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Providing Content in Canada's Official Languages

Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.

 

 

 

 

 

 

 

              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 OVER-THE-AIR TV POLICY /

EXAMEN DE CERTAINS ASPECTS DU CADRE RÉGLEMENTAIRE

DE LA TÉLÉVISION EN DIRECT

 

 

 

 

 

 

 

 

 

 

 

HELD AT:                              TENUE À:

 

Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

Portage IV                            Portage IV

140 Promenade du Portage              140, promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)

 

November 30, 2006                     Le 30 novembre 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 OVER-THE-AIR TV POLICY /

     EXAMEN DE CERTAINS ASPECTS DU CADRE RÉGLEMENTAIRE

                 DE LA TÉLÉVISION EN DIRECT

 

 

 

 

BEFORE / DEVANT:

 

Michel Arpin                      Chairperson / Président

Rita Cugini                       Commissioner / Conseillère

Richard French                    Commissioner / Conseiller

Elizabeth Duncan                  Commissioner / Conseillère

Ronald Williams                   Commissioner / Conseiller

 

 

ALSO PRESENT / AUSSI PRÉSENTS:

 

Chantal Boulet                    Secretary / Secrétaire

John Keogh                        Legal Counsel /

Valérie Lagacé                    Conseillers juridiques

Shelley Cruise

Peter Foster                      Hearing Manager /

Gérant de l'audience

 

 

 

 

 

HELD AT:                          TENUE À:

 

Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

Portage IV                        Portage IV

140 Promenade du Portage          140, promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)

 

November 30, 2006                 Le 30 novembre 2006

 


           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

PRESENTATION BY / PRÉSENTATION PAR:

 

Shaw Communications                              1089 / 5956

 

Bell Canada                                      1141 / 6261

 

Cogeco Inc.                                      1228 / 6805

 

British Columbia Institute of Technology         1277 / 7026

 

Fédération nationale des communications          1306 / 7211

 

Société des autres et compositeurs dramatiques   1339 / 7417

  et de la Société civile des autres multimédia

 

Shaw Rocket Fund                                 1365 / 7565

 

 

 

 


                 Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon resuming on Thursday, November 30, 2006

    at 0830 / L'audience reprend le jeudi

    30 novembre 2006 à 0830

LISTNUM 1 \l 1 \s 59485948             THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.

LISTNUM 1 \l 15949             Madame la Secrétaire.  Mrs. Secretary.

LISTNUM 1 \l 15950             LA SECRÉTAIRE : Merci, Monsieur le Président.

LISTNUM 1 \l 15951             Avant de débuter, j'aimerais rappeler aux participants que l'interprétation gestuelle est disponible durant cette audience, et si vous voulez bénéficier de cette interprétation, s'il vous plaît m'en faire part.

LISTNUM 1 \l 15952             Also, for the information of the participants in these proceedings, we would like to indicate that we do have some additional information that was added to the public record since the commencement of this hearing.  Copies are available in the examination room.


LISTNUM 1 \l 15953             In addition, we have ‑‑ nous avons une étude sur la production indépendante, mentionnée dans le mémoire du Conseil provincial du secteur des communications du Syndicat de la fonction publique, qui est le commentaire numéro 42.  Cette étude était mentionnée dans leurs commentaires.  Elle a été déposée au dossier public.

LISTNUM 1 \l 15954             We are now ready to proceed with the next presentation this morning of Shaw Communications Inc.  Mr. Jim Shaw will introduce his panel, after which you will have 15 minutes for your presentation.

LISTNUM 1 \l 15955             Mr. Shaw.

PRESENTATION / PRÉSENTATION

LISTNUM 1 \l 15956             MR. SHAW:  Thank you and good morning.  I apologize, I am getting a bit of a cold, so I won't be speaking too loud and hopefully everybody can hear.

LISTNUM 1 \l 15957             It is a pleasure to have with me today Michael D'Avella; our President Peter Bissonnette; the guy we call Ken "Steinovich" ‑‑ it is really Ken Stein but we nickname him and I am sure he is familiar to all of you here.  We have our trusted advisor and long‑term member of CRTC panels, Chris Johnston, with us; Cynthia Rathwell; and Mike Ferras today.

LISTNUM 1 \l 15958             So with that I think you will be pleased to know that our presentation will be quite brief, as was our ad in the paper.

LISTNUM 1 \l 15959             We are Canada's largest video ‑‑


LISTNUM 1 \l 15960             THE CHAIRPERSON:  You are just giving me an opportunity because I was looking for one and I have one.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 15961             MR. SHAW:  I thought I had 15 minutes.

LISTNUM 1 \l 15962             THE CHAIRPERSON:  I have nothing against your ad and I was told that CanWest Global and BGM are very pleased that you took that much lineage in their newspapers.  So I am sure they appreciate the intent.

LISTNUM 1 \l 15963             MR. SHAW:  Yes.  I understand ‑‑

LISTNUM 1 \l 15964             THE CHAIRPERSON:  It was also followed by emails that my colleagues and I have received and numerous other members of Parliament have also received.

LISTNUM 1 \l 15965             MR. SHAW:  Right.


LISTNUM 1 \l 15966             THE CHAIRPERSON:  But on behalf of my colleague Mr. French and myself, I want to say that we are pleased to see that your employees are not concerned about losing their job but they are concerned about accountability, they are concerned about ‑‑ let me read it through ‑‑ the core values of your company, which is accountable, balance, customer focus, integrity, loyalty, positive, can‑do attitude and team player.

LISTNUM 1 \l 15967             MR. SHAW:  Right.

LISTNUM 1 \l 15968             THE CHAIRPERSON:  Personally, I have received over 100 of them, mostly, mostly from your own employees, not from the general public.

LISTNUM 1 \l 15969             For the record, I want to let you know that we will not take them into consideration because the time to file comments was September the 27th ‑‑

LISTNUM 1 \l 15970             MR. SHAW:  Okay.

LISTNUM 1 \l 15971             THE CHAIRPERSON:  ‑‑ and it was known at that time that the broadcasters were to seek fee for carriage.  We understand that you are quite upset by the idea of the broadcasters.  That is why we are having this forum.

LISTNUM 1 \l 15972             MR. SHAW:  Right.

LISTNUM 1 \l 15973             THE CHAIRPERSON:  But I don't think the way the whole matter has been handled so far was the correct way.

LISTNUM 1 \l 15974             MR. SHAW:  I would just like to say back that it is our view and our intention and has been for quite a while to allow Canadians to have a view.  I get calls from customers every day asking me to keep them informed and involved.  Now whether we did that in a right form or we did it in the wrong form ‑‑


LISTNUM 1 \l 15975             THE CHAIRPERSON:  Well the thing is that wait for the decision.  Obviously, if the decision was to be the one that you are asking us to make, i.e. authorizing fee for carriage, then I could understand the campaign.  But so far it was not warranted.  So you have in face of you members, particularly myself, who is not very happy about this campaign.

LISTNUM 1 \l 15976             MR. SHAW:  Okay.  Should I continue?

LISTNUM 1 \l 15977             THE CHAIRPERSON:  Yes, you could.

LISTNUM 1 \l 15978             MR. SHAW:  Okay.

LISTNUM 1 \l 15979             We are Canada's largest video provider, servicing over 3.1 million Canadian customers and we are here today to speak to you on behalf of those customers.

LISTNUM 1 \l 15980             We would also like to present our views on the future of the broadcasting system.

LISTNUM 1 \l 15981             Contrary to what a lot of you have heard over the past few days, we think the future is incredibly bright for broadcasters, distributors and consumers.

LISTNUM 1 \l 15982             We operate in a highly competitive environment driven by the demands of our customers.


LISTNUM 1 \l 15983             Over the past five years we have invested over $4 billion in expanding capacity, in introducing services in our cable and satellite businesses.  We have also made a tremendous investment in customers, servicing, providing 24/7, 365, same day, next day.  This is what we do to remain competitive, innovative and leaders in our business.

LISTNUM 1 \l 15984             We have virtually no regulatory protection, lots of competitors and a growing black market satellite problem.  We have to compete every day to keep the customer.

LISTNUM 1 \l 15985             The industry does not need new layers of regulatory protection.  Instead, we should use our strengths, work together and conquer all challenges of the digital world.  We can do this by innovating and putting the customer first.

LISTNUM 1 \l 15986             As we face more competition, the answer will not be to increase prices without increasing value.  If we do, we will lose the loyalty of our customers and everyone will suffer.

LISTNUM 1 \l 15987             Rogers and others have discussed the harm of the entire system that will result from a fee for carriage and we strongly agree with their submission and their positions but today we are here to talk about problems and we are here to talk about solutions.


LISTNUM 1 \l 15988             MR. BISSONNETTE:  One of the most important elements of our vision of a bright future is a strong analog basic cable service.

LISTNUM 1 \l 15989             Local broadcasters will always be part of this service.  The fact is that 70 percent of our customers take only analog services.  That is why we believe that a strong analog offering is not only good public policy but great for consumers and good for business.

LISTNUM 1 \l 15990             We believe that a strong analog service is a competitive advantage to the system in a world where customers want the best programming on two, three, four or even five outlets in the home without having to buy a digital box.

LISTNUM 1 \l 15991             But make no mistake, we are committed to developing a strong digital platform as well.

LISTNUM 1 \l 15992             We are always adding new digital services, especially high definition television, and we recently made the move to simulcast, all analog services in digital, so that we could offer our customers a low cost digital box.  In addition, we have also invested over $2 billion in Star Choice, our all digital service.

LISTNUM 1 \l 15993             And the strength of our digital and analog offerings are strengths for the system and for broadcasters.


LISTNUM 1 \l 15994             Broadcasters rely on cable and satellite to provide stronger, interference‑free, reliable signals throughout their coverage areas.  In fact, along with the priority carriage and simultaneous substitution, broadcasters rely on cable to deliver 90 percent of their audiences.

LISTNUM 1 \l 15995             We are committed to ensuring that all conventional broadcasters receive priority carriage as part of our basic service.  Broadcasters will continue to have tremendous opportunities to generate billions of dollars in advertising revenue to support their businesses.  We think this is being and will continue to be an extremely fair bargain for broadcasters, consumers and BDUs.

LISTNUM 1 \l 15996             Broadcasters have the largest audiences and continue to take the lion's share of all TV advertising.  They are the largest best‑known destination for the most popular Canadian and U.S. programming.  Conventional TV is still the most watched service and its revenues continue to grow.

LISTNUM 1 \l 15997             We further support strengthening the system by giving broadcasters even more market‑based opportunities to generate revenue.  We suggest full advertising flexibility, including removing the 12‑minute advertising limit and allowing promotions, sponsorship and product placement.


LISTNUM 1 \l 15998             MR. D'AVELLA:  We would also like to discuss time‑shifting in some detail because it has been raised as problem when in reality it is one of the great strengths of the system and one that supports the ability of broadcasters to generate advertising revenue.

LISTNUM 1 \l 15999             Time‑shifting preserves advertising, unlike, for example, PVRs, it increases windows available for Canadian programming, it encourages Canadians to adopt digital technologies, and it keeps our broadcasting system competitive with unregulated options by offering more choice and flexibility to viewers.

LISTNUM 1 \l 16000             Broadcasters, predominantly large national companies, should find ways to monetize the value of time‑shifting instead of trying to eliminate or reduce choices for consumers.

LISTNUM 1 \l 16001             Large‑market broadcasters such as CanWest and CTV call for DTH to distribute all local stations to preserve broadcasters' existing advertising models.


LISTNUM 1 \l 16002             Star Choice already carries nine CanWest stations and 10 CTV stations in standard definition.  We foot the entire bill for their distribution on costly and scarce national satellite transponders.  In the future we are going to need capacity for HDTV services to sustain our competitive position and give our customers greater value.

LISTNUM 1 \l 16003             We also currently carry 13 small‑market broadcasters on Star Choice.  Six of these broadcasters are owned by the Pattison Group, Newcap and Standard Broadcasting.  They are affiliates of the large national networks and broadcasters.

LISTNUM 1 \l 16004             From a Star Choice customer perspective, they add little value outside of their local communities.  Mandated carriage of even more of these services is unnecessary.  For Star Choice, it is untenable.

LISTNUM 1 \l 16005             We cannot and the system cannot afford to waste scarce and expensive resources on the distribution of stations that add little value.  By the broadcasters' own admission, these stations are highly duplicative and offer a limited amount of unique local programming.


LISTNUM 1 \l 16006             The CRTC has identified omnibus channels as a way to make efficient use of capacity.  However, there appears to be little willingness on the part of broadcasters to explore this practical solution.  Giving them more regulatory protection will only reinforce that unwillingness.  We need a strong signal from the Commission or means to make omnibus channels more achievable.

LISTNUM 1 \l 16007             We also think that small markets provide excellent opportunities.  Shaw has over 100 cable systems with less than 6,000 subscribers.  We recently purchased some small cable systems in Whistler, Grand Forks and Kenora.

LISTNUM 1 \l 16008             These markets represent challenges but we have found ways to bring new digital services, high‑speed internet and soon even digital phone to some of these small communities.  Serving small markets takes work, investment and innovation but it can be done.

LISTNUM 1 \l 16009             MR. STEIN:  As business people we prefer market‑based solutions.  We don't like being told what to do and we don't want to tell broadcasters what to do.

LISTNUM 1 \l 16010             With respect to the question of whether broadcasters should be required to provide an over‑the‑air digital or HD signal, that is their business decision to make.  Shaw is committed to distributing the broadcasters' over‑the‑air digital services on basic, no matter how they deliver the signal to our headend, provided there is no fee for carriage.


LISTNUM 1 \l 16011             We would like to work with broadcasters to ensure a smooth transition to digital.  HD provides broadcasters a fantastic new opportunity to strengthen their service and to counter the attraction of web‑based services.

LISTNUM 1 \l 16012             Yes, it will cost money to implement high definition but that is the cost of doing business.  Our cost to facilitate distribution in the next five to 10 years will be in the billions for Star Choice and for our cable systems as we acquire and operate transponders and expand cable capacity.

LISTNUM 1 \l 16013             We encourage broadcasters to make the investments they need to make.  Improving high definition content will be one of the ways that we will retain and even repatriate customers.

LISTNUM 1 \l 16014             We also need a regulatory framework that puts the consumer first.  This means replacing complex and inflexible rules with a simple rule requiring BDUs to distribute a majority of Canadian services.  This will ensure Canadian programming choices exist so that people are always able to buy Canadian.


LISTNUM 1 \l 16015             Collectively, the regulator, broadcasters and distributors will need to foster innovation, provide greater choice and ensure continued viewer loyalty to the Canadian broadcasting system.  This is the only way to succeed in a digital world.

LISTNUM 1 \l 16016             MR. SHAW:  Throughout the history of the Canadian broadcasting system, which you all know very well, we face many challenges.  The current situation is no different.  Thankfully, broadcasters and distributors are both strong.

LISTNUM 1 \l 16017             The CRTC should be wary of making important decisions based on only anticipated trends and consumer surveys and the cyclical problems of some broadcasters' business plans.

LISTNUM 1 \l 16018             We have presented a number of proposals here today that we think will provide a solid framework for the future.  A strong analog service guarantees priority carriage for over‑the‑air broadcasters; provides broadcasters with full advertising flexibility, including product placement promotion and sponsorship opportunities; supports the benefits of time shifting through commercially negotiated arrangements; continues measures to support small system markets; looks at the Commission to see what they could do to remove the regulatory burden that is now placed on broadcasters, whether that is reporting on ‑‑ whether you have, what do you call it?

LISTNUM 1 \l 16019             MR. STEIN:  Capacity.


LISTNUM 1 \l 16020             MR. SHAW:  Capacity.  We had capacity but logs and stuff like that.  Is there a way that the Commission could make the load lighter rather than just look to the consumer?

LISTNUM 1 \l 16021             I'm sure there is somebody there that does that report that wouldn't be that happy with that idea.

LISTNUM 1 \l 16022             Collaboration between distributors and broadcasters to ensure an effective market and transition to digital, but only on the basis that the distributor will provide, and we will take up and do whatever we want with the signal, and they can provide it in any form.

LISTNUM 1 \l 16023             So if they want to stay analog, we are fine with analog; if they want to go to digital, we are fine with digital.  If they want to work on HD, let's work on a business plan for HD.

LISTNUM 1 \l 16024             So we are very flexible there and we think that gives the ability for Canadians to have a maximum level of choice from the system today.

LISTNUM 1 \l 16025             One last comment.  We love the TV business.  As you know, Shaw was just able to purchase CJBN‑TV Kenora, Canada's newest superstation.


LISTNUM 1 \l 16026             Other small market stations are for sale, or maybe a network.  We would ask them to please give us a call because we like the small markets.  Serving over a hundred small markets now, we think that we have come up with a good plan to do it and we don't understand why they can't.

LISTNUM 1 \l 16027             With that, that ends my comments here today.  Thank you very much.

LISTNUM 1 \l 16028             THE CHAIRPERSON:  Thank you, Mr. Shaw.

LISTNUM 1 \l 16029             I will ask Commissioner Williams.

LISTNUM 1 \l 16030             COMMISSIONER WILLIAMS:  Good morning, Mr. Shaw, gentlemen, Ms Rathwell.

LISTNUM 1 \l 16031             That's probably a good place to start, Mr. Shaw, with small market stations.

LISTNUM 1 \l 16032             You state in your submission that you do not support regulatory protections for large broadcast ownership groups with small market stations.  You just said you would have some innovative solutions to challenges within the small market television industry.

LISTNUM 1 \l 16033             What measures do you consider would be appropriate to ensure these stations continue to fulfil their local programming obligations?

LISTNUM 1 \l 16034             MR. STEIN:  I will start and I'm sure others will have some comments.


LISTNUM 1 \l 16035             We think that measures that we have put in place, as described by the small broadcasters ‑‑ I think they described it as a home run.  We think that those measures are appropriate in terms of providing support in those areas.

LISTNUM 1 \l 16036             So I think where we have a concern primarily is when we get into excessive duplication.

LISTNUM 1 \l 16037             We think that the small broadcasters can make their own decisions, make their own investments in terms of serving the particular community.  They may have in those areas substantive over‑the‑air audience, which is fine and appropriate, and where we deliver them we will make them available as part of the basic service on cable.  And where we deliver them via satellite and they are linked up, then they will be made available.

LISTNUM 1 \l 16038             One of the options we would really like to explore much more is the omnibus channel because there is just excessive duplication.  Looking at the omnibus channel and creative ways of advertising to support them I think would be appropriate.

LISTNUM 1 \l 16039             So far we haven't received a very positive response in that front, but that is what we would like to explore.

LISTNUM 1 \l 16040             COMMISSIONER WILLIAMS:  Describe your omnibus channel proposal, please.


LISTNUM 1 \l 16041             MR. STEIN:  Cynthia, do you want to take that?

LISTNUM 1 \l 16042             MS RATHWELL:  Thank you.

LISTNUM 1 \l 16043             Our omnibus channel proposal would be that we would take local programming from each of the small market signals and compile it on one channel, much as the Commission envisioned in its decision regarding partial and omnibus channels that was issued to Bell ExpressVu.

LISTNUM 1 \l 16044             Ideally, we would like to negotiate those kinds of channels with broadcasters.  Unfortunately, to date, we haven't sensed a great willingness on their behalf to afford any consent that would be necessary to arrive at those channels.

LISTNUM 1 \l 16045             We would be appreciative of any Commission support.  We know that in the decision that was rendered on this already the Commission signified that it viewed it as an efficient and perhaps very good solution to the problem of duplication.  And that is the kind of thing we would like as well.


LISTNUM 1 \l 16046             COMMISSIONER WILLIAMS:  The broadcasters have recommended that all of their stations that originate programming should be carried on satellite in their entirety.  The distribution of just their original programming would not be adequate, in their view.

LISTNUM 1 \l 16047             How much does it cost per year to distribute a typical local station by satellite in high definition across its market?  And if you could include costs like the uplink costs, the transponder costs, receiver costs, just give us an idea of how much money is involved in this type of distribution.

LISTNUM 1 \l 16048             MR. D'AVELLA:  I will start, Commissioner Williams.  Thank you for your question.

LISTNUM 1 \l 16049             Right now I think we distribute about 73, including three HD broadcast television stations, on Star Choice.  They occupy, I believe, about ten transponders.

LISTNUM 1 \l 16050             If we were to do all of them ‑‑ I think there are 124; that's the number we have heard in this hearing ‑‑ it would obviously require another anywhere from seven to eight transponders.  And bear in mind that that is essentially standard definition.

LISTNUM 1 \l 16051             So when we move to HD, the greatest efficiency that we have been able to achieve on a transponder is essentially three per transponder, and the standard definition world is anywhere from eight to ten, depending on the content.


LISTNUM 1 \l 16052             So there simply isn't enough capacity.  We don't have enough transponders.  We don't own the satellite.  We lease capacity from Telesat.

LISTNUM 1 \l 16053             Right now I think, Peter, we probably have one and a half transponders available probably for HD services.  That is all incremental cost to us.  They pay absolutely none of the costs associated with backhaul.  They don't pay any of the transponder costs.  It is all costs to Star Choice.

LISTNUM 1 \l 16054             MR. BISSONNETTE:  And the reality also is whereas on the cable side we have the opportunity to continue to expand through upgrading and resizing our networks to provide for more services, with satellites, after the one and a half transponders are used up, there is no more capacity.  The next capacity that will be available to us will be when there is a new satellite that is launched by Telesat.

LISTNUM 1 \l 16055             So we are continually looking at more creative ways of adding services that our customers really want, utilizing the capacity that we currently have in a more effective way ‑‑ and that's why omnibus really appeals to us; looking at different technological approaches to multiplexing, if you will, on transponders.  We looking at 8‑QSB or 8‑PSK types of multiplexing to even use our existing transponders more effectively.


LISTNUM 1 \l 16056             So it is a continuous challenge.  We just could not accommodate those additional local channels.

LISTNUM 1 \l 16057             We don't think that by providing those services that we really add more value to the system and to our customers, other than those that might be specifically in a discrete location within that community.

LISTNUM 1 \l 16058             MR. SHAW:  I guess, Peter, it would be fair to say that we think that each transponder is about $20 million.  So every time you add one to us, that is roughly our cost.

LISTNUM 1 \l 16059             You know, even right now, if we take TVA, we have nine channels up.  Right?

LISTNUM 1 \l 16060             MR. BISSONNETTE:  Yes.

LISTNUM 1 \l 16061             MR. SHAW:  They are almost all duplicated and all for the Quebec region, which is only a certain part of Canada.  We are glad to do that, but the duplication is so heavy.  And you go and every channel has the same thing on.  It just uses up all our space and we don't have any ability to offset that at all.  So that is our issue.

LISTNUM 1 \l 16062             We are trying to be more efficient.  We are not saying we won't show CBC.  You might not get CBC Moose Jaw; you might get Regina or you might get Winnipeg.  Maybe we could go by region and get a few.


LISTNUM 1 \l 16063             But the load is really heavy on this duplication.  Every channel is the same except for the local news.

LISTNUM 1 \l 16064             What we were hoping is to just make a channel and we will put all the local news on it.  We will just copy them all and put them all on, because that's Canadian programming.  Then you can just tune to the channel and you can watch ‑‑ you know, we will do it by time zone and you can watch Toronto, then you can watch this.  All the other programming is identical.  You just take the network feed and move ahead.

LISTNUM 1 \l 16065             For us, it really just reduces our cost; maybe allows the ability for us to be a little more creative and do a few more things on a go forward basis.

LISTNUM 1 \l 16066             COMMISSIONER WILLIAMS:  Thank you for your answers, gentlemen.

LISTNUM 1 \l 16067             In your written submission you propose a regulatory model that calls for replacement of the existing distribution framework with the simple preponderance rule:  one basic requirement that distributors offer predominance of Canadian services to customers.


LISTNUM 1 \l 16068             Could you please elaborate on this concept.  Are you proposing that a predominance of Canadian services would have to be offered but that subscribers could choose any combination of services they wanted, including one that might not include any Canadian services at all?

LISTNUM 1 \l 16069             MR. STEIN:  Yes.  What we are basically proposing is that we would have a basic ‑‑ whether it is analog or digital, there would be a basic package which would have all the priority carriage services: the CBCs, the local services.  So that would be fundamentally a package that would be predominantly Canadian, quite frankly.

LISTNUM 1 \l 16070             Added to that we would also put on that basic package some of the channels that might currently be on tiers or on digital that we think would be particularly relevant to a good portion of the market.

LISTNUM 1 \l 16071             We still believe very strongly in the analog market.  So we would like to make sure that the basic package is strong.  That service for every consumer would be predominantly Canadian.

LISTNUM 1 \l 16072             In terms of packages, we do believe that people should be able to pick from the other services.  They should be free to pick what services they wish, whether they are Canadian or international.


LISTNUM 1 \l 16073             We would think that on an overall basis, even if they picked a U.S. or foreign package ‑‑ and we would include in that things like Rye and BBC World.  It is not limited to the U.S. services.

LISTNUM 1 \l 16074             But if they pick that, we still think that the overall package they would take would still be predominantly Canadian.  But we would not require them to buy a strictly Canadian package.

LISTNUM 1 \l 16075             COMMISSIONER WILLIAMS:  The first package that you described with the local signals and the Canadian services, and I imagine the 91H services, have you given any thought to what price point that would be offered at?

LISTNUM 1 \l 16076             MR. STEIN:  Price point?  The price point it would be offered at would be very similar to the price point we would offer it at now.  We wouldn't see that shifting or changing.

LISTNUM 1 \l 16077             COMMISSIONER WILLIAMS:  There would be no reductions or increases?

LISTNUM 1 \l 16078             MR. STEIN:  No.  It's popular now.  We have been able to maintain our basic cable subscribers with that set of services by increasing value in that package and continuing to invest in the system.


LISTNUM 1 \l 16079             MR. SHAW:  And we always have the market forces coming in to monitor us.  As you know, satellite guys do different things.  The black market guys come in and do different things.

LISTNUM 1 \l 16080             Our ability to continue to raise the rate is always a big subject at our firm when we go and say gee, we have 3,000 trucks right now.  Well, when gas goes up three bucks or it goes up a buck, this is a big deal for us.  Then of course everybody wouldn't mind getting the odd little wage increase, and stuff like that.  So we have a lot of imbedded costs.

LISTNUM 1 \l 16081             We have 9,000 employees now and we are just trying to manage it.  So there is a lot of that in there, Ken.

LISTNUM 1 \l 16082             We also have to be cognizant of the market.

LISTNUM 1 \l 16083             Peter, are we charging ‑‑ is it around 50 bucks?  I can't remember, 40 bucks.

LISTNUM 1 \l 16084             MR. BISSONNETTE:  The average is around $50, but that includes more services than just our basic services.  Our basic services are priced at $23, $24.

LISTNUM 1 \l 16085             MR. SHAW:  I'm talking about the seventy.

LISTNUM 1 \l 16086             MR. BISSONNETTE:  Yes.  So it is in that $49 for 70 channels.


LISTNUM 1 \l 16087             There is good value in there.  The fact that 70 percent of our customers are quite happy to take an analog‑only service, bundled in some cases with our Internet or telephone services, really reflects the kind of value that they see in those services.

LISTNUM 1 \l 16088             COMMISSIONER WILLIAMS:  Thank you.

 

LISTNUM 1 \l 16089             In your written submission, you state that Shaw believes the market, rather than regulatory mechanisms, is the most effective way of ensuring the production ‑‑

LISTNUM 1 \l 16090             This is in the area of Canadian programming.

"...ensuring the production, presentation and the amount of popular Canadian programming, but that the current reality is that the Canadian Television Fund is the major determinant of what Canadian programs are produced."

LISTNUM 1 \l 16091             If marketing is the most effective way of ensuring the protection of Canadian programming, why is there a need for the CTF?  Why does the CTF exist?


LISTNUM 1 \l 16092             MR. SHAW:  Don't everybody reach at once!

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16093             MR. SHAW:  Our view of the CTF is that it is not a very effective organization, that it is basically ‑‑

LISTNUM 1 \l 16094             What do you call it on the farm when you have a big thing and everybody goes and eats there?

‑‑‑ Pause

LISTNUM 1 \l 16095             MR. SHAW:  Okay.  I won't call it that.

LISTNUM 1 \l 16096             I think that when we look at it, it has shown that it hasn't been that effective, even though our company this year will pay $56 million ‑‑ this year alone ‑‑ and, yet, they are having a hard time figuring out how to get us ‑‑ our satellite guys can't get a Board seat to help make a decision.

LISTNUM 1 \l 16097             It is really ineffective.  When you have 25 Board members, you can't run anything effectively, I wouldn't care what it was.

LISTNUM 1 \l 16098             I think that, when you look at it, it is another thing that needs to be revamped.  It might be more of an overall government issue, but, certainly, when the CBC is allowed to go in and take, automatically, 37 percent ‑‑ what for?


LISTNUM 1 \l 16099             Why is that?  Why is that not a decision?

LISTNUM 1 \l 16100             Do I get an automatic right to go there?  I don't.

LISTNUM 1 \l 16101             I get an automatic right to do what?  I get an automatic right to pay.

LISTNUM 1 \l 16102             The only thing they ever call us about ‑‑ and they have never called me.  They call Peter, I guess.  I said to them:  We are the largest payer in there, and yet the chairman has never even bothered to phone me once since its inception, about anything.  "What do you think?"  "How is it doing, Jim?"  "Do you have any opinions?"  "Are we doing a good job; not doing a good job?"

‑‑‑ Laughter /  Rires

LISTNUM 1 \l 16103             MR. SHAW:  I get judged quarter‑over‑quarter at Shaw Communications, and I can tell you that some quarters ain't that great and I get in trouble.

LISTNUM 1 \l 16104             What is the process, and what do they do with it?

LISTNUM 1 \l 16105             We are not here recommending solutions, but we do see it as not as helpful as everyone would think.


LISTNUM 1 \l 16106             COMMISSIONER WILLIAMS:  As you know, Mr. Shaw, the CRTC has no involvement in how the Canadian Television Fund operates, but we do play a significant role in its funding.

LISTNUM 1 \l 16107             Could you explain why the way the CTF is funded should be re‑examined?  And what changes would you propose?

LISTNUM 1 \l 16108             How can we fix this organization that, in your opinion, isn't as effective as it could be?

LISTNUM 1 \l 16109             MR. STEIN:  This started with the cable industry's proposals in the early nineties, because it was felt that there was a recognition, as we developed new programming services, that we would need to invest not only in the capital expenditures that we would have to make, in terms of our distribution systems, but that we would have to make investments in the development of content.

LISTNUM 1 \l 16110             The original idea was that this would be an investment in the development of Canadian programming.


LISTNUM 1 \l 16111             Our concern, over the past number of years, has been that it is not really looked at as an investment vehicle, but much more as a vehicle to take care of special interests, and to be able to allocate funding on an ‑‑ I hate to say it ‑‑ envelope basis ‑‑ the CBC is entitled to so much ‑‑ and that winning programming, like children's programming, for example, has actually been on the decline.

LISTNUM 1 \l 16112             As well, since 1999, when the expenditure requirements were changed, it is obvious that there has been a flat line in terms of Canadian programming investment.

LISTNUM 1 \l 16113             We feel that the original intent of the fund, which was to invest in Canadian programming, to make it worldwide competitive, to put it on a sustainable basis, has clearly been an abject failure.

LISTNUM 1 \l 16114             Our changes would be:  to run it more as a fund; to run it as an investment vehicle.

LISTNUM 1 \l 16115             That is what the world's broadcasting is all about.  It is a very competitive environment for distributors and broadcasters, and we think that investment in programming should be treated the same way.

LISTNUM 1 \l 16116             We think that, in any industry you look at, the fact that it has to be competitive, that it has to exist without subsidies, that always strengthens the industry.


LISTNUM 1 \l 16117             A perfect example is western Canada's transportation system.  We used to have lots of subsidies, and the subsidies, under a variety of governments, were eliminated, which led to a tremendous strengthening of the transportation industry, and tremendous benefits for the economy of western Canada.

LISTNUM 1 \l 16118             I think the example holds:  that excessive regulation, excessive attention to allocating on an entitlement basis, is not the way to develop an industry.

LISTNUM 1 \l 16119             That is our view.

LISTNUM 1 \l 16120             COMMISSIONER WILLIAMS:  Thank you, Mr. Stein.

LISTNUM 1 \l 16121             In the area of time shifting to Fee for Carriage, in your written submission you state that the provision of time‑shifted signals is beneficial to Canadian consumers, and the Canadian broadcasting system generally, as it increases the windows for viewing Canadian programming, it encourages Canadians to adopt digital technologies, and it encourages consumers to remain within the broadcasting system, rather than choosing non‑regulated options.

LISTNUM 1 \l 16122             The time shifting of Canadian over‑the‑air stations has been a significant selling point for DTH operations, such as the one you have, in attracting subscribers to the service.


LISTNUM 1 \l 16123             Why should over‑the‑air licensees be able to negotiate with DTH for the use of their distant signals?

LISTNUM 1 \l 16124             There was a proposal put forward that they would like the ability to withdraw their consent for carriage to help the negotiating process go along.

LISTNUM 1 \l 16125             Could I have your comments on that, please?

LISTNUM 1 \l 16126             MR. STEIN:  First of all, the reason time shifting developed was because people demanded that we carry their signals.  So the whole basis, as it evolved, on DTH was this magical development, where we started putting these signals up, and people started saying:  Wow!  This is terrific.  I can watch this show at this time.

LISTNUM 1 \l 16127             I noticed in one of the surveys, though, that one of the advantages people saw in time shifting was watching sports earlier.  I guess you could watch your hockey game an hour earlier ‑‑ before it started.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16128             MR. STEINS:  You could get the result early, too.


LISTNUM 1 \l 16129             Consumers like it.  Its advantages are there for people now, and it is a double advantage.  One is that signals get lifted up and they get carried, and they are on the satellite; and, aside from the excessive duplication, the fact that people can choose when to watch it is advantageous.

LISTNUM 1 \l 16130             I think the surprise to us was when a broadcaster said that it wasn't of value to them, the fact that people had increased windows to watch their programs.  We thought that that was a tremendous value.

LISTNUM 1 \l 16131             In any event, we were willing to negotiate with them, and we did come to a negotiation ‑‑ a commercial negotiation ‑‑ as to the carriage of their signals, and that's the way it is at the moment.

LISTNUM 1 \l 16132             MR. SHAW:  I have to say that one of the main things that we find on time shifting ‑‑ and we recently started it on the cable system, because we were at such a disadvantage to all of the other providers.

LISTNUM 1 \l 16133             I think, Peter, that happened within a month or two.

LISTNUM 1 \l 16134             I think the commercial rate negotiation has gone very well, so I don't think you should be concerned about that.  It is no different from any other signal we have, and any other supplier relationship, and provider relationship.


LISTNUM 1 \l 16135             We have always been able to come to some deal.  You have the dispute mechanism, if that goes the wrong way down the road, and you can get involved, if you guys want, or not.

LISTNUM 1 \l 16136             We think that it is a natural progression.

LISTNUM 1 \l 16137             The one thing that is really hard for us is that Canadians love it.  Other than, when you go through all of the CBC, if you get the wrong time shift and you get a whole bunch of the same programming, they don't like that, but they do like being able to watch ‑‑ I always get these numbers mixed up ‑‑ CFTO, and then Winnipeg, and then you can watch Regina ‑‑

LISTNUM 1 \l 16138             I don't know about you, but I am having a hard time staying up past 10 at night.

LISTNUM 1 \l 16139             I am waiting for the 11 o'clock CTV news in Calgary, and I can barely make it.

LISTNUM 1 \l 16140             And I am not the biggest CBC fan, because that channel seems a bit different to me.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16141             MR. SHAW:  I do like to watch some news, and I can hardly make it.  I am up really early in the morning, but I can't make it ‑‑ midnight is a stretch.


LISTNUM 1 \l 16142             MR. BISSONNETTE:  Jim, let's not forget that five, six or seven years ago, when people thought of satellite, they thought of black market satellite, and they thought of the advantages that black market satellite provided to them, which was time shifting, the ability to look at services at different times of the day, to look at prime time kind of programming.

LISTNUM 1 \l 16143             We have now provided a product where there is no difference, if you will, in terms of the advantages that our customers, who happen to be DTH customers, will experience between the services we provide and those services that the black market might provide.

LISTNUM 1 \l 16144             The one advantage, I guess, is that the black market is free.

LISTNUM 1 \l 16145             But the fact is, in terms of programming, we have a very, very compelling series of programs that are available to our customers.

LISTNUM 1 \l 16146             As Ken said, when we weren't carrying some of the distant signals, we were written to by the broadcasters, saying:  Why aren't you carrying my services?

LISTNUM 1 \l 16147             When we launched high definition television, we were asked:  Why aren't you carrying CFTO?  You have to carry CFTO.


LISTNUM 1 \l 16148             It is a compelling service, and based on the compelling service, we agreed that it would make a nice tuck‑in, if you will, with our other HD services on Star Choice, and now on our cable services.

LISTNUM 1 \l 16149             So the broadcasters have expressed the desire to be carried, and you don't express a desire to do something if it is hurting you.

LISTNUM 1 \l 16150             MR. FERRAS:  I would add, in terms of the negotiation, that I think it is our full expectation, and we are fully committed to having a very good negotiation with the broadcasters.

LISTNUM 1 \l 16151             As you know, we didn't really have that opportunity ‑‑ no one in the industry did ‑‑ because the agreements expired in August of last summer.  Then we went into this policy proceeding, and we hope to take guidance from the Commission and from the record, in terms of policy, go away and meet the broadcasters, and really sit down and work hard and try to come to a solution.

LISTNUM 1 \l 16152             Our perspective is going to be that time shifting is really valuable for the system.  It keeps Canadians plugged into the broadcasting system, to the regulated platform, and that has to be good for everybody.


LISTNUM 1 \l 16153             That is our intention.  We are here to listen and to participate, and we really want to take your guidance and then go and sit down with the broadcasters.

LISTNUM 1 \l 16154             MR. D'AVELLA:  Just one final comment on that subject.  We don't know any broadcaster or programmer who is looking for less carriage.  They all want more carriage.  And they are not homogenous enterprises.  We are dealing with companies, some of which own 33 specialty services.

LISTNUM 1 \l 16155             So they are all interested in:  What is the big deal?  Give me more carriage of this, and a trade‑off for that.

LISTNUM 1 \l 16156             As Michael points out, these are all commercial negotiations that we are quite comfortable entering into, and we are very confident that we can get a deal done.

LISTNUM 1 \l 16157             COMMISSIONER WILLIAMS:  Thank you.

LISTNUM 1 \l 16158             You also state that specialty and pay television services do not transmit free over the air, and, thus, consumers understand and accept the logic of an associated fee.

LISTNUM 1 \l 16159             However, the signals of Canadian television stations are available to customers free over the air.  Canadians will resent and resist being forced to pay for these signals, and many will find alternative sources of programming.


LISTNUM 1 \l 16160             Describe the scenario.  Would subscribers in Winnipeg not accept the logic of a fee associated with the DTH carriage of stations from Vancouver and Halifax, since these stations cannot be received over the air in Manitoba?

LISTNUM 1 \l 16161             I would ask you to elaborate a bit on that answer to describe what you view the customer/subscriber reaction would be to such fees being introduced.

LISTNUM 1 \l 16162             MR. SHAW:  Currently, we use it as a digital promotion, to enhance digital, to expand the capacity across the network.

LISTNUM 1 \l 16163             Basically, most of these ‑‑ Peter ‑‑ are available at no cost.  Right?

LISTNUM 1 \l 16164             That is basically it.  No one is paying for it now.  It is the same way we do it with the music channels.  The Guide you get for free, to try and promote access to digital, which is good for us, but also good for all of the other networks that are on the digital capacity ‑‑ or in the digital category.  And you have seen them go up.

LISTNUM 1 \l 16165             But what happens ‑‑ it is funny, with a subscriber, when you say ‑‑ let's see if I can think of a good example.


LISTNUM 1 \l 16166             If I went to you every day and I said, "You got 5 bucks?" and then I went to the next person and said, "You got 5 bucks?" you would say, "I'm not giving you 5 bucks."

LISTNUM 1 \l 16167             What did I get?

LISTNUM 1 \l 16168             If the answer is nothing ‑‑ and maybe a time shift is good from a consumer point of view ‑‑ the answer is nothing.

LISTNUM 1 \l 16169             The subscriber, I mean they go crazy.  Like you should see the calls I get.  I mean, they would make the e‑mails to the Commission look mild.  I mean, you can't even believe it.

LISTNUM 1 \l 16170             By the time they get to me, it's like full‑out war.  As I say, when we hurt a subscriber, we really hurt him.  We knife him and hurt him and knife him and hurt him.

LISTNUM 1 \l 16171             But when you practically look at it, we have to hang our hat in our group on value and that is why we are so adamant about it that it doesn't provide any value to any Canadian and no one will understand.

LISTNUM 1 \l 16172             The same way if I try to describe to a consumer how simultaneous substitution works, it's just like you might as well have glazed in the globe because no one can figure it out, and no one wants it.  They say, "Why do we have to do it?"  Then I explain the reason why we have to do it.


LISTNUM 1 \l 16173             I guess those are the benefits they have, but right now, even on the simulcast, I don't know if there is a lot of value that you can go and say, "Yes, here, give me a buck or two bucks" and that kind of thing.

LISTNUM 1 \l 16174             COMMISSIONER WILLIAMS:  Thank you.

LISTNUM 1 \l 16175             We will move into the area of transition to digital.

LISTNUM 1 \l 16176             In your written submission you state that:

"Fee for carriage or any other economic reward should not be linked with making the decision to broadcast in digital or offer HD programming.  These are investments that broadcasters will need to incur to operate in a competitive digital world and they should not be subsidized by cable or DTH customers."  (As read)


LISTNUM 1 \l 16177             In Public Notice 1993‑74 announcing its determinations pursuant to the structural public hearing, the Commission considered it reasonable that cable subscribers should bear a portion of the capital costs of implementing digital video compression, DVC, and universal addressability and to allow a portion of DVC and addressability related expenditures to be eligible for the purposes of cable operators, capital expenditure fee increases.

LISTNUM 1 \l 16178             Could it not be argued that programming services should be given the same sort of assistance that cable licensees have received in the past?

LISTNUM 1 \l 16179             MR. SHAW:  Why don't I start, and then we will go ‑‑ I'm sure the boys have a bit of a comment.

LISTNUM 1 \l 16180             You know, when we go ‑‑ and I will just try to remember our capital.

LISTNUM 1 \l 16181             So four years ago it was $850 million; three years ago I'm thinking $460 million ‑‑ Peter, around there?

LISTNUM 1 \l 16182             MR. BISSONNETTE:  Yes.


LISTNUM 1 \l 16183             MR. SHAW:  Yes.  And last year was $530 million, and this year going to $630 million a year.  I mean, we are supporting and a lot of these channels have carried at no cost.  We support all the uplinking, we do all this stuff.  For someone to argue that Jimmy Pattison, who is one of the richest guys in Canada, can't afford to upgrade Kamloops, I just find that ‑‑ like I don't understand.

LISTNUM 1 \l 16184             Some of these guys, they are really successful guys and they are going, "Well, you don't got $10 million or $5 million or something and we are spending hundreds."  We are just trying to keep the well shut.

LISTNUM 1 \l 16185             In cable TV my father always said, it's just a license to spend money.  He said, we are just waiting to the day we get to make some.

LISTNUM 1 \l 16186             So, I mean, we are coming, but there are a lot of requirements on the system and on us for capacity.

LISTNUM 1 \l 16187             You know, we have to put on all the French channels as soon as we hit ‑‑ I don't know, what is it, eight‑something, 750.  We have French channels that they have 40 customers ‑‑ 40, and they are on every network we have?

LISTNUM 1 \l 16188             So the burden on us is a lot to keep all this stuff going.  So for a guy to come and argue that you couldn't afford to go and spend a little bit on your business, I have to say:  You know what, you should maybe get out.  I guess maybe they will phone us to sell.


LISTNUM 1 \l 16189             MR. BISSONNETTE:  Jim, just to put it in context, we have heard numbers bandied around in terms of what it costs to move a transmitter from an analog to digital or to high definition.

LISTNUM 1 \l 16190             Given that there is even sufficient transponder space available, we are looking over the next five to 10 years what Shaw will have to invest, just in our satellite business, to provide high definition television to those broadcasters who will want to have high definition television distribution, and it is in the order of $775 million.

LISTNUM 1 \l 16191             $775 million; that is a lot of $10 a months.

LISTNUM 1 \l 16192             MR. STEIN:  A comment I would like to make on it is that I found it interesting Mr. Brace's comments about the costs for CTV of about $46 million.  They are willing to pay $1.7 billion for CHUM and they don't have $46 million to invest in going to HD?  That would seem to me to be not a very good kind of way to put the number.

LISTNUM 1 \l 16193             I think we are spending $630 million in capital in the coming year, just as Jim says, to keep the well closed.  So these are the investments that one has to make.


LISTNUM 1 \l 16194             In the high technology business, if you are a transmitter, if you are trying to depend on towers that last 20 years, that is just not the way this business is going to develop over the next 10‑15 years.  There are going to be a lot of changes and everybody is going to have to make those kinds of investments, and they are going to have to make those kinds of investments in a competitive marketplace.

LISTNUM 1 \l 16195             So that's the way we see that this has to develop.

LISTNUM 1 \l 16196             COMMISSIONER WILLIAMS:  All right.  Thank you very much, Mr. Shaw and your panel members.  That completes my line of questioning.

LISTNUM 1 \l 16197             Vice‑Chair Arpin...?

LISTNUM 1 \l 16198             THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 16199             Vice‑Chair French...?

LISTNUM 1 \l 16200             COMMISSIONER FRENCH:  I guess this is a question for Mr. Shaw.

LISTNUM 1 \l 16201             There were 17 very small market broadcasters came to see us yesterday or the day before and one of the things they asked us to do was to eliminate the benefits policy for transfers of property where the broadcasting property's revenues were less than $10 million a year.

LISTNUM 1 \l 16202             If we did that, would that stimulate that market?  Would it be the kind of market you might be interested in absorbing?


LISTNUM 1 \l 16203             MR. SHAW:  You know, listen, I think our main point is that we are a large operator of small markets, right, and we have been very successful at deploying and building.

LISTNUM 1 \l 16204             So it's just we don't agree with the argument that you have no money, you can't convert, your system is in dire needs when all you do is local news that looks like community programming, you know, you have two anchors and one truck and four cameramen or something.  I mean, we just don't agree with that argument.

LISTNUM 1 \l 16205             We go and say, "You know what, if you don't like that business, call."

LISTNUM 1 \l 16206             COMMISSIONER FRENCH:  If we remove the benefits policy there would be more sellers and you might be a buyer?

LISTNUM 1 \l 16207             MR. SHAW:  I think all you would see is there might be a little quicker consolidation.  There will be consolidation across every line, no different than you see now with even telephony.  There are only really two large telcos.  Cablecos, there are only really three or four.

LISTNUM 1 \l 16208             You will just see a quicker consolidation where you will have, you know, Hildebrand buying them up or one of these guys, or maybe Shaw.


LISTNUM 1 \l 16209             COMMISSIONER FRENCH:  I don't know if this is for you, Mr. Shaw, or not.  You said there is a growing black market satellite problem.

LISTNUM 1 \l 16210             Do you have evidence and could you share it with us?

LISTNUM 1 \l 16211             MR. SHAW:  Well, I don't know if we have it or not with us, but what we are seeing is a continued response from our customers.  As you know, cable penetration has dropped.  I think Mr. Rogers was here yesterday saying they are down 5 to 8 percent.  I think we are down in that similar kind of range across the board.

LISTNUM 1 \l 16212             What is happening is that when ‑‑ maybe some of you go to Florida, maybe some of you go to California and some go to Arizona, that you have access to all these different channels, and when people come back they want them.  So the only way to get them is to really take them.

LISTNUM 1 \l 16213             Now, some might pay and some might not pay, that's a different issue, but we are seeing greater pressure on us to provide everything everybody wants and then we just have to come up with how we can support the Canadian broadcasting system with that.

LISTNUM 1 \l 16214             But we are seeing a huge demand for I want, I don't know, Comedy Central, or I want, you know, Hokey‑Pokey, HBO or whatever channel.


LISTNUM 1 \l 16215             You know what, people are not as patient as they used to be.  They are asking us all the time for this stuff.

LISTNUM 1 \l 16216             I'm not making a pitch for it, I'm just saying that there is a lot of pressure from general consumers that go "Why do I have to steal?"  I don't have an answer.  I can't offer it.  What do we do?

LISTNUM 1 \l 16217             MR. BISSONNETTE:  And there is evidence.  In the last two weeks ‑‑ and we have worked with our other satellite competitor in this area because it is mutually beneficial to all of us, whether in the cable industry or in the satellite industry, to do something to prevent the growing black market.

LISTNUM 1 \l 16218             In the last two weeks we know that there was a coordinated bust taking place in Ontario where one satellite retailer of black market devices was arrested.  All of his inventory was seized, his records were seized, and his records reflected in the most recent year how many people he has been selling black market devices to.


LISTNUM 1 \l 16219             And we know it's going on.  We see if you just go to the internet and you look under some of the Bluebird/Blackbird types of devices, the number of retailers or the number of private people who are actually selling software to activate those devices continues to grow.

LISTNUM 1 \l 16220             MR. SHAW:  I think if you look in Toronto, if we go to the Yellow Pages and we look under "satellite", I think we counted like 250 guys selling them.  And it won't be any different in Toronto than it is in Calgary or Vancouver or Ottawa or anywhere.

LISTNUM 1 \l 16221             COMMISSIONER FRENCH:  I don't think anyone contests that it exists.  I was just interested ‑‑ I appreciate the anecdotal evidence, but I underline it is anecdotal ‑‑ that it is actually growing.  And you believe it is and you are well‑placed to make that judgment and I appreciate it.

LISTNUM 1 \l 16222             It is very hard always for the Commission, and for broadcasters and for distributors to have concrete data and anything you have of course would be valuable.

LISTNUM 1 \l 16223             But it is your contention or your experience and interpretation of that experience that this is a "growing problem"?


LISTNUM 1 \l 16224             MR. STEIN:  Well, you know, Mr. French, with all respect, over the last number of years we have filed all kinds of evidence about this problem.  We have worked with the Motion Pictures Distributors Association and we have worked with the RCMP, we have done surveys, we have spent hundreds of thousands of dollars with evidence.

LISTNUM 1 \l 16225             The federal government hasn't acted, the Commission says it's not your jurisdiction, so we are left on our own, totally on our own to deal with the problem.

LISTNUM 1 \l 16226             The thing is, Mike can talk about some of the latest kind of events in terms of it growing, it is very hard to get enforcement under the current set of laws.  It is very easy to get access to the system, it is very easy to hack some of the systems that are out there.

LISTNUM 1 \l 16227             We at Shaw have invested in Star Choice in a more expensive technology to make sure it couldn't be hacked, but we can't realize the advantages of that because we are still competing against the black market.

LISTNUM 1 \l 16228             We could do a survey every month to put the evidence on the table, but the evidence we have put on the table in the past hasn't led to action to deal with this problem, as contrary to the kind of actions that have been taken in the United States.

LISTNUM 1 \l 16229             Mike may want to give you some more information about what is happening.


LISTNUM 1 \l 16230             MR. FERRAS:  Just quickly, I agree with everything that has been said, but I guess the point we want to make is just to understand that the problem has changed.  It used to be you would go and take a satellite receiver and you would ship it or you would have a grey address.  That problem, there has been great work done in the industry by our industry partners in the U.S.   As Ken mentioned, we work very closely with the RCMP across the country and Canadian Motion Pictures Distributors Association, DirectTV has fixed their system.

LISTNUM 1 \l 16231             The new problem is the one that Peter talked about, which is the free‑to‑air problem where you can go and buy this box illegally that is meant to pick up satellite signals that are in the clear.  There are still a few of those out there.

LISTNUM 1 \l 16232             But that box could be sold and imported with no problem whatsoever, because until it is modified it is legal.  And it so easy to modify now, you just hook it up to your internet ‑‑ hook your internet into it, bang you get it, and you get all the satellite services from two major providers.


LISTNUM 1 \l 16233             Evidence is always anecdotal.  It is really hard to say, "Well, the problem has gone from this much to this much, but the people that we deal with all the time on this say this is going to be bigger than the old black market problem ever was unless something is done.

LISTNUM 1 \l 16234             COMMISSIONER FRENCH:  I just equally, respectfully to Mr. Stein, it is not the testimony of all the participants in this proceeding that this is a growing problem.  This is the first time we have heard that it is a growing problem.

LISTNUM 1 \l 16235             We realize it is a large problem, a troubling problem, there is an enforcement issue.  Other people have said this problem seems to have levelled off.  I'm just giving you an opportunity to expand on your view that it is growing and I appreciate that you have done that.

LISTNUM 1 \l 16236             Thank you, Mr. Chairman.

LISTNUM 1 \l 16237             THE CHAIRPERSON:  I want to come back to narrow your question that Commissioner Williams asked of Mr. D'Avella and Mr. Bissonnette and it has to do with regard to cost comparison.

LISTNUM 1 \l 16238             What we are really looking for is regarding the cost of a satellite carriage of an analog over‑the‑air signal versus the carriage of a similar over‑the‑air station but with an HD signal.


LISTNUM 1 \l 16239             You referred to the fact that only opening up a new transponder cost $20 million, but we are trying to get some information regarding a more narrow situation of what are the uplink costs of an analog service versus an HD signal transponder cost and receiving cost.

LISTNUM 1 \l 16240             MR. D'AVELLA:  Well, the cost of the transponder doesn't change, it is our ability to put programming on that transponder in a standard definition form ‑‑ in satellite it's all digital ‑‑ we can compress it eight‑to‑one, so we can provide eight programming services on a single transponder.

LISTNUM 1 \l 16241             In the HD world, the current state‑of‑the‑art is two.  we can provide two HD signals on that single transponder.

LISTNUM 1 \l 16242             There are technologies that will allow us to take it to possibly three services on a single transponder, so you could look at it in the sense of it is three times the cost to do HD.

LISTNUM 1 \l 16243             It also costs more money to backhaul, simply because of the fact that this is not a broader service with more information on it.  I mean, we have fibre networks in place that allow us to do this.

LISTNUM 1 \l 16244             In all the HD deals that we have done, whether they are broadcast services or other types of services, we typically pay the cost of backhauling the service to an uplink.  That is the way the market is kind of unfolding here.


‑‑‑ Pause

LISTNUM 1 \l 16245             MR. D'AVELLA:  Peter is asking me a question.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16246             MR. D'AVELLA:  Well, the operating cost on the transponder, I think it is in the order of about $2 million a year on a per‑transponder basis, but that is in addition to the capital we have already committed to buy it.

LISTNUM 1 \l 16247             On the consumer side, on the receiver side, I think the cost of our satellite receivers is typically in that ‑‑ the HD receivers is typically in that $300 to $500 range, depending on whether it has a PBR or not.

LISTNUM 1 \l 16248             THE CHAIRPERSON:  I don't know if you were following the hearing at the beginning of the week, but the cablecos that are involved with the operation of TVA and TQS are supporting a fee for carriage.

LISTNUM 1 \l 16249             Since you are operating Star Choice and you are delivering francophone signals throughout Québec, do you have different views regarding fee for carriage for the Québec market, or the one that you have expressed so far applies also for the French market?


LISTNUM 1 \l 16250             MR. SHAW:  It did make us think it looked a bit self‑serving if you owned both and then you wanted one fee to just go from ‑‑ what's that commercial where they all jump up and they go ‑‑ somebody's got their hand in your pocket, this kind of hand in your pocket, hand in your pocket.  You have seen that commercial.  It did look a little bit like that to us.  We didn't see a lot of benefit out of doing it.

LISTNUM 1 \l 16251             We certainly carry all those markets.  We have a big operation in Montréal and we are supportive of that, but we still feel that there is no subscriber, no Canadian benefit to have that fee in there.

LISTNUM 1 \l 16252             THE CHAIRPERSON:  Mr. Shaw, Mr. Bissonnette, Mr. Stein and the team, I want to thank you on behalf of the Commission.

LISTNUM 1 \l 16253             We will take a 15‑minute break.

LISTNUM 1 \l 16254             MR. SHAW:  Super.  Well, thank you.

LISTNUM 1 \l 16255             We are very positive about the future and the direction you guys are doing.  So thank you very much.

‑‑‑ Upon recessing at 0923 / Suspension à 0923

‑‑‑ Upon resuming at 0952 / Reprise à 0952


LISTNUM 1 \l 16256             THE CHAIRPERSON:  Order, please.  A l'ordre, s'il vous plaît.

LISTNUM 1 \l 16257             Madame la Secrétaire ?

LISTNUM 1 \l 16258             THE SECRETARY: Merci, Monsieur le Président.

LISTNUM 1 \l 16259             We are now ready to proceed with our next presentation of Bell Canada.  Mr. Gary Smith will introduce his colleagues.  After which, you will have 15 minutes for your presentation.

LISTNUM 1 \l 16260             Mr. Smith?

PRESENTATION / PRÉSENTATION

LISTNUM 1 \l 16261             MR SMITH:  Thank you, and good day, Chairperson Arpin, Vice‑Chairperson French and Commissioners.

LISTNUM 1 \l 16262             My name is Gary Smith and I am the President of the Bell Video Group, which comprises Bell ExpressVu, our DTH platform and Bell IPTV, our terrestrial broadcasting distribution undertaking.

LISTNUM 1 \l 16263             Joining me today, on my left, are Chris Frank, Vice‑President of Programming; Barry Kiefl, President of Canadian Media Research; and on my right, David Elder, Vice‑President of Regulatory Law.

LISTNUM 1 \l 16264             Bell appreciates the opportunity to participate in this important review of the regulatory framework for over‑the‑air television.


LISTNUM 1 \l 16265             We will focus today on three key issues:

LISTNUM 1 \l 16266             First, the proposal for a fee‑for‑carriage regime;

LISTNUM 1 \l 16267             Second, the impact of distant signals;

LISTNUM 1 \l 16268             And finally, the transition to over‑the‑air digital and HD transmission.

LISTNUM 1 \l 16269             We will explain to the Commission why we feel that the broadcasters do not have a case for increased funding, and why if would be inappropriate to implement fee‑for‑carriage.

LISTNUM 1 \l 16270             With regard to distant signals, we submit that the problem is not only overstated and dramatised, but also has already been dealt with satisfactorily such that no new provisions are needed.

LISTNUM 1 \l 16271             Finally we will confirm Bell's support for the hybrid distribution models suggested by several broadcasters, and that we are prepared to assume a contributing role in this respect.

LISTNUM 1 \l 16272             Turning first to fee‑for‑carriage, there are compelling reasons to reject such a regime.

LISTNUM 1 \l 16273             First, broadcasters have failed to prove that a problem actually exists.  Indeed, the evidence suggests otherwise.


LISTNUM 1 \l 16274             We have no reason to dispute the broadcasters' claim that growth in advertising spent on conventional channels is slowing, but we would note that these dollars are moving primarily to the specialty channels, where advertising revenues have increased 318 per cent since 1997.

LISTNUM 1 \l 16275             Most, if not all, of the broadcasters seeking fee‑for‑carriage are already benefiting from this shift through their ownership interests in specialty and pay services.

LISTNUM 1 \l 16276             In any event, the chart in your hand‑out reveals that broadcaster PBITs for conventional services have remained consistent over the last six years and are themselves reasonably healthy, averaging 12 per cent annually.

LISTNUM 1 \l 16277             These are hardly businesses in dire need, as they would have you believe.

LISTNUM 1 \l 16278             No doubt the marketplace will continue to yield shifts in fortune between different services and between competitive broadcasters.

LISTNUM 1 \l 16279             Good and bad business decisions have been made by the broadcasters regarding such factors as their acquisitions of Canadian and U.S. programming, diversification into specialty and pay services, and the development of Internet‑based initiatives.


LISTNUM 1 \l 16280             Some have even diversified outside of broadcasting and outside of Canada.  These decisions have inevitably impacted individual broadcaster profitability, yielding winners and losers.

LISTNUM 1 \l 16281             Nevertheless, the profitability of the group of broadcasters in aggregate has proven reasonably consistent over these last few years.

LISTNUM 1 \l 16282             Further evidence of the health of these businesses is the significant interest in station start‑ups and acquisitions.

LISTNUM 1 \l 16283             Conventional over‑the‑air TV programming undertakings have been added to the Vancouver and Toronto markets.

LISTNUM 1 \l 16284             CanWest MediaWorks is one of the five applicants currently vying for a broadcasting licence to serve the markets of Calgary and/or Edmonton.

LISTNUM 1 \l 16285             CHUM acquired the broadcast properties of Craig Broadcasting Systems prior to being acquired itself by Bell Globemedia.

LISTNUM 1 \l 16286             Most recently, Shaw Communications has acquired CJBN‑TV in Kenora, Ontario.

LISTNUM 1 \l 16287             Not only is there no problem to solve here, but in fact, this is a healthy industry sector worthy of investment.


LISTNUM 1 \l 16288             It is clear that the broadcasters have been evolving their businesses to meet the changes in their current business environment.

LISTNUM 1 \l 16289             For example, they have begun ad‑supported Internet content initiatives intended to exploit the revenue opportunity that this presents.

LISTNUM 1 \l 16290             CTV's recently‑launched Broadband Network is a great example.

LISTNUM 1 \l 16291             It is, in the words of its CEO Ivan Fecan:

"...part one of CTV's answer to Canadian's appetite to tap programming on emerging platforms and to provide a solution to the advertisers who want to reach them."  (As read)

LISTNUM 1 \l 16292             CanWest MediaWorks has also launched its own online presence, featuring exclusive, ad‑supported on‑demand content.

LISTNUM 1 \l 16293             These early forays into online ventures continue the pattern of profitable diversification established by these broadcasters, first demonstrated via their expansion into pay and specialty.


LISTNUM 1 \l 16294             Moreover, the fee‑for‑carriage proposal itself would be bad for consumers, harmful to BDUs and would establish a damaging precedent for the industry.

LISTNUM 1 \l 16295             To ask consumers to pay a tax to receive services that they already receive is certain to be unpopular.  The broadcasters' proposed fees are all over the map.

LISTNUM 1 \l 16296             However, it is clear that the aggregate fee to be faced by consumers could be significant.

LISTNUM 1 \l 16297             Consumers would react to the increase by scaling back on the number of pay and specialty service packages to which they subscribe.

LISTNUM 1 \l 16298             As well, Canadian BDUs would inevitably face subscriber losses, as we know that all price increases cause churn and a price increase with no added value such as this would be a particularly serious customer irritant.

LISTNUM 1 \l 16299             The BDUs' role is also badly misrepresented by the broadcasters in this debate.

LISTNUM 1 \l 16300             They have suggested that BDUs are getting a free ride here.

LISTNUM 1 \l 16301             This is simply untrue.

LISTNUM 1 \l 16302             Bell incurs significant expense in the acquisition and distribution of conventional over‑the‑air signals.


LISTNUM 1 \l 16303             These costs cover backhaul, signal processing, uplink and transponder costs.

LISTNUM 1 \l 16304             As you will have observed from the chart on page 3 of this statement, we are less profitable than the broadcasters who are asking that we subsidise them.

LISTNUM 1 \l 16305             We simply cannot afford to absorb a fee‑for‑carriage and would, without any doubt whatsoever, be forced to pass it on to our customers.

LISTNUM 1 \l 16306             In this debate, the broadcasters conveniently ignore the many benefits that DTH brings to them.

LISTNUM 1 \l 16307             Signal quality is enhanced significantly, while coverage is extended to many more markets, both urban and rural.

LISTNUM 1 \l 16308             Additional value is afforded those conventional broadcasters who own pay and specialty services, whose distribution benefits in the same way.

LISTNUM 1 \l 16309             Finally, in respect of fee for carriage, we submit that the proposal, if accepted, would establish an unhealthy precedent.

LISTNUM 1 \l 16310             The broadcasters would inevitably come to rely on this tax, a purely regulatory fix, in support of their bottom lines.


LISTNUM 1 \l 16311             Such a tax would be susceptible to regular requests for a rate increase, having become an entrenched and accepted component of their business planning.

LISTNUM 1 \l 16312             Fee‑for‑carriage income would also reduce their incentive to innovate in response to technological and competitive pressures.

LISTNUM 1 \l 16313             Furthermore, the U.S. is also serious about fee‑for‑carriage. U.S. broadcasters want to receive fees from Canadian BDUs for the carriage of their local signals to Canadian households.

LISTNUM 1 \l 16314             Canada has been debating an opt‑out clause to the WIPO treaty to avoid this leakage from the Canadian broadcasting system.

LISTNUM 1 \l 16315             Any decision by the CRTC in favour of fee‑for‑carriage would probably put beyond reach any such opt‑out, resulting in fees‑for ‑carriage flowing to U.S. over‑the‑air broadcasters.

LISTNUM 1 \l 16316             None of this southerly revenue flow would contribute to the production of Canadian content.

LISTNUM 1 \l 16317             I would now ask my colleague, Chris Frank, to speak briefly on the second key issue in this proceeding:  distant signals.

LISTNUM 1 \l 16318             MR. FRANK:  Thanks, Gary.

The availability of distant signals is a significant consumer benefit.


LISTNUM 1 \l 16319             Our subscribers across the country value the viewing choices that such signals provide, and the ability to time‑shift programming at their convenience.

LISTNUM 1 \l 16320             Moreover, the value to broadcasters of time‑shifted advertising is not lost to the fast‑forward button of a PVR, as time‑shifted programming is viewed in real time.

LISTNUM 1 \l 16321             Over‑the‑air broadcasters maintain that the time‑shifting of distant signals has had a serious, negative impact on local broadcasters.

LISTNUM 1 \l 16322             We submit that such claims are overstated and that, in fact, distant signals drive a major increase in the viewing of over‑the‑air signals.

LISTNUM 1 \l 16323             Nielsen data show that, by virtue of distant Canadian signals, DTH generates increased viewing of Canadian over‑the‑air broadcasters, which is in keeping with the policy objectives of the Broadcasting Act.

LISTNUM 1 \l 16324             Indeed, the percentage of viewing of English‑language, Canadian over‑the‑air channels is 33 per cent greater on DTH than it is on cable.

LISTNUM 1 \l 16325             This 33 per cent increase in share is a bonus audience for over‑the‑air broadcasters that would not exist without the accessibility of distant signals.


LISTNUM 1 \l 16326             It is an audience and a revenue source that has been ignored in the studies submitted by the broadcasters.

LISTNUM 1 \l 16327             DTH also provides a repatriation of Canadian audiences.

LISTNUM 1 \l 16328             U.S. over‑the‑air broadcasters enjoy less than half the viewing share in Canadian DTH homes than they do in Canadian cable homes.

LISTNUM 1 \l 16329             Thus, DTH generates additional viewing of Canadian over‑the‑air‑services at the expense of U.S. broadcasters.

LISTNUM 1 \l 16330             Some conventional broadcasters argue that they are unable to monetize the viewing of these distant signals by generating additional advertising revenues.

LISTNUM 1 \l 16331             We have learned that this is inaccurate as a general statement.

LISTNUM 1 \l 16332             Broadcasters are monetizing a significant percentage of out‑of‑market tuning.

LISTNUM 1 \l 16333             Moreover, there is nothing preventing them from changing the way that they sell ads so that they can monetize this to a greater extent.

LISTNUM 1 \l 16334             That is, seize the opportunity and adapt instead of seeing only a problem and asking for a regulatory fix.


LISTNUM 1 \l 16335             Existing distant signal arrangements are working successfully in support of the Commission's desire for a vibrant, competitive environment in the BDU sector by incenting Canadians to move to digital platforms.

LISTNUM 1 \l 16336             It is important to note that the impact of distant signals on large‑market broadcasters is not the intended focus of this proceeding.

LISTNUM 1 \l 16337             The Commission has previously approved a comprehensive deal which saw substantial benefits to both large‑market and small‑market broadcasters.

LISTNUM 1 \l 16338             Now that the deal is due to be renewed, large‑market broadcasters continue to demand additional compensation from BDUs based on what Bell considers to be exaggerated claims of financial losses.

LISTNUM 1 \l 16339             Indeed, Bell submits that the negative market impact of distant signals on all markets, major or otherwise, totals less than 20 million dollars per year, while aggregate compensation that we believe is paid by digital cable and DTH providers exceeds that figure.


LISTNUM 1 \l 16340             Bell's own contributions include more than two transponders, uplinking, encoding, encryption and back‑hauling; as well, cash compensation for the second set of U.S. networks; and commercial arrangements with small independent broadcasters.

LISTNUM 1 \l 16341             In the Public Notice initiating this proceeding, the Commission stated that, and I quote:

"...the carriage provisions and the programming fund approved in Public Notice 2003‑37 have improved the financial situation for most small market independently owned television licensees."

LISTNUM 1 \l 16342             This has been confirmed by earlier speakers in this proceeding.

LISTNUM 1 \l 16343             Further, in terms of the specific written comments of the small‑market independent broadcasters, we are prepared to discuss their suggestions in prospective negotiations regarding a renewal of this agreement.

LISTNUM 1 \l 16344             In the distant signals debate the broadcasters conveniently ignore the major benefits that DTH brings to the broadcasting system.

LISTNUM 1 \l 16345             For example, as the following chart shows by year, since its launch in 1997, Canadian DTH added many new BDU customers to the Canadian broadcasting system.


LISTNUM 1 \l 16346             The total net new subscribers added reached 1.4 million in 2005.

LISTNUM 1 \l 16347             This growth has generated an estimated two billion dollars in net new revenue for Canadian pay and specialty services, much of which flows to Canadian content producers.

LISTNUM 1 \l 16348             Additional new revenue is generated for the Canadian Television Fund and other CRTC‑approved independent programming funds.

LISTNUM 1 \l 16349             This is extra revenue with no risk or investment requires on the part of broadcasters or content producers.

LISTNUM 1 \l 16350             Since all the major over‑the‑air broadcasters own specialty services, they have directly benefited from DTH investments.

LISTNUM 1 \l 16351             All this, in addition to the more direct benefits to conventional broadcasters of added over‑the‑air viewership.

LISTNUM 1 \l 16352             We have provided further explanation of these data in the attached charts.

LISTNUM 1 \l 16353             Gary?

LISTNUM 1 \l 16354             MR. SMITH:  Thanks, Chris.

LISTNUM 1 \l 16355             The third key issue is the transition to digital and HD over‑the‑air transmission.


LISTNUM 1 \l 16356             Easy access to conventional broadcast services in a digital world is vital for 100 per cent of Canadians and is clearly the business concern of the over‑the‑air broadcasters licensed to provide these services.

LISTNUM 1 \l 16357             However, we acknowledge that the cost of traditional terrestrial distribution outside major markets is prohibitive.

LISTNUM 1 \l 16358             We therefore support the broadcasters' hybrid proposals, which we understand to provide digital terrestrial distribution of signals in major markets only, leaving BDUs to assist with a solution outside the major markets.

LISTNUM 1 \l 16359             Appropriate alternative approaches supported by the BDUs should be considered.

LISTNUM 1 \l 16360             The BDU are themselves facing the need for major investments, in this case, to meet the growing demand for high‑definition services.

LISTNUM 1 \l 16361             The BDUs accept this as a cost of doing business and submit that the over‑the‑air broadcasters have to assume a similar level of responsibility for the costs associated with the hybrid solutions that they propose.


LISTNUM 1 \l 16362             There is, therefore, a need for the industry to find the synergies allowing the over‑the‑air broadcasters to avoid the need for digital transmission towers everywhere, without imposing extra costs on the BDUs.

LISTNUM 1 \l 16363             As you heard yesterday, Bell is already discussing small initiatives along these lines with APTN in northern areas of Canada and is similarly prepared to discuss alternative distribution arrangements with all interested over‑the‑air broadcasters.  We would present the results of such discussions for Commission consideration and approval.

LISTNUM 1 \l 16364             In conclusion, Bell categorically rejects the conventional broadcasters' proposal for fee for carriage as the wrong solution to an unsubstantiated problem.

LISTNUM 1 \l 16365             We also dispute the exaggerated claims made by broadcasters regarding the impact of distant signals on local broadcasters.

LISTNUM 1 \l 16366             And finally, we support the consideration of appropriate alternatives to a costly transition to digital over‑the‑air broadcasting.

LISTNUM 1 \l 16367             This concludes our opening comments.  Thank you for your time and we are happy to answer any questions you may have.

LISTNUM 1 \l 16368             THE CHAIRPERSON:  Thank you, Mr. Smith.


LISTNUM 1 \l 16369             I am asking Commissioner Duncan to initiate the questions.

LISTNUM 1 \l 16370             COMMISSIONER DUNCAN:  Good morning.  Your written brief and your comments this morning are certainly very helpful as they probably answered some of my questions but I will proceed anyway.

LISTNUM 1 \l 16371             You noted that you generally agree with the analytical approach taken in the Nordicity study but that the estimates and assumptions taken in the study are Nordicity's own.  So there are three areas I would like to ask you about specifically and then I have a broader request after that.

LISTNUM 1 \l 16372             I am just wondering if you agree with Nordicity that the rate could increase as much as $6.00 to $19.00 if we were to allow compensation for over‑the‑air signals.

LISTNUM 1 \l 16373             MR. SMITH:  I think the wide range of fees proposed by broadcasters over the course of this hearing illustrates the fact that the range of possible outcomes could be within the ranger proposed by the Nordicity study or wider.

LISTNUM 1 \l 16374             COMMISSIONER DUNCAN:  I am going to ask you more specifically about that in a minute then.

LISTNUM 1 \l 16375             Do you agree with Nordicity that we could lose as many as 900,000 households?


LISTNUM 1 \l 16376             MR. SMITH:  Perhaps I could ask my colleagues Chris and Barry to comment on that.

LISTNUM 1 \l 16377             MR. FRANK:  I would suggest, Commissioner Duncan, that is wholly dependent on the level of the fee.

LISTNUM 1 \l 16378             COMMISSIONER DUNCAN:  I should qualify that.  I actually had meant to qualify it by saying if we were at the high end of that range.

LISTNUM 1 \l 16379             MR. FRANK:  It also depends on the range of over‑the‑air broadcasters who would benefit from fee for carriage.  For instance, we have heard from certain private broadcasters that the fee would be restricted to strictly private broadcasters and exclude private broadcasters.  So it would depend on the fee level and on the range of broadcasters, i.e. the number of broadcasters who benefited.

LISTNUM 1 \l 16380             Barry, do you have anything further to add?

LISTNUM 1 \l 16381             MR. KIEFL:  No.

LISTNUM 1 \l 16382             COMMISSIONER DUNCAN:  It is probably unlikely that the public broadcasters and the educational broadcasters would be excluded though?


LISTNUM 1 \l 16383             MR. FRANK:  Well, that has been our experience in previous CRTC decisions.  When we have arranged commercial deals with private broadcasters, the Commission has ensured that those benefits ‑‑ and I am speaking specifically of DTH over‑the‑air carriage ‑‑ also apply to the CBC and Radio‑Canada.  So I take your point.

LISTNUM 1 \l 16384             COMMISSIONER DUNCAN:  Uh‑huh.  Thank you.

LISTNUM 1 \l 16385             They also, Nordicity, estimated that the EBITDA for the BDUs could be reduced ‑‑ would, I think they said ‑‑ would be reduced between $328 million and $426 million if we did allow fee for carriage.

LISTNUM 1 \l 16386             Is that one of the items that you disagree with or agree with in the Nordicity study?

LISTNUM 1 \l 16387             MR. SMITH:  I think it is clear that fee for carriage would cause significant churn to customer bases assuming the BDUs pass it on to the customers, as we would, and that churn would have a very significant effect on the profitability of all BDUs.  For us, it would be very, very serious.

LISTNUM 1 \l 16388             I would point out that a successful satellite platform such as ourselves has a churn rate of approximately 1 percent per month.  In a difficult environment, you could easily see that doubling to 2 percent per month.  Losing an additional 1 percent of your customers every month would cost us hundreds of millions of dollars.


LISTNUM 1 \l 16389             COMMISSIONER DUNCAN:  You are losing net 1 percent a month?  They are just turning on and off, so people come back?

LISTNUM 1 \l 16390             MR. SMITH:  Yes.  A platform such as ourselves, we decide essentially how much to invest in growth and how much to invest in acquiring new customers.  So most platforms will invest enough to replace any churn that does happen on your platform and some platforms such as Bell ExpressVu is going further than that and still growing aggressively.

LISTNUM 1 \l 16391             COMMISSIONER DUNCAN:  Thank you.

LISTNUM 1 \l 16392             In your conclusion you state, and I quote:

"Bell does not specifically endorse all assumptions made or conclusions drawn by the Nordicity study."  (As read)

LISTNUM 1 \l 16393             I was wondering if it would be possible for you to provide us with a report or an overview of where the differences are, what your thoughts are so that we have a better picture of what your position is.


LISTNUM 1 \l 16394             MR. FRANK:  The prime intent of that statement was to indicate that we agree with the trends in the Nordicity Group, not specifically each and every assumption.  However, if you would like us to provide a list, we would be happy to.

LISTNUM 1 \l 16395             But I think the point we are trying to make is that we agree with the trend, we don't necessarily agree with the specific assumptions and the specific figures.

LISTNUM 1 \l 16396             COMMISSIONER DUNCAN:  When I was reading your brief I thought it was very alarming but it was qualified by that but I just didn't quite understand or couldn't appreciate exactly what the degree of concern should be based on that qualifier.  I couldn't ‑‑ it didn't give me a good picture.

LISTNUM 1 \l 16397             MR. FRANK:  Well let me reinforce our opposition to fee for carriage.  We don't think it is a good idea.  It is a solution in search of a problem.

LISTNUM 1 \l 16398             Having said that, it really depends on the number of broadcasters and the level of the fee for carriage that will be determined, what kind of losses in customers and what kind of increased expenses we will have to face.

LISTNUM 1 \l 16399             COMMISSIONER DUNCAN:  Okay.  I think that is fine.  Your position is perfectly clear.  I have got that, so I don't think we would need anything else but I do have some more questions along this line.


LISTNUM 1 \l 16400             CanWest questioned the high range of $19.00 and indicated they felt an increase in the order of $2.00 to $5.00 would be more reasonable.  So it is quite a difference.

LISTNUM 1 \l 16401             Would you care to comment on their projection?

LISTNUM 1 \l 16402             MR. SMITH:  Well we saw a range of different fees for individual channels proposed over the course of the hearing, everything from the low end of 10 cents, I think was the lowest, through to ‑‑ I think one of the channels was proposing they would like to see a fee of $2.00 per channel.

LISTNUM 1 \l 16403             Now clearly, if you take the higher end of that range and you multiply it by the number of channels that could receive these fees, you do get to the very large numbers of $19.00 quoted.

LISTNUM 1 \l 16404             It would be unthinkable ‑‑ unthinkable ‑‑ to reach anything like those high numbers and I am sure the Commission wouldn't want to go there but our concern is more that it is establishing such a damaging precedent.


LISTNUM 1 \l 16405             Even if you were to apply a fee of $1.00, say, that you could argue would be bearable by the market, the broadcasters will be back for more and they will be back for more time and again, and I think that it is establishing a tax that has no benefit to consumers and will ultimately result in the damaging effects that we have identified in our submission.

LISTNUM 1 \l 16406             COMMISSIONER DUNCAN:  Thank you for that.

LISTNUM 1 \l 16407             MR. FRANK:  Commissioner Duncan, I would just like to add that I think that was confirmed by the Global panel.  When asked how long such a fee would stay in place, they suggested within three to four years they would be back to look at it again.

LISTNUM 1 \l 16408             COMMISSIONER DUNCAN:  Yes.  Yes, they did.

LISTNUM 1 \l 16409             MR. FRANK:  And our experience is those fees generally go down ‑‑ excuse me, don't generally go down.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16410             COMMISSIONER DUNCAN:  Yes.  I knew what you were thinking.

LISTNUM 1 \l 16411             So with respect to the other ‑‑ I mean I get your position but I am just wondering if you want to have any specific comments.  I would like to give you an opportunity to comment on the specific amounts proposed by some ‑‑ the CanWest, I can take it I just got your comment on the 50 cents per signal.

LISTNUM 1 \l 16412             But TQS, for example, they suggested $1.00 for themselves and $1.00 for TVA.


LISTNUM 1 \l 16413             Others supported a flat rate that would apply to all broadcasters and that the Commission should determine that rate.

LISTNUM 1 \l 16414             CTV offered 10 cents a signal with 50 percent committed to Canadian programming and the balance to be used for other initiatives that would be approved by the Commission.

LISTNUM 1 \l 16415             Do you have anything that you want to add to any of those or just ‑‑

LISTNUM 1 \l 16416             MR. FRANK:  If I could just add a few words and it goes to the comment you made a few minutes ago, Commissioner Duncan, and that is that it is unlikely that the Commission would not include public broadcasters.

LISTNUM 1 \l 16417             We note that none of the private broadcasters' suggestions to you include the public broadcasters or in fact some of the other niche over‑the‑air broadcasters and that would drive up ‑‑ even the CTV proposal, some might think 80 cents ‑‑ I think when we did the math in the Toronto market it was closer to $1.40.  So these are big numbers.

LISTNUM 1 \l 16418             COMMISSIONER DUNCAN:  I think Commissioner Cugini did draw that out in her questioning at the time.


LISTNUM 1 \l 16419             MR. FRANK:  I am sorry, I missed that.

LISTNUM 1 \l 16420             COMMISSIONER DUNCAN:  No, no, that is all right.  She did ask about the extra signals, thank you.

LISTNUM 1 \l 16421             You indicate if fee for carriage was imposed BDUs must be free to decline carriage of the over‑the‑air signals or to place them in discretionary packages and you pointed out that there is no guarantee that any of the incremental revenue generated by fee for carriage would be used to create Canadian programming.

LISTNUM 1 \l 16422             CBC suggested rather than imposing a fee for carriage at this time, the Commission should entertain applications to set wholesale rates for conventional television stations at the time of their licence renewal and in that context it was suggested that the Commission could choose to link the level of fees to the amounts of Canadian programming provided by the broadcasters.

LISTNUM 1 \l 16423             Can we have your comments on that CBC suggestion?


LISTNUM 1 \l 16424             MR. SMITH:  I think it would be sensible for the Commission to consider all aspects of the programmers' needs at licence renewal.  So in that respect I think it is a very reasonable request but we are very concerned about the Commission sending any signals to the industry the fee for carriage will be considered as part of those licence renewals for the reasons that I think we have outlined.

LISTNUM 1 \l 16425             We are very skeptical about the broadcasters' suggestions, in various forms from the various broadcasters, that they will consider incremental commitments to Canadian content and priority content.

LISTNUM 1 \l 16426             We think that it is very clear that the broadcasters are seeking an improvement to their bottom lines.  They were very clear about that objective of seeking fee for carriage, and clearly, if they are granted fee for carriage only to have it diverted into additional costs for their businesses, it doesn't achieve their objective.

LISTNUM 1 \l 16427             So I think that the broadcasters are suggesting that whilst the Canadian content and priority programming obligations may be reviewed as a part of the licence condition, the reality of their offer to provide additional programming in return for fee for carriage is an illusion.

LISTNUM 1 \l 16428             COMMISSIONER DUNCAN:  Thank you.


LISTNUM 1 \l 16429             If fee for carriage was adopted as a regime despite what you are telling me, I am wondering do you think that we should continue to require distributors to provide broadcasters with priority carriage or simultaneous substitution?

LISTNUM 1 \l 16430             MR. SMITH:  We would like to see the move towards the specialty world where we can change the packaging of those channels.  It is not so much the must carry obligation but the packaging would be sensible to be considered.  We would like to give our customers the option to choose if they are forced to pay for a service like that.

LISTNUM 1 \l 16431             Chris, I think you might have something to add.

LISTNUM 1 \l 16432             MR. FRANK:  Thank you, Gary.

LISTNUM 1 \l 16433             When you think about the availability of these signals on a free‑to‑air basis in communities such as the one we are in today, the consumer does have the option of erecting an outside antenna or in fact using sophisticated inside receiver equipment to switch from satellite or cable to the free over‑the‑air signal.


LISTNUM 1 \l 16434             If we are offering that signal on a priority basis, which means it is on basic, and there is a fee for carriage and we don't give the consumer the opportunity to opt out, I think we will have a major, major irritant on our hands and I think our call centre will light up like the 1st of July.

LISTNUM 1 \l 16435             COMMISSIONER DUNCAN:  Shaw had a discussion this morning.  They were talking about the preponderance of Canadian signals.

LISTNUM 1 \l 16436             Did you have any comments on their suggestion?

LISTNUM 1 \l 16437             MR. FRANK:  Well, we have long advocated preponderance in a digital world.  We think that the technology allows customers to ‑‑ it is a hundred percent addressable and it allows the customers to pick and choose what they want.  That is a huge, huge benefit and I think it is one of the major benefits driving people from analog to digital.

LISTNUM 1 \l 16438             So we would like to offer customers what they want but our view of preponderance is that we would ensure that each customer purchases more Canadian services than they do foreign services.  So it is not preponderance at the distribution level but rather preponderance at the consumer level.

LISTNUM 1 \l 16439             COMMISSIONER DUNCAN:  Thank you.

LISTNUM 1 \l 16440             CTV suggested that broadcasters should be able to refuse to allow BDUs to carry their signals in distant markets if they are unable to negotiate a satisfactory fee for carriage.


LISTNUM 1 \l 16441             I am wondering what your thoughts are.

LISTNUM 1 \l 16442             MR. SMITH:  On the fee for carriage for distant signals, which I think was the context, if you are referring to that.

LISTNUM 1 \l 16443             COMMISSIONER DUNCAN:  Yes, it was.

LISTNUM 1 \l 16444             MR. SMITH:  They were establishing a precedent which would be very damaging, we believe, if implemented because if the broadcasters have the option to force us to withdraw distant signals if we are unable to agree, we would have no basis for sensible negotiation of any arrangements.

LISTNUM 1 \l 16445             Further to that, we believe that withdrawal of distant signals would be a major consumer irritant.  As I think has been made clear by previous speakers to this hearing, Canadians like viewing of distant signals, particular the ability to time shift.

LISTNUM 1 \l 16446             I think Mr. Rogers and his panel made it very clear that it was a major drive to take up digital television in Canada, which we think has been good overall, and we would very much dislike any possibility of distant signals being withdrawn.

LISTNUM 1 \l 16447             Chris, would you like to add anything?


LISTNUM 1 \l 16448             MR. FRANK:  I would just like to note, Commissioner Duncan, that that would be a radical departure from the current regime.

LISTNUM 1 \l 16449             First of all, in the broadcast distribution regulations there is a mechanism called dispute resolution, and it contemplates the provision of the continuation of a service while negotiations or in fact a dispute is under way.

LISTNUM 1 \l 16450             Just to reinforce what Gary said, putting the toothpaste back in the tube in terms of distant signals is going to be a major challenge for digital distributors in Canada.

LISTNUM 1 \l 16451             We have always been committed to coming to the table and negotiating with broadcasters.  We have, I would like to think, a first class record in that regard.  We are the company who instigated the first and second, and completed the first and second, comprehensive agreements with the CAB.

LISTNUM 1 \l 16452             In the first instance, the broadcasters had cash compensation in mind.  In the second round of discussions, which led to the deal the Commission approved three and a half years ago, which is on extension, they switched from compensation ‑‑ and this is very important.  They wanted carriage.  They stated that right up front.  They wanted more carriage.


LISTNUM 1 \l 16453             And that's what the deal ended up giving them: two and a half more transponders worth of carriage for small independents and for large market broadcasters.

LISTNUM 1 \l 16454             That deal costs us now $8 million a year.

LISTNUM 1 \l 16455             COMMISSIONER DUNCAN:  I think it is very useful to have your answers to their suggestion on the record.

LISTNUM 1 \l 16456             I want to explore a little more on that.

LISTNUM 1 \l 16457             I was a little surprised yesterday when I was discussing it with the CCSA people.  As they pointed out and you are mentioning the funds that you are already paying to the CAB now, I am assuming therefore that CTV was anticipating that there would no longer be this bulk CAB deal but they would negotiate individually.

LISTNUM 1 \l 16458             Would you take that to be the intent of their suggestion?

LISTNUM 1 \l 16459             MR. FRANK:  I think that is correct.  But if my memory is correct, the work‑around solution that was contemplated in our original licence, and I think has been captured in the broadcast distribution regulations, contemplates negotiating with an industry group.  It becomes very complicated.


LISTNUM 1 \l 16460             I think it was Ms Fusca from Stornoway yesterday who explained how difficult it is to go from BDU to BDU to cut deals.  It would be, I think, problematic to go from broadcaster to broadcaster.  We would rather negotiate with an industry group like the CAB, but we are not firm on that.

LISTNUM 1 \l 16461             We will come to the table with reasonable suggestions to arrive at an arrangement so that we don't have to delete identical programs on distant signals.

LISTNUM 1 \l 16462             That is the essence of the problem.  As Mr. Hennessy said to you yesterday, this isn't about access to distant signals; it is, rather, compensation in lieu of program deletion.

LISTNUM 1 \l 16463             Our company ‑‑ and I would imagine other digital broadcasters in Canada ‑‑ simply would not be competitive one to another or with the U.S. DBS companies if we had a menu of conventional Canadian stations that look like Swiss cheese.

LISTNUM 1 \l 16464             COMMISSIONER DUNCAN:  I didn't get the impression from CTV that they were talking about that.  I thought they were talking about value for their signal.  They weren't talking, I didn't think, in terms of not having to delete the signal.


LISTNUM 1 \l 16465             So whether this was an additional charge or an additional reason to have a charge...

LISTNUM 1 \l 16466             MR. SMITH:  Perhaps I could speak briefly before I ask Chris to elaborate.

LISTNUM 1 \l 16467             I think the submissions from the broadcasters have claimed very significant damage to their businesses caused by distant signals.  They have submitted various reports to substantiate their claims, and we have read those reports with great interest.

LISTNUM 1 \l 16468             We believe that whilst the reports are obviously founded on good scientific bases, some of the assumptions in their reports are questionable, in fact just miss some important points.

LISTNUM 1 \l 16469             We have assessed the damage as significantly less.

LISTNUM 1 \l 16470             The damage that we have assessed ‑‑ and I think we alluded to it in our opening statement ‑‑ we think is capable of being addressed with regulatory intervention through negotiation.


LISTNUM 1 \l 16471             If CTV's position is that the damage is greater and that they would like to see regulatory intervention to help them negotiate a better settlement, our contention is that is not necessary.  No regulatory intervention is required in the environment as it exists today.  We are happy to go to the table with these broadcasters and negotiate a new settlement.

LISTNUM 1 \l 16472             We have brought Barry Kiefl with us, who has done the analysis on the reports, if the Commission would like to understand further our reasoning behind our lower estimates of the damage caused to this distant signal debate.

LISTNUM 1 \l 16473             COMMISSIONER DUNCAN:  Thank you.  I don't have any specific questions on the report, at least not at this time.  Some of my colleagues might.  Thank you for the offer.

LISTNUM 1 \l 16474             This actually leads us right into the question that I had about time and station shifting.  I did read, of course, in your brief your feeling and why you felt that they were able to monetize the time shifting.  And I did give them an opportunity on Monday to explain their side of it, so we don't need to go there.

LISTNUM 1 \l 16475             The broadcasters are making a distinction between time shifting and station shifting, and I didn't come away with that when I was reading your brief.

LISTNUM 1 \l 16476             I am wondering if you would care to comment on this distinction.


LISTNUM 1 \l 16477             I think, as well, you have already commented on Rogers' position yesterday that time shifting actually represents an opportunity for broadcasters and BDUs to work together.

LISTNUM 1 \l 16478             I would be curious to know if you have made any attempts.  I understand from the Rogers people that they have made some approaches.  Rogers, of course, explained that the most important thing was increasing eyeballs and slowing down the move to PVRs, and you touched on that as well in your comments.

LISTNUM 1 \l 16479             I guess I'm just interested to know if there is an argument there.  Is station shifting another aspect of it or just another positive aspect from your point of view?

LISTNUM 1 \l 16480             MR. SMITH:  I'm going to ask Chris and Barry to contribute to this answer, but I would like to start off by reminding the Commission of what I find quite an outstanding statistic: and that is that the viewing of these channels in DTH homes is 33 percent greater than it is in cable homes.

LISTNUM 1 \l 16481             The actual numbers underlying that is 43 percent of viewing in Canadian homes is of these over‑the‑air channels over DTH and only 30 percent in cable homes.

LISTNUM 1 \l 16482             COMMISSIONER DUNCAN:  Can I just ask here:  Is that because there are more of them and it gives them more opportunities?


LISTNUM 1 \l 16483             MR. SMITH:  The obvious suggestion is that having a line‑up which includes all the distant signals gives customers a lot more opportunity to view Canadian content and the adverts that are contained on those channels.

LISTNUM 1 \l 16484             COMMISSIONER DUNCAN:  Which they make use of.

LISTNUM 1 \l 16485             MR. SMITH:  I think that is a fact.  It's a measured fact.  So it is very easy to substantiate the fact that there is an opportunity here.

LISTNUM 1 \l 16486             It does become arguable as to how extensive the broadcasters are actually monetizing that or able to monetize it.  I think that was the discussion that you had with the broadcasters earlier in the hearing.

LISTNUM 1 \l 16487             Let me invite my colleagues, Chris and Barry, to contribute to this.


LISTNUM 1 \l 16488             MR. FRANK:  The only thing that I would like to add before I pass the microphone to Barry is that  the whole program substitution and program deletion regime is about local program rights, not about distant signals per se or the value or access to distant signals.  It is to protect local rights.  So with simultaneous substitution, programs from certain distant signals are substituted for local signals.  Or there is a program deletion regime in place.

LISTNUM 1 \l 16489             Our comprehensive deal with the CAB addresses the issue of program deletion and our particular regulatory regime.  We have put in place additional carriage and other limitations on signal shifting and time shifting to protect specifically small market broadcasters but also to protect large market broadcasters as well.

LISTNUM 1 \l 16490             Barry.

LISTNUM 1 \l 16491             MR. KIEFL:  Thanks, Chris.

LISTNUM 1 \l 16492             The bonus audience that was referred to in the opening statement, and which Gary just referred to, it was about three years ago actually that Nielsen decided that it was time to break out the audience according to digital cable homes and analog cable homes and satellite homes.  It was actually quite a shock.

LISTNUM 1 \l 16493             I remember the first time looking at the data.  It was the beginning of the TTCs in 2003‑04.  Looking at the size of the audience for Canadian broadcasters within the DTH environment ‑‑ this is in English TV ‑‑ Gary mentioned the last TTCs in 2004‑05, Nielsen put it at 43 percent.  That's on a 24‑hour basis.


LISTNUM 1 \l 16494             In prime time it was close to 50 percent, which is really quite remarkable.  Compared to the cable universe, it's just a little over 30 percent.  So you are talking about a repatriation of the Canadian audience for Canadian broadcasters.

LISTNUM 1 \l 16495             It relates to the whole issue of monetization because clearly that bonus audience is something that if it weren't for DTH, a large part of that audience the broadcasters wouldn't have.  If DTH operated like a cable in the sky, like old‑fashioned cable, and only carried local signals and so forth, there wouldn't be nearly as large an audience for Canadian broadcasters.

LISTNUM 1 \l 16496             What you are talking about is a bonus audience that has been generated by DTH that is an audience they wouldn't have had without DTH.  Even if there is some part of it that they can't monetize ‑‑ and I'll spend a moment talking about the part that I think they can monetize and are monetizing right now ‑‑ there is an audience there that they wouldn't have had otherwise.

LISTNUM 1 \l 16497             So if there is a part of it that they can't monetize, it's an audience they wouldn't have had.  If all of a sudden these distant signals were to disappear their audience would decline substantially.


LISTNUM 1 \l 16498             Think for a moment of CTV.  CTV has some major hit shows in prime time, like CSI with 3 million viewers or more on some weeks.  About 10 percent of that audience is delivered by distant signals.  I doubt very much that CTV would be happy with a situation which would see 3 million drop to 2.7 million all of a sudden.

LISTNUM 1 \l 16499             The part that they can monetize, CTV in particular or CBC ‑‑ CTV said here earlier this week that about 30 percent of their revenue is from network advertising.  That 30 percent is an audience that is delivered partly by distant signals.  There is really no way around it.

LISTNUM 1 \l 16500             I've checked with the ACA, the Association of Canadian Advertisers, the organization that represents all of the advertising agencies, the CNTC.  They confirmed that they do pay for the audience to network commercials that are delivered by distant signals.

LISTNUM 1 \l 16501             So CTV is talking about 30 percent of its revenue coming from network signals, network advertising.


LISTNUM 1 \l 16502             CBC Sales confirmed with me this week that they deliver 50 percent of their revenue with network ads.  If somebody is watching Hockey Night in Canada on a distant signal, they want to catch the Toronto game in Vancouver off of CBOT on ExpressVu, that audience is counted by the measurement companies.  It is delivered to the CBC.  They sell the audience to the network advertiser.

LISTNUM 1 \l 16503             So you have a combination of both the network advertising and the bonus audience which, combined, represent perhaps as much as 75 percent of the monetization issue in terms of what DTH ‑‑ in particular DTH, and digital cable is doing the same thing.  But DTH because it does have so many additional channels and does deliver this extremely high audience for Canadian broadcasters is primarily responsible for really delivering a new audience and an audience that is watching a lot of network commercials.

LISTNUM 1 \l 16504             COMMISSIONER DUNCAN:  Thank you.  Would you ‑‑

LISTNUM 1 \l 16505             MR. FRANK:  Could I just add to that very quickly by giving you a quick example of one of the palpable benefits of time shifting.


LISTNUM 1 \l 16506             Barry has mentioned Hockey Night in Canada.  It would seem that the national press is preoccupied with the ubiquity of Toronto Maple Leaf hockey games coast to coast.  Through distant signals the local Ottawa hockey games, which are carried by the CBC and are often restricted just to the Ottawa area, are now available coast to coast to coast.

LISTNUM 1 \l 16507             So all of this, all of CBC's hockey games are available and I think that very much pleases consumers; not everybody in Canada is a Toronto Maple Leaf fan.

LISTNUM 1 \l 16508             COMMISSIONER DUNCAN:  My husband certainly is.  I have certainly heard about them for long enough.

LISTNUM 1 \l 16509             Yes.  Would you agree with me then that this bonus audience is, in fact, only going to increase as cable deploys more of their digital service, these people buy more of their digital packages?

LISTNUM 1 \l 16510             MR. KIEFL:  Yes.  I think cable began offering distant signals in competition with DTH to meet the competition of DTH about three of four years ago, but they began initially by offering them as a separate package which the consumer could pay.  I think it was around $5.00 a month to receive all of this package of distant signals.


LISTNUM 1 \l 16511             And then, about 18 months ago or maybe a little longer, they opted to offer them as part of the digital basic package and as digital cable continues to grow and no doubt it will, and DTH, I'm sure, is going to be trying to get more customers in addition, we are going to see more of this trend, there is no question about it.

LISTNUM 1 \l 16512             COMMISSIONER DUNCAN:  Do you think that they are ‑‑ I want to keep on with this because I think everybody has made their points wo we will have to go away and deliberate, but I just ‑‑ do you think there is a distinction where you are mentioning between station shifting and time shifting or it's just ‑‑ it's all a benefit from your point of view?

LISTNUM 1 \l 16513             MR. KIEFL:  Well, it's a benefit, but one of the quite interesting findings in both the Armstrong Consulting Study and in the study done by CanWest was that of the distant signal viewing that they measured in their analyses of BBM data, something in the neighbourhood of 40 to 45 per cent of all of the distant signal viewing in each of the studies was attributed to station shifting.

LISTNUM 1 \l 16514             COMMISSIONER DUNCAN:  I see.

LISTNUM 1 \l 16515             MR. SMITH:  And I find it interesting in that we talk about distant signals in the context of time shifting, but in reality a lot of the distant signal viewing that's going on, as measured in both of those studies, is the stations that are shifted.


LISTNUM 1 \l 16516             And I should point out that ‑‑ and I think there was a question yesterday put to Rogers about station shifting that it's not necessarily the whole station that's shifted.  It can be just an individual program.

LISTNUM 1 \l 16517             For example, Global about two years ago began airing programs in the Eastern time zone so that they aired at the same time ‑‑ in the Atlantic time zone so that they aired at the same as the local station did in Toronto.

LISTNUM 1 \l 16518             So, you can actually station shift or program shift, as opposed to the whole station.

LISTNUM 1 \l 16519             COMMISSIONER DUNCAN:  O.K.  Thank you very much.

LISTNUM 1 \l 16520             We are looking to get some information on costs so I think it will help us with that, that would be great.

LISTNUM 1 \l 16521             Some broadcasters have provided preliminary estimates on the cost of greater existing transmitter networks to high definition.  That's the replacing of the whole network and others, and also cost on constructing a system ‑‑ sorry ‑‑ a system paralleling their network and the first one on upgrading.


LISTNUM 1 \l 16522             Would it be cost effective as another alternative for a broadcaster to distribute its service in high definition across its market by satellite, with the signal being delivered free to air with your experience in satellite delivery?

LISTNUM 1 \l 16523             MR. SMITH:  It's quite a complex answer I think is the preface to my answer.  You can't look at the cost of distribution by satellite on a channel by channel basis because there is such large embedded cost in running a satellite platform.

LISTNUM 1 \l 16524             So I think some of the broadcasters have been the point that it is just is inappropriate for them to essentially set up their own satellite platform for distribution of over‑the‑air signals, be it SD or HD.

LISTNUM 1 \l 16525             It would make sense for them to piggyback on the back of an existing satellite platform like Bell ExpressVu and we agree with that, it's just simple economic as it costs hundreds of millions of dollars to set up a satellite platform before you put any channels up.

LISTNUM 1 \l 16526             And then, you have the incremental costs of providing additional bandwidth to carry each service.


LISTNUM 1 \l 16527             The previous panel, Mr. Shaw's panel, gave the Commission some numbers which I would broadly support that each transformer would probably cost around two million dollars a year and the number of channels you can put on that transformer is about eight or so SD channels and two HD channels are present and that may grow in the future.

LISTNUM 1 \l 16528             But I would stress the point, that is the incremental cost over adding each new signal.  It does not take into account any of the core infrastructure costs that the business has.  It doesn't take into account the cost of all the costs of services or security services and everything else.

LISTNUM 1 \l 16529             Another point I would like to make in answer to this question is the satellite resources are finite.  There is only so many frequencies available.  There is only so many over the locations available and probably more importantly, each customer with a satellite dish currently only looks at certain frequencies and certain over the locations.

LISTNUM 1 \l 16530             So, once you could theoretically, if there was bandwidth available in space for another satellite with different location, you haven't got anybody looking at it and it's a huge logistical exercise to provide dishes and set up boxes to customers which is, yes, another reason why piggyback is such a service on the back of an existing satellite platform is the right way to go


LISTNUM 1 \l 16531             COMMISSIONER DUNCAN:  I'm sure you can appreciate that we are just trying to address that remaining five to ten per cent.

LISTNUM 1 \l 16532             MR. KIEFL:  Yes.  I think my colleague, Mr. Frank, would like to add something.

LISTNUM 1 \l 16533             MR. FRANK:  I would just like to comment on some of the evidence given by previous witnesses to the effect that the two DTH companies and I should only speak obviously of ExpressVu, are bringing on new satellite capacity in the not too distance future.

LISTNUM 1 \l 16534             I would just like to point out that the next satellite that we will be acquiring will actually be a replacement satellite.  So, whereas it will provide a better coverage, higher power coverage of Canada, which is more conducive to high definition TV, we are not increasing the number of frequencies at that orbital slot that are currently available to us.

So, it's replacement, it's not necessarily incremental.

LISTNUM 1 \l 16535             The first opportunity for incremental a space segment and as Gary said, will be at a different orbital location which has significant logistical challenges and significant costs associated because you have to provide a new receive end antenna won't be till after 2010.  Gary, you have the ‑‑


LISTNUM 1 \l 16536             MR. SMITH:  Yes, that's the right time frame, around 2010.  I appreciate the intervention from Mr. Frank because these are huge costs, huge costs, the cost of any satellite exceeds one billion dollars as the commitment that we have to sign to support any satellite to expand our services.

LISTNUM 1 \l 16537             Now, that investment is a cost that we, as a BDU, are willing to embrace and we have embraced it for satellite bandwidth today and we will continue to do so, particularly in respect of the growth of HD services in Canada.

LISTNUM 1 \l 16538             We believe we have to bear our own costs for that and, you know, grow with the punches the industry charges us and HD is one of those punches great opportunities.  We simply believe that the over‑the‑air broadcasters have to do the same in these respects.  They have to, you know, evolve their businesses and innovate to the same extent according to our submission.

LISTNUM 1 \l 16539             COMMISSIONER DUNCAN:  I appreciate your comments and then certainly that wouldn't sound to be a third possibility or alternative for them continuing over‑the‑air distribution.


LISTNUM 1 \l 16540             MR. SMITH:  I would like to add that, you know, once I think satellite distribution is a very expensive option for them to pursue in isolation.

LISTNUM 1 \l 16541             I think because we will have to carry a lot of these channels anyway, as a result of the existing regime, there is an opportunity for synergies by bringing into the market a solution whereby a satellite distribution platform provides access to a limited number of high definition signals or digital standard definition signals to Canadian consumers outside the major markets, either at a reduce subscription or a subscription which is subsidized by the broadcasters over on some commercial basis that works for the industry.

LISTNUM 1 \l 16542             And we are anxious and willing to participate in those discussions.

LISTNUM 1 \l 16543             COMMISSIONER DUNCAN:  Thank you.

LISTNUM 1 \l 16544             MR. FRANK:  And those are the types of things we can talk about with the broadcasters in the context of a new comprehensive agreement respecting program deletion.

LISTNUM 1 \l 16545             COMMISSIONER DUNCAN:  Thank you.  That actually ‑‑ I jump ahead of my question because that sort of follows into one of my other questions that I had.


LISTNUM 1 \l 16546             Just dealing with these customers that will be the remaining five or ten per cent, estimated to be the remaining five to ten per cent, there is two suggestions that I am aware of, that provision of a set‑up box at low or no cost or the provision of a sub‑basic package which would be excluding, which would exclude probably the U.S. channels and these would be take it then the kinds of solutions that you're suggesting, you might be able to work upon with the broadcasters as a more cost effective delivering service to these hold‑outs if you like?

LISTNUM 1 \l 16547             MR. SMITH:  In general, the types of options you've described, there are certainly the types of things that we would be welcome ‑‑ we would be happy to discuss.

LISTNUM 1 \l 16548             There are many different models, but we have to acknowledge there is a huge cost in carrying these signals and in providing the logistics and the set‑up boxes and things, so somebody has to be and if we want to bring those services for each subscriber, then there is a cost to the industry.

LISTNUM 1 \l 16549             But, you know, our ambition would be to make the costs as achievable as possible and what the broadcasters to find a way to make it work for them as well as for ourselves.


LISTNUM 1 \l 16550             COMMISSIONER DUNCAN:  Thank you.  I have another cost capacity related question here with regards to the ‑‑ what I understand is 124 local stations and in your brief, you indicated that you're presently carrying more than 70 I think is what it said.

LISTNUM 1 \l 16551             I am just wondering how much satellite capacity would be required to distribute the remaining local stations in standard definition and then when they convert to high definition and what kind of cost and timing you expect involved there, if you were to ‑‑ first of all, I guess we would have to assume you're going to deliver all 124, but ‑‑

LISTNUM 1 \l 16552             MR. SMITH:  Well, first of all, a simple math that each transformer on the satellite carries eight, nine, ten channels, that sort of number, depending on the content of those channels.  So, the simple math would say if there is 54 channels missing, then it would be five, six, seven transformers, that sort of size.  I think that's consistent with the kind of ‑‑ the response to the same question that was posed to Mr. Shaw's organization as well.

LISTNUM 1 \l 16553             COMMISSIONER DUNCAN:  Yes.

LISTNUM 1 \l 16554             MR. SMITH:  So, that clears the simple math issue.


LISTNUM 1 \l 16555             From our business perspective, it would be a ‑‑ it would be an unreasonable demand on our business to carry all 124.  There is hugh duplication in these signals and they don't bring any additional value to the majority of the subscribers and I simply don't recognize the physics of a satellite platform.

LISTNUM 1 \l 16556             Satellite platforms are really good at delivering, you know, high quality bandwidth with intensive signals across to a larger audience across a large area and I think the compromise that has been reached over the course of the last ‑‑ well, since ExpressVu was created back in 1998 where we carry two thirds of the signals, 70 or so, is an appropriate compromise for the SD world.

LISTNUM 1 \l 16557             And whilst we are prepared to look at tweaking the number of signals we carry, so for example the small independent ‑‑ sorry, the independent broadcasters serving small markets, we know are seeking another four signals, I think, and we are very happy to consider that request as part of the overall negotiation, without making any commitment to carry them across, but we need to ‑‑ we do need to discuss of other aspects of that deal.


LISTNUM 1 \l 16558             We're happy to consider tweaking with them, but a whole set increase from 70 to 124 would rob us of five, six, seven transformers as which (a) we don't have today.  We are in the same position that Mr. Shaw's organization is, that there just isn't.  You don't leave satellite capacity unused.  So we would have to take down money earning services, revenue earning services, which would hurt potentially Canadian specialty in pay and our business.

LISTNUM 1 \l 16559             And we also need future growth of satellite resources to deal with the enormous transition to HD that we're expecting over the coming three to five years.

LISTNUM 1 \l 16560             We currently have in excess of 40 HD channels, we are expecting that to grow to more than 100 in the near future and that's going to really stretch our resources to meet that need.  So, to take five, six, seven transformers, which is a substantial pushing of a new satellite to deal with signals which don't bring any incremental value to the majority of our subscribers.  It just doesn't make sense, I'm afraid, Commissioner Duncan.

LISTNUM 1 \l 16561             COMMISSIONER DUNCAN:  You mentioned about the satellite being replaced, a replacement satellite.  So, will that give you ‑‑ does it also include an increase in capacity then?


LISTNUM 1 \l 16562             MR. SMITH:  No, it doesn't.  We, as Chris described, we currently have four satellites dedicated to ExpressVu services in over two different over the locations.  Two of them, the 82 degree location and those two satellites are going to be replaced by the new satellite when it's launched in 2008.

LISTNUM 1 \l 16563             COMMISSIONER DUNCAN:  I'm sorry, which location did you say?

LISTNUM 1 \l 16564             MR. SMITH:  It's over the locations 82 degrees west.  It's one of our two over the locations and the satellites of that location will be straight replaced by the new satellite that we're launching in 2008, subject to a successful launch, of course.

LISTNUM 1 \l 16565             So, we are looking at increasing capacity further, but as per described that means going to different frequencies and different over the locations and that's great and very significant logistical issue how you migrate customers to that location.

LISTNUM 1 \l 16566             COMMISSIONER DUNCAN:  Now, you mentioned I think a few seconds ago that you expect that the HD signals that you're carrying are going to increase in the near term to 100.  Do you have the capacity now for that?

LISTNUM 1 \l 16567             MR. SMITH:  No.


LISTNUM 1 \l 16568             COMMISSIONER DUNCAN:  You don't have the capacity.

LISTNUM 1 \l 16569             MR. SMITH:  No.  We will be achieving that through a combination of technology enhancements for the existing satellite technology ‑‑ the existing orbital locations, by making more efficient use of those locations, and by adding incremental capacity at new orbital locations not yet contracted for.

LISTNUM 1 \l 16570             COMMISSIONER DUNCAN:  Mr. D'Avella mentioned compression ‑‑ or three HD services on one transponder.

LISTNUM 1 \l 16571             Is it reasonable to expect, then, that technology will evolve so that that three will increase to five or six?

LISTNUM 1 \l 16572             MR. SMITH:  It is early days to say with high definition, but there is certainly potential for it to increase, and increases over the next five to ten years do factor into our satellite plans.


LISTNUM 1 \l 16573             We certainly anticipate, say, in ten years' time, being able to carry significantly more services because of improvements in technology.  But in the short term ‑‑ and by "short term" I am thinking three to five years ‑‑ we will be significantly constrained by available bandwidth and current technology.  So to carry another 50 SD services ‑‑ even the 50 in SD would be unreasonable.

LISTNUM 1 \l 16574             And to start to suggest that we would carry the same services in HD would be just a death blow to the DTH business.

LISTNUM 1 \l 16575             COMMISSIONER DUNCAN:  On the point of omnibus channels, it seems that that would be most applicable to the small‑market stations.

LISTNUM 1 \l 16576             Am I correct in that?

LISTNUM 1 \l 16577             I am just wondering if you have actually sat down at the table with them and tried to explain your situation, and shown them that this would be an avenue for them to get their local content across the country, if that is their objective, by using an omnibus channel.

LISTNUM 1 \l 16578             MR. SMITH:  I am going to ask my colleague, Chris, to speak to this in more detail, because, as Vice‑President of Programming, he is responsible for all of the discussions we have directly with the broadcasters and will know more detail than I do.

LISTNUM 1 \l 16579             The omnibus suggestion, which ExpressVu was very happy to pioneer and obtain Commission approval for, is something which could apply to any local content, not just for the independents.  It could apply to any of the broadcasters.


LISTNUM 1 \l 16580             Chris, would you like to expand upon that?

LISTNUM 1 \l 16581             MR. FRANK:  Yes, thank you, Gary.

LISTNUM 1 \l 16582             We have had discussions with most of the broadcast groups, and certainly with the CAB, in the discussions that led up to the last comprehensive agreement.

LISTNUM 1 \l 16583             We did float this idea at our licence renewal, and subsequently we got CRTC permission to do it.

LISTNUM 1 \l 16584             In fact, we are doing it now with CJOH.

LISTNUM 1 \l 16585             I would encourage the broadcasters and the Commission to think of this not just necessarily as an omnibus channel, because I understand the broadcasters' concern about having CTV programs mixed up with CTV programs, mixed up with Global, et cetera.

LISTNUM 1 \l 16586             We are prepared, to the extent our resources permit, to provide each local channel with its individual channel spot on our electronic programming guide, so there is not a hodge‑podge of programming on one omnibus channel.


LISTNUM 1 \l 16587             The idea would be that all of the unique local programming, market‑over‑market, would be available on a discrete channel, and those discrete channels would be placed contiguous to the same network in time zone.  So for customer convenience ‑‑

LISTNUM 1 \l 16588             The broadcasters are concerned that, in an array of 1,000 channels, they will get lost.

LISTNUM 1 \l 16589             Let's use an example, because it's appropriate.

LISTNUM 1 \l 16590             Let's take CBC Kingston, which is owned by the Corus Group.  If we provided the unique local programming from Kingston ‑‑ Kingston is not currently carried on our service ‑‑

LISTNUM 1 \l 16591             COMMISSIONER DUNCAN:  Yes, we know that.

LISTNUM 1 \l 16592             MR. FRANK:  ‑‑ near or very close to either Ottawa or Toronto, or maybe between Ottawa and Toronto, people who want CBC network programming can easily rejoin the network, without getting lost, yet people in Kingston, and expat folks from Kingston across the country, can see all of the local programming and local news from Kingston.


LISTNUM 1 \l 16593             That is the essence of our proposal.  It was, I think, quite clear in our licence application some years ago.  And, as I said, the Commission has approved it, and we are very interested in exploring this possibility with broadcasters, because it brings more local and regional programming to our subscribers.

LISTNUM 1 \l 16594             COMMISSIONER DUNCAN:  I would think they would be more interested in exploring it with you, as well, given that it seems unrealistic to expect that we are going to be able to add all 124 channels.

LISTNUM 1 \l 16595             MR. SMITH:  Absolutely.

LISTNUM 1 \l 16596             I would like to add to Chris' response.

LISTNUM 1 \l 16597             The technology that we have in a digital satellite platform is very advanced, and it brings a lot of capabilities.  It is appropriate, and we want to try to bring those capabilities to the benefit of the industry, and, of course, ourselves and our consumers.

LISTNUM 1 \l 16598             Hence, we have made significant investments in, for example, interactive technology.

LISTNUM 1 \l 16599             Some of the Commissioners may be aware that we recently launched an interactive sports portal and an interactive news portal to give customers on‑demand access to more content.

LISTNUM 1 \l 16600             This technology enables broadcasters to do things like interactive advertising, or other interactive ventures that we haven't even thought of yet.


LISTNUM 1 \l 16601             Quite frankly, we are a little bit disappointed that the broadcasters are not working with us more aggressively to make use of this innovative technology that we are pioneering to overcome some of these difficulties, but are, instead, coming to the Commission for a regulatory fix to a problem that we don't think exists anyway.

LISTNUM 1 \l 16602             COMMISSIONER DUNCAN:  Do you approach them on that?  Do you take the initiative?

LISTNUM 1 \l 16603             MR. SMITH:  Absolutely, Commissioner Duncan.

LISTNUM 1 \l 16604             We have a team of individuals within our organization looking after the technology, but also the promotion and the marketing aspects of that technology ‑‑

LISTNUM 1 \l 16605             COMMISSIONER DUNCAN:  But the liaison ‑‑

LISTNUM 1 \l 16606             MR. SMITH:  ‑‑ who are working with the broadcasters, and we are continually trying to persuade them to engage with us.

LISTNUM 1 \l 16607             COMMISSIONER DUNCAN:  Thank you.

LISTNUM 1 \l 16608             MR. FRANK:  Yes, I can confirm that the liaison through my department is fully engaged.

LISTNUM 1 \l 16609             COMMISSIONER DUNCAN:  Thank you.


LISTNUM 1 \l 16610             MR. FRANK:  If I could go back two or three questions to your question about the number of high definition services available on one transponder, it is our evidence ‑‑ and I think it was Mr. D'Avella's evidence, too ‑‑ that the current state of the art is two per channel, and that we hope to get to three, maybe four, in the near to middle term.  But currently it is two.

LISTNUM 1 \l 16611             COMMISSIONER DUNCAN:  Thank you.

LISTNUM 1 \l 16612             Do you think that the absence of an off‑air alternative would change the competitive balance in the marketplace and allow distributors to raise their rates?

LISTNUM 1 \l 16613             This is a concern from a consumer point of view.

LISTNUM 1 \l 16614             MR. SMITH:  My initial reaction is no, I don't think it does affect the rates that BDUs are able to charge for the services they currently provide.

LISTNUM 1 \l 16615             I think there is a die‑hard community of people that don't see the need for the extra value that television entertainment brings.  They really just want local news, for example, and I think that is an important social service.  That is my personal view.


LISTNUM 1 \l 16616             As we made clear in our opening statement, we think that those services should be available to 100 percent of Canadians, and there is a place for over‑the‑air broadcasting into the future.

LISTNUM 1 \l 16617             I'm sorry; does that answer the Commission's question?

LISTNUM 1 \l 16618             COMMISSIONER DUNCAN:  Actually, no.

LISTNUM 1 \l 16619             I'm sorry; I will try again.

LISTNUM 1 \l 16620             MR. SMITH:  I will try again.

LISTNUM 1 \l 16621             COMMISSIONER DUNCAN:  I am just thinking in an instance where the off‑air is gone because the spectrum has been taken away, or the analog transmitters are worn out and haven't been replaced, so there is no over‑the‑air transmitter.

LISTNUM 1 \l 16622             Then you are dealing with cable and DTH.

LISTNUM 1 \l 16623             Do you think, then, that we should be concerned that it would give distributors a greater opportunity to increase prices?


LISTNUM 1 \l 16624             MR. SMITH:  I think, if we can find a solution whereby the BDUs help to provide a zero or a low‑cost solution for the small percentage of customers who don't want the rich content that is available on the BDUs, then I don't see any reason why it would change the existing model at all.  There would be an opportunity for customers to gain access to the four, five or six signals they currently enjoy via over‑the‑air transmission through the BDUs, in some appropriate format.

LISTNUM 1 \l 16625             The customer may have to buy reception equipment, and there may be arrangements in place with the broadcasters to cover the costs, but it would be an acceptably low cost to the consumer, and it wouldn't feel like a subscription.

LISTNUM 1 \l 16626             Then, the existing regime wouldn't be changed.

LISTNUM 1 \l 16627             If you took them away entirely, then, I would still not see an opportunity for us, for example, to increase our prices, because I think we have certain access to a customer's propensity to pay for these services, and it depends on the quality of the services we bring, which is why we would continue to invest in more services, more HD.

LISTNUM 1 \l 16628             We think that, when you add real value to subscribers, by adding choice of programming and quality of programming and high definition services, then customers have demonstrated that they are willing to pay for those services.

LISTNUM 1 \l 16629             But we don't ask customers to pay something for nothing, which is the core of ‑‑

LISTNUM 1 \l 16630             COMMISSIONER DUNCAN:  That is really the answer, I think, that I was looking for.  Thank you.


LISTNUM 1 \l 16631             The analog shutdown date ‑‑ you indicate that you favour what you call a "date certain deadline" for the shutdown.  I am wondering what factors you think the Commission should consider in determining that date.

LISTNUM 1 \l 16632             MR. SMITH:  Our platforms are 100 percent digital, so we are not directly impacted by this date, which is why we have not put forward a specific date.

LISTNUM 1 \l 16633             We do favour the Commission establishing a date certain, and the reason for that is because we think that one of the biggest threats that we face is the Canadian broadcasting services falling too far behind our neighbours across the border.  If there is a wealth of high definition services available either over the air, using digital terrestrial equipment, or through the BDUs in America, then more customers in Canada will migrate to sources of programming from the States.


LISTNUM 1 \l 16634             We think that our best defence against that is to continue to provide a really strong programming offering to Canadian consumers; and allowing the industry to fall behind by not setting a date certain, or setting a date certain a long time after the States, will give significant assistance to that market that Mr. Shaw and his team were referring to.  You can easily go and buy a Direct‑TV Box or an Echostar Box and watch American programming today.

LISTNUM 1 \l 16635             We don't want customers to want to do that.  We want them to feel that they are getting good services from Canadian BDUs and Canadian broadcasters.

LISTNUM 1 \l 16636             COMMISSIONER DUNCAN:  You are probably aware of some of the other dates that have been suggested ‑‑ the end of 2010; August 2011.

LISTNUM 1 \l 16637             Do you have a date that you would like to apply to date certain, or would you just leave that to the Commission?

LISTNUM 1 \l 16638             MR. SMITH:  We would leave that to the Commission.

LISTNUM 1 \l 16639             COMMISSIONER DUNCAN:  Thank you.

LISTNUM 1 \l 16640             You state that if the Commission determines that a higher percentage of funding should go towards the small‑market fund, DTH licensees could contribute up to 2 percent of their gross broadcasting revenues to the CAB fund, rather than the current .4 percent.

LISTNUM 1 \l 16641             These funds, you suggest, would come from the CTF.


LISTNUM 1 \l 16642             We wanted to explore with you, given that ExpressVu is a national service which derives its revenues from subscribers across the country, would it be appropriate for this money to be directed to the 11 small markets that serve the 17 stations, at the expense of a national funding agency like the CTF?

LISTNUM 1 \l 16643             Did you consider that when you made your comments?

LISTNUM 1 \l 16644             MR. FRANK:  I think the key element of that statement is "if".

LISTNUM 1 \l 16645             We certainly understand what you are saying, but it was only a question of ‑‑

LISTNUM 1 \l 16646             If the Commission saw the value that this independent fund is bringing to the small‑market independents, and if the Commission felt there was capacity within those local independents to effectively utilize additional funds for incremental programming, then we thought that would be something that you might be interested in.

LISTNUM 1 \l 16647             It is not that we are advocating that, but we would note that cable is able to divert slightly less than 2 percent ‑‑ or 2 points of its 5 points, excuse me, to community channels.


LISTNUM 1 \l 16648             There is a case to be made that local broadcasters are our community channel, and that, if we could set aside a similar amount of money, using the cable model, that money could go to incremental programming for small‑market broadcasters, or perhaps even large‑market broadcasters, if you felt, in your wisdom, that that would help make those services more competitive in the 500‑channel universe.

LISTNUM 1 \l 16649             That was the thrust of it.  We weren't advocating it, necessarily, but I take it that the point of this hearing is to flesh out ideas ‑‑ or flush out ideas ‑‑ and that was the intent.

LISTNUM 1 \l 16650             COMMISSIONER DUNCAN:  Thank you very much.  That's helpful.

LISTNUM 1 \l 16651             There is one last question that I have.  In the absence of transmitters, how should cable priorities be determined?

LISTNUM 1 \l 16652             This would apply, I think, more to your DSL service ‑‑ IPTV ‑‑ than to ExpressVu, but I would like to explore it.

LISTNUM 1 \l 16653             I am not sure if it applies as much to Bell ExpressVu, but I want to know how you think that local, regional and extra‑regional signals should be determined and defined in the regulations in the absence of over‑the‑air transmitters.

LISTNUM 1 \l 16654             MR. SMITH:  I'm not sure I understand the question, I'm sorry.

LISTNUM 1 \l 16655             Let me confer with my colleague.


LISTNUM 1 \l 16656             COMMISSIONER DUNCAN:  Maybe it is not something that you want to address, and that's okay too, but because they are broadcast over‑the‑air cable carriage is determined by where their signal reaches, the contours they reach, and the local signals, regional signals and extra regional signals, which all tie back into the over‑the‑air transmitter.

LISTNUM 1 \l 16657             So once the transmitters are gone, I'm just wondering how you think that carriage should be determined?

LISTNUM 1 \l 16658             MR. SMITH:  I think my understanding of the broadcaster's proposals ‑‑ specifically I am referring to the hybrid proposals that we have vocally supported ‑‑ is, in the major markets, that there would still be digital terrestrial over‑the‑air broadcasting available.  So in the major markets I don't think it would be an issue.  It wouldn't change the existing regime.

LISTNUM 1 \l 16659             I think the Commission's foresight over the years in developing a competitive BDU market through provisioning for DTH, there are two DTH providers available to all consumers.  I think in 90 percent of Canadian households there is a cable option, so Canadian consumers have a very, very wide range of options available to them for a source of services.


LISTNUM 1 \l 16660             The final question remains as to whether there needs to be a replacement for the over‑the‑air services outside the major markets.  That was the subject of the hybrid discussion.

LISTNUM 1 \l 16661             Does that answer the Commissioner's question?  I'm not sure.

LISTNUM 1 \l 16662             COMMISSIONER DUNCAN:  That's sufficient.  Thank you.

LISTNUM 1 \l 16663             That's all my questions, Mr. Chairman.  Thank you.

LISTNUM 1 \l 16664             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 16665             Commissioner Cugini...?

LISTNUM 1 \l 16666             COMMISSIONER CUGINI:  Good morning, gentlemen.  Just a couple of questions.

LISTNUM 1 \l 16667             I have here your printout from your website of the lineup on ExpressVu and I notice that there is a section that says "Additional hardware required for the following channels".

LISTNUM 1 \l 16668             Are those the services that are on Nimiq 2?

LISTNUM 1 \l 16669             MR. FRANK:  They are the services that come from 82.0E, yes.


LISTNUM 1 \l 16670             COMMISSIONER CUGINI:  I want to look at it from the perspective of your customer and on the impact on these services that you carry that require additional hardware.

LISTNUM 1 \l 16671             MR. FRANK:  Right.

LISTNUM 1 \l 16672             COMMISSIONER CUGINI:  So if I want to receive CTV HD in my home, what am I required to purchase?

LISTNUM 1 \l 16673             MR. FRANK:  All of our HD services come from 82.0E.  The two key business drivers for adding capacity at 82.0E were (a) to be able to grow our business, but (b) to have backup in case we ran into an in‑orbit problem at 91.

LISTNUM 1 \l 16674             So the route for expansion 82.0E and all of our HD services are there, so you would need an additional feedhorn and additional wiring in your home to accommodate reception at 82.0E

LISTNUM 1 \l 16675             COMMISSIONER CUGINI:  Is there an additional cost to the customer in order to receive these, in terms of hardware firstly?

LISTNUM 1 \l 16676             MR. FRANK:  We have a variety of offers in the marketplace dependent on what the customer is ordering.  So in some cases it is available free, in other cases there is a slight charge, yes.

LISTNUM 1 \l 16677             COMMISSIONER CUGINI:  You also include some local signals on the 82.0E.

LISTNUM 1 \l 16678             MR. FRANK:  That's correct.


LISTNUM 1 \l 16679             I would hasten to point out that many of those are part of the comprehensive deal that we struck with the CAB some four years ago, in those cases where customers were moved or new customers have been dealt with either on a free or highly subsidized basis.

LISTNUM 1 \l 16680             COMMISSIONER CUGINI:  Highly subsidized in terms of the equipment that they will require in order to receive ‑‑

LISTNUM 1 \l 16681             MR. FRANK:  Additional equipment, that's correct.

LISTNUM 1 \l 16682             COMMISSIONER CUGINI:  I heard you, Mr. Smith, when you said that if we were to require the addition of all local stations it would be disastrous.

LISTNUM 1 \l 16683             I note they are your business decisions, but I am curious as to why you would carry some and not all.

LISTNUM 1 \l 16684             We heard OMNI yesterday saying OMNI 10 and 11 should be carried; we heard Global that said that Red Deer and ‑‑ it escapes me right now ‑‑ should also be carried.

LISTNUM 1 \l 16685             So why some and not ‑‑ what is the process that goes into making that decision?


LISTNUM 1 \l 16686             MR. SMITH:  It is a compromise, and a very important one for the Commission to be fully aware of, that, as I explained, satellite technology is very good at delivering a signal across a wide area to a large number of customers.  It is a very inefficient way of delivering a signal to a very small number of customers.  A community of 10,000 or something, you just wouldn't use satellite for that unless it was a very unusual circumstance.

LISTNUM 1 \l 16687             So what we have ended up with, through both a combination of the effects of the regulatory regime that we operate under and the commercial negotiations that have taken place that Chris has referred to on a number of occasions through this hearing, we have ended at a compromise, and that compromise is that we carry 70‑plus of the local services and not 50.


LISTNUM 1 \l 16688             It is a compromise that can be adjusted, but it is the compromise between using our bandwidth for services which don't generate incremental business benefit for our business, therefore allowing us to generate incremental business benefit to fund all of the developments of the platform and the investment in, for example, new satellite services for high definition and, on the other hand, giving sufficient carriage to the broadcasters to, first of all, meet consumer demands, because the consumer is the end, the most important feature in here in many respects, and also meet their desires for local content and local advertising.

LISTNUM 1 \l 16689             That compromise has been struck and it has been successful struck for the last few years at the levels we have.

LISTNUM 1 \l 16690             Yes, I'm sure the broadcasters want the other 50 channels, but the incremental value to them in our terms would be significantly outweighed by the cost to the BDU business, and specifically the DTH business.  We would not be able to carry anywhere near the amount of specialty pay and high definition services that we currently have, and it is those services as much as the local broadcasting services which are driving value into the broadcasting industry.

LISTNUM 1 \l 16691             As we pointed out earlier in the hearing, in fact in our opening statement, our profitability is still significantly less than the broadcasters that are seeking these fees for carriage from us and the additional carriage.

LISTNUM 1 \l 16692             We are not a pot of money, we can't fund all this stuff as a charity to the industry, we have to have something that works as well.

LISTNUM 1 \l 16693             COMMISSIONER CUGINI:  Thank you very much.

LISTNUM 1 \l 16694             Thank you, Mr. Chairman.


LISTNUM 1 \l 16695             THE CHAIRPERSON:  Commissioner Williams...?

‑‑‑ Pause

LISTNUM 1 \l 16696             COMMISSIONER WILLIAMS:  Mr. Smith, earlier this morning we received the views of Shaw Communications on the effectiveness of the Canadian Television Fund.

LISTNUM 1 \l 16697             Could we please have the views of Bell on the effectiveness of this specific funding mechanism?

LISTNUM 1 \l 16698             MR. SMITH:  I'm going to ask my colleague Mr. Frank to speak to that because I think he is one of the architects of the arrangements that exist.

LISTNUM 1 \l 16699             Chris...?

LISTNUM 1 \l 16700             COMMISSIONER WILLIAMS:  Mr. Frank...?

LISTNUM 1 \l 16701             MR. FRANK:  Thank you.

LISTNUM 1 \l 16702             I think there were two elements to the Shaw panel's comments on the CTF:  (a) its effectiveness in promulgating new Canadian programs and (b) DTH's inability to get a seat on the Board.


LISTNUM 1 \l 16703             In respect of programming, I have to say that generally speaking we would like to be in a regime where we leave the programming of conventional specialty and pay services to the experts in the various companies, and the same with the independent funds.

LISTNUM 1 \l 16704             So we don't have any comment in specific, but we have noticed that there have been a number of reorganizations, new concepts at the CTF which is focusing on streamlining the Board and getting more quicker and more effective decision.  That we applaud, any reorganization that would do that.

LISTNUM 1 \l 16705             We, like Shaw, are very anxious to have a seat on the Board.  Currently, one Board seat is allocated to DTH and I think it is fair to say that in this competitive climate neither of the two DTH companies can agree on an equitable sharing arrangement.

LISTNUM 1 \l 16706             Perhaps I'm mischaracterizing.  One of the DTH companies would like to see two Board seats and the other would like ‑‑ is prepared to share the existing Board seat ‑‑ I'm trying to be small "p" political here, it's a bit difficult ‑‑ and then work from within the system to see if we can acquire a second Board seat.


LISTNUM 1 \l 16707             So we would like to be a part of the CTF and look forward to the point at which we can actually have a seat on the Board.  As it is an independent fund, we will make our comments known at the time we get on the Board.

LISTNUM 1 \l 16708             Canadian programming is important, it differentiates us from our unregulated competitors from south of the border, so we are fully supportive of the general initiative and glad to see our 5 percent is being used to promulgate new Canadian programming.

LISTNUM 1 \l 16709             COMMISSIONER WILLIAMS:  Thank you, Mr. Frank.

LISTNUM 1 \l 16710             Thank you, Mr. Chair.  That is my question.

LISTNUM 1 \l 16711             THE CHAIRPERSON:  Thank you very much, Mr. Williams.

LISTNUM 1 \l 16712             Mr. Smith, or maybe one of your colleagues, earlier this morning when we discussed with Shaw, and again when we discussed with you and your team regarding various costs, one of the considerations that we are having here currently is the related costs of uplinking and carrying an analog over‑the‑air signal versus the carriage of an analog HD signal.

LISTNUM 1 \l 16713             Are there major differentials in these costs and what are they?


LISTNUM 1 \l 16714             MR. SMITH:  As I explained earlier, Commissioner Arpin, there is a large chunk of fixed cost which is currently we do not have any pre‑established mechanism of allocating that cost on a megabyte basis or on a channel basis, so there is just a large chunk of cost that we bear as a cost of doing business.  The only real costs which we can identify as being separately incremental for each channel is the satellite transponder, which we have quoted the cost to the Commission.

LISTNUM 1 \l 16715             I can certainly take it as an action to give some thought to this and provide some further information to the Commission if they would find it useful.

LISTNUM 1 \l 16716             THE CHAIRPERSON:  I think we will find it useful if you could do it, please.

LISTNUM 1 \l 16717             MR. SMITH:  Part of the discussion that we have had over the last couple of days had to do with the francophone market where, as you probably heard, the two major cable BDUs are supporting the idea of a fee for carriage for the francophone TVA and TQS service.

LISTNUM 1 \l 16718             Does ExpressVu have a different point of view on that than the ones that Shaw expressed earlier today?  So was CCSA, as a matter of fact.  They said the same thing as Shaw.


LISTNUM 1 \l 16719             MR. SMITH:  To the extent that these channels, these broadcasters are seeking fee for carriage for their services, I wouldn't want to differentiate them from any of the English language services or any of the services which could fall into this category.

LISTNUM 1 \l 16720             With regard to the size of their proposed fees, I thought they were outrageous, but that is a personal view again.

LISTNUM 1 \l 16721             THE CHAIRPERSON:  All right.

LISTNUM 1 \l 16722             MR. SMITH:  Chris, do you have anything to add?

LISTNUM 1 \l 16723             THE CHAIRPERSON:  I think for the record that is really ‑‑

LISTNUM 1 \l 16724             MR. FRANK:  Well, I would note one of the two integrated broadcasters that were in front of you, and perhaps both, are agreeing to fee for carriage on the basis that there is a rebalancing of rates between specialty and pay and conventional broadcasting.

LISTNUM 1 \l 16725             THE CHAIRPERSON:  Surely one is saying that.

LISTNUM 1 \l 16726             MR. FRANK:  Yes, surely one is saying that.

LISTNUM 1 \l 16727             THE CHAIRPERSON:  The other one we are going to hear after you and their written submission doesn't address that issue.


LISTNUM 1 \l 16728             MR. FRANK:  that sounds like robbing Peter to pay Paul.

LISTNUM 1 \l 16729             I think our position, as Gary said, is that we are opposed to fee for carriage, both in principle and in actual fact.

LISTNUM 1 \l 16730             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 16731             Mr. Smith, in replying to one of the very first questions Mrs. Duncan asked you, you mentioned that the fee for carriage was some kind of a tax.

LISTNUM 1 \l 16732             Could you elaborate on the legal consideration that the fee for carriage could be a tax that will be levied following a CRTC policy?

LISTNUM 1 \l 16733             MR. SMITH:  I was worried that you didn't have any questions for my colleague Mr. Elder, so I will happily pass the microphone to him.

LISTNUM 1 \l 16734             THE CHAIRPERSON:  There are a few.  They are coming.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16735             MR. ELDER:  Because, as you can see, I'm clearly not here for eye candy.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 16736             MR. ELDER:  I think we can appropriate it from two senses.


LISTNUM 1 \l 16737             One, I think if you take it from a customer perspective and look at what is being proposed, to the extent we can nail down what is being proposed, I think the requirement that BDUs collect money and hand it over to another party to underwrite the activities of another party I think most people would understand to be a tax and would use the term in that sense.

LISTNUM 1 \l 16738             There is no perceived value, or additional perceived value to the consumer.  In essence, it purports to apply changes to an unencrypted free over‑the‑air wireless service.

LISTNUM 1 \l 16739             And it divides consumers into two groups, the taxed, which would be BDU subscribers, and the tax exempt, which would be traditional over‑the‑air viewers, anybody who has an antenna, rabbit ears, or a coat hangar for that reason.

LISTNUM 1 \l 16740             I think it is difficult to square this with the concept of a subscription fee.  If only some people have to pay the fee and others don't, I don't think that fee is clearly tied to the reception of the signal.

LISTNUM 1 \l 16741             I think looking at the legal test, I think in pith and substance the purpose is to raise revenue.  As we note in our brief, I think it meets the five‑prong test outlined by the Supreme Court.


LISTNUM 1 \l 16742             Additionally, and most importantly I suppose, I think it fails the regulatory charge test or the regulatory charge exception in that test.

LISTNUM 1 \l 16743             I think if you look at the case law, regulatory charge does not mean any charge that might be levied pursuant to a scheme of regulation or that might be purportedly for regulatory purpose.  They fall into very definite sort of categories where there are sort of user fees like a water supply charge or a fee for the registration of a title of land.

LISTNUM 1 \l 16744             Sometimes they have social policy elements, so they could be like a markup on imported liquor that is really designed to encourage a domestic industry, or energy conservation where the pricing or whatever is designed to disuade people from using certain types of fuels.


LISTNUM 1 \l 16745             Finally, there is this notion of regulatory charges where there is a relationship between the fee and the benefit or the need for certain services, so fees for removal of gravel I think was one that has been found as a regulatory charge and it's raised sufficient revenue to cover the costs of the regulatory scheme and the building and maintenance of the roads over which the gravel trucks would travel, or an education fee paid by developers where there was a relationship between the development and the need to build new schools and so the developers were on the hook for helping to subsidize the building of those schools.

LISTNUM 1 \l 16746             I don't see in the case law a situation like this where there is a general regulatory purpose which is the creation and presentation of Canadian programming ‑‑ I think that is where we are going on this ‑‑ and found to be a regulatory charge.

LISTNUM 1 \l 16747             In fact, there was some discussion earlier in this hearing about the Westbank case, and if we look at the Westbank case itself, there it was by way of a by‑law but it was essentially like a property tax.  The intention was to levy funds in order to promote the interests of aboriginal peoples and further the aims of self‑government.  That was the overarching purpose.

LISTNUM 1 \l 16748             The Court distinguished that overarching purpose from the very specific purpose, which it said was really simply to raise revenue.

LISTNUM 1 \l 16749             I think similarly here where we migh say there is an overarching purpose of filling the objectives of the Broadcasting Act or the creation and presentation of Canadian programming, I think the very specific purpose here is transferring wealth from one set of industry players to another.


LISTNUM 1 \l 16750             For those reasons I think this does qualify as a tax under Canadian law.

LISTNUM 1 \l 16751             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 16752             Mr. Smith, in your oral presentation at the bottom of page 6 this morning you mentioned the WIPO discussion in Geneva.  I don't want to enter into that, but your second sentence says:

"U.S. broadcasters want to receive fees from Canadian BDUs from the carriage of their local signals to Canadian households."  (As read)

LISTNUM 1 \l 16753             Other than through discussions at WIPO, do you have any other evidence that they are looking for their ‑‑ obviously they are interested in receiving a carriage fee, but do you have other evidence that they are pressing for a fee for carriage?

LISTNUM 1 \l 16754             MR. SMITH:  I was certainly referring there to the discussions which were taking place around the WIPO Treaty.

LISTNUM 1 \l 16755             I would open it to my colleagues if anyone wishes to contribute.


LISTNUM 1 \l 16756             MR. ELDER:  I think it mainly is through WIPO.  I think popular wisdom is that in fact the current retransmission regime that we have for distant signals was provoked by pressure from U.S. broadcasters.

LISTNUM 1 \l 16757             I don't think it is ‑‑ I think it is a truth that they want access to some of our money.

LISTNUM 1 \l 16758             MR. FRANK:  Commissioner, Vice‑Chair Arpin ‑‑

LISTNUM 1 \l 16759             THE CHAIRPERSON:  Yes...?

LISTNUM 1 \l 16760             MR. FRANK:  ‑‑ I would just reinforce the comments made by the Rogers panel when they went back to the '70s and emphasized the kerfuffle between the U.S. border broadcasters and the regulatory regime of program substitution ‑‑ well, first commercial deletion and its successor program substitution as indication that American broadcasters won't be shy in terms of representing their appetite for additional revenues.

LISTNUM 1 \l 16761             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 16762             On the copyright side, do you have any comments to make regarding specifically the argument that was developed by the broadcasters in their legal opinion regarding copyright?

LISTNUM 1 \l 16763             From your own standpoint, does the Copyright Act already cover the notion of fee for carriage?


LISTNUM 1 \l 16764             MR. ELDER:  Again, it is a little difficult because trying to nail down this concept of fee for carriage is a bit like nailing jello to a wall.  Even the broadcasters don't seem to agree amongst themselves.

LISTNUM 1 \l 16765             But if we look at it as being compensation for the value in this unencrypted over‑the‑air free broadcast signal, we think that is copyright.

LISTNUM 1 \l 16766             I do think, and I would agree with the telco TV panel on this front, that the federal government, the elected parliament of Canada, has considered this issue and has decided not to include in copyright legislation the recognition for this type of a signal right.

LISTNUM 1 \l 16767             So I would think it would be, well, let's say passing strange at best, for the Commission under the guise of the Broadcasting Act to second guess parliament in that regard and create such a right.

LISTNUM 1 \l 16768             THE CHAIRPERSON:  But will you agree that we are talking here about two different statutes and there could be two different rights?

LISTNUM 1 \l 16769             MR. ELDER:  I still don't think ‑‑ I mean, just because you don't call it copyright I don't think removes it from the Copyright Act.


LISTNUM 1 \l 16770             I think parliament, as they divide up jurisdiction and hand authority to various pieces of legislation and various regulatory boards, they have in mind what they are handing out and I think if it is about what is in essence a property right in a signal, in an intellectual property, I think that is copyright and I don't think you can do that unde the Broadcasting Act.

LISTNUM 1 \l 16771             THE CHAIRPERSON:  If there was no more over‑the‑air broadcasting and all the system would be carried through BDU, will you say that then for the broadcasters rather than being Tariff 2A it will be Tariff 17 that will apply?  Then it will mean that you are going to have to share the load.

LISTNUM 1 \l 16772             MR. ELDER:  I suppose it would be.  It is difficult to see exactly ‑‑

LISTNUM 1 \l 16773             THE CHAIRPERSON:  Unless parliament amends the Copyright Act.  Obviously I'm taking it from ‑‑


LISTNUM 1 \l 16774             MR. ELDER:  Right.  I mean, in a way it is difficult to say whether in fact that would make current over‑the‑air broadcasters specialty services, the way we currently understand the term, which have been from their inception kind of narrowcast, partly subscription fee supported services.  We would be creating almost another sort of category to the extent that over‑the‑air broadcasters would maintain their kind of general ‑‑ their mass audience focus.

LISTNUM 1 \l 16775             Obviously it is going to get very complicated if they are going to continue to have separate services like that for each market rather than sort of one national service or an east‑west thing.

LISTNUM 1 \l 16776             I guess in that situation hypothetically I would agree that 17 would apply.

LISTNUM 1 \l 16777             THE CHAIRPERSON:  At the beginning of this hearing the Commission announced that they had accepted and put on the record a Nordicity study that was provided to the Commission by CIEL.

LISTNUM 1 \l 16778             Do you have any comments, now that your Mr. Hansen made available some comments that he had provided to Nordicity and he has reserved the right to make further comments.

LISTNUM 1 \l 16779             Do you have anything else you want to add?

LISTNUM 1 \l 16780             MR. SMITH:  I have nothing, Commissioner, offhand, but I would invite my colleagues to contribute if they feel the need.

LISTNUM 1 \l 16781             MR. FRANK:  Simply to note, as Paul did I believe in an e‑mail, that the number of pay‑per‑view services are significantly overstated.

LISTNUM 1 \l 16782             THE CHAIRPERSON:  Exactly, yes.


LISTNUM 1 \l 16783             MR. FRANK:  I think we would like the opportunity to go through it in detail, because there was no dialogue, of if there was dialogue it was very, very limited, between us and Nordicity and the people who I think know our business plan best are ourselves.  So we would like to go through it and comment to you.

LISTNUM 1 \l 16784             THE CHAIRPERSON:  You will have an opportunity to file something before December 20th.

LISTNUM 1 \l 16785             MR. FRANK:  Yes.

LISTNUM 1 \l 16786             THE CHAIRPERSON:  Legal counsel...?

LISTNUM 1 \l 16787             MS CRUISE:  Thank you, Mr. Chair.

LISTNUM 1 \l 16788             I just have one question and I believe it is for Mr. Elder.

LISTNUM 1 \l 16789             In your submission you commented on the WIPO Broadcasting Treaty and you stated that if Canada ratified the treaty and the new rights were granted to foreign broadcasters that out of necessity the rights would be granted to domestic over‑the‑air broadcasters.

LISTNUM 1 \l 16790             I just wanted to clarify if what you are suggesting is that it would be a legal requirement or if it would be some other type of requirement.


LISTNUM 1 \l 16791             MR. ELDER:  I guess strictly speaking I would say it would not be a legal requirement because it is up to Canada, I guess, what treaties it wants to sign onto and whether it can negotiate any exemptions or not.

LISTNUM 1 \l 16792             I guess what we are saying here is, certainly there would be very strong pressure on Canada to allow that kind of a right.  As we talked about a bit earlier, the U.S. has been exerting that pressure for some time on us.

LISTNUM 1 \l 16793             I guess we think that if the CRTC, for example, was to create what we think amounts to a signal right, in fact this could be very provacative to the U.S. in the context of the WIPO talks.

LISTNUM 1 \l 16794             If I was sitting at the negotiating table for Canada I would hate to have to try to explain that away and maintain the Canadian position that there shouldn't be signal rights and they should be exempted.

LISTNUM 1 \l 16795             MS CRUISE:  Thank you.

LISTNUM 1 \l 16796             That's all.

LISTNUM 1 \l 16797             THE CHAIRPERSON:  Mr. Smith, gentlemen, thank you very much for your presentation.

LISTNUM 1 \l 16798             We will take a 10‑minute break.  We will get back with the next intervenors at a quarter to 12:00.

LISTNUM 1 \l 16799             MR. SMITH:  Thank you very much.

‑‑‑ Upon recessing 1135 / Suspension à 1135

‑‑‑ Reprise à 1149 / Resuming at 1149


                 LE PRÉSIDENT:  Order, please. À l'ordre, s'il vous plaît.

LISTNUM 1 \l 16800             Madame la Secrétaire ?

LISTNUM 1 \l 16801             Merci, Monsieur le Président.

LISTNUM 1 \l 16802             Nous procéderons maintenant à la prochaine présentation, qui est de Cogeco Inc., et monsieur Yves Mayrand introduira son groupe de présentation.

LISTNUM 1 \l 16803             Après quoi, vous aurez 15 minutes pour votre présentation.

LISTNUM 1 \l 16804             Monsieur Mayrand?

PRÉSENTATION / PRESENTATION

LISTNUM 1 \l 16805             M. MAYRAND : Merci, Madame la Secrétaire.

LISTNUM 1 \l 16806             Bonjour, Monsieur le Président et membres du Conseil.

LISTNUM 1 \l 16807             Nous vous remercions de votre invitation à comparaître, et nous espérons pouvoir contribuer utilement à votre examen du cadre réglementaire de la télévision conventionnelle.

LISTNUM 1 \l 16808             Je suis Yves Mayrand, Vice‑président, Affaires corporatives de COGECO inc. Me Caroline Dignard, Directrice, Affaires juridiques, est à ma droite et monsieur Éric Simon, Directeur, Planification financière, est à ma gauche.


LISTNUM 1 \l 16809             Permettez‑moi d'abord de situer brièvement notre groupe et nos observations.

LISTNUM 1 \l 16810             COGECO est une compagnie à capital ouvert dont les titres subalternes sont inscrits à la Bourse de Toronto.

LISTNUM 1 \l 16811             COGECO est indirectement l'actionnaire de contrôle de TQS, une compagnie à capital fermé qui a comparu plus tôt cette semaine et dont l'autre actionnaire est CTV Television Inc., une société du groupe Bell Globemedia.

LISTNUM 1 \l 16812             COGECO est aussi l'actionnaire de contrôle de Cogeco Câble inc., une société à capital ouvert dont les titres subalternes sont également inscrits à la Bourse de Toronto et qui constitue le deuxième plus grand câblodistributeur respectivement en Ontario, au Québec et au Portugal.

LISTNUM 1 \l 16813             Les activités de câblodistribution représentaient 83 pour cent des produits consolidés de COGECO pour le dernier exercice financier terminé le 31 août dernier.

LISTNUM 1 \l 16814             C'est pourquoi nous avons décidé de soumettre des observations séparément de celles de notre filiale de télédiffusion, et c'est pourquoi nous nous abstiendrons de commenter spécifiquement sur les représentations de celle‑ci.


LISTNUM 1 \l 16815             Notre groupe représente en quelque sorte un modèle réduit du système canadien de radiodiffusion.

LISTNUM 1 \l 16816             Je dois cependant préciser que notre groupe n'a pas d'intérêt de propriété, et encore moins de contrôle, dans des services spécialisés ou télévision payante.

LISTNUM 1 \l 16817             Les positions que nous exprimons traduisent la nécessité d'assurer un juste équilibre entre les divers intérêts présents au sein de notre système de radiodiffusion pour les années à venir, une préoccupation que vous partagez sans doute dans le cadre de cette importante audience publique.

LISTNUM 1 \l 16818             L'équilibre, l'équité et l'interdépendance entre les divers éléments et groupes d'intérêt en présence sont à la source du succès remarquable de notre système canadien de radiodiffusion au cours des 75 dernières années.

LISTNUM 1 \l 16819             Notre système a toujours réussi jusqu'à présent à s'adapter aux changements technologiques et économiques en trouvant de nouveaux points d'équilibre.


LISTNUM 1 \l 16820             Il en va de même encore aujourd'hui, et le défi n'est pas insurmontable, même sur la question des frais d'abonnement et du passage à la télédiffusion en haute définition.

LISTNUM 1 \l 16821             Nous avons clairement pris position en faveur de l'élargissement des frais d'abonnement aux réseaux privés de télévision conventionnelle, comme il en existe déjà depuis fort longtemps pour les services de télévision spécialisés, avec cependant certaines précautions dont je parlerai dans quelques instants.

LISTNUM 1 \l 16822             Nous avons réservé jusqu'à nouvel ordre notre position sur l'élargissement des frais d'abonnement aux réseaux de télévision conventionnelle du secteur public, essentiellement pour trois raisons.

LISTNUM 1 \l 16823             Premièrement, les réseaux du secteur public ont déjà accès à au moins deux sources de financement indépendantes et substantielles, soit les crédits de fonctionnement et d'immobilisations de l'État, et les recettes publicitaires, et aussi dans certains cas d'autres sources de fonds importantes, notamment des frais d'abonnement pour leurs propres services spécialisés.

LISTNUM 1 \l 16824             Deuxièmement, le problème de financement des émissions de la télévision conventionnelle privée, particulièrement dans le marché francophone, est sérieux et nécessite un correctif rapide.


LISTNUM 1 \l 16825             Troisièmement, le Conseil devrait connaître les nouveaux paramètres du mandat des chaînes publiques avant de leur attribuer de nouveaux frais d'abonnement.

LISTNUM 1 \l 16826             Ceci étant dit, il importe d'abord et avant tout de mettre rapidement fin à l'exclusivité dont jouissent présentement les services spécialisés sur l'accès aux frais d'abonnement.

LISTNUM 1 \l 16827             Si elle avait sa justification pour la phase de développement des services spécialisés, cette exclusivité n'a plus sa place dans un environnement de large choix et de maturité de ces services.

LISTNUM 1 \l 16828             Our position on fair access to subscription fees differs from the position of many cable or satellite distribution undertakings.

LISTNUM 1 \l 16829             You are probably wondering why.  Here are our reasons, which we feel are, quite frankly, compelling.


LISTNUM 1 \l 16830             First, the monitoring reports and the statistical and financial data of the Commission demonstrate without a shadow of a doubt that the growth of specialty and pay television services, whose proliferation and remarkable performance constitutes unquestionably a great accomplishment, unfolds increasingly to the detriment of the audience and advertising revenue of conventional television services, which remain however the pillars of the Canadian system that bear the weight of producing the most expensive programs and providing local services.

LISTNUM 1 \l 16831             Second, the statistical and financial data of the Commission shows that the basic services of the large cable distribution undertakings and the satellite and microwave distribution undertakings, which depend in good measure on the distribution of conventional television signals, have generated direct and indirect subscription revenue of approximately 2.3 billion dollars in 2005 compared to approximately 1.7 billion in 2001, an increase of more than 34 per cent over the last five years.

LISTNUM 1 \l 16832             The growth in basic subscription revenue over that period is mainly attributable to satellite distribution undertakings, which presently distribute a comparatively smaller number of local conventional televisions to the pool available.


LISTNUM 1 \l 16833             Third, the statistical and financial data of the Commission shows that subscription revenue of the large cable distribution undertakings and the satellite and microwave distribution undertakings from their non basic services, which depend mainly on the distribution of specialty and pay television services, went from approximately 1.8 billion dollars in 2001 to approximately 2.3 billion dollars in 2005, a 30 per cent increase over the last five years.

LISTNUM 1 \l 16834             These same distribution undertakings made affiliation payments of approximately 1.2 billion dollars to specialty and pay television services in 2005, compared to approximately 873 million dollars in 2001, an increase of over 40 per cent over the last five years.

LISTNUM 1 \l 16835             While affiliation payments represented approximately 49 per cent of subscription revenue derived from non‑basic services in 2001, they reached approximately 53 per cent of such subscription revenue in 2005.

LISTNUM 1 \l 16836             Fourth, media that are not regulated by the Commission have no regulatory obstacle preventing them from using subscription revenue as well as advertising revenue.

LISTNUM 1 \l 16837             To those who argue that conventional television is `free', we can only observe that it is no longer `free' for almost nine out of every ten households in Canada, but that it otherwise remains `free' to broadcasting distribution undertakings due to pure regulatory arbitrage.


LISTNUM 1 \l 16838             To those who say that it would not be appropriate to direct subscription fees to a conventional television sector that is in trouble, we reply that the trouble of this sector is mainly due to a differential treatment which is no longer warranted.

LISTNUM 1 \l 16839             Finally, to those who say that there are possibly too many conventional television networks given the current capacity of the market, we reply that none of the existing television services in Canada would be viable in the absence of a regulatory framework, including specialty and pay television services, and that diversity of Canadian information and entertainment sources is in the public interest, including in television for mass audiences.

LISTNUM 1 \l 16840             This is why we feel it is not defensible to continue excluding conventional television from access to subscription fees via the regulatory framework.

LISTNUM 1 \l 16841             It would be a tragic and irreparable mistake, particularly in a market as confined as the Francophone market in Canada, to resign ourselves to the shrinking, and eventually the demise, of the major conventional television networks as a result of our failure to restore on a timely basis a balance in the use of financial resources available within the Canadian broadcasting system.


LISTNUM 1 \l 16842             The entire system would be seriously diminished, and Canadian viewers as well as Canadian talent would loose a common meeting place that is more essential than ever before in this highly fragmented audiovisual universe.

LISTNUM 1 \l 16843             N'oublions surtout pas que ce sont les grands réseaux de télévision conventionnelle qui soutiennent les plus grandes productions télévisuelles canadiennes pour les plus larges auditoires, que nos producteurs indépendants, nos talents et nos artistes dépendent encore largement de cet élément du système canadien pour rejoindre leur public, et que nos concitoyens dépendent encore très largement de ce moyen de communication tant pour combler leurs besoins individuels que pour soutenir les besoins de leur collectivité locale.

LISTNUM 1 \l 16844             Ce sont ces mêmes réseaux qui contribuent à la pénétration élevée et à la valeur perçue du volet de base, et indirectement des volets facultatifs, auprès des consommateurs.

LISTNUM 1 \l 16845             Bref, la télévision en direct fait partie des fondations de l'édifice, et les fondations ont un sérieux besoin d'entretien avant que les lézardes ne deviennent irréparables et que tout l'édifice ne soit mis en péril.


LISTNUM 1 \l 16846             Voilà pour le principe de l'élargissement des frais d'abonnement.

LISTNUM 1 \l 16847             Trois questions fondamentales découlent de la reconnaissance de ce principe, soit : d'abord, l'établissement du niveau approprié des nouveaux frais d'abonnement pour les services de télévision conventionnelle dans leur ensemble; ensuite, la gestion de leur incidence monétaire sur les autres éléments du système de radiodiffusion; et troisièmement, leur répartition entre les entreprises visées.

LISTNUM 1 \l 16848             Sur le niveau approprié pour l'assiette globale des nouveaux frais d'abonnement, nous avons soumis dans notre mémoire qu'il serait imprudent d'établir un tel niveau avant d'avoir une compréhension claire des facteurs d'élasticité de la demande pour les volets de service des entreprises de distribution de radiodiffusion au Canada.

LISTNUM 1 \l 16849             L'état du dossier public jusqu'à ce jour démontre selon nous qu'il faut faire des analyses économiques et financières plus poussées tant pour le marché francophone que pour le marché anglophone avant de déterminer cette assiette globale pour chacun de ces marchés.


LISTNUM 1 \l 16850             Il nous semble que le Conseil devrait commander une étude complète et impartiale sur cette question et la publier avant que les titulaires de licence des réseaux conventionnels ne soient appelés à formuler leurs demandes et à comparaître pour leur prochain renouvellement de licence.

LISTNUM 1 \l 16851             Un nouveau déséquilibre du système canadien de radiodiffusion n'est manifestement pas souhaitable, et il importe donc de bien faire collectivement nos devoirs.

LISTNUM 1 \l 16852             Quant à la gestion de l'incidence monétaire sur les autres éléments du système de radiodiffusion, nous sommes d'avis qu'il faut absolument éviter un modèle selon lequel les nouveaux frais d'abonnement pour la télévision conventionnelle sont prélevés à même les ressources financières existantes des autres éléments du système de radiodiffusion, et notamment un modèle selon lequel ce prélèvement est laissé à la discrétion des entreprises individuelles.

LISTNUM 1 \l 16853             Il en résulterait inévitablement des dérapages et des litiges.


LISTNUM 1 \l 16854             Enfin, quant à la répartition de l'assiette des nouveaux frais d'abonnement, il nous semble essentiel que cette répartition soit établie par le Conseil comme ce fut le cas pour les frais de base des services spécialisés dits analogiques, en évitant des formules complexes ou variables, comme celles qui seraient basées sur les parts d'auditoire, et en assurant un terrain de jeu à niveau entre les services concurrents une fois que ces frais seront établis.

LISTNUM 1 \l 16855             Nous n'avons pas soumis d'observations sur les autres questions soulevées par le Conseil dans son avis public, puisqu'elles sont entièrement du ressort de notre filiale de télédiffusion TQS.

LISTNUM 1 \l 16856             Toutefois, nous voudrions terminer en soulignant les deux grands thèmes de la réforme du cadre de réglementation qui devraient selon nous transparaître à l'issue de la présente instance politiques.

LISTNUM 1 \l 16857             Ces thèmes reflètent un constat fondamental : en raison des technologies numériques et des médias non assujettis à la réglementation, le pouvoir de négociation des télédiffuseurs est en déclin à la fois par rapport aux producteurs d'émissions, aux talents, aux auditoires et aux annonceurs.


LISTNUM 1 \l 16858             Il faut donc, premièrement, éviter de nouvelles contraintes structurelles sur les intrants et les activités des télédiffuseurs, et au contraire leur donner une plus grande flexibilité dans leur façon de réaliser les objectifs prévus.

LISTNUM 1 \l 16859             Deuxièmement, il faut viser un cadre de réglementation simple et d'application aisée.

LISTNUM 1 \l 16860             Ces thèmes sont non seulement très pertinents au regard de l'état hautement concurrentiel des marchés, ils sont également très pertinents au regard de la politique du gouvernement canadien sur la réglementation intelligente et des principes directeurs de l'OCDE pour la qualité et la performance de la réglementation.

LISTNUM 1 \l 16861             Voilà. Nous vous remercions de votre attention et nous sommes prêts à répondre à vos questions.

LISTNUM 1 \l 16862             LE PRÉSIDENT : Merci, Monsieur Mayrand.  Je pense que votre mémoire et votre présentation orale sont très clairs, mais j'aimerais élaborer quand même sur certaines des propositions que vous mettez de l'avant, notamment relativement à l'incidence de l'arrivée d'un nouveau tarif sur l'ensemble des abonnés.


LISTNUM 1 \l 16863             Je vois que vous spécifiez que vous vous abstiendrez de commenter sur les propositions qui ont été mises de l'avant par votre société affiliée, Quatre‑Saisons.  Cependant, je pense qu'on ne peut pas vivre dans un processus comme celui dans lequel on est présentement sans quand même y faire référence, de part et d'autre.  C'est inévitable.  C'est l'objet du débat.  Donc, quant à moi, je vais certainement y faire référence, et quant à vous, j'espère que vous vous sentirez à l'aise pour commenter.

LISTNUM 1 \l 16864             La première considération, évidemment, qui vient à l'esprit, après avoir entendu l'ensemble des témoignages depuis le début de l'audience, est à l'effet que les visions sont diamétralement opposées entre les exploitants d'entreprises de distribution francophones et les exploitants d'entreprises de distribution anglophones, et même aussi diamétralement opposées, du moins, c'est ce que le CCSA nous a dit hier, avec la position des deux entreprises de distribution que sont Vidéotron et Cogeco Câble, donc, que leurs membres québécois qui sont dans des petits marchés partagent l'opinion de leurs membres anglophones.

LISTNUM 1 \l 16865             Qu'est‑ce qui vous amène à croire que ‑‑ parce que, effectivement, vous remarquez qu'il n'y a pas d'étude d'élasticité ‑‑ qu'il n'y a pas d'étude pour supporter la volonté des téléspectateurs francophones à supporter leurs stations généralistes avec un tarif?


LISTNUM 1 \l 16866             M. MAYRAND : J'avais cité, apparemment, trois facteurs.

LISTNUM 1 \l 16867             D'abord, le premier ‑‑ qui, je pense, est bien documenté dans le mémoire de TQS et le sondage qui l'accompagne ‑‑ c'est que, dans la très grande majorité des cas, les Québécois, comme d'ailleurs sans doute au Canada anglais, mais en tout cas, les Québécois dans le marché francophone très largement ne réalisent pas, pour ceux qui sont abonnés soit à un service de satellite, de câble ou de micro‑ondes, qu'il n'y a aucun paiement des frais d'abonnement qu'ils versent à leur distributeur qui sert à payer pour la réception des signaux et la qualité des signaux des services conventionnels qui font partie du volet de base.

LISTNUM 1 \l 16868             Alors, clairement, quand on leur explique ce dont il en retourne, l'attitude des consommateurs québécois a tendance certainement à être, disons‑le franchement, ouverte à considérer au moins le problème.


LISTNUM 1 \l 16869             Deuxièmement, je pense que nous avons tenté par un résumé des statistiques que le Conseil compile sur les produits d'abonnement pour les volets de base que ces volets‑là ont généré une certaine croissance de revenus, nonobstant l'introduction de la concurrence, nonobstant une foule de facteurs qui auraient pu indisposer les abonnés.

LISTNUM 1 \l 16870             Alors, c'est un autre indice qu'il y a une ouverture des abonnés à considérer un réaménagement de frais pour ces services‑là.

LISTNUM 1 \l 16871             Et troisièmement, je pense que, quand on constate le degré d'attachement des Québécois à leur télévision généraliste et la pure quantité de programmation de qualité et aussi la variété de cette programmation qui est offerte au public québécois, c'est un lieu commun qui est considéré comme extrêmement important pour eux.

LISTNUM 1 \l 16872             Alors, je pense qu'on les convainc assez facilement qu'on ne serait pas très heureux de se passer de ces services‑là.

LISTNUM 1 \l 16873             Et, en fait, il y a peu de choses dans le dossier public jusqu'à présent qui tendent à documenter quelle serait l'attitude des consommateurs si les grandes chaînes généralistes n'étaient carrément plus disponibles sur le relais de base.  Nous pensons que leur réaction serait sûrement assez pointue et assez critique.


LISTNUM 1 \l 16874             LE PRÉSIDENT : Vous faites état de l'étude du sondage CROP que TQS a déposée avec son mémoire.  Cependant, ce sondage mesure une perception de la part des répondants qu'il y a une valeur pour les canaux généralistes, les stations généralistes qui sont offertes, mais le sondage ne va pas jusqu'à vérifier s'ils seraient prêts à verser, en sus de ce qu'ils versent présentement, les montants auxquels leur perception se réfère.

LISTNUM 1 \l 16875             Cependant, au début de l'audience, les entreprises que sont Rogers, Shaw, Bell ExpressVu et le CCSA ont déposé une étude du Strategic Council qui a mesuré l'intérêt des Québécois anglophones par rapport au paiement d'une redevance, et si je regarde, juste pour les fins de notre discussion, il y a 129 répondants anglophones sur 1 000 personnes sondées.

LISTNUM 1 \l 16876             Donc, il y a eu 129 répondants anglophones au Québec qui ont été invités à se prononcer, et 68 pour cent d'entre eux se sont dit fortement opposés au paiement d'une redevance, alors que la moyenne canadienne, c'est 65 pour cent.  Donc, en fait, c'est au Québec que le commentaire a été le plus véhément, si je regarde les résultats du sondage du Strategic Council.

LISTNUM 1 \l 16877             Qu'est‑ce qui vous fait croire que les Québécois francophones auraient une attitude distincte?


LISTNUM 1 \l 16878             M. MAYRAND : Bien écoutez, je pense qu'il est plutôt admis et compris dans la Loi sur la radiodiffusion qu'il y a une différence fondamentale entre la radiodiffusion du secteur francophone et celle du secteur anglophone.  Je pense qu'il y a de nombreuses manifestations pratiques et concrètes de cette différence.

LISTNUM 1 \l 16879             Alors, certainement, je vais admettre d'emblée qu'il faut faire beaucoup plus de travail pour évaluer quelle est, justement, l'élasticité de la demande de services chez les francophones.  Je ne pense pas que l'étude que vous venez de mentionner le fasse.  Nous vous disons qu'il y a lieu de faire ce travail‑là.

LISTNUM 1 \l 16880             Mais ceci étant dit...

LISTNUM 1 \l 16881             LE PRÉSIDENT : Elle suggère un prix, d'ailleurs, qui est beaucoup plus élevé que celui qui est le montant le plus élevé qui a été présenté par les diffuseurs francophones.

LISTNUM 1 \l 16882             M. MAYRAND : Alors, j'allais en venir à la question de la méthodologie et des plages de redevances qui sont mentionnées dans différentes études, parce qu'il y en a d'autres aussi, qui touchent principalement le marché anglophone.


LISTNUM 1 \l 16883             Alors, sans rentrer dans les considérations de méthodologie et de ce qui constitue la plage appropriée, la position que nous avons prise, nous, c'est qu'il faut faire nos devoirs de façon plus analytique sur l'élasticité de la demande pour le marché pertinent, et en ce qui nous concerne, évidemment, le marché francophone, certainement dans le cas de notre filiale TQS, est celui qui est pertinent pour ses activités.

LISTNUM 1 \l 16884             LE PRÉSIDENT : Un des intervenants, si ma mémoire est fidèle, c'est le groupe Rogers, qui a fait référence au fait que si le Conseil adoptait une proposition de tarif de redevance d'abonnement pour les stations généralistes, on se retrouverait, juridiquement, dans une situation d'option négative par rapport à la situation juridique au Québec avec la Loi sur la protection des consommateurs.

LISTNUM 1 \l 16885             Quelle est votre position quant à cette embûche potentielle?

LISTNUM 1 \l 16886             M. MAYRAND : Écoutez, je pense... d'abord, je ne peux pas m'empêcher de constater que cet obstacle est soulevé par l'entreprise qui a peut‑être eu le plus de mailles à partir, avec ce qui était, effectivement, convenu d'appeler l'option négative, lorsqu'elle fut appliquée en Ontario.


LISTNUM 1 \l 16887             Mais honnêtement, je ne pense pas qu'il s'agisse ici d'une question d'option négative.  Il n'y a pas de changement proposé dans l'offre de services.  Il n'y a pas introduction d'un nouveau service qui s'ajoute ou modifie le volet.

LISTNUM 1 \l 16888             D'ailleurs, il nous semble que les règles qui président à l'établissement des volets de base devraient continuer de s'appliquer, que l'on introduise un frais d'abonnement pour les services dits conventionnels ou pas.

LISTNUM 1 \l 16889             Alors, dans cet environnement‑là, il n'est pas question de changer dramatiquement le volet de base ou d'introduire de nouveaux services.  On parle tout simplement du niveau... possiblement du niveau de prix pour un volet donné, et je ne pense pas que quelque loi de protection du consommateur que ce soit n'interdise des ajustements de prix.

LISTNUM 1 \l 16890             Nous avons fait, d'ailleurs, beaucoup de travail, lors de l'adoption de la nouvelle Loi de protection du consommateur en 2002 en Ontario, sur son application, et nous arrivons très bien, comme cablôdistributeur là‑bas, à nous conformer aux exigences de la loi lorsqu'il y a des ajustements de prix et à les notifier correctement et avec franchise à nos abonnés.

LISTNUM 1 \l 16891             LE PRÉSIDENT : Lors de leur comparution, Quebecor Média, pour un, et TQS, pour l'autre, ont proposé deux modèles différents de tarif d'abonnement.


LISTNUM 1 \l 16892             Un est un modèle qui est laissé à la libre négociation ‑‑ et je vois dans vos commentaires que vous ne croyez pas que ça soit la voie à suivre ‑‑ et le deuxième modèle, celui qui était mis en relief par TQS, est d'un montant, ultimement, de $1.00 en l'étalant sur deux années.

LISTNUM 1 \l 16893             Quelle est la position de Cogeco par rapport à ce modèle et par rapport au prix?

LISTNUM 1 \l 16894             M. MAYRAND : Alors, il y a deux éléments de réponse à votre question, Monsieur Arpin.

LISTNUM 1 \l 16895             Premièrement, sur le modèle, nous sommes clairement en plein appui à la position de notre filiale TQS sur le principe que les droits doivent être établis de façon neutre et objective par le Conseil et non pas laissés à une libre négociation.

LISTNUM 1 \l 16896             Et laissez‑moi préciser que dans le contexte du marché francophone et du niveau d'intégration dans ce qui prévaut dans ce marché, et de l'ampleur des exigences du cadre de réglementation, il nous apparaît insoutenable de dire qu'il peut y avoir une véritable négociation de libre marché pour tous les joueurs.


LISTNUM 1 \l 16897             Alors, d'après nous, il nous semble incontestable que le Conseil a un rôle irremplaçable à jouer et, comme nous le disions dans notre présentation orale tantôt, il faut surtout éviter de récolter une série de problèmes indésirables et de litiges qui risquent de vous embourber, de nous embourber, et de créer énormément d'instabilité et de récriminations au sein du système.

LISTNUM 1 \l 16898             Alors, c'est pourquoi le modèle de base proposé par TQS nous semble de loin préférable à celui qui a été proposé par nos vis‑à‑vis.

LISTNUM 1 \l 16899             Maintenant, quant au niveau des droits, j'ajouterais que COGECO est parfaitement d'avis qu'il faut une introduction mesurée et progressive d'un nouveau droit, quel que soit le quantum qui sera éventuellement déterminé pour ces droits.

LISTNUM 1 \l 16900             Alors, le seul point de réserve par rapport à la position de TQS c'est sur le quantum.  Alors, TQS vous a offert un quantum précis.  Corporativement, nous n'avons pas soumis de quantum.  Nous vous avons dit, on a besoin de faire des devoirs et puis il y a 83 pour cent de notre chiffre d'affaires consolidé, et ça va en augmentant, qui représente la câblodistribution.

LISTNUM 1 \l 16901             Alors, il faut faire très attention, il faut compléter les devoirs comme il faut avant d'établir le quantum.


LISTNUM 1 \l 16902             LE PRÉSIDENT:  La période d'étalement qui est mise sur deux ans est suffisante ou devrait être plus longue que deux ans?

LISTNUM 1 \l 16903             M. MAYRAND:  La difficulté que nous aurions et que je pense que vous auriez à déterminer aujourd'hui, si ça doit être sur deux ans ou trois ans, par exemple, ou peut‑être même une plus longue période de temps, c'est que nous n'avons pas de vraie mesure économétrique sur l'élasticité de la demande et l'impact qui résulterait des frais qui seraient introduits dans le système.

LISTNUM 1 \l 16904             Alors, tant qu'on n'a pas ça, c'est très difficile de dire aussi quel est l'horizon temps approprié pour arriver au résultat final.

LISTNUM 1 \l 16905             Je vous dirais, cependant, et c'est un peu subjectif à ce stade‑ci, qu'il faut aussi un degré de certitude et de stabilité dans les changements qu'on apporte à la tarification et au coût des intrants.

LISTNUM 1 \l 16906             Alors, ça militerait, d'après nous, sur une période d'introduction progressive relativement courte parce qu'on ne peut pas passer notre temps à avoir des ajustements, et on est d'accord là‑dessus avec les observations qui ont été faites par d'autres... d'autres parties présentes à cette audience‑là.


LISTNUM 1 \l 16907             LE PRÉSIDENT:  Ceci étant dit, COGEGO, au cours des années, a introduit des augmentations tarifaires.  Disons que ça ne serait pas quand même nouveau pour vos abonnés d'avoir à faire face à des augmentations tarifaires.

LISTNUM 1 \l 16908             Vous avez quand même eu une certaine... accumulé une certaine expertise au niveau des années pour savoir quels sont les niveaux qui sont acceptables et puis je ne sais pas si vous pouvez partager avec nous les résultats de votre vécu comme exploitant?

LISTNUM 1 \l 16909             M. MAYRAND:  Si le Conseil a besoin de données qui sont plus spécifiques, nous serions certainement prêts à considérer à les partager sur une base confidentielle, évidemment.

LISTNUM 1 \l 16910             LE PRÉSIDENT:  Je ne cherche pas des nombres absolus, mais je parle... je cherche à comprendre la dynamique d'une augmentation de tarif et puis la réaction du consommateur.

LISTNUM 1 \l 16911             M. MAYRAND:  Oui.  Mais ceci étant dit, vous avez parfaitement raison de dire que COGECO et, en fait, toutes les autres entreprises de distribution de radiodiffusion, grandes et petites, ont, au fil des années, procédé à des majorations tarifaires.


LISTNUM 1 \l 16912             Il n'y a personne qui a dit que ces majorations‑là constituaient une forme d'option négative ou un lynchage des consommateurs et le constat est dans les chiffres que nous avons résumés dans notre présentation orale et qui sont tirés de votre propre base de données.

LISTNUM 1 \l 16913             Il est manifeste qu'il y a une augmentation progressive du produit des frais d'abonnements pour la base et pour les volets.

LISTNUM 1 \l 16914             LE PRÉSIDENT:  Oui, mais il y a aussi et il y a manifeste parce que vous partez sur un horizon de 2001 à 2005 et aussi l'arrivée de nombreux nouveaux services de catégorie 1 et de catégorie 2 qui, évidemment, ont fait augmenter de manière importante les redevances versées aux exploitants de canaux spécialisés.

LISTNUM 1 \l 16915             M. MAYRAND:  Bien, je pense, monsieur Arpin, que c'est précisément la source de la problématique à laquelle nous faisons face aujourd'hui, il n'y a pas de doute, mais...

LISTNUM 1 \l 16916             LE PRÉSIDENT:  Mais ces services‑là sont quand même offerts en bouquets à des abonnés qui choisissent volontairement d'y souscrire.


LISTNUM 1 \l 16917             M. MAYRAND:  Mais revenons à la base, et dans le cas du service de base, je ne pense pas que ce facteur‑là a joué dans le prix du volet de base.

LISTNUM 1 \l 16918             Il y a, évidemment, une distribution de services dits spécialisés encore au volet de base, et c'est certainement le cas chez COGEGO, mais dans l'ensemble, c'est un volet qui comporte une majorité de services autres que spécialisés.

LISTNUM 1 \l 16919             LE PRÉSIDENT:  Pour ce qui est des services francophones, ma connaissance antérieure me fait croire que les services francophones qui sont à la base chez COGEGO n'ont pas eu le bénéfice d'augmentation tarifaire pour soutenir leur développement.

LISTNUM 1 \l 16920             C'est le nombre d'abonnées, oui, qui leur a bénéficié, mais ce n'est pas l'augmentation du tarif parce que... Dans le cas des bouquets, ça peut être différents, mais dans le cas des services à la base, les décisions rendues par le Conseil avaient déterminé de maximums et ces maximums‑là sont en place depuis de nombreuses années, sinon même en certains cas, on commence à parler bientôt de décennie.

LISTNUM 1 \l 16921             M. MAYRAND:  Monsieur Arpin, nous avons régulièrement un rendez‑vous avec nos fournisseurs d'émissions.

LISTNUM 1 \l 16922             LE PRÉSIDENT:  Ceux qui sont sur bouquets.


LISTNUM 1 \l 16923             M. MAYRAND:  Bien, qui sont sur bouquets et qui sont portés à la base également.

LISTNUM 1 \l 16924             LE PRÉSIDENT:  Oui, parce que c'est souvent les mêmes personnes, là.

LISTNUM 1 \l 16925             M. MAYRAND:  Voilà.  Et ils ont eux‑mêmes des bouquets de services dont ils négocient les frais d'affiliation en bouquets.

LISTNUM 1 \l 16926             Alors, nous avons une négociation d'ensemble de en bout de piste, on peut facilement affirmer que les services en question, quelle que soit la distribution en partie à la base, en partie sur un volet facultatif ou carrément sur les volets facultatifs, ont connu une croissance de leurs frais d'affiliation au cours des années.

LISTNUM 1 \l 16927             LE PRÉSIDENT:  Si je vous comprends bien ‑‑ et corrigez‑moi si j'ai ‑‑ Québecor Média propose que la redevance n'affecte pas le coût de l'abonnement, de manière générale, bouquets et services de base compris, pour l'abonné moyen, et que le tarif d'abonnement qui serait souscrit viendrait en majeure partie, sinon en tout, d'une refonte des tarifs d'abonnements versés à l'ensemble de ceux qui en perçoivent présentement.

LISTNUM 1 \l 16928             Si je comprends bien, ce n'est pas la position de COGECO?


LISTNUM 1 \l 16929             M. MAYRAND:  Vous avez tout à fait bien compris; ce n'est pas notre position.

LISTNUM 1 \l 16930             LE PRÉSIDENT:  Ce n'est pas votre position, bon.  Vous nous recommandez au Conseil d'entreprendre une étude complète et impartiale avant de formuler notre politique.

LISTNUM 1 \l 16931             Quels facteurs devrions‑nous prendre en compte dans une telle étude?

LISTNUM 1 \l 16932             M. MAYRAND:  J'ai peur de ne pas pouvoir vous donner une réponse détaillée aujourd'hui parce que je ne suis pas... je ne prétends surtout pas être un expert de ce genre d'étude.

LISTNUM 1 \l 16933             Je pense que nous pourrions certainement, dans notre réponse écrite, vous donner ce que nous estimons être certains critères pertinents, mais à tout événement, il nous semble capital que le Conseil soit l'organisme qui entreprenne ou prenne l'initiative de cette étude.

LISTNUM 1 \l 16934             Pourquoi?  Parce qu'autrement nous aurons une prolifération d'études avec des questionnaires dont les questions et la méthodologie varient dans un cas comme dans l'autre et il sera extrêmement difficile, voire impossible, d'en tirer des conclusions pratiques et utiles pour déterminer ce que vous aurez à déterminer.


LISTNUM 1 \l 16935             Alors, il nous semble préférable que ce soit le Conseil qui prenne l'initiative, traite avec les spécialistes appropriés, s'il y a lieu, et établissent avec eux sur la base de leur expertise les paramètres appropriés.

LISTNUM 1 \l 16936             LE PRÉSIDENT:  Écoutez, si vous pouvez contribuer à nous aider, c'est sûr qu'on acceptera vos commentaires et ils seront certainement bienvenus.

LISTNUM 1 \l 16937             Votre société affiliée nous a dit que la redevance... dans sa perspective, la redevance ne devrait s'appliquer qu'aux entreprises de télévision généralistes commerciales privées.  Avez‑vous une position quant aux entreprises publiques?

LISTNUM 1 \l 16938             M. MAYRAND:  Quant aux entreprises publiques, nous n'avons pas pris de position pour l'instant, comme je vous l'indiquais dans mes remarques en début de comparution, et il nous semble qu'il y a là un problème de définition des mandats des chaînes du secteur public, que ce soit les chaînes qui relèvent du gouvernement fédéral pour leur financement ou celles qui relèvent du gouvernement provincial pour le financement.


LISTNUM 1 \l 16939             Il y a une préoccupation réelle qu'on ait de la confusion et des difficultés d'application inutiles s'il n'y a pas une conception claire du mandat à venir de ces chaînes‑là et de ce qu'elles ont l'intention de faire avec un influx additionnel de produits d'abonnements.

LISTNUM 1 \l 16940             Alors, nous avons réservé notre position.  Il nous semble que ce serait regrettable et dommageable pour le secteur privé de la télévision conventionnelle au Québec d'attendre nécessairement que cette question‑là soit réglée.  Elle est en voie de discussion dans le cas de CBC Radio‑Canada.

LISTNUM 1 \l 16941             Dans le cas de Télé‑Québec, ce n'est pas clair encore, mais ce serait regrettable d'attendre que ces mandats‑là soient éclaircis pour les années à venir dans le nouvel environnement audiovisuel numérique et de ne rien faire en attendant, pour s'assurer que le secteur privé de la télévision conventionnelle est capable de remplir les obligations que vous allez lui demander à ce secteur de remplir lors de leurs renouvellements de licence qui s'en viennent très prochainement.


LISTNUM 1 \l 16942             LE PRÉSIDENT:  Demain, nous entendrons les représentations de la Fédération des télévisions communautaires autonomes du Québec et un volet de leur mémoire traite de la diffusion hertzienne et de l'intention de certains de leurs membres de soumettre des projets au Conseil en vertu de la politique sur la télévision communautaire qui leur permettrait d'avoir... de détenir des licences de diffusion hertziennes.

LISTNUM 1 \l 16943             Est‑ce qu'un tarif d'abonnement pour... devrait s'appliquer à eux?  Je suis sûr que ça va faire partie de leur demande.

LISTNUM 1 \l 16944             Si le Conseil dit, oui, au principe, la suite va suivre.

LISTNUM 1 \l 16945             M. MAYRAND:  Mais là aussi on a, je pense, un problème de définition de mandat.  La politique du Conseil a été clairement établie il y a quelque temps sur la possibilité pour les télévisions communautaires d'émettre en rayonnement hertzien.

LISTNUM 1 \l 16946             Ceci étant, il y a relativement peu de développement sur ce plan‑là jusqu'à présent, mais il y a une chose qui est sûre, c'est que le Conseil a fixé des paramètres assez clairs sur le mandat de la télévision communautaire.