ARCHIVED - Transcript, Hearing 14 April 2011

Volume 9, 14 April 2011

TRANSCRIPT OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION

SUBJECT:

To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3

HELD AT:

Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

Transcripts

In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing.

Canadian Radio-television and Telecommunications Commission

Transcript

To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3

BEFORE:

Konrad von Finckenstein   Chairperson

Leonard Katz   Commissioner

Rita Cugini   Commissioner

Suzanne Lamarre   Commissioner

Peter Menzies   Commissioner

Tom Pentefountas   Commissioner

Stephen Simpson   Commissioner

ALSO PRESENT:

Jade Roy   Secretary

Joshua Dougherty   Legal Counsel
Valérie Dionne

Sheehan Carter   Hearing Manager

HELD AT:

Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

April 14, 2011

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PHASE III

REPLY BY:

CTVglobemedia Inc.   1354 / 8112

Rogers Broadcasting Limited   1445 / 8686

- vi -

   UNDERTAKINGS

   PAGE / PARA

Undertaking   1389 / 8303

Undertaking   1403 / 8403

Undertaking   1404 / 8413

Undertaking   1410 / 8447

Undertaking   1425 / 8535

Undertaking   1427 / 8553

Undertaking   1431 / 8585

Undertaking   1434 / 8603

Undertaking   1504 / 9051

   Gatineau, Quebec

--- Upon commencing on Thursday, April 14, 2011 at 0905

8099   THE CHAIRPERSON: Good morning. Bonjour.

8100   Commençons, Madame la Secrétaire.

8101   THE SECRETARY: Thank you.

8102   Now, Mr. Chairman, we will now proceed to Phase III in which the applicant can reply to all interventions submitted for its item.

8103   We will begin with the presentation by CTV, now known as Bell Media.

8104   Please reintroduce yourself for the record, after which you will have 20 minutes for your reply.

8105   Thank you.

8106   THE CHAIRPERSON: Before you start, I understand you wanted to have a part of your response in camera?

8107   MR. BIBIC: Not a part of the opening statement.

8108   THE CHAIRPERSON: No, no. So we will do the public part first and the questioning and then we will go into camera.

8109   Is that okay?

8110   MR. BIBIC: Correct.

8111   THE CHAIRPERSON: Yes. Let's go.

REPLY

8112   MR. CRULL: Thank you, Mr. Chairman, Vice-Chairs, and Members of the Commission. We are pleased to be here today to provide Bell Media's response statement and answer any additional questions you may have on our license renewal application.

8113   For the record, my name is Kevin Crull and I am President of Bell Media.

8114   With me today, beginning on my immediate left, is:

8115   Rick Brace, President of Specialty Channels and CTV Production;

8116   Phil King, President of CTV Programming and Sports; and

8117   Corrie Coe, Senior Vice-President, Independent Production.

8118   To my immediate right is:

8119   Mirko Bibic, Senior Vice-President, Regulatory and Government Affairs, BCE;

8120   Kevin Goldstein, Vice-President, Regulatory Affairs, Bell Media;

8121   Clare Brown, Senior Vice-President, Finance for Television group; and

8122   Lloyd Lewis, Vice-President and GM of CTV Edmonton and ACCESS Television.

8123   To start, we want to take this opportunity to thank the many intervenors who wrote to the Commission or appeared in person to support our license renewal applications and those who spoke of the local reflection that our television stations provide their communities. Over 600 positive interventions were submitted from businesses, independent producers, community organizations and individual Canadians. More than 200 of those interventions specifically supported the adjustments we proposed to our specialty services.

8124   Mr. Chairman, we have thousands of Bell Media employees who for many years have contributed immeasurably to Canadian programming, giving it a uniquely Canadian voice and delivering quality on par with anything else produced anywhere in the world.

8125   Before getting into the policy and regulatory discussion, and particularly on behalf of my colleagues, I wish to emphatically set the record straight regarding our passion and our commitment to Canadian programming.

8126   No private broadcaster has contributed more to Canadian programming than CTV, now Bell Media. CTV spent almost $2 billion dollars on Canadian programming over the last five years, and Bell Media expects to spend over $2 billion more in the next five years.

8127   But our financial commitment alone really doesn't tell the story. It's our passion which is primarily reflected through what we put onscreen. As a matter of fact, working with independent producers, we have achieved Canadian programming milestones that most industry observers did not think possible:

8128   We created Canadian Idol when conventional wisdom said that Canadians just wanted to watch U.S. television programs. It turned out to be the highest-rated Canadian show ever, with an average weekly audience of 1.7 million viewers.

8129   We took a struggling music awards show, the "Juno Awards", and we turned it into a must-see national event. In 2011, the "Junos" achieved its biggest audience yet with 2.4 million viewers and led to increased album sales and digital downloads for every one of the show's performers and winners.

8130   We created a home-grown, top-20 show, "Corner Gas", at a time when sitcoms were thought to be a dead genre. An average of over 1 million viewers tuned in for every one of the 107 "Corner Gas" episodes that aired.

8131   We cracked arguably one of the biggest challenges of all with "Flashpoint", a one hour drama which is now in its fourth season. "Flashpoint" has consistently drawn over a million viewers, in or out of simulcast with the U.S. network CBS.

8132   We have had numerous successes with Canadian movies, drawing audiences of more than 1 million viewers for "Eight Days to Live", "In God's Country", "Tagged" and many others.

8133   And of course, there is "Degrassi". The current version of the 30-year-old franchise will begin its 11th season this summer. It's not only a perennial favourite with Canadian audiences, it is shown in dozens of other countries around the world and its use of webisodes pioneered multi-platform broadcasting.

8134   Quite simply, Bell Media has a full-on, award-winning and longstanding commitment to Canadian programming excellence.

8135   Despite the evidence that financial returns on Canadian programming are frequently negative, we have remained steadfastly committed to producing and airing programming that reflects all Canadians.

8136   And over the next license term, Canadians can expect more of the same. Whether it's "Highland Gardens", which follows six Canadian actors, musicians and performers, struggling to break into show business; or "Saving Hope", a fast-paced drama set in a Toronto hospital that follows the lives of its doctors and staff; or "Borealis", a drama for Space which is set in the Canadian Arctic, Bell Media will continue to build on this strong legacy.

8137   We believe that everyone involved in this proceeding is striving for a successful Canadian broadcasting system. I know we certainly are. We invest hundreds of millions of dollars and countless hours every year to that end. We would argue that no private broadcaster is more committed or more invested in achieving the policy objectives of the Broadcasting Act than Bell Media.

8138   I would now like to turn now to three key policy issues discussed during this hearing. Specifically, the need to stay true to the policy objective of providing licensees with regulatory flexibility, the appropriate level for CPE and PNI obligations for all participants in this process, and the right approach to regional production.

8139   A number of intervenors have requested, either explicitly or implicitly, that the Commission abandon its objective of providing the Large Ownership Groups with enough flexibility to navigate the undeniably treacherous waters which are facing our industry.

8140   We encourage the Commission to reject these calls for additional regulatory complexity and stick with the group licensing policy as written. As the Commission has reiterated many times during this proceeding, this is not a policy hearing. Adding unnecessary restrictions, conditions and specifications will only dilute the flexibility provided by the Commission's policy.

8141   Perhaps no other issues have received as much attention in the last two weeks as the appropriate CPE and PNI rates. The policy is clear and we are prepared to comply with the minimum CPE set out in paragraphs 50 to 52 of the group licensing decision, and a minimum 5 percent PNI rate. The other broadcasting groups actually have come before you arguing for lower contribution levels for themselves.

8142   Every Large Ownership Group should be subject to the same CPE and PNI contribution rates. If the Commission decides to rewrite its policy by adopting a ramp-up schedule to reach these rates, then all Large Ownership Groups must be treated the same.

8143   We base this view on three primary considerations.

8144   First, the group licensing policy explicitly defines the Large Ownership Groups. The Commission was well aware of each group's revenue and asset mix when it set the policy and determined those broadcasters who would be subject to it. Stated simply, the policy either applies to an ownership group or it does not. If it applies, then it must apply on a consistent basis and special treatment should not be given to some ownership groups.

8145   Second, the Commission set the 30 percent CPE and 5 percent PNI minimums based on what it feels are the appropriate levels to achieve Broadcasting Act objectives. It would be bad public policy to conclude that the CPE and PNI objectives are more important for one broadcaster than another. Yet if different rates apply to different groups, even in the first year, this would be the outcome.

8146   Third, the fact that CPE and PNI spending are percentages of each group's overall revenues automatically adapts the expenditure requirement to each Large Ownership Group's individual circumstances. In absolute dollars, Bell Media will spend actually 6.5 times more than Rogers Media and 40 percent more than Shaw Media because our broadcasting revenues are that much larger than theirs. No further concessions for size or asset mix are necessary or appropriate.

8147   As you know, regulatory symmetry is a very significant issue for BCE given the competitive dynamics of the communications and media sectors. And we observe that symmetry is a regulatory objective for the Commission. It has been applied to LPIF contributions, to the 5 percent annual BDU payments and priority programming requirements, to name just a few. In all cases, the same requirements apply to all contributors regardless of their revenue, profit or asset mix profile which vary widely. It would therefore be inconsistent with past practice to abandon this principle when establishing and applying the minimum CPE and PNI rates.

8148   With regards to the minimum CPE rate calculation methodology, we spent quite a bit of time to better understand the Commission's formula as outlined in paragraphs 50 to 52. Provided that all Large Ownership Groups are subject to the same formula and it is applied on a symmetrical basis we will abide by the Commission's formula as outlined in the policy. We filed in confidence our CPE projections using the Commission's formula and, as requested, we also included LPIF revenues from 2013 and beyond, as well as Olympics-related revenues.

8149   It would be a mistake to underestimate the financial challenge that a 30 percent CPE rate poses for Bell Media. While it is in fact 30 percent of our revenues, it actually represents nearly half of our programming and production expenses. It's an unprofitable half to be sure. And, as the CPE chart the Commission distributed earlier this week shows, a 30 percent rate reverses recent CPE trends and it represents nearly a 4 percentage point jump in 2012 over 2011.

8150   In absolute dollars, a 30 percent CPE will require Bell Media to spend $22 million more in 2012 than 2011. I would note that this increase dwarfs the increase that Rogers has purported they will incur by adhering to a 30 percent CPE.

8151   The same logic in support of CPE symmetry also applies to PNI. With respect to the appropriate PNI rate, we feel that a 5 percent minimum is acceptable for the next license term. The rationale for this position is best understood in the overall Canadian programming context.

8152   All stakeholders agree that spending on Canadian programming is essential to achieving the objectives of the Broadcasting Act. A 30 percent group CPE minimum generates a very meaningful amount of Canadian programming, yet it also provides broadcasters with critical programming flexibility to address the industry's many challenges as well as opportunities.

8153   We agree with the Commission that programs of national interest, which are a subset of Canadian programming, can be very effective in reinforcing Canadian culture and our identity. But as important as they are, the reality is that they are also the most financially challenged and riskiest type of Canadian programming. Our extensive experience as a PNI leader allows us to speak with authority and has shown that it takes many attempts to find even one success.

8154   So as the Commission considers the PNI spending minimum, we ask that it take into account four facts.

8155   First, because PNI is a subset of CPE a higher PNI rate will decrease money available for other forms of Canadian programming, very important forms like local news or "eTalk" or "The Marilyn Denis Show".

8156   Second, increasing the PNI rate is likely to depress broadcasters' revenues and profits. As revenues decline, so too will CPE.

8157   Third, at a 5 percent PNI rate there remains sufficient flexibility for a broadcaster to continue to produce high-quality Canadian programming in non-PNI categories.

8158   Fourth, the Commission has stated that it is concerned about an adequate level of funding of PNI. It's therefore critical to consider all sources of such funding. Specifically, the extraordinary PNI funding from the recent CTV and Canwest tangible benefits packages must be factored into the analysis. These benefit packages will inject $179 million into PNI over the next seven years. For Bell Media, this means that our PNI spending, with the 5 percent minimum as part of our licence, will still be 28 percent higher over the next license term than it will be in 2011.

8159   The significant impact of this extraordinary incremental funding from tangible benefits indicates that it should be considered when setting the PNI spending requirements for the next five years. Ignoring these incremental funds will lead to a situation where the Large Ownership Groups are required to significantly surpass their historical PNI funding levels. This would unnecessarily reduce their production spending flexibility, and be contrary to the objectives of the group licensing policy. That is why a 5 percent PNI rate is appropriate for all.

8160   The final policy issue that we would like to discuss is regional production. Bell Media and the other Large Ownership Groups have all commented on their extensive history of working with producers across the country and their intention to continue to do so. We are highly motivated to seek out the best Canadian stories and production opportunities wherever they arise. It's in our viewers' interests and it's therefore in our interests to do so and we do so on a regular basis.

8161   Whether the discussions take place primarily in person, over the phone, through email or some combination of the three, they do take place. Imposing regulations which dictate the type or frequency of our regional outreach is neither necessary nor appropriate.

8162   Seeking out the best Canadian stories and the best Canadian talent wherever they are has resulted in shows like: "Corner Gas", which is filmed in Saskatchewan; the "Junos", which moves to a different Canadian city each year; "Mayerthorpe", a movie filmed in Alberta; "Inside the Titanic", which was produced in Montreal; "Todd and the Book of Pure Evil", co-produced in Manitoba; and the series "Sanctuary", which is filmed in Vancouver.

8163   I would now like to turn it to Kevin Goldstein.

8164   MR. BIBIC: Kevin lost his voice, so I will take over. Here's my chance.

--- Laughter

8165   MR. BIBIC: Moving to our own application, we believe that the requested changes to the conditions of license for some of our specialty services, including MuchMusic, MuchMore and ESPN Classic, are consistent with the Commission's policies relating to genre exclusivity and will ensure that each channel remains focused on its licensed genre. Our requests are also consistent with the types of adjustments the Commission has granted other services in the past.

8166   Changes to genre exclusivity and changes to Nature of Service are separate issues. The Commission has an existing and recent policy to assess whether it is appropriate to remove the exclusivity provision of a particular genre. Changes to that policy are beyond the scope of the license renewal process and we have proposed no such changes.

8167   On the other hand, other licensees have asked for and received flexibility over the years in order to respond to changes in market dynamics. The Commission itself has indicated that the group license renewal process is the appropriate time to consider such changes.

8168   Given that most of our licences have not been reviewed for many years and the environment in which the services operate has been changing rapidly, we feel that our requests are modest but necessary. This is especially the case of our requests for MuchMusic and MuchMore -- requests no other licensee opposed. We firmly believe that without the proposed changes viewer engagement will decline and service quality and performance will suffer. Neither of these outcomes is beneficial to the broadcasting system.

8169   With regards to ACCESS Television, we listened carefully to the Commission's concerns about our proposed changes last week and today would like to present a revised proposal. For the most part, our revised proposal follows the regulatory model the Commission approved in December of 2010 for SCN, Saskatchewan's educational broadcaster.

8170   We are prepared to adhere to the conditions of license for ACCESS that we filed with our undertakings yesterday and reduce the license period to three years. During this time we will evaluate the station's performance and how ACCESS should evolve going forward.

8171   The revised proposal retains what we consider to be two of the key building blocks of ACCESS' programming over the next license term. In particular, it will facilitate educational interstitials, which will be aired primarily during the evening viewing period, and educate Albertans about education and life-long learning. Our plans for educational interstitials have the strong support of the Alberta Government.

8172   It will also enable ACCESS to maintain 14 hours per week of our flagship current affairs program, "Alberta Primetime". This is a unique regional program which provides an in-depth daily look at the issues and concerns facing Albertans. At the cost of $1.8 million annually, this program represents a significant production investment by ACCESS.

8173   Kevin...

8174   MR. CRULL: Thanks, Mirko.

8175   To conclude, Bell Media's proposal has embraced the Commission's group licensing policy and, in particular, the spending minimums for CPE and PNI.

8176   A minimum 30 percent CPE rate is, in our view, very substantial and very challenging to the operation of a private broadcaster. It is not only 30 percent of our revenues; as previously stated it represents half of our programming and production expenses. A minimum 5 percent PNI rate is no less challenging.

8177   Given the risk and the profit profile of these programming categories and their impact on Bell Media's overall success, I can guarantee you that these will be a heavy personal focus for me over the next license period and I will be spending a significant amount of my time focused on Canadian programming.

8178   I trust that we have addressed the key elements of the debate that arose during the hearing. We really appreciate your attention, both last week and today, and we are now happy to respond to any questions you may have.

8179   THE CHAIRPERSON: Thank you.

8180   You say you want to apply the policy as it is, but then when it comes to specific terms you want to take advantage and change. As far as I can see, the only part of the policy that you have accepted as laid out is where we say how to calculate the CPE. You say you are willing to accept that.

8181   But we said very clearly a minimum of 30 percent for PNI -- a minimum of 5 percent for PNI and 30 percent of CPE.

8182   Let's take PNI for instance. What was your PNI last year? Was that a public figure or not?

8183   MR. CRULL: Yes. Our PNI for 2009 is, I believe, a public figure.

8184   Clare...?

8185   MS BROWN: Yes. Last year it was 5.8 percent based on the new category definitions.

8186   THE CHAIRPERSON: Right. This is 2009.

8187   In 2010...?

8188   MS BROWN: In 2010, 5.2 percent.

8189   THE CHAIRPERSON: So we came to the 5 percent by looking just at drama, because we didn't have the figures for documentary and award shows. You filed those, et cetera. With those you are going over five.

8190   Why are you now regressing? What did you say in 2009?

8191   MS BROWN: In 2009 5.8.

8192   THE CHAIRPERSON: Yes.

8193   MS BROWN: Sorry, I misspoke. 2010 was 5.9.

8194   THE CHAIRPERSON: 5.9. 2009 was not exactly a banner year and 2010 was a bit of the recovery. So 5.8 and 5.9 and we said 5 as a minimum. Your historical average is 5.8 and 5.9 for the last two years and you come in and say 5 percent. I just don't get it.

8195   I mean, we were absolutely clear in our policy we are only measuring drama, we have to find out the numbers for documentaries and then set the appropriate amount. Why are we regressing here?

8196   MR. CRULL: Well, Mr. Chairman, we did adhere exactly to the 5 percent minimum and I will emphasize that what we are laying out is a forecast. The way revenues actually play out and spending actually plays out, the one thing I can be certain of is the numbers in the future will be different than the numbers that we put down as a forecast on paper.

8197   So we adhered by noting we will spend a minimum of 5 percent.

8198   I'm sure, as you know, for 2009 -- when I look at 5.8 and 5.9 percent and I look at what that reflects, that is not meaningfully above a 5 percent minimum.

8199   I would say secondly, and I would emphasize, if the Commission is concerned about an adequate flow of funds to programs of national interest, the first thing is there is a massive multiplier effect of our 5 percent spending.

8200   Ms Coe can describe this much better than I at my tenure, but naturally the industry has many funding mechanisms for independent producers to spend on the production of PNI and our 5 percent spend is only the beginning that gets it started.

8201   Second, these initiatives to create a hit show is a long cycle and you just can't be precise, Mr. Chairman, in any year. We are working on shows right now that may be big hits in 2012 or 2013 and we can't predict when they hit and when we will really ramp up our spending on them.

8202   So I believe it's highly inappropriate to take our 5 percent minimum spending and suggest that we are somehow gaming the system or not adhering. What we are telling you is that will be our minimum spend.

8203   THE CHAIRPERSON: Sorry. How come we have a complete disconnect here?

8204   We said the policy -- I'm actually looking at the paragraph that sets out the 5 percent minimum.

8205   MR. BIBIC: Paragraphs 74 and 75.

8206   THE CHAIRPERSON: Yes. Thank you, Mr. Bibic.

"...the Commission has determined that group expenditures of at least 5% of gross revenues over the licence term is appropriate. The large groups will be required to file, as part of their renewal applications, their historical spending on long-form documentaries and award show programming. Based upon its analysis of these past expenditures, the Commission will establish, at licence renewal..."

-- i.e., today:

"...a base level spending requirement for programs of national interest and determine whether any increases over the licence term may be necessary."

8207   We couldn't spell it out properly. We said that we know how much you spend on drama, we don't know what you spend on -- give us those figures, and on that basis we will --

8208   We didn't say: On that basis we will go back and let you produce less than you have historically.

8209   MR. CRULL: Mr. Chairman, applying the 30 percent CPE and the 5 percent PNI, it absolutely is placing a significant burden on a business that already has tremendous financial challenges.

8210   I would like to suggest that -- we have some charts and some specific data that we are anxious to discuss in camera --

8211   THE CHAIRPERSON: Yes, we will go through that in camera.

8212   MR. CRULL: -- and I think I can better respond to some of the questions.

8213   THE CHAIRPERSON: Okay. The other thing is, you want us to take into account -- when we come to CPE, you want us to take into account the benefits.

8214   I mean, the benefits -- I don't get it.

8215   Or, I'm sorry, CPE --

--- Pause

8216   THE CHAIRPERSON: "...the fact that CPE and PNI spending are percentages of each group's overall revenues automatically adapts the expenditure..."

8217   And then you make the point that we shouldn't forget that, when we look at both of those, you also have significant benefit obligations.

8218   Are these two separate kettles of fish? I mean, the benefits are the price -- in effect, the transfer tax that you have to pay when you acquire assets, and you are no different than anybody else.

8219   And that is to be spent for the benefit of the system, not for the benefit of Bell.

8220   We have already made huge concessions to you -- huge, I may say, by allowing you to spend a lot of that money on changing from 224, or whatever the system is called --

8221   MR. CRULL: Yes, sir.

8222   THE CHAIRPERSON: -- but now you want that spending that you make pursuant to benefits also to be taken into consideration when we look at your CPE and PNI?

8223   MR. CRULL: Mr. Chairman, I believe that we all have the interest of ensuring a robust independent production sector for this subset of CPE, which is called and termed Programs of National Interest. And given that interest, we are all in it to make sure there is a sufficient, guaranteed flow of funds toward independent production.

8224   We are asking you to take it into consideration not to justify us changing or not being in compliance with your policy, we are complying with your policy and asking you to take into consideration that our 5 percent minimum is highly appropriate, given that over the next five years, the next term of this licence --

8225   Never before in the history of Canadian television has as much money in the industry flowed toward PNI through independent producers, and we believe it is very appropriate to take that into consideration.

8226   MR. BIBIC: So the benefits moneys would not apply -- are irrelevant to the calculation of the 5 percent. We totally agree with that.

8227   We are simply saying that there will be a lot of money in the PNI pipeline, over and above the minimum 5 percent that each broadcaster puts in, and it's significant.

8228   We are just asking the Commission to look at the PNI moneys available in the pipeline in totality.

8229   MR. CRULL: We mentioned in our opening statement that this produces, I believe, an increase of more than 20 percent growth in PNI, in guaranteed -- guaranteed -- flow to PNI, and 20 percent annually is a big number.

8230   I don't know many businesses, other than Google, that enjoys 20 percent, guaranteed, increases in their flow of funding. I think that is producing -- we are going to be very proud of the robust production that comes out over the next five years.

8231   MR. BIBIC: Mr. Chairman, may I take another shot at paragraph 75 of the decision?

8232   Ultimately, you may disagree that 5 percent is the right number, but I firmly believe that Bell Media requesting 5 percent is completely in keeping with the decision. It says minimum 5 percent -- minimum. Others have come forward with far less than 5 percent, which is completely outside the parameters of 75.

8233   Sure, paragraph 75 does say that once you get all of the data you will examine what is the appropriate number, and we have come before you with a number of factors seeking to justify why 5 percent is the right number.

8234   It does not say in 75 that the number for each broadcaster will be pegged exactly at what it was last year or the year before.

8235   In fact, we hover below 6 percent, as you heard Clare mention. And it is hard to nail it right at 5 percent. It could very well be above 5 percent in a given year, based on the productions we finance.

8236   THE CHAIRPERSON: But, Mr. Bibic, you told me: 2009, 5.8; 2010, 5.9. For 2011 your projection is obviously confidential, but it is not going to be below 5 percent.

8237   So those last three years that we have here, whatever that number happens to be, you are now coming back with something that is less than that, when the clear thrust of everything we said was -- if we look at drama only, it would count for, roughly, 5 percent for everybody, and throwing in the other two categories, let's set the appropriate number.

8238   We did not say, "Let's spend less than you have spent on drama for the last three years," which is effectively what you are proposing.

8239   MR. BIBIC: Mr. Chairman, we will give you the number, it's 5.2 percent for 2011.

8240   THE CHAIRPERSON: Okay. You are the mathematician -- or somebody is the mathematician -- 5.8, 5.9, 5.2 -- the average, whatever it is, it's not 5.

8241   Okay, we will be able to go into it in more detail in camera, and my colleague Mr. Katz, who is an expert in numbers, will try to outline our position.

8242   Now, on regional commitments, I thought I was very clear when I heard you and the others. This is now the third time around that I am hearing the same thing, what you set out here in 28 and 29. You will seek the best story. You have regular contacts. You will go out to the region and you will get whatever you --

8243   You have heard this week every single regional group complaining about exactly that, that this is what you say, but, in effect, it is only partially practised. They have to seek you out. They have to come to Toronto. They have to invite you to come to the regions, et cetera.

8244   And I said: Please, I don't want to impose on the way you do business. Come forward with a commitment, a concrete commitment that we can just reiterate.

8245   And what you come back with are, again, wonderful, encouraging words, but no commitment.

8246   I just don't get it. I mean, I have made it absolutely clear that I would prefer not to have to impose it on you, because I don't want to restrict your business flexibility. On the other hand, I want to see a commitment, not lip service.

8247   MR. CRULL: We would prefer, Mr. Chairman, that you don't impose it, as well. We would highly encourage you to look at the free market. We are naturally motivated to seek out the best creative, wherever it occurs.

8248   I would also implore you to look at our track record.

8249   I don't put as much stock in what others who come before you say what their personal view is, what I put stock in is our track record of productions that come from every corner of this country.

8250   THE CHAIRPERSON: Mr. Crull, it can't be too difficult for you to talk to your colleagues and say: What do we actually do from year to year? And, on the basis of that, can we not, out of that, construct a commitment?

8251   And give yourself whatever flexibility you need.

8252   But if what you say is true, it should not be difficult. Obviously, what they all want is that you establish regional offices, et cetera, and that is not the policy that you have followed -- regional promotion or contacts or whatever.

8253   But if you say that you will -- I don't know what you do, so I am talking like the blind about colour, but let me just imagine here that you could say: We will have a meeting with producers in each province once per year, or we will attend annual producer association --

8254   Whatever you do, I don't care, just set it out so that there is something concrete here.

8255   MR. CRULL: Mr. Chairman, one of the ways that Bell Canada, and now Bell Media, will seek to be a robust participant in a challenged communications and media industry is to reduce our operating expenses.

8256   Bell has reduced travel and entertainment by moving to videoconferencing and using today's technology in order to work with our employees, who are all around the country.

8257   So we will travel whenever it is appropriate, and we will use the technology when it's appropriate.

8258   THE CHAIRPERSON: That's the very reason why I am reluctant to do it. I don't want to interfere in the efficiencies of your business. On the other hand, I want a commitment.

8259   You have, obviously, after this hearing, some time, so I would ask you and the other groups to take this seriously and come forward with a meaningful commitment.

8260   Now, you say here on MuchMusic that this request -- no other licensee has imposed -- Mr. Goldstein, or Mr. Bibic, at paragraph 35 --

8261   I seem to recall just yesterday hearing a lengthy complaint about MuchMusic and how what you are suggesting would alter the whole genre of it.

8262   MR. GOLDSTEIN: I will try to speak to that. I believe that was from CIMA yesterday, which is an organization that represents participants in the music industry. They are not a broadcast licensee. We listen to their concerns.

8263   They obviously have a vested interest as part of the music industry, and obviously the music industry has changed dramatically over the last ten years. That has impacted them, it has also impacted MuchMusic. That is one of the key reasons why we need to evolve.

8264   Our reference there relates to a broadcast licensee, which is generally where you look when you are making an assessment under the genre exclusivity policy, in terms of whether or not the changes that you are requesting are in any way bordering up -- bumping up against someone else's exclusivity.

8265   THE CHAIRPERSON: You are absolutely right in what you say. That was part of the objection. But the bigger objection was the money part. Your contribution to VideoFACT you want to roll into your CPE, and they do not want to roll it in because, as they suggested, those are, if I understood them correctly, in fact, untied moneys, and therefore they are available to anybody who wants to produce music videos, it doesn't have to be liaised with a broadcaster.

8266   MR. BRACE: I think the objective there, Mr. Chair, was to use the money as practically as we can to benefit our system, the broadcast system, and encourage viewing on the linear service, MuchMusic, bringing people back to the system, and making converts of those who aren't, and making sure that we develop a bigger audience and advance the audience.

8267   So what we proposed was to reduce the VideoFACT spending, or the MuchFACT spending rather, to 3.5 percent, acknowledging that music videos are still vitally important. We acknowledge that -- and, obviously, maintaining a significant portion of music video display within our broadcast schedule.

8268   But, with the other 3.5 percent, to try to do something that would benefit the very people who are members of their group; that is, to go out through independent production and produce programs that would involve the upcoming musicians, the people who are independents, to try to give them profile. That is not necessarily sending people online, it is bringing people into the regulated system, that being MuchMusic and our licensed service.

8269   That is really what we are trying to do. I think that it benefits the system in a bigger way than what we are doing now. By continuing to just produce music videos with that money -- we have all acknowledged that people aren't watching those on MuchMusic, they are watching them online. They are watching them on other sources, on other platforms, which, quite frankly, aren't regulated. They are outside the system.

8270   Our objective is to promote and advance the system, and that is what we are trying to do, and I think that it benefits the very members of CIMA equally.

8271   THE CHAIRPERSON: But isn't the net effect of it that the benefit that right now is money going into VideoFACT, and allowing people to access those funds and make music videos, will now be, in effect, restricted to people who produce it for Bell Media?

8272   Because it will be counted as part of your CPE and PNI and, of course, as a result of that, one has to produce for Bell Media in order to have access to those funds.

8273   MR. BRACE: It is true that it will result in fewer music videos being produced -- and, hopefully, we have put arguments on the record that acknowledge why we think that makes sense for us.

8274   But, I guess, in trying to emphasize the point a little further, what we are trying to do is advance the music industry. We are trying to do it with the independents, we are trying to do it with audience, bring them into the system, and keep them within the system for those who are there now.

8275   It's just imploring the Commission to understand that it is a relatively inefficient spend, if those are the objectives we are trying to achieve in spending all of that money on videos, when we could be doing something with it that, I think, would benefit the system, and benefit the industry, quite frankly, in a more efficient way.

8276   THE CHAIRPERSON: I understand what you have said here, if nobody opposed it -- we have strong opposition to it, as you know.

8277   Now, turning to ACCESS, I see the Order in Council that you produced, which talks about Learning and Skills Television of Alberta Limited being designated as the Alberta --

8278   Let me get my fingers on the document.

--- Pause

8279   THE CHAIRPERSON: It is designated as the provincial authority for Alberta and the provincial education broadcaster for Alberta.

8280   What does that mean? What privileges fly, what right do you get by being designated a provincial education broadcaster?

8281   MR. GOLDSTEIN: I think that designation essentially qualifies us under the distribution regulations for mandatory carriage and simulcast.

8282   Under our current licence, we have an obligation to ensure that that designation is in place at all times.

8283   So that's what it entitles us to.

8284   THE CHAIRPERSON: I am not familiar with the Act under -- how does it qualify you as being --

8285   Do our regulations wrap themselves around provincially designated bodies? Is that what you are saying?

8286   MR. GOLDSTEIN: Yes, they do.

8287   THE CHAIRPERSON: Okay. And Learning and Skills Television of Alberta Limited acquired the assets of ACCESS and the name and the right to operate the station, as I understand it.

8288   MR. GOLDSTEIN: Back in 1994, yes.

8289   THE CHAIRPERSON: And it then changed its corporate name to ACCESS from -- whatever it is called --

8290   Learning and Skills Television of Alberta Limited changed its name and it's now ACCESS?

8291   MR. GOLDSTEIN: I believe that Learning and Skills Television of Alberta Limited remains the corporate entity that holds that licence.

8292   THE CHAIRPERSON: And you own that licence?

8293   MR. GOLDSTEIN: Yes.

8294   THE CHAIRPERSON: You own that corporate entity?

8295   MR. GOLDSTEIN: I believe so.

8296   THE CHAIRPERSON: You believe or you know?

8297   MR. GOLDSTEIN: The last time I looked, yes.

8298   It's a subsidiary of -- we have recently done a merger of our overall -- a corporate reorganization, but it is a subsidiary of -- I think it's Media Inc.

8299   I would have to look at our corporate org chart.

8300   THE CHAIRPERSON: You are telling me that CTV owns Learning Skills and Television of Alberta Limited, which is the holder of the provincial designation, and which operates under the name of ACCESS.

8301   MR. GOLDSTEIN: Yes.

8302   THE CHAIRPERSON: Could you confirm that, please?

8303   MR. GOLDSTEIN: I can do that, yes.

UNDERTAKING

8304   THE CHAIRPERSON: Thank you.

8305   Now, assuming that what you just stated is true -- and I have no reason to doubt it, I just want to see the chain of evidence -- what exactly are you proposing for ACCESS?

8306   MR. GOLDSTEIN: Could you repeat the question, please?

8307   THE CHAIRPERSON: You say a three-year licence, and you say that you want to have the same treatment as SCN. Put some flesh on those bones for me.

8308   MR. GOLDSTEIN: I will start, and then maybe Mr. Lewis could take over.

8309   Obviously, as we noted in our opening statement today, we listened with interest, both in terms of the concerns that the Commission had last week in our appearance, as well as what the intervenors said. So we took a look at the SCN licence, which is something that Rogers, one of the intervenors, suggested we do in their intervention.

8310   That licence, essentially, is structured not dissimilar to the model that the Commission has employed for ethnic broadcasting, where you have a portion of your schedule more commercially oriented, and that has helped to subsidize the educational programming, which is the other part of the schedule.

8311   Essentially, the way in which the SCN approval works, which is from last December, is that 60 percent of the programming on the service is from Categories 2(a) and 2(b), which is analysis and interpretation and long-form docs, and 5(a) and 5(b), which is formal and informal education.

8312   There is also a subset within that 60 percent of, specifically, 5(a) and 5(b) programming, and 60 percent of the schedule falls into that.

8313   Then, the other 40 percent allows you to do programming that is more commercial in nature, to help subsidize that programming, mostly in the prime time period.

8314   That's how we developed it. We, essentially, took the COLs and largely graphed them onto the ACCESS licence, and we included that as Appendix B with our filing yesterday.

8315   I don't know, Mr. Lewis, if you want to comment --

8316   THE CHAIRPERSON: You included Appendix B with what?

8317   MR. GOLDSTEIN: With our undertaking filing late yesterday.

8318   MR. BIBIC: It's the pages that follow the Alberta Government Order in Council that you were looking at.

8319   THE CHAIRPERSON: Thank you.

8320   It will continue to be known as ACCESS?

8321   MR. LEWIS: Yes.

8322   THE CHAIRPERSON: So 60 percent will be educational and 40 percent commercial.

8323   Then, in three years -- what happens in three years?

8324   MR. BIBIC: Mr. Chairman, the principle behind the revised proposal -- we developed it for this reason. ACCESS needs changes, modifications, and more flexibility -- and Kevin and Lloyd are in a better position to speak to this -- given the loss of funding from the Alberta government.

8325   We came forward and we asked for those changes.

8326   Concerns were raised last week as to what kind of beast this really is. It's kind of hard in the space of five days to say: We won't be an educational broadcaster any more, we will do something completely different.

8327   You can't do that in five days, so we took a step back and we said: Okay, we will ask for a shorter licence. That will give us time to think through what we want to accomplish with ACCESS and what it should really be, educational or something else.

8328   We asked for three years, not five. That would give us that time to think it over.

8329   Also, in the meantime, it would maintain its educational mandate, and still get some flexibility. And we said, in terms of the flexibility that we will ask for: Let's go to a precedent, very, very recent, that this Commission has accepted with another educational broadcaster in another province.

8330   That is how we designed the revised proposal, or the principle behind it.

8331   So in three years we would come back -- ahead of the three years, when it is time to renew again -- with a model, whatever that might be. At least we will have the time to think it through in the meantime, and we will deal with it then.

8332   MR. GOLDSTEIN: If I could just add, I think one of the important things to also note about the SCN proposal is that its circumstances and ACCESS' circumstances were not dissimilar. It was a situation where it was being privatized and losing government funding.

8333   Obviously, ACCESS was privatized some time ago, but it only recently lost government funding.

8334   So we are, essentially, looking to model after that approach.

8335   THE CHAIRPERSON: So you are essentially changing the proposal that you made to us originally on ACCESS. You have reconsidered it and you are basically trying to see whether the SCN model works for you.

8336   MR. GOLDSTEIN: That's correct.

8337   THE CHAIRPERSON: Obviously you don't make money on the educational part, so the 40 percent will be mostly movies?

8338   Is that what it's going to be?

8339   MR. LEWIS: It would be movies, drama, comedy -- very much the same programming that we carry now.

8340   THE CHAIRPERSON: And, presumably, mostly foreign.

8341   MR. LEWIS: Pardon me?

8342   THE CHAIRPERSON: Mostly foreign, I would imagine.

8343   MR. LEWIS: Yes, certainly a significant part of it would be.

8344   MR. GOLDSTEIN: Although the service -- just to build on that, the service still has to maintain Canadian content exhibition requirements in prime time under the TV regs, just like any other television broadcaster.

8345   THE CHAIRPERSON: Oh, you have an exhibition requirement?

8346   I guess I read this too quickly. There is an exhibition requirement in prime time, you say?

8347   MR. GOLDSTEIN: Yes, ACCESS is subject to the same, currently, 60:50 requirement, which will become 55 --

8348   THE CHAIRPERSON: Oh, it's those you are talking about. There is no special requirement, it's the generic one. Okay.

8349   Thank you. Rita, over to you...

8350   COMMISSIONER CUGINI: Good morning, and thank you.

8351   I have just a follow-up question on ACCESS. The difference between ACCESS and SCN is that SCN is independently owned. It's not owned by any major broadcaster.

8352   So, with the revised mandate of ACCESS, as you have defined it here, why should we not consider this to be a second stick in the markets where CTV has an over-the-air television service?

8353   MR. GOLDSTEIN: A couple of reasons. One, it's not an over-the-air broadcaster. The Commission's policy on multiple ownership in a market relates to over-the-air.

8354   Second, it remains that it will have an educational focus.

8355   And, third, there is --

8356   COMMISSIONER CUGINI: Except in prime time. That's where it becomes most competitive.

8357   MR. GOLDSTEIN: True, but -- I guess the third thing that I was going to say is that that, in no way, makes it any different than ASN in the Atlantic market, which is a satellite-to-cable operator, which doesn't have the same educational focus.

8358   CTV operates, obviously, CTV Atlantic and, as well, operates a satellite-to-cable operator in those markets, and that has never been considered to be in any way something that is offside the Commission's policies.

8359   I think that this is fully consistent with the approach the Commission has taken in the past.

8360   COMMISSIONER CUGINI: Thank you.

8361   THE CHAIRPERSON: Rita, could I interrupt? The Staff sent me a question on ACCESS, which I should have asked and I didn't.

8362   ACCESS' current Conditions of Licence require it to have educational programming that forms part of a formal learning system that leads to a formal assessment and accreditation by an educational institution. So does SCN.

8363   For the new ACCESS COLs, you left that portion out. Can you explain why?

8364   You said that you were copying SCN, and apparently you didn't copy it totally.

8365   MR. GOLDSTEIN: My understanding is that SCN does not have -- ACCESS has a current requirement that 100 percent of its programming be educational and focused. SCN does not have that Condition of Licence. It has a 60:40 split.

8366   What we are trying to do is figure out a way to have programming that is more commercial in nature to subsidize the programming that is not.

8367   Mr. Lewis is in a better position than I am to comment on it, but I think that we should highlight that ACCESS is operating in very different market dynamics than SCN is, in terms of the competition in the markets in which it operates.

8368   As well, the competition -- or those markets were, until a few years ago, served by over-the-air stations that were coming in from Red Deer, and the operator of those stations made the determination that it couldn't make a go of it with no restrictions in terms of its programming overall.

8369   We are trying to figure out a way here that we can actually have a service that continues to benefit the people of Alberta with educational programming, and the educational interstitials and other programming that we are offering, but find a way to actually support it from a commercial perspective.

8370   Mr. Lewis may want to add --

8371   THE CHAIRPERSON: You talk about regulatory symmetry when you talk about CPE and PNI, and Mr. Crull is adamant that there should be regulatory symmetry. But when it comes to educational television, that symmetry is now suddenly being -- you know, you say that you are doing it like SCN, but you are not.

8372   MR. GOLDSTEIN: I'm sorry, Mr. Chairman, but I'm not certain where the difference lies in terms of --

8373   THE CHAIRPERSON: If we imposed this requirement on the old ACCESS and we imposed it on SCN, why wouldn't we impose it on the new ACCESS?

8374   MR. GOLDSTEIN: I am sorry if I am not understanding. SCN is the --

8375   THE CHAIRPERSON: The old ACCESS and the present SCN are required to have educational programming that forms part of a formal learning system that leads to a formal assessment and accreditation by an educational institution.

8376   That is a requirement on SCN and the old ACCESS. Now, with the new ACCESS, you have dropped that.

8377   MR. GOLDSTEIN: I think I understand. You are referring, specifically, to the reference to the 40 percent of 5(a) and 5(b), which requires it to be linked to educational --

8378   THE CHAIRPERSON: Yes, exactly.

8379   MR. GOLDSTEIN: The rationale behind that -- it is actually more of a logging classification than anything else.

8380   I would ask Mr. Lewis to try to tackle that.

8381   MR. LEWIS: If I may, what I spoke of last week, and what I really feel strongly about, and what the Alberta government, as well, has encouraged us on, is the notion of producing interstitial programming that drives educational messages within that prime time programming.

8382   Perhaps getting back to what Commissioner Menzies said, in terms of, you know, an adult conversation about what the licence is, I guess I would propose that, instead of tying that programming to an accredited institution, let's not. Let's use that time and that energy to produce messaging that really, really has an impact on Albertans in their understanding of our education system.

8383   That is a significant investment. It is one that the Alberta government has encouraged us to make, and I see it being highly valuable.

8384   If we do, indeed, need to go back to what you are suggesting, I think we probably can, but I really see our time and resources being better spent in interstitial programming. I think it's more important, I think it's more relevant, and I believe that it will advance the Alberta government's mandate better.

8385   THE CHAIRPERSON: What exactly do you mean by interstitial programming?

8386   MR. LEWIS: Let me explain that.

8387   We have suggested that we would make an investment of $250,000, minimum, to hire extra staff to produce, on an ongoing basis, in partnership with the Alberta government, and the Departments of Education and Advanced Education and Technology, programming that would highlight a variety of different needs in Alberta -- a variety of different opportunities -- perhaps changing our focus more than our mandate.

8388   Let's look at the global economy as being perhaps a piece of interstitial programming. It might be 60 seconds describing what the global economy is, and what Alberta's role in it might be. And the fact that in China they are processing beef. The fact that that is going to have a direct bearing on Alberta's beef market. We would look at profiling a company that is involved in the processing of beef.

8389   How would you, as a student, if that was an area of agriculture that interested you, take advantage of that trend and become better prepared for it moving forward?

8390   We would chisel out 6 minutes in prime time programming, in this popular programming, to broadcast these. We would invest in the people to produce them, and work directly in partnership with the Alberta government to ensure that the topics we are covering and the kinds of messaging that we are producing are consistent with their mandate.

8391   To me, that seems like it has a lot more relevance than connecting a program like Hellcats to a kinesiology program at the University of Alberta, to ensure that it does fit the mandate.

8392   I just think that it is a better use of our time and energy.

8393   THE CHAIRPERSON: It sounds to me like public service announcements.

8394   MR. LEWIS: Well, it would be programming, I think, programming that matters. I guess it's semantics.

8395   Again, it would be something that we would invest in to produce and give the airtime to. So public service perhaps on our part, but in conjunction with the Alberta government.

8396   THE CHAIRPERSON: And would they pay for it?

8397   MR. LEWIS: No.

8398   THE CHAIRPERSON: Okay. I have a request from one of the commissioners for a health break, so let's take a five-minute health break, and then we will go back to you, Rita.

8399   MR. LEWIS: Thank you.

--- Upon recessing at 1002

--- Upon resuming at 1009

8400   THE CHAIRPERSON: Okay. Rita, you were going strong before I interrupted you. Back to you.

8401   MR. BIBIC: Ms Cugini, if I may just close up on the question you asked at the end, ACCESS' proposed Condition of Licence 3 that we filed yesterday with our undertakings, and the last sentence says:

"A minimum of 40 percent of this programming must be drawn from Categories 5(a) and 5(b)..."

8402   We huddled in the break and we are quite prepared to adopt the language that's in the SCN condition of licence which continues after that sentence"

"...and must be devoted to educational programming directed to preschool children or to educational programming with clear learning objectives and comprising part of a formal learning system..."

8403   Et cetera, to the end, and we will file that with our final statement.

UNDERTAKING

8404   THE CHAIRPERSON: Thank you very much. I appreciate that clarification.

8405   Rita...?

8406   COMMISSIONER CUGINI: Thank you. We huddled too, and I have a couple more questions on ACCESS.

8407   Mr. Goldstein, you just said that the difference is because, first of all, you are a satellite cable service, unlike -- you are not an over-the-air, but can you confirm whether or not you still have analogue transmitters up?

8408   MR. KEVIN GOLDSTEIN: We will until the end of August.

8409   COMMISSIONER CUGINI: And then you will shut them down?

8410   MR. KEVIN GOLDSTEIN: That's correct.

8411   COMMISSIONER CUGINI: Okay.

8412   Something you didn't file which I believe we asked for, or at least we questioned you about it, is proof of ongoing conversations with the Alberta Government confirming that they accept these changes that you are proposing and that they will -- therefore, if we approve the changes, continue with the designation.

8413   MR. KEVIN GOLDSTEIN: Sorry, we didn't realize that, but we will be happy to file that as part of our reply.

UNDERTAKING

8414   COMMISSIONER CUGINI: Okay, perfect. Thank you.

8415   Mr. Brace, we are going to talk about MuchMusic and MuchMoreMusic.

--- Laughter

8416   COMMISSIONER CUGINI: Just one question. If an applicant comes forward and proposes a music service that is devoted primarily or predominantly to music videos and they commit to a percentage over 25 would Bell Media oppose that application?

8417   MR. BRACE: No. As a matter of fact, I think AUX was denied something similar to that and in that particular application we didn't intervene in any manner, quite frequently, negatively or positively.

8418   So, no, we believe that the future is not music videos. We have several services, you know, in the digital world that are kind of dedicated to music videos now and, you know, we have got to find a way to make those more robust and more resonant to the audience that they are targeting. So it's not a concern for us.

8419   So we think -- well, our direction is much different.

8420   COMMISSIONER CUGINI: Okay.

8421   MR. KEVIN GOLDSTEIN: If I could just add, just in terms of this, there are numerous music video services that have already been licenced as copies. We operate some of them. Others operate -- there are other independents who operate. We don't have a problem with a music video service but MuchMusic is going to be still a music-oriented specialty service.

8422   So if someone came along and said, "I want the same conditions of licence that MuchMusic has. We are going to be a general interest music service, 75 percent music videos", I think we would have a concern with that.

8423   But if someone wants to come along and be a music video service we have no issues with that.

8424   COMMISSIONER CUGINI: Okay.

8425   MR. BRACE: For clarification, Commissioner Cugini, if we are talking about eliminating genre exclusivity for this, that's an issue for us, but not the music video point that you raised.

8426   COMMISSIONER CUGINI: Right, thank you. And it is because it is the biggest chunk in terms of your asks for those two services, so that's why the question.

8427   We also talked quite a bit at length about MTV the other day and based on our conversations and based on the direction that that service is taking, would you agree that a more specific or a nature of service that betters defines the service today might be necessary?

8428   MR. BRACE: We certainly haven't contemplated that. I think that, you know, what we are attempting to do with our suite of services whether it's MTV, whether it's any of them, quite frankly, music or non-music, is to make them unique.

8429   I think that, you know, the Commission -- and we have discussed that in this hearing -- you know, there is the concern that it's getting more and more muddied as we look at the services across the system and that differentiation is becoming more difficult to determine.

8430   Our direction is to make sure that we have unique services. We think that that is the -- you know that is the health of the system. It's the health of our services and the health of our businesses. So we hadn't contemplated a need to adjust the nature of service for MTV.

8431   What we had committed to was making sure it was unique and different, certainly from Much. And I know that that's kind of been the comparison that's been drawn, that we program it differently, you know, and continue to do that. That for us just makes sense from a business standpoint.

8432   COMMISSIONER CUGINI: So you believe that the current nature of service which is the licensee will offer a:

"...24-hour a day specialty television service devoted to talk programs, the programs broadcast on the proposed service will explore a wide range of topics including social trends, relationships, daily news events, technology and controversial issues facing Canadian society."

8433   That still remains appropriate and that adequately describes MTV?

8434   MR. BRACE: We believe it does, and I think that we had a good discussion on some programs that were actually in question.

8435   We put some criteria on the table by which we kind of rationalized those and I think that, you know, it kind of met the nature of service that's been established.

8436   So we hadn't contemplated adjusting it, no.

8437   COMMISSIONER CUGINI: Okay. This is a bit of a clean-up question, but it goes to -- it's to the same issue on nature of service.

8438   We didn't talk -- I don't think we talked at all on Monday about Bravo, but this may need updating. This nature of service has existed since 1994:

"Bravo, a 24-hour service consisting of performance and drama programming as well as documentary and discussion. Each day will consist of three eight-hour blocks with some programming repeated during the day or week."

8439   Is that still adequate or appropriate or a concept of what Bravo is.

8440   MR. BRACE: I will just ask Mr. Goldstein to get his voice back and comment on this if he could.

8441   MR. KEVIN GOLDSTEIN: I will try here.

8442   What you have just read was the original description in the decision and it was never translated into a condition of licence.

8443   I think the first part of it in terms of the 24-hour service and performance and drama programming and documentary and discussion is the framework within which Bravo has always operated and continues to do so today.

8444   There is some other language when you go a little further down. The decision just further refines the types of programming it's supposed to offer. I don't think we offer an eight-hour block anymore.

8445   So if that was to be translated into a condition of licence, I don't know that that three eight-hour block which is something that specialty services used to do in the early days but tend not to any more, would remain appropriate.

8446   COMMISSIONER CUGINI: Can you file the nature of service that we can impose as a condition of licence?

8447   MR. KEVIN GOLDSTEIN: I think we can do that.

UNDERTAKING

8448   COMMISSIONER CUGINI: Okay, thank you.

8449   We did speak about Fashion Television and its request to reduce its Canadian content to 35 percent. And I will ask you the same question I asked someone else who has done the same thing: Why should a Fashion Television be a Category B, therefore?

8450   MR. BRACE: Kevin?

8451   MR. KEVIN GOLDSTEIN: I will be honest. It's not something I think we considered.

8452   I think it doesn't really differentiate itself from the Discovery Health example where they were suffering from a similar circumstance and looked for a reduction in terms of Canadian content exhibition and I believe expenditures as well due to similar-type circumstances. And I don't think they were -- they were Cat B or there was no shift from a Cat A to a Cat B in that circumstance.

8453   I definitely think it's something we can look into and file comments on in a written reply but it's not something that we have discussed.

8454   MR. BRACE: Fashion TV for us is a real focus of attention now because, quite frankly, what we have discovered is that, number one, the programming has very little shelf life. As you can appreciate you are talking about trends and trends in fashion and that sort of thing. So keeping current is incredibly difficult.

8455   The repeat factor on that channel is, quite frankly, immense. It's something we do have to address if we are hoping to have any kind of a chance of garnering an audience that makes sense for us. It has struggled. It's languished. We recognize that. We see it as -- having said that -- as a valuable opportunity for us.

8456   So our challenge with FTV, and by the way what I would say is that -- just to kind of put a bit of a fine point on what I have described here, in the last five years we have been able to kind of acquire a Canadian example and something in the neighbourhood of like 126.5 hours of original programming. That is why you get into the repeat factors which are, in our view, something that needs to be addressed significantly.

8457   So it is a work in progress, quite frankly, Madam Commissioner, that is now something very much on the front burner for me personally.

8458   COMMISSIONER CUGINI: Well, as you know, I mean I hope you can appreciate sitting up here, how difficult it is for us to hear an argument put forward that says when the service is struggling the first thing that suffers is the Canadian content.

8459   From a public policy point of view it's very difficult to hear that it's the first thing to go, is Cancon.

8460   MR. BRACE: I get that, but what we don't want to be in a position of doing is to achieve a Canadian content level by virtue of repeats.

8461   That's really the issue is that we have got to get some programming in there. There is some programming. There is more programming as you would appreciate, available from a foreign standpoint that can give some quality to the schedule and make it more robust.

8462   And so what we are saying is that in practical terms if we are going to meet a Canadian content commitment that's higher, it's going to have to be done with repeats which I think is self-defeating in this case.

8463   So a little bit of flexibility in that area, our ability to get more robust programming, drive the service, hopefully be able to drive audience, create more from a Canadian standpoint is the direction that we hope to go.

8464   COMMISSIONER CUGINI: Well, in building your argument for why it shouldn't be considered a Category B, I would do a little bit more than just comparing it to the precedent of Discovery Health, completely different circumstances.

8465   Discovery Health certainly didn't have the track record at the time that Fashion Television has today. So in building your argument I would take that into consideration.

8466   MR. BRACE: As Mr. Goldstein pointed out, we hadn't even contemplated that till you mentioned it so we can take that away.

8467   COMMISSIONER CUGINI: All right. Thank you very much.

8468   Those are all my questions.

8469   THE CHAIRPERSON: Steve?

8470   COMMISSIONER SIMPSON: Thank you very much. Good morning.

8471   As a follow on to the Chair's question with respect to regional program development, going back to that issue, in the testimony we had heard through the last two weeks, we are not encouraged that we are seeing positive metrics with respect to actual bucks being spent on the ground in the regions. And you have addressed part of that.

8472   But I'm going to try and sort of dissect to try and help do two things here. I'm very much in the Chairman's point of view that I would like to eke out more defined commitments that are workable for all and, at the same time, gain some more understanding as to the issue of development versus actual production. So we'll start off with first your request.

8473   My goal here is to have you add the submission that you have agreed to with the Chairman regarding regional production commitments, whether you could sort of bifurcate that for me with respect to development versus production.

8474   I have heard, and I understand, that for every one show that gets into production there might be 10, 12, 15, 20 -- I don't know what the number is -- but I'm curious as to whether there is an opportunity in driving regional production, to give us a better understanding of what money and what commitment might you put to developing more projects that may or may not see the light of day but get the regional story out.

8475   Because, you know, in the fullness of time what regional production does is job creation on one end, but I'm trying to get to the Canadian story side of things. So if there is an opportunity to produce a program in Saskatchewan like Corner Gas it is arguably a Saskatchewan story that comes to the national audience. And I think that's very cool.

8476   I'm just trying to figure out whether there is more we can do on the development side of things to get the regional stories out and developed even if they do wind up being co-produced between two different centres.

8477   You know I'm trying to break it into two areas of spend and activity so that when you are out in the regions you are looking for projects but give me an idea of what that might mean as a metric or as a scale of activity, not just showing me what Mr. Crull referenced, which were the projects that actually made it to life.

8478   MS COE: Oh, thank you, Mr. Commissioner.

8479   I think there is a few pieces in your questions. So I am going to try and address them piece by piece.

8480   COMMISSIONER SIMPSON: Absolutely.

8481   MS COE: Let's start with the development piece.

8482   You are very right in saying that you have to have many, many development projects that are on the go and are in active work for usually quite a long period of time before each one comes to a place of readiness where the producer and CTV, in this case, knows whether the show can be ordered, whether it's ready, whether it's going to be right, whether it's going to be suitable for one of Bell Media's channels, whether that's CTV or Space or something else or whether it really isn't going to fit for us and at that point, you know, the producer and the writer go elsewhere.

8483   That often is a period of a year or two years. Regardless of genre it often takes a long time.

8484   So within that you are looking for projects that are with regional producers as well as projects that are with producers in Toronto and other centres. Sometimes those projects are stories that are set in the regions and sometimes they are not related to where that regional producer is based.

8485   So if I can show you an example, we are developing right now a project with a writer, Graeme Manson, and the production company Temple Street that's located here in Toronto, not here but in Toronto. And the story is based on an award-winning novel by a writer from out west called Border Songs which is set completely in the Lower Mainland of B.C. and all of that kind of landscape.

8486   It's gorgeous and it's a setting that we haven't had anywhere, well away from Vancouver, right on that sort of border area where, you know, the delta is.

8487   And it's terrific but it's actually not a story brought to us by a B.C. producer. This happened to be one that originated here because the producers in Toronto fell in love with that book and fell in love with that story and the writer did as well and that's where they are working on it.

8488   So that said, we often will get stories from regional producers that are kind of set there. So there is a few elements.

8489   Because we are looking for the very best stories; first, we look to find the best stories. We also need to talk to the talent and the production companies and writers across the country to try and find all those stories. They may or may not be set where that writer lives or where that producer lives.

8490   So we do try and have that balance. But it is shaped by the first filter of is this a fantastic story and does this writer have that right sensibility to tell a story?

8491   COMMISSIONER SIMPSON: Exactly why I'm asking the question the way I did.

8492   I'm asking all the broadcasters and all the groups to try and not just lean on -- it's unfair as a producer to only lean on the metrics of what you have actually got under production. I'm trying to get you to bring forward an understanding for us of more of the development of work that's being done.

8493   MS COE: M'hmm.

8494   COMMISSIONER SIMPSON: Because this is another demonstration of your regional commitment that you may not have been successful in extracting a production out of Saskatchewan but you made the effort to try.

8495   That's what I'm saying.

8496   MS COE: Very much so, and we do have development projects that are across the country with writers; in B.C., like Corbett, who is working on a show for MuchMusic which is quite close to his own life and it's pretty exciting.

8497   We are also working with him on another project that he is developing for CTV which is more of a procedural and more appropriate to that conventional network but still has his voice, right, because he has got a quite strong voice as a writer.

8498   We are working with Dennis Heaton.

8499   We are working with Andrew Wreggitt who has written the pilot Borealis which we have mentioned earlier I think in this morning's opening remarks.

8500   They all have a different voice and that voice is embodied not only by their personality and their character but also it is shaped by where they were brought up and where they live and what the concerns are there.

8501   That's important to us because that's what makes the story authentic and that's what makes the script ultimately good and that's what makes us want to commission it.

8502   COMMISSIONER SIMPSON: Agreed, agreed.

8503   I'm just asking you if you can get that narrative into your commitment so that we can see that you are -- the process by which and how many or the metrics of how accurate -- you know, you are in the development cycle.

8504   MS COE: Okay.

8505   MR. CRULL: I think, Commissioner Simpson, the question makes a lot of sense.

8506   So we will take it away and spend some time being able -- we don't often present all our failures. So now that I appreciate the intent of what you are getting at, I think that our track record -- what we believe is evident is that our track record speaks for itself and you are saying, "Okay, maybe it does on what you have produced. Now, show me also what you have started and worked on and failed maybe or not produced".

8507   COMMISSIONER SIMPSON: Exactly, exactly.

8508   The second part of that question, although we have been, you know, making also a move to expenditure and away from exhibition, we have been hearing a lot from the groups with respect to the chicken and egg problem, which comes first, the money or the exhibition window?

8509   I'm also asking if it's possible -- if it's not, fine, but what you might consider or how you might approach coming forward with some type of exhibition carrot to be able to secure financing.

8510   I mean you do have a project that you are -- I'm assuming here and, again, I'm trying to get you to give us a much better understanding of this process.

8511   But when you are going to make the shift from orange light to green light on a project, give us an idea of when your commitment to a window comes up. Does it come up after the financing or before?

8512   Give us an understanding of that because it's all part of this commitment to getting stuff on the air.

8513   MS COE: I think I will jump in and answer that. We are usually the trigger. So we will be the first commitments to the producer.

8514   Our money will then trigger not only funding from other agencies, whether it is the Canada Media Fund or the IPF or Cogeco or Rogers or what have you, it will also trigger distribution interest usually if they know that the broadcaster is committed and has ordered the series or ordered the show.

8515   It sometimes can also trigger international interest from other broadcasters who might have been waiting to see if this thing was really going to move ahead before they then put in their commitment.

8516   And, of course, last of all, tax credits will come as well.

8517   All those things are predicated on the commissioning broadcaster taking that first step and saying yes, we really want this show and we are there.

8518   Assuming everything else falls into place and you do secure those other pieces of financing and you do get the stars attached and you go to camera, we are absolutely there and our money flows during the course of production.

8519   We start right away, as soon as we sign our contract, and it is about usually halfway through. Our investment will be with them by the time they start principal photography.

8520   So it is a substantial commitment and it is a very real one. And as they are in production and into post, we start working with our publicity and promotion teams to figure out how we are going to get it best placed and best promoted and get the best audience.

8521   COMMISSIONER SIMPSON: I get it, but what I am trying to extract from you is -- and again, I will leave it for your written submission -- if you could put some thought to helping your batting average on getting regional productions going, whether there is anything you can do to stimulate a higher percentage of projects getting going by having some type of advance commitment to a broadcast.

8522   You have given me the gestation stage of a production and I understand that, but when it comes to regional production, I am treating it as an exception here and asking if there is anything that you are willing to do that is exceptional to stimulate more and better regional production. I will just leave it at that. I want to move on.

8523   Back to accessibility on described video, you had indicated in your submission this morning that your costs per programming hours were roughly about $1,600.

8524   Would you clarify for me whether we are to interpret that that would be toward original production or just adaptation of existing productions you purchased? Is there a formula or a ratio or are we to assume it would be always with the original productions?

8525   MR. KEVIN GOLDSTEIN: That is the hour if a project -- to what it costs to DV an hour of programming when it is presented to us in a non-DV'd format. So that is what it costs to add on DV on top.

8526   COMMISSIONER SIMPSON: Any particular program?

8527   MR. KEVIN GOLDSTEIN: Any.

8528   COMMISSIONER SIMPSON: Okay. Just out of curiosity, what is the -- a short answer here because we're under the clock here -- but what is the process by which you make the determination as to what gets converted?

8529   MR. KEVIN GOLDSTEIN: What projects get DV and which doesn't?

8530   COMMISSIONER SIMPSON: Yes.

8531   MR. KEVIN GOLDSTEIN: I don't know. I will ask Corrie perhaps to try on that one.

8532   MS COE: All of our commissioned Canadian programming is DV'd. We also try and DV as much as we can of our live programming, so like the "Junos" or "So You Think You Can Dance," which is hard because when they are live, that time frame is really short.

8533   I can't speak to our foreign programming, how they choose which ones, because I am not involved in that.

8534   Kevin, I am not sure if you have a better awareness on that.

8535   MR. KEVIN GOLDSTEIN: We can definitely follow up with that in writing.

UNDERTAKING

8536   COMMISSIONER SIMPSON: That would be great.

8537   Last question on DV.

8538   In your projections on incremental costs -- I am referring to your page 6, question 1, which was the impact of doing incremental hour DV -- you are sort of casting that out over the licence period to about $6.2 million, but there is going to be a kicking-in in 2012, an implementation of a U.S. policy that is going to cause programming in the U.S. to be coming at you that is DV'd.

8539   Have you factored that into your projections?

8540   MR. KEVIN GOLDSTEIN: We have not. That is just a strict calculation in terms of adding up the hours times the $1,600.

8541   COMMISSIONER SIMPSON: Okay. If there is anything that you can do by going into your crystal ball to give us an idea of whether that policy might actually create some easement to that budget figure you have given me, that would be helpful. I would appreciate.

8542   I want to go back to ACCESS, everybody's favourite subject.

8543   You had indicated in your addendum that as part of your revised submission that you would broadcast 14 hours of regional programming.

8544   Would you give me, in short form, a description of what that regional programming is going to be?

8545   MR. LEWIS: It would largely be "Alberta Primetime," which we produce internally. As well, the educational interstitials that we have put forth as well would add to that.

8546   COMMISSIONER SIMPSON: So it's news, community --

8547   MR. LEWIS: Yes. It's largely current affairs, daily current affairs.

8548   COMMISSIONER SIMPSON: Okay.

8549   You had indicated in your submission that that would be averaged over the broadcast year. I thought we weren't going to do that.

8550   MR. LEWIS: Again, the reason would be to look after exceptional holidays or things of that nature that may indeed take place. That would be a minimum as well. I think that on a normal basis we are probably well in excess of the 14 hours, to be honest.

8551   So averaging would allow us maybe to look at Christmas day and days like that where you might slightly dip down if you didn't average, certainly not any other intention than that.

8552   COMMISSIONER SIMPSON: Would you do me a great favour and just add that to your submission list, please? Give us a greater clarification of what you think the impact is going to be, as you have described it, in terms of the addition or reduction of hours.

8553   MR. LEWIS: Sure.

UNDERTAKING

8554   COMMISSIONER SIMPSON: Okay.

8555   I too am drowning in a sea of paper here.

8556   The last question is to do with a statement you made in your -- gosh, was it this morning's -- yes, it is this morning's submission, reply statement.

8557   In paragraph 23 you had made a statement that I would like some greater understanding of with respect to reality, in that you say that reality is "the most financially challenged and riskiest type of Canadian programming."

8558   Now, that seems to run contrary to my understanding in terms of its relative cost for unscripted production, and so I am wondering if you -- would you please give me a better understanding of how that statement works in your mind because my understanding is that reality programming is not anywhere near the cost of scripted drama?

8559   MR. CRULL: I am sorry, Commissioner Simpson, the word "reality" in that context is not meant to mean "reality programming."

8560   COMMISSIONER SIMPSON: Ah! Sure.

8561   MR. CRULL: It's simply meant to emphasize the reality is that PNI tend to be the most financially challenging category.

8562   COMMISSIONER SIMPSON: Got it. My bad.

8563   Okay, that's it. Thank you very much.

8564   THE CHAIRPERSON: Tom?

8565   COMMISSIONER PENTEFOUNTAS: Good morning.

8566   Just to be clear on ACCESS, if you lose educational status, ergo, you lose mandatory carriage. You are not going to be putting up digital transmitters in Edmonton and Calgary; is that correct?

8567   MR. KEVIN GOLDSTEIN: That is correct.

8568   COMMISSIONER PENTEFOUNTAS: I am sorry to do this to you.

8569   MR. KEVIN GOLDSTEIN: That's okay. That is correct.

8570   COMMISSIONER PENTEFOUNTAS: And you will try to find satellite and cable distributors that will pick up ACCESS?

8571   MR. KEVIN GOLDSTEIN: I think what we tried to express in our written filing of yesterday was that a situation where ACCESS doesn't have mandatory carriage makes a financially challenged model exponentially worse.

8572   COMMISSIONER PENTEFOUNTAS: My question was you are basically going to shut down?

8573   MR. KEVIN GOLDSTEIN: I don't make those calls, but it definitely puts it in a very challenging position.

8574   COMMISSIONER PENTEFOUNTAS: Okay.

8575   MR. BIBIC: And, Vice-Chair, this is why -- ACCESS is an educational broadcaster, is designated as such. We will come back with -- well, it is designated as such.

8576   There were some questions as to whether -- you know, there's some questions as to how educational it is, but the fact is it is the designated educational broadcaster and there is an Order in Council.

8577   We will come back with the discussions we have had with the Alberta government.

8578   There are questions of where will this go and that is why we ask for the three years. We will figure that out.

8579   We may very well come back in three years and say we want it to continue to be the educational broadcaster, designate it as such and here is how we will operate it, and convince you of our case or we may come back with a different model.

8580   COMMISSIONER PENTEFOUNTAS: Chances are if there is no mandatory carriage, that dog ain't even on.

8581   MR. BIBIC: And that is one of the things we have to figure out between now and three years from now if you approve this for three years.

8582   COMMISSIONER PENTEFOUNTAS: So nice of you to help out Kevin there. Thank you.

8583   THE CHAIRPERSON: All of this exchange has illustrated the key importance of showing us what your discussions were with the Alberta government and the support that you enjoy from them and also establishing beyond a doubt your status designation.

8584   You made those two undertakings earlier.

8585   MR. BIBIC: We will do that.

UNDERTAKING

8586   THE CHAIRPERSON: No, I just realized how key it is.

8587   MR. BIBIC: But if this is not approved, we have a big problem on our hands with respect to ACCESS, which I am not sure anybody really ought to be searching for as a solution.

8588   We want to be renewed. That is why we came forward with a request for licence renewal. We don't want to be rejected. It is an educational broadcaster and we can't turn on a dime and suddenly make it something else in three days.

8589   THE CHAIRPERSON: Okay.

8590   Peter?

8591   COMMISSIONER MENZIES: First of all, on the sort of nature of service with that, what is more important to you in the long run is having flexibility to change the nature of the specialties or genre protection, apart from the issue of carriage and that sort of stuff?

8592   MR. BRACE: Yes. That is a very interesting question, Commissioner Menzies.

8593   I think that in the short term it's the modifications that we have asked for in conditions and to a certain extent natures of service that are important for us.

8594   I think the discussion of genre protection -- and we discussed that a little bit the last time we were together and in listening to some of the people that have spoken about it throughout the week -- is a bigger discussion, quite frankly, our position being that to eliminate genre exclusivity on a broad basis at this point would be premature.

8595   I think we put some points on the record as to why we support that but to also emphasize that there actually is a process in place for those who want to challenge on a genre-by-genre basis a nature of service, and there are criteria that the Commission established for that back in 2008 at a hearing on BDU and specialty.

8596   So for us in the short term, just to kind of wrap up the answer, it's the nature of service minor modifications and conditions of licence that are most important for us to enable us to respond more closely and be more resonant with our audiences depending on the service.

8597   COMMISSIONER MENZIES: Okay. I was just wondering -- it's very difficult to do this quickly and I am not trying to make it more complicated than it needs to be.

8598   But when you talked about MuchMusic it crossed my mind that whether you oppose a music video station coming in or not, it is helpful to inform the discussion, but at the end of the day staff makes a recommendation.

8599   It struck me that whether you like it or not and whether you say you're okay with it actually ends -- it's not entirely irrelevant, but the final decision is an analysis made by staff.

8600   I was wondering if there was anything reasonable that could be suggestions that you might have -- and I wouldn't ask you to do it right now -- regarding something that could be written in to that extent that gave staff something to work with in terms of the flexibility that we all agree you are willing to give somebody who wants to get into a business that you have decided is a bad business.

8601   MR. BRACE: Thank you for that, Commissioner.

8602   First of all, we obviously respect the Commission and their ability to make the decisions. We offer our input and to the best of our ability make our arguments, but we fully acknowledge that it is not our decision and never has been.

8603   On your second point, thank you for giving us some time to reflect on that. We would be happy to think it over and to file something as part of this hearing.

UNDERTAKING

8604   COMMISSIONER MENZIES: Thanks.

8605   Just -- I will try to make this quick.

8606   You state, sort of regarding CPE, I guess PNI really -- when you mention "Flashpoint" -- and I can't find the exact phrase here at the moment -- but when we talk about drama and it talks about being sort of culturally reflective, et cetera, et cetera.

8607   I have asked this question sort of through the week, so somebody on staff will win some kind of lottery for the fact I am asking it again.

8608   What is the particularly Canadian cultural value, the distinctive Canadian cultural value that is expressed through "Flashpoint"?

8609   MR. CRULL: Thank you, Commissioner.

8610   COMMISSIONER MENZIES: Which I think is a really good show, by the way.

8611   MR. CRULL: It's a fantastic show and I have reflected on that as well.

8612   Let me start by first saying the Commission, after careful reflection and a lot of thought, has designated the drama genre as particularly reflective.

8613   So, first of all, it fits clearly within that.

8614   Secondly, so then we ask ourselves, is that show and is that genre fulfilling the vision, and I think in this case it absolutely does. It's very clearly shot -- I mean they take great pains. It is very evident that the drama is shot in Toronto and you see landmarks quite frequently.

8615   The cases that this particular force deal with and the outcomes, the fact of law and the judicial outcomes and the perspectives that are created on some of the legal violations are uniquely Canadian, and that becomes evident whenever you watch the way they deal with some of the issues that they are facing.

8616   I would ask Miss Coe to expand probably on that.

8617   MS COE: Actually I also have just an example.

8618   You know, it's also airing on CBS and they are part of the financing. They came on board after we had done an initial pilot and had ordered the first season.

8619   So we often have tussles with them about their viewpoint, as you do on any show when you have more than one financier.

8620   Typically their comments are akin to: We think he's too sensitive; we think you're having too much diversity; we would rather have more guns or more violence.

8621   And we go: That's not our society; that's not what we do; that's not this show.

8622   So, you know, distinctions are often subtle between nations, but there really is a sensibility at play here that I think is infused in that show, and it shows up in our others, "The Listener."

8623   "Degrassi" is a great example. You would never see that show being done in the States in that same way where you have -- anyhow, I could go on for hours and I won't, but thank you.

8624   COMMISSIONER MENZIES: That's good. I just --

8625   MR. CRULL: I think actually you raise, Commissioner, though something that I have spent time probing with my team in my early tenure, and that is how do we ensure that CPE overall, that all of the Canadian programming we do is adding to this uniquely Canadian voice and reflecting values that are Canadian?

8626   I have frequently questioned the premise that PNI is more effective at that than non-PNI CPE. I believe our local news -- and in fact the intent of our local news is to tell global, national and local stories with a local Canadian flavour. I believe that that can be argued as more effective in fulfilling that mission.

8627   I believe that shows like "Marilyn Denis" or "etalk" that we produce, that are also non-PNI CPE, in many cases can be more effective at fulfilling that vision than what a drama or a comedy can be.

8628   So I think you are probing at an area that is a fair area and it is probably why we are so emphatic that forcing above the 5 percent is going to harm other areas of important Canadian content reflection.

8629   COMMISSIONER MENZIES: Which segues kind of nicely to my last question regarding the possibility of -- or discussions about impact of a PNI higher than the 5 percent we have discussed.

8630   If something goes up, something has to go down, and I thought of that in the context of your -- you know, if more money goes to this, less money goes to that, and I am curious as to what that might be.

8631   Given current past trends, that tends to be local news in terms of, if you look at the industry broadly, where they made the most cutbacks recently.

8632   I was struck by, on page 5 of your submission from yesterday, when you talked about LPIF having allowed you on Vancouver Island to continue providing local programming at nearly double the weekly rate required under the COL.

"LPIF is also responsible... [blah-blah-blah]. Without LPIF, at a minimum CTV would have been forced to cancel 20.7 hours of local programming per week and for this reason LPIF must continue long term." (As read)

8633   So it's probably going to become kind of like income tax when it comes in as a short-term measure and 100 years later everybody's wondering what happened there.

8634   Nevertheless, if you had to spend more on PNI, that would put more pressure on things such as local news, which, it seems to me, it then follows that demands for LPIF would be greater or the need for LPIF would be even greater.

8635   I am wondering if we were to go down that road, would we be looking at demands for an increase in LPIF over the next few years? If PNI went up, is that going to lead to LPIF going up is my question essentially or am I joining too many dots?

8636   MR. BIBIC: I don't think you are joining too many dots, Commissioner. I can't say as I sit here today that it will directly lead to a greater demand on LPIF, and that is to be discussed and considered when LPIF is reviewed shortly.

8637   But clearly, if one goes up, something is going to come down, and we would like to probe that with you in the in camera session. We have some facts and figures to bear that out.

8638   And if PNI goes up, I mean news and local news is one category that could go down or other non-PNI non-news Canadian programming that people do enjoy and watch and does convey a voice and in most cases is actually more profitable than PNI.

8639   So that is the Rubik's Cube we have to play with and there are puts and takes and there are many, many, many regulatory levers here, as I am learning, and LPIF might be one of those that we have to pull.

8640   COMMISSIONER MENZIES: Thank you.

8641   THE CHAIRPERSON: Okay, those are all our requirements.

8642   I would ask counsel to read out the undertakings before we go to in camera.

8643   Counsel?

8644   MR. DOUGHERTY: If it would be possible to wait until after the in camera session to read out the undertakings?

8645   THE CHAIRPERSON: Fine.

8646   MR. DOUGHERTY: Thank you.

8647   THE CHAIRPERSON: Okay.

8648   So let's take a break and then go into in camera.

8649   I just want to reiterate what I said on regional programming so that you heard me loud and clear, Mr. Krull.

8650   We do not want to impose anything that reduces your operational flexibility. On the other hand, what you have so far is -- a laudatory intention and a description of what you have done in the past won't cut it. So we are looking for some commitments, okay?

8651   MR. BIBIC: Mr. Chairman, this one has been troubling me all morning. I don't really -- I want to answer the question. I think the direction the questions are going is causing me some concern, but I do want to answer the question.

8652   So is the intention for the Commission to hear all the broadcasters out as to what they are prepared to commit and then that gets baked into conditions of licence?

8653   Because I think we are getting into -- God, this is microregulation, it seems to me. We have an incredible track record, we will provide more information as to all the things we have in development, and now we are fussing about whether or not some Bell Media executives make three trips to Western Canada. I just don't get it.

8654   THE CHAIRPERSON: Well, I did not say that. I said --

8655   MR. BIBIC: Well, that is what I want to understand.

8656   THE CHAIRPERSON: I want to understand what you do. Mr. Krull says, you know, we may not travel, we may go to a meeting or whatever, et cetera.

8657   But on the other hand, I hear the other side. I have heard them all week. I heard them two years ago. I heard them four years ago when you and CTV acquired CHUM, saying --

8658   You know, this is constantly whittled down and being back, and we need some assurance that you pay attention to the regions.

8659   I don't know what you do. You tell me what you do, how you do it, et cetera, but put it in such a way that I can point to it and say this is what Bell does and that is what they will continue to do. It's something concrete here. It's not just lip service to regional protection.

8660   MR. BIBIC: Okay, that's helpful.

8661   THE CHAIRPERSON: Thank you.

8662   Let's take a 10-minute break.

--- Upon recessing at 1053, to resume in camera at 1110

--- Upon resuming at 1234

8663   THE SECRETARY: Okay. We are now ready to resume the public session of the hearing.

8664   THE CHAIRPERSON: Counsel, would you please state the undertakings we expect Bell to fulfil?

8665   MR. DOUGHERTY: Thank you, Mr. Chair.

8666   There are several undertakings and we would ask that you please file these responses to the following undertakings by Wednesday, April 20th.

8667   - Regarding regional production provide a specific commitment that ensures regular contact with the regional producers.

8668   - Second, what additional measures is Bell Media willing to undertake to stimulate regional productions?

8669   - Provide the number, the total number of productions that Bell Media had of obviously Citytv at the time, in development in the regions over 2008/2009/2010 especially those that did not actually make it to the air.

8670   - For ACCESS confirm that Bell Media owns the corporate entity that controls the learning and skills television undertaking designated in the Alberta Government Order In Council.

8671   - And the impact of averaging regional programming hours over a year versus the current obligation.

8672   - For the Bravo service please file a proposal for a condition of licence describing their nature of service.

8673   - File comments as to whether Fashion TV should be classified as a Category B given Bell Media's proposed reduction in Cancon.

8674   - What impact will the increase in described video coming from the U.S. do to the January 2012 implementation of 21st Century Communications and Video Accessibility Act of 2010 have on the costs of described video in your estimates?

8675   - Propose language to ensure flexibility and a nature of service allowing other possible applicants to provide similar, potentially-competitive services for your Category As.

8676   - The profitability of documentary and award show programming and file with us how the profitability of a couple of specific programs are recorded when they are rebroadcast in other Bell Media-controlled services.

8677   - Finally, file with the Commission the expenditures of reality programs that celebrate Canadian talent for the years 2008 to 2010.

8678   Thank you. Thank you, Mr. Chair.

8679   THE CHAIRPERSON: Okay. Thank you. I think that's all for today.

8680   We will meet again -- we will resume at -- what is it, 12:30 -- at quarter to 2:00. Thank you.

8681   COMMISSIONER KATZ: Can I just ask that it be 2008 to 2011, please?

8682   MR. DOUGHERTY: Thank you, Mr. Vice-Chair.

--- Upon recessing at 1237

--- Upon resuming at 1344

8683   LE PRÉSIDENT : O.K. Commençons.

8684   THE SECRETARY: We will continue with the presentation by Rogers Broadcasting Limited on behalf of itself and of Rogers Sportsnet Inc.

8685   Please reintroduce yourself for the record, after which you will have 20 minutes for your reply.

REPLY

8686   MR. PELLEY: Good afternoon, Mr. Chair, Commissioners and Commission staff.

8687   For the record, my name is Keith Pelley, President of Rogers Media, and with me today:

8688   - Shannon Valliant, our VP of Operations and Strategic Development, on the left;

8689   - Alain Strati, our VP of OMNI and Specialty TV;

8690   - and right beside me, Susan Wheeler, our VP of Regulatory.

8691   We are pleased to have the chance to come back and respond to some of the concerns we heard from you and certain interveners.

8692   I think it gives us both an opportunity to have a fair and open exchange on some of the key issues in this hearing, specifically, Canadian program expenditures, programs of national interest, local programming and genre protection.

8693   There was a lot to think about after last week and we have given our proposal considerable thought and looked at a number of possible options. We believe we have a solution that strikes the right balance.

8694   Last week we heard the following concerns from you and certain interveners:

8695   1 - that we shouldn't be allowed to benefit from a group-licensing framework if we don't achieve a 30-percent group CPE;

8696   2 - that we shouldn't be granted a full five-year licence if we are not prepared to increase our CPE targets over the term; and

8697   3 - that you needed some assurance that a lower PNI target will in fact benefit local programming.

8698   Our proposal is aimed at addressing each of these concerns.

8699   Mix does matter. As we explained last week, a 30-percent group CPE unduly penalizes Rogers, based on our mix of assets. Specifically, it requires Rogers to absorb a much larger increase in Canadian programming expenditures than the other groups in this proceeding.

8700   After the benefit of our discussion last week and given the Commission's expectation that we achieve a minimum group CPE of 30 percent, we have come here today to respectfully ask to be taken out of the group-based licensing framework, based on our mix of assets.

8701   While we believe it is a forward-thinking policy that provides large broadcast groups with considerable flexibility and ensures stable funding to Canadian programming, the cost of entry for a group of our size and asset mix is simply too high. The benefits do not outweigh the costs.

8702   By requiring that we adhere to a 30-percent group CPE, you are not only asking us to increase our spending on Canadian programming at a much higher rate than our competitors but you are also asking us to continue to incur further losses on Citytv over the licence term. We simply cannot agree to that.

8703   Instead, we propose licences where the Commission establishes individual CPE requirements on each of our specialty services and Citytv.

8704   In addition, we are proposing that our licence term be shortened to three years.

8705   As we mentioned in our remarks last week, our plan over the next few years is to grow our television division and stabilize Citytv. Based on this plan, we think our group will be in a much better position in the next couple of years.

8706   But why guess? In three years we will both know more. In three years we will be in a better position to evaluate our progress and see where things stand.

8707   It wasn't our intention to come to this proceeding asking for a policy change. It became very clear that the Commission felt we were asking for an exception to the policy by requesting a 25-percent group CPE. That was not our intention.

8708   We honestly believed the Commission's proposed 30-percent group CPE was a preliminary view. This interpretation was reinforced by the Commission's application form, which allowed applicants to propose an alternative to 30 percent should they believe a different target was more reasonable for this group.

8709   If we misinterpreted it, we do apologize, but it is for this reason that we filed detailed financial information in support of our proposed group CPE target of 25 percent.

8710   If we had understood that the Commission was not prepared to consider proposals below 30 percent, we would have applied for a policy change at that time.

8711   A 30-percent group CPE is not viable for us, nor is it symmetrical given our mix of assets compared to Bell and Shaw.

8712   If the Commission does not believe it is possible to keep us in the group-based licensing framework with a CPE lower than 30 percent, we respectfully ask that you make an exception to the policy and exclude us for a three-year period.

8713   Alternatively, should the Commission wish us to remain in the group-licensing framework, we would also be prepared to come back in three years provided we are granted a 25-percent group CPE during that period.

8714   MS VALLIANT: While we are asking to opt out of the group-based licensing framework, we are still willing to make CPE commitments in keeping with the Commission's new quality-over-quantity approach to supporting Canadian programming through expenditure measures.

8715   As we discussed in our in camera session, we believe the Commission can ensure fair and equitable treatment of English OTA stations by imposing a fixed CPE that reflects current spending.

8716   For Citytv this would mean a CPE of 22 percent, consistent with our estimate of Global's CPE for 2011 and close to the CTV 'A' Channel CPE of 24 percent.

8717   If approved, this will amount to a total of $146 million of spending on Canadian programming on Citytv alone over our proposed three-year licence term, an increase of 42 percent from 2010.

8718   We are also willing to uphold the CPE and exhibition obligations, including commitments to independent production, of OLN, G4 and Biography.

8719   We hope the testimony of Victor Lucas, our dynamic production partner from Greedy Productions in Vancouver, demonstrated our commitment and enthusiasm for the creation and promotion of unique Canadian programming like "EP Daily" and "Reviews on the Run."

8720   We are very proud of our small part in Victor's international success. Our experience with Victor is an example of how great programs can be made in any region of the country when broadcasters and producers share a vision of creativity and entertainment.

8721   MR. STRATI: Despite our request to be excluded from the group-based licensing policy, we are also willing to make expenditure commitments to programs of national interest.

8722   Specifically, we are willing to contribute 2.5 percent of total group revenues in Year 1 and 2, rising to 3 percent in Year 3. We believe this is a substantial commitment for our group given our size and programming orientation and one that surpasses historical levels of spending on this category of programming.

8723   Over the next three years our proposal will amount to an additional $7 million, an increase of 49 percent.

8724   The concern we heard from interveners is that we will be performing well enough towards the end of our licence term that we could ramp up to higher levels of PNI. That is why we have proposed a three-year licence term. As Keith said, let's not guess.

8725   As we explained last week, any commitment to PNI beyond 3 percent will come at the expense of our investment in local programming, especially in our western markets where investment is needed the most.

8726   So we certainly understand the Commission's need for some assurance that what we don't spend on PNI, we will spend on local.

8727   We are therefore prepared to agree that if we spend less than 5 percent on PNI, we will direct the difference to local.

8728   Specifically in Year 1 and 2 of our three-year licence term, we are willing to direct an additional 2.5 percent, over and above our baseline spending in 2011, on local programming.

8729   In Year 3, as our PNI commitment increases, we will direct 2 percent to local programming over the established baseline.

8730   This amounts to a minimum $18 million of additional spending on local programming over the next three years, creating new local programming opportunities in each of our markets.

8731   In order to also give you some assurance that these incremental funds will go where they are most needed, we are also willing to commit that at least 80 percent of these funds will be spent outside of Toronto, in western markets, over the licence term.

8732   We hope the testimony you heard earlier this week from Hockey Calgary, Edmonton's Ice on Whyte Festival, Winnipeg Harvest and Toronto Children's Breakfast Club provided compelling evidence of Citytv's local focus and community involvement.

8733   We are very proud to be partners in such worthwhile and community-building initiatives. It goes to the heart of what Citytv is about and we are encouraged to see that it is resonating in all of our markets.

8734   Susan.

8735   MS WHEELER: Mr. Chair, we believe the record of this hearing makes it clear that the genre exclusivity policy is broken and must be modernized.

8736   Last week, Commissioner Cugini asked: Why now? Why look at this now? The answer is very simple. We need to review it now because we have already waited too long. The study we filed with the Commission shows that the genre exclusivity policy has not prevented competition in supposedly protected genres.

8737   Not one of the applicants in this hearing has disputed that. Of course, they have each asked to retain their exclusive access to programming, but they are also seeking greater program flexibility in light of this increased competition.

8738   Again, we believe the domestic genre protection policy was a useful and effective tool for building strong, profitable specialty services. Its work is done. The policy is clearly eroding and as long as the Commission does not act, it will continue to erode in an uncontrolled and unfair manner.

8739   As we explained to you last week, the genres assigned to Category A services are described in very different terms, giving some services considerable flexibility, while others have very little. Some channels are required to focus on their subject areas or demographic. Others are required to do so exclusively.

8740   This kind of variability makes the idea of introducing competition on a genre-by-genre basis very difficult, particularly when it is unclear what genre is being protected. Is programming to women a genre? Is programming to a 50+ demographic a genre?

8741   Three out of the 21 Category A channels owned by large corporate groups don't even have a description of their protected service.

8742   Change is clearly needed now and it is time to start defining the shape of that change. We believe it is a topic that belongs in the vertical integration hearing, but if not then, it should be made a priority as soon as possible.

8743   Until that time, we respectfully request the Commission approve our licence amendments for OLN, G4 and Biography in order to ensure they are on a level playing field with other Category A and B services.

8744   Keith.

8745   MR. PELLEY: Thank you.

8746   Mr. Chair, we considered many options and we believe our proposal is fair and strikes the right balance in addressing key concerns we have heard during this hearing:

8747   - it provides increased contributions to Canadian programming;

8748   - it ensures equitable and symmetrical treatment among all groups;

8749   - it does not unduly penalize a group of our size based on our mix of assets; and

8750   - it provides a mechanism by which the Commission can reassess our commitments in a timely fashion.

8751   A 30-percent group CPE for Bell, Rogers and Shaw is not symmetrical. It leaves our conventional CPE at 28 percent and theirs in the low 20s.

8752   As the Commission is aware, the Citytv, former CHUM/Craig, stations have a history of financial instability and as such have undergone three separate ownership changes since 2004.

8753   We might be biased -- we are biased -- but we feel that Citytv's future in each of its five markets has never been brighter as a result of our ownership and our management. We have invested and lost a considerable amount to turn Citytv around. We are obviously in this for the long run, but we have a lot of work to do.

8754   We believe we have a real chance of making Citytv a strong contributor to the system, but this can't be achieved at any cost. We must be given a chance to stabilize these stations before more obligations are imposed.

8755   We welcome your questions.

8756   THE CHAIRPERSON: Thank you.

8757   I would be lying if I didn't say I was deeply disappointed in what you presented. I thought we had a good discussion last time in underlining your problems.

8758   Now, I don't want to put any figures out that are confidential. Your percentage CPE figures for the years 2007, 2008, 2009, 2010, we discussed those publicly, did we not?

8759   MR. PELLEY: Yes, we did. Yes, I think we discussed them publicly. Did we discuss them publicly?

8760   MS VALLIANT: I believe so.

8761   MR. PELLEY: Yes, I think we did.

8762   THE CHAIRPERSON: And they were: 2007, 31.3 percent; 2008, 32.8; 2009, 29.7; 2010, 32.2.

8763   Now, in light of those, you came to us and said yes, those were our percentages, but we lost money and we can't be losing money at this rate. That's a snap of what you said.

8764   So we kept saying, you know, PNI is one thing, CPE is another. You were above 30 and now basically you want to go down considerably so that you can become profitable, but it is essentially at the expense of CPE, and I asked you to come back and be original and see what we could do.

8765   But opting out and basically, you know, leaving our group policy in shambles was not the solution that I had required.

8766   I mean, CPE, I see your problem. You know, I thought you were going to talk here mostly about CPE and what to do about it. I didn't expect you to come forward and say that CPE at 30 percent, which is below your historical average, is an unattainable goal and so unattainable that you want to pull out altogether.

8767   MR. PELLEY: Well, you can imagine, Mr. Chair, we had significant dialogue about this after our fruitful discussion last time and I think, without going back and rehashing our historical CPE -- which, in 2007, as you know, we inherited a group of losing stations that were failing and costs were high and revenues were low.

8768   But I think we have kind of addressed that, that, you know, unfortunately, for whatever reason -- and we respect the fact that you based the 30-percent CPE on historical -- whether it was a new management staff or whether we hadn't explained that at the time or whether the communication wasn't good, the historical CPE does not reflect where we needed to be.

8769   We made all those changes and in 2011 we have a CPE of 23 percent and we are still losing $15 million.

8770   I think the real point is we would like to be part of the group-based licensing framework. We applaud it. We applaud the actual move from exhibition to expenditures. We think that is going to create compelling content.

8771   But when we sat around and said, but can we literally look at doing that at 30 percent, what kept coming back to us last week in our discussion was that you wanted us to be at 30 percent and we just don't know how to make that work. We looked at it over and over again.

8772   So we thought, okay, so let's try to come up with a solution. Maybe if they take us out of the group-based licensing framework, we don't get the benefits then of having the GBL, we only do a three-year term and we keep the specialty CPE as it is.

8773   And maybe we even give that other option to Bell, Shaw and Corus -- and we all know that they would turn that down pretty quickly -- but that would at least give us some symmetry there.

8774   So we looked at that and then we sat down and said, you know what, at the end of the day, are we really a group? Like are we a group? We're OLN, who has broad distribution, and you have G4 and BIO. Are we really, really a group?

8775   So we thought, if you want us to be part of the group-based licensing framework, we can't get to 30 percent. And we heard you loud and clear, so we thought we would give you an option to allow us to get out of it and to keep the symmetry by having the other option.

8776   THE CHAIRPERSON: But you say you don't want to be part of the CPE and then you say -- on PNI you are basically restating what you stated last week. There is nothing different that I can see here other than it's a three-year term, but you were also starting at 2.5 and you were ramping yourself up to 3.5. So there is not really a substantial change here.

8777   MR. PELLEY: Well, I think there's a couple of things.

8778   First of all -- and I think the three-year term is significant because I think we discussed last time that -- we said that we would grow over the next couple of years and we would be a different organization.

8779   And let's be honest, nobody wants to do a three-year term. Everyone wants to have a five- or a seven-year deal so you can plan your programming and so forth.

8780   So that, we thought was -- that's a significant give, we thought, but we felt that that was something that could benefit both parties, so that we could be evaluated after three years.

8781   And then the other, in terms of our PNI at 2.5, I concur and we discussed why, you know, we are not set up or equipped for PNI. But we heard you also and wanted to make the commitment from local.

8782   So whatever we don't spend in that 5 percent on PNI, we will spend on local. We just feel that we are in a better position to produce local than we are PNI.

--- Pause

8783   THE CHAIRPERSON: Your local would be the same amount of money, but presumably it would be spent on news and local affairs programming, so therefore with the PNI, which is also dear to the creative community because the independent production quota would not apply.

8784   In effect, this would be money spent in-house at Rogers, right, on news and local affairs mostly, I would imagine?

8785   MR. PELLEY: Well, I think --

8786   THE CHAIRPERSON: I mean let's not beat around the bush, that's --

8787   MR. PELLEY: Yes. Well, I think first and foremost, as we talked about last week, our "Breakfast Television" show in Toronto is the one profitable Canadian show that we have.

8788   The other four "Breakfast Television" shows in the West are not. So they need significant investment and we want to get them to the point where they are profitable.

8789   But this is incremental dollars that we would be spending on local. If we went to a 5-percent PNI, we would be forced to scale back some of our local coverage, and that is not where we believe we want to go or where we are actually positioned. So I think it is a commitment to local.

8790   I think if you went around the country and you asked Canadians -- from our perspective -- what would be the best for the system, what is the best that they want to hear, I think they would say local.

8791   We could produce another -- with the dollars to get our PNI -- maybe another drama series or maybe three-quarters of a drama series, but is that better than producing much more local?

8792   I think from our perspective and I think from consumers I think you would say that they would rather hear about their local communities rather than three-quarters of a drama series, which is about what we would have to produce at a 5-percent PNI.

8793   THE CHAIRPERSON: You are right that we said a minimum of 30 percent as a preliminary view, but we then stated absolutely clearly the Commission's intention is not to impose at this time additional obligations on the groups beyond their recent historical expenditures.

8794   Your recent historical expenditures are not at what you are now suggesting, they are at 32, 29, 32. I mean that is where -- I don't know how you could possibly misread this because it was clear what we were doing.

8795   MR. PELLEY: Yes, I know, and this is where, I think, there was some disconnect, and I think the historical expenditures that you based your CPE on were the right numbers, it's just those numbers were when the business wasn't viable.

8796   So that is what has got us in this predicament, is that the historical CPE numbers that were put forward were just not realistic in a viable business. We inherited it. We had to make changes. We had contracts that were already there. So we had to fix the business and we have started to fix that.

8797   You combine that with the recession, which also put the CPE out of whack, then there were a number of reasons why the historical expenditures just didn't make sense.

8798   In those three years, we lost $100 million, and so when we sat down and said -- so that's what brought it to us.

8799   When we started this whole process, Mr. Chair, when we started this, we simply looked at the historical expenditures, we looked at the 30 percent, we felt that it was a preliminary view.

8800   We said: Okay guys, those historical expenditures, they don't work. It's just they don't work. So how do we make it viable?

8801   And then you throw in the fact that our mix -- it's the more specialty you have, the way more advantageous you can take part in the group-based licensing framework.

8802   You combine all of those and we said, you know, what would be fair to us and that we could contribute the best to the system would be a 25-percent CPE. And we heard that this is certainly not what you were looking for.

8803   So we tried to come up with -- to be honest with you, we tried to come up with another solution than what we are bringing forward today.

8804   THE CHAIRPERSON: What was the CPE that you offered last week? Was that 25 too?

8805   MR. PELLEY: It was 25 percent CPE.

8806   THE CHAIRPERSON: Yes, but last week when you came forward with your original proposal.

8807   MR. PELLEY: It was a 25-percent CPE. And at a 25-percent CPE --

8808   THE CHAIRPERSON: Which is lower than your projection for this year?

8809   MR. PELLEY: That is as a group, 25 percent as a group.

8810   THE CHAIRPERSON: Yes, as a group, you are right.

8811   And your conventional TV for this year surely is also much higher than 25 percent?

8812   MR. PELLEY: Our conventional CPE for this year, 2011, is at 23 percent.

8813   MS VALLIANT: And we are losing $15 million this year.

8814   THE CHAIRPERSON: So you are at 23 this year and you are willing to go up to 25 for the next three years is what you are saying?

8815   MR. PELLEY: No, 23 percent is what our conventional CPE is right now. We were prepared to go as a group to 25 percent.

8816   THE CHAIRPERSON: That's what you said on Monday, I know, but today you are telling me you want --

8817   MR. PELLEY: What we were looking for today, take us out of the group-based licensing, give us a CPE on conventional at 22 percent.

8818   And where we got that number was based on the fact that 22 is in the ballpark. I think Shaw is at 22; I think Bell is at 24. It might be at the low range, but without the benefits of having the group-based licence, even though we are small, we still had some benefits of it. We thought 22 percent would be a fair number.

8819   Then keep the specialty number as it is and, as I said, a three-year term, and we would have no benefits of the group-based licensing framework, which is obviously significant for our competitors.

8820   Hence, the reason why this particular offer, although it works for us, is something that I don't believe our competitors would accept.

8821   THE CHAIRPERSON: Are we playing chicken here? What happens if I say no or what happens if we say it is 30 percent for everybody, there has to be symmetry? You know, as I indicated loudly to you, we can talk about the PNI, but CPE is sort of the cornerstone of this.

8822   MR. PELLEY: Right.

8823   THE CHAIRPERSON: Are you going to sell City? Are you going to get out of the broadcasting business?

8824   MR. PELLEY: No. I think -- no, we are not having a game of chicken, but I think at a 30-percent CPE, and when you look at -- okay, so let's look at this.

8825   City was purchased for $400 million, $100 million then for a building. They have put $600 million on it. Now, even based on a -- based on a 25-percent CPE, I think we start to make, I think it's about $13 million in year 7.

8826   So if you think about that $600-million investment to $13 million, you probably -- I was saying to Shannon over breakfast this morning, you probably could put that into treasury bills and do better.

8827   We are committed to City. It is a transitional stage, but at the same time, at a 30-percent CPE, we would have to evaluate how much we want to invest and how much attention we want to give to this particular core of the business.

8828   When we look at, you know, are we better off being a stronger player in the digital space? You know, is publishing, where all our magazines are Canadian and we are great contributors to with the likes of Macleans and Chatelaine and Flare, is that an area that we should focus on?

8829   I just think that if it's at 30 percent, when it doesn't become viable, then is it really worth investing in?

8830   So I don't think we are playing -- to be honest with you, Mr. Chair, I don't think we are playing chicken. We are just giving you the reality. We are just looking at it and saying here is the reality of the business.

8831   And right now all we are talking about really is financial. The other key component of the whole group-based licence, which is our mix of assets, we can't have the advantages that --

8832   Like I listened this morning to Bell Media and, you know, you can listen to them, and what they have contributed and the programs that they have done, it's something that we want to aspire to do. We are not equipped to do those programs right now, but it is certainly something that we want to build and we want to get bigger. We are in a transition period and it is going to take some time.

8833   THE CHAIRPERSON: Yes, I mean you clearly want to become a group, you just got 10 Cat 2 licences or something like that from us and presumably if there is something on the market you will buy a specialty channel. And you are part of an integrated group, you need the content for all your multi-platforms.

8834   And we want you to prosper --

8835   MR. PELLEY: Yes.

8836   THE CHAIRPERSON: -- don't get me wrong.

8837   MR. PELLEY: This is not a question of trying to see what we can do to break the success of Rogers or City.

8838   MR. PELLEY: No, I understand.

8839   THE CHAIRPERSON: Okay. Well, I think we will continue this discussion in the in camera part, but first I will pass it on to my colleagues.

8840   Rita...?

8841   COMMISSIONER CUGINI: Thank you.

8842   I don't have a lot of questions for you because I do think that a lot of the answers will come from the in camera session so I just have some housekeeping questions really.

8843   One place I want to start is, did you follow the intervention from the Alberta Producers Association -- I can't remember the name now, AMPIA -- the former AMPIA -- and there seems to be an issue with a shortfall on tangible benefits. That was directed to Alberta as a result of the CHUM City transaction.

8844   MR. STRATI: Commissioner Cugini, do you mean the shortfall in some of the elements that have not been spent yet?

8845   COMMISSIONER CUGINI: That's right.

8846   MR. STRATI: So there are two elements that are sort of unspent or untouched if you will. One of them is the financing sort of fund which I believe is sort of interim financing which protects credit purposes.

8847   We are working with AMPIA. In fact this week -- I don't know if it is, the weeks meld altogether -- or late last week we had sort of finality on the lawyers in looking at that. We are establishing a new fund with Alberta and Manitoba where we are going to pay into this fund the entire amount, the $450,000 or so that is available, and establish a new fund. So we are about to trigger those funds and announce that and we hope to do that soon.

8848   We know we have until August of 2011 to do so, but we had hoped to do it so we could have cleaned it up for housekeeping purposes. We haven't done so yet.

8849   There is also one fund that is another element that is in a variety area for $2 million or so. We are looking at a project that would be able to use those funds. So we do hope that we will meet that deadline for August for payments for both the $400,000 in financing and the $2 million-plus in terms of a program project.

8850   COMMISSIONER CUGINI: At which point you will report to us, once that --

8851   MR. STRATI: Correct, as part of our end of the year.

8852   COMMISSIONER CUGINI: Thank you.

8853   In your responses that you just filed with us yesterday -- and I'm going to turn your attention to described video costs -- you seem to make a distinction -- well, you specify "current original hours".

8854   What do you mean by "original hours" there?

8855   MS WHEELER: So the first chart was under the current regime where it's four hours a week and the original two hours would be original to the service.

8856   COMMISSIONER CUGINI: And the other two are acquisitions?

8857   MS WHEELER: They are repeats.

8858   COMMISSIONER CUGINI: Repeat of the two hours, okay.

8859   MS WHEELER: Yes. Potentially. They could be new as well, but in terms of complying with the requirement.

8860   COMMISSIONER CUGINI: And that's pretty standard that the cost of an hour of described video is $1500?

8861   MS WHEELER: It does range. As we tried to explain, dramas and scripted programming is a bit more involved so it's around 15 to 16 an hour, but if there's less -- if it's unscripted or if it doesn't require a writer to have to rewrite the script for description purposes, the cost will go down, but they are around $1100 in that way.

8862   COMMISSIONER CUGINI: Do you do any of this in-house?

8863   MS WHEELER: I don't believe we have the infrastructure to do it in-house, but I will let Alain speak to that.

8864   MR. STRATI: Depending on the project, Commissioner Cugini, some of it we work with producers and it's described as part of the -- it's part of the budget if you will for the program. That is for very large projects, as you can imagine, some of which we do in-house and some of which we try and work with other efforts. One of them is Accessible Media.

8865   COMMISSIONER CUGINI: Okay. You know, we asked you the question about what would be the impact if we increased it from 50 to 75 and you have provided your estimates here.

8866   When you acquire programming that is non-Canadian, does any of it come described?

8867   MR. STRATI: Currently none.

8868   COMMISSIONER CUGINI: And none is available that you know of?

8869   MS WHEELER: No, not right now. But we do understand that recent legislation in the United States will require U.S. broadcasters to actually start doing a considerable amount of described video programming, in 2012 I believe, January 2012 it comes into effect.

8870   COMMISSIONER CUGINI: Right.

8871   MS WHEELER: So we do anticipate being in a position where we will be able to acquire described versions of the U.S. programming that we import.

8872   COMMISSIONER CUGINI: So of course you have no way of knowing whether or not that is going to mean an incremental cost when you aquire those shows?

8873   MS WHEELER: That's right.

8874   COMMISSIONER CUGINI: Okay.

8875   On to your specialty services. I think Commissioner Simpson is going to go into the details of the nature of service and changes that you have requested, but if I am to understand your proposal this afternoon you are not putting forward any changes to Canadian content exhibition or to Canadian content expenditures that are conditions of license of your specialty services.

8876   Is that correct?

8877   MS WHEELER: That's correct.

8878   COMMISSIONER CUGINI: Okay.

8879   Commissioner Simpson...?

8880   COMMISSIONER SIMPSON: Thank you very much. Thank you.

8881   Back to some stuff we left off last week. I wanted to talk about nature of service with respect to properties, in particular OLN.

8882   I was having a great time listening to the descriptions that were being given to me in response to my challenging the nature of service description and I was hearing words like "adrenaline", "survival", "Chase", "pursuit", none of which appear in your nature of service.

8883   I'm wondering, if these are indeed criteria that are being applied to how you are programming this particular channel, why wouldn't you have come forward with a request to modify the nature of service before starting to use these metrics or descriptions?

8884   MR. PELLEY: Well, I think, Commissioner, those words are my words. They are not necessarily Alain's words so I will let him speak, but the three words were "adrenalin", "survivor" and "adventure" and the key word being "adventure", which is part of our nature of service. So it's almost like the adjectives of "adrenaline", "survivor" are adjectives to describe the "adventure" that you are programming on OLN.

8885   MR. STRATI: That's essentially it. We look at it in terms of, for example, we talk to Canadian independent producers, how do you describe "adventure"? So we start using those words.

8886   So it's really categorizations, examples, amplification of what you are looking for.

8887   COMMISSIONER SIMPSON: Yes. The other day when talking with another group, I think it was with respect to music programming, it started to become apparent to me that a great programming idea when it is originally hatched and sanctified through an application to the CRTC, complete with its description of service, that there is the natural tendency for it to morph, because as you start to get your feet wet in the whole exercise, if it's successful it starts to take on a life of its own. Much like parents bringing up kids, you know, you have a very clear idea of what you want that child to be when they grow up and then as they get older they have their own ideas. I think I truly respect that evolutionary process because it is an evolving form.

8888   But without the rules of engagement, because there are other players in the arena, it's becoming apparent to me that we have to I think look at genre and it's implicability as a whole or to start looking at reapplying some of the standards that started the genre process.

8889   So my question is this: If we were to allow -- it's a two-part question. If we were to allow you to in effect remove the restrictions of your non-Canadian drama programming on OLN for example with respect to feature films, how could you assure us that these changes aren't going to impact the issues of programming diversity within this channel?

8890   MR. PELLEY: Before Alain makes a comment I will just make the overall comment that it's great to have the flexibility, but the networks that are going to be successful on a go-forward basis are going to be very niche focused. So you might deviate a little bit on your nature of service because they have seven or eight different categories, but where you are going to be successful is 80 to 90 percent of your network has to be on that one category.

8891   So we have kind of taken into that word "adventure" and said that's where that category is going to be. Yes, the other 10 or 15 percent might move over, but you can't be all things to all people anymore, it has to be niche. With as many channels as we have and as saturation happens that's even more important.

8892   So maybe you can talk about the drama, but I don't see the drama at all moving away from that adjective of "adventure".

8893   MR. STRATI: Commissioner Simpson, I think what you want to do is, first and foremost -- there are restrictions on our ability to carry drama programming, so first and foremost it is a question of what is going to be the programming mix of OLN.

8894   The mix of OLN is going to be much like it is today, it's going to be a great focus on the new series of "Mantracker" that is starting Sunday with Shane Doan and his brother; it is going to be Les Stroud and his new project that he's working on; it is going to be about some of the characters and departures that are working on new projects; it is going to be about the U.S. shows that we are buying, but we are going to enhance our schedule and look at something, if it comes up and if it makes sense, that will enhance our schedule and deliver something stronger in terms of OLN.

8895   That's sort of how we look at it for programming, it's going to enhance what we are doing, but it's not going to have a significant change. We are going to continue what we are doing.

8896   COMMISSIONER SIMPSON: You are not seeing this as a removal of restriction, as widening the genre, but you are looking at it as a refinement process?

8897   MR. STRATI: I think if you look at other channels in terms of -- I will use History as an example that will carry drama, whether it's a movie or a series, that have elements that are connected and that fit the expectation of a viewer. Like I said, if you turn to OLN and you watched a movie of some kind, or if you watched the show of some kind, you would say "Yeah, that fits with what I get from OLN and that's a great show."

8898   COMMISSIONER SIMPSON: I'm going to ask the question again from a different point of view.

8899   Given that you want to grow your assets -- this has definitely been communicated today that you want to start investing more into television system -- is the removal that you are asking for not running contrary to what I heard your President say with respect to tightening of genre, in that if you want to get into this specialty space at this stage of the game, isn't it to your advantage that the genres are as tight and the rules are applied as strictly as possible to give you the ability to enter into this space?

8900   MR. PELLEY: Yes. Let me -- and Alain can touch on that.

8901   That's what I believe. I believe strongly that the more niche and the more focused you are going to be the better with the flexibility on that other 10 or 15 percent to potentially even bring in new viewers to your channel.

8902   But the more niche you are and the more focused -- and OLN is a perfect example, it used to be a network that was all over the place, it was everywhere, it was from fishing, it had some adventure, it had some reality, it had some amateur sports, but it was 20 percent of everything with nothing where it had an actual brand and I think that's going to be the key on a go-forward basis, things that you could argue were too niche 10 years ago aren't niche enough now, but the flexibility to either bring in new viewers or to allow better ratings and I think the flexibility is still really important.

8903   MR. STRATI: I think he's got it right. I would only say, Commissioner Simpson, that it's a crowded space. There are a lot of channels, there are a lot of options, it's a need to create an identity. You need to create an identity for what you are doing.

8904   I think that's what Keith is talking about niche. You need to mean something, you need to have your programming back that up or else your audience won't follow you.

8905   MS WHEELER: Just philosophically, that's why we are asking for the genre exclusivity policy to be modernized, because we believe the market will require that. In order for the distribution services to want to carry our services and pay us a wholesale fee they will want to be able to communicate to their customers that they do have a niche different service that they want. It shouldn't really matter what's written down in a Red Book as to what that service is about, it's really about what the audience thinks it's about.

8906   MR. PELLEY: You can almost look at it from radio's perspective and how radio now, you know, it's no longer -- there are not 35 rock stations, everyone has a niche and now they have moved into even more niche where its hard rock or progressive rock or '70s or '80s. I think if you look at where television could go from a specialty perspective, it could very well head down the radio world and where the best programmers in the best operators are victorious.

8907   COMMISSIONER SIMPSON: Yes. I'm not struggling with your explanation, I'm trying to figure out how that fits into the regulatory framework we are dealing with now. Because you are sort of saying that -- because you do have the benefit of hindsight -- not hindsight, but being last in to an overcrowded space right now and while others have been dabbling with it you have an opportunity to get in there and sort of rifle shot your opportunities.

8908   It's sort of like what's going on with the beer business, you know, it used to be a mass business and now it's specialty brands. But the one thing about a microbrewery is it's still beer and it still sells to beer drinkers and that is, I think, the conflict.

8909   But let me move on to G4 Tech, which is another property that I have had some issues with in trying to square the circle on where you are going with this.

8910   Given what you have just said, what you are doing with G4 Tech seems to me to be sort of running contrary to the explanation I have heard in that you are using the word "niche" and I'm hearing "environment" or "branding", which picks up on a conversation we had the other day.

8911   But with G4 Tech you are running "The Office" and stuff that's really obviously not technological but it appeals to the similar interests of people who like technology, but it seems to me that it's running a little contrary to what you just said.

8912   Now, is G4 Tech then a bit of an anomaly and to be treated as such or is it another example of your programming philosophy?

8913   MR. STRATI: I don't think it's an anomaly, I think it's consistent with the philosophy. I think it's consistent with the philosophy you will see on other channels in terms of what they are trying to carry.

8914   We talked a bit about this last time, we look at the viewer in terms of establishing a strong primetime lineup, you know, Monday to Friday. That's the key component where we can generate audience and generate viewers.

8915   We look at this shows that we are generating and producing, whether it's our Canadian producers with "EP Daily" and "Reviews on the Run", an American show like "Attack of the Show", a great comedy like "The Office", which is always skews younger, always does better in a younger demographic that is attractive; some of the adult swim content for adult digital distraction, so that there are different things that you can tune into because there are 500 different options.

8916   So what are we trying to build for someone who is -- when you say technology we talk about millennial Generation "Y", 18 to 34, 12 to 24, someone who is interested in technology, the media, the apps, the other elements. What is their media consumption.

8917   Part of it is information based, part of it is entertainment-based. That's sort of what -- that's the envelope of programming interest that they have and what we are trying to deliver.

8918   COMMISSIONER SIMPSON: It sounds to me like you are making an argument for removal of genre to be able to fully go in that kind of a direction, but I will leave it at that.

8919   So I gather what you are saying is you need to do this, that tightening -- getting back to what the original terms of service are is something that you would not want to contemplate with it.

8920   MR. STRATI: Commissioner Simpson, I heard you talk before about what the impact is. We should be clear that there are a lot of services that we are talking about in the Category "A" space that have a lot of viewers. You know, some of the recent successes of some of the shows that have gone on special show the strength of these brands, the strength of their programming that they are generating themselves and also that they are acquiring.

8921   We talk about protection, protection, protection, as if they need protection. In our minds it's really not necessarily about maintaining protection but establishing good, healthy, strong different services and allowing for services to compete in order to deliver, quite frankly, a better service as opposed to worrying so much about protection. I don't think they actually need much protection.

8922   COMMISSIONER SIMPSON: Okay. Just two more questions and then I'm done.

8923   On G4 Tech, you had referenced last week that it was broadcasting award shows.

8924   Could you tell me a little bit more about that and do these shows apply to PNI?

8925   MR. STRATI: Sure, I would be glad to. I'm not sure if the "Canadian Video Game Awards" could apply to PNI. I know they are not on the current list.

8926   I will tell you about how it came about. Victor Lucas has attended to and been part of a very big show here in Toronto called "Fan Expo" in August which G4 is involved in and said to us, "I wanted to give back to the community, I wanted to get involved in the community, I want to start an awards show, I'm looking for partners, would you help to be a partner?" and I said "Absolutely."

8927   So we started -- he started the "Canadian Video Game Awards". It's an industry recognition of the video game production community, it's on a very small scale, very small budget. Given the audience and appeal that Victor has -- because Victor is obviously involved in the show -- it was something that we thought we could help him with and we are glad to do so.

8928   MR. PELLEY: We could probably do -- there are probably several of those. I think that's an hour taped away show at how much money was that?

8929   MR. STRATI: Basically about $20,000.

8930   MR. PELLEY: You could probably do 10 of those or add $20,000 and just do tape delay, but I don't need you can put that in the same sentence as "The Junos" that would generate a $2.4 million or 2.4 million ratings and probably cost you $1 million to produce, or in excess of $1 million.

8931   I don't think that if we applied for the PNI for the award shows I guess we could do the one-offs on the tape delayed basis, but we are not equipped to do the big ones like "The Junos" or "The Geminis" or such based on our distribution.

8932   COMMISSIONER SIMPSON: Okay.

8933   My last question goes back to your presentation at the beginning of the session and it had to do with your proposal to take the equivalency of the two and a half or half of the PNI and apply it to a different form of programming that would be -- I think I remember you saying 80 percent western Canadian based.

8934   Are you prepared at this point to talk about what that looks like or is it something that you would rather talk about in camera?

8935   MR. PELLEY: What the local programming would look like?

8936   COMMISSIONER SIMPSON: Yes. Yes.

8937   MR. PELLEY: In terms of how we would use those dollars?

8938   COMMISSIONER SIMPSON: Yes. Yes.

8939   MR. PELLEY: Yes, we can talk about that.

8940   COMMISSIONER SIMPSON: Okay.

8941   MR. PELLEY: The first and foremost -- and James Haggerty, who is our EVP of operations, his number one priority right now is to take the Breakfast Television shows and make them more viable. We are number one here in -- well in Toronto we are number one. It's the biggest promoted show that we have on the network, our billboards are all across the city. That's not the case in our western provinces.

8942   And not only the promotion, but when we talk about brand identity, Breakfast Television has built the brand identity for the Toronto station and we don't have that same brand identity out west.

8943   The other focus that we need to -- obviously because our competitors have significant dollars to work in local news, that we are going down the road -- I think we talked briefly about it last time -- specials. We don't have those identified at this particular time, we just have the actual category of specials, one-hour specials that we want to do in those respective communities. We need to have some type of an emotional link with the communities that doesn't exist there right now.

8944   COMMISSIONER SIMPSON: Those are my questions.

8945   Thank you.

8946   THE CHAIRPERSON: Peter...?

8947   COMMISSIONER MENZIES: I first of all just want to touch on the report Commissioner Cugini mentioned. I don't need to get the entire answer right now, but if you could address, please, in reply -- you can answer it now if you want -- the issues raised on the report concerning the obligations undertaken from the "A" Channel production fund and the western fund. I think you mentioned that the undertaking was for it to be paid by August 2011, which you indicated that you hoped to do.

8948   I just want to strengthen -- I'm not sure you intended to use the word "hoped" but it was a little softer than the word I was hoping to hear in terms of that you would undertake to have this all cleaned up and have these issues, whatever issues they are, addressed or rebutted or clarified for us.

8949   MR. STRATI: Absolutely. If I said "hope" I didn't mean it to --

8950   COMMISSIONER MENZIES: I know. I don't think you did. It's not really the word I heard, but I thought that's the word that's going to be on the transcript --

8951   MR. STRATI: Sure.

8952   COMMISSIONER MENZIES: -- and it would probably be better to have a better word or just some clarity, because it is -- I mean on the face of it it is a report, but it is a reasonably sad story for those producers whether one is a big fan of regional production quotas or not. There is money promised there. It's not all your fault, it may not be your fault at all, but there is money promised there from funds involving you that people aren't sure whether it was spent or not a nobody can find it.

8953   So it would be good to clear that up because that relationship, particularly if you plan to enhance your emotional ties in your profile in those cities, Edmonton and Calgary, it looks like a relationship that could probably do some work. I'm not asking you to write cheques to them that you don't otherwise own, but it would help.

8954   I'm curious to know little bit more, I do want a little bit of it on the record before we go in terms of your proposal to reinvest in local because, as you say, in some of those cities you are -- I think you just said you don't have the emotional ties with the community that you would like to have. I'm curious to know how you are going to build those ties, whether that means those stations in Edmonton, Calgary, Winnipeg, Vancouver, whether those -- whether you are going to have people on the ground there in addition to the current local staff doing that, because it's very hard -- it's very challenging for companies, given that the distance from Toronto to Calgary is the same as from London to Moscow, to build emotional ties from a distance.

8955   MR. PELLEY: Well, I think, Commissioner, the answer to your question is yes, we will have more bodies, because we are going to create more shows. The talk about creating a daily current affairs show in Calgary or creating a CityLine type show in Vancouver. So we are talking about incremental bodies, incremental shows, to basically start to develop that identity more than we have to date.

8956   Previously when they went and they started to cut all the local in previous years, you start to lose your identity and your affinity and your emotional connection with the community and I think it's something that we need to focus on on a go-forward basis.

8957   COMMISSIONER MENZIES: Another question regarding that.

8958   Forgive me if I have erred here, correct me because there is a lot to read here in a short period of time, but we were talking earlier about your request to be relieved of the burden of, what was it, 100-and-some hours of film.

8959   Now, I can't recall, but just to clarify, were you asking that that be removed completely or were you asking that that be removed and replaced with local special events programming or something like that?

8960   MR. PELLEY: We were asking that it be removed completely.

8961   COMMISSIONER MENZIES: Okay. Have you given any thought to using those hours, if not that same resource, to not necessarily weekly programming or something like that, or even a different number that might help you build those emotional ties to communities through things like provincial election coverage, you know, provincial election debates or election night coverage or municipal elections or any special community events at all?

8962   MR. PELLEY: Well, it's interesting that you mention elections because there was a meeting that we had just last week in terms of where our position is and what should we be doing based on the May 2nd election coming up federally. Is that something that we should be producing.

8963   And it came back from our newsroom that we don't have the resources, we don't have the scale to compete with the likes of CBC and CTV. It was: We should focus on provincial and municipal elections. That's where we can win and they won't actually pay as much attention to it.

8964   So, if that's the way that we can link in, then that is something that we are prepared to seriously look at.

8965   COMMISSIONER MENZIES: Did you want to add anything?

8966   MS WHEELER: Yes. I think what you are asking is whether we are prepared to make exhibition requirements to local, and I think that our expenditure commitment to local will result in incremental hours, we just don't know how many, and we really don't think that is the right direction to go in anyway, because we believe in the new direction that the Commission has set, and really focusing on the quality of the programming, rather than the quantity.

8967   So we think it is a bit inconsistent to commit to both exhibition and expenditures, because then you are limiting the amount or the types of programs that you can actually do, and you are just trying to achieve volume.

8968   COMMISSIONER MENZIES: Sure. I am not necessarily trying to tie you down on a commitment like that, I am just trying to get a broader sense of -- like, you talked about building up, in terms of local production -- you know, investing more heavily, or investing in rebuilding something -- and if you are more comfortable talking about some of that, because it might be competitive information, in the in camera session, that's fine. But I was just thinking about it and thinking, I mean, how much money can you put into the Calgary breakfast show, and how much can you get back from it without doing other stuff. Right?

8969   MR. PELLEY: Right.

8970   COMMISSIONER MENZIES: Because if you are not a breakfast viewer -- I mean, frankly, if I look at your station in Calgary through the evening, there is nothing to distinguish it from, you know, the Spokane 4-plus-1, except that it doesn't have Spokane news.

8971   MR. PELLEY: Yes. You are bang on, and that's a concern. And that's not the case in Toronto.

8972   COMMISSIONER MENZIES: No.

8973   MR. PELLEY: I think we said last time that we take Toronto as a benchmark, and breakfast television is making money, cash in, cash out, in Toronto, and that's a positive.

8974   But we have to take that format -- like, people in Toronto have an affinity with the station. They know the stars, they know the personalities.

8975   And we have just started to grow that even more with adding specials.

8976   So it's something that we need to focus on out west, and right now we haven't because -- I would say that you are right, if you don't watch breakfast television in Calgary, it's another station.

8977   COMMISSIONER MENZIES: It's a very strong brand identity here, but nothing --

8978   MR. PELLEY: Right.

8979   COMMISSIONER MENZIES: It's not there at all.

8980   MR. PELLEY: No, and that's a high priority for us.

8981   COMMISSIONER MENZIES: Thank you, those are my questions.

8982   THE CHAIRPERSON: Suzanne...

8983   COMMISSIONER LAMARRE: Thank you, Mr. Chair.

8984   First of all, Terms of Trade. The CMPA has made a proposal that the Terms of Trade Agreement become a Condition of Licence. What is your opinion on this?

8985   MS WHEELER: Commissioner Lamarre, we don't really believe that is necessary. I think the rationale they used is that they have no recourse should broadcasters walk away from the agreement.

8986   I believe that you have a draft copy of the agreement, and there is a clear dispute resolution mechanism in it, which entertains both mediation and arbitration, and the ability to go to court.

8987   So there clearly is recourse if broadcasters were to breach the agreement and "walk away".

8988   COMMISSIONER LAMARRE: There is recourse to get back on track with the agreement, but if there is not a Condition of Licence, there would be no sanction toward -- no regulatory sanction, if I may use that expression, toward the broadcaster who would be acting as a bad corporate citizen.

8989   Do you have any views on that?

8990   MS WHEELER: I guess that there are no affiliation agreements between BDUs and programming services, and that's not a Condition of Licence either, but there is still regulatory recourse should those negotiations or relationships break down.

8991   And, certainly, the producers have the ability to come to the Commission, express their concern, and the Commission obviously knows where to find us and is able to open up that dialogue with us, should they wish to do so.

8992   COMMISSIONER LAMARRE: Let me turn this question the other way around. If it were imposed as a Condition of Licence, what would be the inconveniences for you?

8993   THE CHAIRPERSON: Just to clarify, I think what the CMPA asked for is that it be imposed as a Condition of Licence, but that it be suspended as long as you don't walk away, the same way as we have it with the broadcasters and --

8994   MS WHEELER: I understand. It is a commercial agreement, so I guess, if it's a Condition of Licence, what constitutes a breach of that Condition of Licence, if we don't renegotiate in a timely fashion that is not provided for?

8995   I guess it really depends on what the Condition of Licence looks like, and I don't believe that they have provided draft language.

8996   But without the certainty of knowing when you are in compliance --

8997   COMMISSIONER LAMARRE: In breach and --

8998   MS WHEELER: -- and when you are in non-compliance with the Condition of Licence, it is a bit difficult for us to really say to you right now whether we are comfortable with it or not.

8999   COMMISSIONER LAMARRE: So what you would be looking at is clarity of what constitutes a breach of the Condition of Licence, and (b) that this breach be a situation that you find reasonable, considering the issue at stake here.

9000   MS WHEELER: Absolutely.

9001   I guess the only second comment that I would make on that, too, is that I am not really clear as to why a Condition of Licence is needed, when we have come in good faith to an agreement with the producers, at the Commission's urging, and we believe that that relationship is on a solid track forward.

9002   If a different situation should arise down the road, then the Commission certainly has the ability to impose it as a Condition of Licence, but I am not sure why you would choose to do that now, before there is a problem.

9003   COMMISSIONER LAMARRE: Okay. I get your point. I'm not saying that I agree or disagree, but I get your point.

9004   Going back to your presentation this afternoon, I just want to clarify a few points. I am sticking to a few words in there, and I want to make sure that I understand properly.

9005   On page 4 of your presentation, at one point in the third paragraph, you say --

9006   First, in the second paragraph you say: "We honestly believed that the Commission's proposed 30 percent group CPE was a preliminary view."

9007   Then, later on you say: "If we had understood that the Commission was not prepared to consider proposals below 30 percent, we would have applied for a policy change at that time."

9008   Let me get that clear. You mean that you would have applied for a policy change for Rogers; hence, an exception for Rogers to the general policy?

9009   MR. PELLY: That's correct.

9010   COMMISSIONER LAMARRE: Okay. Thank you.

9011   I was afraid that you were asking for another policy process from the CRTC.

9012   MR. PELLEY: No.

9013   COMMISSIONER LAMARRE: Okay. I just wanted to make sure.

9014   At the top of page 5 you say that you are still willing to keep up with the Commission's new quality-over-quantity approach through expenditure measures.

9015   May I conclude, then, that you do prefer expenditure measures, rather than exhibition measures?

9016   MR. PELLEY: Okay. The expenditures -- much better for the system. Much better for the system.

9017   Exhibition -- far easier for us to actually get the Canadian content, because you could take a movie and just repeat it over and over and over again.

9018   So if you want higher quality content, then expenditures is the way to go.

9019   In addition, as you grow your revenue, and as we grow, you are going to spend more on Canadian content, as opposed to, if your exhibition is just there, the growth in your revenue is irrelevant.

9020   That's why we applaud the group-based licensing framework, because that part works, and expenditures definitely work over exhibition.

9021   COMMISSIONER LAMARRE: Okay. On page 5, at the bottom of the second paragraph, you are talking about the increased CPE for 2011, and what it would amount to if we were to approve what you are asking for right now, for a three-year licence term.

9022   You conclude by saying:

"It would be an increase of 42 percent from 2010."

9023   I am not sure whether or not you will want to answer this question here, but since you put it in the presentation, I guess it's a fair question.

9024   When you say an increase of 42 percent from 2010, do you mean that by the end of 2014 the yearly expenditure would be 42 percent higher than what it was in 2010, or that through those three years you would have spent 142 percent of what was spent in 2010?

9025   MS VALLIANT: The number is relative to the last year of the licence term versus 2010, to give you a sense as to how aggressively it is growing over that period.

9026   COMMISSIONER LAMARRE: Okay. So it is definitely growth, the expenses of the last year versus the expenses of the first year.

9027   MS VALLIANT: Versus the expenses in 2010, to be clear.

9028   COMMISSIONER LAMARRE: In 2010, the other licence term.

9029   MS VALLIANT: Right, and that's all because revenue is growing so much.

9030   COMMISSIONER LAMARRE: Okay. It's the same thing, then, I would assume, on page 6, when you are talking about the increase in spending on PNI as being a 49 percent increase. That would be the last year of the licence term, if it were a three-year term --

9031   MS VALLIANT: Correct.

9032   COMMISSIONER LAMARRE: -- compared to 2010.

9033   MS VALLIANT: Right.

9034   COMMISSIONER LAMARRE: Okay. Thank you, that clarifies it for me.

9035   THE CHAIRPERSON: Rita...

9036   COMMISSIONER CUGINI: I have one question. If we accept your opting out proposal, will your CanCon be 60:50 or 55 percent on City?

9037   MS WHEELER: Well, we would abide by the regulations, and the Commission is going to amend the regulations so that it's 55:50.

9038   THE CHAIRPERSON: For all members of group licences.

9039   MS WHEELER: Oh, no, I believe it actually says in the policy that that aspect will apply to all conventional television stations.

9040   COMMISSIONER CUGINI: Who are part of the group licensing framework.

9041   MS WHEELER: No, I don't believe that's correct.

9042   THE CHAIRPERSON: Anyway, we know where you stand.

9043   Thank you. Let's take a 10-minute break before going in camera.

--- Upon recessing at 1457, to resume in camera at 1510

--- Upon resuming at 1632

9044   THE CHAIRPERSON: Okay, we are back on the record.

9045   Counsel, would you please read out the undertakings?

9046   MS DIONNE: Yes. Thank you, Mr. Chairman.

9047   I have four undertakings and I would ask that you file the information by April 20.

9048   File comments on the issues raised in the Nordicity Report concerning the tangible benefits obligations towards the "A" Channel Production Fund and the Western Fund;

9049   refile your aggregate financial projections showing the impact of increased CPE spending on total revenues;

9050   file the impact of an incremental spend of $1 million on Canadian programming versus on U.S. programming and what that would do to your revenues; and

9051   please file an impact analysis if your Category "C" sports stations were brought into the group CPE calculation.

UNDERTAKING

9052   Thank you.

9053   MS WHEELER: Just as a clarification on four, would we be using the same calculation that was proposed in the policy or are we now using the revised fixed OTA CPE and the specialty?

9054   MS DIONNE: Both. Under both.

9055   MS WHEELER: Both.

9056   COMMISSIONER PENTEFOUNTAS: Haven't they already answered that there won't be any impact on the revenues, it's strictly -- the revenue stays the same, it's the profits that change when you spend $1 million on Canadian as opposed to 1$ million on foreign.

9057   Is that correct?

9058   MR. PELLEY: Yes, correct.

9059   COMMISSIONER PENTEFOUNTAS: Is that a necessary -- is that redundant at that point since they have already --

9060   MR. PELLEY: It's not, but we could give you clarity on it and examples and further elaborate on it, if you would like.

9061   COMMISSIONER PENTEFOUNTAS: But basically we got the answer, okay.

9062   MR. PELLEY: That's correct.

9063   THE CHAIRPERSON: Okay. Thank you very much.

9064   I think that concludes our hearing for today.

9065   What time do we start tomorrow morning?

9066   THE SECRETARY: Nine a.m. tomorrow morning.

9067   THE CHAIRPERSON: Okay. Thank you.

9068   MR. PELLEY: Thank you.

--- Whereupon the hearing adjourned at 1634, to resume on Friday, April 15, 2011 at 0900

REPORTERS

Johanne Morin

Jean Desaulniers

Monique Mahoney

Sue Villeneuve

Date modified:

2011-04-14