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37th PARLIAMENT, 1st SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Tuesday, May 7, 2002

0910

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.))

Mr. Bernard Courtois (Executive counsel, Bell Canada Enterprises and Bell Canada; Strategy Manager, Bell Canada)

Mr. Alain Gourd (Group Executive Vice-President, General Services, Bell Globemedia Inc.)

0915

0920

Mr. Alain Gourd

0925

Ms. Sheridan Scott (Chief Regulatory Officer, Bell Canada)

0930

Mr. Bernard Courtois

0935

The Chairman

Mr. Abbott

Mr. Bernard Courtois

Ms. Sheridan Scott

0940

Mr. Jim Abbott

Ms. Sheridan Scott

Mr. Bernard Courtois

Mr. Jim Abbott

Mr. Bernard Courtois

Mr. Jim Abbott

Mr. Bernard Courtois

0945

The Chair

Ms. Christiane Gagnon (Québec, BQ)

0950

Mr. Alain Gourd

Ms. Christiane Gagnon

0955

Mr. Alain Gourd

The Chair

Mr. Mills (Toronto—Danforth)

1000

Mr. Bernard Courtois

Mr. Dennis Mills

Ms. Sarmite Bulte (Parkdale--High Park, Lib.)

Mr. Bernard Courtois

1005

Ms. Sarmite Bulte

Mr. Alain Gourd

1010

Mr. Bernard Courtois

Ms. Sheridan Scott

1015

Ms. Wendy Lill (Dartmouth, NDP)

Mr. Bernard Courtois

1020

Ms. Wendy Lill

Mr. Bernard Courtois

Mr. Alain Gourd

1025

Ms. Wendy Lill

Mr. Alain Gourd

The Chair

Mr. Bernard Courtois

Ms. Sheridan Scott

1030

The Chair

Mr. Alain Gourd

The Chair

Mr. Bernard Courtois

The Chair

Mr. Konrad von Finckenstein (Commissioner of Competition, Competition Bureau)

1040

1045

1050

The Chair

Mr. Jim Abbott

Mr. Konrad von Finckenstein

Mr. Jim Abbott

1055

Mr. Konrad von Finckenstein

Mr. Jim Abbott

Mr. Konrad von Finckenstein

Mr. Jim Abbott

Mr. Konrad von Finckenstein

Mr. Jim Abbott

The Chair

Ms. Christiane Gagnon

Mr. Konrad von Finckenstein

Mr. Gaston Jorré (Senior Deputy Commissioner of Competition, Mergers Branch, Competition Bureau)

1100

Ms. Christiane Gagnon

Mr. Gaston Jorré

Ms. Christiane Gagnon

Mr. Konrad von Finckenstein

The Chair

Mr. Dennis Mills

Mr. Konrad von Finckenstein

Mr. Dennis Mills

Mr. Konrad von Finckenstein

1105

Mr. Dennis Mills

Mr. Konrad von Finckenstein

Mr. Dennis Mills

Mr. Gaston Jorré

Mr. Dennis Mills

Mr. Gaston Jorré

Mr. Dennis Mills

Mr. Gaston Jorré

Mr. Dennis Mills

Mr. Konrad von Finckenstein

Mr. Dennis Mills

Mr. Konrad von Finckenstein

Mr. Dennis Mills

Mr. Konrad von Finckenstein

Mr. Dennis Mills

1110

Mr. Konrad von Finckenstein

Mr. Dennis Mills

Ms. Sarmite Bulte

Mr. Konrad von Finckenstein

Ms. Sarmite Bulte

Mr. Konrad von Finckenstein

1115

Ms. Wendy Lill

Mr. Konrad von Finckenstein

Ms. Wendy Lill

Mr. Konrad von Finckenstein

The Chair

Mr. Jim Abbott

1120

Mr. Konrad von Finckenstein

Mr. Jim Abbott

Mr. Konrad von Finckenstein

Mr. Jim Abbott

Mr. Konrad von Finckenstein

The Chair

Ms. Christiane Gagnon

1125

Mr. Konrad von Finckenstein

The Chair

Mr. Konrad von Finckenstein

The Chair

Mr. Konrad von Finckenstein

The Chair

Mr. Konrad von Finckenstein

1130

The Chair

Mr. Konrad von Finckenstein

The Chair

Mr. Jim Abbott

Mr. Konrad von Finckenstein

Mr. Jim Abbott

Mr. Konrad von Finckenstein

The Chair

CANADA

Standing Committee on Canadian Heritage

NUMBER 061

1st SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, May 7, 2002

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I declare open the meeting of the Standing Committee on Canadian Heritage, which meets today to continue its study on the state of the Canadian broadcasting system.

I would like to inform our guests that some members are on different committees and will be joining us shortly.

We are very pleased today to welcome a large Canadian enterprise that is very involved in what we are about, Bell Canada Enterprises, or BCE.

[Translation]

We are pleased to meet Mr. Bernard Courtois, executive counsel, Ms. Sheridan Scott, chief regulatory officer, and Mr. Alain Gourd, executive vice-president, Bell Globemedia. Mr. Courtois, you have the floor.

Mr. Bernard Courtois (Executive counsel, Bell Canada Enterprises and Bell Canada; Strategy Manager, Bell Canada): Thank you, Mr. Chairman, members of the committee. As was just said, I am Bernard Courtois and with me this morning are Ms Sheridan Scott from Bell Canada and Mr. Alain Gourd from Bell Globemedia. Thank you for having invited Bell Canada Enterprises to appear before you today.

BCE is Canada's leading communications company, with a major presence in telecommunications and broadcasting. We provide Canadians with both connectivity, via Bell Canada Holdings, and content, through Bell Globemedia.

BCE has chosen a strategy that requires it to innovate on a corporate wide scale by re-inventing itself as an advanced communications company. The set of broad communication capabilities assembled by BCE represents an effort to shape a future of the entertainment, information and communications industries in which Canadian content is a solid business proposition. This vision is about adding new Canadian choices for audiences and about linking Canadian media--television, print, and interactive--to gain scale in ensuring a Canadian presence in the face of the overwhelming U.S. entertainment and information's juggernaut.

[English]

Right now three significant forces are driving change in the communications marketplace: digitization, competition, and globalization. We must respond in order to ensure the continued relevance and effectiveness of Canada's broadcasting regulatory framework and the Broadcasting Act objectives on which it is based.

Today, BCE will share with the committee our perspective on a number of key issues, and I'll ask Alain to begin with the most important one, Canadian content.

[Translation]

Mr. Alain Gourd (Group Executive Vice-President, General Services, Bell Globemedia Inc.): As the committee has heard, the broadcasting industry has been transformed by structural shifts in recent years. Nonetheless, conventional television continues to be the financing engine and major showcase for culturally important, first-run Canadian programming.

Broadcasters have relied for many years on popular American programming to cross-subsidize this kind of Canadian content. However, today American programs are becoming more expensive, and the traditional model is breaking down. We have a game plan for success in Canadian programming. At CTV,we are using the foundation provided by the Canadian Television Policy to focus our efforts on finding ways to create more popular, more successful Canadian programming.

[English]

The key elements of our strategy are: a can-do attitude; a focus on the creation of Canadian successes, Canadian blockbusters; substantial investment in Canadian programming, particularly drama; the development of the Canadian star system; and the use of multiple-media platforms.

[Translation]

In terms of attitude, we look to the significant success in Quebec, where French-language drama garners large audiences and is central to the viewing experience. We need to adopt that attitude, that “chez-nous” can be best.

And we know CTV has the talent and knowledge to produce success. With 15-and-a-half hours a week of local programming at CTV originating stations from Halifax to Vancouver, we understand Canadians. We have the top-rated evening newscast in every market we serve except Vancouver, where we moved from fourth to second after becoming a full CTV affiliate. CTV also has won the Canada award for television that reflects Canada's diversity three years in a row at the Geminis for documentaries developed through our regional offices in Halifax, Toronto and Vancouver.

And our dramas often garner critical acclaim—or example, our movie about Dr. Lucille Teasdale, which we co-produced with TVA, won five Gemini awards. But we need more and bigger successes.

¿ (0915)

[English]

In addition to attitude, the second element of our strategy is to focus on the success of blockbusters. CTV's approach to priority programming is to invest major resources in drama and documentaries. These are the two genres we're focusing on. CTV uses a simple premise: the more arrows we shoot at this target, the better our aim becomes and the more bull's eyes we hit. The Canadian television policy gives us this opportunity to focus on these genres and is producing impressive early results.

For example, if you take a look at the slides, you'll see that CTV produced and aired seven of the top 10 or 11 Canadian movies and dramatic specials—by audience size—in the first eight months of this broadcast year, that is since last September 2001. They ranged from 1.5 million to around 1 million viewers each time.

So we not only attracted strong audiences for these productions, whether it's the Jonathan Wamback story or the Matthew Shepherd story; we also scheduled them across nearly every day of the week in prime time.

Our third strategy to achieve these successes is obviously substantial investment. CTV's annual spending on Canadian content is the highest of any private broadcaster. First, we tightly focused the $230 million in benefits promised when BCE bought CTV. Of these benefits, 92% will translate to on screen, with $80 million going toward drama alone. The more new, original Canadian programs we develop and air, the better chance we have of creating success, of creating blockbuster Canadian programming.

In total last year, CTV invested $359 million on Canadian programming as part of the total BCE spending of $473 million on Canadian content that year. And over the next five years, BCE will spend close to $3 billion on Canadian content.

So investment is important. However, comme on l'a vu au Canada français, the fourth element is developing a Canadian star system. The Quebec entertainment industry has taught us the importance of domestic stars in attracting big audiences, from Mike Bullard to Canada AM with Lisa LaFlamme to Vicki Gabereau to eTalk on CTV on Saturday, and the overall top TV specialty services, which are there to contribute to the star system.

The final element of our strategy is the use of multimedia platforms across conventional and specialty television, print, and the Internet to build audiences for Canadian programming stars, as well as to develop stars. The multimedia stories on the video, which we will show you in a moment, indicate what we can achieve with our third and fourth strategies.

¿ (0920)

[Video Presentation]

Mr. Alain Gourd: Having now shown some examples of what we are doing, I'd like to talk about how you, the members of the committee, can help in this approach.

In our view, the government's role is obviously to provide the right framework for success. We are not calling for new government programs. First, we ask that you support the Canadian television policy, which is a relatively new CRTC policy that has had a positive early impact. It gives CTV and other broadcasters our best shot at creating a sustainable Canadian programming model by building on our individual strengths. We cannot accomplish this if the rules keep changing.

Second, the Canadian Television Fund is essential to program quality, and therefore it needs stable funding and must be maintained at least at current levels.

Third, you can help us to increase our investment in Canadian programming, and this can be accomplished in two ways. Other groups have described the excessive licence fees paid by broadcasters and why they are unfair. These funds would be better directed towards improving each broadcaster's Canadian programming.

As well, broadcasters are seeking legislative changes to allow pharmaceutical advertising. Canadians should be able to have Canadian information about such products following a pilot project. We also believe broadcasters should use these new revenues to augment their Canadian drama, and we at CTV are making that commitment here today.

Fourth, the work on copyright must continue in order to ensure that it stays current with the many new ways that creative products, including video, are coming to market.

Finally, as you can see by the articles published every day, when the Globe and Mail reviews CTV's programs or reports on BCE's business development, no one tells them what to write. They can sometimes be our harshest critics. Editorial independence is a priority in order to provide balanced and fair reporting.

Quite simply, our philosophy is that editorial independence is good for business as well. It is key to our credibility, and we believe the marketplace will reward those who are sensitive to what customers want. CTV maintains news management and presentation structures for CTV television operations that are distinct from those of the Globe and Mail.

CTV has a statement of practices and principles that spells out these commitments, and we have established an impartial monitoring committee to receive and handle complaints. This committee will report annually to the CRTC. We have created public service announcements to publicize this process across our Bell Globemedia stations, to be used in an on-air campaign worth $1 million.

Now Sheridan Scott will turn to the related issue of diversity of voices.

¿ (0925)

[Translation]

Ms. Sheridan Scott (Chief Regulatory Officer, Bell Canada): Thank you, Alain.

Good day.

Some commentators have expressed concern that there has been a reduction in the number of Canadian broadcast voices that can speak to issues of public concern. Nothing could be further from the truth. A review of the facts demonstrates that there has been a significant increase in the number of independent broadcasting voices that Canadians can turn to for news programming and other information programming.

[English]

For example, in the Toronto market there has been a large growth in the number of different TV channels offering news and other information programming. In 1982, at the time of the Kent commission, there were fewer than a dozen independent Canadian providers of such programming. These consisted of the CBC, two of its privately held affiliates, and two CTV affiliates as well as Canadian stations operated by CHUM, Global, CHCH, TVO, and an ethnic service, CFMT. In addition, the French-language CBC service, Radio-Canada, was present in the market as well as three U.S. networks, ABC, NBC, and CBS.

In 2002 the number of sources of news programming as well as information programming has soared. CRTC data indicate that in Toronto, for example, consumers can choose from a significant number of services available from other cable or DTH providers. They continue to have access to CTV, CBC, SRC, CHUM, Global, TVO, and CFMT, and they can also receive the signals of a new English-language conventional station, Crossroads Television, and the French-language service of TVA. Moreover, the commission has recently issued two new conventional licences in Toronto to Rogers and Craig.

In addition, consumers are offered a wide-ranging selection of Canadian specialty services aimed at serving niche news and information programming markets. For example, Torontonians now have access around the clock to all kinds of news provided by Newsworld, CTV Newsnet, CPAC, and cable Pulse24. They can receive specialized business news from ROBTv and sports news from TSN, Sportsnet, and The Score, as well as ethnic information programming from services such as Telelatino, Fairchild, and AsianTV. The perspective of Canada's aboriginal people can be found on APTN.

In addition, Canadian consumers now receive additional conventional U.S. services from affiliates of the Fox Network, and two relatively new networks, Warner Bros. and United Paramount. They can also choose from foreign niche services, such as CNN, CNN Headline News, and CNBC, as well as other international services, such as the BBC, Deutch Welle, and TV5. From less than a dozen separate voices twenty years ago, now more than two dozen can be heard.

¿ (0930)

[Translation]

A similar progression can be documented in large francophone markets and in smaller anglophone markets.

In Montreal, there were three different ownership groups providing French-language news and information programming in 1982. By 2002, that number had risen to nine. Looking at a smaller English-language market such as Halifax, the number of independent voices in news programming and information programming was six in 1982, three of which were Canadian. By 2002, the number of independent Canadian news and information voices alone had grown to over 15 while the number of foreign voices exceeded 10.

When one overlays the new digital specialty services launched in the fall of 2001, radio, newspapers and the increasingly diverse set of voices available via the Internet, the range of independent sources is truly impressive.

I'd like now to say a few words about the CRTC.

[English]

In today's context of accelerated, ongoing change in the communications industry, procedural or structural reform of the CRTC should be considered. It should be carried out so that the CRTC is structured in a manner that encourages the development and application of a coherent national broadcasting policy, allowing it to operate in a more effective and efficient manner.

To that end, BCE submits three recommendations for the committee's consideration: reduce the number of commissioners and eliminate the designation of regional commissioners, while continuing to reflect regional sensitivities; clarify the CRTC's mandate with respect to competition issues, either by cabinet direction or legislative amendment; and finally, harmonize the powers and procedures available to the commission for broadcasting and telecommunications matters.

Bernard will now conclude with a few words on foreign ownership.

[Translation]

Mr. Bernard Courtois: BCE recognizes the global trend towards relaxation of trade and investment barriers, including relaxation of foreign ownership restrictions.

BCE supports this trend in the context of international negotiations and upon ensuring that Canada secures material benefits in return. However, BCE believes that the need is still there for Canadians to control broadcasting enterprises, both programming and distribution. It has been a fundamental and long-standing policy in this country that the Canadian broadcasting system be effectively owned and controlled by Canadians.

Under this regime, the Canadian broadcasting system has been highly successful in giving Canadian access to a wide array of choice, while ensuring a place for Canadian voices and favouring the development and success of Canadian creators and their products.

[English]

BCE also believes that cable television undertakings, like satellite television undertakings, are properly characterized as “broadcasting undertakings” under the Broadcasting Act, rather than as “carrier undertakings”. There's a fundamental distinction between the two activities.

In the Telecommunications Act, a Canadian carrier is defined as “a telecommunications common carrier”. This is an old notion that has been governing the telecommunications business for a long time. By definition, a common carrier does not choose the content it carries. That choice is made by the customer, and the common carrier must carry whatever the customer chooses to be transmitted, without discrimination.

A broadcasting distribution undertaking, like a satellite television undertaking, or a cable TV undertaking, does quite the opposite. It is not a common carrier. For example, it chooses, albeit with some restrictions, to carry certain television and radio channels and not others. It chooses where certain channels are placed in the lineup. And it chooses, albeit with some restrictions, how channels are packaged with other channels for subscribers to obtain access to them. These decisions have a significant impact on what Canadians see and hear.

¿ (0935)

[Translation]

Thank you, Mr. Chairman, for giving us the opportunity to state our views. We will be pleased to answer any questions you might have.

The Chairman: Thank you very much, Mr. Courtois, Mr. Gourd and Ms. Scott, for having given us a very clear presentation, supported by slides and photos that give very clear examples of what you want to tell us here.

[English]

We are most grateful for your presentation in both languages that described your point of view and recommendations regarding the CRTC, foreign ownership, and other issues in an extremely frank and clear way. We appreciate this.

Mr. Abbott.

Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance): Thank you.

I also would like to thank you for coming. This gives us an opportunity to canvass the people at the top on a number of important issues so that we know who we're speaking to.

There are so many questions in my mind relative to convergence and satellites and everything else. I'm just going to deal with a couple, and I'm sure the other questioners will deal with a few as well.

I note that your vice-president and senior legal counsel for Bell ExpressVu, Ian Gavaghan, is quoted on page 6 of the National Post today. He's talking about the satellite dealers. I'm not a lawyer, by the way, but I've learned a little bit. Recognizing that there is an injunction relative to the enforcement that deals specifically with the charter challenge, I think we will probably be free to discuss the judgment itself.

I've received legal advice, and I'm going to read what in my opinion is the most germane part of the judgment. This is from Justice Frank Iacobucci:

Parliament intended to create an absolute bar on Canadian residents' decoding encrypted programming signals. The only exception to this prohibition occurs where authorization is acquired from a distributor holding the necessary legal rights in Canada to transmit the signal and provide the required authorization.

We understand there was much more in the judge's comments, but this is by far the most germane part of it.

The interpretation I've received from legal counsel is that it basically says it was Parliament's intent to create an absolute bar on Canadian residents decoding encrypted signals, the exception being if they were receiving the signals from a licensed provider such as yourself. Therefore, going after the purveyors, the vendors, of the decoding equipment is just not on.

In other words, the judge's judgment is very, very specific—to create an absolute bar on Canadian residents decoding encrypted programming signals.

Along with how many angels can dance on the head of a pin, we can argue the fact that people would not have this equipment if someone wasn't providing it, but that's really irrelevant to the legal argument, isn't it?

So from Bell's perspective, would you agree with the legal opinion I've received that the only people in Canada this can be enforced against are the Canadian residents who are decoding the encrypted programming signals?

Mr. Bernard Courtois: No, that would not be our position. Sheridan will explain how we view the situation.

Ms. Sheridan Scott: My understanding, Mr. Abbott, is that there are several heads under the Radiocommunication Act that would be appropriate here and that it would be possible to enforce against a number of parties. One of the parties against which one could enforce would be the dealers. In addition, one could enforce against the actual owners of the equipment, but I don't believe that's the intention.

¿ (0940)

Mr. Jim Abbott: If I may ask the question, do I have lack of information? Did the judge also say that the bar would be against the dealers?

Ms. Sheridan Scott: What the judge is explaining, I believe, is whether one should take one approach or another to the interpretation of the legislation. I believe two interpretations were put before the judge--whether one would see it as an absolute bar with permission granted, or a certain subset of people to be able to offer the service or not. That's the interpretation that the judge accepted, that it would be an absolute bar.

So the fact that people could receive services from a distributor who had been authorized in the United States to distribute in the United States was not sufficient for that person to be able to offer service to Canadians in Canada.

By adopting this approach, where the judge said it is an absolute bar, and you can only receive if you fall into this exempted category... that is, those who hold the rights, both the copyright rights to distribute in the country as well as the licensing rights that DTH holds. Now, once one has gone down that path to create the framework, you go back into the Radiocommunication Act and look at who would be acting in contravention of the legislation.

In that area, I believe, there are three or four groups who could be characterized as acting in contravention of the legislation, including those who decrypt the signal themselves in their home, but also those who provide the means to enable someone to decrypt the signal in their home. And that would be the dealers.

Mr. Bernard Courtois: I believe Mr. Justice Iacobucci was pronouncing himself in the manner that you wrote, because the question before him was whether the legislation was clear or not. He was not addressing the question of whether it was the users or the people who sold these decoders to people; he was addressing whether or not the law is clear that there's a prohibition. That's why he was expressing himself in that manner.

Mr. Jim Abbott: At the risk of being argumentative, I would suspect that if the judge had the interpretation that you're giving us, he might have instead written, I conclude only that Parliament intended to create an absolute bar on Canadian residents and those selling them the encrypted decoding equipment and programming signals.

He didn't say that. He just said, “on Canadian residents,” and that's where we, respectfully, have a pretty significant difference of opinion.

Mr. Bernard Courtois: Obviously the courts will decide that, and so on. We don't want to argue the point. We simply want to say that we're comfortable that the law explicitly covers the possibility of going after the people who create the infraction by selling the decoders. They're the ones who are putting the customers in this difficult position. The law is clear that they are committing an infraction. There were arguments put to the judge and put to the court that it was legitimate to decode them, and he was saying, no, that's not what the law says, the law doesn't say it's legitimate to decode.

Mr. Jim Abbott: On convergence, considering that AOL Time Warner has just lost $54 billion plus, or something in that vicinity, and recognizing that BCE has had its own challenges--although, you might argue, not necessarily related to convergence--wouldn't you say that the jury is still out on whether convergence is really going to work? I mean, $54 billion is not chicken feed.

Mr. Bernard Courtois: Yes. Actually, there is a lot of confusion around the word “convergence”. It captures a lot of different but very fundamental phenomena. It covers convergence because everything is being digitized; it covers convergence because everything can be carried on the Internet and then come out on different networks and equipment; and it covers convergence of players that used to be in separate industries.

In the case of AOL Time Warner, they're writing off the goodwill of the acquisition made when AOL acquired Time Warner. It's a goodwill write-off; it's not a write-off or an operating loss.

In our case, we think our strategy to bring assets together to participate in the growth portions of our business is actually demonstrating very tangible results. Convergence the way this committee would be interested in it, which is within the content portion of the business, is the newer form of convergence, and it will take a few years before substantial new revenues are generated from it.

We've already generated very substantial revenues and good financial results from having moved earlier than our peers around the world into the area of combining mobile and wire-line, of going into the Internet, of going into high-speed Internet, of going into Internet portals.

If you look at our results compared with where we would be if we had not made this change, you will find--you'll see a slide here--that in the U.S. the closest thing to Bell Canada is the local telephone companies. They have stayed telephone companies. They have not gone into the newer areas we tried to combine and get into for growth. The business they've stayed in used to be all we had, which was wire-line voice telephony. That business is now in a permanent state of decline.

That is, long distance has been declining in revenues in the marketplace by about 7% a year for many years. Local voice is now entering a phase of decline. In 2001, for the first time since the 1930s, Bell had a reduction in phone lines. In the first quarter, in the results we disclosed two weeks ago, we again had a reduction in phone lines. That's going to be a permanent state of affairs.

If we had not invested strongly in the new areas of growth, we would now be facing decline, and, in order to dig ourselves out of it, trying to invest very strongly in the new areas. You have to start years ahead of time before they have an impact on your results. Because we started in 1996 with ExpressVu, in 1998 and 1999 with Bell Nexia and Sympatico and Sympatico High Speed and so on, we now have $1 billion of annual revenues from broadband-to-business. We now have about $500 million in annual revenues from satellite TV and from high speed and the Internet. We have a couple of billion dollars in revenues from mobile. These wouldn't be having an impact on our results.

What we have and will distribute to you afterwards is a slide that shows a little yellow dot, with BCE on revenues...and on EBITDA being the only one that's positive, compared with the closest thing to us, which is the big U.S. phone companies--SBC, Verizon, and Bell South. They are in a state of decline and we're generating growth, only because we started years ago.

The kind of convergent revenues we'll generate by adding Bell Globe Media, the Globe and Mail, CTV, and Sympatico-Lycos to the telecom assets will show hundreds of millions in revenues a few years down the road. But we had to start.

Our strategy is not only proving to be successful for us--there would have been no choice but to pursue it to find growth--but I think it's also a good sign for our whole industry. As you know, the whole industry is under a cloud now in the financial markets. At least we're showing that there's real life there in the new areas.

¿ (0945)

The Chair: Can I get back to you, Mr. Abbott?

Madame Gagnon.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): Thank you for your presentation.

I would like to talk about the anxiety of the population and of the actors, craftsmen and journalists who work and live in the media information sector. I would also like to raise the issue of standards to be applied in professional ethics. Several journalists and other persons told us about their concern regarding convergence, competition and marketing of products in the broadcasting sector. There are various interests. Companies are being merged that have diverse interests with regard to their objectives in terms of marketing and, as a result, profitability.

To ensure that there be some kind of ethical standards with regard to the contents that are broadcast or performed, what kind of benchmarks could we adopt for all these different companies? Someone suggested that ombudsmen could play a role. Let us take the following example: the directors of BCE decide that certain subjects should be raised because it is profitable for the company to talk about them in order to increase the sales of certain products. On the other hand, a journalist rightly wants to criticize the same product because it is contrary to public interest. With a company like Bell Globemedia, how can we ensure, in these circumstances, that the public gets accurate information?

I think that we will have to face this problem. We have heard about certain events that lead us to believe that... You say that things are going well with Globe and Mail and that Mr. Thomson has kept his independence. As for the Asper family, it is a different story. In any case, the issue is not limited to the mere fact that one family is more or less open and the other one is more or less closed. I think that we will have to adopt a framework that will allow us to take measures if the public or journalists feel that they are being wronged by a company like yours, even if it is an essential one and even if some of its actions are meant to meet competition.

¿ (0950)

Mr. Alain Gourd: Various models could have been studied and could still be studied, such as the ombudsman model. The issue was raised very vigorously by various parties, including the unions, before the CRTC, when licences were being renewed for Quebecor, CTV-Bell Globemedia and Global. The CRTC decided to adopt the model that already existed when TQS was first acquired by Mr. Péladeau Senior. At that time, an advisory committee was set up and news gathering has been divided between the printed media and television.

During the three said licence renewals, the CRTC, in its decisions to renew the licences, proposed a different model. It proposed to the various companies that they should have their own committee for monitoring the independence of television newsrooms as compared to the printed media, or to develop an industrial model with the Canadian Broadcast Standards Council.

With regard to CTV, we decided to quickly and vigorously implement the structure proposed by the CRTC which is first and foremost a statement of principles and practices and includes the monitoring committee in its structure. The later, in our case, is chaired by Ms. Gail Scott, former advisor with the CRTC and a very well-known journalist, Mr. Daniel Lamarre, former President of TVA, and from the Canadian West, Mr. Jon Festinger, a well-known lawyer in the broadcasting and communications field. These three persons would never jeopardize their credibility by omitting to vigorously monitor the independence of television newsrooms.

For us, this does not only involve structure and the CRTC, this is really our philosophy. We think that it is crucial for the CJOH station here and the CFCF station in Montreal to be able to reflect the views of their viewers, even if they do not deal with the same news in the same way, as one station speaks from the Montreal point of view and the other from the Ottawa point of view. The same applies to the Globe and Mail. We think that its credibility with viewers is something absolutely essential to the success of these businesses. In fact, if listeners begin to doubt that they are being manipulated, they will switch to other media and the ratings will go down. In fact, as I said earlier, for instance, the Globe and Mail has no qualms about criticizing us, and this is good. When we announced the creation of a monitoring committee for newsrooms, the event was covered by the Toronto Star but not by the Globe and Mail, and that was good. They receive the news and they decide what to do with it.

I beg your indulgence for the long preamble, but my conclusion is that the new model was implemented less than a year ago and it should be allowed to run for a few years to see what it can do, and whether it works or not. Later, after a few years, we will know whether there is any need to consider other models when we will all come back before the CRTC to report on its activities.

Ms. Christiane Gagnon: Thank you. Moving on to a different topic, we know that public television complements private television. I would like a little bit of information on the Canadian Television Fund and the fact that CBC competes with you, even though it already receives public funding. This situation seems a bit unfair to me. In a case like this, for some TV series, for example, public TV has a clear-cut advantage over private industry.

I would like to know what you think about this complementarity and I would also like to know how CBC competes with you, not only with respect to funds, but also with respect to the other aspects of the issue, including complementarity. Since we are also looking at CBC's mandate, we must take opinions into account when people tell us that some types of programs should be reviewed and that television programming no longer reflects the mandate of the CBC. We have heard this criticism from the public as well as from other witnesses we met with across Canada. Since you are from the private sector, you must have a better understanding as to how this works.

¿ (0955)

Mr. Alain Gourd: In a previous life, I had an opportunity to be affiliated with CBC for seven years and to represent the francophone affiliates on the National Advisory Committee for Radio-Canada and its affiliates.

In this light, I am personally convinced that Radio-Canada and CBC do complement the private sector. Yes, they are competitors in terms of viewing audiences, for example, as are TV-Ontario and Télé-Québec.

Having said that, they have a clearly defined mandate. Furthermore, some adjustments were recently made to the Canadian Television Fund, and we should, in my opinion, give them some time to take action and see what kind of results will be achieved in that regard. As far as we are concerned, we are serene about the situation.

I would also like to point out that in a country like Canada, be it in the anglophone or francophone market, we are in competition in an area one day and we established partnerships in another area the next. We are delighted to be involved in several partnerships, namely with CBC, with whom we established a partnership for the Olympics, with Radio-Canada, for the Fomula 1, as well as with COGECO and TQS. We have a partnership with the three francophone stations affiliated with CBC in Trois-Rivières, Sherbrooke and Chicoutimi.

To my mind, it is the Canadian and Quebec way of doing things; instead of being black and white, with one side being good and the other bad, we need to qualify the situation a bit more. It can be said that CBC does, on occasion, go a bit too far when buying rights, for example, but in other areas, there is room for partnerships. Without generalizing, we can criticize an aspect here, but recognize the value of something else in another area, and even associate ourselves with it.

[English]

The Chair: Mr. Mills.

Mr. Dennis Mills (Toronto—Danforth, Lib.): Colleagues and witnesses, I'm mesmerized by the reach and the impact your organization has in the whole psyche of the country. I can remember many years ago, when I first came to Parliament Hill, I read a book called Wire Wars, on the capacity the Bell organization had to influence public policy. I see today a capacity that is extraordinary. A positive example is what your team did on the Juno Awards; it was a masterpiece the way it unfolded. It was a great production.

My concern emanates from an experience I had about three years ago with one of your units called CTV Sportsnet. I went in and met with your senior person there. I had just finished chairing a committee of parliamentarians on the whole issue of the importance of amateur sport in Canada. They had a contract with the Canadian Hockey League, which is kind of like the major junior league across Canada, and they had contracted to do about 50 games for the season of the 400-plus games that represent the whole league.

Another station--not one of yours--called Headline Sports wanted to show some more of these amateur games, not competing with CTV Sportsnet. There was not going to be any monetary loss to Sportsnet, and it was going to show more amateur sport on another channel. I found it very difficult to move the organization to understand there was a public policy responsibility, where it wasn't affecting your earnings per share per quarter. I found them very tough to move. In fact, I appealed to this team to go to the board. I lost, and that's fine.

My question is, when we have public policy objectives that as parliamentarians we have to meet and try to communicate on behalf of our constituents, who in the organization do we go to? Is there a system in your organization that we go to in order to see if we can cause a shift in attitude or sensitivity?

À (1000)

Mr. Bernard Courtois: I have to agree that it's sometimes difficult for people who want to deal with us in various ways to find exactly where to go and how to address these problems. It's a challenge we've had for many years, even when we were not in as many sectors as we're in now.

We have a group here in Ottawa that interfaces with MPs and can help you navigate the situation. We're quite sensitive to the public interest, but our business units are all driven to deliver their monthly results very tightly, and sometimes we need to help navigate the issue through the organization.

Mr. Dennis Mills: Thank you.

That's all I have, Mr. Chairman.

The Chair: Ms. Bulte.

Ms. Sarmite Bulte (Parkdale--High Park, Lib.): Thank you very much.

I apologize for coming late and not hearing your presentation, but I've taken the opportunity to go through it quickly. I have a couple of areas I want to speak to you about. One is the television fund.

I'm a big supporter of the television fund, CTF. I think it's very important. However, I know it's been oversubscribed substantially. From the information I have, which I will admit is hearsay, in fact stations like yours that give licence fees for productions, especially under the Telefilm, under the equity side, because you have the audience share, tend to get programs produced. Yet programs that are done through the specialty channels--and I see you've talked about the importance of specialty channels--don't seem to get produced.

You talk about how you'd contribute more through getting rid of the excess licence fees you pay in pharmaceutical advertising. How can we guarantee that in fact that money does get there, into programming? I'm not just talking about you, but broadcasters in general.

There's the whole question of programming with the CRTC rules and changing the priority programming away from drama to other things. How do we...? You talk a lot about drama. You're very proud of your drama shows. My constituent happens to be number one, Tapestry Films, with Tagged: The Jonathan Wamback Story, so I know it quite well.

My concern is that if we do the excess licence fees, how do we ensure the moneys are funnelled not just to broadcasters like yourselves, who have so-called audience share under the equity side of Telefilm? How do we ensure it's not oversubscribed? I know you say the rules keep changing. What does that mean?

With respect to the pharmaceutical advertising, please correct me if I'm wrong, but I understand it's not just a broadcasting problem, but an ongoing battle with Health Canada. Maybe you could tell us what the status of that is.

Last but not least, I wanted to talk about your comments regarding the CRTC and harmonizing the powers and procedures available to the commission for broadcasting and telecommunications. Could you expand on that?

Then I'm going to ask you a question. Is this something our government should look at perhaps, harmonizing the broadcasting and telecommunications under one ministry, as opposed to...? When I walked in, Mr. Abbott was asking questions about the Telecommunications Act, which is subject to Industry. We're looking at the Broadcasting Act, but when we look at copyright, that seems to be a joint area. I understand that part of the problem of not having been able to come up with the regulations on the copyright is that Industry is looking at it and Heritage is looking at it. I wonder if you could comment on that.

Last but not least, you mention clarifying the CRTC's mandate with respect to competition issues, either by cabinet direction or by legislative amendment. Could you please expand on that as well?

Mr. Bernard Courtois: I'll start maybe with the issue of structure in government, one ministry or two. We're a little betwixt and between in that, in the sense that there was a time when there was a communications ministry that encompassed both broadcasting and telecom, but it turned out that telecom is a very significant industry with lots of employment, lots of revenue, lots of complex but maybe more arcane issues. I know the industry as a whole felt it was difficult to get visibility in a department that also had a number of issues that relate more directly to Canadians--broadcasting, cultural issues, and so on.

I would just say that, at the moment, we find that the two departments work very well together. We're actually quite happy with that, and it's making life easier for everyone in the industry. We fear approaches that would change institutions entirely. At the moment, things are working well and we don't view a need for change there.

You covered a number of other areas. I'll ask Alain to talk about the television fund, and I'll come back to Sheridan for the CRTC issues. Maybe she can put in a bit of a plug for the Bell Fund.

À (1005)

Ms. Sarmite Bulte: Perhaps I would ask Mr. Gourd, as a former deputy minister, to comment on the broadcasting and communications side.

Mr. Alain Gourd: Personally, I believe the results are what is important. It's dangerous to have nostalgia and say, well, I was deputy minister of communication, therefore we should recreate the past.

What is critical is that the communications industries are managed in a cooperative fashion. Whether it's by putting in the same structure all these industries, or by ensuring that two departments managing two sides of the communications industries work together, it is a matter of a practical position. Bernard has indicated that for the time being we have so many challenges, so much on our plate, that it might be quite disruptive to try to do structural changes as opposed to ensuring coordination.

In terms of the Canadian Television Fund, in a way, in a paradoxical way, the problems are rooted in success. There are so many creators, so many producers, so many scripts being developed that there is oversubscription. Therefore, I feel, personally, that in terms of new approaches, we probably should do what BCE did, and CTV, relative to the acquisition of CTV net benefit commitment. If we had taken the net benefit commitment of $230 million and required that it be matched by the Canadian Television Fund, it would have siphoned the fund and disrupted it considerably.

So a one-window approach was taken where a producer could go to CTV and use the net benefit, having the option of going to the fund but without obligation.

If I make that relationship with excess broadcast fees and pharmaceuticals, I feel that if and when these revenues are reoriented, they should be reoriented in drama. That's our position at CTV. We believe it should go through independent producers as opposed to building massive in-house production capability. We feel as well that there should be no obligation to the producer to get money from the CTF, but it should be optional, depending on the availability of funds in the CTF and depending as well on the financial packaging of that given producer. We feel relative to pharmaceutical advertising it should be reoriented towards drama, should go to an individual producer, and CTF should be an option.

Of course, the proposal relative to pharmaceutical advertising is rooted in the management of health in this country. But we have to underscore again that when we turn on our TV set.... Even in Amos, Abitibi, where I was born, we see a lot of pharmaceutical advertising coming from the U.S. programming services. It's there in the country. So the question is, do we wish Canadians to have Canadian information on these products, or do we want to rely on information coming from south of the border?

Of course, one way to approach it would be to have a consultation process as opposed to moving directly to a change, and then, at the end of the consultation process, doing it the way they are doing in Europe--and it is a pilot project--which is to really test the hypothesis and see what's the real impact on price. Is it true that it would increase prices? Is it true that it would create disruption, because a patient would go to a doctor and decide on this drug as opposed to that one?

We don't believe it's the case, but let's consult and test and have a pilot project that will take the time it takes, as they do in Europe. We would then be able to assess the situation.

Just going rapidly through my notes, I believe that covers it.

À (1010)

Mr. Bernard Courtois: Sheridan will handle the CRTC issues.

Ms. Sheridan Scott: Thanks very much, Bernard.

With respect to our proposal that the rules be harmonized for the CRTC so they will be similar for telecommunications and broadcasting, that suggestion is based on the observation that right now the procedural framework for the CRTC is different on the two sides. It is set out in two different pieces of legislation that don't always correspond.

On the broadcasting side, the CRTC has relatively blunt instruments to deal with licensees. It has the power to license, and the licences are issued for up to seven years. It can attach conditions, but it can't change those conditions for five years. It can issue a short-term renewal, which is a little bit of flexibility, but it's still a short-term renewal. That's all it can do to deal with that specific problem if something is before it. It has the power to pass regulations, but again, it's a very lengthy process to pass regulations to manage aspects of the broadcasting industry. Finally, it has the power to hold a hearing and then issue a mandatory order.

That too can be a relatively lengthy process. Recently, there have been complaints about Quebecor refusing to grant access to the inside wire in apartment buildings. Competitive suppliers of programming want to be able to access the inside wire, and Quebecor has hived off their inside wire, put it in a separate subsidiary, and is claiming that they are not subject to CRTC jurisdiction. The commission was relatively quick at moving on that, but still it requires the hearing process with the notice requirements and then a while to draft the decision.

On the telecommunications side of the jurisdiction, the CRTC has much more flexibility. It has the power to issue orders that will further the policy in section 7 of the Telecommunications Act. It still obviously observes the rules of natural justice, but it can act with a bit more finesse when it tries to deal with a specific problem. That would be one area where we think the commission might have a bit more flexibility if it had some of these order-making tools.

In addition, the powers the commission has with respect to subpoenaing witnesses, production of documents, confidentiality, and whatnot are set out in the legislation in the context of holding a public hearing. Now, they have powers they exercise under their rules, but in the Telecommunications Act it's very clear as to the breadth of powers the commission has in order to do things like calling witnesses, making the confidentiality rulings, and whatnot.

We have simply suggested that you take the powers that seem to be sprinkled throughout and put them together so it is quite clear that the commission's powers are the same under the Telecommunications Act and the Broadcasting Act. I suspect that in terms of calling witnesses and confidentiality rulings, that was indeed Parliament's intention.

So that's the nature of our suggestions for the CRTC to harmonize the two sides of its jurisdiction.

With respect to the relationship between the CRTC and the Competition Tribunal, our observations there are simply that there seems to be some overlap in the work they carry out. They have slightly different mandates. The CRTC has a specialized mandate, obviously, on the telecommunications and broadcasting side. The commissioner of competition is looking at larger issues of competition.

It's our view that where there is clear jurisdiction for the CRTC to rule on a matter--for example, with the issuing of new licences where there has been an acquisition--those powers should belong to the CRTC. They should be able to issue the licence with a view to furthering the objectives of the Broadcasting Act. It's their decision whether to do that or not.

Under the current legislative regime those acquisitions and mergers are also subject to the Competition Tribunal's jurisdiction, and right now there is a matter before the courts where this issue is being argued. Should there be dual jurisdiction, for example, in the case of Astral, which applied to the CRTC for a licence to operate 17 radio stations in Quebec? The CRTC has said yes, and the competition commissioner has suggested that this be referred to the tribunal. Clearly, this is a case of double jeopardy for Astral, who may have received a licence from the CRTC but will now have to appear on issues related to the Competition Act.

Our suggestion is that you recognize the specialized jurisdiction of the CRTC in broadcasting in that case and say, that is your total jurisdiction. The commissioner does have specific statutory powers to appear before the CRTC and make submissions. We would suggest that it's appropriate for the competition commissioner to come forward to explain his case if he believes there would be a lessening of competition. The CRTC can hear those arguments and take them into account when it makes its ruling, which will reflect whether the action in question furthers the Broadcasting Act.

À (1015)

Maybe I will take just a minute to put in a plug for the Bell Fund. As you were talking about conventional stations accessing funds, it occurred to me that it's interesting if you think about who comes forward seeking funds from the Bell Fund. The Bell Fund was created in 1997 to provide funds for people who want to do both traditional and new media content. It has to have both aspects. It's a way of encouraging that sort of synergy conversion between the two types of programming.

Specialty services, which tend to have niche orientations, such as children's programming, sports, and documentaries, are very well suited to creating related web content. We find a disproportionate number of specialty services coming forward and seeking funds. It's another place for them to go if they want to receive funding for their projects in addition to the CTF.

Thank you.

The Chair: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you.

In point four of your executive summary you say: “The growing convergence of formerly separate media does not mean, in BCE's vision, speaking with one voice, but rather ensuring that widespread Canadian voices are increasingly amplified by new technological opportunities....”

I would like you to provide this committee with proof of that statement. Quite frankly, in our travels across the country we have heard many people in many communities say that they have seen their broadcasters being taken away. CTV is cutting down, and the various news outlets are reducing their staff. We hear your side and their side. I think it would be great if we could actually see some facts from you about the increase in Canadian voices you have spawned with your consolidation. Perhaps you could provide that information. I'm sure you don't have it with you right now.

You mentioned eliminating the designation of regional commissioners at the CRTC. Across the country we hear concerns that the CRTC is centralized and industry based, that we're not getting an equitable statement of reality across the country. I just can't for the life of me understand what that would be about.

Finally, we went to see Astral Media the other day. There were some interesting comments from André Bureau about cross-ownership. I'd like to hear your comments on this statement: “We only urge policy makers to recognize that a change”--in ownership--“made to one policy lever”--regarding BDUs--“will inevitably have consequences for other policy goals. Therefore, my company supports a mechanism that prevents a non-Canadian who acquires control of a BDU from acquiring or retaining any interest in a Canadian programming service. You can call this a cross-ownership ban.”

So that's Astral's position on that, and I'd like your comments.

Mr. Bernard Courtois: I'll start with the last one. As I explained in our presentation, we operate broadcast distribution undertakings competing with cable and the wire-line service. As I pointed out, we realize we make choices that are not like those of a common carrier. We make choices that actually have a big influence on what Canadians get to see and hear.

We recognize that if those choices were made in New York or Los Angeles, it's far more likely those people would deal with people they're used to dealing with and whom they have gotten to know socially. They owe them a favour or want a favour from them or they've done business with them. It's quite possible that the Canadian coming out of St. John's, Toronto, or Vancouver wouldn't even get in the door to present a proposal for a specialty channel.

That's why I think Mr. Bureau is saying if you ever free up cable television, then you want to make sure these people have no direct or indirect connection--in other words, not even convergence in the living room, as it's sometimes called, where someone owns an interest in a broadcast distribution undertaking and separately owns an interest in content--because they're bound not to deal with them.

There's a lot...and we sense it. I mean, programmers come to us and say, we're worried about how ExpressVu is dealing with us. And we come with a background that says, well, let's sit down. We have an open mind about that.

We realize there are concerns. People are saying you just cannot regulate that behaviour. If you want Canadians to control that part of the business, you can't really give that control to foreigners.

À (1020)

Ms. Wendy Lill: You support this concept of a cross-ownership ban between distribution and content--

Mr. Bernard Courtois: No, we don't. What we do support is the fact that people realize there is an issue of control there for Canadian interests.

Canada actually has a number of enterprises that are trying to do for Canadians what people are trying to do around the world, and move into the new world of developing new services and new capabilities. As Alain explained, it could very well be that the future of the whole system depends on stronger, more commercially sustainable programming. And for that programming to be more sustainable, in a world where audiences are getting fragmented; where more and more people are getting down to the U.S. to buy rights; where it takes more effort, more resources, more skills, and more money to succeed in this new environment and to bring it all together, you would be taking Canada away from the future if you in put that kind of cross-ownership ban.

We believe you're much better served by a competitive environment where you actually have two, three, or four Canadian enterprises going head-to-head in that kind of market.

I'll move on a little bit with the question Alain may be dealing with, of how an enterprise like Bell Globemedia is dealing with certain unavoidable economic realities in dealing with its situation, but how at the same time we maybe have a philosophy that, in terms of diversity and editorial independence, is an indication of how the system should be run.

Mr. Alain Gourd: In terms of the diversity of Canadian voices, just quickly,I can see three dimensions. Number one is the fact that we have tried to underscore the reality that there is more diversity of voices in the total Canadian broadcasting system today as compared with 1982. As you suggested, we would be very pleased to table supporting documentation, as Sheridan did, that will compare what has happened over 20 years in as many markets as possible, in addition to the three markets we have referred to today.

Then you have the issue of the internal diversity of voices when broadcast undertakings are acquired and put under the same corporate umbrella. We have mentioned that our philosophy, not only because it was the right thing to do from a public policy perspective but also because it was the right thing to do from an audience perspective, was to give our broadcasting undertakings full autonomy to cover the various situations the way they see fit. And there might be differences between the coverage by one entity as compared with another's.

For example, in the case of the Junos, the day after the Junos took place, our TV newsroom was mentioning the Juno broadcast on CTV, while the Globe and Mail mentioned the Junos but didn't mention that it was broadcast on CTV. It simply referred to the Junos generally, and that's appropriate.

So there again we will undertake to provide additional information relative to examples.

There is a third component, and maybe your question was focused more on that third one. Does the acquisition of various broadcasting undertakings and a regrouping, the fact that they are put together, bring an increase in Canadian voices, or is it neutral, or is it negative?

Again, I could refer very quickly to situations where a bigger group was able to launch new voices. And one that comes to my mind from a few years ago is the launch of CTV Newsnet, which was a news service providing a different perspective, as compared to Newsworld, which was more of a general approach to news. Newsnet was more headline news.

We have Le Canal Nouvelles, en français, lancé by Quebecor , and that also required resources to sustain it.

I have in mind also the new Internet sites that are developed where there is a strong news component, whether a national news component or a new local site that provides a local news component.

And again, in order to be more systematic, if you agree, I will readily accept your invitation and table more systematic documentation with the clerk of the committee relative to these new voices that have been added by our group over the last few years.

À (1025)

Ms. Wendy Lill: Maybe you can talk about the voices that have been eliminated in places like northern Ontario, I guess because it's not a prosperous market. I'm not sure what your policy is around remote areas in this country, because it doesn't appear they are on the radar screen for you.

Mr. Alain Gourd: Indeed, we would be very pleased to do so, even though these are challenging situations.

There is pressure from the erosion of viewing on conventional stations, and there is a greater impact of direct-to-home in these areas, as opposed to downtown Ottawa or Toronto. These pressures are reducing the financial ability to sustain the provision of local voices. What we have tried to do there--I'll be very brief and expand, as you invited us, in writing--is to keep the provision of local voices, whether in Atlantic Canada or northeastern Ontario, by using digital technology to maximize the allocation of the resources toward coverage, toward the gathering of news, as opposed to having full-fledged production facilities in each of the localities .

So what we are trying to do is to develop a model where in a given community, like Atlantic Canada, we put the production facilities in one central location; however, we keep journalists in the various localities to cover the news. In northeastern Ontario, we still have 43 people in the news department, including 26 reporters. And we're the only ones there. There's nobody else in TV. We maintain across the board, whether in Atlantic Canada or northeastern Ontario, a commitment to provide 15. 5 hours of regional and local programming. And for each community, there is a local segment that will be dedicated to that community only and will not be reproduced elsewhere.

I agree readily, Ms. Lill, these are challenges. They're difficult markets to cover. But our commitment is to do everything we can using modern technology, using different ways to manage and sustain the provision of local voices in the community, despite the financial pressure.

The Chair: Our second set of witnesses have arrived, so I think in fairness to them--we scheduled them for 10:30--I think we should move on.

I just want to ask you two very quick questions before we close.

You referred to the reduction of the size of the CRTC, the commissioners. As I understand it now, there are up to 13 full-time and six part-time. Do you have any specific ideas?

Mr. Bernard Courtois: Yes, and Sheridan will speak to that.

Ms. Sheridan Scott: Maybe I can take the opportunity to respond to the question on the regional designation of commissioners, because that's part and parcel, I think, of our recommendation.

Our suggestion is that there be a reduction in the number of commissioners. There are 13 and six. We would suggest there no longer be the six part-time members. There aren't any now. That power to appoint part-time members is not used. We believe it is a good idea to have people devoted full time to addressing the issues before them at the CRTC.

Our suggestion is that 13 is a difficult number to have efficient and effective decision-making and to keep a national focus on the issues. We proposed it be more in the range of five to seven commissioners. We believe that would be sufficient to reflect the regional perspectives of this country.

To return to Ms. Lill's question, we think it is extremely important that you draw commissioners from across the entire country, but by designating them as regional, the message seems to be sent out that they are for that region and have less credibility to pronounce upon issues that might deal with other regions. Our view is that the commission benefits in its decision-making by hearing the perspective of all the regions coming together to create the national broadcasting policy--so a smaller commission, a more focused commission, but a commission that will continue to draw its members from across the country to develop national policies.

À (1030)

The Chair: We've had our witnesses before us in the regions, including last week, when we were in the Atlantic region. In regard to access to the funds available--the CTF and other funds--they said the big players have almost primary access because of their power to access. They gave an example, for instance, of one big player using a satellite in the region to access funds, to the exclusion of the little guys in the same place. We've heard this from the little players. What is your view of this?

Mr. Alain Gourd: In principle, our view is that it is essential that creative contributions come from outside of Toronto, and outside of Montreal in the case of the francophone market. We have tried to put that into practice, and if you take a look at the productions that we put on the screen a bit earlier, quite a number of them are produced through the development offices that we have opened in the various regions.

Applying that philosophy to the fund, we feel that it is very important that the CTF, and also Telefilm, be extremely sensitive to having a significant number of productions coming from the regions.

Should we have quotas, 20% from B.C. or 25% from the Prairies? We don't feel that it's practical, because from year to year it might vary. But certainly our various private sector representatives on the board of the CTF should make sure that nobody plays games, that nobody tries to do through the back door what is not desirable through the front door.

So we agree with the approach, without suggesting any rigid additions to the modus operandi of the CTF.

The Chair: Unfortunately, our time has come to a close. We'd like to thank you very much for appearing.

Mr. Courtois and Mr. Gourd and Mr. Scott, if by any chance you have any additional information as requested by some members, and beyond that as well, that you would like to file with the clerk on specific issues or whatever issues have been brought up today, we would appreciate that very much. It would certainly help us quite a bit.

Mr. Bernard Courtois: We will do so, Mr. Chair, and thank you very much to you and members of the committee for the opportunity to appear before you.

The Chair: Thank you for appearing.

À (1033)

À (1037)

The Chair: We're pleased to welcome a very important witness before us from the Competition Bureau, in the person of Mr. Konrad von Finckenstein, the Commissioner of Competition; Monsieur Gaston Jorré, Senior Deputy Commissioner of Competition, Mergers Branch; and Mr. Gwillym Allen, a senior economist and policy adviser at the Competition Bureau.

Mr. von Finckenstein, the floor is yours.

Mr. Konrad von Finckenstein (Commissioner of Competition, Competition Bureau): Thank you, Mr. Chairman.

Thank you for allowing me to appear before you. We welcome this opportunity to participate in your consultation on the Canadian broadcasting system.

I understand our written submission has been circulated to your members. I wanted today to briefly outline what we are about in the Competition Bureau and then go right into the recommendations we made in our submission to you.

[Translation]

As commissioner I am responsible for the administration and enforcement of the Competition Act and three statutes dealing with labelling requirements: the Precious Metals Marketing Act, the Textile Labelling Act, and the Consumer Packaging and Labelling Act.

The Competition Act is a federal law of general application to the Canadian economy. The act governs, with some exceptions, all business dealings in Canada, and contains both criminal and non-criminal provisions. It aims to promote competition in the market place by stopping anticompetitive practices.

The ultimate objective is the safeguard and protection of the competition system rather than the protection of individual competitor. The Competition Bureau's mandate is straightforward. We strive to ensure that Canada has a competitive market place and that all Canadians enjoy the benefits of competitive prices, product choice and quality service.

À (1040)

[English]

Overall, you can divide our work into five main areas. First of all is public education: we inform companies what they can and cannot do and we try to ensure that consumers have accurate information, which they need to make informed decisions.

Our second rule is to review mergers before they take place to ensure they do not lead to substantial lessening of competition. Our merger and enforcement guidelines provide a single unifying framework for evaluating the likely impact of mergers on competition in Canada. These guidelines facilitate business's planning ahead, knowing the approach the Competition Bureau will take when reviewing mergers.

[Translation]

Third, we can exercise three options to correct anticompetitive activity that may range from price fixing, bid-rigging, misleading advertising to secure markets, such as moral suasion, warning letters, visits, interviews, etc.; enforcement through injunctions, consent orders, and...[Editor's Note: Inaudible]...voluntary codes; and finally, prosecution for violations of the act.

Fourth, we also play the important role of marketplace referee, by drawing a line between anticompetitive conduct and vigorous competition.

Finally, we use every opportunity to promote and advocate greater competition. We have a statutory right to make independant interventions and representations in respect of competition. It is in this role that I appear before you today.

[English]

In the bureau we have five principles that guide our daily work: fairness, trying to make sure we make the right decision between diverging interests; transparency, so it's clear what we do, how we do it, and why we do it; timeliness, in that we are aware that our decisions can cost business money and we try to do them as quickly as possible; predictability, in that we feel there should be no surprises, and people should know the approach we take; and finally, confidentiality, because in order to do our job we need very confidential information from companies, and they have to be assured we will protect that information.

Now let me turn to our submission.

[Translation]

In announcing the launch of a study on the state of the Canadian broadcasting system, the standing committee is responding to a pressing need to review key aspects of the Broadcasting Act.

To determine whether the act remains an effective instrument in view of the rapidly evolving communications environment, it is our understanding that you are contemplating the present and future direction of the system to determine whether the objectives of the Broadcasting Act remain relevant and appropriate, whether new objectives should be introduced, and how the key public policy goals of the broadcasting system can best be achieved through a legislative and regulatory framework.

The Competition Bureau takes a keen interest in the broadcasting sector. In our view, a competitive broadcasting sector is vital for both economic growth and prosperity in our domestic market as well as for enhancing Canada's competitiveness abroad.

[English]

Our submission addresses the four themes identified in your mandate: conceptual considerations, cultural diversity, broadcasting policy, and foreign ownership. In terms of context, the bureau is interested in examining and reporting to the extent in which competition and market mechanisms have historically been relied upon and going forward may be relied upon to realize the core objectives of the Broadcasting Act. For this purpose we examined and made recommendations regarding the broadcasting policy objectives, the current regulatory model and its environment, and proposals for legislative and regulatory changes.

We believe the current regulatory system has seen many successes, and Canadians currently enjoy a very good and reasonably priced access to a broad choice of Canadian international programming services over a variety of distribution technologies.

However, despite these past successes, the current regulatory model will become increasingly difficult to sustain in the evolving communications environment. The bureau expects that within the next five to ten years the system will experience substantial pressure as a result of the advent of online broadband technology delivering non-Canadian programming into Canada on an unregulated basis; the increasing popularity of new media and technologies and services such as e-mail, consumer-to-consumer file sharing, and personal video-recording devices; and the ongoing fragmentation and possible reduction of broadcasting viewership.

In light of the substantial pressures of this evolving environment, we have made three recommendations. Let me just quickly run through them.

Number one: include as part of Canada's broadcasting and regulatory policy an objective that regulation where required be efficient, effective, and directly solely at the realization of the act's core cultural objectives; an objective of increased reliance on market forces for the provision of broadcasting services and programs to all Canadians; and an objective of enhanced efficiency and competitiveness at the local, national, and international levels of Canadian broadcasting services.

The bureau believes the addition of these objectives to Canada's broadcasting policy and the regulatory policy will help ensure that the broadcasting system can continue to achieve its historic cultural goals--i.e., the maintenance and augmentation of Canadian content.

Second, we feel that the mandate of the CRTC should be clarified to specify that the CRTC has a responsibility to preserve a diversity of voices within the broadcasting system. At the same time, the CRTC review of broadcasting transactions should focus solely on the impact mergers would have on core cultural values and the diversity of voices.

The first clarification deals with the importance of preserving the diversity of voices in the context of an increasingly concentrated media environment. Many observers have openly expressed concern that media concentration adversely affects the marketplace of ideas. The impact of the concentration of the diversity of voices is not within the scope of the Competition Act. Nonetheless, it's a question that's often raised with the bureau by our stakeholders, and it does raise serious issues that should be addressed in an open and democratic society. The CRTC's mandate should clearly state that it has a responsibility to preserve a diversity of voices within Canada's broadcasting system, and its regulation should be consistent with and foster the free exchange of ideas.

Diversity of voices is not an issue of economic competition, and consequently it does not fall within the purview of the bureau's mandate. Canadian culture is squarely based on a democratic government, which in turn needs a diversity of voices to live up to the ideals. We therefore view the maintenance of diversity of voices as a natural adjunct to the CRTC's mandate to maintain and enhance Canadian culture.

The second clarification addresses the mandate of the CRTC with respect to broadcasting transactions. Currently, both the CRTC and the bureau possess the power to review and approve certain broadcasting transactions. We are in favour of a clear division of responsibility and jurisdiction. The Competition Act provides certain criteria for analysis that the bureau applies in all merger reviews, including those that involve media companies. We would continue to review the commercial implications of broadcasting transactions and their competitive effects on market power.

À (1045)

The CRTC should not review broadcasting transactions from the perspective of commercial viability. The CRTC's review should be focused solely on the impact the proposed merger would have on the attainment of the core cultural objective—namely, the production and distribution of Canadian content. According to us, its logical corollary is the maintenance of diversity of voices.

[Translation]

Finally, as an additional measure in support of the enhanced operation of market forces, the Bureau recommends that foreign investment levels for broadcasting distribution undertakings remain consistent with those applicable to telecommunications carriers. In our view, in terms of carriage, there is no distinction between telephone signals and broadcasting signals. Consequently, in this age of convergence, the carriers of either signal should enjoy the same access to capital and be bound by the same ownership rules. This approach will ensure that broadcasting distribution undertakings are not placed at an unfair, competitive disadvantage vis-à-vis telecommunications undertakings which may also participate, directly or indirectly, in content distribution.

[English]

In conclusion, the bureau's submission proposes various measures to reduce the scope of regulation and increase reliance on market forces, while to facilitate at the same time the realization of the core cultural objectives underlying the Broadcasting Act.

We hope these comments, Mr. Chairman, will assist the committee in determining the changes it believes should be made to the Canadian broadcasting system. I would be happy to answer your questions.

À (1050)

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

As was evident in the previous presentation by BCE and many witnesses previously, the whole question of the CRTC and the Competition Bureau, and the relationship between the two, occupies a central place in our study. I'm very grateful to you for having presented to us your view as to where you see the relationship of one to the other in regard to the broadcasting system.

Mr. Abbott.

Mr. Jim Abbott: I as well thank you for your presentation.

Interestingly, you mentioned just in passing, near the conclusion of your comments, the issue of commercial viability. In my home riding in Cranbrook we had a situation where the existing AM radio broadcaster, which is just a run-of-the-mill radio broadcaster, tried a number of years ago to get a western FM, and it has now been successful. These are the only two commercial outlets that would then be augmented by the CBC in the area, to give you an idea of the size of market share. One of the reasons the licence for the western FM was held up was that the CRTC deemed that they didn't have the market, that they couldn't actually sustain it and so on and so forth, which of course was proven to be completely wrong once the broadcaster managed to arm-wrestle the CRTC to the ground.

So I understand what you're saying there, but I'm having an interesting time trying to rationalize the push, which I agree with, where you talk about reducing the scope of regulation. If I go to your recommendation 1, paragraph 30(b), “to foster increased reliance on market forces for the provision of broadcasting services and programs to all Canadians”, I'm having difficulty reconciling that with the overreaching issue of Canadian content. You've alluded to it, but it seems to me that if we are going to be relying on the provision of broadcasting services to all Canadians on the basis of market forces, almost by definition that is contrary to what you're saying. We also think there should be some reliance on Canadian....

Can you help me understand where you're going with that?

Mr. Konrad von Finckenstein: What I am suggesting is that the CRTC and the government should specify what are the cultural objectives that need to be obtained and basically establish a framework. But within that framework let market forces... Don't prejudge. In your example of the broadcaster who will succeed or not, let him risk his dollar. Just set out the rules and let the players in the market play.

I believe you heard from the CBA previously. For instance, they proposed something they called “preponderance of rule” rather than... Whatever the rule, for argument's sake, if 50% of the channels in the cable system have to be Canadian, fine. If that's the rule, and you think it's necessary for fostering Canadian culture, so be it. But then let the public choose which channels they want. Leave it open after you go beyond the basic tier.

Basically, let the individual person, the consumer, decide what he wants to watch. Let the market decide which channels will be offered, etc. The regulator would only ensure whatever percentage has to be offered that needs to be Canadian. You can choose as a consumer either way. Let the market decide which way to go.

We are trying to combine basically the best of both worlds. We fully appreciate that Canadian culture is a core objective, should be protected, and should be enhanced. But do it in a way that minimizes the impact on the market so that you have the creative forces of the market working within the framework of the rules you've set.

Mr. Jim Abbott: To put a fine point on this--this is really key to my understanding--your board would not become involved in any discussion about that policy objective of the establishment of Canadian content rules.

À (1055)

Mr. Konrad von Finckenstein: No. It's nothing to do with us.

Mr. Jim Abbott: Okay.

Let's go to the marketplace in Vancouver, which I'm vaguely familiar with. You have CKNW, which is an all-news AM outlet. My understanding is that the CRTC can establish that within the marketplace they will have an exclusive right to an all-news AM outlet and that no one else will be able to do that. They stipulate that it will be soft rock or they stipulate that it will be western or that kind of thing.

Do you have any comments about that?

Mr. Konrad von Finckenstein: I have no comment with regard to Vancouver or any specific market, just generically. In our submission, for instance, one of the things we say in point 27 is that you might want to look at the various rules that exist such as genre protection and whether they really fulfil the requirement that's set out. Are they necessary in order to foster Canadian content? Why is it necessary to have genre protection in order to foster Canadian content? It's a question that should be examined.

From our point of view, we would say, no, that's unnecessary...purely speaking, competitive. I appreciate there may be other considerations that I'm not aware of, but from an economic point of view, let the producer produce the channel they want and run the radio station they want, and let the consumer decide what he wants to hear. As long as there's a sufficient offering of Canadian content, I think the consumer should choose what he wants to hear rather than you prescribing the genre that each station may use or not.

Mr. Jim Abbott: Finally, in a rural constituency like mine, which is in the mountains and therefore FM in particular is really restricted in how far it can go, you have the ability to have one, two, or three radio stations. For example, in a small community like Golden, which would be 3,500 people, there presently is one radio station.

Would it be the position of the Competition Bureau that if somebody wanted to set up another radio station, which would not interfere in terms of radio frequency with anyone simply because of the geography of the area, a second or a third station should be able to go into that market even if it was a small market like that?

Mr. Konrad von Finckenstein: Absolutely. I think it's up to the entrepreneur to risk his dollars in establishing it and in terms of the audience to decide whether they want to listen to the new station or not.

Mr. Jim Abbott: Okay, thank you.

The Chair: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: Thank you.

Earlier on, the senior officials from BCE told us that the role of the CRTC needed to be clarified with respect to the role of the Competition Bureau. The CRTC's specialty is the Broadcasting Act. Since broadcasting is a very specific sector, when you make a decision that goes against a decision made by the CRTC, do the people who analyze the cases, especially the one that was raised this morning, look at them from a general competition perspective or do they take into account the specific nature of the broadcasting sector?

Mr. Konrad von Finckenstein: When we examine a merger, we use our people from the Bureau and we hire experts. In the case of a merger in the broadcasting field, we obviously hire experts to help us. Our analysis deals solely with the competitive aspects and the impact of the merger on the market in terms of advertising.

Mr. Jorré is in charge of the Mergers Branch and he can explain the situation to you.

Mr. Gaston Jorré (Senior Deputy Commissioner of Competition, Mergers Branch, Competition Bureau): The legislation applies generally, and we use the same analytical methods. Obviously, facts vary widely from one sector to another, and the analytical methods must be applied in the context of the sector in question.

A the Commissioner explained, to understand the impact of a merger in any given sector, we need experts from that sector. But our analysis always focuses on one question: will competition be substantially reduced? In broadcasting, we often look at the impact on advertising markets.

Á (1100)

Ms. Christiane Gagnon: When you issue an opinion that contradicts a CRTC opinion, which one prevails? Does the CRTC opinion prevail? In the case mentioned this morning, which does prevail, the CRTC's or the Competition Bureau's?

Mr. Gaston Jorré: There are two aspects involved. First of all, we are not talking about contradictory opinions, or decisions. There are two different statutes involved here, and they have different objectives. Each must be appropriately applied, in view of the circumstances in question. When someone build a plant, the plant must be in compliance with environmental regulations, the Building Code, and the municipality zoning by-laws. The company which builds the plant must comply with all applicable statutes and regulations. The same thing applies in broadcasting. I don't think we are talking about a contradiction here. We are talking about different reviews, with different goals.

We are therefore applying our usual analytical process. We are looking at the circumstances of the sector and we reach a conclusion. The CRTC has much broader goals, including Canadian culture. It therefore looks at this differently.

With respect to whose opinion or decision prevails, that is not really a question because neither prevails. The two statutes apply, in the same way as both environmental regulations and the Building Code apply to a company wishing to build an industrial plant.

Ms. Christiane Gagnon: With respect to how mergers are perceived, people say that they give the impression of being anti-competitive in nature, and that their goal in Canada is to prepare for the U.S. market. On the other hand, we are told that here in Canada, we are going to end up with only two major players, and when that happens, smaller players will find it much more difficult to be in the broadcasting market.

So, we hear that in Canada, the mergers do not provide for healthy, desirable competition, but nonetheless prepare companies to penetrate foreign broadcasting markets, particularly the U.S.

Mr. Konrad von Finckenstein: We hear that argument in a great many sectors, but we do not accept it at all. If a company is not competitive on the Canadian market, I would have serious doubts about its ability to be competitive on the North American market. You need a critical mass before entering the U.S. market. The result would be a monopoly or duopoly in Canada, in other words, a lack of competition, but that lack of competition would not enable entry into the U.S. market. This would apply to all industries, and particularly to broadcasting.

[English]

The Chair: Mr. Mills.

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

Mr. Commissioner, you said that you review mergers before they take place. Did you mean to say that?

Mr. Konrad von Finckenstein: We review mergers if they are over a certain threshold of $400 million post merger. Or if the target is more than $35 million, you have to notify us.

We therefore review a merger ex ante, before it takes place. Normally the merger does not take place unless we approve it, though people can decide to go ahead and risk the chances. But this is very rare.

For mergers below that threshold, we don't have to be notified. If we are not aware, they can proceed. We have the power under law for three years post merger to apply to a court to have the merger undone, if we are of the view it led to a substantial lessening of competition.

Mr. Dennis Mills: You talked about your responsibility in terms of anti-competitive practices. Could you please explain to the committee the difference between creative competition and anti-competitive practices?

Mr. Konrad von Finckenstein: Yes. You put your finger on one of the most difficult tasks the bureau has. Obviously we want vigorous competition. Vigorous competition means you thrive and your competitor doesn't. On the other hand, the act has specific provisions against what's called abuse of dominance, or anti-competitive activities. Basically, the difference is, when it comes right down to it, is there a business logic for what you're doing? Does it make sense?

Let's say, in abuse of dominance, you're already the dominant player in the market. If you then proceed and sell at below cost, why are you doing that? You already have this huge market share. Are you doing it to get more market share? No, you don't need market share; you're already dominant in it. You're really doing it to drive somebody out of business. That's anti-competitive.

If, however, you introduce a new program, a new loyalty program, or you give certain discounts or provide new services that may be very effective and may increase your market share--wonderful; that's why competition is there. You're in effect growing the market, you're offering new product, and you may attract new customers. So that's the difference between anti-competitive and pro-competitive.

It is not a strict line. It's a grey area, and it's very case-specific. You have to look at each case. You have to look at how the market behaves, the attitudes in the market, and the ability of players to influence the market.

Á (1105)

Mr. Dennis Mills: Mr. Commissioner, I'm glad you said it's a grey area, because the more I get into this Competition Act, the more grey I see.

Mr. Konrad von Finckenstein: I have grey hair, for good reason.

Mr. Dennis Mills: I intend, for the balance of my parliamentary career, to understand what this act is all about and what this bureau is all about. I'm only sorry I didn't get on it earlier.

But, Mr. Jorré, on method of analysis, you say that sometimes you hire industry experts when you're doing an analysis of certain files. How do you ensure that those industry experts are independent of the parties that you're analysing?

Mr. Gaston Jorré: Obviously we can't hire somebody who is working for one of the parties. We just have to check who--

Mr. Dennis Mills: How do you check them out?

Mr. Gaston Jorré: We seek to know what their experience is, what their qualifications are, and what their work history is, and we try to scan that to see that we're obtaining someone who is appropriate in terms of the know-how and who is not going to cause any problems from the point of view of bias.

Mr. Dennis Mills: If you discovered that an industry expert whom you've chosen to do an analysis had a long-standing working relationship with the dominant party in the merger, would you consider that a problem? Would you be concerned about that?

Mr. Gaston Jorré: It would depend on the facts, but it might be a problem. One of the difficulties in a small country is that there are sometimes, in some areas, a limited number of experts, which sometimes forces us to look outside the country for experts. In some areas, you don't have a lot of people available. You'd have to look--

Mr. Dennis Mills: So you're receptive to looking to experts who are outside of our country because of the small market of availability on certain industry experts?

Mr. Konrad von Finckenstein: You seem to be under the impression that we use only one expert. We may use several.

Mr. Dennis Mills: No, I said “experts”.

Mr. Konrad von Finckenstein: Depending obviously on the complexity of the case, and so on, they may use several. They may be Canadian; they may be foreign; they may be a mixture of both. What we're trying to do is get the best knowledge on this industry.

Mr. Dennis Mills: When you're going through processes, who is the Competition Bureau accountable to? Where do you get challenged, if people really want to, on your methodology or your method of analysis, or, to use your expression, the grey that is so often involved in what you do? Who challenges you?

Mr. Konrad von Finckenstein: Remember, we do not have decision-making power, we have challenging power. When we say this merger results in a substantial lessening of competition, or this activity is anti-competitive, if the other side says no, we have to go before the Competition Tribunal, which is a body made up of judges and economists and businessmen, and in effect marshal a case before them, saying these are the facts, etc. And the tribunal makes the decision, not us.

Mr. Dennis Mills: This is my last question, Mr. Chairman.

As members of Parliament, and more importantly, as ministers, we have sort of conflict of interest guidelines. Do the people you have on your staff or the people you hire to do these analyses have a conflict of interest guideline in terms of the Competition Bureau?

Á (1110)

Mr. Konrad von Finckenstein: I don't know what their guidelines are, their own perimeters. I know what ours are. We have guidelines vis-à-vis our employees, lawyers we hire, economists we hire, and we follow those before we hire someone.

Mr. Dennis Mills: Are they public?

Mr. Konrad von Finckenstein: Yes.

Mr. Dennis Mills: Great.

Thank you, Mr. Chair.

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: Thank you very much.

I, too, would like to pick up on what Madame Gagnon started out the questioning with. I believe you're aware that one of BCE's recommendations was to clarify the CRTC's mandate with respect to competition issues either by cabinet direction or legislative amendment.

While I understand that you're not at liberty to discuss the Astral case specifically, I'm interested in knowing if indeed you feel.... Do you monitor the cases that are before the CRTC? My understanding from Ms. Scott was that you in fact can appear before the CRTC if you have a problem with what it is considering, notwithstanding the division of cultural objectives versus the commercial nature, as you said this morning. Do you wait until the CRTC has ruled? Again, I don't know all the facts, particularly of the Astral case, but why wouldn't you have appeared at that time and made those decisions?

Mr. Jorré, you used your words very carefully on questions of precedence or priority in your answer to Madame Gagnon. It would appear to me that the Competition Act would be paramount right now in a CRTC decision. Correct me if I'm wrong.

Mr. Konrad von Finckenstein: Let's start with the issue of having a dual regime here. Two acts apply, the Competition Act and the Broadcasting Act, and approval is needed under both. It is the same as the example Mr. Jorré used--when you build a house, you need a building permit, but you may also need a permit for environmental purposes, if there's no sewage, etc. You may need various permits in order to build.

We actually have an interface agreement with the CRTC that we signed a few years ago. It is on our website and the CRTC's. It clearly states that, in the merger review, there's a parallel jurisdiction; any transaction must comply with the legislation administered by both organizations.

We tried to address it to make it clear to our customers, our stakeholders--and the CRTC's--that basically both are needed. There is no paramountcy. Nothing can go ahead unless approval is given from both. The CRTC looks at things in terms of its concerns, the maintenance and promotion of Canadian culture. We look at whether a thing will substantially lessen competition. That's what the legislation right now provides in both and that's what we have to do.

Now, I don't know what Bell Canada is suggesting, but there are other areas. Let's take banking, for instance. We have a responsibility; OSFI has a responsibility; and the Minister of Finance has one. Section 94 of our act actually says that the Minister of Finance can declare that a merger is in the national interest and can therefore basically deprive us of our jurisdiction to review. The minister has never done this, but technically they do have the power to do it.

And clearly if a situation arises, for whatever potential reason--the health of the Canadian financial system, etc.--where it is considered so important.... Parliament saw fit to put this sort of override mechanism in the Bank Act. It has not put such an override mechanism in the Broadcasting Act.

Parliament is free to put a prohibition in the act if it wants to, to say that culture can, in certain instances, trump competition. If there was such a statement, it wouldn't bother me at all. I'm not a fanatic on competition in that way. I'm just saying that the laws as they are right now provide for dual examination and dual approval.

Ms. Sarmite Bulte: Perhaps I can follow up on your example of the banks. Correct me if I am wrong, but you did a report prior to the proposed bank merger a few years ago, before the minister was in a position to decide. Correct?And while the Minister of Finance does have that ability, it comes after your review is done. Is that not correct?

Mr. Konrad von Finckenstein: It so happens with banks that we need to approve, and the Minister of Finance needs to approve. We made a preliminary assessment pointing out what the difficulties were. So did OSFI. The Minister of Finance said this was too problematic, and there was no sense going further.

However, we were quite prepared to go to the second step and in effect work out the competitive issues. But he still could have disallowed it, if he felt that national interests with the CRTC were cultural interests quite different from the competitive ones. Dual approval is needed there, as well as here.

The Chair: Ms. Lill.

Á (1115)

Ms. Wendy Lill: Thank you for coming here.

Last month Casey Anderson from AOL came before the committee and assured us that the market itself will provide sufficient incentive for the production of Canadian content, that content regulations and other instruments were simply unnecessary. In that kind of world view, we all rely on the market to ensure that Canadian voices will be heard.

I know you are interested, and deal with economic, and not cultural, objectives. We also know that multimedia conglomerates are waiting in the wings to enter the Canadian marketplace for business reasons. If they say they're coming in because they really like to tell Canadian stories, I think we'd be pretty naive to believe that.

Just while you're here, can you talk about what it means to you when you hear that kind of statement coming out of probably the biggest media conglomerate in the world? What is that going to mean when they knock on your door, or when they knock on the CRTC's door? Where does it all shake down?

Mr. Konrad von Finckenstein: I have not advocated anything along those lines. We have never suggested we should do away with rules for protecting Canadian culture, and enhancing it, etc. I think that is your role as legislators, to make these value judgments. Is Canadian culture something we value, something that should be protected and enhanced? I think Canadians have spoken clearly on that point. They feel it should be done.

What we are suggesting here is that, while you're doing it, don't interfere with market forces to the extent it's not necessary. Let Canadian market forces set out the rules to provide for proper protection of Canadian content, and have an organization like the CRTC force the Canadian culture.

That doesn't mean you have to go so far as to answer the example that Mr. Abbott raised of genre protection. I think genre protection has nothing to do with Canadian culture. Let Canadians decide what they want to watch. Just make sure there are channels they can choose, if they want to.

Ms. Wendy Lill: What we hear over and over from BCE and CanWest Global, all of the big players, is that they have to get bigger if they're going to create the content, if they're going to compete internationally. It seems to me those are business decisions they are putting forward that they feel have to be respected. It appears to me that it moves in a completely diverse direction from that of protecting that cultural objective.

It's hypothetical to talk about AOL, but whomever comes to you to talk about the imperatives of the marketplace, it seems to me that you will always move in that direction, as opposed to the cultural one, if you believe your mandate is financial.

I'm just trying to figure out how we make sure that we don't lose our balance.

Mr. Konrad von Finckenstein: You're absolutely right. It's a question of balance. That's why we have dual approval. That's why we have the CRTC, whose mandate is to protect and enhance Canadian culture. You have the mandate of the bill. We have the statutory champion of competition. You have to balance it.

What we are basically saying in our submission is that you might want to re-balance this a bit. We think that market forces have not been given enough freedom to work within whatever confines you suggest for protecting Canadian culture so that we can get the benefits of these market forces, without in any way taking away from the need to protect, enhance, and force the Canadian culture.

The Chair: Mr. Abbott.

Mr. Jim Abbott: Just last weekend, I believe, we had the issue of grey market satellites decided. The most germane quote I am aware of by the justice is this one:

There is some strong feeling on the part of some people in Canada that the regulations that restrict residents' ability to decode encrypted signals are anti-competitive. Do you have any comment on that?

Á (1120)

Mr. Konrad von Finckenstein: We have chosen to regulate broadcasting and establish a system whereby you can only broadcast in Canada if you have a licence to broadcast. By the same token, if you are in Canada, you should receive only signals from people who are licensed in Canada.

As you are aware, there is the whole issue of the charter, but we'll leave that aside for the time being.

That's the regular scheme we have set up. Whenever you set up a regulatory scheme, to some extent you hinder the free forces of the market and you restrict competition. But we do it all over the place in the interests of good government, the better distribution of wealth, or the attainment of social goals, whatever the case may be. The trick is always to do it in a minimal way, to do it only so far as is necessary to ensure your basic structure. But since we know that market forces are by and large better allocators of resources, let them work in the best way possible.

Mr. Jim Abbott: Again, just to drive this to a precise conclusion, it is my understanding that you as commissioner are saying that this restriction, within the specific confines of the consideration of competitiveness, is a restriction you have not challenged.

Mr. Konrad von Finckenstein: Absolutely. If you have a limited spectrum you have to somehow deal with it, and we have set up a system for allocating that spectrum.

Mr. Jim Abbott: In your presentation, from number 14 and on to where you get into your actual recommendations, you get into talking about new media services. It touches on the grey market satellite services, and you talk about cross-subsidization. Were you simply offering observations, or was there some kind of conclusion you had arrived at here?

When I read through it, it struck me that what you were really saying was that in your judgment there was a real limit to what could really be regulated with all the new media that are coming online.

Mr. Konrad von Finckenstein: What we really tried to do was outline the pressures the system is facing.They are multiple and enormous, and they need to be addressed. We have had great success with our broadcasting system so far, but in light of these tremendous changes that are occurring and the pressures that are evolving, it's time to rethink and deal with them.

To some extent the present policies will be overcome by technology. If you can turn on your computer and see anything you want live and in real time, providers will spring up who will offer you exactly what you want, basically completely bypassing our regulatory system and thus the CRTC. It is a question of time as to when that will arrive. Is it two years, five years, or ten years? I don't know, but knowing that it's coming, we should prepare ourselves and try to figure out ways to deal with that.

[Translation]

The Chair: Ms. Gagnon, do you have a question?

Ms. Christiane Gagnon: Yes, I do. You deal with competition. According to some people, foreign ownership might lead to greater competitiveness among different products and provide more access to satellite signals, as you said earlier. Should we therefore raise the foreign ownership limit? Some people say that this would be very damaging in terms of Canadian content, and that the U.S. could broadcast their products here, regardless of quotas. But if competition was sufficiently open and this was something you advocated, what would we have to do in order to protect Canadian content?

Á (1125)

Mr. Konrad von Finckenstein: As commissioner of competition, I am generally against foreign property restrictions because they always end up distorting pure competition. However, we recognize that such restrictions are necessary in certain fields. We now have restrictions in two fields: broadcasting and telecommunications.

In our brief, we state that, if you alter the percentage of foreign ownership, you have to apply the same adjustment in broadcasting and telephone signal distribution, because the signal involved is the same. We do not believe there should be any difference between the two. But will that adjustment be made or not? That is something the government has to decide. Obviously, in the past it was a question of balance: there had to be a balance between the competitive goal we wanted to achieve and the chances of losing our national identity and culture because these companies could become fully foreign-owned.

To be honest, all I can say on the subject is this: if there is a change, that change must be applied both to the carriage of broadcasting signals and that of telephone signals.

Ms. Christiane Gagnon: Thank you.

[English]

The Chair: Mr. Commissioner, you referred to an interface agreement between yourselves and the CRTC. I take it this is not a statutory document, but just a memorandum of understanding between the two commissions?

Mr. Konrad von Finckenstein: Yes.

The Chair: Would it be possible for us to have a copy of it for our research?

Mr. Konrad von Finckenstein: Yes, absolutely. I can give it to you right now. I have it here in my binder. It was a document we worked out with the CRTC in order to help our stakeholders understand how the two organizations interact with each other.

The Chair: When was this done, Mr. Commissioner?

Mr. Konrad von Finckenstein: In 1999.

The Chair: Have you found it has eliminated the differences of viewpoints between the commissions and has helped look at an integrated conclusion in areas where you two might be in divergent streams, so to speak?

Mr. Konrad von Finckenstein: I don't think that was the purpose. The purpose was basically to inform our stakeholders how we work. Clearly, we would come to different conclusions on different areas--for example, mergers. For instance, it's clearly specified that in areas where the commissioner forbears or exempts, the Competition Act will apply. To the extent there's no longer any regulation by the CRTC on a certain aspect--long distance, for instance, was a case in issue--then to the extent the commission forbears, the Competition Act applies. If people have complaints, they will have to come to us, and we will investigate and prosecute if necessary.

So it was meant as part of education, of clarification, and I think it helped for that purpose. It has not eliminated in any way any differences we may have in terms of our different functions, or in the outcomes of that.

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The Chair: Do you attend their hearings, especially on issues that could involve convergence of ownership and so forth? Do they in turn keep a watch, in brief, on your hearings? In practice, how does that work in regard to CRTC hearings that you might find might affect you in some way, and vice versa?

Mr. Konrad von Finckenstein: In terms of their policy-making function, for instance, they are right now looking at the whole price cap regime for telephones, etc. We made a submission to them and pointed out that when you make this serious decision as you review price caps, these are the issues to take into consideratio...and how you could force the competitive goals by taking certain measures.

We have the statutory right, as I mentioned in my remarks earlier, to appear before any federal decision-maker, and we use it and regularly make submissions to them. We have no hearings or anything like that; we only have the right to challenge. Where we challenge a company in a merger or where we challenge a company in terms of its conduct, we go before the Competition Tribunal. Technically, the CRTC could intervene. I'm not aware they've ever done it.

I presume they are aware of what we're doing. We try to talk to each other as much as possible and share expertise on areas to educate each other. But essentially, these are two separate processes that are going on side by side.

The Chair: Yes, Mr. Abbott.

Mr. Jim Abbott: I have one last quick question. That's with regard to the Internet. We were talking earlier in my questions to you about the new media and the challenges there will be coming up with revisions to the Broadcast Act. Would it be your opinion that the definition of broadcasting should include the recognition, or specifically Internet program?

Mr. Konrad von Finckenstein: No, the CRTC had hearings on this issue, on whether to regulate the Internet, etc., and we made submissions. We don't think it's technically feasible. To put in a regime that you can't enforce strikes me as being counter-productive.

That said, as new forms of media emerge, based on the Internet, etc., to the extent that regulation is possible and would attain the core objective of the CRTC in promoting Canadian culture, I don't see why they would not engage in those. But it's a bit premature, because we really don't know how this technology will evolve and to what extent it will be able to be regulated.

Mr. Jim Abbott: So you would share my opinion that although we can take a look at cable that is available to Canadian subscribers and at satellite that is available to Canadian subscribers and put in interdictions as we may see fit, in fact to be able to put interdictions or control on the Internet, as we now understand it, is probably not doable.

Mr. Konrad von Finckenstein: You are way out of my league in terms of technical knowledge, but I understand right now we can't do it. It doesn't mean we won't be able to do it in the future.

The Chair: Mr. Commissioner, we really appreciate your presence here today, and the presence of your colleagues. If I may ask, if from time to time our research team wants additional information, could it contact your people to obtain some documentation and so forth?

Mr. Konrad von Finckenstein: It would be our pleasure to help you.

The Chair: Thank you very much for being here today. It was extremely useful to us.

The meeting is adjourned.