TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

             TRANSCRIPTION DES AUDIENCES DEVANT

              LE CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

                      SUBJECT / SUJET:

Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /

Révision des cadres de réglementation des entreprises de

distribution de radiodiffusion et des services de

programmation facultatifs

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)

April 22, 2008                        Le 22 avril 2008

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

               Canadian Radio‑television and

               Telecommunications Commission

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

                 Transcript / Transcription

Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /

Révision des cadres de réglementation des entreprises de

distribution de radiodiffusion et des services de

programmation facultatifs

BEFORE / DEVANT:

Konrad von Finckenstein           Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Leonard Katz                      Commissioner / Conseiller

Rita Cugini                       Commissioner / Conseillère

Michel Morin                      Commissioner / Conseiller

Ronald Williams                   Commissioner / Conseiller

ALSO PRESENT / AUSSI PRÉSENTS:

Cindy Ventura                     Secretary / Secretaire

Cynthia Stockley                  Hearing Manager /

                                  Gérante de l'audience

Martine Vallée                    Director, English-Language

                                  Pay, Specialty TV and

                                  Social Policy / Directrice,

                                  TV payante et spécialisée

                                  de langue française

Annie Laflamme                    Director, French Language

                                  TV Policy and Applications/

                                  Directrice, Politiques et

                                  demandes télévision langue

                                  française

Shari Fisher                      Legal Counsel /

Raj Shoan                         Conseillers juridiques

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)

April 22, 2008                    Le 22 avril 2008

- iv -

           TABLE DES MATIÈRES / TABLE OF CONTENTS

                                                 PAGE / PARA

PRESENTATION BY / PRÉSENTATION PAR:

Ontario Ministry of Culture                      2126 /12420

Ontario Media Development Corporation            2135 /12454

Canadian Independent Programming Services        2174 /12678

APTN - Aboriginal Peoples Television Network     2190 /12733

Stornoway Communications                         2198 /12766

S-VOX Trust                                      2210 /12817

TV5 Québec Canada                                2220 /12860

Ethnic Channels Group Limited                    2227 /12885

Conseil provincial du secteur des                2284 /13214

  communications (CPSC) - du syndicat

  canadien de la fonction publique (SCFP)

Fédération nationale des communications - CSN    2293 /13270

Syndicat des communications de Radio-Canada      2303 /13334

Canadian Association of Film Distributors        2382 /13741

  and Exporters

Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Tuesday, April 22, 2008

    at 0900 / L'audience débute le mardi 22 avril

    2008 à 0900

12413            THE CHAIRPERSON:  Good morning.

12414            Madam Secretary...?

12415            LA SECRÉTAIRE:  Merci, Monsieur le Président et bonjour à tous.

12416            Avant de débuter avec la première présentation, nous aimerions vous aviser que TQS ne comparaîtra pas à l'audience le 23 avril.

12417            We will now proceed with the next two intervenors, the Ontario Media Development Corporation and the Ontario Ministry of Culture.  We will hear each presentation, which will then be followed by questions by the Commissioners to both intervenors.

12418            We will begin with the presentation by the Ontario Ministry of Culture.  Appearing for the Ministry is the Honourable Aileen Carroll.

12419            Please introduce your colleagues and you will have 15 minutes for your presentation.

PRESENTATION / PRÉSENTATION

12420            HON. AILEEN CARROLL:  Thank you.

12421            Et merci.  C'est un grand plaisir d'être ici.

12422            I am delighted to join you this morning and I would also like to take this opportunity to thank the Commission for this opportunity to appear.

12423            Je suis heureuse d'être ici, en compagnie de représentants  de la Société de développement de l'industrie des médias de l'Ontario, la SODIMO.  La SODIMO, un organisme du ministère de la Culture a pour fonction de soutenir le travail exceptionnel des industries des médias culturels de l'Ontario.

12424            Joining me today are Kevin Shea, to my right, Chair of the Board of the OMDC; and to my left, Steven Davidson, Assistant Deputy Minister at the Ministry of Culture; and one over to the right, Karen Thorne‑Stone, who is the President and Chief Executive Officer of the Ontario Media Development Corporation.

12425            I am here today as Ontario's Minister of Culture to work with the Commission in what I see as our shared role as guardians and makers of public policy.  I urge the Commissioner to reinforce a regulatory framework that continues to position the cultural industries of Ontario and Canada as leaders and long‑term players in this global knowledge‑based economy.

12426            Cultural industries are being challenged by constant technological change and evolving business models and in this environment of change the creation and distribution of uniquely Canadian content is more relevant than ever before.  The ability of our cultural industries to compete internationally depends on the tenacity and the foresight of the Commission to uphold the public policy articulated in the Broadcasting Act.

12427            Nurturing the growth of the cultural industries and helping them maximize their potential to innovate and to compete internationally is a major and personal priority of mine.  Creativity and innovation are the new raw materials for economic prosperity.

12428            Ontario's culture sector generated just under $20 billion to Ontario's GDP in the year 2003.

12429            L'Ontario est le siège du plus grand nombre d'industries culturelles au Canada.  Notre secteur des industries culturelles est le troisième en importance en Amérique du Nord pour ce qui est de la création d'emplois, venant tout de suite après ceux de la Californie et de New York.  Quarante‑trois pour‑cent de la main‑d'oeuvre totale du Canada dans les industries culturelles travaille en Ontario.

12430            Between 1999 and 2007 Ontario's entertainment and creative industries created over 80,000 net new jobs in Ontario, and this is an increase of almost 40 per cent compared with 17 per cent in the overall Ontario economy.  The Ontario Ministry of Finance has identified the entertainment and creative industries as one of the key economic sectors expected to grow faster than the rest of the economy over the next two decades.

12431            Ontario is the economic engine of independent production in Canada and Canada's independent production companies are market leaders in all forms of entertainment, media and cultural products.  They have built a global reputation for excellence in animation, drama, documentary, children's television programming, games and interactive media.  You can therefore see why the continued growth of this sector of our economy is a major concern of mine.

12432            The Ontario government understands the enormous competitive advantage that cultural industries give us in the global economy where intellectual property is high stakes.  That is why we are promoting a culture of innovation across the province.

12433            In the last six months the Ontario government has announced new initiatives that will deliver over $100 million a year in additional support to the cultural industries over the next three years.  My Ministry has developed an ambitious agenda to promote the development of Ontario's cultural media sector.  Our entertainment and creative cluster strategy reinforces the objectives of the Broadcasting Act by fostering successful firms that contribute high‑quality creative content to Canada's broadcasting system.  Our strategy champions the creation and retention of Ontario owned intellectual property.  It encourages collaboration through pooling our resources, knowledge and innovation to help firms increase their competitive advantage.

12434            Cluster companies that can adapt to emerging technologies and business models and produce marketable slates of quality programming and content, intellectual property that they own and control, will be far better able to reinvest in their own growth.

12435            Et il importe maintenant, plus que jamais auparavant, que nous ayons un système réglementaire qui favorise la création de contenu de qualité en faisant une place à nos producteurs sur les ondes et dans toutes les nouvelles chaînes numériques.

12436            The Broadcasting Act gave rise to a Canadian creative industry of cultural and economic importance.  There is still a pressing need to nurture this sector.  The CRTC's regulatory framework has fostered an innovative pay and specialty sector marked by a diversity of popular brands that rival the best foreign programming.  This collaboration between Ontario's independent production and creative community and the pay and specialty service sector has resulted in long‑lasting benefits to Ontario's economy and to the Canadian broadcasting system.

12437            The pay and specialty sector and the broadcasting distribution sector have found a winning strategy that attracts the vast majority of television audiences in Canada.  Indeed, many have achieved success internationally.

12438            Continuing to strike the right balance between market forces and Canadian content requirements will ensure that our broadcasting system remains strong and grows stronger.

12439            I would like Commissioners to focus on a few key points from our submission, the first being support for Canadian content production.

12440            High cost entertainment programming, particularly drama and scripted comedy, engage the widest use of creative resources and talents within Ontario's creative cluster and when a series is resold in international markets it can generate economic benefits for production companies for years to come.

12441            Ontario supports the principle that in exchange for regulatory supports, such as a genre protection and guaranteed access to the broadcasting system, programming services are required to invest in and showcase Canadian programming.

12442            En stimulant la demande sur les marchés pour du contenu canadien, les politiques du CRTC ont contribué à créer des entreprises lucratives, y compris des entreprises de production indépendantes qui forment le coeur du secteur ontarien.

12443            Should regulatory supports or expenditure requirements be removed within the pay and specialty sector, there will be adverse effects on Ontario's production community.  The impacts will be felt throughout the entire cluster.

12444            We strongly recommend that the CRTC's regulatory framework maintain or indeed enhance current levels of investment in the production and showcasing of Canadian content.

12445            The second point I want to address is fee for carriage for over the air television producers.

12446            I fully appreciate the complexities associated with this issue and the task you have before you.  Ontario's cluster industries are undergoing rapid change to new content formats and distribution models and this change is occurring in a global media environment and impacts all players within the broadcasting value chain.  Stable levels of investment will enable Ontario's cluster companies to meet the demands of constant product innovation and development, and if the Commission chooses to introduce a fee for carriage, revenues should be directed to Canadian programming, particularly high definition, HD priority programming, such as Canadian drama produced by Canadian independent producers.

12447            Producing quality Canadian drama on HD will indeed enable Canadian broadcasters and producers to compete more successfully with foreign programming and facilitate export to foreign markets.  We recognize that a greater number of Canadians are accessing entertainment content over broadband Internet or mobile distribution because consumers want entertainment and cultural products when, where and how they prefer.

12448            Les services de programmation et les producteurs de contenu doivent pouvoir s'adapter rapidement à cette tendance s'il veulent réussir sur le marché médiatique numérique mondialisé.

12449            A portion of any new funds should be directed to the production of new media products associated with television programming; for example, to finance webisodes or mobisodes which could be broadcast on the Internet are on your cell phone.

12450            My final point is that a strong broadcasting system centres on the collaboration between the diversity of prosperous players.  The future production and showcasing of Canadian programming is independent ‑‑ sorry, is dependent on the successful business relationships among all players within the broadcasting value chain.  Pay and specialty programming services that are able to negotiate mutually beneficial terms with distributors are better able to collaborate on, and indeed to invest in, the production of Canadian content.

12451            We support the maintenance of regulations that provide the opportunity for smaller independent programming services to survive and prosper alongside larger BDUs and programming services.

12452            Alors, je voudrais maintenant céder la parole à Karen Thorne-Stone, présidente directrice générale de la Société de développement de l'industrie des médias de l'Ontario.

12453            Karen...?

PRESENTATION / PRÉSENTATION

12454            MS THORNE‑STONE:  Thank you, Minister.

12455            Mr. Chair and Members, I would like to thank the Commission for the opportunity to contribute to this review of the regulatory frameworks for BDUs and discretionary programming services.

12456            The Ontario Media Development Corporation, OMDC, is an agency of the Ministry of Culture and we are pleased to appear today with the Minister to advocate on behalf of Ontario's cultural media industries, particularly the screen‑based industries.

12457            The Minister has already described the importance of Ontario's creative industries to the province, and OMDC is the vehicle through which the government supports the growth of these critical sectors through tax credits and a range of other investment programs and services for the book and magazine publishing, music, film, television and interactive digital media industries.  OMDC strives to maximize opportunities for growth and innovation in Ontario and around the world.

12458            The Government of Ontario's media tax credits which are administered by OMDC are an important source of financing for foreign and domestic content creation.  Last year OMDC issued over 1,000 tax certificates which were valued at almost $200 million specifically to support content creation in Ontario's cultural media industries, of course including television production.

12459            Pay and specialty television services have become a critical element of the Canadian broadcasting system.  They have moved from holding a marginal place at their inception to in 2007 earning $2.7 billion in English service revenues.  They contributed almost $1 billion to Canadian programming, of which over $300 million went directly to independent producers.

12460            Ontario, as a center of excellence for screen‑based content creation, is a major beneficiary of this economic and cultural activity.

12461            Decisions made in this proceeding could have a direct impact on that economic activity and in particular on support for Ontario's independent producers.  Any decisions that are made should not and must not come at the expense of support for Canadian content.

12462            Therefore, I would like to focus my comments today on three key issues that were set out in the agency's written submission:  first, the measures that directly support the funding and exhibition of Canadian content; second, the measures that ensure the priority and preponderance of Canadian services; and finally, measures that mitigate the inequality of bargaining power in the broadcasting system.

12463            Let me start by first addressing the funding and exhibition of Canadian content.

12464            OMDC stated in our written submission its belief that advancing the Canadian content objectives of the Broadcasting Act must take precedence over any greater reliance on market forces.  I would like to reiterate that position here today.

12465            The Minister has already outlined how important pay and specialty television services are as a source of Canadian programming.  Recently released CRTC numbers indicate that in 2007 conventional spending on Canadian programming was $616 million, while pay and specialty services spent almost $945 million.  Ontario's independent production community is a major beneficiary of this spending.

12466            The significant spending is due in large part to the current regulatory environment, in particular the fact that these licensees are subject to Canadian programming expenditure and exhibition requirements.  OMDC believes that these requirements should be maintained.

12467            History has shown that when broadcasters are not subject to expenditure requirements, their spending on Canadian programming declines.  The 1999 TV Policy was predicated on the argument that market forces would ensure that broadcasters invested in quality Canadian programming, but eight years later we see that the results of that policy have been higher spending on foreign programming and lower spending on Canadian content, particularly dramatic content.

12468            We urge the Commission not to go down that road again.  Expenditure and exhibition requirements should be maintained for pay and specialty services.

12469            In addition, we agree with the proposal put forward by the CFTPA, among others, that the time has come to reconsider the low exhibition and non‑existent expenditure requirements for Category 2 digital services and that it is time to increase Canadian content obligations for video on demand and pay per view services.

12470            I would like to turn now to some comments on the issue of preponderance and the distribution model put forward by the Commission.

12471            It is certainly clear that the Commission's model would represent a substantially altered operating environment for those pay and specialty services that have played such an important role in supporting Canadian content.  However, OMDC does not believe that such changes are warranted at the present time, nor are we confident that these changes will maintain support for Canadian content.

12472            In our written submission OMDC argued that we saw no evidence of need for these changes.  We remain unconvinced that without regulation consumer demand alone will ensure that BDUs continue to carry the channels currently available.  We also remain unconvinced that the proposed changes will have a positive impact or, at the very least, a neutral impact on the availability of Canadian content.

12473            In addition, the distribution model put forward by the Commission has defined preponderance as 50 per cent plus one.  OMDC would submit that this percentage is too low and marks a distinct shift from the Commission's current mandate to make maximum use of Canadian creative and other resources.

12474            In fact, as indicated by the CFTPA, currently close to 75 per cent of the total services received by Canadian consumers are Canadian services. OMDC is opposed to any model that could lead to such a drastic reduction from the current levels.

12475            Finally, we submit that the current access rules, along with genre protection, have contributed to a favourable operating environment that has allowed pay and specialty services to support the production and exhibition of Canadian content.  We urge the Commission to consider seriously the potential impact that the proposed changes may have on this balanced ecosystem.

12476            OMDC echoes the Minister's statement today that any regulatory changes that result from this review should, at the very least, maintain and preferably enhance the level of investment in the production and exhibition of Canadian programming.

12477            Finally, I would like to address inequality of bargaining power in the marketplace.

12478            The Minister has rightly pointed out that a strong broadcasting system requires a diversity of prosperous players as part of a healthy entertainment and creative cluster.  The Chairman has also stated that access is an important objective of the Broadcasting Act.  OMDC's opinion is that access incorporates broad principles of diversity, including choice, ownership, editorial and programming.

12479            In principle, we agree that issues that can be left to the marketplace are best left to the marketplace.  However, it is evident in this instance that a free market does not really exist.  Broadcasters, both small and large, have indicated to the Commission that they feel disadvantaged when negotiating with BDUs.

12480            As an advocate for independent producers, we are aware of the issues that they face with access to broadcasters and the need for the system to ensure that such access is both real and fair.  It is important that producers have access to a wide range of commissioning broadcasters.  Rules such as the five‑to‑one linkage rule, access rules, undue preference provisions and dispute resolution procedures all help ensure a diversity of broadcasters participating in the system.

12481            We therefore believe it is important to maintain and support discretionary services and we urge the Commission not to allow conditions that permit only BDU affiliated or large consolidated discretionary services to survive and prosper.

12482            MR. SHEA:  Mr. Chairman, Members of the Commission, this brings us to the end of the OMDC's portion of the presentation and I would like to reiterate the three key points of OMDC's position.

12483            Canadian programming expenditure and exhibition requirements for pay and specialty services should be maintained.  Under the current access rules Canadian pay and specialty services have thrived, and we think that those rules should be maintained.  But if the Commission decides that a new distribution model based on preponderance is necessary, preponderance in our view should be defined as something greater than 50 per cent plus one.

12484            It is important for the Commission to ensure that a diversity of companies of all sizes and genres continue to have access to our broadcasting system.  At OMDC we believe strongly that the production and exhibition of Canadian content should be at the core of the regulatory framework of our broadcasting system.  Any changes that are implemented to the current framework should, at the very least, maintain or ideally enhance the current levels of support for our content.

12485            I would like to thank the Commissioners for the opportunity for the OMDC to appear here today and turn the presentation back to Minister Carroll.

12486            HON. AILEEN CARROLL:  Thank you, Kevin and thank you, Karen.

12487            Our cultural industries are economic drivers and they have momentum.  They are poised to grow substantially.  Ontario has the creativity, the infrastructure, the technology and the culture of innovation to ensure this growth.

12488            I ask the CRTC to stay the course, to reaffirm its regulatory commitment to investment in the production and showcasing of Canadian content.

12489            Thank you, Commissioners and we will be happy to answer your questions to the best of our ability.  Merci.

12490            THE CHAIRPERSON:  Thank you very much for your presentation.

12491            Minister, I want to particularly welcome you.  It is wonderful for you to come and appear before us.  We at the Commission realize that our decisions have not only regulatory but a political impact and therefore hearing from you and the point of view of the Ontario government is most welcome.

12492            It is also an unusual role reversal for me.  As a lifelong civil servant, I am used to pleading before Ministers for funds usually and I instead have a Minister pleading in front of us.

12493            HON. AILEEN CARROLL:  It is good for me to plead.

12494            THE CHAIRPERSON:  Thank you.

12495            I want to ask you a couple of questions on your presentation.

12496            On page 7 you say:

"Our strategy champions the creation and retention of Ontario owned intellectual property.  It encourages collaboration through pooling resources, knowledge and innovation to help firms increase their competitive advantage."

12497            Nobody can argue with that statement.  I just wonder what you mean by "Ontario owned intellectual property".

12498            Do you mean intellectual property owned by Ontario producers, entrepreneurs, or is this government owned or what exactly are you referring to here?

12499            HON. AILEEN CARROLL:  Mr. Chair, the point that I was attempting to convey there is that the intellectual property is a pool that has been the result of the clustering of our players in the creative sector in the province while the government, through the high priority we give to our creative cluster entertaining policy assists and enables.  We do so through our tax credits; we do so through a number of policy initiatives.  But indeed, the ownership remains with the community.

12500            It is reinforced by the ability of some of the smaller companies to be assisted within the cluster by mentoring.  It is a cumulative effect of producers and all of the talent that is entailed, the interdigital, the new interactive media people; small players who are greatly enhanced by being mentored and working with larger.

12501            As a result, they produce a pool of intellectual property that they own and control, and of course with that they are able to reinvest in their own growth.

12502            THE CHAIRPERSON:  Okay.  Thank you.

12503            HON. AILEEN CARROLL:  I don't know if my colleague would like to elaborate or if the answer suffices.

12504            MR. DAVIDSON:  Mr. Chair, if I might just expand a little bit on what the Minister has said, we believe strongly that as markets evolve and as digitization introduces new opportunities for new platforms in new ways for consumers to access entertainment and cultural content, that it is the intellectual property created by Ontario's small and medium‑sized content producing industries across a whole range of sectors, not just limited to film and television but also interactive, digital, book, music; that it is that intellectual property which has tremendous value for those companies to increase their competitiveness, both domestically and globally.

12505            THE CHAIRPERSON:  Okay.  Thank you.

12506            Second, on fee for carriage, I notice you do not say you are for or against, but obviously you say essentially if we do it, we should be make sure that the funds are spent on the creative side.

12507            But then on page 14 you say, on the top of it also:

"A portion of any new fund should be directed to the direct production of new media products associated with television programming, for example, to finance webisodes and mobisodes."

12508            I must say this somewhat surprised me because this hearing on fee for carriage is really focusing very much on the obligation of over the air television broadcasters to be under the obligation to provide local content, and they are saying we would love to do it but in effect we need some help because our traditional sources of revenues are not enough and fee for carriage is obviously one that they suggest.

12509            Now you bring in here a new element where in effect you are saying that the fee‑for‑carriage which would be generated by the regulated part of the broadcasting industry would also be used to finance the unregulated part, the Internets, the mobile broadcasting, et cetera.

12510            And there is an unusual position that most other ‑‑ usually we hear the argument that really whatever one sector generates should stay in that sector.  So, here the regulated broadcasting, whatever fees they generate, should be reinvested in the regulated part; if you want to do something on the unregulated part, then the fees for such should also come from the unregulated part.

12511            You make this cross‑over here and suggest that we use fees generated under the regulated broadcasting system to, in effect, finance production for the web and mobile broadcasting.

12512            Maybe you can explain to me your rationale for this.

12513            HON. AILEEN CARROLL:  Well, I'll attempt to do so, Mr. Chair, and then I'll look to colleagues who may wish to provide insights as well.

12514            I think, first of all, Ontario, the government whom I represent, my Ministry has chosen not to, you know, to promote or dismiss the discussion on fee‑for‑service.

12515            That said, the decision when rendered, if it is one that allows for that fee, then we have been so bold as to say, as you've noted, what we think might be done with some of those fees.

12516            And I think it emanates from a recognition on our part that the competition in the new technology areas is keen and the cost of making sure that our Canadian companies can get out there and compete is not a small cost.

12517            So, my recommendation, and that it was that the new funds that would accrue, should you make that decision, could be used to finance the competition in that area.

12518            Now, I accept the point that you've made, Mr. Chair, that the web and the world of webisodes and mobisodes is to date unregulated, but I'm not sure ‑‑ and I stand to be corrected by my colleagues ‑‑ that that prevents the use of funds that accrue from being utilized as they develop Canadian content in those areas and reinforce our ability to compete.

12519            That said, I certainly have wise colleagues here to assist the Minister.

12520            Thanks, Kevin.

12521            MR. SHEA:  I think what the Minister suggested first is that the priority, should the Commission elect to move to fee‑for‑service should be for new and incremental programming, ideally drama, ideally HD drama because that is the most under served category in our system.

12522            Secondly, most broadcasters today when they are electing to pursue different content strategies, if it's not multi‑platform, if they're not simultaneously thinking about how we're going to disperse content on other platforms, probably won't make it to the end of the game.

12523            Recognizing as well that there's an investment in providing the extension of that content to both online and mobile, we're saying the Commission should enhance that point of view and encourage broadcasters to spend money in that direction.

12524            And that's our suggestion.

12525            THE CHAIRPERSON:  The difference between recognizing, enhancing, encouraging and prescribing, what you are suggesting here is that we prescribe.

12526            MR. SHEA:  I think we're suggesting that a portion of it ‑‑

12527            THE CHAIRPERSON:  Should be directed.

12528            MR. SHEA:  ‑‑ should be directed.

12529            THE CHAIRPERSON:  I look at it as being mandatory rather than encouraging.

12530            I agree with you, obviously every broadcaster has to look at different platforms, et cetera, but you basically suggest that we here order them to spend part of that money on new unregulated platforms.

12531            MR. SHEA:  Mr. Chair, I don't think we're suggesting that you order them.  I think what we're suggesting is that in the creation of tomorrow's dramatic content, if there is not a portion of the budget set aside to be able to enhance other platforms' distribution, then they're not in the modern world.

12532            And if funding is required to do that because of competitive reasons, then a portion of that should be set aside for that distribution.

12533            That's just purely a suggestion.

12534            THE CHAIRPERSON:  Okay, thank you.

12535            Rita, I believe you have some questions.

12536            MEMBER CUGINI:  Thank you, Mr. Chairman.

12537            Good morning to all of you.

12538            One of the great things about coming at the tail end of a three‑week long hearing is we get to ask you to help us sort through some of the things that we have heard so far.  So, that is the context in which I will be asking my questions.

12539            Minister, you did you use the phrase culture of innovation, and especially related to the issue of genre exclusivity some have said that the culture of innovation is not necessarily bred from the status quo and, especially when we are dealing with genre exclusivity, that if we don't open that up a little bit to competition that broadcasters will just continue to do what they are doing because the genre is protected and won't necessarily be as innovative or creative in order to maintain their position.

12540            How do you respond to such comments or position taken by others in this proceeding?

12541            HON. AILEEN CARROLL:  Thank you, Commissioner Cugini.

12542            I think that's a fair question and I, again, tried to reinforce the marketplace but, see, you know, keep that balance with the regulatory system that has had to date such wonderful outcomes.

12543            So, while we're not opposed to new entrants in the marketplace, I think it's important that we want to ensure that new entrants are prepared to invest in Canadian content and encourage the development of Canadian expression.

12544            So, that's a worthwhile goal in words, but I think we need to look at, you know, what are the real dynamics of that world and would that be the outcome.

12545            So, on genre exclusivity we support the principle that in exchange for regulatory protections programming services are required to fund and exhibit programming.

12546            I think that there is concern that if the door was opened, opened wide that the incoming sweep of foreign‑produced programmings would create dynamics that would make it very difficult for a Canadian specialty within that genre to survive.

12547            And I think that the reinforcement that's in place has produced some excellent work.  I don't think we're producing poor quality that can't be seen as excellent when looked at in comparison to others being produced, let's say in the States, and I think what might happen is that in competing in an unfettered market we would see the need to reduce, reduce, reduce to a common denominator that would not be of the quality of today.

12548            And, again, I think we have to deal with economy of scale.  We don't have that same economy of scale.  We can't produce that overnight.  We're doing a very good job, we're on a great roll in my view, but we cannot compete with the American companies' deep pockets.

12549            But I think it's important, I think you hear from my colleagues who have been doing this a little longer than I have.

12550            MR. DAVIDSON:  Yeah, thanks.

12551            I would just add to the Minister's comment that our fundamental position is that we do support the principle that in exchange for regulatory protections such as genre protection but also access and distribution protections that there be requirements for Canadian content production.

12552            So, that's fundamental to us.

12553            MR. SHEA:  I just want to add that we have a system that's a byproduct of a number of different rules and regulations.  As a consequence of that mixed bag of rules and regs we have a very, very successful pay and specialty sector.

12554            You know, as we stated in our opening remarks, some nine hundred and some odd million dollars on an annualized basis are spent in Canadian programming.

12555            Our worry -- our concern is that once you start tinkering, as long as -- we suggest there's three things that you look at when you're about to change the  regs:  One is, will this be a byproduct of more Canadian programming by making the change; will it be better; and will it create innovation.  And if the answer is yes to all three, then we would recommend that perhaps certain changes be made.

12556            To be more specific on genre protection, and this is more a point of view not necessarily totally well thought out yet by the OMDC, but if our principal priority is priority programming, so it's, you know, in the areas of drama, kids, documentaries and so on, why should we be too concerned about genre protection in news and sports, for example, two areas of content quite well served by this country.  Sports seems to always be able to find a buyer for rights and access to systems.

12557            So, perhaps there are certain areas of content where the Commission can say, we don't think we necessarily have to regulate that aspect of the market, but we do think that genre protection as it pertains to services that are involved in the area of priority programming has to be very, very carefully looked at before you start necessarily tinkering with the rules.

12558            MEMBER CUGINI:  Mr. Shea, you did say, you know, in your three criteria, would it result in more Canadian content.

12559            Some would argue that the model as proposed, sure, some services may fail.  If we get rid of the access rules and we get rid of genre protection, it is possible that some services just won't make it and, therefore, their Canadian content requirements fall out of the system.

12560            However, it may also result in better Canadian content.  There may be more money available in the CTF for fewer players and more ‑‑ like I say, not necessarily more Canadian content, but better Canadian content, Canadian content that is more compelling and, therefore, will be more watched by Canadian viewers.

12561            Do you see any validity in that argument?

12562            MR. SHEA:  You know, ultimately over time if you end up making better programming which means that it's more successful that then gives the economic ability to create more.

12563            I just ‑‑ you know, I think that as you deliberate, you know, the fundamental three things we're asking you to look at is, is it going to be more, better and create real innovation in Canadian programming.  And that's our little test that, you know, we think is important for you to take a look at.

12564            MEMBER CUGINI:  On the issue of fee‑for‑carriage, as you know the conventional broadcasters are tying it directly with their provision of local programming.

12565            Do you support that position?  I know based on what you said this morning that you believe that a portion of the funds should go to drama or priority programming and that a portion should also go especially to high definition.

12566            But the position of the OTA broadcasters is, it's local programming that this money will go to, to sustaining and enhancing the provision of local programming. 

12567            HON. AILEEN CARROLL:  Well, I mean, as you noted, Commissioner, we have, you know, left the decision on whether you'll allow over‑the‑air fee to ‑‑ a fee‑for‑carriage to occur or not and we refrain from taking a position directly on that.

12568            But I do believe strongly that the costs inherent in drama, in the scripted comedy, in getting to the high density which is the technology where everyone is going, are considerable.  So, the need to have, if you decide, an infusion of new funds into our ability in Ontario to have more development in that area with all of the multiplier effect it creates in that industry is one we see as a beneficial one.

12569            When I say to the CRTC I want you to stay the course, I'm not asking you to tread water.  As a Maritimer there's a real difference in those two terms.  You are moving forward when you stay the course, you know, you are not at all reluctant to be looking at all of the new things that are happening.

12570            I just don't think there's any evidence yet that indicates that the course you are embarking isn't handling things quite well.  So, just to ‑‑ I did want to convey that.

12571            But here is an area where funding to help us get into and develop better expertise within the cluster in those areas is an important use of funds, from my perspective.

12572            That the broadcasters think it should go to local and regional programming, I am sure they have put forward their arguments for that.

12573            And on either approach I would ask my colleagues, if you're comfortable, to comment in that regard.

12574            Steven.

12575            MR. DAVIDSON:  Thanks.  I would just  emphasize the Minister's point that when we ‑‑ we certainly recognize the value of a whole variety of types of programming, sports, news, local programming ‑‑ documentary is an area in which we are particularly strong ‑‑ but our emphasis on drama and scripted comedy, particularly the production of those high‑value pieces of content in HD, is driven by our long‑term strategic goal to support the international and domestic competitiveness of our content‑creating industry.

12576            We look at those forms of content as having a longer shelf life, and a greater opportunity for future marketing across new and emerging platforms.

12577            That is why we orient back to a focus on those particular kinds of programming.

12578            MR. SHEA:  In observing the proceedings in the last number of weeks ‑‑ and thank you, CPAC, because it is very, very helpful ‑‑ I think that we are not yet convinced that the Commission has necessarily looked at every other opportunity to pursue revenue in the broadcasting system.

12579            There are essentially three ways to make money:  subscription, advertising, and government funding.

12580            If the Commission were to take a close look at a couple of aspects of subscription, we still see a fair number of dollars going south for the payment of subscriber fees to American services.  Perhaps, rather than putting services on a list in perpetuity, maybe what the Commission should be thinking about is putting services on a list for a couple of years, with the notion that that will ultimately create a partnership with the existing Canadian broadcaster perhaps, and keep those subscriber fees here.

12581            Secondly, there have been a number of different ideas on new revenue streams in advertising presented at this hearing.  We collectively think that the Commission should hold a hearing to pursue new lines of advertising within our existing system, whether it is a BDU for VOD or whether it is an existing broadcaster that wants to partner and use unsold avails on other services.

12582            We think it is timely.  We think that there could be some very innovative ideas that come forward, and perhaps enhance new opportunities for revenue from our existing system.

12583            We don't necessarily think that all opportunities have been totally pursued, in terms of just jumping on the opportunity for fee for carriage.

12584            That is our point of view.

12585            COMMISSIONER CUGINI:  Mr. Shea, are you suggesting to us that we shouldn't, in this proceeding, make decisions on what has been brought forward, primarily, by the BDUs; that is, the selling of ads on local avails, the selling of ads on VOD, dynamic ad insertion, and such, that they really deserve a separate proceeding?

12586            MR. SHEA:  We think the opportunity to have a call ‑‑ a broad call for applications to enhance the advertising opportunities within our existing system would be timely, would open the process up, and I think bring some of the collective best ideas forward.

12587            COMMISSIONER CUGINI:  Thank you.

12588            HON. AILEEN CARROLL:  Commissioner, if I could jump in, I think that when we discussed the whole dimension of advertising, knowing all that had been brought forward in advance of coming this morning, we were in congruence on that, both the OMDC and the ministry.

12589            I think it might be a very opportune time, because you have heard a lot, I understand ‑‑ and you understand even better ‑‑ over these weeks on that matter.

12590            COMMISSIONER CUGINI:  Thank you for that.

12591            On the issue of preponderance, you cited the CFTPA's figure of 75 percent.  The CBC has come forward with two-thirds.  Do you outright reject 50 percent plus 1?

12592            MS THORNE-STONE:  I think, as you have heard today, our theme throughout our presentation is very much about ensuring, at a minimum, that we maintain the level of Canadian content that Canadian consumers are currently receiving, and, ideally, that we enhance it.

12593            It would appear, at least from the data that we have available, that the current level of services received is considerably higher than 50 percent plus 1.

12594            So our concern is that setting a threshold at that lower level leaves room for reduction.  We would prefer not to see that happen.

12595            COMMISSIONER CUGINI:  My final line of questioning is related to the opportunity for smaller independent programming services.

12596            What you said this morning was that you support the maintenance of regulations that provide the opportunity for the smaller independent programming services.  Is it, therefore, your position that the status quo is enough protection for them?

12597            We will be hearing from them shortly, but, based on their submissions, they and others have suggested that perhaps the regulations should be enhanced to protect them further; that the regulations, as they stand today, just aren't doing enough for the smaller independent programming services.

12598            MS THORNE-STONE:  I will start, and perhaps others would like to step in on that question.

12599            Our position on this one, I think, is twofold.  One is the importance of Canadian content, and certainly a drive to enhance it, if we can; and the second is to continue to ensure a real diversity of broadcasters in the system.

12600            We are satisfied that the system, as it is structured at the moment, has provided for that kind of diversity.  I don't think we would be in any way opposed to something that enhances it further.

12601            I don't know if others want to add to that.

12602            COMMISSIONER CUGINI:  Thank you to each of you.

12603            Those are my questions, Mr. Chairman.

12604            THE CHAIRPERSON:  Commissioner Katz.

12605            COMMISSIONER KATZ:  Thank you, Mr. Chairman.

12606            Welcome.  On page 4 of your submission, Madam Minister, you say in the second bullet:  "Creativity and innovation are the new raw materials for economic prosperity."

12607            I think we all support and agree with that statement.

12608            At the same time, we also hear that regulation seems to stifle innovation and prosperity, as well ‑‑ or too much regulation.

12609            The CRTC is always asked to take a look at this red book, with all of the regulations that exist on the broadcasting side, and it is being asked to streamline these regulations in the interest of further economic prosperity, creativity and innovation.

12610            How do we reconcile these two areas?

12611            HON. AILEEN CARROLL:  As ever, in the world of public policy, we look for the wise course of balance, and I don't underestimate the task you have in front of you in getting the right mix of regulatory and allowing for market forces.

12612            I think we have done a lot of work ‑‑ and it is in both my written submission and in the previously submitted document ‑‑ concerning our cluster strategy in Ontario.

12613            We believe that our cluster strategy achieves growth and success in the entertainment and creative industries, that economic tool to which I referred, because it enhances market forces through incentives, rather than through requirements.

12614            We bring in that piece.

12615            It is encouraging partnership among players to overcome their small size, so that they can get mentored and piggybacked, so that the overall impact is one of a larger group, rather than seeing them struggle on their own.

12616            It improves access to international markets, which I think is key.  I think that is something that, under my time, hopefully, as minister, I am going to try to grow, from a number of dimensions.

12617            I was grateful to the finance minister for a small amount of money in the budget to allow me to fly a bit in that regard.

12618            Also, as a final point, our cluster strategy supports the retention of intellectual property by firms in the cluster, so that they can build a base of profitable assets, and they can extend their successful grants.

12619            I note that in the world of media ‑‑ and, of course, I have been reading a lot of it ‑‑ some of the more recent, quite strong statements of players who have or will be coming before you ‑‑ the use of the word "regulatory" is, in my view, sometimes deliberately played as a negative concept.

12620            But, in fact, as I said at the opening, I came here because I think we have a shared role as guardians and makers of public policy, and I don't believe that to regulate is to impede or to stifle.

12621            In fact, the Broadcasting Act, and all that this body has done, basing your authenticity and your work on that Act, has had mainly the exact opposite of stifling.  It has allowed creativity.  It has allowed growth.

12622            When the Act was first enacted, whether the legislators thought about the fact that maybe even an unintended consequence would be the growth of this marvellous industry; instead, I think, it was an idea that we have to socially and culturally look after this fabulous identity, but, in fact, this is what has occurred.

12623            When I look around at what we have already growing, the result of the creativity of our industry and our players, in and of themselves, but because of that milieu that you have helped create, I see us just doing incredible things.

12624            I watch the Brits and I watch the Americans, and they are watching us.  And I watch the millions of pounds or dollars that they are putting in to reinforce what they have, and to keep us from moving past them, and they should be tense, because we have an incredible set of dynamics, we have people in our industries, and we are competing with them.

12625            And without your protection ‑‑ however dynamic we are, I still think of this industry as fragile.  It needs you to continue with it.

12626            I have no difficulty sitting down with any of the stakeholders in this industry to explain my perspective on the word "regulatory", and why it is a very positive dynamic tool.

12627            COMMISSIONER KATZ:  Thank you.

12628            I have one other question, and it goes to the submission of the Ontario Media Development Corporation.

12629            You stated in a number of areas that there is a need to continue to support production and the exhibition of Canadian content ‑‑ and I guess that you have, as well, Madam Minister.

12630            My question is:  The piece that is missing here is viewership.  We are supporting production and exhibition.  What, if anything, can we do to further promote viewership of Canadian programming?

12631            It is one thing to put it on the screen, but if no one is watching it, that begs the question:  How much can you continue to motivate people to create it if no one is watching it?

12632            MR. SHEA:  It is interesting for me personally at these proceedings, because the entrepreneur in me has, sometimes, a different perspective or point of view ‑‑ but I am here as OMDC.

12633            We have an industrial strategy, clearly, in Ontario, where we want to see more and better makers of content, and what might not necessarily attain huge mass audiences, some of the content that is created has a very loyal but niche audience.  That is the beauty of specialty television.

12634            That is also why it is subsidized by subscription and advertising.

12635            I think we recognize that we are a small, little country, and here we are provisioning numerous specialty services, and that is to ensure that there is a Canadian choice, a Canadian voice, and alternative content.

12636            I think, if we ever begin to walk away from that objective and purely look at audience delivery, or even foreign sales of content, then we have decided that we have now a very commercial, or a very commercialized broadcasting system, which is only going to create winners because of a consequence of advertising revenue, and I don't know, Mr. Katz, if that is necessarily the way we built this system.

12637            The Commission has made significant headway in the last number of years by allowing more promotional time and so on ‑‑ in fact, uncounted promotional time on conventional broadcasters, which was a smart move ‑‑ and I am sure that the broadcasters and creators of content, as we begin to look at multi‑platform opportunities for the creation of awareness and marketing of our content, will do an excellent job.

12638            But even at the end of the day, as this Commission knows, OMDC also plays a major role in the magazine industry, and the unfortunate reality is that the popular choice of Canadians, certainly Ontarians, is to purchase magazines that are all about the American television and movie industry, and that is a very, very difficult thing to compete with.  That is a reality that has been ever present for the last 30 or 40 years.

12639            So I think we have to get, as the Minister points out, the cluster working to ensure that our magazine industry, to ensure that our music industry, to ensure that our interactive industry is all about the promotion of great Canadian stories and great Canadian content, but it's not easy.

12640            HON. AILEEN CARROLL:  Mr. Katz, I would like to add to that.

12641            Your question is excellent.

12642            We aren't going to motivate the Canadian viewer by anything but excellence, certainly not out of a sense of duty.  There is just too much out there.  We need to be aiming for that excellence.

12643            And I think that Kevin has elaborated marvellously, but I think that the excellence of our content has much to do with the regulatory balance that let's us get there.

12644            We have the talent.  There are incredible Canadian productions, as you know, that people are running home to watch, and we need to keep producing more of that.

12645            I can't imagine anybody saying:  I'm going to watch this dreadful program because I'm a Canadian.

12646            No, they are not.  They are going to watch that program because it's excellent, and we are here because we think we are doing excellent things.

12647            COMMISSIONER KATZ:  This is my last question.  Some folks have come before us and advocated a different role for the broadcast distribution undertakings, the BDUs ‑‑ maybe no more regulation, but a different form of regulation, or a different form of contribution, as well.

12648            Do you have any views as to whether there should be a rebalancing, a reallocation, a different way of looking at the BDUs as part of this broadcasting system?

12649            MR. SHEA:  Not necessarily, specifically, but many of them are very diversified companies.  They are not just in the distribution business, many are in the broadcasting business, many are in new media businesses.

12650            I think there have been some folks who have advocated that, maybe, you take a corporate approach, in terms of looking at the contributions of the major players.

12651            Again, I think we come back to ‑‑ any sort of alteration, Mr. Katz, will create the byproduct of changing or altering the regulation.  There will be an outcome, and as long as the outcome hits our three elements of more, better and innovation, then we think you should move in that direction.

12652            But as to specifics vis‑à‑vis trying to advise the Commission, we don't necessarily see that as our role.  Rather, we want to ensure that the overriding objectives as to where you are headed are hitting the priorities of our communities.

12653            COMMISSIONER KATZ:  Thank you very much.

12654            Those are my questions, Mr. Chairman.

12655            THE CHAIRPERSON:  Before I let you go, Mr. Shea, I have to follow up on something that you said, because I don't understand it.

12656            You suggested that subscription opportunities aren't fully explored, and one of the areas you mentioned was foreign subscriptions and things going down south.  You also mentioned that there should be a time limit on people who subscribe to subscription services offered by the BDUs, which originate, presumably, in the States, mostly.

12657            Where does viewer choice come in here?

12658            Surely, if a BDU offers it, it's because viewers want to watch it and they pay for it, et cetera.

12659            If I took up your idea, the net effect would be that the CRTC would offer something off the air, which is being paid for and enjoyed by Canadians right now?

12660            I don't quite see how we would do it, and I can't imagine what the reaction would be.

12661            If that's not what you meant, what exactly did you mean by your comment?

12662            MR. SHEA:  I simply meant, Mr. Chairman, that I don't necessarily believe ‑‑ and I have felt this for some time ‑‑ that a foreign service is put on a list in perpetuity.

12663            As a byproduct of that, two things happen.  All of the subscription revenues go south.  Secondly, all of the advertising on those services, because of current regulation, is unsold in Canada, creating an inventory issue.

12664            Every night 28 percent or 30 percent of Canadians are watching content from another service, but the advertising opportunity ‑‑ the avails ‑‑ are not being utilized in the country ‑‑

12665            THE CHAIRPERSON:  Forget about the avails.  With avails, I understand the issues.  But you were talking about terminating subscription services, or putting them on a periodic review or time‑limited ‑‑

12666            MR. SHEA:  No, I am simply suggesting that when a foreign service is added to our list, perhaps it is reviewed every two years, and the review could be that maybe an existing Canadian broadcaster might want to partner with that service.

12667            There is no motivation if they are on the list forever.  I think you have an opportunity with the conversion to HD to say that in 2011 foreign services have to re‑apply.

12668            Our hope is that, when they re‑apply for carriage in Canada ‑‑ we will be looking to see that they can perhaps engage in a Canadian partnership, that's all.

12669            THE CHAIRPERSON:  Okay.  Thank you very much for your very interesting contribution.

12670            We will take a ten-minute break before we hear the next panel.  Thank you.

--- Upon recessing at 1005 / Suspension à 1005

‑‑‑ Upon resuming at 1020 / Reprise à 1020

12671            THE CHAIRPERSON:  Okay, Madam Secretary.

12672            THE SECRETARY:  Thank you, Mr. Chairman.

12673            We will now proceed with the next six intervenors:  Canadian Independent Programming Services; APTN ‑ Aboriginal Peoples Television Network; Stornoway Communications; S‑VOX Trust; TV5 Québec Canada; and Ethnic Channels Group.

12674            We will hear each presentation, which will then be followed by questions by the Commissioners to all intervenors.

12675            The Canadian Independent Programming Services will have 15 minutes for their presentation, followed by the 10‑minute presentations for their members.

12676            Appearing for the Canadian Independent Programming Services is Mr. Bill Roberts.

12677            Mr. Roberts, you may begin.

PRESENTATION / PRÉSENTATION

12678            MR. ROBERTS:  Thank you.

12679            Mr. Chair, Vice‑Chairs, Commissioners, Commission staff, good morning.  My name is Bill Roberts, President and CEO of S‑VOX, and today being Earth Day it is perhaps an appropriate time to speak to the small and vulnerable in our broadcasting ecosystem.

12680            This panel will speak first for the group of seven licensees which have been identified throughout this proceeding as The Independents.  The Independents are represented this morning by Martha Fusca, President and CEO of Stornoway Communications; Jean LaRose, CEO of the Aboriginal Peoples Television Network; Slava Levin, President of Ethnic Channels Group; and Suzanne Grouin, Président de TV5 Québec Canada.

12681            To your far right is Andreé Wiley of Blake Cassels Graydon, our legal counsel.

12682            The five members of this panel who are also appearing on behalf of their own companies will introduce their representatives later before making individual presentations on behalf of their respective companies.

12683            The Independents are broadcasters who own and operate specialty programming services, both analog and digital, and are not affiliates of a BDU, nor integrated into any of Canada's large broadcasting corporations.  We wish at the outset to indicate that we do recognize the Commission's desire to update the regulatory framework, to streamline, to simplify and to lighten the regulatory burden, but not at our expense.

12684            We first filed joint comments in the proceeding reviewing the regulatory framework for over the air television in 2006.  We later appeared as a group in the diversity of voices preceding and we have filed joint submissions in all phases of the current proceeding.  Attached to this presentation, for ease of reference, is a summary of our joint recommendations in the current proceeding.

12685            A number of us are pioneers, operating some of the first specialty services to be licensed by the Commission, its first specialty offspring.  We refuse to be replaced by any American or European cousin.  As a group we have invested hundreds of millions of dollars since the 1980s in capital infrastructure and start‑up funding.  Collectively we have produced thousands of hours of original Canadian programming each year and acquired thousands more from independent producers from all parts of Canada.  Each one of us was licensed specifically to enhance the diversity of Canadian voices and programming in the Canadian broadcasting system in conformity with the dictates of the Broadcasting Act.

12686            They are, first and foremost, about the creation of a variety of Canadian programming and its provision to Canadians.  We were licensed to widen the range of programming available, to serve the needs and interests of generally underserved audiences, the aboriginal peoples audiences, third language and ethnic audiences, official language audiences in a minority context, audiences seeking faith or religious programming, information programming not otherwise available or looking for alternative approaches to public affairs.

12687            We do not all have the same distribution status.  The terms and conditions of our respective licenses, including our wholesale rate, where applicable, were set by the Commission by reference to our individual distribution status.

12688            MS FUSCA:  In light of our diversity, what is the common thread that brought us together?  It is independent ownership.

12689            Why?  Because independent ownership makes us vulnerable to extinction in a broadcasting system characterized by unrelenting concentration of ownership and of horizontal and vertical integration.  Balanced regulation has built the Canadian broadcasting system and only a balanced regulatory structure can give us a fair chance at continued, reasonable reasonably sustainable access to the distribution infrastructure of BDUs, our only pipeline to Canadian audiences.

12690            The Commission has in fact long recognized that there is a functional link between plurality of ownership and plurality of voices.  It has specifically recognized at the time we were licensed and since the important role that we, as independent licensees, play in serving as a counterpoint to the recent consolidation trend.  We provide a better balance between the delivery of programming stemming from a few corporate conglomerates and from independent voices and perspectives.

12691            That is the role you have entrusted to us.

12692            What is now heightening our vulnerability and why are we spending our limited time and resources intervening in CRTC proceedings?  Why are we participating in this hearing alongside large integrated licensees?  Because some of the changes proposed by them, by the Commission and in the Dunbar Report for the regulatory landscape governing BDUs and specialty services, if implemented, will lead inexorably to our inability to fulfil our mandated role in the Canadian broadcasting system.  We will have no bargaining power, no negotiating strength, no leverage with distributors in the digital models proposed unless there is a strong commitment to the regulatory support of small, independent broadcasters.

12693            We have already commented at length in our written submissions on how little bargaining power we have now with regulation.  We cannot in 15 minutes address all the past experiences with BDUs that justify our concerns if the regulatory system is overhauled without taking into consideration its most fragile participants.  We have detailed those experiences; they are on the public record.

12694            We will stress instead in the time allowed us the minimum regulatory support required for independently owned niche services to survive in a world of digital distribution with increased power in the hands of BDUs and increased reliance on market forces.  Without regulatory support, our substantial contribution to both Canadian content and to the diversity of the Canadian broadcasting system, a system which the Commission has acknowledged should include both large and small broadcasters, will be lost.

12695            MME GOUIN: Les modèles proposés par les EDR transféreraient aux EDR le pouvoir de décider lequel des services autorisés par le Conseil mériterait un accès et à quelles conditions, sans égard au mandat ni à l'historique de ses services ou à leur capacité à satisfaire aux objectifs de la Loi sur la radiodiffusion.

12696            Une exigence de simple prépondérance de services canadiens qui s'appliquerait soit aux services offerts aux abonnés par les EDR, soit aux services reçus par les abonnés, ou même dans les deux cas, ne modifierait pas cette conséquence.  Cela ne contrerait pas la possibilité d'offrir un traitement de faveur au service détenu par quelque grande société intégrée horizontalement et au service contrôlé par les EDR aux dépends de petites entreprises de radiodiffusion, relativement, par exemple, à l'accès, la tarification, l'assemblage et à la prévisibilité d'une distribution raisonnable.

12697            Avant de commenter davantage sur le modèle de distribution présumé par le Conseil et sur certaines questions soulevées aux fins de cette audience, nous aimerions apporter deux autres commentaires préliminaires.

12698            Le premier a trait aux liens que le Conseil et d'autres parties établissent entre le changement de technologie utilisée pour fournir la programmation télévisuelle et le besoin de réviser le système réglementaire.  Ce système, aux dires de tous, a donné au Canada un choix de programmation de radiodiffusion parmi les plus vastes de tous les pays, tout en maintenant un système de radiodiffusion vivant, qui lui est propre.

12699            Le deuxième concerne l'exhortation à la concurrence et aux forces du marché, plutôt qu'à la réglementation pour promouvoir les objectifs culturels de la Loi sur la radiodiffusion, une loi fondée expressément sur l'intervention dans le marché.

12700            Aucune des partie à cette instance n'a exposé un raisonnement crédible, appuyé sur une preuve statistique, démontrant que la migration de la distribution analogique vers la distribution numérique exige un nouveau régime de réglementation sur la distribution afin de rencontrer les objectifs culturels de la Loi sur la radiodiffusion ou même pour améliorer le choix du consommateur.

12701            Ce qui est indiqué dans la loi, au sujet des EDR utilisant les technologies les plus efficaces, doit être interprété comme une exigence pour le régulateur, de s'assurer que la technologie soit utilisée pour affirmer le mieux possible la prédominance de la programmation canadienne.  La technologie numérique augmente le nombre de services que les EDR peuvent distribuer.  C'est sa nature même d'être au service du consommateur.

12702            Nous notons également que malgré le battage publicitaire entourant l'accessibilité de nouvelles plateformes de visualisation, les statistiques sérieuses n'appuient tout simplement pas la prétention que l'offre télévisuelle des EDR, telle que nous la connaissons, a perdu sa suprématie ou perdra du terrain à court ou moyen terme si les règles de distribution ne sont pas éliminées.

12703            Beaucoup de participant à cette audience ont dit ‑‑ et vous me permettrez la traduction ‑‑ « Si ça fonctionne, pourquoi changer. »  Même monsieur Rogers, au début de cette audience, a spontanément posé la question « What's the problem? »

12704            Bill?

12705            M. ROBERTS: Merci, Suzanne.

12706            Nor has any party made a convincing case that reliance on market forces or the pursuit of competition in the relationship between BDUs and specialty services should guide the distribution of Canadian broadcasting.  Let's be clear, there may be a choice of BDUs for subscribers, specialty services may compete for viewers, but specialty services remain the captives of cable BDUs.

12707            Not one specialty service can sustain a viable business plan without significant and sustainable cable access.  Cable distribution provides service to 75 per cent of Canadian homes and remains a series of de facto local monopolies, often with more than 90 per cent of the market in densely populated areas.  The implications for access by vulnerable specialty services are self‑evident and commercially real.  That is where competition is lacking and some continued regulatory support is required for some of the licensees.

12708            Canada, particularly where broadcasting is concerned, is a construct, not a natural market.  If we let the regulatory genie out of the bottle, Canada's broadcasting soul will quickly had south of the border.

12709            MS FUSCA:  The Commission has proposed a small basic tier and guaranteed access to what it has called core services.  We support the CAB's proposal that access be guaranteed to all licensed analog and Category 1 specialty services in recognition of their high levels of contribution to Canadian programming.

12710            In the words of TELUS, the Commission must:

"... maintain the current carriage requirements of Canadian specialty and pay services because access to subscribers is a cornerstone of success for Canadian services."

12711            We would extend this logic further to take into account the fragility of the economics of independently owned legacy analog services when carriage conditions changed.  Their ability to contribute to diversity was based on distribution on a buy‑through basic tier at a regulated wholesale rate.  They must remain on the basic service at a regulated minimum wholesale rate.

12712            In the models proposed by BDUs, the basic service will not be limited unless the Commission expressly prohibits its enlargement beyond the services required to be part of it.  Historically, cable BDUs have offered close to 40 television services as a basic buy‑through tier with high consumer acceptance judging by subscriber numbers and BDU financial results and despite an astonishing and continuing rise in the price charged.

12713            In the models proposed, the basic package could be augmented by foreign, vertically integrated, even Category 2 services.  This would be at the expense of Canadian content and of vulnerable Canadian services denied carriage or reasonable carriage terms or relegated to unappealing tiers at reduced wholesale rates which cannot sustain their viability.

12714            We take no comfort in the view in the new regulatory distribution regime, long‑standing services may simply fail.  We find unacceptable Mr. Engelhart of Rogers suggestion on the first day of the hearing that:

"With genre protection rules relaxed or eliminated for Canadian services, existing services need only morph into more popular services and thus maximize their audiences."

12715            The diversity required by the Broadcasting Act is not, in our view, to be measured by reference to the size of the audience a service achieves, and it is certainly not served by having services morph to a homogeneous middle ground.  It should be measured against the extent to which the service provides programming choice on a sustainable basis, programming which represents and serves the interests, needs and tastes of a reasonable number of Canadians, not necessarily the majority of Canadians.

12716            MME GOUIN:  En ce qui a trait à la publicité, nous partageons l'avis de la SCR, à savoir que la publicité, soit dynamique ou autrement, qu'elle soit insérée dans les services de VSD ou dans nos propres inventaires de services de programmation, elle doit être au bénéfice des services de programmation détenant les droits des émissions et demeurer sous leur contrôle.

12717            Les services indépendant qui n'ont peu ou pas de pouvoir de négociation avec les EDR sont particulièrement vulnérables à une pression indue dans ce domaine.  Le Conseil doit établir un processus spécifique pour déterminer les règles du jeu en ce qui concerne le développement des services VSD ou SVD par abonnement.

12718            Celles qui s'appliquent peuvent permettre la contre programmation et, éventuellement, un système parallèle de radiodiffusion contrôlé par les EDR avec peu de contenu canadien qui réduit la capacité des services de programmation, particulièrement ceux qui ont peu de pouvoir de négociation, d'acquérir et de contrôler les droits de programmation.

12719            Nous sommes particulièrement préoccupés que le Conseil maintienne et poursuive l'accord de longue date avec les EDR, leur permettant d'utiliser les disponibilités dans les émissions américaines à leur profit en échange d'une accessibilité à une proportion de ces disponibilité à des fins de promotion des services canadiens comme les nôtres au coût direct d'insertion.

12720            Nous appuyons la position de la SCR sur le maintien de la règle relative à l'exclusivité des genres pour les services analogiques et de catégorie un canadiens et sur la mesure restreignant l'entrée des services étrangers en concurrence avec les services canadiens.

12721            La règle d'exclusivité des genres est particulièrement importante pour maintenir l'accord réglementaire par lequel des services de catégorie deux ne bénéficieraient pas de la protection des genres, en échange de conditions de licence plus souples.  Ces services ne doivent pas maintenant, qu'ils soient intégrés verticalement ou non, être libres de se transformer en services qui concurrenceraient des services ayant des exigences réglementaires plus élevées.

12722            Les indépendants élaboreront davantage sur certains de ces sujets dans leur présentation individuelle.

12723            M. ROBERTS : Merci.

12724            In closing, we would like to address the argument for those who proposed the maintenance of some regulation to further the objectives of the Broadcasting Act are seeking regulatory protection.

12725            We were puzzled to read the following comment by Shaw at paragraph 20 of its reply comments on describing the development of its infrastructure, and I quote:

"Shaw assumed these risks to build the system and create new products with no subsidies, regulatory protections or guaranteed returns."

12726            Mr. Chair, cable BDUs are no stranger to regulatory intervention where the government or the Commission has found it to be in the interest of the Canadian broadcasting system.  BDUs have been and still are protected from competition by American satellite distributors.  BDUs were allowed by the Commission in response to the alleged threat of so‑called death stars to improve the distribution infrastructure over which they now offer Internet and telecom services and to pass on to television service subscribers some of the related capital expenditures through basic rate increases.

12727            The capital‑intensive high fixed asset nature of the BDU business so often referred to was also taken into account in years of rate regulation by the Commission and in the return on those assets that BDUs were guaranteed.

12728            Now the BDUs are calling for an open door policy for American programming services.

12729            Such regulatory requirements as the addition of the few analog and Category 1 services of the independents before you this morning on digital basic, the retention of the five‑to‑one regulatory bargain as proposed, some form of genre exclusivity, genre protection from foreign services, and a past due requirement for ethnic services are, by comparison, very modest regulatory intervention indeed.

12730            We thank you for your attention and we invite your questions.

12731            THE SECRETARY:  Thank you.

12732            I would now invite APTN, Aboriginal Peoples Television Network, to begin their presentation.

PRESENTATION / PRÉSENTATION

12733            MR. LaROSE:  Mr. Chairperson, Commissioners, Commission staff, I am Jean LaRose, Chief Executive Officer of Aboriginal Peoples Television Network Inc.

12734            As you know, APTN is one of the very few 9(1)(h) services.  We owe this status to the CRTC and to the efforts of aboriginal peoples who have made APTN possible.

12735            Almost all participants in this proceeding have supported the continuation of 9(1)(h) status as a regulatory tool.  In our case, this regulatory tool has had a great impact for aboriginal peoples in broadcasting.  We understand that the other services represented on this panel face greater distribution challenges than APTN, especially as independent services, and I wish my comments today to be taken with that context in mind.

12736            APTN supports Canadian independent programming services.  Independent services provide the diversity and ownership, programming and perspectives that is essential to reflect Canadian society and, as the Broadcasting Act says, the special place of aboriginal peoples within that society.

12737            APTN has supported some industry consolidation in the past, but we know that there is significant value to the system in maintaining strong, independent broadcasters.  A healthy independent sector has direct benefits for APTN.  We share programming and resources with other independents.  S‑VOX and Pelmorex, for example, have consistently supported APTN.

12738            For aboriginal people seeking to enter the broadcasting system, the more doors to knock on in the more communities the better.  Individually, independent programmers don't have much, if any, bargaining power.  Acting together, as we are today, we can increase our ability to prosper in the existing highly competitive broadcasting environment.

12739            Independent broadcasters have been leaders in specialty broadcasting.  Without the example of other independents that went before, like Vision TV, the idea of a standalone independent aboriginal broadcaster would probably have been written off as impossible.  We have benefited directly from the experience of past leaders.

12740            The Commission's regulatory framework should protect the contribution that independent programming services make to the system.  Let me review some of the more specific points that are important to APTN in this proceeding.

12741            The Commission has asked:  "What is the proper size for basic service?"

12742            We believe that Canadians should be offered a Canadian basic service at an affordable price on contiguous channels.  We propose that the Commission take the opportunity to establish a simple foundation Canadian basic service.

12743            I will return to this point later.

12744            On the fee for carriage issue, when you take into account our view about the basic service, that it should be affordable, you can better understand our concern that a fee for carriage for local over the air signals will likely add as a new cost to the basic level of service.  We do support a broadcaster consent regime for distant television signals which could include a fee for carriage, but the focus should be on limiting the importance of distant signals rather than on compensating local signals after the fact for lost revenue.

12745            When the CRTC is looking at the question of distant signals, we shouldn't forget that remote and underserved communities should be treated differently.  We are not proposing to stop the distribution of distant signals in these communities.

12746            We support continued access rules for continued access rules for Canadian programming services that make a meaningful contribution to Canadian programming.  We also support the preponderance rule proposed by this Panel.

12747            For our service, genre protection is not as big a concern as it may be to others.  APTN is a general interest, first level of service for aboriginal peoples.  We are not a specialty service.  APTN endorses all efforts by aboriginal peoples to participate in the broadcasting system.

12748            The one area in which we have noted a concern is to ensure that new entrants don't have an undue economic impact on our ability to fulfil our mandate for aboriginal peoples.  If APTN can't fulfil our mandate and if new entrants in aboriginal broadcasting aren't viable and able to pick up in areas where APTN is no longer able to meet the mandate, then the result is a net loss to the system and to aboriginal peoples.

12749            In this way we think you can see that it is not a genre that APTN strives to protect, but rather our ability to advance the position of aboriginal peoples in the system.  That is our role.

12750            APTN agrees with other members of this panel that advertising rights on VOD and SVOD should remain with the broadcaster.  Without this restriction, the CRTC will have created new, almost unlimited, VOD and SVOD programming services owned by the BDUs with the power and business motive advancing their own services to shut out Canadian broadcasters.

12751            There is no reason why the full capabilities of VOD and SVOD, including dynamic advertising, cannot be fully exploited by the broadcasters and the BDUs working together under fair and negotiated access agreements for broadcasters.  Similar logic applies to the use of local avails.  For foreign services there is absolutely no benefit to the system to allow BDUs to sell local avails.  All it would do would be to expand advertising inventory and move advertising dollars from broadcasters to BDUs.

12752            Lastly, I would just like to point out that the impact on broadcasters of allowing BDUs to access local avails cannot be offset by a fee for carriage if that line of thinking is to be explored.  This is because only some broadcasters will access a fee for carriage in specified circumstances, but all broadcasters will be hurt by lost revenue and lost opportunities from the flood of inventory represented by BDU sold local avails.

12753            At the risk of sounding presumptuous, I would like to table a proposal that builds on Commissioner Morin's basic service equation, which is Canadian content, plus Canadian expenditure minus wholesale fee.

12754            The simple response to competitive pressures would be to start with a more affordable basic service that is composed only of Canadian programming services and only of those services that meet key Canadian content and Canadian programming requirements.  Why not offer Canadians a smaller basic package that has only local Canadian channels, Canadian specialty channels making core commitments to Canadian reflection as indicated by their Canadian content and expenditure obligations, such as the Independents represented at this table, The Weather Network, national news services and a few other services such as CPAC and the other 9(1)(h) services that are recognized as being of exceptional importance.

12755            The proposed new Canadian basic package should be offered on low contiguous channels by all BDUs.  This would leverage the characteristics of digital distribution to advance Canadian programming and stop abusing stratospheric placement of basic services such as we see now happening by some BDUs.

12756            A simplified, affordable and Canadian basic service could be the new cornerstone for a renewed television system.  It would serve as the foundation for the more flexible bundling and packaging that BDUs are requesting.  It would place the consumer first.  The cost of the basic package should go down and at the same time that service would reflect our own country first, not some other country.

12757            In my presentation I have focused on the issues that raise serious concerns about any future BDU regulatory environment.  We see that change is coming.  This hearing is likely to replace some of the more detailed distribution and linkage rules with smarter regulation.

12758            The term "competition" we know is not in the Broadcasting Act, but it is still an economic reality that needs to be recognized.  Still, competition has its limits.  The competitive market unregulated does not necessarily lead to optimal outcomes in a cultural industry such as ours.  In a fully competitive dog‑eat‑dog market APTN would not exist.  Obviously we think that would be a huge loss.

12759            I have proposed an approach that some could dismiss as self‑serving, and I would argue that almost everything proposed to the Panel over the past two weeks has been self‑serving.  After all, for many of us the outcome of this hearing will determine our survival.  Our proposal supports the most important elements in our system.  It puts Canadian services first and it can be implemented easily on an industry‑wide basis.

12760            I am concerned that if we place undue emphasis on competition ahead of broadcasting policy objectives, we will very soon find out we have given up far more than we have gained.  A case in point is the mortgage rates fiasco in the United States.  A fully free and unregulated market cannot and will not regulate itself, except maybe in the long term and usually after some cataclysmic event has forced it to adjust.

12761            I probably don't need to remind you what one famous economist had to say about waiting for the long term.

12762            For me, I like to see results in my own lifetime and I am happy to say that APTN is a good example of good policy achieving results.  We have tools at our disposal to make a real difference.  We should not hesitate to use them.

12763            Thank you for your attention.

12764            THE SECRETARY:  Thank you.

12765            I would now invite Stornoway Communications to begin their presentation.

PRESENTATION / PRÉSENTATION

12766            MS FUSCA:  Good morning, Mr. Chair, Vice‑Chairs, Commissioners and staff.  I am Martha Fusca, President and CEO of Stornoway Communications, owners and operators of three digital specialty channels:  ichannel, a Category 1 public and social affairs issues channel; bpm:tv, Canada's dance channel; and The Pet Network, both Category 2 channels.

12767            Appearing with me today are Jim Macdonald, Chair of Stornoway Communications; Don Richardson, our CFO; and consultant, Dr. Gerry Wall of Wall Communications.

12768            The first thing that I would like to make clear to you is that we are not here to ask for a handout.  We have never asked for one and we do not plan to do so today.  What we want is for you to provide us with a regulatory framework that enables us to run our business in an environment that, while highly competitive, does not prohibit us from performing our obligations.

12769            We have already provided you, as have others, with ample evidence that in order to achieve our obligations and the overriding objectives as expressed by the Chair, you will conclude that despite heated rhetoric and misleading information put forth by some, the strong Canadian broadcasting system will require a truly analytical principled and forward‑looking regulatory restructuring that benefits the entire system well into the future rather than benefiting some at the expense of others, particularly the smaller independent broadcasters.

12770            In our limited time this morning we will outline for you how this proceeding is a watershed for our industry and our company, Dr. Gerry Wall's assessment of the future of our company and what that means for the industry.  And using the assumed model we outlined how you can ensure the survival of our company and the other independent broadcasters, ensure the broadcasting system remains accessible ‑‑ that is, open and viable to current and future independent entrants ‑‑ and how a balanced streamlined and forward‑looking approach will benefit the broadcasting system and Canadian consumers.

12771            Throughout this process and as early as 2004 we placed on the record our experiences with BDUs as a new entrant and as an independent broadcaster.  I have reported to you numerous examples of the obstacles, that we have attached for your reference, that have impeded both our success and our contribution to the objectives of the Broadcasting Act ‑‑ all of this took place within the existing regulatory framework ‑‑ what you will need to ask will happen if so‑called market forces are unleashed on the system.

12772            We retained Dr. Wall to prepare a financial analysis of the impact of so‑called market forces on ichannel.

12773            Gerry...?

12774            DR. WALL:  Thank you, Martha.

12775            By way of background, I have assisted Stornoway with economic and regulatory research and analysis since their original application in the 2000 hearing, all to say I am quite familiar with how they have performed and why they have performed the way that they have.

12776            Stornoway engaged me to review the proposals put forward by the CRTC in Broadcasting Notice Public Hearing 2007‑10 and to forecast the impact of those proposals on ichannel.  I have also looked at the historical financial performance of ichannel and my analysis leads me to the following conclusions.

12777            ichannel has performed at less than average levels for a Category 1 service primarily because they have not been able to generate the expected degree of subscriber penetration and subscriber revenues, nor the expected volume of advertising revenues.  Packaging arrangements have been a contributing factor to the relatively low penetration and a lower than average wholesale rate has also been a key factor in relatively low revenues.

12778            If the proposals of the Commission were adopted, it is my view that ichannel would be severely negatively impacted and ultimately the channel would be unlikely to continue operations.

12779            The key negative impacts would be a result of the following proposed changes:  the elimination of genre exclusivity; the introduction of a simple preponderance rule; the elimination of distribution and linkage rules; and the charging by BDUs for high definition and/or SD capacity on their systems.

12780            In brief, the elimination of genre exclusivity would allow BDUs or large conglomerates, some of which are already engaged or have support for the creation of this type of programming, to extend their services into public affairs program channel.  The result would be at best modest, and at worst significant and unsustainable subscriber losses for ichannel.

12781            A move to a preponderance rule and elimination of distribution and linkage rules could result in ichannel losing carriage on one or more BDUs.  The loss of carriage on just one of the major BDUs will result in an estimated loss of subscribers of between 9 per cent for the smallest of the large BDUs up to 23 per cent.

12782            If BDUs were able to charge ichannel for HD capacity on their systems, the additional cost per year could be as much as $720,000 per year per DTH operator.  Cable operators, for which there is no comparable bandwidth charge proxy, would add a further indeterminate cost to ichannel's operation.

12783            I very briefly reviewed the financial implications of the proposed elimination of regulations on ichannel.

12784            What is the broader application for the Canadian broadcasting system?  I believe it is twofold.

12785            First, the broadcasting system would lose a vital element of diversity in public affairs programming.  ichannel provides an independent, non‑conventional point of view to those Canadians who seek such alternatives.  They are not a monolithic offering.

12786            Second, the loss of ichannel would, I believe, send a signal to any potential new entrants that there is no hope for successful independent programmer entry into the Canadian broadcasting system.  It belongs solely to the large mainstream companies and most particularly to the BDUs and their affiliates.

12787            Why would this message be sent?  Because in my view Stornoway has done everything that reasonably needed to be done to be successful.  They entered the market in 2000 with good channel concepts.  They have operated in a prudent fiscal manner.  They have met the regulatory obligations and have displayed exemplary human determination and creativity.

12788            If such a service as ichannel can't survive in the Canadian broadcasting system, what is our system giving Canadians?

12789            MR. MACDONALD:  Mr. Chair and Commissioners, without regulatory support many of the BDU demands, clothed under the guise of consumer choice, would simply put an end to diversity and accessibility.  Therefore, the contributions Stornoway makes to Canadian content and diversity are even more important today than they were in 2000.

12790            For example, in the most recent reporting year, ichannel broadcast 69 per cent of Canadian content; bpm 87 per cent and The Pet Network 41 per cent, and yet bpm:tv is not available on Star Choice or Shaw, despite our efforts and numerous requests from consumers.

12791            Similarly, The Pet Network is not available on Star Choice, Shaw or Bell ExpressVu.

12792            We have made clear through this proceeding that we are currently struggling and that at stake is our very existence.

12793            So what should you do about this?

12794            Consistent with the model you asked us to consider, we have a number of specific recommendations that will provide the core of a streamlined, sustainable cost‑effective and forward‑looking regulatory framework which will achieve the objectives for this proceeding and those of the Broadcasting Act.

12795            Our views on preponderance are shared by anyone for whom Canadian culture is vitally important.  I cannot conceive of any other country that is even modestly proud of who they are as a people that would find it acceptable to rank their culture on the basis of 50 per cent plus one.

12796            Therefore, our recommendations also address the importance we place on Canadian cultural sovereignty.

12797            For questions one and two we provide you with an outline for the basic tier for major BDUs attached herewith.

12798            The basic tier includes, one: mandatory carriage of independent analog and Category 1 services on the digital basic service.  These services, like our ichannel, make significant contributions to Canadian content and Canadian program expenditures and are vital contributors to the diversity of the Canadian broadcasting system.

12799            The Dunbar‑Leblanc Report suggests that consideration be given to discretionary services that provide high levels of Canadian content, significant Canadian program expenditures for which incentives might include such benefits as compulsory carriage, subscription fees, inclusion in the basic service or even channel placement.

12800            Mandatory minimum wholesale subscription rate for independent analog in Category 1 services on the digital basic tier.  The imbalance of power between BDUs and independent specialty services like ichannel necessitates that per subscriber wholesale rates be mandated.  As Dunbar‑Leblanc pointed out, the requirement to regulate carriage or wholesale fees should be investigated in light of the relative bargaining power of the parties.

12801            Our experience has shown that for independent services, mandatory carriage without a mandated subscriber fee does not work.  After six years, Stornoway is still losing money.

12802            MS FUSCA:  With regards to the rules that would help to prevent discrimination or self‑dealing by BDUs and mechanisms that would help to protect the interests of independent programming services, we propose that you permit independent Category 2 services to apply for Category 1 status.  Applications would be evaluated by the Commission on the basis of the commitment and ability to fulfil Category 1 Canadian content and Canadian program expenditures, the provision of diversity and other criteria established by the Commission.  These would be carried on the basis described above for independent analog and Category 1 services.

12803            As Dunbar‑Leblanc noted, we recommend that consideration be given to moving to a new system, the reward services that make significant contributions to furthering the objectives of the Act with greater carriage and access rights.  Access to Category 1 licences provides the opportunity for additional independent Canadian program services to enhance diversity, Canadian content and Canadian program expenditures.

12804            Prohibit distribution fees charged by BDUs.

12805            We deliver our service to BDUs.  The delivery of signals by BDUs to subscribers is the responsibility of the BDU and the costs should be borne by them.  Given the imbalance of power between the BDUs and the smaller independent broadcasters, demands by BDUs for payment of these costs place and inappropriate and unaffordable burden on our services.

12806            Attempts by BDUs to both determine whether they will carry our HD signals and then charge us for HD distribution could prevent deployment of HDTV by independent broadcasters.  This would be a significant competitive setback for our services.

12807            Enforceable access is mandated by the Broadcasting Act to BDU marketing venues at reasonable cost.  The most important and effective marketing opportunities available to us are the marketing venues controlled by the BDUs.  In the case of local avails, notwithstanding clear direction from the Commission, often these are available to independent services like ours only at very expensive and restricted terms, so much so that we cannot afford to use them.

12808            Clearly our success in using these avails would benefit the entire system.  BDUs are, unfortunately, keen to profit by selling these avails rather than promoting Canadian programming and advising Canadian consumers of available Canadian content.  And while some have proposed to allocate a portion of the revenues derived from the sale of ad avails to Canadian programming, one would have to ask how long before they appear before the Commission claiming that that portion which they so willingly contributed to Canadian content should be called a tax.

12809            Mr. Chair, Vice‑Chairs and Commissioners, these five recommendations would help ensure my company has a reasonable opportunity to survive and grow; provide the same opportunity to other independent broadcasters; send a signal to potential new entrants that the system is open to them; preserve our unique contribution to Canadian content and support diversity while making independent services accessible to all Canadians.  Five recommendations that are consistent with the objectives of this proceeding and the model proposed for discussion.

12810            On the subject of the VOD and SVOD, we provided an outline for the Commission's consideration on February 22, 2008.

12811            However, we feel more strongly than ever that given the importance, opportunities and potential pitfalls that revolve around these platforms that everyone would be well served by a separate hearing.

12812            In closing, I would like to thank the Commission for licensing Stornoway in 2000, to supporters of rules for smaller independent broadcasters, including the CFTPA, ACTRA, Friends of Canadian Broadcasting, CTV and Global, Cogeco, who recognizes that smaller independent broadcasters may need special consideration and TELUS.  While other BDUs claimed that they wanted to work or partner with broadcasters, TELUS has been the only one that has actually been specific about how they would do that.

12813            Keep access rules, genre protection, flexible basic package and allow for more 9(1)(h) and Category 1 licences and, importantly, the Commission is charged with awarding licences not to BDUs, a process clearly in keeping with the public interest.  We need a practical, commonsense approach.

12814            Thank you very much for your attention and the opportunity to participate in this proceeding.

12815            THE SECRETARY:  Thank you.

12816            I would now invite S‑VOX Trust to begin their presentation.

PRESENTATION / PRÉSENTATION

12817            MR. ROBERTS:  Thank you.

12818            Mr. Chair, Vice‑Chairs, Commissioners, Commission staff, S‑VOX is a signatory to the submissions filed in this proceeding by the independents you have heard from just now, and S‑VOX of course supports their recommendations.

12819            And my name is still Bill Roberts, President and CEO of S‑VOX.

12820            I thank you for the opportunity to emphasize, expand on and discuss further some of the issues raised in this hearing.  Some are of particular interest to S‑VOX companies involved in the licences of a Category 1 digital service, a Category 2 digital service and VisionTV, Canada's Faith Network, the S‑VOX analog specialty service.

12821            Appearing with me from S‑VOX are Mark Prasuhn, our COO and Senior Vice‑President Programming; Joan Jenkinson, Director Independent Production; and Du‑Yi Leu, Director Regulatory Government and Stakeholder Relations.

12822            I would also like to recognize members of our diverse mosaic faith community who have joined us here today:  Reverend Marcus Martinez; Reverend Erik Puranen; Harinder Padam; Carlton Jackson; Nirmal Cheema; Jasjot Seron; and Harmeet Singh.

12823            In 1983, following an extensive religious policy hearing, the Commission concluded that a broadly‑based specialty channel devoted to serving the various religious practices and beliefs of Canadians on a national interfaith basis would be preferable to the licensing of single faith services, a model common in other jurisdictions, or the importation of foreign religious programming services.  It called for such applications.

12824            That is how VisionTV was born.  We are a direct policy creation of the Commission.

12825            MR. PRASUHN:  VisionTV must, by condition of licence, provide a service devoted to interfaith religious programming that is related to, inspired by or arises from a person's spirituality, including related moral or ethical issues.

12826            By celebrating the multifaith and multicultural composition of Canadian society, VisionTV contributes to the attainment of many of the objectives of the Broadcasting Act and the social good that it prescribes.  VisionTV is a dual status service.  It is guaranteed access on all large BDUs and on the basic service of large cable BDUs.

12827            While VisionTV's wholesale rate of 12 cents per subscriber per month, $1.44 per year, is among the lowest in the industry, its Canadian content requirements are among the highest.  It must devote, by condition of licence, a minimum of 65 per cent of the broadcast day to the exhibition of Canadian programming, more than over the air television stations.

12828            Its Canadian programming expenditure requirement is set by condition of licence at 50 per cent of its gross revenues.

12829            In the 2007‑2008 broadcast year, VisionTV will expend $11 million on Canadian programming.  That represents 93 per cent of its total subscriber revenues for the year.  It has received over the years a long list of international and national awards for programming excellence and exceptional involvement in multicultural activities, including an unprecedented five Gemini Canada Awards for quality multicultural programming and the prestigious CWC Employer of the Year Award.

12830            VisionTV is a not‑for‑profit corporation operating for the benefit of a registered charity.  As such, it must reinvest any profit it achieves in the operation of the service.

12831            As a small, independent service, VisionTV can offer types of programming not made available by mainstream broadcasters or local single faith religious over the air television stations.

12832            In the 2006‑2007 broadcast year, approximately 56 per cent of the total hours aired by visionTV were not provided by any other service available nationally.  In 1993, in amending its religious broadcasting policy to permit the licensing of single faith over the air services under certain circumstances, the Commission nevertheless stated VisionTV's type of balanced service should be available to the largest possible number of Canadians.

12833            In 2003 the Standing Committee on Canadian Heritage likened VisionTV to a national public broadcaster in its contribution and urged the Commission to ensure that audiences have fair access to it on BDUs so that, as unique part of the broadcasting system, it continues to thrive.

12834            In VisionTV's last renewal in 2004, the Commission stated that, in its view:

"VisionTV plays an important role in the broadcasting system by providing diversity through its multifaith, multicultural programming."  (As read)

12835            MS JENKINSON:  So what is the problem Mr. Rogers asked on the first day of this hearing.  The problem is that in the digital distribution models proposed by BDUs, small independent services such as VisionTV will have no assured carriage or guaranteed access on terms that permits sustainability unless we are prepared to morph into more mass appeal services propelled by market forces.  The resulting rush to the middle has little to do with the letter or the spirit of the Broadcasting Act.

12836            For example, the Globe and Mail recently reported that in one evening an episode of CSI could be found on 10 different services available to Canadian subscribers between 7:00 and 11:00 p.m.  Morphing with the express purpose of maximizing audience does not even meet the proportionality test proposed by Bell, nor is it likely to maintain the Canadian content levels currently provided.

12837            We are told over and over that the consumer should be king of the digital universe.  Who indeed is that consumer?  Is it only the viewer of easily recognizable mass appeal programming, the product of market forces?  Does it include citizens from Canada's English and French minorities, from multicultural and multiracial communities, from those interested in religious programming?

12838            In short, does it include Canadians of all interests and tastes mentioned in section 3 of the Broadcasting Act for whom, and I quote:

"... a balance of information, enlightenment and entertainment programming that is varied and comprehensive should be provided."

12839            It may not be the job of the CRTC to tell Canadians what they should watch, in the words of Mr. Shaw, but it is its job under its empowering statute to ensure that Canadians have as varied and diverse an offering of Canadian services as possible to choose from.

12840            We are told that in the new distribution model the consumer will choose.  Of course the consumer's choice will be framed by what the BDU chooses to offer in the first place and how the services are packaged, and the BDU's choice will be based on commercial imperatives and self‑interests.  ARPU, or average revenue per unit, will be king.

12841            By way of example, Rogers' modified dual status service Sportsnet on Channel 27 with a regulated rate of 78 cents per subscriber, more than six times that of VisionTv's, is distributed on the basic service with a far more favourable channel placement than VisionTV or APTN on Channels 61 and 70, respectively.

12842            Why is The Shopping Channel on Channel 19 and why did Rogers bump VisionTV from Channel 20 in Vancouver?  Because Turner Classic Movies came along?

12843            Who can blame BDUs if the pursuit of cultural goals is superseded by market forces?

12844            MS LEU:  We have been alarmed to note that during this hearing BDUs and some intervenors referred to the competitive excellence of Canadian services almost exclusively in terms of their relative ratings and subscriber levels.  While it is certainly an important element in evaluating the success of Canadian television channels, more than commercial attractiveness should be used to assess their relevance.

12845            In a cultural industry such as television, of significance in the daily lives of so many of this country's citizens, mass appeal cannot be the sole measure of success.  Excellence in Canadian television must also be about social responsibility and reflection of the positive values that hold our social construct together.

12846            Canada's diverse communities, be they ethnic, faith‑based or cultural, are the binding defining elements that help to propagate social values, tolerance and accommodation.  This is where diversity lives and if it is to provide inspiration, it must be given a voice.

12847            Mr. Chair, basic service carriage and other regulations have not only served to give a leg up to some legacy services, they have allowed small independent broadcasters to provide niche programming to underserved audiences at affordable prices.  If such services need continued regulatory support to meet their mandate and conditions of licence in a new distribution environment, then continued regulatory support is required by the Broadcasting Act.

12848            S‑VOX has 20 years of experience with BDUs and their potential to become gatekeepers rather than the gateways, even when access is guaranteed.  Anyone who has observed at this hearing the public aggressiveness of BDUs toward the broadcasting giants and the Commission, notwithstanding the imposing stature of the Chairman, may indeed wonder how they behave with small independent broadcasters behind closed doors.  The independents have already outlined in the written submissions to the extent possible, without committing hari‑kari, the uneven landscape between them and BDUs.

12849            It is illusory to think that if market forces replace regulatory requirements, BDUs will not use the flexibility available to them.  They will.  They will move non‑profit services with high Cancon, high CPE and niche mandates out of basic service in favour of their own and those with mass appeal.  They will grind our rates and repackage our services.  Eventually they won't carry us at all.

12850            If VisionTV were to be moved to a niche religious package, for example, it would require a huge wholesale rate to remain economically viable.

12851            Moreover, other single faith services whose business model is donor driven could be offered to BDUs without charge or even for remuneration, as is the case in the United States.  It would be a poor substitute for the balanced and diverse approach of VisionTV.

12852            MR. ROBERTS:  As recommended by the independents, the analog and Category 1 digital services licensed to them, including VisionTV, should therefore be carried on the basic service of cable and DTH BDUs at a minimum regulated wholesale rate.  It is illusory to rely on ex‑post dispute resolution and undue preference mechanisms as a principal means of ensuring the fair treatment of small independent broadcasters when one party has the power to repackage, reprice, realign and has the financial means to complicate, prevaricate and delay.

12853            If unresolved disputes do arise, a more even‑handed process must be developed to level the bargaining power and expedite the resolution.  We have recommended the use of expedited hearings for the independents.

12854            Smart regulation such as VOD rules to protect the rights of broadcasters and genre exclusivity for Canadian services must be maintained.  Why should services with minimal Canadian content requirements, some of them vertically integrated, be able to compete with analog and Category 1 services with onerous Canadian content requirements?

12855            The competitive test between foreign services and Canadian analog Category 1 or Category 2 services should be even more stringent to ensure a viable Canadian broadcasting industry.

12856            Mr. Chair, the spirit of the Broadcasting Act is in danger of being destroyed under the pursuit of mass‑market middle ground success in a largely market‑driven BDU‑determined television universe.  Television is capable of so much more.

12857            It is the responsibility of the regulator to ensure a plurality of voices within the new digital universe for services such as VisionTV, which is uniquely positioned to reflect faith‑based communities in a spirit of diversity and accommodation.  Without regulation, many such channels that reach underserved audiences will simply be paved over.  Let's not throw away the cultural objectives of the Broadcasting Act with the regulatory bath water.

12858            We thank you again for the invitation to appear and your kind attention and your questions later.

12859            THE SECRETARY:  Thank you.  J'invite maintenant TV5 Québec Canada à faire leur présentation.

PRÉSENTATION / PRESENTATION

12860            MME GOUIN:  Bonjour à tous.  Monsieur le Président, comme vous le savez, TV5 est un service sans but lucratif issu d'un partenariat international entre diffuseurs francophones.  Sa mission est d'offrir à l'ensemble des citoyens canadiens, francophones, bilingues et francophiles, l'accès à un large éventail d'émissions de langue originale française en provenance de la francophonie internationale ainsi que de toutes les composantes de la francophonie canadienne.

12861            Réciproquement, TV5 a aussi la mission d'alimenter le réseau international TV5 Monde en production québécoise et canadienne de langue française.  C'est cette mission qui lui a valu d'obtenir une licence.

12862            C'est cette mission ou cette nature de services qui fait que TV5 accroît la diversité de programmation offerte aux Canadiens.  C'est cette mission que les gouvernements canadiens et québécois appuient.  C'est en accomplissant cette mission que TV5 répond aux attentes de ses abonnés et contribue à l'atteinte des objectifs de la Loi sur la radiodiffusion comme de ceux de la Loi sur les langues officielles.

12863            Cette mission, nous ne voulons donc pas la changer, pas plus que nous voulons modifier radicalement les paramètres de nos conditions de licence pour les harmoniser avec qui que ce soit.  Nous ne sommes pas ici pour demander que la nature de notre service soit réduite au plus simple dénominateur commun d'une quarantaine de services réunis dans une grande catégorie appelée « intérêt général » comme le suggère Rogers.

12864            Notre ambition est simple.  Nous voulons poursuivre la mission unique qui nous a été confiée en nous améliorant sans cesse, comme nous l'avons fait depuis vingt ans.

12865            Pour modeste et légitime que soit l'ambition de TV5, elle ne pourra se réaliser dans l'univers totalement déréglementé que préconisent certaines entreprises de distribution de radiodiffusion.  Je dis « certaines » car au moins un distributeur, Telus, a clairement indiqué que la demande de suppression de l'accès, formulé par les autres EDR, n'avait rien à voir avec la réponse aux besoins des consommateurs et tout à voir avec l'accroissement du rapport de forces des distributeurs, face aux services spécialisés.

12866            C'est ce qu'ont aussi expliqué, avec moult exemples à l'appui, de nombreux propriétaires de services spécialisé dont Alarco, Pelmorex, Astral et mes collègues du regroupement des services spécialisés indépendants.

12867            Supprimer le droit d'accès à des services facultatifs et de catégorie un ne peut que réduire l'éventail et la liberté de choix des consommateurs.  C'est pourquoi nous croyons qu'il est essentiel à l'atteinte des objectifs de la Loi sur la radiodiffusion que tous les services analogiques et de catégorie un conservent leur droit d'accès au système canadien de télédistribution.  C'est une condition minimale de base, une condition nécessaire à tous, mais qui ne sera pas suffisante pour certains.

12868            En effet, le maintien du droit d'accès permettrait essentiellement d'accomplir deux choses.  Premièrement, offrir aux citoyens canadiens la possibilité d'accéder, s'ils le désirent, à un très large éventail de services de programmation canadiens et, à travers eux, aux émissions canadiennes qu'ils diffusent.

12869            Deuxièmement, offrir aux services spécialisés canadiens au moins la possibilité de négocier leurs conditions de distribution, dont la tarification, l'assemblage, la promotion, la vérification des comptes.

12870            Évidemment, si l'accès donne le droit de négocier à tous les services qui en bénéficient, il ne leur donne pas le même pouvoir de négociation.  Si des grands groupes de radiodiffusion comme Astral, par exemple, sont en mesure de faire état des énormes difficultés qu'ils rencontrent actuellement dans la négociation des conditions de distribution de leurs services facultatifs, en dépit de leur puissance financière et de leur part de marché considérable, vous pouvez aisément imaginer, Monsieur le Président, ce qu'il en est pour de petits groupes indépendants, propriétaires de quelques services seulement.  Et à fortiori, pour un service comme TV5, unique et entièrement autonome.

12871            Disons‑le clairement : son pouvoir de négociation est pratiquement nul.  Par ailleurs, les conséquences qu'entraînerait une réduction de son aire de distribution ou une baisse de son tarif seraient beaucoup plus immédiates et négatives pour un service sans but lucratif comme TV5.

12872            En effet, TV5 n'a pas le coussin que constitue la marge bénéficiaire des entreprises commerciales.  Tous ses revenus sont réinjectés dans ses opérations.

12873            Toute baisse de revenus se traduirait donc directement et immédiatement par une baisse de qualité de sa programmation.  Une programmation qui, contrairement à ce qui a été affirmé par Quebecor Media, n'est pas composée de reprises d'émissions déjà diffusées, mais très majoritairement d'émissions originales, en première diffusion et inédites à la télévision canadienne de langue française, y compris la majorité des émissions canadiennes qui sont produites pour nous et aussi pour les communautés francophones hors Québec.

12874            Au cours des dix derniers jours d'audience qui se sont écoulés, j'ai entendu les distributeurs répéter comme un mantra que le consommateur est roi, alors que le modèle qu'ils proposent défend, en fait, le principe que le distributeur est Dieu.

12875            C'est lui qui devrait décider seul ce que veut le consommateur.  C'est lui qui devrait décider combien de services devraient être à la base, services de base auxquels le consommateur est obligé de s'abonner.

12876            C'est lui qui devrait décider si un service a suffisamment d'abonnés pour être distribué et si oui, de quelle façon et à quel tarif.  Et tout cela, selon des critères vagues et contradictoires qu'il serait le seul à connaître et qu'il pourrait pondérer avec la plus complète discrétion.

12877            Monsieur le Président, nous sommes absolument convaincus qu'un tel modèle ne serait pas à l'avantage des canadiens, que ce soit en tant que citoyens ou en tant que consommateurs; au contraire.  D'ailleurs, la Loi sur la radiodiffusion est très claire à ce sujet.  C'est à un organisme public autonome, le CRTC, et non pas aux EDR que le législateur confie la tâche de surveiller et de réglementer le système de radiodiffusion, de façon à atteindre les objectifs de la loi.

12878            Et comme le conseiller Morin l'a indiqué à plusieurs reprises, ces objectifs sont d'abord sociaux et culturels.  Ils visent le maintien et la valorisation de l'identité nationale et de la souveraineté culturelle, l'épanouissement de l'expression canadienne et le reflet de la dualité linguistique.

12879            Si le législateur, c'est‑à‑dire le Parlement canadien avait souhaité que les lois du marché aient prépondérance sur ses objectifs culturels, il n'aurait tout simplement pas adopté la Loi en matière de radiodiffusion.

12880            C'est pourquoi nous demandons au Conseil de s'assurer que le cadre réglementaire qui résultera du présent processus prenne en compte à la fois les réalités économiques particulières aux services indépendants et notamment aux services indépendants sans but lucratif (dont leur faible pouvoir de négocier face aux EDR), la contribution que chacun de ces services apporte, individuellement, l'atteinte des objectifs sociaux et culturels de la loi.

12881            TV5, de par la nature de sa programmation, contribue de façon importante à l'atteinte des objectifs de la Loi sur la radiodiffusion et de la Loi sur les langues officielles.

12882            Dans le cadre des modèles proposés par les EDR, cette contribution ne pourra continuer de se réaliser, à moins que le Conseil enchâsse dans les nouvelles règles qu'elle émettra des règles précises pour que TV5, un service indépendant à but non lucratif puisse continuer de remplir ses objectifs.

12883            Monsieur le Président, je vous remercie de votre attention et je serai heureuse de répondre à vos questions.

12884            THE SECRETARY:  Merci.  I would now invite Ethnic Channels Group Limited to begin their presentation.

PRESENTATION / PRÉSENTATION

12885            MR. LEVIN:  Mr. Chairman, Commissioners and the Commission Staff, I am Slava Levin the President of Ethnic Channels Group Limited.

12886            Ethnic Channels is a new entrant in the broadcasting system.  We specialize in new digital third language ethnic services.  We launched our first service in 2004 and we have now launched a total of 10 Canadian third language services in Russian, Arabic, Vietnamese, Filipino, German, Hebrew, Persian, Ukrainian and Greek.

12887            These are all Canadian services.  They are all Canadian programming ‑‑ excuse me, they all include Canadian programming.  They are all distributed by us from our broadcast facility in Toronto where our production studio is located also and they are all operated by us.

12888            We make opportunities every day for Canadians from ethnic backgrounds to get involved in Canadian broadcasting.  These Canadians are our employees, producers, contractors and, of course, subscribers and viewers.

12889            These are often new Canadians adjusting to a new life in this country.  Our company and our services speak directly to one of the key broadcasting policy objectives in the Broadcasting Act.

12890            Let me first run through the five major questions the Commission has identified from our perspective.

12891            Our ethnic services are distributed as premium specialty services.  We support a lower cost basic service while protecting the viability of independently owned services as our panel has suggested.

12892            We strongly support access rules for Canadian services.  In our case, we support an improvement to the CRTC rules for third language services.

12893            If a BDU distributes a foreign third language service, then the BDU should distribute at least one Canadian third language service in the same language one‑to‑one, and I will return to this point a little later.

12894            We would love to see a return of genre protection for digital third language services like our own.  Being realistic, we think this protection is not likely to be regained.  Respectfully, we think the CRTC lost an opportunity for something amazing to happen in the Canadian ethnic broadcasting when it removed the genre protection from our services.

12895            In 2004 we had only just begun to benefit from the CRTC's rules for new Canadian third language services.  For one thing, visual cable networks finally had the capacity to carry a significant number of these services.

12896            Then the rules changed.  There could easily be in excess of a hundred Canadian third language channels in existence today, instead I believe there are about half that number in total.

12897            We do hope our experience will encourage the CRTC to preserve genre protection for Canadian services in other specialty and pay sectors.

12898            Our main concerns regarding fee‑for‑carriage is that the basic level of service should remain affordable.  It is no secret that many ethnic Canadians find illegal foreign DBS services very attractive.  We're working hard to bring those subscribers back to the Canadian system.  For our customers, increasing the cost for basic service could frustrate those efforts.

12899            Under no circumstances should BDUs have access to local avails in foreign third language services.  Advertising is one of the very few advantages that we have over BDUs when we enter into negotiations with foreign channel partners.

12900            If BDUs could sell advertising in foreign services, then this small advantage will vanish.  Foreign channel partners will have little incentive to deal with us.  They will instead enter the Canadian market in partnership with the BDU.  This would be a total disaster for the Canadian third language broadcasting.

12901            As far as access to advertising in our own services is concerned, this is not something we want to share with the BDU.  These advertising dollars represent our main negotiating point with foreign program suppliers and the key to our revenue growth.  We can't afford to divide that pie further with the BDUs.

12902            Regarding VOD programming, the danger with too much deregulation of VOD and SVOD, is that it would allow the BDU to bypass the Canadian broadcaster entirely.  If a BDU could, for example, package its own third language programming on VOD, insert ads and sell it on a subscription basis, then what role is there for an independent programming service like ours?  Simply none.

12903            Expanding VOD without protecting broadcasters will lead to a decrease in ownership diversity and a diversity of voices in our system.

12904            I would like to return to our proposed one‑to‑one rule for Canadian and foreign third language services and explain why it is so important for our survival.

12905            Category 2 third language service such as ours have never enjoyed genre protection from similar Canadian services and since 2004 we do not enjoy genre protection from foreign services.

12906            Since 2004 the number of Canadian third language services distributed by BDUs has increased, yes, but the number of non‑Canadian third language services has increased much faster.

12907            Since 2004, 19 third language Canadian Category 2 services have launched, but 30 plus foreign third language services have launched during the same time frame.  There were only six prior to 2004.

12908            The number of foreign third language services has grown five times.  Each of these services easily should have been brought into Canada as a Canadian service.

12909            The Commission regulatory framework provides an ideal way to Canadianize a large number of foreign third language services, so why aren't more foreign services partnering with Canadian broadcasters to deliver a Canadian version of that service?  Why are foreign services coming in on their own in increasing numbers?

12910            Well, it turns out that the main competitors to partner with these services are also our distributors, the BDUs.  BDUs go directly to foreign programming services and say literally, you don't need a Canadian broadcaster, you don't need ethnic channels, we'll bring your service into Canada ourselves.

12911            Meanwhile, the same BDUs suggest to us that there is no need for our services or, worse, they take our suggestions for new services and then cut us out of the picture.

12912            This actually happened to us.  We were told there was no way they would distribute Communist Chinese channels when we were in negotiations to bring the programming for these services to Canada.  The next thing you know there was an application by the BDUs to the CRTC to add these same services to the list.

12913            There's got to be a better balance of power between the BDUs as distributors and Canadian third language broadcasters.

12914            We are proposing a simple solution.  Let the BDUs continue to bring in some foreign third language services, but make sure that the BDUs also distribute at least an equal number of Canadian third language services in the same language.

12915            We also recommend that BDUs not be permitted to sponsor foreign third language services.  It should be a Canadian broadcaster.

12916            If there is a market in Canada for third language programming, then it should be served at least equally by Canadian broadcasters.

12917            Canadians whose first language is not English, French or an Aboriginal language, deserve to have the Canadian broadcasting system that has the potential to support Canadian broadcasting services in their own language.

12918            We do not believe there is any good reason to exclude third language broadcasting from the regulatory support that makes the Canadian system possible.

12919            As a last point I will address the significance of Internet distribution to Canadian third language broadcasting.

12920            In many ways third language services are a natural fit for the Internet.  We're pursuing Internet distribution ourselves through our related company, NEXTV, especially with services that BDUs won't carry.

12921            Are third language Internet services a threat to BDUs?

12922            Consider the following:

12923            One, Jump TV which is one of the world's largest IPTV distributors of third language programming with 300 plus services has stated recently that it has only 3,500 Canadian subscribers in total to all of its services.  I don't see a threat.

12924            Two, customer access Internet through a hi‑speed Internet service offered by local ISP.  Very often the local cable company, that BDU earns revenue from that.

12925            Given Canadian copyright laws, the opportunities for television Internet distribution are still limited.  IPTV cannot offer the same kind of same kind of multicultural package the BDU can offer.

12926            Four, BDUs can add as many third language services as they see fit to respond to any Internet competition.

12927            At Ethnic Channels we have literally dozens of potential channels we're offering to allow the BDUs to respond to Internet competition or threat.  Why aren't the BDUs taking us up on that offer?

12928            Internet TV should be viewed for what it is, it is not a threat to BDUs, it is instead a response to the continued dominance of the BDUs and the gatekeeper role they play.

12929            It would be ironic, maybe even tragic if the modest competitive pressure BDUs feel from the Internet inspired CRTC to deregulation to make BDUs even more dominant than they are now.

12930            Thank you for this opportunity to explain our views to this proceeding.

12931            THE CHAIRPERSON:  Well, thank you very much for your submissions.

12932            First of all, I would like to thank you for the way you have organized yourself, first of all having your umbrella organization and then the individual channels.  There was very little overlap, but rather each one of you concentrated on your particular interest and then we had the overview from them.  That is very helpful and useful for us and I appreciate you for the effort that must have gone into it to structure yourself accordingly.

12933            Secondly, it was very refreshing to hear you, Mr. LaRose, in pointing out that practically everybody before us is making submissions in their own self‑interest, but you are the only who admitted it and I thank you for that.

‑‑‑ Laughter / Rires

12934            THE CHAIRPERSON:  Now, let me ask you on the substance.

12935            One subject that all of you raised, and you are not the only one, others have raised the whole issue of VOD, SVOD and the danger it poses.

12936            And let's leave aside for a second the whole issue of advertising and whether BDUs should be able...

12937            But where does linear program stop and where does VOD and specialty VOD start and is this a way for the BDUs to sort of bypass and, in effect, buy the programming directly and put it on their own channels, et cetera.

12938            And Ms Fusca suggested we should have a separate hearing on it, so have others, but help us ‑‑ we may or may not do that ‑‑ but what do you see as sort of the big great divide, what is the dividing line between VOD, SVOD and linear programming?

12939            What should we sort of focus on, because clearly we will have to make this dividing line because it is becoming very amorphous and you go from one to the other and in time will only continue unless we sort of say, this is where it stops, this is where you are swapping into linear programming.

12940            Any ideas?  Do you have any help you can give us with that issue?

12941            MR. ROBERTS:  Yes, Mr. Chair.  I will turn to Slava and Suzanne to elaborate on VOD, SVOD and the linear comparison.

12942            But we are as independents very concerned about just these complex issues as you have listed them and we are also concerned about the creation of a sort of parallel broadcasting system that may result from this.

12943            But Slava and Suzanne.

12944            MR. LEVIN:  Well, thank you, Bill.

12945            As far as VOD and SVOD is concerned, the content part of it should always remain with the broadcaster.  We can't allow the BDUs to be acquiring content abroad or within, it will be direct competition towards all of us.

12946            BDUs have a tendency to sneak into the system and build out a separate distribution to what we have and that will affect all of us.  If they have the ability to build an SVOD infrastructure and deliver the content, it essentially defeats the purpose of having broadcasting channels, in fact it would help the consumer to choose programming when they want to watch it and how they want to watch it and for BDUs to do that at their sole discretion is just something that we can't ‑‑ we don't see the reason for it.

12947            MME GOUIN:  De plus, Monsieur le Président, dans le marché francophone la possibilité pour les distributeurs de créer une offre programme qui soit spécifiquement francophone européenne vient fragiliser davantage certaines des chaînes canadiennes que nous avons, du simple fait qu'ils pourraient créer une offre et, en détenant les droits, viendraient contrecarrer les chaînes qui ont actuellement une licence d'exploitation canadienne. 

12948            On est vraiment dans une situation où les distributeurs doivent absolument négocier avec les détenteurs de droits, avec les chaînes.

12949            Et si cette négociation ne se fait pas, ça sera toujours un pouvoir, une influence qui sera grandement entre leurs mains et qui pourra aussi continuer d'influencer, de façon un peu trop présente le rapport de forces sur tout ce qui découle de la distribution d'une chaîne.

12950            LE PRÉSIDENT:  La règle principale doit être, selon vous, que les distributeurs peuvent acquérir leur programmation, seulement des programmations canadiennes qui ont les droits pour ces programmes?

12951            MME GOUIN:  Exactement.

12952            LE PRÉSIDENT:  Même si c'est un programme originalement étranger, c'est le Canadien qui a le droit de les distribuer au Canada, qui doit être la personne qui négocie avec les BRD?

12953            MME GOUIN:  Oui.  Et je peux vous donner l'exemple très spécifique de TV5.

12954            Étant donné la nature particulière du service de TV5 où nous avons un bassin important de contenu original européen francophone, si les distributeurs se décidaient à aller offrir une offre similaire à nos contenus, nous n'avons plus aucune raison d'être dans le marché canadien parce qu'il pourrait, à ce moment‑là, être en compétition directe avec notre service.

12955            THE CHAIRPERSON:  And I presume the same would apply to third languages?

12956            MR. LEVIN:  That's correct.

12957            THE CHAIRPERSON:  Secondly, before I pass it over to my colleague, Mr. LaRose, in your presentation you stressed several times the issue of contiguous channel placement.

12958            I don't think I have heard anybody raise or specify or emphasize contiguous channel placement.  Maybe you can explain to me why this is obviously of great importance.

12959            MR. LaROSE:  Well, I think it's of great importance to APTN for sure, but I think it's also of great importance to some of the other players around this table.

12960            As you know, when APTN was licensed, we were licensed as basic and when we look at what has been in the past the definition of basic, it usually was meant initially when cable and other such entities were launched, anywhere below 30 or so.

12961            In this rapidly evolving world, we're now 105, 108, 110.  Nowhere near any other service from which a consumer, who apparently is king but as I guess now there's a God over the king.

‑‑‑ Laughter / Rires

12962            MR. LaROSE:  But the issue is that we are finding ourselves with no reference point for the consumer to find us and why I'm proposing contiguous is that if the individual consumer out there who does get a basic package should be able to know exactly where that basic package is located.

12963            One shouldn't need to play Russian roulette to find out where we are located.  You know, if one of our services is on 12, the other one's on 18, the other one's on 36 and the last three are anywhere over 100, you know, that person will spend more time programming his remote than actually watching us.  And I think that's why I'm proposing to contiguous.

12964            I think the Commission has a role to ensure that when it defines basic it also tells the BDU, this is what basic means.  Basic is a package that is consumer friendly, that's easily accessible and by contiguous I think if we were to say anywhere below 30 or 40, or whatever would be determined to be technologically the best placement for our package, I think that's how it should be placed.  It shouldn't be left up to penalize us by putting us in the stratosphere and the nose bleed section of the dial.

12965            THE CHAIRPERSON:  Okay.  If contrary to you and your colleagues' submissions, the Commission decided there is no minimum basic, you can offer a basic, it has to include this but you can make it as large as you want, then your reasoning would still apply to it.

12966            Let's say for argument sake we say the following 20 services are part of the minimum that has to be in the basic, but Rogers offers 60 as its basic package, then if I understand you correctly you are saying at least those 60 channels have to be all contiguous to each other, so that anybody who wants to find what the Commission has described as the minimum basic is there together with all the others in one continuous line‑up.

12967            MR. LaROSE:  Absolutely, yes.

12968            THE CHAIRPERSON:  Okay.

12969            MS WYLIE:  Mr. Chairman, the independents have also made another proposal which would be that, at least the independent services because of their vulnerability, not be placed further down in the ‑‑ certainly in analog it has been the case, but in a position that is less helpful than the BDU services and services which would ‑‑ and this proposal would be, of course, in line with the vulnerability of independent services which should have a better chance than being three dozen places behind the Shopping Channel on the service.

12970            So, that would be another way of looking at it, is if it's a BDU controlled service or if it's a conglomerate service, it should not have a better position than the Canadian independent service.

12971            THE CHAIRPERSON:  Okay, thank you.

12972            Rita, you have got some questions?

12973            MEMBER CUGINI:  Thank you, Mr. Chairman.

12974            I too would like to echo the Chairman's words and compliment you on how clear your presentation was this morning.  I think it would be an under statement to say that your legal counsel knows something about organizing an effective panel when appearing before the CRTC.

12975            So, as a result, I don't have a lot of questions but I do have some that are a bit specific to what each of you have said.

12976            But I am going to start with, obviously, the common theme of all of your services that have come together as an organization and that is your position on the must carry status of independently owned Category 1 services and I have in front of me the list that was provided by Ms Fusca as an attachment.

12977            You are essentially asking for 9(1)(h) status by virtue of ownership; is that not correct?

12978            MR. ROBERTS:  Well, let me clarify a little bit or attempt to clarify.

12979            First of all, thank you for recognizing our legal counsel.  We struggled with the definition of what exactly was an independent and we thought at first that maybe an independent is when you have a coalition of small broadcasters who can only afford one lawyer.

‑‑‑ Laughter / Rires

12980            MR. ROBERTS:  And then we thought, well, you know, maybe independents are the people that have to use commercial airlines to get here, but ‑‑ so, thank you for recognizing counsel.

12981            No, there is a difference between this proceeding and the 9(1)(h) approach.  9(1)(h) approach is very much tied to the licence itself and should, for example, a Vision TV get bought by a CTV, then it would no longer ‑‑ then it would, that licence would continue to be functioning as 9(1)(h).

12982            However, what we're asking here is to have recognized our independent ‑‑ small and independent status on basic because of our ownership, not the nature of the licence.

12983            MEMBER CUGINI:  And let's take your example further.  So, if Vision TV is bought by CTV, then the carriage of Vision TV on basic would no longer be required?

12984            MR. ROBERTS:  In the absence of 9(1)(h).

12985            MEMBER CUGINI:  Right, in the absence of 9(1)(h), based on your model.

12986            And in looking at your list there is the absence of services that have higher Canadian content exhibition requirements and higher CPEs that are not on your list based on your model.

12987            MR. ROBERTS:  Yes, I'm going to let Martha respond to that list.

12988            MEMBER CUGINI:  Okay.

12989            MS FUSCA:  Yes, that was my invention and I was trying to ‑‑

12990            MEMBER CUGINI:  Well, I hope it is more than an invention.  It is based on your model.

12991            MS FUSCA:  That's right.  Well, in working with your model.

12992            So, what I was trying to do was come up with something that was easy to understand, something very practical and something that we would hope would solve a lot of the problems that we're currently having and I think that are inherent in the current system that we have.

12993            And the way to look at that ‑‑ by the way, there was another way I could have done it which was to say that Stornoway Communications in any event considers that things like such as the community channels, the educational channels, the local over‑the‑air channels and all of the independent, even the ones that actually are not part of our group, be allowed to be on digital basic and for all of the reasons that we've outlined over the course of these proceedings.

12994            As part of our submission however we've also included the possibility, as has in fact Telus and a few other folks have been supportive of this as well, that not to preclude, because the Chair over the course of these hearings has asked certain questions about well, you know, where could we go and all of that, so to keep the system open we would also allow for the possibility that folks would either have a Category 2 or actually have some wonderful idea can come forward to the Commission and apply for a Category 1 channel that has certain benefits, one of them being that they do have the option of being on digital basic.

12995            If they have proven to you that the expenditures are high enough ‑‑ for example, that CPE is high enough ‑‑ that Canadian content is high enough, that they are independent, and also that there is a very distinct service ‑‑

12996            9(1)(h) is a very different creature, but we also think that there may be possibilities where there may be another one or two beyond the current and beyond those folks that are currently applying for a 9(1)(h).

12997            There may be another one or two channels that the Commission, at its discretion, could say, "We feel that this is a very pivotal channel to the system," and could license it as a 9(1)(h).

12998            COMMISSIONER CUGINI:  The public policy objective that would be fulfilled, based on your model, when your model excludes specialty services that exist today that have higher Canadian content obligations ‑‑

12999            MS FUSCA:  I am afraid that ‑‑

13000            COMMISSIONER CUGINI:  That is my question.

13001            MS FUSCA:  Yes.

13002            I didn't have an opportunity, and I could come back to you in the reply phase, but the folks that ‑‑

13003            I don't know that anyone actually has a whole lot higher.  Perhaps you could share with me an example.

13004            But when you are talking about anywhere between ‑‑

13005            It's expenditures that you are talking about; right?

13006            COMMISSIONER CUGINI:  Let's look at Slice, which is 82.5.  It is probably the highest ‑‑ 82.5 Cancon, 71 percent CPE.

13007            MS FUSCA:  Okay.  But those are also part of ‑‑ the distinction I made was that those are part of the large conglomerate groups, which have had certain other advantages that we certainly have not had, nor will we have.

13008            It is a very different kettle of fish for somebody like CTV ‑‑ and I love CTV, but for CTV to actually go down to Rogers, which they have in fact done, and negotiate VIP carriage for 37 channels, versus any one of us going down with our single channel.

13009            I was trying, as I said, to come up with a model that would actually give a little bit to everybody in the system, while also trying to keep with a situation where the basic package is not as small as perhaps 10 channels, but small enough that ‑‑ it was somewhere around 23, I think.

13010            I would allow for flexibility for the BDUs to have other channels in there.  I don't know how big the package should be, but we were looking at the Rogers' Toronto example, which is 41 for basic.  That would give them, also, a lot of latitude.

13011            I might say that when we talk about affordability, the cost for that package that you currently have is $2.50 wholesale.  If, in fact, you added what CTV and Global are asking for, it would still be under $5.

13012            COMMISSIONER CUGINI:  I understand that.  The issue for me is this:  You are asking us to make a value judgment that ownership is more important than Canadian content.

13013            I mean, that is essentially the bottom line, in terms of carriage on basic.

13014            MR. ROBERTS:  In terms of our presentation here today, we are saying that if the environment ‑‑ if the ecosystem can take care of the small and diverse players that make a contribution to the system, and that contribution is measured on Canadian content, on CPE, on diversity, on the quality of their programming, then the bigger players will be able to take care of themselves.

13015            We are here about basic carriage, a minimum regulated basic fee, and diversity in the system ‑‑ point final.

13016            COMMISSIONER CUGINI:  Okay.  Thank you very much.

13017            Ms Fusca, since you were most recently on the microphone, I am going to go back to you for just a second.  You mentioned in your presentation that, for example, both BPM and the Pet Channel exceed the 35 percent Canadian content limit.

13018            They are Category 2 services, albeit with limited distribution, I grant you that.

13019            However, are you not an example of the system working and market forces ‑‑

13020            MS FUSCA:  I am so delighted that you have asked that question.

13021            COMMISSIONER CUGINI:  Let me finish my question.

13022            ‑‑ and market forces working, and you doing all that you need to do to make your services attractive?

13023            And you have chosen to exceed Canadian content levels to make those services attractive.

13024            You are also an example of how genre exclusivity has worked in your favour.  You certainly weren't the only pet channel licensed, and yet you were able to get carriage on Rogers.

13025            BPM, if we had really stuck to the letter of the law in terms of genre, would never have been licensed as a music service.

13026            So aren't you an example of market forces working, and increased competition ‑‑

13027            MS FUSCA:  I just hope you remember all of those questions that you asked me.  I am trying to keep them in my mind.

13028            I am so delighted that you asked that question, because the fact of the matter is, I have managed to convince my board of directors ‑‑ our Chair is here and he can attest to this ‑‑ that I need to have ten years to make a go of this business, because I have been losing money for six years.

13029            The long and the short of it, quite frankly, is that I have been ground down so bad in recent negotiations on BPM TV that, unless there is a change, I will have to drop that service.  That is number one.

13030            Number two is that I actually only have two more years to be able to get the pet network on some of the other services.  Otherwise, again, I will be forced to take it down.

13031            The board of directors is fine with certain ‑‑ I forget what the economic expression is when you lose a little bit of money, but they don't want to continue supporting what they call a lost leader, and neither do I.

13032            We are here before you to tell you what it is that we are telling you, not because, as I said earlier, we need a handout.  We believe that these are ‑‑ and if you take a look at our mail ‑‑ incredibly popular services.  They would be more popular if we could get the carriage.

13033            And you have heard these stories before.  The claim is that there is no capacity, and then, suddenly, you get, you know, two porno channels.  There is no capacity, and you get AMC and the other American ‑‑ those kinds of channels.

13034            In terms of BPM TV, by the way, I would have preferred the dance channel that I applied for.  It was actually pressure from the market, where BPM TV is not really a music channel, it's a dance music channel.  Unfortunately you can't dance without music, but everything that you find on BPM TV is actually about dance.

13035            We also produce documentaries on choreographers and that kind of thing.

13036            And I forget ‑‑ there was one other very key piece of your question.

13037            You have to know that if we don't get some kind of relief, in other words, if we are not allowed to really pursue what we thought we could when we applied for these channels, they won't exist in a couple of years, even if they don't throw me off the systems they are on already.

13038            COMMISSIONER CUGINI:  But what you thought you applied for ‑‑ again, you were Category 2.  You knew ‑‑

13039            MS FUSCA:  You know what?  When people talk about negotiation, I naively ‑‑ and it is partly my fault, by the way.  Perhaps I should have had far more experience than I did going into this business.

13040            And I know it was about Canadian content, if you could remind me about that question.

13041            Yes, perhaps I didn't have enough experience, and that is certainly my responsibility, but when you get into an industry and a business where you think that you actually do have the ability to negotiate ‑‑

13042            I took the Commission's words at face value.  Perhaps I shouldn't have.