Canadian Heritage Committee on March 20th, 2007

[Scott Hutton]

No, we haven't looked at that aspect of it yet. As I indicated earlier, part of our policy, not only with mobile broadcasting but with all of the Internet and Internet broadcasting, is it's an exemption situation that we've chosen not to regulate. We have not monitored it closely.

One of the findings of our report is that it might have been somewhat of une lacune. We have certainly reorganized ourselves to pay much closer attention to new media, to how one technology is having an impact, and to how the business models will be developed over the next number of years in order for us to foreshadow what the impact will be on the broadcasters we regulate.

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

I raised it because I think issues that were theoretical three years ago are suddenly becoming very practical. We're going to start to see a dramatic shift.

In terms of market fragmentation, I hear this a great deal, particularly from private radio broadcasters. It's not that I'm unsympathetic to the issue of fragmentation, but I always say that if you want people to listen to you, you're going to have to put out a product they want to hear. Certainly, in terms of new technologies, people can choose what they want to hear, when they want to hear it, and how they want to hear it. It is going to be the future of broadcasting, whatever medium it is.

I want to go back to CBC, though. It seems to me that at least CBC Radio One and Radio Two are probably in a fairly good position to weather market fragmentation, because it is a product that people know. You can go into people's houses and it's not often that they have easy rock on the radio. They're more likely to have CBC Radio One or CBC Radio Two on, even if they're not listening to it. There are programs, whether it's on an iPod or whether it's through Internet services, for example, shows such as Ideas or Quirks & Quarks.

Have you looked at how radio fragmentation is affecting private broadcasts and how it's affecting public broadcasts?

[Scott Hutton]

I'd have to agree with you. Spoken-word content is one, and the CBC is quite well placed in that domain, with the changing world.

As recently as last December, we published our revised regulatory framework for private conventional radio. We found that the key to private radio is the localism of the service. They are doing very well right now.

It's to be mindful of the situation that, yes, the Internet, Internet streaming, and different forms of products are certainly being made available, but right now the key to over-the-air radio, primarily FM, is the local content. You hear your local news. It's one of the only or one of the few areas where you can hear the local news, and it is mobile. They are thriving right now in that domain.

Broadcasters are doing very well, both on the balance sheet and on the listenership front, and the same would apply to the public broadcaster.

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

We have seen in recent years that private broadcast profits have not only stabilized but have increased.

I want to ask one last question. It's the issue on the transformation from analog to digital, because it is an issue I hear a great deal about in my riding, where I have a lot of rural people. They're people who don't have cable, and they watch the public broadcaster through rabbit ears.

They're very concerned that they're no longer going to be able to watch CBC television, which is the one show they might watch. They watch Hockey Night in Canada, and they watch it through rabbit ears. They say it's a public broadcaster, but now they're going to have to get an entire cable package to watch the one show they want.

Have you laid out some ground rules for the switch from analog to digital?

[Scott Hutton]

The commission is currently in its deliberations on that very issue, in respect primarily to the over-the-air television framework for commercial or private stations. That is a key concern, how one can ensure that Canada remains modern and moves to the digital world without leaving communities behind. So that is front and centre in our deliberations right now.

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

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

Thank you for attending today. We've had a fairly broad discussion about the new media as they relate to broadcasting in general. However, as you know, this is actually a study of the future of public broadcasting in Canada, so my first question is going to be general. The second one is going to focus more on the CBC.

There's a suggestion in the report that was just finished by the CRTC that there may be a digital gap developing between Canada and the U.S. None of the witnesses expressly stated that, but I tried to connect the dots, and I think what I read was that there was an intention originally to stay about two years behind the U.S. in terms of converting to a fully digital environment in Canada. There's some evidence that came before the CRTC that indicated that gap or that difference in timing may be over four years. I believe it was the Canadian Association of Broadcasters that suggested that if we don't provide more programming in HD, Canadian viewers will end up watching more American programming, which actually does offer HD.

So I have two questions. Is my understanding of the report correct? Secondly, is there an intention to actually establish a fixed date on which that conversion has to be done? As you know, most of the major European countries have gone to a fixed date, anywhere from 2007 through to 2012. The U.S., I believe, is February 2009. Canada doesn't have a fixed date.

Could you answer those two questions?

[Scott Hutton]

First of all, I would have to agree with the proposition of the CAB that if Canada does not provide high-quality television services, in this case HD, Canadians will watch HD from other countries. So it's very important that we remain at the forefront and offer Canadians those choices.

In a segue to your second question--it starts a bit with where you started off your question--Canada chose to have a market-based approach to the transition to digital and the transition to HD. This market-based approach has left us behind. We are, at the very least, two years behind, and some interveners have suggested, as you said, that we're four years behind.

To your second question, as I indicated to Mr. Angus, we are wrestling with that issue right now as a result of our hearings last November and December with respect to over-the-air television and the transition to digital. Now, our role certainly is to regulate our broadcasters, so we are struggling with how we can evaluate whether or not we need a change in policy from a market-based approach to something more firm, which, as you've noted, is done in the U.S., which is at 2009. A lot of the folks who came before us suggested that we should maybe set a date two years beyond that. But that's for us to decide.

A little particularity is that this decision also has to be made in conjunction with the spectrum management folks over at Industry Canada, because it is primarily their decision. We can help. We can push our broadcasters on that front. But it is their decision.

[Ed Fast, Conservative, Abbotsford, BC]

There was a suggestion from some of the broadcasters that both the regulatory and business environments in Canada currently are not conducive for them to actually invest heavily in additional transformation and that there's going to have to be a complete review of that to make it worthwhile for them to do it on a more timely basis.

[Scott Hutton]

You're putting me on sketchy ground, because that's exactly the issue that is before us. The broadcasters have certainly said that transitioning to digital and transitioning to HD is very expensive; therefore, we should allow them fees or regulatory bargains to be able to achieve the objective of transitioning to digital. So that is before us. That is a live issue that I would like to avoid providing too many details on.

[Ed Fast, Conservative, Abbotsford, BC]

Let me focus briefly now on CBC, because that's what this study is about. There's been a suggestion that the CBC has historically been hamstrung by limitations placed on it in terms of expanding into new platforms. I believe the Lincoln report touched on that and suggested that in most cases the CBC has not been given permission to purchase, for example, pay-TV offerings or specialty channels.

What is your general approach in terms of how we will allow CBC to remain competitive in a rapidly changing technological world?

[Scott Hutton]

I'd have to go back to a little bit of history, to our dealings in licence renewals. At the last licence renewal in the year 2000, when some of the new technologies were coming on board, that very issue was raised. I think our point of view at that point in time was that exploration in new business areas is excellent. You need to do that, but you must not forget your core business. That was a theme in that renewal.

As we go forward into potentially another renewal in a year to a year and a half, certainly the position that the world is changing, that Canadians are demanding something different, will probably require re-evaluation or at least reconsideration of that view.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Scott.

[Andy Scott, Liberal, Fredericton, NB]

Thank you very much.

I'd like to explore a little bit the CRTC's particular role in this exercise. It occurs to me that we have a traditional challenge, given the demographic nature of the country's population base and so on, and proximity to the United States, applied now to a whole new series of manifestations of that challenge.

I think we all probably agree on some terms of the challenge. Maybe there's a mixed response to that, and we might disagree in some ways, nuanced ways perhaps. But I think the issue will be, where do we find the creative energy for the solution? So the first question becomes, what is your role and mandate, and how far can you go in assessing that? You've been given a mandate to take a look at these issues. How far does your mandate allow you to go in doing the evaluation? The next part is the response to that evaluation, and how far can you go to say to the government, these are the kinds of things that we would propose be done, so to what extent can we take some strategic alliance here in terms of our work? Then, finally, on the other end of this exercise, as a regulator where do you see yourself? And you can inform us in terms of recommendations that we might make to the government as a result of the work we're doing.

I think part of the problem will be where the responsibility rests for dealing with this. We will wish an outcome, we will expect an outcome, and we will sit idly by while that outcome doesn't materialize, because no one really knows whose responsibility it is to make sure that outcome in fact is realized. So could you respond to where you fit in this equation?

[Scott Hutton]

Not to downplay changes that are before us, but if one looks at our situation right now--forget about new media--you have newspapers, you have magazines, you have arts, you have broadcasting. There are probably a number of different ways for Canadians to see themselves or to see stories about themselves and/or to express themselves. I think that's the foundation of the Broadcasting Act and a lot of our public policy interventions in all of the fields.

We have now an additional field coming on stream. It is a field that is probably closer to the areas that we've traditionally been dealing with, because a lot of the companies involved in this new field are either telecommunications companies, which we regulate under the Telecommunications Act, or broadcasting enterprises, which we regulate under the Broadcasting Act.

So you do have an existing role, and now you have something new. I think as policy-makers, we need to look forward. It will have to be a mix, into the future, of a variety of interventions. What are our responsibilities right now, or what is the CRTC's tool kit as it looks at broadcasters? Well, we have exhibition requirements, a percentage of Cancon, whether you agree with that or not. In the on-demand world, you'll be looking at shelf space instead of percentage of viewing. So those are tools that we can evolve into that domain.

We have expenditure requirements. We require broadcasters to reinvest or cable companies to reinvest into Canadian content. Money is something that would likely be able to survive into the future, so that's something you can probably count on there. What you may not count on is the source of that money. As you have more and more competition in this domain, as you have more and more players, as the market gets larger and larger, you may not be able to depend on the current players to be providing those funds.

Does that mean we look at different players to be providing them to those funds? Maybe. Do we look at more direct government intervention, again, to promote that, to provide those funds? Those are options into the future.

In terms of government intervention, certainly we don't have those funds, or that mandate hasn't been provided to us at this point in time, but our current means certainly will be challenged. What we are doing right now and over the next number of months is really finding out where the CRTC will find itself. What will the CRTC look like in five years? We have a new chairman, and he's asked us that question. Certainly we are going to be embarking on that domain.

Really, we have to go back to asking what's the main role of the broadcasting system. I think, or I would be a proponent of saying, there is a role for somebody to defend that in the broadcasting world, going forward. What exactly will that look like? It will be an evolution of our current tool kit, that's for sure, but I think something can be done certainly in the next five years, since the full impact, as we indicated in our deck, is probably a half-generation away.

[Andy Scott, Liberal, Fredericton, NB]

How do you reconcile the necessary interventions because of, again, the nature of the country and so on? We have a regulated system, we have a mixed system, we have all those things. How do you reconcile that with the fact that we need to be very nimble in order to keep up with the pace?

My fear would be that the very instruments that make it work are going to also make it slow. The pace is going to be the feature that is going to define this, and we are, for all the best reasons, going to have a hard time making the decisions quickly enough to keep up.

[Scott Hutton]

I can answer on two fronts.

One, currently we are certainly looking at all of our regulations to ensure that we remain flexible and nimble. We are conducting a set of policy reviews. While traditionally policy reviews have a shelf life of about seven to eight years, I think our current policy reviews are probably in the two- to three-year timeframe. Certainly we are very much aware that we must remain nimble, so we are balancing that internally. Our radio policy does reflect the need for flexibility. Even though that industry seemed to be doing extremely well at that time, we provided them with the flexibility to compete against the new platforms.

The other side of the coin is certainly our practice of using exemption orders, of not regulating the brand new content so that regulation doesn't impede its development. That's another way we achieve the balance.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

We will now move on to Mr. Kotto.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Thank you, Mr. Chairman.

In your opinion, is a public broadcaster still relevant in the 21^st century?

[Scott Hutton]

Yes.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Considering everything we've just discussed?

[Scott Hutton]

Yes. This comment seems very timely to me, for today, as well as for the future of the Canadian broadcasting system. Especially when it comes to English-speaking Canada, you can't lose site of our proximity to the United States. On the French-language side, the market's small size is the issue. Either way, it will be necessary to adapt to market changes as well as to changes in what Canadians want.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Could you succinctly remind us—and you may be able to expand later on—of the CRTC's specific role with respect to controlling Canadian content as it concerns the public broadcaster?

[Scott Hutton]

Are you referring to the CRTC's role with respect to regulating the CBC/Radio-Canada?