Evidence of meeting #30 for Canadian Heritage in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was broadcasters.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Konrad W. von Finckenstein  Chairman, Canadian Radio-television and Telecommunications Commission
Rita Cugini  Acting Vice-Chair, Broadcasting, Canadian Radio-television and Telecommunications Commission
Scott Hutton  Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
Suzanne Gouin  President and Chief Executive Officer, TV5 Québec Canada, Independent Broadcasters Group
Martha Fusca  President, Stornoway Communications
Bill Roberts  President and Chief Executive Officer, ZoomerMedia Limited, Television Division, Independent Broadcasters Group
Mike Keller  Vice-President, Industry Affairs, Newcap Broadcasting (Jim Pattison Group), Newcap Inc.
Monique Lafontaine  Vice-President, Regulatory Affairs, ZoomerMedia Limited, Independent Broadcasters Group
Joel Fortune  Barrister and Solicitor, Joel R Fortune Professional Corporation, Independent Broadcasters Group

4:20 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

That's the argument made by Internet service providers who claim to be only a “tube” and therefore have no responsibility.

And you're buying that...?

4:20 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

The courts have accepted that.

4:20 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

As far as I know, these people do a lot of advertising stressing the fact that their “tube” can be used for very quick downloads, watching films, listening to more songs, and so.

It seems to me there is a fairly direct connection.

4:20 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

If you change the Broadcast Act, we may be able to do something. However, under the Broadcast Act as it currently exists, the courts have explicitly stated that we cannot do that.

4:20 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

Is that what you're recommending? Should the Act be amended?

4:20 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

If the Act were amended, I'm not sure what we would do to influence Internet service providers.

In France, for example, they wanted them to pay a tax. The purpose of the tax was to fund national broadcasting. There are no ads on national radio, but there is an Internet bit tax. I don't know how much it amounts to, but all the money collected that way is used to fund national broadcasters. That is one way of contributing to the system, without trying to control Internet content.

4:20 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

If we were to propose something like that here, I imagine our Internet service providers would not be very happy about it. Once again, they would say they have no role to play in this area. But a lot of people believe the opposite.

My feeling is that you don't really have any power. In fact, you said so yourself. You play a critical role. You may roar like a lion but you bite like a kitten.

I see that you have made specific proposals with a view to securing greater powers and a greater ability to enforce the regulations, so that people think twice before trying to circumvent a regulation, but do you have any others?

4:20 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

Well, talk to me next fall!

I am concerned. I have announced hearings. We want to understand the current phenomenon. We want to know where all of this is leading. After that and after holding consultations, we will have a clear idea, and at that point we will be making suggestions as to what can be done. That is exactly the reason why we are holding these hearings. This is a phenomenon that no one really understands.

The CRTC does not claim to understand what is happening or what the solution is. I doubt that there is a single solution. We will probably have to try a lot of different things.

4:25 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

We have been talking about vertical integration and certain sectors of the industry taking control of others. Can you give me your views on the idea of changing the regulations to allow foreigners to buy telecommunications companies?

Because there is this integration, do you think it's possible that it won't have any direct impact on the broadcasting industry, because it is integrated and one branch of the industry often belongs to the other?

4:25 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

When I appeared before you about a year ago, I expressed a view on that. In fact, I said that you cannot separate telecommunications from broadcasting. If you liberalize one, you have to liberalize the other. In my opinion, it is very tricky, because we're talking about a creative industry that reflects Canada. That is why I believe we should retain national control. We can allow foreigners to have 49% ownership, but no more.

4:25 p.m.

Liberal

Pablo Rodriguez Liberal Honoré-Mercier, QC

You said that last year and I wanted you to repeat it.

4:25 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

I have not changed my mind.

4:25 p.m.

Conservative

The Chair Conservative Michael Chong

Merci.

Mr. Del Mastro.

4:25 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Thank you very much, Mr. Chairman.

I have one very quick question and then I'm going to pass it over to Mr. Hiebert.

We've discussed some of the changes that are happening in the Canadian broadcasting industry. We heard before this committee--and I know that you heard before your committee as well at the CRTC in your hearings--from companies like Shaw, Bell, Rogers, Corus, and City, essentially all of the broadcasters and broadcast owners moving forward, and they are not supportive of fee-for-carriage.

I'm curious as to why the CRTC would still proceed with a court hearing when there are no broadcasters in Canada that still support that position, especially in light of the redistribution and retransmission rights war that is going on in the United States right now.

4:25 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

First of all, it's not fee-for-carriage; it's value-for-signal. As you know, we have said that the broadcasters and distributors should negotiate what is the value of the signal that's being distributed. We don't see why.... The distributors pay for the specialty signal and they don't pay for the over-the-air signal. We've made a reference to the court, saying, “Here is the scheme that we would implement” and asking them to tell us if it legal or not.

Because many people appearing before us have said no, this is copyright, and you're interfering with copyright. They have said that this not broadcasting. That argument was debated before the court. Part of industry said it was copyright; part of it said it was not. We await the outcome.

If they say, “Yes, CRTC, you have the power, and you can do it”, all we would do then is establish the fee. It's up to them to decide whether to negotiate it or not, etc. Now that in the interim we have this vertical integration where most of the major broadcasters are owned by the distributors, those negotiations may take a totally different form from what you see in the U.S.

I have no idea what they will do. It's up to them to decide. All I do is set the fee if the court says we have the power to do so.

4:25 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Okay.

Well, I'm just concerned about things getting passed off to consumers, first of all, such as extra charges. But also, secondly, with respect to companies, it would actually be a redistribution of incomes from one BDU to another, potentially, and that I have some concerns about.

Mr. Hiebert, go ahead.

4:25 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Thank you.

I have a couple of questions. The first one is quite brief, I think.

In your submission, you make the statement that you have different regulations for applications where a broadcaster would control more than 35% to 40% or less than 35% of the national audience. I presume you're talking about the number of viewers in the country--

4:25 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

4:25 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

--as opposed to the percentage of the population. With the numbers of viewers declining as significantly as they are, and certainly you've talked about young people migrating from television to the Internet...I hear from broadcasters that they believe 16-year-olds to 24-year-olds don't watch television at all anymore.

With that happening, as they migrate from TV to the Internet, and as the television audience is reduced and diminished, is the value of a TV licence therefore also diminished, because you have many fewer members of the audience looking at the commercials by which the TV stations use to monetize their audience?

4:30 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you, Mr. Hiebert.

Mr. von Finckenstein, go ahead and answer that question, and we'll finish there.

4:30 p.m.

Chairman, Canadian Radio-television and Telecommunications Commission

Konrad W. von Finckenstein

First of all, I don't believe that audiences are decreasing. The audience share of TV is relatively stable, if not increasing.

But let's assume, for argument's sake, that it actually happens. It's also a question of whether this is a temporary trend or a permanent trend, and there are several people in the industry who also believe this is a question of age. As you get older and have other responsibilities, you go more and more to television to be entertained. You don't want to interact, you don't want to choose, etc., you just want to click and say, “Please entertain me”. But when you are young and full of energy, etc., you love the interaction and you want it. I don't know whether it's true or not. We will see. Only time can tell.

Secondly, the market so far has not given any signal that television licences are less valuable than before. On the contrary, they have risen steadily. The latest transactions--for example, when you see what was paid by Bell for the CTV network--show a healthy increase. So we haven't seen that phenomenon yet.

4:30 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you very much, Mr. Hiebert.

Thank you to our witnesses, Mr. von Finckenstein, Mr. Hutton, and Madam Cugini, for your appearance.

We'll suspend for a couple of minutes as we wait for our next panel to appear.

4:35 p.m.

Conservative

The Chair Conservative Michael Chong

Welcome back, members of the committee, to the continuation of our 30th meeting of the Standing Committee on Canadian Heritage.

We have in front of us for the second panel representatives from three different groups. From Newcap Inc., we have Mr. Keller, vice-president; from Stornoway Communications, we have Madam Fusca, the president; and thirdly, from the Independent Broadcasters Group, we have Mr. Fortune, Mr. Roberts, Madame Lafontaine, and Madame Gouin.

Welcome to all of you.

We'll begin with a combined opening statement, I understand, from the Independent Broadcasters Group and Stornoway Communications.

You may begin.

4:35 p.m.

Suzanne Gouin President and Chief Executive Officer, TV5 Québec Canada, Independent Broadcasters Group

Mr. Chairman, members of the Committee, good afternoon.

First of all, we would like to thank you for your invitation to appear today.

We are here today as members of Le groupe de diffuseurs indépendants, le GDI, an association of independent Canadian broadcasters.

Let me introduce you to the member representatives who are here today.

My name is Suzanne Gouin and I am the President of TV5 Québec Canada.

I'm joined by Martha Fusca, president of Stornoway Communications. From ZoomerMedia television, I'm joined by Bill Roberts, president, and Monique Lafontaine, the vice-president of regulatory affairs. As well, I'm joined by IBG's legal counsel, Joel Fortune.

For efficiency's sake, we have joined forces and combined our presentation, although Stornoway is a separate company.

We would like to begin by saying a few words about independent broadcasting, and then move on to the substantive question you are examining.

Canada has a rich linguistic and cultural heritage, and that heritage is reflected by independent broadcasters, including IBG's members. Members of the Independent Broadcasters Group offer programming for Canadians from all conceivable backgrounds, in English, French, Aboriginal and many other languages, including Cantonese, Mandarin, Russian, Hindi and Punjabi, to name only a few, and for every age group and interest.

Independent broadcasters often have the mandate to provide programming that isn't found on mainstream commercial services. Independents provide content and editorial diversity and contribute directly to the free expression that we expect to find in their media and that makes our democracy function.

We also create and support jobs in the cultural industries in every region of Canada and, as small and medium enterprises, spur innovation—what Mr. von Fickenstein was referring to earlier—and growth in the economy.

Before going any further, let me explain what we mean by “independent” broadcasters. An “independent” broadcaster is a broadcaster that is not owned by a corporate group that also owns a cable, satellite or telephone network. Why is this distinction important? It is important because the cable, satellite and telephone companies are the gatekeepers to Canada's broadband networks that all broadcasters need to access in order to reach Canadian audiences.

Subject to only a few rules set by the CRTC, these carriers decide what channels Canadians get to watch on television and new media screens. Just as importantly, these carriers largely control the marketing of programming services—for example, how they are packaged, the retail price, channel placement and how aggressively they are marketed. Last, even while they have all this power, these carriers compete directly with independent broadcasters for viewers and programming, since they also operate a large number of their own TV services.

So, ownership of the distribution networks is critically important. If you own one of the large distribution networks, then the services you own get access, and they are marketed so that they reach a large number of Canadians and prosper. If you don't own the networks, if you are an independent broadcaster, then you are in a much different position.

4:40 p.m.

Martha Fusca President, Stornoway Communications

Our message today is direct. Increased ownership concentration and cross-ownership between programming services and cable, satellite, and telephone companies will do great harm to independent broadcasters. Swift and proactive regulatory action is needed to mitigate this harm.

Canada is reaching a level of ownership concentration that has not been seen before. If BCE's acquisition of CTV is completed, then the owners of Canada's four largest cable companies and two largest telecom companies, Bell and Telus, will control the following: at least 90% of all Canadian cable and satellite subscribers; 97% of mobile phone customers; all four national conventional television networks, including TVA, distributed nationally under a CRTC requirement; 66% of Canada's analog and category 1 specialty channels, the channels that have benefited most from direct CRTC support and regulation; 83% of the total revenue generated by TV in Canada, including both distribution and broadcasting activities; and in excess of 90% of all residential Internet customers in their markets.

We know this committee is examining the move toward new viewing platforms together with changes in ownership in the TV industry. It is fair to say that probably all independent broadcasters are looking at viewing platforms to grow their businesses and to reach Canadians in all technologies, but television broadcasting remains by far the most important viewing platform, and it is also the generator of the same content that Canadians want to watch online.

Also, as you can see from the overlapping ownership of broadcasting networks, in emerging viewing platforms like mobile and the Internet, concentration of ownership is just as significant an issue for accessing the new networks as it is for accessing broadcast distribution. This concentration of ownership represents an enormous challenge to independent broadcasters, both for broadcasting and for new modes of distribution.

This is why adequate regulatory checks and balances need to be built into the system. But the CRTC has moved in the other direction. The commission has removed a number of important roles that were specifically intended to ensure that Canadians' specialty and pay television services get fair access to distribution networks.

The result of this deregulation is that BDUs will have the ability and every incentive to give pride of place to their own broadcasting services and to non-Canadian services. Independent broadcasters look at these coming challenges and are concerned about their ability to maintain a meaningful presence, or even to survive, within the system.

One way to ensure that Canadians continue to have access to important and diverse Canadian TV services is for the CRTC to use paragraph 9(1)(h) of the Broadcasting Act. Paragraph 9(1)(h) permits the CRTC to require cable and satellite BDUs to distribute certain services on basic or other terms and conditions. Some independent broadcasters have applied to the CRTC to become paragraph 9(1)(h) services as a response to concentration of ownership and deregulation. Paragraph 9(1)(h) services reach a large number of Canadian homes through Canada's largest BDUs. Consequently, they have to meet high Canadian content and other stringent obligations.

Regrettably, the CRTC announced at the end of this past summer that it was going to impose a moratorium on paragraph 9(1)(h) applications until after June 2012 at the earliest. It is important for the committee to appreciate that some paragraph 9(1)(h) applications were filed two and a half years ago, including those of the broadcasters on this panel. This means that it will be four and a half years from filing when they are finally heard by the CRTC.