I                      Who are we?

1.                Thank you, Madame Secretary.  For the record, I’m Peter Murdoch, CEP’s Vice President, Media.  With me today is Monica Auer, our legal counsel in this matter. 

2.                CEP is Canada’s largest media union.  Thousands of our members work in Canadian TV programming services. 

3.                Like you, Mr. Chairman, our members support accountability.  The public regulatory process should provide Canadians with a way to assess and to help direct our broadcasting system’s path.

4.                More specifically, our members also want a strong Canadian broadcasting system, with space for well-funded local programming, more original program production, and increasing employment opportunities.

II                   The LPIF

5.                But it’s important to remember that it’s the crisis in local programming that has brought us all to this hearing.

6.                So I’d like to begin by thanking you for creating the LPIF.  We supported this fund.  Some broadcasters say they’ve kept stations open because of it, and for that reason alone the LPIF has worked.  Increasing the LPIF, instead of reducing it next year, might solve many of private broadcasters’ current financial challenges.

7.                As well, our original concerns about the fund remain.  It does not target local news specifically.  It does not require new spending on local content.  Under your allocation formula it will help larger stations more than smaller ones.  The fund’s board does not have the employee representation recommended by the Heritage Committee, and as we all know, BDUs did not take your hint to pay the LPIF, but taxed their subscribers instead. 

8.                But the LPIF was at least an attempt to help some broadcasters, and we thank you for that initiative.

9.                I will now focus on rebalancing revenues and responsibilities to support and strengthen local news and our broadcasting system. 

III                 Canadians matter

10.           In calling on you to rebalance the system, I want to begin at the beginning – with what this hearing has called “consumers”.  I prefer to call them Canadians. 

11.           Last week Corus told you that advertisers are the foundation of our broadcasting system.  We fundamentally disagree.  So does the Minister of Canadian Heritage, who told the House last Wednesday that this hearing must put Canadian consumers first. 

12.           After all almost every household in Canada has a TV set.  Over 90% have access to cable or satellite, making television almost a public utility.  Canadians rely on, and should be able to rely on, their local TV during emergencies.  On average they watch 4 hours of TV a night.  In fact, on any given day most Canadians are probably spending more time with the TV system, than with our health and education systems. 

13.           TV is a central thread in our nation’s fabric.  This thread gives Canadians a social-psychological connection to their country, whether through gossip about their favourite shows, or complaints about their city councils.

14.           Local TV stations are still Canadians’ primary source of information and entertainment.  The internet has not replaced them, and many Canadians are sitting down every night to watch their favourite local newscast or drama.  Local TV matters because it links Canadians – not because it has made some companies and a few families a great deal of money.

15.           But unless broadcasters running local TV stations obtain more revenue, stations will close, as in Brandon and Red Deer.  Canadians and Parliament are relying on you to find solutions. 

IV               The past matters

16.           The central problem is that revenues and responsibilities in broadcasting are out of balance.  Forty years ago, as Chart 1 below shows, cable was the infant industry in our system, with just 14% of all broadcasting revenues in 1968. 

17.           This makes it easier to understand the CRTC’s decision that BDUs should wire the nation first, instead of paying for the local TV signals they used in their business.

18.           But last year, BDUs took in more than half, or 57% of all broadcasting revenues.  The infant industry has grown up.

19.           In fact, when you only look at revenues from TV programming and distribution, in Chart 2, BDUs’ share in the last ten years has more than doubled.  Last year BDUs took in 64% of all TV revenues.  

20.           BDUs’ growing share of the pie has not been matched by a growing share of responsibilities.  Chart 3 shows that BDUs’ share of total Canadian TV program expenditures has stayed stuck at less than twenty percent.

21.           Chart 4 shows that while TV programming services now obtain 36% of the TV system’s revenues, they pay for 82% of its Canadian programming.

22.           This imbalance is the problem.  But BDU and TV broadcasters are unlikely to solve this problem without stronger guidance from you.

23.           For instance, we know that the spring hearing and this one were prompted by some broadcasters’ business decisions to cut or eliminate their local news.

24.           These cuts were perfectly lawful because the CRTC eliminated any regulatory requirement for local news years ago.  It assumed that broadcasters would choose to spend more, when they could just as easily spend less:  in reality, the marketplace did not protect local content, because the business of broadcasting – like any other business – is to produce their content at the lowest cost.

25.           Since good local programming costs money to make, you must mandate both exhibition and expenditures.

26.           We saw what happened with local content.  The same thing happened with Canadian programming overall, when Canwest and CTV applied to renew their licences in 2001.  As Chart 5 shows, although these companies were already forecasting foreign program spending well beyond their Canadian content levels, the CRTC did not limit foreign program expenditures – and helped to create the current foreign spending problem we now face. 

Source:  CTV and Canwest 2001 licence renewal applications

27.           Allowing media consolidation has also created problems.  Assuming larger companies would raise Canadian exhibition and expenditures, the CRTC ignored our submissions that debt costs would lead broadcasters to cut domestic program spending.  As we predicted, the marketplace did not protect local content.

28.           These decisions simply made the problems caused by a structural revenue shift more obvious.  The fact is, that since BDUs now dominate our system, it’s time for them to meet their financial obligations.   

V                  Rebalancing revenues in the system

29.           We think that previous, successful CRTC policies, can be adopted for the future, and that the coming analog-to-digital transition is the ideal time to correct the current imbalance.

30.           One simple way to start, is to begin ensure the requirement that the right to sell local advertising is restricted to those who offer a reasonable level of original local service to a community.

31.           Let’s now get to the heart of this hearing.

A                   Regulate rates for local TV stations

32.           This panel has clearly said that it does not want to talk about a fee for carriage model in which you would consider public submissions from all parties, and make a decision about the fee that BDUs would pay when they carry local TV stations. 

33.           We’re puzzled by the hostility towards fee for carriage. Didn’t the CRTC use this approach in 1987 for Canada’s highly successful legacy specialty services?  Didn’t the US actually launch its current retransmission consent model with fees set by an independent third party?  The CRTC used fee for carriage successfully before – why not again?

B                   Pay for what is used

34.           We also think that the CRTC should use the powers Parliament gave it under the Act to regulate basic rates in the public interest.  The CRTC should recognize that since BDUs are no longer an infant industry, they should pay their share of the system’s programming benefits for Canadians. 

35.           After all, BDUs are where they are now because they were monopolies for fifty years.  Canadians paid for their expansions and upgrades through rate increases and capital cost allowances.  In 1993, the CRTC let BDUs keep half or more of these rate increases forever. 

36.           Since the CRTC stopped regulating rates, the predictable result is that the rates have simply gone up and up – while Canadians’ ability to pay has not.  Any competition in our BDU sector is extremely limited by its oligopolistic structure, and also by non-compete contracts that BDUs secretly arranged with each other.  How many other non-compete deals exist?

C                   Backroom deals are not transparent, accountable or fair

37.           The lack of transparency is why your suggestion of allowing broadcasters and cable companies to make deals behind closed doors, simply doesn’t make sense.  We would have liked to have heard the views and opinions of former FCC Chairman Richard Wiley last Monday, but the one question he received gave us little chance to learn from this potentially invaluable source of expertise

38.           So we still don’t know:  how will backroom deals put Canadians’ interests first, when Canadians aren’t even at the table?  Can subscribers ask for final offer arbitration too, or will this be reserved for BDUs and TV stations?  If BDUs and TV broadcasters don’t like final offer arbitration, can they appeal to you, to the courts or to Cabinet?  Or is this another ad fight waiting to happen in three years, when the first deals might expire?

39.           Last week we learned that BDUs already skim specialty services’ subscriber fees, and that broadcasters fear that BDUs will punish their specialty services.  Different programming services have told you that BDUs treat them with contempt and threats.  Why should this evidence be ignored? 

40.           Won’t backroom deals create a new barrier to entry, and new uncertainty for new TV applicants?    Last week it was suggested that TV companies should just put the peripheral issues of local avails and VOD in a box along with compensation for value, and negotiate everything.  Won’t this really create a new private regulatory regime that excludes Canadians except when it comes to paying the bill?

41.           Will private compensation contracts lead to a new kind of journalistic chill?  This isn’t an empty threat:  according to the Hill Times, BDUs just fired Nik Nanos from CPaC, because they didn’t like the work he was doing for TV stations.  Apart from anything else, will BDUs try to influence programming content of the broadcasters they deal with? 

42.           And then there is this:  if you allow BDUs and TV companies to bargain in every market, will we end up with 64 different broadcasting systems, and a more complex regulatory regime?   Why would different regimes for each city be more efficient than a single set of CRTC regulations? 

43.           As for subscribers, if deregulation has not kept rates down, why would even more deregulation through secret agreements be any better?  What’s the remedy if subscribers don’t like the results?  To disconnect from the system altogether? 

44.           Then last Friday Jim Shaw told you that the solution is for every broadcaster to meet him personally, and ask for his help.  If that’s going to be the system, why would Parliament or Canadians need the CRTC anymore?  Let’s just put Jim in charge!

45.           Regulating through private deals is a bad idea.  It will transform a system regulated in the interests of Canadians, into one run by private contracts signed between six or seven large companies.  Backroom deals remove Canadians’ ability to help guide the development of our system, and to challenge CRTC decisions. 

D                   Deregulation hasn’t worked – regulation will

46.           Parliament has given you a road map for the requirements you should set down for broadcasters:  instead of waiting for their best offer, you can and should set the terms of that deal yourselves.

47.           We’ve heard that BDUs will go to court or cabinet whatever you decide here.  Well, let them.  It’s time to find out who’s in charge.  Canadians deserve to know.

VI               Group Licensing

48.           I also want to address your group licensing proposal.

49.           I understand that this panel has scolded some interveners for being too imprecise.  This is a policy hearing, you’ve said, and we need details from you. 

A                   Lack of specifics makes it hard to assess CRTC’s proposal

50.           But none of the six CRTC notices about this hearing tells Canadians how your proposal will generate more original programming, new employment, or more resources for Canadian content.

51.           This surprised us, because we thought the CRTC is subject to the federal government’s Directive on Streamlining Regulation requiring federal agencies to quantify the costs and benefits of proposed regulatory changes.

52.           Is it fair to criticize interveners about insufficient detail, when you haven’t disclosed any of the information we need to do more?  You’ve denied our access to information requests for basic financial data about individual TV stations.  You won’t release the basic cable rate data you’ve had from BDUs since October 26^th, even though this panel asked questions about basic cable rates last week.  Last July you told us that the CRTC hasn’t estimated the impact of the group licensing model.  And last week we learned that the CRTC has no records about how much the major ownership groups have spent on Canadian content in the past.  

53.           If the CRTC doesn’t know if or how its own proposal will benefit the broadcasting system, how should Canadians? 

B                   Conceptual model could permit reduced exhibition, expenditures and employment in TV

54.           Nevertheless, we tried.  We estimated that group licensing could reduce Canadian content by up to 45% in over-the-air TV.  Setting a 50% Canadian spending requirement could reduce overall Canadian TV program spending by $85 million, since last year, the level was 53%.  If expenditures and exhibition go down, employment will go down.  

55.           These job losses will be in addition to the thousands of jobs our system has lost so far:  almost eight thousand, in the last nine years. 

56.           Job losses matter.  Your enabling statute does not discuss  “operating profit”, and EBITDA, but does say that our broadcasting system should give Canadians employment opportunities.  Describing concepts that create even more unemployment as “flexible”, doesn’t make them any better for our broadcasting system. 

57.           We have no problem with flexibility, Mr. Chairman. We’re just as pragmatic as you.  But any flexibility you grant must demonstrably benefit our existing system.  Flexibility without benefits is deregulation all over again.  It’s just another way to transfer more money to broadcasters without strengthening our broadcasting system.

58.           We think a better solution is for the CRTC to set CPE levels for over-the-air TV services as a whole, based on their overall revenues and whether they are private or public.  A similar approach worked for private TV before, CPE still works for our specialty services, although it is more complicated.  CPE will work for local TV too – if combined with a fee for carriage or an strengthened LPIF.  

VII             Rebalancing regulation:  put Canadians first

59.           To conclude, Mr. Chairman, the problem in our broadcasting system today is very clear:  it’s that revenues and responsibilities have become completely imbalanced.  This is the problem that you can address and clarify going forward.  

60.           Tinkering with local avails, VOD and simsub will not solve this central problem.  For that, you need the powers that Parliament gave to you, to require distributors to pay local TV stations fees that you believe are fair, without raising basic service rates.

61.           Asking TV and BDUs to negotiate these fees for you, puts their interests before Canadians’, and creates continued uncertainty.

62.           What we know is this:  broadcasting is essential to Canadians.  It isn’t a luxury.  Canadians want their local television to be on air and they don’t want to be taxed by wealthy and powerful cable companies. 

63.           Clearer parameters from the CRTC about what they are supposed to solve, would help BDUs and TV broadcasters to address the problem.  Yet Canadians will still need the CRTC to protect their interests in high-quality domestic programming, and affordable cable rates.  

64.           We are confident that the priorities and principles that Parliament developed forty years ago remain as clear and important as they were then, and that Parliament still supports them. 

65.           On behalf of the thousands of Canadians who work in the broadcasting system, the thousands who have already lost their jobs, and the millions who not only enjoy, but rely on, their local nightly news, I sincerely hope the CRTC musters the courage to do what is right, that it rebalances its regulatory approach to put the public interest first, and that it faces the consequences.  We’ll be with you.  And so will Canadians.

66.           Thank you for your time.