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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
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 13, 2008 Le 13 février 2008
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès‑verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio‑television and
Conseil de la radiodiffusion et des
Transcript / Transcription
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 /
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 13, 2008 Le 13 février 2008
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PHASE II (Cont'd)
INTERVENTION BY / INTERVENTION PAR:
Crossroads Television System 242 / 1451
CanWest MediaWorks Inc. 258 / 1536
Rogers Communications Inc. 286 / 1677
CTVglobemedia Inc. 309 / 1859
CHCR Limited 335 / 2005
Bell ExpressVu 350 / 2076
CFTPA 364 / 2153
REPLY BY / RÉPLIQUE PAR:
YES TV Inc. 389 / 2264
HDTV Networks Inc. 395 / 2295
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon commencing on Wednesday, February 13, 2008
at 0904 / L'audience débute le 13 février 2008
LISTNUM 1 \l 1 \s 14451445 THE CHAIRPERSON: Good morning.
LISTNUM 1 \l 11446 Madam Secretary, whom do we have today?
LISTNUM 1 \l 11447 THE SECRETARY: Thank you, Mr. Chairman, and good morning to everyone.
LISTNUM 1 \l 11448 We will now continue with Phase II in which interveners appear in the order set out in the Agenda to present their intervention.
LISTNUM 1 \l 11449 We will now proceed with the presentation by Crossroads Television System. Appearing for Crossroads Television System is Mr. Stewart.
LISTNUM 1 \l 11450 Please introduce your colleague, after which you will have 10 minutes for your presentation.
LISTNUM 1 \l 11451 MR. STEWART: Good morning, thank you.
LISTNUM 1 \l 11452 Mr. Chairman, Commissioners Katz and Arpin and Commission Staff, thank you for allowing CTS to appear before you today.
LISTNUM 1 \l 11453 My name is Glenn Stewart, Director of Sales and Marketing and with me is Matt Hillier, our Corporate Controller and Privacy Officer.
LISTNUM 1 \l 11454 The important issues outlined in our written submissions appear to be shared concerns for most over‑the‑air broadcasters.
LISTNUM 1 \l 11455 CTS opposes both these applications in general terms for most of the same reasons articulated and well documented by our colleagues at CAB and the larger broadcast groups. However, we felt it necessary for CTS as a small truly independent and not‑for‑profit broadcaster to put our concerns on the public record and to appear at these proceedings.
LISTNUM 1 \l 11456 In our view it would be prudent and in the best interests of the Canadian broadcast system to ensure that all over‑the‑air broadcasters have the opportunity to fully transition to digital by 2011 before services such as these are licensed.
LISTNUM 1 \l 11457 Furthermore, we believe that it would be unfair to existing broadcasters, the BDUs, as well as the applicants themselves to approve these applications in advance of the very crucial CRTC hearings commencing April 7th.
LISTNUM 1 \l 11458 We have serious concerns about the applicants' expectations regarding channel placement, priority carriage, simulcast opportunities and distant signal status, given the specifics of their application, especially due to the lack of local content to be offered in each market.
LISTNUM 1 \l 11459 It would be unfair for HDTV to be accorded the same rights and privileges as existing over‑the‑air broadcasters who provide significant local program content and other community services in the markets in which they operate. Permitting dual status would be inappropriate in these circumstances.
LISTNUM 1 \l 11460 To be clear, however, the two issues that would most negatively affect CTS would be:
LISTNUM 1 \l 11461 One, the introduction of a new HD TV services into Calgary and Edmonton so soon after granting three new licences in the late spring of 2007; and,
LISTNUM 1 \l 11462 Secondly, the addition of a new service, either HDTV or YES TV in Toronto. Toronto is a saturated and extremely fragmented market, a new entrant will, by necessity, take advertising revenue from existing stations.
LISTNUM 1 \l 11463 MR. HILLIER: To illustrate, we would like to walk you through the potential impact on CTS.
LISTNUM 1 \l 11464 In HDTV's Appendix 4A, there were planned 650‑million in national sales in the first licence period. This contained a ramp‑up from 2.5‑million in year one to 176‑million in year seven, a massive growth curve.
LISTNUM 1 \l 11465 The Applicant has said they would garner three per cent of the national sales market, but the critical questions for us: Whose market and whose sales?
LISTNUM 1 \l 11466 The markets relevant to CTS are Toronto, Ottawa, Calgary and Edmonton, representing by our best estimate about 50 per cent of national sales. So, about 325‑million of HDTV's projected revenues would come from these three markets.
LISTNUM 1 \l 11467 HDTV's assertion that 35 per cent of its revenues would be new spending is aggressive, especially in the mature Toronto market. But let's assume that their assertion that revenue taken from existing off‑air stations of 15 per cent plays out.
LISTNUM 1 \l 11468 The result of 15 per cent of 325‑million is about 49‑million, or 7‑million per year. Year seven itself would be 13‑million from these markets. Again, who would the 7‑million per year, or 13‑million in year seven come from? Likely not the major national broadcasters with their top 20 programming, therefore, it would be stations like CTS that these amounts would most impact.
LISTNUM 1 \l 11469 Though to some it may not seem like big dollars, but even 7‑million in revenue taken would eclipse CTS' total commercial revenues from these three markets.
LISTNUM 1 \l 11470 So, despite HDTV's assertion that their strategy would "build a wall to protect the local broadcasters", or "protecting those that are most precarious", CTS would precisely be that kind of local broadcaster most impacted in our three markets.
LISTNUM 1 \l 11471 MR. STEWART: As a small independent broadcaster, we would likely lose commercial revenue in much the same way as Sun TV, which is Quebecor, A‑Channel, now it's CTVglobemedia, and perhaps even OMNI.1 and .2, which is Rogers. The difference, of course, is that we are not part of a larger media empire and, therefore, may suffer the greatest harm.
LISTNUM 1 \l 11472 We launched our local commercial religious stations in Calgary and Edmonton on October 8, 2007. CanWest has fired up its re‑broadcast transmitters for Red Deer and now has a second successful brand which is E! in these markets. Rogers has yet to launch its OMNI stations, but once launched they too will have a second set of stations to go along with their newly acquired Citytv brand.
LISTNUM 1 \l 11473 We are asking the Commission to allow time for these markets to more fully digest these new stations and appearings before considering a new entrant.
LISTNUM 1 \l 11474 For these reasons and others outlined in our written submission, we respectfully request that the Commission deny these applications.
LISTNUM 1 \l 11475 However, should either of these applications be approved, at the very least we ask that dual status be withheld as a condition of licence in order to minimize the negative impact on existing local over‑the‑air stations, and CTS specifically, as they make the transition to digital by August, 2011.
LISTNUM 1 \l 11476 We'd be pleased to answer any questions at this time.
LISTNUM 1 \l 11477 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 11478 I notice that you make the point that HDTV will have no local programming and no community involvement.
LISTNUM 1 \l 11479 What is the local programming or community involvement of your station?
LISTNUM 1 \l 11480 MR. STEWART: We were licensed as local over‑the‑air stations in both Calgary and Edmonton and have been that in Toronto for 10 years now.
LISTNUM 1 \l 11481 We produce a lot of local programming, perhaps more than many broadcasters. "The Michael Coren Show" is a flagship show, "On The Line" with Christine Williams, "Faith Journal". Matt, you could probably mention more offhand.
LISTNUM 1 \l 11482 MR. HILLIER: Yeah. "Behind the Story", and we also commission some single faith, multi‑faith programming and "Real Life" is another show that we produce out of the Toronto office and in Calgary and Edmonton we have flagship programs called "Top Story" and we have "Close‑Up" and "The Priest, the Monk and a Rabbi", and...
LISTNUM 1 \l 11483 THE CHAIRPERSON: And they are locally produced, however, I was thinking in terms of local, of relevance to the community; is there some station in Toronto that Torontonians would identify with or it takes issues there of interest to Torontonians but not necessarily to Vancouverites or the same thing with Edmonton, et cetera. Do you have local programming in that sense?
LISTNUM 1 \l 11484 MR. STEWART: Absolutely, Mr. Chair. Michael Coren is a well‑known local Toronto broadcaster, Christine Williams features local issues and stories. They may be of national scope, but all the guests on her show and on Michael's show are from the region.
LISTNUM 1 \l 11485 MR. HILLIER: And for "Real Life" as well, they get out into the community, around the Golden Horseshoe area and they also have field reporters in Calgary and Edmonton as well that try to report stories from those local communities as well.
LISTNUM 1 \l 11486 THE CHAIRPERSON: Secondly, you mentioned you are preparing for migration by 2011 like everybody else. Exactly what are you doing in terms of that and are you going to be there by 2011, or are you going to be there earlier than 2011?
LISTNUM 1 \l 11487 MR. HILLIER: Thank you, Mr. Chair.
LISTNUM 1 \l 11488 For the Toronto, main Toronto market we actually launched our digital signal on January 7th of this year ‑‑ and correct me if I'm wrong, Glenn ‑‑ but we have probably about true HD, probably about 15 hours on our schedule, 15 to 20.
LISTNUM 1 \l 11489 MR. STEWART: Actually we have two and a half hours of true HD, the remainder are SD converted ‑‑ up converted, but we have very little to do in the Burlington operation in order to go true HD.
LISTNUM 1 \l 11490 And without twisting our controllers' arms, I would expect that we'd be fully digital in Ontario or at least from the Burlington studios by this time next year. We already have installed HD cameras in the studios and we just have to change over our switcher at this point and, of course, I'm not an engineer, but there's not a lot left to do in Ontario.
LISTNUM 1 \l 11491 THE CHAIRPERSON: And in Alberta?
LISTNUM 1 \l 11492 MR. STEWART: In Alberta, we are fully digital in terms of operations. We work with independent local producers and part of our contracts are that they be delivered HD capable.
LISTNUM 1 \l 11493 Our challenge in Alberta is the installation of HD transmitters, which we will have by 2011. We would like to do it earlier, but if we continue to face challenges such as what we have before us today, then it will in all likelihood be at the end, at 2011 before we can do that.
LISTNUM 1 \l 11494 THE CHAIRPERSON: Well, I'm just trying to get a hold on the comfort factor you want here, because Mr. Bitove tells us that he will be up in a year at the earliest and then he'll be a fledgling station ‑‑ network, station, whatever you want to call it and it will take him some time to get there, et cetera.
LISTNUM 1 \l 11495 So, you are established, you are already on the way up to migration. You are already ready in Ontario, you tell me, and you are operating digitally in Alberta but you don't have transmissions yet.
LISTNUM 1 \l 11496 Where is ‑‑ I mean, this is after all not a totally regulated market. We still have a free economy. There is some certain competition, et cetera. Where is the threat that you see from Bitove given that he is new, that he is not going to be there for another year and you are already well established from what I gather on the way to migrate to digital?
LISTNUM 1 \l 11497 MR. STEWART: Certainly, in Ontario, Mr. Chair, we are. Our larger concern is Alberta. We are facing challenges in start up. Omni has yet to start up. We would like for, if at all possible, the Commission to give us a little breathing room ‑‑ and the other broadcasters.
LISTNUM 1 \l 11498 If I take us back to 2005 the first or the most recent applications were denied in part because, I believe, the Commission felt that the markets were not back to where everyone hoped they would be. But you also gave a lot of thought with respect to CHUM's argument about giving them some room when they took over the former Craig stations. And in that instance we were talking about stations already in the market.
LISTNUM 1 \l 11499 In this instance in 2007, going into 2008, we are talking about three new entrants going into the market at one time. And we would be very grateful if we had time to have the market digest these three new stations and see what happens once we come out of the April hearings, whatever determinations are made at that point in terms of what the new playing field will look like.
LISTNUM 1 \l 11500 At that point presumably there will be new entrants coming thereafter, but at least we will all know. Existing broadcasters, BDUs and everyone will know what the ground rules are. We likely won't be having the debate about whether dual status is applicable or warranted or the proper thing to do, based on current regulation.
LISTNUM 1 \l 11501 THE CHAIRPERSON: And the fact that you are a specialty station, you know primarily a religious station, you still ‑‑ what impact would Mr. Bitove's network have on you? I mean he himself said he does not plan to do any religious broadcasting yesterday. So the audience presumably that he attracts will be quite different than what ‑‑ the audience that you are serving.
LISTNUM 1 \l 11502 MR. STEWART: Well, Mr. Chair, we are a niche broadcaster. We are special in the sense that we are a niche broadcaster but we are not a specialty service. We don't enjoy pass‑through subscription fees, et cetera. Our sole revenue sources are block programming sales and commercial spot sales.
LISTNUM 1 \l 11503 And while Mr. Bitove, with respect, says that they are only going to peel off 3 percent of the market, our belief and our experience has been that it's always the stations at the lower end that suffer the greatest setback. Once the advertising pool is whittled down and you get through your CTVs, your Globals, your Rogers, formerly the CHUM group of stations, then the remainder of the money kind of filters down to the rest of us.
LISTNUM 1 \l 11504 And if you peel off another layer off of that money there is less for those of us at the bottom end. We don't expect that CTV and Global will. Yes, they will see reductions in dollars in terms of pure amounts. As Matt stated earlier, in our opening comments, our total revenues are not that large but in the circumstance of another entrant coming in we will feel the brunt of that most likely. And with respect to Toronto, either of the services will have somewhat of an impact on what we do.
LISTNUM 1 \l 11505 THE CHAIRPERSON: In your last paragraph where you sort of as a plan B say if we approve it we should not give them dual status, just so I understand exactly what you mean, that we will give them mandatory carriage for their digital only but not for the analog; is that the idea?
LISTNUM 1 \l 11506 MR. STEWART: Correct. I mean, we are not anticompetitive. We believe in the open market system and CTS is a niche religious broadcaster, you are quite right. We cater to a fairly specific audience and get support from that group.
LISTNUM 1 \l 11507 But by the same token, every day we have to go out and compete in the national spot sales market. So if the new entrant has all the rights and privileges that existing broadcasters have including ourselves, it will make our job that much harder.
LISTNUM 1 \l 11508 Now, whether or not the HDTV business plan can go forward based on not having analog carriage, that's not for us to determine. But certainly we would ask that the Commission pursue that line of questioning because that's really the thing that is going to affect us the most.
LISTNUM 1 \l 11509 THE CHAIRPERSON: Okay, thank you. Those are my questions to you.
LISTNUM 1 \l 11510 Do my colleagues have any questions?
LISTNUM 1 \l 11511 COMMISSIONER KATZ: I just have one question. You run through a financial scenario on here as well. At the same time, you say that if the Commission is to licence the HDTV application Calgary and Edmonton are particularly sensitive given the timelines since the last time licences have been awarded.
LISTNUM 1 \l 11512 The argument that you make is equally applicable five years from now as it is today; the fact that Edmonton and Calgary have just been licensed in the last two years or so. Notwithstanding that one can make the same financial arguments you have made here at any point in time, because what you are looking at here is the impact on your business and you are saying you will be impacted negatively by someone else coming in, but it's irrespective of when the previous person was licensed or not.
LISTNUM 1 \l 11513 MR. STEWART: With due respect, Commissioner Katz, not really in our instance. We will ‑‑ all we are asking for is time to get our legs in these markets. CTS has a habit of not coming before the Commission asking for help in that regard.
LISTNUM 1 \l 11514 We will make our business model work if given the appropriate amount of time to allow the market to digest these three new entrants. To lump another one on top of, in short order, isn't something that in our view will be healthy certainly for us. And I can't speak for the other broadcasters.
LISTNUM 1 \l 11515 But again I draw your attention back to the fact that we are a truly independent small operator. We don't have a fallback position with respect to a corporate synergy, if you will, and revenue from other markets, et cetera. And we only ‑‑ we only play in really the one arena which is spot national sales. And that's what will be likely most effective in those markets.
LISTNUM 1 \l 11516 We are not asking for a five year moratorium or anything of the kind. This just comes on the heels of the start‑up system. And I guess if I think back to Mr. O'Farrell's comments yesterday, it is the timing more than anything else that will harm CTS in the near term.
LISTNUM 1 \l 11517 COMMISSIONER KATZ: If this was a cat 2 application would you be as concerned with it being ‑‑
LISTNUM 1 \l 11518 MR. STEWART: No.
LISTNUM 1 \l 11519 COMMISSIONER KATZ: You would not?
LISTNUM 1 \l 11520 MR. STEWART: No, no. Our concern is that it will be conventional over‑the‑air and have all the rights and privileges of a conventional station when indeed our belief is the premise of the application is to take us higher to the next level, new technology, et cetera. And the Commission has put the onus on existing broadcasters to come up to that same level by 2011. And I think many are doing it even quicker.
LISTNUM 1 \l 11521 But this is just one more challenge added on to the top that, frankly, we don't need at this time.
LISTNUM 1 \l 11522 COMMISSIONER KATZ: So it's the rights and the privileges?
LISTNUM 1 \l 11523 MR. STEWART: Yes.
LISTNUM 1 \l 11524 COMMISSIONER KATZ: Specifically which ones are most vulnerable to you?
LISTNUM 1 \l 11525 MR. STEWART: Channel placement, priority carriage, low on the band, simulcast opportunity ‑‑ not because we enjoy simulcast opportunities. We are not in that game. But I think Mr. Johnson referred to, in his comments, about you know looking for that one hit that CTV and perhaps Global miss or that sleepy hit. Well, if they get that then they have got to show that that capitulates them into the Top 20 programming arena. And that alone siphons off a large amount of money.
LISTNUM 1 \l 11526 So it's a question of really those of us at the lower spectrum who don't have simulcast programming, big U.S. programming, commanding the largest chunk of the advertising revenues. We are the ones who suffer.
LISTNUM 1 \l 11527 Similarly, and I don't want to get off topic but you know we are able to go to 14 minutes an hour and then 15, and so on and so forth. Again, for a little station like CTS and those who don't have the larger programs that is of a little comfort because there is a lot more money that is going to get shifted by the advertisers into those bigger shows because there is more veil in those bigger shows.
LISTNUM 1 \l 11528 So again, as a small, independent broadcaster we are the ones who don't benefit directly from those kinds of measures.
LISTNUM 1 \l 11529 COMMISSIONER KATZ: Those are my questions.
LISTNUM 1 \l 11530 THE CHAIRPERSON: Okay, thank you.
LISTNUM 1 \l 11531 MR. STEWART: Thank you.
LISTNUM 1 \l 11532 MR. HILLIER: Thank you very much.
LISTNUM 1 \l 11533 THE SECRETARY: I would now invite CanWest MediaWorks Inc. to come forward.
LISTNUM 1 \l 11534 THE SECRETARY: Appearing for CanWest is Ms Charlotte Bell.
LISTNUM 1 \l 11535 Please introduce your colleagues, after which you will have 10 minutes for your presentation.
LISTNUM 1 \l 11536 MS BELL: Thank you.
LISTNUM 1 \l 11537 Good morning, Chairman, Vice‑Chairman, monsieur le vice‑président, Commission staff.
LISTNUM 1 \l 11538 For the record, my name is Charlotte Bell and I am Senior Vice‑President of Regulatory Affairs for CanWest.
LISTNUM 1 \l 11539 I am joined today by a number of my colleagues. Beginning at my immediate right, which is your left, is Barb Williams, Executive Vice‑President of Content.
LISTNUM 1 \l 11540 To my immediate left is Kathy Gardner, Senior Vice‑President of Integrated Media Research and Corporate Promotions.
LISTNUM 1 \l 11541 And next to her is Brad Kubota, Senior Vice‑President, Revenue and Inventory Management.
LISTNUM 1 \l 11542 We appreciate the opportunity to appear before you today. As you know, we filed a detailed written intervention on January 24th and it's not our intention to repeat all of our written comments here today.
LISTNUM 1 \l 11543 We followed the deliberations that took place yesterday and we note the undertakings of both applicants to ameliorate their proposals to somewhat mitigate certain shortcomings that were raised by intervenors. But the fact remains that regardless of these changes, the conventional television marketplace is not growing and it continues to experience significant pressure from a variety of competitive forces. In our view whatever benefits might result in licensing these services at this time will be outweighed by the impact it will have on the system.
LISTNUM 1 \l 11544 While we oppose both applications, we are particularly concerned with the HDTV proposal to establish what appears to be a super station that would enjoy the same carriage and other benefits as a national network without incurring the high costs of operating a network.
LISTNUM 1 \l 11545 HDTV suggested that incumbent broadcasters were self‑serving in opposing their proposal. If we operated in a free market environment absent of significant cultural and social obligations I think that might be a fair statement. But that simply is not the case.
LISTNUM 1 \l 11546 It is also why the Commission's licensing criteria requires applicants to clearly demonstrate that there is a market and demand for the proposed service. It is also why the Commission typically ensures that the licensing of a new entrant will not impede on the ability of incumbents to continue to meet their obligations.
LISTNUM 1 \l 11547 As you know, conventional broadcasters carry significant regulatory obligations ranging from high levels of local programming in each market, and for CanWest this represents well in excess of 30 hours per week in a number of markets. For us it is also 16 hours per week of primetime priority programming, investments to provide close captioning and described video as well as the costly transition to digital technology and high definition.
LISTNUM 1 \l 11548 Our ability to continue to meet these obligations is directly tied to our ability to maintain and grow our revenues in a shrinking advertising marketplace. And I would like to add that if we could somehow cut $100 million from our news and infrastructure costs our business model would look very different too, and that might be attractive to us.
LISTNUM 1 \l 11549 Chairman, in your speech at the CAB convention last fall you stated that the Commission continues to see OTA television as the cornerstone of the Canadian television system. You further stated that one of the Commission's challenges will be to ensure that OTA television is properly funded.
LISTNUM 1 \l 11550 We wholeheartedly agree on the importance of funding. In fact, we think it is critical. However, we also believe that fragmentation is an equally important factor that has a direct impact on our financial capacity to contribute. Every new entrant chips away at our viewing share and revenue base and this is something the Commission has very long considered.
LISTNUM 1 \l 11551 MS GARDNER: In 1998, in response to a Order in Council, the Commission conducted a public proceeding to evaluate whether the addition of new national networks would serve the objectives of the Broadcasting Act.
LISTNUM 1 \l 11552 Following a public hearing the Commission concluded that for any new network to be truly national new local stations affiliated to the network would have to be licensed.
LISTNUM 1 \l 11553 The Commission further determined that there are few, if any, markets in Canada that could sustain the licensing of new local stations without seriously impinging on the ability of existing licensees to fulfil their obligations under the Broadcasting Act.
LISTNUM 1 \l 11554 Commissioners, this was at a time when conventional advertising revenues were still growing and profitability had reached 16 per cent the previous year. Today's picture is even more precarious and one of the applicants under consideration is proposing to establish a national service minus the cost of meeting local programming requirements in markets in which it seeks mandatory carriage.
LISTNUM 1 \l 11555 We think the Commission's determination in 1998 was wise. In the last 8 years three English‑language conventional television groups have been sold, WIC, Craig and CHUM. Under new ownership Toronto One continues to struggle in Canada's largest television market.
LISTNUM 1 \l 11556 Most recently we have witnessed the demise of Québec's second private OTA network, TQS. As you already know, profitability for the conventional television sector has declined sharply in the past few years as a function of a shrinking advertising market coupled with rising programming and infrastructure costs. These are strong indications that the conventional television marketplace neither needs nor can sustain the addition of another national network. What was true 10 years ago in a much less competitive media environment is even more so true today.
LISTNUM 1 \l 11557 MR. KUBOTA: Commissioners, to some extent the HDTV proposal has been positioned as a response to consolidation or a means of adding diversity as well as demand for more high definition programming and we would like to address each of these issues.
LISTNUM 1 \l 11558 The first question is: What would be the impact of adding a new national player to the marketplace?
LISTNUM 1 \l 11559 With one more viewing choice audiences will further fragment and in turn this will impact advertising revenues in two ways.
LISTNUM 1 \l 11560 First, by further fragmenting viewing our ability to deliver the same audience levels will be reduced and will in turn impact on revenues. We already have excess inventory and we are not typically sold out in prime time in most of our markets.
LISTNUM 1 \l 11561 Second, by adding more national advertising inventory in an already saturated marketplace, there will be pressure to lower rates and this will impact national advertising sales which represents more than 80 per cent of our overall conventional revenues.
LISTNUM 1 \l 11562 MS WILLIAMS: It is difficult to assess how much diversity or plurality of editorial voices will be added by a network that will not provide local programming as part of its mix, but in a 300‑plus channel universe it does appear to be a risky proposition with more downside than benefit to the system.
LISTNUM 1 \l 11563 In terms of diversity the question is: What is being added to the system that's not already there and at what cost?
LISTNUM 1 \l 11564 The reality is, the new national player will add another bidder for national programming rights and the likely outcome is that it will drive programming prices up. When coupled with the impact a new entrant will have on viewing and revenues, this means we will pay more to deliver less.
LISTNUM 1 \l 11565 I want to add something else here that we have been thinking about since hearing the presentation yesterday.
LISTNUM 1 \l 11566 We do understand that the core benefit is free HDTV where none is available now. Further, they suggested yesterday that that represents about 3 million Canadians, essentially the 10 per cent of viewers that currently watch TV off‑air. Yet, we know that the majority of people that watch TV off‑air are in non‑urban settings.
LISTNUM 1 \l 11567 In fact, research tells us that fully two‑thirds of those 3 million people would be outside the CMA that their transmitters would reach. So we are down to 1 million.
LISTNUM 1 \l 11568 Further, one then needs to speculate, of the 1 million how many are likely to be owners of HDTVs and will invest in an HD antenna? Are people who haven't even invested in cable or satellite really likely to be early adopters of HD?
LISTNUM 1 \l 11569 So what is that 1 million really, 300,000, 200,000? Is an entire national network being contemplated to satisfy the need of potentially only a few hundred thousand viewers?
LISTNUM 1 \l 11570 Or is this position and notion of free HD really a front for a completely different network with quite different objectives?
LISTNUM 1 \l 11571 In terms of meeting the demand for high definition, I think it is fair to say that Canadian broadcasters have made great progress in the past year alone working towards the 2011 shutoff date.
LISTNUM 1 \l 11572 While the cost of making this transition is significant and promises little to no financial return, CanWest supported the establishment of a target shutoff date at the TV Policy Review to ensure an orderly market transition in line with the U.S.
LISTNUM 1 \l 11573 In fact, we have been moving ahead with our digital rollout plans and have already begun the conversion of all of our newsrooms to digital technology, and later this year we will be launching high definition transmitters in Toronto, Hamilton and Vancouver and will soon be filing applications for HD transmitters in Edmonton and Calgary.
LISTNUM 1 \l 11574 We will also be discussing the transition in more detail in the upcoming BDU review, as well as our licence renewals next year.
LISTNUM 1 \l 11575 We can also confirm that all of our newly commissioned dramatic priority programming is HD and most of our documentaries are being produced in high‑definition as well, and we are acquiring HD rights for the vast majority of our foreign programming schedule. In short, if the program is available in HD, we are acquiring HD rights automatically.
LISTNUM 1 \l 11576 Commissioners, CanWest has had a long history of smart risk‑taking, innovation and entrepreneurship. We believe that a healthy marketplace includes vigorous competition and, regardless of your decision, we will continue to meet our challenges head on and invest in programming and technology to remain relevant in this changing environment. But the extent and timing of those investment will largely depend on our financial capacity to do so.
LISTNUM 1 \l 11577 In a number of decisions and policy statements over the past year alone the Commission has recognized the challenges faced by conventional broadcasters. We trust that you will carefully consider the impact of further licensing on our ability to continue to meet our important public policy objectives.
LISTNUM 1 \l 11578 MS BELL: Commissioners, thank you for your attention and we will be happy to answer any questions you may have.
LISTNUM 1 \l 11579 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 11580 I notice you didn't say one word about YES TV. I gather you are not terribly concerned about them getting a licence?
LISTNUM 1 \l 11581 MS BELL: I think we are concerned about any licensing of conventional players at this time, but clearly we have a bigger concern with the impact of the HDTV proposal.
LISTNUM 1 \l 11582 Brad, would you like to add anything about local sales or the impact of YES?
LISTNUM 1 \l 11583 MR. KUBOTA: Yes. I think the question ‑‑ and we experienced this a little bit with the creation of Dose ‑‑ the 18 to 34 crowd on one hand very hard to hit and if you can find them it would be great. Very fickle people to find. We have had a tough time actually finding programming that will consistently hit them on a regular basis.
LISTNUM 1 \l 11584 So it's actually a very small amount of money for the market to sustain and we just haven't been able to find them on a consistent basis.
LISTNUM 1 \l 11585 THE CHAIRPERSON: The other thing, the same question I asked CTS, I mean you are already in HD in Toronto, Hamilton, Vancouver, you are applying in Edmonton and Calgary next year, I guess that leaves Montréal and Ottawa of the stations where HDTV wants to broadcast. They aren't on the air for at least another year.
LISTNUM 1 \l 11586 So is your anxiety justified? I mean, are they really going to be meaningful competition? You have quite the head start, you have the audience, you have the loyalty of the viewers, you have HD in five out of the seven markets already by the time they come on the air.
LISTNUM 1 \l 11587 MS BELL: You know, I think what's going to happen is that if you do license this network with the obligations that they have proposed, let's just not look at today and what the environment looks like today, let's take a look at five years down the road when we still have the obligations that we have and we are competing and everyone is HD at that point, so now you have this different type of network, this different model that seems to be a hybrid of a specialty and a conventional network without most of the obligations that are tied to either of those types of licences. I think we will be absolutely at an unfair disadvantage at that point.
LISTNUM 1 \l 11588 THE CHAIRPERSON: So it's more the conditions that they are asking for than the fact that they are being licensed that you are concerned about?
LISTNUM 1 \l 11589 MS BELL: I think it's both. I think it's both.
LISTNUM 1 \l 11590 I think we are and we continue to be very concerned about the future of conventional television and its business model.
LISTNUM 1 \l 11591 Quite frankly, you know, I mean we respect the entrepreneurship. I mean we come from a long line of great entrepreneurs who would probably say "Good on you for trying, it's a great business idea", but the fact is, we have very high obligations that are tied to our national network and if we are going to contemplate a new business model ‑‑ because in fact I think what this is doing is it's confirming the fact that the existing model is under stress and probably will not remain viable in the future unless we do something about it soon. I think that's what it's telling you. If the existing model worked, that is probably what Mr. Bitove would have applied for.
LISTNUM 1 \l 11592 THE CHAIRPERSON: Michel...?
LISTNUM 1 \l 11593 COMMISSIONER ARPIN: Thank you, Mr. Chair.
LISTNUM 1 \l 11594 Ms Williams, in your oral presentation you spoke about non‑BDU subscribers and you mentioned a number of 3 million and suggesting that 2 million of those were living outside the major CMAs.
LISTNUM 1 \l 11595 It's interesting what you say because it is contrary to what we were told last year when we had the OTA review where the major argument that was made to make sure that we maintain an over‑the‑air transmission in a digital world is that close to 15 to 17 and sometimes 20 per cent of the non‑BDU subscribers were living in the major CMAs like Toronto, Montréal, Vancouver, Calgary, et cetera.
LISTNUM 1 \l 11596 So where did you get your information and could you elaborate on that?
LISTNUM 1 \l 11597 MS WILLIAMS: Well, I will ask Kathy Gardner to because it was her research team that came up with the number.
LISTNUM 1 \l 11598 But I would want to be clear, I believe what the suggestion was yesterday was that there was a total of 10 per cent of all viewers that are currently watching TV off‑air, which is that 3 million number that they provided yesterday.
LISTNUM 1 \l 11599 I'm not sure what you are suggesting as to whether 20 per cent of that 3 million is actually in the urban area.
LISTNUM 1 \l 11600 COMMISSIONER ARPIN: No, what I'm saying is of the total viewership in major markets ‑‑ well, the average number that was used during the OTA Review was something like between 12 to 15 per cent of households of those living in major markets were not BDU subscriber's.
LISTNUM 1 \l 11601 Now, what you have said in your oral presentation, and it is outside of your text, was that your evaluation is there are about 3 million non‑BDU subscriber's all across Canada and 2 million of them are living outside the major markets, which is, for me, contrary to what has been said during the OTA Review.
LISTNUM 1 \l 11602 MS WILLIAMS: I'm going to ask Kathy to speak to that because it was her team yesterday that was working on this.
LISTNUM 1 \l 11603 MS GARDNER: I think there are two areas that we have to identify first and foremost.
LISTNUM 1 \l 11604 In the HDTV application, their licence is specifically designated to the central market area. All of the data that would have been pulled for the OTA argument last year would have been based on the full coverage area. So we were looking at central market area and that's how we derived the figure that Barbara Williams was referring to.
LISTNUM 1 \l 11605 All of this data is based on the fall 2007 central market versus rest of English Canada percentages.
LISTNUM 1 \l 11606 COMMISSIONER ARPIN: As you know, yesterday I did raise the question that in some markets they were using low‑power frequency.
LISTNUM 1 \l 11607 MS GARDNER: Exactly.
LISTNUM 1 \l 11608 COMMISSIONER ARPIN: But they are saying that even in using low‑power frequencies the coverage in digital was much broader than analog and that was stated by their own consulting engineer, not by the applicant or ‑‑ well, we had the technical people at least making the argument.
LISTNUM 1 \l 11609 But what I am hearing from you is that the comments that you have made, you are basing it on what was said yesterday rather than a specific research that CanWest has done.
LISTNUM 1 \l 11610 MS GARDNER: Well, the research that we did access was just based on the BBM diary data and taking the central market. So it wasn't anything beyond that, just using the pure facts and figures that would be available to us through the diary data for those eight markets versus the rest of English Canada.
LISTNUM 1 \l 11611 MS BELL: And we are using the central market, because that is what they are proposing.
LISTNUM 1 \l 11612 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 11613 You have also, Mr. Kubota, referred to it that the business is not what it used to be. But aren't you going through a good year now?
LISTNUM 1 \l 11614 MR. KUBOTA: We had a not bad start. You know, without trying to give away all, you know, the secrets, no, quite frankly we are not.
LISTNUM 1 \l 11615 COMMISSIONER ARPIN: And I will ask the same question to other English‑speaking ‑‑ well, I have here a table that has been made available to all of you because you are a member of TVB. And obviously, I can't divulge the numbers but I can surely see that network sales are really improving and somehow even the specialty services are still doing well and keep doing well. But the conventional broadcasters are not doing bad either.
LISTNUM 1 \l 11616 MR. KUBOTA: Commissioner, I think you are referring to the TSS report, are you, that is published ‑‑
LISTNUM 1 \l 11617 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 11618 MR. KUBOTA: And is that the November report that you have or is that ‑‑
LISTNUM 1 \l 11619 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 11620 MR. KUBOTA: That is right, it just came out.
LISTNUM 1 \l 11621 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 11622 MR. KUBOTA: Well, the data we have here, and I think it is good to keep in mind that currently CanWest plays in the spot market. We are an unwired network, we don't play in the network playground. The spot market, there you will see year‑to‑date, fiscal 2008 season to date is .5 per cent year over year.
LISTNUM 1 \l 11623 COMMISSIONER ARPIN: Yes, well, that one is a bit slower than the networks. Who is doing the network?
LISTNUM 1 \l 11624 MR. KUBOTA: To the best of my knowledge, the network includes everything there. The network includes specialty, it includes conventional networks, so CTV would be in there, CBC would be in there. And while I don't have the network numbers there, I do know the total TV season today is 4.6 and specialty is, as you said, is just shy of 9 per cent ‑‑
LISTNUM 1 \l 11625 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 11626 MR. KUBOTA: ‑‑ year over year. It is extremely healthy.
LISTNUM 1 \l 11627 But our concern is the spot market. Our concern is where we play on a day to day basis is the regional market. And I might take this opportunity too to ask for some clarification on ‑‑ and it has been great they have said they will stay away from local sales ‑‑ we would like to know how they define local sales, particularly in a market like Winnipeg, is MTS considered local sales in a market like Vancouver?
LISTNUM 1 \l 11628 Is the B.C. Government, is BCLC considered local? They are locally generated accounts and yet they are, of the 20 per cent of sales for us, the local sales, they are probably 80‑90 per cent of the money that we see on a local basis. So when they say they won't touch local sales, what do they mean by that? We would be curious to know.
LISTNUM 1 \l 11629 COMMISSIONER ARPIN: Well, I think, surely, it is a good question and I would hope that they clarify that when they will come with their reply, because the notion of national and local sales, particularly in this country where there is, because of the size of the country, numerous regional players like the B.C. players that you mentioned, sometimes some broadcasters will consider them as being national because they are sold through agencies and others would consider them local and that definition varies from one broadcaster to the other that have been around long enough to know.
LISTNUM 1 \l 11630 Ms Bell, in your written presentation, because in your oral presentation you didn't refer to it that much, but in your written presentation you are making an argument about diversity of voices and you are not suggesting that there is enough diversity of voices, but you are quoting the Commission's last decision suggesting that overall there is a good balance of voices and at the end obviously you are concluding that, all being considered, we may not need to have distinct new voices through HDTV.
LISTNUM 1 \l 11631 Would you agree with me that the contrary argument could be made and that there is never enough diversity of voices?
LISTNUM 1 \l 11632 MS BELL: Vice‑Chairman, you know what, I think, and I think you will appreciate this comment, we appreciate the fact that everything you have to do is to balance different interests. Diversity for the sake of diversity, if it is going to have a negative impact on what is already in the system, is probably I would say not a good use of added diversity and I think that is usually how the Commission approaches these things in licensing new entrants, is to weigh and balance in the interest of the system. And we are telling you we don't think it is in the interest of the system.
LISTNUM 1 \l 11633 And I would add one point, and I apologize for interrupting, but I find there is something I just cannot compute in my mind. If you are arguing that we need to do this to add over‑the‑air free HD service and that is your selling point, why are you asking for mandatory carriage? Why are you asking for mandatory carriage on DTH when we don't even have it? Thirty hours of local programming doesn't warrant mandatory carriage on DTH, but zero local programming and six hours of priority programming does? And, I am sorry, but I disagree. I think the Broadcasting Act is very clear about the importance of local and we take that very seriously and we know you do too. So, yes, we have some issues with that. Barb.
LISTNUM 1 \l 11634 MS WILLIAMS: Well, and if the whole point is that you want to provide it to those that are not buying cable or satellite, then why do you care if you are carried on those? There is not a consistency of logic to that.
LISTNUM 1 \l 11635 COMMISSIONER ARPIN: Finally, and you alluded to their priority programming plan, yesterday at the hearing we had a new scenario that was presented to us making use of the same financial envelope, providing eight hours of priority programming starting with year four and adding more hours of also priority programming right from the start. I know that it is part of your written submission. I don't know, do you have any comments to make on the fact that they introduce an amended proposal regarding priority programming changes your conclusions in your written submission?
LISTNUM 1 \l 11636 MS BELL: I don't think it does. I think that the fact is the impact is still going to be what the impact is going to be. I would say, in terms of the priority programming, and I haven't done the math here, but for all multi‑station groups, if you reach 70 per cent of Canadian homes, you are considered a multi‑station group and it is Commission policy that we should be doing eight hours, that all of those groups should be doing eight hours of priority programming.
LISTNUM 1 \l 11637 And again, I think to go back to the Chairman's question yesterday is why does this warrant exceptions to policy? What are you bringing to the table that warrants all of these exceptions to current policy? And I am just not sure that that has really been answered here and I think that is very much at the crux of your dilemma.
LISTNUM 1 \l 11638 COMMISSIONER ARPIN: Thank you very much, Mr. Chair.
LISTNUM 1 \l 11639 THE CHAIRPERSON: Commissioner Katz?
LISTNUM 1 \l 11640 COMMISSIONER KATZ: Thank you, Mr. Chairman.
LISTNUM 1 \l 11641 I have got two questions. Ms Bell, on page 3 of your submission this morning there is reference made to HDTV seeking to become the equivalent of a super station that would enjoy the same carriage and other benefits as a national network. And we heard Mr. O'Farrell yesterday from the CAB make a similar point about a national network. Can someone explain to me what a national network is and what a non‑national network is?
LISTNUM 1 \l 11642 I heard Mr. Kubota talk about spot purchasing, not national purchasing. And maybe there is a distinction without a difference, I don't know. But if someone can clarify for me what defines a national network and are there certain obligations inherent in being a national network operator versus being something other than that? Is Global a national network operator?
LISTNUM 1 \l 11643 MS BELL: We are not licensed as a national network per se, but we are national in scope, and so we are considered a multi‑station group and we are national in scope.
LISTNUM 1 \l 11644 And I think what you have here is an application to serve all the major markets in Canada without having to serve a lot of the smaller ones. I agree with that. But I think if you are hitting over 70 per cent of the Canadian population you are pretty much national. And I don't know from an advertising standpoint, Brad?
LISTNUM 1 \l 11645 MR. KUBOTA: From an advertising standpoint it is really about ease and simplicity. It is do I have the ability to book one spot that runs across the country and you can send me one invoice?
LISTNUM 1 \l 11646 But I will take this a little bit further as well and perhaps there is one other question we would like clarity on. They say that there will be a network and yet they imply that they have the ability to stream different signals into individual markets. Would they take regional signals?
LISTNUM 1 \l 11647 If it was to be considered a specialty station, we don't currently have the ability right now to regionalize our signal, we don't currently have the ability to take Western Canada advertisers and only broadcast them to Western Canada. If they are a super station with that ability, they truly are in a class by themselves.
LISTNUM 1 \l 11648 THE CHAIRPERSON: When you say you don't have the ability now, are you talking about technical ability or you don't have the licence to do it?
LISTNUM 1 \l 11649 MR. KUBOTA: The licence, specialty stations do not have that licence.
LISTNUM 1 \l 11650 COMMISSIONER KATZ: So you are not a national network licensee today?
LISTNUM 1 \l 11651 MS BELL: We are not, we don't have affiliates, no. We are not licensed as a national network.
LISTNUM 1 \l 11652 COMMISSIONER KATZ: From the HDTV perspective in their application, you are not suggesting that they could have anything different?
LISTNUM 1 \l 11653 MS BELL: You know what, I think I am using the term loosely and it does get used loosely. I think that when we say a national network I think what we are trying to say here is that there is a national presence. And certainly if you are in the Vancouver and Alberta and in most of the provinces you have a national footprint and those are all the major advertising markets also would consider that.
LISTNUM 1 \l 11654 COMMISSIONER KATZ: The continuation of that statement, "without incurring the high costs of operating a network," what are those high costs that they would not be incurring that you are incurring today?
LISTNUM 1 \l 11655 MS BELL: We have to provide local programming in every single market in which we operate, so does CTV. We are also at eight hours of priority programming, so is CTV. In fact, we have 16, but that is because we have two national footprints let us say. We have the infrastructure of stations across ‑‑ this is a hybrid model, in my view, between a conventional and a specialty. You don't have the infrastructures, but you have the carriage. So there is a very high cost, obviously, in terms of infrastructure.
LISTNUM 1 \l 11656 And I would point out, you know, I would love to be in a position where we only had eight transmitters. We have about 90 that we somehow have to figure out how we are going to convert in order to reach all of the people that we reach now, which is, you know, part of the challenge here. This is a very very different beast than what we are dealing with and there is a high cost there.
LISTNUM 1 \l 11657 COMMISSIONER KATZ: What percentage of the Canadian population do you reach today?
LISTNUM 1 \l 11658 MS BELL: Cathy.
LISTNUM 1 \l 11659 MS GARDNER: We reach about 97 per cent of the population.
LISTNUM 1 \l 11660 COMMISSIONER KATZ: My only other question is to I guess Mr. Kubota. You referenced in here on page 8 you already have excess inventory. Is that programming inventory?
LISTNUM 1 \l 11661 MR. KUBOTA: Yes. Actually, anyway you want to look at it in terms of excess capacity in response, excess capacity audience. And I think the key there is, you know, the more options that advertisers have, or as one of their references pointed out, the more doors to knock on, the more options advertisers have the less demand that is placed on that inventory.
LISTNUM 1 \l 11662 The more options they have to tackle a market, you know, through a network execution, through a specialty execution or through ‑‑ and CTS was inferring earlier, you know, the big guys, that Global and CTV wouldn't be affected and, in fact, we are. The less demand you have on your inventory the more pressure you have on your CPRs and your CPMs.
LISTNUM 1 \l 11663 And yesterday, HDTV alluded to the fact that they would and they had to, had no choice, would target the mark with specialty efficiencies. I would suggest that they are a conventional broadcaster coming in with specialty efficiencies. There couldn't be a heavier stone to put on or drag down efficiencies in the conventional markets. It will leave is with excess capacity and lower rates.
LISTNUM 1 \l 11664 COMMISSIONER KATZ: Thank you.
LISTNUM 1 \l 11665 THE CHAIRPERSON: Vice‑Chairman Arpin.
LISTNUM 1 \l 11666 COMMISSIONER ARPIN: From one of the answers that you gave to Mr. Katz I need to have a clarification. You said you are not a network and you don't have affiliates. But I know that there are private broadcasters that are carrying Global's programming, particularly the Pattison stations and NBC.
LISTNUM 1 \l 11667 Since they are not affiliated, it is because you have an output deal with them?
LISTNUM 1 \l 11668 MS BELL: That is correct.
LISTNUM 1 \l 11669 COMMISSIONER ARPIN: And how many other ‑‑ do you have a good number of those stations or is it..?
LISTNUM 1 \l 11670 MR. KUBOTA: Yes, we have two in B.C., we have a bit of an output deal with Thunder Bay and CJON and they don't carry the complete schedule, it is just bits and pieces.
LISTNUM 1 \l 11671 COMMISSIONER ARPIN: Okay, thank you.
LISTNUM 1 \l 11672 THE CHAIRPERSON: Okay, thank you very much. That is all of our questions.
LISTNUM 1 \l 11673 I think we will take a 10‑minute break before hearing the next one.
‑‑‑ Upon recessed at 1000 / Suspension à 1000
‑‑‑ Upon resuming at 1013 / Reprise à 1013
LISTNUM 1 \l 11674 THE CHAIRPERSON: Okay, Madame Secretary, I think we are ready to proceed.
LISTNUM 1 \l 11675 THE SECRETARY: I would now invite Rogers Communications Inc. to make their presentation.
LISTNUM 1 \l 11676 Appearing for Rogers is Mr. Rael Merson. Please introduce your colleagues, after which you will have 10 minutes for your presentation.
LISTNUM 1 \l 11677 MR. MERSON: Thank you.
LISTNUM 1 \l 11678 Good morning Mr. Chairman, Mr. Vice Chair, Members of the Commission.
LISTNUM 1 \l 11679 My name is Rael Merson and I am the President of Rogers Broadcasting.
LISTNUM 1 \l 11680 With me today are, starting on the far left, Susan Wheeler, our Vice President of Business and Regulatory Affairs, and David Purdy, the Vice President of Video Product Management with Rogers Cable.
LISTNUM 1 \l 11681 On my right are Ken Engelhart, Vice President, Regulatory for Rogers Communications, and Alain Strati, Vice‑President, Specialty TV & Development for Rogers Media.
LISTNUM 1 \l 11682 Thank you for making the time for us.
LISTNUM 1 \l 11683 We would like to use the time afforded us today to make five specific points.
LISTNUM 1 \l 11684 Firstly, the high‑definition nature of these applications is not a distinguishing characteristic.
LISTNUM 1 \l 11685 Secondly, the applicants have not demonstrated a demand for their programming.
LISTNUM 1 \l 11686 Thirdly, that these applications fail to meet the obligations of an over‑the‑air licence and risk unbalancing the playing field.
LISTNUM 1 \l 11687 Fourthly, this is not the time to licence a new over‑the‑air entrant.
LISTNUM 1 \l 11688 And lastly, that mandated analog distribution is a very inefficient use of spectrum.
LISTNUM 1 \l 11689 So, starting with the first point: that HD is not a distinguishing characteristic.
LISTNUM 1 \l 11690 Contrary to the assertions made by each applicant, we do believe in the business case for HDTV.
LISTNUM 1 \l 11691 Citytv in Toronto is already providing high‑definition content.
LISTNUM 1 \l 11692 All of our local Canadian programs like Breakfast Television, Cityline and CityNews are all produced and broadcast in high definition.
LISTNUM 1 \l 11693 OMNI Toronto will operate fully in high definition, including production and transmission facilities, by mid‑2009.
LISTNUM 1 \l 11694 The HD investments that we have already made are essentially all that HD Networks is proposing to do.
LISTNUM 1 \l 11695 In essence, they want to operate a single broadcast facility, with a network of retransmitters across the country.
LISTNUM 1 \l 11696 Ultimately, HD is just a technical format.
LISTNUM 1 \l 11697 It is not a factor in program diversity, and it is not a relevant contribution to the system.
LISTNUM 1 \l 11698 HDTV claims that they will provide free, over‑the‑air HD services to Canadians who do not wish to obtain a BDU service.
LISTNUM 1 \l 11699 But their transmitter in Vancouver will only be 300 watts, while Toronto and Montreal will be only 160 and 450 watts respectively.
LISTNUM 1 \l 11700 You would have to live near the transmitter to receive the signal.
LISTNUM 1 \l 11701 HDTV Networks claims that its HD broadcasting format will distinguish its service from the services offered today.
LISTNUM 1 \l 11702 But, in our opinion, that is simply not enough.
LISTNUM 1 \l 11703 The second point we would like to make is that HD has not demonstrated a demand for its service.
LISTNUM 1 \l 11704 In our opinion, the HD Network ‑‑ HDTV Networks' application must be evaluated on the basis of its programming and service commitments.
LISTNUM 1 \l 11705 And on those grounds, their application is entirely deficient.
LISTNUM 1 \l 11706 There are surprisingly few details with respect to their proposed programming strategy.
LISTNUM 1 \l 11707 Although we know they intend to offer non‑U.S. foreign and Canadian acquired programming, we do not know where that programming will be sourced from, what genres they intend to offer, or whether it will all be in high definition.
LISTNUM 1 \l 11708 We only know that there will be no local programming, and a commitment to less than eight hours of priority programming per week.
LISTNUM 1 \l 11709 In addition, we cannot assess how their proposed network will impact our stations.
LISTNUM 1 \l 11710 They have not provided any information for their revenue projections, making it impossible for us to examine the assumptions and methodology they have used.
LISTNUM 1 \l 11711 A new entrant must be required to demonstrate demand for its service.
LISTNUM 1 \l 11712 Implicit in this requirement is the commitment to bring something different, and of consequence, to the Canadian viewing public.
LISTNUM 1 \l 11713 We fail to see how HDTV can support its claim of offering diversity in the system with so few details on its proposed program offering.
LISTNUM 1 \l 11714 The third point we would like to make is that the applications fail to meet the standards of an over‑the‑air licence.
LISTNUM 1 \l 11715 The fundamental distinguishing characteristic of an over‑the‑air broadcaster is our ability to reflect the communities that we serve.
LISTNUM 1 \l 11716 We do that through local programming and local involvement.
LISTNUM 1 \l 11717 Our priority status derives from this local contribution.
LISTNUM 1 \l 11718 But HDTV Networks wants over‑the‑air status without any commitment to local programming or the local community.
LISTNUM 1 \l 11719 That contradicts the very nature of service for an over‑the‑air broadcaster.
LISTNUM 1 \l 11720 HDTV Networks is trying to establish a national network with only one broadcast facility in Vancouver, and Digital retransmitters in Canada's eight largest markets.
LISTNUM 1 \l 11721 But without local programming or local stations, they are not really proposing to establish a true network of broadcasting services.
LISTNUM 1 \l 11722 They are instead proposing a "superstation", a regulatory construct that does not exist in Canada.
LISTNUM 1 \l 11723 To put it simply, HDTV Networks wants access to the over‑the‑air sector without having to pay the price of entry, and that price of entry is an investment in local and priority programming.
LISTNUM 1 \l 11724 We note too that HDTV argues it has no obligation to offer local programming because it will not solicit local advertising.
LISTNUM 1 \l 11725 This commitment is completely disingenuous because, as everyone knows, most television advertising is national.
LISTNUM 1 \l 11726 With respect to the YES application, while we applaud its goal of empowering marginalized youth, we believe it simply fails to meet the standards of an over‑the‑air broadcaster.
LISTNUM 1 \l 11727 While YES has at least recognized the obligation to offer local and priority programming, much of this programming will be user‑generated.
LISTNUM 1 \l 11728 It is doubtful that user‑generated programming is in keeping with the Broadcasting Act requirement that programming be of a "high standard".
LISTNUM 1 \l 11729 In addition, it clearly provides little benefit to the Canadian independent production sector.
LISTNUM 1 \l 11730 The fourth point that we would like to make si that now is not the time to licence a new entrant in the over‑the‑air market.
LISTNUM 1 \l 11731 Market conditions must be supportive for a new entrant.
LISTNUM 1 \l 11732 Given the regulatory commitments of over‑the‑air broadcasters, there is a need to ensure the broadcasters can continue to meet their requirements by assessing the economic health of the sector.
LISTNUM 1 \l 11733 A test of market readiness should focus on the health of the market in general rather than on the profitability of individual broadcasters.
LISTNUM 1 \l 11734 We believe factors such as PBIT margins for the sector, sales growth above inflation, stability of pricing and sell‑out rates provide a helpful insight into the economic health of the sector.
LISTNUM 1 \l 11735 We submit that none of these factors currently supports the introduction of a new over‑the‑air entrant.
LISTNUM 1 \l 11736 David?
LISTNUM 1 \l 11737 MR. PURDY: Our fifth point is that the applicants propose inefficient use of spectrum.
LISTNUM 1 \l 11738 We at Rogers Cable were troubled by HDTV's request that it be distributed as part of an analog basic service, on a mandated basis.
LISTNUM 1 \l 11739 Both the Commission and Industry Canada have developed a number of policies to encourage and support the transition of the system from analog to digital, and ultimately HD.
LISTNUM 1 \l 11740 At Rogers, managing the transition is an expensive and difficult process.
LISTNUM 1 \l 11741 We are aggressively marketing our digital services and we have over 58 per cent of our customers have digital set‑top boxes in their home, the most in Canada.
LISTNUM 1 \l 11742 That number is growing at an impressive rate, around 10 per cent a year.
LISTNUM 1 \l 11743 However, during the transition, we are required to carry many over‑the‑air services three times: in analog, in standard definition digital and high definition.
LISTNUM 1 \l 11744 And as a result, even though we have made massive investments in capacity, we are facing a serious bandwidth crunch.
LISTNUM 1 \l 11745 The result is that we have to make more investments to increase capacity during this transitional period.
LISTNUM 1 \l 11746 And even with these investments, there are finite limitations.
LISTNUM 1 \l 11747 Accordingly, we were pleased when the Commission announced that it would only license over‑the‑air services on a digital basis, on a go forward.
LISTNUM 1 \l 11748 New digital services will attract customers to the digital platform and will not use up our valuable capacity.
LISTNUM 1 \l 11749 For every analog channel, Rogers can carry 12 standard definition services or two to three HD services.
LISTNUM 1 \l 11750 Granting mandatory analog carriage to these digital services, however, would be a troubling step backwards.
LISTNUM 1 \l 11751 It would not provide the same encouragement for customers to migrate to digital, and it would also exacerbate the bandwidth shortage.
LISTNUM 1 \l 11752 Granting HDTV's analog carriage request would also reduce Rogers Cable's ability to use this capacity to distribute new and innovative services, including other HD services, video‑on‑demand services and third‑language programming services.
LISTNUM 1 \l 11753 Rael?
LISTNUM 1 \l 11754 MR. MERSON: In conclusion, we believe that both applicants have proposed services that are more appropriately licensed as Category 2 digital specialty services.
LISTNUM 1 \l 11755 In our view, the applicants' proposals are simply not sufficient to receive the regulatory privileges afforded over‑the‑air television stations.
LISTNUM 1 \l 11756 We thank the Commission for the opportunity to appear today and would be pleased to answer any questions you may have.
LISTNUM 1 \l 11757 THE CHAIRPERSON: Thank you very much.
LISTNUM 1 \l 11758 I would like to follow up on point number five.
LISTNUM 1 \l 11759 In your submission, you suggest that you will probably carry U.S. signals in analog format even after 2009, when they have converted to HD.
LISTNUM 1 \l 11760 MR. PURDY: Hm‑hmm.
LISTNUM 1 \l 11761 THE CHAIRPERSON: A, I don't understand why you do it; and B, if you can do it for U.S. services, why can't you do it for HDTV?
LISTNUM 1 \l 11762 MR. PURDY: Good question. Thank you very much, Mr. Chairman.
LISTNUM 1 \l 11763 We, at Rogers, are reviewing and that decision right now.
LISTNUM 1 \l 11764 So, one of the things that we are discussing is whether or not we would in fact, post‑2009, carry the U.S. signals in analog, and it is something that we debate and discuss internally.
LISTNUM 1 \l 11765 If we did carry them, it would be to manage the transitional period and to minimize any customer disruption.
LISTNUM 1 \l 11766 It would only be done if we felt that it would be disruptive to our customer base and hurt our subscribers.
LISTNUM 1 \l 11767 But it is something that we are reviewing internally now and it is something we are discussing ‑‑
LISTNUM 1 \l 11768 THE CHAIRPERSON: So it is not cost issue. It is a customer convenience issue.
LISTNUM 1 \l 11769 MR. PURDY: It is a customer convenience issue, and it is ‑‑ you know, our intent is to, as we migrate, go through this digital migration, that we minimize customer disruption.
LISTNUM 1 \l 11770 Certainly, the over‑the‑air signals from the U.S. stations are something that we are discussing right now.
LISTNUM 1 \l 11771 MR. ENGELHART: If I could add, Mr. Chairman, I think I would answer that, your last question, by saying there is a trade‑off between cost and the customer impact.
LISTNUM 1 \l 11772 As we explained in our in‑chief remarks, there is ‑‑ you know, bandwidth is all we have to sell. So, obviously, bandwidth is important to us
LISTNUM 1 \l 11773 And managing the bandwidth during the transition period is difficult, and David's team is looking at what to do about the American signals in 2009.
LISTNUM 1 \l 11774 That having been said, you know, if we have 68‑70 per cent of our homes have digital boxes, so 30 per cent of the people (that don't have that digital box) lose those American signals, they might be annoyed.
LISTNUM 1 \l 11775 I mean, it has been part of their television service for their entire lives, and they are going to wonder where it went.
LISTNUM 1 \l 11776 So there is going to be a consumer reaction and we have to figure out what the impact is on us and weigh that against the bandwidth issue.
LISTNUM 1 \l 11777 With the new service, you have the same bandwidth issue, but you don't have the same consumer reaction because it is not something that they have grown up with their whole lives.
LISTNUM 1 \l 11778 THE CHAIRPERSON: Okay. Thank you.
LISTNUM 1 \l 11779 Mr. Katz?
LISTNUM 1 \l 11780 COMMISSIONER KATZ: Thank you, Mr. Chairman.
LISTNUM 1 \l 11781 I want to focus on two areas.
LISTNUM 1 \l 11782 The first one has to do with the reference you have made, both in your submissions this morning as well as in your evidence that you filed, you comments you filed as well, regarding whether user‑generated content fits under the definition of, I guess, high standard, as you called it in your submission this morning.
LISTNUM 1 \l 11783 You didn't allude to it as being a high standard issue in your actual submission, but you alluded to that notion, anyways.
LISTNUM 1 \l 11784 Can you expand upon that notion because all we are seeing right now in the new media area is much more, obviously, user‑generated content, and if what you are telling the Commission is that anything that is user‑generated does not fit under the Broadcasting Act, I think it is something that needs to be further pursued.
LISTNUM 1 \l 11785 MR. MERSON: Thank you, Mr. Vice Chair.
LISTNUM 1 \l 11786 You know, there is ‑‑ we sweat programming and programming decisions every day, and ultimately the choices that we make are on the breath of the appeal of the services and whether the services have appeal to broad enough audience to really build the advertising base that you think might be available from over‑the‑air television.
LISTNUM 1 \l 11787 And we have spoken about it in the past.
LISTNUM 1 \l 11788 Look, our vision for over‑the‑air television is that it becomes the most ubiquitous, most widely dispersed medium out there.
LISTNUM 1 \l 11789 And in that very ubiquity you can build a business case, because we know we have taken on a fairly difficult business case in Citytv.
LISTNUM 1 \l 11790 But you can build a business case if you believe that ultimately over‑the‑air television will become the mass medium and that everything else will devolve into smaller niches that people pay for.
LISTNUM 1 \l 11791 So, when we look at user‑generated content, you know, there are a couple of levels.
LISTNUM 1 \l 11792 One is YouTube. You know, YouTube is the ultimate expression of user‑generated content.
LISTNUM 1 \l 11793 The magic of YouTube is not in the content itself, but it is in its searchability, the fact that you can go in because these are all very, very niche audiences that are looking for something in particular.
LISTNUM 1 \l 11794 You can go in and specify and identify what it is that you do.
LISTNUM 1 \l 11795 It is the antithesis of a mass market strategy. It is a highly‑differentiated, massive searchable database that YouTube has created.
LISTNUM 1 \l 11796 So, as a concept, I can't see, and we can't see, how it is that user‑generated content, which by its nature has this very, very niche appeal, has applicability to a mass medium like over‑the‑air television.
LISTNUM 1 \l 11797 Where it does have applicability is how you see us using it at this point in time, which is, to the extent that we solicit content from our viewers to add to what it is that we have on the air.
LISTNUM 1 \l 11798 So, you know, in the midst of a snow storm, we look to our viewers to provide clips of their cars covered in snow. In the midst of sort of an event that is happening, we get that content from them.
LISTNUM 1 \l 11799 So there is tons of applicability within, particularly as you want to get your viewership more involved in what it is you are doing, in building the content on your local programming.
LISTNUM 1 \l 11800 But as a mass market strategy, it is the concept that we have difficulty with.
LISTNUM 1 \l 11801 Does that answer your question?
LISTNUM 1 \l 11802 COMMISSIONER KATZ: Yeah.
LISTNUM 1 \l 11803 Thank you.
LISTNUM 1 \l 11804 The second question relates to the BDU side of your business as well.
LISTNUM 1 \l 11805 The CRTC, as you are well aware, are getting an awful lot of applications for carriage, one of them being YES TV here, HDTV. There have been a lot of applications for 9(1)(h), as well.
LISTNUM 1 \l 11806 Is one of the reasons for that inundation by the Commission that a lot of these programmers are having trouble getting carriage from the BDUs, and so they are turning to the CRTC and saying "We can't get on, so give us these licenses in order to incent the BDUs to actually put us on."?
LISTNUM 1 \l 11807 MR. MERSON: I would ask David to answer that.
LISTNUM 1 \l 11808 MR. PURDY: I would say, in the case of Rogers, it would be hard to make that argument. We have launched virtually all of the channels that have been licensed.
LISTNUM 1 \l 11809 Certainly, our policy is to carry anything that we feel our customer base would find compelling.
LISTNUM 1 \l 11810 I think what is probably at issue here is broad‑based carriage lower down the dial, and it is really preferential carriage that they are seeking.
LISTNUM 1 \l 11811 You know, I think that is something that really is earned, rather than something that should be asked for upfront.
LISTNUM 1 \l 11812 You know, you talk about user‑generated content in channels that have launched, and we carry BITE TV, which is a user‑generated service, or much of the content on BITE TV is user‑generated, but it has failed its sort of garner much in the way of market share, either for viewers or for advertising revenue.
LISTNUM 1 \l 11813 So we give everybody a fair shot, but I think the preferential carriage is ‑‑
LISTNUM 1 \l 11814 COMMISSIONER KATZ: When you say you give everybody a fair shot, anybody who wants to seek access to the Rogers Cable systems can get on as a Cat 2?
LISTNUM 1 \l 11815 MR. PURDY: The vast, vast majority of the Cat 2s that have been licensed in this country have gotten carriage from us.
LISTNUM 1 \l 11816 The only ones I can think of are some of the hi‑fidelity services which, as I mentioned earlier, we're desperately trying to figure out how to provide spectrum and launch those services as well.
LISTNUM 1 \l 11817 And the reason we're doing that is because they're currently carried by our competitor and we want to maintain a parity or have a better product than our competitors.
LISTNUM 1 \l 11818 COMMISSIONER KATZ: And you don't have the capacity for these types of providers right now?
LISTNUM 1 \l 11819 MR. PURDY: We are in a spectrum crunch and we're busy trying to launch switch digital which would allow us to have even more spectrum, but until switch digital is up and running, which should be some time at the back half of this year, we're in a really tight spectrum crunch.
LISTNUM 1 \l 11820 But it's our intent to carry most of the services that are licensed, certainly those that have compelling content and we think would be compelling to our customer base.
LISTNUM 1 \l 11821 COMMISSIONER KATZ: Do you do consumer research to find out when someone comes to you with programming whether it's something that will sell basically, or do you make that decision internally based on your experience?
LISTNUM 1 \l 11822 MR. PURDY: We do constant consumer research. So, we go to our customer base at least four times a year on a quarterly basis and ask them what programming genres are of greatest interest; when they look at our digital line‑up, when they look at our total television line‑up, where they see deficits or deficiencies or where they'd like to see more types of content.
LISTNUM 1 \l 11823 And we've got the programming genres mapped out, both from a total perspective and on a segmented basis, so, we know what segments of our customer base are looking for.
LISTNUM 1 \l 11824 So, of particular interest right now, obviously, is, you know, young people and how to make the television product more relevant to young people and, so, we're doing constant consumer research.
LISTNUM 1 \l 11825 COMMISSIONER KATZ: Okay. Thank you.
LISTNUM 1 \l 11826 THE CHAIRPERSON: You are both a broadcaster and a BDU. How are you doing in terms of broadcasting with your newly acquired network and with OMNI in terms of transition to 2011?
LISTNUM 1 \l 11827 MR. MERSON: It's a ‑‑ you know, Citytv was the first to launch pure hi‑def through its entire system, so, all of City's local programming in Toronto is produced in hi‑definition and transmitted in hi‑definition, all the major shows: the news, "City Line", "Breakfast Television".
LISTNUM 1 \l 11828 OMNI, we have ‑‑ we're in the midst of the process. We are ‑‑ we've held back on building the production facilities because we are in the process of building this new production facility to cover both City and OMNI in Toronto, but if you go to OMNI you'd see the cameras are all hi‑definition.
LISTNUM 1 \l 11829 What they haven't yet put in place is a hi‑definition switch and they're in the process of launching their hi‑definition transmitters that will be up and running in July of this year.
LISTNUM 1 \l 11830 Across the country ‑‑ but by July of 2009, it will be ‑‑ OMNI as well will be completely hi‑definition throughout the system.
LISTNUM 1 \l 11831 So, both City and OMNI in Toronto will be completely hi‑definition by early next year.
LISTNUM 1 \l 11832 The rest of the country, the roll‑out, we've planned the roll‑out on a staged basis. As you've heard everybody explain, it's an expensive proposition and, to some degree, as business people what we try to do is match the expenditure with the adoption of the new technology by the consumers.
LISTNUM 1 \l 11833 So, we're in the process of sort of rolling this out in an organized fashion. We will be fully hi‑definition capable across the entire system by 2010. So, we'll be ready for 2011.
LISTNUM 1 \l 11834 THE CHAIRPERSON: In terms of your answer to Vice‑Chairman Katz in terms of carriage and that you're trying to get everybody on, et cetera, and I have no doubt to question your statement, all I can say, an awful lot of licensed Cat 2s have appeared before us and have told us we can't even get a meeting with the BDUs never mind having a fair shot at getting on.
LISTNUM 1 \l 11835 That's obviously a different perception here, let's just leave it at that. But it was a number of people who appeared before us that suggested that the problem with the BDUs is really quite large.
LISTNUM 1 \l 11836 MR. PURDY: Mr. Chairman, I would be surprised if they're referencing Rogers Cable. I think ‑‑
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11837 MR. ENGELHART: In fact, Mr. Chairman, I've heard some of them say, "We're only on Rogers".
LISTNUM 1 \l 11838 We carry just about everything. We can ‑‑ happy to provide you with a copy of our channel line‑up. There's virtually no Cat 2 that we're not carrying.
LISTNUM 1 \l 11839 THE CHAIRPERSON: I only repeat what was told to me and I sort of pass it on to you.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11840 THE CHAIRPERSON: They did not qualify it as to one BDU, they said all, so that's...
LISTNUM 1 \l 11841 MR. ENGELHART: As I say, Mr. Chair, we're happy to give you a list of the launched Cat 2s and the ones that we're carrying and the ones that we're not, because there are precious few that we're not carrying.
LISTNUM 1 \l 11842 MR. PURDY: And I'd be willing to meet with any of them.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11843 THE CHAIRPERSON: I will pass your offer on.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11844 MR. PURDY: A lot of them are in the audience today.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11845 COMMISSIONER ARPIN: Among the Cat 2s that you have launched, some have succeeded, some have failed, at least to our knowledge.
LISTNUM 1 \l 11846 Do you have any specific experience regarding failure and the reasons why they fail?
LISTNUM 1 \l 11847 MR. PURDY: Thank you, Vice‑Chairman.
LISTNUM 1 \l 11848 The specialty channels that we've shut down, and there's only been a handful, are the ones that largely seem to have a flawed business model or no strong source of programming.
LISTNUM 1 \l 11849 So, when we ‑‑ WTSN I think was the first of the Category 2 specialty channels to shut down, and I think they would say ‑‑ and they're here today, so, I probably shouldn't speak for them ‑‑ but I think they would say that the production costs associated with live sports is what ultimately brought that channel to its end.
LISTNUM 1 \l 11850 The other channels that we've shut down typically didn't have a strong source of programming and they didn't garner either ratings or really much in the way of advertiser interest.
LISTNUM 1 \l 11851 COMMISSIONER ARPIN: And was it the case of High School Television Network?
LISTNUM 1 \l 11852 MR. PURDY: We launched High School Television Network and I think in the end they had trouble meeting their financial commitments and it was a strong source of programming.
LISTNUM 1 \l 11853 I point to ‑‑ and I don't mean to pick on Byte TV ‑‑ but I point to Byte TV and at the end of the day it comes down to having strong stories, great story tellers, great production partners and, you know, truly compelling content, and what format the content is in and how stylishly it's shot doesn't make up for the fact if you don't have strong producers producing strong stories.
LISTNUM 1 \l 11854 COMMISSIONER ARPIN: Thank you.
LISTNUM 1 \l 11855 THE CHAIRPERSON: Okay, thank you very much.
LISTNUM 1 \l 11856 Thank you. Your submission was very much to the point and, therefore, easy for me to grasp.
LISTNUM 1 \l 11857 THE SECRETARY: I would now invite CTVglobemedia Inc. to come forward.
LISTNUM 1 \l 11858 THE SECRETARY: Appearing for CTVglobemedia is Mr. Kevin Goldstein. Please introduce your colleagues, after which you will have 10 minutes for your presentation.
LISTNUM 1 \l 11859 MR. GOLDSTEIN: Thank you.
LISTNUM 1 \l 11860 Good morning, Mr. Chair, Members of the Commission.
LISTNUM 1 \l 11861 For the record, my name is Kevin Goldstein and I am Vice‑President of Regulatory Affairs for CTVglobemedia. Before we begin, I'd like to take the opportunity to introduce my colleagues.
LISTNUM 1 \l 11862 To my right, your left, is Brian McLuskey, Sr. Vice‑President Revenue Management for CTV, a 25‑year veteran in the advertising industry. Brian is responsible for market positioning, defining market objectives, establishing broad pricing strategies and developing business strategies that reflect long and short‑term industry trends across all broadcasted digital platforms.
LISTNUM 1 \l 11863 To my immediate left, your right, is Rick Lewchuk, Sr. Vice‑President CTV creative agency and brand strategy. Rich has worked in television broadcasting for nearly three decades and has held a number of senior roles with CTV in the areas of programming and program promotion. He currently oversees the marketing, promotion and brand creative for all CTVglobemedia television networks and stations.
LISTNUM 1 \l 11864 Finally, to Rick's left is Steve Armstrong, President of Armstrong Consulting, one of Canada's top economic research consultants specializing in media who prepared the impact analysis we filed with our interventions.
LISTNUM 1 \l 11865 We will now begin our presentation.
LISTNUM 1 \l 11866 The Canadian broadcasting system is a system that has been carefully constructed over a series of decades based on the principles outlined in the Broadcasting Act.
LISTNUM 1 \l 11867 At CTVglobemedia we have had the privilege of operating in this system for over 45 years. However, this privilege has not come for free, it has involved significant obligations, obligations relating to Canadian programming and obligations to make a significant contribution to local reflection in the communities in which we operate.
LISTNUM 1 \l 11868 We continue to fulfil these obligations which are not inexpensive. This is the regulatory bargain that we and other licensees have committed to.
LISTNUM 1 \l 11869 Yesterday morning the Commission heard a proposal from HDTV Networks to bypass significant obligations. HDTV Networks believes it should be given unprecedented flexibility and be permitted to cherry pick the policies it should have to adhere to.
LISTNUM 1 \l 11870 As the Chairman alluded to in his questioning, HDTV is not proposing certain exceptions to existing policies, they are essentially proposing a whole new class of undertaking. As we will discuss today, in our view, there is no merit to such a proposal.
LISTNUM 1 \l 11871 Brian.
LISTNUM 1 \l 11872 MR. McLUSKEY: Whether you call it privileges but not obligations, benefits but not the responsibilities, cherry picking or skimming the cream, that is what this application is because, unlike all other over‑the‑air broadcasters, it does not have a local commitment.
LISTNUM 1 \l 11873 The Broadcasting Act mandates that your regulation of the sector be readily adaptable to technological change, however, the Act does not say that you should do so when it would have a negative impact on existing players and their ability to fulfil their obligations.
LISTNUM 1 \l 11874 Make no mistake, approval of this application will result in increased competition for national advertising. Given the severe challenges already affecting conventional broadcasters, anyone who thinks this will not affect their ability to continue their current contributions, including local programming, is dreaming in HD.
LISTNUM 1 \l 11875 Any comprehensive analysis of the conventional television model, both here and around the world, will note that advertising‑based over‑the‑air television is in decline and suffering from fragmented audiences and changing advertising patterns.
LISTNUM 1 \l 11876 The numbers over the last five years are clear and the Commission has seen the numbers for '06‑'07. In fact, the Commission recognized this in Public Broadcast Notice CRTC 2007‑53 when it noted that:
"This sector faces a number of challenges with audience fragmentation and technology changes, over‑the‑air stations will continue to experience a decline in audience share, major changes in the form and delivery of advertising and additional costs related to the digital transition. (As read)
LISTNUM 1 \l 11877 PBIT for this sector has dropped to historic lows and one of the major players, TQS, has filed for bankruptcy protection.
LISTNUM 1 \l 11878 On all accounts, the business model for conventional television and, hence, the ability of the sector to continue to deliver a wide range of programming, and specifically local programming, is under siege. Any further licensing will only fuel this crisis.
LISTNUM 1 \l 11879 In essence, HDTV Networks is looking for a version of a Vancouver super station with priority carriage. It is the equivalent of CTV applying for an over‑the‑air licence for CFTO with eight re‑broad stations in the top Canadian markets with no local commitment but wide‑spread cable and satellite distribution.
LISTNUM 1 \l 11880 To be blunt, a great licence if you can get it, but this is not a long‑term recipe for increasing diversity in the system. In fact, recent history has shown us how damaging poorly executed new licences can be to the marketplace.
LISTNUM 1 \l 11881 HDTV Networks has provided no rationale why it should be given such flexibility where others have not. Moreover, we can guarantee that if they are licensed with these conditions, other investors in the over‑the‑air sector will want equitable licensing treatment.
LISTNUM 1 \l 11882 Rick.
LISTNUM 1 \l 11883 MR. LEWCHUK: At the end of the day what HDTV Networks is proposing is to solve the problem that doesn't exist. The Canadian broadcasting industry is already at the forefront of the HD revolution and CTVglobemedia is amongst those Canadian television broadcasters that are strongly committed to the growth of HD programming.
LISTNUM 1 \l 11884 Today virtually all of our prime time programming on the CTV network is available in HD. CTV's entire slate of Canadian scripted programs is presented in HD, this includes "Corner Gas", "Degrassi: The Next Generation" and "Instant Star", and all of our Canadian Movie of the Week titles, such as "Would Be Kings" and "Mayerthorpe" which had its world premiere on CTV on Sunday night and generated 1.3‑million viewers, notwithstanding the fact that it was scheduled against the Grammys.
LISTNUM 1 \l 11885 From a specialty perspective, TSN, RDS and Discovery Channel were among the first to launch in HD and each has grown tremendously since. In 2006 TSN's HD line‑up featured more than 1,500 hours of HD programming and in September of that year it became the first Canadian broadcaster to launch a daily newscast in HD.
LISTNUM 1 \l 11886 Meanwhile, Discovery launched Canada's first 24‑7 HD service with Discovery HD.
LISTNUM 1 \l 11887 Yesterday morning HDTV Networks indicated that all of their programming will be in HD, even if they must up‑convert some unknown amount of their programs. Up‑converted programs are not true HD.
LISTNUM 1 \l 11888 In addition, HDTV Networks has also asked for analog distribution so that viewers that do not have digital cable will be able to receive its service. This requires programs to be down‑converted. What is clear from all of this is that HDTV will not be offering a true HD service, notwithstanding their name.
LISTNUM 1 \l 11889 We should also highlight that what HDTV Networks is looking to provide is not a free service.
LISTNUM 1 \l 11890 First, for large portions of Canada, including Saskatchewan and three of the Atlantic provinces, this service will not be available over‑the‑air.
LISTNUM 1 \l 11891 Second, in markets where the signal is receivable someone who has invested upwards of a thousand dollars in an HD television with a built‑in tuner will still have to spend extra on an antenna.
LISTNUM 1 \l 11892 Third, and finally, it's naive to assume that today's consumer is interested in investing in an HD set and being satisfied with the few over‑the‑air channels that are available, let alone what HDTV Networks will offer.
LISTNUM 1 \l 11893 Over‑the‑air HD tuning is not and will never be the 10 to 12 per cent of the population HDTV Networks referenced yesterday. The overwhelming majority of Canadians get their HD television today and will continue to get their HD television in the future from Canadian BDUs, and that does not come free.
LISTNUM 1 \l 11894 HD for the sake of HD is not a reason to approve an application, particularly when doing so will cause significant harm to an already challenged sector.
LISTNUM 1 \l 11895 In fact, what was clear from HDTV Networks' presentation is that they're proposing a transitional solution for a couple of years until such time as all over‑the‑air stations have made the transition. At that time, any novelty associated with this application is removed and HDTV Networks becomes the same as everybody else. Consequently, this application is no different than any other application for an over‑the‑air licence and should be evaluated on the same basis.
LISTNUM 1 \l 11896 MR. GOLDSTEIN: Before we conclude, one short note about YES TV. We listened to their presentation with interest yesterday. In our view, it would be more appropriate to licence what YES TV is proposing as a community television station or a digital specialty service.
LISTNUM 1 \l 11897 We seriously question whether their business model is viable as an over‑the‑air station, nor does it merit using valuable over‑the‑air spectrum for this purpose.
LISTNUM 1 \l 11898 Yesterday, HDTV argued that there is a messiness if their service is not treated in the same way as the other incumbents on certain accounts, except they want to pick and choose their regulatory requirements, taking the privileges but not the obligations. That's not messiness, we would say it's unfairness.
LISTNUM 1 \l 11899 In conclusion, what is the HDTV Networks' application really about?
LISTNUM 1 \l 11900 One, what is being applied for by HDTV Networks is unprecedented and, in effect, requires a new category of licence.
LISTNUM 1 \l 11901 Two, to license such an application would allow HDTV Networks to have privileges but not the obligations that all conventional broadcasters adhere to.
LISTNUM 1 \l 11902 Three, the approval of this application will undermine the ability of licensees to fulfil their obligations, particularly disturbing given the severe challenges already affecting conventional broadcasters.
LISTNUM 1 \l 11903 Four, the cost to the system of licensing HDTV Networks outweigh the benefits, in fact, there is no net benefit to the broadcasting system.
LISTNUM 1 \l 11904 Five, what HDTV Networks is looking to provide is not a free service.
LISTNUM 1 \l 11905 And, six, to be blunt, the rules either work for all of us or for none of us.
LISTNUM 1 \l 11906 For all of these reasons we believe the HDTV Networks' application should be denied.
LISTNUM 1 \l 11907 We would like to thank the Commission for the opportunity to appear before you today and we welcome any questions you may have.
LISTNUM 1 \l 11908 THE CHAIRPERSON: Thank you very much.
LISTNUM 1 \l 11909 A couple of clarifications first of all.
LISTNUM 1 \l 11910 You say up‑convert is not true HD. What exactly do you mean by that?
LISTNUM 1 \l 11911 MR. GOLDSTEIN: Up‑converted programming, and I'll ask Rick to add to it given his programming background, up‑converted programming simply makes the signal technologically compatible, it does not make the programming in 16 X 9 ratio with the crisp, clear picture that HD TV is known for.
LISTNUM 1 \l 11912 What it essentially does is allow you to watch something that's in standard definition through an HD TV signal.
LISTNUM 1 \l 11913 MR. LEWCHUK: There's actually a great example that Rogers Cable has on the air right now. They've got a commercial and there's a gentleman watching his ‑‑ what he thinks is an HD television set and he thinks he has HD but, in fact ‑‑ and he talks about the goalie being squished and he's not watching real HD.
LISTNUM 1 \l 11914 THE CHAIRPERSON: Oh yes, right.
LISTNUM 1 \l 11915 MR. LEWCHUK: You need to have a true HD signal to see HD. If you're just taking a standard definition signal and up‑converting it to HD, it does not have the quality of an HD signal.
LISTNUM 1 \l 11916 THE CHAIRPERSON: Do you get the squishing with that Roger signal, let's say, in its commercial when you up‑convert?
LISTNUM 1 \l 11917 MR. LEWCHUK: I'm sorry?
LISTNUM 1 \l 11918 THE CHAIRPERSON: Do you get the squishing, as you call it, of the signal when you up‑convert?
LISTNUM 1 \l 11919 MR. LEWCHUK: You can, it depends how the up‑conversion happens. You'll see a good example of that on Score TV and much of the programming they put on Score HD where they up‑convert basketball games and such, it's very much different than when they have a true HD basketball game.
LISTNUM 1 \l 11920 MR. McLUSKEY: The bottom line on that, beyond aspect ratio, is you can't create detail where none exists.
LISTNUM 1 \l 11921 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 11922 MR. McLUSKEY: And that's exactly what the analog formula is trying to do when it takes that SD signal and covert it up to HD TV. There's basically information that's missing. You can't make that appear.
LISTNUM 1 \l 11923 THE CHAIRPERSON: Secondly, you question HDTV's assumption that people will want to watch HD free over‑the‑air, suggesting because of the availability people won't go that way.
LISTNUM 1 \l 11924 But isn't it true that HD over‑the‑air is actually a better signal than you get over the BDU because it's not compressed?
LISTNUM 1 \l 11925 MR. GOLDSTEIN: I'll ask Rick to comment on that.
LISTNUM 1 \l 11926 MR. LEWCHUK: I've seen both. The fact is, you know, the HD signal ‑‑ I'm most familiar with Rogers, that's what my delivery is through and I do see ExpressVu as well. You could say I have a trained eye looking at it.
LISTNUM 1 \l 11927 I've seen over‑the‑air and I've seen it through both ExpressVu and Rogers and there's very, very little difference in quality to my eye.
LISTNUM 1 \l 11928 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 11929 MR. GOLDSTEIN: I think I would also add that if a significant amount of your programming is up‑converted in the first place, it doesn't really matter whether it's compressed through or you're receiving it over‑the‑air, it's still not going to give you the crisp quality that a true HD signal would offer.
LISTNUM 1 \l 11930 THE CHAIRPERSON: Now, you heard HDTV yesterday argue that really their application was meant to jump‑start the adoption of HD in Canada and proper produce a programming, et cetera.
LISTNUM 1 \l 11931 I gather you don't buy this argument.
Is it because you think this is just marketing, or is it because, in effect, time has overtaken the HDTV application because when they filed their application we hadn't set the deadline for 2011 yet and so, therefore, you know, the need to adopt a strategy and get there wasn't as urgent as it is now for every other broadcaster?
LISTNUM 1 \l 11932 MR. GOLDSTEIN: I think we'd probably agree with that.
LISTNUM 1 \l 11933 THE CHAIRPERSON: So, basically it's an application that's been overtaken by time?
LISTNUM 1 \l 11934 MR. GOLDSTEIN: Yeah, I think, as we indicated in our opening statement, you know, this is ‑‑ essentially the main thrust of this application is, is that it's over‑the‑air HD. Once everyone else moves in that direction, it loses its novelty.
LISTNUM 1 \l 11935 And the other thing I think that Mr. Lyons noted yesterday and some of the other people on his panel is that, you know, because of the transitional framework that's in place some of these licences are low power and, at least in the interim period until 2011 or until Industry Canada finalizes its digital allotment plan for HD TV, there's going to be difficulties in certain areas receiving this over‑the‑air.
LISTNUM 1 \l 11936 So, technically, you know, you're going to have trouble in the interim period receiving it over‑the‑air and then ultimately, once it becomes more full power, everyone is going to be in that space. So, essentially, I'm not exactly certain how that would kick‑start the process even though it's already been kick‑started essentially.
LISTNUM 1 \l 11937 THE CHAIRPERSON: What about timing? I mean, presume the Americans are going to be there by 2009, you like everybody else are now under deadlines imposed by us, you're also presumably worried about losing audience to the U.S. signal, et cetera, so you're going to try to be there before 2011 presumably in some key market.
LISTNUM 1 \l 11938 So, to what extent is HDTV going to be the jump‑start or be there ahead of you? I'm trying to figure out, you know, to what extent their argument, we'll be there across the board, is actually in reality, given the timing, come true?
LISTNUM 1 \l 11939 MR. GOLDSTEIN: Well, we're already and have been for some time in the two largest English language markets in the country over‑the‑air, Toronto and Vancouver, which covers off a significant portion of the population that HDTV Networks is seeking to serve.
LISTNUM 1 \l 11940 And, you know, yes, we're working on comprehensive plans. One of the problems we're dealing with at this point is that we are dealing with, you know, a transitional model that Industry Canada has put in place. Our understanding is, is that come this summer there will be a finalized plan. Given the time frame between now and then, you're going to want to move to the final, you know, wait for the final situation as opposed to investing in a transitional situation.
LISTNUM 1 \l 11941 So, we intend to come forward, you know, following that, the finalization of that plan with, you know, as required under the policy with a comprehensive plan to meet the roll‑out obligation.
LISTNUM 1 \l 11942 THE CHAIRPERSON: Now, you object to both effect, that HDTV is asking for a licence without having any obligation for local content, and also to the effect that they're asking for re‑transmission in all three modes, HD, digital and analog.
LISTNUM 1 \l 11943 Of those two, which one ‑‑ and you think it's unfair. Of those two obligations, the local content, local commitment and the benefit of re‑transmission, which one is more objectionable to you?
LISTNUM 1 \l 11944 If I said to you, we are going to licence them, take your pick, one of these two they're going to lose; which one would you pick? Which is more significant to you, let's put it that way?
LISTNUM 1 \l 11945 MR. GOLDSTEIN: I think they're both significant. You know, as we indicated in our opening statement, no other over‑the‑air broadcaster has ever been licensed without local programming obligations.
LISTNUM 1 \l 11946 And, you know, we also find it somewhat offensive that if you're applying for a service that the whole rationale for it is, is that you're going to jump‑start the HD process and provide HD programming, that you would require analog distribution of that service, because to us that sort of cheapens the experience that you're trying to offer.
LISTNUM 1 \l 11947 Maybe I'll ask Brian to comment on what potentially the impact could be in either situation.
LISTNUM 1 \l 11948 MR. McLUSKEY: Well, basically you're kind of presenting us with a "Sophie's Choice" and no matter which kid we choose the family's going to be devastated. That analogy just carries right through.
LISTNUM 1 \l 11949 The fact of the matter is that even if they were to meet local commitments, the system simply can't afford another player, there is already too much fragmentation and we're going to have more failure on our hands.
LISTNUM 1 \l 11950 We've seen TQS, this would just invite more. There simply isn't enough money there in the advertising base to support it.
LISTNUM 1 \l 11951 THE CHAIRPERSON: Okay. Let me ask the question a different way to avoid the "Sophie's Choice" analogy.
LISTNUM 1 \l 11952 Both CanWest, Rogers and you have really called this a super channel, that's what it is, and it is a format that we don't have and a licence that we don't grant in Canada.
LISTNUM 1 \l 11953 If we said, actually the super channel makes sense but you can't treat it like the other over‑the‑air, so, super channel, fine, you can do this, but no re‑transmission because a re‑transmission doesn't fit into it.
LISTNUM 1 \l 11954 I mean, if you want to be a super channel and appeal over‑the‑air, if you can get carriage rights from the BDUs, bully for you, but you're not going to have a mandatory one and, in effect, we create a new category of licences like that, would you see that in the interests of the broadcasting system or not?
LISTNUM 1 \l 11955 MR. GOLDSTEIN: Quite frankly, with the challenges we face, I don't know that there's the stability in the system to make any conclusive decision about that. I would certainly want to wait until after the hearings and to see how the conversion to HD TV and the whole world basically, the advertising community, the support of conventional TV unfolds before I'd opine on that.
LISTNUM 1 \l 11956 MR. McLUSKEY: I think advertising is only one side of it too. I think Rick wants to comment on what the potential impact may be on a programming expense side as well.
LISTNUM 1 \l 11957 MR. LEWCHUK: There would be an equal impact from the side of purchasing, acquiring programming, both Canadian programming and foreign programming if there is a super channel model that comes in because they would, in fact, be another purchaser of national rights to programming.
LISTNUM 1 \l 11958 And from what I can tell from their program schedule, they're looking to compete with exactly the same type of both Canadian and acquired programming, and that drives our costs up.
LISTNUM 1 \l 11959 We've seen every new entrant into the over‑the‑air field drive our costs up, even if it is as small a player as Sun TV, it does have an effect on our programming costs.
LISTNUM 1 \l 11960 THE CHAIRPERSON: Okay. Thank you.
LISTNUM 1 \l 11961 Do my colleagues have any questions?
LISTNUM 1 \l 11962 Michel?
LISTNUM 1 \l 11963 COMMISSIONER ARPIN: In your oral presentation you only had one paragraph about YES TV, but I note that you have a fairly extensive submission regarding YES TV and we had the discussion earlier regarding user‑generated content.
LISTNUM 1 \l 11964 Are you making use of user‑generated content in the CTV programming?
LISTNUM 1 \l 11965 MR. LEWCHUK: Most of our user‑generated content tends to happen on our specialty channels particularly in the youth market with MuchMusic and MTV. There is more access and we make use of that.
LISTNUM 1 \l 11966 We have also integrated our web component very much on our CTV side with youth‑generated content and a great example of that is Degrassi: The Next Generation which fits right into that core audience that YES is talking about. We have had a very substantial web presence with that show since we launched it seven years ago. That website continues to invite user content.
LISTNUM 1 \l 11967 We just had an interesting small comparison with some user‑generated content with two promotions that ran at the same time; one for the Super Bowl which invited people to upload their game face, the pictures of themselves cheering for the football, and we actually put those pictures of those winners right on television during the Super Bowl.
LISTNUM 1 \l 11968 At the same time we had a promotion called "Degrassify Yourself" which allows people to go on and they can put themselves, their picture with stars from the show. It was quite pleasant to see that the promotion for Degrassify Yourself had more than 10 times as much uptake as the Super Bowl promotion did. So people are already getting involved with doing those sorts of things.
LISTNUM 1 \l 11969 So there are those sorts of things that you can do.
LISTNUM 1 \l 11970 COMMISSIONER ARPIN: What was the quality of the content that you did receive? Was it sufficient for you to ‑‑ did it meet your needs and could you program a full schedule with user‑generated content?
LISTNUM 1 \l 11971 MR. LEWCHUK: You could definitely not program a full schedule with the content and even with ‑‑ you know, we were dealing largely with still pictures and there were many even just simple still photos that were not of high enough resolution, high enough quality that we felt comfortable putting on our website let alone on television. And even the ones we put on television we embellished and enhanced through digital process and put some bells and whistles around them to make them more palatable on television.
LISTNUM 1 \l 11972 COMMISSIONER ARPIN: Thank you. Thank you.
LISTNUM 1 \l 11973 THE CHAIRPERSON: Commissioner Katz.
LISTNUM 1 \l 11974 COMMISSIONER KATZ: Similar to yesterday I didn't want consultants to get a free ride here. So Mr. Armstrong, I have got a couple of questions for you on your analysis.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11975 COMMISSIONER KATZ: On the first page I guess of your analysis, you summarize the sources of revenue that HDTV have suggested will provide them with the revenue sources they are looking for. And then a little lower down you said:
"The available evidence suggests the approval of HDTV and YES TV applications will not result in a significant increase in television advertising revenues and likely to derive all of its advertising revenue from existing English‑language conventional TV broadcasting services." (As read)
LISTNUM 1 \l 11976 COMMISSIONER KATZ: Yet, up above in the five bullets, if I look at those five bullets, the first two are basically generating revenues from existing television stations. Then the third one is over‑the‑air radio transition and the last two seem to be new revenues into the system.
LISTNUM 1 \l 11977 So can you explain how ‑‑ the evidence suggests something different than your comments saying it's likely that all the revenue will be derived from existing?
LISTNUM 1 \l 11978 MR. ARMSTRONG: Commissioner, the bullet points are from the HDTV‑N application.
LISTNUM 1 \l 11979 COMMISSIONER KATZ: Yes.
LISTNUM 1 \l 11980 MR. ARMSTRONG: That's where they said their sources would be. When I looked at what happened in local markets where new over‑the‑air televisions had been introduced which I set out in figure 1 on the next page, I tried to see if there was a pattern where a new station was introduced; could we see an increase in revenues that differed from overall trends in the market? And when I look at that figure I don't see any identifiable pattern.
LISTNUM 1 \l 11981 Then if we look at '99 and 2003 there were new stations introduced in those years and there was an increase in revenue, a really significant increase in revenues in those years in the market in which those stations were introduced. But there were also significant increases in other markets where there were no stations and there was a good jump in the industry as a whole.
LISTNUM 1 \l 11982 And we know that television increase in advertising revenues tends to come in a clump, at least that has been the pattern over the past 10 years, that there is a structural adjustment.
LISTNUM 1 \l 11983 In '99 and 2003 there is evidence that there was that structural adjustment. If we look at the other years in which new stations were introduced ‑‑ excuse me, the structural adjustment was '98.
LISTNUM 1 \l 11984 If we look at '99 and 2002 and 2004 and we look at the markets in which new stations were introduced, which are highlighted there, the growth in revenues in that year ‑‑ in fact, in some years it's negative ‑‑ looks like it's tracking with the market in general, the overall television market, which is the last row in that column. There doesn't seem to be any perceptible bump.
LISTNUM 1 \l 11985 So what I conclude from that is, notwithstanding the claims of new entrants that they will bring new revenues into the market, there is no clear evidence to suggest that that happens. So my conclusion is then that if the Commission were to licence these television stations they would attract all of their revenues from the existing conventional English‑language television stations as apparently has been the case in the past.
LISTNUM 1 \l 11986 COMMISSIONER KATZ: So you have invoked a notwithstanding what they say clause.
LISTNUM 1 \l 11987 MR. ARMSTRONG: Yes.
LISTNUM 1 \l 11988 COMMISSIONER KATZ: Okay.
LISTNUM 1 \l 11989 Can you just confirm what was said yesterday as well, the growth rates that you have assumed here for the year of your growth from 2009‑2015, I think someone mentioned you used 2.4 percent. Is that correct?
LISTNUM 1 \l 11990 MR. ARMSTRONG: I used the ‑‑ yes, 2.2 or 2.4 percent from my study of where I projected the future growth in television advertising revenues.
LISTNUM 1 \l 11991 COMMISSIONER KATZ: So that future growth was from years 2012 through 2015?
LISTNUM 1 \l 11992 MR. ARMSTRONG: I used the rate from my study that the CAB filed that was for 2007 to 2011 and I extended it forward to 2015 for this.
LISTNUM 1 \l 11993 COMMISSIONER KATZ: So the rate between 2007 and 2011 was?
LISTNUM 1 \l 11994 MR. ARMSTRONG: I will just confirm that for you.
LISTNUM 1 \l 11995 MR. ARMSTRONG: For private English‑language conventional television the growth rate in revenues was 2.2 percent.
LISTNUM 1 \l 11996 COMMISSIONER KATZ: 2.2, okay.
LISTNUM 1 \l 11997 Thank you. Those are my questions.
LISTNUM 1 \l 11998 THE CHAIRPERSON: My colleague's question about user‑generated content sparked something in my mind. You heard before Rogers very eloquently stating the difference between user‑generated content and program TV and suggesting that user‑generated content is very useful to go in a specific niche market, et cetera, but they didn't see a place for it on TV, on regular TV. He put it in much better words than I can but you heard him.
LISTNUM 1 \l 11999 Do you share that view?
LISTNUM 1 \l 12000 MR. LEWCHUK: Yes.
LISTNUM 1 \l 12001 THE CHAIRPERSON: Okay, that's clear enough.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 12002 THE CHAIRPERSON: Thank you. Those are all our questions.
LISTNUM 1 \l 12003 MR. GOLDSTEIN: Thank you.
LISTNUM 1 \l 12004 THE SECRETARY: I would now invite CHCR Limited to come forward to make their presentation.
LISTNUM 1 \l 12005 THE SECRETARY: Appearing for CHCR Limited is Ms Marie Griffiths.
LISTNUM 1 \l 12006 Please introduce your colleague, after which you will have 10 minutes for your presentation.
LISTNUM 1 \l 12007 MS GRIFFITHS: Yes. First, I want to advise the Commission that I will be cutting short the written presentation just to make sure that I get everything in. So there will be some going from one paragraph to another.
LISTNUM 1 \l 12008 Bonjour, mesdames et messieurs. Good morning, Madam Secretary, Mr. Chairman, Vice‑Chair of the Commission and staff.
LISTNUM 1 \l 12009 I am Marie Depaeris Griffiths, the principal of CHCR Limited, the owner and operator of 105.1 and 106.3 FM in Montreal.
LISTNUM 1 \l 12010 I am joined by Stephen Zolf, partner at Heenan Blaikie and my legal counsel.
LISTNUM 1 \l 12011 We are here today to express our concerns about the application by HDTV Networks. Our interest in this application is based on our experience as local broadcasters with experience in producing the local television programming for audiences dating back to 1976 on Montreal's first community channel 9, belonging to national cablevision.
LISTNUM 1 \l 12012 In the late 1980s CHCR helped to create Télévision Ethnique du Québec, a third‑language specialty channel.
LISTNUM 1 \l 12013 In 1995 I spearheaded the application for CJMT, an ethnic multicultural over‑the‑air television station.
LISTNUM 1 \l 12014 As we noted in our written comments, we have several principal concerns with respect to HDTV's application.
LISTNUM 1 \l 12015 First, the application does not comply with the Commission's 2007 call for licensing new digital over‑the‑air television stations, nor would the applicant's proposed service meet the policy objectives identified for programming undertakings in the Broadcasting Act.
LISTNUM 1 \l 12016 Second, the applicant's proposal both ignores and distorts the regulatory framework for the licensing and distribution of high‑ definition digital television signals.
LISTNUM 1 \l 12017 Third, if licensed its service would threaten the contributions of existing licensed services that have finally stepped up to the plate to produce high quality content, Canadian HD programming. It would also threaten the multicultural development of Canadian productions across this country.
LISTNUM 1 \l 12018 First, in the call for applications the Commission required applicants to provide clear indication that there is a demand in the market for the proposed service. The applicant has to demonstrate the contribution that the proposed service will make to achieving the objectives in the Broadcasting Act, in particular to the production of local and regional programming.
LISTNUM 1 \l 12019 The expected audience of the proposed service, the proposed expenditures and the means by which the applicant will promote the development of Canadian talent including local and regional talent and an indication as to the amount of high definition programming and details with respect to local, regional, Canadian and foreign programming, we submit that the applicant has failed on all counts.
LISTNUM 1 \l 12020 There is no evidence of demand for its proposal. It has not addressed the potential negative impact on existing over‑the‑air broadcasters. There is no meaningful commitment to priority programming. There is a complete absence of local programming.
LISTNUM 1 \l 12021 The last deficiency was striking to us given CHCR's roots in establishing over‑the‑air television and radio stations in the local market.
LISTNUM 1 \l 12022 The applicant claims that it will not be seeking local advertising but rather will limit itself to national advertising. It describes itself as no threat to local over‑the‑air stations. Effectively, this has allowed the applicant to avoid expending significant resources for new, original, local programming which are the core responsibilities of an over‑the‑air station, particularly a network. Yet, at the same time, the applicant is seeking the benefits of priority carriage and access. This fundamental benefit is rooted in the Act.
LISTNUM 1 \l 12023 As the Commission noted in Public Notice 2002‑32, requiring BDUs to distribute digital signals, digital television services is wholly consistent with the objective of section 3(1)(t)(i) of the Act which provides that BDUs should give priority to Canadian programming services and in particular to the carriage of local stations.
LISTNUM 1 \l 12024 The applicant yesterday explained that they are not seeking the quid pro quo of local programming, namely the right to sell local advertising. But with all due respect, we submit that this misses the point. The Commission's June 2007 call clearly stated the criteria for licensing of new over‑the‑air digital high‑definition services. It required applicants to address the contributions that the proposed service would make to achieving the objectives in the Act, and particularly with respect to the production of local and regional programming.
LISTNUM 1 \l 12025 Even apart from the local issue, the entry of a network in eight major urban markets will surely come out of the existing advertising pie. Nor has the applicant provided any meaningful evidence of demand for its service. The applicant described yesterday its research as a bottom‑up approach in which it explored the general idea for a TV network in the works. But without specifics on its proposed programming schedule, experience tells us that Canadian viewers will only embrace a new service if the content is of high quality.
LISTNUM 1 \l 12026 It is quality content, not technology that drives demand. It is not enough to offer low‑quality content in HD particularly when much of the content is merely upconverted from standard definition format.
LISTNUM 1 \l 12027 We have already identified our concerns about the applicant's proposed programming in our written submission. For example, the applicant's proposed news format which involves user‑generated content and internet‑based video services is much more appropriate for an internet television station or a Category 2 digital specialty service. It is not appropriate for a general interest free television from coast to coast as a network.
LISTNUM 1 \l 12028 In summary, the applicant has not clearly explained its plans, how it will add to diversity in the system or how it can coexist with other broadcasters. Yet, what is clear is that it will introduce new risks into an already precarious environment.
LISTNUM 1 \l 12029 Second, a significant amount of the applicant's proposed service will be repurposed programming upconverted into HD. Not only that, the applicant is seeking mandatory distribution of its service on the analog basic service of BDUs. This means that a significant amount of its programming will be downconverted from 480i standard definition format.
LISTNUM 1 \l 12030 CHCR submits that nothing in the digital migration framework or in any other CRTC policy mandates the distribution of a new entrant's channels on analog basic. The applicant has not applied for analog transmitters nor is it clear in any case how analog carriage of an HD service will contribute to the overall objective of making the transition to a fully digital broadcasting environment.
LISTNUM 1 \l 12031 Several intervenors have already pointed out that now that the Commission has set August 31st, 2011 as the shutdown date for existing analog transmitters it will only consider applications for new over‑the‑air services using digital broadcast facilities.
LISTNUM 1 \l 12032 In our submission licensing the applicant's service as proposed risks driving a truck through a nuanced and sophisticated DTV migration policy. This policy was formulated to balance the interests of Canadian viewers, existing analog over‑the‑air services and BDUs. The policy provides interim support measures to those services that have had longstanding distribution rights on the analog platform.
LISTNUM 1 \l 12033 The applicant is effectively clothing itself as a transitional analog service even though it is applying for a licence for the first time. As a prospective new digital over‑the‑air entrant it cannot, by definition, be in transition so it should be able to benefit from the interim distribution framework.
LISTNUM 1 \l 12034 Our third point is that granting the application would effectively jeopardize the rollout of HD programming currently underway among licensed Canadian services. This is taking place in a challenging environment. There are many threats whether from the internet, broadcasting on cell phones and other substitutes or from digital piracy.
LISTNUM 1 \l 12035 The applicant claims that it understands that there are business risks facing a new entrant to the broadcasting sector, but what about the impact on existing services? Among the risks are the potential threat to the plans of existing stations to ramp‑up new Canadian high‑definition programs.
LISTNUM 1 \l 12036 There will also be downward pressure on ad rates from the entry of another over‑the‑air service which will permit advertising agencies to play each broadcaster off again. This will threaten the overall contributions made by all services.
LISTNUM 1 \l 12037 Also, given our experience as ethnic broadcasters, this service would setback dramatically the current inroads we have made with national advertising agencies who are still reluctant to try something new.
LISTNUM 1 \l 12038 We believe that the Canadian broadcasting industry is currently in a delicate and precarious state. Yet, it is moving ahead sure and steady. Therefore, it would be prudent to let existing licensees complete their transition to HD rather than licence a new applicant that is offering no local programming commitments and no apparent programming diversity for new and original content.
LISTNUM 1 \l 12039 CHCR submits that the recent wave of consolidation has now set the stage for the existing players to devote greater resources to programming with more local reflection. The Commission will of course have to remain vigilant to ensure that broadcasters make the necessary contributions to the benefit of the entire system. The benefits of these mergers need to be realized by all elements of the Canadian broadcasting system including viewers and independent producers.
LISTNUM 1 \l 12040 Given the glaring deficiencies in this application we submit that it would be more appropriate to treat the applicant's proposed service as a discretionary service rather than it being considered as a proposal for a new, over‑the‑air service with mandatory carriage across Canada.
LISTNUM 1 \l 12041 The applicant even conceded yesterday that his proposal had many similarities to a digital Category 2 service even though it clearly seeks the distribution and programming benefits that come with a general interest over‑the‑air licence.
LISTNUM 1 \l 12042 In summary, the applicant has not offered the evidence necessary to assess the actual impact of what would be a destabilizing service both from a programming standpoint and from a distribution standpoint.
LISTNUM 1 \l 12043 In conclusion, and with all due respect, this is neither the time nor the circumstance to roll the dice with the Canadian broadcasting system. I appreciate this opportunity to raise these concerns and I would welcome any questions from the Commission.
LISTNUM 1 \l 12044 THE CHAIRPERSON: Thank you very much.
LISTNUM 1 \l 12045 Earlier in your presentation you made the following statement, and I wrote it down, that this:
"...licensing HDTV would threaten the multicultural production in HD across the country." (As read)
LISTNUM 1 \l 12046 THE CHAIRPERSON: How did you get there? I didn't hear anything in HDTV speaking about multicultural production. Why do you feel licensing this network would threaten multicultural production in HD across the country?
LISTNUM 1 \l 12047 MS GRIFFITHS: Chairman von Finckenstein, one of the problems that I have been having since I did hear the applicants is I am trying to sort of nail down what exactly the application is.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 12048 MS GRIFFITHS: And at one point I was very surprised to hear that they have looked into airing multicultural programming, third‑language programming. My good friend, Shan, we discussed it yesterday and the Asian/Chinese programming from Fairchild and also some Latino programming. But these are foreign programs, probably great quality productions. Our countries of origin can produce quality programming but I fail to see what benefit it would give the Canadian broadcast system.
LISTNUM 1 \l 12049 So you know we throw in a bit of this and a bit of that, but I have some concerns how much ethnic will there be. Do they plan to do any local ethnic programming? In the case of Quebec it is very important that ethnic is reflected with the French language.
LISTNUM 1 \l 12050 So there is a lot of questions that are unanswered that are at the basis of some of our concerns.
LISTNUM 1 \l 12051 THE CHAIRPERSON: I see. Okay, thank you.
LISTNUM 1 \l 12052 Michel.
LISTNUM 1 \l 12053 COMMISSIONER ARPIN: The only thing that your oral presentation doesn't contain in your written submission is that you have yourself contemplated applying for an HDTV licence to serve the Montreal market and for business reasons you have passed because you needed to put all your resources behind launching your second FM station, at least that's what is stated here.
LISTNUM 1 \l 12054 Now, coming back to the question earlier or the first question that the Chairman did ask to you and the reference that you made to some ethnic programming from other sources, is your basic concern the service that HDTV is contemplating for the Quebec market, particularly for Montreal and the consequence it will have on your own plan to eventually apply for an ethnic HD service?
LISTNUM 1 \l 12055 MS GRIFFITHS: Definitely. We had our own plans on the drawing board and I am not here to whine about that. You know, I didn't make it to the gate on time and that was brought up.
LISTNUM 1 \l 12056 But yes, my concerns are that this is not a complete ‑‑ what we consider a complete, you know, high end network licence; what it means for us anyway. And changing it now at this point in time raises concerns and creates opportunities that could end up being so negative and detrimental that it would slow down the development of what we in Quebec see as an opportunity to create programming as the French production section does.
LISTNUM 1 \l 12057 French original productions are very popular in Quebec. Anyone who knows our industry ‑‑ the English part of the industry scratches its head and go, "How do you do it?" Well, we did it out of necessity because we didn't have the neighbour that gave us, right, the big choice of the American English‑language programs. Well, the ethnics across this country have that same opportunity.
LISTNUM 1 \l 12058 Et pour le développer des émissions avec le contenu canadien qui reflètent ce qui se passe dans ce pays d'une région à l'autre. Et pour le faire, ça nous prend une place à nous. Donc, la raison, qu'on a avancé avec une demande pour HDTV pour Montréal est ‑‑ in our vision of an HDTV network it is to drive. It should be the thrust of getting their HDTV sets in your house, which meant we don't want to be carried on analog. And we knew that the ethnics ‑‑ we come from a specialty service, Vice‑Chair Arpin. Vous le connaissez. Mon père a fait ça 40 ans.
LISTNUM 1 \l 12059 26,000 members were paying to get a special service. The content was there. It was relevant. It was high quality.
LISTNUM 1 \l 12060 And there is a chance now for ethnic programming across Canada to develop like French programming does in Quebec, which would give us original creative high‑quality shows and series and movies.
LISTNUM 1 \l 12061 Well, if you licence this applicant who will be in Quebec with certain third‑language programming that is foreign; as they stated yesterday, with three partners that they have mentioned, no local productions, no reflection of French at that point since there is no local or regional, I am sorry. I know their application is different. That's what they said. But to me different means better and it's not better.
LISTNUM 1 \l 12062 COMMISSIONER ARPIN: Thank you very much.
LISTNUM 1 \l 12063 THE CHAIRPERSON: Thank you very much. Those are all our questions.
LISTNUM 1 \l 12064 MS GRIFFITHS: Thank you.
LISTNUM 1 \l 12065 THE CHAIRPERSON: Madam Secretary.
LISTNUM 1 \l 12066 THE SECRETARY: I would now invite Alliance of Canadian Cinema Television and Radio Artists to come forward if they are in the room.
LISTNUM 1 \l 12067 THE SECRETARY: I would now invite Canadian Film and Television Production Association to come forward if they are in the room.
LISTNUM 1 \l 12068 And I would now invite Bell ExpressVu to come forward if they are in the room.
LISTNUM 1 \l 12069 THE CHAIRPERSON: Well, I guess they are not in the room. We are obviously ahead of schedule. So let's have an early lunch and maybe you can contact the parties and we will start in an hour, okay?
LISTNUM 1 \l 12070 Thank you.
‑‑‑ Upon recessing at 1127 / Suspension à 1127
‑‑‑ Upon resuming at 1129 / Reprise à 1129
LISTNUM 1 \l 12071 THE CHAIRPERSON: Sometimes we are early. We are ahead of schedule so you are on right away, out of turn. But thank you very much for coming.
LISTNUM 1 \l 12072 Madam Secretary.
LISTNUM 1 \l 12073 THE SECRETARY: We will now proceed with Bell ExpressVu.
LISTNUM 1 \l 12074 Appearing for ExpressVu is Mr. Chris Frank.
LISTNUM 1 \l 12075 Please introduce your colleagues, after which you will have 10 minutes for your presentation. Mr. Frank.
LISTNUM 1 \l 12076 MR. FRANK: Thank you very much.
LISTNUM 1 \l 12077 Good morning, Mr. Chair and Commissioners. My name is Chris Frank and I am Vice President of Programming for the Bell Video Group, which includes Bell ExpressVu.
LISTNUM 1 \l 12078 With me today is Susie Lindsay, on my left, Regulatory Counsel for Bell Canada and Counsel to the Bell Video Group this morning; and Paul Armstrong, Director of Regulatory Affairs for the Bell Video Group.
LISTNUM 1 \l 12079 We thank you for this opportunity to share our thoughts on the two applications before you today. We also apologize for holding you up for the last few minutes.
LISTNUM 1 \l 12080 Bell does not oppose the granting of licences to HDTV Networks per se, but does object to the proposed carriage terms in which the application rests.
LISTNUM 1 \l 12081 HD Networks intends to focus almost exclusively on national programming with regional inputs from eight cities. While it intends to broadcast 100 per cent HD programming, HDTV Networks requests that the Commission direct BDUs to distribute its signals in both standard definition and HD digital formats. As well, with specific regard to ExpressVu, HD Networks asks the Commission to, I quote:
"Ensure distribution of HD Networks service in standard definition on Nimiq 2(sic)." (As read)
LISTNUM 1 \l 12082 "On Nimiq 1", excuse me. Freudian slip.
LISTNUM 1 \l 12083 Bell notes that, as the Chair pointed out yesterday, the application does not fit into an established licensing category. Like specialty services, they wish to compete only for national advertising.
LISTNUM 1 \l 12084 Yesterday, in the context of explaining their lack of local programming commitments, HDTV stated that they see themselves as similar to a specialty channel. Its plans to operate eight separate transmitters appears calculated to ensure compulsory carriage as part of cable operators' basic service and to gain equitable treatment with established national station groups for carriage of multiple signals on DTH distribution platforms.
LISTNUM 1 \l 12085 Moreover, its proposal to offer a down converted SD service calls into question its commitment to 100 per cent HD network and suggests that its actual intent is to gain access to Canadian households as rapidly as possible through basic cable and DTH.
LISTNUM 1 \l 12086 ExpressVu has long supported the licensing of more and varied services and is a strong proponent of HD. We strive to be Canada's leading leader in providing our customers a comprehensive set of HD programming. To that end, ExpressVu would give reasonable commercial consideration for carriage at its discretion of this service.
LISTNUM 1 \l 12087 Essentially, if licensed, HD networks should be granted the discretionary access privilege on DTH, the same as Category 2 digital specialty services.
LISTNUM 1 \l 12088 Therefore, ExpressVu opposes granting HD Networks must carry status on DTH. Currently only CBC, Radio‑Canada, CTV and TVA enjoy must carry status under section 37(b) of the regulations. And there is nothing in this application that would justify giving the applicant greater DTH access rights than those established for other conventional TV services.
LISTNUM 1 \l 12089 ExpressVu questions the need for it to distribute more than one same time zone feed of HD Networks, inasmuch as by the applicant's own admission it is focused almost exclusively on national audiences. Individual feeds would appear to have little or no unique local content.
LISTNUM 1 \l 12090 Accordingly, the carriage of duplicate feeds would waste scarce satellite resources and would represent a roadblock for other valued HD services seeking distribution.
LISTNUM 1 \l 12091 Further, ExpressVu opposes any compulsory order to carry a down converted SD version of the service. This application is, after all, predicated on being HD‑specific. The special provisions established for analog services to transition to digital simply do not apply. There is no justification for compulsory carriage of the SD signal. If the signal is approved, then carriage of a down converted version should be at the distributor's discretion, as is the case for Category 2 digital services.
LISTNUM 1 \l 12092 Bell also opposes HD Networks request that the Commission direct ExpressVu to carry the service on a particular satellite of the applicant's choosing.
LISTNUM 1 \l 12093 In renewing the licences of ExpressVu and StarChoice in 2004 the Commission considered and denied similar requests in Broadcast Public Notice CRTC‑2004‑19. In that Public Notice the Commission stated that, and I quote:
"As to the choice of satellite on which the signals of particular television stations are distributed, the Commission considers that this decision is best left to the DTH licensees." (As read)
LISTNUM 1 \l 12094 ExpressVu finds no compelling evidence in this application that Commission's prior determination should be reversed. Indeed, bandwidth is tighter than ever due to the accelerating conversion of HD of existing services and the need to carry a full range of standard definition services.
LISTNUM 1 \l 12095 If the Commission did set the precedent of dictating which satellite were to be used by ExpressVu for which service, it would be inundated with requests for similar treatment by other services. ExpressVu would lose its ability to plan its satellite use in order to offer maximum value to its subscriber base.
LISTNUM 1 \l 12096 Therefore, should the Commission license HD Networks and should ExpressVu elect to carry its HD feed, then ExpressVu would select where and how that service would be distributed. All things being equal, it would likely be carried on a satellite located 82 degrees west, where all ‑‑ I repeat all ExpressVu's HD services are currently located. If ExpressVu elected to carry a down converted version of an HD Networks feed, then ExpressVu would decide at which orbital spot to locate the service.
LISTNUM 1 \l 12097 The second application before the Commission is from YES TV. For the same reasons I cited earlier, Bell opposes granting YES TV must carry status on DTH. If the Commission elects to license this service, Bell suggests that it be granted the same access privileges as a Category 2 specialty service.
LISTNUM 1 \l 12098 This concludes our opening remarks. We thank you for your attention and welcome any questions you might have of us.
LISTNUM 1 \l 12099 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 12100 I understand your reluctance to being told on which satellite to put a specific service, et cetera. but maybe there is a bit too much inside baseball here for me.
LISTNUM 1 \l 12101 Can you explain to me what is so special about Nimiq 1 and why HDTV wants to be on that and what would be the difference of putting it on that satellite as opposed to the one which you mentioned at 82 degrees WL?
LISTNUM 1 \l 12102 MR. FRANK: Absolutely.
LISTNUM 1 \l 12103 First of all, we should probably get away from designating satellites as 1, 2 or 3. What we are really referring to here are orbital locations.
LISTNUM 1 \l 12104 91 degrees west longitude is where Nimiq 1 currently resides. It won't be there forever because satellites have a shelf life of 12 to 15 years, if we are lucky. So 91 degrees is where our service started and it is chockablock at the present time with standard definition services. All 1.8 million plus of our customers can see 91 degrees.
LISTNUM 1 \l 12105 At 82 degrees west longitude, where Nimiq 2 is currently located but won't be located there for too much longer because we will be launching a new satellite, hopefully this summer, into 82 degrees which means that Nimiq 2 will probably be redeployed.
LISTNUM 1 \l 12106 But the point being, at 82 degrees west longitude is where we locate all of our high definition services and the new satellite that is going into 82 degrees west longitude this summer is specifically designed, all the transponders are high‑power, which means we can provide greater throughput, in other words carry more signals, and provide greater quality of service because all transponders are high‑powered.
LISTNUM 1 \l 12107 So 82, in a nutshell, is for high definition and 91 degrees is where all of our existing standard ‑‑ excuse me, the lions' share of our existing standard definition services are located.
LISTNUM 1 \l 12108 THE CHAIRPERSON: I gather fewer people get the signal from 82 than from 91?
LISTNUM 1 \l 12109 MR. FRANK: Yes, that's correct. I'm sorry, I left that off.
LISTNUM 1 \l 12110 But that is accelerating and we hope that's going to be like a hockey stick curve, Mr. Chair, as HD becomes more and more popular and we get more and more services. It's kind of like the cable guys going from analog to digital. When you have a compelling customer proposition at 82 people will flock there an increasingly our customer proposition at 82 is getting richer and richer.
LISTNUM 1 \l 12111 THE CHAIRPERSON: But if we acceded to HDTV's request, we would be effectively kicking somebody off the satellite, if I understand you Correctly.
LISTNUM 1 \l 12112 MR. FRANK: We would have to make adjustments, yes.
LISTNUM 1 \l 12113 THE CHAIRPERSON: Okay. Thank you.
LISTNUM 1 \l 12114 Len...?
LISTNUM 1 \l 12115 COMMISSIONER KATZ: Thank you, Mr. Chairman.
LISTNUM 1 \l 12116 Back to the notion of a network. In your submission on January 24th in paragraph 3 you indicate that:
"It is the company's view that HD Networks has not presented an application for a national conventional network." (As read)
LISTNUM 1 \l 12117 Can you, in your terminology, explain to me what a national conventional network is and who is a national conventional network operator today in Canada?
LISTNUM 1 \l 12118 MR. FRANK: I believe in regulatory terms in the context of our licence and our operation, the national networks that we carry are CBC, Radio‑Canada, CTV and TVA, so four in number and they have must carry status on our service.
LISTNUM 1 \l 12119 COMMISSIONER KATZ: And they are the only ones?
LISTNUM 1 \l 12120 MR. FRANK: Yes, sir.
LISTNUM 1 \l 12121 COMMISSIONER KATZ: Okay. All right.
LISTNUM 1 \l 12122 Next question. You say in your submission this morning in paragraph 10:
"Should the Commission license HDTV Networks and should ExpressVu elect to carry this HD feed..." (As read)
LISTNUM 1 \l 12123 Can you explain to us what thought process you go through in deciding who to carry and not to Kerry?
LISTNUM 1 \l 12124 MR. FRANK: Certainly.
LISTNUM 1 \l 12125 Our initial predilection would be to carry all quality services who come to us asking for carriage, but because DTH does have bandwidth limitations there are only ‑‑ physical science only supports so many transponders and so many signals in the sky and satellites are very expensive. We don't have ‑‑ and we can't adjust quickly as terrestrial distribution undertakings can. We are bandwidth limited.
LISTNUM 1 \l 12126 So when we look at a new service for distribution, we are focused almost entirely on the programming that that service offers. We are looking for programming that will add to our customers' choice, broaden the depth of programming and enrich our customer proposition.
LISTNUM 1 \l 12127 COMMISSIONER KATZ: It's purely an analysis done internally by Bell? There is, I guess, no opportunity for programmers to negotiate anything, you decide whether you will or will not carry him based on what you just enunciated?
LISTNUM 1 \l 12128 MR. FRANK: I heard testimony this morning about distributors ‑‑ excuse me, service providers having difficulty getting meetings, getting their propositions considered.
LISTNUM 1 \l 12129 To the best of my knowledge, we have never turned down an opportunity to discuss with a potential service provider the attributes of his or her service.
LISTNUM 1 \l 12130 I note for the record that neither of the applicants in front of you today approached us to talk about what they might be offering us in terms of new and enriched programming.
LISTNUM 1 \l 12131 COMMISSIONER KATZ: I can only speak from experience that the CRTC have licensed an awful lot of Cat. 2s and an awful lot of them aren't on the air. So you sit back and say "Someone has made an investment, got an idea, there is an entrepreneur out there, they have sought a licence, they have incurred costs, they have come to the CRTC and we have licensed it, and yet it is laying their dormant. In some cases they are reapplying for extensions as well. It sort of behooves us to sort of try and understand whether the vast majority of these ‑‑ and it is probably in the 75 to 80% range that never see the light of day and are just doing it on a whim and leaving or whether they are just having trouble getting carriage.
LISTNUM 1 \l 12132 MR. FRANK: Well, if we go back in history, Commissioner Katz, to 2001 when the first wave of Category 1 and Category 2 services were introduced into the marketplace, I think history tells us that ExpressVu was a leader in the distribution of services. We had all of the Category 1 services signed up, affiliated first.
LISTNUM 1 \l 12133 I believe ‑‑ I stand to be corrected on this, my friends at Rogers may wish to argue this point ‑‑ but I believe we launched the most Category 2 services of any distributor. If we weren't the most, we were only one or two services behind. Since then we have added Category 2 services as capacity permits.
LISTNUM 1 \l 12134 I would underscore in that process the need for us at this point to have a full array of standard definition services and also high definition services, in some cases dual illuminating the same service in high and standard definition.
LISTNUM 1 \l 12135 So the point I'm making is, we have a capacity challenge and we are doing the best we can with the bandwidth we have.
LISTNUM 1 \l 12136 The question you asked me initially was: How do you choose a new service? Well, we are looking for new and different and quality programming at an affordable price.
LISTNUM 1 \l 12137 COMMISSIONER KATZ: The last question I have is: You mentioned that the satellite at 91 degrees WL has a reach in the 90s and you said the 82 degrees is a hockey stick and it is moving up. What is it at today in terms of reach?
LISTNUM 1 \l 12138 MR. FRANK: I would be happy to supply that to you within the next 24 hours in a confidential undertaking. We don't release that figure typically, but happy to share it with the Commission.
LISTNUM 1 \l 12139 MR. ARMSTRONG: That information is filed in confidence in the context of the BDU regs proceeding in our August answers to the Commission's questions on HD, providing in confidence the proportion of our subscribers that have access to 82.
LISTNUM 1 \l 12140 COMMISSIONER KATZ: Can we get it on the record for this proceeding as well? Could you just file in confidence?
LISTNUM 1 \l 12141 MR. FRANK: Absolutely.
LISTNUM 1 \l 12142 MR. ARMSTRONG: Of course.
LISTNUM 1 \l 12143 COMMISSIONER KATZ: All right. Thank you.
LISTNUM 1 \l 12144 MR. FRANK: We will send it to you as quickly as we can.
LISTNUM 1 \l 12145 COMMISSIONER KATZ: Thank you.
LISTNUM 1 \l 12146 That are my questions.
LISTNUM 1 \l 12147 THE CHAIRPERSON: Okay, thank you very much. We appreciate you coming.
LISTNUM 1 \l 12148 MR. FRANK: Thank you very much.
LISTNUM 1 \l 12149 THE CHAIRPERSON: Madam Secretary, do we have another intervenor or do we break for lunch?
LISTNUM 1 \l 12150 THE SECRETARY: I would now invite the Canadian Film and Television Production Association to come forward.
LISTNUM 1 \l 12151 THE SECRETARY: Appearing for the CFTPA is Mr. Guy Mayson.
LISTNUM 1 \l 12152 Please introduce your colleagues after which you will have 10 minutes for your presentation.
LISTNUM 1 \l 12153 MR. MAYSON: Mr. Chair, Vice Chairs, CRTC staff, my name is Guy Mason and I am the President and CEO of the Canadian Film and Television Production Association. With me today are two prominent Canadian producers.
LISTNUM 1 \l 12154 On my immediate right, Stephen Ellis of Toronto's Ellis Entertainment Group founded in 1964 as primarily focused on a broad range of factual entertainment from tank overhaul for History Television to Divine Restoration for Vision TV, to the long‑running Profiles of Nature series. Stephen is a Member of our Broadcast Relations Committee, a past Chair of the Association and a chair of our copyright initiative, the Canadian Retransmission Collective, and the newly formed ISAN Canada Registration Agency.
LISTNUM 1 \l 12155 To Stephen's right Heather Haldane, Producer and Executive Producer of Toronto‑based "Screen Door" which is known for its television movies such as "Shades of Black" and "Prom Queen", and mini series "Shattered City" and the upcoming "Everest". Heather is an Executive Producer of the new drama series "MVP" which currently airs on the CBC. She is also a Member of our Broadcast Relations Committee and this is her first time appearing before the Commission. Welcome, Heather.
LISTNUM 1 \l 12156 Also with us is Mario Mota, to my left, the CFTPA Senior Director Broadcast Relations and Research.
LISTNUM 1 \l 12157 CFTPA represents almost 400 companies that create, finance, produce, distribute and market feature films, television programs and interactive content for new digital platforms.
LISTNUM 1 \l 12158 The Broadcasting Act requires that the programming provided by the Canadian broadcasting system should, among other things, include a significant contribution from the independent production sector. The producers on our panel are here to share with you their experiences in creating and financing quality original Canadian television programming, much of it in HD, and to discuss the need for new players in the over‑the‑air television market, specifically those committed to delivering 100 per cent HD programming.
LISTNUM 1 \l 12159 Our written interventions detailed quite clearly how consolidated the Canadian broadcasting market has become, the significant market power that existing broadcasters have in their dealings with independent producers and the healthy state of the overall broadcasting sector.
LISTNUM 1 \l 12160 The Commission itself has recently noted, and I quote here, that:
"Large ownership groups have a privileged position in the Canadian broadcasting system." (As read)
LISTNUM 1 \l 12161 The reality is that increased consolidation among Canadian television broadcasters in recent years means that there are fewer broadcast groups to which independent producers can supply high quality Canadian programming. This has considerable implications for the independent production sector and for maintaining a diversity of voices in the Canadian broadcasting system.
LISTNUM 1 \l 12162 In the recent Diversity of Voices proceeding the CFTPA urged the Commission to take steps to enhance diversity of voices and Canadian programming choices available to Canadians. This hearing represents a perfect opportunity to doing just that, while also providing increased opportunities for independent producers.
LISTNUM 1 \l 12163 We believe that one of the surest ways to achieve a diversity of voices in the broadcasting system in the ever consolidating media world is to mandate a significant place for priority programming produced by independent producers in broadcasters' program schedules.
LISTNUM 1 \l 12164 Canadian independent producers provide a rich diversity of programming sources and creativity to the broadcasting system.
LISTNUM 1 \l 12165 HDTV Networks states that in Canada's highly consolidated broadcasting market it would represent a much needed new door to knock on for independent producers since it pledges to acquire a significant portion of its programming from independent producers. Based on the revised proposal put forward by HDTV Networks yesterday, the CFTPA is pleased to offer conditional support for the licensing of HDTV Networks.
LISTNUM 1 \l 12166 We note that YES TV was recently approved for membership in the CFTPA as a producer, therefore we don't believe it is appropriate for us to take a firm proved position on YES TV's application. The comments made in our written intervention stand and we would be pleased to answer any of the Commission's questions on it. We trust the Commission will give YES TV's application due consideration in line with our overall desire to see new players in the system.
LISTNUM 1 \l 12167 Stephen.
LISTNUM 1 \l 12168 MR. ELLIS: Various of the incumbent over‑the‑air broadcasters, as well as their industry association, vigorously oppose the applications before you on the grounds that the OTA television market can't absorb another competitor.
LISTNUM 1 \l 12169 That response is predictable. The same argument has been made by existing licensees each time the Commission has considered applications for new OTA television licences.
LISTNUM 1 \l 12170 The CFTPA believes, however, that the over‑the‑air television market can absorb and the CRTC should license new entrants. The sky didn't call when the Commission issued new licences in the past and it will not fall now.
LISTNUM 1 \l 12171 What they describe as the precarious financial position of the OTA television market, the CAB and the incumbent broadcasters opposing the applications have conveniently failed to point out the real cause for the drop in PBIT levels in recent years.
LISTNUM 1 \l 12172 A major economic problem facing over‑the‑air TV broadcasters, if one accepts that one exists, appears to be the dramatic growth in foreign programming expenditures, not insufficient advertising revenue. If the financial situation of the OTA television sector is indeed so challenged, it begs the question: Why did CTV, Globemedia and Rogers pay hundreds of millions of dollars to buy additional over‑the‑air television stations?
LISTNUM 1 \l 12173 The Association notes that the Dunbar‑Leblanc Report recommended that the Commission consider allowing competitive entry into OTA broadcasting markets where spectrum is available, particularly by new entrants who are unaffiliated with incumbent broadcasters in the same market.
LISTNUM 1 \l 12174 In the author's view, less weight should be given to economic arguments in favour of protecting the incumbent broadcaster's market share and more weight should be given to letting market forces decide which broadcasters respond best to consumers' needs.
LISTNUM 1 \l 12175 The CFTPA generally agrees with this recommendation. By providing 100 per cent of its programming in HD and offering a fresh programming perspective, HDTV networks would, in our view, be meeting the current and future needs of Canadian television viewers.
LISTNUM 1 \l 12176 Moreover, we note that in a recent decision approving an application by Rogers Cable to extend the licence to areas of its cable distribution systems serving certain locations in southern Ontario into areas already served by other incumbent cable providers, the Commission noted that:
"Consumers should have increased choice among distributors of broadcasting and other services and that overall service to the public should have a higher priority than the economic viability of any incumbents against whom the new entrants would compete." (As read)
LISTNUM 1 \l 12177 We believe the same should apply with respect to new entrants in the over‑the‑air television market.
LISTNUM 1 \l 12178 The Association acknowledges that HDTV Networks has proposed a different approach for its national HDTV network, one with essentially no local programming commitments. In our view, this should not be an obstacle to licensing HDTV Networks.
LISTNUM 1 \l 12179 One might argue that the CFTPA's position is no less self‑interested than that of the incumbent broadcasters. Producers want more customers; broadcasters want fewer competitors.
LISTNUM 1 \l 12180 That said, we do think it's fair to say that the independent production sector has been an instrument of public policy in this country for a quarter of a century and, as a result, the aims of the Association's membership coincide with the policy objectives of the Broadcasting Act and the CRTC.
LISTNUM 1 \l 12181 Heather.
LISTNUM 1 \l 12182 MS HALDANE: We applaud HDTV Networks for listening to the production and creative communities and essentially doubling its original priority programming exhibition commitments. In our view, the revised hourly priority programming exhibition commitments are appropriate for a new market entrant and commensurate with the privileges it will receive as an over‑the‑air television licensee.
LISTNUM 1 \l 12183 The CFTPA urges the Commission to make these commitments a condition of licence.
LISTNUM 1 \l 12184 In terms of general first‑run Canadian programming, HDTV Networks proposal in its application must air 13 hours of original programming each week. It is not clear to us whether this commitment still stands in light of the applicant's revised hourly priority programming exhibition commitments. We ask the Commission to seek clarity on this and urge HDTV Networks to maximize the number of original first‑run priority programming hours it commits to broadcast over the license term.
LISTNUM 1 \l 12185 In the CFTPA's view, HDTV Networks proposed level of spending on Canadian content, particularly original priority programming, represents a significant contribution to the Canadian broadcasting system and to the independent production sector.
LISTNUM 1 \l 12186 While we are generally supportive of HDTV's Networks application, the CFTPA is nonetheless concerned about some of the mechanics of the application and seeks certain commitments and greater clarity on a number of aspects.
LISTNUM 1 \l 12187 First, the Association is concerned with the fact that HDTV Networks business plan appears to be based on earning a significant portion of its advertising revenues from existing specialty television services. Since specialty services have Canadian programming expenditure requirements based on a percentage of revenues, we are concerned that any negative impact that HDTV Networks may have on the revenues, especially services, will reduce current spending levels on Canadian programming.
LISTNUM 1 \l 12188 Accordingly, the CFTPA urges the CRTC to make HDTV Networks spending commitments conditions of licence so that the licensing of HDTV Networks results in guaranteed spending on Canadian programming in the Canadian broadcasting system.
LISTNUM 1 \l 12189 Second, HDTV Networks has not made any commitments to acquire and commission priority programming and other Canadian programming from independent producers in different regions across country.
LISTNUM 1 \l 12190 Canadian independent producers provide a rich diversity of programming sources and creativity to the broadcasting system by virtue of the fact that they come from each region of the country.
LISTNUM 1 \l 12191 Accordingly, the CFTPA urges the applicant to make firm commitments to working with independent producers in each of the regions in which it is seeking transmissions.
LISTNUM 1 \l 12192 A third concern the CFTPA has with HDTV Networks application relates to its commitment to acquire existing programming from third parties.
LISTNUM 1 \l 12193 HDTV networks has not committed to exclude costs associated with any up converting of existing Canadian standard definition in programming towards its Canadian programming expenditure commitments.
LISTNUM 1 \l 12194 From our perspective, all expenditures committed should go exclusively to programming. The technical transfer costs involved are the cost of doing business and should not be permitted to erode the value of this commitment.
LISTNUM 1 \l 12195 Fourth, we believe that HDTV Networks revised higher spending commitment for script and concept development, $3.5 million over the licence term, remains inadequate to support its priority programming exhibition and expenditure commitments.
LISTNUM 1 \l 12196 Mario...
LISTNUM 1 \l 12197 MR. MOTA: The CFTPA has expressed on many occasions that English‑language private over‑the‑air television broadcasters must do more to finance, schedule and promote original Canadian scripted drama; documentary, including feature length docs; children's and youth programming; Canadian theatrical feature films.
LISTNUM 1 \l 12198 The Association urges the Commission to seek from HDTV Networks more clarity about its programming strategy for these important under representative programming strategies.
LISTNUM 1 \l 12199 We want to see the applicant make firm commitments with respect to the broadcast of original first‑run Canadian programming in these genres, along with minimum spending commitments.
LISTNUM 1 \l 12200 Turning now to another subject that is critical for our industry in terms of trade.
LISTNUM 1 \l 12201 Over the years, the CFTPA has urged The Commission to require that broadcasters enter into terms of trade agreements with the CFTPA on behalf of Canadian independent producers. We are very pleased that the CRTC has seen the value for both broadcasters and producers of having terms of trade agreements and for requiring that such agreements be filed as part of broadcasters upcoming license renewal applications.
LISTNUM 1 \l 12202 We must admit that we were somewhat concerned when we heard HDTV Networks talk yesterday about 360 degree commissioning of original Canadian programs, that is program licensing for multi‑platform exhibition. Independent producers are open to this approach, provided that they are compensated one way or another for the separate multi‑platform rights.
LISTNUM 1 \l 12203 HDTV networks must acknowledge that every rate has a value and it must pay fair market value for those rights. This is the essence of terms of trade.
LISTNUM 1 \l 12204 We acknowledge HDTV Networks pledged to undertake its best efforts to conclude a Terms of Trade Agreement with the CFTPA within the first year of its initial licence term, however, given that it is not planned to launch until likely the fall of 2009 there is no reason why it cannot commit to conclude such an agreement prior to its launch.
LISTNUM 1 \l 12205 Guy.
LISTNUM 1 \l 12206 MR. MAYSON; Thanks, Mario.
LISTNUM 1 \l 12207 Given the significant level of ownership concentration that exists in the Canadian television market, the applications before you represent an ideal opportunity for the Commission to enhance diversity of voices and Canadian programming choices available to Canadians.
LISTNUM 1 \l 12208 Independent producers want to see more opportunities for Canadian audiences to see Canadian programs. We want to see more hours of and greater expenditures on Canadian priority programming and the redressing of the significant imbalance in Canadian foreign spending on drama.
LISTNUM 1 \l 12209 The CFTPA believes that HDTV Networks' proposal will deliver on some of these objectives and, therefore, it is in the public interest.
LISTNUM 1 \l 12210 Thank you for your attention today. We would be pleased to answer any questions you may have.
LISTNUM 1 \l 12211 THE CHAIRPERSON: Thank you very much for your presentation.
LISTNUM 1 \l 12212 Let us go in reverse order, terms of trade. You say HDTV Networks must acknowledge that every right has a value and must pay fair market value for those rights. Those are ringing verities, but how do you actually intend to translate them into reality? What does that mean?
LISTNUM 1 \l 12213 MR. MAYSON: If your question is referring to terms of trade and the value of rights, I think it really relates to the chain of rights, which begins with the essential copyright held by the producer and the initial licence given to a broadcaster for the initial window and the subsequent exploitation of that product and multiple chain of rights that follow that in different exhibition windows and different platforms.
LISTNUM 1 \l 12214 And so we find the whole rights environment has become increasingly more complicated and the exploitation of those rights needs to be recognized as each of those areas having a particular value and recognized upfront in the initial discussions with whoever is licensing them.
LISTNUM 1 \l 12215 THE CHAIRPERSON: Yes, I appreciate that. But don't you do that now if you are a producer and you negotiate rights of the broadcaster? Don't you try to address all of these points? I mean, I understood your terms of trade to, in effect, being something like a standard form contract where you set all of these things out and you, in effect, reduce yourself to agreeing on the value of these various rights, the rest of it being sort of standard form clauses and not wasting anytime on negotiating rules.
LISTNUM 1 \l 12216 MR. MAYSON: M'hmm. It is what producers do now and I know, and Heather can address it right now. So, yes, go for it.
LISTNUM 1 \l 12217 MS HALDANE: Yes, I would say what we are looking for in terms of trade is broadcasters will try to operate fairly globally and just assume that a contract covers all of these rights.
LISTNUM 1 \l 12218 If we are successful in establishing terms of trades with all the broadcasters, which is what we are certainly pursuing, it would set terms that say that, you know, we are really discussing each of those separately and they all do have value. And until that is acknowledged we are forced, as often are producers, to sign agreements where everything is rolled in together and we are asked to give it away. And these negotiations happen very close to when we go into production. There is a lot of pressure to suddenly just agree to terms and move on.
LISTNUM 1 \l 12219 Whereas, if we had an understanding from the beginning that each of those had value and couldn't be rolled together, it would make that negotiating much more fair and equitable.
LISTNUM 1 \l 12220 THE CHAIRPERSON: Okay, then you give conditional support to the HDTV Networks application. You list four conditions. Interestingly enough, you don't address the two points that everybody else seem to have a problem with; namely the lack of local content and the mandatory distribution rights. Why? Is local content not something that is of interest to you? Because to have local content you also need to purchase it from presumably local producers.
LISTNUM 1 \l 12221 MR. MAYSON: Local content is obviously very important. I think what we find appealing about the HDTV application is that it is a very different type of model that is being suggested and I think it is going directly to the heart of where we see is the biggest ‑‑ local content, in our view, is not where there is a crisis right now in the system. The crisis is in encouraging greater amounts of priority programming in primetime and I think that is what we find attractive about the HDTV application, so it is going directly to that issue.
LISTNUM 1 \l 12222 THE CHAIRPERSON: Now, you have been here throughout the hearing. You have heard the others basically saying that there is a regulatory bargain here. In order to get mandatory carriage the over‑the‑air people have to produce local content to reflect the local community in which they operate.
LISTNUM 1 \l 12223 HDTV here is trying to have the best of both worlds, they want mandatory carriage but they don't want to have the local content. That equation doesn't work. And if you would allow it to HDTV, you will have to allow it to us. And you, in effect, are restructuring the whole system.
LISTNUM 1 \l 12224 You have heard the arguments. You have been sitting here like me. I would appreciate your views on those. Do you feel there is validity to those points being advanced or are they self‑serving or only partially true? From your perspective, how do you value those?
LISTNUM 1 \l 12225 MR. MAYSON: I think I will come back to my original point. I think where we see real value in HDTV's application is in their commitment to priority programming, a very significant commitment.
LISTNUM 1 \l 12226 I understand the equity argument from the incumbent broadcasters. I think they also have very well‑established business models of which obviously local content commitment to news is part of that model. But the world is changing very quickly and I think the HDTV application makes it a powerful case and a compelling case for addressing the priority programming issue.
LISTNUM 1 \l 12227 MR. MOTA: Mr. Chair, just to add to that as a footnote. I mean, the system today is built on a sense of inequality anyway between over‑the‑air stations in different markets. No over‑the‑air television station in any market in this country is created equally and that was done on purpose. Every time an applicant has come before you they have proposed a kind of a different model or a different plan.
LISTNUM 1 \l 12228 You know, as an example, the Citytv stations in each of the markets they operate have generally higher local programming commitments and requirements than the CTV or the Global stations in those markets. And that was sort of done intentionally because the Commission wanted to add and the players themselves wanted to create a niche and create a different approach to the market and creating diversity in that market.
LISTNUM 1 \l 12229 I mean, from our perspective, what kind of a system would we have if, you know, all these players in each market were required to do the exact same thing? And we think that the system is built now to provide diversity for Canadian television viewers. So there is really nothing stopping the Commission from going a different way and doing a different approach here, it has done that in the past.
LISTNUM 1 \l 12230 MR. ELLIS: And if I could just add to that as well. I think the focus of the production community in Canada of course it that we are competing in an unusual marketplace in the world market where our customers, our consumers, our viewers have access to everything that the largest producer of entertainment programming in the world provides. So, I mean, if you look at the sum total of all Canadian production at probably somewhere between a billion and a billion and a half dollars a year, you know, represents a small fraction of the turnover of one Hollywood studio.
LISTNUM 1 \l 12231 We see the challenge of competing in that environment where we are spending $1 million an hour no a drama and Hollywood's spending $4 million an hour on a drama. The Holy Grail here is to get as much investment into high‑quality programming that will compete on a national scale up against that high‑budget programming from the south. And one of the ways to do that obviously springs from new entrants who are willing to commit significant dollars into the system.
LISTNUM 1 \l 12232 I guess we resisted commenting on the regulatory bargain issue described at between mandatory carriage and the degree to which that applicant commits to local programming, because from our perspective we see the local programming commitments eating into the ability of an applicant's spending on the priority programming that will appeal on a national scale.
LISTNUM 1 \l 12233 THE CHAIRPERSON: You have heard many of the interveners today describe the HDTV application as in effect being the Canadian version of a super channel and so a new category that we don't have right now. Do you see a need for such a category? Do you see this as desirable? Do you think the CRTC should contemplate creating that kind of category? And what would be the effect if we did that?
LISTNUM 1 \l 12234 MR. ELLIS: If I can just jump in on that. I have been around the business a fairly long time and I remember there was a time when, you know, local broadcaster CHCH TV opposed the introduction of what was then proposed the Global Television Network, which was going to do, you know, the dramatic thing of distributing its signal across Southern Ontario on a purely repeated basis without, you know, local community requirements. And that was a radical thing back in the 1970s when that was proposed.
LISTNUM 1 \l 12235 I think, you know, the rest is history. It was obviously a very successful outcome and perhaps, in a small way, indicative of how innovation over time has benefited the system.
LISTNUM 1 \l 12236 MR. MOTA: Just to add to Stephen's point. I mean, from our perspective, why shouldn't the Commission launch this type of service, if you want to call it a super station? We have four or so, five or so coming in from the United States. We would think that we should have a place for a Canadian service in that regard.
LISTNUM 1 \l 12237 And the Commission in the past certainly has created new categories of licence in competitive licensing applications. Satellite radio is certainly an example come to mind. There was no specific category for that when it received applications and it decided to go ahead and create a model and here we are with, you know, two services competing in the Canadian marketplace that adds a different level of choice for consumers.
LISTNUM 1 \l 12238 So, from our perspective, the reality is there is $120 million on the table with the HDTV Networks application for new original priority first‑run programming. And, from our perspective, the Commission should not take that lightly.
LISTNUM 1 \l 12239 THE CHAIRPERSON: Now, you have been here, you have heard the other side of the argument, which is that by doing this you are in effect sacrificing local content, et cetera. And, you know, that the super stations will make it impossible for the existing players to fulfil what is called the regulatory bargain.
LISTNUM 1 \l 12240 And then, as I said, our job is of course to evaluate these claims versus HDTV claims, et cetera and so that is why I was interested in hearing your comment, how you feel about it.
LISTNUM 1 \l 12241 MR. MOTA: We appreciate, Mr. Chair, you have a balancing act to do, there is no doubt, with every application, with every proceeding. But you have heard our perspective, that this is a significant injection of new dollars into the system that would go a long way.
LISTNUM 1 \l 12242 I mean, if we use as a proxy the CTF's data that for every dollar the CTF invests in a production in Canada leverages an additional $3.20 in other sources of dollars to the system. So $120 million x $3.20, you can do the math, will inject almost half a billion dollars in new money, in Canadian production into our system to creating more Canadian hits, and we think that is something that the Commission should take very seriously.
LISTNUM 1 \l 12243 THE CHAIRPERSON: Okay, thank you.
LISTNUM 1 \l 12244 Any questions from my colleagues?
LISTNUM 1 \l 12245 COMMISSIONER KATZ: I have one question.
LISTNUM 1 \l 12246 You no doubt had discussions with HDTV for the last several months, if not longer than that. They came in yesterday and they amended part of their application as well. You now come in and offer conditional support. I hope this is not a Sophie's Choice type of question, but they put on the table what it is that they have professed to want to commit to. Obviously, the Commission is going to make a final determination.
LISTNUM 1 \l 12247 From what you see in front of you right now, are you prepared to support that application or not?
LISTNUM 1 \l 12248 MR. MAYSON: I think we certainly do support the application and we have had some discussions with HDTV, hardly extensive. We, I think, gave them some input very early on and I think they obviously reflected that in an amended application. It was more advice, if anything, in terms of where we think the need is in the system essentially. And so we certainly do support. And as we have said here, we think this application goes right to the heart of one of the biggest problems in the broadcasting system right now in terms of support for Canadian programming and they are making it a priority and I think, you know, so we certainly do support it. But we have some conditions, which I think, you know, it is hardly perfect, but should it be supported? Yes, I think it should be.
LISTNUM 1 \l 12249 COMMISSIONER KATZ: Thank you.
LISTNUM 1 \l 12250 THE CHAIRPERSON: Okay, thank you very much. Thanks for your time.
LISTNUM 1 \l 12251 We will take a break, we will take an hour lunch.
LISTNUM 1 \l 12252 Madam Secretary, you have some announcement?
LISTNUM 1 \l 12253 THE SECRETARY: For the record, I would just like to add that we have been informed by the Alliance of Canadian Cinema Television and Radio Artists, item 9 on the agenda, that they will not be appearing at this hearing.
LISTNUM 1 \l 12254 This completes the list of appearing interveners and Phase II.
LISTNUM 1 \l 12255 Thank you, Mr. Chairman.
LISTNUM 1 \l 12256 THE CHAIRPERSON: Okay, then let us do this afternoon in reverse order. Let us hear from YES TV first and then from HDTV. Thank you.
LISTNUM 1 \l 12257 Excuse me, YES TV and HDTV, are you ready to go on or do you need some more time to prepare your reply? My colleague here is worried that you need more time to prepare your reply.
LISTNUM 1 \l 12258 MR. ELLIS: No, we will be ready after lunch.
LISTNUM 1 \l 12259 THE CHAIRPERSON: Okay, and YES TV too?
LISTNUM 1 \l 12260 MR. BITOVE: (off microphone)
LISTNUM 1 \l 12261 THE CHAIRPERSON: Okay, fine. So we will meet in an hour.
‑‑‑ Upon recessing at 1215 / Suspension à 1215
‑‑‑ Upon resuming at 1324 / Reprise à 1324
LISTNUM 1 \l 12262 THE SECRETARY: We will now proceed to Phase III in which applicants can reply to all interventions submitted on their application. Applicants appear in reverse order. We will now begin with YES TV Inc.
LISTNUM 1 \l 12263 Please reintroduce yourselves, and you will have 10 minutes for this purpose. Thank you.
REPLY / RÉPLIQUE
LISTNUM 1 \l 12264 MR. GIRARD: Thank you.
LISTNUM 1 \l 12265 Once again, I am Michael Girard, counsel for YES TV. I am joined, to my immediate left, by Ryan Sutherland, and to his left, Mr. Aaron Goldman. In the back row we have Ms Tara Lee Gerhards and Mr. Sanderson Layng.
LISTNUM 1 \l 12266 We would like to thank all the interveners for bringing up their concerns. We have already responded to these concerns in the written responses and we believe that they have been adequately responded to. And no particular new concerns have arisen in the course of the proceedings, except for four specific points that we would like to deal with at this time.
LISTNUM 1 \l 12267 To deal with the first point, I would like to call on Ryan Sutherland.
LISTNUM 1 \l 12268 MR. SUTHERLAND: In the CTVglobemedia intervention it was said in response to Vice‑Chair Arpin's question that it would be difficult, if not impossible, to program an entire schedule with user‑generated content. For the record, we agree and would like to clarify that user‑generated content is an important component of our programming, but is not intended to constitute 100 per cent. Rather, we seek to strike a balance between traditional programming and integrating user‑generated content.
LISTNUM 1 \l 12269 We were delighted that the Commission heard some examples from CTV about the real success of UGC it had engaged in relating to Degrassi and the Super Bowl. We noted with particular interest that user‑generated content response from the Degrassi community was 10 times higher than the response from the Super Bowl community, which clearly reflects the interests of our demographic. User‑generated content is a dynamic form of programming which the younger audience truly responds to and provides a powerful mechanism for youth to share the diversity of views, experiences and creative productions.
LISTNUM 1 \l 12270 The second item we would like to respond to, during the CanWest intervention we heard that it had experienced difficulty in getting advertiser support for its services dedicated to the younger demographic. They spoke of their Dose product and they characterized the young market as being fickle.
LISTNUM 1 \l 12271 Our approach is to focus directly on the youth, make certain the ads are empowering youth and we will make supreme efforts to attract sponsors and thereby not have to rely solely on traditional advertisers to buy ads on our station.
LISTNUM 1 \l 12272 Sponsorship allows the advertisers to specifically address their relationship with a large youth audience, and we have every confidence that we will have considerable sponsorship involvement in our production budgets.
LISTNUM 1 \l 12273 MR. GOLDMAN: CanWest has clearly stated that youth demographic has been very difficult to reach. It is very important for our service to be broadcast over the air and as a must‑carry by the BDUs in order to successfully bring the greatest benefit to the greatest number.
LISTNUM 1 \l 12274 During the Bell ExpressVu presentation it was said that neither of the two applicants contacted Bell to discuss carriage. In fact, we were in contact with Bell ExpressVu and asked for a meeting and were refused. I discussed that situation with Paul Armstrong of that company today and I was told that we had approached the company through the wrong channels.
LISTNUM 1 \l 12275 We are pleased that some of the interveners attending in this hearing, including Bell ExpressVu, had expressed interest in purchasing content from YES. We are delighted at their interest in our programming initiatives.
LISTNUM 1 \l 12276 MR. SUTHERLAND: We have worked out with your counsel the matters to be filed and we will go about honouring those undertakings.
LISTNUM 1 \l 12277 Thank you once again for the opportunity to advance our application dedicated to bringing the youth of the Toronto market and the independent producers into the broadcasting system.
LISTNUM 1 \l 12278 MR. GIRARD: And in closing, we would also like to commend the Commission staff for their diligence and their administrative support and assisting us in this, our first application. Thank you.
LISTNUM 1 \l 12279 MR. SUTHERLAND: Hear hear.
LISTNUM 1 \l 12280 THE CHAIRPERSON: Thank you very much.
LISTNUM 1 \l 12281 What is the Dose product? How does it differ from what you are offering? Is it a direct comparator?
LISTNUM 1 \l 12282 MR. SUTHERLAND: Actually, we don't have a lot of information about that product, it was just an example that they cited of their experience in trying to attract a young audience with advertisers.
LISTNUM 1 \l 12283 THE CHAIRPERSON: I see, okay.
LISTNUM 1 \l 12284 Len or Michel, any questions?
LISTNUM 1 \l 12285 COMMISSIONER ARPIN: Well, Mr. Goldman referred in his remarks to the fact that some interveners were saying that the only thing that YES TV was really seeking was must‑carry. Now, that prompted my mind and we also yesterday heard a reference to HSTN, which sent me on Google last night. Well, there was something about HSTN on Google, and I will read only one sentence of what I found, which is:
"On September 30, 2005 SF Partners Inc. purchased the channel and re‑named it YES TV and intended to re‑launch the service."
LISTNUM 1 \l 12286 Now, I also dug up in the CRTC record the decision CRTC‑2005‑473 and also the original licence that was granted to HSTN. And I read what the CRTC had stated in those two decisions and I ask myself, are you trying to do, using the over‑the‑air transmitter, what you were not successful to do with your HSTN specialty service?
LISTNUM 1 \l 12287 MR. GIRARD: If I may respond first and then Mr. Goldman continue, he was involved in those details. But I would like to point out to the Commission that the previous application, the HSTN which became YES TV, that application involved funding and co‑production and ancillary agreements between YES TV and an existing licensed broadcaster. That application, as you noted, was as a specialty channel and was under a much different business plan. And that business plan was dependant upon the agreements with that licensed broadcasters.
LISTNUM 1 \l 12288 The licensed broadcaster failed to meet a number of significant commitments, including financial commitments both to the undertaking and to some of the associated parties resulting in the channel being unable to launch in accordance with its licence.
LISTNUM 1 \l 12289 As counsel to YES TV and some of the associated parties, I am aware that litigation will be instituted against that licensed broadcaster as a result of those issues. And in view of the anticipated litigation, we did not specifically address those issues in this application, but Mr. Goldman was involved in and I am sure he can add more if the Commission wants to explore that any further.
LISTNUM 1 \l 12290 COMMISSIONER ARPIN: No, the base of my question has nothing to do with any conflict that you could have with ‑‑ I think those are commercial matters and they are matters for the court, not for the CRTC, and I appreciate the statement that you just made, Mr. Girard. And, to that extent, I will remove myself from any further questions.
LISTNUM 1 \l 12291 THE CHAIRPERSON: Okay. Well, thank you very much for appearing. We will look at your application and we will try to make a decision as soon as we can. Thank you.
LISTNUM 1 \l 12292 MR. SUTHERLAND: Thank you very much.
LISTNUM 1 \l 12293 THE SECRETARY: I would now invite HDTV Networks Inc. to come forward.
LISTNUM 1 \l 12294 THE SECRETARY: Please reintroduce yourself, and you will have 10 minutes for this purpose. Thank you.
REPLY / RÉPLIQUE
LISTNUM 1 \l 12295 MR. BUCHAN: Mr. Chairman, for the record, it is Robert Buchan, one of the counsel to this application.
LISTNUM 1 \l 12296 Before Mr. Bitove begins his reply to all interventions, HDTV Networks would like to respond to the first of the three undertakings that it gave yesterday to produce more information for the record, if that would be appropriate.
LISTNUM 1 \l 12297 I think the first, Mr. Ken Johnson ‑‑ where is Mr. Johnson, beside Mr. Bitove ‑‑ is prepared to reply to Commissioner Katz's questions relating to the impact on the HDTV profit and loss statements under three different possible scenarios for distribution by BDUs. That was the first of the undertakings that we had noted for reply.
LISTNUM 1 \l 12298 Secondly, Mr. Johnson undertook to provide by next Tuesday on behalf of HDTV the background support data for the HDTV revenue model, and he will, but he would also just like to clarify exactly what it is he is to provide by next Tuesday. He knows he can provide it, but he just wants to know exactly what it is.
LISTNUM 1 \l 12299 And the third undertaking that we have noted related to the back‑up data for the market research for this application that was provided by Solutions Research Group, and Mr. Yigit said yesterday that he would be able to provide that information to the Commission by next Tuesday.
LISTNUM 1 \l 12300 But just before Mr. Johnson proceeds. With your permission, Mr. Chairman, I would like to clarify two matters of what I would call maybe misunderstandings of a legal regulatory nature that crept onto the record of this proceeding, they relate to nomenclature; one with regard to the local programming issue and the other with regard to the network issue.
LISTNUM 1 \l 12301 They are not highly contentious, but I think that these terms have been, with regard to the regulatory bargain or the obligation, the class of undertaking that is being licensed, there is some confusion. And with regard to whether a network licence was appropriate or required, there is some confusion.
LISTNUM 1 \l 12302 Could I proceed to clarify those two issues?
LISTNUM 1 \l 12303 THE CHAIRPERSON: For what purpose? I do not quite understand your intervention here. I mean, I am expecting HDTV to respond to the submissions made throughout on certain terms. So you now want to redefine those terms for the purpose of the reply, is that it?
LISTNUM 1 \l 12304 MR. BUCHAN: No, we don't want to redefine them for the purpose of the reply, Mr. Chairman. On the question Mr. Katz asked a couple of times, what is a network and is a network licence required, if the Commission wishes, we would like to be able to clarify that. And also with regard to whether or not there is a new class of undertaking required, as was suggested by CTV and by CAB. We would like to be able to clarify that point.
LISTNUM 1 \l 12305 THE CHAIRPERSON: Yes. But, I mean, why coming from you rather than Mr. Bitove? Are you telling me what the law is on this issue or are you making a submission on behalf of your client?
LISTNUM 1 \l 12306 MR. BUCHAN: I am not making a submission on behalf of my client, I am seeking to clarify for you and for the Commission our understanding of the law on both of those two definitional terms.
LISTNUM 1 \l 12307 THE CHAIRPERSON: Okay, now that we know this is your understanding of these terms, by all means, give them to me.
LISTNUM 1 \l 12308 MR. BUCHAN: Thank you, Mr. Chairman.
LISTNUM 1 \l 12309 With regard to local programming and the class of undertaking to be licensed, it was suggested by the CAB that perhaps we didn't apply for the right thing or that there wasn't a class of undertaking that could be licensed. And there has been some discussion this morning as to whether or not it should be a super station licence that doesn't exist or is it a hybrid or what is it? I think Mr. Goldstein for CTV said this is essentially a whole new class of undertaking.
LISTNUM 1 \l 12310 That is simply not the case. As I suggested when we had a brief discussion yesterday with Mr. Katz, with regard to this application when it was filed and it was reviewed by the Commission and there were deficiency letters and questions asked and whatever, it was approved and gazetted for this hearing. And it is licensable as it is under the Broadcasting Act and under the Television Broadcasting Regulations.
LISTNUM 1 \l 12311 If that were not the case, I am sure that the three interveners who appeared this morning, the CAB, CTV, CanWest, Global or Rogers would have noted the fundamental deficiency in the application that it wasn't licensable.
LISTNUM 1 \l 12312 With regard to the issue of local programming and over‑the‑air television broadcasters, that is an issue that has always been dealt with by the Commission by way of conditions of licence that are made appropriate to the circumstances of a particular licensee. And I think it was clarified this morning by the CFTPA by Mr. Mota that there is a lot of different conditions that are attached to different broadcasting licenses with regard to local programming. And Mr. Bitove will make his own submissions with regard to that issue and will speak to it.
LISTNUM 1 \l 12313 But I just wanted to clarify, if there was any misunderstanding, that these eight licenses that have been applied for, if there is any suggestion that they are not licensable without local programming, that that isn't correct and I think the oral interventions were a little loose with the language on that issue.
LISTNUM 1 \l 12314 With regard to the issue of a network licence, we didn't apply for a network licence because the Commission hasn't issued a network licence for the last 10 years, it maybe goes back as far as 20 years perhaps since there was a last separate network licence that was issued.
LISTNUM 1 \l 12315 As a matter of law, the Commission doesn't issue such a licence, but more particularly HDTV Networks, if licensed, the eight stations would collectively fall well below the signal reach levels in English‑Canada that would be associated with the network programming obligations that are often referred to.
LISTNUM 1 \l 12316 And I think our friends from CanWest said this morning, you know, the term "network" gets thrown around and there are network programming obligations that are imposed on multi‑station systems that are operated by companies like CTV and CanWest. But, for the record, the average over‑the‑air reach of these eight stations, if licensed, would be about 40 per cent of the English‑speaking population of Canada, well below the 70 per cent multi‑station threshold that was mentioned this morning by Ms Bell.
LISTNUM 1 \l 12317 And, you know, with regard to this whole issue, a network and super stations and everything else, we just found it a bit ironic it came from CanWest that I still remember as Global originating out of Paris, Ontario.
LISTNUM 1 \l 12318 THE CHAIRPERSON: Is this part of your legal submission too?
LISTNUM 1 \l 12319 MR. BUCHAN: My legal submission are concluded, Mr. Chairman.
LISTNUM 1 \l 12320 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 12321 MR. BUCHAN: I would like to ask Mr. Johnson to respond to the first of the three undertakings. Thank you.
LISTNUM 1 \l 12322 MR. JOHNSON: Thank you.
LISTNUM 1 \l 12323 Commissioner Katz, this is in response to your request regarding the impact on our financial statements of not being available on all three tiers on the dial.
LISTNUM 1 \l 12324 We have included a pro forma statement of PBIT if we were to decrease the reach of our stations by not being permitted to transmit in analogue positions. As the Commission has already pointed out, based on the eight markets that our licence application covers, the three tiers; analogue, SD and HD of viewers represent approximately 7.2 million Canadian households, including 3.9 million analogue, 3.1 million standard definition and approximately 200,000 HD, which is an estimate based on a fraction of the digital viewers.
LISTNUM 1 \l 12325 With respect to your request for us to identify the impact of not being carried in the 3.9 million analogue households, we believe that it is a conservative assumption to use a linear relationship between audience and revenue. Therefore, since the 3.9 million households represents more than 50 per cent of our audience universe across all three tiers, we believe that we are being conservative in saying that our revenue will be impacted by 50 per cent.
LISTNUM 1 \l 12326 In addition, we believe that the potential lost audience could well be above 50 per cent, since the greatest portion of digital subscribers still use the lower dial positions, notably channels 2 through 30. Assuming we lose 50 per cent of our projected revenue, our revised revenue figure for the seven‑year licence term would be $327 million, down from the $654 million. With a loss of $327 million of revenue over the seven‑year licence period, we would invariably have to lower our programming expenses by more than 60 per cent to retain reasonable levels of investment return.
LISTNUM 1 \l 12327 As evidenced in the profit and loss statement submitted with this response, approximately $363 million of programming expenses would have to be cut from our budget, including more than $217 million of Canadian programming. That is why we feel strongly that all three tiers have to be achieved, so that we maximize our benefits to the Canadian broadcasting system and have a viable business plan.
LISTNUM 1 \l 12328 We have also included for your benefit a listing of the cable channels in the Ottawa area for a large BDU.
LISTNUM 1 \l 12329 You will notice that the four major U.S. networks are being carried on 32 different spots or stations on the dial. CBS and Fox alone have nine spots each in the Ottawa area, and we are seeking three spots to be available on all three tiers for our network.
LISTNUM 1 \l 12330 Thank you.
LISTNUM 1 \l 12331 MR. BUCHAN: Mr. Johnson, also, I think you wanted to clarify the nature of the information to be provided by next Tuesday.
LISTNUM 1 \l 12332 MR. JOHNSON: Thank you. From yesterday it was my understanding that you needed some support on our revenue model. I want to be sure what we needed, our audience projections or what was needed. I just wanted to clarify that.
LISTNUM 1 \l 12333 THE CHAIRPERSON: Mr. McCallum, you have the list of the undertakings there.
LISTNUM 1 \l 12334 MR. McCALLUM: If I may. We have the transcript and perhaps we can clarify this off line at the end with the aid of the transcript.
LISTNUM 1 \l 12335 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 12336 MR. JOHNSON: No problem, thank you.
LISTNUM 1 \l 12337 MR. HOOVER: Mr. Chairman, interveners have suggested now is a bad time to licence ‑‑
LISTNUM 1 \l 12338 THE CHAIRPERSON: Sorry, people are online, so, for the record can you introduce yourself.
LISTNUM 1 \l 12339 I know who you are, but the people in the offices don't.
LISTNUM 1 \l 12340 MR. HOOVER: I'm Doug Hoover.
LISTNUM 1 \l 12341 Commissioners, interveners have suggested now is a bad time to licence a new entrant because the industry is undergoing change.
LISTNUM 1 \l 12342 In my 30 years of broadcasting I cannot recall a time without change, in fact, the only constant has been change itself.
LISTNUM 1 \l 12343 Some suggest that conventional television is in a perilous state, yet the CAB's own report acknowledges that conventional revenues increased at a compound annual growth rate of 6.2 per cent in the last five years.
LISTNUM 1 \l 12344 Commissioners, there are always challenges to be met, everything from VCRs in the 80s to Internet in the 90s. Today's incumbent broadcasters are very large multi‑platform companies. Its their own multi‑channel services that are causing fragmentation of their conventional channels.
LISTNUM 1 \l 12345 Broadcasting has always been a difficult business, a business founded by proud Canadian entrepreneurs accountable to the Commission. I believe Mr. Bitove has demonstrated he is such an individual.
LISTNUM 1 \l 12346 MR. BITOVE: Thank you, Doug. My name's John Bitove.
LISTNUM 1 \l 12347 We built our revised schedule taking into account what we thought was a very important stakeholder group, notably, the Canadian original programmers.
LISTNUM 1 \l 12348 When you take a close examination of what the networks, or what we loosely call the networks have in terms of local programming today, it really is minimal outside of news.
LISTNUM 1 \l 12349 Having said that, we've heard the Commission loud and clear and we really want this licence and, as such, we are revising our programming schedule.
LISTNUM 1 \l 12350 Under the current revenue model which we are assuming and related assumptions about sources of revenue, we believe we can provide some hours of programming every week.
LISTNUM 1 \l 12351 Consistent with our strategy of funding Canada's production community, these programs will be produced by independent producers in the local areas. Funding for these productions will come from money currently allocated within the budgets but, again, this is assuming the current revenue model stays the same because we know you are constantly looking at and reviewing the business model for television, including hearings you'll be going through.
LISTNUM 1 \l 12352 I'd like to turn it over to Ellen for further elaboration.
LISTNUM 1 \l 12353 MS BAINE: Thank you, John. I'm Ellen Baine.
LISTNUM 1 \l 12354 We will be doing 16 hours of cumulative local programming per week over the HDTV Networks. For greater detail we mean each station in our eight markets will air two hours of local programming.
LISTNUM 1 \l 12355 Our intention is to go to the communities we are serving and local producers there to find and create that programming.
LISTNUM 1 \l 12356 In order to do this, we will modify the nature of the news budget and acquired Canadian programming budget to make our business plan work.
LISTNUM 1 \l 12357 We have been very careful to try and protect our priority programming schedule and budgets to minimally impact what we have discussed with these various important stakeholder groups for the Canadian broadcasting system.
LISTNUM 1 \l 12358 The CFTPA said that they didn't want local programming to eat into our priority spend and we agree. We just don't feel we have the latitude to increase our total programming expenses.
LISTNUM 1 \l 12359 MR. BITOVE: Thank you. And now I'd like to conclude.
LISTNUM 1 \l 12360 Consolidation has led to a cookie cutter approach to programming, it really happens in all industries when consolidation takes place.
LISTNUM 1 \l 12361 Maybe the CAB shouldn't have been so silent on consolidation after all these years. Neither YES nor we are part of the CAB, so I don't think it's any coincidence it has been silent when other CAB members are applying for licences, but when non‑CAB members apply everything seems to protect the club.
LISTNUM 1 \l 12362 There used to be dozens of families with different ideas for programming and most of them are gone.
LISTNUM 1 \l 12363 I have an idea for Mr. Armstrong and the CAB to save CanWest and CTV from all their projected PBIT losses, I'd buy either of those businesses for a dollar, they're not in business to lose money.
LISTNUM 1 \l 12364 But let's really get serious and look at reality. There are not a lot of businesses that have 30 and 40 per cent margins for ever. I've had lots of these conversations with Mr. Hoover. Things change, businesses change and as managers we have to react accordingly.
LISTNUM 1 \l 12365 Secondly, the two major players just spent billions on acquisitions within the industry. They didn't diversify and they didn't spend this money to be nice, they did it because they believe in the future of television, and so do we.
LISTNUM 1 \l 12366 Thirdly, please take into account that the current game changer in television is hi‑definition and the CRTC cannot support a dual class citizenry.
LISTNUM 1 \l 12367 Imagine if when colour TV was introduced, in addition to buying a new TV you required Canadians to rent monthly a set top box to get colour TV? That's, in effect, what you're doing here by not licensing us and recognizing the fact that free HD TV is a right of every Canadian.
LISTNUM 1 \l 12368 And finally, fourth, besides our viewers or consumers, the other major large stakeholder group is the Canadian production community. Our plan projects 362‑million in new money over the initial term of our licence that would be foregone by not licensing us.
LISTNUM 1 \l 12369 I'd like to thank the Commission for hearing us, I'd like to thank the Staff for the deficiencies and all the interaction work we've done. It's the second time I've appeared before you. I hope we've been more efficient and now I'd like to turn it back to you, Mr. Chair.
LISTNUM 1 \l 12370 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 12371 A couple of questions. You said Canadians have the right to free over‑the‑air HD TV, they shouldn't have to buy a set top box.
LISTNUM 1 \l 12372 Won't they have that by 2011 when everybody has switched over to digital? I mean, I can't imagine as the industry switches over to digital and not to HD at the same time.
LISTNUM 1 \l 12373 MR. BITOVE: I don't know, Mr. Chair. I remember a couple ‑‑ not even a couple of years ago when the CRTC said we want a more aggressive transformation to HD, everyone was saying they couldn't do it or it was too expensive and you started to get some licensing applications and now everyone's talking about that they will be able to do it.
LISTNUM 1 \l 12374 I don't know. I can tell you what we intend to do and how we intend to live by it and get it done.
LISTNUM 1 \l 12375 THE CHAIRPERSON: Okay. The second thing, you heard it today from Rogers and Vice‑Chairman Arpin asked you yesterday and I never got a clear answer.
LISTNUM 1 \l 12376 Your distinguishing mark right now is the technology, you're going to be HD and all HD as soon as you can.
LISTNUM 1 \l 12377 Once everybody else has converted, let's say we're in 2011 and everybody else has gone digital and not only digital but HD as well, what is the difference between you and the others?
LISTNUM 1 \l 12378 MR. BITOVE: I think our ‑‑ I'll turn it over to the programmers because I think that's when our ‑‑ you know, we're just trying to get started now to get, you know, a healthy vibrant viewership up as soon as possible.
LISTNUM 1 \l 12379 MS BAINE: I think ‑‑ it's Ellen Baine talking.
LISTNUM 1 \l 12380 I think we'll go back to the three points that we made yesterday, maybe we didn't make them clearly enough.
LISTNUM 1 \l 12381 One was our news programming which we feel is different than the other conventional stations are doing right now.
LISTNUM 1 \l 12382 The other is the access for the Canadian producers to pitch us programs and productions that might not be acceptable by more conventional broadcasters, but that we might be able to read and turn around on a quicker basis because we don't have all the different stakeholders that we have to worry about at the same time.
LISTNUM 1 \l 12383 So, those ‑‑ and also acquiring programming from around the world that doesn't necessarily appear on conventional television right now but that we hope to make part of our schedule.
LISTNUM 1 \l 12384 MR. HOOVER: If I might add, I think it's important to note that we will bring a new voice to the Canadian conventional broadcast landscape and one that is singularly interested in conventional television and, as such, when we commission programming it will be for the purposes required to attract audiences to our only service.
LISTNUM 1 \l 12385 And I think that's an important distinguishing facet of our approach to the other players because what happens in their circumstances that they're always looking to how this will play after conventional on whatever other service they have intended to receive the programming, so the decision process becomes much more complex and much more diluted in commissioning programming in that context.
LISTNUM 1 \l 12386 We have a very clear objective and that's to gain audience to our conventional service and, so, our decision‑making process won't be diluted by other agenda.
LISTNUM 1 \l 12387 THE CHAIRPERSON: The commitment to local programming that you made, 16 hours cumulatively or two hours per station per week, if I understand it correctly, you're willing to make that a condition of licence?
LISTNUM 1 \l 12388 MR. BITOVE: Yes, sir.
LISTNUM 1 \l 12389 THE CHAIRPERSON: Okay. Michel, Len, do you have any questions?
LISTNUM 1 \l 12390 Okay, I think ‑‑ are you going to file some additional documents with us regarding this commitment, or...
LISTNUM 1 \l 12391 MR. BITOVE: Yes, we'll get it in before we leave or in the next 24 hours. You know, by next Tuesday, Mr. Chair, we're submitting a lot of stuff. We'll coordinate with your Staff and make sure everything we're supposed to file will be filed.
LISTNUM 1 \l 12392 THE CHAIRPERSON: And our legal counsel has some clarification that he still requires.
LISTNUM 1 \l 12393 Go ahead, Sébastien.
LISTNUM 1 \l 12394 MR. GAGNON: Thank you, Mr. Chair.
LISTNUM 1 \l 12395 Just a few follow‑up questions.
LISTNUM 1 \l 12396 Some of the interveners were wondering this afternoon whether ‑‑ well, what local advertising meant for HDTV. So, would it be possible for HDTV to define local advertising, what it considers is local advertising?
LISTNUM 1 \l 12397 MR. BITOVE: Yes, sir, we will provide written submissions.
LISTNUM 1 \l 12398 MR. GAGNON: Okay, perfect. Thank you.
LISTNUM 1 \l 12399 The same time as the other ones?
LISTNUM 1 \l 12400 MR. BITOVE: Yes, sir.
LISTNUM 1 \l 12401 MR. GAGNON: Could you comment also on what Rogers has suggested this afternoon, that up‑converting standard definition digital programming to hi‑definition would cause the programming to suffer a loss in quality. Would that be correct in HDTV's view, or...
LISTNUM 1 \l 12402 MR. BITOVE: We don't share that view. You know, we mean it when we say it, our intention is to provide the HD signal, all of our programming in the HD signal to our viewers.
LISTNUM 1 \l 12403 You know, there's some good conversion, there's some bad conversion, but we know we need to have a really good product to hold our viewers and we intend to do that as dealing in this or any other consumer business.
LISTNUM 1 \l 12404 MR. GAGNON: Okay. Also, would HDTV be willing to make its commitment of at least 250‑million of Canadian programming expenditures as a condition of licence?
LISTNUM 1 \l 12405 MR. BITOVE: No, it's not a condition of licence. If we get the coverage we've asked for we expect to hit the revenue we've projected and the corresponding programming costs that we've budgeted.
LISTNUM 1 \l 12406 MR. GAGNON: And I think you've just mentioned that you will have local programming commitments. So, does that have an impact on your local advertising, do you still...
LISTNUM 1 \l 12407 MR. BITOVE: No, we will still agree not to solicit the local advertising.
LISTNUM 1 \l 12408 MR. GAGNON: Okay.
LISTNUM 1 \l 12409 MR. BITOVE: Even though we're doing the two hours per station, 16 cumulative for the week.
LISTNUM 1 \l 12410 MR. GAGNON: Thank you.
LISTNUM 1 \l 12411 THE CHAIRPERSON: Madam Secretary.
LISTNUM 1 \l 12412 THE SECRETARY: Thank you.
LISTNUM 1 \l 12413 This completes Phase III and the consideration of Items 1 and 2 on the Agenda.
LISTNUM 1 \l 12414 I would like to indicate for the record that the interveners who did not appear and were listed in the Agenda as appearing interveners will remain on the public file as non‑appearing interventions.
LISTNUM 1 \l 12415 This completes the Agenda of this Public Hearing.
LISTNUM 1 \l 12416 Thank you, Mr. Chairman.
LISTNUM 1 \l 12417 THE CHAIRPERSON: Okay, thank you very much.
LISTNUM 1 \l 12418 Thank you all interveners and we will undoubtedly see you again.
LISTNUM 1 \l 12419 Thank you.
‑‑‑ Laughter / Rires
‑‑‑ Whereupon the hearing concluded at 1358 /
L'audience s'est terminée à 1358
Johanne Morin Jean Desaulniers
Beverley Dillabough Jennifer Cheslock
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