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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 23, 2008 Le 23 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 23, 2008 Le 23 avril 2008
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
Shaw Communications Inc. 2398 /13836
Channel Zero Inc. 2597 /15115
The Fight Network 2610 /15184
High Fidelity HDTV Inc. 2622 /15241
Maple Leaf Sports & Entertainment Ltd. 2636 /15307
Canadians Concerned about Violence in 2680 /15546
Entertainment
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon commencing on Wednesday, April 23, 2008
at 0900 / L'audience débute le mercredi
23 avril 2008 à 0900
13830 THE CHAIRPERSON: Good morning.
13831 Madam Secretary...?
13832 LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous.
13833 I would now invite Shaw Communications Inc. to make a presentation. Appearing for Shaw is Mr. Peter Bissonnette.
13834 Please introduce your colleagues, after which you will have 15 minutes for your presentation.
13835 Mr. Bissonnette...?
PRESENTATION / PRÉSENTATION
13836 MR. BISSONNETTE: Good morning, Mr. Chairman and Commissioners. My name is Peter Bissonnette. I am the President of Shaw Communications Inc.
13837 With me today are Ken Stein, our Senior Vice‑President of Corporate and Regulatory Affairs; Michael D'Avella, Senior Vice‑President, Planning; Michael Ferras, our Vice‑President of Regulatory Affairs; Cynthia Rathwell, the Vice‑President of Regulatory Affairs and Programming for Star Choice; Jean Brazeau, Vice‑President, Telecommunications Regulatory Affairs; Dean Shaikh, Director of Regulatory Affairs; and Chris Johnston, the Senior Adviser to Shaw.
13838 Shaw was very encouraged last July when reviewed the Notice of Public Hearing that initiated this proceeding. It was clear from the Notice that the Commission planned to consider a simplified and sustainable approach to achieving broadcasting policy objectives in a digital era and that the approach would be based on putting the consumer first. We were very optimistic about the proceeding because the focus of Shaw's business is on maximizing innovation, choice, value and service for our customers.
13839 As we consider how to modernize the regulatory framework for broadcast distribution, two essential points about consumers must be kept front of mind.
13840 First, they can easily leave our broadcasting system if it does not offer them the choice, value and service that they want; and second, consumers today do not purchase television service in isolation. In most cases they purchase it as a part of a broader package that can include telephone and Internet. In fact, only 6 per cent of our customers now take basic cable service alone.
13841 It is significant, given overall government policy, that over the last seven years the prices for a basket of telephony, Internet and basic cable services have actually dropped 25 per cent. At the same time, the penetration of our bundles due to their value has risen well over 70 per cent of our customers.
13842 Over 15 years ago in a structural hearing the Commission updated its regulatory framework to serve consumers, drive digital and promote effective competition in broadcast distribution, while continuing to ensure that the Broadcasting Act objectives were met. BDUs accepted the challenge.
13843 Shaw, for its part, helped to create intensely competitive broadcast distribution, Internet and telephony markets. Shaw has done all of this through risk‑taking, innovation and investment. As a result, Shaw now serves over 3.3 million customers with high quality broadcasting and broadband telecommunications services and has nearly 10,000 employees serving our customers.
13844 Since 2000 our capital expenditures have exceeded $5 billion.This year alone we will spend another $750 million, and we will do that to expand our programming offerings by increasing capacity, introducing advanced compression and modulation technologies, consolidating headends and segmenting customer nodes into smaller, more reliable serving areas.
13845 We will continue to provide award‑winning customer service through the introduction of back office systems. We will make our distribution systems even more reliable.We will develop new consumer applications and technologies that will enrich the viewing experiences, such as advanced interactive capabilities and set‑top boxes, and finally we will increase consumer access to high definition television by offering a low‑cost, high definition set‑top box.
13846 Risks and investments can take time to show a return.For example, it took seven years before Star Choice became profitable. Creating a high‑quality, high‑value service for customers got us there. Ultimately, Shaw's investment in the provision of both broadcasting and telecommunications services has contributed significantly to the realization of broadcasting policy.
13847 Our investments have provided Canadian specialty services, including independent digital niche services like Game TV, WOW TV and The Fight Network with access to millions of customers. We have offered customers in remote communities across Canada a breadth of television and other broadband services that rivals that of consumers in Vancouver and Toronto.
13848 We have helped to increase the revenue of Canadian specialty and pay services from $1.3 billion in 2000 to $2.7 billion in 2007. We have increased the available customer base for specialty services by close to one million customers. We have boosted the capacity of small cable systems, our own and those of others, through our satellite technology HITS QT. We have driven dynamic competition in the provision of DTH service, as well as increased competition between DTH and cable service. We have kept hundreds of thousands within the legal broadcasting system and used secure technology that cannot be diverted to illegal use.
13849 On the matter of fighting the black market and strengthening the broadcasting system generally, our role out of telephony and Internet service and the sale of service bundles is helping to increase basic cable penetration, particularly in smaller communities. By embracing risk and competition, Shaw contributes to the government's objectives of driving innovation, investment and fair competition to foster a strong knowledge‑based economy.
13850 MR. STEIN: We believe that this proceeding is the logical culmination of a number of CRTC and government reviews that should ultimately lead to the streamlined regulation of the broadcasting industry: specifically, the Telecommunications Policy Review Panel which suggested that broadband's full potential will not be realized in Canada with asymmetrical broadcasting and telecommunications regulatory frameworks; the CRTC's 2006 report on the impact of new technologies and the future broadcasting environment, prepared in response to a Governor in Council request, which concluded that Canadians are increasingly likely to use unregulated technologies for programming content; and then recently the government's Competition Policy Review Panel, to which Shaw recommended the development of a broadband regulatory framework that would drive business growth and productivity, support a strong knowledge‑based economy and maximize Canada's global competitiveness.
13851 As Peter said, we were very positive about this proceeding when the Commission first initiated it. We agreed with the focus on keeping our broadcasting system relevant by allowing cable and satellite to respond more flexibly to customer demands for service, innovation, quality and value.
13852 For example, the Commission expressed its desire to increase reliance on market forces. Specifically, your notice concluded, and I quote:
"It is time to move away from the current detailed regulation and to take a revitalized approach to both distribution and discretionary programming undertakings that aims at reducing regulation to the minimum essential to achieve the objectives of the Act, relying instead on market forces wherever possible."
13853 Notably, the Commission's Notice also spoke directly to the need to regulate with a view to satisfying consumers, saying that:
"In particular, the Commission seeks to recognize the increasing autonomy of audiences and consumers, providing them with the greatest possible choice of services at affordable prices."
13854 Following that Notice, the Dunbar‑Leblanc Report was released on September 12th, raising a number of important and forward‑looking issues to be addressed. But somewhere along the line we became concerned with the overall process of this hearing and, in particular, the shift in focus from distribution issues to local broadcasting issues. Let's consider what happened.
13855 Following the publication of the Dunbar‑Leblanc Report on November 5, the CRTC moved to expand the scope of the proceeding to include fee for carriage.
13856 On November 30 the Commission confirmed this expansion and added distant signal issues to the hearing.
13857 Three weeks before the hearing, on March 14, the Commission announced an assumed distribution model to guide discussion at the hearing.
13858 And, on the first day of the hearing, the Commission announced a new approach yet again, specifically the five key questions that it intended to focus upon with interveners. The Chairman indicated that all other questions are secondary or tertiary.
13859 The Commission's decision to reconsider broadcasters' demands for fee for carriage and consent to distant signal carriage is totally inappropriate. Broadcasters have been calling for both of these measures for years. You dismissed their most recent demands less than six months before this process began, and there is no new evidence or circumstances to justify any reconsideration.
13860 The profits of the large private broadcasters pushing hardest for these measures, CTV Globemedia and Canwest, actually increased following last year's dismissal of their demands. As well, they have taken steps to address fragmentation by acquiring a long list of Canada's most popular specialty services. CTV Globemedia acquired 17 new specialty services when it purchased CHUM and Canwest acquired 18 additional specialty services with its purchase of Alliance Atlantis. Together they now control 53 operating specialty services.
13861 On distant signal carriage BDUs offered to negotiate the matter and the Commission accepted that proposal in its May 2007 TV Policy Decision less than a year ago. Now new broadcaster proposals for retransmission consent are being entertained before negotiations have even had a chance to take place.
13862 The Broadcasting Act requires the CRTC to streamline regulation and focus on Canadians' needs and interests as it supervises the achievement of Canadian broadcasting policy in the competitive digital age. The Act tells us that the broadcasting system should strengthen the cultural and economic fabric of Canada and it should be readily adaptable to scientific and technological change.
13863 We firmly believe in the Broadcasting Act and its objectives.The Act makes it clear that Canada has one integrated system in which every element of the system plays a role with no one role being more important than another. As such, the diversion of this hearing to focus on the issues of local broadcasters is completely unacceptable.
13864 Michael...?
13865 MR. D'AVELLA: So where do we go from here?
13866 Shaw encourages the Commission to implement a streamlined regulatory framework. Our broadcasting system is now strong enough to introduce more competition and customer choice. Cable and satellite companies need to be able to make competitive offerings that respond to consumers and are supported by new technologies.
13867 Shaw's plan for streamlining consists of three basic principles: specifically, cable and satellite services would continue to provide the current basic service and retain the flexibility to add services to basic in response to customer demands; provide a preponderance of Canadian services in each package subject to a customer's ability to add whatever services she chooses on a pick and pay basis, on digital pick and pay basis; and adhere to the existing undue preference rules.
13868 We believe that this proposal, while appropriately simple and straightforward, supports the ongoing achievement of broadcasting policy in the context of the business and technological realities of the 21st century.
13869 We would now like to address the Commission's five key questions.
13870 First, regarding the composition of the basic package, we agree that basic should include core services and the U.S. four‑plus‑one, but that beyond those BDUs should have the flexibility to determine its composition. Only 6 per cent of our customers purchase basic cable alone and we see no demand for a reduced basic service. Removing popular services from basic would be completely unacceptable to our customers.
13871 Second, we do not believe that any specialty or pay service should have guaranteed access to cable and satellite systems. Providing a preponderance of Canadian services in each package will ensure that the vast majority are carried. Introducing a measure of competition will improve the quality of programming services as access will not be taken for granted.Removing entitlements will also allow BDUs to ensure that limited capacity can be allocated to services that deliver the greatest value to our customers. Only in this way will the system remain relevant to Canadians.
13872 Let us emphasize that capacity will always be limited.While we invest constantly in expanding it, demand will always exceed supply.
13873 For example, we have recently reduced the number of channels allocated to our own cable pay‑per‑view service from 50 to about 30 because our system needs the capacity for new standard definition and high definition programming services.
13874 On the Star Choice side, pay‑per‑view channels have been reduced from 50 to 21 for the same reason.
13875 Third, we do not believe that genre exclusivity should be maintained to protect specialty services from competition with other Canadian or non‑Canadian services. The only requirement for the admission of non‑Canadian services should be that they hold non‑exclusive Canadian programming rights. This will give Canadian programmers ample opportunity to access programming while giving consumers the choice they want.
13876 In our experience, customers want Canadian services. They do not want to be denied choice and they will look beyond the broadcasting system if necessary.
13877 If BDUs provide basic service and a preponderance of Canadian services in each package, there is no need to maintain genre exclusivity and access protections for Canadian programmers.
13878 On the question of BDU access to advertising revenue for on‑demand services and local avails, in our view, permitting such access will maximize revenue within the system and facilitate more investments in capacity, technology and the development of new services. At the same time, allowing cable and satellite companies to access advertising opportunities will not harm broadcasters or programmers.
13879 The value of local avails on the U.S. services is less than 2 per cent, approximately $54 million of the total television advertising pie of $3.3 billion.
13880 With respect to advertising within VOD programming, we believe distributors and program owners should have the flexibility to develop business models that maximize new revenue opportunities.
13881 Peter...?
13882 MR. BISSONNETTE: And finally, Mr. Chairman and Commissioners, our answer to the question of whether a fee for carriage should be introduced is: absolutely not.
13883 The CBC already receives $1 billion from Canadians in annual Parliamentary appropriations. It also enjoys nearly another $100 million from Canadians every year from the CTF and it still wants more. For the large private broadcasters, they have made it absolutely clear during this hearing that the demand for a fee is about only one thing: increasing their profitability.They have strongly resisted making any commitments to incremental spending on local programming or drama.
13884 It is unacceptable for these large, well‑financed and profitable conglomerates to demand a fee from consumers that will subsidize their own costs of doing business, their increasing expenditures on U.S. programming and their recent multi billion dollar acquisitions.
13885 And let's be clear, if the CRTC grants broadcasters a fee for carriage, broadcasters will keep coming back year after year asking for increases to keep fixing more alleged cracks in their businesses as they arise.
13886 Let's revisit briefly the entitlements that broadcasters currently enjoy, which include free spectrum that is a public resource. They enjoy improved signal reach and quality through the delivery on cable and DTH; over $250 million a year in Canadian programming licence fee subsidies through the CTF; federal and provincial tax credits that support Canadian productions and ultimately subsidize broadcast licence fees; freedom from Canadian programming expenditures granted as part of the 1999 TV Policy Review; controlled entry by new broadcast competitors into local television markets; exclusive access to local television advertising; income tax measures that shield broadcasters from competition from U.S. border broadcasters; simultaneous substitution of local Canadian television stations over U.S. television stations; mandatory and priority carriage on cable; and extensive specific carriage entitlements on DTH.
13887 Beyond saddling customers with new costs for broadcasting services that are free over the air, fee for carriage would lead to calls by U.S. broadcasters and trade officials for equivalent consent and payment rights.This could lead to additional annual outflows of up to $570 million to U.S. broadcasters from Canadian cable and satellite customers.
13888 This exposure, the breadth of existing protections, and the fact that CTV Globemedia and Canwest have been clear that this is really about profits are reasons that fee for carriage must be resoundingly rejected once and for all.
13889 Aside from any issue of CRTC jurisdiction over fee for carriage, it would simply be bad public policy to introduce a measure that would have significant costs for millions of Canadians, including the costs of claims by U.S. broadcasters, for the benefit of a few private companies and the CBC.A decision with this kind of impact on the system and consumers should, in our view, only be considered by Parliament.This consideration should be undertaken in consultation with the CRTC and other departments of government, including those responsible for copyright and trade policy.
13890 Local broadcasting is not what this hearing was intended to be about. While it is one of the many important elements of our broadcasting system, nothing in the Broadcasting Act identifies it as a cornerstone, nor do over the air broadcasters have a monopoly on local content.
13891 Shaw TV productions, for example, produces thousands of hours of local programming every year. This programming is considered a critical source of local news, information and entertainment in the communities that Shaw serves.
13892 In closing, this hearing was initiated to review the framework for broadcast distribution and discretionary programming services. We commend the Commission for the understanding it has exhibited in the initial Notice of Public Hearing that consumer market and technological forces create a need for more streamlined and flexible regulation of broadcast distribution and discretionary services.
13893 We hope the consumer focus of the original Notice of this proceeding can be regained. Looking to the past will leave us unprepared for the digital future. We encourage the Commission to accept the reality that continuing to provide Canadians with strong Canadian programming choices is best achieved through competition, innovation, not through protection, subsidy and entitlement.
13894 Thank you, Mr. Chairman.
13895 THE CHAIRPERSON: Thank you very much for your submission.
13896 At the outset, let me say that I am somewhat disappointed in not seeing Mr. Shaw here. Given his vociferous views on this hearing, his correspondence, et cetera, I thought he would have done us the courtesy of showing up personally.Sending you, which in his terminology I would characterize as a "B Team", I don't think adds to the process.
13897 That being said, let's deal with ‑‑ this is not meant in any way meant as disrespect to you. I very much appreciate your submission and I like the way you orderly went through the points. But since we have been subject to his criticisms, I would have appreciated the opportunity to deal with him on some of these issues one on one, or at least personally in this context.
13898 Now, let's go through. You have sort of undertaken a reading of the tea leaves in suggesting where we are going and what we are doing. Let me assure you, this hearing is exactly what we stated in the PN.When I asked five questions at the outset and said these are primary, it is because my mind works logically and from one issue to another, et cetera.
13899 It seemed to me until we make a decision on those issues, we can't deal with the other ones because they are all interconnected.That does not presuppose any outcome of those. I wanted to know the views of people on those five issues.
13900 You have heard them over the last two and a half weeks and now I have yours and let me go through those with you one by one.
13901 First of all, basic package.
13902 If I understand it, you are suggesting basically yes, there should be a basic package that should be a buy‑through. You, Commission, dictate what is the minimum that should be in there. We will then, in our commercial judgment, compose the basic package as large as we think is in the interests of consumers, consumer interest being your driving motivation.
13903 Is that correct?
13904 MR. BISSONNETTE: Absolutely. It's about consumer choice and our consumers have expressed to us through the way they buy our services what they like about our services. They see value in our services and we believe that the constitution of the basic cable package is satisfying the needs of our customers.And to change it by either skinnying it down or moving maybe higher content Canadian services but less attractive Canadian services such as news, you know, which has been suggested, would be not well accepted by our customers and it would be technically impractical as well.
13905 THE CHAIRPERSON: Okay.We have heard sort of three basic views here and I would like you to tell me why one is the one that you put forward.
13906 Another one is saying there should be a basic minimum package.It should be all Canadian, no foreign, and basically the emphasis being on affordable. There are lots of Canadians who want to have cable or satellite access, but in effect they are asked to by this package when all they can afford is this little one. That's one.
13907 Another one is saying that no, there should be a basic package but it should include at least one fourth of four‑plus‑one.And then yes, you can add on it, but a least you should offer it to give in effect consumers the choice: buy the basic or buy the extended basic. And of course you will make the extended basic as commercially attractive as possible.This is obviously your interest and you will do it in such a way.
13908 You have chosen the third option, which we just discussed.
13909 Explain to me why either one of the other two options, from your view, is not in the interest of either the system or the Canadian consumer.
13910 MR. STEIN: Well, there has been a lot of blood, sweat and tears that has gone into the definition of "basic" ever since 1959, and I would just make a few comments about it.
13911 The first is that the basic has always included the U.S. ‑‑ well, in Edmonton starting with U.S. one‑plus‑one, and that wasn't very acceptable. And then that was expanded into the U.S. four‑plus‑one.The whole basis for the basic entry point into the provision of cable services, that first contact is with the consumer is on basic. So it is important.
13912 As Peter pointed out, only 6 per cent of our subscribers only take basic, but it still remains is the fundamental access point to the system.
13913 THE CHAIRPERSON: That is in effect the enhanced basic. Right?
13914 MR. STEIN: No.
13915 THE CHAIRPERSON: The one you offer.
13916 MR. STEIN: Basic basic.The basic, not the enhanced basic; the basic. The basic which ‑‑
13917 MR. BISSONNETTE: The basic we currently offer our customers.
13918 THE CHAIRPERSON: Okay, let's make sure we know what you are talking about.
13919 MR. BISSONNETTE: Yes.
13920 THE CHAIRPERSON: What is your basic basic, as you call it? What does that include?
13921 MR. D'AVELLA: Just to provide you with one example ‑‑ we are just looking at the Calgary channel lineup ‑‑ it consists of about I think about 35 basic services, but only 6 per cent of our customers only take that package. So the vast majority of our customers take a combination of packages that would include the tiers, which are not part of the basic service ‑‑
13922 THE CHAIRPERSON: Yes, sure.
13923 MR. D'AVELLA: ‑‑ and other services.It could be telephony, it could be Internet, it could be something else.
13924 THE CHAIRPERSON: Walk me through the Calgary basic basic of 35. What is included in that?
13925 MR. BISSONNETTE: Okay. We have the local broadcaster CFCN. We have KX ‑‑ we have the four‑plus‑one services. We have our French CBC service, the local broadcaster. We have Shaw Television, Shaw TV. We have CMT, Country Music Television. We have KREM, a Spokane service. We have Access Alberta. We have the PBS from Spokane; CBC Newsworld/Voiceprint. We have Treehouse TV. We have E!, the local broadcaster. We have The Weather Network. We have YTV and TSN; KAYU, the U.S. of the four‑plus‑four.We have Score; Home and Garden Television, We have Crossroads, which is a mandated carriage service. We have CTV Newsnet; Business News Network; MuchMusic; MTV; MuchMoreMusic; Canadian Learning Television; APTN; Vision TV; CPAC; CFTM TVA Montréal; and RDI.
13926 THE CHAIRPERSON: Okay. But if I understand, it is a very small basic but it is more than what is sort of normally referred to as basic basic, which is over the air mandatory analog and Cat 1s plus 9(1)(h).
13927 You have a few in there which don't fall into that category, not many but ‑‑
13928 MR. BISSONNETTE: Yes.
13929 THE CHAIRPERSON: If I understood that correctly.
13930 MR. BISSONNETTE: Absolutely.We have what we consider to be a fulsome basic service.
13931 And I think, as we have said to the Commission in previous consultations, our view is for the foreseeable future that we will offer our customers an analog package, a compelling analog package. Even though we are fully digital in many of our systems, customers have three and four outlets, so they still have their analog television sets and we believe that the value of our services to our customers in terms of the video services they receive from us is also captured in that analog offering, which would be available in children's rooms, in dens, in workout rooms and will be still available on analog television.
13932 In fact, once we have fully converted to digital, it is still our intention to convert digital over the air signals to analog signals so our customers continue to enjoy analog reception on their TVs. We think that is a competitive advantage.
13933 The fulsomeness, if you will, of our basic cable service is something that has evolved over time and our customers have asked for that type of the basic service. We believe that they see the value in that service and it is, if you will, a cornerstone to our cable services, because from there more attractive but discretionary analog services are available to our customers.
13934 THE CHAIRPERSON: Okay. Now help me out on this. This is your basic basic.
13935 MR. BISSONNETTE: That's our basic service.
13936 THE CHAIRPERSON: It is a very modest package. It is what you consider sort of ‑‑ it is probably affordable to most Canadians.
13937 Now there are some others, and I'm sorry if I picked the example because it is the only one that comes to mind, but Rogers in Toronto I'm told the basic package is $65. $65 is not $35 obviously.
13938 I don't know what the prices are, et cetera, and I don't want to pick on Rogers, but there are others who have larger packages.
13939 What is our role here? You are offering a basic basic which seems to sort of address both consumers' choice and affordability; others do not.
13940 So what should we do? Would you just let the market decide or should we, as the CBC has suggested, mandate an absolute minimum basic that people have to offer?
13941 If they don't want to take it, that's fine. If they think the enhanced basic is better value for bucks, et cetera, let them, but at least provide this sort of outlet, so that the least well‑off in society have access to decent television by having this basic mandatory package.
13942 MR. STEIN: We wouldn't really want to comment on the Rogers' model, because we have always taken the approach of trying to offer a basic that is basic, and then offering choice beyond that.
13943 We have, in fact, been criticized more for not having a bigger basic.
13944 Essentially, I think the rule that we would suggest for the Commission is that the Broadcasting Act specifies what services or priority services should be carried. It specifies certain considerations for the Commission, in terms of coming to mandatory decisions.
13945 And we think that, beyond that, people should be able to respond in the marketplace.
13946 The marketplaces are not uniform across the country. The ability to respond in Calgary and to deal with consumers in Calgary may be very different from the situation in Toronto.
13947 It is also very different between Calgary and Lloydminster, and small communities.
13948 There is a variation there.
13949 I think that the main consideration we would say is, if consumers aren't complaining about it, then why change it?
13950 MR. BISSONNETTE: And what is the cost of change? And what is the benefit of change, as well?
13951 We don't see, frankly, Mr. Chairman, that by removing some of these services, that would really impact the cost of the services that we offer on basic, just because of some of the costs associated with providing that service.
13952 THE CHAIRPERSON: Let me put it differently, because I want to be sure that we understand.
13953 What if we said, "Fine, price it however you want, but, at the very minimum, you have to offer one package which consists of OTA, one set of four‑plus‑one, mandatory analog and Cat 1, and 91H"?
13954 Price it at whatever you want, offer whatever extended ‑‑ 1, 2, 3 ‑‑ you want, et cetera, but at least that should be there, and at the price that you, obviously, set.
13955 So that customers know, "I want nothing else but the absolute bare‑bone basis. That's what I get for this price."
13956 Would that be terribly objectionable to you?
13957 MR. BISSONNETTE: We don't think it would be appealing to our customers.
13958 We agree that there are core services that should be in basic, but we also suggest that we have the flexibility within our packaging to address what our customers are saying is meaningful to them as part of a basic, over and above the core services that are proposed by the Commission.
13959 THE CHAIRPERSON: You didn't answer my question.
13960 If I asked you to offer ‑‑
13961 MR. BISSONNETTE: That was my (b) answer.
‑‑‑ Laughter / Rires
13962 THE CHAIRPERSON: What I am trying to get at is, you say that customers are not interested.They won't buy it.
13963 That's fine. In that case, there is no harm for you in offering it on that basis.
13964 On the other hand, if there is indeed a segment of the population that is interested in that basic package, regardless of whether it is 2 percent or 10 percent, they would have access to it.
13965 And I, frankly, fail to see where the hurt is to you.
13966 MR. BISSONNETTE: It is just the practical reality of skinning down the basic. The method of doing that in an analog environment is to use traps, and in order to put traps into customers' homes ‑‑ the cost of that would be prohibitive, and the intrusion, if you will, to what customers are already enjoying ‑‑
13967 Customers actually take basic cable, primarily, for the over‑the‑airs and for the four‑plus‑one services.
13968 Our customers in Victoria love PBS. In order to make that a discretionary service, we would have to trap those customers out.
13969 THE CHAIRPERSON: I fully understand that.
13970 Let's move to 2011. We are now in an all‑digital world. What is your answer then?
13971 I know you told me that you are still going to offer analog as part of good marketing, et cetera.
13972 By the way, when you were down in the States, I understand that the Americans are going to do that for a period of three years after 2009, as well.
13973 MR. BISSONNETTE: Yes.
13974 THE CHAIRPERSON: But we both know that analog ‑‑ one of these days it is going to be out of the picture. So, since we are looking forward and we are talking prospective, I am positing that, with an environment where everything is digital, what would be your answer in that environment?
13975 MR. BISSONNETTE: Obviously, if we are fully digital, which we won't be for a long time, for the foreseeable future, but when we are fully digital and our customers are able to enjoy digital services on all of their outlets, we would have more flexibility in making that kind of package offering.
13976 We could offer a core service, and then we could, again, make any services beyond the core service a discretionary service.
13977 However, Mr. Chairman, for the foreseeable future, we will have an analog offering, and in order to make that kind of package shift, we would have to trap.
13978 MS RATHWELL: If I may, Mr. Chairman, just from the DTH perspective, Star Choice is already an all‑digital service, so the introduction of a basic basic, if you will, would still have a lot of negative impact for us, even currently. It would be disruptive to our operations. It would cause a lot of customer confusion and complaints, and the volume of interaction with our customer service people, even at that first level, let alone changes that would be necessary to our billing and provisioning systems, would be very, very costly and very disruptive.
13979 It's a highly competitive environment for us, and we are trying to focus all of the resources we have on increasing our capacity and innovating to meet different kinds of challenges.
13980 Unfortunately, for us, this wouldn't be a very useful, or efficient use of our resources.
13981 We have received no complaints in the last two years, that we know of, concerning the price of basic, for example. So we are confident that we are in tune with our customers and provide them with the value they are looking for on basic.
13982 THE CHAIRPERSON: You made a dangerous statement, you opened up Star Choice. I happen to be a Star Choice customer, so let me just probe what you said a bit.
13983 I don't know whether there is demand for it. I certainly don't want a basic basic service.I am not speaking for myself.
13984 But, surely, when I signed up with you, you told me, "Here is our basic package. We call it Bronze, and there is Silver and Gold, and you can add to it."
13985 There is wonderful flexibility, and everything is differently priced, et cetera.
13986 For the life of me, I don't understand why, when you say that it would make your life more complicated to offer in that menu, which is very complex ‑‑ there are all sorts of combinations possible ‑‑ that you put in there a combination, "Here is our basic basic," which is actually less than what you call Bronze.
13987 MS RATHWELL: I think the difficulty would be twofold.
13988 In the first instance, as I noted, it would confuse the market. They are used to getting Essentials. They think it's a good package. They seem to be responsive to the price.
13989 So, suddenly, they are presented with a choice, and that is going to drive a lot of activity at our service levels.
13990 Beyond that, in terms of systems, our current systems have sort of limited capabilities. We have a certain number of packages. It is very flexible, you are correct, and we would like to continue to try to work on that, but adding another layer of basic would just add extra complexity to the backroom systems, which we are not sure we could cope with.
13991 THE CHAIRPERSON: Okay. Let's go to the next subject, access.
13992 You, I am sure, have listened to the proceedings over the last two and a half weeks. As you say, there are an awful lot of people who are arguing for one sort of access or another to be mandatory, or retained, or to increase the present access, et cetera.
13993 Other than you, I don't think there is anybody ‑‑ there is absolutely nobody who has advocated this sort of radical ‑‑ basically doing away with mandatory access.
13994 How do you explain you being such an outlier on this?
13995 MR. STEIN: I will start, and I am sure that others will want to join in on this, in terms of access.
13996 We feel that now, when you look at the structure of the industry, you have, primarily, the specialty services ‑‑ and there are other major organizations ‑‑ CTV, Globemedia, Global Canwest, Corus, Astral, et cetera ‑‑ they have enough clout to be able to negotiate access arrangements.
13997 There have been certain corporations that we have had a lot of success with, and with certain others maybe a little less success. But, generally, we have been able to work out commercial negotiations and come to arrangements about what services we carry and what we don't carry.
13998 It is a very tricky issue. The thing is, when you put a service on, as J.R. always says to us, the hardest thing is taking a service off.
13999 If you only have ten subscribers to a service, it is difficult, so you have to make a really conscious judgment about what services are going to be on, and how that works out.
14000 But for the major players, it is a game of equals, in terms of negotiating that, looking at what is attractive and what to put on. So we don't see the necessity for access.
14001 Now, the independents do make a good point; that is, they don't have ‑‑ we think they have a lot of clout, but they may not because they don't have tie‑ins and "I'll carry this, and not carry this" type of arrangements.
14002 On the other hand, they have a number of distributors that they can go to.
14003 What we found was, for example, one service, Wild TV, goes to Bell and they get carried by Bell, and then we get our customers clamouring for it.
14004 It seems to me that the opportunities for the services are very strong. They can go to at least seven strong distributors out there ‑‑ there aren't two, there are seven out there ‑‑ MTS, SaskTel, now TELUS, Bell, Shaw, Videotron, Bragg Systems, Cogeco ‑‑ and if they get on one of those, that's a breakthrough in terms of them saying, "Okay. I can now go to Shaw and I can demonstrate that I have been getting this customer response and it's a good service."
14005 If you look at any other cultural activity, the shelf life is the most attractive thing you can go for, but you have to put forward a case for it.
14006 We are staying at The Chateau Laurier, and when we walk by the Art Gallery, it is very significant. How do artists get into the gallery? Nobody regulates that. Nobody protects them as artists. They probably should be, but they aren't.
14007 They have to get that shelf life, but they have to argue with the galleries. They have to make commercial arrangements with the galleries. They have to be able to drive themselves to do that.
14008 We feel that programmers should be able to do the same thing.
14009 The final point I would make is that Jay Switzer, in an article in The Broadcaster magazine, said that we need more failures.
14010 That is part of the problem. The system gets so clogged up with a whole bunch of services, that just aren't going anywhere, that you can't take off. Therefore, it doesn't allow for the entry of new services, because they just clog the whole system up.
14011 We feel: Look, why don't we do it this way. Why don't we just say that there is no guaranteed access, but the Commission has in place rules for undue preference, for making sure that commercial negotiations are carried on in an appropriate manner, and we don't disagree with that.
14012 We think that would work quite well, but there would be no guaranteed access.
14013 I think that André Bureau made the point ‑‑ we don't always agree with André, but he did make the point that, a lot of people, once they get on, they put their feet up and it's like, "Okay. We're fine. We don't have to do anything any more."
14014 That's the problem we see. We think that if people had to fight to keep on the system, they would do a better job, and they would, in particular, do a better job on Canadian content.
14015 THE CHAIRPERSON: I am glad that you mentioned André Bureau ‑‑
14016 MR. STEIN: Maybe I shouldn't have.
‑‑‑ Laughter / Rires
14017 THE CHAIRPERSON: We have heard from all sorts of people. We have heard from the independents, whose basic claim is "We have no clout."
14018 We have heard from Allarco, who actually has mandatory carriage, who says "We can't get on. A year later, we still don't have a deal" ‑‑ with you, among others.
14019 We have heard from Astral, one of the largest specialty owners in this country, who is saying, "Notwithstanding our clout, we have huge difficulty getting carriage."
14020 And they also make the further argument that ‑‑
14021 Essentially there are five ‑‑ IPTV is not ‑‑
14022 How many are there?
14023 Three large terrestrial and two satellite, so that's five.There are smaller terrestrials, obviously, and IPTV, but those are the big ones.
14024 If you don't get carried by one of them, that would put the viability of some of these channels, right away, into jeopardy.
14025 If you don't get carried by two, you probably don't have a market case any more.
14026 I find it somewhat difficult for you to say that.
14027 And then you say, once you have carriage, it is hard to turn them off; and in the next sentence you say, "I don't have the ability to turn somebody off, it's mandatory carriage."
14028 Frankly, I am hearing an awful lot of dissonant noise here, and I am having trouble sorting it out.
14029 I hear somebody like Astral, who has been in the business for many years, who is successful, saying that getting access is a huge issue, and then you come along and say, "Well, it's no problem. We should have a free‑reigning system. And, yes, there are five of us, but we will put people on, because if one of us carries it, the other one has to carry it."
14030 And, yet, that's not the case, you don't have identical offerings.
14031 MR. STEIN: First of all, I don't want to be confusing about this. Let me be very clear. We don't believe in access rights. Right?Let's be clear about that.
14032 Secondly, the reason that the negotiations are tough and difficult for people is that, when we do put something on, we realize that it is difficult to then take it off. So we want to make sure that, when we put it on, we have some assurances that this is going to be successful going in.
14033 The third point is that when you say there's, like, three large terrestrial distributors, well, you know, MTS and Sasktel are horrendous competitors as far as we're concerned.
14034 I mean we lost in Winnipeg 25,000 or more subscribers to MTS and in Saskatoon we have a huge battle going on with SaskTel and I'm sure Access is having the same thing in Regina.
14035 So, there is lots of opportunities for people to go to competitors and say, look, I can differentiate you. I can make ‑‑ you know, if I give you my package, you put me on your system, then you can sell against Shaw.
14036 I remember sitting down with the Premier of Manitoba saying, well, I'm recommending ‑‑ you know, I'm recommending, you know, this kind of a package because, you know, that will help you beat the other guys, whether it's Bell or whatever.
14037 So, there's lots of opportunities out there. I think that people are just presuming protection and it gives them a different mindset about going in.
14038 And I think that the more you're able to respond to consumers and the more that we're able to emphasize Canadian content as an advantage, then I think the better the system will be.
14039 MR. D'AVELLA: The only other thing we might want to add here is, you know, with respect to the two that you mention in particular, the Allarco and Astral, these are business negotiations. We got a deal done with Allarco. It's a tough deal.
14040 There are four standard definition channels they want launched and two HDs. It's a big package. It took us time to work it out, but we finally got it done.
14041 With respect to the other one, I'm not sure specifically what Astral was referring to but, you know, a lot of these guys come to us and say, carry this service and, by the way, we want digital basic carriage.
14042 And we're saying, well, wait a minute. We offer a discretionary digital service here. If you're prepared to take the chance, if you think you've got a good enough service and you think customers are going to buy it, we'll offer it the way we offer everything else. But we're not going to give you digital basic carriage, it's too expensive for us, customers don't want it in that fashion.
14043 So, these are all business negotiations. It's all part of, you know, the dynamic process of actually negotiating with these programmers who do have a certain amount of clout.
14044 THE CHAIRPERSON: Well, I understand that. I mean, I have no problem with business negotiation and each party looking out after their own.
14045 But the argument that is being presented to me and that is, No. 1, it is very unequal a negotiation, you have all the trump cards, the others have none, if they don't get on they're dead.
14046 Secondly, in terms of economic size, other than Astral, the others are really pygmies compared to the BDUs and certainly that even once getting on, on what terms and how do you get treated.
14047 Yesterday for instance we had APTN here talking here about not being treated contiguously, notwithstanding that they are mandatory carriage, get bounced up all over the schedule and are hard to find, et cetera.
14048 So, I hear a litany of complaints from everybody about the BDUs' power being totally disproportionate to that of the broadcasters, basically running the roost and pushing broadcasters around.
14049 The two things that are protecting them they say, and they are minimal protection according to them ‑‑ and that is what I wanted to hear from you ‑‑ access is one, genre is the other ‑‑ we'll come to genre in a moment, let's stay with access, so...
14050 And, as I say, you are the only one who basically says preponderance and that is all. We can carry anybody, Canadian or foreign as long as, I presume, and you say an offering of performance, most of the others say a subscription of performance, that means at least they have to buy 50 plus one.
14051 So, I would like ‑‑
14052 MR. BISSONNETTE: Mr. Chairman, we ‑‑
14053 THE CHAIRPERSON: So, I would like to understand why you feel this extreme position in your field?
14054 MR. BISSONNETTE: Well, Mr. Chairman, we have said that the packages that we will provide in a digital realm will be preponderance packages.
14055 So, these would be delivered to a customer. So, a package that is delivered to a customer will have a preponderance of Canadian services and that's why we take the position that having those kinds of preponderance rules provides programmers with an opportunity to be made ‑‑ to be put in front of our customers.
14056 And then I guess the factor that differentiates them is the quality of their programming.
14057 THE CHAIRPERSON: Okay. Let me just understand that.
14058 Because I read your submission last night again ‑‑
14059 MR. BISSONNETTE: Yes.
14060 THE CHAIRPERSON: ‑‑ the February 28th.And you are telling me, which you say in your February 28th, that it is a preponderance of offering, but you say by way you offer it, so packaging it in effect, de facto, will be a preponderance of subscriptions.
14061 MR. BISSONNETTE: Exactly. The services that customers will receive when they receive a package will be a preponderance of Canadian services.
14062 THE CHAIRPERSON: Okay.
14063 MR. D'AVELLA: Provided we don't restrict their ability to buy a single service after they've purchased the basic tier.
14064 MR. BISSONNETTE: Which still is a ‑‑
14065 THE CHAIRPERSON: Explain that to me, please.
14066 MR. BISSONNETTE: I think what Michael is saying is that the basic tier has Canadian services on it and where a customer is subscribing to our basic tier, that they also have the flexibility through the technology to order a pick‑and‑pay service in a digital realm.
14067 THE CHAIRPERSON: So, can I through pick‑and‑pay service wind up with more American channels than Canadian?
14068 MR. BISSONNETTE: No.
14069 MR. D'AVELLA: No.
14070 MR. BISSONNETTE: It would be impossible.
14071 THE CHAIRPERSON: Why?
14072 MR. STEIN: It would be impossible to ‑‑
14073 THE CHAIRPERSON: I thought I just heard that pick‑and‑pay is not subject to preponderance.
14074 MR. D'AVELLA: No, but ‑‑ I mean, the objective of pick‑and‑pay is to allow them to buy one or two channels, it's not to allow them to buy 15 channels on a pick‑and‑pay basis.
14075 Any package we create in a digital world will be preponderantly ‑‑ is that a word?
14076 MR. BISSONNETTE: Yes.
14077 MR. D'AVELLA: Canadian.So, we just can't restrict their ability to say, look, I've bought the basic package which consists primarily of Canadian services, but I do want to buy Fox News on a stand‑alone basis as one service, but overall he is predominantly Canadian.
14078 THE CHAIRPERSON: So, if as a regulator I buy into the Shaw scheme, at the end of the day there won't be a single Canadian who will have a preponderance of foreign channels over Canadian channels buying from Shaw?
14079 MR. BISSONNETTE: That's correct.
14080 MR. FERRAS: They would have to buy our basic service and then in our basic digital basic there are so many Canadian services in there and you need to have that pieces of equipment in order to get the digital and with the digital, our digital service there's already Canadians bundled in there.
14081 And we're also making the commitment that any digital package that we offer will have a preponderance of Canadian services in it.
14082 So, on top of that a Canadian can buy a pick‑and‑pay Canadian or U.S. service, but there's just not enough U.S. services to buy on that basis to ever get to that situation you're describing.
14083 THE CHAIRPERSON: Okay. This was an elaboration of what Mr. Bissonnette says, but it doesn't take away from his clearcut answer which was no.
14084 MR. BISSONNETTE: Yeah. That's exactly the answer.
14085 THE CHAIRPERSON: Okay.
14086 MR. STEIN: Can I just make a point because you raised the issue about people finding it very difficult to talk to us and not liking us and all this type of thing.
14087 But, you know, we have 3.3‑million customers who love us and they love us because we give them choice and that is something that the programmers never liked from the beginning.
14088 I mean, most of the battles and disputes we've had with the Commission are people say, oh, we want to be on this package, we want to be on that package, and we've always said no. We want our customers to have a choice.
14089 We've been having this battle with programmers ever since ‑‑ in the late 70s. And, you know, J.R. and Peter and I went, when the negative option disaster took place, we went across and met every Minister of Consumer Affairs in the provinces we served and we said, we have two conditions in terms of how we offer our services.
14090 One is, we never take anything away from anybody that they don't want taken away; and, No. 2 is, we never force them to take something they don't want. So, those are the two rules we had going in when we launched digital.
14091 And we also launched digital on the basis that we gave ‑‑ and maybe it wasn't from our point of view, even our point of view the best thing to do ‑‑ was a pick‑and‑pay environment where you could pick five services and people loved that.
14092 We didn't just complicate them with all kinds of packages, et cetera, et cetera, it was a pick.
14093 Now, the programmers didn't like it and some of them have argued at this proceeding, they compare our penetration rates for their services on Shaw as opposed to ‑‑ or Star Choice as opposed to other services.
14094 But we give consumers a choice and if the programmers don't like us because we give people a choice, that's their problem because we have 3.3‑million customers out there who like it.
14095 And the preponderance model ‑‑ just to finish ‑‑ the preponderance model actually guarantees them more access because we have to be able to offer the Canadian services.
14096 Those are the ones we really want to have are good, Canadian services.
14097 THE CHAIRPERSON: Nobody has said that Shaw doesn't treat its customers well, but the complaints are that Shaw doesn't play by the rules.
14098 MR. STEIN: J.R. ‑‑
14099 THE CHAIRPERSON: That is quite a different rule, that is quite a different issue.
14100 MR. STEIN: Yes.
14101 THE CHAIRPERSON: Whether it is justified or not, I am not commenting on it. I am just saying, all these things we have heard here in two and a half weeks, nobody says Shaw treats its customers badly, that was never the issue.
14102 The issue was, what are the rules, do they favour them?Does Shaw abide by them? Do they play it fast and loose or do they interpret them extremely?
14103 That is the issue.
14104 MR. BISSONNETTE: And we say we do follow the rules. We're in compliance on all carriage obligations. We have independent and large specialty conglomerates represented on our cable network.
14105 One of the challenges that we explained to you when we were chatting with you a couple of months ago was that we have capacity constraints and our energies are very, very much focused on expanding the capacity of our systems in order to accommodate more services.
14106 The issue with the pay television ‑‑ the Allarco application was a commercial issue. We met with them. We offered, in fact, to carry them prior to December on the basis that we would give them a launch of their standard definition channel, but they said, no, you know, we think that's an undue preference, we don't think you're being representative of our services.
14107 So, we were able to, through the course of negotiations, add four standard definition, one hi‑definition in an environment where we have constrained capacity. We've had to do things in order to continue to add services, and we will.
14108 Wild TV was one we didn't frankly think would be attractive to our customers. We had hundreds and hundreds of calls from customers wanting Wild TV, a small, little independent that thought he had no bargaining power, but his bargaining power was in the content that he offered our customers, and so he's now on.
14109 THE CHAIRPERSON: Okay. Now, you said in your access model the only thing that protects people is the undue preference rules, is what you are suggesting.
14110 As you know, there have been suggestions that we strengthen those and build in a reverse onus so that if anybody complains about access or ability to add that, in effect, the BDU has to demonstrate that they have abided by the rules, et cetera.
14111 MR. BISSONNETTE: Yes.
14112 THE CHAIRPERSON: What is your view on those?
14113 MS RATHWELL: If I may, we'd like to respond to your question and we will on the undue preference.
14114 But just a final point on access that probably bears mentioning is that, as we've emphasized throughout our submission, our focus really is customers and there's customer choice and customer value.
14115 And one of the problems that we find with the access rules is that the value proposition often slides as a result of the guaranteed access.
14116 And, so, we have a situation where, for example, several Category 1 services that have had guaranteed access and a presence on our system for seven years now are still failing to attract any significant number of subscribers which leads to the question, who is the access ultimately benefitting? Is it benefitting the Canadian broadcasting system if nobody's watching it? Is it benefitting our customers if they're not watching it?
14117 You know, we have to ask those questions and we submit, you know, with respect, that it's not beneficial for either the system or for our customers.
14118 And then with respect to your question on the reverse onus, in our experience, the current undue preference rules and the process that accompanies that is more than satisfactory. We don't recall a situation at Shaw where we haven't felt compelled to put on the record in response to an undue preference or an undue disadvantage complaint all of the information that was relevant to the dispute.
14119 These don't always enure to our benefit ultimately and, you know, sometimes we're successful and sometimes we're not.
14120 But we're not aware of any significant flaws with the current process and we'd recommend the maintenance of the current approach.
14121 THE CHAIRPERSON: Okay. So, just to terminate on access. If I understand it, if I accept the Shaw proposal, the only people who have access are OTAs and 9(1)(h)?
14122 MR. BISSONNETTE: That have guaranteed access.
14123 THE CHAIRPERSON: Yes.
14124 MR. BISSONNETTE: That's correct.
14125 THE CHAIRPERSON: Yes.
14126 MR. BISSONNETTE: Yes.
14127 MR. STEIN: Yes.
14128 MR. BISSONNETTE: The other ones ‑‑
14129 THE CHAIRPERSON: On guaranteed access means just that, or are they automatically part of the basic?
14130 MR. BISSONNETTE: Those are automatically part of the basic.
14131 MR. STEIN: 9(1)(h).
14132 MR. BISSONNETTE: Yes.
14133 THE CHAIRPERSON: And it is a contiguous basic?
14134 MR. BISSONNETTE: Did you say a contiguous basic? We're talking in terms of our basic, that those 9(1)(h) services ‑‑
14135 THE CHAIRPERSON: No, I mean that the channels are one next to the other.
14136 MR. BISSONNETTE: Oh, I see.
14137 THE CHAIRPERSON: That 9(1)(h) doesn't find himself up in the 600s while all your basic packages are ‑‑
14138 MR. BISSONNETTE: No, that ‑‑ so, that's not in our view.
14139 THE CHAIRPERSON: So, they are part of your basic package, but they may be anywhere where you think they are best positioned in terms of marketability?
14140 MR. BISSONNETTE: That's correct.
14141 THE CHAIRPERSON: Okay. Sorry, Mr. Stein, did you want to say something else?
14142 MR. FERRAS: I was just going to follow up with what Cynthia was saying.
14143 We just think that whenever we have to respond to a complaint from the industry we really have to do a full and detailed response to the Commission to make our case.
14144 So, there really is a big onus on us now to respond to a complaint and explain exactly what we've done and why we've done it and there's no short cuts.
14145 We've done a few of these, to say the least, and there really are no shortcuts. You really have to explain to the Commission in policy terms and in market terms and to the complainant what we have done.
14146 That's why we feel that the process is working.
14147 And we really think there should be an onus on the person making the complaint as well to make their case, otherwise we're going to end up with a lot of frivolous complaints with unsupported evidence that, you know, every time we make a small change are we going to be in a situation where just the letter comes into the Commission saying Shaw just moved a channel ‑‑ it might not even be their channel ‑‑ and then we have to do a huge response.
14148 We think there should be an onus on the complainant as well, but we think the process is working.
14149 THE CHAIRPERSON: I have some trouble accepting that because, as you know, programmers are very reluctant to take on BDUs and drag them before the CRTC. So I don't think you want to face an avalanche of complaints. It is certainly not the experience that we have seen so far.
14150 But on your last answer, Mr. Bissonnette, why not contiguous? It is the basic package. It is the buy‑through; you are offering it as one and yet some of the people, especially the 9(1)(h)s, are complaining bitterly because they are not being placed contiguously.
14151 MR. BISSONNETTE: In the analog world, it is not contiguous. If there was a digital, a pure digital world, we could see where contiguous would work.
14152 THE CHAIRPERSON: Educate me. Why is it difficult in the analog world?
14153 MR. D'AVELLA: In the analog world, I mean these lineups have evolved over time. Services were launched at different times. But it would be virtually impossible for us to move the tiers. The tiers are kind of fixed in place.
14154 I mean, we would have to go out and start changing traps.It is just not a practical way to run the business. In a digital world we could do that.
14155 THE CHAIRPERSON: Okay, let's go on to genre then.
14156 You have heard everything under the sun on genre here in the last two weeks from people saying the system is fine, don't touch us.Rogers is saying streamline it; keep genre but keep buckets of genre, sports, lifestyle, music, dah‑dah‑dah‑dah. Others saying the system doesn't work, strengthen it, et cetera. Some people are saying you don't need it for domestic, but you certainly need it to keep the foreigners out. Certainly some of the independents and certainly the creators have said that the genre is absolutely the essence; it is part of the Canadian system. The Act mandates diversity; it demands access for everybody. Given the small market, given the small returns, the only way that you can have a specialty channel and make it exist is if you at least know you own this genre. You still have a battle to get carriage, to get advertising, but at least nobody can come and take this genre away from you if you own this slice at least.
14157 I would like to understand why you are coming basically saying with the key argument that I have heard several times: it has been a great success. Why tinker with success? Why abolish it, et cetera, and throw it into the unknown and all you're going to have is a morphing towards the middle. Everybody is going to chase the biggest audience and essentially, you know, you are going to lose what you achieved through regulation, which is diversity.
14158 Now I appreciate, like Mr. LaRose said, everybody who appears before me makes self‑serving arguments, so I take all of this with a grain of salt but I would like to hear from one of you.
14159 MR. BISSONNETTE: So we won't be self‑serving.
‑‑‑ Laughter / Rires
14160 THE CHAIRPERSON: That would be refreshing.
14161 MR. BISSONNETTE: We will just tell you what our customers tell us.
14162 We would like to have more programming services and we would like to have the flexibility to choose which programming services we have.As a recent example, I think the Commission received our application for the USA Network and on the basis of a conflict in genre which was, in our view, minimalistic at most, that service was denied.Here is a service that is one of the more popular non‑Canadian services available to us and only conflicted on I think some strip programming with one of the Canadian ‑‑ is it Category 1 or 2?
14163 MR. STEIN: Two.
14164 MR. BISSONNETTE: A Category 2 service. Other than that, you know, we were denied access to that service and our customers feel disadvantaged because they can't get that service.
14165 I think what we are suggesting on genre exclusivity is that as long as the non‑Canadian, whether it be an American or other foreign service, doesn't have exclusive rights to that programming, that they should be able to be carried on our cable, our distribution systems.
14166 Ken...?
14167 MR. STEIN: With respect to the Canadian services, we think the genre rules should be eliminated entirely. We don't agree with Rogers about five broad categories. We think that that would probably start to become more complicated in terms of making judgments.
14168 We feel that if people want to change the nature of their service, they would presumably discuss that with distributors to see exactly how that would unfold. But we feel that people who are creative and business people should be able to have the ability to say: You know what, I'm not making it as a book channel, I want to be a sports network.And if they can go out and try to find programming that fits that kind of situation, then they should be free to do that.
14169 THE CHAIRPERSON: You keep coming back to your central theme, which is customer satisfaction and what the customer wants, et cetera. The problem is, we are administering the Broadcasting Act which doesn't say do what the customer wants, customer satisfaction is your number one priority. It sets a huge number of objectives, which you are much more familiar with than I, but I usually say that there are basically three basic themes ‑‑ two basic themes. One is make sure there is Canadian content; the other is to make sure there is access to the Canadian system both by Canadians as producers or as participants or as viewers.
14170 You know, there are all sorts of other sub‑issues, very important ones, like 75 per cent independent production, and so forth.
14171 So saying that is what my customer wants is not the only answer.I mean, we have to look at everything through the prism of the objective that Parliament prescribed and how do we marry those?
14172 If I adopt your scheme of absolutely no genre protection, what guarantee do I have that this is exactly what the people predict will happen; that you will have a morphing towards the middle, you will have in effect two, three, five, what do I know, general categories where everybody is chasing the biggest and these very valuable, very appreciated small, discrete genres that we have created and that Canadians watch will no longer be viable and will disappear?
14173 MR. STEIN: Well, we agree with you on the Broadcasting Act objectives. It's a matter of the means of achieving those objectives.
14174 We feel that the best way to achieve the objectives set out in the Act is by giving Canadians what they want. We find that with kids, with children, they are the strongest viewers of Canadian content and somehow we beat it out of them by the time they become adults. I think that if we were able to have a system that put more emphasis on having Canadian content that would achieve it by meeting customers' needs, we would have that kind of diversity.
14175 I find it really interesting that the broadcasters keep arguing about local broadcasting as being the cornerstone and local broadcasting, you know, being the central and needing more support, when in fact it is the most popular part of the programming and it is protected from foreign competition, not by the fact that it is protected. I mean, I can watch the Detroit news if I want to, but who would want to?
14176 So I think there is a mindset here that we don't agree with, and we believe that a competitive system will achieve more diversity and that ‑‑
14177 MR. BISSONNETTE: And sustainable.
14178 MR. STEIN: Yes, exactly ‑‑ and that will achieve the objectives set out in the Act.
14179 There is no ‑‑ the rules are eliminated ‑‑
14180 THE CHAIRPERSON: And the risk is worth taking?
14181 MR. STEIN: Pardon?
14182 THE CHAIRPERSON: The risk is worth taking. I mean, the CAB says don't do that, you are going to destroy the Canadian system, you are never going to be able to re‑created.
14183 MR. STEIN: They didn't argue that on radio. They argued the opposite on radio.
14184 THE CHAIRPERSON: I'm talking about TV. We are talking about TV here. You heard them. They were here. You listened to them on the Internet I'm sure, so you know exactly what they said.
14185 MR. STEIN: I was rolling around.
14186 THE CHAIRPERSON: Okay. Now, there are several variations. You don't like the Rogers approach, I gather that.
14187 Canwest suggested keep the present one, but allow more or less a 10 per cent deviation. You know, have everybody stay in their genre but, you know, don't make it too tight.As long as their programming is 90 per cent in that genre, 10 per cent they can in effect transgress and have programming that belongs to another genre.
14188 I know you don't like genre, but get over that first of all for the purposes of the argument.
14189 MR. BISSONNETTE: I have to eat my peas.
‑‑‑ Laughter / Rires
14190 THE CHAIRPERSON: For the purpose of the discussion, what do you think of that suggestion?
14191 MR. BISSONNETTE: Ken...?
14192 MR. STEIN: Well, it's hard to get over the first hurdle.
14193 THE CHAIRPERSON: I said for the purpose of discussion, Mr. Stein.
14194 MR. STEIN: Well, I take it from what you are saying that you're not going to go away from genre protection.
14195 THE CHAIRPERSON: No. Please, you know, we are having a very serious discussion here and I have to look at all the options.
14196 MR. STEIN: Okay, I appreciate that.
14197 THE CHAIRPERSON: I understand what you are saying. You are saying get rid of genre. I said okay, but for argument sake if I don't accept that argument, there are other things that are being put forward and I would like to know where Shaw stands on these things.
14198 One of them is a relaxation by allowing this sort of 10 per cent deviation. That was a new idea that was put on the table and you as one of the main criticizers of the very rigid genre system now, I was wondering whether you thought this would be helpful or not or if this basically makes no difference, whatever your position is.
14199 MR. STEIN: Well, I think that if you aren't going to go ‑‑ I mean, we would prefer no genre protection, but of course any kind of variation would be better than what we now have.
14200 THE CHAIRPERSON: Okay. Astral came forward with a different thing. It essentially suggested that in each ‑‑ they made the parallel, if I understood them correctly, to Allarco. We allowed Allarco in, notwithstanding that in effect that genre was occupied, because we felt there was enough room for a third player in pay‑TV.
14201 So could we do the same principle on genre and say look at the various genres; some of them are more successful than others, and where they are and give a sort of five‑point criteria. You hold a hearing and say ‑‑ let's say for argument's sake, Home and Garden. There is really room for maybe a second player or third, et cetera, as long as that player would present a new aspect or a different aspect and in effect contribute to the diversity, and on that basis we might allow some of these genres to grow or be double occupied or triple occupied.
14202 What is your feeling on that?
14203 MR. STEIN: Well, we can always go for the option that would maximize consumer choice.
14204 MR. BISSONNETTE: Choice. You have done it with sports, essentially with Sportsnet and TSN and Score. I know they squabble amongst themselves as well; we are not the only ones they squabble with. On genre you certainly will see more of that.
14205 Again, we think that the more the merrier, and to the extent that they can sustain themselves by attracting customers that that is the best of all worlds.
14206 THE CHAIRPERSON: And what do you say to the argument that most people who defend genre protection say it is really an issue of market?
14207 Most of these genres exist foreign and if we don't have genre protection, then bringing in a foreign channel is going to be cheaper for them; selling into Canada is just icing on the cake. They make their money in their home market, et cetera, while we produce the Canadian version. Yes, we have a Canadian content, but whether Canadians are willing to pay for that extra to the extent of the cost is very much open and, in effect ‑‑ Home and Garden is a perfect example ‑‑ you will wind up with an American Home and Garden and ours will die on the vine if you take away the genre protection.
14208 MR. STEIN: Well, Home and Garden is probably a good example. I mean, I don't think that Home and Garden ‑‑
14209 THE CHAIRPERSON: I didn't want to pick on them. I just picked one that came to my mind.
14210 MR. STEIN: No, no, it is easier to deal with specific programming issues rather than broad generic terms.
14211 If you had a Home and Garden that was telling you how to grow vegetables in southern Georgia, it wouldn't be of much relevance to somebody in Alberta who is trying to shovel snow out of their driveway. So I think that most areas, a lot of areas ‑‑ we find in our surveys that Canadians want Canadian programming.It's just a matter of how you get there.
14212 You know, our surveys indicate 85, 90 per cent of people want there to be Canadian programming services, want there to be Canadian programming. We feel that Canadian programming, to the extent that it is suffering difficulties, would be better if it had to be more competitive with the U.S. programming and differentiate itself and make itself more relevant to Canadians.
14213 So I think that is the view we have in terms of this.
14214 If we're looking at genre protection, getting more flexibility within that is fine.
14215 And if the American services can't have exclusive rights to the programming that they do have, then we feel that they should be able to come in.
14216 THE CHAIRPERSON: You keep harping on this exclusive rights, but isn't that a bit of an empty right?
14217 First of all, especially when we are talking foreign, but even on domestic, is the rights also owned by somebody else? Then first of all it is a question, yes, you as a Canadian channel can get them, but you are directly competing with somebody who has the same program, et cetera, who probably gets it on better terms because he is buying it for a bigger market, et cetera, and is now competing with you.
14218 And third, how do we enforce it? How do we enforce program rights from ‑‑ do we go to each one of them and say show us that your program rights are non‑exclusive; that you have negotiated open terms?
14219 A lot of these folks who hold the program rights are not part of our jurisdiction.
14220 MR. STEIN: Well, I think the first problem we have is that if you look at the current situation ‑‑ and we were quite concerned about, as you know, the rejection of the USA Network.
14221 What was fascinating to us is that when people look at the Broadcasting Act, the reason that we were rejected was because we overlapped on series that were American. So we say okay, that is strange. So we were rejected on that basis for, you know, a minimum overlap, but also an overlap not on anything other than the U.S. programming that they had.
14222 So our view is that we would prefer there to be ‑‑ we understand the issue if a service is trying to come in and it says, you know ‑‑ I don't want to use specific names, but it comes in but comes and says to the programmer in Canada: We are not going to allow you to have the rights because we are going to come in on our own.
14223 So we don't think that would be appropriate.
14224 But let's also look at the reality of it. ESPN is not going to come into Canada. ESPN owns a good chunk of TSN. You know, there are similarities in the programming that are apparent to anybody who goes to the U.S. and comes back to Canada.
14225 Canadians aren't interested in basketball to the same extent.We want to make sure there is lots of hockey ‑‑ unfortunately, the Flames got knocked out.
14226 So when it comes down to it, I think that the reaction of "oh, the Americans will come in and they will take over the whole system" is really an over‑reaction. We are talking about just having the ability to pick and bring in specific ones, making sure that they are appropriate within the Canadian system.
14227 And the preponderance rule will ensure that the system remains Canadian.
14228 THE CHAIRPERSON: As you know, this issue really came to the fore with the whole issue of RAI, et cetera. The net result of our decision now is that you can get RAI here; you can also get Italian football on Telelatino, and it's non‑exclusive. But I bet you anything what Telelatino pays is a different price than what RAI pays in Italy.
14229 Therefore, you know, giving them this rate of non‑exclusivity may very well be a very empty right. It just does not commercially make much sense.
14230 MR. BISSONNETTE: Any comment?
14231 MR. D'AVELLA: Well, in that particular instance I mean you are addressing ‑‑
14232 THE CHAIRPERSON: I'm just using this as an example of what was the issue. I'm not trying to revisit that decision.
14233 MR. D'AVELLA: I mean, Corus will come up and talk about the success of Telelatino. I think Telelatino has been able to do very well despite the entry of RAI. RAI is a discretionary service. I mean we offer it in some markets where there are, you know, enough Italians to kind of justify the service.
14234 But I don't think it has fundamentally changed their economic model or changed anything from their perspective.
14235 Just to add to Ken's point, I mean clearly you're not going to see an ESPN in this country because they are a significant owner of TSN.But even things like first‑run movies, I mean the relationships between companies like HBO and the Canadian pay licensees are so strong, are so embedded, they have developed economic models over the past 20 years where HBO probably wouldn't want to change that.
14236 So we are really talking about services that are really on the margin, on the fringe, services like USA which do try to be distinctive.
14237 And there will always be a variety of venues for strip programming, for movies. I think I have seen The Matrix on APTN, on American Movie Classics, on Lonestar ‑‑ I'm not sure how that is a western movie, but it was on Lonestar.I have seen it on Action. So everyone is buying movies.
14238 We are buying movies in VOD. We are buying them in different windows. We are buying old movies; we are buying new movies.
14239 It is really about providing customers with here is a variety of ways to get this programming. How do you want it? We can provide it to you in this particular format, in another format. We don't see any harm to the Canadians as a result of it.
14240 THE CHAIRPERSON: Our whole system of access and genre is really meant to leave our Canadian content the way it was and contributions to Canadian programming, et cetera.
14241 If we adopted the Shaw approach, isn't the net result that every programmer will say what is the minimum that I can do to keep my Canadian audience and, on the other hand, increase my returns to my shareholders?
14242 I no longer have genre protection. I don't have access. I have to compete with these guys. Does it make sense to have 50 per cent Canadian content, and so on, or can I live at 35 or can I live at 25, et cetera?
14243 Isn't that inevitably the net result of your ‑‑ that the contributions to the Canadian system, whatever form they are, are going to be driven down?
14244 MR. STEIN: We don't agree with that, and I think that it's ‑‑ it's a model.We can use different models of policy approaches, but we think that the model of protectionism is a bad policy approach and it doesn't work in many sectors.
14245 We, in our western Canadian roots, use the transportation as an example. I mean, we heard stories ten years ago about the Canadian railroad system was collapsing and we had to, you know, continue to protect it and subsidize it, et cetera.And we transformed it by privatizing it and going to a deregulated competitive approach.
14246 Now, people say well, culture is not like transportation.Well, culture, you look at the strong Canadian cultural contributions to the world and they aren't protected, whether it is artists, Jeff Wall from Vancouver, writers, authors, Margaret Atwood, they aren't protected and they do extremely well around the world.
14247 Musicians. I subscribe to Rolling Stone. Every week there is a lot more in Rolling Stone about Canadian musicians than there is in Variety about Canadian television.
14248 So I sit there and I look at it and I say, you know, maybe the model is wrong. Maybe going to a model which is more competitive, which encourages people to be ‑‑ you know, look at films, "Little Miss Sunshine", $10.5 million, made a huge amount of money; "My Big Fat Greek Wedding", whatever. Lots of examples that are outside the Hollywood ambit.
14249 I think we get too focused on the fact that, you know, we are a small country and we can't compete. We have said this time and time again, that we don't agree with that. We think that there would be lots of room for dealing with the American situation, which we recognize is strong, by trying to develop a more competitive situation here in Canada.
14250 We believe that eliminating the access rules and not having guaranteed access, but sticking with preponderance, you know, we think that would be a better approach and would help ‑‑ would be stronger in terms of developing support for the objectives laid out in the Act.
14251 THE CHAIRPERSON: You are dealing with a former free trader, a former Commissioner of Competition. I am not used to being called protectionist and I don't have a protectionist viewpoint.
14252 MR. STEIN: I wasn't calling you protectionist, but certainly the CAB is protectionist. You are being asked to protect.
14253 THE CHAIRPERSON: But I am also aware that the requirements under the Broadcasting Act are not market‑driven. They are cultural, they are social, and a whole bunch of them which you cannot achieve by free market alone. That is why I am on record as saying we will always have regulation in the broadcasting.The question is let's make sure that it is smart, it is targeted to achieve the objectives without interfering more than is necessary with free market.
14254 But to suggest that culture is like transportation and both of them will benefit if you just let the viewers ‑‑ you cannot demonstrate to me in any convincing way that some of the objectives of the Broadcasting Act can be achieved by pure market forces alone.Surely you are not saying that.
14255 MR. STEIN: By free market forces alone?
14256 THE CHAIRPERSON: Yes.
14257 MR. STEIN: No, I'm not saying it's strictly by free market forces, but we are saying that the balance has gone way, way, way over to the one side of it, which is the protectionist side of it, and that you need to have certain rules in place.
14258 You know, getting back to ‑‑
14259 THE CHAIRPERSON: Okay, but what are the rules then? Preponderance, period?
14260 MR. STEIN: Yes.Period, yes. Preponderance and ‑‑ yes, and having a basic cable service, and preponderance would be exactly the way to go.
14261 THE CHAIRPERSON: Okay.
14262 MR. BISSONNETTE: It's very simple.
14263 THE CHAIRPERSON: Yes. But, I mean, my question was: If I buy your model, do I not automatically drive down the contributions to Canadian content, to Canadian distribution, et cetera, because the market forces ‑‑ I mean, if you want to talk market forces, you have the reality that this is a smaller market. You earn your bucks on a smaller base than you do in the States, et cetera. So there are different economies of scale here.You have to take this into account.
14264 You are not going to ‑‑ everybody is going to try to get the biggest market possible and you are not going to do that by being differentiated in having small separate niches as we have right now.You are going to have a morphing towards the middle.
14265 We can argue whether the morphing will be towards five channels, 10 or 12, but to suggest it is going to stay the way it is right now with the number of specialty channels we have, I think it is basically illusory.
14266 MR. STEIN: Let me go to another example, is going to the Internet and looking at what ‑‑ I mean, it's interesting, we met with one group of government officials who said to us you know ‑‑ we said we are concerned about this kind of protectionism ‑‑ not of your view, Mr. Chairman, but of others who have expressed ‑‑ and they said why are you worried about it?The CRTC is irrelevant to anybody under 30.
14267 Now, what you are saying is that ‑‑ so does that mean that all those people who are under 30 are less Canadian? In fact, they are more Canadian. They watch more Canadian TV.
14268 You know, as part of the Shaw Rocket Fund board, we meet with people who are involved in youth and youth studies, et cetera, and they say the number one most important thing to kids is their cell phone and most important application is message texting. The next most important application is the Internet and YouTube and Facebook and all those kinds of things. And then number three, and probably a distant number three, is television.They love it, they like it, but it is certainly number three.
14269 So what we feel is that if you want to build cultural industries, you have to be in to respond to those kinds of expressions and need that are out there by Canadians. And as that generation grows up and also has more influence over the older generation, then we are going to have to make sure that we have an industry that is able to satisfy that. And that is what Canadians want. That's what we want.
14270 THE CHAIRPERSON: That's what we want. We are right on the same wavelength. I'm concerned about the media. You know we are going to have a big hearing on this issue. I'm concerned about being relevant. I am concerned about having something that Canadians want. There is no question about it.
14271 The question is you are going from one extreme to the next.Part of this hearing is to determine, as we said at the outset, what we can take off you basically saying, unless I misread you, is let her rip. The only protection is going to be consumer preferences and preponderance. And I say fine, if I buy that I still ‑‑ you tell me what assurance or what likelihood is there that the broadcasters' contribution to hold Canadian content will stay where they are.
14272 I guess you are telling me you hope that it will be in the self‑interest to do that, but that's about the only assurance you can give me
14273 MR. STEIN: Well, right now I would say let's judge it by the experience we are having. If you look at the analog services, the Cat 1s and the Cat 2s, the services that have to be the most responsive to the marketplace, to dealing with distributors and consumers, are the Category 2s.
14274 So what we are suggesting ‑‑ you know, you are saying we are suggesting a total abandonment of the rules. We are not. We are saying as we move into a digital environment, everybody becomes a Category 2. Right?Fine.
14275 THE CHAIRPERSON: Yes.
14276 MR. STEIN: And what's wrong with that? They are great services. They are doing well and they will continue to do well, and they will meet the expectations.
14277 Again, Canadians want Canadian services.
14278 THE CHAIRPERSON: Okay. As you know, Cat 2s have a lower Canadian content and they have no CPE, so you are making exactly my point of all coming down to the Cat 2 level.
14279 MR. STEIN: Well, to us it's not a question of coming down. It may well be a question of coming up as well.
14280 You know, we just firmly believe that in competitive markets we have to respond to the demands of our customers and having content providers also in this world that we are facing over the next number of years have to respond as well to that.
14281 It's interesting, when you did your Technology Review there was one common view that everybody expressed and that is that the world is changing. Right?
14282 But then there was two very distinctly different approaches to dealing with that change. There was a whole group of people who said oh, my goodness, the world is changing.We have to come in off all these regulations and all these protections and all these subsidies to ensure that the world we have is sustainable through that time period, and a whole group of other people, of which we were one, who said no, if you are going to deal with this new world, you have to mirror it. You have to become deeply immersed in it and involved in it and have to be able to respond that way.
14283 So that is the view that we have: that by being able to respond to that kind of environment ‑‑ I mean, I see more in the programming side from looking at it from the perspective of the Rocket Fund, and it is amazing what Canadians are able to do on that side. It's amazing the kind of reputation we have around the world for what Canadian creative people are able to do with children's programming and link it into the web, et cetera. And unleashing that to me would be the most important thing we could do.
14284 My view is that the current system does not allow that to happen.
14285 In fact, children's programming is a perfect demonstration because the amount of money being invested in Canadian programming by broadcasters and others has absolutely declined over the last number of years.
14286 THE CHAIRPERSON: Okay, I think we have beaten this subject to death.
14287 By the way, don't read anything into my question. All I'm doing is testing the ideas that are put forward against yours, which are different. Where we come out is to be decided by us and the entire Commission.
14288 So as you have done until now, as I say, don't read the tea leaves. I am giving everybody a hard time, asking everybody the same question from the other side.
14289 Let's go to fee for carriage.
14290 Your position is very clear. You are against it. Essentially your basic argument is they don't need it. Both the two largest services in Canada have just made massive acquisition and they clearly, you know ‑‑ if they were suffering financially, they wouldn't have been able to buy either Alliance Atlantis or CHUM.
14291 Second, I mean I heard their submissions; you heard them, as everybody, it was somewhat self‑serving, you know. I don't for one second believe that they went to their bankers and said we have this flat over the air business, it is not going, it is not going anywhere, but please finance us for $1 million to buy all these specialty channels.Yes, there will be some synergies, but they are minor.
14292 That is how it was presented to us. Clearly that is not the case. It was a sober business decision and they saw great potential in cross‑marketing, in joining their OTA with the specialty channels to convince their bankers and their investors that this was a good deal.
14293 We approved them and I wish them all the success.
14294 With that being said, they are in the OTA business and the OTA business is our prime vehicle for local content. All the figures show it is flat. It has now been flat for two years, and I don't see any indication that it is going to grow.
14295 You say well yes, but this is corporate family and they can cross‑subsidize, et cetera. We both know cross‑subsidization is economically irrational behaviour. If you have a business and you have several divisions, one of them works and one of them doesn't work, one is fruitful, et cetera, yes, you will maintain them but you will try to cut down the costs and you are going to try to turn the unprofitable one profitable rather than support it with the proceeds from the other.
14296 If you do that, what is going to suffer is the local content, yet that is one of our key considerations. This is our prime vehicle for local content.
14297 You in your submission this morning say they have violently rejected any tying of the fee for carriage to local content. You have heard something differently than we. I heard sort of a lukewarm response, but I didn't hear violent response. But be that as it may, I thought we made it quite clear that we said if there is a fee for carriage, we are asking the question: Should there be one? What should be the amount and what should be the obligations?
14298 It is not sort of an ongoing free operating subsidy for OTA.That is not anybody's suggestion.
14299 So in that context, is there any form of fee for carriage that to you would be acceptable if it is tied, let's say, to incrementality or specifically to local content or if it is time‑limited; you say yes, this is the cornerstone of part of our local content, there is no question, but we want to make sure that this is really ‑‑ that you are also taking some steps to fix it, et cetera.
14300 So rather than taking the position that you are saying a flat no, are there variations on the theme?
14301 MR. BISSONNETTE: Absolutely not. I mean, I think we have given you 50 reasons why fee for carriage shouldn't be considered by the Commission.
14302 In terms of the enterprise, you are absolutely correct that the enterprise comprises of specialty services and over the air broadcasters and they have it within their purview to make decisions to bolster the over the air side of the business if they choose to. They are now in a better position to do that by virtue of the synergies that they are going to benefit from from the acquisition of those specialty services.
14303 They are now a much stronger conglomerate, with much more moving parts, with much more creative groups that they can call upon.There is nobody restricting them in terms of making their over the air broadcast services more attractive than themselves. If they chose to do more local programming, it is absolutely within their discretion to do so.
14304 So we think that there is not one iota of an argument that there should be a fee for carriage. You know, they have discretion to change their advertising rates if they want.They can be more appealing to advertising. They can do things within their own operating structure in terms of becoming more efficient.We know that that is one of the drives that they have.
14305 But we don't see one iota of an argument that they should be passing on their costs to our customers.
14306 THE CHAIRPERSON: What would you do without OTA?
14307 MR. BISSONNETTE: Well, you know it's ‑‑
14308 THE CHAIRPERSON: Isn't OTA something that Canadians really do want to watch? It's one of the prime things. You put it in your basic package. You would put it in there even if we didn't force you to.
14309 I mean, when I say it is a cornerstone of the system, let them do what they want.
14310 MR. BISSONNETTE: Well, we are not saying that. We say that they have a role within the broadcasting system. They have a responsibility within the broadcasting system to program with each of their "B" contour locations and they do a very, very good job of that. We just don't buy the argument that they for some reason have overnight become unprofitable based on their behaviour.
14311 They have priority carriage. We have given them all of the ‑‑ you know, we work very closely with broadcasters. We actually work very collaboratively with them in our local regions where they have ‑‑ you know, where in the past they have had technical issues and we have worked together with them. We recognize their importance. But we also recognize they are just one small portion of what we provide to our customers.
14312 They have control over the viability, economic viability of those over the air transmitters.
14313 MR. STEIN: In terms of the over the air, I mean it is interesting in the Bell submission they filed evidence in terms of the viewing of Canadian broadcasters and pay and specialty, and the most fascinating probably about that is the success of the combination of broadcasting and now they own those services.
14314 So we are not saying the over the air is not important.It's just that with that kind of a combination, the corporations are strengthened. That was the whole basis of their submissions when they appeared before you, is that they are strengthened.
14315 So their ability as over the air services to meet the responsibilities is still there.
14316 So we think that to go to Canadians and say to them well, you know, the world has changed and you are now going to have to pay for it ‑‑ and, by the way, we are not asking the people who have over the air receivers and aren't using cable to do this; we are asking just cable and satellite subscribers to pay for this.
14317 So it seems to us to be a bit ironic, if not contradictory, to be able to tax cable and satellite subscribers to fund over the air services.
14318 THE CHAIRPERSON: Oh, come on, 90 per cent of Canadians, or somewhere in that neighbourhood, receive their over the air via cable or satellite. So I mean that is a little bit of a facetious argument to say you are asking the cable subscribers. They are the very ones who receive the service.
14319 MR. STEIN: Well, we don't ‑‑ our penetration rates are 50 per cent; they are not 90 per cent.
14320 THE CHAIRPERSON: Not yours, but ‑‑
14321 MR. BISSONNETTE: In terms of the overall conglomerate of BDUs, you are saying 90 per cent get it through that; that's correct.
14322 MR. STEIN: Well, if you have a black‑market dish, you don't have to pay.
14323 I think the thing is that to go to people, to go to 9 million, 10 million Canadian households, and say to them that you are going to pay $5‑$10 a month to support three or four companies, this seems to us to be not a good policy and that that is something that we think is inappropriate.
14324 THE CHAIRPERSON: Okay. But three or four companies, you say. First of all, we talk about a local broadcaster and then more than three, but there are three big ones, I agree with you.
14325 But secondly, what we talked about is it being incremental and it going to the actual local station, not going to the network, right, so that the fee for carriage would actually ‑‑ so that is one of the questions my colleague Michel Arpin posed: Shouldn't it go to that local station in Moose Jaw who are putting on the content for Moose Jaw? They should get the money so that it is incremental over what they get presently from ‑‑ let's take CTV or whatever ‑‑ from their parent.
14326 MR. STEIN: They are already getting money through Star Choice and Bell. I mean at the last hearing the small broadcasters from those areas said that they had a home run. So their PBITs have improved significantly.
14327 So I don't think it is appropriate to use those small systems as an example.
14328 But to say to the people of Toronto that you have to pay, or the people in Calgary, that you have to pay extra because CFCN requires that money to do their local programming, we just don't think that is going to fly with Canadians.
14329 THE CHAIRPERSON: I am being reminded by my colleagues of the call of nature here.
14330 I am not finished with you, but let's take a 10‑minute break.
‑‑‑ Upon recessing at 1042 / Suspension à 1042
‑‑‑ Upon resuming at 1102 / Reprise à 1102
14331 THE CHAIRPERSON: We were on fee for carriage, your favourite subject.
14332 As I mentioned, tying it to local content, incremental, and putting a period of time on it ‑‑ let's take a period, five or seven years or something, and then to revisit or review.
14333 That does not make the concept any more acceptable to you, I gather. You still think it is, basically, wrong.
14334 MR. BISSONNETTE: Mr. Chairman, you have ascribed a kind of cornerstone positioning for local broadcasters, and I think that Alex Park, who is our Vice‑President of Programming, would be rolling his eyes right now, because in Calgary alone we produce over 8,000 hours of local programming, local relevant programming, that is intended to be attractive and meaningful to those in each of the communities that we serve, and we have no exclusivity, if you will, on local programming.
14335 The broadcasters, as an example, have created certain voids within local programming that we are quite happy to fulfil, because our customers really appreciate what we do in terms of animating the local communities that we serve.
14336 As an example, last year and the year before, and this year, we had the blessing of being able to carry Western Hockey League hockey games, which are taking place right in our communities, whether it is in Saskatchewan, Saskatoon, or Vancouver, or Calgary, or Prince George, and our customers really appreciate the fact that we have taken the time and made the effort to make those games available to them.
14337 The broadcasters could easily do that. Instead of spending money buying U.S. programming, they could do more, and focus more on the local communities with those resources.They could do, we are sure, a tremendously good job.
14338 We do that good job. So, in terms of a being a cornerstone, local, over‑the‑air provider, we are a cornerstone cable‑casting local provider of community programming, and it is greatly appreciated by our customers.
14339 There are more than just the over‑the‑airs that are doing that kind of programming.
14340 But they have a choice to make, and they made the choice to spend more of their dollars on acquiring U.S. programming, in competition with each other, driving up the prices of that programming, as opposed to doing more local programming.
14341 THE CHAIRPERSON: That kind of goes back to what I said, that the OTA is the cornerstone of the system, and that has been so historically.
14342 We started off with having OTA ‑‑ we imposed upon them obligations on Canadian content, on exhibition, prime time, et cetera.At one point in time they had CPE, et cetera.
14343 Then we developed the whole specialty system, and then along came the BDUs, of course, which added great, enhanced distribution, et cetera.
14344 This all started with the OTAs, so that's why I talk about the OTA as being the cornerstone.
14345 And, yes, you are saying that they are spending far more money than they should on foreign programming, and that is really what their problem is, rather than ‑‑
14346 That may be right.
14347 And, of course, they say: That's how we get the viewers, who then stay for the Canadian programming.
14348 I am not going to get into that, but what I clearly see is that the local programming, which is not exclusive, you are absolutely right ‑‑ their community channels vary ‑‑ their specialty channels ‑‑ but, by and large, local programming is delivered by them, and it has been progressively reduced, cut back, et cetera, yet it is a very key part of the system.
14349 One way to address this issue, which they have come forward with, is fee for carriage.
14350 In fact, I went one step further and said, "Well, if that's how you justify it, then let's tie you to it. I want to see some bang for the buck."
14351 Rogers was here and said: Why are they getting fee for carriage? They will get exactly the same after the fee as before.
14352 I said: Well, that can easily be changed. If you specifically tie it, you provide an incremental, et cetera. If you provide it, it goes to the local ‑‑
14353 By the way, as a parenthesis, Rogers, I owe you an apology.Your basic package is not 65 in Toronto, but 38. CBC misrepresented you, so my apologies, panel.
‑‑‑ Laughter / Rires
14354 THE CHAIRPERSON: Back to OTA.
14355 MR. BISSONNETTE: I know that you are being provocative ‑‑
14356 THE CHAIRPERSON: No, I am trying to say, "Here, look ‑‑ "
14357 MR. BISSONNETTE: ‑‑ but what evidence have they given us ‑‑ what evidence have they shown you that they have the need?
14358 We haven't seen that.
14359 And in terms of the purpose of fee for carriage, what did they tell you with their own voices? They told you that it is, in fact, to increase their profitability.
14360 And even cajoling them, as you did, to try to get some commitment on increasing their Canadian content, they resisted that by saying:No, this is just to fix the cracks .
14361 They haven't shown any evidence that they have the need.They have the resources and they have the wherewithal to do more local programming, if they choose to do it, and they have chosen not to do it. They have said: We just need this to improve our PBIT.
14362 THE CHAIRPERSON: I thought it was CBC who said that it was to fix the cracks, but there have been so many representatives ‑‑
14363 MR. BISSONNETTE: There have been too many cracks here, haven't there?
‑‑‑ Laughter / Rires
14364 THE CHAIRPERSON: Let's go to the related subject of distant signal. We spent a lot of time on it here. First of all, Rogers was saying: We are not the problem, it's the DTH.
14365 And the DTH was saying: No, we're not the problem. We pay, too ‑‑ et cetera.
14366 Then, when CTV and Canwest were here, they said: Yes, well, they pay something, but this isn't the value for it, and this is our signal ‑‑ the position of CTV basically being that sim‑sub is the second best anyway.
14367 We pay for the Canadian rights, so we should have exclusivity.If you want to protect us, that's fine, but then make it ‑‑
14368 And when you do time delay, or station shifting, we lose the value of those programs that we paid for. So the only way to do it ‑‑ and it's very simple ‑‑ give us the right to ‑‑ that they have to negotiate consent from us for a distant signal.
14369 What do you say to that?
14370 You say in your submission that you offered to renegotiate, which, by the way, was news to me. But, even so, obviously those negotiations have not been taking place.
14371 MR. BISSONNETTE: Yes. We are able, willing and ready to negotiate, as we committed at the last hearing, and that hasn't taken place. Essentially, they have no interest in talking about that.
14372 We have a package of distant signals, and we have it because, once again, our customers have really made it clear to us that they enjoy having those distant signals.
14373 I don't think there is any lack of recognition by the broadcasters that that is the case. In fact, when we were constituting our packages of distant signals, they were very clear that they wanted to be included in that package, because they saw value in it.
14374 So it's not just a take, if you will, which is being characterized as us just taking these signals and willy‑nilly putting them somewhere, they wanted to be included in those distant signals.
14375 And to the extent that they can monetize the benefit of those, again, we think that they have the full capability to monetize those distant signals.
14376 And to the extent that you would give them an easier path, or a path of least resistance to getting money for those, that is the approach they are going to take.
14377 But sitting down and collaboratively talking about what is the benefit to our customers, what is the value to our company to have those services, and how do we do that, we haven't had those discussions.
14378 THE CHAIRPERSON: From that, I take it that if we accede to Canwest and CTV and say yes, they cannot retransmit without your consent, so then negotiations will ensue, you will negotiate and you will cut a deal, because customers want it.
14379 I have heard for the last two and a half hours that the customer is king. Shaw wants to please its customers. So, if the customers want time shifting, you will offer it. In order to do that, you have to cut a deal with CTV.
14380 So what is the problem with us acceding to Canwest ‑‑
14381 MR. BISSONNETTE: You are characterizing them as apostles, that they are very enlightened, and that they are easy to deal with, and they are not.
14382 THE CHAIRPERSON: That's your word, it's not mine.
14383 MR. BISSONNETTE: The reality is, it's not that simple.
14384 We have commercial negotiations with broadcasters all the time.
14385 We would love, for instance, to move TSN to basic. They don't want that. We say that you get more eyeballs if you are on basic. They say: No, the rates of those services are greatly differentiated. The economics don't make any sense to us.
14386 It is not as simple as just saying: They will give you your consent because they are enlightened. It doesn't work that way.
14387 THE CHAIRPERSON: Let's stay with this. Why would CTV not ‑‑
14388 I mean, you say that there is customer demand; they say that there is a value in it, which you don't recover right now.
14389 Now, obviously, you would have to strike a deal, but why would it be not in their interest to negotiate with you?
14390 MR. STEIN: The background on the distant signals ‑‑
14391 Let me start on the satellite side first, because there were a number of negotiations with respect to that.
14392 Distant signals have been part of a satellite subscriber's package for years, because of Cancom and picking up Detroit signals and making them available.
14393 When there were first proposals to come to a satellite system in Canada, the government rejected the Commission's approach, which was to be a controlled, regulated kind of approach, and said: No, we want a dynamically competitive one.
14394 So we went to a dynamically competitive model, which also has to be competitive with cable, and we tried to balance it, and I think we did succeed in balancing it by saying: Okay, we are going to carry a lot of different signals across the country, but in order to be able to do that, we have to make them available to our customers across the country.
14395 Because they have advocated a local kind of approach, it just won't work. We don't have the capacity. You couldn't have a competitive market for satellite in Canada if you forced that on the satellite business in this country. Geography, et cetera, wouldn't allow you to do that.
14396 The signals are up there, and we carry them. We probably have more up there than we actually want, but that was part of the negotiation.
14397 So they are up there. Are we willing to compensate for that? On cable we do.
14398 On the satellite side ‑‑ and Cynthia can go into this more ‑‑ we already pay the uplink. We pay to put them up there. We pay to deliver them into their local market. We pay into the Small Market Fund at the CAB, as well.
14399 We also pay for the transponders.
14400 So there are a number of costs to the satellite side in providing those signals, and the benefit of that is that we are able to offer them to our customers.
14401 We are able to do two things. We are able to offer them in the local market, and we are able to offer time shifting to our customers.
14402 If we went to CTV and they said, "No, we don't want you to carry that any more," then we would say, "Okay. Does that mean we don't have to carry it into your local market?"
14403 It would be very difficult for us to have to carry it, put it on the satellite, and then not be able to deliver it to people.
14404 So that's where it is.
14405 And then, when you get into the negotiation, the retransmission consent becomes difficult.
14406 We feel that if we are required to carry the service, then we shouldn't require their consent to be able to offer that into another market, but we are willing to sit down and negotiate a commercial arrangement.
14407 THE CHAIRPERSON: I'm sorry, I don't follow at all. I don't see why the negotiations between you and CTV regarding distant signals would be any more problematic than any other negotiations between you and the broadcaster.
14408 They are problematic. They are difficult. I am sure that both sides struggle with them, et cetera, but why is the distant signal a special case? I don't follow.
14409 MR. STEIN: We are willing to negotiate; it's the consent that is the issue.
14410 THE CHAIRPERSON: But you have to do that now. You do that when you negotiate with, for instance, a Cat 2. Right?
14411 You can't distribute them unless they consent.
14412 On the other hand, they want to be carried by you, so there is an obvious meeting of interests somewhere in the middle.
14413 It's the same here. If CTV's distant signals are carried by you, it is more money for them.They can monetize. They can charge more for their advertising. It's a cost to you. You have to come together, but why are these negotiations in any way different from any other negotiations between broadcasters and BDUs?
14414 MR. STEIN: Because the consent ‑‑ they still require us to carry it.
14415 So the consent isn't to carry it, the consent is to carry it into a different market.
14416 THE CHAIRPERSON: The distant signal you wouldn't have to carry.
14417 MR. STEIN: No, but I have to put it up there.
14418 THE CHAIRPERSON: Why?
14419 MR. STEIN: Because you people ‑‑ because I am told that I have to.
14420 THE CHAIRPERSON: On cable?
14421 MR. STEIN: No, on Star Choice.
14422 THE CHAIRPERSON: I am talking about cable.
14423 What requirement do you have to put on, in Toronto, a distant signal from Halifax? None.
14424 MR. D'AVELLA: On cable, they are already compensated. There is no issue on cable, they are getting paid.
14425 The issue in satellite is, we haven't even begun negotiations. They don't want to talk about it because they are waiting for the consent hammer.
14426 If they get the consent hammer, then it shifts to them.They have the ability to say: You are not going to carry any of them.
14427 That is contrary to what they actually want. They want them all carried.
14428 THE CHAIRPERSON: And you want them.
14429 You want it because of the customers, and they want it because they will make more money.
14430 I still don't see how ‑‑
14431 MR. D'AVELLA: That's our point. Let's have a discussion. Let's have a negotiation.
14432 If the negotiation doesn't work, then the Commission could take another step.
14433 MR. STEIN: I think it is important to distinguish between the DTH and the cable situation.
14434 With the DTH situation, it's a requirement that the signals be up there, and if the signals are going to be up there, and we aren't able to time shift those signals, the whole economics of the competitive marketplace in Canada will fall apart.
14435 THE CHAIRPERSON: Okay. Let's assume, for argument's sake, that I will accede to that argument. That still doesn't mean that we couldn't say: Fine, we will have one rule for DTH, but another one for cable.
14436 And, on cable, you can't do time shifting without consent.Logically, from everything you have said, DTH does not apply to cable.
14437 MR. STEIN: We are not in Geneva, I guess, but Canada doesn't recognize retransmission consent, as you know. So what we are saying is: Why would we apply in Canada what we refuse to apply internationally?
14438 MR. FERRAS: I think there is a big problem, too, with that idea. Those signals are already up there, and they are serving the broadcasting system very well. They are very popular with customers.
14439 And, suddenly, if there was a consent requirement, and we couldn't get it, and they took them down as a condition of the negotiations ‑‑
14440 We have to think about consumers. Those signals are up there. It's not like it's a Cat 2 that is trying to get access, or any other service that is trying to get access; we have a situation where the Commission approved cable to carry these services in 2000, for a very good reason, and we are distributing those signals.
14441 Just to be clear, there is no impasse in terms of the discussions, there just haven't been any. The plan, as presented to us by the broadcasters, was, "Let's wait for the Commission's decision on TV Policy." And then this hearing happened, and they said, "Let's wait for that decision, and then we will sit down and discuss."
14442 So, just to be clear, there is no impasse in terms of negotiations.
14443 THE CHAIRPERSON: I see.
14444 There is a sort of flavour to all of this. You are not against negotiation as long as you have the hammer, but if the other side has the hammer, you don't like it.
14445 MR. BISSONNETTE: No. Actually, nobody has the hammer now, but you are going to actually hand the hammer to them.
14446 In terms of real, legitimate, good‑faith bargaining, negotiations, discussions, between ourselves and the broadcasters, giving a hammer to either one of the parties, in fact, creates an imbalance in those discussions.
14447 That is all we are saying, that the consent is a hammer. Do not consent; there are other ways of dealing with that, and they are good, commercial negotiations.
14448 And we are prepared to pay for those signals. So it is only a matter of degree. And if the degree doesn't work, then we come to you.
14449 MS RATHWELL: Mr. Chairman, just to build a bit on something that both Ken and Mike alluded to, Ken noted that there are proceedings currently going on in Geneva ‑‑ or, he said that we are not in Geneva.
14450 What is happening in Geneva, albeit it is a very long process, is movement toward an international signal rights treaty.
14451 This is a copyright matter that is under consideration in that forum. Progress toward a draft has been slow, but this is a slow process that BDUs and broadcasters have been engaged in with the Department of Canadian Heritage and the Department of Industry, to talk about potential ramifications on an international level of the introduction of retransmission consent.
14452 It has been the position of the BDUs, as a group, that this could result in two scenarios that are not necessarily in the best interests of cable and satellite consumers in Canada.
14453 What Michael was speaking of, in the context of, I think, narrowly Canadian signals, but which is equally problematic, is the notion that this could lead, and reasonably could be assumed to lead to demands by U.S. broadcasters for retransmission consent.
14454 That could lead to denials of service that would be simply unacceptable to our customers.
14455 Secondly, it could lead, plausibly, to demands for remuneration.
14456 A study was prepared, which we tabled with the government a couple of years ago ‑‑ and I believe it was tabled by Bell in the TV Policy Hearing last year ‑‑ where the value of lost revenue ‑‑ or lost value to our system going to U.S. broadcasters could range anywhere from $350 million a year to $570 million a year for the carriage of distant U.S. broadcasters in Canada. That model was built on conservative estimates of what U.S. broadcasters are currently charging within their own retransmission consent regime in the United States.
14457 So I think that this issue goes far beyond what is necessary to produce local programming, or whatever, and we have to look broadly at the issue.
14458 THE CHAIRPERSON: I'm sorry, I don't buy that at all. I am very familiar with retransmission. I know what is going on in Geneva. It has no implication on this.
14459 And by the time Geneva comes around, we will all be retired.
‑‑‑ Laughter / Rires
14460 THE CHAIRPERSON: Let's stay with the issue before us.
14461 And we are not talking about U.S. signals here, we are talking about Canadian signals, retransmission with Canada, a regime that is here.
14462 As far as the retransmission of U.S. signals, we dealt with that in the FTA and NAFTA.
14463 But let's not go there, we are not talking about the FTA and we are not talking about trade issues.
14464 What about the related issue of station shifting, which Canwest and CTV raised?
14465 You do simultaneous sub for stations in the same market for the first set of four‑plus‑one's, which I understand, but not for the second set.
14466 Let's say, if a program is seen in Toronto at the same time as in Buffalo, there is simultaneous substitution. But if that same program is also on a second set of four‑plus‑one, let's say, from Syracuse or something, then the sim‑sub doesn't apply and people, in effect, can shift stations and watch it, et cetera.
14467 If I understood them correctly, they felt that it should be across the board. You should do the simultaneous substitution on everything that you offer in the same time period, so that a CTV program ‑‑ let's say "Desperate Housewives", which seems to be everybody's favourite. If it appears on another U.S. station, regardless of whether it is the first four‑plus‑one or the second or the third, it should be all simultaneous substitution.
14468 MS RATHWELL: I believe that if it is the same time zone we do simultaneous substitution.
14469 At Star Choice, we have an original channel override capability that does that across our system.
14470 And what's more, both on the cable and on the satellite side, we do pay 25 cents per sub per month to the broadcasters for the carriage of the second U.S. four‑plus‑one.
14471 Just to set the record straight, I know there has been some implication before that Star Choice pays nothing currently for the retransmission of Canadian distant signals, but we have calculated the value of money and in‑kind costs of carrying local broadcasters, and it works out to about 96 cents a month for the distant Canadian ‑‑
14472 THE CHAIRPERSON: I know. I appreciate that. But in the CTV and Canwest submissions, they talk about the distant signal, the time shifting and the station shifting. They said that there are two related issues.
14473 Let's say that you are in Winnipeg. You can watch the news of one of the Toronto stations, thanks to time shifting.
14474 But they also were worried about station shifting, in terms of simultaneous substitution.
14475 You are in Winnipeg, yes, but there is no simultaneous substitution because it is a different time period, yet the program is being shown on a four‑plus‑one, presumably coming out of Minnesota or something, and it would have the American ads.
14476 Am I talking rubbish here, or are you following me?
14477 MS RATHWELL: No, I think perhaps what we are talking about is same time zone/same network viewing.
14478 So if you are in Toronto, you would have the option of watching another Eastern Time Zone signal of the same network.
14479 That would be not time shifting, but ‑‑ I guess one could call it station shifting.
14480 For Star Choice, within the small markets ‑‑ and we recognize the challenges of those markets ‑‑ our system is technically capable of effecting simulcast over same network/same time zone signals, and we have been very good at doing that.
14481 Our system cannot sustain doing substitutions in the larger markets. It is technically impossible for us to make that many substitutions, because they occur at the set‑top box level.
14482 We do our best, and we do it very well, compared to other DTH companies on that count, but we think it's a substantial contribution as it is.
14483 THE CHAIRPERSON: There will be an opportunity to make further submissions, and I would ask you to look at the CTV/Canwest submission on station shifting and what they ask for ‑‑ whether you can accede to it or not, or what problems it would cause.
14484 At first glance, it sounded like a very reasonable request.
14485 The last issue is BDU advertising on VOD, SVOD and local avails.
14486 You are clearly asking for it, and so ‑‑ surprise, surprise ‑‑ is every other BDU.
14487 We have heard an awful lot of submissions here about the danger of VOD ‑‑ and let's deal with the first issue first ‑‑ of VOD and SVOD ‑‑ because it's controlled by you and you have acquired the rights, it has a danger of becoming ‑‑ there is a fear of bypassing regulation, in effect, offering linear programming at any time in another guise of VOD or SVOD.
14488 I have asked others, and I am asking you the same thing.Where is the golden thread? Where is the logical dividing line between VOD and SVOD showing again from a linear program and regular linear program ‑‑
14489 How should we approach this?
14490 This is turning out to be a major issue of concern to most broadcasters.
14491 MR. D'AVELLA: Mr. Chairman, I will start.
14492 The VOD part of our business is still a very small part.It is really in its infancy, and it is going to be driven, obviously, by the growth of digital set‑tops.
14493 Most of what we buy we buy directly from program owners, as opposed to broadcasters, because most broadcasters don't really own any VOD rights for the programming they buy. Some do. Some are buying more rights.
14494 And the models right now are entirely pay‑per‑views. If you have decided that you want to watch the Rocky movie on VOD, you are going to pay whatever the price is, $4.95 or $5.95, and that is always a revenue share with the program owner.
14495 We offer very little free‑on‑demand. Free‑on‑demand is something that Comcast has done extraordinarily well with, because they have a lot of it. They can get a lot of programming, and they have a means of paying for it by, essentially, inserting advertising.
14496 It is clearly an opportunity for the Canadian broadcasting system, and we think that, as broadcasters and programmers actually get their minds around the VOD opportunity and actually start acquiring some of those rights, we are quite happy to do these deals.
14497 There are deals where, if CTV wants to make "Corner Gas" available on VOD, we are happy to do that.
14498 You can do it on an episodic basis, you can buy the entire series, you can do whatever you want. And, typically, the model would be: Let's make it a free‑on‑demand service, but we are going to figure out how we split the advertising, or share the advertising.
14499 Or, some of the proposals we have seen are: Why don't you pay us a few hundred thousand dollars, and then you can make it available any way you want.
14500 We have no ability to recover that, if we make it a free‑on‑demand service.
14501 We do some subscription video‑on‑demand.It is not free, it's pay, and it is largely from the premium movie services. They are the ones providing the content for that.
14502 Apart from the Hollywood studios, which, essentially, own all of this product, there are very few other companies that are licensing VOD content, let's say, in sort of the North American market, if you will.
14503 The real opportunity here, for both us and the broadcasters, is, once they get their minds around acquiring VOD rights for U.S. network programming, that's where we think the opportunity really begins to make some sense.
14504 THE CHAIRPERSON: Thank you for that description.
14505 But I was looking forward. I mean, what the broadcasters are worried about is that you somehow disintermediate them, that is really what it boils down to.
14506 And what they are wanting to ‑‑ and what has been suggested to us, that everything that goes on, VOD or SVOD, you should be obligated to buy it from the Canadian rights holder and can't go directly to, let's say if it is a foreign rights holder or something like that; and, secondly, so that clearly you have to do a deal with them, and also, if there is any advertising on those or if there is any dynamic advertising substitution or something, that should be subject to a sharing basis with the rights holder, the Canadian rights holder.
14507 That is what was put to us by various people in different formats.
14508 What is your position on that?
14509 MR. D'AVELLA: Well, with respect to buying the rights, I mean, that's clearly their prerogative.They have the ability to do that and they're probably in the best position to do that since they're paying the most money for the first run rights in any event.
14510 And what we do know from reality is, you know, you can't buy a program from NBC for VOD because they're basically saying, look, I've already sold this program to CTV or Global and I'm not going to jeopardize that business by selling you a VOD right.
14511 So, they're already No. 1.
14512 THE CHAIRPERSON: Just on that point ‑‑ I'm sorry to interrupt you ‑‑ but I heard exactly the same opposite from somebody and he's saying, every time you want something different, a different right you have to pay for it, just because CTV has a linear program does not mean they have the VOD right and if you want SVOD there is another right