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37th PARLIAMENT, 3rd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Thursday, April 29, 2004

1100

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

Mr. Glenn O'Farrell (President and Chief Executive Officer, Canadian Association of Broadcasters; Coalition Against Satellite Signal Theft)

1105

Mr. Harris Boyd (Senior Vice-President, Industry Affairs and Office of Small Systems, Canadian Cable Television Association; Coalition Against Satellite Signal Theft)

1110

Mr. Shan Chandrasekar (President and Chief Executive Officer, Asian Television Network, Coalition Against Satellite Signal Theft)

The Chair

Mr. Ken Stein (Senior Vice-President, Corporate and Regulatory Affairs, Shaw Communications Inc.)

1115

1120

The Chair

Mr. Jim Abbott (Kootenay—Columbia, CPC)

Mr. Ken Stein

Mr. Jim Abbott

Mr. Chris Frank (Vice-President, Programming and Government Affairs, Bell Express Vu, Coalition Against Satellite Signal Theft)

Mr. Jim Abbott

Mr. Chris Frank

1125

Mr. Jim Abbott

Mr. Chris Frank

Mr. Jim Abbott

Mr. Chris Frank

Mr. Glenn O'Farrell

Mr. Chris Bredt (Partner, Borden Ladner Gervais LLP, representing DIRECTV, Coalition Against Satellite Signal Theft)

The Chair

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

1130

Mr. Glenn O'Farrell

Mr. Chris Bredt

The Chair

Mr. Andy Savoy

Mr. Ken Stein

Mr. Andy Savoy

The Chair

Mr. Ken Stein

Mr. Chris Frank

1135

The Chair

Mr. Andy Savoy

The Chair

Mr. Andy Savoy

Mr. Glenn O'Farrell

Mr. Shan Chandrasekar

1140

The Chair

Mr. Shan Chandrasekar

The Chair

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

Mr. Édouard Trépanier (Vice-President, Regulatory Affairs, Quebecor Media, Coalition Against Satellite Signal Theft)

1145

Mr. Luc Perreault (Vice-President, Communications and Regulatory Affairs, Pelmorex, Coalition Against Satellite Signal Theft)

Mr. Paul Crête

Mr. Harris Boyd

Mr. Glenn O'Farrell

1150

The Chair

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

Mr. Chris Frank

Hon. Joe Fontana

Mr. Chris Frank

Hon. Joe Fontana

Mr. Glenn O'Farrell

Hon. Joe Fontana

Mr. Glenn O'Farrell

Hon. Joe Fontana

1155

Mr. Ken Stein

Hon. Joe Fontana

Mr. Harris Boyd

Hon. Joe Fontana

Mr. Harris Boyd

Hon. Joe Fontana

The Chair

Mr. Ken Stein

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mr. Glenn O'Farrell

1200

Mr. Brian Masse

Mr. Harris Boyd

Mr. Brian Masse

Mr. Harris Boyd

Mr. Brian Masse

Mr. Harris Boyd

Mr. Brian Masse

Mr. Harris Boyd

Mr. Brian Masse

Mr. Chris Bredt

1205

Mr. Édouard Trépanier

Mr. Brian Masse

Mr. Édouard Trépanier

The Chair

Mr. Brian Masse

The Chair

Mr. Ken Stein

Mr. Brian Masse

Mr. Ken Stein

Mr. Brian Masse

The Chair

Mr. Gérard Binet (Frontenac—Mégantic, Lib.)

Mr. Glenn O'Farrell

1210

The Chair

Mr. Roy Bailey (Souris—Moose Mountain, CPC)

The Chair

Mr. Luc Perreault

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Paul Fitzgerald (Vice-President and Legal Counsel, Congreso Ibero-Americano de Canada)

1220

1225

The Chair

Ms. Bahija Reghai (Vice-President, Coalition of Canadian Arab Professionals and Community Associations)

1230

1235

The Chair

Mr. Andy Savoy

Mr. Paul Fitzgerald

Mr. Andy Savoy

Ms. Bahija Reghai

Mr. Andy Savoy

The Chair

Mrs. Lynne Yelich (Blackstrap, CPC)

1240

Mr. Paul Fitzgerald

Mrs. Lynne Yelich

Mr. Paul Fitzgerald

Mrs. Lynne Yelich

Mr. Paul Fitzgerald

Mr. Alan Riddell (Partner, Soloway Wright, Congreso Ibero-Americano de Canada)

Mrs. Lynne Yelich

Mr. Alan Riddell

1245

The Chair

Mrs. Lynne Yelich

The Chair

Mr. Paul Crête

Mr. Paul Fitzgerald

1250

Mr. Paul Crête

Mr. Paul Fitzgerald

Mr. Paul Crête

Mr. Paul Fitzgerald

Mr. Paul Crête

Mr. Paul Fitzgerald

Mr. Paul Crête

Mr. Paul Fitzgerald

Mr. Paul Crête

Mr. Paul Fitzgerald

1255

Mr. Paul Crête

Mr. Paul Fitzgerald

Mr. Paul Crête

Mr. Paul Fitzgerald

Mr. Paul Crête

Paul Fitzgerald

Mr. Paul Crête

The Chair

Ms. Bahija Reghai

Mr. Paul Crête

1300

Ms. Bahija Reghai

The Chair

Hon. Joe Fontana

Mr. Paul Fitzgerald

Mr. Alan Riddell

1305

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

Hon. Joe Fontana

Mr. Paul Fitzgerald

1310

Hon. Joe Fontana

Mr. Paul Fitzgerald

The Chair

Mr. Roy Bailey

Mr. Paul Fitzgerald

Mr. Roy Bailey

Mr. Paul Fitzgerald

Mr. Roy Bailey

The Chair

Ms. Bahija Reghai

Hon. Joe Fontana

Ms. Bahija Reghai

Hon. Joe Fontana

Ms. Bahija Reghai

The Chair

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 013

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, April 29, 2004

[Recorded by Electronic Apparatus]

Á (1100)

[English]

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

Welcome to this Thursday, April 29, meeting of the Standing Committee on Industry, Science and Technology. We are continuing our study of Bill C-2, an act to amend the Radiocommunication Act, more commonly known as an act to deal with the grey and black market satellite piracy, or theft, as some would describe it.

We have broken up our morning session into two sessions. In the first hour, we have the Coalition Against Satellite Signal Theft and Shaw Communications. I see that we have a large group at the table. Although we're not going to have time for everybody to have their say, we're going to try to keep each of the two witnesses to five, six, or seven minutes maximum so that we have time for questions.

I understand that for the coalition, Glenn O'Farrell, Shan Chandrasekar, and Harris Boyd, are going to share that bit of time. That's the order I have them in, so we may as well start in that order.

In the second hour, we have the Congreso Ibero-Americano de Canada and the Coalition of Canadian Arab Professionals and Community Associations. Maybe they're already out in the audience.

With that, we'll invite you, Mr. O'Farrell, to take your part of that first five, six, or seven minutes.

Thank you.

Mr. Glenn O'Farrell (President and Chief Executive Officer, Canadian Association of Broadcasters; Coalition Against Satellite Signal Theft): Thank you very much, Mr. Chair.

Good morning. We represent the Coalition Against Satellite Signal Theft. Myname is Glenn O’Farrell. I'm the president and CEO of the Canadian Association ofBroadcasters.

Allow me to introduce the people with me today. Shan Chandrasekar is the president and CEO of the Asian Television Network. Édouard Trépanier is the vice-president of Quebecor Media. Chris Frank is the vice-president of Bell ExpressVu. Harris Boyd is the vice-president of the CCTA. Ken Stein is with Shaw, of course. Chris Bredt is a partner of Borden Ladner Gervais, representing DIRECTV. Last is Luc Perreault, a vice-president with Pelmorex.

In the interest of time, I'd also like to point out that Lori Assheton-Smith is also here and she is counsel with the CCTA.

[Translation]

Mr. Chairman, the Union des artistes, which represents about 6,400 French-language artists in Canada, would have liked to be here with us to support this bill that will contribute to the struggle against the theft of intellectual property.

Pierre Curzi, its President, was telling me:

When broadcasting signals are involved, it is the entire television workforce that suffers. On one hand, the UDA favours a diversity of voices in all languages, but on the other, illegally importing foreign signals endangers our ability to continue to support Canadian cultural and multicultural policies.

[English]

The full membership of CASST, our CASST coalition, is included in the written materials you have, so I won't review that with you in the interests of time. But you'll see it's a very broadly based coalition. In fact, we think it's unprecedented in that it brings together the entire Canadian broadcasting system as well as U.S. representatives. This level of cooperation is testament to how serious we all see the threat of signal theft.

Based on research the industry has conducted, we estimate that there may be as many as 700,000 unauthorized users of satellite services in Canada. And we feel that's a conservative estimate.

Using that conservative estimate of the impact on the industry, this would mean that approximately $400 million or $500 million per year is lost to the Canadian broadcasting system. And this is an industry, Mr. Chairman, that employs 150,000 Canadians. It's a growth employment industry; in other words, we continue to hire more and more Canadians.

While law enforcement activities and civil actions by the private sector have chilled the illegal market somewhat, the problem remains very serious. Many dealers have been investigated and charged, but even some of those convicted have gone back into business, which is very disturbing. Experience shows that improved tools are required now to effectively combat this problem. And that is why we are here today.

It should be understood, however, that only those involved in commercial activity have been charged, because we are not interested--and we want to be very clear--in pursuing individual users, and we say “individual users”, not “individuals who are conducting commerce”. We are interested in dealers.

We would like to address the specific changes being proposed in the bill before you, but before doing so, it's critical that we all understand that the Radiocommunication Act today states that it is against the law to decode encrypted television programming signals without the consent of the authorized distributor.

In Canada, there are two authorized distributors, Star Choice and Bell ExpressVu. DIRECTV, which is represented in our coalition here today, and the DISH Network, or EchoStar, are not authorized for distribution here in Canada. It's as simple as that.

The Supreme Court, in April 2002, confirmed that under the Radiocommunication Act both grey market and black market activity is illegal. There is no need to make a distinction between them. Many people who believe they are grey market users and think they are paying a U.S. satellite service are really only paying an illegal dealer. The bottom line is that Canadian rights holders of programming are not getting paid, Canadian distributors are not getting paid, Canadian producers, artists, and technicians are not getting paid, and there are no contributions to any of the funds privately or the CTF, the Canadian Television Fund.

As well, some of the devices used cause interference with search and rescue and police radio frequencies, endangering public safety. There have already been some cases that are very significant and serious.

The revisions being proposed in Bill C-2 would not change the law. What is currently illegal will remain illegal.

Now, I'd like to ask Harris Boyd to address these changes.

Á (1105)

Mr. Harris Boyd (Senior Vice-President, Industry Affairs and Office of Small Systems, Canadian Cable Television Association; Coalition Against Satellite Signal Theft): We are aware, of course, that the Department of Industry has explained the changes to the committee members, but we'd like to address them as well and explain why we feel they're important.

The Radiocommunication Act currently includes specific inspection provisions to allow inspectors to enter premises and examine records and devices where there are reasonable grounds to believe that equipment that is in violation of the act may be found. Where the premises are actually private dwellings, however, a warrant is required unless there are exceptional circumstances involved. These provisions remain unchanged in the act, with or without Bill C-2. What this bill proposes is to update these provisions to reference computer records and data files, which are much more prevalent today than when the act was originally drafted. The other aspects of the provisions will remain unchanged.

On penalties, the current maximum penalty under the Radiocommunication Act for someone providing or modifying devices to decode encrypted signals on a commercial basis is only $25,000. These maximum penalties are extremely low, given that many of these businesses are reaping millions of dollars per year in the black market. What's more, these maximum penalties are seldom levied upon conviction. Our experience over the last two years indicates that the average fine levied on illegal satellite dealers has only been a few thousand dollars. This can easily be seen as just a cost of doing business.

The proposed amendments to the Radiocommunication Act would raise the maximum fine for a corporation that violates this section of the act to $200,000. While judges would of course still be free to levy fines less than that maximum, this change in the law would send a very clear signal that selling equipment that enables users to pirate satellite signals is a very serious offence and violators will be punished accordingly. We strongly support this increase in penalties.

While we recognize that the fines are also being increased for individuals, our interest, as Glenn said, is only in those involved in commercial activity. It would not be a good use of police resources to investigate personal use, and it would also be very difficult.

The next area being addressed by the proposed amendment is the importation of equipment used to receive unauthorized signals. Such equipment includes DIRECTV and DISH Network receivers and access cards as well as a wide range of devices specifically designed to access the signals of these services without authorization. Those devices have no other lawful use. By far the largest segment of the market in illegal satellite services is the theft of U.S. services. Consequently, preventing such equipment from entering Canada would go a long way toward shutting off the supply.

The amendments would limit importation to those who have obtained an import permit, and such permits would be issued only to those who have legitimate reasons to purchase and distribute satellite receiving and authorization equipment. This, of course, would include the three authorized importers for Star Choice and Bell ExpressVu and any other individuals who require such equipment for specific purposes and can justify an import permit. While these changes wouldn't prevent all unauthorized equipment from entering Canada, they would increase the likelihood of confiscation and facilitate the work of customs officers. We feel that's a very important step in reducing the flow of illegal equipment into Canada.

The final area of proposed changes to the act is the addition of a provision of statutory damages. This is very much of interest to those of us in the private sector. Many CASST members have launched civil actions against black market dealers. Such actions are generally faster than the criminal process; however, the cost of launching such actions is extremely high and it's very difficult for individual plaintiffs to prove damages. The amendments to the act allow a plaintiff to receive statutory damages. While the actual assessment of damages would be at the discretion of the court, the proposed amendments would set out the factors to be considered, including the need to deter other similar conduct.

Although civil suits will still be expensive to launch, being able to recoup at least some of the damages without having to prove the quantum of losses would allow the private sector to initiate actions against many more of these unauthorized dealers. Given the magnitude of the industry's losses to signal piracy, somewhere between $400 million and $500 million a year, the maximum statutory damages being proposed against someone involved in commercial activity seems to us to be relatively low.

I'll ask Shan to finish our presentation.

Á (1110)

Mr. Shan Chandrasekar (President and Chief Executive Officer, Asian Television Network, Coalition Against Satellite Signal Theft): Thank you, Harris and honourable members.

We strongly support these amendments to the Radiocommunication Act and cannot stress enough the urgency of implementing them. Every day that these dealers are in business is another day that they have an opportunity to lure legitimate Canadian customers into the black market. Once customers are lost, they are very difficult and, ultimately, very expensive to repatriate. Moreover, all of this is very detrimental to the Canadian writers, producers, directors, and distributors who breathe life into our domestic broadcasting system, including new Canadians with tremendous aspirations and talent.

We would like to also emphasize that it is not our industry's intent to pursue individuals who are engaged in securing access to satellite signals without authorization for their own personal use. While this activity is still illegal, it is those involved in commercial activity reaping millions of dollars in illicit gains who are the real threat to the Canadian broadcasting system and are the reason these amendments are badly needed. It is these businesses that are enticing otherwise law-abiding Canadians to commit theft. They must be shut down before the Canadian broadcasting industry suffers irreparable harm.

Finally, although we are here today to discuss the amendments to the Radiocommunication Act, we are aware of some committee members who have concerns about the availability of foreign services in Canada. While the Canadian system offers an excellent diversity of programming, it is certainly true that many services originating outside the country have not yet been authorized for distribution in Canada. However, there is a formal CRTC process in place under which new services can be approved. In fact, the commission is currently considering applications for 15 new third-language services. The system does work if people are prepared to follow it. Once they start to operate outside the legal framework, the system begins to break down. We also commend the CRTC for licensing several other multicultural services that are waiting to be launched.

While the black market problem is a complex one and the proposed amendments will not solve it completely, they will help a great deal. Regardless of the reason people steal, theft cannot be tolerated. Those who promote, aid, and abet it must face the consequences of their actions.

We'd be pleased to answer any questions you may have.

The Chair: Thank you.

Ken Stein.

Mr. Ken Stein (Senior Vice-President, Corporate and Regulatory Affairs, Shaw Communications Inc.): Thank you, Mr. Chairman.

Good morning to all of you, and thank you for having us here. My name is Ken Stein. I'm the senior vice-president of corporate and regulatory affairs for Shaw Communications Inc. With me is Mr. Michael Ferras, who is responsible for all the black market coordination activities in working with the RCMP at Shaw Communications; and Cynthia Rathwell, who's the vice-president of regulatory affairs at Star Choice.

Shaw is a diversified national Canadian communications company headquartered in Calgary. Shaw is the leading provider of cable television and Internet services across western Canada, including northern Ontario, serving 2.1 million cable customers and 970,000 Internet customers. Shaw also owns Star Choice, one of the two licensed national Canadian DTH services. Star Choice has over 815,000 customers across Canada.

Bill C-2 contains important proposed amendments to the Radiocommunication Act. Shaw believes that these amendments are essential to countering the illegal use of satellite services. We would ask that Parliament pass these amendments as soon as possible. We need them to ensure that we can survive in a competitive and consumer-focused business.

In considering the importance of this bill, we are mindful of the policy and licensing history of Canadian DTH services and the great successes we have achieved against very formidable obstacles. Only 10 years ago, Canada did not have a domestic DTH satellite broadcasting service at all. In July 1995, the government issued an order directing the CRTC to license Canadian DTH services. The government did this based on the conclusions of the direct-to-home satellite policy review panel that valuable time had been lost in attempting to launch Canadian DTH services and that the entire broadcasting system might be irreparably harmed if the federal government did not exercise its jurisdiction expeditiously. I think those words ring true today.

As a result of their efforts, by December 1995 the CRTC had issued a call for applications, completed a licensing hearing, and had licensed two national Canadian DTH services. Despite the immense challenges to be faced, Shaw jumped into the DTH business with both feet.

These challenges included the economic challenges of financing and operating a new capital-intensive, high-risk satellite business and investing in a secure technology that could not be hacked; the technical challenges resulting from the capacity constraints of operating a dual-satellite receiving system requiring the use of special elliptical dishes to receive signals; the business challenge of competing against strong, incumbent cable operators; and finally, the challenge of competing against a well-developed black market.

Our response to the government's and the CRTC's call for a Canadian DTH alternative and the implementation of that alternative has been unwavering. To date, Shaw has invested over $1.2 billion in Star Choice and created hundreds of new jobs. We have attracted over 800,000 customers, and after seven years and some very difficult times, we are finally approaching profitability.

The benefits we have provided to the Canadian broadcasting system are significant. We have extended digital broadcasting services to all Canadians, such that customers in Iqaluit have the same level of service as do Canadians in Vancouver or Halifax. We have expanded the financial base for Canadian television, speciality, and pay services, as reflected in the financial performance of these companies. We have provided Canadians with the benefit of choice in Canadian distributors and in the packaging of services, and we have provided a solid and real Canadian satellite alternative for Canadians.

At the same time, as a licensed entity we have very substantial regulatory obligations. These include contributing 5% of our broadcasting revenues annually, off the top, to Canadian programming and services. Since our inception, we have contributed over $100 million to Canadian production funds. We've provided guaranteed access and increased revenues to dozens of new and original Canadian programming services. We have provided protection of the program rights purchased by Canadian broadcasters through substitution techniques such as our unique virtual channel override technology, and we have to follow packaging rules to link foreign broadcasting services to Canadian services. Finally, even in the face of capacity constraints, we are carrying small local broadcasters in several communities, such as Prince George, Lloydminster, and other areas. We have done all this despite the fact that we must still compete with an illegal service that is growing and vibrant.

It has been two years now since the Supreme Court of Canada ruled unanimously that unauthorized satellite services are illegal. To realize the promise of that ruling, the Canadian broadcasting industry immediately devoted itself to extensive public education and private enforcement. Extensive meetings and consultations with government, the RCMP, the CRTC, and other agencies were also held to build a coordinated response to the issue.

It is now two years later, and we have still not seen sufficient enforcement to deal with this problem. Better legislative tools, more enforcement, and government leadership are needed to stop the black market so our investment in the Canadian DTH business is not undermined and the industrial and cultural policy goals to which we have contributed are not lost.Without stronger legislative tools, the more entrenched the black market becomes, the more interest there will be in providing even more sophisticated devices to steal satellite signals. The recent appearance of the Blackbird decoding device is a case in point.

Á (1115)

The proposed amendments to Bill C-2 will allow the government and the industry to act more effectively to protect the Canadian broadcasting system and, ultimately, all the services offered by legitimate distributors. It is impossible in the long run to compete against illegal black market satellite services that do not pay taxes, do not pay licensing fees, do not pay for the products they sell, do not invest in infrastructure, and have little to fear from enforcement. Without having the proper legislative tools or the will of Parliament and the government to act urgently, we are beginning to ask ourselves why we should continue to support a broadcasting system that is not supported by its own law makers.

In conclusion, we believe the proposed amendments to the Radiocommunication Act are essential to provide the government and the industry with the tools necessary to deal with the satellite black market.

Thank you very much.

Á (1120)

The Chair: We will go to question period, starting with Mr. Abbott.

Mr. Jim Abbott (Kootenay—Columbia, CPC): I'll try to keep my questions brief, and hopefully the answers the same, so we can get into a dialogue.

First, I want to make it absolutely crystal clear, on behalf of the Conservative Party of Canada--and I'm sure I would be joined by the other parties--that we all see the black market as theft, plain and simple, and it must be dealt with in that context. So let's be really clear about that particular issue.

One of the questions I have for Mr. Stein, and perhaps Mr. Frank from ExpressVu, is this. If we are being asked to make these changes to give better protection, we need to know what your companies are doing to prevent signal theft. I'm thinking in terms of the fact that DIRECTV, as I understand it, a week or 10 days ago did some extra coding, or whatever the process was, that made an awful lot of the screens go blank for people who were in this black and grey market. So clearly there are things that can be done. What are you doing?

Mr. Ken Stein: The first is in terms of technology. The technology that Star Choice has adopted is very secure. We haven't yet found that anyone has hacked into that technology. That requires a significant investment. We also work very closely with our suppliers on that side to make sure that whatever improvements we make to the receiver, equipment, or transmission are done fully, with a mind to making sure the encryption system can't be hacked. So far we have no evidence that it has been. So that's primarily been our focus.

Our second area of focus has been working with the Film and Video Security Office and the RCMP, primarily in western Canada, to try to encourage them to lay charges, and on how to lay charges and proceed. So we've worked actively with them. We've taken things into our own hands and written directly to the RCMP about the resource levels and the priority this has been given in Alberta. The RCMP has responded to that in a relatively positive way.

We see that on-the-ground enforcement is the most direct way to achieve this. We think that working with the RCMP and having the changes that are in this legislation will really make all of our jobs a lot more effective in dealing with the issue.

Mr. Jim Abbott: The first part of your answer is what I was really after. In other words, you have tried to develop as secure a system as possible, and to the best of your knowledge, it is secure.

I wonder if ExpressVu could give us a quick report on that.

Mr. Chris Frank (Vice-President, Programming and Government Affairs, Bell Express Vu, Coalition Against Satellite Signal Theft): Do you mean on the technology only, or on multifaceted—

Mr. Jim Abbott: I'll repeat my question. You're asking legislators to come forward with law to protect you. What are you doing to protect yourselves?

Mr. Chris Frank: On the technology front we are very active. As you described DIRECTV being active, we are very active with electronic countermeasures that disrupt and disable boxes that are attached to our system and are pirating our service. So we have a very aggressive and increasingly effective ECM program to discourage pirates.

We also have implemented much tighter inventory and retail control methods. We are sending a very clear message to installers and to retailers that we have a zero tolerance policy against piracy. If anyone is found in any way involved in any of these activities, they are immediately cut off.

Á (1125)

Mr. Jim Abbott: If I understood Mr. Stein's testimony, he said that he's unaware of there being any theft or interference in their ordinary commerce. That may be correct. What has the experience of Bell been?

Mr. Chris Frank: Our experience is that we do have some signal theft, like many other distributors across the country. We're doing everything possible, everything reasonable, to stop it.

Mr. Jim Abbott: Isn't the real core of this problem, the starting point of this problem, the fact that Canadians want to have choice? The whole issue of the establishment of Canadian content rules, the CRTC rules and so on, and people wanting Fox News, HBO, ESPN, isn't that really the starting point of this problem, which ultimately manifests itself in the illegal behaviour?

Mr. Chris Frank: If I may comment on that, Mr. Abbott, I think the real reason is that people want something for free. It is very difficult for the Canadian industry to complete against free. I think starting in 1995, as Mr. Stein outlined, the CRTC, in fact the federal government, has encouraged competition in the distribution of broadcasting services, and now we have a much more competitive situation than we had 10 years ago. With the advent of digital technology, Canadians are getting choice, much more choice than they ever had before.

Mr. Glenn O'Farrell: With your indulgence, Mr. Abbott, I would like to add something very quickly. If that were true, that it's all about choice, you'd wonder why there would be piracy in the U.S., where consumers have lawful access to those signals. There is piracy there as well. I think, to enforce what Chris is saying, it's a technology-enabled culture that has people believing that if the technology allows it, they should have it. And if it means bypassing the system, so be it.

We have tried, as you know, very hard with this coalition to sensitize Canadians to the fact that theft is theft. I'm sure you've seen or heard the radio or television ads that try, without being patronizing to Canadians, to say you have to recognize that this activity is, unfortunately, illegal. There still is a propensity, unfortunately, for certain people--and there always will be those people--to take advantage of technology where they see it giving them a leg up. And the leg up is not paying for what they are receiving unlawfully.

Mr. Chris Bredt (Partner, Borden Ladner Gervais LLP, representing DIRECTV, Coalition Against Satellite Signal Theft): Mr. Abbott, if I could comment also, on behalf of the coalition last December I was in Brussels at a meeting of AEPOC. This is the European anti-piracy organization. In Europe also, piracy is rampant, and they evaluate the financial damage to European broadcasters at around 1.3 billion euros. So it is not only a Canadian problem; this is a worldwide, widespread problem.

And where there is technology, some people will find ways of stealing it. So it is not an issue of choice. As Glen was saying, it is an issue of stealing programming and getting these signals for free.

The Chair: We'll come back to you, Roy, a little bit later.

Andy Savoy, please.

Mr. Andy Savoy (Tobique—Mactaquac, Lib.): Let's be very clear here. When you're talking about free and stealing, you're talking about a black market. We're talking about a grey market. We all agree with you about the black market; there's no problem there. But the grey market is what we're discussing and what I think Mr. Abbott was getting at.

There's nothing free about the grey market. There's nothing being stolen with the grey market. You pay for the service. You're basically accessing the grey market based on a demand for those services, because you're paying for them. So there's no stealing involved in the grey market.

There is an issue surrounding content, yes--cross-subsidization of Canadian content. I agree with you. But let's not talk about stealing and free in the grey market, because it doesn't exist, in my mind at least--unless you can counter that.

Á (1130)

Mr. Glenn O'Farrell: I think people have come to believe that the grey market is a phenomenon that has legitimacy, as you've just stated. That's not our experience. Those are not the facts as we see them. I might ask Chris Bredt, from DIRECTV, to speak to this, because he has hands-on experience, but we see people paying dealers who never pay the service providers, who therefore never pay the rightful owners of the programming. It's becoming a smaller and smaller constituency, because some people are paying an invoice with the sense that they are absolutely lawful in their actions, but the money never goes to the service provider. The dealers who have sold them those dishes are collecting the money and the money never ends up where it should. Furthermore, it's a smaller and smaller constituency.

But maybe Chris can speak to this.

One other thing is that there are very few people who believe they are paying the grey market who will actually produce an invoice that shows they have paid DIRECTV for this programming. They will often show you an invoice that shows they've paid such and such a dealer.

Mr. Chris Bredt: First of all, I act for DIRECTV and some of the other providers in numerous enforcement actions, and quite frankly, the grey market has disappeared. The problem out there is the black market.

But let me talk about the grey market. The black market is theft; the grey market is fraud. DIRECTV does not willingly provide service to anyone in Canada. In order to get service in Canada, you have to lie to them, defraud them at least twice, because when you call up, the first question they ask is, where do you live? If you say Canada, they say, “Sorry, we cannot serve you”. Part of DIRECTV's agreements with the content providers is to provide service only in the areas for which they've bought the rights.

So when you come here and you say that in the grey market, the people are paying.... They're defrauding us. They're lying to us; they're giving us false information in order to get the service.

The Chair: Back to you, Andy.

Mr. Andy Savoy: Thank you very much. I understand what your philosophy is on this, but let's be very clear. It's not because people want something for free. That's what was stated, that people are accessing these markets because they want something for free. It's not; it's the choice they want, absolutely. The problem is, as I understand it, we have to cross-subsidize the Canadian side in terms of content, and the CRTC controls that. I understand also that we have a growing multi-ethnic population, a cultural, spiritual population that needs access in Canada. We have to broaden that environment. We have to provide them access to media for them to participate and to be informed by those various spiritual, cultural, linguistic channels that they can't get now.

My dilemma is, in trying to foster that environmental growth and foster the environment of choice within the market, and understanding that black is.... Absolutely, there's no question about the black market. But the grey market seems to allow this access. We need to try to weigh that off against our cross-subsidization of content, because I think that's the essential argument here.

Is there any way, as some people have suggested, we can levy some type of fee on the grey market providers that would subsidize the Canadian Television Fund so we could, in fact, get our due, let's say, in terms of cross-subsidization of Canadian content? Has that proposal been bandied about, talked about, and what are your impressions on it?

Mr. Ken Stein: I'll speak to those points, and I'm sure others will as well.

First, the grey market is illegal. The Supreme Court of Canada said it is illegal. So I'm surprised that people are still debating this issue. We had a debate on this issue, and the Supreme Court said--you may not agree with the law, but a law is a law--it is illegal.

Mr. Andy Savoy: There are 700,000 people who disagree with the Supreme Court. We represent the people.

The Chair: Let Mr. Stein finish.

Go ahead, Mr. Stein.

Mr. Ken Stein: Thank you.

I don't think it's a philosophical question; it is a legal question. We have invested $1.2 billion. This isn't just about contributions to the Canadian Television Fund; this is about creating an industry that has to compete with people who are either stealing or defrauding. We think that's unfair.

Mr. Chris Frank: If I could just add, it's also about delivering a full range of Canadian broadcasting signals in English and French and in third-language services to all parts of the country. Before the advent of Bell ExpressVu and Star Choice, francophones in western Canada and anglophones deep in the province of Quebec did not have an opportunity to view a full range of conventional, specialty, and pay services in the language of their choice. Now they have that choice from at least two service providers, and as Ken said, billions of dollars have been invested in developing a Canadian DTH industry that provides increased choice--choice that is increasing every month and every year as new services come onto the market. In the last two years Bell ExpressVu and Star Choice, as well as Canadian cable companies, have added over 60 new broadcasting services from Canada and around the world to provide Canadians with even more choice.

So the black market--grey if you want, still illegal--undermines the very heart and soul of what we're trying to create.

Á (1135)

The Chair: A final point, Andy, before we go to Paul.

Mr. Andy Savoy: Okay.

Do you see a solution in terms of allowing these linguistic, cultural, and spiritual communities to grow? We have to foster growth within them in Canada. Do you see a mechanism for us?

I realize it's now market based, via CRTC applications, so a company is not going to apply for a small ethnic, spiritual, and linguistic community of 5,000, 10,000, 15,000, or 20,000 people, because the viewership is not there. I understand that. Their success in accessing channels now is based on market demand. It gives the larger segments, the larger ethnic, linguistic, and cultural segments, a leg up in terms of accessing the ethnic, linguistic, and cultural channels.

It's a problem, as I see it. We should be trying to offer each of those groups an equal level of access to the respective demand or requirements.

The Chair: Thank you, Andy.

Are there any comments?

Mr. Andy Savoy: Are there any comments on how we can facilitate that?

Mr. Glenn O'Farrell: I'd like to ask my friend Shan Chandrasekar to speak to this in a moment, because here you have the living testimony of someone who has played by the rules, the Canadian rules. He has developed a company that employs Canadians, and it is continuing to grow and provide fantastic service.

Before I pass it to Shan, I'd like to say that I understand there were 17,000 people, or whatever number of people, who didn't believe the Supreme Court was right when it said this was illegal. There are many more; in fact, we think there are 700,000 dishes out there that are illegal, most of which are the black market.

Fundamentally, what we have in the broadcasting system is a balance, a balance that was crafted in public policy terms. It said that what we can do for Canadians in a market such as Canada—with 11 million households or so, it is smaller than California—is to foster the development of a system that today, frankly, is quite enviable, when you look at the variety of choices available to Canadians from Canadian service providers, in addition to all of the foreign services they have access to. It's not a perfect world, but it's a balance.

Shan, would you like to comment?

Mr. Shan Chandrasekar: First of all, I'm absolutely enchanted and thrilled to even be sitting here. When I immigrated to this country 37 years ago, never in my wildest dreams did I ever imagine I would be sitting in front of a parliamentary subcommittee. This is the first time in my life that I've even come to Parliament Hill in Ottawa.

Canada is one of the greatest countries in the world. I think we've given incredible opportunities to new immigrants who've come from different parts of the world. I've travelled to nearly 50 countries around the world. When I come back and land in Canada, I'm always proud to be coming back home.

But I feel sometimes that our kindness is taken as a weakness. We go from mania to depression. It was totally unheard of 20 to 30 years ago. I think we've now become super-sensitive so we don't offend anybody. What is ideal is not practical. You can't please all the people all the time. Even as a television producer, when you cater to your own audience, the five fingers of your hand are not the same length. You can't satisfy all the people all the time.

Programming is what it's all about; programming is what drives it. Our feeling is that certainly Canada has a few problems with respect to access policies and with respect to cable and satellite companies. The traditional thinking of 25 to 30 years ago is changing, but it has to change more drastically. That's the commercial aspect of it.

From a Radiocommunication Act point of view, if you stay focused, if theft is encouraged in this country, it will be very difficult for entrepreneurs to develop access to smaller communities because of Canadian content and rules. If CBC takes $500,000 to produce a one-hour special, an ethnic community could probably do it for $5,000 an hour with a limited shoestring budget, but it would still cater to the needs of the particular community.

As time goes by, the only way it can even be encouraged is because communities that could never dream of a television service 20 years ago have several of them today. The Chinese are an example, as are the Italians, Spanish, Portuguese, and Greeks, the South Asian community, and the minority groups within those communities. They're all coming forward, and this is going to get better and better.

As the increase in fibre optics and digital compression technology takes more of a stand, there will be more technological opportunities to drive these services. Eventually, it will become a business decision, because if you're not in the picture, people are not going to buy the product. Obviously, the broadcast distribution undertakings in this country will be driven by necessary business decisions. It will move towards that.

But we can't even get off the ground, in the meantime, if rights are acquired in Canada by legitimate Canadian license holders and the U.S. ones are broadcasting those services in Canada. The grey market dealers and black market dealers are really making life difficult for legitimate operators in Canada. It's very difficult to even get off the ground.

From the perspective of multicultural communities, this legislation is extremely important, but your point is very well made. We are delighted that you are sensitive to the fact there has to be greater access, but it will be a separate session in which, hopefully, those doors will slowly be opened.

Thank you.

Á (1140)

The Chair: Thank you.

We have translation, so just temper the speed at which you are speaking.

Mr. Crête.

Mr. Shan Chandrasekar: Sorry, sir. I come from a country where there are 17 languages and 564 dialects to please them all in--two hours a day for 28 years of my life--so I got used to speaking very fast.

The Chair: And you do very well.

Paul.

[Translation]

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Thank you, Mr. Chairman. We are fortunate in that we have excellent interpreters here.

The Bloc Québécois is supporting this bill and believes that we must quickly attack the signal theft problem head-on. Our only comments will not necessarily deal with what you have raised, but I was happy to hear you say that you are targeting the network and the system. I would like you to give me a few concrete examples.

Mr. Trépanier, can you tell me how signal theft affects your business, Quebecor Media? The industry has provided us with some figures, but I would like to know the real impact, whether it be financial or other, and what would happen if this bill dies on the order paper and we have to wait another six months or a year to adopt it.

Mr. Édouard Trépanier (Vice-President, Regulatory Affairs, Quebecor Media, Coalition Against Satellite Signal Theft): The short answer is that, for Quebecor Media, signal theft represents about $50 million per year. Now, if I may, I will explain how we arrived at that figure. It won't take very long.

We believe that in Quebec, about 300,000 households are involved in signal theft. This, generally, is not a matter of choice, since these people are francophones and want to watch television in French.

Vidéotron serves about 80% of the cabled area in Quebec, with cable penetration at about 70%. If we do the math, we estimate that there are about 170,000 households using illegal equipment in Quebec. One cable subscriber represents about $500 per year, with $200 going to programming services, and with the cable company keeping about $300 per subscriber for infrastructure and its contribution to Canadian programming. When we multiply $300 by 170,000 households, if my math is correct, this represents $50 million. That is a huge amount.

Now, what would happen if the act were not amended and we had to attempt to determine the impact on our undertaking? The figures are not easy to come by, but I can assure that it would be much more expensive to attempt to charge the illegal satellite dealers. They can be taken to court and fined $2,000 or $3,000, but they will continue to sell their illegal equipment. They often have to be charged two or three times before they are found guilty of contempt of court. At that point we will have spent $50,000, $70,000 or $75,000 in legal fees and they might just change the name of their company and continue to operate. It can easily cost us $100,000 before we manage to shut these people down, and, what is even more important, it can take three or four years to do it. What can happen in the space of three or four years? If none of our neighbours are paying for their signal, at some point, since we are only human, we start wondering why we should continue to pay for something that our neighbours are getting for nothing.

After three or four years, it will be difficult to counter the trend. Instead of losing 15% to illegal activities, as is the case in Canada today, the loss could be 30%. In Italy, for example, 50% of the signals are pirated.

If we don't counter this trend, will we still have a broadcasting system in three, four, or five years? You ask me what will happen to Vidéotron or Quebecor Media. The worst thing that could happen is that within a few years, our broadcasting system might no longer exist.

Á (1145)

Mr. Luc Perreault (Vice-President, Communications and Regulatory Affairs, Pelmorex, Coalition Against Satellite Signal Theft): Mr. Crête, allow me to give you the broadcasters' view point. Mr. Trépanier said that Vidéotron loses $50 million, but he obviously did not include Cogeco's losses.

The broadcasters that are regulated by the CRTC must pay a certain percentage of their gross earnings to the Canadian Television Fund. In Quebec, this money is used to produce televised series that are of cultural significance to Quebeckers. If we lose the amount quoted by Mr. Trépanier, then, every year, two series like Lance et compte, Fortier or Urgence would not be produced in Quebec. This directly affects employment for producers, directors, actors, artists and rights holders. This bill is extremely important for broadcasters since it will allow us to continue producing French Canadian content of the highest quality in Quebec.

The Quebec market represents a very small percentage of the North American one. The francophone market is extremely fragile. Any erosion of the Canadian Television Fund must not be tolerated, since it would prevent us from producing miniseries. These are social and cultural events in Quebec, since we know that 80 or 90% of the population all tune in to watch them.

Mr. Paul Crête: Are you up against individual, isolated dealers, or is this a well-structured organized crime network intent on making large sums of money? If the bill is adopted, how much energy will be required to dismantle and break up these systems? I am most interested in the first part. Do you think that organized crime is involved?

Mr. Harris Boyd: We have no evidence to support that theory. Last week, the RCMP in Quebec uncovered drug and weapons operations in the same locations. We also know that the illegal satellite dealers are very well organized. Very often, a number of stores are involved. For example, in Ontario, a company called HU Works had 11 different locations in different cities, but they were all connected and made bulk equipment purchases from the United States. They are very well organized. There are no doubt hundreds, if not thousands of dealers in this business. We have investigated over 200 of them since the Supreme Court decision.

They are all over the country, and they are very, very well established because it is a lucrative business.

Mr. Glenn O'Farrell: I would like to quickly add one more comment.

Because of the way in which the act is drafted, Canada has become a haven for this type of activity. The fact that the act has no teeth means that this country is right for this type of undertaking. That is the problem that we must face. It is unfair to us that this is happening in Canada; it should also be happening elsewhere.

Á (1150)

[English]

The Chair: Thank you.

Joe.

Hon. Joe Fontana (London North Centre, Lib.): Thank you, Mr. Chairman, and thank you to our witnesses as well.

There is no doubt that the government supports Bill C-2; that's why we introduced it, and we know it needs to be done fairly quickly.

I see this as a two-pronged problem. This half of the equation, with the bill before us, I believe is easy to solve. Yes, we're going to impose import restrictions and import certificates. Yes, we're going to go after the dealers and the people who want to prey upon sometimes innocent people, as well as corporations. That's the easy part.

The other half of the equation--and I want to canvass this with you--is the fact that there is a growing appetite, there is a market. I happen to believe 99% of Canadians are law-abiding citizens. We rely on them to pay their taxes on a voluntary basis, and so I'm not sure everybody is trying to get something free. Of course, if it's offered to them in a legal way, I'm sure they'll have it. The other half of the equation, which is not what this committee is concerned with but is directly related to solving the problem, is choice, giving people what they want, because that's obviously what they need.

But let me deal with this half here. You're telling me it's a $400-million problem. I've just heard that it's probably a 10% problem in Quebec. It's a $400-million problem across the country. Do I take it, then, that the total amount of the business pie is about $4 billion and we are talking about a 10% problem here?

Mr. Chris Frank: The $400 million is just the tip of the iceberg. It is subscription revenue lost to Canadian distributors. It doesn't take into account lost advertising revenue and all the trickle-down or the multiplier effect.

Hon. Joe Fontana: All of that money is essentially what you're not getting. Everybody keeps saying it's a $400-million problem, so I'm using it too. I know it's plus, plus, plus, but what's the total pie? You're telling me it's a $400-million problem. In Quebec you said 170,000 people, at $300 a year, are not paying their fair share, right? So can we at least agree that this is a 10% problem or 15% or 20%?

I'm trying to understand from you what the total scope of this problem is.

Mr. Chris Frank: I think $400 million underestimates the size of the problem considerably.

Hon. Joe Fontana: Then we're using the $400 million wrongly.

Mr. Glenn O'Farrell: If you want to develop a sense of what the percentage is of the overall pie, we have to know what pie we're talking about. Are we talking about the broadcasting system, which includes distributors, programmers, producers, artists, writers?

Hon. Joe Fontana: I see the $400-million problem in every document, and it's being used here again today. If it's not $400 million, if it's a $1-billion or $2-billion problem, start to correct your language. I'm trying to understand on behalf of the Canadian public, which wants us to have good public policy. That's why this committee is trying to understand the problem. Identify the problem for me clearly, what it is quantitatively, and then I have some other questions on the qualitative side.

Mr. Glenn O'Farrell: I'll do that very briefly.

The problem, as we estimate it, is currently at a level of approximately 700,000 Canadian users of satellite signals. We estimate from that number between $400 million and $500 million in lost subscription revenues. We have not quantified the larger pie you're speaking of, because it depends what pie you're talking about. But the loss to the system, Mr. Fontana, in our estimate--and it's a conservative estimate, because nobody self-identifies as a thief on the census form--is between $400 million and $500 million annually.

Hon. Joe Fontana: Let's deal with that part of it. Everybody's saying that it's black market and grey market, and there's a difference. Can you identify what portion of that $400 million is black and what portion is grey? Somebody said it's not the grey market any more, that's not a problem, it's all black market. You need to perhaps take a different view, because one is fraud, you're absolutely right, and one is theft. Theft is black market, fraud is grey market. So in your opinion, how much is which?

Á (1155)

Mr. Ken Stein: What we've found is that it's 90% to 95% black market. One of the things that happens here, of course, is that people who perhaps had been grey market in the past, when we get them into a focus group, other people call suckers. So essentially, that's a switch totally to a black market kind of situation.

Hon. Joe Fontana: The remedy, as you're suggesting and as we're suggesting, even though it's in the legislation, is to go after big companies, dealers who are taking advantage of the system, not so much the individual who's actually using the system. Yet we all want to call them stealers or fraudulent. You don't want to go after the user, you want us to go after the big boys and those who are preying for commercial reasons. If we do that and enforcement is directed there, do you think we're solving the problem? I, for one, don't want to turn Canadians who may want choice and may rationalize it into criminals. Do you think that by going after the dealers and the people who want to do this for commercial reasons, not the individual user who is receiving the signal, we're going to solve the problem?

And then I have one further question.

Mr. Harris Boyd: I don't think we can pretend this is going to solve the problem. This is going to help reduce the problem. This is a very big problem, a very complex problem. This is one aspect of it, trying to reduce the supply and trying to have the consequences for a dealer engaged in this sort of activity match the benefits they're getting out of it. It will certainly help. They're not necessarily all big companies. Most of these outfits are not incorporated, because seeing that they don't pay tax, there isn't really any advantage in incorporating in the first place. So a lot of them are individuals or groups of individuals doing this activity.

Hon. Joe Fontana: But you don't want to make a criminal out of the individual person, do you?

Mr. Harris Boyd: Not an end-user, no.

Hon. Joe Fontana: Lastly, I need to ask this because the other half of this equation has to do with giving people what they want. It may very well be that another committee will have to study this as part of solving the problem. I think that's why you're getting some questions from this committee as to how we solve the total problem and how we give people what they want.

We have a diverse community in this country and they do want the programming they want to see. I think I identified the fact that my mother would love to see some good Italian programming that she can no longer get in this country. My point is, when you go to the CRTC, are you for an open and competitive system so Canadian consumers can get whatever they want legally whenever they want it?

The Chair: Thank you, Joe.

Mr. Ken Stein: We totally agree with you in terms of the choice issue, and the Broadcasting Act allows for that. Thirty years ago, when we started cable in Edmonton, we could only bring in one U.S. signal. The Government of Canada at the time directed the commission to relook at the situation; why should people in Edmonton, which after all is a major city, be denied access to signals people in Toronto and southern Ontario could get? That whole issue is really important, and we do believe that the commission can deal with these issues under the Broadcasting Act.

It's unfortunate that some of our applications get sent back to us without being considered. We don't think that's totally fair, because we do think there needs to be a discussion about this. At the same time, we do believe there is a need to make sure Canadian programming services are strong and vibrant as well, but we do need more choice.

The Chair: Thank you.

We'll go to Brian, and then we'll have time for short, short questions from Gérard and Roy, if you feel you really need to.

Brian, please.

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

I want to go to some of the numbers because they've been used by Industry Canada too. In your document you say “based on research”, and that's where you come up with your 700,000 unauthorized users. Do we have copies of that research or can you provide that research? The one Industry Canada was referring to was a survey, not research, so what research do you have? Is it independent, who conducted it, and can it be made available to us?

Mr. Glenn O'Farrell: We'd be happy to provide you with it just for your benefit. We don't have it with us today, but we'd be happy to provide it to the committee.

The 700,000 estimate is a conservative estimate, as we've said, and it's based essentially on four different points of research and surveys. One was done by Strategic Counsel, two were done by Vidéotron and COGECO, and a third was done, interestingly enough, by the Government of Quebec.

Then of course, anecdotally, we note that there's an association called the Satellite Dealers for Free Choice, which has publicly gone on the record saying they have more than a million users. But that's anecdotal.

But we would be happy to provide you with that research and the methodology.

Â (1200)

Mr. Brian Masse: I would appreciate that. That would be very helpful for us when we're discussing these numbers, and that's why I'm asking for it.

One of the other things that were in your presentation was a comment about the fact that many of these businesses are reaping millions of dollars per year. How many businesses are out there? Is the RCMP able to lock them down in terms of identifying who they are? Because the fines are being increased to $200,000.

I'm just wondering, if they're making millions of dollars in the black market system, is a $200,000 fine really a punishment if there are as many of these businesses as you're saying here? I'd like to know how many there are making multi-millions of dollars or over $1 million.

Mr. Harris Boyd: I guess we'd like to know how many there are as well, Brian, but--

Mr. Brian Masse: It's in your presentation.

Mr. Harris Boyd: There are certainly hundreds and hundreds we've investigated. We work with the Film and Video Security Office, and since the Supreme Court decision they've investigated 236 dealers on their own. In addition, the RCMP and some local police forces have also undertaken close to a hundred investigations in that period in time.

Certainly, there's no evidence that is the global scene with regard to these dealers; there are many more. There are other investigations that will be started. We work with Crime Stoppers; they provide tips on dealers. This is an ongoing thing.

In addition, even some of those convicted go back into business. You'll see in the information we've provided that we've had to go through the contempt-of-court route even after we had an injunction against them. They either resurface in a different location or under a different name or the brazen ones go right back where they were in the first place.

Mr. Brian Masse: So there is no evidence to corroborate your statement that “many of these businesses are reaping millions of dollars per year”.

Mr. Harris Boyd: Well, not exactly. Can I make one more comment?

Mr. Brian Masse: That's what I'm trying to get. You have a statement here--

Mr. Harris Boyd: I can give you two good examples. One business that operated out of Rigaud, Quebec--very close to Ottawa--prior to the Supreme Court decision actually managed to get a conviction overturned in a lower court. Following that, they sued the RCMP for $48 million in lost revenue. There was a similar case in Vancouver, and I'm sure Chris Bredt can talk about some, from a DIRECTV point of view, where the lawsuit was in the order of $50 million. Those are some of the larger operations. There's certainly reason to believe millions of dollars in revenue are being taken in by these people.

Mr. Brian Masse: I'm confused about how they can go through the legal system and then be awarded a sum back, yet at the same time you're saying they're actually stealing.

I'm going to move on to different questions. I do have a question for DIRECTV, because there was a great statement made at the beginning by Mr. Stein. He talked about Star Choice; they had invested in their technology so it couldn't be hacked or pirated. Why is it that others in the industry aren't doing that? To me, that seems like the solution. So there is a solution, in a sense, that's happened here.

DIRECTV in my constituency is a big choice for people. I have to add that some of the numbers, I think, really are bogus, because I know people who have DIRECTV and subscribe to Bell. They're all over the place, because if DIRECTV loops the cards, zaps them, has changed the cards recently, or does whatever it does, then it goes down. It's not a reliable product to have as your sole source of entertainment and cultural connection, so they do actually legally subscribe to other services.

Why is it DIRECTV or others cannot come up with that type of security provision for their products?

Mr. Chris Bredt: Let me respond on behalf of DIRECTV.

DIRECTV does continually update their technology. The problem is that the number of people in the North American market creates incentives because of the hundreds of millions of dollars of revenue available if you can figure out how to hack the DIRECTV technology. So millions are spent to try to crack the codes, and hundreds of millions are spent to try to come up with codes that are uncrackable. It's a bit of cat and mouse.

What you've been hearing about lately is that DIRECTV is switching out the P3. The P3 stream is now coming down, and we expect that by next week it'll be down in full. If you go onto the Internet sites, you'll see people are already selling P4 cards, promising programming for P4 cards, and selling P5 cards.

The problem you have in Canada is that until the Supreme Court decision came down, Canada was a haven for pirates. That is, a lot of people came up here because they knew they weren't going to be prosecuted for serving the big American market and also the Canadian market. That's why DIRECTV has been spending so much money up in Canada to go after the piracy community.

You asked about how big these people are. We did a civil raid, an Anton Pillar raid, in Montreal late last year where we seized over 700,000 devices and parts for devices. When you look at how much these things can be sold for, you see these people were making millions. It's big business, and when big business is involved, there's a real incentive to spend the money to get high-tech people to try to crack the technology.

Â (1205)

Mr. Édouard Trépanier: Can I add something to this, please?

Mr. Brian Masse: Sure.

Mr. Édouard Trépanier: A technology without a card may be a little more difficult to hack; however, when it is hacked, it's more costly to replace all the terminals. Now, fortunately for Star Choice and for cable operators, for example, who operate with digital receivers that do not have cards, so far they have not been hacked, but as with every technology, they are hackable.

The Chair: This is your final question, Brian.

Mr. Brian Masse: There's one contentious issue that really concerns me. We hear code words, that there's no intent to go after individuals, or in your case, you're not interested in going after individuals. If this legislation reduced the fines for individuals, would you be comfortable with that if it went after the actual dealers and those businesses? Is that something your industry would be supportive of? That's where I think there's a lot of concern.

Right now, as the bill currently stands, we're moving up to a total of $26,000 in potential fines for an individual if they also have criminal fines. Would you support lessening the fines for individuals while ensuring that the companies that are doing the complete black market rip-off are addressed?

The Chair: Thank you, Brian.

Mr. Ken Stein: Can I comment on that?

First of all, what they as individuals are doing is either theft or fraud, so while we're not proposing that we target those people, the fact is that they are doing something that's against the law. The focus groups we have discussed this with, from both the cable side and the satellite side, admit it. They admit that's what they're doing, but they basically say, well, everybody's doing it.

The other thing that happens is that the dealers, many of them, are individuals, and Harris can speak to that. Yet the third part of this is that dealers basically say to the individual who's in there looking at a dish, it's okay, you don't have to worry; if anything happens, we'll deal with it; they're not going to come after you. That's like selling somebody a car that goes 180 miles per hour and saying, don't worry about it; you can take it out on the highway and the OPP are not going to stop you. That's the problem, and that's what this bill corrects.

Mr. Brian Masse: That you can stop the source is the whole point there. If the claims of your position are true, if you stop the source, then you stop the individual user, and that's where I think you have to look at the punishment to fit the crime. On one hand, we're hearing, well, we're not going to go after the individuals, but at the same time, a $26,000 fine that could be part of any type of other raid on a person's home or something else.... It could be even individually done, or a target or a sweep. It's all potentials.

Mr. Ken Stein: — [Inaudible—Editor]— on the issue of gun control.

Mr. Brian Masse: Well, gun control is not my legislation, sir. You should talk to that side.

The Chair: Thank you, Brian.

Now, we do have a next set of witnesses to meet with. So we'll give a very short question to Gérard and a short one to Roy. Then we'll suspend for a minute.

Gérard.

[Translation]

Mr. Gérard Binet (Frontenac—Mégantic, Lib.): Thank you Mr. Chairman.

My question is to Mr. O'Farrell. I represent an outlying area where there are not too many cultural communities that we must strive to understand and with whom we need to try to curry favour in the lead-up to an election, as is the case today. But what about a member from Ottawa, with a majority of constituents representing a given community? How can that parliamentarian respond to the concerns of these constituents who...

Mr. Glenn O'Farrell: That is an extremely relevant question, in view of the current electoral climate. I believe that a parliamentarian who represents an ethnically diverse community is entitled to defend the government's position on this bill and should advocate some type of compromise.

Our market here in Canada is small, with 11 million households, but our programming is nevertheless extremely diversified. I would say that our system is as good as, if not better than what can be found in other countries. But it is not perfect. As Shan said earlier, new networks are constantly being created. He is about to launch two new digital networks. The CRTC currently has 15 applications for new ethnocultural networks. We are building, and there is always room for improvement. I don't think it will be possible to be all things to all people in the short term. We have a strong, comprehensive system that has served us well for quite a number of years. We must strive to preserve it and not allow it to be jeopardized by signal theft.

Â (1210)

[English]

The Chair: Thank you. We'll give you some time in the next group, Gérard.

We'll give a very short question to Roy, then we'll suspend.

Mr. Roy Bailey (Souris—Moose Mountain, CPC): Thank you, Mr. Chairman.

There was some terminology that was used today that really hurt me, not because I have a dish or anything like that, or because I'm receiving illegal signals, but such terms as theft, piracy, fraud, and so on hurt me because it's hurting my constituents.

I happen to live in a part of Canada that is growing more and more organically produced crops. The only way they can get a market update is from the U.S. So you go around in my constituency and you will see that there are two things that this signal is there for. One is because it's their livelihood. Secondly, there is the weather. I myself have a $10 radio on top of the fridge that I'll tune into an FM station, which comes from about 45 to 50 miles away, and I'll get a modern update on the weather that is much more accurate than what comes out of Winnipeg.

Don't forget, there's a reason. For these people it's their livelihood. It's their bread and butter. This is not provided for them in Canada. That's the reason, Mr. Chairman, I am hurt. These people are not pirates, they're not thieves or anything else; they're outstanding Canadian citizens. They're trying to make a living.

I was really hurt by those terms. I just wanted to make that comment.

The Chair: Before we suspend, are there any comments on Mr. Bailey's comments?

Mr. Luc Perreault: Since Pelmorex Communications owns and operates the Weather Channel in Canada, and Météo Média in French, we do believe that we offer excellent forecasting capacities in Canada through websites, through our satellite channel, or what have you.

The Chair: Your ad is accepted.

With that, we're going to suspend for a couple of minutes. I know some people want to take pictures. You can take a picture during the two-minute suspension, if you want.

Mr. O'Farrell, very briefly, because we're way behind.

Mr. Glenn O'Farrell: We encourage you, Mr. Chairman, to do your best to get through this as quickly as you can because of the circumstances. We appreciate the opportunity you gave us today. Perhaps you could move up the appearances, or the schedule, for next Thursday to Monday in order to expedite the process, if it's possible.

The Chair: Thank you. We'll do our best.

With that, we'll suspend for a couple of minutes. We'll invite the next set of witnesses to take the seats that are not occupied by our distinguished first set of witnesses.

Thank you very much for your help this morning. Any additional comments you might want to make you could send to us.

We invite you to the next group, which is the Congreso Ibero-Americano de Canada and the Coalition of Canadian Arab Professionals and Community Associations.

Â (1214)

Â (1217)

The Chair: I'm going to call the second half of our April 29 session to order. We have at the table representatives of the Congreso Ibero-Americano de Canada and the Coalition of Canadian Arab Professionals and Community Associations.

We will go in that order. So I believe Mr. Fitzgerald is speaking on behalf of the Congreso.

We invite you to speak for a maximum of seven minutes. Is there a written presentation that was submitted ahead of time?

Okay, it's being handed out.

Mr. Fitzgerald, please proceed.

[Translation]

Mr. Paul Fitzgerald (Vice-President and Legal Counsel, Congreso Ibero-Americano de Canada): Thank you for allowing us to appear before you today. I have with me Alan Riddell who represented us before the Supreme Court in the Bell ExpressVu case.

This is the second time in two years that we present a brief on the ethnic grey market. I hope that with an election in the offing, you will be more attentive to the voices of the ethnic minority.

[English]

We're all familiar with the ads against satellite signal theft. The kid steals the chocolate bar from the store, and he comes home, and the punchline is, “But Dad, you steal satellite signals”. Imagine if the punchline was, “But Dad, you buy satellite TV from the United States”. Would it lose a bit of its punch? Would the average person at home say, “Yeah, whatever”? Don't you think, if the average five-year-old can understand the difference between buying something from someone else and stealing a signal outright, that surely the Government of Canada should be able to make the same distinction in understanding that some people use the grey market to get things that they cannot get elsewhere?

I want to talk specifically about the ethnic grey market. I've asked the clerk to pass out copies of a Montreal newspaper in Spanish that is this week's edition, April 20, circulating in Spanish stores and in the Spanish community in Montreal, Ottawa, and Toronto. Beneath the fold on the front page you'll see a big ad for Digi-Sat and beneath that another ad for D. Forand Satellite. Both of these are Montreal area grey market satellite dealers. You will note that the ads have addresses and phone numbers.

I want you to think about the kinds of things you normally see advertised on the front page of a newspaper. You won't see ads for cocaine, because the police will go and get that person. You won't see ads for prostitution, because, again, the police will go and get that person. Neither are you going to find ads that say “We have water for sale”, because water is commonly available. So the kinds of ads you're going to see are for services that are in demand and yet not everywhere available, and at the same time, services that have what I would call the patina of legality to them.

In the PowerPoint presentation that you all have before you, on slide 8, we show exactly how the grey market works in fact. I just want to take you through that slide briefly.

In the ethnic grey market, we have three basic components. There is one group of customers who are willing to pay for a service that is legal and often CRTC-approved but is not distributed in Canada. This lack of distribution is almost exclusively always for commercial reasons. Second, there is a group of stations that produce and own the content of their programming and wish to have their signals distributed in Canada without having any means of effectively doing so. Third, there are U.S. satellite companies charging monthly subscriptions for the fees to the Canadian credit cards of Canadian viewers and paying the foreign TV stations that own the content.

I had the honour of listening to the presentation of the previous witnesses, and they told you that in the grey market people didn't pay for the service or they didn't pay the copyright holder. Let me tell you about my personal experience.

I have a DISH Latino subscription at home. I bought it through Can-Am Satellites in Vancouver. They charge me a yearly fee of $85 for providing me with a fictitious U.S. address, and they bill my credit card from DISH Network in the United States in Boulder, Colorado. Every month I am billed by DISH Network in U.S. dollars for the programming I am subscribing to. And, by the way, if the folks at DISH Network were to look really hard, they would notice that my Canadian credit card has, in fact, a Canadian ID number; they have looked the other way. They're receiving the money and, more importantly, they're giving that money to the people who own the copyrights for the programming I am watching.

I just want to talk briefly about Bell. Representatives from Bell ExpressVu have been here pretending to have clean hands and wearing white hats; yet they have repeatedly denied that they are involved in grey market activities in the United States. When I made a presentation to the Standing Committee on Heritage on April 25, 2002, I think it was, I talked about the reverse grey market, about the fact that francophones in Florida, Canadians and other people who wanted to watch the CBC or Hockey Night in Canada, were watching Bell ExpressVu. Representatives from Bell ExpressVu actually came in and told the heritage committee shortly after my presentation that they weren't aware of this and it was not happening.

In the PowerPoint presentation, there is in fact a list of the websites for the businesses in Florida where you can get those services. I'll be happy to provide anybody on this committee with a 1-800 phone number to dial to get Bell ExpressVu in Toronto to hook up your service in the United States. Bell is involved in this game and doesn't want you to know about it.

We talked about the grey market itself, and I want to talk about why the grey market is important. From the ethnic side--and this is on slide 16--we're talking about the need to be able to watch in your own language or participate in your own culture.

Â (1220)

In Canada it is so important that the francophone culture survive that the CRTC and the government require the CBC to have a station in Regina with local Regina news for the 7,390 people in Saskatchewan who speak French at home, and we support that. We notice, however, that there's no requirement for any channel whatsoever for the 245,496 Canadians who speak Spanish at home. Why the double standard?

On slide 17 we talk about content and diversity of news. No less reputable a source than CSIS said: “Foreign-based regional news and current events provides real-time information and insights.... Access to this native language programming is critical to the identification and understanding of regional events.” I don't think you get much stronger than that, when the people whose job it is to tell the government what's going on outside the country say, “By the way, you can't find it all on Newsworld.”

To give you an example of what you can't find on Newsworld, yesterday there was a major demonstration in El Salvador, the city my wife comes from. People were attacking the main cathedral. The folks who had lost the election were firebombing buses and throwing rubber bullets. The archbishop of San Salvador was trying to mediate. Does anybody in this room know about it? No, because Newsworld didn't cover it. But CNN did cover it in Spanish. That's why I know about it, and that's why most of the people in this room who speak Spanish, in the groups sitting behind me, understand, because they were watching it . It's not just about the language; it's also about getting access to news that is not available elsewhere.

We've talked about not going after individuals, and I want to touch on that for a moment. The previous witnesses talked about the fact that they didn't want to go after individuals. They're absolutely right. But why don't they want to go after individuals? For one simple reason: it's bad politics. Let's go after Hortez for watching a game from Chile. As we drag him through the court system, a lot of people will say, “We'll never vote again for the Liberals, we'll never vote again for this government, and we're going to have massive demonstrations.” Why? Because that's not possible in Mexico and the United States. You do not drag people through the streets for subscribing to channels that are not available. The United States does not drag francophones through the streets for subscribing to Bell ExpressVu and watching RDI. It's just not possible.

Going after individuals is bad politics, so instead, let's go after companies. That's a good idea. What happens when you go after companies? You take out Can-Am Satellites, which provides me with my satellite service. Therefore, when my credit card expires, there's no one to keep me in the grey market. There's no one to give me continued access to that satellite signalling. Then we hope that I will just quietly go away.

Next is slide 20. I want to talk about some of the things that are not illegal to do and to draw some parallels. In Canada it has never been illegal to subscribe to a foreign newspaper or magazine. In my satchel I have subscription cards from eight different U.S. magazines, all with return addresses in Florida. We don't think anything about doing that. We're paying for a magazine that's not available in Canada because we would rather read Newsweek or Fortune than Canadian Business or Maclean's. It's a market choice. It has never been illegal to read or import non-pornographic foreign books, to listen to a foreign radio station via shortwave or the Internet, and to watch foreign TV channels via the Internet. In border towns it's not illegal to watch U.S. unfiltered, pure American programming, with no one telling you what to do.

I think that the Congreso in the next election will be running ads similar those the coalition is running. It'll show dust in a pair of shoes, like in The Wizard of Oz. It'll say, “What happened here? Oh, that's what happened to the government official who tried to come between the citizen and his remote control.”

I think you're playing with fire when you start telling people what to watch.

We believe that the black market should be condemned. On slide 26 we make some concrete proposals: to legalize the grey market, to introduce a grey market tax of $1 per receiver per month to support the Canadian Television Fund, and to increase the penalties and provide for civil remedies against those individuals and corporations that sell and use black market technology. Frankly, even at $25,000, it's still a cost of doing business if you're making millions selling hacker cards. Finally, we're calling for the introduction of a new trafficking offence that would severely punish those who traffic in pirated receiver cards and modified receivers.

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Thank you.

The Chair: Thank you, Mr. Fitzgerald.

Ms. Reghai, I believe you're speaking on behalf of the coalition. Please proceed.

[Translation]

Ms. Bahija Reghai (Vice-President, Coalition of Canadian Arab Professionals and Community Associations): Good afternoon, Mr. Chairman, ladies and gentlemen.

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My name is Bahija Reghai

[English]

and I'm here on behalf of the Coalition of Canadian Arab Professionals and Community Associations of Ottawa. CAPCA is a broad-based, non-profit organization that works towards improving the status and profile of Arab Canadian communities in Ottawa and enhancing their equal rights and liberties.

I'd like to begin by sharing with you how shocked we all were upon discovering that Prime Minister Paul Martin's first piece of legislation would be a bill that seeks to criminalize Canadians, and particularly members of Canada's ethnocultural communities, who are currently paying for cultural programming not made available by Bell ExpressVu or Star Choice but that is available through brokers working openly in our communities. This bill would give extraordinary powers to cable inspectors to enter our homes and search them, and this is truly Orwellian.

In addition to the other ethnocultural communities that contribute to Canada’srich heritage mosaic, there are approximately 600,000 Canadians who considerthemselves of Arab descent and use Arabic at home. Many of these Canadians, as I have mentioned, purchase their service through Canadianbusinesses. In question are about nine Arabic channels that are notavailable through the only two licensed Canadian satellite companies.

These law-abiding citizens do not steal the signals; they pay for them. The most significant flaw of Bill C-2 is that it does not distinguish between those who purchase foreign-language programming notoffered in Canada and those who steal programming not offered by the licensedsatellite providers.

Although the CRTC has given licences for Arabic channels, cable providersare not supplying them to Canadians because they claim it is not cost-effectivefor them to do so. Since the Canadian Multiculturalism Act “recognizes the importance of preserving and enhancing the multicultural heritage of Canadians”, and the federal government's declared policy is to “foster the recognition and appreciation of the diverse cultures of Canadian society and promote the reflection and the evolving expressions of those cultures” and to “preserve and enhance the use of languages other than English and French, while strengthening the status and use of the official languages of Canada”, it is our position that federal public policy decisions pertaining tothe cultural heritage of Canadians, including members of our ethnoculturalcommunities, should not be subjected solely to business considerations.

Should cable and satellite companies offer Arabic and other languagechannels as part of their bundles, ethnic minorities will not need to resort topurchasing these channels from other programming suppliers in the community.In many cases, subscribers to foreign-language programming are alsosubscribers to the two licensed satellite and cable companies.

We assert that cultural bundles offered to all Canadian subscribers would reflectthe kind of diversity that the Canadian government is encouraging by improvingevery Canadian’s access to multicultural programming currently limited to thosewho seek to maintain a connection to their language and country of origin.

Current multicultural policies seek to improve understanding among all ofCanada’s ethnocultural communities. The irony of this bill is that it fails toincrease access to multilingual programming while criminalizing those who seekaccess to it.Once passed, this bill will remove any motivation to introduce additional cultural programs to the market.

It is important to note that today Canadians can and do subscribe to foreignchannels through the Internet, by subscribing to Internet packages and thenconnecting their computers to their TVs. It is our understanding that such actionsare not illegal, nor are they policed. What is the logic then of criminalizingCanadians for something that is actually available through alternate means?

CAPCA urges you today to stop this bill from becoming law. No memberof our community can argue against the need to prosecute those who knowinglysteal programming that is already available on the market. Theft is theft.However, that the government would lump the so-called grey market with theblack market is unacceptable to our respective communities.

This government is sending the wrong message to our communities if its onlysolution to the problem of lack of access to cultural programming is to criminalizethose who wish to pay for such programming.And make no mistake about it. We know that the only target of this bill is ourrespective ethnic communities, and no amount of government spin to the contrary willconvince us otherwise.

We are painfully aware that the demands of the Coalition Against SatelliteSignal Theft, which appeared before the Ontario Liberal caucus, were met virtually wordfor word in this bill. The penalties outlined in this bill are the exact penaltiesrecommended by these industry lobbyists.

We urge you to examine the logic behind imposing a one-year sentence or $25,000 on a Canadian who subscribes and pays for service that the two largest industry suppliers do not provide.

Our committee members are deeply disappointed that the large corporate donors to the Liberal Party and Paul Martin are rewarded with legislation designed to curtail ethnic Canadians' access to cultural programming, instead of legislation that seeks to enhance choice and access to such programming as the solution. This is a bill that looks after corporate interests, not citizens' interests. This bill, in isolation, does nothing to deal with the issue of consumer access. In June 2003, the House of Commons Standing Committee on Canadian Heritage listed the increasing lack of access in the grey market as a primary reason why people choose to be satellite pirates.

[Translation]

We would like to thank you for listening to us and we hope that you will convey the following message to Prime Minister Martin: please do not reduce the Canadian multicultural tradition to a single idea or a simple concept void of any substance, but do promote it with a public policy. The government must be proactive in its efforts, and it can begin by encouraging the CRTC to favour cultural programming and to cancel the radical measures that unfairly target those who subscribe to services that are not yet available in Canada.

Thank you.

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[English]

The Chair: Thank you very much.

Ms. Yelich has allowed Mr. Savoy to take her place for a short question, or to take maybe the first minute or two of her time.

Mr. Andy Savoy: Thank you very much, Ms. Yelich.

[Member speaks in Spanish and Arabic]

I'll speak in English now.

I want to speak to one of Paul's recommendations on the legalization of the ethnic grey market. In terms of legislation, I think it's very difficult to legalize an ethnic grey market, because in identifying an ethnic market under the law, how do you identify that it's based on cultural, spiritual, linguistic... Do you understand what I mean? So I would just like you to flesh out that recommendation a little bit.

Second, as you probably heard in your earlier interventions, I do have a very serious problem with the ethnic problem in Canada. In trying to grow and foster ethnic communities, they do need access to their spiritual, religious, or linguistic materials. Perhaps you could respond to that.

Mr. Paul Fitzgerald: I actually think that making the distinction is a lot simpler than most people realize. If you think about it, how are you going to separate out the ethnic grey market from the non-ethnic grey market, or from the black market?

If I were to say to you, “You can have a channel for 30¢ a month”, you would buy the channel. If I say to you, “You can have a channel for $3 a month”, you would think about it. Do you really want that channel? The bottom line is that the grey market is always—and when I say “always”, I know what I'm talking about as somebody who has been trained in law—or without exception in any circumstance ever more expensive than buying from Bell or buying from Star Choice. So the person who buys grey-market programming is buying it because they are prepared to pay a premium for a service that is not otherwise available.

You are aware that the Canadian Association of Broadcasters has called, for example, on the CRTC to make HBO and programs like that available in their packages. That will get anybody who is in the non-ethnic grey market out of the grey market in about ten seconds, because they are not going to pay a premium for a service that they can have from a Canadian company. That doesn't make any sense.

What we're saying is go after the black market. And when you go after the black market, those who are left paying a market premium are going to be the grey market. It's not difficult to do this. For example, this is the October 2002 edition of a magazine called Satellite DIRECT. You can pick it up in any magazine store or at any Chapters. It says right on the front, “The Entertainment Guide to DIRECTV”. It's published by a company in Edmonton. You might say, why would somebody in Canada want to find out what's on DIRECTV? Is it because they're watching DIRECTV? And if they're watching DIRECTV, and if they're subscribing to this....

The other thing I forgot to mention is that the company that puts this out also puts out Bell ExpressVu's in-house magazine. So Bell ExpressVu goes to the magazine company and says, by the way, could we have the subscriber list for this magazine? Then they say, let's send them all a note and say, if you're still watching black market TV by, say, next Tuesday at 4 o'clock, we'll have the police knock on your door. Bell solves their own problem.

Ethnic people aren't going to be on this list, because if you don't speak English at home you're probably not going to be watching HBO anyway. So the ethnic market is watching ethnic channels. Using common sense, you can actually get there.

Mr. Andy Savoy: I think Ms. Reghai wanted to respond, as well. Do you support this proposal?

Ms. Bahija Reghai: Sure. Absolutely. I think criminalizing it is absolutely crazy. The way to go is to legalize the grey area, the ethnic communities and spiritual communities, as you call them.

Mr. Andy Savoy: Linguistic, too.

I'd like to thank my colleague.

The Chair: We go to you, Lynne, for your full time, of course. Then we'll go to Paul.

Mrs. Lynne Yelich (Blackstrap, CPC): Thank you very much, Mr. Chairman.

I think the presentations are excellent. It certainly gives us something to think about.

Specifically to you, Paul, the heritage committee is calling on the CRTC to make more channels available. A couple of days ago, Bell ExpressVu said they were looking at providing Arabic, Italian, Portuguese, and Russian channels. If they're approved by the CRTC, isn't your real fight with the CRTC? Isn't that where you should be going?

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Mr. Paul Fitzgerald: That's an interesting question. It's a constant bugaboo going back and forth between the CRTC and the satellite companies.

In fact, there is a list where they talk about the channels that were provided. It's on slide 12, Report on the Carriage of Ethnic Services by CanadianBroadcasting Distribution Undertakings, January 2003: “According to information provided by Mediastats in June 2001,none of the 44 Category 2 ethnic services authorized fordistribution were being carried by ExpressVu or Starchoice.” There were none, zero.

Now, there are some channels, and Bell was quick to point this out. There is a CRTC hearing looking at licensing 15 new channels. Who is supporting that licensing? Who is the person who has applied for the licence? It is Vidéotron out of Montreal. If the channels are allowed, Vidéotron has said they will carry them.

Bell ExpressVu is not supporting the application, as far as I know. They have no intention of carrying those channels. They say they're going to, they want you to believe they're going to, but in fact, they make far more money from carrying hockey or pornography than they'll ever make from carrying anything in Spanish. They're a company. They want returns for their shareholders. It's not surprising that they don't want to carry ethnic packaging.

Mrs. Lynne Yelich: You're in favour of the grey market but opposed to the black market, of course, as you made quite clear. How would you crack down on the black market while supporting the grey market? What's your suggestion?

Mr. Paul Fitzgerald: I would crack down on the black market primarily by going after the people who are subscribing to this magazine—that's the fastest way to do it—and also by cracking down on the people who are selling HU cards, the various types of hacker cards.

When walking into a house and looking at the TV set, a police officer knows in about 15 seconds if the set is black or grey. If it's grey, it has an ordinary card in it and it looks very much like a Bell ExpressVu unit. If it's black, it has some lights flashing on the outside. It has the kind of electronics connected to it that, in fact, cause interference with search and rescue, as one of the witnesses pointed out. Black market is dangerous not only because it's theft, but because it interferes with search and rescue signals.

This is our third recommendation. We want to increase the penalties and provide for civil remedies against the individuals who are in the black market. If you have a Bell ExpressVu blocking signal, if you have Star Choice...by the way, Star Choice said they have never been hacked. It's interesting. They're using a more advanced technology. Bell is using a simpler technology, and they want you to fix their problem. Star Choice is using a more expensive technology, and they're solving their own problem. It's fascinating for me, as a taxpayer, to look at where this one is going.

We have a situation where Bell can jam the signal and go after the people on this list. You get those things happening, and then there are increased penalties. You're hammering the black market user and the black market dealer. If they know you can get them, and if they know they're going to face a penalty when you do get them, it's how you dissuade the black market.

Mrs. Lynne Yelich: Hence, the grey market is all right.

On slide 25, you referred to “s. 9(1)(c) of the Radiocommunication Act to the Supreme Court”. Why did you make reference to that?

Mr. Paul Fitzgerald: I'm going to let our lawyer, Alan Riddell, with Soloway Wright, handle that because he co-chaired this one.

Mr. Alan Riddell (Partner, Soloway Wright, Congreso Ibero-Americano de Canada): Sorry. What was the thrust of the question again?

Mrs. Lynne Yelich: On the slide, you made reference to it. Why did you make that reference to the act to the Supreme Court? Why is it in your presentation?

Mr. Alan Riddell: The Supreme Court of Canada, in Bell ExpressVu Limited Partnership v. Rex, invited litigants to bring a charter challenge. They indicated that it was not possible to pronounce on the important issue of whether paragraph 9(1)(c) of the Radiocommunication Act was or was not unconstitutional. Mr. Justice Iacobucci said it was necessary for them to have an evidentiary record before them that is complete in order for them to decide this very important issue of whether or not black marketing and grey marketing is constitutionally protected under the charter.

Some of the protagonists went back and started litigating at first instance on an evidentiary record, as they'd been invited to do by the Supreme Court in Mr. Iacobucci's decision. Bell ExpressVu intervened and turned the entire case into a gargantuan exercise, where tens of thousands of pages of material were filed by Bell ExpressVu as intervener. The case dragged on and on, and Incredible Electronics, one of the companies that had accepted the Supreme Court of Canada's invitation to litigate the charter issue, ran out of money and was forced to abandon the litigation. This was after eight months of litigation, and they hadn't even completed the deposition stage of the case. The cost that had been racked up by Bell ExpressVu was in the neighbourhood of $1.2 million on the eve of Incredible Electronics' dropping out of the case for lack of funds.

So the case became so incredibly expensive that no one except Bell ExpressVu and the federal government, which was involved and racked up, apparently, $500,000 in legal costs at the taxpayers' expense, could afford to enter the fray. Therefore, the case was basically abandoned, and we're now at an impasse, where everyone else in the industry is looking at this situation and saying, oh, my God, if I try to raise this charter issue, if I try to invoke my charter rights, as the Supreme Court of Canada has invited me to do, at first instance, I'm going to have Bell ExpressVu and Star Choice and the Department of Justice litigating against me, and if I don't have a war chest of at least $5 million or $6 million to fight them at first instance, I'm just not going to be able to get to the final decision.

That is why we are proposing that there be a reference directly to the Supreme Court of Canada on this issue. It's the only way, in fact, that justice can be done and that the important constitutional question, which the Supreme Court of Canada itself expressly invited the people of Canada to bring to have decided, can be decided. In effect, we have these monopolistic companies on one side, Bell ExpressVu, Star Choice, that have a tremendous amount of money to litigate and a tremendous amount of money at stake, and are demonstrably willing, as they did in the Incredible Electronics case, to spend millions of dollars in legal fees. On the other side, there simply aren't the financial resources. We're dealing with very small players who are not necessarily very well organized individuals and cannot possibly raise the legal resources to fund a charter challenge fighting these companies, even at first instance.

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As a lawyer, I would remind you that the $5 million or $6 million you're going to spend at first instance fighting Bell ExpressVu and Star Choice is just the first stage. It's guaranteed that whoever wins at first instance, after the first $5 million or $6 million have been spent, is going to have that decision appealed to the next level, which is the Ontario Court of Appeal or whatever provincial court of appeal is seized of this. Whoever loses that will then appeal to the Supreme Court of Canada. It's a seven-year process, and probably, by the time all is said and done, it's going to cost each litigant $15 million or $20 million, given the rate at which the litigants were spending in the Incredible Electronics case.

So that's the reason.

The Chair: Is that okay, Lynne?

Mrs. Lynne Yelich: Thank you.

The Chair: That's about ten minutes now, actually.

We're going to Paul, then Joe, and we can come back to Roy.

[Translation]

Mr. Paul Crête: Thank you, Mr. Chairman.

Mr. Fitzgerald, I would like you to tell us a little more about your association, the Congreso Ibero-Americano. How many members do you have?

Mr. Paul Fitzgerald: We have about 60 flesh and blood members, 60 real people. We are an umbrella organization, if you will. We have received messages of support from the Chilean community in Edmonton, the New Brunswick community, the Nicaraguan community in Ottawa. We also have the support of a number of Ottawa communities.

We started with a petition campaign. We managed to collect 400 signatures, simply through our daily contacts. It is a small, non-profit, volunteer organization, but we have the general support of the citizens.

Â (1250)

Mr. Paul Crête: There are some 60 people who are members of the organization.

Mr. Paul Fitzgerald: Yes, since we only began to recruit members a few months ago.

Mr. Paul Crête: Is your organization incorporated? Do you have an office?

Mr. Paul Fitzgerald: Yes, we are incorporated in Ontario.

Mr. Paul Crête: I would like you to tell us what impact your recommendations would have on signal theft. This trend is widespread in Quebec and Canada. What would your recommendations accomplish? Would the effects on signal theft be positive, negative, or neutral? There are two different problems here. There is the problem that your communities are experiencing in accessing the signals, something that we can understand, and then there is the piracy issue. The bill deals mostly with signal theft. How would your recommendations affect that?

Mr. Paul Fitzgerald: As far as we can see, Bill C-2 does not distinguish between signal theft and the grey market. And that is the problem, is it not? We want you to acknowledge that there is a difference between piracy and the grey market.

We know that people generally pay a little more for grey market services than they do for the traditional ones, and we are against signal theft. As I explained to Ms. Yelich, we think that the best way to penalize the illegal dealers is through campaigns to determine who is subscribing to a given publication, or something along those lines. It would not be hard to do. If a Quebecker wants to read Le monde diplomatique, a publication from France, he can't go and steal from Provisoir, because that is illegal. The fact that the periodical comes from France is irrelevant: it is illegal, full stop. If he wants to read the Journal de Québec or Le Soleil he can do so. Theft is illegal. Those who steal these signals, in Quebec, want free television. Bell Canada's witnesses said that they could not compete against those who are providing a service free of charge. So we are truly up against the black market and the signal thieves, but we must recognize that there are communities and ethnic minorities who are entitled to have a service in their own language, something from their country of origin so that they might keep up with the news from their country and preserve their culture.

Mr. Paul Crête: Your recommendations do not cover the black market. None of your recommendations would impact this sector.

Mr. Paul Fitzgerald: The black market is the black market. There is no difference when it comes to the underground economy. The judge is not interested in what motivates the thief. Someone who steals a car—

Mr. Paul Crête: I don't want to enter into a philosophical debate. I want to know if, in your recommendations, there is something that might help us to better contain the black market. All you need to say is that it was not the aim of your brief, and that will be the end of it. I want to know if you think that your recommendations will have an effect on the black market.

Mr. Paul Fitzgerald: I believe that our recommendations will impact the black market. In slide 26, we request that a new offence be added: “Introduce new offence of “Trafficking” in pirated receiver cards and modified receivers.” That will have an impact on the black market. We distinguish between the person who buys and sells the cards, which is a more serious offence, and an individual subscriber. We acknowledge the difference.

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Mr. Paul Crête: The way I understand it, you are suggesting a complete overhaul of the system that we now have in Canada, rather than simply targeting the piracy problem. You seem to be saying that the access to the signals by your communities is inadequate or unacceptable. I don't think that your situation is covered by this bill.

Mr. Paul Fitzgerald: We would like the committee counsel to amend Bill C-2 to recognize the difference between those who pay for a signal and those who steal it. That has not been taken into account, but I think it would be possible to include it in Bill C-2.

Mr. Paul Crête: Your first recommendation deals with legalizing the grey market. Can you repeat it so that I might properly understand how you would go about legalizing the grey market?

Mr. Paul Fitzgerald: For example, on the first page of the newspaper that I have distributed, there are the names, addresses and telephone numbers of the dealers. The list of customers is available and they could be taxed $1 per unit per month. That is legal. The tax would go to the Canadian Television Fund, I believe. The great majority of those who buy from the grey market also want to support Canadian culture. They live in Canada and they want to support the system. This would involve levying a tax and recognizing that the dealers must may the GST and other costs. This would give them a level of legitimacy.

Mr. Paul Crête: But we can't do that without amending the basic principle, the way in which we access signals in Canada. You are suggesting that in addition to the current types of access, we would add a third type for ethnic or foreign media. You would like them to access these signals outside the system that is provided for in the act. We can't simply ask someone who advertises in your paper to remit $1, because there is no incentive to pay if no legal obligation exists.

Paul Fitzgerald: Precisely. It may not be the short-term objective of Bill C-2, but it is our objective, our philosophy. We recognize that grey market subscribers must support the system and Canadian culture through a payment to the Canadian Television Fund.

Mr. Paul Crête: I have no other questions.

The Chair: Go ahead, Ms. Reghai.

Ms. Bahija Reghai: The reason why we have a grey market is because there is a need for it. Neither the CRTC, nor the government, nor the cable companies are responding to the demand. That is the only reason why a grey market exists. Now the black market is another matter. That is theft. The grey market includes people who respect the law, who pay, but who want access to signals that their cable companies could provide but they don't because there is not enough profit in it.

Mr. Paul Crête: I am not saying that it is not legitimate, but at this point in time, that market is not legal.

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Ms. Bahija Reghai: Absolutely, but it is a grey market that has not been... As Mr. Fitzgerald said, there are Canadians who have businesses that appear to be legitimate because people can subscribe and pay for the service. The government has turned a blind eye. Why? This act will upset the balance and give private companies a hammer when all that is required is a bit of help. It is truly unfortunate, because all of the ethnic communities that are not currently served are criminalized. That is not how they should be treated.

[English]

The Chair: Merci.

Joe, then Roy.

Hon. Joe Fontana: Thank you, Mr. Chairman.

Maybe we can start by trying to get to a common definition of black market and grey market. I heard Bahija say, as long as you pay, it must be legal. The question is, who are you paying? The grey market no longer exists, according to the previous witnesses. They say it's all black market now. You agree that the black market is wrong and we should go after the black market in no uncertain terms, but there is a significant grey market. You define the grey market as one where people are legitimately paying some money, even though the previous witnesses and others will say the only way you can do that is by a fraudulent act, by saying you live somewhere you're not to have access to the system in the U.S., therefore paying for it.

I have some sympathy for trying to work this thing out, and I know part of the answer would be to open up for consumers the greatest amount of content possible. We want to protect Canadian content and so on, but let's face it, with the Internet and everything else, the world is changing, and we're finding that people will get the material they want legally or illegally.

I need you to clarify a few points for me. Define what you believe to be the black market and explain why the previous witnesses would have said the grey market no longer exists. I have a definition from Industry Canada of what the black market and the grey market are.

The other point is with regard to the Supreme Court. The Supreme Court has indicated that both the black and grey markets are illegal. From your arguments, you don't believe this is the case, and there is no illegal act going on with regard to the grey market.

Finally, how do you believe the country, outside opening up in a very legal way all kinds of channels and content by getting CRTC approvals and so on--and hopefully our providers would be able to do that--could legalize something the Supreme Court says is illegal? You're saying, in order to get to the grey market, people are having to do certain things and lie, or call it what you will; they may fraudulently say they don't live where they do in order to gain access to the market. That is not legal. Tell me how you believe you can legalize that system.

Mr. Paul Fitzgerald: I'm going to let Alan Riddell deal with the second point, then I'll deal with points one and three.

Mr. Alan Riddell: What the Supreme Court of Canada said in the Bell ExpressVu case is that there was a violation of section 9 of the Radiocommunication Act by both black market and grey market. It also went on to say that in fact, section 9 of the Radiocommunication Act may well be unconstitutional and therefore void. So both might possibly be quite legal. The final decision as to whether section 9 is constitutionally valid or not, thus the final decision as to whether these practices are legal or illegal, has to be taken in another court case before the Supreme Court of Canada on another record.

We believe, on our definition of the situation and having looked at the law, the Supreme Court of Canada will in fact recognize that section 9 is contrary to the charter, and therefore that grey marketing is legal.

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Hon. Joe Fontana: Could you explain grey market and black market? Everybody seems to have a different definition of what it is.

Mr. Paul Fitzgerald: I think it's actually not that complicated. The grey market is where the customer pays money directly or indirectly to the satellite company that has the rights to distribute the channel. That's the grey market. Money, business--business happy, customer happy.

Hon. Joe Fontana: It has authorization to do business?

Mr. Paul Fitzgerald: No, the satellite company that has the right to distribute that particular channel.

For example, there are a bunch of slides in here talking about TV Chile. I think, Mr. Fontana, if you look at those slides, slides 9 through 11, they talk about the specific case of TV Chile, how they have a CRTC licence, how no one carries them, and how TV Chile, in fact, gets money from me when I buy something through DISH Latino. They get money.

Now, say you're the owner of TV Chile. You have customers in Canada, and they're paying; you're getting the money. You could have a philosophical discussion, if you wanted to, about how legitimate that was, but most businesses get the money, put it in their pocket, and say, thank you, we have the money; the customer is happy. The fact that they had to do a little bit of a circuitous route around is not a huge problem for them. Their lawyers aren't spending a lot of time looking at it.

That's what the grey market is.

But you asked how we make the grey market possible, how you would legalize it in Canada. Well, there are two, I guess, leads I can give you. One is that--

Hon. Joe Fontana: I wanted you to also define black market, because on that we all agree, including you, that it's the worst category, right?

Mr. Paul Fitzgerald: The black market is where you're not paying anybody, basically. You're stealing. It's theft. That's the black market.

Hon. Joe Fontana: So it's illegal, whether you pay or not?

Mr. Paul Fitzgerald: Can you show a credit card receipt? Can you show some kind of receipt? I can show a credit card receipt from DISH Network.

Hon. Joe Fontana: Surely you're not saying--

Mr. Paul Fitzgerald: Seriously, if you want a simple legal test, that's certainly one of them.

Hon. Joe Fontana: I know you don't want to make it appear to be that simple, but surely to God, a receipt doesn't meet the total test of what's legal or illegal in Canada.

Mr. Paul Fitzgerald: If somebody has a credit card receipt from the satellite company acknowledging payment--

Hon. Joe Fontana: Wait a minute. If you buy a stolen car from someone and you know that it's stolen--you can produce a receipt that you paid for the car, but they can prove that you knew all along that it was stolen--then guess what? You're going to jail too.

Mr. Paul Fitzgerald: I'm talking about a credit card receipt from the satellite company, DISH Network. There are two in the United States. You have a credit card receipt from DISH Network. You can verify that. There's a trackable financial trail to my credit card. That would suggest that they know that I'm here. They're receiving my money; that's confirmation. We're not talking about giving the credit card receipt from my friend Biff, who happened to do...no.

Hon. Joe Fontana: So as long as the money's going directly from you to the satellite provider, that would be your test of a legal transaction?

Mr. Paul Fitzgerald: That is one test, and certainly, if it meets that test, I think it would be clearly grey market.

But I want to deal briefly with your second question, which was how you get there. I would like to draw your attention to slide 17, where they talk about the Radiocommunication Act, paragraph 9(1)(c), “Exemption Order”, for national defence and security. That's SOR/2002-16, December 13, 2001.

What basically happened here, and it's important that we understand this, is that after the Supreme Court decision in Bell ExpressVu v. Rex, somebody at CSIS said we need to be able to keep our satellite system going, and given that we're a government department, we need to do this legally. So they went to cabinet and they got SOR/2002-16 approved. Essentially, they got an exemption from paragraph 9(1)(c) of the Radiocommunication Act. It doesn't apply to CSIS as long as whatever they're doing is in “the national interest” or it's for “national defence”.

What you might want to do is call CSIS up and ask them how they're paying for the service. Who is their provider? Are they breaking the law? You would never have CSIS break the law, after all. If they're breaking the law, surely this committee wants to know about it. If they're not breaking the law, they'll be able to show you their route. But I tell you, it's trackable.

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Hon. Joe Fontana: And if they can't produce a receipt... that's what I'm supposed to do, right?

Mr. Paul Fitzgerald: Exactly.

But trust me, they will have a receipt. They're not in the black market. If they're paying, they're probably running it through Canada's embassy down in Washington. I'm sure they're doing it that way. But they're using a U.S. address; they're running this through. They have a card; they can prove payment. They are in the grey market. But they got an exemption around paragraph 9(1)(c) because they wanted access to culture and to content that's not available here in Canada.

Think about it. If CSIS, with the kinds of satellite dishes it has, needs to access the grey market, it tells you that, really, they've looked and they can't find this stuff elsewhere.

The Chair: Thank you, that's very interesting.

Roy.

Mr. Roy Bailey: I have a quick question. With the number of cables or programs potentially coming in, as you've mentioned, Paul, from Chile and so on--the Arab, the Italian--it's unlimited really. I think electronically you will see that happening. The question is directly this: CRTC has some control over the content and the programming of the cable programs that come into my house. I found out the other day that Global News wasn't very good news. I don't know why. I never watched it. Will CRTC have any control whatsoever of the television programs such as the one you're bringing in from Chile?

Mr. Paul Fitzgerald: What the CRTC's policy is--and it's stated on slide 14--is that they will license an unlimited number of category two services that meet basic licensing criteria. What it means is if for your TV Chile, your TV Romania, your TV Bangladesh, you want a licence, there's your licence.

Mr. Roy Bailey: It has nothing to do with programming.

Mr. Paul Fitzgerald: Nothing to do with programming. Then you have to take that licence and get Bell or Star Choice to carry you. In most cases they'll say no, because there's no money in it. What we're saying at that point is that maybe it's time to start looking at allowing people in various markets to buy programming. And this is something else I would recommend the committee do: look carefully at the U.S. situation. In the United States, people who speak French are watching Radio Canada, RDI, TQS in French, paying for Bell ExpressVu. It's not illegal. The American government is not spending a lot of time on this one. There are dealers in places like Florida and Wisconsin selling those signals. If America can figure out how to handle that in a country where DISH Network and DIRECTV have in fact the same kind of government powers as Bell ExpressVu and Star Choice have here, then clearly it seems to be possible that this works.

I think if in the United States they can make ethnic television happen, one of the things you'll find is that Canada may well have different signals. So, for instance, if you're in the United States and you want to watch French TV, you go to Bell ExpressVu. If you want to watch Filipino TV, you also go to Bell ExpressVu. They have a better package. I think it's Filipino; it's one of those other languages where in fact you have a greater population, for some reason, in Canada than in the United States and therefore Americans of that ethnic group subscribe to ExpressVu rather than U.S. companies. Nobody is worried about it down there. I don't know why it's such a huge issue here. It really shouldn't be.

Mr. Roy Bailey: A good point.

The Chair: A final comment to Ms. Reghai.

Ms. Bahija Reghai: I'm sorry, but it is criminalizing a good portion of the ethnic communities. Whatever happens--

Hon. Joe Fontana: We're not finished with the bill yet, thank you.

Ms. Bahija Reghai: No, but it would. I want to draw your attention to the Internet possibility. At the moment, anyone can subscribe to foreign-language programming and then hook up the Internet to the television ,and you get it without--

Hon. Joe Fontana: Do you now want to add computers and the Internet to the bill?

Ms. Bahija Reghai: No, but this is not policing; I'm sorry, but this is targeting people who do not have a computer. The majority of new immigrants do not have computer access and all of that. I could have access to any program I want through the Internet. I just need to pay, that's it. But a new immigrant does not, and that's....

The Chair: Very good, everyone, colleagues. I think it's clear. We want to try to do the best job we can for all Canadians.

With that, we're adjourned, and we're meeting Tuesday. We have more witnesses, including some of the individuals who discussed here today.

So we're adjourned. Thank you to all of our witnesses for their help today.