EVIDENCES

[Recorded by Electronic Apparatus]

Tuesday, June 13, 1995

.0905

[English]

The Chair: Good morning, ladies and gentlemen. We're here on the first of our three intensive days on DTH. We had a warm-up last week with Mr. Spicer, and this morning for an hour we are lucky to have with us two-thirds of the three wise persons who produce the Direct-to-Home Satellite Broadcast Policy Review Panel, which was the policy review panel created by the federal government to advise them on the whole question of this fascinating and difficult subject.

We are lucky today to have both Gordon Ritchie and Roger Tassé, joined by the secretary of the panel, Matthew Fraser. I'm simply going to invite them to make opening remarks and to launch us into this subject, please.

Mr. Gordon Ritchie (Former Chairman, Direct-to-Home Satellite Broadcast Policy Review Panel): Thank you very much, Mr. Chairman. My apologies for not having a prepared opening text that could have been distributed in advance in both official languages. When the panel presented its report we ceased to exist and ceased, as a result, to also have the kind of resources required for that endeavour.

What I thought I might do instead is on behalf of my colleague, Roger Tassé, andMr. Rabinovitch, who is unfortunately unable to join us, make a few opening remarks.

I think you've all received copies of our policy review panel report. We hope it speaks for itself. Rather than covering that same ground at this time, I would propose to focus on a few of the most important issues that have been raised and will be raised in testimony before this committee.

Perhaps I should clear away several unfounded allegations right from the outset.

First, some have alleged that the policy review panel was the instrument of political influence by the Prime Minister on behalf of his son-in-law. That is completely and utterly false. At no time did the Prime Minister, his staff or anyone else exert or attempt to exert any influence whatsoever on the independent deliberations of the panel. We were gratified, therefore, when on publication of our report editorialists across the country dismissed these allegations as demonstrably and patently untrue.

Second, I read with mounting astonishment the attempt by your first witness, CRTC chairman Keith Spicer, to portray this as an attack on the independence and the integrity of the commission. Nothing could be farther from the intentions of the policy review panel. We believe our report is in fact a powerful affirmation of the Broadcasting Act, of its fundamental principles, of its institutions, including the CRTC, and of its procedures, namely formal competitive licensing.

The CRTC role under the Broadcasting Act is clear. It is to ``regulate and supervise all aspects of the Canadian broadcasting system'', subject to the Broadcasting Act, the Radiocommunication Act ``and to any directions to the Commission issued by the Governor in Council under this Act...''.

In other words, the elected government also has its role. It must set overall policy as definitively as possible. Where there is confusion or misinterpretation or evolution of policy, the government must set the CRTC straight through a policy direction if necessary, and that's the business we're on today. There's no requirement that the CRTC be regarded or regard itself as infallible.

The policy review panel was forced to agree with the overwhelming bulk of submissions we received from Canadians right across the country and with the overwhelming weight of editorial opinion right across the country that in this specific case, the DTH exemption order, the CRTC clearly got it wrong.

First, the exemption power was clearly not intended to be used to short-circuit the licensing power in a matter of such critical importance to the Canadian broadcasting system. As you all know, the clear statement of the government of the day's purpose with respect to legislation that comes before you is found in the explanatory notes that are tabled at that time. With respect to the exemption power in Bill C-40 these notes, which are part of the record of the predecessor to this committee, read as follows:

This provision

- the exemption power -

is designed to relieve services which are not culturally significant from the burden of regulation. This is...to ensure that services which are technically classified as broadcasting but are of little, if any, relevance to the statutory objectives [of section 3 of the Act] are not stifled in their development by inappropriate regulation.

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In the report of the predecessor committee, two examples were cited: real estate radio and transmitters in ball parks. By no stretch of the imagination was this power ever intended to be applied to a service that could soon count over a million subscribers and compete directly with existing cable and off-air broadcasting systems.

Second, the exemption order created a de facto monopoly. I know that Chairman Spicer said:

This accusation is demonstrably false since any applicant not meeting the exemption criteria could still apply for a licence under our normal open procedures. With one of Canada's leading newspapers, ``methinks the chairman doth protest too much''.... I invite you to judge for yourselves.

The policy review panel found that the exemption order was tailor made to suit one and only one consortium, which happened at the time of the order to comprise most of the established players in the system: the biggest telephone company, the cable companies, the equipment manufacturers and the satellite systems. It was also thanks in part to a last-minute reinterpretation of satellite policy designed to exclude the most obvious other competitors. It offered these other competitors the opportunity to embark on an arduous and uncertain licensing process for the privilege of going up against the fast-track company. Only the CRTC is surprised that today, eight months later, no one has come forward to take up that generous offer. To call this anything other than a de facto monopoly is, I submit, to invent yet another official language.

For these reasons, we advised the government that the CRTC should be encouraged and, if need be, directed to engage the appropriate licensing procedures in order to, first, promote competition for the benefit of Canadian televiewers right across the country and, second, to promote programming by and for Canadians. We included in our report draft orders that might be used to spell out the policy direction we recommended the government give to the CRTC, if such direction were required.

It's been claimed by lawyers hired by certain commercial interests, and echoed last week by the CRTC, that the proposed orders recommended by the policy review panel are unduly specific and, therefore, beyond the powers of the government.

We've not come before you flanked by batteries of lawyers armed with stacks of high-priced legal opinions. Indeed, it would have been irresponsible for the panel to have bought and paid for such opinions when we had access, as adviser to the government, to the top law officers of the Crown, who are recognized for the quality and independence of their judgment. We sought and received their best advice. We accepted their advice and we reflected it in the orders we proposed and that the government has placed before you. We've made our recommendations. The decisions are now up to the government with the benefit of the advice received before your committee and your counterpart in the other place.

Obviously, the policy review panel has no copyright on the draft orders, nor are we wedded to every word and punctuation mark. We are, however, committed to the substantive policies contained in our report and it's to those I'll now turn.

The first is promoting competition. Today's householder feels trapped in the grip of monopoly. She has the choice of one telephone line into her home. She has the choice of one coaxial cable into her home. She has the choice of one pay-per-view service in her region. When she reacted in outrage at what she perceived as the arrogance with which the cable companies first introduced the specialty channels, she looked to the skies for relief through direct-to-home satellite alternatives and there she found another monopoly in the form of a single Canadian distributor carrying the same pay-per-view service.

The policy review panel therefore recommended the CRTC move immediately to establish what we have called a licensed competition regime. All operators would be required to meet the full set of conditions of licence. One class of licence would apply to the direct-to-home satellite broadcasters themselves. Another class would apply to the packagers of pay-per-view services. We recommended that the CRTC promote competition by accepting all qualified applicants for licence, not arbitrarily limiting the privilege to a single company.

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Also, since one company was already reportedly proceeding on the basis of the existing exemption order, we recommended that the CRTC take all appropriate steps to move expeditiously to put all competitors on the same level playing field through licences.

There is concern that the company that is organizing to operate under the exemption order could, if that order were rescinded before licences have been granted, find itself in some kind of regulatory limbo. That was certainly not our intent; nor was it, nor is it, a necessary result.

To put it bluntly, the retroactivity problem has been created by the actions of the CRTC, and the CRTC has the power to resolve it.

If the CRTC had proceeded by way of a fair licensing procedure last year, we would not now face this problem and we would not now be here before you. If they had acted as soon as the government indicated to them that the government concurred in our report, we would not face this problem and we would not have to be here before you.

Indeed, it may still be possible for the CRTC, which is the master of its own procedures, to act in time to ensure that this problem does not arise. Given the study and debate that have already been devoted to this issue, they could move very expeditiously if they so chose.

However, the CRTC has indicated before you that it has concluded that the earliest date on which licences could be granted would be in December of this year. This clearly presents a two-sided problem. If the exemption order is rescinded immediately and licensing is not completed until the end of this year, then the Expressvu consortium would be required to revise its current business plan. If, on the other hand, the exemption order is left in place, then potential competitors would be obliged to stand by while the Expressvu consortium is free to proceed. Neither way works.

There are, we believe, ways to resolve this problem. It will be for the government to decide on the precise resolution, based on the advice it gets before you.

For our part, the policy review panel would only urge that a solution be implemented that would ensure that all potential competitors are put on an equal regulatory footing at the earliest possible date. That's the important issue here.

The other objective of equal importance is to promote programming by and for Canadians. Over the years a number of fundamental policies have been implemented by the CRTC to achieve this result: Canadian content, simultaneous substitution, non-duplication, etc. We believe these rules should be fully applied to DTH satellite broadcasting and the pay-per-view services carried by those satellites. And of course the way to do that is through formal licensing. That is the instrument for imposing and enforcing these conditions.

Confusion has arisen over several elements of these conditions: the financial contribution to Canadian programming, the non-exclusive acquisition of Canadian rights, and a French pay-per-view service.

The first is the level of direct financial contribution to Canadian program production that should be required of all participants in the system. Today there is no consistency. Some contributions are voluntary; some are mandatory. Some are fixed sums; others are a percentage of revenues; and others are a percentage of net revenue. Of course, under the exemption order there is no requirement whatsoever for financial contribution to Canadian programming.

This situation is clearly unsatisfactory and must be tidied up and must be tightened up.

We recommended that satellite broadcasters and DTH pay-per-view packagers should all be required to make a significant contribution, comparable to that required of other broadcasters, and suggested the benchmark of at least 5% of gross revenues.

We were therefore very pleased to see that the CRTC, in its recent convergence report, has completely endorsed this conclusion. The CRTC in that report recommends on page 41 that:

The Commission considers that the fairest mechanism would be to base the contribution on the gross revenues derived from their broadcasting activities.

As to the level of contribution, the CRTC has heard the same things as we have heard: demands that the level should be higher than 5%. The CRTC therefore proposes - and we agree - that the precise ratio should be applied following appropriate consultations. We would urge that it be applied uniformly across the board.

However, the CRTC appears to be reluctant to endorse our recommendation that the resulting funds be independently managed rather than controlled by the distributors. That is an important point, and you may wish to question the creative people on this issue - the writers, the actors, the directors and the producers - as to how they would benefit from this fund if it were independently managed as opposed to controlled by the cable companies.

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The second question is that of Canadian rights for feature films carried by pay-per-view packages.

Mr. Hanrahan (Edmonton - Strathcona): Can I just interrupt for a moment, sir? Could you run by the last point you made? It went by rather quickly and I missed it. I mean the role of the artist, etc.

Mr. Ritchie: Yes, indeed, sir. What we have recommended is that all licensees in the satellite system, the holders of broadcasting licences and pay-per-view licences, be required to pay at least 5% of gross revenues. Those funds would be managed by an independent arm's length organization, not controlled by the cable companies, the satellite companies, or other distributors.

We believe that is preferable, and the very strong representation we received from the artistic community across the country was that it would indeed be very much better suited to supporting the objective of increasing programming by and for Canadians. So we believe that was an important part of our recommendations and we would very much hope the CRTC would see fit to proceed in that way.

Second is the question of Canadian rights for feature films carried by pay-per-view packages. There is a problem arising from the dominant presence of the American market looming over us. The policy review panel recommended that this be addressed by requiring that Canadian rights be purchased strictly on a non-exclusive basis.

Again, we were pleased to see that in its convergence report the CRTC has endorsed this conclusion. The CRTC recommended that:

When licensing competitive pay-per-view or VOD [that is, video-on-demand] undertakings offering feature films, it would be reasonable to impose conditions of licence prohibiting the acquisition of exclusive Canadian rights for any foreign or domestic film. We agree this is the most sensible way to ensure that Canadian rights holders have an incentive to sell to every DTH distributor, thus maximizing their potential audience and the potential payback.

This is a technical but important issue. We, like the CRTC, are satisfied that the problem can be fully resolved for pay-per-view on satellites, and we will be pleased to elaborate in answer to your questions.

Finally, we make no apologies for recommending that satellite broadcasters wishing to carry English-language pay-per-view must also carry a French-language service if such a service is available. Today, limited cable capacity provides an excuse for not doing so. With typically only three or four channels available for pay-per-view, Viewer's Choice or Home Theatre, it is difficult to carry a duplicate of service. With several hundred channels available we don't believe that excuse holds up.

In conclusion, I hope this brief presentation will assist you in focusing on the fundamental proposals recommended by the policy review panel and now adopted by the government. We believe the CRTC should proceed as expeditiously as possible, through established licensing procedures, to promote competition among satellite broadcasters to better serve Canadian viewers while promoting programming by and for Canadians. To put it more succinctly, as one of Canada's leading newspapers did last weekend, it's surely time to get on with satellite licensing.

Thank you very much.

The Chair: Thank you, Mr. Ritchie.

We are under quite a constraint of time here, so I would suggest that in the interests of fairness,

[Translation]

we start with seven minutes per party.

Mrs. Tremblay.

Mrs. Tremblay (Rimouski - Témiscouata): Thank you, Mr. Ritchie, for your presentation. Would it be possible to get a copy of your text?

Mr. Ritchie: I do not have a text.

Mrs. Tremblay: You do not have a text.

Mr. Ritchie: My apologies!

Mrs. Tremblay: It looked like you had the papers in front of you.

Mr. Ritchie: I just jotted down a few notes last night.

Mrs. Tremblay: Perfect.

Mr. Ritchie: We tried to get a translation, but I didn't want to table anything that wasn't translated. If you wish to have them, I can give you my notes, but they are in English only.

Mrs. Tremblay: It doesn't matter. I would be very happy to have them, if you don't mind.

Mr. Ritchie: Mr. Chairman do you want us to table them?

The Chair: The notes for Mrs. Tremblay? Sure, that's fine.

Mrs. Tremblay: You have said many things in your presentation and it's probably fair for Mr. Spicer to attack you and for you to try and demonstrate that he was wrong. It's up to us, later, to decide between those opinions.

.0925

There is however a point that seems important and I'd like you to clarify it for me. Section 7 of the Act is extremely specific and gives the Governor in council the option to proceed as it has, insofar as it deals with important matters of direction. It can ``issue...directions of general application on broad policy matters with respect to any of the objectives of Canadian broadcasting and regulatory policy.'' That's what set out in section 7.

When we look at the recommendations you've made and what the government ordered based on your proposals, it's obvious that your extremely specific. You therefore contravene subsection7 (1) of the Broadcasting Act by going into detail and by not concentrating simply on the major policy directions.

How do you justify your feeling authorized to do so?

Mr. Ritchie: Mrs. Tremblay, I'll start by stating the principle we used and then will ask my colleague, Mr. Tassé, who is much more versed in legal matters than I am, to fill in the significant details.

As for us, first of all, we set out a framework for general policy implementation. Later, we tried to establish which types of directions would make this general policy effective. That's what you have before you. In other words, we have thought of all those words and all those sentences in that text as not being specific, but rather essential to the efficiency of a general policy framework.

Mr. Tassé.

Mr. Roger Tassé (Ex-Member of the Direct-to-Home Satellite Policy Review Panel): Thank you, Mr. Ritchie.

I think that this a very important issue to start with. Some lawyers and other people have tended, upon acknowledgement of the policy direction proposal that you have before you, to scrutinize each of the paragraphs and each of the words used and say that each one of them was very precise. I would suggest rather to consider the policy directions as a whole.

It is a policy, a general policy. What we proposed must, of course, be expressed in words and I don't see anything in section 7 that forbids the use of precise and understandable words or that the CRTC, which has been given these policy directions, be able to understand what the government wants it to do from now on, that it understand the government's policy. That's the first comment I'd like to make.

The second is that on reading some of the expressed opinions, I see some kind of a desire or an indication that the policy directions should simply repeat what is already in the act. We have an act that is quite specific concerning policies; for example, sections 3 and 5 give directions. But Parliament has said: ``The government may, under certain conditions, go further. It may specify its direction. It may add.'' To my mind, it is therefore not enough to say to government that all it can do is simply say in other words what is already in the act.

I see in that an indication that the government can signify its directions. It can move towards a more precise policy, if you want to use that term. But it still remains a general policy direction.

It would seem, and this is the last aspect of this issue that I will emphasize, that the key element is what is in the act, which is to say that when the government adopts this kind of guideline, we won't be able to licence at all because that will be the CRTC's responsibility. On that, we've been beyond reproach. Quite the contrary, we have reaffirmed the CRTC's authority. We have told it to use its authority.

The guidelines recommendation is the framework for the exercise of this authority. The bottom line is that the CRTC will have final say as to whether someone is granted a license or not, and under what conditions.

.0930

The policy itself will be underpined by the definition of terms or of conditions for licensing so as to give concrete expression to the government's intent.

Mrs. Tremblay: I'll present this differently.

At the beginning, you told us, Mr. Ritchie, that Mr. Chrétien had in no way interfered in this matter. I'm willing to believe you. I'd be surprised if he'd have you come to his office to write this or that. That's not the kind of mandate he would have been tempted to accept, I think, if only because of the good reputation I know that you have.

However, I've specialized in preschool education and I had to work very hard to become familiar with this field. Quite sincerely, it's seems clear to me that the bottom line is that taxpayers will end up paying for this lovely project. They will pay because there's nothing in the project that forbids two companies from competing with different technologies, without complying with the same standards. People who subscribe to Expressvu won't be able to get Power DirecTV if it provides something else. We're starting over, here in Canada, the battle between VHS and Beta. The real ``Beta'' (the ``idiots''in french) will once again be, probably, the taxpayers. I find that very unfortunate.

Not very long ago - it was probably under the previous government because it was carried out under the change-over period to the party in power - , the CRTC granted a license to COGECO and to Shaw to operate in the audiodigital field. As they were using an American satellite, the government told them no.

Here, in your order, you tell us - and everyone says so with you - that it was not made to measure for Power DirecTV. However, that's what everyone believes. It's not because all the newspapers write it that it's wonderful. All the newspapers are asking for Mr. Dupuis's resignation and that hasn't made him resign.

It is stated under section 4(b) that the CRTC is hereby:

(b) to take, immediately on the coming to force of this order, all necessary and appropriate steps to ensure that no person is authorized to carry on a DTH distribution undertaking by any means other than a license. Your average person, such as myself an average citizen, translates that it's to keep Expressvu from going into business.

At section 5, the CRTC is hereby further directed not to refuse to issue a license to an applicant to carry on DTH distribution undertaking for the sole reason that the applicant holds a license to carry on DTH pay-per-view television programming undertaking. Elsewhere, it is stated that: ``if it uses an American satellite.'' You would think it was made for measure for Power DirecTV. It's not because the name isn't there that you don't think so.

Let's talk about competition. You complain that the CRTC should not have granted an exemption to Expressvu, that it wasn't within its powers to do so. The courts will have to decide who, of you or Mr. Spicer, is right. For my part, I don't know. I'll give you the benefit of the doubt.

How do you want the average citizen to wage his way through these words? Particularly because in the end, he will have to pay for us stopping someone from starting up so as to wait for another one to be ready, because we know this company won't be ready before June of 1996? I mean Power DirecTV.

The Chair: Could you formulate that more succintly, because ten of your seven minutes have already gone by.

Mr. Ritchie: Those are very complicated and very basis questions. So allow me, as much as possible, to answer succintly.

We are dealing specifically with this problem. The first thing we had to recognize within the panel was that it wasn't our role to license or to choose between the applicants. It wasn't our jurisdiction and it wouldn't have been reasonable. We looked into experiences into other countries such as Great Britain, where the architect had imagined a system in which there would be a place for everybody.

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The market did its work. The end result was quite unexpected. Therefore, we said to ourselves: It's not our responsibility to decide who gets a license, and we can't even predict how the market will go. It will be up to Canadian consumers, to Canadian viewers to decide who will die, who will survive and who will blossom.

What we said is very fundamental: for the TV viewers' sake, all competitors must be on the same regulatory footing and, to that end, the means favored by the act and by tradition is licensing. Therefore, the CRTC licenses in a way that is fair to all players, so that they can compete to win the consumer and TV vierwers' favor.

There's a little problem, given that the exemption exists. It wasn't the best way to procede, but at least one company said it proceded on that basis. Therefore, it should be changed as soon as possible and the CRTC should adopt the necessary measures to put all participants on an equal footing.

So it's not at all a matter of choosing one over another or penalizing one rather than another. Rather, it is saying: You, the Canadian TV viewers, have the right to have everyone compete on an equal footing to win your approval. That's all we said.

[English]

Mr. Hanrahan: Gentlemen, thank you for your attendance today. I appreciate it.

I want to start off on a different track. I don't mean any implications by this, but I do want to clear up a few matters.

In the Reform Party, our position on direct-to-home satellite policy has been fairly consistent and fairly clear. We do favour open competition, there's no question about it. However, we've been critical about the process and the manner by which the cabinet directive came about. The process seems to have been questionable from the outset. You related about the political influence relative to the son-in-law of the Prime Minister.

Before dealing with the substance of the directive, I think many in Canada would like to have some questions answered about this process which led to the directive. We believe the directive is a good directive and the process must be seen to be free of political influence. In this regard, without any implications - it is a matter of information only - I would like to ask both of you gentlemen what your own historical relationship has been with Mr. Chrétien.

Mr. Ritchie: Perhaps the most important thing is to underline, as you said, that this is a good directive; the substance is good. Most Canadians looking at this will say if the process had been flawed, it would have produced a flawed result. If it produces a good result, then it could perhaps just be because it was the appropriate process.

Those who know us, including our colleague, would say, as I dare say Mrs. Tremblay said a moment ago, if you were looking for someone to cook a deal, these are probably the last three people in Canada you would choose. We are not exactly known for our slavish adoption of instructions from anyone.

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So I would tend to say, with great respect, that the burden of proof is squarely on those who make those allegations rather than the burden being on those who have, as disinterested outsiders, done their best professional job to come up with a result that is generally accepted as good, rather than to put them somehow in the box and treat them as if they had to defend their behaviour and their past relationships.

I make no apologies personally for the fact that I have worked with Prime Minister Pearson, with Prime Minister Trudeau, with Prime Minister Mulroney, with Prime Minister Clark, with Prime Minister Turner, with Prime Minister Campbell, and with Prime Minister Chrétien, in different capacities. I make no apologies whatsoever for that. I think those of that group who are still alive would say that if there was one characteristic of our relationship, it was precisely that they had faith in my professionalism and my integrity. Perhaps some caution should be taken not to leave an implication that it's otherwise.

What I say about myself with diffidence I can say with great force with respect to my colleagues. I don't think there is any question about the reputation for integrity of our colleague who is not present here today, Robert Rabinovitch, and of course my colleague Mr. Tassé is simply known as one of the outstanding Canadians in the field of public affairs.

I don't know whether, Roger, you wish to add to that.

Mr. Tassé: I would just say that the most precious good I have is my professional reputation. I am not for sale. I have never been for sale. Like Gordon, I have served under Mr. Trudeau, Mr. Clark, Mr. Mulroney, and Mr. Turner. Yes, indeed, I have worked with Mr. Chrétien as well. He was my minister in 1988 when I was deputy minister of justice.

If you were to talk to people I have been associated with either in the profession or in the service of the government, I think you will find out that I speak my mind and I have my integrity, which is the most precious good that I have; otherwise, I don't know what I am. That, to me, is to be protected. I can assure you that I would not have got in this type of process with hands attached behind my mind.

I think the three of us went after this in a very professional way, applying all of our skills and experience. We're not infallible. Nobody can claim we have not tried to do the best professional job possible, and there has been no attempt to influence us in any way, shape, or form.

Mr. Hanrahan: Thank you, gentlemen. I certainly am not making any accusations, but I did want you to have that opportunity to put it on the record. The process, as I say, is one that is of concern to a number of people. The competition angle of it I think is excellent.

Given what you say, do both of you have any background in broadcast regulation?

Mr. Tassé: Speaking for myself, I have not had any background in the operation of broadcasting enterprises, but when I was the deputy minister of justice, on a number of occasions people came to me from the Secretary of State department with questions of a policy nature. Also, I have not had any background in broadcasting but I spent some time with Bell Canada. I was an executive vice-president at Bell for three years after I left the government. I had accumulated over time some knowledge of both broadcasting and telecom.

What we were asked was to apply our skills - I would say, Gordon, our analytical skills - because the three of us didn't just go away for a month or two and then come back and say, well, this is a blueprint for you to consider. This is not what happened. We were fed with a lot of good briefs. We applied our minds, our experience, and our skills in trying to ask what makes sense, trying to come up with a coherent view of what we heard. We made up our own minds as to what we would do as policy advisers, because that's what was being asked of us - to provide policy advice.

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I've done that almost all my life, applying the skill I have to different topics. If you look at my record, I've been jumping from one area to another and always making it possible...not because I have great knowledge about these things. It's because the people around me would help me and I would apply my mind and engage in debate with them. And that's what we did.

I must tell you I know more now than I did when I came into this project.

Mr. Ritchie: For completeness, not only do we have nothing to hide but we actually published our curricula vitae in our report. You will see our absent member of the panel, Mr. Rabinovitch, served with distinction as deputy minister of communications and under-secretary of state and has since that time also had considerable interest in the sector.

For my part, I am perhaps the world's leading expert in channel surfing.

As Mr. Tassé has said, if we have expertise, it is in the field of public policy and in the field of advising different governments on public policy matters.

The Chair: I'm afraid I will have to zap you and move along to -

Mr. Hanrahan: On a point of order, will we have another round?

The Chair: We may take a little from the next session, but we are under some pressure because by 11:30 a.m. we have to be in another place to have a live video conference with some folks in the north. I'm trying to balance the interesting answers with the shortage of time.

Mr. Ianno (Trinity - Spadina): From my perspective after having Mr. Spicer here last week, I guess one of two or three sticklers was the U.S. satellite - the use of a U.S. satellite by Power DirecTv versus Expressvu's using the Canadian satellite. Did you by any chance analyse any of that side of things, what the consequences and ramifications would be, so we're more informed?

Mr. Ritchie: Indeed, we looked very seriously at that, because of course it was that provision that created the monopolistic situation, so we were very concerned to determine whether it was well founded.

Here are the things we discovered. First, that did not accurately reflect the policy of the government or of the CRTC up to that point. The government policy, and indeed the act, provide for the promotion of the use of Canadian facilities. That had been interpreted as meaning Canadian programming would be carried on the Canadian ``bird'', and indeed the cable companies, the major competitors to the DTH providers, were free to bring their American programming off American satellites.

Therefore, when the CRTC interpreted Canadian satellite policy as requiring the exclusive use of Canadian satellites - and by the way, if you were to compare the draft exemption order with the final order, you'd find it was not in the draft but only in the final order - they raised some very serious questions. Frankly, our concern was, first, that this was applying an unequal standard to DTH providers as opposed to cable distributors, and no reason was given, nor has any since been given, for the differentiation.

Mr. Ianno: So in effect it was the inconsistency -

Mr. Ritchie: Not only that. Second, you should be clear that our recommendation requires Power DirecTv or any other Canadian consortium that has an American satellite connection...and these are Canadian companies; they all will be Canadian-controlled companies. To qualify for a licence, these would all be required to use the Canadian satellite for their Canadian programming.

So you have now a situation where the ``grey market'', so-called, has dishes that are receiving American programming directly from the American satellite, making no contribution whatsoever to the Canadian system, and not using the Canadian satellite. Our recommendations would require Power DirecTv or any other contender, including Expressvu, to bring its Canadian programming off the Canadian satellite. Clearly, if all the Canadian programming of all the different competitors is brought off the Canadian satellite, then that cannot decrease - it can only increase - the demand for those Canadian satellite services.

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One thing that concerned us was the suggestion that somehow the Canadian satellite covered the whole of the country while the American satellite had a footprint that didn't extend that far. When we talked to the best technical wizards on this, they said that's really not the case. The fact is that as you go farther north you're going to have to have a bigger dish, whatever satellite you use.

Again, to be clear, our recommendation would impose on a company like Power DirecTv the obligation not only to have a bigger satellite in order to receive transmissions in the north, but also to have what's called dual feed so that it could indeed receive the Canadian programming from the Canadian satellite.

Frankly, our recommendations are consistent with the past policy of the government and the CRTC and the Broadcasting Act, and in our view would clearly advance the objectives of the Broadcasting Act.

Mr. Ianno: In terms of the CRTC being able to license either Expressvu or Power DirecTv or anyone else who is interested, you stated more in terms of the amount of time required to be able to put it into effect, to give licensing agreements to the companies that were actually applying. Is it possible, from the information that you've gathered, that the CRTC would be able to do it faster than within the 60 or 90 days they indicated to us?

Mr. Tassé: Yes. Our judgment is that if they had embraced our report when it came out onApril 6 -

Mr. Ianno: Was it on April 6?

Mr. Tassé: April 6 - already two months ago. If they had said at that time, ``Yes, we accept your analysis, we accept your conclusion, we'll make it ours'', and called for licences, then they could have expedited things. Maybe we're naive in thinking that this was a possibility. They have rejected that.

This would require determination and will on their part, and also some creativity, imagination.

As Gordon Ritchie has said, the CRTC is the master of its own rules. If you look at the rules, you will see that there are 30 days for this and 50 days for that. If you add all of that up, it makes many months.

We're saying that there has been a lot of debate about this. There have been discussions before the CRTC. These people have already got into a lot of the work that is required to support a licence application. The CRTC had, and still has, it within its power to say we don't need this 50 days; we'll take 10 or 15 days. In other words, if the will is there, then it can be done. But I don't see the will.

Mr. Ritchie: It has been done in the past.

Mr. Tassé: It has been done in the past in some situations where in effect they were required and they had decided. That's their prerogative, after all.

I'm not complaining about that. I'm just expressing regret that -

Mr. Ianno: So if they decided today that they wanted to go ahead and give the licensing so that in effect it would not penalize Expressvu from starting on July 1, -

The Chair: September 1.

Mr. Ianno: - excuse me, on September 1 - would they be able to accomplish it, taking into account the rules and regulations they have to deal with?

Mr. Tassé: At this time, on June 13, I think that's getting awfully close.

Mr. Ianno: But it's still possible?

Mr. Tassé: It would require a lot of will, and I don't see the will there when I read the -

Mr. Ianno: When you indicated the 50 days and 10 days, if I remember the process he was referring to, he said 30 days and then 50 days' notice to hear public expression.... I gather that you had 464 dissertations on this. Could some of that not be used? Then if there are additional people or people who want to speak who didn't speak to you, they would still be able to do that. So in effect the September 1 date could actually be implemented so there would be no suffering.

Before you answer that, there's one other point that Mrs. Tremblay brought out - I don't know if it was an insinuation or her information - stating that Power DirecTv wouldn't be ready to start until June 1996. So in effect, even taking into account what Mr. Spicer indicated, which was that the earliest he could achieve this goal with all the dates he had to meet would be December 1995....

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If your statement were correct, Mrs. Tremblay, for June 1996, it would still not serve the purpose of Power DirecTv somehow being in the field at the same time as Expressvu. I think that possibly that information you have is not correct, just for the record.

The Chair: I'm afraid we're running short of time. We'll be able to ask those participants more directly when they're going to be able to start up. But perhaps you can -

Mr. Ritchie: Just to be very clear on this, what we said, which is most important, is that everybody should be on the same basis, a licence basis, as quickly as possible. To the extent that the delays, whether they were necessary or unnecessary, create a potential problem, there are ways of dealing with that.

We have pointed out that our report made recommendations in good faith that could have been implemented without this problem arising. Indeed, if the CRTC had chosen to proceed, in our view, correctly by licensing last year, the problem would never have arisen. But if the CRTC in its judgment finds that it cannot or does not choose to move quickly enough to avoid that situation, other steps will have to be taken.

The important thing is that what we're urging is that everyone be put on the same level playing field to compete for the benefit of Canadian consumers.

Mr. Ianno: I have a last point. Do you think the way the CRTC has responded has more to do with asserting themselves from a political perspective than with trying to resolve this specific issue?

Mr. Ritchie: We're not going to speculate on the motives. I will say that in our view it is a complete red herring to try to portray this as a power struggle between the elected government and Parliament on the one hand and an administrative agency on the other. That is not the issue. It is not the issue raised by our report and it is not an issue that has to take up the time of this committee. Frankly, that is a complete red herring.

The Chair: Thank you.

We're pushed for time.

[Translation]

I will therefore suggest that each person ask a question, but a good one.

Mr. de Savoye.

Mr. de Savoye (Portneuf): Mr. Chairman, I appreciate that and you can count on me: it'll be a good one.

Mr. Ritchie, I'm basing my question on the statement that the CRTC sent to us on June 6 1995 and I quote:

[English]

Most importantly, however, is the cumulative effect of these specific and narrow directions. Their implementation would effectively preclude the Commission from considering alternative regulatory measures capable of accomplishing the same underlying policy objectives.

[Translation]

In my opinion, Mr. Ritchie, and you can comment on my opinion, your report leads us to a licensing and procedural mechanism. In so doing, your report skirts around, in my opinion, important issues. You should have, still in my opinion, stated directions and policies. You gave us an agreement and licensing process. You've proposed a competitive environment which, in actual fact, is deceptive.

If I remember my economic courses correctly, competition is based on the possibility, for a business, to turn a profit. The normal process is that a leader innovates by marketting a new service or product. Then, competition comes in and tries to take his market share, according to the usual laws of economic.

And yet the government orders which result from your report mean that the company which had taken the lead, Expressvu, is being brought back to square one. That's not competition. To my mind, the vice versa should have occurred.

Moreover, given the fact that the receiving systems of Expressvu and Power DirecTV are incompatible even though Power DirecTV has dual feed, which isn't Expressvu's case. The consumer becomes the prisoner of his choice.

For example, your cellular phone is able to receive either the Bell Mobility cellular signals or the Cantel signal, but not both. At that point, the choice of Cantel or Bell Mobility cellular becomes a definite one because afterwards, the cost of transferring become prohibitive because you would have to buy a new phone.

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Thus, true competition would only be possible if the material was compatible, and your report does not discuss this. You may be for or against this, but you have no right to remain silent.

Moreover, with regard to the gray market, you recommend that Power DirecTv be left to negotiate source control of the signal with the American producer DirecTv in order to avoid that it be captured by Canadian households.

So, it seems to me that between countries such as Canada and the United States, such agreements should be bilateral at the national level. This control could be provided at source through a bilateral accord and we would not have to rely on negotiation between two corporations. Your report gloses over that as well. I feel that your report was extremely narrow regarding the licensing process and did not examine all the problems, particularly in the context where the signal that arrives by satellite is only the tip of the iceberg of signals that will arrive from all directions through the information superhighway. You may have been precursors, but you simply restricted the debate to a minuscule part of what's at stake. Now, I will listen to you.

The Chair: Now there's a nice little quesiton.

Mr. Ritchie: In these remarks, I think I've discovered two propositions that I would like to deal with.

First of all, there's the issue of technical standards. On pages 28 and 29 of our report, you will find that that subject was discussed and that our position is as set out in the report.

As you know much better than I do, given your experience in this area, a government that would have decided to opt for Beta rather than VHS or for MacIntosh rather than DOS or Cantel rather than Bell would have discovered that it was 100% wrong in the final analysis. This is why it is not incumbent on the government, and especially not on the government of a smaller country, to try to establish technical standards for the whole world.

Incidentally, let me point out that the technologies of the two modes in place and all the others are all incompatible for trade reasons, as you are well aware.

Mr. de Savoye: In the area of telephone systems, Canada took a leadership role in setting international standards.

Mr. Ritchie: And we strongly encourage the government to continue to play a leadership role, taking into account market forces.

The second proposition is that one way or another, the result of our recommendation would have been to penalize one of the stakeholders, Expressvu. This is absolutely not supported by the strength of our recommendations. It is true that the effect of our recommendations would have deprived Expressvu of a de facto monopoly, but we don't apologize for that. Our objective was to break the monopoly and to open up that market. Penalizing any of the stakeholders is contrary to our report, which aims at putting all stakeholders on a level playing field.

[English]

The Chair: Unfortunately, we're very much pushed for time here. I did notice that Mr. McKinnon has a question. I see a couple more questions, short ones.

Mr. McKinnon.

Mr. McKinnon (Brandon - Souris): Good morning, gentlemen. My question is only on the technical components or perhaps limitations of systems here in Canada.

You use the colloquialism ``Canadian birds'' up there. What is the present capacity of the satellites we have? Are they there at the resource level to the degree that we can in fact have infinite numbers of companies coming into play should that occur?

I think I'll just stick with that and see what your answer is, and then I have a subsequent one depending on what you tell me.

.1005

Mr. Ritchie: I believe you will have before you later in this process witnesses from the satellite companies who can give you a more precise answer. Clearly it was our assessment, based on their briefs and our consultation with the technical experts, that there was sufficient capacity up there to require all users to carry Canadian programming on the Canadian satellites, but I recognize that there could come a situation where the Canadian satellite capacity would not be sufficient. In that case we do have bilateral agreements that would permit the use of other satellites.

Mr. McKinnon: And still get the revenues from which, by using those facilities, we're able to exert our leverage from the companies?

Mr. Ritchie: Since they would be Canadian regulated companies, they would be subject to all of the conditions of licence we've indicated, including the financial contribution.

The Chair: One question from Mr. Hanrahan.

Mr. Hanrahan: Gentlemen, you propose an industry-wide financial contribution system as an alternative to the cable fund. You also have stated that the funds generated for Canadian program production should be administered by bodies independent or at arm's length from those who contribute to them. This should amount to 5%, I believe was the figure you used, of gross revenue.

I have just two quick questions. You made reference to page 41, and I was wondering if it was in this document that page 41 was to be found.

Mr. Ritchie: Excuse me, sir, that was the CRTC report on convergence, which may be before you later in -

Mr. Hanrahan: All right. I'd like you to just spend a moment on how you would see this system working. My concern is that we set up another kind of almost slush fund that a body could use, to their own direct satisfaction, I suppose.

Mr. Ritchie: It's precisely to avoid that that we have urged that it be independently managed. So on the one hand, it would not be possible for the distributors to use it simply to lay off normal costs of operation, which would defeat the purpose of the fund, or on the other hand permit political interference in the management of the fund. We left the details of how that can be managed up to the CRTC to work out, but that would be the objective.

Mr. Hanrahan: Do you see the need to put a restriction on that body? My concern is, as with many things in bureaucracies, that the bodies that do the regulating often take up more of the moneys than the people who are to benefit from them. Would you also put a restriction on the administration of such a program?

Mr. Ritchie: Again, sir, although we've been accused of being excessively specific in our report, this is yet another example of an area in which what we've done was indicate the broad policy direction and leave it to the CRTC to work out the details. But your concern is one we would share and one that I'm sure, when they examine the testimony here and your question, they will be sensitized to.

The Chair: I have a quick question before we get the final question from Mr. de Jong, and it's simply this. You said in your opening remarks, Mr. Ritchie, that there are ways to resolve this problem, that the condition should be that all potential competitors are put on equal regulatory footing at the earliest possible date. Could you come up with a practical solution to this problem if the CRTC had the will and the creativity to which Mr. Tassé referred?

Mr. Ritchie: The first and most obvious thing would be to just get on with the licensing procedure and get it done in time. Given all the study that's been undertaken of that, as we've indicated, we don't believe that's unrealistic.

If, however, for whatever reason the CRTC judges that impossible - without getting into the details and technicalities because that would be for the government and the CRTC to determine - one could very easily see a response in which, recognizing that the CRTC erred in its interpretation of satellite policy and was asking the government to clarify that policy, the government could clarify it in such a way that the CRTC could make appropriate adjustments to its exemption order, so that there would not be that undue impediment to competition, even in this interim period before the full licensing regime is in place.

We would, however, still very strongly urge that at the soonest possible date the CRTC take all appropriate steps to put everyone on an equal license base. So all I'm talking about is some of the kind of interim measures that could be taken to ensure that no one found themselves in some kind of regulatory double bind.

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The Chair: Do you want a quick follow-up?

Mr. Ianno: Just one additional, Mr. Chairman. Would it be possible for the CRTC to give the September 1 date to the two or three applicants and give them the licence, go through the process and then cancel them if they didn't meet the specification?

Mr. Ritchie: I see what you're getting at. I think technically the simpler way to do it would be through amendments to the exemption order. You should understand, as I'm sure you do, that the exemption order does not apply to one specific company. It could apply to any companies that qualify.

Mr. Ianno: It's just the U.S. satellite factor.

Mr. Ritchie: The problem is it's been tailored so it applies to only one company.

Mr. Ianno: I see, so that would be the quickest way.

Mr. Ritchie: If the tailor were to adjust the clothing, then the simplest way to enable others to operate, in an interim period before the full licensing regime were put in place, would be as I've described. But again I should say we have no responsibility; we have no role. Our advice has not been sought, nor would it be accepted. It will be for the government to decide on the basis of the testimony before this committee.

Mr. Ianno: And you did not make any recommendations as an interim measure?

Mr. Ritchie: No, because, frankly, when we made our recommendations, there was still ample time for the CRTC to address the issue and deal with it simply through its normal licensing procedures.

The Chair: Thank you. A very last quick question from Mr. de Jong.

Mr. de Jong (Regina - Qu'Appelle): Thank you very much, Mr. Chairman. Many questions come to mind.

The Chair: How about one?

Mr. de Jong: Yes, I know.

The fact of the matter is that the way things stand now, one company is at a disadvantage - Expressvu. They had a business plan and certain expectations to start September 1, and it looks as though they won't be able to start, and if they do there'll be all sorts of legal action. The fact of the matter as well is that the CRTC deposited a legal opinion with this committee that expresses great concern about the legality. Did you examine that? Were you aware that such a challenge might arise when you were preparing the report?

It seems so unseemly, if I could put it that way, for the government to be at such odds with its arm's length regulator that confidence in the whole system has been shaken. Were you sensitive to that possibility?

My third question would be this. The CRTC suggested that the proposed order is too specific and that if the government wanted to move in that direction it should have gone through legislation. Did you consider recommending to the government that instead of ordering the CRTC they move through legislation instead?

Mr. Ritchie: First, Mr. Chairman, to suggest that one company is at a disadvantage is to buy into a rather bizarre interpretation of the present situation, to be very candid. You do in fact have a company which has, with great fanfare, announced an elaborate set of contracts that have been reached with or without escape clauses, one doesn't know, and they are the ones who've identified a magic date of September 1. That is not a company that's been disadvantaged. That is a company for which the exemption order was tailored and which will be able to operate unless and until the CRTC moves to establish a proper licensing regime, at which time they can of course apply for a licence.

When you began your question I thought you might perhaps be talking about other companies that find themselves shut out of the market by the effect of that exemption order. In looking at whether a directive power was required - I should say these things first - we did not anticipate that the directive would actually be required.

Frankly, as my colleague has said, you can accuse us of naivety, but when the government clearly indicated, within two weeks of receipt of our report to the CRTC, that they endorsed the principles in that report, it was open to the CRTC at that point to act, and to act immediately, without any requirement for it to be formally directed by the government.

But if it came to it, if you're asking us whether it occurred to us that an administrative agency of the Government of Canada would defy a directive given duly under legislation to it to adopt a policy framework, no, Mr. Chairman, it never occurred to us that an agency would take that position; nor, indeed, would it occur to us that anybody would waste a lot of money in attempting to litigate such a preposterous proposition.

.1015

The Chair: Well, on that zingy note, I think we'll bring this part of the meeting to a conclusion. We'll take a five-minute pause, thanking you very much for your help.

We'll be back in five minutes.

PAUSE

.1023

The Chair: Ladies and gentlemen,

[Translation]

our next witnesses are from the Conseil provincial du secteur des communications, Canadian Union of Public Employees. They are Mr. Bernard Chabot, and

[English]

Linda Craig, who is responsible for research.

We regret the delay in this. We will try to be as efficient as possible, but we have to put on, as I indicated, roller skates to get over to our next meeting before 11:30 a.m. because we're being hooked up by satellite to television in northern Canada.

[Translation]

Please make your opening remarks, and then we'll move on to questions.

Mr. Bernard Chabot (President, Conseil provincial du secteur des communications, Canadian Union of Public Employees): Thank you very much, Mr. Chairman.

The ``Conseil provincial du secteur des communications'' thanks the Standing Committee on Canadian Heritage for giving it the opportunity to speak on behalf of workers, who are often the people hardest hit by technological changes, it must be said.

The Conseil provincial du secteur des communications of the Canadian Union of Public Employees is composed of close to 6,000 people working in the fields of radio, television, film, telephone services, the press and cable television in Quebec. CUPE is the Canadian union that is the most representative of all the types of jobs that lie at the heart of the major technological upheavals buffeting the world of communications as a whole.

This organization of workers has long taken an interest in the evolution of all the components of the world of communications. Thus, the CPSC intervenes regularly before the Canadian Radio-Television and Telecommunications Commission in debates that are closely related to the interests of the public and of the employees that the council represents. Specifically, the CPSC participated in the recent hearings on convergence and the information highway.

On April 24 of this year, the government tabled two draft orders in the House of Commons that give the Canadian Radio-Television and Telecommunications Commission policy directions on the issuing of licenses to direct-to-home satellite TV undertakings, on the one hand, and on the issuing of licenses to pay-per-view television programming undertakings that supply services through the intermediary of the direct-to-home satellite TV companies.

The CPSC will begin by presenting its position on the government's use of Section 7 of the Broadcasting Act.

.1025

It will then speak to the Committee on the content of the orders. More specifically, we would like to address issues pertaining to the financial contribution, the use of U.S. satellites and the issuance of licences.

The CPSC has serious doubts as to whether the orders comply with the letter and spirit of the 1991 Broadcasting Act. Subsections 1 and 2 of Section 7 of the act stipulate:

7.(1) ...the Governor in council may, by order, issue to the Commission directions of general application on broad policy matters with respect to a) any of the objectives of the broadcasting policy set out in subsection 3(1); or (b) any of the objectives of the regulatory policy set out in subsection 5(2).

(2) No order may be made under subsection (1) in respect of the issuance of a licence to a particular person or in respect of the amendment, renewal, suspension or revocation of a particular licence.

With this order, the government is doing indirectly what the act and the spirit of the act forbid it to do directly. We think that in this case, the government's use of Section 7 constitutes direct government intervention in the affairs of the CRTC and takes no account of the latter's terms of reference and powers. The government thus gives itself dual powers, the power to supervise and the power to decide.

Indeed, in the parliamentary debates that preceded the adoption of the Broadcasting Act, Liberal Party MPs, then in opposition, expounded at length on their concerns about the abuses to which the use of this section could lead. Ms Sheila Finestone, MP for Mount Royal, stated on November 3, 1989:

The bill, as drafted, will seriously hinder the CRTC in its role as an expert and independent quasi-judicial agency, because it gives Cabinet two powers: the power to dictate policy to the CRTC, and the power to review the CRTC's decisions.

By virtue of these two powers, Cabinet will have enough control to effectively have the upper hand over the Commission, a way of winning on all counts. We have said that Cabinet must be able to impose guidelines on the CRTC, but these guidelines must be limited to basic policy issues in the pursuit of the Broadcasting Act's objectives.

Ms Finestone came back to this matter on December 3, 1990, saying that:

the Liberal Party holds that the Cabinet's dual powers to review CRTC decisions and to give it general policy directions are excessive. These dual powers can give rise to government interference through Cabinet. This looks extremely unhealthy, in my opinion. Regardless of the party to which the minister belongs, we should be wary of this provision.

The Liberals therefore believe that Cabinet's review powers should be eliminated to forestall - if I may put it this way - any political interference that compromises the Commission's independence.

It certainly seems that we were not wary enough. The government decision at issue today constitutes a dangerous and unacceptable precedent, given the objectives of the Broadcasting Act and the powers that the legislator entrusted to a quasi-judicial agency, the CRTC, precisely to avoid any temptation of political meddling, or even patronage, in such a key sector.

In this regard, Mr. Don Boudria stated on December 3, 1990:

...the government is acting like its own CRTC, since in practice it is taking away much of the latter's powers and , of course, in a way leaving the door open for salesmen, lobbyists, by acting like this.

Ms Finestone stated that:

The powers accorded to the Governor in council leave the door open to interference and favouritism. It's very unhealthy. The ministers must recognize this. Why leave yourself open to pressure when it can be avoided?

Indeed, why leave yourself open when it can be avoided? This is precisely the trap into which this government has fallen. In stipulating respectively that ``the undertaking cannot be prevented from distributing a pay-per-view television service... solely on the grounds that the use of a foreign satellite is necessary for supplying part of this service'' and ``that the CRTC cannot forbid the use of foreign satellites for the distribution of part of an undertaking's programming to subscribers by means of a DTH satellite TV undertaking,'' sections 3 (g) of order JUS-95-235-01 and 4 (f) of order JUS-95-239-01 - which put into question the selection criteria established by the CRTC - are in fact merely an extension of the direct intervention of a petitioner against a CRTC decision that was unfavourable to him.

.1030

As Robert Dutrisac wrote in an article in the daily Le Devoir on May 25 last, ``All it took was effective lobbying by an undertaking headed by someone close to the Prime Minister for the Ministers of Heritage and Industry to chime in and blame the CRTC for its application of the Canadian Broadcasting Act.''

So the fears expressed during these debates are today born out by the very persons who had disparaged section 7 in the act and streneously condemned the risks involved in this section. Mr. Boudria even warned the minister that:

The next government, a Liberal government, will straighten out the mess created by the current government, but it will also want to rewrite this bill.

The intentions expressed on December 3, 1990, seem very distant today. Note as well that Mr. Keith Spicer's comments at the same time were well-founded, to say the least. He emphasized that:

The people in place with whom I deal in the government do not worry me in the slightest, but his act will be enforced for a certain length of time. It should therefore be scrutinized more closely.

Did Mr. Spicer have a crystal ball?

However, we do not deny that section 7 of the act gives the Governor in council the power to issue directions concerning the objectives of the Broadcasting Act. For instance, we would tend to agree with the government intervening by order to demand that the CRTC review its decision to grant exemptions, precisely in light of the very objectives of the Broadcasting Act. We therefore ask the government to delete from its orders the parts that undermine the integrity of the CRTC and harm the latter's capacity to carry out its role as an expert, independent and quasi-judicial agency.

Ms Linda Craig (Head of Research, Conseil provincial du secteur des communications, Canadian Union of Public Employees): We would now like to discuss certain points relating to the content of the order. We will begin with the issue of the use of foreign satellites by direct-to-home (DTH) distribution undertakings.

The CPSC wishes to inform the committee that it disagrees profoundly with the government on this point. We believe that the use of foreign satellites is in contradiction of the objectives of the Broadcasting Act, which seeks in part to protect our country's cultural sovereignty. The use of satellites implies more than the mere use of a technology. It is also and above all the use of powerful vehicules for flooding the airwaves with massive amounts of unregulated foreign cultural products that could be a serious and fatal blow to any hope for our own cultural policies as French-speaking or English-speaking Canadians. As a representative of the ADISQ said in an interview with La Presse, ``Satellite TV must not be a disguised means of flooding our market with U.S. productions.''

Concerning the financial contribution, we note that the government orders the CRTC to demand that the undertaking, using the means agreeable to it, make an annual financial contribution for the creation of Canadian programmes by independent producers.

At a time when this government is demanding major cuts at CBC that seriously compromise the latter's ability to comply with its terms of reference under the Broadcasting Act; and at a time when the situation of the private broadcasters who, with the CBC, produce most of the programs that we watch and identify with is increasingly precarious, independent producers benefit from subsidies, tax credit policies and government aid that verge on the scandalous.

To cite the words of Mrs. Finestone in December 1990 when she spoke out against the cuts imposed on CBC by the government of the time,

The last thing that Canadians need at this stage is the further disppearance of national institutions like the Canadian Broadcasting Corporation, which plays an important role in unifying Canada by promoting our common values.

This said, we would tend to agree with the order on the policy of issuing licenses to DTH satellite TV distribution undertakings when it stipulates that the CRTC is ordered not to authorize anybody, individually or by category, to operate a DTH satellite TV distribution undertaking unless a licence is issued for this purpose.

.1035

In other words, we believe that rules should be the same for all companies.

We conclude our remarks by reminding the committee that we, like the CRTC, consider that the directions containted in the orders are too specific, more particularly in sections 3(g) and 4(f) of the two orders.

In this regard, we want to stress the importance of the use of Canadian satellites in the delivery of DTH television services. The use of Canadian satellites is a crucial condition for preserving a strong canadian broadcasting system, an essential element of a country's cultural sovereignty.

We therefore demand, first, that these sections be deleted from the orders, because as well as jeoppardizing the country's cultural sovereignty, they constitute an attack on the integrity of the CRTC. We want the government to play more of a supervisory role, which would be appropriate in this case, by sending the CRTC back to do its homework on licence exemptions.

Second, we think it is essential that DTH undertakings, like all the new distribution undertakings that will emerge, contribute financially to the development and production of Canadian programs by directly supporting the undertakings that provide the core of this production; public and private broadcasters.

Private and public conventional broadcasters have always played a vital role in achieving the cultural objectives of the Broadcasting Act, and they remain a fundamental component of the system for the future attainment of these objectives. But conventional broadcasters are faced with increasingly vigourous competition and see their market fragmenting day after day.

In this context, it is important to establish fair regulations that will give conventional broadcasters access to the new resources that will be allocated for the creation of Canadian programs.

Finally, we believe that there is good reason to ask the CRTC to review its policies on licence exemption in relation to DTH distribution undertakings.

Mr. Chabot: We would like to thank the committee for giving the Conseil provincial du secteur des communications of the Canadian union of public employees the opportunity to express its point of view. We are now ready to answer your questions.

The Chair: Thank you very much. Mrs. Tremblay.

Mrs. Tremblay: Thank you very much for your presentation. I just might like to start off with a joke, given that all of Mrs. Finestone's famous quotes have almost become the arguments of the Bloc québécois. If we in Quebec weren't hoping to leave soon, my goodness, I'd say that we could take power after the next federal election.

[English]

Mr. de Jong: Then what are you going to do?

[Translation]

Mrs. Tremblay: In any event, thank you for your presentation. I'd like to make sure that I understood your recommendations, because they seem to be extremely important. I don't know whether you were here during the previous presentation, but the CRTC appeared before us trying to prove that the orders were illegal, while the witnesses who came before them tried to demonstate to us that the CRTC was mistaken. Now it is being suggested that the famous 5% fund that undertakings will have to contribute to, be run by an independant agency rather than by the cable companies or the satellite owners themselves. So you seem to be saying that this famous fund would go to public and private broadcasters, not to private undertakings. Could you explain this point to us?

Ms Craig: In our view, independent producers must not be dismissed. However, given the cuts that the CBC and the NFB have undergone, as well as all the other institutions that were in place and reflected our culture, and given that the private broadcasters' market is becoming more an more fragmented, we have to conclude that these undertakings and institutions should have a slice of the pie when cable companies broadcast their signals.

.1040

In our view, in the 500 channel universe, conventional television remains an essential part of Canada's broadcasting system because it can offer diversity and because it is still accessible. We must be able to ensure its survival.

Mrs. Tremblay: Unless I'm mistaken, these orders and the report from the expert panel contained criticisms of the cable companies, saying that they don't have any competitors and that they use American satellites directly; consequently, there wouldn't be any harm in DTH also using American satellites. But these satellites aren't at all used in the same way. Cable companies get the signal from American satellites, but they package them and don't distribute them directly, whereas if we went ahead with this initiative, we would be invaded by signals from American satellites. So people are trying to make us believe that it's the same thing, but it isn't.

Could you explain this to us?

Mr. Chabot: We are not the ultimate experts in this area, but as you said, the cable companies do package all the signals they receive, whereas the proposed DTH system would be direct, unless I'm mistaken.

Mrs. Tremblay: It's direct.

Mr. Chabot: As far as we're concerned, this enables us to be even more specific about the use of Canadian satellites. In our view, the protection of Canada's cultural identity is truly at stake. This may be a silly comparison, but it's as if someone were comparing the satellite to a pipe. If you didn't own the pipe, you would have a hard time doing anything about the liquid flowing through it. I believe that regulations must be maintained, and to do so, the satellite at least has to be Canadian owned.

[English]

Mr. Hanrahan: Thank you both very much for your attendance.

I haven't had time to read through this. It is a very interesting document. Some very clear questions come to mind immediately. On page 2, the bottom four lines read:

the power to dictate policy to the CRTC, and the power to review the CRTC's decisions. By virtue of these two powers, Cabinet will have enough control to effectively have the upper hand over the Commission, a way of winning on all counts.

In your opinion, does that essentially now make the CRTC redundant?

[Translation]

Mr. Chabot: Considering the way the government has used section 7 since 1991, the CRTC's independence has been compromised and the government has been able to play with the lobbyists. In our view, when the CRTC was created and established, the purpose was to have an agency that would not be lobbied. It was supposed to be independent, while at the same time respecting Canadian policy. That was the danger that the Liberal critic warned us of, I think that we've seen proof of it: there really is a breach.

Ms. Craig: As we mentioned in our presentation, our organization represents communications workers. As such, we frequently have to make representations before the CRTC. So when we appear before the CRTC, it's important for us to know that the decisions taken or the criteria and policies set by the commission will not be frequently overturned.

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We are concerned to see that it is possible to go back on CRTC decisions. As we always work in good faith, it is important for us to know that the CRTC can operate without interference.

[English]

Mr. Hanrahan: Now, having this situation occur for the first time, do you see it as kind of a crack in the door, that this is likely to happen more and more often as lobbyists become more and more powerful and that your submissions to the CRTC, while in good faith, will be overlooked?

Also, in regard to redundancy, with the increased communication abilities, whether they're American or Canadian satellites, personally I'm starting to wonder as I watch the CBC in English - and I appreciate French CBC as much more unique than English CBC - programs like the OJ trial from a Canadian perspective give me great difficulty in terms of what we're talking about in Canadian content.

But given the technology that we may have in a matter of years, does it make almost everything redundant...that the consumer will be king, that he will pick from the 500-channel universe or whatever? He may be able to watch Seinfeld 500 times a day because of lack of production and so forth. In terms of protecting our Canadian sovereignty, culture and so forth, do you think that's possible in terms of the future?

[Translation]

Mr. Chabot: In effect, this crack in the door is a dangerous precedent. In our view, this is unacceptable, because it means siding with those who believe that regulations on airwaves and communications are increasingly burdensome. We believe that it is still possible to maintain a minimum of regulations, because communication is essential, it is culture's lifeline. If we cannot control, or have a minimum of control over this issue, the country's independent identity will be in jeopardy in the long run. I think that it is possible to assure a minimum of regulations, and to do so requires the mandatory use of Canadian-owned satellites. When you own the medium, you can regulate it.

The Chair: Thank you. I must intervene. Mr. Ianno, could we askMs. Craig to comment briefly?

[English]

Mr. Ianno: Yes, can we get her response as well?

[Translation]

Ms Craig: There is a lot of talk about the possibility of regulating in the future. This is an important and timely issue. During the hearings on the information highway, there was a lot of talk about the need to find a different way of regulating, but for the time being, we have not yet come up with one. So we have to work with what we have and with what we know. It is true that we must presently manage a transition period and deal with the arrival of large American channels and American signals, but for the time being, we still have a way of regulating, namely through the use of Canadian satellites. I wonder why we would not do it.

We have to think about new ways of regulating. Initially, the Internet was wide open and unregulated, but now, more and more attempts are being made to implement monitoring mechanisms, because of all the abuse. So we have to regulate if we want to have control over what happens here at home.

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[English]

Mr. Ianno: Do you have general information as to how much companies would pay to satellite companies for their beaming down of signals, either from Power DirecTv or from Expressvu?

[Translation]

Mr. Chabot: We do not have that information.

[English]

Mr. Ianno: So you don't have the information in terms of how it will affect your employees and how much money is going to be paid from that?

[Translation]

Mr. Chabot: Absolutely not.

[English]

Mr. Ianno: So I guess what I'm trying to figure out is if you don't have that information, we don't know how your employees will be affected. But we do know, I guess, that if somehow the 5% gross revenue that the panel recommended is put into place, there will be money for the independent producers and others, and especially many in your field, the many that you represent. Correct?

[Translation]

Mr. Chabot: Yes, but the problem with independent producers - and maybe we were not clear enough on this in our brief - is that they are here today and gone tomorrow, they are often around as long as it takes to turn out one production. In English you could call them fly-by-night operations.

[English]

Mr. Ianno: Are you saying independent producers are fly-by-night?

Mr. Chabot: Yes.

[Translation]

Often.

[English]

Mr. Ianno: They can be? I guess what I'm getting at is that the money they've been talking about, I assume, is going to go to many of the independent producers that are existing. Especially in my riding, many of them that are there are not fly-by-nights and they work very hard and offer a great deal to Canadian industry.

[Translation]

Mr. Chabot: We are not saying that all independent producers are fly-by-night operations, but we hope that most of the 5% fund will be invested in productions made by existing broadcasters, whether they be public or private. We believe that they must be favoured first, if possible.

[English]

Mr. Ianno: So you want the money to be given to the TV stations.

[Translation]

Mr. Chabot: Yes.

[English]

Mr. Ianno: Oh, I see.

[Translation]

Mr. Chabot: At least for production.

[English]

Mr. Ianno: So you want -

[Translation]

Mr. Chabot: For broadcastings.

[English]

Mr. Ianno: As compared to the independent producers. Which stations should receive the money? The private sector?

Mr. Chabot: The private and public sector.

Mr. Ianno: So in other words, we should be in effect...I guess nobody likes to use the word ``taxing'', but we should be getting the money from the consumer to subsidize the private sector. That's the way you see it.

Mr. Chabot: Private and public sector.

Mr. Ianno: I see. I guess another perspective that I wasn't totally clear about is the end of it. Your conclusion is:

Finally we believe that there is good reason to ask the CRTC to review its policies on licence exemptions in relation to DTH distribution undertakings.

Yet, I guess when I was going through your brief - aside from listening to you, I reread it. It seems that by using the quotes of other members, you weren't in agreement with it. Am I missing the point? You were basically saying that the CRTC should be left to its own decision-making process and that the government should not ask, as they did this time, for it to review because you feel it's somehow a form of interference. Am I missing something?

[Translation]

Ms Craig: In fact, we do not disagree with the government having a supervisory role, and we said so. But there are parts of the order where, for example, they go back on criteria that were already established by the CRTC, namely the use of a Canadian satellite. We find that too limited, but concerning the license exemption, we feel there is cause to review the procedures, because, like the government, we believe that all DTH undertakings should have to be issued a license. Then, the government could ask the CRTC to redo its homework, as we say, as it did in the case of digital radio. At one point, licenses were issued and the government asked the CRTC to go back to the drawing board.

[English]

Mr. Ianno: So in effect, if I interpret correctly, you do agree with the government and cabinet asking the CRTC to once again check and review, because there was possibly some unfairness in the system?

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[Translation]

Mr. Chabot: Any company interested in broadcasting via satellite, like all companies in broadcasting and telecommunications, should apply for a license. There should be no exemptions. In our opinion, everyone must be treated on an equal footing.

[English]

Mr. Ianno: So with the usage of U.S. satellite, as the cable companies are doing, and by Power DirecTv as compared to Expressvu, you then agree that somehow the limitations are not equitable?

[Translation]

Mr. Chabot: I'm not sure I understand what your saying.

Ms Craig: Me neither.

[English]

Mr. Chabot: Is it possible for you to repeat that?

Mr. Ianno: Sure.

I guess the big difference between Expressvu and Power DirecTv or anybody else is that Expressvu is using the Canadian satellite - again, we don't know the numbers in terms of how much it would cost - and Power DirecTv was using the dual system, which is the Canadian for the Canadian programming and the U.S. satellite, similar to the cable companies, for the programs that will be on the pay-per-view or whatever else. Taking that into account, the government asked the CRTC to review that exemption order, and you agree with that. Is that what I'm to understand?

[Translation]

Ms. Craig: In fact, what we are requesting is not so much a review of this exemption because it concerned Expressvu. We consider that the government was aware when the CRTC set these criteria, even in September. The government - more specifically the ministers of Canadian Heritage and Industry - stated at that time that it reflected the government's current policy.

However, these two people also stated that they wanted to review the satellite broadcasting policy; whereas now, the government is saying: ``We feel we have to review the exemption criteria or in fact we should no longer provide exemptions.'' I think the government is entitled to do that.

But we're not here to talk about Expressvu or Power DirecTv. It is important is to assure us that the integrity of the regulatory body will be respected first and foremost. Then, knowing if Expressvu... We could talk about this for a long time. In our opinion, Expressvu made a request in good faith. Criteria existed and this organization met them. Power DirecTv did not meet the criteria, and did not apply for a license. This is a completely separate issue for us.

[English]

Mr. Ianno: After what you just said, why do you basically agree with the government's asking the CRTC to review its policies on licence exemptions in relation to DTH distribution undertakings?

[Translation]

Ms Craig: Simply, because we believe that in the future, we will be able to see how we can resolve the case of Expressvu. Should we allow Expressvu to operate and then apply for a license? That has already been suggested.

However, going back to what we were talking about earlier, DTH undertakings should have to obtain licenses. For us, all broadcasting companies should have to apply for a license and meet certain objectives. In applying for a license, companies must comply with the Broadcasting Act and the purpose of the act.

Once there are exemptions, we feel there's a problem. All we're saying is that the government can ask the CRTC to review that part, and determine whether there should be an exemption order or whether certain guidelines should be issued.

The Chair: Unfortunately, we're almost out of time and I have one final question to ask. It deals with the distinction between cable broadcasters and the use of American satellites. Mrs. Tremblay asked this question, but I may not have understood the distinction well.

You have an American satellite, you have a dish and you have a connection for cable broadcasters. Because of this connection, there is compliance with the Canadian Broadcasting Act. There's a long wire that's part of the dish, and that is the cable.

.1100

For direct-to-home satellites, there's an American satellite.

Mrs. Tremblay: A Canadian satellite.

The Chair: You have a dish at home, as well as a wire that goes from the dish to the TV, and in accordance with the Canadian act, the connection is in the TV, because of the chip. I don't understand the distinction between the two when you consider these elements together.

Two distribution systems reflect one technology which is different because the connection is head-in in one case and at home in the second. But in both cases, the technology complies with the Canadian act.

Mrs. Tremblay: Expressvu is going to do that; it is going to use the Canadian satellite, but not by...

The Chair: No, because cable broadcasters are using American satellites.

Mrs. Tremblay: But Expressvu is going to do the same thing. It's going to use American satellites, bring the data down to earth and then send it back to the Canadian satellite which is going to send it into your TV. As for Power DirecTv, it is going to use the American satellite and send the signal to your TV. It's not going to go through the Canadian satellite.

The Chair: As a distribution principle, the only distinction I see is that the wire is longer for the cable broadcaster and shorter for the house.

Ms Craig: As we said earlier, we're not technical specialists. However, we have expressed to you our concerns as workers and as citizens. We've just told you that for us, using American satellites seems dangerous in that it is bringing into Canada productions from the U.S., but also from elsewhere. It is important to ensure this country's sovereignty. I am not going to talk about whether the act or the connection works the same way, as I do not want to talk through my hat. I do, however want to express our concerns in this area. I think they are justified, at least in part.

[English]

The Chair: I saw a last, teeny-weeny question.

Mr. Ianno: This is related.

In terms of the cable companies and because they also use American satellites, have you been complaining about that? What is the negative effect that has had for your workers?

[Translation]

Mr. Chabot: I would say that cable companies use satellites simply to improve the reception of signals that they subsequently transport on to earth. They do all the connections. They do it for the quality, because they couldn't transmit signals by cable from the United States to Canada.

Ms Craig: Cable companies also have to comply with rules governing connections. For example, first of all, cable companies must offer as many Canadian channels as they do American channels. Secondly, they pay a lot of money for channel services coming from the U.S. That was also in the news for a while. They pay for copyright. It also has to be economically viable for them to bring the American services in here. Because of all these restrictions, we think that cable companies are less tempted to bring in 100 or 200 American services.

[English]

Mr. Ianno: Are you saying the DTH will not have to pay for copyright and all the rest of the things you've stated?

The Chair: Or respect CRTC rules as they have indicated they would?

Mr. Ianno: Especially with licensing versus exemption.

[Translation]

Ms Craig: At any rate, we hope that the CRTC will look into these rules if they allow American satellites to be used. On that topic, I think that we can rely on the CRTC whose job it is to establish those things.

The Chair: Unfortunately, we have to wrap up the meeting. Thank you for your views and comments, they were very interesting.

We have to discuss a small issue.

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Perhaps we could wrap up the official meeting and meet again in 25 minutes in room 701 of the Promenade Building.

The meeting is adjourned.