EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 25, 1996

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[Translation]

The Chairman: I'd like to call the meeting to order. Today, we shall be hearing from representatives of the CRTC.

We have the pleasure and the honour of having with us Mr. Keith Spicer, the Chairman,Mr. Fernand Bélisle, Vice-Chairman of Broadcasting; Mr. David Colville, Vice-Chairman, Telecommunications; and Mr. Allan Darling, Secretary General.

[English]

Mr. Spicer, thanks for coming. The floor is yours, and I will leave it to you to introduce the people with you or to carry on in the best way you can.

The procedure usually is that you have 20 minutes to half an hour to do your presentation to allow a lot of time for questions from the members, if that's all right. Thank you.

Mr. Keith Spicer (Chairman, Canadian Radio-television and Telecommunications Commission): Thank you very much, Mr. Chairman. As always, it's a great honour to appear before our parliamentary masters. I want to tell you that I'm accompanied today by three of my colleagues: Fernand Bélisle, vice-chairman of broadcasting; vice-chairman of telecommunications, David Colville; and Allan Darling, secretary general of the CRTC.

This is, unfortunately for me but perhaps fortunately for you, probably my last appearance before a parliamentary committee. You can always call me back. You have 60 days, if you have any last shots you'd like to get in.

I'd like to make this as comprehensive a presentation as possible. I'll begin by running you through, if you'll be patient to hear a little introductory statement, some of the main questions that have come before us, and then I'll talk about some financial issues.

[Translation]

As well as discussing our priorities and expenditures, I would like to draw on my experience as Chairman of the commission for the last seven years and share with you some reflections on the role and the future of the CRTC, since we feel that the CRTC does indeed have a future.

[English]

Why do you need an independent regulator? Well, to be a regulator you probably need a bit of common sense, but you also need a sense of humour, a sense of irony, a sense of perspective and probably a very thick skin. The role of regulator and referee makes the CRTC, like all regulators, an irresistible target for criticism, and quite often we deserve it. Individual decisions are sometimes decried and condemned, sometimes lauded and applauded, and at other times damned and praised simultaneously. But looking back over its accomplishments since its inception 28 years ago, I believe the commission has been an exceptionally useful and successful instrument of public policy and nation-building.

That is at least the nearly universal judgment of foreign observers, if I may seek brief solace in the dictum that no man is a prophet in his own country. Other countries seem to envy Canada the growth of its own varied, prosperous and distinctive broadcasting system and the persistence and success with which Canadian cothas been sustained in the face of a global selection of programming choices. Canada is also looked on as a model for the achievements of our internationally competitive and standard-setting telecommunications sector.

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My wish is to hand over the leadership of the CRTC with the knowledge that Parliament continues to believe that a transparent, impartial, strong, independent regulator is in the best interests of the country as a whole, in the best interests of consumers, in the best interests of public policy, in the best interests of government, and in the best interests of the broadcasting and telecommunications industries.

Raising this issue now is vital. It's vital because Canada's economic development, intertwined with the global economy, has reached a watershed. Intimately connected to this are new fundamental public policy questions related to the convergence of technologies. This mix of developments has a direct impact on Canadian cultural policy, which is essential to defining us as a nation and which holds us together as a country.

[Translation]

The CRTC is an important instrument, chosen by Parliament, to deal with these issues. It is an appropriate and well placed instrument available to tackle the many emerging new policy questions, and contribute to the solution of the issues arising from them.

Call the regulator what you want - the Canadian Technology Convergence and Cultural Industry Commission, or the Culture and Information Highway Organization - the country is going to need an organization to act as regulator, arbitrator, traffic cop, guardian of government policy, and defender and the public interest. I emphasize this to recall that experiences around the world have shown that deregulation creates a new set of industry and national policy problems that need to be managed. This has led to modified forms of regulation and arbitration. Deregulation only leads to a new type of regulation - regulation being an unavoidable stabilizer in the endless pendulum swings between monopoly and so-called free market.

I say "so-called" because I know of no absolutely free markets in the world - certainly not the U.K., even less the U.S. For it is a myth that the U.S. is an unchecked, free-for-all, let-the-market decide, free-enterprise nirvana. The U.S. is a rigorously regulated market place. And despite changes and liberalization of legislation such as the new Telecommunications Act of 1996, the fact remains that the workload of the regulator, in this case the FCC, has just significantly increased. The nature of the FCC's functions will change, but in anyone's foreseeable lifetime, the FCC will remain a central part of the apparatus of public administration in Washington.

This broader context is very pertinent to Canada, and specifically, pertinent to the CRTC. If I may be candid, with the possible exception of the honourable members of this committee, there seems to be a shortage of people who are fond of the commission at this point in its history. Complaining about the CRTC is becoming more popular as a national pastime than enjoying hockey. Both of these sports are great fun.

[English]

The complaints fall under the broadly mistaken notion that the commission is somehow not advancing the wider public policy orientation of relying on market forces to encourage competition in the workplace, even though the record indicates clearly that it is and has, as I will outline for you in the next few minutes. Our critics also find fault with us for adhering to the legislation passed by Parliament that sets the parameters for decision-making.

The solutions to these perceived problems also fall into a couple of broad categories. One is the impression that the world would be set right if the commission were only abolished, or barring that, if regulation were done away with almost entirely or diluted to the extent that it would be meaningless.

Similar to this kind of thinking is another disturbing notion being discussed quietly in some circles, which is to weaken the effectiveness of the CRTC and through the back door allow whatever government happens to hold office to micromanage decision-making. Any move in this direction, I believe, would rob Canadians of two fundamental guarantees of a democratic society: the right to transparency in public policy decision-making and the right to impartial, non-partisan judgment in regulatory arbitration - judgment manifestly free of favouritism and nepotism.

I can tell you, Mr. Chairman, that Canadians have a great deal of interest in the public, open and consultative way in which our deliberations take place. Take broadcasting as an example. Since this time last year, over 11,000 interventions were submitted to us commenting on various broadcasting applications made during the year. Our Internet site, which contains our public records and decisions, is accessed 50,000 times each month. An average of 4,000 distinct users each month access this site to keep abreast of our activities.

A word about government policy and competition now.

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[Translation]

The commission is well aware of the desires of consumers for more choice of distribution and programming services, aware of the eagerness for industries to see increased, but fair competition, and aware of the government's wish to accelerate competition and have the convergence of technologies and enterprises act as a powerful economic motor.

Within its legislative framework, the commission has acted and made specific decisions and specific recommendations to government to satisfy these demands for increased reliance on market forces. We have succeeded in doing so while observing the objectives and mandates set for us by Parliament in the Broadcasting and Telecommunications Act.

The Broadcasting Act, section 3, states that:

(d) the Canadian broadcasting system should:

(ii) encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, values and artistic creativity, by displaying Canadian talent and entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view...

The telecommunications policy, which has clear pro-competition elements, has among its objectives, as stated in section 7:

(c) to increase the efficiency and competitiveness, nationally and internationally, of Canadian telecommunications;

(f) to foster increased reliance on market forces for the provision of telecommunications services...

But it also includes provisions for the balancing of competitive factors against nation-building ones, for it also has among its objectives facilitating the development of a system that serves "to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions". Allow me to point out that the word "social" comes before the word "economic". I believe there is no other broadcasting act in the world that includes that priority. It goes on to say "to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas...".

Last May in our report on convergence, Competition and Culture on Canada's Information Highway: Managing the Realities of Transition, our recommendations to the government centred on steps to foster increased reliance on market forces and accelerate lasting competition in the delivery of electronic information and programming services to Canadians. We also suggested new ways of keeping Canada on its own broadcasting system with strong Canadian programming.

The Information Highway Advisory Council also submitted its report and it too is waiting for a response from the government. Consistent with our mandate, consistent with the current orientation favouring competition and consistent with the government's intentions, the CRTC's recommendations were guided by several principles, including:

- Fair and sustainable competition requires that consumers have increased choice among distributors or telecommunications and broadcasting services, including those of cable, telephone, wireless, direct to home (DTH) and others.

- Barriers to competition in distribution must be removed so that both the public and content providers have affordable and non-discriminatory access to all distribution systems.

- Finally, new programming services must contribute to increasing choice, diversity and innovation.

[English]

I'll say a word now about the CRTC and competition. Contrary to widespread misinformation, Canada has one of the most open telecommunications regimes in the world. Our markets were open to competitive entry before those of most of our major competitor countries. In broadcasting we have the world's broadest selection of fundamental programming choices - just go to the United States or Europe if you doubt that - with an increased range of distribution alternatives now licensed by the commission.

Not only has the commission been operating in a competitive environment and working to expand competition, but we have changed and continued to adapt our regulatory process to keep pace with change. As well, responsiveness to the needs of industry and consumers is evident in our decisions to open up alternatives to broadcast distribution by licensing satellite distribution services and multi-point distribution services. Our decisions to license pay and pay-per-view and specialty television services expanded viewer choices. So did our decisions to license new pay audio services, to encourage the move to digital radio and to adopt a flexible regulatory approach that has allowed the radio industry to adapt to the fast-changing needs of its markets.

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The commission's desire to enhance competition is also seen in our decisions forbearing from regulating in a range of services, and relying increasingly on the forces of the marketplace set out in our pro-competition Telecommunications Regulatory Framework of September 1994 and our split rate base decision of 1995, which significantly reduces restraints on competition in telephone services.

In fact, I would like to remind you, Mr. Chairman and hon. members, that we have been active in advancing competition in telecommunications since we assumed responsibility for this sector two decades ago. In 1979 our predecessors opened up competition to include interconnected private-line services; in 1982, terminal devices; and then in the late 1980s we included enhanced services and resale. In June 1992 a major expansion of the telephone markets was achieved by allowing long-distance competition.

In addition to these initiatives, the commission has decided not to regulate terminal devices and a variety of competitive private-line services and data transmission services of some telephone companies. We have opened up inside wiring services to marketplace competition. We are also reviewing our decision on forbearance of cellular and other wireless services.

When you are dealing with monopolies or quasi-monopolies, you cannot simply throw a switch one night and wake up the next morning with wide-open competition and no regulation. In everyone's interest, there must be reasonable transitions. Of course there is lot of scope for debate on what is reasonable and what is a transition. New entrants need access to bottleneck facilities at fair rates and they need protection from the dominant incumbent, at least until the conditions for effective competition are in place. This is especially true when some industries or some aspects of a business become competitive sooner than others.

When weighing these issues, the question for regulators is not how long any delay to competition should be. Rather, it is what conditions must be met or what issues must be resolved to allow fair and sustainable competition to take place in the shortest time, while balancing competing interests among the following: first, consumers, including business and residential; next, program producers and information-service providers; next, carriers, distribution systems and broadcasters; and finally, investors, including shareholders.

It is perfectly natural that as regulators try to balance these interests while making the transition from a monopoly environment to a competitive one, the competitive interests will have sharply divergent visions on how to make this transition and how to manage it. But the groundwork has been laid by the commission through its broad framework policies and decisions. Now both the broadcasting and telecommunications sectors are well positioned to play competitive roles on the information highway.

I have a word now about financial requirements. Mr. Chairman, the CRTC will continue to deliver in all of the areas I have mentioned, but it will not be easy to accomplish all of this with the resources provided. I hope the following doesn't sound like a long, self-serving line. It really is factual; we're just trying to give you the facts as we see them.

Let me turn now to the diminishing expenditures authorized for the commission in a period of increasing workloads and responsibilities.

In this fiscal year the broadcasting sector will process over 1,900 applications for television, radio, cable, pay, and specialty services, and approximately 200 cable rate filings. The commission will also respond to approximately 70,000 telephone calls and 10,000 letters of inquiry or complaint. Currently, 18 public hearings are anticipated.

The telecommunications sector will process approximately 2,200 tariffs and other applications and agreements, respond to about 23,000 subscriber and competitor complaints, and hold five major oral public hearings, each expected to take anywhere from two to four weeks, on substantial issues that will lead to increasing local telephone competition.

We will attempt to undertake this mammoth task with ever-decreasing financial and human resources. For example, the 1995-96 spending plans authorized $34.7 million and 450 full-time-equivalent positions. In the current fiscal year, 1996-97, resources of $33.2 million and 422 full-time-equivalent positions are proposed. The full impact of reductions from program review one and two will cause the 1995-96 resource levels of $34.7 million to decline by 1998-99 to $31.2 million. This budget reduction of $3.5 million follows previous budget reductions of $3.1 million absorbed between 1992-93 and 1995-96.

Separate budget accounting regimes apply to the telecommunications and broadcasting components of the commission's activities, and as a result, budget reductions have created anomalies and distortions in authorized levels of expenditures. The total budget reductions during this six-year period have fallen almost entirely on the broadcasting activities of the commission.

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This situation is particularly troublesome since broadcast licence fees generate more than three times our financial requirements for broadcasting operations. I'm not claiming that the CRTC is a huge profit centre, but we do bring in a lot more than we spend. In other words, Mr. Chairman, although the broadcasting revenues are higher than those of telecommunications, our allocation for broadcasting has been arbitrarily diminished without reference to these revenues.

In 1995-96 broadcasting revenues are forecasted at $71.2 million, and in fiscal 1996-97 at $73.7 million. In telecommunications, forecasted revenues for each of these years is $16.5 million, equal to actual costs. Total revenues are $89.9 million in the current fiscal year. Yet, as I mentioned, despite increasing generation of revenue, reduced allocations imposed on the broadcasting operation in particular are putting sufficiently severe pressures on our operations to the point of beginning to undermine our ability to discharge our mandate.

It is clear, Mr. Chairman, that continued budget reductions will cause demands placed on the commission to outstrip our resources. We are at a breaking point today in managing what is essentially a demand-driven operation.

I warned you that this might sound like a long dreadful whine, but the fact is the public expects a great deal from us. They expect very personal high-quality attention. The industry expects us to jump very quickly when they make applications. The public wants to be heard promptly, courteously and with full explanations. This is why you can't simply flip a switch and say get on with this. You have to address enormous attention and care to these various demands the public puts on us.

Projected reductions for future years will result in delays in our responses to both applications from the broadcasting industry and requests or complaints about that industry from the public. Allowing this situation to persist creates a serious predicament not merely for ourselves but, just as importantly, for the industries we regulate. These are growing increasingly concerned over the inadequacy of the commission's resources and are aware that this is hampering our ability to manage the workload in a timely and expeditious way, precisely to achieve the competitive objectives I just outlined.

Let's talk now about attaining these objectives.

[Translation]

With your permission, Mr. Chairman, I would like now to provide you with an overview of some of the specific activities where we will be directing our resources.

The commission will actively pursue the implementation of its revised Telecommunications Regulatory Framework, which focuses on: new mechanisms for the regulation of telecommunications services to ensure universal accessibility at affordable rates which are just and reasonable; removal of barriers to competition in the local market, including open access to the networks of the telephone companies and the provision of information services; and regulatory safeguards to protect subscribers and competitors against the abuse of market power.

Advancing the attainment of these objectives, last fall the commission issued its Split Rate Base decision which establishes the regulatory approach that will be used to oversee the substantial investments that telephone companies plan to make in broadband capacity to carry video signals. This decision places the onus and the rewards for this investment on the companies and shareholders, as should be done in a competitive environment. The decision also sets broad competitive parameters which will allow flexibility in pricing which, in turn, will provide greater incentives to telephone companies to be more efficient and innovative by allowing shareholders to share in the benefits of increased productivity.

In a competitive environment, it is inevitable that prices will move towards true market costs. Concerned about the burden that an increase in local rates may place on some individuals, the commission has held cross-country public hearings to get views on how to ensure that local telephone service remains affordable. These regional hearings will conclude with a national public hearing next month.

In broadcasting, the commission has continued to expand availability of programming and distribution choices; it is carrying on its seven-year effort to streamline its licensing procedures and regulations. It will also set new ground rules for ensuring fair access of Canadian programming to distribution.

In addition to the licenses granted for DTH distribution and DTH pay and pay-per-view services, and services which are alternative delivery services in competition with cable, we have received an application for another DTH distribution service. We have also received more applications for additional services. We further expect applications from telephone companies.

That sentence was so long that it would make Balzac jealous.

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This month, we will be announcing the commission's policies on access to programming services of distribution undertakings, and the criteria that will be used for exempting certain services from regulation. We will also shortly be commencing an exhaustive public review of distribution regulations designed to provide greater flexibility to the industry and allow it to better serve the consumer in a competitive environment.

Viewing choices will be further expanded following the public hearing which begins May 6 on licensing additional specialty an pay television services.

[English]

Mr. Chairman, the committee members are aware, of course, of the groundbreaking commission decision on television violence and children announced last month. I can say, without equivocation and with a certain pride as a Canadian, that Canada is a world leader in addressing this complex and sometimes misunderstood issue. Arrived at after four years of exhaustive consultations with the industry, the public, the medical community, and a lot of consensus-building, we have developed a made-in-Canada, appropriate-to-Canada approach. On one hand it respects creators' and distributors' freedom of expression, and on the other it gives parents and families the tools they need to protect young children from exposure to needless, gratuitous and glamorized violence.

The V-chip and a user-friendly program classification system, both being developed in Canada for Canadian needs, will put parents in control of their children's TV viewing. They will set standards of excellence here and abroad, where other countries are eager to learn from us. The V-chip and classification are a very small part of the CRTC's long reform-by-dialogue. They're maybe 10% of the whole effort, but still they're important.

Far more important are the industry's voluntary codes and sustained contribution to public education. In the end, this entire issue is probably a matter of public education, for our goal is not censorship but more sensitivity to children's right to childhood, not restriction, just more thoughtful self-restraint when children are the audience. Society in North America and elsewhere is raising its consciousness to children's needs and rights, and Canada is part of this momentum of hope.

[Translation]

Mr. Chairman, allow me to conclude by re-emphasizing that regardless of further deregulation and the use of streamlined procedures, the transition to a more competitive marketplace driven by technological developments will inevitably increase the policy challenges, responsibilities and workload of the commission for many years to come.

The convergence of technology in cable distribution, telecommunications and satellite operations is blurring the distinction between certain broadcasting and telecommunications activities. The broadcasting distribution industry will change dramatically. Cable will face major competitive challenges as more distribution alternatives come onto the market. Telecommunications' crucial role as an economic motor will continue to grow, and the progressive opening of the market to competition has increased, and will continue to increase, the number of players, as well as the number of potential service suppliers, participating in the CRTC's telecommunications proceedings. Taken together, this means of course that there will be genuine competition to cable and that consumers will be able to choose among distribution technologies and supplies.

[English]

To cope with the evolution of technology, industries are developing strategic alliances. There will be increasing demands on the CRTC to review or approve, in the public interest, major acquisitions, mergers and corporate consolidation transactions.

As the crossover of industries develops, we expect that during the next few years there will be tests to our governing legislation. Some significant changes in the law may be proposed to you by this or future governments. We anticipate that all this will add significantly to our workload.

I'll end my remarks here, Mr. Chairman, as you'll be glad to know. I thank you and your members for your great patience. My colleagues would now be delighted to try to answer any of your questions. Merci.

The Chairman: Mr. Spicer, may I express our appreciation for your presence and also for your very comprehensive report to us. You have touched on a large number of issues in a short time, which is always a challenge. At the same time, it's given us in this committee certainly a lot of food for thought.

I'd like to turn the session over to questions from members.

[Translation]

Ms Gagnon of the Official Opposition has ten minutes for questions and answers. She will be followed by Mr. Abbott,

[English]

who will have 10 minutes, and then the government party. Then we'll have individual rounds of questions of five minutes each. Madame Gagnon.

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[Translation]

Ms Gagnon (Québec): Good morning, Mr. Spicer. I have a question to ask you about the government's present reevaluation of the CRTC's role. After the initiatives taken by the government based on the CRTC's decisions, the Prime Minister gave the government a mandate.

You might remember the government's attitude at the time of the order on direct to home satellite distribution companies. We know that the government showed favouritism in this matter. The present process concerns us in particular, and this concern is shared by the Provincial Communications Industry Board.

It has been said that this process was done on the sly. We do not know what the objectives are, what the leeway is, or above all who the participants are. Minister Manley's statement that when there will be more competitiveness there will be less regulation concerns us. We would like to ask you if you agree with minister Manley's statement.

Mr. Spicer: No, Ms Gagnon, I do not agree at all with Mr. Manley's opinion that we have shown little enthusiasm for competition. The results are extremely clear. I recognize that Mr. Manley, and he said it himself, has a mandate other than our own.

Our mandate is to reconcile the cultural objectives of the Broadcasting Act and the industry objectives of the Telecommunications Act. Mr. Manley is only concerned with the industry objectives. From his perspective, it is completely legitimate to focus on competition as the main objective, if not the only one.

I cannot share only half of the vision given to us by these two acts. It is a question of different mandates.

Ms Gagnon: At present, do you know more about the process set up by the government? Do you know more than us, because we are completely isolated from this process? What type of recommendations can you make to this working committee?

Mr. Spicer: With regards to a mandate review, I have no advice to give to the government. The government is elected democratically. We serve the Parliament. We are ready to be studied and to cooperate in any study that involves us.

Ms Gagnon: Do you think that with the recommendations that you could make at the end of any process begun by the government, you could convince the government to change its policy?

Mr. Spicer: It is not up to me to give you an answer on the impact of our recommendations, Ms Gagnon. But I can say that with the events that came out in the open last year, we completely disagreed with the government on the issue of direct broadcasting satellite orders.

The page has been turned and we are now officially supported by the government in the area of direct broadcast satellites. The government has not interfered with our decisions on this issue, and it is my impression, unless I'm mistaken, that our relationship with the government is quite excellent.

I have noticed two things. First of all Minister Copps, just after her appointment, made extremely strong statements in favour of our national identity on television screens and on the radio in Canada, which is precisely one of the reasons for our conflict with the Minister of Industry last year. Secondly, she supported us on the issue of violence on television and the protection of our children.

Without going into the details of a future study, and we were really not consulted, I believe that this is an issue that is the responsibility of the government alone. I can say that the dialogue between the government and ourselves is extremely frank calm, very open and conducted with lot of simplicity. In our opinion, this dialogue is extremely professional, and we have no complaints to make.

[English]

The Chairman: Mr. Abbott.

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Mr. Abbott (Kootenay East): Thank you. I too welcome you and your colleagues. I note in your written submission that you indicate that as chairman for the last seven years the commission has been an ``exceptionally useful and successful instrument of public policy and nation-building''.

You also say the CRTC is:

in the best interests of the country as a whole, in the best interests of consumers, in the best interests of public policy, in the best interests of government and in the best interests of the broadcasting and telecommunication industries.

Considering U.S. direct-to-home satellite services have been operating since 1994, why don't we have any Canadian DTH services broadcasting two years later in this country?

Mr. Spicer: It is because the United States does not have the Canadian Broadcasting Act. Section 3 demands that the primary role of broadcasting policy and regulation in Canada is to keep Canada on its own screens. It's two different worlds. It's the planet Mars and the planet Venus. We do not simply act as an economic arbiter, as the FCC in Washington does.

We have a radically different law taking into account what I might call - without getting too fancy - the geocultural situation of Canada. We are a small population right next door to a giant that shares one of our official languages. If you look back at the last 200 years - and you know Canadian history probably better than I do, because they study it better in the west, I think - Canada is not an accident of the market. It's been an act of will, century after century, decade after decade, year after year.

Mr. Abbott: If I may use your phrase ``to keep Canada on its own screens'', obviously you feel you are operating in the best interests of the country as a whole and the best interests of the broadcasting and telecommunications industry. But it rings rather hollow because of the 1.3 million U.S. direct TV subscribers; 200,000 of those 1.3 million subscribers are Canadians.

I suggest the CRTC policies have created a new category of global citizens. Canadians are becoming electronic Americans. Aren't you concerned about the fact that people may well look back on this time as the development of the grey market for American satellites in Canada?

Mr. Spicer: If we were to try to stop American programs, we would be accused of setting up electronic Berlin Walls. We're not in favour of this. We're in favour of a great deal of freedom of expression and freedom to receive foreign programming. Of course we are.

But it's not easy to be promoting Canadian culture against the economic forces. You'll recall that our information highway report was called Competition and Culture on Canada's Information Highway. These are in definite conflict. There's no doubt about it.

If we were to simply transmute ourselves into the FCC and say we're just economic arbiters, let's have a wide-open market - even though the U.S. market is far from wide open - then we would not long have a Canadian broadcasting system. We will always have short-term anomalies. We'll always have examples you can point to such as the DTH. But are you aware that Canadian cable rates are probably between 50% and 100% cheaper than American ones for more choice?

Mr. Abbott: Staying with the issue of DTH and not speaking right now about cable, I have no problem with the objective of what you are trying to achieve. But the reality is that in trying to achieve Canadian content on the screens in Canadian homes through your present DTH policy, you are driving people who want DTH to the grey market where there is no Canadian content, no Canadian regulation, no Canadian rules. Those people are receiving that across the border from those satellite positions.

Mr. Spicer: I think there is something very important, though, we should remember. It has been over two years since it's been possible for anybody to start a satellite business in Canada. We set up two doors by which you could enter the satellite business in Canada. In June 1994 we said if you are an all-Canadian company using all-Canadian resources, you can come in right now; you don't need a licence. We could have had five people come in if the market had been big enough. Only one company, ExpressVu, decided after looking around that they could make a dollar doing this.

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Mr. Abbott: Wasn't there a restriction on ExpressVu that they had to use a Canadian satellite? And now all of a sudden with the collapse of the Anik satellite we're finding out all sorts of things about this.

Mr. Spicer: I know you don't want to blame us for the collapse of Anik -

Mr. Abbott: No, of course not.

Mr. Spicer: - because we're not responsible for that. We're responsible for many crimes, but not that one.

We said we want a wide-open regime of companies that will meet these all-Canadian criteria, including use of Canadian satellites. This is what our two laws, our broadcasting and telecommunications laws, tell us: use maximum and at the very least predominantly Canadian resources. This is our duty under the laws the people in this building have passed. So we're carrying out your orders in doing this kind of thing.

The other door to competition was for those who could not comply with all these pro-Canada initiatives the law laid on us. It said to come on in the front door and get a licence. Well, nobody decided to do this. I'm not going to point to any individual companies. I'm just saying the door was wide open for at least 18 months for them to come in and present a licence. Nobody did that. What we saw - and I don't want to reopen the page on this - was something else.

The public events you saw were a result of a great deal of what I think was unfair comment made about the CRTC. Frankly, it was not only unfair but wrong. I will not go so far as to speak of disinformation, but I did speak of misinformation. We did not get a very fair hearing, I'll tell you. As a result of this, we licensed both of those companies.

What happened next? Well, one company, ExpressVu, couldn't get its technology together. I guess we're not responsible for that. The other company decided it didn't want to use its licence. What could we do about that?

Neither ExpressVu nor a new applicant we have, Star Choice, thinks it's necessary to have the kind of subsidies imposed on cable subscribers that the Power DirecTv people wanted.

So we've tried to do everything openly and fairly and we believe we have, from beginning to end, favoured competition in this. If you look at what is on the screens at what price, and what choice there is, we still maintain the Canadian broadcasting system is incomparably richer and more affordable than the American one.

Mr. Abbott: For the sake of time, I want to change topic. But while you say the country is going to need an organization to act as a regulator, an arbiter and a guardian of public policy, I suggest the CRTC's regressive DTH policy has introduced a totally unregulated, uncontrolled flow of information from the U.S. to homes in Canada. Obviously you and I have a point of disagreement there.

I'd like to switch quickly to the cable production fund. A CRTC news release, released on March 29, 1995, was headlined ``There is absolutely no hidden tax.'' It also says ``Commission's decisions are taken with the public process.'' Unless the public takes the time - whether they are going to sit down and read the paper or scan the Internet - I submit that individual cable subscribers are totally unaware of the cable production fund policy. I'm talking about the ordinary citizen who is going to be enjoying tonight's hockey game, whoever he or she may be. These people have no idea of what the CRTC policy has done to their basic monthly services, and I believe the consumers have a right to know from these regulated monopolies.

Why has the CRTC not required cable companies to notify their subscribers about on the cable production fund public policy and its impact on the basic cable rate?

Mr. Spicer: What our policy on the cable production fund has done for consumers is given them a lot more Canadian programming, which is our central duty under the Broadcasting Act.

Mr. Abbott: Do the consumers know they are paying that? I suggest to you they don't.

Mr. Spicer: Maybe we should spend more time and money telling them this.

Mr. Abbott: I think this is important. I have enjoyed some of the programs that I've noted on broadcast over the air. I have noted the inclusion of the cable production funds. I'm not being critical of this issue. What I am being critical of is the fact that for every dollar - correct me if I'm wrong - the cable companies collect monthly, and in most cases it's $3 or $4, do they not keep 50¢ themselves?

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Mr. Spicer: Only if they use it for capital.... Did you want to intervene, Mr. Colville?

Mr. David Colville (Vice-Chairman of Telecommunications, Canadian Radio-television and Telecommunications Commission): It's every dollar that was collected for a specific program, their capital expenditure. So if there was a rate increase specifically related to capital program, then half of that money is kept by the cable operator and half goes into the cable production fund. But it's not the whole basic cable rate.

Mr. Abbott: No, I'm just talking about the cable production fund.

The Chairman: Could you make this the last brief question so we can move on?

Mr. Abbott: Yes, I will. The other prepared question I have is this.

On May 16, 1995, I believe you were asked by a member of this committee whether you had given notice to Canadians, and you said you had. I suggest that we don't seem to be able to find any record that Canadian cable subscribers have been notified by the CRTC or by the cable companies of the impact of the cable production fund on their bill.

So my question is twofold. First, could you provide to this committee the verification of your comment that they were informed; and second, would you see yourself being able to undertake to instruct all of the cable companies within a reasonable period of time - reasonable being two, three, or four months - to inform all of their subscribers about the contributions they as cable subscribers are making to the cable production fund?

Mr. Spicer: Vice-Chairman Bélisle would like to answer that.

Mr. Fernand Bélisle (Vice-Chairman of Broadcasting, Canadian Radio-television and Telecommunications Commission): Mr. Abbott, when the commission changed its regulation and created the programming production fund, the commission issued a public notice asking for comment on the commission's proposal and also issued a draft regulation that would create the mechanism whereby that fund would be, and at that time we believe we gave notice to all interested parties. We held a public process and received comments in terms of the various positions of all parties on the commission proceeding in creating a production fund.

When the chairman answered in front of this committee that we had given notice, that is what he was referring to - the public process we ran obtaining comments from everybody in changing the regulation from what it was before and creating the production fund.

Mr. Abbott: Thank you.

The Chairman: For the government side, Mr. O'Brien.

Mr. O'Brien (London - Middlesex): Thank you, Mr. Chairman.

Mr. Spicer, gentlemen, thank you for your presentation. I enjoyed it. It was very thorough.

I have two or three questions that are of a general nature but I think important to me, to my constituents, and to other Canadians. The first one would be around the issue of public education, which has come up here through my colleague from the Reform.

I wonder if you could overview briefly what the CRTC does in terms of public education, and critique yourselves and suggest areas where you might improve that. I believe there's quite a degree of ignorance in the sense of lack of understanding by the Canadian public about what the CRTC is all about, its parameters and so on. Briefly, could you overview your public education program and suggest any improvements?

Mr. Spicer: Thank you for that question, Mr. O'Brien. It's a fundamental one. I would plead guilty to our not spending enough time or money explaining ourselves.

We passionately believe in this. I can tell you that even before I arrived at the CRTC, weeks before I physically came into the building, I sent a single-space eight-page memo to the public relations or public information department of the CRTC outlining a whole program for public information, with documents and movies - everything - at all levels of the society. I have to admit we could only afford a small part of that.

I'll point to a couple of initiatives that are making a difference. One is a collection of fact sheets that summarize, usually in one page in bullet form, 30 or 35 of the main questions. If you don't have a set of these, we'd be glad to send each of you a full set of them, because it would be a good thing for you to have in your filing cabinet. It covers, for example, the DTH, the production fund, and it gives our view. We don't necessarily agree on it, but at least you'll have what our position is and what we think the facts are.

.1210

Another interim measure we've taken is to set up an Internet site, one of the very first in the government. As I've told you, this is consulted about 50,000, sometimes 90,000, times a month. It's really proving to be a formidable tool of public information as the Internet expands.

I presume MPs are already plugged into the Internet. I think they do connect you. Just punch in ``CRTC'' and you'll find us. You'll get our daily decisions, press releases and speeches - whatever you'd like to know - at the same time that it appears elsewhere.

Next, we have broadened the communication efforts of commissioners. Before my time, I think the chairman was almost the only person who was authorized to speak on behalf of the commission. Now it's fairly routine for both vice-chairmen to make speeches, which allows us to spread ourselves out more. Any of the commissioners attend conferences and speak on our behalf. As I often say, we're trying to sing more or less from the same hymn book.

The previous government and parliament wanted to have a more regional bent to some of the commissioners' representations, so we encourage our regional commissioners - for example, Vice-Chairman Colville in Halifax, Sally Warren in B.C., and others - to speak out within a regional context or on national issues.

So we're doing what we can. We're trying to do a lot more on a shoestring. I cannot say we have made expensive movies or videos. There are no doubt many other things we can do.

Again, I hope it doesn't sound too plaintive, but I would point out that when you're a regulator in a judge-like position, if somebody's leading a press campaign against you or a minister of the government says something - for instance, that you're not promoting competition - it's very hard to slang back. For us to get in a public fight with a minister, a government or anybody is, at the very least, a bit undignified. We try to keep our nose to the grindstone and not get involved in an endless series of public fights. We could every day, if we wanted.

So by keeping our mouths shut, we're taking a lot of hammering we would love to answer. We do answer quite a few letters that appear in the media. If they're really wildly off base, we'll send a letter that sets the facts right. But that is definitely a handicap. We're far from the status of Supreme Court judges, but we are a quasi-judicial body, and you cannot really get out there and argue in the public press all the time.

Mr. O'Brien: I appreciate that.

I would request the information the chairman referred to. I'm sure my colleagues would like it as well.

Mr. Spicer: Okay.

Mr. O'Brien: Your comments anticipate my second question. I don't know if it's really possible to answer, but I'd like you to try if you can.

As you mentioned, you're a quasi-judicial commission. I hear from some people that you're too independent of government, and I hear from others, as I'm sure you do, that you're not independent enough. I wonder what your view of that is, and of any improvements in the relationship between the CRTC and government.

I suppose that's a bit philosophical, but....

Mr. Spicer: I'm glad to hear you're getting those contradictory views. That of course confirms that maybe we're somewhere in the middle.

We think the idea of independence is not simply a matter of status or ego of commissioners. It is a function of the role of the CRTC to make sure the regulatory system is honest and transparent. You have independent regulators doing their work in public, basically to protect a government - any government - from its friends.

There are only two kinds of regulation, the kind you do at arm's length and in public, and the kind you do in-house and secretly. There are plenty of countries in the world where the communications minister gives out a broadcasting licence to his girlfriend or his brother. Lots of countries do it that way.

Needless to say, we are not perfect. We make all kinds of mistakes. We don't claim infallibility. We try, though, to do an honest, impartial, professional job, and to do it always in public, not in secret.

I guess none of us, when we were children, dreamt of growing up to be regulators. We have all, to some extent, having taken on the monkish role of the independent regulator, become convinced of, and really do believe in, the ethics of open, independent, transparent regulation.

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We're independent of the government for a purpose, which is to let the public know the decisions are made honestly and openly. This is a great service to the political system, and to any government. If you look at the roughly 5,000 decisions we make in any given year, some of them are microscopic, others are huge. No government really wants to be making these kinds of decisions, because they're also heavily political.

This is another reason why. If you're going to be a regulator of anything, of the hot water supply, you're going to be getting into hot water because you're a regulator. You have to make unpopular decisions. You make decisions that literally take money out of somebody's pocket and put it into somebody else's. We do this many times every day. That's the nature of the job.

So we're not trying to be ridiculously independent just for the heck of it. We're trying to maintain the independence Parliament set up for us in order to assure Canadians of an honest system.

The Chairman: Mr. Bélanger.

[Translation]

Mr. Bélanger (Ottawa - Vanier): Mr. Spicer, gentlemen, I would like to discuss finances, if I may. I thought this was a session to examine budget estimates. Therefore, I have two questions.

First of all, I would like to know how the CRTC has managed to cope, up until now, with annual budget cuts for a number of years now. How has i monayed?

My second question involves the other side of bookkeeping, that is credits and debits. I would like to get more information on the nature of your revenue sources. I imagine that the people who seek your services pay fees. Therefore, I would like to know a bit more about the rate of increase of these fees, because in the end, you have a monopoly.

It is all very well to talk about competition today, but the CRTC has a monopoly, and I want to ensure that you are not exaggerating in that area.

Mr. Spicer: Mr. Bélanger, I see that my colleague, the Secretary General, is dying to answer your questions.

[English]

Mr. Allan J. Darling (Secretary General, Canadian Radio-television and Telecommunications Commission): On the second question first, the question of fees, there are two sources of fees that fund our activities. First, the telecommunications industry is assessed our actual costs, and whatever the budget is that we table in Parliament becomes the amount they pay to us. In the current year that is $16.4 million.

On the broadcasting side -

Mr. Bélanger: They're assessed on actual costs. Is that assessment prorated? How does it translate for a licensee? What do they pay?

Mr. Darling: It's prorated against that part of the telecommunications industry which files tariffs with the commission. It's based on their proportion of gross revenues relative to the total revenues of the industry. So if Bell Canada, for example, has 35% of the gross revenues of the industry, they will pay 35% of our costs.

Mr. Bélanger: So there's a disincentive to show revenue?

Mr. Darling: On the part of Bell?

Mr. Bélanger: Sorry.

Mr. Darling: Not when you're looking at billions of dollars of spending and our total budget is $16 million. We're not a heavy cost factor for their operations.

Mr. Bélanger: How much would Bell pay, for instance?

Mr. Darling: I'm sorry, I don't have that specific amount. I could provide it to you.

Mr. Bélanger: Okay.

Mr. Darling: On the broadcasting side, this year for the first time the estimates vote met the cost of administering the broadcasting program by showing only the expenses related to the statutory payments. But in fact Treasury Board continues to treat our expenditure estimates as though they were appropriations for its internal control.

.1220

In other words, there is no relationship between what we spend on broadcasting and what the industry pays as a fee. The broadcasting fees basically are 1.8% of the gross revenues of that industry, minus a certain base-level fee or reduction. It varies by industry. In cable it's less $175,000, in radio it's less $2 million, etc. So even if these revenues go up - and because the broadcast industry is in fact a growth industry it is increasing its revenues every year - our budgets are not set by the Treasury Board with reference to that growth, nor have our reductions been assessed with reference to that growth.

Mr. Bélisle: Bell pays in the neighbourhood of $6 million to $7 million annually.

Mr. Bélanger: That's for the telecommunications side.

Mr. Bélisle: That's only on the telecommunications side. At this time Bell is not allowed in broadcasting.

[Translation]

Mr. Bélanger: Over the course of the past five years, what type of increase has there been in CRTC revenues from licences or other fees, in absolute terms and in percentages? Estimates will be fine.

[English]

Mr. Darling: Approximately, the revenues of the industry have probably been increasing by about $3 million to $4 million per year, in fees they pay. I'm referring strictly to broadcasting now. Let me emphasize, these are not revenues to the CRTC, these are revenues to the consolidated revenue fund.

On the telecom side, there was an increase of our costs in 1995-96 because we added additional responsibilities for the small provincial companies, which had been previously regulated provincially. So the budget there went up maybe from $14 million to $16 million.

But essentially our expenditure budget since 1992-93 has decreased from $37.8 million to where in the current year it's $34.7 million, and it's going down to $31 million. That's what our expenditure line is.

Mr. Bélanger: Mr. Chairman, I'll have you note my first question is still not answered.

The Chairman: I'll come back to you, Mr. Bélanger.

[Translation]

The Chairman: Ms Gagnon, you can take your time.

Ms Gagnon: I would like to ask you questions on the CRTC's ability to preserve French Canadian content. We know that licences were issued to a number of companies in the area of satellite broadcasting. Power DirecTv and DMX are companies that were issued licences. A number of us received letters from the Provincial Communications Industry Board which is concerned about French content and Canadian content following this opening up of the market.

What type of assurance can be given to people who are concerned about the new mandate that the government wants to give to the CRTC? How can we reassure these people about French content, which is already minimal?

Mr. Spicer: Ms Gagnon, I should probably ask my colleague vice-president Bélisle to add to the answer, but would like to assure you that we sincerely have the interest of the television audience and the Francophone public at heart in everything we do.

The advertising base in the Francophone market is extremely limited. It is obviously even more limited than that of the Anglophone market in Canada, which already has problems with regards to the United States. Therefore, from time to time, we are not able to go as far as we would like to, because advertising funds are non existent.

We are currently witnessing, in Quebec, efforts made by two companies to join forces. Three large companies are trying to go further in that direction, and this is partly due to the compactness of the Quebec market.

Vice-president Bélisle will probably want to provide a more specific answer to your question, but that was a general answer.

.1225

Mr. Bélisle: For basic services, we require, even for direct broadcast satellite companies, that there be a majority of Canadian services, and for pay-per-view television services, we required the same ratio as for other companies in order to ensure that a percentage of Canadian content is always broadcast.

Ms Gagnon: The direction that Mr. Manley is taking is raising in this area. It is said that we are going to deregulate and the more there is competition, the more there will be openness on the markets. The Provincial Communications Industry Board is therefore right to be concerned about this openness and this deregulation.

Mr. Bélisle: I think that they were concerned about the potential review of the commission and the impact that it could have.

As the Chairman said earlier, the commission has not yet been consulted and we do not know what scales or margins will be used in that review. In the meantime, we will continue to follow the Broadcasting Act which requires a majority of Canadian content.

Our report of last year on the convergence is proof of the commission's intentions in this area.

Ms Gagnon: I would like to ask a question about the CRTC's power of intervention in broadcasting organizations. We know that TQS and TVA are about to merge. Does the CRTC have the power to intervene on behalf of both newsrooms in order to ensure that each network maintains a certain level of autonomy? We know that in Hull, they are in adjacent accommodations.

Mr. Spicer: Yes, when we examine all these transactions, we have the power to reject the agreement leading to the transaction. We judge each case on an individual basis. There is no possible general rule or policy. We judge things based on the realities of the moment and of the case.

[English]

The Chairman: Mr. Abbott.

Mr. Abbott: I'd like to be very precise with this question. Subsection 18(6.3) of the cable television regulations, 1986, has a direct impact on the rates charged to consumers for basic cable services since January 1, 1995. I want to be precise because I asked a question...and I apologize to you. I'm not questioning the answer you gave me; I can't recall the answer you gave me.

My background notes say that at an industry conference on January 30, 1996, Mr. Bélisle is on record as saying that the CRTC will not require subscriber notification about the diversion clause - the clause I just quoted - and its cost unless ordered to do so by the Federal Court.

I don't know if my background note is accurate or not, but in light of that, and in light of my asking the question, ``Will you do this?'', I just need to know: do we have an agreement that you will be doing this?

Mr. Bélisle: That we will be...?

Mr. Abbott: That you will be asking the cable companies to inform their subscribers about the amount of money going into this fund and the apportioning of that fund relative to their monthly rate.

Mr. Bélisle: Currently the regulation requires that whenever there is rate increase on the basic service, and only the basic service, every cable company must notify their subscribers. What you are referring to in that note and in terms of the debate I participated in last January at an inside conference in Toronto - Mr. McTeague and Mr. Keith Mahar were there - is the process of how we created the cable production fund.

Mr. Mahar disagrees that the commission followed proper procedure in creating the production fund. He is taking legal action against the commission to determine if the production fund was legally constituted. The commission's position is that it was; that we followed all proper procedure in the public notice we ran at that time; that at that time it fell under our rules and regulations from the Broadcasting Act; that we gave proper notice. There's a fundamental area of disagreement with Mr. Mahar and the commission on that, and he is challenging the commission in court.

.1230

Mr. Abbott: I respect that, but I would still like to know whether this committee has the commitment of the CRTC that the cable companies will be instructed within a reasonable time - and I've suggested ``reasonable'' means two, three, four months; let's be reasonable - to inform their subscribers about the amount of money that is being collected as a portion of their monthly payment. Say their monthly payment is $35, and let's say the cable company is taking $5 of that $35, $2.50 of which is going to the cable production fund, $2.50 of which is being retained by the cable company. Do we have an agreement or do we not have an agreement? That's the question I have here, that you will be instructing the cable companies to make that information broadly distributed, widely distributed, even to the point of it being in the monthly statement, so the subscribers....

Understand that at this time I'm not accusing the CRTC of not following proper procedure. What I'm suggesting is that the average cable user, the average cable subscriber in Canada, will be totally unaware of this. I would be inclined to agree with Mr. Mahar and Cable Watch to that extent only, that the subscribers should be aware of this fund that is being set up and what portion of their monthly cable bill is doing the kind of good things the chairman has been talking about, which is developing Canadian programs.

Mr. Bélisle: I guess, Mr. Abbott, we will take your request under advisement and consider it with all our other colleagues.

Mr. Abbott: Okay. Could we have a report date?

Mr. Bélisle: The next full meeting with an agenda we could put it on would probably be at the end of May or early June - so by the end of June.

Mr. Abbott: Okay. Thank you.

Finally, I suspect many millions of dollars are being collected in this cable production fund. Could you advise who is the individual in charge of that process? What is their title, what department are they under, and could we have an idea of the terms and conditions under which they would be distributing these funds?

Mr. Bélisle: The cable fund is not under the direction or administration of the commission. An independent body was set up. There's an independent board of directors, composed of twelve members from the various cable industry broadcasters and producers and the CBC; and there might be a consumer person on there, though I'm not sure.

The commission, in creating the production fund, gave out the broad purpose of what the money should be used for, the bulk of it drama and children's programming. All the criteria for disbursement were set up by that independent group and are not in the commission's domain.

Mr. Abbott: I understand that, but it would be helpful if you could provide that to us.

Mr. Bélisle: The director general they've hired to run the cable production fund is Mr. Bill Mustos.

Mr. Spicer: We could give you quite a bit of documentation on it, even the names of the members, their phone numbers, anything you want.

Mr. Abbott: Do they have a responsibility to you, and through you to us, to reveal all their expenses of administration as well as where the funds have been distributed to?

Mr. Bélisle: They have a responsibility to file a report on an annual basis, and the commission makes it public.

Mr. Spicer: We laid down at the beginning, if memory serves, a rule that they should not spend more than 5% or 7%, I'm not sure which, on administration. We built that into their constitution.

We will be monitoring them. We'd love to give you as much information as you'd like.

I would just add that we really do appreciate your comments on this. It's a central question you're asking, particularly because I think the public has felt mystified by a lot of the billing practices of the cable industry in the past. We've been pushing very hard on this. I could name you four or five hearings over the last five years in which we specifically told the cable industry we wanted them to set up under the cable self-regulating system a more transparent system of billing. Shaw Cable in Edmonton is one of the leaders on this. I think Rogers is getting considerably better.

.1235

Mr. Bélisle: Most cable companies now have a standard to meet in terms of the disclosure. Whenever they add another service that is charged on basic service, they disclose it the first time - they put the charge on - and then it's lumped into the annual amount.

We will provide you with all of the information on the initial documents setting up, the initial policy setting up, the cable production fund, who the present board of directors are and what their operating philosophy is, how you qualify. They have the cable production fund as a kit put together that they hand out to anybody who wants access to the fund. I believe their first annual report is out, so we'll make sure that's included in the information. We'll send it to the clerk.

Mr. Abbott: Excellent. Thank you for the input.

The Chairman: Send it to the clerk, who will transmit it.

Questions from the members. Mr. O'Brien.

Mr. Spicer: I was told that under the Canadian production fund information sheet we have the names of all the members of the organization. It's in there already.

We will follow up on this. I think what you're asking is absolutely central. You're asking for more accountability and transparency from the cable industry. We can easily commit to pressing much harder on that. We've been trying, but maybe not as hard as you would like. We'll make sure that you will get everything you want.

Mr. O'Brien: I have a question on Canadian content regulations. I think it's been asked. If this has been answered, I apologize. If so, I didn't hear the answer.

I just wonder how often there is a review of the Canadian content regulations, be they for radio or television, and whether in your view, Mr. Spicer, those levels are now about right. Is there or will there be pressure to change those levels over time?

Mr. Spicer: There are always pressures in both directions, up and down. Right now we have debate on the level of Canadian music, particularly on the new possible pay audio services, but even on AM and FM radio. A debate about this is going on right now.

Broadly speaking, some of the cultural creators would like it to be raised and the private broadcasters would like to leave it pretty well the way it is. This is an honest debate about how much is in a system.

Again, we're not claiming credit for this, because the people who invented it were at the time of Pierre Juneau. We have maintained what Pierre Juneau put in place, with the result, I guess, that if you look at the last American music awards, the top three people were Canadian women - every one of them.

Mr. O'Brien: I appreciate that, but is it an ongoing review or is there a built-in time in which you must review this?

Mr. Spicer: It's not an ongoing formal review. I would say that it's an ongoing subliminal review. We think about this all the time. It comes up all the time; for example, in licence hearings and in interventions by the various trade associations. I can't claim that....

Mr. Bélisle: It's been generally accepted that on television, in terms of Canadian content, the commission puts on two requirements. One is an exhibition requirement, which is 60% overall Canadian content, and there's a financial requirement. Over the past fifteen to twenty years that has generally been seen to be a reasonable amount of obligation to put on licensees, and the financial health of the industry has been seen to be able to maintain that.

In radio - as the chairman just talked about - it's been pegged at 30% on pay and specialty services that are cable delivered, and on other methods of distribution the commission puts on an exhibition requirement. It's at least the equivalent of that of conventional broadcasters, 60%, if they're distributed solely on basic service; but if there's discretionary service, the commission tailors the requirement for Canadian content based roughly on the amount that the discretionary.... If there's 60% or 70% penetration, we lower the requirement.

Mr. Colville: As an example of the chairman's comment about constantly reviewing this, in radio, depending on the particular format or style of music that the radio station may be playing, we try to have the Canadian content level reflect the relative availability of that type of music for them to play. So we are constantly reviewing those sorts of levels.

.1240

Mr. O'Brien: I have a final question, Mr. Chairman, for my information as a new member.

Let's assume for a minute you wanted to change the level, up or down. What's the process? What's involved?

Mr. Spicer: Undoubtedly we would have a public hearing. We would have written interventions. We would almost certainly have a public oral hearing. It would be a very serious change of regulations, and all of this would be done openly with plenty of public warning. Any citizen could intervene, and probably appear as well.

Mr. O'Brien: Is it within your purview to do that, or would it have to come back to the House of Commons?

Mr. Spicer: No, we can do that on our own notion.

Mr. O'Brien: Thank you.

The Chairman: I have a request from Mr. Bélanger, Mr. Peric, and Mr. Anawak. I'll give you precedence.

Mr. Bélanger.

Mr. Bélanger: Let's go back to the question. How did the CRTC cope with the reductions in the funding in the past few years?

Mr. Darling: I would go back to the baseline of 1992-93, because that's the year in which the commission was funded to introduce regional commissioners and to reflect the new Broadcasting Act of 1991.

Since then, as the chairman indicated in his remarks, we have been subjected to cuts of $6.6 million. Approximately $4 million of that was done by eliminating 63 positions in the commission. At the same time as we eliminated 63 positions on the broadcasting side, we actually increased the telecom side by 18. So our net shows less, but in terms of impact it was 66 fewer positions.

We did that in a number of ways. We subjected the organization to a careful review. We reorganized it. Instead of having it structured on an industry basis, we now have it on a functional basis. We de-layered a number of positions. A number of executive-level positions were eliminated. We went down by about one-third in our executive complement. As well, we eliminated a number of management positions immediately below the executive level. By and large, we've done it by trying to maintain, if you like, the workers at the coal face and streamlining processes and procedures in order to get better efficiencies that way.

We also closed the Toronto office, simply because it was only operating at a small level. To maintain it I would have had to increase resources, and they simply weren't there.

In terms of the reductions on the balance, the remaining $2.6 million, there is $600,000 we have yet to identify, because the government only told us in this budget that we were subjected to cuts in 1998-99. Of the remaining $2 million, we've done a number of economies in terms of careful scrutiny of how we spend money on travel. Nobody in the commission at the staff level is allowed to travel, except with the cheapest possible economy fare. Our records show that is indeed being achieved. Even commissioners, for the most part, travel on economy fares. When Mr. Colville comes in every week from Halifax, that's the manner in which he travels.

Mr. Bélisle: Mr. Bélanger, if I could jump in here, what the commission did also was look at the three industries on the broadcasting side - radio, television, and cable. We reviewed every regulation policy, and we streamlined where we felt that what was required back in the 1970s and 1980s.... In light of the evolution of each one of the industries, the commission reviewed every one of its policies and regulations.

We had to downsize the work; we had to reduce the workload. So we established working committees that tackled radio, TV and cable and asked, why is that policy there; why is that regulation there? Is it still? Thank you.

Mr. Darling: I have one final comment. We are also cutting back on our level of investment activity in our informatics budget.

Mr. Bélanger: Investment activity?

Mr. Darling: Yes, I consider spending on informatics to be an investment, because that's how we get economies and efficiencies. We've maintained the budget -

Mr. Bélanger: Would you qualify today's CRTC as being less, equally, or more effective in carrying out its mandate than the CRTC of three or four years ago?

Mr. Bélisle: It is just as efficient in different times.

Mr. Darling: We are carrying out the same mandate with fewer resources. Quite frankly, I think with the cuts we still have to absorb over the next two years we are going to have difficulty.

.1245

Mr. Bélanger: Mr. Spicer,

[Translation]

you said in your statement, and I quote:

[English]

``Contrary to widespread misinformation, Canada has one of the most open telecommunications regimes in the world.''

[Translation]

As I understood it, in your answers to some questions, you attributed in part to the government or to some of the ministers the responsibility for this misinformation. If the government is not responsible, then who is in your opinion?

Mr. Spicer: I am not here to revive old quarrels. I answered earlier that there was a difference between the mandate of the Department of Industry and ours.

Our role is broader. It must reconcile culture and competition. The role of the department is essentially an industrial role, and Mr. Manley is the one that has said so. I have given you a paraphrase of what he has said. So, there is no dispute there, and there's none between Mr. Manley and Ms Copps. They have different visions and apply different legislation. We are not saying that there is any conflict or contradiction there. There are two parallel, but different mandates.

Mr. Bélanger: You said it in English but in the text in French you talk about "false ideas that are going around". Where does that come from?

Mr. Spicer: Sometimes, media observers and certain columnists that will remain unnamed write with a purely ideological mandate. They spread ideas and there are people that eat it up as if it were gospel. I know that you are much too sophisticated to eat it up, obviously, because you have read the Broadcasting Act.

But there are ideas that circulate and, as I said to Mr. O'Brien, we don't have the time, the money, the desire nor the status to constantly argue with people who contradict us. We are not paid to start or aggravate debates. We are trying to do our job and, quite often, silence serves us well. Quite often we would like to respond.

[English]

The Chairman: Mr. Abbott, we have some internal business before we close, so could you make it a brief question? I'd like to ask Mr. Spicer a question too before we close.

Mr. Abbott: I wonder if I might make a suggestion, Mr. Chairman. I noted that we started at 11:23 a.m. as a result of the vote in the House. Do we have any agreement to carry on for the full two hours, which would give us more time with these very good witnesses?

The Chairman: The members are free to decide. I will leave it to the members to decide.

Mr. Bélanger: I had a commitment that I could cancel if the committee wanted to, but I....

Mr. Abbott: I'm asking because it's very rare that we have this opportunity.

The Chairman: Mr. Abbott, Madame Gagnon was just pointing out she has to prepare for Question Period. I know that some of my members.... So perhaps we could be brief.

Mr. Abbott: Yes, thank you for your consideration.

I'd like to talk about 900 telephone numbers. I note the activity you've undertaken with respect to the V-chip, but the V-chip and that source of information coming into the home is not the only source of potentially negative, pejorative information coming into the home. I'm thinking specifically of the 900 numbers devoted to pornography.

My understanding is that the people who wish to bill under 900 first have to register with the CRTC. Is that correct? I need that bit of information before I can carry on with my question.

Mr. Colville: It has been some time since we dealt with the 900 issue, so I don't believe that's the case at all. I stand to be corrected by going back and checking the file, but I believe we said essentially that if the phone companies believe that for whatever reason these calls are obscene, they can refuse to bill, but others could bill the calls.

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Mr. Abbott: I am asking the question because it was drawn to my attention by a father who would probably have the same concerns many parents would have about issues like violence that could be controlled by the V-chip. In fact, his children had accessed a phone number in California called Dateline. The charges, unbelievably, were $50 a minute.

You have been doing excellent work on the V-chip issue, and we could have a lot of dialogue on that, but the point is that there is a second source that parents are concerned about. Effectively what's going on at this moment, I suggest with the greatest respect, is that the position that many of the telephone companies find themselves in is to be collectors of fees for some of the grossest pornography, which is not really a good position.

Is the CRTC prepared to revisit this with the idea of taking a look at any number of things? For example, I know that AGT and BCTel have limits they automatically put on; they are tracking that. But I don't believe the rest of the telephone companies in Canada are doing that, warning their subscribers that they're overdoing it with the 900 bills. In other words, should the other telephone companies be encouraged to do that? And secondly, under what possible pretext could anybody be charging $50 a minute? Would the CRTC be prepared to look at these 900 lines?

Some of them are used very legitimately for very good purposes. Even the Reform Party has used them, and that was probably the most legitimate purpose ever. The point I'm trying to drive at is that the 900 service is a very valuable service, but is the CRTC prepared to look at regulation of the 900 service in the same way and with the same attitude with which you looked at V-chips?

Mr. Spicer: We have dealt with this before, as Vice-Chairman Colville said, and if the members are telling us this is a major problem, we will of course look at it. I can't guarantee the result, but I can guarantee we'll take this with deadly seriousness.

Another area of interest that has come up is the Internet - violence, pornography and hate literature on the Internet. We've had visits from anti-hate groups, one in particular which asked us to intervene. We said that there is already the Criminal Code to deal with this kind of thing; it is a new technology and we'd like to let it evolve. We're not looking for reasons to jump in and censor because a lot of Canadians don't want us to do anything. We get hammered either way, as you know. But I can tell you we take this very seriously.

Our effort on protecting children from television has been limited to violence. We're not dealing with sex or language as such. The medical evidence on which we're basing the violence file is very clear. If the members are telling us - and you just have - that you want us to look at the 900 lines, not only because they may be harming children but because perhaps there's some gouging going on, I think it is something we can and should look at.

Mr. Colville: I would agree, although as the chairman indicated at the outset of today's session, we're constantly drawing a delicate balance between competing interests and our legitimate role to intervene in particular issues.

Strictly speaking, we don't regulate businesses that happen to use telecommunications to run their business. We regulate telecommunications service providers. So to the extent that the telecom providers are providing a billing service on behalf of some other business, then we can step in and intervene in an indirect manner. As the business becomes much more competitive in any event - and this probably goes back to your earlier question about making sure consumers are aware and have the information to make these decisions - you start to cross the line where ``buyer beware'' starts to take hold. But taking your point, one has to make sure consumers have the information with which to make those decisions.

[Translation]

The Chairman: Mr. Spicer, I would like to thank you once again for your presentation. I would also like to thank your colleagues.

I would like to ask you two general questions. You said, during your presentation in French, that deregulation would necessarily give rise to another type of regulation. Could you please explain to me a bit what type of regulation would be created. You have given examples of the United States and the United Kingdom.

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[English]

Just as another very brief question, I want to find out whether you find yourself in a constant internal challenge, or dichotomy, being a regulator and a judge at the same time - because you're both. You're a regulator, and at the same time, you have to judge on various institutions that apply to you to apply this regulation. You're both at the same time.

Does that present the core challenge of the CRTC in the way it carries out its mandate?

[Translation]

Mr. Spicer: With regards to the first question, I can give you two examples of the way in which deregulation or the encouragement of competition has created more regulation, this at the request of the market, that is to say of new competitors.

The 92-12 decision made by the CRTC was the first to authorize competition in the area of long distance telephone. I believe that this decision took the breath away from the people who wanted to say that we were against competition, as did our decision of September 1994 on the deregulation framework.

These decisions certainly freed up the telephone market but, at the same time, they created new problems which required the intervention of a regulator. Why? In order to protect the new competitors who were extremely weak when dealing with old monopolies. Even those that seemed relatively powerful at the beginning realized that, for example, telephone companies that were already in place were giants, had revenues that were at least seven or eight times greater than those of new competitors, and that once the giant awoke, the competition became extremely dangerous, the giant became a bulldozer.

It wasn't simply a question of siphoning off profits from telephone companies. To give just one example, Unitel, who wanted us to liberalize long distance competition in June 1992, had already asked, a few months later, that we intervene to protect it against unjust measures taken by telephone companies.

The same thing is occurring right now in the United States with the famous Telecommunications Act of February 1996. The media wants us to believe that it is like in the Far West. They say that it's a massive deregulation, that there are no more rules. Well, that's incorredt! The FCC, the American CRTC, now has more powers and much more responsibility for maintaining the honesty and the reliability of the market. This is the dilemma.

At a superficial level, there's a tremendous contradiction but in actual fact, if you think of it, you'll realize that monopolies are extraordinarily powerful. Their power over the market is huge. It takes years to reverse the trend and create durable and viable competition.

In Britain, British Telecom has been competing with Mercury for the past seven or eight years. Mercury is still experiencing great difficulties and British Telecom is at least as powerful. The same thing will happen with France Telecom and Deutsche Telekom in Europe. It will take years to set up true competition.

Often, media commentators and those with a particular ideological stance take an ironic view of the term transition. They claim we're attempting to postpone competition indefinitely. We would ask them to be more assiduous in doing their homework. Mr. Colville could give you the most sordid details about matters relating to co-rental, the dismantling of services, number transportability and demonstrate to you with the appropriate evidence why the many hearings he's directing at the present time over a period of 18 months are necessary to liberalize the market and maintain it. That attempts to answer your first question.

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As far as the second is concerned, the contradiction between judge and regulator, the answer is somewhat similar. We do not claim to be judges but we do carry out a quasi-judicial function. As I explained, we attempt to do this out in the open but we also try to work on files, on facts and not on slogans or idealogies.

Our basic statutes are the Broadcasting Act as well as the Telecommunications Act. They are gospel. They constitute the basis for our work and I would say that a good part of the misunderstandings that arise in debates about the CRTC in Canada are due to the fact that very few people have read these two Acts. I've taken the trouble to read you a few key passages from these Acts not so much for your intention but for the public at large which is often under the impression, because of the extensive influence of American media on our media, that the Broadcasting Act has only one thing to say, competition. That is completely wrong.

You won't even find the word competition in our Broadcasting Act. You will find it in the Telecommunications Act. The Broadcasting Act deals with culture in section 3. So we have the responsibility, in as clearsighted and discriminating a manner as possible, to hear the evidence and the information provided by the public, to study our basic texts and attempt to shape decisions that are in keeping with Canadian reality.

[English]

Mr. Colville: I think on the telecom side, the commission has become much more of a referee than a judge. I think our style of regulation will change dramatically to something that's generally known as ``alternate dispute resolution'' rather than a formal courtroom environment for deciding issues. We'll be getting people around the table, and doing consensus-building perhaps more than we have in the past.

The Chairman: Merci beaucoup.

Thank you very much, Mr. Spicer, Mr. Bélisle, Mr. Colville and Mr. Darling, for appearing today. I think you've made us more informed. We appreciate your candid answers. Thank you for coming.

Members, we have a short item of business to deal with. I've just asked the clerk to give you a notice of motion from the official opposition. We have just received it. It had to be translated into English and was sent to us two or three days ago by the Bloc. I've just sent it on to you.

[Translation]

Ms Gagnon, would you like to table a motion?

Ms Gagnon: This is a motion presented by Mr. Gaston Leroux, Vice-Chairman of the Standing Committee on Heritage, and reads as follows:

Whereas the Board of Directors of the National Film Board has ratified a restructuring plan following the budget cuts of $20 million imposed on it by the federal government;

Whereas this restructuring plan will mean the loss of 180 jobs at the NFB, 170 of which are in Montreal;

Whereas this restructuring plan calls for the closing down of several NFB services;

Whereas this restructuring plan calls for the systematic use of contracting out for both the technical and creative aspects of the NFB's work;

Whereas the NFB is a public body;

Therefore,

the Standing Committee on Canadian Heritage intends to evaluate the impact of the changes to be made at the NFB by hearing witnesses including representatives of the Board of Directors and representatives of the employees.

[English]

The Chairman: Mr. Abbott.

Mr. Abbott: I wonder if Mr. Leroux would entertain a friendly amendment. I am concerned that with the people who have been included here - the representatives of boards of directors and representatives of employees - we will be getting one side of the story. I wonder if you would entertain the idea of a friendly amendment that would add, ``and other interested persons''.

The Chairman: Mr. Abbott, the rules provide that there be 48 hours' notice once the members have been notified. There are two ways of doing it. Either we give consent today to receive the motion and treat it, or

[Translation]

which I would suggest to Ms Gagnon, Mr. Abbott and the other members, since the Standing Orders provide that committee members must receive 48 hours advance notice... Since Mr. Leroux is not present here today, this would give the other committee members an opportunity to study the motion. We could come back on Tuesday

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[English]

to treat the motion in detail.

[Translation]

Ms Gagnon: Agreed.

The Chairman: You can tell Mr. Leroux, Ms Gagnon, that we will examine his motion and put it to a vote next Tuesday.

Thank you.

[English]

The meeting is adjourned.

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