INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 2, 1999

• 0904

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order on Bill C-276, an act to amend the Competition Act, 1998, on negative option marketing.

I'm very pleased to welcome our two witnesses here this morning: Mr. Duff Conacher, coordinator of Democracy Watch, and Mr. Michael Janigan, executive director of the Public Interest Advocacy Centre.

• 0905

My proposal would be that we start with opening statements, and then we'll move to questions together.

I'll begin in the order as listed, if that's okay, unless you've come to a different arrangement. I'll ask Mr. Conacher to begin.

Mr. Duff Conacher (Coordinator, Democracy Watch): Thank you very much for the invitation to appear today.

As mentioned, I am the coordinator of Democracy Watch, which is a citizen advocacy group that works on government and corporate accountability issues, based here in Ottawa, with supporters across the country. I'm also chairperson of the Canadian Community Reinvestment Coalition, a coalition of over 100 organizations from across the country, which works on issues of bank accountability. The total membership of the groups in the coalition is over three million Canadians.

I'm here to express the strong support of Democracy Watch for Bill C-276 in terms of its principles. There are a few concerns we have with the bill, which I will mention. I want to go through a few points as to why we are in favour of this move on negative option billing, and then I welcome your questions.

Negative option billing completely violates the fundamental principle of informed customer choice. The principle of informed customer choice is fundamental, of course, to the relationship between the seller and a buyer for one simple reason, and that's so that the customer only pays for what the customer has sought out and then chosen to buy after hearing the sales pitch and gathering any other information the customer feels they need to make their choice.

Negative option billing, because it violates that principle, essentially imposes the seller's agenda on the customer, and that's an agenda that large corporations are increasingly shoving down consumers throats. As a result of negative option billing, informed customer choice is reduced to essentially a choice between gagging, and then if you can gag loud enough, you won't be forced to swallow something you don't really want—not exactly a principled way of doing business.

I am most concerned with the testimony I've seen from Mr. Frank Swedlove, the executive director of the financial sector review group of the Department of Finance, in terms of commenting on the impacts on banks and also making some claims about the impacts on customers if Bill C-276 went through.

First of all, in his testimony, Mr. Swedlove said the Department of Finance is “strongly supportive of efforts to protect consumers”. I doubt the rest of his testimony, based on the fact that there is no evidence the Department of Finance is strongly supportive of efforts to protect consumers, despite the policy paper that was released on the financial sector framework on June 25, 1999.

The reason I make that statement is that the department has been forced to be supportive of efforts to protect consumers. While it's claiming that it's going to set up an independent ombudsman now that will help consumers, it was that department and that minister that behind closed doors negotiated the initial banking ombudsman structure with the banks, signed off on it, and applauded it. That was a structure where the banks chose a majority of the board members of the ombudsman, the ombudsman had no binding ruling power, and essentially the ombudsman was selected, paid, and directed by the banks. This is from a department that claims to be strongly supportive of efforts to protect consumers.

Secondly, that same department and that same minister negotiated, once again behind closed doors, and once again applauded, a voluntary code with the banks on access to basic banking in February 1997, a code that, in a survey conducted by the Canadian Community Reinvestment Coalition in May and June of this past year, the banks have routinely violated. Our survey of 103 branches of the banks, and also Canada Trust, which signed on to this voluntary code, found that 96% of the branches were violating that code. So it's a totally ineffective measure, supposedly to protect consumers, from a department that supposedly is supportive of efforts to protect consumers.

• 0910

Finally, we've also proposed as a coalition to both the Department of Finance and the Minister of Industry and that department—and we've also proposed this to the banks, whom I know you're going to hear from next week—a very simple method of allowing consumers to band together to become informed and empowered in the marketplace. That simple method is that a one-page flyer would be required by the federal government to be enclosed in bank statements, credit card bills, and other mailings the financial institutions send out to their customers. This one-page flyer would come in the same envelope and would invite people to join a broad-based financial consumer watchdog organization that would watch over the industry. A very simple flyer would go out, with a lick-and-stick envelope that people would simply fold up, stick their membership cheque in, and send back.

I'm sure the financial institutions will claim next week that they're very concerned about their customers. Financial institutions refuse to enclose this flyer voluntarily, even though it would cost them nothing to do so. So they refuse to give their customers a choice to join a consumer watchdog group and to facilitate that choice, despite the fact that it was recommended by the MacKay task force and by the House finance committee and the Senate banking committee. The Minister of Industry and the Minister of Finance, again supposedly strongly supportive of efforts to protect consumers, have not acted on this despite the broad-based recommendation.

So when the executive director of the financial sector review group is raising concerns on behalf of the banks before you, while saying he hasn't even spoken to the banks yet, all I can say is that I sincerely doubt his sincerity, and the department's, in terms of being supportive of efforts to protect consumers.

Mr. Swedlove went on to say that banks may try to get around the negative option billing prohibition measure by choosing to leave fees unchanged but reducing services within a given package, or stifling the banks' service charge packages in other ways, causing the banks to shift from offering packages to charging on a per transaction basis. He puts this forward as if everything has been just fine with service fee packages over the past two decades. Things couldn't be much worse in terms of what the banks are doing to customers. So once again I doubt these claims that this is going to be entirely onerous on the banks and actually have a negative impact on their customers.

Mr. Swedlove also claimed that negative option marketing by banks has not been raised as a concern through the whole process of the review through the MacKay task force and the committees and leading to the policy paper last June. This is actually a form of the Department of Finance practising negative option policy-making.

Did they ask consumers whether it was a concern? No. So it's not a concern unless consumers speak out.

Did they ask consumer groups? No, although it must have been very clear to them, given that I and many others appeared in particular in the summer of 1997 when Toronto-Dominion Bank was trying to impose privacy invasion on its customers through a negative option choice.

So once again I'm very concerned. I find it very mysterious that the department is out there speaking on behalf of the banks, having not even talked to the banks. I very much believe they were forced by a very active Liberal caucus committee, by the broad-based coalition of the Canadian Community Reinvestment Coalition and other consumer groups, and by very arrogant banks who were trying to shove ill-advised mergers down people's throats last year. All those things forced this department to be very supportive of measures to protect consumers, but nothing else.

The problems we have with the bill—

The Chair: Mr. Conacher, can I ask you to wrap up your opening statement, please?

Mr. Duff Conacher: Yes, indeed.

The Chair: Thank you.

• 0915

Mr. Duff Conacher: Some problems with the bill, if the proposed amendments are adopted, that we think should be changed include, first, that there should be a clear prohibition, not just a reviewable conduct measure. We don't believe the Competition Bureau has the integrity, the time, or the resources to track and file for reviews in any court. In other words, if it's just a reviewable conduct measure, the banks and others will just continue to get away with the practice.

The second problem with not having a clear prohibition is that for the civil penalties that are put in place, we don't believe a $100,000 fine will discourage any bank. The big five banks together make $95 billion in revenues. If there's a one-in-a-thousand chance of getting caught, which is what the chance of getting caught likely will be, then the banks and all others will view a $100,000 fine as being actually a $100 fine, because any business looks at a fine, multiplies it by the chance of getting caught, and that's the actual way they view the fine. If you don't believe me, you can talk to the most conservative law professors across the country, including Michael Trebilcock, who is a leader of the law and economics movement. He'll tell you that you can't regulate business by thinking a $100,000 fine is a $100,000 fine, because the business will always take into account the chance of getting caught and just knock down the fine by that amount. So the fine should be much higher. A $100,000 fine is no real disincentive to continue practising this.

Finally, if the proposed amendments are adopted, the complaints report would not specify which company is the subject of complaints, if the complaints are found to be justified, and we think this is very necessary.

Overall, I think the thing to keep in mind is that while it might be a small amount per customer, a nickel, a dime, a dollar per month, it amounts to millions of dollars of gouging for any business. The banks have 20 million customers. Every nickel they can gouge from their customers is $1 million in their pockets, but it may not be of much concern to an individual consumer.

Just to give you one quick example, CIBC recently set up a subsidiary and set up white-label, generic bank machines. This will give you an example of how far any business will go to gouge its customers. It is not identified anywhere on these white-label or generic bank machines, as you may have seen on the news recently, that it is a CIBC machine. It's set up by a subsidiary of theirs. If a CIBC customer uses a bank machine labelled as a CIBC machine, there is no Interac fee. Of course, you get charged withdrawal costs based on your basic package. CIBC, through a subsidiary, has set up 200 machines across the country. CIBC customers are given no notice that it's actually a CIBC-owned machine. If they take out $20, they are charged $1.25 by the machine, $1.25 by Interac, plus the cost of making a withdrawal from a CIBC account. There's triple dipping, with no notice given. It's truly negative option marketing and billing.

We're sitting here as consumer groups. You'll hear from some others. None of us are very big. We don't donate $500,000 to the major parties, as the banks do each year. We can't invite the minister to view a playoff game in our private box or threaten to leave the city.

The Chair: Would you please wrap up?

Mr. Duff Conacher: Yes. To wrap up, this is a private member's bill, and I feel the minister should be embarrassed that it is a private member's bill. The government has taken no action on this issue. Credit card interest rates is another issue that has been sitting there for years. If you're going to act with integrity, you'll close what we feel are loopholes in this bill. Keep it strong and push it through the minister.

I would challenge all of you on the government side that if this attempt to get such a bill through is thwarted once again by ministerial intervention, then I would hope some of you would cross the floor, because it's about time. Nothing has been done by this government to protect consumers since 1993—

The Chair: Thank you, Mr. Conacher.

Mr. Duff Conacher: —and it's about time to let the minister know.

The Chair: Thank you for your opening comments.

Mr. Janigan, I would ask that we stick to the time that was allocated, please.

Mr. Michael Janigan (Executive Director, Public Interest Advocacy Centre): I will attempt to do so. Thank you, Madam Chair.

The Chair: Thank you.

Mr. Michael Janigan: We'd first like to extend our thanks to the chair and the members of the committee for giving us an opportunity to speak today on an issue that has long tried the patience of consumer advocates. We commend the efforts of the honourable member from Sarnia—Lambton in sponsoring legislation to address this problem.

• 0920

The Public Interest Advocacy Centre, of which I'm the executive director, provides legal services and research to vulnerable consumers and the organizations that represent them. This work primarily concerns the issues involving important public services, including telecommunications, broadcasting, energy, financial services, and public transportation. PIAC's members include individuals, groups, and organizations representing 2.5 million Canadians.

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

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

We have thus seen the gradual implementation of such statutory measures as cooling-off periods, penalties for misleading advertising, and contract rescission for misrepresentation. Many consumer protection statutes have also tackled the problem of unsolicited goods, some barring legal remedies for collection where there has been no consent by the consumer to receipt of the goods. It is important to recognize that the intent of such measures is not simply to protect consumers, but also to eliminate competitive advantage conferred on an unscrupulous seller by engaging in these practices.

I want to address the implied notion of the opponents of this bill that this bill attacks industry practices that would otherwise be unassailable in law. Whatever the requirements that are currently being met by these industries under the standards set out in the various governing acts and regulations, there's nothing I'm aware of that imparts contractual status to circumstances that amount to the receipt of unsolicited goods. In effect, large industries such as cable or banking have frequently turned a common-sense protection afforded to them in law into an aggressive and disreputable marketing tactic.

Common law has always recognized a course-of-dealing exception to the requirement associated with offer and acceptance. For example, a hardware or grocery store may periodically receive shipments of goods from its supplier to be retailed in the store. There is no specific consent to the delivery of individual items, but an understanding exists that the store will pay the supplier for all shipments received within some kind of reasonable limit of business custom. Similarly, no specific consent is required for deliveries of natural gas or fuel oil to the homeowner, even though the quantities and time of delivery, which are ordinarily fundamental terms of a contract, have not been agreed to. What's important to note here is that the parties are delivering and paying for goods that are pretty much foreseeable under the terms of their initial agreement.

In the first example I gave, depending on the bargaining power of the retailer, he might also be able to ship back the unsold items to a supplier. In business arrangements where parties are of close to equal bargaining power, one will frequently find arrangements to deal with problems arising from an initial lack of detail.

This is a very dissimilar circumstance than what presents itself in industries that wish to market products or services that are different in significant ways from those that were initially contracted for. Consent to the changes is not simply inferred in law, because it may be difficult for the supplier to obtain the same or because a guaranteed percentage of customers must pay for the changes to make them financially viable. Whether the reason is the promotion of cultural content or maximizing the return to the shareholder, there is no blessing of contractual validity that is conferred upon such changes in contractual arrangements.

What I'm saying is simply this. Individual consumers may still retain the legal right to demand their money back for services they did not order in the industries that are affected by this bill, regardless of the bill's passage or failure. It happens all the time now. It's easier for these industries to quietly give a complaining customer his or her money back and continue to reap the rewards from the inattentive as a result of negative option practices, or perhaps the customer goes away after a few attempts.

What this bill seeks to do is to enlist the assistance of the Competition Act in making negative option billing reviewable conduct unless it conforms to the exceptions set out therein. These practices may still be subject to contractual remedies by customers misled by the practice who choose to seek a civil contractual remedy. This bill provides a statutory means to attempt to reduce the use of this practice and the numbers of customers who might be misled by the same.

• 0925

Whatever the high-flown objections to the statutory prohibition of this practice, two important conclusions are inescapable. The practice has meant that large numbers of customers in these industries don't know what they're paying for. Secondly, the practice has been enormously lucrative for the industries that use it.

The cable industry, of course, is a rather obvious example of the benefits to industry of the use of negative option marketing. In the 1980s and the early part of this decade, cable companies were able to add many new subscribers for additional tiers of service, many of whom were decidedly confused as to what they were getting. In 1993, for example, a survey found that 66% of Canadian cable customers reported that they obtained only basic service while in fact only 8% subscribed to the lowest level of service.

We are entering an era of provision of service through multimedia and other digital outlets where proponents will be competing aggressively for market share. It will be possibly fatally injurious to competition if key players using their existing customer base engage in negative option marketing to artificially make demand fit the expense of supply.

There will be a whole range of arguments to justify ignoring the requirement for consent in order to establish commercially viable Canadian services. We would suggest that all of these arguments essentially amount to the supposition that the interests of the industry should be preferred to the right of the individual customer to consent to a contract for goods and services. The marketing principle “what consumers don't know can't hurt them” is very much alive and well in the submissions of the opponents of this bill.

Bill C-276 seeks to empower Canadians by insisting that their right to choose be respected and that the historic relationship of vendor and purchaser be restored to industries whose products are important public services. We think this bill is both overdue and far-sighted, a unique combination that commends its passage.

Thank you, Madam Chair.

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

We're now going to turn to questions. Just to remind everyone, we do questions in approximately five-minute rounds, so everyone should try to take that into consideration.

Mr. Breitkreuz, please.

Mr. Garry Breitkreuz (Yorkton—Melville, Ref.): Thank you very much, Madam Chairman.

I listened with interest to your presentations. Of course, I agree with the principles underlying this bill. I was kind of hoping to hear maybe a few more suggestions on how to amend the bill or possibly strengthen the bill. The basic principle underlying the bill I think is supported by the vast number of Canadians.

Mr. Conacher, you made the point or wondered why this is a private member's bill and not a government initiative. How can you expect the government to support a bill like this with a principle like this when they are the biggest violator of that principle? How many services does the government provide to Canadians that they do not solicit and that they do not wish to have? I don't know how you would get around that difficulty.

If you would ever implement a bill like this, you would have to look first at yourself in dealing with a situation like this. I don't think it would take too much imagination to realize what I'm talking about or to find support for that.

I was hoping you would maybe explain a little bit more about the amendments, but I wondered if you would speak to that basic issue. You used the example of banks and all kinds of others, but you have a prime example in government as being the biggest violator of this principle.

Mr. Duff Conacher: I'll just say briefly that at least you do have a choice of governments once every four or five years. So if you don't like all those things being imposed on you, you can always vote them out.

Mr. Garry Breitkreuz: Good point.

Mr. Duff Conacher: Not a negative option vote either, although we do have problems with our voting system, which Democracy Watch is also concerned about.

The Chair: We're not here to discuss that.

Mr. Breitkreuz, any more questions?

Mr. Garry Breitkreuz: I was hoping you would give us some more concrete suggestions for amendments. You were going to get into this, and I really didn't hear very much about that whole issue.

Mr. Duff Conacher: I'll start with changing it. If I understand the situation correctly, there are proposed amendments that would change it from a clear prohibition to reviewable conduct. The reviewable conduct would be initiated by the Competition Bureau. We just don't see the bureau having the resources to track and file all these industries for a review.

• 0930

So it turns it into a complaint-driven process, which is essentially a negative option penalty, and relies solely on the bureau, which we have a lot of concerns about, both in terms of its ongoing operation since 1986, something we've commented about elsewhere, but also just in terms of resources to be able to track and file these for review in the court. So it should be a clear prohibition.

Then along with that, the penalties would be higher than if the proposed amendments were adopted. The civil penalties under reviewable conduct are fairly minimal. I say again, a $100,000 fine, I'm sorry, is not a $100,000 fine. Of course no business will ever tell you this publicly, but any law and economics professor will, and every so often you'll get a business consultant admitting that yes, businesses look at any fine, any penalty, and they calculate the chance of getting caught, and they multiply the penalty by the chance of getting caught. So a $100,000 fine with a one-in-a-thousand chance of getting caught is a $100 fine. And don't tell me that any bank or any other of these major corporations that would be affected by this bill are going to change their practices just because they might have to pay a $100 fine.

A clear prohibition changes it into a criminal offence with a much greater stigma for the business.

Finally, watering down the complaints report is a huge mistake. Essentially the bill, if the amendments are adopted, amounts to mostly moral suasion through this annual report. And this annual report sounds very general to me. It should specify which company is the subject of the complaints—again, if the complaints are found to be justified by the bureau—so at least that is out there publicly, if you pursue the other amendments.

Also, to pick up on one other issue that's not small but sounds small, there really isn't anything set out—and hopefully there would be in regulations, but it's best to put it in the bill itself—on this notice that has to be sent to the client. It could be in light pink ink on red paper in seven-point font at the end of an eight-page flyer, saying, “Oh, by the way, here's the description and the date and the cost, and here's how you obtain the service.” So they could essentially continue to practice negative option billing, because it's not really specified what type of notice exactly. “Standard form” should be in the bill in terms of the notice that has to be given to customers.

The Chair: Make this your last question.

Mr. Garry Breitkreuz: I was hoping the other witness, Mr. Janigan, would make some comments.

Mr. Michael Janigan: We appeared before the various committees that were studying the previous bill, which involved itself solely with the practices in the broadcasting industry, and obviously we were in support at that time of essentially a blanket negation of these practices within the context of the cable industry. This bill now has provision for an exemption for broadcasting services within certain conditions. On balance, we preferred the first version of this, but we understand the pressures that have been exerted with respect to this bill, and we're content to live with half a loaf rather than none, with the hope that the CRTC goes to school on the expression of distaste for this practice that's contained within this particular bill.

I have less concern than my colleague with respect to the migration of the prohibition from a criminal one to a civil one. It all deals with how aggressively the provision is enforced by the Competition Bureau. There is potential for implementing some change in these practices through the use of the civil regime that's in the Competition Act, depending upon the degree of enforcement.

• 0935

It's unfortunate that the civil law regime incorporates the quantum of penalties that it does, and my colleague is quite right that possibly larger financial penalties in the civil law regime with the Competition Act may be necessary for deterrence. But at least it's a start, and I'm prepared to live with the enforcement of this going to the civil law portion of the Competition Act.

The Chair: Thank you.

Thank you very much, Mr. Breitkreuz.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Mr. Janigan, I want to ask a couple of questions about page 6 of your report. You use the example from 1993 of the cable customers saying they thought they had one thing, but then they had less. Have you done any other studies along that line to express the same opinion on that?

Mr. Michael Janigan: There are no empirical results that I'm aware of. What I'm referring to is a study that was done I believe by Environics for the Friends of Canadian Broadcasting in 1993, preparatory to their submissions to the CRTC on regulation of cable distribution undertakings. I've taken the result directly from there. This followed essentially a round of negative option marketing for their extended tiers of cable, which the cable companies had done in the 1980s and early 1990s.

Mr. Walt Lastewka: You also say:

There will be a whole range of arguments to justify ignoring the requirement for consent in order to establish commercially viable Canadian services.

Could you expand on that sentence?

Mr. Michael Janigan: Well, there seems to be always a reason we should ignore the necessity to obtain the consent of the consumers when it comes to establishing viable commercial services. You could well see, for example, that in the future there may be some kind of multimedia service a company wishes to deliver to its customers, and it can only be established if they have a certain percentage of the customers take up. “Won't this be grand for the country, and won't it be grand for the industry? And boy, it will really be grand for our shareholders. All we have to do is send out these notices, and if people object, they won't get it; if they don't, we'll put it in. We know that lots won't object, even though they don't necessarily know they're getting it, so we'll have a commercially viable service and everybody will be happy.”

This is the same sort of thing we've gotten for years, for example, from the cable companies: “This is important work, gentlemen. We're dealing with the cultural protection of the country, and you have to let us do this.” Then we turn around and what we get is the space channel. The product that's promised doesn't necessarily always live up to the importance that is ascribed to it.

If we don't step in to deal with these kinds of arguments now, we're going to be faced with more and more of this in the future: how important things will be to the country, and that we don't have it established, and we have to have it established by making sure we have a certain market share. It's pretty easy to establish a successful business when you're guaranteed a certain market share of your existing customer base.

The threat of it—and I think this is principally why the Competition Bureau has given its consent and supports this bill—is it really is an attack on competition in the general sense. This presents a market barrier to anyone else who wants to get involved in the provision of services. If a bank, for example, can automatically get a take-up of 60% or 70% for a particular service, be it an insurance service or some other kind of service it wants to offer its customers, you're not going to get a competitor that can come in and establish a competing service, because the bank just has this inherent market advantage. It's injurious to competition, it puts a market barrier in place for competitive entry, and it is damaging to the industry as a whole.

Mr. Walt Lastewka: Thank you, Madam Chair.

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

[Translation]

Mr. Brien.

• 0940

Mr. Pierre Brien (Témiscamingue, BQ): Mr. Janigan, I'm a little surprised to see how strongly you're opposed to negative option marketing. When the privacy issue was on the table, where consent wasn't explicit, you did not object as strongly to persons obtaining personal information with more conditional expressions of consent. I'll come back to this later if time permits.

Although I think our two witnesses will likely respond negatively, given their statements, I want to ask them if in their opinion, there are circumstances where negative option marketing could be good for consumers. For example, how do you feel about the CRTC requiring consumers to take certain basic television services as part of a package or about Canadian content rules? Are you opposed to these practices as well?

[English]

Mr. Michael Janigan: No, because in that circumstance with basic service, what you're contracting for is what you're getting. Let's go to something ab initio. When you contract for basic service or sign, let's say, a contract from cable for basic service, you're expecting to get basic service, and basic service is what's defined from time to time by the CRTC in the context of the country.

When you're dealing with additional tiers of service, which are by definition optional and by definition not something that is integral to the cultural preservation of the broadcasting industry, these are additional services, and the fact of your sign-up with the cable company did not connote your acceptance of them layering further tiers of services on top of that. Basic service is a different thing.

That's part of the general package. When you went in to negotiate, you thought, “I'm going to get basic service, and basically this is chosen for me. At the moment, at least, I didn't get a right to pick this, this, this, and that. I'm going to have to get this.” You understand that you're going to get that. But the other practices in adding these tiers of services are certainly quite different.

If I could address the privacy concerns, I think you have to distinguish here, and I think you can distinguish, in terms of—and I think what you're referring to is in Bill C-6 the requirement for the ability to access the information for certain purposes on a negative option basis, the protection of a privacy right someone may have to the right to the individual information that he or she has or has given to a company and that of a contractual right. Contractual right by definition means an offer that is given and an acceptance of an offer.

In negative option marketing involving contractual rights, you are implying acceptance of the offer in the provision of the services.

In terms of the privacy right, it's a different matter. It's not a contractual right per se. It would be preferable, frankly, to have specific consent, but I think you can distinguish between those two circumstances in terms of Bill C-6 and the matters that are under discussion here.

Let's face it, it's far preferable in each circumstance to have a positive consent obtained, but in terms of thresholds of protection, I think it's more important in a contractual circumstance to make sure there is actual acceptance of a particular contractual provision.

[Translation]

Mr. Pierre Brien: I don't want to go on about privacy concerns at this time, because I'm sure we're not likely to agree.

You say you have problem with a certain number of restrictions being placed on basic cable service. Since the number of new services is growing, do you think the CRTC should be allowed to impose some restrictions on these new services in terms of Canadian content? By grouping certain services together in a tier or package, it's possible to reach a wider market and thus reduce the cost of providing the service. I'm thinking here in particular about French language services. In such instances, negative option marketing benefits the community. Moreover, the CRTC has ruled on this practice. You don't seem to have much faith in its ability to make a decision or to assess the necessary correlation between services offered to consumers, the cost of the services and the ability to group together services with Canadian content.

• 0945

[English]

Mr. Michael Janigan: There are a lot of questions in that particular set of questions. I'll try to answer them in series.

First, with respect to whether or not the additional tier should have minimum Canadian content, I think that's an interesting point. We haven't specifically got into cultural issues in terms of programming in the past. I think that's a matter for the CRTC to determine whether or not additional tiers of service have to offer some minimum Canadian content with respect to any tiers. And that's not something necessarily that this bill is addressing.

Secondly, whether or not in order to have these tiers established the use of negative option marketing should be sanctioned, I think that's a question that goes fundamentally to the root of this bill. In our view, we think it's not permissible to infer consent of individuals to the provision of services simply to accomplish some other goal that may be in fashion at a particular time.

In this circumstance, the goal is, hey, we won't have commercially viable services unless we invent the fiction that everybody out there has consented to receive this and is willing to pay for it through the negative option practice.

We think if service is important, put it on basic service. If it's an additional service, then it should be an optional service. If you want it, you should subscribe to it or you should sign up to get it. There are a lot of different cultural pursuits that could be made commercially viable and would be excellent for Canadian culture if they could be established by negative option marketing.

Magazines could thrive in Canada. Movies probably could thrive in Canada if you were billed for services that you didn't necessarily know you were receiving but pay for anyway. How would fundraising during elections be aided if you were able to send out a notice to everybody who gave you money in the last election that they'll be billed for the same amount in this election unless they object. It's an easy practice is establish commercial viability through negative option marketing. But unfortunately, it's wrong. What you're doing is inferring consent when no consent exists.

The Chair: Thank you.

Thank you, Mr. Janigan, and thank you, Mr. Brien.

Madam Jennings, do you have any questions? No?

Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair. Let me also welcome the presenters this morning, and permit me, through you, Madam Chair, to make an opening comment.

I was under the impression today that we were coming here to discuss arguments for and against and how we can improve...as opposed to just simply government bashing.

With that, I want to address my questions to Mr. Conacher, because in stickhandling his way around his presentation he talked in generic terms but never really gave us any concrete facts. I'd like to begin by asking a question on the generic ATM machines you referred to. Correct me if I'm wrong, but you stated that these were machines owned and operated by the CIBC, if I'm not mistaken.

Mr. Duff Conacher: A subsidiary of the CIBC.

Mr. John Cannis: Nevertheless, it ends up in the same pocket.

Mr. Duff Conacher: I agree.

Mr. John Cannis: Have you brought any facts to substantiate that? My understanding—and let me finish my question—is that there are machines out there that are also owned by individuals who operate them—

Mr. Duff Conacher: Yes.

Mr. John Cannis: —and they operate them, to my understanding, as a business. There's a cost factor, to my understanding, for running this ATM machine. So if you're saying they are owned by a subsidiary of the CIBC, what percentage of these machines are owned by the subsidiary of the CIBC?

Mr. Duff Conacher: CIBC has 200 of what's been reported to be 4,000 in total of these generic or white-label machines, as they're also called.

Mr. John Cannis: Do you not see that also as expanding the choice for the consumer, adding more machines available to the consumer, and it's his choice should he wish to use the machine?

Mr. Duff Conacher: Indeed. It would just be nice to be given notice, as most people are, that if you are a CIBC customer and you use a CIBC machine, you will not be charged the Interac fee, because you're dealing with your own bank and there will be no extra surcharge. You'll only be charged whatever you're charged depending on your package for withdrawals.

The CIBC's machines charge you $1.25. You're also charged the Interac fee as if you're dealing with another financial institution, plus you also pay whatever you normally pay for a withdrawal. That's triple-dipping, with no notice to the customer.

• 0950

Royal Bank is doing it differently. They also have some machines out there that are generic and they do have a little notice that it's a Royal Bank machine, but they're not charging the Interac fee; they're not charging the customers anything extra for using those machines.

Mr. John Cannis: My last question, Madam Chair, has to do with the types of fines Mr. Conacher referred to. You kept referring to $100,000. If you have any specific examples, I'd appreciate it if at some point in time you can provide them to us.

I know in some of the data I have read with respect to the Competition Bureau's efforts when concerns come forward that are substantiated, from my understanding—and maybe you can confirm—the most difficult part is having people come forward with not just one case or three cases, but...as we can all appreciate, you need a certain amount of evidence to be able to put your case forward.

To my understanding, according to some of the most recent data I have—Madam Chair, if you will permit me to put this on record here—the Competition Bureau, with the resources it had in the last year, penalized guilty parties almost close to the tune of $80 million. I have a couple of examples I'd like to tell you about, Mr. Conacher, for your records too. I know Hoffman-La Roche, for example, was fined $48 million. Another example is the snow removal companies in Quebec, $3 million. It goes on, with BASF AG fined $2.25 million. I haven't seen fines at $100,000 such as you referred to, unless you can give us some specific examples of who was fined $100,000 and the size of the company.

Mr. Duff Conacher: This is under proposed amendments. With the civil remedy system there would be—if I'm understanding everything correctly, and I hope I am—a maximum of $50,000 for an individual, for the first order against an individual, and a maximum of $100,000 for any subsequent order. For corporations, it would be a maximum of $100,000 for the initial order and for any subsequent order a maximum of $200,000. So again, I would say given that there's not going to be 100% enforcement—I don't know of any law for which there is, not even stop signs—any business will look at that and multiply it by the chance they think of getting caught and that's the actual amount of the fine.

Mr. John Cannis: What is your one recommendation, if you will, your strongest recommendation?

That's my last question, Madam Chair.

Mr. Duff Conacher: I'd say if you're going to stick with this, again, increase the penalties. Returning to the notice that a client would receive, again I would suggest putting the 1-800 number for Competition Bureau on that notice the individual receives. If they have any problem and they think there's something that's not right, make it easy for people to complain if you're going to stick with a complaint-driven system.

Mr. John Cannis: Are you not aware that this exists now, that there's a whistle-blowing facility set up?

Mr. Duff Conacher: Yes. I'm here in Ottawa and I'm a lawyer and I study competition law. But I'm sure if you ask people if they know when they're supposed to call the Competition Bureau, you'd probably have 99% of Canadians saying “When I see too much competition”, when in fact it's the exact opposite, because it's called the Competition Bureau as opposed to the anti-trust bureau, which is an equally obscure term.

If it's going to be complaint-driven with a very low penalty, I don't think it's going to work. I invite you, as a committee, to have hearings on how to regulate corporations. Invite the most conservative law professors in the country, and they'll come and tell you exactly the same thing. Any business will look at a fine, divide it by the chance of getting caught, and that's the fine for the business. Businesses think about the bottom line, and they calculate everything based on the bottom line; they calculate penalties and any sanction out there.

All of these excuses and reasons that unfortunately Mr. Swedlove has also pushed—essentially it's just that businesses don't want rules. That's all. They just don't want rules. If there are no rules, there are no rules to break, and they can treat their customers however they want. People are sick of that, in many ways.

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

Mr. Jones, please.

• 0955

Mr. Jim Jones (Markham, PC): Thanks, Madam Chair.

The biggest abusers of negative option billing have been cable companies, I guess, in the past. There probably is new technology that the cable companies can use such that passing this bill will not really hurt them from a standpoint of choice, but are there other industries that will be impacted?

For example, at one time I used to belong to the Book-of-the-Month Club. If I didn't send the card back every month, I would be sent a new book. Is that negative option billing?

Mr. Michael Janigan: It certainly is a circumstance that could be characterized as negative option billing, although at the start of the entire process, you're asked to contractually bind yourself to an arrangement that would include the provision of a book on a once-a-month basis, for which you would be billed unless you sent it back. From that standpoint, then, it may be inferred that this process was part of the original contract.

As I understand it, such things as the Book-of-the-Month Club and the record thing have retreated to a large extent, primarily because the problems associated with collection were so enormous that they've gone to a positive option rather than a negative option.

I think it's obvious that the banks still have a relatively large interest in maintaining this practice as part of their marketing arsenal and would like to see more flexibility given to them in order to do these kinds of practice without the impediment of this bill. I think some fairly substantial returns can be earned by banks and others with large marketing bases through use of this bill.

As well, even though most of the cable companies have gone cold turkey on the negative option, some of them still have the intent to practice it. So we think this would be a very positive consumer measure.

Mr. Duff Conacher: I mean, it is defined, which businesses this bill would apply to. Who can predict what the provinces would do as a follow-up in terms of regulating enterprises and businesses that offer services at a provincial level? That's always the difficulty we have with our system, that in most cases you can't just do one law to apply to businesses across the country because of the jurisdictional split. This bill is only going to affect the businesses that are set out in the bill, which does not include the Book-of-the-Month Club or any others.

Mr. Jim Jones: I'm aware that probably the cable companies could have it that as soon as you turn on your TV.... For instance, when DirecTv comes up there, you have your manual, and you can select what you want.

The biggest complaint I have of the cable companies is that they bundle channels together. If you want to get, say, MSNBC, it costs you $20 to get these six other channels. That's the bigger complaint I have, because I think you can get around this negative option with the technology now, menu selection and all of that.

I'm not aware that this is pervasive other than among the cable companies. Is negative option billing pervasive in other industries?

Mr. Michael Janigan: I think some examples were provided by the sponsoring member, when he introduced this legislation, with respect to the banks, in particular. He gave the example of the National Bank of Canada, which had chosen to introduce some type of health coverage insurance by way of a negative option marketing plan that deducted $9.50 per month from a bank customer if they did not object to its provision.

I don't know how carefully you read your statements in the mail, but frankly, I'm not a very careful reader of a lot of things that come to me—for instance, bills and invoices. In circumstances where you have an incredibly large customer base, it's very easy to get take-up for a new service in a big way if you have a negative option technique. In this circumstance, obviously the banking industry has a very big incentive to keep this particular weapon in their arsenal.

Mr. Jim Jones: Thank you.

The Chair: Thank you, Mr. Jones.

Madam Jennings, please.

• 1000

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): One thing that's been mentioned in other hearings is that in the bill there's no definition of what is a new service. Have you thoughts on whether or not there should be some attempt to define what is a new service?

I'm asking this because I'm confused as to what is a new service. If I buy a coat, say, and I take it to my cleaners to be cleaned, and it comes back exactly the same but with different buttons on it, for instance—it's not a new coat but slightly different—although I may not be happy with the buttons they put on, it's not a new service.

I'd like to know if you have any thoughts as to whether or not the proposed legislation should include a definition or else some guidelines or criteria that could be used in interpreting whether or not a service is in fact a new service. That might then clarify some of the other issues you've raised.

The Chair: Mr. Conacher.

Mr. Duff Conacher: There are, I understand, some amendments that would clarify it somewhat. For services required by law, where a business is required by law to provide the service, then obviously that would not be subject.

Ms. Marlene Jennings: That would exclude.

Mr. Duff Conacher: Right.

I agree with you, though, that it's essentially left to be prescribed in regulations. That's dangerous, I think, because regulatory power and the process of putting in place regulations is usually not quite as public as this process. Essentially, all of the intent of the bill could be drained out, depending on how service is defined.

In Democracy Watch's view, we would like to see privacy included in this. I know there's a concurrent bill going through, but we feel this sharing of information is for the purpose of soliciting customers for new services. We think it should also be included. Again, we'll see exactly what happens with that bill, but it looks as though only implied consent is going to be put in place.

I understand the difficulty for drafters, having studied legislative drafting myself. It's very difficult to come up with an all-encompassing list. It's often better to say “including but not limited to”, and then list what would be a service. Again, it would be a further step forward to include that list in the bill, at least in a basic, general way. It then could be further defined by regulation so that at least there are some safeguards and it isn't left to what could be very much a backtracking regulation to define service in a very limited way, which would then allow the practice to continue in most areas.

Ms. Marlene Jennings: I'm confused, Mr. Conacher. I have the definition here. It says:

“service” excludes services prescribed by the Governor in Council under section 128.

That's quite clear. Anything the Governor in Council prescribes in a regulation will be excluded from the definition of service. But that doesn't help me understand what would be a new service.

Mr. Duff Conacher: No, I agree. It's a legislative drafting problem, as with any definition or list.

Ms. Marlene Jennings: And I'm asking whether or not you have any suggestions as to how new service could be designed. Would that have to wait until we see what's prescribed under section 128?

Mr. Duff Conacher: It's something I haven't thought about as much as I should have, but I can follow up with a letter to you.

Ms. Marlene Jennings: Please.

Mr. Duff Conacher: Especially in the banking area, with which we're most familiar...and obviously the Public Interest Advocacy Centre is much more experienced in telecommunications than is Democracy Watch. Hopefully we could jointly cover that by setting out what should be at least a basic guarantee in the legislation and then specifics to come through the regulations.

Ms. Marlene Jennings: Mr. Janigan, do you have any thoughts?

• 1005

Mr. Michael Janigan: I think you may be right that clarity of interpretation may be assisted by including in the definitions section a definition of what constitutes a new service. Essentially there's been an effort to do that in the exceptions section, which to some extent hints at what may or may not be considered a new service. But I think you're right; for the purposes of clarity, new service could be included in the definitions section.

I would be very hesitant to offer the wording of such a definition at this point in time, but certainly I'd be happy to direct my mind to it and forward it to the attention of the committee.

Ms. Marlene Jennings: Thank you.

The Chair: Thank you very much, Madam Jennings.

Mr. Brien, please.

[Translation]

Mr. Pierre Brien: I ran short of time earlier. Before I put my next question, I'd like to comment on Mr. Conacher's presentation.

You concluded by saying that it would be very easy for a political party to tell people that they gave in the past and unless they give notice to the contrary, they will continue to give in the future and that their bank authorization was still valid.

As you undoubtedly know, there is legislation on the books in Quebec, the Consumer Protection Act, which prohibits certain practices. A number of negative option practices are considered illegal. This legislation covers a range of practices and applies to a number of sectors, including federally regulated companies operating in Quebec.

In the case of the National Bank, we'll have to agree on the definition of negative billing. You cited the example of health insurance coverage that the consumer received free of charge for a three-month period and for which he was subsequently billed $9. At the outset, the consumer must sign a contract indicating that unless he advises the company to stop sending him the product after the three-month trial period is up, he will be billed subsequently for the product. The onus is on the consumer to terminate the contract if he so desires. How can you call this negative option billing, when the consumer signed a contract with the financial institution?

[English]

Mr. Michael Janigan: In that circumstance, you would have to look back at the terms of the original contract, whether or not you in fact were in agreement that if you did not signify at the end of the three months, you would be automatically billed. The question arises, of course, as to how the contract was conveyed and what were the terms entered into, but under the scenario you've given to me, it's certainly much less clear that it is your classic negative option marketing situation. Whether or not the circumstances can be saved by the terms of the initial contract is certainly an arguable point.

If you're saying that's not your classic situation, then on the basis of what you told me, I think I would agree.

[Translation]

Mr. Pierre Brien: You're the one who gave the example of the National Bank. Are you familiar with the terms of the original contract?

[English]

Mr. Michael Janigan: No, I took those from the comments of the member who introduced the bill in his statements before the House in March. He gave seven or eight different examples concerning the different industries and the necessity for regulating them. Unfortunately, those additional facts were not contained therein.

[Translation]

Mr. Pierre Brien: Fine, thank you.

[English]

The Chair: Thank you very much.

I want to thank you, Mr. Conacher and Mr. Janigan, for being with us this morning. We appreciate your comments. If you have any follow-up comments, as was discussed, we would appreciate receiving them by the end of next week, if that's at all possible.

We're now going to suspend for about five minutes to allow witnesses to change places.

• 1009

• 1016

The Chair: We're going to reconvene.

I want to welcome our next group of witnesses here today. We have with us four different groups: the Canadian Association of Broadcasters; the Specialty and Premium Television Association; the Canadian Cable Television Association; and the CRTC.

I would propose that we hear everyone's opening statement in order of the witnesses I have just listed, and just to make everyone aware, it has come to my attention there's a possibility of a vote between now and 12:30 p.m. Hopefully, we'll be finished before it's called. If there is a vote, we'll have to determine what we'll do in the event that does happen. So I apologize if there's any inconvenience caused to anyone who's here today as a witness.

I'll begin with the Canadian Association of Broadcasters, and we have Madame Sylvie Courtemanche and Mr. Pierre-Louis Smith. I'm not sure who's doing the presentation.

Ms. Sylvie Courtemanche (Senior Vice-President, Specialty and Regulatory Affairs, Canadian Association of Broadcasters): We both will be, Madam Chair. Thank you very much. Good morning, Madam Chair and committee members.

I am Sylvie Courtemanche, senior vice-president, specialty and regulatory affairs for the Canadian Association of Broadcasters. With me today is Pierre-Louis Smith. He's the director, regulatory affairs, for Groupe TVA Inc., and is vice-chair of the CAB specialty board.

I'd like to begin by thanking you for the opportunity to appear before you today. The CAB's opening remarks will follow closely the submission in both official languages that we filed with the clerk.

The Canadian Association of Broadcasters represents the majority of Canadian programming services, including private radio and television stations, as well as private networks and specialty services, and is pleased to have this opportunity to provide its remarks on Bill C-276, an act to amend the Competition Act.

The issue of consumer protection is the cornerstone of this bill. It was in fact with the specific goal of ensuring consumers are given a choice of programming provided by Canadian distribution undertakings that Bill C-216 in 1996-97 and Bill C-288 in 1998 were introduced. Both of those bills were in respect of regulated undertakings only under the Broadcasting Act.

For its part, Bill C-276 encompasses a multitude of federal undertakings, including broadcast undertakings. The objective remains the same: ensuring consumers are given a choice in respect of goods or services. The bill seeks to prevent forcing additional costs on the consumer for services rendered or obtained without his or her specific prior request for such services.

At the very outset, the CAB would like to state its support for the basic principles of the bill. The consumer is the key element for any broadcast undertaking and is in fact our reason for being. However, the CAB is of the view that the bill, as originally drafted, could have disastrous consequences on the viewing choices that could be offered to television viewers.

First, let's determine the impact on the consumer should the bill never come to pass.

Program distributors in English Canada have stated unequivocally that negative option marketing is obsolete. The launch in the fall of 1997 and 1998 of programming services in English Canada took place without resorting to negative option marketing. Any new launch of English programming services will be carried out in the same manner. The practice of negative option marketing could, however, be used in the broadcasting sector in the event the Canadian Radio-television and Telecommunications Commission were to license a mandatory service, or in the circumstance of a launch of French language programming services.

• 1020

By its very nature, a mandatory service includes a particular public interest component, since the commission must conclude that such a service must be offered to all Canadians in order to meet the objectives of the Broadcasting Act. In Canada, only two programming services have been given mandatory status to date: the TVA network and the Aboriginal programming service, APTN.

In its current version, the bill could limit the commission's regulatory and supervisory powers under the Broadcasting Act. It could in fact have the effect of preventing the commission from licensing a mandatory service, since it would be impossible to ensure distribution of the service to all Canadians. Thus the bill could raise a major jurisdictional argument.

Where French language programming services are concerned, there are unique market circumstances that require flexible marketing approaches.

[Translation]

Mr. Pierre-Louis Smith (Director, Regulatory Affairs, Groupe TVA Inc., Canadian Association of Broadcasters): Thank you, Sylvie.

In May 1999, the Commission licensed four new French-language specialty services which are expected to be launched in January 2000. There are currently 27 English language specialty services, 13 French language specialty services and two specialty services providing bilingual programming.

The imbalance between the number of French language and English language programming services is due to the much smaller size of the French language market. The English language market contains roughly 6.6 million subscribers whiles its French counterpart has approximately two million potential subscribers. It should also be noted that a French language programming service incurs the same programming costs as an English language service, but does so in a substantially reduced market. French language programming services offer a considerably higher amount of Canadian programs, 71 per cent in fact, compared to English language services at 62 per cent. Moreover, cable subscription in Quebec is the lowest in Canada - 67 per cent versus 79 per cent in English Canada.

This reality is what creates unique French language market circumstances and what, in fact, makes negative option marketing necessary in order to meet the objective of increasing television services at an affordable price in French language markets. Should new French language services be provided à la carte or as part of a package based on positive option marketing, it would be impossible to ensure their success.

The combination of a limited market, fixed operating costs and a low subscription rate creates unique and difficult circumstances for French language programming undertakings. Marketing satellite television services in any market raises particular concerns.

For example, the most popular satellite television service in the U.S., A&E, which has a subscriber base of 70 million, refuses to allow its services to be marketed à la carte because of the impact this distribution method would have on its programming service. There are other similar examples.

It should be noted that existing French language specialty services have had a substantial economic impact. French language services require a large quantity of new content given the very limited availability of programming for French language specialty services.

It follows that there will undoubtedly be substantial economic benefits as a result of the introduction of the new French language specialty services. Therefore, we must not lose sight of the fact that the supply of French language programming in Francophone markets is more limited than in English markets. More flexibility in the marketing approaches for French language markets is needed in order to attain a cultural balance within the broadcasting industry. Thank you.

[English]

Ms. Sylvie Courtemanche: The CAB believes amendments to Bill C-276 are essential to safeguard the commission's existing jurisdiction over the broadcasting industry and the future licensing of mandatory services.

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Bill C-276 should in fact include a mechanism allowing Heritage Canada or the commission to create an exception to the bill for cultural reasons. As it now stands, the bill allows for exceptions strictly by Industry Canada and only for economic reasons. Including an exception for cultural reasons where the broadcasting industry is concerned would in no way reduce the degree of protection afforded to consumers by the bill. Rather, it would put the broadcasting industry in a position to meet the cultural goals of the Broadcasting Act and give consumers the opportunity to benefit from a wider choice of television services at an affordable price in all Canadian markets.

This concludes our opening remarks, and we're available to answer any questions you may have. Thank you.

The Chair: Thank you very much.

I'm now going to turn to the Specialty and Premium Television Association. We have Ms. Jane Logan, the president and CEO and, accompanying her, Mr. Michel Arpin, vice-president, planning, Radiomutuel, and Mr. Pierre Roy, president and CEO of Les Chaînes Télé-Astral. Ms. Logan, please.

[Translation]

Ms. Jane Logan (President and CEO, Specialty and Premium Television Association): Thank you, Madam Chair, members of the committee. My name is Jane Logan and I'm the CEO of SPTV, the professional association representing the majority of licensed Canadian specialty and premium services in English, French and third languages, including 15 French language services operating in Quebec.

With me today are two members of our board of directors, Mr. Pierre Roy, President and CEO of Les Chaînes Télé-Astral, and Mr. Michel Arpin, Vice-President of Planning for Radiomutuel.

[English]

We submitted our brief two days ago, so we're not going to read it out loud, but we have some comments we'd still like to make today.

In 1997, one of SPTV's first activities as a newly created trade association was to intervene with respect to the original negative option marketing bill put forward by Roger Gallaway, due to our concerns over the expansion and survival of French language viewing choices. We are pleased that the concerns put forward at that time about the particular issues confronting the French language market have now been accommodated in a government amendment to this bill, and it's supported by its author, Roger Gallaway.

SPTV acknowledges the importance of upholding consumers' right to choose and supports the fact that negative option marketing is no longer used for the launch of new English language services in anglophone markets.

[Translation]

However, in Francophone markets, in order for consumers to have the right to choose, they must first be offered a truly diverse range of French language services providing high quality programming.

Mr. Michel Arpin (Vice-President, Planning, Radiomutuel, Specialty and Premium Television Association): With few exceptions, Madam Chair, French language specialty services are currently distributed almost uniquely in Quebec's Francophone market, a market that has only 1.8 million cable subscribers compared to 6 million subscribers in the rest of Canada.

This undeniable demographic reality means that in order to simply operate and be economically viable, French language specialty services must be offered in an affordable tier or package to a significant percentage of this limited potential subscriber base.

If these conditions are not met, that is if new French language specialty services are not authorized and widely distributed, then the quality and diversity of the French language programming offered to Canada's Francophones will diminish, while the number of Canadian and American English language services will increase.

The French language cultural milieu would also lose some momentum in its ongoing development. Specialty services provide a creative outlet for countless French language authors, producers, technicians, set designers and actors. In particular, these specialty services have contributed to the creation of nearly 5,5000 direct and independent jobs in television production in Quebec.

These services have also played an innovative role in bringing to the viewing audience stories to which they can relate. Canal D, MusiMax, Canal Vie, Canal Histoire, Canal Z, CD-Plus, Canal Évasion and the soon to be seen Canal des arts have developed and will continue to develop Canadian programming that has strong audience appeal because it reflects people's aspirations.

• 1030

Mr. Pierre Roy (President and CEO, Les Chaînes Télé-Astral, Specialty and Premium Television Association): Madam Chair, I want to underscore how very important it is for us to serve our subscribers well and how respectful we were of consumers during the last round of hearings on the licensing of new French language specialty services.

When the last series of new specialty services was launched in 1997, Quebec consumers complained mainly about the fact that cable companies had switched some services from one tier or package to another, forcing consumers who wanted to keep receiving some existing services to subscribe to a new package.

Mindful of this situation, we proposed that the new tier of services to be launched in January be offered as a separate choice to consumers. In other words, we proposed that the new tier be composed solely of new services to which the consumer would be completely free to subscribe or not, without changing established tiers or migrating services between tiers. We're convinced that this approach respects the freedom of choice of consumers. Combined with negative option marketing practices which are well explained and respectful of consumers, this approach provides the two essential ingredients for the successful launch of new French language specialty television services in Quebec. Not only do these conditions ensure respect for Canada's Francophones as consumers, they also ensure respect for them as full citizens with the right to choose freely the services to which they would like to subscribe. However, people also realize full well that in order to exercise this right, a real diverse selection of affordable French language programming services must be extended, offering high quality, attractive programming that promotes their culture and values and responds to their needs.

In a healthy democracy, Parliament and the Government of Canada must take into account the full range of needs, expectations and interests of the Canadian public. For this reason, we urge the committee once again to adopt the amendment to Bill C-276 put forward by the government and supported by numerous stakeholders, including the author of the bill, MP Roger Gallaway.

Ms. Jane Logan: Thank you for your attention. We would now be pleased to answer your questions. Thank you.

[English]

The Chair: Thank you very much.

I'm now going to turn to the Canadian Cable Television Association. We have Mr. Masciantonio, director of government relations; Madam Roscoe, senior vice-president; Mr. Taylor, senior vice-president, legal; and Madam Parenteau, director for the Quebec region.

Madam Roscoe.

Ms. Elizabeth Roscoe (Senior Vice-President, External Affairs, Canadian Cable Television Association): We would like to begin by thanking the committee for this opportunity to appear before you to provide clarity on the cable industry's position on Bill C-276.

We're also very pleased to be here with our colleagues from the Specialty and Premium Television Association, the Canadian Association of Broadcasters, and the CRTC.

Before we begin, I would like to take this opportunity to introduce the members of the association who are here with me this morning. My name, as you indicated, is Elizabeth Roscoe, senior vice-president, external affairs. Lysline Parenteau is the director for the CCTA Quebec region. Chris Taylor is senior vice-president, legal and regulatory, and Nick Masciantonio is the association's director of government relations.

We have some brief opening remarks and would then be pleased to answer your questions.

CCTA represents over 85 member companies that collectively provide cable television service to over 7.3 million homes. We are the national association representing companies that provide primarily broadcasting distribution service throughout various regions of Canada, such as Rogers Communications, Shaw Communications, Videotron Limited, as well as companies that operate in smaller communities, such as Cablevision du nord de Québec, Cable Atlantic, and Delta Cable from B.C.

The companies we represent are very focused on satisfying our customers, on being technological leaders, and on responding to the competitive marketplace. They are partners with broadcasters, pay and specialty services, in fulfilling the Canadian cultural connection.

We understand that the objective of Mr. Gallaway's legislation is to ensure that the right of Canadian consumers to express consent for new services they receive from federally regulated industries is enshrined in the Competition Act.

The cable industry supports the move to obtain express consent for new services. Cable companies today adhere to the practice of allowing customers to expressly indicate their choice to add or refuse new services. Obtaining express consent, or, as we and others refer to it, positive option marketing, has been used by cable operators with the introduction of new specialty and pay services in 1997, and also in Quebec from 1998 to today.

• 1035

Positive option marketing is also being employed by cable companies, with the introduction of digital cable service, which provides significant consumer choice and increased channel choice for customers.

We have brought along a number of marketing materials, which we will distribute, to demonstrate the degree to which the industry members now work to inform, educate, and obtain express consent from their customers. Our member companies respect their customers. We learned from our customers in 1995.

In the time we have available, we'd like to update members on the competitive environment. We'd like to address one element of the legislation that we believe requires modification, and we would like to review the position of our Quebec members, who are preparing to launch four new language specialty services in the coming year.

The Canadian cable industry is very focused, as I said, on our customers. We understand clearly that customers today have a choice of distributor. This in turn means we have to work very hard to keep and satisfy our customers.

A variety of competitors have emerged since the introduction of competition to the cable industry in 1996. There are two national direct-to-home satellite providers that provide digital video and audio service, with well over 100 different programming choices. MMDS services, which are wireless cable services, have also established themselves in Manitoba, Ontario, and Quebec, and are seeking licences from the CRTC to operate in B.C.

In larger communities, multiple-unit dwelling owners have been allowed to apply for and be granted BDU licences. A new type of competitor has emerged that was not envisaged at the time by government or the CRTC, namely residential developers, who are themselves laying the cable and telecommunications network to serve new developments.

The reality is that there are a variety of competitors providing cable television service across Canada. In response to this environment, the cable industry has worked hard to improve its customer relations and service offering by introducing new digital technology and adding new programming services to increase the value of our service. Above all, we have worked to improve our customer relations, billing practices, and customer call centres, providing on-time service calls and improving our marketing efforts.

Let me now turn to the specifics of the legislation. As mentioned at the outset, we have reviewed this current draft of the legislation and support its intent. However, the CCTA and its members recommend that proposed paragraph 53.1(2)(a) be modified. This paragraph requires that specific customer notification be sent three times consecutively before a new service can be provided to customers and that express consent be obtained from the client. Members should know that the cable television industry is already subject to a number of CRTC regulations and our own industry self-administered standards, which require customer pre-notification.

We believe the drafting of paragraph 53.1(2)(a) is actually a constraint to the customer and the service provider. Take, for example, a cable company in Manitoba that applies to the CRTC for a condition of licence to carry a new service, such as a hypothetical Canadian travel channel. It should be noted that cable companies usually apply for new services with the support of community organizations and their customers. If the travel channel is approved by the CRTC for that operator in September and the cable company advises its customers of its availability and obtains electronic consent through the customer account department in October, the way paragraph 53.1(2)(a) is drafted it would be January before the company could actually provide this service, after receiving express consent, or it would be a reviewable matter by the Competition Bureau.

The result of this clause is, in our view, both very onerous and costly for the cable company. More importantly, it's very inefficient for the consumer, who cannot receive the new service for three months, even though they absolutely want and indicate their desire for that service. This section of the act does not allow companies to efficiently offer new services, respond to the competitive market, or meet consumer desires. We would be pleased to work with Mr. Gallaway to revise this section of the draft.

Finally, let me turn to Lysline, who will review the position of our Quebec members on this legislation.

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[Translation]

Ms. Lysline Parenteau (Director, Quebec Region, Canadian Cable Television Association): In other committee proceedings examining earlier drafts of the bill, it was made clear that Quebec cable industry members wanted to see the legislation contain an exemption allowing them to use negative option marketing to introduce new French language services.

The rationale for that exemption was deemed to be specific market issues as well as our collective interest in supporting our cultural obligations to successfully offer French language services in a more restricted market.

While Quebec cable operators are supportive of the exemption, they question how such an order may be deemed to be appropriate and how it will actually come into effect.

For example, if the federal Heritage Minister allows the use of negative option marketing, but provincial law forbid its use, what happens then? Who decides if the cable company is complying with or in violation of the law? If the federal government truly believes that for cultural reasons, the negative option approach must be allowed in some cases, its use should be ordered from the outset.

If that were the case, federally regulated distribution undertakings would comply. Such a situation could arise in all provinces in which provincial laws prohibit negative option marketing.

[English]

Ms. Elizabeth Roscoe: That concludes our remarks.

The Chair: Thank you very much, Madam Roscoe.

I'm now going to turn to the CRTC. We have Madam Andrée Wylie, the vice-chairperson of broadcasting, and Monsieur Jean-Pierre Blais, executive director of broadcasting.

Ms. Andrée Wylie (Vice-Chairperson, Broadcasting, Canadian Radio-television and Telecommunications Commission): Good morning. Bonjour, Madam Chairman and members of the committee.

Thank you for inviting us to appear before you today. My name is Andrée Wylie and I'm vice-chairperson of broadcasting at the CRTC. I'm accompanied by Mr. Jean-Pierre Blais, executive director of broadcasting.

Before giving you the commission's point of view on Bill C-276 in response to your questions, I'd like to provide you with a very brief overview of the current communications environment, as well as the commission's role and mandate in this context.

[Translation]

As you know, Parliament has created the CRTC and given it the broad mandate to regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policy set out in the Broadcasting Act.

[English]

The act imposes on the commission the responsibility to ensure that the programming provided by the Canadian broadcasting system is both varied and comprehensive and that it makes as much use as possible of Canadian talent and Canadian resources.

The act also stipulates that distribution undertakings should provide efficient delivery of programming at affordable rates, using the most effective technologies available at reasonable cost.

The commission regulates conventional, private and public radio, and television stations, and has to date licensed 15 French language specialty services, 29 English language specialty services, and 5 specialty services in other languages.

[Translation]

In the Commission's 1997 vision statement, the interest of consumers is at the heart of the Commission's objective. The Commission aims to ensure that in an increasingly competitive environment, Canadian viewers have choices among affordable and diversified programming as well as distribution alternatives.

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The broadcasting distribution industry is in transition at this time, as is the whole communications environment. Technologies are evolving, the industry is consolidating, globalization is advancing and new services are being developed. It does not seem that long ago that cable was the only provider for the distribution of television signals.

[English]

Since 1995, the commission has licensed alternatives to cable, such as direct-to-home satellite or DTH, like Expressvu and Star Choice, and multi-point distribution or MMDS, such as Look TV. These distributors use digital technology, which permits the offering of programming services to consumers on an individual basis. Cable operators are also now in the midst of converting all or part of their systems to digital technology. A key characteristic of such digital offerings will be their addressability from a technological perspective. Accordingly, the technology itself will offer more options for consumers.

Currently, Expressvu and Star Choice have approximately 600,000 subscribers between them throughout Canada. A study prepared for the Canadian Association of Broadcasters has predicted that digital subscriber levels, including cable, BTH, MDS, and others, will reach approximately 2 million to 3.2 million subscribers in the English language market and 700,000 to 1.1 million in the French language market by 2005.

[Translation]

During the transition period, the Commission will ensure that there continues to be a strong presence in programming choices which reflect the linguistic duality, cultural diversity and social values of Canada.

In order to encourage distributors to offer a greater choice of programming services, the Commission is in the process of completing a new licensing framework for specialty and premium services that will be used in the consideration of new applications for such services during this transition period. The Commission will be issuing its determination in January 2000.

[English]

In this transitional environment, the French language broadcasting distribution market presents unique challenges. One of the main characteristics of the French market is its relatively small size in relation to the English market. While there are approximately 6.6 million subscribers in the English language market, the number of potential subscribers in the French language market is only about 2 million.

Another characteristic of the French market is the level of cable penetration, which is on average 10% less than in the English market. Among the reasons for this discrepancy is the fact that fewer French language services are available compared to English language services. Rates and costs for services are also generally higher on the French side because the market is so much smaller. The size of the market creates economic challenges for programming undertakings, in terms of both advertising and subscriber revenues, for the creation of quality programming content relevant to Canadians.

I hope this overview has been helpful. We thank you for your attention, and we will obviously be pleased to answer any of your questions.

[Translation]

Thank you for your attention. We will now be happy to answer your questions.

[English]

The Chair: Thank you very much, Madam Wylie.

Now we'll begin questions.

[Translation]

Mr. Brien.

Mr. Pierre Brien: I'll begin with some questions directed to the representatives of the CRTC.

You referred to a general licensing framework, but you made very little mention of the bill now before the committee. Therefore, I'll give you the opportunity to do so now. Does the proposed legislation give you the authority to do something that you can't do right now? What added powers does it give you over and above those you already enjoy under existing laws?

Ms. Andrée Wylie: I don't think this bill gives the CRTC any new powers.

Mr. Pierre Brien: I don't mean new powers. Practically speaking, what, if anything, does it allow you to do that you couldn't do before?

Ms. Andrée Wylie: As I see it, this legislation focuses on how services are marketed, which is secondary to the Commission's specific powers. Therefore, it doesn't add to what we can do in any way.

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Mr. Pierre Brien: The amendments to the proposed legislation call for the minister to allow exemptions. When the CRTC testified before a Senate committee in 1997, your legal counsel explained that the Commission wielded considerable power and that Parliament had left it to the Commission to decide how best to regulate the broadcasting industry in Canada.

The proposed legislation would grant the Minister of Canadian Heritage the power to exempt certain broadcasting services, something which she apparently already had the authority to do. If, theoretically, both the minister and the Commission have the power to allow exemptions, how is this going to work out?

Ms. Andrée Wylie: It could be argued that the bill strips the Commission of its right to exercise one of its powers, instead of giving it a new power, as you alluded to in your first question. My answer to that question would have to be no. However, it's possible that the Commission could lose one of its powers. We're pleased to note that with the amendments that have been proposed, it should be easy to work things out. The Commission shouldn't have any problem meeting the goals of the Broadcasting Act.

Mr. Pierre Brien: Yes, but how do you see the two parties, namely the minister and the CRTC, working together?

Ms. Andrée Wylie: Well, the minister will need to consult with the CRTC when an exemption is being sought and will need to get the authorization of the Governor in Council. Both parties will likely have to sit down and discuss the reasons why such an exemption should be allowed, so as not to restrict the Commission's ability to comply with the objectives of the Broadcasting Act.

Mr. Pierre Brien: I'd like to briefly discuss digital television.

Some people actually believe that the day is coming when they will be able to select services à la carte. I'd like to hear your views on the subject because as I understand it, you have no intention of abandoning your mandate, which is to ensure Canadian content. Therefore, we're always going to see certain services grouped together. Consumers will have more than one choice available to them. Does the CRTC still intend to impose, as part of the options available, French language and Canadian services which will eventually be offered through digital technology?

Ms. Andrée Wylie: In terms of marketing and in terms of the Commission's jurisdiction, I can't imagine not offering consumers the choice of packaged or bundled services. Even in the United States, where there are 62 million subscribers, the practice is to bundle services, rather than go with à la carte service.

Digital technology will allow subscribers to select, much as they would in a Chinese restaurant, an item from column A, another from column D and another from column C. I don't think the Commission can fulfill its obligations under the Broadcasting Act by allowing distributors to sell packages that contain no Canadian services. I don't foresee the day when subscriber will be allowed to select only foreign services.

Mr. Pierre Brien: I see.

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

Ms. Jennings.

Ms. Marlene Jennings: I want to thank all of the witnesses for their succinct, albeit lucid presentations.

Basically, I have two questions. I assume that you've all had a look at the government's proposed amendments. Let me tell you right away that you have here in me a very sympathetic listener.

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My first question concerns the CRTC's powers to allow exemptions and to impose bundling of services so that Francophones and francophiles across Canada can enjoy French language services and so that Canadian content and increasingly, cultural diversity is ensured.

Are you satisfied with the amendments proposed by the government? In your opinion, will these help to safeguard our cultural and linguistic diversity and ensure that Anglophones and Francophones have more or less the same access to services? I see that English Canadians have a much broader choice of services than do Francophones or people who enjoy listening to programs in French.

Every time I travel outside the province of Quebec, with the exception of a small portion of Ontario and New Brunswick, I'm disappointed to see how few French language channels I can tune in to. Fortunately, there's RDI. I applaud you on your decision regarding TVA. I supported you on this and I believe you made an excellent decision. Therefore, I'd like to know if you think the government's proposed changes will ensure the continuance of these services.

Secondly, Ms. Parenteau, did you make the presentation on behalf of the CRTC?

Ms. Lysline Parenteau: No, Ms. Wylie did.

Ms. Marlene Jennings: Ms. Wylie, you stated that as a result of the proposed amendment, the CRTC would be stripped of some of its powers and that these would now be in the hands of the Minister of Canadian Heritage. Despite this fact, you still feel that you can reconcile matters and ensure adequate accessibility to services.

Ms. Andrée Wylie: Yes. We feel that with these amendments, we can still achieve the objectives of the Broadcasting Act by exempting certain broadcasting services when, in the opinion of the Commission, this approach is necessary.

Secondly, I want you to understand that as drafted initially, the bill would have diminished the Commission's powers. Now, however, these amendments restore the Commission's ability to exercise its jurisdiction.

Ms. Marlene Jennings: Thank you.

Ms. Logan, you talked about a hypothetical case of a cable company in Manitoba that is requesting...

An Hon. Member: I'm sorry, but I believe that...

Ms. Marlene Jennings: I'm sorry, it was Ms. Roscoe. While the witnesses were making their presentations, I was reading the briefs which I only received this morning. The government is proposing to amend clause 1 by providing for an exemption. The proposed amendment reads as follows:

(4) Paragraph (2)(a) does not apply where the client has provided to the enterprise a waiver of the notice requirement set out in that paragraph.

Do you believe this amendment will rectify the kind of problem you mentioned? In the example you gave, the company had obtained the client's consent.

[English]

Ms. Elizabeth Roscoe: I'll invite my colleague, Chris Taylor, to comment on this as well.

As we indicated in our brief, I think, we understand that the main objective is to obtain express consent, and we understand and support and, as I mentioned, are already doing that.

• 1100

Indeed, we think that to obtain that express consent you have to have had some sort of pre-notification to customers of what the new service is that's going to be added. We think paragraph 53.1(2)(a), with its mention of three consecutive notices, which, as it's drafted, I guess, would mean mailing notices, is onerous and would have a time effect on the delivery of the new services. We also note that the waiver may already be there, but we of course are now trying to ensure that we are communicating specifically with our customers. We think paragraph 53.1(2)(a) could actually be modified and improved.

Chris, do you have some comments?

The Chair: Mr. Taylor.

Mr. Christopher Taylor (Senior Vice-President, Legal and Regulatory Affairs, Canadian Cable Television Association): Yes.

Ms. Marlene Jennings: There is an amendment, which would appear to do what you're asking. I'm asking if it in fact does what you're asking.

Mr. Christopher Taylor: I think the difficulty with the amendment as worded is that it would require individual services on a case-by-case basis to be examined, because the wording is:

any licensed service distributed on a broadcasting undertaking that, in the opinion of the Governor in Council, should be exempted in order to achieve the objectives

So what would be—

Ms. Marlene Jennings: We're not talking...you may not have received the amendments—

Mr. Christopher Taylor: Oh, I'm sorry, I was looking at the—

Ms. Marlene Jennings: —but the government has submitted an amendment that exempts the paragraph 53.1(2)(a) you were talking about, where you have the series of notices, the timeline, you name it, before you can actually begin to bill for the service.

Mr. Christopher Taylor: Okay.

Ms. Marlene Jennings: There is now an exemption that says it does not apply where you've received from your client a waiver of the notice requirement set out in the proposed paragraph, which means that when you inform your clients in advance that you have this service and they sign up, as you said, through e-mail, etc., on that little form or whatever they can include that they're exempting you from further notices, that they want the service as of October 1 and you can start billing, instead of as under the proposed legislation, only on January 1, for instance.

If you need time to look at it, you can always communicate back as to—

Ms. Elizabeth Roscoe: I think we should take a look at it.

Ms. Marlene Jennings: —whether or not you feel that proposed amendment satisfies the situation, whether it is the correction you were looking for.

Mr. Christopher Taylor: Okay.

Ms. Elizabeth Roscoe: I think we would like to take it under advisement.

Ms. Marlene Jennings: Sure.

Ms. Elizabeth Roscoe: It is different from—

Ms. Marlene Jennings: That's it.

Thank you.

The Chair: Thank you very much, Madam Jennings.

Mr. Jones.

Mr. Jim Jones: My question is to the CRTC. In conjunction with the objectives of the Broadcasting Act, and really, in lieu of all the technology that's out there now, with digital TV, satellite TV, and the Internet, is the CRTC now obsolete?

Ms. Andrée Wylie: Surely you don't want to get rid of me so quickly.

There obviously are more technologies, greater globalization, and greater possibilities, but I do think—and of course there are predictions as to the inability to regulate—that at a minimum we're a long way from that world. For the commission, there is still a role to play, and for Parliament, to have legislation that gives it a role to play in ensuring diversity in Canadian services and respect for the bilingual and multicultural makeup of our country. There is a role to play.

It would be difficult to deny that technology will make it more difficult. On the other hand, choice and diversity will increase as well, driven by technology, which may put more importance on market forces and choice by the consumer, but I think there is a transition period of some years in going towards that world.

Mr. Jim Jones: For the CAB, in your brief, you said the bill included a mechanism to allow Heritage Canada or the commission to create an exception to the bill for cultural reasons. What could that be?

• 1105

Ms. Sylvie Courtemanche: My understanding was that, as it currently stands, a proposed amendment is not included in the bill. If that amendment is included as structured, that would be a solution to our concerns.

Mr. Jim Jones: Okay.

To the cable companies, we're talking about negative option billing, but isn't bundling also a negative option in that it's forcing somebody to take a bundle when he only wants one of those channels?

Ms. Elizabeth Roscoe: The bundling of the services, as you refer to it, or the package—some of the operators call them tiers—is offered on a discretionary basis overall. The customer has a notification as to whether or not they want to receive that bundle of services. That is the way the commission licensed them originally, and it has continued to do so on many a case going forward. The customer has an opportunity to take or not take that package.

Mr. Jim Jones: Or nothing. If I want NBC, it costs me $20 and I have to take seven or eight other channels. That's the only channel I want, so that's negative option or negative billing.

Mr. Michel Arpin: But when you want the Report on Business of The Globe and Mail, you purchase the full Globe and Mail. You get the travel section, the classified ads—

Mr. Jim Jones: When I go into a grocery store, whatever I want to buy I will buy—

Mr. Michel Arpin: It's not a grocery store.

Mr. Jim Jones: Well, it almost is.

Mr. Michel Arpin: No.

Mr. Jim Jones: If I have 400 channels to select from, I should be able to select the channels I want to select.

Ms. Elizabeth Roscoe: Certainly, as you know as well, digital technology does lead you to more of that ability to have that choice. I think various operators are moving to introduce that degree of choice for their customers.

Mr. Jim Jones: Is this bundling legislated by the CRTC or is it a cable TV uniqueness?

Ms. Elizabeth Roscoe: No, it isn't CRTC-mandated activity. It is the way in which the services are licensed. It's the efficiency of getting them out to the marketplace. The tiers—or this bundle of services, as you've heard of them—are packaged to be as consumer-affordable and as attractive to as broad a base of the audience as is possible.

Mr. Jim Jones: Or to cross off inefficient channels.

Mr. Christopher Taylor: One aspect, I think, is that there are linkage requirements imposed by the CRTC. There is a form of bundling that is required as the CRTC implements the Broadcasting Act policies. There will always be a connection—I think that's what Madam Wylie said earlier—in order to promote the Canadian content and the other cultural objectives of the statute.

The particular packaging of services is another matter. Ultimately, as long as you satisfy those linkage requirements, the choice of what goes into a package is a marketing decision. People decide, on the basis of marketing information they have from surveys of consumers, what makes them an attractive package for consumers.

So there are two aspects to it.

Mr. Jim Jones: But when you exclude a channel, the only way I can buy it...I don't think that's really legal to do that. Everybody should be able to buy the individual product, and the bundle should be a sum total that is less than it would be if you bought all the products individually.

Mr. Christopher Taylor: You're getting into two issues on that point as well. Suppose you wanted to buy the Arts and Entertainment Network channel. Well, that's an American service, and under the linkage rules, you're only going to get that if you also have a linkage with a Canadian service. That's a cultural policy objective that's being addressed there.

With respect to the pricing, this is one that people sometimes have difficulty dealing with, but frankly, the fact is that sometimes, on a per unit price, the price actually goes down. It's hard to describe it as volume, but that's kind of what it's like. You actually get a better price on a per channel basis if you buy a package of five or ten or something than you do if you were to buy, say, only a pair of them. There's a marketing decision there that's made by the distributor as to what is the best way to make up a package that will be the most appealing to the majority of consumers. Under the current analog environment, that's a technical problem. Under the digital environment, there's greater flexibility so that this sort of pick-and-choose thing becomes a greater opportunity. Nonetheless, there remain the two linkage requirements as well as the marketing volume issues.

• 1110

Ms. Elizabeth Roscoe: Speaking to the specific example that Chris referred to, many years ago, as members of the other associations will recall, a certain sports service was on a stand-alone business and available to individuals. At that point, its price point was $7.95 on a stand-alone basis, and that was seen to be cost-prohibitive to many consumers. But then when it was a component of, as Chris refers to, a package of service, the price for TSN and the other services was lower, and there were other services added into that package to create greater value.

Mr. Jim Jones: You haven't convinced me.

Ms. Elizabeth Roscoe: Our job is to try.

The Chair: Thank you, Mr. Jones.

Mr. Jim Jones: Thank you.

The Chair: Mr. Malhi, please.

Mr. Gurbax Singh Malhi (Bramalea—Gore—Malton—Springdale, Lib.): Thank you, Madam Chair.

Could you explain why they have five specialty services in other languages, and which other languages do they have?

Ms. Elizabeth Roscoe: I'm sorry, is that a question for the CRTC?

Ms. Jane Logan: I can explain the five, which we call third language services.

There's Telelatino, which operates in Italian, largely, and some Spanish; there is Fairchild and Talentvision, which are in Mandarin and Cantonese; there's the South Asian Television network, which is Hindi, Punjabi, Tamil, Urdu—about 17 different South Asian dialects; and Odyssey, the newest service, is a Greek-Canadian service. All those specialty television services are based in Canada and have Canadian employees and Canadian content.

Mr. Gurbax Singh Malhi: Thank you.

If this bill were to succeed, what can the cable industry do to ensure the prices are not raised for the consumer?

Ms. Elizabeth Roscoe: Which prices would you be referring to? For the existing services?

Mr. Gurbax Singh Malhi: Yes.

Ms. Elizabeth Roscoe: We'd be happy to talk to you for a minute on that. I'm not sure which elements you're speaking of, whether it is for the basic service, for discretionary services, or for new digital services, but a lot of the prices that are reflected, for example, in a tier of those services, or even on basic service, are reflective of our input costs, which are partnerships with the programming, especially in pay services, which also receives subscriber fees. So that's a component as well for our own internal costs, which go to building cable plant, repairing networks, and indeed continuing to make our product more technologically adaptable for our customers.

I can't speak to what you may be looking for in terms of a rate freeze, if that's where you're going. I'm just not sure what areas you're trying to explore.

I think there is also something else. Many of our basic rates are regulated by the commission.

Mr. Christopher Taylor: I think it's fair to say this bill, in and of itself, would not have an impact on rates.

Mr. Gurbax Singh Malhi: All right. Thank you.

The Chair: Thank you, Mr. Malhi.

Mr. Gallaway, please.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you, Madam Chair.

I have one quick point, Ms. Roscoe. The fact is, most people don't have basic cable; they have an enhanced package, and part of it is not controlled. So, for example, when Rogers raised rates about $1.64 six months ago, and they're going to do it again on January 1, a very minute part of that $1.64 was CRTC-authorized. You have the absolute discretion to raise it whatever you want. Is that not correct?

Ms. Elizabeth Roscoe: Are you talking about the basic rates?

Mr. Roger Gallaway: I'm talking about enhanced packages. What I'm saying is, of that $1.64 rate increase, as I recall, a very small 23¢ was CRTC-authorized. The other $1.30 was Rogers Cable raising the rate. Is that correct?

Ms. Elizabeth Roscoe: I don't have their rate increase in front of me.

Mr. Roger Gallaway: Well, assuming those numbers are correct, would that not be correct?

Ms. Elizabeth Roscoe: There could be a component of the new services that are being added within those tiers. I can't speak—

Mr. Roger Gallaway: No, I'm talking about a person whose service has not changed. I'm talking about a person who had a rate increase.

Ms. Elizabeth Roscoe: For their tier?

Mr. Roger Gallaway: Yes.

Ms. Elizabeth Roscoe: There were no new services added to it?

• 1115

Mr. Roger Gallaway: No new services, just a rate increase.

Ms. Elizabeth Roscoe: Then that would be, as I said earlier, to the upgrades and plant improvement they would be making, but—

Mr. Roger Gallaway: All right, but that is not what I'm saying.

Ms. Elizabeth Roscoe: —that is not rate-regulated.

Mr. Roger Gallaway: I'm saying the $1.30, if indeed that is the non-CRTC part, is in fact a Rogers decision, not a CRTC decision.

Ms. Elizabeth Roscoe: That's right.

Mr. Roger Gallaway: Is that correct?

Ms. Elizabeth Roscoe: That's correct.

Mr. Roger Gallaway: Okay. Thank you.

On May 17, 1996, the Toronto Star carried a story. Richard Stursberg—do you know that name?

Ms. Elizabeth Roscoe: I do.

Mr. Roger Gallaway: —said they had no intention of ever using negative options again.

You are a spokesperson, and you've appeared at this committee and others for other industry associations. Do you stand by that?

Ms. Elizabeth Roscoe: I should clarify. I've never appeared for other industry associations.

Mr. Roger Gallaway: Okay, my mistake.

Ms. Elizabeth Roscoe: That's all right.

Certainly the industry has said, as we've indicated today—

Mr. Roger Gallaway: No, I'm referring to your association.

Ms. Elizabeth Roscoe: The Canadian Cable Television Association—

Mr. Roger Gallaway: Yes.

Ms. Elizabeth Roscoe: —is supportive of this legislation. We are not using negative option marketing in English Canada today.

Mr. Roger Gallaway: Okay, so you support it.

Ms. Elizabeth Roscoe: Right.

Mr. Roger Gallaway: Ms. Logan, it's nice to see you again, and Mr. Arpin.

You are supporting this legislation as amended.

Ms. Jane Logan: Yes, we are, as amended.

Mr. Roger Gallaway: All right.

Ms. Wylie, you are the commissioner of the CRTC, correct?

Ms. Andrée Wylie: Yes.

Mr. Roger Gallaway: You are appointed by order in council.

Ms. Andrée Wylie: Yes.

Mr. Roger Gallaway: You regulate many of the members of these associations here with you today.

Ms. Andrée Wylie: Yes.

Mr. Roger Gallaway: You've heard Mr. Jones express some...I'll call it cynicism about the CRTC and its relevance. Do you not find it unusual that you, who are regulating these people or their members, are appearing on the same panel with the industry? You are a quasi-judicial body, an arm's length body, and you're appearing with the people you regulate. Is that not bad PR, at minimum, for the CRTC?

The Chair: Mr. Gallaway, you should be aware that we've arranged the witnesses.

Mr. Roger Gallaway: I understand, but witnesses have the right to say not now, thank you.

The Chair: Well, not really.

Ms. Andrée Wylie: If you want an answer to that, no, I'm not uncomfortable. Obviously I know these people. They appear before us.

Yes, I am a member of a quasi-judicial body, and I feel confident that I can carry that goal even if I have breakfast with members of the industry or appear before the committee with members of the industry.

Mr. Roger Gallaway: One final question—

Ms. Andrée Wylie: You may be skeptical about that, as Mr. Jones was earlier, but I'm—

Mr. Roger Gallaway: I'm just reflecting what I hear from the public, not my opinion.

Are you the vice-chair?

Ms. Andrée Wylie: Yes.

Mr. Roger Gallaway: In 1995 or thereabouts, your predecessor—I think his name was Bélisle—

Ms. Andrée Wylie: Yes.

Mr. Roger Gallaway: —was in fact going to certain parliamentarians' offices and lobbying with respect to a bill that someone said was the predecessor of this one. Are you doing any of that?

Ms. Andrée Wylie: No, Mr. Gallaway. I'm too busy regulating.

Mr. Roger Gallaway: Okay. Well, you're close to the regulated here.

Secondly, do you know if you are ever called, then, by parliamentarians for your opinion on legislation, either existing or proposed?

Ms. Andrée Wylie: Well, I was here.

Mr. Roger Gallaway: No, I mean privately.

Ms. Andrée Wylie: No.

Mr. Roger Gallaway: Okay.

That's all, Madam Chair.

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

[Translation]

Mr. Brien.

Mr. Pierre Brien: I too have a question for the CRTC officials. The minister will have the power to grant an exemption to a licensed broadcasting service. Companies file an application for a license with the CRTC. Since the minister has the power to exempt a licensed service, would you agree to grant a conditional license to a company wishing to offer services through negative option marketing? How would that work?

Ms. Andrée Wylie: Before issuing a license allowing this kind of distribution practice, the Commission discusses the possibility of allowing an exemption with the minister. In such cases, the distributors must provide the service for which the license has been issued.

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In the case of APTN, I agree with you that this venture will not prove viable unless the Commission attaches certain conditions respecting distribution. Before a license is granted, an exemption will have to be granted since the service is based on mandatory distribution. I have to admit that I haven't yet taken a close look at the specifics of this consultation and exemption mechanism.

I assume the bill will also deal with this practice. If a service is based on mandatory distribution and if some form of consultation is required, as a rule, the licensing and the exemption will have to be linked.

Mr. Pierre Brien: Do you feel that the provisions of the bill affect in some way the autonomy granted to the CRTC by virtue of its enabling legislation? Clearly, an exemption will have to be allowed, but it isn't clear whether the consultation you spoke of with the minister will take place at the actual licensing stage. Isn't the CRTC losing much of its autonomy in many respects?

Ms. Andrée Wylie: That's nothing new, because the Governor in Council already enjoys this power under the legislation. I'll let Mr. Blais respond further.

Mr. Pierre Brien: At this particular stage of the process?

Ms. Andrée Wylie: Yes, there are certain steps we can take. Exemptions can be granted based on very specific reasons, including frequency, or broad exemptions can be granted thereby ensuring that the aims of the Broadcasting Act are being met. The Governor in Council has the power to issue a directive and provision has already been made for this.

Perhaps Mr. Blais would care to add something.

Mr. Jean-Pierre Blais (Executive Director, Broadcasting, CRTC): The Broadcasting Act already provides for some interface between the Governor in Council and the CRTC. The Governor in Council is authorized to issue directives respecting certain matters and can appeal CRTC licensing decisions. That's why we feel that the new mechanism will jibe with the existing provisions.

Mr. Pierre Brien: In my opinion, there's a difference between appealing a decision and engaging in consultation prior to issuing a license.

Mr. Jean-Pierre Blais: We didn't say anything about consultations before the fact.

Mr. Pierre Brien: Non, but I'm bringing the subject up. The minister may exempt a licensed service. How will you go about granting a license if you don't know if an exemption has been allowed?

Mr. Jean-Pierre Blais: In the past, we issued licenses where the actual scenarios were quite different. For instance, licensees have different distribution requirements, depending on whether they are operating in a French language or English language market. We can always speculate about different scenarios.

Thus far, we have yet to receive a business plan which would lead us to believe that services need to be distributed in any particular way. Some licenses have already been issued and the services are in the process of being made available. We will see what kinds of business plans are submitted to us in the future in light of the requirements in place at the time, including those related to digital technology.

Ms. Andrée Wylie: In my view, it's possible that exemptions will be allowed in the case of services that are already licensed so that we can achieve the aims of the legislation. I don't think the amendment would prevent us from allowing an exemption, for whatever reason, to a service that is already licensed.

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Mr. Pierre Brien: This is a complicated issue. We're talking about the minister allowing an exemption. The CRTC issues a license after examining the business plan drawn up by the distributor, who was working on the assumption that the service would be exempted, whereas in reality, the distributor had no way of knowing for certain that the exemption would be allowed. The CRTC also takes into account investment conditions and a number of other factors.

In considering whether or not to license a service, the CRTC interfaces with the government. What concerns me is that when the times comes for the CRTC to decide if it will license a service, it will be engaged in discussions and will have some idea of the government's or of the minister's position. That's not how the CRTC normally conducts its operations. Generally, there is a right of appeal and so forth. When the time comes to make a licensing decision, the CRTC will in fact already know what the government's position is. I'm rather skeptical about this entire process.

Mr. Jean-Pierre Blais: I think the CRTC would base its decision on the public file and...

Mr. Pierre Brien: At what stage of the process?

Mr. Jean-Pierre Blais: All throughout the process, as is presently the case. If the government is of the opinion that the CRTC erred in licensing a particular service, then it can appeal the decision. The two parties already interface. This is nothing new. Although it hasn't done before, the government can even review the CRTC's decision-making process. Recently, it endorsed our plans for distributing four new services in the French language market. This interface mechanism is already in place.

Mr. Pierre Brien: I disagree with you.

[English]

The Chair: Merci, Mr. Brien.

Mr. Murray, please.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Madam Chair.

We're dealing with a bill that was spawned by consumer outrage, and as often happens, particularly when members' bills are drafted when we're trying to address a problem, there are little wrinkles that appear that weren't anticipated at the beginning. But we're essentially dealing with a very simple idea here. We have an awful lot of industry firepower arranged around the table this morning, and we've been discussing this bill over the last hour or so. I just want it to be clear in my own mind where it is we stand.

I know Mr. Gallaway helped the process along earlier when he asked about the level of support. Am I correct in understanding now that with regard to English language services, all of the industry players are comfortable with the bill, with the proposed amendments, or are there some qualifications there? First of all, I'd just like to know if that's the case. If anybody is not...I believe the Canadian Cable Television Association has qualified it.

Ms. Elizabeth Roscoe: We'd like to take a look at the most current amendment that deals with the waiver, but in principle we have indicated that we are supportive.

Mr. Ian Murray: In other words, then, we're—

Mr. Christopher Taylor: Actually, having looked at the waiver provision, I would say that in a way it addresses the issue. From a legal perspective, though, in looking at this just as a lawyer, I'd ask what the waiver is. If the person gives express consent, is that not an implied waiver of a notification requirement? They're saying to give them the service now. Don't they then impliedly waive the requirement for the notice? The difficulty I would have with that is the ambiguity.

I think consent is the goal, and frankly it should be sufficient. If you have a second section saying that if you get a waiver from the customer then you don't need the notification, you're actually introducing a concern there as well about what constitutes an adequate waiver. From a purely practical point of view, it will be very awkward for a cable company, a DTH company, or anybody else affected by this bill to say to the customer that they've just ordered this service and it's a new service, so the company has to ask them if they waive the requirement to receive notification. The customer won't know what you're talking about. They'll wonder if you're from outer space or something, because they want the service tomorrow.

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So while it may strictly address the concern, it's just not as clean as simply relying on express consent. Ultimately, I think that is the goal.

Mr. Ian Murray: With that caveat, then, we're really looking at the French language services as a potential problem.

Madame Wylie, in summing up, when you were talking about the characteristics of the French language market, you mentioned that it presents unique challenges. I read that to mean the CRTC would be open to the kinds of requests we've heard from industry providers, from those services. Again, I'm not trying to anticipate a ruling by the CRTC here, but am I wrong to read a great deal of sympathy into that comment, that it presents unique challenges, and that you therefore do understand that the industry has a point?

Again, I'm just trying to simplify this for my own sake. We seem to have solved the English language problem pretty well. We're now looking at the French language problem, and the regulator appears to be sympathetic. Is that a fair assessment on my part?

Ms. Andrée Wylie: Yes, the CRTC's position is that the amendments provide the flexibility that may be necessary to deal with the French market differently from the English market. It's also important to note that the Broadcasting Act itself very expressly says the CRTC has the power to regulate the French market and the English market differently because of the numerical composition in part, and because of other concerns obviously.

Mr. Ian Murray: All right. Thanks very much.

The Chair: Thank you, Mr. Murray.

Mr. Lastewka, please.

Mr. Walt Lastewka: Mr. Murray asked some of my questions, but I want to go back to the CRTC and Mr. Brien's third question.

In your opening two paragraphs, you said you had to first give us an overview of current communications, etc., and that you would then give your point of view on Bill C-276. I think Mr. Brien was getting at the same thing. We didn't hear your point of view on C-276.

Ms. Andrée Wylie: I know I said we would give the commission's point of view on Bill C-276 in response to your questions. Obviously, we are not in a position to speak on Bill C-276 in its entirety. Only a very small part affects us, especially in our broadcasting jurisdiction, so my attempt was to give you our position on Bill C-276 as it affects that area of jurisdiction in particular. As I've already said, we are satisfied that with the amendments, the flexibility necessary would be there for us to not be limited in exercising our jurisdiction.

The reason for the overview was to remind the committee of the increasing diversity of distribution undertakings, which in the future will also make distribution undertakings more open to their customers' or subscribers' desires and wishes, because market forces will enhance that.

Mr. Walt Lastewka: You mentioned some points on your responsibility to regulate and to supervise. Is there not some place in the Broadcasting Act that says you're to do that for the protection of consumers and so forth?

Ms. Andrée Wylie: There is certainly a requirement for the commission to be responsive to the consumer. The commission must balance how it tries to make sure the objectives of the act are met while ensuring that the consumer is paramount in how that is done. A reasonable balance must be found between the two through the use of technology at the best cost possible, through decisions that ensure the costs for services are reasonable and affordable as well, and also through ensuring that there are a basic number of services available to the consumer at a low cost. For example, the tiers we are talking about in enhanced services are discretionary to the customer so that Canadians can get cable service at a reasonable cost, and they can get an enhanced package and enhanced TV picture without taking discretionary tiers if they don't want them.

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Mr. Walt Lastewka: In those years that we did have negative option billing, in effect the CRTC condoned negative option billing by the various providers. Would it be fair to say that, or is that unfair?

Ms. Andrée Wylie: The commission did not one way or the other speak on, prohibit, or require negative option billing. It was a method of selling enhanced tiers that was developed for commercial reasons. However, the commission is responsive to complaints by consumers.

I think it has been explained by a number of parties before that negative option billing as a commercial mechanism was less of a concern in the complaints we received than was the attempt at launching a new tier to prevent the customer from keeping the tier they already had at the same price. That was much more often the difficulty that was expressed, and it was then captured as a problem of negative option billing.

Mr. Walt Lastewka: Now that we have this bill—and let's assume it goes through in its amended form—do you see it as part of your responsibility with the Competition Bureau to keep on eye out that we don't get into negative option billing 2 or 3 or whatever could be developed, not by the people around the table today, but maybe their replacements in the future?

Ms. Andrée Wylie: It is my understanding of the bill that the responsibility for enforcing its requirements will not be ours.

Mr. Walt Lastewka: It will not be yours.

Ms. Andrée Wylie: It will not be ours.

Mr. Jean-Pierre Blais: In reality, we have a rather large customer service complaints group at the commission that interfaces with the public through e-mail, through the telephone, and through written complaints. Obviously we monitor these things because we're concerned about them occurring, but should we receive these types of complaints, we would pass them on to the appropriate people who ultimately are responsible for this area should the act be passed.

Mr. Walt Lastewka: Thank you, Madam Chair.

The Chair: Thank you, Mr. Lastewka.

[Translation]

Mr. Brien.

Mr. Pierre Brien: I'd like to get the opinion of the representatives of the Specialty and Premium Television Association on the subject I was discussing earlier with CRTC officials. If, at some point in the future, you want to use negative optioning to market a new service and you need to apply for a license, knowing full well that you will need ministerial approval, how would you proceed? Would you seek ministerial approval, while at the same time applying to the CRTC for a license? Would you wait until you actually obtain ministerial approval before applying to the CRTC? Practically speaking, what would you do, assuming of course the legislation will be adopted?

Mr. Michel Arpin: The mechanism promises to be very cumbersome and I don't think we have a definitive answer to your question. Clearly, it's going to create some problems for us. I find the amendment interesting, but it will be very difficult to implement. Before making a decision, the minister will have to hold consultations and speak to Cabinet. That could be a long, drawn-out process.

Companies, on the other hand, operate on real time. As soon as they obtain a license, they start to incur costs. Development costs were incurred during the licensing process and once that license has been obtained, the company hires staff. If it has to wait six or eight months before getting confirmation of the exemption, the process will be extremely time-consuming.

Personally, I find it very hard to see how this mechanism will work. From a legal standpoint, it may resolve one problem, but on a practical level, it will create many more.

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We discussed one such problem earlier. The legislation says that as soon as the client's consent has been obtained, services can be extended to him. However, this fails to take into account one fact, namely that services are offered free of charge for a three or four-month period to familiarize customers with the new product. Am I to understand, on reading this bill, that after these three months are up, production will have to stop until people subscribe to the service. That's how I understand it.

Therefore, I think we need to consider the bill's provisions very carefully. Perhaps they need to be rewritten. Unfortunately, I don't have any solutions for you this morning.

Mr. Pierre Brien: I see. I'd now like to put a more general question to the witnesses.

Earlier, Ms. Wylie, you stated that existing services might also be affected. The bill does not provide a definition either of “new services” or “services”. What exactly is meant by a new service? Would this be a specialty channel, a tier or package, a service that was formerly part of the basic service package and has now migrated to a new tier or optional service?

I'd also like to know why you say existing services will also be affected. I put the question out to anyone who might care to respond.

[English]

The Chair: Is there a response to that?

[Translation]

Ms. Andrée Wylie: I believe that existing services could be affected. Consider the following example. The CRTC is currently looking at bilingual markets in Canada and at a regulatory framework that could improve the number of services available to such markets. It's not outside the realm of possibility that a service that is already licensed could migrate to another tier. However, I haven't really considered all of the specifics of this matter.

As the bill is now worded, I do think an existing service could be granted an exemption. Would this mean changes to the licensing conditions with respect to cost and to either the inclusion or exclusion of certain basic services? Quite possibly it would. The mechanisms now in place enable us to ponder questions like that.

Ms. Sylvie Courtemanche: In the case of a license renewal, it would have to be clear that this was not a new service. Every five or seven years, depending on the licensing terms, licenses are renewed. Therefore, it would have to be made very clear that when an existing license is renewed, this is not deemed to be a new service.

Mr. Michel Arpin: That's a very relevant point. On November 19 last, the CRTC published a report on the establishment of a French-language arts specialty channel. Committee members should find two of the paragraphs in the report to be of some interest in connection with the bill.

In paragraph 41, the Commission says it intends to favour an approach based on both analog and digital distribution. In paragraph 42, it notes that one limitation to this approach is that for distribution in analog mode, certain cable operators use fixed traps to select the services to be received by a subscriber. The Commission furthers adds that it hopes the advance notice it is providing in this report will allow cable operators to provide from the start for the possible subsequent addition of a service to one of their tiers.

Further on, the Commission says that it is not guaranteeing that it will in fact issue a license, but that if it does in fact do so once the bill is enacted, the distributor will have no choice but to obtain the Heritage Minister's approval in order to be exempted.

These are extremely practical considerations. Like the committee, the bill must address this every-changing reality.

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[English]

The Chair: Thank you.

Thank you, Monsieur Brien.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings: A number of questions have been directed to you concerning the bill and the proposed amendments. Would you in fact prefer that the bill not apply at all to your industry?

[English]

Ms. Jane Logan: That's a difficult question. Obviously we have a lot of mechanics we need to work out. We've heard, through this committee, from four groups that are prepared to make it work: Canadian Heritage, CRTC, the cable industry, and the operators. So there's a lot of goodwill here. Quite frankly our industry, the specialty and premium television channels, depend on consumer goodwill, and we are prepared to support a bill that reinforces consumer rights, even if it's not going to be easy.

[Translation]

Ms. Marlene Jennings: Is Ms. Logan speaking for everyone seated here at the table?

[English]

Ms. Elizabeth Roscoe: Thank you very much for the question.

As well, I would agree and concur with our colleagues that we're prepared to make this work. We are doing the express consent activity with our customers now.

Ms. Andrée Wylie: As Mr. Gallaway reminded us, we don't endorse industry's word easily. We speak of course to our jurisdiction. We are concerned about consumers as well. We have a role to play under the specific act of Parliament, and we certainly believe that making sure those objectives are met and respecting consumer choice have to be balanced. Therefore we are in accord with the amendments that permit us to continue to achieve this balance.

[Translation]

Ms. Marlene Jennings: Therefore, if I can sum up...

[English]

The Chair: Madame Courtemanche has an answer.

Ms. Sylvie Courtemanche: We would support the bill, again as amended.

[Translation]

Ms. Marlene Jennings: If I understand correctly, despite the problems highlighted by my colleague Mr. Brien in so far as the application of the legislation is concerned, if the bill were to be adopted with the proposed amendments, you're confident that its provisions would be applicable and that you could overcome some of these problems. Is that correct?

Mr. Pierre Roy: We support the bill and the proposed amendments. However, we shouldn't underestimate the problems we are likely to encounter with implementing its provisions. That's the point Mr. Arpin was attempting to make.

Ms. Marlene Jennings: I understand.

[English]

Ms. Elizabeth Roscoe: Thank you again.

With the conditional amendments that we've spoken to and with the clarification that's been provided here, we think we can make it work.

[Translation]

Ms. Marlene Jennings: Therefore, if I have it straight, the process whereby an exemption is granted needs to be clarified somewhat.

Personally, I have to say that having once been a member of an organization with quasi-judicial powers, after reading the proposed amendments, I assumed that when the CRTC received a license application containing a business plan developed on the assumption that an exemption would be granted, then the onus was on the CRTC to engage in consultations with the Heritage Minister, as part of its standard operating procedures.

In my opinion, both processes should be undertaken more or less simultaneously and the exemption should be granted at around the same time as the license. Barring that, obtaining a license should be conditional upon the distributor obtaining an exemption.

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Mr. Michel Arpin: That should be clearly stated in the bill, otherwise, it won't happen.

Ms. Marlene Jennings: The bill should give the CRTC the power to initiate the exemption process on recommendation of the minister.

Mr. Michel Arpin: I agree.

Ms. Marlene Jennings: It says that “the Minister of Canadian Heritage consults with the Commission [...] before recommending a regulation”. I think this should read instead “before the CRTC requests”.

Mr. Michel Arpin: Both processes should take place simultaneously.

Ms. Marlene Jennings: Right.

Mr. Michel Arpin: The CRTC also needs to exercise some kind of influence, because the Department of Canadian Heritage will not initiate this process on its own. It doesn't have the resources and it's not set up to do that. It doesn't hold hearings or engage in consultations and it doesn't have a structure in place to initiate this process. The CRTC, on the other hand, does. In fact, that's what it is mandated to do.

Ms. Marlene Jennings: The CRTC has to be the party that initiates the process.

Mr. Michel Arpin: Right. In any case, that's my opinion.

Ms. Sylvie Courtemanche: The Broadcasting Act sets out clear procedures. In the case of an appeal, a specific course of action is set out in the legislation, with a specific timeframe given and so forth. In the case of policy directives issued by the government, the act itself provides for a well-established course of action. This signifies not only intent, but describes the appropriate course of action to take. Everything is spelled out clearly in the Broadcasting Act. Thank you.

[English]

The Chair: Thank you.

I have one question for the witnesses—not for the CRTC, but for the rest of the witnesses here today. I've heard a number of concerns about how these changes would be administered with the amendments. I'm just wondering if any of the associations have met with the Competition Bureau to discuss with the commissioner of the Competition Bureau how they would be enforced—what the process would be—and if not, why not.

Ms. Roscoe.

Ms. Elizabeth Roscoe: I can speak to that. No, we haven't done consultation with the Competition Bureau. I guess we would presume that discussion.... I know Mr. von Finckenstein was here two weeks ago, and we did review his remarks, but we are not yet of the view.... We were seeking some of the clarification that's come forward in some of the questions here by members as well, on how the amendments would actually work.

The Chair: Thank you.

Ms. Logan.

Ms. Jane Logan: That's the next step we need to take and have another look at these mechanics.

The Chair: Ms. Courtemanche.

Ms. Sylvie Courtemanche: I agree. We should be looking at the proposed amendments and determining how we could actually make it work for the industry. Then afterwards we'd have to consult obviously with our friends who administer the Competition Act, in order to determine whether we can come up with a proposal that works for everyone.

The Chair: Well, my suggestion would be that you take that step and that you take a look at it quite seriously. We have met with the commissioner of the Competition Bureau and we will meet with him again before we complete this phase, but we're in the final couple of weeks of this process.

This is a consultation process. The commissioner comes here, and if he hasn't received any notification from any of the industries, he can't clarify and he can't answer questions. Obviously members from this committee can ask him some of the questions that have arisen today, but it is a consultation process we're in right now, and as part of it, you have a responsibility to bring some of these concerns forward.

Also, Mr. Arpin, the ministers do take Orders in Council very seriously. Six to eight months is a slight exaggeration on what the government would or would not do. If you have those concerns, I would suggest you meet with the minister responsible and suggest those things as well.

The commissioner has assured us it's a commonsense approach he wishes to bring to the changes to the bill. He's endorsed the changes with the amendments. I would hope that you raise those concerns, and we'll ask him the questions as well.

Thank you all for being with us today. The meeting is now adjourned.