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37th PARLIAMENT, 2nd SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Tuesday, November 26, 2002

0905

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

Mr. Kenneth Goldstein (Executive Vice-President and Chief Strategy Officer, CanWest Global Communications Corp.)

0910

0915

The Chair

Mr. Marc-François Bernier (Individual Presentation)

0920

0925

The Chair

Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance)

The Chair

Mr. Jim Abbott

The Chair

The Clerk of the Committee

Mr. Jim Abbott

Mr. Joseph Jackson (Committee Researcher)

Mr. Jim Abbott

Mr. Joseph Jackson

Mr. Jim Abbott

The Chair

Mr. Matthew Fraser (Individual Presentation)

0930

0935

0940

The Chair

Mr. Ian Morrison (Spokesperson, Friends of Canadian Broadcasting)

0945

0950

The Chair

Mr. Bernard Courtois (Executive Counsel, Bell Canada Enterprises)

The Chair

Mr. Alain Gourd (Group Executive Vice-President, General Service, Globemedia Inc., Bell Canada Enterprises)

0955

1000

The Chair

Ms. Elizabeth McDonald (President and Chief Executive Officer, Canadian Film and Television Production Association)

1005

The Chair

1010

Mr. Kenneth Goldstein

The Chair

Mr. Jim Abbott

Mr. Kenneth Goldstein

Mr. Jim Abbott

Mr. Kenneth Goldstein

The Chair

Mr. Jim Abbott

Mr. Ian Morrison

1015

The Chair

Mr. Matthew Fraser

The Chair

Ms. Jocelyne Girard-Bujold (Jonquière, BQ)

1020

Mr. Marc-François Bernier

Ms. Jocelyne Girard-Bujold

1025

The Chair

Mr. Marc-François Bernier

The Chair

Mr. Alain Gourd

The Chair

Mr. John Harvard (Charleswood—St. James—Assiniboia, Lib.)

1030

Mr. Matthew Fraser

Mr. John Harvard

Mr. Matthew Fraser

Mr. John Harvard

Mr. Matthew Fraser

Mr. Ian Morrison

1035

The Chair

Mr. Kenneth Goldstein

The Chair

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

Mr. Ian Morrison

Ms. Sarmite Bulte

Mr. Ian Morrison

1040

Ms. Sarmite Bulte

Mr. Ian Morrison

Ms. Sarmite Bulte

Mr. Ian Morrison

Mr. Matthew Fraser

The Chair

Mr. Marc-François Bernier

The Chair

Mr. Marc-François Bernier

1045

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

The Chair

Ms. Wendy Lill

The Chair

Mr. Kenneth Goldstein

1050

Ms. Wendy Lill

Mr. Kenneth Goldstein

The Chair

Mr. Matthew Fraser

The Chair

Mr. Marc-François Bernier

1055

The Chair

Mr. Alain Gourd

The Chair

Mr. Rodger Cuzner (Bras d'Or—Cape Breton, Lib.)

The Chair

Mr. Rodger Cuzner

The Chair

Mr. Rodger Cuzner

Mr. Kenneth Goldstein

1100

The Chair

Mr. Alain Gourd

The Chair

Mr. Marc-François Bernier

The Chair

Mr. Rodger Cuzner

Mr. Matthew Fraser

The Chair

Mrs. Betty Hinton (Kamloops, Thompson and Highland Valleys, Canadian Alliance)

1105

The Chair

Mr. Matthew Fraser

The Chair

Mr. Kenneth Goldstein

Mr. Alain Gourd

The Chair

Mr. John Harvard

Ms. Sarmite Bulte

The Chair

Mr. Marc-François Bernier

The Chair

Ms. Sarmite Bulte

1110

The Chair

Mr. Paul Bonwick (Simcoe—Grey, Lib.)

The Chair

Mr. Paul Bonwick

Mr. Alain Gourd

1115

Mr. Paul Bonwick

The Chair

Mr. Marc-François Bernier

The Chair

Mr. Kenneth Goldstein

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Marc-François Bernier

Mr. Alain Gourd

The Chair

1120

The Chair

Mr. Geoffrey Elliot (Vice-President for Corporate Affairs, CanWest Global Communications Corp.)

1130

1135

The Chair

Mr. Geoffrey Elliot

The Chair

Mr. Matthew Fraser

1140

1145

1150

The Chair

Mr. Bernard Courtois

1155

The Chair

Mr. Bernard Courtois

1200

The Chair

Mr. Bernard Courtois

The Chair

Ms. Elizabeth McDonald

The Chair

Ms. Elizabeth McDonald

1205

1210

The Chair

Mr. Jim Abbott

Ms. Elizabeth McDonald

Mr. Jim Abbott

1215

Mr. Geoffrey Elliot

The Chair

Mr. Matthew Fraser

1220

The Chair

Ms. Jocelyne Girard-Bujold

Mr. Geoffrey Elliot

Ms. Jocelyne Girard-Bujold

Mr. Geoffrey Elliot

Ms. Jocelyne Girard-Bujold

Mr. Alain Gourd

1225

Ms. Jocelyne Girard-Bujold

The Chair

Mr. John Harvard

1230

The Chair

Mr. John Harvard

Mr. Matthew Fraser

1235

The Chair

Mr. Alain Gourd

The Chair

Mr. Alain Gourd

The Chair

Mr. Alain Gourd

The Chair

Mr. Geoffrey Elliot

1240

The Chair

Ms. Elizabeth McDonald

1245

The Chair

Mr. Paul Bonwick

1250

Ms. Elizabeth McDonald

Mr. Paul Bonwick

Ms. Elizabeth McDonald

Mr. Paul Bonwick

The Chair

Mr. Paul Bonwick

The Chair

Mr. Paul Bonwick

The Chair

Mr. Bernard Courtois

1255

The Chair

Mr. Matthew Fraser

Mr. Alain Gourd

The Chair

Ms. Wendy Lill

1300

The Vice-Chair (Mr. Paul Bonwick)

Mr. Geoffrey Elliot

The Vice-Chair (Mr. Paul Bonwick)

Mr. Matthew Fraser

1305

The Vice-Chair (Mr. Paul Bonwick)

Mr. Alain Gourd

The Vice-Chair (Mr. Paul Bonwick)

CANADA

Standing Committee on Canadian Heritage

NUMBER 005

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, November 26, 2002

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I'd like to declare open the meeting of the Standing Committee on Canadian Heritage.

[Translation]

The Standing Committee on Canadian Heritage is meeting today pursuant to Standing Order 108(2), to resume its study on the state of the Canadian broadcasting system.

[English]

I would like to mention to our guests that I was just informed that today 36 committees of the House are sitting, so members are all over the place. If we manage to get a quorum of members for a short while, we might have to interrupt to deal with a couple of motions, one relating to our operating budget, which has to be filed by noon today in order to be received on time. Otherwise, we won't have any money to function. So you will bear with us. I ask you also to bear with us if you find that the numbers are thin in our ranks on both sides of the House for the reason I explained.

I would like to greet the witnesses for our first panel on cross-media ownership: from CanWest Global Communications, Mr. Kenneth Goldstein, executive vice-president and chief strategy officer, and Mr. Geoffrey Elliot, vice-president of corporate affairs; in an individual capacity, Monsieur Marc-François Bernier, professor at the Université d'Ottawa, and Mr. Matthew Fraser, professor of communications, Ryerson University; from Friends of Canadian Broadcasting, Mr. Ian Morrison as spokesperson; from BCE-Bell Canada Enterprises, Monsieur Bernard Courtois, executive counsel, and Monsieur Alain Gourd, executive vice-president of Bell Globemedia; from the Canadian Film and Television Production Association, Ms. Elizabeth McDonald, president and chief executive officer, and Mr. Guy Mayson, senior vice-president, operations and members'services.

Welcome to all.

Mr. Goldstein, I will ask you to lead off, please.

Mr. Kenneth Goldstein (Executive Vice-President and Chief Strategy Officer, CanWest Global Communications Corp.): Thank you, Mr. Chairman, and good morning, members of the committee and staff.

The issue of cross-media ownership is often linked to another issue, namely the so-called concentration of media. In order to place all of this in context, let me touch briefly on this linked issue.

To put it as succinctly as possible, the argument that there is media concentration in Canada in 2002 is one of the first great myths of the 21st century. The media concentration argument is based on a false statistical premise: that the market share of a company within a particular medium can be considered in a vacuum, without relating the medium to other media or to the overall size of the population or to the households that are served.

I have given the clerk a copy of a little background report. Unfortunately, it's only in English; when it is translated, you'll all have it. I'll make very brief reference to it here.

In 1950 Canada had 95 daily newspapers and 150 radio stations. There was no Canadian television, and of course there was no cable, no satellite, and no Internet. Today Canadians can choose from a combined total of 1,401 Canadian daily newspapers, radio stations, and television services. Of the 102 daily newspapers in Canada today, CanWest has 17. It is the largest group by circulation. But its combined circulation is equivalent to only 12.9% of the households in Canada. This percentage is lower than the similar percentage for the largest newspaper group in Canada in 1950. In radio the share of tuning for the largest group is under 17%, according to the CRTC. And according to the CRTC, the television tuning shares among anglophones are about 18% for CTV, and just under 15% for Global.

In other words, the statistical analysis indicates that the concentration that has been claimed by some simply does not exist.

Now I'd like to turn to the specific questions the committee has set out on cross-media ownership. I'd like to commend the committee for clearly stating, at the outset, that these questions are to be considered “within the context of its study of the Canadian broadcasting system”. I will adhere to the spirit of that instruction. Here are the questions and my answers.

What do recent trends in Canadian media ownership suggest? They indicate that Canadian media are attempting to counter the effects of fragmentation by re-aggregating fragments in order to maintain economies of scale. As the statistics make clear, however, re-aggregated fragments rarely yield the same market shares that single outlets had in the past.

Is it possible to foresee particular changes in the near future? In the near future, two developments are likely. First, there will be fine-tuning of asset portfolios, as properties deemed to be non-core by some media companies are sold. Second, the hard work of implementing new operating systems is still under way. This work in progress will continue.

Does cross-media ownership affect the expression of diverse opinions? No, it does not. There is nothing in the structure of cross-media ownership that has any structural impact on the expression of diverse opinions. It is a matter of corporate culture—not a matter of corporate structure. I would note, however, that Global has made an important contribution to diversity by launching the Global National newscast with Kevin Newman. It increased the number of national television news voices in Canada from three to four. We are, of course, pleased that Global National now ranks second among these newscasts.

Have changes in Canadian media ownership affected editorial independence? No. Global's broadcasting properties still have their own news directors who select and plan their newscasts according to their own local or national needs. Again, there is no structural link between cross-media ownership and how editorial matters are handled.

The economic consequences of cross-media ownership.... The focus of this question deals with promotion. If what is meant here is that cross-promotion is used by different media in the same ownership group, then this is obviously the case. It is a practice followed by virtually all media—CBC television and radio, CTV, the Globe and Mail, Global, and the National Post, and so on. However, this does not bar media from advertising in other media; nor does it preclude joint promotions that cross ownership lines.

¿ (0910)

Lessons from outside Canada.... Do you foresee a move to de-convergence? No. There will be continued fine-tuning of asset portfolios and operating systems, but convergence isn't going away. It is not going away, for reasons of economies of scale—and for a very important additional reason. The consumers of tomorrow, the Internet generation, are multi-media consumers. We have to be ready to serve these consumers.

What lessons are there for Canadian media firms? In some cases, Canadian firms are ahead; in other cases, firms in other countries are ahead. Of course, we are monitoring developments from all over the world.

What should the federal government be doing? What can the federal government do? I will answer these last two questions together. The federal government should be doing two things. First, it should continue along the path of copyright reform, and consider even accelerating that process, because copyright will be fundamental to everything that broadcasters do.

Second, the federal government should focus regulatory efforts on the key issues that will determine the playing field for Canadian television in the next decade. These include, but are not limited to, priority carriage for Canadian services in a digital environment, standards for set-top boxes, and fair access to electronic program guides.

Finally, let me note that something very important is at stake in your deliberations. Canada is a large country, but a small market. The total revenue from all sources of the entire Canadian media industry is about the same size as three or four months' revenue for AOL Time Warner, or six or seven months' revenue for Viacom.

Cross-media ownership is about adding value and improving quality to ensure there are Canadian voices in an increasingly borderless media market. If we artificially chop the Canadian media market into uneconomic pieces, then Canadian media will not be able to compete with the media from everywhere that will be coming into Canada. This will ultimately lead to a reduced ability to tell Canadian stories to Canadians, and to the world.

Thank you.

¿ (0915)

The Chair: Thank you, Mr. Goldstein.

Mr. Bernier.

[Translation]

Mr. Marc-François Bernier (Individual Presentation): I would like to thank you for this opportunity to talk to you for what is, after all, a brief time, about the impact of convergence and, indirectly, the concentration of the press on the quality and diversity of journalism. This concept of quality journalism, I should point out, is not elitist in any way. It is deeply embedded in North American customs.

Essentially, this is about serving the public interest, respecting privacy and now, more and more, about an obligation to the truth, accuracy, to equity and integrity. In some instances, partiality is evident in factual reportage. In a nutshell, these are the basic notions of journalism.

Over the next few minutes, I'm going to focus on one or two questions that pertain to the questionnaire that you gave us.

First of all, if we look at cross-ownership in Canada from the economic view point alone, we must acknowledge that, in some instances, it has proven to be a very costly strategy for shareholders, given that the value of shares has dropped radically, particularly in the case of Quebecor. Others have opted for another convergence strategy, opting for strategic alliances rather than acquisitions and mergers. These are the strategies retained by Transcontinental Media, in Quebec, and Gesca of Power Corp. Group in particular. Rather than going the acquisition route, they decided to enter into strategic alliances with various content providers or platform providers.

As a professor of journalism, I am particularly interested in the impact of convergence on the quality of the press and information. Convergence, or, put another way, concentration, generally creates—and this has been borne out by several studies—a form of growing pressure to make content compatible with the business plans of the conglomerates.

Under these circumstances, journalists are strongly encouraged to bear their employers' interests in mind rather than concern themselves first and foremost with serving the public. I am not claiming that this is the case, but in my opinion, these journalists are encouraged to be first and foremost good employees rather than good servants of the public. This often puts them in situations where there's a conflict of loyalty or a conflict of interest between the company and the public that they are to be serving, given that certain significant truths may hurt the interests of either the corporation or the owner.

In the United States, research has been conducted which shores up certain arguments; I will therefore send you a more complete document in a few weeks which will include biographical references, of course.

In Quebec in particular, we have seen the extent to which this type of convergence has taken hold. At Quebecor, for example, the cross-promotion of Quebecor services or products has gone well beyond the parameters of advertising and we find it increasingly in news bulletins. On television we often see news stories or pseudo-stories promoting the content of TVA and Quebecor Group entertainment programs. We see the same thing in the Quebecor newspapers, which in turn promote the TVA programs.

As a person who spent several years working as a journalist for Quebecor, I know that the tradition is well established. The rule back then was that news which was favourable to Quebecor was always to be presented on the first page; the layout had to be flattering and the message well conveyed. Unfavourable news, if printed at all, was to be placed somewhere inside the paper.

Recently, an employee working for Canoe, Quebecor's Internet site, told me that he had his fingers severely rapped by a senior manager of Quebecor because information unfavourable to Videotron had been broadcast on the website, Videotron being this huge Quebec cable operator that also belongs to Quebecor.

Then there is the example of the newspaper La Presse which is, in Quebec, Gesca's largest newspaper. In November 2000, we witnessed a somewhat suspicious impact of concentration and competition. Concentration was being hotly debated at a meeting of the Fédération professionnelle des journalistes, in November 2000, which resulted in many interesting exchanges. The report which appeared the following day in La Presse reflected the spirit of the debate; however, the title read as follows: “Competition makes concentration of the press indispensable”.

¿ (0920)

The title mirrored the opinion of La Presse's boss alone, since all of the other interveners in the room were opposed to that, including Mr. Claude Ryan.

I would invite the members of the committee to be cautious as well about what we could refer to as this pretence of diversity in information, with the arrival of the Internet. The advent of the Internet has not resulted in new, original sources of information but rather, and we see this happening more and more often, new ways of multiplying the same information, using some platforms less often and making such information more accessible but without there being really any diversity. Instead of having real diversity, we hear the same information repeated over and over and over again. Check out the new media to determine how many journalists really go out in the field in order to cover events: there aren't any or if there are, they are few in number. They simply take the content provided by the traditional media and rebroadcast it in a different way over the Internet while at the same time providing advertising in an effort to make a profit, something that the Internet is not always able to do. The profitability of Internet sites has yet to be proven.

To conclude, I would like you to understand that convergence and concentration are not the only threats to the quality of journalism. The culture of journalism also has numerous flaws and failings, particularly when it comes to its lack of rigour or equity, or yet again its inability to process information in an in-depth fashion. So we can't blame everything on convergence and concentration, but these phenomena are being added to the risk that exists already or which is weighing down on the quality of information. One scenario that we should consider is that, in the long term, this will hurt the social legitimacy of journalism and its credibility.

American studies demonstrate that the public support of the freedom of the press varies in accordance with its perception of the quality and integrity of the work done by journalists. The public is growing increasingly suspicious about self-interest when it comes to journalists or media corporations. Both the American and Canadian public—although there are not as many studies on this particular issue—is becoming increasingly suspicious about the media's mission of public service. The public has grasped the fact that the media had now become big conglomerates, huge political and economical institutions.

I think that it would be difficult to turn the hands back on the clock, to the days when there was no convergence, but, basically, what we need to do, what a government could do if it were unable to restore the situation, would at least be to establish some parameters or force these big conglomerates to develop some journalism accountability mechanisms, provide ombudsmen, develop codes of conduct and strengthen the transparency and accountability of the media to take into account the growth in concentration and convergence.

We also have to think about public interest in such a scenario. We cannot go so far as to intervene in the way that the newsroom operates, but we can compel the media companies to discipline themselves. They must do this. This is occurring in the United States and many are doing this. This model should be developed in Canada with credible ombudsmen, press advisory boards, codes of ethics. These are self-regulating mechanisms that are quite in keeping with the economic and political liberalism of our democratic societies.

Thank you for your attention.

¿ (0925)

The Chair: Thank you very much, Mr. Bernier.

Before continuing,

[English]

I would like to ask the indulgence of the witnesses for just a few minutes, because we have a quorum right now and we have to get our budget passed by 12 o'clock today.

I should mention to members that the second item, number two, contains details of contracts that have already been passed by the committee, so we can't go back on them; they have already been passed.

Yes.

Mr. Jim Abbott (Kootenay—Columbia, Canadian Alliance): I have three quick questions.

Number one, I have to assume that the international travel that we're contemplating is in another budget.

The Chair: That's correct, yes.

Mr. Jim Abbott: The second thing is that I don't see any detail of our expert's fees here.

The Chair: Could you explain it?

The Clerk of the Committee: They come from a different budget.

Mr. Jim Abbott: All right.

The third thing is I wonder if we could have a little clarification on the $83,000 on reports. How do we arrive at $83,000?

Mr. Joseph Jackson (Committee Researcher): When we discussed the reports last week--you weren't in fact present at the time--we noted that there are three categories of reports. There's a category A, which is just black and white; there's a category B, which might have a colour cover and is black and white; and there's a category C, which would allow for a more graphic design, to have at least one or two colours put in the report, colour photos and so forth. So at the time we discussed the various options and the committee agreed that the category C report would be the approach that was most appropriate for this particular report.

Mr. Jim Abbott: And this is for the printing and binding?

Mr. Joseph Jackson: This is the printing cost for that number of copies. Of course, if one changes the number of copies, the price changes accordingly.

Mr. Jim Abbott: Okay, thank you.

The Chair: I would like to have a motion that the committee adopt an operational budget for the period of November 2002 to March 31, 2003. This is moved by Mr. Harvard.

(Motion agreed to)

The Chair: There's just one last item. Tomorrow we have witnesses from the Northern Native Broadcast Access Program, and we are holding a reception for them. We have to have a budget for the cheeses and cocktails of $436.29. This is what this is about. Is somebody ready to move it? Mr. Bonwick.

(Motion agreed to)

The Chair: Sorry for the delay.

I would now like to ask Mr. Fraser to speak.

Mr. Matthew Fraser (Individual Presentation): Thank you, Mr. Chairman.

Let me start off with a statement that some of you might find provocative: I really don't believe cross-ownership is an issue. My nervous system is not fixed on the issue of cross-ownership, and I don't believe yours should be. Cross-ownership is a fact. We have it.

Foreign ownership, which we'll be discussing later today, is a much more stimulating issue. I'll have many things to say about it.

Cross-ownership really is a debate about its effects, because it already exists. We should remind ourselves that governments want cross-ownership. The Congress in the United States decreed cross-ownership in 1996, with a telecommunications act, which ordered the FCC, the regulator, to deregulate ownership restrictions in the United States. In Canada, the federal government issued its convergence policy in 1996, which also made cross-ownership official. We sometimes call cross-ownership convergence. They are really the same thing. It's about media companies investing in new market segments in order to bundle different kinds of services.

We should remind ourselves that cross-ownership is unlike foreign ownership. We do not have foreign ownership control in Canada. But cross-ownership is a fact. We have it. We're really debating its effects.

Some examples of cross-ownership that are familiar to all of us in Canada are Rogers, which is in cable TV, mobile phones, radio, television, magazines, specialty TV channels, sports franchises, like the Toronto Blue Jays, and web access. BCE Inc., with Bell Canada, is in the phone business, mobile phones, and web access, and owns the Globe and Mail, CTV Television Network, ExpressVu , and many other services.

In the United States, just to mention one company, AOL Time Warner has 13 million cable TV subscribers. If you consider that Ted Rogers has 2 million, this will give you some perspective of the size of these companies in the United States. Time Warner owns a television network called the WB Network. As you know, it owns CNN. It owns Time magazine, People magazine, Sports Illustrated, Home Box Office, Warner Brothers—a Hollywood movie studio—Warner Music Group, and, of course, AOL.

Media cross-ownership is a fact. It is with us. What we're debating is whether it is good for society.

I would submit—and I think we would all agree—that the debate about cross-ownership tends to be twofold. First of all, it is a debate about its economic effects, which is largely a debate about competition. Second, we debate its social effects, which, I would submit, is largely a debate about pluralism, or what is often called diversity today.

Let's begin with the economic debate about media cross-ownership. The view is that convergence, or cross-ownership, causes media concentration—in other words, that it reduces competition. We have monopolies or oligopolies. Why is this bad? There are two reasons, I would suggest. One is that it encourages abusive dominant positions by large-scale media companies. Big companies tend to drive out small companies, it is argued. Also, we see strategies of horizontal integration; in other words, companies are moving horizontally to take over other companies in the same business, to achieve economies of scope.

We have one example of a vertically integrated company in Bell BCE, Inc., and an example of a horizontally integrated company in CanWest Global.

This is the first response as to why it is bad. The second response is vertical integration, which encourages media companies to self-deal, or to favour their own. For example, it could be argued that because Rogers owns a television channel called Sportsnet and the Toronto Blue Jays, it would tend to favour offering Blue Jays games on Sportsnet—and not offer Blue Jays rights to Sportsnet's competitor, The Sports Network, which is owned by CTV, or Bell Canada. This is one of the concerns, that media concentration encourages vertical integration, which encourages self-dealing.

¿ (0930)

Why is convergence, concentration, or cross-ownership good? There are two reasons. It encourages what economists call “efficiency gains”, economies of scale and scope. In other words, creating big companies--in Canada, we call them industrial champions--allows the companies to achieve economies of scale and scope and to invest in media products. I think Ken Goldstein was essentially making this argument a few minutes ago.

The second reason why cross-ownership is good is cross-ownership or big media companies can sometimes be innovative. We see a diversity of the product range. A very good example is HBO in the United States. I think most people agree that some of the best television on American television today comes from HBO. There are The Sopranos and Sex and the City. I'm trying to think of a few of the other programs, but HBO really is where good American television is being made.

HBO is owned by AOL Time Warner, one of the biggest media companies in the world. It is not a small, independent outfit. Big companies can actually encourage economic efficiencies and cultural efficiencies. Some of the most innovative and creative television and book publishing happen inside huge media conglomerates because small companies, unfortunately, cannot achieve the same kinds of efficiencies.

Now, let's turn to the second issue, which I think is the most controversial one, on the social questions around media cross-ownership. Most of the debate has been focused on the question of pluralism or diversity. In Canada, as we all know, we've had a debate about newspaper concentration with CanWest Global and Izzy Asper. I think it's one of the reasons we are discussing this issue today.

It's a strongly ideological debate, and, interestingly, seems to unite libertarians and Marxists on the same side against so-called “big media”. The focus has tended to be on the newspaper-TV cross-ownership issue, although cross-ownership does not exclusively involve TV and newspapers.

Here is a quick history. In the United States in 1975, the Federal Communications Commission, the FCC, banned TV-newspaper cross-ownership. The rationale was based on a dual notion of diversity. One reason was that the ban would promote diversity of ownership in the industry. The second reason was that the ban would promote diversity of viewpoints in the American media industries, notably in television and newspapers.

Interestingly, the FCC gave all kinds of waivers to its ban. In other words, the ban was prospective. In existing companies, where there already was a TV-newspaper cross-ownership arrangement in a single city, the FCC issued something like 29 waivers. The Tribune, a big American company in both those businesses, got a number of waivers. We all know who Rupert Murdock is. He owned a newspaper and TV station in New York and in Boston, I believe, and he too got a waiver.

The American policy, dating to 1975, although it was fairly strict, was weakened in its impact by the issuance of permanent waivers to a number of large-scale media companies.

Then, of course, as I noted, in 1996, with the Telecommunications Act in the United States, Congress ordered the FCC to deregulate its cross-ownership rules. It was silent on the TV-newspaper ban, interestingly, but the FCC got the message.

As you know, this year the FCC is moving with alacrity to deregulate the TV-newspaper cross-ownership ban. The debate is going on right now in Washington and is in the American newspapers. Every indication is that the FCC, under Michael Power, a Republican-appointed chairman, is going to deregulate the cross-ownership ban in the United States.

In Canada, our tradition has been largely case by case. I think it's fair to say that the CRTC has been relatively indulgent towards cross-ownership. There was one complaint about London, Ontario, where the Blackburn family owned a newspaper and a television station. I believe that in 1984 the CRTC ruled there was no evidence of undue concentration in that particular local market.

In 1994 Ted Rogers bought Maclean Hunter, a big publishing empire, with CRTC approval. Then the real debate emerged in 2000-2001, when CanWest merged with Hollinger, and of course BCE bought CTV and The Globe and Mail. The issue really came on the table again in a big way. The debate has largely been around the diversity of viewpoints--in other words, editorial independence.

¿ (0935)

We'll probably get into that in questions, but I'll just submit, very briefly, that I think the whole editorial independence issue is a red herring. Editorial independence is something that exists in theory but not in practice.

You simply have to go to the United Kingdom or France or most European countries and you will know that all newspapers take very strong and strident editorial positions, which are dictated by their proprietors. It's the same thing in Canada and the United States. It's the same thing at TheToronto Star, for example, whose editorial line is dictated by the so-called “Atkinson principles”. There has been a debate about CanWest Global. I'll let the CanWest Global executive speak to that. But I would submit it's a red herring, although it's certainly worth debating.

On the diversity issue in general, I would invite the committee members to come to Ryerson, where I teach, and speak to my students, who are 18, 19, 20, 21, and 22 years old, and ask them how they consume media. I think most of this debate really is generational, and I would include myself, at 44, in the older generation. The elites today tend to be of that generation and older.

We tend to debate this issue through the optic or the prism of our own experience. We can recall the Davey commission and the Kent commission. We should have people in this room who are 25 and under and ask them how they consume media. They do not turn to The Globe and Mail for their main sources. They don't read the National Post. They don't necessarily watch the CBC news. They're on the web. They're consulting all of these media organs in a very splintered way. They multi-task. They go to cnn.com. They go to cbc.ca. They might go to nationalpost.com. Or they're doing their homework while they're watching the news.

Young people consume media in a very different way. This generation will be the elite of tomorrow. I think we have to take into consideration the media consumption patterns of the younger generation, not only consider how we, ourselves, in the middle-age group and older consume media.

They can consume media in that way because there is a huge diversity of media. We no longer live in an era of press barons, where one British press baron can command and shape opinion, maybe in the way The Globe and Mail did a generation ago. We live in the 500-channel universe. The Internet has.... I can go on to Le Monde and read Le Monde on the web tomorrow. I can consult with The Guardian in the United Kingdom--many newspapers. We have a diversity thanks to technology.

When you consider that 20 years ago regulations that seemed legitimate then are no longer legitimate because we can actually question their rationale. The rationale always, inevitably, if you look at the literature, was the so-called “scarcity” rationale. Spectrum was scarce.The television spectrum was scarce. We only had four or five television networks. Newspapers were scarce. There was one newspaper shaping public opinion. We no longer are living in an era of scarcity.

I would conclude that today, the so-called scarcity rationale no longer animates the diversity principle. I would add as an addendum that there is some role for governments to correct market failures. There, I would say, we should maybe think about turning to competition law, the Competition Bureau in Canada.

In the United States, as you know, the Department of Justice and anti-trust officials are extremely aggressive about policing market failures such as vertical integration or undue market dominance. In Canada, fortunately--I suppose it's debate for another day--we don't have the same tradition. We don't have the same institutional vigour. We don't have the same kinds of statutes that give our institutions the same kind of legitimacy to go after market failures.

As I say, the CRTC has been relatively indulgent. But we do have a Competition Bureau and we do have a Competition Act. We have competition law. I think we should turn there to policing and putting in place safeguards such as undue market abuse and abuses that come from vertical integration.

Thank you.

¿ (0940)

The Chair: Thank you very much, Mr. Fraser.

Mr. Morrison.

Mr. Ian Morrison (Spokesperson, Friends of Canadian Broadcasting): I would begin by saying, “And now for something completely differen”.

[Translation]

Mr. Chairman and members of the committee, thank you for inviting the Friends of Canadian Broadcasting to take part in this round table on cross-media ownership.

[English]

The Broadcasting Act provides a frame of reference for our discussion today:

3(1)(i) the programming provided by the Canadian broadcasting system should

(i) be varied and comprehensive

(iv) provide a reasonable opportunity for the public to be exposed to the expression of differing views on matters of public concern

If fewer journalists cover events and the influence of their perspectives and opinions extends further through integration of television and newspaper newsrooms, the public's access to differing views will inevitably suffer. Of course, as powerful owners press a shrinking pool of journalists to pump out work for all their different platforms, two things will happen: the quality of the work will suffer and fewer journalists will be prepared to stand up to the owners as the number of doors to knock on diminishes.

Where cross-media ownership is permitted, the owners should be required to maintain separate news gathering between their television licensees and the newspapers in which they have a financial interest.

We note that the Canadian Association of Broadcasters is not present this morning. As I'm confident that you would have welcomed a CAB appearance on a topic like this, and knowing their interest in your committee's work, their non-appearance suggests to me that their members, of whom only two are here today, do not have a common position on this topic. While we do not know what the CAB's members think about concentration and cross-ownership, we do know what the public thinks.

You may recall that Friends of Canadian Broadcasting shared with you the results of an Ipsos-Reid poll some months ago. We commissioned that poll on media issues. I want to remind you of Canadians' views on concentration and cross-ownership, expressed in their responses when Ipsos-Reid posed the following question:

As you may know, there has been some discussion about increased concentration in the media. For example, Bell Canada Enterprises now owns The Globe and Mail and the CTV Network, while CanWest Global owns many television stations and newspapers, including the National Post. Quebecor now owns TVA, Vidéotron and several daily newspapers. Given this, do you strongly agree, somewhat agree, somewhat disagree, or strongly disagree with the following statements:

Owners of Canada's media have gone too far in trying to inject their own personal political opinions into what their medial outlets say and what they report.

78% of Canadians agreed with that statement.

Media concentration undermines the health of Canada's democracy.

68% of Canadians agree.

There is too much media concentration in Canada.

62% of Canadians agree.

As you may know, the United Kingdom government has undertaken a review of communications policy over the past year, including a white paper, public hearings by a joint committee of both Houses of Parliament, and recently the introduction of a revised communications bill. I say recently, but it was one week ago. Here's what the joint committee of the House of Commons and the House of Lords had to say about concentration and cross-ownership:

Media ownership restrictions are in place to act as a bulwark for plurality in media. Plurality is seen as being important for three reasons:

it ensures that no individual or corporation has the power to limit the freedom of expression of opinion in an industry which is central to the democratic process;

it should secure a plurality of sources of news and opinion and prevent the information agenda being slanted in a particular direction; and

it helps to maintain cultural diversity and vitality.

That's a direct quote. It's referenced in the document we've tabled, Mr. Chair.

The policy document accompanying the draft bill--and we've brought copies of this policy document to share with you--expresses the U.K. government's view that:

Competition law alone is not sufficient. It can address issues of concentration, efficiency and choice, but it cannot guarantee that a significant number of different media voices will continue to be heard, and it cannot address concerns over editorial freedom or community voice.

¿ (0945)

The British government has therefore decided that no one controlling more than 20% of the national newspaper market may hold any licence for channel 3, or hold more than a 20% stake in any channel 3 service. No one owning a regional channel 3 licence may own more than 20% of the local regional newspaper market in the same region.

On channel 3, you would have heard of ITV, as it used to be known. It is the mechanism in the U.K. that is widely accessible to the population nationally and regionally, with a public service mandate but private sector ownership. It is broadly equivalent to what we would call major media organizations in television, like TVA, CanWest, and CTV.

We believe the British government's rationale for this new cross-ownership policy is instructive for your committee's work. In notes accompanying the new communications bill, which we've tabled with you, the government states that the new rules place

...limits on the market at key points to ensure plurality of voice at national, regional and local level. In particular, it is felt that significant joint ownership of newspapers (the most editorially influential medium) and channel 3...would dilute plurality to an unacceptable extent.

[Translation]

Therefore, why not adopt the 20-20 rule for Canada? What do you think? The members of our organization are asking you to take a sympathetic view of this new British policy. Thank you, Mr. Chairman.

¿ (0950)

[English]

The Chair: Merci, Monsieur Morrison.

I would like to turn to Bell Canada Enterprises, Mr. Courtois.

[Translation]

Mr. Bernard Courtois (Executive Counsel, Bell Canada Enterprises): Thank you Mr. Chairman. Mr. Gourd will be speaking for us on this first subject. Both of us are prepared to answer your questions. When we deal with the second item, that is to say, foreign ownership, our roles will be reversed.

[English]

The Chair: Mr. Gourd.

[Translation]

Mr. Alain Gourd (Group Executive Vice-President, General Service, Globemedia Inc., Bell Canada Enterprises): Thank you, Mr. Chairman. Why are we concerned about cross-media ownership?

I believe that these concerns relate to transactions that have been for the most part approved by the CRTC. One might of course mention the consultation within Bell Globemedia, CTV and The Globe and Mail. And the consolidation within Quebecor Media, the largest cable distribution company in Quebec, Vidéotron, the number one television station and network, TVA, and the main newspapers, Le Journal de Montréal and Le Journal de Québec, also come to mind. And we must not forget the acquisition of the Hollinger chain of newspapers by CanWest Global.

Moreover, I feel that there is another type of transaction that might help to shed some light on the issue of cross-media ownership, and it does not involve a cross-ownership transaction. I am alluding to the bringing together within a medium, the print medium, of a large number of dailies by a single corporation, but that issue is separate from cross-media ownership, and I am referring to the concentration within a single medium.

The transactions to which I have referred are not sui generis. They did not simply happen one day in isolation as opposed to the rest of the world. We all know that to a great extent they were inspired by cross-border transactions. Take, for example, AOL Time Warner and Vivendi. When it comes to involvement in content, in the distribution of content, there are telephone companies such as BCE, AT&T, with its attempt to penetrate the cable industry and, in Europe, Telephonica.

As we told this committee last May, the forces that were felt throughout the world and in Canada, and that have given rise to these transactions are still with us. Take for example digital technology, which continues to evolve. We are now moving from digital technology in broadcasting to the use of this technology on the Internet in support of broadcasting activities; the Internet is even being used to carry products between Vancouver and Toronto. It is a more practical way of doing things than relying on the satellites, for example, when we want to take a product from Halifax and carry it on the CTV network.

And, of course, there is increased competition—and I will come back to that— as well as continuing globalization. However, we don't yet know how this will end because, on the one hand, there are transactions that are somewhat worrisome, such as the evolution of AOL Time Warner, in terms of a drop in the value of the shares as well as financial difficulties.

There is also the Vivendi Group, which makes the headlines almost daily. In this case, I think it is less a question of deconvergence and more a matter of selling off whatever assets they can in order to reduce their debt. I don't see any strategy to reduce convergence in that case. Rather, I think financial pressures are forcing them to make the most on whatever they can manage to sell.

[English]

On the other hand, many of the companies I have mentioned continue to pursue their cross-media business initiative. Again I can refer to AOL Time Warner, which continues to move forward with new services in an attempt to find a successful business model. On a smaller scale, there are numerous activities around the world that are focused on implementing practical, concrete, cross-media applications.

By way of illustration, at a conference earlier this month in the U.S., several newspaper companies outlined their experiences using websites to attract young readers--as you mentioned, Matthew and others--who generally do not read newspapers.

I guess one of the major preoccupations is relative to a perception that increasing cross-media ownership has led to a reduction in the Canadian media voices that can speak to issues of public concern. This has not happened, however. In fact, Canadians currently have many more media services to choose from in a variety of sources than at any time in the country's history, and those services are owned by a record number of different organizations.

As evidence of that, I would like to refer to a CRTC process that started two years ago to initiate an annual report on development and trends in the broadcasting industry entitled Broadcast Policy Monitoring Report. The most recent edition was released last week, on November 20.

The commission addressed the issue of the diversity of voices in detail, by examining numerous indicators over a period in which there has been an increase in the number of Canadian companies with ownership in more than one medium. The commission nevertheless found that “From 1991 to 2001, both the number of stations and number of owners of television stations in key Canadian markets have risen significantly.”

Where are the data that support the CRTC's findings? Let's look, to begin with, at the Toronto market. The Kent commission examined media concentration in the early 1980s. At that time, there were fewer than a dozen independent Canadian providers of news and information programming. These consisted of the CBC and two of its privately owned affiliates; two CTV affiliates; as well as Canadian stations operated by CHUM, Global, CHCH, and TVO; and an ethnic television service, CFMT. In addition, the three U.S. TV networks, ABC, NBC, and CBS, were present in the market.

By 2002, the number of sources of news and information programming had increased significantly. CRTC data indicate that in Toronto, for example, consumers can choose from a significant number of services available from either cable or DDH providers. They continue to have access, of course, to CTV, CBC, CHUM, Global, TVO, and CFMT, and can also receive the signal of a new English-Canadian conventional station, Crossroads Television Services. The commission has recently issued two new conventional licences in Toronto to Rogers, which was already in the market, and to a newcomer, Craig.

In addition, consumers are offered a wide-ranging selection of Canadian specialty services aimed at serving niche news and information programming markets. For example, Torontonians now have access around the clock to all kinds of news provided by Newsworld, CTV NewsNet, CPAC, and cable Pulse 24. They can receive specialized business use from ROBTv; sports news from TSN, Sportsnet and The Score; as well as ethnic information programming services, like Telelatino, Fairchild, and Asian TV. The perspective of Canada's aboriginal people can be found on APTN.

¿ (0955)

[Translation]

There is a similar progression in the francophone market. In 1982, for example, there were basically three news services for francophone viewers. Radio-Canada, Télémétropole (TVA) and Radio-Québec.

In 2002, this figure has increased significantly. Besides TVA, which now offers LCN, and Radio-Canada, which provides RDI, we now have Télé-Québec, the new version of Radio-Québec, TQS, and the French TVOntario network, TFO, by satellite, the Canal Vox community channel, Téléuniversité and le Canal Savoir, the international TV5 service, and many other specialized services including Astral and Canal Vie, which all provide news in one form or another.

À (1000)

[English]

When one includes radio, newspapers, and the diverse voices available via the Internet, the range of independent sources available, to my mind, is truly impressive. Canadians are the direct beneficiaries of these trends. They have many more media services than ever before, and those services are provided by a wide range of ownership interests--in fact, a range that is the highest in the country's history.

As well, the major media companies that have embarked on cross-media incentives--BCE, Bell Globemedia, Global, Quebecor Media, Rogers, and Shaw--are trying to develop new ways to gather and present news and information to Canadians, which would not be possible without cross-media ownership.

One example I can offer from our own experience at Bell Globemedia is foreign bureaus. By putting resources together, we can provide access, particularly to the Globe and Mail, to many more foreign bureaus than would be possible otherwise.

[Translation]

So we believe that the current regulatory framework is sensitive to these issues, since it allowed for the application of a mechanism like ours, namely, a committee to monitor editorial independence in the media; this is something that we are now doing and which ensures editorial independence.

Furthermore, we believe that our news and information services, both television as well as print, must be encouraged to work in synergy with their market, their citizens and viewers, without taking orders from headquarters in Toronto.

Finally, we believe that progress will occur through collocation and encouraging the natural progression of our common efforts. What is clear is that this will not come about through the centralization of the Bell Globemedia corporate policies.

As the saying goes, “may a thousand flowers bloom”; then we will be able to progress and ensure a wealth of exchanges among the various media.

Thank you.

The Chair: Thank you very much.

[English]

I'd like to allow 45 minutes for members to ask questions, Mrs. McDonald, so please finish by 10:15.

Ms. Elizabeth McDonald (President and Chief Executive Officer, Canadian Film and Television Production Association): Thank you, Mr. Chairman.

First of all, I think principally we accepted the invitation to come to respond to issues of foreign ownership, particularly in light of Mr. Rock's announcement last week. That being said, I think I'll give a different view of what cross-media ownership means. It may be important. I'll be brief.

In the rapidly globalizing media industries, Canadian broadcasters remain the most important outlet for Canadian television programs. The CFTPA represents the people who make the programs that aren't news and aren't sports, and take up a considerable amount of air time on most broadcasters' schedules and do attract large numbers of viewers. So I think it's important for us to understand that as these companies vertically integrated, indeed, we actually supported their move to cross-ownership. There are several reasons for that.

One of the reasons is it would allow Canadian broadcasters to be able to invest large enough licence fees on a national basis. Up until recent times, what we had was a strung-together group, where there were always holes in the middle. Now most national drama programming and documentary programming is seen from coast to coast in Canada thanks to some of the consolidation that has taken place. It has also meant the investment levels are higher and there have been new production opportunities.

I will give the example, because Mr. Gourd is here, that with Degrassi: The Next Generation, if you hadn't consolidated in the way you did, I don't think the website attached to that, which gets three million young people, three million hits a week in Canada, would have happened without that converged opportunity.

That being said, as you move forward in your discussions and realize that this is an issue that goes beyond just news and sports, I think there are a couple of areas where we have to be vigilant.

One area is to ensure that consolidation does not translate into diminishing opportunities for independent creators. In our case, we would be talking about the 400 active independent producers that we represent in every region of the country. At this point, the CRTC has generally imposed conditions of licence that ensure that the largest television groups acquire 75% of their priority programming from non-affiliated producers.

In light of the discussions in the United Kingdom and other places, it will be very important to ensure that the CRTC is encouraged by policy to continue to ensure that the diversity of voices is there.

I'd like to address some comments by Mr. Fraser. He said “small companies can't make innovative programming”, and he used the ideal of HBO. Indeed, HBO is an ideal circumstance, and it's rare. Indeed, HBO is being asked to revisit its own business strategy. There are not only The Sopranos and Sex and the City, but there's Six Feet Under. I think they did Band Of Brothers as well.

It is obviously an outstanding outlet for broadcasting for a product. It is unique and it is a highly expensive undertaking that very few companies could actually support. It is a unit within a much larger company. So while we should praise HBO for what it has achieved, we should not put it as the run of the mill, but actually the ideal.

It's also based on a very high licence fee arrangement, which is 80% to 85%, and the producers are not allowed to hold the copyright. While it is very positive, I understand the new president of HBO is under considerable pressure to review his business plan. Part of the production financing we deal with in this country has to deal with the realities of our marketplace and the international marketplace.

Finally, I'd like to agree with Mr. Goldstein on his comments on the copyright regime. However, I would want to ensure that any changes to any copyright regime recognize not only the fact that broadcasters hold copyright, but in fact that broadcasters often buy their product from independent producers, and that indeed the copyright of independent producers is recognized, because that is the asset value of the companies that we represent.

À (1005)

In summation, I think that cross-media ownership has some benefits in this area, as long as the safeguards in the system are maintained and supported through public policy and are regularly reviewed, and as long as we remember that cross-media ownership is not just sports and news; it is also other parts of the broadcasting agenda.

Thank you.

The Chair: Thank you very much, Ms. McDonald.

In the interest of giving a chance to all members, considering that many of us are here, I would like to ask members to confine their questions to a stretch of five minutes, including the answers.

Before we start, I have just two points to make. The first one is that the documentation referred to by Mr. Morrison and others has not been given to members, because it's awaiting translation. When it has been translated, all of it will be sent to you immediately. This was the reason why you haven't seen it.

The second point I would like to make is addressed to Mr. Goldstein. I recall that Mr. Martin of the NDP asked Mr. Asper in Winnipeg about how much was spent on American versus Canadian programming. In particular, he asked Leonard Asper how much of the expenses of CanWest Global were dedicated to American programming over their licence term of seven years. The figures were unavailable then. Mr. Asper told us that he would send the information in writing to the committee. The committee researchers tell me that we haven't received it. We would really appreciate it if you would make a note, and send it on.

À (1010)

Mr. Kenneth Goldstein: It will be done.

The Chair: Thank you.

Mr. Abbott.

Mr. Jim Abbott: Thank you.

I'll take just 30 seconds of my five minutes to make an editorial comment. I found rather amusing, quite frankly, the reference to the HBO ideal of The Sopranos and Sex and the City. I'm really not sure that the world is a better place because of these two programs.

Mr. Goldstein, I'm interested because the issue of cross-media ownership, convergence, and concentration varies from city to city. I'm thinking of Vancouver, in particular. If I understand it correctly, your organization owns the Vancouver Courier?

Mr. Kenneth Goldstein: It's one of the weeklies.

Mr. Jim Abbott: Yes, so you basically own the Vancouver Sun, the Vancouver Province, and the Vancouver Courier. You also own BCTV, which I believe has a 60% market share of viewers for the evening newscast. You also own CH TV out of Victoria, which also comes to the marketplace on cable.

So I'm suggesting to you gently that while your comments—which were global, in terms of numbers—may be valid, it might be disingenuous to suggest that the numbers you were giving us would really be applicable in a marketplace like Vancouver. In fact, do you not have an absolute concentration of editorial content, in particular, going into the Vancouver marketplace?

Mr. Kenneth Goldstein: I don't think we do, and I'll explain why.

First of all, there are many competing weekly newspapers, so the Courier is one of many weekly newspapers in the Vancouver area. David Black's company owns a whole bunch of weeklies there too. So there's enormous and vigorous competition in the weekly newspaper area in Vancouver.

The two newspapers—the Sun and the Province—were under joint ownership long before CanWest got there. The two stations—BCTV, and CH TV from Victoria—were under joint ownership long before CanWest got there. CanWest's circulation of these two newspapers is equivalent to 40%—less than half—of the households in Vancouver.

The commission has licensed additional television stations, so there are seven other local television stations in Vancouver, in addition to BCTV and CH TV. To the extent that BCTV has a large audience for its news, it is a function of its historical success and consumer acceptance, which are totally unconnected in any structural way with the ownership of the newspapers. It has always had a large share, and I hope it will continue to have a large share. But it is not a large share borne of lack of competition in the television market; it's a large share borne of its historical performance.

The Chair: Last question, Mr. Abbott.

Mr. Jim Abbott: Okay. I'll switch to Mr. Morrison.

Mr. Morrison, maybe you could enlarge on this. Are you suggesting there should be some kind of government regulation? You said “required to maintain separate newsrooms”. Are you suggesting that the government should get into these corporations and say they must have a certain number of reporters covering the news beat for print and other reporters covering the news beat for radio and other reporters covering the news beat for television? Are you suggesting that the government should regulate news gathering in that way?

Mr. Ian Morrison: I would just segue from your interchange with Ken Goldstein. By the way, they have 40% of the households. There are only 7,000 households in Vancouver that support the Friends of Canadian Broadcasting, so I bow down on my knees before his market dominance. Because of those 7,000 households, we are quite aware of issues around cross-media ownership in Vancouver. I'm moving to answer your question.

We are quite aware that when you'll get the CHAN television, BCTV, covering a specific issue--there was recently something around schoolyard bullying--where you get a common perspective between that 60% market audience between six and seven and what the Sun is saying, you're getting a pretty dominant point of view on an important policy issue being heard.

To answer your question, the CRTC has the authority, under existing statute law, the Broadcasting Act, to impose conditions of licence on television licensees. The CRTC could have, but did not, in response to quite a bit of lobbying from Mr. Goldstein's company, and indeed from Mr. Gourd's, put in a condition on the renewal of the licences of CTV and Global that the television newsrooms maintain separate news gathering from the newsrooms of the newspapers in which the owners had a common interest. It would have been a simple thing under the authority of the Broadcasting Act.

The CRTC chose instead to take a, in my opinion, quite weak pledge from these companies around what they would do, and a pledge around separation of management between the television newsrooms and the newspapers. As you know, and as I think the implication of your question, Mr. Abbott, suggests, it is the independence of the news gathering that is important for plurality and diversity of opinion in our society.

À (1015)

The Chair: Mr. Fraser, very briefly, please.

Mr. Matthew Fraser: Mr. Morrison is not a journalist; I actually am a journalist. I write a column for the National Post. So I can tell you a little bit about how the real world really functions.

First of all, in principle, we don't need regulations. Secondly, it just doesn't work that way in the real world. This is organizational behaviour 101, and I invite you to ask Mr. Goldstein and Mr. Gourd whether their experience, as executives, confirms my impressions in the trenches. These newsrooms are actually not working together or combining their functions in a meaningful way. Turf warfare, silos, corporate cultures actually mitigate against these concerns.

The National Post newsroom is fiercely jealous of its autonomy, as I'm sure the Globe and Mail newsroom is, vis-à-vis CTV and Global. Yes, they do work together in some areas such as marketing and cross-promotion and this kind of thing. Indeed, it gets silly in some respects. For example, as a National Post columnist, I have been banned from all CTV television outlets. I used to comment on CTV's ROBTv, but I no longer can go there. I guess you can see me on Global TV, although in fact I'm on CBC. No favouritism from me. And probably Global Television doesn't have Globe and Mail commentators.

So it does affect cross-promotional and branding strategies. Global wants to brand National Post journalists and so forth. But in terms of journalistic news gathering, it really doesn't work that way. It doesn't, believe me.

[Translation]

The Chair: Mr. Bernier, you will have your turn a little later.

Ms. Girard-Bujold, you have the floor.

Ms. Jocelyne Girard-Bujold (Jonquière, BQ): Thank you, Mr. Chairman. I am substituting for Ms. Gagnon and I hope to do as well as she would have.

I listened very carefully to what you have told us. I see that cross-ownership has contributed to a concentration in the print media. That is what we are experiencing in the region. I come from the Saguenay—Lac Saint-Jean area. As Mr. Bernier said, because of concentration there are fewer journalists and their opinions are influenced by single-minded management positions. That is also reflected in the survey conducted Mr. Morrison on what Canadians think, that is, that independence has suffered because of cross-concentration.

Mr. Bernier, you said it would be desirable to have an ombudsman who would not necessarily be in charge of the opinions reflected by the stations, but who would rather suggest ways that they might discipline themselves. I would like to know how you see that happening.

À (1020)

Mr. Marc-François Bernier: Yes, of course.

Essentially, self-regulation methods in journalism, that is the rules that the media come up with for themselves, aim at ensuring a better quality of information. Therefore, the ombudsman generally uses a code of conduct on the basis of which he or she receives complaints from the public and investigates, and makes a statement or a ruling on the professional conduct of journalists. Press councils can also do this: however, they have certain limits. There is some doubt about their neutrality because their funding also comes from the media. There are all sorts of internal problems in press councils but still, they should not be disregarded, because we do need several mechanisms rather than only one. However, large conglomerates could create an ombudsman position in order to increase both the transparency and accountability of their journalistic process and thus ensure high-quality information.

Having been a journalist myself for 20 years, let me take this opportunity to say that contrary to my colleague, what is important in my opinion is that there be several people in the field collecting information. When there is only one journalist in the field and when his or her report ends up on the Internet, on television and in the newspapers, there may be several sources of dissemination, but there is no plurality in the sources of information acquisition. This one journalist's way of working is multiplied, and the effect is multiplied through the different channels of dissemination. This is what we often see in Quebec.

At Quebecor, that was constantly the case. There was, as we put it, a pipeline between Le Journal de Montréal and Le Journal de Québec, but it was a one-way pipeline, to such an extent that there was no parliamentary columnist, or if there was one, he worked for the Journal de Montréal but was based in Quebec City. The print media and its newspapers is doing exactly the same thing, except for strictly parliamentary news for the time being. More and more often, we see the same articles in different newspapers. One person collects the news, does the foot work, and his or her report has an impact that is multiplied by the many sources of dissemination. That is the crux of the matter.

This has a political impact. Through their decision-making, the media have a political agenda, whether deliberate or not. They also influence how public debates unfold. That's why we must be vigilant and ensure some form of monitoring. So the important thing is to have a variety and diversity of journalists in the field as well as radical independence among newsrooms in order for this diversity to work. This does not prevent companies from continuing to favour convergence or joint promotion with regard to programming and marketing. But from a news standpoint, there should be, at a minimum, some kind of standard that is more rigorous without necessarily being rigid.

Ms. Jocelyne Girard-Bujold: I think that right now there's some sort of magical thinking, a unique way of thinking. You know that the CRTC has been quite lax in the past. It allowed many things, and I think that we're now at a crossroads—an apt word since we're talking about cross-ownership—and we have to sit back and take stock. We have to ask what must be done to respect people's opinions, to respect the public. The owners, as well as the public and the structures that are currently in place to allow everything that's going on right now, because of globalization... We were talking about the Internet, which is something extraordinary, but as readers, it's important that there be limits.

It has always been my considered opinion that we must respect the public and its intelligence. Today, people's intelligence is no longer respected. They are fed a kind of group think. In my opinion, that's serious.

You say that the owners and the people who are part of large multinationals must come up with a code of ethics. But will this code of ethics be driven by the public or will it follow some sudden self-awareness on the part of these owners? Maybe they will come to understand that public opinion has become wary of the news they provide.

À (1025)

The Chair: You have the floor, Mr. Bernier.

Mr. Marc-François Bernier: It is difficult to anticipate who will lead in this dance. The basic principle nonetheless is that news does not belong to corporations, just as the law does not belong to law firms, medicine to hospitals and to professional associations. Journalists and press organizations are stewards of the news.

When we embrace journalism as a profession, we see the state of this industry and when we leave it, we should in principle leave it in a better state than it was when we arrived. We have a fiduciary duty, but right now, I'm worried about the quality of the news and the pressures brought to bear on journalists. Many cases have been reported, both at CanWest and in Quebec, where journalists have been subjected to pressure. I'm not saying that this is the rule everywhere; the evidence may be anecdotal, but it is nonetheless troubling.

In my opinion, we cannot turn a blind eye to these issues. At the very least, we have to examine the problem more seriously and determine its extent in order to adopt measures that are reasonable and proportionate.

The Chair: Mr. Gourd, you may make a brief statement.

Mr. Alain Gourd: In Abitibi, where I am from—and unfortunately I am not as familiar with the Saguenay—Lac Saint-Jean region or other regions of Quebec—there are 125,000 people spread over an area where the distance between the north and the south is greater than the distance between Montreal and Quebec City, and where there are more spruce trees than there are people. Nevertheless, citizens want to receive the same number of services as people in Montreal, which means that the system, over the years, has developed approaches favouring the concentration of property within a category. Radio-Nord, for example, has several private television stations.

Quebecor has all of the weeklies. As for the print media and the TV, you are undoubtedly aware of the relations that exist between Quebecor and the others. They are constantly squabbling. On the radio side, there is Astral and Radio-Canada. In addition to that, there is cable and direct broadcasting by satellite, which complicate matters.

Now, with respect to a code of conduct, the television companies have adopted one. That is our case, and as I mentioned earlier, in terms of editorial content we also have an independent oversight committee for our television programming.

Moreover, I would say that in my opinion, and in our opinion, at Bell Globemedia, imposing a homogenous system for print media and television and even our various local stations is a mistake. It is also bad business, since the stations and the newspapers must be in tune with their markets. But if their perspectives are different, if they contradict each other, and if the Globe and Mail attacks BCE, the results will be what you might expect.

We prefer to encourage synergy by collocating people; once that is done, they work together or at least we hope they do. If they do not agree, it's because the chemistry is not there, as Matthew Fraser said. We offer them resources, mainly abroad, to gather information; it is in fact difficult to have two offices in Beijing and two offices in Nigeria. Nevertheless, the newsrooms will always be separate.

[English]

The Chair: So members will know, in the interest of time, I have requests from Mr. Harvard, followed by Mrs. Bulte, Mrs. Lill, and Mr. Cuzner.

Mr. Harvard.

Mr. John Harvard (Charleswood—St. James—Assiniboia, Lib.): Thank you, Mr. Chairman.

I promise not to call any of you a “moron”. I have a couple of observations and a couple of questions.

Mr. Abbott was referring to the broadcast market in Vancouver.

Ken Goldstein is a Winnipegger. People should know that Ken and I go back a hundred years.

Ken, you made mention of what you called “rigorous competition” in the Vancouver market. I would agree with you that there's a rigorous competition when it comes to market share, but I really doubt whether there's a rigorous competition when it comes to ideas between David Black and CanWest, whose forefather is Conrad Black. I agree with you only on the level of market share. Whether it does any good for the public, I'll leave that to you.

The other thing that I would say, and perhaps this is to Matthew Fraser, is what sells is not necessarily in the public interest. It's interesting that media consumers will shell out a lot of hard-earned money to listen to or read the rants of right-wing commentators. I wouldn't dare call you that. A lot of the right-wing commentators couldn't be elected as dog-catchers. In fact, the very same media consumers who put out this money to read or listen to right-wing commentators are more apt to vote Liberal. Of course, then we come to the Liberal hegemony in this country.

I have two questions, one would be to Mr. Fraser.

You were mentioning students today who are multi-tasked and use the Internet a lot. If they were to be asked what they would want from the broadcast media, in other words, from CanWest, BCE, and so on, what do you think their answers would be?

Ian, to you, on the 20-20 rule, if it were adopted in Canada, who would be most affected by it?

À (1030)

Mr. Matthew Fraser: I think they go in and out of the broadcast media. I interview every year dozens of students attempting to get into the School of Radio and Television Arts at Ryerson. I ask them what they watch, what they read, and I'm surprised at how few of them spend a lot of time watching the main broadcast networks and actually watching television or reading newspapers in the way we do. They're just doing other things, but I have to be more precise. I think their behaviour is different. They go in and out of media and take what they feel they need, which is far different from our habits, which used to be, at least, reading the Globe and Mail--today, of course, you're all reading the National Post for your information--or watching the CBC newscast or the CTV newscast. The agenda-setting function of mainstream media organs may still be there, but it's in decline. As I said, the younger generations will actually become our elites tomorrow. They're not couch potatoes in the way many of us are.

Mr. John Harvard: So they are less passive.

Mr. Matthew Fraser: Yes. They're drilling down for information. They're on all kinds of websites too numerous to name, but they do go to CBC.ca, they do go to CNN.com, they do watch newscasts.

Mr. John Harvard: So they'd be more interested in this so-called interactive stuff.

Mr. Matthew Fraser: They are very interactive. Your classic teenager is doing his or her homework, is on ICQ having conversations with his or her buddies, is listening to an Internet radio station from Australia because they happen to like punk rock. It's called multi-tasking. The sources are there, which is my point.

Consider that in the 1950s the CBC was not only a Canadian monopoly, it was also the CRTC, the regulator. The CBC's market share was 100% in Canada until 1961. In the United States the three major networks, CBS, ABC, and NBC, in the 1970s and 1980s had a combined market share of 91%, 33-33-33 roughly. Today the four major networks, because you have to add Fox, together have less than 50%. All the big networks today are in the 10% to 15% range. I believe Global is at 15%. The CBC English is at 7%. So that will give you an idea of the greater diversity and the splintering of the sources. True enough, some of the big media companies own some of these channels; as Mr. Goldstein said, they're trying to re-aggregate the fragments.

Mr. Ian Morrison: I'll take a brief pause to dissociate myself from some of the misinformation you've just received. On the points you fired at me, Mr. Harvard, obviously, something that was designed in the U.K. for the U.K. context is being suggested as a model for your consideration. Therefore, it has to be adapted into the Canadian context. If you assumed that it would apply separately in each official language group in the country, it was my analysis of it--this has only been British public policy for seven days--that it might require the disposition of some assets by two companies. One would be Quebecor and the other would be CanWest. But based on some of the information I've heard here today, at least from CanWest, it sounds as if I might be wrong and it would have no deleterious impact on them whatsoever, so they could all join with everyone else in thinking it was an appropriate ceiling to defend the public.

À (1035)

The Chair: Mr. Goldstein, briefly.

Mr. Kenneth Goldstein: Since our name is being used in vain, let me assure Mr. Morrison that what Mr. Fraser said was not misinformation. The CRTC has published the report, and CanWest, including all its specialty holdings, has a 14.8% tuning share among anglophone Canadians.

But let me say this about the 20-20 rule. Let me add another 20. In the Canadian context it would be 20 years out of date, because in the United Kingdom you don't have 80% subscribing to satellite and cable. You have ITV, which Mr. Morrison mentioned has a share of 28% or 30% of tuning in the United Kingdom, and there is simply no comparison. The United Kingdom is about 20 years behind us in the fragmentation of the market.

The Chair: Thank you.

Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman.

Thank you all for coming before the committee today. I enjoyed listening to each and every one of you.

Let's think about the communications bill in the U.K., Mr. Morrison. I've also been following that, and Lord Putnam, as chair of the joint committee, was very eloquent in his plea not for foreign ownership, yet the communications bill is now providing for foreign ownership in the broadcasting area. So could it be that perhaps they put in the part about divesting themselves and not allowing that because they're allowing foreign ownership?

I think we have to look at what the committee said and what the legislation said, which are two different things. So I'm a little bit concerned that one may have to do with the other.

I know the committee will be travelling to London, so I hope we'll be looking more at the communications bill and the fact that they have allowed for foreign ownership in broadcasting. That's question number one.

Mr. Fraser, with respect to the CRTC and the Competition Bureau, and the role that should be played in these mergers, we saw what happened with Astral: the CRTC ruled in their favour. It was quite all right to buy the radio stations they wanted. The Competition Bureau came in and wouldn't let go. Was that the role of the Competition Bureau? Yes, perhaps.

It would seem to me that when you said--or maybe it was Mr. Harvard--that our Competition Act is toothless in very many areas, here was the place where they just wouldn't let go. The question then is, who had the right to decide that, the CRTC or the Competition Bureau? I understand they settled, so we won't know. Should the CRTC have more teeth in this area?

My last question is to Mr. Bernier. When you talked about the public good, it reminded me again, going back to Mr. Fraser's presentation on the Competition Bureau and efficiencies of scale, of the bank mergers, which of course is something that is in the papers today, the banks coming to ask what is defined as “public good”. Is that something that we or the CRTC should be looking at? Should we look at the “public good” test?

The argument with the banks on merger is that at some point the efficiencies of scale don't matter any more. That was something we heard during the bank merger debate. So when you talked about public good, should we be looking at those types of guidelines for the CRTC, as opposed to the Competition Bureau?

I think there are a number of questions.

Mr. Ian Morrison: It was I who was to go first, was it?

Ms. Sarmite Bulte: Yes.

Mr. Ian Morrison: I'd be happy to cede to Mr. Fraser--

À (1040)

Ms. Sarmite Bulte: No.

Mr. Ian Morrison: --but I want to follow your lead.

It's true that there is some distance between the parliamentary committee and the government in the U.K. The proposal I put before you is the one that the British government had introduced last week in the Commons, a majority government. Presumably it's going to be public policy.

It's true that there are some interesting proposals on foreign ownership. However, before 11 a.m., one is not supposed to talk about foreign ownership in this room, I have been instructed. I will be with you on foreign ownership on Thursday, so I'll return to it then.

If I might, I know you are perhaps very well informed about the views of the permanent public service in this country because of your parliamentary responsibilities linked to the heritage ministry, and I am aware that some of the senior public servants see a kind of trade-off, on the one hand, between foreign ownership rules and cross-ownership concentration rules. So if you do one, you.... You know? Were there time, I would want to question seriously the logic behind their frame. Certainly I would be happy, should you wish on Thursday, to return to the topic.

If I could, in ten seconds, because Mr. Goldstein had the opportunity to do so, I just want to point out to you that if one says that in the 1950s the CBC had 100% of the audience in this country, and then says that in the year 2000 it had 7%, you're comparing apples and oranges. In the one case, you're ignoring American viewing, and in the other case, you're factoring it in.

Ms. Sarmite Bulte: But, Mr. Morrison, if we're looking at the U.K. communications bill, have they done the trade-off there in foreign ownership versus the cross-ownership?

Mr. Ian Morrison: I know the clerk did not tell me that this was on the topic, but a one-sentence answer would be that it seems to me what they're trying to do is create more of a level playing field between the rules that apply to foreigners within the European Community and foreigners who are without the European Community, like us.

Mr. Matthew Fraser: I'm glad you mentioned the Competition Bureau versus the CRTC issue. I'll suggest to you, from a perspective of institutional analysis, that what we are seeing indeed is an institutional rivalry between the two bodies in a context of the diminishing powers of the CRTC and the ambitions of the Competition Bureau, which has traditionally been weaker. And the courts, of course, were going to arbitrate on that matter in Canada.

In the United States the situation is much different, and, I would suggest, much healthier, because you have real checks and balances there. You have the Department of Justice, which is the anti-trust department, and which, as you know, has been very aggressive. We all know about the Microsoft case. They're very aggressive about policing abuse of market dominance in the United States. They also have the FCC, which is the regulator and has broad powers, and then they have the courts. And the American tradition is different from what we know in Canada, in that the U.S. courts have been very active in striking down regulations--in other words, telling the FCC, no, that is not constitutional, on first amendment grounds or whatever.

In Canada we lack those checks, because the courts in this country, notably the Federal Court, do not discipline the regulator. Lawyers will tell you it's because of our tradition called “curial deference”, where the courts defer to the sweeping powers of the regulator. Therefore, the CRTC has traditionally been very powerful in Canada, because it has not been disciplined by the courts. But what we are now seeing is a slippage towards the Competition Bureau, and this Astral case was a case study in this rivalry between the Competition Bureau and the CRTC.

The Chair: Mr. Bernier.

[Translation]

Mr. Marc-François Bernier: May I answer the question, since part of it was addressed to me?

The Chair: Yes.

Mr. Marc-François Bernier: Essentially, I will limit my remarks to information and journalism, because I believe that the Competition Bureau has a different mandate, one that focuses on other matters. I am one of those people who believe that the CRTC has a role to play, and that for 20 or 30 years, it has neglected a major part of that role. It willingly played the deregulation game. I fully understand the economic and political context. The issue is not one of understanding, but we must look at the effects that can have. I believe that the CRTC could regain some of the respect that it deserves from the broadcasters themselves, who generally have licences but do not really honour their conditions, without suffering the consequences. It could even impose rules for licensing, namely by requiring broadcasters to show more self-discipline and to go to greater lengths to provide better and more diversified information.

When I talk about diversified information—I always come back to that—I do not mean that we should have 12 Internet sites with the same information: that is multiplicity and not diversity. And I will add that it is true that we have more access to international information now thanks to the Internet. However, local and regional information are still the poor cousins. More and more, concentration and convergence are such that decisions are made outside the regions, and people no longer have access to information that concerns them first and foremost; but they know what is happening in Nigeria, because someone feels that is more important. I am not saying that it is not important, but people must also have access to local and regional information, and that is something they have less and less of. They have it in the dailies which do not have journalists, where journalists sell advertising or do not do their job as they should. So we need to be cautious and not simply add up the number of newspapers that are published; we must also look at the content. And when we look at those newspapers, especially the ones that are free, it is quite depressing. We must admit that.

À (1045)

[English]

The Chair: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you.

I want to go back to some of the comments made by Mr. Goldstein and Mr. Fraser. We know where you're coming from on the idea of media concentration, that in fact media concentration doesn't exist because there are thousands of media products out there in the market area.

The fact is, though, that the number of media owners has shrunk dramatically in recent years. There are three cable companies owning 80% of cable subscribers. The number of TV and radio stations have dropped from 43 to 20 between 1980 and 2000. I look at where I come from, Nova Scotia, and we have one independent daily, which really is quite unique in fact. But there are no independent radio stations any more. There are no independent TV stations. There are chains, but the idea of independents is really the dinosaur at this point in time.

It's interesting to hear Mr. Fraser say that the diversity of media is incredible and there's the 500-channel universe. Then he talks about going to the net, where he reads The Guardian or Le Monde. I wish he were going to the net and reading a Canadian newspaper, but he's not. He's getting his diversity on the net from international sources.

Again, Mr. Bernier makes the point that we are not seeing local and regional information through media concentration and concentration of ownership. We're seeing a lot of money changing hands. We're seeing a lot of grousing about the fact that media conglomerates are losing money, but at the same time they seem to have bought enormously overpriced products. And now the way they are maximizing profits is to strip stations, to strip employees. Recently Shaw stripped the Cable Television Standards Foundation because they can't afford it any more.

All we're hearing about are cuts that are going to the heart of what people are caring about. They care about their local news, about trusting the media, trusting the reporters. That is not coming across in polls that have been done in the States or in Canada. It certainly wasn't what we heard across the country.

I have to say that in the argument for big, for conglomerated, for re-aggregating the fragments, and for all of this crap that I'm hearing around convergence, the case is not being made for the public interest. That's what we're here about. That's what this committee is all about, the public interest. It's not about your profits. I don't really care about those profits in terms of this debate. That's not our concern. You can make profits, fine, but if you don't do the job that we need done, then the whole game is out the window.

I'd like you to comment on that. Where is the argument that big has made a difference in terms of people feeling they're getting their news, that they're hearing their friends and the people in their world talking, and that we are really seeing diversity, as opposed to simply different chains but with the same voices saying the same thing--the same message being hammered over and over and over again--and the bottom line being profits?

The Chair: You're asking Mr. Fraser and Mr. Goldstein.

Ms. Wendy Lill: Sure, they can start, and then Professor Bernier may want to comment.

The Chair: Okay, Mr. Goldstein.

Mr. Kenneth Goldstein: I'm interested in the point you've made and in some of the comments that were made previously. Let me see if I can tie them together.

I think we have a question of cause and effect here. I believe the point you're making is if there are reductions in staff, it's because of cross-media ownership or so-called media concentration. Let me suggest to you that the cross-media ownership and the consolidation in the media market is not the cause of these things, it's the result. It's the result of fragmentation.

I appeared before this committee in 1994. It's on the public record. I don't know if any of the members were the same. I don't think they were. At the time, I said when you license an infinite number of vertical speciality services, you will make it economically difficult for local stations to fulfill their mandates. That is exactly what has occurred. It is the nature of the reality of the marketplace. It would be nice if we could all wave a magic wand and keep doing it the way we used to do it. The marketplace in which we live will not allow that to happen.

Let me also say for the public record that in the last year, one Canadian daily newspaper was killed by its owner. It ceased to be a daily newspaper. It's gone. It's now a weekly. It's not owned by Quebecor, BCE, or CanWest Global, all of which are the cross-media companies. It's owned by the Toronto Star. They killed the Cambridge Reporter. It's no longer a daily, it's a weekly.

I would suggest that to start to make jumps of logic, saying because you have cross-media, you are cutting things, we've cut far less than some others have.

À (1050)

Ms. Wendy Lill: Could you answer the question about public interest? How is concentration of ownership in the public interest?

Mr. Kenneth Goldstein: Consolidation of ownership is a response to a fragment. We don't have concentration of ownership by any statistical standard. Consolidation of ownership is a response to fragmentation. It's in the public interest because you would not have true, viable, independent Canadian media without it.

The Chair: Mr. Fraser.

Mr. Matthew Fraser: Yes, I share your concerns. I would even agree that there is a policy dilemma and a trade-off when dealing with consolidation of ownership. Consolidation of ownership can be troubling, but there are the efficiency gains that I talked about earlier. In other words, big media companies can do things because of realized efficiencies that small media companies cannot.

I would even suggest to you that the entire thrust of the CRTC's regulatory decisions over the last number of decades has actually been guided by that consideration. In other words, if you look at the CRTC's decisions, it has encouraged, some may say indulged, consolidation. If you look at the rationale that the CRTC enunciates, they almost invariably talk about the need to create strong Canadian companies in a global marketplace.

We have some of the executives from some of the companies here today, even in the production and artistic sectors. Elizabeth McDonald is here representing Canadian producers. There, too, we have seen tremendous consolidation. Elizabeth's largest member, Alliance Atlantis Communications Inc., really is the only significant player in the sector and produces a great deal of prime-time drama in this country. I totally agree with Elizabeth that you do need small independent players. Epitome Pictures, which made the Degrassi series, is one of them.

There is a trade-off. If you look at how the policy system in Canada has built up Alliance Atlantis, again, it's part of the same tradition in this country of building strong Canadian players. The term keeps coming up in those decisions in a global marketplace. We've built the players, they're there: CanWest Global, BCE, Torstar, Shaw, Quebcor, and Alliance Atlantis.

Now, I believe in a few minutes we will be discussing the issue of whether we should open up ownership thresholds to allow foreign players to come into our market. For those who are concerned that there has been too much consolidation in the domestic market, maybe foreign ownership relaxation is one of the answers.

[Translation]

The Chair: Mr. Bernier, please be very brief, because there are three committee members who want to ask questions.

Mr. Marc-François Bernier: I would like to remind you that in 1996, when Mr. Conrad Black purchased the Regina Leader Post a study, the McKenzie study of 1996, showed that local coverage, in other words public affairs, health and issues linked to agriculture, decreased. It is important in those areas, but local coverage dropped because they favoured exchanging texts in Conrad Black's empire. I fully understand the economic strategy. The point I want to make is that it is not the best strategy for keeping people well informed. Essentially, that is the point I wanted to make.

À (1055)

The Chair: Mr. Gourd, a very, very brief answer, please.

Mr. Alain Gourd: With Cogeco, we own TQS and the French-language CBC station serving Saguenay—Lac-Saint-Jean. There is enormous pressure to cut local news now that remote stations from Montreal, Quebec City and Toronto can be captured by satellite. I believe we have the means to counter this trend. First of all, we can provide Radio-Canada with the means of programming its own news, with its own local journalists, even though we own the Radio-Canada station.

Secondly, we all pay excessive broadcasting fees, in that they are higher than CRTC operating costs, and higher than Industry Canada's spectrum management costs. In my view, those amounts—which are in fact a tax—should be reinvested in local news in the regions under CRTC jurisdiction, to strengthen and support local news.

[English]

The Chair: I have three requests. Could we just discipline ourselves to close after 11 o'clock—say by 11:10—so that we can start the other panel?

Mr. Cuzner, Ms. Hinton, and Mr. Bonwick. Mr. Cuzner.

Mr. Rodger Cuzner (Bras d'Or—Cape Breton, Lib.): This has been a great discussion here today.

Just a note of caution to Mr. Fraser. You've been published in the National Post, carried on CBC, Global, and CTV. So you're sort of setting yourself up as a journalistic whore.

Some hon. members: Oh, oh!

Mr. Rodger Cuzner: I think this sort of speaks to the fact that our journalistic community, especially the national community, is very independent—

The Chair: I think we should strike this from the record. I don't think it's fair, and I think we should....

Mr. Rodger Cuzner: Yes, sure. Just to make my point, Mr. Chair, that—

The Chair: I think there are other ways to make a point.

Mr. Rodger Cuzner: Yes.

My point is that our journalistic community are very talented, independent thinkers.... How about this: Have you ever gone for a beer with a group of journalists? They all have their own opinions, and the only thing they reach consensus on is that they are not buying. Okay?

I think it comes down to this, Mr. Goldstein. In your initial comments, you had indicated we're looking at corporate culture versus corporate structure. For the most part, the market looks after corporate structure. But are there checks and balances for the corporate culture? Are there aspects of corporate culture assuring us that all opinions and voices are being heard? Is there a role for a regulator in the corporate culture to assure this? Is there a role to play for regulation in there?

I'll open this up for anybody, because what I sense, from the people who speak against convergence, is there's this conspiracy to silence a certain portion of our community. I think silencing the people in that community—which I know—would be like trying to herd cats.

But are there checks and balances in there?

Mr. Kenneth Goldstein: Yes, there are numerous checks and balances, and I don't think we can say we're not regulated. Of course, on the broadcasting side in particular, we are regulated by the CRTC. The CRTC in renewing the CTV and Global licences in 2001 set in place a monitoring committee requirement, and they also set in place the notion that the Canadian Broadcast Standards Council could do this as well if the broadcasters agreed, and I believe that's about to happen. The Canadian Broadcast Standards Council has been monitoring, independently of Global, the whole notion of the newsroom independence and so on since December of last year, and there has not been a single complaint.

On regulation going further than that, if you want to start to get into regulation of editorial matters, regulation of how many contrary letters to the editor should be published, and so on, even our critics have admitted that we publish contrary opinion. There was an advertisement run by a number of former Southam employees, they established a website, and they criticized some of our editorial policies, which is fine, let's have a vigorous debate. They then listed the number of submissions they had made to our papers with their critical comments, and they had made twelve submissions, of which they said seven were run, which isn't bad.

Let's not forget something very important in all this discussion. There is a Charter of Rights and Freedoms in this country. A lot of people work very hard over a lot of years to establish that Charter of Rights and Freedoms, and I would caution those who blithely say, let's fiddle with the tax structure to have newspapers do this, or, let's regulate newspapers and let's regulate content, to go back and read the charter.

Á (1100)

The Chair: Okay.

Monsieur Gourd.

Mr. Alain Gourd: With respect to corporate culture, we do not believe in common editorial policy. We do not believe in directives from the centre. We have a code of ethics. We have a monitoring committee. Each station has to be close to its market, even if they contradict themselves--Ottawa contradicting CFCF Montreal. Except for Vancouver, we're number one in every market.

The Chair: Monsieur Bernier.

[Translation]

Mr. Marc-François Bernier: I have two comments to make about this.

Within the structure—many authors talk about this—in the way in which appointments and promotions are made in press organizations, there is no need to tell employers, directors or managers to take direct action. You don't say anything to the director or manager. Here is how people get promoted: those who fall into line climb the ladder, and those who don't fall into line don't climb the ladder. That solves the structural problem right away.

Secondly, though there is indeed a Canadian Charter of Rights and Freedoms, unfortunately it does not protect the journalists of the Montreal Gazette who wanted to criticize Mr. Asper's position. They had to keep quiet because they were threatened with dismissal. The Charter is therefore not applied equally to everyone.

[English]

The Chair: Okay.

Mr. Fraser, this will be struck from the record. I know it was said in jest, but we don't want to give any impression.... You're completely free as a citizen to do what you do, and many others do the same.

Mr. Rodger Cuzner: And it was in jest.

Mr. Matthew Fraser: I've been called a moron, but never a whore.

The Chair: Mrs. Hinton.

Mrs. Betty Hinton (Kamloops, Thompson and Highland Valleys, Canadian Alliance): Thank you, Mr. Chairman. And here I was going to start off by saying “That's C-U-Z-N-E-R, and he's a Liberal?” And make sure you get that part straight, that lovely label.

I just want to begin, I guess, by telling you that I had the pleasure of attending the Broadcasting 2002 Convention this year. I was the only member of Parliament who was there, and because I keep a pretty low profile, it was kind of akin to being a fly on the wall. I learned a lot and it was very interesting.

One of the things I learned at this, the positives they were talking about regarding convergence, etc., is that a larger market share equals a lower delivery cost. It gives you broader access to capital. They called it vertical integration. These were all the positive things that were coming about this convergence portion.

The negative would be that it's a narrow message because you're getting a limited number of people who are delivering the message, and a broader audience. I thought that was quite significant when I heard that.

They also said that Canada was the envy of the U.S. because cross-ownership is simply not allowed in the United States, not to the degree we have it here. Here you can own print, television, satellite, and Internet and be one company under different names. I think that has some reasons to cause some people to look twice.

In terms of what my colleague Ms. Lill said, we have a lot of things in common, but one of the things we don't have in common is that I don't think “profit” is a dirty word. I understand the need for profit and I understand the need for what's been happening within the industry. My fear is that we will lose a difference of opinion and that it will go from reporting to creating. That's my major concern.

I will ask just one question, and I would open it to anyone who is interested. The example I'm going to give is Lloyd Robertson delivering the news. Some people may view it as being slanted when you have a commercial break come on and it says “Sponsored by EDC,” which is Export Development Canada. That is money coming from taxpayers via the government to support one particular news program. There may be reason for people to think there might be some sort of slant there, or that the neutrality has been lost on broadcasting. We all know how much money it would cost to be the sponsor for a major news program.

I'll leave it with you at that and ask you for responses.

Before I leave, may I say one other thing? I would not say anything negative about Global today if my life depended on it because Global did a huge service for one of my constituents and it was picked up by other media. My constituent, Lieutenant-Colonel Al Trotter, has been struggling for over 13 years to get recognition by government for his prisoner-of-war status. It was Global that picked up that story and it went nationwide, and I thank you on his behalf.

Á (1105)

The Chair: Mr. Fraser.

Mr. Matthew Fraser: On the merger of advertising in the news, I have just a very quick historical perspective. In fact, that is how news began in the late 1940s and 1950s. We all know who Mike Wallace is. He was actually a news broadcaster in the 1950s. He would be reading his news show and then he would turn around and another camera would have him, and he would pick up a pack of Chesterfield cigarettes in his hands and say “Smoke Chesterfield”.

That is actually the way the broadcasting industry began, 40 or 50 years ago. It was separated out in the 1960s and 1970s and 1980s, and now we're seeing it slowly come back together. That's just a historical trend. It's nothing new. That's how it started 50 years ago.

The Chair: No, please. I think we'll run out of time.

Mr. Kenneth Goldstein: I'll be very brief. I suspect any responsible broadcaster would say the same thing. The newscaster doesn't know that spot is in there. That spot is sold separately. We do not colour our news to suit the advertisers. They're completely independent.

Mr. Alain Gourd: Since Lloyd Robertson is with CTV, maybe a quick word. National news and local news are not categories supported by the government, even though these are very important categories. I'm not criticizing that; it's a fact. Therefore it has to be supported by advertising. Keeping in mind what Ken just said about the anchor not knowing what advertising is in this program, or the writer of the news, I think it is very commendable that a government entity does agree to put advertising in the number one newscast in the country.

The Chair: Mr. Harvard.

Mr. John Harvard: Mr. Chair, I just want to say that 40 years ago my work on radio was sponsored by Peter Stuyvesant cigarettes, and I'm a non-smoker.

Ms. Sarmite Bulte: And so am I.

The Chair: Monsieur Bernier.

[Translation]

Mr. Marc-François Bernier: I'd like to add something else on the topic raised by the member. These are indeed historical practices among journalists, but they are nonetheless practices we have fought because they discredit the profession. For many people, this exacerbates the confusion between journalism and promotion, and other types of communication. These practices are not recommended, but we see them more and more, particularly in highly convergent media. Increasingly, we see efforts to change journalists into promoters. I believe that this is damaging to journalists. We behave as if journalism were subject to the corporation. We have to be careful about practices that discredit the profession.

[English]

The Chair: We'll conclude with Mr. Bonwick, because we have a second panel and--

Ms. Sarmite Bulte: Mr. Chair, just for the record, the Export Development Corporation is not funded annually by taxpayers' dollars. It actually makes money now. I think we should be clear.

Á (1110)

The Chair: Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Just a clarification, Mr. Chair, is it going to be the same panel but on a different topic?

The Chair: That's right.

Mr. Paul Bonwick: There are a couple of concerns I'd like to address and then put forward one question.

I should first of all start by thanking all of you who have participated today, because it has been very informative, regardless of your differences in opinion.

Every time I do a book, I write down what I think my job is at this committee with regard to the review of the Broadcast Act. It's to ensure that Canadians have access to a healthy and vibrant broadcasting industry, while again ensuring there are opportunities for Canadian or regional coverage. So there's a balancing act.

There are a couple of things--conspiracy theories--that I'd like to address for the purposes of the record. I suspect that Mr. Asper and Mr. Sabia do not go to bed at night dreaming about global domination through editorial control, contrary to what some of my colleagues might think.

I think it's also important to recognize that when a couple of the members of the panel were being asked about what you are providing to the public, the premise of the question, in my opinion, was wrong. It's what the public is demanding of you. It's not a case of whether it's Mr. Goldstein or Mr. Gourd saying this is what they're doing. It's me saying this is what I want you to do, and if you don't do it I'll change the channel. I think the Canadian public clearly determines what it is you're going to do, not some people sitting in a boardroom saying they think they're going to do this.

My concern is the balancing act between a healthy, vibrant broadcasting industry, recognizing that the private sector clearly represents the majority of the industry.... It's a question of balancing off the healthy, vibrant nature of the industry versus making sure that there is an opportunity for regional and Canadian stories to be accessed in a timely fashion.

Mr. Fraser made an interesting comment, and I think I could put it in perspective for my office. With regard to the number of inquiries we receive from people under the age of 25, 90% plus come by way of e-mail and request that we respond in the same fashion. When you deal with my generation, we get 75% plus by phone or by letter and they ask us to respond in a different fashion. So I'm glad to hear Mr. Fraser say let's look at what the next generation wants, not simply what we're after. Hence the balancing act. How do we maintain a healthy, vibrant industry and how do we ensure that Canadians over the next decade have access to Canadian and regional stories? Do we do it by way of policy or do we do it by way of investment? Because protection is a big challenge.

When somebody who's 18 years old wants to know about a particular issue, they do not necessarily go out and buy The Globe and Mail. They go to the Internet and they punch into the search engine that particular issue and they'll bring up 250 different perspectives on that topic. So I'm interested, especially from Mr. Gourd, Mr. Goldstein, and perhaps Mr. Bernier, as to how we do the balancing act to ensure that the private sector is profitable and successful and yet still balance off the Canadian story side.

Mr. Alain Gourd: If I may start, I think the Broadcasting Act has a very interesting and important feature in section 3, which is a statement of values, a statement of objectives. Every licensee, whether private or public sector, has to strive to implement that mandate given to the system.

Secondly, yes, in terms of news particularly, we have to rely on advertising, and therefore we have to be conscious that at the end of the day we must deliver a profit to continue to operate.

However, my third comment is that for us, the best way to succeed in the category of news particularly is to let the news people do their job without interference from the centre, let them cover the events as they are, as they see them, within the boundary of the Broadcasting Act, the boundary of the regulations, the boundary of the various statutes, which are in a manual that is given to every journalist. But within this general framework, the newsroom covers the news, and I think that's the best way to get positive results.

Á (1115)

Mr. Paul Bonwick: If I can interrupt, on the Canadian side, one other--

The Chair: Let Mr. Goldstein and Mr. Bernier answer your first question.

[Translation]

Mr. Marc-François Bernier: Well, the concept of profit doesn't worry me either. I worked for Quebecor for a long time, and I know that a profitable company makes it very much easier to provide information. Quite often, the problem is associated not solely with profit but also with the profit requirement. There is a difference between requiring 8% return on an investment and 17% or 20% return on an investment. There is a major impact on the quality of the resulting information.

There is another point I would like to make. We are seeing the emergence of a highly connected generation, but since you members here represent the people of Canada as a whole, remember that most Canadians do not work this way, and do not obtain information this way. Older people do not have much access to new technology. People in the regions do not always have access to a high-speed connection. People in the regions who receive information by satellite often have no access—or are just beginning to have access, as in Quebec City—to local news. For many years, they did not receive local news. They were connected to Montreal or other regions.

So we have to be careful, and look at the situation as a whole. A great many Canadians do not have access to the new technologies, and we must take that into account.

[English]

The Chair: Mr. Goldstein.

Mr. Kenneth Goldstein: I'll try to be as absolutely brief as I can. You've posed the fundamental question. That, to us, is what this word “convergence”, with all its many meanings, is about. How are we going to find that balance? That's what we're trying to find. How do we find the balance between being able to serve our local communities and the fact that we're inundated with media from around the world?

I'm going to give you one number: 717,921 Canadians. What's that number? That's the number of Canadians who have signed up to receive the New York Times online, as of May. That's larger than the circulation of any daily newspaper in Canada. When almost 750,000 Canadians are receiving the New York Times online, we have to refocus how we run all of our media, to focus very much on local and regional, and that's something we're trying to do.

[Translation]

The Chair: You have 30 seconds. We have to go to our... [Editor's note: inaudible].

Mr. Claude Duplain (Portneuf, Lib.): I want to make sure I understand this properly. With cross-ownership, we run into problems with local news. However, in your last answer you said that in Quebec City and in the regions, there was no local news and that the news programs were from Montreal. Now, there are local news programs. That is the opposite of what you were saying, isn't it?

Mr. Marc-François Bernier: Quebec is a capital city, but until very recently, the people in that capital city with satellite dishes on the Île d'Orléans could not get the Quebec City news. They could get only Montreal news. That is very difficult to believe, and it changed only recently. But the change came about because of political pressure that the mayor of Quebec and the urban community exercised for years. The change did not come about because of the broadcaster's initiative. Now, we are seeing the same problem in other, more remote regions.

The Radio-Nord issue is fairly interesting. Right now, there is a conflict within Radio-Nord. And when there is a conflict, everyone is on the outside and there is no more local information, except the information generated by managers.

We have to be careful about such things. We have to very sensitive to specifics.

Mr. Alain Gourd: There is a possible solution, I believe. I am chairman of the board of the Canadian Association of Broadcasters, and we have an agreement with Bell ExpressVu to add a significant number of local stations. I hope that the agreement will be approved as quickly as possible, because it will make over 20 more stations available directly by satellite in the different regions, including French Canada. We hope that this goes through soon.

The Chair: Thank you.

I have some information for committee members.

Á (1120)

[English]

The reports that were tabled by Mr. Morrison regarding the English study are copyrighted for the House of Lords and the House of Commons of the United Kingdom, so we don't have any right to translate them. What we will do is that the clerk will write to the members, and those who are interested in getting the copies will just signify to the clerk and we'll issue them.

The first panel is adjourned. I would suggest that we break for five minutes to stretch our legs, and we'll join up again afterwards.

Á (1120)

Á (1128)

The Chair: We'll resume the meeting and now start the panel on foreign ownership. We have already introduced the speakers, except that this time, as I understand, Mr. Geoff Elliot, vice-president of corporate affairs for CanWest Global, will intervene.

We'll start with you, Mr. Elliot.

Mr. Geoffrey Elliot (Vice-President for Corporate Affairs, CanWest Global Communications Corp.): Thank you very much, Mr. Chairman, for the opportunity to speak on behalf of CanWest on the subject of foreign ownership in the broadcasting sector. Because of our experience, I suspect that CanWest's position may be somewhat different from that of other Canadian companies in the same field.

By way of introduction, I should mention that CanWest has a 100% ownership position in networks TV3 and TV4 in New Zealand, as well as substantial wholly owned radio interests in that country. The company has a 57.5% economic interest in Network TEN, one of the three national networks in Australia. CanWest has a 45% equity interest in TV3 in the Republic of Ireland, the only private sector conventional network in that country. We also have a 30% stake in UTV, a franchise of ITV, the British commercial network, and that's located in Northern Ireland.

Canadian regulations currently limit foreign ownership of Canadian broadcasting companies to the aggregate of 20% direct investment and 33% indirect investment, for a theoretical total foreign limit of 46.7% in voting equity.

CanWest believes it's now time to review the current limits on foreign ownership of voting shares in the broadcasting sector, with a view to relaxing or raising them.

The real issue is the need to provide more room for Canadian broadcasting companies to grow in a highly competitive world of media convergence, rapid technological change, and international media consolidations. Technology and the Internet, as you know from what other speakers have said this morning, are breaking down international borders and protected national markets for media of all kinds.

The Canadian market alone does not provide scale opportunities to match the market power of foreign media conglomerates. In order to grow and ultimately survive, Canadian media companies like CanWest require additional flexibility to acquire strategic positions in broadcasting assets located in other countries.

Current limits on foreign ownership in the broadcasting sector in the U.S. and other countries constrain or limit the ability of Canadian companies to forge those strategic partnerships.

Strategic partnerships require a sufficient level of investment to ensure participation in the management and strategic direction of an asset, as opposed to possible portfolio investments that the current lower foreign investment limits usually imply.

Total elimination of controls on foreign ownership, while not objectionable to CanWest, is not required to achieve our goals. The raising of existing Canadian limits on foreign ownership should, however, in our opinion, be accompanied by a similar relaxation of the rules in the U.S., Europe, and other countries, such as Australia.

The U.S., Britain, and Australia all have domestic policy reviews underway now, or national legislation currently under consideration that would provide for a relaxation of foreign ownership rules in broadcasting. So there's a unique opportunity now to pursue such reciprocal adjustments in the current round of multilateral trade negotiations in the WTO. If we miss that opportunity, the history of trade negotiations suggests that it will be another decade before the next opportunity comes along.

CanWest supports raising the limit on foreign holdings of voting equity in broadcasters to 49%, to include any combination of direct or indirect ownership, whether by a single shareholder or a group of shareholders, or widely held foreign shareholdings, subject only to other countries, notably the U.S., being prepared to do the same. Such a move would create several distinct advantages to Canadian firms, and as far as we're concerned, no material disadvantages.

In my remaining time I'll address very briefly the specific numbered questions raised by the committee.

First of all, CanWest believes existing foreign ownership rules for broadcasting are too restrictive. It's time to relax the rules, but we should do that in a measured way, in concert with similar opening up in the U.S. and other markets to Canadian investment.

Regarding the experience of other jurisdictions, in the European Union I believe there are both national and European Union rules. In the past, a combination of state monopolies and restricted private sector entry have combined to restrict the choices available to consumers to levels far below those available today to Canadians. These rules, including foreign ownership, are now gradually being relaxed in those foreign jurisdictions.

Á (1130)

As I noted, CanWest currently has a 45% equity interest in TV3, the only private sector conventional television network in the Irish Republic, and we also manage that operation. The chief executive of TV3 was formerly the manager of the Global TV station in Winnipeg.

As to your question 3, the main reason for relaxing the rules would be to enable Canadian broadcasters to grow and compete in a globalizing business. The Canadian market in itself is insufficient. Canadians already have access to a countless number of channels, both Canadian and foreign, delivered by cable and satellite.

Moving on to your question 4, some claim that it would be preferable to relax the rules for telecommunications, and possibly also cable, while leaving the current rules in place for broadcasters. CanWest does not agree with that. If cable and telecommunications companies were purely distributors of broadcast signals, it might make some sense to treat them differently from broadcasting.

However, BCE owns telephone systems, satellite TV distribution systems, as well as owning the CTV television network and a variety of specialty TV channels. Cable companies like Rogers and Shaw also have substantial specialty television holdings. All compete directly with conventional broadcasters. The telephone, cable, and satellite TV signal distributors all have the potential for self-dealing and providing preferences to their affiliated broadcasting units. To treat them separately would provide those companies not only with preferred access to capital, but also with a discriminatory advantage in terms of potential strategic partnerships with foreign broadcasters. CanWest believes it's essential that any relaxation of foreign ownership rules be applicable equally to the three sectors I just mentioned.

Turning to the fifth question, regarding diversity of voices, a relaxation of foreign ownership rules should in our view have no impact at all, provided that Canadian broadcasters remain obliged to meet the other requirements of the Broadcasting Act and the CRTC, irrespective of ownership.

It's interesting that the Australian Senate addressed that same question of the linkage between foreign ownership and Australian content in their current review of legislation in Australia in a bill before the Australian legislature. I'd just like to read one short paragraph on the conclusion of the Senate report.

Á (1135)

The Chair: Is it really short?

Mr. Geoffrey Elliot: Oh, yes, it's very short.

The Australian Senate committee said:

The Committee believes that in relation to foreign owner influence, it is reasonable to assume that foreign owners will be motivated to maximise profits, rather than influence public opinion. Accordingly, it is to be expected that they would provide content with the aim of maximising consumer demand and therefore advertising revenues. There is, therefore, a commercial imperative for broadcasters to include Australian content. Furthermore, it is crucial to note that this Bill

--that is, the Australian bill--

will in no way alter the existing Australian content rules. The Committee therefore considers that concerns about a diminution of locally produced programming should this Bill proceed are unfounded.

Canadian content on television comes variously from the mandate of the CBC, CRTC regulations, and the Government of Canada support programs that subsidize the projects of independent producers. We don't see that situation changing at all because of any potential change in foreign ownership rules. Increasing levels of foreign ownership should have no obvious consequences for the promotion or exhibition of Canadian content on television, given the regulatory environment just mentioned.

Turning to your question 7, as to the cost of capital and access to capital, Canadian companies already raise non-voting equity capital and also debt capital in foreign, mainly U.S., capital markets. The cost of debt capital, of course, depends on the financial circumstances of the borrower and its ratings by the ratings agencies. The real significance to broadcasters is that relaxation of the Canadian rules, combined with those of the U.S. in particular, would provide greater flexibility for international growth of Canadian broadcasters.

Finally, in response to question 8, we believe there should be no impact on jobs in Canadian broadcasting, as long as the CRTC continues to regulate the minimum Canadian content levels and requires that broadcasters meet the other requirements of the Broadcasting Act.

I'll stop there. Thank you, Mr. Chair.

The Chair: Mr. Fraser.

Mr. Matthew Fraser: Mr. Chairman, I am gratified that this committee is giving consideration to foreign ownership of media, which is, in my mind, the number-one issue facing not only the Canadian media sector, but media sectors in virtually every country.

Deregulation of foreign ownership rules is sweeping the world at the moment. Mr. Morrison was citing British examples a few minutes ago. In Britain, for example, Tony Blair's government, which is a socialist government, as we all know, is now moving forward with deregulation of foreign ownership. As you probably read in the papers, he met last week with Sumner Redstone, who is the chairman of Viacom Inc., which owns CBS and MTV. It is a huge American media conglomerate that is interested in investing in the British broadcasting industry. Mr. Blair met with him at 10 Downing Street and was under severe criticism by a number of, I believe, Labour peers, notably Lord Putnam. It's a very controversial issue there, but the Labour government is going forward with foreign ownership deregulation, as are other countries.

I looked on the web last night, very briefly. In India, the headline from one Indian paper was “Foreign investment rules relaxed in print media”. In Brazil, they said “Brazil okays foreign investment in media”. In other countries there is the reverse trend. In Zimbabwe, a headline from a newspaper there was “Zimbabwe government plans to bar foreign ownership investment in private media”. Industrialized countries seem to be going forward with foreign ownership deregulation. In some countries, like Zimbabwe, they're going in the other direction.

I'd like to start with a concept. I hope I don't sound too professorial. As I say to my students, and this relates to foreign ownership, you can really understand the entire Canadian broadcasting system if you get your head around one concept, and that is the concept of cross-subsidy. Once you master the concept, you don't need to learn anything else. You've understood the whole system.

What is the cross-subsidy mechanism? At the foundation of our entire broadcasting system in Canada, Canadian broadcasters and media companies make money and profits importing mainly American products into this country. They cross-subsidize, or invest in Canadian content. The entire system is based on that.

We know that CTV and Global air a lot of American programs in prime time. They make profits and are obliged by conditions of the licence to reinvest in Canadian content. It's called “simulcasting” in broadcasting.

Specialty TV channels, as we know, in Canada are partnered with American channels. For example, Home & Garden takes its programming from Home & Garden U.S. TSN, The Sports Network, is partnered with ESPN and gets ESPN's feed. I could go on and on. They make money on the American shows and are obliged by regulation to cross-subsidize Canadian content. Likewise in pay TV, TMN, The Movie Network, or Movie Central, in the west, is partnered with HBO, Home Box Office.

Even in the book industry, most Canadian publishers make money on so-called agency business that is distributing American books in Canada. Then they cross-subsidize Canadian authors.

Why am I talking about cross-subsidy? The foreign ownership rules actually allow the cross-subsidy mechanism to work. We keep out foreigners from our media industries. We know that they're limited to minority positions of 33% and 20%, but they cannot take controlling stakes in the industry. It is why American broadcasters, like HBO, are obliged to go through Canadian middlemen, like The Movie Network. They cannot come directly into the market due to the regulations. Therefore, their programs, like The Sopranos and Six Feet Under, must go to TMN. TMN makes money on HBO programs and cross-subsidizes Canadian content.

Why do we have foreign ownership rules that try to make this cross-subsidy mechanism work? The main rationale is that domestic firms will behave in a predictable manner. In other words, they will do what governments and regulators want them to do, largely because their assets are fixed on Canadian soil and can be seized if they disobey the rules and regulations.

Á (1140)

If we look at it, this rationale actually is not entirely true. In fact, it can be argued that it's false. I would argue that foreign companies can behave in a predictable manner in this country, and also that Canadian companies do not often behave in a predictable or desired manner in this country.

For example, Cineplex Odeon, the movie chain in Canada, has been Canadian owned. We know it was owned by the Bronfman family for a number of years. During the period of Canadian ownership of Cineplex Odeon, did that movie chain become an outlet for a burgeoning output of Canadian movies? No, it did not. If you look at it, it operated and ran its business like most of the other movie theatre chains in North America. So Canadian companies working in Canada do not necessarily behave in a way that might be desired by regulation.

The other argument I would make is that the cross-subsidy model actually does not really work, if you look at it. Yes, broadcasters and media companies are obliged to direct certain percentages of their revenues towards Canadian content production, but if you look at the history of it, the interest group lobbying, most of them lobbied the CRTC vigorously and spent a lot of money on lawyers and lobbyists trying to get those obligations reduced, not increased. If the cross-subsidy mechanism were working and flourishing, Canadian media companies would be overjoyed to cross-subsidize Canadian content, but they are not. They are constantly trying to have these obligations reduced, not increased. So I would argue that foreign ownership, in the name of the cross-subsidy, actually does not work.

My next point--and I'm not going to be long here--would be that our foreign ownership rules are, if I may use the word, hypocritical. We have very restrictive foreign ownership rules in Canada, which keep foreigners out from controlling stakes, whereas Canadian media companies are present throughout the world. We just heard one example of CanWest's presence in Australia, New Zealand, Britain, and other countries. Conrad Black, as you know, owns the Chicago Sun-Times in the United States, he owns the Jerusalem Post, and he owns the Daily Telegraph in the United Kingdom. Mortimer Zucherman from Montreal owns the Atlantic Monthly newspaper, I think. He owns a newspaper in New York and many other magazines in the United States. Ken Thomson, Lord Thomson, needless to say, he and his father have owned newspapers throughout the world, notably in the United Kingdom. That tradition goes back to Lord Beaverbrook. Ted Rogers was once a top five cable baron in the United States. He was one of the five biggest cable owners in the United States. The Shaw family, as you may know, is just now selling its cable operations in Florida, so they've been present in the United States. Yet no foreigner, no American, no foreigner of any kind, can take a controlling interest in any media company, in particular broadcasters.

I would argue that in Canada, we have to conceive of the Canadian market in a different way and realize that Canada is actually now a part of a continental market. The distinction between Canada and its regulatory system and the United States as a different territory no longer is valid.

Let me take the TV and movie production centre as an example. I'm sure Elizabeth McDonald will have something to say about this. In that sector today there are five major production centres that benefit culturally and economically from activity in TV and movie production. Those five centres are L.A., New York, Toronto, Vancouver, and Montreal. In other words, Canada has three in the top five. Our three largest Canadian cities are beneficiaries of a North American TV and movie production industry. It's not Dallas, it's not Atlanta, it's not Seattle, it's not St. Louis, it's not Detroit, it's not Boston. It's Toronto, Vancouver, and Montreal. I would argue that we have to reconceive the way we're holding this debate and realize that we are not only participating in this economy, but we're also beneficiaries.

Then someone might say, yes, but what about the U.S. restrictions in foreign ownership? Don't they have a 25% foreign ownership cap on broadcasters? That is true. The American market is entirely open to every piece of the media and entertainment industries. We've had Canadians. The Bronfmans controlled the Hollywood studio. We know about Vivendi, which is Paris-based and owned Universal Studios for a brief period of time. Ted Rogers is in cable TV.

Á (1145)

Any foreigner can buy any piece of the American entertainment and media industries, with the exception of over-the-air broadcasters--in other words, the television networks. That regulation has been in place since the 1930s for a particular historical reason. That was during the anti-communist period, and the government at the time felt that maybe a communist could buy an American television network--so-called aliens. In more modern times, the fear in the United States has been that a Saddam Hussein might buy CBS, or whatever. So there has been a sort of historical concern in the United States about national security.

My understanding is that the Americans are open to negotiating these rules, with a view to lifting them to its trading partners, notably friendly trading partners, which is why I would suggest that Canada enter into bilateral or multilateral negotiations with the United States to achieve reciprocity on ownership restrictions. In other words, yes, the Americans must lift this restriction on that one remaining piece of their industry so an Izzy Asper or a BCE can go down there, if they can find the resources, and buy CBS or NBC, or move into the broadcasting sector, which they cannot now. I would suggest that one solution is to negotiate with the Americans for reciprocity on that.

My final point would be on the cable TV issue, which is being debated in the newspapers. To me, that's a no-brainer. I cannot understand why the Canadian government, or at least the Department of Canadian Heritage, is resisting. Allan Rock, the Minister of Industry on this, and senior officials at the Department of Canadian Heritage should know that the 1996 convergence policy actually encouraged, very firmly and strongly, that cable TV and the phone companies should be competing as convergence entities, that cable TV should be offering phone service, and that the big phone companies should be offering video service--that is, television service. So I'm flabbergasted that the government now seems to be stymied on this point, where one ministry or one minister doesn't want cable television to be included in foreign ownership, when, if they're supposed to compete with the big phone companies as convergence companies, they would not be able to access foreign capital in the same way as some of the telephone companies.

I can understand why Bell Canada or BCE would not want competitors to access foreign capital, because they know well that as long as its competitors, like Sprint, AT&T, Rogers, and the other big cable companies cannot access foreign capital, they will fail.

My two conclusions would be reciprocity with the United States on media ownership and bundling in, including cable television, in the ownership deregulation.

Thank you.

Á (1150)

The Chair: Thank you very much, Mr. Fraser.

Monsieur Courtois.

[Translation]

Mr. Bernard Courtois: Thank you, Mr. Chairman.

The foreign property issue is more complex, in our view. I will demonstrate why this is so for our company, and in our opinion for Canada, by setting out three facts.

The first fact is that telephone companies are in competition with cable companies. The second fact is that technologies which previously offered different services are continuing to evolve, and can provide services that compete directly with one another. The third fact is that, when TV signals are provided through a cable system or through telephone wires or satellite, we find ourselves moving into the content business, not into the signal carrying business.

[English]

Coming back to each of these realities, phone companies are in direct competition with cable companies. The path is clear, particularly in this country, by the way. There's more of this. Canada's in a quite advantageous position compared to other countries in the world, but the two types of enterprises are definitely on a path to compete with each other to offer voice, Internet, and television services to compete for the same customers.

The technologies continue to evolve. Digitization is an ongoing process, and it will continue to make formerly separate technologies offer overlapping and directly competing services.

We have, of course, the cable television system used to offer cable modem service in direct competition with the DSL and the other Internet services or telephone companies, and those DSL services are going to increasingly be able to carry video and capabilities that can compete with cable TV.

We have phone companies in Canada that actually hold cable licences, or are applying for cable licences, to run over their telephone wires. Aliant, MTS, SaskTel have cable licences, and TELUS has an application pending.

Conversely, EastLink, in Atlantic Canada, offers telephone service over a cable system, and in the U.S. there is a considerable degree of telephone service offered by Cox and AT&T. So it's not a question of whether, but when the other cable operators in Canada do the same with the technology.

Similarly, in the wireless area, it might be important for me to point out that the screen phone on mobile telephony, which is now digitized, is equivalent somewhat to the home computer that we all had about twenty years ago. Twenty years ago, none of us would have viewed our home computer, which you used to do very cumbersome e-mails and maybe some spreadsheet work, as a multi-media appliance. The World Wide Web didn't even exist in those days. But today that same PC offers video, interactive games, downloading of music. And in a way the mobile phone system is going the same way, and down the line there will be questions as to whether people take up their mobile phone as they do today and want to play Who Wants to be a Millionaire?, but in the future it will be “Do I want to watch CNN Headline News or CTV Newsnet?”

The third reality is that when we offer TV not only over satellite, but over a cable system or over phone wires, we're in the content business. We're not a carrier. A carrier is defined in the Telecommunications Act as being a common carrier, which, as I mentioned when I appeared here before, is a well-established legal concept dating back to canals and railways and road transport even before there were vehicles, horse-drawn vehicles.

There's an established legal concept that says that a common carrier does not choose or influence the content of what is being carried, and when we offer television over our phone wire or cable system, we do something very different. We determine the packages, and the customer chooses, in discussions with us on pricing and all that, whether you get a sports package, a news package, a history channel, etc.

To transpose that to the telephone system, just to illustrate the difference, if we did the same thing in the telephone network as we do in offering cable television, when you use your phone to call your mother or a friend, you'd have to discuss with the phone company whether you're going to be talking about the Grey Cup or about the newscast last night. It wouldn't occur to you that you're even in the same world at all. That's how different the two functions are. And as we go to the world of hundreds of channels and digital channels, there is more influence in choosing on the part of the service offerer as to what people get to see and hear, what's economic, how it's packaged, what gets carried.

When people talk about structural separation to get around the content and carriage issue, people should realize that what they're talking about is separating the cable modem business from the cable TV business, or separating the cable telephone business from the cable TV business, or separating in our case the TV over phone wires from the telephone company. So these are things that are running on the same infrastructure. There would be huge costs in terms of innovation and productivity, and costs for the Canadian system.

Á (1155)

Those are my initial comments, Mr. Chairman, simply to point out these very factual realities.

Thank you.

The Chair: Mr. Courtois, one point escaped me in your address. Are you saying that because of the facts you brought up you have reservations about foreign ownership? You didn't address that question as to whether your corporation is for relaxation of the rules or not.

Mr. Bernard Courtois: The reason I'm making these points and illustrating these realities is to explain why, in our view, there is no easy solution here. You can't say I'm going to do something, carve it out, and throw the rules out here and keep different rules elsewhere. That's why an enterprise like ours looks at this issue and says there is no easy, obvious solution.

The position we have taken before this committee is that we still see a need for keeping Canadian control of broadcasting enterprises, whether they be a phone company offering cable over phone wires or a cable television network. That's a question of control; it's not a question of ownership.

Mr. Elliot, on behalf of CanWest Global, talked about the possibility of relaxing ownership, keeping Canadian control, and negotiating internationally to make sure Canada gets something in return. That would open up the possibility of greater.... In whichever segment of the industry you did that, it could resolve some problems that people have about a particular degree of ownership.

So I don't disagree with anything they've said. It seems to be in accordance with all the principles we'd put forth. But if you go beyond that and give up control, then I think the answers you heard to many of the questions would be quite different.

If you give up control, then you're going to make it a North American market for content. You're going to significantly reduce diversity of voices. You're going to have a considerable impact on the content industry in Canada.

Â (1200)

The Chair: Excuse me, what is your distinction between control and ownership, and how do you see the two being very distinct or not?

Mr. Bernard Courtois: At the moment, we have a requirement for Canadian control and also a specified amount of foreign equity ownership. You can change the specified amount of foreign ownership without changing the control requirement. With an enterprise like CanWest, which is family controlled, you can control an enterprise and still have a large percentage of foreign ownership if it's in diverse hands. Certainly at 49% plus, the requirement for Canadian control, you've opened up from 33% to 49%. Indeed, people should realize the arithmetic here. We talk about 33% at the holding company level and 20% at the operating company level. It could give you a total of 47%. But if you could have 49% at the holding company level and 49% at the operating company level, you wind up with 74% foreign ownership and still require Canadian control.

At BCE, we do not have a proposal. We're still looking at these complex issues. We're not proposing any particular change, but we're pointing out that control is the key element to focus on, and that might give you room to manoeuver on this percentage of foreign ownership.

The Chair: Mrs. McDonald.

Ms. Elizabeth McDonald: Thank you, Mr. Chairman.

Before I make my brief comments on foreign ownership, I'm going to begin by correcting a couple of comments that Professor Fraser has made. I regret that I have to do this. I really dislike doing this in a public forum, particularly since on a number of occasions he has provided us with his expert advice.

Anyway, first of all--

The Chair: Maybe he'll stop blowing his own horn, then.

Ms. Elizabeth McDonald: I'll try to stay on the public record.

Just to correct the perception that Toronto, Vancouver, and Montreal are major production centres like L.A. and New York, Mr. Fraser is talking in the area of service production. That is where, as an industrial strategy, the productions are actually created in Canada, but the economic benefit--the copyright--is held by American companies. If you're going to name Toronto, Vancouver, and Montreal, then you might as well name Sydney and Prague as well. Let's not forget anybody.

Also, there has been a 35% to 40% drop in Vancouver this year, and similarly in Montreal. Toronto is steady. Part of the reason we had a high increase last year was because of labour issues in California. In fact, a lot of those jobs referred to the state of California. Yes, we are active in that area. It is not content we control anyway, so it's comingling information. We should make that clear. It has more to do with an industrial, rather than a content, strategy.

The other side of it is on behalf of one of my 400 members, Alliance Atlantis. They are actually only in production, I think, with one Canadian drama, which is 11th Hour, and another one that they co-produce with Keatley MacLeod, which is Cold Squad. I believe Julia Keatley owns the copyright or it's a shared copyright. In fact, in a lot of areas Alliance Atlantis in the area of Canadian content are doing less. They are actually buying more from Canadian companies.

It makes it sound as if we only have one major company. We have a number, including Corus, who owns Nelvana, Breakthrough, Big Sound, Minds Eye--all of these are growing companies. They're not all mom-and-pop stores, but actually vibrant, growing, what were small and now are medium-sized enterprises. To the best of my knowledge of Canadian history, small and medium-sized enterprises have been important to the development of Canada.

On the issue of Canadian ownership, we are deeply concerned about this issue. We were more concerned last week with the announcement by Mr. Rock, or thought we were, of a review for an ownership. I was at the Innovation Summit and read the documents carefully, and from our perspective it appeared that the review of foreign ownership in that context was only of telecommunications. However, there seems to be some debate about where the cable industry fits into that. The last I saw, they're regulated under the Broadcasting Act, but I'm not a lawyer, as some of my distinguished colleagues are.

I appreciate the care and trepidation that BCE expresses as they go into this issue, but let me tell you what concerns are from the side of the people who create Canadian programming. I think our issue here is that if the delivery system becomes disconnected from it, it is our belief that the content might be affected by it. In fact the content is the heart and soul of the Canadian broadcasting system. What we are saying is there's a clear need for government policy to continue to preserve a secure place for Canadian expression on Canadian airwaves.

One of our concerns with foreign ownership and control is basically once those bodies step into our board rooms, what are their demands going to be? What kind of voice are these shareholders going to have when we start talking about Canadian programming, the type of Canadian programming, etc.? We are here talking under the Broadcasting Act and we are talking about, at the heart of it, whether there is going to be a place for Canadian voices and Canadian stories. Our concern is that those voices will be silenced or be compromised by changes in these foreign ownership levels.

I really think we have to go back and answer those questions. I note some of those. What would be the consequences for diversity of voices in Canada if foreign ownership rules were relaxed? Well, what was the consequence of diversity of voices in the United States when the syndicated exclusivity rules were removed? There are hardly any independents in the United States.

Â (1205)

I'd also say we have to be very careful when we're talking about foreign countries like Australia. There is a huge difference between Australia and the uniqueness of the Canadian broadcasting system. There are differences between us and the United Kingdom and even Ireland.

One difference is that our geography has put us in a particular place. I think most Canadians want to remain as Canadians. I think we saw last year after the Olympics when we beat the American men's and women's hockey teams that Canadians will come out to cheer when we win. I don't think we want to cede our broadcasting system. If we cede our broadcasting system, then we threaten to cede ourselves as a nation.

People talk today about what the young people do. I live with a 15-year-old and a 22-year-old. Indeed, Mr. Fraser is right: they pick their news sources from the Internet. They do watch TV; they watch a lot of TV. They watch it on their computers and in their homes. But they want to know they have access to Canadian stories. They're becoming curious about it, and to a large extent more knowledgeable than any of us are.

They are even concerned about the news sources and probably question them more. While they do have that diversity of sources, they also question the validity of the sources in a way I didn't, and I certainly was the best-educated person for many generations in my family.

I think we have to really step back and question what the impact of this is and try to balance it out. I'm heartened that BCE is looking at it so seriously and understanding that they are in the content business. That content business in Canada is particularly difficult, because geography is what brings in a lot of signals initially. Geography has created a set of circumstances in Canada. We've put together a very delicate system, and at the heart of it we do not want to take it apart, because once we do we will not be able to regain the place.

If we threaten our ability to tell our Canadian stories, then we threaten not only our ability to tell our stories and our cultural role. It's important to understand that in this country between 1997 and 2001 the Canadian film and television production industry grew faster, at a rate of 7.3%, than the overall Canadian economy. While some of that was as a result of certain years when there was activity from Hollywood, it is also because of the increase in activity from Canadian conventional broadcasters and the Canadian specialty services. During that same period there was significant job growth in our sector of 8.2%, six times faster than television and radio broadcasting and more than three times faster than all other industries combined.

I think we have to be careful when we bring up the questions of increased foreign ownership--and, I appreciate, the issue of foreign control as well--and what promises we are willing to make. We have to be certain that if we're going to create cultural separation we really understand what it means and that we can do it. We have to make sure whether, if we're going to accept promises, those promises will last. Are they just short-term promises? And what will be the cost to countries like Canada in the long term?

Thank you.

Â (1210)

The Chair: Thank you very much, Ms. McDonald.

This has been a very interesting panel, for certain—just as interesting as the first one.

Mr. Abbott.

Mr. Jim Abbott: Well, indeed, Mr. Chairman, this has been an exceptionally interesting panel. I would suggest to Ms. McDonald that the economic reality is if we're going to have Canadian voices and Canadian stories they are going to be possible only because of cross-subsidy.

I take Mr. Fraser's comment very seriously that way, because the other alternative is for there to be 100% tax money to fund the Canadian voices and Canadian stories.

Ms. Elizabeth McDonald: Mr. Abbott, I'm not disagreeing that there's cross-subsidy. I don't think it's unusual in other industries as well that companies use money that they make on some product to invest in other products. I think it's totally a normal business practice. I would say also that programs like the Canadian Television Fund that aim at a certain kind of cultural product actually only represent 14% of the overall production, and that there's a significant amount supported by tax credits, which exist in other industries, and which in fact can demonstrate that they actually return more by keeping Canadian jobs working, etc.

The issue of cross-subsidy is not foreign ownership. It's an interesting one and used in many debates on many subjects, but that's now what the foreign ownership argument is about. It's who owns and controls Canadian companies, not where people go and buy product. So I think we have to separate those out and make sure that we're using it correctly. The cross-subsidy issue has been there, but I think we always act in this sector as if we're the only ones who ever do it, that there are no other industries in the country where money comes in one door and pays for another, and those companies are successful overall.

I agree with you. It's a fact of life. I'm not here promoting 100% tax support. On the other hand, I think we have to question whether indeed we want to ensure that we have some kind of distinct Canadian system and what kinds of safeguards and structures have to be there to make that certain. I think any of us agree that if you owned 75% of my house, I would suggest to you that you would feel you have a strong voice in how I decorate that house, live in that house, etc. It's a fact of nature.

I think we have to be careful, if we're going to cede ownership of these companies, to see what that means. I'm saying be cautious. I'm also saying if you give up your broadcasting sector and you don't understand the implications of it, then it's going to be very hard for my sons to come here twenty years from now to try to rearrange the deck chairs on the Titanic.

Mr. Jim Abbott: But I suggest to the whole panel that to try to separate telecommunications from broadcasting today is absolutely impossible. I would suggest that taking a look at foreign ownership, as the industry minister has said he is going to be doing and about which the heritage minister has said she wants no part of, if I understand her position, is absolute lunacy. It just cannot happen.

You take a look at Shaw, which is a carrier--a canal, to use Mr. Courtois' example--and they also own Corus. But I also suggest to Bell, to BCE, that in the same way that you are a telecommunications company, you're obviously very much under the Broadcasting Act as well. To separate foreign ownership is simply not possible between the two enterprises. I would hope that the heritage minister would be able to cooperate with the industry minister and that we would have a joint hearing on that.

Let me put one last question. At the risk of putting Mr. Elliot on the spot, he happens to be the one enterprise that happens to fall into this question. Taking a look at CanWest Global, CHUM, Shaw, Rogers, Quebecor, we basically have very closely held companies. Wouldn't it be true that if there were a move to expand foreign ownership, the owners of those closely held companies would receive a very disproportionate benefit? In other words, given the fact that there is a limited amount of capital in Canada by its very nature, by opening up foreign ownership the owners of those five companies that I named--which, although they are running on earnings, are also running on capital gain or appreciation of assets--would benefit very directly if there were a broadening of foreign ownership because suddenly there would be a market for their very large, multi-billion-dollar equity.

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Mr. Geoffrey Elliot: It seems to me, Mr. Abbott, that the answer to your question may be different depending on which of those companies you're dealing with, and it would depend on whether the current families who control those enterprises are prepared to give up the level of control and equity they now have.

In the case of CanWest, my understanding is that the Asper family has personal holdings in that company that are equivalent to roughly half the total equity, and perhaps it's possible to control the company with something less than that. I don't know. They also have a multiple voting structure in the shares that provides them with a much larger proportion of the voting shares of CanWest and is reflected by their equity.

I can see a circumstance where there could be a strategic partnership with a foreign broadcasting enterprise or investor based on a trading of equity positions.

The Chair: Mr. Fraser.

Mr. Matthew Fraser: You raise a very interesting distinction between closely held companies and publicly traded companies like BCE, for example, where control is not exercised. It's an important distinction because it explains BCE's position on foreign ownership. It is true that Ted Rogers has I think something like 90% of the votes in his company. I presume Mr. Asper has the controlling voting interest in his company. Some have a controlling voting interest with less than 50% of the equity. But family-controlled companies could benefit because if there is foreign infusion of capital and that creates demand for the stock, it could increase the price of the stock. So foreign ownership could not only create benefits from being able to deploy the capital, but also have an inflationary impact on the stock price itself.

When you turn to BCE, it's somewhat different. Bell Canada is a widely held company, and therefore if foreign ownership restrictions were lifted, their situation is unlike that of, say, Ted Rogers. Ted Rogers will decide whether he wants to sell control or not; so will Izzy Asper, so will J.R. Shaw, and so will Pierre Péladeau. BCE is different. Any foreigner could come in and just simply buy the company, and if you look at the size of American phone companies vis-à-vis BCE, it's very easily done. That's why Bell Canada executives are against foreign ownership deregulation, because they know their company is fragile because it's subject to hostile takeovers by large American and foreign companies. There is some self-interest among Bell Canada executives, because they control the company now and with relaxed foreign ownership restrictions they might get bought out. That's the first reason.

The second reason, of course, is the one I elaborated on a few minutes ago, and that is by keeping a low cap on foreign ownership they know that the lack of access to foreign capital of their main competitors, like Sprint, AT&T Canada, and Rogers, will starve them of those benefits and therefore they may fail in the marketplace.

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The Chair: As a comment on what you've said, Mr. Abbott, I think I should explain what the heritage minister explained to me, which was that considering the study had been going on for nearly two years, and that we had announced very clearly we were going to study the question of foreign ownership and the same intervenors appear on both committees anyway, she felt the timing of the other one would only create confusion in people's minds. And what is more, I understand there was a motion presented actually by our colleague, Madame Girard-Bujold, before the industry committee to have a joint hearing, which they rejected.

Our announcement on studying the foreign ownership question goes back nearly six months. We had said we were going to have these panels. I hope the two conclusions coming at the same time will not raise confusion in the public mind. I think this was a point the minister certainly explained to me, that she felt the timing of it, it being at the same time when we're hearing the same intervenors in both committees, certainly leads to potential confusion.

Madame Girard-Bujold, c'est à vous.

[Translation]

Ms. Jocelyne Girard-Bujold: Thank you, Mr. Chairman.

This is indeed a difficult problem, as Mr. Courtois pointed out. I sit on the industry committee as well as this one. After the holidays, we will begin studying Mr. Rock's proposal.

With respect to what Ms. McDonald said about the option of increasing foreign ownership, in my view we will have to safeguard the Canadian and Quebec identity. This is a very important consideration. The distinction has to be made, because it is very important in safeguarding our identity.

In the end, it is a business issue. If we are considering an increase today, it is for business reasons. I understand that BCE does not wish to see an increase in foreign ownership, while Global, I believe, does. There is a balance right now, and we will have to be aware of all the repercussions. Mr. Fraser has, however, given us another point of view.

Under Mr. Rock's proposal, foreign ownership would increase from 20% to 33%. You also stated that Canadians would have to be majority shareholders. You said that you have already invested in many countries, including Australia, Ireland and New Zealand.

At present, what is the foreign ownership percentage in CanWest Global Communications?

[English]

Mr. Geoffrey Elliot: I'm sorry, I'm not sure that I understand the question.

[Translation]

Ms. Jocelyne Girard-Bujold: I mean direct ownership, because there is direct ownership and indirect ownership.

[English]

Mr. Geoffrey Elliot: I don't know the precise amount, but it's a rather small proportion of the total. We do trade on the New York Stock Exchange, but those shares that are traded on the New York Stock Exchange are non-voting shares. So in terms of voting shares, I suspect the current percentage of foreign ownership in CanWest is rather small.

[Translation]

Ms. Jocelyne Girard-Bujold: Go ahead.

Mr. Alain Gourd: My colleague Bernard Courtois talked about Canadian control; he said that we might be able to come up with different formulas for foreign ownership. I'd like to illustrate the Canadian control issue by using French Canada and Quebec as examples, if I may. First I'll talk about distribution, and then about programming.

In distribution, some people suggest that, since Canadians can have controlling interest in foreign companies, such as companies in the United States, then foreign companies, such as U.S. companies, should be able to have a controlling interest in Canadian distribution companies. It's like the fable called The clay pot and the iron pot. In North America, we are the clay pot; we are certainly not the iron pot. Without naming names, we know that the largest cable company in Quebec has been cutting programming services unilaterally. Cuts have affected French-language services like RDS, Canal Évasion—one of ours—and Astral Media's Super Écran. It has gone so far that Astral has refused to continue carrying Family Channel. The issue is before the CRTC. On the one hand, this illustrates Mr. Fraser's point that Canadian companies can establish favourable conditions for themselves, even though they are Canadian. But if those companies were controlled, say, from Dallas, Texas—in other words, from outside Canada—could such problems be dealt with more easily? I don't think so.

With regard to TV programming, I agree with Ms. McDonald. Let's say that the content acquisition policy were decided in Los Angeles: would it be easier to sell French-Canadian content in Los Angeles or in Montreal?

Some might take refuge behind the CRTC regulation, which states that there must be a minimum of 60% in the grid and 50% in prime time, but most conventional channels, like TVA and TQS, in which we have an interest, broadcast less than the minimum. If TVA and TQS were suddenly controlled by foreign English-language interests, such as a company in the U.S., the U.S. owners might well be tempted to reduce Quebec's content to its very minimum and fill the slots with U.S. products dubbed into French. I think that is what would happen.

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Ms. Jocelyne Girard-Bujold: In the past, there have been precedents that have shown us how easy this is for them. That is why I will study the issue very closely when I sit on the industry committee. I'm not ready to tell you that I would automatically agree to increasing foreign content.

Thank you.

[English]

The Chair: Mr. Harvard.

Mr. John Harvard: Thank you, Mr. Chairman.

I think I should perhaps address my remarks to Mr. Fraser. Matthew, let me say off the top, there is a touch of the cultural nationalist in me. I'm not an isolationist, but I'm not absolutely crazy about continentalism either. I find it difficult to discount or dismiss the ownership of all broadcasting, because I happen to believe that broadcasting is not just another commodity. It's not up there with wheat, or women's dresses. I think there's something especially important about broadcasting, because it is in the cultural field. I think it does have a responsibility to contribute to Canadian identity and Canadian national pride.

You mentioned that markets like the U.K., India, and Brazil are opening up their markets, or at least considering opening up their markets, to foreign ownership. I'm not too sure what that says beyond the fact that the United States is the super economy of the world. It's not only the superpower, but it's also the super economy, and the area of broadcasting and telecommunications is in great need of capital. I'm not surprised that it would turn to foreign markets, and particularly to the United States of America, because that's where the money is.

I go back to whether we can dismiss the fact of who owns a broadcasting outlet or who owns a broadcasting network. I think it does count. I don't think owners are cultural eunuchs, and I don't think they're cultural nihilists either. I think there is a part of them that speaks to their nationality, their own citizenship, and their own national pride. I think there is a difference between Izzy Asper of CanWest Global and Michael Eisner of Disney. Sure, they're both business people; yes, they both have to watch the bottom line. But if I had to put my money on one over the other, I'll put my money on Izzy Asper—and it's not just because he happens to come from Winnipeg. Izzy Asper, for example, is an incredible Winnipeg homer—God bless him. He takes a lot of the money he has earned in the business—and he's earned a hell of a lot of money—and plowed it back into his community. I don't know, but maybe Michael Eisner has done the same thing in L.A.

When I listen to you and to Geoff Elliot—who works for Izzy Asper—what I hear is the business case for the industry. I don't think you pay enough attention to the other values that should be so central to the broadcasting system. It's always business; it's always business. Yes, business is important; and yes, in my opinion, profit is not a dirty word. At the end of the day, you have to make a dollar. But there has to be a sense of responsibility to the community and a responsibility to the country. When I listen to you, my feeling is that you don't have the balance right—you just don't. It's too much business.

There's my pontification—my homily for the day.

Â (1230)

The Chair: Are you satisfied with the homily, or do you want to hear comments?

Mr. John Harvard: Oh, I want to hear comments. I want him to blow me away.

Blow me away.

Mr. Matthew Fraser: I'll just make three quick points. I want to talk about culture, and to first talk about two paradoxes. One is the paradox of the cross-subsidy. The other is what economists call the paradox of the national champion. Then I want to talk about your natural market phenomenon.

The paradox of the cross-subsidy in the cultural sector in Canada, which Elizabeth correctly said existed in other sectors too, is that we are cross-subsidizing our industry with the very products that we seem to be hostile to—in other words, American products. In English Canada we find ourselves in this situation where we're cross-subsidizing our domestic production, at a very minimal level, with products from the United States. These products are the problem. This is the paradox of the cross-subsidy.

The paradox of the national champion is the Alliance Atlantis case. We build up big Canadian companies. Or, actually, we make them big, because we—as regulators and policy-makers—designate them, saying “Thou shalt do good deeds”. A company like Alliance Atlantis has benefited from hundreds of millions of dollars in subsidies over the last twenty years. They've done a lot of good things. But the problem with national champions—Bell Canada is another one—is that they move away from those good deeds toward the marketplace, at a certain point. In other words, they move away from subsidies toward shareholders.

If you look at Alliance Atlantis over the last few years, after twenty years of doing a lot of good things, and producing a lot of homegrown Canadian drama, what are their messages? “We're getting out of domestic TV production because it's a drain on our cashflow, and we're going to do more production for international markets, notably the American market.” Indeed, Alliance Atlantis has the number one show on U.S. prime-time television, called CSI: Crime Scene Investigation. It has two in the top ten. The other one is CSI: Miami, I think it is called.

The paradox of the national champion in Canada is that we pump a lot of subsidies into these companies to do good things for Canada, but they eventually abandon us, because they go elsewhere and follow markets.

My third point is on the natural cultural market. I think Alain Gourd is correct to talk about the French-Canadian market. As he pointed out, it's an example of a completely self-regulated market, to the extent that broadcasters will actually program more than the minimum required. Why? There are two main reasons. The cultural idiom in French Canada is so unique, the population is extremely attached to the idiom. So when you have a prime-time show like La Petite Vie, or one of these other shows that's in prime time, they get something like three million viewers per evening.

Alain will correct me. Is that right?

For a population of six or seven million, half of the population is watching one show. There's a tremendous attachment to these homegrown products for cultural reasons.

The second reason is that they have a star system that is extremely successful, mainly because French-speaking stars in Canada can't go to Hollywood, for obvious linguistic reasons. In English Canada, unfortunately—or fortunately for them—we export our best and our brightest talents, the Mike Myers and the Jim Careys. Our best go away and work in the United States. In Quebec it works, so you don't need the regulations.

Â (1235)

The Chair: I should mention that we have to finish at one o'clock. Members have other duties, as I have. Perhaps we could expedite our questions and answers.

Mr. Gourd

Mr. Alain Gourd: I will be very quick.

I want to move from the answer I gave relative to French Canada and try to see if it is germane to English Canada, since I have the pleasure of operating in both markets.

One of the things I wanted to raise when I referred to Vidéotron cable, TVA, and TQS was the importance of control for French Canada. Because if control is somewhere else, inevitably, the products of that other country, translated into French, will creep into the programming.

Is there a lesson we can draw for English Canada? When I started in francophone broadcasting in 1973, which reveals my age, the top shows in Quebec were La Petite Maison dans la prairie, Le Monde de Disney, Bonanza en français, Dallas in French....

One of the reasons it turned the corner was the importance of print, because Mr. Péladeau Sr. started a lot of magazines to promote the star system--and control mattered. He was right there in the market living with these people--the stars, the broadcast outlets, and so on and so forth. I remember that he came to me as a broadcaster to make some partnerships.

If I move to English Canada, one of the things the CAB were reflecting on was how we could improve Canadian content on CTV, for example, or on other anglophone television networks. Will we be in 50 years in exactly the same situation, despite the tax system and the subsidies and everything?

One of the things I'm starting to conclude--and that is maybe one of the benefits of cross-media ownership--is what about print: Shouldn't the Canadian Association of Broadcasters go to the Canadian Newspaper Association and talk about giving more room in Canadian newspapers to promote Canadian films and Canadian television programs? If the chain is controlled in Los Angeles, will they be more responsive than if we can meet the pressure right here in Canada and it's a Canadian chain? I think that control in the community, even though it's tough to quantify, matters.

The Chair: We'll be watching your promotion of the stars in the Globe and Mail from now on.

Mr. Alain Gourd: Indeed, but I think it should be first from association to association.

The Chair: Oh, I see.

Mr. Alain Gourd: That should be all broadcasters and all newspapers.

The Chair: Okay.

Mr. Elliot.

Mr. Geoffrey Elliot: Thank you, Mr. Chairman.

I want to comment on a couple of things that were said by Mr. Harvard and an earlier speaker.

First of all, what's our motivation for seeking a relaxation of Canadian rules? It's not because we want to sell out in Canada; it's because we want to grow internationally.

I listed the number of investments CanWest has in terms of broadcasting in other countries. It's striking that although we're in Australia, the U.K., Ireland, and New Zealand, we're not in the United States. There's a good reason why we're not in the United States: it's because we haven't figured out a way to get there. That's very largely a function of our inability to take a strategic position in station groups or in individual television stations that might become available for sale in the United States because of their foreign ownership rules.

It's not that we want to own them 100%. We want to be in a position not to have portfolio investments but to have strategic investments that will at least give us an opportunity to participate in the management, not necessarily take control. That's been roughly the pattern of the way we have engaged internationally.

It's also noteworthy that while CanWest may appear to be a large media company in a Canadian context, on a world scale we rank something like 43rd. We're in a global media environment that is characterized by the creation of giant conglomerates, all of which compete directly with us one way or another in the Canadian market through the penetration of their products into the Canadian market. If we're going to be able to maintain our presence as a substantial media company, we have to find a way to bulk up.

There's very little prospect for expansion in a Canadian context in television or newspapers because we're already there, and if there's a growth possibility, it has to come internationally. The point we've been making is that our success in defining an international growth strategy depends on better access for our investments in foreign markets.

Now, a number of people have spoken about the distinction between ownership and content. I think it would be fair to say that if you look at the content of the broadcasters we are associated with in various countries around the world, you'll see very little that reflects Canada in the operations of TV3 in Ireland, UTV in Northern Ireland, TV3 and TV4 in New Zealand, or Network Ten in Australia. Partly it's because they run on the basis of local management in the context of local regulatory and other environments, but also importantly it's because they have to be intensely local in their programming.

Where do television stations get their revenues? They get their revenues from advertisers, and that means that they have to guess pretty well and predict pretty well what consumers want to see on television or hear on radio or what have you. If the consumers have a distinct interest in a local product, that's what has to be provided. Certainly we have no idea about the content of news and information programming other than the names of the programs, and we don't have an interest in being involved in that.

Finally, I just wanted to make one more point, and that was on philanthropy. We encourage philanthropy, not just in Winnipeg but everywhere we operate. The $4 million in cash we spend in philanthropic causes annually in Canada is spread very evenly across Canada, although Winnipeg does get its fair share.

Â (1240)

The Chair: We'll conclude with questions from Mr. Bonwick and Ms. Lill, but just before we do so, I was interested in one comment you made, Mr. Elliot. You said that one of the big motivations for the relaxation of the foreign ownership rules would be to permit you to have enough capital to be able to enter markets like the United States.

Perhaps the question we might pose--and I don't say we need an answer right now, but as we go along--would be this. If by any chance the object is to preserve Canadian content.... And I don't make the point whether foreign ownership and control or Canadian ownership and control are linked; we're just trying to find out. But if there were, should that be the priority, versus the other aspect of trying to get into the U.S. market? Would Canadians be saying, “Well, I would prefer not to get into the U.S. market if I could be sure of preserving the other dimension of it, which is far more important to me than a corporation getting into the U.S. market“?

Ms. McDonald.

Ms. Elizabeth McDonald: I'd like to address the issue of when we give up the opportunity to own. You might remember that under Communications Minister Flora MacDonald we attempted to have a distribution policy for the film sector. That attracted a lot of interest from our colleagues in California, to the point at which most of the major studios were grandfathered in.

So I would suggest, before we see too readily or grandfather in foreign owners or invite them into this country, that you go to any local Canadian film multiplex to find out how many Canadian movies are actually in the theatres. I think perhaps in Ottawa we're really lucky. We have Bollywood Hollywood playing in one theatre still, but it's probably hanging on by the skin of its teeth, thanks to James Bond coming back to town.

I think we have to be really careful of what it means. After all, we were all very confident that we would be able to maintain room for Canadian movies and at the same time keep our friends in Hollywood and the United States happy. Well, it didn't quite work out like that.

I don't know how many of you have ever been to Disney World, where you get to see a totally owned system. In Disney World, if you stay in a Disney hotel, you would be in part of a chain that owns ABC, ESPN, etc., and you will find what happens to a cable system there. Every channel, until you get to over channel 60, is owned by that corporate group and in fact is pretty well shut out. So if you happened to not only want to watch Canadian television, which wouldn't be possible, but to even watch The Today Show on NBC, you'd have to be pretty determined to continue trying that.

As a result, I think we have to be careful as we look at what our distribution systems can do. It could become pretty easy either to do what's happening in feature films and only have a much-debated figure of 2% of our screens available. It's probably less in English Canada; I think it rounds out to that with French Canada included. You can lose it altogether, if you're not careful, or we could end up in a situation where there would be Canadian content but it's not clear whether you'd ever find it.

I think there are a lot of warnings here. Another thing in this debate is that we've heard a lot of talk about the change to the foreign ownership rules in the United Kingdom, and we're quite familiar with them. A few things have been missed. One of them, I think, was stated earlier. Part of the issue in the United Kingdom is that they're already open to major companies like Vivendi and Bertelsmann, if they were economically strong enough to buy anything at the moment, so they have large multinationals through the EU, because of the particularities of their membership in the EU.

But the other thing that nobody is talking about is the fact that for the first time the British government is looking at content levels and whether there is going to be enough room for British stories. It's sort of interesting. I can't remember who said they were twenty years behind the times, but I was speaking at the University of Sheffield this year, and I had done some speaking the year before. The year before it was “Oh, we will never have problems with British stories”, and so on, and now people are coming around to see what the opportunities are going to be for British TV programs and British movies, because they are no longer convinced of those ownership levels--that even though everybody now watches Coronation Street, that indeed in ten years they won't be watching Friends or whatever is the substitute for Friends at that time.

So I think even in the United Kingdom, where reality is pushing them this way, they have other situations they are concerned about. I think we have to be careful, before we leap forward, that we don't throw the baby away with the bath water.

Â (1245)

The Chair: Thank you.

Mr. Bonwick and Mrs. Lill.

Mr. Paul Bonwick: Thank you, Mr. Chair.

I notice through this session, and even more so on the previous one, the British model has been used as an example, in general terms and selective terms. For the purposes of the committee, I think it's important for us to recognize that is such a different market.

I'm thinking about the English-language competition within the U.K. versus Canada. I'm thinking about the massively fewer channels that are available within the U.K. versus Canada. I'm thinking about twice the population for that English-based community within the U.K. versus Canada. Most importantly, they have Europe next door to them, with a massively diverse cultural mosaic in place, and we have the United States. They're being very selective in using specific examples within.

From my standpoint--and I'm going to ask for some help on clarifying because of my confusion--I'm looking at two very different issues, as I see them. One is investment versus content and control. We tend to associate control with investment. If we accept the fact that there are rules in place and the status quo will be maintained or enhanced from a Canadian content standpoint, then from my standpoint I'm confused. Help me understand why somebody owning 10% versus 42% versus 33% is going to make a difference if they all have to play by exactly the same rules on Canadian content?

I guess I'm looking for some help for investment versus content control. Maybe you can tell me how attracting foreign investment in the broadcasting industry, if they have to play by the same rules as domestic investors, will have an adverse effect on what Canadians are viewing.

Second, maybe you can expand on how, if we increase the foreign investment level, it will enhance the level of service presently received by Canadians.

I do take exception to two comments. You made a comment, Elizabeth, about making promises, and hopefully they're going to stick to making promises. My understanding is it's not about making promises as much as it is about following the law.

The other point was on being pretty determined to find a channel. In my opinion, pretty determined is me walking from here to the Museum of Civilization, not sitting in my room hitting a button 61 times.

Â (1250)

Ms. Elizabeth McDonald: First of all, I meant following the law. On the issue about the same rules, the regulatory process is an open process. If we move toward foreign ownership, and you say they're the same rules, you're seeing the rules as they are now.

I participated in a hearing in 1999 that reviewed the Canadian television policy. We were going to do more for Canadian television; broadcasters were going to be more responsible, and we were going to tell more Canadian stories. Indeed, there was a lot of talk that the solution for the Canadian system was to be more Canadian.

Since that time--and I guess I should defer to the chair of the CRTC--we've seen a substantial drop in Canadian drama programing. I'm sure you've heard people talk about it. I'm sure you've heard my confrères from ACTRA, the Directors Guild, and the Writers Guild. You've probably heard speeches from Mr. Dalfen on the effect of that changed policy. One of the problems is that based on conditions of licence, etc., there's probably nothing he can do for five years except coerce, hope, and pray, and then we'll find ourselves at another hearing.

It's tough when you're the voice for independent producers. We are basically the voice for people who have market relationships with broadcasters. People are relatively uncertain about going into that forum to say things, because they're worried about how it will affect their business relationships, so they depend on us. We are not just a regulatory group; we actually spend 50% of our time doing labour relations, and we run training programs. We don't have a field of lawyers doing all that stuff.

So you're right, if they have the same rules, but can you guarantee to me that the rules we're talking about now for Canadian levels of content will be in place? I certainly hope the ones for Canadian drama will be much improved. But can you guarantee me that? That's the whole issue with the regulatory process.

Mr. Paul Bonwick: I can't guarantee you that. It's called democracy.

Ms. Elizabeth McDonald: It's not so much democracy. It's not that people vote on it; it's actually a hearing, and an issue often to do with various vying groups coming together. It has a lot to do with the powers you have at the time and the economic wherewithal.

So we can't guarantee that. I don't think we can make the assumption that those existing rules will be there, and we shouldn't worry. Assumptions were made in 1999 by the CRTC that this would actually be good and there would be more levels of Canadian drama. I know from talking to commissioners that they're stunned at how things have evolved.

Mr. Paul Bonwick: Mr. Chairman, if I'm being asked--

The Chair: Let the members.... I think we'd better give a chance to Ms. Lill. We're finishing at one o'clock, Paul.

Mr. Paul Bonwick: I understand that, Clifford, but I also understand you're allotting significant amounts of time at the beginning of the session; as it moves into the last ten minutes, you're saying “you have four minutes”.

The Chair: No, no. You have had a lot of time to speak, just as much as anybody else during this questioning--just as much as anybody else.

Mr. Paul Bonwick: That's not true.

The Chair: I'm sorry, we'll get the clerk to check the time. I think that's very unfair to say. I've given you a lot of latitude, you had all your questions asked, and I think it's fair that the responders be able to intervene.

Monsieur Courtois.

Mr. Bernard Courtois: The point I was making when I talked was that if you had control in foreign hands, you might have the answers to some of the questions. Take diversity of voices in Canada when you're talking about content and markets. If Time Warner Cable buys a Canadian cable operation, AT&T Broadband buys a Canadian cable operation, or CBS, NBC, and ABC operate in Canada, you're going to have a North American market. There are significant economies of scale in this business, and you're not going to have as many diverse sources of information. When you talk about diversity of voices, you're talking about different sources.

Let me illustrate it with the Olympics. You can choose to meet Canadian content requirements by spending your money here or there. Now, the Olympics are pretty expensive, so you have one source of coverage for the Olympics. When you watch the Olympics on the Canadian channel and you watch the Olympics on the American channel, they're happening at the same time in the same place but you're not watching the same Olympics. The American channels will focus on different athletes, different perspectives, and different stories. Here you would have absolutely irresistible forces to have the same feed with the same single sources, so you would diminish the sources.

That's what I was talking about, where you get into control. In terms of the distribution system, if you have a wide diversity of possible digital channels that come on board, what makes you get across the gate or not is whether you're going to have a profitable product; then you can interest distributors in taking it.

Suppose you're sitting in New York City and you owe a favour to your friend from Hollywood or whatever, or suppose you do business with them and they come across and they want to propose a new specialty channel for you. They have a much better chance of having a good, positive discussion with you than someone you've never heard of who comes out of Toronto and tries to propose a new digital channel. You don't owe them anything and so on. That's the kind of thing I was talking about.

Â (1255)

The Chair: Mr. Fraser.

Mr. Matthew Fraser: If you follow Mr. Courtois' logic, then Izzy Asper should be forced to divest of Network Ten in Australia because he's Canadianizing the Australian broadcasting system. Conrad Black should be forced to divest of the Daily Telegraph in the United Kingdom and the Chicago Sun-Times, and on and on. There is no direct linkage between ownership and content.

Take the Quebec market, for example. Mr. Gourd said that if broadcasters in Quebec in the French language were controlled by a Dallas-based company, the outputs might be different. That is completely fallacious. I am presuming that Dallas-based American broadcasters would want to make money in the Quebec market, and the best way to make money in the Quebec market, to maximize profits in that market, is to air programs like La Petite Vie. If they were indifferent to those commercial strategies, they would lose money and have to retreat from that market.

Mr. Alain Gourd: I have to disagree, I'm sorry. I was quoted. If in the Quebec market a U.S. entity owned TVA or TQS, it would show La Petite Vie; it would show the top French-Canadian shows. But when it was average, they would go down to the minimum Canadian content and put on U.S. shows translated into French. That's what I believe. Maybe others disagree, but that's my conviction.

It's the same in English Canada. We're going to add a third drama, in addition to Cold Squad and 11th hour, and we have a fourth in the mill for after Christmas. We have the choice to specialize in drama or in sports on conventional television. We go for drama, but when we look at a drama such as 11th hour, we're looking at a drama for the Canadian market only, which goes back to what Bernard said. If I'm owned by an American, I will take a continental view of that drama, and therefore I'll maybe do U.S. shows for my dramatic series and then fit in other kinds of programming for my Canadian content. That's what I think.

The Chair: Mrs. Lill.

Ms. Wendy Lill: Thank you.

I have found this session very interesting. We have many more in the next couple of weeks. We'll be discussing foreign ownership and media concentration further.

I agree with Elizabeth McDonald about the importance of ownership. If you cede the ownership of your broadcasting system, then you cede your sovereignty. There was a reason why we put this system in place many years ago. The Telecommunications Act and the Broadcasting Act were all set up for a reason.

I think it's important that our committee continue to look back at where we've come from, why we've set up the regulatory bodies that we have, and why they are there. Clearly, they are there to protect Canadian content and identity.

Interestingly, Matthew Fraser talks about there being no direct relationship between ownership and content. You make the very good point that the American ownership of the distribution of the film industry means that we see whatever tiny percentage it is of Canadian films in our theatres. It's a very clear example of what happens when you do not have control over the ownership of your distribution systems.

Mr. Asper was quoted from his presentation in Winnipeg. I wasn't here. You probably repeated it today, Mr. Elliot, that you would like to see the permitted limit for direct foreign ownership to a voting equity of a broadcast licence go up to 49%. Who owns the system in that situation?

If, for example, Time Warner takes over 49% of CanWest Global and maybe 51% is owned by Mr. Asper, I don't know. Ten years or two years down the line that may not happen. The fact is that 49% is a big chunk. Would it not effectively be control of the company?

I don't know whether you think it's important. Mr. Harvard makes the point that he keeps hearing about the business case. I earlier said the same thing that I hear about the business case. The bottom line is we're not here to discuss it. None of us, and I'll even say an NDPer, are against making a profit. We are here to say that we want to make sure the Canadian content is protected. I have no faith that Canadian content would be protected under Time Warner. Mr. Courtois made the point just now.

Again, if the control goes to foreign ownership, are you saying that we still have our content and sovereignty protected? Then again, does it matter?

· (1300)

The Vice-Chair (Mr. Paul Bonwick): I know other people want to speak, but I want to mention that Mr. Lincoln had to excuse himself. He has a budgetary meeting at one o'clock for this very committee, I believe. He extends his apologies for having to leave.

The first speaker is Mr. Elliot.

Mr. Geoffrey Elliot: Thanks very much, Mr. Chairman.

First of all, there has been a lot of discussion about control versus an increase in allowable and permissible foreign ownership. I don't think anybody is advocating, and certainly we were not advocating, giving up control. Whether or not control is given up at 49%, 29%, 39%, or 51% depends a lot on the actual structure of the company. Particularly in the broadcast sector and in our company, where there are multiple voting shares, it's not as simple as that.

I want to reiterate that our point is not about selling CanWest equity to foreigners. I'm not sure that Mr. Asper would be interested in selling any equity at six bucks a share, which is where we are at the moment. It's really about gaining access to foreign markets through the ability, in terms of investment access, to take strategic stakes. Strategic stakes provide participation in management but not necessarily control. That's what we've been talking about.

The Vice-Chair (Mr. Paul Bonwick): Mr. Fraser.

Mr. Matthew Fraser: Yes, on the links between ownership and content that you're talking about, I would agree with Elizabeth McDonald's example of the feature film industry, which has been a failure in this country. As I noted in my opening remarks, we had a situation in Canada where one of the big movie chains, Cineplex-Odeon, was owned by a Canadian company, Seagram's. A major distributor, Alliance Atlantis, has roughly 14% to 20% of the market. Yet there was no boom in the Canadian movie industry during that period. Canadian ownership does not always mean a boom in Canadian content, just as foreign ownership does not mean shutting out Canadian content.

I have one quick point. I would predict that we are actually already going towards a situation where the major broadcasters in this country are already lining up in a North American way with American broadcasters. CTV has an output deal with ABC, which is owned by Disney. Mr. Elliot will correct me if I'm wrong, but Global TV has an output deal with Fox, I believe. We are already seeing a North Americanization of the broadcast network business in this country.

Let's not forget that the CBC receives roughly a billion dollars in subsidies every year. It will always make the Canadian market distinct.

· (1305)

The Vice-Chair (Mr. Paul Bonwick): Mr. Courtois, did you--

Mr. Alain Gourd: If I may, I will intervene, since we were quoted.

Yes, we absolutely have an output deal with Disney, but we have one with Time Warner and with many others. Our policy is absolutely not to be under the control of any foreign supplier. We like diversity of suppliers in order not to be controlled by any.

I also wanted to address the issue of Australia, let's say, as compared to Canada. I think there is a big difference in the case of Canada. We're right beside the United States. The U.S. products come off the air, they come from satellites like EcoStar and DIRECTV. I won't raise the black and grey markets again. They are on cable.

There is a big distance, both geographically and also culturally, between Australia and the U.S. because of the distance. Yes, we are in an era of globalization, but these cultural and geographic distances still play a role. Therefore the pressure from the U.S. is there in Australia, but I think it's much greater in Canada.

The Vice-Chair (Mr. Paul Bonwick): Do you have anything to add, Mr. Courtois?

Thank you. That will conclude today's session. Thank you very much for taking the time.