Canadian Heritage Committee on March 27th, 2007

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, sir.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Abbott.

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

Thank you for your testimony.

It's been rather interesting that Ms. Fry and now Ms. Bourgeois brought up the issue of funding. I'm about to do the same thing, because what we have is you in a very unique position, as the Canadian Conference of the Arts, where you would be aware of the funding that goes into many aspects of arts. Certainly we round it out roughly at $1 billion that goes to the CBC.

The question, really, is where the funding should come from, and should it be more, should it be less. I think that you have some turf of your own to be protecting, because there's not an infinite envelope of taxpayer money, and I know that you respect that. Therefore I think you are in a position, and we should be prevailing on you to give us an opinion, as an interested party, on the current level of funding that comes from general revenue to the CBC.

[Alain Pineau]

I would expand your question to say the level of funding and investing the Canadian government makes in arts and culture in general, because this is our viewpoint. I'm focusing more on the CBC here today, but it's just one of the components of the big picture. It is our published position--and it is supported by all of the various organizations we deal with--that within the recognition of the limitations of the public purse, the Canadian government does not invest sufficiently in arts and culture. It's a very important sector of our economy. It plays a role in all sorts of ways and fashions, whether it's through education, through health care. Arts and culture are to be found everywhere. They're not only the kind of thing that elevates you.

So there is not enough of an investment in that sense. The government itself.... And I'm not attacking this government, because the cuts took place under another government, and before that under another government, so it's not partisan at all. It's just a question of no, we're not investing. As a society we are not investing. Statistics show it internationally. We're not investing enough in arts and culture.

On the CBC funding, we're not investing enough either. Should all the money that it requires to fulfill its mandate adequately in the new environment and produce truly Canadian content and contribute to the development of this sector by having farm teams, making experiments, being daring, trying things that would not work commercially.... We owe it to ourselves to have such practice teams or development teams, and that I see as part of the CBC. And that's why, no, there is not enough investment.

How much? Should it all come from government? I'm not saying so. We're talking about putting levies on distribution forms to contribute to Canadian content. Some of it can come through there, through the CTF, or other funds like that.

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

You made the statement that we could find all sorts of other ways to fund the CBC. Can you give us some suggestions?

[Alain Pineau]

That's exactly what I was getting into. The CBC currently gets indirect funding through the CTF. It does not access the CTF funds itself. It has been demonstrated in front of this committee beyond a shadow of a doubt, but it provides distribution platforms for Canadian content that is developed by an independent sector that this country adopted 10 to 12 years ago to have as a policy and develop that. We believe that this is a good system. It's there, it produces high-quality programs. The CBC, particularly if it is relieved of its obligation to compete with the private for commercial revenue--and I'm not saying it should be completely out, that remains to be seen--should be able to access those funds as much as possible.

As I said, we could create new rivers to fill those funds. That's what we mean by regulation of new media and stopping this decision not to regulate, to give an exemption to the media.

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

You said we could create new rivers. I'm sorry, I don't understand that statement.

[Alain Pineau]

ISPs, Internet service providers. All people who provide cultural content on your cell phone, on the instrument on which you receive podcasts, on the Internet should be called upon to contribute the same way that broadcasters and cable operators currently contribute a portion of their revenue to talent development and to the television fund, among others. There's a multitude of those funds. One of the problems is that in a sense when you reproduce you have to spend--as you heard here--most of your time trying to cobble the money together, because it's all over the map.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much for that.

I thank you, witnesses, for coming before us here this morning. Thanks for the questions around the table, and thanks for your answers.

We'll take a short recess of five minutes.

[The Chair, Conservative, Gary Schellenberger]

Welcome back to the table, everyone.

Our next presenters are from the Canadian Association of Broadcasters, Mr. Glenn O'Farrell and Ms. Susan Wheeler.

Mr. O'Farrell, you have the floor.

[Glenn O'Farrell, President and Chief Executive Officer, Canadian Association of Broadcasters]

Thank you very much, Mr. Chair.

We were engaged in a heated morning-after discussion there, and I should have been more mindful of the time. My apologies.

[The Chair, Conservative, Gary Schellenberger]

That's okay. We were a little delayed making our way up here too.

[Glenn O'Farrell]

Honourable members of the committee, my name is Glenn O'Farrell and I am the president and CEO of the Canadian Association of Broadcasters. Joining me here today is Susan Wheeler, the CAB's vice-president of policy and regulatory affairs.

First let me thank the committee for the opportunity to appear again before you to share our views on your investigation into the role of CBC and Radio-Canada. As you can imagine, this is an important process from the private broadcasters' perspective. It's one you've embarked on, and it's a discussion we need to have sooner rather than later.

In our view, any examination of the roles and activities of our public broadcaster must recognize three fundamental realities. First, both private and public broadcasters operate in a fragmented and very rapidly changing media environment characterized by new technologies and changing consumer habits. Second, a healthy Canadian broadcasting system needs strong and vital public and private components that are relevant to Canadians. Third, Canadians are entitled to accountable and transparent reporting of publicly administered funds and activities.

We urge the committee to invest the time and energy in your committee work to ensure that Canadians have a strong and properly funded public broadcaster that complements a vibrant and dynamic private broadcasting sector, providing premium content that successfully serves the needs of all Canadians.

The CBC and Radio-Canada face many of the same challenges as private broadcasters, including competition from unregulated media sources, expanding content platforms and, of course, increasing copyright payments.

Canadian private broadcasters are proud of the role they play in achieving the cultural policy objectives, as set out in the Broadcasting Act. A brief look at key audience numbers and program expenditures demonstrates the value that the private broadcasting sector brings to Canadians.

Private radio broadcasters account for approximately 88% of all radio listening. Our sector accounts for approximately 66% of total spending on Canadian television programming, and Canadians dedicate about 66% of their total viewing hours to privately-owned Canadian services. It follows that any review of the CBC/Radio-Canada mandate should be mindful of the importance of maintaining and fostering a strong Canadian private broadcasting sector,

In certain specific activities, CBC/Radio-Canada has been successful in implementing its public service mandate in a way that complements the private sector. Their radio networks, for example, provide a distinctive non-commercial public broadcasting service that complements the service provided by private radio broadcasters. However, the situation with respect to the CBC/Radio-Canada's television network does not reflect a similar or comparable complementary public broadcasting service. There are several issues that warrant review and discussion in this regard.

In our written submission, the CAB has provided four specific recommendations to address these issues.

First, CBC/Radio-Canada should be required to publicly report annually detailed information relating to its radio and television networks as well as its online services, rather than just providing the broadly aggregated information that it currently places on the public file.

Second, the government should further study the implications of CBC/Radio-Canada's reliance on advertising revenues to support its television services.

Third, CBC/Radio-Canada should focus its resources on regional and national programming, leaving television programming of purely local interest, namely local news and information, to the private television broadcasters operating in local markets across Canada.

Finally, in moving into new digital platforms such as the Internet, CBC/Radio-Canada must ensure that its focus and its resources remain on its core broadcasting services as the primary vehicles for the achievement of its mandate.

The CAB believes that the legislative mandate of CBC/Radio-Canada, as set out in the Broadcasting Act, remains appropriate.

I'll now turn it over to Susan Wheeler to address the core issue of our submission: accountability.

Susan.

[Susan Wheeler, Vice-President, Policy and Regulatory Affairs (Television), Canadian Association of Broadcasters]

Thank you.

In our view, the real issue is not the public broadcaster's mandate per se but rather the way in which CBC/Radio-Canada interprets and implements that mandate.

We have seen over the past decade that even though the public broadcaster's mandate has not changed, the interpretation of that mandate by different management regimes has been radically different.

CBC/Radio-Canada is a public broadcaster that in 2006 received a parliamentary appropriation of just over one billion dollars. Clearly, this direct public subsidy conveys a special obligation to CBC/Radio-Canada as a public broadcaster. CBC/Radio-Canada should be expected to use this public subsidy to provide a public service: programming that is distinctive from and complements the programming provided by the private sector, that is of relevance and appeal to Canadian viewers, and that enhances diversity within the broadcasting system. Moreover, CBC/Radio-Canada should be fully accountable for how it uses that subsidy to achieve its public mandate.

It is instructive to examine how public broadcasters in other countries are held accountable for the way in which they carry out their public mandate. We note that throughout this process, the BBC has been identified as a leading model for a public broadcaster, and we also find a lot of value in this example, especially when reviewing how it has defined its role and structured its organization to fit that role. For example, the BBC recognizes the impact that its activities can have on private broadcasters. Because of this, it is governed by a set of fair-trading guidelines that ensure that it does not use its public funds to compete unfairly with commercial companies, and that any commercial activity it undertakes supplements and supports its public purposes.

Equally important, the BBC produces an annual report and account, which provide detailed information, both qualitative and quantitative, on all of its public-purpose and commercial activities. This includes the reporting of extensive programming, audience, and financial information for each of its individual services, which in turn permits assessments that are objective, rigorous, and transparent.

We believe that CBC/Radio-Canada should strive towards a similar level of transparency and accountability, to ensure that it is using the government subsidy in an effective manner to further its public service mandate, but not use those funds to compete unfairly against private sector broadcasters. This is consistent with the recommendation of the Auditor General of Canada, following a 2005 examination of CBC/Radio-Canada, that measures should be adopted to improve accountability and reporting.

As a start, CBC/Radio-Canada should be required to place on the public file detailed financial information relating to each of its services, rather than just the broadly aggregated information that it currently publishes. This would provide an essential tool to enable interested parties to assess the extent to which public funds are being spent on programming that furthers the mandate of CBC/Radio-Canada, rather than being driven by purely commercial considerations.

We want to emphasize that without this level of transparency and accountability, it is virtually impossible to complete a fair and fulsome review of the public broadcaster. There is simply too much of the day-to-day activity of the CBC and Radio-Canada that we cannot speak to because information on that is held in privilege.

[Glenn O'Farrell]

We can make certain comments based on the information available to us.

First, CBC/Radio-Canada's overall TV programming strategy puts the public broadcaster in direct competition with the private sector. Because programming decisions are driven by the need to maximize viewing audiences in order to generate advertising revenues, the proper balance between the public and private elements of the Canadian broadcasting system is distorted. It introduces unhealthy competition for the acquisition of popular programming.

Because of the importance of this issue, CAB believes that the government should assess the impact of CBC/Radio-Canada commercial activity on its ability to properly fulfill its public service mandate, with an ultimate goal of finding ways to reduce the reliance of CBC/Radio-Canada on advertising revenues in the future.

Second, in recent years, CBC and Radio-Canada have exploited a number of other broadcasting platforms, starting with specialty television services and pay audio, and now moving on to newer digital platforms, including a number of Internet services. CBC/Radio-Canada must ensure that its presence on these platforms does not come at the expense of its core broadcasting services, which are the primary vehicles for achieving its mandate.

Third, an additional concern relates to CBC/Radio-Canada's business practices with respect to digital media platforms, the resulting impact of such practices on the private sector and the level of disclosure of information that CBC/Radio-Canada should be expected to undertake relative to its digital media operations.

Mr. Chairman, the need for transparency and accountability, in our view, is paramount in assessing how the public broadcaster's new media strategy is carried out. CBC/Radio-Canada has not published or revealed its new media in its annual report or, to our knowledge, in any other document since 2003. This information would clearly facilitate an accurate assessment of whether CBC/Radio-Canada's activities in this area do indeed help or assist to fulfill their public mandate. We don't have that information. Thus, we can't make that assessment.

The CAB believes that the standing committee's examination is a valuable step towards better defining CBC/Radio-Canada's role in Canadian broadcasting for the next decade. In our view, the public policy objective must be to reaffirm the value and relevancy of CBC/Radio-Canada to the Canadian public as a unifying force that helps foster and shape our cultural identity. By soliciting the views of interested parties, the standing committee will be in a position to identify those particular issues that require further study and/or clarification, providing a strong foundation for consideration of the detailed operating plans that will be prepared and considered at the upcoming licence renewals for CBC/Radio-Canada services.

We appreciate the opportunity to appear before you today, and we'd be pleased to answer any questions you may have. Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you for that presentation.

We'll give the first questions to Mr. Scott. I understand it might be shared. It won't be five minutes each.

[Andy Scott, Liberal, Fredericton, NB]

Understood--so I'll speak quickly.

On the question of the delineation of the resources that you suggest should be focused on regional and national programming, leaving local interests to private broadcasters, what happens in the cases where there is no fulsome private broadcast? I live in a provincial capital that's covered privately, I guess, by Global and ATV, both of them emanating from Halifax, and it's obvious--no disrespect to my good friend from Halifax. But if it weren't for the public broadcaster doing local in Fredericton--and I suspect the same would apply to Charlottetown--it would be very out of balance in terms of what would be of local interest. That's one. What happens then?

The second one--and then I'll stop--is very simple. In more practical, detailed terms, what is the complementary relationship? I know in theory, and I heard it in theory, but I'd like to know practically what you mean when you say that. What are the things that are appropriately complementary? Where is that appropriate complementarity not being fulfilled right now?

[Glenn O'Farrell]

Thank you very much, Mr. Scott.

On your first point, I think it's an absolutely valid concern you raise in regard to exceptions to the rule, if we want to call it that. In other words, consideration has to be given to all of the regions of Canada. Where there are exceptions to the rule, as you suggest would be the case in your hometown, the CBC should certainly be sensitive to that.

We have no grievance or we have no particularly strong views on that point. However, we think the rule should not be that they try to duplicate, but that they try to be complementary.

To the second part of your question, what is complementary? I would start with the concept that the complementary role of the CBC and Radio-Canada should be one that abides by one particularly important founding principle among others.

Let me take a moment on one. The CBC's role in the system should not have a distorting effect on the commercial marketplace for private broadcasters. When the CBC or Radio-Canada has a distorting commercial impact on the marketplace, it is no longer complementary. There is effectively direct competition in the marketplace, as opposed to complementarity in the marketplace. It can be assessed or measured in a variety of ways, which we could get into some discussion on.

But I think the principle would come from what we tried to say in our written submission and again here this morning. If you add the concept of any distortion in the marketplace, it has to be viewed as less than complementary. There may well be circumstances, and we could examine them, where the distortion has an offsetting public policy advantage to it and it should be looked at. But I think the principle should nonetheless be such that wherever there is such distortion, we would try to avoid it at all cost.

[Hedy Fry, Liberal, Vancouver Centre, BC]

I have two quick questions. They both somewhat have to do with financial viability.

I think you're saying, as everyone has said, that the CBC should be free of commercial revenue. But in order to do it, the CBC will have to become financially supported in a manner that allows it to be viable with regard to its mandate. It means the government will have to fund the CBC appropriately. However, at the moment, I notice that English CBC is raising revenues of $200 million a year to make it viable, and French CBC is raising revenues of $100 million a year to make it viable. Should the government suddenly find an extra $300 million a year to give to the CBC in order to make it viable? That's the first question.

The second question is this. You said the BBC raised a level of funding to help it on an international level. It took local programming and made it internationally viable for funding. How did it do that? How can the CBC do that to raise some of the $300 million it needs right now from commercial revenue to make it viable?

[Glenn O'Farrell]

On the first question, on the advertising revenue, I don't think there is any possible way we could have that discussion here today without more information before you, Madam Fry, and before any witness appeared before this committee.

That's why we are suggesting that accountability and transparency must be introduced in a much more meaningful way as it relates to the CBC and Radio-Canada's operating activities, where we can clearly understand where revenues are being derived from in terms of the programming of the services, and where the expenditures for programming are being devoted. And in the absence of that more detailed information, I don't think we can zero in on one number without understanding the cost implications, or frankly, understanding the balance sheet more clearly.

What we are suggesting in this respect is that because the CBC is publicly funded, we feel it's not unreasonable to expect that Canadians would not only not object to it, but they would embrace the concept of more accountability on their dollars and how they are spent by a crown corporation.

The CRTC has accountability obligations on the private sector that far exceed those that are imposed on the CBC or Radio-Canada now--for instance, specialty channels that are financed by advertising revenue and by subscription fees. Because it was deemed that subscriber fees were being paid to a service as a revenue stream, the CRTC originally, when licensing, required much broader disclosure requirements of those services, such that each and every one of the services that operates in Canada today files annual returns that are extensively detailed on revenue and on expenditures in a way that CBC is not even close to. And that's for services that are not enjoying or not attracting any public subsidy funding through appropriations, such as the CBC does.

All we're saying on the topic of accountability is we think it's important to have a useful discussion. People will have different views on what to do, but to have a useful discussion we have to start from a foundation that is based on fact, and we don't have those facts available to us. Until those facts are available to us, it's a little bit like having a discussion in the dark.

On the BBC subject, I'll let Susan speak to our remarks on the BBC. In essence, we're saying BBC stands out, in our view, not as the be-all and end-all, but as perhaps a place where we could learn about how public accounting and transparency of a public broadcaster could be imported in some way to apply to the CBC.

[Hedy Fry, Liberal, Vancouver Centre, BC]

I'd like Susan to speak specifically to how the BBC gains revenues internationally, just through local programming internationally--specifically that, not anything else.

[The Chair, Conservative, Gary Schellenberger]

Be very short if you can, because we're up to almost eight minutes.

Okay, Ms. Wheeler.

[Susan Wheeler]

I can't speak directly to their specific programming strategies for their local programming on their international platforms, but what I can tell you is that through their charter they have identified those services that are going to have commercial activities and those services that are going to be in keeping with their public service mandate. They use their commercial services, such as BBC International and BBC World, to really export that content internationally and try to build some revenue around that.

It's really that division of priorities and purposes that I think has been successful for the BBC in enabling it to garner additional revenues.

[The Chair, Conservative, Gary Schellenberger]

Okay, thank you for that.

Mr. Kotto.

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

Thank you, Mr. Chair.

Welcome.

Your first recommendation indicates that, in your opinion, CBC/Radio-Canada lacks accountability and transparency.

Could you elaborate on this?