VARIOUS BROADCAST APPLICATIONS /

PLUSIEURS DEMANDES EN RADIODIFFUSION

HELD AT: TENUE À:

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Portage IV Portage IV

140 Promenade du Portage 140, promenade du Portage

Gatineau, Quebec Gatineau (Québec)

November 4, 2004 Le 4 novembre 2004

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

BEFORE / DEVANT:

Charles Dalfen Chairperson of the CRTC /

Le président du CRTC

Andrée Wylie Vice-chairperson /

Vice-présidente

Ronald Williams Commissioner / Conseillier

Joan Pennefather Commissioner / Conseillère

Stuart Langford Commissioner / Conseillier

ALSO PRESENT / AUSSI PRÉSENTS:

Pierre Lebel Secretary / Secrétaire

James Wilson Legal Counsel /

Conseiller juridique

Lynn Renaud Commission Staff /

Peter Foster Gestionnaires

HELD AT: TENUE À:

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Portage IV Portage IV

140 Promenade du Portage 140, promenade du Portage

Gatineau, Quebec Gatineau (Québec)

November 4, 2004 Le 4 novembre 2004

PAGE / PARA

PHASE II

INTERVENTION BY / INTERVENTION PAR:

Catholic Youth Studio and the 904 / 5212

Oblate Fathers of Assumption Province

Canadian Independent Record 915 / 5264

Production Association

CKUA Radio Network 951 / 5407

Canadian Recording Industry Association 974 / 5526

Society of Composers, Authors and 995 / 5627

Music Publishers of Canada

Canadian Music Week 1012 / 5688

SONOGRAM 1021 / 5730

l'ADISQ 1045 / 5879

Rob McArthur 1068 / 5979

Patricia Silver 1087 / 6078

Forerunner Global Media Inc. 1094 / 6116

Indie Pool Inc. 1101 / 6146

Just for Laughs 1110 / 6203

David Bray 1115 / 6225

Ben Miner 1122 / 6261

School of Creative and Performing 1126 / 6294

Arts of Humber College

Susan Aglukark 1131 / 6339

Jeff Healy 1133 / 6356

PAGE / PARA

PHASE II (cont.)

INTERVENTION BY / INTERVENTION PAR:

Frank O'Dea 1139 / 6393

National Campus and Community 1143 / 6418

Radio Association

CHIN Radio International 1165 / 6482

PHASE III

REPLY BY / RÉPLIQUE PAR:

CHUM Limited and Astral Media Radio Inc. 1172 / 6504

Canadian Broadcasting Corporation and 1207 / 6633

SIRIUS Canada

Canadian Satellite Radio Inc. 1238 / 6770

Gatineau, Quebec / Gatineau (Québec)

--- Upon resuming on Thursday, November 4, 2004

at 0930 / L'audience reprend le jeudi 04 novembre 2004 à 09 h 30

5205 THE CHAIRPERSON: Order, please. À l'ordre, s'il vous plaît.

5206 Good morning. Bonjour.

5207 Mr. Secretary, would you call the next item, please?

5208 THE SECRETARY: Thank you, Mr. Chairman.

5209 But before I do, for the record, I would like to indicate that intervenors number 4, the Canadian Music Publishers Association; number 7, Mr. Dan Kurtz; number 22, Samantha Parton; and number 25, Veda Hille, will not be appearing. Those interventions will remain on the record as non-appearing interventions.

5210 So we will hear the Catholic Youth Studio and the Oblate Fathers of Assumption Province, Mr. Kenning Marchant.

5211 You have 10 minutes to make your presentation.

INTERVENTON

5212 MR. MARCHANT: Good morning, Mr. Chairman, Commissioners.

5213 Catholic Youth Studio has produced Catholic radio in Toronto on AM 530 for the past 10 years. It has been an applicant before you for a full FM licence.

5214 The missionary oblates have made a distinguished contribution to Canada for over 150 years. They help negotiate treaties with First Nations. They founded the University of Ottawa. The Queen of Apostles Renewal Centre has been a centrepiece of the ecumenical movement in Canada for 40 years. A current priority of the oblate fathers is the expansion of Catholic radio and religious radio, generally.

5215 They are partners with other Catholic media, including Salt and Light Television and the Social Communications Committee of the Canadian Conference of Catholic Bishops.

5216 My brief is in three parts: one, the applications; two, religious programming and subscription radio; three, access for Canada's largest denomination, Roman Catholics.

5217 The three applications before you are not ordinary applications for broadcast undertakings. They are applications for programming control of two entire sectors: satellite radio, in the case of XM, CSR and SIRIUS, and national digital radio, in the case of CHUM-Astral.

5218 I submit that the CRTC would not licence the Canadian cable line-up to, say, Viacom as long as a few Canadian channels were included. That would be very difficult to reconcile with the objectives of the Broadcasting Act. Yet, that is what CSR asks for satellite radio.

5219 The Commission wouldn't license all of direct-to-home television to, say, Turner Broadcasting simply on condition that they carry CBC, Radio-Canada and another Canadian channel. Yet, that is what the SIRIUS application asks.

5220 And the Commission would be unlikely to turn control of the FM dial over to a single programmer. Yet, that is what the CHUM-Astral application asks for national digital radio.

5221 We urge you to deny all three applications in their present form.

5222 We urge you, first, to call for submissions on satellite options, and then call for fresh subscription radio applications, applications that will make Canadian subscription radio like Canadian subscription television, whether cable or DTH, offering some non-Canadian services, to be sure, but a predominance of Canadian channels and a diversity of Canadian channels to reflect and connect Canadian cultural diversity.

5223 Some of this must await new technology. We submit that the advantages of getting the right structure for Canadian subscription radio warrants such prudence. For example, you have been told by applicants that a Canadian satellite for subscription radio is too expensive. However, our technical advisers say that a Canadian satellite partnering radio, video product, telephony and military uses could well be economically feasible, but it has yet to be explored.

5224 The satellite frequencies for Canada have the technical advantage of portability. This would support multiple uses in a spread-out country like ours. Indeed, if subscription radio is not available to support such a satellite, that would undermine viability for other uses.

5225 We urge the Commission not to limit the future options for Canadian subscription radio. As Lady Macbeth says in the closing act of Macbeth, "What's done cannot be undone".

5226 We urge the Commission, in conjunction with Industry Canada and Telesat, to invite submissions on future satellite options for Canadian needs as Industry Canada has just done in its October 21 public notice.

5227 With respect to national digital radio, we urge the Commission to retain licensing control of individual channels. This will ensure fair access for a variety of Canadian services. A single programmer should not control an entire radio sector.

5228 An important part of Canadian cultural diversity is religion. There is a wide variety of religious faiths in Canada. Whether or not we are religious people, religion is the source of many of our most important social values: respect for the dignity of human beings, caring for others, respect for the wisdom of those who have gone before.

5229 Now, and throughout the ages, the most beautiful music is inspired by two sources, human love and religious faith. They are not in contradiction.

5230 The best selling book of all time is the Bible.

5231 The Canadian Charter of Rights and Freedoms begins with these words:

"Whereas Canada is founded upon principles that recognize the supremacy of God and the rule of law."

It goes on to say:

"Everyone has the following fundamental freedoms: (a) freedom of conscience and religion...",

yet our broadcasting system is overwhelmingly secular in its program offerings.

5232 In most of Canada people can choose their favour music, news, talk or sports. What most cannot find on their radio dial is their faith.

5233 Catholic radio saw subscription radio as the answer to this. Subscription is about paid choice; however, people cannot choose if they do not have access. And when Catholic radio approached the applicants before you, we were told, "THERE IS NO ROOM AT THE INN".

5234 XM and SIRIUS already carry U.S. faith-based channels, but there will be no place for Canadian religion. With respect, we think this is wrong. Subscription radio should offer a menu of Canadian religious channels, ideally, as many as can pay their way. At a minimum 5 or 10 in a 50- or 100-channel offering. Surely, 90 per cent secular is enough.

5235 Catholic radio argues for other faiths to be included for a very simple reason: it believes there should be collaboration and less isolation among religious groups. For example, our application for Catholic radio in Toronto included regular time slots for other faiths.

5236 This brings me finally to the access needs of Canadian Catholics. Roman Catholicism is, by far, the largest denomination in both French and English Canada. Roman Catholicism is also multi-lingual. Mass is celebrated in 35 different languages in Toronto each week.

5237 Almost 13 million Canadians identified Roman Catholic as their faith in the 2001 census. That's 44 per cent of the population.

5238 Catholic support and maintain local parishes across Canada. They support Catholic schools in every province. They support Catholic charities. They support Catholic events like World Youth Days or Catholic Radio's Gala Concert for the Papal Silver Anniversary.

5239 Roman Catholics need and would support national radio access in both official languages on digital or satellite or both. If even 1 per cent of Catholics subscribed, that would be 130,000 subscribers. We think some multiple of that is more probable.

5240 So Catholic radio would provide significant lift to any Canadian subscription radio service, so would programming for other faiths. And Catholic radio has specific success in targeting the youth demographic. Yet, religious channels are excluded from all three applications.

5241 Commissioners, we need your help in establishing a fair, firm and Canadian foundation for subscription radio. None of these, with respect, are provided by the proposals before you, so we urge you to deny these applications. We urge you, instead, to call for applications which will make Canadian subscription radio look like Canadian cable and DTH television: predominantly Canadian, with access for a diversity of Canadian programming, in both official languages and third languages and including Canada's religious faiths.

5242 Thank you.

5243 THE CHAIRPERSON: Thank you, Mr. Marchant.

5244 Your oral presentation was very clear, as were the two written submissions. The only questions I have are in respect of your comments on page 5 of oral presentation today. We refer to your technical advisers. I take it they are not here with you today.

5245 MR. MARCHANT: No. Principally, I'm referring to Pit Bull of Bolsen Consulting, who we use regularly. He, in turn, had some conversations with others.

5246 I might add that the points that are made here, I might just support those briefly with this, that I understand XM is planning--or is providing some video product on its distribution system.

5247 I guess it's our contention that this just simply hasn't been looked at. And I would note that the conclusion drawn in the public notice of Industry Canada, that it's not likely to be available in the future, isn't supported by any particular documentation.

5248 THE CHAIRPERSON: Right. I guess the issue is that very often, when a licence is being applied for, and particularly where new technologies are involved, the Commission is told about future possibilities.

5249 Our problem is we have applications here today and so the viability and likelihood of future possibilities, to the extent that these are raised in intervention, it would be useful to be able to probe that a bit, as to when, where, how, what and cost.

5250 MR. MARCHANT: Well, I'm certain that such a feasibility study could be done. I'm sorry that it isn't something within the resources of my client to go and do.

5251 I might add this point that I think is relevant but a little different, that the Commission did make a call for applications for this general category of thing and what it initially invited were indications of interest. It received -- because I was involved in that -- some indications of interest simply for program services. Those applicants were encouraged to withdraw because the Commission simply wanted to consider ones that had their own distribution system with them.

5252 I assume that the Commission's intent was not to foreclose access to these two huge categories of programming for Canadians, but that would be the effect.

5253 I guess with respect, Mr. Chairman, I think particularly given that Industry Canada has called for public comments -- and I am certainly going to encourage my client or my clients, I might say, to respond to that and to challenge the contention that it is not likely to be available.

5254 I don't know whether my clients can carry the full burden of it, but I would urge the Commission to join in that approach because I think the stakes for the national interest and for this category are sufficiently important to warrant that prudent delay.

5255 THE CHAIRPERSON: I guess we will look to that proceeding. As I indicated in the opening remarks at this hearing, the issue of a change or not in Canadian satellite policy is very pertinent here.

5256 On access of course -- I don't know whether you were present at the questioning of the applicants, but the issue of access has been raised with all of them and in two cases they are applying as distribution undertakings, in the third case the applicant indicated that it would be prepared to be considered a distribution undertaking even though it is applying as a programming undertaking, and the issue of access was raised with it as well.

5257 MR. MARCHANT: I have followed the hearings. At the same time, as I indicated, we specifically approached those applicants and either got no response or "Go to New York" or "Go to Washington". I think it is important that there be access, not simply that it be discussed, with respect.

5258 THE CHAIRPERSON: I understand your point.

5259 Thank you very much, Mr. Marchant.

5260 Mr. Secretary.

5261 THE SECRETARY: Thank you, Mr. Chairman.

5262 The next appearing intervention will be presented by the Canadian Independent Record Production Association, Messrs Brian Chater and Geoff Kulawick.

--- Pause

5263 THE SECRETARY: Mr. Chater, you do have 25 minutes to make your presentation.

INTERVENTION

5264 MR. CHATER: Thank you. Excuse my voice. I'm having a bit of trouble with it.

5265 Good morning, Mr. Chair, Madam Vice-Chair, Commissioners. My name is Brian Chater, President of CIRPA, and with me is Board Member Geoff Kulawick, President of Linus Entertainment, who releases records by such well-known Canadians as Gordon Lightfoot, Ron Sexsmith, Canadian Brass and Quartetto Gelato.

5266 We appreciate your invitation to appear at this hearing to express our views on these applications and their relationship to a number of vital issues for Canadian creators and entrepreneurs and for the future direction of broadcast policy in Canada.

5267 In a piece dated October 19 from Wharton Strategic Management, the opening sentence notes that SIRIUS Satellite Radio issued a statement describing the acquisition of Howard Stern for its network, without a trace of humour, as, "the most important deal in radio history".

5268 In this hearing CIRPA would like to echo that sentiment, without a trace of humour, that this hearing is the most important hearing on the future of Canadian broadcasting for many, many years and, in the view of CIRPA, has major ramifications for the entire future of Canadian broadcasting.

5269 As everybody in this room is acutely aware, technology is rapidly changing the whole industry and, to mix metaphors, tilting the playing field, while at the same time moving the goalposts.

5270 All of this is to make clear that CIRPA, as stated in its intervention, regards these applications and this hearing as a major policy issue. For the record, we reiterate our view that there are so many key issues that need to be addressed, discussed and resolved, particularly in light of the aforesaid technological changes that are taking in place that, in many instances, are blurring the lines of demarkation between various media, that a separate and detailed policy hearing is called for in consideration of any licence application.

5271 From a policy perspective, while this is a subject we could debate for hours, as we have time constraints we would just like to draw to the Commission's attention to three recent pronouncements in this regard and then offer brief summations of several policy issues that are of major concern to CIRPA.

5272 One, in a recent Supreme Court decision on the SOCAN Internet tariff, at paragraph 63, the Court stated:

"Canada clearly has a significant interest in the flow of information in and out of the country."

5273 Two, A Cultural Diversity Coalition update in September 2004 quotes what Canada said at the UNESCO debate:

"The proposed UNESCO convention on cultural diversity should explicitly incorporate as one of its objectives the right of government to take measures they judge appropriate to protect and promote cultural diversity."

5274 Three, The Minister of Canadian Heritage, the Honourable Liza Frulla, stated on September 9, 2004, when responding to the publication of new data on international trade in cultural services:

"This is the reason why it is so important to have a convention on cultural diversity. This convention could establish clear rules that enable Canada and other countries to maintain policies aimed at promoting culture."

5275 CIRPA submits that all of these are key policy points that merit considerable detailed discussion. There axe many others that immediately come to mind. Among these, of course, is the substantial issue of technological change and how it is affecting whole industries and the Broadcasting Act, a point that has been brought up by some applicants.

5276 As a representative of the music industry, I can certainly attest to this, but equally important is what these changes are doing to relationships between different creators and owners and different industries. We could continue on this subject alone for a long time as it is, in our view, of critical importance to the hearing, but given the major time considerations we are under we will just flag this issue to the Commission as yet one more reason for a policy bearing in this regard.

5277 It is clear that an important part of the overall policy discussions that CIRPA feels should take place first is the issue of government policy and support programs for the music industry and clarification of how these will fit into the overall picture, both now and in the future. It appears to CIRPA that from reading some of the applications there are either misconceptions or misinformation in some minds as to the changes that have occurred and continue to occur in the music business, and their impact on the independent sector. This is yet one more issue that CIRPA feels requires a detailed policy evaluation before proceeding to a licensing process with the long term implications that these applications have raised.

5278 Another key "policy" issue that CIRPA submits should be considered in this whole discussion is that of the use of music at a marketing tool by providers of services, in this case satellite radio. Given the advances in technology that are constantly taking place, this issue requires a very real and urgent policy discussion. This discussion should not just be about the uses of another product to make money by a third party and what the appropriate monetary recompense for this might be, but should also address the availability of digital quality radio signals that can and will be downloaded by new devices that are coming to market even at we speak, and the effects this technology will have on the independent music business and its ability to remain in business.

5279 Unlike previous hearings, these issues are today a reality and not just some hypothesis of future scenarios. In the view of CIRPA, these facts alone should play a major role in the policy hearing.

5280 Yet another major policy issue that CIRPA feels is of critical importance, and will return to later, is that of exactly what is proposed for licensing. Reviewing the applications, it would appear to CIRPA that some applicants an asking to be licensed in entirely new categories. To repeat, CIRPA submits that this is a major policy issue if such changes are to be allowed and, once more, points to the need for a full policy hearing in this regard prior to any discussion of the applications themselves.

5281 To conclude this section, CIRPA submits that all the issues we have raised above clearly point to the need for a policy hearing, particularly given the fact that some applicants are asking for a foreign program service to be licensed in Canada, something that CIRPA is of the opinion would radically change the nature and substance of Canadian broadcasting in the future.

5282 To turn to the issues raised in our written intervention regarding Canadian content, the position of CIRPA is simple and fits with our comments and observations in other sections of this presentation.

5283 In our view, any service licensed by the Commission should fully adhere to the current regulations on Canadian content for all channels broadcast. CIRPA is of the view that these services should be licensed fully and we would be concerned with any agglomeration of channels partly from Canadian and partly from foreign sources. The Commission will recall our strong views on this and our active participation in the hearings and subsequent proceedings at the pay audio hearings in 1994, even though what was being proposed at that time was clearly a niche use.

5284 The quotes and expectations of the applicants we are reading in the press are very different this time around it would seem. We note in the piece from the Wharton Business Review, Wall Street analysts have that voted satellite Radio is the future. The same sentiment is voiced by Wharton School professors, amongst others.

5285 Now, whatever you may think of Wall Street analysts after Elliot Spitzer, the fact remains that, given all the expectations being quoted, if this is indeed the future then this is clearly a horse of a different colour and the issue of Canadian content becomes of critical importance to this whole discussion if the Commission policy in this regard is to continue to operate in its current way.

5286 Some applicants are making the case that the almost total lack of Canadian content in their service will somehow be offset by the benefit of a few Canadian program channels being beamed across the United States and the "broad" exposure this will bring to Canadian artists in a major export market. They also cite the additional copyright fees that will be earned by Canadians as a benefit.

5287 CIRPA would like to address these two points and the "real world" of the music and media businesses. First, the supposed U.S. benefit.

5288 The reality of U.S. media is that the vast majority of Americans listen to and watch American programming. CIRPA views this as a choice of Americans in general and, as much, it is entirely their choice and it is not for Canadians to comment or make suggestions.

5289 A recent example of this predilection on the TV side is the hit British TV show "The Office", which had cult success on BBC America and won two Golden Globes. However, in order to "mass market" this series NBC has recast it using an American cast and added American writers to the team to "Americanize" it. Again we repeat, there is nothing whatsoever wrong with this approach, we are merely using this as an example of the realities of programming Canadian channels in the U.S. and expecting a big take up.

5290 Also, we would like to address the point that some applicants are using the wording "broad exposure" across Canada and the U.S. as a sales benefit. While one might characterize it as "broad exposure" in that it is everywhere, the reality is that there is not broad exposure by listeners, as it is, by the applicant's own admission, a niche subscription service with a limited market, even with their projected subscriber take up by 2010.

5291 CIRPA notes also that while Canadian content on American-programmed channels is presented as a fait accompli and a major benefit, nowhere is any promise made on any channel of any actual percentage. Even given this minimal and totally non-guaranteed exposure, one might also want to discuss the number of "spins" and where in the broadcast schedule these occurred, rather than just raw airplay lists of who and what was played.

5292 While time constraints don't allow a detailed discussion of the realities of marketing, distribution and selling of recorded music in Canada, the U.S., or indeed any other market, the current realities of this whole issue are very relevant to this whole process and, in our view, require a very detailed research and discussion and clearly points, once again, to a policy review of the whole issue prior to a hearing.

5293 Finally, some applicants have raised the issue of copyright payments and how increased monies will benefit Canadians.

5294 Notwithstanding the fact that some applicants have stated in a different context that copyright is an irrelevant issue at this hearing -- a policy point with which CIRPA strongly disagrees by the way -- the issue here is flow of monies to Canadian creators and CIRPA has two comments.

5295 First, the quantum of any payment by these services is still to be determined and, given the history of user/creator disputes over rights payments in the past, predicting what might or might not be paid is, at best, a guessing game, especially given the low initial projections re revenues.

5296 Second, and of far greater relevance, by their own admission some applicants will be programming a very high level of foreign content on their services so in fact whatever quantum is established, the vast majority of the money will not flow to Canadians anyway.

5297 The next issue that CIRPA would like to address is the licensing process, and whether some applications are licensed at all.

5298 First, notwithstanding the protestations of some applicants that the ownership and control is in Canada and they had the power to remove or adjust channels being imported, the fact clearly remains that in these applications the vast majority of program channels are programmed in a foreign country.

5299 In the view of CIRPA, this is clearly contrary to all tenets of the Broadcasting Act and Commission policy regarding licensed broadcast services in Canada.

5300 Some of the applicants have made the argument there is a strong and widespread support for the service from consumers and from users such as car manufacturers. Even if this is true, the fact remains this argument is basically spurious and there is no justification for contraventions of the Broadcasting Act.

5301 CIRPA is sure there is support for carriage of many U.S. channels, as witnessed by great market sales. That doesn't mean the Broadcasting Act allows it.

5302 It appears to CIRPA some applicants argue the nature of the service, the importation of an entire block of special programming, constitutes a channel. The argument is then made that use of Canadian resources is rendered impractical by the nature of the service.

5303 It would seem to CIRPA a trifle disingenuous to create an exceptional service and then try to broaden the exemption under the Act to cover it. CIRPA very much doubts that it was the intent of the legislator that this would be the case when drafting section 3(1)(f) to the Broadcasting Act. To say the least, it is the very broad interpretation of the word "format".

5304 As we say in the music business, let's get real here. Now viewer content means components of a program and format, at least in the case of music formats, means a genre of music, for example, Canadian content and smooth jazz format.

5305 In the view of CIRPA, some applications conveniently portray this argument in all or nothing terms to try to make this contention more valid. It would seem to CIRPA that some applicants are basically relying on the creation of a totally new entity that doesn't currently exist to justify being licensed.

5306 Clearly, as CIRPA has stated earlier, the issue is a major one of policy that should be part of a wide ranging and very detailed discussion of the future of radio that needs to be fully canvassed and studied before any decision on these applications is made.

5307 CIRPA notes that some applicants have made reference to the 1995 decision on digital pay radio as an example of a similar licensing process to the current one. So that the record is absolutely clear, CIRPA wishes to reiterate the fact it did not agree with the reasoning of the decision then and it does not now.

5308 We would also point out, given the major differences between pay audio and the expectations expressed for satellite radio and scenarios, this is clearly a major issue of policy that has to be discussed.

5309 Some applicants have also tried to make a comparison to video on demand to make their case for the licensing of special treatment. CIRPA feels this argument lacks validity for it is patently obvious this is neither video nor on demand. If you subscribe you get all channels all the time, not just when you ask for it.

5310 CIRPA also disagrees with some applicants when they make the case at section 3(1)(f) "should be interpreted in the context of regulatory policy and should be viewed in the context of section 5(2)(c)". CIRPA is of the view this argument totally neglects to take into account section 5(3), which clearly seems to trump section 5(2)(c) in favour of section 3(1)(f) if there is a conflict in objectives in these two sections.

5311 Applicants have also argued that the Commission's thinking in the 1999 new media decision lends credence to their arguments in this hearing. However, in the view of CIRPA, and from its recollections as a participant in the hearings, the feeling appeared to be at that time that this was a fluid and evolving area and while for the present time the Commission would not licence or otherwise regulate these new media applications, it stated it would return to the subject in five years to further review this issue.

5312 To be clear, whatever decisions were made and will be made in the future on new media, CIRPA is of the view that these proposed services are clearly not new media in the sense that it was discussed at the hearing in 1999.

5313 These services and applications are merely a new technology doing similar things as before, providing music to consumers through what is effectively a broadcasting entity by another name. It is merely added technology, if you will, not new media.

5314 An example might be FM as opposed to AM, or DVD as opposed to video cassettes, the product is essentially the same, unlike many new media services and products.

5315 To return to our written intervention according to a policy hearing, CIRPA would like to address the issue of whether there was actually any need towards a rush to judgment on these issues. In our view, while moneys are being freely expended in all directions by some applicants both on talent and structure, there appears to be little money being earned before the if all reports in the press are correct.

5316 A Globe and Mail article in October states that the applicant SIRIUS lost $151 million U.S., in the second quarter on revenue is $13.3 million. And the Wharton Strategic Management piece states that for the same quarter, XM lost $166 million on revenues of $52.9 million U.S.

5317 As of September 30, Wharton states that XM had 2.5 million U.S. subscribers and SIRIUS 700,000 for a total of 3.2 million with projections for both services combined to come in at 4.1 million subscribers by December 31.

5318 CIRPA notes an article in the Toronto Star following the XM announcement of its planned move to Canada earlier this year stating that U.S. analysts were wary of the deal. CIRPA also understands that the U.S. company, in partnership with one of the applicants, has received substantial operating funds from GM to enable its continued operations.

5319 Given the current cash outlay of some applicants, and the fact as reported in Business Week of November 1, GM missed earning expectations in the third quarter and lost money on its North American operations as well as having sustained a $3 billion loss in Europe since 2000. CIRPA wonders what the position of GM might be in the future of any additional funding for such initiatives as this.

5320 To quote the chairman and chief executive officer of GM:

"We have to be more aggressive to address some chronic problems"

5321 In referring to its current financial situation.

5322 An area we would also like to comment on is the data being distributed by some applicants regarding the adoption curve of satellite radio as compared to the launch of radio, TV and CD players. In the view of CIRPA, comparisons between these take-ups are spurious and it is basically comparing apples and oranges.

5323 While it is true all these new products will be acquired first by early adapters, the big difference is the relatively low cost to consumers of subscribing to satellite radio and paying for the equipment as compared to the purchase of early market additions of radios, televisions and CD players which were inherently high-end products until mass production drove their prices down.

5324 Although CIRPA has not reviewed these numbers and the research behind them in detail, if absolute sales numbers are involved then an increase in absolute population over time given when these initiatives first came to market also has to be factored into the equation as well.

5325 To quote Professor Fader from the Wharton Strategic Management piece, "The growth curve may look like a hockey stick but satellite radio still has to get beyond the early adapters."

5326 CIRPA is of the view, given all this uncertainty, should you have concerns about any or all of these applications, that there is little need to rush to make a decision until it becomes much clearer or actually happens in the marketplace in the next year or two.

5327 This approach would be similar to the new media decision by the Commission in 1999, where essentially it took no action pending the development of the marketplace and establishing its successful new business models. We would offer this to the Commission as a possible interim solution, maintaining our positions on that which is stated in our intervention.

5328 The next issue that CIRPA would like to comment upon is the involvement of the Canadian Radio Broadcasting Corporation.

5329 Given our detailed comments in our written intervention, we will restrict ourselves now to a few additional comments on this key issue.

5330 CIRPA notes that, one, in a CBC Radio fact sheet handed out is corporate priorities for 2004 stating in item four: to demonstrate that CBC Radio is a well managed company and generates cash flows to reinvest in programming.

5331 Two, CBC Radio Canada in its SIRIUS presentation package states that its financial contribution will be $13.4 million in cash over the first two or three years after licensing.

5332 In CIRPA's view when comparing these two statements, this raises four questions:

5333 One, are there other commitments in kind or in services apart from the $13.4 million in cash?

5334 Two, given the public knowledge of the current numbers at SIRIUS and the current potential financial situation, why does CBC Radio Canada think this is a good investment to put funds controlled by a public corporation into this proposal?

5335 Three, it will be providing a foreign program service with minimal and mostly unguaranteed Canadian content to Canadians in exchange for four Canadian CBC channels on pay satellite with a very limited number of potential listeners as compared to terrestrial radio. How does CBC Radio Canada justify its application given its mandate under the Broadcasting Act?

5336 Four, if it has spare money from its commercial activities, why is it not using that money to create programming when it states in its own document this is a major objective of a public corporation rather than making speculative investments?

5337 CIRPA has other problems with the CBC involvement.

5338 As the Commission knows, we expressed major concerns in our written intervention regarding the differences in rationale contained in the 1994 application by Galaxy in the clear support and acknowledge of Canadian identity and Canadian creators that was contained in its document.

5339 The current application, which essentially has minimum Canadian content and programming control, in our view clearly in no way fulfils the mandate of the CBC.

5340 CIRPA also notes with dismay that nowhere does CBC Radio Canada address these issues and also the availability of Galaxy channels for the service. This is a matter of major concern to CIRPA.

5341 CIRPA also has concerns with the reported business practices of CBC Radio Canada. It has been reported to CIRPA that CBC Radio 3 promoted its application heavily to the Vancouver Indian community to sign on to the application.

5342 It may have happened before but CIRPA can't recollect a media campaign using a licensee's broadcast facilities to lobby business for a new licence when it well knows there were competitive applications in the marketplace that did not have access to this option to promote their application.

5343 CIRPA was also not privy to what potential supporters were told in this regard, but it certainly raises many questions.

5344 Was there any indication, for example, that outside their own channels, the vast majority of music will be foreign programs and as of today is basically non-Canadian and there will be no guarantee of any Canadian content there whatsoever?

5345 Further, was it maintained that the application -- mentioned that the application was for a subscription service that projected at best in seven years it would still only reach a small percentage when compared with the total number of radio listeners?

5346 There are many words to describe this behaviour in our view and somewhat questionable is about as polite as we can get.

5347 To conclude our comments on CBC Radio, we note that it trumpets the value of launching two new radio services focusing on new music and emerging artists.

5348 The fact is in our view that an investment of $13 million plus some frequency juggling and negotiating across the country, CIRPA feels it could go a long way toward doing this using terrestrial radio and not have to use satellite radio, which as CBC Radio Canada knows is a very different animal.

5349 We trust CBC Radio Canada will make this point absolutely clear to those who were asked to intervene on its behalf.

5350 CIRPA has diligently searched the Broadcasting Act and nowhere can it find wording that says it is a CBC Radio Canada mandate to be a distributor of foreign program services or that it should be programming into the United States unless we have missed something in our reading.

5351 CIRPA is also of the view the corporation is acting in clear violation of its mandate through its involvement and its application.

5352 We are now in our final point, that of Canadian Talent Development matters. As the Commission will note, CIRPA has raised in our written interventions three issues. These are self-evident. We do not intend to comment further except to say we totally stand by our position as stated in these issues.

5353 There are however some points we would like to add in this regard.

5354 First, in the view of CIRPA, commitment to Canadian talent developed by broadcasters, whether high or low, are a secondary function to that of Canadian content on air in the Canadian regulatory system and as such cannot in any way be substituted for actual air play. It is merely an additional benefit the Commission requires from broadcasters under the current system of regulation due to the fact only a limited number of broadcasting licences are available to be granted to applicants by the Commission.

5355 CIRPA also notes an applicant's presentation on CTD laud their value to Canada and the broadcasting system while making no numerical commitment whatsoever to Canadian music on the vast majority of their programming. As we have stated, CTD commitments are an adjunct to Canadian content airplay and not a replacement.

5356 We conclude this presentation with a brief statement regarding sections (h) and (i) of our intervention concerning the sales replacement issue and the encryption issue. These are both issues of major substance and concern to CIRPA members. But given the time we have already taken we note both these issues are raised in detail by other interveners and we expect will cover them comprehensively I their presentations and will clearly echo our concerns on these important issues. CIRPA would only comment that these are just two more issues that are ongoing and of major import and which clearly point to the need for a wide-ranging and detailed policy hearing on this whole issue.

5357 CIRPA thanks the Commission for its time and for its indulgence and looks forward to answering your questions you may wish to ask.

5358 And I apologize for my really bad voice.

5359 THE CHAIRPERSON: Not at all. Thank you, Mr. Chater. Commissioner Pennefather.

5360 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman. Good morning, gentlemen.

5361 MR. CHATER: Good morning.

5362 COMMISSIONER PENNEFATHER: Good morning, Mr. Chater. Thank you for your very thorough intervention, both written and oral, this morning. You have covered a great deal of points in depth. So I think our questions will just try to draw out some of the points a little more.

5363 I guess what I would like to ask you a little more about is one of the themes that you raise is satellite radio is the future. Yet you would suggest we take time, if you will, to review. There seems to be a mix of both urgency in your comments and yet how to approach the future called satellite radio. Here we are in a situation, yes, this is both a policy hearing and we are looking at specific applications where we address these issues.

5364 So in the sense, you see satellite radio as the future. In what way do you mean satellite radio is the future? Will it replace other technologies in radio, is it...? That would reflect, to me, a certain degree of urgency. Could you just expand on that point?

5365 MR. CHATER: Happy to. We think that satellite radio in fact may be the future, we didn't say it is the future. However, if it is, we have to adjust to it now rather than later or we have to do something now or make decisions now based on what may or may not be. The other question you are asking about is relationship to the entire spectrum of everything, if you like. My answer, a bit quickly, that nothing has ever replaced everything. As we have all heard for many many years television is going to be gone when... I am sorry, movies were going, television came, books were gone when this came. I still read books everyday, I still watch television everyday, I still go to the movies everyday.

5366 So, in fact, what you are seeing is an increase of various media activities. Obviously, that being said, is that there comes a point when it becomes... you have to make a choice between media. But I don't think, in the short-term, my last time... I don't know when that will be, it will not go away and it won't change. That being said, I mean, to answer your other question we don't see any evidence as yet of any major impact on current terrestrial radio, however, we are only a bit of the way down the road. We are just slightly down the road, we don't know yet, so it is very hard to tell. I mean, that is why we are saying it may be an option we are throwing out to you, to wait for year two and see what happens.

5367 MR. KULAWICK: I would like to say something.

5368 MR. CHATER: Go ahead.

5369 MR. KULAWICK: I don't know if it is satellite radios, the future, but I think digital multi-channel radio is the future and there is certainly a need to get more channels of exposure for artists. But I think it is important to know that it is not necessarily foreign channels that would benefit. I think Canadian program channels that include the Canadian content under the Broadcasting Act are essentially primary for us to continue to be hearing voices by Canadian artists. We do get airplay or we do get broadcasts in America through SIRIUS and XM, but they are such a small percentage compared with the volume of music that is played, that we do get exposure but it is a very small percentage of what the music is and the artist that they are actually playing.

5370 COMMISSIONER PENNEFATHER: You are right on where my next question was, so let me just stay with you a moment on that point. You say there is a percentage now of play, I am assuming you are saying in satellite radio in the North American footprint. Can you give me a sense of what kind of percentage that would be?

5371 MR. KULAWICK: I don't know of any data that identifies what percentage of artists are Canadian, it would be very difficult to pull that out because I just don't think there is research available or a tracking method or reports that would give you total play as a percentage and count it up. However, I can tell you that there was... one of the applicants brought up an airplay gap using one of my artists as an example and I just found that it was completely a distortion of the fact that, yes, we did get more plays on satellite radio in America than we received on terrestrial radio in Canada, but it is just a de facto of the fact that there are so many channels of music that the 30 or 20 plays that we received were surrounded by tens of thousands of plays of other artists that weren't Canadian.

5372 COMMISSIONER PENNEFATHER: That is my point. If I may, Mr. Chater, as well... just to pull the conversation, practically speaking, that the reality-- If we look at satellite radio as one of the futures then, in fairness, and certainly it is here

5373 MR. CHATER: Maybe, maybe.

5374 COMMISSIONER PENNEFATHER: It is a concept of several channels. To your point then, wouldn't it be an advantage to Canadian artists to have an even greater place in that particular kind of radio? Let us take it beyond it will not replace other radio, it is what it is, and isn't there some benefit to artists to have this kind of exposure?

5375 MR. CHATER: Yes.

5376 MR. KULAWICK: Absolutely, and we need more access to listeners for Canadian artists and a system that allows people to listen to the types of music they want, the variety or the styles. It would allow a lot of our artists to be heard where they cannot be heard currently under the limited number of terrestrial frequencies. So, I think it is essential that we make channels available and musical styles available to Canadian listeners.

5377 But I think the real danger is that if we import these signals then we are going to be looking at a situation where potentially in a year down the road the landscape may change where perhaps Canadian artists wouldn't look so well favourably by the programmers in the Unites States. I use an example of how France is portrayed as a nasty country. Well, we would have no ability to have Canadians heard in Canada to any great degree if the programming choices made outside of the country were such that they chose not to support Canadian artists for example. So I think it is important that we can have a relationship with the broadcasters where I don't need to send records to New York to get airplay to reach a listener in Medicine Hat.

5378 MR. CHATER: I would like to add a couple more points. To come back to your first question, and this is me speaking, not CIRPA. Having don't the research, and I am sure the applicants will love me dearly for this, I can say I don't really feel that I have a business mould that is potentially successful, I really don't. This, to me, is a dotcom in disguise, both XM and SIRIUS. I am using my hand over fist, that is what you see, that I quoted $100 million each in the last quarter. You can't go on doing this forever, you have to break even at some point and, I know, we didn't break even yet and they have tremendous capital costs.

5379 Is this a business? We don't know yet. And I think... I mean if you go back to the 1999 decision, I think we didn't agree with it at the time and (inaudible) we do, that you were correct in saying we should do nothing for the moment and wait and see what happens. And I think, you know, this is me speaking, not CIRPA, you have two business plans which are by no means clear, they will be successful. I mean, we hear a lot of talk about this and that, I mean, that's (inaudible) applications are very different, especially about the future.

5380 COMMISSIONER PENNEFATHER: I take that point. And, again, here we are though and we do have, as you say well here, a balancing act in terms of trying to see the benefits and the downsides at the same time. And particularly, considering that you are coming from the Independent Record Producers' Association, I think it is... What I was looking forward to was getting some specifics from you on the realities, both good and bad, of how you see this. And just so that I understand your earlier point, Mr. Kulawick, is it,--

5381 MR. KULAWICK: Yes.

5382 COMMISSIONER PENNEFATHER:  --and considering all your experience in production of music in this country, if in terms of subscription radio then and subscription radio as proposed by at least two of the applicants, you would see the importance of both Canadian channels and exposure on the U.S. services that are part of what the Canadian subscriber receives as very important.

5383 In your presentation, Mr. Chater, you call this a horse of a different colour and yet you say the current regulations should apply. Just how far is it a horse of a different colour and could you give us some sense of how much in light of... Let us assume some benefits here for artists and it is a reality down the road, business plans aside, if you could give us a little more detail on how you see that balance. What could perhaps be a formula? I am sure you are aware of the discussions we have been having over the last few days on just these points.

5384 MR. CHATER: I have listed to them with some interest. I mean, you know, as I say... as you may know, I have been here since the start, we do regard it as a very important occasion. Two points, one, I think it has to be absolutely clear from CIRPA's point of view that two of the applicants out of three, the programming is not taking place in Canada on these channels, end of story. And I am sorry, I don't agree that control, switching things on and off, is control. Control is about... programming is what you put on. You shouldn't have to go to somebody in New York, as Geoff said, and say will you play my song in Canada?

5385 And the second thing is that, we could discuss for hours, the mechanics of how you route merchandise and market records, how you sell them. The reality is that, as I say or in this presentation of CIRPA says, we are unconvinced that we must take up in the U.S. for Canadian channels. I mean, I can speak to this as an Englishman, ask me about Scotland. I don't know much about Scotland and Scots would tell me you should know about Scotland because it is a big country and we do a lot of things and they do, I grant you. However, that being said, unless they tell me in the park about Scotland I don't know much about it and that is the equivalent of U.S./Canada is England/Scotland. So, I can view it from the other side too.

5386 MR. KULAWICK: I would like to address that as well if I could. Already Canadian artists merit exposure on many channels in America and they get it, they are getting it, and it is based on merit and it is also based on the culture of America and what Americans wan to hear and what they choose to listen to. So, the danger of having a Canadian channel in America is that you might have a situation where instead of a Canadian artist being mixed in with other folk or electronic music, it would be oh, you know what, we are already supporting this act on the Canadian channel so we don't need to mix it in with where all listeners of that genre might be listening.

5387 If you produce electronic music you need to have your music heard where those listeners are that are listening to electronic music. And I, for one, don't see any take-up on Canadian channels that are block programmed where people tune in for a specific hour. I see that as the niche of the niche and I frankly think the danger of having Canadian artists relegated to a Canadian channel outside of this country has little or no benefit. And, you know, we hope to see our artists continue to be played on XM and SIRIUS and within the channels that they already have.

5388 MR. CHATER: If I may, Commissioner, one more point on that issue. The analogy that you use here is the British analogy. I mean, in 1964 I am sure if you put a British channel on, you would have 400 channels saying well put 400 on. Now, as my friends in Britain tell me, the equivalent IMA, which is the Independent Music Association, they are looking at ways of trying to find methods to get British product onto America airways because it doesn't fit the genres, it doesn't match urban music, there is some, but there is a variety of differences. But British music, believe me, in the U.S. is very very cold.

5389 COMMISSIONER PENNEFATHER: Thank you very much. I appreciate your responses to my questions.

5390 MR. CHATER: Yes, no problem.

5391 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.

5392 THE CHAIRPERSON: Mr. Chater, just one question. In your written intervention you list both satellite radio providers and the terrestrial applicant.

5393 MR. CHATER: Yes.

5394 THE CHAIRPERSON: But most of your comments, both in the written and the oral intervention are directed at the satellite providers.

5395 MR. CHATER: Correct.

5396 THE CHAIRPERSON: What is your view on the terrestrial application?

5397 MR. CHATER: It has pluses and minuses. I mean, as you know, we don't support or oppose any particular application ever. But, I mean, there are, as Commissioner Langford said yesterday, there is some issues there that, you know, which have been raised. I mean, obviously, by definition, you hear it all the time from us, we like Canadian content. I mean, that's by definition.

5398 How it plays out -- I mean, really, I would be presumptuous to suggest to you how you might want to licence it, but I have no particular views on it, apart from Cancon.

5399 THE CHAIRPERSON: But if I check off the criteria that you thought are deficient in the satellite applicatons, most of those seem to be met by the terrestrial applicant, airplay and so on.

5400 MR. CHATER: As we say in all our presentatons: Here are various criteria, we don't want to suggest to you what you do or don't do, we're just saying, "we like these." And, obviously, by definition, we like Canadian content.

5401 THE CHAIRPERSON: Thank you.

5402 One is left to wonder what further information you could provide to us that you haven't already provided.

5403 MR. CHATER: Believe me, I could be here for hours, but you wouldn't like that.

5404 THE CHAIRPERSON: Thank you very much.

5405 Mr. Secretary.

5406 THE SECRETARY: Thank you, Mr. Chairman. The next appearing intervention will be presented by CKUA Radio Network, Mr. Ken Regan and Mrs. Sharon McMullan-Baron. You have ten minutes to make your presentation.

INTERVENTION

5407 MS McMULLAN-BARON: Mr. Chairman, thank you for this opportunity. Good morning. I'm the Chairman of the Board of CKUA Radio Foundation, the body which governs this unique not for profit Canadian radio broadcaster.

5408 Before I begin, I would like to introduce my colleagues here with me. On my right is Ken Regan, CKUA General Manager, who will be making our formal presentation today.

5409 On my left is Patricia Bradie from the firm of Osler Hoskin and Harcourt who has been assisting CKUA as our counsel.

5410 Mr. Chairman, madam Vice-Chairman, Commissioners, almost 77 years ago CKUA Radio was founded on the principle of serving the community through the medium of radio. It was founded with the vision of utilizing the relatively new and affordable medium of radio to provide education and perhaps even inspiration by offering new ideas and experiences and by broadening horizons of people who might otherwise not have such an opportunity.

5411 And while much has changed over the years, one thing has not and it is CKUA's commitment to that founding principle. It is one of the reasons why when CKUA was briefly shut down in 1997 the community that CKUA has served so well literally rose up to save their radio service. Nothing could say more about the value of CKUA to its audience.

5412 I would like to now introduce our general manager, Ken Regan.

5413 MR. REGAN: Thank you. I hope you enjoyed that entrance.

5414 Mr. Chairman and ladies and gentlemen, thank you for the opportunity to participate in these very important deliberations.

5415 As CKUA's Chairman has just stated, CKUA radio is as much about community today as it was in 1927 but just because CKUA, like most community-based broadcasters is committed to serving local and regional communities, it does not mean that CKUA is parochial, narrowly focused or a limited service.

5416 In fact, CKUA'S programming, entertaining professional programming combined with the uniquely Canadian voice, a respectful intelligent presentation to its audience, and a presence on the Internet as garnered CKUA exponential growth in both regional and international audiences.

5417 Since 1996, CKUA's terrestrially served audience has more than doubled and CKUA's award winning web site, ckua.com now receives on average 98,000 individual visits per month.

5418 This translates to more than 1.2 million sessions a year with a number of hits to the web site numbering about 40 million a year.

5419 But the important thing is that rather than sacrifice its community character in search of this wider national and international audience CKUA has attracted global appeal by remaining faithful to its community routes.

5420 CKUA as a community-based broadcaster is as appealing and competitive in terms of its product as any broadcaster in this or any other country and it is limited only by the fact that unlike our friends makings application, CKUA being largely listener supported cannot afford satellite technology or the wherewithal to build a national terrestrial network.

5421 Mr. Chairman, as you and other commissioners are aware CKUA in September filed a comprehensive intervention concerning the three applications for licence to provide a national multi-channelled subscription radio service.

5422 That intervention dealt with a number of policy and licensing issues and, as stated there, CKUA would, in fact, support any of the applications the Commission deems most appropriate, should that transpire, as long as two critical issues are addressed through condition of licence.

5423 These are Canadian content and the funding framework for community radio. Here are the issues as we see them.

5424 But first, it's important, I think, to understand the context in which these applications come to us.

5425 Because while the applicants suggest that subscription radio is a recent or a new idea in Canada, the fact is that subscription radio, however you define it, has in effect existed within the community and campus broadcast sector for years.

5426 Therefore, it is inherent that any additional subscription service to be licensed, particularly one that's back stopped by billions of dollars worth of technology and financing will undoubtedly have an impact on existing services, specifically in this case, community and campus broadcasters who rely on listener donations and subscriptions.

5427 A second critical issue is the lack of Canadian content offered by the two applicants for satellite-based service.

5428 Like other interveners who have expressed concerns about this issue, CKUA understands the arguments relating to the foreign partners allocation of the majority of space on their U.S. services, but in the interest of Canada's cultural sovereignty, those rationalizations do not justify the limitations or make the proposals right.

5429 To rectify the problem CKUA suggests a condition of licence be applied, such that applicants wishing to introduce satellite-based services commit to significantly increasing the number of proposed Canadian programming services available at launch, with an objective of having a minimum 10 per cent, minimum 10 per cent, of the channels offered to Canadians being Canadian programming services by the commencement of third year of operations.

5430 Further, that a minimum number or percentage of the channels, as established by the Commission on approved services, be reserved for broadcasters who consistently exceed Canadian content requirements and whose content is acknowledged to meet high professional standards and whose programming and overall schedule will be attractive to both domestic and international audiences.

5431 Further, this condition of licence should stipulate that the programming and channel mix comprising that minimum 10 percent Canadian content or complement be a reflection of the full spectrum of Canada's radio broadcasting industry as spelled out in Section 3.1(b) of the Broadcasting Act.

5432 CKUA believes such conditions would augment the applicant's service offerings, would help to at least mitigate potential damage to existing subscriber services in the campus and community radio sector and would also result in a service much more reflective of the whole of the Canadian broadcasting system.

5433 The second major issue with respect to these applications is this.

5434 To survive, let alone thrive in the face of these potential new services. the community and campus radio sector in this country must have... must have a new framework of funding support.

5435 Section 3.1(b) of the Broadcast Act acknowledges the value of community broadcasting and, by extension, community radio, as a fundamental component of this country's broadcast system. It says:

"The Canadian Broadcasting system operating primarily in the English and French languages and comprising public, private and community elements."

5436 Yet, as indicated in CKUA'S intervention, the same community element exemplified by the community and campus radio sector is threatened by these proposed new services.

5437 Community and campus radio broadcasters in this country survive primarily by their wits, the generosity of their audiences and their skill at developing community focused niche programming traditionally not offered by existing commercial or public broadcasters.

5438 It is their skill of developing this unique on-air product that engenders interest, loyalty and hopefully financial support. But it remains as it always has been for this sector a very capricious existence.

5439 CKUA is particularly concerned that the incursion of potentially 200 channels of largely commercial free digital quality and universally available subscription radio that often duplicates to a significant degree the niche programming offered by existing campus and community broadcasters will no doubt erode audiences from these vital community conduits to the public airwaves.

5440 And as indicated in past CKUA submissions to this Commission, any erosion of audience for community broadcasters usually translates directly to erosion of revenues because community broadcasters receive no ongoing or direct government funding. Community broadcasters do not have authority to access investor money to develop or sustain operations the way private for profit broadcasters do and, unlike with the Canadian film and television industry, there is no significant funding framework to support, develop or sustain the community radio sector.

5441 Admittedly, there are programs that offer project funding to community and campus broadcasters, but the fact is project funding does nothing to contribute to the fundamental and systemic problem that faces all community-based broadcasters in this country and that is operational sustainability.

5442 CKUA believes a new model of funding support is required, based on operational support to at least mitigate the potential threat from the proposed services and to provide a measure of sustainability to a sector that has suffered disproportionately, simply because it often chooses to reflect communities outside the main stream or because it has not, to this date, been considered worthy of government subsidy.

5443 And yet, the community broadcasting sector is as relevant and some might argue more relevant to their communities than either private commercial radio or the CBC.

5444 Otherwise, how else can you explain its survival, considering how little support it receives from outside of those specific communities. So, what do we do?

5445 To rectify the historic and systemic inequity relating to support for the community broadcasting sector and, by extension, its communities, CKUA proposes the following solution, and in your package of materials, there is a graphic that illustrates how this might work as well.

5446 That a condition of licence be applied to any successful applicant for a national subscription radio service to the effect that all licensees contribute a minimum five per cent of gross operating revenues to Canadian talent development or initiatives identified by the Commission.

5447 And it has been encouraging to hear during these deliberations some consideration of even increasing that level of Canadian talent development.

5448 Also, that 50 per cent of these funds be allocated to support a newly created Canadian community radio broadcast fund.

5449 Also as part of the condition, that an escalating scale of support be developed for these initiatives and the fund and administered over the period of the licence term.

5450 Thirdly, that the fund be structured to support the operations and sustainability of community broadcasting in Canada, as defined as not-for-profit or by not-for-profit status, and that support not be tied to project funding.

5451 The moneys from the fund should be distributed on a matching basis, equal to each community broadcaster's revenues, as derived from their audiences.

5452 Should moneys available in this fund initially be insufficient to meet condition four, that funding support be distributed on a pro-rate basis, equivalent to each community broadcaster's revenues derived, again, from audience or from donors, until such time as the fund is sufficient enough to fulfil the matching criteria of condition four.

5453 Point six, that the fund be fully funded by the end of the licence term.

5454 And finally, that this fund, or envelope of funding, be administered by a neutral third party, such as one of the existing industry support fund administrators, such as the small market television fund, for example, or through an arm's-length relationship, to be structured under the auspices of the National Campus and Community Radio Association or other such body deemed appropriate by the Commission.

5455 Canada's radio community and its community radio are at a cross-roads. Canadian cultural sovereignty, sectoral equity and sustainability and the fundamental precepts of the Broadcasting Act will all be affected by the Commission's deliberations and determinations.

5456 CKUA is submitting its comments and proposals not out of self-interest alone, although we acknowledge our responsibility to our listeners, our donors and supporters to protect the interests of CKUA, but our intent is to offer solutions that will support and protect the interests of all campus and community broadcasters in this country.

5457 In conclusion, Mr. Chairman, when CKUA was taken off the air in 1997, what occurred was, indeed, unprecedented and, some might say, astounding. The citizenry of one of Canada's most politically conservative provinces rose up to save their community radio service. Something even more remarkable when you consider that essential services like health and education were also being cut significantly at that time.

5458 But people drew a line in the sand over CKUA radio and it begs the question: why? To be honest, I'm not sure that I have an answer. Except to surmise that over its 77-year history, CKUA has become such an integral part of people's lives in Alberta and the life of its community that, for those people who love it, losing it is not an option.

5459 And I'm not trying to hyperbolize or be melodramatic, but the love the people have for CKUA is deep and genuine.

5460 But CKUA is not exceptional in this regard. There are outstanding campus and community broadcasters throughout Canada, all serving their communities with as much diligence and passion as CKUA serves its own and they, too, are appreciated. But there is no doubt that CKUA has become a leader in the community broadcast sector.

5461 But CKUA has also had the benefit of a long history, outstanding professional leadership, significant investment over the years and the dedication of extremely knowledgeable and talented staff and volunteers who believe in its purpose.

5462 CKUA is not the example of what other community or campus broadcasters should be. Each community and campus broadcaster develops and evokes its own character and relationship with its community. But CKUA is an example of what the campus and community broadcast sector might become: strong, vibrant, professional and stable. But that will only happen and it will only continue for CKUA if community and campus broadcasters are given the credit and the regulatory and industry support they need and deserve.

5463 CKUA believes this Commission has the opportunity now to ensure that we do.

5464 Thank you very much.

5465 THE CHAIRPERSON: Thank you very much for your thoughtful written intervention and your oral presentation today.

5466 Commissioner Pennefather.

5467 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.

5468 Indeed, welcome to one of the longest-standing broadcasters in the country. I was just asking my colleagues earlier to double-check when you began to occupy the airwaves. So it's a 77-year history of success and important contribution to Canadian broadcasting.

5469 Again, as the chairman noted, your presentations are clear. And today you added to the written intervention with details on your fund proposals, so I just have a few questions there.

5470 But before I do, just so that I'm clear, your proposal is related to subscription radio in this country and the potential launch of one or three, or perhaps more, subscription radio services in this country. I gather the rationale that would, therefore, bring you to propose a fund and specific licences, but a fund, in particular, to support community campus radio, is there some particular impact on campus community with subscription radio?

5471 I think I had a little trouble understanding that because the type of subscription, the type of radio is so different, that there is much of a challenge. Why would subscription radio challenge the loyalty of your subscribers?

5472 MR. REGAN: Well, because the applicants can offer a product that, in some respects, at least, and in some cases in many respects, comes very close to duplicating the services that CKUA provides to its audience or that other campus or community broadcasters provide.

5473 Most campus and community broadcasters play music of artists who are not perhaps popular enough to achieve airplay on commercial radio and they provide a venue for alternative kinds of music or different genres of music.

5474 Our subscriptions come voluntarily, so people can still access our services for nothing. That's the remarkable thing about the success that we have achieved. The $2.2 million that we raise annual in subscription comes for something that people can get for nothing.

5475 So when these new services come in, they are, in some respects, duplicating our product. It is in a digital format. We have not been able to afford to move into the digital realm. And it's commercial-free, in most instances.

5476 As the Commission knows, campus and community broadcasters have been allowed restricted commercial licences and the opportunity to sell airtime, so, in some ways, we have a product that is desired, we have restricted time sales, but to be faced with competition from something that duplicates our service, is commercial-free and is in digital format causes us some concern, particularly when they can offer it at a cost that's cheaper than many people are voluntarily paying now.

5477 COMMISSIONER PENNEFATHER: I hear you on the music component, but, by its very nature, community campus, it's my understanding, that the loyalty of your listeners is not just to the music but to the local reflection and to the community-diverse programming that you must carry under your mandate and this is national services that we are talking about. So there is a little bit of--perhaps on the music, but certainly your successes over the years has also been related to the community programming, per se.

5478 That's why I thought that perhaps there was a little bit of a disconnect there.

5479 MR. REGAN: Please.

5480 MS McMULLAN-BARON: One of the things that I have learned about subscription radio is that, when people pay for a subscription, they know what they are getting, right? You make a purchase and you are pretty certain of the product you are receiving.

5481 If they purchase subscription radio in the format that's before you, they are going to assume CKUA, if carried, receives a percentage of that subscription radio. What our funding model is looking at is ensuring that some of those revenues, then, end up back into the community sector.

5482 What I found was, for people who voluntarily subscribe, they understand what they are getting. But I'm just concerned about this new process coming in and confusing the consumers because, as proposed, that guarantee isn't there to the extent that we would like it to be.

5483 COMMISSIONER PENNEFATHER: Well, I would assume that you would make it very clear to your subscribers that--as I subscribe to different television services, I don't assume that if I subscribe to one, I'm supporting the other. So I'm sure you would do that.

5484 Let me just ask you about your COL proposals and your Community Broadcast Fund. In your Canadian content proposal number one, in the written intervention, you had proposed 10 per cent of bandwidth. Here you are proposing a minimum of 10 per cent of channels by the third year of operation.

5485 So first question: why the change from bandwidth to channels? And second question: 10 per cent, on what basis did you choose a 10 per cent minimum?

5486 MR. REGAN: With respect to the first question, channels to bandwidth, to be honest, I don't know that there was any specific rationale for making the change. It may have been more just an inadvertent change of phrasing in the second submission.

5487 With respect to the 10 per cent, however, whether bandwidth or channels, whichever it might turn out to be, our feeling is that the applicant's U.S. partners, if approved, are gaining access to--their projections--about 10 per cent of the Canadian market. So we feel it would be a quid pro quo, at least, to have 10 per cent of the available channels allocated to Canadian programming.

5488 COMMISSIONER PENNEFATHER: I think you were clear on that, in fact, in your written intervention as the thesis, the rationale, behind the 10.

5489 In terms of the Broadcast Act, and the discussions, clearly, that we have been having, do you have any comment on why you feel the 10 per cent is an appropriate minimum?

5490 MR. REGAN: To be honest, not particularly.

5491 COMMISSIONER PENNEFATHER: Is it too low?

5492 MR. REGAN: I mean, we would be happy if it was a higher percentage, obviously. We feel, as other intervenors have said, there's significant understatement of the value of the Canadian content being proposed by these services.

5493 And if could just, if I may, Commissioner Pennefather, refer back to your previous question about the subscription issue, music is fundamental to or has become fundamental to what CKUA does and we certainly provide a significant degree of other community-based of community-focused programming, but it's the music that has, primarily, helped make us successful. We use the music, if you like, to attract the donors and subscribers to CKUA that allow us to do those other things.

5494 If we were to change the balance to provide a preponderance of other kinds of programming to the detriment, let's say, or the reduction of the music programming, which is unique and professional and provides people access to artists like Ron Sexsmith and Bruce Good and The Sadies, and other people who have appeared here, we would not retain the same kind of support that we get now.

5495 So the music programming is fundamental to our success, and I suspect probably the same for my colleagues elsewhere in the community broadcasting sector.

5496 COMMISSIONER PENNEFATHER: If I may, then, take you to the fund proposal, and the first number there is 5 per cent. Now, as it's written, it says:

"...5 per cent of gross to initiatives identified by the Commission and 50 per cent to support newly created fund." (As read)

5497 The initiatives, you are talking CTD there?

5498 MR. REGAN: Yes.

5499 COMMISSIONER PENNEFATHER: Because you said CTD and it's not written.

5500 MR. REGAN: Well, it was our feeling that we didn't want to restrict that 5 per cent because the Commission might have other ideas or other ideas might come forward in these deliberations for how that 5 per cent might best be allocated. But certainly Canadian talent development seems to be the focus for the proposal.

5501 COMMISSIONER PENNEFATHER: I see. So Canadian talent development initiatives, not campus community, as Canadian talent--

5502 MR. REGAN: That's correct.

5503 COMMISSIONER PENNEFATHER:  --because I think a point was raised in reply that you, in fact--campus community is not an eligible third-party initiative.

5504 MR. REGAN: Right.

5505 COMMISSIONER PENNEFATHER: I see. So it's, basically, a creation of new fund and that fund, the 5 per cent--on what basis did you look at a 5 per cent minimum? What was your, let's say, regulatory basis--

5506 MR. REGAN: For CTD?

5507 COMMISSIONER PENNEFATHER: Yes, CTD or the fund itself.

5508 MR. REGAN: Right.

5509 COMMISSIONER PENNEFATHER: Just to be clear, I'm just talking now about the 5 per cent. What regulatory basis did you have in mind for the 5 per cent?

5510 MR. REGAN: Well, the 5 per cent is what has been proposed by the applicants, themselves. It's also, I guess, the precedent from other BDUs in this country, in terms of contributions to Canadian talent development, so we thought it was a good place to start.

5511 The 50 per cent that we recommend be derived from that for the campus and community broadcaster or the Community Radio Broadcast Fund we think would be a fair contribution to start again because we don't want to be seen to be taking money out of the pockets of the music industry or the artists in this country.

5512 Obviously, the Canadian talent development initiatives are there for a good reason and they are effective in supporting those artists. But we also believe, and it has been stated at these hearings on several occasions that, first and foremost, the most important thing for an artist in this country trying to establish themselves is airplay and airplay is what the campus and community radio sector in this country provides in spades for those artists, particularly independent artists and up-and-coming artists.

5513 And at the same time, we are not seeing any of the Canadian talent development initiatives funds unless we go through a sometimes rigorous and complicated application process. Our feeling is that if we can be given some measure of stability to continue to do the work that we do in giving airplay to those artists, then they will benefit exponentially from that, as well, and, in fact, it will simplify using the suggested formula that we proposed, it will simplify the administration at both ends and moneys that we now spend trying to survive, we will better spend in doing more work to support and promote Canadian artists.

5514 COMMISSIONER PENNEFATHER: Okay. So your justification for a fund which would support you operations is that this would be a trickle-down to artists.

5515 Under your current licence, what's your balance music/spoken word?

5516 MR. REGAN: I don't have it handy here, but I believe the spoken word is about 10 per cent, 15 per cent.

5517 COMMISSIONER PENNEFATHER: Okay.

5518 Those are my questions, Mr. Chairman, thank you very much.

5519 Thank you for your answers and for being here today.

5520 MR. REGAN: Thank you.

5521 THE CHAIRPERSON: Thank you very much.

5522 MR. REGAN: Thank you.

5523 THE CHAIRPERSON: Mr. Secretary.

5524 THE SECRETARY: Thank you, Mr. Chairman.

5525 The next appearing intervention will be presented by the Canadian Recording Industry Association, Mr. Pfolh, Brian Robertson, Graham Henderson and Stephen Zolf.

INTERVENTION

5526 MR. ROBERTSON: Good morning, Mr. Chairman, Madam Vice-Chair, members of the Commission.

5527 My name is Brian Robertson and one of my last official acts, as president of the Canadian Recording Industry Association, is the pleasure of joining you today for this important process.

5528 CRIA's job, in part, is to promote the interests of our member Canadian record labels and their artists and, indeed, the Canadian-owned legal on-line music services. In all, we represent more than 95 per cent of all records produced and distributed in Canada.

5529 Before we begin our presentation, I would like to introduce my colleagues here. On my right is the incoming president, Graham Henderson. We are also joined by Richard Pfohl; to his right, CRIA's general counsel, and to Richard's right is Stephen Zolf, a partner at Heenan Blaikie and our regulatory counsel.

5530 By way of introduction to Graham, he has a wealth of experience in the Canadian music industry. He is currently the senior vice-president of Universal Music Canada, a post he has occupied for almost five years.

5531 Graham has been involved in the music industry for over 17 years and began his legal career acting for artists, producers, independent labels and songwriters and developed what was, arguably, the largest music law practice in Canada.

5532 Additionally, a number of years ago, he upset half of the male population of Canada by marrying the etherial lead singer of Cowboy Junkies, Margo Timmins, but I digress.

5533 I would like to ask Graham to begin our official presentation.

5534 MR. HENDERSON: Thank you, Brian.

5535 I don't know how to follow that.

5536 We are here today to talk about two issues: content protection and Canadian content. At the outset, allow me to make clear where CRIA and its members fit into these proceedings.

5537 The record labels and our partners, the recording artists, are responsible for creating all of the music that will make these new subscription radio services successful.

5538 As one of the satellite applicants said on Tuesday, "It's all about the music". Our content, our music, is the guts, is the life blood, of any successful satellite or digital audio broadcasting system and we are, in effect, the primary stakeholder here.

5539 We can either be the major beneficiary of these new services or we can be their principal victim.

5540 Now, please don't misunderstand us. We recognize the potential benefits of this new technology. We are not Luddites, but we have been here before. Our recent experience with Internet piracy has taught us to view the introduction of any new technology through a more cautious lens.

5541 There are two problems inherent in the technology that underlies these new subscription services. Number one is aggregation and number two is distribution.

5542 Satellite radio is a bit like terrestrial radio, in this sense, when you turn it on, it's there, and when you turn it off, it isn't. But disaggregation occurs when some captures the signal, chops it up into individual songs, files the songs away in a permanent library on their hard drive. Redistribution occurs when that digital library is peddled on the peer-to-peer or P-to-P black market.

5543 Practically, what does this mean? Well, here's what you could do today, Mr. Chairman, members of the Commission: go home tonight and go on to eBay, purchase the XM PCR receiver, which you can get for less than $60. Once you have it, go to a web site called timetraxtech.com and for a mere $29.99 you can buy some software, which, incidentally, has been created by a hacker living across the river here in Ottawa. Then subscribe to XM.

5544 With some minor configurations to your computer, you will be in business. In a matter of days, you will have a complete library of thousands of songs, a personal digital juke box. The files will be perfect copies. The songs will be arranged for you. They will be indexed for you by artist, title, genre and so forth. You will have, virtually overnight, a record collection bigger than the HMV store on Sparks Street. Press a few more buttons and this library becomes available to the world.

5545 Latent within these technologies is the potential for them to become a PVR or P-to-P network on steroids. You would never need to buy another CD again.

5546 So what can be done? Fortunately, there is an easy fix for the problems of disaggregation and redistribution. We are asking the Commission to require each applicant, by a condition of licence, or through equivalent obligations, to ensure that their service meets certain minimum standards.

5547 First, each service must be obligated to prevent their subscribers from being able to create the type of digital juke box that we have been talking about.

5548 Second, each service must ensure that each digital receiver is self-contained, with no digital output. If the receiver has a digital output, the device must employ the appropriate digital rights management system to prevent any redistribution.

5549 We believe that imposing this obligation on the applicants should be non-controversial and within their power and the CHUM applicant's submission yesterday would appear to confirm this.

5550 The technology is available off the shelf and it's inexpensive.

5551 Without these safeguards, we could see a repeat of the last few years, years in which widespread music piracy turned a billion-and-a-half dollar industry in Canada into an $850-million industry. Years during which thousands of Canadians lost their jobs, entire retail chains closed, including Canada's arguable flagship chain, Sam the Record Man. Some artists have seen their careers grind to a premature halt and others have seen promising careers flounder.

5552 Now, you have been asked to solve a grey market problem by licensing the applicants. The music community has, for several years, faced a far worse problem, that of the black market known as peer-to-peer file sharing. If you allow the applicants to launch their services without the safeguards we have asked for, you may solve one problem but most certainly will compound another. The potential exists for a massive market failure.

5553 We have also heard a lot about artists and how they are going to benefit through the repatriation of the grey market and each applicant has also put forward an array of intended benefits, in terms of Canadian talent development. The danger here is that if these services are licensed without the adequate protections, there will be fewer Canadian artists around to enjoy the benefits and our expert reports bear this out.

5554 Richard.

5555 MR. PFOHL: Thanks, Graham.

5556 Now, the applicants, when they appear later today or tomorrow, may tell you that this issue can be addressed without Commission intervention, that our interests are perfectly aligned. If this is the case, then there's nothing that should impede them from implementing the measure that we are asking for. Unfortunately, what we see as a fundamental threat to our existence at least one or two of the applicants apparently sees as their business model.

5557 Let me give you an example. Last week, XM Satellite Radio announced the introduction of MYFI, M-Y-F-I, a receiver and recorder that, according to the press releases, allows subscribers to record up to five hours of their favourite songs. The Washington Post described the MYFI as, quote:

"The latest entry in the highly competitive battle over digital music, a fight that pits XM against its immediate competitor, SIRIUS, but, more broadly, against on-line music sources like Napster." (As read)

5558 Now, as Brian mentioned, those on-line music sources are some of our members, the difference is that we are trying to sell the product, with the MYFI, people would take it without buying it.

5559 Similarly, SIRIUS Canada referred in their presentation on Tuesday to SIRIUS' objective as creating, quote, "the iPod in the sky" with, quote, "thousands and thousands of hours of memory" and device that, and I quote again, "does all the work for free".

5560 Frankly, we remain unconvinced that this issue is susceptible to a business solution, absent action by the Commission to require each licensed service to control its network.

5561 CSR stated in their written reply that it, quote, "would not be appropriate for the CRTC to attempt to address a `world-wide problem'".

5562 SIRIUS Canada stated in their written reply that, quote:

"On a practical level, this matter will not be solved in Canada. Canada is a small market." (As read)

5563 Essentially, they are telling you to do nothing and wait for a U.S. fix, if any.

5564 This is the position of applicants who come before you seeking a Canadian broadcasting licence as Canadian-owned controlled broadcasting undertakings and, in the case of SIRIUS, with Canada's national broadcaster, the CBC, as a full-fledged partner.

5565 We urge the Commission to impose content-protection obligations on the subscription radio applicants at the time of licensing, rather than trying to stem the flow of unauthorized duplication and distribution of music after the fact. We don't want a repeat of what we saw on the Internet.

5566 Unlike the case of cable and satellite television signal theft, the replies of at least two of the applicants convey a fundamental unwillingness to adopt reasonable conditions of license. If the applicants are unwilling to address such issues at the time they are seeking licensing, imagine their position once they are fully licensed when we have no leverage. We submit that the Commission should exercise its jurisdiction in a manner that takes these considerations into account and establish the appropriate regulatory framework for these services.

5567 Graham.

5568 MR. HENDERSON: This brings us to our second and final issue, Canadian content. It is incumbent on the Commission to ensure that the Canadian Broadcasting System safeguards, enriches and strengthens the cultural, political, social and economic fabric of Canada as required by the Broadcasting Act.

5569 The Commission must determine if each applicant has made sufficient commitments in this regard. The Commission should assess each application to determine if it maximizes the use of Canadian creative and other resources, as required under the Act. While the Commission has exercised some flexibility in applying these principles in the past, CRIA recognizes that the three applications before you propose vastly divergent approaches to Canadian content. CRIA submits that the Commission must consider carefully whether these novel services serve the statutory obligations of promoting Canadian culture under the Broadcasting Act.

5570 It must also ensure that the services licensed in these proceedings do not set a precedent for establishing insufficient Canadian content commitments on the basis of technological determinism. I would be remiss, by the way, if I did not say how welcome Mr. Miller's remarks were yesterday on behalf of CHUM regarding the importance of content protection.

5571 In conclusion, we appreciate the opportunity to submit our comments and we would be pleased to answer your questions.

5572 THE CHAIRPERSON: Thank you. Your briefs were very clear and I appreciated Professor Leonard's attachment. I guess if you look at the replies of the applicants, and we will explore this further with them, essentially they make a number points, but one of the points they make is Canada should not be out in front in this. And I take your point that they are applying here for a Canadian licence and so the Canadian terms should be, in some way, self-contained.

5573 But to the extent that this is a problem being wrestled with around the world, to what extent would a condition and at what level of calibration would a condition work so that Canada didn't misstep in regard to solving an industry wide problem?

5574 MR. HENDERSON: Well, I will give you some general answers and then I will ask my friends maybe to fill in behind me. I don't think that we are asking the Commission here to solve this problem. What we are suggesting is that the solution be pushed back onto the applicants. We are suggesting that... and by the way, we would be more than willing to offer our technical assistance in this regard so that we could come up with a set of technical measures that would avoid the disaggregation and distribution problems.

5575 THE CHAIRPERSON: Without wanting to interrupt your flow, have you invited those kinds of discussions offline with the applicants?

5576 MR. HENDERSON: Yes, we have.

5577 THE CHAIRPERSON: You have, and the response has been?

5578 MR. HENDERSON: It has been I would say indeterminate at this point. As you can see from the responses of the two satellite applicants, they were extremely reluctant. They were the ones who suggested that this had to be solved elsewhere. And I should, just on that point say this, that as a Canadian I am not accustomed to thinking of our country as one which waits for Americans to fix our problems. And I believe it has been in our history and it is in our nature to solve problems. This problem does not require a global fix. It is not as if someone somewhere has to go and throw a couple of switches and then the whole problem is solved around the world.

5579 Here in Canada we can solve this problem. As I said in my submissions, the fixes are there and they can be applied to the technology relatively easily.

5580 THE CHAIRPERSON: By, in your view, making certain adjustments to the receivers?

5581 MR. HENDERSON: By making adjustments to the receivers and the underlying software.

5582 MR. PFOHL: And, might I add, basically the adjustments would allow it to recognize if we go to a digital rights management protocol where we would have a code perhaps in songs that would say listen, you can or can't copy this or you can make X number of number of copies of it, it would recognize that code and it wouldn't allow people to make those copies and to redistribute them freely on the internet.

5583 MR. ROBERTSON: And the reason, Mr. Chairman, if I could, is that the reason we are asking for a Canadian solution is that here we have had the biggest problem in the world in terms of high speed internet penetration, computer penetration. We were the first country in the world to have retail sales losses in our business. We have had the highest per capita sales losses. Retail sales have gone from $1.4 million 1999 down to $850 million last year. So we have got the biggest problem world wide, that is why we are asking for a Canadian solution.

5584 MR. HENDERSON: And if I might just add to that. It is an interesting conundrum. We have heard an extraordinary amount about how artists are going to benefit. I mean, and that is the sort of primary focus of this. What is interesting is that subscribers to this type of service may well not be the type of consumer that artists are happy with because they... based on our research, these consumers are interested in the disaggregation and distribution features that satellite radio has to offer. In other words, they may not be CD buyers. So, Sadie, the Good Brothers and other artists who are desperate to get their records onto radio and we support that and we understand it and we see the value of satellite in that, without the safeguards you may find that the subscribers to these services aren't CD buyers.

5585 THE CHAIRPERSON: Right, and I guess this is a problem whether the distribution is terrestrial or satellite?

5586 MR. HENDERSON: Yes.

5587 THE CHAIRPERSON: Now, we have had digital audio rollout in other countries, the UK we have heard from... I know that in Germany they have now switched to an entire digital transmission system and shut the analogue off. Has this problem been a problem in those countries and, if so, have there been regulatory solutions imposed and, if so, can you share with us what that experience has been?

5588 MR. HENDERSON: Well, the answer is this is a problem that the recording industry is facing around the world. In some sense, in certain less regulated jurisdictions such as the United States the players got into the marketplace before there could be hearings and before the issue could be adjudicated, if you will. That would be true for satellite radio in the United States and for digital audio broadcasting in Europe. But I can tell you that from the label perspective we view, both in Europe, where the issue is being addressed just as we are addressing it here, we view it as one of the single greatest threats to our business model yet and that is coming from an organization that has survived the internet piracy.

5589 MR: PFOHL: And, if I could just add. We are at a sort of unique position in Canada today because the technology has just recently come about that allows this sort of disaggregation, that is the copying of individual songs and then distribution. And it has become more of a threat because, as you heard over the last three days, now the next frontier is a combined sort of iPod/receiver so that people will have a built-in memory that will allow them to store thousands and thousands of songs. So, when some of these services were licensed in say the UK four years ago or what have you, that technology didn't exist.

5590 You are in a unique position because we can address this problem before the problem arises here. Our counterparts in other countries are working on this problem, but if the service is coming into Canada what we are saying is that we need to take the prudent measures to prevent the problem in Canada.

5591 THE CHAIRPERSON: I take that point. Do you see an analogue to the PVRs and television here?

5592 MR. HENDERSON: Well, the quick answer is that the TVO has about eight hours of recording time, I think, and what we are looking at here is something that is virtually--

5593 THE CHAIRPERSON: You mean TVO?

5594 MR. HENDERSON: TVO, yes.

5595 THE CHAIRPERSON: It is distinct from TVOntario.

5596 MR. HENDERSON: That is right, it is only got eight hours of broadcast. No, it is far more limited. Stephen... Oh, sorry.

5597 MR. PFOHL: Yes, if I could just add a bit to that. It is limited, in part, because they negotiated that in the States, that you could only record a certain amount of time, eight hours or so. You are not allowed to record thousands and thousands of hours of programming and you are not allowed to automatically have it record everything that ever appears on TV and then store all those programs so you can go back later and watch those programs again and again.

5598 THE CHAIRPERSON: But if you take the word "automatically" out of that, what is the practice? Are the sets... are the TVO and other personal video recorders recording proof or is it just that it doesn't automatically go onto your own hard drive or your own recorder? In other words, if you wanted to record off the TVO or off the television set and do thousands of hours, are you saying that the fact that it isn't automatic is a serious obstacle and it takes a lot of effort to do or are you saying that the device itself renders this impossible?

5599 MR. PFOHL: My understanding is that the device itself renders it impossible because there is a limit of, as Graham mentioned, I think it is about eight hours or so that you can record. So, it effectively--

5600 THE CHAIRPERSON: No, I hear that part, but can you not record off that device to your own device? You said you couldn't do that automatically, unless I misunderstood you.

5601 MR. ZOLF: I believe, Mr. Chairman, that you cannot do that, and just to give more context to that, there was another competing device, I think it was the replay player which had an additional attribute where you could share the programming that was taped onto the hard drive with 10 of your best friends, there were digital rights management measures to stop you at 10. But that went before the courts and ultimately that product was withdrawn. So I believe it is hermedically sealed, if you will.

5602 THE CHAIRPERSON: So, the eight hour rule flows from which source? Is it a court imposed rule or an FCC...?

5603 MR. ZOLF: I don't believe the eight hour is a court imposed measure, it is I think rather a technical constraint, that is the hard drive and I am sure the hard drive capacity would grow, but it is relatively limited, relatively finite compared to the problem we are talking about here.

5604 MR. HENDERSON: Just from our application--

5605 THE CHAIRPERSON: Just to follow that up if I may.

5606 MR. HENDERSON: I am sorry.

5607 THE CHAIRPERSON: So it is really... you are addressing the current state of the technology but you are not saying that there is any legal or regulatory inhibition to expanding that, hours with technology, upwards to whatever?

5608 MR. ZOLF: No that I am aware of, but that being said, there have been legal and regulatory developments which have stopped the distribution aspect of that programming.

5609 MR. HENDERSON: We can't speak--

5610 THE CHAIRPERSON: Right. Well, I guess I am wondering about this phenomenon, not just worldwide, but media deep.

5611 MR. HENDERSON: Well any owner of content we like to, you know, we have referred to ourselves... try to talk about music as much as we can because content sort of becomes a euphemism. I mean, we make music and filmmakers make films. But anyone who is a copyright owner or a content owner is going to be concerned about the potential for disaggregation and, most particularly, about redistribution. And if you just have a moment, at some point, to look at paragraph 16 of our intervention you will see what the survey turned up in the United States that, you know, 65 percent of adults surveyed indicated that they would use the cherry picking features of digital radio to record their favourite music. That is what they are interested in it for. And when they say they want to turn it into the iPod from the sky, well I have an iPod too.

5612 The difference is that my iPod... it is manual, I have to rip my files to my CD and, you know, and then back and it does have sorting features, but there is no sort of... I can't plug it into something and say okay go get stuff for me, this perfect digital copy that will substitute for the products of our members. And not just CDs, but the online services such as Puretracks, Archambauktzik and others who have just established themselves in this marketplace, a fragile toehold in a sea of unlicensed and illegal activity, would suddenly be faced with a competitor who isn't playing by the same sort of rules.

5613 MR. PFOHL: Mr. Chairman, just to return to your question regarding the T-load. We are all lawyers here so we are cautious about speaking about something we are not certain on. I was my understanding that it was either the FCC or some regulatory body--

5614 THE CHAIRPERSON: It inhibits my colleagues.

5615 MR. PFOHL: We are different lawyers. It was my understanding it was the FCC or some regulatory body in the States that had worked out that limit, but we can look into that and submit it to the Commission and let you know what the reason for that was.

5616 THE CHAIRPERSON: I take Mr. Leonard's point also that there is a tenancy in television to not want to necessarily watch a lot of repeat performances, where as--

5617 MR. PFOHL: Yes.

5618 THE CHAIRPERSON: --in music there is.

5619 MR. PFOHL: Absolutely.

5620 THE CHAIRPERSON: That is part of the differentiation.

5621 MR. HENDERSON: I am still listening to Led Zepplin.

5622 THE CHAIRPERSON: Who isn't? Those are our questions. We will explore this further with the applicants and I want to thank you very much for both your oral and written presentations.

5623 Thank you, we will break now for 15 minutes. Nous reprendrons dans 15 minutes.

--- Upon recessing at 1130 / Suspension à 1130

--- Upon resuming at 1148 / Reprise à 1148

5624 THE CHAIRPERSON: À l'ordre, s'il vous plait. Order, please.

5625 Mr. Secretary.

5626 THE SECRETARY: Thank you, Mr. Chairman. The next appearing intervention will be presented by the Society of Composers, Authors and Music Publishers of Canada, Mr. Paul Spurgeon. You have 10 minutes to make your presentation.

INTERVENTION

5627 MR. SPURGEON: Thank you. Good morning, Mr. Chairman and Committee Members. My name is Paul Spurgeon, I am general counsel for SOCAN, as you heard, Society of Composers, Authors and Music Publishers of Canada.

5628 SOCAN filed a six page submission with the Commission on September 15th, 2004. I know you and your staff are familiar with it, so I am not going to read it during the next 10 minutes. Instead, I want to focus on just one key issue which is of critical importance to SOCAN's members, namely Canadian content.

5629 Now, before I address our concerns regarding Canadian content, I want to first make sure you understand who we are and what it is we do. SOCAN is a not-for-profit Canadian organization that represents composers, lyricists, songwriters and publishers of musical works from across Canada and around the world. Although some of our members are also performers and producers, you cannot be a member of SOCAN unless you either create or publish music and/or lyrics.

5630 On behalf of our approximately 25,000 active Canadian members and hundreds of thousands of members of affiliated societies around the world we administer performing rights in music and lyrics. The performing right is that part of copyright which gives owners of musical works the sole right to perform in public or broadcast their works or to authorize others to do so in return for royalty payments. On behalf our members, SOCAN grants blanket licenses to users of music who pay us copyright royalties in accordance with tariffs set by the Copyright Board of Canada.

5631 When Canadian music is performed in Canada the royalties stay at home. When foreign music is performed in Canada the royalties leave the country, you pay for the people who own the rights. Since the livelihood of our Canadian members depends on effective Canadian content policies SOCAN has always been extremely interested in the Commission's broadcasting policies. Now that you know who we are and what we do, allow me to turn to what the Commission has called "the cornerstone of Canada's Broadcasting Act, Canadian content."

5632 Mr. Chairman, SOCAN is here today because we have three fundamental Canadian content concerns with the satellite radio applications before the Commission. First, the satellite radio applications do not meet the requirements of the Broadcasting Act, plain and simple. Second, they fly in the face of the Commission's long-established practice. And third, they would create a dangerous precedent that would adversely affect other elements in the Canadian broadcasting system. First of all, turn to the Broadcasting Act. I am sure you have heard this time in and time out, but it bears repeating. The Broadcasting Act, in a notice of public hearing you issued on July 8th, the Commission recognized that since no such services are currently licensed for operation in Canada these applications give rise to a number of policy issues that need to be addressed in order to ensure that the objectives of the Broadcasting Act are met.

5633 Now, the Canadian content provisions of the Broadcasting Act are very clear and well-known. Under the heading Broadcasting Policy for Canada, 3(1)(f) of the Act states: "Each broadcasting undertaking shall.." not may, but shall "..make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French or English, renders that use impracticable in which case the undertaking shall make the greatest practicable use of those resources."

5634 Mr. Chairman, the satellite radio applications you have before you involve 179 channels, of these, 171 channels will be imported, as is, from the United States. On the other hand, only eight of these 179 channels or less than five percent will be produced in Canada. SOCAN is concerned that the satellite radio applications run afoul of the Broadcasting Act for at least two reasons. First, by only providing eight Canadian channels out of a total of 179 channels, these applications do not satisfy the requirement that a maximum use be made of Canadian creative resources.

5635 Second, the applications have not discharged the onus of establishing why satellite radio renders the use of Canadian content impracticable. Last Monday, the Globe and Mail reported and I quote, "Stewart Lyons, Executive Vice-President of Canadian Satellite Radio, said asking its U.S. partner for more Canadian channels would be a significant problem as XM has already agreed to drop some of its U.S. slots to squeeze in the four new Canadian listings."

5636 Mr. Chairman, the fact that they were able to squeeze in four new Canadian channels demonstrates that it is not technically impossible or impracticable to use Canadian content. As a result, it is clear that CSR's excuse for making use of a minimum Canadian content does not meet the requirements of Parliament enacted in the Broadcasting Act. The bottom line is that a Canadian content ratio of one to 25 or one to 20 does not meet the requirements of the law.

5637 If I can move to the Commission's longstanding practice, in addition to the statutory problems if the Commission approves these satellite radio applications in their present form, you will depart from past Commission practice for no good reason. The Commission does not allow Canadian television, satellite and cable companies, for example, to import services consisting of the delivery of American programming, as is, and dump it into the Canadian market. For the same reason, we believe that the Canadian satellite radio companies should not be allowed to make minimum use rather than a maximum use of Canadian creative resources.

5638 SOCAN would also like to point out to the Commission's decision to grant the Al-Jazeera television station carriage in Canada also stipulated that the Canadian distributors must ensure that the channel's content meet certain requirements when broadcast in Canada. Mr. Chairman, this Commission has made it clear that foreign programming cannot be imported into Canada on an as is or take it or leave it basis. There is no reason to depart from the Commission's long established past practice in this case.

5639 Finally, the third point, the Commission should not create a dangerous precedent. If the Commission creates new rules for satellite radio, you must carefully consider how these new rules will impact on your upcoming commercial radio review. As subsection 3(2) of the Broadcasting Act states, "The Canadian broadcasting system constitutes a single system." The present satellite radio applications therefore cannot be considered in isolation, they are indeed part of a single system.

5640 I would also like to draw the Commission's attention to the recent Supreme Court of Canada decision, SOCAN and the Canadian Association of Internet Providers in which the majority of the court held and I quote, "Canada clearly has a significant interest in the flow of information in and out of the country. Canada regulates the reception of broadcasting signals in Canada wherever originated."

5641 In sum, SOCAN submits that the satellite radio applications cannot ignore Canada's Broadcasting Act, the Supreme Court of Canada and the Commission's past and future role in regulating the Canadian broadcasting system. Allow me to conclude by briefly responding to the first question the Commission asked in its July 8th notice, namely: "What is the appropriate amount of English and French language Canadian content that this new service should provide to satisfy the objectives of the Broadcasting Act?" As SOCAN stated in its September 15th submission, "Each of the applicants should meet or exceed the Canadian content requirements on each music channel that it broadcasts in the same percentage that applies to radio stations that feature similar formats, consistent with the fact that these services have more music, their Canadian content requirements therefore should be commensurate with that reality and feature more Canadian music, not less."

5642 Moreover, this may mean that these services have to provide more made in Canada signals. Mr. Chairman, members of the Commission, today I focused on your Canadian content policies because of the critical role that Canadian content plays in determining the livelihoods of SOCAN's Canadian members. SOCAN remains confident that the Commission will continue to play an important role in promoting the objectives of the Broadcasting Act, as you have done so effectively in the past.

5643 I thank you and I would be pleased to respond to any questions.

5644 THE CHAIRPERSON: Thank you. Commissioner Langford.

5645 COMMISSIONER LANGFORD: Thank you, Mr. Chairman, I think I will follow your lead, sir, because we do have your written submission and I too will focus on today's presentation of Canadian content. And, we may end-up getting into a discussion on the true meaning of 3(1)(f) of the Broadcasting Act. But before we do, let me put a general question to you, because we have had lots of conversation in this room this week about the notion of balance and realities. What if the realities, despite your take on the Globe and Mail's report, what if the realities really are... and I make no editorial comment on my opinion of this reality, but if the realities really truly are that four or five, at this point, Canadian channels are all that are available, that is it, there are no more available, it doesn't matter whether it is the applicants in front of us who go to XM and SIRIUS in the States or a new set of applicants in six months or a new set of applicants in a year, after that I am not so sure about compression realities and technological, but at this time, in this timeframe, only four or five channels are available period.

5646 Now we are stuck with the question of balancing that reality run by Canadians, managed by Canadians with some CTD, Canadian talent development, some royalties coming to your people, some more room for expression, a new avenue to express their, you know, your composers, lyricists, songwriters' work versus the grey market where the satellites are up there, the stuff comes in, people buy a tiny little box and plug it into their car and away they go. How do we balance those two in your view? Which is the best avenue to go down?

5647 MR. SPURGEON: Well, in light of the law, I don't think you can balance it. If you want to do business in Canada, you have to abide, you have to comply with Canadian law. It's as simple as that. It doesn't matter whether you are selling pharmaceuticals or whatever, you have to follow the law and I don't know whether a balance can be achieved.

5648 I don't know whether they can do business in this country because of the fact that Parliament has said you must use a maximum amount of Canadian resou