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37th PARLIAMENT, 1st SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Thursday, April 11, 2002

0905

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

Mr. David McLennan (President and Chief Operating Officer, Bell ExpressVu)

0910

Mr. Chris Frank (Vice-President, Programming and Government Affairs, Bell ExpressVu)

0915

Mr. Ian Gavaghan (Vice-President and General Counsel, Bell ExpressVu)

0920

Mr. David McLennan

The Chair

Mr. Abbott

Mr. David McLennan

Mr. Jim Abbott

Mr. David McLennan

0925

Mr. Jim Abbott

Mr. David McLennan

Mr. Jim Abbott

Mr. David McLennan

Mr. Jim Abbott

Mr. David McLennan

0930

Mr. Jim Abbott

Mr. David McLennan

Mr. Ian Gavaghan

Mr. Jim Abbott

Mr. Ian Gavaghan

Mr. Jim Abbott

Mr. Ian Gavaghan

Mr. Jim Abbott

Mr. David McLennan

Mr. Jim Abbott

The Chair

Mr. David McLennan

Mr. Ian Gavaghan

The Chair

Ms. Christiane Gagnon (Québec, BQ)

Mr. David McLennan

0935

Ms. Christiane Gagnon

Mr. Ian Gavaghan

Ms. Christiane Gagnon

The Chair

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

Mr. David McLennan

Ms. Sarmite Bulte

Mr. Ian Gavaghan

Ms. Sarmite Bulte

Mr. Ian Gavaghan

Ms. Sarmite Bulte

Mr. David McLennan

0940

Ms. Sarmite Bulte

Mr. David McLennan

Mr. Chris Frank

Ms. Sarmite Bulte

Mr. David McLennan

Mr. Chris Frank

Ms. Sarmite Bulte

Mr. Chris Frank

Ms. Sarmite Bulte

The Chair

Mr. Tony Tirabassi (Niagara Centre, Lib.)

0945

Mr. David McLennan

Mr. Chris Frank

Mr. Tony Tirabassi

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

0950

Mr. David McLennan

Mr. Chris Frank

Ms. Wendy Lill

0955

Mr. Chris Frank

The Chair

Mr. Rodger Cuzner (Bras d'Or--Cape Breton, Lib.)

Mr. David McLennan

Mr. Ian Gavaghan

Mr. David McLennan

Mr. Rodger Cuzner

Mr. David McLennan

1000

Mr. Rodger Cuzner

Mr. David McLennan

Mr. Chris Frank

The Chair

Mr. Jim Abbott

Mr. David McLennan

Mr. Jim Abbott

Mr. David McLennan

Mr. Jim Abbott

1005

Mr. David McLennan

Mr. Jim Abbott

Mr. David McLennan

Mr. Jim Abbott

Mr. David McLennan

Mr. Ian Gavaghan

Mr. Chris Frank

1010

The Chair

Ms. Gagnon

The Chair

Mr. Roger Gallaway (Sarnia--Lambton, Lib.)

Mr. David McLennan

Mr. Roger Gallaway

Mr. David McLennan

Mr. Roger Gallaway

Mr. David McLennan

Mr. Roger Gallaway

Mr. David McLennan

Mr. Roger Gallaway

Mr. David McLennan

Mr. Roger Gallaway

Mr. David McLennan

1015

Mr. Roger Gallaway

Mr. David McLennan

Mr. Roger Gallaway

Mr. David McLennan

Mr. Ian Gavaghan

Mr. Roger Gallaway

Mr. David McLennan

Mr. Roger Gallaway

The Chair

Ms. Christiane Gagnon

Mr. David McLennan

Ms. Christiane Gagnon

The Chair

Mr. David McLennan

Mr. Chris Frank

1020

The Chair

Mr. Chris Frank

The Chair

Mr. David McLennan

The Chair

Mr. Paul D. Bush (Vice-President, Corporate Development, Telesat Canada)

1025

1030

1035

The Chair

Mr. Jim Abbott

1040

Mr. Paul Bush

Mr. Jim Abbott

Mr. Paul Bush

Mr. Jim Abbott

Mr. Paul Bush

Mr. Jim Abbott

Mr. Paul Bush

Mr. Jim Abbott

Mr. Paul Bush

Mr. Jim Abbott

Mr. Paul Bush

1045

The Chair

Ms. Christiane Gagnon

Mr. Paul Bush

Mr. Bob Power (Director, Regulatory Matters, Telesat Canada)

Ms. Christiane Gagnon

Mr. Paul Bush

1050

Ms. Christiane Gagnon

Mr. Paul Bush

The Chair

Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.)

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

1055

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

Mr. Paul Bush

Mr. John Harvard

The Chair

Ms. Wendy Lill

1100

Mr. Paul Bush

Ms. Wendy Lill

Mr. Paul Bush

The Chair

1105

Mr. Paul Bush

The Chair

Mr. Paul Bush

The Chair

Mr. Paul Bush

The Chair

Ms. Lise Lareau (President, Canadian Media Guild)

1115

1120

Mr. Arnold Amber (Director, Newspaper Guild Canada)

1125

1130

1135

The Chair

Ms. Lise Lareau

The Chair

Ms. Lise Lareau

The Chair

Ms. Lise Lareau

The Chair

Mr. Jim Abbott

1140

Ms. Lise Lareau

Mr. Jim Abbott

1145

Ms. Lise Lareau

Mr. Jim Abbott

Ms. Lise Lareau

Mr. Arnold Amber

The Chair

Ms. Christiane Gagnon

1150

Ms. Lise Lareau

The Chair

Ms. Christiane Gagnon

Ms. Lise Lareau

1155

The Chair

Mr. Arnold Amber

The Chair

Mr. John Harvard

1200

Ms. Lise Lareau

Mr. John Harvard

Ms. Lise Lareau

Mr. John Harvard

Ms. Lise Lareau

Mr. John Harvard

Ms. Lise Lareau

Mr. John Harvard

Ms. Lise Lareau

Mr. John Harvard

Ms. Lise Lareau

Mr. John Harvard

Ms. Lise Lareau

Mr. John Harvard

The Chair

Ms. Sarmite Bulte

1205

Mr. Arnold Amber

Ms. Sarmite Bulte

Mr. Arnold Amber

Ms. Sarmite Bulte

Ms. Lise Lareau

1210

Ms. Sarmite Bulte

Ms. Lise Lareau

Ms. Sarmite Bulte

Ms. Lise Lareau

Ms. Sarmite Bulte

Ms. Lise Lareau

Ms. Sarmite Bulte

The Chair

Ms. Wendy Lill

1215

Mr. Arnold Amber

The Chair

Mr. Rodger Cuzner

Ms. Lise Lareau

Mr. Rodger Cuzner

Mr. Arnold Amber

1220

The Chair

Ms. Sarmite Bulte

Ms. Lise Lareau

The Chair

CANADA

Standing Committee on Canadian Heritage

NUMBER 049

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, April 11, 2002

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): Good morning. I declare open this meeting of the Standing Committee on Canadian Heritage,

[Translation]

which is continuing its study on the state of the Canadian broadcasting system.

[English]

To start the hearings today, we are pleased to have representatives with us from Bell ExpressVu, in the person of Mr. David McLennan, the president; Mr. Chris Frank, the vice-president of programming and regulatory affairs; and Mr. Ian Gavaghan, the vice-president and general counsel.

Mr. McLennan, the floor is yours. We'll allow you about fifteen to twenty minutes to state your case, so that we then allow time for questions by members.

Mr. David McLennan (President and Chief Operating Officer, Bell ExpressVu): Thank you very much.

Good morning everyone. Mr. Chairman, honourable members of the committee, thank you for inviting Bell ExpressVu to address you today.

My name is David McLennan. As one of the two licensed direct-to-home or DTH providers, what I'd like to do during today's presentation is really focus on the role DTH has played and is playing in the Canadian broadcasting industry, and specifically focus on some of the accomplishments so far from the perspective of benefits DTH has brought to customers, from an overall public policy perspective, as well as from the perspective of benefits to the overall broadcasting system. I'd also like to take a few moments to outline some of the challenges our industry is facing, and then end with a few specific thoughts and recommendations on the issues that need to be addressed.

From a policy perspective, the government's strategy of creating competition is, in my view, working very well, especially amongst the broadcast distribution community in Canada. DTH provides a very strong, competitive alternative to cable across the country. The continuous evolution of our technology has driven product innovation. This means things like numerous new and creative applications, like high-definition TV, interactive TV, and all-digital networks. These are new things that have come about as a result of digitization and direct-to-home TV.

We have also made some early-stage investments in two-way satellite technology, which could provide the underpinnings of a more robust satellite Internet access service across the country, especially in rural and underserved areas. We have one service nationally, which means rural and underserved markets have the same kind of choice and value in terms of programming that customers in major urban markets get. It's big-city choice in smaller rural and urban marketplaces.

Because our service is national, we also have the ability to deliver all of our French-language programming across the country, and I think that's a tremendous benefit. It's the same for third-language services as well.

With our current DirecPC service, we're also able to deliver a higher-speed Internet access service to rural and underserved subscribers, and that exists today. This is not only available to subscribers in these communities, but also to schools; we've been a very active participant in the SchoolNet program with DirecPC.

ExpressVu is also a substantial employer, with about 1,500 employees across the country working in positions ranging from very specialized broadcast technology jobs to customer service jobs. Beyond our company, we create a lot of employment generally in the broadcasting industry, whether it be for production people or for creative people who are participating in generating Canadian content. As well, jobs are created nationally through the extensive retail network that we have established to sell our product.

Since the launch of Bell ExpressVu and Star Choice a little over four years ago, the two companies have grown very rapidly. In total, the two companies have almost 2 million subscribers, representing just about 15% of the TV households in Canada. Bell ExpressVu itself has a little over 1.1 million subscribers. To make this happen, the shareholders of both Bell ExpressVu and Star Choice have made considerable investments totalling more than $2 billion.

These investments have really led the way for digitization in Canada. Without DTH, I think digitization would have seen a much slower rollout across the country. Right now, the two satellite providers have about a 65% market share of the digital subscribers in Canada. As a result of this, customers, programmers, and the broadcasting industry as a whole have enjoyed significant benefits—and we'll have more about that on the coming slides.

Since the launch of DTH, the installed customer base of cable has been relatively static. It's DTH that is driving the growth of the industry. In Bell ExpressVu's customer base, we're seeing an ever-increasing trend of new subscribers coming from cable-passed territories. In fact, currently, about two-thirds of our new subscribers or new acquisitions are coming from areas that are passed by cable. Within those two-thirds, about 20% of those people are coming from one of Toronto, Montreal, or Vancouver. So Bell ExpressVu is not only a tremendous success in rural Canada, we are beginning to be a success in urban markets. I think that's very important from a competitive perspective relative to cable.

¿ (0910)

But DTH isn't just about taking share away from cable companies. Since 1998, DTH has added over 800,000 net new subscribers, net new customers, to the system. These are customers who, prior to the launch of DTH, quite possibly were subscribing to an American grey-market service or possibly weren't buying a multi-channel service at all, but are now. With 800,000 new customers added to this marketplace, DTH is therefore expanding the number of Canadians who are watching licensed Canadian programming. This results in a substantial revenue opportunity for the programming community, and especially for the pay and specialty programmers across the country.

Why has DTH done so well? I think the answer is very simple. We have a great product—and forgive me for being a little biased, but I really do think we have a great product. The best way to describe our product is really in some simple attributes: choice, quality, and value. This is really our value proposition to our customers.

Choice means more than just being able to chose another service provider over your cable company. It really means the ability to chose from hundreds of all-digital channels. Flexible packaging in small thematic bundles allows our customers to watch what programming they want, when they want, and from anywhere in the country

Quality means great picture and sound. All of our channels are digital. Of course, our advanced technology allows us to offer useful applications like an electronic programming guide to help you navigate through our hundreds and hundreds of channels. It also means useful applications such as interactive TV, something we're just launching right now and have tremendous hope for. And quality also means offering industry-leading customer service, and that's a real point of differentiation for us at Bell ExpressVu.

Finally, we price our service in a very competitive way relative to cable and to our competitors, so that we offer a very good economic value to our customers.

I'd like to now turn the presentation over to Chris Frank, who will talk about some of the benefits that arise for the Canadian broadcasting system.

Mr. Chris Frank (Vice-President, Programming and Government Affairs, Bell ExpressVu): Thanks, David.

Our system is truly one country, one service, with programming and linguistic choice. We distribute every provincial educational service, the Aboriginal Peoples Television Network, the proceedings of the House of Commons and the Quebec National Assembly, all national and regional television networks, a full range of Canadian specialty and pay-TV services, third-language services from Canadian and foreign service providers, 55-plus channels of pay-per-view television, plus the very best of U.S. and other foreign networks and specialty services.

In practical terms, this means a French-language customer in Gravelbourg, Saskatchewan, can access the same services available to someone in Vancouver. An English-language customer in the Beauce region can access the same services as someone in downtown Montreal, or, in some cases, can get à la carte services in the language of their choice. Or APTN can be accessed throughout the north or in first nations territories where traditional wire-line facilities are not available.

Our addressable digital technology allows our customers to customize their programming, thus offering choice, variety, and cost-effectiveness. Our service area is all of Canada, so all channels and services reach all corners of our vast country.

David has already mentioned the 800,000 net new subscribers our industry has brought to the Canadian broadcasting system. This translates into $316 million annually in new revenues for Canadian broadcasters. This incremental revenue comes to these broadcasters virtually at cost. As well, DTH has contributed more than $60 million to independent funds for the creation of new Canadian programming.

There's more on DTH's direct contribution to Canadian production through independent funds. Although DTH has only a 13% share of the multi-channel television market in this country, we contribute 25% to the Canadian Television Fund. Since 1998, and with our help, the CTF funding pie has grown from slightly more than $55 million in 1998 to over $100 million in 2001.

In addition, Bell ExpressVu is proud of its contributions to the Bell Broadcast and New Media Fund. This unique fund earmarks funding for broadcast programming with an integral, interactive, and enhanced multimedia dimension.

The next slide demonstrates the beneficial impact DTH has had on Canadian specialty and pay-TV services. With the rapid growth of DTH, pay-TV services have also enjoyed considerable growth. In fact, it's not a stretch to say this industry was moribund before we came along, and that we have been instrumental in its rebirth. Through DTH, pay-TV has more than four times the penetration it has via other forms of distribution. As I said before, although DTH only has 13% of the market share, it contributes a whopping 45% of pay-TV revenues—and that figure was from last year. Plus, DTH customers tend to watch up to 30% more Canadian specialty TV than do customers of other distribution undertakings.

In summary, Mr. Chair, DTH has not only expedited the rollout of digital TV across Canada, it has also levelled the playing field for the delivery of multi-channel television to rural, underserved, and uptown Canada. DTH equalizes the selection and variety of broadcast programming across the country.

I'd like to pass the presentation to our general counsel, Ian Gavaghan, who will now discuss the satellite piracy issues.

¿ (0915)

Mr. Ian Gavaghan (Vice-President and General Counsel, Bell ExpressVu): Thanks, Chris.

Chris and David have talked about the benefits that we have brought to this industry, and I'd like to turn to an issue that presents a significant challenge to our industry.

Unauthorized competition from black- and grey-market U.S. direct broadcast satellites, or DBS services, is a critical problem and is growing worse. Bell ExpressVu wants to raise the awareness of this issue and particularly of the potentially harmful effects that could occur within the Canadian broadcasting industry.

When Bell ExpressVu and Star Choice launched their services in 1997, we filled a void and quickly demonstrated that we were a competitive alternative to U.S. DBS services. In 1997, there were about 350,000 Canadian subscribers to U.S. DBS services. This dropped by 200,000—more than half—due to the expensive repatriation efforts made by both Canadian DTH services and rigorous enforcement efforts both by our industry and by the federal government. However, the last year has been a window of opportunity for retailers of equipment that receives unauthorized U.S. DBS services. This window opened because of some adverse legal interpretations of the Radiocommunication Act, one of which ExpressVu is now appealing to the Supreme Court of Canada.

Retailers now openly sell pirate devices for stealing U.S. DBS programming. They cloak themselves with legitimacy by dishonestly using trademarks similar to DIRECTV and EchoStar. Consumers often don't know the service is illegal. Sometimes the price is so low that it's too compelling to pass up.

Unauthorized U.S. DBS competition in Canada has now regained an alarming share of the Canadian market. A survey of southwestern Ontario households was commissioned by the Canadian Cable Television Association and was released earlier this week. It estimated that between 520,000 and 700,000 households in Canada receive unauthorized U.S. DBS services. This confirmed our earlier estimate of about 600,000 households, the vast majority of which are black market, and this market share is growing rapidly.

The presence of this second, unlicensed broadcasting industry in Canada has a material negative effect on the licensed Canadian broadcasting industry. Its market share equates to about $325 million in lost annual revenues for Canadian BDUs alone, or broadcasting distribution undertakings. In 600,000 households, there is now little or no exposure to Canadian programming. No CBC. No TQS. No TSN.

Canadian programmers lose subscriber fees and advertising revenues. Canadian production funds lose $16 million annually in direct contributions from BDUs, as well as other funding from programmers. As producers lose funding, they lose follow-on international revenue, and artists lose opportunities. In short, Canadians lose jobs.

To restate it, unlicensed competitors put at risk the employment base of our industry and the billions of dollars of investment in infrastructure and programming by our industry; and last, but not least, they completely undermine the policy foundation of our broadcasting industry.

Clearly, we need to reverse the accelerating rate of growth of U.S. DBS signal piracy in Canada. The industry is doing what it can. Individually, we continue to take legal action against signal pirates. Collectively, we have come together to raise awareness to the issue and coordinate our individual activities.

Awareness of the potentially devastating effect of this problem is crucial, and so is a willingness by government to raise the priority of the issue moving forward. If the Supreme Court of Canada agrees with our interpretation of the Radiocommunication Act, as we expect, then we anticipate enforcement of laws against signal theft and against related offences. If it becomes necessary to amend the Radiocommunication Act, we urge the members of the committee to implement those changes as quickly as possible.

David.

¿ (0920)

Mr. David McLennan: Thank you, Ian.

Let me now turn to the economics of our business, because in order to sustain the many benefits we've discussed, the business case has to add up.

To date, an estimated total of over $2 billion has been invested in DTH by the shareholders of both Bell ExpressVu and Star Choice. However, while we have experienced growth in the marketplace, the financial viability of DTH requires substantial scale, and we're not quite there yet. Obtaining scale is challenging in a country the size of Canada, with only 12 million TV households and a market dominated by cable.

Bell ExpressVu needs about three more years of continued investment just to break even. During that period of heavy investment, it's very important that we have a stable regulatory framework. Otherwise, it becomes very difficult to attract the kind of investment we need and to make the kinds of business investment decisions that we need to make in order to move forward and achieve critical mass.

Finally, given the challenging economics that we all face, regulatory financial obligations need to be examined. Specifically, those that do not advance the Canadian broadcasting industry should be eliminated. Here, I'm specifically referring to the part II licence fees, something I believe you've heard about from the Canadian Association of Broadcasters and the CCTA.

Just to conclude, the black and grey markets require immediate attention. The issue that they represent is an industry-wide issue, and that issue represents a very serious threat and challenge to the Canadian broadcasting system. Secondly, we need a stable regulatory framework, one with which we can attract capital and make the investment decisions necessary to sustain our growth, achieve critical mass, and continue to enjoy the benefits of competition.

Mr. Chairman, that concludes our presentation. We would be happy to take any questions you may have.

The Chair: Thank you, Mr. McLennan. I think you have put forward a very concise presentation that states your case very clearly. We appreciate that.

Mr. Abbott.

Mr. Jim Abbott (Kootenay--Columbia, Canadian Alliance): Thank you for your presentation.

Would you call it a grey market for the Canadians who are down in the Sunbelt in Florida and have their dishes taking in the Bell ExpressVu signal in Florida? Would you see them shut down?

Mr. David McLennan: That is the identical situation, only in reverse. That's happening in the United States.

Mr. Jim Abbott: So you would like to see the people from Quebec and Ontario, people who have cottages or homes for the winter in Florida, not have their satellite dishes and not be able to access hockey games and things like that.

Mr. David McLennan: We are not authorized to deliver our signal to the United States. The Federal Communications Commission does not allow us to terminate a signal in a subscriber's home, a customer's home, in the United States. If we are made aware of people who are receiving the service in the United States, yes, we do have to shut them off.

¿ (0925)

Mr. Jim Abbott: I have something from a website. It's called “The Canadian Solution: An economical way of providing a vast improvement in the quality and quantity of TV & radio signals to your home”. This is on a site from Plain, Wisconsin. It says “Lower your satellite programming costs!”, “Restore CBC Radio & TV Reception!!”, and so on. On that website are Bell ExpressVu, Star Choice, and so on. So would you agree that we have a reverse grey market?

Mr. David McLennan: That activity appears to be going on, yes.

Mr. Jim Abbott: Yes, I believe we do have a reverse grey market. I'm wondering why you permit it, because my understanding is that when a person knows the sequence of numbers on my Visa card, they know my Visa card was applied for somewhere in British Columbia and they know what my address is.

Now, I would suspect that this may be news to Bell, but I don't know. I would suspect that Bell might know you could go to the Visa companies, and for the people in the United States who are accessing Bell ExpressVu through the reverse grey market, you would be able to shut them down because of their Visa cards. If their card comes from FirstBank in Seattle or from whatever bank in Miami, you would be able to detect that. Have you undertaken any activity like that to stop the reverse grey market?

Mr. David McLennan: Just to be clear on websites such as that, those vendors are not authorized service providers of our product, and we do monitor such situations. We take action where necessary, and we will not knowingly deliver service to a system in the United States.

And just to add to that if I could, one of the features of the grey market typically is an intervening party between the ultimate customer and the BDU. That intervening party often uses, for example, a credit card or some other means of payment that is based in Canada. So even though we can run those types of inquiries that you suggest, the result is usually not helpful.

Mr. Jim Abbott: In order to activate Bell or, I presume, Star Choice—you might not know about them—I understand that a person has to call a 1-800 number that is based in Canada and cannot be accessed from outside of Canada. I also understand that this is circumvented by having a number in Montreal that simply call-forwards. Are you aware of that?

Mr. David McLennan: I'm not aware of that. That's not an ExpressVu initiative by any means.

¿ (0930)

Mr. Jim Abbott: With respect, I would suggest that perhaps it is. If you're asking this committee and the Canadian government to get serious about the grey market and the black market, I would suggest to you that it would be very helpful for us to be encouraged by the fact that you are able to show us how you have made sure there isn't a reverse grey market. It seems to me that there is a number in Montreal—it might be there or it might be anywhere—that is regularly calling in. In other words, it's call-forwarding to your 1-800 number in Canada.

Let me just walk through this. I'm sure you understand it, but I just want to make sure everyone can clearly understand what's going on.

A 1-800 number basically accesses and starts the Bell ExpressVu service. That number is accessible only from Canada. In order to circumvent this, a 1-800 number in Montreal can be accessed from the United States, and it is call-forwarded to another telephone number in Canada. When that telephone number in Montreal is reached, the telephone number in Montreal then calls the 1-800 number in Canada, meaning that it is accessed in Canada. Someone in Arizona, in the state of Washington, in Florida, or in the Sunbelt, can start Bell ExpressVu by going through that Canadian-based number.

I would suspect that Bell Canada, of all companies, would be able to know there is one number—or two or three or even ten numbers—in Canada that is regularly accessing your 1-800 line to activate your service. I don't think that's rocket science. I think that's pretty straightforward for Bell.

So have you taken steps to make sure there isn't this reverse grey market?

Mr. David McLennan: Just taking that a little further, once that gets into our system, our 1-800 number, we will not activate somebody who doesn't have a legitimate Canadian address. Even if they do get through to our call centre, if they have a Florida address, an Arizona address, or anything outside of Canada, we will not activate the service.

Mr. Ian Gavaghan: Can I add to that?

On your earlier point about us taking action against the reverse grey market, in point of fact, an action is now before the Supreme Court of Canada, the Richard Rex–Can-Am matter. One of the three bases on which we originally brought action against him was that he was operating a website that offered our product into the United States. That was exactly why we went after him.

Mr. Jim Abbott: Just to get onto a directly related topic, I'm curious about why you went after him when you could go after any Spanish-language newspaper or community paper in the Montreal area or anywhere else. Of course, I use Spanish because of the number of Spanish channels on the American satellites. Why would you have gone to somebody more obscure? Why would you not have gone after these Spanish markets?

Mr. Ian Gavaghan: Are you talking about the newspapers that are available now?

Mr. Jim Abbott: Yes.

Mr. Ian Gavaghan: I think that's exactly on point with what we were trying to say this morning. The black market in Canada has exploded, and distributors of black market equipment in Canada now feel comfortable enough to take out full-page ads in the Toronto Sun, in local Montreal or Winnipeg newspapers, or what have you. That's exactly the problem.

Why did we go after Richard Rex and Can-Am? Because he was a very large dealer in all three areas: the black market, the U.S. grey market, and the reverse grey market. He was operating an e-commerce site, as well as storefronts. He was also in British Columbia, and we wanted to address the issue in British Columbia, because it had never been addressed there before. That's why we went after him.

Mr. Jim Abbott: I would just suggest something on my own behalf and perhaps on the behalf of other members of the committee. If I could be convinced, perhaps in a further submission, of the aggressive steps Bell ExpressVu is taking to stop the reverse grey market—that you are going after the Canadian snowbirds and people like this one on the Internet, that you are taking the necessary, simple, technological action that I've suggested to you this morning—perhaps I would feel more inclined to say, yes, we should do something.

I'm just of the impression—perhaps it's a bad impression—that the DTH marketers in Canada are talking about and asking for action on the grey and black markets in Canada, but that, because of the very large footprint that you have with your satellite signal, the DTH providers in Canada are not really serious in turn about stopping the revenue sources from the reverse grey market.

Mr. David McLennan: I think we are very serious and that we have been the most aggressive party in Canada in pursuing this, but we'd be happy to summarize our actions as a follow-up.

Mr. Jim Abbott: Thank you.

The Chair: Might I suggest that you summarize what you have done and send it to our clerk? It would be extremely helpful, because this whole issue of black and grey markets has been coming up quite often.

Mr. David McLennan: We will do that, Mr. Chairman.

Mr. Ian Gavaghan: If I could simply add one thing, I think some of the techniques have been oversimplified here this morning. What you have to remember is that these are people who are attempting to commit fraud on Bell ExpressVu. They're thinking of ways to trick us and to defraud us.

The Chair: This is why I think your documentation will be extremely useful.

Madame Gagnon.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): I would like to pursue the subject of the black market, piracy and bypassing Canadian DTH satellite service. What do you think we can do to stop this piracy? Apparently it is difficult even to know who is doing the pirating and who is buying these dishes. What needs to be changed in the Broadcasting Act to deal better with such practices?

[English]

Mr. David McLennan: The grey market and black market have exploded recently because of some of the unclear court decisions that have been rendered in the past twelve to eighteen months. As a result of those decisions, the threat of prosecution for stealing these services is now fairly remote because of the lack of direction from the courts.

As Ian mentioned a moment ago, we did take one of those cases to the Supreme Court of Canada. The hearing was in early December, and we're now awaiting a decision. We feel we will get a favourable decision, and I think that will swing the pendulum toward putting some proper discipline back into the market with respect to respecting the laws of the act. Failing that, amendments to the Radiocommunication Act, and specifically to paragraph 9(1)(c), will be sought to clarify the language in the law.

¿ (0935)

[Translation]

Ms. Christiane Gagnon: What do you mean when you say “clarify”? I would have liked you to go into detail about that, even as regards the wording. What do you mean by “clarify”?

[English]

Mr. Ian Gavaghan: We do have some potential language that we could suggest if that would be something the committee would appreciate. A number of different legislative amendments could be written.

The most obvious issue is that there has been a problem around interpreting paragraph 9(1)(c), so the idea would be to make that as crystal clear as possible first: de-encrypting U.S. services in Canada would be illegal. In addition to that, Copyright Act amendments similar to those brought in by the Digital Millennium Copyright Act in the United States, for example, would be possible in order to protect encryption systems of copyrighted material and other similar initiatives.

Again, though, we have material on this that we could share with the committee.

[Translation]

Ms. Christiane Gagnon: Thank you.

[English]

The Chair: Ms. Bulte.

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

I have to tell you that I don't share Mr. Abbott's point of view that it's up to you to go out and check the Internet. Stealing is stealing to me, whether it's stealing somebody's copyright or stealing somebody's signal. I certainly know this is what my understanding is.

When the cable association came before us, they also told us there is also a problem with enforcement. Nobody wants to touch this. Can you explain to me why that is? Is it just because of a lack of people to enforce it? Why don't the authorities want to get involved?

Mr. David McLennan: Maybe I'll start, and Ian can complement the answer.

In the recent past, meaning the last eighteen months or so, a series of decisions in various courts across the country have added to some uncertainty around the interpretation of the Radiocommunication Act. Since that has happened, it has taken the teeth out of law enforcement and out of the incentive to go after people who are blatantly selling this product. We hope the actions we've initiated with the Supreme Court will put those teeth back into the enforcement of the law, and that we can get back to more aggressively pursuing the people engaged in this activity.

Ms. Sarmite Bulte: When is the decision expected to be handed down?

Mr. Ian Gavaghan: Actually, we don't know when it's going to be coming down.

Ms. Sarmite Bulte: You don't know yet.

Mr. Ian Gavaghan: No, but we're hoping it's in the next month or so.

Ms. Sarmite Bulte: Let me go on to your second recommendation. I agree with you. I think these black- and grey-market areas need to be clarified as soon as possible, and they need to be clarified in the public's eye as well. As you say, when it goes so far and there's such blatant advertising, people don't understand that it's illegal, that it's stealing, and that it's wrong.

When you suggest a stable regulatory framework, can you perhaps expand on what exactly you mean by that?

Mr. David McLennan: It's rather a generic point, in that we have invested heavily—“we” meaning BCE shareholders who have invested, and Shaw shareholders who have invested heavily in Star Choice—based on a certain framework and set of rules under which to operate. For instance, our company is coming up for a licence renewal hearing this year, and we just want to make sure the rules do not materially change in a way that would affect the continued investment that we have to make to get our business to critical mass, to be able to become a profitable company, and to be able to continue delivering the benefits that we have been delivering. So it's really that we just need to see some certainty and predictability in the framework in order to feel good about making the right business decisions.

¿ (0940)

Ms. Sarmite Bulte: When you say “rules”, are you talking about the CRTC rules?

Mr. David McLennan: Principally, yes.

Chris, do you have anything to add to that?

Mr. Chris Frank: No, David, I think you've said it absolutely perfectly.

The key here is that, in 1995, the government looked very closely at the whole issue of direct-to-home satellite broadcasting, and introduced a government order that was then translated into a CRTC regulatory framework.

We believe this industry has been thoroughly analysed. We have a set of rules, and we're attempting to make a successful go of our business. We'd just like to have stability and continuity in the rules of engagement.

Ms. Sarmite Bulte: If I can, I'll ask you another, totally unrelated question, one on Canadian content.

One of the great things about having direct-to-home is that you have so many choices. It's wonderful to have so many choices. Yes, if you want to watch the news from Atlantic Canada, you have access. I guess my concern is how we can ensure that we continue to hear our Canadian voices and have our Canadian choices, how we can ensure that the Canadian content is there for all to access in this multi-channel universe. There's so much that we're going to end up having “everything else but”. How do we reserve those spaces and ensure that there are not just limited spaces, but that we can expand on those spaces from a Canadian content perspective?

Mr. David McLennan: Firstly, dealing with some of the major leakages in the system, such as the grey market, is a very important initiative, because services such as DIRECTV and EchoStar provide virtually no Canadian content. They're not contributing to the broadcasting system. It's essentially an end run around the entire system, so fighting that particular threat is a very important part of ensuring that Canadian content remains as a mainstay of our service.

Having done that, I think the kinds of contributions our company and Star Choice make to Canadian production—you heard Chris make reference to our contributions to the CTF and the Bell Broadcast and New Media Fund—are very important to generating Canadian content. Of course, that Canadian content ends up on our service, ends up on Rogers Cable, and ends up on the cable of cable companies across the country. So as we become more successful and are able to contribute more back to the generation of Canadian content, I think it will become a self-fulfilling thing.

Mr. Chris Frank: David, perhaps I can add just a few more points.

First of all, the act and our regulatory framework require that we give prominence to Canadian services. In fact, every one of our customers has a predominantly Canadian lineup. We simply package our services that way, and that's the way in which they seem to be very popular. On our electronic programming guide, we give prominence to Canadian-licensed services ahead of foreign services. Our pay-per-view undertakings feature a full range of Canadian films, and we actively promote Canadian events.

So we're all about Canadian programming. In fact, it's our point of product differentiation. If we didn't have Canadian programming, we'd look a lot like EchoStar or DIRECTV, the two U.S. providers. I believe that's why we've been so popular. It's because we offer a full range of services in the language of the customer's choice, from coast to coast to coast.

Ms. Sarmite Bulte: Mr. Frank, just to follow up, you said “the act and our regulatory framework require”. What act?

Mr. Chris Frank: I'm sorry, it's the Broadcasting Act.

Ms. Sarmite Bulte: Thank you.

The Chair: Mr. Tirabassi.

Mr. Tony Tirabassi (Niagara Centre, Lib.): Thank you, Mr. Chair.

I would like to offer my thanks to the presenters for taking the time to come here to make their presentation.

The one question I was going to ask was identical to that of my colleague Ms. Bulte, with regard to the regulatory framework that you make in your recommendations, so I won't even go there.

This is a day and age when you can get comfortable on the couch with your clicker in hand, and it's difficult to decide for others what they should be watching. I've never been one who would want to think for a moment that we can convince other people about what they should be watching or that we can make choices for them. But one area that I know is increasing is that of the local community channels.

We talked about Canadian content. Bringing that down even more specifically, have you ever looked into creating community channels much like those that the local cable companies have? If you haven't looked at creating them, what is it that you would do to promote local or regional content?

¿ (0945)

Mr. David McLennan: This is a very topical issue in the industry right now, and we're working closely with the CAB and its members to work through this issue. Right now, we have quite an extensive offering of local channels from markets across the country. We certainly don't offer all local channels, because it's just not practically possible or technically possible to do that from a bandwidth perspective, but we do offer a very large representation of local channels to give that local flavour to our service. And remember, it's very important for us to be able to do that, because while we have a national service, we also compete with an incumbent cable company as well at the regional level.

Specifically, some of the issues being faced by local broadcasters, and particularly by small local broadcasters, come as a result of the tremendous amount of choice now available to anybody watching a multi-channel service. The reality of that choice is that while people watched those channels more often when they only had one or two channels on their dial 10, 15, and 20 years ago, they now they have 200 channels on their dial. That's causing some tuning away from some of these local broadcasters to other channels, and that's just the function of the growth we've had in the product.

So that's a serious challenge for some of these local broadcasters, but we're working with the CAB to come up with a solution that would be workable for the smaller local markets and workable for our service.

Mr. Chris Frank: If I could just add a few comments, we have discussed with the CRTC the possibility of having what you've referred to as a community channel. To this date, though, because we're a national service, the regulator hasn't seen the efficacy of that proposal. But what we have been doing—and it's something that I think has gained wide acceptance amongst our customers—is to offer news from across the country, from each region and from all the major and major-minor communities across the country. We carry live news on channel 198 or 199 so that people from coast to coast can either check their local or regional news, or if they are, say, expatriates from Newfoundland who are living in British Columbia, they can watch Newfoundland news from that time zone. We find that to be a very useful and popular service, and we're hoping to expand that as our satellite bandwidth increases.

As for the idea of a community channel, we'll continue to explore that with the CRTC, because we agree with you. We do think it has a lot of merit, and we would like to do it.

Mr. Tony Tirabassi: Thank you, Mr. Chair.

The Chair: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you for your presentation. I'd like to pick up on some comments that have been made about Canadian content.

You have expressed your commitment to Canadian content, and I understand that you have increased your input into the CTF. You also mentioned that you follow with CAB's recommendation that the part II licensing fees be removed. I'm curious. I want to get a sense of why you think that's beneficial at this point in time. I put forward to CAB a couple of weeks ago that this money could be transferred to the CTF. If there is in fact a very strong commitment to Canadian content, then let's try to get more money into the Canadian content pot.

Following up on that, I'd like to know something else. As a national service committed to Canadian content, we have seen statistics from across the country that show that the public broadcaster, CBC, is the most efficient producer of Canadian content. I'm wondering if you would recommend a greater role for the public broadcaster in the new and evolving broadcasting environment we're living in.

¿ (0950)

Mr. David McLennan: I'll address the part II fee question, and I'll get Chris to address the CBC question.

What I really meant by my comment on the part II fees was that we should be trying to focus those resources on things that further the broadcasting industry. Specifically, on any given day, there are lots of choices to be made in terms of investing and spending money in the broadcasting industry, from our perspective. For instance, we've just done a thorough review of the software development that we need to do underpin interactive TV services. It costs millions and millions of dollars to do that, so I think funds such as the funds now being used for part II, along with other similar kinds of resources, could be better deployed into investments that continue to evolve our product and allow us to bring innovative services that add to the broadcast system. That was really the focus of my comment regarding those fees.

Chris.

Mr. Chris Frank: Thank you, David.

In terms of your question about where the part II fees might go, we definitely favour a redeployment of those fees into the Canadian broadcasting industry. The CTF would be one possible relocation point, and if we're going down that road, I wouldn't want to lose track of the other independent funds, such as the Bell Broadcast and New Media Fund, because those funds do provide a unique service within the industry.

I believe the CAB and others have pointed out how important interactive television is going to be in the days, months, and years to come. In fact, it could become a substantial revenue opportunity for Canadian broadcasters as enhanced and interactive television becomes more and more important.

There are other places where this money can be placed, too, such as in increasing and accelerating the rollout of digital receiving equipment across the country, because surely the future is digital, not analog. High-definition television is coming. We know from demonstrations that the Americans have deployed HDTV in all of their major cities, including border cities. To date, Canada does not have an HDTV service on a regional or a national basis, and that will become a pressing problem for us.

So there are a number of places where this money can be redeployed, but I agree with your point. Content is very important, and we simply must have first-class content to keep Canadians watching Canadian services. But we also have to have a modern, efficient delivery system, so that we keep pace with the rest of the world.

As far as CBC is concerned, we have been a staunch supporter of CBC and Radio-Canada, and we are also very supportive of the private broadcasters in this country. I'd simply say that we have CBC services from coast to coast and Radio-Canada services from coast to coast. In fact, we have just signed a new entente with CBC, and we will be adding new Radio-Canada services from other parts of the country—most specifically the Prairies and the west—as soon as we have additional satellite capacity.

We also carry the Galaxie digital audio service, which is made for us specifically by CBC. We're very pleased with that service. In fact, we've just signed a new deal that will extend the distribution of it for another six years.

We also carry CBC Newsworld and RDI on our basic service so that 100% of our customers, in both English and French, can have access to those services. And we're very supportive of the new French-language arts service that CBC has launched. So we're behind CBC, as we are behind private broadcasters.

Ms. Wendy Lill: One of the things we've heard is the idea of a “green space”, something that is distinctly Canadian in terms of the programming that people can move to so that they can be confident that they will be watching Canadian material. In terms of your technology and direct-to-home systems, is that even working in the same universe? Within your technology, is it possible to have a green space, a number of dedicated channels that people can find more easily than they can find the World Wrestling Federation or whatever? Is there some way that, within your system, you can make that top-of-mind for Canadians?

¿ (0955)

Mr. Chris Frank: I'm very pleased that you asked that question, because Bell ExpressVu is quite proud of the fact that we're the only distributor in Canada that offers an all-Canadian basic service for a very affordable $10 a month in English and $8 a month in French. We do in fact have that green space you're referring to.

On our basic services, we have educational services from coast to coast, along with CBC, Radio-Canada, and all of the private broadcasters, both national and regional, plus Newsworld and RDI, plus CBC's Galaxie digital audio service, for what we think is a very affordable rate. It was a commitment we made to the Canadian broadcasting system when we were first licensed, I'm pleased to say it survives to this day, and we think it leads the industry.

The Chair: We'll now close with three questioners: Mr. Cuzner, Mr. Abbott, and Mr. Gallaway.

Mr. Rodger Cuzner (Bras d'Or--Cape Breton, Lib.): I have two questions. I can ask them, and you guys can sort them out.

The first one is on the grey and black markets. Number one, is the technology there to identify and bring the abusers forward? We have identified it as a problem and a number of presenters have identified it as a problem. Could you be specific about where you believe the effort should be made to address the problem?

The second one is on access. I represent a rural riding. Access to high-speed Internet is certainly a concern. Excuse my technological ignorance, but is the direct-to-home satellite Internet high-speed? If it is, I guess the biggest cost when it comes to accessing high-speed Internet is the cable cost, so are we now at a point at which, financially, it makes as much sense to go to satellite for accessing high-speed Internet?

I just have those two different questions.

Mr. David McLennan: With respect to where we should be focusing our efforts on the black market and grey market, that starts with enforcing it at the level at which this product is being sold. We need to up the temperature on satellite dealers and retailers who are advertising and selling this product. That's where it starts. If I can go back to the pending Supreme Court decision, I think that's just an important catalyst to being able to turn the temperature up on the law enforcement side.

Do you have anything to add, Ian?

Mr. Ian Gavaghan: No, I think you hit it spot-on, David. That's clearly the focal point: where these devices are coming into the country, and how they're being distributed throughout the country. That's where we should focus as we move forward.

Mr. David McLennan: Remember, the majority of this activity starts with software people defeating the conditional access systems that protect the programming. Therefore, go after the people who are selling it, but also put some teeth into going after the people who are actually doing the software hacking itself. I think it's at that level that we could really manage the system.

Mr. Rodger Cuzner: What about the end user? Is the technology there to identify a household that is using grey and black...?

Mr. David McLennan: To specifically identify a user, no, but our technology—I can't speak for the technology of others—is capable of defeating the hackers. It's a bit of a game, actually. They do things, then we do things, and then they figure those out. We go around and around like that.

À (1000)

Mr. Rodger Cuzner: The idea is to scramble the signal, and then you have to buy a new card. A guy in my hometown is a cult hero. He has a very profitable business, but he's almost like the high school pusher. Everybody knows he's doing it, but he has pretty much had free rein at it. It's bizarre.

Mr. David McLennan: We have to work hard to stop that, because it's out there, it's blatant, it's in the newspapers, and it's stealing. It's theft, so that's where we need to focus our efforts.

With respect to your question about high-speed Internet in rural areas, we have a service right now called DirecPC. It's available in a limited sense, because it's a bit bandwidth-constrained. But it is there to offer higher-speed access to rural customers than they would otherwise get through a dial-up modem running at 56 kilobytes. Our DirecPC would download data at about 400 kilobytes, so it's about seven or eight times faster than what is available with dial-up. It's a one-way service, though. You go out to the Internet via telephone and come back via the satellite, so it's not really a true two-way system.

We have made an early stage investment in two-way satellite technology. The satellite that we and Telesat will be launching in December of this year has a small two-way payload on it that we will use to explore the possibilities of future services. But I have to tell you that the business case and the economics surrounding it are a very difficult proposition.

Mr. Chris Frank: David, if I might, the honourable member might be interested in knowing that by making this investment, we have established for Canada, for all time, the ownership of the 91º parking spot where we put our satellite for Ka-band. This will potentially open up this universe of truly high-speed, two-way, via-satellite services that have the potential to provide true broadband capability to rural and underserved Canada. I think it's a significant achievement that we have claimed that position in space for Canada, and that's thanks to the investment David was just referring to.

The Chair: Mr. Abbott.

Mr. Jim Abbott: I've gone through the ExpressVu channel lineup. I believe that, one way or another, something like 342 channels other are accessible. That's what I have in front of me, anyway. I take a look at the fact that members of the Spanish-speaking community in Canada—many of whom will be speaking to other Spanish people who have recollections of Augusto Pinochet, dictatorship, and things coming down on them—currently have access to 26 Spanish-speaking stations for $21 U.S. a month through the grey market. They can get Sesame Street in Spanish, or whatever.

Of your 342 channels, you have one at a cost of $3 a month, the Telelatino Network, out of Toronto, and it's half-Italian. Where is the Spanish-speaking community in Canada supposed to go to be able to see entertainment or receive information in their language if we shut down the grey market in the way you're talking about?

Mr. David McLennan: It's a real challenge for us to offer all of the services that are available across North America. We just don't have the bandwidth to do that, so unfortunately there are situations in which we do have to make some tough choices in terms of putting one genre programming on over another. Unfortunately, we have had to do that because of bandwidth constraints, so that is a limitation of our service.

Mr. Jim Abbott: Can you see the problem in going to the Spanish-speaking community in Canada and saying they will no longer have 26 channels?

Mr. David McLennan: I can certainly acknowledge that they are something those customers would like to have, yes.

Mr. Jim Abbott: You made the comment that Bell ExpressVu made an investment on the basis of a certain framework and set of rules. I would expect that in Lloydminster, in Medicine Hat, and in other fringe areas like those, the people who are broadcasting on-air have probably made an investment on the basis of a certain framework and set of rules, yet they're currently having their signal fundamentally stolen because of satellite. In other words, you have a major leakage, to use your term, in what I call a “red market”.

As I see that red market, people in western Canada are accessing programs that have been purchased in good faith by channels in western Canada but are also being shown in Atlantic Canada, and because of your service, those channels in the west are no longer able to verify for their advertisers, for the people who are paying their bills in western Canada, that they in fact have the audience the advertiser is paying for. For example, the audience for Survivor, which was a really hot item a year to a year and a half ago, or whenever it was, found out who the survivor was from a station in Atlantic Canada because of the satellite service. So what remedy do you see for what I call the red market?

À (1005)

Mr. David McLennan: This is an issue that we're discussing in earnest right now with the CAB, in order to resolve many of these issues you have just suggested about distant-market signals. Given that we're in very thorough negotiations with the CAB, I'm therefore a little hesitant to talk about the solution until we have been able to nail it down. But we are working with these broadcasters and their association to come to an equitable solution from their perspective.

Mr. Jim Abbott: But with respect, I would suggest that, in the same way in which you understandably are concerned about the grey and black markets, the on-air broadcasters in Western Canada are very understandably concerned about your services and the Star Choice services in what I call the red market.

Mr. David McLennan: Certainly, we are very respectful of their rights, and we're working to address those issues.

Mr. Jim Abbott: I have one final question, and that's with regard to high-definition TV. I'm not a technophobe or a technophile or whatever it is, but to the best of my knowledge, if we go back probably as far as fifty years in Europe, when and where the technology wasn't even close to the technology we have today, of course, France decided on a particular standard for the television sets that were going to be sold and used in France. They thereby eliminated the ability of the viewers in France to be able to access signals from Luxembourg, from Belgium, or from Switzerland, where they had a slightly different technology.

You can help me if I'm wrong, but I've been led to believe that because we are at the very beginning of high-definition TV, we are at a point in Canada—and please understand that I'm not necessarily recommending this, I'm just asking for your input—at which we could establish a standard for high-definition TV that would be different from the standard of the receivers in the United States. In so doing, we would be able to capture and put a technological wall around the viewers. You would have to go to the United States and actually purchase a television set there in order to see a signal originating from an American satellite or whatever. My understanding is that there are ways to do that, but is that something Bell would recommend? Would bell recommend that, in this way, we would be able to build a technological firewall around Canada?

Mr. David McLennan: I'll start, Chris, and then you may want to augment the answer.

Certainly, the firewall concept.... You're right, it is early days for high-definition TV in Canada, and standards do need to be defined. Doing that is very important, but that's from an off-air broadcast perspective. There's also the question of how we would broadcast high-definition services in our technology. Our technology would be unique to Bell ExpressVu, and if we had a certain set of Canadian high-definition signals on our service, they would be available to all of our customers through our technology. Now, that may be a different technology from cable and a different technology from Star Choice, which would also be a different technology from what the off-air broadcaster would use.

In terms of a firewall from the off-air broadcasting perspective, I think a situation would quickly develop in which you would just buy an American television set with that particular hardware in it if you wanted to watch American high-definition off the air.

Mr. Ian Gavaghan: If can I just add something, digital televisions have the ability to look at a number of different processes. I would therefore anticipate that, unlike in your earlier example in which analog televisions were involved and all the circuitry was hardwired, you would have televisions available—in fact, they're available today—that could handle a variety of different types of HDTV presentation equally well.

Mr. Chris Frank: I would also add, honourable member, that David spoke earlier today about the size of the Canadian market being 12 million TV households. We live beside a country that obviously has a much larger market and a much larger number of TV households.

In a perfect world, your idea of a firewall makes sense. Unfortunately, we live in a world surrounded by economic reality. It just wouldn't be feasible for the manufacturers to build a specific set for the Canadian marketplace and sell it cost-effectively. There would be such a gap between the price of TVs in Canada and TVs in the United States that what David was suggesting would likely happen. People would buy U.S. sets and then tune into U.S. delivery vehicles such as DIRECTV or EchoStar, and that would defeat your purpose.

We gain significant economies by being next to a large economic juggernaut. Those economies of scale translate into lower unit prices for things like our set-top boxes or television sets. So I think it's inevitable that we will have the same standard as the United States for HDTV and a number of other consumer products.

À (1010)

The Chair: Okay, we really have to move on, because, in fairness to other—

[Translation]

Ms. Christiane Gagnon: [Editor's Note: inaudible]

[English]

The Chair: No, we really have to move on as soon as we can, so I would ask both the questioners and the witnesses to confine their questions and answers as much as possible.

We'll hear from Mr. Gallaway and Madame Gagnon, and then we'll close.

Mr. Roger Gallaway (Sarnia--Lambton, Lib.): Thank you, Mr. Chair. I'll be brief.

We've heard from previous witnesses about the 600,000 grey- and black-market customers. How do you arrive at that number?

Mr. David McLennan: The CCTA commissioned and has just completed a study in southwestern Ontario. It essentially identified the subscriptions to satellite and to cable, and specifically within the satellite category, U.S. satellite subscriptions. They then extrapolated those findings based on, I think, an interview of over 1,000 people. They extrapolated those findings to a national number, so that was one of the bases for the number.

Mr. Roger Gallaway: Okay, thanks.

I come from southwestern Ontario. Is there a geographic concentration of grey and black, or is it spread across the country? Or can you break it down into grey and black? How many are there of each?

Mr. David McLennan: Firstly, I think it's predominately a black market. It has probably evolved from being more of a grey market to now being more in the black-market category.

Geographically, is it limited to a particular part of Canada? No, I think it's spread across the country nationally. You'll see it in rural areas and you'll see it in urban areas. It's everywhere.

Mr. Roger Gallaway: As a final question, we've heard a lot of adjectives thrown around here about these abusers. We've heard about thievery, about theft being attributed to these people. Why do these people do it then? Is it a question of cost, or is it a question of programming choice?

Mr. David McLennan: The motivation for somebody to hack a system is certainly an economic one. They'll sell the codes or the physical hardware devices that get around our systems and other systems for their own profit, so it's a—

Mr. Roger Gallaway: But what about the black-market people?

Mr. David McLennan: Those are the black-market people. They are the hackers who are defeating our conditional access and that of others and are then selling that knowledge or hardware to other people for profit so that those people can watch the programming for free.

Mr. Roger Gallaway: Yes, but I'm thinking about the end user, the guy who has a black-market dish on his house. Why are they doing it? I'm not talking about the—

Mr. David McLennan: Again, that would principally be an economic motivation, in that they can buy a hardware device one time—these things go from $50 to $100, or maybe a little bit more—but then they wouldn't have to pay a monthly subscription fee. They're watching virtually all of DIRECTV's service, which is a substantial service, with one pretty minor upfront payment and no ongoing monthly fees.

Mr. Roger Gallaway: Then I just have one more quick question.

I'm not certain I understand how all this stuff works, but I do understand that if I have what you refer to as one of these illegal hook-ups, you scramble the signal at times and I have to pay this hacker every time it's scrambled. Is that not the way it works?

Mr. David McLennan: Let me try to summarize it for you. Let's take DIRECTV or EchoStar as an example.

A customer in Canada has a hacked DIRECTV or EchoStar service. Like us, those companies have the means to readjust their codes within the system. That would cause the hacked card or hacked system not to work anymore. That customer would have to take it back to have it realigned with the new codes that the software people and the hardware people have figured out, and then they could watch TV again. So it's certainly a back-and-forth game between the service provider and the—

À (1015)

Mr. Roger Gallaway: What I'm trying to find out is whether or not you're saving money at the end of the year if you have a hacked system.

Mr. David McLennan: It depends on how aggressive the service provider is in changing the codes and causing you, the customer, to have to spend more money to get a new card or a new piece of hardware.

Mr. Roger Gallaway: Do you have any data on what people pay for a hacked system?

Mr. David McLennan: I think these things are $50 to $100.

Ian?

Mr. Ian Gavaghan: It varies.

Mr. Roger Gallaway: What I want to do is compare the cost of your service to the cost of a hacked service.

Mr. David McLennan: Essentially, after you make your one-time hardware purchase, we're competing with something that's free because there would be no ongoing monthly programming charge.

Mr. Roger Gallaway: All right.

[Translation]

The Chair: Ms. Gagnon.

Ms. Christiane Gagnon: I do not think we have dealt with the issue of raising the percentage of foreign ownership. Some witnesses have said that this would have a positive impact on their company's development. What would be the advantages or disadvantages for you if we were to decide to raise this barrier regarding the percentage of foreign ownership?

[English]

Mr. David McLennan: I don't mean to duck your question, but with respect, BCE will be appearing before the committee in a few short weeks and will be addressing the issue of foreign ownership from a company-wide perspective. If I can, I would ask your indulgence for that. Thank you.

[Translation]

Ms. Christiane Gagnon: Thank you.

[English]

The Chair: Before we close, I wanted to put something on record. We did invite your competitors, Star Choice and Look Communications, to appear at the same time as you. For their own reasons, however, they chose not to appear. I say that because I want to make it quite clear that we wanted to give complete access to all who wanted to appear, and they were definitely invited.

Just before we close, I have one qualification on a question put to you by Mrs. Lill on green space. The way I had understood it—because, based on their briefs, this came out from a few interveners who requested that we look at it—“green space” is defined as a public package on the spectrum. You would have networks like Vision TV as some kind of public service, and CBC and so forth, in a green space. All the public channels would be in one group other than strictly Canadian content that is both private and public. Can you address whether or not you see any merit in this? This has been a specific request made to us in a brief.

Mr. David McLennan: It's certainly possible to do it—and I'll refer you back to Chris's response that, for instance, our local channel offering is all grouped together. It's logically grouped together in one spot in our electronic programming guide, and once you've spent a little bit of time with the guide, you'll know that type of programming is in that area of the guide. You'll know to go to section 200 for that type of programming, and you'll know to go to section 300 or 400 for a different type or genre of programming. So it's certainly technically possible to do, and I think we have the beginnings of that organization in our service right now.

Do you have anything to add to that, Chris?

Mr. Chris Frank: Mr. Chair, we're quite familiar with the so-called “foundation tier”—

À (1020)

The Chair: The “foundation tier”.

Mr. Chris Frank: —that people like those at Vision TV have proposed, and as I said before, we're very pleased to tell you that we have this foundation tier embedded within our basic service. So we are in fact converts. We're there already, and we have been essentially since we launched our service. We made a commitment to an all-Canadian basic service, with certain key elements such as Vision, such as educational broadcasters, CBC, the national private networks, the Weather Network, Newsworld, RDI, and CPAC—in other words, bringing information, public affairs, and basic entertainment services to Canadians for an affordable price.

The Chair: Thank you.

Mr. McLennan and colleagues, we really appreciate your appearance here today. We look forward to getting the documentation that you promised to furnish us in regard to the black market and the reverse black market. Thank you very much for appearing.

Mr. David McLennan: Thank you, Mr. Chair and honourable members.

The Chair: I will now call on Telesat Canada. We would like to welcome Mr. Paul D. Bush, vice-president for corporate development at Telesat Canada, and Mr. Bob Power, the director of regulatory matters.

Mr. Bush, the floor is yours. Thank you for coming.

Mr. Paul D. Bush (Vice-President, Corporate Development, Telesat Canada): Thank you very much. We're pleased to be here, Mr. Chairman and honourable members of the committee.

My comments today are taken directly from the document we submitted in August. We have extra copies of it with us morning, and we can leave them behind with the clerk.

I'd like to cover three areas this morning: firstly, who we are, who Telesat is; secondly, where we fit in the Canadian broadcasting system; and, thirdly, some comments to leave with you. Telesat really views itself as a fundamental part of the infrastructure of the system. Our comments will really be primarily aimed at the facilities side of it, and we'll go from there.

Telesat was created through a 1969 act of Parliament. We own and operate the Canadian communications satellites. The very first Canadian satellite, Anik A1, was launched in 1972. In fact, Canada was the first nation on the planet to have a domestic commercial satellite system.

To date, we have successfully launched thirteen satellites in Canada. Four are currently in operation, while the remainder have been either retired or moved out of their respective orbital slots. We lease capacity to and provide capacity to the broadcasters. We also provide capacity to the telephone companies and to the Internet service providers, in order to provide services across the country.

The satellites cover all of Canada, from the northern most tip of Baffin Island to the latest satellites that cover to the southern most tips of South America. We cover a very wide territory.

In 2001, Telesat's revenues were $320 million. Over half of that, 54% of our revenues, came from the broadcasting industry, the bulk of that being the Canadian broadcasting industry. We're a private company wholly owned by BCE. We have a technical and very specialized workforce, with 600 employees across Canada. We have offices from Vancouver to St. John's, as well as operations throughout the north. More and more, we're also opening up shops in South America and in the U.S. as we expand our scope and scale.

We're recognized as a world leader in satellite communications. By virtue of the fact that Canada was the first country to launch a satellite, we have been able to take that expertise out in order to do consulting. Last year, 10% of our revenues came from consulting with countries like Greece, with countries in Southeast Asia, and with companies around the world that are in the satellite business.

Our core business is delivering satellite capacity and service in North America, and it's a very competitive marketplace. Since the March 2000 implementation of the World Trade Organization agreement, the Canadian government has authorized over fifty foreign satellites to provide services into Canada, so there are alternatives.

How do we fit into the Canadian broadcasting system? The short answer is that we fit into a few different areas. From the top, we are at 37,000 kilometres, where the satellites sit in space. We are the pipe that feeds the direct-to-home services and the cable services. We provide the facilities in space that cover all of Canada, and, as I mentioned, 70% of our capacity is used by the broadcasters, with 95% to 96% of the broadcasters in Canada today using Telesat satellites to distribute their signals.

We fit at the bottom, too. In other words, on the ground, we deal with the broadcasters in getting their signals to the satellites and getting their signals spread across the country. We have an extensive ground infrastructure of teleports and shared facilities to which CBC, CTV, Star Choice, ExpressVu, and others bring their services, and we broadcast them up to the satellites.

And we fit in the middle, from the standpoint of being a company that is very much in sync with the broadcasting industry. We have to be in sync with the broadcasting industry if we're going to design the right types of satellites and if we're going to be successful, because they are such a significant part of our business.

À (1025)

Now, there are a couple of things I would mention on that, and they came up in the ExpressVu discussion.

I mentioned that the first satellite was launched in 1972. Since then, Canada has been very innovative in terms of satellite technologies. In the late 1970s, we launched the first Ku-band satellite, which meant for smaller dishes, which really led to DTH. In the 1980s, we worked on digital video compression, which is a sort of opposite to high-definition television and allows us to squeeze more channels into the same satellite capacity. And now, as was mentioned by ExpressVu, in terms of interactive television and high-definition television, we are very active in trying to look at where the market is going and in making sure the satellites and facilities that we have in place will be able to accommodate that direction.

As part of our submission, we had a technical innovation section, and it's part of the document that we left here.

To quantify our involvement in the Canadian broadcasting industry, I have a couple of facts to leave you with. As I mentioned, 95% of the broadcasting signals in Canada are delivered on the Anik and Nimiq satellites. Our facilities deliver both to cable and to DTH, and with 8.5 million cable households and the almost 2 million DTH households, that pretty well equates to the one-in-ten rule observed in the U.S. There are about 20 million DTH users in the U.S., and we're approaching about 2 million in Canada now. So the one-in-ten rule tends to work fairly well.

Our satellites and our teleport infrastructure provide essential services for the national broadcasters, CBC, Global, and CTV. They also provide essential services into northern communities. In many instances in Canada, due to our landscape and our population distribution, getting fibre and different types of facilities in is obviously very difficult. Satellite bridges that gap, and the broadcasters use 70% of our satellite capacity.

In summary, Telesat provides a very essential infrastructure and expertise, both on the space and ground sides that serve as the foundation of the Canadian broadcasting system.

Looking forward, Telesat will continue to work with the Canadian broadcasters, and we come here today really in support of the broadcasters both in the traditional broadcasting sense, in the sense of the new broadcasters, or BDUs, and in the DTH sense. We will retain and grow in this customary grouping because it's very core to our business. To that end, to enable Telesat to grow as well in order for Canada to continue to have a strong presence in the global satellite market, legislators, government, and regulatory agencies should be guided in their work by a number of following points I'd like to make.

Firstly, Telesat's facilities—and satellites in general operate—in a free trade zone at 37,000 kilometres. I use the term really to suggest that while our business successes and failures in the past have really been gauged by how well we've done in Canada, our business successes will increasingly be determined by influences that are outside of Canada as we move forward. Our costs are very similar to those of our competitors. In fact, they're the same. Our insurance costs are the same as those of an American or a European. And our future growth is really dependent on us being able to expand into new markets.

Secondly, Telesat welcomes the competition that has been introduced into Canada. In fact, during the WTO negotiations, Telesat gave up our exclusive access in Canada two years early. We gave that up in order to be able to gain market in the U.S. and gain market in South America—so it was really for the Americas. In terms of moving into those new markets, we were confident about the expertise that we had in Canada, and we wanted to take it on the road.

In so doing, in embracing that competition, we have increased our spending on satellite facilities. Over the last four years, we have spent over $1.2 billion in terms of building three new satellites: firstly, the Nimiq satellite, which the ExpressVu services fly on; secondly, Anik F1, which was launched in 2000; and thirdly, Anik F2, which we're finishing now and which will be launched in June of next year. We're also building Nimiq-2, which is a second DBS satellite. And to put it in perspective, satellites cost in the range of $4 million to $5 million per satellite. So it's a very expensive venture, but we believe this is a very strong commitment in terms of the system in Canada and in terms of expanding our growth.

Gaining the new transmission capacity has been a very positive thing for the broadcasting industry. They not only have the additional capacity in Canada that we've introduced or are building and are going to introduce, with the coverage they also have a means of exporting products into other jurisdictions and availing themselves of what is really one of the most reliable systems in the world from a satellite perspective.

À (1030)

That brings me to the third point: For Canada's unique role in the Canadian broadcasting sector to continue, this committee and other government bodies should recognize the effect that too heavy a regulatory burden might have on the company's future. While Telesat operates in a liberalized WTO environment, we're subject to more policy objectives, greater regulation, and significantly higher regulatory fees than our competitors. As an example, we pay annual licence fees to use the orbital slots in Canada. For Nimiq—and this is directly flowed back to the broadcasters—the licence fees are $2.1 million per year, while the equivalent licence fees for an American DBS operator are $100,000 per year. So there are significant differences in the fees that we pay versus those paid our competitors.

There's a requirement in Canada as well for investment in R and D, and we embrace that. Telesat has a very extensive R and D program in terms of rural and remote Canada, but that is not something imposed on competitors as they come into Canada.

In addition, Telesat makes public benefit capacity available. In other words, on the Nimiq satellite, a certain amount of public benefit is committed. On each of our Anik satellites, we make a series of transponders available for public benefit.

Legislators and regulators must recognize that fees, policy obligations, and regulations applied to Telesat can no longer be set in isolation—in other words, the Canadian market only. Instead, they should be cognizant of the competitive market forces that are very much in play in North America. To do otherwise would compromise this Canadian company's ability to compete in the North American satellite market.

The fourth point that I'd like to make is that legislators and regulatory agencies need to take a more coordinated approach as they set policies and pass legislation in the broadcasting and telecom industries. I want to leave you with an example that demonstrates the urgent need for this type of cooperation amongst policy-makers.

The example is a CRTC decision, Order CRTC 2001-435, in which the commission imposed a levy on Canadian telecommunications carriers, including Telesat. The contribution levy in 2001 was just under $9 million, and it was aimed at reducing the high cost of delivering telecommunications services to remote and underserved areas of Canada, which we firmly support. For Telesat, this has had a doubled financial impact.

Telesat, but virtue of its satellite licence, incurs added costs for building satellites that cover the country. In other words, the Canadian satellites spread power and coverage over the north, while our competitors cover Los Angeles and Florida and they overflow into Canada. So we already incur a cost to be able to build satellites to cover all of Canada, and we do that as a condition of licence. By virtue of that, we're contributing already to serve the north.

In effect, through its decision, the CRTC is indirectly taxing the broadcasters: 54% of our revenues come from broadcasters, with 70% of the utilization of the satellite. That almost $9 million flows directly down to our customers. In this case, the broadcasters were hit significantly in terms of this contribution levy.

Let me extend this precedent to a telephone example. If you're a telephone user, it would be like putting a levy on you in order to put money into the production fund. So, again, it's coordination of the various levies and fees and where they ultimately end up. We suggest that this should be looked at. We strongly believe this was not the intent of the creation of these two acts, and the Canadian Association of Broadcasters and the Canadian Satellite Users Association are currently appealing this contribution levy to cabinet.

In summary, and to finish, as you continue to work at reviewing the state of the Canadian broadcasting industry, we ask you to consider a number of final points. Firstly, recognize Telesat's unique position as it operates in both the telecommunications and broadcasting sectors in Canada. We need some coordination of policy objectives and legislative imperatives affecting these two sectors, so as to allow each sector to flourish and to not penalize, through dual regulation, those entities that actually operate in both.

À (1035)

Recognize that Telesat is already operating in a very competitive WTO environment. The regulations in space, in orbital slots, and in how we gain landing rights in other countries of the world, are very much dictated by the WTO agreement. The fees, regulations, and policy objectives should not impede our ability to be able to compete in our own country or to move into other countries without additional costs.

I'd like to make a couple of comments on DTH, on both Star Choice and ExpressVu, which I think have been a very successful launch of DTH services in Canada. Many of us have worked on this for over twenty years in terms of getting DTH service in Canada. It has had a positive impact on the industry, in that you now have a choice. I think it was discussed earlier, but I would say it's very difficult to use the legal approach if there's not a choice. There are now two choices out there, and we're very pleased to see that upwards of 2 million Canadians have chosen to go in the direction of the Canadian alternative.

The other thing that choice does is give some redundancy in the facilities, or dual facilities. We now not only have a system that's feeding cable, we also have a DBS system that's feeding direct-to-home. There's some redundancy built into that in the event that you did have a satellite failure or in the event that you lost certain portions of the system, so I think it has made the system much more robust.

We also urge you—and I think it was certainly discussed in the last discussion with ExpressVu—to support the efforts needed in terms of curbing the grey and black markets. The numbers, as were presented, represent 500,000 to 600,000. If you talk about $40 to $50 a month in service revenues that would be coming to either Star Choice or ExpressVu, that's a huge amount of money flowing south, or certainly not flowing into the Canadian system.

Telesat firmly believes in building on our strengths. Among our key strengths is our relationship with the Canadian broadcasting community. As we are an integral component of the Canadian broadcasting system, enabling Telesat to continue to grow and to compete on the same footing as our competitors in North America will not only strengthen the viability of Canada's satellite operator, it will also enable Canadian broadcasters to continue to have access to one of the most advanced, reliable, and cost-effective satellite infrastructures in the world.

Thank you very much.

The Chair: Thank you very much, Mr. Bush. We'll now open the floor to questions.

Mr. Abbott.

Mr. Jim Abbott: Thank you.

Just to confirm it—I believe this is correct—are Star Choice and ExpressVu both carried by your satellites or on your satellites?

À (1040)

Mr. Paul Bush: Yes. Star Choice is on the Anik satellites, on Anik F1 and Anik E2. ExpressVu is on the Nimiq-1 satellite, and the second Nimiq satellite, as David McLennan mentioned, will be launched in December of this year.

Mr. Jim Abbott: Because you're effectively a monopoly—of course, that's a terrible word—can we know that your arrangements with Star Choice and ExpressVu, both financial arrangements and other related arrangements, would be identical? Because you are owned by Bell and Bell ExpressVu is obviously owned by Bell, can we know that doesn't give Bell ExpressVu an advantage over Star Choice?

Mr. Paul Bush: Let me deal with the first issue first.

As I mentioned earlier, 54 satellites are licensed to provide service in Canada. In terms of access to the satellite facilities of other players, those are available to Canadian service providers and broadcasters today. Just from a reality-check standpoint, there are three operators in the U.S., and you now have seen that one of those operators has been bought by a European operator, which means we're really down to two operators in the U.S. So, yes, we are the only operator in Canada, and we have been fighting hard to make sure we maintain and grow from a Canadian position.

In terms of the contracts that we have with the cable industry, versus those with the DTH industry, versus dire competitors who are in the telephone business and use our services as well, there are absolutely similar commercial arrangements, depending on what is ultimately negotiated in the end. In many cases, such as in the case of Nimiq, the contracts are actually filed with the CRTC.

Mr. Jim Abbott: In terms of the capacity that you have, presumably you have some spare capacity or you could create some spare capacity technologically. Before I carry on, is that a proper assumption on my part?

Mr. Paul Bush: Right now, we're actually fairly tight in terms of capacity in the Canadian system. That's why we've been bringing on Anik F2 and Nimiq-2.

On the Star Choice types of services or in the cable service, there is definitely capacity available, so we have not been as constrained on what we call our fixed-satellite services or our Anik services. In the case of Nimiq, we have been constrained because, to date, we have one satellite for providing that service. As of December, though, we'll have a second one that will clearly open it up.

Mr. Jim Abbott: So you have two new satellites coming on line, and they will increase your capacity pretty significantly.

Mr. Paul Bush: Yes, they will.

Mr. Jim Abbott: On that increased capacity, I believe there was a question from Mr. Cuzner earlier about the issue of broadband Internet access. Without getting into whether it's wise or not wise, and into what the model would be for actually getting into the business of broadband access, in your best judgment, with the two new satellites coming on line, will there be sufficient capacity to be able to provide broadband access to remote areas of Canada?

Mr. Paul Bush: Yes, in our view, there will be with the capacity that we're building. In fact, in a number of projects that we've worked on, from SmartLabrador, to K-Net in northern Ontario, to B.C.'s telepsychiatry, we have been doing a number of pilot projects to build up to providing broadband.

Two specific satellites are being brought on line. Anik F2 has a very specific payload designed for two-way interactive services. ExpressVu is talking about DirecPC, and that is a very important first step in terms of providing Internet services. On the satellite side, the second and third steps are what we're working on. That new capacity will be launched next June, and that has full, Canada-wide coverage, again from Baffin Island to Vancouver Island, and it will provide hundreds and hundreds of thousands of Canadians with access to two-way Internet.

The other way in which we see ourselves meeting those requirements is through a community-access model. With different-frequency C-band and Ku-band, similar to what the broadcasters and cable companies are using today, you can bring a pipe, if you will, into the centre of town—be it a community centre or an RCMP detachment—and then use wireless or cable or telephone modems to be able to get out.

So the short answer is, yes, we believe the capacity is either in orbit today or is being launched, and it's going to be able to meet that need. In Canada, there are just under 6,000 communities in total, and 4,700 of those do not have access to high-speed Internet. Our view is that a number of them will be served by fibre and will be served by traditional technologies in the long run, but 1,000 to 2,000 of them will not. Our very strong view is that satellite can fill that gap.

Mr. Jim Abbott: Would it be sufficiently broad broadband in order to satisfy many of the brand new requirements, the streaming requirements? I'm not technologically up to speed.

Mr. Paul Bush: Wide views are held on this. I was on the original SchoolNet advisory board, I'm involved in a number of things today, and I can tell you that there are different sides to the equation. Some people want terabits to the tub, they want high speed to the home. But the other thing we really want to be able to do is videoconferencing.

What we've been trying to do with the communities in some of the projects that we've been on is assess what they really need. What we've found over the last two or three years was that most of the communities do want high-speed Internet. They definitely would like to go from dial-up to something through which they can actually get an always-on Internet service. There's quite a varying degree in terms of what's acceptable. Do you need to have one megabit or two megabits, or are people happy with ten times what they have today in dial-up?

Our belief is that, with the satellite capacity that we have, the communities that we've looked at can benefit from this. We can fit them in very well with the systems that we either have in place or are building over the next couple of years.

À (1045)

The Chair: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: In your brief, you say that the government and regulatory bodies should establish more harmonious policies between telecommunications and broadcasting. You even say that they should be more rational. I would like you to give me a few examples of recommendations or go into more detail about certain points.

[English]

Mr. Paul Bush: What we're suggesting is that, in the context of reviewing broadcasting policy and reviewing telecommunications policy, it has to be looked at in the context of the WTO and agreements that we have agreed to and have implemented with regard to the WTO. It also has to be also looked at with regard to the Radiocommunication Act, which is another act that guides us in terms of licence conditions, in terms of fees, and in terms of how we conduct ourselves as we move into new markets outside of Canada.

So I'm not suggesting any specific policy changes at this point. What I am suggesting is that reviews are underway, and that as those reviews are looked at, they should not be looked at in isolation.

Mr. Bob Power (Director, Regulatory Matters, Telesat Canada): If I could just elaborate on that, one of the things we want to bring to the attention of the committee today is the fact that we're a telecommunications company and are regulated under the Telecommunications Act. We're forging ahead in a liberalized telecommunications environment under the WTO; however, a large part of our customer base is regulated under the Broadcasting Act, and sometimes decisions made under the Telecommunications Act have what is perhaps an unintended impact on our broadcasting customers.

As another example, within the Telecommunications Act is a section, section 28, that allows the CRTC to actually allocate satellite capacity if it's going to further the objectives of the Broadcasting Act. So there are linkages, and we'd just like to bring it to the attention of the committee that these are things that should be looked at when policies are being developed.

[Translation]

Ms. Christiane Gagnon: You say that you opened up your market to the American market in the context of the Free Trade Agreement. What were the economic spinoffs of that for your industry?

[English]

Mr. Paul Bush: In terms of spinoffs, the upside for Telesat and for Canadian industry is that it's a quid pro quo. We can now apply for licences in the U.S. market, and Bob and his team have secured licences in Brazil, Argentina, and Colombia. So the spinoff for Canadian entities is that we are now able to market our services into their territory.

I can tell you it has have been very difficult to secure licences in their territory in the last two years, as they have attempted to slow down the process or slow down entry in many ways. But we have been successful in licensing our existing satellites for access in the U.S., and with the exception of one country, we are now licensed fully in South America. So as we look out at the global marketplace, the upside for Telesat and for other satellite operators is the ability to provide service into each other's marketplace.

À (1050)

[Translation]

Ms. Christiane Gagnon: I am not familiar with all the aspects of the telecommunications universe, but if free trade caused you to lose part of your market, did it not cause you to gain others? The other markets had to open up to us.

[English]

Mr. Paul Bush: Yes, we have had an impact in terms of our business services. We've lost a number of customers who have shifted to American satellites. The reason they've done so is that they're consolidating their networks. Rather than having two satellites or three satellites, they'll use one satellite. Since they've consolidated on their U.S. satellites, we've lost some market share there.

We've lost in the broadcasting industry and on the occasional use or real news and real sports ones that come up on an hour-by-hour and minute-by-minute basis. Where there is existing infrastructure, rather than swinging over to Canadian infrastructure, they're staying on the American infrastructure. So there have been some impacts.

On the broadcasting side, we have really focused on trying to develop our infrastructure and facilities to encourage the broadcasters to stay. I think we've been successful at that because we have tried to partner with the Canadian broadcasters, as opposed to putting something up that they're not fully up to speed on.

So we have had losses in certain segments of our business, but we've had gains as we have moved into the market. Just over the last year, we've signed General Motors and Ford for networks through which we provide the services into each of their dealerships. That's a 12,000- or 13,000-site network. So we've had losses in Canada, but , as we wanted to do, we've also had some gains in certain market sectors.

The Chair: Mr. Harvard.

Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.): Thank you.

Mr. Bush, to some extent, I would like to follow up on what you've said in response to the questions asked by Ms. Gagnon. I want to know a little bit more about your competitive environment and how things have perhaps changed since the relaxation or liberalization of WTO rules. I think you mentioned in your presentation that 70% of your satellite capacity is used up by the broadcasters, is that right?

Mr. Paul Bush: That's right.

Mr. John Harvard: What was it before the liberalization of WTO rules?

Mr. Paul Bush: It was actually a little higher at one point. But our revenues have grown, too. Because our revenues have grown, it's not a straight equation. As a function of our total revenues, the broadcasting has gotten a little smaller, but we've tried to keep it as flat as possible. In fact, the broadcasting revenues have been relatively flat over the years.

Mr. John Harvard: I was referring more to capacity. I think you used the word “capacity” and said 70% of your satellite capacity was used up by broadcasters. I was wondering whether that had changed since the liberalization of WTO rules.

Mr. Paul Bush: It has actually been determined more by technology than by the WTO in the case of the broadcasters, because of a massive move toward digital video compression over the last four to six years. Whereas it used to take one satellite channel to carry a television signal, we now see six, seven, and eight on one. So the revenues have stayed relatively flat with regard to broadcasters.

Where we have seen an increase in capacity in regard to the 70% has been with the new specialties coming on, yes, but largely it has been driven by DTH. DTH has had a significant impact in terms of the capacity that is used.

À (1055)

Mr. John Harvard: The big players in broadcasting are CanWest, CTV, and CBC, right?

Mr. Paul Bush: Yes.

Mr. John Harvard: Do you have all those as your customers?

Mr. Paul Bush: We have them as our customers or as indirect customers. In other words, a number of the broadcasters buy their transmission services through Star Choice or ExpressVu. So we have customers directly, yes, in the case of CTV and in the case of CBC, and we have customers indirectly in the case of a broadcaster like Vision, which buys its service through ExpressVu and Star Choice.

Mr. John Harvard: If I can confine my question to the broadcasting or broadcasting client side of your business, since the liberalization of WTO rules, it sounds to me like you've been able to maintain your stable of clients, and that these new competitors offered up as a result of liberalization are theoretical at the moment. In other words, you're not losing your big customers, at least not so far.

Mr. Paul Bush: I think it's important to recognize that the satellite business, Telesat's business, is dominated by ten to fifteen customers. You might say that while there hasn't been a significant impact, there has been a major impact—

Mr. John Harvard: I'm not decrying that, by the way.

Mr. Paul Bush: No, I know, but what I'm trying to do is put it in context.

The impact has happened in certain areas in the broadcasting market. What Telesat cannot afford is to lose one of those top ten, because if we lose one of those top ten, it could result in a percentage loss of capacity on our satellite—not the loss of one transponder, but the loss of ten, and that would have dire consequences for us.

So just to put it in context, there are very few groups that you actually sell to. That fact is not contained to Canada, those are pretty well the conditions around the world. What you want to do is try to keep those customers happy and on the system, and that's what we try to do.

I might also say that the American market was opened up. As we moved into the American market—and it did take us two years longer than we thought it would—we found that all of the American carriers had signed up their broadcasters for long-term and future-generation-term contracts. That's smart business, I guess, but it precluded us from making major strides into the broadcasting sector in the U.S.

Mr. John Harvard: Let me just ask you about one more thing, because I don't have a good handle on your business.

When I'm watching a television program back at home in Winnipeg, be it on CBC, CTV, or CanWest, all of the programs that I watch at home come through Shaw Cablesystems. When I'm watching a program, of course, it ultimately comes through your satellite as well. So it comes through Shaw and it comes through your satellite, yet it's the programming of one of these broadcasters. Do you have separate contracts with both Shaw and CanWest at the same time, or do you have a contract with CanWest that in effect dictates or stipulates that it will appear on Shaw in Winnipeg. How does that work?

Mr. Paul Bush: No, they tend to be separate contracts with the individual programmers. However, in that particular case that you're citing, CanWest actually does provide the service through Shaw.

Mr. John Harvard: Through Shaw.

Mr. Paul Bush: Yes.

Mr. John Harvard: So your contract is with CanWest then, is it?

Mr. Paul Bush: Our contract is actually with Shaw, and Shaw provides the service to CanWest. I think that's how that one works.

Mr. John Harvard: I see.

Mr. Paul Bush: Having said that, though, there are other examples. The Quebec broadcasters provide their services out of our teleports, and they then inject themselves into the Shaw service in Winnipeg. That's a separate contract that we have with Quebec broadcasters for doing that. With SCN, the Saskatchewan Communications Network, we have a separate contract into which they would provide their services. So some of them are direct contracts that we have, and some of them are indirect. It depends on the market.

Mr. John Harvard: I see.

Thank you.

The Chair: Thank you.

Ms. Lill.

Ms. Wendy Lill: Thank you for this presentation.

You commented that you're a telecommunications company forging ahead under the Telecommunications Act, but lots of your customers are regulated under the Broadcasting Act. That's a very interesting dilemma that we have to get a handle on. I think we do have to have a better sense of the linkages between those two acts, of where they interconnect, so this is a task for our committee.

I'm struck by the general environment in which you operate. You are a free trader with wide-open doors. You're out there operating in the free trade zone, but your success is determined by influences outside of Canada. There's no question that you are working at an international level, and it would seem clear that you embrace competition and you want it wide open. As far as you're concerned, that's the way to go for the telecommunications industry.

We are here to look at the broadcasting environment and to very much look at the nurturing of Canadian culture in an environment that gets wider and wider all the time. We're trying to encourage and nurture Canadian culture. Culture is not on the table now. We hear over and over that it's not on the table in terms of trade. I have to get a sense from you of how you square that circle. You're working in the big, international environment, so you don't want any kind of restriction. But people are saying the actual content, the stuff that goes onto your platform, should be nurtured and given a certain amount of protection and shouldn't be on the table. So I'd like your comments on that.

I'd also like to know whether or not you have any sense of foreign ownership restrictions in the industry. Do those go out the window? Let's look at some of the issues that we're facing.

Á (1100)

Mr. Paul Bush: In terms of regulation with regard to content, our view, my discussion, and my preamble are really focused on the facilities. You can make a very clear distinction between the facilities and the content, and they can be and should be licensed differently. One is more regulated under the Radiocommunication Act, which really governs how you use spectrum and frequencies across borders. We're very comfortable in that in a competitive marketplace on the facilities side.

I don't want to take the jump to then say it's competition on the cultural side, because we're not commenting on the licensing regimes at all with regard to broadcasting, with regard to licensing a BDU in Canada versus a cable company or DBS company in the U.S. Our comments are specifically aimed at facilities competition. That's where we're very comfortable. We're quite uncomfortable as we start to move into content and other areas, because that really is not our playground.

Ms. Wendy Lill: I appreciate that, but I would like you to tell us if you think it is in fact possible to have separate regulatory mechanisms for facilities and content? If it is, do you think that is in fact preferable and the way for us to go in the new Broadcasting Act?

Mr. Paul Bush: We think it is, and we think that was actually the intent of a number of the WTO agreements: to have competition in facilities. There is some small print in the WTO agreements, and there are some exclusions in terms of the WTO, but we generally think it's very possible to have full and open competition in satellite facilities while keeping the licensing regime with regard to BDUs and with regard to programmers. Whether that evolves or doesn't evolve is up to Canada. It's not up to the U.S., and it's not up to a WTO body.

The Chair: Thank you very much, Ms. Lill.

Could I ask you a couple of questions before we close? First of all, could I suggest that our researchers might contact your office in regard to the questions of the burden of regulations, what applies to you, and what system you feel would be better? That way, we could really get a good handle on it when we examine the whole issue in regard to you. As Ms. Lill suggested, there's a real dichotomy here, in that we are involved with the Broadcasting Act but you are ruled under another act of Parliament. We therefore have to make the link and understand it.

Also, could you explain to me what the difference would be between a fixed-satellite signal and a DBS or domestic broadcast satellite? In what sense do they differ, and why would you use one for one thing and another one for different services?

Á (1105)

Mr. Paul Bush: It oftentimes is confusing, but I'll tell you the best way to think of it. The satellites sit in physical orbital slots in space, in parking spaces, so the first thing you need is a parking space for your satellite. Those satellites have different frequencies on them. In the case of a cell phone, it has a frequency different from the frequency of a portable phone. With satellites, it's exactly the same thing. We have different frequency bands.

The main difference between a direct broadcast or DBS satellite and a fixed satellite—the Aniks are the fixed satellites and the Nimiqs are the DBS satellites—is the frequency bands that they use. The difference in the frequency bands is that, because of a number of different things, like the frequency that we use and the physical distance from its closest neighbour, the DBS frequency band allows you to go with smaller dishes.

On a DBS satellite, we can get down to 45-centimetre antennas. That's about as small as you can go. When I started at Telesat, the smallest was a 4.5-metre antenna, so we've come a long way in terms of 45-centimetre or 18-inch dishes. On the fixed satellite side, you can get it down in terms of size of dish. In fact, we've done some things with Star Choice to get them down to a 60- or 70-centimetre antenna, but while we've tried to do it, that is very rare. On the fixed satellites, you're generally limited to 1- to 1.2-metre antennas.

So the main difference is that the frequencies or the spectra that we use on the satellites differs from the DBS to the fixed satellites.

The other thing I might mention is that the DBS satellite tends to be fairly single-purpose, meaning it is designed for a direct broadcast to a small dish. One or two major hubs are going out to millions of subscribers. The fixed satellites, the Aniks, are designed as multipurpose ones. They can provide DTH, but they're really designed to provide broadcasting along with telephone services and along with Internet services. The DBS tends to be mainly for direct-to-user small dishes, and as ExpressVu mentioned, they can add on multimedia services, which they are doing. It's multimedia services going directly to users. That's the prime function of that satellite.

The Chair: When the signals are broadcast from an FSS to a slightly bigger dish, and then another signal on DBS is broadcast to a smaller dish, are the signals equivalent in power and clarity, or do they differ widely?

Mr. Paul Bush: They don't differ widely, no. In some ways, there's a reason why you have a slightly larger dish for the FSS, in that the power may be a little less. For Anik F2 and Nimiq, the power is pretty well the same between the two satellites, so we really don't have that much of a difference in terms of power on the ground.

The reason you have a slightly smaller dish with DBS is mainly that you don't have satellites as close together in terms of their orbit. I mentioned parking spaces. In the FSS band, satellites are two degrees away from each other. In the DBS band, they're nine degrees or ten degrees away from each other, which means there is less interference. Less interference means a smaller antenna, so that's why we end up with smaller dishes.

The Chair: Just as one last question, why wouldn't Star Choice, for example, choose a DBS system rather than Anik?

Mr. Paul Bush: At the time of their launch, decisions were made by both Star Choice and ExpressVu about which technology they would go with. Star Choice opted to use the fixed satellite because it was also their medium for providing services to cable. They were able to continue to provide services to cable and overlay a direct-to-home service onto that. The same signal that they carry for Vision goes to their cable head and goes to direct-to-home users.

The Chair: Thank you very much, Mr. Bush, Mr. Power. We appreciate your presence here today.

Finally, I'll call on the Canadian Media Guild and the Newspaper Guild Canada.

Á (1109)

Á (1112)

The Chair: The last time you appeared before us, Mr. Amber and Madame Lareau, we had an unfortunate experience. There was a vote and you got cut off. That was extremely unfortunate, because you came all this way to see us and you then had to go home without being heard. So we apologize. It was beyond our doing, but we are very pleased to welcome you today.

So, from the Canadian Media Guild, we have Lise Lareau, the president; and, from the Newspaper Guild Canada, Mr. Arnold Amber, the director.

We are ready to hear you, Madame Lareau.

Ms. Lise Lareau (President, Canadian Media Guild): Thank you very much. It's a pleasure to be back.

I am president of the Canadian Media Guild, and I'm also a producer at Newsworld, my normal job.

I want to turn your minds away from satellite services. Let's talk about public broadcasting and the role of the public broadcaster in this country. You probably got our brief sometime in October, but I have copies here. We were here in November but didn't get through our presentation, as Mr. Lincoln mentioned. I'll therefore recap our main points, and my colleague Arnold Amber will move on to some of the stuff that has occurred since November and will respond to questions on some of that.

Looking at the headlines of our brief, the pendulum in this country has swung dramatically in broadcasting culture policy. It has swung toward the commercial for-profit sector, in our view. That wouldn't be a problem, but it has swung with public money attached to it. Our brief wonders about that.

We ask some questions about whether that's an efficient expenditure of public money, and we ask that question given the fact that we've been left with a public broadcaster that, by all accounts and without much dispute, doesn't have enough money. The Canadian Television Fund rules and other tax regulations are basically skewed against it in its attempt to do what it is mandated to do, which is serve the public interest with public money. That's the main thrust of our document.

We did provide some specific ways in which you, as a committee, could deal with this, including some specific ways of changing the Broadcasting Act. We suggest that the Broadcasting Act be amended to bring the pendulum back to somewhere in the middle again, instead of having it so dramatically to one side. The middle is somewhere between the commercial interest and the public interest.

Our brief calls for the act to be amended so that it clearly delineates that there should be a balance between internal CBC production and outside independent production aired by the public broadcaster. We also suggest that the act could be amended to say CBC must remain a fundamental and significant presence in this country and in the Canadian broadcasting system. We also talk about how the act should make special note of the role of CBC Radio, something it doesn't do right now.

In our brief, we talk quite a bit about governance, in terms of both corporate governance—which I'll get to in a minute—and the way in which the commissioners of the CRTC are chosen. We believe the latter should happen through a much more public and transparent process involving you, the heritage committee.

Again on the corporate governance section of our brief—it's a significant part of our brief and something we at the Canadian Media Guild have been proposing for a long time now, for about a decade—as you know, since the last time we were here, corporate governance has become a hot political issue in this city. I believe it is something you can address that will significantly impact on the public broadcaster.

The fact is that most Canadians believe CBC is somehow the voice of the government. If you talk to the average person on the street, their perception is that CBC is the government's voice. We have to stop that. People have to start believing the public broadcaster is their own. I think our proposals go some way toward getting the government out of the public broadcaster, and more importantly, they move things toward the perception that the government is out of the public broadcaster.

Á (1115)

I'll just précis our proposal for you. The act should stipulate that applicants to the board of directors of CBC would have to all be interviewed openly by you, the heritage committee, and the committee would ultimately forward a list of candidates to the cabinet. I consider this really to be a Canadian compromise on what is now in place in, say, the U.K. model, in which it's even more public than that. More importantly, the board of directors itself would have the power to select the president, something it doesn't have now.

We believe all this would make the process much more transparent. More importantly, it would enhance the integrity of CBC in the public eye, removing it from the optic of being beholden to the government of the day, and that's the most important change you can make.

Since we were here last, two reports have come down on this topic, one from the Auditor General and one from the accounts committee. They were concerned with the types of people who are on the board of directors. We are too, but we're more concerned that it be a transparent process and that there be sufficient distance from the government in the eyes of the public.

We note that, just a few weeks ago, CBC was here talking about this very issue. CBC really wants people with other broadcasting interests to be allowed on the board of directors. Frankly, our organizations and I would prefer that people have expertise in broadcasting, a background in it, but that those with financial interests in the private sector or the commercial sector not be allowed on the board. It's more important that they understand and share the dedication to the public purpose of the public broadcaster, in our view.

So those are the highlights of our brief. Before I turn it over to my colleague Arnold Amber, though, I would like to take this opportunity, here in this public forum, to talk a little bit about something that's going on right now at CBC. You're probably aware that my colleagues at the Syndicat des Communications de Radio-Canada are currently locked out. It's the third lockout in two years at CBC. I don't want to dwell on this, because we're really here supporting CBC, the public broadcaster, not its management policies. I just trust that you'll turn your attention to the dispute and will consider it and do what you can in your various jobs in order to help to bring it to an end.

I'll now turn the mike over to Arnold Amber.

Á (1120)

Mr. Arnold Amber (Director, The Newspaper Guild Canada): Thank you.

Good morning, everyone. I noticed that the chairperson spoke about our appearance last time, when the bells rang. Some of our colleagues who read the transcript said that was the highlight of our presentation. However, we did find it a little disconcerting, never having had to talk through while the bells were ringing in our ears. However, we did realize the importance of that particular day. It was a very important piece of legislation that was in the House.

So today we have returned, and one of the advantages we have of returning later is that we have had the opportunity to hear some of the other issues that have come up. We would like to comment on some that obviously were not in our paper. I would like to cover three or four of them.

The first item is this concept of a “green space” in the Canadian broadcasting system. I must say we're very much in favour of a type of green space in the Canadian broadcasting system. I take it at its best. At its best, it addresses the issues that I think are the reason why government and this particular committee are interested in broadcasting and in communications. What we do is involved in the culture of this country, is involved in the affairs of this country, and is about the views of this country that are held by the people of this country.

The idea of creating a space—and calling it a green space is a lovely way to do it—in which those in the various types of broadcasting are concerned about broadcasting purely as a service—that being public service broadcasting—rather than being concerned about bottom line considerations, is a unique idea for this country, and it's a good one. To me, however, the issue about the green space isn't about grouping all the public service broadcasters together in a cable line so that they may be channels 17, 18, 19, and 20. It's first establishing the idea that there should be a spot, a place, in the Canadian broadcasting system for a whole range of public broadcasters.

True, we speak to you today about the national public broadcaster, both in English and in French, and in other languages as well in northern parts of Canada. But sure enough, the people at Vision, the people at TVO, the people at the Aboriginal Peoples Television Network...many more should be there. In fact, one of the problems public broadcasting has had in this country—and it's one reason why the CAB statistics are so maddening to examine—is that there has been an incredible increase, many times over, in the number of “private broadcasters”, “speciality channels”, and “cable channels”.

Before we decide we're going to bring all of the public service broadcasters together so that people know that, in that range on their cable, these are the channels that are devoted to public broadcasting and service broadcasting, we must first make sure there is space there for us. So that would be my first issue.

Secondly, I'm sure the technology will change over a number of years. Technology will change so much that it won't matter whether you're channel 11 or you're channel 172. When CBC appeared before you and was asked about this, I think they made a good point: if we do have a “green space” and one puts CBC, Radio-Canada, both versions of the news channels, and all these others into it, it must be in a place where, right now, people watch television.

I was shocked at my own cable company's decision many years ago, when they took Vision TV, which I regarded as an incredibly fine asset in my viewing day—I still do—from a low number on the cable system, where one could run up and down and would hit upon Vision, to a place in my cable system where it is just out of the way.

Á (1125)

So, to me, the issue is one of ensuring, firstly, that there is more space for the green broadcasters; and, secondly, that CBC and its colleagues must be in a place where people are watching television.

On another point, since we were here last, I know you've heard from the CAB and I know you've also heard from private broadcasters, including CanWest Global. I know you've also heard from other people who very effectively sliced and diced many of the statistics that the CAB presented to you. I don't wish to go over all that with you, but there are some things I would like to tell you and ask you to consider.

To me, it seems somewhat incredible that, after all these years of having a multitude of opportunities to present good, quality Canadian programming, the CAB still comes here and asks you for a greater portion of public funding; asks you to diminish funding for CBC, the public broadcaster; and makes allusions to the idea that it is the primary provider of Canadian programming.

The CAB brief is full of illogical situations. At one stage, it talks about the fact that prime-time viewing is no longer important because we now have something called appointment viewing in the marketplace. I would suggest to you that if this is the case, the CAB should tell all its members to start putting Canadian programming on in prime time.

One of the things that irritates me when I do watch some of the private broadcasters, and particularly CTV, is that half-hour logo that comes up—and I know you've all seen it. It comes up, and usually it's a picture of this building. Over it comes the CTV logo, and the voiceover and the words under it say “Canadian Television”. That would really be very interesting if these logos weren't appearing in between one American program, another American program, and another American program, and so on. Between 7 p.m. and 11 p.m., nearly every program on CTV is an American program, yet they hang onto this “Canadian Television” logo.

I think there are incredible problems, and I advise you not to do what they ask. In their words, “public policy objectives must now be achieved primarily through privatebroadcasters.”

Another illogical summation in their brief is that they say American programs are going to be marketed around the world by the American distributors and the American networks directly, and that private Canadian television broadcasters are going to have to figure out how to make quality programs on their own. Excuse me, but they don't use the word “quality“, they actually use the term “popular programs”.

I tell you that if we end up with a system in this country that relies on the private broadcasters, I think we will again be seeing more of the other things you heard during these last couple of months, including the idea that infomercials are good Canadian content.

Lastly, it would seem to me that the CAB...in its plan, the CAB says that the funding that comes out of the fund should be based on ratings. That's incredible. We are not talking in this committee...I don't believe your committee has an interest in seeing a Canadian version of, for example, any of these shows that are necessarily on in the United States—things like The Weakest Link, if I may use one of the lowest-common-denominator programs. I think this is about creating quality programming with Canadian values and Canadian voices. I think you should take these things into account, but let me now move on.

The Canadian Broadcasting Corporation came to see you folks, and CBC said many things during the course of that meeting. We have no problem supporting them on the idea that CBC and Radio-Canada must be a fundamental part of the Canadian broadcasting system—as we have said in briefs to this committee and in briefs to the CRTC for well on ten years—and not just an adjunct to it or a minor player in it.

Á (1130)

We believe CBC is now producing programs about whose content one may argue, such as the recent drama Trudeau, but it is not easy for one to argue against the idea that it gave us a reflection of a time in this country's history, that it gave us a time to look back at, debate, and think about in terms of what it might mean for the future in this country.

We can also easily support CBC when they talk about the idea that they are providing real Canadian programming in prime time. It's Canadian programming with good content.

Lastly, we already said to you that we are interested in seeing CBC Radio recognized in the act. We also could support CBC in asking you and asking the government to ensure that there are enough frequencies on the FM dial for CBC Radio in the future.

One area in which we obviously differ completely with CBC is that of local television. We agree with them on one point, though. We must clear up in the act what is regional and what is local. Having been at CBC for a number of years, I have had the great advantage of seeing one administration at CBC determine that regional was local, and another one determine that local is regional. It depends on what's playing in that administration in a given year, and this must be cleared up.

After we get beyond that point about clearing it up, it seems to us—as we've said before and will say again—that local television as a broadcasting concept is fundamental as well. No sane broadcaster at all, anywhere...even in a unitary state like the United Kingdom, there has been growth. Some of the biggest growth at the BBC over the years has been the development of local television. When I lived there many years ago, it was only national television. They had to develop local programs because one of the fundamental interests of people is what happens in their community. Their interest is not in everybody else's community. They have an interest there as well, but their fundamental interest is local.

Strong roots in a community build credibility for a broadcaster. It gives them depth. In our case, at CBC, it provides programming for Newsworld, for RDI, for both news networks, so it is fundamental that there be a local presence and good local programming.

So we go to the question of whether or not all local programming must be news. We say no. Over the last three years, the debate about local programming has all been about suppertime programming. We'd like to say to you today that local programming is more than that.

In years gone by—and I look down at one particular member of your committee who knows it very well, because he worked at a station that was a very vital CBC station—there was a debate about CBC serving the needs of the Winnipeg community. Local programming is about the development of the talents of artists. It's about sensing what the community is. It doesn't have to be local programming that's all about a half-hour or hour-long newscast.

But we should also be going back to the debate of the last few years. We'd like to say that the idea that there is one way to do local news broadcasting for CBC is fundamentally flawed. Even in its heyday, when stations...I'll again use Winnipeg. Winnipeg's was a very successful local news operation, but there were other cities where CBC always had difficulty in attracting an audience.

In the last few years, we've heard how important the local television news programs are on the east coast. As CBC understands its mandate in terms of local importance, there is no reason why it would say the show in Newfoundland is an hour-long show for Newfoundland because that's what they need because of the situation of Newfoundland, while in other communities across the country there is not a good or great or sufficient private local broadcast.

Á (1135)

If you asked the people of Newfoundland, and if they had their choice, they would happily vote overwhelmingly to go back to an hour-long CBC news hour. Therefore, what we're saying is that it cannot be beyond the ability of administrators, whether they be in Newfoundland or elsewhere, to determine whether or not that community needs a local CBC news hour.

I'm finished.

The Chair: That was very interesting.

I would like to echo the members' thoughts about your presentation today and about the brief you sent to us. What we appreciate is that it's very forthright. It takes a lot of courage to sometimes say things people don't dare bring up, and I think you've brought up a lot of issues that are viewed as controversial and that people are too timid to bring forward sometimes. So I really appreciate what you had to say today, both of you.

Ms. Lareau, I should explain for the record that, in regard to the labour issue touching Radio-Canada, we are all extremely conscious of it, of course. One of our members, Madame Gagnon, had brought up a motion before the committee that the committee should look into it. It is not our mandate to be a labour tribunal. We cannot touch such issues, obviously. At the same time, though, I think each one of us, in our own respective way, is extremely conscious of this issue. I certainly know we have brought it up before our caucuses, and we hope it will eventually be solved, and sooner rather than later. Certainly, I think all members here are extremely conscious of it and active in regard to it.

Perhaps in the course of your questions, Ms. Lareau, you might clarify one thing so that you save me from having to ask it later on. You say, “We recommend that the Act empower the Board to select the President, who would sit on the board ex officio.” At one point when you answer other members, perhaps you could also explain to us whether you are for the dual system of a chair and a president. Or are you talking about a new faction that would include the two and be appointed by the board? That's just so we are clear as to what you mean.

Ms. Lise Lareau: Thank you, Mr. Lincoln. You know what? I have experience and expertise in both models, and it doesn't matter to me either way, frankly, as long as we get to a point at which there's transparency and distance from the government. That's the most important thrust of what we have to say.

The Chair: What I was asking is if you are for both the chair and the president being appointed by the board.

Ms. Lise Lareau: No, our proposal calls for the president to—

The Chair: The CEO...they called on Robert Rabinovitch.

Ms. Lise Lareau: Correct. The president would be the CEO, and the rest of the board would be selected by you or be recommended by you, with the selection made by cabinet.

The Chair: Mr. Abbott.

Mr. Jim Abbott: Thank you.

This is really an interesting dichotomy that we have here. On one side of the coin, I understand clearly that what you're asking for is transparency and distance from the government. I think those were the words that you used. You also made note of the fact that many people in Canada see CBC as the government network. Yet at the same time, you're asking the government and members of a government-sanctioned committee to become involved in a labour dispute at CBC. Can you see a pretty serious contradiction there?

Á (1140)

Ms. Lise Lareau: I think you're taking it a step beyond what I meant. I never suggested that you get involved in a labour dispute. I was merely putting something on the public record because it's something that has currency now.

Mr. Jim Abbott: It's just that, as Mr. Lincoln has correctly mentioned, we gave serious consideration to the issue as a committee, but I think we, as politicians, have to be very careful if the members who are currently in a dispute with management in Quebec and Moncton are looking to some action on the part of politicians and the political process. Well, with respect, they are. Two people came to my office and were lobbying me quite aggressively to become involved.

We're all totally autonomous. We are free to choose whatever we're going to do in the House of Commons. That's the beauty of our democracy. Other members, in their wisdom, have chosen to become involved in the process. I just think the people who are currently involved in this dispute may have to give that another thought, in terms of the fact that you do want transparency and distance from the government.

The other thing I might comment on—and perhaps you'd like to comment with respect to this—is the fact that I have always really been impressed across the board with the professional journalism that has been exercised by the people at CBC. I was therefore quite disturbed when I happened to see an opinion piece by Dennis Trudeau—who I understand is the anchor in Montreal—in the Globe and Mail. Is that really a professional approach to journalism? As a journalist and as a spokesperson for CBC and all it stands for, is that really professional, in your judgment?

Á (1145)

Ms. Lise Lareau: Well, in that opinion piece—and that's what it was; it wasn't purported to be a news piece—he wasn't doing his news job of disseminating the news of the day. He was clearly taking a point of view as an individual, and it was clearly demarcated in the piece that it was an opinion piece. Like everybody in this country, if he has a point of view on that matter or any other matter, he shouldn't be forbidden from expressing it.

Mr. Jim Abbott: I don't think in Canada...this is democracy, and we have total freedom, or certainly should have total freedom. I don't feel restrained, except to the extent that I would not be making a comment on something that would cast a reflection on the Canadian Alliance or its members, in spite of the fact that I identify it as being my own comment.

Now, I'm interested in your recommendations on page 28 of your brief: “We recommend that the Act contain wording which permits government to fund the CBC in line with its mandate.” If we reflect back to 1993, when there was a wholesale change of government, we had 201 new members in the House of Commons. At that particular point, we had a $42-billion deficit; we were spending $42 billion more than we were taking in. The total public debt, as I recall, had grown to something like $460 billion, which is just a gargantuan amount of money. Everything was in the draft, particularly pensions to seniors, health care, and all of those things.

Heaven forbid that we would face the same situation again, but what would happen if we did face the same situation again and the act stipulated a specified level of funding for CBC? We would have to amend the act rather than having the government making what it considers to be the prudent cuts that are required. Of course, they didn't just cut CBC, they cut health care, they were looking at cutting pensions, they cut defence, and they cut all the other things that come out of the taxpayers' pockets.

If we were to follow your recommendation here and it was enshrined in legislation, then in order for them to cut CBC, they would have to first cut all of these other things while we were going through the process of amending the act that stipulated a level of funding for CBC. That really would tie the hands of the government and would put CBC on a pedestal that I don't think it really deserves when you put it up against the other imperatives of government spending.

Ms. Lise Lareau: Before I turn this over to my colleague, we should talk about the record of cutting for a minute.

We went through that period, and I know most people at CBC, along with its supporters and viewers, understood the cuts during the period you're referring to. You're right, a lot of stuff was cut then. But what we don't understand is why funding hasn't been restored in a period that has been more prosperous.

What we want to stop is the continued attack on the concept of public broadcasting in an era that isn't so deficit-ridden. That's an important point to make now. This isn't the mid-1990s, but things haven't changed in the funding. It has remained stable. And it has not just remained stable, it's clearly not enough.

I don't think anybody disputes that it's not enough, yet nobody seems to be willing to do something about it. Really, if there was another method of ensuring proper funding, other than changing it in the Broadcasting Act, I'd be here before you to propose it. If you can think of another way to ensure funding that is level with the mandate but isn't enshrined in the act, I'd be happy to entertain that as well.

My colleague Arnold Amber may have something to add.

Mr. Arnold Amber: Very quickly, I think the area you're taking us to is not one about broadcasting—an area in which we claim to know something—it's the area of processes in this Parliament. But surely I can say that even in those periods of incredible cuts, they didn't happen the day after the government woke up and said it was going to slash $50 million from the CBC budget. There was a process.

There is in fact a labour process, if nothing else, in regard to certain numbers of cutbacks, and it actually has a three- or four-month window. In other times, there are also budgetary years. I don't want to keep going through the system here, but whether or not the CBC budget were cut by $100 million in the end, whether it started necessarily on September 1 or had to wait until “legislation was dealt with”, I presume it would not make that much difference in the long run. As I said, there are legal requirements right now before some of these cuts are suddenly put into place anyway.

I think our point here is that we've lived through processes, we've lived through people basically having expectations of a national public broadcaster that are written down in an act in some cases or in some statement of agreement between the CRTC and the public broadcaster, with everything working well with one exception: the resources needed to produce the programming that everybody has been talking about are not there. As my colleague said, we are looking for another way to perhaps get over this hurdle.

I think getting into the debate on support for public broadcasting versus support for hospitals is a no-brainer. However, at the same time, you folks are in the midst of an incredibly long process and a detailed study about something that is obviously of great importance in this country. How do we define this country? We don't just define it by our public health service, we define it by a lot of other things, and broadcasting is certainly one of them. But as I say, I think going down that road and into that debate is futile.

[Translation]

The Chair: Ms. Gagnon.

Ms. Christiane Gagnon: Thank you, Mr. Chairman.

As the chairman emphasized earlier, it takes a great deal of courage to come here and put forward some of your recommendations, particularly when they have an impact on important issues.

You said that the CBC was the voice of government and that Radio-Canada and CBC television should be felt more as the voice of the public. We have heard many comments to this effect from various communities. I would like you to give us some specific examples that illustrate your view.

You also said that the members of the board of directors should be interviewed by the committee. I would like to state my opinion on that. Even if they were interviewed by the committee, which, as you know, is made up of government and opposition members, would we really be able to give any direction as regards the hiring of members?

My third question is about the recommendation made by the CBC, when Mr. Rabinovitch, the President, appeared. He would like to have people from the private sector on his board of directors representing various fields such as direction, production, and so on. Do you not see that as a sort of hybrid public television, in which the private sector would determine the direction it would take? What impact would that have on programming and the type of productions available on the CBC?

I would like to hear your opinion on these three points.

Á (1150)

[English]

Ms. Lise Lareau: In terms of how a committee process would change things, there is probably no ideal way of selecting a board of directors, but we thought a committee process such as this one....

First of all, our vision is that the positions would be advertised nationally, so you would get a different cross-section of applicants from what you get now through what is a very private and internal process. So right off the bat, your candidates would come from a larger mix.

Then, in terms of you interviewing them, I see the interviews being televised. And I actually see them as interesting television, because you'd have people who would be forced to define, in public, their views for the public broadcaster. Right there, you have a more transparent process. You have a larger cull and a more transparent process for determining who these people are. So while it's perhaps imperfect, I would certainly see this as being a big step ahead of where we are now, with it being very closed, very secretive, and very tied to the government.

In terms of the private sector and commercial sector folks who would be on the board as per the CBC proposal, I don't know if it would dramatically affect programming. What it does, though, is skew the debate within a board. If somebody has an interest in the private sector—and we're talking about the public broadcaster and its interests at the board—you're really talking about a conflict of interest in a significant way. I would say it would be uncomfortable for everybody in that room on certain key debates about confidential plans, five-year plans, and future planning. It's just not an ideal scenario.

You do want people with expertise in broadcasting and people with context about the issue, but you don't want people who have an immediate conflict, such as people who could gain financially in their jobs with commercial broadcasters because of any decision they might make on the board.

The Chair: Madame Gagnon, this is your last question.

Ms. Christiane Gagnon: Yes, it's my last question.

[Translation]

You mentioned that the CBC was the voice of the government. Other people have this perception as well. You also said that this television must be more a public television. I would like you to talk about situations in which you have the impression that the CBC is the voice of the government. Do you feel any pressure, and, if so, where is it felt?

[English]

Ms. Lise Lareau: I did not say CBC is the voice of the government. It's perceived as the voice of the government by the people. There's a big distinction there.

With my guild president hat on, I do think our president and board are inhibited from really advocating in government circles in the way people further outside the field might advocate. There is certainly a perception amongst employees that they cannot go against the government of the day in any significant way. If you're advocating for changes to, say, the CBC funding formula or whatever, we feel inside that...you'd have to ask them, but there certainly is a perception that they are inhibited from doing just that, from advocating as fully as they might.

Á (1155)

The Chair: Mr. Amber, very briefly, sir.

Mr. Arnold Amber: Very briefly, speaking as somebody who has been at CBC for a number of years and was the producer of all of what we call the news specials that took place for a number of years, we have to make it clear that we are not saying there is government interference in the newscasts, in the current affairs, and in this, that, and the other thing. I think my colleague said quite clearly that it's just perceived that way by the people.

It's just like a discussion I heard about Air Canada on the radio last week. Somebody called up and said it's a government airline. Well, it has been many years since it was a government airline. So we're talking about one external perception, not about the actuality of people determining what the programming is.

The other point she made was that, internally, one sometimes believes that if one is appointed by government, it is then hard to go up against the government and ask for things that we, as workers inside, think we need as an institution. I think that's probably more accurately what we're talking about, as we see it.

The Chair: Mr. Harvard.

Mr. John Harvard: Thanks, Mr. Chairman.

Welcome to both of you.

I must say, Lise, that I'm surprised when you suggest that a lot of Canadians perceive CBC as a voice of government. I spent eighteen years there and was involved in a lot of big stories, a lot of controversial stories. I don't remember ever being accused of being a mouthpiece for government. I just don't remember that. Be that as it may, we won't get into the principles that lie behind CBC. Because we all share them, we don't have to bicker about them.

I do want to deal with two recommendations that you have made, and I disagree with both of them. One is your suggestion that this committee get involved in the interviewing process with respect to directors on the board of CBC and that we, as a committee, make a recommendation. I wouldn't touch that with a ten-foot pole. It would politicize the process to a far greater extent than it is politicized now.

Actually, the people who sit on the CBC board are rather faceless, in my opinion, and I think there's some merit in that. I would agree that perhaps Canadians don't have a good opportunity to evaluate their work. If you ask me how well the board is functioning, how much it is contributing to the decision-making and to the overall policy, I honestly couldn't tell you. I really have no means of assessing its work, but I think that's a long distance from how members get there in the first place.

I've said before in other venues that I am not in favour of American-style confirmation hearings of any kind. That just invites all kinds of silly politicking, so I wouldn't touch that with a ten-foot pole, and you can say what you like to that.

And the other recommendation is your suggestion that CBC retain some production capacity in all program areas and that the programming on CBC be a balance of internal CBC production and independent production. I disagree with that, and I'll tell you why. While I would agree that CBC should have a guaranteed portion of certain funds—let's say the Canadian Television Fund; it wouldn't be hard to convince me that perhaps CBC should have access to 50% of all those funds, and perhaps even more, but let's say 50%—I think it is CBC's business to decide how that money should be spent.

If it already hasn't done so, I can think of all kinds of situations in which it would make sense that CBC establish an internal unit to do programming, as opposed to farming it out or outsourcing it, but that's up to CBC management. In some situations, they may want to have an internal unit that does all the work. In other areas, they may want to farm out that work for whatever reason. To me, that's a management decision. I don't think that's really a policy decision, at least not at the parliamentary level. So that would be my take on it.

Â (1200)

Ms. Lise Lareau: I'll answer your second question first, because it actually is a policy decision. Now let me tell you why.

What people don't recognize is that CBC cannot produce its own internal programming by itself under the current rules—and this is non-news now. In order to produce a drama or any kind of other show, it costs 40% more to do it inside. The way to do it now is to access Canadian Television Fund money, which is what the game has become all about. You have to do it through an outside producer. You cannot be the producer of the program internally as soon as CTF money is triggered. Those are the rules, which is why I'm saying it has been skewed—

Mr. John Harvard: I'm sorry, but I just don't understand the 40% thing.

Ms. Lise Lareau: That's what CBC's own numbers show. If they want to do a program without accessing CTF funds, it costs that much more for them to do that show. As a result, the policy has created a financial pressure on CBC to access CTF money in order to do any programming—because it's under the gun financially—but in order to do programming with CTF money, it has to do it with outside production. It can't do it internally. Those are the rules of the CTF fund.

So you understand now—

Mr. John Harvard: I understand that, yes.

Ms. Lise Lareau: —that it is policy that has created a climate of disincentive for CBC to produce its own programming internally.

Mr. John Harvard: So what you're saying is that if CBC wants to access CTF funds, it has to do so through independent producers.

Ms. Lise Lareau: That is the issue.

Mr. John Harvard: All right, I'll concede that point to you.

Ms. Lise Lareau: Thank you. I'll keep trying.

Now, on your previous point, do you know what? I'm not married to the heritage committee idea either. I just want it to be transparent and open. In the U.K., they have another guy, a commissioner, whose job is to put public people on public boards. That's a good model too. I just think this current model, the status quo, is unacceptable in 2002, so I'd be very happy to see you recommend any other way of achieving transparency other than the one we have now.

Mr. John Harvard: Can I just take you back to the CTF thing, then? If that policy were changed so that CBC could spend the money either in-house or out-of-house when it accesses CTF funds, is it your assumption that CBC would chose to use most of that money in-house?

Ms. Lise Lareau: I think it would be a fair split, frankly.

Mr. John Harvard: So you just simply want CBC to have that flexibility.

Ms. Lise Lareau: Exactly.

Mr. John Harvard: I see nothing wrong with that. Thank you for the clarification. If that's the case, if you just want to give CBC some flexibility, I wouldn't have a problem with that.

So she got a convert on at least one of the recommendations.

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: Thank you very much, Mr. Chairman.

Thank you again, both of you, for your presentation and for your recommendations. I think you've brought up a lot of things that are worthwhile discussing. While we maybe don't necessarily agree with everything, it's a wonderful opportunity to debate with each other.

Like Mr. Harvard, I'm a huge supporter of CBC. I feel it is the most essential national cultural institution that we have in Canada.

You brought up many points. I don't want to belabour the CTF part, but at one time, when it was a cable fund, monies were allocated for CBC. That situation was subsequently changed, though.

Mr. Amber, you talked about quality programming. I'm hard-pressed to think of an in-house drama production. Aside from the history series Mark Starowicz produced, what else is there? You talked about the importance of quality programming. Think of The Arrow, about the Avro Arrow. The independent producers do great quality programming. They work very closely with CBC and are partners within CBC.

Just for the record, my concern is about setting aside money for internal productions. I was not aware of the governance issue there. I thought they had changed something about self-dealing. How do we ensure the best quality productions? When we have this incredible talent across this country, why not use it? I'm not convinced that money should be set aside.

Also on the fund, I understand that the reason self-dealing was put in was that you didn't want private broadcasters coming in and doing their own programming, because that gets away from using Canadians. So I need to be a little bit more convinced on that side.

On this whole issue of local and regional programming, Mr. Amber, I absolutely agree. When Mr. Rabinovitch appeared before us and justified closing things down out east and across the country, he said regional does not include local.

I don't ask for an answer right now, but I wonder if you could help us with how we would define this in the act. What would your definition be so that the issue can be addressed in the act?

You also said, Mr. Amber, that local programming is more than news. Isn't part of the problem the fact that the CRTC has also done a disservice by changing what their definition of “priority programming” is? We talk about drama going down and about no drama being produced. Wasn't it just a couple of years ago that they changed or expanded their definition of “priority programming”? It had to do with all sorts of things, but it took away drama. I think they put in local news possibly, but not between six and seven o'clock. I want you to comment on the CRTC decision with respect to priority programming.

There is so much here that I wish we had longer, but I wonder if you could comments on those things.

Â (1205)

Mr. Arnold Amber: You're right. It's hard to think back to the last time there was an “in-house production” in certain areas. That's because of the way in which the financing of television in Canada is now done. As Lise said, if you automatically end up with hundreds or thousands of dollars by contracting to an outside producer, why wouldn't you do that? Basically, over the years, an incredibly illustrious group of people who were working for CBC ended up no longer working there.

However, the question that we ask in our paper is whether a national, public broadcaster should just be a transmitter, a buyer of somebody else's programs, or whether it must also be a developer and an actual programmer of programs. Our answer is yes, which is why I say to you—and we say it in our paper—that there has to be some balance here.

In our paper, we lay out the fallacies of this. There are two or three of them. One of them is that when you get the 40% extra money for your initial program on-air, you generally do not own the copyright or the program, and that if it's sold anywhere else, you get nothing back. But the other problem is that it in some way determines what your program schedule will be, because each time you want to do something, you have to attract somebody from the outside who is willing to do that program. We outline this in our paper.

The question that I think is underlying this is why we wouldn't use all these people. Well, in the past, when we did do in-house production, it wasn't that there were people who were there for 25 years, with just them doing these in-house productions. In the broadcasting area, somebody could come in to CBC—a well-known producer or director could—and work for six or nine months on a production. It existed in the past and it can exist in the future. We're not talking about a re-establishment of a hierarchy and a whole number of “jobs-for-life” types of programs, to use the vernacular.

Ms. Sarmite Bulte: Just on in-house production, you just talked about holding the copyright. What about The Red Green Show? Is that not produced in-house?

Mr. Arnold Amber: No.

Ms. Sarmite Bulte: All right.

Ms. Lise Lareau: If I may add something, it's also interesting to note that even the Trudeau series is not copyrighted to CBC. Again, that was done using CTF money, and when you trigger the CTF, which CBC is compelled to do for financial reasons, the outside producer holds the ownership of that product at the end. So CBC does not own Trudeau. This is the place we've come to at the public broadcaster. We can't own, we don't hold copyright, we can't develop ourselves unless another producer happens to be interested.

And I might add that other producers are not interested a lot of the time. You have to interest producers, and the only time they're interested is when they can resell, preferably in the lucrative foreign markets. But some stories that we want to tell in this country are never going to be resold. What about those stories? They're not being done right now.

In this city, I know an Ottawa Citizen reporter made this point a couple of weeks ago, when Trudeau aired: A lot of stories out there aren't as sexy as the Trudeau story, so they aren't being told on TV right now.

Â (1210)

Ms. Sarmite Bulte: But isn't that also because the broadcaster won't give the licence fee for it? Again, it's the same thing for an independent producer. In order to get his or her production done, it has to be sellable.

Ms. Lise Lareau: That's precisely the reason why you have a public broadcaster. CBC is the only place that doesn't care about the bottom line. It's the only place that you can do internal production for a non-commercial—

Ms. Sarmite Bulte: We need to speak to some of the independent producers. For example, why is it that CTV picked up Tagged: The Jonathan Wamback Story, a Canadian story, but CBC didn't? I don't buy the idea that CBC is going to pick up all the Canadian stories, because it doesn't.

Ms. Lise Lareau: From a producer's standpoint—and I've talked to many of them, to people who do this for a living—I can tell you that they know the only stuff you can sell to CTV and to the commercial side is stuff that has heavy headline value, in their view. If the stuff is of more interest to, say, fewer people, if it has less name recognition off the top, and if it is more of a quiet story but an important one, it won't get done by the commercial side. It just won't. You can bring those producers to your committee, and they'll acknowledge that.

Ms. Sarmite Bulte: But you're saying it would automatically get done at CBC.

Ms. Lise Lareau: Not under the current rules, it wouldn't. You're right. So what we're saying is that the Broadcasting Act has to be changed so that the CTF isn't set up in the way it currently is, so that there's a blend of internal and external production at CBC, in order to enable that to happen. Once CBC develops the capacity policy-wise to do its own production, it can then control and do the projects that aren't necessarily commercial-driven anymore. That's something it hasn't had the luxury of doing for a very long time.

Ms. Sarmite Bulte: I agree with you on that.

The Chair: Excuse me, Ms. Bulte, but it's nearly 12:15 p.m. Ms. Lill has to go, and a lot of other people have meetings. In fairness, I think we have to give her a chance.

Ms. Wendy Lill: Thank you.

I just want to pick up on the issue of local TV. You made the point that CBC's growth has been in local TV because of the interest of people in their communities, because of the strong roots that people have in their communities, and because of how local programming provides credibility. I'd like to just focus on that.

As we all know, the supper-hour shows across the country have now been totally altered. We have this fifty-fifty model. Places like Halifax are seeing huge drops in ratings at that hour. The people working on those shows are worried that they're going to be cut altogether. In fact, we're moving away from local programming at a hundred miles per hour. The private broadcasters are saying they don't need CBC, that they're doing it all themselves, yet my colleague across the way from Sydney and my colleagues from Newfoundland know they are in fact being very poorly served by the private broadcasters at the local level.

You made the point that some kind of flexibility is needed, that there may in fact be some markets in which people are able to get whatever they need, maybe in Toronto, maybe in Montreal, but I don't know. But I certainly know that in Sydney, in Halifax, and in St. John's, that's not happening.

Do you see some way to actually put within the act...should we be urging for a local component requirement for CBC, but also for flexibility within that local component?

Â (1215)

Mr. Arnold Amber: Certainly, when it comes to the local suppertime shows, that's exactly what we think should be done. It's one thing to argue that.... Let's take another city, one like Calgary, or other cities in which there is a multiplicity of outlets. I'm not saying Calgary is well served or not well served. I don't live there, I'm just using it as an example.

Maybe you say you should put the resources where they're needed and where they're wanted. There are many ways to ascertain this, and I think CBC should at least be compelled to consider that. I believe it's Mr. Abbott who keeps saying it's basically about choices. No one is saying to anybody that CBC should take $2 billion to do programming.

It does all come down to choices, but I think there are fundamentals for broadcasting, and also for public broadcasting. The word used in Europe is “service”. If it's public service broadcasting, what do the people of Newfoundland want? What do the people in Halifax want and need? I use the word “need” as well as the word “want”. Is it impossible to ascertain some of these things? I think not.

For example, as you go further west on Canada Now, the hour starts off with the half-hour of national news here in central Canada, and then the half-hour of local news. In the east, where there really is a desire for a lot of local broadcasting, it starts off with the local half-hour first. The fact that it is all called Canada Now still isn't quite as inviting to me as Halifax Today would be, or whatever the title might be.

I think we have to break out of some moulds here, because the choices and options are tougher and tougher to do. We're not asking CBC or this committee to write something that's unrealistic. But on this point about being realistic, a national model does not necessarily serve all when it comes to local broadcasting. The principle is that there must be local broadcasting.

The Chair: Mr. Cuzner, we'll close with you.

Mr. Rodger Cuzner: Ms. Lareau, if I could, has your position on the in-house and out-of-house productions been advanced by CBC, or is it at least being supported by the corporation?

Ms. Lise Lareau: It has been supported by the corporation, but I have to say that they don't hang to it as clearly or as dearly as we do, and for their own reasons. I think a lot of principled producers within the corporation have helped us to develop this, and I know they would advance it. But I don't think it runs counter to anything CBC would ever tell you.

Mr. Rodger Cuzner: Mr. Amber, we have a young boxer in Glace Bay by the name of Kyle Clark. He's 18 years old and he's destined to be an Olympian. He was a gold medal winner at the last Canada Games, in Corner Brook in 1999. But if we threw him in against Lennox Lewis, I think we know what would happen. He'd get his ears boxed. If we put him in with Mike Tyson, he'd get his ears bit.

Some hon. members: Oh, oh!

Mr. Rodger Cuzner: If we take the same sort of rationale and apply it to what's going on with the television industry, are we not setting ourselves up for the failure of our own productions, the Canadian productions, if we're putting them up head to head against ER and Friends, the monsters from the States? Do you not see any merit in some of the rationale for the schedules the private companies are making now in trying to find placement for the Canadian productions? I'll throw that out to you.

Mr. Arnold Amber: That's an argument, but I personally.... You know, you can only come here and say what you believe. If I thought they were sitting around on Bay Street trying to figure out that this is why they're going to use Friends on their television network rather than a Canadian program that they'd really love to put it in there at eight o'clock, but they don't because they don't want to go up against Friends because it might transfer to another Canadian commercial broadcaster, I think it's worth debating.

However, I don't think that's what's happening at all, because at many times over many years, on CTV, on Global, and on the French side as well, the commercial broadcasters have had the opportunity to properly place programs when they weren't up against Friends but were up against something else. For example, in one of the programming thrusts that exists now, a lot of the American channels run these secondary current affairs hours. A Canadian program can quite obviously run up against those, because Canadians tend to watch Canadian news and Canadian current affairs programming.

So I don't think that's the rationale for it. I think it's one of the excuses for a policy that has to do with the bottom line. And by the way, if I perhaps owned a company that was about the bottom line, I would probably make the same decision. But that's not what this exercise is about. This exercise is about creating national voices in our broadcasting system.

Â (1220)

The Chair: I'm afraid we have to close here. Unfortunately, there are many things going on at the same time. It's a real pity, because your brief was extremely important to us. It was very interesting. From the questions, you could tell we were extremely interested in what you had to say today, and we'd like to extend a very special thank you for coming back to see us.

Ms. Sarmite Bulte: Maybe you could come back to see us again.

Some hon. members: Oh, oh!

Ms. Lise Lareau: We'll have to make it a habit.

Thank you for your attention and time. We appreciate it.

The Chair: By the way, just before we close, I was hoping Mr. Harvard would still be here, but he has just left. I have had two requests from Mr. Abbott and Madam Gagnon—they had to leave a little earlier—that we bring in either some experts or the officials from the ministry in order to give us some enlightenment on Bill S-7. We can't discuss it now because we don't have a quorum, but I'm just going to put in on record that I've had these notes from them, these requests that I've turned over to the clerk. We'll have to go from there.

Thank you again. Our meeting is adjourned.