Canadian Heritage Committee on Feb. 8th, 2007

[Douglas Barrett]

I think technically it's the obligation of the regulator to enforce its regulations. We operate under a contract. The contract gives us approximately $120 million. As in any contract, there are policy stipulations and objectives that we must meet; the enforcement piece belongs to the commission.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I've been trying to get a sense from Shaw and Vidéotron of the exact nature of the cause of this public spectacle. The first comments I heard from Shaw was that they didn't like Trailer Park Boys. I thought it was kind of rich that a cable giant is getting hoity-toity about low-brow entertainment, but that might just be me personally.

Then there was the issue of accountability and their lack of voice, and yet they have a place on the board and we understand the board has been reconstituted.

Then it became an attack on CBC, a very clear and in-your-face attack on our public broadcaster saying they did not want to be part of anything that had to do with CBC. Yet when I'm looking at how the money is distributed, CBC doesn't get any money directly. It goes to independent production.

Then there's $100 million from the federal government. The argument that certainly could be made is why would any federal money be going to support private broadcast? Does the $100 million that's put in by the federal government offset what ends up in independent production that ends up on SRC or CBC?

[Valerie Creighton]

In terms of the $100 million, your question is really whether that is enough? The problem with the production of Canadian television in this country is that it is very difficult for the broadcaster to make that production and get a return on investment because of the challenge we have in building our audiences as compared to audiences for American programming.

The broadcasters do face a difficulty in the cost to produce, promote, and broadcast these entities and get some return on investment. That's where the fund steps in to play that role.

Is it enough? We know that prior to the broadcaster performance envelope system, the fund was oversubscribed by about 50% in terms of the volume of activity out there that could be supported, but the broadcaster performance envelopes at least have given more predictability to the system. Broadcasters are not given the money; producers apply to us. They are issued the cheques. They produce the program. They have to have a broadcast licence to come to us.

In terms of the CBC and to try to answer the question, yes, Shaw and Vidéotron have made it very clear they don't like the fact that 37% of the money in the fund is allocated to the CBC envelope. Historically, the CBC has always been able to not access the fund directly, but producers who come to the fund who have CBC as their broadcaster have been able to access that money to get those programs on the CBC.

The question of the 37% we inherited. This was not something the board of this organization had any influence over in terms of the policy direction. That's a requirement of our contribution agreement, so we are stuck with that. Can it be reviewed? Sure. But I think it's important to note that producers who apply to us.... The CBC is our major public broadcaster. They do a lot of Canadian programming in terms of the drama especially, and in prime time, so producers tend to go to the CBC to try to get a licence to get their show on the air. Historically, the CBC has technically often accessed more than 37% of the fund, so I think that number was picked as a model to try to give some semblance to their ongoing access.

[Charlie Angus, NDP, Timmins—James Bay, ON]

The clarity I need to get out of this is that there is $100 million—

[The Chair, Conservative, Gary Schellenberger]

I'll give you one little question. Make it very, very short.

[Charlie Angus, NDP, Timmins—James Bay, ON]

It will be quick. Thank you.

We have the $100 million from the federal government and we have a 37% envelope that is independent production that goes to CBC. Can an argument be made that Shaw is directly supporting programming that is going onto CBC? Because it seems to me that $100 million of taxpayers' money is going into a fund, and some of that, or a good percentage of that, is probably ending up in--

[Valerie Creighton]

Yes, that's correct.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Warkentin.

[Chris Warkentin, Conservative, Peace River, AB]

Thank you, Mr. Chairman.

Thank you to all the witnesses. We appreciate your testimony today.

Certainly I'm an optimist, and I'm very optimistic that the fund is going to continue and that things will be negotiated. I'm very supportive of Canadian broadcasting, and I know you have played an important role in that, so thank you. We appreciate your contribution.

I want to get a little bit of clarification. There's been a lot of talk as to what should be done at this point to try to get things moving. I know the discussions continue, and there are obviously some sensitivities on both sides, on the corporation side as well as on the fund side. Obviously both of you find yourselves in a little bit of an impasse, and I certainly am optimistic that things can be resolved.

I'm looking for a little bit of clarification. There have been calls for the minister to cut off the broadcasting licences to Shaw Cable and to Vidéotron. I know the minister doesn't have the authority—I should double-check. Is it your understanding as well that the minister doesn't have the ability to cut off the broadcasting licences of those two companies?

[Douglas Barrett]

I think that is so far from our job—

[Chris Warkentin, Conservative, Peace River, AB]

Yes, but I guess the question I am going to get to is whether, even if the CRTC were to now cut them off, you think that would be helpful in terms of resolving this situation. Just from your perspective, do you think there is a possibility of the corporations coming to the table and negotiating? Obviously, from the recommendations you've made, it looks like you're extending an olive branch.

[Douglas Barrett]

We think the BDUs have an important role to play at the table, both at an operational level at our table, as they have in the past, and as major funders alongside the funding of the department. I guess what we think is logical is for the minister to be maintaining lines of communication. You see, we get all our policy direction from her. She has made an announcement about new funding. We expect there to be a fresh contribution agreement, with new provisions. There is no particular reason why she wouldn't discuss with them what the overriding policy objectives for the fund would be prior to signing the contribution agreement with us.

That is at a policy level, not at a commercial level. Because the Government of Canada is the largest single contributor, it obviously has the biggest voice, and it knows what it is trying to accomplish. So that dialogue and debate is useful, not only so the minister can hear what the other funders wish to contribute, but for us. It is a useful dialogue. But ultimately, we operate under contractual orders from the minister.

[Chris Warkentin, Conservative, Peace River, AB]

And it seems that those discussions are happening. Obviously Vidéotron—

[Douglas Barrett]

The paper said she met with them. I am not sure that it was the start of a dialogue.

[Chris Warkentin, Conservative, Peace River, AB]

Right. I guess we can be hopeful.

In terms of the recommendations you're making, you do actually look for some clarification in terms of the payment procedures. My understanding is that there is a difference of opinion as to when the obligation to pay actually comes into effect. Obviously they've been paying on a monthly basis since its inception. There is an argument out there—Is it the end of August when the actual deadline happens, when they must be paid up for the annual basis? Is that correct?

[Douglas Barrett]

Broadcasters all operate under a broadcasting year that ends August 31. They then file a return. That return would be used as the basis for the calculation. So I think the payment period would be mid-fall.

I have not personally appreciated how much we rely on the monthly payment piece. This all was new to us when it occurred. We also knew that there was a difference between the regulations and the circular. So make no mistake, without monthly payments, or some form of confirmed bridge financing, we would have a serious problem.

[Chris Warkentin, Conservative, Peace River, AB]

I understand that. I certainly appreciate that.

Mr. Abbot has just one follow-up question.

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

I have just a quick question.

You mentioned in your testimony that when your staff was reduced there were some changes there. I am curious about the effect of the reduction on the total remuneration—the total salaries—paid. Can you give us the absolute dollars before and the absolute dollars after?

[Valerie Creighton]

The overall saving to the industry was approximately $3 million in reductions of staff, which was put into the programming budgets.

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

Thank you.

[Douglas Barrett]

I should say that we are contractually obligated to operate with an administrative cost ceiling of 5% of the funds under administration. We have lots of discussions at the finance committee about whether we can do better, but I'd put that 5% up against most other programs as an administrative cost load.

[The Chair, Conservative, Gary Schellenberger]

Thank you. I think what we'll do, in all fairness, because time is running down, is allow every party around the table one question.

We'll go to Ms. Fry.

[Hedy Fry, Liberal, Vancouver Centre, BC]

I think we are going to split our question. Can we do that?

[The Chair, Conservative, Gary Schellenberger]

Okay, but you have one question.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Okay, you were waiting, so you go ahead.