Canadian Heritage Committee on Dec. 2nd, 2010

[Ken Stein]

First of all, in terms of the local distribution, when the government developed the policies for satellite, it was very much focused on having a national service. As satellite companies, at the beginning we were really only required to carry one service--one CBC, one CTV, one TVA, etc., across the country.

Over a period of time, both in response to what our customers wanted and what consumers wanted.... And I must point out that for Shaw Direct, Quebec is a huge market. We're very successful in that market. We have 500 employees, I think, in Montreal.

[Peter Bissonnette]

Our call centre is in Montreal. We have only limited capacity, and I think we've talked about that in the past, to provide services. To the extent that we can make a very, very, compelling francophone service available in Quebec, that's what we've done. In fact, in the next few months we'll be launching three more local services on a virtual channel to our customers in Quebec.

If the world were perfect and we had an unlimited spectrum, we would carry every local service. Remember, the customers in those areas can still get signals off air with their local antenna. They can actually interface that antenna into their satellite box and they can switch from satellite-distributed signals and receive those over-the-air signals. They actually aren't blocked from getting their golf games and their local news, etc., because it's available to them as an over-the-air signal if they choose to do that interface.

[Ken Stein]

To be specific—

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

Just one moment, I do not understand. Are you suggesting that consumers go back to using their rabbit ears in order to watch local programs? Was that your suggestion or did I misunderstand?

[Ken Stein]

It's where over-the-air services are going to be going. I'm not sure about those particular services, but there will be digital. There's nothing wrong with over-the-air reception in those areas. It can be very successful. It works successfully. It's technically possible to do it.

Just to be clear in terms of the situation that exists, we have agreed to put up Quebec City, Trois-Rivières, and Rouyn-Noranda on Star Choice. We've also agreed that in 2012 we will put up Jonquière. So we are trying to address the problem.

The problem we have is that the transponder capacity we have.... We're building a new satellite. It's $350 million and will be ready in 2012. We will continue to do that.

The problem really is the economics. We're doing this not because the economics works for us, because it doesn't. What we have to do is balance how we're making those investments and providing a return to those people who buy our bonds and shares while at the same time trying to meet those obligations. We're very committed to providing all the local services we can. I think we now carry about 80 local signals right across the country. We're very focused on doing that. We do as much as we can.

[Peter Bissonnette]

We've actually approached the CBC, who use two transponders on the current satellite that we share, and we've said, “Why don't we try to find an alternate transponder for you that could be better put to our purpose in terms of distributing local signals?” So far we haven't been successful in convincing them that would be a good thing, but we're going to continue to work on that as well.

In the meantime, we're busily building, as Ken said, a $300-million satellite to give us more capacity. Remember, a lot of things now are going high definition. High definition takes more capacity in terms of distributing it across the nation. But we're doing what we can in a reasonable and economic, prudent way.

[The Chair, Conservative, Michael Chong]

Thank you, Madame Lavallée and Mr. Bissonnette.

Mr. Armstrong.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Good afternoon, and thanks for being here. I found your submission very interesting.

People watch TV in other platforms. Since 2005 the number of this has doubled. I expect this to grow exponentially. How does this viewing of unregulated platforms affect the funding of Canadian content? Can you expand on the relationship that this has?

[Ken Stein]

Of Canadian content that's available, whether it's through Apple or the proposed Google and Netflix, there's not really any Canadian content on it. That was the point we were making earlier, which is that we want to ensure that those services are introduced in a way that Canadians do have access to Canadian content. The problem with the growth rate, the way we see it, is it's like an accident. Do you know what I mean? By the time it happens, it's too late to deal with it. That's what we're primarily concerned about. The number Peter recited was extraordinary to us. That in a few short months it's gone to 5% is incredible.

We want to make sure, though, that Canadians have choice. We want to make sure they continue to have access to those kinds of services. But when networks start denying us the broadband rights to programs that Canadians have seen on over-the-air television, then it's going to become a huge problem.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Mr. Bissonnette, as mentioned, in the last two months 5% of your entire traffic has gone to downloading movies over Netflix. Is that accurate?

[Peter Bissonnette]

Yes. We heard in the U.S. that it could be as high as 20%. That was a number that was provided by a company that actually builds things that can help you to manage your traffic. But we've looked at it specifically over our Shaw network, and 5% is the number.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Right.

Just to switch to a different subject, on the possible ISP tax or levy, you said that if you're not in the system, that wouldn't affect you. If you are in the system, could you expand on the fact that it might drive people away? I'm concerned if we increase taxes we'll drive people towards Netflix, which will increase this 5%. It's going to grow anyway—tip of the iceberg. But we're actually making it worse if we did something like that.

[Peter Bissonnette]

Absolutely, it becomes an avalanche. There are very smart and very tech-savvy people. Two generations behind me, frankly, are very much that way, and if there's a way they can get what they want—and they do get it over our network—and they see the value of what they're getting as being more attractive over here, they're going to get it. The technologies now are great enablers. That's what they're for.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Okay.

[Michael Ferras]

I could even give you a real practical example when we talk about symmetrical rules. Shaw has video on demand, and video on demand is very much like an over-the-top provider of a service. Just like BDUs must contribute 5% of their gross revenue, so must video-on-demand undertakings.

The commission is currently having a process right now where they're considering increasing that financial contribution that video on demand should make to the system. Our point is that this is exactly the kind of thing where you have to stop and say, “Wait a minute—this is a competitive tool within the Canadian broadcasting system”. To start adding taxes to that service, which will increase the price, which will decrease our ability to invest in it, etc., is precisely going in the wrong direction.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

I just have one last question, if I have time. This is to any one of you.

Do you believe the decision to exclude Internet service providers from the broadcasting category will erode BDU contributions to production funding? Do you think that would erode that?

[Ken Stein]

First of all, are you talking about an ISP levy?

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Well, no, we've decided to exclude Internet service providers from the broadcast category right now. Right?

[Ken Stein]

Yes, you mean as telecom carriers.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Is that going to erode our BDU competition to produce production funding?

[Ken Stein]

No.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

So it would have the opposite effect, or it would have no effect at all?

[Ken Stein]

I don't know.

Charlotte.

[Charlotte Bell]

If I understand your question, they're not contributing now, so I'm not sure that it would actually impact the contributions that are going to the Canada Media Fund at this time.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

If at some point in the future the role were reversed, how would that affect BDU contributions to production funding?