of flexibility and whether or not the percentage would be applied over the course of the entire licence term or otherwise. We think that at the end of the day, the Commission has to have the comfort that if it is has imposed a condition of licence, we have met that requirement over the course of the entire term.
17146 Therefore, yes, we think that it's not inappropriate to carry forward surpluses the same way that the discussions that we have heard over the past number of days have included carrying forward losses or, if you will, deficiencies in meeting the condition.
17147 At the end of the day, you have our unequivocal commitment that we will comply with at a minimum those spending levels over the course of the licence term.
17148 COMMISSIONER WILSON: Mr. O'Farrell, what about the proposals that have been made with respect to how we calculate the average? Some have suggested that we average it over the entire licence term as opposed to year to year or that we apply the commitment and hold you to it from years three through seven or the 10 per cent over-under per year.
17149 I'm just wondering if you have any thoughts on those proposals.
17150 MR. O'FARRELL: I think of the alternatives that you described, our preference would be the latter and that is the 10 per cent over and under rule.
17151 COMMISSIONER WILSON: Okay. Just very quickly some questions on technical, on delivery and distribution of your signal.
17152 I noticed in four out of your six applications you had the following sentence:
"The distributed signal will use an encryption format deemed to be the adopted standard of cable operators and compatible with other digitally compressed Specialty Services." (As read)
17153 I was a little bit curious about that given that DTH is the dominant digital distributor at the moment, so I'm just wondering if that was a mistake or if there's something you know that I don't about encryption.
17154 MR. O'FARRELL: There's nothing that we know that you don't know. Trust us.
17155 THE CHAIRPERSON: That's all good. I hope that's not the case.
17156 COMMISSIONER WILSON: Maybe then you could have someone speak to the fact that you're using an encryption format which is deemed to be the adopted standard of cable operators as opposed to DTH.
17157 MR. O'FARRELL: We can give you our assurance that our encryption format would be compatible with DTH and with cable from launch and thereafter throughout the term of the licence for each and any of these applications.
17158 COMMISSIONER WILSON: For very good reasons, of course.
17159 MR. O'FARRELL: Indeed.
17160 COMMISSIONER WILSON: Okay. I want to look briefly at the issue of captioning and service to the visually impaired. With respect to captioning -- we will get that one out of the way first -- in all of your application forms, you have committed to 100 per cent captioning from year one right through year seven of the licence term.
17161 In four of the supplementary briefs it mentions 90 per cent either as a minimum or as the level, 90 per cent. I just want to clarify for the record what your commitment is.
17162 MR. O'FARRELL: I think Charlotte Bell can clarify that for you, Madam Commissioner.
17163 COMMISSIONER WILSON: Okay.
17164 MS BELL: Our commitment is 100 per cent. That's what's in the application.
17165 COMMISSIONER WILSON: Thanks. Now, with respect to DVS, first of all I guess what we are interested to know is if you will be technically capable of delivering described video in your services.
17166 MR. O'FARRELL: Charlotte.
17167 MS BELL: Yes, we are.
17168 COMMISSIONER WILSON: Okay. The general statement that's contained in most of your applications is that each service commits as appropriate to provide described video for any subject matter of particular concern for the visually impaired.
17169 I have to tell you when I first read this, I was quite excited. I thought here's somebody whose actually going to do something, but the language when I read it again is equivocal. It's not really a commitment. At least the way that I'm reading it, it doesn't seem to really be a commitment. I'm just wondering exactly, is this a meaningful commitment and exactly what it is?
17170 I guess part of what's driving me is if you look at Vital TV, for example, it says:
"Global commits to providing descriptive video on all programming dealing with health issues that directly affect the visually impaired." (As read)
17171 If you asked me, I would say, you know, every health issue affects the visually impaired the same way they affect someone whose not visually impaired. What does this mean, "as appropriate any subject matter of particular concern"? Who decides what the particular concern is and how much programming does this actually translate into? Is it a meaningful commitment?
17172 MR. O'FARRELL: I think that the way the narrative of that section reads can lead to the questions that you are asking and rightfully so because there might be some confusion as to what really does that mean.
17173 I think what we are committing to is to offer as much descriptive video service as we can in the course of the licence term. I think the statement that we make in that narrative really shouldn't be interpreted too narrowly or too broadly because I think that your point is well taken. Most programming on health matters would have some relevance to that community.
17174 Perhaps Pat Douey can speak on the Vital TV side how we would distinguish which programming from a programming content or category point of view would be more appropriately covered by that undertaking.
17176 MS DOUEY: I think in this particular instance we weren't committing to all health programming as far as Vital TV is concerned. That would be quite an onerous commitment to make given the uncertainty of the digital market. I think in this application we were referring to programming about specific health related to visual impairment.
17177 COMMISSIONER WILSON: Do you have any notion of how many hours that might end up being for that particular service, for example? I'm quite familiar with the issue of described video and the challenges in terms of the cost, particularly in the digital environment. It's a hopeful statement that you make in your applications.
17178 I guess what I'm trying to get a sense of is what can we expect and what can people who are visually impaired expect? Are we talking a couple of hours a year or --
17179 MR. O'FARRELL: Commissioner Wilson, I think that we would ask your indulgence to provide you with a quantifiable amount of that, perhaps in Phase II, where we can state in terms of number of hours how many hours per year would be covered by that undertaking specifically as it relates to this question.
17180 COMMISSIONER WILSON: Okay. Thanks. That's great.
17181 That concludes my general questions, so I will turn it back to the Chair. Once other Commissioners and counsel have had a chance to ask questions that I might have missed, then we will start the examination of the individual applications.
17182 THE CHAIRPERSON: Counsel, please.
17183 MR. McCALLUM: Just a couple of questions about the commitments to independent production. Mr. O'Farrell suggested, I guess, a type of definition of what is an independent producer and also asked for a degree of flexibility with respect to the two types of service, information based and entertainment based.
17184 I just had a couple of questions. Obviously the context is that the Commission hasn't made up its mind as to whether to impose a condition of licence in this area or not. Some of the definitions that have been put on the table for independent production are that there be a 33 per cent interest in the production company.
17185 I wondered, if that definition were the one retained by the Commission in these circumstances, would the commitments hold?
17186 MR. O'FARRELL: We would invite the Commission to view this with more flexibility than the 33 per cent suggestion that you heard and that you relate to now. We thought this through and honestly are of the view that in this digital environment, we really and truly need to reassess the rules.
17187 Perhaps we are suggesting and perhaps what we are suggesting isn't appropriate as to the first licence term. Perhaps it's a number of years within the first licence term. I think that we have to unshackle some of the former rules, at least for the initial period as we launch digital. Therefore, as a consequence, we would invite the Commission to consider our proposal as the definite for an independent production company.
17188 MR. McCALLUM: So, therefore, you would have difficulties meeting those commitments if that definition were adopted by the Commission.
17189 MR. O'FARRELL: Well, the first question is -- I think you mentioned if the Commission were to establish a COL on this issue, notwithstanding what its definition of an independent production company was, we would not have any problem complying with it as a COL or as a commitment that was noted in the decision.
17190 We are simply making the suggestion that you consider our option as the appropriate option, at least for the first term or some significant part of the first term of the licence.
17191 MR. McCALLUM: In other words, it could be a COL that could possibly be phased in after a certain number of years.
17192 MR. O'FARRELL: Correct. It's an option you may want to consider, but your bottom line question, can we comply with that, yes.
17193 MR. McCALLUM: And are you saying then you could comply with it even if the definition was at the 33 per cent level?
17194 MR. O'FARRELL: Correct.
17195 MR. McCALLUM: And just to press it one step further, some parties have even suggested that there be no interest of the licensee and the production company. What would be your commitment in those circumstances?
17196 MR. O'FARRELL: We don't think that's a realistic proposal in a digital environment. I think that would be imposing rules that surpass the rules that we live with and have abided with in the analog world.
17197 MR. McCALLUM: I see. And vis-à-vis the flexibility on both information based programming and entertainment based programming, just to double check. If the Commission -- again it hasn't made up its mind -- but if the Commission were not disposed to give the flexibility that you ask for in those two areas and it wanted to go with a 33 per cent rule to be standard, what would be your commitments there, again understanding that you asked for that flexibility.
17198 MR. O'FARRELL: Our commitments would not change. They would be as they are stated in our applications.
17199 MR. McCALLUM: And that could be for the purpose of a condition of licence if the Commission --
17200 MR. O'FARRELL: That's correct.
17201 MR. McCALLUM: Thank you.
17202 Thank you, Madam Chair.
17203 THE CHAIRPERSON: Mr. O'Farrell, since your commitment would not change, although you wouldn't be happy, why is it that you need the flexibility? What are the positives to allowing the flexibility
17204 MR. O'FARRELL: We think --
17205 THE CHAIRPERSON: We have heard mostly reactions that say "That's what we have lived with", "It's a good idea, you should do it", but you are asking flexibility -- even after considering the proposals we have before us, your definition of independent is not terribly restrictive.
17206 Considering we have had as much as or as little as zero per cent, you still want any commitment made if you had the choice in your information based services to allow that 50 per cent of what is earmarked or committed to the independent production sector to possibly be a sign to companies that by your definition would be affiliated to you. Correct?
17207 MR. O'FARRELL: That's in the entertainment category that it's 50. It's 25 in the information.
17208 THE CHAIRPERSON: Sorry, and 50 in the other. Am I correct in my understanding of what it is you want to -- the flexibility you are seeking, and since your answer to counsel is that you would live with the same commitments even if you could not produce any of it via affiliated companies as defined, I would like to hear why is it necessary, positive, significant, helpful in the digital environment to have this flexibility.
17209 MR. O'FARRELL: Kevin may want to add some comments to this, but I would start by saying to you we embrace the opportunity that the Commission extended to us to have a discussion on this topic as it relates to a definition and the rules that would apply in the digital environment.
17210 Ultimately, if the Commission, after hearing all the various suggestions that it has heard, were to determine that it was best to licence these services with the commitments and COLs that counsel was just referring to, notwithstanding the marvellous advice you received, we would be happy to live with that, but unfortunately we would also feel that an opportunity for flexibility would have been lost, and again, if I can emphasize, if for only the first term or part of the first term of these new licences.
17212 MR. SHEA: I guess --
17213 THE CHAIRPERSON: No one to date, Mr. Shea, has given us a whole lot of response to the positives that could flow from it. Everybody is addressing it negatively. We are not getting a whole lot of advice as to why the environment would warrant this type of flexibility. So I hope that is what you are giving us.
17214 MR. SHEA: Let me try and help. Structurally, CanWest today predominantly derives its revenues from advertising. We have Prime, so we do get some subscription revenue. In recent years, we bought into Fireworks and we are beginning some return on investment in programming. But, Madam Wylie, that clearly is the future. If we do not own our content in the long term, revenues that are specifically derived from either advertising or subscription are going to be eroded.
17215 Today, we compete with numerous American specialty networks that are carried in this country. A&E, for example, own their own content. In the specialty world, in the conventional world, we have got to alter the economic cycle that we have become accustomed to and begin to operate like other licensees like Alliance Atlantis that own their content.
17216 Specific to these applications though in front of you, which is what we are asking for some flexibility, we have great hope that DesigNation, because there is no channel like it in the world, could well travel beyond these borders, and the economic reality of being able to negotiate those terms for carriage in other countries, is that you have to own the content. If you don't own the content, you don't have a channel to export.
17217 We also think that the Canadian Travel Channel has great promise to be carried in other countries. Now, Leonard might like to discuss very briefly with you a development that happened yesterday in Australia where you know we operate conventional television services, but our company's plan is to develop and design as many new television services that have platforms with interactive that we can export, because there isn't a channel as of yet that really is exported from this country. We tend to import everything.
17218 Secondly, we must own the rights of content, Madam Chair, in order to ensure that we can replicate some, if not all of those services on other platforms outside of conventional and specialty television, meaning the interactive aspect of it, and you can only make those events happen, we can only ensure that these positives develop, if you actually own it. Otherwise you are just funnelling your ideas through third parties that may never be able to execute on it.
17219 But I will turn it over to Leonard.
17220 MR. ASPER: Thanks, Kevin.
17221 Just in terms of the international arena, I mean, we have to appreciate -- I think we have the most successful programming environment in the world because if you look at Australia as an example, it is much less regulated and nobody has made a dime there, and most services have been owned by broadcast. They have been opening and closing, you know, a year later and they try something else and it doesn't work, and it has happened in England as well even with Ms Douey's company. A lot of services have gone broke simply because the penetration wasn't there, and the program rights costs were too high for the programming services.
17222 It goes back to getting to that 40 or 50 per cent penetration level or the critical mass, and what we do want to do is definitely export these channels and try to move them into the United States, move them into other English-speaking countries and hopefully European countries.
17223 Kevin is right about owning the content and if you look toward the future, I think some day, fairly soon, maybe five years out. Advertising is going to start to undergo a very serious change in that there won't be necessarily as many commercial breaks in between programs. There will be advertising really within the programming and as part of the interactive sidebars to programs.
17224 So when you have a Web TV device, you split the screen and the ad is on the left side of the screen, the program is on the right or there is a lot of product placement, there is a lot of virtual advertising. And that is the kind of thing -- if you own the content, we can't get those rights when we try to buy programs now, only in very select circumstances. That is going to be able to help us protect those revenue streams as the typical 30-second or 15-second advertisement in between a program starts to become less attractive to the viewer. We have to try to recapture those advertising revenues within the programs and if those rights are split, owned by the producer or other parties, then I think it makes it more difficult for us to protect that revenue stream.
17225 THE CHAIRPERSON: Would you see a connection between flexibility, in your case information-based 25 per cent, and 50 per cent in the entertainment-based applications? Do you see a connection between this flexibility and a more restrictive or on the restrictive side of the spectrum when you define what is an independent company?
17226 In other words, if you have let's say a 50 per cent flexibility then would it be more comforting for the so-called independent production industry if the definition of an independent company were restrictive so that at least that other 50 per cent would truly be funnelled to unconnected parties?
17227 MR. O'FARRELL: What we put forward it's not like "take one, take all". The proposal that has these components, you are absolutely right, I am sure that from an independent production company's perspective, which you have just described, that would be more attractive than the proposal that we have put on the table --
17228 THE CHAIRPERSON: And it would -- Mr. Shea?
17229 MR. SHEA: Commissioner Wylie, I agree. I can see that over the course of the next number of years, as a number of cycles change, the Commission has to ensure that it remains loyal and committed to ensuring that we have an active independent production sector, while at the same time recognizing that broadcasters and specialty operators have their own economic reality of beginning to own their own content.
17230 In fairness, Commissioner Wylie, apart from drama, in many of these areas of content there isn't the willingness of the independent production sector to take on the risk, specifically in the information category because, as we well know, quite often this content does not travel outside of Canada and the independent production sectors that tend to work in this area aren't those that are showing up at nip.com, and so on, to resell this kind of programming and that is something that we can do.
17231 So I think we have to come at this by ensuring that there are incentives that allow us to reach our objectives in a common way and simultaneously ensuring that there are incentives for the independent production sector.
17232 THE CHAIRPERSON: And by having a restrictive definition, then there would at least be unknown expectation of what will truly flow to the independent sector in its most narrow definition. There will be other phases to the hearing, of course, where people can agree or disagree with you, but we indeed don't know everything you know and it's very helpful for people to advance ideas that may not be the ones that we have traditionally applied and could be valid reasons for seeing these things in a different manner in this new environment.
17233 So we will hear, hopefully, from other parties in response to the various positions put forward.
17234 Commissioner Wilson.
17235 COMMISSIONER WILSON: Thank you, Madam Chair.
17236 I want to turn now to the Canadian Travel Channel, and I have just a few questions on this specific application.
17237 The first one has to do with your nature of service. On page 7 of your application form, Section 7.1, you set out the categories -- although I have to note that in all of your applications you didn't use the numbers for the categories.
17238 MS BELL: Sorry.
17239 COMMISSIONER WILSON: Now, in your nature of service in Section 7.1, you have listed Categories -- and I am going to use the numbers here -- 1, 2(a), 5(b), 11, 12, 13, 14 and, of course, 15 which we have already eliminated, the infamous filler programming.
17240 When you look at Schedule 10 which sets out your programming, you show Category 7(c), movies with a travel theme in that schedule, but it's not included in your list of categories.
17241 So I am assuming that you want to include 7(c) in your nature of service.
17242 MS BELL: Actually, in fact, 7(c) and 7(d), because it might be a made-for-TV movie or a feature film, and that was an omission in Section 7 of our application.
17243 COMMISSIONER WILSON: Okay, and similarly Categories 1, 11, 12, 13 and 14 don't appear in Schedule 10. Is that just because the examples that you gave us didn't fall into those categories?
17244 MS BROWN: Exactly.
17245 COMMISSIONER WILSON: Also in Section 7.1 of the application, you have as your description:
"The Canadian Travel Channel will be a 24-hour destination channel dedicated to exploring Canada's most beautiful travel destinations and stories of Canadian travellers in the global village. The service will provide programming on business travelling, personal safety issues, travel values and Canada's best vacation spots". (As read)
17246 Are you just going to do business travelling or are you going to do personal, recreational travel?
17247 MS BROWN: Absolutely. That was an example. It will also include vacation travel, leisure.
17248 COMMISSIONER WILSON: Okay. It is quite clear that it will, but I just, for the benefit of clarification, wanted to ensure that your description of the channel under your nature of service would describe what it is actually going to be.
17249 MS BELL: I understand.
17250 COMMISSIONER WILSON: If we could go to research, your market research, maybe we can in a slightly more specific way look at how you have developed your penetration rates and the subscriber rate.
17251 On page 15 of the Pollara study, it says:
"If those who are interested in renting or buying a new digital receiver box had access to the receiver, 68 per cent would at least somewhat likely pay up to an additional 50 cents to subscribe to the Canadian Travel Channel." (As read)
17252 And it concludes that:
"When extrapolated to the Canadian population, this translates to 20 per cent demand at 50 cents." (As read)
17253 In your business plan your subscription projections are based on 30 per cent penetration, starting in year one, at a rate of 60 cents.
17254 If only 20 per cent would be willing to subscribe at 50 cents, what was the rationale for 30 per cent at 60 cents?
17255 MR. O'FARRELL: Katherine...?
17256 MS BROWNE: In preparing our subscriber revenue projections, we had come up with key parameters for our overall business plan, examples of which are cumulative income over the licence term at a break-even level, which we felt was reasonable but also demonstrated a certain level of investment spending in the services over the licence term.
17257 As such, we looked at our affiliate projections, subscriber projections about which Catherine Thompson might be able to speak to you further in terms of penetration levels, and came up with our model.
17258 In so doing, the rates that were derived from these business plans were derived in such a way that we used not only research data but financial business parameters, as well as the information that we gathered from our distributors in terms of subscriber projections, to come up with the mix that we came up with.
17259 COMMISSIONER WILSON: Okay. Did you want to add anything?
17260 MS THOMPSON: I would just like to add that when we talked to our distributors and when we looked at what these services would need in order to be successful, one of the most important things, as Mr. O'Farrell has mentioned, is the attractiveness of the service. In order to do that, we are strong believers in Canadian content and that requires expenditures.
17261 When we looked at the digital universe overall, we tried to take a very realistic view. I think you will notice from the CableLabs Report that has been filed by the CCTA that they were projecting a digital universe, by the end of 2004, of 3.6 million subscribers with digital boxes.
17262 We have come in at 3.3 million subscribers by that time frame with digital boxes. So we are anticipating the same kind of universe.
17263 Then when we looked to see what is actually working in the digital environment right now -- as you know, we don't have many models. We have Star and, as Mr. Shea mentioned, our rate falls squarely within that range that they are currently getting for that service.
17264 As well, Mr. Schwebel made mention last week of the take-up rate that they have experienced to date. In the first year with StarTV they have had between 28 per cent and I believe 62 per cent take-up.
17265 Again, our penetration rate in the first year, at 30 per cent, falls squarely within that range.
17266 COMMISSIONER WILSON: Thank you.
17267 If you look at your business plan over the course of the seven-year licence term, you have projected spending for sales and promotion at about 17 per cent of your total revenue. I think we all heard Mr. Lamarre talk the other day about the big marketing budgets that he has, and we were suggesting that he might share them with everybody.
17268 I am assuming that you have taken a similar approach and that you have dedicated a fairly large percentage of your revenue to marketing in order to drive the take-up rate of the services.
17269 MR. O'FARRELL: I think, Commissioner Wilson, it is fair to say that we have taken an aggressive position on promotion and marketing generally from pre-launch right through to the end of the licence term. We don't think that it is all going to happen overnight, so we have a committed and a sustained effort throughout the term.
17270 On the general level of our marketing budgets, and so on, perhaps Katherine Browne can speak to you about how we have allocated that as a matter of pre-launch and post, to give you a sense of the commitment in dollar terms.
17271 COMMISSIONER WILSON: Okay.
17272 MS BROWNE: Over the seven-year licence term, including the pre-launch period, we have allocated almost $9 million to each service for marketing, sales and promotion. Of that amount, approximately $1.1 million has been earmarked for the pre-launch period, which we feel is necessary to ensure a successful launch of these digital services.
17273 The high level that we are expending each year over the licence term we feel is necessary to maintain the awareness of the services and ensure their success over the term of the licence.
17274 MR. SHEA: Commissioner Wilson, a quick footnote.
17275 All these costs are third party costs. This does not include the promotion that would back these services on Global Television Network, on globaltv.com, or the Prime Network.
17276 I think it is worth noting that we have seen in the past year a dramatic increase in both the popularity and viewership of Prime. Prime is now struggling to become the most poplar Canadian specialty service. We are one or two away.
17277 It speaks to two things. One is the power that Global Television Network has put behind it to create awareness of its programming. Secondly, while every applicant appears before you and they say "my service is the driver, my service is the driver", we not only have to drive these boxes into the home but we have to make sure that they stay.
17278 At a hearing some time ago we never pretended for a moment that Prime was going to be the driver to move the tier. What we did say was it will be a reason why people keep the service.
17279 I think while you are making your determinations on successful winners, we have seen over the course of many years research that says if it was a PBS-oriented service, I would buy it.
17280 While services will drive boxes, the most important thing is they have to stay. They stay for two reasons: the power of awareness promotion; and the power of content.
17281 Quite often it is the services that are least likely to drive the box that keep the box in the home. I think it is something that the Commission should keep in mind from a marketing perspective: those who can really put incremental promotional dollars behind services.
17282 COMMISSIONER WILSON: The other day when you appeared on the 13th Street application you talked about how there would be Prime news breaks on 13th Street. Or am I confused?
17283 MS BELL: We were proposing to do news breaks similar to what we do on Prime TV, but they would not be Prime TV news breaks. We would repackage them to fit the service.
17284 COMMISSIONER WILSON: So you would repackage them and they would be branded for that service. They would not be branded as Prime.
17285 MS BELL: Absolutely.
17286 COMMISSIONER WILSON: You would be using something like that to drive people to other services in your stable, so to speak.
17287 MR. O'FARRELL: That is correct. We would be trying to brand them and maintain the theme of the Mystery Channel and 13th Street. But they would not be Prime updates like Charlotte was referring to as an example.
17288 COMMISSIONER WILSON: Okay. That is helpful.
17289 With respect to original Canadian production, I think the number for the Canadian Travel Channel that you have talked about $38 million total to Canadian programming.
17290 What percentage of that would be original programming versus programming that is already existing in the system?
17291 MR. O'FARRELL: I think that Katherine Browne can help you on that.
17292 My number is $37 million on Canadian program spending overall.
17293 COMMISSIONER WILSON: $37 million?
17294 MR. O'FARRELL: Not $38 million, which is the 45.9 per cent number that we have spoken about.
17295 MS BROWNE: Yes, that is correct. The $38 million might have been a number that you pulled from Schedule 1, which represented cash expenditures versus amortized expenditures.
17296 COMMISSIONER WILSON: And what proportion of that is original Canadian programming?
17297 MS BROWNE: 98 per cent of that would be original.
17298 COMMISSIONER WILSON: Okay. Correct me if this figure is wrong, but it says $10 million to independent production.
17299 MS BROWNE: That is correct; $10.5 million, to be exact.
17300 COMMISSIONER WILSON: If we accepted your proposal about the 25 per cent for the information-based services to affiliated independent producers, 25 per cent of that might go to Fireworks and the 75 per cent would go to unaffiliated?
17301 MR. O'FARRELL: Yes, that is correct.
17302 COMMISSIONER WILSON: Those are all of my questions with respect to the Canadian Travel Channel.
17303 I will just ask the Chair whether you want me to proceed.
17304 THE CHAIRPERSON: Unless my colleagues have a problem, we will go through the applications and reserve questions for the end. I think it is less disruptive to Commissioner Wilson, unless counsel is going to frown at me.
17305 COMMISSIONER WILSON: He is smiling, so I think he is going to go along with it.
17306 THE CHAIRPERSON: He knows I am not easily intimidated.
--- Laughter / Rires
17307 THE CHAIRPERSON: Proceed, Commissioner Wilson.
17308 COMMISSIONER WILSON: Okay.
17309 Next I'm going to look at DesigNation. I guess you will have noticed that our hearing secretary referred to it as "designation". I was asking myself the same question. Are you at all concerned about having a name that people might mispronounce for this channel?
17310 MR. O'FARRELL: It's a name for the time being that is attached to an application. Whether or not it sticks is a matter of debate.
17311 COMMISSIONER WILSON: It depends on how many people get it right. I have been in that situation where people just can't seem to get the name of a channel right. It's tough if you are trying to market a service if you can't brand it properly.
17312 THE CHAIRPERSON: You may have shed terror in the souls of your so-called competitors if DesigNation is not going to stick.
17313 COMMISSIONER WILSON: Why?
17314 THE CHAIRPERSON: It may encourage them to say this will be competitive with something else.
17315 COMMISSIONER WILSON: Okay.
17316 Once again, if we can look at the nature of service and the programming categories you have listed in section 7.1, 2(b), 5(b), 11, 12 and 13, and in Schedule 10 you find Categories 1, 2(a) and 7(b), and lots of them. I'm assuming that you just forgot to include those in your nature of service and you would want those included.
17317 MS BELL: That's correct.
17318 Just for your information, predominantly for this service, a large proportion of this schedule would be devoted to 5(b). I think there are some programs that were categorized as 2(a) in Schedule 10 that would perhaps more appropriately be put in 5(b), just for the record.
17319 COMMISSIONER WILSON: Okay.
17320 7(b) is the ongoing comedy series. You are not proposing any films on design or fashion?
17321 MS BELL: No, we were not.
17322 COMMISSIONER WILSON: One of the other applicants for a service of this nature, TVA, broke down its in-fashion programming into three major segments: 60 per cent under fashion and beauty, about 26 per cent under lifestyle, and about 13 per cent under home design. Have you looked at your schedule and estimated what percentage of the programming might fall into those categories?
17323 MS BELL: I would like Heather Hatch-Dinel to answer that question.
17324 MS HATCH-DINEL: What we have done, actually, we haven't done a percentage breakdown, but it's fair to say of the 18 to 20 programs that we have listed in our proposed schedule to date approximately five of those programs deal directly with fashion. The remaining offering of programs really deal with the variety of design disciplines that will be featured on the channel. That includes everything from architecture, to visual arts, graphic arts, industrial design, theatre design, urban design.
17325 So there is a real range of design disciplines that we are planning to look at that is going to be really more the majority of our emphasis than fashion design.
17326 COMMISSIONER WILSON: So you haven't really segmented the schedule into subsets?
17327 MS HATCH-DINEL: Not specifically because we do have such a range of design disciplines that we are looking at. We were really trying to create a balanced presentation of those disciplines. But certainly I would say the majority of our offerings lie in areas that are beyond fashion.
17328 COMMISSIONER WILSON: The majority.
17329 MS HATCH-DINEL: Correct.
17330 MR. O'FARRELL: Commissioner Wilson, if it is useful to the Commission we can provide you that breakdown subsequently, we don't have it here today, if that were desirable.
17331 COMMISSIONER WILSON: I think that would be useful.
17332 MR. O'FARRELL: Certainly.
17333 COMMISSIONER WILSON: I think that would be useful.
17334 MR. O'FARRELL: Certainly.
17335 COMMISSIONER WILSON: Okay.
17336 Also, in Schedule 10, the ongoing comedy series that you have said you would like to include, which is Category 7(b), the example that you show is Caroline in the City. I have to admit I have never watched it. I'm a big fan of the old sitcoms but not the modern sitcoms -- you know, the All in the Family type sitcom.
17337 MS BELL: I think what we are proposing here is to include an entertainment component to the service that would be tied in with design, and Caroline in the City -- she is actually a cartoonist. She does a column and it's centred around her job. That's why it's included in there.
17338 There are other examples, like Designing Women, that sort of program.
17339 COMMISSIONER WILSON: How much sitcom programming would you intend to schedule?
17340 MS BELL: I think in our sample schedule there were no more than three series a week.
17341 COMMISSIONER WILSON: We have heard from various applicants about the notion of using films to sort of pick up, you know, a thematic thing on their services. You haven't chosen that. You have chosen the comedy series. How do you see that fitting into the nature of this service? How do comedy series, per se, fit into this genre as opposed to film or --
17342 MR. O'FARRELL: I'm going to ask Heather Hatch-Dinel to speak to that issue.
17343 However, what might be of interest to you is that we really don't see making much use of this genre, per se, and we would be prepared to live with the self-imposed condition restricting us to, say, no more than 10 per cent on average over the course of the broadcast year would be devoted to programming of that genre.
17344 Heather, would you like to --
17345 COMMISSIONER WILSON: You can tell that Mr. O'Farrell is a regulatory lawyer because there isn't even a question here about a condition and he is offering one up.
17346 MR. O'FARRELL: We just want to be helpful.
17347 MR. ASPER: I'm shaking my head here, but he didn't see it again.
--- Laughter / Rires
17348 COMMISSIONER WILSON: But, as the Chair said, he needs a rear-view mirror. He needs one of those things that the bicycle guys wear with the little rear-view mirror, so that he can see what you are doing back there.
17349 MR. ASPER: Or a bell maybe.
--- Laughter / Rires
17350 MS HATCH-DINEL: I think one of the reasons we wanted to use sitcom programming, or we have suggested it as part of the schedule, is that there happens to be a number of comedy sitcoms that relate to the world of design. There is Canadian Sitcom, which is hanging in. There is Designing Women, which Charlotte mentioned. There is Absolutely Fabulous, which is a series from the U.K.
17351 We just felt that it was an opportunity for people who enjoy that kind of entertainment to come to the service. They may not have a dedicated interest in art and design, but it would certainly be a way to bring them to the service and might, in fact, open their eyes to some other offerings that we have on the channel as well.
17352 It is certainly not the emphasis of the programming. It's really just a minor part of it.
17353 COMMISSIONER WILSON: I guess as I was reading through it just didn't seem to fit with the sort of esoteric nature of the channel, you know, being very focused on design across a whole range of disciplines. Maybe it's my bias against modern sitcoms that's shining through.
17354 MS HATCH-DINEL: I think if you look even at a program like Caroline in the City, I mean she is a graphic designer, she is having to deal with the issues of having a small business in her home studio and employing -- you know, employment issues, deadlines. I mean, she is dealing with real world issues that many designers do deal with, albeit in a comedy situation, but it's not unrelated to what a lot of people in the designing world would experience.
17355 COMMISSIONER WILSON: I guess, just before I move off this, the thing that captured my attention the most in your description of the service in your supplementary brief was the comment about the Bug, the revival of the Bug, and what that had done for Volkswagen.
17356 Personally, I would love to see a program on the redesign of the Volkswagen, although I like the old design better. But the greatest ad that they had for that was the "hug-it/drive-it". "Hug-it/drive-it". It was so cute. It's like: what do I do with this car? I think that would be an interesting program.
17357 Contribution to independent producers. I think your total Canadian programming expenditures again are in the range of $38 million.
17358 MR. O'FARRELL: That's correct.
17359 COMMISSIONER WILSON: And $12.5 million would go to independent producers.
17360 MS BROWNE: It's $10.4 million.
17361 COMMISSIONER WILSON: Oh, 10.4?
17362 MS BROWNE: Yes. The $12.5 million, again -- sorry for the confusion -- the $12.5 million that you are referring to is the cash expenditure that was quoted in Schedule 1 versus amortized.
17363 COMMISSIONER WILSON: Okay.
17364 Now, one party in particular has intervened against the proposed service because they believe that the programs that you are proposing to broadcast, specifically the ones related to home and garden design, are going to compete with an existing service, HGTV.
17365 I'm just wondering I guess, first of all, what percentage of your schedule you would suspect would be related to home and garden design; and -- here we go -- would you be prepared to accept a limit on the amount of home and garden design programming that you do?
17366 MR. O'FARRELL: I'm not going there until I hear a bell or something ringing.
17367 I think, you know, the concept of the competitive nature as they have made the allegation is something that Heather can speak to because we really don't have that type of programming in mind. It is a totally different approach.
17368 Heather, could you explain it, please?
17369 MS HATCH-DINEL: Yes. We have approached interior design as really one of many disciplines on the service. Interior design can really address a lot of different types of spaces. HGTV has chosen to address residential design in most of the programming that they show. To a certain extent, they have taken more of a how-to approach, how to improve the look of a room, how to select certain kinds of colours or fabrics to enhance a particular space.
17370 But it is fair to say that there is a tremendous industry in Canada that addresses interiors of a completely different nature, and these are the public spaces that most of us really encounter every day, whether it is a hospitality interior, an interior of a retail complex, an entertainment complex, health care facilities. I mean, there are endless public spaces that are designed and are designed by interior designers. So these are certainly, you know, the range of interiors that we would want to look at with the service.
17371 Also, I think it is fair to say that our approach to design overall is really one that has to do more with being a little bit more analytical, profiling the designers, looking at really sort of the aesthetics, the cultural and market forces and, indeed, even the client demands that inform a designer's work. So I think our approach is slightly different from HGTV.
17372 On the gardening side of the HGTV format, again they tend to look more at residential applications for landscape design, if you will, and our intent would be to broaden that perspective to include public spaces, infill projects that take place in downtown cores, you know, new developments that take place in both suburban areas and in downtown areas.
17373 So I think there is -- and regeneration of waterfronts and those kinds of situations.
17374 So I think there is, again, just a broader look at the scope of landscape architecture than what HGTV currently covers with their programming.
17375 COMMISSIONER WILSON: Just on the issue of competitiveness, do you consider your application to be competitive with the proposal by CHUM for FashionTV and the TVA proposal for INFASHION?
17376 MS BELL: No, we don't.
17377 COMMISSIONER WILSON: You don't?
17378 MS BELL: No, we do not.
17379 COMMISSIONER WILSON: So you think that both could be licensed and survive?
17380 MS BELL: Yes, because fashion is not the core mandate of this service. We feel they are completely different, even though there is a small portion of our programming that would be devoted to that area.
17381 COMMISSIONER WILSON: But there is quite a large portion of the CHUM proposal, for example, that would be devoted to design and art and architecture and --
17382 MS HATCH-DINEL: I would just like to point out, actually, that when you really look closely at CHUM's application, very little of the actual programming that they have listed deals with design. I think when I went over their application they had, I believe, about 20 to 24 programs that they listed and of that only four of them related to the variety of design disciplines that they are planning to cover, which are architecture, photography and some visual arts. So they clearly have placed their emphasis on fashion.
17383 COMMISSIONER WILSON: Okey-dokey.
17384 THE CHAIRPERSON: If you will allow me, you didn't seem to have understood what my comment was earlier, but if it is a design channel and you change it to HGTV it will strike terror in the hearts of your competitors is what I intended to --
17385 MS HATCH-DINEL: We get it now.
17386 THE CHAIRPERSON: When you said this designation or characterization may not stick, I hope you only mean the name.
17387 MS BELL: Yes, I think --
17388 MR. O'FARRELL: We wouldn't be suggesting that we would be departing from the theme or the core mandate that we are describing for you here. We might have --
17389 COMMISSIONER WILSON: You just meant you might change the name.
17390 MR. O'FARRELL: Indeed.
17391 COMMISSIONER WILSON: That's what I thought you meant.
17392 Okay. I want to turn to Vital TV.
17393 With respect to the nature of service again, in Schedule 10 you show programming from Category 7(c), which is specials, miniseries and made-for-TV-movies. I wonder if you could just describe how you are going to use drama in this service which is primarily an information-based service?
17394 MR. O'FARRELL: Pat, do you want to speak to that issue, please.
17395 MS DOUEY: In our Schedule 4, Vital TV, you will note that we have one medical movie of the week and we want to be able to use that category so that we can offer some of the very fine content that is available.
17396 Films -- Hallmark, for example, in the U.S., is a maker of a number of very good medical movies for -- or medical themed movies, if you like, for television, which highlights some of the health crises that people face but in a very dramatic and a very compelling way.
17397 However, it would be our intention to use such content in context. Generally speaking, we wouldn't just put a movie out there. If we showed Philadelphia, for example, we would show it in the context of some discussion and other themed programming around AIDS for example. So we would very much try to relate the dramatic content to factual content.
17398 COMMISSIONER WILSON: Okay. You have also indicated sort of generally speaking that programming would come from drama and comedy. This is one of those regulatory questions about subcategories. I'm just wondering which subcategories you are proposing.
17399 MS BELL: The two subcategories we are proposing are 7(c) and 7(d), which is made-for-TV-movies, specials and feature films.
17400 COMMISSIONER WILSON: Another regulatory question, the movies with the health or medical theme, would you accept a condition of license stating that all drama programming would have a health or a health-related theme?
17401 MS BELL: Yes. Yes, we would.
17402 COMMISSIONER WILSON: You are also proposing to broadcast programming relating to pet and travel health -- Animal Instincts and Four Winds I think are the two programs -- and I'm just wondering how you are tying pet health into the health network. Not that I object, I love pets, but --
17403 MS DOUEY: Well, I think that again this is the topic of one program. Pets are very important in people's lives, in two senses I suppose. There is a lot of medical evidence that having pets and having pets around make for healthier humans. So I believe that in the description of the program we talked about that as one component of it.
17404 But also there are developments in veterinary science that are of great interest to people as well and we see that as certainly not out of the range of a health channel's programming.
17405 COMMISSIONER WILSON: Okay.
17406 Some of your schedule appears to be made of lifestyle-type programming and I'm just wondering if you could talk about how this programming is different from what is currently available on other services such as WTN, or would you disagree with the characterization of some of your programming as lifestyle programming?
17407 MS DOUEY: I think there is a certain amount of programming that deals with issues like physical fitness and nutrition and part of what this channel is about is wellness. It's not all about people who are all sick.
17408 I think that there is quite an important component of the mandate of the service to promote healthy living, and in that sense I think programming that relates to physical fitness, to diet, people's sex lives, et cetera, is an important -- are important types of themes for us to be able to cover on this channel.
17409 But in all cases we see the channel as reflecting the Canadian health care system, so obviously are going to be very much supportive of people's health.
17410 COMMISSIONER WILSON: So it may not be really different from what is available on WTN, but you would argue that it is a necessary component in terms of rounding out the genre and creating the destination channel?
17411 MS DOUEY: I believe that is the case. It also is not the majority of the programming on the channel by any means at all, it is rather a minority of the programming.
17412 COMMISSIONER WILSON: Okay. Your commitment to Canadian programming for this channel is quite substantial, and I believe your Cancon level is 75 per cent during the day and 80 per cent during 6:00 to midnight. You have said that 72 per cent of the 75 per cent will come from independent producers.
17413 Now, there were two figures quoted in the application referring to that 72 per cent. One was $23 million to independent production over seven years, which you find in the Executive Summary, and the other was $25 million which shows up in the Supplementary Brief on page 5.
17414 MR. O'FARRELL: I think Katherine Browne can clarify that for you.
17415 COMMISSIONER WILSON: Okay.
17416 MS BROWNE: Total Canadian expenditures would be 39.9.
17417 COMMISSIONER WILSON: $39.9 million?
17418 MS BROWNE: Yes, of which $21.4 million would be earmarked for the independent production community.
17419 COMMISSIONER WILSON: Okay. And how much of your commitment is to original Canadian programming?
17420 MS BROWNE: Of the dollar commitment, 99 per cent is original.
17421 COMMISSIONER WILSON: Ninety-nine per cent original. Okay.
17422 MS BROWNE: Yes.
17423 COMMISSIONER WILSON: And the repeat levels that, Mr. Shea, you talked earlier about, the levels, are they fairly consistent across all of the channels?
17424 MR. SHEA: Yes, they are.
17425 COMMISSIONER WILSON: Okay. I'm not going to ask you that again. Okay. Foreign programming purchased by Vital TV will originate primarily from the United Kingdom, Australia and Ireland is what you say in the application, but the coding that you use in Schedule 10 shows programming will see from the U.S.
17426 MS BELL: That was an error in Schedule 10.
17427 COMMISSIONER WILSON: Oh, that was an error?
17428 MS BELL: There's some coding mistakes in Schedule 10. Yes.
17429 COMMISSIONER WILSON: Yes.
17430 MR. O'FARRELL: In fact, Commissioner Wilson, I think that our plans at this stage would be to have no more than 5 per cent of our foreign programming from U.S. sources.
17431 COMMISSIONER WILSON: No more than five?
17432 MR. O'FARRELL: Correct.
17433 COMMISSIONER WILSON: Okay. That helps. Those are all the questions I have specific to that application, so I will move on to Digital1. I'm sure that person will turn herself over right after this call. I'm sure you will all notice that we save all the really interesting discussion for the general questions and then get into the nitty-gritty when we talk about each individual application. It's kind of a letdown after you talk about these lofty ideas and then you come down to conditions of licence and then Categories, 2(a) and 7(c). That's what being a regulator is all about.
17434 Nature of service for Digital1. In Schedule 10 you -- again this is just to clarify the category -- you indicate that you will air numerous programs from subcategory 2(a), including Cybercafe, Gear, the Innovators and Streaming Out Loud. Subcategory 2(a) represents 40 per cent of your original programming block, but you haven't indicated this category in your nature of service. Did you want to add it?
17435 MS BELL: Again, that was an omission. Yes, please.
17436 COMMISSIONER WILSON: Okay. You have also indicated that you intend to broadcast Category 2(b) long form documentaries and Category 11, but neither of these is included in the schedule or shown as to frequency of the programs that really are in those categories.
17437 MS BELL: I think we would be airing some programming in the long form documentary category. It's not a significant amount of the schedule, but we would like to have that category. In terms of Category 11, which is general entertainment and human interest, again we would like to include that category, but there wouldn't be a lot of programming from that category.
17438 COMMISSIONER WILSON: And what kinds of programs in these genres would you program?
17439 MS BELL: Actually, if you look at our Schedule 10, the one program that I found that I believe was not categorized properly, it was categorized under 2(a), was Hollywood Effects. Perhaps that would be more appropriately categorized under Category 11 because it's dealing with movies and behind the scenes, that sort of thing.
17440 COMMISSIONER WILSON: Okay. And what about the documentaries?
17441 MS BELL: Perhaps Anne Marie Varner could give you some examples.
17442 MS VARNER: Yes. We actually had done a lot of research on some of the things that are in the market, in particular in the U.K. For example, there are long form documentaries that are available to us. I can list a few of them. Hack or Attack, Dinosaur, which deals with animation and things of that nature, Tales from the Net and the TechnoFolks Guide to the future, so there's some interesting things out there that we would like to have an opportunity to run.
17443 COMMISSIONER WILSON: Okay. That's great. Once again for Canadian programming expenditure. Your supplementary brief says $42 million. Is that correct?
17444 MS BROWNE: Total Canadian expenditures amortized would be $41.4.
17445 COMMISSIONER WILSON: $41.4?
17446 MS BROWNE: Yes.
17447 COMMISSIONER WILSON: And how much of that goes to the independent production sector? Instead of me quoting a number, I will just ask you.
17448 MS BROWNE: 8.3 over the licence term.
17449 COMMISSIONER WILSON: 8.3?
17450 MS BROWNE: Yes. That's correct.
17451 COMMISSIONER WILSON: Okay. Let me just -- I think it was Trina McQueen who said that she hated to do math in public. I am in the same camp. In your Executive Summary, you say that 60 per cent of Canadian content will go to the independent production sector, so your Canadian content level is 77 per cent of your programming and 60 per cent of that will go to independent production. Is that how you calculated it or is the Executive Summary --
17452 MR. O'FARRELL: That's not the breakdown. Katherine, perhaps you can clarify, please.
17453 MS BROWNE: I believe that the hour percentage is higher than the expenditure percentage. Maybe Charlotte can speak to that.
17454 COMMISSIONER WILSON: That's why I don't like doing math in public.
17455 MS BROWNE: Of the Canadian program expenditures, we have 20 per cent going to the independent production community over the licence term.
17456 COMMISSIONER WILSON: Okay, but that represents 60 per cent in terms of hours. Where does that 60 per cent come from?
17457 MR. O'FARRELL: Anne Marie, are you able to shed any light on this?
17458 MS VARNER: I believe that those calculations were really done on the hours, in my estimation at this point.
17459 COMMISSIONER WILSON: Okay. How much of the $41.1 million is original Canadian programming?
17460 MS BROWNE: One hundred per cent.
17461 COMMISSIONER WILSON: A hundred per cent. I like those round numbers. Now, your relationship with Astral on this application, considering that they already have a service of this nature in the system, although it's in French, what kinds of synergies would you be looking at between those two services?
17462 MR. O'FARRELL: Madam Commissioner, I am going to ask Lisa to add her comments in a moment, but I think that what we would like to do is work hand in hand with Canal Z as much as possible in developing Canadian programming for exhibition in both the French market and the English market.
17463 Recognizing that the programming services are not identical, but there are significant similarities, we see it as a very real benefit of licensing Digital1 because it would ensure that Canadian programming production opportunities would be expanded beyond what Canal Z currently does and by working in tandem with Astral, we think that there are real benefits both to Digital1 and indeed to Canal Z, but I will hand it off to Lisa if she would like to add some views.
17464 MS de WILDE: Thank you, Glenn. We are very excited at the prospect of being able to use some of the learnings that we are drawing out of the Canal Z experience which I would just like to add briefly has been a very exciting one to date.
17465 Canal Z is a huge success with viewers in the francophone market. It's hitting amazing shares of market, especially with regard to its target demo which is men 18 to 34. So we think that there really are some important learnings that we can extract from that and, frankly, take the success of a Canadian French language network and this time around turn it into something that we can use to inform how this much narrower technology channel would be launched in English.
17466 I can think of things like the way in which the Web was used as a very successful instrument of watching and building a loyal following with the network before the network had even launched. Glenn has alluded to the prospect of co-commissioning programs and that's obviously exciting because it means bigger licence fees and, therefore, more production values on the screen for both viewers of Z and Digital1.
17467 COMMISSIONER WILSON: So there are no specific plans to share programming between the services.
17468 MS de WILDE: We do have plans that we will co-commission approximately three different series in a given year. They would, you know, focus on the science and technology niche because we see that that's where the research and common shooting is going to be much more appropriate.
17469 COMMISSIONER WILSON: Okay. In terms of independent production, we talked earlier in the general questions about the different percentages that you would apply to the two different types of services, information and entertainment and flexibility with the definition. Would you be proposing to apply the same kind of definition to producers that might be affiliated with your partners in these channels?
17470 MR. O'FARRELL: Yes.
17471 COMMISSIONER WILSON: Okay. And I will ask you this -- I should have asked you this question up front, actually, under the general questions, so I will ask it here and I won't ask it for any of the other services.
17472 With respect to the revenues that you have projected for e-commerce, the three-year services through the interactive components of your services, what did you use as a basis for projecting those revenues? We have seen quite a range from very conservative to quite optimistic revenue projections of as much as $6 million over seven years -- $6.5 or $7 million over seven years.
17473 So what has been your general approach to the revenues that you can generate?
17474 MR. O'FARRELL: I think to answer that question, I would like to call on Katherine Browne and Greg Treffry who can supplement to the answer that Katherine will provide.
17475 MS BROWNE: I think that you will note that we have two sources of revenue from interactive initiatives -- interactive advertising revenue and e-commerce revenue -- and you will have probably also noted that we are probably among the more conservative in terms of our projections and what we did was we consulted with our new media division within Global as well as new media consultants externally and tried to come up with a framework, given all the uncertainties with this type of revenue projection.
17476 What we determined was that with a Web presence we could probably obtain a 25 per cent premium on our current CPMs, current over-the-air CPMs, so we used that as a basis for a CPM that we could apply to our Web audience to come up with our interactive advertising revenues. It has turned up with a very, very low projection of $340,000 over the seven-year licence term for interactive advertising.
17477 E-commerce revenue, again we looked at the audience that would be coming to this service, and projected a certain amount of participants from that audience who would actually purchase from our Web site. We assumed about $200 to $300 of purchasing per year, per the people who are participating and a 5 per cent margin. Again, over the licence term we were only looking at about $3.6 million in e-commerce revenue.
17478 What we wanted to do was to ensure that our interactive plans were not dependent on interactive revenues. So we maintain this conservative approach so that our business plan will allow us to continue to invest in interactive technology over the licence term.
17479 MR. TREFFRY: I have nothing to add.
17480 COMMISSIONER WILSON: I was waiting for some great insight.
17481 MR. TREFFRY: We are finding that based on what we have done, it's what we are experiencing currently with globaltv.com and other markets that operating -- and, again, it's going to be in Canada for e-commerce that we haven't had the opportunities, Canadian opportunities, as has been presented in the U.S. So I think our numbers are pretty realistic.
17482 COMMISSIONER WILSON: Yes, and I think that one of the figures that was mentioned to us was that only 2 per cent of retail transactions in Canada are taking place over the Net.
17483 MR. TREFFRY: Yes.
17484 COMMISSIONER WILSON: Is there not some point at which it will just take off, where people become more confident?
17485 MR. TREFFRY: There will be, but it's hard to predict at what point in time that is going to happen and what device that it's going to occur on.
17486 MR. ASPER: I think, Commissioner Wilson, it's getting more and more difficult to identify what revenues are coming. E-commerce is easier, but interactive revenues, for example, are more difficult because often what we are experiencing is that people buy a spot on Global because it has the interactive component on its Web site, and that is going to be happening more and more with these services. People will enhance the advertising revenues on the service if one is able to offer additional components.
17487 So calling it one or the other, interactive revenues or conventional advertising revenues, is getting more and more difficult to do and that's why I think you are seeing different numbers being bandied about by people.
17488 COMMISSIONER WILSON: But your general approach would be to be more conservative.
17489 MR. ASPER: Yes, I think so. I mean, it is an unproven market yet, but I think it's something that we are all going to have to develop.
17490 MR. O'FARRELL: Commissioner Wilson, the research to which you made reference that was quoted about Internet activity --
17491 COMMISSIONER WILSON: The 2 per cent.
17492 MR. O'FARRELL: Yes. What is interesting, however, is it's leading the way in the Canadian economy or the information and cultural industry sector over all other sectors. So there is a propensity to see our sector, which is broadcasting, and so on, leading the way in that area. So for what it's worth, that's very early information but it does show some sign of promise.
17493 COMMISSIONER WILSON: Thank you.
17494 Speaking of money, I would like to turn to your money -- I wish it were my money. Again, with respect to the nature of service and programming categories, in your schedule you indicate that virtually all of the programming will come from a subcategory 2(a) analysis and interpretation and you don't indicate any programming from either 5(b) or 11.
17495 Now hold on half a second. We see in section 7.1, you don't include subcategory 2(a).
17496 MS BELL: That's an omission.
17497 COMMISSIONER WILSON: Ms Bell!
17498 MS BELL: I know, and I would also to point out to you that in Schedule 10 there are some programs that were listed at 2(a) that would probably more appropriately be categorized as 5(b). So there is a mix between the two in our proposed programming.
17499 COMMISSIONER WILSON: Okay, so what you would like is 2(a), 5(b).
17500 MS BELL: That's right.
17501 COMMISSIONER WILSON: And 11.
17502 MS BELL: Eleven and --
17503 COMMISSIONER WILSON: Along with all of the other --
17504 MS BELL: There was also 2(b) as part of our schedule which is not listed -- oh, no, it is listed.
17505 COMMISSIONER WILSON: Okay so you wanted 2(b) as well.
17506 MS BELL: Yes, and we had news and information, business news.
17507 COMMISSIONER WILSON: You did.
17508 MS BELL: Yes.
17509 COMMISSIONER WILSON: For Category 1.
17510 MS BELL: Yes.
17511 COMMISSIONER WILSON: And you also had some programming from Category 7 for this service.
17512 MS BELL: No.
17513 COMMISSIONER WILSON: Oh, I'm sorry. I'm looking at the wrong --
17514 MS BELL: Okay. I thought I missed something there.
17515 COMMISSIONER WILSON: I'm looking at the wrong --
17516 MS BELL: Can we have it? Just kidding. No, we had Category 11 though, entertainment.
17517 COMMISSIONER WILSON: Okay, so you want 1, 2(a), 2(b), 5(b), 11, 12, 13, 14, but not 15.
17518 MS BELL: That's right.
17519 COMMISSIONER WILSON: All right. Independent production got 83 per cent Canadian content level and in the executive summary it says you will spend close to $40 million on Canadian programming. In the supplementary brief it says you will spend more than $40 million. And then it says in the executive summary $15 million to independent producers and over $15 million to independent producers in the supplementary brief. So maybe you can just clarify those.
17520 MS BROWNE: I will try and follow your previous line of questioning and just answer what I think you are going to ask. So $38.4 million is the total Canadian expenditure. Of that, 93 per cent is new.
17521 COMMISSIONER WILSON: Okay.
17522 MS BROWNE: And 12.6 to the independent production community.
17523 COMMISSIONER WILSON: Maybe I can get a job as a proofreader after this, pick up all the little discrepancies in the numbers.
17524 You are planning to establish a content advisory committee for this channel, and you are proposing to include the Canadian Association of Financial Planners, the Canadian Securities Institute, the Canadian Institute of Financial Planning, the Canadian Securities Commission and the Canadian Association of Insurance and Financial Planners. I don't know how they keep themselves straight because they all have very similar sounding names.
17525 I am just wondering if you can elaborate on the role and the mandate of the committee and how it will affect the content of the programming and the choice of the programming?
17526 MR. O'FARRELL: Commissioner Wilson, we have some experience in the area of advisory boards having had the pleasure of working with one in Global- Quebec now for a number of years where a five-person board gets together approximately four times a year and they have basically three roles.
17527 The first one is to provide the input on the station-produced programming, the in-house, as to its relevancy to the core mandate that we have defined for ourselves and which would be the same as we are advocating for the Your Money advisory council.
17528 The second mandate is to assist us in critiquing what we have done by independent producers, again on the nature and theme of the service, and making sure that we are carrying out the mandate that we have said we would carry out.
17529 Thirdly, because these are credentialed individuals that we would be looking to invite to this advisory council, they play a dual role in that respect. First of all, they provide input as to the kind of information that we are providing, the kind of relevancy and currency that that information has and, secondly, they become advocates and disciples for us in those communities as well.
17530 Bill, would you like to add anything to that?
17531 MR. HUNT: I think that covers it quite well other than the fact that we have left out a representative from the Canadian Association of Retired People who will also be on that board.
17532 COMMISSIONER WILSON: On page 8 of Schedule 1, you say that the channel will draw from the expertise found in financial institutions, the Canadian government and representatives of the financial advisory committee and that adherence to strict guidelines or sources of financial information will be part of every production contract.
17533 Have you developed these guidelines already or is that one of the roles of the advisory committee?
17534 MR. O'FARRELL: We have not developed them yet, but we would be looking to groups such as the ones you have mentioned there, or the Investment Dealers Association, who all have codes of ethics, and so on, to ensure that our advisory council has the input of as many sources as possible in developing that code.
17535 We have not done it yet, but our intention would be to develop it from the base of credentialed organizations with national stature in the area.
17536 THE CHAIRPERSON: Maybe you can add the Canadian Bar Association for protection.
17537 MR. O'FARRELL: I would be happy to add them.
17538 COMMISSIONER WILSON: How specific will the information be that is offered on this channel?
17539 I will just give you an example.
17540 Particularly around the time when we are all worrying about contributions to RRSPs, there are all sorts of newspaper articles and magazine articles about how to go about investing in RRSPs and what you should do. It is often generic, and it often doesn't change from year to year. It sort of gives the same general advice.
17541 How much more specific would the channel get in terms of giving advice?
17542 MR. O'FARRELL: I am going to ask Bill to speak to this.
17543 But I think you heard Dierdre McMurdy mention in her comments in the oral presentation that she hears and feels there is scattered data and scattered information out there that perhaps leads to confusion, leads to misunderstanding, or leads to misinformation.
17544 What we would strive to do -- and it is our commitment to do it -- is to try to really become the destination of reference for these matters. So we would make every effort possible to try to elevate our programming content into accurate credential information that is totally based on fact.
17545 Of course, you are going to have people expressing opinions from time to time because that is the nature of investment advisors, and so on. But we think that, with the help of our advisory council, it would be possible to curtail that to ensure that the littlest amount of discrepancies flowing from one piece of advice versus another piece of advice would occur.
17547 MR. HUNT: I think, as well, we would see an in-depth explanation of options in the particular example that you have given, with experts from several different fields who would deal with that advice and provide that advice and answer questions, if we look at RSPs, with respect to spousal RSPs and their options and opportunities and educational RSPs and how they work for families who may not even know about them.
17548 This type of exploration is not something that would happen necessarily either just at the time of deadlines with respect to tax. It would be part of ongoing financial planning that would be built into probably several programs from different perspectives.
17549 This is the interest, I think, that the channel will certainly hold. It will provide tremendous opportunity for people to move into areas of financial investment for the improvement of the quality of their lives and their futures simply because they will have a destination to now look at these kinds of things.
17550 It is a very interesting question, and it allows me to exaggerate a little. That is my contribution.
17551 Dierdre, I don't know if you might have a comment.
17552 MS McMURDY: Actually, another point that might be worth making is that the financial services industry is always developing new products. They are always trying to gain new market share, and it is a very competitive market.
17553 So there is a lot of tide selling in that respect.
17554 But I think there is also a certain amount of consumer confusion with new products being developed. I can think most recently, for example, of clone funds, which allow people to basically dodge around federal restrictions on the amount of foreign content in their RRSPs.
17555 And as the mutual fund industry, for example, has matured, we have seen a real fragmentation in the industry, a lot of very specialized kinds of services, attempts to add value and I guess garner fees as well for the retailing segment of that industry.
17556 So I think you help people to navigate that a little bit.
17557 Another thing that has been very popular, at least in my personal experience, is the ability for people to ask questions. A lot of them are sometimes very specific to their situation. But they usually resonate quite well with other viewers, and you can often get an expert in who can help them sort of sift through things. That has been very successful.
17558 With Prime Business, for example, at tax time we get a couple of tax lawyers in. People can make calls to them and ask them, and people then phone in with sort of ancillary questions and supplementary questions on those points. That has been very successful and quite educational and informative and raises awareness as well.
17559 So I can vouch for the direct kind of response that there has been. There has been tremendous direct interaction.
17560 COMMISSIONER WILSON: Refresh my memory. Is there phone-in programming that is part of the schedule for this service?
17561 MS McMURDY: I cannot speak to that. But in my own personal experience, whenever you do provide that -- with Prime Business as an example, whenever we have people, pension fund managers, or tax experts, people are invited to call in and ask the questions. We do a format every Friday where people can phone in with questions on the market. It is hugely popular.
17562 Part of that again is the fact that capital markets and their nature have really changed. For example, technology stocks have really added a whole new element, and a whole new element of confusion for a lot of people too.
17563 MR. HUNT: Although not mentioned specifically in the program outlines here, certainly that would be a very important component, I think, particularly when you are talking about tax time and other elements. That type of interactivity is traditional and adds --
17564 COMMISSIONER WILSON: The original interactivity.
17565 MR. HUNT: Absolutely. And adds a great deal to this kind of programming. So certainly it would be incorporated into some of the in-studio.
17566 COMMISSIONER WILSON: I guess what I am trying to get at is that -- and I assume this is the reason that you have a financial advisory committee. And that the Chair of the Panel made the comment about the Canadian Bar Association and protecting yourselves.
17567 You have to find a balance between how general the information is and how specific it is. You would think that the more specific it is, the more useful and more attractive it would be to the viewer. If it is too general, who is going to tune in? Who is going to watch this stuff day after day?
17568 Not that we are not all fascinated by money, or lack thereof.
--- Pause / Pause
17569 MR. HUNT: We are fascinated by microphones. We are still having trouble.
17570 I don't have one, so I will try and speak up.
17571 THE CHAIRPERSON: It is not that simple, because this is being transcribed. So there must be the use of the microphone for your comments to be on the transcription.
17572 MR. HUNT: I think it is working now.
17573 Let me jump all over that comment, if I could. There is no service like Your Money that currently exists in the marketplace. As Dierdre said, there are places that you can go to find specific information, whether it be radio or magazines or the odd television program. But there is no singular destination that people can go to to be educated, to learn, to look at options, opportunities at a level that is not at the level of the professional or the executive.
17574 As the young woman said in the video, the 40-year-olds with the Mercedes.
17575 This is for people who have not had the opportunities to really dive into their personal financial health.
17576 So point no. 1 is that this is a tremendous opportunity for service that does not currently exist and can be of great benefit.
17577 Secondly, it will provide a unique service, and it will be unique in many ways. This is kind of an interesting example.
17578 We talked about the Investment Club. This would not necessarily use real money, but it would be real people working through, with experts, investment as a group in the stock market. What a wonderful way to learn the ins and outs, to learn the risks and the opportunities, to perhaps go places and be a part interactively -- and I will look to Greg on that one -- to explore areas that you would not otherwise explore.
17579 These opportunities, first of all, make it unique. Second of all, it is the only place that you will be able to go for a myriad of financial information and opportunity. And it relates to everyone, not those who are currently just in the money.
17580 COMMISSIONER WILSON: Are you speaking personally, Mr. Hunt?
17581 MR. HUNT: I don't know anyone more than me who needs this service.
--- Laughter / Rires
17582 COMMISSIONER WILSON: I noticed in the nature of service that you have included infomercials. I am wondering what role will these infomercials play.
17583 What kinds of infomercials will they be? Will they be specific investment consultant companies or financial institutions or publicly traded companies or other companies doing these infomercials?
17584 Will they tie in with the genre or --
17585 MS BELL: I think they will tie in with the genre. We have not specifically made any great plans to do a lot of infomercials. But there would certainly be some as part of the schedule, and they would tie in with the nature of the service.
17586 COMMISSIONER WILSON: Those are all of my questions for your money. So we will turn to VIOLET.
17587 I am sure you are aware of this funny comment on the first day about the digital world not being a place for shrinking violets, and the Chair asked Mr. MacMillan if he was referring to your application.
17588 THE CHAIRPERSON: And he said yes.
--- Laughter / Rires
17589 COMMISSIONER WILSON: So we will pursue these questions on the final application that we are going to be looking at.
17590 With respect to nature of service, your nature of service definition is fairly broad for this application. It could be difficult to ensure that you remain focused on romance and relationship programming.
17591 I'm just wondering if you might propose alternate wording that would be more precise than "who care about and are interested in affairs of the heart"?
17592 MS BELL: I actually have some wording that I could propose right now, if you would like.
17593 COMMISSIONER WILSON: Okay.
17594 MS BELL: All right.
17595 VIOLET is a 24-hour digital specialty programming service devoted exclusively to programming related to love, romance and relationships.
17596 Would that help?
17597 COMMISSIONER WILSON: We like the word "exclusively".
17598 MS BELL: There you go.
17599 COMMISSIONER WILSON: Regulators like the word "exclusively".
17600 Okay. Your narrative description of the service as well as your program description in Schedule 10 include programs from categories that you have not included in your proposed "nature of service" definition. Could you just tell us what the categories are that you are proposing for the service.
17601 MS BELL: Okay. I will go through them for you.
17602 Category 2(a), which is analysis and interpretation; 5(b), informal education, recreation and leisure; Category 7, drama and comedy.
17603 COMMISSIONER WILSON: What are the subcategories?
17604 MS BELL: (a), (b), (c), (d), (e).
17605 COMMISSIONER WILSON: Okay. So all of them.
17606 MS BELL: Not quite all of them.
17607 COMMISSIONER WILSON: Oh, no. Sorry.
17608 MS BELL: I left two out.
17609 COMMISSIONER WILSON: Okay.
17610 MS BELL: And Category 11, general entertainment and human interest.
17611 COMMISSIONER WILSON: Okay.
17612 MR. SHEA: 2(b), as well --
17613 MS BELL: I apologize, 2(b).
17614 COMMISSIONER WILSON: I heard that. All right. Long form documentary.
17615 What proportion of your schedule would be dedicated to entertainment programming versus -- will you be doing any information -- yes, obviously, you will be doing information programming.
17616 MS BELL: Yes.
17617 COMMISSIONER WILSON: What is the proportion between the two?
17618 MS BELL: It's about 75 per cent of the --
17619 COMMISSIONER WILSON: Entertainment.
17620 MS BELL: -- schedule. Yes.
17621 COMMISSIONER WILSON: Okay.
17622 Will you be airing any soap operas?
17623 MS BELL: I will let Catherine Thompson answer that question. She is the expert.
17624 MS THOMPSON: Am I the expert on relationships? I don't know about that.
17625 COMMISSIONER WILSON: Are any of us?
17626 MS THOMPSON: You know what? I think that that is why we need this channel, because none of us are experts in relationships.
17627 What we are looking at in terms of soap operas -- Riverdale, for instance, would be I think categorized by some people as a soap opera, and that would be the kind of programming we would be putting on there. The typical Y&R or Guiding Light, or whatever happens to be out there, we are not looking at doing soap operas of those natures.
17628 COMMISSIONER WILSON: Okay.
17629 MS THOMPSON: We do have the virtual soap opera, though, on violet.com, which will be entirely different.
17630 COMMISSIONER WILSON: Sorry?
17631 MS THOMPSON: The soap opera that we are thinking of doing on violet.com, we are going to have -- just on our Web site we will have a soap opera that people can follow daily --
17632 COMMISSIONER WILSON: The virtual soap opera.
17633 MS THOMPSON: That's right. Yes.
17634 COMMISSIONER WILSON: Will participants be able to decide who ends up with who?
17635 MS THOMPSON: I'm hoping so. I'm hoping so. It will be a chance --
17636 COMMISSIONER WILSON: Who has whose illegitimate child.
17637 MS THOMPSON: Exactly. That's exactly right. You have the idea.
17638 COMMISSIONER WILSON: Okay.
17639 Can you just describe what you mean when you say that VIOLET will highlight programs created exclusively for the channel?
17640 MS THOMPSON: I think what we were trying to get in that description was the fact that what we are going to do with our script and content development fund, which is $3 million over the course of the licence term, is try and develop Canadian drama in this category, which is unfortunately missing as it stands. What we have decided to do with that development fund, the programs that arise out of it, is to schedule those featured in prime time. So we are giving the prime time slot to the Canadian programs that we hope will come out of this fund.
17641 COMMISSIONER WILSON: Would those be programs like Riverdale?
17642 MS THOMPSON: Riverdale is already established and out there. We are talking about new stuff that's going to be out there that we are going to help to fund and develop.
17643 COMMISSIONER WILSON: Right. I'm saying would it be like that? Would it be a similar type of programming?
17644 MS THOMPSON: Sure. That's exactly right. We are looking at dramas and comedies in a series format, so Riverdale would be a perfectly good example.
17645 COMMISSIONER WILSON: Okay.
17646 Your broadcast day, is it 18 hours or 24 hours?
17647 MS BELL: It's 24 hours.
17648 COMMISSIONER WILSON: And the repeat level would be similar --
17649 MS BELL: Yes.
17650 COMMISSIONER WILSON: -- to what you see in other specialties right now?
17651 Okay. Let's go to the numbers.
17652 This actually I found to be the most complicated application in terms of all of the different commitments and how they add up. I'm wondering if you could take me through, because on page 2 of the executive summary there are a whole bunch of different figures. I just want to try and figure out, are they all separate figures that you add up to get a total or are some included in others? It wasn't 100 per cent clear to me. It may have been because it was a little late when I was looking at the numbers.
17653 You have a script and development fund of $3 million over the course of the licence term.
17654 MS BROWNE: That's correct.
17655 COMMISSIONER WILSON: You have a year 1 new independent production amount of $3.69 million.
17656 MS BROWNE: The $3.69 million that's referred to in the executive summary is a combination of Canadian acquired and Canadian independently produced program expenditures, cash expenditures. If you will permit me, maybe we can just break down the amortized expenditures over the seven-year term.
17657 COMMISSIONER WILSON: If that would be easier.
17658 MS BROWNE: I think that would be easier.
17659 COMMISSIONER WILSON: So you can see how --
17660 MS BROWNE: I can see how you got confused, yes.
17661 COMMISSIONER WILSON: -- I got a little confused.
17662 MS BROWNE: I apologize for that.
17663 COMMISSIONER WILSON: Okay.
17664 MS BROWNE: The total Canadian expenditure commitment, including the $3 million script and concept development fund, is $29.9 million over the licence term, 89 per cent of which is new.
17665 COMMISSIONER WILSON: Okay.
17666 MS BROWNE: $13.8 million to the independent production community.
17667 COMMISSIONER WILSON: Okay.
17668 Anything else I need to know about that?
17669 MS BROWNE: I don't think so.
17670 COMMISSIONER WILSON: All right. I think that clears it up for me. I don't know if that clears it up for staff, but they will let you know.
17671 Excuse me.
--- Pause / Pause
17672 COMMISSIONER WILSON: Okay. I guess one final question about -- this goes back to research again and it's quite similar to the previous question.
17673 Just extrapolating from the results in your survey, 17 per cent demand at 50 cents moving to 30 per cent at 55 cents in year 1. I guess you would give us the same answer that that is just one of the building blocks that you used in developing your subscriber penetration rates?
17674 MS BROWNE: Yes, that's correct. We used several components in coming up with our business plans.
17675 COMMISSIONER WILSON: Those are all of my questions on your applications.
17676 Madam Chair.
17677 THE CHAIRPERSON: I have one question.
17678 We discussed, in a general way, what your position was vis-à-vis the independent production sector -- leaving, I believe, the possibility of a definition of an "independent producer" which may be more restrictive than yours -- if flexibility was then accorded. To make sure we understand how it would work, if you will allow me, we will put that grid or that general position to the test in two of the services.
17679 One, information-based. I would expect Vital TV would be information-based.
17680 I'm not too concerned now about whether -- unless I make a horrendous mistake, as to whether it's amortized or not, just to understand how it works.
17681 For Vital TV, I understand that Canadian content would be 75 per cent, of which 72 per cent would be acquired for the independent production sector. Right?
17682 MS BROWNE: Charlotte, I believe she is referring to hours, the 72 per cent.
17683 MR. O'FARRELL: Madam Chair, the numbers that Catherine has given this morning to the questions that Commissioner Wilson has raised were expressed as a percentage of spending and not as a percentage of hours.
17684 THE CHAIRPERSON: Okay. I think I heard you say that amortized it was $21.4 million. Is that --
17685 MS BROWNE: That's correct.
17686 THE CHAIRPERSON: Yes?
17687 MS BROWNE: Yes.
17688 THE CHAIRPERSON: Okay.
17689 So now we have $24.1 million -- let's say, the Commission held you to this commitment -- to go to the independent production sector. Then we would define "producer", let's say, as completely unrelated for the purposes of discussion.
17690 Would that mean, then, because it's in information-based and you want 25 per cent flexibility that 25 per cent of this would go to a related company and 75 per cent to unrelated as defined?
17691 MR. O'FARRELL: As per your definition?
17692 THE CHAIRPERSON: Well, as per your proposal.
17693 MR. O'FARRELL: Well, as per our proposal a company would -- as per our proposal up to 25 per cent could be produced for the service by a company in which we would have less than a controlling interest.
17694 THE CHAIRPERSON: Or however the Commission defines "independent" as to "non-independent".
17695 MR. O'FARRELL: Correct.
17696 THE CHAIRPERSON: I think you agreed with me -- at least Mr. Shea did -- that there was a possibility that flexibility could be more easily granted if the exclusion of producers to which certain money would not flow were strict, in other words.
17697 MR. O'FARRELL: We agree with that.
17698 THE CHAIRPERSON: Okay. So, then, if I test it against VIOLET, which I suspect is an entertainment --
17699 MR. O'FARRELL: That's correct.
17700 THE CHAIRPERSON: -- service, I think I just heard you say $13.8 million would go to the independent production sector.
17701 MS BROWNE: That's correct, yes.
17702 THE CHAIRPERSON: Which would mean, under your proposal, that 50 per cent of that $13.8 million could legitimately flow to an affiliated company as defined?
17703 MR. O'FARRELL: That is correct.
17704 THE CHAIRPERSON: Okay.
17706 MR. McCALLUM: I just have a few questions on some but not all of the services, if that's all right. Unfortunately, I have to go back to some of the ones at the beginning, starting with Canadian Travel.
17707 In that one there was discussion of Category 7(c) and 7(d), and I think the answer in that case was that there should be programming coming from those categories. I'm just wondering, for the purposes of a condition of license, if there is any limit to the programming coming from those categories for Canadian Travel?
17708 MS BELL: I think we would propose no more than one -- or an average of one movie per week as a condition of license.
17709 MR. McCALLUM: One movie per week. That would be repeated, though --
17710 MS BELL: That's right, yes.
17711 MR. McCALLUM: One movie repeated subject to your regular repeat factor?
17712 MS BELL: Exactly.
17713 MR. McCALLUM: Could that be translated into a percentage of programming? I ask that because some of the others have provided it as a percentage of programming.
17714 MS BELL: We would have to calculate it because it would depend on the length of the movie. Most of the time it would be two hours. I guess eight hours divided by -- I think 5 per cent of the schedule would do it.
17715 MR. McCALLUM: I will take 5 per cent. But you have a couple of other undertakings, if it is different you can come back and --
17716 MS BELL: M'hm. All right.
17717 MR. McCALLUM: Thank you.
17718 Just on Canadian Travel, could you just clarify, is there a role for Astral in the ownership of that service?
17719 MR. O'FARRELL: No, there is no role for Astral in the Travel.
17720 MR. McCALLUM: It is 100 per cent Global?
17721 MR. O'FARRELL: That's correct.
17722 MR. McCALLUM: On DesigNation, again you were asked some questions about Category 2(a) and 2(b). I believe in that case you said that there would be programming coming from those categories. Again, I wondered if there could be an amount or a limit for the purpose of a condition of license.
17723 MS BELL: Limiting Categories 2(a) and 2(b)?
17724 MR. McCALLUM: Yes.
17725 MS BELL: I think the bulk of the programming on this service is going to be coming from 5(b), so would you like that combined as a limit, 2(a) and 2(b)?
17726 MR. McCALLUM: Or if you can break it out individually, that would be even better, but --
17727 MS BELL: I think again under 2(b) there would be no more than 5 per cent of the schedule.
17728 MR. McCALLUM: And 2(a)?
17729 MS BELL: 2(a). There is not a whole lot of difference between 2(a) and 5(b). It might go up to 10 per cent of the schedule.
17730 MR. McCALLUM: Thank you.
17731 Further on DesigNation, in responding to a question from Commissioner Wilson about sitcoms, which is Category 7(b), you kind of alluded that there might be a possibility of a condition of license of up to 10 per cent. I just wanted to clarify, would there be any programming coming from any other categories of Category 7 other than 7(b)?
17732 MS BELL: We hadn't planned that in our schedule. It's not in our proposal.
17733 MR. McCALLUM: Therefore, if the condition of license was imposed in that case it would be covering all of Category 7 and no more than 10 per cent?
17734 MS BELL: We would like the opportunity, if we can take the opportunity of doing Category 7, if there were a drama related to the design world, so under Category 7(a) we would like to add that also. So it would be Category 7(a) and 7(b).
17735 MR. McCALLUM: And no more than 10 per cent?
17736 MS BELL: That's correct.
17737 MR. McCALLUM: Thank you.
17738 Further on DesigNation, I think one of the earlier applicants which proposed a fashion-type program, INFASHION, said that they were willing to accept a condition of license that there be no how-to programs. How would you react to such a condition of licence for DesigNation?
17739 MS BELL: Well, I don't think that we want to foreclose the opportunity totally from doing any of that type of programming, but we would certainly be open to limiting the amount of programming that we would do in the how-to category.
17740 MR. McCALLUM: How would you propose to limit it?
17741 MS BELL: Ten per cent.
17742 MR. McCALLUM: Is that spread across categories or is that --
17743 MS BELL: Yes, it would be.
17744 MR. McCALLUM: So in the how-to nature.
17745 MS BELL: Exactly.
17746 MR. McCALLUM: In your presentation this morning you mentioned the, I guess affiliates, Design Exchange, DXNET and Canadian Interiors. I assume none of those have an ownership interest in the case of DesigNation?
17747 MR. O'FARRELL: Not at this point in time. However, there is an option available to Canadian Interiors to take an equity position.
17748 MR. McCALLUM: How would that work vis-à-vis a condition of license vis-à-vis independent production then? Would they be caught by the limits or not, in your view?
17749 MR. O'FARRELL: Well, first of all, they are a publisher of a magazine, they are not in the production of video per se, to my knowledge, but I would expect that they would be captured by whatever conditions would apply to the licensee.
17750 MR. McCALLUM: Their role would primarily be, for this service, to be assisting with developing the programming and the programming ideas. Is that right?
17751 MR. O'FARRELL: That's correct. But also it is fabulous cross-promotional platform for DesigNation. They hold -- and perhaps Heather would like to speak to this for one second -- they hold an annual event which is extremely well attended, it is a national design award ceremony and it would be a fabulous promotional tool for Designation.
17753 MS HATCH-DINEL: Yes. Canadian Interiors magazine each year sponsors the Best in Canada Design Awards which salute Canadian designers who are developing products in a variety of genre, whether it is industrial design, hospitality design, product design, and we definitely see an opportunity to promote that event, to telecast that event, to help in the organization of that event and obviously to profile the winners and the various finalists that are identified for the award. So it is certainly a way that we can integrate what they are doing with what we are doing.
17754 MR. O'FARRELL: Their publication reaches, obviously, a constituency that we consider to be of interest to this service, so it would be a two-way kind of relationship.
17755 MR. McCALLUM: Thank you very much.
17756 If I could just ask a question or two on Vital TV.
17757 Again, on the Category 7, I think in responding to Commissioner Wilson you said that you thought that there might be some programming in Category 7, 7(c) and 7(d), and I just wondered again could a condition of license be designed for those two categories as well?
17758 MS BELL: Yes, 10 per cent of the schedule.
17759 MR. McCALLUM: That would be covering both 7(c) and 7(d)?
17760 MS BELL: Both, that's right.
17761 MR. McCALLUM: My last couple of questions are on VIOLET.
17762 A similar question about Category 2(a) and 2(b) in the case of VIOLET. My question again is: Could a condition of license be designed in that case?
17763 MS BELL: It could, or you could go the other way and say that at least 74 per cent of the programming on the channel would be from the Category 7. You might do it either way, whatever is simpler.
17764 MR. McCALLUM: Oh, I see. So Category 2(a), 2(b) maximum would be 25 per cent there?
17765 MS BELL: M'hm.
17766 MR. McCALLUM: I see, okay. Thank you.
17767 Finally, just on VIOLET, can you clarify what would be the percentage of ownership interest between Global and Astral in that case? I think it is an ownership interest in the limited partnership?
17768 MR. O'FARRELL: It's an 80/20 relationship in VIOLET -- 80 per cent to Global, 20 per cent to Astral.
17769 MR. McCALLUM: Thank you.
17770 Thank you, Madam Chair. Those are my questions for now.
17771 MS BELL: Actually, can I just ask you to go back to Travel one second.
17772 When we calculated I miscalculated and I would like to change that number. I said 5 per cent and it should be 10 per cent. I apologize for that.
17773 Thank you.
17774 MR. McCALLUM: Thank you.
17775 THE CHAIRPERSON: Madam Bertrand.
17776 CHAIRPERSON OF THE COMMISSION: I'm sorry, I guess I'm like Martha, Madam Wilson, I'm not too good at calculation.
17777 Could you please repeat for me on your information-based services what is the percentage you would devote to independent producers that would not be affiliated with you or any of your partners?
17778 MR. O'FARRELL: Seventy-five per cent.
17779 CHAIRPERSON OF THE COMMISSION: Okay. So, Madam Wylie, the Chair, was right. I'm sorry.
--- Laughter / Rires
17780 CHAIRPERSON OF THE COMMISSION: We haven't talked -- and it goes without saying most likely, but it would be interesting to have on the public record what is your estimate of overlapping between the channels you are proposing and the existing stations you have, either when you have two stations in the Toronto-Hamilton area or in Vancouver?
17781 What do you see as being different windows? Do you see it a very different percentage from proposal to proposal or do you see it like an average percentage of programming that will be shared with Prime and with the other.
17782 MR. O'FARRELL: Madam Chair, we consider that to be a very relevant question to the success of the digital tier. Back to a point we were trying to make earlier and that is we really do feel that creative, innovative Canadian content in all of these services is going to carry the day.
17783 We would be prepared, and frankly in our self interest, be prepared to ensure that a minimum amount of program overlap between the two and with the 10 or 15 per cent of maximum overlap between any two services would be the case over the course of a broadcast year.
17784 CHAIRPERSON OF THE COMMISSION: But isn't it like somewhat of a challenge. On one hand, there is an advantage when you have the capacity of programming of producing and all the ramifications of one's company so that you can count on this in order to bring quality to the viewer, yet at the same time if you want to assure real diversity that will be very important at the same time, you are kind of caught in between -- you see that 10, 15 per cent of overlapping would be a way of bridging the two elements and kind of creating harmony rather than contradictions or conflict?
17785 MR. O'FARRELL: Absolutely, Madam Chair. Both harmony, added value and programming strategies, overall that would make sense. Kevin may want to add something to this, but you know that, for instance, on the conventional side it's very clear where our Canadian priority programming responsibilities lie and how one schedule versus another schedule cannot be duplicated.
17786 There are, and we think that there is this 10 to 15 per cent range of opportunities where we actually can leverage off each other to the benefit of the viewer and to the benefit of rolling the service out to more subscribers.
17787 CHAIRPERSON OF THE COMMISSION: Thank you.
17788 THE CHAIRPERSON: Now, the last word is yours. I don't know if Mr. Asper wants to take the opportunity so that he can really hone his skills of speaking from the back row or if Mr. Shea will, but if you wish to, you have the last word to wrap up.
17789 MR. SHEA: Madam Chair, we have arranged it so each one of us has some closing remarks.
17790 THE CHAIRPERSON: I did not include them in my invitation.
17791 MR. ASPER: I will say one very quick word just in response to Madam Bertrand's question.
17792 I think the whole -- just to describe what we are trying to do as a company is important to understand how the programming will flow back and forth. The idea would be, and what I am about to say is the way the Internet is working is that the whole causative linkage is that a show would maybe appear as an information program, say, about health, maybe on Global Television in a morning slot instead of what we are doing today, which can be airing infomercials or children's programming which is threatened because obviously there are a lot of children's channels.
17793 It will say okay, and now for a different program, go see Vital TV, you know. Vital TV will then say "Well, here's some more information on medbroadcast.com's Web site or the globaltv.com Web site". It's to really provide different programming. It doesn't help us to repeat programming.
17794 The watching factor on a repeat information programming is extremely low, much different than drama. It's to create different arenas for different kinds of programming, but the idea of growing as a company is to be able to create those links. That's why it's unlikely just for marketing and business reasons we would want to have the same programming.
17796 MR. SHEA: Madam Chair, we won't leave you today paraphrasing Fleetwood Mac because once was enough in this hearing. We would like to summarize by telling you that we think that what we have provided you with are articulate and thoughtful responses to your call for applications by way of the manner in which we have responded to the criteria, the call and the manner in which we have prioritized and with a view to trying to make these applications the very best under the circumstances.
17797 I think our Cancon levels speak for themselves. I think our commitments to Canadian spending in dollars speak for themselves. I think that our commitment to marketing and promotion, both in all of the manners that we have described to you today, also speak for themselves.
17798 Something we haven't spoken to very much today, frankly, is the team that is in front of you. This team that has been working on these applications for quite some time have developed very personal equity in these applications because we all believe in them very, very deeply and very profoundly.
17799 I think that we have a competent group who are prepared to take on the challenges of the digital age with our partners. We have selected carefully key partners, including Astral that is with us today, but others as well to try to make these services that we have submitted applications for the best possible under the circumstances.
17800 Finally, I think that these applications over and above their Cancon levels, their spending, the team that is looking forward to launching them, the partners that we have identified to do it with, we benefit as a company from a very strong and committed ownership group that is here for the long stay and that is committed to making sure that this area, and we said it in the oral presentation, is not an area that we have grown in substantially, the so-called specialty area, but it is an area in which we see growth -- everybody does -- and we look forward to being part of that growth.
17801 We wish to thank you very much for your indulgence today and for your kind and cooperative manner in allowing us to correct certain issues that were unfortunately not the way they should have been in the application.
17802 Thank you.
17803 THE CHAIRPERSON: Seeing you on your position, you blame Ms Bell.
17804 MS BELL: As always.
17805 MS ASPER: No. We just blame Bell Canada.
17806 THE CHAIRPERSON: We thank you for your cooperation and your patience. It has been a long morning, Mr. O'Farrell, Mr. Shea, Mr. Asper and all your team. We will see you again and hopefully examine responses in hand by Phase IV.
17807 We will resume at 2:15.
17808 Nous reprendrons à 2 h 15.
--- Upon recessing at 1245 / Suspension à 1245
--- Upon resuming at 1415 / Reprise à 1415
17809 THE CHAIRPERSON: Rebienvenue à notre audience.
17810 Welcome to the second half of today's hearing.
17811 Mr. Secretary, please.
17812 MR. CUSSONS: Thank you, Madam Chair.
17813 At the break, Mr. O'Farrell gave to Commission counsel a nine-page article dated 10 August 2000 entitled E-commerce and Business Use of the Internet. This article has been taken from the Statistics Canada Web site, which is www.statscan.ca, and the Commission is placing it on the public examination file of Global Television Network.
17814 I would now like to introduce our next applicant, Astral Television Network Inc. and Global Television Network Inc., Limited Partnership, OBCI, who has applied for a new Category 1 service specifically to be called Cinefest. There is a maximum presentation time of 20 minutes, and Mr. Bureau, welcome back to our hearing.
PRESENTATION / PRÉSENTATION
17815 MR. BUREAU: Good afternoon, Madam Chair, members of the Commission. My name is André Bureau and I am Chairman of Astral Media and President and CEO of the Astral Broadcasting Group.
17816 Before we begin our presentation today, I would like to introduce the members of our panel.
17817 Starting on my left, Lisa de Wilde, President and CEO, Astral Television Networks. To her left, Alicia Ortiz, Vice-President, Strategic Planning, Astral Television Networks. To her left, Peter O'Brian, a well-known independent producer whose film credits include the Grey Fox, My American Cousin and John and the Missus. Peter is also Executive Producer of the Canadian Film Centre's Feature Film Project.
17818 To my right, Michelle Marion, Strategis, Astral Television Networks. Behind me, starting on my right, Bruce Anderson, Principal with Earnscliffe Research and Communications; René Bourdages, Executive Vice-President, Astral Television Networks; Stephen Zolf, Partner, Heenan Blaikie; Glenn O'Farrell Vice-President -- Oops! I don't have his new title. Sorry. It was written yesterday and so -- CanWest Global Network. He's not the boss, but just, just under the boss.
17819 Joe Tedesco, Senior Vice-President, Finance and Business Affairs, Astral Television Networks. At the table on my right, David Beutel, Vice-President, Corporate Development for the new media company, Nitromedia; Chris Bell, Vice-President, Technology, Astral Television Networks, and Michel Houle, Consultant.
17820 And now let's hear Lisa.
17821 MS de WILDE: As André said, Cinefest is a partnership between Astral Television Networks and CanWest Global Network. One hundred per cent Canadian owned, Cinefest will be controlled and operated by the majority shareholder, Astral.
17822 As a broadcaster, Astral's specialty is movies. We bring to Cinefest this love of movies, whether in English or French, from Canada, from the United States, from around the world. Astral also brings a long-standing commitment to building a Canadian film production sector. Among many things, Global brings to Cinefest its expertise in running successful advertising-driven channels as well as its national news gathering machine which will help us in our coverage of film festivals.
17823 As the largest private sector financial supporter of Canadian films, Astral plays a unique role in the creation of Canadian movies. Our support begins with script and concept development dollars, goes on to include those critical pre-buy licence fees and investments, culminates in the exhibition and promotion of movies on our signal, and finally is completed with film restoration and preservation. Cinefest will let Astral build on this existing support in some important new ways.
17824 We are also passionate about film festivals. We have been long-time supporters of film festivals across Canada. You have only to drop into our offices over the next three or four weeks in both Toronto and Montreal to get a sense of the excitement and I will personally admit that I am thrilled you have decided not to sit on the weekends to allow us to go and sample a bit of the film festival that kicks off in Montreal this week.
17825 Astral has also faced head-on the challenges of offering high-quality services that have niche penetration. As operators of pay television networks, we understand those unique pressures of successfully marketing the new digital services that will be dependent, especially in the cable market, on subscribers choosing to adopt and pay for set-top addressable technology.
17826 Our experience in this area of Canadian broadcasting, along with our real passion for film and for film festivals, led us to create Cinefest which we believe is the type of high-quality and attractive service that is going to be needed to drive new digital packages.
17827 Cinefest promises to be a television destination unlike any other, either in Canada or in the United States. It will replicate the film festival experience for the in-home viewer by offering, as international film festivals do, feature films as well as some shorts and documentaries.
17828 It will celebrate, 24 hours a day, cinema that is outside the mainstream. Cinefest will also commission dynamic new original programming that will take the viewer behind the scenes of the film festival and promote independent filmmakers and the craft of filmmaking.
17829 There is another distinct aspect to Cinefest. It will offer a truly Canadian perspective on the world's independent films. Because we as Canadians look at the world throughout own prism, Cinefest will reflect a unique Canadian point of view whether through the variety of titles, the different countries represented in our schedule, the new original programming that we wrap it altogether with, the on-air look and feel will be genuinely Canadian.
17830 Cinefest will not be a knock-off network. It will be a made in Canada original. In fact, no more than 25 per cent of our schedule will be from the United States. We are proud to say that we will be much more than the U.S. Sundance Channel which is made up of 70 per cent U.S. programming. Cinefest will emulate the Toronto and Montreal film festivals that have the vast majority of their titles coming from Canada and around the world.
17831 More than 60 per cent of Cinefest's programming will be films. When viewers tune into Cinefest, they will see great stories and high quality hard to find, un-released and limited release titles. Many of our films will have been seen only at festivals and will never yet have been seen on Canadian TV.
17832 Cinefest will be amazing. It's a niche that will capture the best of a huge pool of movies. The vast pool of over 6,000 films produced globally each year is pretty mind boggling. Out of that pool, Cinefest will focus on the best of these films. We will exist to celebrate wonderful movies that Canadians haven't been able to see.
17833 Hollywood films, as we well know, are already a mainstay on Canadian TV. In addition, the largest, commercially successful independent titles are already picked up first by pay-TV and then by specialty channels and conventional television. Cinefest's raison d'être is to celebrate precisely those titles that haven't been the big box office smashes, and to provide something that is truly different on TV, to allow Canadians to discover the world of cinema that is beyond their local megaplex.
17834 When viewers tune in to Cinefest, they will become part of a film festival experience. This is vividly shown in our sample Cinefest program catalogue that is filed with our application.
17835 To give you a more detailed sense of our schedule, Michelle Marion.
17836 MS MARION: Thank you.
17837 Throughout Cinefest's schedule, you will see interesting programming blocks. Cinematheque Spotlight will be a month-long look at the films of an actor or director like cinema pioneers Godard, Bunuel, Guy Maddin and Jim Jarmusch. Digitaldomain slot will focus on un-released and limited release films shot using digital technologies and digital video, like the gutsy Canadian films, Steve and Jack's House, both low budget improvised digital films, or the riveting digital Danish shocker, Celebration.
17838 Cinéma du Monde will celebrate international features like Germany's rollicking ride, Run Lola Run or the works of directors like Argentina's Eliseo Subelia or Iran's Abbas Kiarostami.
17839 First Take will feature films from up and coming filmmakers or first features by today's hottest Canadian and international filmmakers before they became famous, films like Knock, Knock and Let Me See, two of Bruce McDonald's earliest films, or Stereo and Crimes of the Future, two of David Cronenberg's first films, all of which have never been seen on Canadian television.
17840 On the documentary side, Cinefest will carry about the same amount of documentaries as you would find at a film festival. Approximately 15 per cent of Cinefest programming will be documentaries.
17841 No film festival is complete without short films. Shorts are fascinating gems -- perfect brief glimpses into other worlds. Though an art form unto themselves, shorts are also important as a training ground for filmmakers. Nowhere is this more evident than with the diverse and exciting shorts that are coming out of the Canadian Film Centre, the National Screen Institute and L'Inis.
17842 And now to highlight our original programming is Alicia Ortiz.
17843 MS ORTIZ: Thank you.
17844 One of the most exciting aspects of Cinefest is its new Canadian original programming. At least 15 per cent of Cinefest's total schedule will be comprised of new originals about film -- all commissioned by Cinefest from Canadian independent producers.
17845 These new shows will provide valuable context for Cinefest's programming in the same way that film festival panels, press conferences and speakers do.
17846 The network's flagship original show will be Indie Insider, a weekly magazine format which shines the spotlight on the world of Canadian and international independent film: Who's shooting what? What's in development? And who was the hit of the film festival circuit?
17847 Backstage Past will feature a renegade film crew travelling to the world's top film festivals -- from Cannes, to Ouagadougou, to Toronto, to Berlin, to Vancouver, to Local Heroes in Edmonton -- for a behind-the-scenes look at the action.
17848 The New Media, another program, will be an edgy show appealing to the filmmaker in all of us, looking at the technology tools available to today's storyteller.
17849 Dialogues will be a series of half-hours of engaging conversation-style interviews with filmmakers.
17850 Movements in Film will look at the different movements in non-mainstream filmmaking, from the French New Wave to Canadian movements like the Prairie Group.
17851 And Voices, an illuminating series of half-hours looking at how different groups use film to tell their stories.
17852 Overall, Cinefest will commission more than 700 hours of new, original Canadian programming from Canadian independent producers.
17853 We will also be 80 per cent closed captioned by Year one and 100 per cent closed captioned by Year four, to meet the needs of hearing impaired Canadians.
17854 Now, to talk about new media, another building block of Cinefest, is Michelle.
17855 MS MARION: Thank you.
17856 The experimental maverick sensibilities of both independent film and new media make it a perfect pairing for Cinefest.
17857 Cinefest's new media plans have two stages: initially, to create an online community for the independent production industry, as well as creating a dynamic experience for our viewers; and then to create a value-added component to enhance the television experience through increased creativity and interactivity.
17858 Cinefest will be the online matchmaker, bringing Canadian filmmakers and talent together via an online salon, as well as a database of actors, directors, writers and producers, and across-Canada props and locations directory.
17859 In addition, we are very excited about our partnership with the Canadian Film Centre's new media centre, with over $1 million that we are committing for the development of new, experimental interactive programming. The beauty of the Internet is that it can provide more of a universal access to the tools of filmmaking and heightening the immediacy of the medium.
17860 Turning to consumer demand, René Bourdages.
17861 MR. BOURDAGES: In January, with the concept for Cinefest in place, we went to the market to research demand and attractiveness. What a pleasure it is to test film. People responded with passion and enthusiasm to this medium that has such a profound effect on all of us.
17862 What also comes through is people's insatiable appetite for film and the desire to have alternative filmic experiences outside of the mainstream blockbusters. This is clearly supported by our research done by Earnscliffe Research and Communications and filed with the Commission.
17863 Cinefest will represent a niche of movies that is currently underserved on Canadian television. Film festival and cinematheques across the country boast impressive attendance figures. The Toronto and Montreal Film Festivals have 350,000 attendees each; and Vancouver attracts 100,000 film buffs.
17864 While the films that Cinefest will offer do not have wide distribution in Canada, there is clear demand for these titles.
17865 For example, last winter the Hini Bollywood hit Hum Saath Saath Hain played for 11 consecutive sold-out weeks at the AMC theatre in Scarborough. Cinefest will bring these sub-titled movies not only to interested niche audiences and ethnic groups but to a larger cinephile audience that would otherwise not be exposed to these titles.
17867 MS de WILDE: Cinefest has made clear and substantial commitments to support Canadian programming. Our on-air commitment will reach 50 per cent by Year four.
17868 We have committed to expend the highest percentage of previous years' revenues on Canadian programming: 45 per cent. And this would represent over $30 million over the first licence term.
17869 Just because this is a digital service, it will not mean bargain basement licence fees.
17870 Cinefest will be a new revenue stream for Canadian producers and distributors by creating an additional window for Canadian theatrical films, as well as a first window for unreleased and limited-released Canadian films, shorts and documentaries. These commitments will also stimulate the production of new high-quality programming about films from Canadian independent producers.
17871 A unique and fundamental benefit of Cinefest is its unconditional commitment to flow all production dollars to unaffiliated arm's-length producers. This is Astral's policy: we are programmers, not program producers.
17872 Additionally, all our films will be licensed from independent distributors.
17873 There are no self-dealing issues, therefore, with Astral. As Sandra Cunningham, an independent producer of such films as Robert Lepage's newest film Possible Worlds said:
"The fact that Astral specializes in acquiring product from a myriad of independent production companies and does not produce content is critical to the wellbeing of our industry."
17874 Who better to address this than Peter O'Brian.
17875 MR. O'BRIAN: Thank you, Lisa.
17876 As an independent producer myself, I can tell you how important this policy is. Cinefest will provide valuable new licence fees for Canadian movies, and these incremental dollars are vital and crucial to independent producers.
17877 In addition, I think that independent producers hope that these new channels will spark new production instead of relying on repurposed programming.
17878 What Cinefest promises is to be a celebration of Canadian filmmaking, and it is this exciting new commissioned original programming that will set the festival atmosphere. It is the opportunity to celebrate and promote and expose Canadian film in Canada on Canadian television that is one of the main reasons that I wanted to work on this important initiative with Astral.
17879 To comment on the business plan, behind me is Joe Tedesco.
17880 MR. TEDESCO: Thanks, Peter.
17881 We have created a business plan that achieves the right balance of affordability and high-quality programming.
17882 Our business plan contemplates that Cinefest will break even on a cumulative basis by the end of the first licence term.
17883 Based on our experience in offering premium services on digital platforms, we set a wholesale rate under realistic assumptions for the roll-out of digital -- in total, reaching 4 million households in seven years.
17884 But our model is flexible. If we are pleasantly surprised by the pace of the digital roll-out and penetration levels for Cinefest, our business plan can be realized under a lower wholesale rate.
17885 The key objective here is to ensure that under any scenario Cinefest will be able to provide an attractive service to drive the digital tier.
17886 MS de WILDE: Cinefest will be magic for cinema lovers. It will offer a Canadian window on the world's most innovative and influential well-known and emerging independent filmmakers.
17887 Cinefest will be a truly Canadian television original: smart, thoughtful, compelling, independent points of view. It will be an out-of-Hollywood experience that will bring new, underexposed, hard-to-find gems to Canadians in their homes.
17888 Cinefest is not about what is already on the dial but about what is not on the dial. Diversity will be our calling card and our celebration.
17889 Now, sit back, get comfortable in your seats. Here is your ticket to Canada's film festival experience on television.
17890 Enjoy your popcorn.
--- Video presentation / Présentation vidéo
17891 MS de WILDE: That concludes our presentation.
17892 Thank you.
17893 THE CHAIRPERSON: Thank you, Mr. Bureau, Ms de Wilde, and your colleagues.
17894 I hope, Mr. Tedesco, you were not practising to be a stunt man for Mr. O'Brian, because I think that would be a breach of the independent production rule.
17895 MR. TEDESCO: It wasn't anything that dramatic, trust me.
17896 MS de WILDE: That makes for a better story than the one we have heard.
--- Laughter / Rires
17897 THE CHAIRPERSON: Madam Bertrand.
17898 CHAIRPERSON OF THE COMMISSION: As long as we do take notice that it has been done before I do the questioning, we are all very...
17899 Good afternoon. I will be the one having the pleasure to question you on some areas where we would need some more clarity and understanding on your application.
17900 Of course, you have been with us last week, so we have had the pleasure of going through especially the questions around the more general issues. I will go through them again because we were talking about the francophone market last week, and you may have different views, and you are entitled to different views. The duality provided by the Broadcasting Act allows for, although the same spirit and the same objectives, applications that may be different.
17901 If you want to bear with me maybe it might end up being much more the association game that Commissioner Wilson was proposing earlier on in saying I say a question and you say yes or no, but please bear with me. It's really to make sure that we have the most complete public record.
17902 First, I will address the question of criteria.
17903 We have heard you about criteria. What is your view in this environment? Would you say that it's the same approach you had in the francophone market or would you put forward some elements, given the landscape, that is quite different in English than in French?
17904 MS de WILDE: I don't think our answer would be significantly different from what Pierre told you last week. It might be just slight -- different calibrations.
17905 We would start by applauding the Commission for having come up with such a clear and exhaustive set of criteria. When we look at the criteria that should guide your decision-making, we would put first and foremost the need to add something new and distinct to the broadcasting system front and centre.
17906 We think that's important for a couple of reasons:
17907 One, to create new services that genuinely attract people to embracing digital technology.
17908 Secondly, because there are established services that play important roles -- in particular movie services.
17909 But to link it to the need to get people to decide to embrace that new technology, the new networks must be attractive, and they must be really compelling to customers. That is where, you know, we see that there is a real need to add great new programming, which obviously then flows into our third criteria, which is the creation of new, original, high-quality, valuable programming that Canadians will come to appreciate and come to rely upon.
17910 Another aspect is obviously interactivity. That's going to vary depending on the niche. Our film niche is probably not going to be the one that gets the genuine interactive content first, but interactivity certainly can be an important value-added concept from the get-go.
17911 Our last idea is we think -- where there is an opportunity, for a Canadian control player to lead the way into the digital world, we think that that is also an important idea.
17912 CHAIRPERSON OF THE COMMISSION: Thank you.
17913 Under interactivity, what would be different if you were to apply for the kind of service you are applying for now, Cinefest, in an analog world in comparison to the fact that you are applying now to be part of the first package that will be offered to this new era?
17914 MS de WILDE: Aside from the fact that the universe will be very small and therefore challenging?
17915 I think that by virtue of the timing of the launch of digital we are going to be able to leverage the fact that Web sites are now something that is a genuine value-added component to a broadcasting service, and so it will allow us to offer not simply promotional tools, like a schedule, but more depth of content.
17916 With regard to film festivals, there is obviously an audience there that loves details about movies around the world. We have great festivals in Toronto, but there are also some amazing ones where people -- your average Canadian isn't going to get to go to Ouagadougou but they would be intrigued by what an African country does in terms of a film festival experience.
17917 So we would find a way to provide that link through our Web site.
17918 CHAIRPERSON OF THE COMMISSION: Does that mean that the choice of content you have is driven as well by the interactivity?
17919 MS de WILDE: Not really, no.
17920 I think that in the case of movies, at least as movies are known today, the fact is they are driven by a story, and they are driven, in the case of independent movies, by the story that is in the mind of the director.
17921 We wouldn't be proposing to play around with the ends of movies, for example.
17922 CHAIRPERSON OF THE COMMISSION: Thank you.
17923 The other question is the implementation date.
17924 What is your view in that environment, of what should be the rules in terms of getting a licence? How long should we wait in order to really -- you know, should there be a deadline or une date buttoir that would kind of create some pressure for negotiation to be concluded and for eventually the viewer to get the benefit of those new niches?
17925 MS de WILDE: We are pretty keen and we looked ahead to find out what the date of the 1st of September is -- and it's a Saturday night -- in the year 2001. We thought that would be the perfect night of the week to launch something.
17926 But, in all seriousness, I think a common launch date is vitally important. It allows us, all of the networks and the distribution platforms, to pool the marketing dollars to make it a big event rather than to dissipate it over a number of different points in time.
17927 To get to a common launch date, it's equally important that there be some pressure to get affiliation agreements and the rules of the game established. So I think that that was, you know, a very helpful suggestion last week.
17928 It's important, in our view, that the Category 1s and Category 2s launch at the same time -- or, to be more precise, that Category 2s not launch before Category 1s, and preferably that it all happen together.
17929 CHAIRPERSON OF THE COMMISSION: So you have the same view, strictly speaking, as the one we discussed last week in the francophone environment?
17930 MS de WILDE: Yes.
17931 CHAIRPERSON OF THE COMMISSION: Thank you.
17932 MS de WILDE: We will be talking about Canadian expenditures in light of your proposal here. But before we talk about this specific proposal, what is your view on the Canadian expenditures? Is it the same approach that was put forward last week, or do you have a different view, or do you want to repeat that view to make sure we understood?
17933 MS de WILDE: Madam Bertrand, does your question go to the new approaches that you have been suggesting?
17934 CHAIRPERSON OF THE COMMISSION: Yes, the flexibility, you know, in that new environment. Do you feel that the rules that did prevail should be transferred into this new world? What's your view on this?
17935 MS de WILDE: We are certainly very comfortable with the commitments that are in our application. We don't have any difficulty with that approach.
17936 Similarly, we think that, for example, your idea of 10 per cent plus or minus does offer some helpful flexibility that may, you know, be really helpful -- at the beginning, in particular.
17937 But we can live, quite frankly, with any approach that you decide is appropriate for the new world.
17938 CHAIRPERSON OF THE COMMISSION: Essentially, your expertise and your experience in the domain -- what you put forward for the digital environment is not any different from the English market than for the French market?
17939 MS de WILDE: That's correct.
17940 CHAIRPERSON OF THE COMMISSION: Okay. Thank you.
17941 Did I forget one?
17942 Independent producers was another area that we have understood Astral, per se, doesn't have any, as of today, but sometimes after the hearing things change --
17943 MR. BUREAU: It's the second time you mention that. Do you know anything that we don't know?
--- Laughter / Rires
17944 CHAIRPERSON OF THE COMMISSION: Well, it goes for the new senior vice-president behind you, Mr. Bureau, at a time where he was in front of the Commission. Other things happened afterwards.
17945 So, more seriously, what is your view of the relationship with independent -- not the relationship, but the definition that the Commission should adopt in order to determine what is an affiliated independent producer or what is a real independent producer? Once we determine that, should there be a general rule? We have heard your views again in the francophone market. What are your views in the anglophone market?
17946 MS de WILDE: They would not be different. You are going to realize that in fact while we may have two offices -- no, we have one office and two doors is the way that we put it. We operate in Montreal and Toronto, but we probably have one guiding mind.
17947 You heard some discussion this morning, and I think it is important to draw out the distinction about drama and, in particular, movies. In the case of Cinefest, we think -- and we like to think that we have made your life easier by simply saying we are not talking about any percentage of common ownership.
17948 CHAIRPERSON OF THE COMMISSION: So it's zero?
17949 MS de WILDE: Zero.
17950 CHAIRPERSON OF THE COMMISSION: You have a high percentage that goes to independent producer?
17951 MS de WILDE: That's right. All of it.
17952 CHAIRPERSON OF THE COMMISSION: That covers, in this particular application, yourself and your partner into the --
17953 MS de WILDE: That is correct.
17954 CHAIRPERSON OF THE COMMISSION: Okay.
17955 So it's the same. So really there are some lessons to be learned from Astral in terms of the two solitudes being on the same wavelength. We will probably ask you for those ways of doing that. That is helpful anyway. Thank you.
17956 I appreciate and I apologize again for repeating the questions, but I think it's --
17957 MS de WILDE: It makes us feel like we are a little bit prepared.
17958 CHAIRPERSON OF THE COMMISSION: I will now turn really to this application.
17959 One area where we need your help -- although I have seen in your presentation that you have already started to help us in precising -- and it is the nature of service.
17960 Of course, nature of service is important because if you were to be granted an application it helps in writing the decision, but also it helps determine from existing services which ones could be in competition in this round, of course which other ones could be in competition if we were to decide to license two or three services. So please help us.
17961 First, you have defined yourself independent movies and production or the Indies as being ones that are not covered by variety, the 100 top titles. It was comforting, because we kind of recognized a way of defining movies ourselves that we had done in a previous decision not too long ago.
17962 But is that the way you think should be kind of universal to determine what is a service that would be devoted to Indie movie?
17963 MS de WILDE: Yes, we do.
17964 I think, just to back up, it is a tough concept to define, not so much in the sense of what is the feel of an independent movie, but in order to define it in a way that in a condition of license there would be clarity such that it was simple and enforceable. That is a much more complicated task.
17965 So what we set out to do was to come up with a rule of thumb that would mean that the programmers and the Commission wouldn't be drawn into endless debates that might end up with "Well, I know it is an independent movie when I see it", because we thought that you probably had much better things to be doing with your time. So it is really that we backed into the variety list, as we affectionately call it. It's like the plumbing.
17966 It's not the magic of what the network is, but what we said was in order to create something that is genuinely new we don't need movies that are on the top 100 variety list.
17967 There is a huge pool of movies out there. Every year, the Toronto and the Montreal Film Festivals screen hundreds and hundreds of movies to come down to a schedule of 200 or 300. So we are confident that we can build an amazing schedule that viewers will love and we don't need those movies which some may be successful independent ones, they may make it on to that top 100 list, at that point they are outside of our bailiwick.
17968 CHAIRPERSON OF THE COMMISSION: So you think, not only for your own application but comparing applications, that would be a kind of objective or a quantitative type of definition that could be helpful not only for the applicant but for everybody in terms of being able to measure the same thing.
17969 MS de WILDE: That's right.
17970 And I think, Madam Bertrand, the idea was to avoid the debate about what is financed, what is distributed, what is a major studio, what is the art house affiliate was just to cut through all of that and say "The bare minimum is it can't be on the top 100 list".
17971 In addition, obviously, it shouldn't be a top studio -- it shouldn't be a movie from any of the studios and it shouldn't be something that has been financed and distributed and produced by. But those are all things that are less tangible.
17972 CHAIRPERSON OF THE COMMISSION: Thank you.
17973 There is, in the definition of an existing service, some way of describing the service, and it is "Showcase, that is very like what you are proposing in a sense, and it is to offer an all-fiction programming service consisting of the best of independently produced movies, drama, comedy and miniseries from Canada and around the world.
17974 Do you feel that from your knowledge of the film business, your attendance to all the festivals, and having been involved and having put forward that application, that you could you give us your insights on how does it compete or it doesn't compete to your understanding of what you want to do?
17975 MS de WILDE: We don't think that Cinefest is competitive with Showcase because Cinefest is directed specifically at films. The definition of what is the essence of Showcase is really much larger than that. It is the drama category, the second run drama category.
17976 So we see that Cinefest is going to be targeted very precisely at the film festival experience. How can we, with your help, fence better your project that it i's clear that Cinefest is about film?
17977 You propose here, which was not, I believe -- or I missed it in your application -- limited to documentaries for example. I think now what you are saying is 65 per cent would be film.
17978 MS de WILDE: We said over 60 per cent would be films.
17979 CHAIRPERSON OF THE COMMISSION: Yes.
17980 MS de WILDE: A maximum of 15 per cent would be documentaries, a minimum of 15 per cent would be original programming, new original Canadian programming and then the balance would be made up of shorts, interstitials, things like that.
17981 CHAIRPERSON OF THE COMMISSION: And you would accept in order to really help the nature of your service, of your application, to be more precise to have those percentages as condition of licence.
17982 MS de WILDE: Yes.
17983 CHAIRPERSON OF THE COMMISSION: When you say 15 per cent documentary, 65 film, the rest is short stories or series. Could it be mini-series?
17984 MS de WILDE: No. In fact --
17985 CHAIRPERSON OF THE COMMISSION: No series at all?
17986 MS de WILDE: No. That was an error in our coding. We thought we needed that 7(c) category in order to pick up specials, but in fact we can put them in under 2 or 2(b).
17987 CHAIRPERSON OF THE COMMISSION: So if you were granted the licence, if I tune in, if I haven't looked at my electric TV guide, I will be sure to be in either doc or short film or long form movie.
17988 MS de WILDE: And in addition, the original programming could be half hours. Those are the type of original film festival experiences that will replicate the panel discussions, what we sometimes call the Entertainment Tonight of the independent film world.
17989 CHAIRPERSON OF THE COMMISSION: Did I understand correctly that your original programming, instead of being film, will be about film?
17990 MS de WILDE: Yes, absolutely.
17991 CHAIRPERSON OF THE COMMISSION: So when you purchase licence fees, how do you categorize those? It's because you will never get a first window, is that what it is?
17992 MS de WILDE: We would hope to get a first window. We would hope to be triggering the creation of those half hours. I'm just looking.
17993 CHAIRPERSON OF THE COMMISSION: Of the programs about film.
17994 MS de WILDE: Yes.
17995 CHAIRPERSON OF THE COMMISSION: But not in the films themselves.
17996 MS de WILDE: Correct.
17997 CHAIRPERSON OF THE COMMISSION: Now, there would be some movies, both Canadian and non-Canadian, that would never have been released. I'm thinking of a movie like Goya that I saw last year in Montreal. It hasn't been on TV anywhere. So there would definitely be movies that we would be the first window for them.
17998 MS de WILDE: That's a non-Canadian movie, but there would be Canadian movies as well. Our original programming is really what adds up to the look and the feel of a film festival, whether it's taking people, you know, around the world to film festivals or, you know, behind the scenes on a local one or whether it's talking about someone like David Cronenburg's filmography from the beginning to where he is today, where he is known by everybody.
17999 CHAIRPERSON OF THE COMMISSION: So doing some retrospective work or getting some more unknown valuable type of films, you might have original pieces, but generally speaking, your original programs will be programs about movies and not movies themselves.
18000 MS de WILDE: That is correct, and it would fall into some of the categories like 2(a), 11, you know. That's where we would log them.
18001 CHAIRPERSON OF THE COMMISSION: And what about the digital domain, the kind of block you are talking about here, about digital video and digital technologies? Would that be mainly original programming or would that be like packaging in order to recognize for the viewer that that kind of program or film is available in that window?
18002 MS de WILDE: That would follow more into the analysis and interpretation. It would be describing what the impact of that technology is on the art of film-making.
18003 CHAIRPERSON OF THE COMMISSION: Okay. I was wondering because I can't remember which application it was, but there was some talk last week about some digital experience and so I was wondering if it was similar. So those that you are describing here in your presentation and that you have, of course, in your application, it's all programs like kind of magazine or interviews about the film industry and the film creation.
18004 MS de WILDE: That's right, either the entertainment side of it or the more analytical --
18005 CHAIRPERSON OF THE COMMISSION: Artistic.
18006 MS de WILDE: -- interpretive side of it.
18007 CHAIRPERSON OF THE COMMISSION: Okay. You talk in your application about Canada's multilingual cultural mosaic is a fundamental tenet of Cinefest, that you are building upon the fact that you will be addressing yourselves to viewers that are of different provenance and different faces and origin.
18008 In order to help us understand the proportion you have planned for them, I see that you talked about your proportion of American presence. If we were to say in three big blocks, Canadian, U.S. and other foreign than U.S., what would it be?
18009 MS de WILDE: It would be -- the remaining 25 per cent would come from a selection of 10 per cent.
18010 CHAIRPERSON OF THE COMMISSION: Just from around the world.
18011 MS de WILDE: Twenty-five. Oh, the remaining -- we spoke of 50 per cent Canadian, 25 per cent -- a maximum of 25 per cent being American and then the balance would be from other countries around the world.
18012 CHAIRPERSON OF THE COMMISSION: Okay.
18013 MS de WILDE: It's interesting. If you think of the video, there were about 12 different countries in addition to Canada and the United States packed into about two minutes. Our sample schedule has ten different countries beyond the United States and Canada.
18014 We very much think that that is the essence of a film festival. It's taking you beyond what's known and what's comfortable and allowing you to experience the world through other people's eyes.
18015 CHAIRPERSON OF THE COMMISSION: Thank you. You talk about in your application $150,000 for script and concept. Here and in the application as well you talk about your partnership with the Banff Centre.
18016 MS de WILDE: The Canadian Film Centre.
18017 CHAIRPERSON OF THE COMMISSION: The Canadian Film Centre. Is it the same money we are talking about or is it different money?
18018 MS de WILDE: That 150 times seven is indeed the money that would go to the Canadian Film Centre for the development of programming concepts, new interactive programming concepts.
18019 CHAIRPERSON OF THE COMMISSION: So you wouldn't be kind of managing that money yourself when we see script and concept here. It would be kind of given to an institution that you respect and you feel will kind of grow that money in a way that it will be beneficial too.
18020 MS de WILDE: That's right, and Michelle, who has forged this partnership, can talk to you in more detail about it because it is really building on a successful institution as that successful institution migrates into the digital world.
18021 MS MARION: We were really excited actually to be able to partner with the Canadian Film Centre's new media centre because they are sort of on the cutting edge of this type of prototype creation and looking at what can happen with convergence between the Web and between the television signal.
18022 There are a lot of people out there that are taking risks with technology, but since we are programmers and that's sort of our strength, we were looking to take risks with content which is why we paired up with the Film Centre.
18023 These dollars, they are seed dollars for the development of these new prototypes and this new type of programming which ultimately could have applications or we hope have applications on our service and in that case there is no licence fee for something that we would play on our network.
18024 CHAIRPERSON OF THE COMMISSION: And that means that that money would count in your Canadian content expenditures.
18025 MS MARION: That's right.
18026 CHAIRPERSON OF THE COMMISSION: It would be part of it. It's not over and above.
18027 MS MARION: That's right.
18028 CHAIRPERSON OF THE COMMISSION: It really counts. So when we count 45 per cent on the revenues, that will be part of it.
18029 MS MARION: Yes.
18030 CHAIRPERSON OF THE COMMISSION: Well, let's talk about Canadian program expenditures. You have proposed 45 per cent of your revenues and the traditional way of doing it we could start as the second year. You have said that you would welcome kind of flexibility, yet not to the point that it would be not demanding vis-à-vis the Canadian content which you think is core to the Canadian services.
18031 When we were doing our own calculation, doing like the average of the seven years, we were coming to 41 per cent. I have the responsibility to ask you whether you would prefer 41 or you would hold on to your commitment, which is 45. I wish I could just say it is 45, but it's your day in court, as they say, and it's for you to really, you know, kind of put forward what you think is best for the content and the application you have put together. It's my responsibility to tell you in our calculation we came to 41 per cent, but it's your commitment.
18032 MS de WILDE: I'm relieved that our calculation came out the same. While I didn't have to do it in real time in public, it's still always helpful to know that we can crunch the numbers.
18033 The fact of the matter is we built the model to live with the 45 per cent of previous years, but at the end of the day, it will be the same total pool of dollars. You know, we can live with either one.
18034 CHAIRPERSON OF THE COMMISSION: You have no preference.
18035 MS de WILDE: No. We were very proud of where we came in in terms of our commitment to Canadian content because we believed that that is vital to creating new attractive services, that we put strong licence fees into the new programming and, frankly, that we add an additional licence fee for Canadian movie producers.
18036 CHAIRPERSON OF THE COMMISSION: Well, that takes me to my other question which is when we look at what you have projected, it's quite optimistic. It's optimistic in terms of the penetration, it's optimistic in terms of the revenue, you are expecting that you will be able to negotiate the wholesale rate that you are putting forward.
18037 When we consider other applications of the same genre, or maybe you will not see that it is exactly competitive to yours, but they are of the same kind of content, we see that your application is one of the most optimistic. How would you explain that and reassure us that it is doable and feasible?
18038 MS de WILDE: I will ask Bruce to first address for you the demand, the attractiveness of the programming concept, and then I would ask Joe to convince you that it's not too optimistic.
18039 MR. ANDERSON: Thank you very much.
18040 I think the first thing that we found when we started our research into the consumer interest in this service was that the broad category film is obviously one of the most popular forms of entertainment in Canadian households.
18041 The subset, the particular subset of the film category that we were testing here, was carefully described to consumers so that they understood that we were not talking about blockbuster films and we specifically chose not to mention some of the better known films like The Full Monty and other such titles.
18042 We wanted people to understand that what we were talking about was a service that would be consisting of independent films, small independent films, Canadian films and foreign language films with subtitles.
18043 Based on that description, we found what we would consider to be a fairly broad and quite enthusiastic niche, upwards of 50 per cent, ranging up to 58 per cent, depending on which question of several in our survey that you look at.
18044 Probably the most important indicator of the resilience of that interest is the fact that we tested price points over a dollar. Now, we understand that consumers don't know in every instance what exactly they are paying for a particular service, but we relied on our experience in the past to understand that any price below a dollar sometimes can artificially inflate interest and once you start testing price points over a dollar, you are really getting a measure of how many people are committed or enthusiastic about this service.
18045 The last point I will make is that the difference between the level of consumer interest at $1.50 and $2 is almost insignificant. It's only four percentage points different. What we found there was again evidence of the enthusiasm and the resilience of the demand at about that 50 per cent mark which is, of course, the goal for the service over the life of the application, as I understand it.
18046 MS de WILDE: Thank you.
18048 MR. TEDESCO: Yes. I will just address the subscriber assumptions that we used in our projections.
18049 Firstly, in benchmarking them against a lot of the other applicants, I think we tended in many cases to be slightly more conservative. When we developed our forecasts for subscribers, we really used as guidance the numbers that CCEA had put out. They expressed in terms of pessimistic and optimistic.
18050 We felt that to underpin our business plan on the optimistic assumptions was far too aggressive, so there we elected to take a mid point between those two numbers. Also, we benchmarked our projections against what ExpressVu and Star Choice had made public in terms of their long term subscriber forecast.
18051 Again, we felt the totality of the digital universe, when you add up their number, was cable was aggressive. We actually scaled back that forecast quite significantly. In fact, our start number from where they are at versus our number is about 800,000 subscribers less. We think we have a realistic subscriber forecast.
18052 As to the point of the wholesale rate, in our view, we put the quality of the service and the attractiveness of the service as a primary objective. If in fact the digital universe is more optimistic than what we have projected, there are certainly opportunities to offer a lower wholesale rate. We would contemplate agreements with the higher level of digital blocks and higher penetration levels that we could reduce our wholesale rate.
18053 CHAIRPERSON OF THE COMMISSION: Thank you. What is the impact if ever your business plan was not to materialize because it wouldn't be as middle of the road type of projections, but more pessimistic? What about your commitments? The percentage we can understand, less revenues, less everything, but in your commitments, which ones are firm in terms of whatever the business plan turns out to be, the meeting of the commitments will be there?
18054 MS de WILDE: I think that's one of the advantages of having lived through the very beginnings of the roll-out of digital. We do have some of the battle scars of knowing that it can go quickly. It can go in stops and starts.
18055 The plan that we have built is the plan that we are prepared to live with. We are in it for the long haul. We think that it is way too compelling a concept to get discouraged if there may be a slower year at the beginning, so the commitments are solid.
18056 CHAIRPERSON OF THE COMMISSION: So when you say 700 hours of new original programming from Canadian independent producers, that would be something we would see whatever.
18057 MS de WILDE: That's right.
18058 CHAIRPERSON OF THE COMMISSION: Okay. What will change is the dollars that will be with that because the dollars are in percentage of your revenues. There is no form commitment that it would be $30 million or $20 million.
18059 MS de WILDE: That's right, but I think that that's where your plus or minus 10 per cent may provide some useful flexibility at the beginning.
18060 CHAIRPERSON OF THE COMMISSION: What about the million to the Canadian Film Centre? Is that a firm commitment?
18061 MS de WILDE: That is a firm commitment.
18062 CHAIRPERSON OF THE COMMISSION: It's not dependent on the revenue base.
18063 MS de WILDE: No.
18064 CHAIRPERSON OF THE COMMISSION: Independent producers, you have committed in your application to start with 75 hours of original programming and it ramps up to 108 hours. That's a firm commitment as well.
18065 MS de WILDE: It is.
18066 CHAIRPERSON OF THE COMMISSION: And it's a total of $11 million. Is that a firm commitment?
18067 MS de WILDE: Yes, it is.
18068 CHAIRPERSON OF THE COMMISSION: It is. Okay. Thank you. We understand that this whole $11 million will be to independent producers that are totally unaffiliated with either Astral or Global.
18069 MS de WILDE: That's correct, and in addition, licence fees that we would pay for movies would obviously also be going to unaffiliated distributors.
18070 CHAIRPERSON OF THE COMMISSION: We talked a bit about interactivity. That's really my last question. The interactivity, I'm not too clear about this part of your answer. It might be my personal difficulty in really visualizing that new universe.
18071 What do you think would make your project special and unique and an advantage in a digital environment?
18072 MS de WILDE: Davit Beutel can give you some good examples of concrete interactive programming elements that we would see being introduced into a service such as ours once the technology platform is there to permit.
18073 MR. BEUTEL: Thank you, Lisa.
18074 As Lisa mentioned before, the content that we would be using on the service as the technology is there is not a lead purpose of existing content. It's not to change the endings of existing films.
18075 In the agreement that exists between Astral and the Canadian Film Centre, it's to create new content, new films that possibly could do that, meaning building in interactivity at the start of the project so that the ability to provide feedback to the script writers, to the actors, to the directors, as the story is starting to play out is a possibility.
18076 There is an example of that right now in a project called Dead End. It's an odyssey across Canada where all along the video, the feedback, the video is being streamed online to anybody, viewers, both on the consumer side and on the film side, who then provide critique and feedback to the filmographers, who then incorporate that into the text.
18077 It is a living screen play, if you will. At the end that is going to be packaged as a complete project and then ultimately could be licensed on Cinefest. That is a perfect example of where that end product could then be licensed by Cinefest for display on the television signal, on the digital signal.
18078 These are examples, such as that.
18079 Another example would be to actually interact real time with a director with a writer as a film is being presented on a scheduled basis; to actually interact with the director to ask questions about the nature of the film, the script, where it came from, on a real time basis back and forth. So it really provides a forum for the viewer; as opposed to being passive, the viewer can play an active role in finding out more about it or contributing to the plot line or the screen play.
18080 CHAIRPERSON OF THE COMMISSION: Let me be l'avocat du diable. That means that 50 per cent of your programming, which will be the film component, will not be really in an interactive mode. It will be the 50 per cent original Canadian programming that will be about film that will be interactive.
18081 MS de WILDE: Some portion of our original programming, which is 15 per cent, could lend itself to the interactive element. But the big block of our schedule, which is long form drama, will not be.
18082 CHAIRPERSON OF THE COMMISSION: So in that 15 per cent -- and when you did your survey, people who are keen in getting that service are keen about the film themselves, not necessarily about the surrounding type of program that is supporting the team or the genre.
18083 MS de WILDE: That's right. It is the concept of being able to go to a film festival seven days a week, 52 weeks of the year. I think the way to see the interactivity in this context is that it is just an additional layer of depth of information. It is another way of accessing the last piece of detailed information that you know that somebody else won't know that will make you feel like you know it the best.
18084 CHAIRPERSON OF THE COMMISSION: So that portion of interactivity, although it will be kind of conceived at the base, is an extra; is not really at the core of the demand that you have studied.
18085 MS de WILDE: That's fair, yes.
18086 CHAIRPERSON OF THE COMMISSION: That means too that, for you, that will not necessarily be a big driver either. You will go more for getting the good movies and the good films on to the screen than really developing the interactivity.
18087 MS de WILDE: As we said at the beginning, there are really kind of two levels of interactivity. Initially, we will have a Web site that will be ready upon launch. In fact, we thought it would be kind of neat to launch it, if we are lucky enough to get the licence, as the marketing tool. That will be there to build the community. It will be a community of people who love film, and it will also be the professional community that wants to collaborate on their next project, for example.
18088 The next level of interactivity is the one that David was describing, which really does start to play with the elements of the programming itself as opposed to simply the value-added.
18089 CHAIRPERSON OF THE COMMISSION: Would I be representing your thoughts correctly if I was to say -- at the beginning, you said that interactivity does not play the same role, depending on the niche. So that would be one kind of niche where interactivity is not the same or does not have the same unique character than it would have for -- I don't want to name another one but other types of --
18090 MS de WILDE: I don't think it goes to the essence of the service as, for example, it would in the case of a health service.
18091 M. BOURDAGES: Où un service de jeux.
18092 LA PRÉSIDENTE DU CONSEIL: Oui, je n'ai rien dit de tout ça.
18093 Merci beaucoup. Merci, Madame la Présidente.
18094 THE CHAIRPERSON: Commissioner Wilson.
18095 COMMISSIONER WILSON: I don't really have a question, but I have a little comment considering that Mr. O'Farrell is in your back row, and I think we got him to agree to some conditions of licence regarding Canadian programming expenditures that were higher than yours: 46, 48 per cent.
18096 I'm sorry, I just had to point that out because he is your partner. If he were not sitting there, I would not have mentioned it. You did say that you had the highest level -- unless you are calculating it a different way.
18097 MS de WILDE: No, no. I am only obsessed with the independent film genre.
18098 COMMISSIONER WILSON: Okay. So your competitors, not every other application.
18099 THE CHAIRPERSON: Counsel...?
18100 MR. STEWART: Thank you, Madam Chair.
18101 Just on a point of clarification with respect to your commitment for documentaries, I believe you said that you would be willing to accept a condition of licence. But in your oral presentation you state:
"Approximately 15 per cent of Cinefest's programming will be documentaries."
18102 I presume what you mean is that not more than 15 per cent will be documentaries, and that is the condition of licence you would be willing to accept.
18103 MS de WILDE: That is right.
18104 MR. STEWART: Thank you. Just a small question.
18105 Will your proposed service be technically equipped to allow for the broadcast of descriptive video?
18106 MS de WILDE: Yes, it will.
18107 MR. STEWART: It has fallen to my lot to ask the question about Category 15 programming --
18108 MS de WILDE: We were waiting.
18109 MR. STEWART: Can I get your answer for the record?
18110 MS de WILDE: We made a mistake.
18111 MR. STEWART: Thank you.
18112 Thank you, Madam Chair.
18113 THE CHAIRPERSON: Applicants are welcome to say that at the beginning.
--- Laughter / Rires
18114 THE CHAIRPERSON: Thank you very much. That completes our review of your application. We will see you again of course in the next phases of the hearing.
18115 Since we kept you until 8:20 on Friday, we thought we would give you a break today and end early.
--- Pause / Pause
18116 THE CHAIRPERSON: We forgot to give Mr. Bureau the final word. Some of us have been so used to him taking it when he wanted it.
--- Laughter / Rires
18117 MS de WILDE: So that is why he gave it to me.
18118 MR. BUREAU: Yes. I won't abuse.
18119 MS de WILDE: We hope that it is clear to you that by virtue of the fact we have focused, as I said, somewhat obsessively on this one application, that is because we really, really, really want it. The fact that we chose one is not by accident. It is because we are absolutely passionate and convinced that we can bring something unique to the system.
18120 We also think that the idea of presenting something through a Canadian prism is an amazing opportunity. It would be an amazing privilege.
18121 We think that it is something that is unique. The way Canadians look at the rest of the world is different, and it is something that personally motivates me. I would think we would just add something to the system that would drive people to take those boxes.
18122 In addition, we know what it is like to roll out discretionary services. It is a fascinating and challenging task. It takes patience and perseverance, but there are ways to do marketing differently in the digital world. We think that we bring something unique to the table.
18123 We obviously love movies, and we love producing high-quality product in partnership with independent producers.
18124 I guess that brings me to the last, which is that I think our commitment to work with independent producers, in a sense, epitomizes just how independent our network would be.
18125 Thank you very much. We have had a blast.
18126 THE CHAIRPERSON: Thank you. We look forward to seeing you again in the next phases.
18127 That completes our day for today.
18128 Nous reprendrons demain matin à huit heures et demie.
18129 We will be back tomorrow morning at 8:30.
--- Whereupon the hearing adjourned at 1530, to resume
on Wednesday, August 23, 2000 at 0830 / L'audience
est ajournée à 1530, pour reprendre le mercredi
23 août 2000 à 0830