Canadian Heritage Committee on March 25th, 2009

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Thank you, Mr. Chairman.

Thank you for being here, Mr. von Finckenstein.

We realize that our committee's study on television has come at the right time and is extremely important. This morning's announcements of cuts to the CBC is a clear reflection of the state of crisis in television. In the CBC's case, the crisis is accentuated by the government's inaction and insensitivity as well as its ardent opposition to public radio. However, that isn't the subject of our meeting today.

When I knew that you were coming, Mr. von Finckenstein, I prepared some questions. However, following your remarks, my questions are no longer relevant. I'm nevertheless going to put them to you, because the answers I have obtained thus far aren't complete. So you'll be able to complete them.

With regard to regional content, I want to remind you that Quebecor asked you to reduce local programming from 21 to 12 hours, particularly at its Quebec City station. I had prepared my question taking it for granted that you would accept no reduction in regional content or softening of the requirements, but I see that the contrary is the case. I wanted to know how the CRTC intended to help private broadcasters. However, I see on page 5 of your brief that, given the exceptional circumstances, you are willing to ease regulatory obligations in the short term.

I would like you to tell me about that, after which I'll ask you my second question.

[Konrad W. Von Finckenstein]

Commercial television has an obligation to broadcast a certain number of hours of local programming. However, it isn't harmonized, it isn't equal on all stations. It varies from four to 36 hours a week. That depends on the period when the television station applied for its licence and what it has to offer.

In the current situation, however, it is impossible to provide that kind of rate of local programming. Since we want the stations to survive, we are prepared to lower these quotas and to harmonize them so that all stations are subject to the same local content obligations.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

The CRTC is as complicated as commercial paper. So I want to make sure I understand. You're saying that you want to harmonize the number of hours of local programming that a broadcaster must broadcast? Is that what you're saying?

[Konrad W. Von Finckenstein]

As I said, the obligations now vary among the various stations. Some stations have minimum obligations, others have very high obligations. It seems to me that must be harmonized, first of all. Second, for the coming year, on an exceptional basis, we may lower them. We've done that in the case of TQS, for example, to give it a chance to survive. My colleague Mr. Arpin can explain the situation to you, citing the case of TQS as an example. That's exactly what I'm talking about.

[Michel Arpin, Vice-Chair, Broadcasting, Chairman's office, Canadian Radio-television and Telecommunications Commission]

Thank you, Mr. von Finckenstein.

The answer that the chairman gave you is a pan-Canadian answer. Indeed, as he pointed out, there are market size disparities among the major networks, whether it be CTV, Canwest, A-Channel, e-Channel or Citytv. In the case of the francophone market, we have one station that is a bit different because there is relative parity among the regional stations, except in Quebec City. In Quebec City, there are much stiffer production obligations than in the markets of Trois-Rivières, Sherbrooke and Saguenay. That's based on the market size and dynamic of Quebec City. It's hard for me to comment on the specific nature of the TVA group application, since the hearing will not be held until the end of April and we haven't yet heard the evidence TVA will want to submit. So this is an important issue for TVA's appearance and an important issue for the decision the CRTC will be called upon to make.

In the case of TQS, the CRTC found itself in a situation in which a business was in bankruptcy, and we ultimately agreed to a compromise for a short period of time. That's not the case of TVA, which is not a bankrupt business. At least—

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

That would be quite a surprise.

[Michel Arpin]

This morning it wasn't. So in that respect, we agreed to a levelling-down, but one that will end on August 31, 2011. The CRTC is in regular communication with the new operators of TQS. We're seeing some light at the end of the tunnel, and, before 2011, I expect we'll see an increase in local production in the regions.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

The fact remains that TQS—

[The Chair, Conservative, Gary Schellenberger]

We move on now to Mr. Angus.

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

Thank you, Mr. Chair.

I'm very pleased to have you here. What brings us here I think is the issue that's facing our local and regional television services. We want to make sure that whatever decisions are made through the CRTC have the best benefits of our regions in mind.

I'm looking at one of our stations in crisis, Windsor A-Channel. Twenty-five percent of the houses in Windsor receive their television through satellite, so they can watch A-Channel Victoria, Ottawa, or Barrie, but they cannot watch A-Channel Windsor. How does A-Channel Windsor compete when 25% of the houses in its market can't access it?

[Konrad W. von Finckenstein]

You of course pick on Windsor, which is a very special situation. You're right next door to Detroit and they have the whole American programming offered over the air. Therefore, you have a very low subscription rate to cable and satellite to begin with.

Secondly, as the Windsor station itself has a very low local content program—

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

But they couldn't see it even if they wanted it. This is satellite.

[Konrad W. von Finckenstein]

Hang on. Let me just get the facts on the table.

Scott, can you enlighten him on what the situation is in Windsor?

[Scott Hutton, Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission]

There's a wider service area than just Windsor, but let's call it the Windsor station for now. There are approximately five to seven hours over that territory of local programming that are required from that station.

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

I'm not interested in that. I was interested in why there's no obligation on the satellites. You say Windsor is special. In Sudbury the direct-to-home is 47%, but I only have five minutes here so I'm going to have to move on.

We try to get the numbers of what the broadcasters are making and what's going on in costs and local. It's difficult. We crunch our numbers, and it seems like four out of the last 15 years is the only time they've lost money at the local level. Last year they made potentially $387 million in ad revenues, and it cost them about $385 million. Yet we're being told that the crisis is local.

The CRTC has denied numerous requests for station-by-station financials. Under section 25 of your rules and procedures you could make those statements public if it was in the public interest. Would you not agree that at this time, when we're talking about systemic regulatory changes to service in Canada, it would be helpful to make the financial statements public so we actually know what the extent of this crisis is?

[Konrad W. von Finckenstein]

We make public as much as we can, which we feel is the happy medium that lets companies compete and have commercial confidentiality while not having it displayed publicly and putting them at a disadvantage. On the other hand, there is enough information so that people who appeared at our hearings and commented have an understanding of what's going on. Mr. Delaney can tell you the exact level of what we make available.

As with all disclosure, there are always two sides of the coin. On the one hand, you try to protect the commercial confidentiality of an enterprise, but on the other hand, as you pointed out, there's a public need for information so people can make informed decisions. It's where you cut the balance.

I can't agree with you that making the financials of these stations available in any detail would not hurt them. It would clearly put them at a disadvantage.

Stephen, perhaps you can say what we make available.

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

Sorry, I only have five minutes. I appreciate your answer.

I guess my concern is that to me, one of the big obstacles has been the CRTC. I mean, the CRTC has rubber-stamped ownership acquisition after ownership acquisition, and the argument, we have been told, is that it would protect local. You've gutted the obligations for Canadian content. And now what are we seeing after all this time? U.S. programming has gone up 75% since 2000 and Canadian programming is stagnant.

We have not seen evidence of losses at local television networks to justify the so-called extent of the crisis. What we're seeing is that some companies have massively overleveraged themselves because they've been allowed the consolidation. We see the money coming from specialty channels, but the losses are being felt on the backs of local, and yet you're saying here that you would consider lower levels of local programming.

[Konrad W. von Finckenstein]

It would be on an exceptional basis.

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

It shouldn't be on any basis, unless you can provide actual numbers to justify why it is that local services and local Canadian content, which have taken the brunt of every CRTC regulatory change over the last 15 years, should be the ones to be sacrificed at this time. I would have a very difficult time going back to the public and saying that we did due diligence. We don't even know the numbers, and we are seeing clearly that the spending is disproportionate. You're expecting us to accept that in any circumstances local is going to pay. I don't know how you can justify that.

[Konrad W. von Finckenstein]

First of all, I don't agree with your description of us as rubber-stamping. We spend an awful lot of time on ownership transfers before we approve them or don't. We weigh a whole host of factors, not only local content and ownership. Be that as it may, you obviously have a different view on that.

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

Ninety percent of the market is controlled by two stations now. That's rubber-stamping.

[The Chair, Conservative, Gary Schellenberger]

Mr. Angus, your time is up.

Now we'll go to Mr. Del Mastro, please.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much.

I thank our guests today from the CRTC for appearing.

I'd like to go back to what Mr. Simms had to say and to also pick up on where Mr. Angus was.

I had the opportunity to view a very recent poll, which I believe came from the Strategic Counsel, that talked about how much Canadians value local television, specifically local television news. They have said, as you've indicated, Mr. von Finckenstein, how much it means to them, very clearly.

You also pointed out in your response that Canadians are paying. They are paying a fairly significant amount into a fund for local programming. They're paying it in their cable bills or in their satellite bills. You talked about the 5% gross revenues that are kicked into a fund. That has increased to 6%. You said that the 6% was roughly $60 million per year. Being a math guy, I worked that out, and it's about $2 per Canadian just for the increase. They're now kicking in about $12 for every Canadian.

I'm not sure how many satellite or cable subscribers there'd be in the country, but I would suggest that probably one-quarter of Canadians actually have a subscription.

[Konrad W. von Finckenstein]

There are 10 million.

[Dean Del Mastro, Conservative, Peterborough, ON]

There are 10 million subscriptions for cable or satellite in Canada. That would mean that each subscriber is paying about $36 per year for local programming. Is that correct?