INST Committee Meeting

37th PARLIAMENT, 3rd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Tuesday, April 27, 2004

Á

1110

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

Mr. Michael Binder (Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry)

The Chair

Mr. Michael Binder

The Chair

Mr. Michael Binder

Á

1115

Á

1120

The Chair

Mr. Marc O'Sullivan (Executive Director, Broadcasting Directorate, Canadian Radio-Television and Telecommunications Commission)

Á

1125

The Chair

Mr. James Rajotte (Edmonton Southwest, CPC)

Mr. Michael Binder

Mr. James Rajotte

Mr. Michael Binder

Mr. René Bouchard (Director General, Broadcasting Policy and Innovation, Department of Canadian Heritage)

Mr. James Rajotte

Mr. René Bouchard

Mr. James Rajotte

Mr. René Bouchard

Mr. James Rajotte

Mr. Michael Binder

Mr. James Rajotte

Á

1130

Mr. Michael Binder

Mr. James Rajotte

Mr. Michael Binder

Mr. James Rajotte

Mr. Marc O'Sullivan

Á

1135

Mr. James Rajotte

Mr. Marc O'Sullivan

The Chair

Hon. Joe Fontana (London North Centre, Lib.)

Mr. Michael Binder

Hon. Joe Fontana

Á

1140

Mr. Michael Binder

Mr. Jan Skora (Director General, Radiocommunications and Broadcasting Regulatory Branch, Department of Industry)

Hon. Joe Fontana

Mr. Michael Binder

Hon. Joe Fontana

Mr. Michael Binder

Hon. Joe Fontana

Mr. Michael Binder

Hon. Joe Fontana

Mr. Michael Binder

Hon. Joe Fontana

Mr. Jan Skora

Á

1145

Hon. Joe Fontana

Mr. Michael Binder

The Chair

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ)

Mr. Michael Binder

The Chair

Mr. Michael Binder

Á

1150

Mr. Paul Crête

Mr. Michael Binder

Mr. Paul Crête

Mr. Michael Binder

Mr. John Cuningham (Counsel, Industry Canada Legal Services, Department of Justice )

Mr. Paul Crête

Á

1155

Mr. Marc O'Sullivan

Mr. Paul Crête

Mr. René Bouchard

The Chair

Mr. Paul Crête

Mr. René Bouchard

Mr. Paul Crête

The Chair

Mr. Andy Savoy (Tobique—Mactaquac, Lib.)

Â

1200

Mr. Marc O'Sullivan

Mr. Andy Savoy

Mr. Marc O'Sullivan

Mr. Andy Savoy

Mr. Michael Binder

Â

1205

Mr. Andy Savoy

Mr. Michael Binder

Mr. Andy Savoy

Mr. Michael Binder

Mr. Jan Skora

Â

1210

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mr. Michael Binder

Mr. Brian Masse

The Chair

Mr. Andy Savoy

The Chair

Mr. James Rajotte

The Chair

The Chair

Mr. Brian Masse

Mr. Michael Binder

Mr. Brian Masse

Â

1215

Mr. Marc O'Sullivan

Mr. Jacques Langlois (Director General, Broadcasting Policy Group, Canadian Radio-television and Telecommunications Commission)

Mr. Brian Masse

Mr. Jacques Langlois

Mr. Brian Masse

Mr. Marc O'Sullivan

Â

1220

Mr. Brian Masse

Mr. Michael Binder

Hon. Joe Fontana

Mr. Brian Masse

Mr. Michael Binder

Mr. Brian Masse

Mr. Michael Binder

Mr. Brian Masse

Mr. Michael Binder

Mr. John Cuningham

Mr. Brian Masse

Mr. John Cuningham

Mr. Brian Masse

The Chair

Hon. Lyle Vanclief (Prince Edward—Hastings, Lib.)

Mr. John Cuningham

Hon. Lyle Vanclief

Mr. John Cuningham

Â

1225

Hon. Lyle Vanclief

The Chair

Hon. Lyle Vanclief

The Chair

Hon. Lyle Vanclief

Mr. Jan Skora

Hon. Lyle Vanclief

Â

1230

Mr. Jan Skora

Â

1235

Hon. Lyle Vanclief

The Chair

Hon. Lyle Vanclief

Mr. Jan Skora

The Chair

Mr. James Rajotte

Mr. John Cuningham

Mr. James Rajotte

Mr. John Cuningham

Â

1240

Mr. James Rajotte

Mr. John Cuningham

Mr. James Rajotte

Mr. John Cuningham

Mr. Michael Binder

Mr. James Rajotte

Mr. John Cuningham

Â

1245

Mr. James Rajotte

Mr. John Cuningham

Mr. James Rajotte

The Chair

Mr. James Rajotte

Mr. Marc O'Sullivan

Mr. James Rajotte

Â

1250

Mr. Marc O'Sullivan

Mr. James Rajotte

Mr. Marc O'Sullivan

Mr. James Rajotte

The Chair

Mr. James Rajotte

Mr. Jacques Langlois

Mr. James Rajotte

Mr. Jacques Langlois

The Chair

Mr. Brian Masse

Mr. Marc O'Sullivan

Mr. Brian Masse

The Chair

---

CANADA

Standing Committee on Industry, Science and Technology

---

NUMBER 012

l

3rd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, April 27, 2004

[Recorded by Electronic Apparatus]

Á  (1110)  

[English]

    The Chair (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Good morning, colleagues. Good morning, all.

    I am pleased to call to order this April 27 meeting of the Standing Committee on Industry, Science and Technology. We're going to begin our study of Bill C-2, an act to amend the Radiocommunication Act. Basically Bill C-2 deals with the grey and black market satellite television usage.

    In a moment we're going to invite Mr. Binder to make a 10-minute presentation on behalf of Industry Canada and Canadian Heritage.

    My understanding was that you were speaking on behalf of both, right, Mr. Binder?

    Mr. Michael Binder (Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry): Yes, for the Department of Heritage and the Department of Industry, and we have colleagues from the CRTC.

    The Chair: Yes, and they will do a five-minute presentation. Okay.

    At some point, colleagues, I'll need to get a motion passed before we finish this morning to get a small budget to assist with witnesses. We'll also discuss witnesses for Thursday. But on your behalf, I have lined up some witnesses, subject to your approval, and they are listed there for Thursday. We would have altogether, at the same meeting, the Coalition Against Satellite Signal Theft, Shaw Communications, and the Congreso Ibero-Americano de Canada. I guess we're looking for a couple of others, but I think we'll at least have both sides of the issue covered on Thursday. We can discuss this a bit later.

    So without any further ado, we're going to ask Mr. Binder to begin.

    Thank you.

    Mr. Michael Binder: Thank you, Mr. Chairman.

    I'd like, with your permission, to talk with a slide deck, and I was wondering if it could be distributed.

    The Chair: Go ahead, Mr. Binder. It's being handed out.

    Mr. Michael Binder: Before I start, I'd like to introduce my colleagues. I am Michael Binder. I'm the assistant deputy minister from Industry Canada. With me today are Jan Skora, who is the director general, radiocommunications and broadcasting regulatory branch; John Cuningham, our counsel; René Bouchard, le directeur général, Politique de la radiodiffusion et innovation; Marc O'Sullivan, executive director of broadcasting at CRTC; and Jacques Langlois, director general, broadcasting policy, at CRTC.

    What I thought I would do is go very quickly through the deck and try to set the context for this particular bill. If you'll look at page 2 of the deck, it's important to understand what this bill is not about.

    It is not about talking about Canadian cultural policy, Canadian content, limiting Canadian choices, checking up on individuals' television-watching practices. It's not about keeping U.S. signals out of Canada or giving inspectors significant new powers.

    What this bill is about is ongoing illegal commercial activities that basically are destroying our broadcasting industry. And if I sound a little bit aggressive here, it's because I actually believe that this is what it does.

    Please allow me to explain. If you'll flip to the next chart, by now you know the way the business is run--broadcasting, programming, content gets encrypted, and it's delivered by a satellite to a device at home, which decodes the signal and then your television receives it. The important thing to understand is it's a property that is being encrypted to protect the right of the producer of the particular content

    If you flip to chart 4, the way the business operates is that the broadcasters--CBC and CTV--purchase the rights to programs, to content, to movies from program owners. It could be the NFB, Telefilm, Hollywood, or foreign content owners. The important thing is they actually pay money. They're paying money for two rights. One is the right to broadcast. But the right that we'll get into a discussion about here is the right to broadcast in Canada. Many times it could be an exclusive right to broadcast in Canada. That's where the money is being paid to content owners, who then distribute the content to the home through satellite.

    On slide 5 you'll see what happens is that somebody, very cleverly, decodes this particular encrypted program and delivers it to subscribers at practically no cost.

    You'll see on slide 6 that what's happening in the grey market is people are using fraudulent information to pretend they're residing, let's say in the U.S., and thereby are eligible to receive American content, even though, you should understand, their American satellite services are not licensed to deliver programs in Canada. They're not licensed by the FCC to deliver programs in Canada. So by and large what is happening here is that people are pretending they are U.S. citizens so they can get the signal.

    I can tell you from discussions with DIRECTV and the DISH Network that they will not knowingly service Canadian programmers because they don't have the rights to the Canadian market.

    Slide 7 just summarizes that this is an escalating problem. I want to emphasize that we are basically focusing on commercial illegal dealers. It's important that we understand we are focusing on dealers. The reason this market grew exponentially is because there are dealers, people who have actually made a lucrative business out of this, out of decoding, decrypting, and producing black markets for Canadian citizens. It's a very lucrative market. They're making a lot of money, and I can tell you, from all the experiences we have had, through the police raids and seizing of equipment, it's the black market that predominates in this particular business.

Á  (1115)  

    By the way, as an aside, the industry estimated that about $400 million escapes Canada every year. Think about this $400 million that is not being used as revenue to produce Canadian content and to support jobs in Canada.

    Regardless of what the court's ruling has been, they have absolutely no fear of the law nor any respect for it. If you look at slide 8, you can see they were advertising in The Hill Times, so they were targeting you. They were targeting members, trying to entice you to go in and get this free-of-charge satellite service.

    If you flip to slide 9--I'm just repeating--you'll see “DTH 'black market' activity is clearly illegal”, and then there's the Supreme Court of Canada. The reason the term “grey market” came into our vocabulary is that for a while there was confusion in the courts about whether the grey market was legal or illegal. In April of 2002 the Supreme Court of Canada declared that the grey market is also illegal.

    Slide 10 is “What Is Bill C-2 About?” This is basically to make sure we stop DTH programming signal theft; it's as simple as that. It is about trying to protect the people who create and sell the television programs and to ensure they are properly compensated and get a return on their investment.

    Slide 11 shows how we're proposing to do this, with four measures. First of all, it's to make it more difficult to get the hardware, and this is where we are talking about putting in some import control. We would like to increase penalties. All our experience has been that the police tell us the dealers view the penalties as a cost of doing business. In other words, the penalties are not severe enough to cause real damage to the black market business.

    We would like to allow the industry to take it on. In other words, we believe that if we provide civil remedies, it's the industry that will prosecute. It will become a lot easier to have the industry take care of its own affairs rather than us and the police trying to chase dealers. We are also proposing to modernize the existing powers of inspectors.

    I go into more detail on import control on slide 12. We've been told by the Canada Border Services Agency that it's been very difficult to police the importing of this equipment, and by putting in a certification scheme, we can have better control over this traffic.

    On slide 13 are the penalties. Remember, the existing penalties in the act were established in 1991. As I said before, the industry and the police are telling us they really have no deterrent effect, and we believe they have to be increased, to become more substantial.

    We're on slide 14. We believe that if we provide the industry with the ability to prosecute a little bit more easily, most of the onus will fall on the industry to take action against those dealers. The industry can protect its rights better.

    We're on slide 15. A lot of concern has been expressed about this provision to the effect that we are putting untoward powers in the hands of the inspectors. If you look at the existing clause 8 in the act and look at all the existing powers of the inspectors, you'll see that all we're trying to do is clarify and modernize existing powers. Remember that when the act was originally passed, the notion of a computer, a cellular phone, or a mobile database really didn't exist. That's what we're trying to do here.

Á  (1120)  

    To summarize, I can tell you we need this bill to make sure our broadcasting industry survives and prospers. It is not about making some big companies rich. There are a huge number of cultural content producers and actors who are being supported by this industry, and I don't think we can really in all honesty allow these funds to escape this particular industry.

    Let me stop right here. Maybe, Marc, we can go over to you.

    The Chair: Mr. O'Sullivan, for the CRTC.

    Mr. Marc O'Sullivan (Executive Director, Broadcasting Directorate, Canadian Radio-Television and Telecommunications Commission): Thank you, Mr. Chairman.

    I'm happy to provide just a few brief remarks about the bill and the issue of signal theft.

    The Supreme Court has ruled on this matter, and the law is clear: theft or piracy of broadcasting signals is an illegal activity. Two years ago the Supreme Court ruled very clearly that any unauthorized decoding of encrypted signals in Canada is a violation of the Radiocommunication Act, and that's any encrypted signals, whether they originate in Canada or elsewhere. Left unchecked, signal theft poses a serious threat to the financial health of broadcasters and distributors and to the achievement of the objectives set out by Parliament in the Broadcasting Act.

[Translation]

    Signal theft harms Canadians in a number of ways.

    First, there is an economic cost to the country. Signal pirating has harmed the Canadian broadcasting industry by depriving it of substantial amounts of revenue. The loss of these revenues weakens the ability of satellite and cable distributors to support their infrastructure and to invest in innovative technologies.

    The second harm is of a cultural nature. By depriving cable and satellite distributors, television broadcasters, producers and program rights holders of significant revenue, signal theft lessens the ability of broadcasters to acquire and air Canadian television programming.

    It also reduces the level of the Canadian Television Programming Fund, which is tied to the level of revenues achieved by licensees. The Fund provides key financing for distinctively Canadian productions.

    Signal theft also causes social harm. It steals the rights of intellectual property holders. The Copyright Act, the Radio Communication Act and the Broadcasting Act proclaim and protect the rights of creators and those authorized by them to control the use of their works. These acts together provide practical incentives for creators to devote their labours to invention, creativity and communication.

[English]

    While the CRTC is not responsible for the enforcement of the laws against signal theft, the commission is clearly mandated under the Broadcasting Act to regulate and supervise the Canadian broadcasting system. In our supervisory role we can bring industry players together to exchange views and information.

    Thus, last year CRTC chairman Charles Dalfen twice convened meetings with the CEOs of BCE, Bell ExpressVu, Star Choice, Rogers, Quebecor, Shaw, CHUM, Cogeco, Astral Media, and representatives of the broadcasting and cable industry associations. Each of the participants confirmed the specific measures their companies and associations would undertake to address the problem of signal theft, and they have taken a number of encouraging steps over the last year. They also agreed to report to the commission with respect to their efforts.

    In turn, we agreed to report to Canadians in our annual broadcasting monitoring report on overall progress in combatting signal theft. In the last edition of the broadcasting monitoring report we outlined the measures taken by individual stakeholders to combat piracy. These measures, along with the legislative changes discussed today, illustrate both the government's and industry's commitment to combatting signal theft.

    Those are my comments. Thank you, and I'd be happy to answer any questions you may have.

Á  (1125)  

    The Chair: Thank you, Mr. Binder and Mr. O'Sullivan.

    We'll start the questions with James Rajotte, please.

    Mr. James Rajotte (Edmonton Southwest, CPC): Thank you, Mr. Chairman, and witnesses, thank you very much for coming in today.

    I just wanted to clarify some information at the beginning. In other information we have from Industry Canada it says there are an estimated 700,000 users who cost the industry about $400 million per year. Can you give us the source for those statistics?

    Mr. Michael Binder: I believe it's an industry study that was undertaken. We received it from the industry.

    Mr. James Rajotte: Do you know the name of this study, just for reference?

    Mr. Michael Binder: We can dig it up and get it for you.

    Mr. René Bouchard (Director General, Broadcasting Policy and Innovation, Department of Canadian Heritage): The study is called “A Report to theCanadian Cable Television Association -Unauthorized Satellite Use In Southwestern Ontario”. That's one of the pieces that was tabled by the industry.

    Mr. James Rajotte: What sort of methodology did they use to arrive at 700,000 Canadians?

    Mr. René Bouchard: I can't speak about the methodology of that particular study, but I think there are different ways of looking at the impact on the industry. First of all, it's not obvious for people to answer surveys and say they are stealing satellite signals, so it's probably difficult to get a precise response on that. I think what the study does, and what other studies have done, is to ask questions through surveys as to whether or not people knew if some of their relatives, or people who they know, actually use illegal material to get access to satellite signals. Also, they look at—

    Mr. James Rajotte: That's hearsay, right?

    Mr. René Bouchard: What I'm saying is that there are different sources that attempt to estimate the losses to the industry. What I'm saying is that one of the ways to go at it is with a survey. There is also the study that I quoted here by the Canadian Cable Television Association.

    I believe that another way the industry went at it was to take a look at the number of people who disconnected from cable and the people who didn't connect to the satellite distributors. So they arrived at an estimate that amounted to 700,000 subscribers and a $400 million loss to the industry.

    Mr. James Rajotte: I raised that because this is what the whole bill is based upon. It seems to me we should be assured as a committee, before we pass judgment on this legislation, that the actual information we have is correct. I'm a little concerned that we're relying on evidence that may not be as strong as it should be, in terms of actually proposing a bill of this nature. The whole thing is based on the fact that apparently 700,000 Canadians are using what you would call black or grey market systems.

    If we could get a copy of the study for the committee, just to reference it, that would be very helpful.

    Mr. Michael Binder: If I may say, that's a good point.

    We never claimed that this was a scientific study. It's like trying to figure out how many people take drugs; it's an illegal activity, but people are just not forthcoming with data. There have been a lot of surveys in the industry itself, who will appear in front of you and who I think you can ask about this specifically when they come here.

    But from all of the raids, and all of the numbers and Internet websites and the actual disconnects and the ECM, or countermeasures, that we see, and the kinds of calls, you can get a pretty good estimate. So it is an estimate, you're right.

    Mr. James Rajotte: The second issue I want to raise is that you actually distinguish in your presentation between the black market and grey market, which signals to me, at least in a policy sense, that Industry Canada is distinguishing them between, even though the court case said there's not a distinction between a black and grey market; they are both illegal.

    Does Industry Canada still distinguish between those who want programming that is not available in Canada and those who simply do not want to pay for any programming whatsoever and just want to commit that? Do you distinguish in a policy sense between those two types of people?

Á  (1130)  

    Mr. Michael Binder: We just differentiate between the two because there was a lot of confusion in the lower courts about those different types of activities. There was never any debate about theft in the black market. In the grey market, there was some debate, but the Supreme Court of Canada has now deemed both activities to be illegal.

    On policy, as long as it's illegal, this is the law of the land. At Industry Canada we are trying to enforce and apply the laws as they exist right now.

    Mr. James Rajotte: But do you recognize that there are in fact many Canadians who want to access other programming services than are provided by the two licensed providers, and that this is why they are taking actions that have been declared illegal in Canada since that court decision?

    Mr. Michael Binder: Let me try to answer it this way. We, in Canada, have some of the best broadcasting systems in the world given our low density, our enormous geography, and low population. We've actually achieved an amazing penetration of cable and broadcasting and satellite services, by making sure that Canadians have a mixture, or a diverse set of content, delivered to them.

    Can it be improved? Absolutely. Do we have the mechanisms to improve it? Yes. It's called the CRTC, and people come in and make applications to it. In fact, my understanding is that the CRTC right now has in front of it a whole slew of new content provisions.

    Is it perfect? We strive for perfection here, but we're also looking for balance, between making sure we have a vibrant, live, competitive broadcasting market and making diversity available to all Canadians. That's what we do, but that is not what this act is about.

    Mr. James Rajotte: Mr. Chair, Mr. Binder made some excellent points there. You say we can improve it, and I wholeheartedly agree with you on that.

    Mr. O'Sullivan, it seems to me the cable companies actually tried to address the root of the problem of those people who want services outside. They made an application to add other services, and the commission said no. Some of the provisions in these bills we can certainly support, but Canadians want services that are not currently available, the cable association is trying to address the root, and the commission says no, and we're not addressing the root of the problem. So perhaps you could just explain to the committee why the commission made that decision.

    Mr. Marc O'Sullivan: You're referring to the HBO decision.

Á  (1135)  

    Mr. James Rajotte: Yes.

    Mr. Marc O'Sullivan: The commission is trying to balance the various objectives set out in the Broadcasting Act. Our mandate comes from the Broadcasting Act. The broadcasting policy in section 3 of the act tells us how we're supposed to regulate and supervise the system.

    In the Broadcasting Act the emphasis is clearly on Canadian content. The overarching objective is to develop a Canadian broadcasting system that provides as much high-quality Canadian content as possible. The act requires that the system be owned and controlled by Canadians. The overall objective of the system is to enhance national identity and cultural sovereignty. The development of Canadian expression is highlighted as an objective. Canadian content is meant to be predominant. It requires the contribution of each element of the Canadian broadcasting system to Canadian content. It provides for priority carriage of Canadian programming. So the overall gist of the act is an the emphasis on Canadian content.

    There are other objectives. The act talks about reflecting the multicultural reality of Canada, about providing for varied and comprehensive programming, about access to Canadian and international programming for Canadians as much as possible.

    We try to balance these objectives, and the regulatory bargain is that we license Canadian broadcasters and Canadian broadcasting distribution undertakings with the overall objective of ensuring that there's Canadian content on the screens. There's basically a cross-subsidy. The Canadian broadcasters are allowed to have foreign programming, and this non-Canadian programming often is the economic driver for these Canadian services. That cross-subsidizes Canadian content that may not be economically feasible for Canadian broadcasters otherwise, because of the smallness of our market. We're always balancing these two objectives, trying to strengthen the Canadian broadcasters, while at the same time allowing for a diverse offering of programming to Canadians.

    The cable association's application for HBO and other services recognized that it was contrary to our policy, that in order to allow for the distribution of HBO and those other services, we would have to change our policy. The CRTC sent it back to the CCTA saying, you're asking us to change the fundamental precept on which the Broadcasting Act tells us to manage and supervise the broadcasting system.

    Canadian broadcasting services obtain the rights to foreign programming, notably, for example, from HBO. CTV was showing The Sopranos. The Canadian broadcasters buy the rights to this programming that's otherwise available on American services, and often that becomes the economic backbone for those Canadian services. If we allow American services to be brought in in this way, added to the list of eligible satellite services, it would be undermining the economic backbone of these Canadian broadcasters. So that's what we're always trying to balance. A lot of the programming that may be carried by some of those services is available through the Canadian broadcasters, like Six Feet Under, like The Sopranos. It's a method for strengthening the Canadian broadcasters, so they can do a better job of producing and airing Canadian content.

    The Chair: I'm sure we'll come back to that point. Thank you, Mr. O'Sullivan. We'll come back to you later, James.

    Joe Fontana.

    Hon. Joe Fontana (London North Centre, Lib.): Thank you.

    I think James has touched on a point. Obviously, the motivating factor for some people to commit illegal action is their wanting to get some additional services. Let's face it, ours is a very diverse country, and if somebody wants to watch a soccer game in Portugal or a favourite program my mother likes to watch from Italy, they can't get it--not that I'm suggesting my mother is in the black or the grey market; she's now in a nursing home, and I'm not sure they've got grey or black market stuff.

    The fact is that there is a bigger issue here with regard to what people will do to gain access to certain things. The CRTC is talking about what it tries to do, and it's not under this committee that we can do it, but one may want to look at how responsive the CRTC is in making sure people get choice, get what they want in a legal way, as opposed to forcing everybody to do illegal things.

    I want to talk about the illegal things distributors and companies do, preying on people by offering something for nothing, with regard to the black market and the black boxes and the cards. One way is trying to stop the importing of these decoding boxes. Obviously, they're coming in from the United States with the cards, and that is clearly illegal, and we're going to fix it by imposing an import certificate, so that without a certificate, they won't be let into the country. So we're convinced that if we stop the supply of decoding equipment, that will stop the illegal use of direct-to-home transmission, right?

    Mr. Michael Binder: Yes.

    Hon. Joe Fontana: How about the fraudulent use of the cards on legal systems in Canada? Just like anything else, they're counterfeited and reproduced. So if you are using either of the two systems in Canada and you happen to get a card that allows you to get extra programming or enhanced services for which you don't have to pay anything, because it's given to you, or you pay a small price, is that also considered to be part of the black market, as we define it?

Á  (1140)  

    Mr. Michael Binder: Absolutely. I understand that ExpressVu have a lot of people who get access to their programs through the black market, through hacking.

    Mr. Jan Skora (Director General, Radiocommunications and Broadcasting Regulatory Branch, Department of Industry): There are two ways one can deal with the problem you've identified, the hacking of a Canadian legal service. Many of these cards are imported, just the cards themselves. With appropriate import controls, one should be able to reduce the flow of those cards across the country and into the country. That's one of the elements we're dealing with, import control. The second way is increasing the penalties for the sale of these cards, with or without satellite receivers. We believe increasing the penalties sufficiently, certainly for distributors that are corporations, but even for individuals who are distributors, will reduce that activity.

    Hon. Joe Fontana: I know it's going to be illegal for two parties, just to be clear. One is the distributor and the corporations that will participate in this illegal activity, and it would seem to me that's why the penalties are being increased substantially: it's not the cost of doing business; it will actually hurt. But we're also talking about going after the individual user. I know enforcement is not necessarily the inspector's role. It becomes a police action, and I'm not sure how much enforcement has gone on. Industry Canada might know. Are police actually going to people and saying, you're using a grey box or a black box, you're fraudulently using this thing, and we're charging people under this act?

    Mr. Michael Binder: No. The focus is really on the dealers. These are the people who actually deal in thousands of those cards, boxes, etc. It's very lucrative. It's hacking, and every time there is a counter-measure by the supplier, the satellite services, you have to reprogram your card, so you get charged again, etc. So it's cashflow, and they are big businesses. The police have never gone after the individuals.

    Hon. Joe Fontana: Sometimes there are unintended victims, the individuals using the cards or whatever. On slide 13, when we talk about individuals, what individuals are we talking about? It says the existing maximum fine for an individual is $5,000 and for a company $25,000, and we're going to move that to $25,000 for the individual and $200,000 for the company. Are we talking about the individual user or an individual who is acting as a dealer? I want to understand that.

    Mr. Michael Binder: The high penalty is for those people who are actually dealing in this, hacking and transmitting and selling.

    Hon. Joe Fontana: So it's the individual who is participating in that activity.

    Mr. Michael Binder: Not your mother; we won't go after your mother.

    Hon. Joe Fontana: The dealer, not my mother. Okay.

    Mr. Michael Binder: This is not the focus of this bill.

    Hon. Joe Fontana: I can call her up and say, mom, you've got nothing to worry about, even though she's not doing it.

    Mr. Jan Skora: The way the act is constructed, with those penalties, it does not differentiate between an individual who is involved simply in decoding and an individual who is involved in distribution and things of that sort. We're faced with a lot of distributors out there. You also have a lot of individuals who are doing this in their own homes. Clearly, the emphasis in making these changes and the emphasis of any enforcement by the RCMP or any other organization has been on the dealers, the distributors. But the act, as it's constructed, doesn't make that differentiation. Another way to answer your question is to say it is illegal to decode, and there are penalties, but the focus of the government and the RCMP has been on targeting the distributors who are having a significant impact.

Á  (1145)  

    Hon. Joe Fontana: Thank you for that clarification.

    As technology continues to advance, this is an issue, and there's a whole other issue with regard to the Internet and the free flow of artistic content. We're talking about direct to home, from a satellite to a television. How about it going through the Internet to a computer? Obviously, Bill C-2 doesn't address that issue. At what point will you come back and say we need to fix that part?

    Second, it's not illegal to get unencrypted programming from anywhere in the world. If there is a soccer program or anything that's not encrypted, it's perfectly legal for a person to have it in their home. If you have a satellite dish or something like that and you're getting unencrypted content, that's perfectly fine.

    Mr. Michael Binder: Absolutely, and there are a lot of free-to-air services. Everybody is welcome to buy a dish, look at the satellite, and receive that unencrypted programming. The broadcaster is saying it's free, I'm broadcasting it, anybody can take it. It's like radio.

    On your Internet question, just think that about ten years ago we didn't know what the Internet was. Who knows what the future will be, when you're going to get broadband in every home and you may be able to bring in television? It may be a completely different business. The question does remain, however, how do you pay the content owner? I don't know if you watch the music industry, but it is suffering because of the Internet. It means you may have to find a different business model.

    So we may indeed be back to you, maybe five or ten years from now, but this is not what this is about. This is really the industry as it exists right now, and there are some issues that need to be addressed right now.

    The Chair: Thank you, Joe.

    Paul Crête, and then Andy Savoy.

[Translation]

    Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Thank you, Mr. Chairman.

    The Bloc Québécois supports this bill. We consider it important that signal theft be monitored more closely and eradicated. However, I would like to make two comments and then to hear what you have to say. I want to comment on the powers vested in the inspector. These are set out in section 5 of the bill. The inspector starts to sound a lot like Big Brother. Just listen to what he will have the power to do:

(a) enter and inspect any place in which the inspector believes on reasonable grounds that there is a radio apparatus, [...]

(b) examine any radio apparatus [...] found there, as well as any other thing relating to such apparatus [...]; and

(c) examine any record, book of account or other document or data that the inspector believes on reasonable grounds [...]

    Isn't there some way to amend this sanction so that it targets signal theft more directly, rather than being a general invasion of privacy?

    Mr. Michael Binder: That is not what we intended.

[English]

    The Chair: In case you're tempted, don't touch the microphones. They'll pick up your voice from wherever you're sitting.

    Thank you.

[Translation]

    Mr. Michael Binder: What we intended here was not to propose that the inspector should have vast powers.

[English]

    If you look closely at section 8 of the act on the powers that exist right now, they were written in an era where computers were not playing the same role they're playing now, databases were not playing the same role they're playing now, and the wireless industry was not everywhere.

    Our intention was to update and clarify those powers. If there is something offensive about this, we're not aware of it. Our lawyers like clarity in some of those bills. They propose text that we think is very in keeping with the times. That's all our intention is here.

Á  (1150)  

[Translation]

    Mr. Paul Crête: I hope we will have an opportunity to hear witnesses on this issue. In spite of your intent in drafting this, the wording might enable data to be used for other means. There have been difficult incidents involving employment insurance inspectors. These inspectors would go into people's homes and conduct investigations as if they were dealing with criminals. I don't want the same thing to happen again. We will see what our witnesses have to say.

    My other question is on the issuing of import certificates. The power vested in the minister—at present, in a single minister—is extremely broad. This bill stipulates that the minister must take into account all factors that he or she considers relevant, not only the factors suggested.

    So in addition to taking into account a given list of factors, the minister could take into account other things, and all relevant factors. Could this list of factors not be somehow restricted so that we ensure no decisions are ever less than entirely rational?

    Mr. Michael Binder: It's difficult to draw up lists that include all possibilities. That is the opinion we were given, but this could perhaps be discussed.

    Mr. Paul Crête: For example, there could be a priority list, and it could be stipulated that in exceptional cases the minister could take other factors into account. We should perhaps consider this option. We should not, by means of rather suggestive elements not expressly set out in the list of factors, create a legal environment conducive to appeals and challenges.

    As we interpret this, someone could always claim that the minister had not taken into account a given factor which she should have My view, we should look at this more closely.

[English]

    Mr. Michael Binder: John, do you want to add something to this?

[Translation]

    Mr. John Cuningham (Counsel, Industry Canada Legal Services, Department of Justice ): Yes, I would like to comment.

    As you said, there is obviously a primary list of factors, the relevant factors. After that, a number of things are specifically identified. As Mr. Binder said, today or in a week, or even in a year, we cannot tell whether factors a, b and c, especially a and b, will be the only factors that will apply if we wish to issue a certificate.

    What this was intended to do is give the minister some flexibility to consider other options. In fact, at the outset the idea was that the minister would be limited to issuing a certificate only under certain conditions. But at the end of the day, it became clear that other factors or situations not taken into account in the listing could emerge. That was the approach. I think that answers your question.

    Mr. Paul Crête: I have a question for Mr. O'Sullivan, along the lines of the question put by Mr. Rajotte.

    Mr. O'Sullivan, in your report you talk about the impact on the Canadian Television Fund. I would like to know whether you have quantified that impact. We can be more general after that. Earlier, there was talk about industry studies on the economic impact of the current situation. Do we have figures from the government to illustrate such impact?

    First of all, however, I would like you to elaborate on the impact which the current situation is having on culture, and tell me why you believe the legislation should be amended.

Á  (1155)  

    Mr. Marc O'Sullivan: As Mr. Bouchard indicated, the industry estimates that lost revenue is on the order of $400 million. We have not commissioned our own study. It is the industry that constantly expresses its concern.

    I would point out that in the broadcasting industry, there are distributors of programs as well as producers. Those two subgroups agree on very little. Generally, they argue among themselves. However, this is a subject on which the entire industry is aligned. They all agree on the harm caused by satellite signal theft.

    We do not have specific figures. I did not allude to specific figures in my notes because we do not have figures established through our own research. This is for the reasons I have already cited: it is difficult to get people to say whether they are in fact using illegal services.

    In the past two years, company heads from the whole sector have been constantly telling us about the extent of the problem. We also know that cable distributors and satellite companies must provide a percentage of their revenue to the Canadian Television Fund. This means that any loss of revenue has an impact on the Canadian Television Fund.

    I did not give you any figures because I have none we have generated ourselves. However, in view of the extreme concern constantly expressed by all important stakeholders in the industry, we recognize that there is a impact. There is an impact we have difficult quantifying, but it is a real impact, otherwise the industry would not be as concerned as it is.

    Mr. Paul Crête: If we rely on them... Yes, go ahead.

    Mr. René Bouchard: To Mr. O'Sullivan's comments, I would add that contributions currently made to the Canadian Television Fund by distributors are on the order of $120 million to $125 million.

    We cannot give you more accurate figures, because as Mr. O'Sullivan indicated those figures are linked to revenue growth. Their current contributions are not negligible by any means, but when people circumvent the system and do not pay the distributors for signal access, then the distributors' revenue is not generated and the contributions to the Canadian Television Fund is not made.

    Moreover, we should bear in mind that, when distributors generate revenue through providing services, they also pay specialized broadcasting services, which invest in production.

    So when Bell ExpressVu or Star Choice does not generate appropriate revenue for its activities, it cannot pay the broadcasters which produce Canadian content and those broadcasters no longer invest in producing Canadian content. So those are two impacts of signal theft.

[English]

    The Chair: Very short.

[Translation]

    Mr. Paul Crête: If the industry's figures were accurate and we used them in our calculations, could we say how much more money would be generated for the Canadian Television Fund and others, so that they could continue their activities?

    Mr. René Bouchard: I cannot answer that immediately, but we can certainly provide you with a figure. Basically, if we can estimate the shortfall, we can say how much is not being invested in the Canadian Television Fund.

    Mr. Paul Crête: I would appreciate that.

[English]

    The Chair: Thank you, Paul.

    Andy Savoy.

    Mr. Andy Savoy (Tobique—Mactaquac, Lib.): Thank you very much, gentlemen.

    We have a bit of a dilemma here. Mr. O'Sullivan, I understand your concern regarding cross-subsidization for content purposes and the impact of that. I support it, in general, but I believe that in growing Canada we're looking at a multilingual, multicultural society, and in terms of the growth of the nation and our commitment to immigration and multiculturalism, we have a serious problem here.

    I know many of the channels that address significant portions of the population come through FTA, but a number of them don't. Looking at those specific groups, limiting their ability to obtain cultural, religious, linguistic content is a serious problem for those groups.

    In terms of that issue and FTA and how we get around providing that specific content for those interest groups, do you have any recommendations? Will this limit or deter access to those stations? What solutions or direction would you provide to us on that front?

  (1200)  

    Mr. Marc O'Sullivan: The question is the number of third language services that are available. The CRTC has licensed Canadian third language services. There are four over the air in conventional television services in Montreal, Toronto, and Vancouver. We've also licensed five analog specialty services that are in third languages, and almost 50 category 2 digital services, of which up to now 10 have been launched. In addition to that, 10 third language services are authorized on the eligible satellite services list. So we've licensed these services, and we've allowed others to be added.

    We recognize that there's a growing demand for such third language services, and it's incumbent upon us to find the best way of doing so. Having licensed Canadian services, we've tried to ensure that the Canadian services can be viable and are not undermined by foreign services distributed by satellite or cable that cover the same programming ground--in the same format or genre as the existing Canadian third language services.

    That's the analysis we do when we receive requests to add third language services to the list of eligible services. We look at to what extent it is competitive with an existing Canadian third language service. Then we do an analysis of the type of programming and whether there is overlap in the programming. We look at whether the proposed service is a general service or a niche service and whether it conflicts with a Canadian service or not. We do that analysis in order to allow for as many services as possible, while protecting the economic backbone of the existing Canadian services.

    We talk about the smallness of the Canadian market. That is accentuated when you're dealing with third language markets. Then the target audiences can be quite small. We look at ensuring, first and foremost, that the licensed Canadian services can continue to thrive.

    We've heard the comments made by the Lincoln committee report on cultural sovereignty. We understand there is growing demand for third language services. We're always looking at ways to adjust our policy--not just how we apply our policy--to allow for as great a number as possible, without undermining the Canadian services.

    Mr. Andy Savoy: I understand what you do have; I guess the issue is what you don't have.

    Access is now being driven by the size of the demand, basically. If we implement Bill C-2 as is, the size of the demand will determine access, because it has to be a marketable product. You have to be able to make a profit, in bringing it through your avenue or venue. But the problem is, when you're limiting access to a small subscription of maybe 5,000 or 10,000--a cultural group from anywhere, basically, that has access now to their home country--we're going to say, “I'm sorry, you can't have access in the future unless it gets to the size where the demand is there to actually see it brought on the Canadian airwaves”. I have a very serious problem with that. That's not good for us in developing as a nation.

    On to the individuals--

    Mr. Marc O'Sullivan: Can I make a quick comment on that? First and foremost, we react to applications to add services to the list of available services. So the distributors basically make the assessment of whether there's a market, and if they feel there's a market, then they make the application. Then we deal with it and then we apply that competitive assessment I talked about.

    Mr. Andy Savoy: Absolutely, but that reinforces my point: there has to be a commercial viability to that service. I have a serious problem with that.

    Mr. Michael Binder: A small community, on its own motion, can walk into the CRTC and say, “We would like this programming to be available”. The CRTC also has powers regarding what it wants to do, what it can do, etc. I'm trying to say that it's a different forum. It's the Broadcasting Act; it's not this act. So whatever we do on content, there is another way of approaching it. It is not the purpose of this particular bill.

  (1205)  

    Mr. Andy Savoy: Okay.

    On the individuals, Mr. Binder, obviously we'd be looking at decoding for profit purposes or decoding for personal purposes, and there's a clear differentiation. And I realize that discretion will be used, and the intent of the legislation is to allow discretion to be used. Is there any way for us to give people assurances in fact that individuals who are decoding for profit versus individuals who are decoding for private use...? Is there any way to make a differentiation between those two and give some assurances to the Canadian public in fact that those who are decoding in the grey zone for personal use could not potentially face fines of $25,000, for example?

    Mr. Michael Binder: I will defer to counsel here on this. I don't know if you can actually legally differentiate between shades of illegalities. If it's illegal, it's illegal. However, I can assure you of this. If this bill is passed, we believe the industry will become aggressive and go after the dealers directly. It's not going to be the police and it's not going to be, by and large, us going after those people because the industry now will have a very quick way of dealing with this particular issue on their own motion. In other words, they have a right to take those dealers to court and to get some severe penalties immediately for these illegal activities.

    It does not make sense for us to go after the individuals. You go after the dealers, and over time, we believe, the individual will come back to the Canadian system. The dealers are the ones who support the individuals. So even though I cannot give you an assurance, I believe that logic dictates that we are going to go after those criminal dealers who are feeding this particular system, the back system.

    Mr. Andy Savoy: If you have nothing further to add, that's fine. I have another question; we'll move on.

    In terms of the FTA market, I've told you of the importance on the cultural side, the religious side, and the linguistic side of FTA. In terms of the implementation of Bill C-2, will we be looking at any deterrences or hindrances to the FTA market, i.e., import certificates for companies that are required to bring their technology in? How quickly can the import certificates be obtained? Are we going to see any hiccups in terms of the FTA-- if you want to call it the market--the FTA, free-to-air, programs that are being offered, and that whole group of viewers? Will we see any hiccups in terms of the FTA and the process of the implementation of Bill C-2?

    Mr. Michael Binder: I don't believe so.

    Can anyone answer here?

    Mr. Jan Skora: Yes. Our intention is not to affect those free-to-air receivers that are clearly free-to-air receivers. Where you will potentially run into problems is if there are free-to-air receivers that are also decrypting receivers. This says here that if it's designed for decryption, then you have to have an import certificate.

    Our intention is to focus on those receivers that are clearly free to air and allow them to come in freely as they do right now. So that's the intention.

    The other thing is we do have a series of district offices across the country that will be dealing with import certificates. We believe it will be a fairly quick process to get an import certificate...basically identifying some basic information, and then an importer can have a certificate that allows them to import equipment into Canada, which will be used legally for legal distribution.

    So on both of those the intention is to make that happen. We've been working with Customs now for the last couple of years on issues like that, particularly in the last year, in putting this bill together to make sure that whatever we have in here and whatever procedures come out of this, they will be able to be implemented very quickly.

    So that's the intention, and we believe it's achievable.

  (1210)  

    The Chair: Thank you, Mr. Savoy.

    Mr. Masse.

    Brian, during your questioning, if I have to interrupt for a minute to do the witness budget, I apologize. We'll make sure you get your full time.

    Mr. Brian Masse (Windsor West, NDP): Absolutely. Thank you, Mr. Chair.

    Mr. Binder, in your opening statement you said the situation is destroying our broadcast industry. Yet from 1999 to 2002 it has gone from 6.1% to 21.2% in terms of satellite products that are legal over here. It has more than tripled. What independent evidence does your department have to substantiate that claim?

    Mr. Michael Binder: If you look at the growth, we were finally successful in introducing competition to a monopoly service. As you know, the cable industry used to be a completely monopolistic service and now there's a choice.

    There are two components. First of all, there are services to areas that never had service before. That was the beginning of the big subscription to satellite services. Now the services are starting to compete with cable in urban areas.

    It is very difficult to estimate illegal activities, going back to the original comment. However, if we do not deal with this, eventually people will not be able to buy rights to programs because the grey market and the black market will become bigger than our original market.

    I'm making an extension here. You'll get to a critical mass where the horses will be out of the barn and you're not going to be able to put them back in.

    Mr. Brian Masse: I'm not saying you're wrong, but it's a very—

    The Chair: May I interrupt for a moment?

    We may lose quorum in a few minutes. I know some members have to go to a meeting. I'm only going to take a moment.

    In front of you is the proposed budget for witnesses for Bill C-2. Are there any questions? If not, I'd like to have a mover for our budget for Bill C-2 witnesses.

    Mr. Andy Savoy: I so move.

    The Chair: Yes, Mr. Rajotte.

    Mr. James Rajotte: At the end of the meeting will we discuss which witnesses will appear when?

    The Chair: Yes. I only want to get a budget for them in case we need it.

    (Motion agreed to [See Minutes of Proceedings])

    The Chair: Thank you.

    Mr. Masse, thank you.

    Mr. Brian Masse: Thank you, Mr. Chair.

    It's a very strong statement, to say the least. I would think we would have our own information for it, other than relying on a $400 million figure from a survey, not a study. There are issues in the study that I would contend.

    For example, many people carry a Bell ExpressVu payment service and they also have DIRECTV, because it's not as reliable with it going up and down.

    It takes me to the second comment you made that “it's an escalating problem”. This is the other issue. DIRECTV can fleece the industry with their own technology and security. They've introduced a new product that has now disabled DIRECTV users, for the most part, as a new card is now introduced into the market. What evidence do you have in terms of DIRECTV?

    I am concerned as well with the Bell and the Shaw ones, the ones that you can legally purchase over here, being completely ripped off by those servers. The escalating problem is happening in the so-called grey market area. Is that escalating?

    Mr. Michael Binder: Those are excellent points.

    I'm only expressing a concern from observing what happened in the music industry. If you waited long enough, it was too late to act. It's the same kind of phenomenon we're having here. If we wait long enough to take any action, it could be deemed that this function is okay and it's fine to pursue this. You're going to have an erosion of subscriptions and an erosion of markets.

    It is an apprehension of what is to come, because so far we have not been able to stop the hacking. The moment you come up with a new box, there is some clever person who hacks it. So far we have not been able to stop it.

    Mr. Brian Masse: But that's not necessarily Canada's problem. DIRECTV itself has remedies for that by introducing new security measures to its own product.

    I'll move on to a question for Mr. O'Sullivan. I want to talk a little bit about the non-encrypted free market and how it has an impact here. I know Industry Canada has indicated that they are okay with the receiving of those signals, whether radio, TV, or satellite.

    I'll give an example. In my constituency of Windsor West, and in many others across North America that border the United States, radio and television right now are readily available. Ironically, the only Canadian content you might get is from Canadian businesses advertising on the U.S. stations because they have the predominant market share.

    Now, what's happening here seems almost to reflect a double standard. How does Canadian content benefit under that situation? Do they pay any royalty fees to you for that? Are there advertising dollars that then go back to you in some way, through taxes or whatever it might be?

    What's happening right now is you have local Canadian companies that have Canadian content and people are choosing to tune into the other choice. Advertisers, Canadian companies, are choosing to spend their dollars there too because they know the market is there.

  (1215)  

    Mr. Marc O'Sullivan: You're absolutely right. Border stations present a particular problem. Free, over-the-air broadcasting is by its very nature uncontrollable. We can delineate the coverage of the signals from Canadian services and license them accordingly, but obviously we have no jurisdiction over the American services. And yes, the spillover in communities like Windsor is significant, and in some cases the American services are aggressively buying advertising on the Canadian side of the border.

    On the occasions where this has been raised with the FCC, they basically said they were not interested in discussing it. The matter is restricted to certain areas, and it's just the nature of the beast.

    With free, over-the-air signals for both radio and television, there really isn't much we can do to restrict Canadian access to those signals. We recognize that it does have an impact on the Canadian markets affected by it, but our tools to be able to do something about it are just basically non-existent.

    Mr. Jacques Langlois (Director General, Broadcasting Policy Group, Canadian Radio-television and Telecommunications Commission): There's also a fundamental difference. What we're talking about here in this bill is the theft of subscription services. It's as if one were to steal a magazine subscription. These are subscription services that people are required to pay for, whereas the over-the-air services are over the air. They're hertz and waves and can be picked up at will. That's a huge, fundamental difference.

    Mr. Brian Masse: Right, but this is where I think this whole thing falls smack on its face. The fact of the matter is that people can get that non-encrypted, non-Canadian content all they want, but they can't purchase it legally. I know a lot of people would be happy to buy HBO, or Al Jazeera, or a lot of the cultural programs and stuff like that, who would spend an extra few dollars, pay an extra fee, to produce more Canadian content in this country. Why can't we do that?

    It really makes it a contradiction. People are able to get as much content as they want that's non-Canadian; they're just not paying for it.

    Mr. Jacques Langlois: But the content on the over-the-air channels, more than likely, is what they also get on their cable systems from the American networks, what we call the “four-plus-one” here. That they are getting anyway. There are simultaneous substitution rules for that where the Canadian broadcaster gets compensated.

    Mr. Brian Masse: So we're screening them--exactly. We're screening them in terms of what products they want to be able to access.

    We're making those decisions because a limited amount of HBO material is available. Once again, whether it's Al Jazeera, HBO, and some of the other cultural programs people want, why can we not let... Many of the citizens we represent use it not only for entertainment, but for education, for connecting to family members by knowing what's happening in their communities, all these things.

    Is there not a system or a way that we can create in this bill somehow that allows for that to happen? Without that, I have a lot of difficulty with the bill. Why can't we put that in first and get it done, and then get into the whole other matter?

    Mr. Marc O'Sullivan: As I said earlier, our marching orders are in the Broadcasting Act, and it clearly tells us we have to ensure that there's a predominance of Canadian content. There is some flexibility. The CRTC is constantly looking to see whether in the manner that we apply the competitive test there are ways for us to allow greater access to a wider number of services.

    It's one thing with third language services, but I think you're talking about a particular area with regard to English language services. I think you're talking about the economic fundamentals of the Canadian broadcasting industry. By way of an analogy, in the feature film industry there are basically no controls on exhibition or distribution. The Canadian feature film industry represents about 3% of the box office in the English language market. It's more successful in the French language market. But in the English language market, without any controls and methods to ensure carriage of Canadian programming, you might end up with a sad result where there's simply an absence of Canadian content on the screens. That's what we're trying to balance.

    We recognize that there is that growing appetite for more services. In a way, the more you offer, the greater the appetite for even more. In Canada people have access to a tremendous number of services, but they're asking for access to even more. We try to balance that. But at the same time, we don't want to undermine the Canadian industry. So that's what we're struggling with.

  (1220)  

    Mr. Brian Masse: Mr. Chair, I'd like to get a clarification. I'll use Mr. Fontana's mother as an example. She gets an encrypted card and she puts it into her machine. Later on the company finds out. Can it charge her $25,000 under this bill?

    Mr. Michael Binder: We're going to go after the company that sold it to her, not her.

    Hon. Joe Fontana: Thank you.

    Mr. Brian Masse: So if somebody has one of these cards in their home and it's discovered, maybe through a police raid for some other reason, they cannot be charged for having that encrypted card in their machine in their home. You're guaranteeing me that.

    Mr. Michael Binder: No, I'm not.

    Mr. Brian Masse: We've skated around this before. The reality is that if you have that card in your home, you can get charged just like anyone else.

    Mr. Michael Binder: Because it's an illegal activity. All I'm trying to say is we're not planning to go after those people. But it is an illegal activity, nevertheless.

    Mr. Brian Masse: But you're putting the onus on the companies later on.

    Mr. Michael Binder: We're going to go after the companies.

    Mr. John Cuningham: Just to make a small distinction, there are criminal prosecutions, and then there may be a civil action. On the civil side, there is a specific limitation of a maximum of $1,000 that the company could obtain from a person doing decoding not for commercial gain.

    Mr. Brian Masse: A company can sue an individual and get $1,000 from that individual. They can also be charged $25,000.

    Mr. John Cuningham: If there's a criminal prosecution.

    Mr. Brian Masse: So it's up to $26,000 per individual.

    Thank you.

    The Chair: Thank you, Brian.

    Lyle Vanclief.

    Hon. Lyle Vanclief (Prince Edward—Hastings, Lib.): On page 13 of Mr. Binder's presentation it says that for illegal signal decoding activities, the fine for an individual is $5,000 and the proposed fine is $25,000. I just heard that the maximum fine was $1,000. Maybe you could clarify that. Also, what's the definition of an individual?

    Mr. John Cuningham: The $1,000 figure is--

    Hon. Lyle Vanclief: It's not on this sheet.

    Mr. John Cuningham: That sheet sets out the fines for a criminal prosecution. Under section 18 there is currently a right of civil action. So a civil litigation process can be commenced by certain people who meet certain criteria. Under the civil action, the maximum a plaintiff could get against an individual in those circumstances is $1,000 where it's not for commercial gain and they're not selling. However, if someone is engaged in it for commercial purposes and they can prove actual damages of $3 million, that's what they could get. So I think you have to note that there are criminal prohibitions, and charges can be laid in the criminal courts for that and there can be convictions. On the other side, there can also be civil litigation for damages, where people could get judgments against them for certain amounts.

  (1225)  

    Hon. Lyle Vanclief: Okay, Mr. Chairman, it's still not clear.

    The Chair: Go ahead, Lyle, the floor is yours.

    Hon. Lyle Vanclief: It's probably because I'm dense on this.

    The Chair: You're helping us all.

    Hon. Lyle Vanclief: But if I look at page 13 of Mr. Binder's presentation, it says, “Illegal signal decoding activities”, for an “Individual”.

    I know there's civil and there's criminal. And the gentleman just said that in civil, for whatever reason, it would be a maximum of $1,000. Help me out here, but this chart says, “Illegal signal decoding activities”, with a maximum fine of $5,000 and proposed maximum of $25,000, for an “Individual”.

    So if someone—whether it were caused or triggered by another company, or whomever—or if the industry itself is saying, “I know that such and such a person, in their house or home, has a signal decoding piece of equipment for their own use”, what does this mean? They're an individual—they're not marketing it out of there—but are they an individual person? Are we talking of an individual company, because the next line says, “Company”?

    Just help me out on what the $5,000 to $25,000 means.

    I'm not saying I want to condone this happening, but it's just not clear, because we didn't hear about the $1,000 until a minute ago.

    Mr. Jan Skora: As we said earlier, the act currently does not differentiate between someone who receives the signal just for their own use and someone who receives the signal and then sells a whole bunch of equipment for commercial use. So currently the act does not differentiate between those two cases.

    In trying to put this legislation together, and in trying to change as few things as possible while trying to get the impact we're looking for, we felt that since the intention is to go after individuals who are explicitly involved not only in decoding but also in selling equipment and things of that sort, we would move the fines to $25,000.

    Now, you're right that an individual who is decoding in their home could potentially be taken to court and could potentially end up with a fine of $25,000—if the court thought that was in the best interest of justice. That hasn't happened to date, but it's a possibility.

    On the $1,000, as my legal adviser has mentioned, criminal prosecutions are prosecutions under the Radiocommunication Act, in which the RCMP goes in and generally seizes equipment and lays criminal charges. Those are the ones that we're talking about, that are moving from $5,000 to $25,000. Civil action is when there's a company out there—Bell ExpressVu, a cable operator, or whoever—who says, “I'm harmed by this, my company has been harmed by this, and I wish to go out and take action through the courts under this section”--not including the RCMP, but by themselves, in trying to get restitution.

    As Mr. Cuningham has said, there are two routes. One route is to say, “I can prove these damages, and if they're $3 million, I'll ask for $3 million in damages”. The other approach, which we're proposing here, is a statutory damage, given certain conditions, where the court could decide, “Yes, an illegal activity was happening here, and, yes, we believe that a statutory damage should be issued”.

    I hope that assists a little bit.

    Hon. Lyle Vanclief: It assists, but I humbly suggest that we need some clarification. For the person on the street out there reading the bill, or looking at this chart, they're likely going to see themselves as an individual, and they're going to say, well, I could be subject to a $25,000 fine. So the explanation you gave I think clarifies it for me, but it's pretty hard to clarify it out there amongst the general public.

    If you look at clause 6, and this amendment, that's what people are going to look at with this bill, with all due respect. They won't go back and sit this bill down beside the act that it's amending. As it says in clause 6, “in the case of an individual, to a fine not exceeding $25,000”. So the explanation you just gave, sir, is fine and dandy, but with all due respect, I don't think there would be many people out there who would understand it, and maybe there needs to be more explanation given.

    To get to what I was originally going to talk about, Mr. Chair, I think we could have the numbers discussion, which Mr. Rajotte raised. I respect that, but I don't think anybody's denying that there's piracy out there. None of us is saying we want to condone it. We do want to stop it.

    There have been some good comments and suggestions with regard to why it's taking place, which Mr. Savoy raised. I think the answer of Mr. Binder and others was that a relatively small group, I think, wants access to it. But if we're going to be able to address the desires of those people, and in order for them to have access to the type of communication they want, then it will take action broader than the scope of this bill.

    Now, I know we can't address that, because it's not here within this bill. This is a penalties bill, or an enabling bill, to put penalties in place if they are doing that. But there will have to be consideration of that type of thing, because there will be a demand. In our society, if there are demands, unfortunately there will always be suppliers, whether or not they are legal demands or legal suppliers.

    So how do we remain proactive as an industry, and as the CRTC, etc., in order to reduce that as much as we possibly can? In other words, what is the cause of this? I think we're having that discussion. We know the cause, but not the solving of the problem. It will help if this act is there, and I support it for that reason, but I don't think any of us are naïve enough to think it will be the total answer. It will help, and it will give more availability for the industry and others to solve this.

    I'll just close, Mr. Chair, with the issue of border enforcement of equipment coming in. This was addressed somewhat as well. I think it was stated that it's difficult. It's been illegal in the past to bring this equipment in, and we're saying it's going to continue to be illegal. If we haven't been able to do anything about it in the past, what confidence do we have that we're going be able to do anything about it in the future? It's like a local police force, if the public wanted to lower the speed limit, being asked by the public, “If you can't enforce the speed limit at 50, how can you enforce it at 30?”

    We haven't been doing as good a job as we maybe could have or should have in the past, so what's going to change to hopefully improve the cross-border movement of equipment?

  (1230)  

    Mr. Jan Skora: That's an excellent question. We've spent the last year and a half trying to deal with that very issue.

    Today, when we deal with the customs enforcement organization, they tell us that they have no mechanism with which to stop equipment at the border. It's very difficult for them. They need a mechanism. They have legislation that provides them with mechanisms, and departments like Agriculture and Agri-Food Canada have mechanisms, that allow them to say, “Do you have a certificate or not?” So with them, with their concerns on their efficiency--really, they're focused on the efficiency of bringing equipment across the border—we designed this import certificate procedure and instrument.

    We're satisfied, and they tell us they're satisfied, that if we had such a regime in place, then dealing with equipment at the border would be much quicker. Equipment that had an import certificate would be brought into the country. Equipment that didn't have an import certificate would be returned. That's what we've been searching for and designing with them, and we feel that this would be much more effective than what we have today.

    On your preamble, I agree with you, this is not a silver bullet. A whole number of things have to happen--border control and enforcement, private right of action, advertising, education, etc.--but we believe this mechanism has a much higher likelihood of success, given the tremendous amount of equipment of all types coming across the border.

  (1235)  

    Hon. Lyle Vanclief: Just to follow up on that--

    The Chair: Very quickly.

    Hon. Lyle Vanclief: --if we need a mechanism to improve the cross-border illegal movement of equipment, whose court is that ball in? This bill doesn't do it. It just puts the penalty there if you're doing it. What action or whatever is going to force getting the mechanism in place?

    Mr. Jan Skora: This bill identifies something called an “import certificate”, which the Minister of Industry would issue, and the border control organization has said that if we put that in place, they would enforce it.

    The Chair: Thank you, Lyle.

    James, please.

    Mr. James Rajotte: Thank you, Mr. Chairman.

    I just want to follow up on what Mr. Vanclief brought up, about page 13. You keep saying, over and over, that the focus is on the dealers, not on the consumers. I think most people would certainly agree with that. But someone also said that the bill does not distinguish between distributors and users. My question is, why would it not do that?

    As well, I was going to ask the same question about the individual. In the bill, I read “individual” to mean a person in their home, turning on their television. Now, why would we not in this bill separate between... My understanding is that in order to get all the distributors, you need to...because some distributors do not fall under the company label. They have to be prosecuted under the individual one.

    Am I correct on that?

    Mr. John Cuningham: Yes.

    Basically, just to provide some of the background clarification, there is an offence. Currently, it's paragraph 9(1)(c), which says you cannot decode without authorization, and that offence is capturing the actual decoding, and that's what the person in their home would be doing, presumably, if they had one of these systems.

    There's another offence that's dealt with in paragraph 10(1)(b), which deals with more of the facilitation of... so you cannot import, manufacture, sell, offer for sale, etc.

    In both of those offences, and generally in the statutes, you're going to have this distinction. That is, there's a specific provision dealing with corporations and a different provision dealing with individuals. I shouldn't say a different provision, but the same provision will make that distinction as it does here, and currently under the act you will see this. If there's an individual, there's a certain fine level and imprisonment level, and if you're a corporation there's a different fine level. Corporations, by their very nature, can't be sent to jail, so they generally don't get imprisonment sentences.

    I think that's where my colleagues are coming from when they say the act doesn't distinguish in that sense where it says “if you're an individual”. If you're an individual person carrying on a commercial business, you're still an individual and you haven't incorporated, and if you're an individual person decoding in your home, you're still an individual. So in that sense there's no distinction made there. There are, however, the two different offences, paragraphs 9(1)(c) and 10(1)(b).

    One of the points, though, that is important to bear in mind is the list of things that's covered by paragraph 10(1)(b), and this bill isn't proposing to change the underlying offences; they exist already. It's proposing in these instances to increase the penalties. Paragraph 10(1)(b) also includes the word “possess”, so 10(1)(b) could be used as a charge against somebody who has the equipment in their home.

    Mr. James Rajotte: Is paragraph 10(1)(b) in one of the clauses?

    Mr. John Cuningham: Paragraph 10(1)(b) is the one that's covered in subclause 6(1).

    Subclause 10(1) covers a number of different types of offences. There are (a), (b), (c) and (d), if I recall, if someone has the act here.

    Then after all of the list of offences it says you're guilty of an offence punishable on summary convictions. So these are not indictable offences or hybrid offences, and it sets out the fine levels or the penalty levels.

  (1240)  

    Mr. James Rajotte: I wondering about page 4 of the bill, clause 6, proposed subsection (2.1), where it deals with paragraph 9(1)(c) in particular, because 9(1)(c) says that no person shall:

decode an encrypted subscription programming signal or encrypted network feed otherwise than under and in accordance with an authorization from the lawful distributor of the signal or feed;

    That's very important, and I want to understand legally who then is contravening that section. Suppose I go to someone, a friend who sells black market systems, and he sets it up in my home. I acquire this--whatever they call the “smart cards”--it's all plugged in, so he's done that. Now he's obviously the distributor. So the TV's off; I come downstairs and I turn the TV on. Aren't I actually the one breaking paragraph 9(1)(c)?

    Mr. John Cuningham: Paragraph 9(1)(c) is the actual decoding. So normally in the investigations against retailers, importers, those investigations are done partly under paragraph 10(1)(b), essentially, because that's the commercial activity in the selling, offering for sale.

    Indeed, it's obviously, just from an evidentiary perspective, also a lot easier to prove. To prove paragraph 9(1)(c) you're going to have to prove actual decoding, which you probably can't do unless you actually come across the person with the box actually decoding, which you're not going to get most of the time.

    Mr. James Rajotte: But in regard to paragraphs 9(1)(c) and 9(1)(d), it's my layman's observation that it is actually me as the consumer doing this who is actually contravening (c) and (d). If we are increasing the penalties for these two sections, it's easier to prove against the consumers than the distributor. Therefore, given all of these statements about focusing on dealers and not consumers, I don't think this bill, as written, adequately does that. Do you see my point here?

    Mr. John Cuningham: You're right. There are these two different offences. The penalties are being increased in respect of both, so subclause 6(1) deals with 10(1)(b) and subclause 6(2) deals with several of the other offences under 9(1)(c) and 9(1)(d), and subclause 6(2.2), 9(1)(e).

    So all of those particular offences have their own set of elements that have to be proved, and you're right, the actual decoding, in general, is what is done by the consumer, and the retail activity, which is caught by 10(1)(b), is generally the charge that would be used against the retailer.

    Mr. Michael Binder: But I think what we are debating now is, does the fine that exists right now in the bill--as it exists right now--have the same differentiation? It's now $5,000 and $25,000 for the company. In going from $5,000 to $25,000, we raised all the penalties including for the individual. And whether the increase is right or wrong, we can debate, but the focus of the investigation, where you're actually going to charge people...in an investigative way we're going after the dealers.

    Mr. James Rajotte: That's not what this bill explicitly says, and Mr. Vanclief I think pointed out an important point, which is that an individual here should be more specifically identified as an individual who's not a simple consumer. If your intent in the bill, as you state, is to go after the distributor and not the consumer, I think that distinction needs to be made. I think that point was very well made.

    Secondly, I think if I understand Mr. Cuningham correctly, 9(1)--both (c) and (d), in my view, and not (e), but (c) and (d)--is much easier to prove against me as a consumer, not against the person who came in and set this up or handed me a smart card in a back alley. Therefore, if the intent of this bill is to go after the distributor and not the consumer, I think this section actually runs contrary to that stated intent.

    If I'm wrong, you can correct me.

    Mr. John Cuningham: Yes, with respect, I think on that particular point it is far easier to prove 10(1)(b) than it is to prove 9(1)(c), because to get the evidence to prove 9(1)(c) you basically have to have the officer with a warrant or lawfully in the premises catching the person actually decoding. It's very difficult to get that.

    With 10(1)(b), if there's an offer for sale, for example, someone runs an ad in a local newspaper, you just take the ad and you bring it to the court and you make the links between the accused and the ad; you say this person offered that for sale. It's a lot easier to prove 10(1)(b).

  (1245)  

    Mr. James Rajotte: Then, with respect, if the intent of the legislation is to go after the distributor and not the consumer, wouldn't it make sense to remove proposed subsection (2.1)?

    Mr. John Cuningham: That's something for discussion, as my colleague says.

    I would just point out that there was a small anomaly in the current act between the penalty for 10(1)(b) and the penalty for 9(1)(c). The current penalties under 10(1)(b) are $5,000 or one year's imprisonment. The current penalty for 9(1)(c) is $10,000--so it's a higher fine--but six months' imprisonment, so a lesser prison term.

    Obviously, there was some discussion about what to do and what options could be taken, but ultimately the decision was taken to basically iron them out at the same level, so now in both 10(1)(b) and 9(1)(c), for an individual--whether that individual is involved in commercial or non-commercial activities--it would be $25,000 and one year.

    Mr. James Rajotte: Do I have more time, Mr. Chair?

    The Chair: You could go ahead, James, if you like.

    Mr. James Rajotte: I'd like to go back to Mr. O'Sullivan. You talked about the CRTC basically implementing broadcasting policy that the government sets, which is certainly true, and you talked about reflecting the multicultural variety of Canada. The reality is we've been approached--I think all members have been approached--by various multicultural communities in Canada saying they want access to services that are not provided by the two licence providers, which I think the two licence providers would be happy to provide them.

    I think this is going to be one of the biggest contentious issues around this bill, ensuring that these multicultural communities have access to services they want. So how do we ensure they do have access to these services? Do you have an answer for that?

    Mr. Marc O'Sullivan: Well, it's in the ongoing work of the commission in considering requests to add services. Yes, we want to be able to add services, but we want to do so in a way that doesn't undermine the existing Canadian ethnic services. Then you'll be hearing from the Canadian ethnic services and they will say, how on earth could the CRTC have allowed these foreign services to come in that go after exactly the same audience, exactly the same type of programming as we have, and therefore undermine us?

    We have to do it on a case-by-case basis. We have to look at each application, at each foreign service that's being requested to be added to the list of eligible services. And we have to see whether that type of programming serving that language group is already in existence by a Canadian service. If so, well, then we try to assess to what extent is it directly competitive, or even partially competitive, with that Canadian service, and we make that assessment.

    I think the commission is hearing the growing call for access to more services. I think the commission in the months ahead will be in a position to indicate how it wishes to be able to examine these matters in a different way. We're hearing that the competitiveness test may be leading to too restrictive an approach in allowing these services and that perhaps a broader approach needs to be taken.

    Mr. James Rajotte: Isn't there an option? If you want to use the CCTA application for HBO, one policy perspective is to say, well, we can't let that happen because it will threaten, undermine, a Canadian service. But the other option to take is to say, yes, we will allow more programming available to Canadians. But we will perhaps have the cable companies invest more in Canadian programming or whatever at that end, rather than trying to shut them out of the market at the top end.

    Is that an option?

  (1250)  

    Mr. Marc O'Sullivan: In fact, there was an application that was premised on that idea, which was something called 49th Media, which was proposing to sell Canadian advertising on American services distributed in Canada and to flow some of that money back into Canadian programming. That request was sent back because it was incomplete. But the reaction of the Canadian broadcasting industry was one of panic, that if you introduce something that changes the financial model, there are going to be winners and losers, and some of the losers are going to be existing Canadian undertakings.

    The reaction was quite vociferous about the HBO proposal. The CCTA's own president, Dean MacDonald, described it as having thrown a grenade into the Canadian broadcasting system, I think, in recognition that it was raising so many concerns on behalf of all--not just the broadcasters, but also the producers.

    So you could look at a model and say, well, we're changing the economic model for the industry. Whenever an industry goes through such a dramatic change, there are going to be victims and there are going to be winners as well, but there are also going to be losers.

    Mr. James Rajotte: The reason I raised that was David Asper actually raised it before our committee. In the last telecom review he was the one broadcaster who actually recommended raising the ownership limits. A lot of the committee members actually lectured him and said, “You have to be a nationalist and you have to support Canadian programming”.

    He did a little test, which I don't know if you want to follow. He said, “How many of you can name the lead character in Global's show Blue Murder?” I don't know if any of you could do that.

    Mr. Marc O'Sullivan: Well, they've cancelled it.

    Mr. James Rajotte: It's been renewed, apparently.

    The Chair: Okay, James.

    Mr. James Rajotte: But none of us could. And then he said, “How many of you have actually watched it?” No hands went up. Then he said, “How many of you have seen Law and Order?” Every hand went up. And he said, “And you're lecturing me on Canadian programming?” He said, “Wouldn't it be better to have a model where perhaps you put money into programming to have excellent Canadian programming, instead of mandating from the top that you have to have a percentage of Canadian programming?”

    Mr. Jacques Langlois: That's a key point, though, because many of you who watch Law and Order are doing it on a Canadian television station, to which they buy the rights to that American program. If HBO and all the other American so-called superstations and what have you were to come into Canada, it wouldn't be in their interest to sell the Canadian rights because they'd have the right to the Canadian audience. So the Canadian television stations would no longer have the rights to the American shows, and therein lies the drain of advertising dollars and the real financial impact.

    Mr. James Rajotte: You're talking about supporting the Canadian industry rather than supporting the Canadian creators.

    Mr. Jacques Langlois: Well, it's both. It goes hand in glove.

    The Chair: The last question goes to Brian. We have to have a short meeting on witnesses as well.

    Mr. Brian Masse: Thank you, Mr. Chair.

    Mr. O'Sullivan, with regard to the applications in CRTC 2003-36 and the stations we're still waiting for a decision on, it feels like we're dealing with a black hole here. When will this decision be made, and do you have specific guidelines? I know if I apply for certain things, you have six months or whatever to get back to me. Specifically, when will the Canadian public hear about these decisions? Do stations like Al Jazeera differentiate...art movies and whatever, where you might have some crossover already with art movies with some products, where Al Jazeera is quite different?

    Mr. Marc O'Sullivan: That decision is coming out this spring; it's coming out this quarter. In fact, there were several applications requesting an addition of a total of 15 services. It was one of the biggest applications we've had to deal with; there were something like 3,000 interventions on that. It's very contentious, and we applied the policy of looking at competitiveness in looking at such an application.

    You mentioned Al Jazeera. That one raised its own complexities, and there are even charter issues that are raised in that, so that one has been particularly onerous to deal with. It's the first time we've ever dealt with such a massive request for such a number of services. That decision is to come out this quarter.

    Mr. Brian Masse: Thank you.

    The Chair: Thank you, Mr. Masse.

    I want to thank our witnesses very much for their taking time this morning.

    We reserve the right to invite you back later on if other witnesses prompt questions we haven't thought of today.

    With that, I'm going to ask those who aren't parliamentarians or their staff to vacate the room as quickly as you can so we can have a short meeting to discuss witnesses. We'll suspend for one minute and go in camera.

    [Proceedings continue in camera]