ARCHIVED - Transcript, Hearing 1 February 2011
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Volume 1, 1 February 2011
TRANSCRIPT OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
To consider the broadcasting application by BCE Inc., on behalf of CTVglobemedia Inc. and its licensed broadcasting subsidaries, listed in Broadcasting Notice of Consultation CRTC 2010-926, 2010-926-1, 2010-926-2 and 2010-926-3
140 Promenade du Portage
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.
Canadian Radio-television and Telecommunications Commission
To consider the broadcasting application by BCE Inc., on behalf of CTVglobemedia Inc. and its licensed broadcasting subsidaries, listed in Broadcasting Notice of Consultation CRTC 2010-926, 2010-926-1, 2010-926-2 and 2010-926-3
Konrad von Finckenstein Chairperson
Leonard Katz Commissioner
Elizabeth Duncan Commissioner
Rita Cugini Commissioner
Louise Poirier Commissioner
Stephen Simpson Commissioner
Lynda Roy Secretary
Stephen Millington Legal Counsel
Rachel Marleau Hearing Manager and Manager of Corporate Analysis and Ownership
140 Promenade du Portage
February 1, 2011
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TABLE OF CONTENTS
PAGE / PARA
BCE Inc., on behalf of CTVglobemedia Inc. and its licensed broadcasting subsidiaries 5 / 31
Quartier Vanier Merchants Association 214 / 1294
Ottawa Food Bank 219 / 1326
Ottawa Regional Cancer Foundation 224 / 1352
Federation of Northern Ontario Municipalities 230 / 1382
Insight Productions 240 / 1438
Sarrazin Couture Entertainment 246 / 1469
Yorkton Film Festival 249 / 1486
Boys and Girls Clubs of Greater Vancouver 254 / 1512
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LIST OF EXHIBITS
NO DESCRIPTION PAGE / PARA
1 Document entitled "Value of the Transaction Based on the CRTC Analysis" 74 / 415
3 Document entitled "Undue Preference and Reverse Onus" 74 / 416
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PAGE / PARA
Undertaking 66 / 363
Undertaking 80 / 454
Undertaking 82 / 473
Undertaking 83 / 479
Undertaking 179 / 1043
Undertaking 181 / 1057
Undertaking 181 / 1066
Undertaking 183 / 1075
Undertaking 187 / 1107
--- Upon commencing on Tuesday, February 1, 2011 at 0904
1 LA SECRÉTAIRE : A l'ordre, s'il vous plaît. Order, please.
2 THE CHAIRPERSON: Good morning. Bonjour, mesdames et messieurs, et bienvenue à cette audience publique.
3 Le comité d'audition est composé de :
4 - Len Katz, vice-président des Télécommunications;
5 - Rita Cugini, vice-présidente intérimaire de la Radiodiffusion et conseillère régionale de l'Ontario;
6 - Elizabeth Duncan, conseillère de la région de l'Atlantique et du Nunavut;
7 - Louise Poirier, conseillère nationale;
8 - Stephen Simpson, conseiller régional de la Colombie-Britannique et du Yukon; et
9 - moi-même, Konrad Von Finckenstein, président du CRTC. Je présiderai cette audience.
10 L'équipe du Conseil qui nous assiste se compose notamment de :
11 - Rachel Marleau, coordonnatrice de l'audience et gestionnaire, Analyse corporative et propriété;
12 - Stephen Millington et Joshua Dougherty, conseillers juridiques; et
13 - Lynda Roy, secrétaire de l'audience.
14 At this hearing, we will consider BCE's application to acquire control of CTVglobemedia Inc.
15 The proposed transaction would further the trend of convergence and vertical integration within the broadcasting sector -- and not only the broadcasting sector, the communication industry as a whole, of course. The panel will therefore want to discuss its potential impact on the Canadian television industry. We will also examine the value of the transaction, the proposed benefits and the impact on diversity of voices.
16 The Commission will issue its decision within 35 days from the start of the hearing.
17 I will now ask the Hearing Secretary, Madame Roy, to explain the procedures we will be following.
18 LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous. Good morning, everyone.
19 Before beginning I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.
20 When you are in the hearing room we would ask that you please turn off your cell phones, beepers and BlackBerrys as they are an unwelcome distraction and they cause interference on the internal communication system used by our translators. We would appreciate your cooperation in this regard throughout the hearing.
21 We expect the entire hearing to take three days and a half. We will begin each morning at 9:00 a.m. We will take an hour for lunch and a break in the morning and in the afternoon. We will let you know of any schedule changes as they may occur.
22 Please note that the Commission members may ask questions in either English or French. Simultaneous interpretation is available during the hearing. The English interpretation is on channel 1. You can obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.
23 We would like to remind participants that during their oral presentation they should provide for a reasonable delay for the interpretation, while respecting their allocated presentation time.
24 Veuillez noter que les membres du Conseil peuvent poser des questions en anglais et en français. Le service d'interprétation simultanée est disponible durant l'audience. L'interprétation en français se trouve au canal 2 et en anglais au canal 1. Vous pouvez vous procurer les récepteurs d'interprétation auprès du commissionnaire à l'entrée du Centre.
25 Nous désirons rappeler aux participants d'allouer un délai raisonnable pour la traduction lors de leur présentation à vive voix, tout en respectant le temps alloué pour leur présentation.
26 There is a verbatim transcript of this hearing being taken by the Court Reporter sitting at the table to my right, which will be posted daily on the Commission's website. If you have any questions on how to obtain all or part of this transcript, please approach the Court Reporter during a break.
27 Please note that the full transcript will be made available on the Commission's website shortly after the conclusion of the hearing.
28 Now, Mr. Chairman, we will proceed with item 1 on the Agenda, which is an application by BCE Inc. (BCE), on behalf of CTVglobemedia Inc. (CTVgm) and its licensed broadcasting subsidiaries, for authority to change the effective control of CTVglobemedia's broadcasting entities to BCE Inc.
29 Appearing for the applicant is Mr. Mirko Bibic.
30 Mr. Bibic, please introduce your colleagues for the record and you then have 20 minutes for your presentation.
31 M. BIBIC : Merci, Madame la Secrétaire.
32 Bonjour, Monsieur le Président, Membres du Conseil. Je suis Mirko Bibic, premier vice-président, affaires réglementaires et gouvernementales, de BCE, et permettez-moi de vous présenter rapidement notre panel.
33 Présents avec moi aujourd'hui :
34 - à ma gauche, George Cope, président et chef de la direction de BCE et de Bell Canada;
35 - à ma droite extrême, Ivan Fecan, chef de la direction de CTVglobemedia;
36 - à la gauche de George, Kevin Crull, chef de l'exploitation de CTVglobemedia.
37 D'autres dirigeants de CTV sont également avec nous aujourd'hui :
38 - à côté de Kevin Crull, Rick Brace, président, revenus et planification commerciale;
39 - à côté de Rick, Corrie Coe, première vice-présidente, production indépendante; et
40 - à ma droite, Wendy Freeman, présidente, CTV News.
41 Derrière nous :
42 - à ma droite ici, John Gossling, chef des services financiers;
43 - à côté de John, Ken Goodwin, de PricewaterhouseCoopers, notre évaluateur indépendant; et
44 - à côté de Ken, Kevin Goldstein, vice-président, affaires réglementaires.
45 Chez BCE et à CTV, nous considérons cette audience comme une étape cruciale vers la conclusion d'une transaction qui apportera d'énormes avantages aux consommateurs de services vidéo et de radio au Canada.
46 Nous vous dirons pourquoi nous croyons que cette transaction est si importante dans l'environnement en rapide croissance de la diffusion multi-écrans, pourquoi la transaction de BCE et de CTV est avantageuse pour les deux entreprises, et comment, dans l'avenir, elle contribuera à renforcer CTV et le système de radiodiffusion canadien en général.
47 Je cède la parole à George Cope.
48 MR. COPE: Thanks, Mirko.
49 Good morning, Mr. Chairman, Commissioners. Let me first apologize, I have a bit of a rough cold this morning, so I will get through this as best I can. But good morning, everyone.
50 On behalf of myself and my colleagues from BCE and CTV who join me today, I want to thank you for this opportunity to present our views in person on this important transaction.
51 Much has changed in our fast-moving industry in recent years but there are three shifts in particular that underscore the importance of the BCE and CTV transaction.
52 The first relates to our industry structure. It is important to appreciate that our cable competitors today control 75 percent of the national BDU market and have a combined 56 percent share of the national retail Internet market. The largest of our Canadian cable competitors have vertically integrated over the last decade and today offer phone, Internet, wireless and cable TV services, together with programming content.
53 Rogers, our largest competitor, has its Sportsnet assets and acquired Citytv almost four years ago. Videotron, our main competitor in Québec, has had unique access to TVA assets for a decade. And Shaw, our main rival in DTH or the satellite business, who will soon compete with us in wireless, now has its Canwest and Corus assets as well.
54 The second major shift relates to the regulatory environment. With the opening up to competition of broadcast services like mainstream news and sports in 2008, and with the exemption from regulation for new media and wireless confirmed in 2009, the Commission correctly decided that there should be greater scope for the marketplace to determine how best to deliver the content that consumers want within these segments. This is a position that the cablecos and telcos consistently supported, and as an industry we welcome the Commission's decisions. Vertical integration is a natural market-based outcome of the Commission's appropriate regulatory structure.
55 The third major change is technology. Content was traditionally viewed on only one screen, the TV. With major advances in technology, we moved to a three-screen world, with the addition of online and mobile viewing of content. And last year we added a fourth screen, the tablet. In short, multi-screen possibilities once only imagined are now very real. And as a direct result of billions of dollars in network investment and service innovations, video is now an essential component of Bell's business. In fact, our video revenue has doubled over the last five years and now represents 40 percent of our residential revenues, and more than our home phone services.
56 Our transaction with CTV responds to and builds on these three critical changes.
57 CTV is Canada's premier content provider. It's number one; a position achieved due to its passion for delivering the very best content, and in particular Canadian content, and its innate sense for what Canadian viewers want to watch. And as the Commission is responsible for overseeing Canada's communications industry, I'm sure you are very familiar with the fact that Bell and CTV, two great Canadian companies, worked in partnership to deliver the best Winter Olympics experience ever for Canadians in 2010.
58 Thanks to that experience and the significant industry changes I mentioned, it became very clear to me -- and, I believe, to our customers, shareholders and partners -- that a leading service provider and a producer of first-rate content can offer immense value to Canadian viewers when working together to provide that content over state-of-the-art networks.
59 And cementing a partnership that promises to deliver great value for all concerned is what our transaction accomplishes.
60 Let me also be clear on this. Our goal in a multi-screen environment is to make relevant, desirable and meaningful content available to as many Canadians as possible via the device of their choice.
61 We believe this is the best way for both BCE and CTV to complete successfully in our already very crowded and ultra competitive marketplace.
62 This means two things.
63 First, it means we are fully committed to the production of Canadian content because we believe it is a critical way to differentiate our product, particularly against unregulated foreign over-the-top video services who have no obligation of any kind to contribute back to our Canadian broadcasting system. In differentiating ourselves and making Bell and CTV stronger online video competitors, we can better ensure that the programming commitments and regulatory payments in excess of $670 million per year that Bell and CTV together contribute to the Canadian broadcasting system can continue.
64 Second, it means that we are open for business when it comes to moving that product. There will be other service providers who will want content from us and we will be open to supplying it on a commercial basis, just as we will continue to utilize non-CTV content when it makes sense to do so. We will of course expect full reciprocity from those of our competitors who also have rights to content.
65 We foresee ourselves, for example, generally adopting a subscription-based wireless distribution model, much like the one currently used by specialty services in the linear broadcasting world.
66 There may be some cases where we choose to offer content that is exclusive to our services, but of course in whatever we do we will always respect the Commission's rules against undue preference. However this evolves, the result will be new and innovative approaches which will benefit viewers.
67 The key point is that this transaction paves the way to more choices for viewers and additional experimentation and innovation by all of those looking for an edge in a highly competitive market.
68 This innovative spirit, and the open marketplace the Commission established and which the major distributors and content providers supported, motivated Bell to participate actively in the highly competitive mobile video market in Canada.
69 We were the first wireless provider to offer mobile access to the Olympics, NHL and NFL games, and most recently BNN, on the very latest in smartphones and devices on Canada's best wireless network. In turn, we have spurred greater competitive intensity in the wireless market. We have done the same in the Internet and broadcasting distribution segments. We are well on our way to connecting more than five million homes to our advanced fibre-based Internet service, and to our IPTV service, Bell Fibe TV.
70 The technology is here and improving all the time. The content is here and will only become more available.
71 Current regulatory rules provide appropriate safeguards while offering sufficient flexibility for players to innovate and experiment. For all these reasons, the transaction is absolutely positive for Canadian viewers, it means they will be better able to access the information and entertainment options they want over the screen of their choosing.
72 These are outcomes that Canadian public policy and regulation should promote. For this reason, we ask the Commission to dismiss the somewhat ironic calls for heavy-handed regulation from those of our competitors who only a short while ago vigorously supported far less regulation, but who then consciously decided not to vertically integrate by purchasing content and programming assets that were available to be acquired.
73 Before turning it over to Ivan, I would like to conclude with a few words on the issue of tangible public benefits.
74 Mr. Chairman, we are prepared at this time to commit to a compelling benefits package, which Kevin will discuss shortly. As you consider the elements of our package, I would ask that you consider the unique circumstances of this transaction. BCE already paid $230 million in benefits in 2000. Never before has an applicant been asked to pay tangible benefits twice on the same asset, let alone when it never exited as a shareholder of that asset and already made what still stands as a record tangible benefit payment.
75 In addition to this unique circumstance, there are two other compelling arguments which support lower benefits:
76 Number one, the 5 percent discount which CTV's largest competitor received last October; and
77 that benefits are not applicable to mainstream news and sports services.
78 If both these arguments are accepted, the benefits package will total a generous $142.7 million. If only the 5 percent discount is granted, the package is $220.8 million. So that gives us a range between $142.7 million and $220.8 million. We have attached to this statement an appendix highlighting the benefits we propose under either scenario. As I mentioned, Mr. Crull will take us through that.
79 I look forward to answering questions once our statement has been completed. Thank you.
80 MR. FECAN: Merci, George, et bonjour, Mr. Chairman and Commissioners.
81 While I certainly share the view that this transaction further develops the multi-screen universe for the benefit of Canadians, I also want to emphasize that it is critical to CTV's future as Canada's No. 1 broadcaster.
82 I say this because after 17 years at the helm of this great company -- and as a veteran of many, many regulatory proceedings -- I am intimately familiar with both the opportunities and challenges facing CTV.
83 As you know, traditional broadcasting networks have been under siege for some time. Audiences have become fragmented, especially with the emergence of specialty channels and the Internet.
84 Today's new media, including online video, is taking audience fragmentation to new levels, particularly in Canada.
85 In 2009, Canadians led the world in time spent online and it was recently reported that, on a per capita basis we lead in the number of YouTube videos watched each month. We have also embraced the use of social media, like Facebook and Twitter and many, many other apps in the online world.
86 Compounding this challenge facing Canadian broadcasters today is the massive disparity in scale between ourselves and U.S. companies like Disney and ABC, Comcast and NBC Universal, Viacom and CBS, and Fox and News Corp. All of these consolidated entities are producing popular content and making it available around the world.
87 Added to this is the presence of new, unregulated and formidable content providers like Netflix and Apple TV -- all foreign-owned, all unlicensed in Canada, and all with no obligations to the Canadian broadcasting system.
88 These are basic snapshots of an environment that continues to change almost daily as growing numbers of Canadians are looking to, and using, unregulated media for entertainment and information they want.
89 And while CTV is immensely proud of the fact that we operate the most popular Canadian-owned online video network, and have done so since 2008, we also know firsthand how difficult it can be to monetize new digital platforms.
90 In the context of these challenges, the BCE and CTV transaction will enhance CTV's ability to develop and market programming across multiple screens, by bringing content and distribution closer together.
91 It also will ensure CTV does not become marginalized as the only major owner of conventional television properties in Canada that is not aligned with a major service provider. In fact, BCE's commitment supports a better, stronger and more robust future for CTV and all that we offer, including highly-valued local TV.
92 While this transaction cannot be expected to solve all of the challenges leading broadcasters like CTV face, it is an important step in the right direction.
93 This transaction adds value by building on a longstanding relationship between CTV and BCE.
94 It helps achieve what the Commission foresaw would be accomplished when BCE first became a major shareholder of CTV just over a decade ago, greater stability and strong support for the ongoing delivery and expansion of CTV for the benefit of Canadians.
95 In short, it gives CTV our best fighting chance to remain Canada's foremost broadcaster and continue to put Canadian talent to work on the screens, behind the scenes and, in the process, help make the availability of outstanding Canadian content, including up-to-date information and video delivered over high-speed wireline and wireless networks, the new standard.
96 With that, I will now turn things over to Kevin to complete this morning's presentation.
97 MR. CRULL: Thank you very much, Ivan, and good morning everyone.
98 Having now been at CTV for several months I have had the great pleasure to see first-hand the resources and the talent that go into making outstanding television and delivering great radio, and I have been particularly impressed and motivated by the pride and the passion towards creating and airing exceptional Canadian programming. CTV is Canada's No. 1 broadcaster today and we have every intention of maintaining that leadership position.
99 Plus, after working nearly six years at Bell competing with Canada's largest integrated providers and helping build this country's fastest growing video business, Bell Satellite TV, along with launching new digital platforms like Bell Fibe TV, I also appreciate the opportunities that are emerging to deliver CTV's excellent content to viewers and listeners anywhere and anytime they want it.
100 So while maintaining our No. 1 position in the traditional broadcasting world, we intend to also be the No. 1 Canadian broadcaster in the multi-screen universe, by expanding the digital distribution of CTV's content and, most importantly, by showcasing Canadian content and our incredible Canadian talent.
101 Through this we will be able to serve our viewers. We will be able to accomplish this because we do not view conventional television and the multi-screen environment as an either/or proposition; rather, we view them as complementary.
102 While we will strive to accomplish this goal, there can be no doubt that the profound industry transformation that is well under way is challenging the television broadcasting business in unprecedented ways. There is no certainty with respect to which business models will work going forward, especially for digital media. And given your own extensive analyses of the industry over the last few years, I'm sure you would agree that the conventional broadcasters will continue to face major financial challenges which do indeed threaten their ability to adequately serve Canadian viewers even as our economy rebounds from recession.
103 It is through this lens that the impact of the BCE and CTV transaction should be viewed. It's also through this lens that the composition of the Bell-CTV tangible benefits package should be evaluated; a package which we have modified in order to provide more funding for programs of national interest created 100 percent by independent producers, as well as more focused investment in two other critical areas to our industry, local programming and local news production.
104 First with respect to programs of national interest, I am tremendously enthused by the opportunity to build on the legacy that was established with the last BCE benefits package, which resulted in the fabulous Canadian programming such as "Corner Gas", "DeGrassi", "The Junos" and "The Terry Fox Story", just to name a few examples.
105 Second, our proposal includes significant incremental commitments to local news programming in western markets, as well as the accelerated production and delivery of HD news content. This will enhance the diversity of voices and local expression in the communities we seek to better serve.
106 Third, in the same spirit, our benefits proposal provides a way for Bell Satellite TV to commit to the distribution of every LPIF-eligible over-the-air television station that it does not currently carry which, for obvious reasons, will be of tremendous value to local programming and also to viewers in each of these many small communities.
107 Finally, added to this we propose to further benefit local programming by enhancing the relevance of the 'A' channels for viewers.
108 For example, the 'A' channels, which have struggled tremendously over the last several years, require assistance to continue to maintain their current programming levels. They also require investment to be broadcast in high definition, which will improve 'A' channel programming quality and allow for HD simulcasting. Together these investments will help ensure that 'A' channel local programming can be sustained and can remain available to these communities.
109 Our proposals are fully in keeping with the Commission's benefits policy, and we have tailored them to address the key issues facing our broadcasting industry today. In this way the investments truly represent a net benefit to the conventional Canadian broadcasting system as a whole, assisting in the distribution and the creation of local and independently-produced content.
110 By supporting more local programming and independent content creation, the Canadian broadcasting system will be better able to stand out in a fragmented and highly competitive market.
111 Our environment truly is changing, and we must adapt. Failure to do so not only risks losing what we have built already, but it also puts at risk what we hope to achieve in the future -- ongoing support for the delivery of content which is more engaging, more accessible, and more relevant for all Canadians.
112 At CTV there is great reason for optimism. Ownership by BCE will provide welcome stability. It will provide increased investment and stronger confidence to go head to head with both regulated and non-regulated competitors by continuing to produce and support great Canadian content.
113 Without a doubt, strong Canadian companies that create, commission and distribute meaningful high-quality Canadian content will be better positioned to maximize the consumer experience and remain relevant to Canadian viewers and listeners as the new media landscape continues to evolve rapidly.
114 I also know that that same level of optimism exists at BCE, as the company executes its plan to provide video over multiple screens, working with CTV and other partners to deliver content to consumers on the device of their choosing.
115 Combining Bell's network and service assets with Canada's leading media company represents a critical opportunity to ensure that BCE and CTV remain leaders in this rapidly changing media and communications landscape, and with great Canadian companies like BCE and CTV working together, Canadian consumers, and, of course, the Canadian broadcasting system more generally, will benefit tremendously.
116 Mr. Chairman and Commissioners, thank you. That concludes our presentation, and we look forward to answering your questions this morning.
117 THE CHAIRPERSON: Thank you for your presentation. This is obviously a tremendously important transaction, in the same way as Rogers, City and Shaw-Canwest was. As you said, Mr. Cope, it is really transforming the landscape, and this hearing and the Shaw hearing, et cetera, have caused us to really reflect on the whole issue of vertical integration. As you know, there will be a hearing on this issue in June, and both the Shaw hearing and this hearing, to some extent, are an overture for that hearing, in order to clarify some of the issues. I am glad that you have spent a lot of time thinking about this.
118 I will talk to you mostly about vertical integration. My colleagues then will take valuation up and benefits and diversity of voices.
119 Assuming that this transaction is approved, what will be the corporate structure? Do you see yourselves having a distribution arm like Bell TV, another one like Bell Fibre, or two distribution arms and then a new media arm like Sympatico, and a production and content arm like Bell, or are you going to put them together?
120 How do you see yourselves responding in terms of corporate organization to the challenges you face?
121 MR. COPE: From a corporate organizational standpoint, upon closing, Kevin -- and he will smile -- will attempt to step into the shoes of Ivan and what he has done in building CTV as the leader in Canada. So he will step into that role.
122 And as we do with -- we have a president of our wireless business and we have a president of our enterprise business. Kevin will lead that as a business unit within the Bell Canada corporate structure. So CTV will operate its P&L like other businesses. One of its key customers, obviously, will be Bell, in a number of places, just as it has other customers across the country.
123 Hopefully that helps you understand how we will do it.
124 THE CHAIRPERSON: The reason I am asking, obviously, is because our whole regulatory structure is based on the assumption that these are separate entities, working, if not at arm's length, at least working at a separate profit centre, et cetera, and I wanted to know whether you intend to do that or do you intend to do some horizontal amalgamation?
125 MR. COPE: No, we don't intend to do a major amalgamation. We intend to have CTV, with its assets, execute its business plan, because it has many customers who will be competitors of ours on the Bell side. Likewise, Bell will have to have relationships with its competitors.
126 So, no, we don't see any change there at all. I think the way you have described it is exactly how we envision it taking place.
127 THE CHAIRPERSON: Now, you will be one of the largest broadcasters -- you will be the largest broadcaster and one of the largest broadcasting distributions combined, and, of course, the rest of the industry is very fearful that you are going to use this to an unfair advantage.
128 What assurance do we have that that's not going to take place?
129 I mean, we do have rules, but all of our rules are really ex post facto, they deal with complaints when somebody complains, et cetera.
130 But what about ex ante? What do you have to say to a TELUS or to a Cogeco that you are not going to use your combined weight in such a way as to be anti-competitive toward them?
131 That is really the tenor of all of the submissions. You know them, you have read them.
132 MR. COPE: Yes, sure, I am happy to answer the question.
133 I think that we have to go back -- and I know that the Commission is aware of this -- to the industry structure that has been undertaken through the cable industry's vertical integration that has taken place. In one sense, that made it pretty clear, as I have said very publicly, that from Bell's perspective, and, as Ivan mentioned, from CTV's perspective, these two entities would seem to make a natural fit to come together, given the coming together of the content and cable operators.
134 So given that they are our main competitors, to have us not vertically integrated against those significant competitors seemed to threaten the CTV model, and I think Ivan would agree with that.
135 And, I think, from Bell's perspective, we, first of all, said, "We don't want to buy all of our supply from our competitors," which we thought would be the inevitable outcome. If we had not purchased CTV, with as much business certainty as I can have, I am pretty comfortable that someone else would have, who would have been a vertically integrated company.
136 So we had that, we just had a business instinct that that would have been the structure that would have evolved anyway. So we did it for strategic reasons and to make sure that our shareholders were protected, which I mentioned in my opening comments.
137 Then, of course, the CRTC has in place the undue preference rules, which we studied, obviously, very carefully before going forward with this transaction, to understand the flexibility and what the spirit and intention of the entire industry was in the previous hearings -- where were we trying to go.
138 And then we looked at this incredible, as I said, technology opportunity.
139 One thing that we are a little sensitive to is the deregulation that the Commission supported. That is exactly why Bell moved so quickly to lead mobile TV, and a leadership position, from our perspective, shouldn't then have to concern itself about competitors going to the regulator and saying, "Oh, we were not moving as fast as they were, we want help."
140 That is part of our position, that it's an open marketplace.
141 But having said all of that, we understand exactly what you are asking us.
142 And as I said in my comments on pages 18 and 19, first of all, we clearly understand that Bell will be in the business of buying content from other content suppliers, and CTV's business model has to work on the basis of supplying its content to other distributors. Those are the core businesses, and we see that continuing.
143 I will tell you with certainty that if we don't see reciprocity from other content suppliers, we will act accordingly.
144 As we saw prior to CTV and Bell making their announcement, there were a number of incidents over the last year, which I think the Commission is familiar with, that suddenly disappeared upon Bell's announcement and CTV's announcement, together, where content became more readily available for everyone, not less. So that has, what I would call, balanced the level of the playing field.
145 Then, in terms of the two organizations that you mentioned --
146 THE CHAIRPERSON: I just picked them as examples. I could have picked -- as you know, others have said the same.
147 MR. COPE: Right. So reciprocity on content will be key to our strategy. You should know that the spirit of our business model will be to provide access to content on a commercial basis.
148 Then, in terms of the two competitors that you specifically asked about, we compete with them in the marketplace every day. The Commission put in place marketplace rules, and it has in place undue preference rules, to make sure that that's what happens. And if it doesn't happen, we have seen you recently make a ruling, which Bell completely supports, where we think it clearly was in violation of undue preference, and that is a judgment you will have to make over and over.
149 But we see ourselves, for example, generally adopting a subscription-based wireless distribution model, on a commercial basis, where companies such as the ones you have named would have access to that content through a commercial model that we will take to the marketplace.
150 We see that as the way forward in the marketplace for CTV to be successful, and, quite frankly, also for Bell to be successful, because it will want access to content for Canadians, as well, from these other suppliers.
151 So we will be offering commercial services to our competitors in the marketplace.
152 From time to time we may do exclusive arrangements, subject to the undue preference rules, of course, or we may have people who supply the content who insist on it being exclusive, and that will be competing with other providers for that opportunity.
153 So we would hope that the Commission would take great comfort, one, in its current rules; two, in how we will approach this asset; and three, we haven't even owned it for a day yet, and the assumption is that we are actually going to do something that isn't in the interest of the Canadian marketplace, and we would say that that's not our strategy at all. Our strategy, quite frankly, was to make sure that the content industry wasn't 100 percent controlled by the cable industry. That was really our strategy.
154 THE CHAIRPERSON: You, undoubtedly, followed the Shaw proceedings very carefully, and read our decision. I put to Mr. Shaw, absolutely point-blank: Do you intend to pursue a policy of exclusive content?
155 He said no, and we took him by his word and we put it as an expectation in our decision.
156 I am now asking you the same thing, and I gather that your answer is no, you will have exclusive deals, as you have just told me. You are not willing to make the same categorical commitment that Shaw made?
157 MR. COPE: No, we are not prepared to make the same categorical commitment that Shaw made.
158 However, I would say this, Commissioner. You have announced that in June we will do a review of the industry. Clearly, the outcome of that structure will be something that Bell will honour. That is clear, that's how we operate.
159 Having said that, I also think it is very important to recognize what we have said; that is, we are open for business on a commercial basis.
160 The other thing I would add is, we will not put ourselves in a position -- we would ask you not to put us in a position where our two largest competitors, Videotron and Rogers, would not be subject to that rule during whatever time period -- or, if that becomes a rule for the industry -- and I don't think we have to go as far as that, I think your undue preference is working. I think we just saw it work.
161 That will be your judgment, not ours. We, of course, have said that we support the current structure.
162 But one of the fundamental reasons for us not being comfortable with that request, which we anticipated -- unless our competitors are subject to the exact same rule upon us closing the CTV transaction, we are put at a competitive disadvantage, and we don't think that would be -- it would be very unusual for us to be subject to a rule that our two largest competitors are not, both who are in the wireless business, both who are in the internet business, and in their respective markets are larger than we are in the internet.
163 THE CHAIRPERSON: As you know, we are very sensitive to that point. That's why we imposed it on Shaw as an expectation. That's why we held the general vertical integration hearing, so that there is one set of rules for the whole industry, so that you are not being victimized just because your transaction comes before us and others do not.
164 We intend to have an across-the-board approach.
165 Now, let's talk about undue preference and reverse onus.
166 Madam Secretary, I have a sheet here. Would you hand that out to the panel, please?
167 It is entitled "Undue Preference and Reverse Onus", and it is available at the Secretariat, as well.
168 THE CHAIRPERSON: It is very simple and straightforward -- what the present rules are.
169 MR. BIBIC: Mr. Chairman, this is a valuation sheet.
170 THE CHAIRPERSON: I'm sorry.
171 Lynda, it's the one entitled "Undue Preference and Reverse Onus".
172 Take the other one back, please.
173 THE CHAIRPERSON: Now, hopefully we all agree, that that is the status of the law as it exists right now, that in effect we have undue preference rules for both terrestrial DTH mobile new media and satellite relay, and conventional TV, pay TV, speciality and VOD. Reverse onus we have for some, but not for others. And we announced that we would introduce it for VOD at licence renewal.
174 So that is really our toolkit as it stands right now. I am not aware there are any other -- if you disagree, Mr. Bibic, please speak up.
175 MR. BIBIC: No, this looks right on a quick review.
176 THE CHAIRPERSON: Okay, so this is what we are dealing with. All of these of course are measures that we will further review at the hearing in June. But it also means that in the interim, if somebody complains and if there is a concern about Bell giving itself undue preference, et cetera, this is what we have to rely on.
177 I want to understand exactly what you were saying, Mr. Cope, just now. You said you would live by the rules and you would appreciate that there will be a hearing in June. So if somebody complains about undue preference being dropped let's say from satellite or something, I presume that means that you will wait until this thing is resolved by us before dropping them or does that mean we will have to step in and give an interim injunction, et cetera?
178 I mean, clearly these rules will have to be thought through, elaborated, refined, et cetera. It is a vertical integration hearing. Any disputes arising in the interim are probably the attitude of Bell to them?
179 MR. BIBIC: Well, Mr. Chairman, we come at this from the same spirit I think or approach that the Commission did in the Shaw decision where you indicated in the Shaw decision, which was only a few short months ago, that "the Commission considers that the existing regulatory tools, particularly the undue preference provisions, have been sufficient to deal with any anticompetitive issues and have ensured the continued success of the Canadian broadcasting system." With that, we clearly agree.
180 Now, if a decision is rendered here within 35 days and we are fortunate enough to get your approval and we close shortly thereafter, we are looking at kind of an April/May timeframe. The vertical integration hearing is only a month or two away from there. So it is not going to be that long a period of time.
181 And the Commission has in the past seen fit to intervene in complaints of this nature as they arose. And where there is a time sensitive issue, you have moved quickly. I can think two very recent examples that have been continual debates in the past about Super Bowl and simulcasts. However, the end result isn't important, but the point is the Commission has dealt with those in a matter of days.
182 I can remember last year when Shaw announced that it was going to broadcast the Masters Golf Tournament in 3D. We filed an application with the CRTC and within a day it had been sorted out with the Commission's intervention and with the Commission's assistance without even the need for a formal ruling.
183 So there is an ability there for the Commission to deal with things quickly. And these things will get resolved and the rules will get, you know, more fully debated in June.
184 THE CHAIRPERSON: I am sorry, all of this I don't dispute, but this does not really answer my question.
185 MR. COPE: I think what my sense is, most of this it sounds like you are planning to deal with a number of these issues at the hearing. I am not aware in the timeframe we are operating the business what the issues would be. We will see what they are. We can only live after we close the transaction.
186 I do really want to make sure though that everybody understands there has been $5 billion of acquisitions announced as a result of the industry structure. And when you have an open marketplace there are winners and there are people who are behind. And the concept of those behind who have endorsed an open marketplace can then come back and ask for the rules to change, completely goes against the Commission's own structure on open marketplace.
187 So having said all of that, yes, we are in on of the undue preference rules. And there have been situations already in brand new media, really exciting stuff, where suppliers of the content have insisted on it being exclusive, otherwise they wouldn't provide it in Canada, nothing to do with us.
188 So we will absolutely work with you in the undue preference and we are looking forward to the hearing. Hopefully we are answering the question for you.
189 THE CHAIRPERSON: Mr. Cope, your colleague understood exactly -- I am trying to understand what will be your behaviour between -- assume we approve this deal, are closing, and the day we release the vertical integration decision, during that period of time what kind of assurance can you give me that you are not going to create fait accompli or deal with your competitors in a way that they consider anticompetitive? That is really what we are talking about.
190 MR. COPE: Yes. Well, given what has been -- two answers. One is, as I have said, we foresee ourselves and the CTV teams working on some of those initiatives now of putting in place a subscription-based model so people have access to the content. I think that is the question you are asking me and we see that as how we are going to go forward. I think the people are working on it even before we close on this type of model for the industry. So we think we see that.
191 And then of course we would imagine that anything we do that some of our competitors don't have access to they will view as anticompetitive. So we will leave the Commission to have to sort through those issues.
192 But the concept on 19 is really how we plan on running the business, which is to recognize that on a commercial basis we anticipate entering into arrangements with what are viewed as Bell's competitors but not CTV competitors for access to that content.
193 THE CHAIRPERSON: Explain 19 to me, because to me it seems to be an oxymoron or a contradiction in terms. You say, on the one hand, there may be times of exclusive content. On the other hand, you will always respect the rules of the Commission against undue preference.
194 You have announced just recently that you are going to offer BNN exclusively on Bell Mobility sets. Right?
195 MR. COPE: Yes. We announced that CTV was providing BNN to Bell Mobility.
196 THE CHAIRPERSON: Right. But then that would mean that I, as a Rogers customer, cannot watch BNN on my mobile device?
197 MR. COPE: No. Let me make sure I am very clear on 19. We fully anticipate that BNN will be made available on a commercial subscription basis to the other wireless competitors in the marketplace.
198 THE CHAIRPERSON: So what is exclusive then? What am I missing here?
199 MR. COPE: Well, let's backup. It says, one, we anticipate making our products generally available in a resale model. So that would be simple.
200 HE CHAIRPERSON: Okay, understood.
201 MR. COPE: Then what I am -- I guess I don't mean to turn around and ask a question -- if undue preference means nothing can be exclusive, then I don't know what the term undue preference means. We may provide preference from time to time to Bell, not undue, that will be the decision that we will have to make with you.
202 I will give you a perfect example of today, which has nothing to do with this hearing, would have to be dealt with in June because CTV had nothing to do with it. But Bell wanted to lead into the wireless industry, worked with the NFL, and the NFL made a decision that it would choose one wireless carrier to carry its product. We paid just as the exact same model in the U.S. for Verizon had paid for, to make sure we had that leadership position. That was a supplier of the content who had asked for that. So there is an example.
203 THE CHAIRPERSON: That is not the issue before us. The actual supplier of the contract is you, it is CTV, your own company. We are not talking about somebody else. So that is the issue we are talking about. If I understand 19 correctly, you are saying some of the content will be made exclusively available on your services. Those are your words, not mine.
204 MR. CRULL: Mr. Chairman, I think what Mr. Cope is trying to convey in that paragraph, first of all, I would emphasize his comments that we are open for business and that in fact for products like BNN that are linear television, that are, you know, popular viewer television products, we fully anticipate making those 100 per cent available to the market and under a model that is being developed today.
205 As we know this is a nascent part of the business, and the model being a subscription-based mobile availability.
206 And we have in fact notified other wireless providers that we are prepared now to enter into discussions with them for BNN and other CTV properties. But I am getting to explain paragraph 19.
207 As we sit and we discuss innovation in this space, there is a great deal of ancillary content that gets created in the production of various programs. And, you know, you may call it DVD extras, you may call it outtakes, bloopers, exposés of a particular Canadian actor in a, you know, certain program where we may in fact choose, because that is not being made available via traditional linear television today, we may in fact produce that and make it available to Bell subscribers as part of their subscription relationship.
208 We view those as important to allowing content creators to innovate and be creative. We view it as a great way to create value for our viewers. But we wouldn't presume that the availability of an outtake or a blooper on a red carpet show on eTalk would represent an undue preference that would change a subscriber's commitment to a particular wireless provider.
209 THE CHAIRPERSON: Sorry, maybe I misread. I understood BNN was exclusively available to Bell customers. You are telling me now that is not the case. So obviously, that is the wrong example that I picked, I just picked your release.
210 MR. BIBIC: Yes. There is a difference between the only provider that has it right now and exclusive rights. And you have the answer from both George and Kevin as to BNN in particular, but other CTV services will be made widely available.
211 MR. COPE: Yes, they will be. So I want to make sure that there isn't the misunderstanding. We are three months away from June or when we close will be very close to June.
212 THE CHAIRPERSON: Yes.
213 MR. COPE: I think the Commission can take comfort that we will be running the business and a model that opens the assets of CTV in a subscription-based model for commercial content offerings to other players in the industry.
214 BNN is a great example. Being the first company to ask CTV to do that, the reward should be that we were first in the marketplace. Now that other people want that access, that is tremendous and obviously CTV will move forward with that access.
215 We have been first mover of mobile TV for a year in Canada and we don't think that should be a penalty. We think that has brought innovation to Canada well ahead of the U.S. And the CTV assets, we think there is a great model for CTV and a specialty model as well in the wireless world where there will be subscriptions. I think the same model will work for Rogers and other competitors.
216 So I think the Commission can be comfortable during that three-month window, that that is how you will see us behaving in the marketplace. Hopefully, that is helpful.
217 THE CHAIRPERSON: Okay, thank you. That was very clear.
218 Now, getting back to my previous question. Where are we right now on exclusivity? I am trying to understand what you say in paragraph 19. Give me an example where the content would be exclusive to your services, using your words.
219 MR. COPE: Kevin.
220 MR. CRULL: Right. Mr. Chairman, you know, it may be, for example, we have digital initiatives around flashpoint today, a flashpoint game, where viewers can go in and they can be virtual participants in the SRU, in the strategic response unit. And we may find that there are capabilities that the digital technology provides that will work with Bell to provide enhancements to the viewing experience, and those would be over and above the linear broadcast of programming.
221 I want to emphasize that it may be a matter of timing because our technical teams are working together to deliver co-viewing digital technology and things of that sort or it may be something that we choose is unique to a Bell subscriber because it works on a certain Bell handset.
222 But that is the type of innovation that we think is fantastic to spur in the market. I want to emphasize on --
223 THE CHAIRPERSON: Are you telling me that your exclusivity is restricted to add-ons?
224 MR. CRULL: Pardon me?
225 THE CHAIRPERSON: That your exclusivity will be restricted to add-ons?
226 MR. CRULL: I would say that that is what we envision as we have our business discussions today.
227 THE CHAIRPERSON: I mean as you know, and Mr. Cope quite rightly pointed the finger, just because it is exclusive can't be undue preference otherwise, you know, we are a provider, we have undue preference, we might as well have an non-exclusivity rule. I understand that.
228 But presumably, the undueness, you have to determine it in the context, and I am trying to figure out from you where it is. And clearly, the area where it cuts most obviously is the area of sports. You know, giving somebody the right to transmit a game after it has been played is more or less an empty right. There is some value to it but not so clearly there. And you will for instance -- if I understand it, for instance, in the Olympics you were exclusively available on your sets, et cetera.
229 So where do we draw the line? What, in your view, is the key component to consider whether something is sort of -- to use it for legitimate exclusivity and one what you think is undueness?
230 Where do you see the line as we put it? I will put it that way.
231 MR. FECAN: Chairman, just you raised the Olympics and it might be an interesting model to look at.
232 THE CHAIRPERSON: You are going to correct me.
233 MR. FECAN: No, sir. No.
234 Just when CTV owns a program or owns the copyright to a bunch of --
235 THE CHAIRPERSON: Yeah.
236 MR. FECAN: -- programming forums then, like in BNN, they can do whatever they wish with it. But in some cases CTV doesn't own the rights to something. The Olympics is, of course, owned by the International Olympic Committee.
237 So the owner of the copyright determines how they believe for their own purposes they can get the most money, the most exposure, the best kind of production values. And so in that case, you know, an owner of a copyright can choose to sell something exclusively.
238 You know whether it's the wireless carrier or the broadcaster, you don't really have a great deal to say about it. They define the terms of the auction, if you will, for each discrete set of rights.
239 So in that particular case, you know, the rights were sold exclusively. That was their decision. Bell bought those rights. We supplied the content.
240 I don't know that there is a way in that situation to compel an owner of a copyright to market their rights in a particular forum.
241 THE CHAIRPERSON: But, surely, just to take that example, if we make a rule that Olympics or something may not be shown exclusively, then you sit down with the Olympics folks and say, "Okay, sorry. If I purchased the Canadian rights I must share them. The CRTC forces me to share them, you know, no matter what you as a copyright holder wants".
242 So I mean --
243 MR. FECAN: They have another option, sir.
244 THE CHAIRPERSON: They don't have such a rule, I agree. But I mean I'm not too sure that a copyright holder necessarily can dictate how we do Canadian broadcasting policy.
245 MR. FECAN: Well, with respect, they could choose to licence it to somebody not under your control --
246 THE CHAIRPERSON: That's what they can do, yes.
247 MR. FECAN: -- over the border.
248 THE CHAIRPERSON: Yeah, no question about that. They can.
249 I appreciate you are being very often driven by the owner of the copyright, which is your point. I can't dispute that. And our control is becoming less and less because there are alternate ways to accessing the Canadian market.
250 But coming back to it where you have the option of buying one, what makes something in your view sort of perfectly okay to be an exclusive and when do you think it becomes an undue preference?
251 MR. COPE: Right. So let -- Ivan's comments, hopefully, were helpful. Let me give you a vision of the TSN sports model you are asking.
252 We believe when TSN -- and they don't always have it -- if TSN has the content rights to distribute it also online and for mobile, which isn't necessarily the choice of TSN, if the supplier provides that we anticipate a model where TSN would make that content available to Bell on a subscription-based model and to Rogers and to TELUS and to the other competitors based on commercial terms, volume terms, all those items.
253 We think that's a model that has worked very well in the linear world and should work very well in the wireless world. So that's how we envision that taking place.
254 Where it gets a little -- two areas I think that are challenging --
255 THE CHAIRPERSON: Yeah.
256 MR. COPE: -- one is if we have the words "undue preference" but you say no exclusivity -- is what you just said a few minutes ago -- that's an interesting -- and that's probably what we are going to sit in June and spend a lot of time on.
257 But when the supplier of the content says the only way you are getting that content in Canada is if one particular carrier, be it internet, TV or wireless carries it, we will have a choice in Canada -- you are right -- to not carry it or to carry it.
258 In the case of a couple of our early moves into this industry -- and by the way it's early days in wireless mobile.
259 THE CHAIRPERSON: Yeah, yeah.
260 MR. COPE: And you made it -- you know it's completely unregulated in that sense. We made some early moves and the content provider ran a process and someone paid more money than someone else to get those rights.
261 Now, obviously, if you have rules in Canada that don't allow any of that, that content provider can decide what he wants to do. Then it just comes over the top into Canada in a different form and everyone around the table, whether or not you are on the broadcast side or the distributor's side, you know, it's an interesting outcome too.
262 So hopefully that helps with our answers and --
263 THE CHAIRPERSON: No, I mean --
264 MR. COPE: -- how we will run TSN is --
265 THE CHAIRPERSON: -- two things. You just expressed that new media is unregulated.
266 I handed you out the sheet.
267 MR. COPE: Yes.
268 THE CHAIRPERSON: You see that undue preference and reverse onus both apply in the new media content.
269 MR. COPE: Yes.
270 THE CHAIRPERSON: But secondly, you read, I'm sure, like I read, the FCC decision on NBC-Comcast. They spend an awful lot of time talking about non-applicable programming and offering comparable programs at comparable prices, all of which is driving at the same point of, in effect some -- and I actually met with the chairman of the FCC and talked about his views on this, et cetera.
271 Clearly, what -- I'm not trying to put any words in his mouth. It just was clear what it is they are worried about. There is some programming that is vital and so they must have programming and make sure that you cannot have an exclusive on that. That's where that whole -- at least my interpretation of that ruling is about, et cetera.
272 And when you think about it in those terms; non-applicable must have programming, really most of it is applicable. It's just another show. What is really very unique must have it's -- probably sports is the one clear-cut example and national events like the Olympics or something like that, yeah, are that.
273 I guess we are going to have to spend much more on this point in June. But I wanted to know where you are coming for, how you approach this thing.
274 I'm somewhat reassured by you that you say your general rule will be, if I understand, that you are a subscription model and you will make it available on commercial terms to your competitors.
275 MR. COPE: Yes, provided of course that TSN or CTV, as has been mentioned, has access to that content for those other media properties. You know, they have to have that ability to do that.
276 But under the basis that they do, we think that will be a model going forward in Canada that you will find Bell is supportive of and CTV. So, yes, it is exactly where you are going when you --
277 THE CHAIRPERSON: How am I assured that you didn't ask for it on an exclusive list basis so you didn't have to sell it to your competitor?
278 MR. COPE: Well, no, what I'm talking about is CTV, what platforms it is allowed to distribute it on.
279 THE CHAIRPERSON: Oh, okay.
280 MR. COPE: Right? If CTV is allowed to distribute it on wireless --
281 THE CHAIRPERSON: Yeah.
282 MR. COPE: -- then TSN will take that and we will have a subscription model, is the vision the TSN team has for that, because their business model will be on the back, obviously wanting 25 people watching that sports content. We will know that as well and that, we think, will be a successful model going forward.
283 I do think -- you know, the one comment I will make about -- the hearing in the U.S. was on the first vertical integration that's happened in the U.S., the first real vertical integration.
284 THE CHAIRPERSON: M'hmm.
285 MR. COPE: We are the last.
286 THE CHAIRPERSON: Second last --
287 MR. COPE: This has been --
288 MR. COPE: -- maybe the second last but this has been -- this has been going on. So the rules were set --
289 THE CHAIRPERSON: Yes.
290 MR. COPE: -- in Canada for vertical integration when the cable companies vertically integrated.
291 And so we made -- we are making this acquisition on the basis that there was a clear recognition of the Commission that the industry was vertically integrated. Because it was vertically integrated and Bell has just added to that -- had to from a competitor perspective relative to suppliers of all of our content.
292 So I think that's an important differentiation.
293 MR. FECAN: Mr. Chairman, from a broadcaster point of view you want more viewers, not fewer. One of the initial conflicts 10 years ago when BCE first owned us was, I think, you know, the broadcaster wanted more; the telco wanted exclusivity and there was a clash of philosophy.
294 What you are hearing now is a different sort of thing in alignment, actually.
295 THE CHAIRPERSON: Yes. I mean, that's exactly -- you are putting your finger on it.
296 You have two souls now. As a broadcaster you want as many eyeballs as possible. As a distributor of mobile devices you want to have more customers which, you know, how do you reconcile this? It is somewhat contrary --
297 MR. FECAN: I think you are hearing Mr. Cope saying that they want the subscription model which, in fact, produces more eyeballs.
298 MR. CRULL: What I might add to Mr. Fecan is what we also want to maintain is the flexibility to innovate.
299 When Mr. Cope was describing the TSN model there may be an opportunity to work with different camera angles, to work with different replay technology, to work with isolation of certain players. You need to work with a distributor's technical people in order to offer some of these value-added and extra programming features.
300 What we would like to maintain through the development of the nascent mobile video industry and online technology, is the ability to innovate and to experiment with that as that goes forward. I think that's very, very different than the availability of a national event or a sporting event game.
301 THE CHAIRPERSON: Will you separate those rights? I mean the mobile rights from the cable rights, et cetera or will they be sold as a bundle?
302 MR. CRULL: That is unclear at this time. I would say at this moment they are being viewed separately but how that may evolve is unclear as far as bundles between linear and mobile.
303 THE CHAIRPERSON: As you know, some foreign jurisdictions insist on unbundling and some of the submissions of the other people in this hearing have said that that's one of the things we should look at in June of unbundling those rights, that you cannot sell them for competitive advantages as a bundle.
304 MR. COPE: And I do think, you know, Commissioner, we are going to have to be -- to find our way through this issue. It's a complex issue.
305 I think nobody in the world would argue that the Canadian Olympic model was unsuccessful. And part of the success was the significant dollars Bell paid and CTV paid for these rights. Without that those dollars, there is implications to our ability to succeed.
306 The ability for TIF to succeed in Canada is companies like Bell and other players who make significant sponsorships. You see that also in what is going to probably happen in the Pan Am Games. Someone is going to -- I'm sure the people on the Pan Am side are counting on some type of distribution model that will have value for them.
307 So there are implications. And I think you make the point it says undue preference and there will have to be a judgment applied. We had one very recently with one of our competitors that we, ironically, were the ones who were saying that has to qualify as crossing the line on undue preference. And you concurred with us.
308 So clearly we have a sense that there is a line that's going to have to be thought through and the execution for us on TSN will be much more on a subscription-based model, as we have said.
309 THE CHAIRPERSON: Yes. As you say, we will have to work ourselves through it. It's not an easy line to draw and I don't want -- you know, that's always -- I think that our aim has to be to bring some predictability rather than do it on a case by case. You don't know what the rule is unless you bring a case before the Commission and get a ruling.
310 That's why I'm sort of exploring with you what your approach -- or at least I want to see it from a business point of view how you are approaching these issues.
311 One of the problems in all of this is always a question of evidence. That's why we have the reverse onus rule because you have all the evidence -- as somebody complaining that he is being unduly -- you are unduly preferring yourself -- and doesn't have the evidence.
312 So in Shaw we asked them first of all, because we expect there will be a lot, to file with us all existing affiliation agreements between Bell and CTV so that we have a base of comparison. Are you prepared to do the same here?
313 THE CHAIRPERSON: Obviously on a commercially confidential basis.
314 MR. BIBIC: Well, the issue we have again comes back to first principles, which is Shaw was asked to do this and they did come forward and volunteer that information. But we operate in a different environment competing against Rogers and --
315 THE CHAIRPERSON: You mean I have to volunteer you?
316 MR. BIBIC: Pardon?
317 THE CHAIRPERSON: I have to volunteer you?
318 MR. BIBIC: The question then becomes are these rules applicable to Rogers and Videotron?
319 MR. COPE: As I have said, Commissioner, on every hearing assure me reciprocity and we will be participating. But under a situation where I just asked my advisor whether or not my competitors have that same obligation, at the moment it's "no".
320 THE CHAIRPERSON: One of your competitors does have --
321 MR. COPE: So we are going to have one competitor and the other two competitors have a competitive advantage?
322 If my competitors are -- you have asked the question. The answer will be --
323 THE CHAIRPERSON: Yes.
324 MR. COPE: -- if our competitors are required to do it, we will do it. If not, we will leave it over to you to make that decision.
325 THE CHAIRPERSON: But I mean -- okay, fine. I mean, as I said, on a commercially confidential basis. I mean this is purely --
326 MR. COPE: We have seen that violated before, sir, and this is very sensitive for us. Confidential information that then doesn't remain confidential has commercial damage.
327 But, having said that, if all of our competitors are required to do something of course Bell will participate in that and, of course, you have the authority to make a different decision.
328 THE CHAIRPERSON: Yeah.
329 MR. COPE: We will leave that to you.
330 THE CHAIRPERSON: You are aware that some of your competitors asked us to go a step further, not only do that but that all future ones should be deposited as well as and when they are negotiated.
331 MR. CRULL: Mr. Chairman, one of the things that we have wrestled with as we have contemplated this line of questioning and that is we have competed with -- if you take the territory that Bell generally operates its local incumbent business in, Ontario and Quebec, we have competed against vertically integrated providers for the entire time that I have been running the residential business and they are -- in fact, I think if you look at Videotron and TVA and Quebecor in the Quebec market, they are far larger and have a far bigger impact on the subscribers and viewers in that market than Bell will in English-Canada, and yet, the current system has worked.
332 We have not in the six years that we have been competing vigorously been in front of you saying that there was inappropriate sharing of information or inappropriate leveraging. And when we have been, as Mr. Bibic said, there was either a rapid intervention or there was a hearing according to undue preference and it got resolved.
333 So I think that is where we struggle with this, is we have been competing in an environment with large vertically integrated providers and the existing system of safeguards has served the marketplace.
334 MR. BIBIC: Mr. Chairman, if I could conclude on this point.
335 We fully appreciate and respect the fact that you wanted to explore at some level vertical integration issues at this proceeding and we hope through the answers that we have given you comfort in terms of how we plan to operate this business.
336 As it relates to specific regulatory rules, the mechanisms, et cetera, we really strongly believe that whatever rules are set in place should be applicable across the board.
337 We are more than happy to come forward and have a fully fleshed-out rational debate in June, where these issues can be debated.
338 Reverse onus. I have some ideas on reverse onus that I would like to share at some point. I need to think them through some more, but the appropriate forum for that is in June, including what needs to be filed and by who.
339 So that is where we really would very much prefer to have that debate.
340 THE CHAIRPERSON: Okay, I hear you loud and clear.
341 Now, the other point which I think Cogeco made, which I found very interesting, is I think they are worried about the flow of information, that by you owning CTV, you find out about the corporate arrangements that CTV has done with Cogeco in terms of affiliation agreements for some of the specialty, et cetera.
342 And they suggest that we take a leaf out of the Telecom Regulations, that you have a customer service or customer, whatever they call it, customer resource centres, in effect, that the information regarding those affiliations is treated separately internally so it cannot be used to their disadvantage.
343 MR. BIBIC: Mr. Chairman, there has been a longstanding rule that information like that needs to be kept confidential. The Commission actually has a policy on this that dates back more than 10 years.
344 We used to have majority control of CTV. That was never an issue.
345 As Kevin said, we have never found it an issue when we deal with our vertically integrated competitors that information flows within them inappropriately.
346 The notion that somehow because Bell is reacquiring control of CTV that it is Bell that is somehow going to breach this longstanding practice, we find to be frankly preposterous.
347 There are confidentiality agreements in every single affiliation agreement. Our competitors honour them. We obviously fully intend to honour those confidentiality undertakings we sign onto in affiliation agreements.
348 THE CHAIRPERSON: So you do not see any need for -- given the enormous size of Bell and CTV, we are talking about one of the largest distributor and the largest broadcaster. You know, if we look at the stable of specialties that CTV has, I mean it is the envy of the industry.
349 MR. BIBIC: Mr. Chairman, integrity in business practices has nothing to do with whether you own 24 specialty services or one. This industry has acted with integrity, and of course, Bell, of all, will operate in that manner whether or not we are the biggest, the smallest, have one service or 24.
350 MR. COPE: And, you know, I think Mirko has concluded it, other than to also add that Bell has never made that request on behalf of Rogers doing that, Videotron to do that, Shaw. All of our absolute arch enemy competitors, we have never in one way or another ever challenged how we think they would deal with information. So we would expect the exact same treatment as a company.
351 THE CHAIRPERSON: As you said, I guess we will discuss this and many other topics in June.
352 What about set-top boxes? The FCC made a big deal about set-top boxes and imposed on Comcast provisions in effect making sure that set-top boxes and access to them cannot be used as an anticompetitive tool.
353 Is that an issue here in this country? I mean it is the first time I saw about it and I read it and they are obviously worried that somehow your set-top boxes can be used in a way to either make switching difficult or in order to -- I think they are worried about over-the-top delivery being compromised or something like that.
354 MR. BIBIC: Mr. Chairman, I am not sure I understand the specific issue. I have to confess that is one condition that I didn't actually latch onto or focus on in Comcast. So could we get back to you on that particular issue?
355 THE CHAIRPERSON: That issue has not come up -- I mean when I -- let me just --
356 MR. BIBIC: We are not sure what the issue is, Mr. Chairman. We don't see how we would use set-top boxes in any nefarious way, as may have been suggested in the U.S.
357 THE CHAIRPERSON: In effect, I think the worry that they express is that you use a set-top box in such a way that is preferential to -- in the worst-case scenario, CTV's online content is somehow advantaged over that of others.
358 MR. COPE: We will --
359 THE CHAIRPERSON: I mean the reason -- caught my eye. You know, I never thought of it. I thought our rules that we have on net neutrality and so on would do that, but I never focused on set-top boxes. That is why I am raising it with you.
360 MR. COPE: In fairness to you, we haven't either focused on that issue.
361 I would say this -- and we will come back to you -- we as most Canadian suppliers do buy their set-top box basically off of volumes that are global. So it is very unusual for us to have unique Canadian boxes.
362 So we will come back. We have not in any of our discussions thought this was a -- would be an issue. We are all looking at each other strategically trying to find out how it could be an issue.
363 So we will come back to you on that with a little more detail once we understand it better.
364 MR. CRULL: If the concern, Mr. Chairman, would be that somehow we would block content from third-party over-the-tops or things like that as the set-top box becomes a gateway and it is a broadband box as well as --
365 THE CHAIRPERSON: The other way around, giving you -- not blocking others but giving yourself some advantage.
366 MR. CRULL: Right. That, we would not anticipate --
367 THE CHAIRPERSON: Especially for new online features that may be offered, you know, by CTV. There's add-ons that we are probably talking about and --
368 MR. BIBIC: And again, that is probably -- we will come back on the specific question.
369 The broader issue, I think, we again should probably leave to June because there is a lot of thought that needs to go into this. There is obviously -- we don't want to squelch innovation in its tracks. You know, to the extent you are adding -- you are providing a window through a set-top box to particular content, I see nothing wrong with that.
370 The key issue is what you do vis-à-vis competitors' content, and, as you said, we do have a fully fleshed-out net neutrality framework which, in fact, leads the world in Canada.
371 So lots of thought needs to go into that, the broader issue that you are introducing.
372 THE CHAIRPERSON: You are completely silent on the issue of terms of trade, which, for CPME, undoubtedly we will be raising and which I have discussed with Mr. Fecan in the past. We are coming up to a licence renewal very quickly.
373 Is your position changing in any way through this takeover if approved in terms of trade?
374 MR. CRULL: Mr. Chairman, I had the opportunity and the pleasure to meet Mr. Bolen and Mr. Barrack at CMPA recently and I can tell you I am very, very encouraged -- and I know they will be before you in this hearing.
375 I am very encouraged that I think that great progress has been made. I am going to turn it to Miss Coe to describe, but we have -- I think that they were very complimentary of the work that CTV has done and that they see an agreement that is imminent.
376 MS COE: Thank you. I would just like to add that actually very recently, in the last couple of weeks, CMPA has provided a recent draft which has gone an enormous distance in bridging some of the philosophical gaps that were between the parties and I think everyone is very confident and very hopeful that we can reach an agreement now based on that draft.
377 I think there may be a little bit of discussion about a minor point or two but I think we are really feeling very comfortable that we have made enormous progress, and full credit to the CMPA for that.
378 THE CHAIRPERSON: Okay. You are aware that we made a specific disposition regarding terms of trade in the Shaw decision. So I underline the fact that this is not an issue that should fall between the cracks.
379 Okay, I think my colleagues have a lot of questions on valuation and benefits.
380 Let's take a 10-minute break and then we will resume. Thank you.
--- Upon recessing at 1026
--- Upon resuming at 1040
381 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.
382 THE CHAIRPERSON: Okay. Let's continue with the questioning.
383 I must say, Mr. Cope, Mr. Bibic, I am not terribly pleased with the answer that you have given me so far, but I hope you will have a chance to revisit some of the points as the hearing goes on.
384 So I will turn it over now to my colleague, Mr. Katz.
385 COMMISSIONER KATZ: Thank you, Mr. Chairman and good morning.
386 Commissioner Duncan and I both will focus on the value of the transaction and the quantum of benefits flowing out of our policy as set out in the information bulletin you are familiar with, Broadcast PN-2008-57.
387 Before I do, though, I just want to follow up on a discussion this morning with the Chairman and I will use the BNN as an example because you used it as well.
388 BNN is 100 percent owned by CTV today?
389 MR. BIBIC: Yes.
390 COMMISSIONER KATZ: It is.
391 In a post-acquisition environment it's all one corporation. Mr. Crull is going to be running all of the broadcasting assets, telecom is with I guess some other executive, but it's all one company.
392 Are you saying you will have term sheets or agreements between your entities in order to deal with the issue of undue preference and those types of issues?
393 MR. BIBIC: Yes.
394 MR. COPE: Yes. I want to make sure that we are clear, given the opening comments.
395 We will have commercial agreements that that division would enter into with CTV, just like we fully expect that, just so we would anticipate -- and we assume our competitors do that internally as well. We will do that for sure.
396 BNN is a great example, we have been talking about it a lot, we are ecstatic with the amount of publicity it's getting today, that it will be a subscription-based model offered to other wireless providers in Canada under commercial terms, the same as Bell would enter into with CTV.
397 COMMISSIONER KATZ: Okay. Thank you.
398 Let's move on to the transaction itself.
399 I thought we would start with the value itself. You have provided a valuation that was done by PWC that was based on the information bulletin that I referenced earlier, 2008-57. We took a look at the model and the model obviously started from the base of what your transaction was and we will come back to the actual numbers themselves and we will redistribute shortly the document that you initially had earlier with the numbers on it.
400 But I just want to understand the actual nature of the valuation that was done.
401 It appears as though BCE chose not to file the model with us at all and you basically said any data you need, any information you need we will do for you, but for the purpose of intellectual property rights or what you acquired we weren't given access to the model itself, which, just so I can tell you, it made it more difficult for us to analyze sensitivities and what the issues really were.
402 Is there a reason why you chose not to file it with the Commission?
403 MR. GOODWIN: Good morning. I can answer that question, Commissioner Katz.
404 It's policy at PWC that we do not distribute the actual financial models that we prepare as part of our valuation work unless it is explicitly contemplated that provision of the model is part of our engagement.
405 That model contains our intellectual property around how we design and build those models. It was extremely complex and it was not contemplated as part of our engagement to provide that model.
406 We had set out that explanation in one of the deficiency responses and we endeavoured thereafter to provide everything that we felt or that you had asked for to help you in the evaluation of the report.
407 MR. BIBIC: So, Vice Chairman Katz, short of providing the actual model, we did come at this from the spirit of we would provide all the information that the Commission asked for and answer all the questions and provide all the work sheets, et cetera.
408 COMMISSIONER KATZ: But I'm sure you can appreciate that the Commission and staff particularly look at these analyses and sort of ask questions, as you would as well, what would happen if the assumptions changed, because assumptions are just that and obviously even the PWC analysis indicated that there is a variation as much as 10 percent in the sensitivity of the data and their level of confidence in the data as well and 10 percent is quite a big number when you are looking at valuations and benefits being split between television, which would garner 10 percent benefits, and radio who garner 6 percent and suddenly a 10 percent spread, as PWC said, in their level of confidence does have a financial impact at the other end of this thing as well. So it makes it harder for us to look at these things and sort of understand them when we don't have some of the data.
409 We will come back to that, because we will be asking you for some of the analysis yourselves and perhaps you may have to do some work over the next day or so in that regard.
410 MR. BIBIC: Okay, let's us do that. We were trying to respect PWC's intellectual property rights at the same time as your process, so from the Bell side that is certainly how we approached it.
411 I'm happy to answer your questions.
412 COMMISSIONER KATZ: Okay.
413 Perhaps now the Hearing Secretary can distribute that exhibit.
414 THE SECRETARY: Value of Transaction Based on CRTC Analysis.
415 I would just like to indicate for the record, Mr. Katz, that the document entitled "Value of the Transaction Based on the CRTC Analysis" is marked as Exhibit 1 and will be filed as such on the record.
EXHIBIT NO. 1: Document entitled "Value of the Transaction Based on the CRTC Analysis"
416 THE SECRETARY: The previous document "Undue Preference and Reverse Onus" is marked as Exhibit 3 and will be filed as No. 3.
EXHIBIT NO. 3: Document entitled "Undue Preference and Reverse Onus"
417 COMMISSIONER KATZ: What you are being given is the CRTC analysis that was done based on our interpretation of our policy, the Information Bulletin, that lays out what does and does not qualify for benefits. We can go through that and have a discussion.
418 I noticed that one of your comments in the reply argument filed 2 weeks ago indicated that the Shaw group had a relatively shorter cross-examination on the valuation and perhaps we can do the same thing with you folks if you agree with our analysis.
419 COMMISSIONER KATZ: So taking you through this, there are three pages, there are three individual tables and I will just --
420 MR. BIBIC: Vice-Chairman Katz, if you could just give us a second?
421 COMMISSIONER KATZ: Sorry. Sure. I will give you a moment to look at it.
422 COMMISSIONER KATZ: In order to work with a common set of data not just for our discussion --
--- Off record discussion
423 MR. BIBIC: The confusion is on this end, it's okay. We apologize, Madam Secretary.
424 COMMISSIONER KATZ: So this hopefully can be used not just for the discussions with BCE, with you folks, but with the other parties as well so we are all talking from the same song sheet and then the Commission will finally make a determination at the end of the hearing after all information has been taken into consideration.
425 So what you have in Table 1 is the value of the transaction based on the CRTC analysis. We will take you through it but, as you can see, it results in a valuation of $2.671 billion.
426 We have then provided in Table 2 the allocation. What we did was, we used the PWC analysis as you provided it for the distribution between television and radio, which I referenced earlier, identified which of the non-broadcasting assets conform with our current policy, and then weighted it in order to reconstruct it based on what we have decided based on our analysis is the entire value, which is the $2.671 billion. You can see on Table 2 that would arrive as benefits of $236 million.
427 Then in Table 3 we tried to provide a reconciliation of what BCE has filed as part of the PWC analysis, our analysis, and beside that your position on what benefits should be applicable and at what percent and also what our current policy has been all along with regard to television and radio.
428 So we can see where BCE indicated -- and I take what you said this morning that your outside range was $220.8 million as you presented it this morning, and our number, rolling it up as we do pursuant to our policies and procedures, was $236.4 million in benefits.
429 We will spend some time going through most of these numbers here now and see where we have commonality of views and where we don't obviously. Okay?
430 Commissioner Duncan and I will take you through this and we will chat about each of the numbers.
431 So if we go back to Table 1, the purchase price of $1.296 billion is the 85 percent of the asset purchase, which is what you purchased given that you already own 15 percent of the assets.
432 To that we added the assumed debt, and the debt was $1.780 billion as you represented it, and the footnote below is the source of where we got that number from.
433 Again, based on our policy and Information Bulletin 2008-57 we took the prorated amount of that 85 percent and got $1.513 billion.
434 With regard to assumed leases, the way we have historically used the interpretation of leases and how you applied it was slightly different.
435 First of all, you did not include some of the leases that we historically and routinely do, things like vehicles and other assets as well, which you provided to us during the deficiency stage and which we included in here.
436 We also made an adjustment for the discounting that we don't normally do, as you had done.
437 So that brings the assumed leases up to $39 million and so the total before any of the deductions is $2.848 billion, how we arrived at it.
438 We have then deducted from there, based on the data you provided and based on some of our preliminary analysis, a total of $177 million, denying some of the items and leaving the rest of them in here.
439 I will turn to Commission Duncan to sort of take you through those and ask you some follow-up questions because we have some questions in that regard as well.
440 COMMISSIONER DUNCAN: Thank you, Vice-Chair.
441 Good morning.
442 First of all, the $139 million as indicated on the schedule represents the Dome Productions and the online properties and that is a number that we took from your report, from the PWC report, and we were wondering if you could give us the amount attributable to each. How much of the $139 million is Dome Productions and how much is online.
443 MR. BIBIC: Commissioner Duncan, I'm going to turn the answers to these specific questions to Mr. Goodwin.
444 COMMISSIONER DUNCAN: Okay, that's fine.
445 MR. GOODWIN: Good morning.
446 We did not separately value online as distinct from Dome. We valued the two of them in totality using a discounted cash flow approach, as well as an enterprise value, EBITDA or, as we refer to it in the report, an EBITDA multiples approach.
447 The challenge that you have in valuing each of those businesses independently is that you are not going to be able to find distinct comparable companies for, say, the online operations. Similarly for Dome, it is an extremely small production company and, again, finding comparables is very difficult whether it's for multiples or for discount rates.
448 So I don't have a distinct breakdown for you, but I can say that we did attempt to do some reasonability checks based on our results.
449 COMMISSIONER DUNCAN: Is it normal for you to combine such unlike assets? They seem to be quite different to me.
450 MR. GOODWIN: Well, we certainly considered the fact that the two businesses are different, but I think what struck us is that when you are looking at Dome Productions it's fairly constant -- or at least it's expected to be quite stable in terms of revenue and earnings and it's not really driving the expected financial performance of the two entities over time.
451 What is really dictating where the valuation result ends up is effectively the growth in the online operation.
452 COMMISSIONER DUNCAN: I noticed in the January 21 reply that there is mention of the fact that Dome was included previously when CTV purchased it from Netstar in 2000.
453 Would it possible to give us the value that was attributed to Dome in that analysis at that point? Not at this minute I don't mean. Friday is good.
454 MR. GOODWIN: We can certainly file that.
455 COMMISSIONER DUNCAN: Okay. Thank you.
456 I'm just wondering, when I read the January 21 reply I noticed you referred to "certain" online properties being excluded.
457 I just wonder what the significance of "certain" was. It's either all or --
458 MR. BIBIC: Do you have the paragraph reference, Commissioner Duncan?
459 COMMISSIONER DUNCAN: I don't, but I should be able to find it pretty easily. Just give me one second here.
460 MR. BIBIC: It's paragraph 29.
461 COMMISSIONER DUNCAN: Thank you.
462 I just wondered if it there was any significance to that word. It implies that something has been left out or included elsewhere.
463 MR. BIBIC: No, I don't think there is a specific significance to the word. We certainly took the approach that online properties do not count for evaluation purposes.
464 COMMISSIONER DUNCAN: Thank you.
465 I think that's the end of the comments on those assets.
466 The next one refers to the sold radio stations. The first one CHNB-FM in Edmonton and then the London station. There was an adjustment that we made to that calculation.
467 The proceeds or the sale transaction, according to the decision 2010-972 at paragraph 20, the proceeds were $22 million and not $11 million, so we adjusted for that, which actually increased the deduction from what you had.
468 MR. GOODWIN: Sorry. Our ownership in that Edmonton station is only 51 percent. That's why we have taken 51 percent of the proceeds.
469 COMMISSIONER DUNCAN: The decision, if you look at it at paragraph 20, it shows the proceeds as $22 million and then it says:
"The benefits were calculated at 6% based on $22 million." (As read)
470 MR. GOODWIN: That's for 100 percent of the company. CTV doesn't own 100 percent of that company.
471 COMMISSIONER DUNCAN: No, I understand it doesn't, but the benefits stated, the tangible benefits you had to pay, were $1.230 or something I believe.
472 Perhaps you could have a look at it and if I'm mistaken you can include that in your comments.
473 MR. GOODWIN: Okay.
474 COMMISSIONER DUNCAN: I just went actually right back to the decision, which I have here, and it says:
"The value of the transaction based on the Letter of Agreement is $22 million and consistent with the Tangible Benefits Policy the package is 6% of $22 million, $1.320." (As read)
475 So we adjusted that. It actually serves to reduce the amount that's going to be subject to benefits.
476 MR. BIBIC: Thank you.
477 COMMISSIONER DUNCAN: The next item is the travel and escape and that's the $6 million that PWC had in their calculations.
478 One thing about the radio stations and travel and escape, can you provide us with the closing dates for each of those?
479 MR. BIBIC: We will do that.
480 COMMISSIONER DUNCAN: Thank you.
481 MR. GOODWIN: The radio stations closed yesterday. We will get you the travel + escape date.
482 COMMISSIONER DUNCAN: Okay. Thank you.
483 Turning, then, to the next page --
484 First of all, what I intended to do was discuss the items that were not included in the deductions that you had proposed to have included. The first item was the tax loss benefits. You had included those in the calculation, and we have included them because all of the elements -- it is our practice that all of the elements that relate to the operation or acquisition of access, subject to tangible benefits, are left in the transaction value.
485 MR. BIBIC: Can we respond to that, please, Commissioner Duncan?
486 COMMISSIONER DUNCAN: Sure.
487 MR. BIBIC: Tax losses do have a value, but they are not a broadcast asset, and they are non-recurring. There is no guarantee of profitability. There is no indication that, by virtue of having a tax loss carry forward, there is future earning power.
488 And maybe I haven't found the precedent, but I have searched far and wide for CRTC decisions that have a clear expression that tax losses are in, and we, as a group, couldn't find a clear decision to that effect.
489 Now, for valuation purposes, I will let Ken Goodwin add to that, but we certainly don't think that it is proper nor clearly established Commission practice to add them in.
490 MR. GOODWIN: I would just like to add to Mr. Bibic's comments. We, too, could not find any CRTC precedent where the matter of tax losses had been discussed, and as we set out in our deficiency responses, the broadcast business is actually separable from the losses. They can be sold as distinct items.
491 And given that there was a lack of guidance with the CRTC, we looked to financial reporting standards and what happens when you are trying to account for a business combination, which, if successful, this will be, and that guidance is clear, in the sense that income tax losses get treated separately within that construct, and when you are valuing the broadcast assets, and in particular a broadcast licence, which is really the essence of what we are looking at here, that valuation is conducted without taking into consideration historical losses.
492 So based on that precedent, which we could find, we adopted the approach that we did.
493 COMMISSIONER DUNCAN: I appreciate that, and I think that a lot of those comments are included in what you have submitted. It appears, though, that you are going to be expected to pay benefits on the value that we determine, and that the tax losses in those businesses will be of benefit to you.
494 It is our policy, as I say -- I don't think you have found any instances where it was addressed is really what you are saying. One way or the other, you didn't find it.
495 MR. BIBIC: You also don't see it in the definition of transaction value, and I think, on this issue, I would submit that it is incumbent on the Commission, where there is an ambiguity -- and, at best, there is an ambiguity -- I would say that it is clearly in our favour, but, at best, there is an ambiguity, and it has been the practice of the Commission, for valuation and benefits purposes, that where there is ambiguity and you want to clarify it, that gets done after the fact, through a process.
496 That was the case that happened several years ago with a debt. Should debt be included or not included. There was ambiguity about that, and the Commission said: Okay, we will resolve it in favour of the applicant, in this case, but there is something that needs to be clarified here, and we will do that going forward.
497 We would say that, at best, that is how this particular issue should be approached, if you actually feel that, as a matter of policy, tax losses should clearly be in.
498 COMMISSIONER DUNCAN: Okay. We have your comments and, as I say, I know they were what you had submitted in writing, as well. Thank you. We will consider that when we are putting this through the grinder afterwards.
499 The redundant land, as well, we have left that in, and it will be allocated -- it has been allocated by virtue of the way the allocation is done. A portion of it gets allocated to non-regulated in sold stations. So it's not all allocated to broadcast assets.
500 MR. GOODWIN: May I provide some context?
501 COMMISSIONER DUNCAN: Sure.
502 MR. GOODWIN: As we had set out in the deficiency responses, that land is currently inactive. It is not an income-producing asset, so there is nothing about the land in Barrie that is contributing at all to the broadcasting business within CTV. It was our professional opinion, then, if it's idle, it is not actively engaged, it is not providing a rate of return within the context of broadcasting activities, that it was appropriate to leave it where we did, which was, effectively, to have it as an exclusion.
503 COMMISSIONER DUNCAN: Would you agree that circumstances might change, and that maybe six months or twelve months down the road you would put that asset to use?
504 MR. GOSSLING: No. It's adjacent to where the Barrie station and transmitter are, but it has no use to that operation. It is truly surplus land beside the 400 Highway.
505 COMMISSIONER DUNCAN: Okay. We have your comments. Thank you. I don't have any more questions on that.
506 The NHL Network and Viewers Choice, the next item that you had proposed to be excluded -- and we didn't accept that. It's the Commission's practice to always include -- and has always been, I am assured, to include minority interests, so we left that in, we didn't adjust for that.
507 MR. GOODWIN: Commissioner Duncan, it was our understanding that the benefits payment applies to transactions involving a change in control, and given that CTV has minority interests in both Viewers Choice and the NHL Network, no change in control has taken place. That's why they have been excluded.
508 COMMISSIONER DUNCAN: Okay. Thank you.
509 As I say, it's our practice to include it in the value of the transaction. So if you wanted to file any more comment on that, we will take note of what you said here, but that is our practice.
510 MR. BIBIC: We would ask you to reconsider and go back to first principles here. Benefits payments are, with respect to acquisitions of control -- with those assets there has been no change in control.
511 So if we go back to first -- the best we can ask of you is to reconsider this based on first principles of the benefits policy.
512 COMMISSIONER DUNCAN: Okay. We can do that.
513 Now, the Vice-Chair took you to page 2, so you can see how we have determined the allocation based on the numbers provided in the Pricewaterhouse report for television and for radio, and we added the $177 million to it, to come to a total value of the transaction, and just calculated the percentage that each was of the total, and applied those percentages against the value that we determined, the $2.671 million, as the Vice-Chair reported.
514 I don't want to repeat anything that we have already gone through here.
515 I note that Pricewaterhouse didn't include any synergies in their report, and in your response of January 21st you said that there was no value in the synergies, that they were included, in fact, in the price agreed to by BCE.
516 I just wanted to draw your attention to a few things here, and then end with a question.
517 In the press release of September 10th, when this transaction was announced, Mr. Cope was quoted as saying: "Acquiring CTV's range of premier video content enhances Bell's execution of our strategic imperatives by leveraging our significant broadband network investments, accelerating Bell's video growth across all three streams -- mobile, online and TV -- and achieving a competitive cost structure."
518 He goes on to talk about maximizing strategic and operating synergies with CTV.
519 I should also add that in your supplementary brief you discuss at length the potential benefits of the acquisition from the video standpoint. There is very little mention of radio. And that was the same today, again, in your opening remarks. The focus is on video.
520 So it's clear -- it would appear to be clear -- that there is greater value in the transaction related to the video products, as opposed to radio assets.
521 I think it's important to make that distinction when we are calculating the value and distributing the value between television and radio.
522 I am just wondering -- we would like you, if you could, by Friday, to re-run the model and assume that there is a premium attributable to television that is larger than radio.
523 For example, if you could do three scenarios -- 20 times, 15 and 25 times -- so that we can see what the impact is if the value attributed to television goes up or down.
524 MR. GOODWIN: Commissioner Duncan, excuse me, I am not sure what you are asking for.
525 COMMISSIONER DUNCAN: I don't think that we are convinced -- I should mention, as well, that in the CTV transaction when they acquired CHUM, synergies were taken into consideration.
526 So I think we would like to get a look at what the numbers might be if those synergies were reflected in this allocation here.
527 COMMISSIONER KATZ: If I could interject, maybe I could help, as well.
528 Your totals between television and radio, if you look at the numbers, are $2 billion, roughly speaking -- $2.1 billion for television and $318 million for radio. What we are saying is if BCE, when they purchased CTV, implicitly was looking toward the higher benefit of purchasing the TV assets than the radio assets, implicitly.
529 You are not paying any more money. The value you paid is what you paid, basically. But if the split between television and radio were more weighted toward television, there would be a higher benefit paid. Right?
530 All we are saying is, the model that PWC used presupposed a $3.2 billion sale, which is fine, and then it proceeded, through a number of assumptions and modelling, which we don't have, to come up with a split that generated 12 percent of the value as being attributable to radio and, roughly, as you will see on Table 2, 81.3 percent attributable to television.
531 All we are saying is, if there were more value to BCE on the television side, through more multiples, or through whatever modelling you used in order to attest to it, how would that translate itself into the split between television and radio?
532 MR. BIBIC: Vice-Chairman Katz, before we readily agree to re-run numbers based on a different allocation of the overall value between TV and radio, I really would like Mr. Goodwin to explain to you how we derived the $318 million for radio.
533 I really don't think it is fair to say that we made passing reference to radio and, therefore, that, by definition, proves that BCE is not committed to radio. I think that is completely false, it is not the case --
534 COMMISSIONER DUNCAN: I didn't suggest that for a second.
535 COMMISSIONER KATZ: I think what we are saying is, if anything, you made passing reference to synergies, and we have always used synergies in our valuations. So we are trying to understand why you chose not to, and that is not to say that you underpaid or overpaid for what you bought. You paid what you paid for it. But how we have it allocated between radio and television is a function of the model and the assumptions that are inherent, and all we are saying is, with those different assumptions, would it be sensitive to the extreme by virtue of impacting the dollars attributable for benefits for television and radio, recognizing that one is at 10 percent and one is at 6 percent.
536 MR. BIBIC: Okay. We understand what you are getting at. Let's unpack it. We will start with Mr. Goodwin explaining how we derived the radio valuation, and then we can unpack it from there.
537 MR. FECAN: A point of clarification. Someone raised the CHUM transaction. The difference there, of course, is that CHUM was a broadcaster, and we are a broadcaster, and there was a lot of duplicative infrastructure which became the synergy number.
538 In this situation, Bell doesn't have broadcasting assets. Therefore, the synergy value may be very different.
539 COMMISSIONER DUNCAN: Thank you, Mr. Fecan. I think I see the synergy as the fact that you are going to be able to incorporate those video products on those other platforms, but I appreciate what you are saying. Thank you.
540 MR. GOODWIN: If I may comment, when we approached the valuation of all of the broadcast business units, we did so using two approaches, one being the discounted cash flow, which is, I think, where the concern is around lack of synergies.
541 But, more importantly, to give the Commission comfort, we used the market approach, and we looked at multiples that exist in the open market, whether they are publicly traded companies or transactions involving comparable businesses.
542 If we want to think about radio for a moment, there have been about three or four transactions in the last year involving radio assets, and our valuation multiple that we applied to radio was, on average, less than those observable transactions.
543 So if there is a concern that we have overvalued radio in order to bring TV down, it is our professional opinion that that's not the case. We think that our valuation of radio is very reasonable, relative to where some of the transactions have been.
544 And following that same line of argument, we took a very close look at conventional and specialty, and when we looked at the transactions that have taken place in that market, again, our benchmarking and our analysis and our concluded multiple supports the fact that, to the extent synergies are being paid in open market transactions for these assets, we have taken those transactions into account. And that is providing, you know, a real weight or a bearing on our overall valuation conclusion. So that should give the Commission comfort.
545 COMMISSIONER DUNCAN: So a few follow-on questions then for that.
546 Did I understand that you would normally include synergies in doing a valuation?
547 MR. GOODWIN: I mean, I think context is everything. The balance of the evidence when we came in to do our work was that the synergistic value, to the extent there is any, was not factored into any of the pricing models or decision-making by Bell. And in fact, the forecast that we used came from CTV. You know, a detailed forecast by business line was not available through BCE.
548 So, you know, we prepared that DCF analysis to satisfy the requirements of the Commission, but felt that we had to go to the market as well to gauge those transactions. So synergies is really a question of fact and circumstance. And the facts and circumstances in the evidence that were before us was that it wasn't really having a bearing on the reasonableness of the conclusions.
549 MR. COPE: If I could add just a couple comments.
550 First of all, the synergies. This transaction, as I even said -- also there are other comments I made as well that day that weren't talked about here -- we talked quite openly that this is about a growth acquisition, this isn't a synergy story. And we are very different businesses. This isn't as if we -- last year we bought Virgin Mobile, we didn't come here, but you can be sure there were a lot of synergies in that particular transaction.
551 So this isn't a transaction about synergies. More important, the market value test supported by external valuation was also supported by the sellers who are the most sophisticated capital markets, operators in the country, being teachers and the Thompson family, so they clearly don't need much help in doing valuation.
552 And then in terms of the comment on the radio, I couldn't agree with you more. You need to know that we did obviously a sum of the parts valuation based on the market. And I think the comments they made, those radio assets were the trade in the markets. They may trade at a different price independent. But the problem in transactions, as the Commission would know, is that when you do a sum of the parts in a valuation sometimes you actually end up not getting those benefits.
553 So in fact I find it, especially at 11 per cent of the value -- so I am very confused by the commentary that we somehow put a bigger weight and didn't value the radio assets at this value. And I can assure you that never ever came up in our approach.
554 It was really what is the multiples, we take the multiples of these particular assets and look at them. And it wasn't based on a synergy transaction, it was based on a market. And then of course the seller has to think we are a market, and clearly they did.
555 So hopefully, that is helpful.
556 COMMISSIONER DUNCAN: It is, thank you. I think probably I am just stuck on the fact that the potential to the buyer, BCE, is in the long-term value of video products being delivered over these other platforms.
557 So there is no way then, Mr. Goodwin, that you could run the model as we have suggested? Bearing in mind that we will take your comments of course into consideration, that is for sure.
558 MR. GOODWIN: Well, I guess, Commissioner Duncan, I would need to come back and clarify, you know, what the initial ask was around the 15, 20 and the 25 times. I mean, we are expert valuators, but we don't know the companies well enough to come up with the synergies.
559 And again, based on the evidence that we had before us and the conclusions that we got to, the fact that synergies weren't implicitly priced into this really has no bearing, in our view, on the fairness of the individual values that we have arrived at.
560 COMMISSIONER DUNCAN: Okay, thank you.
561 Mr. Bibic, did you want to add anything to that or you are satisfied with that?
562 MR. BIBIC: No, thank you, Commissioner Duncan.
563 COMMISSIONER DUNCAN: Okay. Thank you very much. Then I will leave that for now for sure. Thank you.
565 COMMISSIONER KATZ: Thank you.
566 So if we flip to Table 2, just to explain how we continued through the analysis, we utilized the PWC recognizing, as you will see there, the unregulated and sold assets, we used $177 million rather than the 263 that you represented and we talked about what the exclusions were, and they are itemized there as well.
567 And then simply used that prorate against the Table 1 total value of the transaction, $2.671 billion, and got to the $217 million for television, $19 million for radio based on our numbers, based on our analysis. So that takes us to Table 3.
568 And we can now get into a discussion of the actual per cent applied against these numbers, recognizing the first column on Table 3, being the BCE value that was used by yourselves, and our numbers as well.
569 And the first one that comes to light is the fact that BCE has taken the position that the A Channel and the CTV Network should only have 50 per cent of the benefits applied against it. And I believe in what I read, your position was that that is what the CRTC did for the Shaw-Global transaction.
570 But I will leave it to you to comment on it first before I offer some other comments.
571 MR. BIBIC: Okay, thank you for the question, Vice-Chairman Katz.
572 So on this issue of -- and this would apply to the CTV Network conventional assets as well as the A Channel assets in terms of requesting equivalent treatment, what was given to Shaw. What we are asking the Commission to do here is to consider, take into account, the unique circumstances of this transaction.
573 So as you will appreciate this morning, we did move away from the view that we should not have to pay any benefits at all because of the unique circumstances. So we moved away from that and we are prepared to pay benefits, but we are still asking you to take into account, as you deliberate on the value and the overall package, that this is really unique.
574 And your policy is a case-by-case assessment, and I think it is fair of us to ask you to consider that we paid $230 million already, never stepped away from an ownership position, always had a string back to control of CTV through our 2006 agreement. And so that is overall context.
575 Digging into the very specifics, the bottom line effect of what was done in Shaw was that a discount was given -- largely speaking, if we scratch below the surface -- on account of the underperforming financially struggling conventional assets. And of course the CTV conventional assets, both CTV and A, have undergone the same financial challenges and we are simply asking for competitive equity to be accorded the same treatment.
576 COMMISSIONER KATZ: The decision that the CRTC rendered in regard to Shaw and Global was not that they were underperforming assets, it is that they were in CCAA.
577 I read your evidence several times now, and I need to draw a distinction. You seem to imply that CCAA is not a serious issue. The decision to take a company into CCAA is a very serious matter, as I am sure Mr. Asper realized as well, because you literally lose total control of your company.
578 There are monitors that are introduced by the courts, there is the need to come up with a plan of arrangement that needs to be approved. You lose total flexibility with regard to strategic direction. What you are left with is basically day to day planning. And that is not in any way, shape or form where the CTV assets are at this time or were at that time even.
579 MR. COPE: Yes I think, for sure, we don't want to in any way be disrespectful to the impact of CCAA on a company. But this isn't about the seller in that case. That is the people who suffered.
580 This is about the buyer, and the buyer is our competitor. And the buyer received a 5 per cent discount on buying the asset in this particular area for the underperformance of the previous owner. CTV's management team performed, so didn't end up in that very difficult situation. I don't want to be disrespectful of that.
581 But I can't see then the logic, and we will leave it to the Commission, the logic to the buyer, being Bell, being asked to pay a different percentage in the most recent transaction in the industry from Shaw because the balance sheets were different. And if --
582 THE CHAIRPERSON: When I asked you about affiliation agreement you said you are not prepared to do the same thing as Shaw was. You said, you make me do it, but I am not going to volunteer it. But now when we talk about value, suddenly you say I want the same treatment as Shaw got.
583 Don't you have to be consistent, at least along the line?
584 MR. COPE: Yeah, I know, I think-- and we're concerned about your comment about this morning. We are very open, as we have said over and over again, that-- so we'll come back to that, that the content of TSN and CTV will be available to wireless on a commercial basis. We have said that this morning.
585 My comment on that, I think, Chair, in fairness, was to say provided there's reciprocity to my competitors. You have the authority to say reciprocity is not required, and we will have to live with what your decision is. I don't think, with all due respect, it is unreasonable for Bell Canada to say it will not put itself in a position that Rogers and Videotron are not in at the same time. I don't know why that is such a discomfort for everyone. That is all we are asking for on that area.
586 And I don't, therefore, get the link. It is actually a very consistent message, it has been consistent from Bell for three years in my role. If Rogers and Videotron are given an advantage, we want the same advantage. If that advantage or disadvantage is taken away, we will live by those rules at the same time. I don't think that is an unreasonable request. It is actually the exact same request in this case.
587 It is not inconsistent that if Shaw, our competitor, was given a credit on an acquisition of a company within the last six months because the seller who went through a terrible time, as I acknowledge -- but the buyer didn't go through that terrible time, the seller did, and the buyer just had an advantage.
588 We will leave this to the Commission to decide. But I don't think there is a lack of logic in our position, but we won't have the final decision, we respect that.
589 THE CHAIRPERSON: Wouldn't the consistency be if you bought a bankrupt company, which you are not, you are buying Canada's most successful broadcaster. If you bought CTV out of CWA, I agree with you 100 per cent, should be 5 per cent. But you are not doing that.
590 MR. COPE: I think if you buy a company out of bankruptcy there is a lot of challenges with that, I couldn't agree with you more. And I think also that what Shaw paid for the asset in the marketplace reflected that implication. I am sure when they did their transaction they had to reflect all that.
591 My point is different, it is very different. Shaw should not be the beneficiary of that 5 per cent if Bell is not. Probably the sellers have lots of issues, but the buyers I don't -- so we just don't share the same view. But obviously, as I have said over and over, Bell will respect the outcome here. We just want to make sure we are consistent.
592 COMMISSIONER KATZ: Allow me to comment on what you said. BCE or anybody else had the same opportunity to acquire Canwest, as Shaw did as well.
593 MR. BIBIC: M'hmm.
594 COMMISSIONER KATZ: They bought distressed assets. Your assets are not distressed assets. With distressed assets you cannot put the same use to those assets as you would otherwise if they weren't distressed. And that is the nature of part of the difference that the Commission came to when they said 5 per cent. If they are distressed they have a different application, different use.
595 It is a different ballgame completely, relative to what you purchased, notwithstanding the fact that maybe financially for a period of time there was equal losses in both companies, I don't know. But that is not the basis for our decision.
596 MR. BIBIC: Vice Chairman, one has to scratch below the surface here. You say distressed. And clearly, they were in CCAA. And as George said, we are not coming forward and suggesting that CTV was in CCAA and we are sensitive to that issue.
597 But let's scratch below the surface. The Commission has the numbers, they are publicly available, we looked at them. So in the 2008/2009 broadcast years the financial performance of the CTV conventional assets and the Canwest conventional assets was the same, a difference of $1 million in terms of negative PBIT.
598 You also say distressed. But if you look at the assets that were under CCAA and that received a 5 per cent discount, it included four speciality services in the Canwest family that were very very profitable. So on an operating basis, those four specialty services were not distressed. On the conventional side the performance was the same as the CTV conventional asset performance.
599 So if you take a step back and you scratch below the surface, you know, the problem then in saying that you only get a 5 per cent discount if it is under CCAA -- and we recognize the language in the decision -- is that it puts form over substance.
600 And all we are asking for is for the Commission to look at the substance here, at the surrounding circumstances, take George's comments into account, I won't repeat them, and come to a decision to say the same discount should be applied here.
601 COMMISSIONER KATZ: I hear you. But just one point you should bear in mind, this Commission has never unbundled each of the assets that are being purchased to look at which ones are profitable, which ones are not, what the level is and then decide what the benefit should be on these companies.
602 It just so happened that the entire group of stations that Shaw purchased were all under CCAA. There may have been some that maybe weren't as stressed, but the corporation that they purchased was a distressed asset under CCAA.
603 MR. BIBIC: You are correct about that. And all we are saying is you do have the flexibility and the jurisdiction and the policy by law as applied on a case-by-case basis, and we are asking you to make a case-by-case assessment here for all the reasons we have put forward, including the uniqueness of the transaction and the benefits of payment in 2000 and to come to a similar view.
604 That's what we are asking. We are not suggesting that we fall within the 60 A A language.
605 COMMISSIONER KATZ: The next item is those competitive genres I guess that you suggest that shouldn't attract any benefits at all, those being news and sports.
606 Can you just take us through your rationale for that?
607 MR. BIBIC: Certainly.
608 So as everyone in the room knows, in 2008, Decision 2008-100, the Commission decided to open up the competition, so to speak; the categories of mainstream news and sports, which ultimately means for regulatory purposes that genre protection has been removed for those categories. They are mainstream and they have been and continue to be subject to vigorous competition.
609 So in essence it's competition that will be delivering the benefits to the broadcasting system that public benefits were otherwise supposed to deliver in a restricted environment.
610 So that's the philosophy and that's on all fours. In other words, it's exactly the same as what happened in 1996 with cable BDUs. Cable BDUs used to operate in a restricted market. Acquisition of control of cable BDUs was subject to tangible benefits payments.
611 Then, when the Commission opened up that market to competition -- and we are grateful for that because we have Bell Satellite TV and IPTV, et cetera -- the Commission decided now its competition that will deliver the benefits that we used to impose benefits in order to deliver. It's the vigorous competitive process that will, in the cable BDU case, the vigorous competitive process that will cause BDUs to invest in technology and the networks, et cetera.
612 And here in our case today, it is that competition that's going to deliver value to the broadcasting system in the sense of enhanced production value.
613 Take TSN. The acquisition of more on-screen talent -- I mean we can't open up a paper -- every single day we open up a paper these days and we see rumours and innuendo and discussion about competitive battles in the mainstream sports segment. Shaw applied for a licence last week. Videotron received a licence for that category not too long ago, including -- including for news.
614 So we are going to get more programming, a different variety of programming, more analysis on screen, different and more investments and on-screen personalities, investments in technology. That's exactly what the benefits were supposed to deliver.
615 So what we are asking for is actually fully in keeping with your policy and in accordance with the precedent that's from not too long ago.
616 COMMISSIONER KATZ: But you are also saying that the other assets should bear the 10 percent because they are not competitive?
617 MR. BIBIC: Which other assets?
618 COMMISSIONER KATZ: Well, the ones that you are suggesting would be exposed to 10 percent benefits.
619 MR. BIBIC: Well, it's really only mainstream news and sports that falls within -- that's on all fours with the cable BDU precedent.
620 Now, you may be referring to the other kind of digital services, the Category Bs. Is that what you are referring to?
621 COMMISSIONER KATZ: Yes.
622 MR. BIBIC: We can see payments on those. I think the main distinction, frankly, is that those are niche services that -- markets with a particular niche and you don't have the same level of vigorous competitive intensity within that particular niche whereas, in mainstream use and mainstream sports, you have many, many players all in that category competing vigorously with each other.
623 COMMISSIONER KATZ: But you are taking the notion of competition in a very narrow sense. I mean even those Cat 2s that make up an awful lot of the audience, the audience only has two eyes, and other than my son who can watch two programs at the same time, most of are tuned to one channel only.
624 As a result of that, the competition is there. I mean, yes, the genres may be different, but the reality is there is competition in the broadcasting system from the perspective of trying to attract the consumer's eyeballs to a particular channel or program.
625 I don't see the difference between a Category C, a Category D or news or sports from that perspective.
626 MR. BIBIC: Mr. Katz, all I can do is I can point you to the precedent, number one, which is cable BDU and the reason I argued it that way or put it that way is that's exactly what was done by the Commission in 1996. I have the quotes in our reply. I mean I can take the time and go through it but it really is as I said.
627 So I was explaining -- the reason I argued it that way is to say this situation is exactly the same as that one.
628 The other point that I didn't make but I should make in response to you now is if you go back to first principles on this -- it's always important to go back to the rule in the first principles. And you elaborated it in section 15 of the Shaw Decision. It's:
"The purpose of a policy is to ensure that the applicant has filed the best overall proposal under the circumstances in order to compensate for the absence of a public call for applications." (As read)
629 The Commission took that language in 1996 in the cable BDU case and said, you know, now that it's open to competition it's the competitive process that will deliver the benefits that we otherwise would have asked of the applicant.
630 And this is exactly the same.
631 COMMISSIONER KATZ: Okay, thank you for your arguments.
632 Thank you, Mr. Chairman. Those are my questions.
633 THE CHAIRPERSON: Okay, then, let's go to benefits.
635 COMMISSIONER CUGINI: Thank you.
636 MR. BIBIC: Mr. Chair...?
637 THE CHAIRPERSON: Yes.
638 MR. BIBIC: Before we leave valuation if you would indulge us and allow Mr. Goodwin to make just one comment on Table 1.
639 MR. GOODWIN: Thank you. I have actually got a question.
640 We would like the opportunity to absorb this document over the course of the proceeding. So what I'm about to ask is based on my preliminary observations. I may have more questions later, if you don't mind.
641 But when it comes to the assumed leases, my recollection is that the gross value of the leases is 22 million for the real property and 6.6 million for the automobiles and the photocopiers. And of that 22 million that I just mentioned, being the real property, only 13 million is in the first five years.
642 So based on the notes that you have got here, I think that you have double-counted and the $39 million number is too high.
643 If what you want is the gross value of the real property and the personal property, the number would be 13 plus 6.6. I would be happy to share that information with staff.
644 And I would just like to comment, too, on why we discounted the lease payment stream. A lease payment, unlike a debt, is a payment that occurs over time with no principal repayment. When you make the payments on the lease they are tax deductible.
645 So it's our opinion that in looking at the future obligations under a capital lease that it's appropriate to take the net present value of the after tax amounts as the de facto form of financing.
646 So those would be my comments on the lease number. I think it's too high. We will have to double-check the assumed debt number. I don't have the figures with me but we will want to get back to you on that.
647 THE CHAIRPERSON: Well, as you know we have -- the way we have set it up today and tomorrow and then on Thursday morning, you sort of have in fact a final stage in rebuttal and maybe there you can give it.
648 But while you raise your head, Mr. Goodwin, I really am troubled with your assertion of intellectual property for the valuation system. If this was a tax case and valuation was a key issue, surely you would be cross-examined and you would display the model at that time. I mean I find the idea of saying that you can't share it with us -- I can see that you don't want to put tax -- confidentiality obviously.
649 But to say that this is your intellectual property and you are not prepared to share it to us so we can't examine it in detail, very hard to accept I must say. I cannot believe you would take the same position if we were in tax litigation or something.
650 MR. GOODWIN: Mr. Commissioner, I have -- I mean the policy that we have put forward is our firm policy. It has to do with our risk management concern that we have across the entire firm. So I'm speaking on behalf of the firm.
651 I have been involved in legal cases and it isn't my experience that the underlying Excel model is required through the discoveries process. Certainly, we will provide a --
652 THE CHAIRPERSON: Well, it all depends on the issue but if somebody does question the model then surely you have no choice but to disclose it.
653 MR. GOODWIN: Well, it wasn't our intention in not providing it to be unhelpful and certainly we tried to provide the staff with all of the supporting schedules and answers to any of the questions that were asked. So it certainly wasn't in the spirit of not being helpful. It had to do with our underlying terms of engagement and how we conduct ourselves as a firm.
654 THE CHAIRPERSON: It speaks for itself.
656 COMMISSIONER DUNCAN: Can I -- that's right. Can I just make one comment on the leases that might be helpful?
657 If you would just check what was submitted because I understand there was a very substantial lease on a property in British Columbia that was not on a final schedule that was submitted. It had been on an earlier one.
658 So we should make sure that we are looking at the complete tables and --
659 MR. GOODWIN: Sure, we will check.
660 COMMISSIONER DUNCAN: -- maybe we will end up at the same point.
661 Thank you.
662 MR. GOODWIN: Thank you.
663 COMMISSIONER CUGINI: Thank you, and good morning.
664 Commissioner Poirier and I will share the responsibility of questioning you on the specific tangible benefits.
665 But before we move onto that, I do have a follow-up question to paragraph 19. And essentially is what assurances can you give us that the availability of CTV content and other content of other distributors will be negotiated on fair, equitable and timely -- in a fair, equitable and timely manner?
666 MR. COPE: The market.
667 COMMISSIONER CUGINI: Okay.
668 MR. COPE: That's how Rogers --
669 COMMISSIONER CUGINI: I know. I heard Mr. Bibic say that this --
670 MR. COPE: Rogers sells to Bell content all the time and the market looks after that. Videotron does. Bell buys from those carriers. For years Bell has bought from CTV.
671 So we have our three -- three of our four largest competitors are vertically integrated and we, for years now, have been having to buy from them. So we are only now going to have the exact same situation our three competitors have had.
672 Up until now the market has looked after those issues, and when they haven't Ivan would know and Mirko would know.
673 I'm sure there has been the odd time people have had to come to the Commission if those things haven't been resolved appropriately. But generally I think it's worked pretty well in Canada where we have been buying services from Rogers and Corus and Videotron for years.
674 Likewise, they will now acquire from us as they did also, I think, during a previous period when Bell did have not just a minority position but a controlling position. So the markets looked after that. I think the market will look after that going forward.
675 I think the market is a huge benefactor of this transaction because it balanced the market. There was an un-level playing field.
676 This levelled the playing field and the content acquisition for the country and probably goes to helping -- significantly goes to helping the Canadian broadcast system. Because the coming together of a BDU and a content provider helps deal with some of the struggles we are all having with how do we deal with some of the content issues as we go forward on assets we buy with all the other technology coming?
677 So I think overall the market in Canada is stronger and those relationships with our competitors will be market-resolved, not that they are ever easy. They are pretty emotional things but we have been able to resolve them.
678 So the market, I think, will deal with the issue.
679 COMMISSIONER CUGINI: Will these negotiations become part of a bundle of negotiations; that is, for the carriage of this content on wireless devices, on cable platforms or on any other platforms that are owned by your competitors? Or will they be negotiated separately?
680 MR. COPE: I think the market will determine that to be -- I'm not trying to be -- to duck the question. My instincts tell me it will be product by product, probably platform by platform because contracts are at different times.
681 Ivan might have some insight on that but I think they come up -- they tend to come up at different times with new things such as wireless.
682 We will probably want to get, you know, BNN wireless out even if we have an arrangement with pick Shaw that we have going for the next three years on a different platform. We will probably want to move that forward.
683 So I think you are going to see all sorts of things evolve here. I mean this is all new ground for all of us.
684 But the market of us buying from each other as competitors has been there for a number of years. We are just a part of that now.
685 MR. FECAN: I would just echo that, that the different rights have different times. The contracts don't come up coterminous so I think George's instinct is right that it will probably be product by product by product. But I can't speak to that.
686 COMMISSIONER CUGINI: Okay, thank you.
687 I will move on to tangible benefits. I am looking at the Appendix 1 submitted with your oral comments this morning.
688 MR. BIBIC: Commissioner Cugini?
689 COMMISSIONER CUGINI: Yes.
690 MR. BIBIC: At the risk of -- I just interrupted but we also have, as Kevin mentioned in his opening statement -- we have modified the proposal that we had filed. I don't know if you have it now but we would like you to have the more fleshed-out benefits proposal that tracks this Appendix 1.
691 So there is another document coming with a lot of detail around Appendix 1.
692 COMMISSIONER CUGINI: Okay.
693 MR. BIBIC: So that will be handed up by Madam Secretary.
694 MR. BIBIC: And just as you receive that document, essentially what that does is it assumes -- we are not moving away from -- there is two scenarios in Appendix 1:
695 $142.7 million; and that, Commissioner, Vice-Chairman Katz, is if the Commission accepts the 5 percent rate on conventionals as well as the exclusion of mainstream news and sports.
696 If you reject the argument on mainstream news and sports, we are at $220.8 million, and that document that we just handed out is our new proposal as to how we would allocate a $220.8-million package with all the details.
697 COMMISSIONER CUGINI: Okay, thank you.
698 So I just want to confirm, based on what was originally submitted with your application, that you have now eliminated satellite delivery of local stations in non-mandatory markets and that was $10.8 million -- you have redirected the $10.8 million, but you no longer have satellite delivery of local stations in non-mandatory markets as part of your benefits package?
699 MR. BIBIC: Correct.
700 And maybe it would be helpful if I can provide a very quick explanation of what we have done --
701 COMMISSIONER CUGINI: Sure.
702 MR. BIBIC: -- using the more detailed document that was just handed out. I will walk you through just the highlights and we can explore the details.
703 So number 1 is on-screen programming and multi-platform content. And what we have done here is just track the language of our original proposal which was filed in December. We have increased that bucket by $27.8 million. It used to be $40.4 million; now it's $68.2 million.
704 THE CHAIRPERSON: What document are you reading from?
705 MR. BIBIC: The one that Madam Secretary just handed out.
706 THE CHAIRPERSON: This one, okay.
707 MR. BIBIC: So to catch up Mr. Chairman, bucket number 1, on-screen programming and multi-platform content, you will see the number there is $68.2 million. That has been increased by $27.8 million.
708 What we did to go from $40.4 million in our December submission to $68.2 million is we removed the -- I call it Freesat, but we removed the Freesat proposal, which was $10.8 million and we added it to this category.
709 We removed the category called digital description platforms, which was $15 million, and we redirected it here.
710 And we reduced the 'A' Channel program by $2 million. There was an allocation of money in our 'A' Channel proposal for a digital retransmitter. We have removed that from the proposal. That is $2 million.
711 So removing Freesat, removing digital description platforms and removing $2 million from the 'A' Channel package provides $27.8 million in extra funds that we are allocating to this category.
712 Then what we have done within that $68.2 million is we said $53.2 million will be directed to P&I, all independent production, and the remaining $15 million would go towards enhancing CTV's local news in six western Canadian markets. You will see all the details. I won't -- I will skip over that.
713 We would love some questions on that but you will see that we are proposing some pretty compelling things in western Canadian markets.
714 Then we move to category number 2 on page 2 -- this is as it was in December -- support local television through satellite carriage, the MPEG-4 issue that we debated at length in the November DTH hearing. That stays the same as it was in December.
715 Category number 3 on page 3, enhanced local news production in HD. What we have done here is the allocation remains the same at $24.5 million, but we have removed specialty services from this category.
716 So we are no longer suggesting that money should be used towards enhancing specialty service production in HD. We think that should go towards enhancing local news production and I think that would address a significant public policy issue.
717 And the fourth one, sustained local programming in 'A' channels remains largely the same, except that we have gone from $27 to $25 million and are not suggesting that benefits should fund a digital retransmitter.
718 And the fifth category is radio benefits. That stays the same.
719 So those are the high-level points and lots of detail now that was not available in December.
720 COMMISSIONER CUGINI: Well, thank you for that clarification. You have eliminated some of my questions, not all of them.
721 There is one other area that you haven't addressed and that is the outstanding tangible benefits from the 2000 BCE-CTV transaction, which I will be questioning you on.
722 So I will talk about the enhanced local news production in HD initiative, the sustained local programming in 'A' Channel markets and the outstanding benefits, and Madame Poirier will address the other elements of your tangible benefits proposal.
723 So the $24.5 million for enhanced local news production in HD. In your December 3rd letter you say that:
"Resources dedicated to HD conversion would allow the production of HD content on CTV's local television stations." (As read)
724 And here you say:
"Stations such as, but not limited to, Calgary, Edmonton, Winnipeg and Halifax would benefit." (As read)
725 Are you in a position now to tell us which other markets would benefit from this initiative?
726 MR. BRACE: Good morning, Madam Commissioner. It is almost good afternoon now.
727 We are still in the process of deciding the exact markets that we are going to attribute this to. What needs to be clear is the $24.5 million doesn't come close to actually fully funding that transition.
728 Just for a little bit of clarity on this issue, we have gone a long way down the road towards transitioning the master controls. We have gone a long way down the road towards transitioning the transmitters.
729 As you know, there is a revenue implication there because, of course, it gives us the ability to simulcast in HD in those markets when we get there.
730 The one part that is missing and the one part that is not economically feasible, and the one part that we have wanted to do for a long time being that HD has been around for over 10 years, is the actual local production.
731 So whether it is the news, whether it is the community programming that we do there, whether it is the promotions that we do in those markets, that has not been feasible or economically advisable for us at this point in time.
732 So we are in the process of selecting the markets we are going to do. We have given kind of a list here where, of course, we are not in that position right now. The $24.5 million will actually help us get part of the way, but there will have to be operational investment as we go down the road as well.
733 COMMISSIONER CUGINI: So this will be a combination of capital expenditures as well as expenditures on actual programming?
734 MR. BRACE: Not so much capital expenditures, no. These are expenditures for -- sorry, these will be capital expenditures, yes, to get us to HD in the newsroom. This is the control rooms, the editing facilities, the graphics, all of that kind of thing that you would do to get to HD in each of the stations.
735 COMMISSIONER CUGINI: So in other words, other than HD quality on the screen, there is no other on-screen benefit?
736 MR. BRACE: I think though that the ability in the local markets, in these smaller markets, to get to HD is a tremendous benefit, you know, to the consumer.
737 I go back to the Commission several years ago where it was determined that HD -- that the Canadian telecasters could not be simulcast if they weren't in HD where the HD signal was available from the U.S.
738 It was considered that the technical quality in that case was such a significant improvement to production that in fact it was more of a production element than a technical element.
739 COMMISSIONER CUGINI: So the bottom line, Mr. Brace, is this is not any additional hours of programming?
740 MR. BRACE: It is not additional hours of programming. I think it just represents a much higher quality. I think that it does recognize certainly some aspects of the Broadcast Policy, particularly the one that says that we should be readily adaptable to scientific and technological change.
741 COMMISSIONER CUGINI: You also say in that same December 3rd letter when referring to this initiative that:
"The HD infrastructure will allow enhanced quality of local news to serve local audiences across the country and made available across platforms." (As read)
742 Is there money allocated within the $24.5 million to provide this programming across platforms?
743 MR. BRACE: I will turn it over to Mr. Crull.
744 MR. CRULL: Vice-Chair Cugini, just one thing I want to comment on because you made the point about on-screen benefits.
745 I will say that I have been struck in my months with the CTV team and working with our local stations by the value that our viewers put on that local diversity of voices and the local news.
746 I am struck by the fact that also there are HD-ready television sets, as we know, in the majority of Canadian homes and yet only 11 percent of viewing is actually in high definition today. I think that is owing to very important local content, like their local news, that is not available in HD. So I view this as a tremendous on-screen benefit to the system.
747 I will pass it to Wendy for one second on our thoughts around digital enhancement of news delivery, but I would say that it is not in this $24.5 million. This is entirely contemplated to be towards high definition equipment upgrades.
748 In our earlier category, category number 1, as a subset of that $15 million for local news there is a $3 million allocation towards the development of innovative digital news delivery, and maybe Miss Freeman can comment.
749 MS FREEMAN: Hi there, Madam Commissioner.
750 Yes, what Kevin was saying is that it provides our viewers a better enhancement of watching the news, a better viewing of the local news, and it is just a better viewer experience overall.
751 COMMISSIONER CUGINI: Now, in light of everything that you have just said -- better viewer experience, simultaneous substitution opportunities in those markets, it is the way in which broadcasting is going -- can you please convince us that this is indeed incremental and not simply the cost of doing business to serve your audiences?
752 MR. CRULL: I absolutely can, Vice-Chair Cugini.
753 I am also troubled and humbled when I look at the financials of the conventional television business as a whole and news delivery very specifically.
754 In a recent deep dive with our news division it was evidenced that the profitability of our national news delivery, just one element of our current operation, over the last five years the profitability is down 70 percent and in fact it is perilously close to being a money loser.
755 So the current operation of our news business will not support this kind of investment. And I would submit to you that high definition technology has been around and been relevant to viewers for well over a decade and these investments have not yet been made.
756 COMMISSIONER CUGINI: Let me ask you this: Would it not be a competitive advantage for us to allow you to use benefits money to convert to HD when other broadcasters have not been able or are not able to use benefits money to do the same, because they are doing it anyway?
757 MR. CRULL: I think it would be a viewer advantage to have the local content available in high definition.
758 COMMISSIONER CUGINI: Right, but how is it in keeping with our benefits policy?
759 MR. FECAN: If I may interject, this is not something that we would be able to do in the short term. There is just no payback for it.
760 So these markets, these communities would not enjoy under -- you know, before BCE bought us, subject to approval, we wouldn't be able to get around to that for a very long time.
761 This is an acceleration and would give immediate benefit. How quick an acceleration? Off the top, five years or so.
762 COMMISSIONER CUGINI: And because you did say short term, all of the benefits proposed are over a seven-year period; is that correct?
763 MR. BIBIC: Well, the way this package has been designed it can't be done in seven equal increments. So, for example --
764 COMMISSIONER CUGINI: That was going to be my next question.
765 MR. BIBIC: -- the second category on lifting all local stations on the satellite service, that would be a sizeable investment and we would make that right up front in the first year hopefully if that were approved, for example.
766 Wendy is more than willing to talk to the local news initiative in category 1. If that were approved, we would be hopeful to get that up and running soon.
767 So I think most of these -- well, most -- the benefits would be front-loaded to a certain degree and then spaced out as we could for the remaining years.
768 COMMISSIONER CUGINI: If the Commission were to deem this proposal as simply a cost of doing business and not indeed incremental or compliant with our benefits policy, would you be prepared to redirect this allocation to another one of your initiatives?
769 MR. BIBIC: So rather than addressing each of these questions one by one, I think what I would prefer to do is we will kind of get an appreciation for your areas of exploration and concerns and then take it all back and soak it in because I suspect there will be some moving parts here.
770 But what I would say is, and I think Kevin has been pretty emphatic that it should not be considered a normal cost of doing business and I think if you go back to the early stages of the benefits policy there is reference to the fact that advancements in capital expenditures can count as benefits if they do truly benefit the Canadian broadcasting system, and we feel that this would.
771 COMMISSIONER CUGINI: Okay. I will give you the opportunity to --
772 MR. COPE: I have to say one thing -- I apologize -- and we will go on.
773 We wouldn't do this for years and years and years without what is proposed here. I just want to make sure everybody really understands.
774 Ivan never -- it didn't happen there and it wouldn't happen without this for a very long time. So we just need to have that in the back of our mind and we will go on to the other issues.
775 I just want to make sure --
776 THE CHAIRPERSON: All morning long you say don't impose upon me something that you don't impose on my competitors, don't give me a competitive disadvantage.
777 MR. COPE: Yes.
778 THE CHAIRPERSON: And you are here asking for exactly the opposite, a competitive advantage over your other competitors. Because we have not allowed anybody else to use benefit money for this. You want us to allow you to use benefit money for this.
779 Isn't that out of sync with what you said before?
780 MR. COPE: No, I don't think so. I thought part of the assumption was what we would not do. So I'm trying to reconcile your point. I will leave that to --
781 THE CHAIRPERSON: No, but I'm sure Mr. Fecan or anybody will tell you going to HD is a necessity. The market drives you there, so you are not doing this out of choice; it's just a question of when you do it.
782 So here you want now using this money, so you are in effect getting an advantage over your competitors because they cannot use benefit money for that purpose.
783 MR. COPE: We will leave you to make that decision.
784 MR. BIBIC: I think, Mr. Chairman, it becomes a question of if it's inevitable why hasn't it been done after all these years.
785 One has to look at the markets. We are not talking about Toronto here and some judicious allocation of capital will have to be undertaken and the question becomes, will these be the markets that we eventually get to or not. What we are saying is it hasn't been done yet. It's a tenable proposition going forward and advancing a capital expenditure that may even have been done down the road can be considered a benefit, it's been stated by the Commission in the past.
786 COMMISSIONER CUGINI: You know, I could be argumentative and say well, what's the cost of not doing it, of not converting to HD in those markets without the advantage of benefits money.
787 MR. BRACE: I would say in the short term, looking at the revenue -- and short term being, as Mr. Cope has pointed out, as much as five years that there really isn't a revenue impact. This is all about incrementality.
788 I can make an argument for increased revenue with the ability to simulcast most certainly and that's where we have obviously invested, but this is something that is not in the normal course of what we have planned going forward and it truly is incremental. I can't emphasize that enough.
789 COMMISSIONER CUGINI: I will move on to sustaining local programming in the 'A' channel markets.
790 Your December letter provided more detail so I will refer to that.
791 Of course you say that you sustain that this initiative would help preserve and sustain these stations since you do claim that they have sizeable financial losses and you project that these losses will continue.
792 So you have sort of subsections in that one initiative and the first one is:
"Invest in digital rebroadcast transmitters in Barrie." (As read)
793 As I understand it, that's an application that is forthcoming. Is that correct? You have not filed that application with the Commission?
794 MR. BIBIC: Vice-Chair Cugini, that is the one that we have now removed.
795 COMMISSIONER CUGINI: You have removed that one?
796 MR. BIBIC: Then the $2 million that was allocated to this has been moved to the first category and that's why -- you are looking at the December version, that $27 million is now $25 million in today's version. That's gone.
797 COMMISSIONER CUGINI: All right. You have just eliminated about 10 questions. Thank you.
798 MR. BIBIC: Good.
799 COMMISSIONER CUGINI: Then the second part of that subset was:
"Transition to digital 8 stations in Ottawa, London, Windsor, Barrie and Victoria and invest in HD conversion of all station master controls." (As read)
800 That's still in there? That's still in the $25 million?
801 MR. BIBIC: That's correct. The other three remain.
802 COMMISSIONER CUGINI: Okay.
803 Now, as you know, all of these markets are included in our list of mandatory markets for digital conversion, so once again the question is: Why should we consider this to be a benefit and apply a test of incrementality to something that you are required to do by August 31, 2011, because those markets are on the list of mandatory markets for conversion.
804 MR. CRULL: I believe, Vice-Chair, that CTV management in the past has been before you with explicit details about the struggles of the 'A' channels and I believe also that they have, in prior communications with the Commission, made no indication that they had the ability under the financial performance of the 'A' channels to meet the current deadline.
805 So I would submit to you that one of the very first things that I have spent time on in my new seat with the team is to examine the viability of the 'A' channels.
806 We are here before you today in the hopes that you will recognize the value of these to the communities that they serve and would recognize that the tangible benefits policy has an opportunity to truly create a benefit for those local markets by giving them a chance to be sustained.
807 They are very much at this point in time of an uncertain future and I have asked that all decisions and all investments in these be held such that we can make an operating decision going forward after this hearing.
808 COMMISSIONER CUGINI: But it begs the question, if this transaction had not occurred and the 'A' channels are in those mandatory markets, would the 'A' channels have complied with the transition to digital?
809 MR. CRULL: I think the current management team, absent the transaction, would have had a management decision to make as to whether to continue operating or to exit those businesses, or to meet the deadline as it was imposed by the Commission.
810 COMMISSIONER CUGINI: Okay. So not only is this initiative something that is absolutely required in order to meet the digital transition deadline, but it is required in order to keep those 'A' channels open. Is that what you are saying?
811 MR. CRULL: Well, I do think that as we have discussed for local news extensively, that there is great relevance to viewers to having high definition available, that in order to accommodate simultaneous simulcast and substitution for the financial benefit of these operating channels that high definition is valuable.
812 I would submit that I believe, Vice-Chair, that you saw there was significant overwhelming support from intervenors in the communities of the value of the programming that is provided by these stations and we are merely here -- I know three out of the five stations have the only local news voice in those markets and we are here merely seeking a method of trying to make this troubled business model in these markets be sustained.
813 COMMISSIONER CUGINI: Have applications for digital transmission been submitted for these markets by CTV?
814 MR. BRACE: The answer is yes.
815 COMMISSIONER CUGINI: So they are in process. Again, it's something that you have to do, it's something you have applied to do already --
816 MR. BRACE: But once again it's a question -- it's a question of sustainability. Obviously if they are going to remain open we have to comply with the mandate. We have gone down that road, we have started the process.
817 The situation now is, can we actually follow through? If we get to a point in the road where we say, you know, the sustainability of these stations is really in question, we do have the ability to redeploy any equipment that we have purchased to other markets, even non-mandatory markets for that matter. So there is an option for that.
818 It's not something we want to do. Obviously the points that Mr. Crull made in terms of the benefit to the community -- particularly London, Barrie and Victoria, as he pointed out, where London and Barrie were the only newscast -- is quite necessary we feel and really does provide value to the community but from an economic standpoint it just doesn't equate.
819 So it's a difficult situation for us.
820 COMMISSIONER CUGINI: Now, in the second half of this subset you say you will dedicate resources to local programming on 'A' stations to offset some of the losses -- I will get into the details of that -- and that's all in this $25 million.
821 So how much of the $25 million is earmarked for digital transition and how much is earmarked for local programming on 'A' stations?
822 MR. BRACE: So the breakdown is the following: $10 million for the transition of the transmitters in the various markets; $5 million for master controls; and the remaining $10 million to maintain the existing programs, understanding that we have the basic number of hours in each market, most of them 7 hours, in one case it's 14, and we are actually overachieving. We like to be able to keep that level and make sure that we continue delivering a valued asset to the consumer.
823 COMMISSIONER CUGINI: So once again, this is not representative of any additional hours of local programming. You keep using words "maintain", "sustain" --
824 MR. BRACE: Commissioner Cugini --
825 COMMISSIONER CUGINI: -- viewers will receive what they receive today going forward.
826 MR. BRACE: Commissioner Cugini, this is life support, this is sustainability. That's what we were going -- and it's not inconsistent I think with the comments that were made particularly by Mr. Fecan in previous hearings here in front of the Commission where it is widely known that the 'A' channels, quite frankly, have been in dire straits and continue to be. It's a real difficult situation for us.
827 But we thought that with this process and the opportunity to make this kind of an investment, it would be certainly a benefit to those markets and to the consumers there.
828 COMMISSIONER CUGINI: Are these three initiatives within the $25 million mutually exclusive? Can you do one without the other?
829 MR. BRACE: I suppose. Well, I suppose you could, except, first of all, the transition of the transmitters would be mandatory, so that would have to happen. So $10 million would be an obligation.
830 I think that without doing the master controls, that would preclude us from doing the substitution that of course is a revenue implication that is quite severe, so I would say that that is an issue.
831 And to not maintain the programming, and getting back I guess to the very basis, which would be an obligation once again, wouldn't be a substantial decrease in the remaining $10 million.
832 So really they are kind of tied together. We thought this through as this is how we can really keep these stations going and continue to deliver what we think is valuable to the communities.
833 COMMISSIONER CUGINI: Where I was going is what if the Commission decided that the $10 million earmarked for the digital transition does not qualify as a benefit, would you redirect that $10 million to master control and to maintaining local programming?
834 MR. CRULL: I would refer to Kevin on that.
835 COMMISSIONER CUGINI: Or perhaps Mr. Bibic. Is there something that you want to absorb and figure out once we have figured out all the questioning on the benefits.
836 MR. BIBIC: That's definitely the approach I want to take, but if Kevin has an answer to the general questioning rather than to the specific question about redirecting, then --
837 MR. CRULL: Right. Well, it's just I believe that we are on record with the Commission that these channels lost $29 million in the last broadcast year and we see only a slight improvement. I think the team has done a spectacular job on managing their programming costs and, as I said, I have been really examining since I have been here ways, but I would tell you that we are not in the business of subsidizing an operation that is losing money like this and so if any part of the proposed tangible benefit were not accepted then we would have to take it into account as to whether we think we can make a go with these and what we have put forward is what we believe is our best opportunity.
838 COMMISSIONER CUGINI: Well, as you know, in a couple of months we are going to be back in this room talking about group-based license renewals, of which 'A' channel will be a part. So is that another opportunity for you to re-examine how these stations will operate in light of the decisions made coming out of this hearing?
839 MR. CRULL: I don't believe in the questioning -- and I will turn it to Mr. Goldstein behind me, if I could, but I don't believe that we see a breakthrough opportunity in the group licensing for the 'A' channels to change their economics.
840 COMMISSIONER CUGINI: Okay. I don't want a preview of what we are going to talk about in a couple of months, but it is something that is looming. I mean, it's here. I know you have submitted your renewal applications, but I guess I just wanted to know whether or not it was another kick at the can for the 'A' channels.
841 MR. BIBIC: I'm not sure it is, Commissioner Cugini. All I would say in addition to that is we are in a state of flux. Sure, the 'A' channels filed their application to convert to digital, I think that is an obvious regulatory application that needed to be made to keep all options open, but let's recognize that the state of flux is that a new owner is coming in and everything is on the table when new ownership comes in and what we are saying is with this investment we can commit to keeping those stations open for some time longer, whereas right now it is a serious state of flux.
842 COMMISSIONER CUGINI: Okay. Thank you.
843 My last area of questioning is the issue of the outstanding tangible benefits, almost $10 million, they are 3 years overdue. They are resulting from the BCE/CTV transaction which, as you know, was the first time that we approved self-directed benefits.
844 I understand from your correspondence that you were not able to give us a time line as to when it is that these monies will be spent.
845 So I have to ask you again whether or not there is an opportunity for you to file with us a time line so that this over $9.9 million will be allocated to projects and within what time frame?
846 MS COE: Vice-Chairman Cugini, if I could speak to that for a moment.
847 It's probably worth noting that of the $9.5 million, approximately $5.7 is actually recouped dollars from previous investments that were out of the BCE benefits.
848 So that's great. I mean, those are success stories and we are eager to try to reinvest those.
849 Over time we have actually recouped a total of just over 11, and we have reinvested some of that to date. We have, as I said, 5.7 left.
850 So out of the initial $230 million commitment, we have a total of just over 3 related to the HCV movies, those heroes, champions and villains, and those are the hardest to try to pull together.
851 I think, for our part, we would love to get one going. It's a tough time now for financing movies of the week, because they are just not as popular, but we will definitely do our best to try to get one off the ground as soon as possible.
852 COMMISSIONER CUGINI: But you can't give me any firm -- by the end of this broadcast year, by the end of the next broadcast year. We need something a bit more concrete to hang our hats on here. They are three years overdue.
853 MS COE: I can always spend money.
854 COMMISSIONER CUGINI: Oh, I am sure that the production community in the room is happy to hear you say that.
855 MR. CRULL: We will take it away, Vice-Chair, and make a submission of our plans and obligation. I was not aware that it was past a deadline to be spent.
856 COMMISSIONER CUGINI: Thank you very much.
857 I will now turn things over to Commissioner Poirier.
858 COMMISSIONER POIRIER: Good morning, everyone. Maybe we will start with one topic that is not on the list, and I wonder why -- free sat.
859 You changed your mind this morning. We can see that. You have decided to not invest $10.8 million of the tangible benefits package to support digital transition in non-mandatory markets, so we wonder why. We would love to have an explanation about this, because many Canadians were expecting to get some kind of free package from Bell ExpressVu, and they won't be able to get it. Why?
860 MR. BIBIC: I will get to the very specific question, but indulge me for a minute.
861 What we tried to do -- we approached this from a high level. We said: Okay, we want to design a package that directs significant sums to on-screen programming, recognizing, of course, that there is a lot of money in the pipeline that will be directed toward on-screen programming and independent productions.
862 We tried to do that. We also tried to design a package that would address other burning public policy issues that are kind of raging right now, one being local content, and the other being availability of local programming.
863 And we have tried to do all of this in a way that, in the Commission's own words in Shaw, is reflective of the evolving multiplatform environment in which we will operate.
864 So those are the principles that we tried to manage.
865 We looked at all of the interventions coming in, and there were some concerns about the amount of dollars dedicated to on-screen programming and independent production, and recognizing, as I said, that there is a lot of money in the pipeline, we still wanted to address that issue, and we thought: Where do we take the money from?
866 It's not that we are against free sat, but we said that local programming and availability of local programming in unserved markets is a burning policy need, and you have to look at them in tandem.
867 On the one hand, Shaw came forward with a free sat-like package, which we think will address that particular need. But what the Shaw package didn't address, and what we tried to do with Category 2, is to make sure, at the same time, that every single LPIF-eligible, over-the-air station in Canada gets carried.
868 You were at the hearing, Madam Poirier, in November. That, obviously, was identified by the Commission and many, many groups as a public policy issue.
869 So we said: Okay, what we can do here is, we will address lifting all of the stations. Shaw will address the free local package -- and we think there is enough money there to do it -- and we will move that money into on-screen, independent production, and there will be more money there for them.
870 So that's the philosophy that we took.
871 COMMISSIONER POIRIER: You say that you think Shaw has enough money to offer a free package to all Canadians, but I wonder, because CBC has made it known that they do not intend to convert their rebroadcasting transmitters in mandatory markets.
872 So there are some sizeable markets that will lose over-the-air access to CBC/Radio-Canada. Plus, some other broadcasters will not convert in mandatory markets. Finally, we have estimated that approximately 8,000 viewers living in official language minority communities will lose access to their native tongue, CBC/SRC service.
873 So why not take this into account and add to Shaw's proposition?
874 MR. BIBIC: Commissioner Poirier, we were operating under the basis of the facts as we read them in the Shaw decision. I can't find it, but I think the number was 31,800 potential unserved households.
875 COMMISSIONER POIRIER: Yes.
876 MR. BIBIC: We did the math, and we think that the Shaw proposal can serve those 31,800 households.
877 So that's how we approached it.
878 COMMISSIONER POIRIER: Would you be willing to reconsider that question with the new elements you have now?
879 MR. BIBIC: We will reconsider it, just like we will reconsider some of the issues that Vice-Chair Cugini raised with us.
880 COMMISSIONER POIRIER: If you reconsider it, would you please take into account the amount of money per household that Shaw will invest to offer a free satellite package, because the numbers that you presented to us were quite different from the ones we got from them.
881 As an example, with Shaw it was $500 per household, and with your proposition, I think it was close to $1,700.
882 There is a large gap between the two offers.
883 MR. BIBIC: We will take a look at it.
884 The inclination is going to be, when we come back -- as I sit here, I still think that the way we have redesigned it is the better way and the more compelling way.
885 If Shaw has addressed a need with the benefits package, then why not remove that from the Bell package and redirect those moneys into on-screen programming?
886 I am sure that the production community is going to come forward and will have several issues, unfortunately, with our package, but that is what it is. But I suspect that they would prefer that the free sat money went to where we have reallocated it.
887 I would ask the Commission to consider that. That has been addressed by Shaw, so let's move the money to on-screen programming.
888 But I will also look at the breakdown per customer, to see if that gap exists.
889 But there are a lot of set-up costs in free sat. We have debated this several times in previous hearings. There is set-up and installation. There are the systems that need to be -- work that needs to be undertaken within Bell. You need to get a technician out. What happens to ongoing maintenance when a customer who is getting a free package calls in?
890 There are a lot of costs there that need to be accommodated if we are going to move forward with that.
891 COMMISSIONER POIRIER: But we are in a competitive world, and it is always surprising to see such a gap between your numbers and Shaw's numbers.
892 MR. BIBIC: It may be that the Shaw numbers didn't include compensation for a lot of these cost items, and that is not something, I think -- a bridge that we are willing to cross, in terms of offering a free package but not compensating for the costs associated with it.
893 Because then you are compounding the issue. You are not recovering your costs, and you are also not generating any revenue from the package.
894 MR. CRULL: Commissioner, I would add that we were sensitive to the households that are at risk of losing their signals in the digital transition, and we were compelled by the fact that the Shaw package fully addresses every single one of them.
895 If their package had mathematically only covered half of the available, then we may have had a different consideration, but their package covers every household that has been identified at risk.
896 COMMISSIONER POIRIER: Thank you.
897 Mr. Chair, I will go through some of my questions before dinner, but I would love, also, to have time, because the proposition is different, and I will need time to go over it.
898 If you allow me one or two questions prior to the dinner time --
899 THE CHAIRPERSON: Why don't we break for lunch now, and you can put your questions this afternoon.
900 COMMISSIONER POIRIER: Okay. Thank you very much.
901 THE CHAIRPERSON: We will break now, and we will resume in an hour.
--- Upon recessing at 1224
--- Upon resuming at 1333
902 THE CHAIRPERSON: Louise, you have the floor. I think you were going to start with Item No. 2.
903 Before you start, let me say that I welcome that you would attack this issue. It came up during the DTV hearing, and it is something that needs to be fixed.
904 I am not sure whether the modalities or the amounts are right, but the fact that you actually took charge of this issue, I very much appreciate.
905 Louise, over to you.
906 MR. COPE: Commissioner, could I interject just for one second before we start?
907 We wanted to clarify -- we went back to the Shaw decision, and I think what you were asking us this morning, on filing, we misinterpreted it as asking us, one, going forward, and two, on competitive information.
908 I think what it says here is: Shaw agreed to submit to the Commission, on a confidential basis, existing affiliation agreements between Canwest Global and Shaw.
909 If that's what you are asking us to do, we are obviously completely comfortable with providing existing agreements between Bell and CTV.
910 There may have been some confusion on that. I have a very different view, going forward, on how you run the business, but in this case, if that's what you are asking us for, we are comfortable with that, if that's helpful.
911 THE CHAIRPERSON: Thank you, I appreciate that clarification.
913 COMMISSIONER POIRIER: Thank you.
914 It was good to have time to look at your new proposal and to see that, in my view -- and I am not there to judge -- you have made major changes that are in the direction of what we expect usually for tangible benefits.
915 I might have to ask some questions in French, so be prepared. If you need your translation device, it would help, okay? But I will start in English.
916 I have looked at many of our last decisions related to transactions and I concluded that most of the time 70 to 90 percent of the tangible benefits flow to on-screen programming and to a third party.
917 And $68.2 million is what we got this morning. It has improved. It was 18 percent of the total benefits package prior to this morning.
918 Naturally, it has improved, but out of $220 million, it is not a lot. It is 30.9 percent of the whole tangible benefits package.
919 Dozens -- not to say a hundred -- of intervenors emerging from the creative sector have expressed their real concern with regard to the fact that it is a much too small amount of money.
920 You said this morning that you are fully committed to the production of Canadian content, so why such a small amount dedicated to on-screen programming?
921 MR. BIBIC: Thank you for that question, Commissioner Poirier.
922 Can I unpack that? There are three or four points that I would like to make in response.
923 COMMISSIONER POIRIER: Yes.
924 MR. BIBIC: One is the opening comment about, typically, what is expected by the Commission.
925 The policy, of course, doesn't dictate 70 to 90 percent, it is clearly case-by-case.
926 One can go back to the origins of the policy, the 1993 benefits policy, and we can fast-forward all the way to the Shaw decision, where the Commission stated that the benefits need to be directed to communities served and to the system as a whole, it needs to be incremental to ongoing investment, and three, that the expenditures flow predominantly to third parties, such as independent producers.
927 It doesn't say, "flow to independent producers."
928 We have put together a package that meets all of those requirements. For example, Category 2, on the satellite carriage, that benefit will flow to those small-market stations which will now get carriage on the satellite system, just for example. They are not independent producers, but they are third parties who would benefit.
929 Again picking up language from Shaw, what we have done is, we have put together a package that is multiplatform in its design, just like the Commission said in Shaw.
930 The point that I am making is, there is no hard and fast rule.
931 Now, the last part of your question was: Why did you decide on the amounts of money that you actually did allocate to independent production.
932 We looked at that -- and here I am picking up a point that I made before lunch. There are outstanding benefits packages already in the pipeline, where significant amounts of moneys will be directed to independent production. You have City/Rogers, you have CTV/CHUM, a little bit left from BCE/CTV and other transactions. That is a significant amount of money.
933 What should not be overlooked -- and this is really, really important. Starting in September of this year there is going to be a new rule that kicks in which requires broadcasters to devote 5 percent of their revenues to PNI and independent production. That is going to be hundreds of millions of dollars over the years, and that is going to keep the money flowing to independent production on an ongoing basis.
934 So when you consider how much money is going to independent production, how much we have already proposed to devote to them now, we said: Why not also tackle these other very burning issues in public policy.
935 I hope I have answered most of the points that you raised, but that was the thinking.
936 CONSEILLERE POIRIER : Monsieur Bibic, je suis toujours assez surprise, par contre, de voir que CTV, qui produit des émissions si resplendissantes et si populaires comme "Flashpoint," "Terry" et "Corner Gas," continue quand même d'investir beaucoup dans l'achat d'émissions américaines.
937 Est-ce que le fait d'avoir beaucoup d'argent, justement, ne permettrait pas de réduire cette proportion d'argent qu'on investit pour produire de très bonnes séries canadiennes comme celles que j'ai mentionnées?
938 M. BIBIC : Comme mon commentaire un peu plus tôt, il y a quand même beaucoup de sommes d'argent qui vont être dirigées vers la production indépendante de contenu canadien. Ça, ça va continuer.
939 CTV, d'après mes connaissances, dépense au-delà de 500 millions de dollars par année sur le contenu canadien. Ça aussi, ça va continuer. Ça va être une façon de nous distinguer contre les services étrangers ou américains comme Netflix et Apple TV. Ça serait l'intention de CTV dans le futur de continuer ces dépenses-là.
940 Mais je ne vois pas la... Quand même, ce qu'on a essayé de faire, c'est de résoudre d'autres problèmes de politique publique. C'est la même réponse que je vous donne encore.
941 Et sur la question des dépenses sur la programmation américaine, je ne suis pas vraiment l'expert pour répondre à cette situation.
942 MR. CRULL: Commissioner Poirier, thank you for the opportunity to comment on this a bit, and in one second I will ask Ivan to comment, as well, because there has been, I think, discussion in the past and commitments made and followed through on some of the spend for foreign programming.
943 I would echo, I think, that it was truly impactful on me, in the early days of my learning under Ivan and working with the teams, the pride and the passion that goes into Canadian production, both the in-house productions that we do around shows like Marilyn Denis, which we are proud to have just re-launched, eTalk, and also independent productions, such as the one you mentioned, Flashpoint.
944 I do view those as being strategically very, very important going forward, and I will endeavour to support the discipline that this team has shown toward producing quality, not just quantity.
945 I think that, for that quality, it takes more than just dollars. It takes a lot of resources, both inside the company and with our partners, on nurturing and bringing those kinds of mass-market hits to market.
946 I would echo Mr. Bibic that we were cognizant that, while that is extremely strategically important, there is a great deal of money flowing into that from our normal course of business, as well as the CHUM remaining benefits and this package.
947 So we felt very good in that potential.
948 MR. BIBIC: Commissioner Poirier, I remember the last point that I wanted to make in response to your previous question.
949 You are correct that many intervenors wrote in on the question of how much money was being allocated to independent production, but what shouldn't be overlooked is that our transaction received close to 600 supporting interventions. There were close to 100 on supporting the local news project, which we haven't discussed yet. There were over 100 supporting our benefits proposal, and 70 supporting our MPEG-4 satellite proposal, including from the very parties that came forward in November, raising issues about satellite carriage.
950 So, yes, the independent production community did write in, but so did the rest of the public, and especially on some of the discrete elements of our proposal.
951 MR. FECAN: I would like to take the opportunity to point out that about a year ago we were in front of the Commission and we were talking about the cost of foreign programming, and what I said to the Commission at the time was that we would endeavour to reduce that cost. I am happy to report to you that we have substantially reduced, over the last year, the cost of the American programming that we carry. So that is a check mark in the "Done" column.
952 We could always do better, but we have certainly taken a very big step in that regard.
953 Perhaps if I could point out one other thing, I think the benefits package that BCE has proposed also keeps the viewer in mind. We are all here for the viewer, and what the viewers have told us is that the thing they value the most is their local stations and their local newscasts.
954 That is not to diminish the contributions of the independent production community, but it is also to say that the local stations and the local newscasts also have a legitimacy, and it is what the viewers want most of all.
955 COMMISSIONER POIRIER: Just to add to what I said, we have numbers here to compare Shaw's proposition and BCE's proposition. When I look at Shaw's number here, the number we have is that 54 percent of the tangible benefits are dedicated to on-screen and new media, while 31 per cent of BCE. So maybe it will help you, when you come back to us next Friday, to see extra money could be put. Okay?
956 MR. CRULL: Commissioner Poirier.
957 COMMISSIONER POIRIER: Yes.
958 MR. CRULL: We are respectful of that. I think a couple of observations I would make. The absolute dollars that we are putting forward at $68.2 million, setting aside percentages, that is as an absolute dollar amount, it is a very significant amount.
959 We think of $118 million -- or I don't think it is appropriate to have the radio benefits in the denominator, if you will, so if you take roughly $200 million of television benefits, we think of 60 per cent of it as going on-screen via the initiatives that we have indentified.
960 So we do feel that it is both compelling and it is responding to the issues facing the industry today, but also in its absolute percentage commitment on-screen.
961 COMMISSIONER POIRIER: Thank you. I have a few quick questions.
962 Of the $68.2 million allocated to on-screen programming and multiplatform content, what is the financial breakdown between the two, on-screen and multiplatform? Do you have that number?
963 MR. CRULL: Do you want to take it?
964 MS COE: I will jump in.
965 Commissioner, we have not set a specific amount for either one at this point. Our thought was that, given that the benefits are to run seven years and given the speed of technological change in this industry and the change in appetite of audience, we thought it made more sense to keep a little bit of flexibility there and be able to spend the money as that is kind of was dictated by the various projects.
966 Obviously the television side will be a very important side, because that is right now the main driver and still the main place for viewers to go. But over the course of that seven years that may shift a bit and we thought it made more sense to keep some room for allowance in there.
967 COMMISSIONER POIRIER: Okay. So no indication, you can give us no indication is it 50 per cent, 90 per cent or..?
968 MR. CRULL: I would just echo Ms Coe's comments, that over the course of seven years, looking at how technology is developing and how viewing habits are developing, we think it is more appropriate to be flexible here. And actually, in speaking with our independent production community, they are very supportive of that flexibility.
969 What we have said is all $53.2 million is 100 per cent spent with the independent community regardless of which screen that it goes on.
970 COMMISSIONER POIRIER: Okay.
971 THE CHAIRPERSON: Can I just interject?
972 Let me remind you, we have heard this before, our response has always been the same. Give us equal increments over seven years and provide for a flex factor, otherwise all of it gets back loaded at the end, et cetera and so on. We appreciate the industry is moving, et cetera, but this way everybody can -- that is our traditional position and you should be aware of that. So at the end of the day I will ask you for a seven-year schedule with annual increments of for those six.
973 COMMISSIONER POIRIER: Thank you, Mr. Chair.
974 In today's submission you also wrote that programs of national interest would be created by independent producers, and this relates to the $53 million. So is it 100 per cent produced by the independent producers? What is the right number?
975 MR. BRACE: Yes, Commissioner Poirier, it is 100 per cent to the independent producers.
976 COMMISSIONER POIRIER: Okay, thank you very much. I love it when it is short and sweet like this.
977 Let's move to the programs of national interest, some other questions I have. In your November letter you stated that these programs would be compliant with the Commission's definition of program of national interest. So could you provide the Commission with more details regarding the initiative? And what I mean is what is the amount of money that would be given or applied to documentaries, to dramas, to shows? Do you know that?
978 MS COE: Again, we haven't setup a specific allocation by genre. We actually value all those types of programming that are included in programming of national interest, they are all important genres and they are all underserved.
979 So it felt probably best for us to be able to react to the best ideas that come in from producers and be able to pick the shows that were the strongest creatively without a sense of having to spend certain dollars in this genre versus certain dollars in another just to comply with a preset notion.
980 MR. BRACE: CTV, Commissioner Poirier, has always subscribed to quality programming. It's where can we build something and make it successful? I think of examples like Corner Gas, which were launched with benefits money and after three years were, you know, self-sustaining, it became the number one comedy in Canada, even above U.S. comedies.
981 So it is that kind of like let's invest for success. So to break it down into categories and say this chunk goes here and this chunk goes there is probably, you know, not the way to go in our view. It is like how can we invest for success?
982 COMMISSIONER POIRIER: Do you still have in mind this mental health initiative that was on the table in one of your documents that you provided us in November? And it seemed to be related to the tangible benefit package. No? It is not anymore in the..?
983 MR. BIBIC: The mental health initiative is a core of what we are doing at Bell Canada, but it is not part of this --
984 COMMISSIONER POIRIER: Okay. Because it was in one of your documents, I wanted to clarify this. Thank you very much.
985 You submitted today some very good information about local news. Who is in charge of local new? You are?
986 MS FREEMAN: I am.
987 COMMISSIONER POIRIER: Okay, yes. And so we thank you for the extra information you gave us. I think it is quite similar to Shaw's initiative. But could you summarize what you are going to do that is incremental?
988 MS FREEMAN: We currently do not have local morning shows in the west anywhere from Winnipeg on. We do have local morning news in the east in markets like Halifax, Ottawa and Toronto. We need to, you know, have our viewers have an opportunity to have local morning news. This is incremental, because in the past we have not been able to do this. If we had done this, we would have had to have shutdown another part of the CTV news system.
989 COMMISSIONER: Okay. So let's move now to the satellite carriage of local television stations, $84 million. You know, a number of parties stated that $84 million for the carriage of all LPIF-eligible local television stations would give BCE a competitive advantage over DTH players. Do you view this initiative as giving you a competitive advantage?
990 MR. BIBIC: Commissioner Poirier, it is really not about competitive advantage, it is about addressing a public policy issue. In a world of finite satellite TV capacity we have already made, and this is revisiting the November, but we have made our choices as to what we can afford to carry. And we do a very very good job currently in carrying local television stations, but we just don't have the capacity to carry them all.
991 These are typically in smaller markets and customers have had a choice; subscribe to satellite and don't get your local station, or subscribe to cable. So it is not about gaining a competitive advantage.
992 A burning public policy need seems to have been identified in November, and I take comfort on this one from this. The Bloc Quebecois came before you with an impassioned plea about the issue and they have now supported this proposal.
993 Rogers came forward with a fully fleshed out position last November and they have come forward and said they support this proposal. The small market independent broadcasters who aren't being carried, all of them, stepped forward in this proceeding and supported this proposal.
994 So I think that gives you the comfort you need to recognize that this addresses a very important public policy issue, certainly from their perspective. And this is the opportunity to fix it.
995 Now, in terms of the amount, this number is not new. What is new is that we have now publicly made it available. But this is the same number we filed with the Commission confidentially as part of that process last year. And the issue is you either make the full investment in order to get that capacity, if you don't make the full investment, you get zero additional capacity.
996 COMMISSIONER POIRIER: Okay. We will dig into the numbers later on. But, you know, back to my question, Shaw invested a million dollars in a new satellite to be able to provide probably the LPIF stations too. So they raised concerns that Bell's competitors are funding additional capacity through normal capital expenditures. And that would give you a competitive advantage.
997 So I am back to the question --
998 MR. COPE: Let me just add two things so we can be unequivocal. We will not do MPEG-4, as Bell, if the benefits package doesn't allow for it, it won't happen. For five years Mr. Crull tried to convince me, and we won't be doing it in the next five years. And so it is not a competitive advantage, it is an advantage for Canada by having us do this. And we can do without the competitive advantage you have talked about if you interpret that there is one, and we just won't do it.
999 So it is very unequivocal with me on that. So one of the great benefits of this transaction will be this particular benefit for Canadians and for these 30 channels we are talking about. So the Commission should relax, there is no issue around that.
1000 COMMISSIONER POIRIER: Good. We are here to ask the good questions so we get the good answers. Thank you.
1001 Let's get into mechanics, okay? How much extra capacity would the MPEG-4 conversion create?
1002 MR. BIBIC: I don't know the answer off the top of my head, but certainly enough to meet the commitment we are making here.
1003 COMMISSIONER POIRIER: Okay. So you would be able to add the 30 LPIF-eligible stations?
1004 MR. BIBIC: And that is a commitment, they will be lifted.
1005 COMMISSIONER POIRIER: In SD or HD?
1006 MR. BIBIC: Well, the central issue in November was SD carriage of LPIF-eligible OTAs, we will step up to that commitment.
1007 COMMISSIONER POIRIER: Okay. So would you be able to carry additional services above and beyond those additional local stations?
1008 MR. BIBIC: I don't know the exact number, but there will be capacity over and above the capacity that will taken up for lifting the 30. But again, the important point to recognize is the full investment has to be made in order to get the step function in capacity.
1009 You can't just kind of modulate the investment to get less capacity, because it is all or nothing. Every last MPEG-2 set-top box has to be swapped out, otherwise you get absolutely zero incremental capacity.
1010 COMMISSIONER POIRIER: The rented ones and owned ones by your clients, all of them?
1011 MR. BIBIC: All the HD MPEG-2 set-top boxes must be swapped out in order to get any new capacity, otherwise there will be no capacity.
1012 COMMISSIONER POIRIER: Okay. Let me ask you a tough question then. As part of the tangible benefits, would it go towards the carriage of other services than the LPIF?
1013 MR. BIBIC: No, the commitment would be the LPIF-eligible standard OTAs.
1014 COMMISSIONER POIRIER: Plus some others?
1015 MR. BIBIC: Well, there will be extra capacity over and beyond that --
1016 COMMISSIONER POIRIER: Yes.
1017 MR. BIBIC: -- but the marketplace will determine which ones need to be carried, et cetera. But the formal regulatory commitment we are stepping up to is as I said.
1018 COMMISSIONER POIRIER: So I will repeat my question. Part of the tangible benefits would go towards carriage of other services? Yes or no?
1019 MR. COPE: No and yes.
1020 MR. COPE: Because in complete transparency it does not happen without this benefits program. And then there is incremental capacity, which you have correctly brought up. There is definitely incremental capacity. But there is not an ability to spend this money and say, okay, now it is at 30.
1021 In other words, we can't spend half to get to 30, we have to spend all the amount to make this work. So the answer is actually yes and no to your question.
1022 COMMISSIONER POIRIER: Okay. Can you provide us with the rationale that you need to invest $84 million to get it all or..?
1023 MR. COPE: Certainly that is -- yes, we can't do it.
1024 MR. CRULL: Well, it is the nature of -- as Mirko was describing, you have to swap all of the MPEG-2 before you can put the signal down in an MPEG-4 compression. So it is a step function investment. And what we can submit is the number of total carriage that is available, and that would give you a feeling in excess of 30 what that number is.
1025 MR. BIBIC: If you think back to November, Commissioner Poirier, you will remember that we had in our opening statement a little diagram with the satellite and if you recall or you go back to it, you will see that, you know, from the broadcaster centre we uplink to the satellite.
1026 And we uplink right now in MPEG-2 and MPEG-4 and then it is distributed to set-top boxes in MPEG-2 and MPEG-4. So long as we have to distribute the signals in both MPEG-2 and MPEG-4 we won't have that extra capacity.
1027 So we have to stop distributing in MPEG-2 in order to get the capacity we need to do this. And in order to stop broadcasting in MPEG-2 we have to get all the MPEG-2 set-top boxes out of our base of customers, the HD boxes. And you have the confidential numbers from November, it is a lot of boxes and that is what is driving the cost.
1028 COMMISSIONER POIRIER: Okay. So are there going to be some costs borne by the subscribers then?
1029 MR. BIBIC: No.
1030 COMMISSIONER POIRIER: None? Zero?
1031 MR. BIBIC: No, well the boxes will be swapped out at no cost to the subscriber, that will free up the capacity. And as soon as the project is complete, every single one of these local stations that we don't carry that we have committed to carry will go up all at the same time.
1032 COMMISSIONER POIRIER: Okay. I will ask a few short questions related to mechanic aspects of the question. Most of Bell TV's HD services are carried by Nimiq 4, right, HD services?
1033 MR. BIBIC: I believe that's right.
1034 COMMISSIONER POIRIER: I thought it would be fast.
1035 MR. BIBIC: Oh, I don't remember all these details.
1036 COMMISSIONER POIRIER: You remember a lot, Mirko.
1037 MR. BIBIC: Yes.
1038 That is correct.
1039 COMMISSIONER POIRIER: Yes, okay.
1040 So would this initiative provide additional capacity on Nimiq 4 then?
1041 MR. BIBIC: I will have to get back to you on that one.
1042 COMMISSIONER POIRIER: Yeah? So get back to me.
1043 MR. BIBIC: I will. We will get back to you in reply for sure.
1044 COMMISSIONER POIRIER: Okay.
1045 So I was wondering. The purpose of my question was to get to know if the new local station would be carried on Nimiq 4.
1046 MR. BIBIC: Oh, now I see where you are getting at.
1047 COMMISSIONER POIRIER: Yes.
1048 MR. BIBIC: So would the new stations be available to all of our customers on Nimiq?
1049 COMMISSIONER POIRIER: That's it.
1050 MR. BIBIC: If that's the question I will get -- I believe the answer is absolutely yes but I will confirm when we come back.
1051 COMMISSIONER POIRIER: Because in the document you submitted to us, only 50 percent of them --
1052 MR. BIBIC: No, no, and that wasn't the intention. But it's a good question. So I will make sure that my answer is correct. But the intention is that they are available to the base.
1053 COMMISSIONER POIRIER: Okay. Do you intend to migrate some services from Nimiq 4 to Nimiq 2 or the opposite, the other way around; for example, pay and specialty services?
1054 MR. BIBIC: Okay. So I will also ask Mr. Dennison who was here last time and make sure I get the right answer.
1055 COMMISSIONER POIRIER: Okay.
1056 So some of your viewers will need a new dish?
1057 MR. BIBIC: I don't believe that's the case but we will get back to you on that one too.
1058 COMMISSIONER POIRIER: Okay. And then my two final questions or three maybe:
1059 BCE is proposing $84 million to swap all those MPEG-2 to MPEG-4 boxes and you haven't provided us with the exact number of boxes. Is it confidential information?
1060 MR. BIBIC: Yeah, we can file that again.
1061 COMMISSIONER POIRIER: Okay.
1062 MR. BIBIC: That was filed in the November hearing.
1063 COMMISSIONER POIRIER: Okay.
1064 MR. BIBIC: I have the number. I just don't want to say it in public.
1065 COMMISSIONER POIRIER: Okay. So you can provide us with the breakdown costs associated with the set-top box, the replacement dish, the installation; the uplink centre costs?
1066 MR. BIBIC: We can file the information necessary to establish the costs of the project.
1067 COMMISSIONER POIRIER: Okay. I am taking, for example, the numbers that were given to us by Free HD Canada, okay, and those numbers are not confidential. They were mentioned at the last DTH hearing, okay.
1068 What they stated was that a basic HD capable of MPEG-4 set-top box would cost $70. They estimated a number of 300,000 HD MPEG-2 to change, okay. So if I make a calculation, 300,000 multiplied by 70 means $21 million to make the change from MPEG-2 to MPEG-4.
1069 How come your number is $84 million?
1070 MR. BIBIC: That question was raised in November, and I remember Mr. Dennison giving a very eloquent answer as to why they were dead wrong. Rather than mess it up I'm going to pull the transcript and come back with that, the formal answer from Mr. Dennison. But they are -- they are wrong. They are woefully or grossly underestimating the amount of how much it would cost.
1071 And we have given the Commission the full breakdown of this number in the capacity report we filed last summer.
1072 COMMISSIONER POIRIER: Yes. But I would like the information to be also part of this hearing --
1073 MR. BIBIC: Oh, I understand.
1074 COMMISSIONER POIRIER: -- because it's related to tangible benefits. So it's a different hearing.
1075 MR. BIBIC: We will file it again.
1076 COMMISSIONER POIRIER: Okay.
1077 And my last question, Mr. Chair.
1078 Confirm that all the 30 LPIF stations would be added within the next year.
1079 MR. BIBIC: The intention -- we hope to be able to do this within the next year. We will make it a priority project.
1080 We think it can be done in a year and then every single station will be lifted at the same time.
1081 COMMISSIONER POIRIER: Okay, thank you.
1082 Thank you, Mr. Chair.
1083 THE CHAIRPERSON: Okay. Let me just follow up on Commissioner Poirier's questions because -- first of all, we really would like the exact breakdown of the $84 million, how much of it is labour, how much is material and the implementation plan so that you make it within one year.
1084 I mean we are not just talking about an objective. But I want to see milestones laid out how you get there.
1085 But, secondly, the point at which this is to be incremental. Clearly, we want to pay for -- we think paying -- using the benefits to pay for the 31 LPIF stations, you are getting quite a bit of extra capacity by going from MPEG-2 to MPEG-4.
1086 I hear you, Mr. Cope. You say you wouldn't make the investment if it wasn't for this but making it now you are getting a huge benefit besides those 31 stations so shouldn't there be proportionality?
1087 Shouldn't it be -- let's say yeah, but the incremental part, the one that is creating capacity for those 31 stations, I don't know what the actual capacity -- but let's say, for argument's sake you create capacity for 50 stations. Then it seems to me that the benefit amount that should be used should be only as a subsidy amount for the 29 stations or put a premium on top of it, et cetera. But why should we pay for all that extra capacity which you are now getting?
1088 I'm sure you have never looked at it that way but I wonder whether --
1089 MR. COPE: I get --
1090 THE CHAIRPERSON: -- an apportionment can be done along those lines?
1091 MR. COPE: Look, there is an intellectual point to your point. I mean to be divided up. But it's very simple. We won't do it without this funding.
1092 THE CHAIRPERSON: I know that.
1093 MR. COPE: So I don't know how to --
1094 THE CHAIRPERSON: You won't do it --
1095 MR. COPE: I know what you are saying. You are saying, let's say there is room for 42 and we should do 12 over -- I hear what you are asking the question on.
1096 But we know intellectually we wouldn't do it and therefore we don't view it as incremental, as a business that we would have normally executed on.
1097 So we will, I guess --
1098 THE CHAIRPERSON: Isn't your answer you wouldn't do it now? You will have to eventually do it.
1099 MR. COPE: No, I don't think so. I don't think so. I think with the growth of IPTV and with what we have seen in the competitive dynamic it would take quite a while for us to make this decision and we don't think we would be doing it.
1100 I want to make sure everybody is clear on that. It's coming to me over and over.
1101 We have another satellite launch we will have to deal with which is going to happen because we have already got another -- I think that's $500 million additional into that particular area of business, at some point. And then our focus also with that and IPTV.
1102 So we have had a hard time on this one, not due to lack of effort on our part --
1103 THE CHAIRPERSON: No, no. You see you have the benefit of using the data. I don't know what the extra capacity is to be gained by putting MPEG-4.
1104 MR. COPE: No -- sure.
1105 THE CHAIRPERSON: If it's 5 percent or something, you know, something -- yeah, it's one thing. If you are getting twice as many extra capacity as it takes to put those 39 stations in it's a different one, et cetera.
1106 Then it seems to me there has to be some apportionment. What the number is we can obviously argue about and discuss that. But I'm just right now groping in the dark. So if you in your response would address that it would be appreciated.
1107 MR. COPE: Sure.
1108 THE CHAIRPERSON: Okay.
1109 Steve, over to you.
1110 COMMISSIONER SIMPSON: Thank you very much, Mr. Chair.
1111 First of all, Mr. Cope, I sense that you are really not feeling well and I appreciate the effort you are putting in today. I closed my eyes this morning and I thought I heard Barry White. I don't know.
1112 THE CHAIRPERSON: Steve. Hang on. Steve, before you do this I have one thing.
1113 Over lunch I asked staff to do a short write-up of what Shaw's proposition is; your original one and the one you just tabled this morning.
1114 I would like you to distribute that, Lynda.
1115 Please tell us whether we got it right because I want to make sure we got -- we understood this. This is what we are all using to look at. Steve has a copy, too.
1116 Sorry, Steve.
1117 COMMISSIONER SIMPSON: Thank you very much. Just for the record, I believe that we don't have any contest over the evaluation or the apportionment of the radio benefits. We are still looking at 318 and 19.1 million; is that correct?
1118 MR. BIBIC: That is correct. We are still looking at 19.1 million for radio benefits which is the number that we had filed in December.
1119 COMMISSIONER SIMPSON: Right. And that is net before -- that's the amount before legacy carryovers from unspent CCD or substantial benefits from before; is that correct?
1120 MR. BIBIC: I am not sure I understood the question, Mr. Simpson.
1121 COMMISSIONER SIMPSON: I believe there were some unspent tangible benefit amounts that were -- that remain unspent that I thought, in aggregate with the 19.1, form the total amount of commitment for the next seven years.
1122 I may have --
1123 MR. BIBIC: I don't think -- the 19.1 is associated exclusively with this transaction. It doesn't pick up any unspent monies that may be there.
1124 COMMISSIONER SIMPSON: Right. I understand that, but I was just clarifying that point.
1125 Moving right into the discretionary 1 percent of the 6 percent, which is earmarked right now for CHUM Fanfest, I was wondering if someone in the panel could give us a bit broader description of what this particular activity entails.
1126 I know it's connected to Canada Music Week which is a one week undertaking in Toronto. But I am asking this question in context to how isolated this particular event is to the Toronto or the Ontario region versus the benefits that would be entailed throughout the country.
1127 MR. CRULL: Commissioner Simpson, you may need to give us a minute on this one.
1128 COMMISSIONER SIMPSON: I thought this was a softball, guys.
1129 MR. GOLDSTEIN: I have got it, sorry.
1130 With respect to the 1 percent discretionary amount what we are proposing to do is actually split it between two separate initiatives. One is to top up the existing amounts that flow from the CTV CHUM benefits to the CHUM Fanfest by $100,000 a year. What that will do is allow us to showcase additional emerging artists at that event. So if there is a certain set amount going to it now, it will add one or two extra artists.
1131 The remaining amount annually, which is roughly $350,000 annually, will go to stage annual concerts in different markets across the country. That will be five concerts at about $70,000 each and that is split between $20,000 for production and $50,000 for talent which assumes five artists per concert at $10,000 each. So that's the split.
1132 Sorry for the delay.
1133 COMMISSIONER SIMPSON: No problem. I am not going anywhere.
1134 Thank you. That's exactly what I was looking for.
1135 Moving into some radio issues because I think the issue of the tangible benefits contributions, with that clarification on the CHUM fund having been made, I would like to move over to sort of bridging set of questions which will take me into some diversity of voices questions for both TV and radio.
1136 But I would like to stick with radio for a minute and ask you some questions with respect to management governance in the future. I know this is a go-forward question and I don't want anything that is out of school but I'm looking more for mindset.
1137 Radio hasn't figured prominently in this hearing for a variety of reasons but it figures prominently in my mind. The questioning I have got starts with management structure.
1138 What will be the management structure in terms of a direct report to the new entity under Mr. Crull?
1139 MR. COPE: Kevin should probably answer that because he has got a structure that he will be looking at going forward with radio.
1140 MR. CRULL: So Commissioner Simpson, we have an executive, Mr. Chris Gordon, who leads our radio business and has done a spectacular job and has been enrolled with a mature and seasoned team for some time. He will continue to report directly to me or would report directly to me upon approval.
1141 COMMISSIONER SIMPSON: This is a subjective statement.
1142 It's been my impression in looking at nationally-owned and managed radio organizations that there is, for obvious synergies and for economies, the need or the want to consolidate management at least on a regional level by taking up some of the senior management at the station level. I'm not disputing the wisdom of that one way or the other but there seem to be some downside issues associated with governance and one of them that keeps popping up are the ongoing commitments to CCD.
1143 We seem to get lost in management transitions. Sometimes it's because management is cycled around from station to station within an ownership group and the CCDs get lost in the shuffle. Other times through consolidations of various accounting systems these CCDs become problematic.
1144 My question is do any of the stations at this point that you are taking ownership of or control of -- I should say -- have any outstanding CCD issues that will come up at renewal?
1145 MR. GOLDSTEIN: Thanks, Commissioner Simpson.
1146 To the best of our knowledge at this point none of our stations have any outstanding CCD issues. We actually -- recently actually undertook an internal audit of it to be sure of that emerging out of the sale of two of our radio stations in London and Edmonton where certain issues arose and were resolved.
1147 We are reviewing that internally but our understanding at this point is we have no such issues.
1148 COMMISSIONER SIMPSON: Terrific.
1149 Continuing along with radio. On the television side the internet looms like a dark cloud on broadcasting it seems at times and there has again been an absence within the entire industry with respect to go-forward strategies for radio and the internet and you are in an enviable position in some people's eyes to be able to command all you survey and have the flexibility on the radio side, as you would with television, to be able to ease into the internet if radio chooses to go that way.
1150 I know there is a lot of chatter these days in the United States about FM becoming an onboard component to mobile devices, be they telephone or just MP3 players.
1151 If that should be the case, that there is a move toward mobility, would that fit into the radio group or how would that work?
1152 Again, no stories out of school. I don't expect that.
1153 MR. CRULL: I'm not sure that we could speculate how a different type of distribution -- I mean certainly the content and the local talent associated with our radio business would remain in their leadership of running those assets.
1154 I can tell you that radio has probably overall in terms of some of the strategic thinking, just because of the size of the business -- and, frankly, it's very stable, it's a well-run and stable business -- it hasn't received the bulk of our management attention as far as strategy going forward, but we are very excited with the commitment.
1155 We recently, as you may know, purchased a station in Toronto and are reopening it under a different format and very excited for that investment and looking at other ways to leverage some of our broadcast content in radio.
1156 COMMISSIONER SIMPSON: To reflect on your use of the word "excitement", earlier you had indicated that having moved over the broadcasting world that it's been a treat -- I'm paraphrasing you -- that you have enjoyed seeing how things are done on that side of the fence. I totally agree with you, it's a great industry.
1157 It leads to me to my next question -- which could be condemned for being rhetorical but I would be interested in your input -- and it has to do -- I'm getting into diversity of voices, but more from the perspective of diversity of voices within the organization you control.
1158 You fit nicely under the 35 percent criteria, as did Shaw, yet as you move your assets or leverage your assets from distribution channel to distribution channel there is always that risk of finding yourself in a market dominant position, not through the ownership of an additional radio station licence, but possibly the development of a radio property into another forum.
1159 The question I have is to do with that excitement of the governance of the broadcasting side.
1160 In your mind will there always be, from what you know now, not an uptake of broadcasting into a telco structure, but will there always be a broadcast culture in this new organization and a telco structure with a management group at the top?
1161 How do you think you are going to feel your way through that?
1162 MR. COPE: Well, first of all, you know, I know you asked from a historical context on the word "telco", but in a way, as you know, we are now in this communication business more from us is from video to home phone.
1163 I think we have to operate the business not dissimilar to our three competitors who we have been competing with who have had this content assets for a period of time.
1164 We recognize that the successful model of the content provider is based on distributing to our competitors and at the same time the success of Bell's model is based on buying from the competitors of CTV. Therein lies really the one who is most successful at that Rubik's cube is going to win in this execution of strategy.
1165 But we have envisioned a leader of CTV as a separate division, and probably moreso than any of our other divisions for some obvious reasons, the success of that division has to be that it has an independence and it's own thinking.
1166 So hopefully that gives you some comfort around that as to where we are heading.
1167 MR. CRULL: Certainly, Commissioner, Simpson. As to your question, the unique corporate culture that exists in the broadcasting and creative industries is something that we want to nurture and want to build on and it's probably no secret to this panel that the corporate culture of a communications company is slightly different.
1168 So we will be careful to respect -- in fact, not be careful, it's very strategic to respect that and to take the best of both cultures and build on it.
1169 COMMISSIONER SIMPSON: Mr. Fecan, you said in the opening statement that this particular proposal that is in front of us really put CTV -- again to paraphrase -- back in the game and that you are aligned now as part of a much stronger whole.
1170 That to me implied that there were some disadvantages to not be aligned with an organization such as BCE.
1171 Would you tell me what those disadvantages as a broadcaster would have met to you if this deal hadn't happened?
1172 MR. FECAN: Well, they are the obvious ones, Commissioner Simpson.
1173 If this deal had not happened we would be probably the largest of the independent broadcasters, we would be dealing with competitors that have vertical integration. What vertical integration can give, and I think in this case would give a broadcaster, is access to technology and capital that you might not normally get from a pure financial investor.
1174 The kinds of technology that Bell is into and the kind of capital investment in new media that Bell is doing because it's part of being a communications company is beyond the scope of what an independent broadcaster can do.
1175 It's critically important because that's where our audiences go. If we have learned one thing from the Olympics is more equals more. The more content you have on the more screens, the more you drive back to the primary screen. If you don't have that, then you are disadvantaged and so why don't you just do it because it's still not profitable on the digital side.
1176 So if you are a purely financial investor in a broadcasting business you have to look at that investment very differently than you would look at it as if you were part of a large communications company.
1177 As the operator of CTV for the last 17 years, I was getting very worried about how we would be able to compete with our friends at the other companies that do have access to that technology and that capital. So that's why I felt that this kind of deal -- I mean there is no certainty in life, but it certainly provides a really good opportunity for CTV's future and that's why I feel good about it.
1178 COMMISSIONER SIMPSON: So moving on from that observation, I go back to the issue of governance and if there is a strong vertical broadcast culture, strong distribution culture, however you want to characterize it, what you are about to do is the biggest consolidation deal that this country has ever seen and with that kind of ground-breaking comes, I choose to believe, a lot of implied responsibility to ensure that this deal is good for the country, is good for Canadians.
1179 With that thought in mind I go back to that sensitivity you just brought up, Mr. Fecan, and ask the question: If there is a wall that exists between -- I shouldn't say "a wall", but if there is a broadcast culture that's empathetic to the very conditions you brought up as a broadcaster, how will that empathy translate into decisions that you make going forward with respect to other non-aligned broadcasters in terms of carriage distribution and the whole?
1180 MR. COPE: Sorry, thank you. I sure know I need that today.
1181 One thing that might give the Commission some help in all likelihood are public reporting. We will have this also as a separate division from a public financial disclosure perspective. So the public market itself will see the results of our media business.
1182 So not only will we have the internal governance that I think you are asking us about, when we report financial numbers that are based on the profit and loss of divisions, like we do now with Bell Mobility and our traditional phone business, or the wireline as we would all refer to it now, and we will in the media business, as our competitors do as well in the media, that implies also a fair amount of independence and governance on financials. So that will be there as well.
1183 Hopefully that gives everybody a little more -- you know, it won't just be happening in-house, it will be happening in public disclosure, and goodness knows public disclosure rules are pretty firm around if we are going to report how the division does it's going to be how that division is doing financially. So that's how we will be structured there.
1184 Then I think the recognition of the different -- we have to recognize the different cultures today in Bell's TV business from its wireless business. It has nothing to do with the content. If we are not successful at that we don't attract people to those different businesses and likewise in the case of CTV.
1185 It clearly has some different background, different education levels that come into it versus, say, we have many engineers that might come through our area and so the success of that business would be building that team. I think when people see the team that's in place they are going to see after close resources that historically have been focused in this area of expertise.
1186 COMMISSIONER SIMPSON: Thank you.
1187 Moving to another column of interest and responsibility is the issue of news.
1188 CTV has carved a very strong market for its news product and I guess the first question is: With this consolidation if it was to go forward, do you see yourself as a stronger consolidated news voice given the absence of the Globe and Mail or do you see yourself breaking even or is there a net -- I'm thinking about it from a leverage standpoint of news assets and the footprint that you are going to be able to make across the country with this new entity.
1189 MS FREEMAN: Thank you, Commissioner Simpson. I'm going to answer that one as the President of News.
1190 I see our editorial approach is always about balance and adding on our local initiative here with the local news we will definitely be stronger in the local markets and communities can now get local news.
1191 I think that is the question you were asking me; correct?
1192 COMMISSIONER SIMPSON: I was trying to gauge whether you felt that the removal of the major national newspaper was a detriment or not.
1193 MS FREEMAN: No. I don't feel that way at all, no.
1194 MR. FECAN: As a matter of governance the Globe was always completely editorially independent and managed independently and so that provides the context for Wendy's answer.
1195 MS FREEMAN: Yes. We ran separate newsrooms, separate operations. We were completely independent of each other.
1196 COMMISSIONER SIMPSON: Thank you. That's where I was going with this.
1197 Following on to the present day and going forward, going back to radio for a second, radio -- as we have heard ad nauseam sometimes -- but I truly believe it's most important feature is its locality.
1198 How will you ensure that your news will be in radio as local as it possibly can be, yet still be able to ride off of your combined strengths?
1199 MS FREEMAN: I'm sorry, can you repeat the question.
1200 In radio...?
1201 COMMISSIONER SIMPSON: Radio strength is local.
1202 MS FREEMAN: Right.
1203 COMMISSIONER SIMPSON: The temptation in a consolidation is to look for synergies that are often value-oriented. How can we be comfortable with the notion that you are committed to news at the local level being as local as possible?
1204 MS FREEMAN: We are very committed to local news. We are committed to working with our local communities.
1205 Did you also ask about radio there, sir?
1206 COMMISSIONER SIMPSON: Yes, I was asking specifically about radio.
1207 MS FREEMAN: Yes. We already are working in regions with the local radio stations. For example, in Vancouver they are already working together with the local station there, in other parts of Alberta, in Toronto. CTV Toronto is working with the local radio station in that department, working together, promoting each other and doing some news.
1208 COMMISSIONER SIMPSON: Is there a trend to combining newsrooms, TV and radio newsrooms?
1209 MS FREEMAN: No. We have independent newsrooms.
1210 COMMISSIONER SIMPSON: Yes. No, I was just asking you if there is a trend to that elsewhere that you have seen.
1211 MS FREEMAN: No.
1212 COMMISSIONER SIMPSON: Okay.
1213 My second to last question. I asked how radio represents itself in the management structure and I was very happy with the answer.
1214 How does news remain independent and yet heard within the management structure of this organization?
1215 MS FREEMAN: We will always maintain our independence. We resist attacks on our independence and we have structures in place for that and they will continue.
1216 COMMISSIONER SIMPSON: My last question has to do with production and distribution.
1217 The larger your footprint the more it presents -- and this is not a Canadian content question, this is just to do with appetite for production -- hang on, I have French in my earphones now. Not that that's a bad thing, it's just a different thing.
1218 My question was to do with appetite for weighting more into production, both for Canadian content purposes and for perhaps worldwide distribution purposes. You are going to be much larger, much better resourced organization, as Mr. Fecan indicated.
1219 Is this something that we can look forward to seeing more activity in this new organization, or is the philosophy to be a net purchaser of said content?
1220 MR. CRULL: I think, in fairness, Commissioner Simpson, both to the radio questions, I was thinking it's very difficult at this early stage on sort of grand strategic observations, but in general to your point I think that our in-house production and what we produce would be geared towards things like variety shows, news and maybe some special events that we cover today.
1221 I believe that the core competencies around Canadian-produced dramas and sitcoms and things of that sort rest with the independent producers and we would look to partner with them. So I don't see a strategic endeavour to put more of our investment towards those.
1222 MR. COPE: I would add -- I talked about it earlier and Ivan touched on -- the coming together, as with our other vertical integrated competitors, does have an ability I think to add stability on both sides of that equation that may not have been there, particularly as we all try to figure out what does the new world of technology mean of content and how do we deal with that issue when we talked about the $670 million that CTV and Bell will put towards content next year.
1223 We don't know if it's a good or bad thing, we just know that there are competitors who are coming into the market who don't make any of those contributions, so we have to figure all that out.
1224 So I would say it puts CTV on a better footing. We have seen things in the market already that have seemed balanced. I mean, there were certain sports teams that were off the air in the summer that ironically reappeared on the air the minute we bought CTV.
1225 So, you know, there have been benefits to a levelling of the playing field that we have already seen. I think that will be a benefit to the entire industry.
1226 COMMISSIONER SIMPSON: I would imagine even within existing properties you have a greater capacity to leverage those assets that you purchased the rights for.
1227 MR. COPE: Yes. That's what we think moving to the four screens.
1228 COMMISSIONER SIMPSON: Thank you.
1229 Those are my questions.
1230 THE CHAIRPERSON: Thank you.
1231 Rita, you had a quick follow-up?
1232 COMMISSIONER CUGINI: Yes. Thank you.
1233 Ms Freeman, I'm afraid you are going to be on the hot seat for another little bit and I'm going to refer to what you filed this morning.
1234 What is the attraction of a local morning news program?
1235 Shaw has proposed new morning news program, Citytv and some of these markets already has one, you are adding one. What is so great about a morning news program?
1236 MS FREEMAN: It's really great for the viewer to wake up in the morning and know what's going on in their community, whether it's weather, traffic, sports, breaking news overnight, that's the attraction.
1237 COMMISSIONER CUGINI: Is Canada AM currently available in these markets?
1238 MS FREEMAN: Yes, it is.
1239 COMMISSIONER CUGINI: So will this new local morning news program replace Canada AM?
1240 MS FREEMAN: It will replace Canada AM, but Canada AM will still be seen on CTV News Channel where it is seen now.
1241 COMMISSIONER CUGINI: Okay. So I'm still going to be able to see it in Toronto for example?
1242 MS FREEMAN: Absolutely. We see it as the best of both worlds. You could wake up in the morning, you can watch your local morning news, but if you also want to get a little bit of national you can turn to Canada AM on CTV News Channel.
1243 COMMISSIONER CUGINI: Okay.
1244 That brings me to asking whether or not any of these news programs or segments of these programs will make it onto Newsnet?
1245 MS FREEMAN: Good question. I would have to look into that.
1246 COMMISSIONER CUGINI: You can see where I'm going. It's a competitive genre --
1247 MS FREEMAN: Right.
1248 COMMISSIONER CUGINI: -- with these tangible benefits and the production of local programming, you would end up incurring a benefit on a competitive genre and therefore a competitive advantage in comparison to the others in that news specialty genre.
1249 MR. CRULL: Really, Commissioner Cugini, that wasn't the intent. These programs for the morning in Winnipeg, Regina, Saskatoon and Edmonton, and then also a noon newscast in Vancouver and a 5:00 p.m. in Edmonton are on conventional CTV.
1250 COMMISSIONER CUGINI: Yes. But the question was whether or not any of these stories would end up on Newsnet.
1251 MR. BIBIC: Commissioner Cugini, just to clarify -- you may have already picked this up, but just to make sure -- Wendy, keep me honest here -- east of Winnipeg Canada AM remains where it is; Winnipeg west Canada AM would move to CTV Newsnet and would be supplemented on the conventional stations with these new morning news shows.
1252 COMMISSIONER CUGINI: Okay. No, I understand that.
1253 MR. BIBIC: Okay.
1254 COMMISSIONER CUGINI: You talk about this initiative will mean that 80 new employees would be hired by these local stations.
1255 MS FREEMAN: Yes.
1256 COMMISSIONER CUGINI: Will they in any way also be asked to contribute to Newsnet and/or to your radio stations now that you will own radio stations?
1257 MS FREEMAN: They will be working on the local morning news shows.
1258 COMMISSIONER CUGINI: Exclusively?
1259 MS FREEMAN: Yes.
1260 COMMISSIONER CUGINI: Okay. Thank you for that.
1261 Then you also say that:
"The $12 million would partially fund the operations and would support most of the costs associated with these programs for two years." (As read)
1262 Does that mean after two years you would hope that these programs would be self-sustaining?
1263 MS FREEMAN: Yes, I would. And we would hope that they would continue.
1264 COMMISSIONER CUGINI: Okay. Thank you very much.
1265 Those are all my questions.
1266 THE CHAIRPERSON: Okay. Before I let you go just a couple.
1267 The sheet I gave you, did we understand your alpha correctly? We want to make sure that we understood you today especially when you look at it in comparison to Shaw.
1268 MR. BIBIC: I would like to reserve judgment on the comparisons to Shaw for a second.
1269 We think that the denominator should be the $200 million and should back out a radio in order to compare apples to apples, so that would be one comment.
1270 In terms of the absolute dollar amounts, put next to each of the initiatives, they appear to be correct at first glance, Mr. Chairman.
1271 THE CHAIRPERSON: Okay.
1272 Second, I forgot to ask you about the whole issue of 3 percent -- five-to-one which changes to three-to-one between your station that you control and stations of independents.
1273 Right now that's not an issue for you because you don't own anybody. Once you own CTV, are you going to run afoul of the 5.1 rule?
1274 MR. BIBIC: No.
1275 THE CHAIRPERSON: Are you going to be offside of the 3.1 rule after August?
1276 MR. BIBIC: Chairman, you are correct that currently for us now it's not an issue, but the reason it's not an issue is we are already considered to be affiliated with CTV and we currently meet the rule and we will meet the rule in September.
1277 THE CHAIRPERSON: Lastly, just an observation.
1278 When we talked earlier about the 5 percent versus 10 percent and you were referring to Canwest and you said the big reason for Canwest's 5 percent which we set publicly at the hearing, et cetera, was by Shaw buying Canwest they obviated the need to go through bankruptcy which would have resulted in obviously loss of talent, having to restructure, finding a buyer, et cetera, and depressing the price considerably because it would have been a bankrupt asset, et cetera.
1279 The saving to the system as a whole by avoiding this bankruptcy, that was the real rationale for us giving basically a 5 percent reward to Shaw. That does not apply in the case here.
1280 Also, if you look at our decision as we clearly said it, that was the principal reason for the 5 percent. Now, you may differ with us or not, I just wanted to make sure -- put it on the record, that was it.
1281 What I propose now, we will have a break and then we will listen to the end.
1282 At the end of the first day I think we will give you a list of issues which have come up which we would like you to look at and then you will have a chance on Friday morning to come back and give us your best shot at all of those issues.
1283 Okay? Thank you.
1284 We will take a 10-minute break.
--- Upon recessing at 1439
--- Upon resuming at 1457
1285 THE SECRETARY: Order, please. A l'ordre, s'il vous plaît.
1286 LE PRÉSIDENT : Commençons.
1287 LA SECRÉTAIRE : Merci, Monsieur le Président.
1288 We will now proceed with Phase II, in which interveners appear in the order set out in the Agenda to present their intervention.
1289 For the record, I would like to indicate that the Commission has been advised that Dan Mathieson, Mayor of the City of Stratford, item 4 on the Agenda, will not be appearing today.
1290 We will now hear the presentations of Quartier Vanier Merchants Association, Ottawa Food Bank, Ottawa Regional Cancer Foundation and the Federation of Northern Ontario Municipalities, who will be appearing as a panel.
1291 We will hear each presentation, which will then be followed by questions by the Commissioners to participants.
1292 We will begin with Mrs. Suzanne Valiquet from Quartier Vanier Merchants Association.
1293 Mrs. Valiquet, you may now proceed with your presentation.
1294 MME VALIQUET : Bonjour, Monsieur le Président et membres de l'équipe du Conseil. Good afternoon, Chair and Members of the Commission.
1295 You know my name is Suzanne Valiquet and I am the principal of a consulting firm in Ottawa called Momentum Stratégique et Créatif. I am also the Executive Director of one of Ottawa's Business Improvement areas known as the Quartier Vanier Merchants Association representing more than 350 businesses.
1296 I have lived in Ottawa since 1967 and I am a graduate of the University of Ottawa. I am a social marketing and communications consultant. My works consists mainly of building relationships to improve and enhance the communities in which we live, work and do business.
1297 To begin this afternoon I would ask that for just a moment you consider Canada and imagine it without any local television programming.
1298 How would we communicate to residents, visitors and businesses what great events, activities and happenings are occurring in their neighbourhoods?
1299 How would we feature our local heroes, the people who illustrate the special things that make one area unique or different from another?
1300 I can speak to you about our area and how it would be disadvantaged without local programming and specifically the 'A' Channel, whom we depend a lot on for our coverage.
1301 The business area I am responsible for is becoming more culturally diverse. Portuguese and Arabic are now almost equivalent to French and English spoken languages. Vanier alone has Ottawa's largest First Nations, Inuit and Haitian populations.
1302 Our country's fabric in the last 10 years has grown in leaps and bounds into rich and vibrant neighbourhoods. The 'A' Channel has helped us illustrate this wonderful ethnic diversity and what it has to offer.
1303 New restaurants, shops and services are opening on several of our main streets regularly. Small business is alive and well in Canada and in fact represents the fastest growing industry in our country. Small- and medium-size businesses are part of what makes our neighbourhoods that place we call home.
1304 Retail owners are more and more engaged in their communities through our BIAs (business improvement areas). Each one of these areas plays an important part in defining our cities.
1305 You may know the terms Byward Market, Little Italy, Downtown Yonge. They are examples of what I am talking about. They are all BIAs. They all rely on local programming to survive.
1306 Now let us consider our question again. Imagine our cities without the local programming provided by 'A' channels.
1307 An organization such as ours that relies on celebrating its uniqueness to make known what's hot or interesting about an area, here would not be possible.
1308 So far, our relationship with CTV through its 'A' Channel has provided an immeasurable amount of visibility to our merchants and community.
1309 We have launched a new farmers' market in an area that was once known for drugs and prostitution.
1310 We celebrated with the 'A' Channel last fall the launch of our ever-popular Pumpkin Festival during a four-hour morning show that not only got our merchants on Beechwood Avenue excited, it brought out hundreds of residents.
1311 The Morning Show worked diligently with us as they featured Chef Éric Patenaude of Todrics preparing Sabayon at 5:00 in the morning; the Salvation Army staff put on a fashion show featuring great outfits from the Thrift Store; there was dance, games and drumming by the Wabano Mamawi Health Centre.
1312 And to kick off the whole thing, our all time biggest supporter Vern White, Chief of Police here, was there with the local beat cops talking about how much he loves Vanier and our neighbourhood.
1313 What I am describing here is not any different from tens of thousands of other communities around Canada, each and every one of them relying on local TV stations to help promote what they do.
1314 Local programming, ladies and gentlemen, is at the basis of who we are and how we define ourselves, one neighbourhood at a time. It is the connection to who and what takes place in our cities, communities and neighbourhoods.
1315 A big part of what I have to do every day is tell people what's going on in their area. If we do not have access to local programming, our messages will no longer be heard, remaining unsung and lost.
1316 Who will lose? Each and every one of us.
1317 And what's to say of future generations? If we don't teach them the importance of communication within the place where they live, work and one day do business, they will lose interest in their community and refuse to get involved.
1318 All the social media networks cannot replace the thrill and the excitement of local TV programming.
1319 As I stated in my letter to the CRTC, we support BCE's application to acquire 100 percent control of CTVglobemedia. BCE can provide for the need to create stability for CTV and an assurance that the community in which we live is important and an ever-greater reason to celebrate it.
1320 I strongly encourage you to approve the transaction put before you and the benefits package as it provides additional stability for the 'A' Channel.
1321 Your favourable decision will go a long way to ensuring the future of our communities and honouring the people who work, live and do business within them across our country.
1322 Thank you, Mesdames et Messieurs, for your time and for listening to me today.
1323 THE SECRETARY: Merci, Mrs. Valiquet.
1324 We will now hear the presentation from Ottawa Food Bank. Mr. Peter Tilley is appearing for the Ottawa Food Bank.
1325 Mr. Tilley, please go ahead with your presentation.
1326 M. TILLEY : Monsieur le Président, Madame la Vice-présidente, Messieurs et Mesdames les Commissaires et les autres membres du comité des audiences publiques du CRTC.
1327 Mr. Chair, Mr. Vice-Chair, Commissioners and other members of the CRTC hearing committee, my name is Peter Tilley and I am the Executive Director of the Ottawa Food Bank.
1328 Mon nom est Peter Tilley et je suis le directeur exécutif de la Banque d'alimentation d'Ottawa.
1329 Thank you for the invitation to speak before you today. I can truly appreciate that you have heard and will hear numerous presentations that pertain to why it is important for BCE to enter into a beneficial acquisition arrangement with CTV. I trust that most of the arguments are sound and informative.
1330 I am here today though on behalf of the Ottawa Food Bank to explain why it is critical to the well-being of our organization and many other organizations just like ours that CTV -- and in particular to this discussion today, 'A' Channel -- be permitted to remain as a visible, viable and active part of the Ottawa community.
1331 Certainly, all of our respective standings within the Ottawa market would not be the same without the presence of 'A' Channel and, of course, CTV Ottawa.
1332 As someone who believes in speaking in terms of specific references as opposed to generalities, I wanted to highlight today several examples of how our organization, the Ottawa Food Bank, has benefited thanks to the presence of 'A' Morning in the Ottawa market.
1333 As many in our community observed just last December 9th and 10th, we at the Ottawa Food Bank were all recently invigorated thanks to the 'A' Morning Food Drive in support of the Food Bank.
1334 This two-day effort commenced at 6:00 a.m. with a live four-hour broadcast on the Thursday morning, right outside of the studios at 87 George. As well, there were additional food collection pods set up at various locations across the city, with remote broadcast feeds from the various 'A' personalities.
1335 The very next day, on Friday morning, 'A' broadcasted live from the Food Bank warehouse floor, again 6:00 to 10:00, for four hours and we unloaded and sorted the food that was raised the day before.
1336 What a thrill it was for all of the staff and volunteers to work around this hotbed of activity as it unfolded before our very eyes, but perhaps most importantly, we were startled to see that 75,500 pounds of food and more than $29,000 was raised in a single day.
1337 Of course, equally important was the incredible awareness that this live food drive broadcast generated with their entire viewing audience. That is an impressive, specific example of just how 'A' works.
1338 Now I will give you another one and how it relates to my second point about the awareness.
1339 On January 24th just past we were visited by a woman, Marsha K. -- as in K., not K-A-Y, I will respect her privacy. She came in to see us about volunteering. She is quite an active senior who has been keeping busy in her retirement. Her only concern in approaching us was that she had watched the entire 'A' broadcast and was worried that she may not be able to reach the food sorting tables that she saw on TV. Marsha stands all of 4'7" tall. We assured her that this would be fine.
1340 One other note to this is that during the course of her orientation tour she leaned over to whisper to me that we were now the top charity in her will. Please appreciate that Marsha is just one example of 'A's beneficial reach out into this community. There are thousands of other such testimonials from amongst all of us local charities.
1341 And one last example. Just two weeks ago, we had His Excellency the Governor General of Canada speak at our Annual General Meeting of the Ottawa Food Bank. Why? Because his communications people saw the warehouse visual on television during that very 'A' broadcast and thought it would make for a nice backdrop for one of his speeches.
1342 The list goes on and on. When people come out to visit our Michael Street warehouse they are often shocked to learn that we support 140 programs in the Ottawa-Gatineau region. They are floored to see the literal tons of food being loaded onto the trucks for delivery on a daily basis.
1343 At some point during the tour some often ask: How do you accomplish all of this? You must be supported by the government.
1344 It is then that we inform them that less than 10 percent of our financial support comes from the three levels of government combined.
1345 That begs the next question: Then how is all of this possible? Well, if they were to ask that question sometime in early to mid-December, my response would likely be: Let me tell you about the 'A' Morning Food Drive.
1346 'A' Morning's support of the Ottawa Food Bank is just one of many, many examples of how a charity somewhere in the Ottawa area has benefited from the support of one of our media partners, whether that be in the form of a story on the CTV 6:00 evening news, an article in the local paper, perhaps a CFRA radiothon, and the list goes on.
1347 We at the Ottawa Food Bank appreciate that we have little expertise to offer you on funding formulas or acquisition packages, but we do have a lot to say on the critical importance of our local media partners remaining as viable, sustainable and active participants in our fight against community hunger. We truly couldn't do it without them!
1349 THE SECRETARY: Thank you very much.
1350 We will now hear the presentation of Miss Linda Eagen from the Ottawa Regional Cancer Foundation.
1351 You may proceed with your presentation.
1352 MME EAGAN : Merci beaucoup. Thank you.
1353 Mr. Chair and Commissioners, you have just been told my name is Linda Eagen and I am proud to be here on behalf of the Ottawa Regional Cancer Foundation.
1354 We are the voice of cancer survivors in Eastern Ontario and that is, in fact, over 150,000 people who are currently living with cancer, in treatment or in other states of their journey.
1355 We are dedicated to helping them in areas that they care and are concerned about the most. We are bringing care close to home. We are helping reduce wait times. We are helping access to new diagnosis and new therapies.
1356 And I will tell you about a very exciting project. We are about to change the face of the cancer experience in this community by dedicating resources to improving quality of life.
1357 I am here today to tell you that what you are going to learn about our Foundation either right now or at another time would absolutely not be possible without the support of 'A' stations.
1358 And so I am asking you to support Bell's acquisition of CTV as well as the benefits package that is proposed in that money will be directed to 'A' and they continue to be a very important supporter.
1359 What is impressive about the relationship that we have with 'A' is that it is longstanding. The Cancer Foundation has been a proud partner of 'A' Television for more than a decade, a relationship that started in 1999 with the introduction of a telethon that has raised quite a bit of funds that are active right now in our community.
1360 And over the years the partnership has continued to grow, resulting in 'A' Television selecting the Cancer Foundation as one of its charities of choice. We do great things together and we have raised hundreds of thousands of dollars.
1361 Their commitment is much deeper though. Over the years the staff has become a partner. We plan things together. We discuss how we are going to engage and empower people in our community. They are truly champions.
1362 I could put a dollar figure just to put things in perspective, but in recent years we have raised over $300,000 together and we are certainly very proud of being able to help local cancer patients and their families with those funds.
1363 The team at 'A' and CTV are also a very valuable resource for the Cancer Foundation. They enable us to initiate some outreach, to help people tell their stories -- stories that give courage to others and inspire.
1364 'A' Television has been a true leader in the fight for cancer survivorship in our community. By using the station's resources and media platform we are able to educate people.
1365 You know, I heard earlier, and everybody here agrees, that regional and locality is important. It is important because it informs people about what is going on in their community. It helps organizations like us promote the work that we are doing. But it is important because it is the strongest call to action.
1366 When somebody is diagnosed with cancer, they want to know what they can access right here, right now, in their community to regain control of their life.
1367 That is a little bit of a segue from the scripted piece, but I thought that you should know that my phone rings every day from people that had heard stories on 'A' TV.
1368 In fact, for better or for worse, I was at the entrance of a restaurant over the Christmas holidays and a bunch of people were smoking outside and they put out their cigarettes and said: There comes the cancer lady.
1369 That is part -- I mean it is perhaps a bit of a humorous example but that is how powerful the work that we are doing is, the work that we are doing together.
1370 In the months ahead -- and something that we are very proud of -- with 'A' Television we are going to be building a cancer survivorship centre. It is going to be called the Maplesoft Centre after another very important partner in our community. Those people came to the plate -- stepped up to the plate because they heard about the work that we were doing through 'A' Television.
1371 So the cancer survivorship centre is new. It is going to, as I said, change the face of the cancer experience. It is going to help address the needs of cancer survivors and their families at all levels -- emotional, psychological, practical, financial, navigating the system. It is truly going to be a pearl in our community, and we want people to know that we are building this centre, that these services are going to be accessible.
1372 I have no doubt that we are going to be able to accomplish that because of the partnership with A.
1373 There are many other stories, as you can probably tell, that we would love to share with you, but know that the people who are sitting in front of you are just a few of the very many in our community. I have been in this business for 25 years and everybody recognizes the role and the value that A brings to our community.
1374 I understand that BCE has proposed to direct some money to help A stations keep their level of local programming, as well as assist with technical updates. In my opinion, all of this help will just make A a stronger and a more viable partner, and will continue to help us reach and engage the community.
1375 The A's are a vital resource for charities and community groups. The station helps to connect communities on issues that matter most, and they work so tirelessly -- they are champions -- to ensure that groups have a voice.
1376 They have done this despite their financial challenges, despite other changes within their organizations, and we can only imagine what could still be achieved with some investment, provided they are given the right tools to survive.
1377 It is for this reason, and many more, that I ask the Commission, please, to approve the transfer of control of CTV to BCE and to approve the investment in A Media Properties, so that they can draw viewers to their channel, so that people can become empowered and we can continue to be a valuable part of our community.
1378 Thank you very much.
1379 THE SECRETARY: Thank you, Ms Eagen.
1380 Our last presenter for this panel is the Federation of Northern Ontario Municipalities. Appearing for the Federation is Mr. Alan Spacek.
1381 Please proceed with your presentation.
1382 MR. SPACEK: Thank you. Good afternoon.
1383 Mr. Chair, Commissioners, my name is Al Spacek, and I am the mayor of Kapuskasing. I am here today in my capacity as President of the Federation of Northern Ontario Municipalities.
1384 The Federation, otherwise known as FNOM, represents 111 cities and towns and municipalities throughout northeastern Ontario. Our mission is to improve the economic and social quality of life for all northerners and to ensure the future of our youth.
1385 Northeastern Ontario is geographically diverse, and so, too, are its residents. From professionals to mine workers, to fishermen, to railway workers, from teachers to forestry workers, FNOM serves a wide range of constituents.
1386 Although we don't represent First Nations, they are very much present throughout our jurisdiction.
1387 FNOM is also recognized by the provincial government as an official source of information and direction when establishing provincial policy and legislation.
1388 I noted earlier that our mission is to improve the economic and social fabric of life for all northerners, and FNOM is highly supportive of the ongoing commitment and important role that all media -- television, radio and print -- play in northern Ontario, as they are an integral part of ensuring that our residents enjoy a strong economic and social life.
1389 CTV and, in particular, MCTV, which serves the communities of Sault Ste. Marie, Timmins, Sudbury and North Bay, provides excellent service to these regions of Ontario, and it is critical that all of these services, at the very least, be maintained, and, ideally, be improved.
1390 Coming from a small town -- Kapuskasing has a population of approximately 8,500 people -- I can speak firsthand to the importance of having a broadcast presence at community events, or having them report on news happening in our town or surrounding communities.
1391 Local stations are part of the fabric of our community, a presence that we have come to rely on, and they are active in helping charities fundraise.
1392 In addition, they tie us together regionally with our neighbouring communities, both from an economic perspective, as well as a social one. Outside of the larger residential centres located in northeastern Ontario -- and I am speaking about North Bay, Sudbury, Sault Ste. Marie and Timmins -- the majority of the towns are much smaller, with populations of less than 5,000 people.
1393 Perhaps one cannot truly appreciate the ruralness of certain parts of northeastern Ontario until you spend time up there, but in such ruralness, sometimes the television set is the only thing that connects you to the places and the people around you. It is what entertains you, and to be able to know what your neighbours are up to, be they in the next town or a little more distant.
1394 It is something that we should be able to take for granted, just like in the large urban settings.
1395 It is with this background that I appear before you to express FNOM's support for Bell's acquisition of CTV. This acquisition will make CTV stronger and better able to compete, and, in my opinion, that's a good thing.
1396 On a much smaller scale, I have witnessed business and economic models change. Kapuskasing used to rely on forestry as its main economic driver, but now, as with other communities in northeastern Ontario, we have had to adapt to a more regional business and economic model.
1397 Businesses in Kap needed to adapt and change to survive, and I say so must CTV and Bell.
1398 FNOM is strongly committed and supportive of the MPEG-4 technology, as it will result in local programming opportunities, providing unique community flavour to our northern regions.
1399 Now, I fully understand that Bell is limited in the number of local stations that it can carry because of capacity issues. You can only carry what you have room for. And I am a businessman, so I understand that business can only do what they have the financial means to do. That's why the MPEG-4 initiative makes sense, as it will provide the necessary funding to improve capacity to carry local television stations, and, more importantly to FNOM's mandate, the carriage of Timmins, along with Sault Ste. Marie and North Bay, will serve to improve the economic and social life of northeastern Ontario residents.
1400 As I hope I expressed clearly to you a few moments ago, the importance of local television cannot be underestimated. It is a tie to what is happening around us, and it connects us and it informs us.
1401 I have spoken about the positive impact that satellite carriage of local television stations here will have on Canadians on a personal level. However, there is also the positive impact for local businesses and charities. For this group, whether it's an advertisement for a local business or an important fundraiser, they will be able to get their message out through their local TV station, knowing that the community will be able to see it.
1402 The business will generate more clientele, and the charity will be able to spread the word about its important cause.
1403 In turn, this can only work to the community's advantage, improving both its economy, as well as its community awareness. All residents will benefit, whether it is the professional or the forestry worker that I spoke of earlier.
1404 Finally, while my direct experience is in northeastern Ontario, we are but one example of a northern community in Canada, and our experiences are not unique to us. Other communities throughout Canada want to rely on their local television station too for news and information, as well as entertainment, but can't because their local station isn't on satellite.
1405 Increasingly, satellite capacity by upgrading to MPEG-4 technology will go a long way to improving the lives of Canadians, businesses, community organizations, and charities, as they will be able to see themselves reflected through their local television station, and Canadian culture will be that much richer for it.
1406 Thank you for the opportunity to appear before you today, and I would be happy to answer any question you may have.
1407 THE CHAIRPERSON: Thank you very much.
1408 The first three of you all spoke about the A station, or the local Ottawa A station. It is actually a Pembroke station, to be correct. But CTV also has the CJOH station in Ottawa. None of you referred to it. Is there an appreciable difference between what the A stations do, in terms of the local activity that you represent, and CJOH?
1409 MS EAGEN: For us, the difference is, in part, the morning offering. It's where we reach a lot of people. It's the type of show where people will put it in the backdrop, and they are constantly aware of what is happening in the morning. That has been our best way to reach people and to get them to take action or to become involved, and that's not available on the CTV side.
1410 THE CHAIRPERSON: Mr. Spacek, you make an impassioned plea for MPEG-4. As you know, we had a specific hearing on this issue and we are very much concerned with satellite carriage.
1411 It will put people on the Bell satellite, but it won't put them, necessarily, on the Shaw satellite.
1412 In your area, do you have any idea whether most satellite subscribers are Bell or Shaw customers?
1413 MR. SPACEK: Mr. Chair, it varies, I believe, from region to region, but I would say that Bell is the dominant carrier.
1414 THE CHAIRPERSON: Thank you.
1415 Elizabeth, I believe that you have some questions.
1416 COMMISSIONER DUNCAN: Actually, Mr. Chair, I don't really have that many questions, or any questions. I am certainly very impressed with the enthusiasm that all four of you have and the support that you have expressed for the A stations. I think that is noteworthy, and I think your message has clearly gotten across how important these stations are to you and the benefit they are, and what you stand to lose if they don't get the financial stability they are looking for, and the right to continue, or the opportunity to continue.
1417 I have no questions. I appreciate your comments. Thank you.
1418 THE CHAIRPERSON: Louise, I believe that you have a question.
1419 CONSEILLERE POIRIER : Ce serait une question pour le maire de... Je ne me rappelle pas le nom de votre municipalité.
1420 LE PRÉSIDENT : Kapuskasing.
1421 CONSEILLERE POIRIER : Kapuskasing. Une question pour vous qui suit un peu ce que le président vous a demandé.
1422 Il va y avoir une transition au numérique partout au Canada, et je pense que vos municipalités ne font pas partie de marchés où on obligera les radiodiffuseurs à faire une transition. Donc, il est possible que des gens de chez vous ne puissent pas recevoir gratuitement des services de télévision comme ils avaient avant.
1423 Alors, bien sûr, l'ajout du MPEG-4 est important pour la TV local, mais est-ce que vous ne considérez pas aussi important de vous assurer que les gens chez vous puissent continuer de recevoir un free package de télévision en ayant un service Freesat?
1424 MR. SPACEK: Madam, that would be ideal if they were able to receive free satellite programming as part of their basic presentation.
1425 I am not that familiar with the technical modality of how the service is delivered, but one of the comments I did make was that, at the very least, we want to maintain our present level of service, and we do enjoy broad coverage at the local level at this point in time, and this pending transaction would ensure that that would continue, at the very least.
1426 COMMISSIONER POIRIER: Thank you.
1427 THE CHAIRPERSON: Okay. I think those are our questions. Thank you for coming and showing your support for this deal.
1428 Madam Secretary...
1429 THE SECRETARY: Thank you very much.
1430 I would now invite our next panel of intervenors to come forward.
1431 THE CHAIRPERSON: Do you need some time to set up the TV?
1432 Don't we have a presentation by way of videoconference?
1433 THE SECRETARY: As you wish. We could take a five-minute break or we could proceed. We are ready for the videoconference.
1434 THE CHAIRPERSON: Okay, let's go.
1435 THE SECRETARY: Mr. Chairman, we will now hear from Insight Productions, Sarrazin Couture Entertainment, Yorkton Film Festival, and the Boys and Girls Clubs of Greater Vancouver, who will be appearing via videoconference.
1436 We will start with the first presenter, Insight Productions.
1437 Please introduce yourself for the record, and you may proceed with your presentation.
1438 MR. BRUNTON: Thank you very much.
1439 Mr. Chair and Commissioners, I appreciate being here today. My name is John Brunton, and I am the President, CEO, Executive Producer and controlling owner of Insight Productions.
1440 I have had the good fortune of producing over 1,000 hours of television with CTV and their associate channels, from comedy, variety, drama, music, documentary series, to some of Canadian television's most important charity events.
1441 Insight is extremely proud to have produced Canada's highest rated television show of all time for CTV, Canadian Idol. We have also had the outstanding opportunity to take the Juno Awards from St. John's to Vancouver and back again under CTV's watch.
1442 Combined, Insight and CTV and have put over 1,000 Canadian bands and musicians on television, in many cases for their very first television appearance. Throughout, Bell has been a significant stakeholder, shareholder, and a strong voice on the board. One of the primary reasons I decided to come here today to speak on CTV's behalf is that I wanted to acknowledge how much respect I have for the company's corporate character.
1443 The unprecedented support that CTV has built around my company's productions is unparalleled. They blanketed the country with publicity and promotion, including huge media buys to draw millions of fans to our shows. CTV has put their money where their mouth is.
1444 When we started producing the June Awards together 10 years ago it was a musical award show on Sunday night. And now it has been transformed into an arena rock concert and a cultural institution. Taking the show on the road to cities across Canada has given artists the opportunity to get close up and personal with their fans to celebrate Canadian music in a week-long fan fest.
1445 CTV has literally taken the Juno Awards to the people, to the fans in their hometowns. No fly over provinces for the Junos. It's the Grey Cup of Canadian music.
1446 As a coincidence, this morning CTV announced the 2011 Juno Awards nominees and broadcast the entire press conference live via CP24, CTV New Channel and CTV.ca, which is unheard of.
1447 Like the Juno Awards, Canadian Idol travelled coast to coast to coast at significant expense for six successful seasons. We went to places like Yellowknife and Whitehorse and the far north, and each year we travelled to at least 10 cities nation-wide. American Idol, on the other hand, with untold resources, travelled to no more than five cities.
1448 Because of Canada's distinct cultural mosaic and regionality, CTV had a strong desire to reach all corners of the country. CTV was obsessed with giving every Canadian the opportunity to be part of the idol experience, another great example of their corporate character in my opinion.
1449 When the tsunami struck Indonesia CTV immediately agreed to fund and broadcast a huge benefit I was involved in; a concert bringing awareness to the cause across Canada which in turn helped raise over $3 million for a variety of charities for that cause.
1450 Same thing has been true with the most recent earthquake disaster in Haiti. CTV rallied together with CBC and Global to cooperate in a telethon that responded fast to the Haiti disaster.
1451 A major force in promoting another video that I had the great opportunity to participate in was young artists for Haiti. CTV helped engage Canadians to contribute to the disaster relief efforts, and young Canadians. They promoted our video 24/7, pushing the views to the point where it became the most watch music video in Canada last year, superseding international acts like Rihanna, Lady Gaga, all the big American culture that comes across our border. We beat them all.
1452 We raised in excess of $1 million dollars, I think it is close to $2 million, for Haitian relief and to date the video has more than 12 million views on YouTube alone; with every view a donation was made.
1453 This could never have happened without CTV's support, generous support in my opinion. And it is another example of what I believe very strong corporate character.
1454 I felt the same way about CTV's commitment to the Vancouver 2010 Olympics. In tough economic times, the most oppressed advertising market I had seen in my 30 years in the Canadian television business, CTV created a multimedia, multicultural broadcast of the Olympics that spoke to all Canadians.
1455 They didn't flinch from their dream in the midst of these terrible economic conditions. They covered every live moment, every Canadian athlete, and we could watch it on our television sets or mobile devices, on the internet, anytime, anywhere in God knows how many different languages. And this obviously cost a fortune for them to do.
1456 Other countries around the world will now learn from Canadians how to cover future games. Ultimately, I think the event was one of the greatest unifying experiences in Canadian history; we all cheered together during the Olympics.
1457 In a world where Canadian broadcasters are going to have to fight off competitive services like Netflix, YouTube, Apple TV, Hulu, who knows what is coming next. How long will it be before Canadian consumers will be able to deal directly with the Warner Brothers, the Foxes, the Paramounts? How long will our Canadian broadcast system be able to geogate U.S. and foreign content that is so crucial to the revenue or our broadcasters?
1458 We need big strong companies in Canada to manage this and we need Canadian companies that can withstand the tidal wave of change that is coming in our direction very quickly.
1459 Every new television show that we contemplate producing at Insight has us sitting around the table discussing not only our television content, but how we extend this content beyond TV, to our smartphones, our tablets, how do we get fans connected online? How do we create apps to engage our fan pace? What is the social networking strategy for the shows we are doing? Is there a ringtone that we can incorporate?
1460 We are looking at unprecedented opportunities for online voting, webisodes, SMS, Twitter, Facebook, all integral parts of modern-day television production and building a fan base.
1461 Every Canadian production company is looking at creating specialized content for non-traditional broadcast, and it is all happening at lightening speed. These are all arenas where Bell will have an enormous effect on the success of independent producers and our content distribution. Bell's experience in this world and their ability to recognize current trends should give CTV a huge advantage in transforming the way we share our content with Canadians.
1462 I support Bell's acquisition of CTV and a strong, well-financed CTV will ultimately benefit the independent production community in Canada. A healthy CTV is good for all of us.
1463 Thank you, Mr. Chair and Commissioners, for this opportunity to speak.
1464 THE SECRETARY: Thank you for your presentation, Mr. Brunton.
1465 We will now continue with Sarrazin Couture Entertainment. I would ask that you please introduce yourselves for the record, and you may proceed with your presentation.
1466 MS COUTURE: Suzette Couture.
1467 THE SECRETARY: Thank you. And Mr..?
1468 MR. SARRAZIN: Pierre Sarrazin.
1469 MS COUTURE: Good afternoon, Mr. Chair, Commissioners. Thank you for the opportunity to appear today in support of CTV and BCE's acquisition of CTV.
1470 As I said, my name is Suzette Couture, this is my partner, Pierre Sarrazin, and our independent production company, the imaginatively titled Sarrazin Couture Entertainment is based in Toronto and produces television series, movies and feature films.
1471 Our first feature film, La Florida, and this is just some background for you, won the Golden Reel Award for highest grossing box office in Canada. And as writer/producers, I would say that we really hit our stride when we began to produce for CTV.
1472 Our recent CTV movie, Doomstown, about gang violence in Toronto, won the Gemini Award for best television movie. And we are very gratified that beyond the awards and high ratings, the movie which addressed a critically important social issue, is being viewed in schools across the country.
1473 Another CTV movie, The Man Who Lost Himself, which is the story of the CFL great Terry Evanshen who suffered a devastating brain injury, was the highest rated movie in Canada that year with over a million eight viewers.
1474 We are very proud of our CTV productions and how they have reached millions of Canadian viewers and sold around the world.
1475 MR. SARRAZIN: CTV is a first destination for independent producers when it comes to pitching Canadian stories. From the top down, the uniquely talented executives who know how to pick the stories that resonate with audiences. From development to production, their support of the creative yields results, consistent and significant ratings. Canadians watch Canadian productions on CTV and it is not by accident, it is their priority.
1476 The CTV attitude is to win the timeslot, they don't see this as an obligation. They are fully committed to their Canadian shows and to excellence in storytelling. From Corner Gas to Degrassi to Flashpoint, CTV has had an enormous influence on Canadian culture. It is no surprise that these programs have had such success on U.S. networks.
1477 Flashpoint has opened doors to a new model of television production that travels north to south for a change, and CTV is rightly proud of this.
1478 MS COUTURE: I guess you can tell we are fond of CTV and we are very happy there. And that is why we are concerned about keeping CTV strong. As you know, the environment for conventional television is being challenged as never before.
1479 The Ontario producers had some statistics recently we were looking at, which was that in 1990 the average U.S. household received 33 channels and in 2008 there were 130. So CTV faces similar challenges with the added punch of new and unregulated competition such as Netflix and online content.
1480 CTV is greatly responsible for the rise in quality of Canadian television programs over the past 10 years, which now are seen in the U.S. and around the world. So we are concerned about that quality and that quantity and that reach and we feel that that is threatened unless CTV can grow and thrive.
1481 MR. SARRAZIN: As Canadian independent producers who are regular commuters to LA, we see the new appetite for Canadian programs in the U.S. Canadian independent producers have become ambitious, we take the meetings in Los Angeles and London and Rio.
1482 We now sell Canadian programs around the world. We have never done as much before. We can only continue to do that with a Canadian broadcast partner that is vital and strong. And we believe that the BCE acquisition will do just that.
1483 Thank you.
1484 THE SECRETARY: Thank you very much for your presentation.
1485 Our next intervener is Randy Goulden from the Yorkton Film Festival. You may now proceed with your presentation.
1486 MS GOULDEN: Good afternoon, Mr. Chair, Mr. Vice-Chair and Commissioners, thank you for the opportunity to provide information and our perspective on this important issue being discussed today. My name is Randy Goulden, I am the Executive Director of the Yorkton Film Festival in Yorkton, Saskatchewan.
1487 The Yorkton Film Festival is the longest running festival of its kind in North America. Established in 1947, this year we are celebrating 64 years of festivals. Over the years, even though we are located in a community of only 17,000 people, the Yorkton Film Festival continues to play an important role for film artists in Canada.
1488 The festival bridges the gap between the feature film and mainstream festivals that are held in Toronto, Banff and Vancouver. It is the goal of the Yorkton Film Festival to recognize emerging and celebrated experienced filmmakers while returning the medium of film to grassroots audiences.
1489 The Festival is a provider of year-round programming and screenings, growing audiences and the creative economies. The Festival has continued to grow, although constantly challenged by limited resources and the ever evolving media platforms.
1490 We are supported by many partners who recognize the need for the work of the Festival in growing the film industry in Canada. Our local CTV station in Yorkton, Saskatchewan is an outstanding supporter and partner of the work we do. They are tremendous champions of the Festival and our filmmakers, supporting all types of Canadian programming, not just what shows up on television.
1491 They are sponsors providing pro bono airtime and public service announcements that are otherwise not affordable for purchase by our festival. Through local programming they promote our screenings, our events, our activities. These grow the Festival audiences and keep the short films entered in our Festival alive and viewed and enjoyed.
1492 They Yorkton CTV employees are encouraged to become festival volunteers, bringing their exceptional talents and skills to the Festival. With all the changing technologies today, these skills are ever needed by our non-profit festival that otherwise could not afford to hire professionals.
1493 We are very proud of the very many local Yorkton youth who have been successful in their film careers and they began by volunteering with the festival in their early ages. Just this year two have been recognized with prestigious awards and nominations.
1494 We are very proud of our very own Paul Dutton who has just received an Academy Award nomination for director in best animated film, The Illusionist. We are crossing our fingers on February 27th.
1495 Douglas Hudema won a Gemini Award for best writing in an information program, Hell on Hooves.
1496 Congratulations to these filmmakers born, raised and started their careers volunteering with the Festival and receiving the exceptional skills and production development from our local CTV staff.
1497 Independent filmmakers are constantly challenged by the evolving multi-media platforms and finding money to fund their work in today's global economy. CTV is and has been a supporter of these filmmakers by providing funding that assists in leveraging dollars from other public and private areas.
1498 This allows our Canadian filmmakers the opportunity to do what they do so well, create and produce incredible films and content.
1499 With nominations screenings are winning at the Yorkton Festival, one of the prerequisites to enter many of the large festivals like the Geminis, Toronto, Banff. We see many internationally acclaimed filmmakers return year after year to Yorkton entering their films, leading panel discussions and workshops, mentoring emerging filmmakers.
1500 This year two of our perennial volunteers again won Geminis, all of this made possible by support from our local CTV station.
1501 CTV's local television stations are a great part of the Canadian broadcasting system. They provide invaluable promotion and publicity of our initiatives and our programs, raising our profile to a level we would not have the opportunity to enjoy without their support.
1502 The Yorkton Film Festival supports CTV's acquisition by Bell as it will make CTV a stronger company and that, I believe, will enable organizations like mine to continue to grow.
1503 In addition, I understand that Bell has proposed to put benefits money toward improving news programming in my region, the Regina region. You heard that earlier this morning.
1504 Now, an additional three hours per day of local programming into Regina and into Yorkton will directly and positively impact on the festival and our filmmakers.
1505 We can also see the many advantages of some of the on screen funding for local news programming going to new media. Our filmmakers are already working in the many new platforms. This will increase their reach and their success.
1506 For the reasons I have just spoken about, we ask the Commission to approve the application and benefits package and I thank you for the opportunity to provide these comments here today.
1507 THE SECRETARY: Thank you very much for your presentation.
1508 And our last presenter, Mr. Chairman, is Mrs. Caroline Tuckwell from the Boys and Girls Clubs of Greater Vancouver and she is appearing via videoconference.
1509 Good afternoon. Can you hear us well?
1510 MS TUCKWELL: Yes, absolutely.
1511 THE SECRETARY: Thank you. You may now proceed with your presentation.
1512 MS TUCKWELL: Thank you, Mr. Chairman and Commissioners, for the opportunity to present.
1513 I am just getting a little bit of echo that I think they are going to try to resolve.
1514 I appreciate the chance to present and certainly the chance to present from here.
1515 I wanted to start with a story. It speaks to our work.
1516 This past spring at one of our clubs a young single mum approached us and asked for help to have her children participate in the club throughout spring break despite the fact that she was not able to pay the small fee. As we always do, we agreed, and of course said that her kids would be welcome, her two young boys would be welcome to come so that she could work during the spring break.
1517 When the first day of spring break arrived the boys didn't show up. So our staff tracked down the mum to find out why and she shared that she hadn't sent them because she didn't have lunch to send with them.
1518 It's a story that I think speaks to the level of poverty that some families are experiencing and the conditions that some children in our communities are living with. It shows them a picture of the world that I think none of us want kids to see and at Boys and Girls clubs it's a call to action.
1519 Of course we said those boys should come. We have got food. We will feed them. We will take good care of them.
1520 And for the rest of spring break and, in fact, since that day, those kids have been in the club.
1521 So our work as you know, I think, is about providing kids with a place to be when they aren't at home and they aren't at school. And we do that in a way that gives the kids the sense that they are hanging out with their friends and they are starting to test out their independence and make decisions and spend time how they want to.
1522 But at the same time behind that is all of the best practices and research-based programming that gives kids the right kinds of opportunities to spend their unsupervised or, sorry, unstructured time in a supervised environment that will be good for them and help them to grow up into strong contributing adults.
1523 We have a policy that no one is turned away because of an inability to pay. What that means is that kids can access our programs. They can play without being in a situation where they are worried about whether or not they have money in their pocket to hand over.
1524 Only 35 percent of our government -- of our funding -- I'm sorry -- comes from all levels of government. What that means is that we rely heavily on the community to do the work we do.
1525 Why we are here today is to speak about the fact that CTV as part of the community is one of the lead partners that has stepped up to help us to do that work. They stepped up as our lead media partner in 2007.
1526 In the handouts in my notes that I have provided to you, I have detailed what that looks like.
1527 It looks like sponsorships of our events.
1528 It's editorial coverage.
1529 Just as importantly, it's volunteer time from the staff and employees who work at our local CTV station who give their time because they live here and they care about this community. They give their time to help us to do our work.
1530 So we speak to this because we have learned through our relationship with CTV that we can be more effective in sharing our message with the community if we have a partner like CTV.
1531 We benefit from having a local presence, a local supporter that has the ability to share our message broadly to those we are trying to reach, to donors, to volunteers and even to government groups that we hope will understand what we do in the community to make the community stronger.
1532 When we have these kinds of relationships it goes beyond your traditional thought of news coverage. A perfect example is a story that CTV did as part of a child poverty series that they did last year.
1533 Often we think of news as covering breaking stories. Often it relates to tragedy or a crisis in the community.
1534 B.C. has the highest level of child poverty in this country. None of us find that acceptable and we are all looking for solutions for it.
1535 As part of this series CTV went beyond just highlighting the issue: Why are children in this province living in poverty more than anywhere else in this country?
1536 They profiled Boys and Girls Club as a solution. They profiled the work that we are doing that's working to solve one piece of that puzzle.
1537 And when I think about strong communities I appreciate that one part of how we come together in community is around hope.
1538 CTV by covering a solution to one of our biggest issues in the community is helping to build hope and cohesiveness and give people a way to act. By showing that we do this work and that they can support us they give people a mechanism to take action that's positive in the community.
1539 One of the other realities that we face is that as a charity and a non-profit organization we work by a different set of rules than other businesses. We are still a business but we do have a different rulebook and that means that we don't have financial or technical resources to market and communicate our work in the same way that a for profit would.
1540 So by having a relationship with CTV like the one we have, we are in a far better position to tell our story. Over the last four years since we have developed this relationship with CTV we have more than doubled our annual fundraising.
1541 What that means is that that money has gone directly into the community. We have opened a new clubhouse and we are serving more than 25 percent more children and youth than we were before the partnership started because they have helped us to tell our story. They have helped us to build credibility and they have helped us to bring new partners into our work.
1542 There is one more reason that we feel so strongly about the ability for CTV to stay strong and stable over the longer term and that's in our ability and our need to do more. We understand that the benefits package that's associated with this application include more local programming and enhanced news right here in B.C. and in Vancouver.
1543 I will tell you one more story before I conclude.
1544 That's the story of a 13-year old boy who not so very long ago lost his life in a conflict on a Saturday afternoon in a parking lot. That young boy was a member of one of our clubs. Our club was closed that day because we don't have the resources yet to keep it open.
1545 We are working very hard on that and CTV is helping us with that by helping us to tell our story in a clear way. And we are making progress.
1546 But if we had fast forwarded the clock and been able to have our club open on the day that that conflict happened, that young man and his friends would have been hanging out at our club more than likely, rather than in an unsupervised environment, where on their own they made bad decisions and there was a tragic outcome.
1547 We know there is more to do and we are thrilled at the opportunity that CTV has in this change of ownership to do more in our community to help us to do our work and for other organizations like ours to do their work.
1548 So thank you again for the opportunity to speak to this. I would welcome any questions.
1549 THE CHAIRPERSON: Okay. Thank you for very impassioned support of CTV.
1550 What I don't quite understand if it came through, why you feel -- you obviously all feel that CTV is a wonderful player in the Canadian broadcasting system and support. Why do you think this will be better under BCE ownership than it is right now?
1551 MR. BRUNTON: I guess, from my perspective, I feel like during the vast majority of the time that I have worked with CTV, Bell has been a very strong voice in that organization. So I guess I feel like there may be a continuation of the corporate culture that I have become accustomed to and the kind of class and the promotional support and all the things that have helped make so many that are so successful.
1552 I mean it's been a long time that I have worked at CTV but certainly for the last good long period of time, Bell has to have had a very, very strong voice in the way that organization worked. So our hope is that the way that CTV has behaved in the past will continue in the future.
1553 THE CHAIRPERSON: Anybody else? Yes...?
1554 THE SECRETARY: Can you please turn on your mic?
1555 MS COUTURE: I support what John says because I feel that there has been so some fragility in terms of broadcasters in the past few years.
1556 When we look at CTV's situation I know that they internally are seeing this as a huge opportunity for growth and for stability. That affects us very directly and in terms of the work that we do and the stories that we can tell to Canadians.
1557 THE CHAIRPERSON: Okay.
1558 The lady in Vancouver, did you want to add anything?
1559 MS TUCKWELL: I would say that I think that as we think about the opportunity for more local coverage we appreciate also that what that means is a broader representation of the needs in our community. And if we think about the non-profit world and the community that we represent in serving the needs of those in our communities, we know that media needs to cover the broad spectrum. There is no single interest.
1560 So we expect that increased news coverage and increased local programming would, I think, as the others have suggested, continue to expand the kind of coverage of the community issues and the response to them that we represent.
1561 Telling our story makes a big difference. So an increased ability to tell our story is why we think it's important.
1562 THE CHAIRPERSON: Len, you have some questions?
1563 MS GOULDEN: If I may...?
1564 THE CHAIRPERSON: Oh, I'm sorry.
1565 MS GOULDEN: Good afternoon, Mr. Chair. I just have a few comments on that question.
1566 I see that it's going to assist our organization in three ways.
1567 First of all, this will allow our local CTV station to be stronger. As I said, we are in a small market area. There are four stations in Saskatchewan, two in Regina and Saskatoon which are over 200,000 people.
1568 In Prince Albert with over -- with close to 50,000 people our community is 17,000 people and we have a station. It's incredible that it's there. We have great support for it, but we are very pleased that it would in that -- in the new world be a stronger company to support keeping it in our community.
1569 This -- the second reason -- will add more staffing. I heard that over 80 new staff will be hired. And as I said in my presentation, it's key that these staff volunteer for our festival. They bring very, very strong skills and technical knowledge that they can share both with assisting our festival, but also bringing workshops and professional development to our film-makers.
1570 The third, and as my friend here from Vancouver said, it allows us the local programming, three hours additional local programming every day Monday to Friday. My goodness, I am so excited about that that I can't wait for this to start happening and I already have plans in place that I want to share with our local television manager.
1571 So thank you for that.
1572 THE CHAIRPERSON: Len...?
1573 COMMISSIONER KATZ: Thank you, Mr. Chairman, and good afternoon.
1574 First of all I have a comment for Ms Tuckwell. It's gratifying to see companies like the CTV stepping up and supporting agencies like yours financially and in-kind. There is no doubt that the work you do and other Boys and Girls Clubs across Canada and other agencies like that provide a benefit that I would call priceless, if I can use the term, and it certainly is recognition of the hard work you do and the fact that they are prepared to step up and support it is admirable from their perspective as well and from ours no doubt as well.
1575 I have one question for the rest of the panel and, Ms Tuckwell, if you want to jump in you are free to as well, it's more of a technical question, and that is you are all on the independent production side of the business and we have talked an awful lot about terms of trade and multi-platforms and everything else.
1576 Can you share with us how you and CTV interact when it comes to taking something that you produce and putting it on multi-platform. You have a good relationship with CTV or are there issues when it comes down to trying to negotiate rights for your content that you develop?
1577 MR. BRUNTON: Every show is different. Rights associated with every program are different. In some cases, you know, we are a service production, in other cases we are operating on our own copywritten material where we have a different kind of control.
1578 But my experience has been outstanding, in that, you know, we have worked very well together, whether it is trying to create the most effective way for people to interact with a show like Canadian Idol where millions of people are voting each week to participate in the program to new conversations about how we can activate buzz about our programs on Twitter, which has no economic base but it generates fans and how many bodies does one put on that activation so that we can create buzz around the Juno Awards or buzz around other shows to create more people to tune in.
1579 So the marketing strategy is something that we have worked on very closely together and I think that all of the broadcasters are realizing that a lot of the dialogue is no longer necessarily going to transpire on ctv.ca but it might transpire in the world of Twitter and it might transpire on Facebook and on other mediums. I really find that everybody is getting much more hip and more progressive about those kinds of things.
1580 But certainly CTV, I think, with Bell, come out of the Vancouver Olympics with multi-platform experience that can help and benefit all of us. That's my hope. We have had a great, great relationship so far.
1581 MR. SARRAZIN: For speaking in terms of drama, the productions that we do, we have to provide digital media plans which they work very closely with us so we would have a whole digital multi-platform way to get our dramatic shows out. They work with us in development these digital media plans and they have a great deal of expertise, which we don't always have.
1582 COMMISSIONER KATZ: When you sell the content you sell it on all the platforms at the same time?
1583 MR. SARRAZIN: We negotiate with CTV. I'm talking about their -- I'm responding to their ability to help us devise digital media plans to go out in terms of what these things are worth. That's something we are negotiating.
1584 COMMISSIONER KATZ: Thank you.
1585 Those are my questions.
1586 THE CHAIRPERSON: Rita...?
1587 COMMISSIONER CUGINI: Just a couple more as well for Insight and Sarrazin Couture.
1588 Are you members of the CMPA?
1589 MR. BRUNTON: Yes.
1590 COMMISSIONER CUGINI: You both are?
1591 MR. BRUNTON: Yes.
1592 COMMISSIONER CUGINI: Did you participate in their submission at all?
1593 The reason I ask is that of course a lot of their submission has to do with the benefits and the amount of tangible benefits and the projects to which those benefits are directed and neither one of you make any mention in your submissions this afternoon on the quantity or quality of the benefits proposed by BCE.
1594 MR. BRUNTON: On a personal level I am a member of the organization, but I didn't participate in their submission.
1595 But I think I can speak for all Canadian producers, all producers around the world would we like to see more benefits, of course we would. I think that goes without speaking.
1596 But there are certain things of course that we don't know that you do. I mean it was interesting to me this morning when I heard that the 'A' channels were losing $29 million a year. I don't know all of the issues that CTV faces. Would we like more benefits money, you bet, every producer would, but what the extent of that is, and what's fair and reasonable is not for us to judge because you have so much more information than we do in terms of the health and the well-being of CTV and all the rest of the channels.
1597 COMMISSIONER CUGINI: But based on what you heard this morning, you find it to be a balanced package?
1598 MR. BRUNTON: You know, it's interesting hearing some of the arguments at the table here about local television. You know, if I take off my producing hat and I put on my hat at the cottage, you know, I'm thankful that I have access to the Barrie 'A' channel. It depends on what hat I'm wearing in a sense.
1599 But do I believe that local communities should have access to their own news about their own community, I think that's a fair and reasonable argument. Does that mean that money should be allocated from what might go to the independent production community to serve those communities and in turn serve an organization like the Boys and Girls Club, I mean that's a tough call. I think it's a very tough call.
1600 COMMISSIONER CUGINI: Ms Couture, you had something to add.
1601 MS COUTURE: I agree again with John. We always want more money and in a way more money is never enough money.
1602 I think that what we have seen in the last few years is a boom in, as I said before, the quality and quantity of Canadian television. I really want that to continue.
1603 At the same time, I think that it's a judicious balance between what this network says that it needs to do and protecting Canadian television and its future in terms of dramatic programming.
1604 I'm so thankful to you all because I feel that you are committed to that and I'm really grateful for your efforts in that regard in terms of what this decision is going to be.
1605 COMMISSIONER CUGINI: Well, a compliment is always a nice way to end the day.
1606 COMMISSIONER CUGINI: I'm sorry, you wanted to add something?
1607 MR. BRUNTON: I just wanted to say one other thing, and this is just gazing into the future.
1608 I really truly believe that the Canadian broadcasting system is going to have a harder and harder time protecting the rights for American television shows, so I also really believe that their point of distinction and their ability to compete is going to be investing with companies like ours and many other independent producers and the brain trust that we have in Canada because I think that the cornerstone of an economy based on buying American programs and exploiting them is going to be a much, much more difficult for them as the years go by.
1609 So I think what the benefits package is today and what these companies may need to be looking to spend in the future to develop content, to exploit it internationally, is going to be, I think, their survival.
1610 So that's just my personal view, but I think that there are these big studios in America that are international companies and they want to deal directly with me and I think that's going to be an ongoing dilemma for Canadian broadcasting and I think we are going to wind up being the people who help solve that problem.
1611 COMMISSIONER CUGINI: Thank you.
1612 THE CHAIRPERSON: I have to ask you a personal question: Why aren't you producing Canadian Idol any more? You can't possibly have exhausted the supply of singers that we have in this country.
1613 MR. BRUNTON: You know, that's an interesting question. I mean, Idol finished its sixth season and it was the fall of 2008 and literally overnight the wheels fell off.
1614 In my opinion, the situation was worse in the Canadian advertising media business than it was in New York and Los Angeles. I think a lot of the people on Madison Avenue said "Let's cut our Canadian advertising budgets" before they dipped into their American budgets. So all of a sudden out of nowhere conventional television was in a terrible spot. In CTV's case, they were about to embark on the Olympics, which was a huge, huge, huge commitment and the show was put on hiatus.
1615 Will it come out of hiatus sometime? Maybe. Will it come out in another form like "Canadian X factor" or something like that, it just very well may, but we certainly haven't exhausted the talent in Canada, no doubt.
1616 THE CHAIRPERSON: Well, I hope it's in hiatus, not an end anyway. But that's purely personal, it's not a CRTC --
1617 MR. BRUNTON: Well, thank you for that. I will pass that on to the guys tomorrow when they come back here.
1618 THE CHAIRPERSON: Thank you very much for your intervention, your support for CTV. I think those are all our questions.
1619 Madame la Secrétaire...?
1620 THE SECRETARY: That is all for today, Mr. Chairman.
1621 We will resume tomorrow at 9:00 a.m.
--- Whereupon the hearing adjourned at 1610, to resume on Wednesday, February 2, 2011 at 0900
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