ARCHIVED - Transcript, Hearing 22 June 2011
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Volume 3, 22 June 2011
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
To review its regulatory framework relating to vertical integration. Broadcasting Notice of Consultation CRTC 2010-783, 2010-783-1 and 2010-783-2
140 Promenade du Portage
22 June 2011
In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.
However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing.
Canadian Radio-television and Telecommunications Commission
To review its regulatory framework relating to vertical integration. Broadcasting Notice of Consultation CRTC 2010-783, 2010-783-1 and 2010-783-2
Konrad von FinckensteinChairperson
Stephen MillingtonSenior Legal Counsel
Eric BowlesLegal Counsel
Stephen DelaneyHearing Manager and Senior Advisor, Broadcasting
140 Promenade du Portage
22 June 2011
- iv -
TABLE OF CONTENTS
PAGE / PARA
14. Shaw Communications Inc. (int. #55) 480 / 2643
15. MTS Allstream Inc. (int. #64) 549 / 3019
16. Astral Media Inc. (int. #29) 575 / 3214
17. Writers Guild of Canada (int. #22) 614 / 3472
18. Directors Guild of Canada (int. #42) 622 / 3510
19. ACTRA National (int. #46) 630 / 3549
20. Canadian Conference of the Arts (int. #49) 639 / 3584
21. Canadian Association of Public Educational Media (int. #38) and Société de télédiffusion du Québec (Télé Québec) (int. #7) 678 / 3833
22. Channel Zero Inc. and CHEK Media (int. #59) 704 / 4059
- v -
PAGE / PARA
Undertaking 507 / 2791
Undertaking 532 / 2924
Undertaking 602 / 3379
Undertaking 611 / 3436
Undertaking 612 / 3450
Undertaking 703 / 3972
Undertaking 717 / 4059
--- Upon commencing on Wednesday, June 22, 2011 at 0900
2639 LE PRÉSIDENT : Commençons, Madame la Secrétaire.
2640 THE SECRETARY: We will begin today with the presentation by Shaw Communications Inc.
2641 Please introduce yourselves for the record, after which you will have 10 minutes for your presentation.
2642 Thank you.
2643 MR. SHAW: Thank you.
2644 Good morning, Mr. Chairman and Commissioners. I am Brad Shaw, CEO of Shaw Communications.
2645 I am joined by:
2646 - Peter Bissonnette, President;
2647 - Paul Robertson, Group Vice-President, Broadcasting and President of Shaw Media;
2648 - Michael D'Avella, Senior Vice-President, Planning; and
2649 - our regulatory team: Jean Brazeau, Ken Stein, Michael Ferras, Cynthia Rathwell, Charlotte Bell and Dean Shaikh.
2650 Shaw welcomes the opportunity to discuss the tremendous benefits of vertical integration. Specifically, there will be more choice and innovation for consumers in a highly competitive environment.
2651 In fact, we are now operating in the most intensely competitive environment in the history of the broadcasting system. There are hundreds of licensed programming services that provide content on conventional, pay and specialty services. There is intense competition amongst cable, DTH, IPTV, over-the-top and online providers.
2652 Canadians are the winners. Investment and innovation by strong Canadian companies will drive the continuing success and competitiveness of the Canadian broadcasting system.
2653 To satisfy the demands of our customers, Shaw has invested $7.5 billion since 2000 and we spend approximately $800 million each year to build and improve our network. Last year, we spent an additional $2 billion to acquire Shaw Media.
2654 The regulatory certainty provided by the Commission's framework introduced in Public Notice 2008-100, the Group-Based Licensing Framework and Diversity of Voices, allowed Shaw to confidently proceed with our acquisition. We assessed the investment risks based on a framework that recognized and even encouraged the benefits of vertical integration.
2655 The Commission approved our acquisition because it served the public interest. Now, we are doing even more to serve Canadians and strengthen the entire system.
2656 MR. BISSONNETTE: Consumers are relentless in their demands for more choice. We have embraced change and we are responding to rapidly evolving customer demands in a very competitive environment.
2657 For example, in March we launched the Shaw Plan Personalizer. Our customers can now build their own cable, Internet and home phone plan based on their specific needs.
2658 In May, we introduced the Shaw Gateway, which leapfrogs the competition and revolutionizes our customers' home television experience by offering the technology platform for the integration of traditional and future television services, including DLNA, IPTV, MOCA, QUAM and DOCSIS capabilities.
2659 We have built new Internet plans to satisfy our customers' demands for choice, transparency, value and performance. This month, after customer consultations in 34 communities across our serving area, we launched affordable Internet packages with speeds up to 250 Megabytes per second.
2660 Shaw High Speed Internet customers will see their monthly data levels increase from 60 to 125 Gigabytes per month without any increase to their monthly bill. Over 1.8 million Shaw Internet customers will also be able to choose Internet plans with unlimited capacity.
2661 We are also undergoing a major upgrade of our network. Over the next 16 months, we will convert analog tiers to digital. We are removing all the analog traps. The upgrade will triple our network capacity.
2662 Through this investment we will have increased capacity to provide a greater variety of on-demand television programming and Internet speeds of 500 Megabytes per second with 1 Terabyte of capacity. This actually encourages even more competition from new media broadcasting.
2663 With both our network upgrade and the launch of our new satellite, we will have significant capacity to serve both our cable and our direct-to-home customers. This means adding new services, including independent programming services.
2664 Since our acquisition of Shaw Media, we have already launched the Pet Network, Silver Screen Classics, Movieola, AUX and BiteTV, and this is just the beginning.
2665 MR. ROBERTSON: We are meeting consumer demand for TV everywhere by making our content available on iPhone, iPad and VOD. We are also committed to exceptional Canadian content through the support of independent producers.
2666 In May, we announced that Shaw Media has 15 new scripted Canadian dramas planned for next year, more than any other Canadian broadcaster.
2667 We have delivered record audiences with homegrown productions and partnerships, including "Rookie Blue" and "Lost Girl." Upcoming titles include "Combat Hospital" and "Titanic." Indeed, "Rookie Blue"'s success in its first season means that it is returning to ABC and Global along with "Combat Hospital."
2668 Our recently completed Terms of Trade Agreement will provide the basis for future collaboration with independent producers.
2669 We are committed to strengthening our news offering. In Toronto, "The Morning Show" will launch in August. It is the first of five new morning newscasts that will redefine local morning news across the country.
2670 We have also expanded our morning news shows in both Calgary and Edmonton to seven days a week and we are extending "16x9," our successful weekly public affairs program, to one hour from its current 30-minute format.
2671 We are also in the process of developing an Ottawa-based Sunday morning national affairs program to premier in the fall.
2672 Shaw Media is demonstrating leadership in the industry and we are pursuing a strategy that puts Canadian content front and centre. All this is reflective of a policy framework that is working.
2673 MR. STEIN: Our main concern in this proceeding is that after Shaw relied on the certainty provided by the Commission's comprehensive and positive existing framework interveners are now proposing new restrictive and unnecessary rules that will undermine our customer focus, as described by Brad, Peter and Paul.
2674 We suggest that the Commission should consider two principles when assessing the merits of various proposals put forward by interveners: flexibility and symmetry.
2675 First, flexibility.
2676 In recent years, the Commission has demonstrated leadership by gradually decreasing the regulatory burden and increasing reliance on market forces.
2677 In Public Notice 2008-100, the Commission stated that, and I quote:
"...a new reality must be faced. New media and the rapid evolution of related digital technologies require the Canadian broadcasting system to be regulated in a more flexible way to permit it to continue achieving the objectives set out in the Broadcasting Act and to retain its relevance for and connection to Canadians."
2678 We agree. We see no reason to rewrite this balanced and forward-looking framework that has yet to be fully implemented.
2679 Many interveners are suggesting that the Commission should turn back the clock to introduce a new set of codes and regulations. This would completely reverse the progress achieved over the last decade.
2680 Secondly, regulatory symmetry.
2681 This means ensuring a level playing field among over-the-top competitors and regulated broadcasters and BDUs. It also means that rules and safeguards cannot apply differently within the broadcasting system.
2682 Certain BDUs and broadcasters are proposing a set of ex ante prohibitions on conduct and new access rules that would apply only to vertically integrated BDUs. If implemented, we would be severely restricted in our ability to package services, compete and innovate. However, our main competitors would have no such limitations.
2683 MR. D'AVELLA: We would now like to address the other items on the Commission's list of key areas.
2684 Shaw shares the Commission's preference for non-exclusive distribution of content. However, we do not support a blanket moratorium on exclusivity or any other codified prohibitions.
2685 The existing undue preference regime with a reverse onus is a powerful safeguard against anticompetitive activity. We are strongly opposed to the introduction of any new codes. We would be opposed to a regime that expands reverse onus while retaining all the existing ex ante protections and introducing new codes.
2686 The unintended consequences of such a framework will be to stifle innovation, experimentation and our ability to serve our customers.
2687 We also have difficulty understanding the rationale for the extensive safeguards to protect independent broadcasters.
2688 First, the proposals will restrict consumer choice.
2689 Second, the current framework is effective and comprehensive.
2690 Third, the proposed rules would apply only to vertically integrated companies.
2691 With respect to Category B services, we support a 3:1 rule with the additional clarification that at least one of the three unaffiliated services must be independent. This would respond to one of the Commission's primary concerns: access for independents.
2692 However, we are strongly opposed to a 1:1 rule that is based on the distribution of services owned by every vertically integrated BDU. This would be completely unworkable and contrary to the principles of customer choice, flexibility and symmetry.
2693 MR. BRAZEAU: Finally, in response to the additional areas identified by the Commission, we submit that:
2694 - The current dispute resolution regime is adequate.
2695 - We agree with Rogers and Bell that AMPs would require legislation.
2696 - Customer demand should determine the composition of the basic service.
2697 - Finally, the Commission has eliminated the benefits tax in BDU transfers of ownership because of increased competition. There is no reason to reintroduce this policy given the current state of intense competition.
2698 MR. SHAW: Vertical integration has and will continue to enhance productivity, stimulate investment and increase innovation for the benefit of all consumers. Strong Canadian companies will drive the success of the broadcasting system in the digital economy.
2699 We strongly recommend the adoption of a regulatory framework that is consistent with the principles of customer choice, flexibility and symmetry.
2700 Specifically, we submit that the Commission should reject proposals for unnecessary new ex ante codes and safeguards.
2701 Mr. Chairman, we agree with your recent statement that:
"We are in a new digital world now, a world in which consumers are in control. They have access to a wide range of digital platforms and applications ... the Commission's ability to regulate through control of access is very much reduced."
2702 Rather than taking a great leap backward, this new world means boldly moving forward with innovation and a focus on consumers.
2703 Thank you and we look forward to answering your questions.
2704 THE CHAIRPERSON: Thank you for your presentation.
2705 First of all, let me reiterate what I said to Bell. I find it very unfortunate that we sent you out a list of process which suggests the issues that we want to cover and the order in which to cover and you do not see fit to address them in that way. All that means is that your concerns on these specific points that are of great interest to us may or may not be addressed because you chose not to answer them, but obviously it's your choice to frame your presentation as you want.
2706 Now, on page 2, Mr. Shaw, you say:
"We assessed the investment risks based on a framework that recognized and even encouraged the benefits of vertical integration."
2707 That's news to me. What in our framework encourages the vertical integration?
2708 MR. STEIN: We believe that when you set out in 2008-100 and the diversity of voices that you recognize that there was vertical integration upcoming and arising in the system and that we felt that based on those policy frameworks which you had set out that this was not a necessary thing in order to move forward, but was part of the way in which the world was unfolding.
2709 THE CHAIRPERSON: Yes. We recognized that clearly. You would be blind not to see it.
2710 It says "encouraged" here. That's what I was wondering. I didn't think that we ever encouraged or discouraged a vertical integration. We noticed a trend within the industry.
2711 MR. STEIN: Well, we think that the comments made were -- if you don't want to use the word "encouraged", I don't want to put words in your mouth, but I think they did provide a positive framework for what we wanted to be able to do it and they certainly encouraged us.
2712 THE CHAIRPERSON: Okay.
2713 Now, you say that you want to enhance consumer choice and that the proposals put by the various people restrict consumer choice.
2714 One of the issues we put on the table was skinny basic. A skinny basic clearly enhances consumer choice and in large basis reduces consumer choice. Consumer has to buy various channels whether he wants to or not just in order to become your customer. The smaller that package is, the more the customer has the choice to only subscribe to those channels that he wants.
2715 How come you, who have consistently over the years come before me and said our number one concern is consumer choice, consumer -- but giving the consumer this you do not adopt the principle of a skinny basic.
2716 MR. BISSONNETTE: Mr. Chairman, as I mentioned in our presentation, recently we introduced our Shaw Plan Personalizer which provides -- I will call it a chubby basic. It's a basic --
2717 THE CHAIRPERSON: Chubby basic.
2718 MR. BISSONNETTE: It's a basic service that we think contains all of the elements that our customers have told us are important to them, which includes the 4+1, the 9(1)(h) services and, based on the response we have had to that Shaw Plan Personalizer, we have seen our customers actually adopt that approach and they feel that they are now being heard with respect to their ability to pick and pay services, to take services they want and not to take services they don't want.
2719 THE CHAIRPERSON: But the chubby basic, as you call it, still includes more than the 9(1)(h)s and the OTAs -- and the educational channels. It includes some of your own proprietary channels, does it not?
2720 MR. BISSONNETTE: It does but, you know, we have been in this business for some time and I think we understand our customers and their preferences and to sell a basic service that wouldn't include those over the air U.S. 4+1s, it would not be attractive service. From a pricing point of view it may not be that differently --
2721 THE CHAIRPERSON: No, I'm not talking about U.S. 4+1, I'm talking about Shaw proprietary channels that are neither 9(1)(h) nor OTAs.
2722 Are any of those included in your chubby basic or not?
2723 MR. D'AVELLA: Mr. Chairman, the make-up of that package is really driven by competitive forces. It's a response to what we have seen in the marketplace.
2724 THE CHAIRPERSON: It's a simple question: Does it include some of your proprietary --
2725 MR. D'AVELLA: It does. It does.
2726 THE CHAIRPERSON: Yes. Well, that's my whole point, which means the consumer has to buy it if he wants to be a Shaw customer.
2727 All I'm saying is the logic of you selling the consumer is controlled, you recognize that that would mean that you wouldn't force them to buy some of your channels. If they want to they will buy them, and they probably will because you have some fantastic channels. That's not the point. The point is surely the consumer should be in charge, not you.
2728 MR. D'AVELLA: But we do give the consumer the option. He can buy the existing basic package or he can buy the new basic package or the personal TV package as part of SPP.
2729 Nobody is being forced to do anything in terms of what packages they buy here. What we have assembled here is a set of services that we think the vast majority of customers want, based on our research, based on our discussion with consumers through a variety of venues. And this response to what they want and what the competitive forces are pushing us in the market to do.
2730 THE CHAIRPERSON: But that basically says, "I know better what the consumer wants than what the consumer chooses".
2731 I mean if you had a skinny basic, it's up to the consumer. It's absolutely up to the consumer to decide what he wants beyond that basic.
2732 MR. D'AVELLA: First of all, there is no demand for skinny basic. Nobody is coming to us and saying, "Give us the local signals and 9(1)(h) services." That doesn't exist.
2733 What people want is a good initial offering that covers everything -- every genre or every area that you could possibly think about at a reasonable price. They are not saying, "Just give me the local signals for whatever price on a monthly basis." That's not where the demand is. The demand is for perhaps a smaller basic or, as Peter calls it, a chubby basic, not as large as the basic services that we have offered in the past, and let me choose perhaps other thematic packages. I mean that's --
2734 THE CHAIRPERSON: But even if that's true, you want to license for five years, wouldn't it, over those five years -- the consumer demand may very well change and as it changes, you know -- and we have heard a lot and you have heard a lot about cord cutting, cord shaving, et cetera, and nobody knows whether that's true or whether that's just figments of journalists' imagination, but let's say just for arguments sake cord shaving has certain truth to it, then actually skinny basic may be something very relevant.
2735 MR. SHAW: Mr. Chairman, there is no doubt that we are in a highly competitive environment. You know, when we talk about the Shaw Plan Personalizer which continues to give customers choice, for example we gave them full choice and, you know, we have approximately 16,000 customers disconnect phone. You know, would I ever want that? Would we want them not taking Shaw services? Absolutely not, but that's what they wanted. They took a little more internet speed, they maybe took a little TV, but ultimately they get exactly what they want.
2736 Competition drives choice, drives value, and certainly everything we have done is about the consumer and by doing that it forces us -- or allows us to invest comfortably in new technologies or the eris gateway, we talk about new data packs, forward-thinking, allowing competition, allow consumers to choose.
2737 That's what I think really we are here for, is making sure we can facilitate choice and constantly look at meeting the demands of consumers on how they want to access content, where they want to access it and it's moving fast. Technology is driving us in many ways and it's extremely challenging. So we have to continue to invent and reinvent ourselves to find ways to ensure that consumers have that choice, because if we don't have that I truly believe they will find somewhere else to get it. And there's many other alternatives that they can continue to find content and I believe they are starting to look at those things.
2738 THE CHAIRPERSON: I totally disagree with everything you say, the only thing is that to maximize choice the basic should consist only of those channels that you mandatorily have to transport. But we obviously agree to disagree on it so let's go on.
2739 The one other point, you say:
"We are strongly opposed to the introduction of any new codes."
2740 Explain this to me, because what I see is merely new landscape, three or four companies which dominate. There are going to be lots of disputes, we both know that, and unfortunately some of them are going to wind up before us.
2741 What I have been talking to Rogers and to Bell, et cetera, it seems to me if we had a sort of a code -- because it's new, it's a new world that we have with four companies, et cetera, what we expect you to do or what you undertake to do, et cetera, whether you do it in specific instances or principles or something like that, that would make it much easier for you to plan your business and also, for our benefit, if it comes before us to deal with this dispute and saying, you know, "Look, here is the code, this is what -- you tell me, what did Shaw do wrong? It seems to me they behaved perfectly exactly as they have said they would be. These are the principles, they applied them." Now, then we can have a dispute whether the principle is properly applied or not, but it certainly reduces the -- and I would think after one or two cases, you know, if it sets a trend, it would help as a guide to both sides.
2742 By not having it we are looking forward to an avalanche of litigation after September 1 on everything, you know, on MFN clauses, on price, on penetration rates, you name it, et cetera. Some of this is inevitable, this is part of the business, but some of it I think we can easily avoid.
2743 So what's wrong with my thinking here? Where am I going off the rails?
2744 MR. SHAW: Well, Mr. Chairman, I will start and someone might want to chime in.
2745 But, you know, I have the Red Book here and, you know, as we talk about customer choice, well, that's what Shaw is about. We are customer-driven company, everything we do is about the customer. When I look at everything we have to do in the Broadcasting Regulatory Handbook, and now you are asking for a set of codes over top of that, I'm not sure in the best benefit of consumers and Canadians how that is going to continue to drive choice and innovation.
2746 I do understand that there are some concerns and some things in front of the Commission to deal with and I think we will be able to address and talk to some of those things, but we are opposed to a code. We are opposed to more regulation that will affect -- that will inhibit our ability to serve the customer, to innovate and to be creative in the things we need to do that we think Canadians and consumers want. And we believe that competition and customer choice is a big deterrent to anti-competitive behaviour and allowing the consumer that kind of freedom and choice I think ultimately is where we want to go.
2747 Certainly the Commission has been leading in that direction and we fully support that, but we also understand that in front of you are some things that we would be happy to address, but from a code point of view we do not support that.
2748 THE CHAIRPERSON: Maybe the word "code" is -- are we talking about, is it the wording?
2749 You know exactly what -- I am a firm believer in competition, don't forget I was Commissioner of Competition and I do appreciate the benefits of competition, but I also appreciate that, you know, if you have excessive market power, there is an incentive to abuse it, and that comes at the cost of your competitors, and it can ultimately be at the cost of the consumer.
2750 That's why we have competition law, and here, where we have a regulated industry, you basically try to incorporate those competition principles within the broadcasting law.
2751 And we have, over the last four years, systematically tried to liberalize, remove restrictions, make it easier, let you serve the customer better competitively.
2752 But when you have only four major players basically dominating the industry, there is, unfortunately, a possibility that the smaller players may not be able to serve the consumer because they are being unduly squeezed by the giants.
2753 Hence, the idea of when this comes before us -- and I can see it coming before us, having sort of some guiding principles, some way that we can both agree -- that will be published, so that everybody knows this is how it's going to be done.
2754 Let me make a parallel to explain what I mean. Our ruling on net neutrality, or internet management practices, is a perfect example of that. We say: No, we are not going to -- here are the principles that you shall -- you guide yourself.
2755 And when somebody comes before us and says, "There has been a violation," we will judge it, and we will judge it by applying these criteria.
2756 You still have total flexibility to do what you want, but you know what the risks are that you are getting into and what are the potential complaints that you may have to face, and you can either decide to face them or you can try to prevent them by structuring your activities in such a way that you don't --
2757 It seems to me that it's of help to you to -- that particular idea, AMP, was praised by everybody, small and large, in the industry, et cetera. They all said, "That's the approach to take."
2758 And that's what I am trying to talk about here. I am trying to take the uncertainty out of it, and unnecessary litigation, and complaints will arise after September 1 as sure as day follows night.
2759 MR. BISSONNETTE: Let me just say that you know our company, and we know what the existing rules are with respect to how we would deal with distributors, independent broadcasters, et cetera, what our carriage and packaging rules are.
2760 We are in compliance with all of those.
2761 There has to be a certain degree of good faith in this, as well. There is no evidence that any of the vertically integrated BDUs have done anything that would be disadvantageous to any of the other, non-vertically integrated or independent broadcasters.
2762 Let me give you an example. Recently, as you know, there was a big furor over the internet and user-based billing, and irrespective of what was happening at the time, Shaw decided that it was going to consult with its customers to determine what was it that they wanted to do with respect to internet services.
2763 They told us very clearly, in all of those consultations, what they expected of us and what they would like to see in terms of their experience with the internet.
2764 We put our heads together and we said: How can we hit a homerun here with respect to our customers?
2765 So our behaviour -- and we have said this before, Mr. Chairman -- our behaviour is driven by our customers and the demands of our customers.
2766 We came out with a new plan for internet customers for packaging, speeds, pricing, that, frankly, was a homerun in the eyes of our customers.
2767 It went against, if you will, the perceived, sort of cynical outlook that was being portrayed about what we were going to do. What we did was in the best interest of our customers.
2768 With respect to the code, our word is our bond with our customers. We want our customers to want us. We want to provide them with services that actually meet their demands.
2769 So the code is not necessary. The rules are very clear right now. Brad just pointed to this book. The rules on carriage and packaging, and dealing with some of the competitive issues, the affiliate relations, the separation of information, we comply with all of that. I don't know that we need any more ex ante rules to make us do what we are doing anyway.
2770 That's why we are feeling -- we are not trying to be difficult with you, we are just saying that the rules are existing right now. They have come over an evolution of years and years and years of consultations with you and with customers. You have been listening to what --
2771 We just came through a hearing with Canwest. All of these intervenors were at that hearing, as well. You considered their input and you said: We feel comfortable enough that the rules that are in place right now --
2772 THE CHAIRPERSON: I did not say that. I said that I do not feel comfortable, that is why we are going to have a hearing on vertical integration.
2773 That is precisely why we are here, because of your merger and Bell's merger.
2774 At the time I said that a lot of these issues have been raised; I do not want to do them specific to Shaw. That's not the way to do it. Let's do it across the industry.
2775 These are serious concerns, let's have a hearing on vertical integration.
2776 That's exactly how we got here.
2777 MR. BISSONNETTE: Mr. Chairman, you said to us: Here are my concerns. One is exclusivity.
2778 We addressed that with you today. Brad gave you his undertaking that we have no interest in exclusivity on linear channels.
2779 You asked us about a variety of things. I am just trying to think of -- the skinny basic. We gave you our position on that.
2780 We have gone through the list of all the concerns you have outlined, whether it was packaging, fair pricing, et cetera, and we have given you our opinion on them. That forms, I guess, the substance of --
2781 THE CHAIRPERSON: Mr. Bissonnette, the basic point was, we quite clearly recognized that, by virtue of vertical integration and the industry converging into four power centres, a new paradigm was created, and we needed to look at these to see whether they were still adequate or not, or whether they were written for an age which was different.
2782 And one of the issues, which you very well know, is that all ex post rules work in favour of the dominant company, because it has the time, while the complainant doesn't. That's why so many suggest ex ante rules.
2783 That doesn't necessarily mean that I want ex ante rules, but I understand what the issue is. That's why we are here.
2784 Anyway, I have said enough. My colleague, Mr. Katz, is chomping at the bit to get at you here.
2785 MR. BISSONNETTE: We are not being argumentative, we are just letting you know --
2786 THE CHAIRPERSON: No, I just want you to -- I really would like you to take a second look at the whole issue of codes, principles, or what have you. I think it would be most beneficial for us if we had a draft from you of what you think would be proper principles to be applied.
2787 Whether we accept them or not, as one of the four major players, I am very interested in your thinking on the subject. Let's leave it at that.
2788 Len, over to you.
2789 MR. BRAZEAU: Mr. Chairman, we will certainly take that on, but also, just to point out, I am not sure if any new principles or codes will achieve the objectives that you think they might achieve, which is to reduce the tension and the disputes in the industry.
2790 They were with us before vertical integration, and they will be with us after vertical integration.
2791 So I am not quite sure that the objective you expect to be met will be met with a new code or principles.
2792 THE CHAIRPERSON: If they stayed at the same level as now, I would be the happiest person. I just want to avoid an avalanche of complaints.
2793 MR. STEIN: Mr. Chairman, I just want to make one final comment about this, that is, what we believe is that the Commission has, over the past five years, adopted an appropriate framework and a whole set of requirements and rules and preponderance and definitions of digital services for the transition that we will be going through in September.
2794 What we found interesting about the people who are trying to impose more restrictions on us is that, in our marketplace, in the hundreds of communities that we serve, the system has never been stronger, there has never been a more competitive choice available to Canadians, and we believe that the framework you have put in place has helped us to achieve that.
2795 So it seems to us to be ironic that, at a time when there has never been more consumer choice, when there has never been a stronger system, when there has never been more competition, people would then say: Oh, we need rules.
2796 I would say that you have achieved your objective.
2797 THE CHAIRPERSON: Please don't misunderstand me on purpose. I am not talking about that, I am talking about the system functioning. I am talking about making sure that the rules apply to the new universe.
2798 You, yourself, this morning said that the three-to-one rule, which we concocted three years ago -- that it should really be mandatory that one of the three should be an independent, because at that point in time we had not --
2799 That is exactly what I am talking about, trying to make sure that the rules we have apply to the present reality and that they work; not going backwards, not taking away consumer choice, not erecting a new regime, but making sure that the present regime works also in an industry that is dominated by four giants.
2800 That's what it's all about.
2802 COMMISSIONER KATZ: Thank you, Mr. Chairman.
2803 Good morning. I want to broaden our discussion from your views on exclusivity or non-exclusivity of linear channels to exclusivity or non-exclusivity in the new media space.
2804 I thought I took from your submissions to date that you were anti-exclusivity for both new media and old media.
2805 I think I heard someone say this morning that your views on exclusivity are limited to linear channels only, so I will ask the question pointedly: Wireless services, do you believe that exclusivity of wireless services should be permitted or not?
2806 MR. SHAW: Mr. Vice-Chairman, a couple of things on that. Certainly we believe in the betterment of the system and overall -- if you can maximize viewership, we believe in non-exclusivity of linear services. We don't believe in a blanket prohibition. We believe that there needs to be innovation on auxiliary rights, when you look at that.
2807 We think that there is an opportunity for certainly having non-exclusive rights across the board, but when you look at it, we certainly want to be able to innovate and be creative, and that certainly falls into those auxiliary rights, which would be broadband or mobile.
2808 Because I don't think there is a scenario where everything works in this rights world. There are unique scenarios and unique things, and I think you have discussed some over the last few days, with the Olympics and those types of things.
2809 We truly believe in giving everyone access, but we also believe that there is not a perfect world where we could actually have prohibition and everything could be the same.
2810 COMMISSIONER KATZ: Let me ask it in a way that is very specific. If Saskatchewan Telecommunications had the rights to the football team in Saskatchewan, and promoted the games, parts of the games, excerpts of the games on wireless service, do you believe they could do that on an exclusive basis, or do you believe that you should have access to that, as well?
2811 MR. SHAW: I believe that there is, in one way -- from a competitive point of view, I say absolutely, everyone has to have that but, you know, to have innovation creation I believe there has to be some leeway. There has to be some opportunity to develop, to create, to innovate.
2812 And if we can sit here and say it's a perfect world and, no, we can't have that, I truly believe there has to be some opportunity for us to look at what Canadians want and create some exclusive -- or not exclusive but unique content.
2813 I think that's what, you know, Canadians want. I think that's what drives investment and that ultimately, I think, is certainly where we need to go.
2814 COMMISSIONER KATZ: So I'll take that one step further. If Saskatchewan did do what I suggested would you be knocking on our door saying you wanted access?
2815 MR. D'AVELLA: Well, I mean, the big factor here of course is that we are not wireless players and I think a lot of the debate that you have heard over the past few days is really amongst the wireless titans, the three of them.
2816 I think we would not be opposed to those types of arrangements in the sense that if SaskTel thinks that there is a business model that says we are going to get the exclusive rights to the Saskatchewan Rough Riders for mobile they would probably have to buy the team to do that. But if they did that I don't think we would have any opposition to that.
2817 I mean that's part of the flexibility, the experimentation, you know the things that make the mobile world somewhat different from the wired world, if you will.
2818 COMMISSIONER KATZ: Okay. I want to come back to discussing ex ante and ex post and Mr. Stein will remember my discussions about AMPs many times now.
2819 You are obviously in favour of a more flexible regime. Ex post everybody believes is a much more flexible regime to allow for innovation and to deal with issues should they arise after the fact. We have heard all sorts of discussions about standstills and the Chairman has raised the issue of code as well.
2820 But notwithstanding that, if this Commission chose to move to a more liberal ex post regime, what flexibility do you think we need or are you going to tell me we already have it with regard to people who may be found to abuse their rights and there was a breach and there was harm to the system? What would be doing about it after the fact?
2821 MR. STEIN: Well, to this point I'm not familiar with any cases where when you have ruled on a dispute that you haven't received full compliance.
2822 Now, there may be some that are out there but, as far as I'm concerned, when the Commission makes a decision whether we like it or not, which depends on which end of the dispute we are on. But generally what we overall feel, as you set out in the 2005 Commercial Practices policy, is that you know there are so many variables in these things that a case by case approach is the best kind of approach in terms of making decisions about standstills and dealing with it on that basis.
2823 So we have always felt that that was the best approach. There is the issue of timeliness in these things and we are always wanting to cooperate in terms of what the Commission wishes to do in terms of that.
2824 But we just feel that you can't anticipate all the kind of issues that are out there. So rather than trying to set up a set of rules to say, okay, we are going to anticipate every possibility out there, we would prefer an environment where you do have your rules. We feel you have lots of them right at the moment. And where somebody feels that there is an issue then they make a -- they file and then we deal with it on that basis.
2825 But we feel that the -- we feel the process has worked. It hasn't always and we haven't always -- it hasn't always advantaged us and we feel that it's a process that should continue.
2826 MR. BRAZEAU: Just to add, Vice-Chair Katz, specific to AMPs, I think if the Commission is moving into a more -- less regulatory and more ex ante or ex post, sorry, regulatory regime as you alluded to, then having AMPs, I think we would be in support of the Commission looking or asking government to provide it with the regulatory powers to impose AMPs.
2827 I think we have publicly mentioned or stated to that fact that we would not oppose in that kind of regimes the Commission having that power. However, the Commission would have to seek the power from government.
2828 What we are opposed to AMPs is that -- imposing AMPS on top of the current regime that you have. We would like to see a more -- yes, less regulated environment.
2829 COMMISSIONER KATZ: Well, I mean, everything that I have read seems to imply that as you move more to an ex post regime to have more flexibility there is risk of breaches as well unless you have the ability for recourse. The system may fall flat and therefore there is a need for something and I just wanted to get a sense.
2830 TELUS suggested that there was a solution already inherent in the Broadcasting Act. You have said that you don't think that one works either so the question is if you are in favour of a more flexible regime and you want us to move that way, what tools do you believe we need to deal with these types of issues.
2831 So I think I heard you.
2832 MR. BRAZEAU: Yes, and we agree that the Commission can certainly ask for that power of the AMPs.
2833 COMMISSIONER KATZ: Okay.
2834 And in your submission of whatever date it was in April -- the 27th of April -- you raised the issue of symmetrical, I guess, regulation and there is a section, paragraph 58 on video on demand.
2835 I don't want to get into the OTT side of it. You basically suggest that there is a symmetrical -- a need for symmetry between VOD and OTT and you say:
"It's reasonable for the Commission to fully exempt all VOD undertakings from regulation."
2836 Can you tell me which of the more substantive regulations that you believe impede you today from competing on a symmetrical basis with OTT? Like what are the regulations that you want to see changed?
2837 MR. FERRAS: Well, maybe I can start.
2838 I think one of the things we were hinting at there was the Commission has had a VOD policy review and it has standard authorizations and standard conditions of licence for VOD. So it might be one area given the way the Commission has approached it, that the Commission could see about exempting video on demand, so basically take out the licensing framework. That would be the first thing.
2839 And then the second thing is just when we look at what -- the Commission has made some very good changes with respect to the policy, opened up some new opportunities for advertising for example and has put some boxes around SVOD content and that content has to come from linear programming services.
2840 When you look at what over the top is, over the top is really a mix of VOD and SVOD and pay. So we just want to be sure that -- we have always said that VOD is a real strong competitive tool for the Canadian broadcasting system and we have been saying that for a long, long time and it really is. That has become -- it more meaningful every day.
2841 So we are just saying we are happy with what you have done. Given that we have got these standardized approaches and conditions, maybe think about reducing the regulatory burden, maybe move to an exemption status for VOD and think about whether those SVOD restrictions can be loosened up just a little bit.
2842 COMMISSIONER KATZ: Okay. I just need a bit of specificity.
2843 So when you file your final comments can you just prioritize which of the regulations are the ones that are most important from your perspective in serving your customers?
2844 MR. FERRAS: Sure. We would be happy to do that.
2845 COMMISSIONER KATZ: A blanket exemption is one thing but if you can't get a blanket exemption, what are the one or two critical items that you think are inhibiting you from competing effectively and providing customers with the benefits of your products and services?
2846 MR. STEIN: Well, the only qualification -- we did listen to paragraph 59, the specific issues that we were trying to deal with in terms of expenditures, exhibition requirements, advertising and that sort of thing.
2847 But I think the key point here is that it's an unclear world as we go forward is how do we compete with the over-the-top services. The one conclusion that we have come to is that we have to compete with them, that they are going to be unregulated and that we have to be competitive.
2848 One of the prime -- we are going to have a lot of tools which we are not going to talk about here because I don't want to tell them what they are. But we are going to have to have a lot of ability to compete with the over-the-top services.
2849 One of the ways in which -- one of the tools that we have is video on demand. So if we are able to get that flexibility in terms of how we offer video on demand and how we offer it to our customers and how we package it, you know, it gives us a stronger tool to deal with those people whether it's Netflix or Apple or Google or YouTube or whatever.
2850 So that's what we are asking for there. We can certainly give you a list.
2851 COMMISSIONER KATZ: If you come back and say that the order that's in here is the order that you believe should be pursued, that's fine. I just don't know that this order is your order or not.
2852 MR. STEIN: I think we just gave you a total, yeah.
2853 COMMISSIONER KATZ: I just want to know if I have to cut the line somewhere, where am I cutting the line after one, two, three, four or whatever.
2854 MR. STEIN: Okay.
2855 COMMISSIONER KATZ: The issue of confidential data has been talked about as well several times and we heard from -- I guess it was Rogers day before yesterday or yesterday, that they were comfortable with having a Chinese wall up on some of the data-related issues.
2856 What are your views on data sharing and access to data, confidential or otherwise?
2857 MR. D'AVELLA: Well, Mr. Vice Chairman, I think we essentially agree with the Rogers' position. I mean we do have Chinese walls between various parts of the organization.
2858 Our agreements are subject to confidentiality provisions. Paul's agreements are subject to the confidentiality provisions. There is no sharing of that information or data across the BDU side of the business and the broadcast side of the business.
2859 COMMISSIONER KATZ: Would you have situations where somebody would move from Shaw Cable to Shaw Media and take all that intelligence and that knowledge with them as well?
2860 I mean, it's one thing to have data Chinese walls. The issue also is should there be a cooling off period for employees with memory and history as well in order to protect that data?
2861 MR. BISSONNETTE: Well, we do instruct our employees with respect to confidentiality. And so all of the things that we do in terms of our code of conduct within our company preserve that, and it reinforces a need for that.
2862 But, you know, there is not a lot of movement between Shaw Media in those particular positions in our company, but I wouldn't want to say that we would restrict people moving in between those departments. But if they do, they have a responsibility and a fiduciary duty to preserve that information to themselves.
2863 COMMISSIONER KATZ: But they are making decisions on behalf of their new employer, be it Shaw Media or Shaw Cable, with full knowledge of what the marketplace demands and has dealt with as well.
2864 MR. BISSONNETTE: Well, you know, we have Chinese walls, we instruct them with respect to their duties. And I don't know what much more we can do about that. And we haven't had any issues with it.
2865 COMMISSIONER KATZ: Well, you haven't had any movement presumably to date, but that doesn't mean there won't be any in the future.
2866 MR. BISSONNETTE: Well, we have had other parallel examples, as you know, between ourselves and our satellite company where we have been living with that provision for a long period of time with respect to sharing information, and it hasn't been a problem.
2867 COMMISSIONER KATZ: Okay. MFN clauses have been raised as well by a number of folks. You've got a particularly unique situation because you also have got an investment in Corus that you believe is totally arms-length to Shaw as well.
2868 And I guess the question that I would ask is, first of all, to what extent do you believe that MFN clauses should be enforced at all and should exist at all?
2869 And secondly, to the extent they do and should, should this Commission be interpreting an agreement between Corus and Shaw Media as an arms-length agreement between two parties for the purpose of what may come up at some future time regarding mediation, arbitration, given that there is a contract I would imagine?
2870 MR. D'AVELLA: Well, let me start, Mr. Vice Chairman.
2871 You know, MFNs are part of an agreement, they are generally negotiated. In some cases we get them, in other cases we don't. We tend to want to ask for them given the fact that we are the largest BDU and we have to leverage the economies of scale and scope in terms of how we provide these services. So MFNs are a normal course of a contract negotiation.
2872 As between us and Corus, we would tend to ask for MFNs as well. We don't treat them any differently than anybody else in terms of access to programming services and expectations.
2873 And there are various elements in MFNs. I mean, some of them are relatively narrow, some of them are relatively broad. You know, the Americans tend to be a little bit different in terms of what they are prepared to provide.
2874 But at the end of the day they are all driven by, you know, who is the BDU, what size is the BDU, what level of distribution are we getting in terms of that particular BDU? And I think you will find as sort of the industry has evolved is that a lot of the rates and a lot of discussions around rates are really based on volume. And clearly, a company of our size does have a volume advantage, if you will, given the subscribers we serve.
2875 COMMISSIONER KATZ: So you are supporting the notion of continue MFNs for the purpose of vertically integrated companies. So you folks and Videotron or Rogers can enter into an MFN, have rates that are in there that you would then impose upon other parties as well?
2876 MR. D'AVELLA: No. We wouldn't impose rates on other parties. I mean, they are all going to negotiate their own deals. But the MFNs in those particular cases, if we are negotiating with another vertically integrated BDU -- we don't even view it as that.
2877 We are negotiating with the programming entity of that particular organization. And we will ask for an MFN and in some cases we get it and some case we don't. But the MFN is designed to ensure that Shaw, as a distribution undertaking, is getting the best deal in the market.
2878 This is not a new concept, it has existed for years, companies are quite prepared to talk about them, they are quite prepared to give them, if necessary, there are always trade-offs in terms of MFNs. And as I said, there isn't a single term in an MFN that you can say is the only term that matters.
2879 There are a variety of things that cover everything from marketing dollars to, you know, level of distribution, to rates. This is not one size fits all.
2880 COMMISSIONER KATZ: No, I mean, I am sure MFNs have evolved in the last 15 years. But when I was involved in many of these things it wasn't just the quantum of the dollars paid, it was the promotion, it was the advertising, it was the support behind it. And people have different values for that as well.
2881 And so quite frankly, in this level of industry consolidation and vertical integration, I don't know how you capture a lot of these values anyways. So I guess beauty is in the eyes of the beholder. But I am not sure how one would even have to adjudicate whether there is a value placed on the various components besides the actual quantum of the content that is being bought or sold as the case may be.
2882 MR. ROBERTSON: I might just add to the conversation with a little bit. In reading the material by some of the interveners, I think there was a particular instance that they were trying to point to, and it would be when two parts of the same company enter into agreement with each other.
2883 And somehow that MFN creates a floor on the pricing and then everyone else has to come up to that floor because we say well, you know, we have an MFN with our own company.
2884 And we recognize, you know, in our preparation for the hearing of course that any deal that we might make between parties within the same organization doesn't really create an MFN type of pricing floor. That pricing has to be based on the valuation in the market, the other deals that are out there that are arms-length.
2885 So we thought that it was a reasonable concern. And to the extent that an MFN would apply to creating a pricing floor that we would then ask others to adhere to, we wouldn't do that.
2886 COMMISSIONER KATZ: Okay.
2887 THE CHAIRPERSON: Wouldn't do that? Meaning what?
2888 MR. ROBERTSON: We wouldn't --
2889 THE CHAIRPERSON: Are you prepared to -- I mean, some people asked for essentially a rule that MFNs of affiliated companies could not be enforceable against non-affiliated companies.
2890 MR. ROBERTSON: Yes, that is what we are saying. We think that -- because you can really -- any terms within the organization you can make between yourselves, it doesn't really set the terms outside of that organization. So we would agree with that point of view.
2891 COMMISSIONER KATZ: My last question is one of follow-up I guess to the Chairman's conversation with you.
2892 You have now said, I believe this morning, that you are prepared to accept a one-to-one correlation between your programming and an independent --
2893 THE CHAIRPERSON: Three-to-one.
2894 COMMISSIONER KATZ: -- three-to-one, of which one of them should be an independent.
2895 MR. ROBERTSON: That is correct.
2896 COMMISSIONER KATZ: Hypothetically, but I am sure it will happen one day, the Commission goes this way and you decide to buy that independent or Corus decides to buy that independent, do you see a need for a period of time for you to replace that independent with another one?
2897 Obviously it is not going to be instantaneous, but I mean you buy this independent that was recognized and suddenly it is now no longer independent, should this Commission give you three months, six months to replace it or do we just leave it open? Have you thought about that at all?
2898 MR. D'AVELLA: We think it is probably reasonable that there would be a cure period, if you will, that we can -- I mean, as we did in terms of the Canwest acquisition. You recognize that we now own all these affiliated services, we had to add services to get into compliance and we are doing it and we are going to be in compliance by the first of September.
2899 So I think some appropriate time to get into compliance is probably reasonable.
2900 COMMISSIONER KATZ: Okay. You may want to think about what that is when you come back to us as well once you have thought it through.
2901 Those are my questions, Mr. Chairman.
2902 THE CHAIRPERSON: Rita?
2903 COMMISSIONER CUGINI: Thank you, Mr. Chairman. And just one question which Len has set-up quite nicely. On this three-to-one rule, I am now looking at one of the appendixes that was filed by the Independent Broadcast Group and they unfortunately only did Shaw Cable, they didn't do Shaw Direct.
2904 But from their numbers you are already in compliance with that three-to-one rule in terms of for every three that you carry, one will be from an independent. Because from their data there are 24 independent Category B services that you carry and 19 BDU-related.
2905 So I guess I am asking, how generous is it that you say, you know, that you will support a three-to-one rule with the additional clarification that at least one of the three shall be unaffiliated?
2906 MR. D'AVELLA: I am not sure that I have seen that chart. But we are going to be in compliance as of September the 1st, so we are adding probably anywhere from five to 10 services between now and then.
2907 COMMISSIONER CUGINI: All independent?
2908 MR. D'AVELLA: Everything we have launched to date is pretty much -- everything is independent, so the glass box services, the Stornoway services, the ethnic channels group we have launched quite a number of independent ethnic channels. And they seem to be the ones that are really pushing for launches and for access.
2909 So there is a very high probability that to get into compliance in September the vast majority of those are going to be independent.
2910 COMMISSIONER CUGINI: Well, then I might suggest, Mr. D'Avella, in your reply comments perhaps you can take a look at this appendix that I am referring to in the IBG submission and provide us with how your line-up will change if we adopt this three-to-one rule that you support.
2911 MR. D'AVELLA: We would be happy to do that.
2912 COMMISSIONER CUGINI: Thank you very much.
2913 THE CHAIRPERSON: Candice?
2914 COMMISSIONER MOLNAR: Thank you, good morning.
2915 I asked a question of Bell when they were here and I want to ask you the same question. You don't support imposing additional ex-ante rules, neither do you appear to support any change to the ex-post rules that are in place.
2916 However, having read the record of this proceeding, and I am sure many of you have done that, there is some compelling information on the record that says within the vertically integrated companies that exist today there is now some incentives and opportunities that could allow you to can in an anti-competitive manner.
2917 You may never do that. I mean, good Shaw. But it is here in front of us and it is fact that those incentives -- well, I believe it's fact that those incentives and opportunities exist.
2918 So I am interested in what can be done to enhance ex post regulation in case actions were taken.
2919 Particularly my interest is in a standstill provision. I would like your comments on the issues related to introducing a standstill provision into dispute resolution.
2920 MR. BRAZEAU: I think what we have recommended is that we would be prepared to support a reverse onus on the -- in dispute. So I think that is part of the remedy.
2921 On standstill, I think Brad mentioned that a blanket standstill provision we think would encourage some regulatory gamesmanship. For the party wanting a dispute would have absolutely no incentive to not complain to the Commission. So I think the Chair mentioned about floodgates opening up as a result of the current framework, I think if you impose a standstill that will encourage intervenors to come and complain about all sorts of issues and that will, in essence, open the floodgates. So that's why we are little concerned about a blanket standstill.
2922 There has been a discussion about all sorts of different standstill for different circumstances. I think we are certainly prepared to look at it and come back to the Commission and suggest maybe certain circumstances where a standstill might be appropriate. But, again, we are little concerned that it might be a little overkill to have a blanket standstill provision.
2923 COMMISSIONER MOLNAR: So are you saying you are coming back in your final arguments with that?
2924 MR. BRAZEAU: Yes, we will.
2925 COMMISSIONER MOLNAR: Okay. Thank You.
2926 THE CHAIRPERSON: Michel...?
2927 COMMISSIONER MORIN: Thanks, Mr. Chair.
2928 I have a question about the skinny basic service, but first of all I can't resist asking you a more general question.
2929 I have been here now for more than three years, you are always raising the issues of competition and innovation and personally in many cases I bought those ideas you are putting forward and I am a strong believer in market forces, but as far as the exclusivity on new platforms is concerned now you are asking for more regulation where the customers are heading to.
2930 So why all of a sudden, from my personal point of view, are you proposing more regulation about exclusivity, which is, in my mind, a synonym of innovation and competition?
2931 MR. BISSONNETTE: I didn't realize that we were asking for more regulation, I thought we have been asking for less regulation.
2932 COMMISSIONER MORIN: But you are against exclusivity on mobile platforms.
2933 MR. BISSONNETTE: I think we have said clearly that we are not in favour of exclusivity on everything but mobile.
2934 I think yesterday we watched Bell and their reasoning with respect to the unique circumstances of mobile and content and niche kind of content that could be made available to customers that's available in many other platforms, whether it's online, and I thought that their arguments were very good, that there are in fact situations or circumstances where that may be even more innovative and may even create more of a competitive environment where people have some discretion in differentiating their service from the other without disadvantaging Canadians.
2935 So it just seemed to be a very compelling argument with respect to that particular aspect of competition. It didn't seem restrictive, it was an anti-competitive and we thought that it actually had some merit.
2936 We understand why exclusivity on the linear channels doesn't have merit, in fact our company has said that the more the merrier, frankly. If we can get our programming from Shaw Media on all platforms and made available on commercial terms, that's a very, very good thing.
2937 So we are not in contradiction with that with respect to mobile.
2938 COMMISSIONER MORIN: I understand now.
2939 So about the basic service. You know that the basic service is the cheapest -- will be probably the cheapest option to face with the competition of the Netflix, and so on, it will allow perhaps 10 percent of Canadians to have more open access to the system, and I want to know what exactly are you against the basic service?
2940 MR. BISSONNETTE: We are not. So I think we stand on the fact that we try to provide our customers with as much choice as possible and if you -- there certainly seems to be a lot of passion from the Commission on this skinny basic and we are trying to understand it.
2941 Is this basically a pricing issue? Because if it's a pricing issue then what we have said is that it's very difficult for us to provide a basic service that's lower cost than we currently offer our customers, which is a more comprehensive offering.
2942 If it's just being able to only have the selection of the 9(1)(h) services, then we know that there are capabilities to do that in a digital domain, and when we have a digital domain we have more flexibility and it could be considered, but it doesn't seem to be something that our customers have expressed any desire in having beyond the basic services we offer now, which is a -- it's a light basic, if you will.
2943 COMMISSIONER MORIN: Yes, but it will offer them more choices because the services will be limited.
2944 So is a cost inhibition in providing skinny basic or is your opposition only based on business principles?
2945 MR. BISSONNETTE: Go ahead. Let me just say one thing.
2946 You know, if our customers are coming to us and saying, "I would like to have a basic service that is smaller than the current basic service we offer", then we would find a way of doing that.
2947 So we are not trying to be obstinate or difficult here, we are saying that there hasn't been an expression from our customers that they would want a basic service that didn't contain as a minimum the Canadian over-the-air services as well as the 4+1 and PBS services.
2948 If customers really, really want to get just those services, there is actually an ability through an over-the-air antenna and they can get it for free. But we want to provide an entry-level service that has some richness to it and offer it at the lowest cost possible. We think that's what we are at.
2949 Because if we were to, frankly, remove the 4+1 services from the basic, the cost of providing that basic service with all of the fixed costs associated with offering services would be virtually the same, if not the same. So having that 4+1, which is what has driven, frankly, the popularity of our cable services since the beginning of time. It was those U.S. 4+1s that made our Canadian services as popular and as attractive as they are. That's why simultaneous substitution became one of the foundations for the broadcast industry.
2950 COMMISSIONER MORIN: Thank you very much.
2951 THE CHAIRPERSON: Peter... ?
2952 COMMISSIONER MENZIES: Yes. Just a quick follow-up on Commissioner Molnar mentioned about the dispute resolution.
2953 I was struck by your description of the current dispute resolution regime as "adequate" and thought that was probably glowing praise, but what I --
2954 MR. BRAZEAU: We have been through it a number of times so I think it works very well.
2955 COMMISSIONER MENZIES: So thank you for that.
2956 COMMISSIONER MENZIES: I was going to ask the question, what about timeliness in terms of the dispute resolution. Are you open to us setting fixed timeframes for quick resolution of those disputes?
2957 MR. BRAZEAU: Well, we have certainly looked at your good commercial practices decision and the practices and procedure for assisted mediation and I think that's what we were referring to as your toolset here for resolving disputes.
2958 Certainly we can look at timelines that were established and come back to the Commission in our final submission and suggest maybe different timelines if we think those are appropriate.
2959 COMMISSIONER MENZIES: Okay. Thank you.
2960 I wanted to get your views and comments if any on theScore's suggestions yesterday regarding a post ante regulatory change regarding placement of channels that would forbid you from moving them without first moving -- moving their positioning to their disadvantage without making the case to us first that their, or anybody else's, products were failing to build support in the market?
2961 MR. FERRAS: Well, I could start.
2962 We have had some discussions with the broadcasters or the programming services and we understand it's a concern. You know, one of the things we explained to them is that in our world as a hybrid analog digital cable entity, unlike the satellite and telco that's 100 percent digital and your lineup is set in the sense that it's not going through this transition, part of the changes that are happening is as we add capacity and as we moved from transitioning the network from analog to digital there are certain things that have to happen and sometimes we have to change channel locations. We really understand their point of view and we always try, in the letters that we send out -- and I know Michael and his team really emphasize, we make channel changes as infrequently as possible, because channel changes hurt us as well. In fact it's one of the number one complaints that we get.
2963 As we move forward, though, and we do complete our transition into digital things will be a lot more settled and certain and so we really see the need to change channel placement as dissipating and going down.
2964 So that's just one comment that I would offer.
2965 COMMISSIONER MENZIES: Okay. Thank you.
2966 I would also like a comment on -- I expect at least some of you have read it -- Cogeco's submission -- they will be appearing tomorrow, but their written submission -- regarding the fear.
2967 Reading through a lot of the submissions by people, there is not a lot that points to something that's been done that's bad; there's a lot that points to motive and opportunity, all right, and that creates fear, because when entities get big people are afraid that that will be used against them, they will get squashed by the financial power, the legal resources, et cetera. In their summary they point to the fear of market squeeze, they also point out that it's recognized under the Competition Act as discriminatory behaviour. But that seems to be the fear.
2968 I mean, what is the most adequate way, in your view, to address that fear from people that they will get squeezed out of the market by structures that are now as large as yours without creating regulations that restrict innovation and creativity?
2969 MR. BISSONNETTE: There is a certain amount of goodwill within the industry right now and I think when we were in front of you a couple of months ago we told you that we take very seriously our responsibility as a vertically integrated BDU and that there was a threshold, if you will, of behaviour that, you know, is something we recognize and we are prepared and we are going to take that very, very seriously in terms of our conduct and establishing relationships, the way we negotiate with the program suppliers.
2970 You know, it was funny when we were listening to the TELUS group and all of the things that they kind of threw on the wall to see how much of that would stick, it was almost coming from a very Machiavellian place. We don't come from that place.
2971 I was saying to Ken the other morning that if I worried about everything that could happen that could go wrong in an elevator, I would never get off the first floor.
2972 So to the extent that we can alleviate any concerns I think you just have to look to our conduct. We aren't doing things -- I mean Cogeco is in the same industry as us and Cogeco buys services from us and to the extent that we can have that as a positive kind of relationship, that's what our objectives are. It's not to squeeze people out of the competition, it's not to do things that are Machiavellian, things that we can't even dream up.
2973 MR. BRAZEAU: Just to add -- and Brad may want to add here -- this market is truly -- I mean we are looking at this market through a different set of lenses than some of the intervenors.
2974 We talked about four competitors. Look at any other market in Canada, they would be happy to have four competitors. We are facing new competition from IPTV providers, we are facing even stronger competition from over-the-top providers. This is a truly competitive marketplace and that is the best safeguard for all of the intervenors and all of the participants in this marketplace.
2975 Brad can speak to the amount of competition we face and the challenges we face because of that competition and that's what really will provide the guarantees for all of them.
2976 MR. SHAW: Yes. There is no doubt the competition drives all our decision-making from what the customer wants.
2977 As Peter mentioned a little earlier, when you look at the digital network upgrade or what we are doing in data plans, those are hundreds of millions of dollars in decision to service the customer to meet their needs and what's doing. So we believe the competitive environment is extremely intense and that automatically will drive your behaviour in a way that I think is fair.
2978 And I must say at the end of the day, you know, the customer needs to choose what they want, what program they want, what services they want. You know, I don't think we can be in a position to know what they want to choose, how they want to choose it and we offer it in as flexible a way as possible and we want to continue to do that. You know, at the end of the day I'm not sure everyone is going to want everything. It certainly is becoming more of a world of fine tuning and finding ways to make sure you can offer services and we are committed to do that.
2979 COMMISSIONER MENZIES: Okay. Thank you.
2980 THE CHAIRPERSON: Steve... ?
2981 COMMISSIONER SIMPSON: Good morning, gentlemen. Just one question to do with signal carriage.
2982 There is going to be a significant amount of debate over desire versus ability with respect to conversion from SD to HD and there has been or will be a considerable amount of expression of concern regarding provision of HD, but not necessarily the carriage of HD. I have been hearing, and reading through the briefings, that BDUs fall back on a capacity issue or a technical issue or quality of signal or capacity issues as an argument for the inability or lack of carriage and I'm wondering if you feel that the reverse onus provision will give BDUs the ability to satisfactorily put their argument forward regarding capacity or technical issues?
2983 MR. BISSONNETTE: Yes, because it is clearly a technical issue. You know, one of the driving forces between our upgrade is to harvest analog capacity to the benefit of more HD services, more video-on-demand and clearly a much greater capacity for internet. As you know, over-the-top services are growing dramatically with respect to using our existing internet capacity and we have to do something about that right now in order to provide the services that our customers are wanting. They want movies, streaming movies and that and we want to make sure that we have the capacity to provide that.
2984 So if the reverse onus would essentially allow us to, in a very, very unemotional, scientific way to demonstrate what capacity we have and what capacity is being used for and what, if any, spare capacity is available, I think we have actually kind of gone through that on the satellite side anyway where we have -- essentially spending $300 million because we have no more capacity to carry HDs. We would love to carry more HDs because it make this more competitive. So it would be quite simply a very matter of fact demonstration of what capacity we have and what would be available
2985 COMMISSIONER SIMPSON: Thank you.
2986 THE CHAIRPERSON: Tom...?
2987 COMMISSIONER PENTEFOUNTAS: A very brief question.
2988 A compelling argument has been made by some of the people submitting briefs to the effect that a company like Shaw, and others, would not mind taking a loss on the broadcasting arm of the business because the real money is in distribution.
2989 How would you respond to that? Blunt and direct and short.
2990 MR. BISSONNETTE: That's not the way we conduct business, that's all I can say, and we won't be conducting business that way.
2991 COMMISSIONER PENTEFOUNTAS: But you are in business to make money, to profit from --
2992 MR. BISSONNETTE: Brad said it very well, you know, when we launched our Shaw Personalizer we recognized that there was going to be some down sides as well. We lost 1,600 telephone -- or 16,000 telephone customers because we gave them the choice to downsize.
2993 So there are times -- but there are good business practices as well.
2994 If you look at the way we offer our services, same day/next day cost us more money, but we do it because that is what our customers would expect from us.
2995 COMMISSIONER PENTEFOUNTAS: So you don't believe in the principle that you are willing to lose money on the broadcasting arm because the real money is in distribution?
2996 MR. BISSONNETTE: We don't believe in at all, it doesn't make sense.
2997 We didn't buy Canwest to lever, if you will, the BDU with respect to that kind of an approach, we bought it to basically make content available across all platforms and all distributors.
2998 MR. SHAW: And certainly the opportunity around that, right, in doing develop -- you know, for us to be able to take Canwest and do what we do. We want to maximize the opportunity for both the Shaw Media side and the distribution side and, you know, we believe that's the fair approach to do it and we will continue to do that.
2999 COMMISSIONER PENTEFOUNTAS: Thank you.
3000 THE CHAIRPERSON: Okay. Thank you.
3001 In closing let me just say this, I don't think you see our problem so let me put it to you as concisely as I see it.
3002 You have made a very eloquent case about the opportunities of virtual integration, your business structure or your intentions and what you are -- as you say, Mr. Shaw, you are guided totally by competition all the time. Fine.
3003 The other side see that, too, but your guided by competition can also mean that you use the enormous power that you have by vertical integration in a way to harm your competitors. Now, you say, "Trust me, I won't do it". Even if I do, they don't. That's the point.
3004 They have come forward with a whole set of ex ante regulation saying basically you have to do something, otherwise we have no chance of survival while you have been liberating and deregulating the system, that's fine if there were lots of people, but now that there are four giants that leaves the rest of us at their mercy. They ask us to impose all sorts of rules that essentially limit your freedom of action and you are against that obviously.
3005 We are somewhat caught in the middle, because while we want you to prosper we also want the independents to prosper.
3006 So what could be a halfway house if you don't want to have a whole bunch of ex ante rules?
3007 That's exactly why I was pushing on you the whole idea of principles, codes, tenets, call it what you want, so that on the one hand you have the flexibility to do exactly what you can to prosper, on the other hand there is some assurance to the other side that you will now use your power only positively, not negatively and if there is a dispute we can deal with it quickly. That's why they want such a thing as a suspension, you know.
3008 And I agree with Mr. Brazeau that can be used for gaming, on the other hand if you have carriage and you have a dispute and you stop carriage you basically put them out of business. So, you know, suspension in such an instance might be one of the remedies, maybe we have to impose it, maybe you automatically offer it, whatever.
3009 But the only way we are going to resolve this without hamstringing you or else saying goodbye to the independents -- because even if you are willing to follow certain principles not all your other competitors might -- is to find some sort of balance, some sort of halfway house.
3010 So I would really ask you to seriously look at that idea and come forward with something along those lines.
3011 MR. BISSONNETTE: We will.
3012 THE CHAIRPERSON: Thank you very much.
3013 MR. BISSONNETTE: Thanks.
3014 THE CHAIRPERSON: We will take a 10-minute break now.
--- Upon recessing at 1023
--- Upon resuming at 1037
3015 THE CHAIRPERSON: Madam Secretary...
3016 THE SECRETARY: We will now proceed with the presentation by MTS Allstream Inc.
3017 Please introduce yourself and your colleagues. You will have ten minutes for your presentation.
3018 Thank you.
3019 MS GRIFFIN-MUIR: Thank you.
3020 Good morning, Mr. Chairman and Commissioners. My name is Teresa Griffin-Muir, and I am the Vice President of Regulatory Affairs at MTS Allstream.
3021 With me today are Pauline Jessome, Senior Regulatory Analyst, and Greg McLaren, Manager of MTS TV Content.
3022 We are pleased to appear before you today. As an independent, regional distributor who built our business model around increasing customer choice, MTS Allstream is well placed to comment on the real effects of vertical integration in the system and what is needed to address what some have called the root of all evil: anti-competitive practices.
3023 The current level of vertical integration represents a paradigm shift for the industry. It also presents opportunity for the Commission to recalibrate the regulatory framework to prepare the industry for today and tomorrow.
3024 Our comments will focus on how to maintain two essential components underpinning the Broadcasting Policy for Canada: diversity and viewer choice. Both rely on fair competition in the system.
3025 Our main concerns track four of the five areas identified by the Commission in advance of this hearing.
3026 First, to explain the significant, system-wide problems with vertical integration, bringing benefits only to the vertically integrated companies themselves;
3027 Second, to discuss the inadequacies of the current ex ante regulatory measures to address concerns arising from vertical integration;
3028 Third, to put forward demonstrable, specific requirements of independent players; and
3029 Fourth, to confirm that the various recommendations MTS Allstream and others have made could form part of ex ante regulation, as well as a code of good business practices applied to vertically integrated companies.
3030 Vertical integration provides greater opportunities for the scope and severity of undue influence to arise. These problems are heightened by the effects of convergence and new platforms in what we refer to in our submission as the new broadcasting industry.
3031 As well, vertical integration can result in cartel-like behaviour and self-preference. Both may be difficult to detect until the damage is already done.
3032 The degree and extent of vertical integration have increased the need for the Commission to put specific measures in place to address the imbalance in market power inherent in a system dominated by large integrators. These measures must address: distribution of programming on all platforms on a non-exclusive basis; reverse onus for all players in the system, including programming undertakings, and vis-à-vis vertically integrated undertakings when a complaint is made by an independent undertaking; no status quo pending dispute resolution for large integrators; and functional separation and confidentiality within vertically integrated programming and distribution companies.
3033 It is also vital that measures be put in place to ensure that independent distributors are able to access content from vertically integrated broadcasters on fair and reasonable terms. Most Favoured Nation, or MFN clauses within or between vertically integrated entities must not be used to disadvantage independent distributors.
3034 While other parts of the regulatory framework may be relevant, these are insufficient to address the anti-competitive threats that vertical integration brings with it.
3035 As an independent broadcast distributor, MTS Allstream needs the ability to compete with vertically integrated companies in order to: continue to operate -- currently there is limited room to manoeuvre and independents are getting squeezed out; and to continue to offer an attractive alternative to viewers, and ensure healthy levels of diversity and competition in the system.
3036 In order for us to achieve this, we are calling for: a regulated basic package; targeted price regulation, including wholesale rate caps and rules to prevent vertically integrated broadcasters from forcing independent distributors to package services in particular ways, or from demanding that distributors provide minimum penetration guarantees; and, finally, transparency in arbitration.
3037 MTS Allstream also supports the Joint Proposal for principles to address issues raised by vertical integration in the broadcasting industry, submitted as part of the written process. These address ex ante principles to establish prima facie undue preference and enhanced enforcement measurements.
3038 We would like to draw the Commission's attention to the fair pricing principles and explain what underpins these.
3039 Large programming services have always exerted considerable leverage in carriage negotiations. However, vertical integration has given them even more leverage. They have access to deeper pockets and the backing of large distributors who, on balance, may prefer a competitor such as MTS Allstream not to have their services at all, or who are willing to extract exorbitant rates for "must have" services. Absent rules preventing it, vertically integrated distributors will always carry their own, and can and will absorb inflated costs.
3040 The result is skewed negotiations in which programming services: expect MTS Allstream to pay a higher fee to pass through the service's costs for HD conversion; expect compensation reflecting a high threshold of viewership demand, when demand is actually much lower; and expect wildly unrealistic minimum levels of penetration.
3041 One might expect that if MTS Allstream did not want these services, we could simply walk away from the negotiation and drop the services. However, to maintain a competitive offering that meets the varied interests of the communities we operate in, we do need a variety of services.
3042 Our point is that this must not be had at any price. There is a need for an objective means to determine value, or to at least ensure that the influence of vertical integration does not exert too much influence on the negotiation.
3043 In the interest of fair pricing and to level the playing field for independent operators, we support the Channel Valuation Methodology approach put forward by TELUS. We also recommend wholesale rate caps for all vertically integrated services to control the anti-competitive vertical integration effect on pricing.
3044 Vertical integration consolidates market power within converged conglomerates. A code of good business practices cannot replace clear regulations, which would provide a transparent framework for vertically integrated companies, although a code could be used to supplement the regulations.
3045 We caution, however, that any code or list must not be considered exhaustive. Anti-competitive practices can take many shifting forms in the system.
3046 We believe that any code or framework should include: a reverse onus of general application for services and distributors alike; and protection of competitive business data through specific confidentiality measures within vertically integrated entities.
3047 These and other measures are required to counter the tendency of vertically integrated companies to self-deal.
3048 Thank you. This concludes our formal comments.
3049 THE CHAIRPERSON: Thank you.
3050 I am trying to understand paragraph 18. You say that you support the Channel Valuation Methodology approach put forward by TELUS. Then you say, "We also recommend wholesale rate caps for all vertically integrated services to control the anti-competitive vertical integration effect on pricing."
3051 Explain that second sentence to me. What exactly do you have in mind there?
3052 MS GRIFFIN-MUIR: I guess what we are looking at is really a maximum that can be charged for a certain kind of programming.
3053 We had actually, amongst ourselves, tried to figure out a way to equate the value of the service with the level of viewership, as the TELUS model does, but to still leave open some room for negotiation.
3054 We looked at the potential for a wholesale rate card, or some sort of limit to be placed on what could be charged for certain services, but while we discussed that -- it becomes almost that, once you create the rate card, the rate card becomes the cap, in other words.
3055 THE CHAIRPERSON: You are worried about vertically integrated companies charging too much for their broadcasting services that you want to carry.
3056 MS GRIFFIN-MUIR: That's correct, yes.
3057 THE CHAIRPERSON: These rate caps would be established by whom, by us?
3058 MS GRIFFIN-MUIR: Yes, by the Commission.
3059 THE CHAIRPERSON: So we are basically getting back into pricing.
3060 MS GRIFFIN-MUIR: That's right.
3061 THE CHAIRPERSON: That's the only way you can see to protect yourself?
3062 MS GRIFFIN-MUIR: Greg can discuss it further, but I guess that some of the difficulty comes with the way negotiations -- what we have experienced thus far and what we are beginning to see in negotiations for programming.
3063 THE CHAIRPERSON: Like TSN, which was mentioned yesterday by Bell.
3064 MS GRIFFIN-MUIR: Right.
3065 THE CHAIRPERSON: But they made it quite clear that they intend to increase the price for TSN.
3066 MS GRIFFIN-MUIR: That's quite clear, yes.
3067 THE CHAIRPERSON: So, to follow your suggestion here, we would establish -- we would look at TSN and, using the criteria of the TELUS model, say that the wholesale rate for TSN should be X.
3068 MS GRIFFIN-MUIR: Should be X, or should not exceed X.
3069 THE CHAIRPERSON: Or should not exceed X, yes.
3070 MS GRIFFIN-MUIR: Yes.
3071 And there is the TELUS model or some other model that links viewership. There are models on the record of the proceeding.
3072 We looked at other things. We looked at the distribution or sharing of revenue between the distributors and the programmers.
3073 THE CHAIRPERSON: Is that for all their channels, or only for certain "must have" ones?
3074 MS GRIFFIN-MUIR: We looked at it in terms of all channels, but it could be for certain channels. That would be more contentious.
3075 THE CHAIRPERSON: How do we get there?
3076 We would have to have a rate hearing for integrated companies to set basic rate caps for all of their own channels?
3077 Is that what you have in mind?
3078 MS GRIFFIN-MUIR: If, for example, the TELUS model were acceptable, it would create the range that we are looking at, so that it would really be accepting a specific model to determine pricing.
3079 MS JESSOME: But it would only come into effect if there was a dispute that you couldn't resolve through negotiations, come to an agreed-upon rate.
3080 The TELUS model would form the basis for coming up with what the cap should be in that situation.
3081 You wouldn't have to sit down with every service today and say, "This is what you can charge as a maximum for each of these services," it would only be in the case where parties couldn't come to an agreement.
3082 THE CHAIRPERSON: So we would ordain that in the valuation of channels, for the purpose of negotiation between a vertically integrated company and independent distributors like this, the TELUS model shall be used.
3083 MS JESSOME: In the case of dispute, yes.
3084 THE CHAIRPERSON: And hopefully that is enough to get you to come to some agreement.
3085 Failing that, you would come to us.
3086 MS JESSOME: Yes.
3087 THE CHAIRPERSON: In that case, if I understand your thinking, we would actually -- let's say, for argument's sake, it's TSN -- we would then set a rate cap for TSN that should not be exceeded.
3088 MS JESSOME: Correct, yes.
3089 THE CHAIRPERSON: And that would, then, serve for the whole industry.
3090 MS JESSOME: Yes.
3091 THE CHAIRPERSON: That's the model you have in mind.
3092 MS JESSOME: Correct, yes.
3093 THE CHAIRPERSON: You don't at all comment on the last question which we had about benefits on the transfer of BDUs.
3094 MS GRIFFIN-MUIR: I'm sorry, I --
3095 THE CHAIRPERSON: In our process letter, which you, like most people, seemed to ignore, we said: Re-imposition of payment of benefits in case of transfers of ownership or changes in control of distribution undertakings.
3096 One of the specific notices added: Should we, in light of vertical integration, reintroduce benefits being payable on this.
3097 If you don't have any position, that's fine; or else you can do it in your written reply.
3098 MS GRIFFIN-MUIR: We opposed the imposition in our original comments, but we will --
3099 THE CHAIRPERSON: Why?
3100 THE CHAIRPERSON: Okay. You don't have to read it out if it's written.
3101 Tom, over to you...
3102 COMMISSIONER PENTEFOUNTAS: Good morning. You mention at Point 8, paragraph (c), no status quo pending dispute resolution. Why are you against status quo pending dispute resolution?
3103 Or, what is your position?
3104 MS GRIFFIN-MUIR: I guess what we are concerned about is the programmer exerting influence in terms of pulling signals, or not allowing us to air the programming while we negotiate the price, or forcing us to go back to the table to talk about something during a negotiation using that particular strategy.
3105 That has actually happened.
3106 COMMISSIONER PENTEFOUNTAS: Okay.
3107 THE CHAIRPERSON: I didn't understand that answer. Maybe Tom understood.
3108 You are distributors. You are carrying TSN, and there is a dispute about TSN. You say: No status quo.
3109 That seems to me to be implying that they can stop delivering TSN until you get a new deal.
3110 MS GRIFFIN-MUIR: Oh, okay.
3111 THE CHAIRPERSON: I assumed you wanted the opposite.
3112 MS GRIFFIN-MUIR: Yes, that's right. That's what I am saying.
3113 COMMISSIONER PENTEFOUNTAS: So you want status quo pending dispute resolution.
3114 MS GRIFFIN-MUIR: Dispute resolution, yes.
3115 COMMISSIONER PENTEFOUNTAS: Okay. You spoke about functional separation and confidentiality within vertically integrated programming.
3116 Aren't the other players in this industry already on board with that issue? Isn't there a separation?
3117 Do you see a problem with that? Do you see it not functioning correctly?
3118 MR. McLAREN: We don't see it today.
3119 This is difficult, because the landscape has changed dramatically in the past year.
3120 Our experience is that changes don't occur over five weeks or five months, but more like five years. The provisions that we see in the affiliation agreements today are different than they were five years ago. There is a lot more attempt -- well, success, frankly, on the part of the programmers to influence our packaging through the agreements, and we don't see that slowing down, and we don't see the integration with BDUs making that any easier for us.
3121 COMMISSIONER PENTEFOUNTAS: I understand, but where does confidentiality fit in?
3122 MR. McLAREN: It is in the interests of both the programmers and the BDUs that we compete with for our packaging to change, and some of the concerns expressed earlier -- what happens if staff move from one entity to the other?
3123 It's impossible to keep that information --
3124 COMMISSIONER PENTEFOUNTAS: Yes, but what can the regulator do about that?
3125 MR. McLAREN: What we are asking for is help in the agreements with a specific term, such as minimum penetration guarantees, packaging partners -- the things that the programmers are asking for today that make it difficult for us to package a service in a competitive way.
3126 COMMISSIONER PENTEFOUNTAS: I am not going to go through the list of all of your requests, but would it be fair to say that you are almost asking that the "free" be taken out of the free market?
3127 MS GRIFFIN-MUIR: No.
3128 MR. McLAREN: No.
3129 COMMISSIONER PENTEFOUNTAS: No?
3130 Because you are asking for an awful lot of constraints --
3131 MR. McLAREN: Yes.
3132 COMMISSIONER PENTEFOUNTAS: -- on the free market here.
3133 MS GRIFFIN-MUIR: Actually, no, I don't think we are asking for the "free" to be taken out of the free market. I think what we are suggesting, or saying, is that the way the market is constructed today, those who have market power can and do and will leverage that market power.
3134 So those without market power need some sort of framework within which they can negotiate. Otherwise, we will be squeezed out of the market.
3135 So either what you are suggesting is that there is no change as a consequence of having four very large vertically integrated distributor broadcast entities, and that's sufficient, or you think there is a role for independents -- which we think -- to give greater choice to the customer.
3136 And in a negotiation where one party is dominant, and also competing directly with you on the distribution side, I would say that there is a need for regulations and guidelines.
3137 COMMISSIONER PENTEFOUNTAS: How much choice does the consumer need if you have four vertically integrated companies and TELUS and yourself and others?
3138 MS GRIFFIN-MUIR: What we are saying is, we are not vertically integrated, and in our territory our largest competitor is Shaw -- and, I guess, Bell ExpressVu -- two vertically integrated companies.
3139 So unless you think the choice that we bring to the market -- and as a converged entity, that would be in internet, wireless, as well as broadcast distribution.
3140 If you think we shouldn't have the ability to offer the customer choice in that area, then there is no need to have certain rules for independents.
3141 COMMISSIONER PENTEFOUNTAS: Yes, but any anti-competitive behaviour that you may fall upon in the near future -- I understand that it hasn't necessarily been a problem yet, but these are concerns going forward --
3142 MS GRIFFIN-MUIR: I wouldn't say that it hasn't been a problem yet.
3143 COMMISSIONER PENTEFOUNTAS: Okay. But there are dispute resolution mechanisms. You can bring them before us or others when there is clear anti-competitive behaviour.
3144 MS GRIFFIN-MUIR: I think we would say that we don't think today that those measures are adequate, and we are concerned that, tomorrow, they will be less adequate.
3145 COMMISSIONER PENTEFOUNTAS: We heard representatives of Shaw say that they are not Machiavellian, they are there to conduct proper business, and they want to have their broadcasting element distributed. They want their broadcasting services to have as big an audience as possible.
3146 You don't believe that?
3147 MR. McLAREN: You just nailed it. Choice isn't just about which provider you select, but what product the provider can offer, and the packaging that we provide to our customers has evolved since we launched the service, not because we wanted to evolve it, but because the programmers basically forced us to.
3148 They don't support the level of choice that we are offering to customers when it comes to choosing programming services.
3149 COMMISSIONER PENTEFOUNTAS: And you can't negotiate that? You don't feel that you can negotiate that?
3150 MR. McLAREN: We have taken it as far as we can, to the point of losing signals the next day. They will turn off the signals if we don't accept the packaging that they are imposing on us.
3151 COMMISSIONER PENTEFOUNTAS: You are calling for a regulated basic package. Why?
3152 How does that help the system, in your minds?
3153 MR. McLAREN: The customer choice, that the fewer services the customer has to purchase off the top, the more flexibility they have got in their packaging afterwards, right. We are not asking -- we are not in favour of asking customers to pay for services they don't want.
3154 COMMISSIONER PENTEFOUNTAS: And you are free to do that, are you not? You can offer as small a package or as big a package as you like.
3155 MR. McLAREN: Not so much.
3156 COMMISSIONER PENTEFOUNTAS: Why not?
3157 MR. McLAREN: Because the programmers won't allow it. You know the options that we have before us right now, in some cases are you'll put us on basic or you won't carry the service.
3158 We are looking at some negotiations right now where the cost of our wholesale fees for basic could go up as high as five dollars. Our wholesale fees could go up as high as five dollars in order to keep the services on the channel because the programmers are asking for basic or near basic carriage.
3159 COMMISSIONER PENTEFOUNTAS: You also made a case for transparency in arbitration.
3160 MS JESSOME: What that -- what we are concerned about there is where there is a dispute only the parties to that dispute, the resolution of the dispute is in confidence.
3161 So the programmer where it's a vertically integrated programmer that may have this same dispute with multiple small BDUs, the programmer knows both sides of any dispute that they have, whereas the independent distributor doesn't know what the outcome of a dispute was with anyone else. So they are at a disadvantage when they are dealing with the vertically integrated programmer.
3162 COMMISSIONER PENTEFOUNTAS: But the Commission does publish undue preference decisions.
3163 MS JESSOME: But in a lot of times -- in a lot of the disputes that have been or at least in some of the disputes, the outcome is in confidence so we don't know what the outcome.
3164 Where we have had a similar -- there was an incident -- what, about a year ago, two years ago between Rogers and the CCSA and we were having the same dispute with Rogers at the same time. The resolution came out in confidence so we had -- and Rogers tells us their version of the resolution saying you know...
3165 And we have no way of verifying whether the pressure they are putting on us is, you know, like if we got -- if we take the dispute further. They know what the settlement is that they came to with CCSA. We have no idea.
3166 So we are kind of pressured to resolve with Rogers because, you know, we don't know whether maybe we will get a much worse deal if we go to dispute resolution. And they know one way or the other but they don't -- they can't tell us or don't tell us.
3167 MS GRIFFIN-MUIR: But I think overall if there is a concern about the volume of arbitration necessary it's in even the interests of the Commission once there has been a negotiation for certain programming services that the outcome and the terms are made public which is not frankly unusual in an arbitration process.
3168 So if there is a concern at the CRTC of a deluge of disputes it's actually in all parties' interests to understand the frame of reference.
3169 COMMISSIONER PENTEFOUNTAS: Well, won't the initial decisions curtail any further disputes?
3170 MS GRIFFIN-MUIR: Well, that's actually our point. If those are made public, yes, it will do that.
3171 COMMISSIONER PENTEFOUNTAS: Decisions aren't -- no?
3172 MS GRIFFIN-MUIR: No, they are not.
3173 THE CHAIRPERSON: Well, half of this is confidential costing data, et cetera, so it's between the two parties. It would be good to make it --
3174 COMMISSIONER PENTEFOUNTAS: Oh, you want that data?
3175 MS GRIFFIN-MUIR: Not the data, the outcome, the actual price paid for the programming.
3176 COMMISSIONER PENTEFOUNTAS: Back to pricing, you also mentioned there is a need to sort of find an objective means to determine value. NFM comes into play here.
3177 How do we go about ensuring that? How do we go about finding that objective value?
3178 MS GRIFFIN-MUIR: Well, as we were discussing earlier, one method would be the methodology that TELUS developed and submitted where there is some correlation between the level of demand for the programming, the viewership and the price that the distributor should pay for the programming. That's one measure.
3179 Our concern with MFN is not just the concern that was addressed by Shaw this morning where they are talking, let's say, between Corus --
3180 COMMISSIONER PENTEFOUNTAS: Right.
3181 MS GRIFFIN-MUIR: -- and their distribution arm.
3182 It can also manifest itself between vertically integrated entities where I could, as a large vertically integrated distributor, make arrangements for programming with another large vertically integrated distributor.
3183 COMMISSIONER PENTEFOUNTAS: I understand. I understand your concern.
3184 MS GRIFFIN-MUIR: And therefore if that becomes the MFN and we are each paying each other inflated costs it's inequitable for the smaller, more independent distributors.
3185 COMMISSIONER PENTEFOUNTAS: And you prefer the TELUS model. You are willing to piggyback on that TELUS model?
3186 MS GRIFFIN-MUIR: Well, I think it's -- yeah. We think it's a good model in the sense that it has kind of an arms-length assessment of what the real value of the program is.
3187 COMMISSIONER PENTEFOUNTAS: Okay, thank you.
3188 THE CHAIRPERSON: Rita?
3189 COMMISSIONER CUGINI: No, I don't have any questions. Peter does.
3190 THE CHAIRPERSON: Oh, sorry.
3192 COMMISSIONER MENZIES: Just a hopefully quick question to follow up on your discussion about your lack of flexibility in negotiations.
3193 How much more flexibility would you have in those negotiations if the regulator didn't insist upon the carriage of 80 or so stations?
3194 MR. McLAREN: Are you referring to like the Category A services?
3195 COMMISSIONER MENZIES: Yes.
3196 MR. McLAREN: I would say not much more, and the reason is because we are not -- you know, we are happy to carry the services. We think they provide value to our customers. So whether or not they are mandatory to have we would like to have them on the line-up.
3197 The challenge comes when we meet with the program and they start dictating the terms of how we are going to distribute them to our customers.
3198 The reverse of that would be if we went into a negotiation and told the programmer, "We'll accept the packaging conditions that you are asking of us but before you rebrand you have to contact us. You have got to consult with us" or "Before you change your program schedule you have to consult with us".
3199 They would say that's ridiculous, "We are the programmer. We make those programming decisions".
3200 And we say to them, "But we are the distributor. We make the distribution decisions. We decide how it's going to be packaged to our customers" and they won't accept that.
3201 COMMISSIONER MENZIES: Thank you.
3202 THE CHAIRPERSON: You asked for vertical -- structural separation in order to provide confidentiality. So what exactly do you have in mind when you say that?
3203 Are you thinking that we should insist that -- let's take Shaw since they were just before us -- that Shaw Media and Shaw Distribution be run as separate companies the same way as satellite is separate from cable? Is that what you have in mind?
3204 MS GRIFFIN-MUIR: Actually, what we were thinking of was more along the lines of what happens in telecom where you have the entity that actually negotiates or deals on the wholesale level has non-disclosure requirements.
3205 THE CHAIRPERSON: So a customer service group, a separate customer service group?
3206 MS GRIFFIN-MUIR: That's right, yes.
3207 THE CHAIRPERSON: Okay, so structural separation that's one point, okay.
3208 Okay. I think those are all our questions. Thank you very much.
3209 Let's take a five-minute quick break before we start with Astral.
--- Upon recessing at 1109
--- Upon resuming at 1118
3210 LE PRÉSIDENT : O.K., commençons.
3211 LA SECRÉTAIRE : Nous entendrons maintenant la présentation d'Astral Media.
3212 S'il vous plaît vous présenter et présenter vos collègues, et vous avez 10 minutes pour votre présentation.
3214 MR. GREENBERG: Mr. Chair, Vice-Chairs, Commissioners and staff members, I'm Ian Greenberg, President and CEO of Astral Media.
3215 Here with me today are:
3216 - to my left, Jacques Parisien, Chief Operating Officer;
3217 - to his left, Nathalie Dorval, Vice-President, Regulatory Affairs and Copyright;
3218 - beside her, Domenic Vivolo, Senior Vice-President Marketing and Sales, Astral Television Networks;
3219 - to my right, John Riley, President of Astral Television Networks;
3220 - beside him, Pierre Roy, President of Les Chaînes Télé Astral; and
3221 - to his right, Dany Meloul, Vice-President, Legal and Regulatory Affairs, Les Chaînes Télé Astral.
3222 Mr. Chair, in the last two years the Canadian broadcasting system has undergone tremendous change. This change has been fuelled by developments in technology, a healthy proliferation of choice and changing consumer expectations regarding how, where and when entertainment is delivered.
3223 In fact, evidence of the scope and scale of this change within our industry can be seen in the sheer number of files currently before the CRTC. In the next two months alone, Astral will be participating in processes initiated by the Commission on four separate matters, all relating to the future of broadcasting in this country. We applaud the CRTC for taking an active role in managing this change and appreciate the opportunity to contribute our perspective in these matters.
3224 Today we are here to present our thoughts on vertical integration and the impact that recent consolidation activity could have on the Canadian broadcasting system. But whether it is vertical integration or one of the other issues for which we have submitted or will submit comment, there are two themes that run through every presentation, submission, renewal and fact-finding exercise that Astral engages in.
3225 The first is our commitment to the continued strength of a distinctive Canadian broadcasting system. The second is the importance of a level playing field within this system.
3226 These concepts form the backbone of Astral's regulatory mandate and must be the litmus test by which every Commission decision is determined and judged.
3227 Astral is an established player in the Canadian broadcast industry, and as we gear up to celebrate our 50th Anniversary this September we are more committed than ever to maintaining a strong Canadian broadcasting system that offers diversity, consumer choice and opportunity.
3228 Astral owns, in whole or in part, five pay-television services, one pay-per-view service, 13 specialty television services and two conventional CBC-affiliated television stations. Astral also owns 83 private commercial radio stations located in 50 markets.
3229 We do not hold an ownership stake in any BDU or telecommunications undertaking and as such are before you today as an independent broadcaster.
3230 We see great benefit to consumers and to our system overall in having companies of different configurations coexisting and competing, but this competition must be fair and certain rules of engagement must be established and enforced in order for this benefit to be achieved.
3231 I will now ask my colleague Jacques Parisien to take a moment to highlight three essential measures that we believe will strike the necessary balance to ensure integrated and non-integrated companies compete on a level playing field to the full and complete benefit of the system and consumers.
3233 M. PARISIEN : Afin de minimiser les perturbations causées par l'intégration verticale et d'en maximiser les bénéfices pour tous, Astral a identifié trois mesures spécifiques qui lui paraissent raisonnables, nécessaires, et qui peuvent être mises en pratique afin de permettre une concurrence équitable, tout en assurant le succès continu de notre industrie.
3234 Ces mesures sont : l'exclusivité des genres, les règles d'accès et l'acquisition de droits de programmation exclusifs.
3235 L'élément clé de ces recommandations repose sur la reconnaissance des différences qui existent entre les entreprises de radiodiffusion intégrées verticalement et les entreprises de radiodiffusion indépendantes, de même que la nécessité d'établir un certain équilibre dans un environnement où les possibilités de maximiser les bénéfices économiques de l'intégration verticale, possiblement au détriment du système de radiodiffusion, sont inévitables si elles ne sont pas balisées.
3236 Our first recommendation pertains to genre exclusivity.
3237 One-per-genre has been a pillar of the Canadian broadcasting system and has led to the creation of a diverse, consumer-oriented and successful sector. It provides viewers with a wide range of Canadian programming choices and it ensures the maximum contribution to the creation of Canadian programming.
3238 Opening genres to competition will benefit large vertically integrated companies to the detriment of independent broadcasters. Vertically integrated companies granted competitive licences will certainly launch these services through their own distribution undertakings and are in a position to further advantage these services through packaging, promotion and positioning to exact a competitive edge. Existing non-affiliated channels in the same genre will no doubt be competitively disadvantaged in this biased environment.
3239 To prevent this, Astral recommends that the Commission modify its regulatory policy established in its 2008-100 notice in order to provide that any genre that is currently operated by independent programming services not be opened to competition and not lose genre protection.
3240 Further, that no exception to the genre exclusivity policy be granted in favour of an integrated player to the disadvantage of an independent programming service.
3241 Our second recommendation relates to access.
3242 We propose the adoption of certain preventive measures that will be added to the rules that already exist and that would complement undue preference policies, aid dispute settlements and curtail anticompetitive behaviour in order to restore a certain amount of balance in an environment in which opportunities to exploit integration are certain to happen.
3243 A cornerstone of this preventive approach is the implementation of the 3:1 distribution access rule for Category B services in the French and English markets to ensure that television services operated by independent broadcasters have access to distribution channels.
3244 This rule has yet to be incorporated into the Broadcasting Distribution Regulations although it was adopted in a 2008 policy. Without a basic access rule, independent broadcast services will find themselves at a significant disadvantage given that they have little bargaining power.
3245 We have also outlined in our written submission, summarized in Schedule A, other preventive rules that should be incorporated to ensure that once a non-affiliated service is carried by a BDU that the service is treated fairly.
3246 The final recommendation we propose is to maintain broadcasters' ability to acquire programming on an exclusive basis.
3247 Given the imposition of a moratorium on the acquisition of exclusive program rights in the recent BCE/CTVglobemedia transaction we feel compelled to cite the distinction between, first, the acquisition of programming on an exclusive basis by a program undertaking, and secondly, carriage exclusivity executed by a BDU.
3248 Astral falls into the first category as we license exclusive programming content for our pay and specialty television services. This enables us to differentiate our channels in the marketplace and provide a compelling entertainment proposition to consumers.
3249 Our approach to acquiring these rights is predicated on working together with our distribution partners to ensure that they ultimately have what we have. Our end goal is to work together with as many BDUs as possible to reach as many consumers as possible on as many platforms as are available.
3250 Exclusive programming rights are the foundation on which linear television services are built in Canada and around the world. Exclusive programming rights bring diversity to the system and underpin the business success and achievements that in turn fund the production of original Canadian programming.
3251 Without exclusive rights we would all chase the same top programs, which would strip the industry of diversity, reduce consumer choice, devalue our system, undermine our incentive to develop new signature programming and ultimately impact business, which would in turn affect Canadian programming expenditures.
3252 Vertical integration carries with it both opportunity and challenge. Preventive measures in the areas of genre exclusivity, access and the acquisition of program exclusivity are essential in ensuring that non-integrated players can continue to compete in a highly integrated industry where players own the content, the pipe and the consumer relationship.
3253 With that I will ask Ian to conclude our presentation.
3254 MR. GREENBERG: As one of the remaining independent broadcasters in Canada I am often asked what I think of vertical integration. My answer is always the same: If it's good for the Canadian broadcasting system and beneficial to consumers, then I support the principle of vertical integration.
3255 But as the Commission no doubt understands, having initiated this process in the first place, we must be careful in the way we structure the regulation of these companies so that there is a place for independent players who still see tremendous opportunity in being independent.
3256 There is definitely benefit for the system in having both integrated and non-integrated players coexisting and competing, and with the reasonable measures we have recommended pertaining to genre exclusivity, access rules and programming exclusivity, I am certain we can coexist and compete effectively to bring diversity, innovation and choice to Canadian consumers.
3257 Thank you, Mr. Chair, for this opportunity to present our perspective in this matter. Jacques will now serve as quarterback for any questions you may have.
3258 MR. PARISIEN: Mr. Chair --
3259 THE CHAIRPERSON: Yes.
3260 MR. PARISIEN: -- before I begin taking your questions, if you allow, let me first spend a few moments answering the questions that you had posed in the hearing documents and that we have not yet specifically addressed in our comments.
3261 - First, on reverse onus.
3262 The reverse onus provision should be applied to programming undertakings.
3263 - On suspension of changes in conditions of distribution pending dispute resolution.
3264 The implementation of any changes to the conditions of distribution of independent programming services should be suspended until disputes are resolved. In addition, this standstill provision would help with regards to the delays in settling disputes.
3265 - On the skinny basic issue.
3266 For sure, a basic service at an affordable price should be available. Now we think that the BDUs are well positioned to better understand their consumer needs with regard to the appropriate services to be part of their basic service offering and we have no specific recommendation to that effect.
3267 - On the financial information of individual pay and specialty.
3268 Astral believes that the financial information of individual pay and specialty services should now be kept confidential.
3269 - On the reimposition of the payment of benefits in the case of change of control of BDUs.
3270 We do not support the reimposition of the payment of benefits in the case of change of control of BDUs.
3271 - On additional information and documents to be filed with the Commission and measures to address the sharing of certain information between parts of a vertically integrated entity.
3272 We propose that vertically integrated entities be prohibited from sharing confidential information they obtain through negotiations or contracts. We, however, raised in our submission that we see very little ability for the Commission to police its application. No requirements relating to filing of agreement is needed.
3273 - And lastly, on the enforcement tools at the Commission's disposal to deal with breaches of its rules.
3274 The Commission recently summarized the means at its disposal to deal with non-compliance issues and has the tools required to enforce breaches such as those discussed in this hearing. Contrary to the TELUS position, Astral thinks that the Act does not grant the Commission authority to impose administrative monetary penalties.
3275 Thank you.
3276 THE CHAIRPERSON: Okay. Thank you for your submission.
3277 On pages 8 and 9, you were giving me an explanation of program exclusivity. I'm not quite sure what you're driving at.
3278 The program exclusivity that the moratorium applies is only for the extension of linear programming to new means of distribution, mobile or Internet, and the question was whether that moratorium should be made permanent or not.
3279 Nobody is questioning your ability as a broadcaster to contract exclusively, and, as you quite rightly point out, the whole system is underpinned by it.
3280 So what is exactly the point you're trying to make on these pages 8 and 9?
3281 MR. PARISIEN: The point is exactly the one you have just raised. In our mind it was important for us to bring it in front of the Commission as the basis of our business model and the basis of our way of broadcasting that exclusive rights are within the system right now and should remain in the system.
3282 THE CHAIRPERSON: What about outside the regulated system, which really is what the issue is?
3283 The whole issue that -- it starts out with Bell sort of having exclusive right to the Olympics. Obviously when they put it on the channels it's done by Rogers or CTV or whoever, but on mobile it was only available on Bell apparatus. In examples like that, support is usually the most prominent one.
3284 Should we permit that or not? Presently we have put a moratorium on it.
3285 MR. PARISIEN: We have not focused on that as we are not involved in distribution. We focused on what we know about and what we do.
3286 Obviously for us it's a question of rights when we deal with our suppliers and we have not so far been involved in distribution on mobility.
3287 THE CHAIRPERSON: But when you deal with any one of the vertically integrated ones who all have -- all three of them at least have a mobile arm and all four have an Internet arm, and they say, we want to take your content and also make it available that way, is that not part of your negotiations? Don't they --
3288 MR. PARISIEN: That's different from the example you gave. We do have some dealings with the distributors to that effect and John will talk about it.
3289 THE CHAIRPERSON: Exactly. Just let me finish my question.
3290 In that case, any one of your channels that they want -- if they say, we want it but we want to put it exclusively on mobile apparatuses and nobody else can do it, is that something that you favour or not?
3291 MR. RILEY: We are looking at the issue from our perspective, which is as an independent programmer. Anyone who's an independent programmer will want their programming distributed on the widest possible basis.
3292 So it's in our best interest, in the consumers' best interest, for example, if we acquire exclusive rights to programming for the linear service. We've also launched -- make available our services on subscription on video-on-demand as part of that subscription and we've also launched online as well too.
3293 So it's in our best interest and it would be in the best interest of consumers to ensure that our programming is made available to anyone. So we would not in that case wish to have -- we wish to have exclusive rights to our service but we want to make that available.
3294 I think the issue that the Commission is dealing with with respect to carriage as between integrated BDUs is somewhat different from what we're looking at, and I think --
3295 THE CHAIRPERSON: I appreciate the difference, but the question I'm posing you is should a moratorium only apply to content that they own or also that they acquire?
3296 For instance, should Bell be in a position to be able to say to you, I want your content and I will distribute it over Bell satellite, no problem, but I'm also going to distribute it over Bell mobile and exclusively?
3297 MR. RILEY: As between our service with Bell?
3298 THE CHAIRPERSON: Yes.
3299 MR. RILEY: No, we would not wish for that to happen. It wouldn't be in our interest and it wouldn't be in our subscribers' interest.
3300 THE CHAIRPERSON: But unless we do something, they have presumably the economic power to demand it?
3301 MR. RILEY: Well, in all negotiations there are requests and demands, but that would not be something that we would --
3302 What we wanted to make sure is because you -- it gets a little cloudier once you get into SVOD and online. We wanted to make sure that the basics upon which programming services, and especially independent ones, have been built are sustained in that environment.
3303 THE CHAIRPERSON: Yes.
3304 MR. RILEY: Vis-à-vis a BDU specifically asking for that -- it's possible someone may request that but it's something that we would not be interested in granting.
3305 THE CHAIRPERSON: But they could turn around and say, well fine, in that case you don't get carriage on my BDU. You only get carriage on my BDU on condition that I get an exclusive for my mobile devices.
3306 MR. RILEY: Well, that's why we have also suggested that having access rules maintained are important for a reason just like that.
3307 THE CHAIRPERSON: By maintaining present access rules they couldn't do that tying in, I suggest.
3308 MR. RILEY: Well, in the example you've given you've said that unless you were to give exclusive on --
3309 THE CHAIRPERSON: You're right. You're right.
3310 MR. RILEY: -- let's say, SVOD or online we won't carry the linear service. Presumably under the access rule that would not be permitted.
3311 THE CHAIRPERSON: Yes. Okay.
3312 I have looked at your Appendix A and I want to walk you through a couple of those provisions.
3313 I see you have the 3:1 rule, and you've heard it here that there seems to be a general consensus, that it's agreed that one of those three should be an independent, and that would obviously be to your benefit and I presume that's what you want, right?
3314 MR. RILEY: Well, we had simply stated that the 3:1 rule should be maintained. We didn't make that additional designation, but we understand that that's where the conversation may be headed. But it wasn't part of our -- specifically part of our request.
3315 THE CHAIRPERSON: Let's not play games here. It favours you. You would support that?
3316 MR. RILEY: Well, that's what I was trying to say, is that yes, we understand where it's going --
3317 MR. PARISIEN: We also mentioned that we favour that it also be clearly applied to the French and English markets.
3318 THE CHAIRPERSON: Yes, but with the condition that in the French, of the three, at least two be French, right?
3319 MR. PARISIEN: Yes.
3320 THE CHAIRPERSON: Now, what's this provision regarding exempt services that you also suggest? You want that if they carry -- on the one for one if they carry one of their own exempt services, they also have to carry a non-affiliate exempt -- give me an example of what you have in mind here.
3321 MS DORVAL: Sir, you are alluding to the 2.3, the third paragraph?
3322 THE CHAIRPERSON: Yes.
3323 MS DORVAL: This is already in the proposal for your regulation. So it was simply reproduced as what's already there.
3324 THE CHAIRPERSON: You're talking Shopping Channels or something like that, is that what we're --
3325 MS DORVAL: I think that's the case.
3326 THE CHAIRPERSON: Yes.
3327 THE CHAIRPERSON: Now, you feel that we should not -- we should change our existing position regarding opening genre and any genre that is right now held by an independent should not be opened up. What is the rationale behind that?
3328 Our rationale for opening up genres such as news and sports was that initially they needed the protection in order to establish their brand power in the marketplace, but by now they are really such a power onto themselves that there is no need for regulatory protection, and to the extent that you always put regulatory protection in, you always stifle innovation and new entry, et cetera. So that is what was our thought for deregulating sports and news.
3329 Now, I don't see why that same thing would not apply to other genres if they reach the stage of maturity and market brand power that news and sports has. For instance, music is one that is often mentioned.
3330 Why should we adopt your rule, which basically would then prevent a genre to be opened up for competition merely because it is owned by an independent?
3331 MR. PARISIEN: Well, linear television, specialty services and pay television have been built around genre protection and it takes time for the marketplace to make room for a genre to develop into a sustainable, viable service, and we think the vertically integrated BDU services would probably have an unfair competitive advantage if genre protection would disappear.
3332 THE CHAIRPERSON: You feel that one of -- I don't know which is your -- you have so many, popular brands, you know, which are by now household names, that by opening any of them up, their existence would be in danger?
3333 MR. PARISIEN: We think they would, yes, definitely.
3334 MR. GREENBERG: You have to remember that many of our specialty services are in the Quebec market, which is a much smaller market than the rest of Canada.
3335 There is one distributor who has over 60 percent penetration --
3336 THE CHAIRPERSON: Yes.
3337 MR. GREENBERG: -- and that is really our rationale for asking for that protection.
3338 THE CHAIRPERSON: Would you apply the rationale only to the French market or also to both markets?
3339 MR. PARISIEN: No. Our position was to apply it across.
3340 MR. RILEY: The risks are magnified in the French market but the principle is no different in either, that there is an inherent advantage built in, and notwithstanding that there is a preexisting network or that it has a brand, as I think the Commission has recognized, there is at least the opportunity to unduly prefer that competitive service.
3341 THE CHAIRPERSON: And reverse onus and non-preferential rules would not protect you there in that case? That is why we have them presumably.
3342 MR. RILEY: No. We think the inherent structure of a now highly vertically integrated system requires fine-tuning of the measures, including the one we've proposed.
3343 THE CHAIRPERSON: Okay.
3344 Now then in terms of standstill, you want a standstill in case there's a dispute. On what occasion would it apply?
3345 I can see it when you have an ongoing relationship, but when you are trying to get a distributor to carry your product and you can't come to terms, would the standstill apply in that case or would you insist that they have to carry you, subject to the terms being negotiated? How far do you carry this whole concept?
3346 MS MELOUL: The standstill that we were proposing was in the instance where either we are at the end of a term of renewal or that we are in a dispute situation, and the idea there is we don't pull the signal and they don't take us off while we are still in discussions, until we have a new agreement or we come before the Commission.
3347 THE CHAIRPERSON: So that's an existing relationship?
3348 MS MELOUL: So that's the existing one and that's what we're talking about.
3349 THE CHAIRPERSON: Okay.
3350 And your 6.1, that says:
"No integrated BDU to be allowed to change the conditions of distribution on any independent Category A or Category B programming service if according to the programming service the change causes harm to that service, unless prior agreement is reached."
3351 Which basically means BDU, you cannot change your line-up or do anything to the positioning of the channel without our consent. That is how I read that. That is basically what you are saying, isn't it?
3352 MS MELOUL: Well, the intent is not anything, it's something that is viewed as causing damage to the service.
3353 We fall upon this quite often, where we get the 60-day notice from BDUs and we do allow those things to go on, but when it's something that we know is going to hurt the service, take it out of a line-up where other services of the same genre are or change the tier on which it will be, then in those instances that's a serious -- we need to sit down and have a discussion and at that moment we would care for the standstill to be there until that discussion is concluded.
3354 THE CHAIRPERSON: Now, you mentioned 60-day notice. You get a 60-day notice right now?
3355 MS MELOUL: We do.
3356 THE CHAIRPERSON: So let's say Vidéotron wants to repackage it, they give you notice, and you want to ensure that the repackaging is not to your disadvantage?
3357 MS MELOUL: We will get a notice that they are changing something in their programming, absolutely.
3358 THE CHAIRPERSON: Okay. Just play it out for me what happens. They obviously think this is better for their business, it's better for the customer, whatever it is. You think it harms you. Then what happens?
3359 MS MELOUL: Well, as I say, we receive these on -- I don't want to say on a monthly basis but it occurs throughout with many BDUs and many of them are reasonable. I mean distributors do try to do a laudable job of distributing the services.
3360 And so in many instances we get the notice. We may have a follow-up discussion with them to really understand the underpinning of the notice and that's the end of that discussion.
3361 THE CHAIRPERSON: Okay. But then let's assume the discussion doesn't end fruitfully, you cannot reach agreement.
3362 MS MELOUL: We have been able in our discussions with the BDUs to get that standstill as we continue to have the discussion.
3363 THE CHAIRPERSON: I understand that. I am trying to posit a situation where you don't reach agreement. What follows then?
3364 MS MELOUL: So we have been able, as a first thing, to say to them, okay, can we just leave things as is as we continue to have the discussion to resolve the matter.
3365 THE CHAIRPERSON: Okay. Third time around. You are trying to get me to implement this rule. This rule doesn't exist right now, right?
3366 MS MELOUL: Right.
3367 THE CHAIRPERSON: So if I implement this rule, the rule is there, Vidéotron tells you we're going to repackage you in another tier, you have a long discussion, you say, sorry, I can't accept that, that's costing me too much money, Vidéotron says too bad, you're going there. Then what?
3368 MS MELOUL: So in that instance -- so the difference, I guess, is that right now we work at getting the standstill with the BDU to continue the discussion and the negotiation. We're coming before the Commission to say it would be a step ahead if it was already implemented.
3369 But then what happens is that we have sat down and we negotiated with them in those instances.
3370 THE CHAIRPERSON: We are not connecting here.
3371 You want me to adopt this rule. I gather the rule means that Vidéotron would not be able to move it because you're objecting. And what does Vidéotron do then? How does this get resolved? Because obviously they think in my hypothetical that it would be beneficial for them to repackage that tier.
3372 MS DORVAL: Sir, we would -- there are some dispute resolution processes at the Commission. So if we were not to be able to reach an agreement together, we would, you know, come to the Commission and file an application for a dispute resolution --
3373 THE CHAIRPERSON: As far as I can see, you wouldn't do anything because you don't have to do anything, they can't move without you. The way this is written right now, they can't do it without your consent. You don't give the consent. So then Vidéotron comes before us saying what?
3374 Because there is no undue preference here. You just are being uncooperative or you just don't agree with them that this is a profitable repackaging. So on what basis do we deal with it? This is where -- you know, what is the test? On what basis do we deal with it?
3375 MS DORVAL: Well, you recently had a case with Vidéotron where there was a packaging or repackaging issue. So I guess in that case it could be Vidéotron who could come to you and ask for help and some kind of dispute resolution to come to an agreement.
3376 THE CHAIRPERSON: Yes, but in that case the other side complained that this was an undue preference. Under your new rule, all I'm trying to point out is you have this suddenly the hammer in hand. They can't move, repackage unless you say so.
3377 And if we adopted that rule I'm trying to figure out how the dispute would come before us, probably because in this -- Videotron coming before us.
3378 But what would they argue and what would be the basis on which we would deal with this dispute? What principle would we apply?
3379 MR. PARISIEN: If you would allow, we will submit recommendations to that effect in the next step.
3380 THE CHAIRPERSON: Well, I mean, the other thing of course you can both go to commercial arbitration.
3381 MR. PARISIEN: Yeah, that's one option.
3382 THE CHAIRPERSON: What about the issue of the audit that you mentioned? Is that presently a problem that you do not get audited or that if you go further you want us to set up a panel if accepted -- I'm making sure I don't mix up presentations here. Is it you who suggested we set up --
3383 MS MELOUL: A list of auditors.
3384 THE CHAIRPERSON: -- a panel of eligible auditors?
3385 MS MELOUL: Yes.
3386 THE CHAIRPERSON: Okay.
3387 MS MELOUL: We, in all of our affiliation agreements, we do have -- we do negotiate audit provisions. But unfortunately we have not been able to have access to audits in every instance.
3388 And the main reason that it's brought forth for not granting us access is the fact that the auditors are not acceptable to the distributor. So rather than have a long debate, what we are proposing is that a panel be brought of broadcasters and distributors and come together to put together a list of auditors which would then be with the Commission.
3389 So then a broadcaster would then say, "Right, it's time for my audit and I am presenting ABC auditors". If the distributor says "No" for whatever reason, "They are not independent. We don't like them. We have had trouble with them in the past", this would be already in existence. It would just be okay, so then draw from the list and we can go ahead and have our audit.
3390 THE CHAIRPERSON: And failure to agree on an auditor right now prevents you to have access to your information.
3391 MS MELOUL: Well, that's what is being raised as the reason.
3392 THE CHAIRPERSON: And then other parties also raised the issue of the timeliness of the auditors is a point and it takes forever and a day to get the data. By the time you get the data it's stale.
3393 Is that an issue for you too?
3394 MS MELOUL: Well, one of the outcomes of not being able to agree on the independent auditors is that we end up having less spend at the 12 months period to audit and then we have to have discussions about whether we can go further back in time to have full coverage from the last time we had an audit.
3395 So, yes, it's an issue for us as well.
3396 THE CHAIRPERSON: And in point 8 of your summary you are raising the issue of information to independent service subscribers. Basically the question is whose customer is it, right?
3397 So is it you or the BDU's? The customer presumably signs that because he wants your services but he gets it through Videotron.
3398 You are the only party who raised that in this entire proceeding which is interesting. I am reading between the lines here, but I gather you are not getting that kind of information from the BDUs.
3399 MR. PARISIEN: Well, that is your reading between the lines and I won't comment on --
3400 THE CHAIRPERSON: Well, please correct me.
3401 MR. PARISIEN: I won't comment on that.
3402 But it's been an internal debate whose customer is it we pertain that through the investment we make in research, our relationships with programmers, our experience, you know, the history behind our company and our services that we know our customers very well. But we can't argue with distributors that they also know their customers very well.
3403 The question is how far can we bring that relationship and how much control can we have at it to adjust and bring forward better programming, better services.
3404 THE CHAIRPERSON: And what exactly would you like to -- how would you like to resolve this problem?
3405 MR. PARISIEN: I don't know if you can resolve that problem.
3406 MR. RILEY: Well, if there were a policy that allowed that independent programming services could obtain basic information such as the name of the subscriber and address, then that would be beneficial.
3407 The fact of the matter is that more and more -- I mean historically there has been a reluctance to provide that information on the basis of whose customer is it anyway.
3408 But the fact of the matter is as it is now and as we go forward, more and more of the weight of selling that service, of marketing that service, tends to fall on the programmer because of course in a highly integrated BDU there are all sorts of other priorities as well too.
3409 THE CHAIRPERSON: Don't we run into privacy problems here? If I signed up to be a Rogers' customer I didn't sign up for Rogers to disclose my name to Astral.
3410 MR. RILEY: We don't think there is a privacy issue and we do have a legal opinion to that effect that we would be willing or happy to provide to the Commission.
3411 THE CHAIRPERSON: And then if you have that information you would use it for what purpose?
3412 MR. RILEY: Well, it would allow us to speak to the people who watch our service whom we also think of as our subscribers more directly to maintain, to reduce churn and to keep those subscribers and to speak to them directly.
3413 THE CHAIRPERSON: So for survey purposes and for marketing purposes you want to know who actually listens to your channels.
3414 MR. RILEY: Absolutely.
3415 THE CHAIRPERSON: And we had a lot of talk about exchange of financial information especially within vertically integrated companies and obviously it's a fear of abuse that the BDU side will share information with the programming side who are in dire competition with you, et cetera.
3416 And if I understand correctly your presentation this morning, you acknowledged the problem but you doubt that we can do anything about it.
3417 MR. PARISIEN: Sorry to say that's what we think, yes.
3418 THE CHAIRPERSON: So basically maintain the present rule of non-disclosure and hope for the best and be abided by.
3419 MR. PARISIEN: Well, unless you find some other way to do it.
3420 THE CHAIRPERSON: What is your point 14, disclosure of financials? There is Category A, B and C -- if subjected to financial disclosure policy on an individual basis should now be allowed to disclose their information at the consultant ownership group level and that any information relating to individuals shall be kept confidential.
3421 Explain that to me.
3422 MS DORVAL: Well, actually, all groups of programming do not report in the same way. Pay and specialty services still have to report on an individual basis.
3423 What we are saying is that since this rule does not apply equally to everybody, we think that everyone should report on an aggregate basis and financial information for individual pay and specialty services should now be kept confidential.
3424 THE CHAIRPERSON: So it's really -- when you say pay and specialty both of them. All of the ones that you have you would basically -- Astral would report on an aggregated basis?
3425 MS DORVAL: Yes, exactly.
3426 THE CHAIRPERSON: You would not even just divide between so much for pay and so much for specialty?
3427 MS DORVAL: We would rather report on a consolidated basis at the ownership group.
3428 THE CHAIRPERSON: Okay.
3429 Now, then, you have been here and if you have not been here you have been listening to these proceedings over the internet, I am sure, and you have heard a lot of -- me talk a lot to everybody about finding a middle ground and talking about a code, et cetera.
3430 What do you think of the idea? One could call it a code; call it a principle, because to some extent you have done that when you talked about pricing and how you would put out some principle that should be used in order to apply to pricing disputes.
3431 MR. PARISIEN: Well, our position on that is that if in its wisdom the Commission thinks there should be a code we will certainly support it and cooperate with it. We just wish that it not be to the detriment of the three rules we think are essential for independent broadcasters to move forward.
3432 So it's not one or the other. It should be the both.
3433 THE CHAIRPERSON: Let me tell you what I told everybody. You would help us enormously if you would put your collective brain power on this issue and come up with a draft that would be acceptable to Astral because you know it is by having areas for us to compare which show the interests that will allow us to find hopefully a solution that appeals to all.
3434 But you are the ones from the industry. You know really what are the key concerns especially as one of the -- I think you are the largest independent broadcasters if not one of the largest. So I would be very interested in seeing something from you, what you feel would help.
3435 If, on the one hand, I don't want to -- we don't want to impose any more on the ex-ante rules than are necessary. On the other hand, in light of the vertical integration and the consolidation of the industry it's clear that the existing regime has to be at least fine-tuned in order to protect people like Astral.
3436 MR. PARISIEN: We accept with pleasure your invitation to submit something.
3437 THE CHAIRPERSON: Good.
3438 MR. PARISIEN: But again, it will not be to the detriment of what we think are the three basic requirements.
3439 THE CHAIRPERSON: Okay, thank you. Those are my questions.
3440 Tom, did you have -- Michel?
3441 CONSEILLER MORIN : Oui, simplement un point.
3442 Vous avez soulevé la question en ce qui concerne les ententes de confidentialité. Je pense que vous avez fait un certain travail là-dessus. Monsieur Riley a dit que ça pourrait être mis à la disposition de la Commission.
3443 Donc, on peut s'attendre à ce que vous déposiez officiellement vos arguments à cet égard-là?
3444 MME MELOUL : Je m'excuse, Monsieur Morin. Est-ce que vous parlez de nos ententes...
3445 CONSEILLER MORIN : Les ententes pour avoir plus d'accès au niveau des consommateurs, vos clients, leur adresse, leur... enfin...
3446 MME MELOUL : Oui.
3447 CONSEILLER MORIN : Il y a un enjeu, c'est celui de la confidentialité.
3448 MME MELOUL : Ah, oui!
3449 CONSEILLER MORIN : Les relations entre les EDR et les clients, d'une part, et vous, d'autre part. Alors, c'est un enjeu qui est soulevé. Est-ce que la Commission... vous pourriez avoir, vous-mêmes, accès à ces données-là. Je pense que...
3450 M. PARISIEN : Oui, Monsieur Morin, nous soumettrons les ententes de confidentialité. Oui.
3451 CONSEILLER MORIN : O.K. Merci.
3452 THE CHAIRPERSON: Okay. On the sharing of the information here, one other question I had is a lot of people have suggested that we use a model that we have in telecom and force companies, certainly vertically integrated, to create something what's commonly called the customer service group and they are then the only ones entitled to deal with the information of broadcasters so as to ensure that it does and there is no vertical flow.
3453 Are you familiar with that model?
3454 MR. PARISIEN: I don't think we are, no.
3455 THE CHAIRPERSON: No, okay. Well, in that case --
3456 MR. PARISIEN: That answers that.
3457 THE CHAIRPERSON: No need to answer the question. Thank you.
3458 I believe those are all our questions. Thank you very much.
3459 MR. PARISIEN: Yeah, I just want to make sure. All the questions -- you are satisfied that we have answered all your questions?
3460 THE CHAIRPERSON: Yes, thank you.
3461 MR. PARISIEN: Thank you very much.
3462 THE CHAIRPERSON: You have very much and I appreciate your answers. I read your -- as you can see from my questioning, I read your submission in detail so I'm familiar with what you said. But I look forward to your draft code.
3463 Thank you.
3464 Okay. We will break for lunch now and we will resume at 1:30. Thank you.
--- Upon recessing at 1200
--- Upon resuming at 1331
3465 THE CHAIRPERSON: Bon, commençons, Madame la Secrétaire?
3466 THE SECRETARY: Merci, Monsieur le Président. My name is Cindy Ventura and I will be the hearing Secretary for the remainder of the day.
3467 We will now proceed with the presentations by Writers Guild of Canada; Directors Guild of Canada; Alliance of Canadian Cinema, Television and Radio Artists, ACTRA; Canadian Federation of Musicians; and the Canadian Conference of the Arts, who are appearing as a panel to present their interventions.
3468 We will hear each presentation, which will then be followed by questions from the Commissioners. Each intervener will have 10 minutes for their presentation.
3469 I would now invite Writers Guild of Canada to begin.
3470 Please introduce yourself, you then have 10 minutes.
3471 Thank you.
3472 MS ASHTON: Thank you.
3473 Good afternoon. My name is Kelly Lynne Ashton and I am the Director of Policy of Writers Guild of Canada, a national association representing over 2,000 professional English-language screenwriters.
3474 As creators of content, screenwriters view vertical integration cautiously. The WGC understands that vertically integrated companies are in a better position to compete, both domestically and internationally, and have the resources necessary to grow and innovate.
3475 However, vertical integration and the resulting large media companies has the potential to lead to abuses of bargaining power which can create imbalances in the media landscape. From the perspective of the content creator the WGC is most concerned about abuses of bargaining power that can affect the price of U.S. programming broadcasters depend upon for their business model.
3476 We are equally concerned about the potential for vertically integrated companies affecting independent broadcasters' access to audiences.
3477 Today I will focus our comments on that concern, and as well address some of the other issues that the Commission included in this proceeding.
3478 The size of these new consolidated companies concerns the WGC, as they have the potential the squeeze the smaller independent broadcasters out of the market through bidding up the price of foreign or Canadian programming or impacting consumers' access to the services of the smaller broadcasters.
3479 Independent broadcasters need to be able to buy quality and current foreign programming to earn ad revenue and quality and current Canadian programming to meet the regulatory obligations. Access to both forms of programming is necessary to maintain and build audiences.
3480 A healthy Canadian broadcasting system requires a diversity of voices and a diversity of programming services. We need broadcasters that can serve niche audiences, act solely as a broadcaster and not as part of a consolidated company, and simply provide more doors to knock on.
3481 The WGC encourages the Commission to ensure that the Canadian broadcasting system continues to support both large vertically integrated media companies and small independent broadcasters.
3482 We have read the specific proposals of the various independent broadcasters and feel that it is best if we leave it to the Commission to workout with these independent broadcasters the details of whatever protections or codes are required to ensure their continued survival.
3483 However, we would like to add that based on our experience as a union we have learned that clear and enforceable rules that can govern future behaviour are beneficial for all parties involved.
3484 As a diversity of voices is important to the WGC and as well is a key goal of the Broadcasting Act. The WGC also recommends that the Commission prohibit exclusive arrangements for Canadian programming. Exclusivity would directly conflict with the objectives of the Broadcasting Act to ensure that Canadians have access to a wide variety of programming.
3485 Further, exclusive arrangements can limit how much revenue producers and talent can earn from sales of multiple windows for programs, thereby undermining the growth and sustainability of the independent production sector.
3486 Finally, Canadian programming is funded in part by taxpayers through financing sources such as the Canada Media Fund and tax credits and, a such, the Canadian public should be able to fully access the programming that it helped to fund.
3487 For that reason, should the Commission feel it necessary to allow some exclusivity, the WGC proposes limiting exclusivity to content that has not been funded directly or indirectly by public monies. Both linear and original digital content which have been funded through CMF, tax credits, independent funds, for example, should be accessible to all Canadians.
3488 We were very intrigued by TELUS's proposal that the Commission already has the power to impose administrative monetary penalties under Section 12.2 of the Broadcasting Act.
3489 We understand that there are differing legal opinions as to whether this interpretation is valid. As the Commission knows, enforceable regulation is an issue that transcends this hearing.
3490 We have shared the Commission's frustration with its lack of ability to impose timely and appropriate sanctions for regulatory non-compliance and supported your previous calls for amendment of the Broadcasting Act to provide the necessary tools.
3491 If the Commission decides to pursue TELUS's interpretation of the Commission's power to impose fines, the WGC would only request that the fines be allocated in the manner that the Chair suggested in discussion with Rogers.
3492 If fines are paid to funding bodies, such as the CMF or the independent funds, they will create more programming that will benefit the entire Canadian broadcasting system from creators to broadcasters to distributors.
3493 As the Chair said, if non-compliance results in "harm to the broadcasting system functioning as it should" then one way to remedy this harm is to put money into fixing the injury done to the system through subsidizing Canadian content.
3494 Another issue added to this hearing was the question whether the Commission's BDU benefits policy should be reinstated. The WGC strongly supports a return to this policy.
3495 In support of the social policy goals of the Broadcasting Act, all elements of the Canadian broadcasting system should be required to demonstrate that a change of control benefits the entire system and not merely shareholders, through payment of a benefits package.
3496 The BDU benefits policy was eliminated in 1996 because the Commission felt that with an open-entry system there was enough competition to ensure that any new owner was the best owner possible. It simply cannot be said that after years of consolidation there exists a competitive market for BDUs.
3497 Five BDUs control 89 per cent of the market. There are very few BDUs which have the resources to be able to buy the smaller BDUs which make up the other 11 per cent.
3498 There is no difference between the consolidated broadcast sector and the BDU sector, particularly now that many of the major BDUs have bought most of the broadcast sector. As such, the underlying principle for the benefits policy exists for both the broadcasting and distribution sectors and, therefore, the benefits policy for the distribution sector should be reinstated.
3499 Further, when the benefits policy existed for BDUs it clearly benefitted the broadcasting system and, in fact, continues to do so to this day.
3500 Funds from BDU benefits founded the Independent Production Fund and increased its funds through other BDU benefits packages. As these were endowments, the Independent Production Fund has been able to make the most of the money and support development and production of hundreds of hours of television drama and, most recently, web series. All from benefits that were first established in 1991.
3501 Unlike the recent spate of broadcast benefits packages, which each expire after seven years, the BDU benefits have provided long-lasting support to the independent production community and, thus, the Canadian broadcasting industry.
3502 Finally, several stakeholders have used this public hearing to raise the issue of genre protection, particularly as it relates to independent Category A services. The WGC would like to confirm its position that genre protection and the resulting genre diversity is an essential element of the Canadian broadcasting regulatory framework whether the services are part of a vertically integrated company or not.
3503 Should the Commission wish to revisit this policy, we recommend that it convene a distinct hearing to allow all stakeholders to fully address the issues. This is not the right venue for such a discussion
3504 In conclusion, the Writers Guild recommends that the Commission impose the following policies in order to prevent potential abuse of their position by vertically integrated companies: prohibition against exclusive distribution of programming; ensure the continued viability of the independent broadcasters, including ensuring equitable access to distribution platforms; pursue an interpretation of the Broadcasting Act that would give the Commission the necessary tools to have an enforceable regulatory framework and reinstate the BDU benefits policy.
3505 I would be happy to answer any questions that you might have.
3506 THE SECRETARY: Thank you.
3507 I would now invite Directors Guild of Canada.
3508 Please introduce yourself and you have 10 minutes.
3509 Thank you.
3510 MR. MURPHY: Thank you.
3511 Mr. Chairman, Vice-Chairs, Commissioners and staff, my name is Peter Murphy and I am the Head of Research and Policy of the Directors Guild of Canada.
3512 Our comments today will summarize and briefly expand on the issues we raised in our written submission: namely, adopting measures to protect independent broadcasting services in today's highly vertically integrated Canadian broadcasting system; requiring the payment of tangible public benefits on transfers of ownership or changes in control of broadcasting distribution undertakings in light of the growing trend of industry consolidation and vertical integration; and three, the strong public interest need for the Commission to continue to publish detailed financial and statistical information of individual speciality and pay television services.
3513 We would also like to briefly comment on the issue of administrative monetary penalties and the view provided by TELUS in their submission to this proceeding.
3514 With regard to the five key areas the Commission intends to focus on during this hearing, the DGC does not have detailed comments or recommendations to offer today.
3515 However, with respect to the third broad area the Commission wishes to address, that is whether there is a need for protection of independent broadcasters, we believe the answer is overwhelmingly yes.
3516 Independent broadcasting services make significant contributions to the Canadian broadcasting system. In our view, these contributions are worth protecting.
3517 As a whole independent services spend a significant amount of money on Canadian programming. They also provide a diversity of voices and programming choice to the system. In addition, the offer another door to knock on for independent producers and their partners in the creative community, including the DGC's members.
3518 Left unchecked, vertical integration could significantly harm independent broadcasting services and threaten the important contributions they make to the system. The Commission must take measures to ensure this does not happen.
3519 You have heard or will hear from the independent broadcasters group and individual independent broadcasters about the difficult challenges they face, especially in today's highly vertically integrated broadcasting environment. The DGC shares their concerns.
3520 We believe they need addition protections to ensure their survival and maintain their important contributions to the system. Independent broadcasters have clearly stated in this proceeding that the Commission's existing rules and policies are insufficient to protect them from potential anti-competitive treatment from vertically integrated BDUs.
3521 The DGC agrees and urges the Commission to consider additional measures to mitigate the potential for undue preference against vulnerable independent services.
3522 Independent broadcasters have proposed specific measures in this proceeding to ensure they are treated fairly by vertically integrated BDUs. We do not claim to be experts in this area and, therefore, will refrain from endorsing specific measures.
3523 We trust the Commission will thoroughly examine the proposals and take appropriate steps to ensure that independent broadcasters continue to have a place in the system now and in the future.
3524 Citing the growing trend of industry consolidation and vertical integration, as part of this proceeding the Commission is re-examining its decision in 1996 to remove application of the benefits test in the case of transfers of ownership or changes in control of BDUs.
3525 The DGC respectfully submits that the CRTC's decision 15 years ago to eliminate the requirement for benefits in BDU transactions was the wrong one. In our view, the emergence of competition in the BDU market was an incorrect rationale for removing application of the benefits test in BDU transactions.
3526 The true underlying rationale for requiring benefits in both BDU and television transactions is that in the absence of competing applications for authority to transfer the ownership or effective control of licence undertakings the benefits test ensures that the Commission, in dealing with such transfers, is presented with the best possible proposal.
3527 In fact, the Commission most recently reaffirmed its underlying rationale for the benefits policy in its decision a few months ago approving BCE's acquisition of CTVglobemedia's licence broadcasting assets.
3528 Specifically, the Commission reiterated that, "The purpose of the policy is to ensure that the applicant has filed the best overall proposal under the circumstances to compensate for the absence of a public call for applications."
3529 In short, the benefits policy ensures that the broadcasting system as a whole comes out ahead when transactions occur. Even if this Commission accepts the rationale given in 1996 to exempt BDUs from the benefits test, the DGC submits that this 15-year old decision is no longer supportable today in light of increasing industry consolidation and vertical integration.
3530 The DGC applauds the Commission for taking another look at the 1996 decision made by a different Commission in a very different time. This Commission has an opportunity to right a wrong, and we urge you to do so.
3531 Before we move on from this issue we must address calls made by some parties in this proceeding to eliminate the requirement for the payment of public benefits in television transactions.
3532 Fortunately, the DGC predicted in its written submission that some parties would use this proceeding to again call for the elimination of the benefits test in television transactions. The Commission must not allow this to happen.
3533 The Commission invited comments as part of this proceeding only on the 1996 decision to exempt BDUs from the benefits policy. This policy for television or radio transaction is not on the table in this proceeding. In fact, following several regulatory proceedings in recent years the Commission has consistently maintained the benefits policy for television transactions.
3534 Given that the underlying rationale for acquiring benefits in both BDU and television transactions is the same, that is the benefits test acts as a proxy for competitive applications, the DGC submits that principles of fairness and regulatory symmetry dictate that the benefits policy be reinstated for BDU transactions.
3535 In response to a request from an independent broadcaster, the Commission sought comments as part of this proceeding on the issue of confidentiality of financial information of individual, specialty and pay television services. The DGC strongly believes, as a matter of principle, that the Commission should maximize transparency of information and data it collects from all licensees. We have consistently expressed the view that it is in the public interest to disclose detailed financial and statistical information.
3536 This information that all broadcasting licensees are required to file with the Commission on an annual basis is an essential tool for assessing the performance of these companies in meeting their regulatory obligations and in assessing their overall contribution to the Canadian broadcasting system.
3537 Transparency and the timely publication of data related to the Canadian broadcasting system are critical for industry stakeholders, such as the DGC, to participate in a constructive and meaningful way in CRTC proceedings. Ongoing and consistent monitoring by industry stake holders, and not just the Commission, is clearly in the public interest.
3538 In short, maintaining access to detailed statistical and financial data of individual broadcasting licensees will allow stakeholders to assist the Commission in its day to day monitoring. This is a good thing.
3539 We believe that the public interest arguments for collecting and releasing this information for all licensees far outweigh any arguments in support of confidentiality.
3540 And before we conclude, we wish to support TELUS's view expressed in its written submission that Section 12.2 of the Broadcasting Act is sufficiently broad to support the imposition by the Commission of a payment akin to an administrative monetary penalty upon a party that breaches its rules.
3541 We agree with TELUS that making orders to pay fines into a special fund that benefits the system by parties who blatantly breach CRTC rules would, to use TELUS's words, "assist with the good administration of the broadcasting system."
3542 We also find the view expressed by the Chair on the first day of this hearing, that any monetary penalties levied would be remedial rather than punitive, a rather compelling argument.
3543 While certainly amending the Broadcasting Act to provide specific powers to the CRTC in this regard would be preferable, in the absence of such an amendment a broad interpretation of Section 12.2 will provide the Commission with the necessary tools to achieve the objectives of the Act. Again, this is a good thing.
3544 That concludes our oral remarks. I thank you for the opportunity to appear before you here today and I would be pleased to respond to any questions you may have.
3545 THE SECRETARY: Thank you.
3546 I would now invite the Alliance of Canadian Cinema, Television and Radio Artists, ACTRA, and Canadian Federation of Musicians.
3547 Please introduce yourselves, after which you have 10 minutes.
3548 Thank you.
3549 MS DOWNEY: Thank you, Mr. Chair, Vice Chairs, Commissioners and staff. It was a great pleasure to see some of you last night at the screening of "Starbuck" a fabulous new Canadian feature film and I thank you for the timing that allowed me to attend.
3550 My name is Ferne Downey, I am a professional actor and ACTRA's National President. Joining me today is Joanne Deer, our Director of Public Policy and Communications.
3551 For those of you who do not know us, we represent 22,000 professional performers who are members of ACTRA, and we also speak for the 17,000 members of the Canadian Federation of Musicians, the foremost organization of professional Canadian musicians.
3552 When we appear before you, our primary objective is always to strengthen our broadcasting system. We want to ensure that we are meeting the objectives of the Broadcasting Act by guaranteeing Canadians the right to see their own stories, particularly scripted drama, in every medium and give Canadian creators opportunities to tell those stories.
3553 Now, before we address some of your specific questions, we would like to raise a concern that not really anyone has talked about yet and that is the issue of asymmetrical regulation that has been magnified by vertical integration.
3554 Vertical integration has created four conglomerates with fingers in every part of the broadcasting pie, program production, conventional broadcasting, specialty television, cable and satellite distribution, new media, as well as conventional and wireless telecommunications.
3555 Now, we have supported these transactions because we understood that they could bring more money for production, opening the door to more Canadian scripted drama, but we also flagged our concern that these growing conglomerates would contain regulated and unregulated entities under the same roof, operating in the same business.
3556 It makes absolutely no sense to us that conventional online and mobile broadcasters within the same family are playing by different rules. Within these new vertically integrated conglomerates you can have several entities acting as broadcasters, one has regulatory obligations to contribute to the Act, the others don't. One must contribute financially to Canadian production from distribution activities, the others don't. One has exhibition requirements for Canadian programming, the others don't. And all of them are competing with unregulated foreign online broadcasters.
3557 You have Bell for example, begging to be able to cut exclusive content deals for its mobile services. Bell Mobile is making content available. It is broadcasting, yet it has no obligation currently to contribute to the objectives of the Broadcasting Act.
3558 This imbalance increases the potential for gaming and destructive practices that threatens to undermine the objectives of the Broadcasting Act and could lead to a reduction in Canadian programming. The risks include: creative revenue allocation between regulated and unregulated entities in the same family to reduce CPE and PNI obligations; skewed investment decisions in programming priorities; and we have already seen how it can lead to calls for levelling the playing field by reducing the content obligations of conventional broadcasters.
3559 Mr. Chairman, we submit that we cannot wait until 2014 to review the new media exemption order. We very much welcome this process and your upcoming look at the over-the-top services and we acknowledge the challenges caused by the ongoing court review of whether internet service providers are broadcast distribution undertakings. But it is imperative that the Commission consider the impact of all of these developments together and develop an appropriate forward-looking comprehensive regulatory framework for broadcasting that includes all platforms and distribution channels, including the internet and wireless.
3560 With vertical integration we see the move towards online and wireless distribution and broadcasting moving even faster then any of us can anticipate. We must fix this asymmetry before Canadian content, in particular drama, falls through the regulatory cracks. It is only by levelling the playing field within these vertically integrated companies to the highest common denominator that the objectives of the Broadcasting Act can be achieved.
3561 I will now ask Joanne to address some of the specific points you outlined for this proceeding.
3562 MS DEER: Thank you, Ferne.
3563 I'm sure some of the other intervenors in this proceeding have a lot more day-to-day expertise and thus will be better able to offer more specific advice on some of the details of existing commercial practices, the challenges of the vertically integrated system and commercial dispute settlement mechanisms. However, on this side of the discussion we would like to offer a few more general comments.
3564 On the issue of exclusivity, we urge you to transform your preference for nonexclusive deals into a permanent regulatory measure. Exclusive deals do not benefit the system. What does benefit the system, and therefore is more in line of the objectives of the Broadcasting Act, is to ensure there are as many markets as possible in which to buy and sell and see Canadian creative content. This will help to maximize audience and put more money back into our system so creators can keep bringing Canadian stories to our screens.
3565 We also submit the content that has been funded in part by Canadian tax dollars must be made available to all Canadians, regardless of who provides their media services.
3566 We also think that exclusivity could have some unintended consequences. Just one of them for example might be increased piracy. If I am a Bell customer and I can't get certain content on my phone because Rogers has the exclusive deal, I can find other ways to get it. I wouldn't, because I know it's wrong, but other people might and not always through legal means and that hurts everybody in the system.
3567 We support strengthening standstill and reverse onus provisions. We also submit there are other things that might be able to be done to address the growing imbalance between vertically integrated conglomerates and small independent broadcasters, distributors and independent producers.
3568 One of these might be to grant third parties the right to bring forward complaints. This would, for example, shift pressure away from a small producer or broadcaster who may be afraid to bring forward a complaint out of fear of repercussions on their future business dealings. It's much easier for a third party to stand up and say, "Hey, something doesn't seem right here".
3569 A second thing you might do is to follow the lead of the U.S. Federal Communications Commission and establish a one-way cost rule permitting smaller players the right to be awarded costs and legal fees if they prevail in a complaint, while preventing the media conglomerate from seeking reimbursement of costs if it should prevail.
3570 Alternatively, you might consider expanding the fund established in CRTC 2011-163 to include funding for small industry players who want to assert their rights in cases of undue preference and disadvantage.
3571 We also support the Commission in using whichever tools you have to implement and enforce regulations and decisions to the fullest extent possible.
3572 The CRTC's regulatory role is as vital today as it was in the '60s, yet things have changed considerably and your existing powers are inadequate in the current environment. We support all efforts to provide you with the authority you need to continue to do your job in the public interest, including the power to impose administrative monetary penalties. We especially like the idea of using those fines and directing them towards a production fund such as the CMF.
3573 Finally, like our colleagues, we urge you to use this opportunity to reverse your decision to eliminate the benefits test for BDUs. This is another case of asymmetrical regulation. The Broadcasting Act requires that each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming.
3574 BDUs are by far the most profitable part of the system and they have achieved this dominant position as a consequence of being, for many years, regulated monopolies. Also, while there are a few technical barriers for a potential new entrant into the BDU marketplace today, there are overwhelmingly practical ones given the dominant position of the big companies.
3575 We submit that you should either reinstate the benefits test when a BDU licence changes hands or issue a public call for applications for that licence. That's how we can ensure the best possible deal for the broadcasting system as a whole when an existing licensee wishes to exit the business.
3576 MS DOWNEY: Mr. Chair, Commissioners, as an actor clearly I am excited by the opportunities provided by the myriad number of platforms out there for Canadians and the whole world to see my work. Vertical integration and technological innovation can be very good things, however, we can't let Canadian content falls through the cracks of asymmetrical regulation. Ask yourselves: How do we ensure that vertical integration creates more opportunities for Canadians to talk to each other, not less?
3577 We urge you to take a proactive approach and head off problems by setting out clear rules.
3578 We would be delighted to answer questions, however, if you ask us to comment further on some of the more technical elements of our written brief we may ask for your indulgence to reply in writing after consulting with our legal counsel who assisted with the brief. He is unfortunately tied up in court all this week, which is why he is unable to join us here today.
3579 We thank you very kindly for your attention.
3580 THE SECRETARY: Thank you.
3581 I would now invite the Canadian Conference of the Arts.
3582 Please introduce yourself, after which you have 10 minutes.
3583 Thank you.
3584 MR. PINEAU: Mr. President, Commissioners, my name is Alain Pineau, I am the National Director of the Canadian Conference of the Arts. The Canadian Conference of the Arts is the largest and oldest cultural coalition in this country. Through our membership, through the organizational members we represent or are concerned for about, I would say, half a million of cultural workers and artists in this country.
3585 Yesterday marked the 66th anniversary of the CCA and for all that time we have been extremely involved in the cultural policy development and following up on developments, including of course broadcasting.
3586 As opposed to our member organizations who represent specific interests, we consider ourselves to be representing common interests, not only of the cultural and heritage sector, but of Canadians in general, our mission being to do everything possible to enhance the cultural life of Canadians.
3587 I'm happy to be here today sitting next to three of our organizational members to comment in this public hearing on the potential effects of vertical integration on the Canadian broadcasting system.
3588 Why am I here? Because the Broadcasting Act is the most comprehensive expression of cultural policy that has ever been adopted by the Parliament of Canada, because broadcasting -- a term which, by the way, is in dire need of being redefined -- because broadcasting is the most largely consumed cultural expression and is a crucial part of the Canadian cultural ecology and economy.
3589 Why have I been here so often? Because during the past five years in this town is where major cultural policy decisions have been made, in what I can only describe as a somewhat haphazard order in discussions that are too often narrowly focused on specific issues and with increasing references to market forces and bottom-line considerations, two criteria that rarely portend well for the health of the Canadian cultural sector.
3590 A few comments about process. For quite some time now the Commission has adopted a rear-view mirror approach to policy making. As many have pointed out, you first let the horses out of the stables and later on you hold a hearing on whether the latch should have been opened or whether there should be fences around the field. The main horse is still outside the fence, and that is the internet.
3591 For several years now we have argued that the Commission should review its decision to exempt so-called new media from any form of regulatory overview. If you cannot regulate the internet, you most certainly can regulate the companies that bring it to Canadians at considerable rate and return on their investments.
3592 We were hoping that the current consultation would mark a change of approach and we deplore the fact that a reconsideration of the Commission's broadcasting regulatory policy 2009-329 is not currently scheduled to take place until 2014. It has been, and remains, CCA's position that this review should take place immediately.
3593 From that perspective it is most unfortunate that the Commission has locked itself into a judicial process which will likely delay any such reconsideration for up to two years.
3594 Vertical integration should mean that you now look at the various limbs of the giants that you have created with the same regulatory lens. If Shaw Cable, Shaw Satellite, Shaw Television Services and Shaw Radio Stations have to contribute to the funding of Canadian programming, then why exactly should Shaw's internet and Shaw's eventual wireless service not do the same? This is the kind of level playing field for Canadian culture we advocate as opposed to the deregulate everything push from some of the most vertically companies in the field.
3595 To conclude this preliminary section, let me say that we fully support your position, Mr. President, that it is high time that we consider merging the Broadcasting Act and the Telecommunications Act and that we review the role and powers of the regulatory body. This must be done in the context of a large public debate which goes well beyond the walls of this institution. It is our hope that the stability of the current Parliament will ensure that this principled public made will take place based on the necessary priority consideration to our cultural objectives as a distinct Canadian nation.
3596 Now, moving on to the potential evils of vertical integration, the topic of today's conversations, over the years from one decision to another and without the benefits of a cultural policy road map, the Commission has allowed the creation of one of the most vertically integrated, if not the most vertically integrated broadcasting system in the Western world.
3597 The CCA shares the opinion expressed by other intervenors that the coexistence of regulated and on regulated media platforms in the same vertically integrated companies raises new concerns about potential adverse effects on broadcasting policy objectives.
3598 As my colleagues at ACTRA point out, the attraction of being able to deliver new media services free from exhibition or contribution obligations may skew investments and programming priorities.
3599 We also agree with the Association des producteurs de films et de télevision du Québec, APFTQ, another of our members, that the Commission's main objective must be the establishment of a flexible framework that ensures that the broadly redefine Canadian broadcasting system offers Canadians programming which is distinctively Canadian.
3600 This requires the Commission to adopt a global perspective, taking into account the role of creators and independent producers in the system. It includes also taking into account the differences which exist between the French and English markets and the role of the public broadcaster in the rapidly evolving media environment. Once again we are concerned that the narrow scope of the current process does not allow for such a comprehensive approach on the issues at hand.
3601 How often have we heard in this forum the passionate statement that, "Oh, we need big, strong, tall Canadian companies to be able to defend against foreign threats"?
3602 Will this unprecedented integration of business interests lead to more and better Canadian content? I tend to support TELUS' view that it is unlikely that vertically integrated companies will use their profits to gamble on content. To quote TELUS' Senior Vice President of Government and Regulatory Affairs, Mr. Michael Hennessy:
"...vertical integration will have a negative impact on open access to content, competition, consumer choice, and contributions to the Canadian broadcasting system."
3603 It will, if it is left unregulated. Your role is to act as the custodians of the cultural objectives of the Act and to regulate where regulation is needed. This is the case here we think.
3604 Now, to some of the main issues at hand -- I am not covering everything, it's part of our memoir presented earlier -- the CCA agrees with the Commission's view that with specific regards to programming rights it is generally preferable to see distribution of programs on a nonexclusive basis as this enhances consumer choice and furthers a competitive workplace.
3605 For obvious reasons the CCA agrees with the position that Canadian programs, particularly those which have been supported with public funds such as the Canada Media Fund, should be made available to the widest number of Canadians on whatever platform they choose to use. In other words, Canadians should have every reasonable opportunity to view the programs they helped fund through their tax dollars.
3606 And I include here the money that some components of the system are required by the Commission to contribute to the various production funds which have been created over the years. This is public money paid for by private companies for the privilege of using public property, a notion which, need I remind you, we would like to see extended to all distribution platforms.
3607 The CCA is of the opinion that the Commission's undue preference rules are insufficient to protect independent broadcasting services from potential anti-competitive treatment by vertically integrated BDUs. This is a matter for concern since independent broadcasting services, as has been mentioned before, make significant contributions to the Canadian broadcasting system and, as such, are worth protecting.
3608 As a whole they spend a significant amount of money on Canadian programming and provide a diversity of voices and programming choice to the system. The CCA agrees with TELUS that it is insufficient to merely prohibit the exclusive distribution of content. Such a prohibition must also be accompanied by principles relating to the negotiation of fair and reasonable terms in order to be effective.
3609 The CCA therefore urges the Commission to give serious consideration to the principles put forward by TELUS to ensure that vertically integrated BDUs do not use any possible loophole to give themselves undue preference when it comes to content distribution.
3610 Finally, concerning tangible public benefits, the CCA argues that unless the Commission is prepared to entertain competing proposals in transfers of ownership with an auction-like process to ensure that the best possible proposal is realized in the public interest, then the appropriate approach continues to be the requirement to pay tangible benefits in both television and BDU transactions.
3611 Thank you for your attention and I will be happy to answer questions to the best of my capacity.
3612 THE CHAIRPERSON: Thank you very much for your various presentations.
3613 Writers Guild, on page 5 you say you are against exclusivity but as a fallback if we allow you say the WGC proposal limiting exclusivity to content that has not been funded directly or indirectly by public monies.
3614 Give me the rationale for that.
3615 MS ASHTON: The rationale is that if it has been funded by Canadians all Canadians should be able to see it.
3616 THE CHAIRPERSON: How do you define indirectly funded?
3617 MS ASHTON: Much as the CCA referenced to the BDU monies, which are paid by the BDUs by CMF, are required to be paid either CRTC so we look at those as public monies, though they are indirectly public.
3618 THE CHAIRPERSON: But take something like the Olympics, is that indirectly publicly funded?
3619 MS ASHTON: I believe you made the analogy yourself that they were funded by taxpayers.
3620 THE CHAIRPERSON: Yes. I'm asking for your interpretation. I'm trying to get some clarification of "indirectly funded".
3621 I mean it depends how far you push it, you know, practically anything is indirectly funded.
3622 MS ASHTON: I see the dilemma there. It may be easier to set up some guidelines that are more specific that relate to funding through various organizations such as CMF or the independent production funds or tax credits.
3623 THE CHAIRPERSON: That's really your primary focus.
3624 MS ASHTON: That's our major concern. We are actually not at all concerned with sports.
3625 THE CHAIRPERSON: Yes. Okay.
3626 Now, Directors Guild, you suggest that we should reimpose benefits on the sale of BDUs and you say the rationale is the same as that for imposing it on a broadcasting undertaking. Everybody before you so far has said that rationale only applies to broadcasters, it doesn't apply to BDUs.
3627 I presume you have followed the hearing, you heard what they said, why do you feel it does apply to BDUs as well?
3628 MR. MURPHY: Well, we have to have disagreement there obviously.
3629 I think that for us just seems to be the underlying rationale rather than a competition issue. Regardless of how easy it is to enter the market, the simple fact is you are changing the licensee from the person the Commission licensed to somebody else. The Commission hasn't anticipated that and so unless there is some kind of competing process for that, then we think the benefits are the only way to really ensure that we are getting the best deal.
3630 THE CHAIRPERSON: Yes, but I mean what I have heard you saying is look -- let's say for instance Aurora Broadcasting was bought by Rogers, before Rogers bought it there was actually competition for it, presumably Shaw bid for it and so did Cogeco, et cetera, Rogers just wound up the winner. So there is competition for it so in effect you have a market for it, it's not unrestrained.
3631 That's the argument they put forward. You obviously don't believe that holds any water. Explain why.
3632 MR. MURPHY: No, it's not sort of a public competition for you, it's a public licence, it's given out by the Commission.
3633 CHAIRPERSON: That being the difference, okay.
3634 And then, ACTRA, on page 2 you mention that, essentially, you want the Commission to consider the impact of all of these developments, together with the development of an appropriate, forward looking, comprehensive, regulatory framework for broadcasting that includes all platform distribution channels, including the internet and wireless.
3635 You are pitching to the converted, but I don't think we have the jurisdiction to do that.
3636 MS DOWNEY: I remain optimistic.
3637 Johanne Deer, would you like to give a more detailed answer than optimistic?
3638 MS DEER: Well, I think to the greatest extent that you can, and obviously there are things that you can do to look at the whole system.
3639 As we said earlier, our big concern is partly the fact that we have -- within vertically integrated companies, you have what we would argue are people broadcasting with rules and people broadcasting without rules, and we think that doesn't make sense and we need to create a level playing field and close any loopholes, and just raise the bar overall.
3640 For example, I know that Shaw and others will say, "That will hamstring us. Let's not anticipate problems that aren't already there."
3641 I think this morning someone used the analogy of getting into an elevator. If we stood in the elevator and worried about everything that could go wrong, we would never get anywhere.
3642 My immediate thought in response to that was: When I get into an elevator, I am actually pretty confident when I push that button, and I can move forward because I know that the elevator has been inspected and it has rules.
3643 So we would argue that it doesn't cut innovation to have regulation. In fact, we believe that it does the opposite, in that it lets people be able to take risks because they know what they are going to be able to do.
3644 THE CHAIRPERSON: Surely enforceability is a much bigger issue. But even if we did that, we could only deal with Canadian distributors of content over the internet. We can't do anything in regard to foreign ones, and we would, in effect, hamstring the Canadian ones by imposing regulatory burdens on them which are not imposed on foreigners.
3645 MS DEER: I think that's something that we are going to look at further in the over-the-top issue that you will be doing, but --
3646 THE CHAIRPERSON: Right, but that is sort of the underlying rationale why everybody says: Don't touch the internet, because all you are going to do is burden the domestics, and you can't do anything about the foreigners, anyway, which come into this country.
3647 MS DEER: I think that is something that we actually want to look at more, in terms of a legal perspective, whether or not there are things that you could do. If you could tell Netflix or Apple iTunes Canada -- you know, at least get them to -- enforce shelf space for Canadian content, for example.
3648 So, yes, I think that is something that we want to look at more, in terms of exactly what it is you are able to do.
3649 THE CHAIRPERSON: The Canadian Conference of the Arts: On page 3, in the bottom paragraph, you say: "The CCA agrees with the Commission's view that, with specific regards to programming rights, it is generally preferable to see distribution of programs on a non-exclusive basis..."
3650 Why is the word "generally" in there? When would it not be preferable?
3651 MR. PINEAU: I didn't have the same pages as you do, but I have found the passage now.
3652 THE CHAIRPERSON: You have the subheading, "Now to some of the main issues at hand," and it's the first bullet.
3653 MR. PINEAU: Yes.
3654 No, quite frankly, I would be quite happy to drop the word "generally".
3655 I have to apologize for the fact that this deck, as you may have seen from the beginning, was sort of cobbled together maybe about an hour before I got here, so I didn't have time to go through it with a fine-tooth comb.
3656 "Generally" is probably unnecessarily there.
3657 THE CHAIRPERSON: Thank you.
3658 Candice, do you have questions?
3659 COMMISSIONER MOLNAR: Thank you.
3660 I would like to begin with a couple of questions to make sure I am understanding the submission made by ACTRA.
3661 On page 4, in the first paragraph, you talk about the notion that a third party could bring forward a complaint.
3662 Are you suggesting that dispute resolution be available to parties that aren't part of the commercial transaction?
3663 MS DEER: Yes. I think we are just exploring the possibility of allowing third parties to bring forward a complaint on their behalf.
3664 COMMISSIONER MOLNAR: Give me a little more detail.
3665 Could you give me an example of what you are suggesting?
3666 MS DEER: For example, if you had someone who was very close to a production; not necessarily the producer, but someone else who was working on the production and had a pretty good sense of how these deals usually work.
3667 Say it was the lead screen writer or a lead actor on the production. They could go back and take it to their union or guild and ask the Commission to explore it on their behalf and investigate it, so that the onus is not always just on the producer or the independent broadcaster to bring forward the complaint.
3668 Because just in terms of raising concerns and saying "Something is fishy here --"
3669 I think a lot of times -- and you will hear this from the independent broadcasters, in particular, I'm sure -- there is a lot of fear in the system, and often they will let stuff slide because they don't want to put their neck on the line, basically.
3670 COMMISSIONER MOLNAR: So funnelling their complaints through third parties.
3671 MS DEER: Not necessarily actively funnelling, but someone else might see something.
3672 COMMISSIONER MOLNAR: Okay. I want to move on to the next paragraph. The last sentence in that paragraph says: "Alternatively, you could expand the fund established in the..."
3673 And that is the CTV benefits decision, I believe.
3674 "...to include funding for small industry players who might want to assert their rights."
3675 Could you give me a little more detail about that? How would you see that working?
3676 MS DEER: It is my understanding that all the parameters of that fund haven't yet been worked out. For example, maybe that's something that a small independent broadcaster or a public interest advocacy group could use to help fund complaints when they see things going on in the system.
3677 Because, again, you hear a lot of small broadcasters say that it can be very -- sometimes it's cheaper to let it slide than to go with the risk of expensive litigation.
3678 COMMISSIONER MOLNAR: So, essentially, they would apply to the fund to be compensated for their costs.
3679 MS DEER: Yes.
3680 COMMISSIONER MOLNAR: I have a couple of questions, and I am going to open it up to all.
3681 All of you comment on exclusivity, and none of you comment on skinny basic, and I am going to ask you about both of those.
3682 First of all, generally, all at the table have a common position on exclusivity, and I understand the position that you put forward, but I wanted to have your response to the position that has been put forward by some of the vertically integrated companies, so I grabbed Bell's opening statement, and here is what they said -- and I am just going to read from the statement that they provided to us a couple of days ago.
3683 They said: "Exclusives can be an important funding and promotional mechanism for innovation and for supporting the creation of more and better Canadian content."
3684 It would appear that you don't support that position, but can you tell me why?
3685 MS ASHTON: I, myself, when I heard that, my question was, "How, exactly, do exclusives fund more content," because I don't believe they explained that.
3686 I start from that premise.
3687 I understand that exclusives can get more subscribers for their service, but I don't believe that should trump access to that content by the Canadian public who funded the content.
3688 I am putting the public interest ahead of their private interest.
3689 COMMISSIONER MOLNAR: Does anybody else want to comment?
3690 I think they used an example, such as the platforms they built when they had exclusive rights to the Vancouver Olympics, the mobile rights, to say that that enabled them to build a platform for innovation and so on.
3691 But I am not here to speak on their behalf.
3692 MS DEER: I guess one response to that is, how do we know that they wouldn't eventually have had to come up with those?
3693 I mean, they are going to have to invest in this stuff anyway, and create ways for that content to be delivered over mobile devices.
3694 So it's quite likely that they would have made that investment and had that innovation regardless of whether or not they had exclusive rights.
3695 COMMISSIONER MOLNAR: Fair enough. I just wanted to give you -- because they promised more and better for the Canadian --
3696 Yes, please, go ahead.
3697 MR. PINEAU: I would echo what my colleague Kelly Lynne Ashton was saying earlier. First of all, they should explain exactly what they mean, because it's not for me to try and guess what it is they are referring to.
3698 If the example they gave -- and I could not follow the hearings at the beginning of the week -- was related to sports, I would go back to the one question that Mr. von Finckenstein asked me about the "generally". I think the "generally" was there because I wasn't quite sure about sports rights and that sort of stuff.
3699 I think that may be the case for the Olympics, for example, and I could say that, when you have exclusive rights to the Olympics, you have exclusive rights to the Olympics.
3700 Currently I have to switch channels if I want to see the Olympics on this or that channel, and the extended devices I think --
3701 But that's not for me, really, to dig into.
3702 COMMISSIONER MOLNAR: Okay. Thank you.
3703 As I mentioned, I would like to get the opinion of all of you as it relates to the issue of skinny basic. If you have been listening to our hearing this week, you will know that many groups have been questioned on should the Commission be looking at a pared-down basic service to address issues of potential affordability in choice.
3704 You, I know, in this proceeding, have very much supported support for independent broadcasters. You have also put forward support for consumer choice. So where do you sit on this issue?
3705 MS DOWNEY: At ACTRA we sit in favour of skinny basic as being a sane alternative for consumer choice, very much so.
3706 MR. MURPHY: Yes, I don't think that we have a hard-and-fast position on it, but we can see the point that the Chair was making earlier in the hearing about -- we do live in a world where the consumer now has a lot more power than they had before, and they sort of choose.
3707 So if the idea of skinny basic is framed in that sense, then I think we could support that idea. Whether or not there is a market for it -- that's what is being told to you by the BDUs -- that's something else.
3708 It's hard to judge if there is a market if it doesn't exist. If it existed, then they might know if there was a market for it.
3709 MS ASHTON: I think there are a number of competing interests dealing with this, and it is very complicated, as we have seen throughout the course of this week and from the last time we addressed skinny basic in the BDU hearing.
3710 There is consumer choice, but then there is also ensuring that there are enough channels in the basic package that those smaller channels get the support they need.
3711 We are really caught in the middle between those two issues, so I can see both sides, which is sort of a non-answer, I know, but it's the one I have.
3712 MR. PINEAU: As I mentioned earlier, I could not follow the hearing so far, but at first blush, and subject to deeper consultation and study, it seems that the concept of skinny basic would make sense, but under all reserves.
3713 COMMISSIONER MOLNAR: Thank you, those are my questions.
3714 THE CHAIRPERSON: Steve?
3715 COMMISSIONER SIMPSON: Good afternoon, and thank you very much for coming.
3716 Mr. Murphy, with respect to your position on the importance of independent producers -- independent broadcasters -- you said that this gives the creative community another door to knock on other than the VIs.
3717 How big is that door with respect to the importance of it?
3718 MR. MURPHY: I think it is rather important.
3719 I think the Independent Broadcast Group and some of the independent broadcasters put out some numbers, and I will just cite some of their numbers.
3720 For example, in 2008-2009, independent broadcasters contributed $318 million to the production and acquisition of Canadian programming. That is more than 40 percent of their gross revenues.
3721 And $110.3 million of that went to independent Canadian production.
3722 As well, they have a five-year time span here where there will be $478.4 million spent on Canadian independent production.
3723 So I think it's a rather significant amount.
3724 COMMISSIONER SIMPSON: Thank you, that was extremely helpful. I wasn't expecting that thorough an answer, and that's just great. Thanks for being prepared.
3725 With respect to the Writers Guild submission, there are a couple of quick points.
3726 You made the point of saying that one of the downside consequences of vertical integration is that this group of three or four has the potential of bidding up both the American and Canadian programming, and I understand your point that it could, potentially, freeze out the independents.
3727 But from the standpoint of where the dollars come from, when you are a writer or a producer or an actor, why do you take the view that the bidding up of Canadian content is a bad thing?
3728 MS ASHTON: It's not just the bidding up, it's concentrating the Canadian content in the large broadcasters; freezing out so that we have less diversity.
3729 It is important to creators to have a variety of different doors to be able to go to, so that when they have different kinds of content, there are options.
3730 The large broadcasters tend to be looking at mass audience, and there is a particular kind of content that they are looking at.
3731 So if you were trying to create a niche product, you would want to be able to have other smaller doors to go to.
3732 COMMISSIONER SIMPSON: Okay. Thank you, that was a great answer.
3733 On exclusivity, just moving to the generality of it, in looking at the downside of it, I have two questions. On the downside of exclusivity, would you expand a bit on why you feel --
3734 Because my interpretation of exclusivity is that it is usually attached to a premium price, in order to get that exclusivity.
3735 Would you tell me why you put forward a negative inference on that?
3736 MS ASHTON: We are not likely to see any benefit from that premium price. The way the deals are going between the broadcasters and the platform, the producers and the broadcasters, it is unlikely that we will see any benefit from that.
3737 So the tying up of those rights for no additional revenue is a problem. If they were free, then the producers would be able to negotiate different deals, and the broadcasters would be able to negotiate different deals, with multiple parties, and there is a likelihood of greater revenue that way.
3738 COMMISSIONER SIMPSON: Continuing on that line, do the Terms of Trade not help ameliorate that problem?
3739 MS ASHTON: We will have to see. It only just started June 1st. There are terms in there saying that there will have to be negotiated rights, but it is a whole new world, and that's not the way it has been working for the last few years.
3740 COMMISSIONER SIMPSON: Okay. Now, this is a question for all of you with respect to exclusivity.
3741 We are always proud of Canadian content and Canadian talent -- and, by the way, last night I gave four thumbs up on that performance. I thought it was a spectacular movie, but that's as far as I'll go.
3742 With respect to exclusivity -- and this is to all of you -- looking at the mirror from the other side, we now have major players within this country that are able to swing the bat, I think competitively, with their U.S. counterparts and world counterparts with respect to being able to bring that kind of product to the world.
3743 As we all know, financing is one thing, distribution is another.
3744 So, from the exclusivity standpoint, looking from Canada outward, are there, in your minds, any upside opportunities with respect to being able -- as creative people and institutions, being able to partner with these companies, to be able to actually get our stuff not only exhibited within this country, but around the world?
3745 MS DEER: I am not sure that you need an exclusive deal to do that. Absolutely, we agree that we have the talent there to do it, but we are not always convinced, as we have seen in the past, that broadcasters will give priority to Canadian programming.
3746 Just to give one quick example, I was on "globaltv.ca" the other day, just to see what kind of stuff they are putting on their website for folks to see, and I counted 2 Canadian scripted series out of 36 shows that they have on there.
3747 And they have stuff on there like The Facts of Life and Good Times, which -- I am not saying they are bad programs. They are 30 years old, but I would like to think -- I mean, Shaw, who was here this morning, was talking about all of this fabulous Canadian programming they are creating, but we are not necessarily seeing them promoting it on their other platforms, as well.
3748 So going forward, in terms of exclusivity, there is nothing -- no incentives at this point in time for them to make exclusive deals with Canadian programming.
3749 COMMISSIONER SIMPSON: But that's now. This is pretty much forward cast in terms of trying to understand the implications.
3750 I understand full well the way the world has worked in the past, that when you took your product and shopped it domestically, you always got 50 percent, 30 percent, 60 percent of what you had in the product, with the Canadian networks knowing full well that your job was now to go to Cannes and the other markets and try to recoup your investment.
3751 There was always that sort of underlying deal, the way it worked.
3752 Would not exclusivity, or at least an attempt by the creative community to find an exclusive arrangement, change that balance?
3753 Because I know that you are working on history, but we are looking at a new world here.
3754 The answer is: We don't know.
3755 MS ASHTON: No, I actually don't think that the kind of premium that they are willing to pay for exclusive rights is going to remove the need for additional financing. We still are going to have to go to MIPCOM and do those sales for the higher budget. If you can't produce it -- finance it in Canada, that is not going to change.
3756 MR. MURPHY: If I could just add, I think from a non-financial perspective, as we represent creators, their view would be that they want as many people as possible to see it. So an exclusive deal is automatically going to limit the amount of eyeballs that get to that product.
3757 COMMISSIONER SIMPSON: That hasn't hurt Mad Men.
3758 Thank you very much.
3759 THE CHAIRPERSON: Michel?
3760 COMMISSIONER MORIN: Thanks, Mr. Chair.
3761 I will ask my question to Mr. Pineau, but if others want to step in, please do.
3762 Monsieur Pineau, comme faisait allusion mon collègue Simpson à propos des industries créatives, le Canada est un bien grand pays et comment pourrait-on nier l'exclusivité sur des plateformes mobiles? Et là, j'enlève complètement l'aspect financement public et financement à partir des fonds du CRTC, mais de l'argent neuf des quatre grands distributeurs. Netflix peut conclure des contrats d'exclusivité aux États-Unis pour vendre ça au Canada, pour vendre ça aux Canadiens, et quelle est la réponse?
3763 Vous êtes une association nationale. Vous représentez toutes les régions. Je ne suis pas sûr que l'exclusivité serait définie de la même façon au Québec par Bell avec IPTV et Vidéotron que dans l'Ouest du pays.
3764 Donc, cette part d'exclusivité que pourrait avoir Rogers dans le marché central pourrait être différent d'un marché à l'autre, mais une bien meilleure réponse que si on dit à tout le monde, pas d'exclusivité, tout le monde a accès aux mêmes...
3765 Autrement dit, n'y aurait-il pas une stimulation régionale à répondre au géant américain avec une offre régionale exclusive? Et on parle de plateformes mobiles. Et pour les industries créatives que vous représentez, est-ce que ce n'est pas un défi qui serait stimulant que de travailler pour des plateformes mobiles en exclusivité avec une des quatre grandes entreprises intégrées?
3766 M. PINEAU : Je pense que la réponse à votre question, si j'ai bien compris l'exclusion que vous faisiez au début, à savoir que tout ce qui est payé avec de l'argent public, il y a déjà une pénurie grave d'accès à des programmes canadiens, il n'y en a pas assez pour commencer, on le sait, et ceux qui le sont pourraient être distribués le plus vastement possible.
3767 Une fois que vous avez exclu ça, je vous avoue que si c'est de l'argent de la compagnie qui investit dans sa programmation, ça tomberait sous le "generally" que j'avais enlevé tout à l'heure et que je remettrais là-dedans. Je pense que c'est quelque chose qui serait acceptable, définitivement, surtout si ça rend plus compétitive et plus intéressante la production de contenu régional. Je trouve que votre idée d'une étude pourrait être fort intéressante, effectivement.
3768 Je vais laisser à mes collègues le soin de répondre de leur point de vue, parce que ce sont eux qui sont dans l'industrie directement, alors que moi, je fais un espèce de survol à 35000 pieds.
3769 MR. MURPHY: It's a difficult question. I wonder if regional exclusivity deals would only serve to entrench those businesses in those areas, so then we would be left with, really, nothing even remotely national in that.
3770 COMMISSIONER MORIN: As a first step.
3771 You don't know, because perhaps at the end, after one year some other vertical integrator will conclude a new deal with Rogers or Videotron which offer in the first phase a program, an exclusive program for the regional market.
3772 MR. MURPHY: Yes. It's a difficult question and I don't think -- I don't think it's something we say we would support off the top of our head. We maybe need to think about the idea a little bit.
3773 THE CHAIRPERSON: Why don't you reflect on it and if you have time for a further submission put it in that.
3774 COMMISSIONER MORIN: Thanks. That's it.
3775 THE CHAIRPERSON: Okay.
3777 COMMISSIONER PENTEFOUNTAS: Thank you.
3778 Hello, good afternoon.
3779 Mr. Pineau, you were speaking at some point about the horses and stables and barns and I'm a city boy. And at the end of the day I think your point was that we can't regulate the internet but we can regulate the companies that bring content to Canadians.
3780 Would you like to expand on that and tell us how we would go about doing that?
3781 MR. PINEAU: Well, yeah. I mean the phrase is that you can't regulate the internet. You can't put quotas on the internet. You can't do this and that and, quite frankly, that's not where I was going. Of course you can't regulate the internet in that sense.
3782 What you can do, and you will notice that in this instance and in past appearances here, ever since I came here for the first time in 2006 for the Commercial Radio hearing, we have been pushing the notion that you know platforms -- distribution platforms are distribution platforms.
3783 It is in that sense that I was saying and focusing entirely on the contribution to the production through a contribution based on the same model as BDUs and satellite and radio and television all for broadcasting. That's essentially what we are saying.
3784 COMMISSIONER PENTEFOUNTAS: But you are not talking about somehow taxing BDUs or internet companies? You don't have a formula that attacks them to deal with --
3785 MR. PINEAU: No. Some attempts have been made and I have --
3786 COMMISSIONER PENTEFOUNTAS: Well, I know we can't but that's what I'm getting -- I want to see if there are some new ideas that are coming out of Mr. Pineau.
3787 MR. PINEAU: Well, maybe you can't under the current Act and that's one of the reasons why this has got to be reviewed and urgently. Quite frankly, that's required.
3788 I'm not a legal expert. I know that the issue has been pushed, unless I'm mistaken to the courts as well. But I think ideally that's where we want to go.
3789 And this contribution -- you know, there used to be that -- well, there is no point. ISPs are just transmitting data and it has got nothing to do with cultural content.
3790 Well, that's less and less true, isn't it? I mean, they sell me their devices by telling me that I will be watching my movies, my programs, my sports, listening to my music and that's what I do.
3791 So you know --
3792 COMMISSIONER PENTEFOUNTAS: I get it. I thought you had something --
3793 MR. PINEAU: You know?
3794 COMMISSIONER PENTEFOUNTAS: There is no formula there.
3795 MR. PINEAU: No. So formulas themselves as to where the proportion should be, I'm only aware of one attempt to establish one and it already dates a bit from Peter Grant who a couple of years ago, I think, or three years ago had at the time an estimate of what the content was and, you know, tried to establish a percentage that would be a contribution.
3796 I think he had at the time established it at about 2.5 percent. I think this kind of study and this kind of reflection needs to be done again as we wait for you to have the power to do what's required.
3797 COMMISSIONER PENTEFOUNTAS: Okay. I thank you for that.
3798 And at one point you were referring to the reason why you have been here for the past five years and there is a greater concentration towards market forces and bottom line considerations and that is néfaste or unhealthy for the Canadian cultural system.
3799 Do you recall that part of your presentation?
3800 MR. PINEAU: Absolutely.
3801 COMMISSIONER PENTEFOUNTAS: Okay.
3802 I understand all that but you do know that we are imposing some rather serious financial pressures on broadcasters through -- I mean I'm sure you know you follow the group licensing proposal. You were -- you had an intervention during that, I think.
3803 So you understand that there are significant amounts of money, one through the group licensing thing and conditions of licence and, secondly, through the two major transactions that have occurred over the last couple of years.
3804 So there are hundreds of millions over the next five years. You know, people are throwing out all kinds of numbers perhaps in the billions that will go towards creative works, most of them descriptive.
3805 There is money there and there are -- and if these companies are not profitable then there won't be money, right?
3806 MR. PINEAU: I fully agree with you on that front. They have got to be profitable. For too long though that seems to be the only and driving consideration.
3807 I acknowledge and welcome the fact that the pendulum has started swinging back somewhat. I mean, you know, the 1999 Decision has been changed completely and I'm just here to prod you to do even more and better.
3808 COMMISSIONER PENTEFOUNTAS: Well, we all have to know there are limits to these things.
3809 I just want to get one question, Madam Downey. By the way, great from yesterday; that opening scene was a testament to Canadian culture.
3810 That being said, you mentioned you represent 22,000 actors in Canada.
3811 MS DOWNEY: Yes.
3812 COMMISSIONER PENTEFOUNTAS: And I was doing some math with one of my colleagues. That seems like a lot of actors.
3813 How many actors are members of the Screen Actors Guild in the States?
3814 MS DOWNEY: Oh, way more.
3815 COMMISSIONER PENTEFOUNTAS: 10 times like 220,000, like 10 times that amount really?
3816 MS DOWNEY: Yeah. No, I represent --
3817 COMMISSIONER PENTEFOUNTAS: They have got a quarter million registered actors in the States?
3818 MS DOWNEY: I am not sure. I don't know. They are currently merging with ACTRA, their sister union, but a couple hundred thousand I think between both memberships. I could get you the number.
3819 When I say 22,000 some of us are actors. Some are stunt performers. Some are stunt coordinators. Some are puppeteers. Some are dancers. Some are singers. I mean it's a diversified professional community.
3820 COMMISSIONER PENTEFOUNTAS: Dancers and singers and the puppeteers are also a part of the Actors Guild?
3821 MS DOWNEY: Everybody. We are not -- yes.
3822 COMMISSIONER PENTEFOUNTAS: Okay, great.
3823 MS DOWNEY: Yes, singers too.
3824 COMMISSIONER PENTEFOUNTAS: Thanks.
3825 THE CHAIRPERSON: Okay, thank you very much. Those are our questions for you. Thank you for your submission.
3826 We will take a five-minute break so we let the other ones set themselves up.
--- Upon recessing at 1443
--- Upon resuming at 1456
3827 LE PRÉSIDENT : Bonjour. Commençons.
3828 THE SECRETARY: Thank you.
3829 We will now proceed with the presentation by the Canadian Association of Public Educational Media and Société de télédiffusion du Québec (Télé-Québec).
3830 Please note that I have been asked to announce that the Association for Tele-Education in Canada as listed on the agenda has changed its name to the Canadian Association of Public Educational Media.
3831 Please introduce yourselves for the record, after which you will have 10 minutes for your presentation.
3832 Thank you.
3833 MS de WILDE: Good afternoon, Mr. Chairman, Mr. Vice-Chair, Members of the Commission, members of the Commission staff.
3834 My name is Lisa de Wilde. I am the Chief Executive Officer of TVO but I am here today in the role of Chair of our newly named The Canadian Association of Public Educational Media.
3835 With me today:
3836 - on my left is Glenn O'Farrell, who is the President of TFO;
3837 - on my farther left, Michèle Fortin, who is the President of Télé-Québec;
3838 - on my right is Stephen Zolf, who is a Partner at Heenan Blaikie.
3839 Our colleague Rudy Buttingnol, who is the President of Knowledge in British Columbia, was unable to be in Gatineau today. He had a previously scheduled board meeting.
3840 We appear today to address the Commission's call for proposals to address the growing trend of industry consolidation and vertical integration in the Canadian broadcasting industry.
3841 Our Association -- its precursor -- was formed in 1974 to advance the goals of public provincial educational broadcasters who produce, acquire and distribute educational programs and services using television and other media.
3842 Our members, comprising Knowledge, Télé-Québec, TVO and TFO, are financed by the taxpayers of each of our home provinces and they have each been designated by the province as the designated provincial educational broadcasting authority. And in the context of his hearing we are some of those smaller independent broadcasting services that have been mentioned in your Public Notice.
3843 The essential role of educational broadcasters in French and English in the Canadian broadcasting system is the result of complex federal-provincial negotiations way back in the late 1960s, early 70s. Those negotiations were ultimately enshrined in the federal Broadcasting Act, in regulations, in CRTC policy and in provincial legislation.
3844 The Broadcasting Act describes educational services as "an integral part of the Canadian broadcasting system." We each devote a significant portion of our operating budgets to Canadian content. As publicly financed services, we operate with limited budgets.
3845 Fundamental to our success is the CRTC regulation that ensures that educational services are distributed on the basic service in their home province. This has now been expanded to include DTH along with the existing cable in the amendments to the regulations which will come into effect on September 1st of this year. This ex ante regulatory provision is an essential safeguard to our ability to contribute to the diversity of programming available to Canadian viewers.
3846 Going forward, it will be important to ensure that educational services be included in any skinny basic service, however that might be defined, when it's distributed in the home province of each of our services.
3847 The combination of high ownership concentration and vertical integration that now characterizes the Canadian market raises the need for safeguards to ensure that small, independent standalone services can continue to contribute to the objectives of the Broadcasting Act.
3848 Canada's top four BDUs -- that's Rogers, BCE, Shaw and Quebecor -- together control over 70 percent of the entire Canadian BDU subscriber base and every one of those BDUs owns a large stable of conventional and specialty services. This degree of concentration and vertical integration raises challenges and concerns for the continued vitality and plurality of independent voices and programming diversity in the system.
3849 While there may indeed be potential benefits, including cost savings and increased efficiencies from vertical integration, the Commission does need to be mindful of the new challenges and the potential conflicts of interest that are raised in a vertically integrated environment.
3850 Priority carriage for educational services is necessary to ensure programming diversity but is not in and of itself an assurance that educational services will be treated fairly.
3851 M. O'FARRELL : Donc, nous participons à cette audience avec l'objectif de promouvoir des règles claires, transparentes et porteuses pour faciliter les relations entre les services de programmation éducatifs et les télédistributeurs, et ce, pour éviter, dans la mesure du possible, la nécessité de faire appel au Conseil.
3852 Notre Association s'intéresse à certains enjeux. J'aimerais vous les noter.
3853 Premièrement : Les nouvelles plateformes de distribution.
3854 Les services de télévision éducatifs sont aussi entièrement dépendants des entreprises de distribution de radiodiffusion (les EDR) verticalement intégrées quant à l'accès aux plateformes sur demande et aux plateformes liées aux EDR en ligne. Un accès garanti à ces nouvelles plateformes est donc crucial pour que nos membres puissent joindre leurs auditoires.
3855 Ensuite, deuxième enjeu : Migration au numérique.
3856 Les services de nos membres doivent recevoir le même traitement que celui offert aux services de programmation des EDR. Nous soumettons que ce n'est qu'avec son consentement qu'on peut modifier les conditions qui régissent leur distribution, incluant, bien sûr, la migration d'un service éducatif du service analogique de base au service numérique de base d'un EDR.
3857 Troisième enjeu : La distribution hors de la province d'origine.
3858 Alors que les services éducatifs se font accorder une diffusion prioritaire dans leur propre province sous les dispositions des règlements des EDR, c'est une affaire toute différente quand de tels signaux sont distribués par les EDR hors de la province d'origine du service.
3859 Dans de telles circonstances, les services éducatifs sont dans la même position que tous les autres services discrétionnaires indépendants. C'est-à-dire nous faisons face aux mêmes enjeux commerciaux que les services discrétionnaires privés dans nos relations avec les EDR hors province. C'est donc dire avec aucun privilège.
3860 Les EDR peuvent donc offrir aux consommateurs hors province nos services dans les bouquets de services discrétionnaires. Cependant, dans le contexte de l'intégration verticale, nous croyons qu'il faut adopter des moyens pour faire distribuer les services éducatifs, ou du moins de l'encourager, au volet discrétionnaire hors province, moyennant une rémunération appropriée. Il y a lieu de favoriser l'accès aux revenus provenant de la distribution de nos services hors province pour améliorer le modèle économique de nos services éducatifs canadiens.
3861 Dans l'Avis de consultation, le Conseil indique expressément que le but de l'audience sur l'intégration verticale est d'instaurer des normes d'interaction commerciale entre les parties intéressées du secteur de la radiodiffusion afin d'offrir à tous les joueurs une juste possibilité d'en négocier les éléments clés, tels les détails de distribution.
3862 Dans la réglementation des EDR, le Conseil reconnaît que les radiodiffuseurs, et je cite :
" ...devraient avoir le droit d'être dédommagés pour l'usage de leurs signaux lorsqu'une EDR les retransmet à l'extérieur du marché de distribution prioritaire. "
3863 Les modifications récentes proposées au Règlement sur la distribution font mention que les EDR ne peuvent pas distribuer, et je cite, " une station de télévision éloignée ", y compris un service éducatif de télévision hors province, sans le consentement de l'exploitant du service.
3864 Cependant, malgré ces dispositions, la nouvelle réalité qui fait suite aux transactions approuvées par le Conseil fait en sorte que l'intégration verticale diminue la portée et les bienfaits de ceux-ci pour les services éducatifs et les autres services indépendants.
3866 MS de WILDE: This proceeding presents an opportunity for the Commission to put in place a framework that will ensure that independent services, including our small regional educational services, continue to bring diversity to Canadians.
3867 As we noted in our written comments, we refer the Commission to the recent FCC determinations approving the Comcast-NBCU merger in the United States. There the FCC adopted several safeguards to protect unaffiliated programming services, including independent standalone services known as "public, educational and governmental" or PEG channels.
3868 We believe that the Commission should implement proactive safeguards to preclude the negative impact of vertical integration in the Canadian broadcasting sector.
3869 In our written comments, we propose the following safeguards:
3870 1. Amendments to the BDU Regs.
3871 We are relying on the Commission to finalize the proposed amendments to the BDU Regulations which will come into force on September 1st. These amendments codify the principle of fair and equitable compensation for standalone over-the-air educational services.
3872 2. Expand Good Commercial Practices.
3873 We believe the Commission should adopt a code of Good Commercial Practices which would cover packaging and other terms of distribution and the issue of non-discrimination with respect to the carriage of signals of equal quality, including high-definition signals. Such an ex ante approach is more suited to the current concentrated ownership environment. We also support a standstill of current carriage arrangements pending dispute resolution. Such a code would help to fulfill the objective under the Broadcasting Act that BDUs provide "reasonable terms of carriage, packaging and retailing" of programming services.
3874 3. Audit Rights.
3875 Standalone programming services must have a right to audit BDU subscriber information on a timely and thorough basis. This is really essential to ensure that programmers receive correct compensation from BDUs.
3876 4. Accessibility to new digital platforms.
3877 Educational services are reliant on vertically integrated BDUs providing access to on-demand and BDU-related online platforms. Therefore, assured access to these new distribution platforms is critical in order to reach our audience. Such access is critical in meeting the objectives of the Broadcasting Act that educational programming provided through independent educational authorities remains an integral part of the Canadian broadcasting system.
3878 To summarize, we are here today to voice our concerns as full participants in the Canadian broadcasting system. We urge the Commission to continue to recognize the role that is played by public educational broadcasters. Without the Commission, there would be no one to do the reconciliation of public policy objectives served by educational broadcasters, on the one hand, and the legitimate business interests of BDUs, on the other hand.
3879 In a world of a multitude of channels and endless availability of content, together with vertical integration, there is a need to look out for small independent players. This will ensure that the diversity of voices brought into the broadcasting system by educational services will continue to be heard by future generations of Canadian viewers.
3880 We thank the Commission for this opportunity to appear today and we look forward to your questions.
3881 THE CHAIRPERSON: Thank you.
3882 On page 3 you say:
"Priority carriage for educational services is necessary to ensure programming diversity but is not in and of itself an assurance that educational services will be treated fairly."
3883 The implication is that you are being treated unfairly. How are you being treated unfairly?
3884 MS de WILDE: Mr. Chairman, no, I don't think the implication is that today we are being treated unfairly. I think, first of all, our world is a bit complex. One has to think, first of all, about our home province and then the rest of the country.
3885 The Priority Distribution Regulation helps a tremendous amount in our home province, although I will ask Glenn to address that because even there it's -- we can see the importance of the Regulation in the context of the DTH market but I think that as we move into the digital world more and more and there are decisions that need to be made by BDUs with respect to our carriage, with respect to the quality of our signal, how much bandwidth do we get, when are we migrated to digital, that there are in fact going to be more issues, and life isn't as simple as simply are you carried in an analog world on a channel.
3886 But maybe, Glenn, you could add to that.
3887 M. O'FARRELL : Monsieur le Président, dans le contexte actuel, en attendant la réglementation modifiée pour le 1er septembre prochain, il y a une situation pour TFO dans son marché prioritaire, celui de l'Ontario, qui est le suivant.
3888 Depuis, je crois, deux ans et demi maintenant, environ depuis 2008, TFO n'est pas distribuée aux Ontariens qui choisissent Shaw Direct comme étant le service d'abonnement qu'ils préfèrent, et ce, malgré -- et je suis nouveau dans la situation, alors, je vais vous donner ce que je sais -- mais ce malgré beaucoup, beaucoup d'efforts et beaucoup de revendications qui ont été faits par des associations communautaires, des associations de francophones à Hearst, à Kapuskasing, à Timmins, à Sudbury, qui réclamaient que TFO soit disponible parce que ces gens-là étaient abonnés à Star Choice autrefois, maintenant Shaw Direct, et, du jour au lendemain, on a perdu accès à ce service-là.
3889 Et malgré leurs pressions, les pressions de TFO, mes prédécesseurs, toujours aujourd'hui, si vous appelez chez Shaw Direct et vous demandez où est TFO, on va vous dire, il n'est pas disponible en Ontario.
3890 LE PRÉSIDENT : Est-ce que vous avez soulevé ce problème-là sur une plainte avec nous?
3891 M. O'FARRELL : Oui, la question a été soulevée dans le passé, et elle n'a été jamais formellement déposée comme plainte officielle...
3892 LE PRÉSIDENT : Et pourquoi pas?
3893 M. O'FARRELL : Ça, je ne peux pas vous dire pour le passé, mais j'ai engagé des discussions, moi, depuis que je suis en poste, et puis, je souhaite trouver un règlement.
3894 Mais je ne sais pas pour ce qui est du passé, pourquoi cette demande-là n'a pas été faite, sauf qu'il y a eu des associations communautaires, et ça, je pourrais vous sortir le dossier...
3895 LE PRÉSIDENT : Oui.
3896 M. O'FARRELL : ...qui vous ont fait plainte, qui ont déposé des plaintes, qui vous ont demandé d'intervenir, et il n'y a eu aucune suite. Je peux parler pour TFO...
3897 LE PRÉSIDENT : Vous êtes avocat, comme moi. Vous avez le droit. L'obligation pour Shaw Direct est bien claire. Je ne vois pas pourquoi on ne litige pas ce problème-là.
3898 M. O'FARRELL : La seule chose que je peux vous dire, c'est que je ne veux pas imputer de motif à quiconque. Cependant, je sais que des plaintes d'associations communautaires, des pétitions ont été formulées et envoyées au Conseil, et il n'y a pas eu de suite.
3899 LE PRÉSIDENT : O.K.
3900 MS de WILDE: But we are optimistic that in --
3901 M. O'FARRELL : J'aimerais juste compléter en disant que nous regardons le 1er septembre avec beaucoup de promesse comme étant une situation qui va venir régler la situation pour ces abonnés-là.
3902 THE CHAIRPERSON: The other point that you raise both in English and French is that you need access to new platforms and that access will come from the same BDUs which also distribute your programs by cable or on satellite.
3903 I don't quite understand what you're referring to here. I mean presumably to the extent that you have a website that is accessible over the Internet by whoever, what access do you require from BDUs who also are ISPs?
3904 MS de WILDE: Increasingly, in addition to our online websites that you allude to, the VOD services that would be provided by the cable services, as both online or as cable VOD services are, I think one could say, more of the new normal. They're how consumers expect to be able to find our programming on the cable.
3905 THE CHAIRPERSON: I see, Rogers portal or something like that you're talking about.
3906 And what is the situation with regard to those? Do you have to negotiate them one by one? I gather it's not automatically that because Rogers carries in your case TVO, it also puts it in its Rogers portal?
3907 MS de WILDE: That is correct, and so it is a matter of commercial negotiation
3908 And, you know, our point is that as we step into activities that take us outside of what is covered by the priority regulation we are in need of some oversight from the Commission to ensure that in fact we can obtain fair treatment.
3909 And so we are more than prepared to go into those discussions and those negotiations, but, you know, in the world as it exists and as it will increasingly exist, we need your oversight.
3910 THE CHAIRPERSON: But, as you know, we don't regulate that. So what specifically do you expect from us in this regard?
3911 MS de WILDE: To listen to a complaint if there is one.
3912 THE CHAIRPERSON: On the basis that this is an extension of linear broadcasting?
3913 MS de WILDE: That's right.
3914 THE CHAIRPERSON: Okay.
3915 Michel, tu as des questions?
3916 CONSEILLER MORIN : Oui, merci, Monsieur le Président.
3917 Si la Commission devait aller de l'avant avec un skinny basic service, un service minimal, squelettique, au prix le plus bas possible, avec des généralistes qui ne chargent pas pour leur diffusion, et caetera, avec des services éducatifs qui, dans leur province respective, ne coûtent rien, si je comprends bien, votre position avec TFO et TVO en ce qui concerne les provinces à l'extérieur du marché de l'Ontario est différente de celle de Télé-Québec?
3918 Si je comprends bien, vous voudriez être traité dans le reste du Canada, suivant vos provinces respectives, avec un tarif dans un cas et gratuitement dans l'autre cas, celui de Télé-Québec?
3919 MME FORTIN : Si vous permettez, Monsieur Morin, je pense qu'il est intéressant pour nous tous de négocier un tarif de distribution à l'extérieur de nos provinces.
3920 La différence la plus importante, c'est que le marché le plus important des francophones pour Télé-Québec est dans sa propre province et que négocier à l'extérieur des provinces peut conduire à des négociations qui ne sont pas économiquement intéressantes, ni pour nous, ni pour un distributeur.
3921 Et c'est dans ce contexte-là et pour des raisons, je dirais, de politique sociale, parce que moi, je crois qu'il faut offrir aux francophones de ce pays le plus grand nombre de services possible, que j'aimerais, quelle que soit une indication, que la Commission favorise, quelle que soit la méthode, la distribution du plus grand nombre de services francophones si moi, j'accepte de le donner gratuitement.
3922 CONSEILLER MORIN : Si vous, vous acceptez de le donner gratuitement.
3923 MME FORTIN : Oui. Oui.
3924 CONSEILLER MORIN : Parce que nous, on ne pourrait pas dire Télé-Québec serait sur le service minimal avec un prix à négocier.
3925 MME FORTIN : Non. Non, non. Si on est sur le service minimal, d'après moi, c'est parce qu'on le donne gratuitement.
3926 Mais je suis préoccupée par le très grand nombre de chaînes de langue anglaise canadiennes et américaines qui sont offertes partout au pays et le non-intérêt économique de distributeurs comme Shaw et les autres, je veux dire, pour distribuer des services francophones comme Télé-Québec.
3927 Et c'est dans cette perspective-là que je dis, entre nous, on ne fera pas d'argent, ni un ni l'autre, en Saskatchewan, mais j'aimerais que les francophones de Saskatchewan puissent avoir accès à plus de services en français et que si j'offre mon service gratuitement, je veux dire, que Shaw ne puisse pas dire, on n'aime pas les Canadiens-français, on ne vous prendra pas.
3928 Comment vous faites ça, je laisse ça à votre imagination, Conseiller Morin.
3929 M. O'FARRELL : Si vous me permettez, juste pour renchérir pour ce qui est de la situation de TFO.
3930 La situation de TFO est identique à celle de Télé-Québec pour toutes les provinces autres que le Québec, parce que pour TFO, il y a un marché francophone au Québec. Alors, manifestement, nous cherchons à être disponible au Québec, et nous sommes disponibles, et nous cherchons à négocier, dans la mesure du possible, une rémunération appropriée.
3931 Mais dans les autres provinces où il n'y a pas de marché, bien entendu, on souhaite être distribué, mais la réalité d'une négociation commerciale lorsqu'il n'y a pas de marché, comme il y a pour TFO au Québec, est différente en Colombie-Britannique ou en Saskatchewan.
3932 CONSEILLER MORIN : Donc, dans les autres provinces, vous ne pourriez offrir que le Québec, vous pourriez offrir cela gratuitement?
3933 M. O'FARRELL : Nous pourrions, mais nous pourrions aussi regarder avec ces télédistributeurs-là s'il y a des façons de toucher à une partie de la rémunération si la négociation le permet.
3934 Mais on est réaliste, Monsieur le Conseiller. On est très réaliste, et quand on regarde les marchés, c'est bien entendu que ce n'est pas sur le dos de la distribution de chaînes francophones additionnelles en Saskatchewan que les télédistributeurs vont faire leur marge bénéficiaire.
3935 CONSEILLER MORIN : Mais pour rester, justement, avec TFO, si le Québec vous offre un service de télévision éducative gratuitement à tous les abonnés ontariens sur le service minimal, sur le skinny basic service, et que vous autres, en contrepartie, vous offrez aux Québécois un service gratuit, où est le problème?
3936 Vous êtes des services éducatifs qui avez été conçus dans chacune des provinces avec des paramètres différents. C'est simplement d'augmenter la diversité et pas nécessairement de trouver un frais d'abonnement dans des provinces respectives.
3937 Parce que l'argument que vous vous servez pour le Québec, à la limite, Télé-Québec pourra le servir en Ontario. Il y a quand même un-demi million de francophones en Ontario...
3938 M. O'FARRELL : Tout à fait!
3939 MME FORTIN : Tout à fait!
3940 CONSEILLER MORIN : ...mais ils sont en minorité.
3941 M. O'FARRELL : Et je souhaite que Télé-Québec reçoive une compensation appropriée pour sa distribution dans tous les marchés où les circonstances des réalités commerciales le permettent, dont l'Ontario pour les raisons que vous venez d'invoquer. Tout à fait!
3942 MS de WILDE: If I may just add a little bit more gloss to that, you very clearly described how each educational network is financed by the province that created them, in large part.
3943 We are, though, under increasing and very valid pressure to increase the sources of our revenue, in other words, not to rely solely on government to finance our operating budgets.
3944 So to us it makes no sense where there is the possibility of a commercial negotiation that there would be a windfall to the BDU who takes our signal outside of our home province and sells it on a discretionary basis and makes revenues from it. We simply believe that those revenues outside our home province should be shared with us.
3945 COMMISSIONER MORIN: I agree, but you are already subsidized by your own province and if you are largely distributed in other provinces, you can do what you are doing now, you can solicit your viewership to give you more money, as PBS is doing in the United States, even in Canada, and you can also have some advertising revenues.
3946 MS de WILDE: Well, Mr. Morin, I think that our reality would be that we already, in terms of our financial model, do rely on those charitable donations from viewers, but we feel it is our obligation to seek to monetize the value of our service outside of our home province when a BDU is selling it and receiving money from individual subscribers.
3947 COMMISSIONER MORIN: But the issue here is the basic service.
3948 MS de WILDE: Outside of our home province we would be talking discretionary service.
3949 M. O'FARRELL : C'est la mise au point que j'aurais dû faire au tout début. Quand on parle de notre marché prioritaire, on parle de la province d'origine. Donc, pour TFO, c'est l'Ontario. C'est sur le service de base, le skinny basic, dont on parle.
3950 Si on est distribué ailleurs, que ça soit dans le marché du Québec ou que ça soit dans le marché de la Colombie-Britannique, on se voit comme étant un service discrétionnaire.
3951 Maintenant, lorsqu'on est sur le marché discrétionnaire du Québec, il y a un marché de francophones pour lequel il y a un attrait, je pense, de faire la distribution de ce service-là et de toucher une rémunération, tant pour le télédistributeur que pour la chaîne.
3952 En Colombie-Britannique, en raison de la taille du marché des francophones et des francophiles, c'est moins évident. Nous aimerions pouvoir toucher à des revenus, s'il en était, en Colombie-Britannique, mais on reconnaît que ce marché-là a moins de capacité de payer que celui du Québec. C'est tout simplement ça.
3953 Mais pour être bien clair, en Ontario, on est prioritaire. Ailleurs, on est discrétionnaire.
3954 CONSEILLER MORIN : Mais s'il y avait un nouveau service minimal qui serait introduit, ce serait obligatoire, distribution obligatoire des services éducatifs -- je dis ça par hypothèse, il n'y a rien de défini -- mais à condition que le service éducatif ou que le service d'un généraliste, il n'y ait pas de prix associé au signal. On serait dans un autre monde puisque ça n'existe pas.
3955 MME FORTIN : La question, c'est est-ce que le skinny basic est régionalisé ou tout le pays?
3956 CONSEILLER MORIN : Bien, les paramètres devraient être nationaux.
3957 MME FORTIN : C'est ça.
3958 CONSEILLER MORIN : C'est tout.
3959 Merci, Monsieur le Président. Ce sont mes questions.
3960 LE PRÉSIDENT : Monsieur O'Farrell, est-ce que vous n'avez pas un "agreement" avec les provinces du Manitoba et du Nouveau-Brunswick qui vous -- officiellement les radiodiffuseurs éducatifs de ces provinces?
3961 M. O'FARRELL : Pour le Manitoba, oui, et c'est des ententes qui sont renouvelables. On est en discussion présentement.
3962 Mais nous n'avons pas le même statut au Manitoba que nous avons en Ontario. Je veux dire, il y a eu des ententes qui ont été faites pour assurer qu'il y ait du contenu manitobain qui est présenté chez TFO. C'est ça le fond de l'entente.
3963 LE PRÉSIDENT : Cette situation-là au Manitoba ne vous garantit pas que vous ne soyez pas partie du skinny basic ou du basic?
3964 M. O'FARRELL : Nous aimerions le renouveler. Nous aimerions bonifier notre situation au Manitoba. Je pense que ça été jusqu'à présent un success story pour tout le monde, pour TFO, pour les producteurs manitobains, les producteurs francophones du Manitoba qui produisent et puis qui cherchent à nous vendre du produit et mettre leur contenu dans notre antenne.
3965 Mais il y a encore du travail à faire. Il y a eu des premiers pas qui ont été faits. Pour être très réaliste, ça été un bon début, mais ce n'est qu'un début, et puis, on voudrait bonifier la situation et peut-être effectivement prendre une position plus ancrée comme service éducatif de langue française en milieu minoritaire pour le Manitoba.
3966 LE PRÉSIDENT : Et la même chose s'applique au Nouveau-Brunswick?
3967 M. O'FARRELL : Ce n'est pas la même entente au Nouveau-Brunswick.
3968 LE PRÉSIDENT : O.K.
3969 Any one of my colleagues have more questions?
3970 If not, thank you very much for your presentation.
3971 I should mention to you, like I have talked to everybody else that -- you also suggest that there should be a code of good commercial practices and if you have the time and the energy to put a draft forward, it would be very much appreciated.
3972 MS de WILDE: We would be pleased to.
3973 THE CHAIRPERSON: Thank you.
3974 Okay, let's take a smoking break before we do the last intervener.
--- Upon recessing at 1526
--- Upon resuming at 1536
3975 THE CHAIRPERSON: Commençons, Madame la Secrétaire.
3976 THE SECRETARY: Thank you.
3977 We will now proceed with the presentation by Channel Zero Inc. and CHEK Media. Please introduce yourselves, after which you will have 10 minutes for your presentation.
3978 Thank you.
3979 MR. MILLAR: Thank you. Good afternoon, Mr. Chairman and Commissioners.
3980 My name is Cal Millar and I'm President and CEO of Channel Zero.
3981 With me today on my immediate left is John Pollard, President of CHEK Media Group and on his left is Paul Brown, our regulatory consultant.
3982 On my immediate right is Naomi Zener, our Director of Business and Legal Affairs at Channel Zero, and to her right is Joel Fortune, legal counsel.
3983 While Channel Zero and CHEK are not related companies we often work cooperatively in program buying and have had similar experiences in dealing with vertically-integrated BDUs. You will recall that we became independent services upon the divestiture of CHEK, CHCH TV and Métro 14 by Canwest Global.
3984 MR. POLLARD: In our appearance today we are going to focus on the primary issue that we raised in our written submission, namely on the fair terms of independent HD OTAs. We also have some views on several of the Commission's key areas and related issues.
3985 In particular we will address the problems and benefits of vertical integration, the need for ex ante rule to deal with specifically with the fair carriage of HD OTA signals, our view on skinny basic and our perspective on administrative monetary penalties.
3986 This hearing is vitally important to the future of the Canadian broadcasting system and it is key to survival of independent broadcasters in this country. It demonstrates the Commission's recognition that issues have arisen from the rapid vertical integration of the broadcasting industry over the past year.
3987 Channel Zero, owner of CHCH Hamilton and Métro 14 Montreal and CHEK Victoria are both independent over-the-air broadcasters.
3988 CHCH has the most watched television news in its market and CHEK is the top-rated newscast on Vancouver Island. Both stations have a condition of licence, the requirement to broadcast a minimum of seven hours a week of local programming. We both significantly exceed these. Today, CHEK airs 49 hours while CHCH airs 76 hours of highly popular, local programming every week.
3989 These OTA stations have proven audience success with unique and diverse programming and deliver an important service to their local communities.
3990 CHEK has doubled the number of employees in the 22 months since taking over ownership of the station and CHCH has added the equivalent of 25 fulltime staff.
3991 Vertical integration in our eyes has the potential to bring great benefits to the broadcasting system. At a time when broadcasters are suffering great losses the new owners of CTV and Global have added financial strength and support to these major television networks.
3992 Vertical integration has, however, created the perfect opportunity for an incentive for self-dealing and undue preference. As OTA services, we have experienced this directly regarding the carriage of our HD OTA signals.
3993 MR. MILLAR: We are here today proposing that the Commission adopt a clear ex ante rule regarding the carriage of its HD OTA signals.
3994 In each television market where an over-the-air programming service is owned by a BDU, that BDU will carry on its distribution platform all independent local OTAs in high definition before they shall be permitted to carry their own OTA in high definition. This rule is capacity neutral.
3995 The existing rules for HD carriage don't work. They do not take into account the huge challenge faced by independent OTAs. As independent OTAs we start to work from a position where we have nothing to trade with the BDUs and the current regulatory procedure at our disposal is not fully effective and exposes us to retaliation.
3996 We are here to ask for a fair and unambiguous rule of the road, no different than enforceable traffic laws on our highways.
3997 We have proposed a simple yet effective requirement that will ensure that the small independent Canadian OTA broadcasters will be treated fairly by large, vertically-integrated BDUs today and well into the future.
3998 We need fair carriage of our HD signals. HD is the colour television of today, if you will. Without BDUs OTA television cannot survive on its own. Fair carriage is what we believe will make the difference.
3999 Here comes a story. My direct experience with a vertically integrated BDU, specifically Bell TV, in attempting to secure HD carriage for CHCH has been frustrating and thus far unsuccessful.
4000 Despite ongoing discussions, Bell has not given us any direct commitment to carry our service in HD, nor any explanation. This is despite Bell's request as recently as early May 2011 for us to provide them with evidence that our service is popular in its market and achieves significant ratings. We provided that information to Bell and we thought you might be interested in seeing it as well.
4001 It's attached to these remarks.
4002 The reason that our signal is not carried in HD is not popularity or ratings for us or for CHEK. The necessity for the rule we are proposing becomes obvious when despite the evidence of the success of CHCH, Bell announced that they are launching their own specialty service MuchMusic in HD and at least one foreign news service, CNN's Headline News Network in HD, while continuing to refuse CHCH's HD request for carriage.
4003 The evidence we provided makes it blatantly obvious that there is HD capacity for Bell to carry CHCH in HD. It is estimated that up to 50 percent of viewing is on HD and that is a very important part of our business plan.
4004 In addition, lack of carriage of our HD signal affects the integrity of our exclusive rights to some of the programs that we acquire by denying opportunities for simultaneous substitution against HD U.S. network signals.
4005 MR. POLLARD: For CHEK we have invested in HD transmission equipment to serve our local market. It would be damaging to our business if our competition is distributed on HD but we are not.
4006 We believe that vertically-integrated OTA services should not gain a competitive advantage in distribution in our local markets just because they own the means of distribution.
4007 We would like to add our comments to the possibility of a skinny basic package. We would expect all local OTA services to be included in skinny basic in HD.
4008 We support the Commission's desire to have administrative and monetary penalties and recommend that all AMPs levied should be paid to a public benefit that is related to the industry sector of the party that is being harmed.
4009 For example, in the case where a penalty is levied for a harm caused to a local broadcaster, the AMP could be directed to the LPIF.
4010 Thank you for your attention. We would be pleased to answer any questions you may have.
4011 THE CHAIRPERSON: Thank you.
4012 I have in front of me a document here entitled "CHCH: The Strength of the CHCH News". Are you introducing this as part of your submission?
4013 MR. MILLAR: Yes. We thought that you may want to since we referred to it in our presentation.
4014 THE CHAIRPERSON: Okay.
4015 Now, I do not quite understand, frankly, your submission. Our present rules, as you know, are not designed for the HD. They refer to digital and the rules that come into place September 1 all talk about digital. Bell, for instance, you are carried on Bell right now and presumably carried in SD on Bell right now.
4016 MR. MILLAR: Yes.
4017 THE CHAIRPERSON: Right. So what -- after September 1 you want to be carried on HD as well or on both SD and HD?
4018 MR. MILLAR: Both HD and SD. However, the addition of SD in this transition from standard definition to HD means that we have viewers that are viewing in both.
4019 THE CHAIRPERSON: But if we accept your submission, we in effect are imposing now a new burden on Bell or anybody else that was not contemplated so far. When we made the original transition rules they were all from analog to digital. We didn't say to HD.
4020 MR. MILLAR: Right. And we believe that our rule is not actually a burden on the DTH distributors because what we are asking for is equity amongst the OTAs. So we would suggest that the DTH BDU has already decided that they have enough capacity if they are prepared to launch their own signal in HD.
4021 THE CHAIRPERSON: Yeah, but you can appreciate as a regulator that we can't put in a rule for your benefit and not for others.
4022 The other OTA stations in the -- whether they are owned by the BDU or owned by another BDU, because most everything is owned by BDUs these days -- you are one of the few exceptions.
4023 In effect, what you want is to change our present conventional rule, saying after September 1 you have to carry all OTA stations in HD.
4024 MR. MILLAR: In a great many markets -- let me use a specific example. In the Toronto/Hamilton extended market which is the technical description of the market --
4025 THE CHAIRPERSON: Yes.
4026 MR. MILLAR: -- every OTA signal is carried in HD. The major ones, the mainstream ones are carried in HD except for CHCH on Bell ExpressVu.
4027 THE CHAIRPERSON: As well as in SD?
4028 MR. MILLAR: As well as in SD and all we are asking for is equity.
4029 THE CHAIRPERSON: That is the Toronto market. What about the Vancouver market where your sister station is?
4030 MR. POLLARD: As far as the Vancouver market goes we will be HD in September. The main concern that we have is that this same treatment could happen to any of the OTAs really as we go forward.
4031 50 percent of the viewing is done on HD now and I think it would be very detrimental to our business if we are not carried in HD along with the other competitors in our market.
4032 THE CHAIRPERSON: But this is really quite a game changer you are asking from us. You are asking us to change our policy of conversion from analog to digital to -- from analog to HD with both forms, SD and HD.
4033 MR. MILLAR: I don't perceive it that way. So let me try this a little differently.
4034 Without question the digital transition at August 31st is from analog to digital in over-the-air broadcasts. When we are talking about dealing with the BDUs, the BDUs are distributing analog cable, digital cable or digital DTH or IPTV.
4035 What we are -- all OTAs will make a decision how to feed their transmitters as either standard def or HD and they will feed that signal so the signals will be HD at that point.
4036 The current regulations, at least perhaps as they are being interpreted by the DTH providers, is that they are not obligated to carry HD and, therefore, they are choosing to carry their own services in a given market.
4037 I don't draw the same parallel that you are that we are asking you to change the overall policies. We are simply saying where the DTH BDU has decided that there is HD capacity that they can carry their own service. They should be obligated to carry the independent at the same time.
4038 THE CHAIRPERSON: So in effect you want us to amend our policy to put an additional requirement on there.
4039 MR. MILLAR: Yes, because otherwise we are in the position of having -- being economically disadvantaged by our OTA competitor.
4040 THE CHAIRPERSON: This is really all about the simultaneous substitution, is it?
4041 MR. MILLAR: No. That is part of it, for certain.
4042 THE CHAIRPERSON: Yeah.
4043 MR. MILLAR: But our news viewers, as an example, on Bell, are being denied the HD signal, the highest quality signal that we are providing over the air and through cable in that market are being denied on DTH.
4044 THE CHAIRPERSON: You are providing news that nobody else provides. You basically cover everything that moves on the Niagara peninsula. And I can't -- if I am interested in that I can't get it anywhere else than on CHCH.
4045 MR. MILLAR: And when you have your new 50-inch TV screen that you have paid for and paid whatever up-charge you pay for it through your BDU, you say it doesn't look so good on my big screen. I will watch -- maybe Global will spend five minutes on my aerial.
4046 THE CHAIRPERSON: I understand that but I mean, if I'm watching Global I'm not going to find out what happened in St. Catharines on there. I find it out on your station.
4047 I mean you differentiate yourself by your coverage, not by the fact that you are HD.
4048 MR. MILLAR: But we also deliver -- we have invested in HD for the success of the station and for the viewers to increase ratings overall and to make the business sustainable.
4049 I mean, I'm veering off script for a second, but you know we have just had an announcement in early June that the A Channel are being rebranded CTV2 and that they are going to carry it in HD. Well, the Barrie station first has a proceeding in front of the Commission shortly, but they are also telling everybody they will be in HD. Well, they are not now so they have capacity to add themselves in HD.
4050 So I don't think it's a hardship for this particular distributor to add us. They found room to add a lower-rated channel than CHCH.
4051 THE CHAIRPERSON: Do you have any idea whether this rule as you support it, whether there is capacity even for instance in Shaw Direct in Rogers or now, of course, in Shaw Cable too if we are talking about takeover?
4052 MR. MILLAR: Sure. By and large, the cable BDUs have managed to provide the capacity and are carrying the signal.
4053 We have a commitment from -- verbal albeit, but a commitment from Shaw Direct through the powers that were here before you this morning from last year that as soon as the new satellite is up, CHCH will be delivered in HD. And Bell has not given us that same assurance.
4054 THE CHAIRPERSON: But you made this rule with regards -- having CHCH and CHEK in mind. How many other free riders will there be if we adopt this rule?
4055 MR. MILLAR: I guess I would answer the question and say in any market where one of the vertically integrated BDUs -- DTH, so SHAW and Bell -- in any market where they own an OTA which would be most of the markets where there is an independent, there would be an obligation.
4056 THE CHAIRPERSON: So, let's say, SCN, for instance, would benefit from this rule too.
4057 MR. MILLAR: That's not one I can answer because I'm not entirely clear on the --
4058 THE CHAIRPERSON: That is what I'm trying to find out, how many independents will sort of qualify for that. As far as I know, they are an independent in Saskatchewan.
4059 MR. MILLAR: Yeah, we could certainly get back to you on that.
4060 THE CHAIRPERSON: Okay.
4061 Thank you.
4062 Steve, you have some questions?
4063 COMMISSIONER SIMPSON: Thank you very much, Mr. Chair.
4064 This is going to be quite different because I think this whole line of questioning and the answers are going to be quite granular compared to the stuff we have been dealing with. I think, you know, that the Chair is trying to wrangle with the concept of a specific request that doesn't quite fit into the box and it's probably indicative of where this is going to go.
4065 I would like to go back and get a much better understanding.
4066 Now, I will frame it by saying that what I find interesting/challenging here is that I am looking at a couple of single stick broadcasters in a very concentrated television environment and I think that we can learn something here by the answers we get.
4067 To follow on with the issue of carriage in HD, I would like to ask Mr. Pollard first. With respect to the September event date of you going HD, the Chair had asked what was happening in the Vancouver market. When you said you are going to be going HD in September was that for Vancouver or is that system-wide with Shaw?
4068 MR. POLLARD: We will be upgrading our main transmitter and it would be, I guess, system-wide. It would follow our contour.
4069 COMMISSIONER SIMPSON: So you are not delivering an HD signal over the air right now?
4070 MR. POLLARD: No, sir.
4071 COMMISSIONER SIMPSON: Okay. I asked that question because in your written submission going back to April, I had been asking staff for an understanding of -- you know your critique was that our 2003-2008 policy really wasn't helping you a heck of a lot with respect to HD. I think I had better understand now that if you are not delivering HD over the air you are not really entitled to HD carriage as a priority and I think that will change with September.
4072 So what is -- you are broadcasting, Mr. Fortune, in HD at CHCH?
4073 MR. MILLAR: We are.
4074 COMMISSIONER SIMPSON: Okay.
4075 MR. MILLAR: And have been for about a year prior to our acquisitions, so about three years now.
4076 COMMISSIONER SIMPSON: Okay. To whatever level of comfort you have in answering these questions, I would like to try and get an idea of a couple of the submission points that you made.
4077 You had indicated somewhere in the middle of your presentation that in the course of negotiating -- I think it was paragraph 24 -- that you had been not really getting satisfactory -- you weren't getting any answers with respect to Bell, with respect to why they were not putting you on the list for HD. Now, here you have been on the air for a year with HD -- three years.
4078 And at any time has Bell cited a technical issue that you were unable to meet with any answers or did they provide you with a technical issue that answered your question?
4079 MR. MILLAR: There have been no references back to technical issues.
4080 Indeed, Bell carries our HD signal on their Fibe service which is distributed very sparsely in the Toronto region, their high-speed IPTV service, and we deliver -- the signal actually is delivered already to their head end. They could carry it momentarily if they chose to.
4081 COMMISSIONER SIMPSON: And your delivery to that head end is within the accepted norms of industry standard so that's not an issue?
4082 MR. MILLAR: It seems to be, and we have never had any complaint.
4083 COMMISSIONER SIMPSON: And for how long have you been engaged in a discussion with Bell about going HD?
4084 MR. MILLAR: We acquired the stations just under two years ago and we started the process relatively informally, asking why it wasn't there and coming into it we didn't know if there was some reason or some thought.
4085 Those conversations progressed. We had a meeting with them in August 201. We were explicit and said that, you know, we think that we should be carried. It's a very popular service. We had very high ratings. People are watching.
4086 And we have now had a year of complaints at that stage from viewers saying, "Why aren't you in HD?" and our answer is obviously call Bell and please, by the way, call Bell. Tell them you want it.
4087 COMMISSIONER SIMPSON: Are these discussions or negotiations face to face, letter to letter? How is it working?
4088 MR. MILLAR: Predominantly face-to-face, telephone. Other than -- and an email correspondence more recently where there was a request for the material we gave to you.
4089 COMMISSIONER SIMPSON: And are you getting the general feeling that you are dealing high enough up on the food chain with Bell that the individual that you are dealing with is able to motivate that organization to action?
4090 MR. MILLAR: It's one of the challenges of dealing with large, vertically-integrated BDUs, is that there is a long way to go up in the food chain. We would always -- we would be dealing with the programming group and there was a change earlier this year.
4091 It has been ongoing. There have been points where it looked like there was progress and then it would stop and then again no explanations.
4092 COMMISSIONER SIMPSON: When there was a shift in their dialogue with you away from the technical and it necessitated you coming back with a demonstration of the marketability of your content, how long ago did you submit this presentation?
4093 MR. MILLAR: Early May this year.
4094 The context of being asked for that was that it looked like progress was being made and this was, you know, providing more evidence to build a case for support for it within the organization. On follow up we were told, no, it's off the table again. Why? Not at liberty to say, was the answer.
4095 COMMISSIONER SIMPSON: Mr. Pollard, what are you doing differently in Vancouver and Victoria with respect to your imminent success with respect to going HD? You know what is happening on your end?
4096 MR. POLLARD: We have changed a lot of the things we do in the station. We have gone hyper local more than anything. We do have a small amount of simulcast programming.
4097 COMMISSIONER SIMPSON: Now, this is where I am asking you this in context to your negotiations with Shaw --
4098 MR. POLLARD: You know, in all of our conversations we have had with Shaw we have basically not heard back anything. TELUS seems to be a little more receptive but, you know, I don't want to be left out is what it comes down to.
4099 COMMISSIONER SIMPSON: But you did indicate though that you were going to be going -- your station is going HD in September?
4100 MR. POLLARD: Yes.
4101 COMMISSIONER SIMPSON: But you don't have the assurance that you are going to be going.
4102 Have either of you had any communication with respect to the tiering once everything goes digital at the BDU end in terms of where you are going to wind up with your stations?
4103 MR. MILLAR: No, I mean specifically in terms of DTH when you are not getting an answer of being carried it's difficult. Clearly, our position is that people still do surf up and down in channel areas and look for channels, like channels together. And so I think, you know, we would expect to be kept in the same neighbourhood when in fact we are carried, as we are done on the BDUs who do carry it.
4104 COMMISSIONER SIMPSON: Your written presentation had indicated -- no, actually your verbal presentation, I am sorry, it indicated that you don't have a lot to trade with a VI.
4105 And yet, the one thing that seems to be working for you is the fact that you are legitimately local. And locality seems to be what works in broadcasting. And I think, from what you have said, that you are enjoying reasonable success with your ability to carve out a niche of being local.
4106 My question is that do you think the BDUs value local in the same way as local has been valued in past? I am thinking 91H and OTA, I guess sort of embracing the importance of local television, or has that changed?
4107 MR. MILLAR: It is hard to speak for John, but I don't know that I could speculate on their perception. The evidence, I think, says that you have strong local programming and that should in and of itself, from a viewership standpoint, encourage the BDU to actually want to carry the signal.
4108 If they are not, in light of that, perhaps there is a OTA competitive imperative that is causing them not to want CHCH, in our case, to be on the dial
4109 COMMISSIONER SIMPSON: The button on this whole line of questioning has to do with reverse onus. I gather then that you would favour the application of reverse onus to both programming services as well as BDU distribution?
4110 MR. MILLAR: Given that we have spent a lot of time talking about equity and symmetrical, we are not opposed to the imposition of reverse onus to programmers, no.
4111 COMMISSIONER SIMPSON: Would you give me an expanded walk around on your view on skinny basic? You know, we have heard a lot about it and we are hearing chubby, skinny, it is like, you know, Grandi Eventi. From your perspective, being that you are extremely local and local has always been perceived or associated with basic service, give me your 360 on skinny basic.
4112 MR. POLLARD: I think that, you know, we would want to be on skinny basic if it is a possibility, and we think OTAs would do well from that.
4113 The difficulty may be in monetizing it for the BDUs.
4114 MR. MILLAR: If I can just add to that. I have to say, you know, we are listening to what others are saying on this and I am not sure that we are all on the same page at this point entirely.
4115 One of the questions in my mind is is skinny basic a strategy where the objective is actually to encourage people to stay in the Canadian broadcasting system, in the paid system, into the existing system? And if it is, and the strategy as a lower price would encourage that.
4116 We are totally onside with the objective. I am not sure that the strategy will work and that is not something that we are really privy to the information for.
4117 COMMISSIONER SIMPSON: Thank you very much on that.
4118 Mr. Pollard, anything to add on that? That is it?
4119 We have heard a lot, particularly from the creative community, a lot of handwringing with respect to their concern for the ability of the independent broadcaster to compete in a vertically integrated world.
4120 And today I think a lot of us were not happily surprised, but surprised that the level of concern in terms of the waterline of where problems may start goes up to and including an organization as large as Astral, which is I think the fifth larges broadcaster in this country, which frankly is a pretty high watermark with respect to concern.
4121 I am not trying to indicate that you guys are at the other end of the continuum. But if they are indicating that they have concerns, tell me in perhaps order of importance, the three greatest areas of concern you have with your ability to survive in a vertically integrated Canadian broadcast system.
4122 MR. MILLAR: We have spent the vast majority of our time here today talking about access and we have defined access as the importance of it being in the new technology. We understand and know there has been a lot of time spent on access in a standard def. world. In our estimation, that is talking about black and white and colour.
4123 So access and access in HD is the single most important. I am not sure off the top of my head -- someone else give me a hand here.
4124 MR. POLLARD: I think that is number one. If people can't see what we do, and really what we are is broadcasters and that is what we do best. That is number one for us, is people have to be able to see what we do.
4125 COMMISSIONER SIMPSON: Programming is an issue. Does that rank second or do you feel relatively self-sufficient in that area?
4126 MR. MILLAR: I don't know that I would make it number two. Obviously it is something we are always concerned about, is the ability of large competitors to be able to -- and currently non-competitors may become competitors, like an OTT service to buy up programming rights. But I wouldn't put it up as high as three. Although, arguably if I can't come up with two and three, it must be number two. So it is a concern.
4127 We talk about access, but the -- how do I say this? The current regimen in order to complain, we have never availed ourselves of a complaint process alleging undue preference even with the reverse onus, partly because as broadcasters we Channel Zero has specialty assets, Category B specialty assets, we have a Montreal station. And the issues can get intertwined.
4128 And, you know, we hit the word retaliation and argued over whether that was too strong. But clearly, you know, as a small independent player, and I will speak for CHEK as well, you know, going up against your competitor and your distributor.
4129 They own the road, we have a nice small car on there and we have fixed it up and it is doing okay. They own the road and they also are driving Sherman tanks. We would just like to know that there is some rules that they don't run over us.
4130 COMMISSIONER SIMPSON: Okay. And so we will say that item number three is everything else?
4131 MR. MILLAR: Yes, please.
4132 COMMISSIONER SIMPSON: Two more questions, gentlemen.
4133 On your rules, you are Category B and you would come up -- again, I commend you for coming forward with not just a litany of things that we should fix, but you have actually come up with recommendations, and we all think that that is great when we get that kind of a response.
4134 And your Category B rule, I was wading through the first paragraph -- this is in your written submission -- and I was struggling with it until the staff, who are always infinitely smarter than I am, helped me understand it. And I just want to clarify with you that my understanding is your intent.
4135 You were saying essentially in Category B that right now the three-in-one rule that exists in Francophone markets and English markets really we should have another look at it because we should be looking at the fact that the one in the three-in-one rule is really three ones; that there is a -- four ones, you know, that we have these four vertically integrated companies but every one of them in and of itself is a one in that three-in-one.
4136 Am I getting on the right avenue here?
4137 So what you are saying is that if there is three ones, there should be three non-vertically integrated companies for three integrated companies, is that right?
4138 MR. MILLAR: Yes. And the only background to that really is that the three-to-one rule, as we went through the process in 2007, coming into 2008, working on that it was developed prior to this level of vertical integration where vertically integrated players could just solve the three-to-one problem amongst themselves.
4139 COMMISSIONER SIMPSON: Frankly, I found that very intriguing. Have you ever used -- this may not be the case with you, Mr. Pollard, because, you know, you are relatively a new owner -- but have you had an opportunity to avail yourself of any of any dispute resolution services of the Commission and, if so, did they work?
4140 MR. MILLAR: We have never had the opportunity as licensees of Category B services. We are precluded, that the answer that was given to us when we requested it over the years was without right of carriage there really is no grounds to forward dispute resolution. I am not sure we entirely agreed on that, but that was the answer that was given to us.
4141 Since taking over, acquiring the OTAs, we haven't, we have been otherwise occupied.
4142 COMMISSIONER SIMPSON: Last question. Any appetite to weigh in on an expanded view from your two points to a code of practice that may give us some insight to unique perspectives you have that we are not hearing from anyone else?
4143 MR. MILLAR: Yes. We are also members of the IBG and we submitted it on that.
4144 COMMISSIONER SIMPSON: Okay, great. I didn't know that.
4145 MR. MILLAR: Thank you.
4146 COMMISSIONER SIMPSON: Thank you very much, those are my questions.
4147 THE CHAIRPERSON: Thank you.
4149 COMMISSIONER MORIN: Thanks, Mr. Chair.
4150 You said that you expect that all local OTA services to be included to skinny basic, of course in HD. So I have two ifs. If the Commission goes ahead and if eventually the court recognizes the value for signal, what will be the rationale to put an OTA broadcaster with a value for signal on the basic?
4151 Because at that time you will want to be treated as a broadcaster with a tariff. And the objective of the skinny basic services is to make it the cheapest possible. So that is my question.
4152 MR. MILLAR: We are on the record as not being in favour of value for signal. OTAs are given a big basket of rights, some of which we are asking to be clarified and we think that that is a reasonable trade-off in exchange for the signal.
4153 COMMISSIONER MORIN: So I have to read that without any value for signal?
4154 MR. MILLAR: Yes. And I would also add that, again in the context to make it relevant to a vertical integration hearing, it is very difficult for a small operator to give up their basket of rights and then negotiate with these same people that we are currently.
4155 COMMISSIONER MORIN: Thanks.
4156 THE CHAIRPERSON: Okay. Let me just go back to the beginning, because I want to make sure I understand it. You, in Hamilton, will transmit your signal right now -- after September 1 in HD? Only in HD or also in SD?
4157 MR. MILLAR: We broadcast the signal off the transmitter, and have been for three years, in HD. As of August 31 we will turn off the analogue standard definition. The BDUs choose to, with our permission, to also provide a standard definition for those subscribers who do not receive HD. But we broadcast in HD and digital.
4158 THE CHAIRPERSON: Yes, but is it that they are not retransmitting you in HD?
4159 MR. MILLAR: That is correct.
4160 THE CHAIRPERSON: And under the present regulation, as far as you understand it, there is no obligation to do that, hence the rule that you suggest?
4161 MR. MILLAR: Yes.
4162 THE CHAIRPERSON: And the fact you suggested that they do, you cited that CTV, CTV2 is now in HD and they will transmit that in HD, but not you?
4163 MR. MILLAR: My understanding is they are not yet in HD, but they have told the advertising, our customers, that they will be in HD as of September.
4164 THE CHAIRPERSON: And why would that not be an undue preference?
4165 MR. MILLAR: Because they will be carrying two of their signals in our market in HD, and they won't be carrying ours yet. CHCH --
4166 THE CHAIRPERSON: That is my whole point, why is that not an undue preference. They are preferring their own signal over you. That is why we have undue preference rule and reverse onus. Going to seem to be prima facie; if you can carry your own, why aren't you carrying CHCH?
4167 MR. MILLAR: Sorry, I misunderstood that, Mr. Chair. We believe is an undue preference. But what we are asking for is a rule to avoid -- that is just so clear that it precludes the need to allege undue preference, put onus on the BDU and go through whatever time it takes to process that complaint.
4168 THE CHAIRPERSON: And another way of getting it would be saying you are retransmitting the -- you have to retransmit that signal, local signal in the form in which it is originally transmitted. Since you transmitted it in HD, then they have to retransmit it in HD?
4169 MR. MILLAR: Yes, that would accomplish the same thing if that were applied to the DTH BDUs.
4170 THE CHAIRPERSON: Would it? Because those people who don't have an HD set would not get it, would not be able to see it.
4171 MR. MILLAR: I will use only the example of the cable BDUs, with our permission, our express permission, they are providing a standard definition signal to satisfy based on market forces. We are okay with that.
4172 THE CHAIRPERSON: And what happens in Montreal with Metro 14? You have only been talking about Hamilton so far.
4173 MR. MILLAR: We are not broadcasting in HD or digital at the moment. On August 31 we will be both digital and HD in Montreal. And we have advised the two cable BDUs that are affected, Cogeco and Videotron; both have agreed that they will be carrying us in high definition and standard definition. But we will have the same issue with the DTH BDUs.
4174 THE CHAIRPERSON: Okay. Thank you very much. I think we understand your problems. Thanks very much for coming, for your submission.
4175 MR. POLLARD: Mr. Chairman, this is my first hearing and I would like to, on behalf of CHEK Television and the staff, I would like to thank you very much for the LPIF, and it is working very well, thank you.
4176 THE CHAIRPERSON: Thank you very much. I am glad to hear that. As you know, we were very much interested in seeing you being created and sort of carved out of Global rather than being shutdown. I am glad to see that you are up and running and you are successful.
4177 MR. POLLARD: Thank you.
4178 THE CHAIRPERSON: That ends it for today.
4179 Madame le Secrétaire, what time do we start tomorrow?
4180 THE SECRETARY: We will start tomorrow morning at 9:00 a.m. Thank you.
4181 THE CHAIRPERSON: Thank you.
--- Whereupon the hearing adjourned at 1617, to resume on Thursday, June 23, 2011 at 0900 hours
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