EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 6, 1995

.0905

[English]

The Chair: Order.

I think we have enough members present to begin our discussions this morning. The subject is direct-to-home satellites. I would invite our colleagues from the electronic media to gracefully egress as we begin our discussions.

We're delighted to welcome Keith Spicer. This is pursuant to Standing Order 108(2) and the Broadcasting Act, which invites us to study draft orders respecting the government's direct-to-home policy.

I suspect you might wish to make an opening statement, Mr. Spicer. This is the first chance we've had to consider the issue formally and directly. It seems appropriate to begin with you, and I invite you to make your opening remarks.

Mr. Keith Spicer (Chairman, Canadian Radio-Television and Telecommunications Commission): Thank you very much, Mr. Chairman. I was trying not to remember the biblical phrase that the first will be last. We are the first to appear, but I hope you'll listen to us anyway.

Mr. Chairman and hon. members, I am pleased to appear before you today in order to discuss the government's proposed orders respecting direct-to-home satellite distribution and DTH pay-per-view programming.

I am accompanied by our vice-chairman, broadcasting, Mr. Fernand Bélisle; our acting vice-chairman, telecommunications, Mr. David Colville; and our secretary general, Mr. Allan Darling.

As you are undoubtedly aware, many of the issues before us today are of a legal nature and will require legal interpretation. As a result, the CRTC senior counsel, Mr. Avrum Cohen, and one of our legal counsel, Madam Sylvie Courtemanche, are also with me.

Mr. Chairman, perhaps you would allow me to try to set the tone of our intervention with a word about the context as we see it. We're not here to engage in polemics with anyone, and certainly not with the government, nor are we here to speculate about motives, rumours, or unproven suspicions.

The government, the CRTC, this committee and every one of us involved in this very important 40-day scrutiny are, I believe, feeling our way in good faith, bearing in mind that the outcome and the way we all play our roles will set a powerful precedent.

In that light, the caution we advise is only the caution of those who wrote the Broadcasting Act, and our insistence on transparency and on respecting the law is the insistence of Parliament itself. We are sure this is also the government's wish. So, while defending the law firmly and frankly as we think it plainly speaks, we are looking forward to cooperation, not confrontation, decisions, not delay. Of course, we are looking toward a healthy precedent that will protect both the government's statutory right to issue broad policy direction of general application and the commission's statutory right and duty to implement policy - and I underline ``implement policy'' - as it sees fit in specific circumstances.

Under the new procedure, we wish to assist this committee in two ways. One way is by stating the facts concerning the commission's DTH exemption order of August 30, 1994, and thus dispel any misapprehension that the commission conferred a so-called monopoly on any individual company through its exemption order. The second way is by analysing the order's clear non-conformity with the Broadcasting Act. In sum, we will stick to the facts and the law.

.0910

To flesh out both facts and law, allow me to draw your attention, Mr. Chairman, to two separate hand-outs we have circulated. I apologize abjectly for the late arrival. I guess you get tired of hearing this. We worked up until the last minute. I learned just as I came in that you only got these this morning. I apologize a great deal. On the other hand, they make wonderful late-night reading.

There is a detailed chronology on the DTH dossier for the past few years. I think it is critical that you really see what has happened here. It's been very hard to follow as to who has done what and when, and to see the big picture. We did this chronology telling, to the best of our knowledge, what everybody did and when, so that you could see the whole movie rather than a photograph of a given moment.

We also have a very specific legal brief filed with you by our legal directorate. This is 21 pages. It's almost poetic, I would say, in its impact. It is full of very practical arguments, very direct legal arguments, as well as case law, which I'm sure you'll find very helpful.

Let's start, then, with part I, ``Facts of DTH Chronology: CRTC Policies and Actions.''

To begin, I would like to take you back to our public hearing on the structure of the cable industry in March 1993, the hearing we called ``the mother of all hearings''. At that time, industry representatives, namely Tee-Comm and Telesat, indicated their intention to develop Canadian direct-to-home distribution services using Canadian satellites.

These proposals received enthusiastic support from the commission, and the industry in general, for a number of reasons. Consumers wanted competition to cable as soon as possible, and many interested parties believed U.S.-based satellite services would spill over into Canada and create what is commonly known as a grey market.

We recognized a strong need for Canadian alternatives in distribution technologies, and we fully endorsed competition in providing those services. In fact, in our public notice following that hearing, we stated:

The Commission considers that the emergence of a strong Canadian DTH industry may provide a degree of price competition to services delivered within Canada by other distribution technologies....

We received a clear message to hasten competition, not to slow it down, and hasten competition is exactly and publicly what we did.

In October 1993 we received separate proposals from Telesat and Tee-Comm requesting that the commission exempt Canadian DTH distribution undertakings from the requirement to hold licences. On March 2, 1994, the commission published a public notice requesting comments on its proposed DTH exemption order. As part of this public process, we carefully reviewed the 60 submissions we received.

Under the Broadcasting Act, broadcasting undertakings must either be licensed or exempted from the requirement to hold a licence. In fact, under subsection 9(4) of the Broadcasting Act, broadcasting undertakings must be exempted from the requirement to hold a broadcasting licence where the commission is satisfied that compliance with the requirements of part II of the act, or applicable regulations pursuant to that part, will not contribute in a material manner to the implementation of the broadcast policy set out in subsection 3(1). Subsection 3(1) gives you broadcasting policy, and subsection 5(1) regulatory policy.

Once we carefully reviewed the 60 submissions received, the commission exempted Canadian DTH companies from the requirement to hold a licence, provided they met certain criteria. Among other things, they must meet the technical requirements of the Department of Industry, meet Canadian ownership requirements, make use of Canadian satellite facilities for the distribution of programming, and carry a predominance of Canadian services.

We did this fully in accordance with the Broadcasting Act. Our exemption order did not create a monopoly; it allows any number of companies who meet all the criteria to operate without a licence. It's important to underline that an exemption by definition means the field is open to anybody who meets the criteria; it is not limiting it at all. We also did not prevent anyone from applying for a licence. Exemption is not exclusion.

To date, and in spite of earlier interest by several companies, only one such company has come forward - Expressvu. That can hardly be said to be creating a monopoly. What we created was a competitive regime with two doors to entry: first, by exemption, if you met all the pro-Canadian criteria; and second, by licence, through our usual open process, if you didn't.

We can't force companies to compete. If we are guilty of anything, we are guilty of standing up for Canada by encouraging early competition by Canadian entrepreneurs, as both the Broadcasting Act and the Telecommunications Act tell us we must.

.0915

The Broadcasting Act says we must make ``maximum use...of Canadian creative and other resources''. The Telecommunications Act tells us to, ``promote the use of Canadian transmission facilities''.

[Translation]

The door has always been wide open, even before we issued our exemption criteria last August 30th, for companies to apply for a licence through an open licensing hearing. We made that absolutely clear in the Public Notice accompanying our proposed exemption order in March of 1994. We have yet to receive such an application.

We have been accused of having effectively prevented certain companies from applying for a licence by requiring the use of Canadian satellite facilities for the transmission of programming. This accusation is demonstrably false since any applicant not meeting the exemption criteria could still apply for a licence under our normal open procedures.

Let me explain, at this point, why the CRTC decided to require the use of Canadian satellites as a condition of eligibility for exemption. Among the factors influencing us were:

- it was consistent with two fundamental objectives of the Telecommunications Act: to render telecommunications services of high quality to all regions of Canada; and to promote the use of Canadian transmission facilities.

- technically, Canadian satellites are known to cover all parts of Canada, ensuring that all Canadians are able to receive DTH services.

- it ensures that Canadian Broadcasting undertakings have effective control over their service.

It has been the Commission's understanding, since the exchanges of letters between Canada and the United States in 1972 and 1982 with respect to the delivery of transborder satellite signals, that Canadian services should use Canadian satellites for delivery of signals within Canada.

Furthermore, in the press release issued on the 26th of April, 1995, by the Ministers of Industry and Heritage announcing the tabling of the proposed directions, it was noted that the two ministers, in announcing a public review of policy respecting DTH on September 12th, 1994, confirmed that the ``CRTC's exemption order was consistent with existing government policy''. Based on our understanding of government policy with respect to the use of Canadian satellites, we too believed that our exemption order was consistent with government policy in this area.

We wholeheartedly agree that the issue of when it is appropriate to use Canadian and non-Canadian satellites must now be resolved. This is why we ask the government to clarify its policy regarding the use of Canadian satellites in our written response to the proposed orders on the 24th of April.

[English]

I have some legal concerns with the proposed orders. Let me first state clearly that the commission supports the right, responsibility, and authority of the Governor in Council, as section 7 of the Broadcasting Act defines these powers, to ``issue to the commission directions of general application on broad policy matters''. This is with respect to the objectives set out in in the Broadcasting Act in subsection 3(1), on broadcasting policy, and subsection 5(2), on regulatory policy.

We recognize and fully endorse the government's exercise of these powers as prescribed under the Broadcasting Act. However, we also consider it vital to emphasize that while these powers are conferred by Parliament, they also have been circumscribed by Parliament in a number of strong and clear procedural safeguards incorporated into the act. We believe these precautionary measures are fundamental in order to protect not only the commission's independence as an arm's-length transparent regulatory body but also the rights of the Canadian public and regulated industries to a regulatory system that is demonstrably fair and open.

The power to issue policy directions has long been debated by various governments, reports, and even a royal commission. In order to put this into context, I'd like briefly to take you back through some of the legislative history surrounding this matter.

Before Bill C-40 came into force as the new Broadcasting Act on June 4, 1991, the Minister of Communications at that time, the Honourable Marcel Masse, made a compelling statement to the House committee studying the bill.

.0920

He argued that:

The power to issue directions, which would give the government the authority to develop broad policy guidelines, only applies to the objectives of the Canadian broadcasting system, as set out in the act.

He further stated that:

This power does not extend to individual decisions regarding licensees, nor to matters being studied by the commission, nor can it be exercised retroactively.

Ironically, at least two of these points are at the core of today's debate. It is clear that the Governor in Council's power of direction was never meant to direct the commission on its implementation of policies, nor to create a licencing decision. The protection of the commission's independence and integrity was at the forefront of the consultations on Bill C-136, the predecessor to Bill C-40, and to Bill C-40 itself. We believe this principle is essential to these proceedings and should be emphasized once again.

The main concerns of those who made submissions at committee stage are perhaps best summarized by the Canadian Association of Broadcasters' statement before the House committee. Among other things, the CAB expressed concerns that these powers would severely dilute the independence of the commission, and would provide the opportunity for political interference in the management of the Canadian broadcasting system.

The CAB also perceived these powers as the creation of yet another regulator, a non-transparent one, that could exercise its powers at any time and could lead to a destabilization of the broadcasting system. It also strongly feared that individuals who made plans based on current commission policy could see their projects and investments affected by political intervention. We believe these arguments are just as compelling today as they were then.

During committee review on Bill C-136, the commission stated its support for the Governor in Council's authority to issue broad policy directions of general orientation, albeit with the inclusion of appropriate safeguards. We reiterate our support for this again today, and we're pleased to have those safeguards, notably, the 40-day scrutiny by this parliamentary committee.

We are before you today to voice our deep concerns, not about the principle of the power of direction, but about the astonishingly detailed nature of the government's two proposed Orders in Council, the unprecedented retroactivity of one of the directions, and the imminent potential for the government to overstep its legitimate authority under the act.

I respectfully submit to you that we were created by you, Parliament, as an independent agency established for the purpose of regulating and supervising all aspects of the Canadian broadcasting system, free from political interference. This is our raison d'être; it is our mandate under the act. The commission's independence and integrity are gravely at stake today.

The government's power of direction was never meant to usurp the commission's exclusive role in implementing broadcasting policy for Canada. Again, I underline the word ``implementing''. It was plainly and unmistakably meant only as an instrument to guide broadcasting policy in a general orientation.

We are also deeply concerned that the government's proposed direction could effectively terminate the commission's presently valid exemption order. We believe this would constitute retroactive regulation, which was certainly not contemplated under the act when the government was given the power to issue directions. We strongly oppose retroactive regulation as intrinsically unfair and destabilizing. We firmly believe any such action would constitute the government overstepping its legitimate authority, and would result inevitably in a legal challenge.

We urge you to consider all these ramifications, and we remind you that the consortium presently proceeding under the commission's exemption order has taken steps, including incurring significant financial investments, in order to launch a Canadian DTH satellite service in September 1995.

We also wish to point out that Expressvu has advised the commission, in a letter dated May 19, 1995, that the proposed orders, particularly the direction that would require the commission to revoke its exemption order, are illegal, and that it will defend or take all legal proceedings it deems advisable to protect its ability to use the exemption order until it receives the licence.

This is a no-win situation for everybody: for consumers, who are expecting an alternative to cable in September; for the companies involved, who have been proceeding legitimately; for Canadian artists and producers looking for new opportunities; and indeed, I would think, for the government itself.

.0925

[Translation]

We also question the need for the proposed order concerning the requirement to create a special class of license for DTH pay-per-view undertakings. The Commission has already licensed pay-per-view undertakings and their contributions to Canadian programming are considerably in excess of the 5% benchmark proposed.

It sees no point in creating a separate class of license for these undertakings in order to provide for the competitive delivery of DTH pay-per-view services. Any person proposing to offer DTH pay-per-view services can apply presently under the existing licensing framework. Furthermore, the CRTC currently allows pay-per-view to be distributed either directly or indirectly to the DTH market, and the Commission believes that these licenses should be permitted to compete in the DTH market.

Finally, let's talk about moving forward to competition.

As a final point, let me repeat this incontrovertible fact: the Commission has a clear record of hastening competition. We have been doing this for years, notably in the long-distance telephone market, and very recently in our report to the government on the information highway. And we have done so very specifically with DTH.

We also believe that our public hearing process provides a transparent, open forum that remains vital for the integrity of the Canadian Broadcasting System in general, the regulated industries and the Canadian public.

This being said, I assure you that we fully intend to cooperate with the government, but will do so within the law. We believe any orders would conform with the Broadcasting Act if they focused exclusively on principles such as the following:

- first, clarify government policy on use of Canadian satellites;

- state that government policy favours competition among alternative DTH distribution undertakings;

- state that government policy favours that all DTH distribution undertakings be licensed rather than exempted and request that the CRTC exemption order be revoked as soon as a licensed DTH distribution undertaking becomes available;

- state that DTH distribution undertakings should make equitable and appropriate contributions to the production and distribution of, and access to, Canadian cultural content products and services while providing Canadian alternatives to non-Canadian services.

[English]

This whole sad episode of misunderstanding and misinformation has already seriously damaged Canada's regulatory process. It now threatens to delay competition, not hasten it. The CRTC only wishes to move forward quickly with all potential competitors and will do all it can to accelerate its procedures once the parliamentary process is completed.

We deeply hope that the government, with the additional time and advice now offered by this committee's valuable process, will review the facts, the law, the value of independent transparent regulation, and substantially modify its draft orders. When all is said and done, the government and the CRTC agree on the fundamentals of Canadian broadcasting. Everyone should now move forward to serve Canadians and Canada, as the Broadcasting Act prescribes.

Mr. Chairman, I know you and your colleagues have many questions for us today, so I'll end my comments here.

The Chair: Thank you, Mr. Spicer.

In order to be economical with our time,

[Translation]

I'll invite Mrs. Tremblay to ask her questions for about 10 minutes.

Mrs. Tremblay (Rimouski - Témiscouata): Mr. Spicer, thank you very much for your very enlightening presentation which I will read again closely. We have many questions but very little time.

I will try to go straight to the heart of the matter and, with your permission, when all my colleagues have finished, I will ask you a a question about ``addressability'', which I would like you to explain to me before you leave.

I am caught in a dilemma. I am a member of the Opposition and I find, when I read the draft orders, that they were tailor-made for a company. Furthermore, you are being accused you of having drafted a tailor-made exemption for another company.

.0930

How can we really understand what all this means? I was pleased to hear all the facts you presented, and we are told that this is for competition. You are telling us that this does not prevent competition. How can we resolve this dilemma?

Mr. Spicer: Madam, that is indeed the basic issue.

If you want to see clearly what's happening, you have to deal strictly with the facts and with the legislation and not listen to rumours, gossip, suspicion, etc.

It is possible that the CRTC was in fact too discrete about all this. It is not always the case, but in this case, since roughly last September, we had heard rumours being circulated quite efficiently by some people, rumours that had reached the authorities and the media that were quite groundless. We had to make a choice. We could have corrected everything. We tried to do so in a dignified and simple way but at a certain point, we would have had to respond in kind and start a media campaign against a lot of of very highly regarded people and drag this legal matter through the media and launch into public debate.

So we took the other alternative: we took a good opportunity to keep quiet but this good opportunity did not serve us well. Because we didn't react by embarking on a campaign to set the record straight and correct the myth, we suffered considerably in the media and in public opinion because the public is convinced that some of these myths are true.

I think I have told you quietly and calmly today that these allegations are false and I have given you only the facts and relevant sections from the Act.

If you want to understand all this, I would suggest you review the chronology, that you examine the information that was given to you on the CRTC process, a process which has systematically promoted competition. Also, read the Act concerning powers of direction and start asking questions of the people who told you the opposite.

Mrs. Tremblay: From the information we have received, the two companies involved, Expressvu and Power, will not use the same technology and we will face the dilemma that we faced with the video systems, the war between Beta and VHS, which in the end penalized a of taxpayers who had to buy new VCRs and different types of tapes. Is there reason to believe that we are going to find ourselves in the same situation and that consumers who decide on one service will not be able to change over to the other if they're not happy with the first one?

Mr. Spicer: That is an excellent question, Mrs. Tremblay. I think that the two companies in competition, officially and unofficially, are well aware of this problem. Generally, they would like to find a way of having compatible technology. Since we are getting to a more technical area, I would like to refer this question to my colleague and Vice-Chairman, Fernand Bélisle, who is familiar with the technical side of the issue.

Mr. Fernand Bélisle (Vice-Chairman, Radio-Television, Canadian Radio-television and Telecommunications Commission): It is true Mrs. Tremblay that both companies have picked a different digital compression. There's not much choice. The American satellite used by DirecTv is DirecTv's own technology. We can either take the American model or try and maintain a Canadian model. It is a fact that subscribers will not be able to chose between the two.

Mr. Spicer: What complicates matters a bit, and you will correct me if I'm wrong, is that Canadian technology is also seen as a more international technology, which means that it has been adopted by some international bodies as well as some American companies. I believe this is the case.

The challenge is to try and reconcile both for Canada, for this land which is called Canada.

Mrs. Tremblay: Thank you.

.0935

[English]

Mrs. Brown (Calgary Southeast): In my first question, Mr. Spicer, I'm going to refer to page 8. You talk about the commission having a clear record of hastening competition. In my view, competition is determined by the marketplace and not by any regulatory framework. Indeed, consumers, not a regulatory body, not a commission, drive competition.

It would seem to me that Canada's strong regulatory framework has hindered that competition. What we have now is an environment of advanced technological supports. This has overtaken the agenda in Canada. We have consumers who want what that technology is prepared to offer, yet we have regulations that are hampering that selection and that choice by consumers. So rather than having hastened competition it has hampered it.

I'd like you to answer that particular concern.

Mr. Spicer: I would love to, Madam Brown. I don't disagree at all with you about the essential motor for competition, which is the marketplace. What is the marketplace? It's technology, it's capitalism, it's market forces, it's millions of business decisions and it's tens of millions of consumers. Let's start with that. We agree on the textbook definition of what a market is.

I have said many times publicly that what is driving the changes towards the information highway is not government, not regulators; it's those three factors: technology, market forces and the consumer. There is no problem with that.

However, when you talk about what the regulator is doing, regulators can either intervene or they can get out of the way. I know you are a serious student of regulation. You will quite often find that in fact, almost invariably, the biggest companies that compete in this market will one morning tell you they don't want regulation, and the same afternoon they'll say, we want protection, please come and regulate.

This is also the law of the market. If you look at what has happened in telephone competition, back in June, 1992 we were asked by the industry to create what would have been a duopoly. We went further than that. We threw it wide open.

It took people's breath away, even the breath, believe it or not, of The Globe and Mail's editorial board. We did it again; I don't know how they choked down the words that this decision was bold and visionary. That's what they said last September about our second telephone decision, which opened up local competition.

They were staggered. Even that wonderful man, Mr. Corcoran, the humour columnist of the business section -

Some hon. members: Oh, oh!

Mr. Spicer: - said he was taken aback. He said some nice words.

So as a regulator you have to become a philosopher, and beware of slogans.

Regulators are probably a necessary evil. If you look at what's going on in the United States, you will find that after they encouraged long-distance telephone competition they had to deregulate a lot more to make sure the huge companies did not eat the little guys for breakfast the next morning. That's the situation we're in.

It's not enough just to gargle with the slogan, ``Let's have competition''. You have to ask how it's going to work. We are the place where the buck stops. The slogans stop at our door.

We have to apply these slogans of competition and protecting Canada too to real-life situations of Canadian reality. There's no more kidding. It's not a textbook game. We're not writing a course on Competition 101; we're making this work. We're making competition work for Canada's economy and culture.

Conceptually it's perhaps useful to see competition not as the goal but as the instrument to the goal. The goal is Canada, the existence of Canada. One of the very useful instruments is the widest possible competition that is compatible with the maintenance of Canada.

Our difficult role is to juggle consumer demands, market forces and demands of a company to take over others and protect them in the morning, whereas they want to be favoured in the afternoon, and to watch the technology, to apply all this to extremely complex situations and to keep our sense of humour. This is really what our role is, to deal with the case-by-case reality.

.0940

In many ways the orders before you today are a matter of applying our unfettered discretion, as the Broadcasting Act says, to apply a case-by-case approach. That's why Parliament set us up in the first place, because no government has the time to deal with the unbelievably detailed matters.

We put out at least 4,600, up to 5,000, decisions a year. Some of them are very large, such as the information highway report; others are very small, such as increasing the wattage of some little station in Wawa, Ontario. But they all demand a view of life both through a microscope and a telescope. We have to do our homework.

I'm not trying to drown your question, believe me. If you want to go back at it.... But my answer is -

Mrs. Brown (Calgary Southeast): Oh, I think we might have got a nugget or two out of that -

Some hon. members: Oh, oh!

Mr. Spicer: All right. That's all I ask.

Mrs. Brown (Calgary Southeast): - perhaps some small bit.

The other question I'd like to ask looks at this issue of Expressvu and its entry into the broadcasting system.

It's interesting to see how you cast the problem on page 7. It's rather interesting in terms of the confrontation that may emerge, because you see the role of the commission as an implementer and the role of government as something that guides broadcasting.

In terms of the legal challenge that's going to emerge, I would like to know how those two elements are going to be satisfied.

Mr. Spicer: You put your finger on the central problem, Mrs. Brown, and that's really why we're here today.

The Broadcasting Act clearly states that the government has the power to give directives of general application on broad policy. This is limited in fact to subsections 3(1) and 5(1) of the Broadcasting Act, maybe subsection 5(2) as well.

This means on broadcasting policy and on regulatory policy Parliament, after these months and months, indeed years, of scrutiny of this intervention power on the part of the government...and I think it's fair to say previous parliaments were walking on eggs when they included this power. It was one of the really sensitive issues. Nobody wanted partisan or political interference in the regulatory process. They wanted it to be at arm's length, free, independent and non-political.

You all know this has enormous advantages for the whole political system. It enables politicians to hive off a lot of difficult, unpopular decisions through people like us. That's one reason we're there.

Another reason is to reassure the industry that there's a level playing field and to reassure consumers that their interests are being protected. It's not always easy to convince everybody on the same day that you're protecting their interests.

The best analogy I can give is that if you take a snapshot of our decisions on one day, you can prove anything - that we're in bed with the phone industry, the cable industry, the artists and the consumers. We're incredibly promiscuous if you really believe that approach.

Or you can look at this as a long-running movie and try to stay to the end. It's never boring. If you see it as a long-running movie, what we would ask you to do is see what we do as a five-year movie. Let's say, stay till the end and judge us against our mandate in the law.

A lot of people have the impression that we have 25 other mandates that are not in the Broadcasting Act or in the Telecommunications Act. Our main job under the Broadcasting Act is to keep Canada on its own airwaves.

Mrs. Brown (Calgary Southeast): Mr. Spicer, I hate to interrupt, but I really want -

Mr. Spicer: Listen, I've been going on too long.

Mrs. Brown (Calgary Southeast): No, no, that's fine. You really put out a very strong statement when you said the result inevitably would be a legal challenge. I'm trying to formulate this question to get at the sense of what's going to happen, given that you see it as implementation and also government's role to guide.

Mr. Spicer: Okay. Let me come back to your question in a more focused way.

There is a way we can reconcile these two statutory attributions of power, the one that has been attributed to the cabinet, that is, the right to give directions on general application of broad policy, and our right and duty, including exemptions under duty, to administer and implement this. That would be to revise the orders so that they stick to general application and broad policy, that they stick, as we have suggested, to principles.

Give us the general principles. The most useful thing this committee could do is to help the government refine these orders into the essential bedrock principles that are in there.

.0945

We totally accept that the democratically elected government should have the right to issue broad policy directions of general application. That is not in question. We said that five years ago when the law was being discussed. We say it again today.

All we're saying is that the other half of the equation, as Parliament itself laid down, is that these powers have to be exercised in the way they were prescribed and circumscribed. They are very closely and tightly circumscribed. Extremely limited powers are given to the cabinet, but they are extremely useful. I would call them minimalist but muscular.

If the government can stick to principles here - broad principles - I believe it can get the broad policies it wants, and they can count on us to do our work in a professional, independent and non-partisan way. That's why we're here.

Mrs. Brown (Calgary Southeast): Thank you.

The Chair: The minimalist but muscular chair must intervene to pass along the microphone to Mr. Ianno, who has some questions.

Mr. Ianno (Trinity - Spadina): Thank you very much, Mr. Spicer, for reappearing.

Instead of dealing with the role of the CRTC and getting into the whole philosophical perspective you're presenting, I'm curious about the issue at hand. Now that cabinet has given some directive, how does the CRTC see the problem being solved?

I've been reading the information you supplied. Part of it has to do with the exemption order versus the U.S. satellite. Taking into account that Expressvu was slated for September 1 or whatever date it would be able to begin its service.... The directive of cabinet was licensing the issue or the exemption. If so, is there a way of still giving an opportunity to Expressvu and others to get a licence so they could operate by September 1?

Mr. Spicer: With all the goodwill we have - and it's considerable - since this process has been launched, ironically it is going to slow down the process of licensing.

The licensing process has been open for eight months. The door has been open for eight months for anybody to walk in the front door, face a public hearing in the light of day on national television, explain why they want a licence and what they're going to do for the Canadian broadcasting system and to support Canadian culture.

Nobody has prevented anybody from walking in to apply for a licence. They would have received prompt and fair service.

I said at the beginning that there were two doors to competition. The licensing one is there. Unfortunately, nobody has chosen to walk in the front door yet.

The other way is exemption, and I should clarify what exemption means. It means you don't need a licence. We had a couple of letters from very interesting people who asked, under the exemption order, how do you get a licence?

Well, exemption means you don't need a licence. That's why, again, Madam Brown, we are saying that we hasten competition.

We were so impressed by what the public told us during the mother of all hearings in the spring of 1993. They said they wanted competition to cable. They were mad at us. It's not unusual for people to be mad at us, but they wanted competition to cable.

We listened to them. We said we would do that. This was also the time when people were talking of ``death stars.'' Remember that phrase? People don't use it any more, but they were using it then. There was a great deal of public fear that the Americans were going to come in and swamp or destroy the Canadian broadcasting system. I think it was overblown, but it was there. That was the climate of the time.

We were being implored by the public and the industry to facilitate competition in Canada by Canadians as quickly as possible. So after holding a 6-month public process, scrutinizing 60 submissions, telling everybody, from beginning to end, that at the request of two companies, Tee-Comm and Telesat, for example - and we thought there would be others - we were considering exempting people who could meet the all-Canadian criteria, we said if they met the essential criteria of Canadian ownership - predominantly Canadian services, Canadian satellites and so on - then they could come in as fast as they could get off the ground, or in other words, without a licence.

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Why is this? It's because the Broadcasting Act says we have not only the right but also the duty to exempt services that we believe would not better serve the Broadcasting Act if they had a licence. In other words, because they are Canadian - they're physically on the ground with their headquarters, technical services, and so on - we can control them. We can make sure they serve the interests of the Broadcasting Act.

So we did set up a competitive regime with two doors to an entry. It was wide open. The exemption means the field is wide open. That's what the exemption order means: wide open. If you're all-Canadian, come on in the front door. We have been praying every morning that more people would walk in. We have also been praying a little bit that somebody would walk in the other door. Nobody has prevented them. I guess you can't call that a monopoly.

As I said before, if the government says anybody can open a dry cleaning establishment, if the field is wide open and if only one guy comes in, can you call that a monopoly? I don't think so.

Mr. Ianno: Mr. Spicer, thank you. Since I have limited time, do you mind keeping your answers short, if possible?

Mr. Spicer: I understand.

Mr. Ianno: What I'm trying to get at is what cabinet gave, which is, I guess, a directive or whatever proper terminology is required. I know where you're at in terms of giving exemptions as long as it's a Canadian satellite. What is the difference between the two, and how do we resolve it?

Mr. Spicer: The difference between exemption and licensing?

Mr. Ianno: No, it's between what the cabinet suggested and where you were at. How do we resolve it? Say Expressvu has been spending money with the belief that they are going to be able to operate the beginning of September. How do we achieve it so that if anyone else wants to operate by the beginning of September, they have that option, but you're still not penalizing the other one that had the information such that they were going to be able to begin?

Mr. Spicer: I will give a short answer on the legal side of that. Then I'll ask the vice-chairman to get into the content.

On the legal side, our main objection is the specificity of the government's intervention, its retroactivity and the unnecessary nature of the papers you signed. So those are the legal points. If you'd like to go through them, I think we could spend some time with it.

Mr. Bélisle: Currently the commission is operating under an exemption order, and Expressvu has an opportunity to operate immediately. The government has required us to issue licences, so where do we go from here?

Mr. Ianno: I understood that because of the way you presented it. Is there a possibility for Expressvu, and anyone else, to get a licence, if that is what is required, as soon as possible so they can begin September 1? Is it a possibility?

Mr. Bélisle: It's not a possibility by September 1. In order to get a licence, we have to hold a public hearing. We need to give at least 50 days of public notice to create a public hearing. We cannot create a public hearing at this stage until the parliamentary process is over in order to determine what the government's requirement will be in terms of the orders it wants to issue to us.

So you're caught now in limbo. Until the government issues the order, we can't issue what we term a ``call'', which is an invitation for parties to file applications. Once they have filed these applications, the act requires that we give 50 days of public notice.

Mr. Ianno: When is it expected that the government is to give the orders?

Mr. Bélisle: I guess we're expecting that the orders to come out by the end of June or early July. I guess that's the best time.

Mr. Ianno: There are delay factors in determining what they want.

Mr. Bélisle: The act requires a minimum of 40 days for the parliamentary process to consider the order. So that means 40 days from the time it was introduced, which I believe was April 26. There must be 40 sitting days of either one of the houses. It's sitting days, not calendar days.

Mr. Spicer: What we can say is that, as soon as the orders come out in whatever form, we will act very fast.

Mr. Ianno: In other words, the 40 days is eight weeks roughly if they're sitting all the way through the system and if they're not both off at the same time.

Mr. Bélisle: C'est alentour de 40 jours. Assuming that the 40 days finished on June 23, then I gather the government on the 41st day could issue the orders. At the end of the 40 days it has one last thing to do, and that is to consult with the commission before issuing the order.

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Mr. Ianno: So by the end of June, if you do the 50 days, it would be close to the end of August.

Mr. Bélisle: There's a question here of how to proceed after the orders are issued. Do we make a general invitation for parties to submit, because as you know, the DTH panel recommended that there be competition in the provisions of DTH? So we would issue an invitation that would last from 30 to 60 days maximum, and at the end of that 60-day period we would then create a public hearing, but we need another 50 days to give notice so people can intervene. You're looking at the end of December, January, for parties to be licensed.

The chairman reminds me that if you take the calendar from June 23, you can have a December 29 date, but you're looking at the end of December or early January to issue the licences.

Mr. Ianno: The big difference also is U.S. satellite versus Canadian satellite. Is that the other big issue other than competition?

Mr. Bélisle: That issue is on the pay per view. The government has to clarify whether there is a requirement to use Canadian satellite for a Canadian service or whether you can strictly use American satellite and the difficulties that this creates to the Canadian system.

Mr. Ianno: This is what they are looking at before they make their order. Is that correct?

Mr. Spicer: This is one of the things they have to determine, and we should again point out that the government has said twice - last September and again in April - that our exemption order is in conformity with government policy as it stands.

[Translation]

Mrs. Tremblay: I have two brief questions for M. Spicer. In policy order number 23501, on page 3, paragraph 4.b) you are directed:

4.b) to take immediately on the coming into force of this order, all necessary and appropriate steps to ensure that no person is authorized to carry on a DTH distribution undertaking by any means other than a licence.

You gave Expressvu permission to begin operations on September 1st. Expressvu has publicly stated that, notwithstanding any order, it has the required legal opinions indicating it can begin operations on September 1st. Should the order come into force as written, what means are at your disposal to allow you to prevent Expressvu to offer its services on September 1st although they do not have a licence? Other than calling for the RCMP, what can you do?

Mr. Spicer: If the government proceeded as you indicated I believe that counsels should get together and examine all the options. I cannot go further than that. I am not in a position to tell you what would be their consensus. It is obvious that there would be a legal problem and that the courts would probably be called upon. I do not believe that your committee would ask us to act beyond the framework of the law.

Mrs. Tremblay: In the same order, section 3, paragraph d) there is a statement I would like you to clarify for me. It is said that cable operators must contribute to Canadian content, that is money is to be put aside to create a production fund. Because they do have a community channel, they do contribute to their production fund and this fund organize CPAC and this from the information we have, would be the equivalent of a total contribution amounting to 13%.

Cable distribution undertakings must maintain their community channel, provide funds to the Canadian production fund and, collectively, assume responsibility for CPAC.

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So this really amounts to a 13% investment. Under paragraph 3.d), we are reducing the contribution of satellite broadcasting. In the French version of the order, we are talking about ``télédistributeur'', but I imagine it means cable operators. They ``are required to contribute to community programming.'' This means we are exempting television from contributing. It's somewhat of an inequality between cable operators and satellite broadcasting, since they will not have to contribute to the community channel and to the maintenance of CPAC. We will therefore be asking cable operators to give more than what is asked of the satellite broadcasting industry.

Mr. Spicer: Madam, this is an excellent question. I think that those who gave you the 13% number would be the first to admit that it does not apply to all cable companies. I'd like to see how this figure was arrived at. It seems to me somewhat high and even quite high for several big companies.

A few days ago, you perhaps noticed that we blamed Vidéotron for not having met its obligations. Let's take this 13% as a starting point. You want to know if satellite broadcasters and cable operators are going to be treated fairly. As a matter of principle, yes.

Technically, I think that the concensus among all those who operate in this area - that's what I am infering from the public hearings on the information highway - is that all operators should more or less contribute the same percentage of their gross revenues to Canadian content. This is pretty well accepted.

[English]

The Chair: I have a few questions to ask, four, actually, and I guess part of it has to do with the history of all of this.

I note you say at the beginning of your remarks that one of the reasons you speeded up the whole process that led to the exemption order was because consumers wanted competition to cable as soon as possible. Yet going by your chronology, and I remember this as well, back in May a year ago there was this announcement by Shaw, Astral, Rogers, JLL, and CFCF that there was going to be this DTH service, which they would be working with WIC, Cancom B.C., and so on.

Now, I know that has changed. The landscape has changed, the players behind the expressed view have totally changed. But that original group of players, of course, included major cable companies an innocent mind might have thought would not have such a great interest in promoting an alternative to their own services, which seemed to be what happened eventually, leading to the collapse of that alliance.

I'd like to know, for historical interest, when that first unyieldy - I will not call it unholy - alliance came together, did the commission in any way directly, indirectly, privately, through any of its members encourage the formation of that alliance, or was it total surprise when this announcement was made on May 17?

Mr. Spicer: Vice-chairman Bélisle will be happy to give you some details.

Mr. Bélisle: The commission did not play any role in encouraging the alliance. The commission played a role in ensuring that there be a Canadian DTH alternative. The announcement that was made at the CCTA was not a complete surprise to the commission, because we had been advised a couple of weeks before that discussions were going on. Once the business plans were starting to be made in how to turn this DTH into a viable operation, the financial numbers did not add up.

The Chair: But did the commission, when they were informed -

Mr. David Colville (Acting Vice-Chairman, Telecommunications, Canadian Radio-Television and Telecommunications Commission): Mr. Chairman, could I just add to that? In the context of the history of this I think it's important to understand also that there was another concept being developed at the same time, commonly known as the ``head end in the sky''. This also came out of the structural hearing. That was the cable operators getting together to try to use the satellite and encompass with that this digital video compression technology, which would allow the smaller, rural cable systems to take a lot of these television services without having to spend a lot of capital dollars for this decoding equipment. On a per-subscriber basis, that would then get very expensive.

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So the cable operators, particularly a number of smaller ones, banded together to develop this notion of head end in the sky. At the time, the notion of head end in the sky and DTH was all being developed under one umbrella. So the consortium of people got together to try to help out the smaller cable systems, and at the same time, a number of parties were developing this DTH thing.

As you noted earlier on in your comments, that eventually split up, because the cable operators noted that the DTH part of it may impact on their own business.

But at that time, that big consortium was pulled together to try to encompass both of those ideas.

The Chair: I'm looking at the large cable companies here, such as Shaw and Rogers, whose names I read here. I ask myself, even if the only role of the commission was to be consulted two weeks before the announcement was made, in light of what the chairman said, which was that consumers wanted competition with the cable business, not some kind of collaboration, did the commission tell folks, hang on - they were the very people being competed against, so why should they come into the tent?

Did the commission offer a view of that?

Mr. Bélisle: Mr. Chairman, I just want to clarify. I did not use the word ``consult''. I think I said we were ``advised''. We were told they were coming together.

The Chair: I see.

Mr. Bélisle: All along the commission has always indicated to all the groups that wanted to offer DTH that.... The group that had to offer DTH had to ensure that the offering would be available to small cable companies, MATVs and individual subscribers, and that there should be no protection for in-cable areas.

Mr. Colville: I think it's interesting to note that as this dual thrust developed, the cable operators spun off developing the head end in the sky notion, leaving the others to develop the DTH proposal.

Mr. Spicer: Mr. Chairman, maybe I can just add one last word. I think we have always tried to encourage the creation of Canadian alternatives, but not to encourage one particular company over others. There's a huge distinction there.

The Chair: All I note is the possible variance of objective between, on the one hand, a kind of Canadian solution, and on the other hand, a competitive solution. I think I see that in the early days there was some possible confusion of objective in all of this. I'm just noting that.

In terms of an exemption order itself, as opposed to any other instrument, the government recognized that it was technically correct, just as you've recognized that it's technically correct for the government to issue a policy directive.

The question is, for a non-lawyer, what is really intended by an exemption order? Is it intended to be a device that is most often used by people like you for situations that are really of a technical variety, where there's not a major principle at stake, not major business interests at stake? Is it possible that while you've technically been correct with your exemption order, it was not intended for major decisions of this kind? Or have a lot of major decisions been achieved through exemptions orders?

Mr. Spicer: We've brought along our lawyer, Mr. Chairman. I could give you some examples, such as tele-shopping, low-power radio and so on, but you're asking whether major decisions...and whether DTH is not a major decision. I'll let Ms Courtemanche deal with this.

Ms Sylvie Courtemanche (Legal Counsel, Canadian Radio-Television and Telecommunications Commission): The requirement is not whether or not a decision is major as to whether the commission should, or when it must, exempt. The requirement under subsection 9(4) is that where the licensing of a class of undertaking will not materially contribute to the implementation of the objectives of subsection 3(1), the commission has the obligation - it doesn't even have the choice at that point - to exempt. That's the test.

For instance, it has exempted the House of Commons and legislature proceedings. I think everybody would agree that these are significant undertakings. They're important in a democracy. But the licensing of those undertakings would not materially contribute to the implementation of the objectives, and that's the test.

The commission, after having gone through a public notice, receiving 60 submissions, reviewed factually whether licensing DTH distribution undertakings would materially contribute to the implementation of the objectives of the Broadcasting Act.

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They decided that wasn't the case, in which case they had to exempt at that point. They didn't have a choice. They established clear and specific criteria.

The undertaking that operates under an exemption order must meet all of those criteria in order to operate under an exemption order. If they don't, then they have to come in for a licence.

The Chair: Let me understand, then, to move on, between the interests of the application or the interests of Expressvu and DirecTv, that the crucial condition DirecTv failed to meet is the condition relating to the exclusive use of Canadian satellites. Is that the deal-breaker? Had they had that would they have been eligible for the exemption order, or were there other things too?

Mr. Bélisle: Mr. Chairman, we hope that could be the only deal-breaker. The problem is, I don't believe Power DirecTv has ever filed or made publicly their proposal. It's a proposal that may have evolved since last year. I have never seen the Power DirecTv proposal. I don't believe it's been filed anywhere.

The Chair: On the face of it, though, that would seem to be the big outstanding distinction.

Mr. Bélisle: From what we understand. I believe Power DirecTv wants to continue to use exclusively U.S. satellite to provide pay per view.

The Chair: And also U.S. stations.

Why is this the deal-breaker for DirecTv when cable television companies are able to use foreign satellites in delivering foreign programming to their subscribers? Why is there one rule apparently for the cable companies and another rule for the satellite companies?

Mr. Spicer: That is not true. There's a distinction between assembling services off-satellite, which is what the cable companies do, and distributing within Canada. Somehow along the line this distinction has been forgotten.

People are saying cable companies are using satellites, of course, to assemble the U.S. services, but then they, the Canadian cable companies, distribute them under Canadian law. If you don't make that distinction, then it's easy to give that impression, but it's critical to make that distinction.

The Chair: But we have not been ironclad in saying that all enterprises within Canada, wherever possible, must use a Canadian satellite, otherwise we would have forced the cable companies to do so as well. If we wanted to advance the case of Canadian satellites, one could have taken that route.

Mr. Colville: Mr. Chairman, this takes us back to the point of the exemption, that if you're using entirely the Canadian satellite, which is a monopoly space segment service in Canada that we regulate, then the exemption order applies. If the exemption order doesn't clearly apply - because we understood that to be government policy - then apply for a licence. We would have to look at the particular circumstances of the application.

The Chair: Let me understand. I think I read in your submission that if the government clarified the issue regarding satellite use, and that hurdle were eliminated, then from what we know, since they haven't issued a formal application to do this, might it end the matter right there?

Mr. Spicer: We have to decide everything on a case-by-case basis with a full application, and that's what makes this so difficult now. We're dealing with rumours, with the phantom application. We have to have a real one. We have to see all the small print. That's what we're in business for.

The Chair: But let me understand you, though -

Mr. Bélisle: If I could just add to that, the use of requiring Canadian satellite is not new. It wasn't created especially for, as some people think, this case. When Cancom was licensed back in about in 1982 or 1984, Cancom in assembling its service was obligated to re-uplink the American networks to use a Canadian satellite.

The Chair: I guess, though, what I hear you calling for in your submission is a greater clarity about the use of Canadian satellites.

Mr. Bélisle: Yes.

The Chair: If that were provided by the government, and that indeed turned out to be the major distinction between the two bids, that might solve the problem.

Mr. Spicer: That's one of the useful things the government could do in any amended order or new orders. It could clarify that question for us.

The Chair: That's very useful for us to know.

Last, I'm curious about the public notice and the 50 days. Is this just generically true of any of your proceedings, that you have to give the public 50-days' notice before you can do things, or are there exceptions to that?

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Mr. Bélisle: Since the inception of the CRTC's rules of procedures back in the early 1970s, in order to give proper notice of a public hearing rules of procedures were developed to give 50 days notice. The application doesn't become public until we create a public hearing. Then the intervenors have 30 days to acquaint themselves with the application and to make their views known to the commission.

The Chair: Could you help me with this one? In the First Choice Communications hearing you gazetted it on October 28, 1993, and you held your public hearings 13 days later.

Mr. Bélisle: Yes.

The Chair: In the case of Omni Cablevision, you gazetted it on June 15, 1985, and had public hearings 11 days later. You did the same with Rural Television - 32 days. What happened?

Mr. Spicer: Mr. Cohen, our chief legal adviser, would like to say a word.

Mr. Avrum Cohen (Senior General Counsel, Canadian Radio-Television and Telecommunications Commission): I'd like to add a detail to what Mr. Bélisle said. The rule of the CRTC, with reference to how many days have to elapse between giving notice and holding the hearing, is in fact 50 days. However, that applies to the issue and renewal of a licence.

We do other things, and some of the things you've referred to might very well be transfers of shares and so on. We may have hearings there that do not fall under the 50-day rule. We would still not be free to give inadequate notice, because the principles of administrative law would be available to any party that felt the notice was too short that they couldn't prepare and make proper interventions. But the 50 days applies specifically to issue, renewal and amendment of licences.

In the case of First Choice, for example, when they were in very serious financial difficulty, when they were first licensed - after some time - and there were those who wished to save it, if you will, by buying the shares, we had fewer than 50 days' notice because it was not the issue or renewal of a licence. It was a share transfer. We were taken to court on that point, as a matter of fact. I had the honour to plead that case and the court said the notice was adequate under administrative law and we didn't need the 50 days because it was not issue, amendment or renewal of a licence.

So you will find some cases, Mr. Chairman, where we'll give less than 50 days. These are the exceptions, and they're not usually licensing decisions.

The Chair: Not usually? Have there ever been any licensing decisions that have gone faster than 50 days?

Mr. Cohen: I don't think my memory is good enough for me to say categorically it has never happened. If it has, it must have been very exceptional and maybe shortened by a few days. I don't remember any considerable shortening of time for a licensing decision.

The Chair: Thank you.

Mr. de Jong (Regina - Qu'Appelle): It's going to be an interesting process for this committee to work its way through this.

Right now, just trying to gather some more information, with the delays that are occurring what is your best guess in terms of how long it will take?

Mr. Spicer: First, our intention would be to act virtually immediately on any new government order. Second, we would look closely at any acceleration or telescoping of our procedures we can, without refusing the right of new players to participate and prepare a reasonable business plan.

That much said, as vice-chairman Bélisle said, our best estimate is that probably something like December 29, 1995, would be the announcement of a licensing decision, after a wide-open public hearing, inviting all the new players to come in.

That would be our best estimate right now.

Mr. de Jong: That is December 29, 1995. Will any of the possible legal actions delay that further?

Mr. Spicer: Again, it will entirely depend on what the order says.

Mr. Cohen: I'd just like to add that this would also depend on the nature of the legal action. There are many legal actions that would not retard our process. If, however, someone were to apply for some sort on injunction or prohibition, and if a court were to order us to stop our proceedings, then obviously we'd have to do that. But we have certainly no intention of delaying things indefinitely because there are court proceedings.

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Mr. de Jong: It's fair to assume that Expressvu will start some legal proceedings because the order is a retroactive one. They have a business plan that assumes a start-up of September 1, 1995. Now that's totally out the window. I assume that they will try to get back some of the damages now that could conceivably occur to them.

Would any of those actions conceivably delay the process as well?

Mr. Cohen: I think the commission would be in a very difficult position if there were a serious challenge to the legality of the order. For example, there's the revocation part of it, which is perhaps the most controversial, and the part that is most likely to go to court. I don't think Parliament wants this commission to act in a way that would appear to it, and to many others, to be illegal.

We'll have to wait for the order and see what it is, but the government would certainly have to understand that this commission, much as it wants to cooperate with the government, is not free to act in a way that it thinks is illegal.

Mr. de Jong: The retroactivity of the government order also disturbs me a lot. I wonder what the implications of this would be, generally, by investors in the Canadian broadcasting system. Do you see this as a potential detriment? Investors will ask why they should invest in something that can be unilaterally changed overnight.

Mr. Spicer: That was the essence of the CAB intervention when these powers were being discussed. They called excessive government interference ``destabilizing''. I think that includes all of the dangers you mentioned.

Mr. de Jong: We already have a relatively large grey market. These are people who tune into the DTH system out of the United States by getting an American address. They're generally people who see that there are all these programs they want to get, but the only way they can get them is by getting an American address. Would you say that the longer the process gets delayed, the more entrenched that grey market will become, and the more difficult it will be to lure them to a Canadian-regulated system?

Mr. Spicer: Yes, I think that is evident, sir.

Mr. de Jong: Why did you make the requirement of having a Canadian satellite? Was it to support the Canadian satellite industry? Was there some other reason as well as to why you required a Canadian satellite to be used?

Mr. Spicer: There are many reasons. If I forget any, my colleagues will fill them in.

First, look at the Telecommunications Act under two headings. Paragraphs 7(b) and 7(e) say that we must favour Canadian technical and transmission facilities, because first, they cover the whole country, and second, they must be used to deal with international situations.

The Broadcasting Act has stipulations about Canadian ownership. It also says that in terms of the broadcasting system, we must make maximum use of all Canadian resources - creative and other resources, or at least a predominant use of Canadian creative and other resources. Presumably, since it's distribution, that could include satellites.

As well, there have been international agreements with the U.S. that generally support that. The government - I think it was last year - sent back our decision on Cogeco and pay radio and said we should favour Canadian transmission facilities more often. The artistic community wanted this. We had our knuckles rapped, if you wish, for not going far enough in supporting Canadian satellites. In general, our job is to stand up for Canada, whether it's content or distribution. This is what Parliament is supposed to do.

To end it off - I shall repeat it - the government has twice said that our exemption order is in conformity with government policy.

Mr. de Jong: Is it easier to regulate because Canadian satellites are used?

Mr. Spicer: Yes, quite right.

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Our mandate is, as I said earlier, to keep Canada on its own screens. That implies some kind of control. If they come under physical Canadian control - using Canadian resources, Canadian companies, Canadian technical standards and so on - it makes it easier for us to guide them to do things that are good for Canada, to encourage Canadian programming. The content is really in the end what it's all about.

Oh, yes, on ownership of control.... I mentioned ownership obligations, which is paragraph 3(1)(a), and the maximum use of the Canadian resources, paragraph 3(1)(f).

Mr. de Jong: If you use American satellites and you want to apply, of course, the Canadian content, that means the viewer sees all sorts of channels they're not able to get because they wouldn't fall under the Canadian content requirements. Is that true?

Mr. Spicer: I'm not sure I get the essence of this question.

Mr. de Jong: If American satellites are used, then all sorts of other programs are delivered with an American company. Doesn't it become the case of where the content regulation would require that certain programs are not delivered in Canada?

The Chair: That's a technical question. There can be an awful lot of capacity in programs up there. It's how they're brought down and which ones are filtered out that determine the issue.

Mr. Spicer: Again, there is a distinction between assembling them and distributing them. When you distribute them in Canada you're supposed to respect Canadian law.

The Chair: But does that help or permit you to make those choices?

Mr. Spicer: Oh, yes.

Mr. Bélisle: The question is, the commission wants to maintain some sort of control over the U.S. signals that are delivered in Canada. I don't think anybody around this table would argue that we can impose any amount of Canadian content on a U.S. service.

The Chair: I see other questioners.

[Translation]

Mr. McTeague (Ontario): Thank you, Mr. Spicer. It's nice to see you again, with your advisors and guests.

My question will not be on the comments you have made here on the cable distribution companies. Rather, my question is about something which arose during the weekend; my neighbour purchased a satellite. With that satellite, he can receive...

The Chair: I hope he did not purchase the actual satellite!

Mr. McTeague: No, no! I am sorry. He purchased a satellite dish antenna. Members' pensions are so generous, you see. But that is another topic.

In any case, he bought a satellite dish antenna and over the weekend, he was able to pick up signals from several other countries. I was particularly interested to see that he could pick up a signal from a country called Dubaï. It is a country in the Middle East that allows all of its citizens to receive the signal free.

I'd like to know how we can prevent people from receiving these signals from other countries free of charge, like my neighbour.

Mr. Spicer: We certainly don't want to prevent Canadians from receiving these signals they can pick up at their own expense. The aim of our policy is not to censure signals to prevent Canadians from receiving them, but to regulate Canadian companies.

Mr. McTeague: That means that if there are approximately 100 signals available, it would be almost impossible to prevent someone from picking up signals from other countries. It is almost impossible, as you say. If I want to watch Showcase or A & E by picking up signals from another country such as Dubaï, it would be impossible to scramble those signals.

Mr. Spicer: There is no CRTC police, I assure you. We are not interested in monitoring individuals.

[English]

Mr. McTeague: I guess my concern then is that as this committee will be looking into this broader question, how and what structures...are we fighting a pirate battle here in terms of ensuring that Canadians see some form of content? The whole purpose of a satellite, of course, is to broaden the net so you can see around the world.

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Mr. Spicer: I think we could make a pretty good case that in terms of quality and fundamental difference, the Canadian broadcasting system, as it stands, offers more choice than any other system in the world, including that of the United States, where you can get 25 channels of O.J. Simpson, and so on.

We have attempted - and this is our duty - to do three things: raise the quality of Canadian television, and you may not agree that we've succeeded in any of this; secondly, to ensure a fundamental diversity, as much diversity as we can; and third, to make sure it's as Canadian as possible. That's our job.

We also try to allow Canadians access to what we call the best of the rest, the best of the world. I think we have all the essential U.S. services. Some may argue that they want the History Channel or another one, but our duty is to make sure Canadian services are predominant. Since the population base and therefore the economic base of the Canadian broadcasting industry is not as big as the United States, that does impose a built-in limit.

But you're right, technology is changing every day, every week, and who knows whether there is going to be a wave of Canadians going to buy satellite dishes to pick out of the ether what they can find. I don't know; I don't see any sign of it yet. I think if they are dissatisfied with Canadian television, the best cure is for them to go abroad.

Mr. McTeague: I appreciate that you've explained the vastness and put into context the mandate and the role you have in this. I commend you for trying, but I see that this marginalizes our whole operation. We are fighting something in the context of the Canadian arena, yet the world is our oyster.

Perhaps what you're suggesting is that we can provide better Canadian programming and send that out to the rest of the world. Perhaps that's our future.

Mr. Spicer: Certainly.

Mr. McTeague: It's a tall order.

Mr. Spicer: It is.

Mr. McTeague: That's all, Mr. Chairman.

Mr. Spicer: Maybe I could take up one last thing.

Fundamentally, Parliament has written a very good Broadcasting Act. We think it's still very valid. It may be that in future years you will see technological and market changes so fundamental that you will want to have a look at it again.

Meanwhile, we have to obey the law as it's written, and so far we think it's a very good law. There's a lot of foresight in that law. It foresaw increasingly market-oriented situations, different technologies, and I think we have mapped out in our information highway report the ways in which we believe we can continue to regulate, in again this minimalistic, muscular way that I was suggesting for the government's orders. Our policy has always been regulation if necessary, but not necessarily regulation - the Mackenzie King theory.

We believe it's very important not to get trapped into cant or dogma and sloganeering about regulation. It has to be infinitely varied, infinitely sensitive, and adaptable to individual circumstances, and again we come back to the point here, the orders. That's why you have the regulator. They're paid professionals who take the time to look at these things through a microscope and get it right.

That's why I'm optimistic that we can work out a sensible compromise on these orders if the government has another look. That's why the government has sent the orders to you; I say the universe is unfolding as it should. I think it's a very healthy process, and nobody should try to portray it as the shootout at the OK Corral.

It is an honest, open, very transparent process in which the government has openly given us its draft directives. We have very openly responded with our letter, we're now doing it openly here, and I think the new perspective this process will bring may well allow the possibility of a workable compromise.

The Chair: Thank you.

I just want to make sure, in the interest of Dan's neighbour, that presumably one of the attractive features of a Canadian satellite service, as opposed to the one his neighbour possibly has, which is not a Canadian satellite service, is that it would provide not only a wide range of channels from around the world but also the Canadian ones. I am assuming that your neighbour may have to find his or her Canadian signals from a cable or from some other source, that the satellite in itself will not provide those stations.

Mr. McTeague: I hope the CRTC police are not going to be conducting an investigation of my neighbour here.

The Chair: Oh, no, I think your neighbour may have expensive tastes.

Mr. McTeague: I guess some people took my advice about abandoning cable subscription fees a little too seriously.

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The Chair: The only point I was trying to make was that I assume that's one of the attractive reasons Canadians would wish to subscribe to a Canadian satellite service, in that it would offer not only that range of foreign programming but also the Canadian stuff. Otherwise, your neighbour is going to be paying a lot of money for more services.

Mr. Spicer: Absolutely.

Mr. de Jong: May I just throw in one other question as a supplement, in terms of Canadian satellite as opposed to others? If you have the U.S. satellite, how much of Canada does that cover as opposed to the Canadian satellite?

Mr. Spicer: Not enough. To the best of our knowledge, it does not cover all of the far north, and this is another reason why we are obliged to make sure we serve the entire country. It's another reason for all-Canadian satellites.

Mr. Ianno: I have a supplement, Mr. Chairman. With the DTH - as much as you know, because they have not yet presented - what is their cost saving, and why would they want to use you as a satellite versus Canadian satellite?

Mr. Bélisle: I'm sorry; are you talking about Power?

Mr. Ianno: Yes.

Mr. Bélisle: The saving with Power DirecTv is that the satellite is already there. It was put up there for the U.S. market, and the spillover into Canada is technically free, per se. The cost would be substantially lower than with a Canadian company.

Mr. Ianno: So in effect, as someone mentioned earlier, CBC and things of that nature will not be seen if you have that process?

Mr. Bélisle: You mean the CBC that's on the U.S. satellite presently? When you refer to CBC -

Mr. Ianno: No, I'm talking Canadian, the one we see on channel 6 or whatever.

Mr. Bélisle: I believe the Power DirecTv, the moving project, as I said, has announced somewhere that it would carry the Canadian services.

Mr. Ianno: For a fee?

Mr. Bélisle: I would think so. They haven't announced their fee, but I don't think there are free services any more. There would be a basic service, which I believe they've stated would meet the carriage requirement of the commission and the predominantly Canadian requirement. At issue is the pay-per-view, which then would exclusively use American satellite.

Mr. Ianno: They wouldn't use the movie channel or the one in the west with the -

Mr. Bélisle: We don't know.

Mr. Ianno: Okay.

Mr. Bélisle: I'm sorry; do you mean in terms of the pay-per-view?

Mr. Ianno: Yes.

Mr. Bélisle: No, they've specifically stated that they want to use DirecTv, the U.S. service.

The Chair: We'll have a chance to talk to the folks directly next week, so to speak.

[Translation]

Mrs. Tremblay: Mr. Spicer, you issued a licence to Cogeco and Shaw for digital broadcasting. They were using an American satellite and the content was predominantly American, but the government reversed your decision, and you then had to withdraw Cogeco's licence.

Now, should the order we have before us, order number 23501, be issued as its stands under paragraph 3.g), you will not be able to refuse to issue a licence because the applicant intends to use a foreign satellite. Had the order been issued as it stands, would you have had to review your decision in that case?

You consider that this is a new policy being put forward by the Canadian government, according to which companies may henceforth use any kind of satellite? Would you then reconsider your decision and again issue a licence to Cogeco and Shaw?

Mr. Bélisle: I don't think that the Commission can issue a licence retroactively. I think that in that context, Cogeco and Shaw could qualify if they were willing to present their project again.

Mrs. Tremblay: There is something else I would like you to explain to me. There is a word that is used quite often, and I'm not sure I understand it very well. I'm referring to the same order, in paragraph h). It says that when a company provides English pay-per-view programming, it must also provide French pay-per-view service. It is the word «service» I'm concerned with.

If, for instance, my English service provides 60 American film channels, because I can receive them directly through my satellite, since we are talking about pay-per-view programming, I would then have to provide a French service as well.

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So, I would very quickly try to find someone somewhere who can provide me with at least one French movie channel, so that I can say that I am offering French service.

Would you consider that equivalent services are being provided in a case where a company offers 60 English movie channels and one French channel? Would a ratio of 60 to 1 be considered providing equivalent services? Would those services be considered comparable?

Mr. Spicer: That is an excellent question, Madam. That ratio would seem unfair to francophone viewers. We have not been apprised of such a case, but should we be, I think we would try to bring about considerable improvement in the proportions. I don't think it would be reasonable...

Mr. Bélisle: We have put out a call for French service providers, because at this time, no one has a licence to offer French pay-per-view services. Applicants may respond to that call up to June 30th, the deadline. I simply wanted to point that out to the Chair and say that the Commission will indeed have to determine what will be satisfactory in light of the proposals that will be presented.

Mrs. Tremblay: But a service may be made up of several channels. That is true.

Mr. Bélisle: It is the same as the 60 English channels someone was referring to earlier.

Mrs. Tremblay: This would be a movie service.

Mr. Bélisle: Sometimes, the same film may take up three or four channels, because it begins on a different channel at 10 or 15 minute intervals.

Mrs. Tremblay: Yes, I see. Even if I have 50 movie channels, that could be considered the only movie service in the range of products I am offering.

Mr. Bélisle: Yes.

Mrs. Tremblay: Now, if no one else has any questions, I am going to raise the big question. I am not going to pop the question, but...

The Chair: I'll let you put your question although Mr. Ianno wanted to ask the last question, because he is busy. Please proceed.

Mrs. Tremblay: Mr. Spicer, I would very much like you to enlighten our committee on an expression that is causing us problems collectively, both in French and in English. It is a concept you referred to, but one which is very difficult to define: I'm talking about universal ``addressability''.

Mr. Spicer: Once again, an excellent question. I have several experts here who may all provide the same answer. At least, I dearly hope so. It is difficult to find metaphors to make this sort of thing understandable...

The Chair: Who created that expression?

Mr. Spicer: A mad engineer, no doubt.

The Chair: A Canadian one, I hope.

Mr. Spicer: Fortunately, I have an engineer right here with me, one who is not mad in any way. He can provide you with a very technical reply. Through this technology, you can target a particular service to a given household, and this means that the client concerned could chose the service he or she wants.

Now, how does that differ from pay-per-view television? This is where we come up against a terminology problem, because the translation of ``pay-per-view'' is ``télé à la carte''. As for universal ``addressability'', I have yet to hear a simple, non technical expression that would summarize the whole concept. In English, I have heard the terms ``pick and pay'' and ``interactivity''.

[English]

pick and pay, interactivity. Even the word ``interactivity'' does not make you feel warm and fuzzy. We are looking for something that sums it all up.

Maybe Mr. Colville has a comment.

Mr. Colville: I guess you could look at it, if you want to use the term ``address'', almost in the postal sense. If homes didn't have any address and you wanted to send mail to them, there would be no way to get a letter to any individual home if it didn't have an address. The idea here with universal addressability is in fact to give every cable home a cable address so that individual programs could be sent to individual homes.

The Chair: There is also the capacity of asking for the mail, too, isn't there? That is to say, ``I'd like a letter - please.''

Mr. Colville: It is the ability to address it to an individual home and then to be able to request specific programs.

Mr. Spicer: It's two-way TV -

Mr. Colville: It's interactivity as well.

Mr. Spicer: - or something like this. I think we are in desperate need of a metaphor here, in both languages.

[Translation]

Mrs. Tremblay: Is universal ``adressability'' always interactive?

Mr. Spicer: Yes, by definition.

Mrs. Tremblay: By definition? Because if that is always the case, we must make things even more complex. We have to refer to ``universal interactive addressability''.

Mr. Spicer: By definition.

Mr. Bélisle: By definition, because, at this time, the cable distributor has the option of "addressing" his clients at any given moment. It is in that sense that there is interactivity. The subscriber will have the option of making individual transactions.

[English]

Mr. Colville: It isn't fully interactive in the sense that you can send a television picture down the channel to a home and then somebody at home can send a television picture back.

When people talk about universal addressability in today's context, it is the ability to send the picture down, but to be able to order that whether it is through the telephone line or directly through the cable system.

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The Chair: You could get specific mail just for your house and ask for specific mail to be sent to your house, but you're not sending any mail out, you're just asking for mail.

Mr. Spicer: You're sending an order for the mail.

The Chair: You're sending the order for the mail.

[Translation]

Mrs. Tremblay: So there would be a fee attached to that service.

The Chair: Yes.

[English]

But it needn't be; it need not be by definition pay.

[Translation]

Mrs. Tremblay: Well, by definition, you will have to pay a fee for that service!

Mr. Bélisle: It will depend on the project in question, because if you take the UBI project in Chicoutimi, for instance, as you know, each home will have a choice. It is up to the companies to determine, in light of supply and demand, which services will be offered free and which will be charged for. Things are not definite yet. We don't know whether that service will automatically entail a fee.

The Chair: It is not yet known whether all aspects of the service will be offered for a fee.

[English]

Mr. Colville: Right now we don't have universal addressability; we have addressability for the pay movie services. As the addressability becomes more universal and becomes available in all homes, some of the services that may be sent to individual homes may be free to the subscriber.

[Translation]

Mrs. Tremblay: As a very creative engineer, how many years do you think it will take before universal addressability is available?

[English]

Mr. Colville: Sorry, I missed that.

Mr. Spicer: How many years would you...?

Mr. Colville: We keep seeing this target moving away from us. We thought three or four years ago that we'd be seeing these devices rolling out on more or less a universal basis, sort of in a 1995 to 1997 time frame. It looks now as if it will be probably the turn of the century and beyond before it will be universal.

Mr. Spicer: What we have heard is that there may be

[Translation]

what you might call a token offering of the first interactive devices as soon as next year, but most Canadians will have to wait from five to ten years.

Mrs. Tremblay: Thank you.

The Chair: We have very little time left because another committee will be needing our room at 11 o'clock a.m..

[English]

Mr. Ianno: I have a technical question. From the U.S. satellite, aside from beaming it to the direct consumers...? Is that the approach they are talking about right now: from U.S. satellite to Canadian consumers directly?

Mr. Spicer: Direct.

Mr. Ianno: If they wanted to bring in the CBC and others, how would they bring that into the beam?

Mr. Colville: We haven't seen their proposal, so we don't know exactly how they plan to do this technically, whether they in fact plan to take the Canadian services off the Canadian satellite and somehow use a dual feed horn on their satellite antennas so that they could pick up American programming from the American satellite and Canadian programming from the Canadian satellite.

Mr. Ianno: Distribute it from the base.

Mr. Colville: But again, we haven't seen a proposal from them, so I can't really comment on what their specific proposal is.

Mr. de Jong: How technically feasible is it to have the receiving unit at home and then have two satellites? Is that technically an easy thing to do?

Mr. Colville: It is feasible, I presume, provided the satellite spacing isn't too far apart, which would require two antennas.

Again, you would have to talk to people such as Expressvu and Power DirecTv to get better answers to these kinds of questions.

Mr. de Jong: So it is conceivable that there could be some technical problems in that.

Mr. Colville: They are probably not insurmountable problems. They would add some cost to the system.

Mr. de Jong: It would be worth pursuing later.

Mr. McKinnon (Brandon - Souris): Gentlemen, it has been very enlightening to have your visit here today, looking at the alleged difficulties we may be facing in the future politically and on a regulatory basis.

It is time for some of us to ``fess up'', in that I am a member of the grey market.

I have in my back yard one of those machines for which the wires no longer function. I wasn't able to keep up with the black boxes as they were going by.

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I have enjoyed the variety and the level of sophistication the satellite dishes are able to provide. I think we have created here in Canada an appetite for that kind of service through the satellite grey market, and more and more people are aware of it.

I would also agree that with the quality we are demanding as consumers we want to try out all the new technology as it is going by, there is no question of that. I think of the difficulty your organization - and I use that in a very positive way - has in wrestling with all of those market forces that you and Jan Brown were referring to there today. It is going to be very interesting to observe how this all shakes out in the end.

We are a very sophisticated group of consumers out there right now, and we want the best that's there, the pick and pay and all these other things that may come at us on the information highway.

Mr. Chairman, I would simply say that I commend the group for their level of knowledge and the sophistication they bring to the table today.

The Chair: We will intervene on your behalf to make sure they don't haul you off to jail with the CRTC police for your grey satellite. I will do my best for you.

I want to thank the members of the commission for coming before us. It is has been a good launch to a very fascinating debate. Thanks very much for coming.

Mr. Spicer: Can I just ask you to think of us more as boy scouts rather than police, and if you have a moment to read our little chronology and the legal paper, we would be honoured.

The Chair: We are adjourned.