Canadian Heritage Committee on March 25th, 2009

[Michel Arpin]

That's hard to predict, but it's unfortunately not impossible. A restructuring effort is being made for the entire automotive sector. When we witnessed restructurings in the beer industry, we also saw advertising volume decline. The automotive industry is a major television user. It's possible, but there are options, new niches. The chairman talked about advertising for pharmaceutical products. We're also advancing the possibility for over-the-air broadcasters to negotiate the carriage of distance signals with cable operators.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

But it's hard to predict, as you say. And yet the government advances the opposite reasoning today in refusing to make a loan to the CBC. It says that if it granted it a loan, since the experts say advertising revenues will fall, the CBC will never be able to make it and would never be able to repay its debt. Do you understand?

I share your view. I don't see how the government can suddenly make that guess, that advertising revenues will decline after the crisis and that we have to let the CBC cut itself up and axe services. Ultimately, I personally think that suits the government.

My other question concerns regional content. You say that content from the regions is important, and it is. It's very important, even more so in light of the cuts to the CBC announced today. I was listening to one of my colleagues on the Standing Committee on Official Languages who said that, in his corner of the country, it's a major problem if there's no regional news. I was recently watching television back home and they interrupted the news to say that a water main had burst in Montreal. They don't care about that in Edmundston or Bathurst.

What is the CRTC's actual power, or lack thereof, to maintain not only a local presence but also local content?

[Michel Arpin]

That's why we established the Local Programming Improvement Fund, a fund that will benefit all television stations in markets with populations of less than one million inhabitants. No money will go to Montreal, but money will go to Rivière-du-Loup, Rimouski, Sherbrooke, Trois-Rivières, Saguenay and Gatineau. In that sense, it's a fund that will be used to develop local programming and even to make more of it. And we know that local programming in those markets is essentially news.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

I want to thank you for appearing here today. As you can tell, we're all very passionate about trying to find some answers. It's because we intimately care about the consumers and the broadcasters involved in this discussion.

We've talked a lot about the economic downturn. You've talked about advertising being one of the reasons that broadcasters are having a hard time. There has to be more to this equation. What do you feel might be the other problems the broadcasting industry is facing that is affecting this? I'd like to hear whether or not you believe our conventional media is about to take a drastic turn. What's going to happen with our conventional media?

[Konrad W. von Finckenstein]

As you know, we've finished a new media hearing. You have to understand that our entire broadcasting system is basically based on closed access, access via the airways, via cable, and via satellite, controlled by us, the CRTC. We could demand a certain amount of production, content, showings, exhibitions, etc. We were successful. We created a unique and very distinct system that probably had more diversity than any other national system, but it was based on us controlling the access. We are no longer there. We also no longer have the restrictions. There's only so much you can put on a spectrum.

With the Internet, we suddenly have this unregulated part that competes, and competes very successfully. On the other hand, it would be foolish to think you could control the Internet. Nobody thinks that. We certainly don't think so.

We are trying to get towards a world where the two can coexist. Right now a lot of content is produced so that broadcasting is repurposed for new media. Nobody could point to an example where people actually produce for new media and then repurpose the traditional. It's always the other way around. The two can actually be very complementary, but you have to be very careful that you don't lose your audience, which can happen very rapidly. There's also the whole issue of copyright. The rights are based on national systems and boundaries. They're not based on the Internet, because its regime doesn't fit.

I don't know whether my colleague appeared before you, but Tom Perlmutter, the president of the National Film Board of Canada, made an eloquent plea before us and others that what we really need is a new national digital strategy, because it's not only broadcasting; it's broadband, it's telecom, and it's copyright.

[Shelly Glover, Conservative, Saint Boniface, MB]

Was he one of the witnesses during your new media study, sir?

[Konrad W. von Finckenstein]

Yes, he appeared before us. I'm pretty sure you will call him. If not, I would suggest that you do so. He has a vision. In a nutshell, he basically says this is as important to us as the Industrial Revolution was.

We should try to get a handle on it. Other countries have done so. Britain has adopted a national digital strategy and so have France and Australia, and Canada should too. We are all talking about broadcasting. It's all I can talk about. That's my mandate. There are obviously issues that go beyond that.

[Shelly Glover, Conservative, Saint Boniface, MB]

I appreciate your giving us a bit of a taste of what is going to come out of this report that you did on new media. I'd certainly like to have more insight, if you're willing.

I have another question before we get too carried away with our time here. The question is about American over-the-air mandated signals, which are about to change here in Canada. I'm just wondering what kinds of repercussions you anticipate here in Canada. Perhaps you can address that for both the broadcaster and the consumer, because I fear that this may pose just another challenge to our local broadcasters, and I wonder what you have to say about that.

[Konrad W. von Finckenstein]

I'm sorry, I don't quite get the question. What exactly are you referring to?

[Shelly Glover, Conservative, Saint Boniface, MB]

The American over-the-air signals apparently have been mandated to change.

[Konrad W. von Finckenstein]

Yes. What will happen is if you are in the border area and you receive American stations right now over the air, they will be digital after June. You will still receive them over your cable and satellite if you have satellite. If you receive them over the air, you have to have a television set that is capable of receiving a digital signal, and if it's not built into your set, you need a digital antenna.

[Shelly Glover, Conservative, Saint Boniface, MB]

That's another challenge for our consumers.

[Konrad W. von Finckenstein]

Yes, absolutely.

[Shelly Glover, Conservative, Saint Boniface, MB]

Broadcasters are going to have yet another challenge. My worry is that with the mounting challenges facing our broadcasters and our consumers, we have to find some better solutions, sir.

[Konrad W. von Finckenstein]

Yes. Revenue solutions—for instance, a lot of broadcasters come to us and say there is this whole issue of part II fees under the Broadcasting Act. That is a special tax that's levied on broadcasters. It is like an extra two points of GST only for broadcasters. The broadcasters have taken the government to court and asked why they had to pay it because they don't benefit from the money. It goes to the CRF and they have absolutely no benefit from it. They won in the first instance. It went to the Federal Court. The federal government won in the second instance, and now it is going to the Supreme Court.

In the meantime, nobody is paying that tax. There are about $200 million of reserves that they carry on their books. Is this not a time to cut a deal? The government won its case. They're never going to get the money anyway because these broadcasters are broke. You know that. So why not make a deal here, saying we will stop this unfair tax? If we establish the principle, we can do it, but it makes no sense. On the other hand, you, the broadcasters, give up any claim for refund.

They have advanced this one to us many times. I've passed it on. It's not for me to settle, but it would certainly do a lot for their financial books.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Angus, please.

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

Mr. Chair, I was just going to follow up on a line of questioning from my colleague in terms of the obligation for the transition from analog to digital. Certainly for over-the-air signals it's going to cost the broadcasters, both public and private, a fair amount of money to put in those transmitters, and yet the spectrum sale from these vast amounts of analog capacity is going to create quite the money pot for the government.

Does the CRTC have any role in suggesting perhaps that some of that money that's going to come from the spectrum sale be used to help set up the digital transmitters that the private broadcasters are going to be on the hook for?

[Konrad W. von Finckenstein]

The only role we have, Mr. Angus, is one of advocacy.

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

Thank you for that. It was nice and succinct.

I've been doing some research on this, because the issue of local and news has to be front and centre continually while we're doing it. When I'm looking at it, I see that in some ways the crisis might be new to some people at head office, but the crisis at the local level and in the regions has been going on for years. There's nothing new about it. I think back to October 2000, when we lost 150 jobs in northern Ontario alone when CTV amalgamated, and it went up for its licence renewal and nothing was said. In 2004 we lost the jobs in Calgary and Toronto local news with the Craig takeover by CHUM. In July 2006 we had 281 job losses to kick off CTV's takeover of CHUM. In 2007 we had 200 at Canwest, in broadcast 350, at print 400, 40 at TQS, 200 further jobs at CTV and Corus. We've lost jobs at TVA, and of course today we lost 800 jobs at CBC. Yet throughout this, these broadcasters come back for their renewal licences and they get their renewals stamped and life goes on as normal. Now we see again your suggestion that you would consider lower levels of local programming requirements.

My argument to you, Mr. Chair, is that the local patient is pretty much on life support. He's very anemic, and the CRTC solution, which is again “Let's bleed the patient”, strikes me as positively medieval.

[Konrad W. von Finckenstein]

I won't go near your image.

Let me point out, first of all, that you seem to conveniently forget that we have just created the local improvement fund. We're going to pump $60 million into local programming.

Secondly, as I mentioned to you, we have given them the right to charge for retransmission of distant signals, which, by their estimate, is worth $40 million; others say it's $70 million.

Thirdly, as I have made clear many times, but let me reiterate, we are talking about exceptional provisions for this one year so as to make sure there is local community television that can avail itself of the new regime once we've figured out how it works.

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

Thank you very much. I appreciate that we have a local television improvement fund, and I certainly support it, but I think in terms of conveniently forgetting....

I'm talking about regulatory obligations. The CRTC has to say to the broadcasters, “These are part of your commitments”, but year after year we see the bleed-off, the firing of local service. Now we're looking at a crisis where, in the last year, we're looking at almost $800 million in spending on foreign programming--Canadian spending, stagnant.

Local news spending has been going down, even when they were making money. Contrary to my colleague Mr. Bruinooge's view, local news spending doesn't seem to account for all that much on the bottom line, and they're making more in advertising.

I'm wondering where the CRTC's role is in saying, “You're making money off specialty services, you're making money in other areas, so where is your commitment to ensure local news and broadcast?”

[Konrad W. von Finckenstein]

Mr. Angus, we don't micromanage the industry. We give them a licence and we give them the terms and conditions of licence. We tell them that they have to have x number of hours of local news and local content. It's up to them to decide how to fulfill that.

You know, I'm not going to get into the business of judging whether this is good quality or bad quality. Obviously, they are there to make money, and they want to attract the largest audience they can. It's in their interest to make good, attractive local programming and news programming.

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

But it's not about micromanaging. It's about living up to the obligations.

They are protected by the taxation code, section 19.1. They are given a whole whack of benefits to have a protected market. At the end of the day, the numbers speak for themselves. It's not about micromanaging, it's about saying, “Listen, your spending on foreign programming has gone through the roof. We've cut the regulations to allow you to do that. Your spending on local news is dropping.”

Now you are suggesting to us that you will consider cutting the obligations for local and independent programming at these stations. That is managing what they're doing.

[Konrad W. von Finckenstein]

It's on an exceptional basis for one year.

You conveniently forget the second thing I said, which is that we're going to look at one-to-one spending, exactly for the very reason that you put your finger on: if you're going to make money in Canada as a Canadian broadcaster, you should not spend all your money buying programming from Hollywood.