:
Thank you, Mr. Chairman.
Good afternoon, ladies and gentlemen of the committee. Thank you for having invited us here today. With me today are two colleagues from the Canadian Radio-television and Telecommunications Commission, Michel Arpin, Vice-Chair of Broadcasting, and Scott Hutton, Executive Director of Broadcasting.
When we last appeared before you on March 25, the commission had not yet held its public hearing to renew the licences of the majority of Canada’s private conventional television broadcasters. Similarly, your study was only getting underway. Both this committee and the CRTC have since heard a wide range of views in our respective forums.
There are clear benefits to holding public hearings on these issues. Being exposed to the opinions of different stakeholders allows both of us to not only understand exactly what is it stake, but also to reach informed decisions.
[English]
The conventional television sector has been the cornerstone of the Canadian broadcasting system since the introduction of television in Canada in 1952. Local programming is, of course, one of the defining characteristics of a conventional television station.
On the first day of our public hearings, I had an exchange with Mr. Ivan Fecan, president and CEO of CTVglobemedia, on the importance of conventional television. I referred to his testimony before your committee and said I had read very carefully his statement to the House of Commons--which essentially he had repeated to us--that conventional is local; it is a glue that binds a community together; it's needed for national interest and national unity issues; and it is the best machine for promoting things, better than anything we have right now. I said to Mr. Fecan, “Have I got that right?” Mr. Fecan answered, “Yes.”
I believe you all agree with Mr. Fecan's viewpoint. I'm glad he shared it with us at the outset of the hearing. However, conventional television's ability to play its central role in the broadcasting system, which includes providing local audiences with local programming, has recently come under threat. There has been a steady fragmentation of audiences' advertising revenues, which are now split between conventional, pay, and specialty services, as well as the Internet.
[Translation]
While conventional broadcasters were adjusting to this trend, along came the global recession. Like many other sectors of the economy, broadcasters were sideswiped by the downturn. They have seen their revenues shrink as spending on advertising declined sharply. Let’s not forget that the automotive sector was traditionally the single largest advertiser on television.
[English]
On May 15 we handed out a preliminary decision that provided private broadcasters with key details regarding their licence renewals. Specifically, we renewed the licences of the major English-language networks for one year, including the television stations operated by CTV Television, Canwest Television, and SUN TV, as well as the Citytv station. We decided to renew the licences of the major networks for a shorter period than the customary seven years to give the industry a certain flexibility to respond to the current economic downturn. We plan to use a group-based approach to renew the licences of major English-language networks in the spring of 2010.
[Translation]
We renewed the licences of the TVA Group’s television stations for two years. We will therefore renew TVA's broadcasting licences in 2011. In the same timeframe we will also review the licences of the French-language television stations operated by the Canadian Broadcasting Corporation and reconsider the programming commitments of the TQS television stations. The specific terms and conditions attached to the licences will be issued by mid-July.
[English]
It's become clear that we cannot carry on with our traditional assumption on models over the medium and long terms. Consolidation in the Canadian broadcasting industry has resulted in a few large groups that control an array of conventional, specialty, and pay-television services. As I indicated in my previous appearance, the commission's processes must take this reality into account to ensure that the objectives of the Broadcasting Act are achieved in the most effective way possible. Over the next year, we will work with the industry to find solutions to the underlying issues that have led us to this point.
The commission has identified seven areas that require structural reform.
The first area is group licensing. As I mentioned to you previously, we need to move away from a framework where licence renewals for conventional television services are assessed independently from pay and specialty services. A group-based approach will allow us to harmonize the rules that govern all categories of television services. It will also allow us to consider the total audiences reached by broadcasting groups, the totality of its revenues, and its programming commitments and obligations.
Secondly, there needs to be a refocus on core elements, coupled with necessary energy and resources. Conventional broadcasters need to refocus on the core elements of their service--local news, local programming, and programs of national interest. Rather than perceiving it as a cost of doing business, they need to see it as a central element of their survival, and expend meaningful resources and energy on it.
Third is the harmonization of local programming obligations. The amount of local programming varies from station to station and depends on when the licence was originally granted. We believe there should be a level playing field and that the amount of local programming should be harmonized, depending on the size of the markets they serve.
Fourth, we need clarified funding. As indicated on May 15, to carry out such refocusing, broadcasters need more predictable funding. Rather than resorting to fee-for-carriage, we will seek to provide revenue support for conventional television by investigating alternative support mechanisms designed solely for local programming; protecting the integrity of the Canadian broadcasters' signals; and exploring mechanisms for establishing, through negotiations, the fair market value of these stations' signals. This will be backed up, if necessary, by CRTC arbitration.
Fifth, we need meaningful commitments. I'm certain that broadcasters can develop successful business models if supported by revenue streams that reflect the value of the programming being distributed. However, in exchange for the above-mentioned harmonization of obligations and negotiated funding, it will be necessary for broadcasters to provide firm commitments regarding local news, local programming, and programming of national importance.
Sixth, we need restraint on foreign programming, and/or commitments toward Canadian program spending. We have heard great exasperation from the Canadian creative community about the amount of money that's being spent each year in Hollywood. To live up to the objectives of the Broadcasting Act, some sort of restraint or attenuation is required. It remains to be determined whether this should be achieved by way of ratio--minimum Canadian expenditure requirements--or a percentage of revenues obtained. But some sort of restraint mechanism appears to be necessary and desirable.
[Translation]
The seventh sector is digital transition. Finally, we must find an acceptable solution to the obstacles standing in the way of the transition from analog to digital television. A hybrid solution which would entail over-the-air digital signals in standard definition in major centres and access by way of cable or satellite in non-metropolitan centres appears to be the answer. However, certain details still need to be worked out, including access, cost and entitlement.
[English]
On the same day that we announced the new licensing terms for private conventional television broadcasters, we outlined our plan to address these seven areas that I have just described. We will soon initiate a public process that will culminate in public hearings this fall, on September 29 to be exact. This is the summer process I referred to during my presentation back in March. We are confident that we will come out of the hearings with a revitalized framework that we will be able to apply in 2010 to the group-based licence renewals. We recognize that we're dealing with very tight timelines. However, the urgency of the matter justifies these timelines, and we have every reason to believe that we will achieve our goal.
[Translation]
You have raised some very pertinent issues during your study, which we are taking into consideration, and we look forward to reading your final report. It will add an important perspective to our deliberations.
Thank you. We are prepared to answer your questions.
:
It's not a question or right or wrong.
We clearly didn't have a discourse or understanding on this. I asked them, “What firm commitments are you willing to make?” They did not give me any. They claim they intended to—and I read you out the process. I think we shouldn't dwell on it.
The fact is that we were not prepared to give fee-for-carriage or consider it unless there were firm commitments. There were no firm commitments on the table.
Today, I just testified to you and said in point four that we want to explore “mechanisms for establishing, through negotiations, the fair market value of these stations' signals....backed up, if necessary, by CRTC arbitration”. In plain language, what that means is that you negotiate the value of the fee that's being distributed. The cable companies distribute it. It has to be evaluated; otherwise you won't be distributing it.
What is it you want? Do you want me to set the value? No. We won't do that. You negotiate that with the broadcasters. If you can't come to an agreement, come to us and we'll arbitrate it.
So there will be a fee. The amount of the fee will depend on the market of the station in question. You can't do it by having, as they said, 50¢ for each signal. It may very well be different for different markets. But you are the players in the market. You negotiate. If you can't negotiate it, I'll arbitrate it for you if I have to.
That's how we're going to approach it.
Thank you, Mr. von Finckenstein, for coming back. We appreciate you taking the time to work with us.
At this committee we have tried to address the various arguments we're hearing from all political perspectives. Our fundamental desire is to make sure that whatever decisions are made, they are done so that our local television communities remain strong and vibrant, that any re-division of the pie doesn't end up with the broadcasters continuing to run their local stations into the ground and taking the money and spending it elsewhere, or with the cable giants ripping the consumers off, and how to do that.
We have the local improvement fund, we have the fee-for-carriage model, and now you're suggesting this compensation-for-value negotiations that are ongoing.
When we met with you two months ago, the question was asked: Is fee-for-carriage dead? You said “No, of course not.” Now, in your closed-door hearings with CTV and CanWest on April 30, you said discussions for fee-for-carriage were “a dialogue with the deaf” and that the new compensation-for-value model was more fruitful than “hammering the dead horse of fee-for-carriage”. So, is fee-for-carriage dead, or do we need to move on?
:
First of all, at the beginning of the hearing I tabled a document saying we all talk about fee-for-carriage and we all mean something different. I said I've actually done impact analysis of what 50 cents per signal would mean, and here it is. Then I asked, are you all in agreement? And surprise, surprise, nobody was in agreement.
That's great, we said, so we're all apparently talking about something different. There were different views on the way you calculated how much each station gets and what the impact would be on the BDU. Tomorrow there's actually a working group meeting with the various participants of the industry to find out what is each person's position, because while everybody throws around the phrase “fee-for-carriage”, they don't necessarily have the same understanding of how you would measure it.
Secondly, as I said here, we, as a commission—and I've indicated that during the hearings—think a much more fruitful way would be to look at really what we're talking about. If you're a cable company, you distribute signals. You distribute them because the viewers want them. The producers of those signals should be remunerated for their value. You do it with specialty channels but you don't do it with conventional. Clearly, as a viewer you want to see conventional as well as specialty channels. So there is a value on it, and to distribute it brings an advantage. What is that value? That value should be established by negotiation. If you can't, we could arbitrate it. But that would then essentially give you a regular income stream for that conventional.
If you want to call it “fee-for-carriage”, call it that. I don't think fee-for-carriage is suggesting one number across the board, regarding what signal and where, etc. As I say, CTV wanted 50%. I think the more logical thing is to value it for what it is worth and then get compensated for it.
:
Thank you very much, Mr. Chair.
Thank you, Chairman von Finckenstein, and your colleagues for appearing here with us today.
My observations through these hearings have brought me to the point where I think all members of the committee care about essentially three broad themes: Canadian content, as I've heard all members of this committee saying they want to make sure there's Canadian content on Canadian airwaves, including Canadian drama; local stations and news, because people care about their local stations and about their local news; and they care about the CBC. I would say, broadly, all committee members have articulated that.
I have a couple of concerns. First of all, I want to go back to your fourth point, in regard to structural reform. In paragraph 4(a) you talked about investigating alternative support mechanisms for local programming. You've created the local program improvement fund. By that, are you looking at expanding the local program improvement fund? Based on some of the hearings we've had, I think there would be support of the committee to make a recommendation around an expansion of the LPIF, broadly. I don't think we've determined what that should be. Is that what you're referring to?
Secondly, I'd like to get something else on the record. Will you be considering this committee's report in your deliberations in July?
:
Well, to answer your question, I will repeat...
We talked about what happened in 1999, but in 1998, the commission held a hearing on some structural aspect—and I too was not part of the commission at the time. Producers lobbied the commission to promote drama series. The commission then created priority hours and decided that eight hours per week would be considered “priority”.
In 1998 and 1999, the commission's rationale was the following: investing in dramatic programming and documentaries would be very profitable and would likely yield a greater return than previously.
Ten years later, we realize this did not exactly come to pass. It was not a failure from day one; things were stable for some time. In fact, recently we have noticed a marked increase in spending for foreign shows by English-language broadcasters.
So now producers are challenging the priority-based system. This upcoming summer and fall, we are going to try and see if we should not... Indeed, television broadcasters and producers are telling us to return to the investment-based system, to spending on Canadian shows based on a percentage of revenue.
Thanks to the witnesses.
Of course, we're continuing our very important study on the effect of the television industry in Canada on local communities and, of course, on local television. This is a very important issue in my hometown of Winnipeg. I was at an event on the weekend where 1,000 people came out in support of local TV. Clearly, Canadians value local television.
I know there's been a lot of discussion today about various elements of the job that you do and that the CRTC does. Without coming out in terms of my personal support for any particular element of the fee-for-carriage discussion, my interest with my questions is more so in your appearance here today in the sense that we didn't necessarily account for having you return to the study, because you were here once already.
My biggest interest is in regard to the fact that our committee actually voted to request that you come back to clarify some of the statements you made at a previous committee meeting. I know that Mr. Rodriguez made reference to some of it, but I just want to give you the opportunity to speak to it again, because essentially that was the purpose of you coming to our committee meeting today.
Looking at the reasoning for you to come here today, it was mostly in relation to the broadcasters making suggestions, and in fact, they did say that they were going to apply fee-for-carriage to local broadcasts, to local television. As you indicated in the previous meeting, of course, you said that there was a resounding “no” to that at one of your encounters with them. So I guess my question to you would be, do you believe that the broadcasters were misrepresenting you and misinforming the committee? Also, because we brought you back to clarify, should there be some sort of request to them for further clarification?
:
First of all, thank you very much for asking me to come back. You will appreciate that when I was before you the first time, it was prior to our hearings, and now it's subsequent to our hearings. So we've had a lot more submissions on all these various points, I think, which is helpful. And I've been following very closely the witnesses before you to see what they say.
In terms of the particular issue of what happened at the BDU hearing, they asked for a fee for carriage, and I basically asked what I would get in return, quid pro quo--spell it out for me. They didn't spell it out. I read you their testimony. They didn't say no. They said that it will be reflected. They talked about sustainability. They talked about coming back further on. So I then used this figure of speech and said “a resounding no”, which I regret very much, because it obviously was misleading. It sounded as if I was accusing them. All I was trying to say was that I didn't get a sound commitment.
We have since gone over the testimony again from our own hearings, and you've heard from the witnesses. It is clear that we didn't have a meeting of the minds. It was unsatisfactory. They indicated that they were willing to come along if we made a decision on fee-for-carriage. I thought that the whole issue was no fee-for-carriage unless you come back with a sound, specific commitment, which they didn't.
I think the best thing is to forget about that issue. Really, both sides have.... Mr. Fecan at one point in time said in our hearing I guess I wasn't too clear, and I probably didn't follow it up sufficiently. The fact is that at the hearing, when we decided not to do fee-for-carriage, essentially, the situation wasn't as bad as it is right now. We didn't see what the value added would be that we would get. And it was done just after they had done major acquisitions and so on, and we felt that they hadn't established sufficiently their need.
This is very much a moving target. Things have completely changed. Remember, this was in October 2008. Clearly, something needs to be done. I have said that publicly many times. We all agree. You have held these hearings. The question is what we do. Having just had this hearing in April, when the first week was only on policy, we have come basically to set up a new master plan. We're going to deal with it in October, and I have outlined today and shared with you, and everybody who's listening to this hearing, for the first time, the seven points we think will be at the heart of the hearings in September.
:
Thank you very much, Mr. Chair.
I'm fascinated by this compensation-for-value model that's being discussed, because we didn't really see this the last time, and I think we're all trying to get our heads around it.
The idea that instead of the CRTC, the big players will negotiate among themselves.... These are companies that are taking out newspaper ads against each other. They're coming before our committee. They're saying no, their map is upside down and has to be read this way. I haven't seen this kind of corporate hostility ever.
I don't know if there's a solution to the future of over-the-air television, but I'd suggest that CTV should get a reality TV show. We could put Phil Lind in a room with Jim Shaw and the Aspers, and we could watch them negotiate.
Is it a viable solution, given the hostility on this issue, to just say that you guys should come up with a deal? Who's going to protect the local operations? Who's going to say that there's Canadian content? That's your job. How can you suggest, given the level of hostility we're seeing, that they're actually going to be able to come back with a plan that protects the overall health of the Canadian television industry?