Canadian Heritage Committee on Dec. 2nd, 2010

[The Chair, Conservative, Michael Chong]

Welcome to the 34^th meeting of the Standing Committee on Canadian Heritage, on Thursday, December 2, 2010.

We are here pursuant to Standing Order 108(2) for a study of the impacts of television ownership changes and the move toward new viewing platforms.

On our first panel today we have Shaw Communications Inc., represented by Mr. Bissonnette, Mr. Ferras, Mr. Stein, and Madame Bell.

Before we begin, I want to let members of the committee know that Quebecor Inc. wasn't able to attend our last meeting, because of a clerical misunderstanding with the committee. I also want to thank Shaw Communications Inc. for its flexibility in arranging this appearance.

We'll begin, without further ado, with an opening statement.

[Peter Bissonnette, President, Shaw Communications Inc.]

Good afternoon. Thank you, Mr. Chairman and members of the committee.

I am Peter Bissonnette, president of Shaw Communications Inc. I am joined by Ken Stein, senior vice-president of Corporate and Regulatory Affairs at Shaw Communications, Charlotte Bell, vice-president of Regulatory Affairs at Shaw Media and Michael Ferras, vice-president of Regulatory Affairs at Shaw Communications.

We would like to begin by thanking the members of Parliament, including members of this committee, who expressed their strong support for our acquisition of the Canwest broadcasting assets, now known as Shaw Media. We would also like to thank the CRTC and the Competition Bureau for their thorough reviews and expeditious approvals of our application.

We note the CRTC chairman's statement that our acquisition “...will generate substantial benefits for the Canadian broadcasting system. Shaw will provide the television properties involved in the transaction with stable ownership as they emerge from a period of uncertainty.”

During the public hearing we received almost 140 supporting interventions from independent broadcasters, producers, directors, artists, unions, and elected officials. We are pleased that there is nearly unanimous agreement that Shaw's ownership of Global Television and the Shaw Media specialty services is the best possible result for the broadcasting system, the economy, and Canadian television viewers.

Through our acquisition, Canada's second-largest broadcaster emerged from bankruptcy protection as a Canadian-owned, integrated going concern. We can now secure jobs, stabilize relationships with suppliers and customers, make forward-looking investments, and develop innovative multi-platform content. And we will spend $180 million on benefits that will support independent producers, local news, and the digital transition.

Charlotte.

[Charlotte Bell, Vice-President, Regulatory and Government Affairs, Shaw Media, Shaw Communications Inc.]

Shaw's acquisition did not raise any market concentration or common ownership concerns under the CRTC Diversity of Voices policy. The commission has set out clear and appropriate guidelines for transactions. Even when considering Corus—which is a separate company with different shareholders and its own board of directors—the combined market share of Shaw Media and Corus is below the commission's 35% bright-line test for expeditious approval.

In fact, our acquisition will actually increase diversity of voices. We have preserved competition in English-language broadcasting and we are committed to strengthening local programming.

Specifically, over the next seven years, we will invest $45 million in the production and exhibition of new morning newscasts in Regina, Saskatoon, Winnipeg, Toronto, Montreal and Halifax. Our other benefits include: $79 million to the incremental development, creation and promotion of newly scripted comedy and drama, produced exclusively by independent producers. We will spend $18 million on new media content to complement and reinforce our other benefits initiatives in connection with scripted programming and news. We will invest $23 million to build digital transmitters in non-mandated markets, thereby insuring over-the-air service to over 60 small communities. Finally, we will invest $15 million for an equipment fund to insure a local broadcasting presence on Canadian airwaves even in very small communities.

[Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs, Shaw Communications Inc.]

With respect to vertical integration, some intervenors have incorrectly described this as a threat to the system. The opposite is true.

To compete in the digital universe, we need an industry structure that allows us to remain at the leading edge of innovation. Our ownership of Shaw Media creates a strong entity that can compete for and maximize the value of multi-platform content rights.

Furthermore, the CRTC has already introduced a comprehensive framework to protect unaffiliated broadcasters and support independent producers. Existing CRTC protections include undue preference rules and extensive distribution and access regulations. Because of the commission's rules, we have already added several independent and unaffiliated programming services on both Shaw Direct, our satellite service, and Shaw Cable, and will be required to add more.

In the uncertain digital future, regulated Canadian companies need maximum flexibility to serve their customers. We should be considering steps to further strengthen the system by decreasing our financial and regulatory burden, not increasing it. Demands for additional regulation and taxation, such as an ISP tax, must be rejected.

We compete in a dynamic environment. We are responding to our customers' demands for choice, quality, and value. To remain competitive, the Canadian broadcasting industry needs strong integrated companies, which must invest billions and focus on offering new services.

Canadian broadcasters and distributors make significant investments in the system, support and exhibit unique Canadian programming, and create thousands of high-quality Canadian jobs. These contributions have been supported by a detailed regulatory framework that achieves the objectives of the Broadcasting Act and preserves the health of the Canadian broadcasting system. However, achieving the objectives of the act and preserving the strength of the system are now challenged by the entry of new media broadcasters who are competing for content and consumers. These entities are not Canadian.

Peter.

[Peter Bissonnette]

Foreign competitors such as Netflix, Google TV, Apple TV, and Hulu have internationally known brands, sophisticated technologies, marketing expertise, and very, very deep pockets. These foreign content providers remain exempt from regulation under the CRTC's new media exemption order. This exempt status needs to be reconsidered for the following reasons.

First, the Canadian broadcasting rights market is threatened as a result. Foreign providers either own or have the power to acquire rights to the world's most popular content.

Moreover, non-Canadian entities have no Canadian content or exhibition requirements. They make no financial contributions to the Canadian production industry. Canadian producers are negatively impacted by revenue being diverted from regulated services to exempt non-Canadian services.

And by consuming valuable capacity, over-the-top providers threaten to undermine our significant network investments and impact the quality of service offered to our ISP customers.

Finally, consumers will ultimately suffer, with fewer Canadian choices.

Private companies are responding by investing, diversifying, and innovating. The government and the CRTC must also respond by asking whether they want a Canadian broadcasting system. If the answer is yes, we need to put appropriate rules in place.

Until recently, the rules against licensing non-Canadians ensured that Canadians were well served by their broadcasting system. Given the ability of new technologies to reach across borders and ride on Canadian telecommunications networks, foreign ownership rules are becoming increasingly incapable of ensuring the continued sanctity of our broadcasting system and its benefits to Canadians. We need a new approach that ensures that non-Canadian providers are at least subject to symmetrical regulations and financial obligations. We need the government and the CRTC to simply ensure a level playing field.

We are ready to compete and we have confidence in the future of the Canadian broadcasting system. Consolidation is an essential and inevitable part of that future. Government and regulatory policy must support the strength of integrated Canadian competitors and eliminate any advantages of non-Canadian over-the-top content providers.

Mr. Chairman, thank you. We look forward to answering your questions.

[The Chair, Conservative, Michael Chong]

Thank you.

We'll have about 50 minutes of questions and comments by members, beginning with Mr. Simms.

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

Thank you, Chair.

Thank you to our guests.

Congratulations on your new acquisition. The way you did your speeches very precisely from one to the other, it was almost as if Global has already influenced production values. It was very nice.

[Ken Stein]

You heard it on the community channel.

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

That's true, yes.

I am loath to ask this question. I want to ask this question like I want a root canal, but, to be fair, I have to ask it, because I've asked the others.

You can call it fee-for-carriage or you can call it value-for-signal. I don't know what you'd like to choose, but I think you know what I'm talking about. I would like to get your thoughts, given that we've given the others the opportunity to weigh in on this issue.

[Ken Stein]

Well, first of all, we've campaigned very actively against fee-for-carriage, or as it became known, value-for-signal. We didn't think it was a good idea then, and we still don't think it's a good idea. We think it's a very bad idea.

We don't see how consumers would accept paying a charge for a service that, for them, has always been available for free. There is no doubt that if such a fee were imposed, it would be passed on to the consumer. So we don't see that as being a consumer-friendly situation at all. We in fact would feel that it would serve more to drive consumers away from the broadcasting system. It would put them more into a basis of subscribing to over-the-top services, going to over-the-air services, which now with digital transmission are very easy to receive. So we don't think that it's a consumer-friendly idea. We don't think that the policy put in place by the CRTC, which envisioned blackouts, was at all consistent with the Broadcasting Act, which guarantees that all Canadians can receive all the programs that are broadcast. On this, we always agreed with Global. I'll put my Canwest hat on. We just feel that overall it's not a good idea, and it's not a good policy.

Now, it remains to be seen what will happen with the court. I think the CRTC told you that they expect a decision before the end of the year. We don't know what the timing will be. If they come down with that decision, we would think that if the court did uphold the commission's jurisdiction, just given the change in the landscape, with us acquiring Canwest and with Bell proposing to acquire CTV, the commission might in fact rethink it in terms of how this would be implemented and its impact on consumers.

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

Thank you for that.

[Ken Stein]

We were opposed then, and we're still opposed.

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

And you're still opposed to it, despite any mergers or anything of the like or acquisition of Canwest Global. Okay.

Ms. Bell, I like what you had to say about the over-the-air situation in small communities. I'm from a rural riding. You're investing in non-mandated areas. Is that correct? Is that the terminology?

[Peter Bissonnette]

Yes. One of the benefits of the acquisition--and there were many--happens to be that it will ensure that anybody who is currently viewing services using an antenna as opposed to a satellite receiver or a cable box won't be disadvantaged. We will be providing them up to $15 million worth of Star Choice receivers so that they can in fact receive those over-the-air signals via a satellite receiver.

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

Okay.

I'm going to move through a couple of questions quickly.

Mr. Stein, you mentioned the extensive rules for distribution and said you want to decrease the burden. Give me an example of what you would like to see in the immediate term to decrease the burden from the CRTC upon you.

[Ken Stein]

I hope I'm not speaking out of turn.

My latest example would be that they have a strange term they've created called the “new media broadcast undertakings”. What they are going to do is ask us to file a whole bunch of information and look at possible regulations affecting us.

We feel that's burdensome. We feel it's complicated. We feel they're on a fishing expedition for information. As well, it doesn't go with the issue, which is really that the over-the-top services are the ones they need to be looking at, not the new media services that we--

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

Sorry, Mr. Stein. I have a few seconds left here, and I just wanted to get in one quick question.

Following your testimony, we will receive testimony, I'm sure, from two entities, CACTUS--Canadian Association of Community Television Users and Stations--and Pelmorex, obviously to do with the vertical integration issue. One, of course, is your service of community cable--is it serving the community--and the other one is whether we are looking at playing with the lineup such that it plays to your goals as a distributor. I was wondering if you could comment on that.

[Ken Stein]

With respect to CACTUS, there was a hearing on the community channel policy. We agreed at that hearing to undertake measures to ensure total access to our system. We're proud of the community television service we offer, and we want to continue to do that. We've agreed with the commission to follow their policies in providing more access to the public and having advisory groups on the community channel.

With respect to the Pelmorex proposals, we think the commission's rules are totally adequate, and that's proven by the fact that over the next year we're going to launch 20 new independent services.

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

Thank you.

[The Chair, Conservative, Michael Chong]

Madame Lavallée.

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

Good afternoon, gentlemen.

Good afternoon, Ms. Bell.

There are many things that I do not understand, but there is one issue in particular that I really do not comprehend. Unless I am mistaken, you said in your presentation that the Canadian broadcasting rights market is threatened; that you have foreign competitors such as Netflix, Google TV, etc.; that the exempt status needs to be reconsidered. And naturally, you suggested that your foreign competitors be subjected to the Broadcasting Act or that there new regulations be developed for them. Did I understand correctly?

[Peter Bissonnette]

Yes. If there's one message we want to leave with you today, it is that over-the-top competitors have a free ride. They're aggregators of broadcasting. They provide broadcasting services in Canada. And they aren't licensed. They're non-exempt. We think there's an element of fairness missing with respect to their ability to provide services to our customers.

We have contributions that we have to make, being members of the Canadian Broadcasting Association. I'll give you some examples of some of the things we do every year as a company—

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

I apologize for interrupting you. We do not have a great deal of time and I want to make sure that you answer my question.

Are you suggesting that the CRTC regulate the Internet? Is that what I am to understand?

[Peter Bissonnette]

No, we're not. These people are broadcasting. We're saying they should be making some of the same contributions to the system that we're making. As for how we do it, I think that still has to be questioned. Every year we pay about $151 million. It's broken out into part one fees, part two fees, telecom fees, central community funds. Shaw contributes $88 million to the production fund and $31 million to local production. None of these contributions are coming out of these non-exempt foreign broadcasters—and they are broadcasters.

We don't think it's fair that we should be burdened by these costs while they ride free on a sophisticated network that we've built because we want our customers to have an experience that's second to none.

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

I apologize for interrupting you.

In Quebec, these are not provider names that we see on a regular basis, namely, Netflix, Google TV, Apple TV or Hulu. Are these providers broadcasted on the Net, via satellite?