Evidence of meeting #18 for Canadian Heritage in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was stations.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

André Bureau  Chairman of the Board, Astral Media Inc.
John Cassaday  President and Chief Executive Officer, Corus Entertainment Inc.
Michel Roy  Chair, Board of Directors, Telefilm Canada
S. Wayne Clarkson  Executive Director, Telefilm Canada
Michael Harris  Vice-President and General Manager, Corus Entertainment Inc.
Pierre-Louis Smith  Vice-President Policy and Chief Regulatory Officer, Canadian Association of Broadcasters
Tara Rajan  Vice-President, Research and Policy, Canadian Association of Broadcasters
Sylvain Racine  Director of des Moulins Regional Television, Treasurer to the Board of Directors, Fédération des télévisions communautaires autonomes du Québec
Gérald Gauthier  Research and Development Officer, Fédération des télévisions communautaires autonomes du Québec
Michèle Fortin  President and Chief Executive Officer, Télé-Québec
Tim Caddigan  Manager, Regional Programming, TVCogeco Peterborough
Maureen Tilson Dyment  Senior Director, Communications and Programming, TVCogeco Peterborough
Jean LaRose  Chief Executive Officer, Aboriginal Peoples Television Network
Charles Allard  Chairman and Chief Executive Officer, Super Channel, Allarco Entertainment Inc.
Malcolm Knox  President and Chief Operating Officer, Super Channel, Allarco Entertainment Inc.
Rick Arnish  President, Jim Pattison Broadcast Group
Scott Sterling  President, Newfoundland Broadcasting Company
Douglas Neal  Senior Vice-President, Newfoundland Broadcasting Company
Stanley James  Chair, Board of Directors, Northern Native Broadcasting, Yukon
Richard Paradis  Business Affairs and Government Relations, Allarco Entertainment Inc.
Sophie Green  General Manager, Northern Native Broadcasting, Yukon

5:55 p.m.


Charlie Angus NDP Timmins—James Bay, ON

Mr. Chair, a point of order, or a point of clarification. We are going to get at least one round of questions, right?

5:55 p.m.


The Chair Conservative Gary Schellenberger

That's my intent, to have one round of questions, yes.

Go ahead, Mr. Rodriguez.

5:55 p.m.


Pablo Rodriguez Liberal Honoré-Mercier, QC

Mr. Chair, if they have 10 minutes each, there will not be a round of questions. We either decide that it's five minutes each and we have a round of questions, or it is 10 minutes each and there are no questions. You decide.

5:55 p.m.


The Chair Conservative Gary Schellenberger

We'll see where we stand. If we have some time left after the presentations, we will maybe have just two minutes.

5:55 p.m.


Charlie Angus NDP Timmins—James Bay, ON

Mr. Chair, a point of order. I don't mind leaving early if we get the job done, but to have everyone come here and present to us and then not have a full round of questions.... If people have to leave, they have to leave. But we came here to listen to them, so I want a full round of questions. Otherwise, I think it's fundamentally disrespectful.

5:55 p.m.


The Chair Conservative Gary Schellenberger

Again, we're taking time here, as we go forward. It was agreed by the committee that the presenters would have 10 minutes, and we will take that 10 minutes. We'll see what time is left at the end, and we will go forward.

With that, I invite the first presenter, Aboriginal Peoples Television Network, please.

May 4th, 2009 / 5:55 p.m.

Jean LaRose Chief Executive Officer, Aboriginal Peoples Television Network

Thank you for this opportunity to be here. I am Jean LaRose, the Chief Executive Officer of APTN.

This year marks APTN's 10th anniversary. Ten years ago, it was difficult to believe that a national aboriginal network could offer 10 hours per day of live Olympic programming across Canada, in high definition, in English, French and up to 8 aboriginal languages. Now, for Vancouver 2010, it is a reality.

Getting ready for the Olympics is a welcome challenge. We are training sports announcers in aboriginal languages—finding new ways to express sporting events in our own languages.

We are training technicians, building sets, and performing behind-the-camera work. We are working in partnership with other host broadcasters to bring Canadians complete coverage of the games. In these games we will reflect all of Canada in a way that has never been done before.

You are hearing a great deal in your committee meetings about how parts of the broadcasting system are broken, but I can tell you that APTN is a success story.

APTN is a national network. We strive to reflect all aboriginal communities—first nations, Inuit, and Métis—and we act as a bridge between aboriginal peoples and the broader Canadian population. We deliver three separate regional feeds directed to the west, the east, and the north of the country, as well as a high-definition feed.

I have distributed to the committee an information package about APTN and our programming.

In 10 years, we have achieved a lot. APTN shows that, thanks to the Broadcasting Act and to the CRTC, the Canadian broadcasting system is strong and contributing to Canada's well-being.

Let me move on to some of the specific themes this committee is examining.

APTN doesn't provide local programming, at least not in the sense discussed at these hearings. But in many cases, our programming has regional and local roots and reflects a particular region or aboriginal group from that region.

Our northern service is the most differentiated of our regional feeds. We currently schedule 40.5 hours each week of distinctive northern programming on this feed. Usually this programming is in Inuktitut or other aboriginal languages spoken in northern communities. This is a different way of looking at local programming. Programming that reflects Nunavut and Nunavik is local, from our point of view, even though the communities it serves are spread out over a region that represents a large percentage of Canada's land mass.

APTN licenses this programming from our general revenues. These revenues come from the subscription fees earned from broadcast distribution undertakings in southern Canada and from advertising. The northern broadcasting societies receive additional funding for this programming from the Government of Canada through the northern aboriginal broadcasting program. Funding for the societies through that program has not changed for many years. As a result, the societies have not been able to stay current with technology and increased production costs.

We are working with the societies to develop their technical and production capacities, which will result in new programming, aimed at the youth population of the region as well as the rest of the young aboriginal peoples in Canada.

We are using other mechanisms to generate production revenues for those programs. In addition to northern local programming, APTN regularly broadcasts programming that reflects other particular aboriginal communities throughout Canada on a regular basis. All of our programming now comes from aboriginal producers or aboriginal-owned or controlled production companies.

In the past, APTN has expressed concern about the disruptive impact the fee-for-carriage proposal could have on the broadcasting system. Our concern has been based on two main factors.

First, a fee for carriage could increase materially the cost of the basic level of service. The basic level of service already costs many subscribers more than $300 per year. Affordability is therefore an issue. You should be under no illusion: the BDUs will aggressively market this fee as a tax on consumers.

Second, we are concerned about the impact on the Canadian broadcasting system as a whole if access to the system is made more expensive for Canadians, especially at this time, when the entire system is facing competition from the unregulated new media sector. Increasing the cost of access could turn Canadians off Canadian broadcasting just when their enthusiastic participation is most needed.

If policy makers elect to follow the fee-for-carriage route direct attention should be paid to the question of the affordability of the basic level of service—and how to make the new fee a "win-win" for consumers. APTN has proposed, in the past, a "Made in Canada" basic service package, smaller and mandated by the CRTC to ensure that Canadian programming remains affordable and available to all Canadians.

This approach, coupled with more consumer selection of digital channels—rather than the "all-you-can-eat" packaging approach that is now so popular, and expensive—could be one way forward.

APTN is ahead of the industry in phasing out our analog technology. Four years ago we concluded that it would not make economic sense to continue to maintain and upgrade our network of terrestrial transmitters across the North.

At the same time, we know that APTN has a history of over-the-air service in the north and an important role to play in the preservation of aboriginal languages. The delivery of APTN to all northern residents will be continued. With the assistance of the Department of Canadian Heritage, we developed an innovative approach. We entered into agreements with a satellite DTH service, Bell ExpressVu, and with local cable operators and cable communities to make sure that all residents now served by analog transmitters will still be able to receive APTN's northern service without any charge through their satellite or cable distributor. We are rolling out this program in smaller communities across the north. Through this program, APTN North will be made available to northern residents as a free service. No resident is required to obtain any additional level of service from a distributor to continue to receive APTN. I don't know whether a comparable program would work in southern regions for southern broadcasters, but the program is working for us.

The Government of Canada has played a direct role in supporting aboriginal broadcasting for a long time.

The Northern Aboriginal Broadcasting Program supports the northern broadcasting societies. As I stated earlier, funding for this initiative has been static for the last 15 years or so. The northern distribution program has funded infrastructure costs to deliver APTN North across the North—this is the program that has allowed APTN to begin the transition from our analog over-the-air network.

This program is being phased out along with our analog infrastructure, as of March 2010. There are, and have been, no similar programs for aboriginal peoples in the south. APTN does not receive direct funding from the government to support our operations or our national mandate. We do obtain licence fee and equity funding through the Canada Media Fund, which supports independent production, generally, and is not focused on "local" programming, as such.

At this point, it is difficult to say whether the recently announced changes to the Canada Media Fund will hurt or further aboriginal programming, and regionally focused programming in particular. A great deal will depend on the details. For now, let me just say that one of the stated goals of the fund is to reward programs that, to quote from the Department of Canadian Heritage's backgrounder, “...have achieved and demonstrated the most potential to achieve success, in terms of audience and return on investment”.

I just want to point out that the audience in Iqaluit is not the same as the audience in the greater Toronto area. The potential return from these audiences is obviously not comparable. It is a real question for us whether smaller audiences in Iqaluit, Thompson, or even Regina and Winnipeg, for example, will be given the same kind of weight as an audience in Toronto when funding decisions are made.

We are also concerned about the focus on hit programs, which may not lead to the kind of innovation and risk-taking in programming that is required. What may be a hit for an aboriginal audience may not be with any other demographic in Canada. Will that make it any less of a hit?

With respect to the CRTC's new local programming improvement fund, APTN will not be eligible for the fund. LPIF funds are not likely to find their way to support local aboriginal programming. I'm not criticizing the LPIF fund; I'm just pointing out that it was not intended to support local aboriginal programming, and it won't.

I thank the committee for this time. I hope I stuck to my 10 minutes. I would welcome any questions later.

6:05 p.m.


The Chair Conservative Gary Schellenberger

You were pretty well right on. Thank you very much.

We'll go to Allarco Entertainment Inc.

6:05 p.m.

Charles Allard Chairman and Chief Executive Officer, Super Channel, Allarco Entertainment Inc.

Mr. Chairman, members of the committee, and staff, my name is Chuck Allard, and I am the chairman and CEO of Allarco Entertainment. With me today is Malcolm Knox, Super Channel’s president and CEO, and Richard Paradis, our business and government affairs representative.

The three of us have each been involved in the television and/or pay television industry for over 30 years. We'd like to extend our thanks to the committee for allowing us to attend this meeting and provide our views and observations on how Canada’s television industry is evolving in the face of tremendous economic and regulatory challenges under the edict of an aging Broadcasting Act that dates back to 1991.

Today we wish to address the main issue your committee is currently looking at, and also to share with you some insights on how difficult it can be these days to launch, as we have just recently experienced, a new English language national pay television service, Super Channel, within the confines of existing regulations and industry consolidation, particularly in the area of broadcast distribution.

We have all witnessed Canada’s television industry go through dramatic changes over the last 30 years, from a universe with 10 channels to one with over 200 channels, where we first saw significant fragmentation, and then in the last 10 years, significant consolidation and concentration. Conventional television broadcasters, who are at the source of our broadcasting system, now find themselves in serious financial difficulty for a number of reasons, including the tremendous growth of specialty television services that are eating up not only audience shares but also advertising revenues. In addition, such conventional broadcasters now have to compete for advertising budgets with the Internet, which has seen its share of advertising revenues increase significantly over the last couple of years.

We believe your committee should recommend the introduction of a reasonable subscriber fee for Canadian conventional broadcasters to ensure the regulatory system is equitable for all television broadcasters, whether they are specialty services or conventional services. We also believe the cost of such a subscriber fee should be fully assumed by the broadcast distribution undertakings that have had the nerve to come before you and strongly object to such a fee and suggest it would just be passed on to the consumer.

It is our strong conviction that BDUs have amply benefited financially for a number of decades from the sale of their basic service package, which has included conventional television services since the beginning and for which the BDU pays nothing to use. Such a subscriber fee should be directed by conventional broadcasters towards the production of Canadian content and local programming over and above their existing Canadian content commitments. In no circumstances should it be used to subsidize the increasing cost of acquiring American programming in a bidding war.

With regard to the BDU positioning, we found it quite instructive when the representatives of Rogers and Shaw came back before you two weeks ago. My relationship with BDUs goes back some time, and I can tell you, as a prior senior officer of the western pay television service licence, we strenuously objected approximately 15 years ago to the granting of pay-per-view and subsequently VOD licences to BDUs, especially terrestrial BDUs, because of the obvious conflicts we could envisage that would arise from the BDUs competing with existing broadcasters, giving them an undue preference and advantage over other independent programming services.

Unfortunately, our objections were denied at that time, and the rest is just history, with BDUs, or the company controlling the BDUs, now owning and controlling broadcasting entities that often benefit from in-house, priority carriage, additional marketing opportunities and other tangible advantages. All of this notwithstanding, there are supposed to be “Chinese walls” to give the illusion that conflicts do not arise and that BDUs are being fair with everyone.

On February 12, 2009, we sent to the chairman of your committee and some members a copy of a letter to the heritage minister requesting much needed changes to the Broadcasting Act to provide a stronger regulatory regime. Why do we need such changes? Because we are a living example of how present regulations are outdated and have allowed BDUs over time to wield excessive power over our broadcasting system.

6:10 p.m.

Malcolm Knox President and Chief Operating Officer, Super Channel, Allarco Entertainment Inc.

The broadcast distribution sector reaches over 90% of Canadian households. At the same time, six BDUs—Rogers, Shaw, Bell TV, Star Choice, Vidéotron, and Cogeco—control access to over 91% of cable and DTH subscribers. In essence, this small number of BDUs has the power of life or death over news services such as ours, not to mention existing services. For many years now, some of the larger BDUs have on a regular basis shown contempt for our regulatory system, even though it is the same regulatory regime that has allowed them to grow into such profitable entities.

We are before this committee today to bear witness, first, to the pure contempt of the two largest terrestrial BDUs, Rogers and Shaw, which have in our case shown damaging disregard for the CRTC's conditions of licence and expectations, and, second, to the intentional injury this has caused a fledgling pay entrant into the Canadian broadcasting system.

The terms of our licence, which was granted on May 18, 2006, clearly stipulate that Super Channel would be offered distribution comparable with that of the regional incumbent's pay television services. The commission went on to state that without such conditions it would be unreasonable to expect the new Allarco service to meet its business plan, including its commitments with respect to expenditures and exhibition of Canadian programming. Since our launch in November 2007, Allarco has suffered unfair treatment from both Rogers and Shaw, which control over 40% of cable and DTH subscribers in Canada.

Since our letter to the minister of February 12, 2009, we've had to initiate an undue preference claim against one of these major terrestrial BDUs for failure to honour the terms and expectations of our licence from the CRTC. To determine how our service was being sold by the two largest BDUs, we conducted independent phone research on how the customer service representatives at both Rogers and Shaw were dealing with our service offering during January, February, and March 2009. The results were shocking, even though we were spending hundreds of thousands of dollars in advertising with Rogers and Shaw on U.S. ad avails, radio spots, and direct-mail pieces.

For Rogers, out of 320 recorded calls made to CSRs at their call centres, 97% of the calls were directed only to the regional pay TV service, TMN. When the caller asked if there were other movie services available, Rogers VOD was mentioned 24% of the time and Super Channel only 10% of the time. For the most part, our service was negatively portrayed and misrepresented by the CSRs, conferring an undue advantage on their own VOD service and the regional paid TV service, TMN. Where is the fairness principle applied here?

In the case of Shaw, the results were also shocking.

To give you an indication of the negative effects such undue preference has had on our business plan, which preference has cost us tens of millions of dollars, another major satellite provider, which launched us in November, reached and exceeded 7.5% penetration of their English language digital base, and a small provincial telco has recently reached 11% penetration. In contrast, Rogers is sitting at one-third of 1%.

6:15 p.m.

Chairman and Chief Executive Officer, Super Channel, Allarco Entertainment Inc.

Charles Allard

In our letter to the minister we strongly support the request by the chair of the CRTC to immediately secure administrative monetary penalties under the Broadcasting Act. It is my understanding that the chair of the commission discussed this question with you in an earlier session in May 2008.

We also propose the introduction of civil remedies for those licensees that have been injured, including actual damages and future damages, because of the wilful misconduct of the BDUs. In the United States and in Great Britain, the FCC and Ofcom have wide powers to impose fines on corporations that do not comply with the letter, intent, or expectations of regulations and/or licence conditions. This is not the case with our own CRTC. Your committee and Parliament have to introduce much needed changes to the Broadcasting Act to provide the CRTC with more teeth in dealing with major broadcasting distribution groups that have been extremely vertically integrated and who refuse to abide by existing regulations and licence conditions.

We fully understand that your committee is presently concerned with the survival of local stations and local news within our broadcasting system. However, we encourage the committee to look beyond the immediate problem, because it is only the tip of an oncoming iceberg.

The recent consolidation of ownership in the Canadian broadcasting and distribution sectors has handed the power of life or death of our broadcasting system not to legislators but to a few private enterprise titans: Rogers, Shaw, and Quebecor. All of these major BDUs have amply benefited from past regulations that favoured their development in the interest of having a strong Canadian broadcasting system. This privileged situation has favoured the growth of their companies into what they are today and is a direct result of the contribution of independent, conventional specialty and pay television services, which are now being shunned by the BDUs in favour of their growing businesses, such as local telephone, publishing, Internet, and wireless services.

This was confirmed to us when we met with the chief executive officers of Rogers on February 12, 2009, who told us that their main businesses were phone, Internet, cellular, and broadcast services, in that order. In other words, broadcasting has fallen back to the bottom of priorities. May we remind the committee of key words spoken by a number of prominent Canadians in the past: “It's all about content”. We sincerely believe that we are at a crossroads in terms of where our broadcasting system is going. It is up to you and your fellow parliamentarians to ensure that Canadian content can continue to be developed and, more importantly, get past the BDU gatekeepers to reach Canadians.

Proposed changes to the Broadcasting Act should, one, give the CRTC the power to fine BDUs that do not respect conditions of licence or commission regulations and to award compensation to broadcasters that have suffered financial losses because of BDU misbehaviour; two, give CRTC the power to issue a clear directive to a BDU to remedy non-compliance immediately with regard to any matter that abrogates or denigrates the spirit and/or intent of the Broadcasting Act; three, clearly establish the responsibilities of each component of the broadcasting system, with a special emphasis on a key role BDUs must play in giving priority and promotion to Canadian programming services; offering other services such as Internet, local phone, or wireless services should in no way be done in a business fashion that is detrimental to Canadian broadcasting programming services; and four, ensure that programming services have the right of access to their subscribers through the BDUs to promote and market their service, in addition to providing a possibility of two-way communication with such subscribers.

This completes our oral presentation, and we look forward to responding to any questions you may have.

Thank you, Mr. Chairman.

6:15 p.m.


The Chair Conservative Gary Schellenberger

Thank you very much.

We move now to the Jim Pattison Broadcast Group, please.

6:15 p.m.

Rick Arnish President, Jim Pattison Broadcast Group

Good afternoon, Mr. Chair and members of the committee.

My name is Mr. Rick Arnish, and I am president of the Jim Pattison Broadcast Group, from our head office in Kamloops, British Columbia.

I've been in this wonderful business for over 40 years, and our owner, Mr. Pattison, has been in the broadcasting business some 44 years. Our broadcast group consists of three conventional television stations, all small market stations, located in Medicine Hat, Alberta, Prince George, B.C., and Kamloops. Our western-based group also consists of 29 FM radio stations, all located in small markets, except for Vancouver and Canada's two most western provinces.

Speaking of television, CFJC TV in Kamloops was one of this country's first small market stations. It signed on the air April 8, 1957, with its 100-watt transmitter, bringing the 16,000 citizens their very own television station.

Community and being a local broadcaster is what we're all about. We continue being the leaders in the area of news, information, and public service, as well as being the conduit for the diversity of voices in our marketplaces for our viewers and listeners.

I appreciate the opportunity to address the members of the Standing Committee on Canadian Heritage at a time when the conventional television industry is at a crossroads in terms of whether it will survive in the 21st century.

You heard in my opening remarks that we have only three small market television stations, and you may be asking yourselves why the Pattison Broadcast Group has not increased the number of TV stations in proportion to that of our radio growth over the past 12 years in particular. The truth of the matter is that we've had a number of opportunities to acquire other television properties but have chosen not to because of my long-term concern about the future of conventional television in our country.

I'm on record as far back as 2005, when I stated this on CAB panels and through media interviews, as saying that I wasn't sure there would be true small market television stations in existence by 2015. Times were fairly good just four short years ago, and I could see some of my broadcasting colleagues rolling their eyes at what I was saying. Now, because of competitive pressures and economic challenges, they and many others are also questioning the future existence of this conventional model that has been around for over 50 years. The system as we know it today is broken.

Mr. Chair and committee members, during these proceedings I've heard some presenters state that the current financial pressure on local broadcasting is cyclical, that the advertising business we rely on will come back in spades and everything will be peaches and cream. Let me assure you that I do not share that view.

In rural Canada, the true small market conventional television station is under tremendous financial and competitive pressure. It all started a number of years ago, as far back as 1997, when the advertising market for medium and small market conventional stations shifted substantially towards the specialty services offered by the BDUs. From day one, the specialty channels not only received subscription fees, they had the ability to increase the amount of hourly advertising they could sell and air. Where did most of this national advertising revenue come from? The answer is that it came from small market stations like ours.

Another concern I have is the fact that many of them have taken on a more conventional television program schedule than a true specialty service, which again impacts the true small market conventional stations. The systemic problem is that there's just not enough revenue to go around even in a strong economy, let alone a weak one.

If it weren't for the direct-to-home small market local programming funding that Canada's 19 independent small market conventional stations have access to, I believe that a number, if not all, of these stations would not exist today. I thank the CRTC for this fund, as it has been a lifeline for our stations in Kamloops, which collectively produce 47 hours weekly of award-winning local programming.

Regarding fee-for-carriage, although we would not turn down any moneys we would be eligible for, that is really a large broadcaster issue. The big companies would benefit to the tune of millions of dollars versus thousands of dollars for our stations. The true small market independent stations have stated categorically that we would not give up the small market local programming fund in exchange for fee-for-carriage. That would be an economic disaster for all the stations.

The newly created CRTC BDU local programming improvement fund is another initiative that will certainly assist the long-term future of our three stations, as long as it's not tied to an incremental amount of local news, information, and community reflection. This new fund would go a long way in ensuring that CFJC TV in Kamloops maintains its 18.5 hours per week of true local programming as well as over 14.5 hours each week on CKPG-TV in Prince George and 14 hours weekly on CHAT TV in Medicine Hat.

Funding would also be used to facilitate the capital expenditures to move toward a virtual digital transmission platform for our stations, as the demand is growing for this type of delivery, even in our small markets.

You've also asked how the federal government could address the situation of local broadcasting, so please let me respond in a very respectful manner to the Broadcasting Act and current CRTC regulations. Regarding the true independent local small market conventional television stations across the country, if there ever were a time to deregulate, the time is now.

One way to help rebuild the audiences and revenues of Canada's small markets is to have no regulation except a minimum requirement of local reflection of, say, perhaps seven hours per week. Other than that, on all small market stations in populations of under 300,000, there should be no regulatory obligations at all, including the current Canadian content rules, where 50% of our programming must be Canadian in prime time, as well as 60% throughout the broadcast week. This would allow small markets to compete with all distant regional Canadian and American signals, along with foreign services and specialty and pay-per-view, which have severely impacted the tuning and revenues of our stations.

Today we truly have the 500-channel universe, Mr. Chair, and this is a matter of survival, committee members. The small market cable companies are currently exempt from regulation, with more changes perhaps coming for even larger cable systems, so why not a major breakthrough for small market conventional television?

Many years ago there was a hue and cry because the CRTC deregulated FM radio in this country, and many naysayers said it would hurt the radio industry. Well, we all know that the radio industry flourished and will continue to do so now and way beyond the 21st century. I'm bullish on Canadian radio.

So I say it's small market Canadian conventional television's turn, and this is something that has to happen now, not six months from now or a year from now, because if it doesn't, many of us will not be in business. Have no fear that deregulating the small markets would endanger local Canadian programming and reflection, because all these small stations will continue to reflect their markets in the best way they know how, and that is through many hours weekly of local news, information, and entertainment programming. Of course, we would expect that the current rules regarding priority carriage and simultaneous substitution would continue for our stations in the markets where we're licensed as the local station.

Another area where the government could assist us and other small market stations is to change the Broadcasting Act to ensure that all satellite BDU distributors, like their cable counterparts, have to carry all conventional small market Canadian television services. In every small market across this country, 30% to 40% of the viewing is to DTH, and if the local signal is not carried, it has a significant impact on viewership and revenues. They have the capacity and will have even more capacity in the near future. It's time to correct the DTH model.

Another area where the government could also assist the conventional industry is the elimination of the part II licence fees that we all pay, which go into general revenue. This is an additional cost, which, if eliminated, would add to the opportunities you have before you to save small town television stations. All we need are the tools to do the job right, and we won't let you down, nor the Canadian citizens we serve. We are the true eyes and ears of the cities and towns we are part of.

In conclusion, the loss of local broadcasting and local reflection built around diversity of voices in our country would be catastrophic. Canadians want, need, and desire to see themselves and their local communities reflected on their television stations. I believe the conventional industry as a whole does an excellent job. If it weren't for stations like ours in Kamloops, Prince George, and Medicine Hat, along with our other colleagues in the small markets, who would cover the daily activities in the marketplace? I'm talking about the weather, school closures, flood and fire coverage, tornadoes, community happenings, sports, entertainment, businesses talking to our viewers, their potential clients, along with the charitable support for hundreds of worthwhile causes. We truly reflect what is going on in the cities and towns we are so proudly licensed to serve.

Members of the standing committee, you have an opportunity to make history by implementing the necessary changes to ensure the survival and sustainability of true small market conventional television in Canada.

Thank you for this opportunity to appear before you this evening. I would be happy to answer any questions you may have.

6:25 p.m.


The Chair Conservative Gary Schellenberger

Thank you for that.

Now we switch to the other end of the country, to the Newfoundland Broadcasting Company. Please go ahead, Mr. Sterling.

6:25 p.m.

Scott Sterling President, Newfoundland Broadcasting Company

Mr. Chairman, members of the committee, ladies and gentlemen, my name is Scott Sterling. I'm the president of Newfoundland Broadcasting. We're a small conventional station in Newfoundland and Labrador. We've been on the air for 44 years.

I'd like to introduce Mr. Doug Neal, the vice-president of the company. He'll begin.

6:25 p.m.

Douglas Neal Senior Vice-President, Newfoundland Broadcasting Company

The business model for conventional television is broken. Mr. Fecan of CTVglobemedia and Mr. Vinner of Canwest painted that broad picture for you when they appeared, and we agree with their views.

As our time is short, I will try to limit our submission to NTV’s experience and viewpoints.

This crisis has been in the making for years. Specialty channels, the CBC, cable, and satellite BDUs all have multiple monthly sustainable revenue streams. A private broadcaster has only one source of revenue--advertising--and that revenue is linked directly to audience viewing.

Today, we would like to point out a few of the root causes that have been in play for many years. They are: over-regulation, audience fragmentation, lack of fee-for-carriage, and, as a subsidized public broadcaster, we also wish to bring forward our views on the use of cultural development funds, fee-for-carriage, the LPIF, digital transition, and the role of the federal government.

On over-regulation, the regulator has over-licensed, causing fragmentation through a proliferation of specialty channels and foreign signals, with only token compensation for the damage these signals cause to the revenues of conventional stations. Today, we believe there is far too much regulation. It’s time to reform and relax the broadcasting regulations.

One prime example of over-regulation relates to Canadian content requirements. Once the CRTC set Canadian content quotas on private broadcasters’ broadcast days, and later expanded these to priority programming in prime time, the private conventional broadcaster’s balance was upset. The sale of advertising is our one and only source of revenue and it is directly linked to program ratings. Good ratings equal high yield; bad ratings equal low or no yield.

Broadcasters will all tell you, and they have told the CRTC, that airing most Canadian entertainment programs does not provide the audience levels necessary to provide the revenue needed to sustain their operations. When asked, Canadians say they want Canadian programming, but the ratings tell us otherwise.

Another example specific to NTV is the length of our broadcast day and evening broadcast periods. For decades, the CRTC granted NTV an extension to its broadcast day for up to 1.5 hours for news. This was due to our unique time zone when compared with eastern standard time. However, at NTV’s last licence renewal, the CRTC decided this extension was no longer acceptable and forced a change. The result: a shorter than normal broadcast period and a longer than normal evening period, meaning that NTV lost one hour each day of it simulcast opportunities, while causing it to air 3.5 hours a week more Canadian content in the evening period than any other station in Canada.

In NTV’s view, the CRTC should immediately do the following.

It should reduce Canadian content quotas to more reasonable and less restrictive levels.

It should make Canadian content programs accountable, using a ratings-based scale that credits a station’s Canadian content quota up to 200% on a prorated basis. We have this mechanism for advertising. Why not utilize it for programming? NTV spends millions of dollars to produce the province’s number one rated television program, the NTV Evening News Hour, yet it receives the same Canadian content credit as a rerun of Inspector Gadget.

The CRTC should provide a standard and reasonable base quota for local Canadian content and a positive Canadian content quota incentive of 150% for stations that over-perform regarding the production of local programming.

It should lift restrictions on certain advertising, in particular pharmaceutical drugs, opening up rich new national advertising opportunities.

It should eliminate part II licence fees, with no retroactive payment requirements.

It should freeze applications for any new services well beyond the return of stability. With 170 new stations licensed, the market is saturated.

Audience fragmentation. The activities of BDUs cause fragmentation to the local broadcaster’s audiences through the introduction of many signals, including U.S. networks and stations airing programming that we have purchased the rights to air in our market. We believe this is the only country in the world where cross-border signal theft or piracy is legitimized. Canadian networks do not air on American BDUs.

Further, it is unacceptable for a BDU to simply take an over-the-air broadcaster’s signal, sell that signal to their subscribers, and pay nothing to the originator of the signal. We believe the purpose of broadcasting in the Canadian Broadcasting Act was to provide a signal to the end-user or the public and not an intermediate entity that benefits financially from the use of the signal and pays nothing for it. That's just another form of signal piracy. I might add that when the shoe is on the other foot, cable and satellite BDUs are quite vocal over the piracy of their signals and cross-border signals.

Earlier in these proceedings, Ms. Bell of Canwest pointed out that during the 1971 hearings on cable TV, the CRTC suggested that people should pay for what they use to operate their business. It makes sense to us. In 1975, the CRTC granted MTV a cable subscriber fee of 25¢ per household and then quickly revoked it without a hearing. Since then, we have repeatedly asked the commission for local cable subscriber fees or fee-for-carriage. We believe that fee-for-carriage is a fair and equitable way to compensate broadcasters for the damage BDUs cause local audiences. Local signals are important to local subscribers, and they already believe they are paying for them.

In a study by the DTV Working Group, recently submitted to the CRTC, of 840 persons who receive only conventional television over the air, surveyed in five centres across Canada, 78% say they would pay a $10-per-month subscriber fee for local signals. This indicates that our signals are important to the public and that they are willing to pay for them. There has been controversy over traditional rates to broadcasters, should a fee-for-carriage regime be introduced. These are our suggestions.

Fee-for-carriage and distant signals are linked and should be an industry-to-industry matter. They are considered damaging to each broadcaster's local market. Nevertheless, they are of great value to the public, who time-shift and benefit from the diversity of voices, a crucial element of our democracy, from each corner of the country. Distant signals are also key components of every BDU's service offering. But from what we've seen and read so far, at the end of the day, the CRTC mediation process or government intervention may be required to solve this matter.

If sufficient subscriber fees flowed to each broadcaster for service provided by BDUs in its market, it would help to offset the damage caused by distant signals. Further, it appears from information recently available on the public record that cable and satellite BDUs are quite healthy, with substantial profit margins. They have had substantial rate increases over the past five to six years and are permitted to sell advertising in our markets, further eroding our only source of revenue. They pay us nothing for the use of our signal. If fee-for-carriage was applied at the local level, we see no case for these BDUs to pass further increases on to the public. In our view, BDUs were given a free ride in order to establish their infrastructure, and it's time they paid for what they take and use.

We believe unfair competition exists from a subsidized CBC operating in our market, with no relationship between their revenues, operating expenses, or capital costs. The CBC, with its very deep pockets, is able to undercut our advertising rates and purchase popular U.S. programming such as Wheel of Fortune and Jeopardy, programs that NTV until last year aired for 25 years and made popular in its market. Now these programs are used by CBC to gain ratings against us. If CBC were 100% subsidized and not competing with the private sector for advertising share, it would provide increased local and national advertising opportunities to the private broadcaster. A subsidized entity should not be permitted to compete with private industry.

CBC's mandate under the Broadcasting Act should therefore be changed to 100% Canadian content, with no advertising. A 100% content on CBC would allow relief to the private sector from the onerous Canadian content regulatory quotas placed on it by the CRTC. Selling advertising has caused CBC to travel down a road that in their view requires them to spend huge amounts on U.S. programming and expensive first-run movies, driving the cost of U.S. programming even higher as bidding among Canadian broadcasters for national rights includes a CBC that uses taxpayer dollars.

CBC recently reported that 60% of their expenses are in salaries. That indicates to us that they're either overstaffed or overpaid. Locally, we estimate they outstaff us three to one, yet produce only 5 hours to our 13.5 hours each week.

Further, there are expenses related to the selling of advertising. CBC maintains sales managers and salaried sales staff, whereas the private sector usually operates on commission sales. They must maintain billing, traffic, and credit departments, commercial production facilities, and staff. At the end of the day, it may well be discovered that the activity related directly and indirectly to selling advertising by CBC costs more than they actually gross. We believe this is especially true in the Newfoundland market.

On cultural development funds, in our view, CBC and the independent sector should explore more avant-garde Canadian productions, while the private sector should concentrate on productions that are economically viable and are quality productions where the focus is to create mass appeal Canadian content programming for exhibition by the private sector. In our view, this is best managed by the private sector, which understands what works. There has to be an accountable commercial element attached to the creation of Canadian programming.

The Broadcasting Act creates an expectation that Canadian programming should be exhibited on television, and although most Canadians suggest that we should have Canadian programming, the program ratings show time and time again that few are actually watching it. Most Canadian programs yield very poor results when compared to foreign programming. It should be obvious from this that Canadians are not satisfied with the quality of most Canadian programming. However, the private sector must realize a return on each hour of its broadcast day. To do this requires high ratings or, more simply put, programs that people will watch.

The local programming improvement fund is a means to help over-the-air small market broadcasters maintain local programming. We know this fund is $60 million, and we have heard that there are 72 stations that would likely qualify for the fund. We know that the formula suggested is based on each station’s past expenses related to local programming. If we divide the fund by the number of stations, we find there is $833,000 per station. Some say that CBC should qualify where they operate stations in markets of fewer than one million viewers.

We maintain that if CBC has access to this fund, based on their subsidized economies of scale, the lion’s share of that fund will flow to them. If this happens, their increased resources will cause competition to escalate for news-related advertising dollars. Should CBC’s ratings increase as a result, it will mean reductions and layoffs in the private sector, negating the fund’s benefit to private broadcasters. So instead of helping, this fund will just become another source of revenue for CBC, maintaining an imbalanced duplication of services that we believe was not meant to be the focus of the fund. We maintain that CBC should have no access to this fund if it is to provide any benefit to local broadcasting.

Further, money realized from the fund by the private sector should go exclusively towards the gathering and production of category 1 news.

In our view, digital transition is not about the quality or HDTV. It's—

6:40 p.m.


The Chair Conservative Gary Schellenberger

Could we just speed it up a little? We're almost at 14 minutes, sir.

6:40 p.m.

A voice

We had submitted this, so I think—

6:40 p.m.

Senior Vice-President, Newfoundland Broadcasting Company

Douglas Neal

Yes, you are free to read it.

May I read what I believe the role of the government is, then?

6:40 p.m.


The Chair Conservative Gary Schellenberger

Could you conclude with that, please?

6:40 p.m.

Senior Vice-President, Newfoundland Broadcasting Company

Douglas Neal

That will conclude it.

The role of the federal government is to change the mandate of CBC to 100% Canadian and fund CBC to 100%; cause the CRTC to relax regulations on the private broadcasting sectors, especially those related to Canadian content, providing an incentive for broadcasters to produce and air high-quality Canadian productions; cause the CRTC to enact a fee-for-carriage regime for conventional broadcasters and end piracy of local and cross-border signals; cause the CRTC to freeze applications for any new services until the present crisis has passed and stability returns to the private sector; provide adequate funds for broadcasters for building digital infrastructure to allow them to transition their facilities without hardship, and provide a set-top box subsidy for the public; and enter into a government-funded television advertising campaign to educate the public about the migration to digital.

And finally, the government needs to act quickly and decisively to resolve the matter of defined benefit pension insolvencies. Plans with perfectly healthy going concern positions are calculated as being insolvent, resulting in huge special payments that are draining the working capital of broadcasters with these plans.

Thank you. I'd be happy to answer any questions.

6:40 p.m.


The Chair Conservative Gary Schellenberger

Thank you.

We now move to Northern Native Broadcasting, Yukon.

6:40 p.m.

Stanley James Chair, Board of Directors, Northern Native Broadcasting, Yukon

Thank you.

My name is Stanley James, and I'm the chair of the Northern Native Broadcasting, Yukon, board of directors. With me is Sophie Green, who is the general manager. I'd like to extend the appreciation of Northern Native Broadcasting, Yukon, to the chair and members of the standing committee for the invitation to appear before you to share our thoughts on the evolution of the television industry in Canada and its impact on local communities.

Northern Native Broadcasting, Yukon, is funded through the aboriginal peoples program directorate of Canadian Heritage. The funding we receive through this initiative has remained almost unchanged since its creation. In the 1980s we saw a decrease in funding.

The agreement of just a little over a million dollars each year, if we are successful with our application, requires us to produce and distribute radio and television programming, with the Yukon First Nation audience's needs determining our mandate. Static funding can only be translated as a decrease, as the cost of living and the cost of business escalate consistently each year. The changes to industry standards, particularly in high definition and digital radio, have an immediate impact on us. We have had to lay off personnel and close down our analog television production unit, putting seven people out of work.

Although advertising has augmented the funding from Canadian Heritage, in the current economic downturn, advertising revenues have dropped faster for us than they have for others throughout the industry. Business does not view the aboriginal audience in remote northern communities as a good investment for their diminishing advertising dollars.

New media, changing viewing habits, audience fragmentation, and convergence are having their effects on us. We have not had the necessary funding to meet the needs of a fast-growing youth population who do not view the world as our ancestors did. We need to be able to produce programming that interests the youth of today, delivering the programming in the media of today. As a communications network, we need to continue to play a critical role in keeping the language, culture, and customs of the aboriginal people alive and in use.

We believe the federal government must continue to assist local aboriginal broadcasters and to assist in meeting the cost of digital transmission. We said the same in June 2003 to the House Standing Committee on Canadian Heritage, when they conducted hearings on the second century of Canadian broadcasting. The role of the cultural development fund to ensure the survival of local broadcasting should be strengthened and have the involvement of local broadcasting in the terms of reference. Oftentimes, non-profit societies such as Northern Native Broadcasting, Yukon, find themselves ineligible because of their status as a non-profit entity, as required by contribution agreements. For Northern Native Broadcasting, Yukon, fee-for-carriage does not apply as we are not television broadcasters but television producers. That means also that the CRTC local improvement fund will not be applicable in our specific situation.

The loss of local broadcasting or local production of content for the aboriginal community could be severe. In the Yukon, where two aboriginal language groups split into eight dialects, the ability to hear our language in as many mediums as possible is of great benefit. It is only a decade ago that the indigenous language of the Yukon began to be written down. Our population is a fraction of the entire population of the Yukon--approximately 6,000 of first nations ancestry, out of the Yukon population of approximately 30,000 people. The role of local aboriginal broadcasting in the Yukon is critical to maintain the diversity of the voices in the territory and the aboriginal population in Canada.

In closing, let me say how much we appreciate this opportunity to be here before the standing committee to talk about the evolution of the television industry in Canada and its impact on local communities. Both Sophie and I will try to provide answers to any questions you may have.

Thank you.

6:45 p.m.


The Chair Conservative Gary Schellenberger

Thank you for that.

I'm going to entertain one short question from each group around the table.

Mr. Simms, you have a question.

6:50 p.m.


Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL

Yes, I do.

Thank you, Chair.

I want to thank all the guests, because one of the things we set out to do here is to get opinions from all aspects of the industry. Everyone keeps talking about the fact that we have a new business model that needs to be attended to, and the CRTC needs our advice as much as anybody else. So I appreciate all that you bring to this table. There were some incredibly good points brought up here today.

I understand the pressure that you have to try to get the right amount of revenue to keep your businesses afloat. This is one of the biggest challenges, obviously, to conventional television--and conventional radio too, Mr. Arnish. I can tell you're a big fan of radio. But it concerns me that you don't want to invest in conventional television anymore, for reasons that it's just not worth your while. Would that be correct?