TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

             TRANSCRIPTION DES AUDIENCES DEVANT

              LE CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

                      SUBJECT / SUJET:

Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /

Révision des cadres de réglementation des entreprises de

distribution de radiodiffusion et des services de

programmation facultatifs

HELD AT:                              TENUE À:

Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

140 Promenade du Portage              140, Promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)

April 23, 2008                        Le 23 avril 2008

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

               Canadian Radio‑television and

               Telecommunications Commission

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

                 Transcript / Transcription

Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /

Révision des cadres de réglementation des entreprises de

distribution de radiodiffusion et des services de

programmation facultatifs

BEFORE / DEVANT:

Konrad von Finckenstein           Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Leonard Katz                      Commissioner / Conseiller

Rita Cugini                       Commissioner / Conseillère

Michel Morin                      Commissioner / Conseiller

Ronald Williams                   Commissioner / Conseiller

ALSO PRESENT / AUSSI PRÉSENTS:

Cindy Ventura                     Secretary / Secretaire

Cynthia Stockley                  Hearing Manager /

                                  Gérante de l'audience

Martine Vallée                    Director, English-Language

                                  Pay, Specialty TV and

                                  Social Policy / Directrice,

                                  TV payante et spécialisée

                                  de langue française

Annie Laflamme                    Director, French Language

                                  TV Policy and Applications/

                                  Directrice, Politiques et

                                  demandes télévision langue

                                  française

Shari Fisher                      Legal Counsel /

Raj Shoan                         Conseillers juridiques

HELD AT:                          TENUE À:

Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

140 Promenade du Portage          140, Promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)

April 23, 2008                    Le 23 avril 2008

- iv -

           TABLE DES MATIÈRES / TABLE OF CONTENTS

                                                 PAGE / PARA

PRESENTATION BY / PRÉSENTATION PAR:

Shaw Communications Inc.                         2398 /13836

Channel Zero Inc.                                2597 /15115

The Fight Network                                2610 /15184

High Fidelity HDTV Inc.                          2622 /15241

Maple Leaf Sports & Entertainment Ltd.           2636 /15307

Canadians Concerned about Violence in            2680 /15546

  Entertainment

Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Wednesday, April 23, 2008

at 0900 / L'audience débute le mercredi

23 avril 2008 à 0900

13830            THE CHAIRPERSON:  Good morning.

13831            Madam Secretary...?

13832            LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous.

13833            I would now invite Shaw Communications Inc. to make a presentation.  Appearing for Shaw is Mr. Peter Bissonnette.

13834            Please introduce your colleagues, after which you will have 15 minutes for your presentation.

13835            Mr. Bissonnette...?

PRESENTATION / PRÉSENTATION

13836            MR. BISSONNETTE:  Good morning, Mr. Chairman and Commissioners.  My name is Peter Bissonnette.  I am the President of Shaw Communications Inc.

13837            With me today are Ken Stein, our Senior Vice‑President of Corporate and Regulatory Affairs; Michael D'Avella, Senior Vice‑President, Planning; Michael Ferras, our Vice‑President of Regulatory Affairs; Cynthia Rathwell, the Vice‑President of Regulatory Affairs and Programming for Star Choice; Jean Brazeau, Vice‑President, Telecommunications Regulatory Affairs; Dean Shaikh, Director of Regulatory Affairs; and Chris Johnston, the Senior Adviser to Shaw.

13838            Shaw was very encouraged last July when reviewed the Notice of Public Hearing that initiated this proceeding.  It was clear from the Notice that the Commission planned to consider a simplified and sustainable approach to achieving broadcasting policy objectives in a digital era and that the approach would be based on putting the consumer first.  We were very optimistic about the proceeding because the focus of Shaw's business is on maximizing innovation, choice, value and service for our customers.

13839            As we consider how to modernize the regulatory framework for broadcast distribution, two essential points about consumers must be kept front of mind.

13840            First, they can easily leave our broadcasting system if it does not offer them the choice, value and service that they want; and second, consumers today do not purchase television service in isolation.  In most cases they purchase it as a part of a broader package that can include telephone and Internet.  In fact, only 6 per cent of our customers now take basic cable service alone.

13841            It is significant, given overall government policy, that over the last seven years the prices for a basket of telephony, Internet and basic cable services have actually dropped 25 per cent.  At the same time, the penetration of our bundles due to their value has risen well over 70 per cent of our customers.

13842            Over 15 years ago in a structural hearing the Commission updated its regulatory framework to serve consumers, drive digital and promote effective competition in broadcast distribution, while continuing to ensure that the Broadcasting Act objectives were met.  BDUs accepted the challenge.

13843            Shaw, for its part, helped to create intensely competitive broadcast distribution, Internet and telephony markets.  Shaw has done all of this through risk‑taking, innovation and investment.  As a result, Shaw now serves over 3.3 million customers with high quality broadcasting and broadband telecommunications services and has nearly 10,000 employees serving our customers.

13844            Since 2000 our capital expenditures have exceeded $5 billion. This year alone we will spend another $750 million, and we will do that to expand our programming offerings by increasing capacity, introducing advanced compression and modulation technologies, consolidating headends and segmenting customer nodes into smaller, more reliable serving areas.

13845            We will continue to provide award‑winning customer service through the introduction of back office systems.  We will make our distribution systems even more reliable. We will develop new consumer applications and technologies that will enrich the viewing experiences, such as advanced interactive capabilities and set‑top boxes, and finally we will increase consumer access to high definition television by offering a low‑cost, high definition set‑top box.

13846            Risks and investments can take time to show a return. For example, it took seven years before Star Choice became profitable.  Creating a high‑quality, high‑value service for customers got us there. Ultimately, Shaw's investment in the provision of both broadcasting and telecommunications services has contributed significantly to the realization of broadcasting policy.

13847            Our investments have provided Canadian specialty services, including independent digital niche services like Game TV, WOW TV and The Fight Network with access to millions of customers.  We have offered customers in remote communities across Canada a breadth of television and other broadband services that rivals that of consumers in Vancouver and Toronto.

13848            We have helped to increase the revenue of Canadian specialty and pay services from $1.3 billion in 2000 to $2.7 billion in 2007.  We have increased the available customer base for specialty services by close to one million customers.  We have boosted the capacity of small cable systems, our own and those of others, through our satellite technology HITS QT.  We have driven dynamic competition in the provision of DTH service, as well as increased competition between DTH and cable service.  We have kept hundreds of thousands within the legal broadcasting system and used secure technology that cannot be diverted to illegal use.

13849            On the matter of fighting the black market and strengthening the broadcasting system generally, our role out of telephony and Internet service and the sale of service bundles is helping to increase basic cable penetration, particularly in smaller communities.  By embracing risk and competition, Shaw contributes to the government's objectives of driving innovation, investment and fair competition to foster a strong knowledge‑based economy.

13850            MR. STEIN:  We believe that this proceeding is the logical culmination of a number of CRTC and government reviews that should ultimately lead to the streamlined regulation of the broadcasting industry:  specifically, the Telecommunications Policy Review Panel which suggested that broadband's full potential will not be realized in Canada with asymmetrical broadcasting and telecommunications regulatory frameworks; the CRTC's 2006 report on the impact of new technologies and the future broadcasting environment, prepared in response to a Governor in Council request, which concluded that Canadians are increasingly likely to use unregulated technologies for programming content; and then recently the government's Competition Policy Review Panel, to which Shaw recommended the development of a broadband regulatory framework that would drive business growth and productivity, support a strong knowledge‑based economy and maximize Canada's global competitiveness.

13851            As Peter said, we were very positive about this proceeding when the Commission first initiated it.  We agreed with the focus on keeping our broadcasting system relevant by allowing cable and satellite to respond more flexibly to customer demands for service, innovation, quality and value.

13852            For example, the Commission expressed its desire to increase reliance on market forces.  Specifically, your notice concluded, and I quote:

"It is time to move away from the current detailed regulation and to take a revitalized approach to both distribution and discretionary programming undertakings that aims at reducing regulation to the minimum essential to achieve the objectives of the Act, relying instead on market forces wherever possible."

13853            Notably, the Commission's Notice also spoke directly to the need to regulate with a view to satisfying consumers, saying that:

"In particular, the Commission seeks to recognize the increasing autonomy of audiences and consumers, providing them with the greatest possible choice of services at affordable prices."

13854            Following that Notice, the Dunbar‑Leblanc Report was released on September 12th, raising a number of important and forward‑looking issues to be addressed.  But somewhere along the line we became concerned with the overall process of this hearing and, in particular, the shift in focus from distribution issues to local broadcasting issues.  Let's consider what happened.

13855            Following the publication of the Dunbar‑Leblanc Report on November 5, the CRTC moved to expand the scope of the proceeding to include fee for carriage.

13856            On November 30 the Commission confirmed this expansion and added distant signal issues to the hearing.

13857            Three weeks before the hearing, on March 14, the Commission announced an assumed distribution model to guide discussion at the hearing.

13858            And, on the first day of the hearing, the Commission announced a new approach yet again, specifically the five key questions that it intended to focus upon with interveners.  The Chairman indicated that all other questions are secondary or tertiary.

13859            The Commission's decision to reconsider broadcasters' demands for fee for carriage and consent to distant signal carriage is totally inappropriate.  Broadcasters have been calling for both of these measures for years.  You dismissed their most recent demands less than six months before this process began, and there is no new evidence or circumstances to justify any reconsideration.

13860            The profits of the large private broadcasters pushing hardest for these measures, CTV Globemedia and Canwest, actually increased following last year's dismissal of their demands.  As well, they have taken steps to address fragmentation by acquiring a long list of Canada's most popular specialty services.  CTV Globemedia acquired 17 new specialty services when it purchased CHUM and Canwest acquired 18 additional specialty services with its purchase of Alliance Atlantis.  Together they now control 53 operating specialty services.

13861            On distant signal carriage BDUs offered to negotiate the matter and the Commission accepted that proposal in its May 2007 TV Policy Decision less than a year ago.  Now new broadcaster proposals for retransmission consent are being entertained before negotiations have even had a chance to take place.

13862            The Broadcasting Act requires the CRTC to streamline regulation and focus on Canadians' needs and interests as it supervises the achievement of Canadian broadcasting policy in the competitive digital age.  The Act tells us that the broadcasting system should strengthen the cultural and economic fabric of Canada and it should be readily adaptable to scientific and technological change.

13863            We firmly believe in the Broadcasting Act and its objectives. The Act makes it clear that Canada has one integrated system in which every element of the system plays a role with no one role being more important than another.  As such, the diversion of this hearing to focus on the issues of local broadcasters is completely unacceptable.

13864            Michael...?

13865            MR. D'AVELLA:  So where do we go from here?

13866            Shaw encourages the Commission to implement a streamlined regulatory framework.  Our broadcasting system is now strong enough to introduce more competition and customer choice.  Cable and satellite companies need to be able to make competitive offerings that respond to consumers and are supported by new technologies.

13867            Shaw's plan for streamlining consists of three basic principles:  specifically, cable and satellite services would continue to provide the current basic service and retain the flexibility to add services to basic in response to customer demands; provide a preponderance of Canadian services in each package subject to a customer's ability to add whatever services she chooses on a pick and pay basis, on digital pick and pay basis; and adhere to the existing undue preference rules.

13868            We believe that this proposal, while appropriately simple and straightforward, supports the ongoing achievement of broadcasting policy in the context of the business and technological realities of the 21st century.

13869            We would now like to address the Commission's five key questions.

13870            First, regarding the composition of the basic package, we agree that basic should include core services and the U.S. four‑plus‑one, but that beyond those BDUs should have the flexibility to determine its composition.  Only 6 per cent of our customers purchase basic cable alone and we see no demand for a reduced basic service.  Removing popular services from basic would be completely unacceptable to our customers.

13871            Second, we do not believe that any specialty or pay service should have guaranteed access to cable and satellite systems.  Providing a preponderance of Canadian services in each package will ensure that the vast majority are carried.  Introducing a measure of competition will improve the quality of programming services as access will not be taken for granted. Removing entitlements will also allow BDUs to ensure that limited capacity can be allocated to services that deliver the greatest value to our customers.  Only in this way will the system remain relevant to Canadians.

13872            Let us emphasize that capacity will always be limited. While we invest constantly in expanding it, demand will always exceed supply.

13873            For example, we have recently reduced the number of channels allocated to our own cable pay‑per‑view service from 50 to about 30 because our system needs the capacity for new standard definition and high definition programming services.

13874            On the Star Choice side, pay‑per‑view channels have been reduced from 50 to 21 for the same reason.

13875            Third, we do not believe that genre exclusivity should be maintained to protect specialty services from competition with other Canadian or non‑Canadian services.  The only requirement for the admission of non‑Canadian services should be that they hold non‑exclusive Canadian programming rights.  This will give Canadian programmers ample opportunity to access programming while giving consumers the choice they want.

13876            In our experience, customers want Canadian services.  They do not want to be denied choice and they will look beyond the broadcasting system if necessary.

13877            If BDUs provide basic service and a preponderance of Canadian services in each package, there is no need to maintain genre exclusivity and access protections for Canadian programmers.

13878            On the question of BDU access to advertising revenue for on‑demand services and local avails, in our view, permitting such access will maximize revenue within the system and facilitate more investments in capacity, technology and the development of new services.  At the same time, allowing cable and satellite companies to access advertising opportunities will not harm broadcasters or programmers.

13879            The value of local avails on the U.S. services is less than 2 per cent, approximately $54 million of the total television advertising pie of $3.3 billion.

13880            With respect to advertising within VOD programming, we believe distributors and program owners should have the flexibility to develop business models that maximize new revenue opportunities.

13881            Peter...?

13882            MR. BISSONNETTE:  And finally, Mr. Chairman and Commissioners, our answer to the question of whether a fee for carriage should be introduced is: absolutely not.

13883            The CBC already receives $1 billion from Canadians in annual Parliamentary appropriations.  It also enjoys nearly another $100 million from Canadians every year from the CTF and it still wants more.  For the large private broadcasters, they have made it absolutely clear during this hearing that the demand for a fee is about only one thing: increasing their profitability. They have strongly resisted making any commitments to incremental spending on local programming or drama.

13884            It is unacceptable for these large, well‑financed and profitable conglomerates to demand a fee from consumers that will subsidize their own costs of doing business, their increasing expenditures on U.S. programming and their recent multi billion dollar acquisitions.

13885            And let's be clear, if the CRTC grants broadcasters a fee for carriage, broadcasters will keep coming back year after year asking for increases to keep fixing more alleged cracks in their businesses as they arise.

13886            Let's revisit briefly the entitlements that broadcasters currently enjoy, which include free spectrum that is a public resource.  They enjoy improved signal reach and quality through the delivery on cable and DTH; over $250 million a year in Canadian programming licence fee subsidies through the CTF; federal and provincial tax credits that support Canadian productions and ultimately subsidize broadcast licence fees; freedom from Canadian programming expenditures granted as part of the 1999 TV Policy Review; controlled entry by new broadcast competitors into local television markets; exclusive access to local television advertising; income tax measures that shield broadcasters from competition from U.S. border broadcasters; simultaneous substitution of local Canadian television stations over U.S. television stations; mandatory and priority carriage on cable; and extensive specific carriage entitlements on DTH.

13887            Beyond saddling customers with new costs for broadcasting services that are free over the air, fee for carriage would lead to calls by U.S. broadcasters and trade officials for equivalent consent and payment rights. This could lead to additional annual outflows of up to $570 million to U.S. broadcasters from Canadian cable and satellite customers.

13888            This exposure, the breadth of existing protections, and the fact that CTV Globemedia and Canwest have been clear that this is really about profits are reasons that fee for carriage must be resoundingly rejected once and for all.

13889            Aside from any issue of CRTC jurisdiction over fee for carriage, it would simply be bad public policy to introduce a measure that would have significant costs for millions of Canadians, including the costs of claims by U.S. broadcasters, for the benefit of a few private companies and the CBC. A decision with this kind of impact on the system and consumers should, in our view, only be considered by Parliament. This consideration should be undertaken in consultation with the CRTC and other departments of government, including those responsible for copyright and trade policy.

13890            Local broadcasting is not what this hearing was intended to be about.  While it is one of the many important elements of our broadcasting system, nothing in the Broadcasting Act identifies it as a cornerstone, nor do over the air broadcasters have a monopoly on local content.

13891            Shaw TV productions, for example, produces thousands of hours of local programming every year.  This programming is considered a critical source of local news, information and entertainment in the communities that Shaw serves.

13892            In closing, this hearing was initiated to review the framework for broadcast distribution and discretionary programming services.  We commend the Commission for the understanding it has exhibited in the initial Notice of Public Hearing that consumer market and technological forces create a need for more streamlined and flexible regulation of broadcast distribution and discretionary services.

13893            We hope the consumer focus of the original Notice of this proceeding can be regained.  Looking to the past will leave us unprepared for the digital future.  We encourage the Commission to accept the reality that continuing to provide Canadians with strong Canadian programming choices is best achieved through competition, innovation, not through protection, subsidy and entitlement.

13894            Thank you, Mr. Chairman.

13895            THE CHAIRPERSON:  Thank you very much for your submission.

13896            At the outset, let me say that I am somewhat disappointed in not seeing Mr. Shaw here.  Given his vociferous views on this hearing, his correspondence, et cetera, I thought he would have done us the courtesy of showing up personally. Sending you, which in his terminology I would characterize as a "B Team", I don't think adds to the process.

13897            That being said, let's deal with ‑‑ this is not meant in any way meant as disrespect to you.  I very much appreciate your submission and I like the way you orderly went through the points.  But since we have been subject to his criticisms, I would have appreciated the opportunity to deal with him on some of these issues one on one, or at least personally in this context.

13898            Now, let's go through.  You have sort of undertaken a reading of the tea leaves in suggesting where we are going and what we are doing.  Let me assure you, this hearing is exactly what we stated in the PN. When I asked five questions at the outset and said these are primary, it is because my mind works logically and from one issue to another, et cetera.

13899            It seemed to me until we make a decision on those issues, we can't deal with the other ones because they are all interconnected. That does not presuppose any outcome of those.  I wanted to know the views of people on those five issues.

13900            You have heard them over the last two and a half weeks and now I have yours and let me go through those with you one by one.

13901            First of all, basic package.

13902            If I understand it, you are suggesting basically yes, there should be a basic package that should be a buy‑through.  You, Commission, dictate what is the minimum that should be in there.  We will then, in our commercial judgment, compose the basic package as large as we think is in the interests of consumers, consumer interest being your driving motivation.

13903            Is that correct?

13904            MR. BISSONNETTE:  Absolutely.  It's about consumer choice and our consumers have expressed to us through the way they buy our services what they like about our services.  They see value in our services and we believe that the constitution of the basic cable package is satisfying the needs of our customers. And to change it by either skinnying it down or moving maybe higher content Canadian services but less attractive Canadian services such as news, you know, which has been suggested, would be not well accepted by our customers and it would be technically impractical as well.

13905            THE CHAIRPERSON:  Okay. We have heard sort of three basic views here and I would like you to tell me why one is the one that you put forward.

13906            Another one is saying there should be a basic minimum package. It should be all Canadian, no foreign, and basically the emphasis being on affordable.  There are lots of Canadians who want to have cable or satellite access, but in effect they are asked to by this package when all they can afford is this little one.  That's one.

13907            Another one is saying that no, there should be a basic package but it should include at least one fourth of four‑plus‑one. And then yes, you can add on it, but a least you should offer it to give in effect consumers the choice: buy the basic or buy the extended basic.  And of course you will make the extended basic as commercially attractive as possible. This is obviously your interest and you will do it in such a way.

13908            You have chosen the third option, which we just discussed.

13909            Explain to me why either one of the other two options, from your view, is not in the interest of either the system or the Canadian consumer.

13910            MR. STEIN:  Well, there has been a lot of blood, sweat and tears that has gone into the definition of "basic" ever since 1959, and I would just make a few comments about it.

13911            The first is that the basic has always included the U.S. ‑‑ well, in Edmonton starting with U.S. one‑plus‑one, and that wasn't very acceptable.  And then that was expanded into the U.S. four‑plus‑one. The whole basis for the basic entry point into the provision of cable services, that first contact is with the consumer is on basic.  So it is important.

13912            As Peter pointed out, only 6 per cent of our subscribers only take basic, but it still remains is the fundamental access point to the system.

13913            THE CHAIRPERSON:  That is in effect the enhanced basic.  Right?

13914            MR. STEIN:  No.

13915            THE CHAIRPERSON:  The one you offer.

13916            MR. STEIN:  Basic basic. The basic, not the enhanced basic; the basic.  The basic which ‑‑

13917            MR. BISSONNETTE:  The basic we currently offer our customers.

13918            THE CHAIRPERSON:  Okay, let's make sure we know what you are talking about.

13919            MR. BISSONNETTE:  Yes.

13920            THE CHAIRPERSON:  What is your basic basic, as you call it?  What does that include?

13921            MR. D'AVELLA:  Just to provide you with one example ‑‑ we are just looking at the Calgary channel lineup ‑‑ it consists of about I think about 35 basic services, but only 6 per cent of our customers only take that package.  So the vast majority of our customers take a combination of packages that would include the tiers, which are not part of the basic service ‑‑

13922            THE CHAIRPERSON:  Yes, sure.

13923            MR. D'AVELLA:  ‑‑ and other services. It could be telephony, it could be Internet, it could be something else.

13924            THE CHAIRPERSON:  Walk me through the Calgary basic basic of 35.  What is included in that?

13925            MR. BISSONNETTE:  Okay.  We have the local broadcaster CFCN.  We have KX ‑‑ we have the four‑plus‑one services.  We have our French CBC service, the local broadcaster.  We have Shaw Television, Shaw TV.  We have CMT, Country Music Television.  We have KREM, a Spokane service.  We have Access Alberta.  We have the PBS from Spokane; CBC Newsworld/Voiceprint.  We have Treehouse TV.  We have E!, the local broadcaster.  We have The Weather Network.  We have YTV and TSN; KAYU, the U.S. of the four‑plus‑four. We have Score; Home and Garden Television,  We have Crossroads, which is a mandated carriage service.  We have CTV Newsnet; Business News Network; MuchMusic; MTV; MuchMoreMusic; Canadian Learning Television; APTN; Vision TV; CPAC; CFTM TVA Montréal; and RDI.

13926            THE CHAIRPERSON:  Okay.  But if I understand, it is a very small basic but it is more than what is sort of normally referred to as basic basic, which is over the air mandatory analog and Cat 1s plus 9(1)(h).

13927            You have a few in there which don't fall into that category, not many but ‑‑

13928            MR. BISSONNETTE:  Yes.

13929            THE CHAIRPERSON:  If I understood that correctly.

13930            MR. BISSONNETTE:  Absolutely. We have what we consider to be a fulsome basic service.

13931            And I think, as we have said to the Commission in previous consultations, our view is for the foreseeable future that we will offer our customers an analog package, a compelling analog package.  Even though we are fully digital in many of our systems, customers have three and four outlets, so they still have their analog television sets and we believe that the value of our services to our customers in terms of the video services they receive from us is also captured in that analog offering, which would be available in children's rooms, in dens, in workout rooms and will be still available on analog television.

13932            In fact, once we have fully converted to digital, it is still our intention to convert digital over the air signals to analog signals so our customers continue to enjoy analog reception on their TVs.  We think that is a competitive advantage.

13933            The fulsomeness, if you will, of our basic cable service is something that has evolved over time and our customers have asked for that type of the basic service.  We believe that they see the value in that service and it is, if you will, a cornerstone to our cable services, because from there more attractive but discretionary analog services are available to our customers.

13934            THE CHAIRPERSON:  Okay.  Now help me out on this.  This is your basic basic.

13935            MR. BISSONNETTE:  That's our basic service.

13936            THE CHAIRPERSON:  It is a very modest package.  It is what you consider sort of ‑‑ it is probably affordable to most Canadians.

13937            Now there are some others, and I'm sorry if I picked the example because it is the only one that comes to mind, but Rogers in Toronto I'm told the basic package is $65.  $65 is not $35 obviously.

13938            I don't know what the prices are, et cetera, and I don't want to pick on Rogers, but there are others who have larger packages.

13939            What is our role here?  You are offering a basic basic which seems to sort of address both consumers' choice and affordability; others do not.

13940            So what should we do?  Would you just let the market decide or should we, as the CBC has suggested, mandate an absolute minimum basic that people have to offer?

13941            If they don't want to take it, that's fine.  If they think the enhanced basic is better value for bucks, et cetera, let them, but at least provide this sort of outlet, so that the least well‑off in society have access to decent television by having this basic mandatory package.

13942            MR. STEIN:  We wouldn't really want to comment on the Rogers' model, because we have always taken the approach of trying to offer a basic that is basic, and then offering choice beyond that.

13943            We have, in fact, been criticized more for not having a bigger basic.

13944            Essentially, I think the rule that we would suggest for the Commission is that the Broadcasting Act specifies what services or priority services should be carried.  It specifies certain considerations for the Commission, in terms of coming to mandatory decisions.

13945            And we think that, beyond that, people should be able to respond in the marketplace.

13946            The marketplaces are not uniform across the country.  The ability to respond in Calgary and to deal with consumers in Calgary may be very different from the situation in Toronto.

13947            It is also very different between Calgary and Lloydminster, and small communities.

13948            There is a variation there.

13949            I think that the main consideration we would say is, if consumers aren't complaining about it, then why change it?

13950            MR. BISSONNETTE:  And what is the cost of change?  And what is the benefit of change, as well?

13951            We don't see, frankly, Mr. Chairman, that by removing some of these services, that would really impact the cost of the services that we offer on basic, just because of some of the costs associated with providing that service.

13952            THE CHAIRPERSON:  Let me put it differently, because I want to be sure that we understand.

13953            What if we said, "Fine, price it however you want, but, at the very minimum, you have to offer one package which consists of OTA, one set of four‑plus‑one, mandatory analog and Cat 1, and 91H"?

13954            Price it at whatever you want, offer whatever extended ‑‑ 1, 2, 3 ‑‑ you want, et cetera, but at least that should be there, and at the price that you, obviously, set.

13955            So that customers know, "I want nothing else but the absolute bare‑bone basis.  That's what I get for this price."

13956            Would that be terribly objectionable to you?

13957            MR. BISSONNETTE:  We don't think it would be appealing to our customers.

13958            We agree that there are core services that should be in basic, but we also suggest that we have the flexibility within our packaging to address what our customers are saying is meaningful to them as part of a basic, over and above the core services that are proposed by the Commission.

13959            THE CHAIRPERSON:  You didn't answer my question.

13960            If I asked you to offer ‑‑

13961            MR. BISSONNETTE:  That was my (b) answer.

‑‑‑ Laughter / Rires

13962            THE CHAIRPERSON:  What I am trying to get at is, you say that customers are not interested. They won't buy it.

13963            That's fine.  In that case, there is no harm for you in offering it on that basis.

13964            On the other hand, if there is indeed a segment of the population that is interested in that basic package, regardless of whether it is 2 percent or 10 percent, they would have access to it.

13965            And I, frankly, fail to see where the hurt is to you.

13966            MR. BISSONNETTE:  It is just the practical reality of skinning down the basic.  The method of doing that in an analog environment is to use traps, and in order to put traps into customers' homes ‑‑ the cost of that would be prohibitive, and the intrusion, if you will, to what customers are already enjoying ‑‑

13967            Customers actually take basic cable, primarily, for the over‑the‑airs and for the four‑plus‑one services.

13968            Our customers in Victoria love PBS.  In order to make that a discretionary service, we would have to trap those customers out.

13969            THE CHAIRPERSON:  I fully understand that.

13970            Let's move to 2011.  We are now in an all‑digital world.  What is your answer then?

13971            I know you told me that you are still going to offer analog as part of good marketing, et cetera.

13972            By the way, when you were down in the States, I understand that the Americans are going to do that for a period of three years after 2009, as well.

13973            MR. BISSONNETTE:  Yes.

13974            THE CHAIRPERSON:  But we both know that analog ‑‑ one of these days it is going to be out of the picture.  So, since we are looking forward and we are talking prospective, I am positing that, with an environment where everything is digital, what would be your answer in that environment?

13975            MR. BISSONNETTE:  Obviously, if we are fully digital, which we won't be for a long time, for the foreseeable future, but when we are fully digital and our customers are able to enjoy digital services on all of their outlets, we would have more flexibility in making that kind of package offering.

13976            We could offer a core service, and then we could, again, make any services beyond the core service a discretionary service.

13977            However, Mr. Chairman, for the foreseeable future, we will have an analog offering, and in order to make that kind of package shift, we would have to trap.

13978            MS RATHWELL:  If I may, Mr. Chairman, just from the DTH perspective, Star Choice is already an all‑digital service, so the introduction of a basic basic, if you will, would still have a lot of negative impact for us, even currently.  It would be disruptive to our operations.  It would cause a lot of customer confusion and complaints, and the volume of interaction with our customer service people, even at that first level, let alone changes that would be necessary to our billing and provisioning systems, would be very, very costly and very disruptive.

13979            It's a highly competitive environment for us, and we are trying to focus all of the resources we have on increasing our capacity and innovating to meet different kinds of challenges.

13980            Unfortunately, for us, this wouldn't be a very useful, or efficient use of our resources.

13981            We have received no complaints in the last two years, that we know of, concerning the price of basic, for example.  So we are confident that we are in tune with our customers and provide them with the value they are looking for on basic.

13982            THE CHAIRPERSON:  You made a dangerous statement, you opened up Star Choice.  I happen to be a Star Choice customer, so let me just probe what you said a bit.

13983            I don't know whether there is demand for it.  I certainly don't want a basic basic service. I am not speaking for myself.

13984            But, surely, when I signed up with you, you told me, "Here is our basic package.  We call it Bronze, and there is Silver and Gold, and you can add to it."

13985            There is wonderful flexibility, and everything is differently priced, et cetera.

13986            For the life of me, I don't understand why, when you say that it would make your life more complicated to offer in that menu, which is very complex ‑‑ there are all sorts of combinations possible ‑‑ that you put in there a combination, "Here is our basic basic," which is actually less than what you call Bronze.

13987            MS RATHWELL:  I think the difficulty would be twofold.

13988            In the first instance, as I noted, it would confuse the market.  They are used to getting Essentials.  They think it's a good package.  They seem to be responsive to the price.

13989            So, suddenly, they are presented with a choice, and that is going to drive a lot of activity at our service levels.

13990            Beyond that, in terms of systems, our current systems have sort of limited capabilities.  We have a certain number of packages.  It is very flexible, you are correct, and we would like to continue to try to work on that, but adding another layer of basic would just add extra complexity to the backroom systems, which we are not sure we could cope with.

13991            THE CHAIRPERSON:  Okay.  Let's go to the next subject, access.

13992            You, I am sure, have listened to the proceedings over the last two and a half weeks.  As you say, there are an awful lot of people who are arguing for one sort of access or another to be mandatory, or retained, or to increase the present access, et cetera.

13993            Other than you, I don't think there is anybody ‑‑ there is absolutely nobody who has advocated this sort of radical ‑‑ basically doing away with mandatory access.

13994            How do you explain you being such an outlier on this?

13995            MR. STEIN:  I will start, and I am sure that others will want to join in on this, in terms of access.

13996            We feel that now, when you look at the structure of the industry, you have, primarily, the specialty services ‑‑ and there are other major organizations ‑‑ CTV, Globemedia, Global Canwest, Corus, Astral, et cetera ‑‑ they have enough clout to be able to negotiate access arrangements.

13997            There have been certain corporations that we have had a lot of success with, and with certain others maybe a little less success.  But, generally, we have been able to work out commercial negotiations and come to arrangements about what services we carry and what we don't carry.

13998            It is a very tricky issue.  The thing is, when you put a service on, as J.R. always says to us, the hardest thing is taking a service off.

13999            If you only have ten subscribers to a service, it is difficult, so you have to make a really conscious judgment about what services are going to be on, and how that works out.

14000            But for the major players, it is a game of equals, in terms of negotiating that, looking at what is attractive and what to put on.  So we don't see the necessity for access.

14001            Now, the independents do make a good point; that is, they don't have ‑‑ we think they have a lot of clout, but they may not because they don't have tie‑ins and "I'll carry this, and not carry this" type of arrangements.

14002            On the other hand, they have a number of distributors that they can go to.

14003            What we found was, for example, one service, Wild TV, goes to Bell and they get carried by Bell, and then we get our customers clamouring for it.

14004            It seems to me that the opportunities for the services are very strong.  They can go to at least seven strong distributors out there ‑‑ there aren't two, there are seven out there ‑‑ MTS, SaskTel, now TELUS, Bell, Shaw, Videotron, Bragg Systems, Cogeco ‑‑ and if they get on one of those, that's a breakthrough in terms of them saying, "Okay.  I can now go to Shaw and I can demonstrate that I have been getting this customer response and it's a good service."

14005            If you look at any other cultural activity, the shelf life is the most attractive thing you can go for, but you have to put forward a case for it.

14006            We are staying at The Chateau Laurier, and when we walk by the Art Gallery, it is very significant.  How do artists get into the gallery?  Nobody regulates that.  Nobody protects them as artists.  They probably should be, but they aren't.

14007            They have to get that shelf life, but they have to argue with the galleries.  They have to make commercial arrangements with the galleries.  They have to be able to drive themselves to do that.

14008            We feel that programmers should be able to do the same thing.

14009            The final point I would make is that Jay Switzer, in an article in The Broadcaster magazine, said that we need more failures.

14010            That is part of the problem.  The system gets so clogged up with a whole bunch of services, that just aren't going anywhere, that you can't take off.  Therefore, it doesn't allow for the entry of new services, because they just clog the whole system up.

14011            We feel:  Look, why don't we do it this way.  Why don't we just say that there is no guaranteed access, but the Commission has in place rules for undue preference, for making sure that commercial negotiations are carried on in an appropriate manner, and we don't disagree with that.

14012            We think that would work quite well, but there would be no guaranteed access.

14013            I think that André Bureau made the point ‑‑ we don't always agree with André, but he did make the point that, a lot of people, once they get on, they put their feet up and it's like, "Okay.  We're fine.  We don't have to do anything any more."

14014            That's the problem we see.  We think that if people had to fight to keep on the system, they would do a better job, and they would, in particular, do a better job on Canadian content.

14015            THE CHAIRPERSON:  I am glad that you mentioned André Bureau ‑‑

14016            MR. STEIN:  Maybe I shouldn't have.

‑‑‑ Laughter / Rires

14017            THE CHAIRPERSON:  We have heard from all sorts of people.  We have heard from the independents, whose basic claim is "We have no clout."

14018            We have heard from Allarco, who actually has mandatory carriage, who says "We can't get on.  A year later, we still don't have a deal" ‑‑ with you, among others.

14019            We have heard from Astral, one of the largest specialty owners in this country, who is saying, "Notwithstanding our clout, we have huge difficulty getting carriage."

14020            And they also make the further argument that ‑‑

14021            Essentially there are five ‑‑ IPTV is not ‑‑

14022            How many are there?

14023            Three large terrestrial and two satellite, so that's five. There are smaller terrestrials, obviously, and IPTV, but those are the big ones.

14024            If you don't get carried by one of them, that would put the viability of some of these channels, right away, into jeopardy.

14025            If you don't get carried by two, you probably don't have a market case any more.

14026            I find it somewhat difficult for you to say that.

14027            And then you say, once you have carriage, it is hard to turn them off; and in the next sentence you say, "I don't have the ability to turn somebody off, it's mandatory carriage."

14028            Frankly, I am hearing an awful lot of dissonant noise here, and I am having trouble sorting it out.

14029            I hear somebody like Astral, who has been in the business for many years, who is successful, saying that getting access is a huge issue, and then you come along and say, "Well, it's no problem.  We should have a free‑reigning system.  And, yes, there are five of us, but we will put people on, because if one of us carries it, the other one has to carry it."

14030            And, yet, that's not the case, you don't have identical offerings.

14031            MR. STEIN:  First of all, I don't want to be confusing about this.  Let me be very clear.  We don't believe in access rights.  Right? Let's be clear about that.

14032            Secondly, the reason that the negotiations are tough and difficult for people is that, when we do put something on, we realize that it is difficult to then take it off.  So we want to make sure that, when we put it on, we have some assurances that this is going to be successful going in.

14033            The third point is that when you say there's, like, three large terrestrial distributors, well, you know, MTS and Sasktel are horrendous competitors as far as we're concerned.

14034            I mean we lost in Winnipeg 25,000 or more subscribers to MTS and in Saskatoon we have a huge battle going on with SaskTel and I'm sure Access is having the same thing in Regina.

14035            So, there is lots of opportunities for people to go to competitors and say, look, I can differentiate you.  I can make ‑‑ you know, if I give you my package, you put me on your system, then you can sell against Shaw.

14036            I remember sitting down with the Premier of Manitoba saying, well, I'm recommending ‑‑ you know, I'm recommending, you know, this kind of a package because, you know, that will help you beat the other guys, whether it's Bell or whatever.

14037            So, there's lots of opportunities out there.  I think that people are just presuming protection and it gives them a different mindset about going in.

14038            And I think that the more you're able to respond to consumers and the more that we're able to emphasize Canadian content as an advantage, then I think the better the system will be.

14039            MR. D'AVELLA:  The only other thing we might want to add here is, you know, with respect to the two that you mention in particular, the Allarco and Astral, these are business negotiations.  We got a deal done with Allarco.  It's a tough deal.

14040            There are four standard definition channels they want launched and two HDs.  It's a big package.  It took us time to work it out, but we finally got it done.

14041            With respect to the other one, I'm not sure specifically what Astral was referring to but, you know, a lot of these guys come to us and say, carry this service and, by the way, we want digital basic carriage.

14042            And we're saying, well, wait a minute.  We offer a discretionary digital service here.  If you're prepared to take the chance, if you think you've got a good enough service and you think customers are going to buy it, we'll offer it the way we offer everything else.  But we're not going to give you digital basic carriage, it's too expensive for us, customers don't want it in that fashion.

14043            So, these are all business negotiations.  It's all part of, you know, the dynamic process of actually negotiating with these programmers who do have a certain amount of clout.

14044            THE CHAIRPERSON:  Well, I understand that.  I mean, I have no problem with business negotiation and each party looking out after their own.

14045            But the argument that is being presented to me and that is, No. 1, it is very unequal a negotiation, you have all the trump cards, the others have none, if they don't get on they're dead.

14046            Secondly, in terms of economic size, other than Astral, the others are really pygmies compared to the BDUs and certainly that even once getting on, on what terms and how do you get treated.

14047            Yesterday for instance we had APTN here talking here about not being treated contiguously, notwithstanding that they are mandatory carriage, get bounced up all over the schedule and are hard to find, et cetera.

14048            So, I hear a litany of complaints from everybody about the BDUs' power being totally disproportionate to that of the broadcasters, basically running the roost and pushing broadcasters around.

14049            The two things that are protecting them they say, and they are minimal protection according to them ‑‑ and that is what I wanted to hear from you ‑‑ access is one, genre is the other ‑‑ we'll come to genre in a moment, let's stay with access, so...

14050            And, as I say, you are the only one who basically says preponderance and that is all.  We can carry anybody, Canadian or foreign as long as, I presume, and you say an offering of performance, most of the others say a subscription of performance, that means at least they have to buy 50 plus one.

14051            So, I would like ‑‑

14052            MR. BISSONNETTE:  Mr. Chairman, we ‑‑

14053            THE CHAIRPERSON:  So, I would like to understand why you feel this extreme position in your field?

14054            MR. BISSONNETTE:  Well, Mr. Chairman, we have said that the packages that we will provide in a digital realm will be preponderance packages.

14055            So, these would be delivered to a customer.  So, a package that is delivered to a customer will have a preponderance of Canadian services and that's why we take the position that having those kinds of preponderance rules provides programmers with an opportunity to be made ‑‑ to be put in front of our customers.

14056            And then I guess the factor that differentiates them is the quality of their programming.

14057            THE CHAIRPERSON:  Okay.  Let me just understand that.

14058            Because I read your submission last night again ‑‑

14059            MR. BISSONNETTE:  Yes.

14060            THE CHAIRPERSON:  ‑‑ the February 28th. And you are telling me, which you say in your February 28th, that it is a preponderance of offering, but you say by way you offer it, so packaging it in effect, de facto, will be a preponderance of subscriptions.

14061            MR. BISSONNETTE:  Exactly.  The services that customers will receive when they receive a package will be a preponderance of Canadian services.

14062            THE CHAIRPERSON:  Okay.

14063            MR. D'AVELLA:  Provided we don't restrict their ability to buy a single service after they've purchased the basic tier.

14064            MR. BISSONNETTE:  Which still is a ‑‑

14065            THE CHAIRPERSON:  Explain that to me, please.

14066            MR. BISSONNETTE:  I think what Michael is saying is that the basic tier has Canadian services on it and where a customer is subscribing to our basic tier, that they also have the flexibility through the technology to order a pick‑and‑pay service in a digital realm.

14067            THE CHAIRPERSON:  So, can I through pick‑and‑pay service wind up with more American channels than Canadian?

14068            MR. BISSONNETTE:  No.

14069            MR. D'AVELLA:  No.

14070            MR. BISSONNETTE:  It would be impossible.

14071            THE CHAIRPERSON:  Why?

14072            MR. STEIN:  It would be impossible to ‑‑

14073            THE CHAIRPERSON:  I thought I just heard that pick‑and‑pay is not subject to preponderance.

14074            MR. D'AVELLA:  No, but ‑‑ I mean, the objective of pick‑and‑pay is to allow them to buy one or two channels, it's not to allow them to buy 15 channels on a pick‑and‑pay basis.

14075            Any package we create in a digital world will be preponderantly ‑‑ is that a word?

14076            MR. BISSONNETTE:  Yes.

14077            MR. D'AVELLA:  Canadian. So, we just can't restrict their ability to say, look, I've bought the basic package which consists primarily of Canadian services, but I do want to buy Fox News on a stand‑alone basis as one service, but overall he is predominantly Canadian.

14078            THE CHAIRPERSON:  So, if as a regulator I buy into the Shaw scheme, at the end of the day there won't be a single Canadian who will have a preponderance of foreign channels over Canadian channels buying from Shaw?

14079            MR. BISSONNETTE:  That's correct.

14080            MR. FERRAS:  They would have to buy our basic service and then in our basic digital basic there are so many Canadian services in there and you need to have that pieces of equipment in order to get the digital and with the digital, our digital service there's already Canadians bundled in there.

14081            And we're also making the commitment that any digital package that we offer will have a preponderance of Canadian services in it.

14082            So, on top of that a Canadian can buy a pick‑and‑pay Canadian or U.S. service, but there's just not enough U.S. services to buy on that basis to ever get to that situation you're describing.

14083            THE CHAIRPERSON:  Okay.  This was an elaboration of what Mr. Bissonnette says, but it doesn't take away from his clearcut answer which was no.

14084            MR. BISSONNETTE:  Yeah.  That's exactly the answer.

14085            THE CHAIRPERSON:  Okay.

14086            MR. STEIN:  Can I just make a point because you raised the issue about people finding it very difficult to talk to us and not liking us and all this type of thing.

14087            But, you know, we have 3.3‑million customers who love us and they love us because we give them choice and that is something that the programmers never liked from the beginning.

14088            I mean, most of the battles and disputes we've had with the Commission are people say, oh, we want to be on this package, we want to be on that package, and we've always said no.  We want our customers to have a choice.

14089            We've been having this battle with programmers ever since ‑‑ in the late 70s.  And, you know, J.R. and Peter and I went, when the negative option disaster took place, we went across and met every Minister of Consumer Affairs in the provinces we served and we said, we have two conditions in terms of how we offer our services.

14090            One is, we never take anything away from anybody that they don't want taken away; and, No. 2 is, we never force them to take something they don't want.  So, those are the two rules we had going in when we launched digital.

14091            And we also launched digital on the basis that we gave ‑‑ and maybe it wasn't from our point of view, even our point of view the best thing to do ‑‑ was a pick‑and‑pay environment where you could pick five services and people loved that.

14092            We didn't just complicate them with all kinds of packages, et cetera, et cetera, it was a pick.

14093            Now, the programmers didn't like it and some of them have argued at this proceeding, they compare our penetration rates for their services on Shaw as opposed to ‑‑ or Star Choice as opposed to other services.

14094            But we give consumers a choice and if the programmers don't like us because we give people a choice, that's their problem because we have 3.3‑million customers out there who like it.

14095            And the preponderance model ‑‑ just to finish ‑‑ the preponderance model actually guarantees them more access because we have to be able to offer the Canadian services.

14096            Those are the ones we really want to have are good, Canadian services.

14097            THE CHAIRPERSON:  Nobody has said that Shaw doesn't treat its customers well, but the complaints are that Shaw doesn't play by the rules.

14098            MR. STEIN:  J.R. ‑‑

14099            THE CHAIRPERSON:  That is quite a different rule, that is quite a different issue.

14100            MR. STEIN:  Yes.

14101            THE CHAIRPERSON:  Whether it is justified or not, I am not commenting on it.  I am just saying, all these things we have heard here in two and a half weeks, nobody says Shaw treats its customers badly, that was never the issue.

14102            The issue was, what are the rules, do they favour them? Does Shaw abide by them?  Do they play it fast and loose or do they interpret them extremely?

14103            That is the issue.

14104            MR. BISSONNETTE:  And we say we do follow the rules.  We're in compliance on all carriage obligations.  We have independent and large specialty conglomerates represented on our cable network.

14105            One of the challenges that we explained to you when we were chatting with you a couple of months ago was that we have capacity constraints and our energies are very, very much focused on expanding the capacity of our systems in order to accommodate more services.

14106            The issue with the pay television ‑‑ the Allarco application was a commercial issue.  We met with them.  We offered, in fact, to carry them prior to December on the basis that we would give them a launch of their standard definition channel, but they said, no, you know, we think that's an undue preference, we don't think you're being representative of our services.

14107            So, we were able to, through the course of negotiations, add four standard definition, one hi‑definition in an environment where we have constrained capacity.  We've had to do things in order to continue to add services, and we will.

14108            Wild TV was one we didn't frankly think would be attractive to our customers.  We had hundreds and hundreds of calls from customers wanting Wild TV, a small, little independent that thought he had no bargaining power, but his bargaining power was in the content that he offered our customers, and so he's now on.

14109            THE CHAIRPERSON:  Okay.  Now, you said in your access model the only thing that protects people is the undue preference rules, is what you are suggesting.

14110            As you know, there have been suggestions that we strengthen those and build in a reverse onus so that if anybody complains about access or ability to add that, in effect, the BDU has to demonstrate that they have abided by the rules, et cetera.

14111            MR. BISSONNETTE:  Yes.

14112            THE CHAIRPERSON:  What is your view on those?

14113            MS RATHWELL:  If I may, we'd like to respond to your question and we will on the undue preference.

14114            But just a final point on access that probably bears mentioning is that, as we've emphasized throughout our submission, our focus really is customers and there's customer choice and customer value.

14115            And one of the problems that we find with the access rules is that the value proposition often slides as a result of the guaranteed access.

14116            And, so, we have a situation where, for example, several Category 1 services that have had guaranteed access and a presence on our system for seven years now are still failing to attract any significant number of subscribers which leads to the question, who is the access ultimately benefitting?  Is it benefitting the Canadian broadcasting system if nobody's watching it?  Is it benefitting our customers if they're not watching it?

14117            You know, we have to ask those questions and we submit, you know, with respect, that it's not beneficial for either the system or for our customers.

14118            And then with respect to your question on the reverse onus, in our experience, the current undue preference rules and the process that accompanies that is more than satisfactory.  We don't recall a situation at Shaw where we haven't felt compelled to put on the record in response to an undue preference or an undue disadvantage complaint all of the information that was relevant to the dispute.

14119            These don't always enure to our benefit ultimately and, you know, sometimes we're successful and sometimes we're not.

14120            But we're not aware of any significant flaws with the current process and we'd recommend the maintenance of the current approach.

14121            THE CHAIRPERSON:  Okay.  So, just to terminate on access.  If I understand it, if I accept the Shaw proposal, the only people who have access are OTAs and 9(1)(h)?

14122            MR. BISSONNETTE:  That have guaranteed access.

14123            THE CHAIRPERSON:  Yes.

14124            MR. BISSONNETTE:  That's correct.

14125            THE CHAIRPERSON:  Yes.

14126            MR. BISSONNETTE:  Yes.

14127            MR. STEIN:  Yes.

14128            MR. BISSONNETTE:  The other ones ‑‑

14129            THE CHAIRPERSON:  On guaranteed access means just that, or are they automatically part of the basic?

14130            MR. BISSONNETTE:  Those are automatically part of the basic.

14131            MR. STEIN:  9(1)(h).

14132            MR. BISSONNETTE:  Yes.

14133            THE CHAIRPERSON:  And it is a contiguous basic?

14134            MR. BISSONNETTE:  Did you say a contiguous basic?  We're talking in terms of our basic, that those 9(1)(h) services ‑‑

14135            THE CHAIRPERSON:  No, I mean that the channels are one next to the other.

14136            MR. BISSONNETTE:  Oh, I see.

14137            THE CHAIRPERSON:  That 9(1)(h) doesn't find himself up in the 600s while all your basic packages are ‑‑

14138            MR. BISSONNETTE:  No, that ‑‑ so, that's not in our view.

14139            THE CHAIRPERSON:  So, they are part of your basic package, but they may be anywhere where you think they are best positioned in terms of marketability?

14140            MR. BISSONNETTE:  That's correct.

14141            THE CHAIRPERSON:  Okay.  Sorry, Mr. Stein, did you want to say something else?

14142            MR. FERRAS:  I was just going to follow up with what Cynthia was saying.

14143            We just think that whenever we have to respond to a complaint from the industry we really have to do a full and detailed response to the Commission to make our case.

14144            So, there really is a big onus on us now to respond to a complaint and explain exactly what we've done and why we've done it and there's no short cuts.

14145            We've done a few of these, to say the least, and there really are no shortcuts.  You really have to explain to the Commission in policy terms and in market terms and to the complainant what we have done.

14146            That's why we feel that the process is working.

14147            And we really think there should be an onus on the person making the complaint as well to make their case, otherwise we're going to end up with a lot of frivolous complaints with unsupported evidence that, you know, every time we make a small change are we going to be in a situation where just the letter comes into the Commission saying Shaw just moved a channel ‑‑ it might not even be their channel ‑‑ and then we have to do a huge response.

14148            We think there should be an onus on the complainant as well, but we think the process is working.

14149            THE CHAIRPERSON:  I have some trouble accepting that because, as you know, programmers are very reluctant to take on BDUs and drag them before the CRTC.  So I don't think you want to face an avalanche of complaints.  It is certainly not the experience that we have seen so far.

14150            But on your last answer, Mr. Bissonnette, why not contiguous?  It is the basic package.  It is the buy‑through; you are offering it as one and yet some of the people, especially the 9(1)(h)s, are complaining bitterly because they are not being placed contiguously.

14151            MR. BISSONNETTE:  In the analog world, it is not contiguous.  If there was a digital, a pure digital world, we could see where contiguous would work.

14152            THE CHAIRPERSON:  Educate me.  Why is it difficult in the analog world?

14153            MR. D'AVELLA:  In the analog world, I mean these lineups have evolved over time.  Services were launched at different times.  But it would be virtually impossible for us to move the tiers.  The tiers are kind of fixed in place.

14154            I mean, we would have to go out and start changing traps. It is just not a practical way to run the business.  In a digital world we could do that.

14155            THE CHAIRPERSON:  Okay, let's go on to genre then.

14156            You have heard everything under the sun on genre here in the last two weeks from people saying the system is fine, don't touch us. Rogers is saying streamline it; keep genre but keep buckets of genre, sports, lifestyle, music, dah‑dah‑dah‑dah.  Others saying the system doesn't work, strengthen it, et cetera.  Some people are saying you don't need it for domestic, but you certainly need it to keep the foreigners out.  Certainly some of the independents and certainly the creators have said that the genre is absolutely the essence; it is part of the Canadian system.  The Act mandates diversity; it demands access for everybody.  Given the small market, given the small returns, the only way that you can have a specialty channel and make it exist is if you at least know you own this genre.  You still have a battle to get carriage, to get advertising, but at least nobody can come and take this genre away from you if you own this slice at least.

14157            I would like to understand why you are coming basically saying with the key argument that I have heard several times:  it has been a great success.  Why tinker with success?  Why abolish it, et cetera, and throw it into the unknown and all you're going to have is a morphing towards the middle.  Everybody is going to chase the biggest audience and essentially, you know, you are going to lose what you achieved through regulation, which is diversity.

14158            Now I appreciate, like Mr. LaRose said, everybody who appears before me makes self‑serving arguments, so I take all of this with a grain of salt but I would like to hear from one of you.

14159            MR. BISSONNETTE:  So we won't be self‑serving.

‑‑‑ Laughter / Rires

14160            THE CHAIRPERSON:  That would be refreshing.

14161            MR. BISSONNETTE:  We will just tell you what our customers tell us.

14162            We would like to have more programming services and we would like to have the flexibility to choose which programming services we have. As a recent example, I think the Commission received our application for the USA Network and on the basis of a conflict in genre which was, in our view, minimalistic at most, that service was denied. Here is a service that is one of the more popular non‑Canadian services available to us and only conflicted on I think some strip programming with one of the Canadian ‑‑ is it Category 1 or 2?

14163            MR. STEIN:  Two.

14164            MR. BISSONNETTE:  A Category 2 service.  Other than that, you know, we were denied access to that service and our customers feel disadvantaged because they can't get that service.

14165            I think what we are suggesting on genre exclusivity is that as long as the non‑Canadian, whether it be an American or other foreign service, doesn't have exclusive rights to that programming, that they should be able to be carried on our cable, our distribution systems.

14166            Ken...?

14167            MR. STEIN:  With respect to the Canadian services, we think the genre rules should be eliminated entirely.  We don't agree with Rogers about five broad categories.  We think that that would probably start to become more complicated in terms of making judgments.

14168            We feel that if people want to change the nature of their service, they would presumably discuss that with distributors to see exactly how that would unfold.  But we feel that people who are creative and business people should be able to have the ability to say:  You know what, I'm not making it as a book channel, I want to be a sports network. And if they can go out and try to find programming that fits that kind of situation, then they should be free to do that.

14169            THE CHAIRPERSON:  You keep coming back to your central theme, which is customer satisfaction and what the customer wants, et cetera.  The problem is, we are administering the Broadcasting Act which doesn't say do what the customer wants, customer satisfaction is your number one priority.  It sets a huge number of objectives, which you are much more familiar with than I, but I usually say that there are basically three basic themes ‑‑ two basic themes.  One is make sure there is Canadian content; the other is to make sure there is access to the Canadian system both by Canadians as producers or as participants or as viewers.

14170            You know, there are all sorts of other sub‑issues, very important ones, like 75 per cent independent production, and so forth.

14171            So saying that is what my customer wants is not the only answer. I mean, we have to look at everything through the prism of the objective that Parliament prescribed and how do we marry those?

14172            If I adopt your scheme of absolutely no genre protection, what guarantee do I have that this is exactly what the people predict will happen; that you will have a morphing towards the middle, you will have in effect two, three, five, what do I know, general categories where everybody is chasing the biggest and these very valuable, very appreciated small, discrete genres that we have created and that Canadians watch will no longer be viable and will disappear?

14173            MR. STEIN:  Well, we agree with you on the Broadcasting Act objectives.  It's a matter of the means of achieving those objectives.

14174            We feel that the best way to achieve the objectives set out in the Act is by giving Canadians what they want.  We find that with kids, with children, they are the strongest viewers of Canadian content and somehow we beat it out of them by the time they become adults.  I think that if we were able to have a system that put more emphasis on having Canadian content that would achieve it by meeting customers' needs, we would have that kind of diversity.

14175            I find it really interesting that the broadcasters keep arguing about local broadcasting as being the cornerstone and local broadcasting, you know, being the central and needing more support, when in fact it is the most popular part of the programming and it is protected from foreign competition, not by the fact that it is protected.  I mean, I can watch the Detroit news if I want to, but who would want to?

14176            So I think there is a mindset here that we don't agree with, and we believe that a competitive system will achieve more diversity and that ‑‑

14177            MR. BISSONNETTE:  And sustainable.

14178            MR. STEIN:  Yes, exactly ‑‑ and that will achieve the objectives set out in the Act.

14179            There is no ‑‑ the rules are eliminated ‑‑

14180            THE CHAIRPERSON:  And the risk is worth taking?

14181            MR. STEIN:  Pardon?

14182            THE CHAIRPERSON:  The risk is worth taking.  I mean, the CAB says don't do that, you are going to destroy the Canadian system, you are never going to be able to re‑created.

14183            MR. STEIN:  They didn't argue that on radio.  They argued the opposite on radio.

14184            THE CHAIRPERSON:  I'm talking about TV.  We are talking about TV here.  You heard them.  They were here.  You listened to them on the Internet I'm sure, so you know exactly what they said.

14185            MR. STEIN:  I was rolling around.

14186            THE CHAIRPERSON:  Okay.  Now, there are several variations.  You don't like the Rogers approach, I gather that.

14187            Canwest suggested keep the present one, but allow more or less a 10 per cent deviation.  You know, have everybody stay in their genre but, you know, don't make it too tight. As long as their programming is 90 per cent in that genre, 10 per cent they can in effect transgress and have programming that belongs to another genre.

14188            I know you don't like genre, but get over that first of all for the purposes of the argument.

14189            MR. BISSONNETTE:  I have to eat my peas.

‑‑‑ Laughter / Rires

14190            THE CHAIRPERSON:  For the purpose of the discussion, what do you think of that suggestion?

14191            MR. BISSONNETTE:  Ken...?

14192            MR. STEIN:  Well, it's hard to get over the first hurdle.

14193            THE CHAIRPERSON:  I said for the purpose of discussion, Mr. Stein.

14194            MR. STEIN:  Well, I take it from what you are saying that you're not going to go away from genre protection.

14195            THE CHAIRPERSON:  No.  Please, you know, we are having a very serious discussion here and I have to look at all the options.

14196            MR. STEIN:  Okay, I appreciate that.

14197            THE CHAIRPERSON:  I understand what you are saying.  You are saying get rid of genre.  I said okay, but for argument sake if I don't accept that argument, there are other things that are being put forward and I would like to know where Shaw stands on these things.

14198            One of them is a relaxation by allowing this sort of 10 per cent deviation.  That was a new idea that was put on the table and you as one of the main criticizers of the very rigid genre system now, I was wondering whether you thought this would be helpful or not or if this basically makes no difference, whatever your position is.

14199            MR. STEIN:  Well, I think that if you aren't going to go ‑‑ I mean, we would prefer no genre protection, but of course any kind of variation would be better than what we now have.

14200            THE CHAIRPERSON:  Okay.  Astral came forward with a different thing.  It essentially suggested that in each ‑‑ they made the parallel, if I understood them correctly, to Allarco.  We allowed Allarco in, notwithstanding that in effect that genre was occupied, because we felt there was enough room for a third player in pay‑TV.

14201            So could we do the same principle on genre and say look at the various genres; some of them are more successful than others, and where they are and give a sort of five‑point criteria.  You hold a hearing and say ‑‑ let's say for argument's sake, Home and Garden.  There is really room for maybe a second player or third, et cetera, as long as that player would present a new aspect or a different aspect and in effect contribute to the diversity, and on that basis we might allow some of these genres to grow or be double occupied or triple occupied.

14202            What is your feeling on that?

14203            MR. STEIN:  Well, we can always go for the option that would maximize consumer choice.

14204            MR. BISSONNETTE:  Choice.  You have done it with sports, essentially with Sportsnet and TSN and Score.  I know they squabble amongst themselves as well; we are not the only ones they squabble with.  On genre you certainly will see more of that.

14205            Again, we think that the more the merrier, and to the extent that they can sustain themselves by attracting customers that that is the best of all worlds.

14206            THE CHAIRPERSON:  And what do you say to the argument that most people who defend genre protection say it is really an issue of market?

14207            Most of these genres exist foreign and if we don't have genre protection, then bringing in a foreign channel is going to be cheaper for them; selling into Canada is just icing on the cake.  They make their money in their home market, et cetera, while we produce the Canadian version.  Yes, we have a Canadian content, but whether Canadians are willing to pay for that extra to the extent of the cost is very much open and, in effect ‑‑ Home and Garden is a perfect example ‑‑ you will wind up with an American Home and Garden and ours will die on the vine if you take away the genre protection.

14208            MR. STEIN:  Well, Home and Garden is probably a good example.  I mean, I don't think that Home and Garden ‑‑

14209            THE CHAIRPERSON:  I didn't want to pick on them.  I just picked one that came to my mind.

14210            MR. STEIN:  No, no, it is easier to deal with specific programming issues rather than broad generic terms.

14211            If you had a Home and Garden that was telling you how to grow vegetables in southern Georgia, it wouldn't be of much relevance to somebody in Alberta who is trying to shovel snow out of their driveway.  So I think that most areas, a lot of areas ‑‑ we find in our surveys that Canadians want Canadian programming. It's just a matter of how you get there.

14212            You know, our surveys indicate 85, 90 per cent of people want there to be Canadian programming services, want there to be Canadian programming.  We feel that Canadian programming, to the extent that it is suffering difficulties, would be better if it had to be more competitive with the U.S. programming and differentiate itself and make itself more relevant to Canadians.

14213            So I think that is the view we have in terms of this.

14214            If we're looking at genre protection, getting more flexibility within that is fine.

14215            And if the American services can't have exclusive rights to the programming that they do have, then we feel that they should be able to come in.

14216            THE CHAIRPERSON:  You keep harping on this exclusive rights, but isn't that a bit of an empty right?

14217            First of all, especially when we are talking foreign, but even on domestic, is the rights also owned by somebody else?  Then first of all it is a question, yes, you as a Canadian channel can get them, but you are directly competing with somebody who has the same program, et cetera, who probably gets it on better terms because he is buying it for a bigger market, et cetera, and is now competing with you.

14218            And third, how do we enforce it?  How do we enforce program rights from ‑‑ do we go to each one of them and say show us that your program rights are non‑exclusive; that you have negotiated open terms?

14219            A lot of these folks who hold the program rights are not part of our jurisdiction.

14220            MR. STEIN:  Well, I think the first problem we have is that if you look at the current situation ‑‑ and we were quite concerned about, as you know, the rejection of the USA Network.

14221            What was fascinating to us is that when people look at the Broadcasting Act, the reason that we were rejected was because we overlapped on series that were American.  So we say okay, that is strange.  So we were rejected on that basis for, you know, a minimum overlap, but also an overlap not on anything other than the U.S. programming that they had.

14222            So our view is that we would prefer there to be ‑‑ we understand the issue if a service is trying to come in and it says, you know ‑‑ I don't want to use specific names, but it comes in but comes and says to the programmer in Canada:  We are not going to allow you to have the rights because we are going to come in on our own.

14223            So we don't think that would be appropriate.

14224            But let's also look at the reality of it.  ESPN is not going to come into Canada.  ESPN owns a good chunk of TSN.  You know, there are similarities in the programming that are apparent to anybody who goes to the U.S. and comes back to Canada.

14225            Canadians aren't interested in basketball to the same extent. We want to make sure there is lots of hockey ‑‑ unfortunately, the Flames got knocked out.

14226            So when it comes down to it, I think that the reaction of "oh, the Americans will come in and they will take over the whole system" is really an over‑reaction.  We are talking about just having the ability to pick and bring in specific ones, making sure that they are appropriate within the Canadian system.

14227            And the preponderance rule will ensure that the system remains Canadian.

14228            THE CHAIRPERSON:  As you know, this issue really came to the fore with the whole issue of RAI, et cetera.  The net result of our decision now is that you can get RAI here; you can also get Italian football on Telelatino, and it's non‑exclusive.  But I bet you anything what Telelatino pays is a different price than what RAI pays in Italy.

14229            Therefore, you know, giving them this rate of non‑exclusivity may very well be a very empty right.  It just does not commercially make much sense.

14230            MR. BISSONNETTE:  Any comment?

14231            MR. D'AVELLA:  Well, in that particular instance I mean you are addressing ‑‑

14232            THE CHAIRPERSON:  I'm just using this as an example of what was the issue.  I'm not trying to revisit that decision.

14233            MR. D'AVELLA:  I mean, Corus will come up and talk about the success of Telelatino.  I think Telelatino has been able to do very well despite the entry of RAI.  RAI is a discretionary service.  I mean we offer it in some markets where there are, you know, enough Italians to kind of justify the service.

14234            But I don't think it has fundamentally changed their economic model or changed anything from their perspective.

14235            Just to add to Ken's point, I mean clearly you're not going to see an ESPN in this country because they are a significant owner of TSN. But even things like first‑run movies, I mean the relationships between companies like HBO and the Canadian pay licensees are so strong, are so embedded, they have developed economic models over the past 20 years where HBO probably wouldn't want to change that.

14236            So we are really talking about services that are really on the margin, on the fringe, services like USA which do try to be distinctive.

14237            And there will always be a variety of venues for strip programming, for movies.  I think I have seen The Matrix on APTN, on American Movie Classics, on Lonestar ‑‑ I'm not sure how that is a western movie, but it was on Lonestar. I have seen it on Action.  So everyone is buying movies.

14238            We are buying movies in VOD.  We are buying them in different windows.  We are buying old movies; we are buying new movies.

14239            It is really about providing customers with here is a variety of ways to get this programming.  How do you want it?  We can provide it to you in this particular format, in another format.  We don't see any harm to the Canadians as a result of it.

14240            THE CHAIRPERSON:  Our whole system of access and genre is really meant to leave our Canadian content the way it was and contributions to Canadian programming, et cetera.

14241            If we adopted the Shaw approach, isn't the net result that every programmer will say what is the minimum that I can do to keep my Canadian audience and, on the other hand, increase my returns to my shareholders?

14242            I no longer have genre protection.  I don't have access.  I have to compete with these guys.  Does it make sense to have 50 per cent Canadian content, and so on, or can I live at 35 or can I live at 25, et cetera?

14243            Isn't that inevitably the net result of your ‑‑ that the contributions to the Canadian system, whatever form they are, are going to be driven down?

14244            MR. STEIN:  We don't agree with that, and I think that it's ‑‑ it's a model. We can use different models of policy approaches, but we think that the model of protectionism is a bad policy approach and it doesn't work in many sectors.

14245            We, in our western Canadian roots, use the transportation as an example.  I mean, we heard stories ten years ago about the Canadian railroad system was collapsing and we had to, you know, continue to protect it and subsidize it, et cetera. And we transformed it by privatizing it and going to a deregulated competitive approach.

14246            Now, people say well, culture is not like transportation. Well, culture, you look at the strong Canadian cultural contributions to the world and they aren't protected, whether it is artists, Jeff Wall from Vancouver, writers, authors, Margaret Atwood, they aren't protected and they do extremely well around the world.

14247            Musicians.  I subscribe to Rolling Stone.  Every week there is a lot more in Rolling Stone about Canadian musicians than there is in Variety about Canadian television.

14248            So I sit there and I look at it and I say, you know, maybe the model is wrong.  Maybe going to a model which is more competitive, which encourages people to be ‑‑ you know, look at films, "Little Miss Sunshine", $10.5 million, made a huge amount of money; "My Big Fat Greek Wedding", whatever.  Lots of examples that are outside the Hollywood ambit.

14249            I think we get too focused on the fact that, you know, we are a small country and we can't compete.  We have said this time and time again, that we don't agree with that.  We think that there would be lots of room for dealing with the American situation, which we recognize is strong, by trying to develop a more competitive situation here in Canada.

14250            We believe that eliminating the access rules and not having guaranteed access, but sticking with preponderance, you know, we think that would be a better approach and would help ‑‑ would be stronger in terms of developing support for the objectives laid out in the Act.

14251            THE CHAIRPERSON:  You are dealing with a former free trader, a former Commissioner of Competition.  I am not used to being called protectionist and I don't have a protectionist viewpoint.

14252            MR. STEIN:  I wasn't calling you protectionist, but certainly the CAB is protectionist.  You are being asked to protect.

14253            THE CHAIRPERSON:  But I am also aware that the requirements under the Broadcasting Act are not market‑driven.  They are cultural, they are social, and a whole bunch of them which you cannot achieve by free market alone.  That is why I am on record as saying we will always have regulation in the broadcasting. The question is let's make sure that it is smart, it is targeted to achieve the objectives without interfering more than is necessary with free market.

14254            But to suggest that culture is like transportation and both of them will benefit if you just let the viewers ‑‑ you cannot demonstrate to me in any convincing way that some of the objectives of the Broadcasting Act can be achieved by pure market forces alone. Surely you are not saying that.

14255            MR. STEIN:  By free market forces alone?

14256            THE CHAIRPERSON:  Yes.

14257            MR. STEIN:  No, I'm not saying it's strictly by free market forces, but we are saying that the balance has gone way, way, way over to the one side of it, which is the protectionist side of it, and that you need to have certain rules in place.

14258            You know, getting back to ‑‑

14259            THE CHAIRPERSON:  Okay, but what are the rules then?  Preponderance, period?

14260            MR. STEIN:  Yes. Period, yes.  Preponderance and ‑‑ yes, and having a basic cable service, and preponderance would be exactly the way to go.

14261            THE CHAIRPERSON:  Okay.

14262            MR. BISSONNETTE:  It's very simple.

14263            THE CHAIRPERSON:  Yes.  But, I mean, my question was:  If I buy your model, do I not automatically drive down the contributions to Canadian content, to Canadian distribution, et cetera, because the market forces ‑‑ I mean, if you want to talk market forces, you have the reality that this is a smaller market.  You earn your bucks on a smaller base than you do in the States, et cetera.  So there are different economies of scale here. You have to take this into account.

14264            You are not going to ‑‑ everybody is going to try to get the biggest market possible and you are not going to do that by being differentiated in having small separate niches as we have right now. You are going to have a morphing towards the middle.

14265            We can argue whether the morphing will be towards five channels, 10 or 12, but to suggest it is going to stay the way it is right now with the number of specialty channels we have, I think it is basically illusory.

14266            MR. STEIN:  Let me go to another example, is going to the Internet and looking at what ‑‑ I mean, it's interesting, we met with one group of government officials who said to us you know ‑‑ we said we are concerned about this kind of protectionism ‑‑ not of your view, Mr. Chairman, but of others who have expressed ‑‑ and they said why are you worried about it? The CRTC is irrelevant to anybody under 30.

14267            Now, what you are saying is that ‑‑ so does that mean that all those people who are under 30 are less Canadian?  In fact, they are more Canadian.  They watch more Canadian TV.

14268            You know, as part of the Shaw Rocket Fund board, we meet with people who are involved in youth and youth studies, et cetera, and they say the number one most important thing to kids is their cell phone and most important application is message texting.  The next most important application is the Internet and YouTube and Facebook and all those kinds of things.  And then number three, and probably a distant number three, is television. They love it, they like it, but it is certainly number three.

14269            So what we feel is that if you want to build cultural industries, you have to be in to respond to those kinds of expressions and need that are out there by Canadians.  And as that generation grows up and also has more influence over the older generation, then we are going to have to make sure that we have an industry that is able to satisfy that.  And that is what Canadians want.  That's what we want.

14270            THE CHAIRPERSON:  That's what we want.  We are right on the same wavelength.  I'm concerned about the media.  You know we are going to have a big hearing on this issue.  I'm concerned about being relevant.  I am concerned about having something that Canadians want.  There is no question about it.

14271            The question is you are going from one extreme to the next. Part of this hearing is to determine, as we said at the outset, what we can take off you basically saying, unless I misread you, is let her rip.  The only protection is going to be consumer preferences and preponderance.  And I say fine, if I buy that I still ‑‑ you tell me what assurance or what likelihood is there that the broadcasters' contribution to hold Canadian content will stay where they are.

14272            I guess you are telling me you hope that it will be in the self‑interest to do that, but that's about the only assurance you can give me

14273            MR. STEIN:  Well, right now I would say let's judge it by the experience we are having.  If you look at the analog services, the Cat 1s and the Cat 2s, the services that have to be the most responsive to the marketplace, to dealing with distributors and consumers, are the Category 2s.

14274            So what we are suggesting ‑‑ you know, you are saying we are suggesting a total abandonment of the rules.  We are not.  We are saying as we move into a digital environment, everybody becomes a Category 2.  Right? Fine.

14275            THE CHAIRPERSON:  Yes.

14276            MR. STEIN:  And what's wrong with that?  They are great services.  They are doing well and they will continue to do well, and they will meet the expectations.

14277            Again, Canadians want Canadian services.

14278            THE CHAIRPERSON:  Okay.  As you know, Cat 2s have a lower Canadian content and they have no CPE, so you are making exactly my point of all coming down to the Cat 2 level.

14279            MR. STEIN:  Well, to us it's not a question of coming down.  It may well be a question of coming up as well.

14280            You know, we just firmly believe that in competitive markets we have to respond to the demands of our customers and having content providers also in this world that we are facing over the next number of years have to respond as well to that.

14281            It's interesting, when you did your Technology Review there was one common view that everybody expressed and that is that the world is changing.  Right?

14282            But then there was two very distinctly different approaches to dealing with that change.  There was a whole group of people who said oh, my goodness, the world is changing. We have to come in off all these regulations and all these protections and all these subsidies to ensure that the world we have is sustainable through that time period, and a whole group of other people, of which we were one, who said no, if you are going to deal with this new world, you have to mirror it.  You have to become deeply immersed in it and involved in it and have to be able to respond that way.

14283            So that is the view that we have:  that by being able to respond to that kind of environment ‑‑ I mean, I see more in the programming side from looking at it from the perspective of the Rocket Fund, and it is amazing what Canadians are able to do on that side.  It's amazing the kind of reputation we have around the world for what Canadian creative people are able to do with children's programming and link it into the web, et cetera.  And unleashing that to me would be the most important thing we could do.

14284            My view is that the current system does not allow that to happen.

14285            In fact, children's programming is a perfect demonstration because the amount of money being invested in Canadian programming by broadcasters and others has absolutely declined over the last number of years.

14286            THE CHAIRPERSON:  Okay, I think we have beaten this subject to death.

14287            By the way, don't read anything into my question.  All I'm doing is testing the ideas that are put forward against yours, which are different.  Where we come out is to be decided by us and the entire Commission.

14288            So as you have done until now, as I say, don't read the tea leaves.  I am giving everybody a hard time, asking everybody the same question from the other side.

14289            Let's go to fee for carriage.

14290            Your position is very clear.  You are against it.  Essentially your basic argument is they don't need it.  Both the two largest services in Canada have just made massive acquisition and they clearly, you know ‑‑ if they were suffering financially, they wouldn't have been able to buy either Alliance Atlantis or CHUM.

14291            Second, I mean I heard their submissions; you heard them, as everybody, it was somewhat self‑serving, you know.  I don't for one second believe that they went to their bankers and said we have this flat over the air business, it is not going, it is not going anywhere, but please finance us for $1 million to buy all these specialty channels. Yes, there will be some synergies, but they are minor.

14292            That is how it was presented to us.  Clearly that is not the case.  It was a sober business decision and they saw great potential in cross‑marketing, in joining their OTA with the specialty channels to convince their bankers and their investors that this was a good deal.

14293            We approved them and I wish them all the success.

14294            With that being said, they are in the OTA business and the OTA business is our prime vehicle for local content.  All the figures show it is flat.  It has now been flat for two years, and I don't see any indication that it is going to grow.

14295            You say well yes, but this is corporate family and they can cross‑subsidize, et cetera.  We both know cross‑subsidization is economically irrational behaviour.  If you have a business and you have several divisions, one of them works and one of them doesn't work, one is fruitful, et cetera, yes, you will maintain them but you will try to cut down the costs and you are going to try to turn the unprofitable one profitable rather than support it with the proceeds from the other.

14296            If you do that, what is going to suffer is the local content, yet that is one of our key considerations.  This is our prime vehicle for local content.

14297            You in your submission this morning say they have violently rejected any tying of the fee for carriage to local content.  You have heard something differently than we.  I heard sort of a lukewarm response, but I didn't hear violent response.  But be that as it may, I thought we made it quite clear that we said if there is a fee for carriage, we are asking the question:  Should there be one?  What should be the amount and what should be the obligations?

14298            It is not sort of an ongoing free operating subsidy for OTA. That is not anybody's suggestion.

14299            So in that context, is there any form of fee for carriage that to you would be acceptable if it is tied, let's say, to incrementality or specifically to local content or if it is time‑limited; you say yes, this is the cornerstone of part of our local content, there is no question, but we want to make sure that this is really ‑‑ that you are also taking some steps to fix it, et cetera.

14300            So rather than taking the position that you are saying a flat no, are there variations on the theme?

14301            MR. BISSONNETTE:  Absolutely not.  I mean, I think we have given you 50 reasons why fee for carriage shouldn't be considered by the Commission.

14302            In terms of the enterprise, you are absolutely correct that the enterprise comprises of specialty services and over the air broadcasters and they have it within their purview to make decisions to bolster the over the air side of the business if they choose to.  They are now in a better position to do that by virtue of the synergies that they are going to benefit from from the acquisition of those specialty services.

14303            They are now a much stronger conglomerate, with much more moving parts, with much more creative groups that they can call upon. There is nobody restricting them in terms of making their over the air broadcast services more attractive than themselves.  If they chose to do more local programming, it is absolutely within their discretion to do so.

14304            So we think that there is not one iota of an argument that there should be a fee for carriage.  You know, they have discretion to change their advertising rates if they want. They can be more appealing to advertising.  They can do things within their own operating structure in terms of becoming more efficient. We know that that is one of the drives that they have.

14305            But we don't see one iota of an argument that they should be passing on their costs to our customers.

14306            THE CHAIRPERSON:  What would you do without OTA?

14307            MR. BISSONNETTE:  Well, you know it's ‑‑

14308            THE CHAIRPERSON:  Isn't OTA something that Canadians really do want to watch?  It's one of the prime things.  You put it in your basic package.  You would put it in there even if we didn't force you to.

14309            I mean, when I say it is a cornerstone of the system, let them do what they want.

14310            MR. BISSONNETTE:  Well, we are not saying that.  We say that they have a role within the broadcasting system.  They have a responsibility within the broadcasting system to program with each of their "B" contour locations and they do a very, very good job of that.  We just don't buy the argument that they for some reason have overnight become unprofitable based on their behaviour.

14311            They have priority carriage.  We have given them all of the ‑‑ you know, we work very closely with broadcasters.  We actually work very collaboratively with them in our local regions where they have ‑‑ you know, where in the past they have had technical issues and we have worked together with them.  We recognize their importance.  But we also recognize they are just one small portion of what we provide to our customers.

14312            They have control over the viability, economic viability of those over the air transmitters.

14313            MR. STEIN:  In terms of the over the air, I mean it is interesting in the Bell submission they filed evidence in terms of the viewing of Canadian broadcasters and pay and specialty, and the most fascinating probably about that is the success of the combination of broadcasting and now they own those services.

14314            So we are not saying the over the air is not important. It's just that with that kind of a combination, the corporations are strengthened.  That was the whole basis of their submissions when they appeared before you, is that they are strengthened.

14315            So their ability as over the air services to meet the responsibilities is still there.

14316            So we think that to go to Canadians and say to them well, you know, the world has changed and you are now going to have to pay for it ‑‑ and, by the way, we are not asking the people who have over the air receivers and aren't using cable to do this; we are asking just cable and satellite subscribers to pay for this.

14317            So it seems to us to be a bit ironic, if not contradictory, to be able to tax cable and satellite subscribers to fund over the air services.

14318            THE CHAIRPERSON:  Oh, come on, 90 per cent of Canadians, or somewhere in that neighbourhood, receive their over the air via cable or satellite.  So I mean that is a little bit of a facetious argument to say you are asking the cable subscribers.  They are the very ones who receive the service.

14319            MR. STEIN:  Well, we don't ‑‑ our penetration rates are 50 per cent; they are not 90 per cent.

14320            THE CHAIRPERSON:  Not yours, but ‑‑

14321            MR. BISSONNETTE:  In terms of the overall conglomerate of BDUs, you are saying 90 per cent get it through that; that's correct.

14322            MR. STEIN:  Well, if you have a black‑market dish, you don't have to pay.

14323            I think the thing is that to go to people, to go to 9 million, 10 million Canadian households, and say to them that you are going to pay $5‑$10 a month to support three or four companies, this seems to us to be not a good policy and that that is something that we think is inappropriate.

14324            THE CHAIRPERSON:  Okay.  But three or four companies, you say.  First of all, we talk about a local broadcaster and then more than three, but there are three big ones, I agree with you.

14325            But secondly, what we talked about is it being incremental and it going to the actual local station, not going to the network, right, so that the fee for carriage would actually ‑‑ so that is one of the questions my colleague Michel Arpin posed:  Shouldn't it go to that local station in Moose Jaw who are putting on the content for Moose Jaw?  They should get the money so that it is incremental over what they get presently from ‑‑ let's take CTV or whatever ‑‑ from their parent.

14326            MR. STEIN:  They are already getting money through Star Choice and Bell.  I mean at the last hearing the small broadcasters from those areas said that they had a home run.  So their PBITs have improved significantly.

14327            So I don't think it is appropriate to use those small systems as an example.

14328            But to say to the people of Toronto that you have to pay, or the people in Calgary, that you have to pay extra because CFCN requires that money to do their local programming, we just don't think that is going to fly with Canadians.

14329            THE CHAIRPERSON:  I am being reminded by my colleagues of the call of nature here.

14330            I am not finished with you, but let's take a 10‑minute break.

‑‑‑ Upon recessing at 1042 / Suspension à 1042

‑‑‑ Upon resuming at 1102 / Reprise à 1102

14331            THE CHAIRPERSON:  We were on fee for carriage, your favourite subject.

14332            As I mentioned, tying it to local content, incremental, and putting a period of time on it ‑‑ let's take a period, five or seven years or something, and then to revisit or review.

14333            That does not make the concept any more acceptable to you, I gather.  You still think it is, basically, wrong.

14334            MR. BISSONNETTE:  Mr. Chairman, you have ascribed a kind of cornerstone positioning for local broadcasters, and I think that Alex Park, who is our Vice‑President of Programming, would be rolling his eyes right now, because in Calgary alone we produce over 8,000 hours of local programming, local relevant programming, that is intended to be attractive and meaningful to those in each of the communities that we serve, and we have no exclusivity, if you will, on local programming.

14335            The broadcasters, as an example, have created certain voids within local programming that we are quite happy to fulfil, because our customers really appreciate what we do in terms of animating the local communities that we serve.

14336            As an example, last year and the year before, and this year, we had the blessing of being able to carry Western Hockey League hockey games, which are taking place right in our communities, whether it is in Saskatchewan, Saskatoon, or Vancouver, or Calgary, or Prince George, and our customers really appreciate the fact that we have taken the time and made the effort to make those games available to them.

14337            The broadcasters could easily do that.  Instead of spending money buying U.S. programming, they could do more, and focus more on the local communities with those resources. They could do, we are sure, a tremendously good job.

14338            We do that good job.  So, in terms of a being a cornerstone, local, over‑the‑air provider, we are a cornerstone cable‑casting local provider of community programming, and it is greatly appreciated by our customers.

14339            There are more than just the over‑the‑airs that are doing that kind of programming.

14340            But they have a choice to make, and they made the choice to spend more of their dollars on acquiring U.S. programming, in competition with each other, driving up the prices of that programming, as opposed to doing more local programming.

14341            THE CHAIRPERSON:  That kind of goes back to what I said, that the OTA is the cornerstone of the system, and that has been so historically.

14342            We started off with having OTA ‑‑ we imposed upon them obligations on Canadian content, on exhibition, prime time, et cetera. At one point in time they had CPE, et cetera.

14343            Then we developed the whole specialty system, and then along came the BDUs, of course, which added great, enhanced distribution, et cetera.

14344            This all started with the OTAs, so that's why I talk about the OTA as being the cornerstone.

14345            And, yes, you are saying that they are spending far more money than they should on foreign programming, and that is really what their problem is, rather than ‑‑

14346            That may be right.

14347            And, of course, they say:  That's how we get the viewers, who then stay for the Canadian programming.

14348            I am not going to get into that, but what I clearly see is that the local programming, which is not exclusive, you are absolutely right ‑‑ their community channels vary ‑‑ their specialty channels ‑‑ but, by and large, local programming is delivered by them, and it has been progressively reduced, cut back, et cetera, yet it is a very key part of the system.

14349            One way to address this issue, which they have come forward with, is fee for carriage.

14350            In fact, I went one step further and said, "Well, if that's how you justify it, then let's tie you to it.  I want to see some bang for the buck."

14351            Rogers was here and said:  Why are they getting fee for carriage?  They will get exactly the same after the fee as before.

14352            I said:  Well, that can easily be changed.  If you specifically tie it, you provide an incremental, et cetera.  If you provide it, it goes to the local ‑‑

14353            By the way, as a parenthesis, Rogers, I owe you an apology. Your basic package is not 65 in Toronto, but 38.  CBC misrepresented you, so my apologies, panel.

‑‑‑ Laughter / Rires

14354            THE CHAIRPERSON:  Back to OTA.

14355            MR. BISSONNETTE:  I know that you are being provocative ‑‑

14356            THE CHAIRPERSON:  No, I am trying to say, "Here, look ‑‑ "

14357            MR. BISSONNETTE:  ‑‑ but what evidence have they given us ‑‑ what evidence have they shown you that they have the need?

14358            We haven't seen that.

14359            And in terms of the purpose of fee for carriage, what did they tell you with their own voices?  They told you that it is, in fact, to increase their profitability.

14360            And even cajoling them, as you did, to try to get some commitment on increasing their Canadian content, they resisted that by saying: No, this is just to fix the cracks .

14361            They haven't shown any evidence that they have the need. They have the resources and they have the wherewithal to do more local programming, if they choose to do it, and they have chosen not to do it.  They have said:  We just need this to improve our PBIT.

14362            THE CHAIRPERSON:  I thought it was CBC who said that it was to fix the cracks, but there have been so many representatives ‑‑

14363            MR. BISSONNETTE:  There have been too many cracks here, haven't there?

‑‑‑ Laughter / Rires

14364            THE CHAIRPERSON:  Let's go to the related subject of distant signal.  We spent a lot of time on it here.  First of all, Rogers was saying:  We are not the problem, it's the DTH.

14365            And the DTH was saying:  No, we're not the problem.  We pay, too ‑‑ et cetera.

14366            Then, when CTV and Canwest were here, they said:  Yes, well, they pay something, but this isn't the value for it, and this is our signal ‑‑ the position of CTV basically being that sim‑sub is the second best anyway.

14367            We pay for the Canadian rights, so we should have exclusivity. If you want to protect us, that's fine, but then make it ‑‑

14368            And when you do time delay, or station shifting, we lose the value of those programs that we paid for.  So the only way to do it ‑‑ and it's very simple ‑‑ give us the right to ‑‑ that they have to negotiate consent from us for a distant signal.

14369            What do you say to that?

14370            You say in your submission that you offered to renegotiate, which, by the way, was news to me.  But, even so, obviously those negotiations have not been taking place.

14371            MR. BISSONNETTE:  Yes.  We are able, willing and ready to negotiate, as we committed at the last hearing, and that hasn't taken place.  Essentially, they have no interest in talking about that.

14372            We have a package of distant signals, and we have it because, once again, our customers have really made it clear to us that they enjoy having those distant signals.

14373            I don't think there is any lack of recognition by the broadcasters that that is the case.  In fact, when we were constituting our packages of distant signals, they were very clear that they wanted to be included in that package, because they saw value in it.

14374            So it's not just a take, if you will, which is being characterized as us just taking these signals and willy‑nilly putting them somewhere, they wanted to be included in those distant signals.

14375            And to the extent that they can monetize the benefit of those, again, we think that they have the full capability to monetize those distant signals.

14376            And to the extent that you would give them an easier path, or a path of least resistance to getting money for those, that is the approach they are going to take.

14377            But sitting down and collaboratively talking about what is the benefit to our customers, what is the value to our company to have those services, and how do we do that, we haven't had those discussions.

14378            THE CHAIRPERSON:  From that, I take it that if we accede to Canwest and CTV and say yes, they cannot retransmit without your consent, so then negotiations will ensue, you will negotiate and you will cut a deal, because customers want it.

14379            I have heard for the last two and a half hours that the customer is king.  Shaw wants to please its customers.  So, if the customers want time shifting, you will offer it.  In order to do that, you have to cut a deal with CTV.

14380            So what is the problem with us acceding to Canwest ‑‑

14381            MR. BISSONNETTE:  You are characterizing them as apostles, that they are very enlightened, and that they are easy to deal with, and they are not.

14382            THE CHAIRPERSON:  That's your word, it's not mine.

14383            MR. BISSONNETTE:  The reality is, it's not that simple.

14384            We have commercial negotiations with broadcasters all the time.

14385            We would love, for instance, to move TSN to basic.  They don't want that.  We say that you get more eyeballs if you are on basic.  They say:  No, the rates of those services are greatly differentiated.  The economics don't make any sense to us.

14386            It is not as simple as just saying: They will give you your consent because they are enlightened.  It doesn't work that way.

14387            THE CHAIRPERSON:  Let's stay with this.  Why would CTV not ‑‑

14388            I mean, you say that there is customer demand; they say that there is a value in it, which you don't recover right now.

14389            Now, obviously, you would have to strike a deal, but why would it be not in their interest to negotiate with you?

14390            MR. STEIN:  The background on the distant signals ‑‑

14391            Let me start on the satellite side first, because there were a number of negotiations with respect to that.

14392            Distant signals have been part of a satellite subscriber's package for years, because of Cancom and picking up Detroit signals and making them available.

14393            When there were first proposals to come to a satellite system in Canada, the government rejected the Commission's approach, which was to be a controlled, regulated kind of approach, and said:  No, we want a dynamically competitive one.

14394            So we went to a dynamically competitive model, which also has to be competitive with cable, and we tried to balance it, and I think we did succeed in balancing it by saying:  Okay, we are going to carry a lot of different signals across the country, but in order to be able to do that, we have to make them available to our customers across the country.

14395            Because they have advocated a local kind of approach, it just won't work.  We don't have the capacity.  You couldn't have a competitive market for satellite in Canada if you forced that on the satellite business in this country.  Geography, et cetera, wouldn't allow you to do that.

14396            The signals are up there, and we carry them.  We probably have more up there than we actually want, but that was part of the negotiation.

14397            So they are up there.  Are we willing to compensate for that?  On cable we do.

14398            On the satellite side ‑‑ and Cynthia can go into this more ‑‑ we already pay the uplink.  We pay to put them up there.  We pay to deliver them into their local market.  We pay into the Small Market Fund at the CAB, as well.

14399            We also pay for the transponders.

14400            So there are a number of costs to the satellite side in providing those signals, and the benefit of that is that we are able to offer them to our customers.

14401            We are able to do two things.  We are able to offer them in the local market, and we are able to offer time shifting to our customers.

14402            If we went to CTV and they said, "No, we don't want you to carry that any more," then we would say, "Okay.  Does that mean we don't have to carry it into your local market?"

14403            It would be very difficult for us to have to carry it, put it on the satellite, and then not be able to deliver it to people.

14404            So that's where it is.

14405            And then, when you get into the negotiation, the retransmission consent becomes difficult.

14406            We feel that if we are required to carry the service, then we shouldn't require their consent to be able to offer that into another market, but we are willing to sit down and negotiate a commercial arrangement.

14407            THE CHAIRPERSON:  I'm sorry, I don't follow at all.  I don't see why the negotiations between you and CTV regarding distant signals would be any more problematic than any other negotiations between you and the broadcaster.

14408            They are problematic.  They are difficult.  I am sure that both sides struggle with them, et cetera, but why is the distant signal a special case?  I don't follow.

14409            MR. STEIN:  We are willing to negotiate; it's the consent that is the issue.

14410            THE CHAIRPERSON:  But you have to do that now.  You do that when you negotiate with, for instance, a Cat 2.  Right?

14411            You can't distribute them unless they consent.

14412            On the other hand, they want to be carried by you, so there is an obvious meeting of interests somewhere in the middle.

14413            It's the same here.  If CTV's distant signals are carried by you, it is more money for them. They can monetize.  They can charge more for their advertising.  It's a cost to you.  You have to come together, but why are these negotiations in any way different from any other negotiations between broadcasters and BDUs?

14414            MR. STEIN:  Because the consent ‑‑ they still require us to carry it.

14415            So the consent isn't to carry it, the consent is to carry it into a different market.

14416            THE CHAIRPERSON:  The distant signal you wouldn't have to carry.

14417            MR. STEIN:  No, but I have to put it up there.

14418            THE CHAIRPERSON:  Why?

14419            MR. STEIN:  Because you people ‑‑ because I am told that I have to.

14420            THE CHAIRPERSON:  On cable?

14421            MR. STEIN:  No, on Star Choice.

14422            THE CHAIRPERSON:  I am talking about cable.

14423            What requirement do you have to put on, in Toronto, a distant signal from Halifax?  None.

14424            MR. D'AVELLA:  On cable, they are already compensated.  There is no issue on cable, they are getting paid.

14425            The issue in satellite is, we haven't even begun negotiations.  They don't want to talk about it because they are waiting for the consent hammer.

14426            If they get the consent hammer, then it shifts to them. They have the ability to say:  You are not going to carry any of them.

14427            That is contrary to what they actually want.  They want them all carried.

14428            THE CHAIRPERSON:  And you want them.

14429            You want it because of the customers, and they want it because they will make more money.

14430            I still don't see how ‑‑

14431            MR. D'AVELLA:  That's our point.  Let's have a discussion.  Let's have a negotiation.

14432            If the negotiation doesn't work, then the Commission could take another step.

14433            MR. STEIN:  I think it is important to distinguish between the DTH and the cable situation.

14434            With the DTH situation, it's a requirement that the signals be up there, and if the signals are going to be up there, and we aren't able to time shift those signals, the whole economics of the competitive marketplace in Canada will fall apart.

14435            THE CHAIRPERSON:  Okay.  Let's assume, for argument's sake, that I will accede to that argument.  That still doesn't mean that we couldn't say:  Fine, we will have one rule for DTH, but another one for cable.

14436            And, on cable, you can't do time shifting without consent. Logically, from everything you have said, DTH does not apply to cable.

14437            MR. STEIN:  We are not in Geneva, I guess, but Canada doesn't recognize retransmission consent, as you know.  So what we are saying is:  Why would we apply in Canada what we refuse to apply internationally?

14438            MR. FERRAS:  I think there is a big problem, too, with that idea.  Those signals are already up there, and they are serving the broadcasting system very well.  They are very popular with customers.

14439            And, suddenly, if there was a consent requirement, and we couldn't get it, and they took them down as a condition of the negotiations ‑‑

14440            We have to think about consumers.  Those signals are up there.  It's not like it's a Cat 2 that is trying to get access, or any other service that is trying to get access; we have a situation where the Commission approved cable to carry these services in 2000, for a very good reason, and we are distributing those signals.

14441            Just to be clear, there is no impasse in terms of the discussions, there just haven't been any.  The plan, as presented to us by the broadcasters, was, "Let's wait for the Commission's decision on TV Policy."  And then this hearing happened, and they said, "Let's wait for that decision, and then we will sit down and discuss."

14442            So, just to be clear, there is no impasse in terms of negotiations.

14443            THE CHAIRPERSON:  I see.

14444            There is a sort of flavour to all of this.  You are not against negotiation as long as you have the hammer, but if the other side has the hammer, you don't like it.

14445            MR. BISSONNETTE:  No.  Actually, nobody has the hammer now, but you are going to actually hand the hammer to them.

14446            In terms of real, legitimate, good‑faith bargaining, negotiations, discussions, between ourselves and the broadcasters, giving a hammer to either one of the parties, in fact, creates an imbalance in those discussions.

14447            That is all we are saying, that the consent is a hammer.  Do not consent; there are other ways of dealing with that, and they are good, commercial negotiations.

14448            And we are prepared to pay for those signals.  So it is only a matter of degree.  And if the degree doesn't work, then we come to you.

14449            MS RATHWELL:  Mr. Chairman, just to build a bit on something that both Ken and Mike alluded to, Ken noted that there are proceedings currently going on in Geneva ‑‑ or, he said that we are not in Geneva.

14450            What is happening in Geneva, albeit it is a very long process, is movement toward an international signal rights treaty.

14451            This is a copyright matter that is under consideration in that forum.  Progress toward a draft has been slow, but this is a slow process that BDUs and broadcasters have been engaged in with the Department of Canadian Heritage and the Department of Industry, to talk about potential ramifications on an international level of the introduction of retransmission consent.

14452            It has been the position of the BDUs, as a group, that this could result in two scenarios that are not necessarily in the best interests of cable and satellite consumers in Canada.

14453            What Michael was speaking of, in the context of, I think, narrowly Canadian signals, but which is equally problematic, is the notion that this could lead, and reasonably could be assumed to lead to demands by U.S. broadcasters for retransmission consent.

14454            That could lead to denials of service that would be simply unacceptable to our customers.

14455            Secondly, it could lead, plausibly, to demands for remuneration.

14456            A study was prepared, which we tabled with the government a couple of years ago ‑‑ and I believe it was tabled by Bell in the TV Policy Hearing last year ‑‑ where the value of lost revenue ‑‑ or lost value to our system going to U.S. broadcasters could range anywhere from $350 million a year to $570 million a year for the carriage of distant U.S. broadcasters in Canada.  That model was built on conservative estimates of what U.S. broadcasters are currently charging within their own retransmission consent regime in the United States.

14457            So I think that this issue goes far beyond what is necessary to produce local programming, or whatever, and we have to look broadly at the issue.

14458            THE CHAIRPERSON:  I'm sorry, I don't buy that at all.  I am very familiar with retransmission.  I know what is going on in Geneva.  It has no implication on this.

14459            And by the time Geneva comes around, we will all be retired.

‑‑‑ Laughter / Rires

14460            THE CHAIRPERSON:  Let's stay with the issue before us.

14461            And we are not talking about U.S. signals here, we are talking about Canadian signals, retransmission with Canada, a regime that is here.

14462            As far as the retransmission of U.S. signals, we dealt with that in the FTA and NAFTA.

14463            But let's not go there, we are not talking about the FTA and we are not talking about trade issues.

14464            What about the related issue of station shifting, which Canwest and CTV raised?

14465            You do simultaneous sub for stations in the same market for the first set of four‑plus‑one's, which I understand, but not for the second set.

14466            Let's say, if a program is seen in Toronto at the same time as in Buffalo, there is simultaneous substitution.  But if that same program is also on a second set of four‑plus‑one, let's say, from Syracuse or something, then the sim‑sub doesn't apply and people, in effect, can shift stations and watch it, et cetera.

14467            If I understood them correctly, they felt that it should be across the board.  You should do the simultaneous substitution on everything that you offer in the same time period, so that a CTV program ‑‑ let's say "Desperate Housewives", which seems to be everybody's favourite.  If it appears on another U.S. station, regardless of whether it is the first four‑plus‑one or the second or the third, it should be all simultaneous substitution.

14468            MS RATHWELL:  I believe that if it is the same time zone we do simultaneous substitution.

14469            At Star Choice, we have an original channel override capability that does that across our system.

14470            And what's more, both on the cable and on the satellite side, we do pay 25 cents per sub per month to the broadcasters for the carriage of the second U.S. four‑plus‑one.

14471            Just to set the record straight, I know there has been some implication before that Star Choice pays nothing currently for the retransmission of Canadian distant signals, but we have calculated the value of money and in‑kind costs of carrying local broadcasters, and it works out to about 96 cents a month for the distant Canadian ‑‑

14472            THE CHAIRPERSON:  I know.  I appreciate that.  But in the CTV and Canwest submissions, they talk about the distant signal, the time shifting and the station shifting.  They said that there are two related issues.

14473            Let's say that you are in Winnipeg.  You can watch the news of one of the Toronto stations, thanks to time shifting.

14474            But they also were worried about station shifting, in terms of simultaneous substitution.

14475            You are in Winnipeg, yes, but there is no simultaneous substitution because it is a different time period, yet the program is being shown on a four‑plus‑one, presumably coming out of Minnesota or something, and it would have the American ads.

14476            Am I talking rubbish here, or are you following me?

14477            MS RATHWELL:  No, I think perhaps what we are talking about is same time zone/same network viewing.

14478            So if you are in Toronto, you would have the option of watching another Eastern Time Zone signal of the same network.

14479            That would be not time shifting, but ‑‑ I guess one could call it station shifting.

14480            For Star Choice, within the small markets ‑‑ and we recognize the challenges of those markets ‑‑ our system is technically capable of effecting simulcast over same network/same time zone signals, and we have been very good at doing that.

14481            Our system cannot sustain doing substitutions in the larger markets.  It is technically impossible for us to make that many substitutions, because they occur at the set‑top box level.

14482            We do our best, and we do it very well, compared to other DTH companies on that count, but we think it's a substantial contribution as it is.

14483            THE CHAIRPERSON:  There will be an opportunity to make further submissions, and I would ask you to look at the CTV/Canwest submission on station shifting and what they ask for ‑‑ whether you can accede to it or not, or what problems it would cause.

14484            At first glance, it sounded like a very reasonable request.

14485            The last issue is BDU advertising on VOD, SVOD and local avails.

14486            You are clearly asking for it, and so ‑‑ surprise, surprise ‑‑ is every other BDU.

14487            We have heard an awful lot of submissions here about the danger of VOD ‑‑ and let's deal with the first issue first ‑‑ of VOD and SVOD ‑‑ because it's controlled by you and you have acquired the rights, it has a danger of becoming ‑‑ there is a fear of bypassing regulation, in effect, offering linear programming at any time in another guise of VOD or SVOD.

14488            I have asked others, and I am asking you the same thing. Where is the golden thread?  Where is the logical dividing line between VOD and SVOD showing again from a linear program and regular linear program ‑‑

14489            How should we approach this?

14490            This is turning out to be a major issue of concern to most broadcasters.

14491            MR. D'AVELLA:  Mr. Chairman, I will start.

14492            The VOD part of our business is still a very small part. It is really in its infancy, and it is going to be driven, obviously, by the growth of digital set‑tops.

14493            Most of what we buy we buy directly from program owners, as opposed to broadcasters, because most broadcasters don't really own any VOD rights for the programming they buy.  Some do.  Some are buying more rights.

14494            And the models right now are entirely pay‑per‑views.  If you have decided that you want to watch the Rocky movie on VOD, you are going to pay whatever the price is, $4.95 or $5.95, and that is always a revenue share with the program owner.

14495            We offer very little free‑on‑demand.  Free‑on‑demand is something that Comcast has done extraordinarily well with, because they have a lot of it.  They can get a lot of programming, and they have a means of paying for it by, essentially, inserting advertising.

14496            It is clearly an opportunity for the Canadian broadcasting system, and we think that, as broadcasters and programmers actually get their minds around the VOD opportunity and actually start acquiring some of those rights, we are quite happy to do these deals.

14497            There are deals where, if CTV wants to make "Corner Gas" available on VOD, we are happy to do that.

14498            You can do it on an episodic basis, you can buy the entire series, you can do whatever you want.  And, typically, the model would be:  Let's make it a free‑on‑demand service, but we are going to figure out how we split the advertising, or share the advertising.

14499            Or, some of the proposals we have seen are:  Why don't you pay us a few hundred thousand dollars, and then you can make it available any way you want.

14500            We have no ability to recover that, if we make it a free‑on‑demand service.

14501            We do some subscription video‑on‑demand. It is not free, it's pay, and it is largely from the premium movie services.  They are the ones providing the content for that.

14502            Apart from the Hollywood studios, which, essentially, own all of this product, there are very few other companies that are licensing VOD content, let's say, in sort of the North American market, if you will.

14503            The real opportunity here, for both us and the broadcasters, is, once they get their minds around acquiring VOD rights for U.S. network programming, that's where we think the opportunity really begins to make some sense.

14504            THE CHAIRPERSON:  Thank you for that description.

14505            But I was looking forward.  I mean, what the broadcasters are worried about is that you somehow disintermediate them, that is really what it boils down to.

14506            And what they are wanting to ‑‑ and what has been suggested to us, that everything that goes on, VOD or SVOD, you should be obligated to buy it from the Canadian rights holder and can't go directly to, let's say if it is a foreign rights holder or something like that; and, secondly, so that clearly you have to do a deal with them, and also, if there is any advertising on those or if there is any dynamic advertising substitution or something, that should be subject to a sharing basis with the rights holder, the Canadian rights holder.

14507            That is what was put to us by various people in different formats.

14508            What is your position on that?

14509            MR. D'AVELLA:  Well, with respect to buying the rights, I mean, that's clearly their prerogative. They have the ability to do that and they're probably in the best position to do that since they're paying the most money for the first run rights in any event.

14510            And what we do know from reality is, you know, you can't buy a program from NBC for VOD because they're basically saying, look, I've already sold this program to CTV or Global and I'm not going to jeopardize that business by selling you a VOD right.

14511            So, they're already No. 1.

14512            THE CHAIRPERSON:  Just on that point ‑‑ I'm sorry to interrupt you ‑‑ but I heard exactly the same opposite from somebody and he's saying, every time you want something different, a different right you have to pay for it, just because CTV has a linear program does not mean they have the VOD right and if you want SVOD there is another right, et cetera, but, in effect, each time the counter runs again.

14513            So, that is the experience of the broadcasters.  Is that not true?

14514            MR. D'AVELLA:  Yeah, absolutely.  They don't necessarily buy the VOD rights and they don't buy the rights because they probably don't see a means of monetizing them.

14515            THE CHAIRPERSON:  But does that prevent you then from buying the VOD rights?

14516            MR. D'AVELLA:  It typically does because the U.S. programmer, the guy that actually owns these rights, is not going to sell them to us because he's saying, wait a minute, I've got this great business with CTV, I'm not going to jeopardize it by selling VOD rights to a company that's got 800,000 VOD customers.  It just doesn't make any sense for them.

14517            And the only ‑‑ you know, this is  going to evolve and it would be in their interest and the broadcasters' interest to become, obviously, much more active in this.  And they know all about it, I mean, there's no news here.

14518            And, again, a lot of the models we've seen from them are, you do what you want with it, but you pay me $3‑million for this particular series of program and then you can decide whether you want to charge for it or whatever.

14519            Advertising within VOD programming, targeted advertising or whatever, is a good concept, it's an interesting idea, there are ways of doing this, it's another way of generating revenue.

14520            It's not necessarily something that we would want to push because not every model's going to be the same.  I mean, if they come to us and say, I've got "Desperate Housewives", I've got the VOD rights to it but here's how we're going to work out the revenue share.  We've sold this advertising, we're going to pay ‑‑ you know, we're going to share that with you guys if you make it available free, or they'll say, charge whatever you want for it but I'm already compensated because I've already sold the advertising on it.

14521            So, it's not ‑‑ none of this is cast in stone, it's still very much evolving.

14522            THE CHAIRPERSON:  But two different points here.

14523            On your first point that they don't want to jeopardize the right, I would have thought the Hollywood ‑‑ let's say a Hollywood rights holder says, here, I've got this relationship with CTV, I sold them the linear program, maybe they'll give them the right of first refusal to the VOD, but if CTV doesn't buy it, why not sell it to Shaw and get an extra dollar and you don't jeopardize the rights by giving CTV the right of first refusal.

14524            I don't see that that necessarily means that you don't have access to those rights.

14525            MR. D'AVELLA:  That's correct, but that's not where the discussions have been to date.

14526            THE CHAIRPERSON:  I see.

14527            MR. D'AVELLA:  And look, I mean, if they don't want them, then obviously somebody else is going to buy them.

14528            THE CHAIRPERSON:  Okay.  The second point, we have heard a lot about this dynamic ad insertion and tailoring ads to the customer.

14529            And you as a BDU are in an unique position of knowing who's watching, when, what, et cetera.

14530            As this outfit Invidi, I'm sure you have heard of them, who made a big presentation to us that they actually can identify the viewer by terms of gender, age, income, region, locality, et cetera.

14531            I don't know, let's assume they can do it.  Mr. Rogers thinks there are all sorts of piracy issues, there may be, maybe they can be solved, maybe they can't, but potentially this is an area where I would have thought where you can make advertising much more targeted, therefore, more lucrative and you also can prevent migration of advertising from the broadcasting system to the Internet where one of the great advantages is that you really know who's clicking on and you can tailor it.

14532            And the example that we have heard, and I'm sure you have heard it, you could sell the ad to GM and say, look, we'll do five, we'll do a truck, we'll do a sports car, we'll do a sedan, we'll do a family van, et cetera, and we'll make sure that the women who watch it see the family van, the 20‑year‑old males watch the sports car, et cetera, and you could change.

14533            Combine that with SVOD or VOD, you know, and even more the customer pays, so you really have a good database of who's watching what.

14534            And I sense people are on one hand excited about it, on the other hand scared and I don't know.  Do you see this as (a) a gross opportunity; (b) a way of preventing the migration to the Internet; and, (c) if you are going on that, would you do that on a shared basis with the broadcasters as they demand or not?

14535            MR. D'AVELLA:  Well, maybe Peter will want to talk about the privacy issues.

14536            But we see it as an opportunity, we don't know how big the opportunity is.  Obviously, any time you can actually target advertising and make it buy more effective, advertisers are going to be very interested in paying for that.

14537            Is it going to divert anything from the Internet?  We don't think so.  I mean, the Internet is a completely different space from an advertiser perspective, different type of usage patterns, different consumption.

14538            You know, it will be something that you could present to an advertiser and say, rather than spending $50‑million on Google, why don't you spend five per cent of that on our system because we can provide you with this kind of targeted advertising?

14539            So, it is an opportunity.  We think the best way to approach it is, it's going to be some sort of a model that we develop with the broadcasters if they own the rights; if they don't own the rights, then we'll deal with the rights holders, whoever they may be.

14540            MR. BISSONNETTE:  And on the privacy, as you know, Mr. Chairman, from your previous life that PIPEDA and privacy are sacrosanct to us and our customers and that continues to be.  We don't share information with respect to our customers to any third party and we would continue to take that approach.

14541            THE CHAIRPERSON:  But you wouldn't have to share it, you could ‑‑

14542            MR. BISSONNETTE:  Yeah, we're very reluctant ‑‑

14543            THE CHAIRPERSON:  It would still be your information, you would just make sure, in my example, that that ad goes to that customer.

14544            MR. BISSONNETTE:  Well, first of all, we don't have the sophistication at this time to do what you just described, but if we had that capability, sharing information still creates problems for us internally in terms of our own value systems and integrity.

14545            And our customers appreciate the fact that their information is held by us as very, very sacrosanct and we'll continue to do that.

14546            THE CHAIRPERSON:  So, what is your position then on BDU advertising?  You want advertising on local avails, I know that.

14547            MR. BISSONNETTE:  Yes, absolutely.

14548            THE CHAIRPERSON:  And on the rest of VOD and SVOD?

14549            MR. BISSONNETTE:  Yeah, we think so, yeah.

14550            THE CHAIRPERSON:  On a shared basis, or on a ‑‑

14551            MR. BISSONNETTE:  Well, Michael described the commercial relationships which are ‑‑ you know, they are on a sharing basis right now.

14552            THE CHAIRPERSON:  But that wouldn't apply to local avails?

14553            MR. BISSONNETTE:  No, local avails we think provides us with an opportunity to earn something from those avails which, you know, have come to us through a series of negotiations with those U.S. programmers and we don't think that it's inviolate that we would have the ability to generate some advertising from those and we will put those funds to good use as most of our funds do go in terms of re‑investing in our own infrastructure.

14554            THE CHAIRPERSON:  But right now local avails are being used as a promotion vehicle; right?

14555            MR. BISSONNETTE:  That's right.

14556            THE CHAIRPERSON:  It's either you own both those or ‑‑

14557            MR. BISSONNETTE:  That's correct, both our own as well as broadcasters.

14558            THE CHAIRPERSON:  Yes.

14559            MR. BISSONNETTE:  Yeah.

14560            THE CHAIRPERSON:  So, that would discontinue, they would be sold, in effect, in competition with broadcasters?

14561            MR. BISSONNETTE:  No, I think they would be ‑‑ you know, I guess if you take everything to the farthest extent that ultimately could happen.

14562            But, you know, there are ways and means of us ensuring that broadcasters still have access to those avails at market rates, that we still have them and we still value them in terms of promoting our own products and we would see that as still very, very important.

14563            But we believe that there should also be the opportunity to sell those local avails to others that see them also as valuable.

14564            THE CHAIRPERSON:  You were here or you heard on the Net the presentation by Telus who talked about NPVR?

14565            MR. BISSONNETTE:  Yes, we actually designed the network PVR five years ago.

14566            THE CHAIRPERSON:  Wonderful, and welcome, the first person who has appeared before me who actually knows something about it.  So, tell me how it works?

14567            MR. BISSONNETTE:  Well, we actually have a trademark on it and the network PVR very simply is a process where we would be able to store programming in a central repository and that that programming would be available to customers who don't have a PVR but do have a digital box and they would essentially have, no different than an Internet customer has a mailbox, they would have a box that essentially stores things that are available to them when it's more convenient to them.

14568            So, technically it works that way.

14569            THE CHAIRPERSON:  You don't offer it right now?

14570            MR. BISSONNETTE:  No, we don't.  We've chosen not to for two reasons.  One is because of contention, contention on the network.  Two ‑‑ the second reason is an extension of a technical reason which is, what programs do you store?  So, do you confine our customers to, say, 10 channels that they could store, or do you confine them to broadcast services, do you confine them to sports programming?

14571            So, where the programming actually comes from, because that creates obviously mass storage kind of complications.

14572            And third, of course, is the whole issue of copyright.

14573            THE CHAIRPERSON:  What about the access?  Would the access be on a sort of program basis.  Like I'm a Star Choice customer, I could run back for one week or two weeks and pick out, or would it be on the amount, or how would you do it?

14574            MR. BISSONNETTE:  So, first of all, it technically couldn't be available to Star Choice customers because they don't have a bi‑directional infrastructure.

14575            THE CHAIRPERSON:  Okay, cable.  Let's go with cable.

14576            MR. BISSONNETTE:  So, it would just be cable and that's the other challenges; do you keep it for a year or do you keep it for a week?  And clearly, you know, that's a consideration.

14577            But the fact is we've had the capability to do this for a long time and we haven't done anything with it.  In the mean time our customers with their own PVRs continue to grow and that I think kind of meets their needs.

14578            Some of the older boxes as well, you know, in our generation over the last five years, you know, we've seen higher and more sophisticated boxes with more and more storage capability and the real benefit to the network PVR was that you could take your whole system, customers that have none‑PVR boxes and all of a sudden provide them with that feature.

14579            But PVRs are becoming now the dominant box that customers are buying and they like to control it themselves and they like the fact that the storage capacity on those is growing every year.

14580            And, so, we've chosen not to do anything in that area.

14581            THE CHAIRPERSON:  Would that access be on demand or just on the linear programming that you are offering right now, going backwards?

14582            MR. BISSONNETTE:  I didn't understand that.

14583            THE CHAIRPERSON:  Assume I'm a Shaw Cable customer, I missed "Desperate Housewives" three weeks ago.  Can I just push in "Desperate Housewives" and all of a sudden ‑‑

14584            MR. BISSONNETTE:  Well, right now they can with their PVRs.

14585            THE CHAIRPERSON:  No, no, in the end PVR, when it's ‑‑

14586            MR. BISSONNETTE:  So, I don't want to give too much weight to the NPVR because, frankly, it's not ready for prime time because there are a whole host of things that have to be dealt with and we're saying, maybe it was a great invention at the time and maybe it was one ‑‑ it was like Nabu, it was a great invention but it had no practical applications.

‑‑‑ Laughter / Rires

14587            THE CHAIRPERSON:  Some of us were involved in Nabu, so...

14588            MR. STEIN:  Somebody always has to be first, right?

14589            MR. BISSONNETTE:  That's right.

14590            THE CHAIRPERSON:  But before we leave this NPVR, I appreciate there's a rights issue, but of course the great advantage is you don't have to think beforehand about what you want to ‑‑ you can just go and visit backwards.

14591            And my colleague Mr. Katz pointed out last time, it doesn't take a genius to figure out that if you marry this with dynamic advertising, et cetera, you could ‑‑ actually here is, take my example, somebody wants to watch "Desperate Housewives" from one month ago, et cetera and he can watch it, but you put in a different ad now than there was a month ago, et cetera.  So, there's a tremendous revenue opportunity there, assuming you can overcome the rights issue.

14592            MR. BISSONNETTE:  Well, technically the answer is you could do that.

14593            THE CHAIRPERSON:  But this is not  something where you are working on ‑‑

14594            MR. BISSONNETTE:  No.

14595            THE CHAIRPERSON:  Is anybody else, that you know of?

14596            MR. BISSONNETTE:  Well, Comcast has NPVR capability and, as you know, that's something that's before the courts.  Am I right?

14597            MR. D'AVELLA:  Cable Vision.

14598            MR. BISSONNETTE:  Sorry, Cable Vision.

14599            MR. D'AVELLA:  Cable Vision on Long Island are being sued, so...

14600            THE CHAIRPERSON:  Okay.  Well, as I mentioned before there is an opportunity to make some further submissions.

14601            The sole issue of VOD, SVOD and NPVR, which is slightly different but, and the distinction between a linear program, their programming, the rights of the BDUs and the broadcasters' concerns are quite a bit and we would ask you, like everybody else, to share with us your knowledge, your experience and where you think this is going.

14602            MR. BISSONNETTE:  Yeah, we'd be pleased to.

14603            THE CHAIRPERSON:  Okay, thank you.

14604            I think I have given you enough of a rough time, I will now pass it over to my colleagues.

14605            Michel.

14606            COMMISSIONER ARPIN:  Thank you, Mr. Chairman.

14607            I think I am going to take the issues in the reverse order. So, I will start with advertising.

14608            And in your oral presentation this morning on page 14 regarding local avails, you have set them to be for a value of $50‑million. Is that amount gross or net, first? That's on page 14, that's your middle paragraph where you say:

"The value of local avails on the U.S. service is less than two per cent..."  (As read)

14609            MS RATHWELL:  It's a net figure.

14610            COMMISSIONER ARPIN:  It's a net figure.  And obviously it's not only for Shaw, it's for the whole avails across the country, or is it the value for Shaw?

14611            MS RATHWELL:  It's for all of the avails.

14612            COMMISSIONER ARPIN:  It's all the avails in the country.

14613            And in your mind is it made up of national advertising or local advertising or a mix of  the two?

14614            MR. BISSONNETTE:  A mix.

14615            MS RATHWELL:  Yeah.

14616            MR. BISSONNETTE:  It's a mix.

14617            MS RATHWELL:  I believe it's a mix, yeah.

14618            COMMISSIONER ARPIN:  It's a mix of the two.  And in your submission in paragraph 40 you are also talking about advertising on the community channel.

14619            And again my question, is it made up of national advertising, local advertising or a mix of the two? 

14620            MR. FERRAS:  I think ‑‑ I can start on that.

14621            We'd like very much to get into that field.  I think our assumptions would be it would be mostly local because of the nature of the content itself and because of the nature of our relationships with our communities.

14622            When you look at some of the programming we do right now that's limited to sponsors' messages, it's all very local and our real problem there is just being able to exploit that opportunity fully, so, that when we have an advertiser and we say to him, well, we can give you a 15‑second spot ‑‑ or, sorry, a 30‑second spot with a little bit of video, but we can't promote a favourable image of you.  And they go, what do you mean?

14623            So, all we're trying to do is improve that relationship with the existing way we run the system and the existing advertisers that we have and it would be mostly local.

14624            COMMISSIONER ARPIN:  Now, in the same paragraph you're dealing with about two ‑‑

14625            MR. STEIN:  Can I just make a comment?

14626            COMMISSIONER ARPIN:  Yes.

14627            MR. STEIN:  Because your paragraph you referred to, 40, also talks about DTH.

14628            COMMISSIONER ARPIN:  I'm coming to that, that was my sub‑question.

14629            MR. STEIN:  Okay. Sorry, sir.  Okay.

14630            COMMISSIONER ARPIN:  I was there.

14631            MR. STEIN:  Okay.

14632            COMMISSIONER ARPIN:  Because I was saying, in the same paragraph, exactly, you are talking about your wish to have a DTH community channel.

14633            And, again, which community are you thinking of and will it be supported by advertising, and obviously in that instance the likelihood that you have local advertising is probably dim.

14634            MR. BISSONNETTE:  So, first of all it would be available nationally and, but it would be a consolidation, if you will, of small vignettes from small communities or large communities across the country.

14635            So, we would try to make it relevant to Star Choice customers and that would be through having local productions taking place throughout communities, having mobile ‑‑ small mobile units travelling from community to community and packaging programming that is of interest of Canadians.

14636            And, so, the notion of a community channel is a yes and I think we're looking forward to making that presentation to the Commission in the future.

14637            And then in terms of how we support it, it would be through sponsorships and advertising.

14638            COMMISSIONER ARPIN:  Now, are you contemplating having a French community channel and an English community channel, or only one community channel?

14639            MR. BISSONNETTE:  Well ‑‑ sorry.  You know, the options are open.  You know, we have a very loyal French Canadian subscriber base in Quebec and the Maritime provinces and they love our programming and we think, you know, that by doing something that is absolutely unique to them or for them, that that would make sense.

14640            COMMISSIONER ARPIN:  And you have the capacity to offer one or two new channels?

14641            MR. BISSONNETTE:  Well, that would be ‑‑ that would have to be a part of the consideration as well.  And as we mentioned in our notes, that we're looking at many different ways of creating additional capacity.

14642            And maybe this is a bit ‑‑ maybe not the right time to talk about this, but I think there's never the right time ‑‑ but, you know, we're looking at some of the redundant broadcast services that we currently carry, that would mean we would have to look at doing something there to free up capacity for services that may not be redundant but be unique in terms of their programming nature.

14643            You know, as the Commission knows from our last presentation, that we've introduced 8‑PSK, which is phase‑shift keying, which allows us to carry more services within our transponders.

14644            And, so, through those kinds of modulation and compression techniques, you know, we would be challenged to find that capacity.

14645            But we think it would be a really compelling national kind of a channel that gives us great excitement when we think about the nature of that program whether it's, you know, talking to customers in Fort Alberni or in New Brunswick or way up in Inukshuk, that programming on that channel would have some relevance to them.

14646            COMMISSIONER ARPIN:  Talking about capacity on Star Choice, I don't know if you had a chance to hear the presentation that Telesat made regarding ‑‑

14647            MR. BISSONNETTE:  Yes, sir.  Yes, we did.

14648            COMMISSIONER ARPIN:  And are you concluding anything from what they said, or...

14649            MR. BISSONNETTE:  I conclude they're trying to sell us satellite space.

‑‑‑ Laughter / Rires

14650            MR. BISSONNETTE:  You know, before we get to those kind of steps, there are a lot of things that we can do in advance to that.

14651            I mean, as you know, there's no satellite up there right now, so if this thing came down in a flaming ball, there's no other option.

14652            MS RATHWELL:  There is one point of clarification I think we should make on the Telesat submission because they did address it, but just in case there was any confusion about it, we'd just like to emphasize that the availability of C‑band capacity is not of assistance to Star Choice, it's not compatible with our network, it's not a small dish application.

14653            So, you know, I know they started by saying there's lots of capacity for HD on C‑band but that's not going to work.

14654            MR. BISSONNETTE:  Yes.  So, it doesn't work.  It would be like having Mickey Mouse ears trying to receive signals.  You know, they used to do just fine but, you know, we're DTH.

14655            But, you know, we're creative, we're working with them, we're working with CL, we're looking at other long‑term options. They're much more expensive than the kind of things we're doing.

14656            We've been able to re‑purpose some transponder space in order for us to launch HDs, we're launching new HDs next week for our customers and we've done that through either harvesting new compression technologies. We're looking at MPEG‑4 which will allow us to even add more services and, in order to do that, of course, customers that want those services have to have an MPEG‑4 compatible box.

14657            So, our engineering staff are doing a lot of work to try and maximize the capacity that we have right now because there is no satellite up there right now.

14658            COMMISSIONER ARPIN:  One question that we've asked of BDUs after we heard Allarco, and the question that we asked them was, while you were having negotiation with Allarco regarding Super Channel, did you launch any other services of any kind?

14659            MR. BISSONNETTE:  Well, they've given you a litany of services that they say we launched and that we knowingly launched those somehow to pre‑empt them from being carried, but that's not the case.

14660            Their attribution of motives ‑‑ they're absolutely erroneous.

14661            You know, with Allarco the first thing we thought was that they were actually licensed for one service and one channel, and through the course of our discussions they made it very clear that that wasn't the way they were going to program their service.

14662            They initially told us they would have a prime service which would be the best of all of the others and, so, we attempted to provide them with access on that one standard definition channel.

14663            They indicated their real desire to have an HD channel, which we ultimately agreed that we would carry.

14664            In the mean time we were, in fact, going through an 8‑PSK on our satellite transponders to accommodate what we already have.

14665            We've now come to an agreement, as you know, and we're launching those services I think within the month.

14666            And we offered ‑‑ frankly, Mr. Arpin, we offered to launch them at Christmas time where they could take advantage of the, I'll call it the national launch, the national preview and because we weren't launching all of the services at one time, they chose not to take advantage of that.

14667            So, to the extent that we've tried to be as helpful as possible by getting it launched, they wanted to ‑‑ they said basically it's all or nothing.

14668            COMMISSIONER ARPIN:  Now, when did you launch Yes TV, the shopping service ‑‑ the Corus shopping service?

14669            We have heard Torstar here.

14670            MR. BISSONNETTE:  Yes TV?

14671            COMMISSIONER ARPIN:  Yes.

14672            MR. BISSONNETTE:  I would ‑‑ what's that?

14673            COMMISSIONER ARPIN:  Was it Yes TV or ‑‑

14674            MR. D'AVELLA:  It's Eyes On TV and we're just trying to remember the timing.  It probably launched in the past six months.

14675            COMMISSIONER ARPIN:  In the past six months?

14676            MR. D'AVELLA:  Yeah.

14677            COMMISSIONER ARPIN:  But prior.  Now, we also heard Torstar, and if you don't have their reply you could always answer at the end of ‑‑ in the next couple of weeks, but we heard Torstar arguing that they've approached Shaw for their own shopping service and they were told that you didn't have enough capacity to offer their exempted service.

14678            And they made to us some request regarding the exemption rules saying that even if the Commission was looking at removing some access rules for existing services, they should keep them regarding exempted services, particularly shopping services.

14679            MR. BISSONNETTE:  So, are you asking whether or not we said no, we don't need another shopping channel?

14680            COMMISSIONER ARPIN:  No.  Well ‑‑

14681            MR. BISSONNETTE:  Because we ‑‑ you know, in our view we don't.  You know, customers haven't said they'd love to have another shopping channel and to the extent that, you know, the Shopping Channel's been there for a long, long time and it seems to have a following, but in terms of, we have no obligations to carry it and, therefore, no desire to carry it.

14682            COMMISSIONER ARPIN:  There's a rule that says if you have, or one of your affiliate has a shopping network, you must offer to anyone ‑‑

14683            MR. BISSONNETTE:  Yeah.

14684            COMMISSIONER ARPIN:  ‑‑ well, to at least one non‑affiliate or non‑owned a shopping network, and that's the exemption order that the Commission has issued years ago.

14685            Anyhow, in the transcript you will find the Torstar presentation, and I will invite you to look at it and if you have any comments to make I would suggest you make them in the reply ‑‑ at the reply stage because when they came they specifically talked about Shaw.

14686            MR. BISSONNETTE:  Well, I guess the first thing ‑‑ thank you, Mr. Arpin.

14687            The first thing is when they approached us I wasn't even aware of the Yes Channel or Eyes On TV Channel.  No. 2 is, we do carry Rogers Shopping Channel so, you know, I would think that that meets our requirements.

14688            COMMISSIONER ARPIN:  No.  That's what the rules says.  If it also a BDU owned, even if it's not a ‑‑ it is perceived by the Commission as undue preference.  So, anyhow ‑‑

14689            MR. BISSONNETTE:  Yeah, we'll look at ‑‑ we'll respond to you.

14690            COMMISSIONER ARPIN:  Yes, please.

14691            MR. BISSONNETTE:  Thank you.

14692            COMMISSIONER ARPIN:  Please.

14693            Now, we'll get to VOD questions.  You said that you are acquiring VOD rights for feature film directly from the studios or through their Canadian distributors?

14694            MR. D'AVELLA:  Some of them are represented by Canadian branches but most of them actually do it directly out of their Hollywood studios or offices.

14695            COMMISSIONER ARPIN:  Okay, thank you.

14696            I want to give them some kind of an order.  Well, distance signal.  In some of the other jurisdictions, I'm thinking most European countries, Australia, the over‑the‑air signals are not on satellite and are not even on cable, and only for the sake of discussion, what will be your views if the Commission was to come to the conclusion that the best way to resolve the issue of the over‑the‑air broadcasting was to forbid the carriage by cable or DTH of the Canadian over‑the‑air and all over‑the‑air services, including the U.S. services?

14697            MR. STEIN:  We will let you handle our customers.

14698            MR. BISSONNETTE:  Are you saying though, just so we understand the question, so you would say from now on we can't carry CFTO or BCTV in Vancouver; it only is available with bunny ears?

14699            COMMISSIONER ARPIN:  Yes.

14700            MR. BISSONNETTE:  Yes.  Well, it would give us more capacity, but I don't know if our customers really appreciate the inconvenience of having to go to the bunny ear reception, particularly given propagation issues of all the inconveniences of dialling and twisting knobs and interconnecting boxes.

14701            COMMISSIONER ARPIN:  So what you are telling me is that the over the air broadcasters are important for you.

14702            MR. BISSONNETTE:  You know, I watch Global news every night in Calgary.  That's all I watch on Global is their news, because it is relevant to me in Calgary.  I don't think anybody has ever said that they aren't important and they aren't important to our customers and to not have them would be an inconvenience.

14703            But I don't know if that goes to the value.

14704            COMMISSIONER ARPIN:  The thing is that it will remove you of the obligation of having to do programming substitution, simultaneous substitution.  It will give you more capacity.  And on the other hand, they will have the benefit of having to monetize the full value of their signal so that they ‑‑ because they will not have to compete with distant signals, they will not have to compete with, in most instances, say take Calgary or Edmonton, with the U.S. stations that you are carrying.

14705            MR. STEIN:  Well, the first thing is that in terms of the carriage where there are signals, I mean the Broadcasting Act requires the carriage.  I mean it is clear in the Act under 3(t) that carriage of local over the air signals is a requirement.

14706            Our point is that we don't question the carriage of the over the air signals.  What we are saying is only in reference to fee for carriage.  That is the only issue we have.

14707            We feel, as we pointed out in our opening statement, that the advantages that over the air broadcasters have with respect to priority carriage, simultaneous substitution, they don't have to pay for the spectrum, that all of the advantages that Peter enunciated are sufficient advantages.

14708            The other part of this is that one of the things that gets lost in all of this is the fact that cable became, through the '70s and '80s, the essential means by which Canadians received their local signals.  So that to go into the city of Vancouver and, with the mountains, et cetera, and then say okay, you are not going to carry this on cable any more, people would just go to their own systems to do it.

14709            I mean, the over the air reception of those services is difficult.  We did studies ‑‑

14710            COMMISSIONER ARPIN:  In analog, but in digital they have to get it or they won't get anything.

14711            MR. STEIN:  But they will go off the system then.  Basically what they will do ‑‑ yes, there is going to be ‑‑ because when the Americans go to digital there will be an improvement in over the air signals, but you will be driving people from the system because they will be able to get the ‑‑ if you don't have the U.S. four‑plus‑one on your cable in Vancouver, then people will find means to get it in other ways.

14712            So I don't see what the advantage would be.

14713            But going back to the cable, cable became the means of distribution of those signals.  I remember at the hearing in 1993 Ray Peters, who is the President of BCTV ‑‑ and you can look it up ‑‑ said: "Commissioner, I remember the bad old days before cable when we had to compete directly with the U.S. broadcasters over the air."

14714            I remember Mr. Perrin Beatty in 1992 said, you know, cable, which was once thought of as a cancer on the broadcasting system, became its saviour.  That is because we were able, through cable, to provide Canadians with wonderful colour signals, with no shadowing.  You know, we forget all of those kind of over the air issues.

14715            Now, those issues go away to some extent when we move to a digital environment, as the Americans are now moving to, but that is only going to increase the capability of Canadians to receive those signals.

14716            So why would you drive them off the cable or the satellite system?  And they will say okay, well, they are not on my cable or satellite so I will go over the air.  By the way, if I go over the air, why do I need my cable and satellite service to begin with?

14717            So I don't see what the objective would be in terms of moving that way.

14718            We think that the over the air signals, we are not denying their importance.  What we are saying is that we feel that they receive sufficient advantages now through simultaneous substitution, priority carriage, all those things that Peter listed, now, and that they do not require a fee for carriage in addition to those.

14719            COMMISSIONER ARPIN:  Regarding fee for carriage, I heard your argument in specific regarding CTV and Canwest.  At the same table we also heard Quebecor agreeing with fee for carriage and obviously this afternoon we were supposed to hear TQS, but for some obvious reason they won't be here today, at least that is what they have notified us.

14720            Star Choice is offering a service to the French market.

14721            I have been looking on page 16 of your oral submission and I have gone through the list of your objections regarding fee for carriage.

14722            Do you have the same objections regarding the French over the air broadcasters?

14723            MR. STEIN:  Well, they were the ones who pressed us to carry.  They were the ones who basically said that if the satellite didn't carry them, particularly in the smaller markets where there is a much higher penetration of satellite, that if we didn't carry them that they would go under.  So that carriage on satellite services was essential.

14724            So we came up with this whole balanced approach, which the Commission reaffirmed, to carry those services and to make them available on the satellite.

14725            I would be hard pressed to imagine why they would want us to take them down.

14726            COMMISSIONER ARPIN:  I am not looking at ‑‑ I have moved towards fee for carriage specifically and fee for carriage for the French.

14727            Are the French broadcasters having a different situation than their counterparts in English Canada?

14728            I am seeking your views because you are serving the French community.  I could read your argument on page 16 which is clearly aimed at CTV and Global and I'm asking you:  What are your arguments regarding TVA and TQS?  Are they the same?

14729            MR. STEIN:  Well, as Quebecor points out, there is a different situation in Québec.

14730            Cynthia will probably comment on this one, as well, in terms of our Star Choice situation.

14731            We feel that our carriage of the TVA and TQS signals, that we pay for the uplink, that we pay for the transponders, that we ensure that they are there to provide service in the area, that that is ‑‑ you know, that that is what we should be doing and that that is the proper policy.

14732            We carry their signals.  We make them available in the communities they serve.  We give them a real advantage to do that and that that is sufficient.

14733            MS RATHWELL:  Just to add briefly to that, yes, there are two strands to our opening remarks.  One is there is a whole list of benefits that all over the air broadcasters receive, and that would apply equally to English and French language over the air broadcasters.

14734            Then there are the particular circumstances of CTV and Canwest that we addressed in terms of, you know, their own business situations and their need for this and all that.

14735            But primarily I think our point across the board for both cable and satellite is that there is already a regulatory bargain in place, you know, and there is free spectrum and a host of other things and that should be sufficient without fee for carriage.

14736            COMMISSIONER ARPIN:  Somehow I could say that the list that I have on page 16 is written in a certain priority order so that you are putting simultaneous substitution and mandatory and priority carriage on cable towards the last benefit?

14737            MS RATHWELL:  I don't think they rank hierarchically.  It is just a list.

14738            COMMISSIONER ARPIN:  It is just a list.

14739            MR. STEIN:  We have more, actually.

14740            COMMISSIONER ARPIN:  You have more.

14741            But do you have anything specific for the French market, because surely the simultaneous substitution ‑‑ well, you are not in the cable business in Québec, but it doesn't work because obviously they are substituting amongst themselves.  There is no time shifting, there is only station shifting.

14742            MR. STEIN:  Well, essentially I would say that clearly when we were going through these discussions our view was that we need not carry, because of the explanation you just gave, we need not carry all the TVA and TQS services in Québec in the French language market.  We did need to do that.  We could have one Montréal TVA and we would have one TQS.  The programming is pretty much the same.<