Thank you, Mr. Chairman,
Ladies and gentlemen, I am Mirko Bibic, Senior Vice-President, Regulatory and Government Affairs, Bell Canada, and I am joined today by Christopher Frank, Vice-President, Programming for Bell TV.
Bell Canada has been providing satellite television services to local communities across Canada since 1997. By investing billions of dollars to build an alternative TV system and employing 3,000 Canadians, satellite TV providers brought much needed competition to cable TV in Canada which, until our entry, had been a monopoly.
Satellite TV reaches virtually 100% of the Canadian population, including households not reached by Cableco networks. In many smaller communities, we provide a wealth of services not offered by Cablecos, including French and ethnic programming. Satellite TV has added over 1.7 million net new television subscribers to the system, subscribers who previously could not or chose not to subscribe to cable TV. These new subscribers have enabled broadcasters to generate hundreds of millions in incremental revenues.
Satellite TV is provided over a single purpose network infrastructure, while cable companies provide TV, Internet, and telephone services over one single network. This has allowed cable companies to become highly profitable. In contrast, satellite TV has accumulated over $2.2 billion in losses since its inception, and Bell TV has yet to become cash-flow positive after more than ten years in operation.
The conventional broadcasters claim that Canadian programming in general, and local programming in particular, is unprofitable and has been for many years. They ask for wealth transfers from Canadian TV subscribers and distributors, otherwise known in the industry as BDUs. The broadcasters have tried to frame the debate to their own advantage, saying that local programming is in imminent danger if it does not continue to be delivered as it always has been by these same conventional broadcasters. They have threatened to close small-market TV stations. However, guaranteeing profits to the incumbent conventional broadcasters should not be the issue of concern. By focusing on the delivery of local expression to local communities, rather than on the polarizing demands of the broadcasters, a constructive way forward may emerge.
We believe that the government should conduct a review of broadcasting policy as it pertains to the role and importance of local expression, the ways in which it may be delivered in the future, available funding methods, and the contributions government and industry stakeholders should make to the industry. This work could also form the foundation for modernizing the Broadcasting Act, whose principles are rooted in how things were and have always been rather than in how they should be going forward.
In the meantime, as these broader issues are debated, there are a number of ways to assist conventional broadcasters that are less damaging than unwarranted wealth transfers. Let me provide you with some examples.
As you know, conventional broadcasters have a responsibility to convert their television stations from analog to digital by 2011. Broadcasters have stated to this committee that the digital conversion will cost them hundreds of millions of dollars, and as a result, they are trying to off-load their obligation. Bell Canada has stepped forward with a constructive proposal in the public interest, one component of which is called FreeSat. Our proposal was tabled with the CRTC last week and is designed to save conventional broadcasters those hundreds of millions of dollars by delivering their signals to smaller communities using satellite technology.
Under Bell's proposal, any local signal currently available in the community would be delivered to that community at no monthly charge if it offers a meaningful level of local programming content. In total, Bell TV is prepared to make available the capacity for 30 to 40 additional standard definition channels, plus one regionally relevant signal from each of the major broadcasting ownership groups. Consumers would benefit from obtaining digital television from their respective local stations without a monthly subscription charge. Broadcasters would avoid the massive cost of upgrading their analogue transmitters in markets where they feel it is not cost-effective.
In turn, their cost savings could be used to continue operating their local television stations. In Appendix 1 to the opening statement, which you have, we have attached our opening statement to the CRTC and the related press release that we issued. Both describe FreeSat in further detail.
There are many ways for the government to assist local television stations as well. In the next few years, the government will be auctioning the spectrum vacated by analog television channels. A fraction of the auction proceeds could be earmarked to support local programming. The government could also eliminate Broadcasting Part II fees, a contentious tax paid by broadcasters and BDUs alike. Over $100 million is collected annually from the broadcasting industry so eliminating these fees would clearly assist broadcasters.
Supporting FreeSat, repurposing the proceeds from spectrum auctions and eliminating Broadcasting Part II fees are just three ways the government can improve the financial performance of broadcasters without harming consumers. Other options may also be available and we would be pleased to contribute to the identification and assessment of alternatives.
Chris.