HERI Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 1st SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Tuesday, June 4, 2002

0905

The Vice-Chair (Mr. Dennis Mills (Toronto—Danforth, Lib.))

Mr. Douglas Frith (President, Canadian Motion Picture Distributors Association)

The Vice-Chair (Mr. Dennis Mills)

Mr. Douglas Frith

The Vice-Chair (Mr. Dennis Mills)

Mr. Douglas Frith

Ms. Susan Peacock (Vice-President, Canadian Motion Picture Distributors Association)

0910

0915

Mr. Douglas Frith

The Vice-Chair (Mr. Dennis Mills)

Ms. Christiane Gagnon (Québec, BQ)

Ms. Susan Peacock

The Vice-Chair (Mr. Dennis Mills)

Ms. Susan Peacock

The Vice-Chair (Mr. Dennis Mills)

Mr. Chuck Strahl (Fraser Valley, Canadian Alliance)

Ms. Susan Peacock

0920

Mr. Douglas Frith

Mr. Chuck Strahl

Mr. Douglas Frith

Mr. Chuck Strahl

Ms. Susan Peacock

Mr. Chuck Strahl

Ms. Susan Peacock

Mr. Chuck Strahl

Ms. Susan Peacock

Mr. Chuck Strahl

Ms. Susan Peacock

The Vice-Chair (Mr. Dennis Mills)

Ms. Christiane Gagnon

0925

Ms. Susan Peacock

Ms. Christiane Gagnon

Ms. Susan Peacock

0930

The Vice-Chair (Mr. Dennis Mills)

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

Mr. Susan Peacock

Ms. Sarmite Bulte

Ms. Susan Peacock

0935

Ms. Sarmite Bulte

Ms. Susan Peacock

Mr. Mills (Toronto—Danforth)

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

Mr. Brian Robertson (President, Canadian Recording Industry Association)

0940

Mr. Ken Thompson (Vice-President and General Counsel, Canadian Recording Industry Association)

0945

The Chair

Mr. Chuck Strahl

Mr. Ken Thompson

0950

Mr. Chuck Strahl

Mr. Ken Thompson

Mr. Chuck Strahl

Mr. Ken Thompson

Mr. Chuck Strahl

Mr. Ken Thompson

The Chair

Ms. Christiane Gagnon

0955

Mr. Ken Thompson

Ms. Christiane Gagnon

Mr. Brian Robertson

The Chair

Mr. Tony Tirabassi (Niagara Centre, Lib.)

Mr. Ken Thompson

1000

Mr. Tony Tirabassi

Ms. Sarmite Bulte

Mr. Ken Thompson

Ms. Sarmite Bulte

Mr. Ken Thompson

Ms. Sarmite Bulte

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

1005

Ms. Susan Peacock

Ms. Wendy Lill

Mr. Ken Thompson

Ms. Wendy Lill

The Chair

Mrs. Beatrice Raffoul (Vice-President, External Relations, Canadian Film and Television Production Association)

1010

Mr. Stephen Stohn (Chair, Canadian Film and Television Production Association)

1015

1020

The Chair

Mr. Chuck Strahl

Mr. Stephen Stohn

Mr. Chuck Strahl

Mr. Stephen Stohn

Mr. Chuck Strahl

Mr. Stephen Stohn

1025

Ms. Christiane Gagnon

Mr. Stephen Stohn

Ms. Christiane Gagnon

Mr. Stephen Stohn

The Chair

Ms. Sarmite Bulte

Mr. Stephen Stohn

Ms. Sarmite Bulte

1030

Mr. Stephen Stohn

The Chair

Ms. Wendy Lill

Mr. Stephen Stohn

Ms. Wendy Lill

Mr. Stephen Stohn

The Chair

Mr. Bob Mills (Red Deer, Canadian Alliance)

Ms. Susan Peacock

Mr. Bob Mills

1035

Mr. Stephen Stohn

Mr. Mills (Toronto—Danforth)

Mr. Stephen Stohn

The Chair

Mr. Stephen Stohn

The Chair

1040

Mr. Stephen Stohn

The Chair

Mr. Farrell Miller (President, JumpTV)

1045

1050

1055

The Chair

Mr. Chuck Strahl

Mr. Farrell Miller

Mr. Chuck Strahl

Mr. Farrell Miller

1100

Mr. Abbott

Mr. Farrell Miller

The Chair

Ms. Christiane Gagnon

Mr. Farrell Miller

1105

Ms. Christiane Gagnon

Mr. Farrell Miller

Ms. Christiane Gagnon

Mr. Farrell Miller

Ms. Christiane Gagnon

The Chair

Ms. Christiane Gagnon

Mr. Farrell Miller

Ms. Christiane Gagnon

Mr. Farrell Miller

The Chair

Mr. Dennis Mills

1110

Mr. Farrell Miller

Mr. Dennis Mills

Mr. Farrell Miller

Mr. Dennis Mills

Mr. Farrell Miller

Mr. Dennis Mills

1115

Mr. Farrell Miller

Mr. Dennis Mills

Mr. Farrell Miller

Mr. Mills (Toronto—Danforth)

Mr. Farrell Miller

The Chair

Ms. Wendy Lill

Mr. Farrell Miller

Ms. Wendy Lill

Mr. Farrell Miller

1120

The Chair

Mr. Farrell Miller

The Chair

Mr. Farrell Miller

Mr. Abbott

Mr. Farrell Miller

Mr. Abbott

Mr. Farrell Miller

1125

Mr. Abbott

Mr. Farrell Miller

Mr. Abbott

Mr. Farrell Miller

The Chair

Ms. Christiane Gagnon

1130

Mr. Farrell Miller

Ms. Wendy Lill

Mr. Farrell Miller

The Chair

Mr. Jim Abbott

1135

Mr. Sunny Handa (Legal Counsel, JumpTV)

Mr. Abbott

Mr. Sunny Handa

The Chair

Ms. Christiane Gagnon

Mr. Farrell Miller

1140

Ms. Christiane Gagnon

Mr. Farrell Miller

Ms. Christiane Gagnon

Mr. Farrell Miller

1145

The Chair

Mr. Jim Abbott

The Chair

Mr. Jim Abbott

The Chair

CANADA

Standing Committee on Canadian Heritage

NUMBER 070

1st SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, June 4, 2002

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Vice-Chair (Mr. Dennis Mills (Toronto—Danforth, Lib.)): Good morning, ladies and gentlemen. We commence our hearing today of the Standing Committee on Canadian Heritage.

Our chairman, Mr. Lincoln, will be a few minutes late, but he asked us to commence.

Our order of reference is Bill C-48, an act to amend the Copyright Act.

Just to inform members, the witness list has been changed. JumpTV has requested that they appear after the Canadian Recording Industry Association, the Canadian Motion Pictures Distributors Association, and the Canadian Film and Television Production Association.

Who would like to begin? Mr. Frith, would you like to begin?

Mr. Douglas Frith (President, Canadian Motion Picture Distributors Association): Oh, why not?

The Vice-Chair (Mr. Dennis Mills): You veteran of Parliament Hill, former government interventionist, now....

Mr. Douglas Frith: Thank you, Mr. Chairman. Let me do that.

Because we've never formally submitted a written response to this bill, we're required, really, to read through. I will do, basically, the background as to why we are presently in front of your committee, Mr. Chairman. Susan Peacock, who is our in-house legal counsel, will address the more technical aspects of the bill.

The Canadian Motion Pictures Association represents--so this is now on the record, Mr. Chairman--the major international film and television companies: Buena Vista, Columbia TriStar, MGM, Paramount, 20th Century Fox, Universal, and Warner Bros.

As background to why we are here this morning, Mr. Chairman, it began, really, two and a half years ago, on November 30, 1999. There was a company called iCrave TV, which began retransmitting 17 Canadian and U.S. signals all over the world to anyone who had Internet access. As a result, rights holders have spent millions of dollars on lawsuits and Copyright Board proceedings, and for more than two years since then we've had discussions with government officials.

Initially the officials were reluctant to amend the Copyright Act, because, they said, there was no urgency. A few months later, when JumpTV made an application to the Copyright Board for an Internet retransmission tariff, the officials agreed the matter had become urgent but said nothing could be done while the matter was before the board. Only after JumpTV dropped its application was a public consultation process begun. A discussion paper was published, and after two rounds of written submissions had been received, the government's intentions, as expressed by the ministers responsible, seemed clear: exclude the Internet from the retransmission licence. That was the position of the Minister of Heritage and at that time the Minister of Industry.

Let me give you a quote. On October 29, 2001, the heritage minister told the Canadian Association of Broadcasters: “Section 31, which provides a loophole for Internet providers to steal your products, must be closed.”

The day after Bill C-48 was introduced, the industry minister said about the bill: “It puts an end to people who pick up broadcast signals and put those on the Internet. It will stop companies from retransmitting over the Net broadcasting material not specifically licensed and approved by the owner of the content.”

At second reading of the bill, the Minister of Heritage said:

“The bill would provide clarity and predictability to the retransmission marketplace. It would remove the uncertainty that plagued rights holders and retransmitters over the last number of years. It would maintain and strengthen the protection afforded rights holders, protections which would be undermined without the legislation.”

The Vice-Chair (Mr. Dennis Mills): Excuse me, Mr. Frith, could you just speak a little more slowly so the translators could get everything?

Mr. Douglas Frith: Oh, the translators; I apologize, Mr. Chairman.

The Vice-Chair (Mr. Dennis Mills): No, no problem.

Mr. Douglas Frith: But instead of an Internet carve-out, the result is a proposal from the officials that would see the bill passed “as is”; have the CRTC review, but not necessarily amend, their exemption order; and have this committee hold hearings next winter to make recommendations on regulations.

Mr. Chairman, it's our view that the official proposal does not work, and I'm now going to have Susan Peacock explain why.

Ms. Susan Peacock (Vice-President, Canadian Motion Picture Distributors Association): When the officials appeared before you they said that their proposal would prevent the launch of any Internet retransmitter prior to regulations being in place. Bill C-48 says that the Governor in Council may make regulations. If Internet retransmission is lawful now, nothing in Bill C-48 will make it unlawful.

The officials have implied that the government's intent is a moratorium on Internet retransmission. However, by putting the moratorium on regulations, the effect will be a preservation of the status quo. It is not expensive to retransmit signals over the Internet. Some may be encouraged to take that chance if they are assured of a free rein for at least a year and are willing to gamble that eventually they will have to start complying with regulations that are no worse than the most recent draft.

With respect to the direction of the CRTC, it's important to remember that the CRTC may do nothing. The CRTC's mandate is not to look out for copyright owners, but rather to make sure that content, particularly Canadian content, is distributed.

Protection of rights is Parliament's responsibility, not the CRTC's. When the CRTC requires a licence and the Copyright Act requires consent, there's a balance. In this case Internet retransmitters want it both ways, the benefits of no CRTC licence and no regulation under the Broadcasting Act, plus the benefits of a compulsory licence and permissive regulation under the Copyright Act.

With respect to this committee's consideration of the regulations, it's important to remember that the officials will have the last word. Unless their opinions change during the next year, they can be expected to reject your recommendations unless they conform to their views.

Last summer's discussion paper gave four principles that the officials believed should guide this process. The first is “shared access by Canadians to a vibrant broadcasting system”.

Nearly 100% of Canadian households have a television set, which is more than have a telephone. More than three-quarters of Canadian households subscribe to the services of a conventional distribution undertaking. Presumably the rest receive over-the-air signals over the air. Internet retransmitters would not enhance access to the broadcasting system.

Internet retransmission would be more likely to contribute to the death of the broadcasting system than to its vibrancy. Non-consensual Internet retransmissions would interfere with the domestic and international market for the licensing of programs to conventional broadcasters. Program suppliers would be induced to seek other outlets. Pay-per-view, pay-TV, and specialty channels are already available and outside the reach of the compulsory licence. When the quality and security of Internet delivery becomes acceptable to rights holders, there will be no need for intermediaries like Internet retransmitters.

The officials' next principle is “equitable balance among stakeholders”. As stated in the discussion paper, eligibility for the benefits of the compulsory licence should be “limited to the extent necessary to achieve the public policy objectives which underlie the compulsory licence, while ensuring that rights holders are treated in a fair and equitable manner”.

Non-consensual Internet retransmission serves no public policy objective, expropriates the property of copyright owners, and diminishes the rights of their authorized licensees, the broadcasters.

Another principle is supposed to be “certainty”. The current language of section 31 is unclear, therefore uncertain. The officials' proposal would preserve that uncertainty for at least a year, and the final outcome is far from certain. The most recent draft regulations do not promote certainty. The meaning of phrases such as “seeks to verify”, “exercises diligence”—possibly “due diligence”—and “in an ongoing effort” will not become clear without lengthy, costly litigation, the outcome of which is also uncertain.

The last principle, technological neutrality and innovation, was the basis for the officials' rejection of an Internet carve-out.

The benefit of technological neutrality is supposed to be that it contributes to long-term legislative stability. However, to the extent that the existing language of section 31 is technologically neutral—and there are several ways in which it is not—the result has not been legislative stability. The Internet is the first unforeseen distribution technology since the compulsory licence was implemented. The result has been legal actions in Canada and the United States, a proceeding before the Copyright Board, and this lengthy process.

¿ (0910)

Unforeseen technological changes may require legislative amendments, whether the legislative language is technologically neutral or technologically specific. Specific language excludes unforeseen technologies, which the government may want included. Neutral language includes unforeseen technologies, which the government may want excluded.

Neutral language forces copyright owners and authorized users to negotiate licences without knowing whether unforeseen and unauthorized users may interfere with their agreements and expectations.

Specific language results in new technologies being eligible for a compulsory licence deliberately, rather than accidentally, and only after careful consideration of public policy and consultation with stakeholders.

The officials also said that in any event, an Internet carve-out would require a definition of “Internet”, and that's too hard. The Australian Parliament didn't think so. Their carve-out uses the word “Internet” without defining it. The CRTC didn't think so either. Their new media exemption order uses the word “Internet” in its definition of “new media broadcasting undertakings” without defining “Internet”. The officials have now defined “new media retransmitter” in their proposed regulations by reference to the CRTC's definition of “new media broadcasting undertaking”, so we assume from that they have changed their minds.

Finally, the officials said that an Internet carve-out would stifle innovation. The Internet seems to be evolving in innovative ways without the benefits of a compulsory retransmission licence. The United States and other countries, including Australia, are as interested as Canada is in encouraging innovation, but they exclude the Internet from their compulsory licence regimes. Canada's innovation strategy is meant to encourage the development of new content and universal access to new technology. It is not intended to expropriate private property as inventory for businesses that make no meaningful contribution to infrastructure or the development of new technology or content.

Our recommendation is for this committee to amend Bill C-48 so as to make it clear and certain that Internet retransmitters are not eligible for the compulsory licence. Attached to our speaking notes is our draft of an amended section 31 with specific language we recommend. There are two versions. The first is a clean copy, and the second one is black-lined to show the changes from the current language. You will see that we include a shorter, simpler, clearer version of the officials' definition of “new media retransmitter”.

Our proposed amendments to section 31 also add the phrase “for a retransmitter” in subsection 31(2) for greater clarity. This amendment is already part of Bill C-48.

We also propose amending paragraph 31(2)(c) so it is consistent with Canada's obligations under the Canada-U.S. Free Trade Agreement, on which section 31 is based.

It may be a good idea to keep the language of Bill C-48 that allows for additional regulations in the future, but none would be needed now.

¿ (0915)

Mr. Douglas Frith: Mr. Chairman, we believe our solution is superior to that put forward by the officials. It better responds to their own principles and is more consistent with policy objectives. We believe it would be acceptable to all the rights holders you will have heard from, including others who will come after us this morning. We also believe it should be acceptable to the conventional BDUs. The CCTA has advised me that they would not object to our proposed language. We checked that yesterday.

The way for this committee to have a real impact on the outcome is not through recommendations about the regulations, recommendations that may be overridden. The way for this committee to have a real impact is to take this issue away from the officials and give it back to Parliament by amending the bill--in other words, have a carve-out for the Internet.

Thank you, Mr. Chairman.

The Vice-Chair (Mr. Dennis Mills): Thank you very much, Mr. Frith and Ms. Peacock.

I'm in the hands of my colleagues, but this has been such stunning news. Do you think we should ask questions of the witnesses now, or would you like to wait until after the next two witnesses?

[Translation]

Ms. Christiane Gagnon (Québec, BQ): Mr. Chairman, I would like to know whether the text of the proposals for amendments also exist in French. We do not have the French text.

[English]

Ms. Susan Peacock: We would be happy to undertake to provide a French translation of the proposed amendments--and of course the brief, if you wish--but when I spoke to the clerk, I particularly said we did not want to give offence, but these talking notes were literally completed yesterday at five o'clock.

The Vice-Chair (Mr. Dennis Mills): Okay. We have a rule in parliamentary committees that nothing can be distributed to members unless it's in both languages. So we will consider that this document doesn't exist for us until it gets translated.

Ms. Susan Peacock: The entire document, sir?

The Vice-Chair (Mr. Dennis Mills): Yes. These are the rules of the House of Commons, that in all presentations, where there's anything in print, it must be in both official languages. It's on the record that you have a document; it just can't be distributed.

Mr. Strahl, would you like to begin?

Mr. Chuck Strahl (Fraser Valley, Canadian Alliance): Sure, if I could.

It's easy for me to ignore the document. I don't have a copy of it yet. But I assume, Mr. Chair, it will be translated and then distributed.

Ms. Susan Peacock: Yes, it will be.

Mr. Chuck Strahl: Good. Thank you.

Thank you for coming. I do appreciate the way you presented that. It's always useful to have witnesses propose their amendments in that way. It gives us the pith of what you want to have happen and allows us not to guess at how you'd like to see it happen.

There are a couple of things, or like the chairman said, a little bit of an eye-popping thing, in that from your testimony you don't seem to think the regulatory regime that may come down the pike somewhere a year from now is likely going to reflect the views of this committee. Do you have some precedent for that, a reason you think the officials won't listen to this committee?

Ms. Susan Peacock: I would hope that they would listen. Certainly I would hope that they would listen to you more than to us--and I'm sure that can be taken for granted. But the officials have been very adamant in their views throughout the two-year period. I think they were fairly adamant when they made their presentations to this committee, and technically, ultimately, regulations are a matter for the Governor in Council. The ministers responsible will be advised by these same officials, and I think it is not certain that the recommendations of this committee will be the ones that ultimately find their way into the regulations.

¿ (0920)

Mr. Douglas Frith: But, Mr. Strahl, more to the point, at the very beginning I read to this committee statements made by the previous Minister of Industry, the present Minister of Heritage, and all the work that we've tried to undertake with the officials of both departments over the last two years. They didn't listen to the two ministers. I'm just suggesting to this committee that you can tinker with regulations as you wish, but if you really want to make an impact, the only way to resolve this issue is to have an Internet carve-out and send it back to Parliament.

Mr. Chuck Strahl: It's not the first time, I guess, that we've had perhaps some policy objectives in some conflict between the officials, and even between ministries. What policy objectives do you think are trying to be achieved here by this delaying?

I agree with you. I think this thing should have been put to bed a long time ago. I just can't understand it. Is it a fight between the two policy objectives, the heritage objective versus the industry objective, or is it just bureaucratic malaise?

Mr. Douglas Frith: Susan, you may answer this, but I will take a first cut at it.

I think there are fundamental differences between the Department of Heritage, which more than likely would prefer to come down on the rights of the content holders, and the industry department, which would prefer to have this technologically neutral position in order to have innovation in the future. But it's pretty fundamental between the two departments, and frankly they've been unable to resolve it. That's why we're appearing here before the committee.

Our suggestion is that we think it's superior to all of the proposals made by one department in particular, but by both, and we'd prefer that you just simply say that the Internet should have a carve-out.

Mr. Chuck Strahl: So if we were to amend the bill as you're suggesting--and I don't have those suggestions in front of me, but listening to your testimony--as opposed to spending our time on the regulations, then you're confident that whatever regulatory changes or specifics would come down would be acceptable, because the framework would already be established.

Ms. Susan Peacock: No regulations would be necessary.

Mr. Chuck Strahl: Okay.

It's unfortunate we don't have your testimony in writing. I understand the problems with that. You mentioned phrases like “seeks to clarify” and so on. Is it in the proposed regulations that you have some concerns?

Ms. Susan Peacock: Yes.

Mr. Chuck Strahl: So the ambiguity gives them enough room to skate. It would be like a Wayne Gretzky breakaway: they'll be skating forever with this if we just leave it as is. That's your concern.

Ms. Susan Peacock: Yes, that's one of our concerns. We have a number of concerns with the proposed regulations. We didn't dwell on it, because we understand the proposal is that a new draft would come back to this committee following the CRTC's review.

Mr. Chuck Strahl: You said you just finished this work last night, at five o'clock. Do you know of any group, other than maybe the officials, that would be very unhappy with your proposals? Is there anybody who's said the carve-out is carving their heart out, so don't do it?

Ms. Susan Peacock: I think JumpTV would take that position.

Mr. Chuck Strahl: Okay.

Ms. Susan Peacock: And I believe the Canadian Association of Internet Providers is supporting Jump.

I have not canvassed them all. You'll hear from some this morning, and maybe you can ask them that question. I believe the CAB told you they would favour a carve-out, and as Doug mentioned, the cable association told us yesterday they have no objection to our proposed language.

Mr. Chuck Strahl: Okay, thank you.

[Translation]

The Vice-Chair (Mr. Dennis Mills): Ms. Gagnon, have you any questions?

Ms. Christiane Gagnon: Thank you for your presentation. This morning, I would have appreciated having a French translation so that I could ask you more specific questions about the amendments to be made in paragraphs 31(1) and 31(2). I do not know if you can give us some more details. That might allow me to ask more specific questions.

¿ (0925)

[English]

Ms. Susan Peacock: Did you want more detail about the proposed changes?

Ms. Christiane Gagnon: Oui.

Ms. Susan Peacock: Yes, I'd be happy to.

The way the section is currently laid out, it starts with definitions, and there's what looks at first like a definition of “retransmitter”, except when you read it, it is not. It does not define “retransmitter”; it says “retransmitter does not include...” and then there's some language.

Currently there are four conditions for a retransmitter to be eligible for the compulsory licence, and we are not suggesting that any of these be changed substantially. Our principal change is in the definition of “retransmitter”, and it would give a positive rather than a negative definition. It would say that a retransmitter is a person who performs a function comparable to that of a cable retransmission system--some of this language is already in the act--and then the critical words “but does not include a new media retransmitter”.

So new media retransmitters would not be eligible for the compulsory licence. I'd like to emphasize that there would be nothing here that would prevent them from transmitting or retransmitting anything on the Internet. It would just prevent them from doing it without the consent of the owners of that content. That would be the result, and we have defined “new media retransmitter” as a person whose retransmission is lawful under the Broadcasting Act only because of the CRTC's exemption order.

So like the officials in their draft regulations, we've defined “new media retransmitter” by reference to the commission's exemption order.

And that's it. The changes are not extensive.

[Translation]

Ms. Christiane Gagnon: Thank you. In 1954, cable networks, it seems, were not subject to copyright for direct retransmission of signals, and according to what some Internet service providers told us, the only thing that has changed today is the technology. It was the same situation when the cable was introduced. As far as these service providers are concerned, they guarantee that if they ever had a mandatory licence, they would be able to broadcast, but with very clear restrictions. They also said that they would implement technology that would solve your concerns with regard to signals that may be rebroadcast in areas you did not approve for this. In your opinion, could this technology work in a similar way?

[English]

Ms. Susan Peacock: No, we don't. We think there are a number of differences between cable technology and Internet technology. I'll give you the one that I think is the most important. Given the constraints on time, if you want to hear more, I can talk for quite a long time on this subject.

We think that the most profound difference is that when the compulsory licence for cable came into effect, and it wasn't until 1990--from 1950 to 1990 it was wide open--there was no compensation for copyright owners. Cable got their inventory for free. They built a $1-billion-a-year industry on that. You might say the production community did not disintegrate as a result. That would be true, but there was harm done. There were opportunities lost. There was unfair advantage taken.

The most profound difference between cable technology and Internet technology is evidenced by the fact that copyright owners don't trust Internet. When the compulsory licence came into effect in 1990, copyright owners were voluntarily licensing their programs to specialty channels and to pay-TV, knowing that they would only reach consumers by means of the same technology used for retransmission. That technology was trusted as to its quality and as to its security. That is not so with Internet retransmission.

A related thing to this is that when Internet technology becomes capable of delivering a quality signal and doing so securely from a copyright owner's point of view, then we and the broadcasters will be able to do this ourselves without the intermediary. That was not possible when we were talking about delivering over-the-air signals to, for example, Canadians in remote parts of the country. Cable performed a valuable function that served public policy reasons by reaching people who could not receive signals over the air, and by giving them a greater variety of signals, secondarily.

The Internet does not do that. The Internet does not extend the reach of over-the-air signals. Everybody in Canada can get them now, which is why everybody in Canada has a television set. It proves the point, I think.

¿ (0930)

The Vice-Chair (Mr. Dennis Mills): Do you want to move on, Ms. Bulte?

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Let me begin by saying that I do concur with your statement that a carve-out would in no way impede innovation. I too fully agree that for the basis of innovation and creativity without an environment that fosters that creativity and protects rights holders, we have no innovation. Let me begin by saying that.

A number of concerns were raised by the Canadian Cable Television Association last week to the effect that they wanted to make sure that any type of carve-out would be what they call technologically neutral. Again, not having the benefit of seeing your proposed carve-out, does that address the cable association? That's question number one.

Secondly, with respect to the Australian exception, my understanding too was that when the Canadian Cable Television Association appeared before us last week they actually said we couldn't really compare the Australian example with the Canadian example because the Australian cable industry was quite different. That's the second question.

Number three, with respect to the U.S. exemption, again, I can't remember who noted it, or I may have read it in a brief, but it was stated that the U.S. exemption was not a fair comparison as well because their industry is quite differently regulated by the FCC.

Could you address those issues for me, please?

Mr. Susan Peacock: I can address them at least in part.

The cable association told us yesterday through an exchange of e-mails, unequivocally, that they have no objection to the language that we are going to put in front of this committee, as soon as it's translated. I think all of the things they expressed concern about are satisfied here.

I can't speak specifically to their comments about differences in Australia because I don't know which differences they were referring to. Maybe it doesn't matter if this language addresses them all to their satisfaction.

Ms. Sarmite Bulte: What about the U.S. example that we can't compare the U.S. carve-out to their ban on Internet transmission because their industry is regulated differently?

Ms. Susan Peacock: I'm not aware of any differences that are relevant to this issue. I know they do it in a different way. They use technologically specific language to say who is eligible. In the beginning, which was in 1978, I think, they said cable could do this. Cable can do it, but their conditions and restrictions are much wordier and lengthier than the ones in the Canadian act. Subsequently they allowed satellite retransmission, but under the U.S. regime nothing is permitted except what is specifically stated. It's as opposite to technologically neutral language as you can imagine.

¿ (0935)

Ms. Sarmite Bulte: I wasn't so much talking about the wording of the carve-out, but just the way their broadcasting, the FCC, is different from the CRTC. They have different public policy objectives.

Ms. Susan Peacock: I don't know what they're referring to. I'm not aware of anything that would result in someone thinking there's a good reason to exclude the Internet in the United States but there's not a good reason to exclude it in Canada. I don't know what they would be referring to, unless they're saying—this just occurred to me—that because the CRTC is so involved in regulation and policy-making, they have an opportunity to fine-tune things, which the FCC does not ordinarily have.

So far, what the CRTC has done is given us an unconditional, broadly based exemption order. In a number of circumstances, when rights holders have appeared in front of them, they have correctly and appropriately, given their mandate, put the interests of distribution undertakings ahead of those of program owners, not because they like them better or they think they're nicer or anything like that, but because it's their mandate to look after the well-being of that sector.

Ms. Sarmite Bulte: Thank you very much.

Thank you, Mr. Chair.

The Vice-Chair (Mr. Dennis Mills): Mr. Chairman, just before you came in we were finishing with the motion picture industry and we were about to move on to Mr. Robertson.

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

Mr. Robertson, the floor is yours.

Mr. Brian Robertson (President, Canadian Recording Industry Association): Thank you, Mr. Chairman and members of the committee.

I am joined today by Ken Thompson, vice-president and general counsel of CRIA. We endorse the views of our colleagues from the Canadian Motion Picture Distributors Association and want to offer some specific views and related views that apply to Canada's music and recording industries.

Thank you for providing the opportunity for stakeholders like the Canadian Recording Industry Association to voice their concerns regarding Bill C-48 and amending the retransmission regime in section 31 of the Copyright Act.

The 32 members of the Canadian Recording Industry Association comprise the major record companies, all the leading independent labels and manufacturers of sound recordings in Canada. CRIA members are also the primary producers of music videos, and thus are directly affected by the retransmission of music video programming under section 31 of the Copyright Act.

The music industry in Canada, including CRIA members, generates revenues in excess of $1 billion annually. CRIA members represent approximately 95% of the market for recorded music produced for sale in Canada and an investment in the careers and recordings of Canadian artists' music of more than $60 million annually.

CRIA's members are also stakeholders in the government's copyright reform process and, for reasons we will outline, will be affected by any immediate changes made to the retransmission regime in relation to new media and the Internet.

The recording industry is sensitive to the effect that proposed copyright amendments in response to changing technologies would have on its core business, the sale of recorded music and music videos. There is perhaps no industry that has to date been more affected by technological changes than the recording industry.

The influences of advances in compression developments and file sharing services such as Napster, coupled with Canada's reputation as having the highest per capita level of high-speed Internet penetration in the world, have resulted in a generation of young people growing up with the view that recorded music and music videos are free for the taking. The inevitable fallout has been a 16% decline in the retail sales in Canada in the last two years. The sale of legitimate CDs has fallen from 58 million in 1999 to an estimated 51 million this year.

With music lovers and consumers obviously embracing the technology, the recording industry has moved as quickly as it practically could in developing new business models that will offer innovative and legitimate online services.

¿ (0940)

Mr. Ken Thompson (Vice-President and General Counsel, Canadian Recording Industry Association): As stakeholders in the copyright reform process, CRIA members and producers of music videos and sound recordings want to ensure that any amendments made to the retransmission regime as a result of digital technology will complement the broader process of copyright reform. We also want to ensure that they will have beneficial results for the Canadian music industry and the performers and composers of music, whose livelihoods are dependent on the health of the Canadian music industry and its future growth. CRIA recommends to this committee that a carve-out of new media retransmitters be explicit in the legislation.

CRIA has previously in its submissions and in response to the government's digital issues consultation paper made comments concerning amendments to the retransmission provisions and has maintained that new media retransmitters, otherwise referred to as Internet retransmitters, should not be eligible for non-voluntary licensing such as the compulsory licences for retransmission.

A compulsory licence permits non-consensual use of copyrighted works and other subject matter and amounts to expropriation of property and creativity. Section 31 of the Copyright Act sets out a compulsory licensing scheme specifically for retransmissions on a closed cable system of local and distant analogue television broadcasts. Regulation of copyright in the form of a compulsory licence is a last-resort solution, applicable only to the most extreme circumstances, where no other alternatives are available to compensate rights owners.

As an industry of copyright owners and content creators, the music industry does not seek solutions in compulsory licences that undermine the rights owners' ability to deal with their creations in a free and open market. A compulsory licence scheme in this case will not further the public's interest in the promotion of innovation in the marketplace, nor will it adequately compensate creators. Extending a compulsory licence scheme such as the retransmission regime to the Internet would pre-empt the developing market for direct exploitation of audio-visual works, including music videos online.

The Internet is a vehicle for expanding markets, which should be left open to develop without the interference of an imposed regulatory regime such as the scheme enacted over a decade ago for cable retransmission under section 31 of the Copyright Act. CRIA agrees with other rights holders that the retransmission provisions of the Copyright Act were intended for non-digital technologies and were clearly not designed for a technically dynamic transmission system such as the Internet.

I'd like to make a specific comment about national containment. A complete carve-out of Internet retransmitters from the retransmission provisions in section 31 of the Copyright Act is important because Internet retransmissions are by their very nature international or even global. From a practical standpoint, the weakness of the approach proposed in Bill C-48 and the still incomplete regulations is that its effectiveness is dependent on an attempt to isolate Canadian retransmitters in the global usage environment of the Internet.

It has been easy to circumvent territorial restrictions through the use of a foreign credit card or by keying in a false address. There is no cogent evidence of an existing technology that is effective in prohibiting the reception of retransmissions on the Internet outside Canada. This means that the whole proposal for an amendment to allow Internet retransmitters to benefit from the compulsory licence regime is dependent on unknown variables in non-existent or at best experimental technologies for territorial restrictions. Imposing the kinds of drastic national solutions in the global information network as have been proposed in reference to Bill C-48 is unworkable and would undermine the protection of copyright, not only in Canada but globally.

The Berne Convention, to which Canada is a signatory, permits limited compulsory licences provided that there's no effect beyond national borders, a no-export proviso. If Bill C-48 is passed in its present form, we'll risk being in contravention of our Berne obligations and other international treaties.

¿ (0945)

As we mentioned earlier in the presentation, no industry has been more negatively affected by the advent of the Internet than the recording industry. This is due in large part to the fact that while technology has moved into the digital era, our copyright law is still in an analog world.

The government moved to address this problem in 1997, when Canada signed the World Intellectual Property Organization, or WIPO, treaties, also known as the WIPO Internet treaties. These treaties require certain amendments to national laws to address the problems the Internet poses for creators. Unfortunately, five years later we are still awaiting the amendments that would allow us to ratify the WIPO treaties and give to creators the legal basis to create the business models to offer our products on the Internet.

CRIA believes that proceeding with non-consensual licensing of exclusive rights in respect of transmissions, including retransmissions on the Internet, in advance of WIPO treaty implementation would require reversing these amendments in the future. Such an unfortunate course would have the result of disrupting the development of services that would have relied on amendments and regulations made now, and that would be reversed in the future when Canada implements and ratifies the two WIPO treaties.

In summary, we do not think it appropriate to seek a quick solution in one specific area of the Copyright Act that would affect the interests of rights holders in the larger process of copyright amendments to effect implementation and ratification of the two WIPO treaties.

Just as some examples, the international trend has been not to extend the compulsory licensing regime to retransmissions on the Internet. The United States and Australia stand as examples. The United States Copyright Office in 1997 published a report in respect to the retransmission regime in the United States that discussed the merit of proposals for extending it to Internet retransmissions. In that report, the United States Copyright Office recommended that Congress not extend the retransmission regime in the United States to Internet retransmitters. Congress listened, as the United States compulsory licence for retransmissions does not apply to Internet retransmissions now.

In addition, there seem to be no compelling reasons in Canada to extend the retransmission regime to the Internet retransmissions that were not referenced in the U.S. Copyright Office report.

In the 2002 special report released by the United States trade representative, the U.S. government still remains concerned about the potential use of compulsory licences for Internet retransmitters of broadcast signals.

Finally, Australia in fact has recently introduced a retransmission regime for cable owners in the Copyright Amendment (Digital Agenda) Act 2000, but explicitly excluded retransmissions on the Internet in this scheme. In Australia, when retransmission takes place over the Internet, retransmitters will be required to negotiate licensing with all underlying rights holders in a broadcast before the retransmitting takes place.

That concludes our comments for today, and we would be happy to respond to any questions you may have.

The Chair: Thank you, Mr. Thompson.

We'll now proceed with questions. Mr. Strahl.

Mr. Chuck Strahl: Thank you, Mr. Chairman.

When Napster files for bankruptcy, you'll probably get a big grin on your face.

I think the protection of private property rights, including intellectual property rights, is a well-accepted priority for us, but I do wonder, is it going to be possible to prevent this rebroadcasting anyway?

We've heard quite a bit about the Australian example and the Australian legislation. We can probably echo something like that here, but what is going to stop somebody from rebroadcasting in the Cayman Islands or someplace where they might not have such a strict regime, and undoing any work we might do? In other words, is it possible to stop this thing?

It reminds me a little bit of when the first cassette players came out. Everyone got their knickers in a knot because it was going to drive everybody out of business. People were going to tape LPs and pass them around from friend to friend, and it was going to be the end of the industry. Of course that didn't happen, although there was a lot of angst about it.

So just for the sake of argument, do you think this kind of legislation can stop it, or is this just a rearguard action in an inevitable expansion of the Internet?

Mr. Ken Thompson: Part of the international aspect of your question is that there are international agreements Canada can belong to, which it can sign on to as a contracting party. It means that other territories, as you mentioned, the Cayman Islands, for example, would have to apply the same principles that Canada would. This has been going on for well over a hundred years under the Berne Convention, which I referenced here.

This is not a rearguard action. If Canada decides to take a different approach, one that's outside of the principles that have been established internationally, that would create the same kind of problem that you've just mentioned in terms of the Cayman Islands. So it's not a rearguard action in any respect.

¿ (0950)

Mr. Chuck Strahl: So your concern is that Canada would be the maverick if it didn't pass the legislation as you propose?

Mr. Ken Thompson: Our concern is that we would like Canadian rights owners to be treated as well in foreign territories as they are here. In order to do that, we have to comply with the norms internationally, and this would be one of those instances. In fact, the Berne Convention is very clear about this matter. It clearly states that there is no export of signals under the exemption that allows compulsory licences for retransmission.

Mr. Chuck Strahl: The Internet is not anarchy, but it has a healthy dose of do-as-you-please in it. The whole industry and the people who use it just don't like legislation and don't like parameters on it. Is it possible to protect the members' rights, their property rights and stuff, with technology rather than with legislative solutions? I'm sure people must be working on a way to encrypt things and to somehow protect it that way so it isn't pirated by everyone.

Mr. Ken Thompson: It's very important to wed technological developments with sound legal principles that will underwrite those technological developments--in other words, allow them to be effective. They wipe out treaties, as I referenced in our submission.

In fact, it does address exactly that issue. It provides specific remedies so that if somebody hacks into your technical method, your encryption, there's adequate recourse under the law to protect you. In the current situation we have in Canada, we don't have that adequate resource as copyright owners.

Mr. Chuck Strahl: If we do as the officials suggested in our last meeting, if we just pass the bill and stand by for the regulations to come by in a year or so, is your concern that JumpTV or some Internet provider will leap into the breach in the ensuing year?

Mr. Ken Thompson: We would definitely endorse the position of the motion picture association in regard to that. It's not as if the retransmitters will be excluded from doing business. In fact, they're not excluded in Australia or the United States. The matter is that they would have to come forward and negotiate openly to do so. So passing the bill at this time, leaving a great deal of uncertainty in the air, is not going to assist them, and it certainly wouldn't assist copyright owners.

Mr. Chuck Strahl: Thank you.

The Chair: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: In the document we received last week from the representatives of Heritage Canada and Industry Canada, we were told that Internet service providers had said that they could guarantee broadcasting within Canada. This morning, you are voicing your concerns, but they were able to guarantee that this would be limited to Canadian territory. They also guaranteed that there would be protection from potential broadcasting abroad and that they would pay royalties in the same way that cable broadcasters currently pay for the right to broadcast content.

If all these guarantees were given, would it not be a good thing for copyright holders? Would they not earn more revenue, given the fact that they might reach new clients whom they cannot currently reach?

This is my question. I am not saying whether I agree or not. I am relating the arguments put forward by Internet service providers. I would like you to give me an answer regarding the possibility of a new market opening up for authors, creators and copyright holders.

¿ (0955)

[English]

Mr. Ken Thompson: Thank you.

There's been no cogent evidence presented that our association has seen that substantiates that the Internet can be contained within the territorial boundaries of Canada. It's not like a cable system, which is closed. I can't move to Buffalo and listen to television programming on Rogers, because it's not available to me.

Even with satellites there's a technical way of preventing Canadians from tapping into U.S. satellite signals, and there was a court case quite recently, a Supreme Court of Canada case, that establishes those legal permits. This doesn't exist on the Internet. It's dynamic. If I send a signal to you across the table, it might be routed through any number of countries.

The technology has far outreached our ability to deal with it under this specific exemption that's allowed, and that's why we've taken the position that there really isn't any evidence that this can be contained within Canada and therefore the compulsory licence is not really appropriate.

[Translation]

Ms. Christiane Gagnon: I also mentioned opening other markets. Is the clientele on the Internet the same as one that accesses products on television, by cable or by satellite? Would this be a different clientele that could open new markets to creators, as Internet service providers seem to be saying? If they were ready to pay royalties and to be subject to the same constraints, would this not be a way to increase the earnings of authors and creators?

[English]

Mr. Brian Robertson: Madame Gagnon, it comes back to this compulsory licensing issue. When you have investment in intellectual property in the hundreds of millions of dollars, you have to have some return on those investments and compulsory licensing is not really going to give you any meaningful return on those investments. You have to have a free market system in which you can freely negotiate the rights to that product and its value. Certainly, compulsory licensing will not achieve that in this process.

The Chair: Mr. Tirabassi and Ms. Bulte.

Mr. Tony Tirabassi (Niagara Centre, Lib.): Thank you, Mr. Chairman, and I want to thank the witnesses for appearing here today.

This is something that's rather involved, to say the least, for someone who in terms of some of the other people here is still relatively new. My question deals with the retransmission of a program; it has a certain value when it's in its original form is being transmitted and it has a different value when it's being retransmitted. If you would, please, explain to me what Internet retransmission does to the value of a program when it's not really being seen in real time? In other words, it's being received and viewed at a different time from when it was actually sent.

In tandem with that, would Internet retransmission destroy the existing policy of simultaneous substitution in Canada?

Mr. Ken Thompson: The answer to your first question, which was what's the difference between the value of retransmissions that might be in a delayed broadcast, is that those retransmissions don't fall under the compulsory licensing as its currently written.

The retransmission compulsory licence in clause 31 for cable broadcasts requires that they be simultaneous. That means simultaneous to the terrestrial broadcast, so anything that's delayed has to be negotiated individually, as Mr. Robertson just said, in a free and open market.

I'm not sure what you mean, but the value in terms of compulsory licensing is that it has to follow the strict rules. It has to be simultaneous, therefore, the retransmission would not in effect undermine the economic basis for the programming, the advertising revenue that the terrestrial broadcast would originally have.

À (1000)

Mr. Tony Tirabassi: That's it, Mr. Chairman.

Thank you.

Ms. Sarmite Bulte: Thank you for appearing before us.

Last week we had a representative from the Internet Service Providers—and Mr. Spurgeon from SOCAM was here; I can't remember the witness's name from the Internet Service Providers—claim they were quite willing to pay Mr. Spurgeon's association, but he didn't want the money. I want you to comment and expand on that, because I think it's really important to get the message clear why, in your industry—you did bring it up—the compulsory licence regime is sort of a last regime for rights holders. I think that's important.

Going back to the legislation—and I meant to ask Ms. Peacock this as well—I know about recommending a carve-out and I understand that's what you want as well....

You talked about the Berne Convention. My understanding is that individual countries can pass legislation provided it is geographically restricted. So if in the regulations we required the Internet service provider to show us that in fact it would be geographically limited and we talked about some kind of certification process, would that satisfy the Berne Convention?

Mr. Ken Thompson: The Berne Convention only sets out principles.

Ms. Sarmite Bulte: I mean TRIPS.

Mr. Ken Thompson: Yes, I'll just take it down the road to TRIPS. It requires, because it's a trade treaty, that it be effective. You have to remember that if foreign territories did what this bill or the regulations are proposing, Canadian broadcasting would be inundated with foreign retransmissions on the Internet, and it's not. The fact that you're maintaining it on a national basis allows rights owners to negotiate individually, as Mr. Robertson said, in a free and open market. That's the model the Berne Convention advocates. It doesn't advocate a compulsory licensing system.

To answer your first question, why is a compulsory licensing regime a last resort, well, essentially, if nothing else is going to work, that's the model that is acceptable, provided it can be kept within the territorial limitations of the country that's applying it. Under the Berne Convention they don't want that. The concept is that rights owners should have the ability to negotiate the use and the value of their creations freely and not be subject to a government regulation on value and price. So it doesn't advocate that for an international model. The Internet, unfortunately, is technology that today at least, and probably well into the future, is not something that's nationally containable; it's not something that can be kept within Canada. So there is a risk involved in passing legislation like this.

Ms. Sarmite Bulte: Thank you.

The Chair: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you. I apologize for not being here for your presentations, but I'll read the transcripts with interest.

I was interested in your comment that you've seen no argument so far that the Internet can be contained in territorial boundaries, and that technology has outstripped our ability to contain material. I guess I try to understand the implications of that, if that's the case. That's a much larger issue to deal with. But it seems to me you're all involved in some ways with compulsory licensing systems now. I mean, you're working with traditional conventional broadcasters, and that is all about a regulatory system.

So are you simply trying to extend the argument that we don't need a regulatory system; that in fact it would be better if it were all eliminated and we could get down to business without a regulatory system? I'm trying to understand whether there's another message we should all be hearing here that you want to put forward.

À (1005)

Ms. Susan Peacock: CMPDA's members are opposed to compulsory licensing on religious and moral grounds; there's a high tenet of belief. The compulsory licence that was created in 1990 was a compromise. We did support it because it was better than no payment at all, which was the alternative, or it was believed to be the alternative.

Today, most channels on television are not part of the compulsory licensing provision. Most channels are speciality services, plus pay and pay-per-view. None of those come out of the compulsory licence. None of them have big black holes in them where the rights couldn't be negotiated effectively. It is being done. It is reality. We don't need the compulsory licence regime for cable any more, in our view. We're not here to advocate that. That would be extremely radical. We tried, we mentioned it, but we think that's biting off more than what anyone would be willing to chew.

Does that answer your question, or was there more to it than that?

Ms. Wendy Lill: No, I appreciate that answer. That's a useful answer. I'm wondering if it will be the same answer from the other interveners.

Mr. Ken Thompson: Unfortunately, the recording industry is forced into one compulsory licence as well--not willingly--as a result of an international treaty. Canada could have chosen to allow an exclusive right. I think we can echo the Canadian Motion Picture Distributors Association and say that we are also morally and ethically opposed to compulsory licensing, as it hurts rights owners, it hurts creators. It stifles creation.

Ms. Wendy Lill: [Editor's Note: Technical difficulties]

The Chair: The Canadian Film and Television Production Association hasn't made its presentation yet, so you'll have a chance to address them.

Maybe we'll now turn to Ms. Raffoul and Mr. Stohn.

Mrs. Beatrice Raffoul (Vice-President, External Relations, Canadian Film and Television Production Association): Good morning.

Thank you, Mr. Chair and members of the committee, for the opportunity to appear before you.

My name is Beatrice Raffoul and I'm the vice-president, external relations, of the Canadian Film and Television Production Association.

With me this morning is Stephen Stohn, vice-president, Epitome Pictures Incorporated, producer of Degrassi: The Next Generation, and principal partner in the law firm of Stohn Abramovitch, specialists in copyright law. Mr. Stohn is also the chair of the CFTPA copyright committee.

The CFTPA represents over 400 companies that finance, produce, distribute, and market television programs, feature films, and multimedia products in English. Our members are present in every region of Canada, from coast to coast to coast. We are the content creation industry, and the protection of intellectual property rights, or copyright, is extremely important to us.

It is generally agreed by all but a handful of people that Internet retransmission of the iCrave TV or JumpTV variety is simply wrong. It is of no net benefit to society. The government has made it clear that it will legislate against this type of Internet retransmission, and that has led us all here before you today.

We would like to highlight that we are here today after having spent the last two years working with officials of the Departments of Canadian Heritage and Industry as well as working with members of a media content coalition. We felt strongly that this was a matter of public policy and that neither the courts nor the Copyright Board should determine public policy. We are looking for your support to move forward.

I'd like to now turn it over to Mr. Stohn for the substantive part of our presentation.

À (1010)

Mr. Stephen Stohn (Chair, Canadian Film and Television Production Association): Thank you. As a practical matter, there appear to be three primary options to legislate against this type of activity. The first is the so-called Internet carve-out—in other words, an expressed statement in the Copyright Act that Internet retransmission is not allowed. There's a lot to be said for this option. It is one we would certainly support, and the United States has effectively accomplished this in its own legislation.

If there is a drawback to this option, it is that it's possibly too blunt an instrument. It rules out the possibility of legitimate cable and satellite operators in Canada using the Internet as a beneficial adjunct to their activities. It does not select the aspects of Internet retransmission that are bad for society and legislate those out; it simply legislates out all Internet retransmission. Having said that, it is certainly an effective short-term solution, and we would support it.

The second option is to try to differentiate the copyright policy issues from the broadcast policy issues raised by Internet retransmissions, and then to deal with the largely copyright component within the Copyright Act while dealing with a largely broadcasting component, under the regulations via the CRTC, under the Broadcasting Act.

Thus, under the Copyright Act there would be provisions requiring effective technological measures to keep the retransmissions not just within Canada, but specifically to authorized users within Canada. And under the CRTC regulations the Internet retransmitters would hopefully be licensed under essentially the same conditions that cable or satellite operators are licensed, including the panoply of requirements such as tiering and linkage, simultaneous substitution, operating community channels, making payments to the Canadian Television Fund, etc., but most importantly, including a provision that would ban advertising in association with the retransmission.

It is the addition of advertising that fundamentally changes the character of a retransmitter from one such as a cable or satellite retransmitter, which effectively enhances the broadcast signal, to that of an Internet retransmitter, which is actually acting in direct competition to the broadcaster.

There was a question earlier that Susan Peacock answered as to what the fundamental difference was between cable satellite retransmission and Internet retransmission. Susan talked about the security of the system, and I would suggest that an equally fundamental characteristic is the addition of the potential for advertising competitive with the broadcaster's, which could reduce the broadcaster's income, which reduces the income down the supply chain to people such as ourselves.

In any event, there's a lot to be said for this second option. It is also one we would ultimately support. And effectively, this is the option the government—at least the two departments—appears to have selected. If this option has a drawback, it is the assumption that there is a clear distinction between copyright policy objectives and broadcast policy objectives, and this is not necessarily the case.

The CRTC has in the past quite properly taken the position that its mandate was to deal with broadcast policy and that any impact upon copyright was at best a secondary concern to it. If the CRTC were in its wisdom to decide that broadcast policy objectives would be met by licensing Internet retransmitters with very minimal conditions, then this would have a clear impact upon copyright and indeed could render almost useless the Copyright Act component of the legislation.

Nevertheless, there is certainly a good hope that the CRTC would impose more than minimal conditions upon Internet retransmitters and would, at the very least, place a ban on advertising added to the Internet retransmission. Just to restate, cable and satellite operators have never been able to add advertising to their retransmissions, something that would suddenly change them from being enhancers of the broadcast signals to direct competitors of broadcasters. Thus there is every reason for the CRTC to ensure that Internet retransmitters are not treated differently in this regard.

À (1015)

We are, however, left with the question of whether or not it is most effective to leave copyright objectives to be implemented by the broadcast regulator.

The third option is to use the Copyright Act alone to regulate those aspects of Internet retransmission that are bad for society. This option does not preclude the CRTC from issuing its own regulations regarding Internet transmissions and/or retransmissions. Such regulations are always within its mandate, and if it sees Internet activities of any sort causing imbalances within the broadcasting system, it will certainly move to redress the situation. But this option presumes that the copyright policy objectives should be met, whether or not the broadcast regulator intervenes.

This final option is the one which until quite recently the government was pursuing most vigorously. It is the one we are most supportive of. This third option would be accomplished by introducing the regulations that have been proposed to you by the two departments, but with the inclusion of one additional section.

This section reads as follows, and you may be surprised to know that it was not generally controversial among all the various interested parties. What it addresses is the ban on advertising in association with Internet retransmissions. It does so in a slightly complicated way, because it also permits so-called “picture-in-picture” advertising.

Just to step back, in television sets that have picture-in-picture capability the broadcast streams can routinely include programs that have advertising, both within the little picture and within the larger picture. The cable industry was concerned that legislation should not have the inadvertent effect of precluding one of those pictures from being an Internet retransmission, since the other picture might have advertising in it that might be said to be in association with the Internet retransmission.

In any event, here is the wording. It is only three sentences, but it's quite turgid, so I will read it slowly, particularly for the translators. This is the language that was discussed in great detail with the two departments and with all the interested parties and was thought to be included in the draft to be presented to you up until a couple of weeks ago. It reads as follows:

Pursuant to paragraph 31(3)(c) of the Act the following condition shall apply to all retransmitters for the purpose of paragraph 31(2)(e) of the Act: Without the written consent of the broadcaster who broadcasts the signal, the retransmitter shall not transmit or arrange for another person to transmit advertising or other information promoting any product, service, cause or institution which may be rendered perceivable by a recipient's broadcasting receiving apparatus at the same time as, or otherwise in association with, the content of the signal, unless as a result of the recipient's own actions which are not necessary to render the content of the signal itself perceivable and which do not result in a reduction in any cost to the recipient of receiving the signal or any other product or service.

À (1020)

We suggest that this ban on advertising, when added to the requirement that effective technological measures be taken to restrict the retransmissions to authorize users in Canada, meets the basic copyright concerns and is properly dealt with within the Copyright Act. To the extent there remain concerns that Internet retransmitters are getting away without having to do all the things licensed cable and satellite operators have to do, then we suggest those other imbalances can be properly dealt with by the broadcast regulator. But even if the broadcast regulator chooses not to intervene, with the addition of a ban on advertising associated with Internet retransmissions the copyright regime would be effective.

In conclusion, we are in the happy position today of discussing three options, one of which is our preference, but all three of which we would ultimately support.

We thank you for listening to our thoughts on these options and would be pleased to respond to any questions you might have.

The Chair: As we've had an opportunity to question the previous two associations, the Canadian Recording Industry Association and the Canadian Motion Picture Distributors Association, I would suggest members confine their questions to the Canadian Film and Television Production Association, especially considering that they've produced three options, which might give us a lot of food for thought.

The chair recognizes Mr. Strahl.

Mr. Chuck Strahl: Thank you, Mr. Chairman.

I'm just interested to know why you think we need to have that specific amendment to the.... It seems to me that if you go to a system where rebroadcast is only done under mutual agreement or license with an Internet provider, then it can be part of your personal deal with that Internet provider. You can just say here's how it's going to work: if you're going to rebroadcast it, you're going to give us x dollars and I don't want any advertising on your signal. Wouldn't that be sufficient, without adding that clause to the proposed regulations?

Mr. Stephen Stohn: You're absolutely right in the context of a consensual retransmission--in other words, where somebody comes to us and says they'd like to retransmit our signal, and we negotiate the terms in the open marketplace.

We start to deal with this when the retransmission is non-consensual. Then we either need to have this ban on advertising within the Copyright Act or we'll leave it to the CRTC to include it, which it effectively does in its cable and satellite retransmissions, because under the Broadcasting Act they are not allowed to add advertising.

Mr. Chuck Strahl: But it does seem to me that what we're hearing across the panel so far--we may hear something different from JumpTV in a minute--is that they're trying to get away from the non-consensual stuff altogether. The idea is that non-consensual retransmission should be banned. And if you go to your concern, which is that we address the issue after the horse gets out of the barnyard, saying if you do go out then no advertising should go with you.... I'm not going to put words in your mouth, but it seems to me that you're trying to prohibit that. So why sanction it with a regulatory clause that says here's how to manage it if you agreed not to play by the rules?

Mr. Stephen Stohn: Yes, absolutely. And we support the Internet carve-out option. If you go with that route, that one cannot undertake non-consensual Internet retransmissions, then effectively what you've said is absolutely right. It's only if the government chooses to go away from this option that there is a need for concern about the fundamental character of the retransmission.

Mr. Chuck Strahl: Have you had any discussions with JumpTV about rebroadcasts or selling them some of your property rights?

Mr. Stephen Stohn: We haven't had discussions with JumpTV. We have had discussions with Microsoft about undertaking trials not of retransmissions but of actual transmissions.

I believe it was you who asked the question earlier about what we can do on the Internet to stop these kinds of illegal activities, these Napster-like activities, which seem so difficult to put down. Our answer is that while you can't stop it entirely, taking a negative approach may be futile in the end. We have to realize that our products must be on the Internet over the course of time. It is going to be the prime delivery mechanism within the next decade.

So we have to be pursuing measures. We are talking with Microsoft about doing trials of Degrassi within a walled garden on the Internet because we are going to have to get our product out on the Internet. If we do it, and we do it in a way we feel comfortable with, we hope it will then preclude others from stepping into the void and saying “We can't get it any other way, so we'll take it illegally”.

Mr. Chuck Strahl: Thank you.

The Chair: Madame Gagnon.

À (1025)

[Translation]

Ms. Christiane Gagnon: If I understand correctly, your restrictions with regard to advertising apply in the same way to compulsory licences and to individual agreements with the broadcasters.

[English]

Mr. Stephen Stohn: If I understand your question correctly, the restriction on advertising is only necessary in the non-consensual regime. So if there is an authorized transmission, we can always negotiate as to whether there is advertising included or not. But it's in the unauthorized, effectively compulsory regime that advertising is completely inappropriate. It has never been part of the system from 1954 to 1990 or from 1990 to date, and so should not be part of any ongoing system.

[Translation]

Ms. Christiane Gagnon: Internet service providers tell us that they need advertising because if an agreement were reached, they would have to pay the same fees as everyone else for rebroadcasting. Would rebroadcasting over the Internet be subject to restrictions with regard to the kind of advertising that can be used because some advertising is offered by the rebroadcaster? In those conditions, it would be practically impossible for an Internet service provider to guarantee that royalties be paid in either case.

[English]

Mr. Stephen Stohn: There are two aspects to that. Right now, cable and satellite companies are not permitted to add advertising, yet they've managed to create a billion-dollar industry. They do it by a subscription model, so an individual pays a monthly fee. There's a contract between the cable or satellite provider and the subscriber. That is a very successful model that does not compete with the broadcaster.

Secondly, there is advertising within the broadcast stream that is retransmitted by the cable and satellite operators, and if there were Internet retransmission, it would be part of that Internet retransmission, but there would not be added advertising around the picture.

We have heard from at least one of the potential providers that they are going away from an advertising model, and would propose a subscription model, in any event. To us, that's the only way it could work. Otherwise, you would have the anomalous situation of Hockey Night in Canada being retransmitted and presented by Labatt, but surrounding it in the Internet retransmission would be an ad for Molson. That would cause great problems within the advertising community, would diminish the value of the advertising, and would cause severe repercussions down the chain.

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: Thank you.

When the officials were before us last week, one of the things they stated, with respect to your proposed amendment on the advertising, was this was really a matter for the CRTC to look at and come back to make recommendations on. I understood there was something about advertising in the original draft regulations that went out, and then it was subsequently removed in the revised set. Was that your understanding, as well?

Mr. Stephen Stohn: Yes. We disagree with the departments. To be honest or fair to them, they could have gone either way on it. Is this a copyright component or a broadcasting component? Their view was it can be dealt with by the CRTC, therefore it's a broadcasting component. That's fair enough, if it is dealt with.

Our view, as a matter of principle, is if there were no CRTC and you included this component, the system would work. Therefore, I feel it's a copyright component and it's probably included here. But it could go either way.

Ms. Sarmite Bulte: So your position is it's more of a copyright issue.

Mr. Stephen Stohn: Yes.

Ms. Sarmite Bulte: We talked today about a carve-out, and we've received wording for a potential amendment for a carve-out. If we're not able to achieve the carve-out, would you support the legislation as it is presently drafted, and allow for a review of the regulations in the fall?

À (1030)

Mr. Stephen Stohn: Yes. We support all three of the options we put forward on the carve-out and what is going forward today. This presumes that the CRTC will come in with regulations that effectively treat Internet retransmitters the same as cable and satellite ones. There's no advertising, there is simultaneous substitution, and all those other things. We would entirely support that.

Of course, we support the third option, which we prefer, to allow the CRTC to do that, but put the advertising section back in the regulations. But we would support all three of them.

Ms. Sarmite Bulte: Thank you very much.

Thank you, Mr. Chair.

The Chair: Ms. Lill.

Ms. Wendy Lill: Thank you.

I think you've made it very clear what the three alternatives are. It is helpful to me.

On your third option, using the Copyright Act to regulate Internet transmission, am I correct in saying that's the status quo, with the additional issue of the banning of advertising?

Mr. Stephen Stohn: Yes, that is the status quo, although ironically it was an action by the broadcast regulator that brought us here today. When they issued their new media exemption order, all of a sudden the underpinnings of the copyright legislation were changed. Before that time it was clear that all retransmitters had to be licensed and therefore had to be under CRTC rules, which said there would be no additional advertising.

When they introduced the exemption for all types of Internet broadcasting, they inadvertently opened a Pandora's box. It was a Broadcasting Act change that suddenly forced some reaction in the copyright arena.

Ms. Wendy Lill: I'm going to ask a stupid question, one some other people have maybe thought of as well. It's about this picture-in-a-picture advertising. It seems to me that banner advertising is the advertising that is all around that tiny picture, which is the retransmission. Do we have any sense of how many people actually watch those tiny pictures, their hockey games or their movies, in that format?

It seems to me to be totally unappealing. I'm just wondering, is this a huge threat? Can people now get those pictures as large as their screens? Is that what we're talking about? But then the banner advertising isn't there if they're....

Mr. Stephen Stohn: Yes. We would be in favour of simply having a ban on associated advertising. It's really a small point of would you say that if you're watching Hockey Night in Canada in a little picture just to see when you come back from commercial or something and you're watching Degrassi on the larger picture...? You really have advertising in both sizes, and is one type of advertising in association with the other? Actually, I don't think so, but there is an argument that it is.

If one of those large pictures was the Internet retransmission and there was no associated advertising, there was just a concern that this be permitted and not throw the Internet retransmission offside because suddenly there was this tiny hockey game in the centre that had advertising in it and was in association. In some ways it's a very small point

The Chair: Mr. Mills.

Mr. Bob Mills (Red Deer, Canadian Alliance): Thank you very much, Mr. Chairman.

Mr. Stohn, you make mention in recommendation 3 that you have this ban on associated advertising and that you think that will really tie it all together. But Ms. Peacock, in her intervention, made the statement--and I stand to be corrected--that if this bill doesn't have the carve-out identified in the body, that period of time that lapses till the regulations are put in force is going to render the bill essentially meaningless.

Ms. Susan Peacock: That was my submission. You've stated it correctly.

Mr. Bob Mills: Why wouldn't you share that view?

À (1035)

Mr. Stephen Stohn: In an ideal world, nearly two years ago the CRTC would have suddenly stepped in and said we made a mistake, and let's redress our new media order to talk about new media retransmitters and require them to be licensed. Or we would have been where we are today, and we would have had one of the three options.

If what was being put forward to you today from the departments was the third option, including the ban on advertising, we would be supportive of it. Others might say it doesn't go far enough and we need an Internet carve-out.

We would be delighted with an Internet carve-out. We're less happy with something that says let's leave the regulations for a year a from now. This is because that will lead to uncertainty for the next year.

We'd be happier still with something that deals with it immediately and says let's bring in the regulations, including a ban on advertising. That would settle the matter now, and if the broadcaster regulator wants to go off and do something on Internet retransmission, it can within the next year or in the year thereafter.

Mr. Dennis Mills: I think this is a very important distinction to note. We're not dealing in an ideal world, but we have responsibility as legislators to give the direction to the officials. We need your best advice on how that's going to be accomplished.

It seems to me that if you agree with Ms. Peacock, we shouldn't subcontract our responsibility to the officials, who may or may not come up what we intended to accomplish or what we really want to accomplish as legislators. If you give all these options to officials, make no mistake, they're not going to choose Ms. Peacock's. The more you're united, then the greater the force we have in amending this legislation.

Mr. Stephen Stohn: Thank you for that.

We can certainly narrow our focus down. What we've been trying to do is respond to what we understood was the practical way to get something happening as soon as possible, because it is absolutely vital that we have certain legislation soon.

If Internet carve-out is possible, we're behind it 100%.

Mr. Dennis Mills: Thank you, Mr. Chairman.

The Chair: Before we break up this part of the hearing, I would say that the majority of witnesses who have appeared have opposed the Internet carve-out. It seems to me that it has been overwhelming.

You made the point, when you introduced your three options, that you felt that the Internet carve-out was too blunt an instrument. I'm wondering what was your reason for saying that, whether you were basing it on the experience of the U.S. and Australia, who are using it, or some other element. Maybe you could just define that for me.

Mr. Stephen Stohn: Yes, and to be clear, we're trying to deal within the realm of the possible. The indications to us until recently were that an Internet carve-out was not going to fly. So then you look to reasons why it might not fly, and then you say it's possible that it is too blunt an instrument. Maybe you can look behind the philosophy of what is wrong and deal with those elements. There are two primary elements: there's the security of the signal, and there's the associated advertising.

Having said that, it would be a very easy process for us all if we simply were to have an Internet carve-out. I absolutely support that. It's only because the indication from two years ago, from eighteen months ago, from six months ago, from three months ago from the departments was that it is not going to happen. We've then tried to work with that to come up with something that looked at the underlying principles, and get to address our concerns in some way.

The Chair: That clears it up for me. Thank you.

Thank you very much to the three groups for appearing this morning. It's been extremely informative and useful to us. We appreciate it very much.

À (1040)

Mr. Stephen Stohn: Thank you.

The Chair: We're now pleased to welcome the representatives of JumpTV: Mr. Farrell Miller, its president; and Mr. Sunny Handa, the legal counsel from Fasken Martineau.

Mr. Miller, the floor is yours.

Mr. Farrell Miller (President, JumpTV): Thank you, Mr. Lincoln.

My name is Farrell Miller, and I want to thank you all for giving us the opportunity to sit here and discuss this issue with you.

I had the opportunity one week ago of speaking to a chapter of the Ontario Bar Association, and at the end of the discussion a member of the audience, an established Bay Street copyright lawyer, came forward and said to me, “You know, with all the media establishment clutter and talk of piracy and stealing, it's absolutely impossible to get across the message of truth”. So we sit here today, and as I mentioned to him, we will do our best.

I'd like to start by giving a brief background leading up to Bill C-48.

Essentially, as a general rule I think everybody in this room would agree that if any party wants to retransmit the work of another, they need to get the consent of that third party. However, in this country we have set up an exception to that rule. It's called a compulsory licence, and what that means is if a company wants to retransmit an over-the-air broadcast, it need not get the consent of that third party. Rather, it pays a tariff to the federal government and the federal government takes that tariff and distributes it to the programmers and the networks so that they in fact do get paid for their programming.

For ten years cable operators in Canada have relied on that compulsory licence. Several years later satellite technology was developed, and satellite companies then relied on that compulsory licence. Several years later, wireless technology was developed, and those companies, like Look Communications, also relied on the compulsory licence when they wanted to retransmit CBC and CBS. And then two years ago, JumpTV was formed and it wanted to rely also on that same compulsory licence.

The only distinction is that cable companies were using cable technology, satellite companies were using satellite technology, wireless companies were using wireless technology, and Internet companies would be using Internet technology. Other than that, it was exactly the same situation.

We always maintain the position, how could the Government of Canada possibly invoke legislation to suggest that perhaps cable and satellite technology would be legal, and wireless and perhaps Internet technology would be illegal? Or perhaps they would select that cable technology should be legal, and Internet and satellite technology should be illegal. We couldn't from the first step ever visualize a government getting involved and picking and choosing which forms of technology would be legal and which would be illegal.

So we announced approximately a year and a half ago what we were going to do. The immediate reaction from the media establishment was that this was illegal under current law, but then the very next thing they did is run to the federal government to get the law changed. That commenced the whole process with Bill C-48. That started approximately one year ago with the development of a consultation paper.

What then materialized from December 2001 until approximately three weeks ago is that the government, through the Ministers of Heritage and Industry, got a group of well-informed people to study the issue, and over a period of six months they communicated with all the interested and vested parties on the issue. They developed regulations—and while everybody was not thrilled with them, everybody could live with them—that allowed companies like Internet retransmitters to rely on the compulsory licence.

I might add one more thing in terms of the compulsory licence.

We have been approached by American companies, and they have said to me, “Farrell, how is it that you can justify the retransmission of CBS, for example, without the permission of CBS?” I've always responded that I think they have a credible argument. It is in many instances very difficult to justify the existence of a compulsory licence. Why should one exist for any kind of technology? If a cable company in Canada wants to retransmit NBC content, surely it can find out where to identify NBC and make an open-market business agreement with them.

However, our response to CBS or NBC has always been that if there is going to be a compulsory licence in Canada, and we're not taking any position on whether there should or should not be, then it obviously must apply equally to cable technology, to satellite technology, to wireless technology, and to Internet technology, period.

À (1045)

At the end of the day, all an Internet retransmitter is doing is delivering that CBS signal to a customer's home on the very same cable pipe as the cable company, but instead of delivering the signal to a TV box it's delivering it to a PC box. Surely the government is not going to come forward to suggest that TV boxes are legal and PC boxes are illegal, because at the end of the day that's the only distinction.

Some of our opponents have suggested the Internet is different, because if you conduct retransmission on the Internet it necessarily will travel all over the world, and that will destroy the North American broadcasting system as we know it. The allegation is false and it's misleading. It's false because there are several well-respected, well-financed software companies that have developed software to accurately identify the geo-location of Internet users. If a company like JumpTV were to set forth and suggest that all of its subscribers would be within Canada, then that's the way it would have to conduct its business. If regulations were set into place, as they were up until a week ago, that put a clear requirement on Internet retransmitters to maintain their retransmission within Canada, then that would be the law and that would be the obligation. I suggest to you that if any Internet retransmitter were to rely on a compulsory licence and the result of that retransmission were to stream outside Canada and into the United States, that company would be in violation of U.S. law. If it took them five weeks to close down iCrave TV's illegal activities, it would take two weeks to close down any other company's illegal activities in the United States.

Our opponents have also suggested that this is different: Internet retransmitters are pirates; they're not looking to pay fees; and therefore they have to be treated differently. It's a completely false and misleading argument. It is an attempt to tarnish us with the piracy image in an attempt to pass through legislation which is in their best interests. JumpTV has always maintained that if the other forms of retransmission technologies have to pay—and do pay—a royalty tariff, then of course JumpTV would pay the very same royalty tariff, plain and simple: no pirates; everybody gets paid pursuant to the compulsory licence. But they've continued to perpetuate the theme of piracy because they know when you have a tremendous media establishment and keep repeating and repeating the same things, it's pretty difficult for the truth to come through.

As a further example, one year ago JumpTV made a submission to the Copyright Board asking specifically for a copyright tariff from the board, so anybody within the past year who at any time may have suggested JumpTV or an Internet retransmitter does not want to pay a royalty tariff, or is a pirate of any kind, is completely, intentionally misleading those who are going to weigh in on this very important issue. It was very clear on the record in the government that we, as a proposed Internet retransmitter, would clearly pay a tariff, just as all the other three forms of retransmission-technology companies have to pay a tariff.

I don't know how many people over the last couple of days you've had the opportunity to hear from who were representing the consumer, who were talking with a view to public policy. I would suggest that from a public policy standpoint what we are here suggesting is that Internet retransmission will offer Canadians the option of a fourth option by which to receive television channels. What it really means, at the end of the day, is we're offering Canadians an option, if they choose to pay for it, of receiving CBC in their offices.

Everybody's talked about the broadband evolution and how Canada is very advanced in terms of the development of broadband. People don't need broadband to receive their e-mail. People also don't need broadband to check their stocks. What they need broadband for is the future development and evolution of applications that are broadband in nature for the Internet.

À (1050)

At the end of the day, what we're really saying here is we are offering Canadians an option to receive television signals through their broadband connection if they choose to do so. From a public policy standpoint, I believe we are improving the situation for Canadians as a whole.

Finally, I want to just quickly address the issue of advertising, because I don't want there to be people lost in the clutter of non-issues. We have maintained for at least eight months that advertising and banner advertising is a non-issue for us. We believe the other issues and the discussion of an Internet carve-out are so abhorrent that we wouldn't want anybody to get lost in the issue of banner advertising.

We have no position. Ban it, don't ban it--we don't care, because it's our intention to be a subscriber model just like the other forms of retransmission technology.

Finally, I would like to offer each one of the members sitting here a challenge. I suggest this to you in a positive and constructive way. I challenge you: if there is any single credible reason why you think that perhaps there should be a distinction made for Internet retransmission vis-à-vis the other three forms of retransmission, please address it to me or to Sunny in this question period. I'd be happy to address it. I hope I'd be able to provide you with a satisfactory answer as to why this form of retransmission should not be treated any differently than the other forms of retransmission.

Thank you very much.

À (1055)

The Chair: Thank you, Mr. Miller. You certainly made your position very, very clear. I think it will be an interesting question period.

Mr. Strahl.

Mr. Chuck Strahl: Thank you.

Thank you for coming to the committee. You've been talked about in absentia for a couple of three weeks here with vigour. You may be coming in, as you say, in the wake of a blitz of concern from the established media, but you are batting clean-up, and it's a very impassioned argument you're making, so good on you.

I have two or three questions following up on all the other testimony we heard. One is on this ability to restrict the geographic area. You say several software companies can do that now. It seems to me we heard other testimony from Internet providers saying that they're working on it but it's still kind of embryonic. I don't know if anybody's actually using it. Is it actually established? Can it actually be done? Can it be hacked around?

I think this is what it's going to come down to. I'm no Internet expert, but it does seem that it's far easier once the transmission is on the Internet, even if it's geographically restricted, if that's possible. You can address that one.

Secondly, once it's there, there are very creative folks like yourselves in other jurisdictions who are going to say they can get their hands on that with some hacking. What's to prevent this? I think this is what's scaring the established media outlets.

Mr. Farrell Miller: Mr. Strahl, if I may answer the first part of your question, yes, there are at least a half a dozen companies that have developed this technology. If you want I can give you the names of those companies.

However, I think the most important answer to your question is that we're saying don't take our word for it. If we don't limit our retransmissions to within Canada, we will be in violation of the regulations that were put forward up until one week ago. So what we're really saying is don't take our word for it; if we can't contain the retransmission to within Canada, then we would be breaking the law in this country and we would also be breaking the law in the United States.

So we think getting lost in a discussion and a debate over whether the technology is good, whether it works, or how well it works—does it work 99%, 98%, or 100%—is missing the whole point. We're saying don't take our word for it; implement legislation that makes it an absolute requirement to limit the retransmission to within Canada. Then let technology dictate the course of whether the retransmission can or cannot be contained to within Canada.

Mr. Chuck Strahl: Okay.

You mentioned the media establishment and the fact that the person you were talking with was suggesting that you're never going to get your message out. There's overwhelming lobbying going on from the media establishment. We heard a lot of testimony also from people who are part of the establishment in one sense but not in a stereotypical way, people like creators, playwrights, authors, recording people, rock stars, who are saying that they have concerns about it too.

Now, I don't know if that's because they have a concern with the whole compulsory licensing idea and it's regurgitating itself because this is a good moment to talk about it. Do you think it's specific to the Internet and can be addressed through the compulsory licensing fees?

Mr. Farrell Miller: Let me put it this way. I have an old friend, the CEO of one of the three main Canadian private TV networks. We had a conversation, and I said to him—this is going back about eight months—“How is it that you can honestly take a position that you would be against Internet retransmission?” He said, “Farrell, the only reason we take that position is because we are against all forms of compulsory licensing. We don't think that Mr. Rogers should be able to retransmit on his network without paying a negotiated fee any more than we should be able to retransmit his network fare without paying a negotiated fee.”

I suggest to you that this a credible argument on his side. However, if you get beyond that and in your wisdom make a legislative decision that there will be a compulsory licence, then I'm suggesting it's blasphemous to talk about picking and choosing certain forms of technology and suggesting that we will deem legal only those that happen to be the technologies owned by the media establishment. When a new technology evolves and develops, to suggest that it should be illegal is, we think, the wrong thing to do. We don't think there's any credible reason to do so. That's why I'm really pleased that you brought up the first question relating to territorial extension of the retransmission.

I think the simple answer is let's not get lost in the details of the extent or how well the geographic screening technology works. Let's set the requirement into legislation, and then let's address whether companies can meet that hurdle. That's exactly where the regulations were going up until a week ago.

We had conversations with several people from both Industry Canada and Heritage Canada who had invested six months of their lives trying to put together these regulations, working with all the parties involved. When we spoke to them in the last couple of days after the letter was delivered to Mr. Lincoln, they apologized to us. They were embarrassed. They felt that if we felt we had been duped by the whole past six-month process, they felt the exact same thing, and they apologized to us.

They felt that they also had probably wasted six months of their lives going through this process of drawing up the regulations, not to mention the fact that there had been a clear promise and declaration by the government six months ago that no new bill would be introduced without regulations. We have here with us a package we're going to circulate with a government news release stating exactly that.

Á (1100)

Mr. Jim Abbott (Kootenay--Columbia, Canadian Alliance): Mr. Lincoln, if I could, I'll just ask for some clarification.

You're referring to the letter that was signed by Minister Rock and Minister Copps--is that right?

Mr. Farrell Miller: That's correct.

The Chair: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: In the consultation paper provided by officials from Heritage Canada and Industry Canada, I read that you had informed the Copyright Board that you were ready to accept the same obligations. However, you asked that you be subject to different rates because, as you say, the presence of Internet rebroadcasters was not taken into account. Moreover, on the one hand, you say that you are ready to accept the same obligations, but on the other hand, you appear before the Copyright Board to oppose the rates required from other broadcasters.

Thus, I am wondering whether this is not an indirect negotiation to reduce royalties. You say that you are ready to do the same thing as the others, but then you appear before the Copyright Board to request a specific renegotiation of rates in your case.

[English]

Mr. Farrell Miller: I'm happy you raised that question.

When we initially went to the Copyright Board a year ago, our business model was at the time not going to be subscriber-based. Therefore, we looked at the other three technologies of retransmission. The tariff they pay is 70¢ per subscriber per month. Because at the time we were not going to collect our revenue from subscriptions, we went to the Copyright Board a year ago and said that our business model is different. We were asking them if they could create a tariff for us to pay that would not be based on subscriptions, because we were not going to have subscriptions. We were investigating whether there was a different kind of tariff we could pay, not a lower tariff, just a different kind of tariff.

However, we then withdrew our submission before the Copyright Board. To try to keep it simple and work through all the clutter that had been created, we made a decision that we would be subscription-based and have subscribers, as do the suppliers of the other forms of retransmission technology. Therefore, we said that if everybody else pays 70¢ a subscriber, we think it only logical that we should pay 70¢ a subscriber. It's only for that reason that we withdrew our submission from the Copyright Board. But I sit here before you today stating that in every single respect we would be willing to live by the same rules and regulations as suppliers of the other forms of retransmission.

Á (1105)

[Translation]

Ms. Christiane Gagnon: What does that mean to you? For instance, does this mean that you would pay copyright fees equal to those paid by compulsory licence holders? For instance, what does it mean to you to broadcast a given percentage of Canadian content? What does this mean in terms of support for the Canadian Television Fund? There is a huge amount of money involved, and others in the sector do not seem to believe that you're financially robust enough to meet all those obligations. It takes a huge amount of money, and according to various points of view, you need that money.

[English]

Mr. Farrell Miller: Absolutely. If there are requirements and responsibilities on the other retransmitters to make a donation to the Canadian Television Fund, then we should have to abide by the same obligations, period. We've said that all along. There's no question about it. Any responsibilities or any onuses that are on them should also apply to us. There's no question about it.

[Translation]

Ms. Christiane Gagnon: However, even with restrictions on advertising, on advertising banners... You will not be able to finance your operations through advertising, because of the restrictions. Financially, you could meet the same obligations as those imposed on other compulsory licence holders.

[English]

Mr. Farrell Miller: Absolutely.

I'm happy you made reference to this notion of advertising. We have no intention of doing any advertising in our retransmission--zero. That was perceived to be a very controversial issue. We were trying to eliminate all forms of controversy to the extent that we could, and we would not engage in any advertising. That's why when we heard the discussion before--and there was a lot of discussion about advertising...that's not our issue. If you ban that, that's fine with us, because our business model is going to be exactly the same as the three competing forms of retransmission. It will be subscriber-based.

If a cable operator charges $35 and pays a 70¢ tariff, we may certainly not charge $35. We may charge $19, but we will pay the same 70¢ tariff. It's absolutely fundamental to our sense of equity and fair play that we should abide by the same responsibilities, payments to the Canadian Television Fund, as the other forms of retransmission.

[Translation]

Ms. Christiane Gagnon: I have only one comment. Your approach has evolved, considering the answers you have given me.

[English]

The Chair: Mr. Miller.

[Translation]

Ms. Christiane Gagnon: This was a comment.

[English]

Mr. Farrell Miller: Do you mean over time, over the past twenty minutes?

Ms. Christiane Gagnon: No, not in two minutes, but in a few months.

Mr. Farrell Miller: Honestly, that has been part of the media clutter, as Mr. Handa just said. I've had people discuss this issue with me, including some of our investors. From what they knew about JumpTV, just by reading the traditional press in this country, their view was very inaccurate in terms of what the truth really was.

However, I do acknowledge you are correct in the sense that our position has changed, certainly with respect to advertising online. Whereas a year ago we were going to pursue that form of business model, we had to take into account what the climate was. Because there was such a negative reaction with respect to the advertising, we made a decision that we had to be sensitive to some of the opposition concerns. Therefore we moved to a subscriber model. But the subscriber model has always been there over the course of the past six months when we were discussing these issues with the heritage and the industy committees that were trying to draft the regulations.

I have to emphasize one more time, when we spoke to members from those two ministries just in the last week, they were apologizing to us for having engaged themselves and us in a six-month process, having come up with regulations that I think by most accounts were a reasonable compromise, and then boom, in one fell swoop, having everything get kind of swept under the rug and then there are no regulations. We think that was a bad move.

The Chair: Mr. Mills.

Mr. Dennis Mills: Thank you very much, Mr. Chairman.

Mr. Miller, I chair the House of Commons committee on the industry of sport in Canada. I have a particular interest in small-market professional sports franchises, whether they be the Calgarys or Edmontons of the world, or the CFL.

What are your views on the feeling out there that those properties that are on major television networks are diminished in their value when they're retransmitted through the Internet?

Á (1110)

Mr. Farrell Miller: Before I answer that directly, I appreciate your interest in small-market professional sports franchises. Perhaps we can get together to figure out a way to keep the Montreal Expos from leaving the city of Montreal, because that's certainly an issue that's dear to the heart of a lot of people in Montreal.

Having said that, I appreciate your point. There's no question that if I were sitting here representing the professional sports leagues I would be arguing vigorously that the whole concept of compulsory licensing in Canada probably, from their point of view, should not exist. Let's assume ABC has the rights for NHL hockey. Why should the NHL be subject to retransmitters in Canada being able to take ABC? Why should cable operators in Canada be able to pull in an ABC feed from over the border and have subscribers, many of whom pay for cable so they can get ABC?

If I were representing a professional sports league I would feel very strongly about that. The only thing I would suggest to the professional sports league in the United States or in Canada is that if you have a problem with the system, the problem is the whole notion of a compulsory licence. If an Internet company is retransmitting it to people in Canada, so that you have 10,000 people watching the hockey game in Canada, why is that any more or less a problem than having two million people watching that very same hockey game on cable retransmission?

Mr. Dennis Mills: My question was, can you see the possibility--I actually see it as more than a possibility--that the value of the rights for a Calgary Flames hockey broadcast is dramatically altered when it can be picked up by Internet retransmission?

Mr. Farrell Miller: Yes, sure I can.

Mr. Dennis Mills: Can you actually see that those rights, their value, is diminished, which ultimately affects the viability of that enterprise?

Mr. Farrell Miller: Let me try to explain what--

Mr. Dennis Mills: No, no. Could you please just answer that question--yes or no.

Mr. Farrell Miller: No. They will not be devalued. Let me explain why.

Mr. Dennis Mills: Okay.

Á (1115)

Mr. Farrell Miller: First of all, the only people who will receive the Internet retransmission are people in Canada, for purposes of this discussion. That's what we have emphasized.

Second, for anybody who receives that Internet retransmission, the Calgary Flames will get compensated through the compulsory licensing system, the exact same way the Calgary Flames get compensated through the cable retransmission.

Mr. Dennis Mills: Mr. Chairman, colleagues, I ask for your indulgence for one more minute, because this is a critical point for smaller communities that are trying to sustain an international or a North American presence in professional sport.

If I'm Molson's or Labatt's and I pay a certain dollar for rights for a certain hockey or football property or franchise, there is no way I would say the right I bought sustains its value if an Internet operator can just pick it up from that television network where I've bought the advertising, if it's just retransmitted over the Internet.

I don't think you could find--this is not about media hustle or spin or whatever--an executive in Canada who would invest in sponsoring a property if he thought that property could be retransmitted over the Internet. He would think he shouldn't pay as much, and he would argue, “Either I'm not paying as much, or to hell with it; I'll find some other property.”

Can you not see that?

Mr. Farrell Miller: With all due respect, I don't believe that's the case. I'm suggesting to you.... First of all, when you talk about “all over the Internet” it suggests it's going all over the world and that people can pick it up for free, and of course that's not what we're talking about. We're talking about people in Canada who are paying a subscription.

So I'm suggesting to you to try to visualize a situation where the Internet retransmission we would be conducting is no different from the satellite retransmission Express Vu is conducting. In both cases we're picking up the hockey game and we're retransmitting it without permission--in both cases. And in both cases they're going to pay 70¢ per subscriber and we're going to pay 70¢ per subscriber, and those moneys then get filtered down to the rights owners, so that they in fact do get compensated.

What happens is, if we're retransmitting a Calgary Flames game and we have 2,000 subscribers, payment is made and the compensation does filter down on an equitable basis.

Mr. Dennis Mills: Well, we disagree. I believe the property is diluted if it goes beyond where I made my original purchase.

That's it, Mr. Chairman.

Mr. Farrell Miller: My final point is that I understand we disagree. The only thing I would ask you to reflect on is how is the Internet retransmission any different from the satellite retransmission? It's just something to think about, because I'm suggesting that there really is no distinction. It's the same activity. It's the same payment made.

The Chair: Ms. Lill.

Ms. Wendy Lill: I'm interested in your comments about compulsory licences. You see that basically as picking up stuff without permission, but it is in fact paying a tariff. It's second best. You think in fact what would be the best would be open-market business agreements.

In terms of Mr. Mills' comments about small-market sports franchises, how would you in fact conduct your business if you wanted to pick up a Flames game, or whatever? You'd go to the thousands of various content providers and you'd make individual deals. Obviously that's not the choice that was made in this country. A choice was made around compulsory licence fees, and that's the model with the moneys then filtering down to the creators.

I find the model you're putting forward incredibly cumbersome. Maybe that's just because I've been looking at this system for as long as it has been in place and it seems to be somewhat workable. How is it you think that kind of a system--the basic open-market agreements--would work?

Mr. Farrell Miller: Let me just clarify that I'm not really here advocating the elimination of all compulsory licensing. I'm just saying that those who advocate that position do perhaps have a credible position to put forward. All I'm saying is that to the extent that there is a compulsory licensing regime, it should and must be applied equally to the alternative forms of technology.

To deal with your question of if there were no compulsory licensing, I think it would work in this country the same way it works in the United States, because in the United States you do not have compulsory licensing. What that means is that when approximately a year and a half ago ABC Television in New York did not have consent from Time-Warner cable distribution in New York, for two days ABC TV went off the air in New York City. They had not reached an agreement.

In dealing in a world where you don't have compulsory licensing, what it really means is that retransmitters have to call the company they want to retransmit and get permission. I might add that JumpTV has already done that with no less than a dozen television channels from all over the world.

Ms. Wendy Lill: If Internet retransmission were allowed in Canada, could you see that leading to an Internet grey market in the U.S.? And what would the likely responses be from the U.S.?

Mr. Farrell Miller: I don't think how the situation is dealt with here has any ramifications, really, truthfully, in the United States, because if any retransmission conducted in Canada seeps into the United States--for lack of a better word--or is delivered into the United States, they will clearly be in violation of U.S. law. As I suggested earlier, if it took them five weeks to close down iCrave TV's illegal activities in the United States, it would take them two and a half weeks to close down the next company. I think it would have to be addressed on a country-by-country basis.

My counsel also points out that we've had a big discussion here about limiting the reach of the retransmission of Internet retransmission. The reality is that satellite DTH companies such as ExpressVu and Star Choice have no technology to limit the reach of their transmission.

That's why Decima Publishing, about eight months ago, published a cover story in their publication that made very clear that there are thousands of people--Canadians who winter in Florida--who bring down their satellite dishes so they can watch CBC in Florida. This is the exact same type of leakage they're worried about with Internet retransmitters.

Á (1120)

The Chair: Before I pass on to Mr. Abbott and the second round of questions, I want one clarification from you so it's clear in my head.

You're suggesting you should be put in the same position as satellite and cable companies. Did I understand you clearly when you said you would be prepared to be subject to compulsory licensing, would pay licence fees, and would also contribute your pro rata share to the CTF, the Canadian Television Fund? Is it what I heard you say, sir? Would you pay licence fees and contribute to the Canadian Television Fund?

Mr. Farrell Miller: It's exactly what I said. It's the only equitable solution I see here. I couldn't see receiving favourable treatment for ourselves. I would be as dismayed to see other people receive favourable treatment under the law.

The Chair: Mr. Abbott.

Mr. Farrell Miller: Absolutely. I have to be consistent in my argument, and my answer to you is absolutely yes.

There are other requirements and things that are referred to. There are things like simultaneous substitution. Canadian retransmitters must substitute the Canadian version of Friends, for example, if it's picked up by a Canadian network, in place of the American delivery of Friends. Everyone in Canada sees the Canadian network commercials associated with the program.

The short answer to your question is we should absolutely be subject to the same requirements.

Mr. Jim Abbott: Of course one of the problems we're aware of right now is because of the different time zones in Canada simultaneous substitution is in a bit of disarray at this point.

One of the concerns I have, as a real Luddite when it comes to computers, is I know about Mafia Boy and other hackers. They seem to have a fair amount of success in getting into pretty sophisticated systems like CNN and American Express, I believe. They are not incidental companies in the world.

One of the concerns, the spectre I have in my half-informed mind, is how do we stop?

Let me summarize. Today you're saying that whatever the rules are that apply to a retransmitter of any description currently in place in Canada, you would be prepared to comply with the rules. It's what I have understood you to say.

Mr. Farrell Miller: Absolutely.

Mr. Jim Abbott: Okay.

What about the hacking aspect, the Mafia Boy aspect, of your technology versus other people's technology?

Mr. Farrell Miller: I think the answer is really simple. They were addressed in the regulations. The regulations said if your security or screening system is penetrated to the extent it's ineffective, you cannot continue your retransmission.

I think your point is well taken. We can never predict the level of hacking, the sophistication of hackers, or their ability to beat the system. I think the simple answer is you must maintain effective control. If you don't have a system to do it, you cannot continue your activity. It was very clearly addressed in the regulations.

Á (1125)

Mr. Jim Abbott: I'm trying to imagine a model where you have $10 million in revenue each month and at that point Mafia Boy 2 hacks into your system. I can't imagine you would say you'd give up on $10 million in revenue each month until you can correct the situation.

Mr. Farrell Miller: Perhaps I have a more practical answer for you. To stream video online to thousands of people requires tremendous set-up of infrastructure and bandwidth. It's very costly. Some of our opponents have argued that anybody can do Internet retransmission because there are no set-up costs, no laying of cables. That's false and misleading. Check with anybody who is knowledgeable about Internet infrastructure and bandwidth. It's very costly to conduct retransmission or online transmission to large groups of people.

So the short answer to your question is even if an individual hacker were to get in--or a dozen hackers--they could not retransmit that content to a large number of people because they wouldn't have the resources or the infrastructure to support that illegal retransmission to thousands of people.

From a practical standpoint, you don't have anybody today, in the United States and Canada, throwing around live television online. It's not because it's illegal, which of course it is, because that certainly hasn't stopped people from shooting around music and DVDs online. The real reason is that the infrastructure required to deliver video to thousands of people online is extremely huge.

So from a practical sense, people can't beat the system and distribute it to tens of thousands of people. That's a practical reason why it could never happen.

Mr. Jim Abbott: Let's ignore the possibility of an argument on your part that it would be an unfair onus on the new media provider versus the other providers. What would your response be if in the act or within the regulations there were a call for any new media, referring obviously to Internet? With the greatest respect, we've only heard about experiments, these things that are out there, and so on. The onus should be put on the retransmitter to be able to show to the CRTC they had that. I don't have the confidence at this point, as a novice, that the technology is in place and actually works.

Mr. Farrell Miller: I suggest to you that the onus should be on us, and was on us in the regulations that were set forth. If we were to go forward, based on regulations, with technology that did not do the job, we would be sued in a heartbeat. That would be the end of the story.

I agree with your presupposition. We're not saying to trust us that the technology works; we're just saying to verify. We're saying it can be done and the onus should be on us. Assuming we can contain the retransmission within Canada, I suggest to all of you, respectfully, it's really no different--other than the form of technology--in terms of our activity, from the other three forms of retransmission technology.

[Translation]

The Chair: Ms. Gagnon, you may put a very brief question.

Ms. Christiane Gagnon: How can you guarantee that that technology is ready? For instance, would you be ready to accept that the CRTC or some other authority make a determination about the readiness of the technology? You say that you have the burden of proof, but if the technology is not adequate, this would be extremely damaging for copyright compliance or rights holders who have broadcasting rights or who request royalties for use on the Internet.

Á (1130)

[English]

Mr. Farrell Miller: If you're asking whether we would subject our technology to scrutiny or a review by a third party, my answer is yes. I would certainly prefer that to the government just coming forward and doing an immediate shutdown of all Internet retransmission. To at least give an Internet retransmitter the opportunity to prove that the technology can be effective is a far more progressive solution to the issue than to just say we're not going to have any Internet retransmission.

So if there had to be a review by a third party, I would welcome that. However, I would just conclude by emphasizing that the regulations that were put forward until a week ago were emphatically clear that the control on the transmission had to be contained within Canada, and if it wasn't, you would be in violation of the regulations.

The Chair: Ms. Lill.

Ms. Wendy Lill: I think you know that the committee is involved in a major broadcasting study at this time. We're very interested in the issues of Canadian content, the promotion of Canadian voices, Canadians talking to one another, etc., and also Canadian ownership of our broadcasting system. I'd just like you to give us some of your views on Canadian content and whether you think the present Canadian content regulations are working in this country and that they're actually carrying out the stated policy objectives in the Broadcasting Act. Also, what do you think about the foreign ownership restrictions on broadcasting in this country?

Mr. Farrell Miller: That's an interesting question.

Speaking as a Canadian, I've always been sympathetic to the requirements for Canadian content. Broadcasters in this country take advantage of publicly owned broadcasting frequency, and I've always believed that if private companies were going to take advantage of, benefit from, and leverage with publicly owned property like broadcasting frequency, they should undoubtedly bear the onus and the obligation to give something back to Canadians. As a general rule, I'm certainly supportive of Canadian content requirements.

I would also add this. I don't know to what extent the members of the committee are familiar with the concept of simultaneous substitution. It essentially means that if a Canadian broadcaster acquires the rights to an American show, it ensures that everybody watching in Canada will see that Canadian broadcaster's advertisements. I think that is extremely sound legislation, and it's extremely sound practice because it really smacks of equity and fairness. If a Canadian broadcaster buys the rights to Friends, everybody should see that broadcaster's advertisements.

In summary, I support things like simultaneous substitution. I would expect that we would be subject to meeting those requirements. And as a general rule, I'm supportive of Canadian content requirements.

The Chair: Mr. Abbott.

Mr. Jim Abbott: This is to the issue of the passage of Bill C-48 immediately. The government position, as I understand it, is that if Bill C-48 is passed as it is presently written or with minor amendments, the issue of the Internet carve-out everybody has been talking about would come into effect. In other words, if there were a one-year moratorium on the whole issue, if there were regulations that were then underway, the argument of the government, as I understand it, is that this would effectively create an Internet carve-out. This would mean that because there were no regulations in place, you would not be able to go forward with your business model.

Mr. Handa, if I may, I'll ask you, as legal counsel for JumpTV--your client, Mr. Miller, will be able to advise you whether he wants you to answer--in your judgment, would the passage of Bill C-48 effectively be an Internet carve-out because there would be no regulations in place? Or if it is the intent of the government to create a temporary Internet carve-out, would it have to be contained explicitly within the legislation?

Á (1135)

Mr. Sunny Handa (Legal Counsel, JumpTV): I am authorized to answer.

Basically, we were brought into this process originally with the understanding that the regulations would be passed contemporaneously with Bill C-48, and that was essential for us. We had been through a very lengthy process with the Copyright Board and then through the consultation process for the bill. The fact of the matter is that a one-year moratorium, whether it supports Internet retransmission or not, is really not going to be of huge concern to us because a one-year moratorium at this point would do great harm to our business.

As to whether Bill C-48 should come out without the regulations, our position is very clear. We would like to see Bill C-48 come into force, but with the regulations. We were made these promises by the two ministries. We participated in the process in good faith, and at the very last minute, without any notice to us, we found that the carpet had been pulled out from under us, and we're not really sure why. All the sides seem to have agreed that the regulations were decent enough, as Mr. Miller has indicated.

Mr. Jim Abbott: But I need clarity, because this is absolutely germane. In your judgment as legal counsel, would you advise JumpTV that the legislation, minus the regulations, was an impediment to you being able to go forward, or would you be inclined to advise them to go forward anyway, because there is no explicit Internet carve-out?

Mr. Sunny Handa: No, absolutely I would advise with the former statement that the law without the regulations would serve as an impediment to him conducting his business as an Internet retransmitter. We feel that the regulations are essential.

We are a little bit troubled, because until now it has been a technology-neutral exemption that has been placed in the act without this sort of regulation-making power. This sort of regulation-making power takes it out of the hands of Parliament and really puts it into the hands of the government, and that is a little bit troubling to us at this stage in the game because we feel that we've been sort of yanked around a little bit and we're not sure why. We've always asked for a transparent process and to be part of that, and we're not convinced, to be honest, that any regulations will be forthcoming even after the suggested one-year moratorium.

The Chair: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: You allow your Internet users to access television signals. Do you feel that you're thereby infringing on the Copyright Act? No one has allowed you to do this. We heard testimony from the Canadian Recording Industry Association, the Canadian Motion Picture Distributors' Association, and the Canadian Film and Television Production Association, and they did not seem to... This morning, in answer to our questions, you said that you were ready to answer all queries and to accept any constraint that goes with the compulsory licence. But you are, as it were, asking all these associations to play a policing role, given the uncertainty of your offer.

With regard to advertising, you said that you were ready to pay the fees; you are also ready to broadcast Canadian content. Can you imagine what all these associations would have to do in order to monitor you and try to get paid for everything you use? I'm thinking about all the restrictions that were discussed this morning. You are alone on the territory, and all the others are there watching you at work. You say that you changed your approach and you are ready to provide all the guarantees that are asked of you, but you're asking them, in the same breath, to act as police officers while they watch you at work.

I'm trying to find a balance between all the guarantees you provided this morning and the expectations of those who are watching you and who risk having to forego their rights, if no constraints are applied.

[English]

Mr. Farrell Miller: First of all, I want to emphasize that we've only changed our position over the past year on one issue, and that's to say that we would eliminate the use of any banner advertising and we would become subscriber model. That has been our only change in position over the course of the past year and a half.

If you're asking about what guarantees we could give, we can give a guarantee that we would not engage in any online banner advertising, certainly to the extent that this is a controversial issue--guarantee no banner advertising; guarantee we would pay a fee, a copyright fee, for the right to retransmit this content. We would pay exactly the same fee as cable operators and satellite operators--exactly the same fee. So the way that producers and artists get paid through the system from the cable operators and the satellite operators, they would be paid from us the very same way.

I appreciate and I'm trying to be as sensitive as I can to your question, and I'm doing the best I can to answer you that these people would get compensated from us exactly the same way as they get compensated from cable operators, satellite operators, and wireless company operators. The difference is that we're not owned by Bell; we're not owned by Star Choice. We are not part of the media establishment. So I suggest to you that other than that, other than the fact that our technology is different from their technology, the fact remains that we're engaging in exactly the same activity.

I want to emphasize one point. This is not about whether JumpTV Canada gets to survive and engage in their business or not. We've been respectful of the process, we've participated over the past six months, and we've arrived collectively, with all parties involved, at draft regulations that I think everybody can live by, and it addressed all the concerns, certainly of our opponents.

Having said that, this is not about the life and death of JumpTV Canada. This is really about whether Canadian citizens, from British Columbia to Newfoundland, will have the ability, if they choose, will have the choice if they choose to do so, to be able to receive CBC taxpayer-sponsored network, whether they will have the choice to receive that through their broadband connection. That's what this is about.

Á (1140)

[Translation]

Ms. Christiane Gagnon: You asked the board to take your business plan into account so that your rates would be adapted to your situation. Did the business plan change over the past year, in view of the fact that you say you are now able to pay the same rates as the others? That raises some doubts about your first approach. After a year, you say that you are able to pay the same rate and be subject to all the obligations. Previously you said that you were in a different situation and you are now saying that you are able to do so.

[English]

Mr. Farrell Miller: Let me clarify. As I've said before, there's only one position we've changed, and that's the move from an advertising-supported business to a subscriber-supported business. There's only been one change. And the only reason why we made that change is to take into account the concerns some of our opponents had with respect to advertising online. So we were sensitive to their concerns and we made a change.

I also wanted to clarify that we actually never appeared before the Copyright Board. I wanted to make that clear. We had made a submission and then the submission was withdrawn. We thought it had become a moot point to appear before them, because if we were going to have subscribers like Star Choice or ExpressVu, then it seemed fair to us that if they paid 70¢ a subscriber, we should pay 70¢ a subscriber. We couldn't come to any other conclusion that we thought was fair and equitable.

[Translation]

Ms. Christiane Gagnon: You say that advertising is extremely important for you because it is a way to meet your financial obligations. So, you have subscribers, and you have advertising. If you drop the advertising, how would you be able to meet all your financial obligations? There are the financial obligations as well as the other ones. If you give up on advertising, you will be deprived of this revenue to meet your obligations. How would you be able to meet these obligations?

[English]

Mr. Farrell Miller: I want to make it very clear. I never said that advertising is important to us. On the contrary, it's not important to us at all, and our entire business model is based on subscriber base. So when you ask me how we can support ourselves as a business, I suggest to you we will support ourselves as a business the same way that satellite and cable operators support themselves as a business. And the way they support themselves as a business is by charging you $30 a month for service. The way we will support ourselves is we will also charge our subscribers $30 a month for service.

Á (1145)

The Chair: Mr. Miller and Mr. Handa, we appreciate your presence here. I know it's not easy to put out a different perspective on legislation, so you've made your position very clear and concise. Thank you very much for appearing here before us.

Mr. Jim Abbott: Mr. Chairman, I realize that you don't have a quorum here today, but I would like to go on the record as offering this question, and perhaps with this question get some action.

It seems to me that on this particular issue on Bill C-48, it might be helpful if we also had CBC make a presentation. Whether they have applied to the committee or not, it seems to me that if we've had the CAB and the other creators, and because CBC are creators as well as broadcasters, we as a committee might suggest to the CBC that their input would be of value.

The Chair: Mr. Abbott, as you know, we asked for all the parties here to suggest witnesses, and you'd have been very welcome to suggest the CBC. Nobody that I know suggested it when we requested it, and the CBC didn't ask to be invited. So we'll see what kinds of time slots we have, given the restriction of the House closure and so forth. Let me look into it with the clerk.

Mr. Jim Abbott: I would suspect that this having been brought up at committee might be reported back to the CBC.

The Chair: Yes. I see your point of view. It's a safe bet.

The meeting is adjourned.