Canadian Heritage Committee on April 22nd, 2009

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

People have criticized you for having gotten yourself into this difficult situation, that this is of your own making. They refer to your acquisitions, your investments.

Can you understand? Are you getting the interpretation?

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

Did you turn up the volume?

[Peter Viner]

I'm sorry.

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

Many of your critics say that you have gotten yourselves into this situation by proceeding to make acquisitions, that your plans were too ambitious.

Today, you are asking the government to help you get out of the mess you got yourselves into. How do you reply to that?

[Peter Viner]

The problem for conventional television is shared, as you've heard by others, with others. The sector has been in decline for some time. There are too many licences chasing too few ad dollars. It's the migration of viewers to specialty channels and to the Internet. This has nothing to do with our capital structure. You see what's happening at CBC. You've heard from CTV. It's backed by some of the wealthiest business units in Canada. Rogers wrote down half the value of their Citytv purchase after 18 months. It's pretty obvious that this is a sector problem, not a Canwest problem.

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

If you were to obtain fee-for- carriage, what would you do with that money? What would you do if the rules of the game were changed, if you could access carriage fees?

[Peter Viner]

First of all, we were asked the question: what would prevent us from reducing service in local markets? We said there were a number of things. A fee for carriage is one of them. We think part II fees, which I believe the chairman of the CRTC addressed.... We think a better, fairer distant signal regime that would force the cable companies to pay for reigning three or four of our signals into a market that we can't monetize.... It could be a relaxation or a review of the type of advertising allowed on television--for instance, pharmaceutical advertising. We're saying that if we don't get some sort of relief, if there's no structural relief, then local service will be cut.

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

We hear it again.

That is what I was saying earlier. It is becoming tiresome for us, as Members of Parliament, to hear everyone engaged in a form of blackmail. I am not singling you out, but everyone has told us that if the government does not do this or that, they will make cuts here or not provide such services there, etc. We are trying in good faith, and in a non partisan manner, to find solutions for the industry as a whole. Fee-for-carriage could be a solution, but the cable television companies are against it.

Mr. Mayrand, Mr. Viner, could the Local Programming Improvement Fund, with its $60 million, represent a long-term solution?

Ms. Bell, what are your views?

[Charlotte Bell]

First off, the anglophone market will not receive $60 million, but rather some $40 million.

We will be taking part in a public hearing next week and we will be broaching this subject. Is it the solution to the problem? It will not have an impact on our revenues, which will continue to decline in the conventional television sector.

Mr. Rodriguez, that sector was set up some 50 years ago. It is expected to offer the same services as when there were only three stations, whereas we now have to compete with hundreds of channels. That does not make sense.

I know that you are disappointed by what we are saying, but that is the situation. We can only tell it like it is, that is not blackmail. CTV officials have told you that they will be closing stations. For our part, we have no choice, we have considered every possibility, we have exhausted all of our options.

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

You are therefore asking for fee-for-carriage. Cable television companies are telling us that if we impose fee-for-carriage, they will transfer the cost directly to consumers. Right?

[Yves Mayrand]

Yes, I can confirm that Cogeco Cable would be obliged to pass on the additional costs, i.e., the fee-for-carriage that would have to be paid to conventional broadcasters, to our customers.

The reason for that is quite simple. We are a public company. We have shareholders. We have to make sure that their interests are also factored into the equation. This is not only about the interests of the broadcasting system, some broadcasters and our consumers, but it's also about the interests of our shareholders.

Coming back to your question, Mr. Rodriguez, let us say that the problem cannot be entirely fixed with a local programming assistance fund. We all agree on that.

Contrary to others, we are for the new fund. It's already much better than the status quo, but it is not a silver bullet, and neither is fee- for-carriage for that matter.

Why is fee-for-carriage not a silver bullet? Because, as I indicated in my opening remarks, it is far too expensive to purchase American programs. That is what we told the CRTC last year.

The figures were in the 2007 report. Canadian private broadcasters spent approximately $722 million on foreign programs, an increase of 4.9% over 2006, whereas spending on Canadian programs decreased by 1.2%, accounting for $616 million.

Those are the CRTC's own figures, Mr. Rodriguez. The figures are slightly different this year. So much the better if Mr. Viner has been able to stem the increase in costs for American programming.

Nevertheless, the fundamental problem is that there are no rules. They can spend whatever they wish on American and Canadian programs.

In support of Mr. Konrad von Finckenstein, I must confirm that I was at the CRTC's public hearing around this time in 2008 and was expecting a clear and specific commitment for a dollar for dollar reinvestment of carriage fees in Canadian programming, and no such commitment was made.

It is all well to say that it was a policy hearing, but the broadcasting policy applies to all components.

[The Chair, Conservative, Gary Schellenberger]

We're out of time here. This is going to be a three-minute round.

Ms. Dhalla, please.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

To be honest, this is becoming a little bit frustrating and challenging, because everyone around this table, as has been mentioned before, is trying to work towards having sort of a non-partisan solution and a base of recommendations. We have someone who just came before you who said the industry is not even in a crisis, and we have talked to Canadians across this country who are losing local programming. All of us know individuals in the industry who have lost jobs, who are in the process of losing jobs. There are stations in Hamilton that don't know if they're even going to have a future.

I'd like to pick up on what Mr. Mayrand said. You had said that, unequivocally, there hadn't been anything stated at the CRTC hearings. I have the transcript right here in front of me, and if I could, I'll just quote a question asked by the chairperson: “So the fee-for-carriage would be in effect to ensure there is local content?” The answer given by Mr. Asper was yes, they were agreed on that. There are many other things in the transcript. When the chairperson came before us, he stated that there wasn't a commitment made. The individuals involved, and the transcript, show that there was a commitment made. There's clearly a discrepancy going on.

So not to belabour the point, but if I could just ask very quickly, do you think this could have been prevented? I mean, the chairman came before us and said that no one saw this coming. It was as a result of the collapse of the auto industry.

I think a lot of people saw this coming for many years. I hope we're not back here 10, 20 years from now with stations in Hamilton closed and thousands of other jobs that have been lost. Do you think this could have been prevented? And what lessons can be learned as a result of this? We have a public inquiry starting with the CRTC next week. Personally, and I think many will agree around this table, it is very late. What other lessons would you provide, or recommendations would you give, to this committee to prevent this--the job losses and the closures--from happening in the future?

[Peter Viner]

I think that's a good question. I think it could have been prevented, but no amount of crisis can be thwarted or prevented without some pain. The pain may be for the local stations that lose some local service, the cable companies that have to pay a portion for fee-for-carriage, or the broadcaster that realizes reduced profits. There's no painless solution here.

I'd like to make a couple of points, though. The Canadian broadcast system is supposed to be in balance. At the moment it's out of balance. One sector has been given a government monopoly, and that is the cable companies. They are now enjoying profit margins of about 55%. Let's not confuse business acumen with a government monopoly. That's how they got there.

Another sector has cultural and news obligations to local markets but currently cannot afford to sustain them. In 2000, when, as mentioned, we bought CHCH, our profits were over $200 million. This year they'll be negative $10 million. That's a pretty dramatic change in eight or nine years.

We've got to wake up and smell the coffee. This is a secular decline that's been in place for a very long time. You cannot license 170 new stations and expect the audiences to remain the same or expect advertisers to continue to support CHCH or Global Television or CTV if the audience has migrated to TSN and Home and Garden. I'm sorry, but that's the way it works.

To answer your question without turning this into a rant, we've got to make some painful decisions. You can't make everybody happy.

[The Chair, Conservative, Gary Schellenberger]

Thank you for that.

We'll move on to Ms. Lavallée, please.

[Yves Mayrand]

Can I just say something quickly?

[The Chair, Conservative, Gary Schellenberger]

Yes, but please be very short.

[Yves Mayrand]

First of all, cable is not a monopoly. I mean, you've heard this. We compete with several--I say several--alternative competing delivery platforms in each of our markets. We do compete. It's not true that we're a monopoly service. Maybe we were 20 years ago, but that's not the case today. I just wanted to make that clear on the record.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Go ahead, Ms. Lavallée.

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

I must say that it is quite fascinating to have a cable distributor and broadcaster sitting side by side. It's been very informative. Please continue your debate, it is quite enlightening.

I will stick to special requests.

Ms. Bell, you said that “Rogers subscribers saw their cable bills increase by $6 a month—without adding any additional services—and no revolt occurred”. I am not asking you for an answer now, because I have barely three minutes left. However, I would like you to provide the chair with a written response, including the source of that information and documented evidence.

[Charlotte Bell]

I can confirm that because it is on my cable invoice, but we can provide you with that information.

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

Yes, because you say: “with no revolt occurring and without adding any additional services.” I would like you to give me the source of that information and send it to the chair.

I have another request. With regard to CNN and the other specialty channels that receive carriage fees, is there a table indicating the total amount of those fees—the royalty pool—and how they are redistributed to the specialty channels? Is there such a document?

[Charlotte Bell]

The problem is that there is no way of knowing the exact figures with regard to the American channels. We only have the total amount.

However, I do know that the total amount of carriage fees increased by approximately 25% last year.

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

Is there such a table?

[Charlotte Bell]

I will see what we can give you, but I do not think it will give you an exact picture of what they receive per service. We do however have the total.