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EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 14, 1996

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[Translation]

The Chairman: Order, please.

[English]

Good morning. Today the business before us is to do the committee study on Bill C-216, which is an act to amend the Broadcasting Act. It was introduced for first reading in the House on March 4, 1996. It received second reading assent on April 29, 1996 and was referred to this committee. As our first witness, we have the proponent of the bill, Mr. Roger Gallaway, MP.

Mr. Gallaway, the floor is yours. I would suggest today we divide the time so you would have half an hour, including questions. Please gauge yourself accordingly so we have some time for the members to ask questions.

Mr. Roger Gallaway, MP (Sarnia - Lambton): Mr. Chairman, I assure you I won't speak for half an hour.

Secondly, I should introduce Mr. Tim Weil from my office, who is with me today.

I'd like first to thank you and members of the committee for inviting me here today to explain why I believe Parliament should move quickly to pass Bill C-216, which is entitled An Act to amend the Broadcasting Act (broadcasting policy).

Quite simply, Mr. Chairman, consumers have demanded we put an end to negative-option billing for new programming services once and for all. We all remember the consumer revolt against the cable companies in January 1995, and we all remember the nationally televised apology by Rogers Cable. But the fact is that nothing has changed since that time.

Even after the consumer revolt, after all the complaints to the CRTC, and after all the calls and letters to members of Parliament, the cable monopolies continue to use negative-option billing to market the last round of specialty channels. The onus has still been on the consumer somehow to cancel the new service before it showed up on their bill. To this very day the CRTC continues to endorse negative-option billing as a ``necessary evil'' when new programming services are introduced.

For this reason, the timing of Bill C-216 couldn't be any better. At present the CRTC is conducting hearings to consider 40 new applications for speciality and pay television services.

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At this very moment, in some ivory tower, the CRTC is holding court with representatives of the broadcasting industry, what we refer to as the media moguls, the cultural elites, and the high priced lobbyists. All the players are there, with one notable exception, and that is the consumer. As is so often the case when Canada's cultural czars gather to decide what is best for Canadians, the consumer has been left out in the cold.

Where was the CRTC during last year's giant cable war? Its chairman was reported to have been on vacation in a foreign country. Did he return to Canada to intervene and protect consumers? The answer, of course, is no. I would encourage members of this committee to ask why.

As members of Parliament, we have learned two important lessons from last year's consumer revolt. First, in my opinion the CRTC does not understand consumers. The fact is that people will not pay for something they did not request and, more importantly, may not even want.

Secondly, the use of negative-option billing for new programming services can actually jeopardize the very service it's supposed to sell. The consumer backlash did little to enhance the popularity of the new specialty channels. In fact, some are still struggling to stay on the air. One has ratings that are so low it must rely on reruns of what they refer to as ``that old Canadian classic'', The Mary Tyler Moore Show, just to scrape by. In my opinion, this should be reason enough to ban negative-option billing for new services.

Who will protect consumers from future abuse at the hands of the cable monopolies? Consumer groups have already warned that the cable industry is preparing a new version of negative-option billing. New programming services would be provided free of charge for an extended period of time, and then the cable monopolies would simply demand a rate hike from the CRTC. In my view, this would amount to a negative-option billing by the back door, and that too should be banned.

Who will protect consumers when new players enter the market to provide programming services to Canadians? As we know, telephone and satellite companies will soon provide competition to the cable companies. Passage of Bill C-216 would ensure that negative-option billing by these new ``distribution undertakings'', as they are referred to, would simply not be an option.

Bill C-216 would accomplish this goal by amending section 3 of the Broadcasting Act by providing, in the context of the broadcasting policy, that a cable distributor or any other distribution undertaking should not demand money from a person for the provision or sale of a new programming service where the person has not agreed to receive the new service.

Mr. Chairman, two simple words contained in this bill seem to have the bureaucrats, the industry and the CRTC scrambling. The words are ``prior consent''. Imagine that. If the bill passes, then a cable company or other distribution undertaking would actually be required to obtain prior consent from the consumer before charging for a new service.

Section 5 of the Broadcasting Act creates an obligation on the CRTC to regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy set out in the act.

Who will protect consumers from a repeat of last year's cable fiasco? Some would say we should let the provinces handle the problem. Only three provinces have laws concerning negative-option billing: Nova Scotia, Quebec and British Columbia. Not one mentions the cable industry, for the simple reason that the federal government has jurisdiction over cable television pursuant to its power over interprovincial or international undertakings.

We must also remember that cable companies, as federally regulated undertakings, can claim immunity from provincial laws, especially consumer protection laws. The province of Quebec has a Consumer Protection Act that would appear to forbid all negative-option billing schemes. In section 5 of that act:

Given the potential for a cable company to try to escape the application of provincial laws of general application to consumer services by claiming immunity as a federal undertaking, it would be prudent, in my opinion, to deal with the specific subject of negative-option marketing of cable services under the Broadcasting Act.

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There are also those who feel that we should deal with this problem through regulation, that we should refer the matter to the CRTC. With all due respect, I suggest that these same individuals would like to ensure that negative billing will remain a viable option for years to come. Why else would you refer this problem to the CRTC when the CRTC has chosen to ignore it for so long?

We must realize that the CRTC sat idly by for years as negative-option marketing was used to sell extended basic service without adequate consumer knowledge. For example, while 92% of Canadian cable subscribers receive extended basic service, a survey conducted by Compas Research in 1993 found that 66% of cable subscriber respondents believed that they were receiving the lowest-priced basic service.

There are even those who advocate a so-called market solution to the problem. How can we arrive at a market solution when the consumers of this country have been left at the mercy of the cable companies? We simply cannot achieve a market solution when we are dealing with a monopoly.

Finally, throughout my presentation I have asked the question, who will protect consumers? The answer is quite simple: members of Parliament will protect consumers by passing Bill C-216 and finally levelling the playing field amongst the industry, the regulator, and the consumer.

In closing, I would like to read a brief quote from Michael Janigan, who is the executive director of the Public Interest Advocacy Centre. In a recent news release Mr. Janigan stated:

Thank you. I will be very pleased to answer any questions you have on this bill.

The Chairman: Thank you very much, Mr. Gallaway.

[Translation]

Mr. Leroux, before you arrived, we discussed how much time would be allocated to each witness. We have four witnesses today, so we decided to divide the available time by four; thus, each group will have one-half hour for both its presentation and the question and answer period. We hope this arrangement suits you.

[English]

Mr. Abbott, we will have five minutes for each party, if that's okay with you.

[Translation]

Mr. Leroux (Richmond-Wolfe): You say we have four witnesses, but I only see three on my sheet. I have the names of Mr. Gallaway, Mr. Spicer for the CRTC and the Consumers' Association.

The Chairman: We will also be hearing from the Public Interest Advocacy Centre.

Mr. Leroux, you have the floor.

Mr. Leroux: Mr. Gallaway, thank you for your presentation. First of all, I think you know that we are clearly seen to be supportive of the need to provide consumers with the best possible protection. I'm sure you are also aware, given my remarks in the House, that we are favourably disposed towards this Bill. In your view, are we talking about a business practice - in other words, an agreement via a contract for services?

[English]

Mr. Gallaway: No. In my mind, we're dealing with the regulation of broadcasting in this country. Consumer services are an ancillary factor that flows out of the broadcast. It flows out of this relationship amongst the CRTC, the cable companies, and the consumers. But today we are talking about the Broadcasting Act, and as an ancillary matter we're talking about consumers.

[Translation]

Mr. Leroux: I understand your answer, but do you recognize that this is a business practice establishing a contract for services? We're talking about the provision of services for which a consumer signs an agreement with a company, which then bills him a certain amount. Are we talking about the same thing here?

[English]

Mr. Gallaway: First, I'm not aware of people signing to receive cable services. It's normally a verbal agreement at the initial stage. For example, if I want to have cable extended into a home that isn't serviced, I would simply call my cable company. They would come and we might have a discussion about what level of service I'm going to receive. Undoubtedly they would ask me if I want to have HBO and a bunch of other extras. We would decide upon what level of service I want to receive and it would be installed. But in terms of signing for something, no, I wouldn't sign.

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[Translation]

Mr. Leroux: Are you saying there is no business contract between a consumer and a cable operator? That no such thing exists?

[English]

Mr. Gallaway: A contract can be formed without signing. Verbal contracts are entered into every day in this country. If I go into Zellers and buy a bag of candy, that's a contract. I receive and I pay. I don't sign anything, though.

[Translation]

Mr. Leroux: So, there is a business contract, and as I understand it, this Bill directly relates to the business aspect of that contract. You say the Quebec Consumer Protection Act seems to outlaw any kind of negative option billing. That's correct: there is a law in Quebec that prohibits negative option billing. However, Section 5 of that Act provides that contracts relating to telecommunications services provided by a company operating within the meaning of Section 2 are not subject to the heading on goods and services contracts.

I would also like to ask whether you have heard of the Kellogg's Company of Canada case. Since you don't seem to be aware of it, I would like to read you an excerpt from the ruling handed down by Judge Martland. I should also say that the Quebec Consumer Protection Act applies even to a federally regulated company. In ruling against the Kellogg's Company of Canada, Judge Martland held that:

A person who discloses libellous material during a television program shall not be exonerated from liability under provincial law simply because the instrument used to disclose that material is subject to federal control. Among other things, that person can be prohibited from releasing such information again.

In my view, the situation in the Kellogg's case is similar, as far as regulatory compliance is concerned. The company cannot justify illegal behaviour by using the medium of television. The provincial statute is not concerned with television, but rather with consumers, business and advertising, to which the pith and substance doctrine applies. In ruling against the Kellogg's Company of Canada, the Supreme Court held, in a majority judgment, that the purpose of the advertising regulations, passed under the authority of the Quebec Consumer Protection Act, is to protect, in this case, children against the harmful effects of certain kinds of advertising. The province may regulate advertising by a business enterprise within the province.

In our view, that area of provincial jurisdiction is very clearly identified, as is this business practice. Do you not think your Bill could infringe on another jurisdiction's powers or simply be redundant? What are your views on that?

[English]

Mr. Gallaway: I'm not familiar with the case you're quoting. I'm certain we could sit here all day and quote cases that appear to state the opposite of each other.

Let me give you an analogy. Under the Divorce Act of Canada the federal government may legislate, and it has legislated, with respect to matters such as custody and support payments. This applies only if two individuals are married and it flows from a divorce action. At the same time, if a couple is married and is not in the throes of a divorce but has only separated, only the province may legislate with respect to custody and support payments. That is because in this country the division of powers has allocated it that way. Yet it is clearly within the purview of the federal government under the Divorce Act, as an ancillary matter to a divorce - and the federal Parliament does and has done this - to legislate with respect to custody and maintenance flowing from a divorce.

What I'm saying to you is that the federal government clearly has the authority under the Broadcasting Act to control broadcasting in this country. The federal government, this Parliament, much as it does under the Divorce Act, has the right to legislate on ancillary matters directly flowing from the Broadcasting Act.

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You have cited a number of authorities. Neither one of us is a constitutional lawyer or a constitutional expert. I suggest to you that there are often obiter dicta from cases that are drawn out and cited as authority. Later this week we will have people who are expert on it to speak to the constitutional thrust of this.

[Translation]

The Chairman: Your time is now up. We will move on now to Mr. Abbott. But there will be an opportunity to cover this point again with other witnesses.

Mr. Leroux: Yes, but he is our main witness, since he is sponsoring the Bill.

The Chairman: I realize that, but we must move on and give our other witnesses an opportunity to be heard. We can call him back subsequently, if need be.

[English]

Mr. Abbott (Kootenay East): I'll try to be brief because I want to make sure Mr. Hanrahan gets a chance.

First of all, as Reform Party heritage critic I am recommending to my colleagues that we support this motion. I want to congratulate you for bringing it forward and getting it this far.

The major reason I'm making that recommendation is that as you know, we are dealing with a monopoly here. We are dealing with a situation that is out of an ordinary commercial transaction. However, as you also know, in my speech I've drawn to the attention of the House that I see this as a band-aid solution. The real solution lies in the area where we have, as you say, media moguls, cultural elites, high-priced lobbyists, Canada's cultural czars, who are all making these decisions without reference to the consumer. I think that is completely out of touch, as was shown in the Juneau report.

The heritage department certainly appeared to be working against this bill that you've brought forward and making recommendations. I wonder if you could give me some enlightenment from your perspective. Why do you think they were doing it? It seems like it should be going ahead.

Mr. Gallaway: My opinion is only my opinion. I don't profess to speak for anyone or for the department. The suggestion has been made to me by those within the department that this could best be done by ministerial directive and/or by regulation. I totally disagree with that approach. As we know, in this town regulations come and go, regulations can change, and regulations often change without a great deal of public scrutiny. Second, my understanding of a ministerial directive is that once a minister leaves, another minister can quite easily change it.

What we need to do in this particular case, and what this bill does, is to build what I refer to as a fire wall between the consumer and the rest of the industry. I refer to the rest of the industry as being a number of commercial enterprises, proponents of certain cultural policies, and those who are regulators. By this very simple bill I'm saying that we're establishing, by statute, rules that will afford some level of comfort to consumers.

Mr. Abbott: I'll defer to Mr. Hanrahan in half a second.

My point on behalf of my party is this: the whole issue of cultural policy with respect to broadcast is in gross disarray. Taking a look at the disarray on satellite parking, the difficulty we're having with the U.S., with the FCC, as we should be, with the convergence of technology and this great Canadiana thing the heritage department is doing - it's just completely out of touch. The real solution is to move away from monopoly, which we currently have, to competition. We will have competition if we can ever get our regulators off their duffs to realize that there is converging technology and we do have to make some changes at that level.

Mr. Hanrahan.

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

Mr. Gallaway, I have two quick questions. First of all, as Mr. Abbott has mentioned, I congratulate you for your bill. We will be supporting it mainly on the basis that it is a step in the right direction in terms of protecting consumers. But as you point out very clearly, they are not represented at the table in any way.

The anger of consumers over last year's fiasco was fairly clear, but it really had no effect. It was ignored. It was a nice publicity situation, but when it came down to it, nothing happened.

Within the concept of the monopoly situation, do you see this bill as a matter of competition, a matter of choice for the consumer or a combination of both?

Mr. Gallaway: As to competition, really I don't think I'm qualified to speak in terms of the marketplace, because I come from Ontario, and where I live in southern Ontario the market has been defined and delineated. How that has occurred I don't know. For example, where I live there's no choice, so you have one company, and for the most part I understand that is the case in southern Ontario.

I view this bill as simply saying to the consumer: at this point there may appear to be limited competition out there, and as a result of that there's limited choice, but at least we're going to give you some modicum of protection with respect to the way you receive and are billed for services. It's nothing more than that.

This is not a radical or comprehensive overhaul of the Broadcasting Act.

Mr. Hanrahan: It's shifting the responsibility from one end to the other.

Mr. Gallaway: It's shifting the responsibility in the way that we, under our tradition, have normally received and paid for services.

Mr. Hanrahan: I have one last question. You state in your comments: ``To this very day, the CRTC continues to endorse negative-option billing as a `necessary evil'''. Can you give me some rationale for this necessary evil?

Mr. Gallaway: I can't, no. In my mind I can't, but the rationale as I understand it from the media is we want to ensure that we have a number of Canadian channels being received in Canadian homes. To do that certain channels are authorized to broadcast by the CRTC, and given the choice, Canadians may or may not agree to accept them, in which case the cultural aspect isn't strengthened. As a result, by way of negative-option billing, they're put on the air, you receive them and you pay for them.

In a flippant moment I've described it as cash for life, because it's a situation where in fact you receive a service, you pay for it, you didn't ask for it and you may not want it, but there's guaranteed cashflow at a certain level to those owners of the companies.

The Chairman: Thank you. Mr. O'Brien is next.

Mr. O'Brien (London - Middlesex): Mr. Chairman, thank you.

Obviously we want to offer congratulations on this side to our colleague Mr. Gallaway for his initiative in bringing this bill forward.

I wonder, Roger, if you'd react to Mr. Abbott's description of the bill as, however commendable, a band-aid.

First of all, I support the bill. I think it's an excellent initiative.

Did you consider a wider scope for the bill? How do you react to the description of it as something of a band-aid?

Mr. Gallaway: Mr. Abbott is in fundamental disagreement with cultural policies of the government. I don't want to put words in his mouth, but I would also suggest he's in fundamental disagreement and has been in fundamental disagreement with cultural policies of previous governments also. He would prefer to see a market-driven industry, and certainly there are arguments for and against that.

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As I've pointed out, this is not a large amendment to the act. The reason for that is that comprehensive amendments to acts from a private member's perspective never succeed in this place, and I think it's fair to say never.

This is an issue, and it's a very large issue. I think it was an issue on which there was consensus across the country. There may be a couple of exceptions in Quebec, but by and large there was absolute agreement that this was wrong. I didn't hear anyone standing up to defend the cable companies, the CRTC or any of the other players in the field. There was absolute agreement among Canadians that this should not happen. So it addresses something on which there is a great level of consensus.

Mr. O'Brien: Thank you.

[Translation]

The Chairman: Colleagues, Mr. Leroux has asked permission to put another question. I realize we don't have much time, but my inclination is to let him do that since his party is the only one that has reservations about the Bill.

Mr. Leroux, I'll give you a few minutes for your question, but please try to be brief.

Mr. Leroux: Yes. Mr. Gallaway, do you believe the CRTC has jurisdiction over business practices?

[English]

Mr. Gallaway: Apparently they don't, because they haven't entered into that field. With commercial practices, it depends at what level you're talking, Mr. Leroux.

[Translation]

Mr. Leroux: I'm talking about a contract for services between a consumer and a supplier of goods or services.

[English]

Mr. Gallaway: I think it's safe to say that the CRTC has commercial clout when it comes to regulating the cost of basic cable.

The question might more properly be put to Mr. Spicer. There are those who would suggest that the Broadcasting Act in fact gives the CRTC the right to deal with negative-option billing, not from a commercial practices perspective but through section 3 of the Broadcasting Act, which is the policy section. In fact, the CRTC has chosen to be silent on that point.

[Translation]

Mr. Leroux: Coming back to your Bill, the two clauses that you identify relate to negative optioning and the business practice of negative option billing.

You mentioned earlier that there were three exceptions - Quebec and two other provinces - as far as the Consumer Protection Act is concerned. In Quebec and elsewhere, negative option billing is completely outlawed. Are you familiar with Section 92 of the British North America Act, which states that business relations between consumers and commercial undertakings are a provincial responsibility, even when those undertakings are federally regulated? That's what the British North America Act says. So, this is clearly a provincial responsibility. And this isn't just an exception; it's an area where the provinces formally exercise their jurisdiction.

To conclude, you were saying that we aren't constitutional experts, but Beaudoin, who is a constitutional expert has said, basing himself on the Kellogg's Company of Canada ruling, that the provincial statute does not relate to television, but rather to consumers, business and advertising, and that therefore the pith and substance doctrine applies.

With this kind of legislation, the concern is that it may lead to endless legal battles. Some companies might decide to challenge the provincial statute and get involved in legal battles. Don't you think this Bill duplicates existing legislation and that it could give rise to long legal battles with companies that seek to challenge the law in those provinces where such a law exists?

[English]

Mr. Gallaway: As you know, Mr. Leroux, court battles are not new in this country. We're seeing those going on at the moment with respect to jurisdictional matters.

We have a long history in this country of references to the Supreme Court of Canada with respect to jurisdictional issues, but I would again answer in the same way I answered previously. The Parliament of Canada could not, even if it wanted to, pass a law dealing with custody and/or maintenance payments, because that, it is clearly understood and agreed, is provincial jurisdiction as laid out in sections 91 and 92 of the British North America Act. But at the same time, under the ancillary provisions, we do in fact legislate under those headings when it comes to divorce.

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So I put it to you very simply that we have the authority to deal with broadcasting and that in fact we entered that field many years ago with passage of the first Broadcasting Act. We have the power to deal with ancillary matters relative to broadcasting, and we in fact do that under the Broadcasting Act. This is nothing more than an ancillary matter under the Broadcasting Act and is clearly under the jurisdiction of this Parliament.

The Chairman: Thank you.

I'm afraid I have to close up Mr. Gallaway's testimony. Thank you for appearing before us,Mr. Gallaway.

I will now call on Mr. Keith Spicer, chairman of the CRTC. Please, Mr. Spicer.

[Translation]

Mr. Keith Spicer (Chairman, Canadian Radio-Television and Telecommunications Commission: Good morning, Mr. Chairman.

The Chairman: Good morning, Mr. Spicer. Thank you for agreeing to appear again before the committee.

Mr. Spicer: When I last came before the committee three weeks ago, I thought it was going to be my last visit and I believe I even said as much. I don't intend to make the same comment today, because you just never know.

I want to thank you for your invitation and at the same time point out that I am here with my colleague, Allan Darling, who is Secretary-General of the CRTC.

[English]

First of all, I'd like to congratulate Mr. Gallaway and the many members of the House and the ministers who have supported him.

But believe me, if anybody understands why the public is interested in this issue, we understand. We took enormous flak over this, a lot of it deserved. However, our position here today is that new legislation is probably bursting through an open door, because really the problem has been solved by the consumers and therefore the market.

We think that particularly since Parliament for the last two or three years has told the CRTC not to intervene, not to regulate, to lay off the market, to accept competition and not to micromanage, we have been severely marked by this.

Believe me, if we appear to be saying this legislation is extremely laudable but probably unnecessary, it's not because we recoil from protecting the public interest. On the contrary, I think we've been following the Parliament...I think pretty well most of the parties, certainly the government party and the Reform Party, have been telling us to deregulate and not to intervene.

With that little preface, I'd just like to say that offering cable subscribers new services and then charging them for these services until they take the initiative to say they don't want them has become a textbook classic on how not to handle consumer relations.

Even though the real harm was caused essentially by one company in a couple of cities, I think the entire cable industry and the infrastructure that is so valuable to this country were considerably damaged. If you wonder why I say the infrastructure is valuable, you should just go to Europe or the United States and they'll tell you why it's valuable.

Consumers have been asking for more choice. At the time of the introduction of the new Canadian speciality services the assumption was that they would want to receive all of these new services. What was not properly understood at the time was the use of niche marketing as a method of responding to viewers' desires to have the freedom to decide which package of services suited and appealed to them, and how much and for which ones they would be willing to pay.

Negative-option billing clearly did not respond to these needs. With hindsight, it's obvious that this method of marketing was the wrong way to go. Its use was very damaging.

Consumers reminded all of us, including the CRTC, that it is consumers themselves who must decide which services are chosen and paid for. As a result of the consumer revolt against the imposition of services, current marketing practices of the cable industry have changed dramatically. Of the forty services now appearing before us for licences, not one is asking for negative-option billing.

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The negative option of marketing is a thing of the past. I can say this unequivocally. David Colville, the commission's vice-chairman of telecommunications, said to the industry at a public hearing this year, ``This negative-option packaging promotion scheme has gone to the dustbin of history''.

There isn't anybody who believes they could possibly revive this, no matter how much they wanted it. Nobody we know in the industry, in any of the licensees in the community, would dare to do this. They have been hammered over the head and they've got the message.

The industry is in full agreement with this and has abandoned negative-option billing and will be offering new services as a part of a package of discretionary services consumers will have the choice of subscribing to. This sea change makes legislative action questionable at this time. This is not necessarily a bad idea, because I think there are other factors and only you, as our democratically elected representatives, can decide that.

Among the other factors you might cite maybe you consider there's a need to reassure the public. Maybe they won't believe that the market has convinced the industry to change its ways. Or maybe you will decide, for reasons of higher policy, that you'd like to have greater certainty. We certainly respect that.

We're not here to fight this bill. We're here only to clarify the facts and to bring you up to date on what is happening on the ground.

As I said before, we think the bill is absolutely laudable. We respect and applaud the people bringing it forward, particularly Mr. Gallaway, who has put a great deal of work into this. We just think it's probably not necessary, unless you decide this for reasons of persuading the public that action has been taken and its firm and that Parliament is involved. We respect that perfectly well. It's important for Parliament to be seen to be playing a role, so we completely accept whatever your decision may be.

A new law now addresses an issue that in our opinion has been effectively resolved. As I said, it's a case of bursting through an open door.

[Translation]

An unfortunate episode served as a real lesson to us. Subscribers have power and can now exert real influence. They can exercise their right to choose from a variety of program packages, knowing in advance, before they subscribe, exactly what they will be getting and how much it will cost them.

The industry heard the strong message of consumers loud and clear and it responded by requesting that we ensure competition among distributors, as well as diversity, choice and price options.

As a result, the CRTC told the industry, producers and program distributors that in future, services will have to be discretionary. The industry has heard that message. Licence applications for new services currently being considered all include business plans developed on the principle that services will be offered on a discretionary basis.

[English]

The Commission has always been sensitive to the notion that cable subscribers be aware of their options and be fully aware of what they're paying for. We've been carrying on this campaign. If you want to go through the delightful process of reading the transcripts of our hearings for the last seven years, you'll see that this has been a theme of every one - a constant guerrilla war, culminating in 1983, when we said they had to apply a truth-in-billing policy of considerable rigour.

This approach was clearly stated in June 1993 in a public notice related to the structure of public hearings, when the commission specifically raised the issue of billing clarity. We stated:

We also said:

The CRTC has told producers of future new speciality services that they must be offered to viewers on a discretionary basis. Viewers will get to choose whether they want to pay to subscribe to an additional tier of new services.

What is the current practice vis-à-vis Bill C-216, Mr. Gallaway's proposal? We believe that the approach adopted by the commission for the consideration of applications for new services effectively addresses the fundamental objective of Bill C-216.

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On February 22, 1995, in our public notice 1995-29, we outlined specific criteria the commission would use to evaluate applications for new Canadian specialty and pay television undertakings. Public hearings of 40 applications started last Monday, May 6. We stated in that notice, and I quote:

Now, in the language of the CRTC, it's a little like the Japanese imperial court when we speak to the industry. They know what we were saying. We said don't even fantasize about coming forward to demand negative option or imposition of things.

I quote again:

Applicants were also told they must submit a marketing strategy:

Also:

[Translation]

I believe you have asked cable industry representatives to appear before the committee and they are perfectly able to defend themselves. The industry is well aware of the Commission's current practices and its views on proper service packaging and billing practices.

I would just like to make three points about our rate-setting responsibility. The Commission sets the overall rate - in other words, the wholesale pass-through rate for programming services included in the basic cable package provided to all subscribers. Rates for discretionary services, specialty services, pay-TV and pay-per-view services are not regulated by the Commission, precisely because they are discretionary and a television viewer can choose whether or not to subscribe to a whole tier of programming services.

The Commission does not regulate marketing techniques. If it did, it would be guilty of micro-management and overregulation, and I think parliamentarians would be the first to criticize the CRTC were we to engage in that kind of thing.

However, the Commission does believe that cable operators must ensure, through appropriate notification procedures, that their subscribers are made aware of all the service options available to them, of the cost of each service or programming package and of any actions they must take to make their choices known to the cable operator.

[English]

Also, at the commission's request, specific requirements on billing clarity and subscriber notification have been incorporated into the cable industry's consumer service standards. These are formal and proclaimed and they are implemented by the Cable Television Standards Foundation.

On the question of picking and choosing individual services, this is not technologically feasible at this time. We use the phrase ``pick and pay'' but said in our press release a couple of years ago this would take ten years to play out. A lot of people think it's now.

Probably I'll just throw these pages out, Mr. Chairman. I'd rather respect your wishes to abbreviate and allow the hon. members to ask more questions.

I think I've given you the basic message. What we're saying is that we commend Mr. Gallaway and his colleagues for doing this. We are certainly not fighting it. If you decide to go with this, we are not going to go into a terminal depression. We are just trying to bring you up to date about the facts on the ground and tell you we don't think it's necessary; but you may decide it's desirable, and that's a different question.

Thank you.

[Translation]

The Chairman: Mr. Leroux.

Mr. Leroux: Thank you, Mr. Spicer. It looks as though you anticipated certain questions and tried to respond to them in your comments. We certainly agree on the fact that the use of negative option billing by large cable companies has proven disastrous. I think they themselves realized this, so they quickly mended their ways. I would like to clarify something, however.

A little earlier, I asked Mr. Gallaway if he thought the CRTC had jurisdiction over business practices such as billing. I am raising this with you because you just referred to two specific practices, namely rate-setting and billing.

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Mr. Spicer: This is something that seems to get a lot of constitutional experts all worked up, Mr. Leroux. I am not one of them, however, and I think it would be risky of me to venture an opinion on the issue. We are certainly aware that Quebec in particular has asserted its jurisdiction over negative option billing and therefore over business practices. We are trying to confine ourselves to the Broadcasting Act, which clearly gives us both the right and obligation to ensure that subscribers have access to affordable services. As for the details surrounding those subscription packages, please don't think I'm trying to dodge your question, but the fact is I really don't have the expertise to answer it.

Mr. Leroux: Yes, I understand, and I don't expect you to give me the kind of answer a constitutional expert would. You say the CRTC does set certain rates but that you have never gotten involved in companies' actual business practices. So, you have never published any directives or specifically given advice on the business practice of billing.

Mr. Spicer: No, as a general rule -

Mr. Leroux: You say as a general rule -

Mr. Spicer: Yes. I'm trying to think of an example I could give you.

Mr. Leroux: I just want to be sure I understand.

Mr. Spicer: I remember what I said about billing clarity. I personally led a campaign on this very issue over a couple of years. Initially, we lectured them, sometimes in pretty strong terms, and finally we ordered them to produce clear and detailed invoices. That seems the least they can do. However, I don't think that necessarily has any negative impact, as far as the Constitution is concerned. That's the only comment I remember.

Mr. Leroux: Thank you, Mr. Chairman.

[English]

The Chairman: Mr. Hanrahan.

Mr. Hanrahan: Thank you, Mr. Chairman.

Thank you, Mr. Spicer for your presentation. I would ask also for a bit of clarification. I did not have a copy of your speech, and you spoke very quickly. I just want to run over a couple of things.

As I understand it, in terms of the consumer's understanding of his options, you said this was resolved and that the consumer must be aware of all the options available to him.

Mr. Gallaway reported in his discussions a Compas research poll in 1993 that said 92% of Canadian cable subscribers receive extended basic service. But a survey conducted found that 66% of cable subscriber respondents believed that they were receiving the lowest-priced basic service. How can one say that consumers are fully aware of their options when there is so much confusion out there among consumers?

Mr. Spicer: First, I think not many of us read our cable bills; we should. This is why we press the cable industry to divide the bill basically into two parts: basic and discretionary. Unfortunately - and this is really a testimony to the quality of the new Canadian services introduced in the mid- to late 1980s - people became so appreciative, or hooked, on the new Canadian services that they came gradually to consider them as fundamental, as basic. Not many people really would make that distinction.

Let's take TSN. Should that be a discretionary service? How important is sports to you? What about MuchMusic? What about the weather station in Canada? These are services that have gradually won mind space among Canadians. I think probably most Canadians now consider these fundamental services. The definition of fundamental services -

Mr. Hanrahan: I understand the psychology of it, but is it the responsibility of the consumer to read his bill and determine what is basic and what is extended? Or is it the responsibility of the seller to inform very clearly and seek the permission of the consumer before these things are billed?

Mr. Spicer: It's definitely the responsibility of the seller. That's what we said. That's what we have been saying for years. That's what we now have.

Mr. Hanrahan: You believe we do now have this?

Mr. Spicer: Yes, I do believe that.

Mr. Hanrahan: Also, I'd like a further clarification. You said at the beginning of your discussions that you can state unequivocally that negative billing is no longer an option. Then somewhere close to the end of your presentation, you stated that it makes it pretty clear that negative billing is not an option. The difference between ``unequivocally'' and ``pretty clear'' is -

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Mr. Spicer: It's a stylistic variation. It has no impact on substance whatever. If you want me to say it is absolutely 1,000% deep-sixed, I'll say that. Whatever you want, it's dead. It's not just half dead, it's dead, very dead. It's not prematurely dead, it is dead.

Mr. Hanrahan: Is it dead in regulation?

Mr. Spicer: In reality. I guess what we're trying to deal with here is not a phantom problem, but a real problem. We think it is solved. But again, I'd like to say out of respect for Mr. Gallaway and the many members who have raised this issue, and many of you here, that we totally respect your right to determine that an issue needs to be made clearer to the Canadian public, for example.

Mr. Hanrahan: But you say you think it is dead. You say it's like charging through an open door. You say it's unequivocal. You think you're pretty clear. Stylistic or not, we're leaving this in pretty vague language.

Mr. Spicer: I don't know what you want me to say, sir. I said absolutely that dead is dead. I don't know what more I can say. The negative option is finished. I don't know how you want me to embroider that any further. Dead is dead. Finished is finita. There is no more negative option.

Anybody who dared to try to revive it - talking of cable companies - would be out of his mind. They know this. They're not completely crazy.

I don't know why.... If you want to continue on this vein, I'm happy to try to find more variations on the word ``dead'', but it's dead.

The Chairman: Could we move on, please? The time is exhausted. Mr. O'Brien.

Mr. O'Brien: Mr. Chairman, I'd like to ask Mr. Spicer something. I think ``dead'' is pretty clear and definitive. But if that's the case, then what's the harm in burying it? I think my colleague's bill seeks to bury the dead and make it very clear to the public that it's not only dead, it's buried. Do you see any harm in that?

Mr. Spicer: Not at all. Go ahead and bury it. We'll send you a bouquet of flowers to put on the grave. That's fine. That's fair ball as long as you know what you're doing, and you always do.

Some hon. members: Oh, oh!

Mr. O'Brien: I'm pleased to support the interment process.

Mr. Spicer: We are not here to praise the negative option, but to bury it with all appropriate -

Mr. O'Brien: But seriously - I was serious with the question, and I appreciate the response - given your statement earlier about the tremendous outpouring I certainly had as a member of Parliament, the outcry from the public, is there any serious harm, from your point of view, with Parliament proceeding with this bill?

Mr. Spicer: No, I can't see any harm in it.

Mr. O'Brien: Thank you.

Mr. Spicer: Maybe I could just add one little thing to think about, possibly in Quebec. The Quebec market has 6 million francophones. It's a different situation. You may want to consult some of your Quebec members on this.

This outcry took place essentially against one company in Toronto and Vancouver. There was not any outcry that I can remember in Quebec. I think it's because the Quebec public realized that to make new Canadian services fly in Quebec, you needed as many people up front as possible.

It's a different situation from ``distinct society'' or whatever. I'm not getting into that. Quebec is a very different place. The realities are different.

So I would just caution you to be careful. If you're going to have a burial ceremony, invite Quebeckers to attend -

Mr. O'Brien: Invite all the family.

Mr. Spicer: That's right.

The Chairman: It's a two-grave situation.

Mr. Bélanger.

[Translation]

Mr. Bélanger (Ottawa-Vanier): My question relates to the same issue. I have just been reading the submission made by my colleague, Mr. Gallaway, and I'd like to quote from his presentation:

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My question is along those same lines. Let's take a specific example. If a community wanted to have RDI included in its basic cable service for an additional fee, and the CRTC agreed, would Bill C-216 outlaw that practice?

Mr. Spicer: Outlaw setting a price? Well, I can't really say what the effect of Bill C-216 would be, but I can tell you that the idea of the Commission's setting a price for new services without there being an opportunity for people to express their views is totally inconceivable. We hold public hearings on all substantive issues and this is certainly an issue we would want to debate.

I believe that for a quarter of the new proposed services, we made it clear that we wanted there to be a fairly lengthy free trial period. Personally, I think the most civilized way of launching new services is to offer a fairly long free trial period for each one, after which you write to or phone the subscriber to ask whether he liked the service that he received free of charge for six months and whether he wants to keep it at the proposed cost. I see that as the best way to respect the consumer's right to choose and at the same time give the new Canadian service a chance to be seen by subscribers.

People will not buy something if they haven't seen it. For instance, if you ask them whether they want to receive a channel that presents the best funeral orations of the week...

Mr. Bélanger: But if there were a desire to include RDI in the basic cable service all across Canada and that meant an additional cost of 10 cents per month per household, or something like that...

Mr. Spicer: It would be very little. A few cents, perhaps.

Mr. Bélanger: ...would this Bill prevent the CRTC from doing that? I think it's important that we have an answer to that question.

Mr. Spicer: Well, we would really have to look at that more closely, because we haven't really considered the bill from that angle. I think the CRTC would prefer that be the subject of a separate study. If you're prepared to reopen the Broadcasting Act, I think there are a whole series of related issues that should be looked at.

But the fundamental issue here, and the one that has led to misunderstandings between proponents of all-out competition and supporters of Canadian content, is Section 3. I don't think it would be a good idea to prevent the CRTC from imposing carriage of a service which is of national interest. We've often thought that when a national service comes along, as it does from time to time, that is really essential - like news, for instance - it might be appropriate to impose carriage of the service. Once again, Radio-Canada has not asked us to impose carriage of RDI.

Mr. Bélanger: Not so far?

Mr. Spicer: No, not so far. I've often said that I was personally in favour of universal carriage of Newsworld and RDI, so that all Canadian households would receive it. I think it would be a symbol of thoughtful dialogue between the two linguistic communities, as well as a way of guaranteeing the immediate universality of such services.

Radio-Canada did not ask us to do that - I imagine because of a public relations concern - but the result is still excellent.

The Chairman: Since we do have some time left, I'm going to allow Mr. Leroux a very brief question, and then move on to Mr. Cullen and Mr. Gallaway.

Mr. Leroux: Fine, thank you.

Mr. Spicer, I believe the statement you made yesterday proves your deep concern for consumers and your desire to protect their interests, and I would just like to take this opportunity to thank you on behalf of all my colleagues for saying that we knew what we were doing. It seems however that you made an exception yesterday for the Cabinet.

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Mr. Spicer, just how far are you prepared to go to encourage cable operators to be clear about the programming packages they are offering consumers? You say that you have made speeches and statements in which you drove that point home. But to what extent can you force cable operators to make an offer to consumers that is clear enough that they know what the options are and can make an informed decision to purchase them or not?

Mr. Spicer: I hesitate to bring forward suggestions so close to the end of my mandate, but after all, why not? I've always believed that transparency was so fundamental in terms of building trust between consumers and cable companies that it might be worthwhile holding a public hearing just on that particular issue or, if you wanted to broaden it somewhat, on relations in general between the cable industry and consumers, so that both parties have an opportunity to get things off their chest. I think it might turn out to be a real learning experience for the cable industry.

One of the tragedies of the Canadian audio-visual system is the weakness of the public relations component. On the one hand, speaking objectively - because this is the view of both Europeans and Americans - our 82% cable penetration rate and the technological excellence of our cable industry, which has become the backbone of a high quality integrated system that, compared to the United States, offers twice as much choice for half the price, are proof positive of the phenomenal success we've had in putting the public interest first. On the other hand, over the past 20 years, the cable industry has completely soured its relationship with the public - a relationship which has been disastrous for some time, as you well know. Events over the last 18 months have only confirmed that. I think the cable industry has a positive message to convey, but that rather than buying new systems, it should spend a little more on public education programs.

I can assure you that I am not being paid to act as a P.R. man for cable operators, nor do I have any intention of playing that role. But I want you to know that foreigners often ask me how we manage here in Canada to offer so much choice at such ridiculously low prices. I respond, as I try to blush, that it's because of regulations and Parliament, but that it isn't so bad. I'm sure that in the coming years, my successors will make it even better.

The Chairman: We have three minutes left.

[English]

A brief question, Mr. Cullen, please.

Mr. Cullen (Etobicoke North): Thank you, Mr. Chair. Thank you, Mr. Spicer. I'll keep my comments very brief. It'll help me, perhaps, to determine how dead is dead....

There are a number of Canadians who perhaps were under the impression that when the cable companies proceeded with this sort of bundling of services in the negative-option billing there might have been a sort of tacit acceptance by the CRTC, with the notion that it would assist these channels to get a start - channels like Showcase, Bravo!, etc. Was that indeed what occurred, and if it was, was that an appropriate action in your view?

Mr. Spicer: Yes, that's absolutely no secret. As to why -

Mr. Cullen: And is it working?

Mr. Spicer: Yes, it has worked with regard to the success of the channels that were launched last year. A lot of people think the only word in the Broadcasting Act is competition.

But for the real words, look at section 3, the law that you and your colleagues wrote, ladies and gentlemen. It says the primordial duty of the CRTC is to make sure there is a maximum of high-quality, diverse Canadian programming. There are our marching orders. That's what we're in business for.

Historically, one of the ways we were able to do this was by negative option. For example, when TSN, The Sports Network, got into really bad trouble through positive optioning back in 1986 or so, they only got a 15% take-up rate. It wouldn't have survived if we had not had negative option the second-last time around. You would not have a sports network in Canada.

You can't have everything. You have to decide. Do we want Canadian services, as Parliament says we must? That's the whole heart of the law. Or are we going to lose our nerve if somebody takes out of context what was a tool, but what is now a dead tool? We all know. And it certainly served its time. Of course, we accepted that and it worked. Historically, it did work very well, but we would never consider it any more.

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The Chairman: Mr. Gallaway, briefly, please.

Mr. Gallaway: You characterized this furore of a year ago as ``harm done by one company in a couple of cities'' and you subsequently said the cities were Toronto and Vancouver.

Cities like Windsor, London, Guelph, Sarnia, Brantford, Mississauga, Hamilton and Ottawa were all affected. And that's just in Ontario. I'd like to suggest to you that there are probably 4 million to 5 million people who were affected, and you've characterized it as being somewhat of a tempest in the cities of Toronto and Vancouver.

Would you say that perhaps that comment was a bit flippant or a bit general?

Mr. Spicer: Oh, I wouldn't say it was flippant. It was not meant to be comprehensive.

Mr. Gallaway: So you would agree that -

Mr. Spicer: Sure, sure.

Mr. Gallaway: - it was a furore that covered -

Mr. Spicer: No. I think I may have -

Mr. Gallaway: [Inaudible - Editor] ...just one city?

Mr. Spicer: I haven't got the transcript. I think I said mainly Toronto and -

Mr. Gallaway: No. You said harm ``done by one company in a couple of cities''.

Mr. Spicer: Okay, a couple, but they are pretty big cities. I don't argue with you on that. Sure.

Mr. Gallaway: This is my final question. You're saying it's a thing of the past. You said unequivocally that it's dead. When did it die?

On February 13, 1995, Maclean Hunter was sending this out. Nowhere in it do you read that if you're not home, if you're on holiday or if you're away for awhile, as of March 1 you are going to be billed.

Mr. Spicer: That was what, fifteen months ago?

Mr. Gallaway: When did it die?

Mr. Spicer: That was fifteen months ago. I think it died when we put out our announcements telling people they should not ask for any special treatment or specialty services. We have constantly informed the industry in speeches, in interviews and in normal conversations that they shouldn't even think of this.

Mr. Gallaway: Should you not have informed the industry prior to March 1, 1995?

Mr. Spicer: Look, the public informed us all about what the future was going to be. We didn't have to draw a diagram for the industry. That's why I don't think that this.... If you want to do this law, we consider it's maybe.... It's certainly not necessary, but if you consider it desirable we're not fighting it.

Mr. Gallaway: Okay.

The Chairman: Thank you, Mr. Gallaway.

Thank you very much, Mr. Spicer. Thank you for appearing, Mr. Gallaway.

Mr. Spicer: Thank you.

The Chairman: I will now call on the Consumers' Association of Canada, the Association des consommateurs du Canada. Mrs. Gail Lacombe is the chair of the board of directors and Mrs. Rosalie Daly Todd is the executive director and legal counsel.

Mrs. Lacombe and Mrs. Todd, you've heard what the routine is. There is half an hour for all of us, so please confine your address to ten or fifteen minutes maximum to allow some time for questioning by the members.

The floor is yours.

Ms Rosalie Daly Todd (Executive Director and Legal Counsel, Consumers' Association of Canada): Thank you, Mr. Chairman and members of the committee.

Gail Lacombe and I are here today to comment on and to support Bill C-216. I will be very brief. I intended to be. I didn't prepare a written text because I knew I would be following Chairman Spicer and I knew I would want to respond to some of the things he said. He has not disappointed me. However, committee members have stolen much of my thunder, so I'm going to be brief on that, too.

First, I want to make a few points in support of the bill on behalf of the Consumers' Association of Canada. In case you don't know, CAC will be fifty years old next year. We're a group of Canadian volunteers from many backgrounds across Canada, in all provinces and the territories. We've come together for one purpose: we have in common an interest in marketplace issues, issues like negative-option marketing.

For more than twenty years CAC has been interested specifically in communications issues, first in telecommunications and then in cable. In 1993 we appeared before Mr. Spicer at the cable broadcasting structural hearings. We had a message that seemed very radical at that time. Today it's almost trite. We said that in looking at the cable and broadcasting industry there were four key concepts for consumers: real choice, affordability, quality programming and competition.

I want to quote from our submission at that hearing, Mr. Chairman. We said:

That message was delivered by the CAC to the CRTC in March, 1993. They were not listening, nor were most of the cable companies. In December 1994 cable companies moved to add channels, and in some cases actually to rearrange packages, without the consent of their subscribers. The rest, as they say, is history.

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Consumers across Canada had plenty to say about choice. But who was listening?

We are here today representing CAC and Canadian consumers because we believe there is a need for federal legislation to outlaw this unacceptable practice in the communications industry. We are skeptical about the new lip service given to consumer choice. We don't believe the current monopoly provider has learned its lesson. We don't have faith in the CRTC. Its focus is on industrial policy and cultural policy. We fear this practice, negative-option marketing, will resurrect itself in some form with the licensing of the new round of speciality channels. With all due respect to Chairman Spicer, it is still being used in some cases.

We don't believe piecemeal provincial responses are sufficient. In our opinion the federal government has full authority under the Broadcasting Act to regulate cable and other distribution undertakings. We ask that that authority be used to outlaw this practice. The purchase of speciality and other channels, like any other purchase in the marketplace, should be a transaction to which consumers give their positive consent.

Ideally, Mr. Spicer, this legislation would not be necessary. We are here to tell you it is.

I want to comment on the fact that this supposedly is a dead policy. I can tell you, Mr. Chairman, I know that as recently as January and February of 1996 at least one cable company was doing what we consider to be negative-option marketing, in that they were offering packages of services to consumers for one free month, and then unless the consumers responded they were billed for three months of the service. I know a number of cases where the consumers actually didn't receive it, made calls saying ``we're not getting this free service'', and were billed approximately $55 for three months. So it is still going on at least with one cable company.

As your committee members pointed out, we don't want it pretty clear; we want the practice outlawed. I think this is a very commendable bill, one having that aim, and we support it wholeheartedly.

The Chairman: Thank you very much.

Mr. Bélanger.

Mr. Bélanger: I'd like to go back to one point. I'm trying to differentiate, I suppose.

I have no problems with banning negative billing, if you can call it that, or negative-option billing. I want to know what your reaction is to the notion of the Government of Canada, in this case through the CRTC, expressing its desire to put on the basic network a service of some sort, be it information related or whatever. All I'm trying to determine - and I'll ask for a legal opinion from someone at some point - is whether or not this bill would prohibit that. If it did, then I want to make sure we're aware of that.

Ms Daly Todd: I heard your question. I'm not sure it would prohibit it, but it would give us some ammunition to argue that we have reached the limit of the ability to do that.

Mr. Bélanger: I have no problem that anyone who wishes to do so should be able to argue in front of the CRTC the merits of adding another channel or replacing a channel on the basic service. I'm fully with you there if there's a will to do so. I wouldn't want to remove the ability to do so inadvertently.

Ms Daly Todd: I would say, speaking for our association, we support a core element of Canadian content. But I would suggest to you we've gone far beyond that core at this point and the future will be redefining what that core Canadian content is and then freeing up consumers to pick, of their own initiative, the best that's there from whatever source.

We are convinced Canadians will pick a high amount of Canadian content. I think the problem is they're not free to do so now. They don't like the linking rules in particular. It's creating animosity against the regulator and the cable company. I think that should change in a competitive environment. But as you know, we're still waiting for that competitive environment.

The Chairman: If there are no other questions, I thank you very much, Mrs. Todd andMrs. Lacombe, for appearing before us and for your very clear message. People understood it very well.

Ms Daly Todd: Thank you.

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The Chairman: I call Mr. Michael Janigan, executive director of the Public Interest Advocacy Centre.

Mr. Janigan, the floor is yours.

Mr. Michael Janigan (Executive Director, Public Interest Advocacy Centre): Thank you, Mr. Chairman.

I extend my thanks to the chair and the members of this committee for giving me this invitation to speak to this issue, which has long bedevilled consumer advocates. We commend the efforts of Mr. Gallaway, the hon. member from Sarnia - Lambton, for sponsoring this long overdue legislation.

The Public Interest Advocacy Centre is a non-profit corporation that provides legal services and research to vulnerable consumers and the organizations that represent them. This work primarily concerns issues of utility regulation in the telecommunications, energy and public transportation fields. PIAC's members include individuals, groups and organizations representing 2.5 million Canadians. For twenty years PIAC has participated in hearings associated with the regulation of the cable industry.

The concern associated with the practice of negative-option marketing has its origins in the nature of a contract of purchase and sale, as recognized in common law. As every first-year law student learns, such a contract consists of an offer and an acceptance.

The history of consumer protection statutes is a chronicle of legislators attempting to ensure that the offer is conveyed without misrepresentation by the vendor, and that subsequently the purchaser has an opportunity to make an informed choice to accept or refuse that offer. This is because a contract that is made with a consumer who was unaware of the key elements of the contract, such as price, quantity and quality of goods to be delivered, is subversive of the efficiency of the market as a whole.

We have thus seen the gradual implementation of such measures as cooling off periods, penalties for misleading advertising and contract rescission for misrepresentation.

Many consumer protection statutes have also tackled the problem of unsolicited goods, some barring legal remedies for collection where there was no consent by the consumer to receipt of the goods. It is important to recognize that the intent of such measures is not simply to protect consumers but also to eliminate any competitive advantage conferred on an unscrupulous seller engaging in these practices.

Whatever can be said of the reasons for the existence of the practice of negative-option marketing in the Canadian cable industry, two important conclusions can be drawn. The practice has meant that large numbers of Canadian cable consumers don't know what cable package they are receiving, and secondly, the practice has been enormously lucrative for the cable companies.

As most of you know, the price of service regulation of the cable industry is only exercised over basic service. Approximately 8% of cable households receive only basic service. The other broadcast services have their fees set by the cable companies. Obviously, the greater the market take-up for these services, the greater the revenue for the cable company and the greater the incentive to use the negative-option ploy to boost subscription rates.

The problem is that for most of these non-price-regulated cable packages, no competitive alternative now exists. A customer, steamed that he or she has been charged for something that was never ordered, can't exercise a choice for another supplier. Even if such a choice eventually exists, it's important that consumers are protected by the requirement that any distribution undertaking must receive the positive consent of the consumer to receive and be billed for such a service before any charge to the customer ensues.

We are entering an era of multimedia and interactive programming services, whose proponents will be competing aggressively for market share. As most of you know, the key players are having a difficult time making the demand fit the expense of supply. I expect that we will be facing a whole range of arguments similar to those advanced by the cable companies in the past to justify negative-option marketing of new services in the name of establishing commercially viable Canadian multimedia services. It is time to eliminate from broadcasting services the marketing principle that what consumers don't know can't hurt them.

Notwithstanding that current cable suppliers have pledged to go cold turkey, we must be aware that this practice can be addictive, especially when your investors are clamouring for a continuing high level of return in what might someday be a competitive market. The cable industry has been successful in evolving from a glorified antenna service to an important element of the Canadian lifestyle.

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The events of January 1995 showed us that Canadian cable users wish to have some measure of control and choice over what they receive in their homes. Most of all, they resent when choices are made for them that have adverse financial consequences.

Bill C-216 seeks to empower Canadians by insisting that their right to choose be respected and that the historical relationship of vendor and purchaser be restored in an industry whose product is itself acknowledged to be the most powerful communicator for merchandising to date. We think this bill is both overdue and far-sighted, a unique combination that commends its passage.

Thank you, Mr. Chair.

The Chairman: Mr. Leroux.

[Translation]

Mr. Leroux: No, thank you.

[English]

The Chairman: Mr. O'Brien.

Mr. O'Brien: I have no questions.

The Chairman: Mr. Bélanger.

Mr. Janigan, obviously the members are pretty convinced about the consumers' position. Thank you very much for appearing. We appreciate it very much.

Mr. Janigan: Thank you.

[Translation]

The Chairman: I just want Committee members to know that we will be completing consideration of Bill C-216 on Thursday of this week.

[English]

We will hear from the Canadian Cable Television Association and the Cable Watch Citizens' Association, and then proceed with the clause-by-clause study of the bill.

[Translation]

Mr. Bélanger.

Mr. Bélanger: In that same connection, would it be possible to seek clarification from the Law Clerk of the House regarding the effect of Bill C-216 on the CRTC's authority over the basic cable service, in terms of developing, adding, removing or replacing channels? The example I have in mind is Le Réseau de l'information, RDI, where the CRTC told Radio-Canada that if it wanted the new channel to be part of the basic service, it would have to make a formal request to that end. Thus far, Radio-Canada has tried to use a different approach - in other words, by entering into an agreement with cable operators.

If, at some point, Radio-Canada has to face the fact - although this would not necessarily be a pre-condition - that it cannot reach an agreement with certain cable operators, we may want the CRTC to considering including RDI in the basic cable service. I just want to be sure we won't be preventing the CRTC from taking such action if we pass Bill C-216. So, I would like to get a legal opinion on the subject, if possible.

The Chairman: Mr. Bélanger, have you read the paper prepared by Mrs. Alter who is with the Research Branch of the Library of Parliament?

Mr. Bélanger: I only received it this morning, so I have not had an opportunity to read it.

The Chairman: One section of that paper, that appears on page 4 of the English version and page 5 of the French version...

Mr. Leroux: Yes, the paper prepared by Susan Alter and René Lemieux.

The Chairman: It's the one dated January 1995 that is appended to the paper prepared byMr. Lemieux on May 8. The first one is Mr. Lemieux's paper, and after that, there's the one prepared by Mrs. Alter. Do you see them?

Mr. Bélanger: You say it's on page 4 of the English version?

The Chairman: It's on page 4 in English, and page 5 in French. This particular section describes the basic rules governing specialty cable services, basic cable service, discretionary services, and so on. Could I suggest that you read that paper first, and if you have any questions, that you pass them on to Mrs. Alter so that she can gather additional information, if required?

Mr. Bélanger: Thank you, Mr. Chairman. I'll do just that.

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The Chairman: I would now ask that you stay a few moments longer so that we can look at the motion tabled by Mr. Leroux which has been postponed a number of times for very good reasons, but that we could probably dispose of today - at least I hope so.

Mr. Leroux, do you wish to speak to the motion?

Mr. Leroux: The motion I have tabled concerns the National Film Board. A restructuring plan and budget cuts of some $20 million have been imposed by the government, and we want to look into their impact on the industry generally and on the NFB's operations as a whole. To that end, we would like the committee to hear witnesses who could enlighten us about the impact of these cuts. That is the purpose of this motion.

Mr. Bélanger: Mr. Chairman, with your permission, I would like to move an amendment to the motion. I don't have it written down, but I would move that after the word "therefore", the motion read as follows:

I just want to say one thing to Mr. Leroux. If the NFB wants to include a representative of employees as part of its delegation, I certainly would have no objection to that. But I do think the NFB should be able to decide who will be part of its delegation. That's the only amendment I would make. I don't imagine it will really change much.

The Chairman: Have you put your motion down in writing?

Mr. Bélanger's amendment would read as follows:

Mr. Leroux: As I understand it, if we say ``the NFB'', we are referring only to the Board of Directors. I cannot accept this amendment, Mr. Chairman. In all the committees, the tradition has been to call any and all witnesses who can provide clarification, and I would therefore find it unacceptable to hear from only one witness, who would present only one facet of the issue. The goal here is to gather as much information as possible so that we can thoroughly assess the situation.

I could go along with my colleague's suggestion if he were prepared to invite the NFB, as well as representatives of management, various divisions of the organization, unions, and so forth. I would be prepared to go along with that. But his proposal seems to be aimed at examining only one facet of the issue, and I find that unacceptable. If we want to act responsibly and gain a thorough understanding of the situation, we have an obligation to hear from any and all witnesses who could clarify the issues for us. And when I say ``witnesses'', I'm obviously talking about people who are directly affected by this. I'm not suggesting that we invite just anybody to appear before the committee.

As far as I'm concerned, it is clear that what is referred to here are the management of the NFB and the people responsible for developing and implementing management plans. In order to gain a thorough understanding of the situation, though, we need to hear from everyone who personifies the NFB.

Mr. Bélanger: To date, the committee has met with a variety of representatives of the Department of Canadian Heritage, or agencies who report to the Department of Canadian Heritage, and in each case, we invited members of the Board. We always leave it up to senior officials to choose the people they feel should most appropriately be included in their delegation. The proposed amendment does not in any way preclude our meeting with other groups at a later date, after hearing from the NFB, if we decide it's necessary.

The same thing would apply to the Museum of Nature. If the committee decided at one point to hear from other people, following last week's presentation, I would be prepared to go along with that. So, I'm not saying no. However, I think we should meet first with the NFB, and then we'll see.

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Mr. Leroux: I would just like to point out to my colleague, for information, that the reason representatives of the various branches of the department came before the committee was that the committee was new. They came to brief us. As for the Museum, let's not forget that Liberal members refused to hear from the union. Our goal here is to get clarification, Mr. Chairman, surely you realize, given your vast experience of parliamentary work, and your responsibilities, that we have an obligation to gather as much information as possible, and that we cannot be content to deal with only one facet of the issue.

The purpose of this is not only to gather information - because we know what the NFB's restructuring plan involves since it has been tabled. The Chairman of the Board, Mrs. Macdonald, has already tabled it, so that information is available. I just want the committee to assess the impact of this Bill and to hear from Mrs. Macdonald and union representatives about the specific goals they are pursuing.

The Chairman: Could I make a suggestion? First of all, in terms of voting on the motion, I see that only five of the 11 committee members are present, and that we have no Reform Party members; according to the rules, though, we need at least six people to put the motion to a vote.

Mr. Leroux: I think I've been had.

The Chairman: Mr. Leroux, this may be my fault. I should have paid more attention, but they all had legitimate excuses. I'm sorry. We will have to deal with it next week before the meeting begins.

You refer here to employees; but are you talking about the union or only a group of employees? Could we begin by inviting the NFB and raising whatever questions we may have with them, and then, as Mr. Bélanger has suggested, perhaps invite other groups to appear, if we decide it's necessary? I have no idea what group you may have in mind. Should we invite union representatives? Does this affect all employees? What about people in management, for instance, who may not agree with the NFB's current policy?

Mr. Leroux: The motion refers to ``representatives of the Board of Directors and representatives of the employees''. I think the wording is clear. We're not talking about all the employees, but representatives of the employees.

However, I think I can go along with what you are suggesting. We could begin by inviting the NFB, then representatives of the employees, provided that everyone agrees both sides will participate - in other words, that everyone will be around the table and not just some people, because then we'll just have to reopen the discussion.

But in all sincerity, I cannot go along with Mr. Bélanger's suggestion that we first hear from the NFB and then we'll see. I cannot accept the ``we'll see'' option, because after hearing from the NFB, I may sincerely believe that we should hear from the employees, whereas Mr. Bélanger might not think it appropriate at all. If I accept Mr. Bélanger's approach, I probably won't get the kind of clarification I'm seeking.

The Chairman: Mr. Leroux, I think it's important to point out that if we are going to talk about representatives of the employees, we have to be specific, because the committee has to invite specific people. You refer here to representatives of the employees, but are you talking about those employees who are represented by a union? Representatives can be either official or not.

Mr. Leroux: Yes, I'm talking about official representatives, Mr. Chairman. If you want me to change the wording of the motion to say "the official representatives of NFB employees", I would be happy to do that, and that way it would be clear. I'm talking about union representatives.

The Chairman: What exactly are you talking about? Are you saying the union would be the official representative?

Mr. Leroux: Yes, because the union's job is to represent employees.

The Chairman: Yes, but what about management employees who are not unionized?

Mr. Leroux: I'm open to suggestions, Mr. Chairman. If you think it would be wise to add that, we can add it. It might also be a good idea to hear from non-unionized professionals, or other employees.

Mr. Bélanger: All of this discussion is academic at this point, since we cannot resolve the issue now for lack of a quorum.

Mr. Leroux: Yes, but we can still try to make some progress. Are you agreeable to that idea?

Mr. Bélanger: Since I don't want to put my colleague in a difficult position, I would certainly be prepared to ask the Chairman, the NFB or the Board to come and meet with us. I won't ask my colleague to compromise himself by agreeing to that suggestion, because I understand his position and I know he would not like it to be said that he didn't want to meet with representatives of the employees. To me, that is a perfectly legitimate position, but I believe ours is equally legitimate.

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The Chairman: Can we just put this discussion on hold until the next meeting? Before we start our next meeting, we will deal with this issue and then put the motion to a vote.

Mr. Leroux: Fine. Further to your request, we will clarify the reference to ``representatives of the employees''.

The Chairman: Thank you.

The meeting is adjourned.

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