Thank you, Mr. Chairman.
Good afternoon, ladies and gentlemen of the committee. Thank you for having invited us here today. With me today are two colleagues from the Canadian Radio-television and Telecommunications Commission, Michel Arpin, Vice-Chair of Broadcasting, and Scott Hutton, Executive Director of Broadcasting.
When we last appeared before you on March 25, the commission had not yet held its public hearing to renew the licences of the majority of Canada’s private conventional television broadcasters. Similarly, your study was only getting underway. Both this committee and the CRTC have since heard a wide range of views in our respective forums.
There are clear benefits to holding public hearings on these issues. Being exposed to the opinions of different stakeholders allows both of us to not only understand exactly what is it stake, but also to reach informed decisions.
The conventional television sector has been the cornerstone of the Canadian broadcasting system since the introduction of television in Canada in 1952. Local programming is, of course, one of the defining characteristics of a conventional television station.
On the first day of our public hearings, I had an exchange with Mr. Ivan Fecan, president and CEO of CTVglobemedia, on the importance of conventional television. I referred to his testimony before your committee and said I had read very carefully his statement to the House of Commons--which essentially he had repeated to us--that conventional is local; it is a glue that binds a community together; it's needed for national interest and national unity issues; and it is the best machine for promoting things, better than anything we have right now. I said to Mr. Fecan, “Have I got that right?” Mr. Fecan answered, “Yes.”
I believe you all agree with Mr. Fecan's viewpoint. I'm glad he shared it with us at the outset of the hearing. However, conventional television's ability to play its central role in the broadcasting system, which includes providing local audiences with local programming, has recently come under threat. There has been a steady fragmentation of audiences' advertising revenues, which are now split between conventional, pay, and specialty services, as well as the Internet.
While conventional broadcasters were adjusting to this trend, along came the global recession. Like many other sectors of the economy, broadcasters were sideswiped by the downturn. They have seen their revenues shrink as spending on advertising declined sharply. Let’s not forget that the automotive sector was traditionally the single largest advertiser on television.
On May 15 we handed out a preliminary decision that provided private broadcasters with key details regarding their licence renewals. Specifically, we renewed the licences of the major English-language networks for one year, including the television stations operated by CTV Television, Canwest Television, and SUN TV, as well as the Citytv station. We decided to renew the licences of the major networks for a shorter period than the customary seven years to give the industry a certain flexibility to respond to the current economic downturn. We plan to use a group-based approach to renew the licences of major English-language networks in the spring of 2010.
We renewed the licences of the TVA Group’s television stations for two years. We will therefore renew TVA's broadcasting licences in 2011. In the same timeframe we will also review the licences of the French-language television stations operated by the Canadian Broadcasting Corporation and reconsider the programming commitments of the TQS television stations. The specific terms and conditions attached to the licences will be issued by mid-July.
It's become clear that we cannot carry on with our traditional assumption on models over the medium and long terms. Consolidation in the Canadian broadcasting industry has resulted in a few large groups that control an array of conventional, specialty, and pay-television services. As I indicated in my previous appearance, the commission's processes must take this reality into account to ensure that the objectives of the Broadcasting Act are achieved in the most effective way possible. Over the next year, we will work with the industry to find solutions to the underlying issues that have led us to this point.
The commission has identified seven areas that require structural reform.
The first area is group licensing. As I mentioned to you previously, we need to move away from a framework where licence renewals for conventional television services are assessed independently from pay and specialty services. A group-based approach will allow us to harmonize the rules that govern all categories of television services. It will also allow us to consider the total audiences reached by broadcasting groups, the totality of its revenues, and its programming commitments and obligations.
Secondly, there needs to be a refocus on core elements, coupled with necessary energy and resources. Conventional broadcasters need to refocus on the core elements of their service--local news, local programming, and programs of national interest. Rather than perceiving it as a cost of doing business, they need to see it as a central element of their survival, and expend meaningful resources and energy on it.
Third is the harmonization of local programming obligations. The amount of local programming varies from station to station and depends on when the licence was originally granted. We believe there should be a level playing field and that the amount of local programming should be harmonized, depending on the size of the markets they serve.
Fourth, we need clarified funding. As indicated on May 15, to carry out such refocusing, broadcasters need more predictable funding. Rather than resorting to fee-for-carriage, we will seek to provide revenue support for conventional television by investigating alternative support mechanisms designed solely for local programming; protecting the integrity of the Canadian broadcasters' signals; and exploring mechanisms for establishing, through negotiations, the fair market value of these stations' signals. This will be backed up, if necessary, by CRTC arbitration.
Fifth, we need meaningful commitments. I'm certain that broadcasters can develop successful business models if supported by revenue streams that reflect the value of the programming being distributed. However, in exchange for the above-mentioned harmonization of obligations and negotiated funding, it will be necessary for broadcasters to provide firm commitments regarding local news, local programming, and programming of national importance.
Sixth, we need restraint on foreign programming, and/or commitments toward Canadian program spending. We have heard great exasperation from the Canadian creative community about the amount of money that's being spent each year in Hollywood. To live up to the objectives of the Broadcasting Act, some sort of restraint or attenuation is required. It remains to be determined whether this should be achieved by way of ratio--minimum Canadian expenditure requirements--or a percentage of revenues obtained. But some sort of restraint mechanism appears to be necessary and desirable.
The seventh sector is digital transition. Finally, we must find an acceptable solution to the obstacles standing in the way of the transition from analog to digital television. A hybrid solution which would entail over-the-air digital signals in standard definition in major centres and access by way of cable or satellite in non-metropolitan centres appears to be the answer. However, certain details still need to be worked out, including access, cost and entitlement.
On the same day that we announced the new licensing terms for private conventional television broadcasters, we outlined our plan to address these seven areas that I have just described. We will soon initiate a public process that will culminate in public hearings this fall, on September 29 to be exact. This is the summer process I referred to during my presentation back in March. We are confident that we will come out of the hearings with a revitalized framework that we will be able to apply in 2010 to the group-based licence renewals. We recognize that we're dealing with very tight timelines. However, the urgency of the matter justifies these timelines, and we have every reason to believe that we will achieve our goal.
You have raised some very pertinent issues during your study, which we are taking into consideration, and we look forward to reading your final report. It will add an important perspective to our deliberations.
Thank you. We are prepared to answer your questions.