Canadian Heritage Committee on April 12th, 2016

[The Chair, Liberal, Hedy Fry]

Good morning everyone. We will begin the meeting.

As you know, today we're hearing witnesses. There are rules for the witnesses here. There are three panels. Each panel is given 10 minutes. At the end of the 10 minutes—and I will time the witnesses so that they know when—we have a question and answer session. During that session, the first round is limited to seven minutes for the questions and the answers. I hope everybody will be as succinct as they can be with their questions and answers.

Thank you again, and welcome.

As you know, today we have the Quebec Community Groups Network, the Friends of Canadian Broadcasting, and Telus.

We will begin with the Quebec Community Groups Network.

[Walter Duszara, Board Secretary, Quebec Community Groups Network]

Good morning, Madam Chair, and members of the committee.

I would like to thank you for inviting us to appear today as part of your study on the media and local communities.

My name is Walter Duszara. I am the secretary of the board of directors of the Quebec Community Groups Network. With me today is Hugh Maynard, a past chairman of the QCGN and president of Qu’anglo Communications. Hugh has fulfilled many roles in English-speaking rural communities as a newspaper editor, CBC Radio freelancer, and consultant in community development for everything from community radio to multimedia community websites.

The QCGN is a not-for-profit representative organization that serves as a centre of evidence-based expertise and collective action. QCGN is focused on strategic issues affecting the development and vitality of Canada's English linguistic minority communities, which we collectively refer to as the English-speaking community of Quebec.

Our 48 members are also not-for-profit community groups. Most provide direct services to community members. Some work regionally, providing broad-based services. Others work across Quebec in specific sectors, such as health and arts and culture. Our members include the Quebec Community Newspapers Association, QCNA.

English-speaking Quebec is Canada's largest official language minority. A little more than one million Quebeckers specify English as their first official language spoken. Although 84% of our community lives within the Montreal census metropolitan area, more than 210,000 community members live in other regions of Quebec.

We have here a copy of our detailed brief and an annual report of QCGN. Unfortunately, we did not have time to have it translated, but copies are available to you, should you wish to have one. Our written submission goes into greater detail on the current media landscape and how dwindling media resources have impacted our community. This morning we will concentrate mainly on proposing possible remedies, or at least ways to limit the damage.

A vibrant, healthy, and diverse media serves to inform, encourage, embody, and advance public debate. It also provides a core indicator of the civic health of its community. Free-flowing, wide-ranging information and opinion enables and nourishes democracy. Local media that accurately reflect the community they serve is essential to help sustain democratic values and provide a framework for our communities to evolve.

These values are of even greater importance in situations characterized by minority linguistic and cultural status.

One of the roles of Canadian Heritage is embodied in its explicit commitment to enhance the vitality of official language minority communities. We would contend that an important and fundamental element of a commitment is to support and assist our development and would include ensuring access to information and news in the community's own language.

It is in this context that we are addressing you. Our challenge as English-speaking Quebeckers is to find ways to foster, support, and encourage quality media content that is local and relevant, even as news consumers now turn to digital sources in ever-greater numbers.

Coverage of issues with a unique impact on Quebec's English-speaking population, the kind of in-depth, day-to-day coverage that can realistically come from no other source than local or regional media, has been thinned out and is endangered.

[Hugh Maynard, Past President, Quebec Community Groups Network]

Good morning, Madam Chairperson, and members of the committee.

Any question of providing commercial financial subsidies instantly raises an intractable set of fresh problems and must be rejected out of hand. Traditional boundaries governing government interaction with media ownership must remain in place.

However, clear opportunities exist to encourage and foster the development of new community-based media vehicles to supplement existing local coverage and to help replace locally relevant content where it has been thinned and, often, has disappeared. These ventures could be seeded so they have a chance to bloom in sometimes surprising and unexpected ways, including the digital sector. In some instances, these could help local media to grow, or in others to establish a digital presence.

Thus, we propose a substantive broadening of the Canadian periodical fund support mechanisms to include new and online media. This would require a concomitant increase in available financial resources. It would also offer the possibility for collaboration between major institutions of our community, such as the CBC, universities, and colleges.

Many journalists get their start working for the CBC, which acts as a de facto training ground. Providing the CBC and other local media with resources for internships in conjunction with university journalism and communications programs would help get some reporting boots on the ground and open the door for a new generation to become active in local and community media.

Any financing for such projects should be channelled through third parties. In this vein, the “Final Report on the Canadian News Media”, published in 2006 by the Standing Senate Committee on Transport and Communications, recommended that the definition of charitable foundations be broadened to allow for not-for-profit media to be included in this part of the federal tax regime. In addition, a portion of the Canadian Heritage strategic fund that's traditionally allocated to the development of official language minority community radio stations could be reoriented to include new community media ventures without excluding community radio. Two examples of this potential are the community hub websites GoGaspe.com—you can reference the links in the report—and valleyjunction.ca.

I declare my conflict of interest as being the owner of valleyjunction.ca, which so far has made $10 in Google ads. At least we've got it started.

These have been started by local individuals in the Gaspé, and where we are located, in the Chateauguay valley, southwest of Montreal. They're intended as information hubs for and about the communities they serve. Taking advantage of the Internet and social media tools like Facebook and Twitter, they directly involve residents and community organizations who can post stories and announcements about their activities, providing one-stop shopping for community information, with sections for business advertising, classified, and legal notices. With an entrepreneurial approach, multiple sources could be packaged for such projects. The use of crowdsourcing could provide an additional lever effect for financing completely outside any government orbit.

Since four out of five Canadians continue to read a newspaper at least once a week, our focus is not just on digital alternatives. Federal government spending on advertising in newspapers has fallen sharply in recent years. According to one report, this figure has plunged to $357,000, in 2014-2015, from roughly $20 million about 10 years ago. Room clearly exists to restore government ad placement with an emphasis on newspapers that cover local news.

CBC/Radio-Canada, a major source of news for many local communities, receives $946 million a year, and an additional $60 million annually has been promised, about $1 billion in total. QCGN believes that much of that stabilized funding should be used to restore local coverage in the regions. Minority-language community newspaper associations have further recommended that 1% of that $1 billion, or $10 million, be allocated to minority-community newspapers or their associations to support member services, sustainability, education, and recognition and retention of English and French-language journalists. This suggestion by the QCNA and its francophone counterparts is a good one that we believe could be broadened. We suggest the creation of a community media foundation, like the Community Radio Fund of Canada, to support community media across all platforms, as well as new media ventures such as the ones we suggested earlier.

We recommend that the provision of support require evidence of community ownership or involvement. This could be twinned with a paid internship fund to get journalism students to support such initiatives. This latter idea could be structured as government summer jobs or internship programs, such as the Young Canada Works in Both Official Languages program.

Thank you.

[The Chair, Liberal, Hedy Fry]

You have one minute.

[Walter Duszara]

A remarkably broad variety of community journalism models are emerging, harking back to a recurring theme that these are vulnerable to faltering, and even failure. In the United States, the so-called hyper-local news projects, established and operated by The Washington Post,The New York Times, and the Gannett chain, have all been shut down. Broadband continues to be limited in the regions, as indicated by a freshly issued CRTC map produced in conjunction with a new hearing on basic telecommunications services. It is essential to reinforce the notion that accessible and adequate broadband service in rural communities is an important, if not essential, instrument of development of our official language minority communities. We must also not ignore the demographics. Many older citizens most accustomed to print, radio, and television are shut out of democratic discourse carried out online. The decline of print largely—

[The Chair, Liberal, Hedy Fry]

Mr. Duszara, could you round out your sentence? We're now over 10 minutes.

[Hugh Maynard]

Just do the conclusion.

[Walter Duszara]

Very well.

We believe the recommendations that we outlined in our report will help lay the groundwork to encourage a fuller spectrum of healthy community media for the digital era, especially as it impacts official-language minority communities.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Now we will go to Mr. Morrison, from Friends of Canadian Broadcasting.

[Ian Morrison, Spokesperson, Friends of Canadian Broadcasting]

Madam Chair, I was going to congratulate you on your long survival as a member of Parliament, but I don't have time to do that.

[Some hon. members]

Oh, oh!

[The Chair, Liberal, Hedy Fry]

Touché, Mr. Morrison, touché.

[Ian Morrison]

Madam Chair and members of the committee, thank you for inviting us to appear today.

My name is Ian Morrison. With me is Peter Miller, who has broad expertise in Canadian media issues, including local television, which, as you know, is synonymous with local TV news.

Television is the most important source of local news in Canada. When a December 2015 survey by ThinkTV asked Canadian adults which medium is their primary source of local news, 36% chose television, eclipsing newspapers at 23%, radio at 20%, and the Internet at 18%.

Peter collaborated with Nordicity to analyze the economic impact of the CRTC's Let's Talk TV policies in a major research report entitled “Canadian Television 2020: Technological and Regulatory Impacts”, released earlier this year. Its key findings are that by 2020, some 15,130 media jobs will be lost, and there will be a $400-million drop in Canadian program expenditures—that's 18% of what now exists—and a $1.4 billion hit to Canada's GDP, all of this as the direct result of Let's Talk TV regulatory changes.

The CRTC has yet to release any economic assessment of the impact of Let's Talk TV, suggesting a lapse in evidence-based decision-making. This loss has nothing to do with technological change and will greatly harm the future viability of local television news. The research study's authors have advanced proposals to reduce the negative impact of the CRTC's decisions by as much as 75%. They say:This would not, in our view, require “turning back the clock” on all LTTV Decisions. It would merely require relatively minor “tweaking” that recognizes Canadians as broadcasting policy has always recognized them—not merely as consumers, but as creators and citizens too.

Compounding this hit, television stations in small and medium markets are particularly vulnerable to adverse economic trends, according to a second Nordicity-Miller study entitled “Near Term Prospects for Local TV in Canada”. That study concludes with the following: ...Canada’s local television heritage is at risk of major cutbacks and station closures, which could be avoided, deferred or minimized by the...[CRTC’s] contemplated reallocation of mandatory Broadcasting Distribution Undertaking (BDU) “local expression” contributions, if...[focused on] small [private] and medium market TV stations.

The near term prospects study projects that up to half of local stations in small and medium markets, where there is often no local TV alternative, will fade to black by 2020 in the absence of CRTC action. This would lead to an estimated 910 layoffs of journalists and others who work to put local news on the air.

The study also found that the most vulnerable stations are independently owned and in small markets such as—

Madam Chair, I won't read out the names of 35 Canadian cities here; they're in my remarks.

When large market local stations are included, the study projects job losses of 3,490.

As you know, local TV, especially news, is very popular with Canadians. A recent Nanos Research poll found that 92% agree that local news is valuable to them, and 90% agree that their federal member of Parliament should work to keep local broadcasting strong in their community.

What can be done to protect local television news?

First, there's tax policy.

Internet advertising is driving structural change, first in print and now in television, as spending has increased eightfold to $3.5 billion since 2006—that's more than a third of all Canadian advertising—yet federal policies to support local media have not changed since the 1990s.

The Income Tax Act should be updated to exclude tax deductibility for foreign-owned or -controlled Internet advertising platforms in addition to cross-border broadcasters and newspapers, as is the case now. Tax deductibility should be restricted to Canadian-owned Internet sites.

Australia has recently moved to require Netflix-like foreign program distributors to collect sales tax. Rogers, Shomi, and Bell's CraveTV collect sales tax from Canadian customers but not their direct competitor Netflix.

The Canadian film or video production tax credit supports most independently produced Canadian programming other than local programming. You should recommend amending the eligibility rules to permit support for local news programming produced by local broadcasters. And we recommend that you invite officials from the Department of Finance to appear to outline options to keep more Canadian ad spending and subscribers' money in Canada.

[The Chair, Liberal, Hedy Fry]

Mr. Morrison, your group has four more minutes.

[Ian Morrison]

And I have four more minutes to speak.

Second is CRTC policies.

The government has the right under sections 7, 15, 26, and 28 of the Broadcasting Act to ask the commission to reconsider decisions and policies in view of the government's broadcasting policies and priorities.

You should recommend that the government instruct the commission to increase BDU contributions in support of local television, amend the digital media exemption order to require foreign and domestic over-the-top—that's OTT—television broadcasters to contribute to Canadian programming, and ensure that Internet service providers and mobile operators are required to give priority to Internet-distributed Canadian local media through such measures as exemption from bandwidth caps.

You should ask the CRTC, Chair, to appear before you once the local television hearing decisions are announced. You should pose some questions about recent TV policies, including why, under Let's Talk TV, a majority of programs aired by Canadian broadcasters will no longer be required to be Canadian and a majority of channels distributed to Canadian households will no longer be required to be Canadian. And foreign broadcasters that distribute programs into Canadian households do not play by the same rules as Canadian broadcasters.

You should ask him to present evidence to support his statement that there is enough money in the system to fix the threats to local television, especially in small and medium markets. If you're not satisfied with his response, you should consider recommending to the government that it direct the commission to make the survival of local television a priority.

Third is the 600-megahertz spectrum auction.

Next year the spectrum will be repurposed in Canada and the United States. This will force Canadian broadcasters to purchase new transmission technology. Congress has allocated a portion of the windfall of that relocation to encourage local broadcasters to have the money to buy new transmitters. Canada has not done so. Funding this capital cost could make all the difference for independently owned stations in small markets for a small portion of the windfall.

Fourth, you should study measures adopted in the United States where local broadcasters benefit from numerous measures to strengthen local TV, including local market rights protection rules, strong restrictions on the importation of distant signals on U.S. DTH, and the doctrine of retransmission consent.

And finally, your committee should consider holding hearings in some of the small cities where local television news is most threatened. A good short list would include Saint John, Rivière-du-Loup, Peterborough, and Kamloops.

Madam Chair, that's all we could pack into the 10 minutes we were given. We did not even mention the Trans-Pacific Partnership.

Peter and I would be happy to respond to any questions from committee members, and we wish you success in your important work.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Morrison. Exactly. You have about one minute to go. So that was excellent; well done.

We move to the questions, and we begin with the Liberals.

Mr. Vandal.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Thank you very much for your presentation.

We've heard from delegations in the last few weeks, including our own Canadian Heritage department, that funding for local production across Canada has increased in the last few years. But that's not what we're hearing from both delegations.

I'm wondering, Ian or Peter, if you can begin by commenting on that. How do we explain that, if funding has actually increased, and you're saying there have been cutbacks?

[Peter Miller, Expert on Local Broadcasting, Friends of Canadian Broadcasting]

I had an opportunity to read the transcript of the testimony by Canadian Heritage officials. I think part of the problem is that they were dealing with dated data. Very often the data you receive is just until 2014, and some of the declines, we haven't seen since then. The declines right now, to be honest, are fairly small because, despite declines in conventional television advertising, the major vertically integrated conglomerates have continued to fund local programming and used the synergies with their specialty services and other assets to maintain revenue. So what you're seeing is a massive decline in profitability, and I think you have received some numbers on that.

The profitability of conventional television, for example, as of last year was somewhere in the neighbourhood of minus 16%, and I'm guessing here. So we've seen massive declines in profitability. To their credit, the operators of all local television stations, be they the larger companies or the smaller independents, are doing what they can to keep money in local TV, but it's not sustainable. That's really the problem going forward. Just because we haven't seen it yet, doesn't mean it isn't a problem.

[Ian Morrison]

Mr. Vandal, I would just add that if you had to focus on one group of local television stations, it would be the 23 members of a coalition called the Coalition of Small Market Independent Television Stations. These are not part of the vertically integrated companies and they're operating in the under 300,000 markets. Think Thunder Bay, think Rivière-du-Loup, think Kamloops.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Are some of the difficulties overrepresented or disproportionately affected in the local news sector? Is that something you can comment on?

[Ian Morrison]

We'll cooperate, Peter and I. Local news is the predominant local programming of television stations. They tend to go to networks or feed most of their other programming from elsewhere. As I said at the beginning, local news is synonymous with local television. It's the preponderant type of programming that is produced and broadcast locally.

Peter, do you want to add to that?

[Peter Miller]

The only other thing I can add is that the regulatory system up till now has regulated local news by having an hour of commitment. So in small markets, the small English-language markets, the hour of commitment is a minimum of seven hours a week. In francophone markets, it's a minimum of five hours a week and goes up to 14 and 10 hours respectively in larger tier markets. The economics of producing local television news is that you need a certain number of people to do it. You need a certain number of shifts.

The only way you can achieve it is to have a certain amount of money in the field to make it happen. Otherwise you don't have a quality product. So people have managed to maintain their newscasts. There's been some discussion around this committee about some of the practices of centralization that take away, if you will, some of the local flavour of local news. But for the most part, they've managed to maintain the infrastructure.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Mr. Miller, our time is going fast. I'd like to move to another question.

In your brief, you recommend or make mention of a reallocation of mandatory broadcast distribution BDUs' contributions, a reallocation of BDUs' contributions. I have some experience, as former chair of APTN, with paragraph 9(1)(h) of the Broadcasting Act.

Is that what you're talking about, and can you maybe give some historical context on what has been done in the past and what can be done in the future?

[Peter Miller]

This is the issue that's very much before the CRTC right now. You heard a little bit from Scott Hutton from the commission when he appeared. The premise is that right now, distributors—and you will hear from one later this morning—tell us that they contribute 5% of their total broadcast revenues to Canadian programming. It's split up in different ways. Up until now, 2% or less went to community expression, to what we commonly call a “community channel”. The thing under consideration right now is to reallocate some of that money to local news. You'll hear more when the commission makes its decision. I think what Mr. Morrison is saying is that you should assess that and make a determination as to whether you think it's adequate.

[Ian Morrison]

I'd add something, Mr. Vandal, with respect to the comment about the advice of Canadian Heritage officials. I would put it this way: If the conclusion they're moving to is wrong, there will be a real crisis in this country. If it is right, that's good news. But there's the old adage that ounce of prevention is worth a pound of cure, and we're here talking about problems that will become much more substantial if unaddressed towards the end of the life of this Parliament.