Good afternoon, Mr. Chair and members of the committee. Our presentation will indeed be very short and to the point.
We are the fourth-largest cable system operator in Canada. Our service footprint covers many local communities in Ontario and Quebec. We offer a wide range of broadcasting distribution and telecommunications services as well as local community programming through our extensive broadband fibre and coaxial cable network, extending from Windsor to the tip of the Gaspé Peninsula.
We have been in the broadcasting business for over half a century, and in the cable business for over 35 years. Needless to say, we have experienced phenomenal change in our lines of business. We have been able to succeed by adapting to change and reinvesting for the future. You can check on what we do, and how well we do, every quarter because our shares are listed on the Toronto Stock Exchange.
Your suggested study themes raise several fundamental questions of broadcasting and electronic communications policy that would require much more than a five-minute speech to fully address.
Here are our key messages today. Hopefully they will help you in your deliberations.
First, traditional local broadcasting is clearly under pressure from a combination of changes--growing costs, declining advertising, and declining viewership--which are all driven in good measure by technological change. As a result, the way of doing local broadcasting has to change as well. In short, technological change must be embraced. The cost structure must be alleviated; advertising must be more targeted and effective; multiple platforms must be used; and viewer involvement must be promoted.
Second, fee-for-carriage for over-the-air television is not a silver bullet. It will not address any of the required changes that we just mentioned. It will only delay them and make things worse in the end. It would be like pouring water in a barrel with an open tap, because Canadian broadcasters are free to overspend on buying American programs and free to underspend on producing local programming.
Third, the expectation that our analog over-the-air television system--which was built over a period of over 60 years--will be converted entirely from analog to digital by August 31, 2011, is, simply put, a project conceived on thin air. Our federal government has decided to reclaim the analog spectrum to sell it for mobile communications, as is being done in the U.S., but has left the resulting technical and financial problem entirely to the broadcasting industry. There is just a small hitch. The broadcasting industry does not have the technical resources or the capital available to go digital all the way, and even if it did, there is no workable business plan to justify the required investment.
Fourth, what can the federal government do to help? Frankly, a good start would be to stop hobbling the industry. For general revenue purposes, the federal government has collected almost $800 million from 1998 to 2006 from revenues of the broadcasting industry by way of a special licence fee calculated as a percentage of all broadcasting revenues. The question of whether this fee constitutes an improper tax is now before the Supreme Court of Canada, but the government is always free to end that tax and to return part of its earlier proceeds to the industry.
This special licence fee is in addition to the base licence fee, corporate income tax, GST, and mandatory contributions to Canadian program funding, which now include the Local Programming Improvement Fund (LPIF). The federal government does not collect any of these taxes or fees on pirated broadcasting signals and services in Canada, yet spends next to nothing on enforcement of its own broadcasting and radiocommunication laws.
And the federal government now stands to collect several billion dollars more from the auctioning off of the analog spectrum used by broadcasters for over 60 years. All of this while the industry faces a more challenging environment than ever before in its history.
Fifth, what can our company do to help more on the local programming front? We have a model that we developed seven years ago in North Bay. When the CTV local affiliate in North Bay decided to cut back on the local news, TVCogeco stepped up to the plate and started to provide local news coverage on our local cable channel. We have a daily half-hour program of news Monday to Friday at 5:30 p.m., with repeats at 6 p.m., 11 p.m., 11:30 p.m., 6 a.m., and 6:30 a.m. Overall, TVCogeco produces, in North Bay, a year-round weekly average of 8.6 original first-run hours of local programs. We also plan to webcast North Bay news beginning in the new year.
Is this good for local broadcasting and diversity of voices? Our viewers, our community groups, and our local representatives sure think so. We could do more if we had access to our own local resources for that purpose. Oddly enough, our local advertising is restricted by regulation. Indeed, regulations still preclude most advertising activities from local community programming, on-demand programming, and commercial availabilities on cable or satellite programming signals.
We will start paying 1% of our total cable broadcasting revenue into the LPIF next fall, but we will not be eligible for any funding from the LPIF unless the criteria proposed by the CRTC are changed. We will be making that point to the CRTC at the public hearing next week.
Based on our experience in North Bay, there are real local programming solutions at hand when the broadcasters feel they no longer have a business case for local programming tailored to the different needs of the local communities. We just need to think and act outside the traditional mode, and we need a little understanding from the federal government and the regulators to deploy these alternative solutions more widely.
I'd be happy to answer your questions.