ARCHIVED - Transcript, Hearing 9 April 2014
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Volume 2, 9 April 2014
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Applications for the renewal of the broadcasting licences for English-language conventional and multilingual ethnic television stations and for certain specialty television services listed in Broadcasting Notice of Consultation CRTC 2014-26
140 Promenade du Portage
9 April 2014
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
Applications for the renewal of the broadcasting licences for English-language conventional and multilingual ethnic television stations and for certain specialty television services listed in Broadcasting Notice of Consultation CRTC 2014-26
Jean-Sébastien GagnonLegal Counsel
Caroline PoirierHearing Manager and Senior Analyst
140 Promenade du Portage
9 April 2014
- iv -
TABLE OF CONTENTS
PAGE / PARA
7. Winnie Ng, Ryerson University (int. 528) 335 / 2130
8. Metro Toronto Chinese & Southeast Asian Legal Clinic (int. 247)344 / 2171
9. Canadian Media Production Association (int. 510)356 / 2218
12. Canadian Cable Systems Alliance Inc. (int. 484)391 / 2446
13. Fairchild Television Ltd (int. 511)410 / 2556
14. Forum for Research and Policy in Communications (int. 574)427 / 2664
16. TELUS Communications Company (int. 543)450 / 2771
17. Gulzar Cheema (int. 515)467 / 2868
18. Irene Chu (int. 337)479 / 2954
1. Rogers Broadcasting Limited488 / 3017
--- Upon resuming on Wednesday, April 9, 2014 at 0900
2115 THE SECRETARY: Good morning, ladies and gentlemen. I just want to let you know that the hearing will be delayed for five to 10 minutes this morning.
2116 J'aimerais simplement annoncer que l'audience sera retardée de 5 à 10 minutes ce matin. Alors, on vous revient aussitôt que possible. Merci.
2117 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.
2118 We're ready to start the hearing, Mr. Chairman.
2119 THE CHAIRPERSON: Great!
2120 THE SECRETARY: Good morning.
2121 We're starting today with the presentation from Ryerson University. Ms Winnie Ng is appearing via videoconference from Toronto.
2122 Can you hear us well?
2123 MS NG: Could you hear us? Yeah. Hello.
2124 THE SECRETARY: Yes, we can. Hi. Good morning. Welcome to this hearing.
2125 MS NG: Okay.
2126 THE SECRETARY: So we'll start with Ms Ng's presentation. You can go ahead. You have five minutes.
2127 MS NG: Okay. Great! Thank you.
2128 Good morning.
2129 THE SECRETARY: I'm sorry, you have 10 minutes. Sorry. I'm sorry, you have 10.
2130 MS NG: Yeah. Got it.
2131 Good morning. My name is Winnie Ng. Let me just by way of introduction -- I came to Canada in 1968 from Hong Kong and I went to school in Montreal for five years and moved down to Toronto in 1975. So, over the past 40 years I've been a proud member of our Chinese Canadian community here.
2132 As a long-time community and labour activist and the current Gindin Chair in Social Justice and Democracy at Ryerson University, I thank you for this opportunity to address the Commission on the pending application by Rogers Media to renew its licence for OMNI TV stations and the proposed reduction of its third-language programming.
2133 My presentation will focus on two key points. One is on the strategic role OMNI stations play in the diverse communities and the importance of upholding that content requirement, and the other is on the critical role of the advisory board. So, I'll proceed.
2134 Canada is a multicultural, multiracial, multilingual nation. Canadians are citizens of the world and this is reflected in the multitude of languages spoken on our streets. OMNI stations serve as a showcase for, and an innovative model of, community ethnic broadcasting across the country.
2135 OMNI stations provide not only a critical link for newcomers and members of multilingual communities to the broader political, social and cultural realities of Canada, it also serves as a bridge for civic engagement among diverse groups. A vibrant, robust media connects us to our communities and gives us tools to democratic practices.
2136 Rogers' proposed deregulation of broadcasting minimums, prime time viewing and the broad service mandate to different language groups are detrimental in shredding the very fabric of what makes Canada unique and striking at the core values of our diverse society.
2137 OMNI third-language programming fills a void in particular among the underserved and often more vulnerable members of the community. A case in point is within the Chinese Canadian community, for many seniors who are on fixed income or low wage earners and their families, those who cannot afford the $75 to install cable system and access Fairchild and other language-specific channels, OMNI third-language programming is their only access to timely and comprehensive community, national and international news.
2138 At the same time, I think we need to recognize OMNI, with its diverse programming, also offers a window for the general public to learn and gain a better insight about their neighbours.
2139 Quoting from Dora Nipp, who is the CEO of the Multicultural History Society of Ontario:
"OMNI TV is the media extension of Canada's commitment to multiculturalism playing a pivotal role for both 3rd language communities and the larger community. OMNI TV covers news stories and angles that are often overlooked by mainstream media; it takes us into the world communities of our neighbourhood and literally gives voice to segments of society that extend beyond English and French Canada."
2140 A case in point I just want to point out is, for example, the Head Tax Redress Campaign that was initiated by the Chinese Canadian community since 1984, it was to the credit of OMNI stations and ethnic media that kept focusing on the issue until it got the attention of the mainstream media and the general public.
2141 To me, with the upcoming provincial election potentially taking place in the spring of 2014 in Ontario, the municipal elections in October 2014, again in Ontario, and the federal election in October 2015, we're about to embark on an unprecedented period of political campaigns. OMNI TV is strategically poised to reach into diverse communities. It is also an opportunity that Rogers can seize to deepen the connections with the communities through OMNI's coverage, which will fill that void and reflect the diverse voices and issues that matter to these communities most. It would also enhance democratic participation.
2142 I therefore strongly recommend CRTC to uphold the 75 percent prime time ethnic broadcasting viewing requirement during the 8:00-to-10:00 p.m. slot and steer Rogers away from a short-sighted orientation of yet more U.S. content programming.
2143 The next point is on the critical role of advisory boards.
2144 In recognizing the strategic role that OMNI third-language stations have played in the diverse communities, the challenges that Rogers professes to be experiencing in identifying audience interest and quality programming for different communities, the presence of a well-connected and dynamic community advisory board is one critical link with untapped resources and potential.
2145 It is most unfortunate that the advisory board set up was dissolved in 2010 by Rogers and purportedly "replaced" by Community Liaison Officers. To me, while the presence of CLOs is an excellent idea and good business outreach and marketing team, however, these Community Liaison Officers do not replace the community advice, the extensive networking, the oversight and accountability that a community advisory board can provide. In fact, the advisory board and the CLOs complement each other, working in tandem to achieve a common goal.
2146 So, to me, the reestablishment of community advisory boards should definitely be part of the condition of licence renewal. These boards should be specifically mandated to meet quarterly, to request and receive relevant business and programming information from Rogers subject to non-disclosure of confidential business information, and to report to the CRTC and the public on a quarterly basis.
2147 In addition, boards should also have a reasonable administrative budget from Rogers for travel and meeting expenses. Last but not the least, the boards should include OMNI staff members who are members of the diverse communities themselves, not just those from management, and these members could be appointed by their unions in B.C. and Ontario.
2148 I believe that the CRTC must take leadership in ensuring that Rogers provides alternatives to programming cuts so that OMNI stations continue to carry out its mandate and to continue serving an otherwise underserved sector of Canadians now and in the future.
2149 Thank you very much. That's my submissions.
2150 THE CHAIRPERSON: Thank you very much.
2151 Madam Molnar may have some questions for you.
2152 COMMISSIONER MOLNAR: Yes.
2153 Thank you. Good morning. Your presentation was very clear and I just want to focus on the last bit here where you say that:
"...the CRTC must take leadership in ensuring Rogers provides alternatives to programming cuts."
2154 MS NG: Yes.
2155 COMMISSIONER MOLNAR: I'm not certain if you've had an opportunity to follow this file and maybe follow the discussions that happened yesterday. Rogers has said that the OMNI stations essentially have lost half of their revenue in the last two years, due to factors outside of their control they would say, based on specialty channels and different changes that have occurred in the marketplace.
2156 So, what do you think is the answer to that? They've come back asking for additional flexibility to try and respond to that.
2157 MS NG: Yes. I guess from my presentation, I think there is a public service mandate that OMNI television stations, and in that sense, Rogers when it renewed its licence the last round has committed, and to me, I think that's part of -- you know, for those who can't afford to pay for cable systems and access other specialty channels, OMNI television is their only source to a more comprehensive understanding of the world beyond their home.
2158 And the other piece, I think it's the content. My sense is if the advisory board is reconstituted, that would provide -- along with the CLOs, that would provide another opportunity for Rogers to do a much more extensive outreach, to have another group that they can consult during their strategic planning process and to make sure that their programming is addressing and meeting the needs of the larger communities.
2159 To me, I guess part of it is in terms of -- we don't have a sense, you know, in terms of the profits or the pieces that Rogers has presented. My sense is in terms of the applications here, aside from the revenue generating the profits that need to be made, there's another key consideration: it's the public mandate in upholding the values and the message of multiculturalism.
2160 And to me, I think the next two years -- as I've mentioned, the next two years are critical, the upcoming 18 months are critical in making sure that members of the diverse communities can get engaged in the political process and also in encouraging the civic engagement and be participating in the electoral process.
2161 And I think those are pieces that -- that's why we need to uphold -- CRTC has a role to uphold Rogers to meet their 75 percent prime time ethnic broadcasting viewing requirement, right, or else if they keep going, you know, reducing from 20 -- their request of reducing from 20 communities to 10 communities, in that sense, this is the demise of the whole multicultural -- of the third-language programming. It's the demise of the third-language programming by 1,000 cuts, right.
2162 If we don't uphold this and they start reducing the numbers, reducing the percentage of content, what's preventing them from coming back in two years time and saying, we need to do it for another reduction?
2163 So, in that sense, it begs the question whether, you know, when Rogers -- it begs the question whether Rogers' intentions when it first purchased OMNI stations, whether the intention all along has been to gradually reduce and eliminate third-language programming.
2164 And, you know, I don't have enough to substantiate but if we don't uphold some of, you know, this threshold, then it's going to be the beginning of the end of third-language programming.
2165 COMMISSIONER MOLNAR: Okay. Thank you very much. You're very clear.
2166 THE CHAIRPERSON: Yeah. Thank you very much.
2167 MS NG: Thank you.
2168 THE CHAIRPERSON: Thank you for your engagement and contribution. You've shed some supplemental light on a lot of the issues that we've already raised and we appreciate your time this morning. Thank you. Enjoy the rest of the day.
2169 MS NG: Thank you.
2170 THE CHAIRPERSON: Madame la Secrétaire...?
2171 THE SECRETARY: Thank you very much, Ms Ng. We will now hear Ms Avvy Go from the Metro Toronto Chinese & Southeast Asian Legal Clinic. Good morning, welcome to this hearing.
2172 MS GO: Thank you.
2173 THE SECRETARY: You may proceed with your 10-minute presentation.
2174 MS GO: Good morning. Thank you. I want to start by thanking you for giving me the opportunity to comment on Rogers' application with respect to renewal of the OMNI TV station.
2175 So my presentation is going to be divided into two parts. I'm going to start by commenting, you know, on some of the experiences we have had working with OMNI and the contribution they have made in our community; and then, secondly, I will comment on some of the conditions that we think the CRTC should be looking at in terms of this application.
2176 You know, just by way of background, we are a community legal clinic providing free legal services to low-income Chinese and Southeast Asian communities in Toronto. We were established in 1987, and since then we have provided free legal services in a linguistically and culturally appropriate way to tens of thousands of clients while at the same time advancing access to justice for the low-income members of our community.
2177 In that process we -- you know, working with the media is a critical piece of our work, and so over that time period we have worked very closely with OMNI and its predecessor CFMT to help reach out to the community and to inform them about important developments in government policies and laws that have impact on the community as a whole, but especially on the low-income members of our community.
2178 As a free over-the-air television station, OMNI is one of the key sources of news information for the diverse communities in Toronto, but particularly the disadvantaged members, the low-income members, as Ms Ng has talked about.
2179 These communities rely on Omni to deliver news in a professional and unbiased and objective manner in the first language spoken by their members. Many of our clients actually do find out about our services and find out about what's happening within the political and economic realm through OMNI and sort of through stations like that and every time -- I can tell you every time I am on OMNI, or someone from my clinic, you know, is interviewed by OMNI to talk about a certain issue, the next day we will get a call from a client because they saw us on the news, they wanted to know what is going on, they are concerned about what's going on.
2180 Conversely, sometimes we find out first from OMNI any announcement or, you know, sort of plans made by the government because they will be calling on us to comment on the issues from the perspective of the community. So it is through this two-way communication with the help of OMNI that we are really empowering our community by engaging them in discussion on issues that affect them.
2181 But unfortunately, over the last few years we have already seen the impact of the funding cuts by the -- the programming cuts by OMNI, to OMNI by Rogers, so a number of the current issues programs outside of the news hours had already been eliminated. And even now the news items, like news hours in Cantonese and Mandarin over the last few years have been drastically reduced as well.
2182 So any further reduction in programming in OMNI will for sure lead to even more negative impact on our communities, yet this is precisely what Rogers is proposing to do in this licence renewal process.
2183 And I find it really ironic that throughout the application -- I read the whole thing -- Rogers touts its commitments to ethnic broadcasting, while at the very same time seeks to amend its conditions of licensing to effectively undermine ethnic broadcasting.
2184 And they try to blame the programming cuts, the need for that, on audience viewing habits and, you know, how it has changed from TV to Internet, but then, at the same time, they also talk about how well their competitors are doing, the pay channels. So I think the two things are inconsistent with each other. If their competitors are doing well, that means people are still watching TV.
2185 But, you know, in any event, Rogers claims that the current business model for OMNI is not viable, but fails to provide any concrete, in my view, necessary information to support that claim. But even if OMNI is facing financial issues, we do not accept that cuts to ethnic programming, especially during prime time -- prime time is the only solution to that problem.
2186 And I want to quote from Howard Lichtman, the multicultural marketing strategist in a recent Toronto Star article, and he was saying that Rogers is missing out on an opportunity to capitalize on the market for ethnic communities by refusing to spend the necessary budget on the community. So from that I take it that you have to spend money to make money and Rogers is unwilling to spend the money to make that money.
2187 Granted, I think Rogers has raised some valid concern over the lack of parity within CRTC's Ethnic Broadcasting Policy. You know, I am taking their words at its face value, but then we submit that those concerns should be addressed not by CRTC giving in to the conditions proposed by Rogers, however, it is through conducting a thorough review of the policy to ensure that free over-the-air ethnic stations are not put at a disadvantage as compared to the pay stations.
2188 In the end we do want to see OMNI's licence being renewed, but simply not on the terms proposed by Rogers. We believe that there are alternatives for programming cuts to make sure OMNI will stay viable and to continue to strive.
2189 I understand from yesterday's discussion that Rogers is going to make some concession, they are now asking for a two-year term of licensing, lowering their request for cutting ethnic programming during prime time and also re-establish the community advisory boards. While these are, you know, a good start, they are just not good enough.
2190 So we are asking the Commission to consider additional conditions and there are particularly three of them. First of all, we believe that Rogers must submit full disclosure of all the financial information necessary for CRTC to make the decision, as well as business decisions that Rogers has made over the last round of renewal with respect to OMNI TV before any decisions can be made with respect to programming change.
2191 And along that same line I think -- well, we submit that Rogers must also present a very detailed plan, a clear business model on a go-forward basis that will ensure the viability of OMNI stations.
2192 Second, to the extent that Rogers can indeed provide concrete financial proof that there is no other viable solution alternative to making cuts, then we ask CRTC to put conditions on Rogers so that only the minimal amount of change in programming will be made and that such change will be temporary and time-limited.
2193 Finally, as Ms Ng talked about, the community advisory boards should become part of the conditions of the licensing renewal and at the same time you should strengthen the mandate, as well as the independence of the advisory to ensure greater community accountability.
2194 However, in addition to these conditions, I am also urging CRTC to conduct its own review of the Ethnic Broadcasting Policy to ensure that there is parity among all third language television stations.
2195 I want to end by quoting the Canadian Broadcasting Act which mandates community ethnic broadcasting programming. It is an integral part of the Act to building informed civic participation among diverse populations that make up Canada today.
2196 In my view, Rogers really has profited significantly from having the privilege to own that licence. It is a very valuable licence that provides access to public airwaves by presenting itself as a champion of ethnic broadcasting. So if Rogers wishes to continue to hold that privilege of owning that very valuable licence to these free over-the-air television stations, then Rogers has to earn that privilege by complying with strict policy objectives regarding Canadian content, local programming and ethnic broadcasting. Thank you.
2197 THE CHAIRPERSON: Thank you. Commissioner Shoan...?
2198 COMMISSIONER SHOAN: Good morning. Thank you for being here today. I have a few follow-up questions based on your oral remarks. You stated that Rogers tries to blame the programming cuts on the audiences' changing viewing habits from TV to Internet.
2199 I have been asking a number of interveners throughout this hearing as to whether they view OMNI programming online, either on their desktop or laptop or on their tablet. Do you or any of your clients view OMNI programming on digital platforms?
2200 MS GO: I view it from my desktop because sometimes when we need some information, like let's say we are aware -- we are made aware of certain interviews that OMNI has done or some, you know, sort of particular announcements, news segment that OMNI has done, then I will just watch it from my desktop.
2201 So I have done that from time to time for particular issues, but most of the time if you are just watching the news, you know, as a news item, I usually -- I think most of us will watch it from TV. I am a TV viewer, I am from the older generation.
2202 COMMISSIONER SHOAN: Understood, thank you. You also said that you acknowledge that some of Rogers' concerns over the lack of parity within the CRTC's ethnic broadcasting policy might be valid, and I'm curious about what aspect of the policy you feel might represent that lack of parity. You acknowledged in your presentation that a number of your low-income clients can't actually afford to buy some of the ethnic specialty channels from Fairchild and NATN, so OMNI is sometimes their only choice for ethnic programming, which in a sense is an advantage for OMNI.
2203 So can you address that a bit more, the lack of parity under the broadcasting policy?
2204 MS GO: Yes. Sure. And again, I'm taking Rogers' word at its face value, right. Like, if you look at their application they talk about the different sort of, I guess advertising sort of restrictions, you know, number of minutes per, you know, whatever program, and they talk about how different rules have been applied to some of the other stations, they mentioned Fairchild and another station -- I can't remember the name of that pay station -- and compare that to the restriction that was imposed on OMNI.
2205 You know, I don't know if that's true, but if that is indeed the case, on its face it seems like there is different policy or the policy has different applications to different stations versus, you know, sort of over-the-air versus the pay station. Honestly, I don't know if that is true or not, I'm just taking Rogers' word for it.
2206 But as you said, like you know, this is a very valuable licence, it is free over-the-air. A lot of people will watch OMNI. Like, one of my colleagues does not have cable and so she only has, you know, sort of some CBC and -- I guess CBC and OMNI will be among the two that she has and many of our clients are in that position.
2207 So I cannot believe, like you know, as Mr. Lichtman has suggested, I cannot believe that Rogers cannot take advantage of that very valuable licence in order to generate enough revenue to cover the program.
2208 So again, it goes back to Ms Ng's question, so what was the intention behind acquiring the licence if you are not going to spend money to invest on the station to make it profitable, while at the same time spending $12 billion to, you know, buy Hockey Night in Canada. Like you know, sort of the two business cases are contradictory to each other and it makes it worse because there is a public interest sort of aspect to these, like first language or third language programming, as you will, for the multicultural communities in Canada.
2209 So, you know, they definitely have two different models going on and two business models and they decide where they want to spend their money and where they don't want to spend their money.
2210 COMMISSIONER SHOAN: Okay. Thank you. Well, your additional conditions were very clear with respect to the community advisory boards being a condition of renewal as well as the concrete financial proof aspects.
2211 I wanted to ask you about two additional aspects of Rogers' application with respect to the OMNI stations. They have proposed reducing their Canadian content obligations to reduce them to 40 percent. Do you have any comments on that?
2212 MS GO: Right. So I think any time someone wants to reduce Canadian content I kind of like, you know, we still live in Canada, you know, I still want to see more Canadian content, and particularly I think what they are trying to set up is to buy more U.S. programs to flood the market, because they don't have to produce them themselves, it's cheaper that way and then, you know, I guess from their perspective they think it is more profitable.
2213 Again, it goes back to what is the purpose of a station like OMNI. It serves a particular purpose as Ms Ng talked about, to engage our community, to provide information, to empower a community to -- there is a public service involved particularly for an OMNI station. So any time I think whoever is the licence owner wants to reduce Canadian content, I think that is very problematic and particularly in an ethnic sort of station context.
2214 COMMISSIONER SHOAN: Okay, great. Those are my questions. Thank you very much for being here today.
2215 THE CHAIRPERSON: Thank you both very much.
2216 MS GO: Thank you.
2217 THE CHAIRPERSON: Thank you both very much. Madame la Secrétaire...?
2218 LA SECRÉTAIRE : Merci, Monsieur le Président. I would now invite The Canadian Media Production Association to take its place at the presentation table.
2219 THE CHAIRPERSON: Good morning, Mr. Hennessy, whenever you are ready.
2220 MR. HENNESSY: Thank you, Mr. Vice Chair. For Mr. Shoan I brought my tablet, even though I am over 60, just to show you some of us are still hip. That will save questions.
2221 THE CHAIRPERSON: I never would have thought you were over 60, Mr. Hennessy.
2222 MR. HENNESSY: Preservatives.
2223 MR. HENNESSY: Good morning, Mr. Vice Chair, Commissioners, CRTC staff. My name is Michael Hennessy and I am President and CEO of the Canadian Media Production Association. Joining me today, as usual, is Jay Thomson, our VP Regulatory.
2224 While we generally support Rogers' renewals applications for City TV and its specialty services, there are nevertheless certain issues triggered by those applications that I would like to address today, issues that in my mind go to the root of what makes the Canadian broadcasting system work for consumers, creators and citizens.
2225 The first issue is the continued mispositioning, in my view, of Terms of Trade is bad for the broadcasting system.
2226 The second is the impact to date of the Commission's group licensing framework which Rogers now wants applied to it.
2227 The third pertains to hockey, and specifically our concerns about how Rogers will record and allocate its NHL revenues and expenses and how much CPE will be consumed by hockey expenses.
2228 And fourth, and tangentially, there is the issue here of whether given regulatory support for vertical integration and the flexibility that flows from the GLF, it is fair to target one channel like OMNI or one group of suppliers like independent producers on the cost side when the company as a whole seems to be net better off.
2229 So to begin with, however, we would like to indicate our appreciation to Rogers for withdrawing its request that City TV and its specialty services be relieved of their conditions of licence requiring them to adhere to Terms of Trade.
2230 We also appreciate that Rogers acknowledged that in respect of those services it is still contractually bound by the current agreement until 2016. And we would point out that Rogers is contractually bound by that agreement in respect of its OMNI stations, too, at least insofar as English language programming is concerned.
2231 For producers, Terms of Trade is critical for ensuring fair treatment and the opportunity to exploit the intellectual property in the productions they develop and deliver to broadcasters like Rogers. No doubt the Terms of Trade condition of licence will be debated at the group licence renewal proceeding in 2016 and we only raise the issue today as an example of how Rogers bases many of its arguments at this hearing on accentuating the negative, while ignoring the fact that it is able to spend billions of dollars on NHL hockey and spectrum due to public licences that it has been granted in the content and distribution markets.
2232 Another example is, Rogers is focusing on the decline in ad revenues on OMNI, while ignoring the revenue opportunities and cost savings that accrue across its multiple channels and platforms and that will come from its broadcasting of hockey in CBC's prime time.
2233 A key issue in this proceeding is whether to bring Rogers under the group licensing framework, which will allow it to shift expenditures within its broadcast group. As we stated in our written intervention, we support Rogers coming under the GLF, particularly since adherence to Terms of Trade is a fundamental component of the framework.
2234 We also submit that aligning the Rogers' licence term with those of others subject to the framework makes sense, even if we have concerns about the long-term impact of GLF in general. It's only fair that Rogers and the other large broadcast groups are treated in a similar fashion.
2235 Additionally, it's important that all stakeholders can engage in a collective and comprehensive review of the framework and its impact at the renewal proceedings that will come in 2016.
2236 We can tell you right now, though, that independent producers are already feeling the impact of the framework on their businesses, some of it good, some of it not so good. We recently surveyed a cross-section of our members to get their anecdotal mid-term report on the framework, anecdotal because the data needed to track the shifts in spending under the GLF is not publicly available to stakeholders like the CMPA.
2237 Overall it does seem safe to say that producers and broadcasters alike are still adjusting to the new system. The upside so far seems to be a movement towards bigger budget, high production, value dramas that are attracting larger audience. That is obviously good.
2238 The flipside of that, however, is that producers of more niche programming, targeted to more genre-specific specialty channels, including kids and non-scripted programming, are finding there is less funding and fewer opportunities for their shows. That raises a red flag if it means the GLF is contributing to a significant decline in diversity in our broadcasting system. But that's for 2016.
2239 In the context of this proceeding, this begs the question, will bringing Rogers into the group licensing framework ultimately be a good thing for the system? Answering that question would have been a lot easier before last November when Rogers announced the NHL deal, before it spent $5 billion to acquire hockey rights we could've been more confident by taking on new CPE and PNI obligations that were associated with the GLF, Rogers would up its investment in various Canadian programming genres.
2240 On its face that clearly seemed good for the system. Now, however, we have to wonder if hockey fans will be the only ones to benefit from Rogers' new group status. Yesterday's panel discussion did not provide us with any comfort with respect to that question.
2241 The CBC deal may further compound this problem. The CBC deal has to be net positive for Rogers in terms of the ad revenues it will deliver to Rogers from free use of the public broadcasters prime time, yet we do not know whether these revenues will contribute to Rogers' group CPE contributions, as we argue they should, or be sheltered from them, which we argue would be wrong.
2242 Rogers, in our mind, is not simply a producer relative to CBC, as was suggested yesterday. Under the CBC deal it will control the content and the broadcast space and derive ad revenues from all the ad revenues from exhibition. That looks more like a broadcaster to us than a producer.
2243 Rogers' answer to you yesterday about how it will account for the revenues associated with hockey on CBC was very vague. You subsequently asked for Rogers to report annually on its accounting practices for hockey, which is a good thing, but this still does not confirm an obligation for Rogers to include the CBC hockey revenues in its CPE base.
2244 Now, Mr. Vice Chairman, we have nothing against hockey fans -- maybe the Leafs -- what we are concerned about, though, is that under the GLF Rogers will now have the motivation, as well as the opportunity to allocate both its revenues and its costs in a manner that will help its new hockey broadcasting business at the expense of its support for other genres of Canadian programming.
2245 For instance, given that Rogers intends to broadcast hockey on a number of its different services, it could be motivated to allocate more of its hockey revenues to services outside of the group, to reduce its group CPE base, while allocating more of its hockey costs to services within the group, to claim as group Canadian programming expenditures.
2246 Similarly, with its group spending flex, Rogers presumably could allocate a large portion of its CPE obligations for CITY, G4, BIO and OLN to SportsNet 360, again to pay for hockey programming. The result could then be that Rogers' inclusion in the GLF could actually lead to less support for Canadian programming, at least for programming that is not hockey.
2247 While we worry that the large broadcasters can already use their CPE and PNI spending flex to shift their expenditures away from certain underserved genres of programming, Rogers' emphasis on hockey may take this problem to an even greater level.
2248 Mr. Vice-Chair and Commissioners, these concerns lead us once again to call on the Commission to make available data that shows how the broadcasters are using their GLF spending flex.
2249 You've heard our message before, not just from us but from others, too.
2250 If the Commission does not soon provide the data necessary so we can examine how and where the broadcasters are allocating their CPE and PNI dollars, come 2016 stakeholders will be severely constrained in our ability to help you assess the overall impact of the Group Licensing Framework.
2251 We note in this particular instance that Rogers supports our request in this respect.
2252 We'd be happy, as always, to work with Commission staff to help define what data should be made available to address this important issue.
2253 Thank you, Mr. Vice Chair, Commissioners. We would now be pleased to answer your questions.
2254 THE CHAIRPERSON: Thank you, Mr. Hennessy.
2255 Commissioner Shoan will have some questions for you, undoubtedly.
2256 A lot of issues were raised. Some of them kind of out of scope and we've got enough on our place already -- on the flex and maybe we'll leave that out. You've made that case before. It has been heard, and I'm sure there will be news shortly on that front.
2257 As for the issues that --
2258 MR. HENNESSY: That's all we ask.
2259 THE CHAIRPERSON: Understood.
2260 As for the issues that regard Rogers' application, Commissioner Shoan?
2261 COMMISSIONER SHOAN: Good morning, gentlemen. Thank you for being here today.
2262 I have to say I'm happy to see a bit more meat on the bones in terms of your positioning on these applications, given the brevity of your written submission. So let's jump into some of your positioning on these applications.
2263 You haven't said a whole lot about OMNI. So I would like to question you about the OMNI applications first before we turn to the sports programming issue.
2264 MR. HENNESSY: M'hmm.
2265 COMMISSIONER SHOAN: Do you have a position on -- first of all, let's talk about sort of the four major asks for OMNI that Rogers have brought forward. Let's go through them one by one.
2266 40 percent CanCon, do you have a position on that?
2267 MR. HENNESSY: I think they -- you know, the issue is we have concerns like everybody when your CanCon goes down. I think that goes to our more general question as to what is a broadcaster in a digital wireless online on-demand linear programming kind of world?
2268 Where does the definition of broadcaster stop? And therefore, how do you allocate revenues and costs associated with that?
2269 Because I don't dispute the issue that advertising revenues are going down for OMNI, but even though OMNI may be outside the group licence, it is not outside the group broadcast licences of the companies and there are a lot of benefits there from, you know, cross-platform opportunities that come with it.
2270 So advertising obviously down. But is that of significant impact on Rogers given the benefits that accrue from having an over-the-air licence and placement in a couple of major centres in the country?
2271 You know, is 40 the right number? I don't know that.
2273 COMMISSIONER SHOAN: Okay. They haven't committed to any local programming on OMNI. Do you have any position on that?
2274 MR. THOMSON: Mr. Commissioner, we typically don't weigh in on local programming issues because it's not an area in which our members are active.
2275 COMMISSIONER SHOAN: Okay.
2276 MR. THOMSON: So we would leave that to others who are more directly affected by those.
2277 COMMISSIONER SHOAN: That's fine, Mr. Thomson.
2278 The request for increased primetime flexibility, do you have any comment on that, specifically the 75 percent between eight and ten p.m.?
2279 MR. HENNESSY: Again, I think the critical issue in terms of -- because you've got so many language group trade-offs to find space for in primetime, it's problematic to begin with.
2280 But you do need -- you know, you can't have a major broadcast channel that doesn't have a significant amount of Canadian content or at least a major Canadian broadcast channel with privilege that doesn't have a significant amount of Canadian content in primetime because it makes no sense.
2281 And I think I heard Rogers say that, you know, they are willing to discuss some flex with respect to that.
2282 COMMISSIONER SHOAN: Okay.
2283 So, let's talk a bit about the sports programming and how much of the CPE spend should be -- can be allocated towards the production of professional sports.
2284 We've heard from a variety of interveners throughout this hearing about how that should be treated. Some have suggested that we should exclude the eligibility of professional sports from accessing that CPE. There have been some suggestions that there should be a cap on how much of that CPE should be -- can be allocated to professional sports.
2285 I suggested that perhaps an increase in the PNI commitment could offset the allocation of a substantial portion of the CPE to professional sports.
2286 Would any or all of those alleviate some of the CMPA's concerns with respect to how that CPE would be allocated in the context of Rogers' renewals?
2287 MR. HENNESSY: Well, you know, let me start first by, you know, noting that we are pleased to see you know the PNI go from 2.5 to 5 percent.
2288 But I would say because I think of all the stuff that we put on the table this is probably the critical question. So if I can take a little time on it?
2289 COMMISSIONER SHOAN: Sure.
2290 MR. HENNESSY: So there's $5.5 billion that were spent on hockey, so an astronomical number relative to the past.
2291 So you could argue therefore, you know, if you're -- if you, Rogers TV channel is buying from Rogers content owner, that if you allocated all of the costs of the transaction to broadcasting purposes, that you would be paying potentially as much as twice, three times. I don't know.
2292 Again, you know, it's an issue of transparency for the rights to broadcast one hockey game, okay? And that seems completely wrong.
2293 So whether it's 2.5 percent or 5 percent PNI, it might not matter. I mean, you know, because well there would still be -- you'd still be able to do the Gordie Howe story episode, one, two, three, four, five for the early years and then another five for the later years. And we'd be happy to make that.
2294 But here is the problem, right?
2295 To begin with, the $5.2 billion that was spent on hockey was not spent just to broadcast it on television. In fact, I would argue that it might even be of more advantage to Rogers Wireless because of the ability to now have, you know, a preference recognizing there are vertical integration rules, but a preference nonetheless in terms of your ability to bundle.
2296 And if the hockey -- and this was clearly -- you know, it would have been part of the thinking and the deal -- if you can clawback some of the market share you've lost on wireless over the last couple of years, with the ability to get the job on hockey bundling when you're selling your cell phones, you could make up, you know, hundreds of millions of dollars just off that because you've increased -- you know, you get a couple more percentage market share points and you fire up your market cap like crazy.
2297 So just as a start, how can you possibly -- I think the number one question asked is, "How much are you really intending to recover from your broadcasting business and other broadcasters?"
2298 "How much are you going to pay for hockey relative to what up until this deal everybody was historically paying for hockey?" Right.
2299 Because otherwise, what you end up with is, you could -- if you load all the costs into broadcasting and then you recover the costs as Rogers, the hockey seller, from Rogers the channels, okay, but at a much higher historical rate, then even though you're generating more revenues and, therefore, you know, your CPE goes up, you can still end up with nothing left at the end of the day because hockey gobbled up all the CPE expenditure because the price of hockey was so high.
2300 COMMISSIONER SHOAN: Okay.
2301 MR. HENNESSY: So there is still -- there will be a spinoff of higher revenues -- it will contribute to a bigger pot for PNI, right?
2302 COMMISSIONER SHOAN: Agreed.
2303 MR. HENNESSY: And that's -- we like that. That's good for us.
2304 From the sounds of it, perhaps some of the comedies or dramas we might have made in the past will be more sports-focused. You know, they will be Gordie Howe story-type things and, yeah. But you might find people like that. You might not.
2305 But we can, you know -- we can make dramas. People have made the Terry Fox story, the Jack Leighton story. Maybe I'd much rather watch the Gordie Howe story, you know; not.
2306 So there is a benefit from the additional revenues if the revenues -- because remember your revenue pot is also going to be related to your advertising and your advertising deal may very well cover channels inside the group and outside the group.
2307 So when you've got this big bundle of revenues how are you going to -- you know, how are you going to allocate them inside and outside? Again, you don't know.
2308 So if more of the revenues end up outside the tent than inside the tent, then they never get counted for CPE in terms of -- you know.
2309 So it's a real -- it's a real muddle and that's not even before you try to figure out the whole, you know, CBC deal and whether those revenues should be in or out.
2310 COMMISSIONER SHOAN: So that's a fair point, Mr. Hennessy. We have asked for those agreements. We'll be examining them. We're looking into the arrangements.
2311 We've asked them to provide a bit more clarity with respect to how they are going to write down the expenses associated with NHL programming and how they are going to allocate their revenues. So that's something the Commission is looking into and we'll do our due diligence on that end.
2312 MR. HENNESSY: Yeah, we know that's got to be confidential.
2313 COMMISSIONER SHOAN: Right.
2314 MR. HENNESSY: Of course.
2315 MR. THOMSON: And we appreciate that you're looking into that, Mr. Commissioner.
2316 COMMISSIONER SHOAN: Of course.
2317 MR. THOMSON: But the next step is where does that money go? Where should that money go as opposed to where they plan on allocating that money.
2318 COMMISSIONER SHOAN: Right, which goes back to the question that initiated this discussion about how much of the CPE should be allocated or can be allocated to professional sports programming.
2319 Before you take another stab at answering that, I take your point, Mr. Hennessy, with respect to how this can be a boon for Rogers Mobile Services. That's certainly true.
2320 But I think the record of this proceeding is quite clear that Rogers is going to be looking to monetize quite a bit of this programming on its specialty channels on City through sublicencing arrangements with TVA, with their arrangement with CBC. APTN has indicated they have begun preliminary discussions with Rogers.
2321 So very true that Mobile will likely benefit but, certainly, Rogers is looking at as many platforms as possible through which to monetize its programming in the traditional system. So we're certainly aware of that and we'll be looking at that as well.
2322 So with respect to the CPE bundle, whatever that may end up being, and that is subject to our continued examination of the arrangements and Rogers' projections, whatever that bundle may be, what do you think is an appropriate amount of the CPE that can't be allocated to professional sports programming?
2323 Given that under our group-based policy we have generally tried to ensure that the profitable programming doesn't necessarily benefit from the flexibility accorded to groups within that policy and that some of the CPE is more properly allocated to programing that would necessarily, probably need a bit more support in order to get made.
2324 MR. HENNESSY: You see, I -- in principal, I'm 100 percent with you.
2325 COMMISSIONER SHOAN: Okay.
2326 MR. HENNESSY: Here's the problem, and it goes back to why I raised the issue of the group licencing framework to begin with.
2327 Yes, Rogers is going to put a huge amount of emphasis on sports. The reason why they are going to do that is they believe, you know, number one that that's the way that a channel like City can survive and become profitable.
2328 The issue obviously for you, the Commission, is well, if you have a conventional TV licence, isn't there supposed to be a degree of diversity with it? Although there are conventional TV licences that are different.
2329 But from, you know, a primetime kind of conventional licence, I'd agree with you. The issue is that as we've moved along through group licence, and you've heard us here before -- we say, well, you've got to -- you know, you've got to put more emphasis on kids or you've got to put more emphasis on -- sorry -- on film.
2330 The answer has been, well, no, there is -- you know, as long as you put a certain amount of money into PNI it's cool for now. I mean, that's why we're happy to support this because we're only going to 2016 and we're lifting the lid on all of this stuff.
2331 So when you say, well, you know, can we put a cap on the amount of CPE spent, I guess you can but it's -- we're in the middle of this conflict.
2332 Now, we would love you to say, oh, you know, you should really do more kids, but Rogers doesn't do kids. So we'd love you to say, like, you should be doing more, you know, film. You know, Bell bought the Movie Channel although City used to, right?
2333 So it's -- what is -- I guess the question for us is where is it going to go?
2334 Now, the PNI has to be -- you know, it has to be kids or drama or long form documentary or film. And it will be.
2335 So from the PNI perspective which is probably pretty much the only thing you're going to see a lot of spending on original content, that's still covered. It may have a bias towards a particular genre --
2336 COMMISSIONER SHOAN: M'hmm.
2337 MR. HENNESSY: -- but we're finding that with everybody. That's why, you know, I think that's a fundamental flaw in the GLF.
2338 Although, as I said in the beginning, there is a tradeoff because some of the stuff that the emphasis has been put on is drawing big audiences. And if you don't draw big audiences the whole system may crumble faster.
2339 So do I have a cap number for you? No, I don't have a cap number for you, partially because I think, as Keith Pelley pointed out, it's a two-year licence and they've already bought a lot of shows that, you know, they are pretty much stuck with. So they're not going to be able to spend all their money on hockey to the extent that those shows that they are commissioning are going to disappear.
2340 COMMISSIONER SHOAN: Okay.
2341 MR. HENNESSY: You know it would be a lot -- you know, when we've got more data it'll be a lot easier to figure that out in 2016 along with everybody else.
2342 Because I think -- I think the thing is that what -- Rogers has kind of taken it to a new level, not in some kind of a disingenuous kind of way. They just, well, that's a real different way and they're saying as some conventional TV guys are, you've got to bet more on sports.
2343 COMMISSIONER SHOAN: Right. So --
2344 MR. HENNESSY: You have to say -- I mean, you have to say as the Commission and, you know, Jay said we don't usually talk on local programming but, clearly -- I can't remember if it was Commissioner Molnar raised the point yesterday. It would still be nice to assume that there is money spent on things like news and information and other genres.
2345 COMMISSIONER SHOAN: Right, okay.
2346 And from what I gather from you, you're fine with the commitment to date, 30 percent CPE including Sportsnet 360, 5 percent PNI of which 75 percent goes to independent production, you're fine with?
2347 MR. HENNESSY: So it went up. It's just that -- you know, going up to 30 and 5 kind of brings it much more in line with everything else, so that's very good.
2348 It's just that having -- you know, we're -- I guess it's a couple of decades ago with the Commission when you were trying to figure out costing, having worked for corporations that have to figure out costing for other reasons and, you know, sort of been a student of this, not an actual cost economist or anything but following it, it's very easy to move costs around.
2349 COMMISSIONER SHOAN: Right.
2350 MR. HENNESSY: And so the numbers are great. The numbers are great. The principles are great but it could all disappear.
2351 COMMISSIONER SHOAN: Right.
2352 MR. HENNESSY: Except for the PNI.
2353 COMMISSIONER SHOAN: Except for the PNI.
2354 MR. HENNESSY: Which will be -- you know, it may be a different kind of PNI but, you know, we have a lot of people that know how to make dramas and documentaries.
2355 You know, the subject matter may be different but that's -- if that's what they believe the audience wants, you know, that's kind of a fundamental rule independent producers live under today. Give us stuff that the audience will like.
2356 I don't know if the audience will like as much of it as Keith sort of suggested they were going to go, but that's kind of their experiment, you know?
2357 But I agree with you. You can't have -- you know, if all City became -- for instance was a hockey channel, that wouldn't be a good thing. And I don't think necessarily it would make sense for them either.
2358 COMMISSIONER SHOAN: Well, in the absence of restrictions, Mr. Hennessy, you could conceive of a -- you know, as Mr. Goldstein noted yesterday, hockey programming can be local programming. If it's produced in Toronto for a Toronto station it can be local.
2359 So you could have a substantial amount of local programming encompassed in hockey programming, which goes back to the beginning of this conversation about should there be -- I mean, hockey programming will be CanCon, but should we limit or manage the amount of CPE that goes into the production of professional sports programming?
2360 And I've thrown a few suggestions out there for you but you --
2361 MR. HENNESSY: Yeah.
2362 So I would say, first of all, that the number one thing you can do, right -- and this is critical. You have to in this work you're doing, ensure that there is not an over allocation of costs to the acquisition of the hockey programming. Because that just wipes everything else off the board.
2363 So you can also, I think as a Commission, right, you can say, "Well, you know, historically the CityTV channel has been this kind of a channel and while we recognize you want to put more emphasis on hockey because" -- in fact, they are saying that in part, you know, 20 percent expense of U.S. acquisitions which we can hardly argue against, because it'll drive more revenues into doing the other things.
2364 Perhaps you have to say it, but we still expect that, you know, City has always done a certain amount of local news. It's done a certain amount of X and Y, that that should continue.
2365 I mean that's -- I think you know the issue is for you is are there things in terms of the nature of service that you want to -- beyond the PNI which is protected, so you know the local programming and that type of thing that need to be protected.
2366 Because you know, if there is more hockey -- from our perspective, right, if there is more hockey that is now generating profits into the system as opposed to more U.S. programming that's maybe not such a bad thing because it probably even makes it more identifiably Canadian.
2367 COMMISSIONER SHOAN: Right.
2368 MR. HENNESSY: But if it eats up all the expenditure revenues it's not such a great thing.
2369 COMMISSIONER SHOAN: Right.
2370 MR. HENNESSY: Mr. Chairman, those are my questions. Thank you.
2371 THE CHAIRPERSON: A couple things, Mr. Hennessy and Thomson.
2372 We talked about CPE. We asked for perhaps an adjusted number if you're going to be including sports and you're going to be including the broadcast costs of live sports.
2373 I don't know if you want to -- if you've thought about if there is a way of keeping abuses in the system of happening. Should you simply exclude live sports from CPE as we know it? Is that the only way of ensuring that it doesn't gobble up all of CPE spend?
2374 MR. HENNESSY: I would be very worried if we did that. I know that's sort of like the Bell proposal yesterday.
2375 THE CHAIRPERSON: Right.
2376 MR. HENNESSY: No.
2377 I think that, you know, there are -- right now, when people talk about the future of convention and what is going to keep the channels alive, clearly more live sports is one of those things.
2378 So you know, you could pull out the revenues, you could pull out the expenses of that. I'm not sure, then, what's left for the other stuff.
2379 If everything else is dog and it's -- you know, it's just going in the toilet, then, you know, all you're seeing as a -- as whether, you know, you're doing local programming or independent production like us is a declining number.
2380 THE CHAIRPERSON: I understand. But how do you make sure hockey expenses don't --
2381 MR. HENNESSY: Yeah.
2382 THE CHAIRPERSON: -- don't gobble up the --
2383 MR. HENNESSY: So I would go -- the way I would do it is I start at the historical. What has been the, you know, sort of average rolling cost of hockey over this period of time? What is -- you know, per game, the average per game.
2384 And you know, there are probably different -- different averages when you're selling to a sports channel or you're selling to TVR or anywhere.
2385 THE CHAIRPERSON: Right.
2386 MR. HENNESSY: So what is that? Is that the kind of price that you're going to be charging Citytv and yourselves? Because if they say no, actually, you know, we spent billions more than we'd ever done before and, therefore, we're going to have to charge ourselves double, then I think you get a -- you got to reel it in.
2387 You know, that is the way I would come at it.
2388 I know it's a tough --
2389 THE CHAIRPERSON: How do you reel it in?
2390 MR. HENNESSY: I think you reel it in and you say, look -- I mean, basically, end of the day, right, the deal around CPE and PNI and everything else is that revenues determine -- you know, the percent on the revenues determine the spending number.
2391 THE CHAIRPERSON: Right.
2392 MR. HENNESSY: And then what you by cleans up that number.
2393 So you say we're not going to allow you to spend more than, you know, the historical price of hockey net of any, you know, reasonable inflationary thing you can see outside of your own tent.
2394 THE CHAIRPERSON: Yeah.
2395 MR. HENNESSY: But -- because as long as -- because if you don't, if you don't, then they have full incentive to say, you know, the wireless stuff is nothing, so this was all really just a broadcast deal. We just decided to pay this astronomical number because this all along was just going to be a broadcast thing.
2396 That would be bogus.
2397 THE CHAIRPERSON: You get back into the costing business and how do you -- how do you quantify that and how do you arrive at a number given the increase in the rights, the cost of the rights, and the increase of production costs as well.
2398 It's very difficult to simply --
2399 MR. HENNESSY: No, I know.
2400 THE CHAIRPERSON: -- apply --
2401 MR. HENNESSY: It sucks.
2402 THE CHAIRPERSON: That's one way of putting it.
2403 MR. HENNESSY: No, I've been on both sides of the costing table.
2404 THE CHAIRPERSON: Yeah.
2405 MR. HENNESSY: And it is a nightmare.
2406 But you know, it's not -- like it's not just going to be this proceeding. I mean, we'll be back in 2016. But you know that the wireless guys at Bell and TELUS are going to be knocking on the door. You know that all the other independent broadcasters, independent cable companies are going to be saying, hey, you know, we're being hose here because there's total inflated costs on hockey and, you know -- and it's all going to show up in that hearing in the fall and all the disputes you're going to get.
2407 So it's kind of like I think you gotta do it because I don't know any other way out.
2408 I mean, you can -- you know, when you say the arbitrary -- you can only spend so much on hockey and then they'll say, well, wait a minute, you know, like Bell and these guys are spending X only on that as opposed to spreading it around.
2409 And like we say, I mean, that's a fundamental question about GLF.
2410 THE CHAIRPERSON: Yeah.
2411 MR. HENNESSY: Should there be more of a spread or not. But to say, you know, that Rogers is way off base and everybody else isn't, I think, was their point. It's pretty tricky.
2412 I mean, end of the day, if -- you know, if that's where you end up on an expenditure, that's the only way you can do it, you know, to address the cost issue, then that's the only way you can do it.
2413 THE CHAIRPERSON: Back to PNI for a moment and the idea that the entirety of the five percent PNI spent could be gobbled up by hockumentaries. Hopefully not Gordie Howe stories. Hopefully sort of, you know, boys of hockey stories might be more interesting.
2414 Would your members be troubled by that?
2415 MR. HENNESSY: Well --
2416 THE CHAIRPERSON: Because you know, as is -- as it's set up right now, PNI, you could do all your PNI spend on hockumentaries. I give that as an example.
2417 MR. HENNESSY: The way it's going right now is our members in the film business are already -- in terms of PNI spend are already feeling they've been orphaned.
2418 The kids' programmers feel that they -- you know, as I said, we don't have the numbers, but they're going we feel like we're having our margins squeezed.
2419 And you know, the doc people have always felt they're out of there. Maybe the doc people would be more happy with more docs even if they're sports docs, edgy sports docs.
2420 So it is -- yeah. I mean, it's -- yeah. Like we would love to see more granularity in the PNI. We'd love to have that debate and explore that because we are worried that, you know, serialized drama is the flavour of the day. And I think may be, you know, a critical flavour.
2421 I think that huge amounts of investment in that may actually be, you know, one of the things that decides whether the system is going backward and forward. And if you're doing that, somebody's got to pay.
2422 But I think the -- there is an assumption here that we're operating under right now that as long as it's PNI, the Commission so far as has said that's good enough.
2423 And you know, we've been -- we've taken the position it should perhaps be more granular, so we certainly wouldn't oppose that position right now because we think that's a really, really important debate to have.
2424 It's just in this case --
2425 THE CHAIRPERSON: And we can have that debate partly in the fall and partly in 2016. Is that --
2426 MR. HENNESSY: In the Bell case, and I think Rogers would -- and -- yeah. In the Bell case, Rogers would argue, look, these guys really -- they slide a lot of their money to the drama side because they've got all these things -- channels that help support that and repurpose the stuff over and over again.
2427 They're saying, we got hockey, so we're going to focus more on the emphasis of sports.
2428 In either case, it's not necessarily good for kids or film or most, you know, intelligent documentary. So -- and I think, you know, as a representative of a broad-based trade association, we'd like to see more minimums on that kind of thing.
2429 THE CHAIRPERSON: I got you.
2430 You also referenced a lot of the creative accounting that happens in our industry and any industry, obviously, all of it legal.
2431 But when you look at the anemic increase in revenues as projected by Rogers given that there will be this hockey influx, does that sort of give you the sense is there some creative accounting going on?
2432 MR. HENNESSY: Well --
2433 THE CHAIRPERSON: Because the increases in revenue --
2434 MR. HENNESSY: I would think there is because Rogers is a publicly-traded company, so it has to take great care in terms of how it positions its numbers. So if you're saying that with the addition of hockey, you know, you're going to balance out some of the losses -- that's all it is -- then you kind of go, well, why did you then spend $5.5 billion just to kind of keep that thing afloat.
2435 So I would be very worried about that.
2436 I think there is a -- there is -- it could be true because it could be true, but only if the value of the 5.2 billion, the real value of the 5.2 billion, is over on the other side, particularly the wireless side, which I also have a sense is probably true.
2437 And that -- you know, when you're having those back door meetings, I think that's -- it would be worth checking some of the analysts' reports on that particular subject.
2438 THE CHAIRPERSON: Mr. Hennessy, Mr. Thompson, thank you very much.
2439 MR. HENNESSY: Thank you.
2440 THE CHAIRPERSON: Madam la secrétaire?
2441 So we'll take a break. We'll be back at 10:30.
2442 THE SECRETARY: 10:30, perfect.
2443 THE CHAIRPERSON: Thank you all so much. Bon.
--- Upon recessing at 1021
--- Upon resuming at 1030
2444 THE SECRETARY: Okay. We are now ready to hear the Canadian Cable System Alliance Inc. presentation.
2445 Please introduce yourselves for the record, and go ahead with your presentation.
2446 MR. EDWARDS: Good morning. I am Chris Edwards, Vice-President of Regulatory Affairs for the CCSA. With me today are Jennifer Salmon, CCSA's Vice-President of Contracts, and Gord Corlett, who is Director of Sales and Marketing for Source Cable Limited in Hamilton.
2447 We have two basic recommendations to offer.
2448 First, that the Commission should insist that Rogers accept the VI Policy in the form of binding Conditions of Licence on all Rogers undertakings, as a condition of granting these renewals. And second, that in view of its ongoing review of the fundamental assumptions and structure of broadcasting regulation, the Commission should refrain from granting long-term licence renewals for Rogers' specialty services.
2449 In Regulatory Policy 2011-601, the Commission stated that it had "received sufficient evidence to conclude that there is a potential for abuse of market power" by VI entities. The Commission included Rogers as one of the four VI entities with which it was concerned.
2450 That is, the Commission found as fact that there was a potential for harm to the broadcasting system and Canadian consumers, identified the persons, including Rogers, that have the incentive and ability to create that harm, and set up a system of rules to prevent those entities from creating such harm.
2451 In our dispute resolution with Bell Media before the Commission, the voluntary VI Code was of no assistance.
2452 The Commission now appears to have recognized that a voluntary Code has been insufficient to its purpose. It has required Bell and CORUS to accept many of the VI Code provisions as mandatory Conditions of Licence for their undertakings.
2453 Perhaps more than anyone else, we have to be able to rely on the rules set out in the Code when negotiating with powerful vertically-integrated companies such as Rogers.
2454 In its reply comments in this proceeding, Rogers said that CCSA and its members:
"...have the option to ask the Commission, in accordance with sections 12 to 15 of the Broadcasting Distribution Regulations, to resolve any dispute that might arise regarding the wholesale rate for Sportsnet and Sportsnet One."
2455 That's precisely our point. Based on our experience, if these rules are not mandatory, then they will be of no use in a CRTC dispute resolution proceeding.
2456 The Rogers licence renewal applications give the Commission an opportunity to give real force to its VI Policy at a time when it actually matters, before the deal is concluded and the damage done.
2457 We urge you to seize the present opportunity to ensure that Rogers, like the other VI entities, is bound by the VI Code as mandatory Conditions of Licence and is held to account for its performance of those requirements.
2458 That needs to happen before, not after, the present negotiation is concluded.
2459 MS SALMON: Our second major concern is with the prospect of long-term licence renewals for the sports specialty programming services. We believe the Commission should share that concern.
2460 The Commission's "Conversation with Canadians" and associated regulatory proceedings have the potential to change the most basic assumptions that underlie broadcasting regulation in this country.
2461 In announcing the Commission's intention to start that conversation, the Chair contrasted a completely new approach with a regulatory system that, for decades, meant issuing licences to networks and cable and satellite service providers with certain conditions attached.
2462 In a couple of years' time, will the Commission even have a licensing regime? We simply do not know.
2463 Under those circumstances, we do not see how it makes sense to issue long-term licences.
2464 It is not only the regulatory environment that's changing. We also face uncertainty with respect to the content that Rogers controls.
2465 Rogers' purchase of the NHL content rights means it now controls a significant amount of valuable content. However, we don't know where or how Rogers plans to distribute it.
2466 We do know that Canadian consumers face a real possibility that, for a time, they will pay twice for some of this content. Our contract with TSN, which runs through 2015, included major price increases based partly on the value of TSN's NHL hockey rights at the time the contract was made.
2467 Rogers recently acquired national distribution rights to NHL games. And as Rogers noted in its reply comments, it will include those NHL rights in its Sportsnet rates beginning in September of 2014. The cost to consumers will rise.
2468 We cite that as an example of how quickly this market is changing and how consumers can be hurt by such change.
2469 Sports programming is "must have" content for distributors. And it also has rapidly become the most expensive content that we buy. In the last four years, the fees our members pay for Canadian sports services have risen from $11 to over $24. That's an increase of 116 percent.
2470 However, not all, or even most, consumers are die-hard sports fans. Programmers are buying these additional sports rights with the intention of passing along the costs to a broad base of consumers.
2471 And the simplest way for programmers to pass along those fees is to limit choice, demand highly-penetrated packaging and spread the high value content among many of its services. That increases the costs to most Canadian consumers, and the only winners are the programmers and the die-hard sports fans whose content will be subsidized by a much broader base of BDU customers.
2472 We have no insight into the future plans for these services, and we also face a highly uncertain regulatory environment. We need to protect our customers from this uncertainty to ensure that they have affordable choices, and we need the regulator to be in a position to help us do that.
2473 The consumer will be much better protected with short-term renewals. If it becomes apparent that increasing sports pricing and packaging restrictions are undermining the regulated system, the Commission will be able to intervene more quickly and effectively.
2474 Long-term licence renewals could deprive the Commission of some important tools that it has to respond to these problems, including the licence renewal process itself and the ability to change existing Conditions of Licence before five years of a licence term has expired.
2475 Long-term renewals would freshly lock these services into the very same regulatory pattern we have had for decades. That would increase the risk that the regulated system will simply be bypassed by Canadians, Canadians who, with every passing day, have more and more alternative sources for content.
2476 Short-term renewals, on the other hand, would support the Commission's message that it is serious about enhancing viewer choice and dealing with the issues of rapidly escalating prices and increasing restrictions on packaging flexibility; in short, that its "Conversation With Canadians" is meaningful.
2477 MR. CORLETT: What Jennifer has described is exactly what we are seeing.
2478 I spend one day a week monitoring customers' calls to get a better feel for what they're saying about us and the competition.
2479 Our customers tell us the same things that they are telling you. They are struggling to pay their bills these days and they are looking at ways to reduce their monthly payments. That is leading them to downgrade their TV service or cancel it entirely and look for content elsewhere.
2480 We know that most of those who drop our TV services and move to over-the-top services are non-sports fans. They are leaving because they can get what they want from Netflix without having to pay a cable bill that is driven partly by increasing costs for sports programming.
2481 Source Cable serves roughly 16,000 TV customers in Hamilton. We compete with Bell Fibe and Rogers. Now Netflix has also emerged as a serious competitor.
2482 Today, we have over 2,100 internet-only customers who most likely get their TV from Netflix. In fact, 65 percent of our total internet traffic is now Netflix content.
2483 That's already a lot of people opting out of the regulated broadcasting system.
2484 The trend is going to continue and escalate if programmers are not bound to rules that force them to focus on consumer needs. We need to be in a position to deliver what the consumer wants.
2485 The following is a real life example of the potential for harm if the major programmers are not kept in check.
2486 We are very concerned that Rogers will spread its NHL content, including NHL Centre Ice games, across a number of its linear channels that most of our customers will be required to pay for. As long as the programming services operate within their nature of service definitions, there is really nothing in their licences to limit that tactic.
2487 For example, FX Canada was originally licensed as an "action and adventure" channel with "crime fiction, epic and heroic drama". FX secured a licence amendment that now permits it to exhibit professional sports programming.
2488 Based on press reports, we expect to see some NHL games introduced into the FX Canada schedule. We have no doubt that the wholesale prices we pay for FX will be increased to reflect that high-cost hockey content.
2489 FX Canada is in our "Movies" package. Should our customers who buy that package have to pay for hockey? We don't think so.
2490 If FX Canada becomes a "movies and hockey" channel, will we have to re-package it? Quite possibly.
2491 Would that confuse and annoy our customers? Absolutely.
2492 This is but one example of how these major integrated companies can maximize the value of their sports rights. Such tactics can only drive our customers' bills up even more. And frankly, this is not a time to be giving Canadians fresh reasons to leave our broadcasting system.
2493 MR. EDWARDS: So we've made two recommendations.
2494 First, make the VI Code rules mandatory Conditions of Licence for all Rogers undertakings as soon as possible, and second, do not long grant long-term licence renewals to Rogers' sports specialty services.
2495 Gord mentioned that his main competitors are Bell Fibe and Rogers, the same people who are imposing these contracts on him. The price increases and especially the packaging restrictions that we have been discussing are classic examples of margin squeezing, anti-competitive behaviour that the VI Policy framework was expressly designed to prevent.
2496 It's happening now. Canadian consumers are feeling the pain and voting with their feet. We need those enforceable rules in place.
2497 There is no legal requirement for the Commission to grant long-term licence renewals. Given the profound uncertainty in the regulatory environment and in the rights market for high-value marquee content, we don't see why you would do that. As we see it, that is just adding risk to an already embattled broadcasting system.
2498 Thank you very much for your time and attention. We'll be happy to take your questions.
2499 THE CHAIRPERSON: Thank you very much.
2500 Commissioner Molnar.
2501 COMMISSIONER MOLNAR: Thank you. Good morning.
2502 Just to be clear, you say do not grant long-term licence renewals to Rogers' sports specialty services. What would you propose to be the appropriate licence term?
2503 MR. EDWARDS: Well, certainly we would think no longer than two years.
2504 You know, when we first thought about this, we thought one year administrative renewals would be a good thing, but when we thought about it further, what we really need is those VI Conditions of Licence as enforceable rules.
2505 So it just seems, you know, Rogers yesterday talked themselves about they were shocked at how quickly the industry was changing and that the group licence renewals for two years would give them an opportunity to digest what comes out of the Talk TV conversation, and the license was -- licences would be renewed based on having understood what came out of that.
2506 So short answer to the question, probably a two-year renewal, as long as we had those VI Conditions of Licence, would make sense.
2507 COMMISSIONER MOLNAR: Okay. The VI Code. So you were perhaps listening yesterday to Rogers' remarks where they said:
"There's simply no evidence on the record of this proceeding that we have acted or intend to act in a manner that violates the VI Code or that our past behaviour merits this level of safeguard."
2508 Do you have a response to that comment?
2509 MS SALMON: We do.
2510 First of all, we're looking to future behaviour, is what we're most interested in. But if we were to go to past behaviour, we would go to our last Sportsnet negotiation, which had to be settled through a dispute through the Commission with dispute resolution.
2511 In the end, we were given a final judgment and we were told by Rogers that if we actually abided by the rates that were set out in the final judgment and the rules according -- for bulk pricing that our member companies could not have access to the HD channels.
2512 So that seems to me like it's in clear violation of the VI Policy where they're withholding content, and they are also -- they would also be tying the selling of the two services together.
2513 So that's an example we have from the past.
2514 Going forward, we're most -- we're most concerned about the penetration guarantees. We know that sports programming often come with a lot of penetration guarantees, sometimes over-inflated, and we would hate to see those penetration guarantees going towards new services.
2515 So FX X is launching, or has launched, and it is likely going to come -- we would expect that if it has hockey, that it will come with a penetration guarantee for that service.
2516 Those are the type of things that if we had the Vertical Integration rules, that at least they would be kept in check for what they could ask for for these services.
2517 MR. EDWARDS: I'd just like to go back to the Vertical Integration proceeding as well because, you know, what happened there was an extensive public proceeding, tremendous amount of evidence and, out of that proceeding, the Commission came to a finding of fact and a conclusion that the vertically-integrated enterprises had the incentive and the ability to behave in anti-competitive manners and that rules were needed to address that.
2518 That was really an economic analysis more than anything.
2519 It's not about diversity of voices. The VI Policy wasn't.
2520 I understand that when you looked at the CORUS and Astral transactions that diversity of voices thresholds were a concern, but that's not what the original Vertical Integration Policy was about. It was an assessment of the potential for harm to the system and Canadian consumers. And out of that came a code of conduct.
2521 And our base proposition to you is that the code of conduct really hasn't helped us as smaller players in the industry, and we need it to be enforceable. And it's that simple.
2522 MS SALMON: Really, it just boils down to if Rogers adheres to the code, they have nothing to worry about.
2523 COMMISSIONER MOLNAR: So you've also proposed that it be applied to all services. And I'm sure you're aware that all services are not subject to renewal at this time.
2524 Sportsnet One is not part of the services that are being renewed at this time. Neither is FX. How --
2525 MR. EDWARDS: We do understand that, yes.
2526 We'd look, again, at the Bell Astral transaction, and not all of the Bell licensed undertakings were part of that discussion, either, but the Commission used its influence as part of granting approval in that transaction to have Bell essentially volunteer to undertake those conditions for all of its undertakings.
2527 Again, this goes back to, for us, what the Vertical Integration Policy is about. It's about the fact that the people who own the content, in Rogers' case now some extremely valuable hockey content that we have to have, also own the distributors with whom we're competing.
2528 Bell's main -- or Gord's main competitor in Hamilton is Bell 5. Rogers is right there, too.
2529 And so it's incentive, it's ability, and I guess it's obvious to us.
2530 COMMISSIONER MOLNAR: So what do you see in this proceeding would incent Rogers to volunteer to apply the VI Code to those services that aren't subject to renewal?
2531 You see some hook here?
2532 MR. EDWARDS: The hook is withholding of approval for the licence renewals that they're looking for.
2533 COMMISSIONER MOLNAR: Okay. Just, I guess, one more question.
2534 A lot of what's been talked about here has been, you know, where is the hockey going to show, and they're talking about many platforms, including City.
2535 I assume, for you -- just to confirm that you would see the distribution of hockey on the City stations as a positive for your customers since there are no special rates associated with the conventional television?
2536 MR. EDWARDS: I'm going to let Jennifer have a kick at that and also probably Gord may want to say something, but I would say that our concern is about specialty services, because you're right, those are the ones that we and our customers are paying for.
2537 So we have a concern that if, for instance, hockey is loaded into FX Canada, the next requirement that's going to come along is we will be pushed to agree to minimum penetrations for FX Canada that are higher than we've had before and more customers will end up paying more for that.
2538 So maybe Jennifer, I don't know if you've got anything to add.
2539 MS SALMON: The example I'd want to use -- and to answer your question, City isn't as much of a concern as the specialty channels.
2540 But the reason the specialty channels are a concern -- and Gord can relate to this more -- is when Sportsnet One launched they moved all of the Blue Jays games over to Sportsnet One, which essentially required all cable operators to now launch Sportsnet One.
2541 So it's using tactics like that where you take the highly valuable content and you put it on so it's a must have service, but then what you're doing is you're diluting all of the channels because you're taking this content that's highly valuable but only a portion of it is actually what customers want to watch, and if you take that part and you put it among many services, then they have to get all of the services when they don't want the other 95 percent of the content.
2542 MR. CORLETT: Yes, I agree with those comments. Like, even on City, not all of our customers like hockey or sports and those are the customers that we are losing to Netflix right now. Now, if they had our basic package, you know, the minimum requirement, they would get City, and if you start putting more sports on more of the basic services it's just one more thing that drives them away from cable.
2543 I like hockey, myself, and I would probably pay for it and enjoy all the extra channels, but the majority of our customers are not big sports fans. They like some of the other content from our other 500 channels and it's unfair for them to have to pay for that extra sports, even if it's perceived to be free, on Citytv.
2544 So my feeling is it's not necessarily a good thing for our consumers that the hockey is on Citytv.
2545 COMMISSIONER MOLNAR: Thank you for that. Actually, that's a bit surprising to me, but thank you for that. Those are my questions.
2546 THE CHAIRPERSON: I think the FX, it's 10 percent live sports, and the vast majority of Cat B, it's not that inhabitual -- unusual, sorry, I should say, that Cat B specialties benefit or have that condition of licence or that exception made. Just to sort of make it clear on the FX front, they're not alone. It's not exceptional. Would you agree with me?
2547 MR. EDWARDS: I think that's a fair comment and our concern is more with the strategy of how that hockey is going to be spread across a number of specialties.
2548 THE CHAIRPERSON: It's understood.
2549 MR. EDWARDS: And regardless if it's a Cat B, when we're faced off against the sort of power we're talking about here, we don't necessarily have the choice as to whether that's something we're going to have to do a contract for or not.
2550 THE CHAIRPERSON: Right. No. Understood. Understood. Your position is very, very clear. Thank you very much. Thank you.
2551 Madame la Secrétaire.
2552 MR. EDWARDS: Thank you for your time.
2553 THE SECRETARY: Thank you, Mr. Chairman.
2554 I would now invite Fairchild Television to take place at the presentation table, please.
2555 THE SECRETARY: So, when you're ready, Mr. Chan, I would ask that you please introduce yourselves for the record and you may proceed with your presentation.
2556 MR. CHAN: Good morning, Mr. Vice-Chair, Commissioners and CRTC staff. My name is Joe Chan. I am the President of Fairchild Television Ltd.
2557 Appearing with me, on my right, is Connie Sephton, Fairchild's Director of Corporate Affairs, and to my left, Andrée Wylie, Fairchild's broadcast consultant.
2558 We thank you for the opportunity to appear before you to expand on our written intervention and to answer your questions should you have any. We appear solely in Rogers' applications to renew its OMNI multilingual television stations.
2559 Fairchild is the licensee of two national ethnic Category A services, Fairchild Television, or FTV, in Cantonese, and Talentvision, or TTV, in Mandarin, as well as of two national third-language Category B services, FTV2 and TTV2, in Cantonese and Mandarin, respectively.
2560 All four of Fairchild's services are general interest services. They are distributed by cable and satellite services for a monthly fee in all markets served by an OMNI station.
2561 This is a complex hearing. In the words of the applicant at paragraph 58 of the Supplementary Brief, the Commission is urged to:
"remove much of the regulation that governs [the OMNI stations'] overall programming and scheduling."
2562 The list of requests for amendment is far-reaching and has been the subject of other interventions.
2563 This hearing is rendered even more complex for interveners, particularly for those who have not requested an appearance, by Rogers' eleventh-hour request for a two-year renewal even though its applications for the OMNI stations were for a five-year renewal and were gazetted as such in January.
2564 Fairchild's intervention is simple, however. It respectfully asks the Commission to deny Rogers' request for the deletion of two of the OMNI stations' conditions of licence, namely:
2565 a. That each OMNI station devote no more than 16 percent of its programming to programs in any one foreign language during each broadcast month and, as of yesterday, a cap of 30 percent; and
2566 b. That in any market containing both an OMNI television station and a Citytv television station, no third-language ethnic programming is to be broadcast on both the OMNI and the Citytv television stations, and, as of yesterday, a cap of 10 percent to 15 percent.
2567 MS SEPHTON: A limitation on the amount of Chinese-language programming that any OMNI station is permitted to broadcast is longstanding. It was attached to each OMNI station licensed to Rogers or licensed to a predecessor and purchased by Rogers.
2568 In March 2008, the Commission approved Rogers' application to acquire the assets of CHNM-TV and for a licence to operate CHNM-TV on the same terms and conditions as were attached to the original CHNM-TV licence.
2569 Nevertheless, as early as 2009, Rogers asked that the Commission delete the various conditions of licence with regard to the amount of Chinese-language programming an OMNI station could broadcast.
2570 In its Decision 2009-54, the Commission denied Rogers' request but agreed to harmonize Rogers' regulatory obligation by establishing a uniform limit on the amount of third-language programming any OMNI station could broadcast each month. Thus was born the 16 percent condition of licence.
2571 In Fairchild's respectful view, no greater flexibility is warranted or appropriate.
2572 The duplication condition of licence was determined to be appropriate in the name of programming diversity when Rogers was allowed to own two or more over-the-?air television stations in many markets. It remains appropriate for the same reasons.
2573 With the deletion of this condition of licence, an OMNI station could broadcast, without limitation, a significant amount of hours in the same language on two stations in the same market. Not only would it be detrimental to viewers by limiting diversity, it would be detrimental to Fairchild's competitive interests, who, as a national speciality service, when selling advertising time, has only one, not two, audiences to sell.
2574 Fairchild's concern is exacerbated by the increased flexibility that Rogers would have to significantly increase its broadcast of Chinese-language programming if the Commission were to approve other amendments applied for, particularly:
2575 a. A reduction in Canadian content from 60 percent to 40 percent between 6:00 a.m. and midnight annually, and from 50 percent to 40 percent between 6:00 p.m. and midnight annually; and
2576 b. A reduction from 20 to 10 of the distinct ethnic groups to be served and the distinct languages of ethnic programs broadcast monthly.
2577 Such reductions would provide Rogers with an opportunity to concentrate its programming efforts and resources potentially on Chinese-language programming.
2578 Fairchild notes that currently an OMNI station can devote some 87 hours broadcast per month in a Chinese language, without limitation with regard to how many such hours are broadcast in any particular broadcast week or broadcast day, or as to the time of broadcast, or as to whether the Chinese-language programming broadcast is foreign or Canadian. For the majority of Chinese Canadians who understand both Cantonese and Mandarin, this could amount to some 174 hours per month.
2579 With a 30-percent cap, the OMNI stations could broadcast close to 330 hours of Chinese programming per month.
2580 Although Fairchild has left it to others to address and to the Commission to determine whether Rogers' other requests for amendment are appropriate, we emphasize that even if the Commission denied all of them, Fairchild would remain strongly opposed to any change in the 16 percent and duplication conditions of licence, for the reasons outlined in our written intervention.
2581 MR. CHAN: Rogers supports its requests for amendment to the two conditions of licence opposed by us largely on the basis of competitive pressure, particularly from ethnic Category A services, and on the effect of changing consumer viewer behaviour.
2582 As noted in our intervention, Rogers is hardly the only licensee to meet increased competition and the effect of changing viewing habits. The Commission has licensed and exempted from licensing several Chinese-language specialty services in the past 10 years. Moreover, the Commission has authorized for distribution by BDUs a plethora of foreign services in Cantonese and Mandarin, several of which were sponsored by Rogers and are distributed by Rogers Cable. These services compete with Fairchild for viewers and advertising revenue.
2583 Rogers has indicated, in response to Commission questions, that it has no immediate plans to change the linguistic composition of its third-language programming and has not determined which ethnic group, if any, it would no longer serve. However, in its reply to interventions, Rogers states, at paragraph 47, that:
"The removal of the scheduling restrictions will simply allow OMNI to schedule its programming according to audience demand and not to regulatory imperatives."
2584 The programming flexibility sought is precisely what worries Fairchild. Its effect could be devastating for FTV and TTV. It would allow a multilingual over-the-air television station to avoid serving less well-served ethnic communities and to provide an unlimited amount of programming in a language such as Chinese if such programming is deemed by Rogers to generate more revenues.
2585 Unlike Rogers, Fairchild is an independent broadcaster. Its regulatory requirements are onerous and are in place until 2020. FTV, a specialty service, must broadcast Canadian programs each day, 40 percent of the time between 6:00 p.m. and 11:00 p.m., and TTV, each day, 33 percent of the time between 7:30 p.m. and 10:30 p.m. Both FTV and TTV specialty services are also subject to onerous CPE requirements, 29 percent of the previous year's gross revenues, the highest percentage of all ethnic services.
2586 Should the Commission approve all Rogers' requests for amendment, the OMNI stations, over-the-air stations, would broadcast 40 percent Canadian content between 6:00 a.m. and midnight annually and 40 percent between 6:00 p.m. and midnight annually.
2587 MS SEPHTON: At paragraph 45 of its reply, Rogers has some advice for Fairchild. If the Commission approves the removal of the scheduling restrictions and language caps, it concludes Fairchild, an independent broadcaster, is:
"more than equipped to absorb changes in the market and adjust [its] programming and business model accordingly."
2588 The potential devastating effect that approval of the deletion of the 16 percent and duplication conditions of licence on the OMNI stations, with or without approval of the other amendments requested by Rogers, could make Fairchild's compliance with its current conditions of licence and its continued ability to offer quality general interest service in one language to Chinese Canadians unsustainable.
2589 The OMNI stations were licensed as multilingual stations. In Fairchild's respectful view, they should not be authorized to devote as they see fit more than the amount of programming in any one foreign language deemed appropriate by the Commission for more than a decade.
2590 MR. CHAN: Rogers is now asking the Commission to grant it a two-year term for the OMNI stations, in its view, an appropriate timeframe to test the appropriateness of the amendments applied for. And that, in its view, is justified pending the Commission's review of its Ethnic Policy.
2591 We have reviewed the Commission's Three-Year Plan 2013-2016. At page 6, it is to undertake research and review of its overall Ethnic Policy for television services in 2013-2014.
2592 In 2014-2015, it may undertake a public finding exercise related to its Ethnic Policy.
2593 In 2015-2016, it may undertake a public consultation of its Ethnic Policy.
2594 First, with all due respect, this hearing is not a broadcasting policy hearing, nor is this hearing subsequent to a fact-finding exercise by the Commission.
2595 Moreover, Fairchild cannot imagine how, if Rogers is granted the amendments applied for on the ground that they will be temporary while it tests a new business model for the OMNI stations and pending a review of the Ethnic Policy, which may or not occur, the status quo could then be reverted to, possibly after a number of administrative renewals, even if the Ethnic Policy is eventually modified.
2596 For these reasons, a two-year renewal does not change our opposition to the deletion of the 16 percent and duplication conditions of licence.
2597 We thank you for your attention and will respond as best we can to any questions you may have.
2598 THE CHAIRPERSON: Thank you very much. Your position is also very clear.
2599 I just want to ask you something. In terms of the success of Fairchild, how important is fixed scheduling to Fairchild's line-up? In other words, a simple example. When is the news broadcast on Fairchild?
2600 MR. CHAN: You mean our news broadcasts?
2601 THE CHAIRPERSON: Yes.
2602 MR. CHAN: Normally, our news --
2603 THE CHAIRPERSON: On your stations, sorry.
2604 MR. CHAN: Oh, on the station. Our news is normally during prime time at 7:00 for both our Cantonese FTV and our Mandarin channel TTV. It's always at 7:00 p.m. for one-hour news.
2605 THE CHAIRPERSON: And that hasn't changed for how many years?
2606 MR. CHAN: No.
2607 MS SEPHTON: Never changed.
2608 THE CHAIRPERSON: Forever. Never changed.
2609 MR. CHAN: Never changed.
2610 THE CHAIRPERSON: So Monday to Friday you're going to get your Cantonese and Mandarin news at 7:00 p.m.
2611 MR. CHAN: Yeah. Our view is that we have been -- you know, stick to watching our news during that particular hour.
2612 THE CHAIRPERSON: What would be the reaction, do you think, if you were to change that?
2613 MS SEPHTON: From the viewers' perspective --
2614 THE CHAIRPERSON: Always.
2615 MS SEPHTON: -- I believe that our viewers have established some sort of habit pattern. You know, after they get off work they want to watch the seven o'clock news and we normally receive a lot of comments right after our news broadcast. So we can see that habit still being sustained there.
2616 THE CHAIRPERSON: Right.
2617 You heard and you read the brief that Rogers sent to the Commission, especially as regards OMNI and the difficulties, the financial difficulties they're having.
2618 MR. CHAN: M'hmm.
2619 THE CHAIRPERSON: What would you attribute those difficulties to?
2620 MS SEPHTON: I think to some extent we agree that there is certainly a financial downturn faced by all broadcasters --
2621 THE CHAIRPERSON: M'hmm.
2622 MS SEPHTON: -- probably the big environment. We do have some over-the-top programming available to our viewer base. However, we do not see a constant or very solid influence yet where that habit, you know, has impacted our viewers' viewing habit.
2623 THE CHAIRPERSON: But you are also challenged by over-the-top services, are you not?
2624 MS SEPHTON: Definitely. Yeah, we are.
2625 THE CHAIRPERSON: And you are also challenged by decreases in advertising revenue for the industry as a whole?
2626 MR. CHAN: Yeah, absolutely. For example, for the year 2011 to 2012, which was the last annual return we submitted --
2627 THE CHAIRPERSON: M'hmm.
2628 MR. CHAN: -- our advertising revenue was down 15 percent mainly because -- it's because we have been also sharing the same problem in that case about all these OTT products especially targeting to the Chinese community.
2629 THE CHAIRPERSON: Right.
2630 MR. CHAN: And in the first six months of this current licence term we already have seen 10 percent down in the advertising revenue.
2631 THE CHAIRPERSON: Right.
2632 And how would you respond to Fraser River Community Crematorium and Unifor that suggest allowing the increase per single language to go from 16 to 25 in the case of Fraser River and 16 to 30 in the case of Unifor? How would you respond to that?
2633 MS SEPHTON: Commissioner, we could actually look at what that 30 percent actually means per language. I had a little calculation done after we listened to the audio feed. With the 30 percent of language cap, per language cap, we are ending up having -- Rogers could broadcast 164 hours of that per language programming per month, and if you count it per week, it's about 40 hours per week per language.
2634 And as you may be already aware, Chinese languages include Mandarin and Cantonese, and these two languages are commonly spoken in the Chinese community. So, if we add the two languages together, they could broadcast up to 80 hours of programming per week, Chinese programming per week.
2635 So, going back to the single language of 40 hours maximum, if that combined with a reduction of let's say the 60 percent to 40 percent Canadian content, which means there will be approximately 24 hours of that 40 hours where Rogers could devote that to foreign Chinese programming.
2636 THE CHAIRPERSON: Right.
2637 MS SEPHTON: So, you know, with that amount of foreign language programming, what it means would be they would -- you know, probably whatever cost savings they can do, they can purchase foreign programming and that would drive up the foreign programming that we are after, that we couldn't afford. And, you know, with an over-the-air station being available, doing all that sort of programming, I mean, you know, why would a viewer pay for us, pay to watch us?
2638 THE CHAIRPERSON: Right.
2639 The Mandarin/Cantonese split in Canada, from your experience, would be...?
2640 MS SEPHTON: I would say approximately 50/50 or 60/40 right now.
2641 THE CHAIRPERSON: Sixty...?
2642 MS SEPHTON: Sixty, I would say, Mandarin.
2643 THE CHAIRPERSON: Probably Mandarin, right?
2644 MS SEPHTON: Yes.
2645 THE CHAIRPERSON: Okay.
2646 MR. CHAN: Because in the last five years or so you see more and more new immigrants coming from China, so that is why you see the demographics switch from -- in the past it was more Cantonese speaking then Mandarin --
2647 THE CHAIRPERSON: And now it's more Mandarin speakers.
2648 MR. CHAN: -- and nowadays it's starting to --
2649 THE CHAIRPERSON: The more recent arrivals are Mandarin speaking?
2650 MR. CHAN: Exactly.
2651 THE CHAIRPERSON: Okay. Thank you very much. Thank you very much for the presentation. I think that's all.
2652 MR. CHAN: Oh, Mr. Vice Chair --
2653 THE CHAIRPERSON: Yes...?
2654 MR. CHAN: -- if I may, I would like to add a final -- a little remark, if I may.
2655 THE CHAIRPERSON: Final word, sure.
2656 MR. CHAN: Yes, sure. Because the whole process sort of puzzles us very much, because what we see is on one hand OMNI kept on saying that they are not prepared to do any program switch or adding certain ethnic languages or delete any ethnic languages, but on the other hand they keep on saying they want to have the language cap taken away, especially yesterday I think when they were asked about what is the most important to them, they say the language cap taken away is the most important issue.
2657 That's one thing we don't really get, which we don't understand. What it means to me, you know, if I were them, I would just, you know, get the approval and move ahead, to quote their words, that they will program the schedules according to the audience need and not to the regulator imperative. That means that they will use all their resources and go after money, go after where the revenue is. In this case it is very likely the two Chinese languages be carried, Cantonese and Mandarin, will be their target. So it will have a huge negative impact on us.
2658 So, in closing, my remark is simple; so if OMNI is not planning to make any major shift in programming why are they that insistent in having the cap taken away? That's my concern. So thank you very much for the opportunity to express our concern. Thank you.
2659 THE CHAIRPERSON: Good express, thank you.
2660 MR. CHAN: Thank you.
2661 THE CHAIRPERSON: We appreciate it. Madame la Secrétaire...?
2662 THE SECRETARY: Thank you, Mr. President. I would now invite the Forum for Research and Policy in Communications to take place, please.
2663 THE CHAIRPERSON: You can proceed whenever you are ready.
2664 MS AUER: Thank you, Mr. Chairman. For the record, my name is Monica Auer and I am the Executive Director of the Forum for Research and Policy in Communications. I am joined today by Sjef Frenken, who is a Director of the Forum.
2665 MR. FRENKEN: Thank you for asking our organization to appear.
2666 THE SECRETARY: I'm sorry, can you please turn your mic on. Thank you.
2667 MR. FRENKEN: I had to press a little harder. Thank you for asking us to appear. The Forum was established last fall as a non-profit advocate for the public interest in broadcasting, telecommunications and other types of media. While membership is open to anyone who supports its goals, its primary focus since December has been on research. We focus on data and empirical analysis, because the most defensible public policies are based on quantitative evidence.
2668 Our Executive Director, Monica, brings a unique perspective, having worked at the CRTC on ownership, survey and audience data and analysis and having gone on to become a lawyer dealing with regulatory issues.
2669 MS AUER: Sjef is part of our panel today because of his expertise in broadcasting. Some of you may know that he was part of the CRTC staff for over 20 years. Before joining the Commission, he had already worked for more than a decade at commercial radio stations in Ottawa and Toronto and for CBC Radio and Television here in Ottawa.
2670 Sjef was the CRTC's Chief of Radio, it's Director of Radio Policy, Director of the Industry Policy Planning and Analysis Branch, Director of Research Analysis of the Strategic Planning Directorate and the CRTC's Director of Broadcasting Policy. His work included the development of the CRTC's policies for FM radio, student community and native radio, community and special programming on cable, political broadcasting, the CBC and Canadian content on radio. Sjef also guided the development of the CRTC's policies for ethnic radio and television.
2671 Since retiring from the Commission in the late 1990s, Sjef has lectured as a University of Ottawa professor on new technology in mass media and has also testified before the Copyright Board as an expert witness in radio and pay audio programming services.
2672 Our remarks today will focus on the evidence about OMNI's performance and the circumstances of its licensee. Our recommendations follow.
2673 The Forum analyzed OMNI's program logs for the 2010 and 2013 broadcast years to understand whether and how its programming has changed. These logs are based on a 24-hour day. We filed our results with the Commission on March 27, 2014. They are also available on our website www.frpc.net.
2674 Rogers then filed its own log analysis, but using an 18-hour broadcast date. While it ignored third language news, accessibility, commercial activity and PSAs, which this Forum addressed, its other results are identical or nearly identical to ours, as shown in the table attached to the written copy of our remarks.
2675 In brief, OMNI's logs do not support Rogers' claims. Roger says, for instance, that it has fostered the OMNI station's news and information programming. In fact, between 2010 and 2013 Rogers cut original third language local programs and news by 40 percent or more.
2676 Rogers says that the OMNI station's ethnic programs serve a range of ethnic communities in their coverage areas. In fact, between 2010 and 2013 it reduced original third language local news in four of the five OMNI stations and its Edmonton and Calgary stations stopped originating their own programs. OMNI PSAs dropped by 54 percent.
2677 Rogers said yesterday that OMNI is in a financial crisis. In fact, OMNI carried 13 percent more ads in 2013 than in 2010. Total advertising hours almost doubled. Rogers' conventional local ad sales grew 10 percent between 2010 and 2013 and its conventional TV revenues grew 35 percent. Revenues at Shaw and Bell over the same period fell 23 percent and two percent respectively.
2678 In reality, the crisis claimed by Rogers has to do with profit margins. OMNI's 10 lowest contributing groups and languages do not lose money, but they have a profit margin of only 12 percent. Rogers, therefore, now says that OMNI's survival hinges on regulatory relief.
2679 Since 2009, Rogers spent less than it promised on local news, it cut original third language news, it stopped carrying original content in several languages. It flouted its commitments to local advisory councils, it converted two originating TV stations into rebroads.
2680 When questioned, Rogers says that what happened before is not relevant. Fortunately the courts disagree with this Rob Ford approach to regulation where all past misconduct should be ignored in favour of a distant and shiny future.
2681 The CRTC is not just entitled, but required to evaluate licensee conduct when hearing renewal applications, especially given the hundreds of people who complained about the OMNI cuts just last year.
2682 As Rogers now wants a two-year renewal for OMNI however, a short-term licence will not demonstrate regulatory concern about its performance. The CRTC should therefore, instead, deny the licence amendments Rogers has proposed for OMNI.
2683 First, its plans are too vague to support approval. Second, the plan's benefits for the public have not been demonstrated. Third, Rogers' failure to consult with the ethnic communities it purports to serve and its cuts to OMNI programming should not be rewarded with approval.
2684 The fact is that Parliament ties COLs to each broadcaster's circumstances. The question then is not whether Rogers should do more for OMNI, but how much more to serve the public interest? Last year returns to RCI's shareholders outstripped the TSX and Standard & Poor's composite index by 355 percentage points.
2685 Rogers recently confirmed that programming content like NHL factored into its recent spectrum bidding decisions. In Rogers' converged world, arguments that OMNI must be self-supporting are self-serving. If accepted, every broadcaster will establish stand-alone broadcasting subsidiaries to avoid laws, your policies and COL requirements.
2686 RCI can afford to and should cover the $2 million needed to maintain OMNI's current COLs. Its adjusted operating profits amounted last year to over $13 million a day, or $570,000 per hour over a 24-hour day.
2687 Four hours of RCI operating profits would more than maintain OMNI's third language local news. With eight hours of profits, a whole day, OMNI could reinstate the original local third language news it formerly originated, increase broadcasting employment, make more programming accessible, strengthen democracy with news and enhance multiculturalism in Canada.
2688 Rogers could use the next two years to revise its approach to marketing OMNI and the total net impact on RCI dividends would be negligible.
2689 MR. FRENKEN: To conclude, Mr. Chairman, Rogers wants greater control over its schedule. You should say yes if it has kept its commitment, if its request complies with the Ethnic Broadcasting Policy, if its plans enable OMNI to provide necessary and desirable programming for local ethnic communities, and if approval will meet the goals of Canada's broadcasting and multiculturalism laws, but Rogers request fails on all four counts.
2690 Recommendation 1: Maintain current conditions of licence. OMNI's existing conditions of licence should therefore be maintained.
2691 Recommendation 2: Add a condition of licence for accessible original local news in third languages. At least a quarter of these hours should be accessible to those whose sight or hearing is challenged.
2692 Recommendation 3: Condition of licence for local news gathering resources in Calgary and Edmonton. Rogers should be required to keep its 2009 commitment to OMNI's news in Alberta, which is for seven reporters in Calgary and 13 in Edmonton.
2693 Recommendation 4: Strengthen program choice. These steps will increase choice in original programming for OMNI's audiences, which will also be strengthened by prohibiting OMNI from simulcasting City TV content and from simulcasting or rebroadcasting radio programming.
2694 Recommendation 5: Review the Ethnic Broadcasting Policy in 2014-2015. A two-year renewal will also permit the 15-year-old Ethnic Broadcasting Policy to be reviewed next year so that it meets the needs and demands of Canada's ethnic communities.
2695 In conclusion, very briefly, Mr. Chairman and Commissioners, Rogers' requests to amend its conditions of licence should be denied, not just because it has not made its case for change, but because they are one-sided. Its proposed amendments would obviously serve Rogers' interests, but will they serve the public interest? Will they restore the 788 hours of original third language local news taken from OMNI's schedules? Will they strengthen service to Canada's growing ethnic communities in Toronto, Edmonton, Calgary and Vancouver? Will they move OMNI stations from being a poor cousin of City TV to being a full-service ethnic television service that offers its audience reasonable levels of original local news and other programs?
2696 No. Rogers promised local ethnic communities that it would strengthen the OMNI stations and they supported Rogers. Rogers can do more and Canada's ethnic communities deserve better.
2697 Thank you for your time.
2698 THE CHAIRPERSON: Thank you, sir. Commissioner Shoan...?
2699 COMMISSIONER SHOAN: Good morning. Thank you for being here today. I wanted to review your list of recommendations, those contained in your oral remarks and contrast them against the ones contained in your written submission to ensure that I understand your current point of view in terms of what the recommendations are.
2700 Your first recommendation was to maintain the current condition of licence that was also contained in your written submission. You had asked for, in your written submission to suspend the OMNI Alberta station's ability to sell advertising for six months. Are you maintaining that recommendation?
2701 MS AUER: Yes. We were conscious of the time constraints for the oral remarks. Our original submissions and our written intervention stand.
2702 COMMISSIONER SHOAN: Okay.
2703 MS AUER: We have given you our top six, so to speak, today, though the others are just as important.
2704 COMMISSIONER SHOAN: Okay, great. One further question of clarification with respect to your recommendations. You have asked that each OMNI station should be required to originate at least 14 hours per week of original local news and third languages. The recommendation in your written submission is for 15 hours. Your preference is for...?
2705 MS AUER: Fourteen and a half.
2706 COMMISSIONER SHOAN: Okay, 14 or 15 will suffice.
2707 MS AUER: Fourteen or 15.
2708 COMMISSIONER SHOAN: Okay, great. So on the point of local news or local programming in general, I guess my first question is, if there is a requirement for local programming, is it necessary that it be local news or is it sufficient that it simply be local programming, or can there be a combination of the two?
2709 MS AUER: Well, I think Sjef will want to talk about that as well, but I think my first starting position would be that news is something that every Canadian relies on every day and, although some broadcasters in Canada are moving to a model, or have already moved to a model where they provide, let's say, independent program productions instead of station originated, station produced local programming, I think it's important that Canadians have access to news and information, and so it is also possible that supposing that a condition of licence for third language original hours of station produced news were established, nothing prevents an OMNI station from adding to that and supplementing with exciting, interesting other local programming. Sjef...?
2710 MR. FRENKEN: The issue of local programming is a tricky one and I don't think I have the answer for you.
2711 COMMISSIONER SHOAN: Okay.
2712 MR. FRENKEN: I can confuse the issue a little more.
2713 COMMISSIONER SHOAN: Okay.
2714 MR. FRENKEN: And that is I was thinking here, I first ran into dealing with the CBC, what is local programming? It could be local origination, it could be programming of interest to that specific community, it can also be, let's say, programming produced, not necessarily for that community by a local production team. And there may be other factors, I can't recall them at the moment.
2715 But you can see that there is quite -- three times two, you have at least six possible combinations and the Commission -- I think it would be worthwhile for the Commission to have its staff really think about what local programming means or to devise the necessary terminology to deal with the various concepts.
2716 MS AUER: If I could just add, Commissioner, another aspect of a condition of licence that requires regular station originated local program production is that it provides the local community served with steady and predictable employment opportunities.
2717 As we all know, the Canadian creative sector as a whole as an industrial sector has a large spinoff effect, so a single job created in broadcasting creates several others elsewhere which can help everybody in Canada today I think.
2718 COMMISSIONER SHOAN: Absolutely. So you have asked for a blanket denial of all of the proposed revisions to the conditions of licence for the OMNI stations. I would like to go through them one by one, perhaps so you can articulate on the public record specifically what your concerns are with respect to each proposed revision.
2719 Let's start with the Cancon proposal, to reduce to 40 percent.
2720 MS AUER: I think Sjef will address that as well, but first, I think it offends the Broadcasting Act, which requires a predominantly broad Canadian system. I'm not too sure why ethnic communities should be exposed to broadcasting that is somewhat less Canadian than other conventional over-the-air television services.
2721 Two, I'm not sure that evidence was presented, at least on the record, establishing that a reduction in Canadian content will actually serve either the public interest, in other words, no survey research was presented to show that ethnic communities want less Canadian programming; similarly, I don't recall seeing evidence establishing that OMNI will be able to succeed better financially with less Canadian programming.
2722 Third, I'm not too sure how having less Canadian programming in general strengthens multiculturalism in Canada and strengthens the broadcasting system as a whole. Sjef...?
2723 COMMISSIONER SHOAN: Great, thank you.
2724 MR. FRENKEN: No, I think Monica has answered it better than I could have.
2725 COMMISSIONER SHOAN: Okay, great.
2726 MS AUER: We danced all over it.
2727 COMMISSIONER SHOAN: There you are. Okay. So we have covered off the Cancon request. You have already discussed local programming. Perhaps you could turn your attention to the request for greater flexibility during prime time, between 8:00 p.m. and 10:00 p.m.?
2728 MS AUER: Well, I would again have been curious to see that request supported by empirical evidence demonstrating, for instance, that Canada, the audiences of OMNI, either actual or prospective, would welcome more non-ethnic broadcasting between 8:00 and 10:00 p.m. on an ethnic television station.
2729 I think another serious concern has to be with other existing ethnic broadcasters who were licensed at a time when they had the certainty of understanding what Rogers' position would be as required by conditions of licence. So I think it confuses the market unnecessarily at a time when local advertising and other types of advertising are already placed at some risk, according to the broadcasters.
2730 COMMISSIONER SHOAN: Okay. I believe your submission has indicated, in so many words, that Rogers' financial crises are somewhat overstated, but as a general statement, would you agree or disagree with the statement that conventional broadcasting in Canada is being challenged today and it's being challenged due to the fact that there are a multitude of sources today for Canadians -- from which Canadians can derive programming or consume programming?
2731 Canadians seem to be moving more and more to the online world and less so to the online free-to-air world. Rogers, in its Phase 1 submission, noted that traditionally the OMNI stations have derived most of their revenue from U.S. strip programming and that that amount has fallen in recent years, but it has always been the predominant share of -- the lion's share of the revenues for the OMNI stations and that in this brave new world, with increased competition from a multitude of platforms, flexibility is a must.
2732 So in terms of the challenges for the industry writ large, do you have any perspectives on that?
2733 MS AUER: Well, I think the entire industry should be glad that the Commission exists to try to ensure its survival through the different policies that the Commission is able to adapt under the Act.
2734 Second, I thought Michael Hennessy made a very good point about how, although a balance sheet looks very fixed when you see it, costs can move from one place to the other depending on one's perspective. So certainty about what is actually being said doesn't exist as a rule, I think, just because of the flexibility in that process.
2735 A secondary problem is that even if the data are valid and reliable, it's very difficult for public groups to challenge any of the data because none of the station-by-station data are published. It has never been clear to me why that is, especially considering that specialty service revenues are published for individual services. And, since we can't actually evaluate or review the individual station's financial position, nobody can say whether in fact the cost allocations are appropriate, whether revenues are being properly reflected, for instance.
2736 I think concerns have already been addressed about the degree to which revenues for mobile and conventional sources are being completely improperly allocated the way the Commission would find it beneficial when it wants to enforce the Act.
2737 I think another problem of course is that Canada's largest broadcasters are converged and so they are benefiting in a number of ways from content on their mobile devices. I'm not too sure how that is being reflected and captured.
2738 As for whether or not Rogers is able to handle -- Rogers itself is able to handle the challenges of today's marketing, I don't forget and I'm sure nobody else does, that Rogers has been in this business a very long time. I have absolute trust in its officers and management's capacity to move with the times and adapt to new circumstances.
2739 I noticed for instance that Marketing Magazine reported last November that Rogers signed a request for proposals to look at its national English language and French language advertising, and I'm wondering whether it has already done the same for its ethnic television marketing and, if it hasn't, perhaps that's something it wants to consider.
2740 I also noticed that Environics did a presentation to a number of people last year in August where it mentioned the success of Bell TV in reaching out to ethnic communities. Well, I know that if Bell can do it, Rogers can do it.
2741 So I have absolute faith that Rogers can meet your expectations if the expectations are set out clearly.
2742 COMMISSIONER SHOAN: Great. Do you have anything to add, Mr. Frenken?
2743 MR. FRENKEN: Yes. You saw my finger hovering. Two things. First of all, change is a matter of nature and if you -- well, this was way before your time, at the introduction of television, radio was going to disappear, a major problem, and then I don't know, FM radio was going to take over. I remember broadcasters coming and begging at the Commission, "My God, do you see this thing, a Walkman. That is going to revolutionize AM radio." You know, you always have change.
2744 COMMISSIONER SHOAN: Today we get the Netflix is going to kill everybody.
2745 MR. FRENKEN: Oh, it's all kinds of -- it's panic. But I will tell you something, if you go back through -- have one of your staff go through the record, you know, there are always broadcasters coming in and saying, "Look, we will do this and we will subsidize it, okay. Just give us the licence, we will subsidize. We have some money here and we can afford to keep this thing going." As soon as they have the licence they say, "Oh, that thing has got to stand on its own feet, okay."
2746 So this whole benefit of having ownership of more than one medium at your disposal, or station or licence at your disposal, the logic somehow keeps falling off so that ultimately everything is supposed to go for maximum content. It's the nature of the beast, that is commercial radio, commercial enterprise and broadcasting.
2747 So don't be too terrified by peoples crying the end of the world is near. Thank you.
2748 COMMISSIONER SHOAN: Thank you. Those are my questions. I wanted you to know I read your intervention cover to cover with interest. I very much appreciated its comprehensive nature and your efforts to do a comprehensive review of the OMNI logs and provide some hard data on the record. So thank you for that.
2749 MS AUER: Our pleasure.
2750 THE CHAIRPERSON: Thank you, Commissioner Shoan. Just briefly back to line 48 of your document when you talk about Rogers promising local ethnic communities that it would strengthen the OMNI stations, are you referring back to 2008-2009, because everything else has a reference right next to it in your document?
2751 MS AUER: I didn't know if people would get tired of the little boxes.
2752 THE CHAIRPERSON: No, no, I like them.
2753 MS AUER: Actually I am going back further.
2754 THE CHAIRPERSON: I would rather have the side notes than the footnotes.
2755 MS AUER: Footnotes are so small --
2756 THE CHAIRPERSON: But go on. Right.
2757 MS AUER: -- but you can get so many of them on the page, that's why I like them. In any event, I was going to say that Rogers has made a number of commitments I think, you know, going back to the earliest days when it actually began its first investments with Mr. Iannuzzi and CFMT when it acquired CHNM, in particular, when it asked for the licences for Calgary and Edmonton. It has promised it every time that the stations would be supported and broadcasters actually -- you know, I think that broadcasters when they are dealing in these kinds of proceedings they do go out and they meet with community members and they ask community members what the community members would like and then they seek community members' support. That would be reasonable to expect that, and I think community members then expect that to some extent those commitments will be met.
2758 And unfortunately, the Act does not allow you to sanction non-compliance with expectations or non-compliance with commitments or non-compliance with performances, the only sanction you have under the Act is a breach of the Regs or a breach of the condition of licence.
2759 Or, I once tried to get the Commission to expand the concept of terms to include commitments and expectations, I wasn't entirely successful; I tried.
2760 THE CHAIRPERSON: It's hard to get a handshake into a condition of licence, but that being said, I also read your document, I thought it was really, really well done and I'm going to put myself out on a ledge and put a little interpretation into what I have read.
2761 My sense was that your feeling is that especially on the OMNI side of the ledger that Rogers, as a proud Canadian company, has somewhat let down the clientele they had committed to serve, not to call them an afterthought, but almost sort of a means to an end. I mean, if I'm wrong, tell me I'm wrong; and if I'm reading more into what you wrote than what you wrote, tell me.
2762 MS AUER: I guess my first starting point would be that, as I said before, I think the broadcasting sector is indebted to Parliament for having established the Commission to balance the needs of all the different stakeholders. Licensees are clearly a critical stakeholder in our broadcasting system, but the public and the audience served by licensees are equally important.
2763 The catch of course is that corporations, you know, whether they are privately held, whether they are publicly traded, their first duty is to their shareholders and owners, their first duty is not to their audience, it is not to the general public, it is not to people like me, it is not to widows and orphans -- we could all go on -- the fact is, they have a legal duty to serve the interests of their owners, and at times I think I clearly heard the reluctance of some of the officers of Rogers yesterday when they said, you know, we just had to make the cuts.
2764 True, they may believe they had to make the cuts, but I thought it was very striking that a number of the least -- it seemed to me the least popular ethnic television programming were still making an operating margin of 12 percent. I would like to make that in my bank account. I don't get that on a daily basis, monthly, I don't get it at all. I'm thinking 12 percent is not bad, it tells me that there is money to be made.
2765 I think it really is open to the Commission to allow Rogers to succeed at what it promised to do, which is to serve communities in Toronto, Vancouver, Edmonton and Calgary. To serve with ethnic programming as it promised to do, it seems to me the data and the evidence suggests that original programming in third languages has dropped, it has disappeared in some cases. I mean, I like listening to the same radio music over and over again because I have a very poor memory, but I don't like watching the same cooking show year-in/year-out, because after maybe their third or fourth time, or the sixth time I actually have picked it up and I don't need to watch it.
2766 THE CHAIRPERSON: You have memorized the recipe. Great. Thank you very much. I think that's all in terms of the Panel. We thank you very much for your time.
2767 MS AUER: Thank you so much.
2768 THE CHAIRPERSON: Again, a very thoughtful document. Thank you.
2769 MS AUER: Thank you.
2770 LE PRÉSIDENT : Madame la Secrétaire.
2771 THE SECRETARY: Thank you very much. I would now invite TELUS Communications Company to take place, please.
2772 THE CHAIRPERSON: Whenever you are ready.
2773 MME MAINVILLE-NEESON : Merci, Monsieur le Président.
2774 Good morning, Mr. Vice-Chairman, Commissioners. My name is Ann Mainville-Neeson and I am Vice-President, Broadcasting Policy and Regulatory Affairs at TELUS. With me today is Dan Page, Director, Content Programming and Acquisitions.
2775 Thank you very much for providing TELUS with this opportunity to further expand on our concerns relating to the incentive and opportunity for anti-competitive conduct which arises from vertical integration. We are particularly pleased for your attention, given that I think we stand between you and lunch, and so thank you very much for your attention.
2776 Rogers is a vertically integrated broadcasting company which has just brought together an unprecedented set of NHL hockey rights with over $3 billion worth of prime national wireless spectrum. These two facts alone should make clear the potential for anti-competitive conduct.
2777 TELUS is concerned that absent additional safeguards adopted as part of this licence renewal proceeding, Rogers will transfer the cost of these expensive acquisitions to its distribution and carrier competitors and ultimately to consumers.
2778 Yesterday, Rogers continued to attempt to downplay the vertical integration concerns raised by some parties in this proceeding, indicating that their overall viewership share is much smaller than Bell/Astral or Shaw/Corus and arguing that imposing the same safeguards on Rogers as imposed on the VI counterparts would be tantamount to a change in policy. That is simply incorrect.
2779 As the Commission made very clear in the VI framework decision, and in subsequent decisions, viewership share is but one indicator of many to assess competitiveness in the market. In this case, the combination of highly concentrated programming investments in NHL content and the broad wireless spectrum controlled by Rogers is perhaps even more disconcerting from a vertical integration perspective than a large viewership share which is spread across multiples genres of programming.
2780 Rogers has essentially "doubled-down" on hockey. The recent $5.2 billion NHL deal for multi-platform rights for all national NHL hockey games and content derived from those games is the culmination of Rogers' hockey-centric strategy. Arguably, Rogers now controls all the access to hockey by consumers in Canada, no matter the service, platform or device.
2781 This is particularly disconcerting because access to NHL content is a "must have" for TV distributors given the popularity of hockey in Canada. It's our golden game.
2782 While other programming genres are increasingly at risk of being commoditized by new over-the-top viewing options, live sports have yet to be subject to the same forces. Accordingly, it should be clear that Rogers has put itself in a very powerful position regarding the wholesale distribution of its specialty programming services; a position of power that is more than sufficient to warrant regulatory parity and that Rogers be subject to the same safeguards as were imposed on the other VI companies.
2783 TELUS notes that the tone of negotiations with Rogers changed when the NHL deal was announced. TELUS now finds itself out of contract for a number of services. In contrast to the statements made yesterday by Ms Wheeler and Mr. Pelley, we have some concerns because we have yet to see the future terms for the services in question and what they will look like. Not surprisingly, we would like some certainty regarding these services and the implications for our customers, especially given the big plans Rogers alluded to in its opening statements and in media interviews.
2784 But of even greater concern to TELUS is the fact that Rogers not only holds the rights to televised sports programming, it also holds the most significant multi-platform rights for sports programming in Canada. The NHL rights acquired by Rogers are unprecedented in scope. In interviews following the announcement of this major deal, Mr. Pelley stated that:
"This is a deal that you can't compare to any other deal based on the fact that it is a multi-platform rights deal and we are in an era of gargantuan change as tech changes almost daily." (As read)
2785 Despite the fact that Rogers must offer linear content to its competitors, Mr. Pelley said that the deal will give Rogers an advantage, stating:
"First of all, you control them, you can package them in many different ways, package them in six or seven different ways and charge six or seven different packages.... It puts you in the driver's seat when you control all platforms..." (As read)
2786 This was reported in the Financial Post. He also stated in the same article that:
"With exclusive rights across all platforms, we believe this agreement can also meaningfully advance the company's multi-platform strategy..." (As read)
2787 Adding that it will have:
"... spillover benefits for the cable and wireless segments in what is to become an era of increased cord-shaving and cord-cutting." (As read)
2788 The concern that this raises is that Rogers may start to promote its non-TV platforms by using some of these rights to create programming over which it can give itself a distribution exclusive under the current rules.
2789 Rogers recently spent a record $3.29 billion on 700 MHz spectrum to allow it to deliver the "ultimate video experience to its customers." In light of the content and spectrum acquisitions by Rogers, coupled with the comments of their executive team, it is a reasonable concern that Rogers will seek to leverage programming exclusives to drive consumer uptake for its mobile services.
2790 In its 2011 Vertical Integration Framework the Commission ruled exclusivity may be offered for programs that are created specifically for new media platforms. While the Commission considered at that time that programming not produced or intended for television was marginal and that lack of access to this content was not likely to cause any significant anti-competitive concerns, things have changed considerably since then.
2791 Consumer demand for programming never broadcast on traditional TV has skyrocketed. Digital media services are producing expensive blockbuster series and are getting big audiences. The success of Netflix' "House of Cards" starring Kevin Spacey, is the much touted example, but there are many more.
2792 In the sports genre, it's easy to see how ancillary programming, a.k.a. non-TV programming, could be highly sought after by fans, especially if promoted on all of Rogers' TV programming services, thereby removing the discovery barrier to which others are sometimes subject with respect to made-for-digital media content.
2793 Bell Media has already known some success with their ancillary programming created with respect to the Montreal Canadiens, and Rogers will undoubtedly follow suit not only with its newly acquired NHL rights, but also the Major League Baseball and other sports programming that they own.
2794 There is substantial economic incentive for Rogers to seek and to recover the costs of acquisition of expensive rights and spectrum through unreasonable increases in wholesale rates for its licensed programming services or through exclusives which will take away choice from consumers. Either way, our concern is that consumers will end up paying more.
2795 Therefore, and finally, TELUS submits that the Commission must protect consumers against this potential anti-competitive conduct and therefore must:
2796 At a minimum, impose the same conditions of licence on Rogers' broadcasting undertakings as were imposed as a condition of approval of Bell's acquisition of Astral;
2797 Second, to provide only a two-year renewal for the Rogers' sports services in order to provide an opportunity to assess the full impact of Rogers' NHL deal; and
2798 Finally, we would really like to see a strong expectation put on Rogers that it will not use programming exclusives to promote adoption of its digital media and distribution platforms.
2799 We also suggest that the Commission should launch a policy proceeding in the near future to examine the Digital Media Exemption Order in order to protect distributors against the withholding of ancillary, non-TV content by Rogers and other vertically integrated companies and we hope to see that perhaps as part of the TV Framework Review.
2800 Nous remercions le Conseil de nous avoir permis de participer à cette instance et nous serons maintenant heureux de répondre à vos questions.
2801 LE PRÉSIDENT : Merci, Madame Mainville. Ce sera monsieur le conseiller Shoan qui aura sans doute quelques précisions à vous demander. Merci.
2802 COMMISSIONER SHOAN: Good morning. Thank you for being here today. With respect to the wish to re-examine the Digital Media Exemption Order, obviously that is, as you mentioned, something probably best discussed in the context of the TV Policy Review that will be happening this year, but we take your point on that.
2803 I read your submission, I think it is very clear with respect to what your main point is. Would you like to make any statements on the record with respect to the specifics of the Rogers' application for its OMNI stations or its City stations, or are you specifically focused on the vertical integration issue?
2804 MS MAINVILLE-NEESON: Yes. We have limited our comments to vertical integration because, you know, we are independent, we don't own any programming services and so, you know, we believe that Rogers and other broadcasters will make their points.
2805 COMMISSIONER SHOAN: Okay, great. Well, as I said, your submission was very, very clear, I think we understand it. I don't think I have any further questions, Mr. Chairman.
2806 THE CHAIRPERSON: Thank you, Commissioner. Madam Mainville, he did a pretty good impression of Mr. Pelley. Maybe put a little more meat on your interpretation of the statement, I think it is your first quote here, the first citation:
"This is a deal that you can't compare to any other deal ... multi-platform rights deal and we are in an era of gargantuan change as tech changes almost daily." (As read)
2807 And then the packaging. Do you want to elaborate on those sort of two quotes that you put forward and what that means to you, how you interpret those statements?
2808 MS MAINVILLE-NEESON: I think Mr. Page is in the best position to answer that.
2809 THE CHAIRPERSON: Very well.
2810 MR. PAGE: Obviously there is a potential for them to leverage this opportunity by what we have heard in the past from others, is placing this content on other channels where potentially as an example FX was given before, where we are expecting a type of programming and now they are able to leverage that with adding sports onto FX, which generally FX wasn't sold to us in that manner, so that it's --
2811 THE CHAIRPERSON: It's still not really sold to you in that manner, there is a 10 percent window.
2812 MR. PAGE: That's correct.
2813 THE CHAIRPERSON: But Global and CTV speciality services also have that proviso. So that's not that different, I mean, and they do have sports rights.
2814 MR. PAGE: Correct.
2815 THE CHAIRPERSON: I understand it's not hockey, I understand it's not, you know, the $5 billion deal.
2816 MR. PAGE: Correct. And I think we would all agree that FX as a service, as a big U.S. brand, you know, that brand isn't known as a sports network, it's known as a general entertainment service. So that would be new to that brand.
2817 THE CHAIRPERSON: Okay.
2818 MR. PAGE: So that would be of great concern, but as well as being able to package it in many different ways, they will be seeking more money from those other services, thus potentially harming our customers and making us increase the price and diluting margin on our service.
2819 THE CHAIRPERSON: Can you give us some examples? I mean, we heard from CCSA earlier. What kind of packaging is of concern to you, besides sort of adding FX to Sportsnet or asking for --
2820 MR. PAGE: Well, the potential to -- if in general service changes and doesn't fit in with a certain package, we would have to move it. We are very different than most other BDUs as we enjoy flexible packaging, which I believe you are all very familiar with. So with that we have very, very specific packages. If the service doesn't fit a certain genre, then we would have to move that to a different package impacting the customers.
2821 THE CHAIRPERSON: Okay.
2822 MS MAINVILLE-NEESON: May I add?
2823 THE CHAIRPERSON: Sure.
2824 MS MAINVILLE-NEESON: One of the things that is of concern of course is that, as we mentioned, we are out of contract with a lot of these services and many of these services one would think should not be impacted by this NHL deal and, you know, I believe that we were somewhat close to finalizing agreements on them and now we haven't been able to finalize those agreements.
2825 To the extent that that means we have some retroactivity that is of concern to us, and we are in a situation where we are unable to make those packaging decisions, if it means that a service is going to be significantly more expensive for our consumers, maybe we transfer them to a different package, and we are not able to do that at this point because we have absolutely no certainty.
2826 So that's one of the reasons why those additional safeguards -- it's not merely taking the VI Code and putting it into conditions of licence, I do hope that the Commission views the Code of Conduct as being enforceable whether or not it's part of conditions of licence. However, there were additional safeguards that were added in the Bell/Astral deal and one of them was the obligation to ensure that contracts are renewed prior to their expiry. That's not what's happening here.
2827 So those are the types of things that we think should be adjusted and there is absolutely no reason why Rogers shouldn't be subject to that same -- those same conditions.
2828 THE CHAIRPERSON: What was allowed for in the Bell/Astral deal was the right to come to the Commission 90 or 120 days prior to the end of a contract term if you could not come to an agreement.
2829 MS MAINVILLE-NEESON: That's right, if you couldn't come to an agreement. However, the point is, if they haven't renewed --
2830 THE CHAIRPERSON: Right.
2831 MS MAINVILLE-NEESON: -- we can come to the Commission and --
2832 THE CHAIRPERSON: That creates a certainty for you at this point --
2833 MS MAINVILLE-NEESON: Certainly.
2834 THE CHAIRPERSON: -- even though you do have other avenues and there are other fora that you can call upon the Commission to help with those negotiations.
2835 MS MAINVILLE-NEESON: Certainly, because I certainly do not believe we are anywhere near requiring dispute resolution, but we would like to have progress in negotiations and I believe that those additional conditions of licence, those additional safeguards that were put on before do have -- do create that imperative to negotiate prior to expiry.
2836 THE CHAIRPERSON: Noted. Getting back to the VI provisions, I don't think the VI provisions as it regards ancillary programming, as you call it, a.k.a. non-TV programming, or non-TV first programming, I don't think it was meant to address Netflix, but it was meant to address sports-related programming that if it was available -- if it was created for the digital world that there would be an exception and there could be some exclusivity as it regards that.
2837 Are you calling into question the entire aspect of that VI Decision? Is it my understanding that you no longer like -- you no longer want broadcasters or creators of content to have the possibility of creating content specifically to be viewed first on a non-linear platform?
2838 MS MAINVILLE-NEESON: No. No, absolutely not.
2839 THE CHAIRPERSON: No.
2840 MS MAINVILLE-NEESON: So this provision with respect to ancillary content was in the Digital Media Exemption Order, it wasn't actually part of the VI Decision, it was part of the Exemption Order and essentially at that time -- right, we are going back to 2009 and things have changed significantly since then, at that time whatever was created simply for digital media platform often did not get that many viewers.
2841 Since then you do have things that are made for the digital media platform that can garner huge audiences. You know, House of Cards is an example but there are many, many more.
2842 When you have a vertically-integrated company that's able to leverage its own -- its traditional TV platform to market things that are available on its digital media platforms that creates an audience potential that can really create a difference with respect to having that exclusive and not other distributors who don't have access to that content.
2843 So I think things have changed significantly at that time. Ancillary programming was not "must have". Now it could be, especially with respect to sports. And I don't think sports programming was really ever considered as part of that digital media exemption or at that time.
2844 THE CHAIRPERSON: It was considered under VI. But we re-examined that issue.
2845 So you would like an end to that? I mean, that's part of your ask today?
2846 MS MAINVILLE-NEESON: I think definitely.
2847 I think that some of that ancillary programming needs to be made available to other distributors. Otherwise, you will end up with some carriers who are able to leverage significant programming to drive consumers to a single carrier.
2848 THE CHAIRPERSON: In the same way that linear programming should be available to all?
2849 MS MAINVILLE-NEESON: That's right.
2850 THE CHAIRPERSON: Interesting, okay.
2851 We thank you very much for your participation in this hearing.
2852 Madame la Présidente... Madame la Secrétaire, devrais-je dire.
2853 LA SECRÉTAIRE : Merci pour le « upgrade », Monsieur le Président.
2854 We have now --
2855 THE CHAIRPERSON: We could co-preside this hearing.
2856 THE SECRETARY: We have one more intervener before lunch by Skype, Dr. Cheema.
2857 Are you -- he should be appearing on the screen pretty soon.
2858 Oh, Mr. Chairman, we need five minutes. We have a technical problem.
2859 THE CHAIRPERSON: Okay. Or we can do it after lunch, if you like, or we can do it in five minutes as you wish.
2860 LE PRÉSIDENT : Il est déjà là. O.K. On peut attendre deux minutes.
2861 THE SECRETARY: Okay. I think it will work.
2862 THE CHAIRPERSON: No problem. And this is...?
2863 THE SECRETARY: It is Mr. Gulzar Cheema.
2864 THE CHAIRPERSON: Merci.
2865 THE CHAIRPERSON: So Mr. Cheema, can you hear us?
2866 DR. CHEEMA: Yes, I can.
2867 THE CHAIRPERSON: As can we. Please proceed as soon as you are ready.
2868 DR. CHEEMA: Thank you. Thank you for giving me the opportunity to speak to you as an intervener for the OMNI TV application.
2869 Let me give you my brief background.
2870 I was elected in B.C. in May 2001 to represent the riding of Surrey-Panorama Ridge. On June 5th I was appointed as a Minister of -- as a member of the Executive Council for the Government of B.C. as the Minister of State for Mental Health.
2871 On January 26, 2004 I was appointed as a Minister of State for Immigration and Multicultural Services.
2872 I was also a member of the Legislative Assembly in Manitoba for five years.
2873 At present I own my my own family practice. I am also a clinical instructor for the Department of Family Practice (UBC) and a Medical Director of South Asian Division of iCON project.
2874 I am also doing regular health programs for public awareness on OMNI Channel and many other radio stations, including Sher-E-Punjab.
2875 As I stated in my earlier letter, I have had a very close relationship with OMNI News Punjabi Edition based in Vancouver since 2007.
2876 After stepping aside from a long political career, I turned my focus again to my family medical practice and also creating greater awareness around public health issues specific to the Punjabi community.
2877 The best way to reach our community is through the various radio stations and the talk show hosts and through TV. But without any doubt, the best way to capture a majority of the South Asian community, who primarily speak Punjabi language, is through OMNI News Punjabi Edition.
2878 With the support of OMNI News Manager, Bhupinder Hundal, and Punjabi News Producer, Nathen Sekhon, we started a weekly segment every Wednesday where I come to the OMNI studios to discuss relevant health issues affecting the South Asian community.
2879 I work as a volunteer. This segment in Punjabi News has broadcast over 1,800 hours of airtime to public health awareness in the community. As of 2007 I have not missed a single program. My time is fulltime volunteer and I don't charge any cent to any program.
2880 We are certainly making a major difference in public health. For example, the South Asian community is at a higher risk of diabetes and cardiovascular diseases as compared to the general Canadian population. Together, we have done a lot of work on educating our community about healthier food and lifestyle options.
2881 I have started to see some of the changes in people's mindset as the community is starting to become more and more conscious. This is a major improvement from where we began our program on OMNI.
2882 OMNI News Punjabi Edition is an important institution in our community. Watching Punjabi News at 9:00 p.m. is part of the daily routine. It is just not another TV program.
2883 OMNI is the number one watched and trusted source of information. OMNI News Punjabi Edition is watched by the majority of the community in Metro Vancouver and surrounding areas.
2884 According to the 2011 Census, there are approximately 170,000 Punjabi speakers in Metro Vancouver, Fraser Valley and Vancouver Island. As I have mentioned, the majority of the community is watching OMNI News, Punjabi Edition. I don't know if anyone has done proper research, but from my perspective, I can confidently say over 100,000 people watch this news at 9:00 p.m.
2885 So why are people watching Punjabi News in large numbers?
2886 Number one, first, OMNI is the most professional in the community. Their presentation is of the highest quality and this is a major attraction for the community.
2887 Secondly, they are also the only ones presenting the news on TV with a Canadian focus in Punjabi. They are covering what is happening in our community, what is happening in B.C., across Canada and back home in Punjab and India. They also give lots of attention to our most important celebrations, such as Vaisakhi, Diwali, and Lohri. They are also providing a very unique service that the mainstream stations or the other Punjabi stations are not offering.
2888 Third, they have very good leaders and staff who know and understand the community. They also have people who have different backgrounds. There are a number of staff members who have immigrated here from India and staff members who were born and raised in Canada. They are all working together.
2889 I spend a majority of my on-air time with anchor, Jasdip Wahla, who is an incredible professional journalist. Reporters Dilbar Kang, Prabhjot Kahlon and Baldeep Jhand are also doing a great job reporting on big issues in the community.
2890 But Punjabi News also gives voices to our young people in the community through its arts and entertainment segment with Tarannum Thind and sports with Surinder Chahal. They profile many of our young people in the community.
2891 But I think the most important people have been OMNI News Manager, Bhupinder Hundal and Producer, Nathen Sekhon. These are two people who are Canadian-born, raised in Canada and throughout their leadership Punjabi News continues to do a better and better job.
2892 These two individuals are the people who I deal with regularly in my relationship with OMNI. I know them to be passionate about their work and care they provide to this community. They are always trying to find ways to do a better job for the community and that is why the community supports them so strongly.
2893 The entire team has their pulse on the community and reflect the community in their program.
2894 OMNI News, Punjabi Edition is a major influencer in our community and that's why every major political party, federally and provincially, pay close attention to this newscast.
2895 As I have stated that I was an elected MLA in Manitoba and B.C., I am still connected to many people in the provincial and federal political process. It is critical for all political parties to pay attention and connect with OMNI News, Punjabi Edition.
2896 This is especially important for federal parties since Punjabi News started covering Ontario and Alberta as well in 2011 elections.
2897 Punjabi News is accessible to over 90 percent of the Punjabi community living in Canada for free with room to grow and reach audiences in Manitoba and Greater Montreal.
2898 I am here today to support OMNI News, Punjabi Edition and demonstrate how important this program is to the Punjabi community in B.C. and across Canada. In my view, this is in the best interest of Rogers, the CRTC, and the community to assist in protecting, nurturing and growing this service.
2899 I applaud Rogers and OMNI for supporting the Punjabi community through the Punjabi News for many years. Their work has and can be seen by the community and many businesses in the community are also supporting the news through their advertising.
2900 However, I am concerned about the Rogers request to delete the condition of license for 100 percent ethnic programming between eight and ten. This could directly affect the Punjabi News program at 9:00 p.m. in B.C. I am unclear what are the reasoning but I think the community is supporting this program very strongly.
2901 I would strongly advise all involved not to interrupt this service as this will be a great negative impact from the South Asian community that will hurt OMNI and Rogers in the long run.
2902 I can provide you an example from 2007. At that time OMNI was M-channel. The management of the M-channel decided to change the Punjabi News time from 9:30 to 10:00 p.m. There was angry feedback from the community as the news time was too late for many. I know many people stopped watching the news and businesses in the community started advertising less.
2903 I also know that the professional experience -- what the feedback I was receiving to my health segments when the news was on at 10 p.m. as compared to the present time of 9 p.m.
2904 The decision was made without consultation from the community. Luckily, OMNI and Rogers changed their time to 9 p.m. in 2010 which the community has very much appreciated.
2905 The community supports OMNI and also could provide even more support. I think it's important for Rogers to work with the community, develop a good relationship and grow Punjabi and South Asian programming in a unique and thoughtful way. They will see greater returns to help their business.
2906 Thank you for allowing me this opportunity to speak to you. I am happy to take any questions you may have.
2907 THE CHAIRPERSON: Well, thank you, Mr. Cheema. Thank you very much for your presentation and your participation in this hearing today.
2908 We also thank you for your public service and your concern of the health of your community. We've clearly taken note of the importance of a fixed time for Punjabi News.
2909 Oh, Commissioner Shoan has a question for you.
2910 Did you appear before us during the Surrey Radio hearing?
2911 DR. CHEEMA: Yes, I did.
2912 THE CHAIRPERSON: As I recall you did, yeah. Great.
2913 DR. CHEEMA: I participated at your Surrey hearing as well and I spoke about the same issue.
2914 THE CHAIRPERSON: Yes. Yes, I recall. Well, it's good to see you again.
2915 Commissioner Shoan...?
2916 DR. CHEEMA: Thank you.
2917 COMMISSIONER SHOAN: Hello, Mr. Cheema. Thank you for participating.
2918 I've been trying to get a feel for how many viewers of OMNI use OMNI's digital platforms to consume OMNI programming either through tablet or desktop or laptop.
2919 Can you speak to your personal use of OMNI's digital platforms or perhaps members of your community in Vancouver?
2920 DR. CHEEMA: I think that a very small number of people will use digital or the online. I think the main source of their information is by watching the TV.
2921 I will give you the example. The reason is that most of the people out of, say 100,000 of them, the majority of them they were not born here. They came in early seventies. Their language skillset is still -- it's very good but their skillset to have digital information is not up to par.
2922 So I think the majority of them they're watching TV on -- by actually watching the program.
2923 Probably, I will -- I will add here one more line, that the Punjabi community they watch news. They love politics. They are very much involved. They want to see what's happening in their community and they want to see the local action.
2924 I will give you one example. Only two weeks ago we had a strike in B.C. There was a strike for a long -- for a period of, I think, about one month. And OMNI channel was able to cover piece by piece every day the information which will have an impact on the community, on our economy.
2925 I think this is something very unique. We should be paying more attention to getting them more news and keeping the time which is so crucial for them to watch because people will love to watch CBC or CTV or other media stations. But if you have the duplication of the time that will have impact.
2926 COMMISSIONER SHOAN: Thank you very much, Mr. Cheema. That's very helpful.
2927 MR. CHEEMA: Thank you. Thank you so much.
2928 THE CHAIRPERSON: Thank you, Mr. Cheema.
2929 Thank you for joining us this morning, Vancouver time, this afternoon our time. Enjoy the rest of the day.
2930 Madame la Secrétaire, ou Madame la Co-présidente, devrais-je dire...
2931 LA SECRÉTAIRE : Oui.
2932 LE PRÉSIDENT : ...alors, 14 h, two o'clock.
2933 And we have one more intervener?
2934 THE SECRETARY: Yeah, after lunch.
2935 THE CHAIRPERSON: And then we will proceed with the Reply from Rogers.
2936 THE SECRETARY: From Rogers.
2937 THE CHAIRPERSON: Okay. And I can advise people that there will be a break as well right after the Reply from Rogers and we'll go on from there.
2938 THE SECRETARY: Up to you. All right.
2939 THE CHAIRPERSON: Thank you so much. So we'll see everyone back at two.
2940 THE SECRETARY: Thank you.
2941 THE CHAIRPERSON: Bon appetit.
--- Upon recessing at 1216
--- Upon resuming at 1401
2942 THE SECRETARY: Good afternoon, ladies and gentlemen. I'd just to inform you that we'll be delayed a few minutes.
2943 It's currently 2:01, so we're hoping for four, five minutes, max. Thank you.
--- Upon recessing at 1401
--- Upon resuming at 1410
2944 THE SECRETARY: Sorry for the delay. I love my job.
2945 THE CHAIRPERSON: Only when she works with me.
2946 THE SECRETARY: We will now hear intervenor Mrs. Irene Chu. She is appearing by Skype.
2947 Good afternoon, Ms Chu. Can you hear me well?
2948 MS CHU: Yes, I can hear you.
2949 THE SECRETARY: Can you see me?
2950 MS CHU: I can see you, yes.
2951 THE SECRETARY: Perfect. We can hear you well as well.
2952 So you may proceed with your presentation. You have 10 minutes.
2953 Go ahead.
2954 MS CHU: Thank you. Good afternoon, Panel Members.
2955 In my written submission, I set out the reasons for my support for a multi-lingual television network; hence my support for the renewal of OMNI Television licence. However, I wish to voice my objection to two of the Conditions of Licence that Rogers has proposed for the Commission to waive.
2956 They are, number one, to delete the conditions of licence that prohibit the overlap of English-language and third language programming with Rogers' conventional City stations.
2957 Here, Rogers is probably referring to the programs from CHIN. In my opinions, this should not be allowed because not only will it displace the present OMNI independent producers who have for years invested into their programs on OMNI and in their communities, but also that the systems are different.
2958 At OMNI, they do not broker airtime, whereas CHIN does that. When airtime is brokered, the production and content suffers. What Rogers intends to do is probably to air the same ethnic programs on both Citytv and OMNI. It would definitely hurt ethnic media.
2959 And the second item is, to amend the broad service mandate to provide programming aimed at a minimum of 10 distinct ethnic groups and 10 distinct languages, rather than 20 of each.
2960 OMNI had, in the past, served over 40 communities and broadcast in almost as many languages. It was truly a multi-lingual broadcaster.
2961 Rogers has already cut a number of services to certain communities. It should not be further reduced to only 10 ethnic groups in 10 languages. By cherry-picking 10 communities that will give them the best monetary return does not reflect the true spirit nor the mission of a multi-lingual broadcaster. If allowed to do so, Rogers will be making a mockery out of "multi-lingual broadcasting".
2962 Regarding the second part of my written submission, I would like to expand a little on the issues relating to Rogers' operation of OMNI to which, I believe, the Commission, in reviewing Rogers' licence renewal application for OMNI Television, should give serious thought, as they bear grave consequences on the operations and survival of a multi-lingual television network.
2963 OMNI Television, together with its previous form as CFMT, has been in existence for close to 30 years. It has always been well received by the ethnic communities and great progress was made as it grew and developed.
2964 In the more recent past, up to 2008, OMNI was profitable. It had a designated sales force that understood the products and was able to zero in on advertisers who had specific interests in the ethnic market.
2965 Starting from 2009, things began to change. After the acquisition of Citytv, much of the back offices were centralized. No more designated sales force was assigned for OMNI.
2966 Panel Members, whether or not you have a sales and marketing background, you must all know and recognize the importance of sales and marketing for any product, especially those of the television industry.
2967 OMNI's multi-lingual programming is a very unique product, and it requires a special team who has the knowledge and expertise to identify and target appropriate clients to sell to the retail and national spots.
2968 With the amalgamation of the sales force, OMNI's programming gets lost amidst all other programming for Citytv. The target clients for multi-lingual programs are no longer properly served. Neither is OMNI's budgetary well-being being adequately looked after by the senior executives at Rogers.
2969 In addition to eliminating designated sales force, Rogers fails to do any marketing for OMNI programs.
2970 While other Rogers products receive high-profile advertising on television, on billboards, on radios and there were -- are numerous, almost on a daily basis, brochures and flyers bombarding people's mailboxes, OMNI receives no marketing, no promotion, OMNI receives no marketing, no promotion, no advertising exposure at all. I have not seen even one in the past few years.
2971 Rogers spends billions of dollars on sports programs and pitiably little on OMNI. Granted, sports attract sponsors and advertisers. It may be justifiable to spend money to gain high yield. But OMNI requires some sustenance as well in order to make its programs attractive and profitable.
2972 With insufficient support from Rogers, OMNI is left on its own to fend for itself. How can that become profitable?
2973 OMNI is like an orphan child deprived of nourishment and care, yet expected to perform impossible feats. OMNI needs resources and investments in order to thrive.
2974 In the past three years, Rogers has pared down OMNI staff and programs to the bare minimum. OMNI, at present, maintains a skeletal existence, no muscles to flex.
2975 I ask the Panel Members to seriously consider stipulating certain conditions that would require Rogers to properly maintain, support, promote, sustain, grow and develop its OMNI programs to ensure the continuance of its services in multi-lingual broadcasting.
2976 Regarding the $8 billion spent on NHL and the cell phone spectrum, Rogers' new CEO, Guy Lawrence, says that he is spending all this money keeping his customers in mind. Maybe he needs the Commission to remind him that his customers constitute largely of ethnic Canadians who appreciate OMNI programs and would want OMNI to remain a healthy and viable multi-lingual program provider.
2977 Thank you.
2978 THE CHAIRPERSON: Well, thank you, Madam Chu.
2979 My fellow Panel Members have no questions for you.
2980 I just want -- one thing that struck me in your document, it's very well outlined, and your requests are quite clear, as is your brief.
2981 In terms of brochures and flyers, you don't actually receive brochures and flyers promoting television programs? You receive that promoting other Rogers' products; right?
2982 MS CHU: Oh, yes. It's all other -- other products, you know, like their cell phone, their wireless, their -- all these other things.
2983 They don't do any advertising or promotion for the OMNI programs or even television.
2984 THE CHAIRPERSON: And you've noticed a marked change since 2009, 2008, from what I understand.
2985 And before that, you were happier with the service, I gather?
2986 MS CHU: Yes. Up to 2008 because I was on the Advisory Board, so I had some knowledge of what was going on.
2987 Up to 2008, OMNI was profitable, and then there's no designated sales force and things began to deteriorate.
2988 THE CHAIRPERSON: Right.
2989 MS CHU: And they cut a lot of services. And you know, there is a misunderstanding that multi-language television only caters to the newcomers, which is not true.
2990 THE CHAIRPERSON: Right.
2991 MS CHU: People like myself, who have been here for 50 years, I still watch them to keep in touch with community.
2992 THE CHAIRPERSON: Certainly.
2993 And as for the Advisory Board, since you have firsthand experience, I gather you would think that they contributed positively to the OMNI experience and to Rogers' appreciation of what that clientele requires?
2994 MS CHU: Oh, yes. In the beginning because it was something very new for Rogers and there was no such thing as multi-lingual, you know, in the proper sense, so it was necessary to have the Advisory Board to open up the communications to let Rogers to get to know the communities and let the communities to know about Rogers' product.
2995 THE CHAIRPERSON: But given the fact --
2996 MS CHU: And it was necessary.
2997 THE CHAIRPERSON: And -- but given the fact that Rogers has decades of experience with these communities, would Advisory Boards still be of use to Rogers --
2998 MS CHU: Not as --
2999 THE CHAIRPERSON: -- and to the system as a whole?
3000 MS CHU: The system as a whole, I don't think it is necessary because right now, even though the Advisory Board does not exist any more, but whenever there is an issue or there is anything regarding a specific community, Rogers always -- OMNI always comes to people like myself or the Chinese community or some other people in other community and have a dialogue with them.
3001 And they can access the community much better now, and there are people that they can use as resource people instead of just maybe one representative from each community.
3002 THE CHAIRPERSON: So the Advisory Board or the elimination of the Advisory Board is not one of the principal causes of the degradation of service, according to you.
3003 MS CHU: I wouldn't think so.
3004 THE CHAIRPERSON: No.
3005 MS CHU: I wouldn't think so, but then, if they cut a lot of the services, maybe, if the Advisory Board is there, they might voice strong opposition.
3006 THE CHAIRPERSON: Okay. Well, we thank you very much for your time --
3007 MS CHU: Thank you.
3008 THE CHAIRPERSON: -- and your effort. We very much appreciate it, and we've taken good note of your presentation.
3009 Thank you so much, and enjoy the rest of the day. It's still morning out west.
3010 MS CHU: Yes, yes.
3011 THE CHAIRPERSON: And we're well into the afternoon here.
3012 Thank you so much.
3013 Madam la secrétaire?
3014 THE SECRETARY: Merci, monsieur le président.
3015 We will now proceed to Phase III in which the applicants can reply to all interventions submitted on their applications.
3016 I would like to please reintroduce yourselves for the record, and then you have 15 minutes for your reply.
3017 MR. PELLEY: Thank you very much.
3018 Good afternoon, Mr. Vice-Chair, Commissioners, Commission staff.
3019 My name is Keith Pelley. I'm the President of Rogers Media. I think you know --
3020 THE CHAIRPERSON: Can I interrupt you for 30 seconds.
3021 Est-ce que nous avons reçu une copie électronique?
3022 THE CHAIRPERSON: So we thought we'd have to follow you, but we actually have a physical copy. We'll just wait for one more copy to arrive. It just makes it easier.
3023 THE CHAIRPERSON: Again, our apologies. We're ready to go.
3024 MR. PELLEY: No worries.
3025 THE CHAIRPERSON: Thank you.
3026 MR. PELLEY: Okay. I think you know everybody on the panel except for, as requested yesterday, Jack Tomik, our Chief Digital Sales Officer, who will talk just in a little bit about OMNI and sales.
3027 THE CHAIRPERSON: That raises an interesting point.
3028 Before the reply, should we listen on the sales -- the sales file?
3029 MR. PELLEY: It is part of our reply.
3030 THE CHAIRPERSON: It's part of your reply?
3031 MR. PELLEY: Yes, it is.
3032 THE CHAIRPERSON: Very well, then.
3033 MR. PELLEY: Jack will speak.
3034 THE CHAIRPERSON: Great.
3035 MR. PELLEY: Okay.
3036 So thank you very much for the opportunity to respond to the concerns raised by intervenors during our presentation.
3037 First and foremost, I think it's important to reiterate that our requests are for short-term licence renewals. A two-year renewal quickly translates into a year and a half after approvals are granted.
3038 We will be back in front of the Commission with both OMNI and the group in a very short time.
3039 The rationale behind such is that we will have further clarity on the NHL on our business as well as some preliminary analysis on OMNI's financial situation after some of the requested changes.
3040 So my comments today will focus on three areas; the NHL, City and OMNI.
3041 For competitive reasons, yesterday we did not outline our full NHL strategy. Without going into too much detail, I will give you a high level view of our thoughts.
3042 Our NHL deal is a landmark deal, and the first time a premium sports league has granted all national rights, all platforms, all languages to one company long term.
3043 The NHL acquisition allows us to reach our sports goal, which is for Sportsnet to become the number one sports media brand in Canada in terms of time spent with the brand.
3044 This means Sportsnet will be the primary focus of their NHL content. It will house more games, more pre-games and more shoulder programming than any other sports entity and will be the destination for everything hockey during the NHL season.
3045 After 30 years, Sportsnet will displace TSN as Canada's sports leader.
3046 Sportsnet 360 and Sportsnet One will also reap the benefits of the NHL deal, but it will be the main Sportsnet network that will drive the most advertising and subscription revenue.
3047 Sportsnet 360 will carry the fourth or fifth game on Saturday night, and the remainder of their games will be U.S. matchups that will not count towards Canadian content.
3048 Sportsnet 360 is a Category A qualifying service that undeniably should be included in our group.
3049 The NHL gives us live content relevant to the consumer and to the advertisers. It will provide a significant boost to City Television by giving us the opportunity to reduce our reliance on U.S. programming and giving us a promotional platform for all our other programming that we have never had before.
3050 All of this will help offset the continued decline in conventional advertising.
3051 It is not a coincidence that the only large broadcast group to intervene against us in these proceedings is the company that lost the NHL rights.
3052 We strongly feel that the NHL deal and our plans for the NHL are in the best interest of Canadian consumers and will benefit the broadcast system by allowing us to increase our investment in CPI and PNI, which, without the NHL agreement, would not be possible.
3053 In terms of our arrangement with the CBC, this is a classic case of win/win/win. Win for Canadians, who will continue to experience the rich tradition of Hockey Night in Canada which they have become accustomed to for the last 62 years.
3054 A win for CBC, who continues to carry at no risk with no cost to the public broadcaster the most coveted content in Canada, Saturday night hockey, and the NHL playoffs. More than 300 hours of coverage at a time when the CBC faces budget challenges.
3055 In addition, the CBC will also continue to enjoy promotional time in these shows.
3056 And it's a win for us. CBC's distribution allows us an important additional platform to efficiently monetize the NHL rights.
3057 Our agreement with the CBC is a sub-licensing agreement, just like we have with TVA. Our terms, however, are different.
3058 We could have easily sub-licensed the rights to CBC for a licence fee and they, then, would have assumed the entire risk for advertising.
3059 Such an arrangement would have likely incurred a loss for CBC on those terms.
3060 Instead of paying cash, we agreed to provide CBC the content while retaining 100 percent of the inventory.
3061 The agreement is by no means different than our currents rights deals we have with the Calgary Flames and the Edmonton Oilers and that TSN and Sportsnet has with the Sochi Olympics.
3062 The only difference is the scale of this deal, and scale should in no way be the factor of determining a change in industry practice.
3063 It is imperative to understand this is not new revenue to the broadcast system. This revenue was sold by CBC in previous years and was used to pay for rights and production costs.
3064 As we've explained, sports programming on conventional is, at best, revenue neutral.
3065 As far as the concerns that have been outlined by several intervenors that we will use NHL hockey to satisfy our local commitments on City, we are prepared to make it a condition of licence that we will not use any NHL hockey or, in fact, any professional sports, either live games or pre or post-shows, to go towards our local exhibition on City.
3066 If you feel strongly regarding the PNI on documentaries, we will make that same condition as well.
3067 In response to the comments made by the CCSA and TELUS this morning, all sports rights are increasing. It is premium content, live, and PVR proof.
3068 In this age, it is more valuable and worth a premium. It is why ESPN has a wholesale rate of almost $6.
3069 This is not unique to Canada. This is a fact globally. It is something we must accept in this country to be competitive.
3070 At Sportsnet, we have made several enhancements to Sportsnet programming over the past five years to ensure Canadians are receiving world class sports programming.
3071 We expect good faith negotiations with BDUs on renewals for Sportsnet as agreements expire that reasonably reflect the enhanced value of these services now that they offer additional content which also includes the National Hockey League.
3072 We are committed to providing value to the BDUs. In this changing environment where over the top has become commonplace, sports offers much watched live viewing and helps against cord cutting, cord shaving and cord nevers.
3073 It is as important to the BDUs as it is to us, and keeps the money in the regulated system.
3074 In addition, and this is probably the most important, the CRTC, through the VI Code, have ensured content will be widely available to all Canadians regardless of their service provider. It prohibits the broadcaster from withholding their signal, which is the U.S. model. And any dispute is now subject to arbitration.
3075 Finally, I find it puzzling, and select your adjective, that Bell has implied that the acquisition of the NHL makes us more powerful than Bell Media. Really?
3076 I find it actually laughable.
3077 We have come to the Commission with a fair deal that reflects our financial situation to serve Canadians.
3078 I would like to address the Vice-Chair's request to provide safeguards on allocations between digital and linear advertising.
3079 I think it's important to understand that the digital consumption of sports programming is rising at a dramatic rate. Let me give you a couple of statistics from the NCAA tournament last week.
3080 Seventy (70) million live video streams across all platforms, which is up 42 percent from a year ago. Fifteen (15) million hours, 15 million hours, of live video streaming. And mobile was up 71 percent.
3081 Here in Canada, our competitor, TSN, had over one million users access the TSN GO Mobile App since the TV Anywhere platform launched just on March 12th.
3082 Digital consumers are making a choice to watch sports digitally, and we can and do expect revenues to increase with this viewership.
3083 In order to give the Commission a sense of this trend, we are willing to file, at the end of each broadcast year, including in the current one, the linear and digital advertising allocations for our licensed sports service.
3084 This will allow the Commission to monitor the reasonableness of these allocations and address any concerns at our next licence renewal in two years.
3085 We'd now like to address Commissioner Shoan's question about our willingness to increase PNI to levels comparable to groups like CORUS and Astral that currently have PNI commitments of nine percent.
3086 PNI targets are based on historical expenditures. CORUS and Astral are comprised almost exclusively of pay and specialty drama-based services. This is why they have a PNI of nine percent.
3087 Our historical PNI has been three percent, and we are committed to increasing it to five percent.
3088 Raising our PNI to levels that exceed our historical spending would be inconsistent with the approach the Commission has taken on PNI with every other broadcast group.
3089 In addition, and this is where I have the most trouble, for us to have a higher CPE and PNI than Shaw, which is double our size, just because we bought the NHL is illogical.
3090 Turning to OMNI, we have listened to the Commission's concerns and our interveners. I think we all agree that the television landscape is changing and we all have to adjust.
3091 Having said that, we are sensitive to the concerns of the ethnic community and our viewers and are prepared to make the following commitments over the next two years.
3092 Number one, there was significant dialogue regarding our request to remove restrictions between 8:00 p.m. and 10:00 p.m. Our request was for flexibility. It was never our intention to remove ethnic newscasts in prime time and make the entire prime time schedule U.S.
3093 For that reason, we would like to propose harmonizing the 8:00 p.m. to 10:00 p.m. schedule across all our stations, which would allow the 8:00 p.m. to 10:00 p.m. block to be 75 percent ethnic and 25 percent English. I think that is more than reasonable.
3094 In terms of languages, our request was to have the flexibility to go from 20 to 10. We are willing to commit to 15.
3095 In terms of overlap programming, we'll accept a cap of 10 percent on all programming, ethnic and English.
3096 On language caps, you heard us yesterday and we're happy to accept 30 percent.
3097 On CanCon -- and we had so much conversation about this last night -- I think it's important for us to reemphasize why we wanted to move from 60 percent to 40 percent. It was to have the ability to acquire ethnic programming to enhance the value and relevance to viewers, such as Bollywood movies, Italian dramas, Chinese documentaries, et cetera.
3098 As mentioned yesterday, we are currently not acquiring any new U.S. programming for OMNI. In 2015, in the finances that we submitted, we are dropping U.S. programming on OMNI by another $8 million. So, for the very first time since we acquired OMNI, ethnic spending will outspend that of U.S.
3099 And finally, to Commissioner Molnar's concerns about Alberta, we will increase our Alberta programming from three hours to five hours, with a reasonable effort to acquire a portion of this from the Edmonton market.
3100 Having said that, the programming that we produce for OMNI is still very relevant to Alberta. The Chinese population is now 4.8 percent of the total population in Edmonton, and the newscasts, despite the fact that we produce them in Vancouver, we believe are still relevant to the people in Calgary and Edmonton.
3101 Yesterday there was a lot of discussion regarding OMNI's revenue challenge as it relates to advertising. As I mentioned, Jack Tomik, our Chief Sales Officer, has joined us today. Jack is an industry veteran, having led the sales groups of both Global and CBC, and I'd like Jack to address the measurement system for OMNI, CTV Two in the marketplace and the value of OMNI in the minds of advertisers.
3103 MR. TOMIK: Thanks, Keith.
3104 There are four key points I'd like to address with respect to OMNI revenues:
3105 - first, the health of a conventional television market in Canada and, more importantly, OMNI in the Toronto market;
3106 - secondly, the impact --
3107 THE CHAIRPERSON: I'll ask you to just bring the mike over a bit closer.
3108 MR. TOMIK: Oh, yeah. I'm sorry.
3109 THE CHAIRPERSON: Great! Thanks.
3110 MR. TOMIK:
3111 - secondly, the impact of an increase in conventional television competition in the GTA caused by the coverage increases and simulcast opportunities for CTV Two;
3112 - third, the viewership loss to strip programming caused by the realities of over-the-top services such as Netflix and the consumer's fascination with binge-viewing;
3113 - further, for the ethnic viewer, their ability to search out homeland content on the Internet live; and
3114 - finally, the inability of the industry to provide ethnic audience data on a timely basis through electronic measurement.
3115 It is very clear that conventional revenue in this country has, for all intents and purposes, stalled for the last decade. In fact, for calendar 2013, it has seen a decline of 5 percent nationally and closer to 6.5 percent in Toronto.
3116 It's no secret that conventional television is struggling. As a result of this struggle, market costs for advertisers have been flat or decreasing. No conventional television station sells all of their inventory, even in the historical high-demand periods.
3117 As the market shrinks, not all conventional broadcasters are being affected equally. It is an unfortunate fact that the smaller the broadcast outlet, the more impact to the revenue.
3118 Advertisers will always buy the best available inventory, and, as CTV, CTV Two and Global remain far from sold out on popular U.S. programs, it becomes evidently clear that advertisers prefer to purchase there instead of on OMNI English inventory.
3119 The market has changed and in all market changes, the smallest, in this case OMNI, is affected to the greatest extent and first. We are, however, experiencing the same situation with our Citytv stations now.
3120 The introduction of CTV Two to the GTA immediately resulted in a 15-percent decreased audience to the OMNI English-language programming. This new choice for consumers was well received and CTV Two immediately saw a share gain of 6 percent in prime time.
3121 This shift in viewing and their ability to sell in the GTA adversely affected the delicate balance of a flat revenue market. As in my previous point, OMNI, because of its size and lower positioning in the market, suffered revenue losses well beyond the impacts to the other television stations.
3122 Consumer habits for viewing of syndicated strip programming has changed dramatically with the universal acceptance of video on demand, access to PVRs and, most importantly, over-the-top services such as Netflix. Traditional strip programming viewers are now watching their programming through these new and more convenient distribution platforms.
3123 Audiences to U.S. strip programming on OMNI are 30 percent of what they were just three years ago. We are very proud of our local service to the ethnic community and it continues to attract advertisers. The rest of the ethnic schedule, however, has experienced dramatic audience declines due to the availability of homeland programming online or via subscription services to foreign content channels on BDUs.
3124 For almost all advertisers, the ability to have timely and accurate audience information for television is the first point of consideration. Unfortunately, in Canada, our ability to cost effectively report these audiences by BBM people meters is just not financially viable. We have yet to justify the cost of electronic measurement for large English-language markets like Ottawa or Montreal English, let alone measuring ethnic audiences in any market in the country.
3125 Ethnic advertisers are similar to English advertisers in the fact that they are steering more of their marketing dollars to digital platforms and especially to search.
3126 In summary, OMNI audiences, both ethnic-language and English programming have declined dramatically as a result of technology, consumer choice and increased competition in key markets across the country. We have worked diligently to improve our revenue situation and will continue to do so.
3127 MR. PELLEY: Thanks, Jack.
3128 Lastly, the Vice-Chair asked if there were any regulatory measures that could be taken to help ethnic programming. We had significant dialogue last evening. We would like to continue to that and will report back to the Commission in the very near future.
3129 In closing, we understand our responsibility to the Canadian broadcast system. We respect our importance to Canadians of all ethnic backgrounds and of all languages in all regions of the country. We appeared here to put forth a fair, reasonable plan in an ever-changing broadcast atmosphere that we think upholds our responsibilities to the Commission and the Broadcast Act.
3130 Thank you.
3131 THE CHAIRPERSON: Thank you very much. I know I promised to break and we're going to take a break but I just want to clear up a couple of points that struck me off the top and then we'll get into sort of perhaps more substantive issues.
3132 In your closing, Mr. Pelley, you mentioned that the Vice-Chair asked if there were regulatory measures. I think it was regulatory measures with respect to better measurement tools --
3133 MR. PELLEY: Ah! I see.
3134 THE CHAIRPERSON: -- and that was the nature of the question. If you want to sort of think about that, go ahead.
3135 MR. PELLEY: That would have changed our dialogue last evening, but yes.
3136 THE CHAIRPERSON: Back to the measurement issue. You're not -- I don't think this is a state secret but you talked about Ottawa, you talked about Montreal, and you're not getting BBM numbers for Montreal or Ottawa?
3137 MR. TOMIK: No. Ottawa has not got electronic measurement.
3138 THE CHAIRPERSON: I'm sorry. For Montreal?
3139 MR. TOMIK: Montreal for French but not for English. That's on the docket right now for BBM to start reporting English markets but it's not happening yet.
3140 THE CHAIRPERSON: Okay. And on the strip programming as it regards OMNI, the fact that that programming is available through OTT, specifically Netflix and binge-viewing, wouldn't that entice you to concentrate more on ethnic content?
3141 MR. PELLEY: Yes. Yes. So, as I alluded to, Mr. Vice-Chair, we reduced the programming on OMNI going forward. I do foresee a potential day that comes when there is no U.S. programming on OMNI.
3142 However, as I did allude to yesterday, we did do some contracts that now represent some $30 million. That is the U.S. programming that is now on OMNI. We're not buying any new programming.
3143 And so, to your point, yes, that would make logical sense.
3144 THE CHAIRPERSON: And some of that programming that's going to find itself on OMNI, is that a consequence of the NHL rights?
3145 MR. PELLEY: No.
3146 THE CHAIRPERSON: I think the question was asked yesterday and there may have been -- we may have misunderstood --
3147 MR. PELLEY: No.
3148 THE CHAIRPERSON: -- that you'd be burning some City content on OMNI --
3149 MR. PELLEY: On the displaced programming, we talked about that as a potential for 8:00 to 10:00.
3150 THE CHAIRPERSON: Yeah.
3151 MR. PELLEY: The number one as far as the U.S. programming that is on OMNI is the strip programming that we currently are contractually obligated to carry either on OMNI or on Citytv, right, the "Two and A Half Men," "30 Rock" and so forth that we have already purchased and have deals in place for the next couple of years.
3152 As far as us airing programming that is displaced on City, well, with moving to 75 percent ethnic from 8:00 to 10:00, that certainly would reduce that significantly and the opportunity for us to do that.
3153 THE CHAIRPERSON: Okay. Back to page 4. You alluded to it and then we're going to pick up on it after the break, but you mentioned the Commission's concern with allocating revenues to exempt services and you made reference to it here. I'd also like you to think about the expenses and the allocation of expenses as well and we'll come back to that and other issues after the break.
3154 And just on the quick, you talked about ESPN, you talked about the $6 wholesale rate. You would agree with me that not only is the wholesale rate a problem but, more importantly, the bundling is a problem because you can't just get ESPN south of the border, you have to get every ABC, Disney, ESPN service in a bundle and that's part of the problem, and you have to get all of the ESPNs.
3155 Isn't that a more accurate reflection of what's happening with sports services with our neighbours south of the border?
3156 MR. PELLEY: Well, I just think that it's a completely different regulatory body. If you are -- even when we acquired these rights and we had dialogue with the National Hockey League and then we articulated the restrictions in terms of you aren't able to withhold your signal, it goes to arbitration, there's no tied selling --
3157 THE CHAIRPERSON: M'hmm.
3158 MR. PELLEY: -- it's a completely different market, that was shocking.
3159 It's just a different market, and the market here certainly supports fair and equitable negotiations with broadcasters and BDUs.
3160 Anything to add?
3161 MS WHEELER: I would just add that it's more of a market-driven system in the States because they can withhold their signal, so that is going to inflate the wholesale rate to what the market can bear, unlike in Canada where we have a dispute resolution mechanism where the Commission will ultimately be the arbitrator of what a fair and reasonable rate is.
3162 MR. PELLEY: I sometimes, as we talk about it, get perplexed when BDUs talk about this NHL content. If we were in the U.S., I would see that they would have something to worry about but the CRTC introduced the Vertical Integration Code and put the restrictions in place.
3163 THE CHAIRPERSON: Okay. So we'll take --
3164 COMMISSIONER SHOAN: I just have one question.
3165 THE CHAIRPERSON: Sure.
3166 COMMISSIONER SHOAN: Just one question of clarification before the break.
3167 Mr. Tomik mentioned that the introduction of CTV Two to the GTA immediately resulted in a 15-percent audience decrease. Later, he said audiences to U.S. strip programming on OMNI are 30 percent of the levels that they were only three years ago.
3168 I understood from our conversation yesterday that there was no BBM measurement for OMNI. So how are you determining your audience --
3169 MR. PELLEY: Oh, no. No, no. There is a BBM measurement for OMNI. It is just not reflective of what the real audiences are.
3170 COMMISSIONER SHOAN: Oh, I see.
3171 MS WHEELER: It's the underrepresentation of the ethnic community in the sample size that doesn't accurately measure audiences to ethnic programming. But to assume that ethnic and non-ethnic are watching the U.S. programming, BBM is accurate.
3172 COMMISSIONER SHOAN: Okay. Thank you for that clarification.
3173 THE CHAIRPERSON: Ethnic viewership is BBM sample size challenged. Yeah. Yeah.
3174 MR. PELLEY: And Mr. Tomik was the Chair of BBM at one time.
3175 THE CHAIRPERSON: Okay. That's good to know. Thank you so much.
3176 So we'll take 15 minutes -- actually, let's take -- let's get back at 3:10. We'll take 18 minutes, okay? So we'll see you all in about 18 minutes. Thank you so much.
--- Upon recessing at 1452
--- Upon resuming at 1511
3177 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.
3178 THE CHAIRPERSON: Hi.
3179 MR. PELLEY: Hi.
3180 THE CHAIRPERSON: I ask everyone to take their seats. Thank you. Commissioner Shoan...?
3181 COMMISSIONER SHOAN: So I would like to follow up on the discussion we had yesterday with respect to OMNI's sales force and I think it's timely we had Ms Chu appear via video conference shortly before Phase 3. She noted the importance of having qualified sales and marketing people on OMNI staff, how selling OMNI programming to advertising agencies requires a special team who has the requisite knowledge and expertise.
3182 And I saw the information which OMNI filed -- or Rogers filed this morning with respect to OMNI's sales force, and I hope you can walk me through it a bit more, but I would like to give you a bit of background about my particular concern or I think the challenges associated with this.
3183 I saw your projected revenues for OMNI going forward and I recollected a conversation I had a few months back with a smaller broadcaster who came to visit me in my office and it was a simple meet-and-greet and this broadcaster was talking about successes they were experiencing on their digital platforms. I thought, well, that's great, it's not typically a story I hear very much, most people usually discuss the challenges they are experiencing on digital platforms.
3184 This broadcaster told me that the one thing they had put in place that they had found to be of enormous import was separating their traditional advertising -- their traditional sales staff between those selling the traditional inventory on their linear platform and their digital inventory, the reason being when they had their sales staff selling the digital inventory with their traditional inventory they found that the digital inventory was often a throw-in, sold for pennies on the dollar, wasn't really given the requisite value, but when they took the time to train digital staff and ascribed the proper value to the digital inventory, the uptake for that particular inventory was actually quite stark, it was quite notable.
3185 And I was thinking about that conversation in the context of the numbers for the revenue projections for OMNI going forward and I was wondering to myself, is this a case where perhaps Rogers is a bit of an author of the demise of this network in the sense of, they have a sales force that perhaps isn't adequately trained to sell inventory for ethnic programming, or is it the case where they are underselling the inventory, perhaps selling it for pennies on the dollar, and I wanted some more information on that.
3186 So if you could give me a bit more information --
3187 MR. TOMIK: Sure.
3188 COMMISSIONER SHOAN: -- Mr. Tomik or Mr. Pelley --
3189 MR. PELLEY: Yes.
3190 COMMISSIONER SHOAN: -- on the type of training you provide your sales staff?
3191 MR. PELLEY: Sure. I will pass it to Mr. Tomik in just a couple of minutes, but I think first I need to clarify the challenges with OMNI's revenue is not in the ethnic advertising. That is a misconception.
3192 The challenge is, and the drop from $80 million to $35 million is based on the U.S. programming and you have to look at historically what funded the ethnic programming on OMNI, what the actual fundamentals of the business model was and that was the U.S. programming funded the ethnic programming. U.S. programming had a margin, a significant margin; that margin has gone down dramatically and, like I said, from $80 million in $2011 to $35 million.
3193 So it has very little, if anything, to do with ethnic advertising or the ethnic sales force whatsoever, it is totally a misconception and I will have Jack maybe allude to that.
3194 COMMISSIONER SHOAN: Okay.
3195 MR. PELLEY: The second thing that I want to talk about is the model. The model that we created in terms of the one sales model is a model that other large broadcast groups like Bell followed suit and just last month Shaw followed suit. It may not be -- and there may be advantages for smaller broadcasters who have that ability to go client direct and not offend agencies, they might have an advantage and perhaps who you were talking with would have been a smaller broadcast entity, not one of the three big who have now followed the same sales model that we initiated last year.
3196 Finally, from a digital perspective, I can't comment on what Shaw and Bell have done and I'm going to tell Mr. Tomik to speak gingerly about this just based on competition, but the actual training that we have done digitally over the last six months to not just our OMNI sales employees, but to all of them, is significant and has required terrific and massive investment. So that's my comment and perhaps, Jack, you want to add to that?
3197 MR. TOMIK: Sure. Thanks, Keith. The first question you ask is a great one and when you are a small-scale operation that kind of splitting between different kinds of reps is really an important and interesting thing, but when you have bigger scale it's not the same.
3198 And just in terms of digital training, we are about two-thirds through the process of digitally training every sales rep in this country, some 600 people, so that the giveaway doesn't happen anymore. I think there was a time and space in this country where a radio or a television or a publishing rep would give away the digital. That doesn't happen anymore. That is the highest demand, fastest increasing category for advertising now.
3199 So I think in the case of a small broadcaster, God knows, but in our case where we deal in scale in digital, we understand the value. Our people are trained.
3200 COMMISSIONER SHOAN: And I can understand that, Mr. Tomik. I think I was trying to talk the analogy that perhaps if you are a member of the sales force for OMNI and you are trying to sell advertising inventory on your strip programming and you are speaking to someone at an agency and they have the option of buying inventory on City with its strip programming or OMNI with its strip programming it may be more difficult and perhaps less appealing, depending on the ability of the sales agent to sell the inventory on OMNI for the same programming because it is on an ethnic service, so that it might be sort of dumped in or thrown in because it is on OMNI.
3201 MR. TOMIK: Yes, and I understand your point. Just to be clear, we have specific 100 percent dedicated reps for ethnic language.
3202 COMMISSIONER SHOAN: Okay.
3203 MR. TOMIK: We have two nationally --
3204 COMMISSIONER SHOAN: And that was one of my earlier questions.
3205 MR. TOMIK: We have two nationally here in Toronto, we have three that operate on a local basis, though, they have the ability to sell OMNI English as well as ethnic. It's about a 75 percent ratio for language against 25 for English, and we also have two full-time reps on OMNI in Vancouver.
3206 And as Keith said, the language revenue for us is not an issue. For our Vancouver station 50 percent of the revenue comes from language sales; in Calgary and Edmonton it is a lot smaller just because of the nature of the markets, it's about 10 percent for each; and in Toronto for our Ontario signal, 30 percent of our revenue comes from language.
3207 We don't have a language issue. In the last three years I think our language revenue -- and I'm just -- I think is only down about 20 percent.
3208 COMMISSIONER SHOAN: Okay.
3209 MR. TOMIK: It's a success story. And I want to talk about how we sell it now, but I want to compare that to the other comment from Keith. The real economic driver for OMNI for over 20 years has been that strip programming and the value that has given to the station.
3210 That strip programming -- and we are down 20 percent in the last three years in ethnic revenue, we are down 65 percent in the big one, in the English language programming and that is where the hurt is coming from. In terms of --
3211 COMMISSIONER SHOAN: So I understand, Mr. Tomik, the same staff selling the same inventory down 20 percent in one category and 60-65 percent in the other?
3212 MR. TOMIK: Yes.
3213 COMMISSIONER SHOAN: Same sales staff?
3214 MR. TOMIK: No, it's different staff.
3215 COMMISSIONER SHOAN: Okay.
3216 MR. TOMIK: Okay? But the nature of the inventory between what's happened to English inventory, it has dropped to 30 percent of what it was three years ago --
3217 COMMISSIONER SHOAN: Okay.
3218 MR. TOMIK: -- as compared to ethnic holding relatively well.
3219 COMMISSIONER SHOAN: Okay.
3220 MR. TOMIK: It's about that English thing. It's about the pressures on the English conventional market that has really hurt the revenue base for all of these stations.
3221 COMMISSIONER SHOAN: Okay.
3222 MR. TOMIK: So it's very important to understand, we are still selling ethnic, we still have dedicated people out across the country who sell it. In addition to that, we have about 50 or 60 other salespeople who do sell OMNI and they do everything possible to include it in every buy.
3223 You know, the circumstance now with national advertisers, there is basically five places in this country that control 85 to 90 percent of the advertising revenue, there are five big agency groups which I'm sure you know soon is going to become four. The ability for us, because of our scale with City and Sportsnet, magazines, radio stations, to bring City to the party has really been beneficial to -- or bring OMNI to the party has really been beneficial.
3224 At that scale when you are talking to customers like Procter & Gamble or CIBC, they don't have time to really get down in there unless we bring it forward. So we have had some great success recently with the one-call model in selling national advertising and seeing a renewed interest in language programming.
3225 So rather than having more feet on the street to serve a small one, it's about having hundreds of feet on the street that bring their little brother along and it is working quite well for us right now.
3226 COMMISSIONER SHOAN: Okay.
3227 MR. PELLEY: I don't want to belabour a point, but the advertising on OMNI is consistent with audience decline and it is the U.S. programming. The ethnic programming cash-in/cash-out is not self-liquidating, right, so the minute the U.S. programming, right, could not fund that ethnic programming, so the minute the U.S. programming audience dropped, the advertising dropped, then all of a sudden it became financially non-viable.
3228 And I don't think you can lose sight of that. This is -- OMNI is the first, we are all facing it, hence the reason conventional advertising is down 5.6 percent. As I mentioned, some of the advertising that is down in some of the other traditional legacy businesses, this is an industry structural change that we are having in advertising and OMNI is the first, and all we are saying is -- so I really don't think it is, if we added 14 or 15 ethnic salespeople or so forth they would just go through the roof, that's not the challenge we are facing.
3229 COMMISSIONER SHOAN: Yes. And I hear what you are saying, Mr. Pelley. For my own understanding, I was trying to understand to what extent it was an industry issue as opposed to an OMNI issue, and what I'm gathering from Mr. Tomik is that the structure is in place from a sales perspective that it isn't OMNI-specific, it's more of a structural issue for the English programming and the specific decline of advertising revenue for that particular aspect of the service.
3230 So you mentioned there was a 60-plus percent decline for advertising revenues for the strip programming on OMNI. Was there a similar such decline for City as well?
3231 MR. TOMIK: No. And the reason is, is that City ratings have held much better than the strip programming. The strip programming is more affected by things like Netflix; City programming has held.
3232 And also, City is a stronger entity and it really comes down to the laws of nature; when things get tough it's the weakest that hurt first. So City has been hurt more than Global, Global has been hurt more than CTV, but at the bottom of the pile in conventional television is the OMNI service and it has been hurt first and the most.
3233 But we're seeing that scale of hurt not as deeply with City in the last year and this year and I'm sure Global is seeing it, but to a lesser extent than us. It's about the largest survive the best in these kind of circumstances.
3234 COMMISSIONER SHOAN: Okay.
3235 MR. PELLEY: But I would say that it will be interesting to hear at the Let's Talk TV when CTV will talk about "Big Bang Theory" that they have exclusive rights to in Canada and how many border stations and U.S. distant signals carry "Big Bang Theory". However, it still does very well, but at what point will it start to erode.
3236 Similar, on City we have "Modern Family" that we strip from 7:00 to eight o'clock. We have had -- where is Hayden? We have had so much conversation saying how long before that starts to erode, how long before the fact that, you know, 35 percent of people are PVR'ing. Binge viewing that Mr. Tomik referred to is now becoming commonplace.
3237 So that's what I talk about, you always have to be looking and understanding that changes are coming. So I would say that if you catapult ahead two or three years, you probably wouldn't see "Modern Family" in strip on City.
3238 COMMISSIONER SHOAN: Okay. Well, thank you for the clarification with respect to sales staff.
3239 THE CHAIRPERSON: Thank you, Commissioner. I don't know why you would binge view "Modern Family", but that's a whole different issue.
3240 THE CHAIRPERSON: It's great to have Mr. Tomik here and, Mr. Pelley, thank you so much for bringing him here on such short notice.
3241 Before we get into the weeds, I just want to sort of get an idea of what the global strategy is for selling this newly acquired NHL property, without giving away any state secrets and before we get into sort of more nitty-gritty issues.
3242 Mr. Pelley, do you want to touch that, or Mr. Tomik?
3243 MR. PELLEY: Sure, I can touch that and then place it onto Mr. Tomik. You know, obviously we invested significant dollars in the National Hockey League and its rights are extensive. As I mentioned, they go across multiple platforms.
3244 We have talked about a number of different models, we talked about setting up a consortium similar to that that was incredibly successful in Vancouver that garnered the highest revenue ever in terms of an Olympic Games and certainly set the stage for CBC and the success that it had in Sochi that was much attributed to our sales model that we created in Vancouver.
3245 For us it's all about having compelling content that resonates with consumer, that is available on any device and that can provide great value to advertisers. The conversations that we have had so far with advertisers are what exactly are you looking for, what exactly do we have to offer, and the conversations have been incredibly creative to say the least and, as a result, I am very excited about the product that we are going to be able to develop this fall.
3246 So in terms of the actual sales process, I will give that onto Mr. Tomik and where we are, but again, I would caution -- you know, maybe you should sit here -- be cautious with as much information with competition listening.
3247 MR. TOMIK: Why don't you get your hand on the button...
3248 You know, it is a very unique opportunity, I have sold hockey in the past, I sold it at CBC, I have sold it for a long time and it's a rare occurrence when something that important as far as a sport sort of starts with a clean slate and because we have all the rights we can start with that clean slate.
3249 We started one-on-one meetings with major advertisers in this country in December and really wanted to hear from them what they would like to do with this new opportunity. It's not just the same as the last 62 years.
3250 So we went through the first tier of large advertisers, and small and medium advertisers too. I was in Calgary yesterday talking about the NHL to advertisers there, and up to date I think we're meeting -- I'm at meeting number 41 talking with advertisers, Keith has been along on many of them, as have other executives. And what we are seeing is a mass of excitement at the presentation, the new angle we are doing with editorial, this follow-on hockey, and just what we are doing with the whole property.
3251 I think it's more than just a broadcast to us, it is re-invigorating the game in Canada. Advertisers get excited by that, too, and we are seeing advertisers change their marketing direction for the next few years because of it.
3252 Right now we are at sort of third level negotiation stage with a number of national advertisers that are highly interested in hockey and so far talks are successful. We are talking to large, medium, small and the sponsorship, the longer-term strategic advertisers will probably be committed to us by the end of May and then the rest of the inventory will be sold as usual in the upfront market beginning of June. So it has been very successful, high interest because of the way we can touch Canadians with it.
3253 THE CHAIRPERSON: On every platform, as you mentioned, Mr. Pelley, it is a unique opportunity and it is probably the first time it has happened, obviously, where you have the rights not just coast-to-coast-to-coast, but by every vehicle available to a modern broadcasting and telecom entity in this country.
3254 So you have heard from interveners that they are concerned that you could potentially -- and it goes back to the question of allocation that you raised earlier and that we have raised earlier -- that NHL-related revenues and expenses can be played with in such a way as to make it very advantageous to Rogers and a lot less advantageous to the broadcasting system in this country.
3255 CMPA mentioned earlier that you could be motivated to allocate more hockey revenues to the services outside your group, or outside -- or within the exempt platforms, the non-linear world. We asked this question yesterday and we asked it again today, how can the Commission be assured that the proper allocation will be made as regards revenues and expenses for the hockey property?
3256 MR. PELLEY: Well, I think in my comments we said we would submit on an annual basis, and we will submit the expenses that we allocate with digital as well as you alluded to just prior to the break. We also submitted in confidence the allocations that we currently have to those properties and, obviously for competitive reasons, we will not get into those discussions here, but if we wanted to go in camera we could certainly walk you through that.
3257 THE CHAIRPERSON: We would rather avoid that. Just back on the point, would you be willing to -- what would be your reaction to audited statements?
3258 MR. PELLEY: Yes, we would be fine with audited statements.
3259 THE CHAIRPERSON: With every aspect of the Rogers family?
3260 MR. PELLEY: Hockey?
3261 THE CHAIRPERSON: Linear, wireless, all the digital platforms, yes.
3262 MR. PELLEY: Could I take one minute?
3263 THE CHAIRPERSON: Sure.
3264 MR. PELLEY: You know, I personally don't see a challenge with it, but it is an unprecedented request by the Commission. I would like to have further dialogue and perhaps get back to you.
3265 THE CHAIRPERSON: Get back to us.
3266 MR. PELLEY: But I understand what your concern --
3267 THE CHAIRPERSON: It's also an unprecedented situation, as you mentioned yourself. At the time the deal was signed and announced --
3268 MR. PELLEY: With the National Hockey League?
3269 THE CHAIRPERSON: -- and since then, yes.
3270 MR. PELLEY: Yes.
3271 THE CHAIRPERSON: We really are in somewhat uncharted territory.
3272 MR. PELLEY: Yes. Susan, do you have...?
3273 MS WHEELER: Yes. I guess I would add that you don't have that assurance right now with any of the other broadcast groups and if it weren't for the fact that we were up for renewal, the timing is everything, we happened to do this deal right before our licence renewal, but if we had had a five-year renewal would this be a discussion that the Commission would actively be -- would this be information that the Commission would be actively seeking or would they have allowed us to exploit those rights and then at the next licence renewal in the regular course of business reviewed how we are doing that?
3274 And I frankly understand the Commission's concern about the allocation of revenues and expenses from digital to linear platforms, but that is, frankly, an industry issue that you should be concerned about for all genres of programming on all platforms.
3275 As you know, there are three vertically integrated companies who could play that game if they wanted to and I think it's only fair -- and you heard Bell yesterday talk about regulatory symmetry, I echo those comments on that basis, that this is new policy, it's new territory for us and I think is worthy of perhaps a discussion in your upcoming policy discussion.
3276 MR. PELLEY: So I think she is going to tell me that that would be an emphatic no and slap me on the wrist.
3277 THE CHAIRPERSON: Yes. Well, we appreciate your concern, but we are not in the hypothetical business, we are here, we are now and we are going to have to deal with it.
3278 MS WHEELER: Absolutely, but the licences before you right now are the broadcasting licences controlled by RBL, not the wireless and the cable licences.
3279 THE CHAIRPERSON: But you also understand that if monies are being transferred and revenues are being transferred out of the linear services into the digital services, that is a concern to the Commission.
3280 MS WHEELER: I don't agree with that actually.
3281 THE CHAIRPERSON: You do not?
3282 MS WHEELER: I think that we are monetizing -- we intend to monetize those rights on the digital platform and we intend to monetize them on the linear platform.
3283 Mr. Tomik can speak to you that there are two different sales taking place in terms of those rights for digital and for linear platforms. We are happy to provide that to you and you can monitor the reasonableness of those allocations and if you have additional concerns, then we are happy to address them and then you can see --
3284 THE CHAIRPERSON: Well, those are the concerns we would like to have addressed. We don't want to be in the situation where digital revenues are artificially inflated to the detriment of linear revenues.
3285 MR. PELLEY: No, no, I understand that. So let me make two comments. One is, we are willing to file at the end of each broadcast year, including the current one, both the linear and the digital revenues and expenses. And again, we are in the infancy stages of a 12-year deal with the National Hockey League, so we are learning more and more and digital is changing dramatically. So we will be back here in two years. So now we have -- we have now looked at it at that particular time and we have said, "Okay, this is the reality of it, we have now gone through a year and a half of the National Hockey League of an unprecedented deal and we have agreed to give you all the information you want."
3286 THE CHAIRPERSON: Yes.
3287 MR. PELLEY: The question from an audited perspective is something that, again, it is unprecedented and I think we would just like to have further discussion on that.
3288 THE CHAIRPERSON: Please feel free to respond and we will be looking at dates before the end of the day at a later date. That being said, notwithstanding the fact that it's a two-year deal as part of a 12-year deal, the Commission, in good conscience, cannot allow a broadcaster to understate revenues within the regulated platform.
3289 MS WHEELER: We completely understand that and as broadcasters we are willing to provide you with the information for our broadcast platforms.
3290 THE CHAIRPERSON: Okay. I understand that. I will let you think about that before the date that is going to be mentioned later on and we will worry about dates later on.
3291 The revenues brought forth, I'm not going to get into the actual figures, but the revenues that were deposited with us this morning I believe, do those figures include all revenues attributable to NHL programming, including mobile platforms, online and other sources?
3292 MR. MANSURI: The numbers we had filed were our current projections across the various platforms. They are not final, but those are the current estimates.
3293 THE CHAIRPERSON: And how do you --
3294 MR. PELLEY: To answer your question directly --
3295 THE CHAIRPERSON: Sure.
3296 MR. PELLEY: -- without again getting into too much information with competitors --
3297 THE CHAIRPERSON: No, I understand that and we are not going to be discussing figures at all.
3298 MR. PELLEY: So I would say the answer would be now. There is digital revenues that were filed that -- both subscription and potential advertising that were not part of that. And in that document that you have seen, under the one subject of "Other" --
3299 THE CHAIRPERSON: "Other", yes.
3300 MR. PELLEY: -- that's where some would exist.
3301 THE CHAIRPERSON: And would you be in a position to file in confidence those supplemental revenues and the sources thereof by the date that will be indicated by the end of the day?
3302 MR. PELLEY: We could, some of them. Some of them are easily -- because they are consumer subscription revenue based and we would be able to submit exactly what our plan is and what we have, based on an in-confidence arrangement, yes.
3303 THE CHAIRPERSON: That's fine. And would you today be in a position to discuss the methodology by which you attribute revenues to the mobile platform and linear platform and other platforms? If you wish, you can also do that by writing.
3304 MR. PELLEY: We would do it by writing or in camera by confidence, yes.
3305 THE CHAIRPERSON: Right. We would like to avoid in camera, if you had noticed.
3306 MR. PELLEY: I know, you keep telling me that.
3307 THE CHAIRPERSON: For a lot of reasons why --
3308 MR. PELLEY: Why?
3309 THE CHAIRPERSON: It's very complicated, as you know.
3310 MR. PELLEY: I understand
3311 THE CHAIRPERSON: -- and this is a public process and that's part of the thinking on that.
3312 MR. PELLEY: I totally understand that.
3313 THE CHAIRPERSON: Right.
3314 MR. PELLEY: But understanding that the National Hockey League rights that we have are, as you mentioned, unprecedented that allow for sub-licensing rights across all platforms, so hence the reason it's really, really sensitive.
3315 THE CHAIRPERSON: Not a problem. And some of them are of less concern than others.
3316 MR. PELLEY: Yes.
3317 THE CHAIRPERSON: The TVA deal is a straight up deal --
3318 MR. PELLEY: Yes, it's a very --
3319 THE CHAIRPERSON: -- and those revenues and expenditures will be accounted for elsewhere --
3320 MR. PELLEY: Correct.
3321 THE CHAIRPERSON: -- within the system and without the system.
3322 MR. PELLEY: Correct.
3323 THE CHAIRPERSON: That being said, maybe you would like to bring us back to the CBC. We have heard concerns, Bell, CMPA and others, and the Commission expressed their concerns yesterday in the initial discussions we had. In the sort of brokered status, if you want to call it that --
3324 MR. PELLEY: Yes.
3325 THE CHAIRPERSON: -- of that programming, your status is a producer, not a broadcaster and, ergo, it would not be subject to CPE and PNI requirements.
3326 MR. PELLEY: Right.
3327 THE CHAIRPERSON: I think we raised that yesterday.
3328 MR. PELLEY: Right.
3329 THE CHAIRPERSON: How do we deal with that? I will give you the large question and then we can drill down.
3330 MR. PELLEY: Yes. And I think I directly made reference to that in my opening comments. Let's look at TVA. If we had done a similar deal with TVA, and we could have done that deal, and we discussed it where we approached TVA and said, "Listen, we want to retain 100 percent of the inventory and we will provide the production", TVA would have done that deal and we would have assumed the advertising risk with that.
3331 The only reason we didn't do that is because we didn't have a robust sales force in Montréal and it was easier to do a different deal where they paid us a rights payment, which we could very well have done with CBC. But if in fact we had done the same deal with TVA as we had done with CBC, the TVA revenue that we had sold would go against the TVA CPE and that is just the practice of the industry.
3332 Navaid, I think you can talk about the Flames, the Oilers, Sochi.
3333 MR. MANSURI: Yes. As we talked about in the opening remarks, it is -- it is a sub-licensing deal where instead of cash being paid by CBC for the right to broadcast those games, the payment that is coming back --
3334 THE CHAIRPERSON: I understand. The problem --
3335 MR. MANSURI: -- is the formal commercial inventory as opposed to cash.
3336 THE CHAIRPERSON: Yes. I understand how CPE would be an issue in a TVA deal, but it's not an issue in the CBC deals. People may not like the word or not, it's a public broadcaster --
3337 MR. MANSURI: Right.
3338 THE CHAIRPERSON: -- and it doesn't fall under the same regime that the private broadcasters do --
3339 MR. MANSURI: Sure, I understand that.
3340 THE CHAIRPERSON: -- with CPE and PNI requirements and that is part of the issue. And in terms of TVA it's understandable, you do not understand the market the same way you understand English Canadian market and they are the best -- the people that are best placed to monetize that content on every platform in Québec and amongst people that want to consume hockey and French across Canada.
3341 Those aren't the issues. The issue is that if you are going to be in and out with respect to your CBC revenues and expenses --
3342 MR. MANSURI: Sure.
3343 THE CHAIRPERSON: -- that's an issue.
3344 MR. PELLEY: I am troubling with what the actual issue is, to be totally honest. I see that this is not new money in the system, this is not new money out of CPE, CBC was using that money to pay for production and pay for rights, it wasn't like they were actually selling the revenue and using that to produce Mr. D.
3345 THE CHAIRPERSON: Well, it went into the general fund and that's not the issue. This is a private broadcaster, that is Rogers, those profits, if there were any, were put towards programming and the general budget of the CBC.
3346 That's not the issue right now, we are going forward. And going forward in your CBC deal, you must understand that there is a potential for revenue there that will not be allocated -- that will not be subject to PNI/CPE spending. That is the concern obviously. Maybe I will let Madam Wheeler address that question.
3347 MR. PELLEY: I know you want to --
3348 THE CHAIRPERSON: This is not a strictly --
3349 MR. PELLEY: I know. I know, but it wasn't --
3350 THE CHAIRPERSON: -- a business question, Mr. Pelley.
3351 MR. PELLEY: It wasn't subject to PNI or CPE beforehand. So okay, Susan...?
3352 MS WHEELER: So as you mentioned before, we are providing that programming to CBC as a program supplier. Only broadcasters have a CPE, it is not in our role as a licensed undertaking that we are providing that programming, and so that's why we don't believe that there is a CPE liability associated with it.
3353 MR. MANSURI: And just to clarify on that, I mean, if we had done the same deal with the CBC as we did with TVA, we would probably not be having this conversation. I think the only thing that's different in this arrangement is how the --
3354 THE CHAIRPERSON: If you do the same deal with the TVA that you did with CBC?
3355 MR. MANSURI: Right. So if it would have been a straight sub-licence of the rights --
3356 THE CHAIRPERSON: Yes.
3357 MR. MANSURI: -- and CBC retained the revenue and paid a rights fee, we would not be having this conversation.
3358 THE CHAIRPERSON: Yes. But you wouldn't have done a straight-up deal because the CBC doesn't have a multi-platform capacity that Rogers has or that TVA has.
3359 MR. MANSURI: The only difference in this deal is that CBC, instead of paying cash for the rights, CBC is paying us with commercial inventory. That is the only difference.
3360 MS WHEELER: And it's only in the linear rights that we are granting to the CBC, it's not the multi-platform.
3361 THE CHAIRPERSON: Yes?
3362 MR. PELLEY: So what would happen if CBC hypothetically came to ourselves or CTV or Shaw and said, "We would like you to sell 100 percent of our inventory", that revenue would be counted in CBC's books, not in ours. We wouldn't be -- we would be providing a service to them, would we not? So I don't see how that differs than this.
3363 THE CHAIRPERSON: So where is the revenue -- you are telling the Commission that you are using your biggest platform, the most watched vehicle following the acquisition of NHL rights to break even and that no benefit will come to the system as a consequence of that?
3364 MR. PELLEY: I think there is significant benefit to the system. I think the benefit is that --
3365 THE CHAIRPERSON: On the CBC broadcast, strictly speaking.
3366 MR. PELLEY: Yes. I think there is significant benefit to CBC. First of all, that we have carved out promotion for the CBC to promote their programming and nothing is more valuable than the highest rated programming to promote. You don't have to look any further than in the early 1990s the way FOX launched and promoted the likes of "X-Files" and "Simpsons" and became a legitimate fourth broadcaster with CBS, ABC and NBC.
3367 Second of all, we are providing cost to CBC, or compelling programming, the most coveted that Canadians have become accustomed to for the last 62 years at break even, which they would not have been able to, they would not have been able to acquire without Rogers and us coming to the CBC and having done that deal. If in fact we had taken the rights and decided not to sub-licence any to CBC and keep it more for City Television and Sportsnet and more on Sportsnet One and Sportsnet 360 and, you know, maybe launching a new NHL type service, we could have done that.
3368 We felt it was absolutely imperative that the Hockey Night in Canada brand not only continues, but we can build it by broadcasting it on Saturday night on so many different platforms, with CBC being the main beneficiary of those rights. So I think there is --
3369 THE CHAIRPERSON: It's an excellent Pan-Canadian footprint, much more impressive than City and that allows you to better monetize the product you have paid for.
3370 MR. PELLEY: No question, and I said that as well in my opening comments as well.
3371 THE CHAIRPERSON: Okay.
3372 MR. PELLEY: Yes, I did.
3373 THE CHAIRPERSON: I don't think -- no you didn't, absolutely.
3374 MR. PELLEY: Yes.
3375 THE CHAIRPERSON: And we are not going to get anywhere further. I think we understand your position. Briefly I want to move on to local programming. We understand the position you put forward during your reply.
3376 I just want to get your thoughts and perhaps a confirmation on your part that you would accept a requirement on original local programming and that would include original news on City TV. Would the local programming be Rogers produced content and programming? Do you have a local programming obligation?
3377 MR. PELLEY: We would accept the 14 hours of exhibition requirements similar to that of our other broadcasters that we compete with on the conventional landscape.
3378 THE CHAIRPERSON: So you would not confirm that you would accept that it be Rogers produced local programming?
3379 MR. PELLEY: That's correct.
3380 MS WHEELER: No, but we don't -- but we can tell you right now that we don't have any plans to not produce it ourselves. We can't guarantee that. Right now under the local programming requirements, we could either produce it ourselves or we could have independent producers produce it for us. We think that's a reasonable requirement and it should continue.
3381 THE CHAIRPERSON: Commissioner Molnar...?
3382 COMMISSIONER MOLNAR: I just want to understand one thing, if that's okay. Ms Wheeler, you said a few minutes ago, it was not in our role as a licensed undertaking that we did the deal. So who holds the rights?
3383 MS WHEELER: Rogers Communications Incorporated.
3384 COMMISSIONER MOLNAR: Rogers Communications. And I mean, you have had some conversation -- I just want to confirm, you had talked yesterday about your accounting allocations and you gave us a sheet today. Is that sheet confidential?
3385 MR. PELLEY: Yes, it is.
3386 COMMISSIONER MOLNAR: That sheet is confidential?
3387 MR. PELLEY: Yes, it is.
3388 COMMISSIONER MOLNAR: Okay.
3389 MR. PELLEY: It is very confidential, as confidential as I can make it.
3390 COMMISSIONER MOLNAR: Okay. So you did just have a comment with our Vice Chair as well as it regards the allocation among services and you mentioned there it is confidential. I'm just having a little trouble in understanding what is confidential about what should be generally accepted, you know, accounting practices --
3391 MR. PELLEY: Right.
3392 COMMISSIONER MOLNAR: -- as it regards revenue recognition amongst services? So what is confidential?
3393 MR. PELLEY: Okay. So what is confidential is, this is --
3394 COMMISSIONER MOLNAR: Just to be clear, I'm not asking you today to tell me where it's going, I'm saying the methodology --
3395 MS WHEELER: That's not confidential.
3396 COMMISSIONER MOLNAR: Why is the methodology --
3397 M WHEELER: The accounting methodology is not confidential. We have already spoken to legal counsel and made that clear, it is the allocations on the actual NHL properties that is competitively sensitive.
3398 MR. PELLEY: Right.
3399 COMMISSIONER MOLNAR: So it is the actual numbers?
3400 MR. PELLEY: That's correct.
3401 MS WHEELER: Yes.
3402 COMMISSIONER MOLNAR: Fair enough, and I fully understand that. But how you allocate will be on the public record and people can comment on that method of allocation that you are having confirmed by your auditors?
3403 MS WHEELER: That is correct. And that accounting methodology is also subject to our auditing practices at Rogers, so it is also reviewed by our auditor.
3404 COMMISSIONER MOLNAR: Can you tell me when it is you anticipate your auditor will provide you an opinion on that accounting practice?
3405 MS WHEELER: I will ask Mona to respond to that.
3406 MS MINHAS: You know, the NHL accounting is a pretty complicated transaction, but we anticipate probably within the next few weeks we will have a much better handle on how that is going to work.
3407 COMMISSIONER MOLNAR: Thank you. That's all I have.
3408 THE CHAIRPERSON: I'm going to get back to the CBC for 30 seconds and a few more questions.
3409 MR. PELLEY: I was hoping you would.
3410 THE CHAIRPERSON: You were hoping we would or we wouldn't?
3411 THE CHAIRPERSON: You talked about the same deal with TVA as opposed to CBC --
3412 MR. PELLEY: Yes.
3413 THE CHAIRPERSON: -- and had you sub-licensed the NHL to the CBC --
3414 MR. PELLEY: Yes.
3415 THE CHAIRPERSON: -- the advertising revenue generated by the CBC --
3416 MR. PELLEY: Yes.
3417 THE CHAIRPERSON: -- would be subject to CBC's CPE requirements; right?
3418 MR. PELLEY: Correct.
3419 THE CHAIRPERSON: Under the scenario you have put forth today, Rogers is producing the content, is being paid the advertising inventory --
3420 MR. PELLEY: Yes.
3421 THE CHAIRPERSON: -- and this advertising inventory, this revenue is escaping from CPE/PNI requirements.
3422 MR. PELLEY: Why? No, it isn't. Why? So the inventory -- when CBC retained 100 percent of the inventory for the Sochi Olympics and took our inventory and sold it, and they sold it very well, that inventory is attributed to our CPE. What's the difference?
3423 MS WHEELER: And I guess just --
3424 THE CHAIRPERSON: CBC's, to the CBC's.
3425 MR. PELLEY: No, it's to ours. It's to ours, not to theirs. That's my whole point. I'm saying they are going -- I am really perplexed at this, is when CBC sold us -- when we did a deal with the Olympics to carry the Sochi Games, they produced it --
3426 THE CHAIRPERSON: Right.
3427 MR. PELLEY: -- and they sold it and we aired it.
3428 THE CHAIRPERSON: Yes.
3429 MR. PELLEY: And that revenue --
3430 THE CHAIRPERSON: And the revenue from that airing went to...?
3431 MR. PELLEY: Our CPE.
3432 MR. MANSURI: And our revenue is accounted --
3433 MR. PELLEY: And our revenue is accounted --
3434 THE CHAIRPERSON: You bought the content, you bought the content from the CBC.
3435 MR. PELLEY: No, we did not.
3436 MS WHEELER: But in terms of --
3437 MR. PELLEY: Hang on a second, we did not. It's the same deal, it's just this one is a lot larger. It's the same deal, it's just reversal. It's the exact same thing as I mentioned yesterday with OLN in 2010. We sold it, being myself and the consortium, the OLN revenue, but OLN put that particular revenue against their CPE. Do you want to...?
3438 MS WHEELER: Can I just --
3439 MR. PELLEY: Sure.
3440 MS WHEELER: -- add something in terms of your comment earlier, there's two things. Pretending CBC had a CPE and that right now they are airing hockey and that any revenues they are making on hockey is going to their CPE, their greater good.
3441 THE CHAIRPERSON: Yes.
3442 MS WHEELER: That is I guess where the presumption is not correct, because as we explained to you yesterday, the reality of sports programming on conventional is that the costs, the rights costs are really equal to the value of the inventory.
3443 So what's happening now at CBC is that the money they are spending on hockey is the money they are making on hockey, so it's revenue neutral.
3444 At this point, as a program supplier giving CBC that content and then selling it on their behalf, it's the same thing, that we are just recouping the revenue that accounts for the value of that programming. So there is no new money being lost to the system, is I guess what we are trying to say.
3445 MR. PELLEY: So I just want Navaid to add one.
3446 MR. MANSURI: And I can't confirm for sure what CBC's accounting rules are, but if they follow the same accounting rules as we have for Sochi, for Vancouver or for the other programming that we acquire from the CBC, this revenue should show up in the CRTC filings.
3447 THE CHAIRPERSON: Where?
3448 MR. MANSURI: On their returns as it has in the past.
3449 MR. PELLEY: Just like the Sochi does on ours. The same deal.
3450 THE CHAIRPERSON: The revenue that you -- the inventory that you will sell --
3451 MR. PELLEY: Yes...?
3452 THE CHAIRPERSON: -- on the CBC broadcast --
3453 MR. PELLEY: Yes.
3454 THE CHAIRPERSON: -- will show up on the CBC's revenue sheet --
3455 MR. PELLEY: It should.
3456 THE CHAIRPERSON: -- assuming they were a private broadcaster?
3457 MR. PELLEY: That is what we have done.
3458 THE CHAIRPERSON: Okay.
3459 MR. PELLEY: Yes. Then otherwise the Olympics that we just carried, and all the inventory that CBC sold wouldn't go against our CPE.
3460 THE CHAIRPERSON: We will just finish up on something and then we will go with that...
3461 So a different issue. There was some changes between the financial projections that were originally filed and new projections.
3462 MR. PELLEY: Yes.
3463 THE CHAIRPERSON: Again, we are not getting into the details, but it appears that you have a higher CPE on City and Sportsnet and a lower CPE on your Group specialty stations, the numbers people are following?
3464 MR. PELLEY: No, that's correct.
3465 THE CHAIRPERSON: Yes. All this compared to what you had previously deposited. Is that part of -- is there a rationale behind that or is that part of the changes that Mr. Pelley explained to us yesterday morning?
3466 MR. MANSURI: It's part of the changes that Keith talked about yesterday. When we initially filed the projections it was based on our forecast for 2014 at that time or, as Keith has alluded to, the projections for this year have changed and we have adjusted our forecast. So the numbers you got this morning are more reflective of what we know today.
3467 THE CHAIRPERSON: Okay. And the adjustment on Sportsnet, that would be subscription revenues that are driving the increase?
3468 MR. MANSURI: I believe it was a combination of subscription and advertising.
3469 MR. PELLEY: It's a combination of both.
3470 THE CHAIRPERSON: A combination.
3471 MR. PELLEY: Yes. Since one of the things on Sportsnet, when we originally filed, it was so --
3472 THE CHAIRPERSON: Long ago. So long ago.
3473 MR. PELLEY: Yes, but it was shortly after the NHL deal --
3474 THE CHAIRPERSON: Right.
3475 MR. PELLEY: -- and so we needed to refile.
3476 THE CHAIRPERSON: The other issue on the OMNI side of the ledger, you had originally projected 40 million by year two. If all your COL amendments were denied, your projections now show $20 million by year two if the proposed amendments to COL are denied. Give us a rationale on that?
3477 MS WHEELER: We didn't provide you with updated financials under a no-COL change scenario, but we can certainly do that. We only provided updated financials on the changes of COL scenario.
3478 MR. PELLEY: Yes. Where are you referring to 20? What is the 20?
3479 THE CHAIRPERSON: I obviously don't have some of your pink slips here with me, I don't want to get anybody into any trouble --
3480 MR. PELLEY: Okay.
3481 THE CHAIRPERSON: -- but you did mention it earlier and that's why I was sort of raising it. We can take a few minutes and go back and find those numbers for you. I think my colleagues may have some questions as well. So let's come back at 4:15 and we will go from there. Thank you.
--- Upon recessing at 1559
--- Upon resuming at 1620
3482 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.
3483 THE CHAIRPERSON: Hi.
3484 MR. PELLEY: Hi.
3485 THE CHAIRPERSON: So we're back.
3486 I just want to get clear on a couple of things and my colleagues will get clear on a couple of things and then we'll have to look at it and then we'll hopefully be in a position to close up.
3487 I want to get back to the Sochi deal, briefly. Very excited about that, Mr. Pelley, I see.
3488 So the Sochi deal, if I understand your methodology and rationale, is the following: Is that you didn't pay the CBC for the rights. You didn't put a dollar value on those rights.
3489 Is that correct, to start with?
3490 MR. PELLEY: We didn't pay for the programming rights.
3491 THE CHAIRPERSON: Exactly.
3492 MR. PELLEY: We paid for news access rights.
3493 THE CHAIRPERSON: Nothing to do with the actual broadcasting of the event in question?
3494 MR. PELLEY: Correct.
3495 THE CHAIRPERSON: There was a hockey game. There was a hockey game. It was two and a half hours. You paid for the rights to broadcast it as a news event or a sports new event. That's a different issue?
3496 MR. PELLEY: And they produced it for us.
3497 THE CHAIRPERSON: And they produced it for you, okay.
3498 And would you say you paid fair market value for the news broadcast rights?
3499 MR. MANSURI: I would say it was fair market value. It was a combined deal that included the broadcast of the Olympics as well as the rights to have extended highlights.
3500 THE CHAIRPERSON: Okay.
3501 So in other words, the CBC used your platform to broadcast a sporting event for the Olympics.
3502 Is that correct? They sold the advertising inventory? They received the sums from that advertising that they sold? So far so good?
3503 And that advertising revenue showed up on Rogers Media books?
3504 MR. MANSURI: Not all -- not 100 percent of what CBC sold, the value of the programming that aired on our platforms.
3505 THE CHAIRPERSON: Yeah.
3506 MR. MANSURI: That value showed up on our CRTC charts.
3507 THE CHAIRPERSON: Right. And that showed up as revenue against Rogers?
3508 MR. MANSURI: Correct.
3509 THE CHAIRPERSON: And you were on the hook for CPE and PNI as a consequence of that revenue?
3510 MR. MANSURI: That's correct.
3511 THE CHAIRPERSON: And how does that make any sense?
3512 MR. MANSURI: As we explained in our accounting methodology, the way we look at is it's a non-monetary transaction.
3513 The fact that we didn't pay cash for those rights, we paid by giving up our inventory, it was still consideration that was given and the value of that consideration was the value of the inventory that we gave up.
3514 It's no different than had we monetized that inventory ourselves and paid CBC cash for the amount that we monetized it.
3515 THE CHAIRPERSON: And how did you calculate that inventory based on what the CBC made on it, based on what, you know, running some rerun would get you for that inventory? How would you calculate that?
3516 MR. MANSURI: Well, currently it's an estimate. I'll tell you how we did it for Vancouver and London.
3517 THE CHAIRPERSON: Sure.
3518 MR. MANSURI: And so basically it was a consortium. It was Canada's Olympic broadcast, maybe, a consortium that monetized everything that sold all the rights. It aired on many different platforms, CTV, TSN, Sportsnet amongst them.
3519 Following the conclusion of the games we received valuations from the consortium on what the value of the commercials that were placed on our platforms and we used that basis to record the value on our books.
3520 THE CHAIRPERSON: And in this case -- I won't throw out any numbers but --
3521 MR. MANSURI: And I was just looking at -- another example is CTV, for example. If you look at the revenue from 2009 to 2010, based on their filings, it was up by 144 million.
3522 I would suspect that that increase is driven by the value of the Vancouver Olympics which were, again, not sold by the CTV. They were sold by the consortium that reflected on CTV's financials.
3523 And the same thing applied to Sportsnet as well.
3524 THE CHAIRPERSON: But CTV had access to all that revenue, even though they used the --
3525 MR. MANSURI: It was the consortium. It was the consortium, not CTV.
3526 MR. PELLEY: No, in fact -- in fact, CTV had nothing to do with the actual sale of that inventory.
3527 THE CHAIRPERSON: Right.
3528 Now, in this case just to be clear, you know, and we can throw out a 100 million, we can throw 120 million, we can throw whatever number we want to throw out.
3529 MR. PELLEY: M'hmm.
3530 THE CHAIRPERSON: It could be 10 bucks.
3531 So that revenue will find its way into Rogers' pockets, the revenue derived from the broadcast on the CBC platform, right?
3532 MR. PELLEY: Yes, and the cost. Yes.
3533 THE CHAIRPERSON: And the cost.
3534 MR. MANSURI: But just to clarify, that revenue is coming -- I just want to make sure you understand the nuance.
3535 We're stuck on this because we feel that that's advertising revenue. That revenue could have come to Rogers in the form of a sublicencing fee from the CBC. It's no different and that's the point we're trying to make.
3536 THE CHAIRPERSON: Yeah, it's in kind. It's a barter system, if you will.
3537 MR. PELLEY: No, no.
3538 Yeah, what I think Navid is saying is if we wanted to, with CBC we could have said, "CBC, just pay us x amount of millions of dollars for the rights". You sell it just like TVA.
3539 It's no different. We just choose to do it a different way.
3540 THE CHAIRPERSON: Right. And CBC should technically show that revenue on its books but the actual money will show up on RCI's books and not Rogers Media, right?
3541 MS WHEELER: That's correct. We're going -- it's a consortium model. So it's a newly-created company that holds the rights.
3542 THE CHAIRPERSON: So it will show up on the physical books of an unlicenced entity, ergo there are no regulatory commitments that come with that revenue?
3543 MS WHEELER: Similar to the consortium model, yes.
3544 THE CHAIRPERSON: Okay. I get it.
3545 Candice -- a question?
3546 COMMISSIONER MOLNAR: We're just kicking this and kicking this, but at the end hopefully we're going to understand. Sorry if we're --
3547 MR. PELLEY: That's okay.
3548 COMMISSIONER MOLNAR: It's not intuitive.
3549 I asked you about the paper that you filed regarding the NHL accounting methodology and you have just been talking about it. But just to make sure that I get it and I'm not supposing something, so this accounting methodology is the methodology that is going to be applied by Rogers Communications to allocate revenue to different Rogers broadcasting services. Correct?
3550 MR. MANSURI: This is the methodology to allocate the broadcast rights, consistent with how we've treated broadcast rights in the past, including Sochi, including London and Vancouver and exactly the same way we treat our agreements with the Edmonton Oilers and the Calgary Flames.
3551 MS WHEELER: But it's not exclusive to broadcast.
3552 COMMISSIONER MOLNAR: Okay, but just -- just to be clear because you're making me confused and I'm confused to begin with -- when you say this is to allocate rights, in fact this is an accounting methodology that allocates revenues and expenses.
3553 So it's not allocating rights. I'm talking about allocating revenues and expenses.
3554 MR. MANSURI: This accounting methodology applies to the exchange of the rights between companies when there is no cash being traded.
3555 And in this case, let's say Sportsnet for example, Sportsnet is acquiring these rights from Rogers Communications Inc. and, again, in a non-monetary way. So what is -- how do we determine what the value of those rights is? It is based on this methodology. That's what this is trying to say.
3556 And the same would apply if there was a trade of other assets between other related companies.
3557 COMMISSIONER MOLNAR: Yeah. Okay. So I'll talk about Sportsnet instead of CBC because you've kicked CBC around for a while here.
3558 So Rogers Communications would show equal revenue and expense related to the rights or would Rogers Sportsnet show equal revenue and expense, or would both?
3559 MR. MANSURI: Rogers Sportsnet would show equal revenue and costs on its financials and those revenues and costs would drive CPE calculations.
3560 COMMISSIONER MOLNAR: So any profit related to these -- to holding those rights, where do those show up?
3561 MR. MANSURI: Well, profit -- it depends on where the profits derives. In the case of Sportsnet, there is two revenue streams. So you've got subscription revenues and advertising revenues.
3562 So in the case of Sportsnet, if we record it based on this methodology, the advertising portion will match the rights costs. The subscription revenue that will stay within the Sportsnet which will drive profit and that would stay on Sportsnet's financials.
3563 MR. PELLEY: And the reason that --
3564 COMMISSIONER MOLNAR: Thank you.
3565 And this is just what I wanted to confirm. So just this is kind of a "yes" or "no" question.
3566 MR. PELLEY: Yes, okay.
3567 COMMISSIONER MOLNAR: Any advertising revenues greater than cost will show up in Rogers Communications. Any lift in advertising revenues?
3568 MR. PELLEY: No.
3569 MS WHEELER: It's on the broadcast, the platform that's broadcasted.
3570 MR. PELLEY: On the broadcast platform.
3571 COMMISSIONER MOLNAR: Those show up on the broadcast platform?
3572 MR. PELLEY: That's correct.
3573 MS WHEELER: Of the entity that's actually exploiting the right --
3574 COMMISSIONER MOLNAR: Sorry. Did I say revenues or revenues greater than costs, I said?
3575 MR. PELLEY: That's correct.
3576 MR. MANSURI: Just one second.
3577 MR. MANSURI: So from an advertising point of view, 100 percent of the advertising from the broadcast of those games will be fully captured in one of the licences for CPE purposes.
3578 MR. PELLEY: I think you're worried about that there is going to be some type of phantom revenue over here on the RCI books which isn't the case.
3579 COMMISSIONER MOLNAR: Yeah, and I will tell you what confused me about this is when I read your methodology it said, "We recognize equal revenue and expense which is determined based on the value of advertising revenue given up".
3580 MR. MANSURI: Right. So it is --
3581 COMMISSIONER MOLNAR: So you're going to assign costs associated with the rights equal to the revenue?
3582 MR. MANSURI: Exactly, which means that 100 percent of the revenue will be captured in the licence. So the advertising revenue is going to be the number that drives the cost, not the other way around.
3583 So there won't be excess revenue in excess of costs.
3584 COMMISSIONER MOLNAR: Okay. But when you consolidate at the Rogers level you cannot assign costs equal to revenue to each of your subsidiaries and have any profits. So where are the profits?
3585 MR. MANSURI: The profits, as I said -- for example, profits can be from a multitude of places. But in the case of Sportsnet the profit coming from the subscription side of it will remain on Sportsnet's financials.
3586 MR. PELLEY: And the reason that will do so is because it's not just the NHL that's driving subscription revenue. It's a part of it.
3587 COMMISSIONER MOLNAR: So what if we use City as the example? You will assign revenue equal to cost. So any profit that would result from showing the NHL programs over City, where do those show up?
3588 MR. MANSURI: In the case of -- as we said this morning, for conventional it is virtually impossible for them to be profitable or any sports costs. I don't think that that's a likely scenario.
3589 So what we're reflecting on City's financials is in fact the best case scenario that a station like City could do in sports programming which is break-even.
3590 COMMISSIONER MOLNAR: And this is going to be attested to by your auditor as the proper allocation amongst your groups?
3591 MR. MANSURI: Well, we've submitted our proposed accounting methodology. It is still being reviewed by our auditors but it's something we have used consistently in the past.
3592 MS WHEELER: But in terms of the rights allocations being equal to the value of the inventory, that's consistent industry practice for a long time.
3593 That's why you don't see much sports on conventional television anymore and that's why it's migrated to discretionary services like Sportsnet and TSN because that is the only way to make a profit on sports programming.
3594 COMMISSIONER MOLNAR: Fair enough. I guess, once again, I mean this is -- it's such a big deal and the rights are not held within the licenced broadcasting system. They are held outside of the system.
3595 So I'm sure you understand our concern is that all of the revenue that's associated with the broadcast of this properly is reflected within the broadcasting system and the costs associated with those rights are not overstated.
3596 MR. PELLEY: Yeah, and --
3597 COMMISSIONER MOLNAR: So it's really an allocation issue.
3598 MR. PELLEY: -- yeah, and the best way to explain this, and I know you now want to go in camera, is to walk you through that sheet that we gave you earlier today. And then you would get -- you would be fully -- it would be much easier to give you clarity on it.
3599 MS WHEELER: But absent going through the details, we can assure you that any exploitation of the rights on a licence broadcast platform, the revenues and costs associated with that, will stay on the licenced undertaking.
3600 COMMISSIONER MOLNAR: Okay. I think -- I think I've probably asked as much as I know. And I think this discussion may help other people who are a party to this proceeding who also deal with this to understand whether or not that's a proper allocation.
3601 Thank you.
3602 THE CHAIRPERSON: Thank you, Commissioner Molnar.
3603 The actual funds, as I mentioned earlier, will show up on RCI's books on the revenue raised, 100 million, 200 million, 50 million, whatever it is on the CBC platform.
3604 MR. PELLEY: Yes, they would.
3605 THE CHAIRPERSON: Yeah.
3606 MR. PELLEY: No different than they would --
3607 THE CHAIRPERSON: I understand.
3608 MR. PELLEY: -- had it been a sub-licence.
3609 THE CHAIRPERSON: I understand that.
3610 And just to be clear following Commissioner Molnar's questions, if there is a discrepancy between the advertising revenue generated by Rogers on the CBC platform and the allotment or the accounting that the CBC attributes to that content, what is the adjustment there?
3611 MR. PELLEY: That would be -- i.e., if I rephrase your question using the specific example, if using the consortium model in Vancouver, if they had came to Navaid and said, "We actually" -- or Hayden and said the ad revenue was worth X millions of dollars on OLN and Navaid said, "There's no chance it's worth that much".
3612 That's your question --
3613 THE CHAIRPERSON: Yeah.
3614 MR. PELLEY: -- where do you go there?
3615 THE CHAIRPERSON: Yeah. You know, if CBC records it as, you know, $100 million worth of --
3616 MR. PELLEY: And we say --
3617 THE CHAIRPERSON: -- and the actual revenue --
3618 MR. PELLEY: And we actually say it's --
3619 THE CHAIRPERSON: -- and we say it's on the linear platform is 130, what happens then?
3620 MR. PELLEY: Well, the good news is CBC doesn't have a CPE, but I don't think there is --
3621 THE CHAIRPERSON: To my original point. But yeah, anyways, go ahead.
3622 But you do.
3623 MR. PELLEY: I understand that.
3624 MR. MANSURI: It's not a situation we've encountered in the past. I'm with Keith. I honestly don't know the answer to that.
3625 MS WHEELER: Perhaps that's an appropriate question to ask the CBC.
3626 MR. PELLEY: Yeah. No, I'm not sure why that's -- I'm still -- maybe I'm like you on this particular issue. I'm not really understanding what the problem is, but that's -- maybe I'll get it eventually.
3627 COMMISSIONER SHOAN: So I'll -- perhaps I can explain what my concern is from a -- I guess I'm looking at it from a policy standpoint.
3628 So from an accounting standpoint, I see the benefit to the parties involved and I understand what you're doing and why you're doing it. But I'm looking at it -- taking a step back and looking at the arrangement.
3629 And for example, Ms Wheeler, you're obviously very familiar with radio regulation and we do quite a bit of radio regulation. We have policies on the radio side with respect to local management agreements, local sales agreements.
3630 These are situations where one or more licensed entities decide to get together, combine inventory or perhaps one entity decides it wants to give some of its advertising inventory to another licensee and work out an arrangement that way. Perhaps they want to share sales staff. Perhaps they want to share promotional staff or marketing staff.
3631 And on the radio side, we have policies in place to ensure that, prior to these situations being put into place, they come to us for approval so we can ensure the continuing independence of each licensee and we can ensure that the integrity of our licensing process is always respected.
3632 So I'm not saying that those policies apply on the TV side or that they necessarily apply in this circumstance. But generally speaking, from a policy perspective, I think perhaps there's something there that requies a bit more thought.
3633 MS WHEELER: So just to clarify, so in an LMA-LSA situation on the radio side, that involves either full management of a station from one licensee on -- and managing the business of another licensee or, on an LSA, it means that they're selling in the entire inventory available to that licensee.
3634 In this situation --
3635 COMMISSIONER SHOAN: It could be in whole or in part, but --
3636 MS WHEELER: It's generally in whole because the whole idea or the efficiencies behind an LMA or an LSA is that you can combine and reduce the amount of resources that you need to be able to manage and sell a station.
3637 And that's particularly why it's used in small markets where those resources are limited.
3638 And in this situation, we're talking about one property, not the entire CBC. So I think there's a distinction there, and it's no different than what a number of ethnic services do in terms of brokered or bartered programming where they either buy the air time and then sell it or, like we have with our independent productions and with OMNI, where we joint sell the air time with the independent producers. So I don't really see that there is --
3639 COMMISSIONER SHOAN: Well, the distinction is --
3640 MS WHEELER: Clearly, it's a bigger -- it's a bigger issue. It's a more popular program. It's on a larger scale, so I understand that. But in terms of the policy or the practice, I don't really see the difference.
3641 COMMISSIONER SHOAN: Well, the difference is it involves two licensees who are distinct entities as opposed to an arrangement you may have with an independent producer. That relationship is different.
3642 But I don't want to harp on it. I think it requires a bit more thought at our end and just so we can understand it, wrap our head around it.
3643 But certainly I understand it from an accounting perspective, so thank you for that clarification.
3644 MR. PELLEY: So if an independent -- small independent producer that owns a couple of television stations, was a broadcaster more than an independent producer, and there's a number of them that are -- that hold licences, maybe they run two or three stations, but they've done very, very well from a sales perspective.
3645 And again, to my point, CBC comes to them and says, "We'd like you to sell all our inventory" and they say, "Okay, well, we'd embark on that. We're going to have to staff up a little bit, but we'll do such".
3646 And they run three or four stations.
3647 The entire revenue would have to be accounted in the CRTC file report under CBC.
3648 So I -- I'm -- again, I'm maybe thick here, but I'm troubled by the fact that we are really doing nothing different than has been done in the past and if, in fact, we were to approach CBC and say, okay, well, we believe that you need to pay us this much in terms of rights and so forth, I'm not sure that, you know, the hockey would be on CBC.
3649 COMMISSIONER SHOAN: That may be so, Mr. Pelley, but in the situation you just described, I can understand from a revenue standpoint and from an accounting standpoint how that can make perfect rational sense. But from a policy standpoint and a regulatory standpoint, can you see that someone on the outside looking in might say, huh, CBC just gave its entire ad inventory to this three-station broadcaster. Does it not call into question some challenges with respect to its independence, its control?
3650 There are policy concerns.
3651 MR. PELLEY: So Commissioner Shoan, you are saying that the policy that has been -- that is --
3652 COMMISSIONER SHOAN: I'm not suggesting there is a policy on the TV side.
3653 MR. PELLEY: Or the -- okay. There's not a policy.
3654 COMMISSIONER SHOAN: Just the broad --
3655 MR. PELLEY: Then the industry practice that has been the norm leading up to this has probably -- has never been discussed, obviously, and is only being discussed based on the magnitude of the CBC, i.e. the consortium model that happened in Vancouver or what we do with the Flames and the Oilers, that might work from a -- it's just tough to understand that from a third party perspective.
3656 Is that what I'm understanding?
3657 COMMISSIONER SHOAN: I'm not suggesting there are any policy concerns with it in terms of anything that's been established today, so you can rest your head tonight and know that you're perfectly on side with any policies we may have.
3658 But this is the first I certainly ever heard of it, so given that it's a novel concept to myself and perhaps quite a few CRTC employees, it's something we'll have to probably think about going forward.
3659 MS WHEELER: And just to clarify, too, you had alluded to that it's a licensee selling on behalf of a licensee, and I just want to reiterate that it's not actually the licensee who's selling on behalf of CBC. Again, we're acting as a program supplier in that capacity.
3660 And there is a sales force, but it's not assigned to any particular licensed entity, so that is, I think, a distinction that's worthy of consideration as well.
3661 MR. PELLEY: Okay. This will be our last comment on this.
3662 THE CHAIRPERSON: Why the funds end up in RCI's book -- books, sorry. Right
3663 MS WHEELER: But it's going to be equal to the costs.
3664 THE CHAIRPERSON: No, I understand.
3665 MS WHEELER: So there's no profit being made, so there's no loss of money to the system, I guess is what our bottom line is.
3666 And from a public interest point of view, we think there is intangible benefits associated with having Hockey Night in Canada continue on the CBC. But in terms of money loss to the system that was alleged by some of the parties here, we don't agree with that because there was never -- there's no new money that's being lost.
3667 THE CHAIRPERSON: No, we understand your position.
3668 And I think from a layman's point of view, just getting back to Commisisoner Shoan's point, I mean, you talked about brokered programming and what happens in a lot of ethnic radio as an example.
3669 And I think people understand when I, as a programmer, pay for an hour's time on XYZ Radio Station there is an exchange of revenue, the station declares that revenue and everything that flows from that flows from that.
3670 I think when you have a rev share agreement, there, too, you've got revenues and each revenue is allotted to the appropriate entity.
3671 But a situation where I have a program -- I am my program. I'm going to do an hour's show and you're going to give me the air time for free, and all the money that I make from that show, I keep, but you, the radio station, it's on your books.
3672 That's where I think people listening at home, not the -- there's probably no one listening at home, but I think that's where people may be somewhat troubled; right?
3673 MS WHEELER: I guess --
3674 THE CHAIRPERSON: And I understand it's a practice and I understand that's how it is, but that would be -- my example is in line with the practice as ascribed today; right?
3675 MR. MANSURI: Yes, Mr. Vice-Chair.
3676 THE CHAIRPERSON: That's kind of a sweet system right now.
3677 MR. MANSURI: Just in that example, though --
3678 THE CHAIRPERSON: I get the money, you get the revenue.
3679 MR. MANSURI: The example you just gave where a program supplier is supplying a program for free to a broadcaster and is selling all that commercial, if that revenue does not show up on the broadcaster that's broadcasting it, that is money --
3680 THE CHAIRPERSON: It's offside.
3681 MR. MANSURI: -- that is money escaping the system.
3682 THE CHAIRPERSON: Right, right. I got you. You would be offside. The broadcaster would be offside.
3683 MR. MANSURI: Yeah.
3684 THE CHAIRPERSON: But not the programmer. Not the programmer. The producer. Let's call them the producer.
3685 MR. PELLEY: There's no money escaping the system here.
3686 THE CHAIRPERSON: Correct. Under your model.
3687 MR. PELLEY: Correct.
3688 THE CHAIRPERSON: Because the broadcaster is declaring those revenues.
3689 MR. PELLEY: Correct.
3690 MR. MANSURI: Correct.
3691 THE CHAIRPERSON: Commissioner Shoan?
3692 We're going to put you in the capable hands of staff before you run off, so Me Gagnon.
3693 Tu veux commencer?
3694 MR. GAGNON: Merci, monsieur le président.
3695 I believe there were two new undertakings that were taken this afternoon. I don't know if we need to go over them, but I would like to fix a deadline for them.
3696 Would tomorrow end of day be okay?
3697 MS WHEELER: Could you refresh my memory on those undertakings?
3698 MR. GAGNON: The first one is -- my notes are not very clear, but audited annual reports on revenues and expenses for NHL programming. Is that what you had?
3699 MS WHEELER: On Sportsnet programming? We don't hold the NHL rights yet, so I thought that question was in relation to the NHL. And we don't take possession of those rights until September. Or July.
3700 THE CHAIRPERSON: Right. Yearly audited statements, I think was the undertaking. Revenue, expenses.
3701 And the other ask --
3702 MS WHEELER: For what time period, I guess, is what we don't understand.
3703 THE CHAIRPERSON: Well, obviously it would have to be -- you know, your hockey rights don't start until September 1, broadcast year, or this summer, July 1?
3704 MS WHEELER: But he wants it by end of day tomorrow, so --
3705 THE CHAIRPERSON: No, no. You obviously don't have -- well, you have --
3706 MS WHEELER: Right.
3707 THE CHAIRPERSON: -- projections.
3708 MS WHEELER: M'hmm.
3709 THE CHAIRPERSON: So when would you have audited projections that you could supply the Commission?
3710 MS WHEELER: We won't --
3711 THE CHAIRPERSON: You won't have that?
3712 MS WHEELER: No.
3713 MR. GAGNON: Actually, it would be a condition of licence that that -- I think that would make more sense.
3714 MS WHEELER: Right. We did agree to file that information.
3715 THE CHAIRPERSON: But that would be end of year next year?
3716 MS WHEELER: At the end of year -- at the end of year next year for only the licensed services.
3717 MR. PELLEY: That's correct. Of the licensed services.
3718 THE CHAIRPERSON: I think there was an ask for --
3719 MR. PELLEY: There was an ask.
3720 THE CHAIRPERSON: -- other platforms.
3721 MR. PELLEY: There was an ask.
3722 THE CHAIRPERSON: I think you were going to take that away and come back to us.
3723 MR. PELLEY: We were.
3724 THE CHAIRPERSON: And that would be filed in confidence. That's the ask.
3725 MR. PELLEY: That was the ask.
3726 THE CHAIRPERSON: And the Commission will decide once the record is closed.
3727 And all we have to decide upon is when that record is going to be closed.
3728 But obviously, we would not ask you to give us audited statements of projected revenues and expenses --
3729 MR. PELLEY: Yes.
3730 THE CHAIRPERSON: -- on every platform for tomorrow, end of business day. So I'll leave you, again, in the capable hands of Me Gagnon, and I'll try not to interrupt again.
3731 MS WHEELER: Okay. And --
3732 THE CHAIRPERSON: Good luck with that.
3733 MS WHEELER: -- I'm sorry; I don't mean to be difficult, but I'm a bit confused as to what the request is for us to take away.
3734 Is whether we would be prepared to, at the end of the -- at the end of the next broadcast year, give you audited financial statements for all RCI properties exploiting NHL rights?
3735 THE CHAIRPERSON: That's the first question you have to answer.
3736 MS WHEELER: Okay.
3737 THE CHAIRPERSON: And the second -- I don't even know if it's a question, but the second is we'd like the projections -- and I don't know if you can get audited projections. You must have that, for year one and two.
3738 MS WHEELER: I don't believe we get --
3739 MR. PELLEY: We don't have audited projections.
3740 THE CHAIRPERSON: You wouldn't have audited projections.
3741 MS WHEELER: Projections audited.
3742 THE CHAIRPERSON: You would simply have projections.
3743 MR. PELLEY: That's correct.
3744 THE CHAIRPERSON: So we would like the projections. And that you can have by the end of business day tomorrow?
3745 MS WHEELER: We believe we've already given you the projections on the -- oh, projections in terms of --
3746 THE CHAIRPERSON: Revenue, expenses, allocation.
3747 MS WHEELER: For each licensed service or just on hockey?
3748 THE CHAIRPERSON: For each licensed service. The hockey deal, obviously.
3749 MR. PELLEY: That's correct. We've given that.
3750 MS WHEELER: We've given that already, though.
3751 THE CHAIRPERSON: I'm not sure you have the allocation between services. I'll just wait for staff to look at that.
3752 MS WHEELER: We filed that as the undertaking this morning.
3753 THE CHAIRPERSON: If you have, then it's done.
3754 Take your time.
3755 MR. GAGNON: I'm sorry. Are we done with the undertakings?
3756 THE CHAIRPERSON: No.
3757 MS WHEELER: So my understanding is that you wanted NHL allocations amongst our services --
3758 THE CHAIRPERSON: Yes.
3759 MS WHEELER: -- which we provided this morning --
3760 THE CHAIRPERSON: Yes.
3761 MS WHEELER: -- in confidence.
3762 THE CHAIRPERSON: Yes.
3763 MS WHEELER: We'll provide an abridged version of that for the public record.
3764 And then by tomorrow, we can respond to your question about our willingness to accept a condition of licence that we provide audited financial statements for all NHL -- exploitation of NHL rights.
3765 THE CHAIRPERSON: Licensed and unlicensed services.
3766 MS WHEELER: On the licensed services.
3767 THE CHAIRPERSON: And unlicensed, in confidence.
3768 MR. PELLEY: You're saying licensed and unlicensed, which (a) we would have to check with the National Hockey League --
3769 MS WHEELER: Right.
3770 MR. PELLEY: -- and our contract, our legal and regulatory as well.
3771 MS WHEELER: We could make a commitment to you today to do licensed services, but in terms of the unlicensed --
3772 THE CHAIRPERSON: We understand.
3773 MR. PELLEY: Unlicensed --
3774 MS WHEELER: -- we're not in a position to do that.
3775 THE CHAIRPERSON: No problem.
3776 Me Gagnon, can we wait until the close of record or do we need that tomorrow?
3777 MR. GAGNON: I believe the line for tomorrow, end of day, would be fine.
3778 THE CHAIRPERSON: Can we not wait until the close of record?
3779 MR. GAGNON: Well --
3780 THE CHAIRPERSON: Are we going to treat tomorrow as a hard stop close of record?
3781 MR. GAGNON: At this time, the record is already closed.
3782 THE CHAIRPERSON: Okay. Well, we -- en tout cas.
3783 MR. GAGNON: I think there was a second undertaking, though. I have noted -- I've noted something. Let me know if that's what you have in your notes.
3784 The Panel was looking for assurances that revenues attributed to mobile platforms were properly accounted for within the licence system.
3785 MS WHEELER: Yes, and we undertook to file each year revenues and expenses. That was our original intention, but we acknowledge that we only put revenues in our reply comments, so we will do that. But at the end of the next broadcast year when we've actually exploited those rights.
3786 MR. GAGNON: Following the filing of those undertakings, the Commission will announce that a final written comment period will -- a round of final comments will be permitted. There will be an amendment to the current Notice of Consultation in the next couple of days.
3787 And obviously, Rogers will have a final right of reply as well.
3788 This will be announced in the next couple of days. Thanks.
3789 THE SECRETARY: I think this completes Phase III of the agenda.
3790 Just for the record, Mr. Chairman, there's also six non-appearing applications on this agenda for this public hearing.
3791 Interventions were received for some of these applications. Panel will consider these interventions along with the applications, and decisions will be rendered at a later time.
3792 This completes the agenda for this hearing. Thank you.
3793 THE CHAIRPERSON: I want to thank one and all for participating.
3794 Intervenors -- there were a lot of intervenors that we did not hear from, but we have their briefs. Everything is on the record.
3795 I'd like to thank the intervenors that came and spoke on behalf of Rogers, and even those that did not, including those that did not, and everyone that participated in the process.
3796 I'd like to thank the good people at Rogers as well. I appreciate that we shipped you in here from Calgary in extremis, but I think your contribution was important.
3797 And I'd like to thank staff for their hard work. I know we worked hard to make sure everything was done. We wanted to leave a bit of a buffer in case something went really wrong.
3798 Thank you very much. I know it's been a hard little while. We thank you very much.
3799 And I'd like to thank my colleagues as well. Thank you all so much.
--- Whereupon the hearing concluded at 1656
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