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 / SUJET:

Further to call for applications for a broadcasting licence to

carry on an over-the-air digital/high definition (HD) television

programming undertaking to serve locations across Canada /

Suite à l'appel de demandes de licence de radiodiffusion visant

l'exploitation d'entreprises de programmation de télévision

numérique/haute définition (HD) en direct pour desservir

l'ensemble du Canada

HELD AT:                              TENUE À:

Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

140 Promenade du Portage              140, Promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)

February 12, 2008                     Le 12 février 2008

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

Further to call for applications for a broadcasting licence to

carry on an over-the-air digital/high definition (HD) television

programming undertaking to serve locations across Canada /

Suite à l'appel de demandes de licence de radiodiffusion visant

l'exploitation d'entreprises de programmation de télévision

numérique/haute définition (HD) en direct pour desservir

l'ensemble du Canada

BEFORE / DEVANT:

Konrad von Finckenstein           Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Len Katz                          Commissioner / Conseiller

ALSO PRESENT / AUSSI PRÉSENTS:

Cindy Ventura                     Secretary / Secretaire

Peter Foster                      Hearing Manager /

                                  Gérant de l'audience

Jean-Sébastien Gagnon             Legal Counsel /

                                  Conseiller juridique

HELD AT:                          TENUE À:

Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

140 Promenade du Portage          140, Promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)

February 12, 2008                 Le 12 février 2008

- iv -

           TABLE DES MATIÈRES / TABLE OF CONTENTS

                                                 PAGE / PARA

PHASE I

PRESENTATION BY / PRÉSENTATION PAR:

HDTV Networks Inc.                                  4 /   27

PHASE II

INTERVENTION BY / INTERVENTION PAR:

Scénario Québec                                  205 / 1266

Canadian Association of Broadcasters              216 / 1324

Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Tuesday, February 12, 2008

    at 0930 / L'audience débute le mardi 12 février

    2008 à 0930

LISTNUM 1 \l 11                THE CHAIRPERSON:  Good morning.

LISTNUM 1 \l 12                Madam Secretary, are we ready?

LISTNUM 1 \l 13                THE SECRETARY:  Yes, we are.

LISTNUM 1 \l 14                THE CHAIRPERSON:  Well, welcome to this public hearing.  The Panel today consists of Vice‑President Michel Arpin and Vice‑Chairman Telecommunications Len Katz and myself, Konrad von Finkenstein.

LISTNUM 1 \l 15                We are assisted by Peter Foster the Hearing Manager and by Jean Sébastien Gagnon Legal Counsel and Cindy Ventura is our Hearing Secretary.

LISTNUM 1 \l 16                Today we will consider the application of HDTV Networks and YES TV Incorporated to operate  digital hi‑definition over‑the‑air television service.

LISTNUM 1 \l 17                The Panel is particularly interested in discussing the following questions:

LISTNUM 1 \l 18                a)   What contribution would the proposed service make to the Canadian programming and to the achievement of objectives of the Broadcasting Act; and,

LISTNUM 1 \l 19                b)  What impact would the licensing of additional television services have on the broadcasting system and the market in question.

LISTNUM 1 \l 110               We have got a lot to do, so I am not going to bother with any further introductory remarks.  So, let's go.

LISTNUM 1 \l 111               Madam Ventura, you have some announcement.

LISTNUM 1 \l 112               THE SECRETARY:  Merci monsieur président et bonjour à tous.

LISTNUM 1 \l 113               Before beginning I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.

LISTNUM 1 \l 114               When you are in the hearing room, we would ask that you please turn off your cell phones, beepers, and blackberries as they're an unwelcome distraction and they cause interference on the internal communication systems used by your translators.  We would appreciate your cooperation in this regard throughout the hearing.

LISTNUM 1 \l 115               Please note that the Commission Members may ask their questions in English or French.  You can obtain interpretation receivers from the commissionaire sitting at the entrance of the conference centre.

LISTNUM 1 \l 116               Le service d'interprétation simultanée est disponible durant cette audience.  L'interprétation anglaise se trouve au canal 7 et l'interpeétation française au canal 8.

LISTNUM 1 \l 117               We expect the hearing to take approximately two days.  Tomorrow morning we will begin at 9:00 a.m.  We will take an hour for lunch and a break in the morning and in the afternoon.  We will let you know of any schedule changes as they may occur.

LISTNUM 1 \l 118               Pendant toute la durée de l'audience, vous pourrez consulter les documents qui font partie du dossier public pour cette audience publique dans la salle d'examen qui se trouve dan la Salle Papineau, située à l'extérieur de la salle d'audience à votre droite.

LISTNUM 1 \l 119               As indicated in the agenda, the telephone number of the examination room is 819‑953‑3168.

LISTNUM 1 \l 120               There is a verbatim transcript of the hearing being taken by the court reporter sitting at my right.  If you have any questions on how to obtain all or part of the transcript, please approach the court reporter during a break.

LISTNUM 1 \l 121               Please note that the full transcript will be made available on the Commission's website shortly after the conclusion of the hearing.

LISTNUM 1 \l 122               For the record, we wish to inform you that at the request of the Commission the Applicant, YES TV Inc. has submitted a copy of its Certificate of Incorporation which will be added to the public examination file of its application.  Copies are available in the examination room.

LISTNUM 1 \l 123               Also please note that Bell ExpressVu has been added to the list of appearing interveners for this hearing.  They are scheduled as the last intervener on the agenda.

LISTNUM 1 \l 124               And now, Mr. Chairman, we will proceed with Item 1 on the agenda which is an application by HDTV Networks Incorporated for a licence to operate an English language hi‑definition over‑the‑air television service with transmitters in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal and Halifax.

LISTNUM 1 \l 125               Appearing for the Applicant is Mr. John Bitove.  Please introduce your colleagues and you will have 20 minutes for your presentation.   

LISTNUM 1 \l 126               Mr. Bitove

PRESENTATION / PRÉSENTATION

LISTNUM 1 \l 127               MR. BITOVE:  Thank you, Madam Secretary, Mr. Chairman, Mr. Vice‑Chair.  Bonjour Mesdames and Messieurs.

LISTNUM 1 \l 128               Before I get started as well, I would just like to go over the material.  We've furnished the Commission this morning with a copy of our script, also a re‑allocation of our programming funds which you'll see there is a one‑pager, it's a document that looks like this.  And, as well, you should have a seating chart to assist you with the individuals who are up here.

LISTNUM 1 \l 129               And before I get started as well, I wouldn't mind just introducing the individuals.

LISTNUM 1 \l 130               To my left is Doug Hoover our Executive Director of Network Programming and Promotions, formerly of CanWest; next to Doug is Tecca Crosby, Canadian Development and Production, formerly of CTV; next to Tecca is Ellen Baine, Acquired Programming for us and formerly of CHUM; and next to Ellen is Michael Taylor, Acquired Programming and Production, formerly from Craig Media.

LISTNUM 1 \l 131               And to the far right over here we have David Hamilton responsible for promotions and formerly from CanWest; Ken Johnson ‑‑ sorry, Claude Galipeau who was formerly with Alliance Atlantis; next to him Ken Johnson who was sales at CanWest and responsible for sales with us; Stewart Lyons our Executive Vice‑President who also works with me at XM Canada.

LISTNUM 1 \l 132               And behind us in our corner is Brandon Alexandroff who was also Finance and also works with me at XM Canada; next to Brandon is Kaan Yigit of Solutions Research Group who performed the market research and focus group studies.

LISTNUM 1 \l 133               Behind me ‑‑ immediately behind me is Robert Buchan one of our counsel and to his left is Mark Lewis, additional counsel for us as well.  And then to Mark's left, the three gentlemen are Wolf Riesterer, Paul East and Kerry Pelser representatives from engineering firm DEM Allen & Associates based in Winnipeg.

LISTNUM 1 \l 134               Is there any clarification with respect to the seating chart.

LISTNUM 1 \l 135               THE CHAIRPERSON:  It seems clear enough.

LISTNUM 1 \l 136               MR. BITOVE:  Thank you.  Now, I'd like to commence.

LISTNUM 1 \l 137               Good morning.  My name is John Bitove and I'm the President and CEO of HDTV Networks.

LISTNUM 1 \l 138               Our team is here to present our plans for a new national network with eight hi‑definition conventional television stations in Halifax, Montreal, Ottawa, Toronto, Winnipeg, Edmonton, Calgary and our proposed home base of Vancouver.

LISTNUM 1 \l 139               All of these channels will be free over‑the‑air and, by the way, as of last week Industry Canada has signed off all the required paperwork to be able to transmit from these sites.

LISTNUM 1 \l 140               As you can see, this is a seasoned and knowledgeable group with decades of industry experience amassed from a wide variety of Canadian broadcasters, from small start‑up to large corporations.

LISTNUM 1 \l 141               I'd now like to turn it over to Doug Hoover to take you through some of the important pieces of our presentation.

LISTNUM 1 \l 142               Doug.

LISTNUM 1 \l 143               MR. HOOVER:  Today we are examining the potential for generating new interest in conventional television via new technology, hi‑definition over‑the‑air free television for Canadians.  Ultimately the main reason we are here today is to offer Canadians a new and better choice.

LISTNUM 1 \l 144               Why us?  First, we bring experience to the table.  Most of our team has been involved with the Canadian television industry for decades and; second, because we think we have put together a strong application that will bring incremental production dollars to the Canadian broadcasting system.

LISTNUM 1 \l 145               Overall, our goals for HDTV Networks are five‑fold.

LISTNUM 1 \l 146               One, create a new independent and unaffiliated conventional network that responds to the needs of Canadian television viewers with a fresh approach to programming and current affairs;

LISTNUM 1 \l 147               Two, to provide Canadians free access to the latest television technology, hi‑definition programming;

LISTNUM 1 \l 148               Three, to encourage and support Canadian productions wherever possible to be produced in hi‑definition;

LISTNUM 1 \l 149               Four, to provide additional access to the broadcasting system for Canadian television production community and its producers, directors, screen writers and actors; and,

LISTNUM 1 \l 150               Five, to ensure that the Canadian broadcasting system remains in the forefront of new and emerging technologies.

LISTNUM 1 \l 151               We wish to serve as a new independent and unaffiliated voice for Canadians, one that will provide additional points of view and new source of information in an era of increasing consolidation amongst the large Canadian media players.

LISTNUM 1 \l 152               Our programming approach, as Tecca and Ellen will elaborate on further, is innovative yet does not stray too far from proven methods and although are ambitious in this regard, are admittedly modest.  We expect Canadians to quickly embrace the high quality programming we will air.

LISTNUM 1 \l 153               In each of eight markets in which we will broadcast, we intend to provide free access to hi‑definition programming.  This is a central part of our application and will be a key component of our success.

LISTNUM 1 \l 154               The stark reality is that today's conventional television industry has been slow to develop HD TV programming to Canadians, yet it is the fastest growing global consumer technology.

LISTNUM 1 \l 155               Currently the only way to receive HD programming for most Canadians is to pay for it through cable and satellite.  We do not think this is appropriate and leaves HD programming out of the reach for many Canadians.  We will increase viewing of HD programming.  Our commitments in Canadian programming will help ensure that the programs made here in Canada will be increasingly produced in HD.

LISTNUM 1 \l 156               The Canadian production industry has been overwhelmingly supportive of our application, filing over a hundred letters of support.

LISTNUM 1 \l 157               It is quite clear that they require a more competitive environment in which to work.  Competition in this regard will benefit the producers, screen writers, actors and directors in this country, not just in terms of production financing but exposure as well.

LISTNUM 1 \l 158               We believe the Canadian broadcasting system should be at the forefront of new technologies.  The Canadian Government and the CRTC have acknowledged Canada is falling behind in this regard.  The proliferation of HD television sets has been rapid, however, the corresponding growth in programming has not yet occurred.

LISTNUM 1 \l 159               Our application goes well beyond merely HD programming in its scope.  We also have significant goals with respect to both user‑generated and interactive content.  We believe that digital convergence is upon us and it is something broadcasters must embrace as a focal point of what they do.

LISTNUM 1 \l 160               These goals are at the heart of our application and we believe that by meeting them the Canadian broadcasting system will benefit considerably.

LISTNUM 1 \l 161               Tecca.

LISTNUM 1 \l 162               MS CROSBY:  When I joined HDTV Networks' team one of my first priorities was to re‑look at the Canadian programming section of the application that was originally created almost two years ago when HDTV first made its application to the CRTC and, specifically, at the resources available for Canadian independent development and production.

LISTNUM 1 \l 163               As a result, we have made some significant adjustments to our original application which I'd like to review with you now.  It should be noted that we have met and discussed this approach with the key unions and guilds and taken their comments and concerns under advisement as we have re‑tooled our vision for Canadian programming allocations and resources at HDTV.

LISTNUM 1 \l 164               It became quite clear that our original plan fell short in two key areas; namely, the amount of priority programming being broadcast in prime time and the amount of resources being allocated for script and concept development.  As a result, HDTV Networks has agreed to significantly increase its commitment to priority programming.

LISTNUM 1 \l 165               In the first three years of its licence term, HDTV will commit to airing six hours of priority programming in prime time, increasing to eight hours in the last four years of its original licence term, putting us on equal footing with other national private conventional broadcasters.  This is a significant increase from our original application.

LISTNUM 1 \l 166               Additionally, HDTV Networks has also agreed to increase the amount of script and concept development from $1.4‑million over the licence term to $3.5‑million with recouped amounts being reinvested into additional development.  This more than doubles our original proposal.

LISTNUM 1 \l 167               However, that is just the beginning of what HDTV Networks brings to Canadian independent production.  Based on our business model, the highlights of our plans are as follows.

LISTNUM 1 \l 168               We intend to make a meaningful impact within the Canadian broadcasting system, specifically in the form of incremental new spending on Canadian production.  The positive benefits to the production industry contained in our proposal include more than $350‑million on Canadian programming over the seven‑year licence term to be committed in the following manner:

LISTNUM 1 \l 169               More than $120‑million on pre‑licensing new priority Canadian content programming produced by independent Canadian producers;

LISTNUM 1 \l 170               More than $95‑million on acquiring existing priority programming from Canadian independent producers, distributors and other broadcasters;

LISTNUM 1 \l 171               More than $70‑million licensing non‑priority Canadian content programming which will be acquired from third parties; and,

LISTNUM 1 \l 172               More than $70‑million on Canadian news and current affairs.

LISTNUM 1 \l 173               I have considerable experience working with Canada's largest broadcaster on Canadian programming and I can say with certainty that for a new entrant broadcaster these are significant and laudable commitments.  Many of these commitments also exceed the spending made by existing broadcasters on a proportionate basis.

LISTNUM 1 \l 174               For example, incumbent broadcasters traditionally spend about 40 per cent of their overall programming budgets on Canadian programming, while HDTV Networks proposes to spend more than 60 per cent.

LISTNUM 1 \l 175               It is for these reasons that our application has met with support from the production community.  In our discussion with stakeholders, it is clear that they are finding today's Canadian television climate in this era of consolidation to be one of reduced opportunities and limited possibilities.  They are looking for new and incremental dollars and opportunities to be brought into the system and they are looking for new entrants like HDTV Networks to do just that.

LISTNUM 1 \l 176               Ellen.

LISTNUM 1 \l 177               MS BAINE:  The key to broadcasting is content and the conventional television universe is no different from the rest of the industry.  However, HD television is in its infancy, so creative thinking needs to be done to fill the schedule, to present the schedule and to provide choices for Canadian viewers.  This is what our application is about.

LISTNUM 1 \l 178               The CRTC has always encouraged a bottom‑up innovation rather than innovation by consolidation.  Changing corporate priorities often provides opportunities for entrepreneurs quick enough to spot the openings and this is what we will try to do from a programming acquisition point of view.

LISTNUM 1 \l 179               As we mentioned earlier, an important component of our programming schedule will be taken up by our Canadian productions that we will develop exclusively with the independent production sector.  Whether it is for series, miniseries, TV movies, feature films or documentaries we will be counting on Canada's creative talents.

LISTNUM 1 \l 180               But Canadians are more and more open to being entertained by the best of world drama, the best of world music and the best of world documentaries.  Our very healthy Canadian cable networks have proven that.  With HDTV Networks we would now be able to bring those same types of programs to the over‑the‑air viewer as well, programs that come from Britain, Australia and India to name just a few.

LISTNUM 1 \l 181               Of course, one other component of our programming will come from the United States, more precisely from the major studies and networks but we are not so bold, nor inexperienced to assume that we will be competing for those expensive primetime shows with other Canadian networks.  Rather, our focus will be on affordable foreign programming including U.S. to be interspersed throughout our schedule.

LISTNUM 1 \l 182               There is an orderly marketplace when it comes to television program sales and often the conventional window is missing from the sale of some quite extraordinary shows.  That could be made available to the general viewing public.  We would be more than willing to work with all stakeholders including other conventionals, cable networks and pay television services in order to offer that window.

LISTNUM 1 \l 183               We have made a couple of strides in that area already.  For example, we have partnered with the very successful Asian Television Network, ATN, to bring some of their successes to HDTV Networks as well.

LISTNUM 1 \l 184               We have also been approached from a representative of one of the country's leading colleges for financial assistance in completing a TV series that their media students are working on and want to shoot in high depth.  We are excited by that idea and hope to do more in this area.  We also see it as a perfect way to develop some of the interactive and user‑generated content we would like to bring to our audiences.

LISTNUM 1 \l 185               Ken.

LISTNUM 1 \l 186               MR. JOHNSON:  HDTV has taken a very conservative and realistic approach to our audience and revenue projections.  We consulted with ZenithOptimedia, one of the top media buying agencies not only in Canada but worldwide.  As referenced by the Financial Post, ZenithOptimedia are the chief statistical gurus in media market data.

LISTNUM 1 \l 187               We asked them to assess our schedule and determine the audience that we could expect to achieve.  With their extensive knowledge of the competitive schedules in each of the markets we would be covering they were able to evaluate each of those markets and estimate a realistic national audience that HDTV would achieve with its initial schedule.  ZenithOptimedia then provided us with competitive costing guides and ranges that we could use to help develop our projected revenue model.  Drawing on my 30 years of experience in broadcast sales and management, I then determined realistic seller rates to calculate our revenues throughout the seven‑year term of the licence.

LISTNUM 1 \l 188               After determining our expected revenues for the seven‑year term we confirmed our calculations by a comparison to the total national advertising revenue earned by broadcasters.  We found that the revenues we were projecting through our licence term represented less than 3 percent of the projected national advertising budgets for those seven years.  This amount of revenue is sufficient to sustain our operating costs and it only represents a very small portion of the industry's healthy advertising base.

LISTNUM 1 \l 189               ZenithOptimedia also found through their audience projections that the introduction of HDTV would have a minimal impact on local station audience share.  This combined with our revenue evaluation confirmed for us that our entry into the marketplace would not have any significant negative effects on local broadcasters.  With the technology of high definition and the enhanced viewing experience that it brings, the industry is in agreement that audiences will grow.  Increased audiences and the experience that high definition provides will encourage advertisers to explore new ways to use the medium.

LISTNUM 1 \l 190               One of the fresh new approaches that we will be able to bring to the marketplace is that we can truly provide an integrated marketing plan that will involve both television and interactive technologies.  This will not only give advertisers a new way to use television but provide the viewer with an enhanced way to watch television.  Most importantly, it will help to repatriate some of the lost television advertising revenues that are slipping over to online.

LISTNUM 1 \l 191               Claude.

LISTNUM 1 \l 192               MR. GALIPEAU:  Thanks, Ken.

LISTNUM 1 \l 193               HDTV will innovate and engage audiences on nonlinear platforms from the internet to cellular broadband.  About 80 percent of Canadians regularly access the internet.  The average weekly time online is approaching 15 hours per user, not far from the average for radio listening now under 19 hours.

LISTNUM 1 \l 194               HDTV wants to wrap content around communities and communities around content.  Therefore, we want to increase a supply of video and interactive services available to Canadians, invite audiences to collaborate with us as producers and storytellers and start the conversation.  In brief here is our five point plan.

LISTNUM 1 \l 195               One, 360‑degree commissioning:  All our regional programs and program licensing will focus on multiplatform exhibition to build out our internet video presence from our website into iTunes from Juiced to mobile delivery.  We believe HD quality video is the next big thing for online on‑demand delivery.

LISTNUM 1 \l 196               Two, pro‑am commissioning:  We plan to be open access for content, especially comedy and news to tap into the community of amateur/professional producers.

LISTNUM 1 \l 197               For example, our news service will be open and collaborative.  We want to develop a new format of conversational news coverage with the audience covering stories from their perspective and sharing these with us.  We plan for a significant and growing portion of our on‑air news and current affairs coverage to be user‑ generated in HD video and submit it to us online.  To achieve this goal we will invite Canadians to do what they are already doing, shooting video, telling local stories, sharing these stories.  And we will partner with innovative citizen journalism news services, like NowPublic based in Vancouver, to help us tap into this new crowd powered movement.

LISTNUM 1 \l 198               Three, an interactive agora:  We know Canadians like to connect and share online.  On our web service we will provide tools for uploading video, stories and photos and for connecting people so they can share perspectives on social and political issues and pop culture.  We also plan regular town halls in each of our coverage areas with calls for video story submissions.  We will also innovate an interactive TV and get live web and cellular input from audiences using technologies like those of LiveHive systems based in Waterloo, Ontario.

LISTNUM 1 \l 199               Four, music, popular culture, comedy:  We know that music and comedy play big online, on YouTube and My Space.  We will get our on‑air talent therefore to provide unique material for online distribution and we will leverage the cross‑promotion of XM Radio both on air and online to push this unique content.

LISTNUM 1 \l 1100              Five, go fish where the fish are:  We know Canadians are massive users of YouTube, Facebook and My Space.  So we will go to them and partner with these services.  We will create branded sections inside these sites and serve our content there.  This social media distribution strategy goes where the audiences are across all day parts and serves them content and invites them back into our network for more.

LISTNUM 1 \l 1101              John.

LISTNUM 1 \l 1102              MR. BITOVE:  In conclusion I would like ‑‑ sorry ‑‑ in conclusion I would like to reiterate some of the points made earlier.

LISTNUM 1 \l 1103              First of all, we would like to become a new, independent and unaffiliated voice in Canadian television broadcasting.  We believe this is important now that an unprecedented amount of consolidation has already taken place.  And this consolidation goes beyond conventional television and cable network acquisitions but it is considerable when you include newspaper, new media and radio interests.  Collectively, Canadians hear from very few independent voices today compared to just a few years ago.

LISTNUM 1 \l 1104              Secondly, free access to high definition programming is important.  Most Canadians are unaware that there is an option outside paying a BDU or DTH provider for these highly sought‑after services, something that is now being labelled the HD gap.

LISTNUM 1 \l 1105              We are also offering to do something that other broadcasters are not.  For example, we are proposing to be the only over‑the‑air source of high definition content in four of the eight markets we propose to operate in.  Not even the CBC offers free HD content in Halifax, Winnipeg, Edmonton or Calgary.  Why is this important?  Because Canadians seem unwilling, maybe because some of them can't afford it, to pay a BDU or DTH provider for something they believe they should get for free.  A recent Decima study revealed that cost is the single biggest factor among those unwilling to rent or buy a set‑top box.

LISTNUM 1 \l 1106              Thirdly, if we don't provide more Canadian content high‑definition programming today we will lose those viewers to the foreign production of tomorrow.  According to the research we filed with our application, three years from now almost half of the country will have a high‑definition television set.

LISTNUM 1 \l 1107              These are large numbers and purchasers of this equipment will soon demand HD programming in large quantities.  If Canadian production is not there to meet this anticipated tidal wave of demand, you can bet foreign production will be.  Our team believes we can create content that comes from Canadian producers not only for Canadians but to also export for the world.

LISTNUM 1 \l 1108              Fourth, independent production requires more avenues of distribution than they currently have.  We believe it is very telling that most of Canada's production community, the CFTPA, Writers Guild of Canada and Directors Guild of Canada generally support our application.  We will provide them with a meaningful broadcast outlet and increased competition for the works which they recognize will benefit all of them in the long run.

LISTNUM 1 \l 1109              And finally, fifth, HD television is an important emerging technology.  However, despite significant demand consumer confusion is rampant.  A recent study suggested 40 percent of persons with an HD‑capable TV set are unaware that they require a separate set‑top box to receive their HD signals.  However, even that statistic is misleading because of the very fact that you don't need a box to receive HD programming.  You can still receive it free over the air.

LISTNUM 1 \l 1110              Additionally, high definition is only the tip of the iceberg.  The world is rapidly becoming a large digital community and there are many new media technologies and new forms of usage and rated content that need to be embraced by Canadian conventional broadcasters.  Today we believe we haven't pursued this diligently enough.

LISTNUM 1 \l 1111              Mr. Chair, Vice‑Commissioners, Commission, as we have said earlier, we are eager to get going and to do so we lack one thing, a broadcasting licence from you.

LISTNUM 1 \l 1112              When some of us appeared before you on the satellite radio application we were asked many questions.  A couple that stuck out in my mind were around our viability and benefits to Canadian broadcasting.  As I sit here today I am pleased to repeat some of them to you.

LISTNUM 1 \l 1113              First of all, for XM we were asked can we raise the money and achieve profitability.  Well, we actually had to raise more than we projected but the answer is a resounding yes.  We raised over $200 million in new money spent on the Canadian broadcasting system and we expect to breakeven at XM Canada this year in just our third year of operation.

LISTNUM 1 \l 1114              Secondly, we were asked if four channels was the maximum we could broadcast from Canada.  Your decision required us to have eight channels.  Well, as we sit here today we have surpassed that number by over 50 percent.  Today we have 13 Canadian channels on the XM system broadcast across the North American continent and close to 10 million XM subscribers in Canada and the U.S. that now have access to Canadian content through these 13 channels.

LISTNUM 1 \l 1115              The third point I would like to raise was the undertone of, "But you are not a broadcaster and how can we trust you?"  Well, the proof is in the pudding based on the success of satellite radio to date in this country.  You took a bold decision to trust us then and licence us.  Therefore, you can be confident about the decision we are asking you to make again.  Just because it hasn't been done before doesn't mean it can't be done now.

LISTNUM 1 \l 1116              We will now be pleased to take any questions after we watch a short video.

‑‑‑ Video Presentation / Présentation video

LISTNUM 1 \l 1117              THE CHAIRPERSON:  Well, thank you very much for your presentation.  We have some questions for you as I am sure you are not surprised.  Basically, I will concentrate on the rules.  My colleague, Len, will concentrate on the financial aspects and my colleague, Michel, will concentrate on the programming.

LISTNUM 1 \l 1118              But before that I would like a couple of questions on your presentation generally.  You are speaking about free TV, et cetera, and you mention and made a big point that most Canadians don't realize there is an alternative to a BDH and DTH provider.  But assuming you get the licence, et cetera, Canadians still won't be able to receive it because they need a special HD licence do they not?

LISTNUM 1 \l 1119              I mean they need a set‑top box if they want to get it from a BDU, but if they want to receive yours just having bought an HDTV is not enough.

LISTNUM 1 \l 1120              MR. BITOVE:  Correct.  You need ‑‑ obviously, most TVs, HDTVs have a built‑in tuner and you need a separate antenna which you can get for less than $50 which gives you the capacity to get the signal for free.

LISTNUM 1 \l 1121              THE CHAIRPERSON:  It's not your intention to supply those for free is it?

LISTNUM 1 \l 1122              MR. BITOVE:  No, sir.

LISTNUM 1 \l 1123              THE CHAIRPERSON:  Okay.

LISTNUM 1 \l 1124              Secondly, when your colleague spoke about the interactive agora in the last sentence he said:

"We will also innovate an interactive TV and get live web and cellular input from audiences using technologies like those of LiveHive Systems based in Waterloo, Ontario."

LISTNUM 1 \l 1125              THE CHAIRPERSON:  Can you explain to me how this works?  I have no idea what you are talking about.  Sorry.

LISTNUM 1 \l 1126              MR. BITOVE:  Thank you.

LISTNUM 1 \l 1127              MR. GALIPEAU:  LiveHive Systems is a company based in Waterloo that provides simultaneous coordinated interaction online and on cellular related to the TV signal.  It's not through the TV signal, it's done simultaneously.

LISTNUM 1 \l 1128              It is to do with the problem that ‑‑ if we want to have interactive television in Canada the difficulty is getting it through the system, so the BDU, DTH, and so on and so forth, is to go around that by actually empowering the online platform, the cellular platform to work simultaneously with a live signal.

LISTNUM 1 \l 1129              It has been used in a number of cases with NASCAR, ESPN, and even in fact with Global and Big Brother.  So the system works and it has been used by broadcasters.

LISTNUM 1 \l 1130              THE CHAIRPERSON:  How does it work?  Give me a live example.

LISTNUM 1 \l 1131              You mentioned NASCAR.  What happens actually?

LISTNUM 1 \l 1132              MR. GALIPEAU:  Well, the broadcast through master control can prompt viewers online or on cell phones to answer quizzes or offer predictions if its sports, to vote if it's a talk show, and those kinds of things.

LISTNUM 1 \l 1133              THE CHAIRPERSON:  But it's audio.  The interaction is audio?

LISTNUM 1 \l 1134              MR. GALIPEAU:  No, the interaction would be clicking.

LISTNUM 1 \l 1135              THE CHAIRPERSON:  It's not just the guy has a cell phone.  You actually see him because he comes on the cell phone?

LISTNUM 1 \l 1136              MR. GALIPEAU:  It would be text‑based and clicking.  So you would be prompted online with various prompts which would be graphic and text‑based.  So let's say we are having a talk show and it's actually interviewing a politician who says "My view of the economy is this" and say "Do you agree or disagree?"  It comes up on the computer screen "Agree/Disagree", it gets fed back into the television and then it can be talked.

LISTNUM 1 \l 1137              THE CHAIRPERSON:  Let's go back to the example of NASCAR.  You are talking to a fan who makes a prediction, blah, blah, blah.

LISTNUM 1 \l 1138              MR. GALIPEAU:  Yes.

LISTNUM 1 \l 1139              THE CHAIRPERSON:  Can the fan take his cell phone, take a picture of himself, send it to you and it goes up on the screen while he talks or can you see him live talking?

LISTNUM 1 \l 1140              MR. GALIPEAU:  Well, I mean you could adapt it for live video.  I mean, live video applications is not what LiveHive does, but it does actually exist.  Yahoo! just rolled out one, so there are those kinds of applications.

LISTNUM 1 \l 1141              However, if you set up a profile at the broadcaster's web site, you would have your picture already there and you can actually interact via your profile.

LISTNUM 1 \l 1142              THE CHAIRPERSON:  My questions are not so much on the technology, it is your intention.  Is that what you are trying to do, is you see yourself in future doing that kind of live interactive television that in effect whoever is interacting with you not only he has the voice but you actually see the person, have a video feed from the site?

LISTNUM 1 \l 1143              MR. BITOVE:  The answer is yes.  Now, how we envision it today and the practical applications three years from now may be different, but we view this as much more of an interactive component terrestrial broadcasting than currently would exist.

LISTNUM 1 \l 1144              THE CHAIRPERSON:  All right.  Thank you.

LISTNUM 1 \l 1145              Now, to your application.  You want us to give you a licence for an HDTV network.

LISTNUM 1 \l 1146              As far as I understand it, you are going to have the main station in Vancouver, that's where most of your programming will be, then essentially rebroadcast in the other cities with a little of a local feed.

LISTNUM 1 \l 1147              This is quite different from the normal rules that we have for networks.  As you know, we basically have made over‑the‑air the cornerstone of our television system and because your local partners then get the carriage and you also get the local advertising.

LISTNUM 1 \l 1148              You agree that you will not go for local advertising, but I don't quite understand the rationale why you feel we should make an exception for you and free you from the local content, from the local news requirement.

LISTNUM 1 \l 1149              MR. BITOVE:  Mr. Chair, we view that television is at various stages in Canada depending on what you broadcast and probably local broadcasting is the most precarious of the three, especially in some of the bigger markets.  So when we built this application we recognized that ‑‑ one of your questions you even said was the impact on the broadcasting system.

LISTNUM 1 \l 1150              We wanted to make it clear that we did not want to impact local broadcasters and there is a quid pro quo that goes with that.  To not impact local broadcasters you will have to forgo the local advertising revenue that is equivalent with it.

LISTNUM 1 \l 1151              So it's part of how we built the application in terms of the fundamental piece, was that the transmitters would be in the larger markets broadcasting over‑the‑air for free, and recognizing that we had to try and protect or segregate, build a wall around the local broadcasters so that we wouldn't impact them, so there isn't local programming per se.

LISTNUM 1 \l 1152              We have said in our news roundtable, obviously if there is a major story that happens in a local market that impacts all Canadians it would be covered and discussed, but we are really not there to compete with local television broadcasters and we want to make sure that is clear.

LISTNUM 1 \l 1153              THE CHAIRPERSON:  Yes, but you just said exactly what bothers me about this "segregate".  You are basically saying local broadcasting we want a separate category.  We just want to be a pure national broadcasting system.

LISTNUM 1 \l 1154              We have no such category and you are asking me to create it.  As I said, what we are really doing right now, as you well know, if you want to, cross‑subsidizing local broadcasting from the national one.  By allowing you to create a purely national system without any local feed, in effect, you are competing with those who have an obligation to provide local programming and taking away the cream on the national market.

LISTNUM 1 \l 1155              MR. BITOVE:  I don't think we share that view.  I think that, if anything, we view ourselves as competing more with kind of specialty in terms of its reach and what its audience has, which is the healthiest of the three sectors if you took national over‑the‑air, local over‑the‑air, and specialty in terms of the revenue base.  So we were trying to ‑‑ because, as you said, we had to be cognizant of the impact on the broadcasting system in Canada, we built our application to minimize the impact on those most precarious and to try and set our sights to compete with those that are healthiest.

LISTNUM 1 \l 1156              At the same time, we had to look at what it is we were trying to do, having free over‑the‑air high definition can't be done unless we put transmitters in these markets.  So it is part of what is constructed.

LISTNUM 1 \l 1157              I guess, Mr. Chair, you know that's what happens in the technology world, is things change.  I understand your job as regulators is to try to keep up with the change, although Parliament never responds as quickly as you need it to be.  So we are trying to build something that is within the framework of the Broadcasting Act and apply for this licence.

LISTNUM 1 \l 1158              THE CHAIRPERSON:  How do you explain the other side of the coin?  I mean, you say you want to jump ahead; you want to fill the void on HD which you see coming; you want to make sure that the Canadian programming and the Americans go off‑the‑air, that you will fill the void.

LISTNUM 1 \l 1159              On the other hand, when it comes to carriage suddenly you are the most traditional of all, you want any kinds of carriage, you want analog, you want digital carriage, you want HD carriage.  I mean, isn't there a little bit of inconsistency?  If you are out front, if you are filling the gap, et cetera, why don't you stay out there?  How come you are now suddenly wanting analog carriage rights?

LISTNUM 1 \l 1160              MR. BITOVE:  It has to do with the revenue and then our benefits to the Canadian broadcasting system, in particular the Canadian production industry.  The larger the reach we have, the more eyeballs we can get, the more viewers we can get, the more advertising we can sell, the more we can plough back into the broadcasting system.  So that's why it's critical from that piece that we be put on equal footing with the national broadcasters.

LISTNUM 1 \l 1161              THE CHAIRPERSON:  But you appreciate that the more eyeballs you reach, the more impact you will have on the traditional system obviously?

LISTNUM 1 \l 1162              MR. BITOVE:  Well, I think any application, whether it is radio or TV, is an impact on the existing system.  We are trying to be cognizant of those, as I said before, protecting the ones that are most precarious and going after the healthiest.

LISTNUM 1 \l 1163              THE CHAIRPERSON:  All right, Mr. Bitove, put yourself in my shoes for one second.  Assuming you get your wish, we approve this, I hold a press conference and I explain why I have done this, why have we given HDTV a national licence with no requirement for local news and local programming, but I get carriage rights, mandatory carriage rights in all three forms that you are asking for, what is my justification?  Why have I done this?  Why does this benefit the Canadian broadcasting system?

LISTNUM 1 \l 1164              MR. BITOVE:  I'm making notes frantically here while we are speaking and I ask for the chance to maybe come back on this later when we caucus with the team, but I would say there are a few things off the top.

LISTNUM 1 \l 1165              First of all, you have had massive consolidation in this industry, you have incredible talent around this table and there are lots more who should be brought back into the Canadian broadcasting system somehow, people who spent, you know, 20, 30 years in an industry were there isn't necessarily the jobs that there were before.

LISTNUM 1 \l 1166              Second, you need to voices.  Newsgathering alone has shrunk in Canada and I think any thriving democracy needs more independent voices of whatever political positions or philosophies that they have to make a country healthier.

LISTNUM 1 \l 1167              Third, we are ploughing dollars into the system.  It's just like with XM Radio, we could have said "Well, don't license it, but that $200 million we have spent on the broadcasting system and jobs in Canada wouldn't be here otherwise.

LISTNUM 1 \l 1168              I think it's easy to explain the local issue by saying they are not going to be ‑‑ you know, they are not permitted to collect local advertising revenue so they are not required to produce local programming.  That's not how this was constructed.

LISTNUM 1 \l 1169              Fourth ‑‑ and this is the biggest of all.  I think you will hear these numbers a few times today ‑‑ there is about 10 to 12 per cent of Canadians who don't use a BTU or DTH provider to get their television signal.  That is about 3‑million‑odd people.  On top of that, even a few years down the road I referenced in all the research you get about half of Canadian households will be HD‑capable, but whether those people are HD‑capable by having a TV set or a set‑top box, they don't want to pay the premium for HD programming.

LISTNUM 1 \l 1170              So the numbers are as much as half or more of the country has this new technology out there that they feel we are almost creating two classes, those who can pay the premium to get high definition and those who can't.

LISTNUM 1 \l 1171              I don't think that's what the Broadcasting Act was founded on.  In fact, when I look at your own reports from this past year where there was questions about over‑the‑air broadcasters, the Commission itself said over‑the‑air broadcasting is important to Canadians and free service is important to Canadians, and I would say that is the fourth piece of the puzzle that we are providing through this application.

LISTNUM 1 \l 1172              THE CHAIRPERSON:  As you know, the Broadcasting Act has requirements for programming as well.  So I don't want to put words in your mouth, but I guess the justification you are saying is well, by having free over‑the‑air HDTV in effect we meet the requirement for free broadcasting accessible, whatever word you want to use.  On the other hand, through the traditional broadcasters, to the extent that they convert to HD ‑‑ and they obviously all will by 2011 or so ‑‑ we meet the local requirement.  So we have different networks addressing different points of the Broadcasting Act.  That would be the rationale for doing this?

LISTNUM 1 \l 1173              MR. BITOVE:  I believe so.

LISTNUM 1 \l 1174              Doug, I don't know if there is anything further you want to add.

LISTNUM 1 \l 1175              THE CHAIRPERSON:  As I say, I don't want to put words in your mouth, I'm just trying to construe when we get into the Act ‑‑

LISTNUM 1 \l 1176              MR. BITOVE:  I think so.  Please give us the time to maybe come back on this after breaks or whatever, but I believe that would be the position right now.

LISTNUM 1 \l 1177              THE CHAIRPERSON:  As you know, you have an opportunity to come back at the end.

LISTNUM 1 \l 1178              As I have made clear on many occasions, I feel it very important for this Commission to be predictable and clear in its role in the place and if they make an exception or make a deviation from existing rules to give the rationale for it and also indicate whether this is a one‑time exception or whether this is a change in gear.

LISTNUM 1 \l 1179              I'm not suggesting we approve yours, but I say if we do those questions obviously will be posed to us and I have some trouble reconciling what I see in front of me with that approach.  So any help you can give me would be appreciated.

LISTNUM 1 \l 1180              I'm sorry, did you have anything else?

LISTNUM 1 \l 1181              MR. HOOVER:  Just a comment with respect to local programming and local production.

LISTNUM 1 \l 1182              It's my understanding that a number of the current conventional broadcasters have started to back away from local news in communities that they serve and so there are licensees that are moving out of that arena.

LISTNUM 1 \l 1183              The other is that in today's technology and the ability to gather information and reflect back into a community the views of the individuals in that community, I don't believe you require an actual facility or bricks and mortar or an actual station per se because you can feed back to a central point and then have that signal go back into the community.

LISTNUM 1 \l 1184              So there are ways of dealing with communicating and giving access to the medium in the community without having a substantive structure and facility built right in the community.

LISTNUM 1 \l 1185              I think through the use of technology we can offer a great deal of access that currently isn't being provided.

LISTNUM 1 \l 1186              THE CHAIRPERSON:  Yes, but with respect that's a different point.  I didn't ask you to have local establishments, I asked you to have local programming and your submission does not offer any at all.  That's the point, whether you do it through a local operation or whether you do feed it via the internet from different parts of the country.

LISTNUM 1 \l 1187              I agree with you, modern technology frees us from the necessity of having sort of a local presence necessarily.

LISTNUM 1 \l 1188              But coming back to you, is there any transition here?  Is there any suggestion that you will move towards local programming, local news or is your business plan basically saying, no, we are separate, we are going to be a purely national network, we have HD content, we have a lot of foreign content that is non‑U.S. that other people don't have, et cetera? But if you were looking for local content, local news, don't look to us?

LISTNUM 1 \l 1189              MR. BITOVE:  You never say never. But I think when we built this application we had to look at, you know, questions even you put to us at the beginning about impact on the broadcasting system.

LISTNUM 1 \l 1190              If you look at the picture today and who is to say ‑‑ I mean, 10 years ago when I wanted to get into broadcasting there was 20 different players and nobody was selling and now we are down to two big guys and a bunch of small independent local guys.  We don't want to impact the small local operators right now.

LISTNUM 1 \l 1191              Now, five years from now, three years from now, if they become healthy and they have much different cost structures or it is a different environment, we may be back to amend our application and say, we think there will be a minimal impact if we are able to do this because there is a different business model.

LISTNUM 1 \l 1192              But if you ask us today as we apply, and you look at the Canadian broadcasting system where the maximum impact is and the minimum impact, I think we have to respect the territory of the small local broadcasters and their limited local advertising revenue pie and allow them to exist in the model they have.

LISTNUM 1 \l 1193              THE CHAIRPERSON:  So if we say, yes, approved, conditional of having local programming, local news equivalence to CTV or so, you pack your bags and don't launch your program, your network?

LISTNUM 1 \l 1194              MR. BITOVE:  It might mean that.  I think that if you are doing local news you have got to get much more aggressive into local advertising and local programming.  I mean, it bifurcates itself.  That is not to say there aren't some national advertisers that won't just buy for efficiency and spread it around on everything, but it is a different model from how we constructed this application.

LISTNUM 1 \l 1195              THE CHAIRPERSON:  You know, I appreciate your pointing out the need for HD programming in Canada and also that there will be a void or else there will be a massive U.S. offering and a lack of Canadian offering and that you want to position yourself for that.  And notwithstanding that we said transition to digital is in 2011 and may actually be driven earlier because of the earlier U.S. conversion.  I see all of that.

LISTNUM 1 \l 1196              But then the next step of sort of freeing you from this, that is why my question.  If we said, yes, we appreciate what you are doing, but we can't let you get off the hook on local programming and local news, it is something you want to reflect on because this is a very big give you are asking here.

LISTNUM 1 \l 1197              MR. BITOVE:  Okay.

LISTNUM 1 \l 1198              THE CHAIRPERSON:  Okay, Mr. Katz, your turn.

LISTNUM 1 \l 1199              COMMISSIONER KATZ:  Thank you, Mr. Chairman.

LISTNUM 1 \l 1200              I just want to pick‑up on one thing on the previous discussion and then we will go into the financial piece of it.

LISTNUM 1 \l 1201              If I look at your reply dated February 7, 2008 and look at paragraph 28, there is a statement in there that I just need some clarification on.  And it reads:

"Contrary to what some interveners have suggested, our proposal not to do significant amounts of local programming in each of the eight markets for which HDTV Networks seeks licences is not contrary to the spirit or the letter of the Broadcasting Act." (As Read)

LISTNUM 1 \l 1202              When I look at the Broadcasting Act, and in fact you quoted it in paragraph 63 of your evidence, there is a sub clause 3(1)(i)(ii) that says:

"It is hereby declared, as the broadcasting policy for Canada, that the programming provided by the Canadian broadcasting system should be drawn from local, regional, national and international sources." (As Read)

LISTNUM 1 \l 1203              It doesn't say "or" it says "and." That, to me, is the letter of the law.  And yet you are saying it is not contrary to the spirit or the letter.  Can you elaborate?

LISTNUM 1 \l 1204              MR. BITOVE:  Well, we didn't say there was absolutely no local programming.  For instance, if there is a major issue, let us take the ‑‑ it didn't happen in Halifax ‑‑ but the Bathurst, New Brunswick basketball team accident that happened.  I mean, we would have cameras there and fill reports and be providing it.

LISTNUM 1 \l 1205              And let us say there was an emergency type situation in Winnipeg.  As Mr. Hoover reiterated, we could provide camera and local content to the citizenry in terms of what is required.  What we are not building, though, is a schedule that has regular, local programming blocks in them.  We just think that that is the domain of the small local broadcasters and we don't want to impact them.

LISTNUM 1 \l 1206              MR. BUCHAN:  Mr. Katz, if I could just jump in to quote from the Broadcasting Act as well.  The reference that you have read in 3(1)(i)(ii) is a reference to the system overall, not to each individual licensee.  And you have read it correctly, but the word is "system" not each individual broadcaster.

LISTNUM 1 \l 1207              If I could take you to section 5(2), it says:

"The Canadian broadcasting system should be regulated and supervised in a flexible manner that.."

and then it goes down to:

"..(c) is readily adaptable to scientific and technological change; (d) facilitates the provision of broadcasting to Canadians; (e) facilitates the provision of Canadian programs to Canadians; and (f) does not inhibit the development of information technologies and their application or delivery of resultant services to Canadians." (As Read)

LISTNUM 1 \l 1208              So, you know, you can take these objectives in the Broadcasting Act and quote them one way or the other, but you started with a reference to the system, and I think what Mr. Bitove is suggesting, that as technology changes, the response to technology and the response to consumer demand changes and this application has been designed in a way to bring high‑definition television to Canadians and high‑definition Canadian programming to Canadians in an attempt to close that gap and that is the attempt.

LISTNUM 1 \l 1209              It is certainly designed and built within the Broadcasting Act and the Broadcasting Regulations.  The whole issue of the trade off between local programming and local advertising, Mr. Bitove has already spoken to that and I know you will be hearing from Mr. Johnson about the question about impact on other broadcasters national and local.  But we started with an objective in section 3 that relates to the system, not to each individual broadcaster.

LISTNUM 1 \l 1210              THE CHAIRPERSON:  If I can just interject.  You seem to use the terms local news and local content interchangeably.  Presumably, local programming and local content doesn't necessarily have to be news?

LISTNUM 1 \l 1211              MR. BITOVE:  Correct.

LISTNUM 1 \l 1212              THE CHAIRPERSON:  And you have no plans in either, if I understand you.

LISTNUM 1 \l 1213              MR. BITOVE:  No, correct.

LISTNUM 1 \l 1214              THE CHAIRPERSON:  You will broadcast local news if they are relative, obviously, because ‑‑

LISTNUM 1 \l 1215              MR. BITOVE:  Correct.

LISTNUM 1 \l 1216              THE CHAIRPERSON:  ‑‑ if it is a national story, like you mentioned a disaster in Halifax or something, you would put it on.  But neither local programming nor local news, you application as it stands right now, sees you playing a role in it?

LISTNUM 1 \l 1217              MR. BITOVE:  Yes.  And I think Mr. Hoover describes it best where he says, you know, it is a bottom‑up local to national news that there will be local content that all Canadians will share an understanding, you know, what is happening.

LISTNUM 1 \l 1218              I think also you have to remember, and this is where we have to do a balancing act, you know, some of the largest Canadian associations and production companies, it kind of falls where who is master, who are you trying to serve in this.  And the more we spend on local the less we have for Canadian drama, whereas we built a programming schedule more built on Canadian drama and the types of things that the major associations are crying out for where they need help.  So that was part of the balancing act as well.

LISTNUM 1 \l 1219              MR. HOOVER:  The only other comment to coattail on John's comment with respect to dramatic production, we will be soliciting and working with producers across the country and many of those producers will wish to produce dramatic programming that reflects and tells local stories. It is just that those local stories will then shared on a national basis.

LISTNUM 1 \l 1220              So again, it is more of a bottom‑up type of localism, if you like where instead of taking a local story and only sharing it back into that local community, we hope to share that story on a national basis and some of those will be through dramatic productions.

LISTNUM 1 \l 1221              COMMISSIONER KATZ:  But picking up on that same topic, the regulatory bargain, if I can call it that, that you are looking at balancing is local advertising and local content as opposed to the package, the broadcasting system, where there are obligations and there are commitments and benefits that ascribe to all broadcasters and goes beyond just local for local, there is a package there as well.  You are just taking two pieces of it and saying I won't do this and I won't do this.

LISTNUM 1 \l 1222              MR. BITOVE:  No, I don't totally share that thought, Mr. Vice‑Chair.  I think what we are saying is our definition of local programming may be different from how people understood local programming 10 years ago.  But the most important thing when it comes to a dedicated block on a schedule called local programming, traditionally that has been setup there with a local revenue source attached to it and we didn't build our schedule that way.

LISTNUM 1 \l 1223              So within the fundamentals of the Broadcasting Act there will be localism in terms of what we are doing.  As to traditionally how you have seen a network licence and what you call local programming and the quid pro quo of local revenue that goes with that, we are not going there, we have constructed this differently.

LISTNUM 1 \l 1224              COMMISSIONER KATZ:  If I can take you to paragraph 31 I guess of your reply as well. And I guess that starts to lead into the financial situation.  You actually commented you find it surprising conventional broadcasters would put forth a study that would suggest their stakeholders' intent to incur losses of some $1.3 billion over the next seven years.

LISTNUM 1 \l 1225              When I look at your financial statements that you filed as part of your initial application, and it may have changed since then, if I read this correctly, and I think it is Appendix 4(a), there is accumulated loss of $169 million or roughly that.  So it is not surprising that there are losses being incurred by the industry, not just the existing conventional, but even yourselves as you go into this opportunity.

LISTNUM 1 \l 1226              MR. BITOVE:  I believe there is a difference between a start‑up and an ongoing structure in a business, and most of our losses could be attributed to start‑up as opposed to the viability of the business.

LISTNUM 1 \l 1227              COMMISSIONER KATZ:  How sensitive is this profit and loss statement to revenue variances if, for example, there was a 10 per cent loss in revenue or a 20 per cent loss in revenue, how sensitive is this financial and would it still be viable?

LISTNUM 1 \l 1228              MR. BITOVE:  Well, I think like any other business, you have to make the corresponding adjustments everywhere on the line ends at a business plan, you know, if you have a softer advertising season or stronger advertising season.  So it is no different than anything else I am involved with.

LISTNUM 1 \l 1229              COMMISSIONER KATZ:  When I look at the letter that accompanied your application from ZenithOptimedia, and I will give you a minute to find it, it was signed by Sunni Boot on November 28, 2006 as part of your evidence.  There is references here to your forecast, specifically a comment in the fourth paragraph down regarding the $3 million of gross national advertising revenue in the first year, which is stated as an accurate reflection of how much HDTV can sell in the first year.

LISTNUM 1 \l 1230              When I drop down to the fifth paragraph, and I will read it just for clarity:

"With respect to projected revenues beyond the first year we believe that if HDTV is able to improve their programming line‑up.."

first caveat,

"..through the addition of best‑in‑class content.."

a challenge for a new start‑up, as you say.

"..and if the television advertising revenue remains constant or continues to grow.."

And I note that Ken Johnson in his opening remarks today talked about forecast of projected national advertising budget, and I will leave the thought, if you would tell us what your forecast assumptions were going up seven years I would appreciate it.

"..then the advertising revenue growth rates presented by the company may be achievable." (As Read)

LISTNUM 1 \l 1231              There are a couple of caveats in there and a couple of very very bold statements and subjective statements as well.  And I don't see Sunni here either.  Can you talk to that and give us some degree of assurance that you can develop a best‑in‑class content in the timelines that you have identified here and perhaps she implied by improving the programming, which may suggest that the programming that you initially contemplated is not going to generate that revenue base?  A lot of questions there.

LISTNUM 1 \l 1232              MR. BITOVE:  One of my cohorts will do programming, the other will do revenue.

LISTNUM 1 \l 1233              MR. JOHNSON:  I think it is important, when you are evaluating the financial health of national advertising revenues, to consider both parts of the pie, the conventional side of the pie and the specialty revenue side of the pie.

LISTNUM 1 \l 1234              Agencies, when they work with our advertisers to form marketing plans, form a marketing plan, they do not predetermine revenues going to either conventional or specialty.  The client gives the agency the amount of money and they go to the market and see how the market reacts to the money they have.

LISTNUM 1 \l 1235              When we took a look at the last five years of national advertising revenues as published by the CRTC, we saw that there was a growth rate on average of 6.4 per cent.

LISTNUM 1 \l 1236              When we wanted to see the impact that we would have over our seven‑year licence term ‑‑ and, again, this is fairly consistent throughout our initial years as well ‑‑ we took a very conservative approach and estimated a two per cent growth rate for the seven‑year term of our licence.

LISTNUM 1 \l 1237              Interesting to note, the two per cent that we were using was even less than Mr. Armstrong's 2.4 per cent that the CAB used in their intervention.

LISTNUM 1 \l 1238              So, we believe that we've taken a very conservative approach to where the total national advertising revenues will grow over the next seven years.

LISTNUM 1 \l 1239              Again, we went back to our revenues and  totalled that for the licence term, we found that we would be taking less than three per cent of national advertising revenues out of the pie.

LISTNUM 1 \l 1240              And, again, major broadcasters have attempted to get assets and build specialty and conventional for that reason, the national advertising pie has to be both parts.

LISTNUM 1 \l 1241              We've also taken a very conservative approach in ‑‑ three variables are used when you build a revenue model:  your audience level, which is your inventory; your pricing level and, of course, your sell‑out or inventory usage levels.

LISTNUM 1 \l 1242              Optimedia did take a very realistic and conservative approach to audiences in our first year and as Sunni has said in that, that she feels they're achievable.

LISTNUM 1 \l 1243              They also provided us with a pricing range.  We use the lower end of the pricing range, again, to be conservative and knowing that we would be up against specialty to get the majority of our revenues.

LISTNUM 1 \l 1244              And the reason we believe that is because our audiences and ratings will be similar to that of the specialty stations.  What advertisers will be looking to us in opening years is for a cost‑efficient way to get a national footprint and to have a low maintenance buy, not unlike the specialties either where there is one bill and one invoice.

LISTNUM 1 \l 1245              The advertisers do not book the large networks for their cheap efficiencies or their easy maintenance of the buy, they book those stations for their top 20 programming, their large ratings and their vast reach.

LISTNUM 1 \l 1246              Again, one of the reasons we took a very conservative approach for the early years of our licence is that that would give us time for the public to find a station and accept what we're doing; certainly for our schedule to mature because it does take a while for the schedule to mature; and, thirdly, because advertisers are usually reluctant to use a new applicant until they have a history in the marketplace.

LISTNUM 1 \l 1247              So, we've purposely used conservative numbers in our early years to give us time to grow, give us time to expand.

LISTNUM 1 \l 1248              And, again, with those three variables, as I've said, we've used the lower end of the pricing range, so we've allowed ourselves a fair bit of time to grow our rates over our term as well as our audience over our term.

LISTNUM 1 \l 1249              We also did a check and balance I guess you'd call it for the seventh year of our term to see, you know, how we would relate to the marketplace as it stands today.

LISTNUM 1 \l 1250              We found that the audiences we had projected in our seventh year of our term were similar to those of OMNI and City, probably a little closer to City's audiences that they're doing today.  The thing to note is that City has only five stations, or the old City I guess had five stations and we cover eight major markets.  So, we believe that our audience growth is very attainable over the seven years.

LISTNUM 1 \l 1251              We've allowed quite a bit of room in our pricing as the term of the licence proceeds and, again, as I said in my opening, I have a bit of experience in sell levels of new entries into the market and I believe I've allowed more than enough sufficient growth to grow the business over the seven years with that variable as well.

LISTNUM 1 \l 1252              COMMISSIONER KATZ:  So, you have assumed a two per cent projected national advertising growth rate over the seven‑year term annually?

LISTNUM 1 \l 1253              MR. JOHNSON:  That's correct, which is less than, as I said, less than...

LISTNUM 1 \l 1254              COMMISSIONER KATZ:  Have you looked at the growth rate of national advertising as between conventional and specialty?

LISTNUM 1 \l 1255              MR. JOHNSON:  Well, again ‑‑

LISTNUM 1 \l 1256              COMMISSIONER KATZ:  Are they both growing at the same speed or are they...

LISTNUM 1 \l 1257              MR. JOHNSON:  Again, what we did and, again, we're after the full pie.  That's what you have to consider when you're looking at national advertising revenues that it's not one or the other, it's both.  Agencies do not pre‑determine where they're spending their advertising dollars.

LISTNUM 1 \l 1258              So, we looked at the total pie and the average over the last five years from the Commission's number was 6.4 per cent.  And, again, cognizant of the fact that the growth rate may not remain at 6.4 per cent, we took a very conservative approach at two which was even less than the interventions mentioned it would be.

LISTNUM 1 \l 1259              So, I believe that we've allowed certainly a smaller growth rate in the national revenues, but if in fact it grows at what the interventions have said, there's even going to be a bigger pie and our three per cent will probably be ‑‑ or our less than three per cent will even be a little lower than that.

LISTNUM 1 \l 1260              So, we don't believe we're going to have an impact ‑‑ a significant impact on any one broadcaster as we go forward for the term of our licence.

LISTNUM 1 \l 1261              I don't know if you want me to speak to this now, but we've taken a similar approach with our audience estimates.

LISTNUM 1 \l 1262              And the example I'll use is that in our first year we've estimated our prime time audiences to be 6,000 audience, which is similar to specialities in their initial year.

LISTNUM 1 \l 1263              We took a look at the three metered markets, Calgary, Vancouver and Toronto, they're metered, and took a look based on BBM population estimates that those three markets would represent about 74 per cent of our audience.  If you take 74 ‑‑ and I'm a numbers guy, so I might be moving a little quick ‑‑ but if you take 74 per cent of the 6,000, that means all we need to garner from three of the major markets in Canada is 4,500 people.

LISTNUM 1 \l 1264              Presently in that time period there's 965.2‑thousand people watching television.  So, as you can appreciate, our impact on any one station or any one program is going to be very, very limited.

LISTNUM 1 \l 1265              COMMISSIONER KATZ:  Okay.  You filed this morning some additional cost I guess for priority programming.  How does that mesh with this P&L and what does it make it look like?

LISTNUM 1 \l 1266              MR. BITOVE:  It's a re‑allocation predominantly how we had news and documentaries in through our ‑‑ and I'll let Tecca or Ellen comment further ‑‑ but through our meeting with the various stakeholders, the guilds, the associations we took money ‑‑ some money that we had allocated for other news programming and put it more into drama.

LISTNUM 1 \l 1267              COMMISSIONER KATZ:  Does this P&L change at all?

LISTNUM 1 \l 1268              MR. BITOVE:  No, the P&L doesn't change, I believe the total, it's just how we allocated the programming costs within the old P&L to a revised P&L.

LISTNUM 1 \l 1269              COMMISSIONER KATZ:  Okay.  And the comment, or the question I asked earlier about sensitivity.  If you missed your revenues by 10 per cent what would that do to the financials?

LISTNUM 1 \l 1270              And I guess I'll ask that question in the context of, the Chairman raised the question about analog distinct from digital.  If this application was hypothetically approved but only for digital applications not for analog, it would certainly have an impact on your reach, obviously.

LISTNUM 1 \l 1271              MR. BITOVE:  Yes, it would.

LISTNUM 1 \l 1272              COMMISSIONER KATZ:  And on P&Ls as well.

LISTNUM 1 \l 1273              MR. BITOVE:  Yes, it would.

LISTNUM 1 \l 1274              COMMISSIONER KATZ:  And I guess the question is, to what extent?

LISTNUM 1 \l 1275              MR. BITOVE:  Well, we'd have to re‑look at that.  Obviously there'd be ramifications on the programming front if our revenue is reduced.

LISTNUM 1 \l 1276              COMMISSIONER KATZ:  Have you done that analysis yet?

LISTNUM 1 \l 1277              MR. BITOVE:  No, we haven't and we were hoping ‑‑ we were wondering if you'd ask the question and Ken said, I hope they don't ask the question because that's going to take a while.

LISTNUM 1 \l 1278              COMMISSIONER KATZ:  I think it's important to have that information on the record.

LISTNUM 1 \l 1279              MR. BITOVE:  Okay.  We will do as best we can.

LISTNUM 1 \l 1280              COMMISSIONER KATZ:  I do know, based on the CRTC records, there's roughly 3.9‑million analog subscribers in the markets you talked about and there's about 3.1‑million digital customers.

LISTNUM 1 \l 1281              So, you're looking at about a little less than 50 per cent of the market just for digital and HD is a fraction of that as well.

LISTNUM 1 \l 1282              MR. BITOVE:  Correct.

LISTNUM 1 \l 1283              COMMISSIONER KATZ:  If you can run these things based on the three scenarios of what you've asked for in your application, which I guess we have before us, if it was just digital and if it was just HD.

LISTNUM 1 \l 1284              MR. BITOVE:  I think it's safe to assume it would be ‑‑ at least half the programming costs are going to go, the Canadian programming costs, but we'll try and vet it out and formally submit it to the Commission.

LISTNUM 1 \l 1285              MR. LYONS:  Sorry, Mr. Commissioner, are you saying just HD or why the distinction between digital and HD?

LISTNUM 1 \l 1286              COMMISSIONER KATZ:  Well, you've filed an application for HD programming.

LISTNUM 1 \l 1287              MR. LYONS:  Right.

LISTNUM 1 \l 1288              COMMISSIONER KATZ:  And from a broadcaster's perspective ‑‑

LISTNUM 1 \l 1289              MR. LYONS:  Right.

LISTNUM 1 \l 1290              COMMISSIONER KATZ:  ‑‑ the carriage of HD distinct from SD I guess ‑‑

LISTNUM 1 \l 1291              MR. LYONS:  Right.

LISTNUM 1 \l 1292              COMMISSIONER KATZ:  ‑‑ is an additional cost as well.  So, we're looking at it from a cost perspective, from a systems perspective from the broadcasters as well.

LISTNUM 1 \l 1293              So, to download or to upload both in analog and in standard digital, as well as in HD, requires additional cost.

LISTNUM 1 \l 1294              MR. LYONS:  Right.  But if we're broadcasting in digital, I think ‑‑ well, obviously there's the three formats, analog, digital and HD, but HD is just a, you know, increased resolution version of digital, it's still digital, but you would actually look at segmenting it all the way down to just HD?

LISTNUM 1 \l 1295              COMMISSIONER KATZ:  Well, I mean, we'll ask the question of the broadcasters when they come up here.

LISTNUM 1 \l 1296              MR. LYONS:  Right.

LISTNUM 1 \l 1297              COMMISSIONER KATZ:  If it's just a matter of just segmenting it and there's no additional cost, also good to know; or is there initial cost associated with SD distinct from HD?

LISTNUM 1 \l 1298              MR. LYONS:  Right.

LISTNUM 1 \l 1299              MR. BITOVE:  I think, you know, Mr. Vice‑Chair, because you've raised a sensitive point, if you look at some of the existing BDUs, you know, their carriage of analog, SD and HD, you know, is all over the place.

LISTNUM 1 \l 1300              You have some markets where you have, you know, nine or 12 CBS stations showing up on the dial in various formats.  So, you know, the uploading and downloading and how that's done is something that we can work with the BDUs to minimize the impact.

LISTNUM 1 \l 1301              The most important thing is the train that, you know, is allocated in market, out of market through those three spectrums that you spoke of and how it's divvied up.

LISTNUM 1 \l 1302              COMMISSIONER KATZ:  Okay.  Is there a time line how long it will take you to do that, just so we can get a sense ourselves?  Are we looking at days, weeks?

LISTNUM 1 \l 1303              MR. BITOVE:  What we will do, I think with your indulgence is, you know, by the time we wrap up today after ‑‑ you know, whenever it is, we'll kind of ‑‑ we'll undertake ‑‑ we're going to try and give you an initial answer by wrap‑up tomorrow.

LISTNUM 1 \l 1304              COMMISSIONER KATZ:  Okay, thank you.

LISTNUM 1 \l 1305              Those are my questions, Mr. Chairman.

LISTNUM 1 \l 1306              THE CHAIRPERSON:  And can you just clarify, so I understand it and the Secretary, what you asked Mr. Bitove to provide by tomorrow.

LISTNUM 1 \l 1307              COMMISSIONER KATZ:  Certainly.  I asked him to take a look at the profit and loss statement, Appendix 4A I guess it is, and to re‑run those numbers with an assumption that the reach of his basic customers will strictly be digital only and the second one being strictly HD only.

LISTNUM 1 \l 1308              THE CHAIRPERSON:  Okay, perfect.  Thank you.

LISTNUM 1 \l 1309              Michel.

LISTNUM 1 \l 1310              COMMISSIONER ARPIN:  Thank you very much, Mr. Chairman.

LISTNUM 1 \l 1311              Mr. Bitove, I will start my first question based on previous discussions that you had with either the Chair or with Mr. Katz and sometimes it is only for a matter of clarification, but on a few occasions you spoke about small broadcasters.

LISTNUM 1 \l 1312              Now, since you are planning to broadcast in mainly major markets, who are you contemplating are small broadcasters in these markets?

LISTNUM 1 \l 1313              MR. BITOVE:  Well, I mean, the issue that comes to my mind is like Sun TV which isn't a small broadcaster in the total scheme, but in the English market is a small broadcaster.

LISTNUM 1 \l 1314              Corus has some small stations, of course there are ‑‑

LISTNUM 1 \l 1315              COMMISSIONER ARPIN:  But they are not in Toronto,  they are in Peterborough and Kingston, say.

LISTNUM 1 \l 1316              MR. BITOVE:  Yeah, but there will be spill from the signal, everything else.  I mean, there's the big two and there's, you know, a few others, but as Mr. Hoover continually points out, there's less and less.

LISTNUM 1 \l 1317              COMMISSIONER ARPIN:  Mr. Hoover, could you ‑‑ explained that you could do local programming from distance and he gave some examples, particularly regarding news and you added that it could be for other content.

LISTNUM 1 \l 1318              Those local components, will they be only available in the locality they have been shot, or will they be available throughout all the whole network?

LISTNUM 1 \l 1319              MR. HOOVER:  No, that's the point, they'll be shared on a national basis.  And if I can just go back for a moment to the tragic bus accident with the school kids in New Brunswick.

LISTNUM 1 \l 1320              The follow‑up to that story was that there's a move to examine whether school kids should ride in those type of vehicles for sporting events.  That to me sounds like a solid idea for a documentary.

LISTNUM 1 \l 1321              So, if we take that tragic incident and commission a documentive program on that subject, we can share that on a national basis.  Now, effectively that's a local story, but we've elevated it and people residing in British Columbia will have access to that same information.

LISTNUM 1 \l 1322              And that's what I meant by taking a local issue or something that originates in a very local manner and then sharing it on a national basis.

LISTNUM 1 \l 1323              And so to me I think that's a very worthwhile programming concept and meets today's view of local as it were.

LISTNUM 1 \l 1324              COMMISSIONER ARPIN:  What you are really saying is you are going to be interested in local events who have a national impact or brought to a national focus.  So, you are making a distinction between really local local issues which have no connotations and no relation for the national audience versus local issues or local events that could have an impact or an interest for national viewers.  Am I right?

LISTNUM 1 \l 1325              MR. HOOVER:  Generally yes.  You know, I don't think we would perhaps cover the local City Council election or something of that nature, that's being very well covered now by community cable channels and services of that nature.

LISTNUM 1 \l 1326              But there are very few significant events that take place in Canada, I believe, that aren't of interest to people beyond the borders of a given city and, so, it's that type of material that we're talking about.

LISTNUM 1 \l 1327              But true localism, because we're not able to segment our signal and reflect it back only to that community, we would leave to the domain of the community service channels and the local there.

LISTNUM 1 \l 1328              COMMISSIONER ARPIN:  And the local broadcaster?

LISTNUM 1 \l 1329              MR. HOOVER:  And the local broadcaster.  Although it's my understanding that they're not doing much of that programming themselves.

LISTNUM 1 \l 1330              COMMISSIONER ARPIN:  At least on the news level, they are still doing local news.

LISTNUM 1 \l 1331              MR. HOOVER:  I believe some are, yes.

LISTNUM 1 \l 1332              COMMISSIONER ARPIN:  All right.  Mrs. Crosby, obviously not as Mr. Bitove, that you had ‑‑ you come up this morning with a lot of people who have recently through the synergies been made available and, so, you've been able to recruit.  So, obviously that surely helped you beef up your presentation and we heard Mrs. Crosby earlier this morning describing the re‑allocation ‑‑ the programming re‑allocation that you have made.

LISTNUM 1 \l 1333              How does that compare with the original plan and why should the Commission take that into consideration because it is an application that was standing by itself and now that you have made some amendments, maybe through re‑allocation, but it is a new ball game that we have before us.

LISTNUM 1 \l 1334              No, you don't agree with that?

LISTNUM 1 \l 1335              MR. BITOVE:  Well, before I turn it over, yes, we're lucky to have these people because they have certainly beefed up our team.

LISTNUM 1 \l 1336              Secondly, programming by its very nature changes flavour of the month or the year or the season.

LISTNUM 1 \l 1337              COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 1338              MR. BITOVE:  So, you know, you learn more and the schedule that, you know, we've had a year ago obviously is subject to change.

LISTNUM 1 \l 1339              The most important thing though was in response to the interventions and the meetings with the stakeholder groups, listening to them and responding.  So, you know, I think it's better for me to turn it over to Tecca to discuss your question.

LISTNUM 1 \l 1340              MS CROSBY:  Yes, I think it's just a better ball game now, not a new ball game.

LISTNUM 1 \l 1341              When I was brought in to look at the application I did go to the places that I discussed today; namely, the hours of priority programming and the script resources and also trying to bring clarity to what monies were available for Canadian programming.  That was important to me and, conversely, I think it's important to this application, and all we really have done is to flush out and put numbers to those efforts and, in particular, to increase the efforts around priority programming hours.

LISTNUM 1 \l 1342              The give, if that's what you can call it, of six hours as opposed to eight hours for the first three years of the licence is mainly driven from the fact that should the CTF rules stay the same, obviously a very important part of Canadian programming financing, HDTV Networks will not have historical access to the Fund.

LISTNUM 1 \l 1343              These rules could be very different by the time HDTV Networks starts, but the feeling was and we discussed with the stakeholders, that if we could have a little bit of flexibility around the eight hours that we could make good in the second part of our licence term.

LISTNUM 1 \l 1344              COMMISSIONER ARPIN:  Just coming out from a week of public hearing on CTF and what you said, obviously, is that you will require some historical evidence before being able to access the significant money, but along the road over the years to what extent are you dependent on CTF financing?

LISTNUM 1 \l 1345              MS CROSBY:  Well, I mean, we can't be dependent at the beginning and I think the real challenge will be the beginning.

LISTNUM 1 \l 1346              Again, if the rules are the same, and I don't know, there have been no new entrant national broadcasters per se to even discuss with the CTF the possibility of, you know, some form of access for a new entrant versus an incumbent broadcaster who just hasn't been doing the level of Canadian production to get historical access.

LISTNUM 1 \l 1347              I think it's fair, and I've said to John, that I think the first couple of years will be expensive to HDTV in terms of making Canadian programming and developing Canadian programming.

LISTNUM 1 \l 1348              There are other broadcasters that we can partner with, particularly the pay services that don't exhaust the audience in terms of their reach and that will bring very viable audiences to us as a conventional broadcaster.

LISTNUM 1 \l 1349              I also think it's fair to say that Canadian producers have really come of age.  You've all read that various Canadian programming has now sold into Canadian networks, maybe aided and abetted by the writers' strike but, nevertheless, we have very sophisticated producers who can put together international financing packages that don't rely completely ‑‑ at all on the CTF.

LISTNUM 1 \l 1350              So, it's my hope that this organization has luck with financing and projects and ratings and audiences and they will be able to access CTF with other broadcasters when the time comes.

LISTNUM 1 \l 1351              COMMISSIONER ARPIN:  If the Commission was to grant you a licence and, say, the decision comes up within the next ‑‑ well, before summer, when do you think you will be able to be implemented?

LISTNUM 1 \l 1352              MR. BITOVE:  It's our hope to be on the air within a year of being granted the licence.

LISTNUM 1 \l 1353              COMMISSIONER ARPIN:  So, that is going to be 2009.

LISTNUM 1 \l 1354              MR. BITOVE:  Yes, sir.

LISTNUM 1 \l 1355              COMMISSIONER ARPIN:  Say, fall 2009, will be about 18 months before ‑‑ no, two years before the date the Commission has picked out for everybody to move from analog to digital.

LISTNUM 1 \l 1356              MR. BITOVE:  It will be for sure after the U.S. shut‑off date.

LISTNUM 1 \l 1357              COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 1358              MR. BITOVE:  So, when that analog spectrum is supposedly out there.  You know, we're trying to deal with the transition and I think it's very important for the Commission to understand those spots on the dials especially for conventional ‑‑ you know, for broadcast network are very important, which is another reason why the whole analog piece, Mr. Vice‑Chair, is important to us in terms of where we're placed.

LISTNUM 1 \l 1359              If we're down at 703, we've got a problem.  If we're in, you know, like the Toronto market 26, which is where Industry Canada has allocated us on the digital spectrum dial, we can make a viable go of it.

LISTNUM 1 \l 1360              COMMISSIONER ARPIN:  But within two years after you had launch, the scenario that has been put out by the Commission in its review of over‑the‑air television last May has set the date of August 31st, 2011 for the switch‑over from analog to digital.

LISTNUM 1 \l 1361              By that time, so you will have been in operation for two years, but by that time I guess all the other networks will also have made that transition, it's at least the plan, we are going to hear more from them through renewals, but at that time what will be the main characteristics of your service, say, vis‑a‑vis CTV and vis‑a‑vis Global?

LISTNUM 1 \l 1362              MR. BITOVE:  Are you talking ‑‑

LISTNUM 1 \l 1363              COMMISSIONER ARPIN:  Programming.

LISTNUM 1 \l 1364              MR. BITOVE:  Well, I mean, I think I'll turn it over to the ladies and Mr. Hoover to bring you ‑‑ to keep you current ‑‑ you know, to talk about the programming.

LISTNUM 1 \l 1365              I just want to understand one aspect of your question and, that is, there's kind of three dates in this whole digital transition spectrum that are relevant.  The U.S. shut‑off date because some of our BDUs and DTHs have allocated spectrum to them on their dial.  The Canadian, the 2011 date, but we also have to remember there's that 2013 date where, from what I understand, analog carriage up until that point in time is still going to be allowed to be carried on BDUs.

LISTNUM 1 \l 1366              So, there's lots of battles over spots on the dial that we have to be cognizant of.

LISTNUM 1 \l 1367              COMMISSIONER ARPIN:  Yes, but I'm not talking dial on the BDUs which obviously the 2013 date is the migration date for everybody, so whatever special pay services, community channel and over‑the‑air services will migrate out ‑‑ totally out of the BDU ‑‑ analog BDU distribution.

LISTNUM 1 \l 1368              But I'm talking here, I'm talking about your over‑the‑air plans, competing against over‑the‑air broadcasters in the digital world as of September 1st, 2011.

LISTNUM 1 \l 1369              MR. BITOVE:  Okay.  I think it's best if I turn it over to Ms Baine.

LISTNUM 1 \l 1370              MS BAINE:   Thanks, John.

LISTNUM 1 \l 1371              I think what we've planned so far for our programming for HDTV Networks is, and we've concentrated on is the diversity of the programming that we can bring.

LISTNUM 1 \l 1372              We've concentrated on three main points.  As we said in our opening remarks, programming from around the world that doesn't necessarily make it to conventional television right now and we have already started sourcing programs that are available in HD from countries around the world; our news program which will be different from CTV and CanWest as we probably talked about ad infinitum already; and our ability to encourage productions from our Canadian producers that are innovative and different than things that might go to the traditional broadcasters right now.

LISTNUM 1 \l 1373              The biggest point on that being that they come to us right away, we can say yes or no right away if it's something we want to do for HDTV Networks rather than having to check with multiple stakeholders from all the other sources that we might have to consider if we were one of the larger broadcasters.

LISTNUM 1 \l 1374              COMMISSIONER ARPIN:  You did mention, Mr. Bitove, I think the first question the Chairman asked you, you said that you were seeing yourself somehow as a specialty services or a specialty over‑the‑air services.

LISTNUM 1 \l 1375              One of the questions that has been raised by some of the interveners, but we may address it at this stage also to better understand your programming strategies, why haven't you applied for a specialty services ‑‑ for a Category 2 specialty service?

LISTNUM 1 \l 1376              MR. BITOVE:  Thank you, Mr. Vice‑Chair.

LISTNUM 1 \l 1377              When I was referring to specialty it was more or less the advertising, the advertising base and where the dollars are.

LISTNUM 1 \l 1378              I think there's predominantly five reasons why we didn't seek a Category 2.  First of all, we want to be free.  Even on, you know, whether it's basic cable, DTH, however, we want to be a free service.

LISTNUM 1 \l 1379              Secondly, we want to be over‑the‑air because there's a portion of Canadians who don't have basic service through a BDU.

LISTNUM 1 \l 1380              Thirdly, we want to be general programmers.  We want to have, you know, to allow the creative, no creative limits in terms of what we put before the Canadian people, other than of course the standards and the other general provisions that go with any programming, but we want to be a general programmer.

LISTNUM 1 \l 1381              Fourth, we'd like the simulcast and substitution rights that are allowed and given by the Commission with respect to the over‑the‑air stations.

LISTNUM 1 \l 1382              And, fifth, as well, the elements of must carry, because we think that reach is very important to us.  So, whether it's a BDU, a DTH or an over‑the‑air signal, we want to be able to maximize the viewership that this gets and, in turn, the benefit from that is the dollars that get plugged into the Canadian production community by having those five.  We want to maximize our audience.

LISTNUM 1 \l 1383              THE CHAIRPERSON:  I think, Mr. Bitove, it's time for a health break.  Let's take a 10‑minute health break.

LISTNUM 1 \l 1384              MR. BITOVE:  Thank you, Mr. Chair.

LISTNUM 1 \l 1385              THE CHAIRPERSON:  And we'll continue.

‑‑‑ Upon recessing at 1059 / Suspension à 1059

‑‑‑ Upon resuming at 1115 / Reprise à 1115

LISTNUM 1 \l 1386              THE CHAIRPERSON:  Before we broke, Mr. Bitove, you gave five reasons.  Maybe you want to repeat those.  In the rush to the washroom I only managed to take down four.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 1387              MR. BITOVE:  You might have got confused on the first one, because even when we were discussing ‑‑ first of all, we want to be free, which means included with the basic service of a BDU, whether by cable or satellite.

LISTNUM 1 \l 1388              Second, we want to be over‑the‑air because there is a percentage of Canadians that don't use a BDU.

LISTNUM 1 \l 1389              Third, we want to be a general programmer.  You don't have a category to license, from what I understand, that allows for general programming.

LISTNUM 1 \l 1390              And we want to be able to maximize our creativity within the standards of the industry.

LISTNUM 1 \l 1391              Fourth, the simulcast and substitution rights that are permitted with over‑the‑air.

LISTNUM 1 \l 1392              Fifth, the must carry, which is also included.

LISTNUM 1 \l 1393              I think just in response as well, it's funny because the way the questioning started, the genesis of this application was responding ‑‑ and I know there was different leadership and people involved in the CRTC then, but there seemed to be a disappointment at the lack of pickup with the Canadian broadcasting system in the conversion, so what we tried to do was respond to the Commission's request for people to respond with the conversion to HD and we had to construct this appropriately.

LISTNUM 1 \l 1394              So I think part of what I wanted you to understand is this was based on a response that we had heard loud and clear coming from Hull.

LISTNUM 1 \l 1395              As well, from what we understand it is not the Broadcasting Act as much as the TV Policy that has the quid pro quo about local programming:  If you don't do local programming you can't go for local revenue.  So we were cognizant of that when we constructed the application.

LISTNUM 1 \l 1396              We also were cognizant of there is ‑‑ Mr. Arpin, that's why, excuse me, I wasn't sure where you were going.

LISTNUM 1 \l 1397              But everyone acknowledges there is going to be four or five years of confusion in this transition from analog to digital and it seems as though some services have analog, but then they are given SD, standard definition, and HD spots on the dial.  Some are digital and from what I understand some of the BDUs have said "Well, even though there is only going to be digital signals coming from the U.S. we are still going to give them analog spots on the dial.

LISTNUM 1 \l 1398              We just think it is really important for you to understand that, as I said, you could take a BDU in a major market like Toronto and CBS has nine spots, three or four in analog, two or three in SD and two or three in HD.

LISTNUM 1 \l 1399              So it's almost if you are broadcasting either analog or digital for general, other than the specialty, you kind of get analog, digital and high def go together in terms of what it is you are trying to do.

LISTNUM 1 \l 1400              My only other point was, you know, with respect to local programming, and that is that we see ourselves as doing local programming again, it's just not a dedicated box on our schedule on a weekly basis in terms of what we do.

LISTNUM 1 \l 1401              Thank you.

LISTNUM 1 \l 1402              COMMISSIONER ARPIN:  Thank you, Mr. Bitove, for the clarification.

LISTNUM 1 \l 1403              Obviously you are seeing it from the perspective of the broadcaster.  If you were a cable operator or an MDS operator you will see exactly what you have said, you have three spots on the dial, one analog, one SD, and one HD, and eventually, and the sooner the better, they want you to vacate the analog spot and eventually I would suspect they will want to have everybody in HD.

LISTNUM 1 \l 1404              So that might be the source of the confusion.  It shows that there are really two sides to the same coin here.

LISTNUM 1 \l 1405              Now, one of your objectives, the first one, is to be free.  As you know ‑‑ I don't want to open up a can of worms here and a first salvo at the public hearing that we are going to have an April, but on the table there is fee‑for‑carriage.

LISTNUM 1 \l 1406              Are you telling the Commission that you will decline fee for carriage if the Commission was to agree with the over‑the‑air operator?

LISTNUM 1 \l 1407              MR. BITOVE:  I think I own Mr. Buchan a dinner on this one.

LISTNUM 1 \l 1408              You know, we started constructing this application over ‑‑

LISTNUM 1 \l 1409              COMMISSIONER ARPIN:  So you had an opportunity to rehearse the question?

‑‑‑ Laughter / Rires

LISTNUM 1 \l 1410              MR. BITOVE:  Exactly.  When we built this a year and a half ago fee‑for‑carriage wasn't contemplated.

LISTNUM 1 \l 1411              I don't envy your position because you are continually trying to regulate and change a system.

LISTNUM 1 \l 1412              I think if you change the rules going forward we trust that you will be fair to everyone in terms of what they are doing.  Obviously if fee‑per‑carriage has repercussions on more Canadian programming, or whatever else, you know, I'm sure there are going to be quid pro quos going forward.

LISTNUM 1 \l 1413              All I can tell you today is, we built this application not expecting or knowing at the time that the Commission may consider that pretty much the whole industry goes to some form of fee‑for‑carriage business.  That's the best answer I can give right now.

LISTNUM 1 \l 1414              COMMISSIONER ARPIN:  All right.

LISTNUM 1 \l 1415              You also said that you want to be over‑the‑air, but in some instances you have picked fairly low power frequencies to serve some of the markets, being available over‑the‑air but to a limited ‑‑ not to the whole market.

LISTNUM 1 \l 1416              MR. BITOVE:  I think I will turn it over to our associates from DML who did all the work.

LISTNUM 1 \l 1417              COMMISSIONER ARPIN:  All right.

LISTNUM 1 \l 1418              MR. PELSER:  What we have done is, when we started the search for frequencies or channels, probably about two years ago, we were in an environment where Industry Canada is working on the post‑transition plan, we are presently in the transition plan.  There are a number of ‑‑ a lot of allotments out there for existing broadcasters and what we did is, we went to the plan and basically found the best frequencies that were available at the time.

LISTNUM 1 \l 1419              The existing plan we are working under does put some limitations on power of stations, and the reason being is to incorporate both existing analog and digital stations for the transition plan.  So we did end up with a number of lower‑powered stations, but that is to accommodate the present rules of Industry Canada.

LISTNUM 1 \l 1420              COMMISSIONER ARPIN:  But what kind of an impact does the users of low‑power frequencies have on your business plan?

LISTNUM 1 \l 1421              MR. PELSER:  If we look at some of the populations that we do cover in some of the major cities, we do, even with the low power, manage to cover some significant populations.  I won't go through them, but for instance in Vancouver in the interference‑free area we still manage to cover two million people; in Winnipeg, where frequencies are much more available, we manage to cover about 900,000 people; some of the other markets, too, the populations are quite significant.

LISTNUM 1 \l 1422              That is one of the advantages of digital, is the fact that we can achieve a very similar coverage area with a much lower power.

LISTNUM 1 \l 1423              MR. LEWIS:  If I could just add one point of clarification, the transitional policy is to take Industry Canada through August 31, 2011.  Our startup date would be hopefully September 2009.  In the course of going forward and building out this system there will be the final allocations of the permanent DTV frequencies in all of these markets.  So it will be resolved for high power operation after 2011.

LISTNUM 1 \l 1424              MR. LYONS:  Presumably that is another reason why the BDU carriage in analog is more important through the transition period and then once the transition period is over we can reallocate signal strength, perhaps up the power of all those transmitters we have after the transmission is over.

LISTNUM 1 \l 1425              So in this period of confusion it is important that we have maximum distribution.

LISTNUM 1 \l 1426              COMMISSIONER ARPIN:  I'm told, and you even referred to it, Mr. Bitove, this morning in answering one of the questions, that your chosen frequency is 26 to serve Toronto.

LISTNUM 1 \l 1427              We are told by Industry Canada that channel 30 is a better frequency than channel 26.

LISTNUM 1 \l 1428              Do you have any comments to make on that?

LISTNUM 1 \l 1429              MR. LYONS:  We started with 26.  Basically the situation is, 26 works through transaction and then after transition you would have to switch to a different channel.  So they recommended channel 30 which works both ways through, but there is some moving people out of that spectrum and some coordination that needs to take place.  We are still working on that.

LISTNUM 1 \l 1430              So they have given us authority ‑‑ because actually 26 technically works but it's not as clean as 30, so we actually would hope to be on 30 at the end of today.  We are just working on some coordination issues.

LISTNUM 1 \l 1431              COMMISSIONER ARPIN:  All right.  Now, back to programming issues, if I may.

LISTNUM 1 \l 1432              You were referred a few times to user‑generated content in some of your Canadian programming and I think Mr. Hoover explained how it could work.

LISTNUM 1 \l 1433              Bit will that user‑generated content be in HD format or could it be upgraded to an HD format?  Obviously your whole presentation is predicated on being an HD network.

LISTNUM 1 \l 1434              MR. BITOVE:  You know, it's our belief that there is going to be a transition in everything to high definition at some point, obviously through our transition period, as we even said, because we would have to upload or convert certain signals to HD.  Our plan is for the user to ultimately, through the over‑the‑air, only get it in high definition or converted high definition, the various online forms.  It is our preference to go that way, but until all the hardware catches up with it we are going to have to be able to adapt both ways.

LISTNUM 1 \l 1435              Sorry, Doug.

LISTNUM 1 \l 1436              MR. HOOVER:  Just to add a footnote, I think it will be a prerequisite of programming that we commission and programming that we purchase from freelance producers to be in HD.  Be it local programming or dramatic programming, it will all be required to be in HD in order to meet our service.

LISTNUM 1 \l 1437              COMMISSIONER ARPIN:  Ms Crosby, in her earlier reply, you talk about foreign program supply, saying that not only in the U.S. you could find some programming but mainly you will be contemplating some other foreign sources.

LISTNUM 1 \l 1438              There are already some specialty services that are providing Canadians with, say, U.K. programming and what will be the impact of your plan on those specialty services?

LISTNUM 1 \l 1439              MS BAINE:  I will take that, Mr. Commissioner.

LISTNUM 1 \l 1440              There are services that are already doing that, but the difference between them and us is that we are a free over‑the‑air broadcaster and there is a lot of those programs that could be made available to conventional television viewers that right now are only available to people who can afford or who choose to buy specialty channels.

LISTNUM 1 \l 1441              COMMISSIONER ARPIN:  Will you be looking at foreign programming in other languages than English?

LISTNUM 1 \l 1442              MS BAINE:  Yes, absolutely.  We are looking at programming from around the world.

LISTNUM 1 \l 1443              For example, the South Asian programming that I referenced in our opening remarks would be partly in English, partly in Hindi, or whatever language they chose to do it in.

LISTNUM 1 \l 1444              COMMISSIONER ARPIN:  What will be the portion of that foreign origin?  Will it cater to the ethnic audience or will it cater to the general public?

LISTNUM 1 \l 1445              MS BAINE:  In that particular portion right now we have about four hours of programming that would be tailored to that ethnic audience and whether they choose to do it in English or in a language that they choose would be sort of up to them.

LISTNUM 1 \l 1446              We have also sourced things like movies which are available in French, Italian, from around the world that could be made available in high definition and obviously we would caption them or closed caption them.

LISTNUM 1 \l 1447              COMMISSIONER ARPIN:  Or even dub?

LISTNUM 1 \l 1448              MS BAINE:  We could, yes.

LISTNUM 1 \l 1449              COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 1450              What you mean by "up to them"?  Aren't you the programmer?  You just said when you have South Asian content whether it will be an English or Hindi will be up to them.  I don't quite understand.

LISTNUM 1 \l 1451              MS BAINE:  When they do programming that is specific to that market ‑‑ when you talk about ethnic programming sometimes they like to do it in English because it is a language that they have come to speak when they come to ‑‑ or French when they come to Canada, but sometimes they also like to do it in ‑‑ they access programming from India or Pakistan or wherever, they are accessing programming that comes in those languages.

LISTNUM 1 \l 1452              COMMISSIONER ARPIN:  You are referring here to your association.

LISTNUM 1 \l 1453              MS BAINE:  Yes.

LISTNUM 1 \l 1454              COMMISSIONER ARPIN:  To ATM.

LISTNUM 1 \l 1455              MS BAINE:  Yes.  I mean they are the experts and far be it from me to tell them what to do.

LISTNUM 1 \l 1456              COMMISSIONER ARPIN:  ATM will be the one that will provide you with the programming?

LISTNUM 1 \l 1457              MS BAINE:  Yes.

LISTNUM 1 \l 1458