HERI Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 20, 2001

• 0839

[English]

The Vice-Chair (Mr. Dennis Mills (Toronto—Danforth, Lib.)): Good morning, colleagues.

Until Mr. Lincoln arrives—he's usually on time, maybe he's been caught in traffic—I think we should begin, unless colleagues have another view.

We have officials from the Department of Heritage this morning. Do we have an official from the Department of Industry, as well? Are we not doing both?

• 0840

A voice: They're coming along after the hour.

The Vice-Chair (Mr. Dennis Mills): Okay. Fair enough.

I suppose the way we would do this is you would chat for about 15 minutes or so and then we could take questions.

Mr. Wernick, the floor is yours.

Mr. Michael Wernick (Assistant Deputy Minister, Cultural Development, Department of Canadian Heritage): Thank you, Mr. Chairman.

I will take a lot less than 15 minutes, I hope. I'd really like to just get to your questions and see how we can be helpful to you. In fact, if my colleague from Industry shows up, it might be best to just direct your questions at either of us, depending on what the subject matter is. I'm sure Mike can join us as soon as he arrives and can catch up with me.

I've made a short presentation, which I believe has been handed out to you. I don't need to go through it in great detail. The essence of it really is the last slide, page 15. But if I could just make a few opening comments, that might help you get warmed up for your questions.

Obviously we appreciate very much the opportunity to follow the minister and appear before you today, to go early in the process to see how we can be helpful to you as members of the committee. If there are particular issues of analysis or research or fact-gathering that you want to pursue, we'd be very happy to continue our work with the research staff and prepare things for you that will be useful to you, as you proceed through your witnesses over the next weeks and months. So coming here today is very much to see how we can be helpful to you, and that is the spirit in which this presentation is offered.

When she was here a couple of weeks ago, the minister of course did a wonderful job of surveying the broadcasting environment. I'll just recap for you the three issues that she highlighted as of interest to her—Canadian programming; Canadian stories—the diversity of voices on the broadcasting system; and the future of local broadcasting in the current technological environment.

What I have put together for you, and I hope this is what you would find useful, is a little bit of a road map of the public policy players in the federal apparatus. The question that's often asked is, who does what.

[Translation]

We have the Department of Canadian Heritage, the Industry Department and the CRTC. Who does what? What are the roles and powers of the federal agencies?

[English]

On the third slide we are just recapping the Canadian model, as we would describe it, the different pillars or parts of the system, which I think you will be exploring in much greater detail in the coming weeks. They include: the public broadcaster; the role of private sector broadcasters in creating programming choices; the role of the independent regulator in overseeing the system and implementing the objectives of the act; the various funding of support mechanisms, whether it's the Canadian Television Fund, tax credits, or other forms of support for the creation of Canadian stories; access to programming choices from around the world; and partnerships of various forms with international players.

Slide four is just the triangle—Heritage, Industry, and the CRTC. The responsibilities laid out—essentially ours and the minister's—flow from the Broadcasting Act, which you will be taking a good look at. Those of the Minister of Industry that are relevant are the Radiocommunication Act, which I'm sure my colleague will come to in a little more detail, and the general world of telecommunications regulations as well. Of course there is in the world of convergence increasing linkages between broadcasting and telecommunications issues.

The CRTC is the regulator for both systems, both broadcasting and telecom. We have a convergence regulator, which a number of countries are trying to build now. The interaction of the Governor in Council, that is to say, cabinet and the executive part of government, with the regulator is probably one of the issues you'll want to spend some time on. It was certainly one of the hot issues the last time the act was looked at in any detail, about ten years ago.

I'll just skip over very quickly the role of the department. I think it's very familiar to members of this committee. It's basically a policy oversight role and cultural policy focus, very much about connecting Canadians to each other, the expression of Canadian choices, Canadian content, Canadian diversity, and projecting Canada into the world. We always look at broadcasting issues, like any cultural industry issue or cultural sector issue, from the cultural lens. It's not to say that there aren't economic and industrial or international implications and lenses that can be applied, but our job, first and foremost, is to focus on the cultural policy goals that are set out in this and many other documents you had before you.

• 0845

Essentially, we do our best to support the minister. That role comes down to: advice on policies from time to time; looking at the legislation, as you're doing now; keeping the minister abreast of developments and well informed of what's going on in the broadcasting system; dealing with inquiries, questions, correspondence, members' inquiries, question period issues, and so on; and generally keeping an eye on issues that would be generated by the CBC, the CRTC, and indeed Telefilm, the National Film Board, as well as other players in the audio-visual environment. The most acute role, which is one we exercised just a little while ago, is that we advised the minister on how to deal with appeals that come to her in the first instance of broadcasting decisions from the CRTC.

[Translation]

That is a role that we play from time to time. Twice this year, the CRTC's decisions were appealed.

[English]

Probably the key role we've exercised in the last four or five years has been the support-for-production role—the building of public policy tools and instruments that support presentation and access to Canadian programming. There are a number of ways in which that support flows, and I'm sure you'll be looking at all of them in turn.

[Translation]

Obviously, there is the CBC and the Canadian Television Fund. There is specific support for

[English]

Aboriginal Peoples Television Network.

[Translation]

There is the Northern Distribution Program. Finally, we have Radio-Canada International and TV5, among other things.

[English]

Industry Canada—my colleague can go through in more detail, I'm sure—is important to the broadcasting environment because they provide a lot of the support and infrastructure in terms of managing the broadcast spectrum, determining which frequencies are available for use—at what power levels, in what geographic areas—how many stations you can cram into a certain geographic area, whether new slots can be created. There's obviously a link between that and the diversity issue. If you want to add more players to a broadcasting market, eventually you can reach the technological limits of how much spectrum is available. Spectrum management is an important referee role that Industry Canada plays.

And of course Industry Canada plays a role analogous to ours on CRTC matters that flow out of the Telecommunications Act and decisions the CRTC takes on telecommunications matters.

The CRTC, I understand, is coming before you on Thursday, so I won't go into any detail of their specific workings. But they're there essentially to regulate and supervise all aspects of the broadcasting system. The most important way they do this of course is issuing, renewing, amending, and suspending broadcast licences to radio and television players. And they do have a great deal of discretion as to what level of regulation they want to impose. They can regulate in great detail or they can back off and exempt from licensing requirements. They can use tools such as forbearance, where they say, “We're just not going to deal with that issue; we'll let the market sort it out for itself”.

They set specific conditions of licence for individual broadcasters, as people come in. They've just been through the major broadcast players in the last couple of years—you'll remember the exercise with the CBC on the terms of its group of licences—and they've just worked their way through the major private broadcast players: CanWest, CTV, TVA Group, for example. They've moved to a schedule and they're trying to group the major private broadcast players together and deal with them as a cluster.

The conditions of licence, of course, are very important in terms of the behaviours of broadcasters and all of the production support that goes into those broadcasters. The role that I'd personally like to underscore for you is I think one that doesn't get enough attention. The CRTC is a national forum on the broadcasting issue. The proceedings they hold—for example, the hearings they had on new media a few years ago, the CBC licensing process, the exercise that's going on now on satellite rules for local broadcasting—are a transparent and inclusive national policy forum. The body of evidence gathered as people come in, make their pitch and their appearances before the commission, and the analysis done by the CRTC really is an ongoing national policy forum on broadcasting issues. It's of great use to the department to be able to piggyback and frankly to skim the best of the work that's done by and for commission proceedings.

• 0850

Some of the main CRTC tools, and I'm sure you'll be talking about this directly with the commission, have to do with levels of Canadian content; the linkage rules in terms of how many foreign services relative to how many Canadian services; rules around the simultaneous substitution of advertising that are very important to the private broadcasting market; priority carriage rules on what should be carried on what tier in the cable, satellite, and wireless world; the licence fees collected from broadcasters; the mechanisms that require distribution undertakings to put money back into programming, either through local channels or production funds; and other conditions of licence that have important behavioural impacts on the system.

Separately and together, the CRTC's regulatory activity very much creates the environment in which broadcasters, producers, and others go about their business.

I want to touch on, if you don't mind, the Governor in Council rule with the regulator. I think this is something you'll probably be brought back to again and again by witnesses in the next few months.

The last time the act was looked at seriously in the late 1980s, and ultimately proclaimed in 1991, there was a very hot debate about the appropriate role of cabinet versus the regulator.

On the one hand, you could have a regulator that was so arm's length there was no mechanism by which the government could challenge, overrule, or get involved in any of the decisions. There's an argument to be made for that in terms of insulating the regulator from political interference or oversight. It meant there was a risk of the regulator getting out of touch, and the policy role of a government couldn't be properly exercised.

On the other hand, if you had too much Governor in Council ability to second-guess, overrule, or oversee the commission, then ultimately people would start appealing to cabinet. The credibility of the regulator as an arm's-length institution would be quickly undermined. You would end up essentially with cabinet running the broadcast system.

The structure that was crafted in 1991 is a balance, at arm's length, where, as some people say, you can reach out and touch the regulator. There are appeal mechanisms for people to seek recourse for decisions the commission takes. There are certain, very circumscribed directive powers by which the Governor in Council can reach out and ask the CRTC to take another look at an issue. It's the balance of appeal and directive powers, the interface between government and an arm's-length regulator, that may turn out to be one of the more thorny issues you have ahead of you.

There are specific powers set out in the Broadcasting Act that allow the Governor in Council to do various things that issue broad policy directions to the CRTC on a matter of importance to the whole system. The Governor in Council can request the CRTC to hold hearings or make reports on a specific issue. It's something that has been done in the last few years.

It can issue directions to the CRTC on the reservation of channels for particular uses and the maximum number of channels or frequencies that can be made available. It can disallow certain classes of applicants. It can deal with the eligibility, basically, of who can and cannot ultimately get a broadcasting licence.

The Governor in Council can always, of their own volition, appeal a decision. The appeals don't have to come in from someone in the environment.

To quickly recap some of the numbers for you, the CRTC issues somewhere between 800 and 900 broadcasting decisions a year that potentially could be appealed to the Governor in Council. The track record is not that many are. About four or five a year over the last few years have actually been appealed to cabinet.

Cumulatively since the early 1980s, there have been over 10,000 broadcasting decisions and only 71 of them have been appealed. Of those, none were actually overturned by cabinet, but in 11 cases the government did ask the CRTC to take another look at an issue through the reconsideration mechanism. It has been done three or four times in the last few years. I'd be happy to go through them, if it would be helpful to you.

On the financial side, the centrepiece of support, the current tool kit is the Canadian Television Fund. I think you'll have an opportunity to explore that in more detail in a few weeks.

I'll recap for you the aggregate figures in terms of the number of projects, the hours of programming, and the incrementality of the fund. Something we're very pleased with is how it's worked over the last few years. There are some other advantages to the television fund in terms of what it does to the behaviour of the broadcasting system that perhaps we could get to in the discussion period.

• 0855

The CBC, of course, the national public broadcaster, is the centrepiece, our largest cultural institution, a fundamental component of the broadcasting system hardwired right into the Broadcasting Act. It operates in English, French, and aboriginal languages in radio and television, and it provides an international short-wave service. The mandate of the CBC, and how it should go about it in the current technological broadcasting environment, of course, is going to be one of the central issues you deal with.

At its best, the CBC contributes to Canadian identity and promotes and supports Canadian creators. It reflects the country in its diversity and is part of our image abroad. It has a predominantly and distinctively Canadian programming schedule.

I'll recap for you, and then I'd be very pleased to turn to questions. I've offered for your consideration a sketch of some of the pillars of what a public policy tool kit of broadcasting will probably end up looking like. It doesn't matter where you start on the circle, of course. There is the role, as I mentioned, of the public broadcaster and the public sector institutions.

What role should they play in the current environment? Are they as focused, well-managed, and targeted as they could be? I would include in that not just the CBC, but institutions like Telefilm Canada and the National Film Board.

With the idea of smart regulation, it's quite likely some form of regulatory oversight is going to be necessary for the Broadcasting Act. I'm sure you're going to have some lively debates about how much and in what form. We have specialized regulation and referees in other areas, whether it's energy, transportation, or financial institutions. It's likely you'll need one in the broadcasting and communications environment as well. So what kind of regulatory oversight and to do what is certainly one of the central issues.

On the financial support for Canadian stories that the minister talked about so eloquently when she was here a couple of weeks ago... Are those tools well targeted? Are they delivering incrementality and value for money? What behavioural impact are they having on the system and on something that's a little bit neglected from time to time, the international partnerships?

Broadcasting is an increasingly international and global industry. Programming is expensive and risky. You get more and more international partnerships, co-production, marketing, and distribution arrangements that spread the risk across a number of markets. Of course, access to programming, the signals from around the rest of the world, is something Canadians have come to expect. The balance between our domestic and international roles is also part of the equation.

I think if you work your way around the four clusters of issues, you'll have exhausted the public policy issues. You'll provide a basis for the witnesses from the community that you'll be hearing from over the coming weeks.

[Translation]

I think I will stop there, Mr. Chairman. If you like, I can answer questions.

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): Thank you very much, Mr. Wernick.

If members would agree, I would suggest we hear from Industry Canada. Then we'll move to questions when we've heard the two groups. I think there are four witnesses from Industry Canada.

Before I call on Industry Canada, while we have all the members here, there's a really important motion we have to put through. You will recall the business of travel. We were asked to review it.

Meanwhile, the first allocation made to us of about $300,000 has been called back by the budget committee. We have to present a new motion. You will recall we had a discussion about it. Rather than have hearings in Toronto and Montreal when we do site visits, we would do the site visits without the hearings that have cut back on our allocation.

The travel budget now is as follows. The travel budget would be $43,619 for the purpose of site visits to Toronto, Montreal, and Ottawa. It would be in the amount of $887,400 for public hearings in Winnipeg, Regina, Edmonton, and Vancouver in February 2002, in relation to the study on the state of the Canadian broadcasting system. This is considerably less, of course, than we had budgeted.

I would really appreciate someone to move that we present this to the budget committee.

Mr. Abbott.

• 0900

Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance): Just on a point of information—I think you may have answered the question—I noted the difference in the two: “support staff” on the western swing was one; “interpreters” was an additional one; and “console operators” was two. Was the difference there that in the first instance, on the $43,000, that is site visits, and on the second it's actual hearings?

The Chair: Yes. We won't need all this support staff for the—

Mr. Jim Abbott: Thank you.

Mr. John Harvard (Charleswood St. James—Assiniboia, Lib.): I'll move it.

The Chair: It's been moved by Mr. Harvard. All in favour of the new budget allocation, please signify. Are there any contrary-minded?

(Motion agreed to—See Minutes of Proceedings)

The Chair: We'll send it on to the budget committee. Thank you.

I will now invite representatives from Industry Canada to come to the table, please.

Mr. Helm, I have a list of four of you. Are there two or four? I have a list here of yourself, Mr. Vaccani, Mr. St-Aubin, and Ms. Rawat.

Mr. Michael Helm (Director General, Telecommunications Policy Branch, Industry Canada): Yes, Chairman, there will be two others. I apologize. There was a confusion about time. We thought we were to be here at 10 a.m.

The Chair: Why don't you go ahead anyway, Mr. Helm, and when your colleagues come they'll be welcomed.

Mr. Michael Helm: Thank you very much.

I have a short deck that I'll ask Mr. St-Aubin to distribute, and I'll run through it fairly quickly.

Let me begin by introducing myself. I'm Michael Helm. I'm the director general of the telecommunications policy branch at Industry Canada. And my apologies, our assistant deputy minister, Michael Binder, had intended to be here, but some dental surgery intervened, so he's not available today.

Mr. Len St-Aubin is with me. He's the senior director of business and regulatory analysis in the telecom policy branch. We will be joined by Ms. Veena Rawat, who is the deputy director general in spectrum planning and engineering, and Mr. Paul Vaccani, who's the director of broadcast application engineering.

I'll start with the general slide about the department as a whole and zero in on the sector I work for, and then I'll turn more specifically to the broadcasting activities that I guess are your interest here.

The department's mission is to foster a growing, competitive, knowledge-based economy. The strategic objectives you see on the page there: innovation, connectedness, marketplace, investment, and trade.

The mandate of the specific sector of interest, the spectrum, information technologies, and telecommunications sector, is to accelerate Canada's transition to the networked economy through the development and use of world-class information and communication technologies for the economic, social, cultural, and civic benefit of all Canadians.

There are seven branches within this sector. I myself and Mr. St-Aubin are from the telecommunications policy branch.

• 0905

When Mr. Vaccani joins us, he represents the radiocommunications and broadcasting regulatory branch; and Veena Rawat, the spectrum engineering branch. We also, in this sector, have an information and communications technology branch; information highway applications branch; electronic commerce; and strategic policy and planning.

Slide number four sets out the legislative framework—the several pieces of legislation the government has enacted. We point particularly to the new Broadcasting Act and the Telecommunications Act, both brought into force about a decade ago, and both in an attempt to be technology-neutral. You'll recall the technology continues to advance very quickly. The idea with both those pieces of legislation was to stay at a level of policy and concepts that could hold even as the technology evolved.

Slide five points out that the Telecommunications Act established a new framework for all federally regulated telecom common carriers. It provides for an integrated Canadian market for telecom services.

We feel now collectively that we have the authority, the responsibility, and the history to provide equal access to all Canadians, wherever they live in the country, for all telecommunications services. The policy objectives in the Telecommunications Act, section 7, are the day-to-day guiding principles we work on.

In slide six you see an attempt to situate Industry Canada, Canadian Heritage, and the CRTC in terms of both policy-making and regulations. In terms of policies, Industry Canada has the responsibility in telecommunications and radio communications and, as I'm sure you heard earlier, Canadian Heritage has the policy responsibility in broadcasting. For regulation, of course, the CRTC regulates in both telecom and broadcasting and Industry Canada in radiocommunications. That's largely technical regulation to ensure the airwaves operate properly, without interference and so on; that's our area of regulation.

Let me move now to focus basically on the four areas of broadcasting that I think are probably of most direct interest to you in Industry Canada's activities. The areas I'll start with are the traditional over-the-air radio and television broadcasting. I'll then deal with satellites; then with cable TV; and finally, with the telecommunications system in general as a carrier for the Internet.

Slide seven—I won't go through it all; you can read it—shows basically, for over-the-air radio and television, that all the technical aspects of broadcasting are the responsibility of Industry Canada. We have to ensure, forced through international negotiations and then domestic rule-making, that the spectrum is available for radio and TV; that there's not interference—it operates properly; we have to have standards and procedures for all sorts of radio apparatus that are licensed by the CRTC—the transmitters and so on; and we issue broadcasting certificates to all radio and TV stations.

The CRTC issues a broadcasting licence; we issue a broadcasting certificate. They are entirely mutually dependent. Neither one is any good without the other. If someone wants to run a radio or TV station, they go to the CRTC and get a broadcasting licence; they come to us and get a broadcasting certificate. Then they can go ahead.

I'll leave that. You may want to come back to it.

For satellites, it's the same kind of thing; again, it's a spectrum. We mention here orbital resources—orbital slots they're often called—for geostationary orbits, that is, satellites that relatively stay in one place above the earth and radiate down to North America or Canada.

These slots, you understand, are limited; there's not an infinite number of them. We negotiate for them in international fora. There's the ITU—the International Telecommunications Union—which is an agency of the United Nations. We secure them for Canada.

• 0910

There's a reference here to coordination, which is simply a technical process to make sure the power and location of the satellites is such that they don't interfere with each other. A lot of international work goes on there as well.

Finally, we assign the domestic orbital slots. That is, if more than one company is after a particular orbital slot, we will have a competitive process to see who should actually get it.

For cable, again, it's technical concerns. It talks about cable leakage standards. If cable—the cable TV that runs along the streets and into your house—isn't properly shielded, it in fact radiates radio interference, and where it is in the spectrum, it can interfere with aeronautical frequencies, and police and safety frequencies as well.

So again, we set standards. That is regulated by something called broadcast procedure 23, which sets out the technical standards that must entail. Also, regarding set-top boxes, receivers, and VCRs, you may have noticed a little sticker on most of your technical equipment, on the back somewhere, that says “Industry Canada”. They all have to be certified as well—and cable modems. As the cable industry goes into the delivery of high-speed Internet, that all has to be regulated as well.

On page 10, we move into telecommunications in general, and in fact the Internet, which I'm sure will be of interest in your deliberations as you go forward.

A statement from the United Nations captures basically the essence of the network age and points out that as everyone gets connected with Internet, we do acquire instant access to an enormous amount of knowledge. Business transactions, as you notice, are being transformed. Economies increasingly become both borderless and global. Citizens are finding new ways to interact with their government—I'm sure you're all well aware of that—and government online, of course, for public servants, is a major activity for us all.

Slide eleven is just one of many graphs to demonstrate the kind of exponential growth we're seeing with the Internet. As of the date of this graph, there are something like 300 million users, and it's accelerating very quickly.

In the department and the sector, as a government initiative, we think the agenda for the network age basically looks for moving ahead on three fronts: infrastructure—we must simply continue to improve our infrastructure so it's appropriate to the needs; use—people have to find out how to use these new technologies, how to use the Internet, and make it comfortable for businesses, communities, individuals, and governments to make use of it; and content.

At Industry Canada, our press for content would be somewhat different from the Department of Canadian Heritage's. I suppose the Department of Canadian Heritage would be more interested in cultural content—film, television, that kind of thing. We tend to mean just websites—Canadian businesses, individuals, and governments having a visible presence on the Internet and being accessible.

The main push we've taken to move ahead with that is basically changing the regulatory basis to use the private sector and competition as the major instrument to drive forward with the infrastructure builds, and so on. This has been going on for the past year. The government, as you know, privatized some of its holdings in telecommunications—Telesat, Teleglobe. Competition has now been introduced into virtually all the market segments. Deregulation continues.

Through trade agreements, we have opened up international market access to our providers. So you will see, for example, Telesat now being a provider of services not just in Canada, but in the United States, and indeed through South America, as far as their satellites can cover.

• 0915

There are many new innovative services: You all know about wireless, BlackBerrys, cellphones, that kind of thing, which we're doing quite well with, and satellite. Digital television and digital radio, we may speak to at some point.

And there's R and D support and tax incentives.

Slide fourteen indicates some of the successes we've had to date. Among that list, I'd point out that Canada was in fact the first country in the world to connect all its schools and all its libraries, and we're very proud of that. Every school in Canada has access to the Internet, and every library, and this was done before any other country had accomplished that.

The community access sites, which you're probably all familiar with, are public sites in libraries, federal buildings, or community halls. People who may not have access to the Internet in their homes can go and use those facilities and log on to the Internet.

There are a number of other statistics in there. As I say, I think we're doing reasonably well.

Slide fifteen emphasizes why the government and the department are putting a particular emphasis now on broadband. Broadband, simply put, just means bigger pipes and greater capacity. It's a way of moving more content into the home, or wherever the person tends to be, more quickly. The broadband task force, which reported this summer, made a recommendation that a standard of 1.5 megabits per second, which is a measurement of how much information can come in, should be the standard we aim for. As you see, that then gets you to near video-on-demand, movies-on-demand, digital television, and perhaps interactive television.

The last slide indicates the impact of the Internet on the future of broadcasting. I've spent some time talking about the Internet and how we're rolling out the infrastructure for it. So what does this in fact mean for broadcasting? On a most simple level, it means that the scarcity of channels will no longer be an issue. This has been a major concern for all broadcast regulation to date. There are only a certain number of television or radio stations that can go into any community. Even with cable, it's a bigger number, but it's still limited.

The economics often mitigate against purely Canadian product in many areas. Sometimes they tend to encourage foreign product, and so regulation is always, traditionally, to a large extent, dealing with how to ensure that the Canadian content gets onto the distribution media and in fact reaches Canadians.

It may not always be in the economic interest of the person running that distribution mechanism to make sure that happens. It's an ongoing concern. I think we've done pretty well at it, but the Internet holds the promise of taking away that problem of scarcity. There are at the moment, I am told, somewhere between 1,500 and 2,000 radio stations on the Internet. You can sit down at your computer and find the right websites and have access far more vast than you could over the air or by cable.

As broadband penetrates further, video will follow. So TV stations, we expect, and other kinds of video programming will probably be there.

Consumers are “voting with their feet”, if I can use that phrase. The Internet is growing very rapidly. People like it—they're signing up; they're using it. You can put your home movies or your vacation slides on the Internet, or pictures of your family and your Thanksgiving and Christmastime gatherings on the Internet and on your website, and it can be accessible to relatives or friends anywhere in the world.

• 0920

The last line I leave you with is, so what does all this mean for traditional broadcasting? As the slide says, the ultimate impact of it is not yet clear. No doubt that's something your committee will be addressing.

That's the presentation, Mr. Chairman. Thank you for the time.

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

We'll open the meeting to questions. We'll start with Mr. Abbott, followed by Madam Gagnon.

Mr. Jim Abbott: Thank you.

Mr. Wernick, I refer you to your slide thirteen. I've been trying to figure out for the last ten days what all of the access to funding is of various producers of video. Clearly, one of the key areas is the Canadian Television Fund.

I might say, on the people who draft the estimates for the department, they do a great job of mudifying the numbers. For example, in the Canadian Television Fund you have $50 million from Telefilm. The Canadian Television Fund does not show it as a separate line item in the budget summary, but Telefilm does.

For somebody who doesn't understand this complexity, that's just the starting problem. So maybe you can help me here with the Television Fund.

The second point is that since 1996 the CTF has supported 2,021 projects, etc. Is the third point that since 1996 CTF has invested $991.6 million, or is $991.6 million an annual figure?

Mr. Michael Wernick: No, it's cumulative.

Mr. Jim Abbott: It's a cumulative figure.

Help me understand. You have $100 million from the Department of Canadian Heritage. Is it an additional amount of the Telefilm money, which I believe is in the range of $91 million or $92 million, whatever the number is? Call it $92 million for sake of argument. Do I understand that $50 million of the $92 million is directed into the CTF, leaving Telefilm with $42 million for projects other than those related to the Canadian Television Fund? Is that a correct understanding?

Mr. Michael Wernick: If you don't mind, I'll just take you through how it was put together and why. I think CTF can take you through this in their annual report on the website. It might help as well. We can provide you with a schematic of how the money flows together.

On the history of the Television Fund, it is an attempt to bring together the various funding instruments into one mechanism that will work together. There had been, before the CTF was created, television funding activity at Telefilm that went back to the 1980s. Telefilm started in feature films and added television programming to its mandate in the 1980s. They were investing money out of their base budget, in support of television programming, in the area of around $50 million a year.

There had also been, through the course of a number of CRTC decisions, obligations put on cable companies to put money back into programming. That was lumped together, by and large, in something called the Canada Television and Cable Production Fund, which existed in the early 1990s.

There are still remnants of funds around for particular purposes. There are about 11 or 12 of them. Rogers runs a fund for documentaries, Shaw runs a fund for children's programming, and so on. There are still targeted funds out there.

In 1995, the minister essentially took the Telefilm activity, which was funding certain kinds of programming, and the cable fund and said, “If you come together I'll top it up. We'll create a single fund targeted to the categories of programming that are identified as priorities.” They included drama series, children's, documentaries, and performing arts programs.

You're quite correct that Telefilm does and continues to do other things, like feature films, international marketing, and new media. We'd be happy to provide information on that. It's in the Telefilm reporting to Parliament.

But we took the roughly $50 million that was in the Telefilm budget for television at the time and combined it with the money coming from cable and satellite, which has been growing very rapidly over the last few years. As the revenues of cable and satellite companies have grown, their contribution has gone up proportionally. We then threw in $100 million of net new money from the department.

• 0925

It's really just an accounting thing, and I apologize for the confusion. We give part of it to Telefilm and part of it to the Television Fund, in terms of the flow of the money. It created a pool that at the time was $200 million and is now about $230 million, because the cable and satellite money has grown. That is run as a single fund by a single board of directors.

There are some advantages to the pooling, in terms of how the money flows. I'd be happy to discuss that with you, if you want to go there as well.

Mr. Jim Abbott: I have been to the CTF site, and I'm sorry I'm a slow learner, but it's not that easy to follow through. I don't really understand. This isn't the time to go after your department, nor should it be taken that way.

I'm simply trying to make a suggestion here that under Telefilm, if $50 million of the Telefilm money is committed permanently to the CTF, the Telefilm line should say $42 million, not $92 million. It does become somewhat confusing.

Mr. Michael Wernick: The way it works, though, in terms of the audit trail and accounting to Parliament is that Parliament appropriates the money to Telefilm, and then Telefilm flows into the Television Fund. So in terms of the accounting to Parliament of all the votes, that's why it shows the way it does.

But I take your point, and we'll see if we can do something to clarify both what's on the website and in the various reports to Parliament.

Mr. Jim Abbott: Taking your bottom point that CTF invested $991 million in projects worth $3.35 billion—in other words it had a multiplier effect—can you help us understand that?

Mr. Michael Wernick: There are two kinds of investments that the Television Fund makes. There are in some cases equity investments of the kind Telefilm has always made. They make an investment in the program up to a certain percentage of the cost and recoup, to some extent, out of the revenues that are generated by that program. The other is what's called a licence fee top-up. You take the money the broadcaster paid the producer for acquiring the rights to the program and top it up by a multiplier.

Some programs tend to use more of one, or use the other and the two components work together, so what you end up with is a program that costs whatever it costs. I know there's been some interest by the committee in trying to figure out what a typical program costs. It varies by whether it's a drama, a documentary, or a children's program; it depends whether it's a one-off, a package of six, or a 22-episode series. Essentially, the fund will contribute a percentage of the cost of making that programming. It may be anywhere between one-quarter and in some cases almost one-half the cost of the program.

But there are other sources of financing. There will be money from tax credits and investments by provincial funding agencies, like B.C. Film or the Ontario Media Development Corporation. There will be private sector investments. There is the licence fee paid by the broadcaster to acquire the program. There might be distribution rights sold for Canada and for other markets.

The mix will vary, essentially program by program. So it's a marrying of the private money into the public money. All that tries to capture the fact that by flowing out roughly $200 million a year from the fund, you generate a lot more production than that. The multiplier has been in the order of 3.5:1 to 4:1 for the entire time the fund has been running.

Mr. Jim Abbott: One final question—

The Chair: Can I get back to you?

Mr. Jim Abbott: Okay.

[Translation]

The Chair: Ms. Gagnon, you have the floor.

Ms. Christiane Gagnon (Québec, BQ): To continue with the same line of questioning, I would like to have more information about the amounts spent by Radio-Canada and by the CBC. We know that the CBC receives twice as much money as the French-language television network. I would like to know whether this is the case because the programs are more expensive or because they produce twice as many original programs. Is it because more people listen to CBC programs in comparison with Radio-Canada programs?

I would also like to know how many viewers there are per dollar invested in each network. Do you have these figures? Can we get these figures?

Mr. Michael Wernick: Generally speaking, I think that we can provide some good figures. We would have to ask the CBC this question when their officials come before the committee.

• 0930

Are you talking about the contribution of the Canadian Television Fund to programming, or are you talking about the CBC's base budget and Radio-Canada's base budget?

Ms. Christiane Gagnon: I would like to have the answers for both: for television, but also for the overall budget.

Mr. Michael Wernick: It is somewhat difficult to track every dollar and cent because Parliament allocates a certain amount to the CBC and to Radio-Canada, and they are accountable for this funding. The CBC has a board of directors and a management team. They have a mandate to deliver a range of services. That includes English and French television, radio—there are several English and French networks—services in the North and international services. Part of the CBC's budget is for infrastructure that is shared by all the services. The way they are shared by the two markets has to be calculated in a rather arbitrary manner.

Obviously, there are two separate markets in the country: the English market and the French market. The ratings are higher for Radio-Canada and for the private broadcasters on the French market because there is less competition. Obviously, French-speaking Quebeckers listen to English, American or foreign programs to a varying extent. The market is somewhat more isolated from the competition than the English is. So, the figures are higher. Clearly, investments in Radio-Canada, or even in French production, generate ratings that perhaps are better. On the other hand, since it is a smaller market, French producers and broadcasters have a harder time saving on production costs. It costs about the same amount of money to hire everyone who is needed to create a drama in both markets, but the English market is more profitable because it is larger.

Ms. Christiane Gagnon: This is just a comment. I don't want an answer. At present, the opposite should hold true. The French network should get twice as much money, in light of one of the answers that you gave me. All things being equal, the funding should be distributed fairly between the two networks. The Broadcasting Act says that quality must be insured in both official languages, French and English, and we can see that there is this disparity in terms of funding. A number of commissions also looked into these matters. The Caplan-Sauvageau Commission said that there was no reason why one network should receive more money than the other. That's my first comment.

My second question is this. When the minister appeared before the committee on November 8, she implied that the foreign ownership cap was not immutable, and that she would agree to review the cap applying to Canadian companies. But we know that what's important is access. The company that succeeds in reaching people, in getting its wires into consumer households, can influence consumer choices.

Do you think that changing the Canadian ownership cap—in other words changing restrictions on ownership of the container—will have no impact on content, unlike what the minister says? She appeared to be saying that there would not really be an impact, given the fact that her objective was to preserve Canadian content. Perhaps we could talk about this. In your view, will raising the bar on foreign ownership have an impact on content?

Mr. Michael Wernick: That is a very good question. When exploring the foreign ownership issue, I think there are two distinctions one can make. First, there is the telecommunications infrastructure. Telco and Industry Canada know much more about this field than I do. Then, there are distribution companies in broadcasting. These include cable and satellite companies which, as you say, provide the means of distributing programming. They also include the generators of programming, those with CBC licences to produce programs for radio and television.

• 0935

Where do we draw the line? That is exactly what the debate is about. I quite agree that there could be a potential impact on broadcasting as such if we change the rules in those first two areas, because broadcasters need the distribution infrastructure to reach consumers.

There are all kinds of distribution regulations designed to manage the impact of cultural policy. For example, broadcasters must include the aboriginal channel in their line-up. They must include channels in the minority official language, and there are other rules. It is difficult enough to regulate Canadian broadcasters. Regulating foreign broadcasters, and imposing the same conditions on them, will very likely present a whole new challenge, but as the minister said, what counts at the end of the day is how those broadcasters act. What do they actually do? I believe she said that, if there were other models available or other ways of doing things, we would clearly have a responsibility to explore them. But the problem here are those Canadian ownership regulations. They are very important.

Ms. Christiane Gagnon: I have a question on francophone communities in Canada that do not have access to a number of French-language channels on cable. For example, ARTV is not available in Ottawa. We seem to think that the problem will just go away when digital broadcasting dominates the market, but in the meantime, what can we do to ensure that francophone communities have those channels available?

For example, perhaps a tax credit could be established to afford francophones outside Quebec access to equivalent service in French?

I find that consumers are under a lot of pressure to pay for the full range of specialty channels. So we end up with people who are connected but cannot really afford it, and yet do not have access to quality products in their own language—that is the position of francophones outside Quebec.

So what can we do until everyone has access to digital broadcasting? Obviously, digital broadcasting is not going to be available tomorrow.

Mr. Michael Wernick: That is another good question. One of the major changes we have seen in the market over the past three, four or five years is a significant increase in capacity. Digital channels are delivered through cable, or by satellite companies. This is very good for consumers, because they now have access to approximately 150 television channels regardless of where they live, or how small their town is. This gives French-language minority communities access to all kinds of Canadian and foreign channels that were not available in the past.

Is that enough? Is it too expensive for consumers? It is hard to tell. I think that the cable and satellite people will say that for $40 a month, you can access almost 200 channels. Canadian consumers have more choice than consumers in any other country. Here's an example. There are more programs available in a town in Labrador than in Paris or Madrid. All kinds of services are available.

Does this deserve more subsidies? Perhaps it does, but the CRTC explored the issue of minority communities and francophone content outside of Quebec last year, and imposed obligations on cable companies and satellites, who will have to increase the offer of available services. We'll have to see whether we should go even faster.

[English]

The Chair: Mrs. Bulte, and Mr. Bonwick.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman. First of all, let me begin by thanking our witnesses.

I'd also like to put on the record that I think we have received so much information here, even if we go until 11 o'clock... I mean, there is so much here that I could ask Mr. Wernick half-hour questions. And Mr. Helm, for some of your things I even need a little dictionary to understand what they all mean.

I say that because it is complex, and I don't think we can make public policy without understanding it. I know we made a schedule as to who we're going to see and when, but I would like to see these people again, maybe even separately. I'm overwhelmed by the information. It's wonderful information, but there are also many questions.

I know we have a draft schedule, but I would really encourage us to bring these witnesses before us again, because these are the people who have the expertise we need to form the correct public policy.

• 0940

The Chair: By all means, Mrs. Bulte, if members want to, we can always have a meeting on a Wednesday, for instance, to hear them. I'd be very pleased to see if the clerk can arrange something. If the members want it, I think it's important we do it. So it's up to you.

Ms. Sarmite Bulte: Thank you.

Mr. Wernick, I'm going to concentrate on the CRTC. My understanding is that the CRTC was put there to supervise and regulate, and I found it quite fascinating when you talked about how they're holding these hearings, how it's transparent and accountable, and you used the CBC study as an example. Yet at that time, a few years ago, I think a number of people were a little concerned about what in fact the CRTC was doing, because their role was to supervise and regulate, not to effect policy. I'd like you to comment on that.

I see that you say under the orders in council the cabinet can ask the CRTC to hold hearings. Correct me if I'm wrong, but I don't think that was the case in the CBC. And a lot of people were wondering what in fact the CRTC was embarking on, that it was starting to create too much public policy as opposed to just supervising and regulating.

I think it's interesting for people to know that you said the CRTC has the right to revoke broadcasting licences, but that in fact it has never been done. I also note, regarding the appeal process, you say the cabinet can... there is nothing about appealing a revocation of a licence, so I wonder if that's just been left out.

I'm going to bring this up, because of what the minister said when she appeared before us and your view of the CBC. You talk about its mandate requiring it to reflect Canada's diverse reality through its regions. When Mr. Rabinovitch appeared before us, when local programming was being cut, he basically stated—and I guess he was legally correct—that the Broadcasting Act does not require local, that it's regional.

So again, if we're looking at what the Broadcasting Act requires, should we be moving more to local, or redefining what regional is?

Mr. Dennis Mills: Who said that?

Ms. Sarmite Bulte: Mr. Rabinovitch, when he appeared before us. He said local is not regional.

I also want to ask Mr. Helm a couple of questions, if I may. So Mr. Wernick, if you could quickly reply, I want to talk about the broadband study, which relates to what Madame Gagnon said on foreign ownership.

Mr. Michael Wernick: Sorry. I'll try to take them in order.

The interaction of the CBC and the CRTC is probably one of the pivotal issues you have to come to a view on. The CBC occupies spectrum in all kinds of communities, runs television services, runs radio services, sometimes directly by itself and sometimes in affiliation with private sector players.

So you really have only two choices. You regulate like other parts of the system and deal with them with the same mechanism of issuing licences, putting conditions of licence on them and putting them through the mill of licence renewal like everybody else in the system, or you treat them completely apart and find some other way to deal with the public broadcaster, which is what a lot of other countries do.

The decision was made to treat them like broadcast licensees, so they go through a process every seven years of coming in, explaining what they've been doing, explaining their plans for the future, getting a licence, and the commission puts either conditions or expectations on them, as they would Global or CanWest, or anybody else who's using the broadcast system.

My recollection is that there was an exhaustive CRTC process before they issued those decisions. They went all over the place. They had town halls. They had hundreds of witnesses. There's a huge body of evidence on the public record. It's all there for people to see. My comment was that it's very useful to have a place where everybody's views, opinions, analysis, and so on is put out in public, in front of everybody else, so they have to win their arguments by the quality of their arguments and their analysis; it's not all done through behind-the-scenes lobbying.

• 0945

There's a very transparent process, and everybody who had a view on the CBC certainly made it known to the commission. Whether at the end of the day they get a particular decision right or not, that's where the appeal and directive powers kick in. But I think you have to decide whether you want the CBC to be under the same regulatory umbrella as the privates, or do you want to deal with them in some distinct way?

It's the government in any case that chooses the board of directors of the CBC, who are there for some kind of public oversight; that chooses the CEO of the CBC and all the members of the CRTC. So ultimately these are people who the government has chosen to supervise the system. The interaction between the two public institutions isn't easy, and there was a lot of friction between the commission and the CBC about the last set of decisions, there's no doubt about that.

But CBC is also subject to all kinds of accountability of Parliament and Treasury Board, which nobody else is, in the sense that they have to come in with corporate plans and they have to get the minister's approval and Treasury Board approvals, and so on. They're very tightly within the public sector system in a way that the private broadcasters are not.

I'm not sure if that's helpful to you or not, but it is a tricky issue as to whether you treat the CBC just like a broadcaster or treat it very much like a public institution. Right now the system is a bit of both. I think the CBC would tell you they would like more flexibility to be just like other broadcasters, but of course since they're getting nearly $1 billion of taxpayers' money, it's important that there be accountability in the public sector sense of things.

We can give you the information. The architects of the act limited the ability to appeal and the ability to issue directions, and it's basically the issuing, amending, and renewing of licences that comes into play. You can't actually appeal the denial of a licence. There are other kinds of decisions when shares or ownership of a company transfers from one player to another. The CRTC has to approve that transfer of ownership and some very important decisions are made in that way. Curiously, those aren't appealable even though they may have a very large impact on the system.

So I certainly encourage you to take a look at the areas where there's an appeal right or a directive right and decide whether that needs to be expanded or contracted for the current environment.

Regions, local, and so on—repegging what's local and what's regional ten years later is probably one of the things you want to make recommendations on. You will have seen over the last couple of years every broadcaster trying to figure that out, because the economics of local markets and advertising are tricky and the competition that comes from neighbouring markets, the economies of scale of having programming generated in a slightly larger area... So CBC went through this clearly and very publicly. CTV just went through it in terms of their northern Ontario operations. Corus has just made some changes to the way it operates in eastern Ontario. TVA-Quebecor have made adjustments in Quebec.

A lot of it is, are you going to let people find the business models and the sorts of solutions that are efficient to them, whether it's to share a journalist or a reporter, or a local news feed, or other kinds of programming over a specific area, or are you going to drive them down to a much more local focus? That's tricky, and basically it's the CRTC that largely regulates it. The expectations on the CBC are hard-wired into the Broadcasting Act, and certainly those definitions could be repegged.

I think I got all your questions there.

The Chair: Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chair. To the witnesses from both Industry and Heritage, thanks for coming in this afternoon.

I want to start with Ms. Bulte's... and that is that I think there is a need to deal with these separately, based on the amount of information we're receiving. There is some cross-tabbing to be done, most certainly, but I think it would require a significant amount of time just to deal with each one of the departments on an individual basis.

I would like to make a clarification before I put my questions. I was doing some quick math with regard to Radio-Canada and CBC, and it's my understanding that CBC Radio receives about twice as much as Radio-Canada. Is that accurate? I'd like a quick yes or no.

Mr. Michael Wernick: Yes, 60:40 comes to mind, but I can break that down.

Mr. Paul Bonwick: It's 33:66, 60:40.

Mr. Michael Wernick: Within that area.

Mr. Paul Bonwick: Within 3% or 4%. And just for anybody who is listening to Radio-Canada, who may review the blues from today's meeting, I think it's important to recognize that Radio-Canada, based on per capita listening audience, is receiving about $2 for every $1 for everybody else in the country.

• 0950

I think it's important to recognize, when Madame Gagnon suggested it should be reinvested to a greater extent, that it's already about a 2:1 ratio right now; 66% to 70% is servicing about 85% of the population and 33% is servicing about 15% to 18% of the population. I say this just for the purposes of clarification.

I'll put my question to Heritage first and then to Industry, and perhaps what I'll do is get you to take down the questions and respond all at once rather than go back and forth, if that's okay with the chair.

On two separate occasions, and this being the third, when either the minister or Heritage officials have presented to the committee, I've asked the same question. You outline what you believe to be your three key issues or three pillars, your three fundamentals, and we recognize that this is a multi-billion dollar industry, and we recognize that there is a very massive role for the private sector to play; yet we never seem to put on paper, as one of the objectives, making sure that it's economically viable, that it's not simply about government.

Clearly, I'm starting to get a message that the economic viability of the industry is a secondary consideration, and simply what we're talking about is the role that government has to play. That's very clearly important; the cultural component, Canadian stories, all those things are fundamentals and very important. Yet despite the fact that on two separate occasions in the past I get people on that side of the table nodding their heads saying, yes, we agree, it still never seems to come out in your documents that there is a need or a role for us to ensure at some level that either our policies are not detrimental to the economic viability or that in fact they create an environment where it is economically viable. So I'd like your comments on that when I'm done with the next.

To Industry Canada, I have three specific questions. First, I want to say it would be nice to get your presentation a couple of days before you come to committee, as opposed to thirty seconds before you start. The other thing I would say is that the next time you're here—and I appreciate the issue of the dental surgery—it would also be nice, because of the number of issues we have to contend with, that you also bring the ADM for sure next time.

You talked about the different responsibilities of Heritage versus the different responsibilities of Industry, and my first question would be what collaboration or cooperation is there—intercommunication is there—between the two departments specifically on licensing and certificates, and beyond that on the grander issues when you're dealing with various aspects of the broadcast system?

Secondly, you spoke about infrastructure and the need to invest in infrastructure, and I'm wondering, could you comment on how much consulting is done with the private sector on what the true infrastructure needs are going to be, not in the short term but perhaps ten years and out? Some of the best minds are obviously in the private sector, and it would be, in turn, I think beneficial for Canadians, or certainly this government, to know where they think the market trends or the needs for infrastucture are going to be ten years from now.

The last question is, in moving towards this 1.5 megabits of information on the broadband, what impact do you envision that will have on local rule cable stations? Thank you.

The Chair: I should mention for the record, in fairness, that the ADM of Industry Canada was called for dental surgery this morning. That's why he couldn't be there.

Mr. Paul Bonwick: Obviously an emergency took place, but...

The Chair: Mr. Wernick.

Mr. Michael Wernick: I think I got the first one. I take your point and agree entirely that there's an economic piece of the puzzle here that we rely on private sector production houses, broadcasters, and distribution companies to generate the policy results we're looking for, and it's an enormously important sector of the economy. Broadcasting, using a narrow definition, is about an $8 billion industry. There are about 35,000 Canadians who make their livelihood in it. It's probably more if you extend it out into the production community and all of the support services that are affected by it.

• 0955

I don't think we're disagreeing at all. I think it's one of those ends and means things. You need a viable, healthy, resilient private sector in order to get the programming and in order to accomplish the cultural policy objectives.

We don't see it as an end in itself. You could create a profitable, viable private sector that just filled the airwaves with foreign game shows and talk shows. You'll generate jobs and you'll generate a broadcasting industry. But to do what?

The purpose of the broadcasting industry, as the minister talked about, is its national infrastructure—for content, for stories, for connecting people to each other, for civic and political life. There are so many things that the broadcasting system is there for and can make a contribution to.

So I agree with you entirely. We need to go about the policy role in a way that encourages a resilient, innovative, entrepreneurial private sector capacity but in order to get where we want to on the broadcasting policy goals.

That would be my attempt to answer your question.

The Chair: Mr. Helm.

Mr. Michael Helm: I believe the first question for me had to do with the collaboration that exists between the departments. You mentioned first of all specific things like the issuing of broadcasting certificates and so on. In that case, actually, we collaborate and communicate more with the CRTC on the precise broadcasting certificates, because when someone wants a licence they have to go to the commission to get a broadcasting licence. Then they deal with us to get the broadcasting certificate. So there is, in an ongoing way, communication back and forth. Obviously the commission doesn't want to have a hearing for a new radio or television station if there isn't spectrum or the technical ability to actually have that station exist. So that goes on frequently and in a continuing way.

On the broader issues with Heritage, there's a lot of communication. Many of the issues that come up require input or have technical questions associated, and we meet frequently. We don't do a rigorous thing such as meet once a week; it's more issue-driven. There's lots of collaboration there. We all know each other individually and see each other often, as do our staff. So I think that's pretty well under control. I can't think of any specific problems either of us have encountered because of a lack of cooperation or communication there.

Your second question—if that's sufficient for the first one—had to do with infrastructure and our consultation with the private sector. I think you were particularly interested in what their views are and whether they share with us and we share with them as to what the infrastructure might look like ten years out or in the longer term.

In telecommunications—I touched upon it in one of the slides—the paradigm has really shifted dramatically from the days when we had the regional monopolies and rate-of-return regulation of carriers. The planning then for the expansion of the networks was very much a cooperative government-industry kind of thing.

As we introduce competition and privatize and move back from government involvement, which we continually do, and move to an industry/private-sector-driven kind of activity, which is where we are in the telecommunications sector, frankly, the government involvement becomes less important.

What the wire line, fibre optic, those kinds of industries are planning ten years out, they don't tell us much. It's competitive information, and there's really no particular reason for us to know, other than to be assured that people are working on it so that things will go ahead.

Of course it's different when we move to the spectrum side because the spectrum is limited. It's public property. It's controlled by Industry Canada in terms of when spectrum is released for what services. So there is much more cooperation in an ongoing way. One of the charts I didn't bring shows the degree of spectrum that we are releasing, and it's a curve that goes up very dramatically and very steeply.

• 1000

It's now our practice that when we see a future application we think someone might be interested in providing, we will make the spectrum available—put out a call to see who wants it, not a competitive process for it.

I don't know how deeply you want to get into... For example, in wireless there's now the question of third generation—your PCS phones. You move from just doing telephony to doing Internet access to downloading music and doing business transactions. We work very closely with the industry moving forward on that.

I'll leave that. If you want more, we have some experts. Dr. Rawat could give you much more detail on that.

Your final question had to do with the implications of broadband—the 1.5 megabit per second or whatever the capacity turns out to be—on local and rural cable systems. It's a very good question. I really don't know. Of course, it's possible that the local and rural cable systems will be the ones providing that infrastructure. The cable industry generally has been pretty aggressive in rolling out infrastructure for Internet high-speed broadband. So they may be providers. Now the telephone companies may be as well.

I suppose from the department's point of view, our preferred scenario would be to see the phone companies and the cable companies and probably satellite companies all making it available to the subscribers, wherever they are in Canada, so that the individuals would then have a choice and you would get some market forces dictating... Whether in fact that's realistic as an economic base, I don't know.

In any event, I guess our going-in position is we would not want to be in the position—and again I'm talking about infrastructure here—of picking winners or losers. Industry Canada—the government generally, I guess, in telecommunications infrastructure—now goes out of its way to assure that it is not we, government bureaucrats, who are deciding which technology is going to be the one. To the extent that we can, we're trying to put in place market forces, so that consumers—the public—can choose. They can be the ones to decide which technology and which company is ultimately going to be more successful than others.

The Chair: Ms. Lill, Ms. Hinton, Claude, Mr. Harvard, and Mr. Mills.

Ms. Wendy Lill (Dartmouth, NDP): Thank you for coming before us and answering some questions.

I have one question for Mr. Wernick, one for both of you, and then one for Mr. Helm.

You are the guardian of the Broadcasting Act, and some of the essential clauses of the act in my estimation are: meeting the public; the goals of public service; strengthening the cultural, political, and economic fabric of Canada; making predominant use of Canadian creative resources; providing for differing views on matters of public concern; reflecting and serving the special needs of the regions.

Paragraph 3(1)(b) talks about the fact that the Canadian broadcasting system comprises public, private, and community elements. We know that the private element has been having a very good run over the last ten years, while the public and the community elements have radically declined. I believe it's a direct result of public policy and regulation. We have seen massive cuts at the CBC. We've seen the licensing of specialty channelling, the de-emphasis of community cable, and increased subsidies to private producers.

We have seen the near destruction of CBC regional and local programming even at a time when the new Broadcasting Act in 1991 specifically said to strengthen the system's commitment to the region, and we know that public and community elements are the most efficient and effective in producing that Canadian content and strengthening that identity.

All of that being said, I guess I have to say that if your department was upholding the Criminal Code instead of the Broadcasting Act, I think you might all be in Millhaven. Where is that defence of the public, the community, and the public sectors in this whole broadcasting picture? I'm not seeing it, and I'm not feeling confident that you are defending that to the extent we need to be defending it.

• 1005

Here's a question for both of you. The issues of concentration in broadcasting and cross-media ownership seem to be slipping between the departments. What groups in Heritage or Industry are studying the implications of concentration and cross-media ownership? The committee needs to know the effects... we need to pin down the effects of diversity of information, Canadian content, prices and choices facing consumers, and local programming. I would like to know if the departments could provide us with any studies undertaken on these issues and identify a contact in the departments for our researchers.

I just have a final question for Mr. Helm. I'd like to know whether you believe broadcasting is a good or a service. There is an initiative supported by Canada and many other countries right now to take culture out of the current trading structures and put it into a separate cultural instrument. But Canada also supports entrenching telecommunications in all possible trade deals. So what happens to Canadian broadcasting internationally as telecommunications becomes the delivery system for our broadcasting under trade deals like NAFTA, WTO, FTAA, and GATT? That's it.

The Chair: Mr. Wernick.

Mr. Michael Wernick: Let me start with the easier question—if it is an easy one. You mentioned two things in your questions, and they are slightly different but related issues. One is concentration and one is cross-ownership.

There's clearly a lot of concentration going on in these industries in Canada, and in any other country you can name, because there are economies of scope and scale. Programming is expensive to make but cheap to recycle. There are forces that will drive people towards bigger and bigger agglomerations, for example AOL, Time Warner, Disney, Kirch, Bertelsmann, Sony, and so on, and that phenomenon has been felt and that business strategy pursued in Canada.

There's no question that the share accounted for by the top four or eight cable companies or the top four or eight broadcasters is large and has grown to some extent over the last few years.

The cross-ownership issue is a more recent phenomenon, although it has come up in the past, and it concerns ownership of print outlets and broadcasting outlets in the same marketplace. There have been different attempts to wrestle with that issue.

I should say first of all that we did provide the committee earlier this summer, when we knew you'd be looking at broadcasting, with a number of the studies we did. These were conveyed to the committee, and there were four or five pieces we commissioned, one on the concentration of newspaper ownership, a piece done by the Université Laval; a piece on diversity and concentration of ownership in the cultural sector; a piece on concentration in the media; and another piece on media cross-ownership.

What essentially we did was to commission a number of viewpoints and see, by sort of triangulating among what the different people said, first of all the diagnostic question: what's the nature of the problem here seen from a consumer or citizen point of view? Are these forces, which are unquestionably going on, having adverse affects for public policy?

There is a really thorny issue, which you raised in your appeal of the CRTC decision, which is that the broadcasting levers can only deal with broadcasting licensees and the conditions under which a company like CanWest or Quebecor operate their licensed properties. There's no way to intrude into their print operations except with the broadcast conditions of licence.

The ability to regulate the print media is extremely limited because of charter rights: free speech and free expression considerations. The public policy question, which I think you want to explore, is whether there's something missing from the tool kit in terms of looking at how media pieces come together. I would say that the CRTC very much looks at the impact in a local market when they are deciding whether to approve an ownership change or not. They'll say, okay, let's take lower mainland B.C. and the Vancouver-Victoria market; how much dominance does one player have? They will address those issues, though maybe not to your satisfaction on a specific thing. But they have increasingly looked at that impact.

• 1010

The issue that will come up over the medium term is our ability to get hundreds and hundreds of different news and information sources. Given the Internet and the proliferation of sources you can get if you subscribe to a satellite service, can anyone really dominate a local market any more? It's still a very lively issue. I'm not quite sure what I think about that. It's clearly important if one media company has most of the print and broadcast outlets in a particular geographic region. I think it's an issue that needs to be explored.

From a purely competition point of view, it's the CRTC that will deal with that. They have basically interposed themselves on behalf of the Competition Bureau and try to deal with issues of anti-competitive dominance in a particular marketplace. It is part of what they do. And increasingly, I think, what the CRTC will be dragged into over the next four or five years are essentially issues about competition: anti-consumer behaviours or anti-competitive behaviours. Protecting the small players from the bigger players is a lot of what the CRTC will have to be doing over the next little while.

On the public issue, I take your point—and we've tried to stress this—that there are different pillars to the broadcasting system. As I said to Mr. Bonwick, the private sector part of it is an important part of the equation, but I agree with you that the public and community areas are right.

What I would suggest—this is just an opinion—is that those definitions or categories probably need to be redone and rewritten, because you also have educational broadcasters playing a big role. There are provincially funded and operated educational broadcasters, and you have broadcasting services provided by not-for-profit organizations, which sort of look as if they're private but aren't quite private. Vision TV comes to mind, as does the Aboriginal Peoples Television Network, and so on. Those lines probably need to be retraced.

There's a very useful and interesting submission to this committee by Vision TV and a number of others that talks about the public foundation of the broadcasting system. This includes public broadcasters in the sense of government-funded broadcasters but expands the definition to include community channels, educational channels, and not-for-profit services: the kind of stuff that is not going to thrive purely on an advertising and subscription model. Repegging those categories is part of a redesign of the Broadcasting Act you might want to consider.

I'm not quite sure what to say about the CBC. That's certainly one of the issues: how much money is enough, and what should it be used for? They have received a substantial amount of taxpayer funding over the last five to ten years. Yes, it was reduced, but so were all parts of government funding. The amount has been rebuilding from a low point in about 1998. Additional investments were made by the government as recently as this spring, and we're all waiting for the budget with anticipation as well.

The Chair: Mr. Helm.

Mr. Michael Helm: Thank you.

I should have mentioned this to Mr. Bonwick. He was asking about the ten-year-out thing. I should have pointed out that the National Broadband Task Force report does in fact... the private sector did take a ten-year look. Perhaps we could, if there isn't a copy available, make that available to the researchers.

Your question about concentration is particularly germane, I think, to the telecom industry. There are all kinds of mergers, acquisitions, and cases of companies getting bigger, largely because of the really enormous capital costs of building up the infrastructure. The interesting thing is that sometimes they work and sometimes they don't. I'm thinking, for example, of where just recently British Telecom and AT&T in the U.S. made an agreement called Concert, I think. After a year and a half or two years they had to wind it down at a cost of several billion dollars to both sides because it simply didn't work. Bigger wasn't better. This is going on, they're trying them, and we're watching.

From our point of view, when it looks as if concentration is taking place to the point where it would diminish competition, to the point where we would perhaps be in danger of slipping back to a monopoly or even a duopoly in the provision of services, then that indeed is a major concern. We have both the Competition Bureau, which is charged with looking at those kinds of mergers, and the CRTC, to the extent that they impact on cross-media concerns that touch on broadcasting.

• 1015

So we're well aware of the trend. It is going on. Whether in the end it will be helpful or harmful, I guess we have to be vigilant. No one wants to stop a merger that will have positive results for people. On the other hand, as I said, we're all aware of possible negative consequences, and hopefully the tools are in place to take a look at that.

In terms of who's looking at it, and so on, as I say, it's the commission in some cases, and certainly the Competition Bureau, and if your researchers haven't already contacted them, we'd be very happy to facilitate that.

Your final question had to do with trade, and broadcasting being a good or a service. Broadcasting and telecommunication services are not mixed in trade negotiations. We go considerably out of our way to make that point. I participated in the WTO negotiations that resulted in the last agreement on telecommunications. It was always crystal clear to everybody in the room that broadcasting was not being considered, and frankly, the time or two that someone raised it, in the context that sometimes came up in terms of direct broadcast satellites, not just Canada but almost everyone in the room would say, no, that's something different.

There is a distinction drawn between the pipes, the infrastructure, and the programming, the broadcasting content. Whether you get CBC, for example, from an over-the-air transmitter, through a cable system, or directly from a satellite, you may have a lot of variation, but it's important that it's the CBC and that its programming be what its programming has to be.

So there is that concern. Again, it's one of those ongoing concerns. You don't want to take things for granted. At every step where negotiations are opened up—and we have now opened a new round that will cover services, and I assume telecommunications again—Canada and other countries will go considerably out of their way to say this is not broadcasting. We're not talking about content. This is infrastructure; this is pipes.

So I hope that's of some comfort, but we do approach that with some care.

The Chair: Mrs. Hinton.

Mrs. Betty Hinton (Kamloops, Thompson and Highland Valleys, Canadian Alliance): Thank you.

I agree with Ms. Bulte; this is a fascinating subject. I have about half an hour's worth of questions for you, but we won't go there.

Mr. Helm, I found it interesting that you said you assigned the orbital slot that was part of Industry Canada's job. I'm sure you've had this pointed out to you on many occasions, but when you assigned the last orbital slot, you nearly left out all of western Canada for Canadian satellite distribution. It was an error that was corrected by the industry itself.

I find it interesting, though, that we're talking about the broadband technologies, and right now we're into the age of digital compression. This is an industry that moves so quickly, and with digital compression, producers are able to put six to eight times as many programs in the same slot as they used to be able to do with the old broadband method.

So we're not going to be able to stop that from happening, nor do I think we should, but I did find it interesting that you talked about culture not being part of the trade agreement, that it was protected. But it really hasn't been protected. There's absolutely no CBC content on pirated American satellite dishes that have come into Canada or on the dishes that are here that aren't pirated, American systems that have been bought and installed in Canada. I would venture to say that Canada has lost millions upon millions of dollars in that particular gambit when we have all these American systems in.

I guess the bottom line here is that we really don't have a choice. You can't force people to watch anything in particular. They will find a way around it. Having recognized that, or we should have recognized that ten years ago, I would be more concerned about the loss of revenue, because we license producers in Canada, we charge for a licence, but we don't protect those people, and if you have distribution rights in Canada and those have been overridden because an American system has come in or they've picked it up off the airwaves, you've already defeated the purpose of the licensing.

• 1020

I'm wondering whether you're looking at anything that has to do with that at all, because now we're going to move further ahead again, via the Internet, where we will have even less control over what people watch in their day-to-day lives. if we're going to be protecting Canadian culture, and I think we should, we're going to have to find a better way to do that. I would like to hear your view.

The other thing I want to mention is that you've talked about the cable industry. Well, the bigger players in the cable industry saw the writing on the wall, so to speak, and they own digital satellite systems now. So they're distributing signal either via cable, which is very popular in urban areas, or via satellite, which is very popular in rural areas. Now the line is blurring to the point where people are choosing satellite systems even in urban areas where cable is available to them, because they like the ability to pick and choose the programming versus having to take tiers. I would be interested in hearing some of your comments in regard to what you see happening and what you see as our obligation.

How do you think we have managed to protect culture with these trade agreements? I have a different opinion entirely. I don't think we've protected culture at all, and I think we need to find a way to address that, not to prevent people from watching what they want to watch, because I don't think we have any right to control that at all, but if you want to deliver the message of what Canada and our heritage is all about, we need to find a clearer delivery than we have today. So I would be interested in your comments.

Mr. Michael Helm: Let me start with the question of the American satellites. As you correctly point out, if someone acquires a dish by some means—a subscription to DirecTv or an American service provider—they're probably not going to see the CBC or other Canadian services.

Of course, when they do that, they are acting illegally. The specific violation is of the Radiocommunication Act, an act for which our department has responsibility. Actually, we've been really quite aggressive in enforcing it. We've worked with the RCMP, not to go after individuals but the people who sell the dishes.

The American satellite providers do not have the contractual rights to sell into Canada. So they don't acknowledge that they're selling into Canada. If someone points out that they are, they themselves can be sued by those people giving them the rights to the programming.

So I think we've been reasonably aggressive in going after the people who sell the dishes. Interestingly, if you've followed, we get mixed decisions from the courts, frankly. Indeed, I believe the current situation in Ontario and British Columbia leaves doubt as to the validity of that part of the Radiocommunication Act that in fact allows us to enforce that. We have appealed those decisions—we being the crown—and further court proceedings go on.

It may be that there would be some need to change the wording of the act. That's frankly what's at stake before the courts. But there has never been, on the government's part, any intention or indication or statement or any sign that there's a willingness and an openness to see foreign service providers accessing the Canadian market when they're not coming through the CRTC process and they're not conforming to our laws about the provision of Canadian content and relevant programming to Canadians.

We've been standard on that. The U.S., frankly, has made overtures in trade negotiations that they did want to open this up. They would like to have a means to have DirecTv and the others provide service in Canada. Our position has always been, no, we're not open to that discussion. When the service is provided, we do our best within the law to see it stopped.

• 1025

So that's the existing situation. As I say, frankly, it's before the courts. We'll see whether the existing legislation is okay or whether we'll have to make some changes.

You raise that also in the context of the bigger question. That's very well with satellites, and perhaps you will be able to control access to foreign satellites better than you have been. I don't know. But you very appropriately raised the issue that there's more technology coming. There are digital facilities coming. There's the Internet coming. There's broadband, wireless. There are going to be all kinds of things on there, and how on earth do you intend to control them? I think you're quite right. I think that's one of the slides I ended with—what are the implications for the traditional broadcasting system?

Certainly to the extent that we've counted on straight protectionism—and I'll turn this over in a moment to my colleagues from Heritage, who are much better versed to speak to this than someone from Industry, but from past incarnations I have some interest in broadcasting—that is, we will ensure Canadians can't see anything other than Canadian stations, I don't see a great future in that. It's not going to work.

I think what we have to do, and what we have been doing for some time now, is switch the emphasis and say let's just make sure the programming is good enough, it's of the quality, the standards, and most importantly, the meaningful content that Canadians will choose to watch it in the face of whatever other options there might be. They will find it more interesting, they will find it more relevant, and they will find it competitive on every level.

As Michael has pointed out, Heritage has put in a whole range of activities to try to address that. Ultimately, I think you're exactly right. That's how the shift, in my view, is going to have to happen.

In regard to protecting property rights in that environment, I've said in the past that I think the real breakthroughs in creativity that have to be made as we move ahead into the age are not so much technological breakthroughs as they are programming rights, negotiations, and agreements—the people who make and own the programming and are going to have it distributed all around the world, how they ensure the rights agreements give them the payback and the resources they appropriately should get, so others aren't getting a free ride. It takes you into copyright and all kinds of things. It's a very complex area, and one, certainly, where some changes have to be made.

Let me stop on that and let Mr. Wernick...

Mr. Michael Wernick: I'll just offer two quick observations on the same topic.

To be very precise, these are charter challenges to keeping out U.S. dishes, and they're going to the Supreme Court in early December. So we'll have a very clear reading of the law that will bind all the lower courts in early December. As Mike said, either that will fix the situation and allow enforcement to proceed, or we'll have to rewrite the statute fairly quickly, and both of those are being prepared for.

In terms of the cable-satellite, it's only really the Shaw family that has bet on both and has a cable and satellite operation. Rogers and Quebecor have not. They have cable operations. The other major satellite company is owned by the Bell family of companies, so you've got ExpressVu and Star Choice.

It's not my impression that Canadians are just dying to get out there and get to U.S. dishes if they are given the opportunity. Quite the contrary. It was attractive before 1995, because there was no Canadian option. Now there are two. We've gone from zero to a million satellite subscribers in about four years, and the growth is still continuing. Nobody's quite sure how much of the pie they'll take away from cable, so cable has to compete. So cable's offerings and behaviours, exactly as was hoped, are responding to competition from satellite. If you are a consumer, you've probably had this debate—do I go with satellite or do I go with cable? What's the better-value proposition?

The other part of the response has been to make sure there's a good value offering of service for money on Canadian satellites. So the CRTC finally got around to licensing another raft of specialized services that will build the audience. They licensed 260 new services a year and a half ago, many of which are launching this fall. Some will succeed; some will fail. But it creates an offering now, so if you go to ExpressVu or Star Choice, you can get 50, 60, soon to be 100 Canadian services. The evidence is, given the option, if you can go to Canadian Tire, get a dish for $99, and you're only paying $40 a month, it's a good proposition. Canadians will choose Canadian offerings and get access to the various services the CRTC mandates.

• 1030

I'm not disagreeing that leakage around the system matters. They are dollars that are not being recycled in the Canadian system. We're going to have to enforce the rights market as vigorously as we can.

The Chair: Mr. Harvard, then Mr. Mills.

Mr. John Harvard: Thank you, Mr. Chairman.

I have a couple of questions for Mr. Wernick and at least one for Mr. Helm.

Let me say off the top, Mr. Wernick, that I certainly agree with you. I do think the CRTC is a good place where broadcast entities can come and face tough questioning, and be put under a microscope, I suppose. I think there is some public benefit from it.

Although I've always thought any question of the CRTC withdrawing or cancelling the licence of a large entity, the CBC, CTV, or CanWest, is a bit of a stretch, if not an outright absurdity... I can't imagine the CRTC ever doing so. I've often thought, if they can't do it in reality, why should they even be able to have it in theory? I think it is being disrespectful to the law. I don't think it's politically possible for the CRTC to do it.

You mentioned the rather difficult issue around the arm's-length relationship between cabinet and the CRTC. I can understand it's not that easy to achieve the kind of balance we want. Maybe there isn't even an agreement on what the balance should be.

Since the Broadcasting Act was last revised, has there been some good study on the balance? If so, what are the experts saying, those who are watching closely? Is the cabinet too close? Is the CRTC too distant? If there was some material, I would be interested in it.

The other question for you, Mr. Wernick, has to do with the Canadian Television Fund. My question has to do with how well the funds have stimulated competition. One would assume, under a kind of monolithic or monopolistic system where the public funds go to one agency, say the CBC, over time that kind of a system would become a bit stagnant.

Under a more competitive system, where you have a number of entities, producers, private producers, and the networks, including the CBC, vying for the same pot of money, it should stimulate more competition. Perhaps even more importantly, it would create better programming. Is there any evidence there is better programming coming out of the mix than what we had prior to the formation of a CTF?

My question for Mr. Helm has to do with the pricing of Internet service. There was a time, as you know, when there was tighter regulation and less competition. The telephone companies basically were required to have their long distance users and business users subsidize the local users.

Since regulation was relaxed and there was more competition, if anything, I think it's gone the other way. Certainly the price of long distance calls has gone down. There has been an escalation in local phone rates. For some people, some of the phone rates are now getting to be a bit burdensome, particularly for low-income people.

• 1035

From what you know, has that same phenomenon, let's call it, occurred with respect to Internet usage or Internet service? I happen to have in my own case high-speed Internet service in my home in Winnipeg. I have a son who is going to the University of British Columbia. He talked me into installing high-speed Internet service in his apartment in Vancouver. I guess university students need that kind of service nowadays. So I have some idea of what the rates are for that kind of service into a home. For me it's quite burdensome.

I'm wondering whether you can give us some kind of a picture as to how companies such as Shaw Cable and Rogers are behaving in that regard. Are they going all out to get the business customer, or are they trying to keep their rates down as much as possible to get service into homes as well? Those are my questions.

The Chair: Mr. Wernick.

Mr. Michael Wernick: I'll try to be brief so we can complete the round. I can see why you might want us to come back. They're very good questions and they take a bit of answering. I'll take the easiest ones and then work backwards.

I can't recall seeing an academic or third-party study or assessment or evaluation that looked precisely at the issue of whether arm's length is too short or too long. It's probably something that could be done and it's probably a question you should ask each witness that comes before you. It's going to be very subjective. People who received the decisions they liked out of the commission will say everything is just right; people who didn't get a decision they liked are going to say, gee, it would be nice if somebody else could have intervened.

I'm not sure there's an objective answer to that question. There is an awful lot of decision-making that goes on—as I said, about 800 decisions a year and nearly 10,000 decisions since the act was redone. You would have to have a view about whether the commission gets it right more or less most of the time. What does their batting average look like? What would you have liked them to have done differently that cabinet should have intervened?

There's a real danger in altering that relationship. If you go too far, you will really politicize the system and the giving of licences and the behaviour of the system. If it's too distant, you end up with an isolated, out-of-touch regulator. It's not an easy balance to set, but it's one of the key architectural issues that your committee should give the government advice on.

I agree with you that the sanctions ladder available to the commission doesn't have enough rungs on it. To talk about revoking a station group licence for a company that's publicly traded and worth $800 million is like the threat of nuclear deterrence. Between that and a slap on the wrist in the text of a letter from the commission, I think there should be more steps that you could go to that would be appropriate and scalable, so that when somebody steps out of line there are other things you might do.

The main thing the commission does currently—you should ask them about this on Thursday—is they give people very short licence periods. They say, well, you're only getting a year or two. They make them go through the whole rigmarole again. And it is costly to them in terms of time, energy, and money to come before the commission. There have been some cases where there have been more serious transgressions, and sanctions have been attempted.

One of the things you might want to recommend is a more graded, scalable ladder of sanctions that the commission could bring to bear on broadcasters. What exactly those should be I'm not sure I have anything to offer this morning. But it's another thing we would be happy to discuss with you. I think the commission staff would have ideas. They probably know, looking back, that it would have been nice if they could have done this or could have done that. They may have some specific ideas for you.

On the Canadian Television Fund, one thing to keep in mind about it is that the money goes to production companies, not to broadcasters. It all goes to independent or affiliated production companies—almost all goes to independent companies. It is a tool that has very powerful results in stimulating an independent production capacity in the country. It had that effect right across the country. So it has made it possible for companies to pop up in every region, every province, every community that can make a go of making programming in documentary or drama or children's or performing arts.

• 1040

So there's a capacity-building role—and this is linked to Mr. Bonwick's question—that has created economic activity and production capacity right across the country.

It doesn't all go to the big players. It's spread along quite broadly. The activity reports of the fund are on the website and are available on paper. They list every project and every production company. When you get the producers in front of you, ask them. They're staunch advocates of the fund, because it does have that impact on independent production. It's an alternative to simply giving money to the CBC to make stuff in-house. The CBC has to find independent producers to work with in order to qualify for the fund. The CBC draws anywhere between $60 million and $70 million in a sense, because productions are funded that they can then put on their schedule. It's a type of additional funding for the CBC that doesn't really get booked to them, but it's clearly a benefit to the CBC.

We did an evaluation for Treasury Board of the Television Fund last year. That's available. It hasn't been put on the website, only because it's too long. It's certainly available to you in the committee. This evaluation went through the incrementality, the diversity, the impact of the fund, and gave it a very good report card. It had some specific recommendations, one of which was—and again this goes to Mr. Bonwick's question—they said to us, you should be very clear that it's a cultural fund and a cultural policy instrument and you should de-clutter all of the language around the Television Fund. You should strengthen the governance arrangements to make sure that the two components, the one by Telefilm and the other one, work more closely together. We have implemented all of those recommendations in the last year.

One of the problems with the fund, frankly, is that it has only been extended a year, three years, another year. It has this temporary life. As the minister has said on a number of occasions, she's an advocate of getting a more permanent or long-term funding base for the fund. We're hoping that may come about.

The Chair: Mr. Helm.

Mr. Michael Helm: Thank you, Chairman.

Mr. Harvard, you observed, quite correctly obviously, that at one point all local telephone service was subsidized—cross-subsidized—within the companies from their long-distance revenues. As long distance has become more competitive and those prices have plummeted, the need has been to squeeze those subsidies out of the system. They haven't been squeezed out entirely. In urban areas they're pretty much out. We pay about what it costs now to provide the service, but in rural and so-called high-cost areas out on the farm, there still are considerable subsidies. I believe this year it's just somewhat under $1 billion—yes, $1 billion, $970-some million—because the act requires that the service be affordable. So there are still quite extensive subsidies.

What changed was it used to come just from the long distance side of the business, and now more recently the CRTC has brought in a process where, with some exceptions, it generally goes across the gross percentage of the gross revenues of all telecom carriers who pay into an independent fund, which is then paid out. So the subsidies for those of us in cities on local telephony have pretty much gone, but outside the cities they're still there and they're still pretty active.

In terms of prices for high-speed Internet particularly and to the extent that they're going after the domestic versus the business market, they're doing both. I think both for the cable companies, who have traditionally been very aggressive in this from early on, and for the phone companies, they're in the happy situation of trying to roll out the service quickly enough to meet the demand. So it is there. I don't get the sense that they're backing off on residential or anything to go to business. I think they're trying their best to cover all the demand.

In terms of prices, maybe I'll ask Mr. St-Aubin to comment. There has been a fair amount of work done internationally. We've participated in studies at the OECD. We carry on stuff with the U.S. as well, because to the extent that you view this as an important part of your economy with important business implications and so on, you have to be sure you're competitive internationally.

If I may, Chair, I'll just ask Mr. St-Aubin to spend a moment or two on pricing.

• 1045

Mr. Léonard St-Aubin (Senior Director, Business and Regulatory Analysis, Industry Canada): The price of retail Internet access is not regulated in Canada, but the studies Mr. Helm has mentioned tend to reveal that Canadian prices are among the lowest in the world, whether it's the OECD that's done comparisons at the G-7 level or at the OECD level. Canadian prices for high-speed Internet access tend to be at the very low end, and, accordingly, the take-up rate tends to be about the highest in the world. I think there's only one other country, Korea, that has a higher take-up rate for high-speed Internet access than does Canada.

Mr. John Harvard: Is that true for both business and home?

Mr. Léonard St-Aubin: Yes, it's for both business and home. The rates in Canada are highly competitive; retail Internet in Canada is a very competitive market. The bulk of the market—certainly for the residential market—is still in the low-speed access. For the high-speed, both cable and telephone companies are picking up significantly, and the take-up rates have been going quite high.

Recently in the U.S., the rates for cable modem service have gone to about $40 U.S. a month. In Canada they still are $30 Canadian a month, and with some of the promotions that go on from time to time between the cable industry and the telephone industry, sometimes the rates are even lower.

Even though it's an unregulated market, all the evidence that's out there suggests the prices in Canada are about as low as you're going to get anywhere.

The Chair: Before passing to Mr. Mills, who will complete the first round of questions, I've purposely, because of the complexity of the subject, allowed pretty flexible time, because it's not fair to just have limits when these questions are so important. I would like to suggest to you, if it's okay with the witnesses and the members—the room is not taken at 11 o'clock—if you want to prolong a little more, I have Mr. Mills, and afterwards, for the second round of questions, I have Madame Gagnon, Ms. Lill, Mr. Bonwick, Mr. Abbott, and Ms. Bulte wants to ask additional questions. If you are happy to stay for another 15 or 20 minutes after, fine. It's up to you. I don't know if members—

Mr. Paul Bonwick: I have to excuse myself at 11 a.m. I have an interview at 11:05 a.m.

The Chair: Why don't we just go on to Mr. Mills and then we'll see, because I want to stay.

Mr. Dennis Mills: Thank you, Mr. Chair.

I have a short question for Mr. Wernick; then I'll move on to Mr. Helm.

On page 13 of your presentation you talk about the Canadian Television Fund tax credits and private and public production funds. Then in the bottom bullet, you say the CTF invested $991.6 million in projects. What portion of that is cash and what portion is tax credits?

Mr. Michael Wernick: It's all cash. The tax credits are a completely separate measure. They don't come into the financing.

Mr. Dennis Mills: Fair enough; that's what I thought.

How much of the total budgets of $3.35 billion would represent tax credits? I don't expect you to have that answer today, but I would really like us to have the answer. I would like to know the value to the treasury of Canada of the tax credits that are being used in television and motion picture production in this country.

Moving on to Mr. Helm, first of all, I want to say to your department, sir, and to the former minister, John Manley, that I think the SchoolNet initiative has just been a phenomenal success. I think we challenge officials on a regular basis when we get frustrated, because of constituents battering us, but this is an example of officials in the Department of Industry just doing a tremendous job. I'd like you to take that back to your colleagues.

Moving to that part of your presentation where you talked about the department's obsession/objective of giving equal access for all Canadians, wherever they may live, I am a strong supporter of Minister Tobin's campaign, so to speak, for getting the resources he needs to make it happen.

But last week I was travelling in remote regions of Nova Scotia and Newfoundland, and as I was driving through these places, where there are sparse populations, I kept saying to myself, “How are we going to implement this objective?” What is the infrastructure exercise, the cost... Has there been some analysis done on this? You go to smaller communities or outports and you say, “Oh, my goodness, how is this going to happen?” Could you please explain that to me?

• 1050

Mr. Michael Helm: Yes, I think so; I can certainly try.

I mentioned earlier that some years ago I used to work in broadcasting within government. It was an ongoing concern. Frequently, from remote areas all over the country we received complaints and concerns. People who lived in Toronto and Ottawa and Montreal and Vancouver had such a richness of broadcasting, of television channels available; why couldn't government do a better job of seeing that people in remote areas had as well? This went on for years—I'm sure you can remember—and it was a very real concern.

I haven't heard a concern or a complaint like that in four or five years—none, zero—because satellite technology, essentially, solved the problem. You can now live on the remotest farm in the remotest part of the country and get a range of television and radio services at about the same price—a comparable price—to someone in the downtown area of the biggest city.

Is there an exact analogy to broadband? I'm not entirely sure, but there's certainly an element of it. There's no question that there are parts of this country that will be served by satellites—or they won't be served. There are areas just in Nunavut—you don't have to go that far afield—where the idea of actually stringing a cable or a fibre... As you point out, you can drive there on a highway and look around and think, “Oh, my goodness, how are you ever going to...” The answer will be, in some areas, satellites.

That technology evolves; it's coming along. We've licensed something called Ka band, which holds the promise of bi-directional, interactive broadband capability.

I'm actually at about the depth of my technical expertise, but Dr. Rawat could comment at length if you like. The short answer to your question is I think in some areas it's absolutely going to have to be satellites. I think the technology will be there.

Mr. Dennis Mills: Is there a departmental plan that identifies those areas where the actual cabling experience will happen? In other words, when those opponents of the initiative to move to roll out more broadband get jumpy about this and say, “Oh, the cost is going to really upset the fiscal framework”, how do those of us who support this initiative defend it? Do you have some kind of document that could give us the rationale on why these costs are like this, and the areas that will be serviced with this added cable and those that will be served by satellite? Is there some kind of master document that could...

Mr. Michael Helm: We spend a great deal of time on that in the department, frankly, and we have a series of plans, based on different variables, as to how it might go. At the moment, those are all working documents. They're really not the kind of thing that's public, because they're shifting so much and we're trying different alternatives. The broadband task force addressed it to some extent. It also is a moving target as the technology develops—

Mr. Dennis Mills: Excuse me, I'm not making my point clear. You'll have to give me another short moment here.

When the Minister of Industry goes to the treasury of Canada and says, “My department's analysis says we need”—let's say, for argument's sake—“a billion dollars to do this exercise”, what's the rationale for that? Where does that number, $1 billion, come from? I've heard numbers as high as $4 billion. So can you tell us where these numbers come from so that those of us who support this initiative can feel like we're discussing this in a substantial way and an intelligent way. Where do these numbers come from, these billion-dollar figures, to do an initiative? What do we get, as taxpayers, for this money? Who gets service, who's in the loop, who's out of the loop?

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Mr. Michael Helm: I think it's fair to say that the numbers you see in the papers now are basically extrapolations from the report of the broadband task force. They laid out some very big numbers.

What wasn't as clear, or some commentators chose not to dig into too much, was just how that would be split between the private sector and the public sector, because, again, most of this is going to be done. The vast majority of Canadians are going to be served by the private sector at no cost to the taxpayer.

But there will be some areas where that won't be possible and probably where the public purse will have to be used. Where that cut is exactly wasn't entirely clear in the broadband task force report, and it's the kind of thing we still look at.

I'm not hedging around your question. I can't think of a public document that lays it out as clearly as you would like. I'm sure as soon as we get something the minister is comfortable with, that he's going to go forward with, it will be available. At the moment, it's all working documents as to exactly how that split would go.

Mr. Dennis Mills: Thank you.

[Translation]

The Chair: Ms. Gagnon, you have the floor.

Ms. Christiane Gagnon: Do you have a prospective study on the trends in listening habits of Canadians with regard to conventional networks broadcast on the air, by cable or by satellite? You say that there is progress, but it is important to know how much progress there is. How can we get a clear idea of this development?

You also say that there are specialty channels with 200 stations to offer. Some subscribers say that they will drop their subscription because 200 channels is far too much. It takes them a long time to go through all these channels. Finally, they decide on 10, 15 or 20 of the 200 channels. It is quite a feat for an individual to choose programs among 200 channels.

We should also find out who uses the option of programmed recordings. We should have a clear idea of all that. I think that, basically, we are putting some pressure on consumers who pay the cost.

Some regions have no access to the new technology. For instance, how could we extend access to more regions? We have to take a look at the entire development before we can tell how people may benefit from it, how this technology could be made accessible to more people and whether the funds and effort that you commit are really worth it.

Mr. Michael Wernick: I think that we could get statistical profiles of the way the market is evolving, and how Canadians consume TV programming.

Obviously, there is some competition between the time spent watching television or listening to the radio and the time that remains to take advantage of other kinds of consumption such as renting or buying a cassette or a DVD. Change has occurred in waves. The introduction of video cassettes and the video library infrastructure have changed, to a certain extent, consumer habits with regard to television. People no longer have to sit down in front of their television set on Sunday night at 8 p.m. to see their favourite program. Now, they have the choice of watching it whenever they wish.

There is an important point behind all this. Once a broadcast has been developed for a first airing, on the CBC or CTV airwaves, it can be recycled many times. This is not the case with news or sports, but films, dramatic series and children's programs have a longevity that extends beyond the first airing. Thus, we are creating a large catalogue of Canadian programming that could also be sold on foreign markets.

The big change came with the arrival of satellites, that displaced the cable companies to some extent by taking a slice of their pie. This opened up the market, especially in rural regions. People who did not have access to the cable before can now take advantage of satellite services.

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Satellite services have gained about 15% of the market and, as I said earlier, no one is sure exactly how far they will go. Clearly, this is a product, this is a service that is attractive to consumers and the growth rates are very remarkable. The services are becoming more and more available and they are very popular.

The other major trend that is emerging is the increase in the number of channels and services, along with extreme specialization. Some networks opt to do business by offering a range of programming. That is the case with CBC, CanWest and TVA, which offer a mix of programs including news, sports, feature films and made-for-TV movies. They are a kind of gateway for all types of content. On the other hand, the business plans of some channels direct them to seek out a very, very specific market, so we have news channels, sports channels, hockey channels, and even a channel for the Montreal Canadians team.

The supply and the choices available have risen dramatically, with digital capacity being a contributing factor. As I said earlier, the CRTC issued licences to more than 250 additional services. This means that consumers are now in control. It is no longer broadcasters who decide, just like that, to offer the programming that they consider best. Now it is consumers and the people who buy advertising time who will decide how long a service lasts.

Of course, even if a service lasts five years, no one can look at 50 channels simultaneously by simply pressing a button. Market surveys show that consumers with families settle on five to 10 channels. They have favourite channels—they may be sports fans or they may like to watch the news or some other type of program. However, the choice is always there. I do not watch the same program as my wife or my son. A family can therefore go with a broader selection.

I think that, in the future, technology will make it possible for cable and satellite companies to offer more limited, more targeted packages. It will perhaps force them to do this. For example, although I might want to buy a set of children's services for my son, this would not appeal to my neighbour, who has teenagers.

The trend is to offer a selection and specialization, and offering a selection opens up new possibilities. Providing a fairly specialized service such as the CBC television arts channel, or a film or a book channel, for example, can now be considered in a business plan. From a cultural point of view, I feel this is an advantage because it means more is available. We no longer have to depend solely on CBC, CanWest or TVA for all the programming. A variety of sources exists, which is in the consumer's best interest.

The Chair: It is already 11 o'clock.

[English]

Unfortunately, several members have other committees to attend, and some have to go to the House for a debate, so it looks as if we are going to be just a very few. I understand there are two more who have to leave. So the best thing I think is to perhaps ask you if you'd be kindly receptive to coming again before us. We'll try to schedule something on a date suitable to the members and yourselves, and we'll get back in touch with you, if that's okay.

Mr. Michael Helm: Yes.

The Chair: I can see there is a huge interest. Several members still have questions to ask. I think, in fairness, if we could schedule a proper time, we'll do this.

Mr. Michael Wernick: We'd be delighted to come back at the early stage that you're in now, but also once you've gone through some of the witnesses. You'll certainly have some more acute questions to ask, and we'll come back as often as the committee finds it useful.

The Chair: Thank you very much for your input and participation. We're most grateful to you.

The meeting is adjourned.