Canadian Heritage Committee on May 25th, 2009

[Konrad W. von Finckenstein]

The court can do what it wants. It does what is appropriate. It can fine people. It can imprison people. It can take their licence away--whatever.

[Shelly Glover, Conservative, Saint Boniface, MB]

In that one case, sir, what was the consequence? That's what I'm just trying to get at. You say you have teeth; prove it.

[Konrad W. von Finckenstein]

We told the CBC that they were in violation. They argued with us, and we made the finding that, yes, they were in violation. They didn't dispute that. They said, “Let us change. We'll come back to you and ask for a different licence, because we're clearly not living up to what you'd stipulated.” In legal terms, it's nolo contendere--essentially, I don't contend your allegations, I don't dispute your finding.

Effectively, they reformed their conduct. They are going to do something else now.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

We'll move back to Mr. Rodriguez, please.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Mr. Chair.

As regards your suggestion about negotiations, can you take this initiative on your own, or does the legislation need to be amended? To what extent is it feasible to proceed quickly?

[Konrad W. von Finckenstein]

Once we have made the decision, we may have to make a few changes to the regulations, but we could implement them before the beginning of the new licence in April 2010. This could be done sooner, depending on the changes we make. We have to decide whether we are changing just the policy or whether we have to change the regulations. We are able to change the regulations ourselves, but it does take a little longer.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

There is consensus on two things, or perhaps on several, but there is definitely consensus on two things—namely that there's a structural problem and that action must be taken quickly. Can you not speed up the process?

[Scott Hutton, Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission]

Because we are a commission, we face some constraints, and we are required to consult the public and act in accordance with natural justice.

However, we have completely changed our game plan. Last April, we were supposed to be issuing licences for seven years. We changed that, and issued licences for one year. We included provisions regarding policy, and we asked questions about the value of the signal and about obligations. We put out a decision just two weeks ago after the hearing was over to provide some clarification and to announce another process scheduled for late September or early October of this year.

We are also trying to issue a decision before the end of the year so that these issues will be settled when we hold full hearings for a new seven-year term—as we did last April.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

I see.

There has been a great deal of talk about the fee-for-carriage system. I know you do not like talking about this much. I actually have the impression that you become impatient when the issue is raised.

Are there any conditions under which you would agree to adopting this system?

[Konrad W. von Finckenstein]

I could never give you a categorical answer to a hypothetical question.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

You sound like a politician.

[Konrad W. von Finckenstein]

I cannot answer your question. Because of the way you ask it, it is completely hypothetical.

Of course, the objective remains the same. We are trying to ensure that the revenues of conventional broadcasters can be foreseen. We are taking into account all sources of possible revenue, including market-associated advertising...

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

The question is hypothetical, but there may be conditions under which you would agree to this.

I would like to come back to your suggestion regarding negotiation. If a value is assigned to the transmission of signals, that is to the content, the cable companies will negotiate a royalty with the broadcasters. The cable companies will react by saying that they will increase the fees consumers have to pay. That is what they always say. Do you agree with that?

[Konrad W. von Finckenstein]

But all companies do that. If we make changes, someone is going to have to pay for them. When people can pass on the cost to the final client, that is what they do.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

So, that is what they're going to say.

Imagine that I am the consumer and my monthly bill goes up because the cable company has decided to pass these costs on to me. Under your proposal, would I be able to opt out? Would I be able to say I did not want a particular channel, such as CTV or Global? Could consumers get fewer channels without paying more?

[Scott Hutton]

We have not yet worked out this level of detail regarding this proposal. That is why the issue must be discussed during a hearing process. Some of the companies raised it. We should distinguish between the fee-for-carriage system and an attribution of value. If we were to charge all the channels 50 cents, there will be an impact on consumers.

Even if we change the regulations to limit the increases imposed on the cable companies, whether they are five, six or seven dollars a month, they will not be able to find these amounts in their pockets.

In order to determine the value, cable companies will base the calculation on what they and the market, that is the consumer, are prepared to pay. This approach would show more respect for consumers than would a decision by the commission on the matter.

[The Chair, Conservative, Gary Schellenberger]

Our next questioner is Mr. Bruinooge.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Thank you, Mr. Chair.

Thanks to the witnesses.

Of course, we're continuing our very important study on the effect of the television industry in Canada on local communities and, of course, on local television. This is a very important issue in my hometown of Winnipeg. I was at an event on the weekend where 1,000 people came out in support of local TV. Clearly, Canadians value local television.

I know there's been a lot of discussion today about various elements of the job that you do and that the CRTC does. Without coming out in terms of my personal support for any particular element of the fee-for-carriage discussion, my interest with my questions is more so in your appearance here today in the sense that we didn't necessarily account for having you return to the study, because you were here once already.

My biggest interest is in regard to the fact that our committee actually voted to request that you come back to clarify some of the statements you made at a previous committee meeting. I know that Mr. Rodriguez made reference to some of it, but I just want to give you the opportunity to speak to it again, because essentially that was the purpose of you coming to our committee meeting today.

Looking at the reasoning for you to come here today, it was mostly in relation to the broadcasters making suggestions, and in fact, they did say that they were going to apply fee-for-carriage to local broadcasts, to local television. As you indicated in the previous meeting, of course, you said that there was a resounding “no” to that at one of your encounters with them. So I guess my question to you would be, do you believe that the broadcasters were misrepresenting you and misinforming the committee? Also, because we brought you back to clarify, should there be some sort of request to them for further clarification?

[Konrad W. von Finckenstein]

First of all, thank you very much for asking me to come back. You will appreciate that when I was before you the first time, it was prior to our hearings, and now it's subsequent to our hearings. So we've had a lot more submissions on all these various points, I think, which is helpful. And I've been following very closely the witnesses before you to see what they say.

In terms of the particular issue of what happened at the BDU hearing, they asked for a fee for carriage, and I basically asked what I would get in return, quid pro quo--spell it out for me. They didn't spell it out. I read you their testimony. They didn't say no. They said that it will be reflected. They talked about sustainability. They talked about coming back further on. So I then used this figure of speech and said “a resounding no”, which I regret very much, because it obviously was misleading. It sounded as if I was accusing them. All I was trying to say was that I didn't get a sound commitment.

We have since gone over the testimony again from our own hearings, and you've heard from the witnesses. It is clear that we didn't have a meeting of the minds. It was unsatisfactory. They indicated that they were willing to come along if we made a decision on fee-for-carriage. I thought that the whole issue was no fee-for-carriage unless you come back with a sound, specific commitment, which they didn't.

I think the best thing is to forget about that issue. Really, both sides have.... Mr. Fecan at one point in time said in our hearing I guess I wasn't too clear, and I probably didn't follow it up sufficiently. The fact is that at the hearing, when we decided not to do fee-for-carriage, essentially, the situation wasn't as bad as it is right now. We didn't see what the value added would be that we would get. And it was done just after they had done major acquisitions and so on, and we felt that they hadn't established sufficiently their need.

This is very much a moving target. Things have completely changed. Remember, this was in October 2008. Clearly, something needs to be done. I have said that publicly many times. We all agree. You have held these hearings. The question is what we do. Having just had this hearing in April, when the first week was only on policy, we have come basically to set up a new master plan. We're going to deal with it in October, and I have outlined today and shared with you, and everybody who's listening to this hearing, for the first time, the seven points we think will be at the heart of the hearings in September.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Mr. von Finckenstein, I have just one last, very short question.

I know that you indicated that you wish we could forget about it, but this is a very important hearing on the future of local television. It's important for us as a committee to ensure that the testimony we receive is the correct testimony. So I just want to clarify one last point.

In your most recent answer to my question, you indicated that you thought that the particular answer, “a resounding no”, was misleading. Could you expand on that?

[Konrad W. von Finckenstein]

If you take it literally, I said that the resounding silence meant that I didn't get an answer. Obviously, I got an answer. I read it out to you earlier today. The answer to my question was the equivalent of a resounding silence, because it didn't answer what I asked, which was to put some flesh on the bones. What does it mean? If you get a fee for carriage, what am I going to get from you? And I didn't get anything substantive that way.

I've learned. I will not continue to use figures of speech like this. I will be more serious. This is not my first time in Parliament. It's about the hundredth time I have had to testify before a parliamentary committee. I know that with Parliament you don't mislead it. You give the information as precisely and as concisely as you can. As I say, it was a figure of speech. It never occurred to me that when I said there was a resounding silence that somebody would read that to mean that there was no answer. Yes, there was an answer. I read the answer out to you. It wasn't a response to the question I posed.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Angus.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you very much, Mr. Chair.

I'm fascinated by this compensation-for-value model that's being discussed, because we didn't really see this the last time, and I think we're all trying to get our heads around it.

The idea that instead of the CRTC, the big players will negotiate among themselves.... These are companies that are taking out newspaper ads against each other. They're coming before our committee. They're saying no, their map is upside down and has to be read this way. I haven't seen this kind of corporate hostility ever.

I don't know if there's a solution to the future of over-the-air television, but I'd suggest that CTV should get a reality TV show. We could put Phil Lind in a room with Jim Shaw and the Aspers, and we could watch them negotiate.

Is it a viable solution, given the hostility on this issue, to just say that you guys should come up with a deal? Who's going to protect the local operations? Who's going to say that there's Canadian content? That's your job. How can you suggest, given the level of hostility we're seeing, that they're actually going to be able to come back with a plan that protects the overall health of the Canadian television industry?

[Konrad W. von Finckenstein]

Don't mistake the noise for the substance. These people are in show business. This is television. They are making a very good show. I wish we had an educated debate, because these are very big issues. Instead you are having issues such as this. There's a very heated debate. We're seeing full-scale ads. We have accusations from one of their people who allegedly mistakes news-making and news reporting. We have cable community channels having debates on this all over the place.

Regard that as background noise. They need each other. Broadcasters need the BDUs; BDUs need the broadcasters. If the signal is not distributed by the BDU, you as the broadcaster are going to be dead on arrival. On the other hand, if you're a BDU and you don't have content to distribute, people won't buy your services. They need each other; they know that full well. They'll come to agreement. They do it all day long. Think of CTV or the whole stable of specialty channels. For each one of those they negotiate the fee with the BDUs. Why can't they do it for the conventional channels? They know each other; they know the business; they know each other's margins; they know the other's area of manoeuverability.

If we set a timeline and say that's a precondition for being able to get a licence or being able to distribute the signal, they'll come to it.