INST Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Tuesday, February 25, 2003

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1530

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Mrs. Solange Drouin (General Manager and Vice-President to Public Affairs, "Association québécoise de l'industrie du disque, du spectacle et de la vidéo")

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1535

The Chair

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1540

Ms. Anne-Marie Des Roches (Public Affairs Director, "Union des artistes", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo")

Ms. Claire Samson (President and General Manager, "Association des producteurs de films et de télévision du Québec", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo")

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1545

Ms. Francine Bertrand-Venne (General Manager, "Société professionnelle des auteurs et compositeurs du Québec", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo")

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1550

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1555

The Chair

Ms. Lise Lachapelle (General Manager, "Association des réalisateurs et réalisatrices du Québec", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo")

Mr. Richard Paradis (President, "Association canadienne des distributeurs et exportateurs de films", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo")

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1600

The Chair

Mr. Gerry Shannon (Consultant in International Trade, As Individual)

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1605

º

1610

º

1615

The Chair

Mr. Donald Ching (President and Chief Executive Officer, SaskTel)

º

1620

º

1625

º

1630

The Chair

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance)

Mr. Gerry Shannon

The Chair

Mr. Brian Fitzpatrick

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1635

Mr. Donald Ching

Mr. Brian Fitzpatrick

The Chair

Mr. Richard Paradis

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

The Chair

Mr. Larry Bagnell

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1640

Ms. Claire Samson

º

1645

Ms. Francine Bertrand-Venne

The Chair

Ms. Jocelyne Girard-Bujold (Jonquière, BQ)

Ms. Francine Bertrand-Venne

Ms. Anne-Marie Des Roches

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1650

Ms. Jocelyne Girard-Bujold

The Chair

Mr. Gerry Shannon

Mr. Richard Paradis

The Chair

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)

Mrs. Solange Drouin

The Chair

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1655

Mrs. Solange Drouin

The Chair

Mrs. Solange Drouin

The Chair

Ms. Claire Samson

Mr. Richard Paradis

The Chair

Mr. Donald Ching

»

1700

The Chair

Mr. Brian Fitzpatrick

The Chair

Mr. Richard Paradis

The Chair

Mrs. Solange Drouin

»

1705

Mr. Brian Fitzpatrick

Mrs. Solange Drouin

Mr. Brian Fitzpatrick

The Chair

Mr. Brian Fitzpatrick

The Chair

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)

Mr. Donald Ching

Mr. Joseph Volpe

Mr. Richard Paradis

Mr. Joseph Volpe

Mr. Richard Paradis

Mr. Joseph Volpe

Mrs. Solange Drouin

Mr. Joseph Volpe

Mrs. Solange Drouin

Mr. Joseph Volpe

»

1710

Mr. Richard Paradis

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

Ms. Francine Bertrand-Venne

Mr. Joseph Volpe

Ms. Francine Bertrand-Venne

The Chair

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.)

»

1715

The Chair

Mr. Serge Marcil

Ms. Anne-Marie Des Roches

Le président

Mrs. Solange Drouin

Mr. Serge Marcil

»

1720

The Chair

Mr. Richard Paradis

The Chair

Ms. Jocelyne Girard-Bujold

The Chair

Ms. Jocelyne Girard-Bujold

The Chair

Ms. Jocelyne Girard-Bujold

The Chair

Mr. Brian Fitzpatrick

The Chair

Mr. Richard Paradis

The Chair

Mrs. Solange Drouin

»

1725

The Chair

Mr. Serge Marcil

The Chair

Mr. Gerry Shannon

The Chair

Mr. Gerry Shannon

The Chair

Mr. James McQueen (Committee Researcher)

»

1730

Mr. Gerry Shannon

The Chair

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.)

The Chair

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CANADA

Standing Committee on Industry, Science and Technology

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NUMBER 024

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, February 25, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): I call the meeting to order, pursuant to Standing Order 108(2), consideration of foreign investment restrictions applicable to telecommunications common carriers.

    We have a number of people with us today. We're going to begin with our presentations. I understand each of you will have three or four minutes. I want to emphasize that the discussion is on foreign investment in telecommunications so it has to pertain to that subject. Sometimes we go off topic, so I'm trying to keep everybody on topic.

    We will begin with Ms. Drouin.

[Translation]

    Mrs. Solange Drouin (General Manager and Vice-President to Public Affairs, "Association québécoise de l'industrie du disque, du spectacle et de la vidéo"): Good afternoon, Mr. Chairman, and members of the Standing Committee on Industry, Science and Technology.

    My name is Solange Drouin and I am the Vice-president to Public Affairs and General Manager of the Association québécoise de l'industrie du disque, du spectacle et de la vidéo. My colleagues who are with me will introduce themselves in turn, but, for the time being, I would just like to say that all of the associations appearing before you today represent virtually everyone involved in the French-language broadcasting system, in both the musical and audiovisual sectors. Together, we will be presenting to you a consensus widely held by our members.

    More specifically, my organization, ADISQ, is made up of independent companies in the music industry which contribute more than 95% of the French-language vocal music production in Canada.

    In the course of your consultations, you have probably noticed that the Canadian industry is structured such that the activities of broadcasting and telecommunications companies are closely linked in a number of regards. In terms of strictly legal considerations as well as the services and business activities they provide, more and more companies are combining these two components. We therefore think that any change to the regulations regarding the foreign ownership of telecommunications common carriers will result in a domino effect on broadcasting policy as a whole.

    Telephone and cable companies are both hybrid distributors—partially telecommunications distributors under the Telecommunications Act, and partially distribution companies, under the Broadcasting Act. That is why in the interest of competitive equity, the cable companies will not agree to telecommunications common carriers being treated differently under the regulations.

    On the basis all the testimonies you've heard to date, you will doubtless have noticed that, by simplifying things, it is possible to sum up the views as follows: there are those who favour the relaxation or elimination of the foreign ownership rules and those who are opposed to removing the restrictions on foreign ownership. We, the associations before you today, are part of the latter group.

    Those who favour deregulation are seeking mainly to facilitate access to capital. They claim that their access to capital on the Canadian market alone would be inadequate to ensure growth and innovation.

    In my opinion, the need for access to capital is an unfounded argument in the context of Canada's Innovation Strategy.

    At the end of January, Peter Harder, the Deputy Minister of Industry, told you about the intense international competition facing Canada in the knowledge-based economy. He mentioned that the telecommunications are the backbone of the knowledge-based economy. He added that Canadian regulations should be geared to international standards, because otherwise, innovation might suffer.

    However, we have noticed that despite the problems caused by the bursting of the speculative bubble in the high-tech and telecommunication sector, Canada did manage to stand out. According to a recent report by the World Economic Forum entitled Global Information Technology Report 2002-2003: Readiness for the Network World, Canada ranks among the top ten countries as regards the use of new computers and information technology.

    The results of the 2001-2002 survey on the readiness level of network infrastructures showed that Canada was in 12th position. The same survey was carried out in 2002-2003, and of the 82 national economies surveyed, Canada ranked sixth.

    This report states that Canada ranks first as regards speed of service when people asked to have a new telephone line installed. It ranks second as regards high-speed Internet availability or broadband access. It ranks fourth as regards the level of investment of R&D firms. It also places fourth as regards the environment that supports the readiness of its network infrastructures. This environment is composed of three factors: the market, policies and regulations, and infrastructure. All of this was achieved in a difficult context, on the one hand, and virtually without foreign investment, on the other.

    Given our position among the 82 countries surveyed, we can conclude that neither our infrastructures nor our technology are an obstacle to Canada's innovation strategy. In fact, we think the missing piece is actually in the area of knowledge, we have these wonderful tools available to us, but we do not yet know how to take full advantage of them.

    For example, you probably know that the Canadian record industry has suffered a great deal because of downloading of musical files through the Internet. A study of Download.com on the MusicNet pay site, shows that there were 18,000 instances of downloading in the first week of January 2002, compared to 2.5 million instances of downloading on the free sites Morpheus and Kazaa, during the same week.

    In addition, Canadians, who pay among the lowest rates in the world for Internet use, are among the most avid Internet users in the world in taking advantage of this free music.

    A study carried out by AOL Canada and RoperASW, which was summarized in the article published in November 2001 by the Financial Post and entitled, Canadians among world leaders in Web use, 44% of Canadian Internet users regularly or occasionally downloaded free music files, compared to 37% of Internet users in Brazil and 33% in the United States and Germany.

    We would remind you that Canada has no policy objective as regards the development of technology and new media. As a result, there is no mechanism in place to solve this growing problem. However, since downloading music is an issue that affects all countries, it might be advisable for the Canadian government to be innovative in this respect, if it wants to maintain the country's high ranking as regards the use of new technologies.

    In closing, I would like to remind the committee that regulatory mechanisms, particularly those having to do with foreign ownership, were established following numerous consultations, because they do have the potential to impact on public interest. This is a public service that affects all Canadians.

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    Beyond issues of employment or creative talent, it is a question of our ability to control the most powerful medium of our time, a medium that enables us to project our cultural identity, our collective consciousness, the common understanding and attachment Canadians have as regards certain moral, esthetic, artistic and social values.

    I will now turn the floor over to Ms. Anne-Marie Des Roches from the Union des artistes, who will talk to you about some of the ramifications of this policy.

[English]

    The Chair: Excuse me for a minute. You took double the time. That means somebody at the end is not going to have a chance to speak.

    We warned everybody that you had 30 minutes as a group. We have two other speakers who will get 10 minutes, and you're making it very difficult. So when you hit three minutes, I apologize, I'm going to have to warn you that you will have one minute to summarize. Is that okay?

    Speaking faster does not help. I think we warned everybody a number of times that especially when we have a group, we allow only so many minutes. You can do it all in one presentation or two presentations. You've decided to make it in separate presentations so you must stick to the time limit.

    Please begin.

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[Translation]

    Ms. Anne-Marie Des Roches (Public Affairs Director, "Union des artistes", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo"): Good afternoon. My name is Anne-Marie Des Roches and I am the Director of Public Affairs at the Union des artistes.

    The Union des artistes is a professional union representing performing artists working in French in the cinema, on disk, in the performing arts and on television.

    Deregulating telecommunications service is an issue that has given rise to many debates throughout the world. The CRTC has in fact been congratulated by the OECD, which found that Canada's performance was better than the average for OECD countries as regards the establishment of a competitive market in the telecommunications field. For example, competition led to the quick introduction of high-speed Internet access, so much so that the supply of broad-band services currently exceeds the demand.

    In the name of competition, competitiveness and our commitment to the liberalization of trade, the government is reviewing the issue of foreign ownership in our telecommunications common carriers, despite the good report card we got from the OECD.

    At this point, I would like to remind you that March 31, 2003 is the deadline for the members of the World Trade Organization to table their requests as regards the liberalization of certain services. This is the first stage in the follow-up to the Doha Summit. The requests have not yet been made public, but it already appears that a number of countries have said they are interested in having Canada further liberalize certain cultural service sectors, namely the entire audio-visual and book publishing sectors, including the telecommunications industry.

    In this respect, we would like to pay tribute to the position adopted by Canada on this in the context of the FTAA negotiations. On February 14 of this year, in fact, the Government of Canada announced that it was reserving the right to regulate the foreign ownership of companies, among other things.

    However, the government has not said that it would continue to regulate or to regulate at the same level as it has done to date. The government has also not yet defined what the value-added services would be in the telecommunications sector. Thus, this is still open, and the pressure is growing and our concerns have only been somewhat allayed.

    We wonder what impact a decision to liberalize or relax foreign ownership regulations will have on our content companies and on our broadcasting policy. We wonder in particular what the impact will be on the government's promise not to make any commitments in the area of culture in the context of the free trade agreements.

    At the moment, the Office of the U.S. Trade Representative is evaluating compliance with telecommunications trade agreements. It is asking for “comments concerning compliance with telecommunications trade agreements”. Under this process, companies complain about the regulatory practices of certain countries.

    We would now like to refer to a brief excerpt from the letter sent by AOL Time Warner.

[English]

We have encountered a number of barriers to competition in the basic and value-added telecommunications markets. For example, telcos and incumbent cable operators are offering light broadband services at predatory prices, while denying competitors the right to obtain these services at non-discriminatory wholesale rates.

[Translation]

    Value-added services are at the very hart of the current debate.

    When Mr. Harder from the Department of Industry appeared, Mr. Rajotte asked whether he had noticed the correlation between authorized foreign investment and pressure to change political cultures. Mr. Harder responded: “Not to my knowledge.” We can confirm that in the United States, there has been no pressure on this regard, obviously. It is because they have no cultural policy to protect. One doesn't have to ask colonel Sanders if he minds having chicken in his courtyard. He doesn't mind. Rather one should ask the chickens whether they are disturbed that colonel Sanders is in their courtyard.

    Ms. Claire Samson (President and General Manager, "Association des producteurs de films et de télévision du Québec", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo"): Hello.

    In our industry, management has traditionally been the most reasonable, and therefore I will shorter what I have to say in order to let my colleagues and all the others have a chance to speak.

    I am Claire Samson and I am CEO of the Association des producteurs de films et de télévision du Québec. We represent some 130 Quebec movie and television production companies which are independent of broadcasters. I will go right to the hart of what I have to say.

    Currently it is the CRTC which is responsible for managing the delicate balance between social and cultural objectives and supporting a communication industry that is economically solid and competitive. Therefore the balances that must be maintained are closely tied to the area of Canadian content and corporate ownership.

    Canadian content on television exists in a large measure thanks to the Canada Television Fund, to which cable suppliers and satellite suppliers must contribute pursuant to CRTC rules. The quotas for broadcasting of shows or of Canadian musical works on radio and television therefore promote national production. These policies would be impossible to implement if the industrial structure was no longer controlled within Canada by Canadians.

    This industry must not only be controlled by Canadians, it must also be diversified in order to ensure production quality. A small number of vertically integrated companies would not foster creation and innovation necessary for the development of original quality productions.

    Over the last two decades, a regulatory framework has been put in place to foster the diversification of creative outlets. There is healthy competition and a good complementarity between integrated broadcasting and production companies and those companies mainly committed to production. For example, the audiovisual and independent production industry in Quebec represents over 100 companies generating 35,000 direct and indirect jobs annually. This industry contributes to the diversity of creation locations. These measures made possible productions whose quality is recognized not only nationally but also internationally.

    This tendency of the market makes the broadcasting and distribution of foreign works, especially American ones, easier. And that is why we have to continue to ensure that there are enough quality Canadian productions in an ever increasing broadcasting world. To achieve this, we have to ensure that the resources created by the distribution of Canadian content or foreign content productions are reinvested into Canadian production.

    As to the requirements for Canadian ownership, in order to apply the regulatory requirements under the broadcasting policy, the companies upon whom these obligations are placed must be controlled within Canada. For example, if we let American distribution companies come into Canada, they could artificially lower their rates, adopt dumping practices and then invoke their inability to participate in reinvesting in Canadian production. That would cause a domino effect on other companies and could put at risk several measures requiring reinvestment into Canadian production.

    Furthermore, the issue of labour relations in a context of American controlled corporations is a great source of concern to us. Canadian production budgets are generally much lower than those of American productions. These conditions require different tariffs and non-monetary clauses adapted to our reality. In other words, the negotiation of collective agreements between producers and workers in the industry would become very difficult if it had to be done in partnership with American interests. Canadian production would no longer be a priority against such a backdrop. And the entire community would suffer, since our national production would no longer be economically viable.

    Canadian ownership rules have allowed us to create Canadian companies we are proud of. These companies are able to act and to efficiently contribute to the promotion of our culture. Now is not the time to relax these rules by allowing these entities to become branches of foreign companies. In order to protect the Canadian nature of the system, it is essential that the control of these fundamental elements of broadcasting and distribution companies remain in Canadian hands. Honestly, as a French Canadian, I would rather trust Canadian companies and Canadian regulations than entrust the survival of our culture to the generous nature of our neighbours to the South. Thank you.

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    Ms. Francine Bertrand-Venne (General Manager, "Société professionnelle des auteurs et compositeurs du Québec", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo"): The purpose of my intervention is to tell you about positive measures taken in the cultural sector, policies that the Canadian legislator has given authors, composers and creative artists. You are responsible for the Copyright Act so I will start by speaking to that.

    It is important to recognize that cultural policies as well as programs that support the cultural sector encourage the use of Canadian creations. As you know, a copyright fee is paid as soon as our works are used. Our cultural policies are proof that legislation and policies to support the cultural sector do go hand in hand.

    The Copyright Act has enabled our cultural sector in Quebec to establish the only society of authors and publishers with reproduction rights. I am sure you are already quite familiar with SOCAN, but perhaps you are less familiar with SODRAC, which is identical to SOCAN, but deals with the right to copy music in the record industry. The term “reproduction“ includes the Internet. Copies are used a great deal.

    In 1985, when SODRAC was established, it collected $100,000. Last year, it collected $11 million. That is an example of how support policies support not only Mr. Péladeau from Québecor, Mr. Rogers or the major cable, direct satellite broadcasting or telephone companies. There have been success stories in our sectors and we are proud to tell you about them today.

    Thanks to the Status of the Artist Act, we were able to establish an association like mine, that is accredited under the Status of the Artist Act, and can negotiate minimum conditions for ordering musical works from a Canadian artist, so that there is a minimum threshold for its use and the artist's remuneration so that the composer can be guaranteed a basic income from his copyright. An American policy would consist of a complete buyout: in the best-case scenario, the composer would probably get $2,000 and not be able to get his copyright.

    It is critical for you to recognize that this type of legislation must be negotiated and therefore tailored to our industry. We are here today with record companies and audiovisual firms to show you that in our sector and in the Canadian environment, we have managed to maintain a relationship with our business partners where the rights of those we represent are respected, while at the same time providing business people the opportunity to fully market their productions.

    The Broadcasting Act is no doubt also very dear to the creators, since it provides for guaranteed Canadian ownership but not necessarily the requirement to use Canadian creative resources as much as possible. There must be a balance between this obligation and the privilege of getting a broadcasting licence. As you know, the Canadian government ordered that airwaves would be public. The privilege of getting a broadcasting licence therefore comes with the obligation to use Canada's creative resources as much as possible, which is why there are requirements for Canadian content on records and in broadcasting—Canadian content rules—, as well as the obligation in the audiovisual sector, which is also set at 40%. These measures support Canadian artists and are prerequisites for getting the revenues we need.

    Over the past few years, we have been involved in hearings on cross ownership. This raises concern about cultural diversity in a Canadian context because these are Canadian business people, but we finally reluctantly accepted the vertical structures because we were assured that these firms would remain Canadian and therefore closer to us. But foreign ownership would be the end of all Canadian successes that I have just mentioned in terms of labour relations, copyright and the cultural sector.

    Let me use the example of Videndi and AOL Time Warner who came to Montreal. AOL's vice-president of public policy came to a forum at HEC in Montreal, last year and I publicly asked him the following question: you have just said that on your Internet site you offer the 10 Canadian best-sellers and the top 10 in Canadian music; if you were to look at the francophone market from a business perspective, would you be as bold as a Canadian businessman who is under some obligation to have Canadian products, would you be happy to have the same obligations and would you do so?

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    He did not answer my question. All university professors and business people who were at this meeting told me that the fact that there was no response meant that when we do an objective assessment of the market, we can decide not to invest into the production of French Canadian music or audiovisual works. We only broadcast star production, such as Celine Dion. The Americans might produce the works of someone in the Canadian market.

    Currently, in Canada, thousands of people earn a decent living from their work in a cultural medium. And here I am talking about all of these individuals, not just two or three, but all of the Canadian creators who need your support. Telecommunication is directly related to broadcasting.

    Thank you.

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[English]

    The Chair: You're outnumbered five to one.

[Translation]

    Ms. Lise Lachapelle (General Manager, "Association des réalisateurs et réalisatrices du Québec", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo"): My name is Lise Lachapelle and I am the Director of the Association des réalisateurs et réalisatrices du Québec, which represents some 450 producers who work in the film and television industry in Quebec.

    I would simply like to add to what my colleague have said. All together we produce content. I would like to remind you that senior managers and public agencies which set the rules first try to meet the needs of Canadians in terms of cultural identity and cultural. Thus, ownership rules must promote the diversity of production, in terms of culture and styles, thus fostering diversity of demand.

    Furthermore, the public needs a culture to share. We often say that the television set is a new public square. Television is 50 years old and now has a history,generally speaking, as well as national and technological ones. And it is on those that the way we produce television are based, and it is our way of producing television that the artists of tomorrow will use to communicate with their contemporaries. We therefore have a responsibility to leave a legacy to our children.

    The history of Canadian television has his own characteristics, its own evolution and its own idiosyncrasies. It is only with some historical perspective that we can organize a given set of contents to create our own history. The interest of content consumers who are also a part of the industry—and that can apply of course to telecommunications— must therefore also be taken into consideration in policy reflections and any decision making process that stems from those policy decisions. The only advantage to opening up to foreign ownership would be in its obligation to reinvesting in Canadian production, as was indicated by one of my colleagues.

    Canadian consumers must also be exposed to other cultures providing of course that there be a plurality of offers on the table.

    Mr. Richard Paradis (President, "Association canadienne des distributeurs et exportateurs de films", "Association québécoise de l'industrie du disque, du spectacle et de la vidéo"): I am Richard Paradis, president of the Association canadienne des distributeurs et exportateurs de films et de programmations télévisuelles. With my colleagues before you, the members of my association and myself are of the opinion that the analysis of any change to foreign ownership allowable in the telecommunications industry in Canada cannot be done without taking into account the possible consequences that would affect the cultural sector and more specifically the broadcasting sector.

    The committee must see beyond the demands made by entrepreneurs and telecommunications executives who have a tendency to consider only the short term when they recommend that the rules of foreign ownership be open to the telecommunication industry and they only tend to look at their bottom line.

    It is important for the committee to assess this matter by taking into account the public interest rather than the financial interest of a group of managers who would presumably be the only ones to benefit from such a situation. The people we represent here today are not the only ones wondering about the merit of opening the ownership of our telecommunication industry to foreign interests.

    Canadians have expressed their opinion very clearly on this issue a few weeks ago. In the public survey by Decima Research carried out for Decima Publishing Inc. in December 2002, some three months ago, with some 2,017 Canadian respondents, 72% of Canadians said that they were against any change in the regulations which would allow foreigners to be majority owners of our broadcasting or telecommunication companies. And that is 4% higher than in June 2001, where they were asked the same question when 68% of Canadians spoke against any such change.

    The majority of Canadians, some 60%, find it unacceptable that telecommunication companies may be held by foreign owners. Fifty-six per cent are of the same opinion with regard to cable companies. Furthermore, 54% are against a situation where foreign interests could become majority shareholders in broadcasting companies and 58% are against foreign ownership, specifically in the radio industry. Finally, 66% of Canadians are against foreign ownership in the print media.

    This Decima Research poll confirms, in even greater numbers than in 2001 when the last survey was held, that Canadians are very uncomfortable at the idea of seeing their communications system in the hands of foreign interests.

    At the ACDEF, we are of the opinion that cultural expression plays a major role in what distinguishes Canada from many other countries and that, while we are invaded by technology, cultural expression continues to be unique in its ability to touch people. It challenges the mind, the soul, the emotions; it is a form of creation that is almost unlimited and which allows us to tell our stories and to share them with large audiences nationally and internationally.

    But to reach Canadians with cultural content that is theirs, we must ensure that we are always in a position to have access to our principal means of communication. We also have to take into account technological convergence which allows us to offer content, whether through broadcasting, through cable broadcasting, through direct satellite or through our telecommunication and wireless systems.

    The viability of Canada's cultural industries is extremely fragile in the context of globalization and an increasingly overwhelming American presence in several areas, such as the movies, music and publishing, and this is true wherever we may be on the planet. And yet, it is towards these cultural industries that the federal and provincial governments turn in order to highlight our own culture within our borders and elsewhere.

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    For decades, the Canadian government has used public agencies such as the Canada Council, the CBC, the National Film Board, Telefilm Canada and the CRTC to ensure that Canadians can always have access to Canadian content.

    In our opinion, it would be counter-productive to significantly increase foreign ownership in our telecommunications undertakings, because there is no urgency to do so; this is reflected in the fact that the largest telecommunications undertaking in Canada, BCE, was recently able to find the financial resources within its own market that it needed to buy back substantial though still minority foreign participation in its stock.

    The models that show that foreign ownership in the telecommunications industry would benefit consumers have certainly not been proven. The risks to Canadian cultural industries are clear, and are certainly much greater than any of the benefits being derived by those promoting deregulation. It comes down to the very survival in the medium and longer term of Canadian cultural expression that is at risk if effective control of the distribution means for cultural products is no longer in the hands of Canadians.

    On behalf of my colleagues, I would like to thank you, Mr. Chairman.

[English]

    The Chair: Thank you very much.

    We'll now go to Mr. Shannon, a consultant in international trade, for 10 minutes.

    Mr. Gerry Shannon (Consultant in International Trade, As Individual):

    Thank you, Mr. Chairman. Mr. Chairman, telecommunications have been on the international trade negotiation table for the last 20 years or so, beginning with the Canada-U.S. free trade deal and then with NAFTA.

    As a consequence of the WTO Uruguay Round, we made substantial multilateral commitments for the first time during negotiations on the important area of trade in services, the GATS. The WTO basic telecommunications agreement reached in 1998 has two parts. The first is a commitment to market access and national treatment for basic telecom services. We made significant contributions to liberalization in several areas, with which you're familiar, while dodging the main bullet on removal or substantial reduction of foreign investment restrictions. We're far from alone in that respect.

    The second part of the agreement was a reference paper on regulatory principles for basic telecom services through which Canada committed to such things as the use of an independent regulator and transparency in interconnection and licensing procedures.

    Looking ahead, we can expect that service industries, including telecoms, along with others such as financial services, will be front and centre at the agenda for the Doha Round of trade negotiations, which began in fact in February 2000. The direction of the process will be to expand the number of countries making real commitments in telecommunications as well as to intensify the level of commitments undertaken.

    There is also the prospect of WTO negotiations on an embryonic international investment regime, which could also be relevant in this regard.

    In short, Mr. Chairman, the process of liberalization of telecommunications in the WTO is well under way.

    By way of establishing myself in this forum, Mr. Chairman, I was Canada's chief negotiator for the last round of multilateral trade negotiations in Geneva and prior to that served as deputy minister for international trade here in Ottawa.

    The future of Canada's foreign investment restrictions obviously is critical in this context, and as a former negotiator I am naturally disposed in favour of trade and investment liberalization. No one can seriously question the economic benefits that derive from trade or the part investment plays in promoting it and global growth.

    If Canada's existing foreign investment restrictions stand in the way of attracting the kind of investment needed to make us a world leader in this area, without serving any purpose other than a psychological one, then they should presumably go or at least be substantially reduced. However, I've been around the track enough times to know that any issue as important and contentious as this one needs to be approached with our eyes wide open.

    We need to have some level of confidence in Canada that removal, or substantial reduction, of these barriers could in fact be expected to lead to substantially increased investment levels and an invigoration of a Canadian industry, and not simply to those results that many Canadians fear such as American takeovers, the drift of headquarters south, loss of sovereignty, and the like.

    I for one would be more comfortable going down this road if I were satisfied that we had a better knowledge base and analytical base than we currently appear to have at our disposal. It would be helpful, for example, to have a sense of the extent to which the existing restrictions present a serious impediment to investment relative to other factors, or the extent to which their removal could be expected to trigger new foreign investment given the current financial state of the global industry.

    It would also be useful, Mr. Chairman, to look behind the numbers on how restrictive Canada is in this regard in comparison with other countries. I was struck by the data in the Industry Canada documentation for you indicating that we rank among the most restrictive among the OECD group, the worst next to Turkey. Perhaps so, but how this receptivity to foreign investment in this sector can fall so low when our general receptivity to foreign investment is so high is puzzling. Equally puzzling is that the generally available material put out by the U.S.A. on what they want in this negotiation--and I speak now of telecommunications, sir, and not culture--targets Mexico, Korea, and Japan as countries whose regimes need to be altered but makes no specific reference to Canada. How does that square with our last-place showing?

    Statements to the effect that there are no foreign investment restrictions in country X, Y, or Z do not necessarily mean that such countries are wide open to foreign investment. Many of the European countries in this category, for example, still have majority government ownership in their traditional major telecommunications providers. Nor do such statements speak of the myriad ways governments have at their disposal for controlling investment.

º  (1605)  

    To get a true measure of the openness of other countries to foreign investment, it would be useful to look at actual foreign investment levels, that is, real world performance. In other words, we should not be removing or reducing foreign ownership restrictions because of an impression that we rate last in some international beauty contest-cum-numbers game; we should do it because it makes sense for us.

    On the U.S. experience, Mr. Chairman, the case of the U.S.A., of course, which has been leading the charge in the liberalization of telecom services trade in the WTO...there's a point I want to reiterate here. The U.S.A. has no formal restrictions on foreign investment except, I understand, in the area of wireless. While the U.S.A. has adopted a predisposition to accept investment from WTO member countries, it also has its own political pressures and the means of controlling unwanted investment, whether foreign or domestic.

    Specifically, the FCC is empowered to review such transactions “in certain circumstances”, and the Committee on Foreign Investments in the United States-- which is known by that unhappy phrase CFIUS--is an inter-agency committee chaired by the Secretary of the Treasury and containing a plethora of U.S. departments and agencies, which can recommend to the President that a foreign investment proposal be rejected.

    These processes are designed to allow the federal government in the United States to review whether a proposed ownership interest violates the FCC's public interest standard or threatens national security in such a way that a President should, on the recommendation of CFIUS, suspend or prohibit the transaction. While no one will get very far in challenging national security reasons as a legitimate way of protecting a nation's interests, it's worth noting that the agencies involved do not limit themselves to security matters, nor for that matter to privacy issues.

    Among the factors the FCC must consider are the effect of the proposed transaction not only on U.S. national security and law enforcement but also competition in the United States and on the “trade and policy concerns” of interested U.S. agencies. Some of these considerations came to light in recent years in discussions of the FCC's handling of foreign applications, where the suggestion has been made in the U.S.A. that the procedures were used to extract concessions before issuing approvals.

    There is also an ongoing debate in the United States on whether new mechanisms are needed to control foreign investment in this sector. To date, the current administration has rolled these back, but they could well resurface as the WTO round comes to fruition and Congress must reject or approve the outcome.

    A further issue I'll just touch on, Mr. Chairman, concerns the role of sub-governments in delivering on commitments made by government, such as the U.S. government for its states or for that matter by the European Commission for its member states. The General Agreement on Trade in Services defines commitments by members in a way that clearly includes sub-national governments.

    In a normal circumstance, state acquiescence in a federal undertaking would not be a matter of concern, but we've had prior instances where a negotiated outcome to a bilateral dispute, in this case in goods, was not implemented by agencies at the state level, to our detriment. Mexico has been similarly treated in state measures affecting transportation of its goods into the U.S. market.

    There may not be a problem here, but given the important regulatory and empowerment role played by state agencies, our negotiators should ask and be prepared to extract an undertaking of some sort from the U.S. federal government that will ensure that key individual states will not dilute the benefits to Canada of further agreements in the telecommunications sector.

    That brings me, Mr. Chairman, to the principle of regulatory transparency to which Canada and others are committed through the aforementioned WTO reference paper. Few governments, I would submit, seem likely to leave themselves without any way of exerting some control over foreign investment in this vital sector. The question, therefore, is not so much the removal of restrictions versus a completely open system as it is the replacement of restrictions with another mechanism like licensing or administrative review.

    I'm not an expert in this area, Mr. Chairman, and I have no particular views on what this mechanism might be, but we do need to be concerned about the potential for lack of transparency, which could present just as big an obstacle to attracting foreign investment as the restrictions themselves.

º  (1610)  

    Say what you will about investment restrictions; they at least provide certain knowledge of the degree of foreign investment penetration permitted. In other words, it could be self-defeating if we were to simply exchange the certain world of formal restrictions for the murkier world of regulation, nor should we expect to be able to achieve through the back door what we no longer do by the front. The prospect of removing, or substantially relaxing, foreign investment restrictions also suggests the potential need to strengthen international cooperation on competition policy.

    I'm aware that the bureau has taken a hard look at the effects of competition in Canada involved in removing the foreign investment restrictions. There are some who argue that opening borders will itself ensure higher degrees of competition and that any problems of market dominance can be avoided through competition policy, and they probably are right. But there is in my judgment a risk that as barriers to trade fall, governments will be tempted to bring political influence to bear on competition policy processes to achieve a protectionist outcome.

    I suspect that both in Washington and Brussels there is a fear that the other guy is giving in to these kinds of predilections. For our part, I'd be happier if I knew there was some prospect of having a competition regime in place globally, possibly under WTO auspices, where agreed rules could be applied and enforced. Competition policy is on the WTO agenda.

    Finally, Chairman, there is timing. We're committed to tabling by the end of March our initial offer on services generally, which must incorporate something on telecommunications. On the negotiation timetable of the Doha Round, there will be important meetings this autumn whereinter alia progress on key service sectors of critical importance to the trading system will be measured.

    The WTO negotiations are due to wind up in 2005, but in my experience it would take a miracle, or a very limited outcome, to make that a reality. A more realistic target might be 2007, if the past is any guide to the future. In terms of the telecommunications negotiations, this timing might be preferable if the current malaise in this sector cannot be reversed within a much shorter timeframe. There's nothing, of course, to prevent Canada from taking steps to liberalize immediately and unilaterally its foreign investment regime in the telecommunications area should we decide to do so. Indeed, there are those who would say that the greatest benefits in terms of attracting investment and encouraging expansion would go to those who do precisely that.

    If there are compelling reasons to move in this direction before the WTO process is over, we should do it. In my view, it would be even wiser, however, to move unilaterally on such an important issue by melding it into the broader negotiations if we can get something in return from our developed country partners. It's also going to be used as a means of encouraging some of the more reluctant developing countries to follow suit.

    Most importantly, it would provide time to design a way of dealing with the structural complexities of this industry as well as the sensitive cultural dimension. I would also, Mr. Chairman, be inclined to look closely at the policies and actual practices of the key countries, the U.S. certainly, but also countries that maintain substantial formal foreign restrictions, investment restrictions, like Mexico and Australia, as well as those who do not, particularly Finland.

    In short, Mr. Chairman, there's much to be said if we're looking to the next round of negotiations to ascertain what we can gain from others in return for concessions that you as legislators are prepared to make. There's time to do this, both in terms of the timetable of the current round and in terms of the industry's need to recover from the difficult times it's had in the past few years.

    Thank you, Mr. Chairman.

º  (1615)  

    The Chair: Thank you very much.

    Now we have Mr. Donald Ching, president and chief executive officer of Saskatchewan Telecommunications.

    Mr. Ching.

    Mr. Donald Ching (President and Chief Executive Officer, SaskTel): Thank you Mr. Chair, and members of the standing committee. Thank you for the opportunity to appear before you today to share the views of SaskTel and the Government of Saskatchewan, our shareholder.

    SaskTel is the principal supplier of telecommunications in the province of Saskatchewan. As of 2002, we are also a licensed broadcast distribution undertaking. As a crown corporation, one of SaskTel's primary goals has been to ensure technologies are in place to allow the residents of Saskatchewan to participate fully in the global economy. For example, SaskTel's fibre optic network was the longest commercial fibre optic network in the world at the time it was built. More recently, we were the first in North America to offer high-speed Internet service using digital subscriber line or DSL technology.

    Put simply, out telecommunication system has played an integral role in the economic development of the province and has improved the quality of life of all of its residents. We see SaskTel continuing to play an important role for Saskatchewan in the new networked global economy, and it's in this context that we make our comments on foreign ownership restrictions.

    Many witnesses appearing for this committee have called for easing the current ownership restrictions. These parties have argued that relaxing the rules would increase access to capital and thereby foster competition, would promote innovation, and would enable companies to build broadband networks to rural and remote parts of Canada.

    I will deal with each of these issues in order. As for competition, it has been suggested by some parties that increased foreign investment will enhance competition, thereby improving Canada's telecommunications industry. I would first like to reiterate a comment made by Mr. Sabia from BCE before the committee last week. Mr. Sabia said, and I would agree, “Canada has got it right.” Vibrant and sustainable competition exists in virtually all segments of the communications market. Canadian consumers enjoy some of the highest-quality and lowest-price telecom services in the world. Canadians benefit from innovative services made available through world-class networks. The fact that the penetration rate of broadband services in Canada is twice that in the United States is, in my view, a testament to Canada's leadership in telecommunications. Canadians receive low prices, high service levels, innovation, and choice.

    Only in local telephone services is that choice somewhat limited, due to the fact that local competition has been slow to develop across Canada. In some parts of Canada, such as Saskatchewan, there is in fact no competitive local exchange carrier in operation. We in SaskTel are not surprised by the state of local competition. Like other incumbent carriers in Canada, SaskTel provides quality service at an affordable price. At $22 per month, there is little if any margin in the price we charge for basic residential service.

    It is therefore not surprising that companies such as Call-Net and AT&T cannot develop a viable business case for accessing this particular segment of the market. Greater access to foreign capital will not enhance that failure in their business plan.

    I would like to share with the committee SaskTel's own experience as a competitive local service provider. SaskTel has successfully established and operated competing systems in both England and New Zealand.

    There are a number of common factors contributing to our success in these countries. In both of the cases, customers were facing very high local service prices combined with extremely poor service quality. SaskTel built its own network, rather than relying on the network of an incumbent. SaskTel provided both cable television and local telephone service to differentiate itself from the incumbent. In both cases there was minimal regulatory intervention within the competitive marketplace. I would note that this is in contrast to Canada, where prices are low and there is significant regulatory intervention requiring service providers to provide quality service.

º  (1620)  

    SaskTel is very concerned that public policy-makers in this country appear to believe that something should be done to facilitate or speed up local competition. This something comes in many forms, such as changing foreign ownership restrictions, restricting the marketability of the established companies, or creating inefficient and artificial competition through subsidizing competitor access to the incumbent phone companies, networks, and services. In our view, it is far too early to conclude that local competition has failed in Canada and further regulatory intervention is required.

    We believe there are five distinct categories of competitors that will be competing for local service in the future. These are: incumbent local exchange carriers, ILECs, in their home territory, which is the Bells, the TELUSes, and the SaskTels; ILEC affiliates competing outside their home territory, which is again the same companies; wireless service providers; cable companies; and competitive local exchange carriers, CLECs.

    Of this array of competitors, only the CLECs are saying they need changes to the regulatory regime in order to compete. SaskTel would argue that it's not up to the federal regulator or the federal government to help certain competitors make their business cases.

    Finally, we would argue that Canadians are not unduly suffering as a result of local competition's delay. Through CRTC regulation of the incumbent telephone companies, affordable and high-quality telephone service is available throughout Canada. The extent to which local competition has been slow to develop is not a major national concern. Regulatory intervention is unnecessary and unwarranted.

    The second point is innovation. Parties to this review have argued that the current foreign investment restrictions are impeding innovation and expansion in the telecommunications sector. The record simply does not lend credence to that contention. As other witnesses have indicated, Canada has been a leader in world telecommunications innovation, achieving many technological firsts, and, as others have noted, the Canadian telecommunications industry has continued to increase its investment per capita at a time when investment declined in most other markets, all of this under the present structure and regime.

    I believe our record in Saskatchewan is equally impressive. SaskTel was the first telephone company in North America to offer high-speed Internet service using DSL technology. SaskTel currently has the largest deployment of DSL per capita anywhere in Canada.

    SaskTel was among the first to offer digital interactive video service, DIV, over DSL technology.

    SaskTel and Saskatchewan have long been at the forefront of broadband expansion. The national broadband task force final report recognized Saskatchewan's CommunityNet initiative as “the most advanced undertaken by any comparable national, state or provincial government anywhere in the world”. Due in large part to this initiative, by the end of 2003 SaskTel will be providing high-speed broadband service to 237 communities in Saskatchewan, some of them as small as 100 residents.

    All of this has been accomplished with 100% Canadian ownership. In short, in our province, innovation has not been inhibited by the lack of foreign ownership.

    The third point is broadband to rural and remote parts of Canada. SaskTel submits that there is no link whatsoever between expanding high-speed broadband service to rural and remote regions of Canada and the lifting of foreign ownership restrictions. The factor limiting broadband expansion is the lack of an underlying business case to justify the investment. This will not be impacted one iota by amending the limits on the foreign ownership of telecommunications assets.

    Well-known, independent analysts have made the same observation. For example, the Yankee Group has stated “Deutsche Telekom AG is not going to invest hundreds of millions of dollars in Canadian facilities just to serve 100 households in a remote village on the shores of Hudson's Bay.”

º  (1625)  

    The availability of foreign capital will not drive broadband services into rural and remote parts of Canada. Ultimately, it will depend upon federal government commitment, and in particular sustainable federal funding, for the deployment of broadband outside the large urban areas, programs that promote deployment models relevant for all parts of the country and support for “first movers” like Saskatchewan and SaskTel.

    In conclusion, I believe it is clear that liberalizing foreign ownership restrictions will not improve the competitive landscape or increase broadband deployment to rural and remote Canada. Nor is it evident that the current ownership rules are inhibiting innovation.

    The Canadian telecommunications industry is healthy and vibrant. Competition is robust in most markets and emerging in others. More importantly, Canadians are getting the benefits of competition in the form of low prices, high-quality service, and leading-edge technology.

    Canadian telecommunications policies should be driven by domestic objectives, rather than mimicking the policies and models of other countries.

    We believe that the current foreign ownership regulations are fair and reasonable and that the public interest is best served when Canadians own and control one of this country's primary infrastructures, telecommunications.

    As indicated earlier, we are not alone in this regard. A Decima Research poll indicates that the great majority of Canadians agree with that.

    I would conclude by simply saying that I believe Canada has it right. The current balanced approach to regulation of foreign ownership of the telecommunications sector remains the best means of achieving the objectives of strong investment and national economic strategy.

    Thank you very much, Mr. Chairman.

º  (1630)  

    The Chair: Thank you very much.

    We'll begin questioning for five minutes.

    Mr. Fitzpatrick, I would ask that your questions be short and the answers short and clear so that we can at least go around the table twice.

    Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance): I find it interesting with the SaskTel presentation that you have taken advantage of liberalized investment rules in the U.K. and New Zealand to commit investment dollars into those markets, I presume to some advantage to SaskTel.

    I wanted to point that out because we seem to be saying that we don't want someone else to come here from somewhere else. We like going into someone else's backyard, making a profit, advancing our cause, and so on. I'm not exactly sure, in the world that we live in, that you can have it one way. This is a two-way street. I only raise that as an issue.

    In regard to the content matter, I heard a lot of evidence. I think really you were talking about Canadian cultural production industries and ownership of those things.

    That's not the issue we're talking about here today. We're talking about ownership on cable, telcos, satellite delivery systems, and other carriers that deliver content. This isn't Time Warner, program people, and so on. We're talking about the delivery system and the ownership rules on that matter.

    We've heard about the British experience. They liberalized that. Their report to this committee was, in terms of culture and so on, that the cost of services went down, the quality of service improved, and choice improved because of the competition.

    Really, the big winner was U.K. cultural content. The regulators, under their regime, made sure that U.K. content was delivered by those people. They weren't involved with that. They said it was a win-win situation. I only want to raise that because it's a concrete example.

    The SaskTel people are even telling us they had a positive experience in Great Britain bringing their system over there. They're part of that liberalized system in Great Britain.

    I would ask Mr. Shannon a question, because I think he could really deal with that.

    We have different ownership rules for cable versus telcos, and maybe other carriers here. The Commissioner of Competition and a lot of the witnesses said they could see no rationale or logic in having different rules for the carriers. All of the carriers are entitled to have a uniform set of rules in terms of ownership, access to capital, and so on. It seems perfectly logical to me because they're in direct competition with one another for delivery of services in so many areas.

    What would be your view on that? Should we be looking at uniform rules on the carriers?

    Mr. Gerry Shannon: Mr. Chairman, the question may go beyond my competence. I don't profess to be an expert on telecommunications, per se, or on the industry. I really was addressing the trade dimension, but the logic of your position makes sense. If we're competing, then having equal access to capital makes a lot of sense from my perspective.

    The Chair: Excuse me, Mr. Fitzpatrick, did you say that the two acts have different rules now?

    Mr. Brian Fitzpatrick: There are different rules maybe for ownership on cable than telcos.

    The Chair: No

    Maybe I have that wrong then, sir.

º  (1635)  

    Mr. Donald Ching: I wonder if I might respond to some comments Mr. Fitzpatrick made about SaskTel.

    You're right, and at first blush, Mr. Fitzpatrick, it almost appears hypocritical on our part to say we participated in New Zealand and in Great Britain, but let's be careful about throwing open the doors here in Saskatchewan.

    First of all, in Great Britain there was an awful lot of regulatory apparatus at work. Don't let anybody tell you there is a wide open market there. New Zealand is a slightly different bit of business. New Zealand had a very open system. Remember, I think the committee should be very cautious about simply looking at New Zealand or Britain or Austria or someplace like that and saying they do it that way there, therefore we in Canada should do it essentially the same way.

    I say that because none of those countries exist in the same milieu that Canada does. We're a country right beside--literally cheek to jowl--to the biggest economic engine in the world, the United States. Unlike, for instance, France and Great Britain, there is no language differentiation between us. Historically much of our history is the same. Our political systems are different, but not startlingly different. Our legal systems are similar.

    The fact of the matter is that we are not in the same position, I would argue, as a country like New Zealand, which is to some extent protected geographically and is protected in many other ways that Canada is not.

    Mr. Brian Fitzpatrick: I'll just make one point on that, because I don't want to let it go. Probably the most dominant global content provider in the world is the Murdoch group. He's not an American; he's an Australian, number one. He has the biggest market share in many parts of the world in the delivery of content to people through satellite and cable systems and so on.

    The Europeans deal with Murdoch. Asia deals with Murdoch. Australia does. South America does and so on. It's not just something unique to Canada. This globe has shrunk a lot because of communications. They can access Home Box Office or CNN in different parts of the world. It's not just a question that we're so close, because the distances really aren't that big any more. The world has shrunk, because the revolution has taken place.

    The Chair: Thank you, Mr. Fitzpatrick.

    Mr. Paradis, did you have a comment to make?

    Mr. Richard Paradis: I have a comment in relation to when he mentioned that there's no real relationship between telecommunications companies and broadcasters and content people who develop content.

    I think BCE is the perfect example of a company that has benefited from the regime we had in Canada that for a long time favoured monopolies in telecommunications. As the person from SaskTel said, we've been able to develop in Canada a model of developing our telecommunications and broadcasting system that has been taken by the French, by the Australians, by New Zealand, to develop their own regulatory regimes based on our experience.

    We do have extremely positive results. We do have very powerful companies. The relationship between Bell and the fact that it is now involved in developing content through one of its subsidiaries, which is the Canadian Television Network, is what we are talking about when we say the linkage between the different ways of communicating today--the fact that eventually, within a couple of years, you're going to be able to watch television on your cell phone--is not the problem. We know we're going to communicate more and much more effectively. What we're saying is we're able to do that with our own companies that are owned by Canadians. It's extremely important to be able to have our own Canadian content on those systems.

    The Chair: Mr. Bagnell.

    Mr. Larry Bagnell (Yukon, Lib.): Merci, monsieur le président.

    Of course I disagree with Bell, but I don't want to get into that. The competition is not alive and well and the regulatory system is not working.

    The Chair: I just want to remind you that you have five minutes.

    Mr. Larry Bagnell: I'll just say where I understand I am so far and then ask my question, to Ms. Samson probably, based on the background.

    We've been asked to just look at the telecommunications wire, but of course everything's connected. There have been hardly any arguments, and none convincing, that there's any reason not to open foreign investment in telecommunications itself.

    Then there's the whole interconnection. The cable companies, of course, are competitors so they wouldn't be happy being left out. They're involved in content, and there's the whole connection to content in the interrelationship.

    I'd like to hear in more detail some of the arguments. I haven't heard very many arguments--even that we couldn't control the content problem through either existing regulations or future regulations.

    Ms. Samson, you are one person who gave me a couple of good examples. I just want to make sure I understand them. One was related to reduced production and the other was related to the structure of the industry, things we couldn't have done if there had been foreign....

    Could you just elaborate on those for me?

º  (1640)  

[Translation]

    Ms. Claire Samson: We have to be realistic. Take the specialty channels, for example, which are not content producers but rather content providers or distributors. It is extremely difficult for them right now to negotiate distribution across the country. Negotiations are long and difficult. I can imagine what the situation would be if the distributor were American and they had to negotiate their participation in the content, the level of Canadian production, with a distributor, whether we are talking about a satellite service or a cable company, whose headquarters was in Connecticut, New York or elsewhere.

    There is no doubt that our system gives us a certain guarantee about the availability of Canadian signals and Canadian content.

    The other point that I was making was about labour relations. Of course, no Canadian productions have the kind of budgets that the Americans do. We know that American productions come to Canada, for example, to British Columbia, Ontario and Quebec. We know that these people are attracted primarily because of our weak dollar. They get a bargain when they do their production in Canada. Generally speaking, they are a lot more generous than Canadian producers, who do not have the financial resources that the Americans do for their productions. For an American producer, shooting a film in Montreal for $78 million is no problem. That amount of money could probably make nine films in Quebec; not just one film but nine. So it is clear that there would certainly be a significant imbalance in how things are done, which would threaten the fragile economic basis of Canadian cinema.

    In conclusion, I would say that last week's federal budget reduced the size of the government's contribution to the Canada Television Fund. We know that, for French productions alone, that will mean 200 hours less television programming next year; as a result, francophone broadcasters in Quebec will buy more American productions. That will bring us exactly back to where we were 15 years ago, when the most popular programs in Quebec were Little House on the Prairie, Dynasty and Dallas, which were all translated into French. It has taken 15 years to develop our own production industry, our own successes, our own star system, which is totally independent today, and just the fact of cutting $8 million next year may put us back culturally, at least in Quebec.

    We always use the example of the Americans since they are closer and the major economic power. Moreover, they consider Canada one of their local markets. So if they own companies in the telecommunications or cable industry that have television networks, it is evident that their interest lies in distributing their own production. I do not see how the current regulations will be able to hold the line and stand up to such a giant. I think that it would be theoretically impossible.

º  (1645)  

[English]

    Ms. Francine Bertrand-Venne: I commend everything Mr. Ching said today, but just to illustrate how important this issue can be for culture and Canadian content, a few years ago the cable companies were saying that SOCAN was just a carrier and was not dealing with content. They were opposing SOCAN in the payment. It took 10 years for cable to be under the Copyright Act and to commit to payments. Now they have to deal with it, because they do work with content.

    It's important to note that technology brings us intertwining things. Mr. Ching has demonstrated today how strongly he feels about this. I want you to understand that copyright issues have been evolving and are making these companies Canadian cultural industries. We're just saying that if the phone companies are delivering content, everybody should be under the same rules in the Broadcasting Act. If they are to deliver Canadian content, it's important that they invest in Canadian content and respect Canadian culture and stories.

    That's why we feel so strongly about these changes in the telecommunication world, and that's why we're here today.

    The Chair: Thank you very much.

    Thank you, Mr. Bagnell.

    Mrs. Girard-Bujold.

[Translation]

    Ms. Jocelyne Girard-Bujold (Jonquière, BQ): Thank you, Mr. Chairman.

    Ladies and gentlemen, thank you for your presentations. What you have said is very much in line with what I think of the issue we are discussing. You are the true operators in that world. You have come to tell us what the situation is really like: yes, we are actually talking about the cultural policy in this country.

    Unlike Mr. Shannon, I believe that we should not go outside the country and allow foreigners to negotiate our culture here. This is something that belongs to us and we need to do what is necessary to protect it.

    I found that all the examples you gave us were excellent, but I was particularly struck by the statement that one of you made, which was that within the current framework, 100 companies had sprung up creating 37,000 jobs in Quebec alone. So just imagine where that can take us.

    Then there were the witnesses last week that told us that the maximums allowed had not even been reached. So what else are we hoping for if we eliminate these restrictions in favour of unfair competition from the Americans where our Canadian and Quebec products are concerned? That is the question I am asking myself. I wonder why we are wasting our time trying to rewrite history when, as you said, the situation is precarious. Right now, the results that we have attained are quite tenuous.

    Mr. Paradis, you also mentioned a poll that caught my attention as a parliamentarian and also caught the attention of all Canadians and Quebecers. Mr. Ching was thinking along the same lines as us, even though he represents a telecommunications business, when he said that things are working today. If you tell me that things are working, I believe you, because you are the people out there in the field.

    So what argument can you give me that I can use when people make the opposite case to me, saying that the current situation is not working well.

    Ms. Francine Bertrand-Venne: Well, we are talking to politicians here. We must show some courage.

    Ms. Anne-Marie Des Roches: I think that where we agree with the cable companies is that when we talk about competition and competitiveness we need to talk about this as well. We are competitive and independent enough in the cultural sector as well; we are not here to beg for charity or anything. But there is a kind of balance in the Canadian system where telecommunications and cable companies are concerned in the sense that these companies, in return for market protection, such as that enjoyed by Saks Tel and others in their local markets, and protection for broadcasters, must reinvest in Canadian production. We have the cable fund, the Canadian Television Fund, in which they invest millions of dollars. That is a typically Canadian type of balance, in my opinion. No foreign company is going to be willing to provide cable service to a village of 100. They will skim the cream off the market, use dumping measures and then go back home with their millions of dollars, and the other companies will go belly up and will have lost jobs. Some balance that is.

    I think that when we talk about ties between telecommunications and broadcasting, it means that we will give you protection and in return you have to work for the public interest. The message that we have come here to give is that we need to preserve the balance.

º  (1650)  

    Ms. Jocelyne Girard-Bujold: That is what I think as well, Ms. Des Roches.

[English]

    The Chair: Mr. Shannon.

    Mr. Gerry Shannon: Thank you, Mr. Chairman.

    I'll just make two points, Madame. First of all, I don't represent a telecommunications company. I have a small trade policy consulting group. I'm here, really, to address it from that perspective—that is, the international trade dimension to the problem.

    Second, I did not and would not invite others to come in to dictate what Canadian cultural policies should be. In the last negotiations, where we had this issue arise, the Canadian government refused to put this matter on the table. No offer was made on culture, and it's open to the government to follow through on that course again if they wish; that's their business. But I don't want to leave the impression that I would advocate somebody else dictating what our cultural policy should be. I'm addressing what I think is the issue of concern here, and that is the basic ownership restrictions on telecommunications companies themselves.

    Thank you.

[Translation]

    Mr. Richard Paradis: Perhaps I could answer your question about what argument you could make. We need to remember that Bell Canada Enterprises was the only company in Canada throughout the 1990s that made over a billion dollars a year in profits, while investing hundred of millions of dollars in research and development. As has already been said, telecommunications firms invest hugely in research and development because they know it is important, and that is why we have an effective telecommunications system that is a model for many other countries.

    The only other firms that have managed to make as much profit as telecommunications companies are the banks, and I imagine you are very familiar with them. Nonetheless, there is one telecommunications firm in Canada that seems to have no difficulty generating very solid profits with Canadian investors.

[English]

    The Chair: Thank you very much.

    Mr. St. Denis.

    Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Mr. Chair.

    Thank you all for being here. It's very informative.

    Just to be up front about where I have been consistently coming from during these meetings—I think it's almost impossible to come to a debate like this without some kind of bias one way or another—I come with the bias that we should do this, and I'm looking for reasons why we shouldn't. So I appreciate the good arguments you've made today.

    I'm wondering this. Some have, in the variety of views we've heard, suggested that as a solution to the possibility of a spillover effect from the infrastructure side to the content or cultural side, one of the protections there—and I think Mr. Shannon hinted at it as well—was to create either new regimes or give teeth to the CRTC through its existing or new licensing regimes.

    Do you have any comfort in that approach? I wouldn't need all of you to respond, maybe just a couple of you to respond to that way of protecting—because I think most of us, anyway, around the table want to protect—our culture.

[Translation]

    Mrs. Solange Drouin: If I understand your question correctly, it goes back somewhat to Mr. Fitzpatrick's opening premise, which was that telecommunications have nothing to do with content.

    I think that that is the basic issue. When we talk about telecommunications, we are talking about infrastructure that allows both the provider to reach the public and the public to access the content. The content might be telephone conversations, of course, but it could be any other kind of content as well. That is why we sincerely believe that you cannot simply bury your heads in the sand and say that you do not deal with content here. That is not true. You are discussing and examining an issue...

[English]

    The Chair: Ms. Drouin, the question was: if we opened it up to foreign investment, could not the CRTC, with its existing powers, or with some additional powers, still take control of the content and those other things we're all worried about?

º  (1655)  

    Mrs. Solange Drouin: Yes, I was about to address this issue, but I wanted to get at that premise before, because I guess it's important.

    The Chair: You went twice as long as during your opening remarks. I'm sorry, but I have to stop you, because I have to live with these people after you go, so be clear to your point. Thank you.

    A witness: And we have to live with her!

    A voice: That's your problem!

    Mrs. Solange Drouin: And that's quite something.

    We think yes, if the CRTC has more power to preserve the content, but we think the content is also the heart of telecommunications, so they would need more power. And we think that if the CRTC is....

[Translation]

    I should say it in French. Why is the CRTC able to intervene on content? It is because there is an agreement in the legislation that protects you, as telecommunications and broadcasting companies. You are given a protected market in exchange for implementing content rules. That deal is set up in the Act.

[English]

    It's what is at the heart of this Broadcasting Act, and there is no such thing in “telecommunications”. I guess if you break this balance, the CRTC won't have the rationale to impose any content if it doesn't have the power to control the ownership issue. That's what we say.

    The Chair: Ms. Samson.

[Translation]

    Ms. Claire Samson: I think that the CRTC does not have enough teeth right now to react to such a situation. The real question will come the day when your signal carrier, whether a satellite or a cable company, or the three main firms owned by American interests and representing thousands of jobs in the country and an economic driver, will start asking for this or that to be changed after it has done enough dumping to show that its margin is so narrow that it cannot reinvest in R&D —it can do so in its own country but not here—and our creative minds have left for the United States. What will we be left with? The sales offices of American companies? I do not believe that our system, as it stands right now in any case, has enough teeth, far from it.

[English]

    Mr. Richard Paradis: You know that the CRTC regulates telecom under different laws from the Broadcasting Act. Broadcasting includes cable, so we have a handle on the relationship between entrepreneurs and the distribution arm of broadcasting and we can attach to them obligations for content development.

    In telecommunications it is completely different. If we are thinking about giving the regulator more power in this area, we're going to have to look at the legislation and change it, because “telecommunications” in the past was just a company that had no right on what it was distributing. In other words, it was distributing voice, and as long as you rented the telephone line you could say whatever you wanted on your telephone and nobody was going to bother you.

    The problem now is that they are merging into the cultural side and the content side. There is a breach there, from where telecommunications used to be a business of just selling space on a telephone line to where they're directly involved in the content development. Our legislation hasn't been adjusted to that reality.

    The Chair: Mr. Ching.

    Mr. Donald Ching: Mr. Chairman, I must echo what I hear from the other side of the table here, and that is that there is a strong process of convergence occurring between our industry and the cable industry. Approximately five or six months ago we rolled out our first video product over our telephone lines, and we know the technology is there for cable companies to provide a voice product over the cable system. In my mind, the telecommunications industry and the cable industry are, for all intents and purposes, becoming one and the same industry. Whether you can somehow or other strip culture out of the role of the carrier and regulate the two things separately is a very interesting issue.

    By and large, telephone companies, being new to this area, haven't reached the point where we are focusing our attention on the issue of content at this particular point, but I must say that in my view, telephone companies and cable companies are converging, for all intents and purposes, and if it has been a phenomenon that you can't separate control and ownership of cable companies from control and ownership of content, then my suspicion is that you can't separate control and ownership of telecommunications from control and ownership of content either.

»  (1700)  

    The Chair: Mr. Fitzpatrick.

    Mr. Brian Fitzpatrick: That's an interesting point. We know this convergence is taking place. Maybe we have to look at the CRTC and the legislative powers it has to see if it has the power to adequately deal with content on all fronts. I'd throw satellites in there as well. That's also a big area. A lot of people are receiving their content through that means. I think that's an important point.

    I do want to reiterate that the chairman of the CRTC was here yesterday, and if I understood the gentleman correctly, he didn't see the problem between the ownership of the pipeline and the content issue. He felt that if somebody wasn't gaining fair access to the system, regardless of who owned the system, they had the powers, the remedies, and the ability to address that and to bring fairness to the people who were trying to gain access to that system.

    That's basically what I heard from the British, too, that this is a regulatory issue. This is not an ownership issue. If you have good regulation in place, you can ensure good content for your country and so on.

    I just wanted to bring that into perspective. It's a good point you raised that the telcos may be outside the parameters of the CRTC, and maybe we should be looking at that.

    I find this whole area of protecting culture to be a bothersome topic, because quite often when I hear people talking about culture, they appear to be a cultural elite that seems to know what's best for everyone. My view of culture is that it's an individual choice. We pick and choose what is our culture. To me culture is everything from Beethoven to Mozart, Shakespeare, and Mark Twain. It's all sorts of things. I think it's a personal preference. The most choice you can give to people is the best way of defining culture.

    The Americans watching the Super Bowl game at halftime must have been wondering if Canada was taking over the U.S., just to throw it back the other way.

    I think that some day in this country we'll have to have a clear definition of culture so that we'll know exactly what we're talking about. I don't want a propaganda machine run by elites imposing their cultural views on everybody in this country. I would find that to be very dangerous.

    The Chair: Why don't we actually have some answers before your time is up?

    Mr. Paradis.

    Mr. Richard Paradis: I have a couple of short answers. First of all, he was talking about satellites. I just want to remind everybody that one of the satellite companies in Canada is owned by the telephone company, which is Bell ExpressVu under Bell, and Star Choice is owned by the second largest cable company in Canada.

    On the point of Mr. Dalfen and his position on the relationship between Canadian content and the people who are carrying the signals, Mr. Dalfen has a particular problem of his own. There is a serious problem with regard to Canadian drama on television, which he's trying to resolve. It's a problem that was created by the commission in 1999 when it tried to change its rules for Canadian content, which in French Canada has given us a 50% decrease in quality drama programming, and in English Canada there no longer is any drama programming.

    As to the question of what is culture, when you talk about the Americans, the most interesting thing is that if you're a cable or satellite subscriber in Canada, in practice you have access to about 200 channels, of which 50% or more are American. If you go down to the U.S., try to find a signal that's not American.

    The Chair: Ms. Drouin.

    Mrs. Solange Drouin: On the culture issue, we all agree with you that it's a right to choose. But the one thing we all pursue here is that we want the Canadian cultural products to be accessible to the Canadian public. That's what we want to preserve in the telecommunications sector and in broadcasting. We all agree that in the end the consumer will choose, but we want to be included among the choices he has. That's what we share.

»  (1705)  

    Mr. Brian Fitzpatrick: My only point is that we have the CRTC, and it's their job to make sure there is a certain amount of Canadian content.

    Mrs. Solange Drouin: In the broadcasting sector, which we know more about, sometimes the CRTC has to use force to impose that on Canadian companies. Imagine what the CRTC could do to a foreign company. Sometimes they have to put on a lot of pressure to have the regulation enforced.

    Mr. Brian Fitzpatrick: They could revoke a licence.

    The Chair: Thank you very much.

    Mr. Brian Fitzpatrick: That's a pretty big hammer.

    The Chair: Thank you very much.

    I will tell you, it's very hard to translate when two people are speaking.

    Mr. Volpe, and then Mr. Marcil.

    Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Thank you, Mr. Chairman.

    Mr. Ching, I hope I don't misinterpret what it was you were saying, but I thought you were making a statement that came as close as anyone could come to suggesting that perhaps, given its record, the CRTC's ability to ensure there would be Canadian programming is, given the convergence issue, probably a figment of the imagination of those who would still sustain the CRTC concept.

    Mr. Donald Ching: If that was the interpretation you got from my remarks, it was unintended on my part.

    My point was that convergence is happening. If there is a problem with separating ownership and content in the cable industry, that problem will exist also in the telephone industry. That was my only point.

    I was not saying the CRTC can or should or does have the ability or the knowledge or the facilities available to it in its legislation to be able to control content. That's an area that, frankly, we're newly into—the business of video transmission—and it's simply something we've yet to understand with any degree of clarity.

    Certainly it's my belief that the CRTC has exerted a large amount of influence over content in the cable industry. Whether they have sufficient powers or insufficient powers is something I simply make no comment on at this point.

    Mr. Joseph Volpe: Thank you.

    It seems Mr. Paradis attempted to address that issue with his reflection on drama in the French language and drama in the English language, both of a Canadian variety. Mr. Paradis, I don't want to put words in your mouth, but last week we had one of our witnesses suggest—no, I'm sorry, make a definite point of saying—that the CRTC “botched”—that was the exact word, I think; you probably read it—its mandate to maintain content that would be acceptable to Canadians. I gather you're telling me the same thing.

    Mr. Richard Paradis: I think the chairman of the commission has recognized that he's a new chairman, so he can do things looking back at what the former chairman did. As soon as he got into his job and was made aware of the difficulties that were developing in the production of English and French language drama, he initiated a study that should be rendered sometime in March of this year.

    Mr. Joseph Volpe: By that time we'll all be American.

    Mr. Richard Paradis: Oh, I don't think so.

    Mr. Joseph Volpe: Well, let me pursue that just a little further.

    If I take Madame Girard-Bujold's premise on culture, and I accept as well Madame Solange Drouin's that we have good Canadian stories to tell and that the Canadian story must be there—being a proud Canadian like you, I think the Canadian story is a great story to tell—

    Mrs. Solange Drouin: Canadian music also.

    Mr. Joseph Volpe: It's part of the story.

    If it's an attractive item, what need is there for a CRTC that, according to the witnesses who have come before us, is incapable of promoting its interests?

    Mrs. Solange Drouin: That's a good question.

    Mr. Joseph Volpe: I don't want to be rhetorical, but if that's the case, is it not equally right that the carrier should have the opportunity to recoup whatever expenses the carrier incurs in order to convey a product to the marketplace, if that product is acceptable?

    If we as Canadians are incapable of producing an acceptable product for the marketplace and we have a regulatory body like the CRTC that can't promote the interests even of a bad product, are we just having a philosophical discussion, or do we actually have a point to make?

»  (1710)  

    Mr. Richard Paradis: I don't want you to get the impression that we as a group...because we all go before the commission regularly and are not afraid to voice our opinions about it. Beyond the fact that they screwed up on drama, the commission has done extremely well in promoting Canadian content, be it music or audiovisual content, and they sometimes even manage to stretch themselves to help us out in the film business.

    But no argument is being made that telecommunications companies shouldn't make money distributing content. What we're saying is that there has to be access; Canadians have to have access to Canadian productions. And it's not a question of quality of productions because—

    Mr. Joseph Volpe: Let me interrupt you for a second, because I think that's a point—

    The Chair: You've run out of time.

    Mr. Joseph Volpe: I'll finish off quickly.

    It's a point that you and others have made. Whether it's a foreign or a domestic carrier, that carrier is interested only in ensuring that his or her clientele is going to buy the product coming down that tube.

    Why would somebody think someone in Canada would be interested in what's going on in lower Chile or southern Argentina? If you live in Montreal or Quebec, or if you live in St. John's, Newfoundland, or in other places in Canada, why wouldn't they want to hear your story?

    Ms. Francine Bertrand-Venne: Because culture should be thought of in the same way as any other industry.

    I'm sure you're aware that the budgets of companies are affected by marketing and by the positioning of businesses. For example, let's take Campbell's soup. Do you think that in any marketplace there's no person paying or negotiating at a high level for accessing Campbell's soup?

    We're just saying we want access, and we want our Canadian citizens to know about Canadian content and culture. If we're not there...and we fear that when we're analyzed under strict economic rules by a foreign owner, he will not see the advantages.

    I think it's important to offer a variety of cultural content, which is what we're talking about.

    Mr. Joseph Volpe: You're telling me that the Canadian carrier is just as bad, because we have to have a CRTC to beat the Canadian carrier into submission.

    Ms. Francine Bertrand-Venne: We're not saying it's easy. You're right; it's not easy.

    In representing authors and composers, it's not a given that a producer will call us for a contract and it's not a given that a record producer will do so. Still, we're here together, and in the end we agree that it's a good thing and the Canadian way of doing things. These are Canadian values. We've accomplished very much in this country, and we just don't want to lose them. That's what we're telling you.

    If it's not broken, why fix it? And who's asking about it? It's actually not Canadians who are asking about it.

    The Chair: Thank you, Mr. Volpe.

    Mr. Marcil.

[Translation]

    Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): Thank you, Mr. Chairman. I would like to make two brief comments. We have heard that the ceiling is never reached. We must understand that it cannot be reached, because no one wants to invest 20 per cent without gaining control of the company. That ceiling will never be reached.

    In what I heard from the CRTC yesterday, no opinion was expressed. They simply said that they administered an act, and the act provides that the ratio is 80:20, period. That is all they said.

    The problem we have here is that we have an objective which involves consulting people to see whether deregulating the telecommunications sector is acceptable. The Heritage Committee was conducting consultations along similar lines, to determine whether deregulation presented any danger as regards content, and so on.

    We have a pretty good idea of the direction the Standing Committee on Canadian Heritage would like to take. For our part, we think that if deregulation were limited strictly to telecommunications, there should not be any problem. However, you are telling us today, as others have before you, that we can no longer dissociate telecommunications. That means we would be endangering Canadian culture, and Quebec culture as well. As you know, Quebec has an act which states that all films must be translated into French. The problem is that we cannot get them translated by Quebecers. They're being translated by French translators. So the French version does not necessarily reflect our language. Although we speak French, our expressions are different.

»  (1715)  

[English]

    The Chair: I'm listening for the question.

[Translation]

    Mr. Serge Marcil: I have five minutes, Mr. Chairman. I am going to keep within my five minutes.

    The question is that there is nothing to be done, because this is the first time we have seen both the telecommunications company and representatives from the other sectors saying the same thing: namely, that there is a danger in dissociating the two sectors. So we are up against a wall: if we deregulate, we run the risk of losing control of the content, and if we do not deregulate, we maintain what we have at the moment. And this, according to most of our witnesses, would be a good thing.

    So, to conclude, your opinion is that we should change nothing, that we should keep what we have. Is that what you are saying? And are you saying the same thing as well? Except that professors tell us different things. All right. So that is correct.

    Ms. Anne-Marie Des Roches: Some times professors get very caught up in theoretical considerations.

    Le président: Yes.

    Mrs. Solange Drouin: But I would like to make one point on this subject that we made to the Standing Committee on Canadian Heritage as well. I think it is important to repeat it here: we think that those who favour deregulation are not thinking about the public interest at all. We are not the only group that holds this view. Matthew Fraser said it himself in his newspaper, which I will not name so as not to give him any advertising, because often, we do not agree with him.

    Let us be quite frank, the interest of the people in the telecommunications sector who are calling for deregulation is to break up the existing monopolies, the huge Bell monopoly. They are the ones who want access to capital to break up Bell's monopoly. But there is no guarantee that this would work, because people might give even more money to Bell, and they could find themselves back at square one.

    For their part, the people in the cable industry want to benefit from the possible deregulation of the telecommunications sector through the domino effect. There would be a domino effect on broadcasting. All the major cable companies in the country are family businesses which at some point want to sell their company to the highest bidder. Rogers wants to sell, COGECO wants to sell. Clearly, everyone is at the second or third generation, and they want to sell for the best possible price.

    So who is concerned about the public interest of Canadians in all of this? It is not definite that this is what is on the table. We should perhaps look at what is hidden behind what people say, behind those concerns, because, as you have heard, and not only from us, Canada is doing very well in telecommunications. so who is genuinely concerned about the public interest of Canadians? We're not sure about that.

    Mr. Serge Marcil: So we will see.

    I would like to make English Canadians aware of our situation. We are French Canadians, Quebecers, and we have our own culture and it is important and necessary that we protect our culture, not because of English Canada, but because of the American influence. The possible impact of American culture on our young people is almost impossible to measure.

    For example, if there were imbalance in content, that is, if all Canadians did not have a choice between American, European or Canadian programs, then we would take the easy way out and Canadian programming would cease to exist. So people would then have a choice: they would watch American soap operas, American football games, American baseball games, and so on. That is more or less the issue being discussed by the Heritage Committee, but I thought there could be deregulation in the telecommunications sector without jeopardizing cultural considerations.

    You said, sir, that in the final analysis, if we were to opt for deregulation, in order to maintain the quality of Canadian content, the Canadian government would have to make a commitment to finance services in rural regions. Because if I read between the lines, the companies would do the most cost-effective thing, so they would neglect all distribution activities in the regions, which is something they are required to do at the moment, in particular BCE. It is their responsibility to provide service to rural regions, to provide services comparable to those available in urban areas.

»  (1720)  

[English]

    The Chair: Mr. Paradis.

[Translation]

    Mr. Richard Paradis: I just wanted to come back to the Superbowl. If there had been no broadcasting regulations in Canada, we would not have had Céline Dion and Shania Twain at the Superbowl.

[English]

    The Chair: Thank you very much.

    Madame Girard-Bujold.

[Translation]

    Ms. Jocelyne Girard-Bujold: I just wanted to express my approval for what Mr. Marcil was saying. It is true that we live in an anglophone ocean. The excellence that has been achieved by Quebec television would have been impossible, in my opinion, without the current regime.

    I also agree with Ms. Drouin when she says that we do not know what lies behind this desire for such much deregulation. So we in the Bloc Québécois agree with your position.

    My colleague, Ms. Gagnon, represents the Bloc Québécois on the Standing Committee on Canadian Heritage, and she agrees with your arguments as well. I think we must keep what we have and even improve it.

[English]

    The Chair: Excuse me, we're running out of time. We have to either ask the question or move on.

[Translation]

    Ms. Jocelyne Girard-Bujold: I wanted to say that I...

[English]

    The Chair: Please keep your political speeches. We only have six or seven minutes, so—

[Translation]

    Ms. Jocelyne Girard-Bujold: Yes, sir. So...

[English]

    The Chair: We have questions to ask.

    Who else has a question?

    We have four here. I want to go through the members first before I go to the researchers.

    Mr. Brian Fitzpatrick: I want to pick up on something Mr. Volpe said. There's a concept here that somehow we reject things that are Canadian. Last week—the cable TV I have has 100 channels—I went home every evening and watched something that was very highly rated right through the whole week. It was ladies' Canadian curling. I really enjoyed that. Hundreds of thousands of Canadians did the same thing. That was Canadian content. If you have something that's really Canadian, we will be attracted. I'm sure in Quebec, when you have something that is really good, strong Quebec culture, people will be attracted to it.

    It seems to me obvious that we're not interested in something from Chile or Argentina. It's not part of our—maybe it can be made to be part of our deal. I want to emphasize the point about the Murdoch people—I brought them up. I think the British deal with the Murdoch people--and they're licensed to provide service in the U.K. They're required to put a certain amount of British content on that station, and they do it. If they don't do it, with the economic regulation they have there they can pull their licence.

    That's a lot of power, and it has absolutely nothing to do with who owns the delivery system. They have the power to regulate that industry and say, “You have to provide a certain amount.” If they provide garbage on there, people will not buy it; they'll switch to somebody else. It just seems obvious to me: they have to provide quality programming or they're going out of business. People don't go around buying junk cars deliberately. They try to buy a good car, and when they're looking for programming, they're trying to get something that's quality. If you're not producing quality, you're going to go out of business.

    That's my final point.

    The Chair: It is your final point.

    Some hon. members: Oh, oh!

    The Chair: Mr. Paradis.

    Mr. Richard Paradis: I was just going to say that before we start talking about Murdoch's channels across the planet, we should maybe look at them, because most of the stuff he has on his channel is the cheapest product he can get—that's basically American.

    The Chair: Madame Drouin, keep it very short.

    Mrs. Solange Drouin: If we were living in Disney World, I would tend to agree. I haven't consulted my colleagues, but if we had the same chance right at the start, I guess we would not need any regulation. Chileans would have the same chances in the United States and Canadians would have the same chances as the French. But that's not the case; we're not living in Disney World. We have a big neighbour there that could impose its view—perhaps not at the first—on content. But I urge you not to think only of tomorrow. Think of five years from now, because they will have the power here to put pressure on to change the content rule five years from now. We won't be in a position to oppose it, because they will be all over the place.

»  (1725)  

    The Chair: Mr. Marcil, is it a question?

    Please, no lecture; a question.

[Translation]

    Mr. Serge Marcil: Last fall, we saw a rather unique event here in Canada. The National Hockey League decided to sign a broadcasting contract only with RDS, a station for which people have to pay. For Quebec, that meant that people could no longer watch the Montreal Canadians in French on Radio-Canada. However, they could watch the Toronto Maple Leafs or the Montreal Canadians on English television. Anglophones did not have to pay to watch the hockey games, but francophones did have to pay to watch the Montreal Canadians in French.

    The Standing Joint Committee on Official Languages got involved, and in the end, an agreement was reached so that at least on Saturday night, people could watch the Montreal Canadians on Radio-Canada in French. So you see what can happen just in terms of cost-effectiveness, if a decision is made to exclude the French-language service of Radio-Canada because the cost is too high and the people are not paid enough. That was just a small example, since we're talking about telecommunications and content.

[English]

    The Chair: Mr. Macil, we will have three hours of debate amongst members on Thursday. We will have much debate, and I will try to keep it orderly.

    Before we close, I have a couple of questions. Mr. Shannon—before you leave—you mentioned discussions at the WTO about extracting concessions in the next round. My question would be, what are these concessions? Are you saying we should do certain things in telecommunications to offset other items? I wasn't clear on what you meant. Could you explain it?

    Mr. Gerry Shannon: Mr. Chairman, I can explain it. What I meant was that the issue of telecommunications is one of several service sectors to be negotiated further in the next round of negotiations. In terms of telecommunications, we do have already in place what is called the reference paper, which is out there and to which we signed on as a country. Two questions arise. One is how much further are members generally prepared to go in opening up their regimes to competition, and one of those areas may well be for the foreign ownership issue.

    Secondly, there's a big question about how many developing countries themselves that are important to us--Brazil, for example, is one market or some of the major Asian markets--are prepared to open up their regimes for Canadian companies that want to invest in their industries in these countries themselves. These are issues for negotiation, Mr. Chair. They're sensitive for us. They're sensitive for others as well. But clearly, what's happening is that as the industry matures, the freer the flow of goods and technology and capital for that matter, ere it goes, the better off are those companies that are able to position themselves to compete internationally. And from a perspective of some of the Canadian telecommunication companies, obviously they want to be in a position of being able to play in those leagues.

    The Chair: One of the problems becomes whether Canada is a significant player when it comes to that point. Also, what happens if we don't get concessions, and looking at what Mr. Drouin said, going forward five, six, seven years...?

    Mr. Gerry Shannon: Mr. Chairman, my experience is if there are no concessions coming to us, we wouldn't give very much. This is a balanced agreement, but you always end up trying to negotiate multilaterally, so on balance you get as much as you've given in a negotiation, both sectorally and more broadly across the full range of issues on the table.

    But my impression is that while Canadian companies are not the largest in the world, they're pretty damned competitive. And given that rights are the basis, some of them argue anyway that removal or a drastic reduction in the restrictions of the levels of foreign investment would position them to be even more competitive. If that is true, then obviously they must consider themselves that they have a lot to gain by having greater access to foreign markets than they currently have.

    The Chair: The last short question to the researcher before we close.

    Mr. James McQueen (Committee Researcher): Thank you, Mr. Chair.

    Mr. Shannon, what we've heard from a number of witnesses is that we need to eliminate foreign investment restrictions now. What happens if in three or four years we've gone to the WTO, we're shut out, and we get no concessions? What do we tell those people? Sorry, we're four years behind the wave.

»  (1730)  

    Mr. Gerry Shannon: Mr. Chairman, my view is that you may argue--some do argue--that removal of restrictions unilaterally makes sense from a Canadian vantage point.

    My own experience tells me that would be unwise. I would prefer to be in negotiations where I had something to offer in return for what we deemed to be in our national interest to achieve in those negotiations. So I've been inclined to say that given that we have a three- or four-year timeframe looking ahead when these negotiations come to fruition, given the fact that you have a certain malaise in the global telecommunications industry still extant, it makes sense to reserve--certainly do our homework and be ready and identify the barriers we see as being harmful to our interests abroad. But I would not be one who would argue that we should dismantle our regime until such time as we were in a negotiating mode and we would be really satisfied we would get something for our offering. That's my point of view. It may differ very well from some of the major corporations probably, but that's my perspective on it.

    The Chair: Thank you very much. We must close. I know the bells are going to ring soon.

    I want to thank all the witnesses for their presentations today and for the heated discussion at times. As you can see, we've had a lot of discussion on the committee. So I want to thank the witnesses for coming today and for being with us. Thank you very much.

    Just a message to the members. I want to remind you we have meetings Wednesday and Thursday morning. Thursday morning is from 9 until 1. Lunch will be brought in, and we'll have our internal debate amongst the members.

    Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Mr. Chair, I want to be recognized.

    The Chair: Okay.

    Mr. Dan McTeague: Chairman, I have received information that one of the companies we'd certainly like to hear from on future business with respect to the motion on studying the oil industry has indicated they believe we are involved in some form of political mischief. I'm wondering if we can deal with that at some point in the near future.

    The Chair: Thank you very much.

    The meeting is adjourned.