:
Thank you, Mr. Chairman and members of the committee. My name is Paul Sparkes, and I am executive vice-president of corporate affairs for CTV.
As Canada's largest broadcaster, we are pleased to be here today to comment on the implications of vertical integration for the broadcasting industry. At the outset, I should point out that while we are appearing together here today, CTV and Bell are not one company yet. The BCE and CTV transaction still has to be approved by regulators.
At CTV, we are proud of our legacy as Canada's number one private broadcaster. We are passionate about what we do and believe in the enhancement of our national identity through high-quality Canadian programming. Our track record in this regard speaks for itself.
We have created many popular Canadian shows that provide a shared experience for Canadians from coast to coast, programssuch as Degrassi, Corner Gas, Dan for Mayor, Flashpoint, Canadian Idol, eTalk, So You Think You Can Dance Canada , and many, many more, including coverage of some of our greatest awards celebrations, such as the MuchMusic video awards, the Junos, and the Gillers. All distinctly Canadian, these programs have provided an opportunity for us to celebrate who we are and to unite our viewers in a common shared experience.
Our Canadian programming is not restricted to our own airwaves. Many of our shows, including Degrassi and Flashpoint, are currently putting Canadian talent on the global stage.
We are also proud to be the home of Canada's number one national newscast, CTV National News, with Lloyd Robertson. Our local newscasts are also number one in all but one market. Our 24-hour all-news network, CTV News Channel, provides information on breaking news, current events, and politics with Power Play, all of which draw on our news organization, CTV News, to deliver breaking news the second it happens from communities across this country and around the world. In addition, CP24 remains an integral part of the Greater Toronto area as a premier source of news and information.
Sports is also a major component of the programming we offer, both on conventional television and through our specialty properties, including TSN and RDS. One of our foremost achievements, and one that we are very proud of, was being the official broadcaster of the 2010 Vancouver Winter Olympic Games. Our commitment was to tell the stories and make Canada's athletes household names in both official languages. I think you will agree with us that we succeeded on all these fronts.
With Bell buying CTV, we will be able to continue and even improve on this legacy. The reason we have remained a leader in our business for so long is that we have successfully stayed ahead of our competitors and the changes in our industry. As you are aware, the communications sector is being reshaped by technological change. Unregulated media and over-the-top services like Netflix, YouTube, and AppleTV are changing traditional business models.
In response, cable companies and telcos are acquiring content providers to help them differentiate their product offerings. For CTV to survive, we must be part of this change. Cable companies and telcos owning broadcasters is not a new phenomenon. The CRTC has allowed them to own conventional television since the mid-1990s, and specialty and pay services since 2001. Virtually all of our traditional competitors are now vertically integrated, including Rogers, Shaw, and Quebecor. But this is not solely a Canadian phenomenon.
Vertical integration is the new norm internationally as well, particularly in the U.S. But why is all this occurring now? It is a response to changes in the competitive environment and consumer behaviour. Whereas broadcasters could once rely on "appointment viewing", the same content is now available across multiple platforms from numerous sources, regulated and not. This is causing audience fragmentation and revenue erosion. And while CTV is trying to compete by making its programming as widely available as possible, without access to distribution infrastructure we are at a significant disadvantage.
In light of all of this, the best path for CTV to remain a leader is to align ourselves with a company that has a strong presence in broadcast distribution and telecommunications. Companies that both create the content and distribute it will be able to maximize the consumer experience and remain relevant in the media landscape moving forward.
This brings me to Bell's proposed acquisition of CTV. Without doubt, this is the right move for CTV, our viewers, consumers, and the Canadian broadcasting system. Why? Because it allows us to continue to do what we do best.
Without this transaction, we would most likely have been broken up and sold piecemeal to our competitors. This would not only have been bad for the Canadian production community, consumers, and viewers, but it would also have negatively impacted the diversity of voices that Canadians have access to today.
Most importantly, this represents a tremendous opportunity for us at CTV. It will allow us to showcase our content on more platforms, providing an even greater experience for our viewers.
And why Bell, you might ask. Because they know us, and we know them. They have been a shareholder of CTV for a decade. We have a history together. We most recently partnered with them during the Vancouver Winter Olympic Games, where Bell provided mobile video streaming. This included coverage of both the men's and women's hockey games, as well as recaps and highlights of numerous sporting events. Through this partnership with Bell, we had great success building audiences on alternative platforms.
This transaction will provide us with the stability and the confidence to compete with both our regulated and non-regulated competitors, and it provides us with the knowledge that we will be able to continue to bring great Canadian stories to the screen.
Thank you very much for the opportunity to appear, and I'm happy to take your questions.
:
Thank you, Mr. Chair, and good afternoon, members of the committee. My name is Mirko Bibic, and I'm senior vice-president of regulatory and government affairs at BCE.
First, thank you for providing this opportunity to present our perspective on the important changes taking place in broadcasting. By looking closely at the profound and fast-paced changes under way, we're confident you will see the tremendous benefits for Canadians. More specifically, we're sure you will recognize that our resumption of a controlling interest in CTV, building as it does on a long-standing relationship between BCE and Canada's number one media company, will benefit consumers and add huge value to the broadcasting system in terms of investment and innovation.
The communications landscape has changed dramatically over the last five years. Even over the last 24 months we've witnessed unprecedented developments. Consumers today are able to receive digital content on multiple screens from multiple suppliers through multiple networks.
A seemingly infinite number of choices with respect to content are now available, whether it's for a TV, a laptop, a smartphone, or a tablet. As a result, consumers now have the ability to easily program what might best be described as their own perfect media mix. Our world is changing, posing huge challenges, but at the same time presenting big opportunities for communications and broadcasting companies.
For Bell, video has been an important part of our business for well over a decade, and it remains a key imperative for us today. Since 1997 we have brought tremendous value to the Canadian broadcasting system. Our Bell satellite TV business opened up the 500-channel universe to thousands of rural communities across the country and introduced competition to a sector still largely dominated by cable companies.
Today, video accounts for approximately 40% of Bell's residential wireline revenues, more than our home phone service, quite a story in itself when you think of this company's long history and roots. Just as we led the way there by propelling competition and innovation with the introduction of satellite TV, including the shift to digital, high definition, and personal video recorders, as well as by contributing over $100 million each year to the production of Canadian content, we continue to see ourselves as a leader when it comes to enabling consumers to create their own perfect media mix.
We are achieving this by continuing to invest billions in network infrastructure and by continuing to be a national leader in R and D spending. Over the last two years alone, we have invested over $6 billion. We are continually enhancing our national Bell satellite TV service, we continue to upgrade our world-class wireless high-speed broadband network, and we are well on our way toward connecting more than five million homes using an advanced fibre-based Internet network capable of supporting our recently launched IPTV service, Bell Fibe TV.
As a direct result of the ever-advancing state of our infrastructure, Canadian consumers are truly at the centre of the new dynamic that is emerging. It was reported earlier this year that each month more than 30% of Canadians are choosing to watch a 30- to 60-minute TV show on a website, and more than 20% of Canadians with cellphones or smartphones watch a video clip. The direction is plain to see.
For Bell and CTV, as Paul mentioned, the 2010 Winter Olympics experience demonstrated beyond a shadow of a doubt that by working closely together Canadian distributors and broadcasters can achieve amazing results. But a major question we have to ask is how do Canadians continue to distinguish themselves and be a part of the shifting media mix every day?
The challenge is particularly acute for Canadian broadcasters, especially because of the massive disparities in scale between themselves and similar companies in the U.S., where consolidation is well entrenched. Disney and ABC, Universal and NBC, Sony and Columbia, Viacom and CBS, Fox and News Corp., each of these companies produces popular content and makes it available around the world.
At the same time, a spate of companies, some massive and some relatively small but all unregulated, are entering the Canadian video space. Netflix and Apple TV, the latter part of a $280-billion company, are stockpiling huge catalogues of TV programs and movies and making that content available online via streamed video.
Canada's leading cable companies and Bell's main competitors are also acquiring content. Vidéotron has owned TVA for years, Rogers purchased Citytv in 2007, and Shaw of course recently purchased Canwest.
The key point is that our transaction will enable Bell and CTV to achieve a measure of scale and scope that will support further network investment and innovation. It will also help to ensure the production of more and even better Canadian content. Producing high-quality, popular content can be expensive. The more screens on which that content is available, the more chances you have of attracting the largest possible audience. And the greater the audience, the larger the advertising revenue.
[Translation]
As this unfolds, consumers continue to be in control. They can watch their favourite show at the scheduled time on TV or record it for viewing later. They can subscribe to video-on-demand. They can stream the show on a laptop or tablet when they want to watch it, or they can watch it via a mobile phone.
There are even more options, such as downloading shows from iTunes or buying an entire season at a local retailer. The fact that so many choices exist indicates that today's marketplace is clearly working. And it will remain a dynamic marketplace.
In such an environment, innovative niche content and applications could well be what consumers rely on to differentiate one company from another. And service differentiation has many proven benefits—it enhances competition across the board, forces all players to innovate and provides better choices for consumers.
As an example, Bell is offering customers who are Montreal Canadiens fans access to a half-hour reality show about the players. Starting this weekend, the show will first be available to Bell customers on all three screens—mobile, online and TV—before it is more widely broadcast on TV networks in January. This enhances the viewer experience, gives them more choice and stimulates competition in the online and wireless markets.
It is good for fans, as well as the producers of the show and all those who work behind the scenes.
Another example is a new partnership Bell has with Radio-Canada to offer leading French-language content on Bell Mobility smartphones, Bell Fibe TV On Demand and the Sympatio.ca Internet portal. It is a commercial arrangement that offers clear benefits, especially for consumers.
By combining assets and expertise from two distinct areas of business, Canadian broadcasters and distributors can continue to do more of these things, experimenting with initiatives that help Canadian companies stand out in a world of near-infinite content.
The changes to the broadcasting landscape are therefore certainly positive and should be encouraged. And if any regulatory or competitive issues were to arise, the CRTC retains all the power it needs to respond as required.
[English]
In conclusion, committee members and Mr. Chair, broadcasting today stands in stark contrast to the days when Canadians were limited to a few channels delivered to a finite set of receivers, televisions, and radios. Consumers are driving the content bus, stopping at the destinations they choose. But how far that bus travels within Canada and how large the map will be with respect to Canadian points of interest depends on whether or not Canadian broadcasters and distributors have the flexibility and scale to build the destinations Canadians want to visit.
:
Let me start with a couple of comments, and then I'll turn it over to Paul.
First, when it comes to this particular transaction, there is no level of media concentration at all. People say that quite quickly, but in this case it's not the case at all. Bell has had an ownership position in CTV for the last ten years. It so happens that we're going from 15% ownership today back to 100%, where it was ten years ago. In the meantime, we don't own any other content assets, so it's not as though we're horizontally merging two broadcasting companies and reducing them to one. It's not reducing that diversity of voices. There are actually a lot of players in the marketplace, large and small.
And I'll give you my distributor perspective, because we operate Bell Satellite TV. We want to carry as much content as we possibly can, given the capacity that we have up in the sky through our satellites. We have hundreds of Canadian services from both large and small producers, and we want to deliver what consumers really want. By marrying this content and content from others with our world-leading networks, we're going to put Canadian content at the forefront.
I have one last point before I turn it over to Paul, which is that this is the reason in our opening statement we pointed out our deal with Radio-Canada. We're obviously not going to have an ownership position at Radio-Canada, but we want their content on our platforms because consumers want to watch it.
:
Gentlemen, I am very pleased to have you here.
I can say that the one upside of merging is that we're going to cut down our meetings from two in a session to one, hopefully. It will be more efficient on that level.
I found the talk very interesting, but I have to admit that I don't really understand why anybody would watch television on a phone. Maybe I'm old school. Then I thought that back in the 1980s—I was only about ten years old then—this guy kept coming up to me wanting to take articles I had been writing and put them on a bulletin board. I asked what the heck a bulletin board was. He told me that people were going on them. I asked him what they were doing. He told me that there wasn't much. They needed content. I asked why the heck they were going on these bulletin boards if there wasn't much there. Of course, that became the Internet, so I missed out on that. That's why I had to get a job as a politician.
I raise this because we are being asked to lay down ground rules for a market that is very much in its infancy, and things are going to change dramatically in the next ten years in terms of delivery of content. For our generation that grew up on black and white TV, then colour TV, and then cable TV, we're still thinking in that paradigm. I'm sure that you guys are already well beyond that, and other people are as well.
When you talk about innovative niche content being what differentiates one company from another, I get that. Rogers gets FIFA. You guys get the Grey Cup. It raises the prices. There's going to be a lot of bidding on those top-notch events. You're always going to want to have things you can offer on your apps and your phones.
I'm interested in what's paid for by the Canada Media Fund. The Canada Media Fund is the Canadian partner at the table. We're paying for content. We want to be able to access content.
Would you have a problem with the Canada Media Fund being directed to have any programs they fund on behalf of the Canadian taxpayer not limited to an exclusive phone deal? If it's available on next-generation platforms, then it's available on next-generation platforms. Would that be a problem for Bell?
:
Thanks for the question.
I think earlier this week another intervener sitting here in this place raised that idea. I found it to be an interesting idea that deserves further thought.
I have to confess that right now, I don't have a formal Bell view on it. But it's certainly something that should get more study. I'm sure that the CRTC will look at it when they have their hearings next year.
I find that it is at least an interesting proposal in the sense that it's targeted and deals with a particular issue. From the standpoint of principle, Canadians have paid into or contributed to these funds indirectly through their BDUs, so shouldn't they have access across all platforms? It at least seems to have the viewer at heart.
I think it's way better than some of the heavy-handed prescriptions some of our competitors are going to come forward and propose, such as a ban on all exclusive arrangements. I think that would stifle innovation dead in its tracks.
You mentioned an infant industry. The worst thing we could do to an industry or a sector of the economy in its infancy is to slap on it heavy-handed rules.
I think it deserves some study, but I'm not quite sure where I stand on it officially yet. But it's interesting, and I think it merits study.
:
Okay. Well, when Konrad von Finckenstein was here, I made it pretty clear to him. I said Bell now owns them, their position was clear, and you can drop the court case. We don't need to go through this; we don't need to continue down.... Because my concern has always been on the side of Canadian consumers, and I've made that clear. I think Canadian consumers are frankly very frustrated. They're very concerned with the amount of money that's leaving their household; they're concerned about bills, debt loads, and all these sorts of things. I'm sensitive to those things.
Just last week we had a whole number of independent broadcasters here who were talking about how we need to open up 9(1)(h) licences. That's a solution for independent broadcasters. I said to them, personally I see where the future's going, and that's not the future. This was really important in 1990, might have been really important in 2000, and in 2010 it might be important until 2012—because the future is going wireless. Everything that CTV plays, I will be able to watch. In fact, when TSN has a great hockey game on, I hope to be able to watch it wherever I am, on a device like the one you have with you, over my wireless network, and it will be streaming in HD. That's the future, and it's not that far away.
So what I need to understand, and this is my position, is that we need an environment in which we're protecting consumers. I think this is what Bell's position was. I hope it's the prevailing position, and I would hope that Bell would indicate to Mr. von Finckenstein that its position hasn't changed, because I thought it was a position of principle.
That's my position on it.
Good afternoon to you and members of the committee. My name is Ken Engelhart, senior vice-president, regulatory, for Rogers Communications Inc. I am pleased to appear before you today to discuss issues related to private television ownership and new viewing platforms in the Canadian broadcasting and communications sector.
My remarks will focus on Rogers' strategy of vertical integration and content delivery, implications of recent broadcasting acquisitions by Shaw Communications and Bell Canada, and on diversity in the Canadian broadcasting system and the accessibility of content.
Rogers was one of the first communications companies in Canada to pursue a vertical integration strategy to leverage its cable and wireless distribution networks and broadcasting content. For years Rogers was prohibited by CRTC regulation from directly owning analog specialty services, which impacted its ability to fully pursue a vertical integration strategy until the late 1990s. Nonetheless, Rogers has always seen the value in integrating content and distribution services to provide the best products and services to our customers.
Rogers' goal is bringing our customers communications and entertainment services into a simple integrated and personal experience that is easily accessible on any device, wherever and whenever they need it. This requires significant investment in wireless and broadband infrastructure, and access to a wide range of content.
Over the years Rogers has been a leader in making these investments and has partnered with a number of content providers to offer new content delivery platforms, such as Rogers' video-on-demand service and its online portal, Rogers On Demand On-line. We believe this strategy has resulted in new innovative products and platforms for consumers, and has helped position Canadian companies to compete against a variety of unregulated media providers that contribute nothing to the cultural objectives of the Broadcasting Act.
Our vision at Rogers Cable is that our customers pay one price for their preferred linear television package, but can then receive all their programming at no extra charge, on demand, online, and on their mobile phones. We are already well advanced in this service offering. Today's viewers want their content anywhere, anytime, and we must satisfy this requirement.
Canadian broadcasting and distribution companies face more and more competition from unregulated over-the-top service providers like YouTube, Apple TV, Hulu, and Netflix, and various illegal black market services. These companies pose a serious threat to broadcasting and cable companies, as they compete with Canadian media companies for scarce advertising and subscription dollars and encourage consumers to cut the cord on the regulated system by offering niche low-cost or free on-demand content.
Of course these competitors have no Canadian content obligations. The integration of broadcast and distribution companies is a natural response to this type of competition and is already well advanced in other jurisdictions, including the U.S. and Europe.
Contrary to those who believe that increased vertical integration will result in less diversity in the system, we believe it can provide significant benefits in terms of innovation, greater consumer choice and value, and continued support for cultural objectives, such as the development, promotion, and exploitation of Canadian programming.
Given the relatively small size of the Canadian media industry, Canadian broadcast and distribution companies must be well financed and structured to respond to increased competition from unregulated global players. Otherwise, key cultural and financial contributions to the system could be lost or severely diminished, including funding mechanisms such as the Canada Media Fund and the local programming improvement fund, both of which are supported by contributions from cable and satellite companies.
The Canadian broadcasting industry is no stranger to consolidation. Over the years we have witnessed a series of acquisitions, mergers, and divestitures of various media properties, some of which have been tremendously successful, and others less so. This is a healthy evolution of what has proven to be a strong and dynamic broadcasting sector. Throughout this evolution, the CRTC has continued to implement and enforce measures that ensure diversity in the system.
Key measures include limits on the number of local radio and television stations that can be commonly owned in a market; caps on the level of total television audience share that can be controlled by one company; specific requirements for the use of independent production on discretionary and conventional television; funding mechanisms to support the provision of local news programming in French and English markets; and regulations regarding undue preference on linear, online, and wireless platforms.
Recently concerns have been raised about the potential of vertically integrated companies to adopt practices that will undermine competition and limit broad access to content by offering exclusively over their own networks, whether TV, broadband, or wireless. The CRTC has announced its plans to address these concerns and other issues related to vertical integration during a public hearing that is scheduled to be held in May. This will provide an opportunity for all interested parties to provide their views on the issue of content exclusivity and establish clear rules for certain business practices.
For our part, Rogers remains focused on optimizing our customers' experience by offering them a rich array of content on the platform of their choice. To succeed, we must have fair access to content from a variety of different sources. We understand and recognize the value of exclusive content offerings, but do not see it becoming a dominant business model or practice.
We believe the CRTC's upcoming proceeding is timely, in that it will allow the commission to establish clear and transparent policies regarding use of content on multiple platforms, which will provide vertically integrated players with a predictable regulatory framework from which to operate. We look forward to participating in that proceeding.
This concludes my remarks, and I would be pleased to answer the committee's questions.
:
Good afternoon, Mr. Chair and members of the committee.
When I presented to you a few weeks ago on the topic of the future of the digital media, I made the point that without clear and effective safeguards, unprecedented vertical integration could constitute the biggest threat to access, diversity, and choice in broadcasting. This is true not only for the public but for independent producers, broadcasters, and even distributors like Telus, which has itself invested over $2 billion in our new Optik IPTV service to compete with the cable industry. So I'm pleased that this committee and the CRTC are taking a closer look at this.
In our view, the Canadian broadcasting system has been successful in providing a diversity of programming because it has provided both foreign and domestic content. In large part, that's due to measures that ensure that foreign programming helps to contribute to fund Canadian content. That's an important point when we talk about exclusivity. The system has also been successful in providing choices of platforms, like cable and satellite, now Optik TV, and in the future Internet and mobile platforms. We think this competition has created unprecedented choice and has helped to keep prices lower than they would otherwise be.
We believe it's of fundamental importance that consumers continue to have access to the content they want on whatever platform they choose, without restriction. While the media concentration and vertical integration of content and its distribution may bring some benefits to the system, it also has the potential, absent of safeguards, to cause significant harm if measures aren't taken to guard against abuses of market power, to counter the decisions of vertically integrated companies to promote their carriage business through exclusive content, or unduly preferential arrangements at the expense of their content operations, thereby reducing revenues flowing to the Canadian broadcasting system.
So we're calling on clear rules upfront to prohibit such discriminatory practices. First, as we suggested last time, exclusive content arrangements must continue to be prohibited on all distribution platforms. We think the easiest way to do that is to begin by categorically stating that exclusive carriage of foreign or Canadian broadcast content is prohibited over the Internet and wireless delivery, just as it is today over broadcast and video-on-demand.
We think the prohibition on content exclusivity must apply to both foreign and Canadian content, because revenues from the most popular content, both foreign and domestic, create the resources to support the system overall. If revenues for high-value content are reduced by exclusive arrangements to help sell more cellphones, then the pool of moneys used to support Canadian content is equally reduced.
Second, we believe that broadcast content now held by a vertically integrated company must be made available to other distributors and carriers on fair and reasonable terms. Undue discrimination, we believe, on pricing, quality, access, and other terms has to be clearly prohibited to promote competition and to lower prices. What constitutes such undue discrimination and how complaints will be resolved must be made clear in advance of such complaints.
For example, on pricing, we suggest a vertically integrated provider might agree to make content available on a non-exclusive basis, but only at prohibitively expensive and thus anti-competitive prices. So we suggest the CRTC should set out in advance how it will determine pricing issues in such a way as to discourage attempts to overprice competitors. The commission should establish that disputes would be resolved through timely and binding arbitration, where the arbitrator would refer to data concerning historical prices to see if things have changed in a vertically integrated environment.
Third, we think timely compliance with the rules is essential. Neither of the first two rules makes much practical sense if enforcement is delayed to the point at which access or content loses its relevance. For example, getting access to streaming hockey games on mobile phones once the baseball season has started is not going to help consumers on another cellphone plan, or competition in general.
Accordingly, the CRTC must have the ability to act quickly to resolve disputes, and some form of interim relief must be ensured. We think that if binding commercial arbitration with clear timelines is used, there needn't be a delay in getting access on an interim basis to that content.
Fourth and finally, vertical integration requires special firewall measures to ensure the confidentiality of information between the content and distribution sides. This is required because negotiations for content acquisition require significant sharing of competitively sensitive information. For example, when Telus's television distribution service, Optik, negotiates for the carriage of a specialty television service, it is often required to provide details of its plans to distribute the service—in what package, with what marketing incentives, etc.
Prior to vertical integration, all this competitively sensitive information was guarded by non-disclosure agreements. Now, with vertical integration, the CRTC must step in to enforce some form of structural separation that will ensure that the information we provide to Global or CTV, or to TVA, is not immediately shared with our carriage competitors, Shaw, Bell, or Vidéotron.
Mr. Chair, committee members, let me conclude by suggesting that what we are proposing is not radical; it builds on the rules that already exist. Many of these rules are already explicit or implicit in the CRTC regulations. But what non-integrated players and consumers need in terms of access is greater clarity and timeliness to limit disputes. We think that's a very small price for the vertically integrated carriers to pay for such unprecedented consolidation.
That finishes my comments, and I would be happy to answer any of your questions. Thank you.
:
The competition between the regulated system and the unregulated system is getting to be quite important. We've seen in the U.S. recently, in the last quarter, about a quarter of a million fewer broadcast television subscriptions. That's not because cable has moved to satellite or cable has moved to IPTV; the whole system has seen a decrease.
That's not because people are throwing their TVs away. They're watching their television on the Internet. You can buy TVs now that hook right up to the Internet. You're not watching it on your laptop; you're watching on your TV. There are companies like Hulu, Apple, and Netflicks that are doing it perfectly legally; they're paying for that content.
This is a big problem for cable TV companies. It's one reason that we have to give our customers the greatest possible diversity of choice, or they'll abandon the regulated system.
The second point I'd like to make is that the vertical integration can help with the delivery of new platforms. You have a sort of chicken-and-egg problem with a new platform: you come out with a new platform and nobody wants to put their programming on it, because there are no eyeballs attached to it; and the eyeballs don't want to watch it, because there's no programming on it.
We offered an innovative service called Rogers On Demand Online. This lets people watch their TV shows from the computer at the airport, or on their laptop wherever they are. They can watch the program they've paid for on cable TV free of charge.
Of course, none of the broadcast networks wanted to put their programming on it, but Citytv did, because we owned them. Once Citytv put their programming on, the other networks thought they had better do it too, or Citytv was going to get an advantage over us.
So having that vertical integration can actually increase the choices consumers have.
First of all, welcome to our committee. It is too bad that Quebecor is not here; I think you would have made quite the trio. There is a question I would have liked to ask Quebecor, as well, but I will still put it to each of you.
A phenomenon we are seeing more and more in the marketplace—and previous witnesses have talked about this, but regardless, you don't really need to be a classical expert to understand it—is the use of wireless devices and the Internet as broadcasting tools. Furthermore, those broadcasting devices are not subject to the Broadcasting Act, but to the Telecommunications Act.
Mr. Hennessy, you said that the regulations needed a bit of a cleanup, and you suggested some new rules. Against the current backdrop of convergence, where each of your broadcasters has their own wireless services, I wonder whether it would not be easier, more effective and more realistic to combine the two pieces of legislation, the Telecommunications Act and the Broadcasting Act, as the CRTC chairman has already called for publicly.
:
I don't actually believe that. I think what you would end up with is one act that has two sections, because one is culturally driven and one is economically driven in its main priorities; one promotes open competition and the other promotes limited competition to ensure the achievement of cultural objectives. Put the two acts together and you really have two competing things in one page.
To be clear, if somebody provides a television service on a wireless device, that service itself is subject to the jurisdiction of the CRTC under the Broadcasting Act. They have simply, to date, decided to forebear from regulation. They could regulate it. I don't think it's necessary at this point, but the jurisdiction does exist.
What they don't regulate is the totality of the business of the wireless carrier, and that's probably a good thing. At the end of the day, I don't think the issue is whether you actually regulate in detail the broadcaster, but whether the consumer has access to the content and independent producers have the ability to provide their content and have it displayed on all platforms.
I think that's where we want to get to: to that form of openness, so that Canadians and Canadian producers can use the system, whether it's by the Internet, wireless, or the traditional platforms, to reach out to the world, and by reaching out to the world I think we start to create more financially viable models that aren't reliant on subsidy.
:
Thank you very much, and thank you to the witnesses.
I was somewhat disturbed during the first panel. I appreciate that Madam Crombie asked the opening question on the matter that had disturbed me. I'm curious, what do you think has changed since the last time? I understand that they're contemplating a purchase, that Bell in fact wants to proceed with purchasing CTV. I think it makes sense. I believe that in markets like this, we're seeing vertical integration around the world. This isn't a Canadian phenomenon. I agree with Telus that whatever the rules are, we should establish them.
I think it's working. I think Rogers is demonstrating that it's working. As I said earlier, we've seen Shaw buy Canwest and they've taken over the Global TV assets and their specialty assets. Rogers has been consistent with their position, even though they own Citytv and Citytv was admittedly, through the recession, in the tank on revenues versus expenses but took a position against fee-for-carriage in any of its forms.
Mr. Hennessy, you've said it's ridiculous, it's almost perverse, the idea that essentially you'd have all the broadcasters owned by BDUs and then figure out how much they should pay each other for the signals they've got out, especially when the two largest BDUs in the country are opposed to it.
What do you think has changed? Why are we hearing what we heard today?
This has been a fascinating study for us. I'm glad to have you gentlemen here. I know my colleagues over there think we New Democrats feel the market is evil. We actually think the market's great, but we simply believe there need to be certain rules to keep a market competitive.
For example, look at the grocery business. You know, it used to be all those little corner grocery stores, then they consolidated and got bigger and bigger. Now there are all kinds of choices, but in a lot of these grocery stores small operators don't get shelf space. That's the way it is. If you want to compete in the milk business and you're a small milk company, go into another line of business, because it's set up, it's anti-competitive. They're not going to allow it.
It's the same in cattle. You have two cattle players and if they see a small operation get up and running, they'll drop the price of cattle a few cents and they can put you out of business. They're not doing it to give the consumer a break; they're doing it because they don't want competition. That's their business model and that's what they do.
Our question is, when we look at vertical integration here, what do we need to do, if anything, to ensure we don't have anti-competitive practices?
Mr. Hennessy, you're giving us a very different picture of the potential for this market from some of the other players. You talk about making content available but only at prohibitively expensive prices, or not allowing access in a timely manner. Why is it that you think the potential of vertical integration can be offset by troubling issues of anti-competitive behaviour toward smaller third-party players?