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37th PARLIAMENT, 2nd SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Thursday, November 28, 2002

1105

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

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

1110

1115

The Chair

Mr. Brent St. Denis

The Chair

Mr. Brent St. Denis

The Chair

Mr. Leon Benoit (Lakeland, Canadian Alliance)

Mr. Brent St. Denis

Mr. Leon Benoit

Mr. Brent St. Denis

The Chair

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

Mr. Brent St. Denis

Mr. John Harvard

1120

Mr. Brent St. Denis

Mr. John Harvard

Mr. Brent St. Denis

Mr. John Harvard

Mr. Brent St. Denis

The Chair

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

Mr. Brent St. Denis

The Chair

Mr. Paul Bonwick (Simcoe—Grey, Lib.)

Mr. Brent St. Denis

Mr. Paul Bonwick

Mr. Brent St. Denis

Mr. Paul Bonwick

Mr. Brent St. Denis

The Chair

Ms. Christiane Gagnon (Québec, BQ)

1125

The Chair

Mr. John Harvard

The Chair

Mr. Brent St. Denis

Mr. John Harvard

The Chair

Mr. Brent St. Denis

The Chair

Mr. Ian Morrison (Spokesperson, Friends of Canadian Broadcasting)

1135

1140

1145

The Chair

Mr. Chuck Strahl (Fraser Valley, Canadian Alliance)

Mr. Ian Morrison

Mr. Chuck Strahl

Mr. Ian Morrison

1150

Mr. Chuck Strahl

Mr. Ian Morrison

Mr. Chuck Strahl

Mr. Ian Morrison

Mr. Chuck Strahl

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

1155

Mr. Ian Morrison

Ms. Wendy Lill

Mr. Ian Morrison

Ms. Wendy Lill

Mr. Ian Morrison

Ms. Wendy Lill

The Chair

Mr. Paul Bonwick

Mr. Ian Morrison

Mr. Paul Bonwick

1200

Mr. Ian Morrison

The Chair

Mr. John Harvard

Ms. Christiane Gagnon

Mr. Paul Bonwick

Mr. John Harvard

The Chair

Ms. Christiane Gagnon

1205

The Chair

Mr. Chuck Strahl

Mr. Ian Morrison

The Chair

Mr. Ian Morrison

The Chair

Mr. John Harvard

Mr. Ian Morrison

1210

Mr. John Harvard

Mr. Ian Morrison

Mr. John Harvard

Mr. Ian Morrison

Mr. John Harvard

The Vice-Chair (Mr. Paul Bonwick)

Ms. Christiane Gagnon

Mr. Ian Morrison

Ms. Christiane Gagnon

Mr. Ian Morrison

Ms. Christiane Gagnon

The Vice-Chair (Mr. Paul Bonwick)

Ms. Janet Yale (President and Chief Executive Officer, Canadian Cable Television Association)

1215

Mr. Louis Audet (President and CEO, COGECO Inc.)

1220

Mr. Jim Shaw (CEO, Shaw Communications Inc.)

Mr. John Tory (President and CEO, Rogers Cable Inc.)

1225

Ms. Janet Yale

The Vice-Chair (Mr. Paul Bonwick)

Mr. Chuck Strahl

Mr. Jim Shaw

1230

Mr. John Tory

Mr. Chuck Strahl

Mr. Jim Shaw

Mr. Louis Audet

1235

The Vice-Chair (Mr. Paul Bonwick)

Ms. Christiane Gagnon

Mr. Louis Audet

Ms. Christiane Gagnon

Mr. Louis Audet

Mr. John Tory

1240

Ms. Christiane Gagnon

The Vice-Chair (Mr. Paul Bonwick)

Mr. John Harvard

Mr. John Tory

Mr. John Harvard

Mr. Chuck Strahl

Mr. John Harvard

Mr. Chuck Strahl

Mr. John Harvard

The Vice-Chair (Mr. Paul Bonwick)

Mr. Jim Shaw

Mr. John Harvard

Mr. Jim Shaw

Mr. John Harvard

Mr. Jim Shaw

1245

Mr. John Harvard

Mr. Jim Shaw

Mr. John Harvard

Mr. Jim Shaw

The Vice-Chair (Mr. Paul Bonwick)

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Louis Audet

Mr. Claude Duplain

1250

Mr. Louis Audet

Mr. Claude Duplain

The Vice-Chair (Mr. Paul Bonwick)

Mr. Chuck Strahl

The Vice-Chair (Mr. Paul Bonwick)

Mr. Chuck Strahl

The Vice-Chair (Mr. Paul Bonwick)

Ms. Wendy Lill

Mr. John Tory

Mr. Jim Shaw

Ms. Wendy Lill

Mr. Jim Shaw

The Vice-Chair (Mr. Paul Bonwick)

Ms. Wendy Lill

1255

Mr. Jim Shaw

Ms. Wendy Lill

Mr. Jim Shaw

The Vice-Chair (Mr. Paul Bonwick)

Mr. Louis Audet

The Vice-Chair (Mr. Paul Bonwick)

Mr. Chuck Strahl

Mr. Jim Shaw

Mr. Chuck Strahl

1300

Mr. John Tory

The Vice-Chair (Mr. Paul Bonwick)

Ms. Christiane Gagnon

Mr. Louis Audet

1305

Ms. Christiane Gagnon

Mr. Louis Audet

Ms. Christiane Gagnon

Mr. Louis Audet

The Vice-Chair (Mr. Paul Bonwick)

Mr. John Harvard

Mr. Jim Shaw

1310

Mr. John Harvard

Ms. Janet Yale

Mr. John Harvard

Ms. Janet Yale

Mr. John Harvard

Ms. Janet Yale

Mr. John Harvard

Ms. Janet Yale

Mr. John Harvard

Mr. Ian Morrison

Mr. John Harvard

The Vice-Chair (Mr. Paul Bonwick)

Mr. John Tory

Mr. Jim Shaw

1315

The Vice-Chair (Mr. Paul Bonwick)

Mr. Louis Audet

Mr. Jim Shaw

The Vice-Chair (Mr. Paul Bonwick)

Mr. John Harvard

Mr. Jim Shaw

1320

Mr. John Harvard

Mr. Jim Shaw

Mr. John Harvard

Mr. Jim Shaw

Mr. John Tory

Mr. John Harvard

The Vice-Chair (Mr. Paul Bonwick)

CANADA

Standing Committee on Canadian Heritage

NUMBER 007

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, November 28, 2002

[Recorded by Electronic Apparatus]

Á (1105)

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I'd like to declare open the meeting of the Standing Committee on Canadian Heritage.

[Translation]

The Standing Committee on Canadian Heritage is meeting today to study Bill C-227,

[English]

an Act respecting a national day of remembrance of the Battle of Vimy Ridge.

If you look at your agenda, there's one sentence that was omitted, which should be inserted between “Shall Clause 1 carry?” and “Shall the title carry”: “Shall the preamble carry?”, in French

[Translation]

Shall the preamble carry?

[English]

I would like to now call on the proponent of the bill, Mr. Brent St. Denis, to speak to us.

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

I want to thank you and the committee for giving a private member and this issue the attention I believe it deserves. It's nice to see a committee give recognition to the efforts of not only a private member, as is my case, but a citizen of my riding, Robert Manuel, whose idea this was as a millennium project. So we have in this bill something coming from the very grassroots of the country. It's an idea I hope you will agree has merit. I was pleased to take his idea and run with it on behalf of veterans living and passed on and our present military personnel in Canada and around the world as a symbol of Canada's tremendous heritage in military operations and peacekeeping.

I will keep my remarks brief, Mr. Chair. I'm going to have my assistant pass one of these coins down each side of the table for you to look at. This is a Royal Canadian Mint coin in commemoration of the Battle of Vimy Ridge. This year being the 85th anniversary, I think it's most appropriate. I don't need to get these back. We can have a raffle if you like.

This bill received second reading on June 18. It received, thankfully, unanimous support in the House of Commons for it to come to your committee. I am hopeful that you will carry this march forward.

I'm just going to summarize the context of the battle. There's a wonderful summary in the coin itself, a nice synopsis of what happened. Then I will take a few moments to expand on that.

Vimy Ridge, which is in France, was a key strategic position that Germany had captured just four months into the First World War. France tried valiantly to recapture its vital coalfields, but lost two battles and 110,000 soldiers. Britain also tried to drive out the German army, but failed. Then on April 9, 1917, four Canadian army divisions, including soldiers from right across the country, every province, every region of the country, that were stationed in France launched their assault on the German position at Vimy Ridge. The brutal struggle lasted for three days, but in the end Canada prevailed and reclaimed this territory for the allies.

Many consider Vimy Ridge to be Canada's greatest achievement of the First World War, yet its victory extended far beyond military strategy to championing of a nation's identity. By forging its disparate batallions into one entity, Canada united the multitude of cultures that existed at home. Soldiers who had enlisted as untrained volunteers joined ranks with the war's most skilled and respected batallions. Most importantly, a nation that had always been viewed as a British colony completed a seemingly impossible task, thereby winning its identity as a respected nation on the world stage. That successful effort at Vimy Ridge earned Canada a signature at the Treaty of Versailles. It recognized that countless thousands of soldiers had already been lost in attempting to recapture that critical position in France. Many believe that was a turning point in the First World War. Canada lost 4,000 men during the battle.

I would like to point out--you all have a copy--that the Royal Canadian Legion, along with many others, has endorsed this bill. I have letters from Lloyd Robertson of CTV, from the National Council of Veterans Associations of Canada, and many other people and legions across this country expressing support for this bill.

Á (1110)

There's one question I'm sure somebody will ask, and I think you should. If we're going to honour by a special day one battle, what about them all? I would suggest to you, colleagues, that this battle represents them all. The culture of remembrance in this country is growing stronger. I see that in my own riding, and maybe you see it in your ridings. By recognizing with a special day, not a holiday, on the calendar of heritage for the country, a day that recognizes the historical and military significance of April 9, and having the Peace Tower flag only at half mast, in accordance with whatever rules of protocol there are for the flag on the Peace Tower, similarly recognizing the importance of that day, I think we then honour all great battles Canadian soldiers have participated in, whatever war it was, World Wars I and II, Korea, more recently Afghanistan. All those I've spoken to unanimously feel this is the right thing to do.

I won't say much more, other than to point out that there are some really excellent, historical documents put out by Veterans Affairs. There are three of them that give excellent details, more than I have provided here. So I ask you to support this, not for me, but for all those who continue to represent Canada as peacekeepers and, when necessary, in action, as we've seen in Afghanistan.

If I seem a little beleaguered today, I'm jetlagged. I have just, by coincidence, come back from nine days in Bosnia with our peacekeepers, along with three other colleagues. I can tell you, the respect our peacekeepers are given by those who need our help is incredible. That respect is built upon the tremendous tradition of professional, well-trained, well-organized, well-led battalions, those people who have given so much to Canada in the past, whether they've lost their lives in battle, passed on simply as a result of old age or for other health reasons, or are with us today. Whatever we can do to honour everyone who has given to Canada in this way I think will reflect well on us as parliamentarians.

Thank you very much, Mr. Chair.

Á (1115)

The Chair: Thank you very much, Mr. St. Denis.

Is it the case that Vimy Ridge is now Canadian territory, given by France to Canada?

Mr. Brent St. Denis: I have not been honoured with the chance to visit, but I understand the title of the land at the memorial is in the name of this country. I believe the title of that piece of land has been given to Canada, and that our memorial there is appropriately on--

The Chair: Canadian soil.

Mr. Brent St. Denis: Yes.

The Chair: Thank you.

Are there any questions for Mr. St. Denis?

Mr. Benoit.

Mr. Leon Benoit (Lakeland, Canadian Alliance): I just want to congratulate you, Mr. St. Denis, on bringing this forth, and also commend you for acknowledging that it was initiated by a constituent and you're doing it on his behalf. I think that's commendable.

Mr. Brent St. Denis: Thank you.

Mr. Leon Benoit: This isn't a trivial bill in my mind. I do believe the Battle of Vimy Ridge really did cement Canada as a country. Canadians at that point stopped being British subjects and really became Canadian citizens. I was fortunate enough just last week to go to Gallipoli, where a First World War battle really cemented Australia and New Zealand as countries. Busload after busload of Australians and New Zealanders are visiting. They have this renewed recognition of the importance of that battle in cementing their countries as nations. Unfortunately, they never had the level of victory in that battle that Canada had at Vimy.

So I really want to commend you. I think you have the bill just right. It's a day for the flag to be flown at half-mast on the Peace Tower to recognize the importance of the day, and yet we're not going to interfere with normal activities, other than encouraging people to remember. So I think you have it just right. I thank you very much for bringing this forward.

Mr. Brent St. Denis: Thank you.

The Chair: Mr. Harvard.

Mr. John Harvard (Charleswood —St. James—Assiniboia, Lib.): I just have a couple of questions. It is my understanding with respect to the lowering of flags on November 11, which is Remembrance Day, that they are lowered at sunrise and kept lowered until sunset.

Mr. Brent St. Denis: I believe that's the protocol.

Mr. John Harvard: Would the April 9 practice be consistent with that?

Á (1120)

Mr. Brent St. Denis: I didn't detail that in the bill. I took it for granted that the flag would be lowered in accordance with the normal routine and protocol for that. I would expect no more than what is done for November 11. I think that would be appropriate.

Mr. John Harvard: This bill, if it becomes an act, would recognize a particular battle. Canadian soldiers over a number of wars have distinguished themselves in a number of battles. Vimy Ridge is one, one of the best known, of course. There's Dieppe in the Second World War, Normandy, Paschendale, a number of famous battles. I wouldn't be surprised if this bill, on passing, prompted some other Canadians to want to have a similar kind of bill passed in recognition of other battles where Canadian soldiers fought heroicly. What would you say to that?

Mr. Brent St. Denis: Far be it from me to discourage anyone from promoting remembrance, but I would suggest that this recognition stands out, inasmuch as it was the first battle where we fought as a country under Canadian command. I think that is what distinguishes it. Somebody who came forward with another bill for another day would have to make a case for uniqueness. I think that's what is unique about this. It's one of many important battles, and a critical one, but because it's recognized as the battle where Canadians from coast to coast for the first time went into battle and succeeded where others had failed, commanded by a Canadian, that's what distinguishes it. So to me, it represents all battles.

Mr. John Harvard: But you would recognize that each battle has its own distinctions.

Mr. Brent St. Denis: They're all unique and special, and I wouldn't presume to judge any other battle, only to say this was the first. We often in our society do honour to our firsts, and this is the first time Canadians fought as Canadians, and Canadians from every province of the country, according to my records.

The Chair: Ms. Bulte, then Mr. Bonwick.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): I had a similar question to Mr. Harvard's, but I wanted to add to what the official opposition said and commend you on your work and your passion in delivering this bill to us today. I would also recommend to everyone, if you have not read it yet, Jane Urquhart's beautiful book The Stone Carvers, which is about building the memorial at Vimy Ridge.

Mr. Brent St. Denis: Thank you.

The Chair: Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Congratulations, Brent.

Mr. Brent St. Denis: Thank you, Paul.

Mr. Paul Bonwick: What an honour it must be for you to bring this forward.

Mr. Brent St. Denis: It is indeed. I was surprised how soon I was able to be accommodated by your committee, and again, I appreciate that. As I have just last night got in from Bosnia, fresh from spending some time with our peacekeepers, this is a particularly special day for me.

Mr. Paul Bonwick: At last night's meeting, Mr. Chairman, when we had some of the aboriginal communities sitting in front of our committee, one thing came through loud and clear, the passionate sense of responsibility they have to remember. It's absolutely critical. They look at it as a responsibility, not only for their generation to remember, but to make sure future generations also understand the sacrifices that were made for them and us to enjoy the qualify of life we do.

As to this bringing other requests forward, I couldn't agree with you more that we don't want to dissuade people from doing that. We'll judge them all individually as they come forward. I have one I will be bringing forward to the committee, hopefully in the not too distant future, with regard to the merchant navy veterans and a similar acknowledgment for that particular day and the thousands upon thousands of merchant navy veterans that sacrificed their lives to supply the troops.

So congratulations, Brent. You've got my full support and, on behalf of the legions in my riding, my undying appreciation.

Mr. Brent St. Denis: Thank you, Paul.

The Chair: If there are no further comments, I think we'll move to clause-by-clause of the bill.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): Mr. Chairman, I would like to add a comment to follow up on Mr. Harvard's statements.

My father went to war for five years overseas, but I still wonder about the relevance of emphasizing one specific battle by choosing one special day. At that rate, why not commemorate the other battles as well?

In my opinion, November 11 speaks to everyone who contributed to the Canadian war efforts. What is so special about the battle of Vimy Ridge? We were just given some reasons why there should be a special day; but will there not eventually be other days people will want to dedicate to other battles? I could mention a few other battles in which my father fought and in which our side was victorious, even thought they were not as big as the battle of Vimy Ridge.

As for me, I prefer to abstain rather than to support this initiative, not because I am against the principle, but I think that November 11 already commemorates the participation of several thousand Canadians and Quebeckers in this war effort.

Why not also commemorate the landing in Normandy, as well as other battles? What is more important than emphasizing any specific battle is that we commemorate Canada's war effort and the help we gave to all the European countries in fighting the Nazis.

I am not entirely against this idea, but as a matter of principle, I prefer to abstain.

Á (1125)

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

[English]

There being no other comments, we'll just move to looking at the clause-by-clause. Pursuant to Standing Order 75(1), consideration of clause 1 is postponed.

We'll look at clause 2.

Mr. John Harvard: Can we not just have an omnibus motion to pass all the clauses at once.?

The Chair: Sure, we could do that.

(Clauses 1 to 4 inclusive agreed to)

The Chair: Shall the preamble carry?

Some hon. members: Agreed.

The Chair: Shall the title carry?

Some hon. members: Agreed.

The Chair: Shall the bill carry?

Some hon. members: Agreed.

The Chair: Shall I report the bill, without amendment, to the House?

Some hon. members: Agreed.

The Chair: The bill has been approved by the committee. Congratulations, Mr. St. Denis. We appreciate your presence here and your efforts in putting this forward.

Mr. Brent St. Denis: Thank you very much.

With your indulgence, I have three coins, and I'm going to leave one for you and one for each of the vice-chairs. I'm not sure where the other two coins are.

Mr. John Harvard: I thought I would just keep it.

The Chair: Okay. Thanks very much.

Mr. Brent St. Denis: Thank you very much, colleagues.

The Chair: We'll just suspend for a few minutes to allow the other witnesses to come for the study.

Á (1128)

Á (1131)

The Chair: I call the meeting back to order. May I suggest that while we wait for the Canadian Cable Television Association and others to arrive, we hear from Mr. Morrison?

I'll give the floor to Mr. Ian Morrison of Friends of Canadian Broadcasting.

[Translation]

Mr. Ian Morrison (Spokesperson, Friends of Canadian Broadcasting): Mr. Chairman and committee members, the Friends of Canadian Broadcasting are very grateful for having been invited to join you today to discuss foreign ownership.

Á (1135)

[English]

I must say, it's always a pleasure to sit among leaders of the cable industry. I enjoyed a similar experience with some of the broadcasters just a couple of days ago.

The statute you are reviewing states that the Canadian broadcasting system shall be effectively owned and controlled by Canadians. Our system consists not just of broadcasters, but also broadcasting distribution undertakings, known as BDUs, such as those represented at this round table. Since 1991, when Parliament passed the current Broadcasting Act, restrictions on foreign ownership have already been watered down in response to arguments by broadcasters and cable monopolies that they should enjoy a level playing field with telcos. Now, following Minister Rock's announcement, we see the second act of that drama unfolding, and we're here to urge you not to suspend your disbelief.

As you know, some of the largest licensees who sit here today and those you heard from on Tuesday are both broadcasters and distributors. However, content and delivery are very different industries. On the content side, these businesses are not capital-intensive. Indeed, their equipment costs have declined markedly in recent years through technological enhancements. Their big costs are operating costs. For example, Leonard Asper of CanWest told your committee on March 1 in Winnipeg that his company planned to spend $1 billion during the current group licence period on Canadian programming. One of your colleagues asked him what CanWest planned to spend on American programming during the same period, and he promised, Mr. Chair, to get back to you with an answer. I understand that during the intervening eight months he has yet to deliver on that promise. It makes one wonder how large that number must be.

In this brief statement I won't take up your time restating arguments as to why broadcasting undertakings should remain “effectively owned and controlled by Canadians”. I'll focus instead on the cable industry, the dominant BDUs.

According to CRTC data, between them, COGECO, Rogers, and Shaw have two-thirds of Canada's basic cable subscribers; add Vidéotron and you reach 87%. Unlike most industries actively lobbying on Parliament Hill, each of these big cable companies began and remains family-controlled. The essence of their original business model developed as a result of Parliament's determination that foreign, that is to say American, television broadcasters should not be allowed to own and operate transmitters in this country. Cable's business niche, under territorial monopoly licences from the federal government, has been to bring high-quality American signals into Canadians homes. Even today cable's only legal competition comes from two Canadian-owned satellite distributors, one of them controlled by Shaw, and a handful of small wireless cable systems.

The larger cable companies do a pretty good job on the technical side, but when it comes to public trust and Canadian identity, the general public gives them low marks. In 1993, again in 1995, and again last year Compas Inc., which was until recently Friends' pollster--they had to choose between Friends and a company called CanWest Global, I'm told--posed the following questions to Canadians, and I'm quoting from the Compas poll:

I'm going to read you the names of several groups. Please tell me how much confidence...you have personally in each group to protect Canadian culture and identity on television. You can do this by giving me a rating on a 7 point scale, where 7 means you have a very high level of trust...and 1, the opposite.

Compas reported the results by summing up the percentage of respondents who gave each group a 5 or a 6 or a 7 rating, that is, a high rating. The results varied little over the eight-year period. The CBC topped the trust rating at 70%, CTV was 65%, the CRTC was 60%, Global was 55%, the federal government was 47%, and cable was only 37%. Encouraging news, however, for the cable industry in this is that its score actually rose from a low of 29% in 1995. It's as if the public had heard American cable magnate Leo Hindery Jr.'s keynote speech to the Canadian Cable Television Association's Vancouver convention last April:

You and your associates have been joined at the hip with the U.S. cable industry for so long that we are like Siamese twins with a common purpose.

Á (1140)

Recently, as you know, these big cable companies have entered into a new business, delivering high-speed Internet access to the households they serve. Between them, the four largest cable companies had 1.7 million high-speed customers by mid-2002. That's considerably higher than the combined Bell-Telus total of 1.2 million. These are data from the CRTC's recent broadcast monitoring report. Now the cable industry is arguing their Canadian ownership requirements should mirror those of the telcos. They argue that allowing more foreign investment in Canadian cable will close the gap between the market's evaluation of a Canadian cable subscriber and that of an American subscriber.

First, why do we need to close that gap? How will that benefit the average Canadian? Second, how do Bay Street financial analysts view the cable industry? The market's evaluation is “below investment grade”. Why? The reasons include excess debt, some of it acquired through highly ambitious, overpriced acquisitions. Quebecor, for example, recently acquired Vidéotron for $5.6 billion, nearly the American per-subscriber price. Even Ted Rogers wouldn't pay that price. Rogers chose to buy the Toronto Blue Jays, talking about synergies with Sportsnet. Unfortunately, the Blue Jays lose $50 million each year. And of course, recently Rogers and Shaw have each seen major investments on the Internet go sour. “Below investment grade” means higher costs to borrow, and therefore access to a smaller pool of capital, it's as simple as that.

Cleaning up their balance sheets, refraining from high-risk gambles, these would be alternative strategies in the cable industry's quest for capital. But why bother if the federal government can solve the problem? If Parliament were to accede to the cable industry's demands and permit foreign takeovers, perhaps the valuation of Canadian subscribers would indeed rise, borrowing capacity might increase, but how does that benefit Canadians? Not at all. It does benefit those who control the companies. Remember that the controlling shareholders are members of just four families, Audet, Péladeau, Rogers, and Shaw. Here's how they benefit.

There aren't that many potential buyers in Canada. A change in foreign ownership restrictions means there will be more potential bidders for their shares. That drives up share values. If you raise foreign ownership levels, it ultimately will mean a major pay day for those families. It's just that simple. I'm not saying there's something inherently wrong with that, but let's acknowledge that this is really what it's all about. It certainly hasn't anything to do with benefiting most Canadians.

Here's what Gordon Pitts, the author of the recently published Kings of Convergence, a book you might find entertaining--he's a Globe and Mail reporter--had to say about Ted Rogers' failed $5.4 billion takeover bid for Vidéotron:

Industry watchers suggest that Rogers simply wanted to bulk up on Vidéotron's cable assets. Some suggest that when foreign ownership rules are relaxed, it could offer a buyer a huge volume of subscribers in a concentrated area. The possibility of foreign ownership is always a factor in the cable guys' estate planning, and Ted Rogers is not entirely immune to it.

Pitts offers a parallel comment on the Shaws:

Industry speculation is that if the rules are changed to allow higher foreign ownership of cable companies, an opportunistic U.S. player, perhaps John Malone, would take a much bigger stake in Shaw Communications and possibly buy out the Shaws entirely. That suspicion is reinforced by the sense that J.R., Jim, and Heather Shaw are, above all, pragmatists. They love the business, but they aren't married to it. In the long run the Shaws will likely be sellers, and they will do very well for themselves.

The point is that one effect of a relaxation of foreign ownership rules in this regulated industry would be to put billions of dollars into the pockets of the members of the four families at the stroke of Her Excellency's pen.

Cable likes to position itself as the small underdog up against the giant telcos, but let's not forget how cable operates when it comes to competition. As you may know, for six years now the big cable companies have defied a CRTC order to open their coaxial wires to third-party Internet service providers, known as ISPs. The big stall continues to this day at the expense of the small entrepreneurs who really built the Internet in this country into the force it is today, including those ISPs that rolled out service to small Canadian communities, which continue to be ignored by big cable. Imagine the reaction if it were the telcos denying access to independent ISPs?

Á (1145)

Last year the federal government's national broadband task force recommended that any public funding of broadband infrastructure in remote areas be tied to opening up the lines to third-party access. Friends recommends that the federal government follow that model. Don't even consider the cable industry's foreign investment pleadings until they fully implement third-party access. The CRTC is well placed to monitor this and to let the government know when big cable complies. Thereafter big cable must satisfy public concerns about effective ownership and control by Canadians of its affiliated broadcasting interests before public policy should even consider addressing the cable families' self-serving foreign ownership propositions.

Thank you.

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

Mr. Strahl.

Mr. Chuck Strahl (Fraser Valley, Canadian Alliance): Thank you, Mr. Morrison, for coming today. I think we're probably going to hear a contrasting story from the next set of witnesses, so this is going to be an interesting debate this morning.

You mentioned that the access for ISPs has been denied, even though it should be encouraged and so on. That's nothing to do with foreign ownership, it has to do with reluctant companies, non-compliant companies. Would it change under foreign ownership? Would it be better? Isn't that a matter not so of who owns it, but of weak regulations or weak-kneed regulators?

Mr. Ian Morrison: I think you're correct, it would probably not change under foreign ownership. I used it to indicate something about the behaviour of these companies that have grown out of a monopoly culture in dealing with smaller entities and entrepreneurs, and in defiance of the duly authorized order of an agent of this Parliament.

Mr. Chuck Strahl: This monopoly culture you talk about seems to me to exist in part because we've insisted on catering to four families, as you say, who got everybody by the face in a downhill pull. You don't expand the market, you don't expand the competition, because no one else can get into the market in a big enough way. The only other people who might get into the market, you could argue, are people with enough access to foreign funds to come in and challenge them head-on. Otherwise, you just get the four families continuing; they'll bleat, but they've still got the whole enchilada.

Mr. Ian Morrison: The origin of the cable industry was different, there were a lot more than four families; I'm going to guess that there might have been 100 families. Gradually, the larger fish gobbled up the littler ones, and indeed, had the Rogers bid for Vidéotron succeeded, we'd be taking about three families today. It's a highly concentrated industry, but based on a territorial monopoly, which continues to be the case today. The competition comes from other technologies, and it's rather unlikely that you or I, for example, might be able to go into business and raise enough capital to string coaxial cable all around the city of Calgary.

Á (1150)

Mr. Chuck Strahl: I'll agree with you on that one, but my point is that the current system, not allowing foreign ownership, for whatever reasons, the big fish gobbling up the little ones, has resulted in three and four families dominating the market. You can't do much worse than that by inviting foreign ownership in, you might do better. It might be American competition, but at least there might be some more people, the argument goes, interested in competing with these guys. There aren't that many folks in Canada who can go head-to-head. We don't have enough volume.

Mr. Ian Morrison: Your scenario might work, but the view on the street, for example, from informed observers like Mr. Pitts, whose book is highly entertaining and quite complimentary to a number of these family entrepreneur billionaires, is not that foreign capital would come in and compete with these established players, but that it would come in and buy their plant. So what you would get, for example, in the scenario I quoted would be a Shaw Communications controlled from Denver by Mr. Malone's TCI. That would not introduce any competition, nor would it remove it, in the market, it would just mean the owners were non-Canadian.

I tried to boil my remarks down, because I thought I would be one of many at this point, but the significance is this. I'll use the example of the Shaws, but this would apply to Rogers as well, and certainly to the Péladeaus, less so to the Audets. In the case of Shaw, J.R. Shaw personally controls 76% or 78% of the voting shares of both Shaw Communications, the cable entity, and Corus, which is the separate corporate structure traded on the Toronto Stock Exchange, the entity all of the broadcasting undertakings are in. So were Mr. Malone able to buy Shaw Communications, that would be one thing, were he able to buy the broadcasting undertakings, that has a lot more to do with control over the content that you and I get to see. There is this issue that all these big players have both the content and the distribution roles, and indeed, the distribution of audiovisual signals plus, as I mentioned, high-speed Internet service.

Mr. Chuck Strahl: Can't you still control content regardless of who owns it? You can still regulate content, what must go out over the cable or whatever. You can still have Canadian content rules, if that's the desire, without specifying who owns it.

Mr. Ian Morrison: I think you have a valid point. There's a distinction to be made between the nationality of ownership and the content that goes out through the transmitters and the wires. That's legitimate. However, with the exception of one member of the OECD, New Zealand, I'm not aware of any countries that do not have restrictions on the nationality of ownership of major broadcasting undertakings. For example, it was only through the good graces of the United States Congress that Mr. Rupert Murdoch was made an American citizen and was thus able to own some of his big broadcasting interests in the United States.

Mr. Chuck Strahl: Thank you.

The Chair: Mrs. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you for this presentation.

You don't believe these companies are really looking for competition, they're looking for profits, they're looking to be bought out. That would be the final picture we're looking at. I think that is really something we have to look at closely.

It appears there's more sympathy with the idea of increased foreign ownership in telecommunications undertakings. The cable and broadcasting industry are arguing that it would be unfair to raise the levels for telco companies and not for the others, since there's more potential for cross-ownership and cross-subsidy. Isn't it the same broadcasters and cable companies who brought us cross-media ownership in the first place?

Á (1155)

Mr. Ian Morrison: Yes.

Ms. Wendy Lill: Isn't that comparable to the idea of the guy who murdered his parents then begging mercy on the ground that he's an orphan?

Mr. Ian Morrison: You're on your own with the image, but you correctly grasped a simple fact. If you go back a decade, there was--I'm going to oversimplify--an 80% Canadian ownership requirement and Canadian citizenship of boards of directors of broadcasting entities, and a parallel thing in the Telecommunications Act of 67% for telcos. An argument was made saying, let's bring down broadcasting to be on a parallel with telcos. It's more complicated than that, because of holding companies, etc., but without going into the complication, what you're getting is a watering down. Now you're getting Minister Rock saying maybe it would be a good idea if telcos were at this level. There's a pattern at work here where, for equity reasons, the broadcasters and cable should go down as well.

You, of course, have to ask the question, what's in the national interest? You are reviewing a statute that says the Canadian system shall be effectively owned and controlled by Canadians. There comes a point where that does not happen. Even people who might take Mr. Strahl's argument that ownership and content are separate issues would probably not fritter away a bargaining chip in future negotiations with the European community or the United States by just voluntarily reducing foreign ownership, even for the telecommunications business, if other countries were not willing to do so. I would refer you to an argument by the British minister, on the introduction of the communications bill, essentially saying the British government sees no likelihood of any change in American law on this in the immediate future.

Ms. Wendy Lill: On the issue of ownership, content, and carriage, we hear a lot about how they can be separated. I want to ask you a specific question. The cable industry makes the argument that we can separate these, and therefore increase ownership of cable without affecting content. I'm wondering about whether that flies in the face of constitutional law, the radio reference case, in which federal regulatory jurisdiction over the message content was established based on control of the medium of carriage. How would you maintain Canadian control of the message if you let that medium fall into foreign hands? Wouldn't we end up with a situation analogous to movie theatres, where the federal government has no jurisdiction, where theatres are provincially regulated, and we have almost no Canadian movies on the screens?

Mr. Ian Morrison: I think the opinions you are expressing are valid and really worthy of serious consideration. I was impressed by a comment Mr. Gourd of Bell Globemedia made sitting around here the other day when he spoke about the example from Quebec. It seems to me that you and he are on the same wavelength there.

Ms. Wendy Lill: Thank you.

The Chair: Mr. Bonwick.

Mr. Paul Bonwick: I would start by saying that I'm disappointed with and take exception to some of your presentation. What I expected was a technical argument, and I think that is what best serves the committee, a factual argument to demonstrate that Canadians would be worse off in repect of carriage and content, more content, should we look at increasing foreign investor limits. I'm not saying it's absolutely a good thing or absolutely a bad thing, what I'm looking for is witnesses and experts within the field with technical arguments about why it is good or why it is bad.

Vilifying arguably successful Canadian families, in my opinion, offers nothing to the argument. I think we should be proud of the fact that we have families that are successful. To talk about--and I wrote down a couple of the quotes--lining pockets with billions of dollars in a self-serving manner would suggest that there are, arguably, 15 people in the country benefiting from the cable industry at present or likely to benefit should there be foreign investment. I would suggest that the record should definitely demonstrate that there are investors who benefit now and will in the future. There are manufacturers that benefit, there are lenders that benefit, there are municipalities that benefit by way of taxes, provinces, and the federal government. Finally, and most importantly, I would suggest that if you asked their employees, they would suggest that they benefit as well in the fact that they are gainfully employed.

Mr. Ian Morrison: It seems to me you would make a pretty good witness yourself.

Mr. Paul Bonwick: I think it's important that the record show, when somebody makes a statement of, in my interpretation, vilification, there's a response to it.

I think we do agree that there's an opportunity to separate, as Mr. Strahl showed, carriage from content, if it's properly enforced. Would you agree that foreign investors must see opportunity for growth and expansion within the industry if, in fact, they are prepared to offer investment?

Second, how do you judge the Canadian situation today as compared to other countries with respect to not only the delivery or distribution system, but access to Canadian content as well? .

Â (1200)

Mr. Ian Morrison: First, you may have heard something I didn't say. I would challenge you to identify where I in any way vilified any families in my presentation. I drew attention to their vested interest, what would be at stake, and where the money could well go as a result of the change in foreign investment.

With respect to other countries, we have to compare apples to apples. There aren't that many countries where there is a level of penetration of coaxial cable as strong as in Canada. It's a pretty strong record. I now sound like a propagandist for the industry, but I'll try to distinguish myself from that by saying they actually have got to a level where something like 80% of Canadian households are passed by cable, and the vast majority of those people actually subscribe. In the last year, faced with an element of competition, they, for the first time, showed a drop of 2% or 3% in their penetration rates in this country.So to compare them, for example, to the U.K. or to the entire United States would be misplaced.

The Chair: I'm sorry. There are two photographers here, one from the National Post and one from the Globe and Mail. They want to take pictures. I've asked you to wait till the members give you their consent. I hope you haven't taken any. I think the clerk made that quite clear. I would like to find out if members are agreeable to the newspapers taking pictures here.

Mr. John Harvard: Don't we have a policy that when we are in session, we don't have pictures?

Ms. Christiane Gagnon: That is the liberty of the press. They could do it quickly.

Mr. Paul Bonwick: Is there a House policy that restricts press, photographers, and TV cameras from operating, or is it freedom of the press at a public meeting?

Mr. John Harvard: The practice is that these things are taken before the gavel comes down, so that there are no disruptions to the proceedings, which is what is happening right now. That's the reason we don't allow it. As far as I know, it is the practice of all the committees.

The Chair: We don't want to have a debate on this, we just want to--

[Translation]

Ms. Christiane Gagnon: But when the minister comes to this committee, taking photos is not a problem; I do not see why there should be one.

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The Chair: Photos can be taken at the beginning, but not during the session.

[English]

So I would suggest that so we don't disrupt the witnesses, you take your pictures now.

Mr. Chuck Strahl: I'm pretty disappointed where they are aiming the cameras, that's the big problem.

Mr. Ian Morrison: Mr. Strahl, I've always thought you to be very photogenic.

The Chair: I think that's enough now, don't you?

Mr. Morrison, sorry to have interrupted you. We just wanted to clear this up. Go ahead.

Mr. Ian Morrison: I was trying to make the case that I don't think you can draw too many international comparisons without taking into account that the Canadian cable industry is a very successful, dominant industry, and now highly concentrated. Perhaps the closest analogy would be in the United States.

The Chair: Thank you.

Mr. Harvard.

Mr. John Harvard: I have just a couple of questions, Mr. Morrison. I take it that if the federal government were to relax foreign ownership rules for cable and some of these other services, it would work in their pecuniary interest. Let's set that aside for a second. I take it from you also that if the foreign ownership rules were relaxed, there would be no benefit to us as consumers, there would be no advantage to us. In fact, you are saying it would not be in our interest at all, it would be somewhat detrimental. Is it your conclusion that despite the restriction on foreign investment in this country, the cable companies have done quite well vis-à-vis their counterparts in the United States, that they've been able to amass capital and other things to serve the market?

Mr. Ian Morrison: I think I said in my brief presentation, on a technical level, the cable industry, particularly the large cable interests that are at this table today, have done a fairly good job. And Mr. Strahl is quite correct to draw a distinction between ownership and policy. You can still administer your own policies. The rates charged to cable subscribers in the United States of America, on a foreign exchange basis, are quite a bit higher than those we pay here. If we did have a situation of Mr. Malone controlling Shaw Communications, as we discussed earlier, we'd have to be quite vigilant that the Malone cable rates did not come into Canada, because that would, of course, be a negative. There's a danger of a price rise. That can be controlled through regulation, although the CRTC has moved, as you may know, to deregulate cable rates, except for the most basic tier. Even there some of these companies are applying for deregulation on the ground that competition has reached 5% of the market. So there is a potential price issue down the road. I'm not recommending, of course, that you go down that road.

Â (1210)

Mr. John Harvard: Basically, what you're saying is that there's nothing in it for us in going down this road. If there is a consequence for us, it's bad. You just don't see any positive developments for the consumers out of this. That's basically what you're saying, Ian, are you not?

Mr. Ian Morrison: Yes, on balance.

Mr. John Harvard: We at this committee are always concerned about the cultural development of this country, the cultural supports. Does the fact that the cable companies are largely carriers of programming in any way diminish your concerns?

Mr. Ian Morrison: While I wouldn't claim to have all the data in my hands, I think you're aware that at least two of the large companies at this table today are affiliated with organizations that are involved in content delivery, they're actual broadcasters. That raises an issue I touched on. Just through the fact that they're engaged in delivery, they have significant obligations. These are obligations that are imposed on them by the CRTC. They, like other distributors, have to contribute a certain amount of money to a combination of their community programming and certain approved funds that fund television development. That's an important source of financing. They tend to take credit for it, I tend to think of it as their subscribers' money being redirected under federal public policy into Canadian creation.

They are an important instrument in the Canadian audiovisual system. They should be treated with great care, but they should in no way be able to always get what they want, when, with our eyes open, we can see who ultimately would benefit.

Mr. John Harvard: Thank you.

The Vice-Chair (Mr. Paul Bonwick): Thank you, Mr. Harvard. What we'll do now, because of time, is start with the other guests who have just arrived.

[Translation]

Ms. Christiane Gagnon: I did not put any questions given the fact that Ms. Lill went before me. So in principle, I should be entitled to a question.

If we eliminated the limit on the percentage of ownership for companies, what impact would this have, for instance, on freedom of the press? Would it be a hazard? We know that concentration of press ownership and freedom of the press...

Mr. Ian Morrison: Do you mean the print media?

Ms. Christiane Gagnon: Yes, the print media, but also communications and news. Would this attitude be on the rise? Do you think that this may also be dangerous?

Mr. Ian Morrison: Probably, Ms. Gagnon. Let me say that I could answer you more easily in English.

[English]

I would say the major concern of a group like the Friends of Canadian Broadcasting on the topic you raised would rest with three entities. They would be, of course, the Péladeaus and their cross-media-ownership position, which was discussed two days ago here, the Aspers, and the widely held company that controls Bell Globemedia. Those would be the three, rather than the people who are sitting at this table today. It's always a matter of concern when you get a level of concentration of ownership in both fields. You are quite correct, with the freedom of expression issue, as opposed to the fiction programming and Canadian content issues, to be concerned primarily with the written press, because that is the most highly editorialized part of our media.

[Translation]

Ms. Christiane Gagnon: Thank you.

[English]

The Vice-Chair (Mr. Paul Bonwick): The chairman had to leave to make a speech in the House and has asked me to fill in for him. During the transition I thought he had covered off everybody at the table, so I didn't go by you intentionally.

We will now open the floor to our witnesses. I just caution that there are four of you to present, so if you can be reasonably succinct in your remarks, so we can get one or two rounds of questions by my colleagues, I would appreciate it.

We'll start off with Janet Yale, president and chief executive officer of the Canadian Cable Television Association.

Ms. Janet Yale (President and Chief Executive Officer, Canadian Cable Television Association): Thank you, Mr. Chairman and members of the committee.

Let me first apologize for being late. A number of us were speaking at another conference here in Ottawa. But we are very pleased to appear in front of you today.

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[Translation]

We are very glad to appear before the Standing Committee on Canadian Heritage during this review of the Canadian broadcasting system. We especially want to thank the committee members for taking the time to attend this panel.

[English]

The cable industry has some very specific recommendations to present to you, and we are going to be brief. We're going to share our presentation. Let me introduce the other members of the panel, Monsieur Louis Audet, president and CEO of COGECO Inc., Mr. Jim Shaw, CEO, Shaw Communications, and Mr. John Tory, president and CEO of Rogers Cable. If you'll bear with me, we're going to walk you quickly through the presentation we have prepared for you.

Let me begin by briefly saying the cable industry is very proud of its accomplishments. We now serve over 7.9 million customers. We have 2 million broadband Internet subscribers; 9.4 million homes can connect to the Internet. And we have major capital investments and over 200,000 kilometres of network infrastructure in place. That is just a brief snapshot of who we are.

Let me just focus, at a high level, on our key recommendation before you today. The cable industry supports and is advocating liberalization of the foreign ownership rules for broadcast distribution undertakings, as well as telecom companies. We believe there are significant benefits that flow from that, access to larger pools of capital, incentives to expand our networks, competitive fairness between telecom and cable companies, and the ability to continue to expand our infrastructure in support of the broadcasting system in this country.

Let me also be clear at the outset that we do not support a change in ownership rules for content providers, and we will explain to you during the course of our presentation how it is possible to liberalize for cable companies, but not for content providers.

With that, I will turn it over to Louis Audet.

Mr. Louis Audet (President and CEO, COGECO Inc.): Thank you, Janet.

This next section on convergence and competitive equity I'll do in French, but of course, I'll be happy to answer your questions in English.

[Translation]

In 1996, the federal government implemented a convergence policy in order to encourage competition among telecommunications companies, and cable broadcasters entered the telecommunications market and telephone companies got into the video market. Thus, pursuant to CRTC Decision 96-1, cable broadcasters are also carriers as defined in the Telecommunications Act. Thus, cable companies deliver television services as well as telecommunications services like the Internet, over a single wire.

As for telephone companies, they also offer telephone services, high speed Internet service and television signals over a single wire. Here we are referring to Telus, Alliant, and Sasktel, which means that you may see two competing landline cable networks that occasionally share the same infrastructure, although they are distinct landline networks. And each of these two networks can offer a full range of services.

Obviously, Bell is an exception as it transmits video signals by satellite rather than by cable. But just this morning, at the International Institute of Communications conference, the president of Bell confided that in the longer term, he was also considering wire distribution. This makes hybrid carriers of both telephone companies and cable broadcasters, as they are part “telecom carriers” under the Telecommunications Act, and part “distribution undertaking” under the Broadcasting Act. These two components cannot be separated because they both exist on a single integrated network. This is why we think that for the sake of fair competition, cable broadcasters and telephone companies should be treated in the same way when liberalizing the regulations on foreign ownership.

Facilities-based competition, which is competition among companies that have their own facilities, as is the case for telecom carriers and cable companies, has allowed Canada to become a world leader. For instance, we can see this in the Internet where the service is widely available at very reasonable prices.

Likewise, there is competition in distribution where satellite and cable distributors succeeded in providing digital service to more than 3 million clients. This is progress, and no one should stop progress. Liberalization for telecom carriers only would create, we think, a competitive imbalance and place government's convergence policy at risk.

Â (1220)

[English]

Anything short of equal treatment would be dangerous, unfair, and contrary to the public interest.

Jim.

Mr. Jim Shaw (CEO, Shaw Communications Inc.): Thank you, Louis.

Cable TV is a very capital-intensive business. Our platform is just starting to develop for the next generation of services, such as digital, which currently stands at 15% to 20% penetration of the total network in Canada, and high-speed, which currently has a penetration of just over 20% across this great nation of ours. It still is one of the highest in the world and is competitive and deregulated. Cable operators have invested heavily, and yet more is still required. As you can see from the charts enclosed in the table, access to capital allows us to be builders of the road. As we continue to ensure that we're world leaders, we need to continue to develop this road we build. Canadians demand quality products, and that will never go away. New services, such as video on demand and HDTV, are yet in their infancy. These will further stretch financing resources to high levels.

Current sources of financing are being challenged. Many of you have seen across North America rating agencies downgrading many companies and many access-to-capital markets closing. the high-yield market has not been open for some six months now, and it's not even expected to open this year. We've reviewed with all these companies, and they're all concerned about debt levels. So companies are going to have to finance on debt and equity levels. The Canadian banking system has started to limit exposure to telecom and cable across the board. One example would be the report last week that the TD Bank, in one year, has dropped loan financing of telecom and cable from $5.5 billion to $1.5 billion. Sources of financing for the industry's development are even more critical as we move forward.

It is our view that lifting the ownership restrictions would have a positive effect on telecom and cable sectors and allow these companies to build the infrastructure to drive continued expansion of the Canadian content realm.

I'd now like to turn it over to John Tory.

Mr. John Tory (President and CEO, Rogers Cable Inc.): Thank you.

I guess I'm going to address what we're not here asking for and specifically the question of the separation of carriage and content. It is our view, and I think it is fact, that the liberalization of ownership on carriage does not and will not mean a change in content delivered by the businesses we represent here today. The content-related rules, as they apply to distribution undertakings such as ours, will remain unchanged regardless of who owns those undertakings. This includes things like the current “must carry” rules, the packaging rules, and so on. Those rules are set irrespective of the ownership of the system. So we are here saying there is a separation today between those measures that protect and promote Canadian content and those that relate to ownership. We're not here asking for change to the rules with respect to content providers, and in fact, we believe they should not be changed. Mr. Morrison acknowledged the importance of these rules, and it is these rules that have a significant impact on what we carry, how we sell programming, and how we work with broadcasters to build the Canadian broadcasting system.

To the extent that the advent of more liberalized foreign ownership rules creates any concern because there are companies in which there are both content and carriage assets or businesses, we believe structural separation will, can, and does ensure that liberalized ownership rules for carriage will not affect content. The three companies that are represented here today have, to some degree, media assets as well as distribution assets, and they have already structured those companies in such a way that the media assets and the distribution assets are in different parts of the enterprise. If the foreign ownership rules were to be liberalized and there were a concern with ensuring that those elements were even more structurally separated than is the case today, there would be few, if any, steps required, and they could easily be taken to ensure a complete structural separate between content and carrier.

So we are not here asking for or advocating any changes with respect to the rules on content. We believe the existing structural separation and other changes that could be made to further cement it would be sufficient to protect the Canadian content rules, while at the same time giving our companies, as Jim said, the benefits of liberalized foreign ownership rules and greater access to capital.

Janet.

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Ms. Janet Yale: Thank you.

The last couple of pages in our presentation answer the following question, which we know is very much on people's minds. Given that cable companies, as well as broadcasters, are covered by the Broadcasting Act, how would you, practically speaking, change the ownership rules for distribution undertakings like cable companies, but not for broadcasters, the content providers in this country? In our view, it's actually fairly straightforward, because the existing foreign ownership rules are contained in a direction to the CRTC called “Ineligibility of Non-Canadians”, and that direction can be amended to apply to the content providers, but not to distribution undertakings, as those terms are defined in the act. The last page of the presentation provides for you the actual wording change that would accomplish our recommendation, to liberalize foreign ownership rules for cable companies, but not for content providers. We wanted to make sure you had in front of you an actual drafting option, so that you could see how it would be done.

We look forward to your questions.

The Vice-Chair (Mr. Paul Bonwick): Thank you, Ms. Yale.

For the first round of questioning we'll go to Mr. Strahl. Mr. Lincoln has been trying to follow a format of about five minutes per questioner for the first round, and hopefully, we'll get a chance for two rounds.

Mr. Strahl.

Mr. Chuck Strahl: Thank you for that presentation. You missed the exciting first round, but we'll now get into it here and see what we can come up with.

We see your description of the benefits that could come from increased foreign investment. What will happen if it doesn't go ahead? Is there a doomsday scenario here? Will we muddle along with the current Canadian ownership rules, or are you suggesting that trouble is on the horizon without it?

Mr. Jim Shaw: The industries are strong and they will build ahead, and I don't have to say to you we would be bankrupt if this didn't happen. It's a matter of how much we want the network to develop, how much we want to be leaders in Canada, and how much this new money creates innovation, jobs, lots of things for Canadians. We feel that this would further the development and further our content ability. Right now our platforms are so minute that even the new digital channels are having a hard time making the financial requirements and their Canadian content requirements, though we've only penetrated 20% of the homes in Canada. Even our Internet, which is a world success, has still only penetrated below 30%. So there are a lot more requirements on the network going forward, and we see people wanting more access to the network. I think, the more access we have to capital, the more we can flourish.

Â (1230)

Mr. John Tory: There are a few, but we'd all like to see more industries in which Canada genuinely has been in a global leader position, not number three or number four, but number one. With cable television and the development, in particular, of broadband Internet access, we have been first in the world in respect of the degree to which we've deployed it, the speed with which we've deployed it, the number of people who have it, and so forth. I think we've done that thanks to a lot of pioneers, and in the cable television world across the globe the people who are here represented at this table and others who aren't here have been pioneers. As Jim said, nobody is arguing the businesses are going to go out of business, but I think, when we achieve a position of global leadership in an industry such as this, it's something we'd like to keep.

Jim talked about the state of the Canadian capital markets. That's partly a function of the size of the country, the times we're in, and so forth, but the demand for capital to maintain your position of global leadership doesn't go away. So you have to look for new, different, and additional places to get that capital, including, as Jim said, equity capital, if you want to maintain a position of global leadership.

What's in it for Canadians? Canadians were the first people in the world to have broadband access, Canadians have a deeper penetration of broadband access today than any other country in the world. The government has said, through its national broadband task force, which Jim, Louis, and I were all pleased to be part of, it wants to make sure more Canadians get access to broadband. In order to find the technology, for example, to make that cost-effective and so on, more capital will be needed to maintain this position of global leadership and achieve some of the government's stated public policy objectives.

Mr. Chuck Strahl: In the last budget too there was a lot of chatter about a lot of new funds for broadband access and so on that didn't materialize, and I don't think it's going to, frankly, from the federal government. We're going to have to find that money from somewhere. I just don't see the problem in what your proposing here. I do think you can easily adjust the Canadian cultural issue outside of worrying about whether there's more foreign money invested in cable systems. I personally don't see a big problem with it. In fact, I would argue that even on the broadcasting side--I know you're not advocating that--more money into the system helps people do a better job. When money is scarce, and it is, and Canada is not that big a market, and you're raising money in these converged industries, I think you'll have to go outside.

There is an argument that opening it up will just be a windfall for the current shareholders; they'll be able to sell out and make a huge profit. What do you say?

Mr. Jim Shaw: These companies are owned by Canadians, and all Canadians are or have the potential to be shareholders. My father, when he passed me the job, said, this is just a licence to spend, and so you're going to get to spend and spend and spend, and all we ever seem to do is spend. We're trying to reverse that trend, which might be a popular thing on the Hill here too, but it's very hard to do that. When you're used to building infrastructure and roads, you tend to do that. These companies are not owned by individuals, they're owned by multitudes of Canadians and other parties, and there's a natural progression. I think whether somebody's shares go up a dollar or down a dollar is not the issue at all, but how we develop these roadways to be the leader we are.

Mr. Louis Audet: And I think the issue at times is being misconstrued as people wanting to sell out. In fact, I would like to stress that the people before you, as Jim said, are not alone. The Canadian public is in this with us. If you follow what John has explained earlier, we've been in the forefront of developing a high performance infrastructure. So it is not an issue of selling out, but of being able to sell equity at a fair price. The size of the Canadian market is such that doing that has become extremely difficult. The value of shares in Canada, because the market is so small, is well below what it should be, and in particular what you would find it to be in the United States, generally speaking. That is the crux of the problem. We can get debt in world markets, south of the border in particular, but being able to issue equity to people who have an interest in buying it at fair and higher prices, to keep the balance between debt and equity and be able to build forward, as Jim has suggested, is really what we're looking for.

Â (1235)

The Vice-Chair (Mr. Paul Bonwick): Thank you.

Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: Thank you.

One of the issues linked to the easing of restrictions on foreign ownership is the quality of the content and the population's access to content. You noted that more funding would be committed to broad band services and one of the advantages for the consumer would be his ability to access a wider range of products. Let me come back to this issue of advantages for the consumer.

We went on a tour to investigate the Broadcasting Act, which engaged us in serious reflection on the accessibility and quality of local programming and the resources needed to meet these requirements. How could easing restrictions on foreign ownership not only provide more accessibility, but also improve program quality and increase investment in creative work?

Would you have to be very generous, as it were, to improve the quality of the programming so that it can better reflect local and regional communities? One of the big issues with regard to the Broadcasting Act is not only broadening accessibility, but also offering the needed resources to various communities.

Yesterday, we met with aboriginal people and we noted that everywhere in Canada, people still do not get all the programming they want. We would like to get it, but we have no tools to carry our effort forward.

Mr. Louis Audet: Ms. Gagnon, thank you for your question. I understand your concern, but as my colleague Jim explained, we stand before you today as road builders. Now by definition, road builders do not build cars and do not direct traffic: they build the roads and the people use them. Content producers use the roads to bring the content to their clients. So your question should not really be aimed at us.

Ms. Christiane Gagnon: As far as convergence or concentration is concerned, your are associated with people who produce content.

Mr. Louis Audet: We belong to structurally separate entities which we do not represent today. Nontherless, I will be pleased to answer your question.

Let me also note that we operate in the context of television stations, specialty channels and radio stations; and we have no desire to access foreign capital in these environments. Consequently, we do not want any changes in the current regulations, as far as these entities are concerned. Currently, they are moving forward very successfully, they are doing their job and they are very committed—I am talking about the sectors in which we work—to providing good service to the local population. In fact, I must say that there is no real direct link with the proposal we are making today, although I do recognize that your concern is legitimate.

[English]

Mr. John Tory: I think there's one place where it can make a difference. Louis said, correctly, we are more the builders of the road and distributors than we are programmers. By making the investment we have made in the networks and spending the billions of dollars we've spent, we have created the capacity, the band width, to allow us to have, in our case for example, enough channels to carry both an English and French community channel in Ottawa and in New Brunswick. We had room when public policy said the aboriginal network should be carried on basic cable. The investment we've made in broadband that Jim Shaw talked about is probably the ultimate distribution network through which people can have access to all kinds of content, including very local content.

So access to capital, equity or otherwise, allows us to build networks that are as robust or have as much capacity as any in the world, which then means there is more of an opportunity to have all kinds of content, including the local content you talked about or very “niche” content, carried and available to people. If it weren't for the availability of that capital, we would have networks that were much less able to do that.

Â (1240)

[Translation]

Ms. Christiane Gagnon: Thank you.

[English]

The Vice-Chair (Mr. Paul Bonwick): Mr. Harvard.

Mr. John Harvard: Thank you.

I must say off the top, I feel right at home with you guys. Mr. Tory, I have your Rogers service in my home in Ottawa, and I have Mr. Shaw's cable service, including Internet service, in my home in Winnipeg, so I'm here as a customer. I must say, John, I'm disappointed that you didn't take up the challenge of seeking the Tory leadership, I would have enjoyed the competition.

Mr. John Tory: Mr. Harvard, I saw Prime Minister Chrétien at a function up here a couple of months ago, and he said he would look forward to vanquishing me as the eighth opposition leader he'd dispatched. That was a defining moment for me, sir.

Mr. John Harvard: My first couple of questions will be directed at you, Mr. Shaw. I've already told you I'm from Winnipeg, and I'm going to take you off topic for a moment. I'm not going to ask you about foreign ownership, I'm going to ask you about a current issue in the city of Winnipeg. This issue was first raised by the CBC in one of its news programs in Winnipeg. Your company is a carrier of the Showcase channel, and on the Showcase channel are two or three rather explicit, violent programs. According to the Broadcast Standards Council regulations, these kinds of programs are to be carried between 9 o'clock in the evening and 6 o'clock in the morning. My understanding is that the programs that are being seen in Winnipeg are technically in compliance, because they emanate from Vancouver and they go out there in that period between 9 and 6 Vancouver time, but some show up between 7 and 9 in the Winnipeg central time zone on a Saturday morning, when the kids are watching. That upsets some people, including me, because I think there's a proper place for those kinds of programming. I'm just wondering whether you, as the carrier, feel a responsibility about that and what you would want to do about it.

Mr. Chuck Strahl: On a point of order, if the witness wants to get into this, it's his business, but we've asked them specifically to come here to talk about foreign owenership. If we wanted to get into a whole bunch of stuff, we could go, but, John, I think you're really diverging from the topic at hand.

Mr. John Harvard: I am diverging, but I'm--

Mr. Chuck Strahl: Just because you've got him in your crosshairs, it doesn't mean you should blow him out of the water.

Mr. John Harvard: I don't think he's in the crosshairs at all. He's the chief executive officer of the company, and I'm sure he can answer it.

The Vice-Chair (Mr. Paul Bonwick): On the point of order, if you want to respond to it, it's not the reason you were invited here, but I'll leave that up to your discretion, Mr. Shaw. There are two minutes left in this round.

Mr. Jim Shaw: There are only two things under the Broadcast Act. We are not able to alter any signal. It's provided to us from a Canadian operator, and we have a choice between a Vancouver feed and an eastern feed. The eastern feed would mean that we would have this explicit programming on in prime time at night, where there are multitudes of viewers, as opposed to having it on early in the morning, where there aren't multitudes of users. We took the way that would show the programming to the least number of people as the best solution for our company in the area, and that's really all we can do.

Mr. John Harvard: Why don't you just delay it, though?

Mr. Jim Shaw: We can't. We're not allowed to alter the signal. It's their signal, they're a Canadian company, and by the Broadcasting Act, we cannot just alter any channel we want.

Mr. John Harvard: So our quarrel, if we can call it that, is with the CRTC?

Mr. Jim Shaw: No, I think it's with the program provider. If they're providing overly explicit programming on a broadcast network that is mandatory, carried down on basic to Canadians, then there is an issue.

Â (1245)

Mr. John Harvard: So you wouldn't ask them to reconsider this, so the programs could be shown at the proper time.

Mr. Jim Shaw: They get letters every week. That is their choice to do it. We are only required to carry it, as we are with the CBC. You cannot alter anything, even if you don't like the programming you do.

Mr. John Harvard: So we talk to either Showcase or the producer, Alliance Atlantis.

Mr. Jim Shaw: Yes, that would be where you would start.

[Translation]

The Vice-Chair (Mr. Paul Bonwick): Mr. Duplain.

Mr. Claude Duplain (Portneuf, Lib.): I do not really have many questions. I am in full agreement with your requests and I think that in your case we can speak of foreign investment without getting into programming, but I would like to delve a bit further into Ms. Gagnon's question, which was also part of my question.

You said, Mr. Audet, that we were not addressing our questions to the right persons, but when dealing with cable broadcasting and community television, I think that we are addressing the right persons. With the current convergence, with foreign investments, you are going to increase in size and often become more and more impersonal. We are also hearing about mergers and of people in places close to us were community television plays an important role in the regions. We have seen community television stations come here to complain about lack of accessibility, and about the programming hours taken away from community television by the companies. You said that you were involved in this, but in a centralized way, and towns no longer have any part in community television.

Community television stations produce independent programs, which means you are involved, as cable broadcasters. Thus, cable broadcasters also have rights.

I would like to have your comments on this.

Mr. Louis Audet: I would be pleased to answer your question, Mr. Duplain.

We are indeed involved in community programming. For smaller networks, approximately 5 per cent of broadcasting service revenue is earmarked for that. For larger networks, 3 per cent of revenues go to the Canadian Television Fund and 2 per cent go to community programming. So it is a major activity. It is one of our responsibilities and it is important to us, but let's say it represents a fairly small section of the highway.

That said, I have no doubt, and in fact I agree with you, that community television is an important community tool. There may be examples of companies whose performance is unsatisfactory in this regard, but that is not our case. In fact, the CRTC issued a new community programming policy that will come into effect in January and will require that 60 per cent of content be community-oriented. Most providers, and the witnesses before you today, already meet that requirement. So we take our responsibility seriously and fulfil our duty.

However, we are always open to suggestions for improvement and on ways to better fulfil our role. In fact, as operators, we get them every day and we try to implement them.

However, I do not want to downplay our role. It is an important one and we try to play it as best we can. Even if foreign ownership were to increase, that CRTC and regulatory requirement would not disappear. It will always be there and companies will have to abide by the regulations and the act. So there is no need for you to worry.

Does that answer your question?

Mr. Claude Duplain: It does indeed answer it, except that we are concerned because community stations have complained to us that they do not have as many programming hours as they used to. Concentration is occurring. In some places, villages are given their programs; they no longer have the opportunity to get involved at the local level like they used to do. Some independent community stations have told me things are going well because they have a small cable provider, but the day they are bought out will the programming they produce in the village disappear and will they just get the programs from Montreal or elsewhere?

Â (1250)

Mr. Louis Audet: Mr. Duplain, I can understand that you were asked the question. It is a legitimate and important one, but as far as the regulatory context and community programming is concerned, the CRTC just completed a full review, at the end of which it set the rules of the game. So now all cable companies must follow them. Whether it concerns us or someone else, the rules of the game must be followed. Some of those who approached you may have found that the local content had been reduced, but obviously the few cable companies who erred in that way, if any, will have to follow the policy as of January 1. So I think that must answer your question.

Mr. Claude Duplain: Thank you.

[English]

The Vice-Chair (Mr. Paul Bonwick): Mr. Strahl.

Mr. Chuck Strahl: Maybe we could, from this point forward, encourage Mr. Morrison to get back into this debate. It might help us to flesh out both sides of the issue.

The Vice-Chair (Mr. Paul Bonwick): I assume you are aware that any of the panellists are welcome to take part in the discussion during that five-minute window.

Mr. Chuck Strahl: Okay. Thank you.

The Vice-Chair (Mr. Paul Bonwick): Mrs. Lill.

Ms. Wendy Lill: I have just one question for you, and it concerns the national broadband task force. I understand they recommended that any public funding of broadband infrastructure in remote areas be tied to opening up the lines to third-party access, and the CRTC has ordered cable companies to open their coaxial cable to third-party Internet service providers, and that's not happening. So are your companies finally willing to do what the task force recommended? If not, why not?

Mr. John Tory: We have always been willing, able, and ready to comply with the direction given by the CRTC. The CRTC, as you know, did extensive costing studies and established a tariff that third-party providers who wish to have access to our networks would have to pay us to have that access. The number of people who have approached us to even talk about having third-party access in our own case might be two or three, and maybe only one of those has even taken it to a subsequent discussion. We have not sat in those discussions and tried to throw up additional roadblocks or anything. The terms upon which those people would do business with us are set by the CRTC. So I'm assuming--and I am making a bit of an assumption here--that in some cases people have either not approached us to seek access or have approached us and decided not to proceed, because they're not satisfied that they can make a business or that there is a business opportunity at this moment in time.

In fact, you can look at the pricing that's been going on with the Internet products and the fact that there's healthy competition between the existing providers. There's very spirited competition between Telus and Shaw, COGECO and Bell, Rogers and Bell, and I think that too has meant lots of price competition, with lots of deals available to people, which make it again somewhat less attractive, potentially, for people to enter this business. We've certainly been more than willing to abide by the rules that are in front of us and meet anybody who calls up and asks to come in and meet, but very few phone calls have been received.

Mr. Jim Shaw: There's been no access denial. It's totally open access, so if any of you guys want to start up a Internet company, we're available any day to talk and get it fired up. What you're suggesting there is totally wrong.

Ms. Wendy Lill: So there's no defiance, there are no obstacles, everything is possible--

Mr. Jim Shaw: The rates are already set, so you can come on--

The Vice-Chair (Mr. Paul Bonwick): Sorry, she has to finish her question.

Ms. Wendy Lill: I just want clarification. It's great to hear you on record telling us you're open and eager to be involved in this.

Â (1255)

Mr. Jim Shaw: Yes, that's right, we're open. The rates are set by the commission through an exhaustive process that all participants went through. They just have to meet certain technical requirements so consumers are protected to some degree, and access is available through all the companies.

Ms. Wendy Lill: In your estimation, there seems to be some kind of problem here, if it's not happening. Where does the problem lie, so that we can clear this up? How are we going to get third-party access happening, if you're saying you're not blocking it, but it's not happening? Where's the roadblock, and what do we recommend, in your estimation?

Mr. Jim Shaw: There is no roadblock, and I guess, when they went and did their financial models, they decided that they couldn't make the economics of the model work. That's the only reason I can guess that people have not come on to get access. You don't get to come on for free, you have to pay your fair share of the costs, and that's all the cable companies ask for. So I'm assuming that they made a business decision on their side. I couldn't guess the reasons for their decisions, but the rates are the same for everybody, so I can only assume that they're not being disadvantaged by those rates.

The Vice-Chair (Mr. Paul Bonwick): Mr. Audet.

Mr. Louis Audet: I think John has hit it on the head. There is a very intense war out there for customers. The phone company and ourselves are battling each other, and it makes for a less inviting place to be for third parties. As Jim very adequately said, we're all observing the rules, and therefore it is open, but it's clear that it's less attractive. It's not an easy battlefield, it's a difficult battlefield. It requires means, there's intense marketing going on, there are promotions that are cutting into the price and into the margin. It's not an easy market. I think that's the explanation you're looking for.

The Vice-Chair (Mr. Paul Bonwick): Thank you, Mr. Audet.

For the second round of questions, we'll go to Mr. Strahl.

Mr. Chuck Strahl: To follow up on that, could third parties looking for access be more successful if there were a relaxation in foreign ownership requirements? Would there be somebody with enough bucks to come in and actually engage in the competition?

Mr. Jim Shaw: I wouldn't expect so. When you look at the economics behind cable or a high-speed modem customer, even in the existing format, I think the time for us recover our capital, our interest, and everything is in the one year-plus range, two years, so we need to have that person on as a customer. That person could leave us any time they want, and we take that risk. I think it's these risks that people are unwilling to take. They go, boy, that market is just so tight, the competition is good, and people think they're getting fair value, so as a businessman, I don't want to enter it for public access.

Mr. Chuck Strahl: I just thought I'd ask, but I agree.

One of the things I see in your brief here you've hit two or three times is that the cable industry doesn't support changes in the ownership rules for content providers. Is that a heartfelt opinion? Probably it is, because you're all integrated, converged-type companies. I suppose you have a certain amount of protection there from the Canadian content rules, access to certain government funds, and so on, but you mentioned it two or three times in your brief. Is that because of the political value of making sure everyone is comfortable with it? Or is it really something that comes from the heart? For example, in the national newspaper business, although it was Conrad Black who brought in the National Post, it was a great thing for the competitiveness of our national newspaper business; we finally had some competition. I would have been just as happy if it had been Murdoch or anybody else, I wouldn't have cared, because it needed some competition. Canadian content maybe in a newspaper business is easier to get to, but can't you allow more access or more foreign ownership, even on the content provider's side, while still assuring, through regulation, a certain amount of Canadian content of production? Couldn't you just say, we need some more people in this business, and we need some more foreign capital?

· (1300)

Mr. John Tory: I suppose, theoretically, the answer to your question could be yes in the final analysis, if all the rules remain the same with respect to what content you have on it, what time, what you have to carry, and so forth. But those businesses, for example, are not as capital-intensive. They don't have the need to have access to the kinds of massive amounts of capital we've discussed in our presentation today. We're all involved to one extent or another in those businesses, and I think we feel that the maintenance of a strong Canadian broadcasting system probably benefits from.... Other countries have been prepared to look at distribution assets, telecom and cable assets and be more liberal with respect to the degree of foreign investment in those assets, though there aren't many left that maintain restrictions on the foreign ownership of telecom and cable, but even in some of those countries there are restrictions that remain today on the ownership of media assets.

I think we are people who are very supportive, and I think it's a point we've tried to make today. We're extremely supportive of a strong Canadian broadcasting system. We're very much a part of it. We know the customers we have want to see Canadian services. They want to see other services too, not just American, but other kinds of foreign and all kinds of services--the more we can supply the better.

I tell a story quite often that's from a past life I had and I think explains maybe part of what we're trying to say. We went out at one point, when I was the head of the Canadian Football League, and had to find a new owner for the Montreal football team that was bankrupt at the time, essentially. A gentleman from New York wanted to buy it. I was frankly delighted. I didn't really care where he was from, because he was prepared to recapitalize that team, to supply the capital they needed to build what became a champion last week. But the one thing he didn't ask me at the time when I was the commissioner seeking to admit him was, would we change the rules of the game, would we alter the content, and would we maybe play the game differently? He bought in knowing he had to play by our rules.

I think, as long as you maintain the Canadian ownership and you have healthy distribution systems and the appropriate set of rules set fromy the regulator, if you combine those three things--Canadian ownership in content, strong distributors, satellite and cable, well-capitalized, able to expand their networks, and so on, and a continuation of whatever rules the regulators see fit for a strong Canadian broadcasting system--you can have your cake and eat it too, as it were, have a strong Canadian broadcasting system that is also well-capitalized, remains a world leader, and so on. You don't have to change the rules even if you admit someone from somewhere else who provides the capital.

The Vice-Chair (Mr. Paul Bonwick): Thank you, Mr. Tory.

Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: You say you want to expand the network. Could you tell us about the development plan you would like to implement? What would your priorities be if you had more money to spend on development? Finally, if you had access to a larger territory, what would your priorities be?

Mr. Louis Audet: I think there are two priorities. First of all, very successful networks should be enlarged to reach smaller communities, or at least remote ones. Ninety-five per cent of households already have access to cable; there is still a small percentage of households that are more costly to reach, but we could do it.

Secondly, as far as we can tell, the trend seems to be towards more access on demand and less by appointment. So if you look far into the future, you can see that consumers will need access to content on demand, regardless of where it comes from. That will require more bandwidth than we currently have. I am referring to entertainment here.

As for the needs of businesses or social services such as hospitals, schools and universities, one can expect a significant increase in bandwidth demand to allow for high speed access. I do not recall the exact figures, but the task force that studied the question of bandwidth tabled its report in June 2001 and clearly identified the needs that must be met in all these areas.

You understand the need—to quote my friend Jim Shaw—to broaden the highway. If you look into the future, you can see that that expansion will probably be the biggest capital expenditure.

· (1305)

Ms. Christiane Gagnon: If the restrictions on foreign ownership were lifted, the number of players would decrease, which would lead to increased concentration of ownership. So one could expect increased cost pressures. The natural tendency is to increase costs rather than lower them.

But en entire segment of the population may not have access to your services do to lack of funds. Don't you think this is an important issue?

Mr. Louis Audet: It is indeed an issue, but it doesn't worry me. You claimed there will be fewer players. I hate to disagree, but there is no evidence to that effect and the least we can say is that we are not making that statement here today. If people decide to sell, they will sell, but otherwise, our predictions do not include the reduction you are referring to.

Moreover, right now there is furious competition between telephone and cable companies. In my view, that phenomenon is directly related to the concern you raised, and rightly so, namely the possibility of increased costs.

But the fact remains that the current competition will not lead to increased costs in the long run. Companies try to be as effective as possible, they compete with one another, and it is rather bitter competition, I agree, but it benefits consumers. So I do not feel there is any need to worry. One has to keep on top of things, but there is no cause for concern.

Ms. Christiane Gagnon: Costs do remain competitive as long as there is competition. Look what happened to the airlines: now that there is no competition, the price of an airline ticket is prohibitive.

Mr. Louis Audet: I agree with you, and rest assured: there is no shortage of competition in the telecommunications sector.

[English]

The Vice-Chair (Mr. Paul Bonwick): Thank you, Madame Gagnon.

Mr. Harvard.

Mr. John Harvard: Thank you, Mr. Chairman.

I have just a couple of questions. You used the word liberalization. I like that word, but unless I wasn't listening closely, you didn't define it. I do understand that when you talk about liberalization of the foreign ownership rules, you want to be put in line with telecoms, but could you just give me some precise figures, if you don't mind?

Second, perhaps my history of the cable industries here in Canada and the United States is a little distorted, so please help me. It was always my impression that at least in the early days, the Canadian cable industry was really far ahead of its counterpart in the United States, that you penetrated the Canadian market much more quickly. Yet now you're saying you need a relaxation of foreign ownership rules to attract more capital and so on. So what happened along the way for you to need this extra source of capital to keep going, when you consider--or at least I thought--that you guys were already ahead of the Americans anyway?

Mr. Jim Shaw: We still are ahead in penetration. The average across the U.S. is about 55%, and I would say in Canada we'd probably be closer to 70%. As you know, cable originally developed bringing across the U.S. three plus one into Canadian markets, channels a lot of the major markets were already receiving over the air antennas, such as Toronto from Buffalo; there were some early systems in Winnipeg that were bringing stuff up from Fargo. That's really how it developed. There was no development in the U.S., except in some very remote areas where they were trying to bring in signals from the big cities. So the same thing happened in both places, and it really didn't catch on in the U.S. until the invention of what we'll call satellite TV, with big stations that would come and beam across, the first being the Turner station and TBS, which really put cable on the wheel in the U.S. With that came the proliferation of CNN and all the other different channels that were copycats or created their own niches, and the same thing happened in Canada.

Canada's penetration on cable is going down because of the fierce competition between cable and satellite, but more Canadians than ever take up these services. Yet people demand to have choice now, so we're having to install file servers so you can poll us and order a show and get it on demand. We're needing to have digital technologies so we can add 50 channels from the regulator when they want that. We have to always expand the choice, and that's all we're told. Consumers really want more. So to take the platform up a level is why we're needing more and more investment all the time, because they're just net money users. If you look at any of the financial balance sheets of the cable companies, they require a lot of money and they continue to invest in Canada and Canadians. All the money they have goes into Canada. We are currently selling our U.S. operations to continually recapitalize our Canadian operations.

· (1310)

Mr. John Harvard: What about liberalization?

Ms. Janet Yale: The current limits for cable companies and for telecommunications carriers are the same, 20% at the operating company level, 33 1/3% at the holding company level. The issue is, do you go up over 50%? When we advocate liberalization, we're saying you can go up over 50% to allow--

Mr. John Harvard: That's on both sides?

Ms. Janet Yale: Telecom and cable.

Mr. John Harvard: But are you wanting to put the 20% over 50%?

Ms. Janet Yale: What we're recommending is the complete elimination of the rules.

Mr. John Harvard: So you're talking about 100%, direct, indirect, you name it. Am I right?

Ms. Janet Yale: Yes. We're saying, once you get over 50%, what's the difference between 51% and 100%? At the end of the day, the issue is whether or not they should be liberalized.

Mr. John Harvard: It might be worth hearing Mr. Morrison on that. Do you have a comment on that, Mr. Morrison?

Mr. Ian Morrison: I agree with her completely, there's no difference between 51% and 100%: 51% is the mistake, not the 100%.

Mr. John Harvard: I think that was a sardonic answer.

The Vice-Chair (Mr. Paul Bonwick): Thank you.

I have a couple of questions myself. Understanding that there are competitors at the table, I'm wondering if you could provide us with any indication, based on your forecasts, of the kinds of capital that might be required over the next five to ten years, or a five-year model. What kinds of dollars are we talking about?

Mr. John Tory: It's hard for us to do that, because there are, and properly so, all kinds of restrictions on what we might share with who, and of course, we're all in the business of making two-year plans. Speaking for our own company--and these are things I have said publicly--in regard to our capital requirements for the cable business alone, our capital spending for this year is $650 million. We've said next year it's going to be something like $500 million-plus, probably down, and the year after that down in the $400 million range somewhere. So you could just add those numbers up. We have continuing capital requirements that the business itself has in order to keep these networks competitive, to add band width, and so on, continuing capital investment. Those numbers add up to $1.5 billion over the next three years for us alone. And Jim and Louis and all the other cable companies could give you numbers that add up to very significant sums of money.

Mr. Jim Shaw: We go over these finances all the time--it seems that's the majority of the business we do nowadays. We spent in the last two years upgrading the network $2 billion. I think this year we're on track for $450 million. We were hoping we might be able to have that come down, but as Canadians demand more services, that also can go up. It is somewhat dependent on what people order from us. It's kind of the chicken and egg thing, where the more successful you are, the more you need and the more you have to build. That's one of the issues going forward. Certainly, it's very capital-intensive, and if we talked to Louis, the story would be the same.

· (1315)

The Vice-Chair (Mr. Paul Bonwick): So several billions of dollars in the next five years are going to be required. I certainly wasn't looking for a balance sheet forecast for you to share.

Going to the competitive side of it, it's imperative, from my standpoint, to have a separation between the carriage and the content. On the carriage side, how are Canadians best served? Tell me if I'm wrong, but I assume the industry, irrespective of country, bases price on a cost of production formula, taking into consideration a reasonable rate of return and what the market will bear. I would assume that equates with the $59.95 or $49.95, whatever the case may be. If that's accurate, how do we compare with other countries? Second, if your cost of production formula goes down through access to less expensive capital or the ability to intensify your capital investments, would that offer any benefit to Canadians?

Mr. Louis Audet: The sad truth of our industry right now is that we don't have a rate of return, because we're not profitable. The competition is too intense. We are working very hard towards achieving that profitability and that rate of return level and becoming free cashflow generators, which is really what the financial markets demand of us. I have every reason to believe we will succeed. I love to talk about rate of return, because from 1992 to 1999 we did have a real rate of return. So we're still in the adjustment period.

Mr. Jim Shaw: Basically, across the board rates south of the border would be 10% to 20% higher than the Canadian rates. In telecom and cable you'd be hard pressed to find better rates in just about any category, whether you're talking about cell phones, cable TV, high-speed access, light-speed access, local phone. I think Canada has done a tremendous job of maintaining these costs. I wouldn't see any increase because of liberalization or any change in policy.

The Vice-Chair (Mr. Paul Bonwick): Thank you. It's very rare that we get an opportunity to have the five of you sitting at the same table.

Mr. Harvard has asked for a very short question.

Mr. John Harvard: You say the current 20% to 33% foreign ownership rule is restrictive. Can I then assume that you've already used up what you have, you've hit the ceiling and you want more?

Mr. Jim Shaw: Would you want to be an investor in a company in second position? Would you want to be an investor locked in with no idea of where regulation is? These are just questions that come up to us. We don't always have the answers. They'll accept some conditions, but don't want to accept them all. They say, well, if I have my choice of investments between this and one with no restrictions, why would I accept one that has a restriction on it? It's the same way as when they sell. Let's say they don't want to buy the whole thing. That's okay. They would want to buy 10%. Is my 10% now locked in, I can never get it back out? They're worried about that. Capital's attracted to the easiest form of development, entry, and exit. That's what they're trying to do. They would like to have a system that was available and established in the rules and wasn't jimmied around so they would be locked in or locked out.

· (1320)

Mr. John Harvard: So even if you haven't hit the ceiling, that doesn't necessarily say anything.

Mr. Jim Shaw: That's right, it doesn't say anything at all.

Mr. John Harvard: Have you hit the ceiling or not?

Mr. Jim Shaw: No, we haven't hit the ceiling. Do we have lots of U.S. investment? We do. Do we have lots of foreign investment? We actually were in London doing quite a bit overseas.

Mr. John Tory: You have to monitor it to make sure you don't go beyond it. That's a regulatory requirement we have. There are people today who might otherwise invest in our companies, but feel that if they took even a minority interest, let alone a majority interest, it would be stranded, because there are restrictions on the people to whom they could sell that interest. If we were at the limit on a given day and somebody owned 10% from the United States, who could they sell it to? They could only then sell it to a Canadian. It inhibits them from making the decision to invest in our companies.

Mr. John Harvard: Thank you.

The Vice-Chair (Mr. Paul Bonwick): Thank you very much to all our guests on the panel today. It was very informative, and I know my colleagues took a great deal away from it. Again, we appreciate your taking the time out of your busy schedules.

Meeting adjourned.