Evidence of meeting #19 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 content.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Jean-Pierre Gariépy  Executive Director, Documentary Network
Sylvie Van Brabant  Producer, Documentary Network
Lisa Fitzgibbons  General Director, Documentary Organization of Canada
Daniel Margetic  President, Performance Committee, Documentary Organization of Canada
Yves Légaré  Director General, Société des auteurs de radio, télévision et cinéma
Maureen Parker  Executive Director, Writers Guild of Canada
Rebecca Schechter  President, Writers Guild of Canada
Claire Samson  President and Chief Executive Officer, Association des producteurs de films et de télévision du Québec
Brigitte Doucet  Executive Vice-President, Association des producteurs de films et de télévision du Québec
Norm Bolen  President and Chief Executive officer, Canadian Film and Television Production Association
John Barrack  National Executive Vice-President and Counsel, Canadian Film and Television Production Association
Brian Anthony  National Execuive Director and Chief Executive Officer, Directors Guild of Canada
Grant Buchanan  Partner, McCarthy Tétrault LLP, Directors Guild of Canada
Mirko Bibic  Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group
Christopher Frank  Vice-President, Programming, Bell Canada Video Group

5:30 p.m.

Conservative

The Chair Conservative Gary Schellenberger

Mrs. Grewal.

May 6th, 2009 / 5:30 p.m.

Conservative

Nina Grewal Conservative Fleetwood—Port Kells, BC

Thank you very much, Mr. Chair.

I have a question for the Directors Guild of Canada. You work with and represent a number of organizations across the country, but what are you hearing from your members that we could add to our report?

5:30 p.m.

National Execuive Director and Chief Executive Officer, Directors Guild of Canada

Brian Anthony

If I understand the question correctly--and I'm not sure I do--you're asking about what we're hearing from our members?

5:30 p.m.

Conservative

Nina Grewal Conservative Fleetwood—Port Kells, BC

Yes, what are you hearing?

5:30 p.m.

National Execuive Director and Chief Executive Officer, Directors Guild of Canada

Brian Anthony

Our members went through a very bad year last year. As you know, all sorts of factors adversely affected our industry: a writers' strike in the United States, a possible actors' strike, the rising Canadian dollar. Remember when it went over 100 cents? It scared off a lot of production activity, because about 50% of our activity in this country is foreign service productions, American productions.

When the dollar rises to a certain point and other factors come into play, production levels drop. So that means less work for our members. But then, of course, we went into a period of economic uncertainty as we moved into the autumn, and that made its influence felt by less work being commissioned domestically as well. It was a perfect storm.

Things are looking a little better this year, but we're not out of the woods yet. Much depends on the CRTC hearings we're going to be involved in tomorrow and much depends on the deliberations of your committee as well.

5:30 p.m.

Conservative

The Chair Conservative Gary Schellenberger

Thank you.

We're going to recess to go to the vote. I hope everyone returns.

Yes, Mr. Del Mastro.

5:30 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

The bell has just begun to ring. I wonder if our next witness, Bell Canada, could make their presentation.

5:30 p.m.

Conservative

The Chair Conservative Gary Schellenberger

Our next witness won't be here until 6:15 because they knew there was going to be a vote.

5:30 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

All right.

5:30 p.m.

Conservative

The Chair Conservative Gary Schellenberger

We will recess.

I'm going to thank our witnesses very much for their presentations. They were well received. Thank you very much.

6:35 p.m.

Conservative

The Chair Conservative Gary Schellenberger

I'm going to call the meeting back to order. I apologize, but there were five private members' bills, and they always take a little longer to get through.

What I'm going to do is the same as we've done with our other witnesses. We'll give you roughly ten minutes for your presentation, as we can, and then we're going to do one round of questions. The questions will be for five minutes. Again, that's being fair to the previous witnesses who have been here.

I welcome Bell Canada Video Group here this afternoon. Whoever is going to make the presentation, or if you are both going to make the presentation, please lead off.

6:35 p.m.

Mirko Bibic Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

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.

6:40 p.m.

Christopher Frank Vice-President, Programming, Bell Canada Video Group

Thank you, Mirko.

There is no doubt that the television business has seen many changes in recent years, including the growing impact of the Internet. For conventional broadcasters, a primary driver of change has been the massive expansion in specialty television services. While the number of TV stations in Canada has remained stable at about 100, the number of specialty stations has exploded from 21 in 1996 to 145 today. Where once the conventional broadcasters were the best--or only--vehicle for advertisers, there are now many alternatives.

Whether this is a structural problem--as the conventional broadcasters call it--or a structural evolution depends on your perspective. Other sectors, such as communications, have certainly had to make difficult adjustments due to shifts in consumer tastes, competition, and regulation. In spite of the growth in specialty services, conventional broadcasters have been able to maintain their advertising revenues at about $2.1 billion annually, although the recession has put some pressure on these revenues. In response to this pressure, broadcasters have not reduced their costs and this has led to a deterioration in their bottom line.

Nevertheless, compared to satellite TV broadcasters, the conventional broadcasters have been exceptionally profitable. During many unprofitable years when satellite TV accumulated the more than $2.2 billion losses that referred to, we were able to continue providing TV service, in part because Bell Canada has other lines of business that are profitable. The conventional broadcasters are in a similar situation, as they also own highly profitable specialty and pay-TV services. The CRTC data in figure 1 show the recently combined pre-tax profit of conventional and specialty services since 1996. CTV and Canwest capture about 57% of the revenue generated from specialty services.

So is the current situation in broadcasting a crisis, or an evolution? It appears to us to be the latter, and the entire industry must adjust. Conventional broadcasters are adjusting by acquiring highly profitable specialty services. But they also seek financial support from consumers or BDUs--cable and satellite. The impact of the broadcasters' request on Bell TV would be, at a minimum, $115 million annually. As we noted, Bell TV continues to run a cashflow deficit, so we can ill afford such a transfer of wealth. Canadian consumers would unfortunately be left with the bill for the broadcasters' demands.

Mirko.

6:45 p.m.

Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

Mirko Bibic

Conventional broadcasters have requested a basket of financial support initiatives, but we will focus on three: the local programming improvement fund, fee-for-carriage, and increasing the number of local stations carried by satellite TV.

With respect to the local programming fund, the LPF, although it has not yet been implemented, the 1% tax rate has already been deemed by the broadcasters as insufficient. If their requests for a 3% tax rate are implemented, the LPF will grow to more than $200 million annually. We support leaving the LPF as originally designed, a 1% tax for local programming.

With respect to fee-for-carriage, Bell has long opposed the concept for several reasons. Under the current television framework, BDUs provide the broadcasters with, among other benefits, a distribution capability at no charge. In return, BDUs are given the right to carry broadcasters' signals at no charge. This arrangement benefits both parties, as well as consumers.

The CRTC has estimated that fee-for-carriage will cost $450 million annually. This will in effect be a transfer from consumers to broadcasters, with no new benefits for consumers and no guarantee that the money will be used for local programming. To fund the transfer, BDUs would need to raise subscriber rates by about 50¢ per channel. As figure 2 in our opening statement shows, this translates into a new monthly tax of $3 to $6 for most subscribers, depending on where they live.

In passing, I would note that the broadcasters have stated that fee-for-carriage would cost half that much. In fact, there was an article this week indicating that in Winnipeg the fee would only be $1.50. Their calculations are mistaken, by the way, and I'd be pleased to answer and explain why in the question and answer period, if you like.

Another broadcaster request is for satellite providers to make available every local television signal in every local market in Canada. Bell TV already carries over 70 local stations, including for markets like Kenora, Ontario, and Terrace-Kitimat, B.C., which is more than any cable company. The CRTC has developed its policies for local station carriage by satellite TV in consideration of our capacity limitations, and Bell TV exceeds the CRTC's standards. Given our capacity constraints, adding the remaining local channels is not viable without dropping dozens of existing channels from our lineup, which would fundamentally alter our competitiveness in the marketplace.

In conclusion, we feel that this committee should not be constrained to considering the narrow set of regulatory fixes advocated by the broadcasters, because there are in fact many public policy tools available to assist local programming without disadvantaging consumers.

Thank you for the opportunity to appear today. We welcome your questions.

6:50 p.m.

Conservative

The Chair Conservative Gary Schellenberger

Thank you.

The first question comes from Mr. Simms.

6:50 p.m.

Liberal

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

Thank you, Chair.

I want to thank our guests for coming today. Certainly back in the mid-1990s you caused quite a stir, and, as you've rightly pointed out, in many cases a monopoly was effectively quashed, I suppose.

I see that the cashflow is not working in your favour at this moment, or did I get this straight?

6:50 p.m.

Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

Mirko Bibic

That is correct; it is not.

6:50 p.m.

Liberal

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

Has it ever been?

6:50 p.m.

Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

Mirko Bibic

Until the last two years we had no earnings. Lately we've managed to have been earnings-positive before interest and taxes, but once you factor in interest and taxes, of course, there has been no positive cashflow. Since 1997 there has been no positive cash flow--in fact only losses.

6:50 p.m.

Liberal

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

Mr. Bibic, I want to explore this FreeSat initiative that you're putting forward. This is something you're putting forward as a service that you're providing. Just so I can get this straight, you're going to carry every local channel--what you deem to be local, and I imagine there are certain standards by which you look at a local television service--and you will provide all these channels on your service for all Canadians. Is that correct?

6:50 p.m.

Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

Mirko Bibic

That is correct. What we mean by meaningful amount of local content is, for example, some local stations have perhaps--and I'm not exaggerating here--30 minutes to an hour of local programming a week, and that's it. To look at every single station like that, we'd have some issues with satellite capacity, but working with the broadcasting community and with the CRTC, we could find some meaningful benchmark, like, seven, eight, nine hours. Every single one of those--

6:50 p.m.

Liberal

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

That's deemed by you, your standard.

6:50 p.m.

Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

Mirko Bibic

No. The CRTC could determine it.

6:50 p.m.

Liberal

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

All right. That was my next question, actually, which is to say, what is regional and what is not? How much are you going to save the consumer in this particular situation by doing this?

6:50 p.m.

Senior Vice-President, Regularory and Government Affairs - Bell Canada, Bell Canada Video Group

Mirko Bibic

Right now the broadcasters have an obligation to convert all their analog infrastructure to digital so that Canadians can continue to receive their local stations over the air. This will cost them hundreds of millions of dollars. They don't want to do it, especially not in the smaller communities. So what we've said is okay, don't do it in the smaller communities; we will guarantee that every community continues to have access to every single one of their local stations. We will save the broadcasters those hundreds of millions of dollars, and in return there ought not to be a fee for carriage and local programming fund increases. We would be saving the consumer the $5 or $6 a month.