Evidence of meeting #32 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 content.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Paul Sparkes  Executive Vice-President, Corporate Affairs, CTV Inc.
Mirko Bibic  Senior Vice-President, Regulatory and Government Affairs, Bell Canada
Kenneth Engelhart  Senior Vice-President, Regulatory, Rogers Communications Inc.
Michael Hennessy  Senior Vice-President, Regulatory and Government Affairs, TELUS Communications

5:10 p.m.

Conservative

Royal Galipeau Conservative Ottawa—Orléans, ON

At $2,000 a month.

5:10 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

Kenneth Engelhart

So it's important for companies to provide better service. I think you see the level of customer service at our company. We're investing more and more in it all the time.

The other thing I'd like to say is just as historical context. Mr. Angus went back to the beginnings of the Internet. When I was a kid growing up in London, Ontario, we got one CBC, there was a CTV from Kitchener—and it was pretty fuzzy—there were two radio stations, and the newspaper owned one of the radio stations and the TV station. A kid growing up in London, Ontario, today has hundreds of channels; the Internet has an incredible variety of information and choice that we couldn't even dream of back then.

5:10 p.m.

Liberal

Bonnie Crombie Liberal Mississauga—Streetsville, ON

I have to tell you as well that a couple of people I've spoken to have received a letter saying they had been the recipients of overdiscounting, and the company was looking for their money back.

5:10 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

Kenneth Engelhart

No, no one had to give anything back.

5:10 p.m.

Liberal

Bonnie Crombie Liberal Mississauga—Streetsville, ON

Good.

5:10 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

Kenneth Engelhart

We did overdiscount some people and underdiscount others. We corrected the overdiscounted going forward, but they got to keep the overdiscount they had received.

5:10 p.m.

Liberal

Bonnie Crombie Liberal Mississauga—Streetsville, ON

Okay, let's just move on.

I want to talk about the future of Canadian content. As broadcasters are becoming larger and want to become players on the global stage, what's going to happen?

5:10 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

Kenneth Engelhart

As I mentioned in my remarks, you have Netflix, Hulu, Apple TV. These are all sophisticated television operators coming into Canada with no Canadian content requirements whatsoever. One of the things that vertical integration can do is try to keep the regulated Canadian system with its Canadian content obligations robust.

But I think the CRTC has to be a bit temperate in the way they regulate. We pay a 5% tax, if you will—a contribution payment—on our video-on-demand. They propose to raise that to 10%, and people like Netflix are paying nothing. The system has to accommodate these over-the-top competitors.

5:10 p.m.

Senior Vice-President, Regulatory and Government Affairs, TELUS Communications

Michael Hennessy

I'd say the number one thing is to focus on the Internet as the future for our content entrepreneurs, creators, or public sector content producers, because that gives you access to global markets. If you have access to global markets, you have the ability to start to create businesses that have sufficient audience that they don't need subsidies, all the wealth transfer we have in the current broadcasting system. The number one thing that I think is required there is venture capital for the start-up companies we see on the Internet, rather than regulation.

5:15 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you very much, Madam Crombie.

Thank you, Mr. Hennessy.

Mr. Pomerleau, your turn.

5:15 p.m.

Bloc

Roger Pomerleau Bloc Drummond, QC

Thank you very much, Mr. Chair.

I found both of your presentations very interesting. But, on principle, I would have a hard time agreeing to a totally free market, for any reason. History has shown that it always ends up creating a competitive environment that knocks out a number of players who should not necessarily be knocked out.

I am coming to my question. Mr. Hennessy, you recommended four rules that the CRTC should adopt. What are the chances that the CRTC will actually take those recommendations into account and flex its muscle by implementing them?

5:15 p.m.

Senior Vice-President, Regulatory and Government Affairs, TELUS Communications

Michael Hennessy

I think there's a significant chance that they will take them into account. They took some of this into account when they rendered the Shaw-Canwest decision.

The issue for the CRTC will be that they worry that if they create rules, they will have to enforce the rules, and they don't have the resources or the money. This is why we put on the table the suggestion to use a commercial arbitration process that the parties go to, which would have timely rules around it, rather than the resources of the commission itself. We're fairly confident that by limiting it to four critical things in terms of exclusivity, price, quality, timeliness, we're not asking so much; that given the value to the companies that are being allowed to vertically integrate, it's a pretty fair trade-off.

5:15 p.m.

Bloc

Roger Pomerleau Bloc Drummond, QC

Very well.

Mr. Engelhart, if the CRTC were to put those regulations in effect, would you be able to live with that new reality? Is there anything you would not be able to accept, either on principle or for economic reasons?

5:15 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

Kenneth Engelhart

I'm not very far away, I don't think, from Mr. Hennessy's position. You have to realize that the CRTC has put in a regime of the type he's talking about for linear television. For linear television, we have to offer Sportsnet, which is owned by Rogers, to ExpressVu, to Telus, to Shaw, and if they're not satisfied with the price, until recently they could take it to arbitration. Sports has now been carved out of that regime, but most services they can take to arbitration.

That sort of heavily regulated regime in which there is no exclusive content is the rule today for linear TV. What we're exploring in the hearing in the spring is whether the same rules should apply to mobile phones and Internet.

One of the complications there is what to do about totally unregulated Internet providers. What if FIFA, whom you can't regulate—the soccer people—sell an exclusive to Jump TV or to Hulu Canada? The CRTC has never regulated those people.

You have to worry about a system that regulates the people who are already in the broadcasting system and leaves everyone else unregulated. But conceptually, the idea that all distributors should get access to the content is one we support.

5:15 p.m.

Bloc

Roger Pomerleau Bloc Drummond, QC

Mr. Chair, I will end with one last question.

Earlier, Mr. Bibic said something the committee hears a lot. Everything is Internet and new technologies. As we heard, 30% of Canadians watch between 30 minutes and 60 minutes of TV on the Internet, and 20% of Canadians use a cell phone or smartphone to watch video clips.

Is that really the future? Personally, I am old-fashioned, and I still watch TV. Is watching a hockey game on a tiny device where you cannot even see the players' names really the wave of the future?

5:20 p.m.

Bloc

Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC

Where's the puck?

5:20 p.m.

Some hon. members

Oh, oh!

5:20 p.m.

Bloc

Roger Pomerleau Bloc Drummond, QC

I realize that new devices will be invented, but is watching TV on an ever-shrinking screen really the wave of the future?

5:20 p.m.

Senior Vice-President, Regulatory and Government Affairs, TELUS Communications

Michael Hennessy

The screens get bigger. A RIM tablet or an iPad starts to become the size of a television. The one thing that nobody is discussing when they say that all this wonderful stuff will happen on the Internet is that, particularly on wireless networks and to an extent on the Internet as well, the laws of physics or laws of capacity say that there's only so much room for it. To the extent that you're paying for capacity on a wireless network, if you start watching multiple movies or hockey games, your bill will become substantial.

The traditional broadcast distribution mass media product is still probably the strongest product for delivering broadcast content television to the consumer, and I think it's going to remain like that. The Internet and mobile are very interesting and they will be a part of the system, no doubt, but one should not underestimate the strength of the core product.

5:20 p.m.

Conservative

The Chair Conservative Michael Chong

Thank you, Mr. Hennessy and Mr. Pomerleau.

Mr. Galipeau, it is your turn.

5:20 p.m.

Conservative

Royal Galipeau Conservative Ottawa—Orléans, ON

I had some questions, but I'll ask them personally.

5:20 p.m.

Conservative

The Chair Conservative Michael Chong

Mr. Armstrong.

5:20 p.m.

Conservative

Scott Armstrong Conservative Cumberland—Colchester—Musquodoboit Valley, NS

I almost feel like letting Royal go ahead, because I'm afraid that if I finish asking questions, I may disappear.

This is such a complicated subject. I'm going to focus on a couple of things.

Mr. Engelhart, you talked about the need for more venture capital so that we can access markets outside of Canada. This is the whole industry I'm speaking of. Do you think it would be smart if the government focused on expanding things such as the Canada Media Fund, maybe focused less on supporting distributors or broadcasters and focused on creating the best content, assuming that everyone has fair access to this content? Would supporting that be a direction we should go in as a government?

5:20 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

Kenneth Engelhart

I don't know if the track record of the Canada Media Fund has necessarily made it the horse we'd want to back. The core of your question is, wouldn't it be better to subsidize Canadian content rather than regulate the system so heavily? That's something I've always thought would be a better model. It's the model that most countries use. Most countries tend actually to give a lot of money to their public broadcaster and then let the private guys basically do what they want. In Canada we have a substantial public broadcaster and we have a bunch of funds and we have a lot of regulations too. It may not be the optimal model in Canada.

5:20 p.m.

Conservative

Scott Armstrong Conservative Cumberland—Colchester—Musquodoboit Valley, NS

Mr. Hennessy, could you comment on that?