ARCHIVÉ - Transcription, Audience du 16 septembre 2014

Volume 7, 16 septembre 2014

TRANSCRIPTION DES AUDIENCES DEVANT LE CONSEIL DE LA RADIODIFFUSION ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUJET:

Parlons télé : une conversation avec les Canadiens

TENUE À:

Salon Outaouais
Centre des conférences
140, Promenade du Portage
Gatineau (Québec)
16 septembre 2014

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.

Conseil de la radiodiffusion et des télécommunications canadiennes

Transcription

Parlons télé : une conversation avec les Canadiens

DEVANT:

AUSSI PRÉSENTS:

TENUE À:

Salon Outaouais
Centre des conférences
140, Promenade du Portage
Gatineau (Québec)
16 septembre 2014

- iv -

TABLE DES MATIÈRES

PAGE / PARA

PRÉSENTATION PAR:

- v -

ENGAGEMENTS

PAGE / PARA

Gatineau (Québec)

--- L'audience reprend le mardi 16 septembre 2014 à 0900

14843   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

14844   Madame la Secrétaire.

14845   LA SECRÉTAIRE : Merci.

14846   Good morning. We will now start today with the presentation of Saskatchewan Telecommunications.

14847   Please introduce yourself and your colleagues and you have 15 minutes for your presentation. Thank you.

PRÉSENTATION

14848   MS SANDISON: Thank you.

14849   Good morning. Mr. Chairman and Commissioners, I'm Stacey Sandison, SaskTel's Chief Marketing Officer.

14850   With me today is Rhonda Carsten, Director of Marketing for maxTV; Robert Hersche, Director of Regulatory Affairs; and Teri Budd, Manager of Regulatory Affairs.

14851   We're pleased to be with you this morning to share SaskTel's views on the proposed changes to the regulatory framework for television.

14852   We believe that this is a crucial time for broadcasting. The overall number of Canadian participants in the current system is decreasing, cord-cutting is now one of our major sources of churn, and in Saskatchewan people are turning to new sources for content. We require the flexibility to meet these new challenges, and giving our customers more choice is one way to increase their satisfaction.

14853   SaskTel operates a fully digital IPTV service branded maxTV. We are a small undertaking with 100,000 subscribers spread out over 23 Saskatchewan communities. Some of these communities have less than 1,900 people.

14854   Despite our small size we have been successful in developing a robust, competitive and innovative IPTV service for Saskatchewan consumers. We have found ourselves to be a welcomed competitor to the two national satellite providers and two cable providers that offer service in Saskatchewan communities.

14855   SaskTel has been at the forefront of developments in the Canadian television distribution industry. We were one of the first companies in Canada to offer an IPTV service.

14856   After our initial launch in 2002 we continued to innovate to meet our subscribers' needs. We were the first telecommunications company in North America to offer video-on-demand and we use that platform to offer movies and local community programming on demand to our subscribers.

14857   We also contribute to the larger provincial broadcast production by providing ongoing support to the Creative Saskatchewan initiative.

14858   Since 2002 we have continued to focus on enhancing choice and flexibility for our consumers. Today, we offer over 175 video channels and have initiated activity to offer 40 of those channels on a standalone basis in October.

14859   We do not charge an installation fee, require subscribers to sign contracts or charge termination fees. We listen to our subscribers and have adapted our service to meet consumers' expectations. As a result, for the second year in a row, SaskTel has won the J.D. Power Western Region Awards for Highest in Customer Satisfaction with Television.

14860   In order for us to continue to meet subscriber expectations, we believe that there must be changes made in how the current distribution system is regulated.

14861   We suggest the future Canadian television framework should be guided by the following five principles.

14862   The first principle is "Minimizing regulatory intervention." Canadian broadcast licensees are encountering increasing competition from unlicensed digital media providers. Only a light-handed regulatory framework will permit the BDUs to compete in this changing environment.

14863   The second principle is "Increase consumer choice and flexibility." For many Canadian broadcast licensees it is becoming increasingly challenging to adhere to past regulatory requirements and meet our subscriber needs. The future regulatory framework should focus on the core priorities stated by the CRTC and the federal government.

14864   The third principle is "Simplicity." Current Canadian broadcast regulations are a complex set of interlaced protections and supports. Simple regulatory policies encourage investment, provide few cross-implications to other licensees and enable ease in compliance and enforcement.

14865   The fourth principle is "Technological neutrality." The availability of broadcast content across many platforms is extensive for Canadian consumers. This reality must be acknowledged and regulatory policies applied in a technologically neutral manner in order to ensure continued achievement of the Broadcasting Act's policy objectives and a healthy Canadian broadcasting system.

14866   And finally, a principle of "Transparency." Canadian consumers are largely uninformed about most broadcast policies and the ensuing amount they pay. Increased transparency will aid Canadians in making informed choices about their entertainment options and the real cost of those choices.

14867   With these principles in mind we are presenting specific recommendations on how to achieve the desired outcome of increased consumer choice and flexibility.

14868   First, we would like to address the CRTC's proposed requirement for a smaller basic service with a capped retail rate. This is deeply concerning for us.

14869   At SaskTel, our basic service is used to create a competitive selection of programming services at an affordable price for consumers. It is also how we recover the costs to acquire a customer and a significant portion of our network and other fixed costs. Content expenses associated with the removal of some programming services from our existing basic package will eliminate only a small portion of the overall operational costs as a BDU. The proposed retail cap of $30 or less is uneconomic for us.

14870   If the smaller basic service proposal is accepted, we will be forced to consider increasing our retail prices for discretionary services or introducing new policies like installation fees, termination fees, fixed-term contracts and equipment fees to recoup the cost of our installation and other fixed costs. This is not a desirable position.

14871   We believe there is very limited consumer demand for the CRTC's proposed smaller basic service. In SaskTel's case, less than 16 percent of our maxTV subscribers purchase only our basic service. The vast majority of our subscribers want more services than what is in our existing basic package and are willing to pay more to receive the services of interest to them.

14872   We are recommending that the CRTC eliminate the current proposal to require BDUs to offer a smaller basic service and continue to allow BDUs to select the composition and price of their basic service according to the market served. An attractive basic service tailored to individual markets is important to maintaining Canadian consumers in the licensed broadcasting industry.

14873   Our concerns with the proposed requirement for a smaller basic service are heightened further with the CRTC's proposal to permit local stations to turn down their transmitters. The most efficient way to deliver a few local signals such as local stations is over the air and not through systems such as our maxTV which are designed primarily for the distribution of multiple channels.

14874   We would like to note that two of Canada's large media entities that own local stations, Shaw Media and Rogers Media, did not support this proposal. In our view, permitting local stations to shut down over-the-air transmitters will be harmful to consumers relying on over-the-air transmission, to BDUs forced to provide a smaller basic service with no margin and to the overall Canadian broadcasting system.

14875   We are recommending the CRTC eliminate the current proposal to permit local stations to shut down their transmitters.

14876   Of the proposals made by the Commission, our next concern is wholesale content agreements. To a large extent, SaskTel is limited from offering increased choice in selecting programming services because of the strict contractual terms imposed by programming services.

14877   In order for SaskTel to keep delivering on subscriber expectations and offer increased choice and flexibility, it is our sincere hope that the Commission adopt the requirements and conditions for the conduct, terms and rates of wholesale content agreements as outlined in your Working Document.

14878   Terms that contain a minimum penetration guarantee or wholesale rate cards that are punitive, with decreased penetration, are a disincentive for us to unbundle services from preassembled packages and permit consumers to select services on a standalone basis.

14879   In our initial intervention we made a number of specific recommendations regarding content affiliation agreements. For example, the CRTC should:

14880   - prohibit minimum subscriber penetration floors or minimum subscriber penetration guarantees;

14881   - prohibit terms setting retail rates or minimum retail rates to be charged by a BDU; and

14882   - prohibit wholesale tied selling of two or more programming services.

14883   As the CRTC examines wholesale contracts, it is our desire that in the future each programming service will:

14884   - offer a single wholesale rate per channel regardless of the retail distribution model to the consumer;

14885   - offer penetration-based rate cards that are not punitive in nature or do not include "make whole" rates;

14886   - negotiate commercially reasonable wholesale rates for all platforms based on "fair market value;" and

14887   - disclose to contracting BDUs the wholesale rates agreed to by other BDUs for a given service to create a more fulsome negotiation between parties and assist in providing more affordable retail rates for consumers.

14888   Regarding the Commission's packaging proposals, SaskTel is unable to support a requirement to allow subscribers to build their own packages of discretionary programming services.

14889   SaskTel's current systems cannot support an unlimited build-your-own concept. The proposed requirement to provide all discretionary services in this manner would result in complex and costly systems work and equipment upgrades that smaller BDUs such as ourselves cannot absorb.

14890   In our view, it would be more appropriate to make this packaging model optional for BDUs or if it is mandated that it be done on a smaller scale, for example encompassing fewer programming services.

14891   We also question the necessity of the CRTC's preliminary proposal to establish a Code of Conduct for BDUs. In our opinion, complaints in the broadcast industry do not warrant a Code. This is a solution to a problem that does not seem to exist.

14892   In SaskTel's case, we have had only a few customer complaints relating to our maxTV service since its launch. Over the past seven years, we have received a combined 12 customer complaints, and of those that did contact the CRTC the majority were related to general displeasure or errors with simultaneous substitution.

14893   We believe that our own data and the national data for BDUs are not reflective of an industry that requires a Code to govern the relationship between consumers and BDUs.

14894   Our main concern is the unintended consequence to consumers in establishing a Code. A Code could create more overhead for SaskTel by requiring service or billing systems changes which would increase overall costs for SaskTel and ultimately for our subscribers.

14895   We question the establishment of guidelines designed for less than 1 percent of TV consumers that will be applicable to 100 percent of subscribers and potentially disrupt the competitive marketplace.

14896   Finally, we believe that the Commission must look closely at how Canadian content is funded.

14897   The current funding model to support Canadian programming requires only licensed BDUs to make financial contributions to support Canadian programming, whereas revenues earned from unlicensed digital media platforms of Canadian and non-Canadian providers operating in Canada are exempt from regulatory contributions.

14898   This model is unfair and creates maximum financial harm to small independent distributors like SaskTel. Funding cannot rest solely on the backs of BDUs if they are to provide affordable options to entice consumers to stay within the current TV system.

14899   We recommend modifications to the existing financial subsidization model to include revenues from programming offered online and on other exempt platforms of Canadian and non-Canadian broadcast undertakings operating in Canada.

14900   In conclusion, we remain supportive of most of the changes suggested by the Commission in your Working Document.

14901   We view the CRTC's new regulatory framework as an opportunity to strengthen the broadcasting environment to allow consumers to have maximum choice and to allow us to compete for their business.

14902   SaskTel has demonstrated an enviable track record of delivering on subscriber expectations and we ask that the Commission enable us to continue on with this success.

14903   In addition, we encourage the Commission to consider the following concept. As we collectively focus our discussions on modifications to existing policies that primarily support a traditional broadcast model we would encourage the Commission to materially consider the reality of viewer preference for over-the-top content acquisition model.

14904   We are already seeing in the various age demographics of content viewership that the habit of the "viewer" towards accessing content when, where and how they like with little regard for the value of an aggregated package model is accelerating at an exponential growth rate.

14905   The growth pattern of Netflix over the last few years versus a decade of adoption history of traditional TV package model points to the stark reality of the consumer's growing desire to move away from pre-packaged content and assert their personal preferences regarding content.

14906   Our desire is that conversation occurs and policies are put in place to recognize this reality, capitalize on it to support funding for Canadian content and Canadian jobs, and enable increased viewer satisfaction with choice and flexibility.

14907   We appreciate the opportunity today to share our views with you and welcome any questions you may have.

14908   THE CHAIRPERSON: Thank you very much. Commissioner Simpson will start off the questioning. Thanks.

14909   COMMISSIONER SIMPSON: Thank you very much for that. I can't help but reflect that your presentation this morning, some of the teeth you were showing from your written submission have been -- I don't want to say that they have been put away, that would imply that you're wearing dentures.

--- Rires

14910   COMMISSIONER SIMPSON: But it just never fails to confound me when written submissions have a lot more teeth than what happens when we all get together, which is I guess why negotiation is always a good tool, because when you get face-to-face people are a little nicer to each other.

14911   Commissioner Molnar said yesterday too when she was interrogating Eastlink that -- she made note that the West is quite competitive and we've heard that before and it seemed to me from your initial submission in the spring that you had two major issues you wanted to get across.

14912   One, you were essentially saying to the Commission and to the government that if you guys really want choice you guys have got to think about deregulating or removing a lot of the barriers that regulation causes you to -- that cause you to stay awake at night.

14913   And the second thing is that you seem to have an appetite to take the gloves off and really get into it with the competition that's coming.

14914   I was wondering if you could tell me now why you're taking a position that you seem to be somewhat embracing the challenges we're facing in this hearing and seem now to want to work toward an outcome that we can all live with.

14915   MS SANDISON: So I would say that our intention hasn't changed. The two issues that we raised are still important to us. It's important for us that regulation is changed so that it can support a more competitive environment, an environment that doesn't inappropriately put cost onto the BDUs alone, an environment that allows us to create attractive programming that still has an economic model that works for us. So the two issues that you raise are still important to us.

14916   Now, we are very much interested in being competitive in our marketplace and gaining the customer's choice because of what we offer in both content and pricing, and if it means that we need to engage in more conversation with various parties to achieve that we will do so.

14917   The overall goal, though, is still the same, that we believe that different kind of regulation would allow us to work better with the content providers and allow us to deliver a better package to the customer that gives them more choice, at the same time with an economic model that works for us, and that secondly we make sure that we offer the content and the packaging that a customer is interested in so that we win their business in our market based on what we offer in terms of content and price.

14918   COMMISSIONER SIMPSON: Okay. I don't want to let you off the hook because this is just too much fun.

14919   You said the objectives of Canadian consumer choice and the cultural objectives of the broadcast industry are mutually exclusive. Would you tell me why?

14920   MS SANDISON: We want to ensure that we have content that customers like and in many cases there is -- in the current information, the current Act, the current policies, there is a push for Canadian content. Somehow we have to be able to find a balance between the majority of customer desire and at the same time being able to support the development of Canadian content and the Canadian industry that goes along in supporting that content, so how do we best come to an agreement or an approach or a framework that allows the ongoing nature of the development of the content as well as at the same time making sure the customers have accessibility to it and that it is part of what they choose to subscribe to.

14921   COMMISSIONER SIMPSON: Please.

14922   MR. HERSCHE: If I may add, and sort of going back a little bit to your previous question as well, is when we first were writing a number of these initial submissions, what we were looking for is -- and we won't go over all the traditional rules that exist today, the preponderance, the must carry, the whatever -- what we saw is a move towards pick-and-pay and a move towards flexibility with the consumer and what we were really saying at the same time is you also have to give us the kind of flexibility as a BDU to be able to meet that. We couldn't meet that over some of the -- let's say the traditional broadcasting rules, and so what you read in our submissions was a bit of frustration of us trying to balance some of those kinds of things.

14923   So it's not that we're not asking -- we're not saying, gee, let's get rid of all regulation, let's do anything like that. We're saying we have to have the kind of environment for us as a BDU if we're going to provide the customers with that kind of choice.

14924   We still need and we are -- as you know from our question we're still asking for other kinds of regulations in terms of the VIs and other kinds of things, again, to give us that kind of flexibility to do what we need to do.

14925   And so we must -- you know, the traditional preponderance rules, other kinds of rules, we are willing -- as you said, with your working paper, we are willing to work within whatever we can make this work.

14926   We do think that it's going to be very difficult and I know many of the people who have been here before you, producers, it's going to be very difficult on them. So we are looking for what can we do in the changing environment as we begin programming on an onward basis.

14927   COMMISSIONER SIMPSON: Thank you. Great, because I sense then that you are coming off that either/or position which you were very eloquent in for at least half of the 44 pages in your written submission, that under the way we were trying to approach things you couldn't get there from here, and now you're saying that there is some middle ground somewhere and it's just up to all of us to --

14928   Because my biggest concern was that, you know, within the broadcast industry, and this has always been my concern with vertical integration, particularly when telecommunications companies start getting into the broadcasting business, even the telecommunications companies had an understanding of a basic obligation to serve, a basic social requirement to recognize that that service had something more than a bells and wires delivery system, that it actually was a system that helped communities communicate with each other and sort of was part of the glue that held a country or a community together, and it was very much a preoccupation of mine to make sure that that thought continued as they got into the broadcasting business, which has an even greater understanding at times of that obligation.

14929   Okay, so let's figure out how we do this. In the first real sticking point, which was pick-and-pay, you had in your written submission a very specific list of things that you wanted us to think about, which were additional costs and implications that go against or go to the real cost of a basic service, beyond the programming services per se.

14930   My question is this: When you had made your confidential filings, had you made your case as to what those costs were that causes you to take the position that 30 bucks is probably not a proposition that you could make money on, considering we were also looking at 20 and 25? So have you made your case in confidential filings regarding your costs on a basic service like we're proposing?

14931   MS CARSTEN: Yes. We included the cost that -- our fixed cost to offer our service to subscribers at a basic point.

14932   COMMISSIONER SIMPSON: Yes.

14933   MS CARSTEN: That would include all of the fixed costs in addition to the content fees and what we found is that our costs exceed the price points that were recommended in the Commission's proposal.

14934   COMMISSIONER SIMPSON: But you don't need to do another undertaking was my question.

14935   MS BUDD: Sorry. We did not file detailed costing information on our fixed costs. We have not filed that, no.

14936   COMMISSIONER SIMPSON: Would you --

14937   MS CARSTEN: But the content fees, we filed.

14938   COMMISSIONER SIMPSON: Okay. Because what we really do need to understand is whether a basic service at a proposed strike-point, if it is indeed capped, is something that just won't fly. And if you have information that, not only goes to your case but to the case in general, would it be to your advantage to file that?

Engagement

14939   MS SANDISON: Yes, we will file that, in confidence.

14940   COMMISSIONER SIMPSON: You've got the date. The 19th of --

14941   MS SANDISON: M'hmm.

14942   COMMISSIONER SIMPSON: Okay.

14943   THE CHAIRPERSON: We're not talking about a full costing study, here, just your assessment of what -- and maybe system by -- you know, area by area, I don't know the costs -- your estimates of your fixed costs and the system or systems that you operate.

14944   MS SANDISON: We apply the same cost, regardless of the community or size.

14945   THE CHAIRPERSON: Well, then, that will make it easier, then.

14946   MS SANDISON: Yeah. So, it wouldn't be that detailed.

14947   THE CHAIRPERSON: Okay. So, the 19th of September. That's okay for you?

14948   MR. SANDISON: Yeah.

14949   THE CHAIRPERSON: Yes. Thank you.

14950   COMMISSIONER SIMPSON: Thanks a lot for that. I was really struck by the percentage figure that you put out, I think it was something like 6%, where you said extended basic service really doesn't fly in your customer world, that really -- could you sort of unpack that for me? Because it was something that -- you exhibit a very, very low threshold, with respect to extended basic, and I'm just wondering if you can put some more meat on that.

14951   MS CARSTEN: So, of our overall subscriber base, 16% of our subscribers take the basic-only package, without any additional programming. From there, it goes up, depending on the level of discretionary services that they select what percentage of our marketplace takes the different levels.

14952   So, is that the number you're asking --

14953   COMMISSIONER SIMPSON: Yes, it is.

14954   Why I asked the question was that I sort of think, you know, burning in my own mind, the bigger question of, if in the wisdom of this Commission's decision an even smaller basic was presented as an entry threshold, does that have the potential of changing that scenario because, all of a sudden, there's a small offering on the table that they can buy; therefore might cause them to want to go to a more extended basic voluntarily?

14955   MS CARSTEN: I think that there is the likelihood that some subscribers will migrate to a smaller basic service.

14956   Certainly, in the churn that we experience with our customers terminating today, 20% of the customers that leave our service advise us that they're leaving because they no longer require a television service. There is the hope that, you know, one of the tools we could utilize to save some of those customers would be to offer them a smaller basic package, if that is in fact the case. We could use that as a tool.

14957   But we do get very supportive feedback from our subscribers sharing with us they really see the value in the basic package that we offer today.

14958   COMMISSIONER SIMPSON: As an IPTV system, your organization has a tremendous amount of experience in that kind of distribution model. Technologically, I think it's been around since what, 1999. Is that right?

14959   MS CARSTEN: We launched the service in 2002, but they were working on it and began that process in 1999.

14960   COMMISSIONER SIMPSON: I think Commissioner Molnar had a sneak peek at it, maybe in its beta version.

14961   But does -- I asked this question earlier last week -- does an IPTV model, because of the very nature of this technological system, provide any consumer advantages, with respect to how it interacts -- how they interact with that system?

14962   The conventional cable is rather one-way, with the expectation of what the set-top box conversation is with the head office, and I'm just wondering if the innovations that you've been putting in place are something that we should be more aware of as we migrate to an IPTV world.

14963   MS CARSTEN: With the functionality and the technology that we have today, we're able to offer our subscribers numerous interactive applications that we can layer onto our IPTV service that allows them to interact with more data than they would find on a linear television channel. It's similar in nature to surfing for information. So that we have that functionality in our system and it provides customers with a little bit more of an interactive experience rather, than just utilizing the guide and calling content.

14964   MS SANDISON: Our goal is to provide a personalized experience for customers so that they can personalize the guide, they can personalize the applications, they can make it more of what they want it to be for themselves or members of their family. So, we look to continue to increase the interactive nature of the service.

14965   MR. HERSCHE: If I could add just one more thing to that which I find unique anyway. We offer community programming in every one of our communities and that community programming is not a linear programming, it is on-demand. So, if you want to watch just a program from your community or just an event, you can do it when you want it, as you want it, and that's proven to be very popular.

14966   COMMISSIONER SIMPSON: M'hmm. But interface, is your STB -- how functionally different is it than a regular cable box, in terms of the other ways you can customize interface?

14967   MS CARSTEN: So, we utilize a set-top box that is common in the industry. It's one of the most voluminous-order set-top box that's out there. I don't know so much that it's specific to the set-top box as it is with the middleware that we utilize to offer our service up to customers and how we are able to customize that to suit the needs of our market and how we want to present and brand our service.

14968   COMMISSIONER SIMPSON: Okay. Moving over to pick-and-pay -- and this is going to tie into the issue of wholesale rates and a single-rate card and so on, so the two are really tied at the hip.

14969   Let's start with negotiated rates for programming.

14970   We've heard from various organizations, including CCSA and others, that a single rate is kind of the way to go and I'd like to ask you about that, first, and whether or not that single rate also applies, potentially, to pick-and-pay, as well as bundles.

14971   Would one hand have to wash the other if, for example, on pick-and-pay because penetration would be less you have to sort of figure an average -- you might have to average up the rate with the programmers so that one is not a money-losing proposition and the other is?

14972   Or do you see the potential of a loss leader on pick-and-pay?

14973   MS CARSTEN: I think that there is the potential for that loss leader on pick-and-pay.

14974   What we are recommending in our submission is that we would like one overarching wholesale rate from our content providers, regardless of how the customer chooses to subscribe to their service, so that there isn't a rate for a discretionary package, and the penetration of that, and then a separate rate for a stand-alone offering to the subscribers. That's sort of the environment that we're concerned about, that make-whole scenario existing, that would make it uneconomical for us to offer those stand-alone channels.

14975   You know, by the end of this month, we'll be in a position to have 40% of our discretionary services available to our subscribers on pick-and-pay. Those are the ones that we have the content agreements in place that allow us to offer those channels.

14976   We have some additional work to do to negotiate with providers to determine how we can offer their services on pick-and-pay.

14977   In addition to that, we do have contracts that prevent the offering of a stand-alone or pick-and-pay service. So, there is that element of our content agreements that don't allow that.

14978   COMMISSIONER SIMPSON: And how would the rest of the standardized agreement work? I mean what are the tools that you're saying you need?

14979   I'm going to get into the issue of full disclosure on rates with other BDUs, but just what are the tools -- because, I guess there's a subset here. It seems that independent program providers really get thrown under the bus here.

14980   If the tools that are laid out are so specifically directed to the VIs and the way they approach negotiations, do we need -- is there a way to have a harmonized set of rules without totally relying on the VI Code to be able to achieve them?

14981   MS CARSTEN: Well, what we know about what we need to offer the flexibility and choice to our subscribers and what we would need in the content provider agreements would be to have penetration-based rate cards -- which we aren't against, by nature, but we are when it becomes a scenario for a make-whole or to drive you to the highest level of penetration and it takes away our flexibility to offer packaging the way the subscribers want to purchase it. Minimum penetration requirements are a concern for us in our ability that we pay on a level that we don't actually have subscribers taking.

14982   We're also concerned about inflexible packaging terms that are laid forth in our provider agreements.

14983   And, also restrictions, like we were just speaking about, that prevent stand-alone offerings to subscribers.

14984   We really are back to that one wholesale rate, regardless of how a customer chooses to subscribe to the service. And that's the kind of thing we would like applied broadly across content agreements, whether it's a vertically-integrated entity or an independent provider.

14985   COMMISSIONER SIMPSON: And that, obviously, is why you draw a dotted line to disclosure, because --

14986   MS CARSTEN: Correct.

14987   COMMISSIONER SIMPSON: -- if you are working in a single-rate environment, you want to make sure that you're dealing with apples to apples, on a competitive level, as well?

14988   MS CARSTEN: Correct.

14989   COMMISSIONER SIMPSON: Okay.

14990   MR. HERSCHE: If I may add. What we are asking for is, in terms of some of that disclosure, right now, we are always at a disadvantage when we're negotiating, not only on the kinds of terms that Rhonda talked about, but I have no idea whether you have gotten a deal and, you're a quarter of my price, am I even dealing -- are you asking for me twice the price? How do I negotiate? It's like dealing on a car and having no idea what the sticker price is or what you're going for. We've bot no comparisons, as we go on.

14991   So, we need something to help us to negotiate is really what we're asking.

14992   COMMISSIONER SIMPSON: M'hmm. But I guess there are two things. There's a certain level of concern that it takes away a lot of the negotiating ability of the programmer, particularly, the independent, because if they get badly beat up by Bell or TELUS, there's a knock onto when they come to talk to you. Is there not?

14993   MR. HERSCHE: Again, if they get beat up by TELUS, you're rather suggesting that I would pay that price for -- or pay a price because they lost to Bell. I think there has to be some sort of a balance in that.

14994   I'm not saying that we would necessarily, as a very small BDU, always get the same price as a Bell or someone with four times as many subscribers. But it has to be fair and reasonable, as we go on. And in the last little while, content costs have been escalating immensely.

14995   COMMISSIONER SIMPSON: Yes.

14996   Going back to the bundles for a second, I think I have a few areas that I want to understand better. On pick and pay, I think you are pretty clear. You are saying that pick and pay may have a tremendous benefit to the consumer because of their ability to go à la carte, but it has a lot of downsides with respect to efficiency, penetration rates for the programmer, relative returns on investment, and so on.

14997   We have heard -- and this isn't really your wheelhouse, but you are affected by the outcome of it. There have been a lot of different thoughts as to what services would go into a pick and pay scenario, and one of the ways that has emerged is that that provider might be gauged on the merits of their programming expenditures, so they sort of rise like cream to the top. If they are making inordinately higher investments, they have the benefit of perhaps going into -- I am thinking Canadian services here -- going into the automatic category of being included in pick and pay, and perhaps even into a different tier on penetration.

14998   How do you feel about that?

14999   MS SANDISON: Overall, we are going to need to be able to have services for our customers that they want. So as much as you may have pick and pay rates that cause you to go to one content provider over another, if it's not an attractive programming option for the customer, they are not going to take it, regardless of the rate that we negotiate.

15000   So it is going to have to be a balance between what we can negotiate across all of the content providers economically, and secondly, how do we build this so that our pick and pay options are options that our customers are interested in picking up from us.

15001   COMMISSIONER SIMPSON: Okay. On the bundle side of the equation, both pick a pack and the existing bundles, pick a pack, we are hearing, has exclusivity difficulties, particularly when it comes to the U.S. programmers, who have a very strong idea of what they want to be included in.

15002   Do you feel that because of that and some of the existing terms that you are experiencing in dealing with the VIs, who are often rights holders of popular programming, that pick a pack is totally a dead duck?

15003   MS CARSTEN: I don't believe that it is a lost cause or a dead duck for that issue. We do have customers that ask us if they would be able to subscribe to individual channels.

15004   Our theme packs do very well for us, our discretionary packages. We have 14 that we offer, and they range from 6 to 12 channels per package, which we retail at the same rate.

15005   So there is a lot of value in the packages that we offer to our subscribers.

15006   There are times, however, when there are just the one or two channels from a package that the subscriber is interested in, and we are very interested in giving them that choice and flexibility, so that customers can take a hold of their own approach to their packaging and their subscriptions.

15007   COMMISSIONER SIMPSON: So if I hear you correctly, if they really want a service, they have the à la carte option.

15008   MS CARSTEN: Correct, if it is available in à la carte for them. Some of the U.S. providers that we have agreements with, it is not an option that is available to us to offer their channels individually.

15009   So in that case, then, a subscriber, if it is a channel that they are keenly interested in, they would need to pick up the theme package, or the discretionary package, where it is available.

15010   COMMISSIONER SIMPSON: On curated packages, one of the options is promoting the idea of smaller packages -- threesies, fivsies and so on. Does that have a double negative effect, in that it starts to get into the area of the same inefficiencies as pick and pay, or are there ways around that because, all of a sudden, the system gets balanced because of your proposal for an open disclosure system on rates?

15011   MS CARSTEN: I think the option to have smaller discretionary packages would introduce complexity to our business from a customer perspective. It would be very disruptive for us to begin educating all of our customers on the nature and the different combinations of all the channels that would be available to them.

15012   We have had good luck in our customer feedback. What we have been provided by customers is that they like the way we have the channels grouped together, there is logic to it, you know, they are related. So it has been very successful for us.

15013   Any element of breaking that up beyond à la carte and the discretionary, I think, just adds more noise to the system and becomes more complexity to explain to our customers.

15014   COMMISSIONER SIMPSON: On set-top box data, you took a very different position, and you were saying that even if the data is aggregated, there is still, by nature, a lot of proprietary stuff in there that becomes problematic when put up against PIPEDA and other requirements.

15015   But does that information not help you be a better BDU and help a programmer be a better programmer?

15016   Because, after all, everybody is in it for the money.

15017   MS CARSTEN: We haven't invested in a technology that would amalgamate that data for us on a regular basis. We do ad hoc reporting on it from time to time, to give us an indication of where the set-top boxes are tuned to.

15018   The challenge with it in our market is that our set-top boxes don't time-out after a period of time. We have done a check, and 95 percent of our subscribers have their set-top boxes turned on at 3:00 a.m. So I think that is an indication of -- while it provides you a benchmark of where customers have tuned their set-top box to, it does not give us an indication of a viewership level, per se, or in what the demographics of the viewership -- what program they were even watching when it was tuned to that channel and then left on.

15019   So that is our concern with that.

15020   Also, to add, we don't use set-top box tuning data in negotiations, nor do we package it up or prepare it in a way that we would be sharing it with any of the content providers.

15021   COMMISSIONER SIMPSON: Thank you for that. Other than your concerns over confidentiality and privacy, you are essentially saying that the data doesn't really hold much analytical value because of its uncertainty.

15022   But when you look at the old diary system, you know, somebody would sit down at the end of two weeks and often write in what they thought they listened to, or watched, and in radio measurement, the people meter -- you know, people were tying them to their ceiling fans and collecting the fees.

15023   I mean, it may not be any better data, but it certainly can't be any worse than the old system.

15024   MS CARSTEN: I think it is an indication of a point in time when a set-top box was tuned to a channel. What you extrapolate from that, it doesn't really give you more.

15025   So it gives you that base bit of information, and that's as good as it gets, from that perspective.

15026   COMMISSIONER SIMPSON: Okay. Lastly, on a consumer code, I found it really interesting because you take great pride in the way you cultivate your relationship with your consumer, and to sort of dismiss the need for a code out of hand, I thought, sort of ran contrary to your corporate view that you put a lot of effort into making sure that your customer is a happy camper.

15027   So the question is this: Aside from your arguments about cost, and burden, I guess, to the administrative side of the company, if you are doing such a great job, why wouldn't it be easy for you to comply, if not become the gold standard for how this kind of code might work?

15028   MS SANDISON: I think the very points you bring up, which are that we are listening to our consumers and we are meeting their expectations, which is reflected in our data, is one of the main reasons that we would encourage this code not to be put in place, because we anticipate a fair bit of cost, and systematic and administrative work to make this happen.

15029   Other BDUs may be in different positions when it comes to how well they are meeting their customer expectations, and it is most likely that we will see a code, potentially, that will deal with the outlying issues, which means that we are going to cover everything that could possibly be covered in a code, which doesn't necessarily help our customers in any way. It increases the cost of us putting that code in place, and in the end the additional costs that we anticipate would happen from what we think a code might look like doesn't add particular value to our consumers.

15030   It may make it more difficult for consumers to sign up for services. It may make it more onerous. We are not sure what all of the elements would be in the code, but we anticipate that it wouldn't be a better outcome than we have today.

15031   COMMISSIONER SIMPSON: Thank you for that. The last question is to the Working Document for Discussion, your pages 1 through 16, which were attached to your speaking notes this morning.

15032   Are they consistent with the previous document that we received back in the spring, or are there any differences that we should be aware of?

15033   MS SANDISON: They will be consistent with what you received. If anything, it is more precise and specific to the reasons why we would agree or disagree with positions. But the core material is consistent.

15034   COMMISSIONER SIMPSON: Thank you.

15035   Those are my questions, sir.

15036   THE CHAIRPERSON: Thank you.

15037   Commissioner Molnar.

15038   COMMISSIONER MOLNAR: Thank you.

15039   Good morning. You have been quite clear and quite persistent in your view that we should stay out of defining basic service and leave it to you in the market.

15040   In your view, the basic service that you provide today, and its composition, is what your customers prefer. Everything in there is what your customers prefer.

15041   I mean, excluding the mandatory that we know, 9(1)(h) and so on.

15042   MS CARSTEN: I think we designed the package from a couple of different perspectives and goals to achieve through it, one of which was to address customer demand in our marketplace, but also to remain competitive and to draw customers to our service, so that those elements, we feel, are well served in that package.

15043   COMMISSIONER MOLNAR: You feel that that package is designed to meet customer needs and not designed in any way to address wholesale negotiations.

15044   MS CARSTEN: Correct.

15045   COMMISSIONER MOLNAR: So there is nothing in there that you believe should not be in a basic service.

15046   MS CARSTEN: For our marketplace, that's correct.

15047   COMMISSIONER MOLNAR: Frankly, the reason I am asking is, we have had conversations with a number of BDUs about sports services.

15048   MS CARSTEN: Right.

15049   COMMISSIONER MOLNAR: So you have a basic that includes two sports services, which we know from this week's -- or last week's conversation, are expensive services --

15050   MS CARSTEN: M'hmm, m'hmm.

15051   COMMISSIONER MOLNAR: -- to contain in a basic service. We had people like Shaw come forward, who said, you know, they'd like to take them out because 40 per cent of customers want sports and 60 per cent don't.

15052   Now, in your view, all your customers want two of them.

15053   MS CARSTEN: So what I can tell you is before we put them into our basic service, when they're in a sports package, just over 70 per cent of our customer base subscribe to those sports services.

15054   The other phenomenon we are experiencing, from an operational cost perspective, is during certain professional sporting events in Saskatchewan, we would have an influx of customers signing up for our sports packages for a number of days, and then unsubscribing from those services. This was a common, ongoing happening in our market, which was driving huge operational costs.

15055   As you can imagine -- I'll give you an example -- whenever there was a Saskatchewan Roughrider football game, we would have a vat of calls into our care centre to sign up for our sports service, and then after the game was over we would experience the same phenomenon.

15056   So it was driving those costs.

15057   We felt strongly, with our competitors having it in their basic package and what was happening operationally in our company, and the already high level of subscription to sports services, that it was a very good move for our company to put that into our basic package for those reasons.

15058   COMMISSIONER MOLNAR: Okay.

15059   So I understand what you're saying is: even if we were to assist and facilitate some of the wholesale arrangements and issues that exist there, it wouldn't cause you to change that basic service, it wouldn't cause you to reduce the services in there in any way?

15060   MS CARSTEN: Correct.

15061   We would welcome any benefits that would come from your assistance with the pricing of that content; however, unless there was a shift in our subscribers' interest in our sports package, and in having those channels in basic, we would leave it for the time being unless something changed.

15062   COMMISSIONER MOLNAR: Okay.

15063   Okay, because I was looking. I think you have a $37.95 entry point for max-only basic.

15064   MS CARSTEN: Right. Without Internet? Yeah.

15065   COMMISSIONER MOLNAR: Right. And this isn't about Internet --

15066   MS CARSTEN: Correct.

15067   COMMISSIONER MOLNAR: -- this is about an entry point into the broadcasting system.

15068   And it includes some elements that -- like, you offer the set-top box and so on, so --

15069   MS CARSTEN: Right.

15070   COMMISSIONER MOLNAR: -- if you -- I mean at $37.95, if you pull out some of the additional services you provide, absent a sports service, you could have obviously easily managed your business within a $30 price cap.

15071   MS CARSTEN: Thirty-seven ninety-five is a bundled price. I misspoke, I apologize. Fifty-seven ninety-five --

15072   COMMISSIONER MOLNAR: I understand that.

15073   MS CARSTEN: Yeah -- is the base price.

15074   COMMISSIONER MOLNAR: But did you see anywhere here that said that's not -- that's not available? I mean it's talking about an entry point --

15075   MS CARSTEN: The entry point --

15076   COMMISSIONER MOLNAR: -- and that there be -- this could be an entry point.

15077   MS CARSTEN: -- is $57, television service alone, for basic.

15078   COMMISSIONER MOLNAR: But you offer a $37.95 price?

15079   MS CARSTEN: True.

15080   COMMISSIONER MOLNAR: Okay.

15081   Anyway, let me go on. I want to ask you about multiplatform.

15082   I have seen nothing in here as it regards multiplatform.

15083   Is that all working out well for you: achieving your multiplatform, providing your customers with TV everywhere, any time?

15084   MS CARSTEN: So we've launched a max On the Go multiplatform service to our subscribers. It's available online, tablet, mobile. It's essentially, at this point in time, made up of subscription on-demand content, some local on demand, some streaming radio. We are interested in enhancing that with some Go applications and additional content.

15085   I would not say that there are not challenges for us to meet the cost of some of the content that we would like to add. Some of that is a reflection on the size of our subscriber base. We just don't have the same economies of scale as some larger serving areas.

15086   So to answer your question, there are opportunities there that we've taken advantage of that have worked well for us. There's further things we want to pursue. Some of that requires some technology work on our side, and other of it is based on budgeting and available fees for us to pay towards additional content.

15087   COMMISSIONER MOLNAR: Yeah. And in no way has the content been unavailable to you, it's just a matter of price.

15088   MS CARSTEN: It's not so much about availability as price, that's right.

15089   COMMISSIONER MOLNAR: How about on your mobile platform, is something going on?

15090   MS CARSTEN: On our mobile platform.

15091   Well, we extend our service out, our max On the Go service, to mobile if you're an authenticated television subscriber. We don't have a mobile-only content play at this point in time.

15092   COMMISSIONER MOLNAR: Okay, thanks.

15093   The last thing I wanted to ask, because I'm not sure that I've seen this in the discussions we had with other BDUs, you had -- in the wholesale affiliation agreement arrangements that you would like prohibited, you said that "Prohibit terms setting a retail rate".

15094   Is that something you've experienced, where your affiliate agreement would have the broadcasters be able to set your retail rate for a service?

15095   MS CARSTEN: From time to time there have been situations that have arisen like that. I would suggest that primarily, when we're dealing with a revenue-share model or the rate cannot be lower than x, that's predominantly where we encounter that.

15096   COMMISSIONER MOLNAR: Is that a big deal for you? I mean if we were to put into some priority the issues facing you in your negotiations for affiliate agreements, what's the big one?

15097   MS CARSTEN: The largest issue that we're facing are the make-whole penetration-based rate cards and our request to have one overall rate regardless of how a customer subscribes to the service. Those would be the priorities that we would put forth to you.

15098   COMMISSIONER MOLNAR: The idea of one rate regardless of how a customer subscribes, is that consistent with the perspective that penetration-based rate cards are not inappropriate? If you have one rate regardless of how a customer subscribes, would you say that could be a penetration-based rate card?

15099   MS CARSTEN: Yes.

15100   COMMISSIONER MOLNAR: Okay, thank you.

15101   Yeah, that's all I have.

15102   THE CHAIRPERSON: Vice-Chair?

15103   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

15104   Good morning.

15105   If you had a mandated basic service, wouldn't that make it easier to offer a skinnier basic?

15106   I gather you're concerned by your region, and the competition in the region, and you feel the need to include sports services in your basic package to compete.

15107   Am I correct thus far?

15108   MS CARSTEN: We include them to compete, and also based on customer demand for them, for sports.

15109   COMMISSIONER PENTEFOUNTAS: Yeah. And when was the last time you negotiated sports services?

15110   MS CARSTEN: We're currently negotiating some sports services, and we have others that our contract will run forward for another year-ish.

15111   COMMISSIONER PENTEFOUNTAS: Right.

15112   Is the trend towards less expensive sports services?

15113   MS CARSTEN: No.

15114   COMMISSIONER PENTEFOUNTAS: No.

15115   Would it be correct to say that the increase will be substantial?

15116   MS CARSTEN: I think that there are rates that have been tabled with us that cause concerns from a price point perspective. I think there's been other contracts that we have that we were comfortable with the rate. And the increases year over year, we felt it was appropriate for the value of the content and the customer's willingness to pay.

15117   So there's a blend, depending on which sports service we're discussing.

15118   COMMISSIONER PENTEFOUNTAS: But that rate will be way ahead of cost-of-living --

15119   MS CARSTEN: Yes.

15120   COMMISSIONER PENTEFOUNTAS: -- guidelines --

15121   MS CARSTEN: Yes.

15122   COMMISSIONER PENTEFOUNTAS: -- in this country -- or in Saskatchewan, would they not?

15123   MS CARSTEN: Yes.

15124   COMMISSIONER PENTEFOUNTAS: Now this capacity of your consumer to pay, is it endless?

15125   MS CARSTEN: I don't believe it's an endless willingness to pay. I think at this point in time, we have worked very hard to keep it as low as we possibly can with what we have to offer to the content providers and what our customers are looking for.

15126   COMMISSIONER PENTEFOUNTAS: Right.

15127   MS CARSTEN: So I do not believe it would be endless, though.

15128   COMMISSIONER PENTEFOUNTAS: And I understand and appreciate your concentration on your subscriber.

15129   Notwithstanding that, have you experienced any cord-shaving?

15130   MS CARSTEN: We have experienced cord-shaving. We have experienced, you know, packaged shaving or managing the amount of the wallet that they spend on their television service with us. And, then, of course, we've experienced the cord-cutting as well.

15131   COMMISSIONER PENTEFOUNTAS: You have.

15132   What would happen to that cord-shaving and cord-cutting if your basic entry-level package price increased even further? Which it most probably will following the next round of sports rights negotiations.

15133   MS CARSTEN: I think there's always a percentage of our market that is extremely cost-conscious and looking to manage how they spend their entire household wallet, and where it's relevant for them. So we consciously try to keep that cost, and any increases to it, as minimal as possible, and continue to deliver all the elements of our product to our customer.

15134   COMMISSIONER PENTEFOUNTAS: Tell me something, if you were to separate the sports package from the basic package, what would be the consumer interest in that package, as a percentage?

15135   MS CARSTEN: Nobody's telling me I can't so...

15136   Anyway, from a sports --

15137   COMMISSIONER PENTEFOUNTAS: Oh, okay.

15138   MS CARSTEN: I just like to check with the --

15139   COMMISSIONER PENTEFOUNTAS: Is there a whip somewhere back there?

15140   MS CARSTEN: -- regulatory folks every once in a while.

15141   COMMISSIONER PENTEFOUNTAS: Uh-huh.

15142   MS CARSTEN: I think, from a sports --

15143   COMMISSIONER PENTEFOUNTAS: The truth shall set us free, yes.

--- Rires

15144   MS CARSTEN: Yes.

15145   COMMISSIONER PENTEFOUNTAS: Go ahead.

15146   MS CARSTEN: I have bosses, too.

--- Rires

15147   MS CARSTEN: On the sports side, the sports package that we offer with channels beyond what we have on our basic service continues to be a very popular option for our subscribers and is one of the more highly penetrated discretionary packages that we offer in our market.

15148   COMMISSIONER PENTEFOUNTAS: What would that put us at, in terms of a percentage of consumers that would buy that package?

15149   MS CARSTEN: It would be greater than 40 per cent.

15150   COMMISSIONER PENTEFOUNTAS: Okay, so it's still less than 50 per cent.

15151   MS CARSTEN: Correct.

15152   COMMISSIONER PENTEFOUNTAS: We've heard from other BDUs that some of the sports packages are loss leaders.

15153   Would that be the case with your sports package?

15154   MS CARSTEN: I wouldn't say that it's a loss leader. I think, you know, beyond the sports services that we have in our basic package, there's an additional appetite for further --

15155   COMMISSIONER PENTEFOUNTAS: Right.

15156   MS CARSTEN: -- sports in our market.

15157   COMMISSIONER PENTEFOUNTAS: Okay.

15158   MS CARSTEN: So I do think it's a very relevant and compelling element of our product offering to our subscribers. We do not position it as a loss leader in our offering.

15159   COMMISSIONER PENTEFOUNTAS: And your $40 basic, how much of that? If there's any sensitive material, you could file it in confidence, but how much of that is -- I guess when you're talking about sports in your basic, you've got the TSN and the Sportsnet, right? So how much of that $40 is attributable to the presence of those sports services in your basic?

15160   MS CARSTEN: It's less than $7.

15161   COMMISSIONER PENTEFOUNTAS: Wholesale.

15162   MS CARSTEN: Correct.

15163   COMMISSIONER PENTEFOUNTAS: Okay.

15164   Yeah, it certainly is. Yes, yes.

15165   And that'll be increasing considerably in the short term, will it not?

15166   MS CARSTEN: We are under a longer term agreement with one of the providers and there are some new elements to the other that we are working through right now.

15167   COMMISSIONER PENTEFOUNTAS: Okay, so unless you want to eat it, you'll be north of $40 soon?

15168   MS CARSTEN: Correct.

15169   COMMISSIONER PENTEFOUNTAS: Okay.

15170   Tell me something else. With respect to the set-top box, you would have no objection to relieve yourselves of that data and let people that are experts in the field clean it up, if need be?

15171   And you can leave the privacy considerations to the Commission and others. Trust us, it's first of mind.

15172   MR. HERSCHE: That's exactly what I was going to say.

15173   We can do that without a problem, but, again, within those privacy constructs we do have a responsibility for our customers --

15174   COMMISSIONER PENTEFOUNTAS: You also mentioned that it wouldn't -- the "audience measurement system does not directly contribute to...the Broadcasting Act...."

15175   Would you care to put a little meat around that bone?

15176   MS BUDD: Sorry, we weren't certain what policy objective that would directly contribute to.

15177   COMMISSIONER PENTEFOUNTAS: Okay.

15178   But you can't specifically point to any part of the act that that concern would be addressed by?

15179   MR. HERSCHE: A lot of the concern, you know, that we're looking at, in terms of the set-top boxes now, or other things, once we become more and more in a pick-and-pay environment, we will be able to tell which customers want which kinds of services. We're kind of wondering what the set-top box would actually contribute over and above that as it goes forward.

15180   COMMISSIONER PENTEFOUNTAS: Okay.

15181   Well, I'm not going to start reading off the Broadcasting Act, we're going to run out of time, but I understand.

15182   Thank you, Mr. Chairman.

15183   THE CHAIRPERSON: Thank you.

15184   I have just four quick questions for you.

15185   I was struck when you identified your five principles, both in your written and your oral presentation, by the absence of any reference to cultural and social objectives.

15186   The Commission identified one of the outcomes in this proceeding as -- one of the public interest outcomes as, and I quote, "a Canadian television system that encourages the creation of compelling and diverse Canadian programs."

15187   Do you agree or disagree that that's an appropriate policy outcome?

15188   MS SANDISON: It's an appropriate outcome.

15189   When we look at what we are able to achieve, in terms of local programming, local content, for example, in Saskatchewan, where we contribute to those kinds of activities, and broaden that out to how the various funds can contribute to ongoing Canadian content production, that is important to us as well.

15190   So your interpretation of us perhaps missing that as a principle is not -- does not indicate that we're not interested or support that.

15191   THE CHAIRPERSON: Right, I understand.

15192   So it's more to do -- a bit like the ones the Commission and I've been quoting, about our regulatory approaches: regulate only where required, and then applying -- it "should be as simple as possible proportionate, easily administered and adaptable to change," is what the Commission talked about.

15193   You would agree with that framework?

15194   MS SANDISON: Yes.

15195   THE CHAIRPERSON: Okay.

15196   Now paragraph 28, you basically -- and you discussed this with Commission Simpson -- went on about "specific recommendations regarding content of affiliation agreements."

15197   How's this consistent with your principles of minimal regulatory intervention and simplicity?

15198   An ungenerous observer might say what you want is: Deregulate us, but regulate our competitors.

15199   MS SANDISON: We want to ensure that there is an appropriate regulatory framework in place that meets the objectives of the Commission, as well as allows us to more appropriately operate in the area of continuing to increase our ability to meet customer expectation, while at the same time being able to produce an economic model that makes sense for us to continue on in this business.

15200   So we would like adjustments to regulation in some of those areas that produces a more fair playing field, a greater opportunity to be flexible within what we offer, so we can meet customer choice objectives as well as economic objectives.

15201   THE CHAIRPERSON: So where there is a problem, you do agree that regulation has its role?

15202   MS SANDISON: That's correct.

15203   I think there's opportunity for the development of framework that would not interfere with our ability to serve a local market, but rather create a framework that encourages fair and equitable rate development, for example, content accessibility, those sorts of things, so framework, on the regulatory side, can help meet the objectives of BDUs and the content providers.

15204   THE CHAIRPERSON: Right.

15205   I just want to get a better record on your comments in paragraph 31. I know there's a lot of detailed evidence in your written submission, including confidentials, so I won't go into the details about your systems and the cost for upgrades and all that. But I was struck when you say that your "systems cannot support an unlimited build-your-own concept."

15206   Should the emphasis be on the "unlimited"?

15207   MS SANDISON: Yes.

15208   THE CHAIRPERSON: So there is a capacity for you to provide some amount of build-your-own in your current system?

15209   MS SANDISON: I think where we have the greater ability to support is in a pick-and-pay model. That gives us the ability to offer customer choice and still allows us to absorb manageable cost when it comes to changing our systems and our middleware and those sorts of things.

15210   An unlimited build-your-own has so many permutations to it that it's difficult to build a system that allows that to work in a way that it's easy for customers to understand, but, more importantly, economically for us to deliver. That would be a huge burden on us: to be able to step up to a build-your-own package.

15211   THE CHAIRPERSON: Right.

15212   So your current system allows pre-designed packages with à la carte top-ups?

15213   MS SANDISON: That's correct.

15214   THE CHAIRPERSON: But it doesn't allow any packages built on à la carte, other than maybe putting a few à la cartes together?

15215   MS SANDISON: I think it would mean a whole different template, if I can call it that --

15216   THE CHAIRPERSON: Right.

15217   MS SANDISON: -- if we had to build into our system the ability to create a complete build-your-own package. I think the permutations attached to that would be significant, and our system is not capable or built to that standard today.

15218   THE CHAIRPERSON: I understand.

15219   My last question's on paragraph 41.

15220   Now I know some journalists have falsely reported that the Commission is advocating some sort of financial contribution by Over-the-Top providers. It's nowhere in the working document. But, in any event, if I read your position here, you're recommending that we do ask for a financial contribution from exempt platforms, so, in a sense, you agree with other parties, such as the CBC, creative groups, the Government of Ontario and the Government of Quebec. Is that correct?

15221   MS SANDISON: There is so much content available in the Over-the-Top world today. As we watch viewer habits picking up more and more of that unregulated content, we think there's an opportunity to be able to capture some level of funding from those providers that help support the traditional broadcast model.

15222   THE CHAIRPERSON: You haven't answered my question.

15223   So you do agree with the position of those players?

15224   MS SANDISON: If that's the position of those players, then we agree with that.

15225   MR. HERSCHE: In our original submission, we played with that a wee bit and we talked about the various models or the various screens, if you will. We were quite taken with, I think her first name is Irene, Berkowitz, from Ryerson, when she was talking about maybe we have to look at this in a broader manner in terms of looking at some of the equipment or screens, if you will.

15226   We don't have a ready-made solution for you, but I think if we look broader, we just do believe that right now, with the falling viewership of BDUs, the other alternatives -- and, as we said before, we do support the Canadian content, that there has to be some dollars going into that -- that perhaps we need that kind of broader model that Ms Berkowitz was talking about.

15227   THE CHAIRPERSON: Right. And a number of parties have put options forward on how exactly that could work, and the Commission will decide whether it's a good idea, and then --

15228   MR. HERSCHE: Yeah.

15229   THE CHAIRPERSON: -- and then, if we do, how? But that's still up in the air.

15230   And you'll have a chance to comment, I guess, in the final phase as to whether you agree or not with some of those models being put forward.

15231   Is that fair to you?

15232   MS SANDISON: M'hmm.

15233   MR. HERSCHE: If I may --

15234   THE CHAIRPERSON: Yes.

15235   MR. HERSCHE: -- add on thing, one thing we would like as we do this goes back to -- and you'll forgive me, I've been in too many different hearings, wireless and others -- is that's really why we're asking for some of the transparency.

15236   I mean if you were going to go to the -- and I just pull this out of the air -- the CBC model or tax, whatever, just tell the consumer what it is.

15237   THE CHAIRPERSON: Right.

15238   MR. HERSCHE: We don't want to hide any of these kinds of items that we're doing. People have to choose and have to know.

15239   From our perspective even, if I have to raise my rates, it's not because I just wanted to gouge more money out of my customer, it's because I'm supporting Canadian content, or whatever I'm --

15240   THE CHAIRPERSON: So you're advocating, if there is to be a cross-subsidy, it should be explicit?

15241   MR. HERSCHE: Precisely.

15242   THE CHAIRPERSON: Okay. A principle that we use under another act sometimes. Yes, okay.

15243   Good. Thank you, those are our questions. Thank you very much.

15244   Madame la Sécretaire.

15245   THE SECRETARY: I will now ask Hollywood Suite to come to the presentation table.

--- Pause

15246   THE CHAIRPERSON: Welcome, and go ahead when you're ready, please.

PRÉSENTATION

15247   MR. SWITZER: Thank you, Mr. Chairman.

15248   Good morning.

15249   Mr. Chairman, Vice-Chairman and Commissioners, my name is Jay Switzer. I'm the co-founder and executive chair of Hollywood Suite, a group of four category B programming services launched in November 2011.

15250   With me today, on my left, your right, David Kines, our president and co-founder, and to my right, Catherine Tait, also a co-founder, and a director of our company.

15251   We thank your for the opportunity to appear here today.

15252   Hollywood Suite is one of the newest independent broadcasters licensed by the CRTC, and, as we indicated in our written submission, our experience in launching our services offers you perhaps the best empirical evidence of some of the major issues at stake in this process.

15253   To us, of paramount concern is the extremely limited power of independent broadcasters, especially new entrants, to reach and build audiences.

15254   Hollywood Suite is a partner of the IBG and we support many of their recommendations as well as those advanced by other independents such as Blue Ant and OUTtv. However, most of these recommended measures do not practically affect our business today.

15255   We are already in an almost pure pick-and-pay offering. In some ways Hollywood Suite is the poster child -- or some might suggest the canary in the coal mine -- for independent programming services in a pick-and-pay environment.

15256   MS TAIT: Almost all of the interveners in these proceedings have agreed on one thing: choice and flexibility for Canadian consumers is a good thing. We agree too and that's why we created Hollywood Suite.

15257   The Hollywood Suite premise is simple: more movies, smartly curated, at a compelling price. We offer four channels of commercial-free films, including hundreds of Canadian films, for $6 or less a month. In a world of infinite choice we believe that consumers still want to be guided to great movies.

15258   We also designed our service to help BDUs combat cord-shavers and -cutters with a broad and deep multiplatform SVOD offering that is included free to authenticated subscribers.

15259   MR. KINES: Almost three years since launching we are now finally being distributed from coast to coast to coast by all major BDUs, including the VIs, with the exception of Videotron.

15260   Other than two smaller BDUs, our channels are not offered in any theme packs nor in large or small or any bundles. We have won almost every single one of our subscribers in a pure à-la-carte environment.

15261   However, there is a huge disparity in our penetration rates, with most non-VI BDUs outperforming each of the VI BDUs by approximately 400 percent.

15262   Our marketing and sales team works aggressively with each of our BDU partners. Yet, there is this wide disparity. Is it systematic discrimination or is it a function of the many conflicting priorities VI call centres face? We don't know.

15263   We're not looking to the Commission to fix this particular imbalance but did want to detail this specific evidence to support the independent broadcasters' urgent requests for improvements to the VI Code of Conduct and its enforcement.

15264   The VI carriers control the pipe, the customer relationship, and the marketing and pricing of services. They have access and control over all direct points of contact with the consumer for their own services as well as ours. And where they may offer services in a similar genre they are not motivated to wave our flag and value proposition to consumers.

15265   Our colleagues at Blue Ant have described a "perfect storm" that will result from the mix of regulations proposed in the Commission's Working Document. Hollywood Suite has been living this "perfect storm" for the past three years.

15266   Therefore, we support the IBG position that without bright line enforceable rules in the VI Code to counteract market inequalities, independent channels will be disproportionately harmed for the penetration they may have already achieved or, in our case, for the penetration they may not have yet achieved.

15267   Changing gears for a second, we applaud the Commission's efforts in the area of audience measurement. Our business currently relies on subscription sales reports that come once a month, VOD usage reports that come whenever a BDU gets around to it, and for the rest of our colleagues 3,000 or so people metres that report once a day. Google has built a multibillion dollar business based on anonymous data from hundreds of millions of users. Yet, we are in the stone age of knowing how, where and when people use our content. The raw data is sitting right in front of us. It just needs to be harvested and sorted -- and soon.

15268   MR. SWITZER: Mr. Chairman, Vice Chairman, Commissioners. The team before you has been in the business -- it pains me to say this -- each of us, over 30 years. We did not launch Hollywood Suite with blinders on. We believe that our multiplatform broadcast offering is compelling, even when lined up against OTT options such as Netflix, and that we will succeed. We have seen success with meaningful national carriage in place after almost three years but we may not make it to profitability if the environment for independent broadcasters worsens.

15269   Your move to reorient the system to more choice is a good thing and we support it. And this may be contentious to say: There may be winners and losers and that is not a bad thing for the system if that is how Canadians vote with their wallet.

15270   What is not good in our opinion is if because of structural and business incentive reasons all the losses on the program service side that may come in the near future come at the expense of independent broadcasters.

15271   Your decisions make a life-or-death difference to most independents. Conditions of licence and clear definitions and regulations about linkage and enforceable codes of behaviour can support a Canadian ecosystem where all players have a chance to succeed and connect with Canadians.

15272   You have asked interveners in these proceedings to pick their best and worst measures proposed in your Working Document.

15273   For Hollywood Suite our best outcome would be teeth in the VI Code, as regulation with respect to the relationship between BDUs and independent programming services.

15274   The worst measure in our opinion -- and this may sound a little strange from us -- for the health of the Canadian broadcasting system as a whole is the reduction or elimination of simultaneous substitution. Although we are not requesting simultaneous substitution at present, we believe this potential -- this reduction or elimination would immediately drain hundreds of millions of dollars from the system, hurting the economy, jobs and Canadian culture, and we think all stakeholders are better served with a stronger ecosystem.

15275   And respectfully to our friends at Canada's large vertically integrated BDUs, we respectfully say that with great size and power comes responsibility, responsibility to all stakeholders in the system.

15276   Commissioners, we are up for this fight but it's hard to compete against such a large unchecked imbalance of power. We are not looking for entitlement, we are just looking for a fair shot.

15277   With that, we thank you and of course are here to answer any of your questions.

15278   THE CHAIRPERSON: Thank you very much for that presentation.

15279   Now, we have heard a lot so far on the record about independent programming undertakings and the difficulty they are having in the -- let's call it the wholesale market for access to BDU distribution. We've heard from IBG, and you were represented on that panel, and Blue Ant and OUTtv, which was part of the IBG presentation. So we've gone a lot around this and I think we have good records and there will be further phases and further evidence.

15280   So I really only have one question and that is: Is there anything that you are asking for specific to your situation, because of the nature of your specific service, that would be a different position in terms of some sort of condition of licence, regulation, whatever, however we might implement that, that addresses your specificity or do the comments made by the others cover the --

15281   MR. SWITZER: We have tried to focus on three or four key things in our written submission. I think we highlighted less than half a dozen that were most important out of the dozens of issues facing you, and clearly, they deal with access, linkage, all the things that we talked about.

15282   What we didn't talk about and perhaps what has come up is the matter of new entrants. You have asked us about our important self-serving needs and we have put those on the record. Very important.

15283   What we perhaps haven't expanded as an independent group or as Hollywood Suite -- we were fortunate to have a shot. We are, frankly, very concerned that the innovation and creativity of the next wave of entrepreneurs, if they look at what's happening in this business, might just decide to not take a shot in this sandbox and go play in the unregulated space and we think that would hurt all. And so that's one supplementary issue that we would like to put on the record.

15284   But matters of access, linkage, all the things that we talked about in our written submission, and in particular clarity in choice of words, precision, matters of linkage, getting the numbers right, getting the rules right, it's critical to many of the independents --

15285   THE CHAIRPERSON: Right.

15286   MR. SWITZER: -- and for those half dozen things very important to us.

15287   THE CHAIRPERSON: But I am correct in my conclusion that there is nothing specific -- I mean I don't want to undermine those positions and you're quite clear and you make references to various parties' positions, but we're not missing something that's specific to your situation that would also --

15288   MR. SWITZER: No, Mr. Chair. This proceeding has covered all of the important issues. We wanted to reinforce with personal experience that these challenges are real, that the -- I'll choose my words carefully -- that the potential for abuse is significant and ongoing, and these are very serious matters.

15289   THE CHAIRPERSON: Right. And I don't want to downplay that. Quite the contrary. I'm trying to make sure that we haven't missed an issue that's specific to you.

15290   MR. SWITZER: No, sir.

15291   THE CHAIRPERSON: Because there will be occasions -- first of all, we're getting undertakings that will be filed and then there will be written comments later on. So you will be able to participate with like-minded service undertakings, programming service undertakings, how if we were to create a more precise bright line test regulatory tool whether we have done the right thing.

15292   MR. SWITZER: Yes, sir. And our issues are not as much about risk of losing broader or medium broad distribution, because we don't have that at present. We're a new start-up.

15293   THE CHAIRPERSON: Right. And the nature of your programming isn't such that you're more threatened by certain over-the-top movie-based services?

15294   MR. SWITZER: There are many threats. It's a challenging time.

15295   THE CHAIRPERSON: That's just the way of life.

15296   MR. SWITZER: We're up for it. We're up for it.

15297   THE CHAIRPERSON: Okay. Well, refreshing. Thank you.

15298   MR. SWITZER: Thank you, Mr. Chairman.

15299   THE CHAIRPERSON: I don't think we have any other questions. Thank you.

15300   THE SECRETARY: I would now ask FreeHD Canada to come to the presentation table.

--- Pause

15301   THE SECRETARY: Please introduce yourselves, and you have 10 minutes.

PRÉSENTATION

15302   MR. LEWIS: Good morning, Mr. Chairman, Vice-Chair, Commissioners, and CRTC staff.

15303   My name is David Lewis and I'm the founder and CEO of FreeHD Canada.

15304   And seated here, next to me, is Brian Olsen, FreeHD's President and CEO and one of the co-founders.

15305   FreeHD is pleased to participate in this important hearing regarding the future of television in Canada, offering its unique perspective as a new BDU.

15306   The future policy that comes from this hearing will be the future in which FreeHD launches its service.

15307   Therefore, we welcome the opportunity to participate in its policy developments.

15308   As we noted in our intervention comments, FreeHD's experience, thus far, in the Canadian television system is as a licensed, but not yet launched, direct-to-home BDU.

15309   Being a yet-to-be launched new-entrant start-up, with no legacy systems and agreements, allows FreeHD many greenfield opportunities to employ next-generation future technologies and to offer consumer packaging and pricing proposals without regard to impact on current subscribers and existing programming agreements -- all of which offers a unique perspective and unfettered ability to meet the three objectives outlined for this consultation".

15310   FreeHD's comments today will continue on this theme as an unfettered new entrant BDU.

15311   Therefore, we will only address the relevant key topics for BDUs outlined by the BNC in this proceeding.

15312   Let me start with an update on FreeHD's progress and status and a brief description of how we plan to provide increased choice in the market and meet the demands of Canadians.

15313   FreeHD has spent the last few years tweaking and perfecting the three critical DTH business elements of technology, capacity, and consumer offers -- all the while, attempting to provide the most compelling offer and unmatched value proposition to Canadians and to meet the future requirements of television viewing.

15314   We have also attempted to develop long-term solutions that will assist Canadian consumers, programmers, and other distributors, alike.

15315   In that regard, we modelled ourselves on an updated Shaw Direct platform, where we can uplink and deliver content and distribute all programs in HD or Ultra-HD when they are ready; offer next-generation HITS and SRDU services to small cable and other exempt BDUs; and offer next-generation features and benefits that are currently only available in urban cable and IPTV markets to all Canadian consumers via very inexpensive DTH satellite systems.

15316   Our unique all-IP satellite platform can also push Ultra-HD content to ISPs, and even to cell towers for caching, aiming to relieve the inevitable mile- and last-mile backhaul congestion already strained by YouTube, Netflix, and other video content being delivered and viewed by Canadians on mobile web and GO devices.

15317   We are also seeking to deliver triple-play or quad-play bundle offers across Canada, perhaps from a single-dish, and believe our unique and attractive TV service will anchor those Canada-wide bundles.

15318   From a greenfield perspective, FreeHD is going to be unlike other BDUs, as we have an ability to implement new technologies without having to worry about outdated legacy platforms and dual-feeds or truck-rolls to upgrade, or the impact on current consumer offers.

15319   Our revised technology and business plan is complete and we are now currently seeking Canadian strategic and bundling partners to launch the service.

15320   At the heart of FreeHD's service, and central to this hearing, is our desire to offer an attractive and compelling Canadian consumer offer.

15321   The Commission may recall FreeHD requested an amended policy to be able to offer free local channels as a forward-thinking, consumer-friendly offer.

15322   Further, in that regard, three years ago, we developed a plan to offer pick-a-pay bundles to Canadians.

15323   Regrettably, our discussions with programmers met with considerable opposition to pick-a-pack or, indeed, any packaging penetration change.

15324   We are very pleased that the Commission and, in fact, many other BDUs and programmers now see the need to offer Canadians increased packaging choice as a way to keep Canadians happy and keep them in the regulated broadcasting system.

15325   We support the Commission to implement whatever policy changes it has at its disposal and deems appropriate to help BDUs offer more, and affordable, choice to Canadians.

15326   As an overriding principle, FreeHD shares the positions and proposed solutions of the non-VI independent BDUs expressed by TELUS, Cogeco, Bragg, CCSA, and MTS.

15327   FreeHD also shares the concerns expressed by those independent BDUs; in particular, the potential for increased consumer choice to be totally thwarted if independent BDUs are forced to live with the unfair and, often, punitive terms and conditions that VI and U.S. programming services have forced upon them in affiliation agreements.

15328   Specifically regarding the proposed working document, FreeHD offers the following comments and responses.

15329   Regarding small basic, FreeHD recommends the adoption of option A, suggested in the working document, as this will provide the lowest-cost entry package to BDUs in offering choice to consumers.

15330   FreeHD also agrees that the 4 plus 1 services are attractive to consumers and understands that it could offer the 4 plus 1s as an add-on to the basic package at no extra cost to consumers.

15331   The FreeHD DTH service was designed with small pick-a-pack packages, to provide the most possible choice to consumers.

15332   FreeHD, therefore, plans to offer a build-your-own-package, or BYOP, and will continue to develop and advocate BYOP if not restricted in this approach by VI and U.S. programming services through agreements.

15333   FreeHD's key concern with implementing BYOP is the reluctance -- or flat-out refusal, in many cases -- of many programmers to allow this type of approach without removing all of their economic risk and financial impact by significantly increasing their wholesale rates -- which would, regrettably, represent a much-increased cost to consumers.

15334   FreeHD would support any means for Commission intervention or regulations to assist in breaking the negotiation logjam and lessening the impact on BDUs and consumers.

15335   In that regard, FreeHD concurs with several approaches that other independent BDUs have suggested, including a standard template for affiliation agreements, specific provisions in the VI Code regarding volume and penetration-based pricing, and standard wholesale rates, as proposed in the Nordicity study that TELUS submitted.

15336   FreeHD supports the Commission suggestion that the Vertical Integration Code of Conduct, or VI Code, would be expanded to prohibit certain provisions that impede a BDU's ability to offer a pick-a-pay option on an affordable basis; for example, unreasonable penetration-based rate cards, requirements to distribute a service on the same terms and conditions at a prior date, and most-favoured nation, MFN, provisions.

15337   There is ample evidence to expand the VI Code, despite the VI protests to the contrary, as the Commission has now heard evidence addressing this issue in this hearing and, despite the fear of retribution, has received several requests for expedited hearings or arbitration from BDUs since imposing the VI code.

15338   For a new unaffiliated BUD that plans to meet the consumer demand for flexibility and choice, the VI programming services market power is one of the more important issues impacting FreeHD's ability to successfully launch a DTH service in Canada.

15339   With respect to simsub, FreeHD agrees simsub has a beneficial impact on urban broadcasters in their over-the-air area.

15340   After reading the interventions and hearing the evidence at this hearing regarding the state of local OTAs, FreeHD is in favour of maintaining simsub and, therefore, recommends no change to the simsub policy.

15341   For the record, we note the significant imbalance of DTH operators' expense to perform simsub on more than 100 OTAs we will carry, versus the much smaller financial/advertising returns to the OTAs from DTH's rural sub-base.

15342   DTH's roughly fourfold higher simsub expense, versus less than 5% of simsub eyeballs delivered, is perhaps something to consider and discuss at future DTH licence renewal hearings.

15343   With respect to preponderance, FreeHD's planned program lineup and packages has always had a preponderance of Canadian programming for each subscriber.

15344   However, for ease of regulation and implementation on packaging and billing systems of the incumbents, option B is recommended for preponderance.

15345   FreeHD is also supportive of the proposed BDU Code and the establishment of an ombudsman to adjudicate the BDU Code.

15346   In terms of implementation, December 15, 2015, is a reasonable timeframe for the new regulatory framework to be enacted.

15347   In summary, FreeHD welcomes the proposed new regulatory framework.

15348   As a yet-to-be-launched new entrant, FreeHD is unburdened by legacy agreements, systems, or technology. This allows much more flexibility to implement decisions and regulations that arise from this hearing, without significantly impacting our business or, more importantly, affecting our customer base.

15349   Our largest concern arises from the inflexibility of programmers to allow BYOP and their position that BDUs absorb all the economic impact of any changes.

15350   We also seek whatever further regulatory protection the Commission can provide from the VI's anti-competitive behaviour that continues to be exerted on independent BDUs.

15351   And, now, Mr. Chairman, we'd be pleased to answer any questions that you and the Commissioners may have, and we thank you for the opportunity to appear before you, again, today.

15352   THE CHAIRPERSON: Thank you very much, gentlemen.

15353   Commissioner Molnar...?

15354   COMMISSIONER MOLNAR: Thank you.

15355   Good morning.

15356   I'm not going to ask you questions as it regards the VI Code. There's plenty of people who have experience with that Code already, and I think the issues are very common.

15357   I am interested in a couple of things, though.

15358   Do you have an anticipated launch date?

15359   MR. LEWIS: Yes. It's going to take us a better part of a year to get everything together, still. So, we wouldn't be in the marketplace before next fall.

15360   Other than that, most of the key elements are in place for us.

15361   So, yeah, it would probably be a year from now before you would see us in the marketplace.

15362   COMMISSIONER MOLNAR: M'hmm.

15363   Clearly, you've been before us a number of times, with your plans to launch. Over that period, we have seen, now, you know -- we're having a discussion here about cord-shavers and cord-nevers and the fact that there is an evolution within the system and how consumers, or Canadians, are viewing and accessing their content.

15364   And so, it's interesting that your business plan, essentially, continues unchanged -- I shouldn't say "unchanged"; I don't know the details of your business plan -- but the fact that there continues to be a plan to launch a new distribution service within the traditional system.

15365   Do you also have plans, as it regards multi-platform?

15366   MR. LEWIS: We've got multi-platform plans GO-type platforms, as well.

15367   We actually thought, at one point in time, about launching the online services under our RSVOD licence ahead of the DTH services.

15368   One of the challenges of our business has been satellite capacity. It comes and goes in the marketplace, and we've had to reinvent our business plan several times.

15369   We've also been able to take advantage of technology changes that have come along.

15370   In this day and age, almost everything is done in software and not in hardware, anymore, so it's allowed us to look at different mechanisms, all the way from a whole-home media centre kind of PVR for every household, now, down to a stripped-down, low-cost all-IP kind of set-top box, which --

15371   COMMISSIONER MOLNAR: So, can I ask, as it regards your multi-platform, do you think you could, in the environment that exists today and in the environment you will launch within a year or two, do you think you could successfully enter the distribution market without a multi-platform strategy to enable the customers who would want your service to access their content over multi-platforms?

15372   MR. LEWIS: I don't think, in this day and age, someone could live without having -- consumers today want to view their content, you know, on any platform, any time, everywhere, which --

15373   COMMISSIONER MOLNAR: So, it truly is part of the distribution system?

15374   MR. LEWIS: In this day and age, it has to be. I don't think there's a sustainable model that is without those kinds of being able to watch things on either an iPad or a cellphone and take it with you, take content and be able to look at it on a GO device somewhere.

15375   At a minimum, you have to be able to take that content and continue the rights and have authentication and all of those things worked out.

15376   COMMISSIONER MOLNAR: Right.

15377   hank you.

15378   That's all my questions.

15379   THE CHAIRPERSON: You were clear.

15380   We have no other questions.

15381   Thank you very much, gentlemen.

15382   MR. LEWIS: Thank you very much, Mr. Chairman.

15383   THE CHAIRPERSON: We will take a 15-minute break, until 10:45.

15384   Thank you.

--- Suspension à 1038

--- Reprise à 1055

15385   LE PRÉSIDENT: À l'ordre, s'il vous plaît. Order, please.

15386   Madame la secrétaire.

15387   THE SECRETARY: Thank you. We will now hear the presentation of TekSavvy Solutions. Please introduce yourself and your colleagues and you have ten minutes.

PRÉSENTATION

15388   MR. ABRAMSON: Thank you.

15389   Monsieur le président, madame et messieurs les conseillers, bon matin. Je suis Bram Abramson, directeur juridique et réglementaire pour TekSavvy.

15390   À ma gauche, Marc Gaudrault, notre président et directeur général.

15391   MR. GAUDRAULT: TekSavvy is one of Canada's largest independent telecommunications service providers. Our subscribers are disproportionately young, and they actually are pretty tech savvy. They look to us for innovative service with a personal touch that doesn't pull punched.

15392   More than half the traffic we carry is streaming video. Our customers watch a lot of television. What they don't do so much is subscribe to Canadian television, because we don't offer it.

15393   Du point de vue commercial, il s'agit là d'un problème fondamental. Beaucoup de nos clients sont très satisfaits de consommer des contenus télévisuels de l'Internet et d'antennes hertziennes -- over the top and over the air.

15394   En même temps, nous savons que plusieurs de nos abonnés aimeraient recevoir un service EDR. Nous le savons parce qu'ils nous le demandent fréquemment et certains de nos clients nous quittent pour des fournisseurs qui peuvent en offrir.

15395   Ça fait donc un certain temps que nous envisageons de près la possibilité de devenir un distributeur de radiodiffusion. Notre conclusion à l'heure actuelle: on ne peut pas le faire, ni ne pas le faire.

15396   When it comes to being a BDU, we can't do it -- and we can't not do it.

15397   We need to do it because it's what our customers want. Those who really want it will go elsewhere to find it. We have strong technical abilities and have creative product designers, and we know we can add dynamic competition to the marketplace.

15398   But at the same time, our ability to provide a BDU into that marketplace is crippled by regulatory barriers that don't make a lot of sense to us.

15399   By far the biggest barrier is bandwidth costs. When the Commission instituted Capacity Based Billing, it took a strong pro-competition stance by putting the right basic model in place. But nothing happens overnight. It's the right model, but it seems like it's got the wrong numbers plugged into it.

15400   The bandwidth costs to offer the kind of non-crippled, good-quality TV service we'd like to offer -- are prohibitive.

15401   My colleague, Bram, keeps insisting that this is a broadcast hearing, and that I am not supposed to talk about telecom tariffs. Commissioners, I have to tell you that that does not make a lot of sense to me. You want more BDU competition. Canadians want more BDU competitors.

15402   TekSavvy wants to be that competition. In this way, our users can watch Canadian television without losing their relationship with us.

15403   Those are broadcast issues. When you last looked into wholesale rates for high-speed access in 2009, cable carriers argued that "multicasting is not an Internet service", but rather a "broadcast video service that could be used by a BDU", and was, therefore, out of scope.

15404   In your 2010 Decision in that proceeding, you found that Internet Protocol multicasting was out of scope because it's a functionality that high-speed Internet access does not require.

15405   If broadcasting-related Internet Protocol carriage is out of scope when we are talking about internet under the Telecom Act and it is out of scope when we are talking about video distribution under the Broadcasting Act, then where does it belong? The underlying costs of providing BDU competition have got to be something you can look at under the Broadcasting Act.

15406   MR. Commissioners, the Act does call for you to ensure that distribution undertakings "provide efficient delivery of programming at affordable rates, using the most effective technologies available at reasonable cost."

15407   Well, unicast bandwidth is available to us and is not affordable. Multicast is more effective, is more efficient, and is unavailable at any cost. And, by the way, because the Copyright Modernization Act, not your issue, but we want you understand our issues, was not clear about the ability to offer Network PVR functions, our toolkit for mitigating those bandwidth costs is very limited.

15408   Some of the barriers we want to talk about are bread-and-butter broadcast issues like accessing content on equitable terms that allow for creative packaging, and you've heard a little bit about this from my colleagues of Zazeen the other day.

15409   But we want to first turn to Item 1, Option B, of your Working Document.

15410   MR. GAUDRAULT: Mr. Chairman, from where we sit, Option B - price capped basic - is the best part of the Working Document. It is also the worst art of the Working Document.

15411   If we have to make basic access available at a fixed price lower than the cost of the bandwidth required to deliver it, then you have just made sure we will never enter the market.

15412   Vice Chairman Pentefountas, you asked about the costs for delivering a BDU over a service making use of the wholesale regime. As it happens, we have been working with Nordicity to have them look into those costs on the operational side.

15413   Based on current CBB rates and assuming a decent level video quality, but not more than that. The costs start at $30 per month and increase to $80 when PVR capabilities are included. That's just bandwidth - before we pay for content or anything else.

15414   After access to networks, access to content is the next biggest challenge for a new BDU entrant like us.

15415   We have deep roots on the technical side. But TekSavvy does not have much history sourcing content. So, we have decided to invest in learning more about it.

15416   We are excited to tell you today that Hastings CableVision, an Ontario BDU, is now under common control with TekSavvy. Hastings is a small, licence-exempt distributor that has been doing business in Madoc, Ontario, for more than 50 years.

15417   Our primary goal in Hastings is to learn about broadcasting and in the process, assist Hastings with making the most of its content arrangements. It is clearly a complex business. But there is also the long march through endless bilateral agreements, each negotiated separately, each secret, yet many of which are very similar to one another.

15418   We think that's inefficient. It's so inefficient that it may not make sense for TekSavvy to get into that business. It may be that, instead, we need to look to a partner with a third-party BDU - perhaps Hastings - to provide television service to TekSavvy Internet subscribers. But, Commissioners, there's got to be a better way.

15419   MR. ABRAMSON: Here's what we suggested in our submission. Going forward, programming services that want to be in the regulated system, because they always, as you've pointed out, have the option of instead exiting and going over-the-top, would file a public Reference interconnect Offer, or "RIO", that provides a default, quick-start, multiplatform option that the parties would always be free to improve on through negotiations.

15420   RIOs would not be heavily regulated. But they would be public. They would set out the default rate or penetration-based card that the service chooses for itself, identify the points of interconnection that the service elects to be at, and include any other relevant terms and conditions that the service includes them in a sort of template, default template, I should add.

15421   RIOs would be vulnerable to ex post complaints if they didn't comply with the rules on the books, just as affiliation agreements are today. Like the VI Code including, we hope, items 6 and 8 of your Working Document, which we see as many interveners have said, great idea.

15422   And including the requirement you imposed in large VI transactions to require non-linear multiplatform rights to be dealt on commercially reasonable terms, at the same time as linear rights.

15423   Affiliation agreements are no longer single-platform. The VI Code ought to recognize that.

15424   So, I'll summarize a little bit.

15425   On the networks side, we have said: you know what, implement Option 1B. But do it by taking a hard look at the cost of providing that capped basic, so that you know what price points actually makes sense. Please consider a follow-up hearing under both the Broadcast and Telecom Acts to do so.

15426   On the content side, we ask that you:

15427   Require a lightly-regulated but publicly-available RIO, reference in our Connect Offer;

15428   Implement items 6 and 8 of your working document in the VI Code; and

15429   Do so in a way that recognizes our multiplatform world.

15430   If the Commission takes these steps, we will build on what we are learning with Hastings and will become a BDU in our own right. So will a lot of other players. We believe that that is the competition that you are looking for and that we think will benefit Canadians.

15431   MR. GAUDRAULT: One more thing. Please don't kill Over-the-Air television. Consumers who try it, love it. But so do prospective new BDUs. They are at one place where something like a RIO is already in place.

15432   The compulsory licence allows for certain channels to be acquired and programmed without deploying an army of lawyers. That is very good for competition. We ask that you maintain it in place.

15433   MR. ABRAMSON: We would be glad to answer your questions.

15434   THE PRESIDENT: It might not be good for lawyers, however.

15435   MR. ABRAMSON: I agree, Mr. Chairman.

15436   THE PRESIDENT: I won't get into the Copyright Modernization Act, even though I was involved in four phases of that reform, but I might suggest that it's not so much it's not clear, it's just not the answer you wanted in terms of Network TVR.

15437   In any event, I'll pass you on to Commissioner Simpson.

15438   COMMISSIONER SIMPSON: Thank you. First off, Mr. Gaudrault, I think Mr. Abramson is right and so, if it's okay with you, I'll just reference you to our shiny new Wholesale Hearing which is coming up in November, which I can promise you you can have ample time to make your case.

15439   MR. GAUDRAULT: I'll be there, yes.

15440   COMMISSIONER SIMPSON: Okay. When I first read your written submission, my head was exploding because, you know, it was just -- you've managed to -- you must be a very efficient packer when it comes to overseas travel because you've got one whole "heckable" lot into an eight-page document.

15441   MR. ABRAMSON: I am not sure whether we think you roughly agree, but fair enough.

15442   COMMISSIONER SIMPSON: I've lied in there and I am going to do my best to try and to save breath because a lot of it, as I've said, was making my head explode.

15443   The first thing I have to ask you though is that in paragraph 2 of your written document, it seems, unless I am not getting it, that you're kind of contradicting your own point when you've said in 2012 only 25 per cent or a quarter of your subs also subscribe to a TV package and by 2014 it was down to 16 percent.

15444   Yet, you've said today that when it comes to being a BDU you can't do it and you can't not do it because you need to do it because it's what your customers want. And so, it is so, would you explain that inconsistency for me?

15445   MR. ABRAMSON: Sure, thanks. I guess -- look, there are three trend sides I want to highlight there. One, it's the simplest one, and it's what Marc referred to, is the people who really want BDU offerings will tend to leave us and we don't offer it.

15446   If you want a triple player, I guess a double player, just put Internet and TV and do your voice over the Internet. We are probably not the best ISP for you.

15447   COMMISSIONER SIMPSON: Yes.

15448   MR. ABRAMSON: And so, it's sort of a self-fulfilling thing.

15449   At the same time, you know, we have been in business for a little while now and our user basis, you know, sort of gotten older and have families in some of them, are cord-shavers or cord-nevers who now actually want BDU service, it's a phenomenon I can say that I am personally familiar with, you know. And so, that's been one trend.

15450   Another trend is simply, to be honest, we are already serving up a ton of video and we would be glad to catch some of that revenue and serve up television to those same customers who may be interested and maybe interested in getting it from TekSavvy, even if they hadn't considered it as something that would cause them to leave us. We see that, you know.

15451   We see people that say: Look, when you guy are going to do this? You're still not doing it, I am still your customer.

15452   Then, I guess, I would add a third one just pretty simple. They may also go to other ISPs, which also are no longer ISPs and it's a trend that we've also looked at some of our friends and competitors who -- some of whom have been before you. And it's more and more simply something that we ought to do.

15453   Do we see it as something that we will always have to do? No crystal balls here, but obviously our kind of view in the documents, there is a window and when that window closes, it will no longer be as compelling a thing, you know.

15454   You know, as Mark said, we can't quite do it, but we can't not do it. Well, there will be a time when we can not do it.

15455   COMMISSIONER SIMPSON: Uh-huh.

15456   MR. GAUDRAULT: You know, I think as well, it's clear people want, you know, the video they want. I think part of this is about delivering it in a way that's sort of modern and edgy and the way they want it. And so, here we are talking about loosening up, you know, some of these constraints.

15457   And it seems to me that, you know, once these constraints are sort of lifted and we can do things in a way that people want it, guess what, they're going to send -- you know, we are going to deliver to them what they are actually looking for.

15458   COMMISSIONER SIMPSON: Uh-huh. Yes. So, it's actually what you are saying, it's that like it or not because of the consumer's behaviour, your consumer's or customer's behaviour is dragging you into this. It's bringing you into that board tech is what you are saying.

15459   MR. ABRAMSON: I think so.

15460   MR. GAUDRAULT: And I mean, I mean it's in my heart too. I mean, you know, we want to start is as useful, right?

15461   COMMISSIONER SIMPSON: Yes, yes. And it's just all part of a package of them getting what -- from you, what they want.

15462   But would you share with me though a better understanding of whether your customers, I'm thinking, and you know them pretty well, but you know, the people who are attracted to your type of services.

15463   Do they make a distinction between video and broadcasting, in the old sense, or it's to them they just don't want the thing?

15464   MR. ABRAMSON: It's an interesting question, you know. Look, they realize that there is some stuff that they can get from other people they can't get from us and what's available over-the-top is certainly a pretty different offering. And then what's available through a BDU, discussions we have had with some of our colleagues, who are BDUs kind of support that, in the sense that, you know, if you go to a Netflix experience it's still a little bit of a linear forward one, a more focused one, a more restricted one in time where there is a few --

15465   You know, a lot of people will have a TV basically running as pretty expensive -- well, expensive if you have to pay for the bandwidth, respectfully -- a pretty expensive wallpaper.

15466   So, we see as there being a bit of a difference there, but certainly, there is some convergence, you know, happening and, you know, ask again in two years and I suspect the question will be pretty -- the question would have a pretty different answer.

15467   COMMISSIONER SIMPSON: Uh-huh.

15468   MR. GAUDRAULT: You know, in general I think our customers are somewhat early adopters, TekSavvy in general, you know, the more we -- I lost the question there.

15469   COMMISSIONER SIMPSON: What I am trying to get at is, as a regulator, we put things into compartments, and we started off with the broadcast compartment, and then we got into the Internet compartment, and then we got into video on the Internet, and now we are into this whole new thing called OTT.

15470   We have these four things on the plate, and I am just wondering if, in the fullness of time, particularly as we keep moving toward an IP delivery system, whether those four pieces become one.

15471   MR. GAUDRAULT: I think there is a part to everything. You know, the Netflix's are there, and I think there is value in the BDU service. I think that people want that. There are things there that really belong there. There is Canadian content, and I think we are advocating beefing that up, so that it continues to have its rightful place.

15472   I think that we see ourselves as -- you know, that is the right thing to do, and I think we want to be there. We want to be those guys that are doing the right things.

15473   So I think it plays a role, and here we are saying that we want to play a role there.

15474   It may not be everything. I think it is shifting --

15475   COMMISSIONER SIMPSON: Looking at one of those four components, the OTT thing. Again, one of the things that I blamed my headaches about was that you had said that you believe foreign OTT services are going to fade away.

15476   Now, are they going to fade away, or are they just going to be amalgamated into a different delivery system and lose their market power?

15477   MR. ABRAMSON: On that, I guess, I want to be clear. I don't think that the foreign services themselves will fade away at all. The list of eligible services, we think that sooner or later -- you know, when we talk about tipping points --

15478   COMMISSIONER SIMPSON: The method of distribution is going to fade away, not --

15479   MR. ABRAMSON: Yes, that particularly. We think that, in fact, instead it will start to become an over-the-top thing.

15480   I think that has been one of the themes bubbling below the surface here, or sometimes not so much below the surface: Look, if we do this, will we cause American services to take their marbles and go home. And hang on a sec, maybe they will take their marbles at some point and go home and start serving OTT anyway.

15481   And when is that tipping point?

15482   I doubt that we will know exactly. As Zach Kornblum put it on the first day, I doubt that we will know until the horse is well out of the barn. That's how these things go, they gather speed very quickly.

15483   But it seems that, regardless of what we do in the Canadian regulatory environment, at some point they will say: Why on earth would we do that?

15484   So we think it's a question of time.

15485   MR. GAUDRAULT: And the best strategy is to make what we have the best possible.

15486   COMMISSIONER SIMPSON: So excluding the thing that we don't want to talk about, did I read you right when you were saying that one of the options you are looking at is playing in the BDU world, or with it, or adjacent to it, or having an affiliation or association with it?

15487   But the other thing I thought I read was that you were also looking, or proposing, or thinking about a Canadian OTT. Is that right?

15488   And, would that be something you would be contemplating doing in an unregulated role, as OTT is now?

15489   MR. ABRAMSON: No, what we are contemplating right now -- we think that there are lots of OTT video offerings out there, almost all of them based in California, and they are compelling, and we assume that there will be more California-based offerings to come, and we hope more Canadian ones.

15490   It would be a real challenge for us to start from scratch and say: We are going to negotiate from point zero and create our own --

15491   I promised myself that I wouldn't use the name of one of those California-based companies, but let's say a YouTube competitor.

15492   We think that would be pretty hard to do, and it's not our core competency. We are good at connectivity.

15493   That said, to the extent that we are looking to start a BDU, which is a little bit of a departure for us, and that is why we have gotten involved with a BDU, we think that the best way to enable that to happen, not just for us but for others, is to tweak the New Media Exemption Order, the Digital Media Broadcasting Undertaking Exemption Order I guess it is, in order to provide for BDUs to be started up that run OTT, and basically to stop getting quite so deep into what exactly is the architecture of your service, and will I allow it, simply because we think it's a lot of work for you guys, but also it is something that would allow a lot of new Canadian BDUs to start up, to compete in the marketplace.

15494   And once you have that level of competition, we think that, obviously, less retail regulation is required.

15495   COMMISSIONER SIMPSON: In the context in which you used the word "architecture", both now and in the written submission, are you talking about that as a combined description of both technology and regulatory architecture, or are you just talking about, specifically, the technology?

15496   MR. ABRAMSON: I have the sudden urge to Google the term "regulatory technologies".

15497   COMMISSIONER SIMPSON: No, "regulatory" and "technologies".

15498   MR. ABRAMSON: No, I know, but I guess I am saying that when you look at a lot of the ways that a lot of networks are architected, I suspect that regulation is one of the many strong influences in the mix.

15499   I won't go so far as to talk about Ario, but certainly there has been a thought that we have given to it, as to how we would build this out in view of the requirement, which, of course, we would always respect, that we deliver nothing over the Internet, and just making sure that we know everything about what it means to be over the Internet, in view of some of the proceedings, which, obviously, we are watching closely, before the Commission.

15500   COMMISSIONER SIMPSON: So, sort of coming full circle on this, and closing on my questions, with respect to this canary you have purchased and put in the cage to have a look at, is it your intent with the argument for us to extend the exemption order? Does that reach into areas where that exemption order could, ostensibly, apply to a problem we might have with that BDU service appearing in other regulated markets, as long as it remains under the level of the exemption order?

15501   Once it catches a ride on the Internet, it has the potential of popping up just about anywhere, and I am just wondering, without telling trade secrets or future planning, is that something we should be thinking about?

15502   MR. ABRAMSON: In terms of how we interact with Hastings, it will be held separately, it will continue to operate, and we are really treating it as a learning experience.

15503   In terms of operating on sort of a national footprint, the first thing I would say is, we don't really intend to catch a ride on the Internet. We have a few hundred thousand subs now, and we have built out our network in a pretty robust way, we think, and part of the opportunity here for us was to really monetize and build on all of the -- sorry, I will use the word again -- architecture that we have in place.

15504   I think it's a fair question. That's right, if the exemption order were to be extended to areas in which the primary BDU was not exempt, like Toronto or Montreal, then certainly you wouldn't have the same advance warning if some new BDU launched in Toronto or Montreal, based on an architecture that was leveraging some synergies with existing physical infrastructure.

15505   The only thing I would suggest is, if that were the concern, there is already a registration requirement under the exemption order at 20,000, and that is certainly something that we would advocate taking a look at, to address those concerns.

15506   We don't think it needs to go to the full -- you know, everyone has to get a licence for every serving area just because.

15507   And I know there are more complex reasons to it, but I have to tell you, me trying to explain the reasoning to some of our folks, saying, "No, no, we need licences to do all of those things," they say, "Well, the rules are clear, aren't they?"

15508   I say, "Well, that's also a good question, but, anyway, we have to follow the rules, and, in addition, we require all of those licences."

15509   COMMISSIONER SIMPSON: The last area is with respect to the BDU starter kit that you are asking for, which is rate certainty and well-defined rules of engagement with affiliations.

15510   And, I presume, when you talk about identifying points of interconnection, it is not only figuring out very quickly what content is going to cost you, but also totally understanding whether you are standing on the precipice of unknowns, like interconnection fees, carriage fees, satellite fees, and so on.

15511   So you are talking about a very open book here.

15512   Why would you be that focused on something that universally applicable, when, as you are saying, you are just looking at trying to understand the BDU business?

15513   This sounds like more of a rollout problem than just a basic understanding of how you can operate your existing BDU that you have just bought.

15514   MR. ABRAMSON: First of all, our plan wasn't always, necessarily, to get there through acquisition.

15515   As I say, the role that Hastings plays in offering television service to TekSavvy customers remains to be seen. We certainly haven't made any decisions. And, if we can make that work, it may be a good option for us.

15516   But I have to say that it feels pretty round-about. In thinking through all of this, as we have been doing for a while, the question we have really asked is: Why is it so hard to become a BDU, if one is willing to follow all of the rules and do all of the things that are necessary.

15517   And the spirit of the submission was, in part, let's lay that out and identify what can be done to bring more competition, because we would love to come to market.

15518   As I say, it may be in a longer window than any of us can anticipate, five years or ten years, but that's not the major issue. The major issue is the Canadian system, and California, and generally non-Canadian system.

15519   We would like to see a strong system in place. We wouldn't mind, actually, seeing lots of new competitors pop up in Canada from now on, if it means more sustainability for all of us going forward.

15520   At the end of the day, if all we are are carriers of traffic, then we are not that much further ahead. So we said, you know, this is a major policy proceeding, let's lay out what we have learned a little bit. That is really the spirit, I think, of a lot of this.

15521   COMMISSIONER SIMPSON: Thank you, those are my questions.

15522   THE CHAIRPERSON: Thank you.

15523   Commissioner Molnar.

15524   COMMISSIONER MOLNAR: Thank you.

15525   You had a discussion with Commissioner Simpson about the exemption order, and I am not sure that I followed that.

15526   The Working Document would propose that you could enter this market as exempt. I am not sure how long, with your customer base, you would be able to retain that.

15527   That kind of exemption, the 20,000, is that something that would work for you for quite a while?

15528   Are you comfortable that you could operate in the market as an exempt system for some time?

15529   MR. ABRAMSON: I am just turning to the exemption order in front of me, to make sure that I am looking at it properly, but --

15530   COMMISSIONER MOLNAR: The Working Document proposes 20,000 within a single market, right?

15531   MR. ABRAMSON: Exactly, within a single market, and that is really the gating criterion.

15532   So we would have no problem going for a licence once we hit --

15533   For instance, if we were at 20,000 subs on a BDU in Toronto and we needed a licence, that would be great. We would love to be in that position.

15534   COMMISSIONER MOLNAR: Right, but that is some time from now.

15535   I guess all I am asking is, is there a reasonable window where you could operate for a number of years perhaps without having to go into a licensed system?

15536   MR. ABRAMSON: Yes, absolutely.

15537   COMMISSIONER MOLNAR: If we were to perhaps exclude exempt systems from the requirements as it regards basic and so on, better for you?

15538   MR. ABRAMSON: Even better for us, Commissioner.

15539   We really see the hard part, in many parts of our business, but today we are talking about BDUs, as that initial hump, where you start up and you provide service to that first customer.

15540   Getting from 1 to 20,000 is a great problem for us. It's the kind of problem we like to solve.

15541   Getting from zero to 1 is also a great problem, and we will enjoy solving it, but it's a little bit of a different kind of problem, and I would characterize it as having more regulatory friction.

15542   So if we were in a position to do all of the work we needed to do to start up, to make all of the decisions we need to, let's say, launch a BDU in a populous area, where the 20,000 number is significant, and then, once it was up and running, say, "All right, we hope to grow this. Let's go apply for a licence," that sequence makes a lot of sense to me.

15543   COMMISSIONER MOLNAR: I think it is important. I mean, we are hearing on the programming side that there is some concern that the system, as it exists, makes it hard for innovative new services to get into the system, and the same concern is clearly there on the distribution side.

15544   MR. ABRAMSON: Yes.

15545   COMMISSIONER MOLNAR: Tell me why you thought Option B was a better solution.

15546   MR. ABRAMSON: Two reasons. One, we think that wholesale regulation is always better than retail regulation. This is retail regulation. We think that the conditions under which that works is when the wholesale regulation is in place and is robust.

15547   We think that the Commission has taken a lot of really good steps in that direction, but there is still more to do. There is still not a ton of retail players. If you compare, let's say, the Internet access market -- or, let me take an extreme example, the long distance telephony market to the BDU market, I think everyone would agree that in long distance telephony there isn't a lot of retail regulation left that we need, because there are so many players that, whatever a consumer is looking for, there will be someone in the marketplace who offers it.

15548   That is less the case today with BDUs. There is BDU competition, but there are not a large number of players. There are two, maybe three.

15549   So we think that until we get to that place, cap retail rates, so that we can be sure there is actually an affordable option for everyone.

15550   Once there are lots of players and they are all competing on price as well as features, then maybe it is no longer necessary. We just don't think we are there yet.

15551   COMMISSIONER MOLNAR: Okay. This is a little bit of an off-the-wall question. We heard some of the strategies -- I am going to use Bell as an example, where they said that multiplatform services will always be linked to a subscriber, so there is no way that anyone will see TSN unless they subscribe to a BDU.

15552   Are these the sorts of things that are driving you to say that you need a BDU licence?

15553   MR. ABRAMSON: Yes.

15554   COMMISSIONER MOLNAR: So it is not just for today, it's for the long term, because it appears that is a long term strategy.

15555   MR. ABRAMSON: I think so. In part, it depends on the sustainability of Bell's strategy to say that if you want this on that platform, you also have to buy that platform.

15556   We are not convinced that that is a sustainable strategy once there is vigorous competition for each of those platforms, but it is going to be a while before we get there.

15557   COMMISSIONER MOLNAR: But how do you get competition for those platforms? I'm confused.

15558   There is Canadian content that is highly desirable to Canadians.

15559   MR. ABRAMSON: Yes.

15560   COMMISSIONER MOLNAR: So, while we talk a lot about the competitors from California, the content -- if you want to see NHL Hockey in Canada, you had better really like Rogers, right?

15561   MR. ABRAMSON: Agreed.

15562   COMMISSIONER MOLNAR: We talked a little bit about the Rough Riders. If you are a CFL fan, TSN is pretty important to you.

15563   MR. ABRAMSON: Agreed.

15564   I guess we would distinguish between sort of program and platform exclusivity. You need TSN to watch, let's say, the Rough Riders, or the Redblacks, or --

15565   COMMISSIONER MOLNAR: The Redblacks, yes.

15566   MR. ABRAMSON: You need Rogers if you want to watch hockey, but those are programming services that should be available to you whether you subscribe to Bell TV, or to TekSavvy TV, or to Hastings Cable.

15567   COMMISSIONER MOLNAR: Right, but they are saying that they are going to be authenticated to a BDU. Whatever that BDU is, you need to be authenticated to the BDU.

15568   MR. ABRAMSON: Ultimately, premium content will always be a bit of a stick. We think that once there are lots of doors to walk through, and once there are lots of things over-the-top, you know, it may be that premium content holders start to revise their views, or say "Let's take a look at this".

15569   Specific sports examples don't come to mind in terms of the NHL and the NFL blackouts on their over-the-top services, but it is certainly a trend that, I think, in the long term, is hard not to see coming.

15570   COMMISSIONER MOLNAR: So, for you, then, this is more of an interim measure, until markets really --

15571   MR. ABRAMSON: It may be. As we said, we think that at some point that window closes, and maybe BDUs don't have the same kind of future, or maybe BDUs have really become over-the-top services and, you know, the little seed that we plant today becomes an over-the-top service in its own right. It started out seeded with Canadian content and with Canadian channels through the regulated system, and then grew into much more, and so on. It's hard to say.

15572   But, look, we are where we are now, and does it make sense in the next few years? Absolutely.

15573   COMMISSIONER MOLNAR: Okay. Thank you. That's all.

15574   THE CHAIRPERSON: Mr. Vice-Chairman.

15575   COMMISSIONER PENTEFOUNTAS: It's a very interesting debate, which I guess we will continue at some other date.

15576   The Nordicity study that you have commissioned will show that your PVR-enabled service would cost $80 to you -- cost.

15577   MR. ABRAMSON: Yes.

15578   COMMISSIONER PENTEFOUNTAS: And we will have that study when?

15579   MR. ABRAMSON: Two things. I want to be clear, it is not that it will cost $80 to us, it will cost $80 in bandwidth to us.

15580   That is the only thing that we have been looking with them at, because that is the part of the business that we have been, you know, using them just operationally to try to understand.

15581   Obviously, when we heard it being talked about, we went back and looked at it and said: I wonder if this is something that we are in a position to submit.

15582   We are happy to file it with you.

15583   COMMISSIONER PENTEFOUNTAS: Is it written?

15584   MR. ABRAMSON: Yes.

15585   COMMISSIONER PENTEFOUNTAS: Oh, could we get it, please, before Friday?

15586   MR. ABRAMSON: Yes, absolutely, we will file it before Friday.

Engagement

15587   COMMISSIONER PENTEFOUNTAS: Thank you.

15588   THE CHAIRPERSON: Thank you. Of course, we will have to figure out whether it is within the scope of the hearing, as well, but we will cross that bridge when we get to it. Not having seen the document, it is a bit difficult to decide on that.

15589   Those are our questions, gentlemen. Thank you very much.

15590   MR. ABRAMSON: Thank you.

15591   THE CHAIRPERSON: Madam Secretary.

15592   THE SECRETARY: I would now ask the Directors Guild of Canada to come to the presentation table.

15593   THE CHAIRPERSON: Welcome, gentlemen. Go ahead when you are ready.

PRÉSENTATION

15594   MR. SOUTHAM: Thank you. Mr. Chairman, Vice-Chairman, Commissioners and Staff, my name is Tim Southam, and I am the President of the Directors Guild of Canada. I am also a director of feature films, documentaries, television movies, and series like Flashpoint, Bones, House, M.D., and Bates Motel.

15595   So, personally, I work across the continent, for many different engagers.

15596   I also am a filmmaker with projects that I take to various kinds of buyers.

15597   On my left is Brian Baker, the DGC's National Executive Director, and on my right is Peter Murphy, DGC's Manager of Research and Policy.

15598   While there are only three of us here before you today, we represent over 3,800 Canadian members, drawn from 47 different craft and occupational categories, covering all areas of direction, production, editing and design of screen-based programming in Canada.

15599   Mr. Chairman, earlier this morning you referred to diversity of offerings in the Canadian media landscape, and this is, in fact, the primary focus of our comments today.

15600   Our primary concern is that, in our estimation, there exists a high probability that, over a short period of time, pick and pay will reduce the diversity of Canadian programming choices available to Canadian consumers, and possibly raise consumers' monthly bills in the process.

15601   The DGC has not seen any modelling exercise on pick and pay that offers a clear forecast with respect to diversity of programming choices or pricing. The U.S. debate around this issue, which the DGC has studied at length, concluded that pick and pay, or à la carte, is extremely problematic to model.

15602   Worse, no one can tell us whether prices will actually go up or down for Canadian consumers. The expert economist who appeared before you last week agreed that prices to consumers might go up, or they might go down.

15603   You, yourself, have indicated, Mr. Chairman, that you never promised that pick and pay would result in lower prices.

15604   This prompts the DGC to wonder what percentage of Canadians would have said: I want pick and pay, and I don't care if it costs me more money, or even the same amount of money for fewer channels.

15605   And fewer channels and fewer programming choices is what the DGC anticipates in a pick and pay universe.

15606   We would like to consider with you today what the Canadian broadcasting system might look like a year or two after the implementation of a pick and pay regime. The evidence seems clear that services' penetration in a pick and pay world can only decline from what it is now with packaging.

15607   Subscription revenues are likely to fall for non-basic Canadian specialty services, as some Canadian consumers choose to unsubscribe to those channels.

15608   For those services, advertising revenues will also decrease or, in some cases, disappear completely, as their penetration levels fall below thresholds of interest to advertisers.

15609   Specialty services in peril can be expected to attempt to protect their bottom lines by spending less money on original programming and by diverting those scarce dollars from production to promotion, in an effort to entice back the subscribers who have abandoned them.

15610   Some services will fail, others will become pure re-run channels, as repeats are less expensive than original programming.

15611   Most significantly for the types of programming like drama and documentaries, which our members are involved with primarily, and which take years to germinate, services will be reluctant to commission new original productions, with revenues not only declining, but becoming uncertain as pick and pay subscribers change their choices on a monthly basis.

15612   While there may be other scenarios, this is by far the most likely. We acknowledge that your full proposal includes allowing BDUs to continue to package as they are now. While that could make a pick-and-pay regime less bad in terms of the impacts described above, I think we are all merely guessing at just how much less bad.

15613   So let's talk about consumer "choice" in this context. The erosion of diversity will likely cost Canadians the choice of programming they currently enjoy.

15614   Canada's pay and specialty channels are the incubators of much of our most exciting programming and, indeed, many of the hits that the audience craves.

15615   In television the creation of hits occurs as often on niche services, where the risk of failure is mitigated by lower production budgets, as it does on the higher budget mass market networks. Weakening niche services will fatally injure the type of hit-making activity which often occurs at the margins, and which of course has given the world an incredible flourishing of U.S. cable hits we generally associate with the second golden age of television and many of our most celebrated breakout hits here in Canada. The carriage of such programs, and their delivery to Canadian homes, provides viewers with an opportunity to find and determine those hit shows.

15616   This availability of programs is crucial. Canada does not have the funds to compete in the American media promotion game. The way we do promotion in Canada, by and large, is through exhibition. We make programs available to viewers. If we don't lose Canadian services completely due to pick-and-pay, then we will surely lose original programming on those services as they fight for survival. The diversity of Canadian programs on offer to Canadian viewers will decline. That will ultimately reduce, not increase choice for Canadian consumers.

15617   We remain convinced that diversity in Canada is something that we must foster through stewardship. The existing rules have resulted in both programming and ownership diversity to the benefit of the Canadian broadcasting system and the Canadian consumer. Diversity is important, as the system should itself be a reflection of Canada's diverse composition. Indeed, Canada's Supreme Court has noted that the policy objectives found under section 3(1) of the Broadcasting Act focus on issues of content such as the cultural enrichment of Canada, the promotion of Canadian content, establishing a high standard for original programming and ensuring that programming is diverse.

15618   Monsieur le Président, Mesdames et Messieurs les Conseillers, nous vous demandons d'imaginer ce qui se produirait d'ici deux ans dans un monde d'options à la carte. Si la réponse est « rien », alors pourquoi sommes-nous ici? Si, par contre, il se produit quelque chose, nous prévoyons un résultat mitigé, sinon négatif, tant sur le plan de la diversité de choix de programmation que sur le plan du coût mensuel imposé au consommateur.

15619   Before closing we would like to comment on two final issues.

15620   First, in preparing for our appearance today we applied the two-year test to our own recommendation that simulcasting be eliminated and we have decided that our position should be reversed. We always understood the economics, but in our written submission we wished to make the point that simulcast establishes a structural disincentive for broadcasters to program domestic productions in prime time. However, projecting forward, given that even without simulcast Canadian broadcasters will continue to schedule their U.S. buys up against the identical programs coming in on U.S. services, we have come to understand that eliminating the significant revenues derived from simultaneous substitution would be a financial sacrifice accompanied by no discernible scheduling benefit.

15621   Finally, we cannot conclude without indicating how profoundly we disagree with the notion of not adjusting the Commission's Digital Media Exemption Order to require contributions from over-the-top players. We strongly recommend that the Commission use the information-gathering provisions of the Digital Media Exemption Order and that it post as much of that information as possible for public review. It should seek inputs from both Canadian and non-Canadian parties and it should do so with an eye to requiring some form of contribution by the OTT services to the Canadian broadcasting system.

15622   This does not amount to the introduction of regulation to the Internet. That happened a long time ago. In 1999, the Commission made the decision to regulate the Internet by way of Exemption Order. Since that time, the Commission has repeatedly amended the conditions attached to that Exemption Order. The precedent has been set.

15623   Further, in our respectful submission, the response to OTT challenges should not be to relieve the existing players of their obligations. Rather, it should be to ensure that the newcomers, where deemed appropriate by the Commission, make contributions as well.

15624   Nous soulignerons, en terminant, que la série de mesures théoriquement possibles évoquées par la Commission dans son document d'analyse pourrait déclencher une tempête d'épreuves financières graves dans le système canadien de radiodiffusion. En l'absence de nouvelles sources de revenus, il sera de plus en plus difficile de remplir l'objectif visé par la Commission de produire des émissions canadiennes de qualité ainsi que les autres objectifs de la Loi sur la radiodiffusion.

15625   À cet égard, nous vous sommes très reconnaissants, Monsieur le Président, de vos commentaires adressés la semaine dernière à la Writers Guild of Canada, dans lesquels vous avez fait observer que parfois, nous nous perdons en discussions sur toutes ces questions réglementaires, au point d'oublier le contenu que nous nous efforçons de produire.

15626   Voilà qui conclut notre discours d'ouverture. Nous serons ravis de répondre à vos questions.

15627   LE PRÉSIDENT : Merci, beaucoup, Messieurs.

15628   Le vice-président débutera les questions.

15629   CONSEILLER PENTEFOUNTAS : Merci, Monsieur le Président.

15630   Mr. Southam, thank you for your presentation and thank you for your initial intervention from earlier this year, a very interesting 116 pages worth of material.

15631   Let's sort of concentrate on the presentation of the day. If offering consumers more control over their channel selection will incent services to fatally reduce their investment in content, how will guaranteeing these same services their revenue stream forever and a day incent them to invest in programming that Canadians want to watch?

15632   MR. SOUTHAM: We are talking -- I suppose there is kind of a semantic question we have to answer, which is when we speak of diversity of choice of services, of course we are making I hope a distinction between that and diversity of programming choices because we know we're in a universe where there's an infinite choice of programming out there.

15633   Our great concern coming from where we are --

15634   COMMISSIONER PENTEFOUNTAS: All the more reason and all the more concern.

15635   MR. SOUTHAM: Absolutely. Where we come from is we are interested in services, not just services which will show our work but services which will finance our work, and so we look at models where there are conditions under which the services have the capital and the desire to create new work and then of course show that work.

15636   COMMISSIONER PENTEFOUNTAS: I know but once we guarantee revenue, what is the incentive to invest in that content?

15637   MR. SOUTHAM: PNI. We believe that all the regulation which is associated with the exhibition of Canadian content in the broadcasting universe provides the inducement, and we've seen it in the last two years, to show Canadian work to Canadian consumers. So we believe that once they are operating in a regulated environment and providing these materials there are a number of procedures which put those Canadian programs in front of consumers long enough for them to make a decision about the titles and we believe that will in the long run improve the opportunities for those services to stay in business.

15638   COMMISSIONER PENTEFOUNTAS: But PNI speaks to spend and not exhibition.

15639   MR. SOUTHAM: We are very concerned with making the shows so that they can be shown to consumers. We believe that from a promotional point of view that is our best chance of having our work be seen. We believe that that offers choice to consumers.

15640   COMMISSIONER PENTEFOUNTAS: You didn't raise it in your presentation today, but on the promotional front, what would your position be as it regards one of the questions laid out in the Working Document that would see a certain transfer of funds to promotional budgets as part of CPE spend?

15641   MR. SOUTHAM: You want to take that?

15642   MR. MURPHY: Yes. We came out in our written submission as against removing production funds for promotion funds. If we take away the production of the show, there seems to be less incentive to promote. You know, we have less programming, less to promote. It doesn't seem to make a lot of sense.

15643   COMMISSIONER PENTEFOUNTAS: But here under this model you are worried that all the money will go into promotion and not programming, in your submission of the day.

15644   MR. MURPHY: Service promotion rather than program promotion.

15645   COMMISSIONER PENTEFOUNTAS: Right.

15646   MR. SOUTHAM: Once there is stress in the system.

15647   COMMISSIONER PENTEFOUNTAS: Yes.

15648   MR. SOUTHAM: I think we also made a little later in our verbal presentation today the point that by far our most successful promotional strategy from the point of view of content creators is showing the work to consumers.

15649   COMMISSIONER PENTEFOUNTAS: But if you don't have original interesting programming, what are you going to be promoting in an attempt to survive under a more of a choice model?

15650   MR. SOUTHAM: I don't disagree with the rhetorical question. We believe in placing interesting programs in front of viewers so that they can see what's there.

15651   COMMISSIONER PENTEFOUNTAS: You concern is that people will stop spending on programming and concentrate on promotion. What are they going to be promoting exactly, reruns?

15652   MR. MURPHY: Well, they would stop spending on original programming and either promoting a rerun service or promoting non-Canadian programming.

15653   COMMISSIONER PENTEFOUNTAS: So what would be the value of that service? I mean that rerun service is available on a plethora of platforms and services.

15654   MR. SOUTHAM: We believe that it would be part of a last-ditch cost-containment exercise by a service under stress. We're not speaking to the initial objectives of that service or their initial mandate or their initial terms of licence.

15655   COMMISSIONER PENTEFOUNTAS: But if consumers were offered more choice, wouldn't these programming services have to invest in programming original and attractive programming to maintain their status? Doesn't it work in the opposite direction?

15656   MR. SOUTHAM: We believe that -- we anticipate that a stable environment where capital is in a stable situation for longer will produce more programming and more choice for consumers and that in a situation where services are under stress that capital will not be used as readily for the creation of content and certainly not scripted content, which is the more expensive content that our members are involved with --

15657   COMMISSIONER PENTEFOUNTAS: Yes.

15658   MR. SOUTHAM: -- and documentary, I should add.

15659   COMMISSIONER PENTEFOUNTAS: I understand your concern over à la carte and pick-and-pay but the Working Document doesn't prohibit the kind of bundling and packaging that's already in place today. Why so much of a concentration on this supplemental choice that will be offered to consumers? I mean what's the fear?

15660   MR. MURPHY: Well, I think the fear is that even with a continued packaging system in place you will have some upkeep -- some uptake of the pick-and-pay, which would likely reduce revenues sort of across the board for most of the services, and in that sense we're losing production dollars through PNI or through CPE.

15661   COMMISSIONER PENTEFOUNTAS: Yes. But don't you see the consumer sort of clamouring for more choice and what do we do -- and do you see the reasoning behind some of those proposals in trying to sort of keep people in the system and the financing of that system, given all the choices that are out there?

15662   MR. SOUTHAM: Yes, which is why we describe our concern as happening two years down the road after that initial exercise of choice as a consumer buying -- spending an hour on the phone with a customer service representative and saying, yes, I like Space Channel or no, I hate Space Channel, not knowing that maybe "Orphan Black" is on Space Channel.

15663   Our concern is that the choice of services may not translate automatically to choice of programming, and after two years our programs may have been lost in that particular shuffle.

15664   COMMISSIONER PENTEFOUNTAS: Yeah.

15665   And it was interesting, Orphan Black, I found out where Orphan Black was playing, and we -- I ordered Space Channel. Well, I didn't --

15666   Mr. SOUTHAM: Fantastic.

15667   COMMISSIONER PENTEFOUNTAS: -- order it, my -- the boss in the house ordered it.

15668   Isn't that a great example of how things should work: there's excellent programming, it's attractive to Canadians, they're willing to sign up for it, as opposed to status quo, and we'll guarantee you -- you know, we talk a lot about "make whole" and "make up" -- we're going to guarantee the programming services revenues forever?

15669   MR. SOUTHAM: Right.

15670   Yes. For me, as a viewer, I'm sure that's ideal. We're concerned about two aspects of the ecology. One is a stability, a stability of where the offerings can be found in a stable way in Canada in a vulnerable -- a vulnerable -- creative environment.

15671   It's very difficult for us to get our shows on an even footing with many of the offerings out there, that's why we're in this room. It's a managed -- it has been, traditionally, a fairly managed process.

15672   We believe it will be less so in the environment we're contemplating.

15673   Also, we feel that -- you know, the other aspect of the ecology that we're very concerned about is the money on hand for Space Channel to make Orphan Black, and then make it available. We believe that -- this is pure speculation, but I am imagining that when the scripts came to the Bell Media group some very alert people said, "This is good for Space."

15674   We are concerned that the environment remain in place for both the capital, and, of course, that internal intelligence to be there to create the show, spend the two years it takes to make it, get it on the schedule so that viewers like you and me can notice it and then order Space Channel.

15675   COMMISSIONER PENTEFOUNTAS: All that work to move it to --

15676   MR. SOUTHAM: It's very hard.

15677   COMMISSIONER PENTEFOUNTAS: -- the main network now.

15678   MR. SOUTHAM: Absolutely. And why not?

15679   COMMISSIONER PENTEFOUNTAS: Yeah.

15680   MR. SOUTHAM: And why not?

15681   COMMISSIONER PENTEFOUNTAS: Yeah.

15682   MR. SOUTHAM: You know, why not? It's a risk-mitigation process for that -- for that company. They saw that the show had legs on a relatively inexpensive platform, a show which had a relatively low budget. They saw that it had legs and they moved it into a higher budget, higher spend environment, where they knew they could do something with it.

15683   Why not have that farm team aspect of specialty channel programming working for us? We're concerned that that will go away in a pick-and-pay environment.

15684   COMMISSIONER PENTEFOUNTAS: A lot of the specialty channels and a lot of the independent specialty offerings have spoken highly of a new measurement in Canada, and the use of set-top box data.

15685   Unless I missed it -- it's a 116-page document -- did you reference that at all?

15686   MR. MURPHY: We didn't address that issue, no, not at all. It's not really our expertise, in terms of how the use of -- I mean we certainly support the proposal that a working group would be set up to set-top box measurements and to find out how we can best utilize new measurements in Canada, but we didn't address the issue in our document.

15687   COMMISSIONER PENTEFOUNTAS: Maybe that's part of the problem, and maybe having guaranteed revenue built into the system forever and a day prohibits you from being more interested in viewership, and true viewership, and monetizing that viewership.

15688   I'll let you take that away with you.

15689   MR. SOUTHAM: I can certainly engage it just for 20 seconds --

15690   COMMISSIONER PENTEFOUNTAS: Sure.

15691   MR. SOUTHAM: -- and that is that, yes, metrics and analytics have proved to be useful in the creative process.

15692   I would hasten to say that the creative process is still the creative process, and that that two-year development period will occur in a much more diffuse way than perhaps aficionados of those metrics would like. It is, after all, an artistic process. But it has been extremely helpful for our -- the people buying what we do to guide us. You know, studios and networks have been much more proactive in the note-giving process based on these metrics.

15693   So, yes, it's absolutely part of the process. And we're not opposed because, why be wrong?

15694   COMMISSIONER PENTEFOUNTAS: Got you.

15695   Thank you so much.

15696   THE CHAIRPERSON: I just want to explore a couple of things with you.

15697   I was a bit surprised and taken aback by your statement in your oral presentation that the way we do promotion in Canada is through exhibition: we make programs available to viewers. That's certainly one way of doing promotion, and certainly the way we used to do promotion. But in a multi-channel and a multi multi-channel world, the discoverability and the curatorial function become very important.

15698   In fact, I was struck, in a visit how -- and I did it with the vice-chair a few years ago -- how much time and effort is being invested in California to build the discoverability and curatorial functions in the multi multi-channel world.

15699   Do you still think that it's mostly through exhibition?

15700   MR. SOUTHAM: I absolutely agree with you that the model that we evoked is not cutting edge; however, I would suggest that it is nonetheless the model under which most Canadian shows are placed in front of viewers so far. And I agree with you, too, that the curatorial function everywhere, including in Canada, has become much stronger.

15701   We feel, nonetheless, that if we don't show our work, it really doesn't have a chance. There are very powerful show creators, and the companies supporting them, that have a much, much, much greater power to place a program before a single frame of that program's been shown to viewers.

15702   We feel that, on average, Canadian creators must make their work, and then show their work before the uptake into the -- before it becomes a hit is more prevalently true -- and perhaps this is not good, but it's more prevalently true than it may be for shows created in the studio system, for instance. However, everything we're saying right here argues for a heavily curated environment.

15703   We're very much in favour of a very managed environment, where this kind of curation can happen, and where we're not having consumers simply -- asking consumers simply to troll through the universe looking for Orphan Black.

15704   So if a better promotional strategy comes forward for Canadian programming that does not siphon a great deal of resources away from production, which is our primary concern -- you know, we understand the logic of it and feel that it's going to help us. Our great concern is that those resources sometimes -- the promotional resources sometimes get pulled away from production, and that's the worst possible thing because we're still at a huge deficit in terms of the average budget of Canadian shows.

15705   Anybody who works in another environment, and comes back into that environment, immediately feels that downdraught creatively and feels they're not necessarily able to do their best. So our great concern is not so much that a promotional budget would exist, it's that it would be pulled out of production.

15706   THE CHAIRPERSON: I notice that online booksellers -- I guess the book world has always been an age of abundance, now we're seeing it in the video world -- often feature Canadian books on opening of their website, including foreign-owned companies.

15707   Isn't that the future of promotion and curatorial discovery?

15708   MR. SOUTHAM: Anything that beats the banal VOD lists we have to cycle through without any idea of what the film's about or the show's about in the current environment is better and we can turn to the publishing sector, which has had a very mature, and, I would dare say, from the public sector point of view, a very proactive development period over the last 50 years. Some of that maturity we may look forward to that in film and television, but we may not be there yet.

15709   I think we're younger in terms of how those activities are articulated, and we're also a much higher cost -- much higher cost -- creature. So to do what we do as well as possible so that we're competitive, so that viewers want us, the bar is really high. It's harder. We're getting a hundred people, 150 people together to make this thing. It has to be as good as the thing that's made in California.

15710   It's a huge undertaking compared, of course, to a book. Speaking purely to the promotional side, wow, if we can learn from that, fantastic.

15711   THE CHAIRPERSON: I'm going to turn to what will appear to be a different subject, but it isn't.

15712   You talk in your presentation about the digital media exemption order, and you add -- your paragraphs aren't numbered, so it's on page 5, near the bottom there. It says:

"It should seek inputs from both Canadian and non-Canadian parties and should do so with an eye to requiring some form of contribution..."

15713   Are you thinking of a financial contribution?

15714   MR. SOUTHAM: Money. Absolutely, it's money. It's only money.

15715   This new business model may be great for us in many, many forms, in fact we know as viewers that it's great. But we, in Canada, need money to make programs which are competitive with programs everywhere in the world.

15716   Our great concern at the Guild is, apart from a few signal events, why are we still struggling so hard to be Denmark, to have four shows or five shows picked up for remake in the U.S. market or which are themselves pulling in audiences? Why are we in this position? What would it take for the creative teams to get into a place where their offerings are consistently or more consistently competitive?

15717   So we don't want to mess around with the delivery system that the OTT community brings to the consumer, but we would love more money to make what we'd make, to develop what we make, and we'd love to induce also a culture which has nothing to do with these hearings, where the creative team is empowered in a different way to make our programs.

15718   THE CHAIRPERSON: Do you have details about what that might look like?

15719   MR. SOUTHAM: The empowerment of the Canadian creative team?

15720   THE CHAIRPERSON: No, the financial contribution, and how it would work.

15721   MR. SOUTHAM: We'll get that to you.

15722   THE CHAIRPERSON: So you can do it as an undertaking.

15723   MR. SOUTHAM: We will.

15724   THE CHAIRPERSON: For the 19th.

15725   MR. SOUTHAM: We certainly will.

Engagement

15726   THE CHAIRPERSON: Now setting aside financial contribution, have you ever turned your mind to promotional contribution, in the sense that there are a lot of OTT players out there, why wouldn't we expect them to promote the works of the local creators?

15727   MR. SOUTHAM: We are perennially, we have been perpetually, and this is a decades-long conversation long and a chicken-and-egg conversation about: is the show good enough to promote? Have we made a show that's worthy of promotion? Have we made a show that can stand alone in the open market?

15728   Let's call it the "open market." There isn't one in the world that I know of, but let's call it the "open market." In my view, in television there's no such thing. However, are we competitive as content creators, and are, therefore, we worthy for uptake on an unfettered service, and then worth of promotion of being at the top of their list?

15729   And the answer is yes, emphatically. Every year we have two or three years which merit that --

15730   THE CHAIRPERSON: I'm not questioning that.

15731   MR. SOUTHAM: Okay.

15732   THE CHAIRPERSON: I assume that --

15733   MR. SOUTHAM: That's my first defence of --

15734   THE CHAIRPERSON: We have the privilege in Canada of doing great content. We also sometimes make less great content. That's the market. But let's assume you have a good content that unfortunately audiences don't now about --

15735   MR. SOUTHAM: Right.

15736   THE CHAIRPERSON: -- wouldn't a contribution by OTTs to actually promote that content through selection and discoverability tools be a useful leverage?

15737   MR. SOUTHAM: As a second order of business, yes, but we're still very concerned with production budgets, with making the shows, and we believe that the contribution to production -- in our case -- in our case -- contribution to production, making the programs, is of paramount importance. Absolutely paramount importance.

15738   THE CHAIRPERSON: I get that, but seeing that aside -- I know your first order of business --

15739   MR. SOUTHAM: And you know that in Canada we deal with a finite pot of money. Perhaps in the OTT world we're dealing with an infinite pot of money, in which case, both together, fantastic.

15740   THE CHAIRPERSON: I doubt there's an infinite pot of money anywhere. There are the laws of physics.

15741   But why aren't you turning -- I mean I put it to you, and it's a bit of a challenge, that you're seeing promotion by looking backwards in how promotion has worked in a more closed environment where multi multi-channels are present.

15742   MR. SOUTHAM: Okay.

15743   I'll simply add that, of course, we are not party to the terms of trade discussions, which is actually the nexus for this -- primary nexus for this conversation. We are in the business of creating the content for broadcast. I think if we were party to those conversations, you know, between broadcasters and the eventual owners or the ultimate owners of the programs, the producers, I think we would have a -- we would have more to say on this topic.

15744   So in many ways we're recusing ourselves on this question.

15745   THE CHAIRPERSON: It's unfortunate, because we only have one system, and we all live in it.

15746   MR. SOUTHAM: I'll simply repeat that we feel we're still under a lot of pressure for production moneys.

15747   THE CHAIRPERSON: Well, you've made that point clear.

15748   Thank you very much. Those are our questions.

15749   MR. SOUTHAM: Okay, thank you.

15750   THE SECRETARY: I will now ask ACTRA National to come to the presentation table.

--- Pause

15751   THE CHAIRPERSON: Welcome, ladies and gentlemen. Go ahead when you're ready.

PRÉSENTATION

15752   MS DOWNEY: Thank you, Mr. Chair, Vice-Chair, Commissioners and staff.

15753   My name is Ferne Downey. I'm a professional actor and the national president of ACTRA, the Alliance of Canadian Cinema, Television and Radio Artists.

15754   With me today is Stephen Waddell, our national executive director; Katie Boland, a gifted actor and proud ACTRA member; Jacob Leibovitch, our director of research; and Sara Mortin, our regulatory consultant.

15755   We are here today speaking on behalf of 22,000 professional performers working in English-language recorded media. We are also very pleased today to be joined by Daniel Calabrese and Liana White, for our sister union, the Canadian Federation of Musicians, representing 17,000 professional musicians from across Canada.

15756   We're all here today to talk about the future television in Canada. The "Let's Talk TV" consultation has been going on, as you well know, for over a year now. During that time Canadians have offered their insight into the media system that informs and entertains us. Although, to be clear, when we talk about the future of television, what we're really talking about is the future of content delivery.

15757   In our view, the focus of this policy review must be to balance the need for consumer choice against the cost required to ensure a healthy broadcasting and production sector. We do hear you when you say that the status quo is no longer acceptable.

15758   We seek to preserve the parts of the current broadcast system that are serving the needs of Canadians, identify elements that are failing to live up to their responsibilities, and work to ensure the entire broadcasting system is positioned to meet the challenges of the future.

15759   We appreciate that the Commission has chosen to undertake a consultation on a wide range of issues, any one of which might normally be enough to merit a hearing in its own right. As such, we believe it is imperative that the "Let's Talk TV" consultation be viewed through the lens of the Broadcasting Act. The act lays out a concrete set of principles upon which the entire Canadian broadcasting system is based and speaks of safeguarding the cultural fabric of Canada.

15760   No subject in this consultation has generated quite a much ink or tweets as the issue of pick-and-pay. ACTRA supports the objectives regarding the Commission's pick-and-pay proposal, but we believe it will reduce consumer choice and result in job losses, contrary to the directive laid out in the throne speech.

15761   Furthermore, we believe the industry is already moving towards a à la carte regime and that regulation to accelerate that outcome is unnecessary.

15762   Under the current regulatory regime, there is nothing that prohibits BDUs from offering pick-and-pay options to their customers. Some Canadian providers are already providing pick-and-pay options, all while maintain the Canadian preponderance rule.

15763   Given that BDUs are already offering pick-and-pay, compelling them to unbundle will reduce the amount of Canadian programming, diminish the diversity of programming by causing some services to fail, lead to job losses, and will have little positive impact on Canadians' cable bills. It therefore seems that the worthy objective of more choice for consumers could come at a steep cost to the Canadian broadcasting system.

15764   Katie.

15765   MS BOLAND: Thank you, Ferne.

15766   Hi.

15767   ACTRA is an advocate and proponent for Canadian content regardless of where it's viewed. We are very pleased that the Commission is placing such emphasis on the maintenance and enhancement of the CPE and PNI as part of the ways to foster the compelling Canadian programming section of this consultation.

15768   While we believe that Canadian content should be positioned where it can attract the most eyeballs, we also need to position Canadian content on the many new platforms that are starting to attract audiences. I had the opportunity to experience the shift in content consumption firsthand when I created, wrote and starred in my own web series, Long Story Short. To that end, we support the Commission's proposal to count online original Canadian programming against a broadcaster's CPE obligations.

15769   Additionally, we support the Commission's proposal to include children's programming in the definition of PNI. Programming for children and youth is underserved in Canada. We know that children who get to enjoy great Canadian television will grow into adults who seek out Canadian programming. This is a worthy and important investment.

15770   We are split on the Commission's proposal regarding programming requirements. We support the Commission's proposal subjecting television stations and specialty and pay services to the CPE requirements, which would put more money into Canadian content; however, we are concerned by the proposed elimination of exhibition requirements during the broadcast day.

15771   Unfortunately, we cannot support the Commission's proposal to eliminate genre exclusivity. The genre exclusivity policy is one of the underpinnings of the specialty and pay television industry. Without it we would likely see a rise in the number of generic services as specialty channels compete in a rush to the middle, abandoning what makes their individual brand distinct in order to exhibit the most commercially successful programming they can.

15772   Stephen.

15773   MR. WADDELL: Thank you, Katie.

15774   We would urge the Commission to rethink its proposals regarding simultaneous substitution. Simultaneous substitution helps form the backbone of the Canadian broadcast system. It protects broadcaster rights and maximizes Canadian advertising revenue, which in turn supports CPE and PNI expenditures and the health of the Canadian broadcasting system as a whole. It should, therefore, be retained.

15775   No one is sure exactly how much money simultaneous substitutions returns to the Canadian broadcast system. The Miller Report, appended to our submission, suggests the removal of simultaneous substitution would also result in the loss of $62.8 million in GDP for the Canadian economy in 2015, growing to an annualized loss of $110.7 million in GDP in 2020.

15776   The Commission has suggested that simultaneous substitution could be worth $20 million annually, while BCE, in their presentation to this Commission, pegged that number in excess of $450 million.

15777   No matter which figure you use, cutting hundreds of millions of dollars from the Canadian broadcast system will have grim consequences for the creation of Canadian content.

15778   We know that simultaneous substitution can sometimes be an irritant to Canadian audiences, but, quite frankly, it feels like the drive to abandon the simultaneous substitution regime is strongest in January, right about the time that the Super Bowl airs.

15779   Commissioners, as you've heard throughout this process, content consumption in changing. We believe that a key element behind much of this change is the emergence of Over the Top broadcasters like Netflix. Almost a third of English Canadians subscribe to Netflix. According to the Miller Report, OTT broadcasting represents 2 1/2 per cent of the television system revenue, and could easily reach 10 per cent by 2020.

15780   As OTT broadcasters consolidate their reach, and hasten a move away from conventional television, the end result will be a reduced level of Canadian programming on any medium as lower revenues for traditional broadcasters will have a negative impact on their CPE and PNI levels.

15781   Now that Netflix is commissioning original programming, such as House of Card and Orange is the New Black, as well as giving a new lease on life to programming cancelled by conventional broadcasters, like The Killing and Arrested Development, any distinction in the viewing experience between conventional television and Netflix-style services has effectively been erased.

15782   We assert that Over the Top services are, in fact, broadcasting services, albeit on another platform. We believe the time has come for the Commission to treat Netflix and other OTT broadcasters as they would any other broadcaster in the Canadian system.

15783   Specifically, the Commission should require them to the independent production funds that help fuel Canadian content creation, as well as maintain a defined percentage of Canadian content in their programming libraries.

15784   In the past, the Commission has required all elements of the television system to contribute to the production and presentation of Canadian programming. We see no reason to deviate from this approach in the case of OTT services. Furthermore, if OTT services are not treated like other broadcasters, Rogers and Shaw will be in the problematic position of delivering two types of content to Canadians, regulated programming through the respective conventional arms and unregulated programming through their soon to be launched joint OTT service Shomi.

15785   Thank you for taking the time to hear our views. We will be happy to answer any questions you might have.

15786   Thank you.

15787   THE CHAIRPERSON: Thank you very much.

15788   Commissioner Molnar will start us off.

15789   COMMISSIONER MOLNAR: Thank you and good afternoon.

15790   I appreciate very much your opening statement where you say we seek to preserve the parts of the system that are serving the needs, identify elements that are failing to live up to it and ensure the broadcasting system is positioned to meet the challenges of the future, because that is as well what we are seeking.

15791   MR. WADDELL: Yes.

15792   COMMISSIONER MOLNAR: So it's great to have partners who can come up with solutions as to how that is done.

15793   So is it your view that the positions you have put forward in your remarks here achieve that?

15794   MR. WADDELL: Yes, Commissioner, it is our view.

15795   Just to boil it all down, what we are here to talk to you about is that, and agree that this system should be looked at as a whole and, as we said, that includes OTT services as well.

15796   We hear the Commission's suggestions on how you might approach changes to the system, we understand, as Fern said, that status quo in your view is not an option. All of that --

15797   COMMISSIONER MOLNAR: Would it in your view be an option?

15798   MR. WADDELL: The status quo?

15799   COMMISSIONER MOLNAR: Yes.

15800   MR. WADDELL: No, I don't think it is an option.

15801   COMMISSIONER MOLNAR. Okay, thank you.

15802   MR. WADDELL: There are certain underpinnings, certain foundational elements that need to be preserved. You know, just like any other construction job, if you pull out an underpinning that house is going to fall and we don't want that to happen.

15803   So there are certain fundamental -- there are certain foundational elements that need to be retained, in our view, and then of course -- and we have to take into account the changes that have happened in the system.

15804   So yes, we are up for change but, you know, let's preserve what's working.

15805   COMMISSIONER MOLNAR: Right. Thanks. That's fair, yes.

15806   So relevance to Canadians is obviously an underpinning.

15807   MR. WADDELL: Yes.

15808   COMMISSIONER MOLNAR: And providing Canadians with greater choice and flexibility is consistent with that?

15809   MR. WADDELL: Correct.

15810   COMMISSIONER MOLNAR: Where the programming is relevant to them they will find it on so many -- I mean the good news is they have more places to find it than they used to.

15811   MR. WADDELL: Right.

15812   COMMISSIONER MOLNAR: But one of those being the traditional broadcasting system.

15813   You have said that you think that the choice and flexibility that is being provided by BDUs today meets the needs. Is that your position?

15814   MR. WADDELL: No. We are not saying, again, that the status quo has to prevail there either. We understand the interest in a pick-and-pay model and à la cart model and we suggest that the industry, that the BDUs are moving there and that they should be allowed to move there and that public pressure will move them there, consumer choice demands will move them.

15815   COMMISSIONER MOLNAR: And so the consequences where you have said it would be the regulator's fault, if you will, if greater choice for the Canadian subscriber caused job loss or lack of diversity or services closing down, would you see that being the natural evolution of what is happening today with consumers?

15816   MR. WADDELL: I think we are evolving there and all we are saying is we don't think that we need to, you know, mandate it at this time. There will be -- we are fearful that there will be job losses as a result. That's our concern.

15817   COMMISSIONER MOLNAR: Yes. And whether we mandate it or do not mandate it, that outcome might be there?

15818   MR. WADDELL: I think the outcome is coming, it's going to be there.

15819   COMMISSIONER MOLNAR: Right. Because the choice will be there and so --

15820   MR. WADDELL: Yes. And consumers are going to demand it, yes.

15821   COMMISSIONER MOLNAR: Right.

15822   MR. WADDELL: So we are happy to talk about other issues, too.

15823   COMMISSIONER MOLNAR: Fair enough. Let's talk about other issues.

15824   I'm going to move not to where you have agreed with the elements of the working document, but give you an opportunity on those where you either disagree or are split, and I'm particularly interested in where you say we are split on the proposal. So that means you --

15825   MR. WADDELL: No, we are split on the proposal, not you.

15826   COMMISSIONER MOLNAR: Yes. Sorry, I'm reading your words here.

--- Rires

15827   COMMISSIONER MOLNAR: You are split on the proposal.

15828   MR. WADDELL: Yes.

15829   COMMISSIONER MOLNAR: So are you talking about you agree with CPE, don't agree with what was proposed for exhibition, or...?

15830   MR. WADDELL: Yes. What we are not happy about is the elimination of the daytime requirements, we think that they should be maintained, but we are really happy about the proposal to subject TV stations, specialty and pay, to CPE requirements.

15831   COMMISSIONER MOLNAR: Yes. Well, folks are normally happy with what is added and less happy with what is taken away.

15832   MR. WADDELL: There you go, yes.

15833   COMMISSIONER MOLNAR: But then we always have to make choices in times of change, so where are you really on this? What's more important, CPE or exhibition?

15834   MR. WADDELL: Well, money is really important, as my friends from the Directors Guild said, yes. So CPE contributions are very important.

15835   We hear some others talking about, you know, arguments for eliminating the requirements during the broadcast day. I don't understand what the objectives are there. You know, do we need more foreign programming on our televisions during the day?

15836   To me -- to us there should be, you know, Canadian content requirements throughout the broadcast day. Canadians should have the opportunity to see Canadian programming throughout the day regardless of the time of the day.

15837   We live in a country where we are dominated by another country's content --

15838   COMMISSIONER MOLNAR: Right.

15839   MR. WEDDELL: -- another country's perspectives and views and media. We have to carve out a niche --

15840   COMMISSIONER MOLNAR: But we have seen a couple of other things --

15841   MR. WADDELL: -- for ourselves and that's where it's important that the CRTC, the Commission, help us to carve out that, the ability to see ourselves on all screens.

15842   COMMISSIONER MOLNAR: So you want the money; you want it all?

15843   MR. WADDELL: We want it all, sure. Absolutely. We need it all. We live in a country that is, as I said, dominated by the U.S. system and we need all the -- this industry and Canadians need all the support that they can get to get content production in this country.

15844   COMMISSIONER MOLNAR: Yes. And yet as you want more, we also talk about the challenges that greater choice for Canadians puts on the programming services and on conventional.

15845   You know, there has been quite a discussion about conventional and the future model to support local programming and so on, so it is quite a challenge to consider that obligations would be increased at a time when revenues for all parts of the system are somewhat -- if not at risk, certainly in flux.

15846   MR. WADDELL: Or in transition, there's no question.

15847   COMMISSIONER MOLNAR: Right. So increasing obligations in a period of transition, does that seem sensible to you?

15848   MR. WADDELL: Yes.

15849   COMMISSIONER MOLNAR: It does?

15850   MR. WADDELL: Absolutely.

15851   COMMISSIONER MOLNAR: And who pays for those increased obligations?

15852   MR. WADDELL: Well, there are various -- like lots of companies are making lots of money, too, in this business. Yes, we are in transition and nothing -- I mean certainly the advertising industry is massively in transition, we haven't talked a whole lot about advertising in this country which is facing global pressures and the pressure of online advertising versus conventional television advertising but, you know, there is money available, it continues to be available, people are making lots of money, particularly Netflix, and so we all have to -- they have to make contributions to the --

15853   COMMISSIONER MOLNAR: I'm sorry, I was talking about the existing services. That's where we were talking about increasing CPE and exhibition.

15854   MR. WADDELL: Yes.

15855   COMMISSIONER MOLNAR: Not on different platforms.

15856   MR. WADDELL: Yes. And the companies are making money and they should be investing in content production in this country.

15857   COMMISSIONER MOLNAR: Yes. Okay, thank you. Those are my questions. Thank you.

15858   THE CHAIRPERSON: Okay. I wasn't sure if Vice-Chair had a question.

15859   I would like to explore one subject matter with you and that is building on your comments about the contribution one should expect from OTT broadcasters.

15860   You take the position they are broadcasters --

15861   MR. WADDELL: Yes.

15862   THE CHAIRPERSON: -- and I take it therefore within the broadcasting system. They are not unregulated, they are just unlicensed. Would you agree with that?

15863   MR. WEDDELL: No. Yes, you're right, they are unlicensed currently but, you know, they are capable of being regulated.

15864   THE CHAIRPERSON: Right. And, frankly, I have always held the view and I have said it on a number of locations, that an exemption order is a form of regulation. It's actually adopted under the Instruments, the Statutory Instruments Act.

15865   MR. WADDELL: Yes.

15866   THE CHAIRPERSON: Just to explore exactly what you're talking about in terms of contribution, I take it you have a request with respect to what we traditionally have in the system about a demand-side, so funding; is that correct?

15867   MR. WADDELL: That's correct.

15868   THE CHAIRPERSON: Do you have a specific proposal in that regard?

15869   MR. WADDELL: We don't have a specific proposal, but we would be happy to provide you with an undertaking to put forward a specific proposal.

Engagement

15870   THE CHAIRPERSON: For the 19th.

15871   You also suggest that there should be a defined percentage of Canadian content. I guess that's akin to the supply side rules that we used to have -- well, we do have still --

15872   MR. WADDELL: You do have, yes.

15873   THE CHAIRPERSON: -- in the more traditional platforms; is that correct?

15874   MR. WADDELL: That's correct, yes.

15875   THE CHAIRPERSON: And shelf space. Yes, indeed. I understand that.

15876   MR. WADDELL: Right.

15877   THE CHAIRPERSON: And of course it's a bit different because it's not the traditional channel with a -- I guess with a program schedule.

15878   MR. WEDDELL: Right.

15879   THE CHAIRPERSON: Would you agree?

15880   MR. WADDELL: That's correct, yes.

15881   THE CHAIRPERSON: So you think that there is a way to get to that? Do you have a specific proposal?

15882   MR. WEDDELL: In terms of shelf space?

15883   THE CHAIRPERSON: Yes.

15884   MR. WADDELL: We can again provide you with an undertaking, but certainly making available -- making it well-known in the catalogue of programming that's available that these are Canadian programs would be helpful.

15885   THE CHAIRPERSON: Right. And I will get to that. Perhaps I was being too oblique earlier. You were in the room I think when I was having a discussion with your colleagues on the promotion element and discoverability and curatorship in the new OTT world.

15886   The reason I was being oblique was because I couldn't put my hand on a document that I was looking for. At the time I was the Director of Investments for the cultural sector and everything there is done confidentially so I was looking for a publicly available document, which I have found.

15887   At the time the Minister of Canadian Heritage -- this was back in April, 2010 -- approved certain investments by Amazon under certain conditions. I think Minister Moore was the Minister at the time.

15888   And some of the obligations or commitments Amazon put forward, including other than investments obviously and the visibility of Canadian -- but the one thing that was interesting was the commitment on increased visibility for Canadian books on amazon.ca webpage.

15889   So here is an example of the way that you can get contribution, but not necessarily in the demand -- well, I guess it is not a demand-side, it is a kind of supply-side -- sorry, the other way around. It's a demand-side because it creates more demand.

15890   By the same token, the approval was based on making more Canadian content available on the Kindle e-reader.

15891   Have you thought about mechanisms of that sort in the discoverability curatorial realm?

15892   MR. WADDELL: Yes. We would agree with those kinds of requirements or stipulations.

15893   THE CHAIRPERSON: Have you thought about details around that?

15894   MR. WADDELL: We could provide you with another undertaking to think about those and provide our views on it by the 19th.

Engagement

15895   THE CHAIRPERSON: Okay. Fair enough. And you can deal with the 19th of September at this late date?

15896   MR. WADDELL: Yes.

15897   THE CHAIRPERSON: Okay, thank you.

15898   So I would like people, if you can, to think about that --

15899   MR. WEDDELL: Yes, we will.

15900   THE CHAIRPERSON: -- in terms more widely. So thank you.

15901   MR. WADDELL: And you will be thinking about a contribution requirement from Netflix?

15902   THE CHAIRPERSON: I think we are developing quite a record on that issue.

--- Rires

15903   MR. WADDELL: Okay. Well, that's good. That's great. Thank you.

15904   THE CHAIRPERSON: As I said earlier, we are fairly -- we are an administrative tribunal, we have a duty of fairness and we are listening to all points of view before making decisions.

15905   MR. WADDELL: Well, thank you, Mr. Chairman and Commissioners.

15906   THE CHAIRPERSON: Thank you. Thank you very much. Those are our questions.

15907   I think we will take a break now for an hour until 1:30, and we will continue with the next presenter at that point.

15908   Thank you very much.

--- Suspension à 1226

--- Reprise à 1331

15909   LE PRÉSIDENT: À l'ordre, s'il vous plaît. Madame la Secrétaire.

15910   LA SECRÉTAIRE: Merci. Avant de débuter, j'aimerais juste annoncer que monsieur Michel St-Jacques qui était inscrit à l'agenda pour aujourd'hui ne comparaîtra pas à l'audience publique.

15911   Nous entendrons maintenant la présentation du Syndicat des communications de Radio-Canada. S'il vous plaît vous présenter et vous avez dix minutes pour votre présentation.

PRÉSENTATION

15912   M. LEVASSEUR: Merci, madame. Alors, monsieur le président, monsieur le vice-président, madame, messieurs les membres du Conseil ainsi que madame et messieurs du personnel de la Commission, je vous remercie de nous donner cette occasion de nous adresser à vous.

15913   Mon nom est Alex Levasseur, je suis le président sortant du Syndicat des communications de Radio-Canada.

15914   Je devais être accompagné aujourd'hui de monsieur Pierre Maisonneuve, que vous connaissez, retraité ex-journaliste de Radio-Canada et porte-parole du groupe « Tous Amis de Radio-Canada », mais à la dernière minute il n'a pu se libérer. Alors, il s'en excuse et me demande de vous transmettre ses salutations.

15915   J'aimerais également profiter du micro pour féliciter le Conseil et certains membres de son personnel pour les prix reçus ce matin pour l'excellence du service public. Ça fait chaud au coeur puisqu'on parle de service public.

15916   Parler de télévision sans parler de CBC/Radio-Canada m'apparaît un peu inconcevable, tant cette institution canadienne a joué et joue encore un rôle de premier plan.

15917   Pourtant, malheureusement, c'est ce que le Conseil a réussi à faire dans le cadre de la présente consultation. Pas un mot sur CBC/Radio-Canada.

15918   La radiotélévision de service public jouit de par le monde d'une valeur reconnue et appréciée, bien que contestée par une frange de gens peu nombreux, mais généralement au pouvoir dans nos sociétés occidentales.

15919   La situation canadienne ne fait pas exception. Ce qui faisait dire d'ailleurs à Toby Mendel, directeur général du « Centre for Law and Democracy », une ONG canadienne, et je le cite :

« Dans plusieurs pays du monde, la radiotélévision publique est sur la défensive. Les raisons en sont diverses, mais elles incluent une incessante ingérence des gouvernements qui prend souvent des formes nouvelles, une crise de confiance du public, un financement de base décroissant, une concurrence agressive et hautement compétitive des diffuseurs commerciaux et un environnement néo-libéral hostile à toute forme de service public. »

15920   L'UNESCO, L'organisation des Nations unies pour l'éducation, la science et la culture, organisation à laquelle, d'ailleurs, le Canada adhère, estime que la radiotélévision de service public est un instrument essentiel pour assurer la pluralité et l'inclusion sociale ainsi que pour renforcer la société civile.

15921   La vision que le Conseil porte à notre examen actuellement fait abstraction de ce genre de concept.

15922   Au contraire, le CRTC propose, pour ne pas dire oppose, une vision basée sur le consommateur, où il semble troquer, le Conseil, son rôle de chien de garde des valeurs du système canadien de télévision, pour le chapeau d'un banal Office de protection des consommateurs.

15923   Nous ne pouvons pas adhérer non plus à une vision du système canadien de radiotélévision qui place le diffuseur public au même rang que les entreprises de nature commerciale. Non pas que le rôle du diffuseur public soit supérieur au rôle des autres joueurs privés, mais parce qu'il est distinct de par sa nature et de par ses obligations.

15924   Nous plaidons ici en faveur de la reconnaissance d'un statut à part pour le diffuseur public dans ce paysage médiatique que nous connaissons et qui est basé presque exclusivement sur la recherche du profit.

15925   Comment ce statut peut-il se manifester?

15926   Par des règles spécifiques au diffuseur public : Pensons tout d'abord à une obligation de contenu canadien de qualité, une obligation de distribution aux Canadiennes et aux Canadiens afin de rendre ces services accessibles au plus faible coût, et une obligation de présence dans les régions afin de refléter les régions au réseau...

15927   Comme nous l'avons expliqué dans le mémoire que nous avons déposé, ces objectifs ne peuvent se concrétiser que par des conditions qui sont propres au diffuseur public : D'abord, un financement public à la hauteur du mandat et des attentes de la population.

15928   La tendance actuelle de remplacer les crédits parlementaires par des revenus publicitaires conduit droit au mur. CBC/Radio-Canada a besoin d'un budget pluriannuel stable et augmenté afin de mettre un terme au démantèlement commencé par l'actuelle administration.

15929   Autre condition essentielle : Une refonte de la gouvernance du diffuseur public. La mainmise politique sur le diffuseur public est incompatible avec son mandat. Bien des pays ont trouvé de meilleurs modèles de gouvernance et aussi de financement public.

15930   Nous espérons et, même, nous demandons au Conseil d'envoyer un signal clair à cet égard : Notre système de radiotélévision ne pourra demeurer canadien que dans la mesure où un diffuseur public fort existera et fixera au plus haut niveau les normes et la qualité des contenus offerts.

15931   Si le Conseil d'adhère pas à cette prémisse, c'est peut-être qu'il encourage l'inévitable : la disparition du dit service public.

15932   Nous sommes également conscients de l'importance qu'ont prise les nouvelles plateformes du web. Nous sommes aussi conscients de l'incapacité de contrôler les contenus offerts à partir de sources externes au Canada.

15933   Il nous semble toutefois souhaitable et probablement possible de soumettre les contenus numériques des diffuseurs télé canadiens à des exigences strictes en termes de dépenses de production et d'obligation de contenu de programmation, et cela sans les lier à leurs autres exigences relatives à la télévision.

15934   Le web n'est pas la télévision, malgré une grande symbiose entre les deux. Le web n'est pas simplement le petit écran du grand écran.

15935   En terminant, monsieur le président, nous nous accordons au moins sur une chose : la semaine dernière, dans vos remarques d'ouverture, vous avez dit, et je vous cite :

« L'élément le plus important sera de mettre les Canadiens à l'avant-plan. Et c'est tout à fait correct, car la télévision canadienne leur appartient ».

15936   Moi, j'ajouterai que c'est encore plus vrai tout cela quand il s'agit de la télévision publique. C'est ce que le groupe « Tous amis de Radio-Canada » et notre syndicat également souhaitent : Un réel débat public sur l'avenir du diffuseur public. Et un financement pluriannuel stable et augmenté.

15937   Si vous ne l'avez déjà fait, mais je pense que vous l'avez certainement fait, je vous invite à prendre connaissance du livre blanc sur l'avenir de Radio-Canada que nous avons publié au printemps.

15938   Je vous remercie et si vous avez des questions, il me fera plaisir d'y répondre.

15939   LE PRÉSIDENT: Merci bien. Vous avez certainement le droit à vos opinions, mais je crois que je vais être en désaccord avec vous de dire que le Conseil a réduit sa vision à seulement des questions de consommateur.

15940   Je le répète à plusieurs égards qu'on est préoccupé des Canadiens en tant que consommateurs, créateurs et citoyens donc.

15941   Je passe la parole à monsieur Dupras qui débutera les questions.

15942   CONSEILLER DUPRAS: Bonjour. Alors, seulement quelques questions. Je pense que votre présentation est claire pour les thèmes que vous abordez.

15943   Radio-Canada veut abandonner la transmission en direct. Dans votre mémoire, vous croyez que les émetteurs doivent être maintenus pour encore quelques années.

15944   Pouvez-vous nous expliquer votre différence de position avec la Société?

15945   M. LEVASSEUR: Parce que, essentiellement, je dirais deux motifs.

15946   Ce à quoi nous a habitué Radio-Canada CBC depuis quelques années, et très courtes années, je dirais, c'est de vendre les équipements pour obtenir de l'argent pour produire.

15947   Ça nous semble être un peu une façon trop minimaliste de considérer l'avenir du diffuseur public. C'est comme si, pour payer ma carte de crédit, je vendais mon permis de travail.

15948   Une fois le permis et l'argent dépensé, je ne suis pas plus avancé au bout de la ligne. Donc, ça, c'est une préoccupation que nous avons.

15949   Nous avons eu l'occasion de dire au Président de la compagnie, monsieur Lacroix, que s'il avait des objectifs différents de mettre... de mettre à... de fermer, si vous me permettez, les émetteurs, il faudrait qu'ils soient liés à d'autres circonstances.

15950   L'important c'est l'accessibilité, tel que le prévoit la Loi sur la radiodiffusion, et l'accessibilité, on comprend qu'une grande partie des Canadiens ont actuellement... reçoivent Radio-Canada et CBC par des services de distribution.

15951   On sent également qu'il y a un retour en arrière là-dessus. On sent que déjà, et plusieurs, je pense, distributeurs ont affirmé qu'ils voyaient ou qu'ils percevaient que certains consommateurs se retiraient de leurs services. Il y a aussi une frange de population qui n'a pas les moyens d'avoir accès à ces services-là.

15952   Et particulièrement dans les grandes villes -- je pense à Montréal, la fermeture des émetteurs à Montréal, à Québec, pour parler du Québec si vous me permettez, ferait en sorte qu'une partie de la population n'aurait plus accès aux services du diffuseur public.

15953   Et je pense qu'avant de prendre une décision comme celle que propose Radio-Canada, je pense qu'il faut voir... prendre le temps de voir comment évoluent les choses au niveau technologique, comment va se faire le transfert technologique, avant d'aller plus loin.

15954   CONSEILLER DUPRAS: Mais au niveau de la programmation locale, pour ce qui est des minorités francophones dans le pays, vous dites que la réalité n'est pas assez reflétée sur les ondes de Radio-Canada?

15955   M. LEVASSEUR: Oui. J'ai eu l'occasion de me promener un petit peu durant l'été en dehors du Québec et la première chose, lorsqu'on parlait de l'avenir du diffuseur public, la première constatation qui était faite par les gens à qui je parlais c'était : Ouais, on ne se voit pas bien bien souvent. Ça prend quelque chose de gros pour se voir.

15956   Vous rappelez-vous qu'au Nouveau-Brunswick, au mois de juin, fin mai début juin, il y a eu un événement assez malheureux qui a amené des morts de policiers, et la population locale a semoncé, je dirais, Radio-Canada, pour avoir tardé à considérer l'événement et à prendre la mesure d'un événement comme celui-là.

15957   Ça démontre un peu, au-delà du fait divers que ça peut représenter, ça démontre à quel point cette organisation-là n'est pas sensible aux régions.

15958   Il fut un temps où RDI, par exemple, était présent dans chacune des grandes régions du pays, et même aussi à l'intérieur du Québec et j'étais, et j'avais le plaisir de travailler pour ces équipes-là à l'époque, et c'était assez fantastique.

15959   Lorsque le camion de RDI arrivait dans une ville pour couvrir un événement quelconque, bien, à côté vous aviez le camion de TVA puis à côté du camion de TVA vous aviez le camion qui s'appelle « V » maintenant, « TQS » à l'époque, et parfois même celui des réseaux anglophones également.

15960   Aussitôt que Radio-Canada a annoncé qu'on se retirait des régions, que notre camion de transmission cessait d'être là, miraculeusement tous les autres camions ont disparu aussi. Celui de TVA ne va plus dans les régions, celui de « V » n'y va pas non plus. Alors, il y a comme une espèce de...

15961   Je dirais, Radio-Canada fixe un peu la barre souvent pour soit la qualité de la programmation, soit pour sa présence sur le territoire, en région, au Québec comme à l'extérieur du Québec, dans les grandes régions canadiennes, et c'est extrêmement important de garder... parce que le mandat de Radio-Canada c'est effectivement de refléter la réalité canadienne et de participer à une conscience canadienne.

15962   Et pour ce faire, bien, il faut être présent partout et il faut être capable de refléter ce qui se passe entre les régions elles-mêmes, mais des régions vers le réseau également et non pas actuellement, comme on le voit trop souvent, du centre de Montréal pour le réseau français ou de Toronto pour le réseau anglais, vers les autres régions. Les régions sont importantes.

15963   CONSEILLER DUPRAS: Et les mesures que le Conseil a imposées pour la programmation locale, pour les minorités francophones lors de son dernier renouvellement, qu'est-ce que vous en pensez?

15964   Est-ce que, de ce que je comprends, ça ne semble pas être la quantité, mais plus dans l'exécution où vous dites la sensibilité?

15965   M. LEVASSEUR: Bien, écoutez, l'effort qu'a fait le CRTC en maintenant une bonne partie des exigences est louable et c'est correct.

15966   Le problème qu'on vit et qu'on voit souvent, c'est qu'au niveau de l'information, il y a cette présence, effectivement, dans chacune des régions. Mais au niveau de ce qui est la... tous les autres types de programmation, autres que l'information nouvelle, très peu de présence de Radio-Canada.

15967   Quand Radio-Canada, par exemple, au réseau français a produit en Acadie une série qui s'appelait « PLV », bien à la première compression venue on a sacrifié la production qui venait de là-bas pour la concentrer à Montréal.

15968   On avait une émission à Québec qui s'appelait « Les Chefs », qui était produite à Québec, bien maintenant elle est produite par une équipe de Montréal qui se déplace pendant quelques fins de semaine à Québec pour la tourner puis qui retourne à Montréal après.

15969   Donc, cette tendance à concentrer la production autre qu'information, il nous apparaît important que les régions aient cette visibilité également et puissent exprimer leurs couleurs culturelles et participer par leurs différences culturelles à l'ensemble du potentiel canadien.

15970   CONSEILLER DUPRAS: Très bien. Merci.

15971   Et j'imagine que vous avez suivi l'audience. Vous avez vu notre Document de travail?

15972   M. LEVASSEUR: Tout à fait.

15973   CONSEILLER DUPRAS: Dites-moi, pour le Québec, est-ce que vous pensez que les conditions particulières du marché requièrent une réclamation différente du reste du Canada?

15974   Est-ce qu'au Québec, la situation actuelle de l'offre de télédiffusion semble satisfaire et répondre aux besoins, être suffisamment flexible et abordable?

15975   M. LEVASSEUR: Vous avez remarqué, je pense monsieur le président aussi l'a fait, avec justesse, que notre mémoire et notre intervention ne porte par beaucoup sur ces éléments-là et ce n'est pas pour rien, parce que nous n'avons pas la prétention d'avoir l'expertise qu'il faut pour faire ce genre d'analyse.

15976   Je pense que mes collègues de la Fédération des communications hier, qui comparaissaient devant vous, ont dû aborder ces éléments-là.

15977   De notre côté, ce à quoi on voulait attirer votre attention, c'est l'importance d'un diffuseur public et ce diffuseur public-là, comme étant non pas seulement un joueur parmi tant d'autres, étant un joueur significatif et qui va avoir une importance, et pour et sur l'ensemble du reste de l'industrie de la télévision.

15978   Et c'est pour ça qu'on plaide devant vous pour que le CRTC envoie ce signal, un signal fort dans son rapport, qu'il faut faire une attention particulière au diffuseur public. Monsieur le président l'a, d'ailleurs, mentionné, je pense, lors de la comparution du PDG de Radio-Canada, en disant : Les propositions que vous faites, ne vous semble-t-il pas que votre problème, c'est celui d'abord du financement? Et je pense qu'il a raison quand il dit ce genre de commentaire-là. Il est suffisamment au courant pour comprendre que les propositions faites par Radio-Canada ne sont pas de nature à améliorer la qualité du diffuseur public.

15979   Lorsqu'on parle de fonds ou d'apport de fonds de la part de certaines... d'un fonds un peu comme vous avez créé, il y a quelques années, le Fonds pour l'amélioration de la programmation locale, c'était très pertinent. Ça été utile pour les quelques années où ça l'a fonctionné. Malheureusement, il est disparu, ce fonds-là. Les fonds qu'on crée de façon ad hoc ont tendance à disparaître de façon ad hoc également.

15980   Alors, c'est pourquoi on plaide, nous, pour un financement qui va être stable, parce qu'un diffuseur de télévision ne peut pas voir ses budgets fluctués d'année en année, alors qu'il fait des investissements parfois sur la base de quelques années, particulièrement lors d'infrastructure ou lors d'acquisition d'émissions, de séries ou de téléséries.

15981   CONSEILLER DUPRAS : Très bien. Mais je vous posais la question parce que vous avez des services spécialisés aussi -- RDI, Explora -- si vous voyez quelque problème quelconque avec les propositions dans le document de travail pour ce qui est de la distribution de ces services-là au Québec, si ça peut avoir un impact quelconque.

15982   M. LEVASSEUR : Ci qui est important, à mon avis, c'est d'assurer l'accessibilité des services de Radio-Canada, quels qu'ils soient. Que ce soit ceux de la Première chaîne ou soit ceux de chaînes spécialisées, ça reste quand même, à bon égard, des investissements publics et évidemment des consommateurs qui, par leur adhésion, fournissent un effort budgétaire au diffuseur là-dessus. Mais ça reste, malgré tout, dans le contexte d'une diffusion publique, et c'est sur ça que nous, on insiste, que cette diffusion là publique demeure la plus accessible possible aux citoyens et citoyennes du Canada.

15983   CONSEILLER DUPRAS : Merci. Merci, Monsieur le Président.

15984   LE PRÉSIDENT : Merci beaucoup, Monsieur Levasseur, et nos salutations à monsieur Maisonneuve.

15985   M. LEVASSEUR : Je n'y manquerai pas.

15986   LE PRÉSIDENT : Merci bien.

15987   M. LEVASSEUR : Merci.

15988   LE PRÉSIDENT : Madame la Secrétaire.

15989   THE SECRETARY: I would now ask DHX Media to come to the presentation table.

--- Pause

15990   THE SECRETARY: Please introduce yourself and you have 10 minutes for your presentation.

PRÉSENTATION

15991   MR. DONOVAN: Good afternoon, Mr. Chairman, Mr. Vice Chairman, Commissioners, Commission staff, ladies and gentlemen. My name is Michael Donovan, Executive Chairman of DHX Media.

15992   I am pleased to introduce you to the new team at DHX which combines the management of our content production and distribution company with DHX Television. We are delighted to be here today, presenting to the CRTC on behalf of DHX Television for the first time.

15993   To my left are Joe Tedesco, Senior Vice President and General Manager of DHX Television; Catherine Tait, Advisor to DHX; Steven DeNure, President and Chief Operating Officer of DHX Media.

15994   And to my right is Dana Landry, CEO of DHX Media; and Mark Gosine, Executive Vice President and General Counsel.

15995   Before I hand this over to the team, I would like to respond to Chairman Blais' question regarding sections 25 to 32 of the Public Notice: What does the future of television look like?

15996   As creators, we welcome new ways to reach audiences. For this reason we see the OTT services as a positive, while still a disruptive force for our industry.

15997   It is our view that digital has changed everything. Nevertheless, because of this, the domestic broadcasting system plays an ever more important role in discoverability, guiding Canadians to Canadian stories. It is this perspective that is at the root of our proposals.

15998   Our company comes to traditional broadcasting with a different point of view. As creators, we believe content is everything. We believe that a strong domestic broadcasting industry has been critical, especially in the children's programming arena, to Canada's success in building outstanding content brands on the international stage. After all, we're the people who taught America how to say Caillou!

15999   MR. LANDRY: As relative newcomers -- or shall I say the newest-comers to the Canadian broadcasting system -- we believe that DHX Media with its deep roots in the global content production and sales business brings a unique perspective to this hearing.

16000   DHX supports the need to respond to consumer demand for more choice and flexibility.

16001   Our view is that we need a bridge -- not a wholesale leap -- that allows for a transition to a system with greater choice. We need to strike an appropriate balance between improving consumer choice and maintaining the elements of the system that work for all stakeholders. This means ensuring diversity in the system and the mechanisms that are in place that encourage content producers and creators as well as independent broadcasters.

16002   To be clear, DHX is not asking to be insulated from the impacts of consumer choice or from dynamic competition. Rather, we are asking for a regulatory framework that provides continued access to subscribers. Without access to the BDUs' platforms we simply cannot reach our audience nor can our services be discovered by new viewers.

16003   MR. TEDESCO: Given time constraints we have restricted our remarks today to the regulatory changes that we believe could have a profound impact on the future viability of our business.

16004   Our primary concern is how a pick-and-pay universe, whether it is à la carte, build your own packages or a combination of both, will impact our mandate to produce and deliver quality programming.

16005   Over the past 25 years we have successfully built our business through market-based negotiations with our BDU partners, achieved better than 60-percent penetration for Family Channel and 50-percent penetration for Disney XD and Disney Junior in English. It is worth noting, as a lot has been said in this hearing about the example set in Quebec by Videotron's pick-your-own-package offering, that Disney Junior has only achieved 20-percent penetration in that market.

16006   We have built our distribution for the Family Channel services without the benefit of legacy basic carriage and without being part of a vertically integrated ownership group. Rather, we have built our business by offering a high-quality product, developing a best-in-class brand and negotiating broad distribution agreements with each of our BDU partners. As a result, our distribution arrangements today vary across the country, with some BDUs offering us on basic, others offering us as part of a large bundle of services and some offering us as a part of a theme pack.

16007   In our view, the current distribution environment is working for Family Channel. BDUs have developed a range of packaging options that serve subscribers and allow them to provide differentiated product offerings to the marketplace. In fact, we are intrigued by the proposal to allow Canadians to maintain their existing status quo packages as we move forward in this new regulatory regime. This approach would certainly provide a stabilizing effect in a period of transition.

16008   What we do wish to bring to the Commission's attention is that where our services are offered in small children's focused packages, our penetration declines to percentages as low as the mid-30s, not because of the quality of the content we offer but because the theme pack is only of interest to households with children at home.

16009   In a mandated pick-and-pay world, whether it is à la carte or build your own package, our penetration will inevitably decline. And as a result, we will have less to spend on Canadian programming, the quality of our on-screen product will suffer and consumers will end up paying more for less than they are accustomed to today. As you have heard from the Disney representative in these proceedings, the mixed model introduces uncertainty in the broadcaster's ability to invest in new original content.

16010   MR. DeNURE: If the Commission does decide to implement a new world of skinny or small basic together with mandated pick-and-pay, we join Corus, the CMPA and the Shaw Rocket Fund in the recommendation that children's services be included on basic. As you have heard from many of our colleagues, Canadian children's services perform an important and unique public service in the broadcasting system and in our society.

16011   Family Channel, which is a commercial-free service, has been the number one rated kids' channel in Canada for the last nine consecutive years. Canadian shows are amongst our top-rated programs. The Canadian-created and -produced series "The Next Step" is currently our number one show.

16012   For this reason, as a new broadcaster, we believe that children's broadcasting services should be available broadly to all Canadians at a reasonable rate. Therefore, we respectfully submit that the Commission should consider including the existing Category A children's services -- YTV, Family Channel and Treehouse -- in that entry-level package. In this way, the original Category A children's services will continue to be available to Canadian families at a reasonable price, while maintaining the level of investment in the production and exhibition of high-quality children's programming that Canadians have come to expect.

16013   MR. TEDESCO: If the Commission does not choose to include children's services on the new small basic package, then we would ask that the Commission consider maintaining the following three critical regulatory safeguards for all independently owned Category A services:

16014   - access rights;

16015   - subscription revenue safeguards; and

16016   - continued genre protection.

16017   First, with respect to access rights, we are confident that with access and some assurances as to fair treatment we will be able to compete and grow our business by offering consumers high-quality, innovative programming.

16018   Second, in order to ensure the continued viability of independent services, we would ask that the Commission establish as a matter of policy that it is reasonable and appropriate for independents to seek penetration-based pricing incorporating minimum floors in their BDU agreements. Once this principle is established, then the reasonableness of any proposed penetration level can be assessed in the Commission's dispute resolution process should market-based negotiations fail.

16019   Third, we urge the Commission to maintain genre protection for existing independent Category A services with respect to the vertically integrated players and foreign networks authorized for distribution in Canada.

16020   We share the concern expressed by the IBG and others regarding the Commission's proposed 2:1 linkage rule and a possible negative impact on carriage of independent services.

16021   MR. DONOVAN: Mr. Chairman and Commissioners, we believe it is critical to give our children a home-grown view of themselves.

16022   So how do we achieve parity for children's services in a lighter regulatory environment?

16023   You have heard from many interveners, including compelling evidence from the U.S. marketplace, about the risks associated with a pick-and-pay approach.

16024   It is our recommendation that the Commission proceed with caution as we embrace the future. We believe that traditional broadcasting will continue to play the most important role as a vital engine of Canadian content in the changing media landscape. In a world of infinite and largely global content choice, who else will guarantee the production of Canadian content but our own domestic broadcasters?

16025   Our Canadian children's programs perform exceptionally well across many digital platforms but these programs have been nurtured and financed here in Canada thanks to a supportive regulatory framework which has contributed to success stories like the Family Channel.

16026   Thank you. We would be pleased to answer your questions.

16027   THE CHAIRPERSON: Thank you very much. Commissioner Simpson will start us off. Thanks.

16028   COMMISSIONER SIMPSON: Thank you.

16029   Welcome to the hearing.

16030   MR. DONOVAN: Thank you.

16031   COMMISSIONER SIMPSON: Thank you very much and congratulations on your acquisition. It's a big deal.

16032   First, two points.

16033   In your written submission you had cautioned us to be mindful of the goals of the Canadian broadcasting system, and I can assure you we are. There have been characterizations over the last week and a half that perhaps the methodologies that have been contemplated in the Working Document were running contrary to the health of the industry, and that's, you know, why we're here.

16034   The second thing is Commissioner Molnar used the term "partners" in our desire to find mutually satisfactory means by which we can get there. I don't know if partnership is the right word but I appreciate the fact that you seem to be very mindful yourself of the fact that we have a job to do and that you are supporting, you know -- and I don't want to say enthusiastically, but you are embracing change with a little more enlightenment than perhaps we've seen.

16035   Now, if I can ask you a couple of broad questions.

16036   First off, because of your business model, do you have anything you can share that would go along the lines of telling us if there's certain types of programs or programming formats that are a little more conducive to being able to survive the transition to digital and all its various forms, whether it's pick-and-pay, on demand and bundling, and whether as an independent programmer you've got that in your offerings compared to some of the niche services we see?

16037   MR. DONOVAN: Joe.

16038   MR. TEDESCO: You know, that's what consumes programmers every day, is how to find those shows that resonate and are relevant to our audiences.

16039   Mr. Donovan or Mr. DeNure highlighted one of our properties right now which is called "The Next Step," which is a Canadian-produced show. It's a unique format that has connected with our audience. I would say that it's sort of a Canadian pop culture phenomenon right now and that show extends beautifully to alternative platforms.

16040   Certainly, I think at the end of the day it becomes about great content. Kids and other consumers want to consume video content now in a variety of platforms. They want to do it with linear. Linear television is extremely healthy with our audience, it's still their primary format, but they also consume content on their DVR, they consume it on their iPad, they consume it on their computer screen, and at the end of the day it really is about great stories. And formats evolve and change and it's our job to figure out through consumer research and listening to our consumers what is going to connect with them.

16041   COMMISSIONER SIMPSON: Again, in your written submission -- because I've got a lot in my notes from that, first -- you had referred to your penetration level, a very handsome penetration level of about 60 percent, but your show was being enjoyed by The Family Channel. But to support your point about the potential impending perils of pick-and-pay, you had made an observation that over the last four years many BDUs have begun to offer more niche thematically based packages and they use this as a bit of a canary in the mine shaft as to what might happen with pure pick-and-pay.

16042   Two questions for you.

16043   First, do you have any -- this is an evidence-based process -- do you have anything that you can share with us by way of an undertaking that would document declines, either as experienced by yourself or others, as these more niche packages started to make emergence into VIs?

16044   MR. TEDESCO: Sure. We could file -- some of that may be confidential information but we're certainly prepared to file it under confidence and we could, I think, show you the relative performance and the relative penetration levels that we achieve depending on the packages that our services are offered in and we could, you know, highlight what that decline has been as well.

Engagement

16045   COMMISSIONER SIMPSON: That's terrific!

16046   That brings me to my second point on this questioning. You said that you -- I'm just asking for you to clarify for me the term you used on the subject of these niche packages. You said:

"Family Channel has experienced a declined rate of subscription of 5%." (As read)

16047   Is that a declined rate of subscription based on penetration or wholesale rates?

16048   MR. TEDESCO: That would be a decline of subscribers in terms of less.

16049   COMMISSIONER SIMPSON: Okay.

16050   MR. TEDESCO: Yeah. Yeah. Just a very straightforward --

16051   COMMISSIONER SIMPSON: Terrific!

16052   Now, I'm going to sort of move over to the --

16053   MR. TEDESCO: Which that decline -- sorry, Commissioner Simpson -- which that decline we're continuing to see in those systems that offer us in those kinds of packages.

16054   COMMISSIONER SIMPSON: So that's a dynamic process?

16055   MR. TEDESCO: Yeah. Yeah.

16056   COMMISSIONER SIMPSON: Okay. On point 9 you talk about needing a bridge and the notes I made to that point I'd just like to unbundle a bit.

16057   The decline -- or sorry -- the bridge that you're looking for, as you say, is to buy some time to make adjustments to whatever the endpoint of this whole process is going to be.

16058   But of the three areas that are covered by this bridge, there's time, there's money and then there's the whole issue of regulation. Now, regulation in this instance perhaps does more to -- I don't want to say protect but keep whole your status as a Category A service, but this bridge can also potentially keep the financial arrangements in place for an extended period and the end result is because there would be a time delay in this process. So on the basis of time, how long should this bridge last?

16059   MR. TEDESCO: We've given that some consideration. If we do move sort of to the world that's contemplated, you know, the mandated pick-and-pay, we would need some time to restructure some of our affiliation agreements.

16060   So, we can contemplate that and also address the inevitable, that our penetrations -- and we will experience subscriber declines and it's hard to predict exactly what the extent of those declines are going to be but we certainly know that some subset of the population will adopt that and we're certainly hopeful that -- some of the things that we've heard over the last couple of days, that there still will be sort of the opportunity for BDUs to offer some of the large value bundles that our services do well in, and consumers, I believe, enjoy the opportunity to buy television and buy lots of television at a price that makes sense.

16061   So we would certainly want some time to transition for that period and, you know, just looking out at what our affiliation agreements are, we're looking at, you know, potentially a three-year time horizon or the end of our licence term.

16062   COMMISSIONER SIMPSON: Okay. So for the sake of clarity, three years?

16063   MR. TEDESCO: Yes, which happens to coincide too with the end of our licence term and I think would also get us through the agreements that we have in place now.

16064   COMMISSIONER SIMPSON: Just to clarify, why I'm asking the questions the way I am is that I'm looking at this bridge as being a little more universal than to just your needs, you know.

16065   MR. TEDESCO: Sure.

16066   COMMISSIONER SIMPSON: This is with respect to how we might develop a bridge that's for all if we deem that to be necessary.

16067   So on the money side of things, affiliation agreements, program agreements are in place and they get renewed whenever they expire. Is it going to be necessary, do you think, to also put a de-escalation or a renewal of financial agreements between programmer and distribution service that is also tiered?

16068   Because right now these agreements, I presume, are rewritten not annually, but perhaps every three or four years?

16069   MR. TEDESCO: Our agreements with program suppliers?

16070   COMMISSIONER SIMPSON: Yes.

16071   MR. TEDESCO: They are generally long-term agreements. Generally, the minimum would be five years.

16072   COMMISSIONER SIMPSON: So just as a very broad concept, would we have to contemplate, or is it your recommendation that we contemplate sort of a rolling agreement that reflects dynamic changes to penetration levels and the like, so that it isn't necessarily protecting you, but at least recognizes the dynamics of the changes going on during that three-year period?

16073   MR. TEDESCO: Well, you know, our main cost is programming. Really, there are two components to it, there is the Canadian content that we commission and, as you know, that is largely driven off the revenues that we generate, and then there is our foreign programming agreements, and we have, obviously, a long-term partnership with Disney, which supplies the overwhelming majority of our foreign content.

16074   Foreign rights owners are about monetizing content, so it would be a challenge -- there is a value and there is a negotiation that happens when we renew these agreements. Obviously, environmental factors impact what we offer, and what we ultimately think we can pay. But, as you can imagine, the rights holders, they are in the business of maximizing fees for the programming that they get, and they are certainly motivated to get market value for those fees.

16075   So I think there is a challenge in correlating our system with what their expectations are, and hence why we are so focused on trying to keep our business as healthy as possible, so we can continue commissioning the great Canadian programming that we do, and have sufficient dollars to also get the other, the foreign programming. That is important.

16076   COMMISSIONER SIMPSON: Yes, I get that. I do understand. It goes without saying that that would be your position.

16077   What is your view toward the recurring theme we have been getting from a lot of distributors that, as we go into this exercise, there should be some form of reference or standard rate for programming?

16078   In SaskTel's instance, they went so far as to say that it really should be a shared -- you know, once a deal has been struck, it should be shared with all BDUs and programmers, so that everybody is -- you know: You show me yours, I'll show you mine, kind of thing.

16079   What does that do to disrupt your business?

16080   MR. TEDESCO: Our preference is to work within a market-based environment, and BDU agreements have to be structured to take a whole host of factors into consideration, because ultimately our revenue is driven by the number of subscribers times the rate.

16081   So it is critical for us to develop correlations around those, and that is why we are advocating for penetration-based type pricing, if we are embarking into a world where our subscribers are going to have some uncertainty attached to them.

16082   So I don't, necessarily, buy into the notion that you have one rate for all distributors, while disregarding all of those other factors that I have just referred to.

16083   COMMISSIONER SIMPSON: Thank you.

16084   Moving on to your big ask, which is being considered for part of the basic, the skinny basic -- my question is going to be this: How much does your presence in a skinny basic make that skinny less skinny?

16085   I know that you can't answer that perhaps by any other way than an undertaking, but if we were to consider this on either a basic or an extended basic basis, we need some evidentiary information.

16086   Again, is it appropriate to ask for an undertaking that you would give us a sense of what those costs would be?

16087   MR. TEDESCO: Yes, absolutely. And, I mean, we have given consideration to the financial implications of that. We have given that some consideration, so we are certainly happy to file an undertaking with more specific information.

16088   The Commission has proposed a range, from $20 to $30, in terms of what that could possibly be. We think that the cost component would be sort of in the 4 to 7 percent range of that total price, depending on where the ultimate price lands.

16089   Certainly, we would work very cooperatively and hard to find the economics that make sense, which the Commission feels would work, and also that our BDU partners feel would make sense. We are happy to engage in a market-based negotiation with them, as far as that goes.

Engagement

16090   COMMISSIONER SIMPSON: Thanks. That's good.

16091   And that would be, as well, in aggregation. It would be for the three services that you propose --

16092   MR. TEDESCO: Right.

16093   COMMISSIONER SIMPSON: -- but we would get it on an individual basis, as well?

16094   MR. TEDESCO: Yes. Well, I guess we can comment on our own services. For the other ones we will give some estimates, based on publicly available information.

16095   So we are happy to do that. Obviously, our own, we can be more precise about.

16096   COMMISSIONER SIMPSON: Are you bundling here?

--- Rires

16097   COMMISSIONER SIMPSON: Sorry.

16098   Moving on to extended basic, we heard some pretty good testimony from Disney, which you partner with on one of their services, and I thought it really interesting to hear them say that, in spite of their deep pockets, no matter how much they spent on programming, and then the promotion of programming, it just became a vicious cycle, and really, until they got into an extended basic, they didn't get traction.

16099   For the record, is that the case with your service?

16100   MR. TEDESCO: Yes. We had the parallel experience with Family Channel. When Family Channel was first launched, it was launched as a fully discretionary service and was sort of bundled with some of the Pay TV channels, and it languished for many years, at very, very low rates of penetration, and low revenues.

16101   Its Canadian content commitments that it could make in that environment were minuscule compared to where we have grown by migrating Family onto a tier and building the service, building the brand.

16102   But, certainly, distribution has been the absolute most important contributor to us being able to build a brand that is now considered, in terms of children's entertainment, the No. 1 brand in Canada.

16103   So distribution was absolutely, fundamentally, the key driver of that.

16104   COMMISSIONER SIMPSON: When that happened -- and I know you can't speak for Disney, but you have had some exposure to that -- when that happened for you, what made the difference, other than the pure numbers of penetration, or subscribers?

16105   Was it that discovery was better because you had exposure to the content, or was it that there was a promotional package that came along with this heightened level of importance to the distributor?

16106   What really made the traction happen?

16107   MR. TEDESCO: It was a number of factors. Obviously, the additional revenues that came along with the broader distribution were hugely important, but certainly the discovery point was absolutely critical.

16108   That is why, when it comes to penetration, obviously there is the ever-important revenue component, that you want to try and not diminish your revenues so that it affects your business model.

16109   But distribution is key, and then discovery, in being able to build your brand. I think that those two elements work together.

16110   COMMISSIONER SIMPSON: Your alternate scenario is very straightforward, so I don't think I have to ask much about it with respect to access rights and pricing floors, but on genre protection, should that happen? Should it be a hard-stop decision or a time-released decision on genre protection?

16111   MR. TEDESCO: When it comes to genre protection, obviously, if we were privileged enough to get basic carriage, that would be a less critical issue.

16112   But, certainly, we are believers in it, and for a couple of reasons.

16113   One, I think it does help preserve diversity in the system. I think you do risk, if you completely relax genre protection, the natural tendency -- especially for ad-supported channels, which are chasing ad dollars.

16114   Certainly, you want to sort of try to offer the programming that is going to attract the most eyeballs of the most coveted demo, which now happens to be moms. Everyone is talking about co-viewing programming being critical in the children's genre, so that you can get moms engaged.

16115   I think there is that element in terms of diversity.

16116   I think, also, as an independent, if you are operating and you have built a great service, and it is a genre that is attractive, you can imagine what some of our concerns may be around a large player, who has much deeper pockets, much more extensive resources to look at genres, and it just makes good business sense.

16117   If we built a great business in a certain genre, and you have the ability to play in that genre, why wouldn't you pursue that?

16118   COMMISSIONER SIMPSON: Sure.

16119   This is the last question, I promise, Mr. Chair.

16120   On multiplatforms -- before me is a company with a much bigger stick as an independent programmer than a lot of independents we have had a chance to talk to in the last week and a half, and I am thinking now about sharing information with a distributor about the subscriber.

16121   Could you give me your views on how important it is for you to have, and build through -- I am thinking online presence, apps and so on -- how important it is to partner with a distributor to be able to, for both you and the distributor, lever the relationship with the subscriber?

16122   MR. TEDESCO: Yes, it is absolutely critical, and we have had a great deal of success with all of the major distributors. We now have a multiplatform offering. Family is available on demand, and in some cases the linear stream is, as well, on an authenticated basis.

16123   Our choice, philosophically, was to work within the ecosystem, so we have partnered with all of the BDUs and extended our services and our content to, essentially, all screens that that content can be played on.

16124   COMMISSIONER SIMPSON: And as the rights holder, you obviously had control of that relationship, from the standpoint that you were granting them rights to it.

16125   MR. TEDESCO: Exactly, yes.

16126   COMMISSIONER SIMPSON: Did you find that the cooperation was mutual going the other way?

16127   MR. TEDESCO: Yes. It was not a hard-sell. I mean, we are very proud of our brands. We have great brands, we have great content, it made sense for them to extend these.

16128   Kids are high users of new technology, so there was a real willingness on both parties to figure out what the right economics were and get those services launched.

16129   COMMISSIONER SIMPSON: Thank you. Those are my questions.

16130   THE CHAIRPERSON: Thank you.

16131   Mr. Vice-Chairman.

16132   COMMISSIONER PENTEFOUNTAS: Thank you.

16133   I am not going to get into the math. I did my own sort of math.

16134   Could Family work in a skinny basic? And, if it could, how do you do the math as a non-subscription-supported service?

16135   MR. TEDESCO: Commissioner, you mean as a non-advertising-supported service?

16136   COMMISSIONER PENTEFOUNTAS: As an advertising-supported service solely.

16137   You mentioned Treehouse, you mentioned YTV and you mentioned Family.

16138   MR. TEDESCO: Right.

16139   COMMISSIONER PENTEFOUNTAS: Perhaps speak to us on Family. How would Family work in basic?

16140   MR. TEDESCO: The Family Channel, as you know, is a commercial-free service, and it has been the No. 1 service, as Steven alluded to earlier, for the last nine consecutive years.

16141   I think that Family, YTV and Treehouse offer very unique programming. There is no overlap between those services.

16142   Our service is differentiated, in addition, to some extent, because it is ad-free.

16143   So, yes, our service is slightly more expensive, but we certainly feel that there is space in the system for a commercial-free, family-oriented service.

16144   COMMISSIONER PENTEFOUNTAS: And that is the only model that you would foresee for Family?

16145   MR. TEDESCO: Well, I mean, we are open to examining alternative models. We think that there is a role in the system for a commercial-free kids' service. We would love to see it on basic.

16146   But if the economics required us to consider advertising, it would be something that we would be prepared to look at.

16147   It would certainly, obviously, require a change of licence, so it would require working with the Commission, as well.

16148   And I would imagine that some of our competitors, or sometimes partners, would obviously have some concerns about another player in that space.

16149   COMMISSIONER PENTEFOUNTAS: Because you would go from whatever your subscription number is now -- and I won't mention it -- to sort of 11.3 million, under skinny basic.

16150   MR. TEDESCO: Yes, depending on how you view Quebec. Because I think the 11.3 includes --

16151   COMMISSIONER PENTEFOUNTAS: Includes Quebec.

16152   MR. TEDESCO: -- yes, the French-language market, and I think that we would only be looking for -- you know, it would only be fair that we look for that carriage in the English market, but, clearly, we would love to be in the French market, as well, if we could strike that arrangement.

16153   COMMISSIONER PENTEFOUNTAS: Because that would -- I have to watch my words -- sort of chunk-up the skinny basic, if we sort of started adding X number of kids' services under the current subscription model.

16154   MR. TEDESCO: Right.

16155   COMMISSIONER PENTEFOUNTAS: It wouldn't be so skinny.

16156   MR. TEDESCO: Well, again, when we did the math, based on existing pricing -- and we are certainly open to looking at alternative models -- again, we came up with a price point that it would occupy about 4 to 7 percent, depending on where the skinny basic number lands.

16157   So it seems to me that there is room for adding those services, especially if we can find a solution that, maybe, improves upon the economics.

16158   And we think it would be a fantastic value to families if one of the outcomes of this meant that kids' services were affordable to all families. I think that would be a fantastic outcome.

16159   COMMISSIONER PENTEFOUNTAS: I am not going to get into the math. I know that it is sensitive information, and you have undertaken, I think, to take a look at potential other models.

16160   Unfortunately, we need that work done by the end of the week, I want you to understand that. So, to the extent that it's possible, and to the extent that you can put in the detail that you can --

16161   MR. TEDESCO: Would there be an opportunity, maybe -- and Catherine, you could help me with this -- to file that with our final comments?

16162   THE CHAIRPERSON: If it is evidentiary in nature, other parties need a fair chance to comment.

16163   MR. TEDESCO: Okay. I understand.

16164   COMMISSIONER PENTEFOUNTAS: Just briefly -- and you touched on it briefly with Commissioner Simpson -- you sort of admitted that things are changing, things will change. There may be some losses on the television front going forward, no matter what decisions the Commission takes.

16165   You obviously have a plan for what happens after that, and you could be talking about two or three or five years down the road, but the changes are coming.

16166   Do you want to speak to us about sort of the big picture, and concisely, as to what that plan is?

16167   MR. TEDESCO: Our plan -- and I will speak on broadcast, and Michael may want to add some comments with respect to DHX.

16168   We have been laying the groundwork, I think, to extend our services to a variety of platforms, because we have been, obviously, following where video consumption is going.

16169   Longer term -- we have developed a YouTube presence with our brands, for example, which we think is important, in terms of having an opportunity. Kids are going to YouTube, we need to have our brands there, so they consume our content, or they have an opportunity to come and see our content, as opposed to other content.

16170   So we are certainly working very diligently to figure out that world. I don't think anyone has figured it out completely.

16171   Certainly, we think that Canadian content is a really important component of that, where we can use local talent, use local shows to build our brands, and maybe extend them beyond just the television world.

16172   We are having some great success with grassroots activities. We put together a concert series in the summer that really leveraged on Family's brand and created a real sort of family-oriented opportunity, sort of a rock concert for young kids. I call it Lollapalooza for Kids.

16173   COMMISSIONER PENTEFOUNTAS: Great. I don't want you to give everything away, but you also have a plan, I would imagine, for monetizing that YouTube content?

16174   MR. TEDESCO: It has been a challenge so far, simply because of traffic. We haven't chosen to monetize it yet.

16175   We have sort of staked that positioning as being a commercial-free service, and when we took our brands out to YouTube, we have now -- at this point we have chosen, really, to brand build and try to build the traffic and not create disruption.

16176   Certainly, if our business model demanded it, there would be an opportunity down the road to monetize that.

16177   COMMISSIONER PENTEFOUNTAS: And is authenticated online content part of that plan?

16178   MR. TEDESCO: We are doing authenticated online content right now, and we have certainly chosen to work with our BDU partners, in terms of rolling out content and really linking that to our subscription, and trying to preserve that ecosystem.

16179   COMMISSIONER PENTEFOUNTAS: When you look down the line, is authenticated consumption sort of the future, or the present?

16180   MR. TEDESCO: I would like to think that authenticated consumption is part of the future.

16181   Like I said earlier, linear TV among our audience is still, by far, the No. 1 way that they consume TV. That may change. Certainly, we are prepared for that change, in terms of having migrated our content onto on demand and giving them alternative options to consume it.

16182   But, for the time present, we would certainly like to work within that ecosystem.

16183   COMMISSIONER PENTEFOUNTAS: Okay. Thank you for your time.

16184   Thank you, Mr. Chairman.

16185   THE CHAIRPERSON: With respect to the deadline for the undertaking, the disadvantage of being in the second week is that you may have less time, but final submissions aren't until the 3rd of October. So how much extra time might you need?

16186   Closer to the 19th of September than the 3rd of October, obviously.

16187   MR. TEDESCO: We will endeavour to do it by the 19th.

16188   THE CHAIRPERSON: Okay. I appreciate that.

16189   If you get into trouble and you need a few days, you can contact legal counsel and see what that is. But, in fairness to everybody --

16190   MR. TEDESCO: Yes, I understand.

16191   THE CHAIRPERSON: Okay. Thank you.

16192   I believe those are our questions. Thank you very much.

16193   MR. TEDESCO: Great. Thank you.

16194   THE CHAIRPERSON: Madam Secretary.

16195   THE SECRETARY: I would now ask Gusto TV to come to the presentation table.

16196   THE CHAIRPERSON: Welcome, gentlemen. When you are ready, please go ahead.

PRÉSENTATION

16197   MR. KNIGHT: Good afternoon, Mr. Chairman, Vice-Chairman and Commissioners. My name is Chris Knight, and I am the President and CEO of Gusto TV.

16198   Sitting to my right is Mr. Mark Prasuhn, Vice-President and General Manager of Gusto TV.

16199   You will be pleased to know that we come before you today not filled with terror and trepidation, but rather we are excited, cautiously so, at the changes being considered here and the opportunities to address the inequities that currently exist in our industry.

16200   We are proud to have been included in these hearings, given that Gusto TV is a relatively new player. Gusto is Canada's newest food and lifestyle channel, offering Canadian viewers a clear-quality, high-definition alternative to those few lifestyle channels they have been watching for years now.

16201   After more than a decade of producing hundreds and hundreds of hours of lifestyle programming, we decided to migrate into broadcasting, because we believed that the market was underserved and there was a demand for an entertaining, quality alternative.

16202   "You are out your mind," we were told. "Nobody launches an independent channel in today's TV market. It's too expensive, the barrier to entry is too high, and you will never get carriage," we were admonished.

16203   Well, they were half right.

16204   In December of 2013, Gusto TV launched with significant carriage, thanks to Bell. Yes, Bell is one of the big VIs we are concerned about, but they absolutely stepped up and launched us.

16205   Shortly thereafter we lit up with TELUS, again with significant carriage. Both TELUS and Bell have been exceptional partners, and without them we would not be here before you today.

16206   After only nine months on the air, I'm proud to say that Gusto TV is performing beyond our wildest expectations and raising eyebrows in the industry. With only two carriers, we regularly rank in the top 15 female-skewed channels, an important consideration when we go to meet with national advertisers.

16207   With only two carriers, our ratings are exceptional. In fact, if you take our confirmed ratings from, say, a week in August, and adjust for the significant difference in carriage, we are as popular, if not moreso, than those specialty channels who've enjoyed a 15-year head start on us -- and did I mentioned we've been on the air for nine month with only two carriers -- and this without the significant benefit of multi-channel cross-promotability, which, as has been stated here, is fundamental to television marketing.

16208   Clearly, our programming resonates with Canadian viewers. Clearly, Canadians are living their lives with "Gusto." And we built Gusto TV from the ground up to live as vibrantly in VOD, live streaming and mobile as we do on our linear service.

16209   So you'd think that, given our popularity, other BDUs would be eager to carry us. Alas, that isn't the case. And just to be clear, Mr. Chairman, while we've been on the air for less than a year, our carriage discussions -- I'm hesitant to call them "negotiations" -- go back to October of 2009. That's half a decade of being told maybe, because in this business nobody ever gets caught out saying no, they just never say yes.

16210   One of the benefits of appearing this late in the docket is we've had a chance to consider what others have said before us, and we're delighted at the following quotes from prior submissions: "Free just isn't a business model," "The paramount importance of discoverability," It's a free market," and my personal favourite, "It's got to be a level playing field."

16211   Interestingly, these are all quotes from the large, multi-billion-dollar, vertically integrated companies who, in some cases, seem to think these tenants only apply to them.

16212   And so with these bon mots ringing in your hears, how about we spend the next few minutes talking about what's in the best interest of the Canadian consumer. Let us consider the two watch words of these hearings, "flexibility" and "choice."

16213   We're of the opinion that most of the conversation so far has been centred on flexibility and not so much on choice. What's the point of multiple packaging options if you're limited in your choices of channels that go into the packages? To use a foodie analogy, we're spending a lot of time talking about the size and the shape of the bottle and not the quality of the wine that goes in it.

16214   We're all for flexibility as long as -- and again I'm quoting the VIs here -- "It's a level playing field." So if we had to choose, we would support small basic option B, but with a couple of healthy and enforceable caveats.

16215   Gusto believes in consumer choice. We also believe in competition -- real competition. We launched Gusto TV because we know Canadians love food and lifestyle programming. But, relative to other English-language markets, Canadians had limited viewing choices until now.

16216   The small basic options A and B, along with the other selection options, as set out in the working document, certainly provide for greater flexibility, but not greater choice, at least not of Canadian services. As difficult as it has been to launch Gusto TV, it would be practically impossible in an unbundled world that didn't afford independent broadcasters some measure of protection in dealing with the multi-billion-dollar companies that are not only their competition, but also their carriers.

16217   In what other business does your better financed, better established, government-protected competition hold your future in the palm of their hands? In what other business is your competition the sole arbiter of your success or failure?

16218   In case you were going to ask, Gusto TV holds a cat B licence. We knew going in that the BDUs were under no regulatory obligation to carry us, but the CRTC stopped handing out cat A licences a long time ago, so this was our only option. And thanks to Bell and TELUS, we've proven Gusto's unqualified popularity and its ability to tap into Canadian lifestyle zeitgeist.

16219   But now you are about to change everything, and you should include enforceable provisions that allow independent channels to compete, not because we're fragile hothouse flowers, but because it's in the best interests of the Canadian TV viewer to have real choice, not simply VI choice.

16220   Let me say that again. It is absolutely in the best interests of the Canadian consumer to ensure independent broadcasters like Gusto TV can compete on a level playing field.

16221   And for the record, Mr. Chairman, we at Gusto TV do not consider Canadian content to be a onerous condition of licence. We intend to make as many shows as we can, then give them pride of place in our prime time lineup.

16222   In spite of significant red ink in this, our first year of operation, we're about to embark on our first original series, with many, many more to come. After all, do we not all recognize that in business small companies tend to be the ones that innovate, push the envelope, take chances? It would be a mistake to leave the channel carriage solely up to the BDUs without immediate enforceable regulations that maximize viewer choice.

16223   Furthermore, Mr. Chairman, linkage by itself is not the answer. Why would any right-thinking VI executive include a robust and popular channel, that competes for eyeballs and advertising revenue, when they can meet the linkage rules by favouring a small micro-niche channel of no threat to their own broadcast assets? A sound business move perhaps, but certainly not in the bests interests of the Canadian viewer.

16224   If you are going to allow the BDUs the sole discretion of deciding what goes in and what doesn't, then we propose what we call "enhanced linkage." Namely, if you're going to include one of your channels, then you must also include other comparable Canadian channels on similar terms.

16225   Enhanced linkage complements the six important principles as outlined in the VI Code, Appendix 1, and puts true channel selection in the hands of Canadian consumers, where it belongs.

16226   Let me say this in conclusion. Gusto TV is one of the best lifestyle channels in Canada. We'll put our service up against any and all comers. We only ask for a level playing field on which to compete. Because, at the end of the day, Mr. Chairman, should not the success or failure of a channel be determined by the Canadian viewer and not the largess of the multi-billion-dollar, vertically integrated oligopoly? Success should be determined by how well a channel's programming resonates with audience and not by who owns it.

16227   We'd be happy to answer any questions you might have, and we thank the Commission for this opportunity to share our thoughts.

16228   THE CHAIRPERSON: Thank you very much, gentlemen.

16229   Commissioner Dupras will start off the questions.

16230   COMMISSIONER DUPRAS: Thank you.

16231   Good afternoon.

16232   I've read your submission. It was very well articulated. You cover many points.

16233   You say in paragraph 22 that pick-and-pay packs, which are those created by subscribers, consumers, of 5, 10, 15 services would destabilize the system and that bundles and theme packs built by BDUs would make new services feasible and bring sufficient stability.

16234   Can you comment further on this? Does this mean, in your view, that pick-and-pay packs is something that would not allow new services to survive?

16235   MR. PRASUHN: I'll jump in, thank you.

16236   I think what we're getting at is that there is a big difference between -- you have three components, skinny basic, à la carte, and pick-a-pack, and what hasn't got a lot of airtime in this last week and a half is how pick-a-pack is going to be priced and what wholesale rates, in that context, would be. I mean we heard this morning a notion about a standardized rate, for example.

16237   But from our perspective -- and we are in a pick-a-pack situation with one carrier -- there is no way that the wholesale rate an independent service with little negotiating leverage would in any way "make whole" or come anywhere remotely close to that. An unbranded service or -- sorry, a service that is not a global brand, like ours, but is a Canadian one starting up, to get a foothold and the consumer awareness necessary to have consumers go through the selection process in pick-a-pack, we think is not going to -- is going to take a very, very long time.

16238   Secondly, there's a lot of friction in the actual process, and, as we've heard again from various BDUs here, that, you know, implementing a full-up pick-a-pack and sorting out the myriad of -- almost exponential number of choices for consumers is very likely to lead to situations where people will default to familiar brands or well-known brands and it'll be a lot harder for a new one to get a foothold.

16239   So that's really our primary concern about it: that the rate compression, in a sense, that occurs in a pick-a-pack, where we're the price taker, the BDU will decide how many channels go in and what the price is, and then will tell us what the wholesale rate is then going to be, and whether it compensates, and -- I use us as an example, it could be any service -- there's no ability to get any sort of offset for the reduced penetration. It's a very, very difficult kind of circuitous trap because, without some revenue coming in, we won't have the money to invest in marketing and promotion to raise our profile so that more consumers will choose it in a pick-pack situation.

16240   COMMISSIONER DUPRAS: So what exactly is the solution for new services like you?

16241   MR. PRASUHN: I would say it's to be given -- as Chris said, to be given carriage conditions that are reasonably comparable to what other services that they -- services that are roughly comparable. So in our case, we're a lifestyle channel. There are a basked of lifestyle channels that have been established in Canada, for quite a few years in some cases, and they have certain carriage situations.

16242   We think if we were given reasonable similar penetration and carriage -- and packaging -- sorry, packaging -- to those, we would have a reasonable shot. But if they're in a -- you know, an extended basic or -- probably not a skinny basic, but, you know, some other broadly penetrated package theme pack and we're in a pick-a-pack scenario, then it's the furthest thing from a level playing field one can imagine.

16243   COMMISSIONER DUPRAS: M'hmm.

16244   MR. KNIGHT: Can I just add to that?

16245   We think it's in the consumer's best interest to have a choice of all the lifestyle channels available, and not just the ones that happen to be owned by the big guys. We have demonstrated through our ratings that we have a channel that resonates, that Canadians love. The only thing that's stopping us from reaching more Canadians is the guys that own the pipeline also own the channels we compete against.

16246   COMMISSIONER DUPRAS: Okay.

16247   I was wondering what specific rules you would suggest.

16248   MR. PRASUHN: I think there's a range of possibilities.

16249   From our perspective, it's the outcome not so much the means. I mean I'm sure you will consider the various proposals that have already been made in that regard, OUTtv, the Nordicity study for TELUS, and there's a host of others that have been tabled here, so...some of them are fairly straightforward, some are quite complicated. Neither of us are regulatory lawyers, so we think that there are other -- many other minds already in this process, including, obviously, all of yours, and your staff will have been put to that question.

16250   We just think the important thing is that there be some mechanism that allows some ability for channels that are competing with other similar channels to have a reasonable foothold.

16251   COMMISSIONER DUPRAS: Okay.

16252   In terms of a Canadian content requirement, should access rights be granted to a service like you, what do you think they should be in terms of exhibition or Canadian production expenses?

16253   MR. PRASUHN: Well, we made the point in our written submission that -- and I think it's an important one, from our perspective -- that the difference between an A and B -- and I've had some personal experience in running both -- an A and B, there was a big difference back in 2000, when the framework was set up, and it's narrowed somewhat since because of subsequent changes and decisions that have happened. Meanwhile, the OTT market has arisen and the foreign eligible list is much, much longer than it was in 2000.

16254   So from our perspective, we look at it and say there are As with some access rights, at least for today and for this moment, Bs with none, and then a host of other totally unregulated competitors with none as well. So we think that Bs and As should be closer -- you know, our Cancon, our CPE, isn't what a typical A channel -- category A channel is, sorry, but it's definitely a lot more than the zero of the others, so we think that some recognition of that is appropriate, in terms of access rights in particular.

16255   In terms of what the level would be, we've actually -- as Chris said, we have a desire and a strong intent to create our own original Canadian programming and give it pride of place in prime time on the service. We are, obviously, at the moment planning for the 25-per-cent level that we're subject to now in our second year, and the 35 per cent that we will be -- that we will require as a minimum in --

16256   COMMISSIONER DUPRAS: M'hmm.

16257   MR. PRASUHN: -- a year's time.

16258   We will exceed those levels, so we would not, ourselves, have any discomfort with a higher percentage if -- of Canadian content and/or a CPE obligation if we could get some reasonable access to the consumer that would allow us to compete with the other lifestyle channels.

16259   MR. KNIGHT: If I could just add to that, we want to make as much as programming as possible. We consider programming to be integral to our brand, and we see it as -- we're not just an aggregator of other people's content. We see that as being an opportunity to tell Canadian stories back to Canadians and support the lifestyle categories that we broadcast. This is important to us: to be able to do as much of it as possible.

16260   COMMISSIONER DUPRAS: Okay.

16261   In your presentation today, you talked about enhanced linkage, together with comparable channels.

16262   In terms of marketing, what is it you have in mind, in terms of obligations of the BDU or the programming service?

16263   MR. PRASUHN: To market the channels?

16264   COMMISSIONER DUPRAS: Yes.

16265   MR. PRASUHN: Well, we feel that comparable channels owned by independents should be absolutely available in the same theme packs and packages as the VI-owned channels.

16266   COMMISSIONER DUPRAS: Okay, but in terms of marketing expense and marketing and promotion of, for instance, the theme pack, in which you would be, that would be a responsibility of the BDU?

16267   MR. PRASUHN: I would say -- well, there's a host of ways the channel would be marketed. If your question is: Would we sort of rest on our laurels because we got into a package that our competitors were in?, absolutely not. It's only the -- it only gets the door open. We still have to compete every day for attention eyeballs with them, and thousands of other possibilities.

16268   So the marketing is relentless and never ceases.

16269   We have, as a start-up service, invested heavily in marketing our channel across a wide range of platforms.

16270   We've done outdoor campaigns in several cities in Canada. We've done radio buys. Wherever possible, with our BDU partners, we bought large quantities of U.S. ad-avails space, and continue to do that now. We've done digital campaigns, search and other means.

16271   So we have a very active social media, and digital media department as well, so we're very engaged in that. It's absolutely critical to the business, so it isn't in any way diminished. It's only made stronger and more possible by a reasonable -- as Mr. MacMillan said in the hearing the other day, a "meaningful carriage."

16272   COMMISSIONER DUPRAS: Okay. These are my questions.

16273   Thank you.

16274   THE CHAIRPERSON: Thank you very much.

16275   I believe the vice-chair has some questions.

16276   COMMISSIONER PENTEFOUNTAS: Yeah, thank you.

16277   A clarification on that point.

16278   In terms of the 1:1 linkage rules that you put forward, and our working document creates a 2:1 linkage, combining A, Bs and Cs, obviously, and the two would be all VI service, and the one would be strictly reserved for independent services, you don't like that math?

16279   Because I listened to you earlier, when you talked about how in a package the VI broadcasting services, there should be a non -- one of their services -- if they're going to have a service in a package, then there should be someone else's services also available in that package, and that doesn't create a specific niche for independent services. So I'm trying to understand why you don't like our math, where you've got two V -- well, you regroup all the VI services in one, and then you get two of their services for every one service that's independent, ergo creating a specific niche for independent services.

16280   MR. KNIGHT: Well, I think the operative word there is "comparable" services. I think, you know -- so when -- you know, in 2009, when we started this process, we went and we talked to BDUs, and we talked to advertisers, and we talked to a whole bunch of people in trying to determine whether or not there was room in the market for a new channel like ours. Everybody said, If you want to put up a channel, make sure it's one that's going to compete toe-to-toe with the big guys.

16281   So I think what's important here is that comparable independent Canadian broadcasters be given an opportunity, a level playing field, to compete with their more established vertically integrated competitors.

16282   COMMISSIONER PENTEFOUNTAS: I'm going to get to my 1:1 rule, but "comparable" -- how would you define "comparable?" Would it be another food channel or any kind of lifestyle channel?

16283   MR. KNIGHT: Well, we talked about that a lot.

16284   COMMISSIONER PENTEFOUNTAS: Okay.

16285   MR. PRASUHN: Yeah.

16286   I think I'd say lifestyle. I mean it -- there, again, as I said earlier, there's going to be some thinking required about how this outcome might be achieved, through what means and mechanism.

16287   I read the Nordicity paper for TELUS, for example, with the funnel and the layers, and I mean it's a -- some of it can be a little mind-boggling. But there's a lot that goes into the consideration of how a channel might be packaged or priced if you were attempting to introduce a model to do that.

16288   I guess our point is a straight-up linkage, whether it's 2:1 or the old 3:1, alone doesn't get you there because the numbers -- and it's doesn't -- it's not throwing the door open to innovation and new entry, we believe.

16289   So we think linkage is better than no linkage, but it isn't the full solution.

16290   COMMISSIONER PENTEFOUNTAS: Back to my comparable, is it all lifestyle or are you limiting yourselves to food when you try to do comparable?

16291   MR. KNIGHT: Well, of course, there is only one channel currently that's allowed to broadcast food all day long, so, you know, I suppose there would be the broader catch basket of lifestyle program --

16292   COMMISSIONER PENTEFOUNTAS: Okay.

16293   MR. KNIGHT: -- or lifestyle channels.

16294   COMMISSIONER PENTEFOUNTAS: And you do realize that your model, as you've laid it out, would allow one VI to link with another VI's comparable service, thereby excluding an independent service potentially.

16295   MR. KNIGHT: Yeah. We probably should have taken the extra step of saying that it would -- we were speaking on behalf of the independent broadcast community and probably should have taken it -- of suggesting that it has to be an independent service.

16296   COMMISSIONER PENTEFOUNTAS: So do you want to go back to our proposal, which is two VI services, all of them together, linked with one independent, and maybe come back to us with an opinion, if that is appropriate, in terms of a linkage rule? And you've got until Friday.

16297   MR. PRASUHN: I think we could do that. But, again, our -- or it's a -- yeah, fair enough, we can answer the question there, and come back to you on that.

16298   But we do believe that, again, the real issue is giving Canadians choice, and, as I think IBG said in their written submission, the -- you know, the days when we needed to have a small number of gatekeepers essentially vetting which channels Canadians could choose or not, with the technology we have now, and the objectives behind -- that propelled, I think, this hearing being called in part, it's really time to look at that as a larger overall principle and find another way.

16299   COMMISSIONER PENTEFOUNTAS: So tell us how the 2:1 linkage rules don't offer Canadians choice, if that's your position. How about that?

16300   MR. PRASUHN: I think there's two -- well, two components. It limits the -- or limits or makes impossible new entry, and it -- as Chris said in his remarks, the -- it gives, essentially, again, a small number of gatekeepers the ability to strategically pick and choose which channels don't compete with the ones that they don't want to have competition with, potentially.

16301   COMMISSIONER PENTEFOUNTAS: Okay, but your enhanced linkage doesn't allow any different treatment for independents, as opposed to VIs.

16302   It's just my reading of it, and maybe we'll take another look at that.

16303   MR. PRASUHN: We'll come back on Friday and try to clarify and do a little more --

16304   COMMISSIONER PENTEFOUNTAS: And see whether you're ahead with your enhanced linkage proposal.

16305   Thank you.

Engagement

16306   THE CHAIRPERSON: Just to build on your comparable model, that's fine for lifestyle, but if you look into kids and all the other categories, doesn't it globally provide a must-offer status to the independents?

16307   MR. PRASUHN: Must-offer. Well, it's up to --

16308   THE CHAIRPERSON: Because all --

16309   MR. PRASUHN: Yeah, yeah.

16310   THE CHAIRPERSON: -- all the VI have -- cover pretty much the entire field of broad categories of programming services, right? Would you agree with that?

16311   MR. PRASUHN: I would agree, but they package them in different ways.

16312   THE CHAIRPERSON: Sure.

16313   MR. PRASUHN: So they could choose to package comparable channels in a small, you know, four-channel tier, or a larger tier that's more broadly defined, or enhanced basic, or any other number of options.

16314   THE CHAIRPERSON: It just seems to me, if you take it to the extreme, and you do that for everyone, you end up pretty much the equivalent. Maybe I'm wrong.

16315   Wouldn't you agree with me that it pretty much gives carriage rights to all the independents?

16316   MR. PRASUHN: Well, no, I think it's going to vary by BDU. It's not the same -- in our mind, it's not the same as, say, the OUTtv proposal of a very big basic, where everybody comes in at a low rate but gets the option of basic. I think that model, by the way, is an interesting one, too.

16317   Again, we think there's a range of models that have been presented and should be considered, so we're not saying we have the answer on that. But we think, when you get through the mechanics, at the end of the day what really matters is the outcome and did Canadians get the opportunity to choose amongst reasonable quality, comparable channels or did they not? And if they didn't, then we think it's not as it should be.

16318   THE CHAIRPERSON: Okay.

16319   Well, there'll be chances in the final submissions to comment on one of the sub-issues in this hearing -- it may be more than a sub-issue -- one of the large issues about independents, and how to ensure some level of diversity in the system.

16320   So thank you, gentlemen.

16321   It's 3:03. Why don't we take a break till 3:15.

16322   Thank you.

--- Suspension à 1503

--- Reprise à 1516

16323   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

16324   Madame la Secrétaire.

16325   LA SECRÉTAIRE : Merci.

16326   We will now hear the presentation of Dr. Gregory Taylor.

16327   You may begin. You have 10 minutes for your presentation.

16328   Please open your microphone.

16329   MR. TAYLOR: Oh, sorry.

16330   THE SECRETARY: The big button. Yes, right there.

16331   MR. TAYLOR: I believe I am on now.

16332   THE SECRETARY: Yes.

PRÉSENTATION

16333   MR. TAYLOR: Thank you.

16334   Chairman Blais and Commissioners, I would like to thank the CRTC for the opportunity to speak today. I believe a wide-ranging public discussion is necessary at this crucial juncture in Canadian communication and to me this hearing reinforces why we need public regulators.

16335   My name is Gregory Taylor and I work at Ryerson University in Toronto, and I am also the author of "Shut Off: the Canadian Digital Television Transition."

16336   I spent years studying Canada's transition to digital television and I'm not at all surprised that we are still coming to grips with the regulatory challenges posed by this conversion. When I finished writing my book, Netflix had only been in Canada a few months and it was already clear the ground was shaking beneath the broadcasters' feet. Some of the current uncertainty is the result of technological and economic upheaval, but much is also the product of a profound industrial inertia.

16337   Conventional broadcasters are justifiably nervous, noting a multiyear drop in revenues, and there is no doubt the Internet and over-the-top services will continue to cut into their traditional market share. However, the numbers from sources such as the Communication Monitoring Report from the CRTC and other sources such as Canadian Media Research are clear that there is still life in living room TV. Linear television viewing numbers have remained remarkably consistent given the proliferation of options. In fact, previous to my presentation today, DHX said that by far their largest audience comes from the linear television viewers.

16338   One can see from the hundreds, perhaps thousands of submissions for this hearing, that over-the-air conventional television is by no means dead in this country. I was disappointed last week to hear from people appointed to oversee our public broadcaster that they seem to be ready to abandon conventional television altogether.

16339   Indeed, I come to praise and resuscitate over-the-air television, not to bury it. Before we pull the national plug on this foundational sector, that until 10 years ago was referenced in this room as "the cornerstone" of the system, let's give it a proper chance to make a contribution. Simply put, Canadians have never seen the true capabilities of digital over-the-air television. Canada has continued to approach the OTA sector from a 20th century perspective, when 21st century digital over-the-air can be so much more.

16340   The ATSC standard chosen by Canada as its national standard in the late 1990s was originally developed and adopted in the United States because of its strong over-the-air signal and the potential to broadcast multiple stations on one 6MHz channel. In the United States today it is doing just that. I have spoken on this issue in many places in Canada and I like to invite the audience to find a United States city of similar size to theirs and search that city name and "over-the-air TV" on the Internet. They are always shocked to discover how many stations are available in the United States. Admittedly, many of those substations are inexpensive retro TV and weather channels, but that also describes a number of current Canadian cable channels.

16341   The inexpensive and accessible nature of over-the-air sub-channels can open the door to new ownership regimes in Canada. This is what I propose today. There is clear precedent currently happening south of the border. An over-the-air resurgence is a growing phenomenon in the U.S. and is proving beneficial for marginalized communities. The National Association of Broadcasters reported in 2013 that:

"The number of African-American households depending solely on broadcast TV delivered over-the-air increased to 22 percent in 2013 (up from 12 percent in 2010)."

16342   A 10-percent jump in just three years.

16343   Of those that switched from cable to over-the-air, 70 percent claimed that cost was the factor. Clearly, to discontinue over-the-air broadcasts in America would disenfranchise the poor. This fact reinforces the historic root of over-the-air's place in the greater democratic goals of mass media: it is accessible to all and not just those who can afford to buy a subscription.

16344   Growth in over-the-air viewership among African Americans has coincided with an expansion of African American broadcasters in the United States. Bounce TV and the Soul of the South Network are examples of new independent broadcasters that have seen substantial growth broadcasting solely on sub-channels offered by licensed over-the-air broadcasters. These independent stations have rapidly expanded and are now available in cities across the United States. This is precisely what the ATSC standard was designed to do. With the notable exception of Southshore Broadcasting in Leamington, Ontario, the multicasting option remains underexplored in Canada.

16345   In Canadian broadcasting, we have traditionally compared ourselves to the United States and the U.K. for points of comparison. In the U.K. recent data indicates that living room television viewership is going up, not down, despite the proliferation of wireless services. The U.K.'s Digital Communication Infrastructure Strategy that just came out last month does not anticipate any shutoff of over-the-air signals previous to 2030.

16346   So such calls for over-the-air shutdown from major broadcasters in Canada are, I argue, premature. I don't believe it is an enormous expense to expand over-the-air to incorporate multicasting. Tony Vidal of Southshore Broadcasting in Leamington, Ontario, is the only broadcaster I know in Canada using a four-signal multicast for his over-the-air signal. He recently told me he completed this transition for under $70,000. Of course this is a low-power station, but this is also a broadcaster whose financial resources are considerably less powerful as well. So what I'm proposing here today I believe is financially feasible.

16347   Under correct policy guidance, Canada can create a more vibrant OTA sector via multicasting which could assist in maximizing choice, instead of trapping the public into BDU contracts with little viable alternatives. Using sub-channels as avenues for new broadcasters as per the American model, Canada could introduce a wider variety of non-vertically integrated programming sources. Canada already has independent OTA broadcasters such as CHEK-TV in Victoria and CHCH in Hamilton. Allowing access to less expensive over-the-air sub-channels could encourage new players in the market.

16348   Most urban centres in Canada have access to OTA channels and new ones have been added even outside of the mandatory markets in communities such as Kingston, Ontario. We have a generation of urban cord-nevers who are about to hit adulthood and they will not buy a cable package no matter how skinny the basic. This is a market that should prove attractive to some advertisers. Of course advertising revenues are going to be much lesser for broadcasters than historic levels, but we live in an era when on-site satellite trucks can be replaced with a reporter with a smartphone and a solid data plan. And by the way, that line was given to me by someone who works in the industry recently. Production costs are not nearly what they were.

16349   I propose that Canada harness the true potential of digital over-the-air and put measures in place to encourage multicasting signals. So, at a hearing where powerful Canadian broadcasters recommend the end of over-the-air service, I am requesting the opposite. What I envision is the OTA equivalent of the "use it or lose it" clause that has been introduced for wireless broadband spectrum. As a condition of licence, 6MHz licence holders should make efforts to find broadcasters for the sub-channels in their multicast signals. Again, I do not believe this would be an expensive proposition.

16350   Of course there will be resistance. When the cable and satellite providers also own the conventional stations, no positive change is likely to happen without a regulatory push.

16351   So, why we should continue and expand over-the-air? A few reasons:

16352   - first, there is clear data demonstrating the continued viewership of traditional television is still consistent in Canada;

16353   - it would limit the already disproportionate power of BDUs within the Canadian system;

16354   - Internet architecture has not yet matured to the point where it can replace over-the-air, which has no data cap;

16355   - Canadian over-the-air has never actually utilized the true potentials of over-the-air via multicasting; and

16356   - I've also mentioned questions about disenfranchising certain elements of the population.

16357   So quite simply, what have we got to lose? As Commissioner Pentefountas said to TVA last week, if broadcasters are not happy with it, they can simply give back their licence. I would think that there might be other takers for access to 6MHz of prime spectrum, who may bring a new vibrancy to Canadian broadcasting.

16358   If this strategy does work, we will introduce a new local programming option and expand broadcasting diversity. If not, it requires a minimal investment and we will know within a few years if the era of over-the-air TV is indeed over.

16359   I thank you for your time.

16360   THE CHAIRPERSON: Thank you very much, Dr. Taylor. Commissioner Dupras will start off the questions.

16361   COMMISSIONER DUPRAS: Thank you.

16362   Could you talk more about the quality of these sub-channels technically? Are you aware if -- can you have for instance HD signals on such channels?

16363   MR. TAYLOR: Yes. Under current compression technology as I know it, you can do one high definition channel and up to two standard definition channels. You can also do -- I thought it was three but apparently there's now up to four standard definition channels if you so choose. And again, I say that recognizing that compression technologies are open to change. But I can say right now that the broadcaster I cited in Leamington, Ontario, has four channels on his multicast signal.

16364   COMMISSIONER DUPRAS: And the over-the-air broadcasters that operate undertakings today have all gone digital and I think you can get the signal in HD?

16365   MR. TAYLOR: Yes.

16366   COMMISSIONER DUPRAS: So that would leave for those frequencies only two channels and they would be standard definition?

16367   MR. TAYLOR: As I understand the compression technologies, yes. Right now that would leave room for two standard definition channels as sub-channels on a 6MHz licence.

16368   COMMISSIONER DUPRAS: And would that quality be of value to those you think would be interested in them?

16369   MR. TAYLOR: I think that yes, that you would find that a lot of channels would be interested even at the standard definition level. There are a lot of cable channels that are still not available in high definition and so I think that especially for some of the smaller broadcasters who might be interested in becoming part of a package like this, I think that standard definition would still be very appealing. And as I said, compression technologies change. Those could be upgraded to high definition in the not too distant future.

16370   COMMISSIONER DUPRAS: And have you heard if doing so, using sub-channels, has an impact on the main signal? I've heard that there might be some signal degradation of the main signal by using the sub-channels. Is that something you've heard?

16371   MR. TAYLOR: I have spoken to technicians when I was writing my book and I did not hear that there was damage done to the main signal. So I believe that as long -- you cannot do three high definition signals right now, but from what I gather, and I've spoken to those who work in the technical field, that this is very much doable and is happening in the United States.

16372   COMMISSIONER DUPRAS: Okay. I think you said that this would not be a very costly proposition to do such channels. What type of programming do you see on such channels?

16373   MR. TAYLOR: Well, that's the big question mark, is that this requires a bit of a leap of faith and that's what I'm proposing here, is that we allow the opportunity to see what happens.

16374   What came to mind when I was coming up with this talk was that the FCC in the 1980s took a sliver of spectrum and set it aside for development. That spectrum became Wi-Fi, the spectrum that's used for Wi-Fi access. They did not know that at the time. They set the space aside. They allowed time to see what would develop.

16375   That's basically what I'm requesting here, is that this could become a community channel, it could allow space for new broadcasters who do not have deep pockets to enter in. The other thought that came to mind was that perhaps this could be a promotional vehicle for some of the hundreds of Category B channels that are trying to get exposure right now. What if we had something like a rotating schedule where some of them got access to the over-the-air frequency in the market to promote their channel that cannot otherwise ever be found?

16376   There are a lot of options on how we could use this, I think. So I think basically what we have to do is, in my proposal, try it and if it doesn't work I don't see it as an enormous gamble.

16377   But I think we're also hearing from a lot of Canadians that they do not want over-the-air cancelled and I think that this gives us a chance to expand what is being offered without necessarily damaging the premium product that are available on cable as well.

16378   COMMISSIONER DUPRAS: Okay. Thank you.

16379   THE CHAIRPERSON: Mr. Vice-Chair.

16380   COMMISSIONER PENTEFOUNTAS: Just briefly. On the spectrum and the potential use of that spectrum for other purposes, we've heard some noise from south of the border and I'm sure you're aware, but just sort of your feeling and sentiment on that spectrum and the possibility that it may be required for other uses in the near term.

16381   MR. TAYLOR: I would assume that you are referencing the incentive auctions going on in the United States right now where broadcasters are being asked to consider turning in their licence for it to be sold for mobile broadband access.

16382   COMMISSIONER PENTEFOUNTAS: You assume correctly, sir.

16383   MR. TAYLOR: Okay. This has been a very controversial move in the United States and they're still not sure -- because the broadcasters don't have to go on public record -- as to how many broadcasters are actually going to come out and be part of this. So there are still enormous question marks hanging over that.

16384   I don't doubt that perhaps a few years down the line Canada might have to consider something like that but I just don't think we're there yet, not by a long stretch.

16385   And I don't think that we've actually used this part of the broadcasting system as well as we should. And right now, in essence, they're squatting on those 6MHz. This is a terribly inefficient use of spectrum and if it is truly that valuable and it is a public resource, I think that it's not too much to ask that the Canadian public get maximum value in return.

16386   COMMISSIONER PENTEFOUNTAS: Okay. Thank you, Mr. Chairman.

16387   THE CHAIRPERSON: Would those sub-channels get carriage on BDUs, must carry, even on a skinny basic?

16388   MR. TAYLOR: I would suspect not. Given how volatile that area is around here, I don't think necessarily that they would have to get mandatory carriage. This is something that would be more of a local, a very local thing. In fact, I'm wondering if this could be -- if there's a strong argument against skinny basic, is this another option?

16389   If we have, say, for example, six to eight local channels, as you might have in Toronto or Montreal, if they multiplex their signals and suddenly now we've got 15 to 20, instead of a skinny basic, what if that over-the-air signal is available to all in that area? And this is true in most major urban centres of Canada right now. We did not do a full digital transition but the major urban centres did.

16390   And so I think that -- it's my view in this strategy I'm proposing that no, these would not be part of a skinny basic package. They may in fact be instead of a skinny basic package. They would be accessible to absolutely all citizens in that area with a simple antenna.

16391   THE CHAIRPERSON: But the economic model then becomes even more challenging because they would have to rely entirely on their ad revenue of people they can reach over-the-air.

16392   MR. TAYLOR: I recognize that this is not going to be as well funded as some of the major broadcasters that we have right now. I'm under no illusions that way.

16393   But I also think that this is an area that's actually growing and that it might have some of those less expensive local commercials that we all found somewhat charming 20 and 30 years ago. But I think that there will be some sort of an audience. Especially younger people who don't want to subscribe to cable may find this appealing and then advertisers will follow.

16394   And so, again, I recognize that this is not an exact science I'm promoting right here, but I also don't think it's an enormous gamble either.

16395   THE CHAIRPERSON: Understood.

16396   Now, correct me if your count is different, but by my count I only -- I think the number of representatives of academia in this proceeding probably can be counted on the fingers of one hand. Other than yourself, there may be two other PhD students and a few more. Where is academia in this proceeding, the people that might help us understand and discover the public interest that don't come to the table with private or individual interests?

16397   MR. TAYLOR: Do you mind if I use that as the foreword for my next book?

--- Rires

16398   MR. TAYLOR: I think actually that, Chairman Blais, I can't answer that. I do believe that this --

16399   THE CHAIRPERSON: They're obviously interested. They're on the margins of the hearing commenting on blogs in the Twittersphere.

16400   MR. TAYLOR: Yes, they're out there and they're commenting. I think a lot are teaching today perhaps. I can't speak on behalf of my colleagues but I certainly think that -- I don't know. I would have to speak on behalf of others for that and I can't tell you where they are right now.

16401   THE CHAIRPERSON: All right.

16402   MR. TAYLOR: I'm here.

16403   THE CHAIRPERSON: And we appreciate that you are here and bringing a different perspective to the hearing. Thank you very much.

16404   Oh, wait a minute, one question. I'm sorry, I didn't realize.

16405   MR. TAYLOR: Yes.

16406   COMMISSIONER SIMPSON: Jus one tag-on question. Digital white space --

16407   MR. TAYLOR: Yes.

16408   COMMISSIONER SIMPSON: -- is it a compatible or a complementary strategy to what you're talking about?

16409   MR. TAYLOR: It is complicated and a very good question. The white space being the channels that are not in use that are available.

16410   COMMISSIONER SIMPSON: Yes.

16411   MR. TAYLOR: Is it complementary? I would say no, because given what I'm proposing there's already a broadcaster putting a signal out there. If we are just to open the unlicensed TV frequencies, which I think is a really good idea, then somebody has to build a full transmitter. I'm thinking this as piggybacking on what already exists to enhance that part of the greater system.

16412   COMMISSIONER SIMPSON: But given -- I heard what you said, but given the need for television to go mobile, is there an application for white space with respect to mobile carriage?

16413   MR. TAYLOR: I didn't even bring up the mobile side of it, but yes, you're right. The other option which I didn't want to get into, because it's a whole other area, today and I only had 10 minutes, but over-the-air can also then be geared toward being picked up --

16414   COMMISSIONER SIMPSON: Right.

16415   MR. TAYLOR: -- by a mobile device. Canada has not explored that avenue either. There are whole areas of over-the-air that remain woefully underexplored in Canada.

16416   So if you wanted to consider developing that route as well, I think that's an excellent idea but it's one that's very much in the test phase in Canada. We don't have that happening, to my knowledge, anywhere, but I do know that at least two broadcasters have done tests on it. But Canada does not have that.

16417   COMMISSIONER SIMPSON: Okay. Thank you.

16418   THE CHAIRPERSON: Thank you, Dr. Taylor.

16419   Madame la Secrétaire.

16420   THE SECRETARY: Thank you.

16421   I will now ask the Canadian Media Guild to come to the presentation table.

--- Pause

16422   THE CHAIRPERSON: Welcome. When you are ready, please go ahead. But you have to press your little button so the light comes on. Thanks.

PRÉSENTATION

16423   MS SMYTH: Sorry, my apologies.

16424   Good afternoon. Bonjour. Mr. Chair, Commissioners, thank you for the opportunity to appear today. My name is Carmel Smyth and I'm the National President of the Canadian Media Guild.

16425   My colleague Marc-Philippe Laurin is the CMG President at CBC/Radio-Canada and Jeanne d'Arc Umurungi is CMG's Communications Director.

16426   We are a union that represent workers that work in the media. CMG represents 6,000 media workers. Our members work at CBC/Radio-Canada, TVO, TFO, Aboriginal Peoples Television, Shaw Media, ZoomerMedia, CKOI Radio here in Gatineau, as well as the Canadian Press, Thomson Reuters, Agence France Presse and MBS Radio. We also represent freelancers.

16427   We are the people who bring you the news and who create original Canadian content every day.

16428   We would like to highlight our three recommendations for the hearing and then give a brief response to some of the proposals in the Commission's Working Document.

16429   My colleague Marc-Philippe Laurin will speak to our first recommendation for establishing a Public Service Media Fund.

16430   M. LAURIN : Bonjour, Monsieur le Président et Conseillers, staff.

16431   À la Guilde, nous croyons que cette audience offre l'occasion de voir comment rétablir l'équilibre dans notre système, surtout pour ce qui est de l'aspect médias de service public et du rôle important qu'ils doivent continuer de jouer dans notre système de radiodiffusion sur toutes les plateformes.

16432   Nous avons donc, d'un côté, les médias de service public -- qui sont gravement sous-financés, alors qu'ils jouent un rôle essentiel pour la bonne santé de notre système télévisuel, de notre démocratie et du point de vue citoyen -- et de l'autre côté, nous avons diverses sources de revenus en croissance et qui ne contribuent pas encore au système à la hauteur de ce que les sociétés concernées en retirent pour l'ensemble de leurs activités.

16433   Autrement dit, les revenus sont en déclin du côté des médias du service public. Il suffit de regarder, par exemple, les lourdes compressions à Radio-Canada/CBC et le recul des revenus publicitaires. Or, CBC/Radio-Canada joue un rôle unique et essentiel dans notre système de radiodiffusion en sa qualité de diffuseur public national.

16434   En même temps, il y a un aspect du système qui est en croissance grâce au fait que nous sommes de plus en plus nombreux à payer des montants de plus en plus considérables aux entreprises comme Bell, Rogers, Shaw, Québecor, TELUS, pour télécharger les vidéos et les émissions en ligne et regarder des émissions sur nos téléphones et d'autres appareils numériques.

16435   C'est pour cela que la Guilde a recommandé, dans l'intérêt du public, que le CRTC établisse un Fonds destiné aux médias du service public, conçu pour renforcer ces médias qui sont si importants dans notre système médiatique. Je pense à Radio-Canada, aux réseaux provinciaux comme TVO et TFO, au Réseau de télévision des peuples autochtone (APTN) et aux télévisions communautaires et indépendantes.

16436   Ces médias du service public auraient accès au Fonds que nous proposons pour des émissions comme les nouvelles, la programmation locale, les émissions dans les langues en situation minoritaire ou pour la création de contenu canadien novateur, représentant une grande diversité sur diverses plateformes.

16437   Le Fonds serait financé au moyen d'un pourcentage des revenus des plus grandes entreprises de câble et de satellite/fournisseurs de services Internet. Ce serait leur contribution à la santé du système auquel ils participent de plus en plus comme distributeurs de contenu et dont ils tirent d'importants profits.

16438   Carmel.

16439   MS SMYTH: Thank you, Marc.

16440   We also recommend -- again, in the public interest -- that robust criteria be put in place for national all-news television services in terms of newsgathering capabilities, including bureaus across the country and journalistic standards. We are encouraged to see that the Commission has included a proposal on this issue in the Working Document.

16441   Last year the Canadian Media Guild published a report showing that there has been a loss of 10,000 jobs in the media industry since 2008. These are jobs cut from various areas of the industry, including in reporting and journalism, which impacts the quality of the information that Canadians receive.

16442   The CMG has recommended that the Commission put in place requirements to make sure that the national all-news services, current and future, have a robust foundation so that these services are able to provide actual news, accurate information and reporting that Canadians deserve and expect from a national all-news service. To us, this means investing in newsgathering capabilities, including bureaus across the country and journalistic standards such as the Code of Ethics of the Radio Television Digital News Association of Canada or the CBC journalistic standards and practices. As we mentioned in our submission in response to the Commission's consultation on national all-news channels, we know these standards emphasize the importance of providing a diversity and range of opinions in the work that reporters do.

16443   On free television, we also recommended in our submission that the Commission keep the remaining transmitters in the system mainly for accessibility reasons. We believe that Canadians who need to must continue to have access to local television services, including news and other programming, without having to pay a subscription to companies such as Bell, Rogers, Québecor. We know that many people who use antennas to access television services cannot afford the cable fees. We also know that many of them have responded to the Commission's proposal to stop this service and we support them in saying that it's important to maintain free television for Canadians who rely on it.

16444   And now, my colleague Jeanne d'Arc Umurungi.

16445   MME UMURUNGI : Bonjour, Monsieur le Président et Conseillers.

16446   I will just highlight CMG's response to some of the areas you have focused on in your Working Document and then we will take your questions.

16447   Carmel just spoke about free television. So, on that issue we believe the Commission should be careful not to appear to be delivering to cable and satellite companies the numerous Canadians who still rely on free television services over-the-air. We believe shutting down all transmitters would mean the end of accessibility to television for many Canadians and in other cases it would lead many of us to receive only American television.

16448   On the proposal for a basic offering, if the Commission were to go ahead with shutting down transmitters -- which we oppose -- CMG recommends still that there be one basic package made up of local stations, 9(1)(h) services and public service media.

16449   At the same time we urge the CRTC to look for ways to strengthen the basic package, for example, by ensuring that unique services such as Aboriginal Peoples Television Network (APTN), ICI RDI and CBCNN maintain their must-carry status where they currently have it and not be transformed into discretionary services. We also urge the Commission to commit to supporting other important, deserving must-carry applications for inclusion in the basic.

16450   We believe that this basic should be free in order to address the accessibility problems we have mentioned and to maintain free television option for Canadians.

16451   We are also proposing that another tier of basic be offered to Canadians. We are calling it the "All-Canadian Basic" tier. We propose that it include public service media, for example, CBC/Radio-Canada, provincial/educational broadcasters, APTN, perhaps weather, community television and other services that we think the CRTC could examine. This Canadian basic should be affordable.

16452   About all-news services, Carmel just spoke about it. We commend the Commission for looking at ways to strengthen national all-news services as part of this proceeding. Beyond the Commission's proposed criteria, including 16 hours per day of original news coverage seven days a week, we want to emphasize again that investments in newsgathering capabilities, including bureaus across the country and journalistic standards will ensure that these all-news services meet the needs and expectations of Canadians for information and news.

16453   On pick-and-pay, we recognize the efforts of the CRTC to be responsive to Canadians' concerns around cost and choice. At the same time, we believe that the future of television in Canada is also about the future of Canadian programming and of the Canadian television industry. CMG urges the CRTC to consider Canadians' needs as citizens who need to have access to programming, be that news, current affairs, dramas, entertainment and other programming made by Canadians for Canadians.

16454   On revenue, we believe that there are funding problems for Canadian programming and that they will be made worse by the proposal to eliminate simultaneous substitution. We believe this proposal creates bigger problems than it resolves. Our view is that it should be maintained.

16455   As we mentioned earlier, we in fact think that we should add more revenue to the production of Canadian programming through the Canadian Public Service Media Fund as an additional way to address the revenue challenges facing Canadian programming. We see it, the Fund, our proposed Fund, as a way of helping increase diversity in the system. It could come from a small percentage of gross revenues from the bigger cable, satellite and Internet service providers.

16456   On must-carry, these are services that the Commission in its wisdom has decided need special promotion and protection as a result of the crucial contributions they make to our broadcasting system. We are very supportive of everything the Commission can do to maintain the unique status -- and not erode it in any way -- of these services that provide much needed diversity and a valued reflection of Canadian society. These include the award-winning Aboriginal Peoples Television Network as well as all-news channels CBCNN in Quebec and ICI RDI outside Quebec.

16457   Je passe la parole à mon collègue Marc-Philippe.

16458   MR. LAURIN: A lot of the conversation in the last week and a half, if you will bear with me, has been about Canadians as consumers, but we are encouraged to see on the Commission's own website that it's our identity as citizens that is central to your engagement with us. Let me quote. It's from the document called "It's Your CRTC" and it says:

"We work closely with citizens, broadcasters, service providers, small businesses, and others. We perform a wide range of activities..."

16459   Nowhere in here does it talk about consumers and we're really encourages to see that because from our perspective we believe that this whole proceeding and public television and television and the whole industry in Canada should be serving Canadians as citizens and it's a priority for us for a healthy and balanced broadcasting system. This is why we urge you to continue supporting public service media, including the services in the 9(1)(h) category, and public broadcasting.

16460   Carmel.

16461   MS SMYTH: So in conclusion (off microphone). Oh, I'm sorry, you would think I would know, being in the business.

16462   In conclusion, we are asking --

16463   THE CHAIRPERSON: If microphones are turning you off, I'm not sure what the future is. But I know, you're not the only one.

16464   MS SMYTH: That's right.

16465   THE CHAIRPERSON: Please conclude.

16466   MS SMYTH: So we are asking you to find ways to ensure that there is funding to create original, compelling Canadian content and that it continues to be produced and distributed as widely as possible, ensuring that future generations of Canadians can take the same pride in our television and film broadcast industry as all of us here in this room do. You the Commission have a once in a lifetime opportunity now to leave a wonderful legacy, a legacy of a balanced, thriving industry that serves both consumers and showcases Canadians and Canadian talent.

16467   Thank you for letting us appear and we're happy to take questions.

16468   THE CHAIRPERSON: Thank you very much. I will be very grateful to the person who invents a remote-controlled microphone to turn on and off as we go through these hearings. You're not the only ones who --

16469   MS SMYTH: Yes.

16470   THE CHAIRPERSON: I know it is a bit nerve-wracking to be there.

16471   MS SMYTH: Yes.

16472   THE CHAIRPERSON: Commissioner Molnar will start off with the questions.

16473   COMMISSIONER MOLNAR: Thank you.

16474   Let's start with your request for a Public Service Media Fund. You mentioned that you represent the folks who make local news and we know from information we gathered going into this proceeding that local news and information is very important to our citizens.

16475   What you have proposed here, just to confirm, is only for public service organizations. So you don't see this as a means to support the production of local news and information by any kind of commercial enterprises?

16476   MS UMURUNGI: We don't mind if it does that. We have in fact asked for a fund previously that would have supported local programming, including local news from any format, private or public. But we are focused today -- because of the challenges facing public media particularly, public service media particularly, we are focusing on that, but we are thinking of all platforms as well in our fund. We are thinking that it would support public service media across the country but also anything online. Any new, innovative content created by Canadians, these people could access that fund in order to create content on those platforms as well, anything that would help meet the objectives of this hearing in terms of Canadian content, Canadian programming.

16477   But if the CRTC were to look at this issue and found that somehow this fund could also help support the local programming of private news, I think it's something that would be important and interesting as well and worthwhile.

16478   COMMISSIONER MOLNAR: Do you have a sense as to the size of fund that you would require?

16479   MR. LAURIN: Last year, at a previous hearing we had suggested 0.75 percent. If we look at the revenues of the -- the gross revenues of --

16480   COMMISSIONER MOLNAR: But I'm not asking how you get the money, I'm asking you how much money you think you require. I will ask about the other one but let's start with --

16481   MR. LAURIN: You know, I think that's a good question. We haven't investigated that deeply. We do take the experience of the LPIF Fund, the Local Program Improvement Fund that existed prior. We looked at the money that was in that Fund.

16482   We're looking -- and I'll answer the next question now. We were going to suggest 1 percent of gross BDUs would create a fund in the area of just under $500 million for public service, for local news programming, which Canadians, as you have said, have clearly indicated is important to them.

16483   COMMISSIONER MOLNAR: Respectfully, isn't it a little backwards for you to come here and say, if it's 1 percent, we have $500 million, versus to achieve what is necessary to serve Canadians? You know, wouldn't you sort out what you need and what is the gap instead of saying, well, we'll take $500 million?

16484   MR. LAURIN: You are absolutely right. It's a little backwards. Unfortunately, without a clear survey of what the potential out there is, it's difficult to establish what kind of an amount. So if we're asked what would we be looking at, I think we see this as a fund that could start, that could help and over the time --

16485   COMMISSIONER MOLNAR: So potentially it's more than $500 million?

16486   MR. LAURIN: No, no. Potentially, it could be less. But we would have to figure out and we would, you know, hope that the Commission when it looks or considers this that it tries to figure out what a fund like this would represent and what would be needed. I mean obviously CBC is spread out across the country, Radio-Canada is spread out across the country. It's in dire need of public service funds. TV Ontario just had --

16487   COMMISSIONER MOLNAR: So can I ask you?

16488   MR. LAURIN: Yes.

16489   COMMISSIONER MOLNAR: CBC came here requesting a fund to support local service. Are you requesting something different or are you requesting the same thing?

16490   MR. LAURIN: I'm not --

16491   MS UMURUNGI: Our fund is different. It's the Public Service Media Fund for all public -- so it's CBC plus TVO, let's say, TFO --

16492   MR. LAURIN: Knowledge.

16493   MS UMURUNGI: -- Knowledge, Télé-Québec. We are also very importantly, I think, in our fund speaking about not just the existing broadcasters, we're also speaking about online, all these growing areas because we want the fund to come from activities that BDUs have online right now that are sort of growing in terms of the revenue that they generate. So we're thinking --

16494   COMMISSIONER MOLNAR: Have you done any work to determine whether or not this Commission is capable of assessing any kind of obligation on ISPs?

16495   MS SMYTH: I think our basic suggestion --

16496   COMMISSIONER MOLNAR: Just yes or no, whether or not you have done it.

16497   MS SMYTH: No, we haven't done any research and I would say --

16498   COMMISSIONER MOLNAR: Would you undertake to just do a little bit of research to determine --

16499   MS SMYTH: Yes.

16500   COMMISSIONER MOLNAR: -- what has been considered in this area?

16501   MS SMYTH: We are happy to do an undertaking and we can have it in by the 19th.

Engagement

16502   COMMISSIONER MOLNAR: Thank you.

16503   MS SMYTH: But can I add our interest in just in promoting the creation of original Canadian content which needs a lot of assistance. So a various range of programming, a various range of companies may have an interest in accessing that money. We are looking to the CRTC to champion that and find ways. I admit we haven't fleshed it out. We are not the brains running this organization. We know that you have the people and resources to come up with that kind of a plan.

16504   COMMISSIONER MOLNAR: But you haven't either defined the need. That's my point. I mean all you said is here is a way of getting money. You have not defined the need.

16505   MS UMURUNGI: Sorry, the need is that public -- right now there's one area in the system, which is public service media, that's really under a lot -- that's underfunded, that's under a lot of revenue stress. We know CBC, we know the cuts at CBC, we know the --

16506   COMMISSIONER MOLNAR: Have you done a quantitative assessment of the need?

16507   MS SMYTH: No, we have not.

16508   COMMISSIONER MOLNAR: Okay. Thank you.

16509   MS UMURUNGI: But we know the cuts that have been going on, including in provincial broadcasting, educational broadcasting. We also know that the advertising revenue is down. On the other side, we know that the BDUs and the different activities the ISPs online have now a bit more revenue that's coming from there that is also -- that involves broadcasting.

16510   COMMISSIONER MOLNAR: Okay. I understand your position.

16511   MS UMURUNGI: Yeah.

16512   COMMISSIONER MOLNAR: Can we go forward onto another of your positions?

16513   MS UMURUNGI: Absolutely.

16514   COMMISSIONER MOLNAR: I didn't understand actually your position as it regards the national news services. So have you seen what's proposed in the Working Document?

16515   MS SMYTH: Yes, we have.

16516   MS UMURUNGI: Yes.

16517   COMMISSIONER MOLNAR: And do you think that's sufficient? I wasn't clear with what you were saying regarding the journalistic standards. Are you concerned that they're not there?

16518   MS SMYTH: No. We are happy to see it in your proposal. There isn't enough detail for us to know how it would work. We would just like to see some kind of criteria that everyone would follow to have a level playing field when the regulations would be in place if it is accepted.

16519   COMMISSIONER MOLNAR: Okay. Thank you. Let's go on to your proposal as it regards basic. First of all, just to clarify, are you concerned that there is something in the Working Document or the discussions that have gone on here that would put at risk those services which have been defined as 9(1)(h) today?

16520   MS UMURUNGI: Yes, we are. We think that if services like APTN were to become -- that if their must-carry status were to be in any way not that stable -- APTN will always need some kind of regulatory support, because the kind of service that it provides does not -- you know, we don't have a lot of people that are served by it.

16521   But, at the same time, APTN is also a very important tool for the balance of our broadcasting system.

16522   COMMISSIONER MOLNAR: So they do have 9(1)(h).

16523   MS UMURUNGI: They do have now, but the proposal is that, maybe, they would have to apply -- it could be jeopardized down the road, and they would have to reapply every time.

16524   COMMISSIONER MOLNAR: The process we have for 9(1)(h) today -- and it is not proposed to be changed at all through this -- is that, yes, at the end of their licence term they would need to justify the continued need.

16525   And you think that is inappropriate? You think that somebody should be guaranteed service forever?

16526   MS UMURUNGI: Our emphasis is that APTN, CBC in Quebec, and RDI in the rest of Canada, for example, are services that right now should be considered for long-term, mass-carry status.

16527   That is what we are proposing. That is what we would like to see.

16528   COMMISSIONER MOLNAR: Okay, thanks.

16529   Just as a last thing, you want a very small basic that, you believe, should be free.

16530   I assume you are saying that it is free to citizens, because they are not consumers, they are not paying anything.

16531   MS UMURUNGI: Correct.

16532   COMMISSIONER MOLNAR: And who pays for that?

16533   I mean, it's not free, there are costs to providing any kind of service, so who is it who pays for that?

16534   MS UMURUNGI: Again, our interest in the balance in the system is that transmitters -- if we stop the way that people are currently receiving free television, we believe that any new model that we set up should have that kind of option, just in the interest of balance, and in terms of responding to the objective of the CRTC in serving Canadians.

16535   We think, for example, that all Canadians should have access to CBC, as they --

16536   COMMISSIONER MOLNAR: I understand what you have proposed, I am just asking who you propose would pay.

16537   MS SMYTH: I think, from some of the discussion we have heard, it is obvious that there is money in the system to provide a service to Canadians who can't afford to pay cable companies. We don't think it is inappropriate to ask cable companies to contribute to that kind of content.

16538   COMMISSIONER MOLNAR: So the cable companies would provide free service. That is what you are proposing?

16539   MS SMYTH: Correct.

16540   MR. LAURIN: If we do away with OTA.

16541   COMMISSIONER MOLNAR: I see.

16542   MR. LAURIN: It should have been clear, but this is tied to OTA. If you do away with OTA, then people who live in rural areas or low-income families who can't afford to buy cable or DTH services would be provided with a free basic service of Canadian programming, Canadian stations, or local stations.

16543   COMMISSIONER MOLNAR: Thank you. Those are my questions.

16544   THE CHAIRPERSON: Who would pay for that?

16545   MR. LAURIN: We would leave that up to you guys to figure out.

16546   It has to do, again, with citizenry and citizenship, right? As citizens we should have access to --

16547   THE CHAIRPERSON: Yes, I get that argument, but we are in a hearing that we announced in June 2013. We have had several phases, and you come to the hearing representing media workers, and you put several proposals on the table and say: Well, this is an idea, but we haven't really explored it in detail, and you, CRTC, figure it out.

16548   That's not how it works. It's your proposal, you have to come with ideas and details.

16549   We have been doing this for two weeks, asking for details.

16550   MR. LAURIN: Yeah. Fair enough.

16551   Again, the basic service that we are talking about, that should be free, is tied to OTA. If over-the-air television disappears, then there would be no accessibility anymore to Canadians.

16552   THE CHAIRPERSON: Why would a local cable system, unrelated to the over-the-air provider who has decided to turn off their signal and go over-the-air, suddenly have to pay for that?

16553   Is that what you are proposing?

16554   MS SMYTH: We think that Canadians, low-income Canadians or Canadians who can't afford it, should have access to basic news and information, in the event of a public health crisis, or an environmental crisis.

16555   It's just a basic service that citizens of a country might expect, and we are hoping that you can lead the way in providing some kind of basic service to all Canadians.

16556   MS UMURUNGI: We think that this proceeding, when it considers balancing all of the different elements, especially the citizens' part, that free television -- if we remove the OTA, we believe that free television becomes -- free basic becomes really, really fundamental.

16557   So we would like to see, within this proceeding, that that aspect of our system is addressed.

16558   THE CHAIRPERSON: All right. Thank you. We will weigh your position with everybody else's.

16559   MS SMYTH: Thank you.

16560   THE CHAIRPERSON: Madam Secretary.

16561   THE SECRETARY: I would now ask The Antenna Guys/The HD Antenna Store to come to the presentation table.

16562   THE CHAIRPERSON: Welcome. Please go ahead when you are ready.

16563   I think you are the first person in this hearing who has brought a prop, which is fascinating. Thank you.

--- Rires

16564   MR. TEBBUTT: A visual aid.

PRÉSENTATION

16565   MR. TEBBUTT: Good afternoon, Mr. Chairman, members, ladies and gentlemen, let's talk TV.

16566   My name is Geoff Tebbutt, and I own a company in southern Ontario called The Antenna Guys.

16567   I wish to address you on behalf of my clients, who have purchased and installed a digital antenna over the last five years.

16568   The title for the Working Document for Discussion, as put forward by the CRTC, is "Choice and Flexibility - A Healthy and Dynamic Retail Market", which is exactly what I am fighting for.

16569   My understanding of a healthy and dynamic retail market includes the ability of a consumer not to use a given service if the price is prohibitive and if a legal, lower-cost option is available. In other words, competition.

16570   I started The Antenna Guys five years go to provide a low-cost solution for Canadians who no longer wished to pay exorbitant monthly cable or satellite bills just to watch TV. With many Canadians being downsized during the last recession, there is less money available for luxuries, like paying to watch TV.

16571   Many of the next generation had already weaned themselves from normal TV shows, preferring to watch their entertainment content through the computer or a gaming device on YouTube or Netflix.

16572   When my 19-year-old nephew lived with me last year, that's how he entertained himself, and many of his friends do the same. Many of the children of my clients do the same.

16573   When Canadians discover that they can watch TV with an indoor or an outdoor antenna, in full HD, for free, many of them are cancelling their cable or satellite subscriptions immediately. For some it takes a little longer, but as the monthly bills rise and the number of channels goes down, my sales go up.

16574   In five years, our website has had over 50,000 hits, without us advertising any more than our name, website and telephone number on the side of our van, and the occasional ad on Kijiji or Craigslist.

16575   In five years, we have installed well in excess of 500 antennas in the following cities: Toronto, Markham, Oshawa, Thornhill, Mississauga, Brampton, Georgetown, Hamilton, Burlington, Oakville, Cambridge, Kitchener, Guelph, Stratford, Woodstock, London, Chatham, Sarnia, Windsor, and numerous other small communities throughout southern Ontario.

16576   We have installed in houses, businesses, dental offices, at Ryerson University, in the Rogers Communications Centre, no less, and recently in four new student housing buildings in Oshawa, in order to lower the students' expenses while in school. Students can barely afford to eat sometimes, much less watch TV.

16577   We also installed one antenna outside of Victoria, B.C., while I was there on a working vacation last fall. In Victoria they receive broadcasts from Vancouver and Seattle.

16578   In cities that are close to the U.S.A., TV antennas allow Canadians to watch high-definition broadcasts, in 1080i, which looks the same as a Blu-Ray, and 5.1 Surround, free from the U.S. and Canada, other than the initial cost of purchasing and installing the antenna.

16579   Now, when I say antenna, most people immediately think of the 10-foot long antennas that you see in the countryside or that used to be on towers attached to many houses 40 years ago.

16580   With improvements in technology, these large antennas are usually only needed in remote areas, more distant from transmitters. We usually install an antenna that is only 14-by-20 inches, and in most areas that antenna is enough.

16581   Sometimes we will go in with an antenna that is twice as big, if we are farther away from transmitters, or have to power through obstacles like trees or buildings.

16582   These antennas are smaller and, I believe, cuter than satellite dishes, or long coax cable strung through your back yards, and front yards, all over.

16583   In Toronto, where most of The Antenna Guys' customers are located, we receive between 18 to 30 channels, from Toronto, Hamilton and Buffalo and area. We watch free broadcast networks such as CBC, CTV, Global, TVO, CITY, OMNI 1, OMNI 2, CHCH, CTS, CTV 2, PBS, NBC, CBS, ABC, FOX, The CW, MyTV, ION, and more.

16584   In addition, many of the U.S. networks broadcast sub-channels, additional programming not available on cable or satellite, programs like documentaries, old TV shows, music videos, newer movies, older movies, weather, kids' shows and more.

16585   When a client installs an antenna, they get to watch these channels free for the rest of their lives.

16586   The alternative, as proposed in the Working Document for Discussion from the CRTC, is to cap rates for basic cable or satellite services at $20, $25 or $30 per month. That is $20 to $30 per month more than my clients are willing to pay, and it will not give them the number of channels they have currently.

16587   We can surmise that the number of channels available for the basic service proposed through the broadcast distribution undertakings will be somewhat less than the average client in a larger city in Canada can receive with a small antenna.

16588   I wish to do the math for you. Twenty dollars per month is $240 per year. That is $6,000 over 25 years.

16589   Twenty-five dollars per month is $300 per year, or $7,500 over 25 years.

16590   And $30 per month is $360 per year, or $9,000 over 25 years.

16591   That is assuming that prices never rise again in the next 25 years.

16592   Compare that to $500 for our most typical installation package in Toronto. That amounts to $20 per year for the next 25 years, or $1.67 per month.

16593   If you had the choice, inferior picture and audio, and less channels, for $20 to $30 per month, or full, uncompressed 1080i picture, 5.1 Surround, and more channels, for $1.67 per month, which would you choose?

16594   Steven Guiton, CBC's vice-president and chief regulatory officer, was quoted as saying television in the 21st century is a cable, satellite or Internet-based service, and that people shouldn't be concerned about the decline of over-the-air service, but rather the affordability of accessing cable and satellite service. We are of the opinion that he's completely mistaken, and, hopefully, no one on this Commission has put credence to his words.

16595   I represent my over 500 installation clients who watch TV with an antenna, who prefer never to pay anything to watch TV again. That is how the television industry started. The networks made money off the companies that advertise the goods and services to the viewing public on their TV channels. But now most broadcast networks in Canada are owned wholly or in part by BDUs, there's now a demand for more money every month to watch these same commercials and programs in order to buy more sports teams, TV networks and sport arena, I'd be willing to bet.

16596   I wish my company could go out and buy things like that, and then ask the government for more money because they spent their entire allowance.

16597   If the income from advertising was not enough for these BDUs to purchase those same networks, then they should divest themselves of those money-losing ventures, instead of asking the Canadian government, through the CRTC, to take money from Canadians' pockets when Canadians cannot or do not wish to afford it. Maybe, in hindsight, the CRTC was mistaken in allowing BDUs to buy these networks if they come out for handouts every few years.

16598   Why do these owners of these networks not embrace this new technology? The cable and satellite companies own many different TV channels that could be broadcast as a subchannel of the main station they already broadcast.

16599   For example, CTV Toronto, channel 9.1, could have TSN, CP24, MuchMusic as subchannels. They're all owned by the parent company. With additional broadcasts available for a growing market segment of antenna users, the BDUs would now have additional income from advertising they did not have before. The money problem's solved.

16600   Even the CBC could add CBC Newsworld, and maybe even a channel of their already produced documentaries, much like PBS in the United States currently does. Allow CBC to advertise on these subchannels and voilà, a new revenue stream for our national broadcaster.

16601   Our national broadcaster, don't even get me started on that topic. I live in London, Ontario -- and I believe it's the tenth largest city in Canada -- where it is now impossible to watch Hockey Night in Canada or Dragons' Den without paying someone. How is that allowed to happen?

16602   Under the heading "LOCAL PROGRAMMING 'A viable local presence'" the first line you wrote is:

"Local stations would be permitted to shut down transmitters."

16603   Mistake. Big mistake. Tens of thousands of Canadians would be affected if this were allowed to take place.

16604   After I appeared on a local radio station last week in Ottawa, a gentleman named Gary Schmidt sent me this message to relay to you, the CRTC. I think he's representative of most Canadians I've encountered, and so I'd like to share his words with you.

16605   He wrote:

"Hi, Geoff, Please raise the following concerns to the CRTC hearing on my behalf if possible. I heard your interview with Rob Snow on CFRA in Ottawa. I'm one of those people who cannot afford cable or satellite services. I use an antenna for over the air TV and have a concern as to what would happen in the event of a large-scale emergency or evacuation if the emergency broadcast system is no longer broadcast over the air through transmitters in my local area? This is a real concern of mine. Thank you for advocating on behalf of people receiving TV over the air through transmitters.
Gary Schmidt
Ottawa, Ontario"

16606   Thanks, Gary, for bringing up that very important point, since there is a significant portion of TV watchers in Canada who do not use, or ever plan to use, cable or satellite to watch their television content ever again. How will they be informed of emergencies if they cannot afford to pay a monthly bill? For these people any amount is too much.

16607   No number of set-top boxes, as proposed in the working document, will tell this Commission how many Canadians are opting out of cable and satellite services in favour of HD TV antennas, but I can attest to the fact that the number is at least 500 Canadians, and possibly as many as tens of thousands of households, who have cut the cord based on my firsthand observations.

16608   Karim Sunderani, the owner of Save and Replay, one of my suppliers, has stated to me that they sell well over 1,000 antennas per month. I've been buying off them for five years and I've seen the lineup out their doors on Saturdays. I know that at least 50,000 Canadians have searched on Google for HD antenna in Toronto and have gone to my website. At least 500 of them have taken the next step and started saving hundreds of dollars per year by having the antenna installed.

16609   Why should Canadians pay to watch TV? Because cable and satellite companies want it? If Canadian stations are allowed to shut down their over-the-air transmitters, I fear many tens of thousands of Canadians will be watching exclusively American television programming. Wouldn't that in itself be contrary to the CRTC's mandate?

16610   Thank you for taking the time to listen to the average Canadian, as well as the large corporations, in this very important matter. I'd be glad to take your questions.

16611   THE CHAIRPERSON: Thank you very much.

16612   I wish I'd heard about your experience with your nephew earlier, because when my nephew stayed with me last year he leached off my subscription, so...

--- Rires

16613   THE CHAIRPERSON: The Vice-Chair will start off the questions.

16614   COMMISSIONER PENTEFOUNTAS: Good afternoon.

16615   MR. TEBBUTT: Good afternoon.

--- Rires

16616   COMMISSIONER PENTEFOUNTAS: Okay, you talked about...you've got a -- your supplier is selling over a thousand of these antennas a month?

16617   MR. TEBBUTT: Easily. And that's just one supplier. I have a couple.

16618   COMMISSIONER PENTEFOUNTAS: Is that in the GTA?

16619   MR. TEBBUTT: That's in the GTA. I have a small shop in Mississauga.

16620   COMMISSIONER PENTEFOUNTAS: Okay.

16621   Okay. And what does it cost? What does an antenna like that cost?

16622   MR. TEBBUTT: This one I install for $500. You can install it yourself for about $150, including antenna and parts.

16623   COMMISSIONER PENTEFOUNTAS: So it costs $150?

16624   MR. TEBBUTT: Yeah.

16625   COMMISSIONER PENTEFOUNTAS: Okay.

16626   And you've got to put that physically on the roof?

16627   MR. TEBBUTT: On the roof, on the chimney, on a wall.

16628   COMMISSIONER PENTEFOUNTAS: Okay.

16629   MR. TEBBUTT: As long as I clear one neighbour's house, I can usually get a good signal from Buffalo, so...

16630   COMMISSIONER PENTEFOUNTAS: Okay.

16631   And if you've got numerous television stations in your home?

16632   MR. TEBBUTT: Numerous TVs, you mean?

16633   COMMISSIONER PENTEFOUNTAS: Yeah.

16634   MR. TEBBUTT: Not a problem. We just amplify the signal. And you can send it to every TV in the house as long as it's less than eight years old, with an ATSC tuner built in.

16635   COMMISSIONER PENTEFOUNTAS: Do you need any other kind of hardware in your home?

16636   MR. TEBBUTT: Maybe an amplifier to boost the signal up, but that's about it.

16637   COMMISSIONER PENTEFOUNTAS: And you could do how many TVs in a home?

16638   MR. TEBBUTT: I've done -- well, we did -- in Oshawa, when we did this large project earlier this year, it was four buildings, and there were 16 units per building that were operating off a single antenna each.

16639   COMMISSIONER PENTEFOUNTAS: Umm...

16640   MR. TEBBUTT: Sixteen apartments.

16641   COMMISSIONER PENTEFOUNTAS: Sixteen apartments, one antenna?

16642   MR. TEBBUTT: Sixteen separate TVs, one antenna.

16643   There's no reason why you can't put an antenna on top of a large apartment building and provide service to that entire building for a reasonable cost.

16644   COMMISSIONER PENTEFOUNTAS: How much more would it cost per unit, per apartment, per condo, per home?

16645   MR. TEBBUTT: Well, we base our big installations on an hourly rate. You know, however long it takes us, that's what it costs.

16646   COMMISSIONER PENTEFOUNTAS: So one antenna and you could have --

16647   MR. TEBBUTT: Yeah. In most --

16648   COMMISSIONER PENTEFOUNTAS: -- an entire building --

16649   MR. TEBBUTT: You know, in the case of an older building, a lot of the cost will be putting new cable in, because Rogers probably doesn't want us to touch their cable or it's probably 25 years old and might have some mouse chews in it, so we'll run a whole new cable and install an antenna.

16650   COMMISSIONER PENTEFOUNTAS: Okay, but there's no added box or unit required?

16651   MR. TEBBUTT: No.

16652   COMMISSIONER PENTEFOUNTAS: Okay.

16653   All those students are probably paying some money for bandwidth use that you spoke of.

16654   MR. TEBBUTT: No, this --

16655   COMMISSIONER PENTEFOUNTAS: Besides the TV. I mean they're --

16656   MR. TEBBUTT: No, the developer of this complex, they made available high-speed Internet from Bell because they know a lot of students these days are getting their content online.

16657   COMMISSIONER PENTEFOUNTAS: Right.

16658   MR. TEBBUTT: And then they also made available antennas in every -- antenna feed in every apartment so that they can watch free TV in full high definition and not have to pay a monthly bill.

16659   I mean I just graduated from college myself 10 years ago and there wasn't an extra 25 bucks at the end of the month by the time February rolled around. No way. No how.

16660   COMMISSIONER PENTEFOUNTAS: I gotcha.

16661   I was going to ask you about subchannels, but the previous --

16662   MR. TEBBUTT: Yeah, I swear we never met before today --

16663   COMMISSIONER PENTEFOUNTAS: Nice.

16664   MR. TEBBUTT: -- and we're talking about the same thing.

16665   COMMISSIONER PENTEFOUNTAS: It's pretty clear what he was talking about there.

16666   I had a final question that I can't for the life of me find right now, so perhaps my colleagues may want to add something.

16667   THE CHAIRPERSON: Well, I'll just follow up while the Vice-Chair's looking for that additional question.

16668   Are you aware -- and perhaps where you're operating isn't quite the case -- are you aware of any condo owners that are preventing the installation of this in addition to --

16669   MR. TEBBUTT: I have heard --

16670   THE CHAIRPERSON: -- to cable or other type of broadband services?

16671   MR. TEBBUTT: I have heard of that and I have a couple of workarounds.

16672   Number one, if they have a single satellite dish on their building at all anywhere, I tell them to maybe sue the landlord. Under the Competition Act of Canada that's not allowed. Especially usually because the superintendent in that building is getting free service, so they are basically an agent of the company and demanding that they use their product.

16673   THE CHAIRPERSON: The cases we've heard about are more related to condo corporations, particularly before the condo purchasers move in.

16674   MR. TEBBUTT: Yeah. Yeah, they do that --

16675   THE CHAIRPERSON: They face restrictions that are already put into place that only allows certain players to be in the building.

16676   Have you seen any evidence of that, excluding this option, as a --

16677   MR. TEBBUTT: Yes, I have seen evidence of that. And, again, I'm hoping that some day someone will sue a condo board over the Canada Competition Act and get that straightened out.

16678   But in the cases where they can't fight, it's no problem. I just put it on a stand like this, on a table on their balcony. It's now a piece of furniture. They have nothing to say about it. It's not attached to their building or to their railing.

16679   THE CHAIRPERSON: You're very attached to the aesthetics of this, aren't you?

--- Rires

16680   MR. TEBBUTT: Look, it's cute.

16681   Or I've actually done -- I've hung it from a curtain rod inside. It's only a pound-and-a-half.

16682   THE CHAIRPERSON: Well, perhaps they'll find a program on one of the lifestyle channels on how you can add to decorating indoors with it.

16683   MR. TEBBUTT: And now they are coming out with other designs, too, that are even smaller and more inconspicuous.

16684   THE CHAIRPERSON: Right.

16685   With respect to the condo issue, though, the Commission has gotten involved in that sort of undue activity, undue preference --

16686   MR. TEBBUTT: Uh-huh.

16687   THE CHAIRPERSON: -- potential, so --

16688   MR. TEBBUTT: Well, I was right, then.

16689   THE CHAIRPERSON: -- so it's not just the Competition Bureau that's worried about ultimate choice.

16690   COMMISSIONER PENTEFOUNTAS: Have you -- oh, go ahead.

16691   THE CHAIRPERSON: Mr. Vice-Chair, I hope you found your answer.

16692   COMMISSIONER PENTEFOUNTAS: So you can threaten them with that next time.

16693   MR. TEBBUTT: Yeah, okay, I will.

16694   COMMISSIONER PENTEFOUNTAS: The question I had, and I wanted to ask the previous gentleman as well, I remember back in the day the antennas were very sensitive to changes in weather.

16695   How do these antennas hold up?

16696   MR. TEBBUTT: Well, I'll give you a story.

16697   I was -- when I first moved to London, I was staying with my mom, and I put one of these in her window -- not even outside, just in her window. I wanted to test it out to see how it was working.

16698   She had to go that night to a friend's house to dog sit, and was watching American Idol on the Bell dish. We had one at her house and she had one at her friend's house. A big thunderstorm came over London. All the channels went dark. I called her up to ask her if she was alright and if her TV had gone dark, too.

16699   And she said, "Yeah, I don't know who won the Canadian -- or who got kicked off this week."

16700   COMMISSIONER PENTEFOUNTAS: M'hmm.

16701   MR. TEBBUTT: I said, "Hold on a minute," and I switched it over to my antenna, and I told her it was the girl in the blue dress.

16702   COMMISSIONER PENTEFOUNTAS: Okay. Good.

16703   MR. TEBBUTT: I had another customer who called me up from Bayfield up on Lake Huron a couple of summers ago just the day after a big storm. He wasn't there. His mom and his wife were there all alone. The satellite service went down because of the storm and a tree crashed into their cottage. They thought the world had ended. The next day he got an antenna so they could get local news and weather.

16704   COMMISSIONER PENTEFOUNTAS: Well, we've got somebody manning the phones because I think these things are going to selling like hotcakes.

--- Rires

16705   MR. TEBBUTT: Yeah, I have a feeling --

16706   COMMISSIONER PENTEFOUNTAS: Back to --

16707   MR. TEBBUTT: -- that I'm going to have quite a few orders when I get back to London tomorrow.

16708   COMMISSIONER PENTEFOUNTAS: Yeah, I can imagine.

16709   Listen, back to London, and I'll just close on this, you don't have a CB -- you don't have a CBC --

16710   MR. TEBBUTT: CBC --

16711   COMMISSIONER PENTEFOUNTAS: -- signal in London?

16712   MR. TEBBUTT: CBC shut down their transmitter in London because, they said, they couldn't afford it. The closest CBC transmitter is Windsor, which is 106 miles away. My biggest, baddest antenna can see 100 miles, so maybe I might be able to get Windsor on a really, really good day. I can't watch CBC, and it's the tenth largest city in Canada.

16713   COMMISSIONER PENTEFOUNTAS: How are you getting American --

16714   MR. TEBBUTT: In London we get some American channels from Erie, Pennsylvania, which is a little bit closer than Windsor is.

16715   COMMISSIONER PENTEFOUNTAS: As the bird flies, less than a hundred miles, is that it?

16716   MR. TEBBUTT: Yeah. But, you know, I do most of my work in Toronto, and in Toronto I can just point it towards the CN Tower from North York and I'll pick up Buffalo by accident. It's because the shape of Toronto is a basin, and the city's on the rim.

16717   COMMISSIONER PENTEFOUNTAS: Yeah.

16718   MR. TEBBUTT: Buffalo's on the rim. The water down here doesn't count. We get an extra 30 or 40 miles out of the antennas that they weren't designed for.

16719   COMMISSIONER PENTEFOUNTAS: Okay.

16720   And what do you tell people that live in Edmonton? I mean how many OTAs would be available --

16721   MR. TEBBUTT: Well, it's not there yet, but, hopefully, you know, with this round of discussions, maybe there will be more stations coming their way and maybe they can have antennas. Because right now I can only operate this in border cities, cities that are close to the U.S., because the Canadians do want their American content as well. They want to watch the real ads on the Super Bowl. They want to see the subchannels that the American channels have.

16722   They're great subchannels. I mean I love watching McHale's Navy on Sunday afternoon.

16723   COMMISSIONER PENTEFOUNTAS: Okay. Well, good luck with that.

16724   Thanks, Mr. Chairman.

16725   THE CHAIRPERSON: Well, actually, thank you for adding a little life on this seventh day of a long hearing. We appreciate it. But it takes nothing away from the content of your presentation.

16726   We appreciate it. Thank you very much.

16727   MR. TEBBUTT: Oh, you're welcome.

16728   COMMISSIONER PENTEFOUNTAS: Thank you.

16729   LE PRÉSIDENT: Madame la Sécretaire.

16730   LA SÉCRETAIRE: Merci.

16731   I will now ask Youth Media Alliance to come to the presentation table.

--- Pause

16732   THE CHAIRPERSON: So welcome. When you're ready just go ahead, please. Thanks.

PRÉSENTATION

16733   MR. MOSS: Mr. Chairman, members of the Commission and staff, my name is Peter Moss. I'm a member of the board of the Youth Media Alliance, Alliance Médias Jeunesse.

16734   Before we begin our presentation, I'd like to introduce my colleague, Chantal Bowen, who's the executive director of the Alliance.

16735   MME BOWEN : Au nom de l'Alliance Médias Jeunesse, nous souhaitons vous remercier de nous donner l'occasion d'apporter notre contribution à l'examen du Conseil portant sur la réglementation canadienne d'un secteur clé de notre système de radiodiffusion : la télévision. Nous croyons que cette audience arrive à un moment critique de l'évolution du système canadien de radiodiffusion. C'est pourquoi nous demandons instamment au Conseil de faire preuve de circonspection dans son examen des changements que l'on propose d'apporter à la structure réglementaire, dans l'optique de s'assurer que notre système de télévision continue de contribuer de façon importante à la programmation canadienne, en particulier à celle destinée aux enfants et aux jeunes.

16736   MR. MOSS: In Canada, the airwaves are considered public property; however, this notion of a public that shares and uses the airwaves needs some definition. It's not simply a singular noun, but a collective. It's composed of many different groupings of individuals that find common ground with each other for a variety of reasons, some large and encompassing -- ethnic, linguistic, religious -- some transitory -- sports or cultural interests, et cetera -- and collectively they form a public.

16737   A public is a creation of its constituents. It celebrates each group's differences. Being a member of a public is a privilege and a right of citizenship. This is particularly true of young citizens, our children and our youth.

16738   A case in point is a public library. It must serve its larger public and provide resources across a wide spectrum of interests and abilities and needs. Each group finds its own resources and, at the same time, can't help but become familiar with the resources of others.

16739   A public park is a similar example. Different games, foods, dress, family groupings are all proudly on display, and each group has the opportunity to learn from and celebrate with each other.

16740   Similarly, our public airwaves have offered the constituent groups of our country the opportunity of a shared experience to see how others behave, and in turn, to be seen by them.

16741   Community comes from familiarity, which comes from exposure and from understanding. We need to hear each others songs and stories, rejoice in our similarities and celebrate our differences.

16742   Our Alliance wishes to salute the Commission for the present policy review. The Commission knows that our members are proud Canadian citizens, ardent creators and defenders of the importance of Canadian children and youth programming that provides our children and youth with Canadian values and stories and contributes to their intellectual, social, and cultural growth as citizens.

16743   The YMA is also an ardent supporter of Canadian television broadcasters. We believe in their critical role in telling our stories and highlighting our talent and the shared values that are truly Canadian.

16744   In addition, the Alliance believes our private and public television broadcasters have a fundamental responsibility to provide challenging and quality programming to our children and youth.

16745   Our members consider television programming to be one of the most effective tools we have to contribute to the development of a sense of citizenship in our children and youth. We believe the Commission must use this public hearing to clearly establish the importance of this type of programming within the future context of the Canadian television system, and particularly when we consider the success of our programming in this area.

16746   As the Canadian Media Fund reported in its latest annual report, this is 2012-13:

"Children and youth productions continue to generate the largest amount of hours tuned by genre among CMF-funded programming."

16747   I think we are third, behind news and sports.

16748   The CMF went on to note that viewers continue to spend much of their peak viewing time watching Canadian-produced children's and youth programming, with a total of a 42-per-cent share in English and a 71 share in French. For both the English and French side, these totals represent a five-year high for CMF-funded programming.

16749   So it's clear, as the data shows, our children and youth are still watching and enjoying Canadian television programming even though they are increasingly moving from one platform to another with great facility.

16750   The good news from the CMF is that the Canadian children and youth programming remains a success with its core audience.

16751   In addition, the Commission is aware, though IMA/AMJ published a major national study on children's programming in Canada in November 2012, sponsored and supported by Bell Media through the CTV, Globe and Mail and CHUM tangible benefits package.

16752   This groundbreaking national content analysis study was undertaken by a team of researchers from the Centre for Youth and Media Studies at the Department of Communications at the University of Montreal under the supervision of Dr. André Caron. The full results of the three-year study, called Are the Kids All Right? Canadian families and television in the digital age, are available on our website and on the website of the Canadian Media Fund.

16753   This groundbreaking research provided us with a unique opportunity to see the important role children's and youth programming has in the lives of young Canadians, "stimulating reflection, creativity and interactivity in the viewers."

16754   As the authors in the report mentioned:

"Growing up, these children..."

16755   -- we're speaking of kids who are 9 to 12 years old --

"...these children were loyal viewers of many quality Canadian-made children's programs. However, as they have fewer Canadian children's programmings available to them and that are now made especially for them, they have begun shifting toward viewing non-Canadian programs. In addition, with a limited variety and quality of Canadian programmings targeting their age in particular, many have begun to watch content designed for older viewers, such as general program audiences or adult programs that are not always appropriate." (As read)

16756   The present challenge facing the Commission is how to continue to ensure Canadian consumers will have access to Canadian programming that will permit us to hear each others songs and stories, rejoice in our similarities and celebrate our differences. We believe the digital environment should be viewed as an increased opportunity for more voices being heard within our broadcast system.

16757   Canada is a country of immigration, where the airwave maximize the potential for cultural exchanges and where ideas are transmitted, learned, adopted, and embraced. This has to be maintained even as we consider the advantage of providing more choice to consumers.

16758   We see no specific need to forego the social and cultural importance of public airwaves even in the digital era, with increasing vertical integration. At the end of the day, the members of YMA/AMJ continue to believe in the important role of both private public broadcasters in continuing to offer Canadian families the very best of quality Canadian children's and youth programming, and we sincerely believe the Commission has to use the present policy review to clearly recognize the importance of this children's and youth programming within the broadcasting system.

16759   YMA salutes the Commission's proposal number 11 on the CRTC's working document, which recommends including children's programming in the definition of PNI.

16760   Furthermore, YMA/AMJ strongly recommends the Commission include children's and youth programming in a small basic proposal that may be considered.

16761   The Commission has to ensure the Canadian broadcasting system will continue to serve the needs of those who represent Canada's future.

16762   This completes our oral presentation. We look forward to responding to any questions.

16763   Thank you.

16764   THE CHAIRPERSON: Thank you very much.

16765   Commissioner Dupras will start off the questions, please.

16766   COMMISSIONER DUPRAS: On the proposition of including children's programming in the categories of PNI, we've heard representatives of Bell and the CPMA last week, which said that they wouldn't want to be forced to do a specific amount of children's programming since specialty channels like Treehouse, Yoopa, Disney service are much present in the television offering.

16767   What is your reaction to this?

16768   MR. MOSS: Do they feel the same way about sports? Lots of cable channels do sports.

16769   Do they feel the same way about news? Lots of cable channels do news.

16770   I believe it's a responsibility of the system as a whole to contribute. I see no reason why they should be prohibited from it, but I see no reason why they should be forced to once it becomes the category of PNI -- once children's programming is included in PNI, they have the opportunity to, and if it makes business sense for them, they have every opportunity to go ahead and do that.

16771   When I was first involved in children's television, one of my jobs was running the YTV Treehouse, and at that time there was competition from Global and CTV on Saturday mornings. I don't know why they stopped.

16772   COMMISSIONER DUPRAS: Okay.

16773   If we were to do away with genre protection and go full pick-and-pay, the children's services and the specialties could end up suffering or disappearing.

16774   What will you propose to alleviate this?

16775   MR. MOSS: I think it's quite a serious challenge to children's and youth programming, but more importantly than children's and youth's programming, from the perspective of the producers -- from the broadcasters and BDUs, our organization, because it's a round table of broadcasters and producers, speaks as much as possible on behalf of children.

16776   So when you talk about pick-and-pay, you're talking about 20 per cent of the citizens of Canada who don't pick-and-pay. They're picked-and-paid for and it's not quite right that they don't get a chance to actually use their own opportunities to make their own choices about what they want to watch. Their parents will do it for them. Very few people under 12 buy their own -- consume their own -- or rather purchase their own television programming.

16777   So I think it would be quite a serious issue if it was left simply to those parents who decided that they would like to provide it for their kids if they can afford it. I think it ought to be made generally available.

16778   COMMISSIONER DUPRAS: From there, the proposition of carrying it on basic --

16779   MR. MOSS: On basic, on skinny basic, on however --

16780   COMMISSIONER PENTEFOUNTAS: -- certain children's services.

16781   MR. MOSS: Yes. However, it's constituted, I believe, it should be as widely available, as widely distributed, as possible.

16782   COMMISSIONER DUPRAS: And how would the Commission determine which service that exists --

16783   MR. MOSS: Do you mean Sophie's Choice?

16784   COMMISSIONER DUPRAS: -- should go on basic? Do you have any suggestions, criteria that --

16785   MR. MOSS: You mean which channel --

16786   COMMISSIONER DUPRAS: -- we should be look at?

16787   MR. MOSS: -- which channels, compared to which channel?

16788   COMMISSIONER DUPRAS: Like one that is commercial-free or...

16789   MR. MOSS: Again, because of the nature of our organization, it's on behalf of kids, I don't think it's fair for us to be able to say this channel or that channel. But I would say that each of the audience segments of children's programming which are distinct and require their own kinds of aesthetic -- preschool, five- to eight-year-olds, and nine- to 12-year-olds -- ought to be well served.

16790   And so in adjudicating or evaluating who gets to be on basic, perhaps it ought to be from an audience perspective who is providing preschool, who is providing five- to eight-year-olds, and who is providing nine- to 12-year-olds, and are those three categories of kids sufficiently well served to be given a rich, balanced diet of programs?

16791   COMMISSIONER DUPRAS: Okay, these are my questions.

16792   Merci.

16793   THE CHAIRPERSON: Those are our questions. Thank you very much.

16794   It's not by lack of interest in your perspective, but, as you know, we've had a lot of discussion so far on the question of children and youth programming.

16795   MR. MOSS: I am delighted to hear that, because in the past that hasn't been the case.

16796   THE CHAIRPERSON: Yes, well -- and, as well, recently through various renewals, like the CBC's, we also had a chance to look at this.

16797   MR. MOSS: Right.

16798   THE CHAIRPERSON: So thank you very much --

16799   MR. MOSS: Thank you.

16800   THE CHAIRPERSON: -- for your participation.

16801   That does it for today for our intervenors, so we're adjourned till 9 a.m. tomorrow morning.

16802   Donc, nous sommes en ajournement jusqu'à 9 h 00 demain matin. Merci.

--- L'audience est ajournée à 1640 pour reprendre le mercredi 17 septembre 2014 à 0900

STÉNOGRAPHES
Lynda Johansson
Jean Desaulniers
Madeleine Matte
Monique Mahoney

Date de modification :

2014-09-17