Canadian Heritage Committee on May 31st, 2016

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Cox.

I want to thank both of the witnesses for coming today and for expanding on what we're hearing. The big issue here is Canadian content and how we maintain that.

Thank you very much.

Now we will break for a couple of minutes while one group of witnesses leaves and the others come in.

Thank you.

[The Chair, Liberal, Hedy Fry]

Order, please. We're about to begin.

We have two sets of witnesses, Cogeco Inc. and Corriere Canadese.

Witnesses, you will each have 10 minutes to present. I will give you a cue when you have two minutes left. Then we're going to go to a question-and-answer period.

We will begin with Cogeco. Mr. Audet and Nathalie Dorval, you have 10 minutes, please. You may begin your presentation.

Thank you.

[Louis Audet, President and Chief Executive Officer, Cogeco Inc.]

Thank you, Madam Chair.

Madam Chair, members of the committee, thank you for inviting us to appear and provide you with Cogeco's perspective on the media and local communities. My name is Louis Audet, President and Chief Executive Officer of Cogeco. With me today is Nathalie Dorval, Vice-President, Regulatory Affairs and Copyright.

Cogeco was founded by my late father, Henri Audet, six decades ago. We made our first steps in the media industry in 1957 with a single conventional over-the-air television station located in Trois-Rivières, Quebec. As we all know, the media industry has changed dramatically since that time, not only in Canada, but around the world.

Throughout these six decades, Cogeco has embraced change and adapted its business activities to the new realities brought about by technological, social and economic changes. It is this ability to adapt that underlies the enduring success of our company, which provides employment for over 4,600 people.

We are no longer involved in conventional over-the-air television broadcasting, nor are we involved in the print media, though we were for eight years. We do however operate 13 local radio stations in the province of Quebec, and we provide community television services to many local communities through 32 distinct community channels in the provinces of Ontario and Quebec. We also make our French-language radio news service, Cogeco Nouvelles, available to more than 40 additional independent local radio stations in the province of Quebec. Our remarks today are, therefore, focused on broadcasting in the digital world and on how local communities can still be served in this digital world.

You have heard this before from other witnesses, but I will confirm to you that the landscape has changed dramatically for traditional broadcasting media in the global digital age. Audiences continue to migrate to digital platforms for their information needs, advertisers continue to shift their advertising dollars to Internet-based media, and Canadian consumers—particularly young people—are looking for more instantaneous, ubiquitous and interactive ways of informing themselves, mainly over the Internet.

From a public policy perspective, what should we do or avoid doing in the circumstances?

First, we need to recognize that the trend I have just described is irreversible.

Second, we must focus our efforts on effectively transitioning our broadcasting media to the new operating models available in the digital world, and yes, that includes the production and exhibition of local television news and information programming.

Third, we must avoid robbing Peter to pay Paul—for example, taking money away from the community television sector to subsidize the public and private sector traditional, over-the-air local television stations.

Fourth, we should stay away from direct funding of television news and information programming by the state. This idea would add to the risk of undermining our democracy.

We made these points to the CRTC during their recent proceeding on local and community television in more elaborate submissions backed by detailed data available on the CRTC's own website. Our submissions to the CRTC are also publicly available on the CRTC's website, and you may find them of interest as a complement to our appearance before you today. In addition, courtesy copies of Cogeco's final comments and oral presentations at the CRTC hearings have been provided to the clerk of this committee.

We pointed out that conventional over-the-air television stations in Canada are, for the most part, owned and operated by four large vertically integrated groups, mainly BCE, Shaw, Rogers, and Quebecor, which collectively control over 79% of all commercial television revenues in Canada.

These large and very profitable groups, which are present on all traditional and non-traditional television platforms, have the financial resources to transition their local news and information operations to the new realities of the digital world. They should be allowed to do that—to pool the resources from their various media and platforms—and be required to provide local news components in the local communities that they are licensed to serve over the air. As cord-cutting intensifies, over-the-air broadcasting will take on added importance to reach all Canadians and foster a common cultural base.

As for the public sector, mainly the CBC, it is for Parliament to decide whether its mandate should be revised to specifically include the provision of local television news and information in both official languages and whether the CBC's parliamentary appropriations are sufficient to support the fulfillment of its mandate should it be so revised.

This leaves only 19 small, independent, conventional local over-the-air television stations operating in small markets that need to transition to new operating models to avoid being forced out of business by declining audiences and advertising revenues. Since they are required by the federal government to vacate their over-the-air broadcasting spectrum, the federal government should provide them fair compensation for doing so out of the proceeds of the auction for the spectrum that will be taken away from them.

We also presented to the CRTC earlier this year a plan to offer, through our community channels, professional local news programming in up to seven local communities in the province of Ontario and seven local communities in the province of Quebec that are without any local over-the-air television service. Our plan is based on our experience in North Bay, Ontario, where we've been providing local television news on the community channel since CTV closed the only local over-the-air television station in that community several years ago.

We hope you've found this presentation useful and we'll be pleased to answer your questions to the best of our abilities.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Mr. Audet.

Now we go to the Corriere Canadese for 10 minutes. You can divide your time or you can present in one 10-minute block.

[Joseph Volpe, Publisher and President, Corriere Canadese]

Before we begin, first of all, thank you very much. Your pronunciation wasn't all that bad. You're forgiven.

Mr. Dan Montesano is accompanying me. He's the chair of the community advisory committee board. I'll be doing most of the speaking.

Without further ado, Madam Chair and colleagues around the table, thank you for affording us the opportunity to enter into your deliberations regarding the state of some of Canada’s cultural institutions—because I think that's what we're talking about—particularly as they relate to heritage, citizenship, and participation in the development of our country.

We are acutely aware that your decisions and your recommendations to government will have an impact on the survivability of—quote, unquote—local media and, with it, the continuance of iconic instruments for the promotion of our Canadian identity. This is so because the committee, as it has seen to date, knows that the financial stability of some of those institutions—and perhaps most urgently, the print media—in the Canadian mosaic is fragile.

We speak at the Corriere Canadese for ourselves, but our experience is reflected in that of others, bigger and smaller, as you've heard already this morning. They recognize, as we do, that the federal government, by its actions, determines the successes or failures of many industries, including our own.

Our submission may strike you as a plea for assistance. We don't apologize. It should. We are no less exempt from the vagaries of the marketplace than the bigger and larger enterprises, such as Postmedia, in search of government allies.

Before we make that plea, however, allow us to present ourselves and some of our value-added contributions to the Canadian heritage. Some of the history of the Corriere Canadese and the Italian-Canadian community it both serves and represents in Canada will already be known to some of you. If so, please indulge us in the repetition.

The most recent Stats Canada figures place the number of Canadians who consider themselves ethnically Italian to be in the range of 1.4 million to 1.5 million. That's about 4% to 5% of the overall population of Canada. Just under one million of them live in Ontario, and about 800,000 of them in the Golden Horseshoe. Of this total, approximately 250,000 still use Italian exclusively, primarily, or frequently during the conduct of their daily business. These are relevant stats because we're talking about the nature of Canada and the communities that make up its whole.

The Corriere Canadese is Canada’s only Italian-language daily newspaper. It has been reporting and commenting on the history of this demographic since 1954. It also takes editorial positions on the role and the administration of government at all levels and in all jurisdictions. Sometimes it does this in English.

The Corriere Canadese remains the third-longest-surviving daily in the GTA, behind only The Globe and Mail and the Toronto Star. Incidentally, the Corriere Canadese receives no federal government assistance.

It is worth noting that as a demographic and as a medium we do not fit into the funding compartments reserved for either of the two official languages or for first nations, yet Italian Canadians have been a part of Canada from its first documented contact with Europeans. Giovanni Caboto—or as some of you know him, John Cabot—was the first recorded European to come to Canadian shores. There have been others, but he's the first recorded one. In 1497, under the commission granted to him by Henry Tudor, he landed in what has become Bonavista, Newfoundland.

From then until now, Italians have played a role in building the country they now proudly call their own. It is a rare community or industry in Canada that does not feel their presence, from the former steel and mining industries in towns such as Sydney, Hamilton, Sault Ste. Marie, and Sudbury to Winnipeg and Trail, B.C. The same can be said for the 350 forestry- and lumber-dependent towns everywhere across Canada, and it is so also for the agricultural and agri-production centres anywhere from southern Ontario westward.

In transportation, both the CPR and the CNR relied on an Italian labour force, much of which stayed beyond the rail construction phase and became builders of communities from Vancouver and Kamloops to Canmore, Red Deer, Thunder Bay, the GTA, Montreal, and Halifax. Today, they are a significant player in the auto parts industry of southern Ontario.

Everywhere they have been a model for Canadian multiculturalism, even before that model became enshrined in law in 1971.

In fact, since 1954, the Corriere Canadese has been able to tell the story of their and our need to promote integration, participation, and diversity, along with the benefits that these accrue to Canadian social values. In every part of Canada, their children are the first to seek out alliances and partnerships outside their own community in order to promote the interests of the whole.

As my colleague said a few moments ago, it is an essential element to the democratic aspect of Canada.

Perhaps there are no clearer examples of this than the immediate past presidents of the Canadian Labour Congress, the Business Council on National Issues—now the Canadian Council of Chief Executives—and the founding president of Service Canada. All of them are scions of that integrated community in Canada.

There are numerous other sterling examples of Italian-Canadian leadership in pension funds, philanthropy, food services, academia, the arts, foreign affairs, and so on.

Bu let us go back to Corriere Canadese. It used to be fiscally equipped to tell those Canadian stories of success and the values they represent. We would like to continue to do that, and to maintain that all-important connection to Europe, and Italy in particular. Italy is now a significant Canadian trading partner, and one likely to become even more so if the CETA is ratified.

However, as with our English-language counterparts, our revenue stream is challenged. You've heard that this morning. Consequently, our ability to reach into the communities in the outer reaches of Canada’s vast geography are severely limited. We now focus on the GTHA, where we can generate subscription revenue, single-copy sales, and limited though relatively consistent advertising.

We consider ourselves a job creator, an incubator for the creative arts, and a vehicle for reaching out to the Canadian citizenry. Everything we do is generated, produced, and distributed in Canada. Our paper is not distributed free of charge. It costs money to manufacture product.

The Government of Canada can be very helpful if it so chooses. It is a major league advertising presence because it needs all vehicles to inform the public on matters of importance to all Canadians. Nonetheless, the department that coordinates the ad buys for the purpose of informing the public about government activities actually excludes the Corriere Canadese completely from those ad buys. It claims—and I paraphrase—that the Italian community is not a target of its communications strategy, and that at any rate, the community is serviced by mainstream media. How does it know?

Just like that, 5% of Canadian society disappeared from the government communication strategy, and with it, all of its contributions this demographic makes toward sustaining our society, our economy, and our governing apparatus. It's a bit like what Mr. Audet said about the local communities everywhere around Canada: poof, they disappear.

Somehow it was deemed absorbed, assimilated into another. How? Ironically, the mainstream press in our market complains of precipitous loss of readership, so what are they reading? Please understand that the annual—

[The Chair, Liberal, Hedy Fry]

You have less than two minutes, Mr. Volpe.

[Joseph Volpe]

—Government of Canada ad buy is not insignificant for us. Of the $100 million spent last fiscal year, on a per capita basis some $4 to $5 million would have been spent through our language media. It's gone somewhere else.

Even if one were to accept the argument—and we do not—that only $8.5 million was spent on print, that still represents about $425,000 for an Italian-language press in Canada. For an enterprise like ours, which has 11 employees and is responsible for an additional 10 FTEs, that represents the difference between survival and additional employee attrition.

The Corriere Canadese also receives no share of the ad buy allocated for online advertising, although our nascent online edition receives about 85,000 hits per day and over 100,000 unique visitors per month. We think it would be good value for money and for Canadian taxpayers.

Furthermore, the Corriere Canadese is shut out from any direct grants and contributions under the aid to publishers program. In the last fiscal year, this program distributed approximately $75 million of our taxpayer dollars to qualified applicants, yet it is virtually impossible for us to qualify. Because we are classified as a third-language publication, we are relegated to the periodicals section, and we are automatically disqualified because we publish every day.

[The Chair, Liberal, Hedy Fry]

Mr. Volpe, thank you. Your time is up. Perhaps during the question period you can get to some of the other issues you were trying to bring in.

[Joseph Volpe]

Thank you.

[The Chair, Liberal, Hedy Fry]

We will begin our questions with Mr. Breton.

[Pierre Breton, Liberal, Shefford, QC]

It's a seven-minute round?

[The Chair, Liberal, Hedy Fry]

Yes.

[Pierre Breton, Liberal, Shefford, QC]

Thank you, Madam Chair.

Thank you all for being here today to shed light on our study.

My question is for the Cogeco representatives.

We discussed the tax file with the experts who spoke with us before you this morning. You referred to it, but you did not speak about it in your presentation.

However, in your 2015 report, you said that the migration of cable subscribers to Internet programming services such as Netflix places your business at risk. You lamented the fact that these services are not regulated under the Broadcasting Act.

I want you to discuss this risk. I also want your recommendations regarding what you said in your report.

[Louis Audet]

Of course, Mr. Breton.

To answer your question, my first observation is that democratic countries around the world refrain from regulating Internet content because they know it presents a risk to democracy and the free flow of ideas.

We object to the Quebec government's decision to ban certain Internet game sites and make them illegal, forcing Internet service providers to block access. This approach poses a problem. For each case that arises, there are good reasons for such a decision. However, if the decision is applied to case after case, censorship eventually becomes an issue. Countries therefore refrain from getting involved.

That said, to answer your question directly, I don't think anything would prevent Canada, when establishing a normal tax structure and collecting taxes such as the GST and QST on goods and services, from implementing something legitimately. It would be a good first step.

Afterward, if the government says that players wishing to use its space must contribute to Canadian content production, it would be another step. However, I think the first step is taxation. The government must have taxation powers, as it does for any other good or service provider in the country, regardless of the good or service sold.

[Pierre Breton, Liberal, Shefford, QC]

It's a matter of fairness, based on what you just said.

[Louis Audet]

I think so.

[Pierre Breton, Liberal, Shefford, QC]

I have a second question for you.

The CRTC requires that 5% of your revenue be dedicated to distributing local Canadian content, which can also help support community television. You have 32 community television stations in Quebec and I think the same number in Ontario. This obviously interests me. My riding has three community television stations. They are very important and have many viewers. They even broadcast municipal council meetings. The community stations have a strong presence.

Are you currently satisfied with this model? Do you have any comments?

[Louis Audet]

We have been working in community television for a long time, probably around 50 years. We are very familiar with it. We stick closely to the model established by the regulatory body. We have been praised for this on a number of occasions. At the CRTC hearings last fall, we offered to transform some of our community television stations by adding local news coverage in places with no local broadcaster, as we did in North Bay when CTV decided to close its station because it wasn't profitable.

[Pierre Breton, Liberal, Shefford, QC]

Thank you very much.

I have a final question.

Access to bandwidth is often a key issue. You said earlier that your local radio stations would inevitably face difficulties as people turn to the Internet. You have heard of the $500-million investment in our budget to expand and increase Internet access across the country, which will partially solve the problem.

What do you think?

[Louis Audet]

We commented on the matter to the CRTC a few weeks ago. We identified three types of problems.

First, the underserved communities not too far from main centres need help building networks in areas where doing so is not cost-effective. This could be done using the $500-million investment that you just mentioned, although how it is administered would need to be reviewed. When an initial $300 million was provided under the previous government, it was basically impossible for our company to access the funding to serve some of the communities that are not profitable for us.

The second case concerns underserved and very remote communities. Not only would the $500 million be needed to build networks in areas where doing so is not cost-effective, but an operating grant would also need to be arranged for providers wishing to get involved in the process.

The third scenario—

[The Chair, Liberal, Hedy Fry]

Mr. Audet, I'm sorry. We have exceeded our time. Thank you.

[Louis Audet]

Madam Chair, just give me 30 seconds. This is important.

[The Chair, Liberal, Hedy Fry]

It's more than 30 seconds. We have exceeded it by 40 seconds.

I'm going to move to the next questioner, and that's Mr. Maguire for the Conservatives. You can make that point later when you get another set of questions.

Thank you.

[Larry Maguire, Conservative, Brandon—Souris, MB]

You can do it right now, Mr. Audet.

[Louis Audet]

Thank you.

The third case is for Canadians who are not the most economically advantaged citizens. They may live in communities that are well served, but they may not be able to afford the service. In this case, we have advocated a telecom stamp system that would be initiated by the federal government to allow these people to participate in the digital age. This kind of participation ensures that the subsidy goes towards the use the government would seek.