TRANSCRIPT OF PROCEEDINGS BEFORE

       THE CANADIAN RADIO‑TELEVISION AND

TELECOMMUNICATIONS COMMISSION

TRANSCRIPTION DES AUDIENCES DEVANT

LE CONSEIL DE LA RADIODIFFUSION

    ET DES TÉLÉCOMMUNICATIONS CANADIENNES

  SUBJECT:

Review of the Commercial Radio Policy /

Examen de la Politique sur la radio commerciale

HELD AT:               TENUE À:

Conference Centre               Centre de conférences

Outaouais Room               Salle Outaouais

140 Promenade du Portage               140, Promenade du Portage

Gatineau, Quebec               Gatineau (Québec)

May 15, 2006           Le 15 mai 2006

Transcripts

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

Contents.

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.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

  Canadian Radio‑television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

Review of the Commercial Radio Policy /

Examen de la Politique sur la radio commerciale

BEFORE / DEVANT:

Charles Dalfen           Chairperson / Président

Michel Arpin           Commissioner / Conseiller

Rita Cugini           Commissioner / Conseillère

Andrée Noël           Commissioner / Conseillère

Joan Pennefather           Commissioner / Conseillère

ALSO PRESENT / AUSSI PRÉSENTS:

Chantal Boulet     Secretary / Secrétaire

Peter Foster           Hearing Manager /

Gérant de l'audience

Bernard Montigny           General Counsel,

Broadcasting / Avocat

général, Radiodiffusion

Anne-Marie Murphy           Legal Counsel /

Conseillère juridique

Robert Ramsey           Senior Director, Radio

Policy and Applications /

Directeur principal,

Politiques et demandes

relatives à la radio

HELD AT:           TENUE À:

Conference Centre           Centre de conférences

Outaouais Room           Salle Outaouais

140 Promenade du Portage           140, Promenade du Portage

Gatineau, Quebec           Gatineau (Québec)

May 15, 2006           Le 15 mai 2006

TABLE DES MATIÈRES / TABLE OF CONTENTS

    PAGE / PARA

PRESENTATION BY / PRÉSENTATION PAR:

Canadian Association of Broadcasters 7 /   42

CIRPA 261 / 1529

Canadian Recording Industry Association    300 / 1707

Friends of Canadian Broadcasting   355 / 2063

EARRS 369 / 2131

Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Monday, May 15, 2006

    at 0931 / L'audience débute le lundi

    15 mai 2006 à 0931

LISTNUM 1 \l 11     THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.

LISTNUM 1 \l 12     Good morning, ladies and gentlemen.  Welcome to this public hearing in which we will examine Canadian commercial radio.

LISTNUM 1 \l 13     Bonjour, mesdames et messieurs, et bienvenue à cette audience publique, au cours de laquelle nous procéderons à l'examen de la radio commerciale canadienne.

LISTNUM 1 \l 14     My name is Charles Dalfen.  I am the Chairman of the CRTC.  I will be presiding over this hearing.

LISTNUM 1 \l 15     Joining me on the panel are my colleagues Michel Arpin, Vice‑Chairman of Broadcasting; Rita Cugini, Regional Commissioner for Ontario; Andrée Noël, Regional Commissioner for Québec; and Joan Pennefather, National Commissioner.

LISTNUM 1 \l 16     The Commission team assisting us includes Hearing Manager Peter Foster; Robert Ramsey, Senior Director, Radio Policy and Applications; Bernard Montigny, General Counsel, Broadcasting; and Anne‑Marie Murphy, Legal Counsel.

LISTNUM 1 \l 17     Chantal Boulet is the Hearing Secretary.  Please speak with her if you have any questions with regard to hearing procedures.

LISTNUM 1 \l 18     The Commission is undertaking a review of its commercial radio policy in view of the major transformations which are taking place in this sector.

LISTNUM 1 \l 19     The commercial radio environment has changed a great deal since the current policy was adopted in 1998 largely due to industry consolidation, technological developments and new economic factors that have rapidly come into play.

LISTNUM 1 \l 110     The Commission therefore wishes to ensure that its regulatory policies and processes keep pace with these changes.

LISTNUM 1 \l 111     Many people are using new technologies for accessing music and listening to it.  The Commission will review the potential impact of these new technologies as it would appear that this trend will continue in the years to come.

LISTNUM 1 \l 112     The hearing will focus on the elements that will help create new commercial radio policies that are appropriate for the current environment, policies that will support a strong and flourishing radio industry in both official languages while pursuing the objectives set out in the Broadcasting Act.

LISTNUM 1 \l 113     Par exemple, le rôle que la radio joue dans la promotion des artistes canadiens et leurs oeuvres, incluant les pièces musicales de langue française, est crucial, et nous devons trouver des moyens pour qu'il se poursuive et qu'il progresse.

LISTNUM 1 \l 114     De plus, nos politiques doivent favoriser une radio commerciale qui offre une plus large gamme de genres musicaux et qui diffuse suffisamment d'émissions régulières d'information produites localement.

LISTNUM 1 \l 115     Nous aurons également l'opportunité de faire le point sur la transmission numérique et sur les nouvelles plate‑formes de distribution.

LISTNUM 1 \l 116     The make‑up of Canadian society is also changing.  Broadcasters are operating in a society that is increasingly multicultural, multilingual and multiracial.  They therefore have to ensure that their offerings reflect this new reality as well as the special place of Aboriginal peoples.

LISTNUM 1 \l 117     As stated in Broadcasting Notice of Public Hearing CRTC 2006‑1, our process will also include a review of the effectiveness of the measures implemented in the Commercial Radio Policy 1998.

LISTNUM 1 \l 118     Au cours de la semaine qui vient, nous écouterons avec soin les points de vue de nombreux intervenants qui comparaîtront devant nous selon l'horaire préétabli.

LISTNUM 1 \l 119     Je tiens, d'ores et déjà, à remercier tous ceux et celles qui prennent le temps de nous faire part de leurs commentaires.  Les enjeux sont importants pour le secteur canadien de la radio, et vos observations nous seront précieuses pour mieux les cerner.

LISTNUM 1 \l 120     If the Commission requests additional documents during the course of this hearing, intervenors will have until May 29th to file them.

LISTNUM 1 \l 121     Furthermore, as mentioned in the Notice of Public Hearing, interested parties will have the opportunity to file brief final written comments following the oral public hearing.  These submissions must be no longer than 20 pages in a 12 point font or larger.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 122     THE CHAIRPERSON:  This is not just for those with presbyopia ‑‑

‑‑‑ Laughter / Rires

LISTNUM 1 \l 123     THE CHAIRPERSON:  ‑‑ and they must be filed no later than June the 12th.

LISTNUM 1 \l 124     I will now invite the Hearing Secretary Chantal Boulet to explain the procedures we will be following.

LISTNUM 1 \l 125     Madame Boulet.

LISTNUM 1 \l 126     LA SECRÉTAIRE : Merci, Monsieur le Président.

LISTNUM 1 \l 127     Nous aimerions souligner quelques points d'ordre pratique qui contribueront au bon déroulement de cette audience.

LISTNUM 1 \l 128     First, simultaneous interpretation services are available during the hearing and you can obtain a receiver from the technician at the back of the room.  The English translation is on channel 1 and l'interprétation française se trouve au canal 2.

LISTNUM 1 \l 129     When you are in the hearing room we would ask you to please turn off your cell phone, beepers, BlackBerries or other text messaging devices as they are unwelcome distractions for participants and commissioners and they cause interference on the internal communication system used by our translators.  We would appreciate your cooperation in this regard throughout the hearing.

LISTNUM 1 \l 130     We expect the hearing to take approximately one week.  We will being each morning at 9:30 and adjourn each afternoon around 6:30 p.m.  We will take one hour for lunch and a 15‑minute break in the morning and afternoon.

LISTNUM 1 \l 131     Given the number of participants and the scope of the issues to be discussed it may be necessary to continue the hearing beyond 6:30 in the evening.  We will let you know of any schedule changes that may occur.

LISTNUM 1 \l 132     Pendant toute la durée de l'audience, vous pourrez consulter les documents qui font partie du dossier public pour cette audience dans la salle d'examen qui se trouve à la Salle Papineau, située à l'extérieur de la salle d'audience, à votre droite.

LISTNUM 1 \l 133     Tel qu'indiqué dans l'ordre du jour, le numéro de téléphone de la salle d'examen est le 819‑953‑3168.

LISTNUM 1 \l 134     Une transcription des comparutions quotidiennes sera affichée sur le site internet du Conseil peu après la fin de l'audience.

LISTNUM 1 \l 135     Les personnes qui désirent acheter des transcriptions peuvent s'adresser au sténographe qui se trouve à la table en face de moi durant la pause ou directement auprès de la compagnie Media Copy.

LISTNUM 1 \l 136     We will now proceed with the presentations in the order of appearance set out in the agenda.  Each participant will be granted a given time to make its presentation.  Questions from the Commission will follow each presentation.

LISTNUM 1 \l 137     Pour les fins du dossier, veuillez noter que le Conseil a publié, le 4 mai dernier, les relevés statistiques et financiers relatifs à la radio privée commerciale pour la période 2001 à 2005.

LISTNUM 1 \l 138     Vous trouverez, au Secrétariat de l'audience, une copie de ces relevés financiers, ainsi qu'un cahier supplémentaire concernant les données financières et statistiques sur l'industrie de la radio privée commerciale pour la province de Québec.

LISTNUM 1 \l 139     I would now invite the first participant, the Canadian Association of Broadcasters, CAB, l'Association canadienne des radiodiffuseurs, l'ACR, to make their presentation.

LISTNUM 1 \l 140     Appearing for the CAB is Mr. Glenn O'Farrell who will introduce his colleagues.  You will then have 20 minutes for your presentation.

LISTNUM 1 \l 141     Mr. O'Farrell.

PRESENTATION / PRÉSENTATION

LISTNUM 1 \l 142     M. O'FARRELL : Merci, Madame la Secrétaire.  Good morning, Mr. Chairman, members of the Commission.  My name is Glenn O'Farrell.  I am the President and CEO of the Canadian Association of Broadcasters.

LISTNUM 1 \l 143     The CAB is pleased to appear before you today to talk about the future of radio broadcasting and the regulatory conditions to ensure its continued vitality and significant role in local communities across Canada.

LISTNUM 1 \l 144     I have the privilege of appearing before you today with a group consisting of some of the most talented and capable radio executives and programmers in Canada.

LISTNUM 1 \l 145     This group of radio broadcasters is representative of the women and men who work in the 600 or more private radio stations across the country operating in small, mid‑size and large markets, all of whom are dedicated and passionate about the work they do every day and the future of local private radio in Canada.

LISTNUM 1 \l 146     On behalf of Canada's private radio broadcasters, we appreciate the opportunity to be the first to appear before you today as you commence the important work of this proceeding.

LISTNUM 1 \l 147     Allow me to introduce the panel.

LISTNUM 1 \l 148     On my right, Rob Braide, Chair CAB Board of Directors, Vice President and General Manager, CJAD, MIX‑96, CHOM‑FM, Standard Radio.

LISTNUM 1 \l 149     Next to Rob is Rael Merson.  Rael is Chair of the CAB Radio Board and President and CEO of Rogers Broadcasting Limited.

LISTNUM 1 \l 150     Next to Rael is Elmer Hildebrand.  Elmer is a member of the Radio Strategy Committee and President and CEO of Golden West Broadcasting and on my far right is Jacques Parisien, Président du Comité de stratégie radio marché francophone de l'ACR et président Astral Média Radio.

LISTNUM 1 \l 151     To my left is Sarah Crawford who is the Chair of the CAB Diversity and Radio working group and Vice President Public Affairs CHUM Limited.  To Sarah's left is Marc Maheu, member of the CAB Radio Board and Executive Vice President and COO of Newcap Radio.

LISTNUM 1 \l 152     To Mark's left is Lilianne Randall.

LISTNUM 1 \l 153     Elle est membre du Comité des questions musicales de l'ACR et directrice musicale réseau RYTHME‑FM Cogeco.

LISTNUM 1 \l 154     To the left of Lilianne is Pierre‑Louis Smith, Vice President Radio CAB and finally, on my far left is Suzanne Wheeler, senior director Policy and Regulatory Affairs CAB.

LISTNUM 1 \l 155     Behind us, we have a panel of experts; that's what they call themselves anyway.  Beginning with Ken Goldstein, President of Communications Management Inc.  He is our CAB Economic Trend Expert.

LISTNUM 1 \l 156     Next to Ken is Pat Grierson who is the President of Canadian Broadast Sales and an expert on advertising trends, and last is Wayne Stacey, President Wayne Stacey and Associates Limited, the CAB's Technical Adviser and the leading expert on digital radio.

LISTNUM 1 \l 157     Mr. Chairman, Commissioners, we will keep our opening remarks brief and focused on three areas of discussion this morning.

LISTNUM 1 \l 158     Number one is the need to adopt the closed market regulatory model to an open market model.

LISTNUM 1 \l 159     The second topic we would like to address is the CAB's Transitional Regulatory Proposals regarding music exhibition and Canadian talent development focused on emerging Canadian artists.

LISTNUM 1 \l 160     And Finally, our third point is the CAB's recommendation to measure the impact of its proposals and monitor what we call "the first phase of the transition".

LISTNUM 1 \l 161     So, starting with the first point that we are calling "Closed to Open".

LISTNUM 1 \l 162     I think we must preface our comments by suggesting that to move forward we need to share a common assumption and that is the radio market is now an open system.

LISTNUM 1 \l 163     The written brief we submitted on March 15th is entitled, as you know: "Then ‑ Now".

The title was inspired by a very clear sense of the starting point of the discussion we're having here today.

LISTNUM 1 \l 164     As is demonstrated in the slide before you, digital technology has changed everything  for content creators, for distributors, for consumers and we also believe it has changed everything for regulators.

LISTNUM 1 \l 165     There is no turning back and as a result, we no longer have a single and regulated system of radio services delivered over the public airways and free of charge to Canadians.

LISTNUM 1 \l 166     Instead, we have both a regulated system developed over the past 80 years and a largely unregulated parallel system of new delivery options for audio content.

LISTNUM 1 \l 167     The key point in all of this is that the CRTC licensing and regulation no longer serve as the single and exclusive point of control of market entry for content providers seeking to offer service to Canadians in the audio space once occupied only by licensed radio services.  That was then and this is now.

LISTNUM 1 \l 168     So, where do we go from here?  We submit the way forward is one that will require managing a transition, a transition to be largely defined by even more change than we have already seen.

LISTNUM 1 \l 169     As a case in point, two years ago, how many of us here today were users or better yet, had heard or even heard about the Ipod.  Yet, within approximately 24 months, the Ipod has become the dominant force in the consumer's electronics audio space.

LISTNUM 1 \l 170     Who among us here today can predict who or what will dominate that same consumer audio space 24 months from today?  How will all the new digital technologies impact Canadian private radio?

LISTNUM 1 \l 171     These are not easy questions.  Yet, radio broadcasters represented by the CAB, while concerned on the one hand by the transition challenges that lie ahead are, on the other hand, equally passionate about the future of private radio in Canada and have demonstrated they are committed to making the necessary investments in technology, marketing and talent to keep reinventing their businesses.

LISTNUM 1 \l 172     Rael.

LISTNUM 1 \l 173     MR. MERSON:  Thank you, Glen.

LISTNUM 1 \l 174     The commercial private radio data recently released by the CRTC covering 2001 to 2005 present an overall positive financial picture of private radio in Canada.

LISTNUM 1 \l 175     In 2005, the private radio industry in Canada cheated healthy financial returns purporting aggregate increased profitability for the sector.

LISTNUM 1 \l 176     These are significant results that clearly strengthen the industry's financial position to absorb the economic impact of the unregulated content providers who are entering the market in growing numbers.

LISTNUM 1 \l 177     However, if you take a closer look and drill down into radio revenue numbers, you will find that the industry as a whole is as the boxing expression goes, punching well above its waist.

LISTNUM 1 \l 178     While the industry has seen year revenue increases since 1998, audience numbers reveal a very disturbing and steady year over year decrease in tuning to radio across all demographic segments.  The decrease in tuning is the greatest in the youth market.

LISTNUM 1 \l 179     More recent tuning statistics indicate that the decline in radio usage is both entrenched and accelerating, as the slide demonstrates.

LISTNUM 1 \l 180     The word of caution on the point is that overall radio revenue and profitability appear untouched by tuning declines.  Revenues the profitability on a per‑station basis are now showing signs of a decline.

LISTNUM 1 \l 181     When taken in isolation the situation in the French radio market may serve as an advance warning of what might happen across the radio sector as technologies multiply new unregulated audio content choices for the Canadian consumer.

LISTNUM 1 \l 182     Jacques.

LISTNUM 1 \l 183     M. PARISIEN:  Dans ce contexte, l'expérience du secteur de la radio privée de langue française pourrait très bien s'avérer un signe avant‑coureur des défis auxquels l'ensemble de l'industrie radiophonique sera confronté en raison de la révolution technologique.

LISTNUM 1 \l 184     Le BAII des stations de langue française s'explique en partie du fait que les stations de langue française exploitées dans les marchés bilingues de Montréal et d'Ottawa‑Gatineau doivent partager avec les stations de langue anglaise l'attention des auditeurs francophones.

LISTNUM 1 \l 185     Dans ce marché dit bilingue, mais considéré comme distinct aux yeux de la réglementation des contenus musicaux, le consommateur peut librement écouter la radio de son choix, peu importe la langue de diffusion de celle‑ci.

LISTNUM 1 \l 186     Or, les marchés de Montréal et de Gatineau représentent à eux seuls 50 pour cent de la population du Québec.

LISTNUM 1 \l 187     Par comparaison, c'est comme si les stations de radio des dix plus grandes agglomérations du Canada anglais comme Toronto, Vancouver, Calgary, Edmonton ou Winnipeg se retrouvaient du jour au lendemain dans les situations de Windsor où le consommateur peut choisir à son gré d'écouter les stations locales ou les stations de Détroit.

LISTNUM 1 \l 188     Confrontée à cette réalité, la radio privée de langue française a choisi d'adopter de plus en plus des stratégies axées sur le développement de contenu radiophonique exclusif.

LISTNUM 1 \l 189     Pour assurer le succès de cette approche de différenciation entreprise au cours des dernières années, la radio privée de langue française a dû et doit encore dépenser une part nettement plus élevée de ses revenus en coûts de programmation que ne le fait la radio de langue anglaise.

LISTNUM 1 \l 190     Le rendement financier nettement moins reluisant du secteur de la radio francophone se résume donc en bonne partie par la perte de revenu potentiel découlant du transfert de l'écoute non monnayable d'une partie importante de l'auditoire francophone vers les stations musicales anglophones et la nécessité d'investir davantage dans les émissions de contenus exclusifs à prédominance verbale pour se démarquer les unes des autres et mieux résister à l'attrait que représentent pour le public francophone les stations musicales de langue anglaise.

LISTNUM 1 \l 191     Pour le moment, ce phénomène est dans une large mesure limité au secteur francophone de l'industrie  Toutefois, il ne faudra pas se surprendre si à mesure que la révolution technologique prendra assise auprès des consommateurs, modifiant en profondeur leurs habitudes d'écoute, que le rendement financier observé dans le secteur francophone s'étende à l'ensemble de la radio privée canadienne.

LISTNUM 1 \l 192     MR. BRAIDE:  The bottom line on all this is that the going forward model for an over market system needs to be focused on a multiple phase transition.

LISTNUM 1 \l 193     In what we consider to be the first phase, we propose to maintain the fundamental principle of regulation with only modest amendments.

LISTNUM 1 \l 194     Our second point for this morning's comments relates to complementary transition or regulatory proposals for music exhibition and Canadian talent development.

LISTNUM 1 \l 195     In short, these proposals are designed to increase the exposure of emerging Canadian artists to a combination of incentive for airplay and directing radios Canadian development contributions to marketing and promotional assistance.

LISTNUM 1 \l 196     Canadian private radio has a unique relationship with Canadian music in that it has the highest music exhibition quotas in the world and is required by regulation, unlike any other jurisdiction, to directly subsidize the domestic music industry.

LISTNUM 1 \l 197     As you see, since 1998, private radio has committed over 168 million dollars to Canadian talent development initiatives, of which 60 per cent is directed towards national funding agencies in the French and English markets.

LISTNUM 1 \l 198     Specifically private radios contribution to national funding agencies went from 1.4 million in 1998 to 16.1 million in 2005.  This represents a staggering increase of 1,170 per cent.

LISTNUM 1 \l 199     Put another way, if you combine the copyright payments and Canadian talent development funding, private radios contribution to the music industry went from 24 million in 1995 to more than 85 million in 2005.

LISTNUM 1 \l 1100     It's clear that the Commission's 1998 policy yielded many positive results for both the radio and music industries, including historic contributions to Canadian talent development.

LISTNUM 1 \l 1101     The Commission's 1998 policy also called for the creation of a Canadian music marketing and promotion fund to support cooperative activities by broadcasters and the music industry in marketing and promoting Canadian music, which by all accounts has produced tremendous successes.

LISTNUM 1 \l 1102     There is no doubt that in a very short period of time, both Radio Star‑maker Fund and Fonds de Radio Star have had a significant impact on the careers of Canadian artists.

LISTNUM 1 \l 1103     These commercial funds have cemented a place in the larger funding environment by providing touring and marketing assistance of critical importance at key stages in artist development.

LISTNUM 1 \l 1104     However, the Commission's decision in 1998 to increase Canadian content levels from 30 to 35 per cent and require 55 per cent of French vocal music in day parts may have not produced some of the desired outcomes.

LISTNUM 1 \l 1105     For instance, we didn't see any marked increase in Canadian music sales which have remained stable at 16 per cent since 1998 and that's unfortunate.

LISTNUM 1 \l 1106     Radios ability to respond to listener demands has never been more important, given its new reality of unprecedented competition from a variety of audio content platforms.

LISTNUM 1 \l 1107     The CAB's bonus system has ended increasing the exposure of emerging Canadian artists who according to the Commission's analysis do not materially benefit under a traditional quota system.

LISTNUM 1 \l 1108     We proposed to do this by providing programmers with an incentive to play new and unfamiliar acts attracts by emerging artists both in day and evening parts which we believe will significantly increase, the exposure of these artists to a greater number of listeners.

LISTNUM 1 \l 1109     Unlike the quota system, programmers will be engaged in actively seeking out and fostering new talent in a manner that responds to the demands of their listeners and is conductive to their market and the supply of Canadian music available in their format.

LISTNUM 1 \l 1110     Mme RANDALL:  Dans la période de transition que nous traversons, ce qu'il faut pour atteindre les objectifs politiques du Conseil, c'est réglementer plus efficacement.

LISTNUM 1 \l 1111     Notre proposition à l'égard du contenu canadien et de la musique vocale de langue française reflète avant tout notre engagement à respecter les quotas actuels de diffusion sans oublier toutefois que la radio est en concurrence directe avec d'autres modèles de distribution de contenu musical qui ne sont assujettis à aucun.

LISTNUM 1 \l 1112     Dans ce contexte, il nous faut tenir compte davantage de la plus grande liberté de choix du consommateur.  Au fil des ans, la radio privée francophone a accru de façon remarquable la présence de la chanson québécoise et canadienne à l'antenne, à tel point qu'aujourd'hui la chanson d'ici occupe en moyenne plus de 80 pour cent de la musique francophone diffusée par la radio privée de langue française et presque la totalité, 95 pour cent de toutes les nouveautés francophones présentées sur nos ondes.

LISTNUM 1 \l 1113     Par contre, le consommateur québécois nous dit également que lorsqu'il a le choix entre écouter de la musique francophone ou anglophone, il a une préférence nettement plus marquée pour les chansons de langue anglaise que pour celles de langue française.

LISTNUM 1 \l 1114     Les résultats d'un sondage réalisé en juillet 2005 par la firme DÉCIMA pour le compte du Ministère du Patrimoine canadien le confirment.

LISTNUM 1 \l 1115     Les Québécois sondés par DÉCIMA ont indiqué consacrer 36 pour cent de leur temps d'écoute à la musique de langue française, 45 pour cent à l'écoute de la musique anglaise, 13 pour cent à la musique instrumentale et seulement sept pour cent à la musique en langues étrangères.

LISTNUM 1 \l 1116     C'est donc dire que le quota de musique vocale de langue française imposé à la radio privée de langue française est, à toutes fins pratiques, deux fois plus élevé que le niveau d'intérêt du consommateur québécois à l'égard de la chanson d'expression française.

LISTNUM 1 \l 1117     Dans ce contexte, pour accroître la diversité musicale à l'antenne, l'ACR propose un système de prime dont le but est de favoriser la diffusion des artistes canadiens de la relève en offrant aux programmateurs des incitatifs pour compenser les risques associés à la diffusion des chansons d'artistes peu ou pas connus du public.

LISTNUM 1 \l 1118     Dans le marché francophone, le système de prime aura pour résultat de faire plus de place aux nouvelles pièces musicales et aux artistes de la relève, donner la chance aux stations de radios de langue française de se démarquer les unes des autres par leur contenu musical et permettre à la radio de langue française de mieux résister à la concurrence des stations de langue anglaise et des nouveaux modes de distribution du contenu musical, tout en continuant d'assumer un rôle majeur dans l'enrichissement de l'expression culturelle francophone.

LISTNUM 1 \l 1119     MR. BRAIDE:  In the English market, the Canadian Association of Broadcasters believes this incentive system will encourage music programmers to take risks by playing more emerging artists, to move off gold or recurrent track sooner, thereby reducing artists burn and increase the effectiveness of exhibition quotas by focusing on quality, who is getting played over quantity.

LISTNUM 1 \l 1120     Preliminary testing done by select stations of various formats in different markets indicate that a modest application of the bonus system adding one single every other hour between 6 a. and 6 p. would result in approximately six more spins a day for emerging artists or an additional 30 spins per week.

LISTNUM 1 \l 1121     We believe radio can maximize the impact of its exhibition quotas and CTD requirements by providing increased exposure to emerging artists on air while at the same time focusing funding on marketing and touring initiatives that assist artists in promoting their first or second albums.

LISTNUM 1 \l 1122     For these reasons, we propose consolidating radios Canadian talent development funding into commercial funds and exclusively at marketing, touring and promotion activities which have proven to be of direct benefit to Canadian artists in establishing and furthering their careers.

LISTNUM 1 \l 1123     It's our hope that when harmonized radios commitment to Canadian content French vocal music and CTD will foster more music that responds to listener demands and allows radio to leverage its promotional strength and support of Canadian artists.

LISTNUM 1 \l 1124     That leads us to the third point of our presentation, a recommendation to measure the impact of our proposals and monitor the transition to an open market.

LISTNUM 1 \l 1125     MR. MERSON:  Given the rapid pace of change in the audio landscape, the CAB believes it makes more sense to review policies of this significance in cycles that are shorter than seven years.

LISTNUM 1 \l 1126     We also believe it no longer makes sense for this responsibility to fall exclusively on the regulator.

LISTNUM 1 \l 1127     As a first step, the CAB commits to finally report three years from today, May 15th 2009, that measures the impact of its proposals on, firstly, increasing the amount of air play dedicated to emerging artists and, secondly, the effectiveness of its funding in supporting Canadian talent development.

LISTNUM 1 \l 1128     Why three years?  We believe that at that time programs will have had enough experience for the bonus system to consider and evaluate its application in the French and English markets and suggest changes that might be required to increase its effectiveness and impact on emerging Canadian artists.

LISTNUM 1 \l 1129     We believe a report of this nature will also provide an opportunity for all interested stakeholders, the CRTC, Canadian Heritage, SODEC and the music industry to engage in an open dialogue on the level and effectiveness of radio CTD commitments.

LISTNUM 1 \l 1130     This discussion will be of critical importance since radio and other interested parties will have the benefit of certain facts that at this time can only be left to conjecture.

LISTNUM 1 \l 1131     These include the total level of CTD funding from additional sources, including contributions from subscription radio services, new licences, transactional benefits and federal and provincial funding, the health of the commercial radio sector and the impact of changes to funding structures, resulting from the introduction of new programs like the MEC.

LISTNUM 1 \l 1132     Armed with this information, private radio will be in a better position to consider its future commitments to Canadian Talent Development based on its evaluation of the effectiveness of funding to date, the demonstrable demand for music initiatives and ensuring its competitive equity with the unregulated sector.

LISTNUM 1 \l 1133     We also note that in order for radio to properly evaluate the effectiveness of its CTD funding, it is absolutely imperative that all funding mechanisms provide publicly available, detailed and accurate information on a per‑project basis that ensures maximum transparency and accountability.

LISTNUM 1 \l 1134     We strongly believe that our proposed reporting exercise would be a positive step to ensuring regulation keeps pace with the changing market realities and is consistent with the Commission's intention to regularly monitor and review its policies as provided for in its three‑year work plan under "compliance, research and monitoring".

LISTNUM 1 \l 1135     MR. O'FARRELL:  There is no doubt that private radio has a good story.  However, over the course of its 80‑year history radio has faced many challenges, through both boom and bust economic cycles.  In fact, at various times radio has been written off as an obvious casualty of changing circumstances in the medial landscape.  Meanwhile, the regulated environment of radio has prospered at certain times and not at others.  That was then.

LISTNUM 1 \l 1136     We respectfully suggest the fundamental difference we now must recognize is that the cornerstone assumption of the environment that brought us this far, controlled market entry, will no longer regulate the audio services space as it has for all these years, and that changes everything.

LISTNUM 1 \l 1137     However, we cannot state with unassailable certainty how quickly the landscape will change in reflecting the reality of an open market as opposed to a controlled market.

LISTNUM 1 \l 1138     What is certain is that it will change profoundly and the evidence of impact is mounting rapidly.

LISTNUM 1 \l 1139     Our position before you today can perhaps be summarized as follows:  A financially healthy radio industry, supported by good public policy since the last radio review, is positioned to face these new challenges and continue to serve the cultural and social policy objectives this Commission is entrusted to uphold.

LISTNUM 1 \l 1140     We have not proposed wholesale change to radio regulation.  We have instead submitted proposals to maintain the principles of Canadian music exhibition requirements and Canadian talent development contributions, in addition to reconfirming the radio sector's commitment to the broad regulatory contract with government, notwithstanding the technological undoing of its cornerstone assumption, controlled market entry.

LISTNUM 1 \l 1141     Given the changing circumstances in the environment, we propose to assess and monitor the impact of our proposals in three years from today against the backdrop of hopefully a clearer understanding of the appropriate regulatory directions for private radio.

LISTNUM 1 \l 1142     Mr. Chairman and Members of the Commission, this completes our presentation and we welcome your questions.

LISTNUM 1 \l 1143     THE CHAIRPERSON:  Thank you very much.  Merci beaucoup, Mr. O'Farrell, ladies and gentlemen.

LISTNUM 1 \l 1144     I will begin the questioning and a number of my colleagues will also have questions for you, I'm sure.

LISTNUM 1 \l 1145     I want to begin by discussing an issue that was raised in our Public Notice but that you didn't fully address, either in your written or your oral presentation today, and that is really one of the forces driving our proceeding today, which is the impact of new technologies, and in particular the internet.

LISTNUM 1 \l 1146     I notice that in a filing attached to your submission by Mr. Osborne he says that:

"Radio broadcasters have a favourable view of the internet as a complementary way to connect with their listeners and a cost‑effective programming research tool.  However, it does not appear that anyone has found the formula for substantially recouping internet costs from advertisers."  (As read)

LISTNUM 1 \l 1147     I noticed in a speech you gave, Mr. O'Farrell, I think a number of weeks ago, you also mentioned that broadcasters are on the internet, are making use of it or experimenting with it.

LISTNUM 1 \l 1148     What I would like to do with this panel, if I could, and with the individual broadcasters who come forward, is ask them questions regarding their uses of the internet and their ability to occupy that space.

LISTNUM 1 \l 1149     I think that in the longer run one of the best defences we have under the Broadcasting Act and for our broadcasting system is an effective occupying of that field by people who, like yourselves, are committed to Canadian content and the development of Canadian artists.

LISTNUM 1 \l 1150     So I think we would be interested in whatever information you could provide us with on the uses and experimentation that your members are making of that space and what conclusions, as preliminary as they may be, that you could share with us to assist us in this hearing.

LISTNUM 1 \l 1151     So it is at this stage rather open‑ended.  I have gone to the websites of a number of broadcasters, Mr. Braide, iceberg.com is one of them, extremely interesting.

LISTNUM 1 \l 1152     Frankly, I would love to have you or the individual broadcasters elaborate now or during the course of the proceeding on the lessons you are learning, the kinds of signals that you are ‑‑ you have your streaming, the kinds of demand you are seeing, the advertising success you may or may not have.

LISTNUM 1 \l 1153     I know I have talked with a number of you about this individually, but it would be useful to have it at this hearing at this moment in time, a snapshot for the record of that.

LISTNUM 1 \l 1154     So I don't know how you want to begin, but it would be helpful to me ‑‑

LISTNUM 1 \l 1155     MR. O'FARRELL:  Well, I think it is a good starting point.

LISTNUM 1 \l 1156     And thank you for allowing the question to be framed that way, because I think that is the right place where we should take this discussion, and that is to the internet and to these alternative technologies that are competing with radio.

LISTNUM 1 \l 1157     I think that the preface ‑‑ and each group here that is represented in their own way are involved in some kind of activity that is internet‑based or otherwise seeking to extend their business lines into new business areas that are all about serving consumers and serving audiences.

LISTNUM 1 \l 1158     I will invite each of the individuals here that would like to share with you their own corporate group stories for the record.

LISTNUM 1 \l 1159     If I may, I would take two steps back and say that's exactly what we are talking about, which is a closed market where we are coming from emerging into an open market where we are and where we are going to.  Clearly, Canadian radio broadcasters are engaging very actively in every possible area of development that leads them to continue in that service orientation of taking content to Canadian consumers in their local marketplaces or beyond.

LISTNUM 1 \l 1160     The same is true of broadcasters across the world.  Regulated broadcasters in other jurisdictions as well are looking to these new activities as places to go to extent their businesses.  The distinction being, of course, those jurisdictions do not have the same kind of regulation in their traditional business that we have here in Canada, and therefore one could suggest that in certain instances there might be a leg up that radio broadcasters elsewhere have over Canadian broadcasters in getting into this unregulated space.

LISTNUM 1 \l 1161     Before I hand it off to a few of my colleagues to answer you specifically on the corporate group stories that they would like to share, it was only a few weeks ago the Clear Channel ‑‑ as you know the largest American radio broadcaster ‑‑ announced that it was producing programming for 75 new radio channels to be made available to all forms of alternate media services.

LISTNUM 1 \l 1162     Which is why we have to be careful when we say "internet".  Some people feel that's a confining statement.  But in this instance their intentions are to go well beyond the confining definition of internet and into a much broader application of alternate media, such that the original audio, video and text programming will providing a foundation for, yes, internet channels, station websites, but iPods also, satellite broadcasts, in‑vehicle navigation systems and HD radio multicasts.

LISTNUM 1 \l 1163     So it's just a broader sense of the area that they are working with.

LISTNUM 1 \l 1164     So on the heels of that kind of a statement, I think which is where others are going, you might want to hear from the corporate groups.

LISTNUM 1 \l 1165     Maybe I will start with Rob and then let others chime in with their stories.

LISTNUM 1 \l 1166     MR. BRAIDE:  Thanks, Glenn.

LISTNUM 1 \l 1167     Mr. Chair, I think speaking for the industry in general there are three sort of overriding principles in assessing or evaluating the wisdom of using the internet.

LISTNUM 1 \l 1168     The first is penetration of tuning, and I think particularly in Canada we are seeing that moving pretty quickly.  We are a very highly broadbanded country, as the Commission is aware.

LISTNUM 1 \l 1169     I think the other two overarching concepts are metrics and monetization.

LISTNUM 1 \l 1170     We are still at the infancy of figuring out how to measure internet usage and as well how to monetize.

LISTNUM 1 \l 1171     Speaking now more specifically about Standard, you mentioned iceberg.com ‑‑

LISTNUM 1 \l 1172     THE CHAIRPERSON:  Just on that point, and by coincidence I happen to have your icebergradio.com, and on each of the pages you mentioned 2,567,000 unique visitors, 1,500,000 total page views, a million, and so on, unique visitors.  So you are measuring something, clearly.

LISTNUM 1 \l 1173     MR. BRAIDE:  The metrics are there, it's a question of having those metrics accepted by the wider advertising community.

LISTNUM 1 \l 1174     THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 1175     MR. BRAIDE:  It is a situation in its infancy.  Certainly the internet, there have been various metric systems set up since pretty much 1995 and I think we can sort of go back to identifying it all starting.

LISTNUM 1 \l 1176     Maybe Mr. Grierson can talk more about that after we're done in terms of that measurement.  But the measuring is going on.

LISTNUM 1 \l 1177     Back to iceberg.com, I think the Commission has seen Standard take every opportunity to use, I guess Trout and Reese first came up with the concept of line extensions.  The internet, Serius Satellite Radio and other things that Standard has done are effectively line extensions to take our content and move them as far out as we possibly can.

LISTNUM 1 \l 1178     THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 1179     MR. BRAIDE:  I think we see that as the potential for the internet and one of the reasons why we have invested so heavily in the iceberg.com portal and as well have developed such a strong internal mechanism to maintain website backends for our individual radio stations.

LISTNUM 1 \l 1180     And with success which is yet to be measured, but which we feel guardedly optimistic about.

LISTNUM 1 \l 1181     THE CHAIRPERSON:  Is it too much to ask that Mr. Heimrath, or whoever it is that runs your service, present with your group when you appear in ‑‑

LISTNUM 1 \l 1182     MR. BRAIDE:  It is our intention to have Jean‑Marie Heimrath with us tomorrow afternoon, Mr. Chair.  Thank you.

LISTNUM 1 \l 1183     MR. MAHEU:  Mr. Chair, if I may ‑‑ I'm sorry.  Go ahead, Rael.

LISTNUM 1 \l 1184     MR. MERSON:  I'm sorry.  Go ahead.

LISTNUM 1 \l 1185     MARK MAHEU:  All right.

LISTNUM 1 \l 1186     In terms of the internet, right now for a lot of radio stations it's a complementary service to the over‑the‑air broadcasting that they are all doing.  The reason for that is, as we all know, our business and our industry is driven by consumer behaviour.  When that consumer behaviour starts to change, our business needs to start looking at where it needs to be to continue to be successful.

LISTNUM 1 \l 1187     We saw that with the transformation of our business back in the late '80s and early '90s with the move from AM to FM, amplitude modulation to frequency modulation.  You know, it was not that long ago when AM radio led in terms of listening with people, and the standard went up in terms of sound quality to the FM.  Consumer behaviour was driven by the availability of low‑cost receivers, and AM radio's world changed very rapidly.

LISTNUM 1 \l 1188     What we are seeing now with the internet is that radio, like all media, does not operate in a vacuum and people use all sorts of different medias different ways.

LISTNUM 1 \l 1189     Up until this point, or until recently, radio owned that mobile content space.  We have all heard the phrase that "content is king".  If that is true, then mobile content is King Kong.  We have, as an industry, always owned that position.  That is changing.

LISTNUM 1 \l 1190     The internet was really the first step in the beginning of that transformation.  It brought digitization to the forefront, MP3 transfers.  It also was the portal or the opening for podcasting to begin to take place.

LISTNUM 1 \l 1191     And we are not that far away now from broadband‑enabled areas, city‑wide or in large metropolitan areas where broadband internet access is going to allow people to be able to receive broadcasts, whether they come from the Internet or regular radio stations, on a wireless basis.  Of course that would obviously concern private broadcasters.

LISTNUM 1 \l 1192     But at the same time, radio has seen consumer behaviour change.  Canadian radio specifically has done quite a good job, evidenced by what Standard is doing with iceberg, and a number of other private broadcasters are doing with their internet presence, to try to at least be in that space to see where consumer behaviour is going to be.  In other words, if you are in the game and you are experimenting ‑‑ and a lot of companies are ‑‑ nobody has the silver bullet yet, as Rob said, to be able to monetize that tuning.

LISTNUM 1 \l 1193     But we feel it is important to be there and invest money, so that we can at least see beyond the horizon a little bit what is out there, what possibilities lie ahead.  That is probably the most valuable thing radio is doing with the Internet right now, is being in the space, trying to figure out how our conventional platforms might be useful in the future with changing consumer behaviour, and it is extremely important.

LISTNUM 1 \l 1194     But the bottom line on internet broadcasting right now, or simulcasting our over‑the‑air signals is there's no radio station that I am aware of that is able to monetize it.  It is starting to get some ratings, it is showing up in terms of tuning, but it is very difficult to monetize that today.

LISTNUM 1 \l 1195     THE CHAIRPERSON:  So does that happen?  How does it get the ratings?  How is it rated when it's coming in on the computer?

LISTNUM 1 \l 1196     MR. MAHEU:  What people are doing now with BBM methodology, is there are now reports ‑‑ and this has only been recently over the last couple of years ‑‑ is penetration listening on the internet has increased where people are actually reporting that they are listening to radio broadcasts on ‑‑

LISTNUM 1 \l 1197     THE CHAIRPERSON:  In the diaries.

LISTNUM 1 \l 1198     MR. MAHEU:  Exactly, on the internet.

LISTNUM 1 \l 1199     THE CHAIRPERSON:  Over the week that ‑‑

LISTNUM 1 \l 1200     MR. MAHEU:  Sure.  So some of that tuning is starting to show up ‑‑

LISTNUM 1 \l 1201     THE CHAIRPERSON:  I see.

LISTNUM 1 \l 1202     MR. MAHEU:  ‑‑ but it's very difficult to monetize that tuning.

LISTNUM 1 \l 1203     THE CHAIRPERSON:  Right, but the viewing of the website while tuning, is that something that you are able to capture or is that something you still haven't been able to monetize all ‑‑

LISTNUM 1 \l 1204     MR. MAHEU:  It's very difficult to monetize, Mr. Chair, because with internet radio you can be listening to an internet broadcast while surfing basically any site that you wanted to.  So we could be on the CRTC website looking over whatever, also listening to something coming from across the road or around the world?

LISTNUM 1 \l 1205     THE CHAIRPERSON:  All right.

LISTNUM 1 \l 1206     Have you experimented with different genres of programming?

LISTNUM 1 \l 1207     One of the questions we asked in the Public Notice was the question about showcasing Canadian programming and the possible needs for incentives going forward, with or without licensing.

LISTNUM 1 \l 1208     Have you formed any views on that or is it still too early, as to the nature of the programming that works?  Are you just streaming your own stations?

LISTNUM 1 \l 1209     MR. MAHEU:  I can't speak for all broadcasters, but as a member of the CAB I can certainly speak to the company I represent.

LISTNUM 1 \l 1210     We see the internet as a valuable tool to be able to promote in a complementary manner some of the things we do on the air for the development of Canadian talent.  What we are finding is that many emerging artists, especially independent artists, are making great use of the Internet to get the word out about their music and about what they are doing.

LISTNUM 1 \l 1211     Certainly here in Ottawa, for instance with our alternative rock station, we make extensive use of the internet.  We have created forums for bands and listeners to be able to interact together and listeners can find out via our forum where bands are playing around town and what's happening, or listen to MP3s that the bands supply.

LISTNUM 1 \l 1212     So I think there is a real benefit there and I think that type of approach is very much in its infancy and radio, being an entrepreneurial business with some very smart people, are going to take that as far as it can possibly go.

LISTNUM 1 \l 1213     The big issue that broadcasters are worried about, though, are:  If we can do it, anybody can do.  So all of a sudden we are faced with the prospect of all of these potential unregulated competitors playing in that space without the same kind of obligations to the Broadcasting Act or the development of Canadian content that we have and we have to compete in an inequitable manner with those folks.

LISTNUM 1 \l 1214     And it's starting.  Iceberg happens to be an endeavour that's owned by a broadcaster.  There are other ones in the United States and in Canada that are not owned by private broadcasters, and as means to receive those signals move beyond the desktop to the wireless ubiquitous device world which we are now starting to come into.  That's where we see the storm clouds.

LISTNUM 1 \l 1215     THE CHAIRPERSON:  I appreciate that.  Answers are in short order, but the concept of building on your own abilities, because you certainly know how to reach audiences and you have awakened to this, varying broadcasters at varying times, and if there is a way to ensure that through us as the vehicle the Canadian objectives can be fulfilled, then in effect there is some fresh thinking that could be done regarding incentives of one kind or another that might help achieve those same objectives, to extend the regulatory bargain, I think as Mr. O'Farrell referred to it, to the wider environment.

LISTNUM 1 \l 1216     I mean, we have always had to do that as Canadians, since the start of radio.  We have had to leverage the new technologies that were prima facie working against us, and I think up to now have managed to do very well in capturing them as a vehicle for our Canadian artists and performers.  We have to, with not perfect success, but I think it's something we have to continue to try to figure out how to do through a combination of entrepreneurship and regulatory backing.

LISTNUM 1 \l 1217     MR. MAHEU:  It's a very good point and you are absolutely correct.

LISTNUM 1 \l 1218     What makes this particular time different than any other time is the fact that the internet knows no borders.

LISTNUM 1 \l 1219     And unlike any other time, potential future competition that private radio will face in the wireless world, whether it's internet or broadcasting to cell phones or devices, is that the content can come from virtually anywhere.

LISTNUM 1 \l 1220     And anecdotally, it would be similar to having companies in Europe and the United States having ultra powerful transmitters that could transmit FM signals right into Canada on an unregulated basis.

LISTNUM 1 \l 1221     THE CHAIRPERSON:  What you say certainly registers.  The internet has no borders, though as a concept I think is not an unequivocally true statement.

LISTNUM 1 \l 1222     When we see the downloading of "Desperate Housewives", for example, on television by I think it is the ABC network, they are not accessible to servers outside the country.

LISTNUM 1 \l 1223     So it seems to me that rightsholders are going to continue to want to ensure that, to the extent possible, borders can be imposed.

LISTNUM 1 \l 1224     I am not suggesting borders here; quite the contrary.  I am assuming that it is going to be borderless for purposes of the exercise and figuring out ways of again leveraging the technology in a more borderless world to achieve the objectives.  I don't see the objectives that we have as Canadians are going to change all that much in regard to wanting to promote our own songs and artists and performers.

LISTNUM 1 \l 1225     So it is up to all of us to try and figure out a way of doing that that is least intrusive and least chilling on the technology and on the investment while we move forward.

LISTNUM 1 \l 1226     MR. MERSON:  Perhaps, Mr. Chair, I can speak to the business model.

LISTNUM 1 \l 1227     We do look at the internet.  We look at the new media as an opportunity as much as we look at it as a threat.  We are in the midst of a storm so it is difficult to see sort of what the beginning and what the end of it is.

LISTNUM 1 \l 1228     To us as we speak about radio, a vernacular changing, we no longer speak about radio or television but we speak about audio content and video content and data and social media and connections and stickiness, the terms that really underlie what the internet does.

LISTNUM 1 \l 1229     As we think of how it is from a business point of view we organize our activities in that regard, we speak a little bit about the media finding its own way home.  So to some degree what you have to do is rethink how it is the service that you provide.  So the service you provide might not well be radio, but it might well be audio content.  Along with that audio content might be community and it might be interactivity and it might be a whole bunch of different things.

LISTNUM 1 \l 1230     But whatever content you develop now has to have those characteristics.  So it has to have the characteristics of audio.  It probably has to have video.  It has to have social media.  It has to have community and it has to have all the bits and pieces.

LISTNUM 1 \l 1231     As you create this, you create this in a different environment.  You don't create it as a one‑off.  The vernacular changes.  It's not radio any more; it's a stream or it's a download or it's a podcast.

LISTNUM 1 \l 1232     But the key to us from a business point of view is to create once and publish many times, and publish in whatever sphere requires that content in whatever way the content is required.

LISTNUM 1 \l 1233     So we from a business point of view are in the process of reorganizing our affairs and doing what we need to do to ensure that we maximize the opportunities.  We are agnostic to medium but we maximize the opportunities to find our content sort of finding its way to an appropriate home.

LISTNUM 1 \l 1234     The difficulty, as Mark says, is replicating the dominance we have in the analog world in the digital world.  It is a much more open environment and it is difficult to meet all of the objectives at the same time.

LISTNUM 1 \l 1235     I am one who believes that we are very much at the inception of the revolution, and the revolution goes through a couple more phases.

LISTNUM 1 \l 1236     The first phase is the evolution to IP‑based protocols, and in IP‑based world there really is no distinction between one medium to the next.  Currently even though multiple media, you know a phone call or a video stream or an audio stream goes down the same pipe or across wireless, there still requires separate infrastructures in order to manage them.

LISTNUM 1 \l 1237     In an IP‑based world, the same infrastructure manages all of those types of streams.

LISTNUM 1 \l 1238     The second big revolution we are going to come into is software‑defined receivers.  These are true multi‑media capable devices.  We have seen them out there.  They are in Korea.  They are out there in their infancy.

LISTNUM 1 \l 1239     What these devices will do is act very much like a modern PC does in the sense that if you have a Windows media file and somebody sends you a Real Player file, you go down and the software is intelligent enough to go to the internet and download the drivers necessary to make all that happen.

LISTNUM 1 \l 1240     So it's another phase of the revolution that will come over the next couple of years.

LISTNUM 1 \l 1241     And the third ‑‑ and this is one that we sort of are involved in in a very big way ‑‑ is the roll out of wireless and the fact that wireless is going to become ubiquitous.

LISTNUM 1 \l 1242     And the radio industry has had some real barriers to entry into its current business based on the fact that it ultimately was the only portable medium out there.  What we are seeing now are real incursions into the wireless base through DVBH, through Flow, through all the other technologies out there.

LISTNUM 1 \l 1243     The question you asked us was:  How do we monetize this?  To some degree, we reorganize our activities to ensure that we give the maximum exposure to the content that we create.  And on the other hand we know that what has made radio successful in the past has been localness.  And to some degree we have to recreate that localness as adjuncts to our businesses in the digital space.

LISTNUM 1 \l 1244     We are doing that to some degree.  The biggest revenue producer on the internet has been Search.  So if you look at most of our websites you will see Local Search in the sense of recommendations.

LISTNUM 1 \l 1245     What we can do that is different from the Googles of this world who provide sort of global access into the internet is to editorialize, and that is what we have done in the past as Canadian media.  We take your question about what restaurant to visit in the local area and we say:  Look, our experience is this is what's best and this is where you should go to.

LISTNUM 1 \l 1246     So we've got to make that evolution.  We've got to sort of repurpose our content.  We have to try to anticipate what the world is going to look like, and we've got to stick with what it is that sort of brung us to the party, which really is localness and our hold on the local markets.

LISTNUM 1 \l 1247     But it is not obvious.

LISTNUM 1 \l 1248     M. PARISIEN : Monsieur le Président, si vous permettez, j'aimerais vous donner quelques perspectives du marché francophone, suite à la question que vous avez posée.

LISTNUM 1 \l 1249     Alors, toutes les plate‑formes n'ont pas, évidemment, le même impact.  Il y en a certaines qui créent une concurrence accrue, particulièrement au niveau du revenu commercial.  D'autres, tout simplement, réduisent nos auditoires, mais c'est non négligeable.

LISTNUM 1 \l 1250     Il y a définitivement des opportunités pour les radiodiffuseurs francophones de profiter de cette révolution et d'investir maintenant, mais le constat, évidemment, des principales entreprises qui sont impliquées dans les marchés francophones, c'est que ça prend énormément, énormément d'argent et que l'horizon n'est pas très clair encore.

LISTNUM 1 \l 1251     Le temps d'écoute se fractionne énormément, et c'est la radio commerciale francophone, le marché francophone qui en fait les frais, et ça fait partie de la révolution qu'on vit, évidemment.

LISTNUM 1 \l 1252     Un facteur important aussi, c'est que l'industrie de la musique est peut‑être intervenue sur le tort, afin d'empêcher le téléchargement de fichiers, ce qui a développé une culture auprès d'une nouvelle génération que la musique, c'est gratuit, et que la musique aussi, c'est gratuit et c'est surtout facilement accessible en anglais.

LISTNUM 1 \l 1253     Alors, dans le marché francophone, pour nous, les activités web ne sont pas nécessairement complémentaires aux activités de base de nos radios commerciales.  C'est pour nous maintenant de trouver un modèle d'affaires qui va faire qu'on va pouvoir compétitionner adéquatement avec l'érosion de tous ces auditeurs‑là.

LISTNUM 1 \l 1254     On a un cas vécu, nous, qui est Radio‑Libre.ca, que je vous encourage, d'ailleurs, à aller visiter pour mieux comprendre comment...

LISTNUM 1 \l 1255     LE PRÉSIDENT : Je l'ai déjà fait.

LISTNUM 1 \l 1256     M. PARISIEN : O.K.  Nous avions, comme concept, développé Radio‑Libre autour de la thématique de la diversité et aussi de la découverte musicale.  Radio‑Libre est un site qui a mis en ondes, en français, tous les produits francophones disponibles.  On les a numérisés, on les a mis en ondes, et on vendait ça par abonnement parce que c'est des coûts assez élevés.

LISTNUM 1 \l 1257     On s'est rapidement aperçu que la musique c'est gratuit, la musique ça ne se paie pas par abonnement, dans ce cas‑là, surtout quand c'est une auditoire plus jeune, et on a été obligé de fermer le volet abonnement pour retourner à un volet public gratuit.

LISTNUM 1 \l 1258     La conclusion à laquelle je veux en venir, c'est que le constat principal qu'on fait, c'est que oui, la musique est gratuite, oui, ça défie toutes les structures d'affaires de notre radio commerciale, mais aussi ça glisse rapidement pour l'auditoire francophone vers une écoute accessible, facilement accessible de musique en anglais aussi.

LISTNUM 1 \l 1259     THE CHAIRPERSON:  Mm‑hmm.

LISTNUM 1 \l 1260     Mr. Hildebrand, speaking for a smaller market broadcaster, I know you have had experience with the use of the internet.

LISTNUM 1 \l 1261     MR. HILDEBRAND:  Certainly what we have been doing in the prairies, we have not been streaming because, as you have already heard, nobody has figured out yet how to charge or monetize anybody that is listening over the internet.

LISTNUM 1 \l 1262     So we have developed a business model that works in our environment where we are setting up community portals and, as a result, actually using all of the local material that we generate on a day‑to‑day basis then is also used on the internet.  That has resulted in many communities.  We are now upwards of tens of thousands of individual users and this seems to be growing.

LISTNUM 1 \l 1263     We have been able to develop a business that actually generates a secondary revenue stream to radio advertising.  So we see this as something that may be a big adjunct to whatever we do on the air.

LISTNUM 1 \l 1264     So it is a little different maybe than some of the other ones that you are hearing about, but we are finding that that works in the smaller communities and we are actually ramping up that whole process to do a lot more of it.

LISTNUM 1 \l 1265     THE CHAIRPERSON:  So using it essentially as a parallel service rather than as a carrier for your radio station.

LISTNUM 1 \l 1266     MR. HILDEBRAND:  Right.  We haven't done any original programming.  We are basically using local news, local weather and anything that happens in the community.

LISTNUM 1 \l 1267     We are providing job opportunities, both for jobs wanted and jobs looked for.  We are providing a trading opportunity, plus everything that happens in the community is on the site.  As a result, it is sort of a community shopping centre.

LISTNUM 1 \l 1268     We have been able to provide a revenue stream that is actually growing and becoming significant.

LISTNUM 1 \l 1269     So the other thing that works well is that one complements the other:  a radio station can drive people to the site and the site can put people back to the radio station.  So it is sort of a complete circle.

LISTNUM 1 \l 1270     THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 1271     Mrs. Crawford, are you in the position to speak for CHUM or would you prefer that I wait until they make their appearance?

LISTNUM 1 \l 1272     MS CRAWFORD:  I would encourage the Commission to address our panel tomorrow.

LISTNUM 1 \l 1273     THE CHAIRPERSON:  Okay.

LISTNUM 1 \l 1274     MS CRAWFORD:  There are people on that panel who are much more knowledgeable than I am and can speak in more detail.

LISTNUM 1 \l 1275     I would emphasize that we have been very active in that area and echo some of the comments made this morning.

LISTNUM 1 \l 1276     It is challenging to monetize one's activities in that area.  We are active in both the television and the radio side and so we see it as a somewhat platform agnostic venture for content creators to really fully explore all of the new media.

LISTNUM 1 \l 1277     In terms of what our radio stations are doing, again there will be those on our panel tomorrow who can speak in much more detail about that.

LISTNUM 1 \l 1278     THE CHAIRPERSON:  Sure.

LISTNUM 1 \l 1279     MR. O'FARRELL:  Mr. Chairman, if I may, just to complete the answer...

LISTNUM 1 \l 1280     THE CHAIRPERSON:  Go ahead, Mr. O'Farrell.

LISTNUM 1 \l 1281     MR. O'FARRELL:  I would like to ask Ken Goldstein to offer perhaps a broader view or a wide‑angle view on the situation because Ken has done some work in this area.

LISTNUM 1 \l 1282     Before I pass it to Ken, I want to make one remark with regard to your comment pertaining to "Desperate Housewives" and downloading it in‑country only.

LISTNUM 1 \l 1283     The distinction we have to be careful of is that is exclusive content as opposed to ‑‑ and we are talking about music, music being non‑exclusive content.  There are obvious differences that apply there.

LISTNUM 1 \l 1284     THE CHAIRPERSON:  And to Mr. Parisien's point, I understand that.  But I guess exclusivity is one of the things you will experiment with, as difficult as that concept is in the world of music, with all the avenues.

LISTNUM 1 \l 1285     Before Mr. Goldstein responds ‑‑ because I will let him respond to this next point ‑‑ it is again in Mr. Osborne's brief.  He is conveying the view that ‑‑ this is on podcasting.

LISTNUM 1 \l 1286     He says it is generally perceived as a positive development that may help the radio broadcasters repatriate the younger listeners.

LISTNUM 1 \l 1287     I haven't heard any of your spokesmen on that.

LISTNUM 1 \l 1288     So if there is anything that Mr. Goldstein or others would add on that, we recognize that that is the demographic that appears to be least tuning to radio among the entire population.

LISTNUM 1 \l 1289     I am wondering whether you would agree with those views conveyed through Mr. Osborne and whether in fact your use of the internet is able to address connecting with that demographic any better than perhaps you have over the air.

LISTNUM 1 \l 1290     MR. O'FARRELL:  I will let Mr. Goldstein take it and if anybody wants to add.

LISTNUM 1 \l 1291     I think the evidence you have heard this morning is that where there are activities online, they basically have not been monetized in a manner that has proven to be successful to date in any demographic group, including the potential repatriation or attraction to the younger demographic group.

LISTNUM 1 \l 1292     Ken?

LISTNUM 1 \l 1293     MR. GOLDSTEIN:  Thank you.

LISTNUM 1 \l 1294     I think on the question of the internet, one could obviously deal with it at many levels in terms of how it affects the use of time, in terms of how advertising is growing rapidly on it.

LISTNUM 1 \l 1295     But I think I would limit my comment on the internet in a contextual sense in terms of what you heard and picking up on what you yourself said about borders.

LISTNUM 1 \l 1296     There are geographic borders but there are two other kinds of borders that the internet also shatters.  I think it is important that we have to remember that.

LISTNUM 1 \l 1297     Yes, geographic borders are at issue, and although one attempts to limit the reception of something like "Desperate Housewives", I suspect I could walk not more than a hundred yards from here and find a teenager who would tell me how to do it from anywhere.

LISTNUM 1 \l 1298     But the other borders ‑‑

LISTNUM 1 \l 1299     THE CHAIRPERSON:  He could probably tap into the satellite signal as well ‑‑

LISTNUM 1 \l 1300     MR. GOLDSTEIN:  Right.  I wouldn't know from such things but...

‑‑‑ Laughter / Rires

LISTNUM 1 \l 1301     THE CHAIRPERSON:  We are trying to combat all of that.

LISTNUM 1 \l 1302     MR. GOLDSTEIN:  Yes.

LISTNUM 1 \l 1303     The other two borders, though, are equally important and they go to the question of monetization and the increased fragmentation conversation.

LISTNUM 1 \l 1304     The first is of course the borders between and among other media because if radio is going to be occupying some of the text space, the people who were text‑based are going to start occupying some of the audio space.

LISTNUM 1 \l 1305     But the most important border in all of this is the border between and among media and non‑media.

LISTNUM 1 \l 1306     If the large advertisers themselves, all of whom have websites, decide to put entertainment content on their websites, the same kind of entertainment content as media have traditionally delivered as a way of attracting people to their websites, that not only adds competition but that means the cost of what we as broadcasters consider the cost of programming to them now becomes part of the advertising budget.

LISTNUM 1 \l 1307     That really changes the economics of everything.

LISTNUM 1 \l 1308     I think that was the only additional contextual comment I could make.

LISTNUM 1 \l 1309     On the notion of attracting young people, podcasting and vlogs and blogs and broadly speaking consumer‑generated media seems to be where young people are at and increasing, not just young people but as the age moves up.

LISTNUM 1 \l 1310     The important point to remember about radio and young people is that it is not just radio; that if you take a look across all media you find young people are being drawn to all of these new devices, to all of the consumer generated media.

LISTNUM 1 \l 1311     So if we only say well radio may have a problem with the teen and young adult market, so does television, so do newspapers, so do magazines, so does everything we thought were the traditional media.

LISTNUM 1 \l 1312     So I think that again is a little bit of context.

LISTNUM 1 \l 1313     THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 1314     The next question is probably for you, Mr. Goldstein.  It has to do with your study for the intervention.

LISTNUM 1 \l 1315     It is your assessment of impacts of the new technologies on radio broadcasting.  You have numbers in your study.

LISTNUM 1 \l 1316     Let's see if I can get to it quickly.

LISTNUM 1 \l 1317     Your scenarios of impact in year 5, of a 4.9 reduction in overall tuning and a 1.0 percent reduction in ad revenues and a heavy scenario, a high impact scenario, of approximately 8.5 percent reduction in overall tuning and 3 percent in ad revenues.

LISTNUM 1 \l 1318     It is reproduced, I guess, at page 110, I believe, of the intervention.

LISTNUM 1 \l 1319     Do you happen to have that?  I'm having a little trouble putting my finger on it right now.

LISTNUM 1 \l 1320     MR. GOLDSTEIN:  I have it.  It is pages 31 onward in our report.

LISTNUM 1 \l 1321     THE CHAIRPERSON:  Right.

LISTNUM 1 \l 1322     MR. GOLDSTEIN:  I have it in that form in front of me.

LISTNUM 1 \l 1323     THE CHAIRPERSON:  Yes, there it is.

LISTNUM 1 \l 1324     My question is how you arrived at those numbers governing impact in the high and low impact scenarios, at page 31.

LISTNUM 1 \l 1325     MR. GOLDSTEIN:  Well, I ‑‑

LISTNUM 1 \l 1326     THE CHAIRPERSON:  Without going through your study.

LISTNUM 1 \l 1327     MR. GOLDSTEIN:  Right.

LISTNUM 1 \l 1328     THE CHAIRPERSON:  I guess the question is the assumptions are not, if you like, data‑based as much as they are based on the assumptions that you sum up at page 1 of your report, where you talk about potentially cyclical downturns and thresholds biting at technology.

LISTNUM 1 \l 1329     So it is that kind of assessment going forward.

LISTNUM 1 \l 1330     Is that a fair comment?

LISTNUM 1 \l 1331     MR. GOLDSTEIN:  That's absolutely correct.

LISTNUM 1 \l 1332     On page 31 in the little box at the top where it says "Assumed Annual Percentage Change in Tuning", those were the numbers we put in and then we just let them flow out cumulatively.

LISTNUM 1 \l 1333     I didn't just pull these out of thin air.  I reviewed a bunch of financial analyst reports, particularly from the American market.  And I'm not saying the American market is the same as the Canadian market, but they have had some of these technologies a little earlier and therefore there are more reports floating around that try to go forward and say, you know, what percentage of this, and so on.

LISTNUM 1 \l 1334     I actually found a number of the American reports too pessimistic.  They did a one‑to‑one relationship between tuning reductions and advertising reductions and I didn't accept that.

LISTNUM 1 \l 1335     I said that radio is well‑run in this country, radio has a good local record.  I think a little bit of erosion can be overcome with pricing, with promotions, with all of the entrepreneurial things the industry can do.

LISTNUM 1 \l 1336     That's why, for example, in the low scenario with a 4.9 per cent decline you only have a 1 percent decline of what the revenue otherwise would have been.  Then I just put the numbers out and drew the lines and applied it as if it would have been last year.  So it's just to give an idea of how much a bite might happen at certain levels.

LISTNUM 1 \l 1337     THE CHAIRPERSON:  Right.  I guess when you try to gauge the impact, and if you look at both, either satellite radio or the internet ‑‑ I have looked at a number of American studies and there is a Credit Suisse study of Canada on potential impact of satellites, and I guess in‑car tuning in Canada is lower than in the United States, 25 percent compared with 35 percent.  When they do their analyses, the numbers that they come up with are relatively modest.

LISTNUM 1 \l 1338     In the United States for instance, the cannibalization ‑‑ I'm looking here at a study by J.P. Morgan done about a year ago where the estimate is that cannibalization of radio listening in '06 at about 1.5 percent.

LISTNUM 1 \l 1339     Are you familiar with that study?

LISTNUM 1 \l 1340     KEN GOLDSTEIN:  It sounds familiar.  I have some more recent ones.

LISTNUM 1 \l 1341     But again, what we are talking about is '06.  We are going forward from that.

LISTNUM 1 \l 1342     THE CHAIRPERSON:  You go forward, yes.

LISTNUM 1 \l 1343     MR. GOLDSTEIN:  Yes.

LISTNUM 1 \l 1344     THE CHAIRPERSON:  Their estimate going ‑‑ and the farther out you go forward, the more difficult it is.

LISTNUM 1 \l 1345     Would you say, from your knowledge, that the subscriptions of Canadian satellite operators are making an impact on radio at this point?

LISTNUM 1 \l 1346     KEN GOLDSTEIN:  I don't think so yet.  I think it's too early.

LISTNUM 1 \l 1347     The interesting place that Jeff Osborne has talked about in his work ‑‑ you have his study ‑‑ it sometimes will affect ad agency attitudes before it turns up in the tuning.

LISTNUM 1 \l 1348     I think Pat Grierson could speak to that in more detail.  But sometimes if all the media buyers have the new services, they start making some assumptions that aren't yet supported by the data.

LISTNUM 1 \l 1349     But it's very early days here for that particular item.

LISTNUM 1 \l 1350     THE CHAIRPERSON:  Yes.  I think, as Mr. Merson was saying before, radio succeeds as a local medium and one thing that satellite isn't is local.  It's also a pay medium, a subscription medium that requires an upfront payment every month.

LISTNUM 1 \l 1351     I haven't, frankly, been able to discern impacts in the financial reports that I have studied.  That doesn't mean it won't happen.  Certainly I grant you that.

LISTNUM 1 \l 1352     But in the reports in this proceeding and elsewhere it could happen, but again it hasn't happened yet.  So we are left, as with so many areas dealing with the new technologies, the numbers are hard to come by and you have done a good faith effort to try to make projections going forward, but it's hard to base it on substantive data.

LISTNUM 1 \l 1353     MR. GOLDSTEIN:  I would agree completely with that comment.

LISTNUM 1 \l 1354     I would only add one thing, that is of course we did not limit our impact to satellite.  We didn't say, "Well, this will be satellite, this will be iPods, this will be internet, this will be mobile", because at the moment we don't know the precise mix.  But we said, if you take them all together ‑‑ plus, as Glenn O'Farrell pointed out at the beginning, something that might be around two years from now that nobody knows about today.  I took that all into account.

LISTNUM 1 \l 1355     THE CHAIRPERSON:  Yes.  All right.

LISTNUM 1 \l 1356     I guess Mr. Osborne points out on the internet that his people that he interviewed don't anticipate any significant revenue ad implications in the short or medium term.  So I guess it's a bit of a guess going forward and you have every reason to be concerned, particularly, as you have said, from unregulated media who may not have the same obligations.

LISTNUM 1 \l 1357     Which is I guess why in the Public Notice and in this hearing I would appreciate whatever help you can give in terms of leveraging the fact that you are regulated and turn it into a benefit in the sense of suggesting incentives or other ways of ensuring that Canadian music artists are carried on these new media to the maximum extent possible.

LISTNUM 1 \l 1358     MR. O'FARRELL:  May I jump in very quickly, Mr. Chairman?

LISTNUM 1 \l 1359     THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 1360     MR. O'FARRELL:  In our brief, and I don't have the exact page in front of me, we presented to you some information in chart form that showed how there was a rise in particularly the youth demographic segment, but across all demographic segments where people were actually ‑‑ the increase in non‑use of radio.  To make sure that we made the point perfectly clear in the materials we distributed to you this morning we also produce the inverse chart, which shows the clear decline in tuning to radio across all demographic segments, in particular the youth segment, but across all demographic segments in the past five years.  This is 2001 to 2005.  It is in the attachments that we circulated this morning.

LISTNUM 1 \l 1361     My point here is, these facts don't lie.  The decline is real, the decline is demonstrable, and it's across all demographic segments.  That's number one.

LISTNUM 1 \l 1362     Number two is, we cannot necessarily and certifiably tell you this morning that the impact is due to one or another of the new technologies, but we do know that the new technologies are competing.  In fact, we don't have to tell you that other than anecdotally.  We all know that it's a fact that we are dealing with today and we will be dealing with more so going forward.

LISTNUM 1 \l 1363     Hence, what we feel is absolutely clear to us is that as we step into this open marketplace with these competing technologies and these competing delivery mechanisms and this competing content, much of which is unregulated ‑‑ satellite, yes, is slightly regulated.  That is only one form of fragmentation ‑‑ we do feel that it's not unreasonable to suggest that the chart that shows the decline overall is not, in all likelihood, going to bounce back.  If anything, there is every indication that the more these kinds of technologies come on‑stream and the more access is given to consumers in more and more ubiquitous devices at lower and lower cost to purchase, with greater and greater accessibility, the likelihood is these facts will continue to show decline.  That's number two.

LISTNUM 1 \l 1364     The last thing I wanted to mention was, you mentioned in your comments a few seconds ago about music.  As much as music is an important part, and has been an important part of radio, radio is not just about music.  In fact, to be perfectly candid, I get caught up in that sometimes too, thinking about it only in those terms.

LISTNUM 1 \l 1365     Music is a fundamental component of radio, there is no doubt, but what is absolutely fundamental to the business of music is serving consumers ‑‑ I think that's what Marc said earlier ‑‑ of which music can be a component.

LISTNUM 1 \l 1366     But more and more, as the experience of the Québec market has indicated ‑‑ and Mr. Parisien spoke of that ‑‑ where music as a non‑exclusive product is being made available and one where this is so much more competition, there may well be a greater migration towards exclusive content to further differentiate and to further make the commercial viability of local radio more likely going forward than less.

LISTNUM 1 \l 1367     So I think that we have to remember the fundamental concept of radio as a medium, while having enjoyed a great relationship with radio ‑‑ that music has enjoyed with radio, I'm sorry, there are other contents and, frankly, the exclusive contents may well be the place to go if you want to make sure that you have more differentiation capabilities than less and you are offering to consumers.

LISTNUM 1 \l 1368     THE CHAIRPERSON:  I'm trying to reconcile your chart that you just drew our attention to with the total hours tuned numbers which we have which show that since 1997 roughly total hours tuned across all persons 12‑plus has remained pretty stable, 516 million hours in '97; 531 million in 2005, with dips around 533, 540, 529, 538 in between.

LISTNUM 1 \l 1369     How do you reconcile those?  What is the chart purporting to say?

LISTNUM 1 \l 1370     MR. O'FARRELL:  The chart you are making reference to is...?

LISTNUM 1 \l 1371     THE CHAIRPERSON:  Your chart.

LISTNUM 1 \l 1372     MR. O'FARRELL:  The chart that we just handed out, yes.

LISTNUM 1 \l 1373     THE CHAIRPERSON:  In the face of those numbers that show pretty stable total hours tuned and pretty flat ‑‑ a pretty flat graph over the last five years, both in the 12‑plus and the 25‑to‑54 demographics, a change of 1 percent a year.

LISTNUM 1 \l 1374     MR. O'FARRELL:  I'm afraid we are not on the same page exactly.

LISTNUM 1 \l 1375     Are we referring to the chart that was attached to the oral presentation?

LISTNUM 1 \l 1376     THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 1377     MR. O'FARRELL:  Okay.  So we are talking about this five year tuning trend that shows decline since fall 2001?

LISTNUM 1 \l 1378     THE CHAIRPERSON:  Yes.  I'm trying to reconcile it with a pretty stable total hours tuned data that we got from BBM over the past five years.  Over the past five it seems to be stable, plus or minus 535 million hours a year tuned, all persons 12‑plus.

LISTNUM 1 \l 1379     MR. O'FARRELL:  Well, it's what you are reconciling it to that I'm having trouble following.

LISTNUM 1 \l 1380     The chart that we just handed out I think makes a statement.  How it reconciles back to the data that you are referring to, I'm not quite sure.

LISTNUM 1 \l 1381     But I do think that it is fair to say ‑‑

LISTNUM 1 \l 1382     THE CHAIRPERSON:  Why do you show a downward trend, I guess, in the different demographics?

LISTNUM 1 \l 1383     MR. O'FARRELL:  Well, effectively all demographic trends are tuning less to radio today than they were five years ago.

LISTNUM 1 \l 1384     THE CHAIRPERSON:  Percentage of the total population.

LISTNUM 1 \l 1385     So is it fair to say, if total tuning is roughly flat and the population grows your tuning as a percentage is down?  Is it as simple as that?

LISTNUM 1 \l 1386     MR. O'FARRELL:  Ken, do you want to jump in?

LISTNUM 1 \l 1387     MR. GOLDSTEIN:  That's the answer.

LISTNUM 1 \l 1388     THE CHAIRPERSON:  That's the answer.  Okay, thank you.

LISTNUM 1 \l 1389     Looking again at other challenges that might be coming down the pike ‑‑ again, as you go into the future there are no facts and you are crystal gazing a bit.  But when we look at GDP and retail sales projections, Conference Board figures, others as well, we see a fairly optimistic set of projections.

LISTNUM 1 \l 1390     The Conference Board of Canada, Winter 2006, shows a percentage change in GDP going up roughly 3 percent a year over the next five years and retail sales going up about 4.1 to 4.7 percent, roughly 4.4 average.

LISTNUM 1 \l 1391     Are those projections you are using in your own analysis, gentlemen?  Mr. Goldstein or Mr. O'Farrell?

LISTNUM 1 \l 1392     MR. O'FARRELL:  Ken...?

LISTNUM 1 \l 1393     MR. GOLDSTEIN:  We didn't actually do a projection.  We did an impact assessment.  But I mean we do use the same Conference Board figures all the time in our underlying models.

LISTNUM 1 \l 1394     THE CHAIRPERSON:  So I guess the question is:  If those numbers hold, does it counteract the impact sufficiently?  I guess that's a tough question to answer.

LISTNUM 1 \l 1395     MR. GOLDSTEIN:  Again, that's why we did it the way we did it, which is to say:  How would this affect what it otherwise would have been?

LISTNUM 1 \l 1396     THE CHAIRPERSON:  But did you actually use those kinds of projections in the "what otherwise would have been"?

LISTNUM 1 \l 1397     MR. GOLDSTEIN:  Well, no.  The "what otherwise would have been" is the unknown, and so we say let's say radio ‑‑ if you look at Figure 10 and Figure 11 in our report you will see a tracking of radio with both GDP and retail sales, and you will see that it's a fairly constant relationship, which is not particularly surprising, although slightly ‑‑

LISTNUM 1 \l 1398     THE CHAIRPERSON:  You only go backwards on those.

LISTNUM 1 \l 1399     MR. GOLDSTEIN:  We go from '91 to 2005, yes.

LISTNUM 1 \l 1400     THE CHAIRPERSON:  The question is:  Did you factor into your projections those kinds of growth rates that might ‑‑ given that there tends to be a pretty close relationship between radio advertising and retail sales, would that have counteracted the impacts that you are projecting?

LISTNUM 1 \l 1401     MR. GOLDSTEIN:  Well, that's it.  It's not a counter acting.

LISTNUM 1 \l 1402     Let's take a hypothetical example.  Let's say that radio and retail sales in a given year go up 3 percent, so all our analysis is basically saying:  If it would have been 3 percent higher based on normal occurrence, these new technologies will have the following impact on that 103.

LISTNUM 1 \l 1403     THE CHAIRPERSON:  So you are taking that into account.  But I didn't notice that.  Perhaps I missed it.

LISTNUM 1 \l 1404     MR. GOLDSTEIN:  But the point is ‑‑

LISTNUM 1 \l 1405     THE CHAIRPERSON:  Can you draw my attention to where you actually ‑‑

LISTNUM 1 \l 1406     MR. GOLDSTEIN:  But I want to say that if it would have been 106 or 102, it's the same thing.  In other words, what you are assessing is the old model that we understand has a relationship between GDP, radio and retail sales.  Whatever that relationship may be will be affected by the new model and we are trying to measure the effect.

LISTNUM 1 \l 1407     THE CHAIRPERSON:  Right.  All right.  I see.

LISTNUM 1 \l 1408     But the dollars could well increase as a result of the ‑‑

LISTNUM 1 \l 1409     MR. GOLDSTEIN:  The dollars, if we are projecting that let's say in a given year it would be 2 percent less than it would have been, and if GDP or retail trade go up 4, you would have expected radio to go up 4, instead it would go up 2.

LISTNUM 1 \l 1410     THE CHAIRPERSON:  It's going to go up 2, all right.

LISTNUM 1 \l 1411     MR. GOLDSTEIN:  That's the point.

LISTNUM 1 \l 1412     THE CHAIRPERSON:  I see, yes.  All right, I take that.

LISTNUM 1 \l 1413     Again, I guess it would be fair to say there is a lot of optimism in the industry as reflected in the applications that we get whenever there is a new call for licences, which is a healthy thing and welcome, but I suspect that radio broadcasters are still pretty optimistic, as I think their performance says they have a right to be.

LISTNUM 1 \l 1414     MR. MAHEU:  Mr. Chairman, you are absolutely right and I don't think anyone should confuse our concerns about the future in talking about how we can make this work for everybody with a very healthy radio environment.  I think everybody in this room today knows that radio is still a fantastic business to be in and Canada is a great place to be in that business.

LISTNUM 1 \l 1415     The numbers that the Commission published last week on revenues and PBIT bear that out, that there is no question that radio, like the economy, has been doing very well.  We were kind of matching the economic activity that's going on out there.

LISTNUM 1 \l 1416     But going forward we are still very bullish and very positive on radio's future.  The questions before you and before us are trying to figure out ways to keep radio relevant and local in a world of consumer behaviour that's changing rather rapidly.  That is the $64,000 question.

LISTNUM 1 \l 1417     THE CHAIRPERSON:  All right.

LISTNUM 1 \l 1418     I don't know whether you have had an opportunity to read the brief of the Competition Bureau and the paper by Dr. Winter.  He concludes in that that radio advertising is complementary to rather than a substitute for other media, and he lists reasons why he believes that's the case.

LISTNUM 1 \l 1419     Would you agree with that?

LISTNUM 1 \l 1420     MR. O'FARRELL:  We don't happen to agree with that and I will ask Pat Grierson to speak to it.

LISTNUM 1 \l 1421     Under the heading of just something that we thought was the right thing to do as an industry group that looks forward and sees a lot of potential change on the horizon, particularly in the media space that we are talking about today, radio, we thought it was a good idea for us to write to the Competition Bureau and suggest that it might be a good idea for the industry, the broadcasting industry, to make a presentation on the changes and so on that we see and that we are currently absorbing to better share the perspective that we think is missed or lost in some of those conclusions.

LISTNUM 1 \l 1422     Patrick...?

LISTNUM 1 \l 1423     MR. GRIERSON:  Thank you.

LISTNUM 1 \l 1424     Clearly, to your earlier point, radio revenues have been strong.  We benefit from an extraordinary economy, great consumer confidence, and some of the struggles of conventional television.  We even had pressure on availabilities which has also driven the prices up.

LISTNUM 1 \l 1425     In short, we have enjoyed the benefit of a very positive cycle.

LISTNUM 1 \l 1426     Although clients and agencies tell us, of interest anecdotally, that their Ad Spend is now going to grow more slowly than it has in the past few years, though certainly not in new media.

LISTNUM 1 \l 1427     And to your point, is radio a silo unto itself?  Clearly not.

LISTNUM 1 \l 1428     From an advertising perspective one tends to approach it from a media‑neutral perspective, that is to say:  Where are my primary consumers, which medium are they using and therefore how do I best reach them.  To suggest that there is a radio budget would be ludicrous actually.

LISTNUM 1 \l 1429     Ad Spend will find all manners of ways to follow the changing media consumptions and habits of all consumers.  To understand where media really is going, one has to watch the consumers.  So no, clearly we have seen the likes of Proctor and Gamble, and many others, announce cuts in conventional television to support new media initiatives.

LISTNUM 1 \l 1430     So I think that responds fairly directly to your question.

LISTNUM 1 \l 1431     THE CHAIRPERSON:  Yes, it does.

LISTNUM 1 \l 1432     I know in the past the Commission has not taken the view that it is complementary rather than a substitute and in a number of decisions has looked at the entire advertising market, the Competition Bureau frequently tells us that it is a market unto itself.  So I'm interested to get your views on that.

LISTNUM 1 \l 1433     So I assume that ‑‑ well, let me not assume, let me ask the question:  Their recommendation on LMAs and LSAs, which is that they be subjected to a merger analysis prior to the Commission making a decision on them, is that a position you agree with?

LISTNUM 1 \l 1434     MR. O'FARRELL:  Because it flows from the wrong assumption we don't.

LISTNUM 1 \l 1435     THE CHAIRPERSON:  Would you like to comment on that, Mr. Grierson?

LISTNUM 1 \l 1436     MR. GRIERSON:  Certainly.

LISTNUM 1 \l 1437     Yes, I believe LSAs can have a very positive effect on radio and can enable us to present the medium more effectively against other media and make the process easier for the buying community.

LISTNUM 1 \l 1438     Radio classically is a difficult and time‑intensive medium to purchase, which from an advertising perspective makes it a difficult one to recommend.  If in fact we can streamline their process for them, which cluster selling and LSAs have been enabled us to do, or did enable us to do, then clearly it does have a positive impact.

LISTNUM 1 \l 1439     THE CHAIRPERSON:  Right.  But their position I think is, I guess flowing from the view that the advertiser is the customer in the relevant market and the relevant market is radio broadcasting in that community, that where an LMA or LSA is proposed, before the Commission approve it it allow merger analysis to be done in the classic form in order to determine whether there is a limitation of competition for the customer, the advertiser in this case, prior to the Commission making a decision and then to make its decision based on either accepting that or overriding that view expressly in its decision, as I take it is their proposal.

LISTNUM 1 \l 1440     I don't think they are appearing, but they will have an opportunity to file comments at the end if they wish to bases on what goes on in the record.

LISTNUM 1 \l 1441     So I assume that your answer is that you don't agree with that as an approach?

LISTNUM 1 \l 1442     MR. MAHEU:  Mr. Chair, I can certainly from a radio broadcaster's perspective, agree with Mr. O'Farrell's comment that the Competition Bureau ‑‑ it flows from the wrong assumption.

LISTNUM 1 \l 1443     You know, we operate, Newcap operates in some of the smallest markets and some of the largest markets in Canada.  I have been in the business 27 years and I have made lots of sales calls, as I know this room full of my colleagues have as well, and I would suggest that you would get the same answer from any radio broadcaster, that when we are talking to clients and customers that we depend 100 percent of our revenue upon, I would suggest that 99.99 percent of them will talk to you in terms of their advertising budget.

LISTNUM 1 \l 1444     We never talk about radio budgets, we always talk about advertising budgets, and we compete for advertising with every other media, especially in smaller markets where there is the one local newspaper and maybe a local television station and a couple of radio stations.  We are competing against those and outdoor.

LISTNUM 1 \l 1445     So we are not competing for share of radio budgets as the Competition Bureau would seem to suggest, we are competing for advertising dollars and we are trying wherever we can to increase our share and to be competitive with media rivals who bring a much larger, more consolidated reach and critical mass to the table.  That's where it's difficult for some of the smaller markets and smaller broadcasters to get their fair share of advertising budgets.

LISTNUM 1 \l 1446     So, quite clearly, radio is in the business of competing for advertising dollars, not radio budgets.  That is the reality that is going on out there in every market in Canada.

LISTNUM 1 \l 1447     M. PARISIEN : Monsieur le Président, si nous lisons le mémoire du Commissaire à la Concurrence jusqu'au bout, c'est assez intéressant de voir qu'il supporte la position de l'ACR sur l'assouplissement des règles que nous avons soumises dans notre mémoire afin que nous puissions mieux compétitionner contre les autres médias, qui, eux, ne sont pas réglementés.

LISTNUM 1 \l 1448     Donc, ce que nous avons dit ici, c'est que nous ne sommes pas d'accord avec leur définition du mot * marché +, mais la réalité, ils la reconnaissent au même point que nous, que nous compétitionnons dans les marchés locaux ou non, toujours contre d'autres médias qui sont moins réglementés.

LISTNUM 1 \l 1449     THE CHAIRPERSON:  Merci.

LISTNUM 1 \l 1450     We will take a break now.

LISTNUM 1 \l 1451     Nous reprendrons dans 15 minutes.  We will resume in 15 minutes.

‑‑‑ Upon recessing at 1106 / Suspension à 1106

‑‑‑ Upon resuming at 1127 / Reprise à 1127

LISTNUM 1 \l 1452     THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.

‑‑‑ Pause

LISTNUM 1 \l 1453     THE CHAIRPERSON:  Just to finish off the line of questioning before passing it to my colleague Madame Noël, Mr. O'Farrell and ladies and gentlemen, as you know, in the Competition Bureau brief, in Appendix A, where they refer to radio market definition in other jurisdictions, they point to the U.S., Australia and the U.K., in each of which they show that the radio advertising market is seen as a separate product market.

LISTNUM 1 \l 1454     I raise it for your comment but also for the fact that going down into the future this may be something that you are going to have to take account of in your submissions here and elsewhere.

LISTNUM 1 \l 1455     So I don't know whether you have a comment at this point or you simply want to note that.

LISTNUM 1 \l 1456     MR. O'FARRELL : I think we stand by our earlier comments but perhaps Mr. Merson would like to add a few additional views.

LISTNUM 1 \l 1457     MR. MERSON:  Just a quick take on LSAs and the level of consolidation.  Again, you know, it is a broad economic view of the situation and what we were trying to impart is the difficulty of competing in smaller markets where ‑‑

LISTNUM 1 \l 1458     THE CHAIRPERSON:  Excuse me, Mr. Merson, this isn't so much of that as it is on the definition of the radio advertising market as being a separate market from other media.

LISTNUM 1 \l 1459     As I say, the Commission, in its request typically when there is a new application, we ask where the impact is going to be and we include print and television and other media.  That has been our practice.

LISTNUM 1 \l 1460     In these other jurisdictions, the Competition Bureau is pointing out they don't look at it that way.  They basically take radio advertising as the sole market ‑‑

LISTNUM 1 \l 1461     MR. MERSON:  Yes.

LISTNUM 1 \l 1462     THE CHAIRPERSON:  ‑‑ for purposes of doing competition law analysis and it was only to note that point because I think not so much perhaps with us as going forward you are probably going to be confronted by that same point again.

LISTNUM 1 \l 1463     MR. MERSON:  Well advised, thank you.

LISTNUM 1 \l 1464     THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 1465     MR. O'FARRELL : Mr. Grierson, I think that you have some comment to add.

LISTNUM 1 \l 1466     MR. GRIERSON:  Yes.  Frankly, if so