EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 13, 1995

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[English]

The Chair: Since we have fair if not full representation, I will now bring the meeting to order.

Just a word of housekeeping to the members present. We have a vote at 5 p.m. The bell will sound at 5 p.m. today for a 5:15 vote. I therefore propose that we invite our guests, who were supposed to talk to us at 5 p.m., to come back at 5:30 p.m. We will receive them for half an hour, three-quarters of an hour, and break until 7:30 p.m., when we come back to another committee meeting room to do our CBC report.

Does that make sense? It gives us enough time for something to eat.

All right.

We're delighted to welcome back, because he has been here often before, often in the context of the CBC, Michael McCabe and his associates.

I would invite you, Mr. McCabe, to introduce your colleagues from the Canadian Association of Broadcasters and to make opening remarks. Then we'll get on with questions.

Mr. Michael McCabe (President and CEO, Canadian Association of Broadcasters): Thank you very much, Mr. Chairman. We appreciate being here this afternoon.

I have with me today Robert Scarth, our vice-president of television; and Peter Miller, our general counsel.

We appreciate this opportunity to talk to you today about the DTH orders. As you know, the CAB is the national trade association that represents the private over-the-air radio and television stations and networks in Canada, and its members are essentially Canada's local broadcasters.

By way of a brief description, local private television stations as a group are the largest component of the Canadian television sector. There are almost 100 private local TV stations across the country. Collectively, they generate about $1.5 billion in revenue, and they capture the majority of all viewing of television - that is about 51% - and the majority of all viewing of Canadian programming, which is about 56% of viewing of Canadian programming.

We approach this issue by recognizing that it is the responsibility of the government to establish broad policy, and it is the responsibility of a regulatory agency such as the CRTC to implement that policy. However, successful policy depends on successful implementation.

In our view the CRTC, as historically has been the case, is the body for the government and the public to rely on in creating the rules and determining the details of policy implementation. Once the government has set broad policy, the CRTC has an important role to play, because it provides a centre of detailed knowledge and expertise and a forum for public input.

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We have a number of comments on the orders before this committee.

Broadly speaking, there are some aspects of the proposed orders that we believe: (a) do not fully address key aspects of public policy; (b) are inconsistent with the intent of the review panel's recommendations; (c) go beyond what we would consider broad policy direction; and (d) are not in line with a number of the policy recommendations made in other policy proceedings, such as the CRTC's report to the government on the information highway and the minister's working group on Canadian programming and private television.

In our opening remarks, we would like to comment principally on three main concerns in the orders as drafted.

First, the orders do not effectively address the issue of priority carriage for local stations; second, the orders do not effectively address the need local broadcasters have for recognition of their program rights; and third, the orders, with respect to DTH contribution to the system, go beyond what we would consider broad policy direction.

We support government policy that promotes competition between distributors. We believe Canadians should have a choice among distributors, be they cable operators, direct-to-home satellites, master antenna television systems, or telephone companies. We hope that competition will deliver all of the things it is supposed to deliver to the Canadian public: lower prices, more efficient service, and greater choice.

Distributors such as cable or DTH are an integral part of the Canadian broadcasting system. As distributors, they have a major role to play and a key responsibility to the Canadian public. That responsibility is to ensure that they provide access to or make available licensed Canadian services, and in that way enhance the Canadian presence on our TV screens.

We are concerned, however, that DTH's carriage responsibilities may be too narrowly interpreted in this order. The DTH order is interpreted by some to mean only that DTH distribution undertakings draw from the same list of authorized television services as cable operators - that is, CRTC's eligible satellite services list.

That is an important element, and we support that measure. However, we believe it is not enough. The order must be interpreted more broadly, so that it properly respects the principle of priority carriage for local stations. Local stations are an integral component of the Canadian broadcasting system. They are the largest and the most popular component within the system.

The importance of local stations is recognized in the Broadcasting Act, which reads in subparagraph 3(1)(t)(i):

distribution undertakings should give priority to the carriage of Canadian programming services and, in particular, to the carriage of local Canadian stations

We believe the order needs to clearly reflect that obligation.

Arguments have been made by others that because DTH is satellite based, it is a national distribution undertaking and therefore is not capable of responding to the local carriage priorities that apply to other distribution undertakings, such as cable.

This in fact is not the case. It is easy for DTH distribution undertakings to respect local station carriage priorities. Local stations can be a feature of any DTH service through the provision of a transparent A/B switch that would allow the DTH subscriber to easily switch between reception modes; that is, between satellite reception for national, satellite-based TV services, and off-air or cable reception for local TV services.

What we are proposing is technologically possible and easily within the means of the prospective DTH providers. Choice for the DTH subscriber should mean easy access to a wide variety of television services, including local TV stations.

Peter.

[Translation]

Mr. Peter Miller (General Counsel, Canadian Association of Broadcasters): Our second concern with the order as drafted is that it does not address the policy principle of recognition of program rights. Public policy has long recognized that distributors must observe the property rights of Canadian broadcasters. That is a principle that must apply to all distribution undertakings, including DTH, if it is to be effective.

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The CRTC, itself, has agreed with this premise. In its report to government on the information highway, the CRTC states that it ``recognizes the importance to all Canadian licensees of protecting the program rights that they have purchased''. The CRTC indicates also that it will proceed with a policy hearing to address the feasibility of implementation of simultaneous substitution and advanced substitution measures to all distribution undertakings, to achieve that end.

Today, one of the cable industry's key obligations to the system is to carry out simultaneous program substitution at the request of local broadcasters. This mechanism protects, to a certain extent, the program rights of local broadcasters and allows Canadian broadcasters to capture audience viewing and advertising, for the benefit of the Canadian public and the system, that would otherwise be lost. It is estimated that this mechanism alone generates $100 million annually.

[English]

This principle of recognition of program rights is also recognized in the U.S. Local U.S. broadcasters benefit from measures called SYNDEX and network non-duplication rules that require cable companies in the U.S. to respect those program rights.

With regard to satellite distributors, the program rights of local broadcasters in the U.S. are protected through the U.S. Satellite Home Viewer Act of 1988. This act ensures that local network stations do not have their program rights infringed by affiliates carried by DTH operators.

Under these rules, DTH operators in the U.S. are not allowed to carry network broadcasters such as ABC, NBC, CBS, FOX, and PBS in areas already served by local affiliates. Only in areas that are not served by off-air broadcasters can the DTH operator make a package of network signals available to its subscribers. What this means is that by law DirecTv in the U.S. can only distribute network affiliates to the little more than 1% of U.S. homes that do not have access to off-air local broadcasters.

Fair competition in Canada should ensure that local Canadian broadcasters obtain the same kinds of rights as are currently in place for our U.S. competitors. Without such measures, DTH providers will be importing TV signals into markets those stations were never licensed to serve. We believe a reasonable solution would be to require that DTH operators delete programs from the TV signals they carry in cases in which they duplicate the programs carried by local broadcasters.

As you've heard, DTH service is addressable, which means the DTH provider can tailor its signals and the programs available to different DTH subscribers. The net result would be that DTH subscribers would continue to have access to all of their favourite programs and DTH would make a positive contribution to the system by respecting the program rights of local broadcasters.

As a third point, we would like to comment on those orders that set a level and means of contribution to the system, paragraphs 3(d) in the DTH order and 4(b) in the pay-per-view order. We fully support the objective that DTH operators, like any distribution undertaking, must contribute financially to the production of Canadian programming. However, we believe the orders as drafted are too specific, do not accurately reflect the review panel's own recommendations, and propose contribution levels below those required of existing pay-per-view providers.

In particular, the way the orders are drafted now, they could be misinterpreted to mean that only a producer that is independent of a broadcaster, not just independent of a DTH distribution undertaking, would be eligible for production support. The obvious intention is to ensure that the financial support provided by a DTH undertaking goes to producers that are independent of the undertaking, and that is indeed in the recommendations of the review panel. We have suggested alternative wording in our written submission, and we would be happy to discuss that with you in questioning.

Finally, if we may be permitted, Mr. Chairman, we would like to make some general observations on how the committee might respond to suggestions made by parties before you for amendments to the proposed orders.

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We would respectfully suggest that the committee members ask themselves the following two questions: First, is the proposed amendment of broad public policy interest? Second, is the proposed amendment within the scope of the DTH satellite review that's at issue here?

Recommendations that are not specifically related to DTH and are not of a broad public policy nature should, in our view, be rejected by the committee.

Mr. McCabe: To conclude our opening comments, Mr. Chairman, the CAB supports the government in its review of DTH satellite policy.

The DTH policy, as currently defined by the two orders before government, cannot be crafted in isolation from the other parts of the system. Key policy requirements such as priority carriage and recognition of local broadcasters' program rights apply across all forms of distribution, and DTH should be no exception.

There are a number of other aspects of the orders as drafted that we believe should be amended to in effect broaden their application and provide the CRTC with the necessary scope to fulfil those orders. These comments are contained in our written brief to the heritage minister, a copy of which we have provided to this committee.

We have not discussed them in detail in our opening statement, but we would be happy to respond to any questions you may have. Thank you, Mr. Chairman.

The Chair: Thank you, Mr. McCabe.

Given the pressure of time - we have about 25 minutes - I would ask that the opening round be limited to five minutes each.

[Translation]

I will ask Mrs. Tremblay to begin.

Mrs. Tremblay (Rimouski - Témiscouata): Good afternoon, gentlemen. Thank you for your presentation.

There are a lot of things and we hear a lot of things, and it is not always easy to get a clear view of all this. I don't know if I should put my question to you. If you are not the right people to answer it, I'll ask another group. What is the difference between the cable companies which pick up programs from American satellites, which organize and distribute them through cable, and those which, like Power DirecTv, want to use directly an American satellite for broadcasting?

Personally, I don't know much about all this and I told you this morning. My field is pre-schooling education. I know much more about children from zero to five years old than about satellites; satellites are a little remote from my day to day concerns. I would like someone to explain to me how this works exactly. I have concerns about the direct use of an American satellite. I have concerns that this might infringe on Canadian culture. I want to know if I should worry more about this or not.

Mr. Miller: Madam, I would suggest you put your question to Richard Stursberg from the Canadian Cable Television Association, but I will try to answer it.

Mrs. Tremblay: Perhaps we should put the question to many people in order to get a clear picture.

Mr. Miller: Yes, that's right. In my view, the difference is as follows. It is true that cable companies use American satellites to pick up American programming and services. They then use their own network, which is Canadian, to broadcast these programs and services to their subscribers.

They can also use American satellites, but there is then a direct link between American satellites and their subscribers. There is a difference only in the last part. Cable companies use their own network, which is obviously Canadian for the last part, but when they use American satellites, there is a direct link between these satellites and the subscribers. Does that help you?

Mrs. Tremblay: Yes, it helps. We are told that the proposed orders were necessary too make sure that there is competition and to avoir a monopoly. As we were saying this morning, when someone starts up a new business a monopoly exists as long as someone else does not discover that there is a lot of dough to be made here and decides to open up a new business to compete with the first one. However, the monopoly would not have lasted very long since Power DirecTv wants to take its share of the market. We would have had two companies and perhaps a whole lot more later on.

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If you can directly access the American satellite and especially if, like Power DirectTv, you sort of own the satellite a little bit, it costs you less. You make savings there. Now, how can we have a level playing field for cable operators and DTH providers? Will the DTH providers not have an edge over cable operators?

Mr. Miller: That is a very good question. I think that cable operators will acknowledge that they will have to use Canadian Satellites for Canadian services and American satellites for American services and then use their own network to distribute the service to their subscribers.

The most difficult question is to know what we should do with services like pay-per-view, where it is possible to use American satellites for part of the programming and Canadian satellites for the other part.

The problem is that for pay-for-view, what Power DirectTv will have to do if the CRTC orders so, is to use only Canadian satellites for Canadian programming and American satellites for American programming, and cable operators will have to seek permission to do the same. They will want their own pay-per-view service, which is a programming service, and use American satellites and Canadian services.

In our view, that is not necessary. There are differences between satellite services like DTH and cable services. Even if we give satellite services the possibility to use both satellites for pay-per-view programming, it is not necessary to do the same for cable operators because their structure is totally different.

You are right: I know that when they appear before the Committee, they will ask for the same thing. Can we find political reasons to maintain the differences between what the cable operators can do and what the DTH services can do? I think we can maintain the difference because the services are different, as well as the underlying reasons. We could perhaps further discuss the reasons which make it necessary to have a somewhat different policy.

[English]

Mr. Hanrahan (Edmonton - Strathcona): Thank you, Mr. Chairman.

Thank you, gentlemen. Again, while I recognize that we may be somewhat intelligent, we're not geniuses, and to get this stuff five minutes ago and try to make our way through it is very, very difficult.

I want to ask you, gentlemen, about your first concern, I believe, on page 2 of your document, in regard to Canadian programming service, and in particular, to the carriage of local Canadian stations.

It seems to me what you're suggesting is that we have a satellite and we have the cable companies that are now receiving the American - ABC, CBS, and so forth.... That can also be received eventually when this gets under way direct to the subscriber through the satellite, avoiding the local station.

With this A/B switch, you are suggesting that by switching it to A, I suppose, it blocks out everything you have already provided in your market.

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Mr. McCabe: I think we might come at it from another direction. It is technologically possible to provide what we've called an A/B switch, and I think that is within the intent of both the current and potential applicants for these services. What the A/B switch means is that simply within the remote you have, you have the capacity to switch from watching a service that is delivered by the satellite to one that is available to you by cable or over the air.

We are merely suggesting that in the order as drafted finally, it be understood that there's a requirement for the DTH providers to ensure that the capacity is there to plug into either the over-the-air signals through rabbit ears or the cable so that the local stations will be available. If it's a world unto itself - that is, if all you are able to do as a DTH subscriber in Canada is get what comes from the satellite - you will not get your local station.

We are saying that public policy should provide for that to happen. It's technologically possible, and it's our understanding broadly that these companies plan to do that. But I think we should make sure that is a requirement.

Mr. Hanrahan: If they went the other way, if they went totally through satellite, it would essentially obliterate the local television stations.

Mr. McCabe: That's right. If all they were plugged into was their satellite dish, that red satellite, then in fact they would not have any access to local service. They can in effect get up and unhook from the satellite and hook into their rabbit ears, but -

Mr. Hanrahan: I just want to get to one point because we have such limited time. As a consumer I can either have the A/B switch regulated and get the American television stations through cable or I don't have the AB switch and I can get it through satellite.

With almost everybody who comes before us, their main concerns are Canadian culture, identity, sovereignty, and all these kinds of things. What's the difference if I get American shows through my local cable station or through the satellite?

Mr. McCabe: We're not particularly talking about American shows. We're talking about the Canadian services we provide.

The situation in which we do talk about American programming is one in which you're aware that one of the ways we support Canadian programming within our system is through the simulcast rules, which pump about $100 million per year into Canadian programming. We have proposed otherwise in this paper to ensure that the DTH providers in effect black out the American stations where they don't own the rights, which is what the Americans do.

Generally, we own the rights to provide an American show as part of our schedule. We're suggesting that as the Americans do under their law, we should provide in this country to black out those so that we may continue to enjoy the revenue from those. But our concern is not American stations as such; our concern is that our stations - that is, local Canadian stations - be available.

Mr. Hanrahan: I admire your presentation in that for the most part you are essentially arguing to keep jobs in Canada, to keep money in Canada, rather than going through the other process.

Mr. McCabe: That is so.

Mr. Hanrahan: Thank you, Mr. Chairman.

The Chair: Thank you.

I've read your presentation with interest and it would seem to me, as I look at your concerns, that it would be fair to say that you're agnostic on the question of Expressvu versus Power DirecTv. You would express these views for whatever enterprise came forward, including any third party, right?

Mr. McCabe: We remain agnostic, yes.

The Chair: So you're not a believer?

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I assume that, knowing you as I do, Mr. McCabe, you have not avoided conversation with these people. There are really two issues. One is what the order should say, what the policy directive should say, and how the CRTC should interpret it; and the other is the actual issues you bring forward.

If we just go through your issues, I think you said your understanding was that the A/B switch problem was not a problem, that it was technologically doable, and that there are no signs of either of the parties, Expressvu or Power, having any problem with it. You just want to make sure that it's codified. Is that a fair summary?

Mr. McCabe: That's correct. We believe these things when we see them on paper and that they are required to do it. We've had fine conversations, and we believe them all.

The Chair: Of course, the problem that we have nowadays with things like the grey market is that it not only does not pick up local television stations, it also doesn't pick up any Canadian stations. This would be a major advance, even if they couldn't pick up the local ones, but you could have it both ways with the A/B switch.

In terms of the programming rights question, the simulcast question, if you like, or the protection to produce a simulcast effect by using the satellites, this doesn't seem to present, for either of the two parties we've talked about so far, a technological problem. Has there been in your informal discussions a kind of willingness to go ahead, or where are we with that?

Mr. McCabe: Perhaps Peter could address that.

Mr. Miller: I would have to say, Mr. Chairman, that without the impetus either through this process or when these applicants ultimately appear before the CRTC in a licensing process, they would not choose to do it for a very simple reason. For them the ability to carry unfettered the U.S. networks would obviously be a competitive advantage, a competitive advantage that they would want to exercise, and in our view it would be an unreasonable competitive advantage.

We know that they can technologically do it. I would imagine that they might have to look at the software that might need to be in place to do it, because although we know, for example, that DirecTv has certain software in place to meet the American requirements, we're not saying necessarily that those should be duplicated here. We're saying the right approach for Canada should be adopted that would be similar.

So we would have to say, Mr. Chairman, that although they could do it without some impetus, we don't think they would be that interested without a little bit of a push.

The Chair: From a technological point of view, I think I understand how it works with a cable system. It does require some manipulation. That is to say that in every case where a local station... I guess there are some time zone questions too. But, in both cases, is the technology of a sufficient sophistication that the addressability allows for everybody's black box to say, we'll take the 9 p.m. show but then it runs all of the local variations through the time zones and when you come on the air and off the air with a... all that can be handled by the technology?

Mr. Miller: You would be surprised, Mr. Chairman.

The Chair: I know I would be astonished.

Mr. Miller: I don't know if you have had the opportunity to have a demonstration. If Power DirecTv could do it legally, no doubt they would be delighted to demonstrate the technology.

It is incredibly sophisticated. The menu systems tell you on every channel exactly where and when the program is available, and allow you to select that program. As a consumer, as a parent, you could black out programs you didn't want. So from the consumer side, it's very sophisticated; and from the technology of the satellite itself, they have the ability to, within an area code - because as you know, there's a phone-back link for the pay-per-view services - they can black out whatever service or whatever program they need to.

For example, they will have to, pursuant to various contracts, do it for things like hockey games and whatever where there are contractual remedies. Our problem is there are no contractual remedies in the situations we're talking about. Without the regulatory regime, it unfortunately won't be done.

Mr. McCabe: To be clear, the American satellite providers are now doing this in the United States to protect the broadcasters who own the rights for particular markets.

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The Chair: Again, at the risk of being boring, the systems that are being proposed by Expressvu and DirecTV are in different time zones, right?

They essentially, as I understand, send out the program in whatever time zone they arbitrarily choose. They do not then send it out again by time delay, because that would chew up a lot of channels, so that where you have.... I can see simultaneous substitution being the case in the overlapping time zone, let's say the eastern time zone or something like that, but what happens when there's a time delay and it appears on the satellite an hour before it does in Winnipeg? What would you propose to do about that?

Mr. Miller: To be clear, we are not proposing that simultaneous substitution, which is the model we have adopted to date, is the right model for DTH.

What, for example, happens in the U.S. is that a slide appears and it says this network affiliate is not available in your market because you have an off-air broadcaster.

The Canadian solution may be on a program-by-program basis. It says this program is not available in your market, tune to your local broadcaster. That is probably the mechanism you would have to develop to accommodate this.

Again, to be frank, Mr. Chairman, we're not coming to you with the precise plan. We would want to sit down and co-operatively work with the DTH providers to find the right solution. But if the principle is entrenched, then we firmly believe the solution will follow. If the principle isn't entrenched, we'll never find the solution.

Mr. McCabe: If I may just add a piece to that to fill it out, it is that in its information highway report to the government, the CRTC recognized that the fairly narrow simulcast provision we now have may in fact need to be updated, and they have proposed that they will have in fact hearings on how the protection of program rights can be extended to all distribution systems and how to improve and update it. So this may well come into that context, as long as the principle is established.

The Chair: Madam Tremblay has a question, and Mr. Ianno has a question.

[Translation]

Mrs. Tremblay: For your 100 members, what is the main drawback of the orders that we are dealing with right now? Where exactly is the danger for those members on whose behalf you speak? If the orders are approved as they are, where is the disadvantage for them?

Mr. Miller: The problem for our members and for local broadcasters would be that if they lose subscribers, people watching their programs, they would also lose the advertisers. If they lose the advertisers, they also lose their capacity to invest in Canadian programming and the news, which is their means of reflecting the community. Those would be the consequences.

We know that local stations, public or private, in the whole of Canada, are the best contributors to Canadian programming, and that their programs are the most popular. From our point of view, they represent the strongest line of defence for a Canadian system. If you go and talk to other stakeholders, like cable operators, they will tell you exactly the same thing.

[English]

Mr. Ianno (Trinity - Spadina): Thank you, gentlemen, for appearing.

I have some follow-up questions from what you said earlier. To go backwards a bit, do the cable companies pay you for carrying your signal?

Mr. McCabe: No, they do not.

Mr. Ianno: They do not. Yet you still receive revenues from your advertising.

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Mr. McCabe: Yes. This is one of the key points we made in our information highway submission, that the advertising pool in this country is stabilizing; in fact, in some respects dropping relative to others. If we're going to continue to be able to sustain Canadian programming, we will have to tap other sources of revenue, which is why we made the proposal of a contribution by all the distribution systems, including the one we're discussing today, to Canadian programming; not to us and our bottom lines but directly to Canadian programming.

Mr. Ianno: If your local networks are shown on the DTH systems, would your advertising still be shown as it is on the cable?

Mr. McCabe: If you're referring to the A/B switch, that's merely a question of picking up our station locally - and therefore the signal would be complete - not uplinking in some way and putting it down. But indeed, if, as is currently the case with Cancom, you pick up stations, Hamilton or Edmonton at this stage, yes, they are currently shown with all their commercials.

Mr. Ianno: So how have your advertising numbers, in terms of people viewing, diminished if it's on the DTH.

Mr. McCabe: The difficulty of course is that there may well be one or two stations, as there currently are on Cancom; one or two or three stations. Your local station, CH, in Hamilton may be on, but CFTO in Toronto is not on the satellite. It is available if the DTH provider provides an A/B switch, but it will not be available on the bird.

Mr. Ianno: Right. But if it is available on the A/B switch, you were mentioning that somehow the number of viewers would decrease and therefore revenues from advertising would decrease, and I still haven't seen that.

Mr. Miller: Let me give a specific example, one you may be familiar with. The program Seinfeld is on Global, and Canadians tune in Thursday night to watch Seinfeld. That is an American program on a Canadian broadcaster. The advantage of that, the benefit to the system, is that the revenues Global makes from that American program it can then churn back into its other activities, and in particular the Canadian programming. They make more money out of that program than they spend, and their profits from that program go to the Canadian programming.

Now, if I'm a DTH subscriber, let's say I have my A/B switch. So I could choose to turn to my local Global station and watch Seinfeld. But if it's on Fox on DTH, I won't bother to switch to my Global; I'll just watch it on Fox. So Global loses those -

Mr. Ianno: What about on cable?

Mr. Miller: That's the beauty of simultaneous substitution. Today, when you watch Fox on cable and you're watching Seinfeld...I don't know whether you have ever noticed, but it's the same ads whether you're on the Fox station or the Global station, because Global has the program rights. Even if you're tuning to Fox, you're getting the Global signal with the Global ads, so Global is getting the revenues.

Mr. Ianno: The difference, then, between the Expressvu and Power DirecTv would be that if they showed an American program on a Canadian station.... How does that work? What would be the difference between the two?

Mr. Miller: Again, this is one of these issues, as the chairman says, on which we're agnostic. The issue would apply to both, because if either of them...and I assume either of them would want to carry U.S. networks...if their subscribers watch those programs, such as Seinfeld, on DTH networks rather than tuning to the local broadcaster or rather than having simulcast, like the cable company, that has an impact on viewers of us, which has an impact on revenues, which has an impact on our ability to contribute to the broadcasting system and spend money on -

The Chair: I'm afraid I'm going to have to intervene, because we have witnesses waiting, we have a vote coming, and we have two more questions.

Mr. Ianno: Just a technical-related question, Mr. Chairman, so we understand.

The Chair: Yes or no will do.

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Mr. Ianno: Is the technology available for both Expressvu and DTH to apply if the CRTC stated that it should be similar in terms of simultaneous broadcast or blacking out or whatever the proper terminology is, on this new technology? Is that correct? I understand the CRTC hasn't stated that yet.

Mr. Miller: To the best of our knowledge, yes. But if it weren't available in September we would accept that there might have to be some transition period. So if they needed to develop anything, they could do it.

Mr. Ianno: Do you know why the CRTC has not yet stated that should protect the local stations?

Mr. Miller: To be frank, we think the commissioners didn't turn their minds to it.

Mr. Ianno: Didn't you do presentations?

Mr. Miller: We did, but as you know, one of the flaws with the exemption process is that it's not like a licensing process, where you have a full discussion and a full opportunity for oral comment. That is one of the reasons why we, like the review panel, recommend a licensing process. All of these issues come out.

Mr. McCabe: We opposed the use of the exemption order in the first place, long before it was used.

Mr. Ianno: Now cabinet is agreeing with most of the industry.

The Chair: I'm going to have to intervene at this point.

We have two final questions, one from Mr. Hanrahan, and one from Mr. de Jong.

Mr. Hanrahan: Gentlemen, one of the key concerns I see here in this supposed 500-channel universe is the whole area of production. Five hundred channels is a lot to have variety on. I do not want to watch Roseanne on every channel I click to. I don't know if I want to watch her even once.

The Chair: She would take up some of the channels.

Mr. Hanrahan: I do want to emphasize the need for a Canadian production fund, which we are looking at.

In your opinion how could we best maximize a Canadian production fund? Or is that beyond the realm of your -

Mr. McCabe: No. Quite specifically, we agree with you that the real problem is where we are going to get the specific Canadian programming. In our information highway proposal we said quite specifically there's no government money for this, the advertising pool is diminishing, and the CBC isn't going to have any money - I guess.

The real problem is how we get the broadcasting system itself to provide the revenues so that there can be more and better Canadian programming. We have proposed - and we were the initial proposers of - a levy on all the distribution systems, including telephone companies, cable, and direct-to-home. We were pleased that the review panel on direct-to-home picked that up as a proposal. We were pleased that the CRTC agreed. We hope we can get you to help us to convince the government that when they make policy that will be the case.

Again, we have made it quite clear that money will all go to programming, not to our businesses.

Mr. Hanrahan: Would that be from -

Mr. McCabe: We have said from gross.

The Chair: I predict that Mr. de Jong has fifteen superb questions, and I ask him to choose one of those.

Mr. de Jong (Regina - Qu'Appelle): You always make my life so difficult, Mr. Chairman.

What concerns me about this whole thing is not necessarily the content, but the process. I'm very disturbed that we have this situation with the CRTC, an arm's-length agency of the government, and the government itself at war with one another. The CRTC has a legal opinion that says this order is illegal. There is almost a veiled threat or the possibility of the CRTC not carrying out the order of the government. That surely must also bother you, as the Canadian Broadcasting Association, to see this type of insecurity or this type of situation existing between the government and the CRTC.

Allegations have been made that this is retroactive and that individual influences are concerned. Surely, these charges as well must bother you, because they have a lot of implications for you as general broadcasters.

Could you comment on that?

Mr. McCabe: Let me comment generally. Peter may want to pick up something following what I say.

First, we believe the government has the power under the act to in fact give broad direction in terms of policy. We think this is a proper area in which to exercise that policy.

.1625

Having said that, you will see in our written submission that we have some concerns about how that power has been exercised. But we have an ongoing and overriding concern that there should be an independent regulator.

We have our battles with the CRTC from time to time, and we think that they overregulate and microregulate and so on. But we must have in this country a regulatory body that, within the bounds of government policy, is able to understand our industry and provide a forum for us to come and argue with all the proponents in a given situation and the public so that good decisions can be made that take into account the needs of our business and of the public.

I think there's more smoke than real fire to this so-called conflict between the two. I believe that if the government, with your advice, provides to the commission an order that is, in the words of the review panel, appropriate, then in fact they're going to carry it out. I don't believe at all that there's any will over there to sort of have a battle with the government.

The Chair: Thank you very much for your helpful intervention. We've heard some interesting, useful, and new ideas. We will certainly bear them in mind.

I propose that we take a two-minute break to allow the next interveners to come. We will be able to tack a little bit of time on, because we don't actually have to be in the House until 5:15 p.m.

.1627

.1631

The Chair: Order.

Ladies and gentlemen, we are under some constraint of time, because we are going to be summoned in half an hour for a vote that will take place in 45 minutes. Because we are close to the chamber we can take a bit of time, but obviously we will have to leave here in good order.

We apologize for our delay, and we welcome the remarks by the Telesat group.

I don't know who is on first, but welcome. Why don't you introduce yourselves to us.

Mr. Ted Ignacy (Vice-President, Finance, and Treasurer, Telesat Canada): Thank you, Mr. Chairman, and good afternoon, honourable members.

I am Ted Ignacy, the vice-president in finance and the treasurer at Telesat Canada. With me are Mr. Don Weese, the vice-president, engineering, and Mr. Len Lawson, director of national sales.

Telesat's appearance here today is primarily intended to provide our company's support for the Canadian broadcasting industry and, in so doing, support for Telesat in its role as a carrier of broadcasting services.

We have noted in our submission to the Minister of Canadian Heritage that the Canadian broadcasting industry is our largest business segment. Over 60% of our satellite capacity is occupied by Canadian broadcasters, and approximately 50% of Telesat's revenues are derived from Canadian broadcasting business.

The extent to which the existing Canadian broadcasting industry remains viable and is encouraged to grow will influence the use of our satellites, and thereby influence the financial future of Telesat.

As you are aware, Telesat has operated as Canada's domestic fixed-satellite services provider for over 25 years. It is a private company owned by a consortium of the Canadian telephone companies, BCE, and Spar Aerospace.

Telesat's mandate is to provide telecommunications service to all parts of Canada, including the northern and remote areas of the country. In addition, pursuant to the exchange of letters between Canada and the United States, Telesat has been designated as the authorized Canadian entity for the provision of fixed-satellite services on a transborder basis to points between Canada and the United States.

Telesat has been interested in and has encouraged the introduction of a domestic direct-to-home satellite-based broadcasting service for about 15 years now. Early in the 1980s, Telesat promoted the establishment of a Canadian DTH service using its Anik C satellites. Since then, there has been a significant increase in the number and variety of Canadian broadcasting services, as well as the emergence of digital video compression and the launch of U.S. direct-broadcast satellite services.

Telesat has taken a leading role in introducing DVC to Canadian broadcasters and has also undertaken extensive trials to explore the capability of the Anik E satellites to deliver a Canadian DTH programming package using DVC technology.

Through the Anik Es, the Canadian broadcasting industry can offer a DTH system fully competitive with emerging U.S. DBS services.

.1635

In October 1993, Telesat applied on behalf of potential Canadian DTH service providers for a class exemption pursuant to subsection 9(4) of the Broadcasting Act. Throughout 1993 and 1994, Telesat worked with a number of potential DTH service providers to encourage the timely introduction of Canadian DTH services. Following the Gazette notice of the federal government in the fall of 1994, Telesat submitted two briefs to the DTH review panel. In response to the latest Gazette notices on DTH, Telesat submitted its latest brief to the Minister of Canadian Heritage.

Telesat has two principal concerns with the two draft orders issuing directions to the CRTC.

Our first concern is that the draft orders in their current form will cause a further delay in the introduction of Canadian DTH services in Canada.

Secondly, we are concerned that the current wording of the proposed orders could result in the carriage of Canadian programming services on U.S. facilities. The draft orders could also create the precedent of allowing foreign programming services to compete directly with Canadian programming services without regard to the impact that such competition may have on existing and future markets for Canadian broadcasting services, the size of the market itself, duplication of programming services, and the amount of Canadian content that is desired.

With respect to timing, it is Telesat's view that the potential DTH market in Canada is small, consisting of possibly up to 1.2 million subscribers. Telesat is also aware that the grey market for U.S. DBS services is growing very quickly in Canada. The growth of the grey market is quite disturbing in that once a Canadian household has made the investment in a U.S. DBS satellite receive terminal, it is unlikely that they will become a customer of a Canadian DTH system using the Anik satellites. That is because the U.S. DBS satellite receive terminal is not compatible with the Anik satellites and the repatriation of that Canadian household would require that subscriber to make additional investment.

Therefore, we believe it is necessary to provide a Canadian alternative to the grey market as soon as possible. This would allow Canadian DTH businesses to successfully gain market entry before the grey market grows too expansive, and it will give Canadian DTH service providers the best possible opportunity to remain viable for the long term.

In our submission to Canadian Heritage, we have recommended that prospective DTH service providers be permitted to start up the Canadian portion of their DTH services under the CRTC exemption order. The Canadian portion could consist of those programming services that have already been licensed or authorized by the CRTC. In the case where a DTH service provider also wishes to add U.S. programming from a U.S. satellite that is not currently on the CRTC's eligibility list, then such programming would be subject to licensing or authorization by the CRTC through a separate application.

We believe this interim measure will allow entities such as Expressvu and Power DirecTv to commence their Canadian programming operations in a timely manner.

With regard to competition and the licensing of foreign programming services, it is Telesat's view that while competition is desirable, the introduction of competition should proceed in a measured way. Telesat agrees with the approach the CRTC has taken in the past with respect to the licensing of new programming services. We believe the CRTC should continue to consider the undertaking's financial viability, the impact of the proposed programming services on existing and future services, the size of the market, the degree of duplication of services, and the undertaking's commitment to Canadian content.

It is Telesat's concern that the wording of the proposed orders could precipitate the demise of several key sectors in the Canadian broadcasting industry. The precedent of unconditionally allowing U.S. pay-per-view services into Canada using U.S. satellites could undermine other Canadian broadcasting sectors. Following the licensing of U.S. pay-per-view as suggested in the proposed orders, other programming services such as the existing Canadian specialty and pay services could all be vulnerable to vigorous and unfair competition from their U.S. counterparts. For U.S. service providers, the Canadian market merely augments their existing U.S. market on an incidental and peripheral basis using U.S. satellites. Telesat is concerned that the current wording of the proposed orders could inevitably lead to changes away from the present government policy, which encourages and promotes Canadian broadcasting services and the use of Canadian telecommunications facilities.

.1640

Telesat submits that the wording of directive 3(g) for DTH and directive 4(f) for DTH pay-per-view could be interpreted to mean Canadian pay-per-view services destined primarily for Canadian audiences could in fact be carried on foreign satellites. This type of arrangement would be a contravention of long-standing broadcasting and telecommunications policy objectives. Therefore Telesat has recommended in its brief that the wording of those directives be modified to make it clear that only those foreign services that are authorized for distribution in Canada by the CRTC could, if necessary, be carried on U.S. satellites.

In addition, to ensure the primacy of Canadian programming while at the same time maintaining a delicate balance between Canadian and foreign programming services offered in Canada, Telesat recommends the following criteria for the carriage of CRTC-licensed and -authorized Canadian DTH services and DTH pay-per-view services in Canada. We recommend that all licensed and authorized Canadian programming that is primarily intended for Canadian audiences use Anik or other Canadian telecommunications facilities.

We recommend that all authorized U.S. and foreign programming that is re-uplinked in Canada and intended for Canadian audiences use Anik or other Canadian telecommunications facilities.

We recommend that U.S. programming that is primarily intended for American audiences may be delivered into Canada using U.S. satellites, subject to the programming service being authorized by the CRTC and appearing on the commission's eligibility list.

We recommend that Canadian programming that is primarily intended for American audiences be delivered within the United States using U.S. satellites. However, any retransmission of such programming back into Canada should use Anik or other Canadian telecommunications facilities.

We further recommend that in the case of U.S. pay-per-view services using American satellites, those services that are authorized by the CRTC to be carried in Canada should be placed under a new category on the eligibility list. This new category would list all authorized U.S. services that can be distributed in Canada via DTH or satellite-to-cable on a pay-per-view basis.

The Chair: Thank you very much, Mr. Ignacy.

Mrs. Tremblay.

[Translation]

Mrs. Tremblay: Good afternoon, gentlemen. I'm going to move quickly to my question. It has to do with what you've written on pages 2 and 4 of the French text, which is probably found on the same pages of your English text.

You went before the CRTC, you exercised that right, and you asked for an exemption for possible Canadian pay-per-view suppliers. On page 3, you say that when you appeared before the Minister of Canadian Heritage and the Minister of Industry, you asked that service providers be permitted to start up as quickly as possible, with an exemption from the CRTC, and that licencing be required of suppliers who wish to use American satellites. Is that a proper summary of your presentation?

[English]

Mr. Ignacy: No. What we are proposing is that all DTH service providers, as an interim measure, use Canadian satellites pending the licensing.

Mrs. Tremblay: They all have to use Canadian satellites.

[Translation]

Do they all have to use Canadian satellites at all times?

[English]

Mr. Ignacy: If the government provides direction to the CRTC requiring the licensing of DTH and pay-per-view, it is Telesat's recommendation that the existing regulatory framework be used to accommodate the earliest possible entry of Canadian DTH services.

[Translation]

Mrs. Tremblay: Fine. Now, what difference would it make for the Canadian industry if the government authorized the companies, no matter which ones, to use American satellites rather than Canadian ones? What impact would this have on the Canadian industry?

[English]

Mr. Ignacy: On the Canadian satellite industry?

[Translation]

Mrs. Tremblay: Yes, of course.

.1645

[English]

Mr. Ignacy: As we noted in the beginning of our remarks, broadcasting represents for Telesat a very significant share of its revenues. If the government were to unconditionally authorize the use of American satellites, we believe we would lose a very significant portion of our business.

[Translation]

Mrs. Tremblay: Do you think that if the directive were implemented in its present form, and cable operators are unable to use American satellites, you will end up losing more money?

[English]

Mr. Ignacy: Mr. Lawson will try to respond to that question.

Mr. Len Lawson (Director of National Sales, Telesat Canada): If I understand your question correctly, you're asking if it's Telesat's concern that with this new directive to allow pay-per-view services off the U.S. satellites, the Canadian cable industry would then in turn apply for the same rights to keep a level playing field. Absolutely. That is one of the major concerns of Telesat Canada. Any change in policy that the CRTC uses for licensing of pay-per-view services could impact a significant part of the utilization that the Canadian cable industry would use for like pay-per-view services.

[Translation]

Mrs. Tremblay: What sort of situation can we expect if both companies are able to make a go of it? You mentioned earlier in your statement that you had worked on the emergence of digital video compression. What is the status of the two projects we are faced with? There is one project we are familiar with, it is supposed to come into effect on September 1st but the other one is still hypothetical since we haven't received any written material on it. We've heard about it but we haven't seen anything. The two technologies are supposed to be different according to the information we received.

It would be rather catastrophic if in the case of satellite television Canadian consumers had to go through the same problems they experienced with VHS and Beta video recorders because of the different technologies used by Expressvu and Power DirecTv, wouldn'it?

[English]

Mr. Ignacy: That sounds like an engineering question to me.

The Chair: I think it's more a Beta and VHS question. Does the consumer get lumbered with one particular technology and if he doesn't like the service he can't switch to the other company because he has to buy a whole new $1,000 installation?

[Translation]

Is that the question?

Mrs. Tremblay: Yes.

[English]

Mr. Don E. Weese (Vice-President, Engineering, Telesat Canada): That would be the situation, Mr. Chairman. I guess that's the nature of competition. Through ABSOC, the standards committee, which you may have heard of, we tried to set a standard, but, for example, DirecTv in the States was already up and operating while this committee was just meeting and arriving at its conclusions.

In order for these companies to go ahead in a timely manner, they must proceed with the equipment they've selected. But you're quite right; once someone has bought Expressvu's equipment, for example, they will not then be able to switch that equipment over and receive Power DirecTv's signals.

[Translation]

Mrs. Tremblay: So it's too late now? The company isn't even in existence yet and it's too late?

[English]

Mr. Weese: It's too late to make the two systems interchangeable, yes.

The Chair: Presumably there's a proprietary element there.

Mr. Weese: There is a proprietary element in both of the systems. In addition, the technology they've chosen is slightly different. There is a common element of technology. They both will be using MPEC-2 in the future. As time goes by, I believe the two systems will converge, maybe in three or four or five years, but for the first few years they will not be compatible.

Mrs. Tremblay: So the best thing to say to our friends is don't buy satellites in the next five years.

.1650

Mr. Weese: No, I didn't recommend that you should say that. Choose either system and I think it will give you very good service.

The Chair: You're agnostic, too.

Mr. Hanrahan.

Mr. Hanrahan: On page 2 of your text, it states that your first concern is that the draft orders in their current form will cause a further delay in the introduction of DTH services in Canada.

How long do you see this delay lasting?

Mr. Lawson: That will be dependent on the length of time the CRTC takes to go through the process of a formal licensing hearing and making an appropriate decision. It then depends on who the parties are that are licensed to ensure that they have their technology in order and get on with the introduction of services.

It could be a delay of three to four months, or it could be a delay of up to almost a year.

Mr. Hanrahan: Do you foresee the legal implications to companies delaying it even further?

Mr. Lawson: I hope it won't delay the introduction of a Canadian DTH service.

One of the key points and the major reason why Telesat introduced the exemption criteria in the first place was to speed up the process in getting a good Canadian competitive response to the threat of U.S. DBS service providers. The timing is critical. The window of opportunity for DTH in Canada is closing. The grey market activity in Canada increases on a day-to-day basis, and every time somebody today in the Canadian market subscribes to a grey market system, they are probably lost for a significant amount of time, for the same reasons we were just talking about, the differences in technology.

Mr. Hanrahan: You say that there are 1.2 million subscribers. How many would you guess are in the grey market?

Mr. Lawson: Today?

Mr. Hanrahan: Yes. You're saying that those are gone and we're not going to get them back.

Mr. Lawson: That's a tough question to ask, because there's no true measure other than through the flow of the hardware and technology across the border over the last number of months. However, we would guess that from a couple of hundred to a thousand systems are being sold every week as we progress, and that's very conservative.

It doesn't take very much to look around and determine that there is a thriving and active grey market in Canada. The Financial Post carries an ad almost daily about digital television with 150 channels. I can assure you that none of these signals are coming off our Anik satellite. If they're advertising in The Financial Post, which has a widespread distribution, then you can rest assured that there is a strong activity of grey marketing going on in Canada today.

Mr. Hanrahan: With your satellite, if the American satellites are permitted into the market, as would seem to be the case, it's going to have a direct effect on yourselves, as you state. What are we talking about here in terms of Canadian jobs and a loss of Canadian money to the United States?

Mr. Lawson: It's hard to quantify the direct impact on Telesat. I don't think it will have a major impact on the number of jobs lost at Telesat, as we've just gone through a restructuring to reflect our new reality. However, I believe it could have a significant impact on the Canadian production industry and the viability of a number of new pay and specialty services that have been launched. Perhaps that question would be better directed at some of the programmers who will come before you during the course of these proceedings.

Mr. Hanrahan: Could you venture an opinion in terms of Canadian production?

Mr. Lawson: I would be away out of line if I tried to get into somebody else's expertise as a carrier.

.1655

Mr. McKinnon (Brandon - Souris): Welcome, gentlemen.

Mr. Hanrahan linked into a few of the things I was going to talk about, but I'll pursue it a little bit further.

In order to get into this industry in a larger way in our country, is your company going to have to expand its hardware up there, or are you equipped to handle any number of signals that we send and then redirect back?

Mr. Lawson: We certainly can't handle an infinite number of signals, but we are definitely quite confident that we can handle all of the proposed service providers who desire to provide a Canadian DTH service, as well as accommodate the Canadian cable industry with the Head End in the Sky initiative they are launching this summer to counteract the threat of U.S. DBS services.

As our customers evolve to digital technology, the utilization of the satellite goes down significantly. DTH and the HITS initiative are the largest contributors to making up the difference in our utilization of our satellite. So they're very important to Telesat's utilization.

Mr. McKinnon: If I understand what you're saying, you are therefore able technically to meet any other player in that field, including U.S. hardware competition. In other words, you can do it just as well as your competitors can.

Mr. Lawson: I'm not sure if I follow your comment on hardware, but certainly we are in the process of evolving a new traffic plan that will accommodate Expressvu, Power DirecTv and the Canadian cable industry's objectives here vis-à-vis new service offerings, in pay-per-view in particular.

Mr. McKinnon: Mr. Chairman, I have one last question. We are a long way from getting a cluttered regime here in this industry we're looking at today. We know of two players. Perhaps there will be more in time.

We have talked about competition being a benefit to the consumer and a benefit to the industry as well. My concern, and why I am following this line of questioning, is that we not be limited by the ability of the traffic to be managed by your particular component of the industry.

Mr. Lawson: Was that a question?

Mr. McKinnon: That was a question. In other words, it's a long time until we meet the maximum capacity of your field.

Mr. Lawson: Certainly we believe with digital video compression we will be able to accommodate any foreseeable traffic that is proposed for any of these initiatives.

If you look at our satellites today, they look full, and in fact they are full for the first time in 25 years, but that really reflects the analog world environment we're in today. The large component of the Canadian broadcasting industry is moving to digital video compression, which will make room and accommodate the majority of these large applications coming forward.

Mr. McKinnon: You will be able to meet all of the services that the American - I used the word hardware, but you didn't seem to like that....

A voice: Competition.

Mr. McKinnon: What they are doing you'll be able to match.

Mr. Lawson: Again, we don't have an infinite capacity in our satellite. We are limited to the spacecraft that we have currently today, but we do believe we can certainly accommodate all the proposed new service providers, as well as other new business that we are continuing to develop for the information highway and issues like that.

The Chair: First of all, I have an announcement about House business. I gather from the opposition whip that the vote has now been delayed until 6:30 p.m., which means that after Mr. Ianno asks his questions, we will have a two-minute pause, bring on our next guests for about half an hour, and then give ourselves a bit of a break to grab something to eat. So we will vote at 6:30 p.m. and meet at 7:30 p.m. on the CBC. Does that strike you as a reasonable plan? Mr. Hanrahan.

Mr. Hanrahan: I have one very short but I think important question I would ask these witnesses before we go.

The Chair: Fine. Let me ask Mr. -

[Translation]

Mrs. Tremblay: Couldn't we just agree to have an hour to eat after the vote? The vote will be at 6:30 p.m.

The Chairman: Yes, we could delay the meeting. It would be best for us to meet...

.1700

Mrs. Tremblay: ...between 7:30 p.m. and 7:45 p.m., depending on when the vote ends.

The Chairman: Yes, it would be more civilized at 7:45 p.m.

[English]

Mr. McKinnon: Are we not to vote tonight?

The Chair: The latest intelligence, which will last about five seconds until they change their minds again, is that we'll now be voting at 6:30 p.m.

So the revised proposal to everybody - and I am sorry about this housekeeping matter, but people have to eat - is that we finish the last questions here and bring on our next guests and thank them. We would have a little break, and then after the vote perhaps we'd meet at 7:45 p.m. We would have a bite to eat after the vote, providing we don't do 267 amendments in the meantime.

Mr. Ianno: In terms of transponders, have you spoken to the Power DirecTv people about using your satellite for the Canadian programming side of their operation?

Mr. Lawson: Yes, we have.

Mr. Ianno: And do you have an idea of how many they would use?

Mr. Lawson: Yes. They have placed an order with us, which is customer confidential, but, yes, we have a firm idea of what they want.

Mr. Ianno: Roughly in the 3 to 6 range, possibly?

Mr. Lawson: In that range, yes.

Mr. Ianno: How many would Expressvu use? A similar number?

Mr. Lawson: Similar and more, yes.

Mr. Ianno: As they grow?

Mr. Lawson: Yes.

Mr. Ianno: In other words, what this would do is give you additional business.

Mr. Lawson: What it really does is make up for the loss of business that we are going to see with the migration of our analogue customer base to a digital environment.

Mr. Ianno: Which has nothing to do with any of what we are discussing, the DTH. Is that correct? That will happen, regardless.

Mr. Lawson: It will happen, regardless. The importance of the -

Mr. Ianno: That's immaterial to our discussion here.

Mr. Lawson: Well, we don't think it is. The importance here is that, in revenue impact and utilization impact on television, DTH will make up the difference of the utilization we will lose and will keep us viable.

Mr. Ianno: Right. You want this to occur immediately and you'd like as many as possible - correct?

Mr. Lawson: We'd like it to occur as quickly as possible because we believe the market is finite and is being eroded on a day-by-day basis.

Mr. Ianno: And you'd like more than one competitor, if possible, for your business purposes.

Mr. Lawson: What we would like is a long-term, sustainable, Canadian, successful DTH business. Whether that's one, two, three, or multiple players isn't as important as the long-term sustainability of a Canadian DTH business.

Mr. Ianno: So initially you'd like as many as possible - correct? You can't determine, from your crystal ball, which ones are going to survive.

Mr. Lawson: No, we can't.

Mr. Ianno: In other words, you'd like as many as possible.

Mr. Lawson: We would like to make sure - and this is within the purview of the CRTC, not Telesat - that the number of DTH services that are licensed and/or move forward will have a chance at surviving, or that at least one strong company will emerge in the end.

Mr. Ianno: Did I understand correctly that you were in agreement with the CRTC agreement more because you felt that maybe they were doing it on the basis of having one competitor that would have long-term sustainability?

Mr. Lawson: No, I don't think that at all. When I looked at the exemption criteria, I don't think they said there would be only one. I think anybody could have applied under the exemption criteria that Telesat proposed.

Mr. Ianno: Were there many applications?

Mr. Lawson: To the best of my understanding, a number of different companies took a run at the DTH business, but it evolved into one company in the name of -

Mr. Ianno: So there were many but eventually all of the many became one?

Mr. Lawson: No, some dropped out and some new players joined the group.

Mr. Ianno: But in effect all of the potential group became one.

Mr. Lawson: There were three potential groups and some of the factions of those potential groups became one, yes, and the others dropped out.

Mr. Ianno: To put that into perspective, they're happy with that, because at least then we have sustainability because of the lack of competition.

Mr. Lawson: Providing they get up and running soon, yes, we have a good chance of -

Mr. Ianno: What does soon mean to you? September 1, or possibly January 1? Are those the same?

Mr. Lawson: Certainly we feel that a Canadian DTH business has to get up and running in 1995, and the sooner the better.

Mr. Ianno: As you may have heard, the CRTC is saying that possibly, instead of on September 1, they might begin either in December 1995 or in January 1996, thereabouts.

Mr. Lawson: If the order retroactively takes away the exemption criteria, then, yes, that's possible.

Mr. Ianno: Were you part of any of the discussions of all the different players who were going to form one group?

Mr. Lawson: I participated in and out with many of the groups discussing market potential, the satellite services...

.1705

Mr. Ianno: Was it done by the suggestion of any of the other players, either the CRTC or yourselves, so that everyone would go towards one player so that in effect your underlying point of sustainability would be achieved?

Mr. Lawson: I don't recall there ever being a restriction on one player or multiple players.

Mr. Ianno: No, I mean a suggestion, not a restriction. Was there a suggestion that basically the groups all get together and do one as compared to many so that way sustainability would be the ultimate goal?

Mr. Lawson: No, I don't recall that. I think what we found was that some of the groups found a common interest and because their own market research indicated the size of the market that -

Mr. Ianno: How would they have known about the common interests if at the beginning stages of the DTH they may have all considered doing it on their own? Where did the discussion go from there in terms of trying to marry the various interests?

Mr. Lawson: Well, there were numerous discussions between interested parties that Telesat, of course, wasn't privy to. This was a business decision. Telesat's role in promoting DTH was to get somebody to step forward and do this. We took a broad business plan and flogged it to the whole marketplace and out of that activity and other people's activities evolved these different factions.

Mr. Ianno: So in effect Telesat was like a catalyst to getting these groups together?

Mr. Lawson: We'd like to think we were a catalyst to getting the concept out that Canadian DTH was a viable business proposition.

Mr. Ianno: When some of the individual players were not viable on their own, were they steered in a certain direction with others who may have been interested who may not have been able to do it on their own?

Mr. Lawson: Certainly in my minimal travels around the industry, it became evident that there was a number of players who had common interests. With each player's permission, I managed to -

Mr. Ianno: Marry them?

Mr. Lawson: Well, I don't know that I married them, but I certainly got them talking to each other.

Mr. Ianno: So then since you were instrumental with all of these individual companies in putting them together and now all of a sudden Power DirecTv appears, which is not part of the group you communicated with, does that cause problems for you?

Mr. Lawson: Not at all. We have been as supportive as possible to Power DirecTv's application, with the exception, of course, of the changes in the pay-per-view policy for DTH.

The Chair: I'm afraid I'm going to have to give the last question to Mr. Hanrahan and then we have to change the cards again.

Mr. Hanrahan: I'm following along the same lines as Mr. Ianno. You spoke earlier of a window of opportunity and the time element here. Mr. Ianno had mentioned December 1 and January 1. With the growth of the grey market you spoke of earlier, and if we spend more and more time with committees such as ours and the CRTC and everybody else investigating this and possible legal positions, could we in fact reach a point where this all becomes redundant because the Americans have taken over, once the window closes?

Mr. Lawson: That's a legitimate and real concern of Telesat Canada. If we don't get on with this business in a timely manner, the size of the market that remains for the legitimate Canadian operators here will not be enough to sustain a long-term DTH business.

I have no doubt that one or multiple companies will attempt to get into the Canadian DTH business. But I am very concerned, and this goes back to my experience in the 1980s with grey marketing and satellite programming theft that happened in the late 1980s when there was a compromise in some of the scrambling technologies.

Mr. Hanrahan: Right. Thank you.

The Chair: So today another 150 satellites were bought.

[Translation]

Mrs. Tremblay: I'd like a very small clarification. Are there agreements between Canada and the United States about the reciprocal use of our satellites?

[English]

Mr. Ignacy: Yes, there are. There's a diplomatic understanding between Canada and the United States such that domestic telecommunications traffic shall be carried on domestic satellites. There is also an understanding on how cross-border traffic is to be arranged between the two countries.

[Translation]

Mrs. Tremblay: Thank you.

[English]

The Chair: Thank you very much for dealing with a very complex subject. As you can hear, we're struggling simply to understand the technology. I sometimes think you are, too. It's fascinating stuff and we thank you for your presentation.

.1710

Again, we'll take a two-minute break to allow this group of witnesses to go, with our thanks, and to welcome the next ones.

.1711

.1715

The Chair: Everyone is more or less back in place. Ladies and gentlemen, as we take our places, I want to welcome our witnesses.

[Translation]

This afternoon, we will be hearing from two associations: first of all, the Société des auteurs, recherchistes, documentalistes et compositeurs, SARDeC, and then, the Société professionnelle des auteurs et compositeurs du Québec, SPACO. We will allot roughly seven minutes for each group and after that we will proceed with questions. I invite the representatives of SARDeC to begin.

Mr. Yves Légaré (Executive Director, Société des auteurs, recherchistes, documentalistes et compositeurs): Good afternoon. I'm accompanied by Marie Cadieux, a member of the board of directors, who will read our brief on the draft orders.

Mrs. Marie Cadieux (Member of the Board of Directors, Société des auteurs, recherchistes, documentalistes et compositeurs): Good afternoon ladies and gentlemen, and thank you for allowing us to appear.

Established in 1949, the Société des auteurs, recherchistes, documentalistes et compositeurs has some 750 members. It has signed collective agreements with the Association des producteurs de films et de télévision du Québec (APFTQ), the CBC, the NFB and Radio-Québec. Its members write or provide the content for hundreds of hours of television, radio and film every year, both for independent producers and direct to broadcasters. The authors it represents are the originators of the most successful programs on French-language television.

SARDeC considers that the Canadian broadcasting system should continue to "safeguard, enrich and strengthen" our cultural sovereignty and identity, as the Broadcasting Act provides. Any new CRTC broadcasting policy should be designed to augment, the country's cultural sovereignty and identity.

The government accepted this principle when it calls for public representations on Order PC 1994-1689, which resulted in the CRTC's public hearings on the information highway in March 1995:

It is critical that the new policy framework strengthens support mechanisms for the Canadian cultural sector. Under the present regulatory environment, the Canadian cultural sector relies heavily on the Canadian broadcasting sector for support, primarily to the broadcasting sector's canadian content exhibition and expenditure obligations. The challenge will be to modify the existing support mechanisms, if necessary and develop new ones, which together will ensure that the existing level of support for the Canadian cultural industries and the availability of Canadian content is, at a minimum, maintained.

This approach should also be applied to the CRTC's policy to programming undertakings and direct-to-home satellite distribution undertakings.

SARDeC considers that the following principles should shape the CRTC's policy on DTH distribution:

- any DTH satellite distribution undertaking, and any pay-per-view television programming undertaking that provides service through a DTH satellite distribution undertaking, should respect existing rules on Canadian ownership.

- any DTH satellite distribution undertaking, and any pay-per-view television programming undertaking that provides service through a DTH satellite distribution undertaking, should have to be licenced by the CRTC.

- DTH satellite distribution undertakings, and pay-per-view television programming undertakings that provide service through a DTH satellite distribution undertaking, should respect the objectives of the Broadcasting Act and make a net contribution to the Canadian broadcasting system, rather than simply supplanting existing Canadian services.

- cross-media ownership (i.e. ownership of cable distribution undertakings by owners of DTH satellite distribution undertakings and vice versa) should be prohibited.

- DTH satellite distribution undertakings should be subject to regulatory obligations equivalent to those binding on Canadian distribution undertakings, particularly in the area of production and distribution of Canadian content of a cultural nature.

.1720

- Pay-per-view television program undertakings that provide service through a DTH satellite distribution undertaking should be subject to regulatory obligations equivalent to those currently binding on Canadian pay-per-view programming undertakings, particularly in the area of production and distribution of Canadian content of a cultural nature.

- Any DTH satellite distribution undertaking should provide service everywhere in Canada, in both official languages.

- DTH satellite distribution undertakings should transmit all Canadian programming services intended for the national market via Canadian satellites.

- Finally, SARDeC believes that the CRTC should ensure that DTH satellite distribution undertakings allow for equitable access to Canadian programming services and that the programming services allow for equitable, non-exclusive access to the suppliers of Canadian programming.

The government is proposing, via the orders under discussion here, to give directions to the CRTC on the policy the latter should follow in the area of DTH broadcasting. The orders reproduce the wording of the recommendations of the task force on DTH satellites, issued in April 1995.

To an extent, the government's proposals are compatible with the SARDeC policies set out above. However, major elements have unfortunately been left out, including those to do with cross-media ownership and the obligation to transmit Canadian programming services via Canadian satellites.

The prohibition of cross-media ownership as proposed by SARDeC would offer more of a guarantee that true competition could start to emerge in television services distribution. The government's draft directions to the CRTC make no reference to this.

The obligation to transmit Canadian programming services intended for the national market via Canadian satellites would make Canadian installations more profitable and ensure that the CRTC had the power to monitor Canadian content. Unfortunately, the government's draft directions make no reference to this either.

In addition, SARDeC is concerned about the way the government is making use of its power to give directions to the CRTC. SARDeC does not contest the right of the Governor in Council to "issue to the Commission directions of general application on broad policy matters with respect to any of the objectives of the broadcasting or regulatory policy", pursuant to section 7 of the Broadcasting Act.

However, SARDeC is concerned that the draft Orders are very specific and narrow, rather than being "of general application" as the Act requires. The wording of the two Orders is so detailed that they suggest the government itself wishes to manage the process of licensing undertakings in the area of DTH satellite distribution, instead of leaving this to the CRTC.

SARDeC fears that the proposed directions would have the effect of ending the authorization currently enjoyed by the Expressvu consortium to operate a DTH satellite distribution undertaking. This consortium, in good faith and relying on a CRTC exemption order, has gone ahead with a service slated to come on the market in September 1995. Despite serious reservations about the use of exemption orders in the are of DTH satellite distribution, SARDeC considers that in this instance the order contains enough safeguards for its policy on DTH satellite distribution to be appropriately respected. The safeguards include obligations vis-à-vis Canadian ownership, the distribution of Canadian programming services authorized or exempted by the CRTC, the use of the list of eligible satellite services with respect to any non-Canadian programming service, the combining of Canadian and non-Canadian services, a preponderance of Canadian over non-Canadian programming services, and the use of Canadian satellites.

Accordingly SARDeC considers that this CRTC exemption order should remain in effect until such time as CRTC has an opportunity to authorize other services by licensing. Otherwise, the Expressvu consortium would be subject to retroactive regulation by the CRTC, on the government's directions. In our opinion, that would be a very dangerous precedent.

.1725

Thank you.

The Chairman: Thank you, Mrs. Cadieux. We will go to the SPACQ right away.

Mrs. Francine Bertrand-Venne (Director General, Société professionnelle des auteurs et compositeurs du Québec): The SPACQ is the professional association to which most of Quebec's authors and composers belong. Our members are the people who write the really current music and lyrics you hear, both for the recording industry and for sound tracks to original audio-visual works. Our organization was created to study, promote and protect the economic, social and professional interests of its members. SODRAC is the Société de droit de reproduction des auteurs, compositeurs et éditeurs de musique du Canada, and I am happy to be here today on behalf of these two associations.

We are pleased to be able to contribute to the formulation of a policy on the introduction of DTH satellite transmission.

It is an opportunity for us to reiterate our concerns about this new service that is the subject of the orders relating to the government policy.

In our opinion, you should be more concerned about monitoring the entire legal and regulatory framework of the CRTC in light of the introduction of DTH satellite transmission rather than dwelling on the legality of the orders. In fact, the exemption granted to ``Expressvu'' was an error because subsection 9(4) of the Broadcasting Act authorizes and exemption only in the case ``where the commission is satisfied that compliance with those requirements will not contribute in any material manner to the implementation of the broadcasting policy (...)''. In our view, DTH satellite transmission, by its very nature, will have a major impact on our broadcasting system.

Because the exemption preceded the review of a general policy on the introduction of DTH satellite transmission and because the wording of the order is very specific, stakeholders are forced to look into the legality of the order rather than formulating the general policies that should be the subject of current discussions.

Lyricists and composers want guarantees that the new technologies will be complying with the Broadcasting Act and expect the Canadian Parliament not to turn a blind eye to this and allow services that will be exempt from CRTC rules to penetrate our marketplace.

Since copyright and the use of works by Canadian creators are intimately connected, it is vital for the people who create Canadian and francophone musical content to keep a close watch on any new methods for distributing Canadian programming. The Broadcasting Act must continue to apply, despite all these new technologies. Canada has legislation that supports its citizens, both as individual creators and in the form of cultural industries.

Broadcasting satellites should be subject to the same act as other broadcasting undertakings. The legal framework protects Canadian ownership and content.

Section 3(e) reads as follows:

each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming.

Section 3(f) reads:

Each broadcasting undertaking shall make maximum use, and in no case lessen predominant use, of Canadian creative... resources in the creation and presentation of programming...

Section 3(d)(iii) reads:

Through its programming and the employment opportunities arising out of its operations, [it shall] serve the needs and interests, and reflect the circumstances and aspirations of Canadian men, women and children, including equal rights [and] linguistic duality...

Section 3(k) reads:

A range of broadcasting services in English and in French shall be extended to all Canadians as resources become available.

It is obvious that the Broadcasting Act clearly establishes serious requirements for programming undertakings that are designed to encourage this country's creators. To date, content policy has enabled Canadian creators to carve out an acceptable place for themselves in Canada's cultural landscape. Quotas have been set: 30% of musical content for radio stations and 65% of francophone content for French-language stations. Conventional television has to carry 60% Canadian content and there are varying quotas for pay and specialty television channels.

In addition, broadcasters are required to assist Canadian talent by making a voluntary contribution toward the creation of Canadian productions. Agencies that support the production of sound recordings, such as FACTOR and MUSICACTION, are the results.

In its 1986 cable television regulations, the CRTC required cable companies to carry a majority of Canadian programming in comparison with foreign services with four conditions:

1) priority to be given to the distribution of Canadian radio and television programming services in relation to the distribution of foreign services;

.1730

2) the total number of Canadian radio and television services in relation to foreign services in the overall supply of programming services to be predominant;

3) restriction on the number and type of foreign services permitted for distribution;

4) assembly rules for programming services, particularly the ratio of one Canadian service for one foreign service, in the case of specialized services.

Moreover, cable companies were encouraged to contribute toward the production of Canadian works, as the CRTC put it, to create distinctive and truly national programs with which Canadians can identify.

It is thus indisputable that the whole policy formulated pursuant to the Broadcasting Act has served to create structures that have been of significant importance for Canadian culture. Creators, performers, producers, and broadcasters have been able to benefit directly from these regulations. It is vital that they not be allowed to disappear with the introduction of a new technology like DTH satellite transmission.

The principle of business competitiveness is all well and good, but what about the competitiveness of Canadian creations and the survival of our culture? The success of works by the members of FPACQ and the SODRAC proves that they have generally been able to deal with healthy and evenhanded competition. They merely want to point out that the Canadian ownership and content policies set out in the Broadcasting Act have enabled them to develop expertise of international calibre and to be heard in a way that allows them to provide cultural variety in the range of programming carried by Canadian broadcasters.

The Canadian Conference of the Arts recently sent us an internal U.S. Government paper that described one of their strategies and mentioned that

the American Government had clearly launched a direct attack on countries that were trying to enforce national regulations on broadcasting, communications and telecommunications, content, intellectual property and copyright.

Will we have the political courage to stand up to our American neighbours?

We hear the expression ``North-American rights'' - that is the danger, since the Americans frequently only recognize their own rights and they are far from acknowledging that copyright is intellectual property. They tend rather to consider works as commercial property. It was this reasoning that led Mickey Kantor, U.S. trade secretary, to draw up a list of reprisals in a number of areas of the Canadian economy during the Country Channel dispute.

In conclusion, DTH satellite distribution undertakings should be subject to Canada's Broadcasting Act in its entirety. Business competition does not worry creators, except if an undertaking that was applying for a license managed to evade the Canadian content and ownership policies, in which case the creative people would consider that they had been seriously harmed and would object vehemently to such a service request.

Finally, the new services must not mean increased distribution of American programming. Creators need to be supported by measures that will guarantee them a significant and special place in the universe of these new technologies. We view the quotas and various rules regulating content not as convoluted restrictions but rather as an assurance of cultural diversity.

The members of the SPACQ and the SODRAC want the culture that they communicate in their works to be an ongoing concern of their country's politicians and demand that the debate go far beyond business competitiveness and focus on the survival of Canadian culture and its respect for linguistic duality.

We want a DTH undertakings to be subject to the same rules as other cable operators, and we want to be sure that regulatory systems are equitable for all distribution undertakings.

We hope that maintaining our culture will be an ongoing concern in the decisions you will have to make and that your obligations to the creative people of this country will evolve into a framework that will enable them to compete with creators around the world. Their talent is beyond doubt; the only thing that remains to be done is to promote the distribution of their works.

.1735

It's the responsibility of the Canadian Parliament to safeguard our cultural sovereignty.

The Chair: Thank you, Mrs. Bertrand-Venne.

Mr. Leroux, you may ask your questions. You have approximately six minutes.

Mr. Leroux (Richmond - Wolfe): First of all, I'd like to thank you for your presentations. In both texts, the remarks are very clear.

I'd like to make a comment, Mr. Chairman. I hope that you don't always welcome your witnesses in this way. MPs who are not interested don't have to stay here. I thought I felt, at a certain point, more or less interest on the part of one of the MPs around the table. If Mr. Ianno is not interested, he doesn't have to remain here. I would hope, Mr. Chairman, that this is not the usual way of welcoming witnesses. I find it offending.

As to the two texts, I'd like to make a first comment.

[English]

Mr. Ianno: I have a point of order. Mr. Leroux, you come in just now after we've been hearing presentations all day. The presentations are normally supposed to be for ten minutes. This is for us to have the opportunity of asking questions so we can get the most out of the witnesses in terms of helping us to understand the issue. As you came in and did your grandstanding, especially when I'm looking at some other matters, I think you should use your own discretion as to how we're dealing with this issue.

The Chair: In the interest of time, I suggest we proceed directly to the questions.

[Translation]

Mr. Leroux: I also sit on other committees and when there are witnesses, I listen very carefully to them, no matter how many hours I have to spent at a committee.

This being said, from SPACQ's presentation I would emphasize a paragraph that seems particularly important to me:

Because the exemption preceeded the review of a general policy on the introduction of DTH satellite transmission and because the wording of the order is very specific, stakeholders are forced to look into the legality of the order rather than the formulating of general policies that should govern the discussion about the issue.

In your opinion - and I'm asking both associations this question - , is the autonomy of the CRTC called into question concerning the draft decrees before us?

The Chair: We'll forget the first association and move on to the SPACQ?

Mr. Leroux: I'm asking both associations because the information and analysis of both seem to be very similar in certain respects.

Mr. Légaré: If there's an element we want to emphasize in our brief, it is our fear of the orders threatening the CRTC's independence, we think that the orders are much too specific. The CRTC must, to ensure the survival of the regulatory framework, have elbow room.

One of the reasons we're defending that regulatory framework is that for us, the entire broadcasting system is based on balance. With the globalization of markets, the information highway, as the audiovisual landscape opens up, we must make sure that that which allowed the development of our broadcasting system be preserved.

There is, of course, the matter of government investments. We know how threatened these investments are these days. There are the cultural institutions such as Radio-Canada/CBC. We know how threatened these institutions are. There's the matter of Canadian content quotas. There is, of course, the organization in charge of licencing the operators of this broadcasting system.

Up until now, that organization was the watchdog of our system and it must continue to be one. The government has the right to intervene, and that's what we also say in the document, but not necessarily in the way it is intervening presently. The exemption granted Expressvu normally goes against our position. We prefer licences.

However, in the CRTC's exemption, there was significant obligations which contributed to the Canadian Broadcasting system. That's why we say that the exemption can be maintained. The order doesn't have to be made to measure.

.1740

Mrs. Bertrand-Venne: I'd like to answer that. I wanted to clarify the problem. I was interested in hearing this gentleman earlier, who was concerned about the battle between the CRTC and the governor in council. Each one has made a mistake. Expressvu asked for a licence and got an exemption. The governor in council, according to the two companies I represent, should always issue policies on ``broad policy matters''.

In our opinion, the order is too specific and leads us to argue over the legality of a semi colon, the competition among undertakings. We're here to say that the Broadcasting Act and the CRTC, which is a good regulatory organization and which has protected us as Canadians, should be maintained. It was to set things straight by stating that both organizations, the CRTC as well as the governor in council, may have made slight mistakes, in our opinion. It was just to balance things out, but for us, it's important that the CRTC stay more objective in its decisions.

We'd like the governor in council to recomit the CRTC to protecting Canadian content and Canadian ownership of undertakings.

Mr. Leroux: In SARDEC's document, there are nine principles which are very well stated. Do you grant equal importance to these nine principles? Do you think that there's one that is more important than the others or, for you, are they a block on which to base the policy?

Mr. Légaré: Yes, it's a block we must base the policy on. We think that it's the only way to reeinforce cultural identity and preserve it. It's hard to take out an element.

For instance, we mention cross-ownership. It's difficult, if we allow cross-ownership, to ensure that our system will be impervious to these problems. Obviously, we can think of limiting cross-ownership - which is the case presently anyway - , which is to say making sure it never goes beyond a certain percentage which might be 20% or less. If we look at all these principles together, it's very difficult to take one out and to think that things will remain the same.

Concerning Canadian satellites, for instance, it's obvious that we have more control over DTH's if we use Canadian satellites rather than American satellites.

The Chair: Unfortunately, our six minutes have become seven minutes.

[English]

We'll go to Mr. Hanrahan.

Mr. Hanrahan: Thank you, Mr. Chairman.

Thank you, panel, for your attendance and your information today.

If I understood the previous questioner, he was asking about a delay in the whole process to study it a little more before we take the great leap, so to speak, in terms of orders and so forth. The previous witnesses suggested that in fact the longer we delay in making decisions in these areas the greater the grey market becomes, and we may be running into a situation where it all becomes a waste of time anyway, because the United States will have taken over through the grey market. Do you see some contradiction in the suggestion of delay and study and the increasing intervention of the Americans in the Canadian market?

[Translation]

Mr. Légaré: In so far as we consider that the exemption granted to Expressvu should be maintained and that that company can operate its system, the time frame to study the overall DTH policy shouldn't cause a problem.

If an organization like Expressvu, which was granted an authorization by the CRTC, can open its doors little by little, the grey market will have an alternative, whereas if licencing overall is delayed and Expressvu is delayed while we're making up our mind, the risk is that American systems, which are presently being sold at a rate of 10,000 per month apparently, will become hegemonic and won't leave any room for Canadian systems which will appear later.

.1745

[English]

Mr. Hanrahan: So you're saying let Expressvu go as of September 1, as was intended. No delay for Power; when they are ready to come on stream, let them come on stream, if they come on stream, and let's get on with it. If studies are necessary in the interim, then we'll do that.

[Translation]

Mr. Légaré: In Power's case, there must be a request for a licence, which is either granted or not by the CRTC.

Mrs. Bertrand-Venne: All people who request a licence and who are involved in the broadcasting and distribution of programming must obey the same rules. That's important to us. We're not here to discuss competition between undertakings. We want all the undertakings to follow the same rules.

Earlier, Mrs. Tremblay was worried about the situation between cable companies and direct to home satellite undertakings. It's the same problem as the convergence between telephone companies and cable companies. We, representing the creators in this country, say that concerning the business side of technology, they can handle it amongst themselves. As to the problem of using a Canadian satellite or an American satellite, for example, we've been told by Canadian satellite promoters that with these satellites, we'll be able to reach Canadians in much more distant areas than if we used American satellites.

The creators in this country want to say to you that there must be a level-playing field for a, healthy and fair competition. To have healthy and fair competition, all must obey that law. That is what is important to us.

Mr. Légaré: Let's make sure we understand each other. We are not here to decide between Expressvu and Power DirecTv. What matters to us is to know whether those who request licences or those who operate services will bolster the Canadian system. Will they contribute to making sure that the works of the creators we represent will be seen or will they allow the Americans to take over?

If, in a way, we consider that the exemption granted to Expressvu is satisfactory, it's because the obligations tied to that exemption lead to a bolstering of the Canadian system and greater Canadian cultural content. That, and not chosing between two competitors, is our only purpose.

[English]

Mr. Hanrahan: I see your point.

The other question I have is on what you are speaking of, Canadian production. With the satellites and the cable systems and so forth, and the 500-channel universe, do you see that in light of this great delivery system we're going to have a very limited production system and that is an area we might want to be looking very seriously at, in terms of artists and whatever? How would you suggest we could increase that?

[Translation]

Mr. Légaré: It's obvious that if we enter the 500-channel universe, which would cause an explosion in competition, and if we don't give our producers, be they public or private, the means to rival that competition, our productions will disappear from the air waves. As to Quebec, given the success of our television productions, given the ratings we have had up until now, given the fact that 43 of the 50 most watched programs in Quebec are not American programs but rather Quebec programs, we think we'll be able to compete with the 500 channels universe.

Will they be 500? Will they be 200 or 300? We think we'll be able to compete in so far as we have enough money to produce quality productions and to offer the public a wide enough range of choice to attract it.

[English]

Mr. Hanrahan: Where would that money come from?

[Translation]

Mr. Légaré: We think that those who will be granted licences to operate channels should contribute in the same way as the cable companies were recently forced to contribute to the Canadian broadcasting system. We think that broadcast satellite operators should contribute in a significant way.

One of the problems of the Canadian broadcasting system is that it waited a long time before requiring contributions from cable companies and those who are now coming on to the market, the DTH undertakings.

.1750

The people who get Canadian content on the air must contribute to the formulation of this content, its production and they must do so in a significant way.

[English]

The Chair: I'm afraid I have to intervene at this point and turn it over to Mr. Ianno.

Mr. Ianno: When I asked about the length earlier, I did it so that you could summarize, so we'd have more opportunity to have this great discussion. It was not intended to insult you in any way. So if you misinterpreted it, it was not meant on that basis.

Mr. Hanrahan: They didn't misinterpret it.

Mr. Ianno: I understand that but I just wanted them to be clear. Thank you, Hugh.

I would have thought that from your perspective in terms of supporting your membership, the artists, you'd come here and go more towards the latter statements you just made, which are how we get Canadian content regardless of who sends the signal. I probably would not have spent as much time on whether the broad policy is what cabinet is referring to, or if it's legal, or if it's exempting, etc. I think the important part of what we're trying to determine, aside from everything else that cabinet has discussed in the panel, is the statement that 5% of gross revenues go toward production so your artists can continue working and can continue producing the good work that they do.

In terms of the same rules of the game, I would also have put more emphasis on that, so that all the cable companies, the direct-to-home satellite groups, the broadcasters, etc., contribute to something that would enrich our Canadian content.

Having heard from you in terms of exemption versus licensing, I don't know if exemption means paying or not. Maybe you have more insight, but I heard you say something to the effect of licensing and paying for it. Yet if we go with your earlier statement, which was to allow this exemption to continue, where is the payment side coming from?

[Translation]

Mrs. Bertrand-Venne: With the exemption, is there an obligation?

Mr. Légaré: Yes, with exemptions, there are obligations to contribute to Canadian content. As to the percentage of revenues, we consider that 5 per cent is greatly insufficient. Moreover, as with the other organizations who submitted a brief concerning the order, the Directors Guild of Canada, the Writers Guild of Canada, we think that 10 per cent of gross revenues will be much more satisfactory. If we dwell on present contributions to local television stations, we notice that they're closer to 20 per cent than to 5 per cent. In those cases, it's a matter of net revenues.

Mrs. Bertrand-Venne: We didn't want to say anything concerning disputes between companies.

[English]

Mr. Ianno: Excuse me. Were you saying net revenues?

[Translation]

Mr. Légaré: I was speaking of 10 per cent of gross revenues.

[English]

Mrs. Bertrand-Venne: That means gross.

Mr. Ianno: Because it could be a lot less. I mean Forrest Gump is still not collecting any -

Mrs. Bertrand-Venne: No. We understand that.

Mr. Ianno: Another part of the statement caught me a bit off guard. You say that the wording of the two orders is so detailed that the orders suggest the government itself wishes to manage the process of licensing and of undertakings of DTH satellite distribution instead of leaving this to the CRTC. Do you really believe this?

Mrs. Bertrand-Venne: The way it is worded, yes.

Mr. Ianno: So you really believe that cabinet wants to start dealing with licensing -

[Translation]

Mrs. Bertrand-Venne: We find the order too specific. We expected the Governor in Council to make general policy recommendations for the introduction of this new technology rather than being very specific and forcing us to come and speak to you on the points of the order which are very specific. We are dealing with Parliament and we expect that you have recommendations to make to the regulatory organization, in accordance with the spirit of the act.

[English]

Mr. Ianno: And don't you think that the cabinet, by stating that they want competition and giving an equal footing to all potential competitors, has stated a form of broad policy?

Mrs. Bertrand-Venne: No, it's a very nice -

Mr. Ianno: Is it broad policy or is it specific?

.1755

Mrs. Bertrand-Venne: I'll waive my right to speak French so you can have a better understanding of what I'm trying to say. It's important that you understand.

What we're trying to say here is that the content should be just as important to you. The cultural aspect of what we're talking about today is just as important as the businesses. We have nothing against the businesses themselves. It's just that they should all be submitted to the same law.

Mr. Ianno: Right; so when cabinet just states that the broad policy is that there should be competition and it should go back to the CRTC to determine, along with all the parameters the CRTC believes to be important, for example Canadian content, that is up to the CRTC to determine, and that is more specific, versus the broad policy picture. Correct? In other words, the cabinet was suggesting that the CRTC continue in its role of determining the specifics. It was not that the cabinet was going to state all aspects, which you of course alluded to: that it did not refer to them.

Mr. Hanrahan: The Reform Party position.

Some hon. members: Oh, oh!

Mr. Ianno: So what is the Reform Party position on that, for you? Is it broad policy or is it specific?

[Translation]

The Chairman: This is not a debate but a dialogue with the witnesses.

Mrs. Bertrand-Venne: We came here to defend Canadian content.

Mr. Légaré: We can understand that the government hoped to promote the principle of competition. To our mind, although competition may be desirable, it is not an objective in itself. The objective is the Broadcasting Act and the Canadian content. The competition between Expressvu and Power DirecTv...

[English]

Mr. Ianno: And that's what the CRTC will determine.

[Translation]

Mr. Légaré: ...may have some advantages for the consumer. Perhaps we should question the competition that will exist among creators and within the broadcasting industry. Our objective is not the same at that level. In the past, it has happened that we hoped for government intervention. When the CRTC issued certain licenses which, in our opinion, did not impose sufficient Canadian content, Shaw Cablesystems, COGECO and many creators and artists asked that they be reviewed.

In accordance with the legislation, the government said: ``Review your decision''. However, the government did not say: ``Review it and here are the exact parameters that you must use.'' The government let the CRTC review its position as a regulatory agency. It was significant at the outset that it asked that the decision be reviewed. We're wondering whether the government isn't going further and being too specific in its decrees. Instead of doing the work of the CRTC, it should ask the CRTC to redo its work. This is not the government's job.

Mrs. Bertrand-Venne: You were somewhat distracted when I spoke earlier. I said that Expressvu's application was a license application and it was given an exemption. That may be where the Governor in Council...

[English]

Mr. Ianno: The last couple of points are just for clarification. About the grey market, how long has the grey market existed, according to your information?

Mr. Légaré: According to my information, maybe for one year.

Mr. Ianno: The grey market?

[Translation]

Mr. Légaré: Apparently, 40,000 dishes are available in Canada right now.

[English]

Mr. Ianno: Mr. Chairman, do you have the number? Do you remember it?

The Chair: No. I was going to say I would have thought the grey market, if we understand that as not a fully licensed Canadian service but not illegal...I think that's ten or fifteen years.

Mr. Ianno: That's right. In other words, it has been ten or fifteen years, and what we're talking about is that the CRTC, Keith Spicer, has indicated to us that aside from the September 1 date, if they have to license, it might be probably December 1995, which means another three months.

I guess the other question I would ask you is this. From September to December, what is the rate of growth in the grey market to make you so concerned about that taking over the system and, as Hugh from the Reform Party has stated, that possibly making it not worth it for these other companies?

Hugh, do you believe possibly Expressvu will cancel its application because of the delay from September to December, because it's no longer viable?

Mr. Hanrahan: I think we should allow the analysts to speak. Mr. Ianno and I can discuss this privately afterwards.

The Chair: Thank you.

[Translation]

Mr. Légaré: There are two questions here. We understand that the grey market will increase by 10,000 additional dishes per month, but that's not the real issue.

There is another principle that is applied retroactively. It's a decision concerning an organization which acted in accordance with the law when the exemption was obtained.

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It bothers us more than the grey market, which is secondary. That data is interesting, but for us, it is not desirable. These are opposing principles. Yes, we hope that everyone will get licenses. That's a principle. Yes, we hope that when an organization or a company has respected the criteria set out in the application and obtained what it asked for, a decision should not be applied to it retroactively. That's an important principle.

[English]

Mr. Ianno: It asked for a licence, not an exemption. That wasn't what it asked for. Correct? So it didn't get what it wanted.

The Chair: I'm going to intervene, because I see -

[Translation]

one last question by Mr. Leroux and I would like to ask one last question myself.

Mr. Leroux: If there was a legal imbroglio between the government, the CRTC and Expressvu, what would be the consequences?

Mrs. Bertrand-Venne: People made mistakes and this is what is delaying the implementation of this service. It's unfortunate, because it's always the content that suffers. The creative talent in this country is waiting, business people are in the grey area, but creators also find themselves taking action so that licencing policies and so on are not debated in the proper forum. We're here before you and we should be before the CRTC to debate these licences for different companies. This places the discussion in the wrong forum.

Mr. Légaré: One can wonder whether this may not adversely affect the effectiveness and function of the operational framework. Given the importance of this framework, that's unfortunate. We think that the rules of the game must be clear so that the system can be maintained.

The Chair: My last question is about the distinction between the position of SARDeC and that of SPACQ. I do see a distinction. If I understood Mrs. Bertrand-Venne correctly, according to her and SPACQ, both the CRTC and the government were wrong, that there were errors on both sides and the only solution is to force all stakeholders to follow the licencing process. You will put everyone on an equal footing.

SARDeC has a few reservations about the exemption but putting everyone on an equal footing would not be a solution. It's been said that Expressvu can continue to live with the exemption whereas Power DirecTv should take a harder road, the licencing road. There is no equality. Is this the distinction that should be made between the two organizations I have before me?

Mr. Légaré: It's true that in our opinion, the point is not to put everyone on an equal footing. With regard to competition, they may not all be on an equal footing. We think that Power DirecTv will undoubtedly be in a position to react strongly. What seems to us less dangerous in the exemption, are the obligations. What seemed dangerous to us in Power DirecTv's application was the question of cross-media ownership, the use of American satellites and the contribution of pay-per-view television. Could Canadian pay-per-view systems be as accessible as one would wish on Power DirecTv? In that sense, we're not talking about putting everyone on an equal footing. To our mind, this is a matter of having a cultural identity and re-enforcing it.

The Chairman: Thank you very much for your presentation. My colleagues and I have to go and vote in 25 minutes. We thank you once again.

Meeting adjourned.