[Recorded by Electronic Apparatus]
Wednesday, June 14, 1995
.1533 
[English]
The Chair: Ladies and gentlemen, welcome to our continuing discussions and hearings on DTH. We have a busy afternoon and an uncertain one, because we may be interrupted by a vote. Some say it's going to be at 5:30 p.m. Some say it's going to be at 6:30 p.m. We will have to work around that and beg the indulgence of our guests, particularly towards the end of the afternoon.
In order not to lose any time, I'm going to ask our first guests, the Friends of Canadian Broadcasting, headed by Ian Morrison - and he's brought along Tim Woods - to make opening remarks on this subject. Then we'll get right into the questions.
Mr. Morrison, welcome.
Mr. Ian Morrison (Friends of Canadian Broadcasting): Mr. Chair, thank you very much.
We have tabled a submission. That submission is longer than I would want to put on the record orally today, so I would like just to speak to it in an executive summary fashion and then to respond to any questions you and the members might have.
Mr. Hanrahan (Edmonton - Strathcona): Point of order. While I appreciate our time restrictions, I would ask that your executive summary be as comprehensive as possible, because many of us have sped-read this at best. We need as much information as possible.
The Chair: Good luck.
.1535
Mr. Morrison: Mr. Chair, I always appreciate sentiments of good luck, but I think luck has very little to do with it.
I was just saying that Friends of Canadian Broadcasting believes the biggest challenge in the Canadian broadcasting system is getting resources from the pockets of viewers into the hands of people who make the high-value Canadian fiction programming.
Friends believes that the current monopoly distribution system is an inefficient failure because it eats up too much of this money and allows too little to reach the people who actually make the Canadian fiction programming.
[Translation]
We favor competition in the delivery of video signals into the home and thus we support the wishes of Canadian consumers as well as those of the Government of Canada, as set out in the draft orders now before us.
[English]
More than one year ago, Friends told the CRTC that we believed a Canadian DTH service should be subject to licensing. In the mid-May 1994 period, when the Canadian DTH consortium, as it was then known, announced itself at the Canadian Cable Television Association's annual meeting in Montreal, a major cable partner announced at the press conference that the consortium would not compete actively in cabled areas.
In June, Friends obtained a copy of a draft letter format that specialty networks were being pressured to sign, offering exclusive direct-to-home satellite distribution rights to this DTH consortium. There's a footnote in our brief that gives you details. That is a proposition that would be illegal under United States law and under the recommendations of the satellite broadcasting review panel that you're studying, as well as the proposed orders.
Over the course of the summer of 1994, Friends received a copy of correspondence from the CRTC to a citizen inquiring about direct-to-home satellite issues, which made the commission sound like the DTH consortium's marketing arm. On September 10, The Globe and Mail published a letter to the editor from the CRTC's chairman stating that the commission did publicly encourage Canadian entrepreneurs to develop a Canadian direct-to-home satellite service. In the same month, in a letter to the same editor, the Canadian Cable Television Association's then president publicly claimed credit to major cable companies for pulling the consortium together.
Meanwhile, the federal competition bureau began to investigate the possibility of restraintive trade actions arising out of the inherent conflicts of interest on the part of the consortium's cable partners, leading to their departure from the consortium.
That's our conclusion, members of this committee. They have not spoken for themselves on the reason for the departure. The exemption order issued by the CRTC in late August of 1994 was clearly drawn up to favour its consortium over the other Canadian player, Power DirectTv by requiring an exempt Canadian DTH provider to use only Canadian satellites.
[Translation]
With others, Friends then appealed to the government to re-examine DTH policy. In view of the evident failure of the CRTC to do its job, Friends welcomed the September 12 announcement by the Ministers of Industry and Heritage, as well as the appointment of the review panel announced on November 26.
According to our research, only one in eight dollars cable companies collect from consumers actually reaches the people who supply Canadian programming. This meager return on investment is quite simply insufficient, especially if one calculates that only part of that eighth actually reaches the creators of Canadian content. Given current fiscal restraints, at a time when governments are withdrawing their support for the arts, that simply makes no sense.
[English]
Friends sees the growth of the grey market as one of the biggest problems facing Canadian broadcasting policy. Already, today, some half a million households are effectively cut off from Canadian broadcasting, a huge drain on our cultural identity and on our sense of belonging, just as it is on our economy.
.1540
This means that millions of Canadians - and the number is growing daily - are effectively unplugged from the Canadian broadcasting system. They are not part of the most powerful source of common identity and belonging available to Canadians, nor can they be reached by Canadian advertisers. This problem will magnify if the government allows a whole new generation of American DTH satellites to enlarge this grey market without effective challenge.
The best defence is a competitive environment for Canadian DTH, including policies to harness American DTH services for Canadian purposes, as the Power Corporation has proposed to do. We encourage other Canadian entrepreneurs to follow Power's example and forge business partnerships with competing American DTH systems: Echostar, PRIMESTAR - there are several.
[Translation]
Under the proposed policies, such partnerships could qualify by respecting Canadian content and ownership policies, as well as by making an appropriate contribution to the financing of Canadian program production.
We strongly favour a direction to the CRTC to withdraw the Exemption Order as proposed by the government. In view of the threat from the growing grey market, we also strongly favour the Orders' taking force and effect before Parliament's summer recess.
[English]
Friends of Canadian Broadcasting lacks confidence in the current senior leadership of the CRTC, that they accept the elected government's policy leadership role. We see them as complicit with Expressvu and we believe they will use any discretion to help Expressvu avoid a licensing procedure and to delay Power DirecTv sufficiently to enable Expressvu to obtain significant market penetration, thereby subverting a level playing field for competitive DTH.
Viewers want this choice of DTH systems, and the existence of Canadian choices will deter the grey market threat. Friends believes that a competitive outcome will make Canadian distribution systems more efficient and enable more money to reach the people who actually make the high-quality Canadian programs that Canadians have demonstrated time and time again they will watch in proportion to their availability.
[Translation]
Competition is a means to increase the bargaining power of creators and packagers in their negotiations with distributors.
[English]
Friends also strongly supports the proposed pay-per-view orders' insistence that rights purchases be non-exclusive. In the case of pay-per-view, these non-exclusive rights are obtained on a consignment basis and the rights holder receives a share of the revenue for each individual sale at the household level. There is no payment for Canadian or American rights, only a non-exclusive right to offer the product for retail sale to individual purchasers in each country.
In view of the grey market problem, it is vital that the commission proceed to license qualifying proposals on a timely basis, and we stress the words ``timely basis''. Under the new government policy, the commission's role will be a simpler one than heretofore. That role is to determine that a proposal meets the Canadian content, ownership and production contribution criteria before proceeding to offer it a licence; in other words, to assess its qualifications, not its economic impact on other players.
There is no reason to hold Expressvu back. All applicants, should others emerge, should be permitted to proceed quickly - and by that we mean September of 1995. We are aware of many precedents for the CRTC taking action speedily where it is in their power and their desire to do so, but Friends fears that the commission may well seek to draw out the licensing process for the following reason.
[Translation]
The Commission's established practice has been to favour the cable monopolies.
.1545
I'm referring to the June 1993 decision to force unsuspecting cable suscribers to subsidize the acquisition of the notorious black boxes - the set-top decoders which are being developed to enable interactive cable and its introduction into many new sectors of activity.
[English]
The government and the viewing public both need to be vigilant to ensure that the CRTC's current leaders, in view of their history of favouritism toward the dominant table interests, do not draw out the satellite broadcasting licensing process in order to shelter cable from satellite competition until cable's consumer-subsidized black boxes are available for installation. That is in the autumn of 1996, we are advised.
[Translation]
Yet, the CRTC can move swiftly when it chooses to do so. For instance, we note that in its recent convergence report, the CRTC pledged to consider, without delay, applications by other potential distribution undertakings. Nevertheless, effective telephone company competition to cable is still years away, while effective DTH competition is available right now - subject only to articifial regulatory road blocks which some of the CRTC's commissioners might well seek to create, if public policy provides the commission with that leeway.
[English]
If Telesat needs a new rate structure to survive, and we do not think it does, then let's address that problem discretely. Friends also believes the advantages to Canadian film creators of Power DirecTv's access to U.S. markets far outweighs any Canadian advantage to Telesat Canada of requiring Canadian pay-per-view to be distributed on Canadian satellites.
The key issue for Canadian public policy is to use competitive technologies to reduce distribution costs and enable more viewers' money to reach Canadian fiction programming creators. If a system like Power DirecTv can also build export markets for these same Canadian fiction creators, more power to them.
Friends understands that the proposed orders have been drafted by the Department of Justice. We have great confidence in that department's constitutional expertise, when lined up against private sector lawyers - even one or two of them, I would say, in this room - whose clients have a vested interest in the advice they provide. Our own reading is that the government is perfectly within its rights to issue these orders.
However, a flurry of legal opinions is now in circulation. Before this committee last week - no surprise to us - the CRTC weighed in with an opinion supportive of Expressvu's position. The issue of legality may well be one for judges to decide. If this proves necessary, we suggest you recommend that the government expedite such a judicial determination, if that in turn proves necessary, in order to expedite the arrival of a new era of competition in the delivery of video services into Canadian homes.
That is the summary, Mr. Chairman. I am open for any questions you or the members may have.
The Chair: Thank you very much. Given the constraints on our time,
[Translation]
I will give the floor immediately to Mrs. Tremblay for five minutes.
Mrs. Tremblay (Rimouski - Témiscouata): I have a couple of questions for you, Mr. Morrison. In fact, I have several questions for you. I would appreciate it if you could give me quick answers.
Could you tell me when Mr. Rabinovitch ceased acting as one of your advisors?
[English]
Mr. Morrison: You are speaking of Mr. Bob Rabinovitch.
[Translation]
Mrs. Tremblay: Yes, Bob Rabinovitch.
[English]
Mr. Morrison: He was on our advisory council until he took up the position of one of the government's advisers on satellite television policy. Because he felt there might be a conflict of roles, he resigned.
[Translation]
Mrs. Tremblay: I have here correspondence displaying your letterhead. I simply want to know the date. When did he stop working for you? I have letters here where his name appears as a member of your Advisory Council. So I want to have a date. When did you remove Mr. Bob Rabinovitch's name from your letterhead?
[English]
Mr. Morrison: If I well recall, it was around Christmas. I will have to get back to you with the details later.
[Translation]
Mrs. Tremblay: Fine. Secondly, can you tell me on whose behalf you are acting as lobbyists? Are you acting on behalf of specific companies or not?
Mr. Morrison: Myself, personally? Yes, I have three clients: Friends of Canadian Broadcasting, Friends of Ontario Universities and thirdly, I was hired by a group that wants to establish some form of support for international development on Parliament Hill.
.1550
That's all.
Mrs. Tremblay: Fine. Now how are the Friends of Canadian Broadcasting funded? Who provides you with funds?
Mr. Morrison: We receive approximately 25,000 contributions per year, Madam. The average is between $30 and $40. These are contributions from ordinary citizens. We are not a charitable organization.
Mrs. Tremblay: You're not as lucky as the Council of Canadians!
Mr. Morrison: People obviously contribute from their after-tax income; the largest contribution we received recently was $1,000.
Mrs. Tremblay: Did it come from Power Corporation?
Mr. Morrison: No, not at all, Madam.
[English]
As far as I know, we received contributions from no corporations.
[Translation]
Mrs. Tremblay: Fine.
Now, in the text I have before me, you start with a quote from a minister who's selling Canadian culture peace meal: Ginn Publishing, Viacom, and soon. He's now preparing to settle the cases of Turner and Polygram.
You're making very serious allegations about the CRTC...
Mr. Morrison: Only about its leaders, Madam.
Mrs. Tremblay: ...and even about Expressvu.
Mr. Morrison: However, I would like to make a distinction between the role of the commission and the role of the current directors of the CRTC.
Mrs. Tremblay: Somewhere in the text, you compare satellites to copper coaxial cables, that can also be used and that could be imported from the United States. I find it rather strange and even disturbing that someone like you has asked to appear before us. First of all, I think you ought to suggest to the Friends of Canadian Broadcasting that they become the Friends of American Broadcasting. It would be more accurate. ``Friends of Government'' would also be more accurate.
[English]
Mr. Morrison: Maybe there's a misunderstanding, Madam Tremblay, because you mentioned Viacom -
[Translation]
Mrs. Tremblay: I'm asking you where culture comes into all this. We have a Minister of Industry who sells culture as though he were selling shoes and then you come along and compare satellites to copper coaxial cables. You say that somewhere in your text.
What about culture? You are an active participant in almost all CRTC hearings to defend Canadian culture against the American invasion, and yet I can't understand a thing you say in this brief of yours. I don't where you're going with all of this and who you're trying to protect.
[English]
Mr. Morrison: It's possible there's a misunderstanding because you mentioned something about Viacom and some other organization, and there is no reference in our brief to Viacom. Possibly you're commenting on a future witness; I'm not sure.
Mrs. Tremblay: No, I'm saying that you are using a quotation of one minister of the government, who is selling the culture piece by piece - Ginn Publishing, Viacom. It's already done.
The main piece of your quotation is from Mr. Manley, from The Financial Post. What do you do about culture? You are Friends of Canadian Broadcasting.
Mr. Morrison: Yes, but I'm also a friend of The Financial Post and indeed was the friend of the chairman of this committee when he was its editor.
But just to pick those off one at a time, with respect to the copper and the satellites, we believe that satellites have perhaps some type of value attached to them in our culture that exceeds their real value. They are nothing more than means for transmitting signals. As such, they are no different from copper wires.
I think the comment you may have quoted is where we do not think there is any distinction between using an American satellite to deliver signals to Canadians and using American copper in cable wires for the same purpose.
As for Mr. Manley, the Minister of Industry, I think I'd like to make sure that Madam Tremblay has a copy of the brief we submitted to this committee, because it didn't quote Mr. Manley. What you have is the brief we submitted to the Department of Communications under their request.
.1555
The reason for quoting Mr. Manley was that he was trying to tell the cable monopolies that this government would no longer provide them with any type of shelter and support and that they had to enter the competitive world. We quoted him because we believe that's a very important and favourable issue for Canadian broadcasting policy.
[Translation]
Mrs. Tremblay: Just for the record, I have here the first page of the fax: ``Addressee: Suzanne Tremblay; Organization: House of Commons.'' My fax number is written on it. I don't want to give it on television because I don't want too many people to write to me. And then says: ``Sender: Ian Morrison''. The document I have in my hand doesn't come from the catacombs. It comes from the guy who sent it.
[English]
The Chair: It may well be the case that Mr. Morrison's organization has lots of documents and you're the lucky recipient of more than one.
[Translation]
Mrs. Tremblay: Thank you.
[English]
Mr. Morrison: And we certainly will continue to do so.
The Chair: Yes. He does have your fax number.
Mr. Hanrahan: Thank you, Mr. Morrison, for your attendance today. I find that, in the Reform Party, we are in agreement with many areas you have discussed with us. I would suggest that choice be the guiding principle of any policy we look at. Also, the freedom of consumers to choose programming and distribution systems should be paramount. Consequently, private industry should be given the freedom to supply a variety of different choices.
We also believe that the information highway offers Canadian artists, whether they are musicians, computer graphic wizards or film makers, tremendous opportunities to expand and profit from a world market that sees no limits.
Given that, I would like you to clarify something, if you would. You have criticized this cable fund. You want to see as many dollars go from the viewers to the producers. I'm not sure if you gave the figure of $8 to $1. Could you expand, to some degree, on how you see that process working? Also, how would you perhaps see an arm's-length organization working?
Mr. Morrison: With respect to the cable fund, first, it was not our intention in the brief before you to criticize the cable fund per se. I would criticize the CRTC for offering the cable companies a bribe to create that cable fund by allowing them to keep $2 of consumers' money for every $1 they put into the cable fund.
But that is not a criticism per se of the cable fund. It's needed, and I'm sure it's going to do very good things.
Mr. Hanrahan: It was extortion of the cable fund.
Mr. Morrison: It's not so much extortion; it was -
Mr. Hanrahan: It was $2 to collect and $1 per donation.
Mr. Morrison: We don't think, in this day and age - this is not the core of your question, so I'll try to dispose of it quickly - that there is enough spare money to throw around such that the cable monopolies should have been allowed to keep, in their own pockets, $1 of consumers' money extra for every dollar they gave the production fund.
But on the main point, our judgment is that all contributors to the broadcasting system, in return for the privilege of the opportunity to use the metaphoric airwaves, if I can put it that way, should be making an appropriate contribution to help finance Canadian production.
In that sense, we favour, for example, the recommendations in the satellite broadcasting panel report, which is the group in which Mr. Rabinovitch - Mrs. Tremblay referred to him - was one of the members. It was saying that each DTH operator should be making a contribution from their revenues towards Canadian production.
But overall - this is the context we want to put before you, and it comes to the $1 in every $8 - our research, and we would be very happy to be proven wrong, says that for every $8 Canadian consumers pay to their cable companies, only one of those dollars makes it through the cable system to the people who actually package and create the Canadian programs.
So we see the cable system, at the moment, as being inefficient. What we need, in an age when government does not have enough money to be able to support a Canadian production, is to find ways to get money from the pockets of the viewers to the people who actually make the Canadian programming. The cable system is too inefficient.
.1600
What led us to take an interest in this topic, Mr. Hanrahan, is that introducing choice, as you put it, in how video signals will get into Canadian homes will create and will discipline a market so that the people who make the programming will have more power and the people who distribute the programming will have less power. That's where we're coming from.
Mr. Hanrahan: Yes, you have a greater market to sell to.
Mr. Morrison: First you have a market. Today, effectively, there is no market.
Mr. Hanrahan: You have spoken of the grey market. A number of other witnesses spoke of it as well. As the grey market grows - it's growing quite rapidly - the suggestion is that this consumer is lost forever. With the technology of DTV, do you not see any of these people who have these great big dishes, so to speak, coming back to the DTV market?
Mr. Morrison: They may well, Mr. Hanrahan. This is a matter of opinion. It's very difficult to get data on this subject. The data I have, which is anecdotal, suggests that your own city, Edmonton, has the highest penetration of new satellite dishes of any city in Canada, by the way. Once people effectively tune out of the Canadian broadcasting system, in a sense, electronically, then they are in the United States, if you want to put it that way. A half-million households, the vast majority of which are anglophone households at the moment, are effectively decoupled from our system, which we find troubling.
With respect to technological change, the important thing for the future - this is where we see hope, yet I noted with great alarm that the chairman of the CRTC did not even refer to the grey market in his opening remarks before you - is that we see hope in the ability of Canadian companies to make deals with American DTH services. The example is the one that the Power Corporation has done, which effectively repatriates or Canadianizes these services.
That's a problem for people in your constituency who have spent $2,500 to buy, at a great mark-up, a satellite dish from the United States in order to receive DirectTv. That's because when and if Power Corporation succeeds in getting a licence, these people will be cut off. Their $2,500 investment will be worth nothing. They will be starting from scratch. That is a way, you could say, of solving the grey market problem, but it's not going to make your constituent very happy.
Mr. Hanrahan: With the increase in technology and choice, even though the investment may be of little value, do you see that competition and choice may in fact put more pressure on Canadian producers to produce better programs in order to compete both nationally and internationally?
Mr. Morrison: Yes. I would position it not as pressure; I would say it's an opportunity. First, we have some very good production talent in English and French, and indeed in other languages, in this country. One of the advantages of DTH technology is the opportunity to export some of that talent and to derive economic benefits from the sale of those rights.
As you open up more roots between the people who make those programs and the people who buy them, our feeling is that the market itself for the programs will expand.
.1605
This applies particularly in the field of pay per view. There will be more money available for everyone.
But from a Canadian point of view, we are now in a position in which we are beginning to be a major exporter of entertainment programming. Please do not forget, in evaluating these orders, the potential-for-exports issue, which is a really substantial one that could bring more money to Canadian creators.
Mr. Hanrahan: You have no problem with September 1 as the start-up date for Expressvu?
Mr. Morrison: This is a very important issue, Mr. Hanrahan. Respecting the chair, I'll give you a very brief answer.
We support the orders that are before your committee. That is, we believe that the CRTC's exemption order has to be withdrawn and that various applicants should apply for a licence. We have seen evidence of the CRTC proceeding to license applicants very quickly when it suits them. I said so in my testimony. We do not see why they could not meet September 1. Certainly they could meet September 30. That would take away Expressvu's problem, in our view, because it would be able to go on the air as a licensed undertaking.
The CRTC is claiming that it would take longer to do so, and we claim that it has a conflict of interest there because it is trying to protect the cable companies, who will not be in an effective position to compete until the black boxes are available.
Mr. McKinnon (Brandon - Souris): Welcome again, Mr. Morrison. I think you were just starting to get into the area that I've got down here as my concerns. As they say over the pond, we do have a bit of a sticky wicket in terms of a legal difficulty.
I'm sensing that you were embarking upon your solution to this current difficulty in terms of the grey market and getting competition into the DTH marketplace. My question really is, what would be your solution so that we get competition and the demand being met by the suppliers of the equipment such that we can start marketing and get on with the job of DTH broadcasting?
Mr. Morrison: Mr. McKinnon, again, it will sound excessively simple, because I'm trying to be brief. I would amend the orders to instruct the CRTC to proceed expeditiously. The don't need to wait until December. That is nothing more than pique on the part of their leaders, who are, as I said in my testimony, unwilling, in our judgment, to accept the policy leadership of the Government of Canada. They should be asked to proceed on a timely basis.
It need not take six or eight months from now to do this licensing procedure. The licensing procedure - we testified on this and it's in writing, so I will not repeat it - is a simplified one. Once you enter the mind-set of competition, you don't have to worry about whether somebody's application might hurt somebody else. The market is going to decide that. People will have the - I sound like the editor of The Financial Post - sovereign right to go broke. That's what happens in a market.
What the government should do, and what I would urge you to urge the government to do, is instruct the CRTC to proceed expeditiously. That would solve the problem.
Mr. McKinnon: Yesterday, and on other occasions, we've heard about equipment incompatibility. Are we too late to reverse that kind of problem in terms of the companies that are coming forward?
Mr. Morrison: This may sound like Mr. Nixon saying ``I am not a crook'', which I felt I might have to say to Ms Tremblay earlier, but I am not an engineer. I would say to you that my understanding, which is quite clear on this subject, is that, first, what Expressvu is coming forward with is new technology and equipment; it is not replacing anything.
But, in response to Mr. Hanrahan earlier, Mr. McKinnon, anyone who has invested in a DirectTv dish and decoder that has been resold to them from Wal-Mart south of the border is out of luck, because that equipment is not compatible with what Power Corporation plans to do in that. As I understand it, Power Corporation is going to have a sophisticated antenna that is capable of pointing simultaneously at the Telesat and the Hughes satellites, which are six degrees apart in the heavens.
.1610
So the antenna will be different. They also require their own black box with their own smart cards in it in order, essentially, to block all of those DirectTv signals that are neither licensed nor authorized for distribution by the CRTC.
Mr. Ianno (Trinity - Spadina): Thank you very much for enlightening us a bit with your presentation.
What is the goal of your organization? What are you trying to achieve? I'm not talking about DTH, just your whole organization.
Mr. Morrison: It is to expand the quality and the quantity of Canadian programming available on Canadian airwaves.
Mr. Ianno: When the CRTC was listening to dissertations or input, did anyone indicate that exemption, as opposed to licensing, was the way to go, as far as you know?
Mr. Morrison: I imagine a whole lot of commercial interests that would have rallied behind what became the consortium, and now Expressvu, would have said that.
The public interest organizations I'm familiar with said the key point is that the people who framed the notion of an exemption order in a statute form had the intention that it would not affect anything that was a material gain for broadcasting policy in Canada. Our judgment is that the exemption order was an attempt by the CRTC, conveniently, to make policy, or usurp the policy role of the Government of Canada, on a major, new policy level akin to the arrival of television in Canada.
Mr. Ianno: In other words, cabinet in effect gave a broad policy direction to the CRTC to go back and study its exclusionary decision. Is that what you see?
Mr. Morrison: I think what cabinet is proposing to do in the orders before you is to instruct the CRTC to withdraw that exemption order and to proceed with the licensing process. I support that strongly, and the Friends of Canadian Broadcasting has advocated that over a long period of time.
Mr. Ianno: We had Telesat here yesterday. They indicated to us that - it's my interpretation or paraphrasing, and we can always check the specifics - basically many of the participants were encouraged to give one proposal and work together toward a DTH effort, as compared to competing with each other. Is that your understanding?
Mr. Morrison: That's by the commission, you mean?
Mr. Ianno: Yes.
Mr. Morrison: It's encouraged by the commission. It's hard to know what the commission has -
Mr. Ianno: First, I started off with Telesat, but there were also all the participants. Since no one was really coming forward, I suspect that those interested in opening up the direct-to-home satellite process must have been encouraging someone to get into the field. Am I on somewhere?
Mr. Morrison: Here's the brief context; it's just bullets here. First, for years, the cable monopolies have been using the threat of American DTH satellites to encourage the CRTC to treat them favourably. They coined the word ``deathstar''. If you were a reader of The New York Times, Mr. Ianno, you would think that deathstar referred to a 1970s movie, but every Canadian knows that deathstar is some kind of satellite. Those are the spin doctors of the cable industry at work.
That has led, over the years, to a desire on the part of the CRTC to create a Canadian alternative. This sounds laudable, but the way they did it was to, in effect - here I would support some of the statements of the government - create what is de facto - that's if they got their way - a DTH system that's a Canadian monopoly.
Mr. Ianno: So are you aware of any of these meetings that may have taken place? I guess somehow in listening to you and rereading it, I sense it's almost...I don't want to use the term ``collusion'' because it's probably not correct, but some -
.1615
Mr. Morrison: We use the term ``complicity'', but I suppose maybe it's a matter of the degree of severity what term you use. It is clear to us they encourage this formation. They were present at the time of the announcement. Before this issue became so sensitive, I think I quoted in my testimony Keith Spicer's letter to the editor of The Globe and Mail last September. The secretary general of the commission has written letters to citizens that sound like my footnote 4, in which he even gives out the fax number of the telecommunications people. So they have gone beyond the role of a quasi-judicial tribunal.
Mr. Ianno: So, in other words, when you state in your paper ``its''...did you see anyone from the CRTC who was encouraging the formation of Expressvu, the consortium, the protection of the cable companies, or the desire to try to prevent someone else from participating in the process? I'm just trying to guess.
Mr. Morrison: I'll take advantage of your question to say this. Perhaps I'll cover it by saying the word on the street is that the strongest leader of the CRTC today and over the last two or three years is not its chairman but its vice-chairman, Mr. Bélisle. He is the person who has influenced the majority decisions on most issues. That is known in the broadcasting industry; it's gospel. It's known on Bay St. in Toronto.
Mr. Ianno: So he's sort of the motivator.
Mr. Morrison: I believe it is logical to assume that everything the CRTC did up to that exemption order is most likely the work of Mr. Bélisle. He was the intellectual and political, in the sense of policy, leader in the CRTC on this subject.
Mr. Ianno: Did he meet with some of these people?
Mr. Morrison: I would welcome a forum like this to ask him directly so you could get a straight answer out of him, but he is known to be very close to the former chairman of the CRTC, Mr. Bureau. He is known to be close to Mr. Gourd. He is known to be close to Mr. Racine, who was the former ADM of the heritage department.
[Translation]
Mrs. Tremblay: It's a delicate situation. We've been hearing nothing but endless allegations and hearsay. I find this very disturbing.
[English]
The Chair: Because we're also pushed for time here, can I just ask you a question? We may have to have Mr. Bélisle back to clarify this.
Mr. Ianno: Before you do that I have just one point and then I'll stop. It's about the 5% the panel recommended.
The panel that appeared before us yesterday indicated it would want to see a 5% gross revenue being contributed by the DTH companies for production purposes, so in effect the quality of content of Canadian-made programming would be helped. Do you agree with that?
Mr. Morrison: The principle we agree with is that all players in the delivery of video signals to the home should have an equivalent contribution. You'd have to ask the panel why it came up with 5%. My interpretation of why it came up with 5% is that it evaluated the current contribution the cable industry is making - you understand the contribution is with subscribers' dollars - as 5% of its net revenue and said DTH suppliers should do something equivalent.
If you're asking if the Friends of the Canadian Broadcasting think 5% is the right figure, no.
Mr. Ianno: I understand.
Mr. Morrison: We think a larger figure is correct, but it would be unfair to ask the DTH people to have a larger figure than the cable people.
Mr. Ianno: I guess the cable only produces - or is that pay-per-view? - $400,000 per year.
Mr. Morrison: That's a different issue.
The Chair: Because we're pushed for time and because delicate issues have been raised, I simply want to ask this question. Last week when the CRTC appeared before us I asked the commission, and Mr. Bélisle responded, whether anyone on the commission directly or indirectly actively encouraged the formation of that consortium a year ago. Mr. Bélisle answered, I think categorically, no, and that the only thing he could say was they were made aware of it.
.1620
Do you find there's some contradiction between what he said and what you believe to be the case?
Mr. Morrison: There's a contradiction between what you say he said and what The Globe and Mail says Mr. Spicer wrote to them on September 10. No knowledgeable person out on the street would feel there was any credibility to a statement that the commission did not encourage that consortium.
Please understand, Mr. Chair, the consortium was announced in May 1994. Expressvu, the applicant, which contains some members of that consortium and others, was first announced publicly at the end of November 1994. We are talking about a consortium that, shall we say, transmogrified or amended itself over time when talking about what the commission encouraged.
The Chair: Thank you very much. I guess it will be up to the committee to decide whether it wishes to clarify this apparent discrepancy between last week's testimony and this.
[Translation]
Mrs. Tremblay: I would like the Committee to recall the gentleman in order to clarify this.
The Chair: Mr. Bélisle?
Mrs. Tremblay: Yes. I think he has a right to present his point of view.
The Chair: We'll talk about that later.
[English]
Now I think we must say ``au revoir''. It's been so interesting that we've gone over time, but we mustn't keep our other guests waiting.
I will call for a brief pause to allow us to regroup.
.1622
PAUSE
.1627
[Translation]
The Chair: The sitting resumes. We are once again under pressure because we never know when we will be called to vote. I ask for your indulgence, Mr. Pilon.
Mr. Pilon represents the Association québécoise de l'industrie du disque, du spectacle et de la vidéo, l'ADISQ. I think we should start immediately with your presentation on satellites.
Mr. Robert Pilon (Vice-president, Public Affairs, Association québécoise de l'industrie du disque, du spectacle et de la vidéo): Thank you, Mr. Chairman. I have with me my colleague, Ms. Solange Drouin, legal counsel for ADISQ.
ADISQ represents independent record and show producers in Quebec. Committee members may be surprised to see an association which represents record and show producers devoting so much time and energy to an issue which, at first glance, seems to affect only the television sector.
If we decided to get involved, it is because we think that the decisions which will be made could create precedents that may well have rather dramatic consequences for the Canadian cultural industries in general, including the record and variety show industries.
We have prepared a brief for the committee. Unfortunately, because ADISQ is an association with only limited time and resources, we haven't been able to have our brief translated. If you don't mind, my colleague Nathalie Filion with distribute the brief, as well as copies of the briefs we tabled during different stages of the CRTC consultations in the months preceding the work of the panel.
[English]
Mr. Hanrahan: I have a point of order, Mr. Chairman. While we do not have an English translation and I understand the reasons for it, I just want to point out to the presenter that if I face this way it is for concentration purposes only. Thank you.
The Chair: Thank you for being such a good Scout.
[Translation]
Mr. Pilon: I'd like to begin by thanking the members of the committee for inviting us.
.1630
L'ADISQ feels that the work of this committee and that of the Senate Committee are extremely important.
You all know that this is the first time since the 1991 Act was passed that the government has considered using the power conferred upon it under article 7. It is an extremely important move. This is a very sweeping power that must be used wisely.
I think any advice the House of Commons Committee and the Senate Committee can give the government regarding the use of that power will be extremely useful.
We therefore hope the Committee will submit a written report to the government at the end of its deliberations, and that the latter will not make a hasty decision, so that the House of Commons' Committee's recommendations and suggestions can be taken into account.
As for the draft orders, l'ADISQ basically feels there are some very positive aspects to it, as well as some negative ones, which we see as major shortcomings.
The main advantage of the draft order in council is that the government has finally decided to direct the CRTC to follow the standard licencing procedure, rather than proceed by exemption, in accordance with the recommendations made by the Senate Committee. We think that is extremely important.
We believe the CRTC made a mistake. In our view, the CRTC misintepreted the legislation and abused its power of exemption under subsection 9(4) of the Act.
Subsection 9(4) does indeed allow exemptions - we can come back to that later - but it is solely for limited services, which is obviously not the case for a service as broad as the service provided by direct broadcasting satellite. So, l'ADISQ fully agrees with that aspect of the exemptions.
However, there are other aspects of the draft orders in council that concern us a great deal.
Since our time is limited, I will focus on one major aspect, even if it means dealing with other aspects during the question period.
We are concerned that if some provisions of the two orders are implemented and combined with other aspects of the regulations on broadcasting distribution undertakings which the CRTC currently enforces, there could be some rather unexpected, but certainly extremely negative, results. Essentially, it may mean dozens, and possibly hundreds, of new American services who are not currently licensed to operate here, could break into the Canadian market, thus upsetting the entire system.
Instead of going through our brief, which you already have, I will spend my last five minutes focusing on one point. We have tried to illustrate the kind of impact those orders may have.
As an example, we took the public television services offered in Toronto through Rogers Cable. Those are the charts you see up here. Below them, you have the services currently offered by Vidéotron Cable in Montreal. You will find the same charts in the appendix to the brief.
On this chart, with Rogers, you have 60 television services - 60 different television stations in Toronto. Forty-four of them are Canadian television channels and 16 are American television channels licensed to operate in Canada. Of the 44 Canadian channels, of course, you have public television services such as French and English CBC, as well as TVO in English and in French. You have the major networks and the bigger private English-language Canadian networks such as CTV, Global, and so on, and the independent stations such as CHCH. Then you have specialty services such as TSN, MuchMusic, etc. There are now approximately 15 specialty services, including the new services such as Bravo, Showcase, etc. You also have the pay television stations such as The Movie Network, SuperÉcran, and finally, you have the Canadian pay-per-view station Viewer's Choice, which uses four Rogers channels for broadcast purposes.
At the other end, you have the 16 American channels. Among those, you have the traditional networks, such as ABC, NBC, CBS, and some American specialty services that are licensed in Canada such as CNN, Arts and Entertainment, and so on.
.1635
Under current cable regulations, most of a cable system's channels must carry Canadian services.
It is important to note that the vast majority of Rogers' channels carry Canadian services: in fact, of the 60 channels, 44 broadcast Canadian services, which is very good indeed, since to fully comply with the regulations, Rogers would only need to have 31 Canadian channels and 29 American.
If you look at the Canadian channels, in red, you will see the percentage of Canadian content, and in blue, the percentage of American content. You can see that the percentages vary a great deal. For Radio-Canada, I think it is 85%; for CBC, 65%; for private stations, approximately 60%, as set out in the Act. Those percentages vary a great deal for specialty services, and obviously, for the 16 American stations, there is no Canadian content.
So the vast majority of Rogers' stations are Canadian - 44 out of 60 - and average Canadian content on those 60 channels is 38%. For Vidéotron - I will not go into all the details for Vidéotron - average Canadian content is 51%.
The danger with these draft orders in council - and we can elaborate further on this during the question period - is that if they are accepted in their current form, a licensed DTH broadcaster could bring in several dozen pay-per-view American channels that are not currently licensed here in Canada.
Let's look at this chart. You see Rogers. This chart is the same as that one. Let's say a DTH broadcaster is given essentially the same channels as Rogers, except for the regional channels, plus 60 pay-per-view channels.
The orders in council state that there must be 5% Canadian content. So, that means three stations out of 60, with 5%, and 57 entirely American channels, perhaps with exclusively American programs that would be imported into Canada. The amount of Canadian content would be 20%. The immediate problem will be that Rogers and Vidéotron will want to have the same rules. Rogers and Vidéotron will tell the CRTC: ``If a satellite broadcasting service was given a licence to broadcast 57 pay-per-view American channels, why can't we?'' The other companies will do the same thing.
Right now, Rogers has 38% Canadian content, which will drop to 21% if you add 57 American Channels. For Vidéotron, that percentage drops to 22% from 51%. You can see immediately what the impact would be.
But that is not all. Once a DTH broadcaster has been licensed for example, to broadcast the 57 DirecTv USA channels, how can you not give HBO permission to do so as well? Things will become very tricky. It will also become very difficult because of international trade rules, despite the exemption for culture. This will set a precedent. One company's services will be allowed in. We think the other services such as HBO, ESPN and MTV - and there are 150 or more of them in the United States - will be able to use that precedent to say: ``We also want to get into the Canadian market''. They will just have to find a Canadian partner to act as sub-distributor and eventually, given the domino effect, the other channels will also be carried.
Perhaps that is a somewhat farfetched scenario, but we think that could well happen within five years.
.1640
If you look at what is being broadcast by this service, which ressembles Rogers' broadcasting, and add the 57 pay-per-view channels, plus 16 pay television channels such as HBO, ESPN, MTV and the others, the overall percentage of Canadian content will drop to 13%.
Once that happens, Rogers and Vidéotron will obviously want to do the same thing. The percentage of Canadian content there will drop to 14%.
But that is not all. The day we let MTV, say, into Canada, do you think that MuchMusic and Musique Plus, with all their problems, will be able to compete with American services that are far better off financially, and that do not have to meet Canadian content and creation requirements?
We think that at the very least, after five years, services such as RDS, Musique Plus, MuchMusic, The Movie Network, etc., as well as Canadian specialty and pay services will all disappear.
The result is the following scenario: let's use the Rogers example because satellite service will be the first to be affected. In five years, the same thing will happen to satellite and cable. Based on its current configuration, Rogers'specialty services will disappear. So overall, you will be left with 10% Canadian content.
I would ask that you read our brief carefully, as it is difficult to convey everything in 10 minutes. When you read it, you will see that this is not such a farfetched scenario. There really is a domino effect, so when one falls, the others follow in close succession.
Canada's broadcasting regulations are far from perfect, of course, but they are the result of 70 years of work. There is a certain balance between Canadian services and American services, between Canadian content and foreign content. That balance may be upset if huge numbers of services are allowed in that basically present foreign programs where Canadian companies act solely as sub-distributors.
For all of the aforementioned reasons, we think some sections of the draft orders ought to be rewritten.
Thank you very much.
The Chair: Thank you, Mr. Pilon, for your excellent presentation. It is much appreciated, especially the charts which are quite dramatic.
As usual, we are short of time. We will therefore proceed immediately with Mrs. Tremblay for five minutes.
Mrs. Tremblay: Good afternoon. I would like to congratulate you on your excellent brief. Indeed, you have given us a lot of information to digest, particularly since we did not have much time to read it. I went through it quickly, as did my staff.
I have a lot of questions for you. Since we began our meetings, we have been trying to find ways to protect Canadian culture. That is a concern of ours and it is also our mandate.
I personally find what you have just shown us to be very serious. I have been concerned from the start that satellites are coming in full speed and bulldozing everything...
The CRTC has already licensed seven services to offer pay-per-view television. They all went bankrupt one after the other, and we now have two monopolies, one in Western Canada and one in Eastern Canada.
Perhaps we can expect that in future, there will be two monopolies as well, they being the only ones strong enough to stay in the running, or perhaps even just one monopoly.
I would like to understand one thing. Perhaps you can explain it to me, since you do not really have a direct stake in this debate. Thus far, I have seen only four people or groups support the exemption. Your group is vehemently opposed to that exemption.
.1645
The CRTC claims it had to grant an exemption. Can you explain that to me?
Mr. Pilon: I will let my legal counsel, Ms Drouin, answer that.
Ms Solange Drouin (legal advisor, Association québécoise de l'industrie du disque, du spectacle et de la vidéo): Thank you very much for giving us the opportunity to explain our position.
In your files and especially in these other ones, you will find the briefs we presented to the CRTC, in which we clearly outline our position.
We looked into all aspects of the exemption process, even producing charts to support our contention that the CRTC had misused its exemption authority. I will not use any more legalese than necessary, but sub-section 9(4) of the Act stipulates, as we all know, that the CRTC does indeed have the authority to order exemptions. It can exempt firms under sub-section 9(4) of the Act. That provision, however, very clearly defines the scope of that power. Sub-section 9(4) states the following:
- ``(4) The Commission shall, by order, on such terms and conditions as it deems
appropriate, exempt persons who carry on broadcasting undertakings of any class specified [...]
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 fact, the CRTC recognized that in a public notice published in June 1993 where it stated very clearly - and you will find this in our briefs - that direct broadcast satellites will be a major component of Canada's broadcasting system. So how could the CRTC legitimately claim that DBSs would not have any major impact on the implementation of Canada's broadcasting policy and thus exempt them? We feel that is an outright abusive interpretation. In fact, we are not the only ones to be of that view.
Mrs. Tremblay: I think I understand...
Mr. Pilon: In Great Britain right now, there are four million direct broadcast satellite subscribers. An undertaking with four million subscribers is not one you would call of limited scope.
Mrs. Tremblay: On page 11 of the French version of your brief, you say that a major shortcoming is that the requirement to foster the production of Canadian programs is not stringent or clear enough. Could you expand on that, please? Do you not think 5% is already quite a bit?
Mr. Pilon: In the kit we gave you, there is a set of charts taken from another brief we prepared for the hearings on convergence. Those charts summarize all of the current requirements for all pay and specialty services, of which there are approximately 15. We noted that in many cases, financial contributions for certain specialty or pay television services amount to a lot more than 5%.
We took the lowest possible rate. I think it would be far more reasonable to force undertakings to contribute 10% of revenues, which would gradually increase to 20% over the licensing period. That is the first shortcoming.
There is another shortcoming-or inconsistency, at least. Canada's broadcasting system includes television, but it also includes radio. Both television programs and films are broadcast on television. On radio, much of the programming is music, including Canadian music, because radio programs must have 30% Canadian content.
The two current promoters of DBS services, namely Expressvu and Power DirecTv, have both said their services would include some audio channels. So their programming will also include music similar to the kind heard on FM stations. Those companies should therefore contribute as much to the development of audio programs as they do to television program development. Audio programming essentially means for records.
.1650
In the same way that most radio stations must remit a part of their income to FACTOR and Musicaction - which are foundations supporting this kind of thing - they should also be obliged to support musical content production.
Mrs. Tremblay: Do you mean that at the present time, there is nothing in the order to that effect?
Mr. Pilon: It is not clearly stated.
Mrs. Tremblay: And you want it to be clearly stated.
Mr. Pilon: Exactly. We say that we must support the production of Canadian programming. Does that include music or not? At this point, the wording simply is not clear.
Ms Drouin: We've been burned before by the CRTC, and thus we would like that to be specified.
Mrs. Tremblay: Okay, I see.
[English]
Mr. Hanrahan: Thank you for your excellent presentation. I caught most of it even though there is no English translation.
The question I would ask first is this. At present you have here Canadian content as opposed to Canadian viewing. What would be the relationship between the actual viewing by Canadians of Canadian content and the figures you have up there?
Mr. Pilon: I can't answer precisely. I would have to look up those figures. I could look at those figures and provide the committee with them later.
My recollection is that obviously in Quebec, in French, it is very high, but also in English Canada the viewing of Canadian-content programming is pretty high. If it were so low, why would Rogers choose to put on so many Canadian channels? It is allowed to put on more American channels right now. Even in English Canada, very often the media are overlooking the popularity of Canadian programming. I think it's pretty high.
Mr. Hanrahan: About the grey market and its growth, is this not going to happen anyway, ultimately, unless we involve ourselves with Canadian DTV?
Mr. Pilon: This is a difficult question, but I would say there will always be a grey market. There will always be many grey markets. There are grey markets in all activities of life. I don't think the legislature should direct itself and should legislate according to grey market activities. If it were the case, the task you have as members of Parliament would be impossible.
I think we should regulate the Canadian broadcasting system according to the objectives in the act that was voted on by the Canadian Parliament, not according to threats of grey market activities.
Mr. Hanrahan: Many other witnesses, I think almost all, have suggested that if we do not act quickly in this regard we may lose the market entirely, because the grey market is spreading so fast. We would then end up making regulations or recommendations that apply to a non-existent market. You do not see that as a possibility?
Mr. Pilon: We've lost a lot of time. If in the first place the CRTC and the government, three years ago, had enacted the right policy, there would be in place right now Canadian DTH systems with Canadian content. We have lost many years.
But because we lost many years does not mean now we should act in a hurry and make the wrong decisions. I don't think at this point if you members of this committee take one more week to write your report and send it to the government this will change a lot of things in the development of the grey market.
Mr. Hanrahan: Mr. Chairman, if I have any time left, I would be more than happy to give it to Mrs. Tremblay, because I think we should all gain from her expertise and her relationship with the witness.
.1655
[Translation]
The Chair: I just have a short question to ask and then I will be pleased to give the floor to Mrs. Tremblay. I do not know if there are any questions from this side.
My question is somewhat related to what Mr. Hanrahan just asked you. There could be a gap between the supply of all these American channels and Canadian demand for them. It depends on individual tastes, on guidance systems, and soon? The fact that what is being offered has only 8% of Canadian content does not necessarily mean its audience will be only 8%. There can be a difference between potential demand and actual demand, that is not strictly mathematical, as I understand it.
Mr. Pilon: That is entirely correct, Mr. Godfrey. However, past experience and empirical analysis have shown - and this doesn't apply solely to broadcasting, but to all other industries as well - that demand depends a great deal on supply, rather than the opposite. You cannot ask Canadians to watch certain shows if they are not given the chance to do so. Imagine what it will be like in five years. You will have access to 300 channels. Your decoder will have numbers 1 to 300 on it.
[English]
You have 300 viewing options. If on that total you have only 40 Canadian viewing options,
[Translation]
there is a strong chance the overall Canadian audience will be very small. I agree this is not purely mathematical, but the chances of that happening are nonetheless great.
The Chair: Let's say the first 40 channels on our system are Canadian and the last ones are all American; I would like there to be another chart here showing use rather than supply, even as it now stands. That would give us an idea of the spread.
Mr. Pilon: Let us compare it to a supermarket. Everyone knows that in a supermarket, space is expensive. Obviously you want your product to always be on the upper shelf, whether its peanut butter or anything else. I believe the navigation systems you were alluding to are important. I think a navigation system that put Canadian content right up front would be like putting a jar of jam on the upper shelf. That would be great. People fight to get space on supermarket shelves when there is only one row with five shelves for jam to be displayed. It's nice to be on the upper shelf, but if your product isn't on any shelf at all or if 95% of the products displayed on those shelves are your competitor's, meaning only 5% are yours, consumers will never buy your product or will do so only rarely.
The Chair: Mrs. Tremblay.
Mrs. Tremblay: I have two questions for now. Yesterday, a group appeared before us and told us that the 5% should be given to broadcasters rather than to private undertakings to produce Canadian programs. They claimed that according to statistics, these kinds of undertakings are springing up all over. What do you think of the idea of giving that money to broadcasters rather than to private businesses?
Mr. Pilon: Generally speaking, Mrs. Tremblay, I would not support that idea. I feel that over the past 15 or 20 years, Canada has succeeded in developing an independent television production industry, and to a somewhat lesser extent, an independent film production industry, especially in English Canada and even more so in Quebec - television production has progressed a great deal in English Canada, where it is very good, very strong - and a solid record industry, where you now find small companies making records. So, we have succeeded.
.1700
There is now a much greater supply of Canadian music and television, both French and English, than there was 20 years ago. Unfortunately, the film industry has not done quite as well. I think the success of the music and television industries is a result of co-operation between radio and television broadcasters and producers; it has also occurred because small production companies started producing films, records and television programs, and then larger companies followed suit in some cases. The dynamism of these small and medium-sized companies producing cultural products like records, films or television programming simply cannot be replaced by productions from traditional broadcasters who, because of their size, sometimes end up having a cumbersome bureaucratic structure.
Mrs. Tremblay: To get a subsidy from Telefilm Canada, you cannot have more than one or two projects underway. Do you think that requirement could be one of the factors that forced people to set up a new company to get a subsidy they otherwise would not have received? What is the explanation for that? We are told that businesses were sprouting up all over the place, but they disappeared just as quickly, sometimes after only 48 hours.
Mr. Pilon: The next witnesses from the APFTQ and the CFTPA will be able to give you a better answer to your question on film production. Generally speaking - we saw this occur in the record industry - an inordinate increase in the number of producers is not a good thing. There must be a certain number of them and financial assistance must not be peace meal. The number of companies must not be artificially increased. That said, I am sure nothing can ever replace the dynamism of independent companies producing television shows and records.
Mrs. Tremblay: You mentioned orders in council a number of times and pointed out the things you agreed with, as well as some weak points or shortcomings. On page 16, you also say that the overall priority should be given to Canadian services rather than foreign services. In your view, are the orders in council too specific or not specific enough?
Mr. Pilon: We go into that at some lenght in pages 13 to 17 of our brief. Those pages were not in the brief we presented to the Senate committee.
You raise an extremely important question, Mrs. Tremblay. In our view, the point is not whether the wording is specific enough, but reflects the principles of Canada's broadcasting policy or not. If it does, even if it is explicit, it will not pose any problem. Let me give you an example.
Mrs. Tremblay: Are you referring to subsection 3(1) of the Act?
Mr. Pilon: That's right.
Mrs. Tremblay: That can be our reference. If it is consistent with one of those principles, of which there are many since it goes as far as (t), it can be legitimately included in the order in council, regardless of whether or not it is explicit.
Ms Drouin: Moreover, section 7, which gives the government the power to issue directions, clearly states:
- ``...the Governor in Council may, by order, issue to the Commission directions of general
application on broad policy matters with respect to any of the objectives of the broadcasting
policy...''
Mrs. Tremblay: ...there really isn't much point in trying to decide whether it is specific enough or not. Specificity is a poor basis for assessment in this case.
Ms Drouin: I invite you to read section 3, which is often very specific. It mentions linguistic duality, minorities, aboriginal programming, and the need for all those to be reflected. It is very specific.
Mrs. Tremblay: So, it is not an appropriate criterion?
.1705
Mr. Pilon: It is one criterion. On page 19 of our brief, we indicated some of the major principles that must be reflected in the order in council. Unfortunately, all those major principles, found in section 3, are not reflected in the order in council. First of all, the system is to be effectively owned and controlled by Canadians, and not just on paper; in other words, both the undertaking and the programming must be truly controlled by Canadians. There's also the question of linguistic duality being reflected in programming, which is very important. I did not mention it earlier, but one sections of the order in council stipulates that when a DBS undertaking offers an English-language service, it will also have to offer a French-language service; with this wording, however, we could end up in a situation where an undertaking comply with the order in council by offering is able to just one French-language service: 60 channels of which just one is a French channel. That would be acceptable under the order in council, but clearly not according to the linguistic duality provision in section 3 of the Act. Also, every Canadian broadcasting undertaking is to contribute to the creation and presentation of Canadian programming and is to make maximum use, and in no case less than predominent use, of Canadian creative and other resources. There is also the metter of their responsibility for the programs they broadcast.
In our view, all those principles must be clearly stated. Those principles are currently in effect for programming undertakings such as TVA or CTV. Those principles also apply to radio, specialty television services and cable. There is no reason why those principles should not also be observed by DBS undertakings.
Mrs. Tremblay: Could you also briefly explain why l'ADISQ wanted to appear before the Committee? What do you have to gain or to lose from satellite television?
Mr. Pilon: In our brief, we refer to cable radio. I will let Ms Drouin tell you about that; that is what concerns us.
Ms Drouin: It's very simple. Over the past two years, we have had to fight the CRTC over an attempt to introduce the same type of multi-channel system into the radio industry. I'm referring to pay cable radio.
Let me give you a little background. There are several stages that led up to this. In June of 1993, the CRTC issued two licenses for pay cable radio to Shaw and COGECO. Those licences authorized Shaw and COGECO to offer Canadians a wide range of approximately 40 specialty radio services, such as a jazz channel, a rock channel, etc. There were to be 40 or so channels to choose from, of which most - over 30 - were to be American channels carrying American program content that would be imported into Canada without change. The entire Canadian music industry was convinced the CRTC decisions flew in the face of the very objectives of Canada's broadcasting policy.
We therefore asked the Governor in Council to force the CRTC to review its decisions. The Governor in Council accepted our request and finally, in August of 1994, the CRTC decided to reverse those decisions. You realize the services offered by Shaw and COGÉCO were similar to the proposed pay-per-view television services mentioned in the orders in council.
We wonder how the CRTC could refuse to grant a pay cable radio licence, should new applications be made, if it had to abide by the orders in council currently put forward by the government. This is not a theoretical question, but rather a practical matter, since on June 1st, 1995, the CRTC issued a public notice stating it had received licence applications for new pay cable radio services.
In our view, if the government were to pass such orders in council, this would set a very dangerous precedent and we would have no grounds whatsoever to argue our case before the CRTC. The CRTC could just brandish the order in council, saying: ``We are completely kosher when it comes to following government directions.''
Mrs. Tremblay: Do you think using the orders in council in the way it did sets a less dangerous precedent?
Ms Drouin: Yes.
The Chair: As usual, we do not know what is going on elsewhere, in the House. I think we had best thank you, take a short two-minute break and ask our next witnesses to make their presentation. We will probably be interrupted, but we will come back later. I would like to thank the representatives from the ADISQ.
.1710
PAUSE
.1713
[English]
The Chair: We're back in business and goodness knows how long this will last before the bells go dinging. I propose that we will ignore the bells for a while and then for the last five minutes there will be a sprint out of here. Without any further beating around the bush, we'd like to get going with the presentation, and I would invite our guests to introduce themselves and to make their collective presentation.
[Translation]
Ms Louise Baillargeon (President and Director General, Association des producteurs de films et de télévision du Québec): Good afternoon, Mr. Chairman, and ladies and gentlemen members of the committee. My name is Louise Baillargeon and I am President and Director General of the Association des producteurs de films et de télévision du Québec.
We are pleased to have been able to accept your invitation to submit our remarks on the draft orders to the CRTC. Ms Suzanne D'Amours, Associate Director General of the Association, will present a summary of our brief.
Ms Suzanne D'Amours (Associate Director General, Association des producteurs de films et de télévision du Québec): Our primary concerns regarding the draft orders are that they are too specific on the one hand, and that some of the provisions have a retroactive effect, on the other hand.
When the Law Reform Commission of Canada addressed the issue of the government's power of direction in its report on independent administrative organizations, it emphasized the dangers of that power: it inspires fear of arbitrary political action, particularly when it is exercised in respect of a regulatory agency.
For that reason, it recommended a certain number of rules that should circumscribe that power on an imperative basis, including: 1) that directions not have retroactive effect; 2) that directions be worded in general terms.
.1715
It seems clear to us from a reading of the proposed draft orders that they do not comply with two of the basic rules. On the one hand, the draft orders are too specific. They interfere with the policy implementation process, and with the actual licensing process.
In doing so, they call into question the principles of the CRTC's autonomy, integrity and independence, principles that are of primary importance to us insofar as they form the basis of the CRTC's credibility, both with the industry and with the public.
Moreover, the draft order will undeniably have retroactive effect since a Canadian DTH distribution undertaking complying in all respects with the legislation and regulations was duly authorized to go into service and that authorization would be terminated by the orders.
We wish to express our great concern over the precedent that would thus be created and particularly at the climate of permanent and chronic uncertainty that could result for all Canadian broadcasting undertakings.
The proposed orders require DTH distribution undertakings and DTH pay-per-view television programming undertakings to hold a licence.
We agree on the substance of the first of these recommendations. We have emphasized on numerous occasions that the CRTC's power of exemption must only be used extremely sparingly. We would in fact have liked this decision to require DTH distribution undertakings to hold a licence to have been made from the outset. However, since that was not the case, we believe the onus is on the government to find a solution so that compliance with the principles of fairness and generally accepted legal practices can be reconciled with the will expressed by the Panel to require DTH distribution undertakings to hold a licence.
On this point, we believe that the wording proposed by the CRTC in its letter of April 24, 1995 to the Deputy Minister of Canadian Heritage would, if accepted, make it possible to reconcile these two objectives.
We obviously agree that Canadian pay-per-view television services should be subject to the requirement to hold a licence. However, we question the necessity of requiring these undertakings to hold separate licences depending whether they are distributed via cable or DTH.
Our understanding was that DTH distribution undertakings would be authorized to distribute only programming services already licensed, exempted or otherwise authorized by the CRTC for distribution in Canada and that Canadian services already licensed could be distributed by new DTH distribution undertakings without their having to apply for a new licence for that purpose.
We are opposed to Canadian pay-per-view undertakings being established solely for the purpose of DTH distribution and, in that case, they will clearly not be subject to the licensing requirement. However, we believe that all pay-per-view television undertakings, whether distributed exclusively by cable, by DTH or by both distribution methods, should be subject to the same requirements and the same conditions of licence and that a single class of licences would therefore be sufficient.
We are greatly concerned about the disastrous effects that would result from extending to the broadcasting sector the concept of North American distribution rights, which the so-called major U.S. studios have imposed on us in the film industry for decades.
The Panel states in its report that, by prohibiting pay-per-view television programming undertakings through licensing requirements from acquiring exclusive distribution and pay-per-view programming rights in Canada, including for feature length films, it would solve the problem and thus prevent the practice of acquiring North American rights from being introduced.
We think this conviction is groundless and based on ignorance of the chain of rights and decisions. Obviously, it is the U.S. distributors, who hold the rights, that have imposed the concept of North American rights in the film industry, not Canadian movie theater operators. Even though Canadian pay-per-view television programming undertakings are required by their conditions of licence to acquire only non-exclusive distribution rights, there is nothing preventing U.S. pay-per-view television programming undertakings from entering into agreement with the major U.S. studios, granting them exclusive North American pay-per-view television distribution rights.
From the moment one accepts the principle of authorizing a North American pay-per-view television programming service, one promotes the introduction of the concept of ``North American distribution rights'' in this industry, and risks depriving Canadian businesses - which exclusively serve the Canadian market, considered as a separate broadcasting market - of any genuine opportunity to compete for the products essential to their programming formula.
Consequently, they risk sooner or later finding themselves in the situation of independent Canandian distributors with respect to the major studios.
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Another aspect of the Panel's recommendations that concerns us is the absolute priority it suggests should be assigned to competition, to the detriment of all other considerations, particularly the viability, profitability and sound financial health of the Canadian broadcasting system as a whole.
This is a surprising recommendation, diametrically opposed to the policy established some 12 years ago by the CRTC with respect to the licensing of new programming services. Under that policy, which was supported by all the witnesses at the hearings on the industry's structure, the following are considered as important factors in evaluating applications: market demand for the proposed service; financial viability of the applicants and their proposals; possible repercussions for current licence-holders.
This policy is healthy. It even seems to us to be the only reasonable and viable policy from both an industry and cultural development perspective.
Mr. Chairman, members of the committee, those are our main concerns. We will be available to answer your questions following a presentation by Mr. Allan King, who is representing a group to which we belong.
[English]
Mr. Allan King (President, Directors' Guild of Canada): Good afternoon, Mr. Chairman. My name is Allan King and I am president of the Directors' Guild of Canada. The Directors' Guild represents over 1,500 key creative personnel in the film and television industries across Canada.
As you know, on June 2 the Directors' Guild filed a joint submission to the government on the question of DTH policy. That brief was put forward jointly by seven different organizations of creators, producers and distributors of Canadian cultural programs. You've just heard from one of those groups, l'Association des producteurs de films et de télévision du Québec, represented by Louise Baillargeon and Suzanne D'Amours.
Two groups that also support the joint submission, SARDEC and ADISQ, have already appeared before you. Three other organizations have also joined in our brief, namely the Canadian Film and Television Production Association, the CFTPA, the Canadian Independent Record Production Association and the Writers Guild of Canada.
I would like to apologize in particular for Mireille Watson, the acting president of CFTPA, who had hoped to be here but was unable to join us.
Finally, I want to introduce our legal counsel, Peter Grant. Mr. Grant is a well-known expert on communications law and cultural policy. He recently chaired a group of experts on alternative programming services, which released its report to the Minister of Canadian Heritage last week. Both Louise Baillargeon and I served as members of that group.
I will take only a few minutes with opening remarks.
A key concern of our various organizations is to ensure that our broadcasting system gives proper support to Canadian cultural expression. The emergence of direct-to-home satellite systems in Canada represents a challenge, but also an opportunity to set structures in place that will protect and assist our cultural sovereignty.
Our written submission to the government notes there is much in the report of the policy review panel on DTH with which we can agree. Certainly we have no difficulty in contemplating a competitive model in regard to DTH distribution. In fact the whole point of sanctioning legal Canadian DTH distributors was to provide a competitive alternative to cable distribution.
We also think a licensing approach for DTH is to be preferred to an exemption approach. That being said, however, we have concluded that in a number of areas the policy review panel made some fundamental errors and that these should be taken into account before any directions are issued by the government to the CRTC.
Our first concern is that the panel provided an inadequate analysis of the implications of competing pay-per-view services in regard to the acquisition of rights. Its prescription of non-exclusivity as the solution was quite shallow and did not adequately address other marketing practices that would have anti-competitive effects.
More importantly, however, the panel failed to understand that its model would bid up prices for U.S. product and lessen the amount available to support Canadian creators. We think the issue of possible pay-per-view competition is a matter that needs to be left to the give and take of CRTC hearings, based on real business plans.
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Second, we think the panel wrongly ignored the inherent policy problem in allowing a DTH distributor to own and operate a pay-per-view service being carried on its satellite system and not to be subject to a requirement to give access to all Canadian-licensed programming services.
The structure blessed by the panel, which not only allows vertical integration but ignores its discriminatory effects, will materially harm any competing Canadian pay-per-view services. It will be inconsistent with sound public policy to have all distribution gate-keepers give equitable access to Canadian-licensed services. More important, it will lead to a lessening of available revenues for Canadian creators.
Third, we think the panel, in an effort to create a level playing field between DTH distributors, has created a scenario where the availability of a legal Canadian DTH service may be delayed for a period of a year or more. Apart from the legal issues involved, we think this will simply play into the hands of the illegal grey market in satellite dishes pointed at DirecTv and will defer lawful competition with cable to the detriment of Canadian consumers.
Accordingly, we favour continuing for a transitional period the exemption order in effect until final DTH licences are in place.
Fourth, we believe the panel has significantly understated the amount of contribution to Canadian content that should properly be made by DTH distribution undertakings and by pay-per-view services.
Finally, we believe the panel has ignored the importance of requiring non-studio films for pay-per-view services to be acquired from Canadian-owned distributors.
Each of these points is elaborated at more length in our joint submission.
We thank you, Mr. Chairman and members of the committee, for giving us the opportunity to come before you. Now we'd be pleased to respond to any of your questions.
The Chair: I thank you for being so concise in introducing your remarks.
I fear there will be a growing degree of nervousness on the part of the members, for whom the bells toll. Therefore I will invite you to take a tea break or something of that variety while we go off and do our duty.
We will come back as soon as we can, but we never know when that will be. We will, however, come right back here and carry on with all of our witnesses. I apologize again for the disorderly nature of parliamentary democracy.
Thank you.