INST Committee Meeting

37th PARLIAMENT, 3rd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Tuesday, May 4, 2004

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1110

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

Professor Paul Attallah (School of Journalism and Communication, Carleton University, As Individual)

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1115

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1120

The Chair

Mr. Russell McOrmond (As Individual)

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1125

The Chair

Mr. Phil Rogers (Partner, Osler, Hoskin & Harcourt, As Individual)

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1130

The Chair

Mr. James Rajotte (Edmonton Southwest, CPC)

Mr. Phil Rogers

Mr. James Rajotte

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1135

Mr. Phil Rogers

Mr. James Rajotte

Prof. Paul Attallah

Mr. James Rajotte

The Chair

Mr. James Rajotte

Mr. Russell McOrmond

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1140

Mr. James Rajotte

Mr. Russell McOrmond

The Chair

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

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1145

Prof. Paul Attallah

Mr. Andy Savoy

Mr. Phil Rogers

Mr. Andy Savoy

The Chair

Mr. Phil Rogers

The Chair

Mr. Andy Savoy

Prof. Paul Attallah

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1150

Mr. Andy Savoy

Mr. Russell McOrmond

Mr. Andy Savoy

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mr. Phil Rogers

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1155

Mr. Brian Masse

Mr. Phil Rogers

Mr. Brian Masse

Mr. Phil Rogers

Mr. Brian Masse

Mr. Phil Rogers

Mr. Brian Masse

Mr. Phil Rogers

Mr. Brian Masse

Prof. Paul Attallah

Â

1200

Mr. Brian Masse

Prof. Paul Attallah

Mr. Brian Masse

The Chair

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

Â

1205

The Chair

Prof. Paul Attallah

Mr. Phil Rogers

Â

1210

The Chair

Mr. James Rajotte

Mr. Phil Rogers

Â

1215

Mr. James Rajotte

Mr. Phil Rogers

Mr. James Rajotte

Mr. Phil Rogers

Mr. James Rajotte

Mr. Russell McOrmond

Mr. James Rajotte

Prof. Paul Attallah

Â

1220

Mr. James Rajotte

Prof. Paul Attallah

Mr. Phil Rogers

Â

1225

Mr. James Rajotte

Mr. Phil Rogers

Mr. James Rajotte

The Chair

Hon. David Collenette (Don Valley East, Lib.)

Â

1230

The Chair

Prof. Paul Attallah

The Chair

Mr. Russell McOrmond

Â

1235

The Chair

Mr. Phil Rogers

The Chair

Hon. David Collenette

The Chair

Hon. Lyle Vanclief

Â

1240

The Chair

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CANADA

Standing Committee on Industry, Science and Technology

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NUMBER 014

l

3rd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, May 4, 2004

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): I'm going to call to order this May 4 meeting of the Standing Committee on Industry, Science and Technology. We're continuing our study of Bill C-2, an act to amend the Radiocommunication Act.

    We have with us as individuals Paul Attallah, professor, Carleton University; Russell McOrmond; and Phil Rogers, partner, Osler, Hoskin & Harcourt.

    I want to invite our witnesses, and I'm going to go in the order in which they're listed on the orders of the day. We're going to ask for five minutes, six or seven maximum, from each of you, in order, and then we will go into questions from members of the committee.

    Just to let you know, colleagues, on Thursday in the first hour we're inviting a witness from the RCMP, and in the second hour, either the privacy commissioner or deputy privacy commissioner.

    So with that, we'll invite Paul Attallah, professor at Carleton University, to start us off.

    Welcome to all.

    Professor Paul Attallah (School of Journalism and Communication, Carleton University, As Individual): Thank you very much for the invitation to speak to you on Bill C-2.

    I think this bill and its underlying logic rests on bad assumptions and therefore makes for bad policy. I've organized my comments in six points, sir, so I'll go over each of them briefly.

    It's said that 700,000 Canadians receive unauthorized satellite signals, costing the industry roughly $400 million annually. I think these numbers are questionable. First, do they represent individuals, or households, or systems, a mix of all three of these, or some other combination? Second, if we divide the alleged lost revenue by 700,000 users, we have to assume that each user would automatically spend approximately $600 per year on a Canadian service. However, basic cable and satellite costs only half of that. Why would we assume a higher number in lost revenue than the cost of basic service?

    Nonetheless, the numbers tell us nothing about the other behaviours of the 700,000 users. What if, for example, most of these people are also users of the Canadian service? Surely such information would alter our perceptions and our proposed remedies. As numbers generated by the industry, it may be prudent to ask if they reflect reality or the industry's self-interest. The fact of the matter is, I think, that the numbers are very elusive, and it may be unwise to advance legislation on the basis of such flimsy evidence. But it is interesting to ask why 700,000 Canadians would engage in this activity. Are we prone to illegality, just too stupid to know better, or simply bad people? Or is there a failure at the heart of the Canadian television industry?

    As you know, Canadian television also relies on a cross-subsidization scheme. The deal has been in place since roughly 1961, when the first Canadian content regulations were introduced, and it goes like this. If we let broadcasters import U.S. shows, they will earn profits, which they will then reinvest in Canadian shows. During this period, 1961 to the present, Canadian TV, or the private industry, has enjoyed billions of dollars in direct and indirect subsidies, deferred taxes, and regulatory protection. The question poses itself: how much has it actually reinvested in Canadian television? A simple way to figure this out might be to go to our TV guides and count up all the Canadian shows in prime time.

    I won't do that now, but it wouldn't take long, because there are not a lot of them.

    The protectionist strategy has not worked over the years. It hasn't protected or promoted Canadian culture, but it has improved the revenue streams of the major television players. In fact, and according to a recent CRTC report, the Canadian private television industry is enjoying a very profitable year. Unfortunately, that contradicts the argument about satellite signal theft.

    Bill C-2 is not about Canadian culture. It's about profit. Nonetheless, if Bill C-2 were such a good idea, perhaps the committee should consider extending it to all media. The Toronto Star and The Globe and Mail, for example, could make it illegal to buy the New York Times because they both carry some of the same news. Canadian bookstores could make it illegal to buy books outside Canada. Canadian filmmakers could make it illegal to watch American films, and so on. We could criminalize any activity that, in the view of the Canadian industry, deprives it of the revenue represented by Canadians. There's no end to how many criminals we could manufacture.

    The logic of this bill, it seems to me, merely opens opportunities for mischief, inconsistencies, and contradictions.

    We should also consider the cross-subsidization business model, which I mentioned before and which Bill C-2 protects. This model is being challenged not just by the behaviour of Canadians but also by developments within the industry itself. You probably all know that there are new technologies, or the new technology of digital video recorders, devices such as TiVo or Bell ExpressVu's own PVR, or personal video recorder. These technologies effectively disconnect viewing from network schedules and allow individuals to watch TV without reference to the embedded advertising. The same phenomenon is at work in pay-per-view, and to a slightly weaker extent in specialty channels.

    In fact, the disconnect between viewing and advertising is leading to a new generation of technology known as VOD, video on demand, which all cable and satellite distributors are currently rolling out. VOD allows viewers to order programs up à la carte. So if I want to get just episode 54 of the Mary Tyler Moore Show I can order that up and watch just that. This is the next big growth area.

    This technology will effectively render obsolete the existing advertising-supported business model, which is the heart of cross-subsidization. In fact, the technology is so potent that the president of AOL Time Warner last year even suggested making it illegal, because just like the proponents of Bill C-2, he says that it will steal away his audience--and that shouldn't be allowed to happen.

    Bill C-2, I submit, is a very old-fashioned, backward-looking piece of legislation that will soon be out of date. Its main function is to protect the business model that the industry itself is throwing into doubt. By adopting it, we set a bad precedent, because if we say today, no, you may not watch DIRECTV because it deprives me of the revenue that you represent, then will we not say tomorrow, no, you may not use this other new technology, whatever it turns out to be, because it also deprives me of the revenue that you represent?

Á  (1115)  

    Bill C-2 represents a reactionary approach to technology that not only criminalizes individual behaviour but also casts suspicion on all new technologies. In fact, it lays the groundwork for any new technology to become the further exclusive property of the currently entrenched players, who are the only ones who will be able to say, oh look, that new technology deprives me of income.

    Of how many future benefits do we deprive ourselves by supporting Bill C-2 today? How much future control over individual choice and technological innovation do we transfer to the largest current players? How many future entrants do we automatically squeeze out of the market? Again, it seems to me that Bill C-2 has little to do with culture and a lot to do with profit.

    If we want to promote Canadian culture, and I think that we should, Canadians should have access to anything and everything. That's how Canadian literature got strong, by going up against the best in the world, not by being sheltered from the world. That's how Canadian film--it's a slower process--is also becoming strong, by inserting itself into the global marketplace, not by scurrying for police protection. It's how Canadian television will get strong--not by criminalizing the behaviour of Canadians or fettering technological innovation, but by turning to the serious work of making content that people actually want to watch.

    If Canadian satellite operators had to meet their American counterparts head on, without measures such as Bill C-2, they might be forced to compete on the basis on the quality of their service and offerings. The private television industry might even be forced to make Canadian programs instead of recycling U.S. shows.

    The notion that large corporations protect our culture is simply tiresome. Bill C-2, I think, is both tiresome and offensive.

    Short of scrapping the bill altogether, two modest proposals...I've said here “may be useful”; I'm not even that sure. They might just be interesting to discuss.

    The first proposal is that we remove all reference to the grey market. While the black market should be illegal, the grey market should be recognized and made legal. It should be required, once it's been made legal along with the other parts of the broadcasting industry, to turn over a percentage of revenue to the Canadian Television Fund. By turning it from a problem into a revenue stream, the allegedly lost revenue may be substantially recovered.

    Second, there has been much talk before this committee about whom the bill targets: dealers, individuals, subscribers, people in their homes, people outside of their homes. There's a great lack of clarity on this and it strikes me as being an area ripe for mischief. Perhaps the bill should open with a simple statement such as--but I'm not the drafter of the bill; I will defer to what greater minds think on this--“Nothing in this bill should be construed as affecting individuals acting on their own behalf or who pay for television services irrespective of their origin”.

    Thank you very much.

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    The Chair: Thank you, Professor Attallah.

    We will now invite Russell McOrmond to speak, please.

    Mr. Russell McOrmond (As Individual): Thank you for the invitation to speak to the committee. I am here as a private citizen. As a volunteer, I have been involved in related areas of policy for a few years now. I'm the founder and ongoing host of the Digital Copyright Canada forum, http://www.digital-copyright.ca, and co-coordinator of GOSLING, http://www.goslingcommunity.org. GOSLING stands for Getting Open Source Logic INto Governments, and it involves civil servants and other citizens who actively assist the engagement of free / libre and open source methods and software solutions in government operations.

    There are a few areas of concern about Bill C-2 that I wish to draw to your attention. The bill makes use of language that is very similar to the language used by the World Intellectual Property Organization in the copyright treaties around legal protection for technological protection measures. Some of the considerable concerns about unintended consequences around these treaties may also apply to this bill.

    Parliament must be very careful what it considers to be a device. This term should be reserved to talk about hardware, not the software used to control the hardware. Parliament needs to be careful not to prohibit the communication of software or other technological knowledge that has lawful purposes, or to prohibit the importing of hardware that has lawful purposes.

    Some of the evidence used to justify this bill is not convincing. There is specific information available on Industry Canada's website that suggests that “satellite piracy can also imperil public safety”. Credible references to back this statement up seem unavailable.

    Regarding Internet and satellite communications, experience in the United States with their Digital Millennium Copyright Act has been that there are many unintended consequences. To be in opposition to such laws in Canada is not to be in opposition to the intent of these laws. I applaud attempts to restrict access to signals to only those authorized to receive them, but I do not believe that a legislative approach is appropriate. I believe a technological approach is better.

    Setting up an environment that promotes the advancement of technological protection measures, or TPMs, for satellite signals cannot be separated from TPMs for the Internet or other forms of digital communication. Some of these same technologies and software from the Internet can be used to help those who wish to protect satellite signals. There are many Internet security specialists who are available to offer help.

    One of the unintended consequences of issue-specific or sometimes technology-specific legislation is that it acts as a deterrent for advances in technology. The same knowledge and technology necessary to advance the state of the art can be abused to circumvent less advanced technological protections. Digital security should be thought of like a game of chess where you want to have the players on your side be as advanced as possible, not thought of as something that can be bought once and forgotten about.

    I believe better protection of signals would be facilitated by a vibrant, competitive and unregulated marketplace of ideas. I see the current bill as protecting existing technologies used by the duopoly of Bell ExpressVu and Star Choice Communications Inc. It seems to be adding strength to that duopoly.

    Who owns the communications tools? This bill has been discussed in the context of a specialized marketplace. Currently, equipment used for authorized access to satellite signals tends to be owned and operated by the satellite company. How satellite services are delivered to customers may change in the future. This bill seems to continue to apply to situations where the consumer owns the reception equipment for the reception of authorized signals.

    I believe that hardware assists for communications, whether they be corrective eye glasses, VCRs, satellite receivers or home computers, should be under the control of the citizens who own them and not a third party. When a citizen buys hardware, he or she should legally be able to be in control of it. Since software can be seen as the rules that govern the operations of hardware, being in control of hardware means legally able to be in control of the software.

    While some specific businesses treat software as similar to hardware, considering it to be industrial property, other businesses and private citizens treat it more like functional literature or similar forms of creativity. Indeed, the Copyright Act defines the term “literary work” as including computer programs. Software can be and is created by anyone, from youths in their parents' homes to large multinationals. How Parliament treats software should take this into consideration.

Á  (1125)  

    Does satellite piracy imperil public safety? The committee should be skeptical of discussions claiming how pirate satellite receivers emit interference that authorized satellite receivers do not. With digital receivers, the difference between an unauthorized and authorized receiver is software and other information stored in the receiver. It is unlikely that they would emit different interference. This should be seen as being as suspect as if Microsoft claimed that a computer running Corel WordPerfect emitted different interference than a computer running Microsoft Office.

    Thank you. I welcome your questions.

    The Chair: Thank you, Mr. McOrmond.

    Mr. Rogers.

    Mr. Phil Rogers (Partner, Osler, Hoskin & Harcourt, As Individual): Mr. Chairman and members of the committee, my name is Phil Rogers. I'm a partner with the law firm of Osler Hoskin & Harcourt. I have practised in the field of communications law for over 20 years.

    I am pleased and honoured to accept the invitation of the committee to appear in my personal capacity and to offer my comments on Bill C-2. I have followed the debates of the committee and look forward to the opportunity to discuss this bill with you.

    For over 70 years Canada has had one clear and consistent policy regarding broadcasting in this country. As a nation, we have determined that we will have a broadcasting system in Canada that is distinctively Canadian, and we will take reasonable measures to ensure that this in fact happens. The means of implementing this policy have varied over the years, but the underlying principle has remained. This reflects a remarkable consensus over many decades.

    Parliament has consistently taken action to ensure that there continues to be a Canadian system that reflects the Canadian experience. In practice, this ensures that the public has access to programming such as Canadian public affairs, sports, comedy, musical talent, and so on. At the same time, in addition to Canadian programming, this policy also provides access to an ever-widening choice of non-Canadian programming services.

    Mr. Chairman, Bill C-2 represents a continuation of this long-standing Canadian policy. If enacted, it will reinforce measures already in place to apply the existing law. On this point, it is worth noting that the present law regarding unauthorized decryption was considered by the Supreme Court of Canada two years ago. In its unanimous decision, the Supreme Court upheld the prohibition on unauthorized decoding of programming signals. The court was clear that both black market and grey market decoding are illegal.

    In reaching this decision, the court expressly recognized the broadcasting policy that Parliament has consistently adopted. The court also noted the system of copyright protection for the benefit of both Canadian and foreign creators that would be imperilled if it found that decoding of signals not authorized in Canada was legal. The prohibition on decoding was found to be rationally connected to the measures enacted by Parliament to ensure that there is a Canadian broadcasting system and that the copyright protections for Canadian and foreign artists are respected.

    In considering these new measures to strengthen the existing law, it is useful to consider the benefits to Canada and what would be lost if Canada does not deal effectively with unauthorized decryption. I have referred to the system of copyright protections established here and in other countries to protect creators. Canada is committed to that system. Our creative talent benefits, just as the creators from other countries do. Canada would not want to be seen as a country that in practice has little regard for the protection of creative works.

[Translation]

    The result is clear: unauthorized decryption, whether grey market or black market, violates the rights of creators, their intellectual property rights. These are their rights; they should be respected.

Á  (1130)  

[English]

    In addition, one cannot overlook the loss of support for Canadian program production that unauthorized decryption causes. Currently, Canadian distributors of programming are required to make contributions to the Canadian Television Fund to support Canadian program production. These contributions are in excess of $100 million annually. However, when illegal dish dealers and their customers step outside the law, whether grey market or black market, they make no contributions. To be clear, in the case of a grey market sale, not a cent is being contributed to the Canadian system or the support of Canadian programs. Those who might wish to tolerate the grey market in spite of its illegality often overlook this point.

    Finally, Mr. Chairman, I will close with a brief comment on the offence and penalty provisions being revised by Bill C-2. If one compares the proposed levels of fines for various offences with those in other communications legislation already enacted by Parliament, these provisions are reasonable. They are relatively similar, for example, to the provisions found in the Telecommunications Act and the Broadcasting Act. It goes without saying, Mr. Chairman, that Parliament is acting reasonably when it takes steps to ensure that its laws are not to be regarded as mere suggestions or advice that can be ignored when convenient. The measures before you in this bill are reasonable compared with existing legislation in this sector.

    Mr. Chairman, that concludes my remarks. I would be happy to respond to any questions from the committee.

    The Chair: Thank you, Mr. Rogers.

    We will start our questions with Mr. Rajotte.

    Mr. James Rajotte (Edmonton Southwest, CPC): Thank you very much, Mr. Chairman, and thank you very much, gentlemen, for coming in today to give your comments.

    Perhaps, Mr. Rogers, I'll pick up on your presentation. I'll actually pose the question to you that Mr. Attallah poses to us, which I think is a very good question. In his first section he asks: “... it is certainly intriguing to ask why 700,000 Canadians would engage in thisactivity. Are we naturally prone to illegality? Are we just too stupid to know better? Are wesimply bad people? Or is there a failure at the heart of the Canadian television industry?” His answer is the last one, but in your view, why are 700,000 Canadians choosing options other than what is legally available to them?

    Mr. Phil Rogers: Well, Mr. Rajotte, I think there are a couple of things I would say in response to that.

    First of all, there's the number 700,000; it may be 600,000 or may be 900,000, but it's a significant number, and the question you've raised is a legitimate point. Why would people do this? Perhaps some still do not appreciate that it's illegal; not everyone is conversant with the decisions of the Supreme Court of Canada, but it's widely known, so there may just be a degree of lack of awareness.

    But there is probably a much larger problem, I would suggest. To the extent this could be tracked at all, it appears the vast majority of these cases are really black market. As you know, Mr. Rajotte, in the black market cases you basically pay a local dealer for a chip decoding device; you don't actually pay for anything beyond that. It really is theft, and you've heard testimony in the prior sessions of this committee--there was a pretty clear agreement--that black market is theft, and that constitutes the majority of those services.

    When you offer someone the prospect of a pretty good programming package, whether it be the Canadian programming package of one of the authorized DTH suppliers or a non-Canadian package and you offer it effectively for free or at a greatly discounted price because it's in effect smuggled, it's not a bad deal.

    This has occurred, as you know, in other industries; it's not just this sector. There have been problems with cigarettes and liquor and so on. The economic advantages are pretty clear.

    I would add one thing--and I don't want to take up too much of your time because I know it's limited--and it's that some people are seeking a particular type of program that is not yet available, and it's a foreign service. I would suggest to you that the proper response to that is not to turn a blind eye or to bless illegal activity; the proper response is to deal with that through the Broadcasting Act. We already have about a dozen foreign-language services available that are authorized for distribution in Canada. There's a proposal before the CRTC right now, as you probably know, to add about another fifteen. That's the proper solution to expand the choice.

    Mr. James Rajotte: It points to two points. Number one is the figures. Most people estimate--and you're correct--that there are between 600,000 and 900,000. It seems we don't really have strong evidence, as Mr. Attallah said in his opening. The evidence we're going on is not all that strong; a lot of it is circumstantial.

    Second, what I really want to get at is the motivation. To me, there's a fundamental difference between someone who wants to get something for free or wants to commit theft, whether it's American or Canadian programming, and people like the witnesses at the last committee who want more access to foreign programming. There's a fundamental difference there between the first group and someone who wants to watch HBO but just can't access that service through the two licensed providers in Canada. Would you agree there's a difference there?

    Even on the rough estimates we have, what percentage is black market versus grey market, and how do we really base that on anything other than circumstantial figures?

Á  (1135)  

    Mr. Phil Rogers: I'll respond by saying this, Mr. Rajotte. First of all, the evidence that was put before this committee in prior sessions was that the vast majority of it is black market. When people go in to investigate this illegal operation, they find it's mostly black market. I can't give you a precise figure; I'm not in the industry. I'm providing a legal perspective here.

    But with respect to the distinction you made, I think it's legitimate to draw a distinction between different types of activity, provided we understand that the Supreme Court of Canada said both are illegal; they were very clear on that. You raise the question of, well, is there a difference perhaps in character with regard to the grey market services? I think the answer to that is two things. We really can't endorse illegal activity for people who have a good reason, and we have a legitimate mechanism through the Broadcasting Act to enlarge the scope of services that are available to Canadians within the legal system. We have an answer to their needs by dealing with it through the Broadcasting Act, and not by turning a blind eye.

    When they do go to the grey market, as I mentioned in my earlier remarks, there isn't a cent going to the support of the Canadian system. You have a foreign provider of services entering and taking advantage of the Canadian market, which may be fine, but making no contribution to it whatsoever. When people come to do business in our country, perhaps it's fair to say they ought to make some contribution here.

    Mr. James Rajotte: Mr. Attallah, did you want to comment on any of those points?

    Prof. Paul Attallah: There are many things running through my mind, but I'm not sure they're organized right now.

    Can I just mention the distinction between the grey and the black markets? Yes, I'm familiar with the decision of the Supreme Court. I believe that last week some people spoke before the committee, indicating that the Supreme Court seemed to have invited a challenge concerning a section of the Radiocommunication Act concerning whether or not it was constitutional. I'm not qualified to go into that, so I won't.

    However, if I'm not mistaken, this Parliament is or was until recently considering decriminalizing the possession of small quantities of marijuana. There are laws, and it's very common for us to adjust penalities and sanctions or to tolerate certain types of behaviour within the law. It's not clear to me that it's much worse to tolerate the grey market than it is to tolerate the possession of small quantities of marijuana; that's just an example of how we can accommodate things.

    Mr. James Rajotte: Plus we can amend the Radiocommunication Act as a Parliament to actually distinguish in law between the black and the grey markets.

    How much more time do I have?

    The Chair: Go ahead. You have a minute if you want.

    Mr. James Rajotte: Mr. McOrmond, I was intrigued by your presentation, and I just want to make sure I understand exactly what you're saying. If you can, please expand on what you mean by a “device”, because you caution us to be careful about how we define that.

    But you also made some statements to the effect that when a citizen buys hardware, they should be legally able to be in control of what they buy, and then “Since software can be seen as the rules that govern the operation of hardware, being in control of hardware means being legally able to be in control of the software. ” Now, if you could, please break that down for us and identify what you mean by the hardware and the software.

    Mr. Russell McOrmond: I've actually done longer presentations on this same thing.

    There are parts of the industry that consider software to be industrial property, so they treat it pretty much the same way as you treat hardware. Now, I'm a practitioner; I create software, and when I analyze software, I look at it more like you would an act of Parliament. It is not itself a technology, but it's the rules that are used to govern technology, and quite often the people who create the software are creating rules we will be governed by.

    I'm very involved in the free software movement, and the free software movement discloses all of the blueprints, all of the source codes of software for public scrutiny. Then, when you run that software, you have access to all of the rules you are governed under, just as you would with Parliament. To me, that should be a right of a citizen when they buy consumer electronics: to be able to install software they have the ability to review and be in control of.

    I'll give an example of the confusion between hardware and software. In the United States they enacted the Digital Millennium Copyright Act, and it was supposed to talk about cryptography devices. Most of the examples of cases they've brought before courts have been complete software solutions. One of the software solutions was a piece of software that allowed you to convert a file from an Adobe eBook format to an Adobe PDF format; it's a file conversion. To me, if you've legally bought an eBook, it should be your right as a citizen to convert it to another file format.

    In fact, inside a computer, as soon as you're displaying it, that's the type of operation you have to do. I believe the citizen should be in control of that.

Á  (1140)  

    Mr. James Rajotte: Can you apply that, then, to the satellite system in terms of...?

    Mr. Russell McOrmond: Currently, the satellite receivers are owned by the satellite operators, but as was discussed in the first presentation, we may be moving away from that. There are TiVo devices, where you buy a satellite dish and your subscription doesn't involve renting hardware; your subscription may involve just having access to the right key in cryptography information to legally decode it.

    Once the consumer owns the equipment, the consumer should have the choice to install the software of their choice that has had that public scrutiny. People talk about the Digital Millennium Copyright Act and how we have to have legal protection for the software around technological protection measures. We talked about this as not being a protection of copyright but a replacement of copyright, where the vendor of the software decides what you can and cannot do with the work rather than a parliament. This distinction is quite important.

    The Chair: Thank you, James.

    Andy Savoy, please.

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

    I think the situation as I see it is certainly not black or white. It is, number one, that the black market obviously is totally illegal, and I would support the initiatives in the bill concerning that. On the grey market side, I have serious concerns--and I've expressed them before--in terms of growing this country, whether it be linguistic, cultural, ethic programming that communities are looking for, but I think they even go beyond that.

    I come from a rural area, which is certainly a rod and rifle demographic. I know that a lot of people watch hunting and fishing shows that aren't available in Canada. These shows become available through CRTC through a process, but I believe, and I've been told by witnesses, that in essence it's market driven. If there's a large enough market, they will receive that programming. I think that's a shame. I think we have to look at a bill that will allow us....

    The other issue surrounding this is the cross-subsidization certainly and the Canadian content issue. I think we have to look at a bill that will allow us to outlaw black market and to look at subsidizing our content, but that also allows some flexibility in the grey market.

    So I was quite intrigued, Mr. Attallah, when I saw your proposal in terms of a recommendation of looking at a percentage of revenue to the Canadian Television Fund from the grey-market providers. And when I hear Mr. Rogers say that if they do business in our country, they should make some contributions here, I think it would address that concern. If they are doing business in our country, then there should be some type of contribution here that would aid our Canadian content via the Canadian Television Fund.

    So in terms of that proposal, going down that road, Mr. Attallah, could you make your comments on that proposal, on the actual mechanism or implementation of how we do this.

    And Mr. Rogers, perhaps you could respond to that, because obviously you feel that if people do business in our country, they should make some contribution as well. Perhaps both of you could comment on that proposal.

Á  (1145)  

    Prof. Paul Attallah: I'm certain that Mr. Rogers will know the mechanism far better than I do, and I would probably make a fool of myself if I tried to say that we should do it this way or that way.

    We already know that the CRTC imposes certain types of investments. I believe MuchMusic devotes 5% of its revenue to the music video production fund. There are mechanisms such as that one that are already in place. It seems to me that--without making a greater fool of myself by discussing the mechanism--there's an opportunity here to turn something that we see as a threat into a contributor to the Canadian television system. The opposite logic holds that only the largest players--only they--have the privilege of contributing to the Canadian television system, and that strikes me as being really weird logic. Why would we say that only Bell ExpressVu and only Star Choice are allowed to make this contribution?

    You can flip it around the other way and say that there are lots of Canadians and people from many other countries working in the United States who make television programs, movies, and all sorts of things there that are enormously popular. Those programs, the content they make, are also a contribution to the American television system. Why would the Americans say, sorry, only a wholly owned American company in Hollywood can possibly have the privilege of contributing to our system?

    It doesn't make sense for us to create ourselves as a little island and say we have to fortify this island and try to defend it against all commerce. We just make ourselves a smaller and weaker market when we do that.

    Mr. Andy Savoy: Mr. Rogers.

    Mr. Phil Rogers: Mr. Savoy, I would have to start by saying it's difficult for me to discuss a mechanism, because having thought about the issue even prior to your raising it, it's very difficult to conceive of a mechanism that is practical, or effective, or legal, much as anyone would like to devise one. We can start with a couple of things.

    I believe you were here when the CASST group was here last week. That included DIRECTV, which is one of the largest, if not the largest, and best known of American DTH providers. They make very clear a couple of things that would affect any such mechanism. They have no rights for distribution of programming in Canada. They will not knowingly take customers in Canada. They haven't bought the rights to the programs that they broadcast for Canada. So we would be, first of all, trying to get them presumably to pay something into a Canadian fund under a law that doesn't exist today.

    I don't know how we would amend our Broadcasting Act in any practical or constitutional way to impose such obligations on DIRECTV to make payments in respect to the distribution of programs that they have no rights to distribute. It's a conundrum for which at the moment I cannot think of a practical solution that would work commercially or legally. So the notion that we can simply get this money from foreign providers is perhaps well intentioned, but I don't see a practical, legal, and commercial way to put it into effect.

    Mr. Andy Savoy: I think that's the dilemma I have, how we find that solution, because I feel that the grey market is obviously something we should not be targeting, except for a contribution toward content, to be the Canadian Television Fund, or whatever the mechanism may be.

    That does present a dilemma. I agree with you.

    The Chair: Lalita has told me that the FCC in the United States actually has a law whereby it's illegal for a U.S. supplier to knowingly sell a signal into Canada. That's what you're referring to, I think. Is that right, Mr. Rogers?

    Mr. Phil Rogers: I wasn't specifically referring to that, but I don't disagree with the comment. I think it's quite valid.

    The Chair: Please continue just on the dilemma point, Andy.

    Mr. Andy Savoy: Mr. Attallah, you talked about the bill targeting dealers, individual subscribers, in your second recommendation, and you said that the bill should open with a simple statement, “Nothing in this bill should be construed as affecting individuals acting on their own behalf”.

    Is it proper for me to assume that you aren't talking with the black market, because it sounds to me like, regardless of whether it's the black market, if you're acting on your own behalf you're still not...? Doesn't this, providing that opening, in fact make the bill almost moot?

    Prof. Paul Attallah: You're right. That's not very good wording. What I'm trying to capture there is the notion that many interveners before have said that, no, we don't want to target individuals, we don't want to go into people's homes while at the same time maintaining the threat that we just might go into your home and do this.

    I just wanted to capture the notion that if people are sincere about targeting dealers, is there any problem with saying that clearly in the bill rather than in maintaining this confusion over whether or not I am at threat?

Á  (1150)  

    Mr. Andy Savoy: Because of the black market, I don't have a problem really with our looking at individuals who are knowingly breaking the law. I view it as theft, as well.

    Mr. McOrmond, in your first point you mentioned that there's language used in this bill that's similar to the language used in the World Intellectual Property Organization, and you mentioned that unintended consequences around these treaties may apply to this bill. Could you expand upon that?

    Mr. Russell McOrmond: I think it goes to what I was discussing a little bit earlier about laws intended to stop people from breaking cryptography actually slowing down the development of cryptography itself.

    For instance, there was a researcher in the United States who had done some research on some cryptography and, when he was about to publish it, was told, wait a minute, publishing this document that describes flaws in a current generation type of cryptography would itself be a circumvention device. It would allow people to have the knowledge to circumvent that cryptography.

    Cryptography advancement itself requires that average citizens, not bonded people or people with import permits, but average citizens, can partake in that discussion back and forth: Here's a new cryptography, can you break it? Yes, I can, here's how; let's improve it.

    The target may be people circumventing for the purpose of breaking the law, but people also have to circumvent for the purpose of making the cryptography better. That's the type of unintended consequences.

    The Electronic Frontier Foundation in the United States actually published a quite large paper that talked in detail about a number of the unintended consequences on the Digital Millennium Copyright Act in the United States, which is their implementation of the WIPO treaties.

    Mr. Andy Savoy: Okay, great.

    The Chair: Brian, did you have some questions?

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

    I'll start with Mr. Rogers. One part of the code language that concerns me that has been used is “intentions”, no intentions of going after individual users, and what not.

    I have a constituency that's right next to the United States. We, on a regular basis, can pull off, from radio and TV, programming that actually has Canadian manufacturers and entertainment and other businesses advertising over there. So Canadian listeners tune in to the American stations and hear Canadian companies advertising on those stations.

    You mentioned that DIRECTV was here the other day. It was interesting, because Shaw satellite, or Star Choice, is able to prevent the breaking of their signals and that. DIRECTV has introduced a new card that has pretty well virtually eliminated it for the current time. They also scramble systems. They can loop them. It doesn't cost much money. In fact, it's just sending out a signal, a continual harassment of those who are using that product.

    Wouldn't it be fair, then, to say that the industry has its own remedy, especially since they can take those measures at any point in time for what's considered the DIRECTV or other market area that has encryption from the United States?

    Mr. Phil Rogers: Well, I wouldn't give you a comment on the technologies, because my expertise is legal, but I can give you a comment that I think may address the thrust of your question.

    First of all, technologies are always advancing on both the encryption side and the decoding side. In the satellite and decrypted programming business, it's a constant cat-and-mouse game. Technology that is fine today may be cracked next month or next year.

    There's obviously a demand to circumvent the price payment system. We know that occurs in other fields as well. If someone has an opportunity and the technology to go around it, there's an incentive to do so.

    It's not exclusively a Canadian problem. These hackers exist in other countries and other services as well. So it's encouraging to see that there are such advancements that occur from time to time, such as the one that DIRECTV implemented. Let's hope it works for a while. Undoubtedly, at some point it will break down and have to be replaced with something else. It goes on and on. It's a phenomenon that has to be dealt with, but it's never a fixed game; it's a moving game.

Á  (1155)  

    Mr. Brian Masse: That's why a lot of constituents I represent are either legally subscribing to Bell or another satellite service, or COGECO Cable, or whatever it might be. They have those, because it's unreliable for their entertainment or other purposes. The cultural issue is a significant part of this.

    That's why I'll ask you this question, because I asked it of the last delegations that were concerned about the stealing. They comment especially about the grey market area or products that are not available--let's say, developing multicultural stations across the U.S.

    Allowing that $26,000 is a significant penalty system--$25,000 plus $1,000, and then potential other offences--would you agree or disagree that this is too much or too low? Would you be satisfied if the bill decreased the individual penalty?

    I would see this as almost draconian, to go after an individual for that amount of money for this type of potential offence or offence.

    Mr. Phil Rogers: Mr. Masse, there are two things I would say about that.

    First of all, as I mentioned in my opening remarks, in looking at those penalty provisions in this bill, I compared them with those that have already been enacted by Parliament in other legislation that is a close parallel, such as the Telecommunications Act and the Broadcasting Act. You will find provisions very much like that.

    For example, in the case of the Telecommunications Act, the fine on conviction for a first offence for an individual for a breach of sections 16 or 17 is $50,000. So it's even higher in that particular case.

    So I'd leave that aside.

    The other factor is--

    Mr. Brian Masse: Is that for personal use, or a company?

    Mr. Phil Rogers: It's for an individual. There are separate fines, which are higher, for corporations.

    Mr. Brian Masse: Okay, thank you.

    Mr. Phil Rogers: I would say that the other factor to bear in mind here is that if you were to speak, as I believe you will, with some law enforcement officials, the provisions applying to individuals may be just as well applied to an individual who is engaged in commercial activity.

    I think, when you put the question, you were thinking of an individual who just uses it for their private, personal consumption--

    Mr. Brian Masse: Yes, that's right.

    Mr. Phil Rogers: --but the statute needs to be drafted in a way that will capture someone who has not operated an incorporated business; there's no official corporate entity; they simply, as an individual, carry on business in a way that is illegal and contrary to the statute. It will be necessary to apply the law to both types of activity.

    I think you've also heard in earlier discussions with this committee that most of the effort has been put to date on going after the dealers, which is the obvious place, and now the border restrictions that will come into effect. Those are the obvious effective points to apply the restrictions.

    Mr. Brian Masse: Thank you for those comments.

    I'll move now to Mr. Attallah. One of the interesting things about this whole situation is that there is general discussion on this being about Canadian content and fostering the industry, which is ironic, because most of the cuts at the CBC, for example, have come to expensive programming, actually the products they roll out for Canadian viewers to watch. Could I have you expand on your comments about the Canadian culture in here? I found them very interesting. How would you see fostering that? Is it going to be done through other means?

    Prof. Paul Attallah: This is a very vexing question, as you can imagine. Alliance Atlantis, which is the largest film distributor in Canada, was until recently the largest producer of Canadian television and has received years of subsidies and indirect protection, things like that. It decided last year that it was going to stop making Canadian television programs, because there was simply no profit in it for them. Alliance Atlantis also owns many of the specialty channels that stand to benefit from legislation such as this.

    We have a television system now, certainly very much on the private side, where Canadian companies are not really broadcasters, they're re-broadcasters of U.S. content. It's not clear to me that it's better for me to get Law and Order from CTV than it is to get it directly from the source, NBC. In fact, as long as we allow Canadian broadcasters to engage in that activity, it displaces the time in their schedules that would be given to Canadian programs. They fill up that time with American content.

    They're supposed to take the profit they make from importing stuff and reinvest it in Canadian television. I think, if you were to go back 15 or 20 years, almost as far back as you wanted, you would find that there have been minimal investments, investments in the least expensive type of programming, or investments in programs that are in the fringe hours of prime time, the ones with the lowest viewership. In other words, making Canadian content has always been seen just as a cost of doing business in Canada: we're forced to make it, so we'll make the cheap and dirty stuff as fast as we can. Regulations such as simultaneous substitution merely reinforce that pattern.

    It strikes me that what we may need instead is a system that encourages broadcasters to actually make Canadian content--and not just Canadian content, but content Canadians actually want to watch--and make sure it has a good window, so they can see it at times when they're watching television. Britain, for example, has two different regulators and slightly different regulatory schemes for the private industry and the public industry. It strikes me that Canada would be well advised to adopt that sort of thing, where you have a separate regulator for public broadcasting and something quite different from the CRTC, whatever we decide to call it, for private broadcasting; different types of regulations would be applied to each of them.

    If it is in fact the case that private broadcasters are incapable of making Canadian content that people want to watch, if they can only survive by importing American content--and that appears to be what their behaviour indicates--then it's time to revisit the sorts of regulations that we apply to them and ask ourselves whether we really want to impose this sort of burden on private broadcasters. Maybe they should just make whatever is profitable, sell it throughout North America, and have their contribution to Canadian content be through reinvestment into the Canadian Television Fund.

  (1200)  

    Mr. Brian Masse: Very good.

    I want to go to statistics to get your opinion on this. I don't know if you saw where the 700,000 came from. It was described as research, it's been described as a study. I would describe it, from my background, as nothing more than a survey.

    Would it hold much weight in your classroom?

    Prof. Paul Attallah: It seems to me that the number is bandied about by the most self-interested party in this discussion. For that reason alone, it merits a certain amount of care and attention. One of the early interveners compared the situation as regards the 700,000 Canadians to the situation regarding downloading MP3 files. A study by Harvard University, a modestly reputable institution, I think, found that downloading MP3 files had a negligible impact on the sale of recorded music in the United States. If downloading MP3s, which I suspect is a lot easier, a lot less expensive, and a lot more widespread than the 700,000 people who are getting unauthorized satellite signals, if that easy, widespread technology has no discernable impact, why would we believe this other expensive one has this huge impact?

    The reason I like the Harvard University study is that their method is replicable, they say what it is, and anybody can go and read it and reproduce the study; but also, they are a disinterested third party. They have no interest in saying that it's high or it's low. I really wish time were given to us to conduct a similar study in Canada. It doesn't strike me as being a bad thing to do before proposing policy.

    Mr. Brian Masse: Thank you.

    The Chair: Lyle Vanclief, please.

    Hon. Lyle Vanclief (Prince Edward—Hastings, Lib.): Thank you very much, Mr. Chairman.

    I thank the witnesses very much for coming this morning. I think you have raised some issues and some questions we, as a committee, need to take a very serious look at.

    Before I ask you to comment on some of the statements or questions I might have, I think, in listening to you and to other witnesses, we know why the grey market is there, because people can't get that information otherwise. We know they're paying for it, so I guess we know the cause. The Supreme Court has said that is illegal. That raises the question, and I ask you, should the appropriate acts be changed--and I think Mr. Rogers has commented on this, directly or indirectly--in order to fix the cause, so that it's not an illegal activity? Mr. Rogers has commented, in my interpretation of his comments, that it certainly would be somewhat difficult unless that type of action was taken to have them pay into the fund.

    I guess I'm showing my frustrations here. Is the bill as it is written enforceable? Can we do that? Mr. Attallah has said that the present situation and the Supreme Court ruling have made a number of people act in a way that is illegal. The law doesn't exist today to allow that, so do we just leave things alone? It appears this has been going on in the past and everybody has said we can't police it, so do we forget about it?

    Finally, I'm not aware how this is treated in other countries. I would be surprised if it were only Canadians who were using a grey market. There must be a grey market in other countries, the U.S., Europe, or whatever. What happens there? How do they handle it?

    Because of a number of points witnesses have brought forward to the committee, including excellent witnesses this morning, we as a committee--and I know this is the work of the committee--may need to think about bringing people from Heritage Canada. We may want to consider bringing officials back and raising questions with them, because naturally and rightly, they're the first presenters. I think, as we go forward as a committee, we need to take comments such as those of the witnesses this morning and pose them back.

    That's a bit of an aside.

  (1205)  

    The Chair: Any takers?

    Prof. Paul Attallah: I'l answer in maybe a roundabout way.

    It was mentioned earlier that the FCC makes it illegal for American companies to sell signals into Canada. There are a lot of U.S. border stations that sell signals into Canada. They do it very knowingly. In some cases the Canadian audience is bigger or more desirable than the American audience. But there are also class 2 cable operators in Canada. Rogers in Ottawa, I guess, is a class 1 operator, a big operator. For small operators there is a cut-off for the number of subscribers they need to have. So small operators are allowed to redistribute American services that class 1 cable operators are not allowed to redistribute.

    That sounds to me like a situation in which an American service is tolerated in Canada whether the FCC likes it or not, and it's an example of the incoherence and inconsistency in our communication policy, where it's legal for this group but not legal for that group. What applies to electronic communication apparently doesn't apply to DVD sales and rentals, and there could be exactly the same content on a DVD as is broadcast over the air. So there are a lot of opportunities for mischief, a lot of inconsistencies, and a lot of incoherence going on there.

    Perhaps the way in which class 2 cable companies handle distribution of services such as American Movie Classics or HBO, for example, or the USA Network in Canada provides a model that could be extended to the grey market more broadly. But I confess that I thought of that as I was speaking to you right now.

    Mr. Phil Rogers: Mr. Vanclief, I have a couple of comments in response to the issues you've raised.

    There may well be different approaches in other countries, and it could be as complex to work out their laws as it is ours. We should probably try to work on ours.

    I would suggest that our law right now is quite clear, given the ruling of the Supreme Court of Canada. They've said it's illegal on both black and grey markets. There are already provisions in the law. Paragraph 9(1)(c) has been there for quite a long time, the provision that exists today and was applied and enforced, leading to the convictions that ultimately went up to the Supreme Court of Canada.

    So what we're doing right now is amending. You, as members of Parliament, are being asked to consider amendments to reinforce that existing law so that it will in fact be applied, but not to fundamentally change the law. There isn't a proposal to change the law fundamentally. This reinforces what is there today.

    You asked whether it's enforceable. In my opinion, it is enforceable. We've had a number of enforcement cases, which continue even during the life of this Parliament, just last week. I think, if there were a problem with regard to that enforcement and fundamental legal difficulties, they would have been raised by the officials of the department and they would have asked for other amendments. There is no indication that the law is not enforceable. There are legitimate policy questions, such as the ones you raise, but the law is clearly enforceable, and the bill that is before you today really reflects an extension of what is already in place.

  (1210)  

    The Chair: Thank you.

    I just want to point out, before we go back to James, that with regard to our legislative summary on Bill C-2, on the third page under section A, “Satellite signal provision in Canada”, the word “dilemma” was used, I think, by Mr. Rogers, and it came up in Andy's intervention, and I commented about the FCC. There's some uncertainty--we're going to ask the researchers to double-check this--over what an American provider can legally provide to a Canadian subscriber. Let me read it into the record: “Under FCC rules, these U.S. signals are not authorized to be viewed outside the United States.” So obviously, as much as there may be goodwill to do something, we have to be careful about what the American regulatory system has to say about it.

    James.

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

    I want to touch upon the issue raised by Mr. Attallah about who the bill targets. I know other members have raised it. The department, in presenting this bill, said they were going after dealers, and they also mentioned the distinction you made, Mr. Rogers, between the two types of individuals, the individual just at home watching these programs and the individual who's doing it for commercial reasons. My big concern, though, is that the bill itself does not do a good job of distinguishing and does not do a good job of identifying its priority of going after dealers. I think the department officials basically admitted that when they were here.

    Proposed subsection 6(2.1) of the bill begins, “Every person who contravenes paragraph 9(1)(c)”. I think it was the assistant deputy minister who admitted it is actually the person at home who turns on the TV who contravenes paragraph 9(1)(c) of the Radiocommunication Act.

    Mr. Rogers, is that your reading? Would you agree with me that this bill needs to be clarified as to who we are actually going after? As it's currently written, it does not identify our priority as going after the dealers and the individuals for commercial reasons, but it could be used legally to go after the person at home simply pressing a button.

    Mr. Phil Rogers: There are several related provisions in the act today, prior to the amendments you have before you, that deal with the activities surrounding the illegal decoding of encrypted satellite signals. One of those provisions is the one you mentioned, the act of decrypting without authorization. Another provision, section 10, deals with possession, distribution, sale, and so on of the equipment. It's my understanding that when law enforcement officers seek to enforce the existing provisions, they most commonly act under section 10, because when you're going after a dealer, you're going after the equipment and so on: they're clearly in possession and are distributing it and selling it. That's a provision in the bill today, and paragraph 9(1)(c) is already in the act with respect to decryption.

  (1215)  

    Mr. James Rajotte: Okay, that's what the department said, as well. But then why do we put paragraph 9(1)(c) in if we're actually going after dealers? If the intent of this legislation is to go after dealers, not the individual at home for non-commercial reasons, why are we putting paragraph 9(1)(c) in this bill?

    Mr. Phil Rogers: Paragraph 9(1)(c) is already in the existing act.

    Mr. James Rajotte: I understand that.

    Mr. Phil Rogers: It's there. I would say that when Parliament enacts regulatory and offence provisions in an area within its jurisdiction, it's quite common in the legislation to enact provisions that deal with all of the activity around that area, whether it be the possession of the equipment or the activation of equipment. If you look at other provisions passed by Parliament, you'll find at least two or three offence provisions dealing with all possible activity. These are clearly designed so that Parliament will not be frustrated by somebody simply circumventing one provision and going under another.

    Mr. James Rajotte: Okay.

    I want to touch upon the concern that I have about our really swimming upstream against the technology here

    I think I know the answer to this, Mr. McOrmond, but is it your view that this bill is actually not necessary, that technology itself or technological developments within the industry could basically address this issue much better than any piece of legislation passed by Parliament?

    Mr. Russell McOrmond: Not only could the technology do a better job, but the bill itself would slow down the advancement of that technology.

    As I read the bill, there was talk about import certificates to existing vendors of this technology, the presumption being that the best people to advance the technology are the people who have already deployed a large amount of yesterday's technology. Actually, in some ways, they're the people who have the least incentive; and the bill ends up protecting their existing technology, rather than providing an incentive to advance the technology further.

    So I believe that, yes, there are technologies in existence. E-commerce on the Internet isn't dealing with the same problems, because the technology is more advanced. The software that sits in my browser at home is in some ways more advanced than what we're talking about here, partly because of some of the assumptions with the technology.

    You build the satellite receiver, you send it into the home, and you forget about it. Well, most homes have phone lines. Why don't we plug those into phone lines, and essentially do an “ET phones home”, so that you don't have the problem of there being a whole bunch of boxes and essentially no way for the provider to determine, well, there are five boxes out there that are using the same ID, and how is it that there are five boxes? There should only be one box per ID. That type of thing....

    So there are technological means to deal with all of the problems, and I think that the bill would stand in the way of advancing those.

    Mr. James Rajotte: That leads into Mr. Attallah's talk about an old business model. That's also my concern with this bill. If we're going to a system whereby we can, you say, just pull up episode 54 of the Mary Tyler Moore Show or episode 33 of Seinfeld, then record it and watch it at that time, it fundamentally alters the entire broadcasting industry.

    If we stay in this model of, well, we have to have Canadian content protection here and we have to have support for the broadcasting industry here, with the two of them linked, the intent is obviously good in supporting Canadian creators and Canadian industry—the intent, we can all agree on—but if the technology just bypasses that in 10, 15, or 5 years, we're not actually doing our job here.

    I take it that's obviously your concern under the old business model approach.

    Prof. Paul Attallah: It strikes me that the underlying logic of the bill, not the outright intent of the bill, is to enshrine old-fashioned technology and old-fashioned business models, because it effectively says you— whoever the supplier of satellite signals is now—get to decide whether the new technology is good or bad for your business model. So they're the ones, as Mr. McOrmond said, with the least incentive to introduce new types of technology or to make the system work faster or more efficiently—and I dare say, the least incentive to contribute to Canadian television, as a result of that.

    It's just a veiled way in which you exclude future competitors from the market.

  (1220)  

    Mr. James Rajotte: We did a telecom study here at the last industry committee. It was actually a government member, a Liberal member, who said that when we're talking about Canadian culture, we have to always distinguish between supporting Canadian industry, which is certainly a noble goal in and of itself, and supporting Canadian creators. Those are two different things that we always have to distinguish.

    Even in our party, we see the viability of supporting the Canadian Television Fund and other things like that, and supporting creators. We want to support the industry. But philosophically, regarding your comments about Canadian culture in point five, if Canadian culture is going to truly compete on the world stage, it seems to me that every other society that ever produced genius and works of art, which we continue to enjoy, are societies that engaged the world, not ones that tried to set up boundaries.

    So I just think that the whole underlying premise of this bill is not only going against the technology, but it's also going against how you actually inculcate and produce artists and works that do transcend our own national culture.

    Prof. Paul Attallah: Indeed, we have a television system that, if it were applied to the world of books, for example, or newspapers, would strike us as just absolutely absurd. You couldn't buy a John Grisham novel, written in the United States, unless you get two Margaret Atwoods with that. Or flipping it around, the rest of the world would say, Margaret Atwood, she's a very nice writer, but you know, she's not American, and I don't think we should have her books sold in our country. If other countries did to us what we propose to do to them, we would have a hard time keeping a straight face on the international stage.

    In 1990 Universal Studios in the United States was bought by Sony Corporation, a Japanese company. Someone rose on the floor of Congress--I don't remember his name--actually proposing that all Hollywood films be declared national monuments, which would prevent them ever from being re-edited or altered in any form. When the question was put to him, why on earth would you want Hollywood films to be national monuments?, he said, well, it's a Japanese company that owns Universal Studios now; what if they re-edit all the World War II films to make it look like Japan didn't lose?

    We're caught in that very wonky logic in Canada. We define our market as the smallest piece of territory we can--not geographically speaking. It's Canada, that's all it is. In electronic goods, we don't take the attitude that the real market for Canadian culture is not just Canada; it's all of North America, and beyond that, it's all of the world.

    The production industry in North America is already continentally integrated, there's no doubt. Americans make programs in Canada, Canadians make programs in the United States. A channel such as the Disney Channel in the United States, not on every single day and not in every year, but in some years in the past 10 years, has actually had something like 35% or 40% Canadian content. It's a thoroughly integrated production system. It's a thoroughly integrated North American audience.

    We don't have these rules concerning American movies; we have them only concerning broadcasting. Why is it good to stop me from watching Law & Order on NBC and to force me to watch it on CTV? If that's a good thing to do, perhaps The Sopranos will be on sometime this week. I can order The Sopranos on DVD through Amazon.com and have it delivered to my door by Canada Post . At the very moment that CTV broadcasts it, I propose to take that DVD, put it in my DVD player, and watch that instead. I'll still be depriving CTV of my intention and of my revenue stream. My money will have gone to Amazon.com, but it won't have accrued anywhere in Canada.

    Perhaps we shouldn't be allowed to own DVD players. It strikes me that this is the underlying logic of this bill: old-fashioned technology under the control of the most entrenched self-interested players.

    Mr. Phil Rogers: Mr. Rajotte, I would like to go back to a point that you made earlier in your comments.

    You started by mentioning that it was an admirable goal to support Canadian industry and, as well, to support Canadian artists, that we had outstanding world-recognized artists. The primary systems for supporting artists in an economic sense is the copyright system, which is an international system. Of course, we have that system in Canada, as most other countries do. One of the fundamental problems with the grey market is that it breaks through and goes around the copyright system. The people who subscribe to grey market in Canada are circumventing the allocation of rights and the payment of rights that creators have established for their own benefit.

    That system is something we should not take lightly, for the very reasons you suggested. It's through the copyright system that creators ultimately get to choose in what windows their works are released, in what markets, and how they get paid. When a country, in effect, starts to say, well, we'll be loose about the system, we don't care too much, that sends very dangerous signals about our whole artistic community and also about our relationship to the creative communities in other countries as well. It gets into a very serious issue, which people often overlook when they talk about grey market.

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    Mr. James Rajotte: Isn't the answer, then, to have a reciprocity agreement with the United States so that you recognize these signals or crossing borders without respect to national jurisdiction, recognizing that 700,000, in your words, even perhaps up to 900,000 Canadians are choosing this option? It seems to me that is the long-term solution to this, rather than this bill. The government may choose to pass this bill, they can certainly do so, but I'm very skeptical about this bill truly addressing the problems of nearly a million Canadians choosing alternative options.

    Mr. Phil Rogers: I'll just make one quick comment in reply. There may be a possibility of negotiating an agreement such as you've suggested. Our history to date on this has been that every time we've engaged in trade negotiations with the United States, for example, starting with the free trade agreement, the policy of Canada has been pretty clear that we are not prepared to engage in free trade on these cultural industries.

    You're suggesting that we should look at that again. If there's a possibility of reopening that, that's perhaps beyond this committee. But it is a matter that the government is, of course, entitled to look at. It would represent a significant change if we were to go in that direction. It's a fundamental change for Canada, and one that would obviously have to be undertaken very carefully and in a way that provides reciprocal benefits. Whether or not it would be possible to have such a deal that benefits Canadians as much as Americans, I don't know.

    Mr. James Rajotte: An agreement of that type would not prohibit the Canadian Television Fund from supporting Canadian artists in that way. In fact, you could even increase that.

    Some of my constituents go down to Arizona every winter, and a lot of them take their dishes down. One of the concerns they have with this bill is whether they'll be able to bring their dishes back and forth. They take their Bell ExpressVu dishes down there.

    I think that is the long-term solution, supporting Canadian artists through funds.

    The Chair: Thank you, James.

    David.

    Hon. David Collenette (Don Valley East, Lib.): Thank you, Mr. Chairman.

    I missed the rationale given by officials last week on this bill, since I wasn't at the committee, but certainly from doing some of the reading before the committee, and obviously at the committee today, and hearing these three briefs, it strikes me that there's a degree of inconsistency, illogic, and adhocery to this piece of legislation coming at this time in the life of this Parliament. It seems to have been designed without reference to the wider goals of Canadian communications and cultural policy, something that I think the three witnesses have certainly put their fingers on.

    I have another basic concern, and this goes back to an earlier life I had here over twenty years ago, in another century, as a minister of multiculturalism. We actually took great strides in trying to foster the notion of greater freedom, not just with the passage of the Charter of Rights in 1982 but also with the Canadian Multiculturalism Act in 1983-84, to ensure that Canadians, notwithstanding their ethnic origins, had the right to live and work in their own language. Obviously there are two officials languages in the country, English and French, but as a public policy goal, we tried to foster the retention of other languages. It was rather prescient at the time, because in the twenty years since, we've become a much more globalized world. I look around my constituency and I see young people today speaking third and fourth languages. They have been exposed in their homes, through books, through movies, and obviously through conversation. This helps them in their lives to interact in the globalized economic environment that we have today.

    It seems to me that the point the witnesses are putting forward--and I don't want to put words in their mouths, but I think it was Professor Attallah who was very clear on this--is that this legislation seems to be arbitrarily based on the need for profitability of two large corporations that, granted, have invested their money and developed a certain expertise in technology, but that are in effect making cultural choices on behalf of individual Canadians as to what particular language services, foreign services, can be brought into the country via satellite. This seems to me to be fundamentally unjust, and something we have to look at.

    I don't know whether any of the witnesses would like to comment on my feeling about their presentations in this regard.

    I would conclude, Mr. Chairman, by saying that I think it's incumbent on us to have the minister and her officials come back and try to justify this bill being passed, at this time, in this context, in this Parliament, without recourse to a wider discussion of Canadian cultural and broadcasting policy and the challenges that face the country in terms of the rapid technological advances we're seeing. Rather than just pass this now, and sort of shut the door and go for the election--you know, put the lights out--we should ask what's going to happen after the election. Are we going to revisit this? Are we going to look at wider implications of this bill in the context of cultural and broadcasting policy?

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    The Chair: Any comments by our witnesses on Mr. Collenette's views?

    Prof. Paul Attallah: I'll go first again, if I may. Sorry; I'm always talking first. It comes from lecturing.

    In fact, I agree very strongly with you that if you're a member of a cultural community, right now you're feeling very much singled out and criminalized and targeted for doing such things as watching World Cup soccer in your own language, or watching a Golden Girls rerun dubbed in Spanish. What's the big crime I'm committing here?

    So there's a lot of unease and anger in cultural communities right now. I have a little bit of familiarity with some of them in Ottawa.

    I also think it's very clear that the other thing that's happening is that we're taking the opportunity for what appears to be technological regulation to make far-reaching cultural choices. Nobody has discussed this. I don't think anybody has given their assent to having corporations make cultural choices for them, and I personally would welcome the opportunity to have a really far-ranging debate on this.

    So thanks for raising that; I agree entirely with you.

    The Chair: Mr. McOrmond, and then Mr. Rogers.

    Mr. Russell McOrmond: In my presentation I made use of the term “duopoly”. One of the concerns our community has had is that these duopolies, or different monopolies, are being used as a proxy for Canadian creativity.

    The community I'm part of, this digital-copyright.ca, has many creators. There are independent musicians. There's a music label. One of the things this label is doing is licensing their music in ways that make the peer-to-peer distribution of it on the Internet free. Why? Because they have the monopolies...and there's more than just one company involved in this, obviously, with CRIA. But the members of CRIA are not seen as being helpful people who are trying to bring their music to market; they're seen as the threat. So they're not worried about private citizens in their home infringing copyright, they're worried about the CRIA members not exposing their work, essentially getting in the way.

    So yes, the concern that these large monopolies are controlling Canadian creativity is very much there.

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    The Chair: Mr. Rogers.

    Mr. Phil Rogers: Mr. Collenette, I think you've identified some very good points that are worth being reflected on by all of us in this committee. However, a couple of observations have come up in the discussion that I think I'd like to put a different perspective on.

    There often are references to the duopoly, that this is for the benefit of the duopoly. In fact, the Canadian broadcasting system consists of a large number of distribution undertakings. We have two satellite undertakings that are authorized and several hundred cable companies that are all authorized to distribute that type of programming, whether it be Canadian or foreign programming. These entities, hundreds of them across Canada, large and small companies, are acting as a channel regulated by the CRTC to deliver a mix of Canadian and foreign programming.

    So in this whole debate that we're talking about, when people step outside the Canadian system and go to grey market or black market, they're stepping outside both the Canadian cable companies and the two satellites. They're stepping entirely outside the Canadian system.

    You raised the question, quite legitimately, of whether this is a change in technology that we're going to have to deal with. You're quite right, the technology presents continual challenges to the broadcasting system. It cannot remain static. When the first DTH satellites were put up in the United States a number of years ago, there were concerns in Canada that the entire Canadian system would fall apart due to this technological change. That in fact didn't occur. Canadians responded with the development of our own DTH industry as well as our terrestrial cable system. We developed a very extensive, high-capacity digital system in Canada.

    So the Canadian system did respond in a way that reflected the technological change, and I have no doubt there will be further technological changes that will undermine the existing system. It just means that we should not simply give up and walk away. We have laws in place today, and these laws that are before you today are simply enforcement of the current system.

    You raised the question, ought we not to evolve? Clearly the answer is yes. It does have to evolve over time. I would suggest to you that you not allow your current system of regulation to in effect fall apart through inaction while you're thinking about what should be the proper regime for the future. Because when that happens, then in effect you foreclose your own options as a government. Events decide your outcomes before the government decides what it wants to do.

    The Chair: Anything else, David?

    Hon. David Collenette: Well, I just get nervous on the issue of duopolies, and I'm glad we had that different perspective at the end. The last time I ran into duopolies, two major airlines were artificially keeping prices up and limiting choices for Canadians. There was the rise of discount operators, and once that changed, then we saw a much more dynamic system. So when Mr. McOrmond raised the word “duopoly”, that struck a nerve with me.

    The Chair: Thank you.

    Lyle, please.

    Hon. Lyle Vanclief: Mr. Chairman, I think I'm somewhat repeating myself here. I know it's clear in my mind that the witnesses we've heard from have given all perspectives around this bill. The perspectives of the two major suppliers of this out there, Star Choice and Bell ExpressVu, I think we know. With all due respect, they're doing their job from their end, saying why they like the bill. Other witnesses have pointed out that they have different views on this as well.

    So in a very brief comment, I think a lot of work needs to be done on this bill. I think a lot of questions have been raised, a lot of points have been raised, and we need to do it as right as we possibly can.

    I don't argue with Mr. Rogers that this bill is enforceable. Sure it's enforceable, but is it the right bill? Are there other changes that need to be made, whether in other acts or something in conjunction with this, to address the situation we have, to address, as much as we can, the concerns of everyone? Sure this one is enforceable, but I don't think it will do the job and address everybody's concerns out there.

    So I strongly suggest that we should think about talking to officials, not only from Industry Canada but also others who are affected by this, before we move forward. We like to move bills through as quickly as we can, but I feel strongly that we need to do them as right as we can. If that takes more time.... There are rumours that there might be an election. So if we don't do it in this Parliament, then it will be a good job for the next industry committee.

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    The Chair: Thank you very much.

    I dare say that if there is a consensus that's emerging, it's that this does need more work. It's a very, very interesting area of study.

    I have a question for our researchers, perhaps. Mr. Attallah was talking about the investment from the Canadian TV fund into Canadian programming. I'm wondering if there are any reports or studies on the quality of that investment, on what Canadians have gotten back from that. I just kind of lay that out there for our researchers to perhaps find out if any work's been done on that.

    With that, I'll thank our witnesses very much.

    Thank you, colleagues. We'll continue with the RCMP and the privacy commission office on Thursday.

    Thank you for your excellent questions and your excellent comments.

    We're adjourned for today.