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Good morning, everyone.
I'd like to welcome everyone here today to the 36th meeting of the Standing Committee on Canadian Heritage. We are here pursuant to Standing Order 108(2), a study on the future of the Canadian Television Fund.
This morning we have three sets of witnesses. I will be keeping our time for questions and answers to five minutes for each person.
At the bottom of the agenda you will notice that we have a couple of notices of motion. I suggest we deal with them on Thursday. At Thursday's meeting we have only one witness, and we will make sure we look into those notices of motion.
Our first witnesses today are from Shaw Communications Inc. We have until 9:45; at 9:45 the questioning will end so that we can get ready for our next witnesses.
I welcome Mr. Jim Shaw and Mr. Ken Stein. Thank you, gentlemen, for coming this morning.
Please go ahead, Mr. Shaw.
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Good morning. Thank you for bringing me and Ken Stein to the proceeding here today. I am CEO and Ken is our senior vice-president of regulatory and corporate affairs.
Shaw's invitation to appear at this committee's examination of the Canadian Television Fund marks the first time this committee has asked us, one of the major funders of the Canadian programming fund, to comment.
Prior to our announcement to withhold CTF funding, few decision-makers cared to hear our views. Our reason for withholding funds has been clear and consistent: the CTF has not delivered on its mandate to support and expand the development of quality television programs that reflect Canada's unique and special nature.
We are here because the issue is important to us and we want to participate in the process of finding a better way to bring more quality to Canadian television in the future. You may disagree with the methods we used to get attention, but I hope you won't disagree with our goal. The Canadian Radio-television and Telecommunications Commission and the government have expressed their desire to deal with this lack of performance of the CTF, and both have engaged in consultation with us and others in the industry.
We are all committed to developing a program funding system that can meet the challenges of competition in the new digital world. At Shaw, our desire for reform rests on three basic principles: performance, accountability, and fairness.
The CTF has not created a strong, self-sustaining, self-financing production industry. The production industry cannot remain completely dependent on the CTF and the CTF cannot forever be dependent on taxing Canadians.
The CTF has not increased viewership for Canadian programming. The CTF has spent $2.3 billion, resulting in only what we will call a few success stories. Can we say this investment has produced positive results?
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Finally, CTF funding was intended to provide leverage to increase private sector spending on Canadian programming. In fact, private broadcasters are now spending more on non-Canadian programming and less on Canadian. For example, in 2005 alone, private broadcasters saw CTF funding increases of $20 million, while their own spending on Canadian programming decreased by $21 million. CTF funding has been used by broadcasters to replace, not expand, their own required funding for Canadian programming. Cable and satellite subscribers are being taxed to support the broadcasters, while they use their own money to purchase more non-Canadian programming.
Let me also speak to CTF accountability. The CTF was created as a public-private partnership, but the CTF is not our partner and it has never been accountable. If we were an equal partner in the process, we would participate in the decisions about how our subscribers' money is spent.
Finally, we would like to see some fairness introduced into the system. We have said repeatedly that we want a funding mechanism that is independent, accountable to those who provide the funding, and responsible for achieving measurable results.
Shaw has met its part of the bargain. We have built a successful enterprise serving millions of cable and satellite subscribers. Shaw's capital expenditures have built a world-class system with a capacity to distribute the greatest number and variety of Canadian and non-Canadian services; increase the penetration and profitability of all Canadian broadcasting and programming services; build a digital capacity to launch numerous and profitable Canadian digital specialty services; provide delivery of high-definition content; and offer unprecedented choice in service to customers no matter where they live throughout Canada, whether in urban, rural, or remote communities. We have 3.1 million customers, and in a short time we have grown from 1,000 employees to 9,000 employees. We have North America's highest Internet penetration and we have launched competition in digital telephony.
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What happened was that in 1993 there was an arrangement through the structural decision of the CRTC to allow systems to decide voluntarily whether to contribute back to a fund or to return funds to subscribers.
People have described that regime. It ended in 1996, 10 years ago. That regime was ended.
Capex was eliminated; the provisions for further capex increases were eliminated. What happened at that point was that the responsibilities for the fund were transferred from the CRTC and their regulatory supervision over to the Department of Canadian Heritage. It then became taken over by the Department of Canadian Heritage. It's quite clearly laid out in the decisions of the commission in 1996-97. It involved funding from the government into that fund, and that was when there was a step taken to make it a partnership.
At that time there was the imposition of a 5% charge allocation on satellites, satellite services, and DTH, and on the cable side a 5% allocation. The community channel was to get 2%, and the rest—the 3%—was to go to the Canadian programming fund or its successors and to individual private funds such as the Shaw Rocket Fund. That was a decision made in 1996.
When people talk about what's happened over the last 13 years, they're describing the first three years, not the last decade.
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I'm going into my second line of questioning, because my tough chair is going to cut me off momentarily.
I would like to go back to the original arrangement—this 50-50 that was the original cable television fund, and I recognize that it has changed since the early 1990s.
Mr. Stein, you were part of that original group that recommended that this was something that was a good deal, because the cable companies got to keep half the bump-up in fees, and the other half went into what was then the cable television fund. As far as I know, that bump-up has never been returned to subscribers, so it seems—There have been numbers put around that subscribers are owed maybe up to $900. I would think you've done pretty well from this arrangement.
You call this an unfair tax, yet you charge subscribers a fee for signals you get for free; you're protected from foreign competition from, say, DirecTv; you have a market value of over $9 billion; you have a seat on the CTF fund; you've been protected and pampered in the market by the CRTC. Now you come before this committee and ask what assurances we, as members of Parliament, are going to give you in order for you to feel that you should bother having to pay your share of what has been part of your licence. I simply don't understand any other business that can dictate terms like that.
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I think Mr. Barrett indicated at the hearing when he appeared that he knew the BDUs had been unhappy for 10 years. I would say that's been the nature of our concern.
There have been various issues. We were concerned about audits, and then we were told the Auditor General was going to do a review, which the Auditor General did—a good review. We've been told that the issues identified by the Auditor General have been corrected, but we don't know how that's been done, or we don't know what the Auditor General's comments are.
Besides, the Auditor General is looking at it from a government point of view, not from a private sector partner point of view. The government has a right to a contribution agreement. We have no such agreement. The government had the right to do an audit. We have no such right. So we're contributing a fair portion into the fund, but it's not a public-private partnership when the government has all the rights and we don't.
Star Choice pays as much into the fund as Shaw Cable does, and over the past number of years—going back to 2004, I think—we've argued that DTH should have two seats on the board.
The board of the CTF—and I don't know what rights the board has to make their own decisions about who is on the board—made the decision that there would only be one DTH representative. Then I was told that they would prefer to have Bell on the board rather than Star Choice, because Shaw was already on the board.
We said Shaw isn't on the board, because our member has been told he can't represent Shaw; he represents the CCTA.
So over the past number of years there has been an ongoing variety of concerns going on, and none of them has been addressed.
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Thank you, Mr. Chairman.
Ladies and gentlemen members of Parliament, Mr. Chairman, thank you for welcoming us here today.
For two years, Quebecor Media has been trying by every means at its disposal to alert all those concerned, whether they be politicians, public servants, regulatory authorities or television industry stakeholders, to the consequences of the radical changes that the digital revolution is causing to the Canadian audiovisual landscape.
Faced with inertia and a lack of reaction, we decided to increase the pressure by suspending our monthly payment to the Canadian Television Fund for 21 days. I am pleased to see that one of the consequences of our action was to convince the Standing Committee on Canadian Heritage to hold special hearings in order to discuss the issue, because I sincerely believe that if we do not react quickly, the Canadian audiovisual production industry is running very serious risks that could result in its suffocation.
First allow me to make a clarification. I'm astonished that this seems necessary, but having read statements that have been reported in the press and the testimony that has been delivered here, I feel obliged to do so.
The monopoly in the cable television sector is no more. It has been replaced, as the legislator wanted during the 1990s, by a highly competitive market in which compete the older cable companies, new players in the sector, satellite operators, telephone companies now operating the service through new technologies, and above all, the Internet, which is becoming the universal means of communication.
In case you are not aware, there are 2.8 million Canadian homes that subscribe to some kind of cable service. The legislator was right to impose deregulation, even though it is far less comprehensive than it should be. In fact, the cable companies are still subject to overzealous regulations which limit their ability to offer better service to consumers and to compete on a levelled-playing field with new stakeholders in the cable sector.
This is why we have publicly encouraged the various authorities concerned on many occasions to carry out to its logical conclusion the thinking that guided the Industry Minister, Mr. Maxime Bernier, and his decision to accelerate the deregulation of the residential telephone sector and to deregulate the cable television sector as completely as possible.
Nevertheless, it must be recognized that the deregulation that has already taken place has served consumers well. Services have been vastly improved, prices are lower and the cable operators are now using their very costly infrastructure to offer new services to consumers and to the population. This is how, for the first time in the history of Canada, Videotron and other cable companies were able to participate in the residential telephone market which allowed for a very substantial decrease in prices.
Another myth I would like to dispel is that by which people believe that the right to broadcast television programs is a privilege, because the airwaves are public property. Do you believe that YouTube.com which has just signed a deal with a major content distributor to broadcast programs in their entirety, or that tetesaclaques.com, a true phenomenon in Quebec, asked anyone to give them the privilege to occupy more and more space in the audiovisual landscape?
Protectionist measures are only possible if the boundaries can be controlled. This is no longer the case. The massive audiences that we could impose a schedule on are no longer there. They are dispersed over the hundreds of new windows. Mainstream broadcasters, like the TVA network, who depend entirely on advertising revenues, are at risk. Audiences are decreasing substantially and ad revenues are following that downward curve. If we do not wake up, these mainstream broadcasters who offer the flagship news shows and public affairs programming will no longer be able to offer these services.
In Quebec, we have the good fortune of the protection of language, which has allowed us to draw significant audiences for homemade productions. Unfortunately, we cannot be fooled into thinking that Quebec is forever protected from this global reality.
The model according to which independent producers do not invest one cent; take absolutely no risk; are totally subsidized by a combination of the Canadian Television Fund, private fund and tax credits; pay 20% of the total production costs; sell single broadcast licences while continuing to hold the broadcast rights through other outlets where we find the audience that we need in order to ensure the survival of an all-purpose broadcaster, that type of model can no longer work. In order to justify the investments that are required to broadcast high-quality programming, a group like Quebecor Media must hold the rights to the products that it airs. We must be able to fully exploit the economic potential of the various types of programming by moving them from video on demand to the generalist network, to a digital network, a downloading site and, finally, to retail DVD sales. That is now the only way to ensure that good quality programming will be economically viable.
With that in mind, the integration of Quebecor Media is no different from what is being done by other large international groups in the entertainment and communications industry. The Canadian Television Fund, which, in the past, did play a constructive role, has not kept up with the digital revolution that has increased the number of broadcasting channels and has broken down barriers.
During the last quarter, advertising revenue at TVA dropped 3.7%. For a single quarter, that is huge. As responsible managers, we must take the necessary steps to adjust our spending to this new reality. I would remind you that Quebecor Media, whose subsidiary, TVA, already spends $109 million annually to produce and acquire Canadian content, intends to hold the line on spending for the coming years. Moreover, Quebecor Media, through its subsidiary Vidéotron, intends to considerably increase its contribution to Canadian programming.
Vidéotron currently contributes $19 million to the Canadian Television Fund and to a CRTC privately regulated fund for the production of Canadian programming.
We intend to increase that amount to $109 million for the next three years. We will meet this commitment to the CRTC by allowing the Commission to sit on the fund's board, which will manage the investment and produce an annual public report.
Before answering your questions, I am appealing to your sense of realism. Our industry is at a turning point. I know that you are clever enough to realize this. If there is one thing that I would ask you to keep in mind, it is that the pace of this change is accelerating, and we no longer have time to discuss it for months or even years. The time has come to act.
Thank you very much for your attention.
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I think you've heard from quite a few people around this table that we agree with you that in fact, with new media, etc., it's getting very difficult to reach audiences, and that protectionism, as you call it, has a difficult time working. But I think it's a pity that you see the idea of Canadian programming and Canadian content as protectionism, because when you look at very viable countries of the world that are seeking to maintain their own culture in this mass communications world—If you look at England and the BBC, if you look at the work that's being done out of England, the work that's being done out of Australia, you'll find that they're maintaining a very strong business.
The question isn't really whether we should be protecting ourselves. The question is how we put money into a fund that will ensure that Canadian content, Canadian culture, maintains its own sense of viability and its own strength in this multi-mass-communications era.
That's a big question. We've heard people say what went on, etc., and now we're putting the money back into the fund.
We heard earlier on from Shaw that they felt they had some problems. They needed an audit. Well, obviously the Auditor General's audit doesn't seem to cut it.
The big question here is this. I would like to hear some really positive solutions, because I think the idea that we're going to do away with the Canadian Television Fund and that we're all going to float ourselves out into the ether isn't going to happen. We all want a strong sense of Canadian culture, Canadian programming.
Of course, language is important. Quebec has the ability to keep its head above water because of its language. We're probably the only people in this hemisphere who can maintain good, strong, French language programming. However, the point is that we need to be able to ensure, because we live so close to the U.S., that we have a strong program.
I want to hear some positive solutions showing that you are committed to maintaining a strong CTF and a way of ensuring that we're producing quality product. If you can give me some of those answers, I'd like to hear them.
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We had one. We've been proposing a solution.
Since the objective of the law is to contribute to the Canadian programming industry, I don't think there is an obligation to contribute to a fund; the obligation is to contribute to the Canadian programming, or the Canadian broadcasting system.
That's why we're proposing that on top of what we are actually contributing to the Canadian fund, we'll add to it, for a $30 million contribution per year, and we're ready to make a commitment for three years of over $100 million. I think this is a real solution.
In fact, we will contribute better to the industry and at the same time we will not contribute to a bureaucratic structure that is saying, “Well, this is a weekend.” We have a bunch of people who say, “We can fund this through CTF and this we can't fund.” Who are they to be able to get what is good for Canadians?
What we are suggesting is to improve and increase the financial contributions to Canada's broadcasting system and, more particularly, as you may suspect, to the Quebec French-language space where most of our activities occur. You said earlier that 16,000 jobs were in jeopardy. We have no intention of jeopardizing these jobs, on the contrary. With the additional funding that we intend to inject in the industry, there might even be an increase in the number of jobs.
We want to ensure that the francophone side of Canada's broadcasting system is solid. We are aiming to occupy all of the audiovisual environment, which is no longer limited to television alone. There were previously two large entertainment and information media: newspapers and conventional television. That was the environment in which the Canadian Television Fund was created. That environment has exploded.
Because of today's distribution channels, audiences that once watched only conventional television have moved, and our advertising revenue has followed them.
Do you think we were happy about cancelling the heavy series called Vice caché? Along with my associates and my family members, I watched the series and thought that it was very well done. Unfortunately, we were not able to fund it because the audience, which started out at 2 million, dropped to under 1 million.
The program is as good as any American one. We could compare it to Desperate Housewives that the CBC has bought to air on its network. Unfortunately, we no longer have the financial means to produce Vice caché because the audience has moved to other channels. Rest assured that we intend to maintain a high level of funding for Canadian programming.
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In your preamble you spoke about protecting Canadian culture, something that is quite noble and beyond reproach. The problem is that it no longer works.
How are you going to prevent YouTube and its ilk from entering Canada? I don't see how you can prevent these new and very powerful universal communication tools from entering Canada.
My colleagues at Shaw did not want to venture too far in their analysis of the francophone market. As someone who has spent a lot of time in English Canada and who has a great deal of affection for the country, let me say this. Jim Shaw referred to CSI. Last week, someone told me that at least half, and maybe more of the production crew who work on 24, one of the most popular programs in the United States, was Canadian.
That also reminds me that in 1992, the CRTC decided that the song Everything I Do, by Brian Adams, was not Canadian. However, the composer was Canadian, the lyricist was Canadian and the singer was Canadian as well. Everything about it was Canadian, but according to some technocratic grid that was devised by who knows who, it was decided that one of the best-selling records in the history of music was not Canadian.
I find that very hard to deal with. It speaks of an attitude whereby we must protect ourselves because we are not good enough. I think that English-speaking Canadians are just as good as the Americans. Moreover, when given an opportunity, they produce exceptionally high-quality programming. Programs such as 24 and CSI are prime examples.
Look at how many Canadians are in Hollywood and New York. I wonder if it isn't the system itself that forces Canadians to go elsewhere in order to produce their programs.
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I'll start by answering the first question. What was the purpose of the legislation? What was the legislator seeking to do by creating obligations for the cable distributor which was, at the time, a monopoly? Well, this monopoly has completely disappeared. As you know full well, Canadians benefit from a communications system that is this effective because billions of dollars were invested in it. Mr. Shaw referred to that.
The same applies to us. We invested $750 million in Videotron. We will also be investing $1 billion over the next three years to ensure, once again, that Canadians may enjoy the most recent technologies, a competitive environment and telecommunication services at the most competitive prices.
Originally, the objective of the legislation was to contribute to Canadian programming or to what was referred to as the Canadian broadcasting system. Well, that's exactly what we want. We want to do so more effectively than the bureaucratic structure which is in place currently does, but because of the persnickety rules in place, it has been more of a hindrance than anything else.
My colleague Mr. Lavoie mentioned it earlier. It's been a while now that we have been raising the issue of new platforms.
Why isn't the Canadian Television Fund able to think further ahead than this? For a very simply reason: independent producers are not interested in it. They are not interested in ensuring that new distribution channels are strong—for the Canadian industry as a whole and over the medium and long term.
Why would an independent producer, receiving 20% of production costs, and therefore having no real financial incentive to create quality products at the best possible cost be interested in changing the system? There is no incentive in it for him.
You need to know that what triggers the CTF contribution is the general-interest channel, only if it holds a broadcasting distribution licence on the general-interest channel. Any other distribution licence would only hold up the triggering of the CTF contribution. These are technical details, but they are extremely important. Unfortunately, that is where the problem lies.
Good morning Mr. Chairman and members of the standing committee. My name is Glenn O'Farrell and I'm the President and CEO of the Canadian Association of Broadcasters. With me today is Susan Wheeler, the CAB's Vice-President, Policy and Regulatory Affairs (television).
We thank the standing committee for inviting us here today to discuss the Canadian Television Fund, the CTF.
[English]
Mr. Chairman and committee members, our remarks today address three points: first, the role of the CTF in the regulatory framework for Canadian programming; second, the future direction of funding mechanisms and the importance of keeping pace with changing realities in the broadcast and communications sector; and, third, short-term measures that should be taken to restore stability in the current funding model for Canadian programming and help identify longer-term solutions as well.
The creation of the CTF in 1996 as a private-public partnership was, in our view, a very clear expression of political will to build and support a strong foundation for the creation of distinctively Canadian programming in English, French, and the aboriginal languages. This political will remains strong, as evidenced by the renewal of the government's $100 million contribution. In fact, we note that in the midst of the current discussion, the Minister of Canadian Heritage demonstrated this government's significant support for the production of Canadian programming by announcing another two-year commitment to the CTF ahead of the regular budget cycle.
Canada's private television broadcasters thank the government for this tangible expression of confidence in the industry's ability to deliver on key cultural and industrial policy goals that are relevant to Canadians and that help foster our regional and national identities.
To fully appreciate the role of the CTF in the broader regulatory context, we think it's important to correct the record on certain issues that have perhaps been misinterpreted or misrepresented in recent weeks. First, private television broadcasters are, without question, the largest investors in Canadian programming and have continued to increase their investments year after year. If you take 2005 alone, Canada's private television broadcasters invested close to $1.4 billion in Canadian programming, such as drama, comedy, sports, and public affairs content.
Secondly, under current policies, private broadcasters do not receive money directly from the CTF. Yes, the CTF provides funding to independent producers in the form of a licence fee top-up and equity investments after securing a broadcast licence commitment. While audiences to Canadian programming must be a key priority, it is also important to note that the CTF investments in Canadian programming support the entire creative industry and cannot be measured in audience numbers alone, albeit they are important. As the CTF stated in its appearance before you last week, for every $1 spent by the CTF, another $3.50 in production spending is triggered.
Jumping to third, the CTF does indeed fund programs Canadians want to watch. Let there be no doubt that the pooling of public and private resources in the Canadian Television Fund has yielded impressive results by any standard of measurement in the form of quality Canadian programming that speaks to audiences of all ages from all regions of the country.
We should be very proud of this public-private partnership and its success in helping the industry advance the nation's cultural policy goals. We think it truly is an example of cooperation other jurisdictions should and can learn from. Although there is no question that building audiences for Canadian dramatic programming in English Canada remains a significant challenge, CTF-funded programs in both official languages are among some of the most watched and loved programs private broadcasters have to offer. Don't take my word for it. Let me give you some factual examples.
If you look at CTV's movie of the week, One Dead Indian attracted over one million viewers, and its documentary, Ice Storms: Scandal at Salt Lake, garnered 1.2 million viewers. Its regular series, DeGrassi, is Canada's most watched English language drama series and is sold in 150 countries worldwide. On Showcase, the cult hit Trailer Park Boys—-we've all heard of it—attracts total audiences of 1.5 million viewers. This is a truly successful story. Not only is Trailer Park Boys carried internationally, demonstrating its resonance both with Canadian and foreign audiences, but the series also led to the spinoff of one of the top grossing Canadian feature films ever, with a total box office in Canada of $4 million. CHUM's Godiva's and Charlie Jade are other examples. Global's new dramatic series, Falcon Beach, launched to a national audience of 575,000 people. Of course, Canada continues to be a leader in the production of children's programming, with popular kid shows, such as Tree House's Daniel Cook and YTV's Jacob Two Two, both ranking regularly among the top ten programs for their demographic and producing a number of spinoff initiatives, including a children's book series and DVDs.
It's not just the larger stations that have been able to find significant audience for their CTF-supported programs. Many other specialty channels, including services like the Aboriginal Peoples Television Network and religious broadcaster VisionTV have had success in building audiences in Canadian programming.
[Translation]
French-language broadcasters have enjoyed remarkable success with Canadian programs which are normally among the top 25 most watched programs in Quebec.
The CAB also noticed that 10 out of the top 25 most watched programs in Quebec were funded by the CTF. And this success is across all genres of programming. 50% of viewing to children and youth programming in the French market is through CTF-funded programs and CTF-funded programs capture 37% of all viewing to drama programming in prime time and 59% of all viewing to variety and performance arts programming. Here are some numbers.
TVA's CTF-supported drama such as Nos Étés and Laura Cadieuxwhich are the most popular in Quebec, consistently attract average audiences of 1.2 to 1.3 million viewers each week.
TQS has also had tremendous success with its CTF-supported sitcom 450, Chemin du Golf and Bob Graton, ma vie, my life which attract average audiences of 600,000 and 1.4 million viewers respectively. French-language specialty services have also been successful in attracting audiences to their CTF-supported programming.
Canal D's documentary programs Un tueur si proche and Danger dans les airs attracted average audiences of 358,000 and 272,000 respectively while TV's youth programs Une grenade avec ça? and Dans une galaxie près de chez vous attracted average audiences of 448,000 and 481,000 respectively.
Impressive numbers for a market of only 6 million. It is also important to note that in today's French-language market, audiences to Quebec-based productions far surpass those to foreign programs. In order to remain competitive broadcasters will need the ability to provide content across all distribution platforms and the flexibility to pursue various programming strategies that reflect their operational environment and business needs.
Our second point is that funding mechanisms must keep pace with changing market realities. All licensed broadcasting undertakings have a responsibility to support Canadian programming as part of their regulatory covenant, a stated objective of the Broadcasting Act. This includes DTH and cable undertakings, which have benefited greatly from the regulation of the sector.
No one player can decide to unilaterally withhold payments when it no longer suits their purpose. Broadcasters make commitments to Canadian programming based on a larger regulatory framework in place for the industry as a whole, including available funding mechanisms such as the CTF. Clearly, a regulated system, in order to operate in an orderly manner, requires all players to play by the rules. The minister made this point when she appeared before you, and it was reinforced by the chair of the CRTC in his public statement last week.
Having said this, the CAB certainly sees merit in having a public discussion that evaluates the use and effectiveness of contributions from government, distributors, broadcasters, and of course producers of Canadian programming.
We note that the chairman of the CRTC has already indicated that this is an issue worth further study. However, the CAB suggests that such a discussion should not be limited to the regulated environment, but widened to include a broader dialogue on how all players in the system, regulated and unregulated, can contribute to furthering Canada's cultural and industrial policy objectives.
We live in an extremely fast-changing media environment that experiences new content and distribution choices being made available to consumers every day, an environment in which regulated and unregulated media compete head to head, all vying for Canadians' time and attention. To put this into perspective, the attached charts that we provided to you today provide a snapshot of the regulated environment to 1996. We've provided the breakout in the English and French language markets. We've also provided a snapshot of the media landscape today, in 2005-06. Clearly, these charts testify to the radical change and fragmentation in the media landscape.
Now consider the plethora of unregulated media also available to Canadian consumers and operating in the same space, including services like MySpace and YouTube, which we've heard so much about lately.
The first step the CAB recommends in evaluating the public–private partnership in this new reality should include a comprehensive and inclusive review of how funding mechanisms can keep pace with changing market conditions, so that they will assist the industry in remaining competitive, not only at a domestic level but also globally. Without question, the first principle of this review must be the creation of great Canadian programming that attracts audiences on all platforms.
Glenn.
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The CAB is pleased with Quebecor's recent announcement that it will reinstate funding to the CTF until there is an opportunity for the CRTC to consider the Quebecor proposal for a new fund.
You discussed it with them at some length this morning.
The CAB is also pleased to hear Shaw's testimony this morning, announcing that it was reinstating its payments to the CTF.
As stated earlier, the CAB agrees that ongoing evaluation and consideration should be given to production funding mechanisms to ensure they are keeping pace with the changing realties of the broadcasting and communications sectors.
From a public policy perspective, however, the CAB believes it would be more constructive to broaden the discussion to include the role of all television production funding mechanisms and not just those proposed by individual licensees. To this end, the CAB believes there are two specific measures that should be taken to address the uncertainty caused by recent events and provide a framework for a longer-term solution.
First, in pursuit of the longer-term solution that addresses the concerns that we and others have expressed—and you've heard testimony here again this morning and in previous hearings of this committee—production funding mechanisms need to keep pace with market changes, and this is top of mind. We recommend that the government use its power under section 15 of the Broadcasting Act to direct the CRTC to hold a hearing and/or make a report on matters related to production funding mechanisms. This initiative would ensure a more fulsome discussion of the role and impact of funding mechanisms on all players in the system. In other words, what are we going to fund, by whom, and for what purpose?
In the CAB's view, this would also send a clear message that individual licensees alone should not and cannot dictate the future of the regulatory framework. This review should produce clear policies and recommendations for government to consider regarding the future direction of proposed production funding in both the English and French language markets. In particular, given recent discussions, we need to revisit the eligibility of public broadcasters to available production funds, such as the CTF.
In addition, given the degree of fragmentation, which the charts we were pointing out to you earlier clearly demonstrated, the emphasis must squarely be placed on audience, not on who makes the content.
To this end, the proposed review should also discuss the eligibility of affiliated producers to available funding mechanisms. The CAB suggests that if the section 15 approach is adopted, it should be undertaken before the commencement of the next broadcast year, which, as you know, begins in September 2007.
The second initiative that we suggest this committee consider is that under paragraph 10(1)(k) of the Broadcasting Act, which gives the CRTC the power to make regulation in furtherance of the objectives, the CAB strongly urges the commission to take immediate action to amend the broadcast distribution regulations to codify payment schedules by distributors to independent production funds.
This action would clarify the payment schedule and provide further stability to the Canadian television production sector. The CAB's understanding is that these amendments could be affected expeditiously within a 60-day timeframe, taking into account all relevant procedural considerations.
We understand that the commission's new chairman indicated as much last week, or at least gave an indication of his willingness to consider that.
We hope the committee will support us in our call for these two immediate short-term measures.
The CAB thanks the standing committee for the time and the welcome that you've afforded us this morning, and we would be pleased to try to answer any questions you may have.
Thank you very much, Mr. Chairman.
We think it is critical, because, frankly, the situation we have just experienced over the past number of weeks shows how volatile and how fragile the system is. Having said that, I don't think we can sit back and just assume that all will unfold, as you've indicated, in the most stable of circumstances.
The reason why we suggest that the regulation should be amended is to provide that stability initially. I believe the new chairman has indicated a willingness to do that. A recommendation from this committee would be helpful in taking that further.
The next point, though, and one that is more perhaps critical on one level but equally critical on another, is where we go from here. We stabilize these regulations or we make the payment schedule more clear, but where are we going from here? We think the government has the opportunity, under section 15—it has been done in the past—to ask the commission to consider some questions of implementation of policy or questions regarding the development of policy and to report back.
Most recently, the commission was asked by and government, under the recent order in council, to do a fact-finding mission on the changing realities in the broadcast landscape. Equally important is a precedent that is perhaps more germane to this issue, and that is one that goes back to 1994, when Order in Council P.C. 1994-1689 was issued by the then government. It asked that the commission look at the question of telecom interoperability and the interconnection between telecom networks and cable networks, with a view to implementing more interoperability between the two in order to offer consumers more choice. The commission issued a report, conducted a process, and reported back to government, and government acted on implementing changes.
We think it's all about where we go from here, fixing the short term by way of the regs, but then, from there, bringing a process together quickly to look at all of these proposals and some of the questions. We need a tangible vehicle, which is why we've made this suggestion.
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We are spirited defenders of Canadian programming because we have a lot of skin in the game. Broadcasters have the most skin in the game. We said in our presentation that if you look at the contributions made by way of financial measures, broadcasters surpass any other sector by virtue of $1 billion-plus per year in the last year on record.
Is it attracting all the audiences that we would hope it would, and is it as successful? In an ideal world, of course, one would always say there's room for improvement, and we hope to strive toward attaining those more lofty goals of higher audiences for all program categories. But I would simply go back to one reality to hopefully guide your committee in thinking about these things.
If this committee, just for a moment, spent only five minutes in absorbing what these four charts tell you, the four charts basically are defined to show 1996—at the creation of the fund—and last year. They provide a picture of English language television then and a picture of English language television now. The same is true for the French sector, then and now.
The charts give you a sense to absorb the degree of fragmentation that has developed in the system. I think you would then be capable of moving onto the next step, which is where we do go from here in light of that fragmentation.
I would add one additional comment, Mr. Chair. This is the regulated system only. It takes nor makes no account of unregulated services that are equally vying for Canadians' attention in growing numbers.