Canadian Heritage Committee on Dec. 2nd, 2010

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much.

In your brief, you talked about an ISP tax. This is something that has been pitched mainly as an idea around copyright, so I'm interested to see that it's in your briefing here today. I view it similarly to fee for carriage, in a lot of ways, as a solution in search of a problem.

Could you comment briefly on why you think the ISP tax would be harmful? I actually think it would drive Canadians away from broadband services and frankly make tham less affordable, which I don't think any member of this committee should support, but I'd be interested in hearing your comments on it.

[Peter Bissonnette]

We offer choice to our customers, but the choice wouldn't be a tax for fee-for-carriage and a tax for ISPs. We don't want that as being the choices. We want the relationship between ourselves and our customers to be one where they look at it as having value within the system.

If you took Netflix, for example, which charges $8.99 a month, it wouldn't take much to convince somebody who had a $3 or $4 value for signal, or whatever it's called, and then an ISP tax to say “This is a system I don't want to be part of. Maybe the relationship with Shaw isn't as joyful as it should be. I'm going to take my $8.99 and tax and move it to Netflix and never have to worry about the relationship again and having to worry about rate increases, or whatever, that might happen.”

We're giving them more and more reasons not to be in the system.

[Dean Del Mastro, Conservative, Peterborough, ON]

And when they're not in the system they're not contributing toward Canadian content, is that correct?

[Peter Bissonnette]

Absolutely.

[Dean Del Mastro, Conservative, Peterborough, ON]

Which is a big loss for the Canadian system.

I want to go to this point on Hulu, Netflix, and Google TV. You rhymed off a whole bunch of them. They are serious international competitors. The technology is there today to support that. The technology that is coming down the road will make that even more viable.

I think it's important that we come up with a policy on this. Is your company working on a suggestion to either government or the CRTC on how we might compel them to contribute toward the Canadian system that you indicate you are currently regulated under?

[Peter Bissonnette]

Absolutely. We want to work with government, with CRTC, to find a way to do this within the construct of the regulations.

Netflix hasn't been around for much more than a couple of months in Canada, and today 5% of our traffic on our network is dedicated to streaming movies from Netflix. We think that's going to grow logarithmically and every six months it's going to double. It doesn't take long to figure out that the billions of dollars that we've invested in our network are going to be consumed by non-Canadian traffic over our network, where nothing is being contributed back to the network. The customers are doing this.

If you have read some of the articles in The Globe and Mail you will see people expressing that it is almost fashionable not to be connected to the Canadian broadcasting system. They are saying they can spoof themselves and go to the U.S. Hulu site, where they don't look like a Canadian any more, and can get access to Glee an hour after it's been on the air. That's not a good thing for the Canadian broadcasting system.

[Dean Del Mastro, Conservative, Peterborough, ON]

I agree with you entirely.

We're eager to work with you on that for a solution. As you've indicated, we have to decide whether we want a Canadian broadcasting system, and I think we've decided collectively, as Canadians, that we do want a Canadian broadcasting system. In fact, we want a strong one.

Can you comment a little bit about how vertical integration is making Shaw a stronger company and providing more opportunities for Canadians?

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Del Mastro.

Go ahead, Mr. Bissonnette.

[Peter Bissonnette]

That's a great question. Even the fact that we went through this acquisition.... The scenario is that if Shaw hadn't stepped to the plate, nobody else wanted the over-the-air broadcasting system. You know, the company would have been broken up in some form. When you look at what the contributions are from the over-the-air and the production that takes place every year, and the independent producers who are actually benefiting from the fact that Global is still Global, and now in very stable hands, if you will, there are benefits that may not be recognized but they are truly tangible benefits that come from this acquisition.

The fact that we now have a very harmonious relationship with Global, because we now own them, and the environment is frankly.... It's not necessarily how you play the tune, but how the tune sounds. We have what I would call a very harmonious relationship. The availability of programming for VOD, for instance, wasn't available before these deals were done, and customers are now seeing video-on-demand programming that heretofore wasn't available.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Bissonnette.

Madam Crombie.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

I want to say welcome to our witnesses as well. It's a pleasure to meet you all.

Corus was here last week and were telling us that all they needed to be bigger and better was to be more globally competitive. We've heard this from other sectors as well, especially from the banking sector when they all attempted to merge and create more concentration in the industry. I'm concerned, and many of us here are concerned, about further concentration in the industry and how it will affect the small independents. Could you comment on that, please?

[Peter Bissonnette]

First of all, the commission went through a process and looked at the diversity of voices and they looked at even the combination of Corus and what is now Shaw Media. They said that between the two of them it would still fall below the 35% bright-line test. There is a perception that Corus is owned by Shaw, but it's not. It is a separate company that trades separately on the TSX; it also has a separate board.

The provisions within the existing regulations, whether it's distribution, carriage of unaffiliated relationships, the kinds of contributions that we make to local production, whether it's through our direct-to-home contributions through what is Shaw Direct, whether it's the LPIF payments that we're making, there are tremendous benefits that are provided for within the regulations we adhere to.

[Michael Ferras, Vice-President, Regulatory Affairs, Shaw Communications Inc.]

If I could just add, even though, as Peter pointed out, Corus is separate from Shaw, in terms of the commission's regulations, because of a percentage of ownership that Shaw does have in it, every time Shaw or Shaw Direct carries a Corus service, we have to carry five independent programming services. That's how the rules work.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

I'll go at this differently then.

I have concern for both the increased concentration in the industry as well as the vertical integration. I want to know what you think the role and the viability of the small and independent TV broadcasters and producers will be. What kind of impact will it continue to have on them and their ability to negotiate in terms of trade?

[Ken Stein]

We think that actually the fact is that having the vertically integrated companies brings us to a point in the broadcasting system where we have a better working relationship with everybody. We're not going to have the same kinds of battles that we've had over the past number of years. So we're going to be able to work with people to take good ideas and to encourage it. That's fundamentally what we believe in as a company: supporting new and innovative services. So we welcome independent broadcasters and program services. A hundred percent of the program production done by Global is done through independent producers, so they're essential to the future of Global Television.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

What is your contribution to the Canada Media Fund?

[Peter Bissonnette]

This year it's $88 million.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Okay.

[Peter Bissonnette]

And $31 million, of course, to the local programming improvement fund.

[Ken Stein]

I'd just like to make a point. We talk about the Canada Media Fund and the support for Canadian production, and I'm on the board of the Shaw Rocket Fund. We look at what's happening, and we very much support what Minister Moore was able to do with the Canada Media Fund to restructure that and establish a board. We very much support what he is trying to do. But I think we have to make sure we understand that right now, through subsidies and tax credits, Canadians are pouring close to a billion dollars a year into the Canadian media production industry: the film, video production, tax credits at the federal and provincial level, the Canada Media Fund, the contributions to other media programming funds. And that's not including the CBC, which is another billion. So there's $2 billion. That's over the next—

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

I just have to get one more quick one in there before we get off.

Our next witnesses are Pelmorex Media, and of course it's the Weather Network, as you all know. They have something called an “all-channel alert” for emergency readiness. I'm wondering if you have the ability to tinker with their position, because of course if you place them on the upper tiers, how effective would their emergency readiness program be?

[The Chair, Conservative, Michael Chong]

Thank you, Madam Crombie.

Go ahead, Mr. Ferras.

[Michael Ferras]

The carriage of Pelmorex as the Weather Network and the alert are really two different things. There's a carriage rule that says that all BDUs have to carry the weather service. As well, Pelmorex has developed an all-channel alert solution, but that is something very different.

Shaw has diligently been involved with Public Safety Canada in the process of determining an all-channel alert solution, and we've made our commitment to that. But you have to understand that whether it's a Pelmorex solution or another solution, or CBC, there are still outstanding issues. There are technical issues, accessibility issues. Will the alert be in audio? We'll make sure that everybody can see it. As well, there's the major issue of indemnification. The carriers and the participants have to be protected against errors in the messaging.

So all of this Shaw and other BDUs are continuing to work through.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Madame Lavallée.

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

Thank you, Mr. Chair.

Earlier, I talked to you about regulating the Internet. You are not, in fact, the first to have made such a suggestion. So we need to take a very close look at this issue.

I am going to talk to you about a more tangible problem. Currently, 39,000 people in Lac-Saint-Jean—Saguenay—I am referring to this region, but this situation applies throughout Quebec—receive their signals via satellite. They have no other choice but to receive their signals via satellite because they reside in municipalities with no cable service. They have no other choice but to subscribe to your services, for instance, and that of your competitor Bell. In these remote communities, satellite-based services such as yours do not send them local television signals.

Quebec is unique in the sense that there are five Radio-Canada television stations from one end of Quebec to the other, in five regions of Quebec. In the other provinces, there would be one or two stations, but rarely five. There are just as many local television stations for TVA, which belongs to Quebecor, its competitor, as you know. So these 39,000 television viewers have to watch Radio-Canada programming from Montreal or TVA programs from Montreal, because you do not provide them with the services tied in to the local television station.

You said earlier that your acquisition “is the best possible result for the broadcasting system, [...] and Canadian television viewers”. There are at least 39,000... I did not name all of the regions in Quebec; I just referred to one as an example. You also said that you could “spend $180 million on benefits that will support [...] local news”.

How will this $180-million investment be of any use to the 39,000 people who live in Lac-Saint-Jean—Saguenay since they do not have access to their local news, the statements made by their mayors and their politicians, and to the weather forecast? They do not know whether, the next day, they will be able to play golf or go to the movie theatre, but that does not matter anyway since they do not even know what is being shown in their local movie theatre.