ARCHIVED - Transcript, Hearing 14 September 2012
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Volume 5, 14 September 2012
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
To consider the broadcasting applications listed in Broadcasting Notice of Consultation CRTC 2012-370 and 2012-370-1
Palais des congrès de Montréal
1001 place Jean-Paul-Riopelle
14 September 2012
In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.
However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing.
Canadian Radio-television and Telecommunications Commission
To consider the broadcasting applications listed in Broadcasting Notice of Consultation CRTC 2012-370 and 2012-370-1
Anthony McIntyreLegal Counsel
Romy Ochmann St-JeanLegal Counsel
Rachel MarleauHearing Coordinator and Manager, Regulatory Corporate Analysis
Neil BarrattHearing Coordinator and Corporate Analyst
Palais des congrès de Montréal
1001 place Jean-Paul-Riopelle
14 September 2012
- iv -
TABLE OF CONTENTS
PAGE / PARA
Canadian Cable Systems Alliance Inc. (int. #1739)1516 / 8335
Diversity Emerging Music Collective (int. #1690)1571 / 8655
VMedia (int. #1682)1585 / 8746
Blue Ant (int. #1691)1606 / 8848
Canadian Association of Film Distributors and Exporters (CAFDE) (int. #1129)1645 / 9055
Union des artistes (UDA); Société des auteurs de radio, télévision et cinéma (SARTEC); Association des réalisateurs et réalisatrices du Québec (ARRQ) et Alliance québécoise des techniciens de l’image et du son (AQTIS) (int. #1470)1655 / 9108
Insight Production Company Ltd. (int. # 1311)1693 / 9294
BCE Inc., on behalf of Astral Media inc.; Bell Media Inc. and 7550413 Canada Inc., partners in a general partnership carrying on business as Bell Media Canada Radio Partnership1711 / 9389
- v -
PAGE / PARA
Undertaking1748 / 9576
Undertaking1750 / 9588
Undertaking1751 / 9594
Undertaking1756 / 9620
Undertaking1757 / 9624
Undertaking1758 / 9632
--- Upon resuming on Friday, September 14, 2012 at 0831
8322 LE PRÉSIDENT : Bonjour. A l'ordre, s'il vous plaît.
8323 Madame la Secrétaire.
8324 LA SECRÉTAIRE : Merci. Bon matin.
8325 Avant que nous commencions, le Conseil annonce que les parties ayant participé au processus auront l'occasion de déposer des observations écrites finales en ce qui concerne l'article 1, à la suite de la conclusion de l'audience.
8326 Nous rappelons aux parties que les observations finales ne doivent porter que sur les nouvelles propositions ou les renseignements présentés par BCE au nom d'Astral à l'audience ou dans les engagements écrits demandés par le Conseil lors de l'audience. Le Conseil ne tiendra pas compte des autres observations.
8327 Les intervenants pourront déposer leurs observations finales, en signifiant copie de celles-ci au demandeur, au plus tard le vendredi 21 septembre.
8328 Le demandeur peut déposer une réplique finale à l'égard de ces observations, en signifiant copie celle-ci aux intervenants concernés, d'ici le 28 septembre.
8329 The Commission announces that parties that have intervened in this proceeding for the above-noted Application, which is BCE/Astral, have an opportunity to file final written comments in respect to item 1 following the conclusion of the hearing.
8330 Parties are reminded that the final comments must address only new proposals or information submitted by BCE on behalf of Astral at the hearing or in written undertakings requested by the Commission at the hearing. The Commission will not take into consideration comments dealing with any other matters.
8331 Interveners may file their final comments, serving the Applicant, on or before Friday, 21 September 2012.
8332 The Applicant may file a final reply by Friday, 28 September 2012.
8333 We will now start with the presentation by Canadian Cable Systems Alliance Inc.
8334 Please introduce yourself and your colleagues and you have 10 minutes. Thank you.
8335 MS TOWNSEND: Thank you very much.
8336 Good morning. I'm Alyson Townsend and I'm President and CEO of the Canadian Cable Systems Alliance.
8337 With me today are:
8338 - Stéphane Arseneau, who is the Vice-Chair of CCSA and the Director of Operations for CCAP, a cable company just outside of Quebec City;
8339 - Glenn Baxter, who is the President of Nor-Del Cablevision, a small cable operator in Norwich, Ontario; and
8340 - Harris Boyd, President of Solaracom.
8341 CCSA strongly opposes Bell's proposed acquisition of Astral Media.
8342 We agree with the position of our colleagues Cogeco, Eastlink, TELUS, MTS and Rogers and all those others who oppose this acquisition but CCSA also considered it vital to speak in its own voice on behalf of its members, the small- and medium-sized cable businesses across Canada.
8343 This transaction would give Bell control over the marquee programming content, both English and French, that is available to Canadian consumers.
8344 This transaction would give Bell not only the many highly penetrated legacy services controlled that it already owns but, in addition, the powerful brands and content of established services like TMN, HBO, Moviepix, Family, and Disney. It would also add to Bell's stable virtually all of the most popular French-language specialty services.
8345 Bell says that this transaction would "provide more and better viewing choices" and that it would "keep prices in check." Our experience with Bell has been just the opposite: consumers' viewing choices have been restricted more than ever and prices have increased dramatically.
8346 If this transaction is approved, we will see new restrictions on our members' freedom to package the Astral services and greatly increased wholesale rates for those services.
8347 In fact, in May 2011, CCSA and Astral had settled, in writing, on terms for the renewal of CCSA's affiliation agreement for all of the Astral services. After the announcement of the BCE takeover, Astral has continually delayed CCSA's attempts to finalize this renewal contract and last month CCSA was presented with new restrictive packaging terms reflecting the same restrictions required by Bell in their contracts. CCSA members have experienced first-hand the punishing effects of Bell's overwhelming dominance in the broadcasting sector.
8348 For almost a year of negotiation and dispute resolution on the Bell Media renewal, our members were denied access to key services, including RDS2, Discovery HD, Space HD and Bravo HD. That happened despite the "no head start" rule established in the Vertical Integration Policy.
8349 As a result of the contract that emerged from the CRTC dispute resolution, our members are being forced to move services such as TSN out of digital theme packages and back to basic service. That means all customers pay more.
8350 MR. BAXTER: Nor-Del Cablevision is a small 100 percent digital cable TV system in Norwich, Ontario. In 2006, we took a huge financial risk to convert our systems to digital. We did it because we knew it was the only way we could offer our customers the choices they wanted.
8351 We serve a total of 2,173 customers in five small, rural communities. Many of our customers are seniors.
8352 We distributed TSN in three digital theme packages. The service had 1,153 subscribers overall. That means Nor-Del had a TSN penetration of 53 percent.
8353 Bell's new contract prohibits distribution of TSN unless the package has very high set penetration levels. Nor-Del has no discretionary tiers that satisfy the new penetration requirement.
8354 Because of that the new contract forces us to distribute TSN to all our subscribers on the basic service. That means our customers who had not chosen one of our theme packs with TSN -- that's almost half of our customers -- will now have to take TSN and will pay 10 percent more than they paid before for their basic service just to cover the TSN wholesale rate.
8355 And as if that weren't enough, the contract requires TSN2 to go to all digital subscribers of TSN. As our company is fully digital, every basic subscriber will have to take TSN2 as well.
8356 We basically bet our company on the transition to digital and it was working well for us. Now, we are no longer able to deliver the choice we promised. We're angry about that and we're sure our customers will be too. We do not see how this has anything to do with increasing customer choice. It's just the opposite.
8357 M. ARSENEAU : Au Québec, la situation relativement à l'achat de programmation a toujours été un peu plus difficile que dans le reste du Canada. Il n'y a pas de services américains de langue française sur lesquels nous pouvons compter pour combler le vide si les services canadiens deviennent hors de portée.
8358 De plus, les membres du CCSA au Québec sont de très petites entreprises et plus de la moitié sont des coopératives détenues par des communautés, comme la nôtre. Alors que nous n'avons jamais eu beaucoup de pouvoir, il est certain maintenant que confronté avec une entreprise de la taille de Bell nous n'en aurons aucun.
8359 Depuis l'achat de CTV et RDS par Bell, nous avons vu ces services devenir de plus en plus chers pour nous et nos clients. Les exigences de pénétration minimum nous forcent également soit à payer Bell pour des clients qui ne reçoivent pas RDS ou à offrir ce service à la base et obliger chaque client à payer, qu'il le désire ou non. Et comme le disait monsieur Baxter, il y a quelques instants, on parle d'un client sur deux.
8360 Les clients n'accepteront pas un tel traitement et changeront simplement de fournisseur de service. Malheureusement pour nous, ils ont la possibilité d'aller vers Bell car Bell ne s'impose pas les mêmes restrictions d'assemblage de services qu'elle nous impose.
8361 Bien que nous ne connaissions pas les tarifs facturés à leurs abonnés, Bell ne leur impose certainement pas le genre d'augmentations auxquelles nous faisons face.
8362 Avec le lancement de RDS2, nous avions l'occasion de donner à nos abonnés un nouveau service de sports de langue française. Malheureusement, Bell refusait de nous rendre ce service disponible à moins que la CCSA et la CCAP ne signe un contrat pour les 28 autres services, et presque tous de langue anglaise.
8363 Étant donné que ce contrat faisait partie du règlement de différends devant vous, le CRTC, nous n'avons eu accès à RDS2 qu'au début du mois de septembre, soit quelques semaines passées, soit près d'un an après que Bell elle-même ait lancé le service. Et devinez quoi? Nous avons dû le mettre à la base aussi.
8364 Une plainte relative à une préférence indue déposée par la CCSA contre Bell pour violation de la règle interdisant les lancements «en primeur» n'a jamais été considérée par le Conseil et a récemment été rejetée comme étant sans intérêt pratique.
8365 Nous pouvons vous assurer que le fait de ne pas offrir RDS2, alors que notre concurrent le plus important l'offrait depuis plus de 11 mois, n'était pas sans intérêt pour nos clients.
8366 Maintenant, vous examinez la possibilité d'accorder à Bell le contrôle sur la vaste majorité des services spécialisés de langue française au Canada et très certainement sur ceux les plus populaires.
8367 Cela comprendra également le seul des services supérieurs (premium) de langue française disponible, en l'occurrence Super Écran.
8368 Il s'agirait d'un pouvoir sans précédent laissé aux mains de Bell. Nous avons une petite idée de la façon dont elle disposera de ce pouvoir.
8369 Bien que la seule approbation de cette transaction jusqu'à maintenant a été par les actionnaires d'Astral, ceux-ci commencent déjà à démontrer une attitude assez similaire à celle de Bell. Ils demandent maintenant des pénétrations minimums, ils veulent restreindre la souplesse d'assemblage des forfaits et demandent des hausses de tarifs excessives. Ils tentent également de dicter la vente liée de leurs services.
8370 Il s'agit d'un changement complet d'attitude depuis le printemps dernier lorsqu'ils proposaient de renouveler les contrats aux mêmes conditions que celles qui existaient jusqu'à maintenant.
8371 Bell agit déjà comme si elle était propriétaire d'Astral. Alors, qu'est-ce que ce sera lorsqu'elle le deviendra réellement? Une telle arrogance est difficile à croire, mais non surprenante de la part de Bell.
8372 Le marché québécois est déjà aux prises avec un manque de diversité des voix. Astral est actuellement une voix forte indépendante. Elle doit le demeurer car cette voix disparaîtra sous le régime de Bell.
8373 MS TOWNSEND: Four major English-language consumer groups commented specifically on the threat that this transaction poses to the customers of small distributors.
8374 Based on their review of the public record from the Bell Media/CIDG dispute resolution, those consumer groups rightly concluded:
"Bell has exercised its substantial market power and advantage in negotiations with non-vertically integrated commercial players to impose increases to wholesale rates for the television services it owns and demand terms that restrict its competitors' flexibility to package Bell's specialty services to retail customers."
8375 Two Quebec consumer groups also strongly oppose this transaction. They do so despite Bell's claims that its purchase of Astral's French-language specialty services would create a more competitive market in Quebec. They have seen what happened with RDS and RDS2 in Bell's hands.
8376 As the new Bell Media contract takes effect with our members, rural Canadians will see their cable bills go up and their content choices diminish. Approval of this acquisition will likely double that impact.
8377 Our members are often the only terrestrial broadband ISPs in their communities. If Bell is allowed to drive them out of the rural markets they serve, where will those communities go for high-speed Internet access?
8378 This is not, as Bell would have you believe, simply an issue of competition between Quebecor and Bell. This is a serious issue for consumers throughout Canada.
8379 We're pleased to see that one of the new Chairman's first actions was to appoint a Chief Consumer Officer, an indication of the importance the Commission places on the interests of consumers. This hearing is a critical opportunity for the Commission to defend Canadian consumer rights.
8380 Bell is already completely capable of holding its own against OTT competitors. Bell does not need the Astral properties to gain such a position.
8381 So what is this transaction truly about? Why does it have to happen now? The real answers to those questions have more to do with cutting Bell's own programming expenses and driving competitors out of the distribution business than standing up to foreign OTT services.
8382 Bell's recent behaviour makes all independent BDUs justifiably afraid of what will happen with Bell's absorption of Astral. Bell has managed to get its way so far by dancing through loopholes in the Commission's Vertical Integration Policy.
8383 That happened largely because the CTV purchase was approved before the Commission addressed how to deal with newly integrated companies and the special regulatory and competitive issues they presented.
8384 As Bell itself said in its reply comments:
"The manner in which the [Vertical Integration] framework's principles are to be applied, how they inter-relate, and real-life implementation issues associated with these, are only now being worked out."
8385 If that is the case, why would one approve another major integration, one that according to the pundits is the "last major consolidation," before we know how the framework actually works in "real life"?
8386 We as the distributors to rural Canadians and you as the regulator cannot sacrifice affordability and consumer choice to improve the efficiencies of the largest communication giant in Canada. That is just not what our system was intended to do.
8387 Thank you very much and we will be pleased to respond to your questions.
8388 THE CHAIRPERSON: Thank you for participating in the hearing.
8389 You may have seen that for other interveners I've been asking questions about where we might be in 2017. Your members and yourselves probably have a unique perspective on that in light of the non-urban, rural aspect of your footprint.
8390 So what are your views about where we ought to be in 2017?
8391 MS TOWNSEND: Thank you. I did anticipate that question, the vision question.
8392 We believe that a lot of that hinges -- I hope this is not hyperbole -- on the outcome of this hearing. We believe that should the Commission deny this acquisition we will continue to grow and prosper within our communities as we have continued to do.
8393 These companies, the way that they function is by building partnerships throughout the industry and we have been successful in creating partnerships with the providers, with the program suppliers, that are solid, good and respectful and mutually beneficial.
8394 So we think that that will continue.
8395 Bell has always -- never indicated that they wished to be a partner at all. They simply wish to drive these companies out of business.
8396 So our vision for the future, should this be denied, is that we will continue to grow and serve our communities; that will be able to offer the same things as the larger players. Glenn(ph) is about to launch telephone in the last month. These companies continue to offer all of the services that the big companies do, maybe a little bit slower, but they are there and they will offer them and they will continue to do so in five years. It will be all services on all platforms, just like the bigger companies.
8397 THE CHAIRPERSON: When you think about your customers, your subscribers, a large percentage of the Canadian population is urban and some of the players who have appeared so far have spoken about their clients or customers, Canadian.
8398 Could you tell me a little bit more about your customers? Are they markedly different than perhaps some of the players in urban and suburban areas?
8399 MS TOWNSEND: Well, that is a very difficult question to answer. It is like -- and I have been asked a number of times: What is the typical CCSA member company; and there really is no typical CCSA member company. Because we represent small coops in Quebec; we represent family-owned businesses in Ontario; we represent Atlantic -- an Arctic coop in the North. So it is very difficult to say that there is a particular customer.
8400 I would say, really, it is those that are not the urban dwellers, and that covers the full gamut.
8401 So we represent a lot of Native communities. We represent companies in Newfoundland. We represent companies in the far reaches of B.C.
8402 So I think that I almost have to answer you by saying we represent those who are not the urban dwellers; who are used to the best, the fast, the rightest.
8403 So they are the real Canadians, just that you would meet every day.
8404 Stéphane, would you --
8405 M. ARSENEAU : Sure; j'ajouterais à cela que contrairement à ce que Bell dit, être petit, c'est bon, parfois.
8406 J'étais sur le chemin pour venir à Montréal, aux audiences, hier, et je fais transférer mes appels sur mon cellulaire. Je reçois un appel d'un client. Parce que récemment, avec les augmentations, on a envoyé une lettre d'augmentation tarifaire à nos clients; 1,75 $ par mois. Et le client m'appelle; il dit : ah; je vous appelle parce que c'est vous qui avez signé la lettre puis je voulais vous dire que depuis quelques semaines, je reçois beaucoup d'offres de Bell. Ils m'offrent les quatre produits à 77 $. Alors qu'est-ce que vous pouvez faire pour moi pour que je puisse rester? Je suis content d'être client chez vous, cela fait plusieurs années, mais à 77 $, je trouve que cela commence à être intéressant. Puis en plus, ils me donnent les équipements et --
8407 Bien, j'ai dit : la première des choses, je pense que si vous aviez appelé -- si vous étiez client de Bell et que vous aviez appelé la personne qui signe l'augmentation tarifaire, je ne suis pas sûr que vous auriez réussi à lui parler aussi rapidement que cela.
8408 Alors je pense qu'être petit, cela fait en sorte qu'on est proche de nos clients et qu'on est capable de les aider quand le besoin s'en fait sentir.
8409 Maintenant, c'est sûr que compétitionner contre un Bell, qui offre mer et monde à ses nouveaux clients et qui donne presque tout, bien compétitionner contre quelque chose qui est gratuit, c'est difficile.
8410 Mais je pense qu'être petit, cela quand même ses avantages et c'est là-dessus qu'on doit miser en tant que petite entreprise. Etre proche de nos clients; être proche de leurs besoins, de leurs attentes; et faire le maximum pour leur livrer la marchandise.
8411 Donc --
8412 MR. BOYD: If I might add one thing, Mr. Chairman.
8413 Alyson and I have spent most of the summer travelling across Canada, meeting our members. So in addition to two very brave members who have agreed to join us here today and worry about the repercussions of that, we talked to a lot of other people.
8414 And I would say our customers are just exactly the same as the customers of the big companies. The difference, really, is the relationship they have with their service provider. In a third of the cases, they are the owner of the service provider through the cooperative movement. In other cases, they are municipally owned, so they own it and pay for it through their taxes.
8415 And we have even had cases where the entire cable company is run by volunteers; I have discovered this summer. Because years ago, they have had to gradually reduce their staff and they continued to function.
8416 And we have family-owned businesses who live and work in the community, and those business owners, people like Glenn, meet their customers every day in the supermarket and in the arena and in church, where they are all praying that they won't have to pay these big increases, probably.
8417 So that is the big difference; it is that relationship, and it is not -- because they are not just bottom-line driven; they are owners; they are volunteers; they people who live and work in the community. And it is not just about money; it is about having a relationship with your customer, and I think that is the real difference.
8418 THE CHAIRPERSON: So in 2017, you will still have these smaller players? You are optimistic?
8419 MS TOWNSEND: We are optimistic; we are optimistic. And actually, I have now been doing this - I can't believe it - for 18 years, and I have been asked that question probably every year; that somehow, people think that these small companies will go away. They will not; they are inventive; they are determined; they are persistent; and they keep reinventing themselves, to the benefit of the Canadian consumer.
8420 THE CHAIRPERSON: Okay. Now let's turn to the application before us. Thank you for that.
8421 Now the challenge -- well, not challenge; maybe an opportunity, of appearing later in the hearing is we have had a lot of (inaudible) issues already and we have developed a pretty good factual record.
8422 The other challenge is -- as I was preparing, I was struck again by the fact that a lot of your intervention is confidential and therefore limits a bit how I can ask questions, and rather than make a mistake, I will ask it at a higher level than some of the details.
8423 You mentioned a moment ago that there is a place for smaller players in the ecosystem. Nevertheless, as I understand CCSA's role, you have nevertheless, by the way you organize yourself in the way you provide services to your -- the member companies. You have found a strategy to create your own size; have you not?
8424 So if -- go ahead.
8425 MS TOWNSEND: Yes?
8426 THE CHAIRPERSON: You might want to explain exactly how you have done that; how your strategy is different than others.
8427 MS TOWNSEND: Well, I -- how we started out -- first off, we are one company, one vote. So we do everything from a unanimous point of view. Which is very difficult to understand in the world business, but our companies want to work collectively; understand the need to work collectively.
8428 So the premise is that sometimes, it may not be good for one company, but they know that further down the road, there will be something good that will happen for their company.
8429 So collectively, we agree on a strategy, completely, unanimously, and we go forward with that strategy.
8430 Our members are very active, as you can see, in our organization. They support us; we support them. We are actually really just an extension of them. And maybe it is because -- and we are still not a big player by any stretch of the imagination. We still are -- well, we are still probably only the fourth largest - maybe even fifth - largest purchaser or English-language programming.
8431 So we manage to get by but we are certainly not -- we don't command the attention that are Rogers, Shaw, Videotron or Cogeco would.
8432 THE CHAIRPERSON: But you are still, by working together, creating a rather large buying group than individual players would have, acting alone; is that correct?
8433 MS TOWNSEND: Yes.
8434 THE CHAIRPERSON: But you are saying that --
8435 MS TOWNSEND: Yes; we hope so.
8436 THE CHAIRPERSON: You are saying that even together, the number of subscribers -- about the total membership would be --
8437 MS TOWNSEND: About 750,000, 800,000.
8438 THE CHAIRPERSON: Right. That even at that size, you feel that you don't have the competitive balance?
8439 MS TOWNSEND: Absolutely; we do not; we do not. And it has gotten worse. It has gotten worse over the last two years since the purchase of CTV by Bell.
8440 MR. BOYD: And maybe just to put that in perspective. I mean even the dispute, we decided that we obviously should join forces with other independent players to have a little more force, if that is the right word - I am not sure it is, given the way it worked out.
8441 But I listened with -- probably with amusement, the other day, to Rogers and their fears about Bell getting too big and that they wouldn't be able to deal with them. And the last time I looked, Rogers had well over 2.3 million customers and they are in wireless and telephone, and they own a lot of content themselves.
8442 So if they are worried and we are a fraction of that size and own no content, then we should be terrified, I would say, because we, like some of the other independents like Cogeco and Eastlink and TELUS don't have anything to trade.
8443 So even though we have a little bit better bargaining position together -- because the other members, some of our members, have 100 customers. So they have nothing. It is better than it would be, but it is still not ideal.
8444 And the other thing I think we should point out is CCSA now welcomes competitors. So many of the SILEC's who compete with our small cable companies are members of the CCSA. There are Bell-owned companies that are in CCSA - you might find that surprising - who joined us in our dispute against Bell.
8445 So have a very diverse organization of people who come together -- I don't want to use the term, necessarily, a common enemy, but for a common challenge. And we maybe are not as big as we need to --
8446 We certainly are not as big as we need to be but, you know, we are looking at strategies to how we can cope with that as well.
8447 Somehow, if we are going to keep our members in business, we have to find ways to cope - and that is not George Cope; that is for us to cope - and we need to constantly need to work on that to be able to collectively launch new services --
8448 We don't have the scale. I don't think scale is really the issue that Bell makes it. We do everything that Bell does, except wireless at the moment, and we probably will have our own online over-the-top service at some point. We are constantly launching new services and --
8449 We think there is a scale you need to do some of these things, but the fact that Glenn, with just over 2,000 customers, could launch a telephone service shows that it is not all about scale.
8450 Thank you.
8451 THE CHAIRPERSON: Your presentation today and intervention speaks a lot about the frameworks of vertical integration framework.
8452 I am just trying to figure out if you are saying that the vertical integration framework does not work or are you saying that it is not rigorous enough or strong enough a framework to deal with the proposed transaction?
8453 MS TOWNSEND: First off, we thought that the vertical integration decision was excellent and it provided us with great hope for the future. We thought that there was a framework there that we could use and that would balance out the issues that we have been up against in the market.
8454 Where it fell down and where it falls down is in enforcement and that is not the fault of the Commission necessarily. Because we don't think that you have the tools that you needed, that you need, to enforce that.
8455 By that, I mean (inaudible), it is a good idea; it is probably a way to go. But around that is -- that is a very specialized area and Commissioners must, out of necessity, be generalists. And to do an affiliation agreement requires specific knowledge, not only of the agreement itself but of past history and how the market has functioned and what are the precedents in the market, which the Commission could have no knowledge of.
8456 So to go to FOA without that background is very difficult; and that is what I mean by enforcement; the enforcement was the problem; is the problem; will continue to be the problem; is our concern. And that is why we have pointed out that even Bell is saying: All of this is unfolding and we don't know how we are going to apply or how we are going to enforce the vertical integration; how it is going to turn out.
8457 So our concern is: If you approve this acquisition and we are still trying to figure out how to enforce the vertical integration policy, it will be too late for our companies. We can't go through another year and a half of mediation and then huge increases and passing that on to subscribers. We won't survive it.
8458 THE CHAIRPERSON: My teachers used to tell me: If you are not part of the problem, you should be part of the solution.
8459 I take your comment that maybe the Commission, you know, was not necessarily - I can't remember the exact words you used; the framework - but you say it may have been an issue with respect to the operationalization of the framework and --
8460 So what would you fix? How would you make it, the operationalization, better?
8461 MS TOWNSEND: Well, there would be a couple of things. One is I think that somebody needs to develop the expertise in this area, of affiliate agreements, because I do think that your role is going to become more adjudicative. Whether you wish for that or not, I think that as we have gone towards competition, there will be a more adjudicative role for you.
8462 So there needs to be the framework for that adjudicative role, and that would be things like rules of evidence, rules of conduct.
8463 I know that I am talking about creating almost a new system, but I think that that is what is going to be necessary. How else could you come out with a fair result?
8464 For instance, just on the issue of evidence - and this was part of the hearing, so it is common knowledge - when you walk into a hearing and somebody presents you with an offer immediately, when the hearing opens, that is not appropriately following the rules of evidence.
8465 So I throw that out there as one example.
8466 So I think developing expertise and developing rules that are clear and transparent are probably -- is the way to go.
8467 Now that is not going to happen overnight.
8468 THE CHAIRPERSON: And hence your caution? Until we get it fixed, we should be cautious with respect to transaction?
8469 MS TOWNSEND: Exactly.
8470 THE CHAIRPERSON: It is interesting. As this hearing has begun; like I get this vision of a far more adjudicative and regulatory CRTC than I had thought I would be seeing.
8471 MS TOWNSEND: -- than you wished for.
8472 THE CHAIRPERSON: Now in your presentation, in your documents, you talk a lot about TSN. And we know that sports programming has always driven broadcasting. It even -- before television, in radio and early days of television and cable distribution and DTH. But in a sense, that problem occurred beforehand. Those were already within the BCE stable, the TSN.
8473 Is it really -- is your concern really not more about the attractiveness of that particular property to subscribers rather than this transaction?
8474 MS TOWNSEND: The TSN?
8475 THE CHAIRPERSON: Yes; TSN, as a property?
8476 MS TOWNSEND: Well, no. Because we think that family and HBO and TMN have the same value for those who want to watch movies of family.
8477 So for the sports enthusiasts, which appear to be about 50 percent, according to what our members see; but there is probably another 50 percent that are more engaged by family or movies.
8478 So no, I don't think it has to do this specific product.
8479 THE CHAIRPERSON: So you foresee what happened in sport to happen as well with respect to the other most popular category, which is film?
8480 MS TOWNSEND: Absolutely; yes.
8481 THE CHAIRPERSON: Movie pictures?
8482 MS TOWNSEND: It will.
8483 THE CHAIRPERSON: Movies.
8484 MS TOWNSEND: We have already seen evidence of that. We thought we had a deal with Astral; they have delayed. Now they have introduced penetration guarantees. So it is Groundhog Day all over again.
8485 LE PRÉSIDENT : Monsieur Arseneau, dans la partie de votre présentation, au paragraphe 33, vous faites référence à Astral étant actuellement une voix forte et indépendante. Je vous vois nostalgique que cette situation-là se maintienne.
8486 Certains ont laissé -- ont porté à notre attention la probabilité qu'une fois qu'Astral était mise en vente, on ne peut vraiment pas aller en arrière.
8487 Est-ce que vous trouvez vraiment qu'on peut dire ce que vous avez dit à la page 33? Parce que quelqu'un devra maintenant -- les actionnaires d'Astral étaient d'accord avec cette transaction-là. Ils vont s'attendre à une vente, d'une façon ou d'une autre. C'est aussi une réalité à laquelle on doit faire face.
8488 M. ARSENEAU : Oui; c'est certain.
8489 La possibilité que cela soit vendu à une entreprise qui n'a pas déjà 29 autres chaînes; je ne peux pas me prononcer là-dessus, c'est certain.
8490 Je pense aussi que cela va être difficile de revenir en arrière et de ne pas -- et de ne peut-être pas conclure cette vente. Mais je pense que c'est notre rôle, en tant que petit joueur et tant qu'organisation, de venir dire que cela va être difficile pour nous.
8491 LE PRÉSIDENT : Mais nous, on doit tenir compte des conséquences aussi; non?
8492 M. ARSENEAU : Oui; j'imagine; j'imagine que c'est votre rôle, effectivement.
8493 MR. BOYD: I don't think we are saying that Astral can't be sold to anybody or should never be sold to anybody, and you may -- if this transaction doesn't go ahead, you may find another -- they may find another purchaser and we will have another chance to comment on that. And I think you will have to look at it as on a case-by-case basis the same as we will.
8494 The problem with the Bell acquisition - and we concentrate on vertical integration, but -- Bell is not only vertically integrated; it is horizontally integrated. And we deal with it across the board on all of the telecom services as well; everything from support structures to access to the internet backbone, to customer transfer process, to inside wire; you name it; we deal with Bell. And they have a history of doing business in a way that disadvantages their competitors largely through delaying tactics, which are very hard to deal with in the regulatory process.
8495 So we worry, given the way Bell operates, that -- if they own more and more services - and this would give them more than 50 services; in French, certainly, the bulk of the services, and in English, they plus -- what they have is - plus the movie services - gives them control over probably the two most popular domains that we will be much worse off and more disadvantaged.
8496 Now that may not be true with another purchaser; we don't know. We don't know who else is even interested. It is not -- it is certainly not us; we won't be buying it. But it is not beyond the realm of the possible that there might be a purchaser that would be more beneficial for the broadcasting system. And I am not talking tangible benefits; that is just the way of buying support and it increases the cost of the transaction. I am not -- personally, I don't even think that is a great approach at all, because it doesn't really aid anyone.
8497 But there may be other purchasers for whom it would be a better fit for the industry and a player who is more of a partner in the industry.
8498 I don't want to say that the people at Bell are bad people or have, you know, motives that are out there to destroy others. They are good business people; they are bottom-line driven; and I can understand that. But there is more to this system than the bottom-line and your responsibility is not to worry about the bottom-line; it is to worry about the system.
8499 So we could be back here again looking at another acquisition for the Astral properties, and I don't think we have any problem with that.
8500 M. ARSENEAU : J'ajouterais peut-être que si Vidéotron avait fait la même offre et qu'ils étaient devant vous aujourd'hui, probablement qu'on serait assis aussi ici aujourd'hui pour dire que c'est trop de concentration. Toutes les chaînes francophones vont appartenir au même joueur.
8501 Mais la réalité dans notre marché, c'est la réalité pour plusieurs marchés, des autres marchés au Canada. C'est que Vidéotron, pour moi, ce n'est pas un compétiteur. Mon compétiteur, c'est Bell; c'est Shaw.
8502 Alors quand je négocie avec mon compétiteur pour obtenir un de ces services et qu'il se permet de me dire non pendant un an de temps et que je perds des abonnés à son profit; cela me touche.
8503 Bell, c'est également d'eux qu'on achète une grosse partie de nos infrastructures. On doit s'attacher sur le poteau; on doit négocier avec eux aussi.
8504 Alors on négocie avec Bell à plusieurs niveaux et on pense que le fait qu'il devienne propriétaire d'une douzaine de chaînes francophones supplémentaire, ce ne sera pas dans notre intérêt.
8505 THE CHAIRMAN: I well understand that when the option of denying this application, in whole or in part, is there and in a sense our concern should not be the impact on financial markets. But we do have the responsibility to make sure that we have a good broadcasting system.
8506 Aren't you concerned that if -- that what you are proposing wouldn't create a bit of chaos in the broadcasting system?
8507 MS TOWNSEND: Well, business people take risks all the time. There was a risk that Bell took in its decision to purchase Astral.
8508 They knew that they would go through a hearing like this, that there would be folks like us who would stand up and say: "Too much market power". That is a cost of doing business. You take a risk. Sometimes it works, sometimes it doesn't.
8509 And that is -- as Harris said, really the job here is to look at what is good for the system and we do not think that this is good for the system. Also as Harris has said, this isn't personal.
8510 Bell will have the incentive and the opportunity and as the expert from COGECO has said, having the opportunity and the incentive would lead anyone to exercise market power in such a way as a dominant player would, that they will try to wipe out the other players.
8511 MR. ARSENEAU: Maybe I can make two comments. When the acquisition by the Teachers Fund of Bell fell through, it didn't create chaos in the industry or in the financial markets. It certainly hurt Bell share price for a while, but it since recovered.
8512 Astral is an incredibly profitable company and doing very very well. It will continue to do well if it's not sold. Obviously the shareholders have a different view than that.
8513 In the French language market, they are totally protected. You have given them genres of protection. There is no American services in French that are going to compete with them.
8514 It's really only the movie business that has any real threat to it at all. There has always been threats to the movie business from video stores and from our video-on-demand services and obviously more recently, over the top, but that much on first run, so --
8515 And it's all Hollywood movies anyway we're talking about which we maybe should be less concerned about than we are of the Canadian system.
8516 So, I don't see that there will be chaos. There may well be a run by other people to try and purchase this very attractive asset. I am not -- I don't collect chaos.
8517 THE CHAIRPERSON: Thank you. I believe commissioner Denton has some questions.
8518 COMMISSIONER DENTON: So, the narrative is either that the -- the narrative we have been hearing from Bell's business rivals is that through tactics of delay and various forms of negotiation they have been abusive of their market power.
8519 Then, the kindest thing said about them came from Ken Engelhart saying that any business player in a similar situation having these assets to manipulate would behave in the same way.
8520 So, we're either -- so, the CRTC is confronted with the story of either they are particularly bad or that they are just bad and this is it. So, the problem we are faced, if we don't approve this one and someone else buys Astral or -- we're confronted with the same incentives to this kind of negotiation behaviour.
8521 So, this is a bit of a difficulty.
8522 And are there measures that we could take that would palliate, eliminate or improve that situation if this were to go ahead and the second portion that you come to us this morning in saying, nice try CRTC, but you are not able to regulate the situation properly.
8523 This is pretty gloomy.
8524 MR. BOYD: Maybe I could have a first stab at that. I don't think, commissioner Denton, that it is necessarily that gloomy. The difference with Bell's as defence said is they are a very large competitor. They are the largest competitor to everybody else in the distribution market. That makes them different and it gives them different incentives as the Rogers people quite clearly pointed out.
8525 I mean, if we had that kind of power, we might get to the -- we might go ahead and we might use it, but I think the chances of that are fairly slim.
8526 So, Bell is different and other players that might be considered as the purchasers might be much more acceptable, might operate differently.
8527 Whether there are rules that you can put in place, obviously I think our position is fairly clear. We don't think the transaction should go ahead, so we haven't spent a lot of time worrying about safeguards.
8528 But assuming that you approved part of it, having a voluntary code that people voluntarily don't follow is not the strongest way to control this. We had recommended that it be incorporated in the BDU regulations or at least referenced. It appears absolutely nowhere.
8529 You know right from approving that code, that it talks about not allowing tide selling, not allowing head starts, not allowing minimum penetrations. We have a contract that includes all of those things. So, the code is not being followed.
8530 If you can find a way to enforce it, given you don't have finding power and given you are going to have just the tools you have today, then maybe it could work, but quite honestly, there are a lot of ways to getting around things.
8531 COMMISSIONER DENTON: Well, intelligent people are paid every day to figure out ways to getting around things.
8532 Ms Townsend, what do you say?
8533 MS TOWNSEND: I am not sure that I get your question.
8534 COMMISSIONER DENTON: Well, the question is, as I say, there is -- Harris is saying, for example, that they are particularly bad and, therefore, we shouldn't.
8535 MS. TOWNSEND: Yes.
8536 COMMISSIONER DENTON: Others are saying: no, anyone given that situation is going to behave as badly, thus if we turn down Bell and someone else buys the Astral assets, we will be in the situation. So, it's either bad or it's worse.
8537 MS TOWNSEND: Huh, huh.
8538 COMMISSIONER DENTON: So, then, we are told that our regulatory tools are -- or capacities and since our tools maybe inadequate and our ability to regulate this portion of the business world is, for various reasons you have said, you know, we are generalists and we need specialists knowledge.
8539 So, this is not presenting us with a happy state of affairs.
8540 MS TOWNSEND: No, no, and --
8541 COMMISSIONER DENTON: And that's sort of my question. Comment, please?
8542 MS TOWNSEND: Well, I guess like -- like the Chairman, I was taught to come with a solution in addition to a problem or in answer to a problem and I would really like to be able to do that.
8543 I have -- we have thought actually, what could we say that -- or what advice could we give you to fix this and the problem is because Bell is who Bell is, the corporate culture, and because they are the size they are, there is not a good answer.
8544 Maybe with the fullness of time and some expertise and some precedence to build upon we will get to a solid kind of common law framework that we can work from, but at this point in time we don't have it and that is a danger to the entire system.
8545 So, I don't know whether that answers your question or it gives you a comment. I would really like to be able to say, this is how to fix it. But because Bell is who they are, there is no good answer, except, don't do this right now until we have some answers.
8546 COMMISSIONER DENTON: Well, the basic presumption on the broadcasting side of a house as opposed to the telecom side of the house is that this is a zone of free business transaction that we have only in essence begun to bear down upon in the last few years and look at from the point of view of how to -- how to regulate it.
8547 So, unlike on the telecom side where there is, you know, wholesale -- regulation of wholesale prices however done, there is no regulation of wholesale prices on this side.
8548 Harris is speaking of, you know, embedding by reference of Code of conduct, but again, we're stuck with the enforceability of that.
8549 MS. TOWNSEND: Yes, yes.
8550 COMMISSIONER DENTON: So, as I look upon what you say, it seems to me that if we turn down this application we are going to be faced with something else like it pretty soon and we are still going to be faced with the structural problem as that of the need to get television programming to a -- that the ability to hold television programming is sort of the battering around with which you defeat your competition.
8551 MS TOWNSEND: Can be.
8552 COMMISSIONER DENTON: Can be.
8553 MS TOWNSEND: Can be.
8554 COMMISSIONER DENTON: And we are told that this is what will rationally be used by certain players to increase their dominance in the system and, therefore, to extract further we cannot make rent out of the situation.
8555 MS TOWNSEND: Huh, hum. Yes.
8556 COMMISSIONER DENTON: Yes.
8557 MS TOWNSEND: That is possible. There are companies that will treat that situation differently. Shaw would be one who have still shown themselves to be a partner within the industry. They have not acted the same way as Bell. And this is not just about one FOA. This has been a consistent pattern.
8558 If we want to launch a Bell service and we do do all with the launches for our member companies, every time we tell them that we want to launch a new service, they use that as an opportunity to extract further rent from our members.
8559 So, if they, for instance, had launched BNN, they wanted to launch Discovery, but they didn't BNN, it's likely the response from Bell is going to be: well, you can have Discovery when you launch BNN.
8560 So, this is not -- we are not talking about the FOA and we are not talking about the results of the FOA. It's gone, it's done, we are implementing it. We are talking about Astral now and what's going to happen in that negotiation.
8561 COMMISSIONER DENTON: So, you see, your vision for the future is that unless we do something, consumers are going to be hit with more pass through of costs imposed upon you by Bell and that the -- that there will be higher, there will be larger and more expensive packages of basic services?
8562 MS TOWNSEND: Glenn is a living proof.
8563 MR. BAXTER: And in our system we -- if we are forced, which we are forced to put TSN on the basic service, it means that I will have to increase the price of the basic service by 10 per cent to all of my subscribers, 53 per cent of whom had the opportunity to chose it in a teared package before and they didn't do so.
8564 So, now, they are going to pay that additional 10 per cent just to recover the wholesale price increase by Bell.
8565 In the packages in which it presently exists at the structure that is set out in the contract that depending of the size of the package, the subscriber will, if they wanted to maintain that package and we decided to maintain that package for them in the smallest package which they pay $7.00 for approximately, they will have an increase of over 50 per cent in that package just because the wholesale rate has gone up so high and that only recovers the wholesale.
8566 In the larger package that they may have been in, that amount is still a 30 per cent increase in that package.
8567 As far as choice, we had a package that gave our subscribers the opportunity to not build a pack, but to select from a list of 100 and some odd channels and they could then choose the services that they really wanted to watch.
8568 The TSN group did not want to participate because, in their words, we don't want to give anyone the choice, we may not be chosen.
8569 So, that's the kind of thing that we who are dealing frontline with subscribers are based with and there is nothing we can do about it.
8570 MR. BOYD: Maybe we should just change the perspective on this. We shouldn't be looking at it from Bell's perspective or Astral's perspective, or even our perspective. We should be looking at it from a consumer's perspective and one of the advantages that getting old and being around for a long time, you have more of that history to look back at.
8571 You know, let's just go back to the mid-nineties when cable had their monopoly and the cable companies were all happy, but the customers weren't happy. Let's remember negative option billing in 1995 and the customers were very unhappy.
8572 Along came Bell and Star Choice, earlier names than those in 1997, Bell rolled out tremendous choice for consumers. They had all of these theme packs, they had small basic at $9.95. They had subsidized equipment and free installation and lots of marketing, 100 per cent digital, customers were very very happy.
8573 I can't say our members were happy, but customers were happy. Customers had never had access to multi channel television, got access to it and they picked up a lot of market share. In very very quick time, they ended up with almost two million customers.
8574 Now, let's come forward to today and see what Bell is doing now that they own that content. Before, in their pure play BDU their role as they saw it was to get the content to the customers that other people owned and yet make money, although they didn't make money for a long long time, but they at least get it out there and to get a market share.
8575 Now that they own the content, what are they doing? Have you seen their new packaging? They have three huge packs: good, better, best. And when you consider we have hundreds of services, those are big packages.
8576 They are no longer interested in customers' choice because it's their services that they are selling. It's a totally different environment than we used to have. Their packages look like the old analog table packages. So, as Glenn said, just as we go digital, so we can offer lots of choice, they go in the other direction and how can they get away with it?
8577 Because they can constrain our packaging and it's more about packaging and flexibility than it is about price.
8578 We can handle the price, it's difficult, but we've got a sufficient bunch of companies and they can handle the price. But if Bell tries determining their market approach, there is not much they can do about that and that's the difference and that's why our structures need to evolve, to handle that and they haven't.
8579 Sorry to be a little too passionate there.
8580 COMMISSIONER DENTON: No, no, no. We are finally getting down to the brass task I mean as far as I am concerned. So, given the situation you have described, then how is that power to be constrained, if it is to be constrained?
8581 And if you don't want to address it now, we would be very interested in reading about it in the final argument.
8582 MR. BOYD: I think we can have a go with that. I mean, we are not the experts and have lots of resources, but we certainly know what we don't want to happen.
8583 COMMISSIONER DENTON: Well, the message goes to anyone in the room. Thank you, Mr. Chairman.
8584 LE PRÉSIDENT : Monsieur le vice-président.
8585 M. PENTEFOUNTAS: Merci, monsieur le président.
8586 Madam Townsend, I think Mr. Baxter mentioned that the demand for TSN sports services amongst your 800,000 or so members, is it about 53 per cent?
8587 MS. TOWNSEND: That was his company in particular.
8588 COMMISSIONER PENTEFOUNTAS: That was his company. Do you have a global figure for it?
8589 MS TOWNSEND: No. I would, based on what we know of the market that seems ordinary.
8590 COMMISSIONER PENTEFOUNTAS: To be where your membership is at. Are you --
8591 MS TOWNSEND: To be where Mr. Baxter is at.
8592 COMMISSIONER PENTEFOUNTAS: Where his subscribers are.
8593 MS TOWNSEND: Yes.
8594 COMMISSIONER PENTEFOUNTAS: And would you also happen to have a number as to the popularity of TMN, HBO and family? You mentioned that it's at least as strong as sports?
8595 MS TOWNSEND: Yes.
8596 COMMISIONER PENTEFOUNTAS: Maybe Mr. Baxter has it for his.
8597 MS TOWNSEND: Penetration within your system, I don't know whether -- I could provide that information.
8598 MR. BAXTER: I don't have it at this moment because we were here primarily looking at the services that already exist with the Bell organization, that we have to subscribe to.
8599 We didn't look at those new services that will be in the --
8600 MS TOWNSEND: It is a bit of a different market because TMN and those services are pay services, so they tend to be lower penetrated because they are a higher price, but they also bring you as much revenue.
8601 COMMISSIONER PENTEFOUNTAS: And just to get an idea of what the -- what the impact of that in Astral services to the Bell stable would do.
8602 MR. BOYD: I guess in terms of penetration, I would think in our member systems and as Allison says, because they are pretty new and I discount those very very small systems for they actually have the right to put those services on a tear and sometimes even on basic, so they have very high penetration. But in terms of the average systems, it's probably in the 15 to 25 per cent in number.
8603 The penetration though is not the key here. It's that they are "must have" people as the Chairman has said earlier in the week, like sports and movies. That's really what TV is all about, so you need them both.
8604 COMMISSIONER PENTEFOUNTAS: You need to hold on the client.
8605 MR. BAXTER: Yes.
8606 MS TOWNSEND: And we are not talking about family because family is if anything, more desirable.
8607 COMMISSIONER PENTEFOUNTAS: Yes.
8608 MS TOWNSEND: So, family would not be at 15 to 25 per cent, it wouldn't be 50 per cent plus.
8609 COMMISSIONER PENTEFOUNTAS: Yes. That's it, yes. And justly briefly mentioned the FOA. Did I understand you correctly that you received an offer the morning up?
8610 MS TOWNSEND: That was at the hearing?
8611 COMMISSIONER PENTEFOUNTAS: At the hearing, yes.
8612 MS TOWNSEND: At the hearing, yes, yes. You did as well. The Commission did as well. There was -- that was the first time we saw any rates come from Bell.
8613 COMMISSIONER PENTEFOUNTAS: Right.
8614 MS TOWNSEND: Was the beginning of the oral hearing.
8615 COMMISSIONER PENTEFOUNTAS: Okay. And that was not an offer specifically to CCSA members. It was to the entire CIDJ group?
8616 MS TOWNSEND: That's correct.
8617 COMMISSIONER PENTEFOUNTAS: Okay. Thank you, madam.
8618 THE CHAIRPERSON: Commissioner Menzies?
8619 COMMISSIONER MENZIES: Just -- it might be repetitive and -- but just to confirm the consumer impact, you've made reference to the fact that the negotiations have resulted in your having to carry TSN on basic, which pushed the cost of basic cable up 10 per cent to your customers?
8620 MR. BAXTER: Yes, that is correct. It pushes the cost to all my -- basis goes up by 10 percent. Those that have it on the discretionary tear, they got pushed up too. We met the wholesale rates that Bell required for us to have it on a tear at that level. That meant that the -- the smaller package I had, it had the greater impact. They had a 50 per cent increase.
8621 COMMISSIONER MENZIES: Right. So the 45 per cent of your subscribers who don't want to watch TSN have to pay to subsidize the 55.
8622 MR. BAXTER: That's correct and that only recovers the increase in the wholesale rate.
8623 COMMISSIONER MENZIES: Now, if there is an ongoing disruption in labour dispute in the NHL, there won't be hockey, which I am assuming is one of the most popular features TSN and RDS has to offer?
8624 MS TOWNSEND: Yes.
8625 COMMISSIONER MENZIES: That is people still pay?
8626 MS TOWNSEND: That's right. There will be no abatement, that's in the contract.
8627 COMMISSIONER MENZIES: Okay. Thank you.
8628 MS TOWNSEND: And just in terms of numbers, there is another interesting number when Glenn talks about the 10 per cent increase.
8629 Prior to the FOA, we paid Bell on a monthly basis in susbscribers' fees about $2.7 million a month. That's a fair amount of money for a lot of little companies.
8630 After the FOA, it's $3.7 million a month, so it's increased by $1 million. That's just the first month of the new contract and as we go forward in five years of that contract, there will be similar increases every year.
8631 COMMISSIONER MENZIES: Just to follow up, it doesn't seem to make sense that driving up the cost of basic cable is a good way to compete against OTT operations?
8632 MR. BAXTER: Yes, exactly.
8633 COMMISSIONER MENZIES: How does that make sense if --
8634 MS TOWNSEND: I don't think they need to compete against OTT operations. That's I think Mr. Engelhart said that that was nonsense and I tend to agree with him.
8635 COMMISSIONER MENZIES: Yes. Thank you.
8636 MR. BOYD: But I mean, you just add -- I mean, it doesn't make sense, but we are being forced to do it. I mean, I like telling stories and Allison and I have, maybe if I may be permitted, one from my summer travels is one of our little companies out in B.C. that's actually owned by the Municipality, it's run by volunteers rather than municipal staff.
8637 And so, they had looked at the various contract proposals and I think I can talk about these things because I was part of FOA, but so, even if we had won to the extent that you could have used that word, they had not accrued sufficient amounts because they didn't the rates were going to go up that much and so, they looked at what they were going to have to pay retroactively, and then they looked at what they were going to have to pay in the future.
8638 So, they went to the Municipal Council because the cable rates are in the taxes, so the Municipal Council said: No, we are not going to give you more money, the tax bills have gone out, we have made our budget, we are not going to send other tax bill to cover the cost of cable. So, they said, you don't get it.
8639 So, they dropped TSN just prior to the Olympics. You can imagine the impact that that had and when they got calls, they sent them to the Council and not surprisingly the Council has since changed their mind and they are going to get the money to cover TSN as well as retroactive in there. If they haven't already put it on yet, they are in the process of putting it back on.
8640 So, the weight of that service is incredible, even in a small place and with a company that couldn't be more efficient because it doesn't have any employees.
8641 So, that's the kind of situation we're dealing with, which is -- you know, it's just a terrible situation for customers. We know we're treating them really really badly and we don't have any choice.
8642 M. ARSENEAU: J'aimerais peut-être ajouter que dans notre cas TSN avait... était l'une des rares chaînes anglophones de sports disponible au début, alors... Et comme on est une coopérative, la vision pour le client était peut-être un peu différente.
8643 Quand TSN est arrivé sur le marché, on l'a mis à la base et avec la nouvelle négociation qu'on voyait arriver, on s'est dit: O.k., on va avoir une augmentation sur RDS parce que lui aussi est à la base, alors ce qu'on va faire, c'est qu'on va retirer TSN de la base et on l'offrira de façon arbitraire aux clients qui veulent payer pour.
8644 Mais, malheureusement, le contrat prévoit qu'on ne peut pas baisser. Si on a une perte de plus de 10 pour cent de pénétration de ce qu'on avait avant le contrat, Bell peut réouvrir la totalité du contrat.
8645 Alors, on ne peut pas perdre 10 pour cent d'abonnés, on ne peut pas donc redisposer TSN ailleurs, donc où est le choix pour l'abonné? Il n'y en a pas de choix. On n'a pas le choix. Il faut le laisser à la base.
8646 Alors, quand Bell dit sur toutes les tribunes qu'ils offrent du choix et qu'ils nous ont donné la possibilité d'offrir du choix à nos abonnés, ce n'est pas vrai.
8647 Mais l'abonné, lui, il croit que c'est ça. Alors, nous, on doit se défendre. On doit dire à nos abonnés que, malheureusement, ce qu'ils entendent dans les médias aujourd'hui, ce n'est pas la réalité. C'est avec ça qu'on doit faire.
8648 COMMISSIONER MENZIES: I have no further questions. Thank you.
8649 LE PRÉSIDENT : Madame Townsend, messieurs, thank you. Those are our questions.
8650 MS TOWNSEND: Thank you very much for your patience.
8651 THE SECRETARY: We will now proceed with the presentation by Diversity Emerging Music Collective. Please come to the presentation table.
8652 THE CHAIRPERSON: Welcome to our hearing. As is usual, I ask you to identify yourself for the purposes of the transcript, and to make your presentation. Thank you.
8653 MS de la TORRE: Thank you, Mr. Chairman. I'm going to read something and then I'll introduce myself, because it's number one.
8654 THE CHAIRPERSON: Please go ahead.
8655 MS de la TORRE: Good morning, Mr.Chairman, Commissioners, Staff, Applicants, Audience at large.
8656 First, I would like to congratulate the CRTC for two appointments, Jean-Pierre Blais as Chairman and Barbara Motzney as Chief Consumer Officer. We are looking forward to experience changes in the future and a more consumer oriented CRTC.
8657 My name is Magda de la Torre and I am a double immigrant. I was born in Cuba and on my first generation I experienced what it meant to live in a complete totalitarian state.
8658 As a political refugee I landed in the United States where I had to assimilate in the melting pot existing there. I learned the science of living in a place where the extremes are flaunted on a constant basis.
8659 A generation later my work brought me to Canada to experience a more tolerant society, a country where life seemed slower and where compromise was an integral part of society. This, ladies and gentlemen, is my Canada.
8660 As a resident of Canada, I am able to speak my mind in front of decision making government executives and try to, in a few minutes, convince them of the reality of my speech.
8661 Believe me when I say that as a first generation ethnic it is my choice to reside in Canada.
8662 Multicultural, multiracial, multilingual, heritage and culture are words that are respected in a country like Canada. We ethnics are lucky to have a regulated CRTC.
8663 Those were my words also on February 2, 1999, on the hearing of the hearing of the Third Language and Ethnic Programming.
8664 Multiculturalism Policy of Canada: It is hereby declared to the policy of the Government of Canada to:
8665 (a) recognize and promote the understanding that multiculturalism reflects the cultural and racial diversity of Canadian society and acknowledges the freedom of all members of Canadian society to preserve, enhance and share their cultural heritage;
8666 (b) recognize and promote the understanding that multiculturalism is a fundamental characteristic of the Canadian heritage and identity and that it provides an invaluable resource in the shaping of Canada's future;
8667 (c) promote the full and equitable participation of individuals and communities of all origins in the continuing evolution and shaping of all aspects of Canadian society and assist them in the elimination of any barrier to that participation;
8668 (d) ensure that all individuals receive equal treatment and equal protection under the law, while respecting and valuing their diversity;
8669 (e) encourage and assist the social, cultural, economic and political institutions of Canada to be both respectful and inclusive of Canada's multicultural character;
8670 (f) promote the understanding and creativity that arise from the interaction between individuals and communities of different origins;
8671 (g) foster the recognition and appreciation of the diverse cultures of Canadian society and promote the reflection and the evolving expressions of those cultures;
8672 (h) preserve and enhance the use of languages other than English and French, while strengthening the status and use of the official languages of Canada; and
8673 (i) advance multiculturalism throughout Canada in harmony with the national commitment to the official languages of Canada.
8674 The Broadcasting Policy for Canada: It is hereby declared as the broadcasting policy for Canada that:
8675 The Canadian broadcasting system should:
8676 - through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society, and
8677 - be readily adaptable to scientific and technological change.
8678 The programming provided by the Corporation should:
8679 - reflect Canada and its regions to national and regional audiences, while serving the special needs of those regions;
8680 - be made available throughout Canada by the most appropriate and efficient means and as resources become available for the purposes, and
8681 - reflect the multicultural and multiracial nature of Canada.
8682 The programming provided by alternative television programming service should:
8683 - reflect Canada's regions and multicultural nature.
8684 Private networks and programming undertakings should, to an extent consistent with the financial and other resources available to them, be responsive to the evolving demands of the public.
8685 It is further declared that the Canadian broadcasting system constitutes a single system and that the objectives of the broadcasting policy set out in subsection (1) can best be achieved by providing for the regulation and supervision of the Canadian broadcasting system by a single independent public authority.
8686 Is the CRTC, as the interpreters of the Broadcasting Act, abiding by its policy? Is the CRTC interpretation reflecting the multiculturalism policy? Where are we now?
8687 1999 to 2002: The CRTC process is somewhat slow as the situation did improve until the demise of the CAB. Adding to it, the lack of a definition of Cultural Diversity in Radio Programming, the lack of accountability reflecting diversity in radio and TV (although BBM is able to provide it) and no best practices in radio, we, the diverse Emerging Canadian Talent, is left with no options or choices.
8688 The Demographics for Diversity are growing at a much faster pace and less than 20 years from now, Toronto's visible minority groups will comprise 63percent of the population of Toronto, 59of Vancouver and 31 of Montreal.
8689 On September 7, 2012, The Globe and Mail published an article with the title "Canada must refuel for cultural creativity". The writers call digital technology a digital tsunami.
8690 Mr. Chairman, Commissioners, in my book you have two tsunamis in your hands: the digital and the diversity.
8691 2003 - 2015 (I made a mistake). We are happy to see a CRTC three-year plan that starts with CREATE.
8692 The CRTC's activities under this pillar ensure that Canadians have access to compelling creative content, from diverse sources, on a variety of platforms. In particular, the CRTC encourages the creation of programming that reflects Canada's diversity and enables Canadians to participate in their country's democratic and cultural life.
8693 The CRTC, next year, will have a Review Ethnic Radio and Television Policies and Targeted review of Commercial Radio Policy for English-language markets following the completion of the review of French-language markets.
8694 Will this be a solution? Will we be able to have a voice in mainstream radio and TV? Will we be acknowledged as Canadian residents and citizen? Will we be respected for our talent?
8695 We have 15,000 members and some are very active; how can we help?
8696 Cultural Diversity: A New International Instrument
8697 Barbary Motzney, as Director, International Relations and Policy Development, Montreal, April 2002, on her speech, speaking for Helen Gosselin, Minister of International Affairs, Canadian Heritage, she sys, and I quote: The logical, first place to start is `What do we mean by cultural diversity'?
8698 Diversity is about more than content or media, it is also values and cultural identity; freedom of expression and choice; pluralism of ideas; human development; access, participation and prosperity; languages, histories and traditions.
8699 Cultural diversity is a human resources which inspires creativity and drive innovation and progress.
8700 What would it mean to realize this potential of cultural diversity? It would mean ensuring that all cultures have the means to express their voices and opinions in a changing world and ensuring the fair and equitable sharing of the opportunities and benefits for all.
8701 Canada's cultural policy objectives: Our cultural policy model is already one of openness based on: Freedom of choice for consumers; freedom of expression for creators; using a range of policy instruments and a mix of partnerships.
8702 Our objectives: With government as direct provider, patron and referee are: supporting artists, creators and innovators; building capacity; connecting Canadians to each other and the world; focusing on young Canadians.
8703 We have identified challenges at two levels: First is the need to build domestic and international support for cultural diversity as a priority objective, and to articulate a common understanding of what we are talking about, what we want to achieve, and what we want the world to look like.
8704 Some key interests for Canada in a multilateral commitment include that:
8705 - cultural goods and services play a broader role in our societies than that of simple commodities;
8706 - cultural diversity recognizes both openness to diverse cultural influences and the importance of promoting local contents;
8707 - cultural diversity plays an important role in social cohesion, economic prosperity, and human security; and
8708 - governments have a key role to play in preserving and promoting cultural diversity.
8709 Second is the need to mobilize that support toward action -- toward action for a new instrument on cultural diversity -- alliances and strategic, partnerships within and between governments, international organizations, private sector actors, and NGO's.
8710 Conclusion: Cultural diversity is not about building walls, it is about encouraging openness while recognizing the importance of the production of and respect for divers cultural content.
8711 The current global environment requires a global approach and if we get it right as a global community it will be about achieving a balance between all nations participating fully within the global community while ensuring our individual voices can be heard and internal diversity flourishes.
8712 We believe that a New Instrument on Cultural Diversity will be a key tool in getting it right.
8713 Mr. Chairman, are the words in this document one of the reasons for her appointment? This is a new and different approach for the CRTC, a direct connection to the consumer; can she do it alone? How about a Radio Task Force including diversity members? How about combined radio stations, a major broadcaster and diversity owners? There are answers, let us find them. Remember, we already have a Tsunami.
8714 Mr. Chairman, Commissioners, I have personally nurtured many Canadian Diversity Emerging youth to men and women with respected families -- how? With a voice in the radio and choices to be made.
8715 This experience gives me energy and strength to keep coming back to you for answers. You, Mr. Chairman and Commissioners, are the single independent public authority authorized to make changes within the broadcasting policy.
8716 Take action; do it now. This is a one a lifetime opportunity.
8717 Again, we at the Collective repeat: Our future, yours and ours, is in your hands.
8718 I have to drink water.
8719 THE CHAIRPERSON: No, please, take a breath.
8720 That was very clear. I understand that along with your written statement for this morning, you provided an additional document to the Secretary that refers to certain BBM numbers in Toronto. You didn't refer to them in your presentation. I take it that they are not key to the point you are trying to make here this morning?
8721 MS de la TORRE: Yes, they are. I'm sorry, I didn't refer to them, you're right.
8722 THE CHAIRPERSON: Before we do that, because we don't normally put in new evidence, so perhaps before you refer to it you can tell us why generally you believe it is relevant.
8723 MS de la TORRE: Because one of the problems -- I did mention it in a way because I mentioned that we don't have any measurement of how many diverse people are hearing the stations or looking at the TV.
8724 THE CHAIRPERSON: Right.
8725 MS de la TORRE: And some people, and even some -- the first time I approached the CRTC about the subject of diversity, they didn't know that the BBM was able to do it. Because to me all of you are sort of new, so that's why I brought it.
8726 The BBM did a service for Spanish when we were doing a program, and there's the tape to, at Energy 108. It went very good for three years. We were no. 1 on the 12-plus, but then Shaw bought it and goodbye Spanish and goodbye Caribbean. We weren't in Spanish or Caribbean completely, were Spanglish and we were half Caribbean and half English. I gave you also the tape.
8727 So although it's not precisely said, it is said that we don't have no accountability and accountability is the most important. You get married and you say, okay, what do you get? How do we spend it? You go to a bank, the same. Why not here?
8728 Canada is a country that everything is statistics and we're not statistic for the CRTC or the radio stations or the TV stations, because they don't want to spend the money because BBM can do it.
8729 THE CHAIRPERSON: Right. And you believe that we should consider this additional information as part of your submission.
8730 MS de la TORRE: You bet.
8731 THE CHAIRPERSON: I believe Commissioner Menzies may have some questions.
8732 COMMISSIONER MENZIES: Thank you.
8733 Can you tell me specifically what you wish us to do with this in regards to the Bell-Astral application?
8734 MS de la TORRE: Okay. Bell, like Shaw, like Rogers, like all the big ones, they act the same, you know, they play games and -- okay, I'm going to put an example, what happened to me last --
8735 I used Bell but I refused to buy any cable. Why? Because I don't want to have choices, because I want to spend more time working or going out of the house, not sitting in front of the TV. So my favourite program was "CSI Miami", because from Cuba I went to Miami. Hello! They took it out and they put it in no. 2, so I had to buy cable to --
8736 I made a choice. I didn't buy the cable. When I went to Miami, I got copies and I brought it here and I see on my -- that's the game that -- in the United States when I was there they play it, the big ones, and here they play it too. And I had problems with Shaw, with Rogers and with Bell. They're going to play that game all the time.
8737 Consumers, we need choices. So if you can fix for the consumers to have choices and approve this buy, it's you that have to do it, with a lot of regulations and with a lot of people to work on them.
8738 COMMISSIONER MENZIES: Thank you very much.
8739 THE CHAIRPERSON: Thank you very much for participating in the hearing. Your position was very clear and we'll consider it with --
8740 MS de la TORRE: I'll keep coming back.
8741 THE CHAIRPERSON: Well, you're always welcomed at our hearings.
8742 MS de la TORRE: Thank you.
8743 LE PRÉSIDENT : Madame la Secrétaire.
8744 LA SECRÉTAIRE : Merci. I would now ask VMedia to come to the presentation table.
8745 THE CHAIRPERSON: Welcome. Please identify yourselves for the purpose of the transcript and then make your presentation. Thank you.
8746 MR. SLOUTSKY: Good morning. My name is Vadim Sloutsky and I am the Vice-President of Business Development for VMedia.
8747 MR. TCHERNOBRIVETS: My name is Alexei Tchernobrivets. I am the CEO of the company.
8748 MR. BURGER: And I'm George Burger, advisor to VMedia.
8749 THE CHAIRPERSON: Go ahead.
8750 MR. SLOUTSKY: Thank you, Mr. Chairman, Mr. Vice-Chairman and Commissioners, for giving VMedia the opportunity to present its views to you on this very important matter.
8751 Again my name is Vadim Sloutsky. I'm the Vice-President of 2251723 Ontario Inc., a licensed Class 1 Terrestrial BDU which carries on business as VMedia. VMedia is part of the VianetTVgroup of companies.
8752 To my right is Alexei Tchernobrivets, VMedia's Chief Executive Officer, and to my left is George Burger, VMedia's advisor.
8753 VMedia is part of a video-content and telephone solution enterprise made up of a team of best-in-class engineers, designers and content industry executives. It provides high-speed internet, home phone and long-distance alternatives for consumers, and has established an international reputation as a provider of top-quality IPTV services for ethnic market around the world, specializing in Russian and Ukrainian language channels. Those channels are available through set top boxes, as well as through Android-based multi-platform apps.
8754 More recently, it has turned its attention to the domestic Canadian TV market, developing new models to leverage its expertise in video asset management and innovative content delivery. In pursuit of that objective, VMedia applied for and was granted a Class 1 terrestrial BDU license in April 2011 by the Commission to launch its service in the Greater Toronto Area and Kitchener/Waterloo.
8755 VMedia has expanded considerable capital in developing its business, which is based on innovative technology that allows Canadian consumers to seamlessly access a wide variety of content, ranging from conventional regulated television services to social media, over the top content, VOD and other applications. As such, VMedia is completely content agnostic and the ability to deliver maximum choice and flexibility at competitive prices for Canadian consumers lies at the core of its business strategy.
8756 VMedia aims to provide precisely the kind of innovation and choice called for by your predecessor, Mr. Chairman, Mr. Konrad von Finckenstein, the kind reflected in skinny basic packages and maximum flexibility in choosing specialty services. We believe that our solution enables VMedia to be a competitive alternative to incumbent BDUs by providing consumers with, in the former Chairman's words, "the choice they want and deserve".
8757 Like Rogers, Cogeco, Telus and other BDUs, which have expressed their own concerns about BCE's behaviour as the market dominant player, we oppose the transaction. However, our experience with Bell which has led us to do so is different from theirs.
8758 All of them are up-and-running operations, their businesses well underway. Their complaints are legitimate, as they simply seek a level playing field in their ability to deliver content -- all content -- to the marketplace on all platforms and at reasonable prices. In a landscape dominated by BCE to alarmingly increasing degrees, their ability to compete with Bell is indeed threatened, but their businesses are not derailed by Bell Media's tactics, as they continue to generate revenues while they engage Bell in the regulatory arena.
8759 We, however, inhabit a slightly different circle of hell. We have not launched yet. Our efforts to do so have been greatly impaired by Bell Media's intransigence and we are not able to generate revenues while our issues are adjudicated. In our case, Bell's behavior, even without ownership of the Astral assets, is an existential threat to our business.
8760 If anyone would have suggested six months ago that VMedia would be spending its time and resources on addressing the CRTC at this time on such a momentous issue, I would have laughed and turned back to continuing to enhance our technology and building our new video business. However, here we are today, and we are here because, no matter how hard we work at building our business, it will all be for nothing if we are unable to carry content currently controlled by Bell Media, which is already the dominant content player in the Anglophone markets in Canada.
8761 Since being awarded the licence, VMedia has been going through the complex steps required to deliver this innovative offering to Canadian consumers. These have included entering into supply agreements with over 30 channel suppliers, including Corus, Astral, A&E, Rogers, and Shaw. Agreements and rate cards were typically provided by them in short order and final agreements were usually signed shortly thereafter.
8762 The experience with Bell Media has been very different. It is now almost exactly one year since VMedia first approached Bell Media, and VMedia still does not have a deal with Bell. Not only do we not have a deal, we have not yet received a draft agreement or a rate card or even a clear understanding of the conditions that attach to carrying Bell Media's 38 channels, including must-haves, such as TSN and Much Music.
8763 The other channel groups behaved as any channel supplier who wanted to sell its wares would. They wanted to close deals. But not Bell Media. Instead, Bell Media has delayed, exacted concessions and pre-conditions to even seeing agreements, and imposed requirements that none, not one, of the other suppliers did.
8764 This despite the fact that Bell Media is obliged to supply BDUs with its channels. And the reason is simple: Bell Media does not want to do deals with companies which compete with Bell TV. BCE, the parent of both, would much prefer that Bell TV gain or retain a subscriber for its BDU service and get upwards of $70 per month than generate the lesser wholesale dollars that Bell Media gets from Bell TV's competitors for its channels.
8765 Well, that's good for BCE but not so good for Canadian consumers which, if the trend goes unchecked, face a dystopian future without real choice, innovation, diversity, or competition.
8766 VMedia cannot afford to place a two-page ad in newspapers across the country to state its case and it does not want to waste resources to pursue a lengthy and costly process before the CRTC to assert its rights to carry those channels under reasonable commercial terms.
8767 But after a year of trying and months of delay, VMedia has no choice but to launch without Bell Media's channels and take this unnecessary dispute to the CRTC.
8768 After being so egregiously stonewalled by Bell, VMedia decided last week that we have no alternative but to turn to the CRTC for its assistance in dealing with this matter. All VMedia has wanted throughout the last year was to reach a fair deal with Bell. Instead, as a result of Bell's failure to negotiate in good faith, VMedia has been unjustifiably and deliberately kept from progressing its business by Bell through specious delays and pretexts. Instead of coming to market as a provider of a dynamic new content platform with as robust and compelling a range of content as possible, VMedia will have to launch with a less-than-competitive offering, and its financial liability and its ability to provide a unique and innovative service to Canadian consumers will be at risk.
8769 MR. BURGER: The two-page ads that Bell placed with major newspapers across Canada two weeks ago claimed that Bell Media's "objective is to enhance competition and consumer choice." That objective is certainly not obvious to VMedia. It also claims that Bell Media wants to make its great content as widely accessible as possible.
8770 Based on VMedia's experience and that of Telus and hundreds of other smaller BDUs reflected in various proceedings before the CRTC, including this one, that statement is debatable, to say the least.
8771 VMedia opposes the acquisition by Bell of Astral. We are concerned that our difficulties in dealing with Bell Media is a sign of things to come for BDU competitors.
8772 Over the last several years, BCE has undertaken a shopping spree for essential content assets, including CTV, the Montréal Canadiens, the Leafs, the Raptors, and now, potentially, Astral.
8773 As Bell Media controls more and more of the content that Canadians view, its attitude towards BDU competitors can only harden. It should be noted in this regard that, with the Astral deal yet to be approved, Bell Media has every incentive to display its best behaviour toward competitors.
8774 If our experience is an example of Bell Media's best behaviour, we hesitate to imagine what it will be like if the Astral acquisition is approved and that incentive is removed.
8775 Our experience and that of many others who have appeared here clearly reflect BCE's abuse of its market power with just the assets that it currently controls. A future in which it is permitted to augment that power by acquiring Astral, for example, appears to us to be bleak indeed. In that future where most content in Canada is controlled by BCE, everyone will be more than welcome to watch BCE's content on Bell Mobility, its wireless service, or on Bell TV, its BDU service, or on Bell Fibe, its Internet service. It will be content that BCE will choose to carry, at prices that BCE will choose to set, on platforms that BCE will dictate to Canadian consumers.
8776 Like VMedia, Canadians will have no choice. Just a new Bell monopoly. Canadians deserve better.
8777 Thank you again for this opportunity and we look forward to your questions.
8778 THE CHAIRMAN: Thank you, gentlemen.
8779 I believe you're the first ones in this hearing to make a reference to Dante's "Inferno".
8780 THE CHAIRPERSON: I believe Commissioner Denton will have some comment and questions for you.
8781 COMMISSIONER DENTON: I join you in the outer circles of Hell here.
8782 MR. BURGER: Was it inappropriate?
8783 COMMISSIONER DENTON: Well, I was just reminded of Solzhenitsyn. Didn't he do the first circle? Yes. Are you in the first circle or the second or how far in are you?
8784 MR. BURGER: It's pretty hot, wherever we are.
8785 COMMISSIONER DENTON: Okay.
8786 I hardly know what to say because, of course, we've been hearing this for several weeks now. Well, I mean, for -- no, it seem -- it seems like weeks.
8787 COMMISSIONER DENTON: It's for several days now.
8788 So I'm just going to ask, if I may, just to move off this moment, just ask sort of, like, who you are. Are you a kind of Internet service provider providing video across -- in an Internet platform or how does your thing work?
8789 MR. SLOUTSKY: We are the IPTV provider. Right now, we operate as over-the-top service with the ethnic content. However, we do see a lot of opportunities in entering the IPTV market in Canada with mainstream Canadian channels. We do see a lot of opportunities in various market segments, such as ethnic niche and so-called "cord cutters".
8790 We believe that there's a significant amount of ethnic communities living in major cities across Canada, and those people would like to watch channels from back home as well as mainstream Canadian channels.
8791 We also see that there's a significantly increasing amount of people who simply cut the cord. That means that they do not want to pay for Canadian service or watch anything that comes from Canada, rather, watch some other services.
8792 And we believe that by introducing a competitive and flexible service to those people, we'll bring those people back to the Canadian grounds to watch the Canadian television, and we -- using our innovative technologies, we combine the IPTV and over-the-top service so that people, the Canadian consumer, will ultimately get a flexible choice between what they want to watch.
8793 COMMISSIONER DENTON: But I'm just trying to understand, then, for a moment. So you both have IPTV and an Internet-based delivery system. So are people watching this on computer or how do they receive it?
8794 MR. TCHERNOBRIVETS: Perhaps I would comment on that. Currently, we're going into market with a digital box solution. However, the digital box is running on an open source, open framework, Android-based, and having this open framework allows consumers a choice between conventional TV or app-based services, such as social media, VOD, or over-the-top.
8795 COMMISSIONER DENTON: So going back to the themes of your speech, and what I said before was we were faced with a problem of was, is this bad, in other words, is this a particular problem with a particular company, or is it worse? Is it the behaviour that anyone would do in that situation?
8796 And you have told me -- you have informed us -- that other companies are ready to deal with you and they have done so. So that would argue that its -- Bell's behaviour has been particularly bad, but the other cables -- why have the other cable companies decided to allow you programming? Do you know?
8797 MR. SLOUTSKY: Well, other companies, in our view, they are mostly in the -- in selling their content, and that's what they do, they sell content. Whereas, as we view, Bell is not really interested in selling just the content because Bell is also involved in selling the Internet service and as well as home phone and TV.
8798 So they are not interested so much to allow any competition to the market, and that's where we see a major, major obstacle to get -- to do any deals with Bell.
8799 As we have pointed out in our presentation, it has been twelve months for our negotiations with Bell just to get any information on them, on -- at least to see the rate cards. With dealing -- dealing with Corus or other content providers, we have approached them, we have supplied our video licence information, and they have informed us with a rate card, with the channels, with all the information required to launch the service. Unfortunately, it has not been the same with Bell Media.
8800 COMMISSIONER DENTON: So it's your view, essentially, that the vertical integration between the carrier business and the programming business has led to this situation, that their incentives are to -- to not just -- their incentives are less to sell you the content than to own the whole business?
8801 MR. SLOUTSKY: George.
8802 MR. BURGER: Actually, we're experiencing a bit of an ebb and flow in terms where power moves and shifts. Frankly, I doubt that two years ago I would have imagined that Videotron and Telus would be here seeking the CRTC's protection. I think that a lot of it has to do with an exceedingly quickly moving landscape in terms of the way Canadian companies approach content.
8803 It is a transformative movement because, historically, content in Canada has been perceived to be more of a burden among broadcasters and among BDUs. It's usually been associated with the concept, obviously, of Canadian content and Canadian cultural priorities and policies and, frankly, in any private conversations, certainly, regardless of what broadcasters and BDUs might say before the CRTC, they view it as a tax, as a subsidy, as an unnecessary burden they have to bear. And that's been the mindset in terms of how they approach the concept of content.
8804 In other countries, particularly in the United States, obviously, content is viewed as an extremely valuable asset, which is why, for example, the whole issue about piracy and copyright and so on is so heavily driven by the United States because it's viewed as a treasured commodity to the extent that perhaps some other countries might view their natural resources or something else.
8805 And that has been the gulf in perception of what content really is. In the U.S., they've always known that content is king. In Canada, we've known that content is a bit of a drag.
8806 And so at this point, everybody has come to realize that in order to be able to differentiate the various platforms that are offered to the consumers, whether it's satellite or the intermodal competition between satellite and cable or if it's mobile or if it's the Internet or whatever means of transportation, the person who owns the content, the valuable content, the content that the public wants and craves, whether it's sports, movies, or anything else, they're going to be able to drive people to their platforms. And that's really where the big money is.
8807 Historically, obviously, in a lot of -- especially in the telecom area, the money has been driven by voice. But quite a long time ago, voice started to lose its value partly because, obviously, the introduction of competition in that area, which drove prices down significantly. In a monopoly environment, you're paying $1.50 to speak a minute between Montreal and Toronto; today, that's laughable.
8808 However, in a situation where someone is in the position -- a company, a particular entity -- is in the position to be able to control the valuable content, the essential content, that others seek, that Canadian consumers seek, they're going to be able to extract above-market prices for the value of that content. And that's the central problem. All the money now is in data.
8809 All the money -- and when you say "data", data is not something like e-mails and so on. Data is content, it's video, it's shows. And that's really what this battle is all about right now.
8810 COMMISSIONER DENTON: Well, first of all, thank you for that precise and comprehensive summary of where we are, because it's good, exactly. So since we are in this situation, we, the CRTC, are faced with, you know, approve; approve with conditions; or deny. And I am seeking your advice as to how do we handle this situation.
8811 MR. BURGER: One disconnect that I've been having in watching a lot of the discussions over the last few days has been the reluctance to consider simply just saying no.
8812 Mr. Chairman, in your opening remarks, you spoke about how this is all about determining whether or not this transaction will benefit Canadian consumers or Canadians. There's certainly nothing that I've seen, and definitely not in Bell's opening presentation, that showed me any specific, rational, tangible arguments that say that Canadian consumers will actually benefit from this transaction.
8813 We've heard about the -- as someone else put it -- the boogeyman of Netflix being bandied about all the time, but I think that's also a bit of a laughable comparison. If anybody takes a look at the market metrics, they'll see that Bell Canada's market capital -- BCE's market capitalization is about $39 billion. Netflix's is $3 billion. In the last 18 months, Netflix's stock has gone down 80 percent and BCE's stock has gone up 50 percent.
8814 So I think that all of that stuff has to really be swept aside. Beyond those discussions, I've heard nothing about how Canadians will benefit from this. So if we take that, if we accept that as a premise that perhaps there is no benefit to the deal, then simply say no. It's done all the time.
8815 Finance Minister Paul Martin said no to the merger of the banks. Nothing happened, the world didn't change, we did not, you know, fall into chaos, and those were banks. Here, we're just talking about TV shows.
8816 So I think that the reality is that -- that the idea of somehow introducing the concept of a very definitive statement by policy makers and regulators as to what's acceptable, what's not acceptable is, in my view, overdue.
8817 If I can just point out -- and I don't mean to digress -- but in the United States, Comcast -- recently, it was announced that the Justice Department has taken on Comcast to investigate for anti-trust activities. Now, I just want to point out -- and I understand that that's not directly within the purview of the CRTC, but in substance, you've got the same power.
8818 In the United States, there are probably about fifteen, twenty, thirty companies that are of the scale of Comcast in terms of being able to protect their interests and take care of themselves. I mean, on the one hand, you may have Comcast, but on the other hand, you have Time Warner or you have Viacom. So they're big boys. They can take care -- boys and girls, and they can take care of themselves.
8819 Even so, and despite the fact that Comcast's behaviour with respect to competition is far -- far less egregious than the behaviour exhibited by Bell, the U.S. Justice Department is stepping in there and taking a look at whether it constitutes anti-trust activities or not.
8820 So that mindset sees these options as perfectly viable, ones which are perfectly legitimate.
8821 You may touch on this further, and I don't want to pre-empt it, but there's also been a discussion about what this means to Astral. What happens if the deal doesn't go forward? Again, did anybody ask the banks' shareholders what does this mean if the merger doesn't go forward?
8822 The mergers didn't go forward, the banks kept their value, and life went on as it should. This would not be the end of the world if the transaction did not take place. The Greenberg family, if they want out, there are means within the marketplace for them to liquidate their assets in an orderly fashion.
8823 There are many other ways of them being able to liquidate their position if they care. If shareholders care, then they can simply trade in and out of the stock.
8824 So I'm not sure why those concerns on this hand should really have anything to do with the assessment of whether or not this transaction benefits Canadians.
8825 COMMISSIONER DENTON: Thank you very much, Mr. Burger. Well done. Thank you. Those are my questions.
8826 THE CHAIRMAN: Thank you.
8827 Just to be clear, is there any reason for us to think that we gave the impression that a "no" is not an option?
8828 MR. BURGER: Mr. Chairman, not at all. I think that there -- it would be unprecedented. So I can understand the trepidation with which one might approach it, if they did. I think that -- in my view, the only part that, to me, is a little bit unusual is the emphasis on what this means to the Astral shareholders, because I think that that's a very, very small segment of the Canadian public which we're hoping will benefit or not from this deal.
8829 THE CHAIRMAN: Okay. Just one final question. When you were developing your business case, you were obviously thinking about a target audience, customer. Can you describe to me who you're trying to reach.
8830 MR. SLOUTSKY: Yes. We -- again, as I have previously described, we target primarily the ethnic niche as well as the so-called "cord cutters", people who are unsubscribing from the traditional, conventional ways of watching TV, that is, either Bell or Rogers, and lately, we do see a lot of people who unsubscribe.
8831 THE CHAIRMAN: But are they young, are they mobile, are they families, are they new Canadians? Tell me about them.
8832 MR. SLOUTSKY: They're a little bit of everything. We do see a lot of young people who cut the cord because they do not watch TV. TV became very -- very personalized commodity. It's -- usually, TV is the household matter, so it's a family thing. But at the moment, when you have YouTube and all these services, everybody has their own preference of what they want to watch, and people do choose their individual way of watching TV.
8833 We do see a lot of young individuals who do not have families, who live by themselves, who are limited in the amount of viewing time, and they want flexibility, they want a choice, and they just don't want to overpay to existing providers, such as Bell and Rogers.
8834 THE CHAIRMAN: Thank you.
8835 Very helpful. You've been very clear. Those are --
8836 MR. SLOUTSKY: Thank you.
8837 THE CHAIRMAN: -- our questions. Thank you.
8838 MR. SLOUTSKY: Thank you very much.
8839 THE CHAIRMAN: Thank you for participating in the hearing.
8840 We will now take a ten-minute break and reconvene at 10:32.
8841 Thank you.
--- Upon recessing at 1022
--- Upon resuming at 1032
8842 LE PRÉSIDENT: A l'ordre, s'il vous plaît.
8843 Madame la Secrétaire.
8844 LA SECRÉTAIRE: Merci.
8845 We will now proceed with the presentation from BlueAnt.
8846 Please present yourself and your colleagues. Then you have 10 minutes for your presentation.
8847 Thank you.
8848 MR. KHANNA: Good morning.
8849 Mr. Chairman and Commissioners, thank you for the opportunity.
8850 My name is Raja Khanna. I am the CEO of Television and Digital at BlueAnt Media.
8851 I am accompanied by Michael MacMillan, CEO of BlueAnt Media, and Asha Daniere, EVP of Business and Legal Affairs at BlueAnt's Television and Digital.
8852 BlueAnt is one of the few remaining independent broadcasters licensed by the CRTC to provide Canadian English-language Category A and B specialty services and we are quickly growing our business. We are a relatively new entity formed in 2011 and are focussed on the creation and distribution of television and digital media content.
8853 In addition to owning seven specialty television services, BlueAnt owns a production company that produces over 150 hours of original television content every year and a digital publishing group that generates 5,000 pieces of original travel, comedy and music content each year.
8854 This digital content is published across our Web sites, mobile applications and tablet magazines, and our AUX tablet music magazine is in fact the number one tablet music magazine in the U.S. and Canada.
8855 Increasing levels of investment in, and creation of, original content lies at the core of BlueAnt's strategic business plan. Less than a year after our acquisition of Travel and Escape, we have commissioned multiple new original series, adding over 100 hours of new content for that channel alone. I can note that's an exponential increase over what the prior owners were doing.
8856 Our intention is to do the same with Bold, should you approve that proposed acquisition, and to replicate this model across all services that come under the BlueAnt umbrella.
8857 We will also continue to increase our investment in the creation of digital media content, the level of which has already doubled in the last year.
8858 In light of this, you may ask why we are here today to comment on the acquisition at issue. The reason is this: Like any ecosystem, the Canadian broadcasting ecosystem needs a variety of organisms in order to sustain itself. It needs large, powerful media companies who engage in transactions like the one before you today and it needs vibrant independent broadcasters and producers who feed the soil that allow the big players to grow.
8859 We are here today to voice our support for the acquisition being considered but also to remind you that this is only half the equation.
8860 Approving transactions like the purchase of Astral by BCE, or the purchase of MLSE and potentially The Score by Rogers, without also engaging in proactive regulatory intervention to ensure some balance in the market will ultimately destroy the entire ecosystem.
8861 Simply approving this transaction, Commissioners, would leave your job half done.
8862 The programming services of just three corporate families in the Canadian English-language private television market will control over 90 per cent of television viewing in the market.
8863 In the face of this reality, the critical role of multiple players who are fiercely innovative, who source and develop new talent and programming, who are nimble early adopters and developers of technology and who offer diverse options to audiences becomes even more imperative.
8864 Our support of this transaction is therefore conditional on a corollary effort on the part of the Commission to ensure that independent broadcasters are not left behind, and we will address our specific suggestions to this end in the second part of our comments.
8865 This hearing and the upcoming licence renewal process provide the Commission with an opportunity to ensure we see continued growth in all players in the broadcast sector, large and not so large, and we are here to offer our perspective on how that might be accomplished.
8866 MS DANIERE: Good afternoon.
8867 Last year's hearing into vertical integration attempted to put in place a framework to facilitate the availability of independent services to Canadian consumers on fair and non-discriminatory terms. However, the current regulatory scheme does not go far enough to meet this goal.
8868 It is our view that this hearing must be seized upon by the Commission as a vehicle to do three things:
8869 - the first is to ensure that the Code of Conduct which emerged from the Vertical Integration hearing last year is structured so as to actually have some influence over negotiations between independents and vertically integrated BDUs;
8870 - the second is to issue a clear statement in its decision on this hearing that the growth of large integrated undertakings must not come at the expense of independent broadcasters whose role is fundamental to Commission policy; and
8871 - third, to determine that the licence renewal process to be undertaken in the coming months will be done in the context of a policy review to ensure the continued vibrancy of the independent broadcast sector.
8872 BlueAnt recognizes of course that the Code of Conduct was conceived as a set of principles and is not able to prescribe a list of specific behaviours. The reality is, however, that the absence of truly enforceable obligations in the Code simply renders it ineffective.
8873 When we at BlueAnt are presented with disciplinary terms our only recourse it to the current dispute resolution process. Our experience indicates that the spectre of such a process barely registers with some of the large BDUs and certainly does not cause them to reconsider packaging decisions or marketing decisions.
8874 Moreover, it is extremely challenging for BlueAnt to afford the time, the cost and the potential recriminations associated with using such a process. Starting a fight that we cannot afford to lose with a large vertically integrated BDU has very little upside in comparison to the enormous potential costs.
8875 Our recommendation is therefore that the CRTC include the Code of Conduct as a Schedule to the Broadcasting Distribution Regulations while stipulating that the Commission will have regard to the Schedule in determining whether there is an undue preference or undue disadvantage.
8876 This would effectively bar many of the discriminatory practices that are at issue for independents and, to the extent it did not, it would give independent broadcasters recourse to a definitive remedy in the face of such discrimination.
8877 We note also that as new forms of authenticated broadcast and VOD services begin to emerge as an alternative to traditional distribution BDUs have yet another forum in which to favour themselves over small independent services.
8878 It is critical in a balanced and sustainable Canadian broadcasting ecosystem that independent broadcasters are afforded the same level of access to data, information and authentication mechanisms that are being implemented by BDUs for their own programming services.
8879 Several BDUs this week have referred to their plans to launch these types of multi-screen applications for their own programming services. BlueAnt and others like us must have access to the same opportunities to launch authenticated applications and services on digital platforms for our own services if we are to have a chance of effectively competing for audience.
8880 It is to address these and other evolving issues that we are requesting a clear statement from the Commission in its decision and a policy review as a follow-up to this hearing, both of which will serve to ensure a fair and equitable ecosystem where all players can thrive.
8881 MR. MacMILLAN: We all agree that innovation is critical, and as a person who has spent the better part of 34 years working in the Canadian television industry, first by starting a small production company which later became a small broadcaster, which then became a very large broadcaster, producer and international distributor, and now back again with a growing small broadcaster, I have had the good fortune to witness the full spectrum of innovation and how it happens and I can tell you unequivocally that in my experience the level of innovation that occurs at a small media company is infinitely greater than that which occurs at a large one. I've been both.
8882 We do not mean to suggest that big media companies don't innovate but it's simply a fact that small nimble companies innovate differently and at a far greater speed than large companies do. The reality is that the industry depends on both streams of innovation in order to thrive.
8883 To encourage the success of independent broadcasters, what we are suggesting today is a treatment akin to what the CRTC has done in the case of small BDUs and new media undertakings. This is not a new concept. It is similarly akin to what the government saw fit to do in respect of new wireless entrants who are dependent for their success on negotiations with the incumbent carriers in Canada. The government's desire to exempt this group from some of the rules normally facing facilities-based carriers was a recognition of the balance that is constantly required to maintain a healthy ecosystem in our communications industry. Independent broadcasters should be given a similar level of protection and encouragement as other similarly situated participants.
8884 Mr. Chairman and Commissioners, our essential point today is that any ecosystem -- whether a natural world biosystem or a human-made economic marketplace like our broadcasting system -- so any ecosystem is a complex amalgam of various participating species in which each plays its own essential role.
8885 These systems or markets survive and succeed precisely because there are a variety of species or market actors, often participating for quite different purposes, even with contrary goals in mind. That makes for a sustainable biosystem. That also makes a market, a market where one wants to sell at the same price the other wants to buy, a market where players are motivated by different goals, who see their world in different ways.
8886 In the Canadian broadcasting market we have some large players whose goal is to protect their cellular, home phone or cable businesses, and hopefully, players with other purposes too -- BlueAnt, whose goal is to create content it can distribute to the world. A sufficiently diverse biosystem or marketplace leads to more invention -- necessity has the habit of doing that -- and is more attractive to a broader range of capital and talent. These conditions drive innovation, experimentation and real competition. These are the conditions that ultimately serve the consumer.
8887 Having three families of broadcast ownership with a 90-percent-plus market share is only part of the picture for a vibrant, innovative market that will serve consumers now and tomorrow.
8888 As well as approving this application the Commission has the opportunity to permit a competitive ecosystem where more than one species exists. You have the opportunity to set the conditions for a healthy, innovative, truly competitive and consumer-friendly marketplace.
8889 Thank you for the opportunity to appear before you. We would be happy to attempt to answer any of your questions.
8890 THE CHAIRPERSON: Thank you very much for being here.
8891 I can't pass up the occasion of having Mr. Khanna, who I remember many years ago foresaw sort of the digital future we are in now in conferences we attended together, as well as Mr. MacMillan, who built a very successful company with both broadcasting and production -- I can't pass that opportunity up and not ask you the same question I've asked many others about 2017.
8892 So what's the ideal state? Where are we heading?
8893 MR. KHANNA: I'll let Michael take the first crack at that.
8894 MR. MacMILLAN: Well, I guess in 2017 -- in our sesquicentennial year, you mean -- I hope at least --
8895 THE CHAIRPERSON: And, by the way, also the end of my term, so that focuses the mind.
8896 MR. MacMILLAN: Well, I certainly hope that -- well, we're ambitious, we're aggressive, we choose to see the glass as being half full.
8897 As for the industry, we hope here in Canada it is still a rational, coherent system that enjoys the participation of all shapes and sizes of market actors, number one.
8898 I think that probably it will be a broadcasting system that is increasingly based on demand, where citizens, where consumers get to choose what and how they watch, where and when and so on. That's a trend that's been well under way for quite some time.
8899 And ideally it will be a system whereby broadcasters can directly connect to their customers. We've heard some talk this week about so-called over-the-top, but really it's suggestions of permitting direct access to customers and we hope that that does emerge and that all players in the industry and all consumers can enjoy that direct access.
8900 So more on demand and I hope a system of greater access whereby the broadcaster can reach out and touch the consumer who is choosing to watch that product. That would be quite a change from what we have today.
8901 MR. KHANNA: And we certainly hope that much of the activity that's happening in 2017, whatever screen it's on or however it's delivered to the consumer, is happening within a regulated environment so that we can sustain this industry that we have, develop great talent, be competitive internationally.
8902 You know, the sort of opposite view of things not going the way we hope and the Canadian system losing some of that edge that smaller and mid-sized companies provide is one where BlueAnt is operating more outside of Canada, practically speaking.
8903 THE CHAIRPERSON: You, in a sense, are describing a more demand world. We used to talk about disintermediation and I've always wondered about that because obviously in broadcasting as we knew it, it was the broadcasters that would mediate that content. Whether it was providing an end of the day prime time program or drive to and from work offering, they would take the content, whether it's entertainment content, news content, and package it.
8904 In this new multiple platform world there's a lot coming at the potential consumer or citizen because of this disintermediation but it seems to me that there are other forces at work, whether it's applications or others that are substituting themselves to the process that broadcasters and other media companies used to play to help you make, as a consumer or a citizen, those choices out there.
8905 So is it all going to be applications that help us make choices? What role does promotion by those media companies play in terms of making sure we find that content? Because there's a risk there's a lot of noise but there's no signal.
8906 MR. KHANNA: You know, certainly, if we evolve to the App world version of the television industry where everything was just an application on a desktop, totally fragmented, you go from 700 channels to an infinite number where there are foreign services and Canadian intermingled and there's no differentiation, that would be a bad thing for all of us.
8907 But that won't be the case because we have large strong BDUs in this country that control -- that are gatekeepers, will always be in terms of the infrastructure, the pipe, the billing systems, things that are critical to these things. They control the platform.
8908 On my iPhone the App -- you know, you may have read recently that Apple has decided to take the YouTube App off of the home screen as a default application. Being a default application is going to radically change the number of people that use that App, massively change what are the default applications in the future on the -- name your large vertically integrated BDU's platform.
8909 They will be their own. They will market their own. They will push their own. Of course they will, they're economically incented to do so. And they will push their large competitors' products because they are economically incented to do so based on those equally balanced negotiations that are happening at that level.
8910 Where will we be? Where will the smaller entities be? There is a real fear there.
8911 MR. MacMILLAN: Indeed. That's sort of precisely our issue. Large media companies are just fine and we're here supporting this application in the context of what we said about the need for action to ensure the survival of the independent species.
8912 Our issue is not large players, our issue is the absence of any small or medium players, and specifically our issue is that the three large players control the pipe. We can't get to our customers without going through the pipe that is owned by those same large competitors.
8913 It's not a question of being carried, it's a question of having effective carriage, marketing, pricing, having any influence whatsoever on the direct connection to our customers.
8914 We can't get to our customers. We can't get in a good shelf on the store. We can't get marketed, priced or packaged properly. That's our problem, not the size of competitive media companies. Size is fine. It's that they control the pipe.
8915 THE CHAIRPERSON: These companies tended to be a few years ago just common carriers, they didn't influence the content, and of course the voice and data game became more of a pennies game than the value added that we once sought and therefore they seem to have brought in the content game to make a difference.
8916 But the Commission cares about content as well. So what's wrong with using that size of company to help us create the Canadian choice that we want along with other choices in the marketplace?
8917 MR. KHANNA: I think having 90 percent of the market come together, those three large companies, and create a Canadian alternative to some of the foreign over-the-top or whatever services -- not that we consider that a huge threat, actually we look at them as opportunities -- but we should have a Canadian solution.
8918 Having a larger company in the mix doesn't really make a difference. All of them, in our view, have to come together to do that, to provide that Canadian solution, much the same way it happened in the United States with Hulu, multiple entities coming together to create it, or it will happen completely independently as it has done with Netflix and others.
8919 Having one strong company -- looking at in the U.S. market, you know, Comcast TV Everywhere solution or Time Warner Studio Everywhere solution on their own, they're not often spoken of in the same sentence as a Netflix or something large like that.
8920 The industry does need to come together. So the scale, you know, for us doesn't really make a huge difference. That's why we're supporting this application.
8921 What makes a difference though is if they did all come together and did do that and created that great Canadian alternative, how fantastic would that be, and just with three people in the room they could control 90 percent of that private English-language market.
8922 Where are the other voices? Where's the choice? Where are the consumer alternatives? Where are the different perspectives? And where is the opportunity to grow in Canada the next medium- and large-sized company? That's the key here.
8923 THE CHAIRPERSON: You talked about the diversity of the ecosystem required, both small and large. Small is, in your view, more nimble, more creative and adds to the diversity.
8924 I note that in your case though, beyond that, unlike other companies, you seem to have been thinking more internationally -- not more internationally -- it included international outlook, it wasn't just the domestic outlook.
8925 I started asking questions -- other companies in Canada, Cogeco for instance has recently made some investments abroad.
8926 Why do you think Canadian companies in their growth strategy haven't thought of themselves more as international companies?
8927 MR. MacMILLAN: Well, the history of most Canadian broadcasting sees itself -- and I'm grossly oversimplifying but the point is still accurate -- has been a business of buying American programming and rebroadcasting it here. It's been inward-looking, you know, go to Hollywood, buy shows and put them on the air for Canadian audiences. That's been the bread and butter of the Canadian broadcasting scene for 50 years. It's never been an outward-looking industry. The content creation industry has been, but not the broadcasting industry.
8928 THE CHAIRPERSON: Okay. Why is that, it's just it was too easy?
8929 MR. MacMILLAN: Possibly. Possibly -- well, yes. Creating content that the world wants to watch, the highly competitive market of the whole wide world, is a tough game, absolutely.
8930 THE CHAIRPERSON: I don't want to put you in an awkward position but at one point you decided to get out of the broadcasting business as well and if you're following what you're suggesting perhaps you shouldn't have.
8931 MR. MacMILLAN: Selling our company?
8932 THE CHAIRPERSON: Yes.
8933 MR. MacMILLAN: Yes.
8934 THE CHAIRPERSON: Alliance. I meant more the -- I know the production side was under a lot of pressure from investors because it's a high-risk business.
8935 MR. MacMILLAN: Yes. Actually we got out of the business of producing programs, interestingly, for other broadcasters and we doubled down on creating content to use on our own broadcast outlets. That's what happened in 2003.
8936 But later on we sold our business Alliance Atlantis to Canwest because we wanted to grow further. We had discussions with many other industry players at the time and also I had a specific view, a very bearish view about the economy, the market, the changing technology and the credit markets in '06 and I thought it was best for our employees and shareholders to sell then at that price. But that was a specific company and industry analysis at that time.
8937 THE CHAIRPERSON: That may have been excellent timing actually.
8938 Now, I'm trying to get a real sense of what you're saying in terms of your position, because you can go to the sandwich bar and order a ham and cheese sandwich but please no ham, please no cheese and hold the bread.
8939 I get the feeling a little bit in your position you're saying "yes but," and the "but" seems to be in very large bold type and underscored, so I'm starting to wonder whether it's really a yes that you're suggesting that we should have at the end of the day.
8940 MR. MacMILLAN: Well, it's a yes in the context of the Commission also taking several steps we've suggested here or other similar ones to make sure that the species of independent broadcaster doesn't simply go extinct.
8941 We also think that they're not large suggestions actually. They are, you know, enshrining the Code of Conduct in the Regulations, making it actually relevant and have teeth. Presumably it's what the Commission intended when it brought out that Code of Conduct. I'm sure that the Commission intended for it to be a useful Code. So make it actual, make it useful, as opposed to right now where it's completely irrelevant. One thing.
8942 Secondly, specific regard to small players is not totally unlike what the Commission has done with very small BDUs, with new cellular -- or what other parts of the government did with new cellular entrants. There are new media exemptions. There are methods to deal with small players who have different circumstances from the big market dominant leaders.
8943 MR. KHANNA: When we have only such small players and such large players with no middle, in an ecosystem that just means the little guys are food for the big guys. We need to create a protected space so we can grow and start to compete. That's what the consumer wants, wants competition, and ultimately I think that's what we all want, to create a sustainable business here.
8944 MS DANIERE: Also, within the context of this hearing itself, I don't think it's a "yes but," it's a "yes and." And the reality is whether this transaction proceeds or doesn't proceed, it's not going to have an enormous impact on what happens to the business of BlueAnt.
8945 It's just that this, as one in a series of multiple transactions where we're seeing increased concentration and convergence, really gives us an opportunity and our feeling was an obligation to come forward and say this is all very good for the market and there are other considerations that need to come into play.
8946 THE CHAIRPERSON: So are you saying even if we were to turn this down that the health of the ecosystem would require us, in any event, to go back and look at the framework we've put into place, that they may not be vigorous enough to ensure the survival of the small players?
8947 MS DANIERE: Yes.
8948 MR. MacMILLAN: And there have since the -- and it's not all about the Code of Conduct but just to take that as a moment in time. Things have changed since then. I mean it's as much about MLSE, it's as much about the possible purchase of The Score, it's also about Astral. It's not this one transaction, it's the fact that 90 percent of Canadian private English-language viewing is controlled by three families. That's an extraordinary development.
8949 And it's more specifically the point that those are the players who own the pipe. If they weren't the players that own the pipe, it would be a different story.
8950 THE CHAIPERSON: At paragraph 8 you refer to -- one suggestion is that were we to approve this that we make a clear statement -- although I take it even if we weren't approving it you would still want a clear statement -- on this hearing about this issue about independent broadcasters.
8951 We have heard, you know, over the past number of days many people saying that statements don't go far enough. I take it that just a statement wouldn't be good enough? It is-- there is end?
8952 MS DANIERE: That is right. And the reality is, you know, we were sort of wrapping our mind around: Okay; what is it that we want to come out of this hearing that is within the context of what you are here this week to decide?
8953 The reality is: Yes; we are asking for all three things in tandem, but I would also suggest that a statement is really a signal. It is a signal to the BDUs; it is a signal to the independence that, you know, with a new Commission in front of us; that there is still a very fundamental support for independence within the industry; and that is why we have it there.
8954 MR. KHANNA: And part of the statement could be, you know, some concrete next steps on how you propose to deal with this? I mean what we didn't want to do is to do, you know, tell you how to do your work. You have this opportunity in this decision, to make some progress on this issue. You have the licence renewals as an opportunity to make some progress on these issues? Whether or not you need to go to that third step of time and resources of having a policy review; we are not saying that-- it may not be necessary, depending on what do here and what you do in the licence renewals.
8955 So, you know, we didn't-- we chose not to say: Do this, this and this and this point and this point; and rather, present the issue and allow you to tell us how best to deal with it.
8956 MS DANIERE: Except for the code of conduct; we really want that.
8957 THE CHAIRPERSON: Which brings me to another concern I would like to have your reaction to.
8958 Normally, Commission decisions aren't conditional on future proceedings. In a sense, you are saying: Yes and you have to do this, but the 'and' would be down the road; in the same way as many have pointed out; that normally, your benefit is not, you know, something that would require another approval. You are in a sense asking us to say: Yes, and we are binding ourselves to a particular result down the road.
8959 Do you think that is an appropriate way of doing it?
8960 MR. KHANNA: You know, there are-- it is a tough balance. We want-- one hand, we would say, you know, put in this decision specific controls in place on the parties of this decision, with the hope that that would then become extended across the board. We certainly want anything that gets decided to be applicable to all players.
8961 THE CHAIRPERSON: So you-- you may have heard some parties, like Shaw, say: No; the vertical integration and the code of conduct are just fine; don't apply a broader set of new regulations to the industry. But you are actually saying that; it is not just with respect to the BCE investment?
8962 MS DANIERE: Yes.
8963 MR. KHANNA: Oh; to be very clear: Yes.
8964 THE CHAIRPERSON: Okay.
8965 MR. MACMILLAN: Our issue is not particularly about BCE. Our issue is about all the vertically integrated BDUs, and we have big problems in getting access through the BDU-- integrated BDUs, in general, and the same code of conduct issues across the board. It is not specifically a BCE concern.
8966 MR. KHANNA: There are-- We have a list of-- it is worth mentioning; it is called: Specific recommendations on what you could do, that we have submitted with our licence renewal application that went in yesterday. Again, we didn't think that this proceeding was the place to dive into those details; we are happy to, if you want.
8967 THE CHAIRPERSON: Certainly not.
8968 I believe Vice-Chair of broadcasting will have questions for you.
8969 COMMISSIONER PENTEFOUNTAS: We were a little busy yesterday, so we didn't get a chance to look at those 12 recommendations.
8970 Yes; and in terms of the Shaw comments, and there is also-- there was a remark made with respect to three to one ratio. I am sure that you have refined that issue in your 12 recommendations, because I gather you see some weaknesses in the rule, right? In terms of where you are placed.
8971 Do you want to speak to that briefly and I want to take you somewhere else after that?
8972 MR. KHANNA: Access is just a very-- those are tabled stakes just to get in the game, but it doesn't-- we need parity of access; we need equality of access; we need better packaging; you know, putting us in on pick-and-pay, you know, tier on channel 890 or something; it doesn't do anything for us, but it satisfies the three to one rule.
8973 In the new world fragmentation, we are talking about apps and authenticated services and over-the-top; that means nothing. Putting a website up on the internet guarantees you nothing; you will not get anyone there just by being there.
8974 COMMISSIONER PENTEFOUNTAS: Yes; and the three to one rule really did not foresee those elements. I guess your impression is it is unfortunate?
8975 MR. KHANNA: Yes.
8976 COMMISSIONER PENTEFOUNTAS: Yes?
8977 Listen, you are obviously-- if you look at the empirical evidence here, you are punching below your weight by mentioning that you are an endangered species; that is the independent broadcaster.
8978 And I know that you said that the big boys and girls can take care of themselves. Basically, the integrated and the BDUs?
8979 So I want to sort of take you away from that and-- and as a learned observers, a couple of issues came up during this hearing. One, scale and the international threat by OTT. You have spoken on that issue briefly. Do you want to add anything to that, given what we heard Monday morning and thereafter from the other VI's?
8980 MR. KHANNA: You know, I think the-- we have to be careful about what we call over-the-top and what it means. When we are talking about an authenticated service, in my mind, that is not over-the-top at all.
8981 COMMISSIONER PENTEFOUNTAS: Yes; I agree with you.
8982 MR. KHANNA: It is just part of-- it is under-the-top; as what we were saying earlier.
8983 It is-- those types of things are critical to our future innovative-- to have more choice for consumers on those multi-platforms. That is what they are expecting. That is what we need to do as an industry.
8984 But we need to be able to do that just as much as Bell and Shaw and Rogers are able to do that for their own programming services.
8985 So all I would say to that is: Great, Bell, you know, just launch this fantastic service; Shaw launch yours; Rogers launch yours; make sure BlueAnt can launch ours. Give us the tools, access to data, authentication mechanisms and whatever we need to be able to do the same thing.
8986 COMMISSIONER PENTEFOUNTAS: I gather that is not on the table right now, your discussions with BDUs, an authenticated plan for BlueAnt content?
8987 MR. KHANNA: We have tried that before. It is pretty much a non-start.
8988 COMMISSIONER PENTEFOUNTAS: A non-start?
8989 MR. KHANNA: So one of the good things that may come of this is they start doing that for their own services, which hopefully, in theory, should open up the door for us.
8990 COMMISSIONER PENTEFOUNTAS: Okay.
8991 MR. MACMILLAN: It would be unfortunate that the talk of OTT- which reminds me an awful lot of the death star talk 20 years ago. The same king of boogieman at the door that are going to kill us all -- would let a behaviour continue that prevents us from participating in the under-the-top. We want to be in the under-the-top. We want to have that direct relationship. But if we can't, then, what do we do?
8992 We would only have to look to ridiculous ideas like going so-called over-the-top, which is the last thing we want to do.
8993 COMMISSIONER PENTEFOUNTAS: Right.
8994 You mentioned apps; you mentioned access to non-linear platforms. I gather, as an independent-- we heard other broadcasters complaining that-- not broadcasters but rather wireless providers complaining that there are delays in getting access to content.
8995 I gather you have a similar problem but from the reverse angle? In that you can't get your content on wireless services in Canada?
8996 MR. KHANNA: It is not the priority for any of the vertically integrated BDUs to spend time negotiating with little tiny BlueAnt; it just isn't. It an economic incentive issue. They are not out to get us. It is-- they have got bigger fish to fry; we get it.
8997 But that is why we are here. If we could figure this out commercially without the Commission's intervention, we would. We are-- that is our, you know, where we come from.
8998 You know, I wanted to day earlier, to the Chairman's comment also of wanting more regulation. Part of this is what Michael and Asha said is that it could be one of the way we are happy to deal with this inequality in the system and this threat to the sustainability, is by lessening the burden on some of us smaller guys, like it has happened in other areas in the government, and allowing us to figure out of these issues on our own, without the Commission having to come in and, you know, prescribe every-- you know, the behaviour of these large guys.
8999 We are not here-- we don't want to overregulate; none of us do. You guys don't; we don't.
9000 But what tools do you have to kind of give us the flexibility, freedom and protection we need to grow and compete? And one of them is actually lessening.
9001 So in those recommendations we have made, you will see that several of them are about reducing the burden on us rather than increasing the burden on them.
9002 COMMISSIONER PENTEFOUNTAS: Mr. MacMillan, you have been at the head of small, medium and huge companies in this country. And there was a case made-- or both ends of the case was made. I mean, Monday, Bell made the case that you are not going to invest or I will have invested if this acquisition's approved, close to $7 billion in content and I can't leave a dime on the table.
9003 The other BDUs expressed the opinion that there is an economic model whereby you can lose money on the broadcasting end because you will more than recup it on the distribution end.
9004 As a somewhat independent observer, if not completely independent and disinterested observer on this point, is-- speak to us on that debate, as a sage, I am almost asking you to speak to us on that debate.
9005 MR. MACMILLAN: So the question is whether--
9006 COMMISSIONER PENTEFOUNTAS: Do the economics work for you? And you have been playing-- you played at that level --
9007 MR. MACMILLAN: In other words--
9008 COMMISSIONER PENTEFOUNTAS: -- invest that much money and hope-- and leave money on the table as a broadcaster in the hopes of recupping that, those losses, on the distribution front?
9009 MR. MACMILLAN: That would be a very rational thing to do. I don't--
9010 COMMISSIONER PENTEFOUNTAS: Given the economics?
9011 MR. MACMILLAN: Yes; I mean I don't know why exactly each of Shaw, BCE and Rogers have so significantly increased their ownership of Canadian media. We know they have and if this is approved to 90 percent plus in the three families.
9012 But they talked a little bit in public about-- and if I were in their shoes- which is what you are asking me, and I guess I could be wrong as to their motive- it is to protect their existing cell phone, home phone and cable business, which have become commoditized to some degree.
9013 And if I had that much sunk cost, it is a pretty rational thing to do. And if it requires a big spend, you know, so be it; it is marketing costs, perhaps.
9014 That is how I might look at it.
9015 COMMISSIONER PENTEFOUNTAS: At the extreme, that's almost the approach. It's a marketing ploy to bring people into your distribution and--
9016 MR. MACMILLAN: Which, then-- that is a perfectly valid reason and if they can-- in my remarks, I mentioned-- in a healthy market, you have got players who have got all sorts of different reasons for being there. That is one reason; it is a legitimate reason; it is fine. But it shouldn't be the only reason.
9017 That is why, in a healthy market, as I said, the buyer is willing to sell the stock at the same price and somebody else wants to go the other way. You want differing --
9018 COMMISSIONER PENTEFOUNTAS: In a healthy market, that wouldn't be the justification and the motivation for holding those content entities.
9019 MR. MACMILLAN: Well, there is lots of motives in business for, you know--
9020 But that is my perception of why they are in the media business.
9021 COMMISSIONER PENTEFOUNTAS: Okay; well thank you very much. Mr. Chair?
9022 THE CHAIRPERSON: Thank you. Commissioner Denton?
9023 COMMISSIONER DENTON: Sir; Gentlemen.
9024 To pursue the ecological metaphor; you are calling upon the gamekeeper for-- get out his rifle and perhaps not back the power of the predator.
9025 So-- and all this week, we have been hearing from Bell's rivals in the cable market of various sizes telling us that so far, what we have done is inadequate- and that is putting it politely- and that they fear whether given our current tools, we really do have the ability, not really to formulate the rules but to execute them or to act upon them in such a way and in a timely way to prevent abuses of, say, market dominance.
9026 So-- and the second fact is we all know you guys are very clever and able, and you seem to be much more sanguine about our ability to act as effective chief gamekeeper than they do. That seems to be-- that is my impressions so far. And I would like you to respond to that. You seem to have come a different assessment of the dangers involved in this than a whole lot of other surely rational capitalist actors. Why is this?
9027 MR. MACMILLAN: I don't want to-- it is hard for us to guess or second guess the analysis by everybody else. But the way we see it, not all that much. I mean the impact of what we are asking is significant, yes, but the actual interventions are relatively precise.
9028 And it is not as if we think we needed to try to keep this metaphor going for this subject too, that we need to have the gamekeeper invading, you know, looking behind everything, behind every bush in every transaction; it is not that.
9029 We think that-- what we are suggesting are a handful of fairly precise, narrow, but intentionally effective actions that you can take. Your actions, by--
9030 So yes; that is how we see it.
9031 Maybe, also, we don't have the same sunk costs as some of the other players. It goes also to the point about why do small companies innovate, in way, better than big companies do? And I fully believe that they do.
9032 And one of the reasons why, when we are a big company; why we are less likely to innovate was because we were worried about cannibalizing one of our existing businesses. We were worried about upsetting the capital markets. We had a lot at stake.
9033 So a small player has less at stake and perhaps we are maybe slightly more willing to live in a changing environment than those who have got billions already invested. We don't.
9034 COMMISSIONER DENTON: So you are saying that some costs deter innovation?
9035 MR. MACMILLAN: Yes, they do; absolutely; absolutely.
9036 But, you know, when I was running Alliance Atlantis through the final years, embarrassed, I would say to our management team- it was a joke, since we started Atlantis with $300; so-- it was years earlier. So this is an awful story, but it is true. I would tell our management team: Please don't bring any ideas to the table unless it moves a needle or are valued by over a $100 million.
9037 Is that innovation? No. It was because we were so-- at the final stages of Alliance Atlantis, so desperate to protect the status quo. That was our number one goal. I know what it is like.
9038 COMMISSIONER DENTON: Thank you for that brilliant admission against interest; it is very good. I will remember that.
9039 Thank you. That-- those are my question, Mr. Chairman.
9040 THE CHAIRPERSON: Commissioner Lamarre?
9041 CONSEILLERE LAMARRE : Merci, Monsieur le Président.
9042 To your point of asking that we include the code of conduct as a schedule to the broadcasting distribution regulation. I get it it becomes regulation instead of just guidelines and hence should be more easily enforceable.
9043 But in paragraph 9 of your presentation this morning, you do recognize that the code of conduct was conceived as a set of principles, and as such, you know, we still have words in there as reasonable, excessive, attain.
9044 So even if we do include it within the regulation, is it going to be any easier for us to enforce it or do we need to go further?
9045 MS DANIERE: I think a little redrafting might be in order.
9046 And so yes, I would agree that were it to become enforceable as a set of regulations, there are certainly some revisions, additional revisions that would, just by necessity, have to be made in order to give it real effect and in order to create this sort of black line that we are seeking.
9047 I think, though, that the principles that were laid out at the code of conduct-- that are laid out at that code of conduct are the right ones. So I think 90 percent of the work is done.
9048 COMMISSIONER LAMARRE: Thank you.
9049 C'était tout, Monsieur le Président. Merci.
9050 THE CHAIRPERSON: I believe those were all our questions, so thank you for your appearance. It was very useful and added to our public record; thank you.
9051 MS DANIERE: Thank you.
9052 THE CHAIRPERSON: Thank you very much; thank you.
9053 THE SECRETARY: I would now invite the Canadian Association of Film Distributors and Exporters to come to the presentation table.
9054 THE CHAIRPERSON: Welcome to our hearing, Mr. East. Please go ahead and make your presentation.
9055 MR. EAST: Thank you.
9056 Mr. Chairman, Mr. Vice-Chairman and Commissioners. Thank you the opportunity to appear before you today. My name is Ted East and I'm President of the Canadian Association of Film Distributors and Exporters, of CAFDE.
9057 CAFDE is a non-profit trade association that represents the interests of Canadian-owned feature film distributors. I regret that executives at CAFDE companies are not able to appear with me today. These hearing have coincided with the Toronto International Film Festival. As you can appreciate, the Festival is one of the busiest times of the year for Canadian distribution companies. This week, they will be premiering a number of notable new Canadian films, including Deepa Mehta's Midnight's Children and Brendon Cronenberg's Antiviral.
9058 CAFDE respects that this proposed transaction has raised some important and challenging issues for the Commission. We are going to limit our comments to issues related to Canadian feature films.
9059 CAFDE supports this transaction. We believe Astral's pay services, when combined with BCE's Pay-per-view and VOD services offer new opportunities to promote Canadian films and reach larger audiences.
9060 BCE is also aggressively exploring new platforms in both the mobile and home markets. Their announcement earlier this week of a new service to compete with NetFlix is a good example of this and we look forward to learning more details about it.
9061 The combination of all of these services should encourage Bell Media to participate in the success of Canadian films, beginning with their initial theatrical release. Feature films have a long shelf life and their success theatrically has a significant impact on their audience and revenues in subsequent windows. A Canadian film that is successful at the box office will bring more revenues in the Pay-per-view and VOD markets than one that is not. It will also find bigger audiences on pay television and other conventional services.
9062 In the past few months, individual CAFDE members have held meetings with Bell Media executives to discuss their commitment to Canadian feature films if this transaction is approved. These meetings have been encouraging and have included discussions of promotion by Bell Media of individual Canadian films, including possible support through a benefits package.
9063 Having Bell Media as an enthusiastic supporter of Canadian feature films will be a critical component in their success in the decade ahead. In fact, support from all the broadcast ownership groups will be necessary. Canadian feature films cannot survive without the strong support of Canadian broadcasters.
9064 This is not a situation that is unique to Canada. Studies have shown that there is a strong link between the success of indigenous cinema at the box office and support from a nation's broadcast sector.
9065 We have appeared before you in the past several years to bring to your attention our concern about the declining support for Canadian feature films and the consequent impact this declining support is having on the ability of individual films to get financed and marketed effectively. This decline in support is particularly felt in English Canada, where we have seen a drop in support from public conventional television and the private specialty services. We have seen City TV walk away from its long and proud support of Canadian cinema, despite the assurances that Rogers, the new owner, made to this Commission that the support would continue.
9066 Last December, we expressed concern about the recent drop in licence fees for Canadian films from the Canadian pay services.
9067 Canadian cinema has made great strides since the Minister of Canadian Heritage introduced a new Canadian feature film policy in October of 2000. We have witnessed extraordinary and sustained box office success in Quebec; Canadian films have been distributed all over the world; won prizes at major international film festivals; and acted as incomparable cultural ambassadors.
9068 We have seen an unprecedented increase in both the quality and the popularity of English Canadian films; films that are proudly and uniquely Canadian. These successes have come in the face of increasing competition from Hollywood.
9069 We believe the golden age of Canadian cinema is still to come; however, the gains made by Canadian cinema in the past 12 years are not necessarily permanent and are in danger of erosion to our funding system and support from our broadcasters.
9070 Does this Commission have a role and responsibility with respect to Canadian feature film? We believe you do. The main support for indigenous Canadian cinema comes from three areas: Telefilm Canada, Canadian distributors and Canadian broadcasters; a three-legged stool.
9071 This works most successfully in Quebec, where there is much stronger support from the broadcasting sector and Telefilm support is considerably enhanced by SODEC, the cultural investment agency of the Quebec government.
9072 The biggest danger of the broadcast industry consolidation for us is the ability of one player to collapse the stool. The Commission must ensure that this does not happen.
9073 The health of Canadian cinema is also linked to Canadian television drama. Many writers, actors, directors and producers are active in both.
9074 Success in television has led to opportunities in feature films. There is no greater example of this that "Par Gross". His success as an actor in television most particularly the popular do south series were instrumental in getting financing for a couple of feature films that he also directed and wrote.
9075 Men with brooms and passion deal were both box office and critical successes. They were both uniquely Canadian, the later dealing with an important historical event. And both films had strong support from Canadian broadcasters.
9076 Should the Commission approve this transaction, it is possible we will see some ownership stability in the Canadian Broadcast sector during the initial periods of the Group Licensing Policy, GLP.
9077 Many in the industry believe that GLP will bring about a significant increase in spending on Canadian drama due to the introduction of the GLP requirements related to programs of national interest category, PNI.
9078 CAFTE members are supportive of the PNI model, but believe it needs to be further defined to specifically recognize the unique qualities and support requirements of feature films.
9079 Each broadcast group needs to have a commitment to Canadian feature films that is appropriate to their asset mix.
9080 In the case of BCE, they are proposing to purchase Astral who have long been the most important broadcast partner for Canadian films. Under BCE's ownership, it is imperative that this support continues and they find new avenues to support Canadian cinema.
9081 Canadian broadcasters operate in a privileged position in this country. Because of the protections offered under the Distribution Policy, Canadian distributors do as well.
9082 As Alliance Films chairman Victor Louis pointed out last December during French language group based hearings: "These privileges must come with the expectation and obligation to support Canadian culture."
9083 One of the tests of the success of the group licensing policy will be the degree to which all joiners in the PNA category continue to thrive and reap the benefits of the anticipated increase in spending.
9084 The flexibility given to the broadcast groups under the GLP does present the danger that certain genres will lose financial support. We are worried that feature films will be one.
9085 We are also worried that these licence terms will run their course without any industry examination of the inevitable flaws in the model. We can't let this happen. We can't wait for the next renewal hearings or the next big broadcast transaction to examine these flaws in search for regulatory remedies. It will likely be too late.
9086 On October 29, the Commission, in partnership with Telecom Canada and the Canadian Media Fund will host a one-day symposium on the promotion of Canadian films and television programs. We are encouraged by this and will participate eagerly, but that is not enough.
9087 We need an ongoing dialogue to identify problems, find solutions and ensure that Canadian cinema and Canadian television drama continues to thrive. This can't be accomplished in one day.
9088 I appreciate the opportunity to appear today and I would be pleased to answer any questions.
9089 THE CHAIRPERSON: Thank you very much, Mr. East. I believe Commissioner Denton may have some questions for you.
9090 COMMISSIONER DENTON: Mr. East, this is a great presentation, but I am not sure it addresses our problem of why we should approve or not the transaction.
9091 How is it in the interest of your members that we approve this transaction?
9092 MR. EAST: Well, we think the asset mix could be a positive one for Canadian feature films. I mean, a transaction like this, more consolidation creates dangers as well as opportunities. We like -- we would like to focus on the opportunities.
9093 I mean, Bell is at the forefront of exploring new platforms. The on-demand services have been driven by feature films and we want Canadian films to be front and centre there.
9094 Any transaction that combines broadcast assets is going to inevitably lead to the bundling of rights issue. It is not unique to Bell's transaction here. It's with all the consolidations that's happened. So, that's possibly going to happen here, so we are concerned about that.
9095 COMMISSIONER DENTON: But can I just say to speak more specifically to the consolidation of rights issue that you have mentioned?
9096 MR. EAST: Well, if you have five different broadcasters that you can sell your film to, you are going to get five different contracts and five different prices. You will get a number of plays or a number of years here and then, it follows that you can sell it again.
9097 If you sell it to one player that has four or five different outlets who will play the film, that contract will be for one price and it won't include all those rights and inevitably that price will be lower.
9098 It's certainly not unique to this situation. It's the result of the overall industry consolidation.
9099 COMMISSIONER DENTON: So that doesn't sound like a happy outcome for your members of your industry?
9100 MR. EAST: Ultimately, it hasn't been a happy outcoming. What we are concerned about is that there is across the board within all the broadcast groups a commitment to feature films.
9101 COMMISSIONER DENTON: Okay. I think I get you. That's my questions, Mr. Chairman.
9102 LE PRÉSIDENT : Non. Ça va. The advantage for a person like you, if you arrive at the end of the hearing, there has been a lot of join of the issues, so the number of questions we may have as lessened. So, thank you very much for your participation, Mr. East. I think you have been very clear. Thank you.
9103 MR. EAST: Thank you.
9104 LE PRÉSIDENT : Madame la secrétaire.
9105 LA SECRÉTAIRE: Merci. J'inviterais maintenant l'Union des artistes, Société des auteurs de radio, télévision et cinéma, l'Association des réalisateurs et réalisatrices du Québec et l'Alliance québécoise des techniciens de l'image et du son de se présenter en avant.
9106 LE PRÉSIDENT : Bonjour et bienvenue. Je vois dans votre présentation, une copie de la présentation orale que vous allez bel et bien vous identifier parce que ça aide la sténographe plus tard à identifier les propos de tous. Donc, allez-y et faites votre présentation. Merci.
9107 Simplement... c'est ça, la petite lumière rouge doit être allumée. Merci. Voilà.
9108 M. LEGAULT : Je vais juste mettre de l'ordre mes papiers, s'il vous plaît. Merci.
9109 D'abord, monsieur Jean-Pierre Blais, félicitations pour votre nomination. Vous avez sauté dans le bain à un moment extraordinaire.
9110 LE PRÉSIDENT : Je crois que oui. Merci.
9111 M. LEGAULT : Alors, bonjour à tous les membres du panel. Alors, je me présente. Monsieur le président, je m'appelle Raymond Legault et je suis président de l'Union des artistes. Je suis accompagné de Sylvie Lussier qui est président de la Société des auteurs de radio et télévision et cinéma, de François Côté qui est le président de l'Association des réalisateurs et réalisatrice du Québec et de Bernard Arseneau qui est président de l'Alliance québécoise des techniciens de l'image et du son. Et son également présents avec moi Sylvie Brousseau, directrice générale de l'Union des artistes, Yves Légaré, directeur général de la SARTEC et de Caroline Fortier, directrice générale de l'ARRQ et Catherine Escojito qui est directrice des communications de l'AQTIS qui est à votre gauche complètement.
9112 L'UDA est un syndicat professionnel représentant les artistes oeuvrant en français partout au Canada. La SARTEC est un syndicat professionnel d'auteurs de radio, télévision et cinéma oeuvrant dans le secteur audiovisuel. L'ARRQ est une association professionnelle de réalisateurs et réalisatrices pigistes oeuvrant principalement en français dans les domaines du cinéma et de la télévision. L'AQTIS est une association de professionnels pigistes qui regroupe des artistes concepteurs, artisans et techniciens du Québec exerçant leur professions dans divers métiers de l'industrie de l'image et du son.
9113 Les francophones demeurent fidèles à leur télévision et le secteur francophone a connu un grand succès dans plusieurs domaines. Grâce à l'augmentation du nombre de services télévisuels disponibles au cours des 20 dernières années et du choix qui en découle, les auditoires francophones regardent davantage des services canadiens et la programmation canadienne.
9114 En règle générale, plus le contenu canadien est disponible, plus les téléspectateurs francophones s'en prévalent. Ainsi, les services spécialisés et payants d'Astral ont contribué à l'épanouissement de la télévision francophone.
9115 En même temps, la migration des auditoires francophones de la télévision généraliste qui diffuse surtout de la production originale vers la télévision spécialisée et payante qui diffuse beaucoup de reprises fragmente l'offre francophone au détriment de la production originale dans des catégories d'émissions coûteuses telles que les dramatiques et les documentaires uniques.
9116 Cela a une conséquence néfaste car c'est la télévision généraliste publique et privée qui, en grande majorité, déclenche le financement de ces émissions auprès des institutions financières, situation qui se maintiendra dans un avenir prévisible.
9117 Le secteur francophone a besoin d'un traitement particulier qui prend en considération son caractère distinctif et il importe que cette réalité soit reconnue par le Conseil dans le dossier de l'achat d'Astral par BCE.
9118 En l'absence d'un enrichissement de la proposition de BCE, il y a un risque de perpétuer les problèmes existants; c'est-à-dire réduction des budgets pour les séries dramatiques, disparition des séries lourdes, insuffisance d'investissement en émissions originales pour la jeunesse et déclin de la diffusion de documentaire unique et d'auteurs.
9119 Les commentaires et obligations que nous proposons au Conseil de faire sien sont réalistes car les groupes de propriétés BCE et Astral Média possèdent les moyens financiers nécessaires pour contribuer davantage à notre culture télévisuelle de langue française.
9121 M. CÔTÉ : Bonjour, monsieur, monsieur le président.
9122 Sauf exception, les services spécialisés et payants francophones d'Astral bénéficient de résultats financiers exceptionnels depuis plusieurs années et cette situation ne changera pas de façon significative au cours des cinq prochaines années.
9123 Ces services sont rentables en partie grâce au régime réglementaire mis en place au fil des ans par le CRTC et, entre autres, à sa politique d'exclusivité des genres propres au service de catégorie «A».
9124 Ce régime réglementaire maintient des barrières d'entrée au secteur, empêchant la venue de nouveaux joueurs, ce qui a pour effet d'augmenter le taux de rendement réalisé par les joueurs actuels dont les services d'Astral.
9125 Nous ne sommes pas opposés à ce régime pourvu que les bénéfices exceptionnels découlant de la réglementation du CRTC soient partagés par tous les éléments du système de radiodiffusion et par les citoyens canadiens.
9126 C'est dans l'esprit d'une recherche d'équilibre que nous faisons nos commentaires aujourd'hui.
9127 De façon générale, lorsqu'une demande de transfert de contrôle en radiodiffusion devant le CRTC une entreprise maximisant ses profits essaiera de réduire la valeur de la transaction aux fins des avantages tangibles pour pouvoir minimiser les avantages tangibles qui en découlent.
9128 La demande de BCE pour prendre le contrôle effectif d'Astral se conforme à cette pratique. L'UDA, la SARTEC, l'ARRQ et l'AQTIS estiment que les taux d'escompte pour la télévision et la radio choisis par BCE, Price Waterhouse Coopers sont excessivement élevés et dévaluent injustement la valeur de la transaction aux fins des avantages tangibles.
9129 Qui plus est, le taux de croissance terminal des actifs inclus dans la valeur de la transaction sous-estime la véritable valeur d'Astral aux fins des avantages tangibles. D'ailleurs, une entreprise faisant une demande de transfert de contrôle aurait intérêt à élargir la valeur des actifs de radio au détriment de celle des actifs de télévision.
9130 Les avantages tangibles sont payables à hauteur de six pour cent de la valeur des actifs de radio alors que ceux payables sur la valeur des actifs de télévision le sont à 10 pour cent.
9131 À ce titre, BCE estime que le taux de croissance terminal de la radio française et anglaise en 2016 sera de 1.5 pour cent alors que celui de la télévision payante et de la télévision conventionnelle sera de seulement un pour cent.
9132 D'après nous, BCE, Price Waterhouse Coopers dégonfle indûment la valeur des actifs de la télévision et gonfle celle des actifs de la radio. Le Conseil devra revoir cette partie de l'évaluation.
9133 Nous considérons que la valeur de tous les actifs d'Astral assujettis à la Loi de la radiodiffusion devrait être comptabilisée comme des actifs réglementés aux fins des avantages tangibles.
9134 En l'absence d'autres informations, nous estimons cette valeur à au moins 40 pour cent de la valeur estimée des actifs on-line and other; c'est-à-dire au moins 88,4 millions de dollars. Ce montant devrait être ajouté à la valeur de la transaction aux fins des avantages tangibles.
9135 L'acquisition d'Astral par BCE permettra plusieurs synergies entre les services des deux groupes. La nature de ces synergies n'a pas été précisée dans le dossier public, mais il est certain que si ces demandes concernant Astral sont agréées par le Conseil, BCE pourrait étaler les mêmes émissions sur plusieurs services de télévision dont ceux de la télévision payante, de la télévision spécialisée et de CTV.
9136 L'UDA, la SARTEC, l'ARRQ et l'AQTIS considèrent que comme le Conseil l'a fait dans d'autres cas semblables, il serait approprié d'augmenter les multiples en rapport avec les BAIDA proposées par BCE, Price Waterhouse Coopers pour mieux refléter ces synergies dans le Rapport d'évaluation.
9137 M. ARSENEAU : Bernard Arseneau de l'AQTIS.
9138 En rapport avec les avantages tangibles proposés par BCE, nous avons les commentaires suivants: Considérant le rôle capital que joue Astral dans l'environnement de la télévision française au Canada et les déboursés liés au bloc davantage lié à l'acquisition de CHUM, pardon, par CTV, et de CTV par BCE au cours des cinq prochaines années qui profiteront grandement à la télévision de langue anglaise, l'UDa, la SARTEC, l'ARRQ et l'AQTIS croient qu'un minimum de 85 pour cent des avantages tangibles attribuables aux actifs de télévision devrait être consacré aux avantages à l'écran.
9139 De plus, au moins deux tiers des avantages tangibles attribuables aux actifs de télévision devraient être consacrés au développement ou à la production d'émissions originales de langue française dans les catégories d'intérêt national.
9140 C'est la meilleure façon pour la production originale de langue française de profiter de l'achat d'Astral par BCE, de la même manière que la production télévisuelle de langue anglaise profite de l'acquisition de CHUM par CTV, de CITY-TV par Rogers, d'Alliance Atlantis par Canwest, de Canwest par SHAW Media et de CTV par BCE depuis les cinq dernières années.
9141 D'après l'Avis public CRTC 1999-97, lorsqu'il examine les demandes de transfert de propriété ou de contrôle d'une entreprise de télévision le Conseil s'attend généralement que des avantages importants découlent de la transaction, à la fois pour la collectivité desservie et pour l'ensemble du système canadien de radiodiffusion.
9142 D'ailleurs, seules les initiatives qui ne pourraient être mise en oeuvre dans l'approbation du transfert proposé sont considérés comme des avantages. En outre, le Conseil n'accepte pas comme un avantage tout projet conditionnel à l'approbation d'une autre demande qu'il n'a pas encore examinée.
9143 Nous sommes très heureux que BCE ait accepté d'inclure dans la valeur de la transaction la part de la valeur d'Astral dans les services spécialisés Historia, Séries+, Teletoon, Teletoon Retro English et Teletoon Retro français, et d'augmenter la valeur des avantages tangibles d'une valeur de 41.3 millions de dollars.
9144 Il n'en reste pas moins que certains des avantages tangibles proposés par BCE ne sont pas conformes aux politiques du Conseil.
9145 D'après nous, le nouveau service pan-canadien de nouvelles en français proposé par BCE pourrait être mis en oeuvre sans l'approbation de la transaction.
9146 De plus, cette proposition est conditionnelle à l'approbation d'une autre demande qui n'a pas encore été examinée par le Conseil.
9147 La proposition de BCE d'ajouter 10 millions à la production de documentaires ne devrait pas être reliée aux célébrations du 150ième Anniversaire du Canada en 2017, mais consacré de façon plus globale au documentaire unique et d'auteur de longue durée dont le financement est de plus en plus difficile à assurer.
9148 Autant l'UDA, la SARTEC, l'ARRQ et l'AQTIS trouvent louable de verser 3.5 millions de dollars sur sept ans pour sensibiliser la population à la journée Cause pour la cause de BCE, autant nous croyons qu'un tel don ne devrait pas faire partie des avantages tangibles en rapport avec la présente transaction parce qu'elle n'est liée particulièrement ni à la collectivité desservie par les services d'Astral ni à l'ensemble du système canadien de radiodiffusion.
9149 BCE propose aussi de consacrer 40 millions de dollars, soit plus de 22 pour cent des avantages liés aux actifs télévisuels d'Astral au soutien numérique dans les régions éloignées du nord canadien.
9150 Cette proposition fera partie des dépenses en immobilisation normale et déjà prévue de Nortwest Tel et nous croyons qu'elle ne devrait pas faire partie des avantages tangibles en rapport avec la présente transaction parce qu'elle n'est liée particulièrement ni à la collectivité desservie par les services d'Astral ni à l'ensemble du système canadien de radiodiffusion.
9151 L'épanouissement de l'accès à l'internet à haute vitesse et à la télévision IP dans le nord canadien proposé par BCE ne serait qu'un sous-produit secondaire de cette initiative en téléphonie.
9153 MME LUSSIER : Bonjour. Sylvie Lussier. En avril dernier, le Conseil a décidé d'approuver la demande d'Astral en vue d'être considérée comme un groupe afin de lui permettre de bénéficier de la souplesse accordée au groupe anglophone, malgré les différences considérables entre le marché anglophone et le marché francophone.
9154 Cette décision lui permet de transférer les dépenses sur les émissions canadiennes entre ses services spécialisés et ceux de la télévision payante ainsi qu'entre ses services de langue française et ceux de langue anglaise.
9155 Selon BCE, bien qu'il soit possible qu'elle demande à l'avenir le regroupement des exigences relatives aux dépenses en émissions canadiennes et en émissions d'intérêt national visant les groupes de services de Bell Média et d'Astral, elle n'a pas l'intention de le faire en ce moment.
9156 Nous considérons que le Conseil devrait explicitement interdire une telle pratique par condition d'approbation.
9157 D'après nos calculs très approximatifs, la valeur de la transaction impliquant BCE et Astral s'élève à bien plus de 2,9 milliards de dollars dont plus de 1,9 milliard de dollars sont attribuables à la télévision.
9158 À ce jour, selon nos calculs, BCE s'est engagé à quelque 117 millions de dollars en bénéfices tangibles que nous considérons admissibles liés à la télévision, ce qui constitue tout au plus 6.2 pour cent de la valeur de la transaction en télévision.
9159 Advenant l'approbation de l'achat d'Astral, BCE posséderait la très grande majorité des services spécialisés francophones de catégorie A qui continuent à jouir d'un statut privilégié dans le système canadien de télévision.
9160 Avec l'ensemble de ses services anglais et français BCE pourrait se prononcer avec un poids impressionnant sur des questions d'ordre pan-canadien et dans bien des cas les règles qui en résulteraient s'appliqueraient également au marché francophone.
9161 Par conséquent, nous partageons les inquiétudes soulevées par d'autres intervenants quant à l'impact de cette transaction sur l'équilibre de notre système de radiodiffusion.
9162 Au delà de la question des avantages tangibles, des questions fondamentales demeurent en cause, comme la diversité des voix, l'accès aux oeuvres nationales, la saine concurrence entre les entreprises de radiodiffusion et le caractère asymétrique des secteurs francophonne et anglophones du système.
9164 M. LEGAULT : Alors, si le CRTC décide d'approuver l'achat d'Astral par BCE, il lui incombera d'établir un cadre réglementaire suffisant pour éviter toute pratique abusive et d'adopter nos recommandations concernant la valeur de la transaction et la nature des avantages tangibles admissibles.
9165 À défaut de respecter l'ensemble de ces éléments, l'UDA, la SARTEC, l'AQTIS et l'ARRQ jugeraient cette transaction inacceptable.
9166 Monsieur le président, ceci complète notre présentation et c'est avec plaisir que nous répondrons à toutes vos questions que vous voudriez nous poser.
9167 LE PRÉSIDENT : D'accord. Merci beaucoup. Comme vous avez vu, j'ai pris l'occasion de cette audience comme mise en scène de demander quelle serait la vision de certains intervenants du système de télécommunications au Canada en 2017 qui serait la fin de mon quinquennat, je ne pouvais pas passer l'opportunité de demander aux créateurs et aux artisans et ceux qui les représentent ici devant moi ce matin, je dois leur poser la même question. Alors...
9168 M. LEGAULT : Avant ou après la transaction?
9169 LE PRÉSIDENT : Mis à côté.
9170 M. LEGAULT : Mis à côté.
9171 LE PRÉSIDENT : Mis à part la transaction, quelle est votre vision du système en 2017?
9172 M. LEGAULT : Je pense que de plus en plus, compte tenu de la nature des transactions qui se font; c'est-à-dire du côté, on voit il y a des câblodistributeurs, télévision par satellite, téléphonie, qui achètent de plus en plus des diffuseurs qui deviennent propriétaires.
9173 Il y a une différence marquée entre les deux lois: la Loi sur la radiodiffusion et la Loi sur la télécommunication.
9174 Dans un monde idéal, je pense qu'il devrait y avoir un mariage entre ces deux lois-là parce que ça permettrait d'avoir un tout incohérent puisque de plus en plus d'entreprises commencent à être intégrées.
9175 Si, ça, ça n'a pas lieu, je pense qu'on va assister de plus en plus à un regroupement de force, un regroupement de... une convergence et, là, d'après nous, il y a un danger. Quand des groupes deviennent trop puissants par rapport à d'autres, la diversité des voix risque d'être mise en question de même que les conditions de licence qui sont accordées aux producteurs indépendants et, par conséquent, le travail que font les artistes et les créateurs pour ces producteurs-là risque de voir de moins en moins de moyens et ça risque d'appauvrir la qualité des émissions qui pourront être faites.
9176 Moi, j'ai de l'appréhension par rapport à ce qui va se passer si la tendance se maintient à un assouplissement trop grand de la réglementation. Dans d'autres domaines, que ce soit dans le domaine des banques ou dans d'autres domaines, s'il y a pas une intervention de la part des différents conseils ou des offices de réglementation qui se chargent à mettre un frein à l'appât du gain, parce que c'est ce dont il s'agit, je pense qu'on risque de glisser tranquillement vers un appauvrissement, en tout cas pour les créateurs, de la présence de la culture et du contenu canadien, et ça à l'échelle du Canada, autant du côté anglophone que francophone.
9177 Est-ce que quelqu'un veut ajouter quelque chose? Oui, François?
9178 M. COTÉ : François Côté. Je suis le Président de l'Association des réalisateurs.
9179 Pour faire suite à ce que Raymond vient d'exprimer, un des soucis qu'on a c'est la pérennité de la culture, en particulier qui passe par les émissions pour enfants et les émissions originales.
9180 La grosseur des compagnies qui commencent à se créer fait que le côté économique devient tellement important, tellement capital, que le genre de contenu n'est plus pris en compte, ne serait plus pris en compte. C'est une chose d'avoir un profit à la fin de l'année parce que des gens ont écouté notre contenu, mais si ce contenu est un contenu étranger qui est importé pour faire de l'argent, ça va donner un bon bilan à la fin de l'année mais la culture canadienne va se trouver appauvrie.
9181 Nous avons un grand souci de voir à ce que les Canadiens entendent et voient ce que les Canadiens ont à dire, que les valeurs canadiennes passent en premier lieu dans les tuyaux canadiens, et que les Canadiens puissent communiquer entre eux ce qui fait l'essence du Canada. Particulièrement dans les émissions jeunesse nous devons faire un effort capital dans les émissions jeunesse pour créer notre propre star système. Comment ça se fait que ça a fonctionné au Québec? C'est parce qu'on a un star système qui s'est développé grâce à notre petitesse et notre isolation. Mais je pense que c'est encore valable. Il faut qu'on passe à nos enfants la culture du Canada. Il faut qu'ils deviennent des fans de ce qui se passe au Canada.
9182 C'est la fin de mon intervention.
9183 M. LÉGARÉ : Seulement pour dire qu'effectivement le problème de la multiplication des plateformes crée un problème de contenu, c'est-à-dire tout le monde veut avoir du contenu pour alimenter cette plateforme-là. Or, le financement de ce contenu est devenu de plus en plus difficile.
9184 On vous a parlé des télévisions généralistes. Il y était celles qui au niveau des émissions d'intérêt général étaient les plus productives de contenu, or elles sont de plus en plus des joueurs affaiblis, d'une certaine façon, et les plateformes sont exigeantes en termes de contenu; comment va-t-on pouvoir assurer la présence de contenu national si le cadre réglementaire ne vient pas appuyer justement ces développements technologiques?
9185 MME FORTIER : Si vous me permettez. Nous avons également une préoccupation évidente pour le contenu original de langue française et je veux citer en exemple un peu le comportement depuis plusieurs années d'un des diffuseurs qui appartient à Astral. On parle de Télétoon. L'exemple vient des enveloppes qui sont dédiées à Télétoon autant en anglais qu'en français par le biais du Fonds des médias du Canada.
9186 Si je me réfère aux données de 2010 et 2011, le comportement de Télétoon en termes de déclenchement de programmation dans les deux langues est assez surprenant. En 2011-2012, en fait il n'y a eu aucun argent investi provenant du Fonds canadien qui a été déclenché en production francophone, que ce soit au Québec ou ailleurs au Canada, et sur une enveloppe totale de 8 390 000 $, il y a zéro dollar qui a été investi en production francophone originale, ni au Québec ni ailleurs au Canada.
9187 En 2012, les chiffres ne sont pas tellement plus reluisants et c'est une tendance qui évidemment pourrait prendre de l'ampleur compte tenu du fait que vous avez accordé bien sûr la capacité à Astral de répondre à ces exigences de contenu à travers toutes ces chaînes, soit en anglais, soit en français.
9188 Donc ça nous préoccupe beaucoup parce qu'on a l'exemple ici de l'animation. L'animation a été au Québec un fleuron pendant de nombreuses années, pas seulement à cause de Cinar, et c'est une industrie qui est très menacée présentement et qui peine à relever, à survivre. Et on a l'impression que c'est quelque chose qui va s'étendre fort probablement, ce qui nous amène à évidemment insister sur le fait que le contrôle de la programmation et du déclenchement de la production doit absolument demeurer à Montréal par des gens qui oeuvrent en français pour garantir qu'il y ait une production qui soit vivante ici.
9189 Encore une fois je prends l'exemple d'un télédiffuseur jeunesse, parce que c'est primordial, on l'a dit devant vous, vous n'étiez pas là, monsieur Blais, à cette époque. On a fait une présentation lorsque j'étais à l'Alliance pour l'enfant et la télévision. Rapidement on avait interviewé des parents, des grands-parents, des enfants anglophones, francophones, pour leur demander quels étaient leurs souvenirs les plus... auxquels ils étaient le plus attachés des émissions jeunesse. Les francophones pouvaient nous citer 6, 7, 8, 10 émissions jeunesse, nous chanter des comptines, la chanson thème, nous parler des personnages, de l'importance que ça avait eue sur eux. Les anglophones nous parlaient de Mickey Mouse, nous parlaient de Bart Simpson, ils nous parlaient de Bugs Bunny.
9190 Alors ça c'est très clair, l'impact que ça a, des émissions entre autres pour les enfants. C'est le fondement de l'auditoire futur.
9191 Je reviens à l'intervention de notre président. On pense que évidemment les émissions jeunesse sont primordiales, mais c'est un indicateur très fort de la pertinence d'investir dans différentes... au niveau de toutes les langues, tant en français qu'en anglais, dans une production qui va être significative pour les Canadiens.
9192 M. LEGAULT : Donc, nous croyons que s'il n'y a pas de réglementation efficace pour venir équilibrer tout ça, ça peut être dangereux pour 2017.
9193 LE PRÉSIDENT : Merci beaucoup. D'ailleurs, moi je me rappelle de Bobino et de Bobinette et de la Boîte à Surprise. Je me rappelle aussi des caractères de Disney qui parlent en français mais qui chantent en anglais.
9194 Monsieur le Vice-président.
9195 CONSEILLER PENTEFOUNTAS : Merci. Je vous ferais remarquer que le Président trahit son âge volontairement et qu'il n'y a aucune menace à ce qu'il nous donne des indications quant à son âge.
9196 Il y a du monde à la messe alors sentez-vous à l'aise. Je ne sais pas qui va répondre, mais commençons par le commencement.
9197 Je vais attirer votre attention à l'avant-dernier paragraphe. Vous avez raison, je pense, de dire que au-delà, c'est un dossier, c'est une audience qui examine beaucoup plus que les avantages tangibles. Et je pense qu'il nous incombe, à nous comme Conseil et aux intervenants comme vous, d'adresser les autres questions.
9198 Quelques-unes de ces questions ont été soulevées par des questions fondamentales, comme la diversité des voix, l'accès aux offres nationales, et la saine concurrence entre les entreprises de radiodiffusion. Il y également un peu le caractère asymétrique entre la langue française et la langue anglaise.
9199 Voulez-vous nous donner vos points de vue sur ces questions-là et d'autres sur le bon fonctionnement d'un marché équilibré et sain?
9200 M. LEGAULT : Oh, large question, très large.
9201 Quand vous parlez du dernier paragraphe, c'est plus sur la question, au-delà de...
9202 CONSEILLER PENTEFOUNTAS : Oui.
9203 M. LEGAULT : Alors, comment faire pour assurer que tout ça soit équilibré?
9204 CONSEILLER PENTEFOUNTAS : Oui, votre opinion sur les autres enjeux que vous avez pu vivre.
9205 M. LEGAULT : Veux-tu développer...
9206 M. LÉGARÉ : Oui, la question est effectivement très large. Lorsqu'on parle, par exemple, des problèmes d'asymétrie entre le secteur francophone et le secteur anglophone, c'est sûr qu'on a des craintes avec l'arrivée de Bell du fait que Bell non seulement va avoir beaucoup de chaînes au Québec mais aussi beaucoup de chaînes au Canada anglais, et lorsqu'elle se prononcera sur des questions d'intérêt national, elle aura un poids très important, qui pourra avoir des conséquences sur le système francophones, que nous ne souhaitons pas.
9207 CONSEILLER PENTEFOUNTAS : Je vais vous interrompre là parce qu'on ava les prendre une à la fois. Je ne voulais pas aller sur ces questions-là mais compte tenu du fait qu'on est là, on va poursuivre sur ce tableau-là.
9208 Est-ce que je dois croire que vous n'avez pas été rassurés par la présentation de Bell lundi à l'effet que la présence d'Astral à Montréal continuera, que M. Parisien va continuer à gérer les affaires à Montréal comme il le fait depuis un certain temps, et que la présence d'Astral restera toujours à Montréal et, conséquemment, le point de vue et les intérêts, préoccupations culturelles et linguistiques, vont avoir leur place au sein de cette émission?
9209 M. LÉGARÉ : Ça nous a rassurés. D'une part il faudra que ce soit une condition d'approbation par le CRTC, ce centre de décision à Montréal. D'autre part, il ne faut pas oublier que même à l'heure actuelle, au niveau des émissions francophones, les chaînes d'Astral ne diffusent pas de temps d'émissions de production de langue française que ça. Il y a beaucoup d'émissions qui sont des émissions canadiennes anglaises qui nous arrivent doublées parfois à l'étranger, parfois au Québec, et qui sont sur les chaînes. Qu'on pense à Série Plus, qu'on pense à Historia ou autres.
9210 Donc, au-delà de cela il faut effectivement qu'il y ait des engagements précis en termes d'émissions d'intérêt national, et c'est aussi ça que nous demandons, c'est-à-dire Bell devra mettre beaucoup plus d'argent qu'on en a offert dans les émissions nationales de langue française.
9211 CONSEILLER PENTEFOUNTAS : Vous touchez à des questions qui n'ont peut-être pas rapport à l'acquisition comme telle mais des plaintes que vous avez déjà faites face à Astral. Cette question de doublage, je trouve ça intéressant et dans votre mémoire et dans la présentation d'aujourd'hui. Est-ce qu'on n'a pas été assez exigeant envers les chaînes spécialisées, surtout en tenant compte du fait de la baisse chez les généralistes ils ont moins les moyens de s'y mettre dans des séries dramatiques et autres?
9212 Est-ce qu'il y a déjà une faiblesse dans les règles?
9213 M. LÉGARÉ : Effectivement, c'est-à-dire si on regarde ce que nous avions fait comme mémoire lors du renouvellement des licences d'Astral, nous souhaitions que les obligations soient augmentées compte tenu des bons résultats financiers d'Astral, et c'est effectivement le cas. Les chaînes spécialisées effectivement déclenchent beaucoup moins que les chaînes traditionnelles, et ça a un impact sur l'offre d'émissions nationales.
9214 CONSEILLER PENTEFOUNTAS : Il n'y aura pas d'impact sur l'acquisition d'Astral par Bell.
9215 M. LÉGARÉ : Si dans les avantages tangibles... les avantages tangibles sont consacrées 85pour cent à l'écran tel que nous le souhaitons au minimum, il y aura un avantage, effectivement, c'est-à-dire nous pourrons avoir davantage d'émissions nationales sur nos ondes. Mais on souhaite qu'au moins 66 pour cent de ces avantages-là soient consacrés à la langue française qui, comparativement au secteur anglophone, a beaucoup moins de ressources économiques.
9216 Avec les différentes acquisitions qui ont eu lieu au cours des années du côté anglophone, ils ont pu avoir une production dynamique et des budgets de production à la hauteur de leurs désirs.
9217 Lorsqu'on regarde au niveau francophone on est loin du compte et on pense que Bell, plutôt que d'avoir des avantages qui ne donnent pas de résultats à l'écran, doit se recentrer sur des résultats qui seront visés mais qui pourront faire en sorte que, culturellement, ça a un impact.
9218 CONSEILLER PENTEFOUNTAS : Vous faites de la plaidoirie pour plus d'acquisitions au Québec; c'est ça qui nous manque.
9219 Juste pour retourner sur ce point-là, vous avez entendu le CMPA je pense hier indiquer qu'au niveau de cette valeur de cette transaction-là, que si on regarde au niveau des abonnés, si on regarde au niveau des revenues et autres, c'est pas mal égal 50/50, premièrement.
9220 Deuxièmement, sur les transactions antérieures, c'est déjà fait, et c'était des propriétés, des actifs, qui oeuvraient dans le Canada anglais, alors difficile d'aller chercher, je vais utiliser une expression qu'un ancien premier ministre a utilisée, notre butin, à cet égard-là.
9221 Alors, qu'est-ce qu'on peut dire à la communauté créative anglaise qui est venue nous dire, au niveau des actifs c'est pas mal 50/50 et vous, vous exigez deux tiers.
9222 M. LÉGARÉ : Bien, nous, selon les données que nous avions, c'était plus près 60/40 que du 50/50 en tant que tel.
9223 D'autre part, effectivement, si on regarde la situation au niveau de la production, on pense que la production en langue française a beaucoup plus de difficultés. On vous a donné les chiffres de Télétoon tout à l'heure. Beaucoup d'émissions sont produites en anglais et Télétoon a une licence bilingue et nous alimente avec des émissions qui ne sont pas de notre langue dès le départ. Donc il y a un problème que les anglophones ne vivent pas et que nous vivons et comme on vous le dit, pour nous au départ il était plus de 60/40 d'entrée en jeu.
9224 Et dans les cinq dernières années il y a quand même eu beaucoup de transactions avec les avantages tangibles qui ont été principalement ou presque uniquement mis du côté anglophone. C'est pour ça que je pense que dans cette transaction-là on l'évaluait à 60/40.
9225 Je pense que ce n'est pas irréaliste ou en tout cas, compte tenu de notre difficulté, compte tenu aussi de la largeur et de la grosseur du marché francophone qui n'est pas équivalent au marché anglophone, c'est plus difficile d'assurer une rentabilité...
9226 CONSEILLER PENTEFOUNTAS : Je comprends le fait que le bassin des anglos est déjà pas mal remplis qu'on a des transactions que nous vécues depuis quelques années.
9227 CONSEILLER PENTEFOUNTAS : Ce qui n'a pas été le cas à Québec.
9228 L'initiative sur la journée pour la cause. C'est clair, d'après vous, ça a aucun rapport avec Astral, alors -- je vois que tout le monde...
9229 MME LUSSIER: Bien, c'est rien de nouveau. C'est déjà une très bonne cause qui est déjà appuyée. Ils ont déjà l'appui, alors le mettre dans ça c'est un peu... ça n'a pas vraiment rapport.
9230 CONSEILLER PENTEFOUNTAS : Vous avez également demandé à ce qu'on donne une valeur et qu'on prenne en considération les services on-line et other -- je cite votre document. Je pense que vous avez évalué ça à 88,4 millions.
9231 En vertu de quelle obligation réglementaire pouvons-nous agir face à ces sommes-là?
9232 M. LEGAULT : C'est quand même des services qui découlent de la Loi de la Radiodiffusion. Ils sont exemptés, mais ce sont des services qui sont sous la Loi de la Radiodiffusion.
9233 MME LUSSIER : Qui font partie de la valeur de transaction malgré tout.
9234 M. LEGAULT : Et en ce sens-là on vous a indiqué 40 pour cent, qui est une appréciation, qui pourra peut-être être davantage définie, mais c'est à peu près l'évaluation qu'on faisait des services qui effectivement étaient on-line et sous la Loi de la Radiodiffusion
9235 CONSEILLER PENTEFOUNTAS : Et au niveau des synergies, est-ce qu'il y a autre chose que vous voulez rajouter? Vous avez fait des représentations au niveau des synergies pour nous aider à augmenter en quelque sorte la valeur de ces transactions?
9236 M. LÉGARÉ : On pense que le Conseil l'a fait par le passé.
9237 CONSEILLER PENTEFOUNTAS : Oui, tout à fait.
9238 M. LÉGARÉ : On pense que dans ce cadre-là ça devrait être banalisé au sujet aussi de Bell parce que bien sûr ce grand consortium maintenant s'il l'acquiert et si vous donnez votre approbation, va pouvoir, avec ces synergies-là, va quand même en tirer avantage.
9239 CONSEILLER PENTEFOUNTAS : Mais est-ce qu'il y a d'autres éléments dont vous n'avez pas fait mention déjà dans votre mémoire...
9240 M. LÉGARÉ : Non.
9241 CONSEILLER PENTEFOUNTAS : ... qui vous vient à l'esprit depuis, pour nous aider dans le calcul de ces synergies-là?
9242 M. LEGAULT : Il y a une partie qui était difficile parce qu'il y a une partie des chiffres qui était confidentiels auxquels on n'avait pas accès. On a fait l'évaluation à la meilleure connaissance des chiffres qui étaient à notre disposition.
9243 CONSEILLER PENTEFOUNTAS : Et vous êtes sans doute satisfaits avec la volonté exprimée par Bell de rajouter les co-entreprises télévisuelles dans leur calcul depuis lundi?
9244 M. LEGAULT : Oui. C'est ce qui explique le 40 millions d'augmentation, c'est-à-dire l'augmentation de ce que Bell a aux avantages tangibles. Mais pour nous, ça allait de soi.
9245 CONSEILLER PENTEFOUNTAS : Ok. Et ça aide un peu au niveau du calcul de la répartition entre francophones et anglophones.
9246 M. LEGAULT : Oui.
9247 CONSEILLER PENTEFOUNTAS : Et juste brièvement, ce désir de lancer une chaîne de nouvelles continue et le 20 millions qui est exigé à ces fins, commentaires?
9248 M. LÉGARÉ : D'une part, je pense que Bell aurait dû déposer une demande ce licence hors de ce cadre-là pour...
9249 D'autre part, ça semble un peu improvisé, et ces 20 millions là on considère, nous, que les émissions d'intérêt national pourraient en bénéficier davantage. Ce service-là, on ne le connaît pas. Est-ce que ce sera seulement de lecture de nouvelles? Est-ce que c'est vraiment un ajout à la diversité des voix? Est-ce que c'est pas du self-serving pour Bell, qui veut faire un service de nouvelles et qui décide de le financer avec des avantages tangibles?
9250 Devant ces questions-là, nous, on dit que c'est pas la place... ce 20 millions là serait mieux consacré à d'autres fins.
9251 CONSEILLER PENTEFOUNTAS : Et vous avez également une opinion sur le 10 millions qui doit être dépensé dans la production de documentaires pour le 150e anniversaire?
9252 M. LÉGARÉ : On trouvait que c'est une bonne idée de produire des documentaires...
9253 CONSEILLER PENTEFOUNTAS: Sauf que...?
9254 M. LÉGARÉ: ... sauf que, justement, ce qui est important c'est d'avoir des points de vue canadiens sur différents sujets. Et lorsqu'on encadre trop et qu'on donne une thématique obligée à des créateurs, ça limite leur expression.
9255 On pense que c'est une excellente idée de mettre de l'argent aux documentaires. Les gens donneront des points de vue canadiens sur des sujets canadiens ou des sujets étrangers, et vous aurez une richesse culturelle plus grande avec ça.
9256 CONSEILLER PENTEFOUNTAS : Juste pour retourner à un autre sujet, chez Astral on a fait mention, y a-t-il assez de place pour déplacer des dépenses entre les services anglophones et francophones. J'ai vu clairement que vous ne voulez pas que ça se passe une fois que Bell arrive sur la scène, s'ils sont pour y arriver... oui, vas-y.
9257 M. LÉGARÉ : On est d'autant plus effectivement contre que lors du renouvellement des licences d'Astral, nous ne voulions pas qu'Astral soit considéré comme un grand groupe, et nous voulions que chaque chaîne ait des obligations précises.
9258 C'est d'ailleurs aussi ce qu'on souhaiterait pour le futur, c'est-à-dire il y a cette transaction... à court terme il y a cette transaction dans le long terme. On a peur que dans quelques années ces jeux, justement, se fassent pour l'ensemble des propriétés de Bell, et on souhaiterait que lors des renouvellements de licences il soit justement précisé pour chaque chaîne les obligations précises pour que, justement, on ait des émissions d'intérêt national en plus grand nombre.
9259 CONSEILLER PENTEFOUNTAS : Voyez-vous des incongruités entre vous et les représentations de l'APTFQ hier?
9260 M. LÉGARÉ : Ah, mon Dieu, ce que l'APFTQ, oui, il y a... mais pas incongrues parce que je pense qu'ils ont demandé, eux autres aussi, une... en tout cas, ils critiquaient l'exercice de la valeur de la transaction tout comme nous. Ils souhaitaient un plus grand investissement du côté des avantages tangibles, mais je pense qu'ils se sont arrêtés là.
9261 Moi, j'ai pas assisté à leur présentation. Moi, j'ai pas entendu à long terme des remarques de l'APFTQ à long terme.
9262 Alors que nous, ce que l'on pense c'est que ça va changer de façon importante le paysage télévisuel canadien et qu'il y a des choses qu'il va falloir, lors du renouvellement de licence, qui est dans les moyens que le CRTC a, d'agir là-dessus.
9263 Donc je pense que c'est pas nécessairement incongru. Je pense qu'on l'a vu plus à long terme.
9264 Je voulais juste ajouter un détail concernant l'APFTQ. Donc les producteurs indépendants, quand un groupe devient de plus en plus puissant comme celui-là, les conditions de licence, et je l'ai dit tantôt, les licences, l'argent qui est donné à un producteur indépendant pour faire une émission de télévision, quand quelqu'un peut magasiner entre 2 ou 3 diffuseurs ou 2 ou 3 groupes, ça va bien. Il y a comme une libre concurrence.
9265 Mais quand il y a de moins en moins de groupes, ça limite sa capacité d'aller voir, donc ses conditions de licence diminuent, donc l'argent pour faire une émission de télévision diminue, les créateurs ont de moins en moins de temps, ça fait que plutôt que de faire une émission en une journée, on est obligé de la faire en une demi-journée. Ça a un impact sur la qualité et ça a un impact finalement sur l'intérêt des Canadiens pour regarder des émissions qui sont en compétition directe avec des émissions qui ont plusieurs centaines de milliers de dollars pour faire. Alors c'est tout ça que ça met en cause. C'est pour ça que je trouve que c'est important.
9266 Comment le CRTC peut intervenir en garantissant que ce qui est donné aux productions et à la production indépendante est suffisant pour faire des émissions de qualité? Ce n'est pas évident.
9267 Du côté de la publicité aussi, il risque d'avoir moins... c'est moins sur les revenus publicitaires. Comment un groupe qui devient de plus en plus important et qui va négocier avec un annonceur américain de la publicité sur différentes plateformes, où va être la production? Même si la publicité ne fait pas partie, c'est pas culturel naturellement mais il y a quand même de la publicité qui est faite ici au Canada et au Québec et qui reflète un peu les valeurs des Canadiens, et où les gens se reconnaissent.
9268 Au Québec particulièrement, il y a des porte-parole qui vendent beaucoup. Je pense à Claude Meunier avec Pepsi, je pense à Benoit Brière avec Bell. Ça a quand même un impact. Donc, c'est considéré.
9269 Quand on achète de la publicité et que finalement c'est un annonceur et qu'on lui dit, r'garde, tu vas pouvoir mettre ta publicité partout sur plusieurs plateformes, ca pourrait avoir un impact très néfaste sur toutes les... du coté des créateurs de la publicité et l'industrie de la publicité, qu'elle soit au Canada ou au Québec.
9270 CONSEILLER PENTEFOUNTAS : En fin de compte, la grande question : Comment est-ce qu'on peut aider ceux et celles qui vont avoir -- et est-ce même possible -- de moins en moins de portes sur lesquelles frapper? Y a-t-il des moyens réglementaires et autres qui peuvent compenser cette baisse?
9271 M. LEGAULT : Bien, une partie, c'est les conditions de licence. C'est sûr que ça, c'est important.
9272 CONSEILLER PENTEFOUNTAS : Et vous, vous êtes assez confortable avec ça? Vous pensez que c'est suffisant?
9273 M. LEGAULT : Non. C'est une partie. Pour moi, il y a une partie... Vous me demandez quels sont les moyens que le CRTC a. Pour moi, les conditions de licence, c'est une façon.
9274 Il serait bien qu'Astral et peu importe considèrent que les investissements dans des émissions d'intérêt national ne soient pas un plafond mais un plancher au-delà duquel elles peuvent investir sans aucune réglementation. C'est ce qu'on souhaiterait, mais ce n'est pas toujours le cas, sauf, je veux dire, du côté des télévisions généralistes, où là, elles sont au-dessus.
9275 Mais il y a d'autres moyens aussi -- Yves -- je pense, sur les réglementations possibles ou la capacité du CRTC d'intervenir dans les... Je pense aux échanges qu'il y a entre les câblodistributeurs puis des plus petits groupes pour ce qui est des redevances. Je le sais que c'est délicat, mais de s'assurer que quand il y a des redevances qui sont fixées qu'elles ne soient pas au détriment de quelqu'un qui n'a pas les moyens de lutter contre des grands câblodistributeurs et des télévisions satellites.
9276 CONSEILLER PENTEFOUNTAS : Non, je comprends.
9277 MME LUSSIER : Si je peux me permettre...
9278 CONSEILLER PENTEFOUNTAS : Si vous voulez compléter, puis ça complète pour moi.
9279 MME LUSSIER : Si je peux me permettre, pour revenir avec l'analogie qui a été faite avec un écosystème, un des avantages qu'on peut voir ou qu'on peut chercher à cette transaction si elle se fait, c'est qu'on va avoir, en tout cas au Québec, deux méga-joueurs, deux superprédateurs, comme monsieur Denton a dit, et l'émulation entre les deux pourrait être bénéfique en tout cas aux artisans et aux artistes qui travaillent. Ils vont avoir besoin d'émissions de qualité, surtout si c'est spécifié dans les conditions de licence des différents diffuseurs. Alors, ça, ça pourrait...
9280 CONSEILLER PENTEFOUNTAS : Et ça n'existe pas présentement entre Astral et Québecor?
9281 MME LUSSIER : Pas tellement. Les conditions de licence d'Astral sont très faibles. Yves a parlé de Séries Plus. Si je ne m'abuse, c'est cinq heures de production originale francophone par année de séries originales. C'est vraiment minime ce que... Alors...
9282 CONSEILLER PENTEFOUNTAS : Alors, pour vous, c'est un aspect positif, ça, la concurrence...
9283 MME LUSSIER : Bien, si on augmentait les obligations, c'est certain que les gens qui voient de la télévision de qualité veulent de la télévision de qualité. Si on leur en offre, c'est ce qu'ils vont demander, et il y aura un effet peut-être d'émulation entre les divers secteurs, les divers joueurs.
9284 CONSEILLER PENTEFOUNTAS : Merci.
9285 Merci beaucoup, Monsieur le Président.
9286 LE PRÉSIDENT : Madame la Conseillère Lamarre.
9287 CONSEILLERE LAMARRE : Ça été couvert. Je vous remercie, Monsieur le Président.
9288 LE PRÉSIDENT : Ah, voilà! Donc, Mesdames et Messieurs, je vous remercie d'avoir participé à notre audience. C'est très utile et fort apprécié.
9289 Madame la Secrétaire.
9290 LA SECRÉTAIRE : Merci.
9291 We will now hear the last intervener. I would ask Insight Productions Company to come to the presentation table.
9292 THE CHAIRPERSON: So, welcome. As is usual I'll ask you to identify yourselves for the purpose of the court stenographer and to make your presentation.
9293 Thank you.
9294 MR. BRUNTON: Thank you very much.
9295 Mr. Chair and Commissioners, my name is John Brunton. By the way, this is my assistant Allison Burke. She produces me.
9296 I'm the Chairman, CEO and Executive Producer and controlling owner of Insight Productions. I'm also the Chairman of Insight Sports, a company that has investments in the NHL Network and co-owns and operates the World Fishing Network.
9297 I have chosen to come here today to support BCE's acquisition of Astral Media. As a Canadian producer, I feel our domestic media landscape needs to be big and strong in order to compete on the world stage.
9298 I believe that Canadian broadcasters are going to be facing intense competition in the future, particularly from the United States. Services like Netflix, Apple TV, YouTube, Google, Facebook, the list goes on, are just the tip of the iceberg of what we're going to face in the next few years.
9299 I truly believe our American counterparts will continue to find ways of dealing directly with Canadian consumers, which will eliminate Canadian companies in the process. The bigger and stronger our media companies are, the more likely our production community will thrive and prosper, in my opinion. I think a revolution will begin where Canadian content will become more and more important to the future of Canadian broadcasters.
9300 My company lives and dies by ratings. In recent years, shows like "Canadian Idol," "The JUNO Awards," "A Russell Peters Christmas," have been amongst Canada's highest-rated productions. In my 32 years in the industry I have produced, as of today, 1,201 hours of programming with CTV and their associated specialty channels.
9301 When BCE acquired CTV in 2000 Insight had already established a great relationship with the network going back to 1979, and with BCE's takeover of CTV came more shows for our company and bigger shows for our company, both on the main network and also on their specialty channels.
9302 BCE promotes creativity and innovation, it's been our experience, and is committed to making our Canadian productions succeed on an international level. An example of this success is "Canadian Idol," which was recognized internationally as one of the best "Idol" formats from over two dozen produced around the world. It was also Canada's highest-rated television show in recent memory, maybe ever.
9303 Insight is also incredibly proud of having the opportunity each year to take "The JUNO Awards" from coast to coast under CTV's watch, bringing the music directly to the fans. In 2002 CTV took over "The JUNO Awards," which was largely funded at the time by the Bell Fund, which of course was established when Bell first got involved with CTV.
9304 The Bell Fund allowed us to travel the JUNOs to communities like St. John's, Ottawa, Winnipeg, Regina and many, many more, supporting the show and celebrating the diverse music and culture we have to offer from coast to coast.
9305 Take, for example, the 40th Anniversary of the JUNOs, virtually every one of Bell's cable channels, radio stations and digital platforms drove viewers to the broadcast. Unbelievably, the 40th Anniversary of the JUNOs was the highest rated in the history of the program.
9306 CTV and Bell's commitment to the JUNOs, developing innovative digital opportunities, tailor-made programming leading up to the broadcast of that show, promoting the hell out of it on a variety of its channels and platforms had just an enormous effect not only on the ratings of our program but of course on the music industry itself.
9307 You know, our music industry is one of our most valuable cultural assets and I really have to say that when CTV and Bell got involved in the program, a program that was spiked in Toronto and didn't reach out to its fan base, it changed dramatically and to think, you know, in a 500-channel universe now that we could have the highest ratings we've ever had 40 years after that show began I think is a real tribute to what they've brought to the program of the Canadian music industry.
9308 You know, Canadian music is part of our DNA and so I just have an enormous amount of respect for the contribution they've made to that program.
9309 In our 500-channel universe, social networking, gaming, the endless digital landscape, the JUNOs broke through. Without the commitment from the executives to unleash the power of their assets, we couldn't have achieved such an enormous audience. They continue to do that to this day. They have the firepower to engage and attract Canadians to this homegrown success story.
9310 The same thing happened last year on another show that we did for CTV, "A Russell Peters Christmas" special, which became the highest-rated Christmas special in the history of CTV and was another gigantic ratings success story due to Bell's activation. They have the power under their own roof to promote our Canadian productions and to compete with the best in the world.
9311 CTV continues to put an incredible amount of support behind our productions through all of their platforms, blanketing the country from coast to coast, building the JUNO brand province by province, using both traditional media outlets and keeping on top of the trends in the new digital media, social media.
9312 In a world that's changing daily they're really been keeping up and being innovative and keep pushing us to push the envelope, to have co-viewing opportunities during the broadcast and so on and so forth.
9313 Canadian broadcasters not only have to compete against U.S. networks and programs but also have services like Netflix, YouTube, Apple TV, amongst many, many others, to contend with.
9314 Bringing together two well-respected and longstanding Canadian brands like BCE and Astral, in my opinion, will only strengthen the Canadian broadcasting system on all platforms. We need to have strong media companies in our own industry that are Canadian so we are not overrun by U.S. programs that jeopardize the content we provide for our Canadian audiences. We need to strengthen our own industry from within, in my opinion.
9315 In a world where digital media has changed the landscape in which viewers consume content, producers will have greater potential to extend the audience reach across all BCE and Astral assets.
9316 Bell Media and CTV have proven to be exceptional partners over the course of our company's history and we can attest to the fact that they are a media company that supports Canadian independent producers.
9317 Bigger and stronger is better, in my opinion, or the tidal wave of American culture that washes over our borders will make it increasingly difficult for Canadian productions to break through and compete.
9318 When Bell unleashes the power of its assets it can produce extraordinary results for Canadian producers. The borderless nature of the digital world is both an opportunity for producers of Canadian content and also a threat. The stronger and more power Canadian media companies become, the better our chances will be to compete on the world stage and celebrate our unique identity.
9319 BCE has always been proud of their ability to reach all corners of the country to showcase Canada's diverse cultures. And how about the Vancouver Olympics? Has there ever been an event in Canada promoted in so many voices on so many platforms to so many Canadians? Its positive impact, in my opinion, will be felt for many, many decades to come.
9320 I support Bell's acquisition of Astral Media.
9321 Thank you very much, Mr. Chair, Commissioners, for this opportunity to speak on behalf of these two companies today.
9322 THE CHAIRPERSON: Thank you very much, Mr. Brunton.
9323 You represent well the many interveners that have supported this transaction through written interventions. The Commission's practice is of course to focus the oral phase of the hearing on those that oppose or conditionally support the application, so it's important for us to as well hear your perspective.
9324 MR. BRUNTON: Thank you
9325 THE CHAIRPERSON: Commissioner Menzies, I believe, will have some questions for you.
9326 MR. BRUNTON: Sure. Thanks.
9327 COMMISSIONER MENZIES: Thank you, Mr. Brunton. It's kind of nice to be able to finish with a touch of creative flair, I guess, at the end of things.
9328 I'm curious, you seem to have an admirable track record at making TV that people watch, which is interesting.
9329 MR. BRUNTON: Yes.
9330 COMMISSIONER MENZIES: In terms of your comments regarding scale and size and how to compete, what distinguishes CTV from some of the other companies you work with that makes it capable of doing what you described it could do, as carrying Canada's flag in terms of the creation of broadcasting content?
9331 MR. BRUNTON: I think that, you know, my experience has been if we're going to do something, let's do it well. I think they recognize that Canadian audiences judge us against the world and particularly American programming and the last thing we could do is produce a show like "Canadian Idol" and have it be the poor cousin to the American show.
9332 You know, we knew from the get-go that Canadians, when it comes to Canadian music, think that we can compete internationally. You have to pick carefully but unless you then really pound the pavement to get the word out, you know, we're just -- you know, all of the magazines and all of the media and all the magazine shows in the United States and the dearth of material on Perez Hilton to you name it, we compete against in this country, and I think that in my experience CTV and its affiliated channels and the people who run those channels really understand that.
9333 You know, when you take all the assets of a company that has so many different diverse assets as a company like Bell does and you get them all rowing in the same direction, if you can get them all rowing in the same direction, all coordinated, not being siloed but actually sitting around the table together -- and we do that, for example, on a show like the JUNOs where we'll have stakeholder meetings and it will include everybody across the landscape of the company.
9334 So you have the people from the radio department, you have the people from print, you have the people from a variety of different ways figuring out, okay, how can sports be part of the JUNO Awards, can there be a conversation on one of their magazine shows with some of the artists that are going to be in the program, how can Bravo! be involved, how can Space be involved, and it's really interesting.
9335 When you try to take all of those assets that they've got under one roof and get them all in the same room together and figure out if we can all, you know, set a pace and a goal together, the power of that.
9336 I mean, to me it's extraordinary that 2.5 million average viewers watched our show, our 40th Anniversary show, and listen, we put on a hell of a show, there's no doubt about it, but that night was just such a competitive night of television and to win that night was something miraculous and has everything to do with all of those assets being activated at the same time.
9337 I'm not saying the others don't do it either. I mean, you know, Shaw and Rogers do that as well.
9338 COMMISSIONER MENZIES: Yes.
9339 You've worked with quite a number of companies. I was looking at a lot of productions on your Web site. Did you work with Astral? I couldn't see anything there but --
9340 MR. BRUNTON: We hadn't worked with Astral to the point -- but we certainly had a very close relationship when Gary Slaight owned the radio stations and they were a promotion kind of asset.
9341 So prior to -- what Standard Broadcasting had not been purchased by Astral we had a long association with the Slaight family and they were huge proponents, for example, of Canadian music. And so they were so connected with the JUNOs that at times they broadcast them on radio across the country. So I had a history with their company but sometime back.
9342 COMMISSIONER MENZIES: Maybe I could just enjoy your perspectives on a couple of things.
9343 We've heard quite a bit this week from a variety of people all passionate about worthy causes regarding there should be investment in what's known in our terms as programs of national interest --
9344 MR. BRUNTON: Yes.
9345 COMMISSIONER MENZIES: -- which tends to include drama. We've heard from documentary people and I don't want to leave anybody out but we've heard from a number of people in terms of how money should be spent and how Canadian culture and content could be developed and that sort of stuff.
9346 And I was struck when I was looking at your Web site, you know, that -- I mean this is a very serious room, right --
9347 MR. BRUNTON: Yes.
9348 COMMISSIONER MENZIES: -- but television for most people is where they just want to have fun.
9349 MR. BRUNTON: That's correct.
9350 COMMISSIONER MENZIES: So you've got a lot of programs there like -- and some of them -- you have "Top Chef Canada," "Canada's Got Talent," you did "Canadian Idol" in the past, "Big Brother Canada," that sort of stuff.
9351 A lot of these are -- this seems to be sort of international generic programming that people anywhere in the world like and I'm not saying that critically because putting on TV that people like to watch is probably a very good thing.
9352 MR. BRUNTON: Well, it's also very difficult, and those formats, if you don't adjust them to your own culture, will be a disaster. If you take --
9353 COMMISSIONER MENZIES: Okay, that's what I wanted to know, was how do you adapt those to our own culture. So if we're doing "Interventions Canada" --
9354 MR. BRUNTON: Yes.
9355 COMMISSIONER MENZIES: -- how do you adapt that to a Canadian culture so that it's not just people from Scarborough or Oshawa or Calgary or wherever with a chemical dependency problem versus somebody from New Orleans or Houston or Dallas?
9356 MR. BRUNTON: You know, I think that every community, if you want to take drug addiction as an example or alcohol addiction, that's a program where there are very specific problems in specific communities, whether it be in North America or around the world.
9357 And Oxycontin, for example, is a drug that had a particular flavour and personality in Ontario and the same thing couldn't be said or North Dakota or South Dakota. Crystal meth is something that is a drug that's very popular in the Pacific northwest and in the central part of America, not so much an issue in Toronto or Montreal.
9358 Every community -- you know, the character that causes a person to create an alcohol or a drug addiction is universal but it's also specific to where you grew up and what your own personal experiences were, how you were raised, the DNA of your mother and father.
9359 So I think that, you know, is there a difference? You know, I think there's a difference between anybody who has an alcohol or drug dependency regardless of where you come from, whether you come from New Orleans or Oshawa or London, England, and it's those personal specific stories that are unique, you know.
9360 "Canadian Idol" is an interesting story and we adjusted that program to suit Canada. We've got a long history of singer/songwriters, the Neil Youngs and Joni Mitchells and Sarah McLachlans, and so we became the first "Idol" to allow people to audition with instruments, and prior to that it had been strictly a singing competition and we made certain adjustments.
9361 The same thing is true about our cuisine. Now, we create our own formats that we that we export outside of Canada. "Battle of the Blades" is a show that we do and it's like figure skaters and hockey players. There's nothing more Canadian than that and that's a show that we export.
9362 But everyone -- you know, if you look at Flipper pie in St. John's or, you know, Haida recipes to cook salmon on the B.C. Coast, you know, if you do a show about Canadian cuisine it's ultimately going to have Canadian DNA all over it.
9363 COMMISSIONER MENZIES: Thank you. So the summary of your argument is that in order to compete -- and this is what I'm taking from it, so correct me if I'm wrong.
9364 MR. BRUNTON: Yes.
9365 COMMISSIONER MENZIES: In order to compete you need to have competitive production values and only mass can create the cash flow to have those -- well, mass is required to -- and I can't say only mass -- mass is required to have the funds to create those production values in order to put on programming that Canadians will watch and be attracted to as opposed to American --
9366 MR. BRUNTON: That's part of my message because, you know, we need to compete on a -- you know, I mean sometimes telling a good story has nothing to do with money. Production values are very important at times with certain kinds of programs, but telling a great story, engaging an audience in great storytelling is really important, and so then it becomes getting the message out.
9367 And sometimes it's not just the production values and the cost of production but it's that breaking through that tidal wave of American publicity and promotion that's so difficult for us sometimes to compete against that.
9368 And so that's when the bulk of these companies -- and Rogers and Shaw are big companies as well -- but the bulk of these companies, the size of these companies and their ability to get these messages out on the four different ways that we can view them now, whether it be on our phones or our tablets or TVs or laptops, you know, that is as important as anything to me, and hopefully our Canadian broadcast community will start getting a little bit more interested in export.
9369 It's interesting to me that we have these big companies and they slice Canada up into smaller pieces but they don't spend a good deal of time concentrating on taking our cultural assets and exporting them and exposing them to the world.
9370 And in the digital world, you know, geogating and these boundaries are going to be harder and harder and harder to control in the future. I mean I read, you know, eight or nine different newspapers this morning from around the world at the touch of my fingertip in 15 minutes.
9371 It's a tricky business. We've got to compete in that world where people are also -- when they're reading the "New York Times," they're also reading the "Globe and Mail," they're also going to CTV News or whatever.
9372 COMMISSIONER MENZIES: Thank you. I won't try to add to that. I'll leave some time for my colleagues if they wish.
9373 MR. BRUNTON: Can I make one more point if I may?
9374 COMMISSIONER MENZIES: Please feel free.
9375 MR. BRUNTON: I just would like to take this opportunity to seed in the idea that if a runaway production leaves from Los Angeles and it comes to Canada, it receives tax credits as an industrial approach, and I'm not against that idea but it's crazy to me that a show that celebrates one of our most valued and most outstanding arenas of expertise, a show like "The JUNO Awards," is not allowed to get tax credits. I don't understand it. I don't understand the thinking behind it.
9376 I know that it's not necessarily this group that makes those decisions but I wanted this opportunity to mention that.
9377 COMMISSIONER MENZIES: Thanks.
9378 MR. BRUNTON: Thank you.
9379 THE CHAIRPERSON: That used to be my responsibility. It no longer is, tax policy being still at the Department of Canadian Heritage, but I'm sure that they will be -- because I know that was our practice to monitor these hearings. So they will take note of your point.
9380 MR. BRUNTON: Good. Thank you. Thank you for the opportunity.
9381 THE CHAIRPERSON: Thank you very much. Those are all our questions.
9382 This ends the intervention part of this hearing for items 1 and 2.
9383 We will adjourn until 2:00, which will give ample time to the Applicants to prepare for their reply.
9384 So we will reconvene at 2:00 this afternoon. Thank you.
--- Upon recessing at 1237 / Suspension à 1237
--- Upon resuming at 1401 / Reprise à 1401
9385 LE PRÉSIDENT : A l'ordre.
9386 Alors bonjour, Monsieur Cope et votre équipe.
9387 Donc la parole est maintenant à vous pour la période de la réplique.
9388 Please go ahead.
9389 M. BIBIC : Merci, Monsieur le Président.
9390 Je m'appelle Mirko Bibic et je suis vice-président exécutif et chef des affaires juridiques et règlementaires de BCE et de Bell Canada.
9391 Se joignent à moi aujourd'hui, bien sûr, George Cope, président et chef de la direction de BCE et de Bell; à ma droite, Kevin Crull, président de Bell Média; Ian Greenberg, président et chef de la direction d'Astral Média; Jacques Parisien, vice-président exécutif et chef de l'exploitation d'Astral Média.
9392 Font également partie de notre panel, de BCE et Bell Média, Martine Turcotte, vice-présidente exécutive, Bell Québec; Gerry Frappier, au bout, président de RDS; et entre Kevin et Martine, Chris Gordon, président, radio et télévision locale.
9393 Derrière nous, Kevin Goldstein, vice-président, affaires règlementaires de Bell Média et Ken Goodwin, de PWC.
9395 Monsieur le Président, vous avez déclaré lundi que nous avions le fardeau de prouver que la présente acquisition sert l'intérêt public; qu'elle bénéficie au système d'un point de vue social, économique et culturel; et qu'elle offre la meilleure proposition possible pour le marché d'aujourd'hui, les citoyens, les créateurs et les consommateurs canadiens.
9396 Vous avez fait, à juste titre, compte-tenu de l'importance de cette acquisition pour les consommateurs et pour le système.
9397 En décrivant la vision stratégique que nous avons mise de l'avant jusqu'à présent, ainsi que les bénéfices incontestables que nous avons l'intention de procurer aux consommateurs, aux auditeurs, aux téléspectateurs, aux créateurs de contenu et à nos partenaires de la distribution, nous sommes persuadés que nous nous sommes acquittés de ce fardeau de la preuve.
9398 En résumé, nous lancerons un service entièrement canadien, afin de faire face aux concurrents étrangers comme NetFlix, Apple et Google.
9399 Ce service sera offert en français et en anglais à tous les Canadiens, partout où les droits nous le permettront, par l'entremise du câble, du satellite ou des fournisseurs de télé IP de leur choix.
9400 Le service regroupera les meilleurs films canadiens et internationaux provenant des services de télévision payante d'Astral, comme HBO Canada et The Movie Network, ainsi qu'un excellent contenu en matière d'actualités, de divertissement et de sports provenant de Bell Média.
9401 Si la transaction reçoit l'aval du Conseil, nous investirons également environ 127 millions $ en contenu de langue française; 107 millions $ dans le cadre du bloc d'avantages tangibles; et une somme supplémentaire de 20 millions $ dans de nouvelles initiatives, dont notre investissement de 15 millions $ dans notre co-entreprise avec le Cirque du Soleil.
9402 Jacques Parisien a accepté de joindre la nouvelle équipe de direction de Bell Média, en attendant que le Conseil approuve la présente transaction.
9403 Basé ici même à Montréal, Jacques supervisera toutes nos propriétés média de langue française et anglaise au pays. En outre, il apportera sa contribution à Bell en tant que membre de la haute direction, afin de nous aider à accroître nos parts de marché au Québec, grâce à ses relations étroites avec différents intervenants à l'échelle de la province.
9404 Au chapitre de l'ensemble de nos avantages, nous augmenterons la diversité des voix éditoriales au moyen d'une nouvelle chaîne d'information nationale de langue française de catégorie C. Nous sommes prêts à prendre l'engagement, comme condition d'approbation, d'exploiter le service pour un minimum de trois ans.
9405 Monsieur le Président, vous nous avez demandé lundi si nous maintiendrons en ondes les stations conventionnelles locales de nouvelles. Nous sommes prêts à nous engager à le faire jusqu'au 31 août 2016, y compris en ce qui concerne les deux stations que nous sommes en train d'acquérir auprès d'Astral, à condition que nous conservions les actifs de langue anglaise et française d'Astral qui sont nécessaires au lancement de notre nouveau service sur demande multiplateformes.
9406 En réponse à une autre de vos questions de lundi, nous accepterons une condition de la licence exigeant le respect du Code relatif à l'intégration verticale, tel qu'amendée de temps à autre, à la condition que le Code s'applique à l'ensemble des concurrents qui sont intégrés verticalement et ultimement devienne également une condition de licence à leur égard lors du renouvellement de leurs licences.
9407 La transaction permet également de procurer des avantages tangibles et intangibles considérables reliés à la radio, soit plus de 60 millions $ de nouveaux fonds qui seront affectés au financement de la création de contenu et à des investissements et de l'innovation d'Astral Média.
9408 La radio joue un rôle important sur le plan de la diffusion d'actualité et d'information locale, particulièrement sur les 35 marchés plus petits dans lesquels nous acquerrons des stations.
9409 Nous nous engageons à offrir à nos auditeurs une présence locale, forte, puisque c'est la seule manière de bien servir et représenter les communautés que nous desservons.
9410 La concurrence restera vive sur les marchés locaux de la radio partout au pays, puisque nous continuerons de concurrencer Rogers, Corus, Newcap, Pattison, Rawlco, Harvard et Cogeco, pour n'en nommer que quelques-unes.
9411 En ce qui concerne CKGM à Montréal; notre intention était de présenter la meilleure solution possible à une situation qui est certes difficile. Nous augmenterons le contenu sportif présenté à la station CJAD d'Astral, tout en comblant un besoin dans le marché radiophonique de Montréal. Nous croyons qu'il s'agit d'une solution constructive, vu les circonstances difficiles. Si vous rejetez notre demande, nous sommes prêts à vendre cette station.
9412 Si le Conseil établit que la proposition Northwestel n'est pas admissible à titre d'avantage tangible, nous proposons qu'il réaffecte les 40 millions $ à des projets à l'écran en langue française et en langue anglaise, y compris des contributions supplémentaires au Fonds Harold Greenberg.
9414 MR. COPE: Good afternoon, Mr. Chairman, Commissioners.
9415 The commitments we have outlined to you are firm and compelling. We expect that Bell's significant investment in broadcasting will unleash a strong, competitive response as our rivals develop their own strategies to improve service and expand choice for consumers.
9416 Since we acquired CTV in 2011, our multiple competitors have responded with initiatives, such as Quebecor's launch of TVA Sports and Sun News; Rogers' launch of City News, FX Canada and its proposed acquisition of The Score; and Shaw's launch of Global News BC 1; to name a few.
9417 Our acquisition of Astral complies with all the rules the Commission has established for our industry. The Commission's diversity of voice policy expresses the relevant benchmark as 35 percent of - quote: "Total television audience;" and it acknowledges the diversity of voices includes - quote: "Expression of Canadian voices amidst foreign ones".
9418 This means all television viewership, including the many non-Canadian channels now accounting for over 13 percent of total viewerships.
9419 And as we have made clear, Bell Media's share of English-language TV viewing will be 33.5 percent, following the Astral/Bell acquisition, which therefore warrants no divestitures.
9420 A close examination of market share underlines that the industry will remain diverse and competitive, following the transaction.
9421 The addition of the Astral English-language services, which are mostly pay-TV services, adds a mere .1 percent to our English TV advertising revenue share.
9422 In radio, Bell/Astral's audience and revenue share will both be under 23 percent, well below the 35 percent claimed by Cogeco.
9423 All of these market shares indicate that television and radio markets will remain competitive following completion of the transaction. None of these shares, by any measure, come anywhere close to any reasonable or customary assessment of dominance in any developed economy.
9424 During the week, you asked how the capital markets might react to the CRTC's decision. The answer is simple: Any decision that is inconsistent with the Commission's existing well-established policies would create significant market uncertainty.
9425 Publicly traded media and communications companies regulated by the Commission make business decisions and enter into transactions based on the prevailing regulatory framework.
9426 Our $3.38 billion acquisition of Astral and Astral's choice of Bell as the ideal purchaser relied upon the Commission's having set out an analytical framework and roadmap; a set of rules with which we fully comply; rules on which the financial community also relies.
9427 Divestiture or denial of this transaction would ultimately lead to the break-up of a great company Mr. Greenberg and his team have built, and to significant job losses in Quebec and elsewhere. This would also guarantee continued foreign dominance in all forms of online content delivery. Canada should not wait any longer to deploy a viable national multi-platform solution, backed by a company with the resources to compete against well-funded global competitors.
9428 Many interveners, including Shaw, the national advertising community and the independent producers across Canada have underscored that we need national champions of Canadian media now more than ever.
9429 Some have accused Bell Media this week of acting inappropriately, with many unsubstantiated allegations, and in some cases outright fabrications.
9430 Now I have worked in the industry for 27 years and I have come to know the executives in Canadian communications, having both competed and partnered with most of them, and I believe that I have developed a reputation as a very approachable executive. Yet only one CEO has called me to address a carriage dispute, Darren Entwistle, CEO of TELUS. We ultimately could not agree and TELUS took their complaints through the CRTC's dispute resolution process and the CRTC ruled in TELUS' favour.
9431 Cogeco also went through the CRTC's dispute resolution. In that case, the CRTC ruled in Bell's favour.
9432 But these two cases show there is a process in place that is working, although we agree with other interveners that have suggested quicker timelines.
9433 When it comes to Quebecor, it is plain for all to see that they, as both the largest broadcaster and cable co in Quebec, simply don't want to compete or to transform and re-energize bell.
9434 Rogers went on at length about Bell's size, saying that we are - and I quote: "Already too big and powerful."
9435 Now that is ironic. Let's remember that Rogers remains Canada's largest wireless carrier, with 36 percent market share. Rogers is the largest TV provider in its service area, with 60 percent market share. Rogers is the largest internet service provider in Ontario. It has significant television and radio assets and has invested in the Toronto Blue Jays, MLSE and a range of other content properties. Just four years ago, Rogers had a larger (inaudible) capitalization then Bell.
9436 The fact that we have outperformed Rogers in the marketplace over the past four years is no reason for the Regulator to intervene with this transaction. The reality is that Rogers wants Astral's English-language specialty and pay-TV channels, and they would like you to force us to sell them.
9437 There is no question that content costs around the world are on the rise. None of us want this but it is a reality. This creates understandable stress within the industry as we all adjust to the rising content costs and consumers' demand for more content on all these new screens.
9438 The industry tension is not caused by Bell. Mirka will take you through the details, but I would like to make one thing crystal clear right now. There is no Bell Media programming that Bell TV carries that is not available to our competitors on commercial terms. And no one in Canada carries more independent programming than Bell TV and Bell Mobility.
9439 Bell Media has invested 7 billion in content to make it attractive to consumers and content buyers like our competitors.
9440 There are 13 million households in Canada and Bell TV serves 2.2 million or 17 percent of them. It makes absolutely no commercial sense for us to withhold content from the other 83 percent of the marketplace or 10.8 million households. It just doesn't work if we do that.
9441 Mr. Chairman, I support you and your colleagues for the emphasis you have placed on the interests of consumers, creators and citizens. You have my assurance that my team is committed to support the development of the Canadian content that consumers want and on the platform and from the provider of their choice. Only with this scale and range of content offered by Astral joining with Bell can we execute on these commitments. Thank you.
9442 MR. BIBIC: Mr. Chairman, Commissioners. I know I have been in the room for much of the week, as I have this morning, and there have been several references throughout the week to serenity. I can tell you that my own serenity was tested several times as I have listened to a number of baseless accusations and misleading statements.
9443 But, at the end of the day, I told myself to be patient, because due process matters and I know it matters to you, and that is why we have the right of reply.
9444 So I wouldn't normally address some of the allegations in this amount of detail but it is an important issue, a significant transaction; and given the extent of the misleading allegations, I do want to go through some of them, so if you will bear with me. So I am at paragraph 26 of the text you have before you.
9445 So it is no surprise that some of our most vocal opponents this week have been Quebecor, Cogeco, Rogers and TELUS. It is clear that these competitors oppose the transaction or seek conditions of approval that will enhance their own self-interest.
9446 While Quebecor complained that Bell Media did not initially offer it RDS 2, it neglected to mention that when Bell sought hundreds of hours of TVA content for its VOD platform, Quebecor refused and it took a ruling from the Commission for us to even be able to negotiate for that content.
9447 Now we then went to mediation, a request that was made for millions of dollars, the number was seven; the Commission's staff suggested maybe that is not unreasonable, so we understood the commercial terms and we said: We don't want to pay that much for the content and we walked away.
9448 We tried to re-engage this summer, and in fact, in August, we were told by Quebecor that we wouldn't be receiving an offer at the time because Mr. Dion was on vacation; that was in August.
9449 Paragraph 28 - so we still don't have the content today is the point.
9450 Only one intervener, Rogers, seeks the divestiture of Astral's English-language pay services and would without doubt seek to acquire them. Rogers' principal argument is that Bell is a bad business partner and therefore should not own Astral, despite our extensive partnerships with them in other areas. We take great issue with these accusations.
9451 On Olympic Mobile rights, Rogers was a partner in the consortium; it had the right to bid for those rights years ago. They could also have matched Bell's offer in order to obtain access with us; they did not.
9452 Rogers complained, on Wednesday I believe it was, of Bell Mobility's 18-month head start in mobile TV, yet Rogers, by their own admission, only launched its mobile TV offering four months ago.
9453 You have heard one side of the story from Rogers. Bell Mobility has tried to secure mobile rights for Sportsnet for over a year and has been unsuccessful. Bell Mobility carries far more than Bell Media content. In fact, we carry Bite and Ox(ph) on demand, which is content owned by the BlueAnt group you have heard this morning.
9454 Rogers claims that Bell forced them to terminate the pick-pack trial this past spring prematurely. That is exactly what they said and it is false. We have correspondence from Kevin Crull to Rogers indicating that Bell Media was - and I quote: "Willing to support an extension of the trial."
9455 Close quotes.
9456 Rogers claims we provide no packaging flexibility, yet we have repeatedly offered them our flexible rate card, the rate card that was adjudicated on by the Commission in arbitration this summer, which Rogers does not want to accept.
9457 Frankly, we are shocked. Because our rate card mirrors the Astral structure for French-language services, which Rogers and incidentally Cogeco, did not hesitate to enter into with Mr. Greenberg.
9458 I think it was in the spring when Rogers announced its Live TV product, which they of course discussed on Wednesday. They did not have the rights to Livestream, the Bell Media content, nor were they prepared to negotiate for these rights. All we asked them was not to launch a product using our rights in the absence of an agreement. Their actions, using our content without an agreement, were commercially unreasonable; not ours.
9459 Now non-linear content; you remember the graphs and the big placards that Rogers brought into the room? Again, on that, you only heard one side of the story. What Rogers didn't mention is that Bell Media has provided to Rogers, Shaw and Bell TV all of CTV's over-the-air content for set-top box VOD. For Rogers alone, during the 2011-12 season; this included 2,400 hours of prime time and other content, as shown in the appendix attached at the back of the closing statement. This content is available to others as well.
9460 Rogers could have sat down to resolve these issues commercially, as we typically do; or they would have sought the Commission's assistance through a dispute resolution. They chose neither; preferring instead to seek regulatory headlines this week.
9461 Now TELUS yesterday; they complained that the Commission's diversity of voices policy was - and I quote:
"...set before massive transactions which have created an extremely vertically integrated broadcasting industry."
9462 Close quotes.
9463 Yet, during the hearing that established the diversity of voices policy, TELUS insisted that consolidation and scale are exactly what Canadian media needs.
9464 Here, I quote again from their submissions back in that hearing:
"TELUS supports industry consolidation, both vertically and horizontally. We are thus at an important cross-road and TELUS believes that we need to accept the notion of fewer but stronger players in conventional media rather than attempting to artificially maintain an uneconomic multiplicity of smaller, weaker companies which must rely on regulatory intervention and assistance to survive. The evolution of VOD and broadband platforms clearly suggests that competition can discipline concentrated entities and that space can be created, and is being created, for every niche market available."
9465 End of quote.
9466 We completely agree.
9467 Of course, the smaller BDU's have also appeared this morning to express their viewpoint.
9468 CCSA members are important customers for Bell Media and we will continue to work hard to be good partners to them. We particularly hope our new multi-platform On Demand service will benefit these smaller BDU's who also need a consumer-friendly response to the threat posed by NetFlix and other foreign OTT providers.
9469 Of course, the comprehensive framework that has recently been put in place by the Commission is designed to deal with the types of issues they have raised. The existence of this framework and its role in resolving disputes was recently recognized by the Commission and the MLSC decision.
9470 Now, back to Rogers for a moment.
9471 They assert that if they had known last year how Bell would behave once it acquired CTV, Rogers, they would have opposed us and then, I quote:
"And proposed even stronger safeguards in the vertical integration proceeding 18 months ago."
9472 This statement cannot be reconciled with Mr. Engelhart's statements only two months ago in the Bell-Rogers reply to interventions in the MLSE transaction filed with you where he wrote together with me, and I quote:
"It should be recognized that the acquisition of the Maple Leafs Network and the Raptors Network will take place in a comprehensive regulatory environment that includes several new measures that are specifically designed to protect independent distributors and broadcasters from any potential anti competitive actions of vertically integrated entities, even if such conduct were possible."
9473 End of quote.
9474 Frankly, I hope we haven't come to the point where a couple of cameras and a microphone just gives you a licence to say anything at hearings. So, I move on.
9475 We would like to put on the record our concerns with how the value of the transaction is being analyzed. We remind the Commission that the value of the transaction was arrived at by a team of expert valuators from PWC, a leading international accounting firm.
9476 Adjustments to valuation inputs will distort the valuation. For example; if one were to change the equity risk premium from 5.5 per cent to 5 per cent, as suggested by the Commission during questioning, the valuation would increase by approximately $200 million, meaning Astral should have been sold for $3.6 billion rather than a 3.38 billion that was negotiated at arms' length between Mr. Greenberg and BCE in the free market.
9477 We have been questioned on the value of various leases as well as part of the regular moral on the file relating to the regulated out-of-home business of Astral and that the questioning claims that because Astral's financial statements don't identify the leases as a separate line item, the allocation cannot be validated.
9478 So, it's a significant financial issue, Mr. Chairman, in order to put the issue to rest yesterday, we filed copies in conference of course of each of Astral's 3,000 out-of-home leases for the Commission's review and verification. So we hope and trust that that completely discharges our burden on the lease issue.
9480 M. GREENBERG: Monsieur le président, mesdames et messieurs les conseillers, au cours de la dernière semaine j'ai écouté le débat avec grand intérêt et ce, du point de vue d'une personne qui travaille dans l'industrie de la radiodiffusion depuis plus de 30 ans.
9481 En premier lieu, je voudrais clarifier une question importante pour le dossier public. Depuis l'annonce de la transaction Bell ne m'a jamais imposé quoi que ce soit sur la manière de gérer mon entreprise.
9482 Je continue à exploiter Astral de manière indépendante et mon équipe de direction prend toutes les décisions concernant nos services. Cela continuera d'être le cas jusqu'à l'obtention de toutes les approbations nécessaires des autorités de réglementation et jusqu'à la clôture de l'opération.
9483 Je dois avouer que les inquiétudes soulevées par les opposants relativement à la concurrence livrée par Bell et moi m'ont surpris. Les négociations serrées et les mésententes concernant la distribution des services et des contenus font partie de la dynamique concurrentielle habituelle. Il en a toujours été ainsi au cours des 30 dernières années et j'anticipe que cela se poursuivra pendant encore très longtemps.
9484 Votre évaluation des avantages qui découleraient de la présente transaction pour l'intérêt public ne devrait pas être compromise par la litanie de plaintes cette semaine par les concurrents de Bell.
9485 But I am compelled to set the record straight, considering the many bases allegations we've heard this week.
9486 When Astral to the market with Disney Junior, Bell TV launched it immediately, but Rogers held us up for almost three years before they would launch.
9487 Bell TV was also the first to launch HBO on-demand online. Rogers was not interested in the product until Bell introduced it and even then, it took Rogers almost a year to launch.
9488 I also take great issue with Rogers' claim that a Canadian alternative to Netflix is easy. Well, if it were so easy, why hasn't anyone done it up till now?
9489 The answer is that it requires only the scope of transaction like this one brings. Astral considered doing it on its own and also in partnership with other players, but we were unable to develop a viable business case.
9490 Rogers also claims that competition for pay television rights is only occurring at the domestic level. This is misleading and they know it. Super Channel had an output deal with one studio, but had to file for creditor protection to cancel his contract as he was unable to support the financial burden of the studio.
9491 Since then, Super Channel has not been a competitive bidder for any U.S. studio rights.
9492 Astral is bidding against Netflix for English and French rights and we have been outbid by them in the case of Paramount who bought both English and French rights for pay tv. Competition in pay television is from international OTT and we must respond.
9493 We need scale, size and integration in order to respond to rising content costs and new competitive dynamics in the pay television world of first run movies and series. We also need comprehensive multi platform offerings for our customers.
9494 That is why all Canadian media companies need to develop their responses to the new world in which we live.
9495 It is only through scale, innovation and constant investment that we will continue to be able to entertain, inform and enlighten Canadian consumers in the manner contemplating in the Broadcasting Act.
9496 At Astral, we realize that we simply could not do it alone on the scale that was required. That is why we sold to Bell, the best and the only player who was willing to keep Astral together and preserve its cultural and bilingual nature. No other buyer was willing to make that commitment.
9497 Mr. Chairman, Commissioners, I must say that while our great system faces many challenges, I am optimistic about its future. With strong, innovative competitors like Shaw, Rogers, Quebecor and Bell, it is evident that competition among the large players is alive and well within the system today and I strongly believe that there will continue to be room for independence within the system as well.
9498 Independent players will continue to merge, innovate and develop market niches and, in some cases, will become market leaders, after all, that's how we got started at Astral.
9499 I would like to take this opportunity to wish you well in your deliberations on this transaction and in your stewardship of our broadcasting system over the course of your mandate.
9500 Thank you.
9501 MR. BIBIC: Mr. Chairman, Commissioners, just a few more seconds. I won't cover in the remarks, but just to assist the Commission and correct the record, we will file a one-page document which responds to some data filed by PIAC on various market shares. It's in response to the Windseck data.
9502 The issue with the Windseck data is that it understated the conventional tv market size by over half a billion dollar, so we thought it was important to correct it. We give it to the hearing secretary. So, that's just an additional point.
9503 Ultimately, I would like to thank of course you, Mr. Chairman, and Commissioners, vice Chairman and Commission staff for the long hard week and giving everyone an opportunity to present their case.
9504 I would also like, of course, to thank all those who supported our application, creators and producers, advertisers and competitors, with a special thanks to those that took the time to appear here.
9505 Thank you.
9506 THE CHAIRPERSON: Thank you. I take it that the additional matter will be given to the hearing secretary today?
9507 MR. BIBIC: Yes. We will do it right now.
9508 THE CHAIRPERSON: Okay, great. Don't move. We are going to take a short recess, about ten minutes, and we will be back in ten minutes about, more or less. On this one I can be less categoric there, so, okay.
--- Upon recessing at 1433
--- Upon resuming at 1452
9509 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
9510 Donc, je vais passer la parole à nos conseillers juridiques qui vont avoir quelques questions pour vous.
9511 MR. McINTYRE: Thank you, Mr. Chair. Excuse me, I'll just organize my papers here.
9512 First of all, I have a question, Mr. Bibic, about your remarks just at your presentation.
9513 One of the things that you've said that BC would be willing to accept as a condition of licence is for the Code to be applied, so long as it would be applied also to your competitors.
9514 Now, we have your application before us today and we don't have any similar applications from your competitors. How would you propose that we would impose conditions of licence on your competitors as well?
9515 MR. BIBIC: But we are not. We are not asking that actually. We are saying, if you look at the text, so I provided -- let's go across this. Provided the Code continues to apply to all vertically integrated competitors which are with us today. Actually, it applies to more than just -- more than just vertically integrated companies.
9516 So that point there is ultimately one about symmetry and ensuring that it continues to apply to all. We do acknowledge that in this application before you, we are saying we are willing to have the Code imbedded in our conditions of licence and no other broadcasters' licences are before you.
9517 So, if you look at the language carefully drafted, ultimately -- ultimately means that at some other point in time -- becomes of condition of licence for them too as their licences are renewed, and that's some years out, but all we are asking you to do is to consider at the time of licence renewal for the others, treating them like you treat us.
9518 MR. McINTYRE: So, you are not asking for the Commission to make a determination vis-à-vis your competitors in the context of this application. This is something for the Commission to look at in the future, I understand?
9519 MR. BIBIC: Correct. Correct.
9520 MR. McINTYRE: Thank you. I have something of a hypothetical question for you.
9521 Would you go through with BCE complete this transaction or would BCE purchase Astral Media at the price of $3.38 billion, were the Commission to regulate wholesale rates for discretionary services?
9522 MR. BIBIC: Do you mean the rates that Bell Media charges for its specialty services to BDUs?
9523 MR. McINTYRE: That's correct.
9524 MR. BIBIC: I am not sure I understand the question. I would say though -- I would say that the Commission in a very real sense, does regulate the rates ex-post, not ex-anti, of course, but sure there would be an issue in terms of coming to an agreement under the VI Code for Category A, B or C, frankly.
9525 Anyone can raise their hands on both sides of the equation, whether the supplier or the customer and bring an issue forward to the Commission and have it -- have it resolved through arbitration. So, that is a form of regulation of rates already.
9526 MR. McINTYRE: Well, I understand that. The question is more of an economic question.
9527 MR. COPE: Well, then, I can help you with that. We never would have proposed to buy Astral if the concept of regulating also rates was on the table. It's not part of the structure of the industry today. We absolutely would not have proposed this transaction.
9528 MR. McINTYRE: And these are rates that presumably would be market rates or based on what a market would provide?
9529 MR. COPE: A regulator can't establish market rates, the market establishes the market rate. We would not proceed with it -- we would not have proceeded with the acquisition.
9530 The rules in Canada involve rate regulation of wholesale. If you can regulate input costs from international content providers, but you cannot then that would be a very different model. That's impossible. So, we would not have pursued this transaction if that was contemplated and it's not the rules of the industry today at all.
9531 MR. McINTYRE: Okay. That answers my question. And you want to add something, Mr. Crull?
9532 MR. CRULL: No. I would just say I would underscore I think that a lot of what we have said is the safeguards, we feel actually do put in place an ex-post rate process and one of the things that I have absolutely lived, very real, in the last while is this absence of any regulatory oversight of the input costs and an absence of regulatory oversight on the retail cost.
9533 And yet, the sandwich in the middle receives all of the attention and I just don't think either that that achieves any of the objectives of that kind of oversight in the absence of an -- and you're either -- and then in the market or and then regulate it.
9534 MR. McINTYRE: Okay. Thank you. So, this is more of a sort of a question about how things would unfold, were the Commission to approve this transaction. We do not have an application for trust arrangement for the radio stations that would have to be divested up.
9535 When does BCE expect to file a Trust Application in this regard with the Commission?
9536 MR. BIBIC: Within the next couple of weeks.
9537 MR. McINTYRE: Has BCE identified the trustee?
9538 MR. BIBIC: It would be the same trustee that we proposed for the Trust Application we had filed as part of the larger transaction which is no longer relevant at this time, but it would be the same trustee identified at that time when we first applied for Trust Application in the spring.
9539 MR. McINTYRE: And you would be identifying that trustee, I presume, when you file the Trust Application with us?
9540 MR. BIBIC: Correct.
9541 MR. McINTYRE: I have several questions with respect to the value of the transaction and these are somewhat to follow up with questions that we asked earlier this week.
9542 The first question is with respect to the Supplemental Valuation Report that was filed, that provided values for the stations that would be divested up. We note that there was no abridged version filed on the record.
9543 Can you, please, explain, you know, why there was no abridged version filed?
9544 MR. GOLDSTEIN: At the time that we filed that, it was unclear whether or not we'd be disclosing the names of the stations at the hearing. We did that on Monday.
9545 I think we could file an abridged version that's definitely redactable of the financial information. I think one of our concerns is that a process is underway to divest of those radio stations and if valuation is made public, that's going to taint that process.
9546 We'd be happy to file an abridged version of that, but removed with all of the salient financial information but has a text in it describing the methodology we used. That's very easy to do.
9547 MR. McINTYRE: A lot of the information we understand deals with aggregated financial data not station specific, so I believe the Commission would expect that that would be information that would be released.
9548 MR. GOLDSTEIN: It's aggregated, but it's aggregated relating to a related subset of stations that would not otherwise be disclosed. The degree of disclosure is not on a station specific basis and was not required to be disclosed in the context of the broader valuation report.
9549 That's sort of what our large concern is, because essentially what it's going to tell someone, anyone really who wants to see it on the public file, is what those stations are valued at, and those parties who are interested in purchasing those stations are required to sign an NDA are going to receive a confidential information memorandum that includes that information.
9550 So if we put that information on the public file right now, it kind of taints that whole process. I think we can look at what financial information is there that we could disclose, but I think we're a little leery to put information on the public file that would allow anyone to just look at those stations and say, this is what they're worth.
9551 MR. McINTYRE: I take your comments. I would just remind you that we would expect that there be a level of disclosure that allows parties to comment in the supplemental or additional comments period provided.
9552 We understand that a lot of the information is aggregated on a sort of... based on the 10 stations rather than on an individual basis. I would just make that point. We'll expect you will address that next week when you file an abridged version.
9553 MR. GOLDSTEIN: Okay.
9554 MR. McINTYRE: With respect to that report, as I mentioned, there's information on an aggregate basis but as we understand it, there is not a breakdown on each individual station to be sold. This is information that we also need for our purposes.
9555 MR. GOODWIN: The method that was used to value the stations to be divested is on a debt-free basis, so what you're getting is the cashflow value before consideration of how the assets are financed. So there is no debt number to be added, if that's your question.
9556 Sorry. Just a moment.
9557 MR. GOODWIN: Sorry. I may have misunderstood the question.
9558 MR. McINTYRE: My question was just about the level of detail in the valuation report. Our analysts require a station by station breakdown for that information.
9559 MR. GOODWIN: If I could, the radio stations that were valued as part of the divestiture process were valued on a group basis, really to facilitate what the remaining portfolio of stations would look like and what it would be valued. So think of it --
9560 The first part of the valuation report that we prepared gives you a broad bucket of 84 stations. After those stations are divested, you will have 77 Astral stations remaining. That's really the focus, because the valuation is consistently applied through the beginning and then the divestiture, and then to what's left.
9561 So you're not going to see, unless it's specifically requested, station by station valuation, because the objective was more about what does the remaining amount look like.
9562 MR. McINTYRE: This is just to say that we do expect the station by station breakdown, so if you could please provide that information by Monday.
9563 MR. GOODWIN: Well, it doesn't currently exist. We didn't value the 10 stations individually and in fact it's only 7, it's just the ones to be divested.
9564 MR. BIBIC: Mr. McIntyre, let me help. There's 84 stations being acquired, ultimately it will be 77 because 7 Astral stations that we're acquiring will be subsequently disposed.
9565 What's in front of you is the radio benefits that Bell Media will have to pay on the value of 77 stations. When those 7 stations are sold, a buyer will come forward with a valuation for those 7 stations in order to assess the benefits that's owing by that buyer for those stations.
9566 So that's why it was done at the aggregate level and not by station by station.
9567 MR. McINTYRE: Right, Mr. Bibic. I stand corrected, it is 7 stations, not 10. Of course three would be CTV stations.
9568 We understand that you provided this n based on the 7 stations as a whole, but it's important for our review that we be able to see that information on a station by station basis and this is to further support your position, that would be the way that we would asses benefits to carve out those 7 stations in respect to this transaction.
9569 MR. BIBIC: So if you require that, of course we'll provide it. Just recognize that Mr.Goodwin hasn't done it, so we will have to do it.
9570 MR. GOODWIN: I know the initial request was for Monday. Respectfully, it's going to take longer than the weekend to come up with 7 individual buyers, because there's more to it than just breaking apart a DCF if we're going to get down to a station by station level.
9571 MR. McINTYRE: This would be acceptable. The station by station breakdown would not generally be considered public information. Obviously you'd have to make your designation, but we could accept filing that later.
9572 When could you file that by?
9573 MR. GOODWIN: Would Friday of next week be okay?
9574 MR. McINTYRE: That would be okay.
9575 Just to be clear, the abridged of what was already filed, we still expect that to be filed on Monday.
9576 MR. GOODWIN: That's not a problem.
9577 MR. McINTYRE: Thank you.
9578 This is just a question with respect to the discount rates presented in the financial statements.
9579 Based on what we've seen, there doesn't appear to be an explanation as to what those discount rates are. We ask that you provide information as far as whether those rates are based on weighted average, cost of capital or cost of equity, or some other rate.
9580 MR. GOODWIN: Are you referring to the notes to the financial statements where there's disclosure about the environment testing?
9581 MR. McINTYRE: Astral's interim financial statements, not in the valuation report but in the financial statements of Astral. This is for comparison purposes with the rates that are set out in the valuation report.
9582 MR. GOODWIN: Okay. Just to clarify, what information are you looking for?
9583 MR. McINTYRE: Just the assumptions, the calculations, basically what are those rates based upon. Like I said, is it based on weighted average cost of capital, cost of equity.
9584 MR. GOODWIN: I can tell you what I know. Ultimately, those are Astral's assumptions from their impairment testing exercise, so they wouldn't have come from us. But in the notes to the financial statement, what you're looking at is the results of an impairment testing exercise.
9585 We had explained in one of the replies to the interveners that the valuation construct there is value and use, it's not transaction value as required by the CRTC in a context like this. Those are also pretax discount rates, but they are weighted average cost to capital estimates, but on a pretax basis.
9586 So they're not going to be comparable to what we have in our valuation report unless major modifications are actually made to the cashflow to adjust for the impact of income taxes. It's a completely different exercise, which is what we tried to convey through the responses to the interveners, because certain people have tried to claim that by picking certain assumptions from the notes, you can criticize the PwC valuation, but that's been done without a wholesome review of what is actually the context of the impairment testing.
9587 We can provide you what you need, but I think if we can we'll try to provide a little bit of context a to why those numbers are going to be different.
9588 MR. McINTYRE: That would be acceptable, so long as we get the information and you can certainly provide context if you so choose.
9589 MR. McINTYRE: With respect to the Netflix, the competitor that you announced on Monday, I believe in your comments on Monday you stated that this is not something that would be launched in the absence of the proposed transaction.
9590 With that in mind, we would like to see some cashflow projections or detailed calculations and assumptions that relate to the launching of the service so it can be evaluated from a valuation standpoint.
9591 MR. CRULL: We can certainly undertake. Some business case work has certainly been done. I would remind that the foundation of this, though, what you'll find is that as a stand alone business, it's a very little incremental. It's really about, for both the distributors and for the combined Bell-Astral, it's about protecting the core business and it's about enhancing the value proposition to consumers with non linear rights as part of the overall core business.
9592 Business case numbers do exist, but it would be again in the context of that, that's in part of, in many cases, the much broader business.
9593 MR. McINTYRE: Okay. I strongly take your point on that, Mr. Crull.
9594 We would just need the cashflow projections along with detailed calculations and assumptions for that proposed service, taking into account obviously the context that you just provided.
9595 MR. COPE: I am assuming this won't be on the public record in any way, shape or form. We're talking about sharing confidential financial information of a brand new product portfolio into the industry which, by the way, has no effect on the valuation because the valuation of Astral won't change.
9596 I'll turn it to the Commissioner to help us out here, but why would we provide --
9597 THE CHAIRPERSON: It's always open to you when you file information to ask for it to be treated in confidence.
9598 MR. COPE: Right. Could you help us understand why we would provide financial details of a new product offering for the marketplace. It doesn't change the valuation of Astral from a benefits perspective.
9599 THE CHAIRPERSON: It goes to incrementality of the benefit.
9600 MR. COPE: Incrementality of the benefit?
9601 MR. BIBIC: Just to be clear, we are not asking -- actually this came up earlier in the week. I forgot to mention it in the opening statement.
9602 We are not asking for benefits monies to fund this product launch. So it's not a question of establishing -- proving that the investment is incremental for tangible benefits purposes because this is completely outside of tangible benefits package proposal.
9603 THE CHAIRPERSON: So you're saying this is an intangible benefit to this transaction?
9604 MR. BIBIC: Correct. So the only benefits monies we're -- remember, we set out a whole list of value that we can deliver to the consumer and our BDU partners through this transaction. One of them is the Netflix competitor launch. We are going to fund that entirely on our own but it's made possible by pooling the Bell Media and Astral assets.
9605 There was another proposal to launch a French-language Category C service. For that we're asking for a portion of the funding to come from tangible benefits and we will fund the rest. So incrementality becomes important for that but incrementality is not an issue for the so-called Netflix competitor launch.
9606 MR. McINTYRE: If I may, I believe the purpose is to evaluate whether there are additional synergies that we haven't previously identified with respect to the transaction.
9607 So to the extent that we can value the projected benefit, financial benefit of this new proposal, then that may be relevant to the question of whether this is a synergy from the proposed transaction.
9608 MR. CRULL: We would submit, Mr. McIntyre, that unquestionably the core assumptions in the business that this type of service is required to remain competitive and in the core valuation assumptions of the business that you have this service incorporated, that we would not without remaining competitive in the market in the coming years, that the business wouldn't perform at management's projections.
9609 MR. GREENBERG: If I can just add one point to try to help here.
9610 The fact of life is, as I said before, Astral, this is our business, we have worked on this model for quite some time. I assure you -- although I haven't seen their numbers, I assure you that this particular project will not make money for many years. It's an investment to, as Kevin said, protect our core business.
9611 There will be no additional profits for years to come on this project. So from the point of view of looking at synergies, if anything, they're negative synergies here from a financial point of view.
9612 MR. McINTYRE: Thank you. Just to reiterate that we would like that information and we'll certainly again take into account what you said with respect to synergies and whatnot.
9613 THE CHAIRPERSON: Or address what you've just said. I mean the challenge we have is that instead of being added to the public record early in the process, which would have allowed the normal back and forth between us and the Commission, we get it at the last minute and so we are where we are.
9614 I suggest that you do what you can to unpack more because we need a little bit more on why this is -- I understand now you're saying it's an intangible benefit. I would unpack it a little bit more.
9615 MR. BIBIC: Okay. We have the question. We will file what we can. We will obviously claim for it to remain in confidence and we will reiterate our submissions on why it shouldn't be considered.
9616 I was also thinking it's like saying if we had -- you know, we have a burden of proof obviously here. If we had come forward and said we're going to just do great stuff, I don't think it would have been enough, with respect, Mr. Chairman, to meet that burden of proof.
9617 So we came forward and said these are the types of things we're going to do, rather than say we're going to do great stuff, and not because -- I would reiterate the submission we just made -- it's not because we were very precise in order to meet our burden of proof as to what we would do that then that becomes an issue for the purposes of valuation because I could also say in three years we're probably going to launch some kind of other new service. In fact, there may be that.
9618 So I mean it was just in response to your comment as to the last minute. You know, we didn't come here to try to take everybody by surprise. We understood the burden and it's just a question, at some point when your mind evolves and you focus your arguments, you know, this may not have been in contemplation -- actually it wasn't in contemplation with this much specificity back when we filed whenever it was, in June, let's say. I can't remember the date. That's all.
9619 MR. COPE: And, Commissioner, we have heard you. We will take your suggestion. We will pursue it. We will respectfully really request this stays confidential as best you possibly can.
9620 And for the financial people in the room, as people have seen with other OTT providers, it will be a negative business case but we will submit it. Thank you.
9621 THE CHAIRPERSON: Thank you.
9622 MR. BIBIC: By when should we file this? The same time period as --
9623 THE CHAIRPERSON: Well, because I take it you will be asking for confidentiality, I'm not going to -- it's not as key for the additional process we'll be running for next Friday and the Friday --
9624 MR. BIBIC: We'll try to file at the same time as the supplementary valuation on those seven stations that you asked.
9625 THE CHAIRPERSON: The longer it takes to complete the record, the later the decision will be.
9626 MR. BIBIC: Understood.
9627 MR. McINTYRE: Okay. Just a few questions on the tangible benefits proposals.
9628 You filed additional information vis-à-vis the new proposals in response to our undertaking of earlier this week. We did not see explanations or a narrative description as to how the new proposals would be consistent with the policy criteria and specifically -- or, for example, vis-à-vis the social benefits, how they relate to broadcasting and how they're incremental and so forth.
9629 So we have some of the monetary breakdowns, the schedules, but we're missing the descriptions of how they comply with the benefits policy.
9630 MR. BIBIC: Certainly we could do that.
9631 MR. McINTYRE: And if you could do that for Monday.
9632 MR. BIBIC: For sure.
9633 MR. McINTYRE: Okay.
9634 With respect to -- and this may be addressed in your response to the question I just asked. For the radio initiatives that you listed vis-à-vis the 1 percent, the discretionary 1 percent, there were a number of initiatives that staff are unclear as to whether they comply with the benefits, the radio benefits policies, and I'll list them out here for you just so that you could address them in your response.
9635 The Canadian Diverse Emerging Artist initiative by the Diversity Emerging Collective.
9636 The Music Education for Underprivileged Children initiative.
9637 And the Development of a Touring App initiative with the Canadian Council of Music, industry associations, and the Top Musique Québec App with ADISQ.
9638 I believe my last question is just with respect again to the 1 percent discretionary portion, we note that there would be over 100 stations if this transaction were approved and there could be some complexity as far as organizing payments of CCD funds, and we'd just like your comment on the -- rather than allowing that to be discretionary whether you would accept a condition of approval where we directed that portion to a fund so that there's a third party in charge of distributing that money.
9639 MR. GOLDSTEIN: Sorry, just so I understand your question, I think you indicated the concern would be that there would be over 100 stations, therefore there could be issues in terms of complexity of payments?
9640 MR. McINTYRE: Well, that's correct, just the --
9641 MR. GOLDSTEIN: Okay. In terms of -- and therefore should it go to a fund.
9642 In terms of the 1 percent benefits initiatives, in terms of Bell Media has managed them historically, they're actually managed centrally from our radio finance department. They're not managed on a station-by-station level. So if the concern is over compliance with payments, we have controls in place to ensure that doesn't occur or there isn't any issue there.
9643 In terms of a third-party fund, I think we would have to think about that but my initial reaction is that that isn't the sort of standard policy that's been applied essentially since the Radio Benefits Police was codified in 1998 and unless a party offered that up I'm not really certain why it would be merited in this instance.
9644 MR. BIBIC: Counsel and Commissioners, obviously our company is quite used to regulatory obligation. We make payments to contribution, to the CMF, to the LPIF, et cetera, et cetera, and Bell Media has 33 radio stations already. So I don't see -- and Astral has been doing it this way with its 84 stations or so. So I don't understand why we would have to change the model and add a layer of potential complexity, not that I profess to understand the exact mechanisms in question but just conceptually in principle that's what we do.
9645 MR. GOLDSTEIN: If I could just add, I think we also file annual reports on this as well, you know, in terms of -- to demonstrate compliance. So I'm not sure --
9646 THE CHAIRPERSON: I think we understand your position.
9647 I do actually have another question and then I will pass the mike to my colleague who will ask you a question about item 2.
9648 The early -- in deficiency process, there was a question about whether you had filed all material agreements arrangements as between BCE and Astral relating to this proposed transaction.
9649 I would just ask if there is any -- if there are any additional agreements that have been conceived since that question was asked in the deficiency process?
9650 MR. MCINTYRE: No.
9651 THE CHAIRPERSON: Okay; thank you.
9652 CONSEILLERE OCHMANN ST JEAN : Monsieur Bibic, permettez-moi; dans le cadre de l'article 2, votre position a été assez claire, tel qu'énoncée mardi et encore aujourd'hui.
9653 Toutefois, une dernière question pour vous : Dans l'éventualité où le Conseil approuverait la transaction, accepteriez-vous, comme condition d'approbation, que BCE retourne la licence de CKGM dans au plus 120 jours après -- suivant la décision favorable?
9654 M. BABIC : On préfèrerait de vendre la station.
9655 CONSEILLERE OCHMANN ST JEAN : D'accord; merci.
9656 LE PRÉSIDENT : Donc c'est un non à la question?
9657 M. BIBIC : C'est un non à la question.
9658 LE PRÉSIDENT : Oui? Merci.
9659 M. BIBIC : Si le Conseil rejette notre demande, on vendrait la station.
9660 LE PRÉSIDENT : Ce n'était pas la question. La question, c'est : dans l'éventualité qu'on approuve la transaction, évidemment, seriez-vous prêt à vendre la station qui fait l'objet -- de retourner la licence pour l'item 2?
9661 M. BIBIC : Au lieu de la vendre?
9662 LE PRÉSIDENT : C'est cela.
9663 M. BIBIC : Oui.
9664 LE PRÉSIDENT : Merci.
9665 C'est tout pour les Conseillers? OK; right.
9666 MR. MCINTYRE: Those are my questions, Sir, or our questions; thank you.
9667 THE CHAIRPERSON: Unfortunately, sometimes the reality of regulatory business is a bit like sausage-making. I apologize that we have been into a lot of details but it just helps us in the end make a -- have a complete record to be able to make decisions.
9668 Mr. Cope, Mr. Bibic, Mr. Crull, Mr. Greenberg and your colleagues, you were probably expecting that we were going to ask some other questions and not necessarily get them all from legal counsels. So I will give you one last question: Why is this transaction good for Canadians?
9669 MR. COPE: I think it is a tremendous transaction for the Canadians and for the Canadian broadcast industry, as we talked about. If you look at the industry development, the new technologies that will be brought to Canadians as a result of this; the new service we have just been chatting about to compete and offer a product which I think may have been lost a little bit in some this during the week.
9670 This is a product we are planning to distribute through the BDU's which will strengthen the Canadian ecosystem and obviously, we -- from a Canadian content perspective, you know, that will drive the success, we believe, of our media assets and the other companies in the country; and that will, I think, contribute significantly to the development of Canadian content, and out of that, of course, the Canadian consumer wins as well.
9671 Most importantly, out of this, the Canadian consumer is going to have choices of other products in the marketplace. And I think it makes the - and I think we have seen it already since BCE made a significant investment in the media industry a couple of years ago, competitive intensity, as witnessed this week, is at a pretty intense level. That is a winner for the consumer. When competition is intense, the consumer wins. And we are seeing it in a level we have never seen before and maybe that is -- you sense that passion today from us and our competitors over the week; the consumer wins from that.
9672 Anything else, Kevin, you want to --
9673 I should ask Mr. Crull, since he runs the business.
9674 MR. CRULL: Now I think I would underscore what we have said about our passionate commitment to Canadian content, and I think that the benefits package is undeniable significant benefit to the system and our passion about continuing to create great content by Canadians, for Canadians, to improve our scheduling balance from foreign-owned content, and we have a great track record of doing that.
9675 And with these combined assets and with the package before you, we feel it puts us in the best position to improve that, going forward.
9676 MR. BIBIC: And radio too.
9677 THE CHAIRPERSON: Thank you very much for being patient with our questions during what I know was a very long week for yourselves and everyone involved.
9678 Don't move quite yet. I am -- the hearing secretary has a few final items to do before we wrap up
9679 LA SECRÉTAIRE : Merci. Ceci conclut la phase III pour les articles 1 et 2. For the record, there are also non-appearing applications on the agenda of this public hearing. Interventions were received on some of these applications. The Panel will consider these interventions, along with the applications and a decision will be rendered at a later date.
9680 Ceci conclut l'ordre du jour pour cette audience. Merci, Monsieur le Président.
9681 LE PRÉSIDENT : Je voulais remercier tout le monde qui a participé à l'audience en tant qu'intervenants, demandeurs, dans toutes sortes de formes écrites ou orales.
9682 In particular, I would like to thank individual Canadians who took the time to participate in our proceedings. The Commission regulates in the public interest and that is pretty difficult to do without the public.
9683 Donc je tiens vraiment à remercier les Canadiens et les Canadiennes qui ont pris le temps de participer dans cette instance. Comme je disais en anglais il y a deux secondes, c'est très difficile d'agir dans l'intérêt public si les membres du public canadien ne participent pas à nos instances.
9684 Some of you are probably wondering when the Commission will rule on this. The answer is as expeditiously as possible.
9685 La réalité, dans ce cas-ci, c'est que comme nous l'avons annoncé ce matin, nous avons deux autres phases de commentaires et de répliques pour ceux qui avaient déjà -- qui avaient déjà fait partie de l'instance. Donc cela nous retarde d'à peu près deux semaines, et comme est notre pratique, nous tenterons de prendre des décisions rapidement.
9686 There are other people I would like to thank; those that prepare the transcripts for these hearings, which allows us to properly remember what was said and not said.
9687 J'aimerais aussi remercier les interprètes, qui nous aident à mieux se comprendre et ainsi que les caméramans et -- les opérateurs des caméras, pardon, qui sont dans la pièce et les gens de CPAC qui ont pu aider à diffuser cette instance d'un océan à l'autre.
9688 I would also like to thank the Commission's Staff and my colleagues here, the Commissioners, for their assistance to build a good public record so we can take what no doubt will be difficult decisions, at the end of the day.
9689 And I would also like to thank the reporters who help bring these important public interest issues to the broader Canadian public.
9690 Alors ce cela, je vous remercie tous et la séance est levée. Merci.
--- Whereupon the hearing concluded on Friday, September 14, 2012 at 1532
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