Canadian Heritage Committee on Feb. 22nd, 2007

[Ed Fast, Conservative, Abbotsford, BC]

Are you confident we're going to come to a resolution of this?

[Konrad von Finckenstein]

I wouldn't have undertaken it if I didn't think there was a possibility of success. Now, as for the degree of success, that will be for others to judge. Of course you never have a totally clean solution. There will always be some people who feel that some parts have not been addressed at all, etc. But given Michel's experience and the experience of others, I think it's the best team we can field in order to solve this difficult problem.

[Ed Fast, Conservative, Abbotsford, BC]

I'm glad to hear that.

Thank you, Mr. Chair.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Angus.

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

Thank you.

I want to go back to the decision to hold this task force in secret. It seems to me you're suggesting that there's something extraordinary here, that because there are commercial or financial interests at stake, we have to protect the interests of the various industrial players and cannot hold public hearings. Yet the CRTC always deals with confidential financial information because you're dealing with licensing. That's part and parcel of any CRTC process. There is a process in the CRTC where information is going to be given in confidence—that's understood—but there are still public hearings.

So I want to get from you the sense of where exactly this legal jurisdiction comes from for having a precursor to public hearings.

[Konrad von Finckenstein]

You're talking about two different things. When the CRTC holds public hearings, it deals with commercial information, you're quite right. And that's data. We're really talking about data of companies and their procedures.

Here what we are really trying to establish is how does the fund work? What is the actual commercial reality? What are the positions of the people? What are the difficulties they encounter when getting funding, when negotiating? This is a type of information that is not hard and fast. We're not talking about data. We're talking about means of behaviour, commercial reality--to what extent small producers have an option when they deal with large broadcasters and vice versa. It just doesn't lend itself to being disclosed in any other way except in confidence.

Just for argument's sake, let's say you're a small producer and you feel that you're being pushed around by both the fund and the cable companies, or you feel that the fund is not working properly and is really dominated by the cable fund. Are you going to say that publicly? You're also going to need funding in future years. You're going to be worried about the repercussions.

That's why we're saying, let's have the first evidence in order to understand the actual workings of all the human dynamics that surround the operation fund. That should be done on a confidential basis.

Once we understand that, then we can work out something wonderful. If not, we'll make options saying, there are problems and the problems are as follows. We will describe them generically rather than specifically.

So rather than saying that Mr. Angus said so-and-so, we will say that there have been allegations that these and these issues arise, and the way to address them, in our view, seems to be by adopting this restructuring. We'll have a public discussion about that, but we won't disclose the actual symptoms that gave rise to the complaint.

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

Well, under section 14, if the CRTC undertakes a review of any technical matter of broadcasting that the minister refers to the CRTC, it makes its recommendations back to the minister. In this case, you're going to be making the report back to the commission.

It seems to me you're insulating this government from the political fallout of what has been a very charged political atmosphere. You're giving the minister fairly broad arm's-length...to escape any of the fallout from this.

[Konrad von Finckenstein]

I don't agree with that at all, number one. Two, this is not something that the minister is mandated to meet. This is my responsibility, as regulator, to enforce. I do—

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

The minister said in the House that it was the CRTC's responsibility to step in.

[Konrad von Finckenstein]

Exactly. She's echoing the law. She's pointing out that the enforcement of the regulation is the responsibility of the CRTC, and I will do that. We're independent, and we do it in accordance with what we do.... We do not take instructions from anybody on the enforcement.

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

I guess I'd have to challenge you on that, because your predecessor was here. Mr. Jim Abbott said on the record that the CRTC takes its direction from the minister. He said that to Mr. Dalfen, and Mr. Dalfen did not challenge that. Mr. Abbott said that's the way it is. That's been the very clear understanding, that this government is giving direction to the CRTC.

So now we have a situation that has been a major political blowout. We've had two companies that have publicly defied, spoken again and again in their public attack, and now suddenly the CRTC is having to meet in private with them to protect anybody from fear of retribution.

There's a major public interest here, and I'm trying to get a sense of the CRTC's role in this if you're doing this behind closed doors.

[Konrad von Finckenstein]

Mr. Angus, you are mixing up two different things. One is, clearly, the CRTC, under statute, takes direction from the minister. The minister can give directions. They have to be public. They're going to be very well debated, etc. Those are directions, policy lines. For instance, the last one was, I think, on the DTH, the direction on how to license satellite providers. That's the process. There's also a provision that she can ask us for reports, as she did in December last year, which resulted in a report in December.

What we're talking about here is the mandate of the CRTC, when there's no such specific global direction, but in effect, to administer the act, the provisions of the act, is the CRTC's responsibility. For that, it is an independent body, specifically made independent. The statute even says, for instance, that the minister cannot give us direction on specific licensing provisions, etc. It wants an independent body there to use its independent judgment.

That's what we're doing. We're using our independent judgment here to ensure that payments are made in the fund because the fund, in our view, is one of the critical elements to ensure Canadian content. When funds are withheld on a monthly basis, it puts the whole funding scheme in jeopardy.

[The Chair, Conservative, Gary Schellenberger]

We've gone overtime on that. Thank you for that.

Mr. Scott.

[Andy Scott, Liberal, Fredericton, NB]

Thank you.

I must say that this is a very scary series of events we're dealing with right now. As a regulator, does it not cause you some pause--without getting into the debate as to whether the circular is enforceable and those things--that two very large, powerful entities that benefit significantly from decisions the CRTC has made in the past could walk away...?

Notwithstanding the fact that you're...and I would like to be as hopeful as you are, in terms of the optimism you've expressed. But when I asked Mr. Shaw this week if he would he just repeat his behaviour if in fact he wasn't satisfied with the resolution of what happened with the board at the CTF, his answer to me was basically, if they won't do what we're saying they'll do, will you guarantee they'll do it?

The reality here is that I'm a little afraid of that possibility and the idea that these companies could cause this reaction. I must say, I'm not perfectly content with the way the situation has been expressed.

I understand you're new; I may be newer than you, I'm not sure. But it happened in December, and the minister was saying it's up to the CRTC. The CRTC, from your own testimony, was silent. I welcome the fact that they are no longer silent. I am a little concerned about why there's this change of heart.

It seems to me that it is a very bad precedent to allow a company that you have regulatory authority over to essentially hold this system ransom, to some extent.

[Konrad von Finckenstein]

First of all, I agree with you, it's not a pleasant situation, and one that I hope will not be repeated.

Secondly, I think I can say frankly that we learned a lesson. To the extent there are payment obligations, they should be clear-cut and mandatory: there should be no ifs, ands, or buts. I don't know why the payment obligation was annual in the past, but the remittances were monthly and were not set out in the regulation. It is clearly something we are going to fix so it doesn't happen again.

By the same token, as I pointed out to you, I believe in cooperation and in working things out rather than in litigation. But I will litigate, trust me, if there is a further breach. We will use the powers or levers we have, but litigation is very often unproductive. We both know litigation is not a quick process; it takes a long time and leaves a lot of bitter feelings at the end. These are ongoing relationships that aren't improved by litigating in the courts. And who knows what the courts will do in their judgments? As a former judge, I think I can say there is no such thing as a surefire win or loss. So I prefer to work things out where you can. That being said, sometimes you have to litigate.

Here, I think these two companies have made a clear commitment to respect...and I cannot foresee their walking away from that. But once this task force has issued its report and once we have a new way of doing business, whatever it is, I cannot imagine it would not require an amendment to the regulations. At that point in time, we will make sure the monthly payments, as well as the total annual payment, are laid out in the regulations.

[Andy Scott, Liberal, Fredericton, NB]

But on the broader question, doesn't it concern you, as chair of a national regulator, the way this has unfolded? Is that not distressing?

[Konrad von Finckenstein]

This is not the first time I have been a regulator. And in regulation you really cannot do it on a confrontational basis; you need the active cooperation of the people you are regulating. You are not going to have a regulation where you constantly enforce; that is ineffective. Regulations, if they are struck properly in the first place and put into place, recognize the interests of the parties and strike an acceptable balance. There may be grudging acceptance, etc., but basically, these are the rules and you enforce them around the edges. That's what we have done in the past, and it worked very well. This particular crisis that we have is very much the exception to the rule; it has not been the case in the past, and I hope it won't be repeated.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Abbott.

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

Thank you again for your testimony. It's been very helpful.

Mr. Angus has seen fit to quote me a number of times, in this and other hearings particularly relating to the CRTC, and my expression about that. I really welcome your clarification today as to certainly what I was saying, what I was meaning, and what my knowledge of the situation was.

The second thing is that I think Mr. Scott's characterization of this being a scary series of events is unnecessarily alarmist. I think we're at a point now where your making the expression of conciliation as opposed to litigation is really what it's about. Clearly, the CTF is a broken vessel at this particular point, or if not a broken vessel, one that has a number of serious fractures. I think what I see here is the CRTC saying, just a second, let's take a look at this vessel; let's do what rebuilding is necessary; let's do what re-regulation is necessary to reinforce; but then within that structure, let's get a proper balance between the creators, the producers, and the people who are making the financial contributions. So I just want to say that I commend you for your conciliation, not litigation. I wish you, and I know the minister wishes you, the very best of success on this.

I must say that from the testimony we had from Shaw and Vidéotron, even CAB, last week, which gave another perspective in terms of these hearings, I think clearly there is a willingness on their part. Recognizing that they have some understandable differences with the CTF administration as well as the other players in it--and these are very serious differences-- I nonetheless think that there was clearly an expression of willingness to move forward favourably.

I for one wish you all the best, and I look forward to a positive outcome of your process.

[Konrad von Finckenstein]

Thank you very much. I am delighted to hear you report the attitude of Shaw and Vidéotron. That will of course be very helpful to Michel in his work.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

We can't do a full round of questioning. What I will do--I see this quite a bit--as long as you can keep to one question...because we do have another 15 minutes. We have to remember that we do have committee business to be done. I think some of the people who are going to ask some of those small questions have some motions they would like to be done.

Please keep your questions and answers short so that we can get our other business done this morning. Thank you.

Ms. Keeper.

[Tina Keeper, Liberal, Churchill, MB]

Thank you, Mr. Chair.

I would like to ask one question. It's about a comment Shaw made—it was actually in their press releases—that they saw their payment as a tax, and that's how they've interpreted it.

I'd like to have you respond to that.

[Konrad von Finckenstein]

I saw that too, and I think it's wrong. This is clearly not a tax. This is a user fee that is directly linked to the industry. It goes to the fund. It goes to production, to produce content that they need, that they are required by law to do, etc. A tax is something that goes into the general coffers of the CRF. That's what the Federal Court ruled, as you know, on the part II fees, as they are called. But in this case there is a clear linkage between the contributions, the system, the user, and how it's being used.

So to call it a tax is, I think, wishful thinking.

[Tina Keeper, Liberal, Churchill, MB]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Kotto.