Speaking notes for Hubert T. Lacroix, President and CEO, CBC/Radio-Canada, at the CRTC’s public hearing Let’s Talk TV: A Conversation with Canadians

September 12, 2014, Gatineau

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Introduction

Good morning Mr. Chairman, Vice‐Chairman, Commissioners, Staff. My name is Hubert T. Lacroix and I am the President and CEO of CBC/Radio‐Canada.

With me this morning is Steven Guiton, Vice President Technology and Chief Regulatory Officer and to his right Jean Mongeau, General Manager and Chief Revenue Officer for the Corporation. On my left, Louis Lalande, Executive Vice‐President French Services, on his left Heather Conway, Executive Vice‐President English Services, and to Heather’s left is Bev Kirshenblatt, Executive Director, Regulatory Affairs.

In our back panel we have: Patricia Pleszczynska, General Manager, Regional Services & ICI Radio‐Canada Premiere, to her left, Marie‐Philippe Bouchard, General Manager, Music and Digital Services, to her left, Jennifer McGuire, General Manager and Editor in Chief, CBC News and Centres and to Jennifer’s left, Sally Catto, General Manager, Programming, CBC Television.

Thank you very much for giving us the opportunity to speak this morning.

Having announced our five‐year strategic plan in June, we are well aware of the range and complexity of the issues facing television broadcasters. We also recognize the challenges facing the Commission in developing a roadmap that achieves the public policy objectives in the Broadcasting Act in an environment where the only thing certain is the risk of maintaining the status quo. As you stated in your April 24 Public Notice,

...The Commission considers that there may be risks to public policy objectives if its current approach remains unchanged. A review of the Commission’s overall approach to television is timely in order to ensure that these objectives continue to be fulfilled. (para 32)

We agree that there are risks to continuing the current regulatory approach. However, we think there is an even greater risk to simply tweaking a model that no longer works.

The most significant of these is that the system will no longer sustain the creation and distribution of compelling Canadian content in formats and on platforms that Canadians want. It would clearly be second best to come out of this proceeding with a regulatory approach that achieves less than what we have accomplished in the past.

In our view, the Commission's approach must support the following:

(i) Market‐based solutions to issues rather than regulatory intervention;

(ii) System‐wide solutions rather than protecting the financial success of any particular company; and

(iii) System‐wide solutions that establish fair business and operating rules for all.

These are the same elements, Mr. Chairman, that you recently indicated would be driving you in this proceeding in order to make sure that the system works and that it achieves the policy objectives of the Act. As you said:

We have to make sure that the business model works, that the Canadian‐made content still gets produced, that it is of quality, that Canadian news and information still has support and is available, and is of quality and actually has reporters reporting and not just reading rip and tear news services.

Our submission and our comments to you today are in the same spirit.

Conventional Television and the Canadian Television System

Your April 24th Public Notice describes the history of the Commission's involvement in Canadian broadcasting and the story of the fragmentation of conventional broadcasters' audiences. One of the startling aspects of this fragmentation is just how quickly and how significantly it has occurred.

As an example, exactly 20 years ago, in 1994, the Commission licensed several new specialty services and in doing so noted that at that time existing specialty services had managed to attract only 4.6% of all hours of viewing by Canadians. On this basis, and in licensing this handful of new specialties, the Commission concluded that, "audience fragmentation should be minimal." If only it was so.

Instead, as we all know, the fragmentation of conventional broadcasters' audiences from the launch of specialty and pay services has been long and uninterrupted and continues to be expanded today with VOD services, mobile services and OTT services.

Today, the relative strength of the conventional and specialty and pay sectors is dramatically different than what it was twenty‐five years ago:

  • Since 1990, conventional television’s share of total advertising in Canada has dropped by 25%.
  • Since 1990, conventional broadcasters’ share of all TV viewing in Canada among adults aged 25‐54 has declined by over 40% (from 64% to 37%).

And yet, despite these changes, Canadians still look to conventional television for their local programming, especially local news. Conventional television still remains at the heart of the broadcasting system ‐ but its business model is broken.

But you already know this. So, why do I repeat it? Because we think that there is indeed a market‐based and system‐wide solution available to the Commission to address this issue.

We think that conventional broadcasters should be paid by BDUs for the programming that BDUs take from them – just as specialty and pay services do. This change would restore balance to the business model of conventional broadcasters. How do we do this?

As recognized by the Commission, over‐the‐air television transmission is no longer an efficient or popular technology for the system. The Commission should thus provide conventional broadcasters with the option of closing their OTA transmission systems and feeding BDUs through whichever other transmission technology they deem appropriate. This would render section 31 of the Copyright Act inapplicable and thereby enable conventional broadcasters to negotiate payment for their programming from BDUs.

We believe this should be the number one objective of this proceeding – to fix the business model of conventional television and thereby preserve local programming in the Canadian broadcasting system.

Where does this leave public broadcasting? Our mandate is to play an important role in the lives of Canadians across the country regardless of where our content is viewed or accessed. To inform, enlighten and entertain. To reflect and serve the needs of all Canadians in both official languages regardless of where they live. To contribute to the cultural fabric of Canada through the promotion and creation of a variety of programming that reflects and celebrates Canada and Canadians. While we are proud of our achievements, the current environment creates challenges in meeting our mandate because these objectives can’t be met if, every year, because of a broken business model, we are forced to do less, if we are forced to reduce our contribution to the broadcasting system. Fixing the business model of conventional television will enable us to sustain our contribution to the system into the future.

The Bigger Picture

So, what do we see as the way forward?

First, we recognize that the Broadcasting Act sets out numerous policy objectives that the Commission must strive to achieve. The most significant of these is to permit and support the creation and distribution of compelling Canadian content in formats and on platforms that Canadians want. Broadcasters must be able to adapt.

Second, the Commission has the responsibility and the tools to promote the health of the broadcasting system as a whole. All programming undertakings should have an opportunity to devise and implement reasonable business plans. This includes operating in an environment with adequate VI safeguards and the ability to receive reasonable compensation for their programming.

What are the elements of broad regulation?

So, what should the regulatory regime look like – beyond fixing the business model for conventional television?

CBC/Radio‐Canada believes there are four overarching objectives the Commission should use to guide its ultimate decision in this proceeding.

First, it is critical to keep the Canadian broadcasting system Canadian. In our view, this is best achieved by maintaining the preponderance rule. This approach has worked extremely well in the past and there is no reason to believe that it has somehow become outmoded.

Second, we believe it is important to preserve a diversity of voices in the system. Given the level of concentration that now exists, we believe this goal is best achieved by means of ex ante safeguards that ensure independent broadcast services are provided with adequate distribution protections to ensure diversity of voices continue in the system.

Third, we believe it is essential that there be funding available for high priority programming. In our view, this includes drama and, as Canadians have said loud and clear in this consultation, local news. The former should continue to be funded by the CMF and the latter by a new Local News Fund.

Fourth, all programming undertakings should be given greater flexibility to focus on the programming choices that are demanded by the marketplace and on the platforms that best meet Canadians' needs. An important measure of success will be connecting with audiences. The Commission should not try to force feed particular genres of programming through particular platforms. Instead, it should focus on ensuring that all types of programming are available somewhere in the system.

These four elements are what we see as comprising the building blocks for a regime of broad regulation which can take the Canadian broadcasting system into the future with a reasonable chance for continued success.

But to return to our starting point, we believe that this framework will succeed only if the business model for conventional television is fixed – otherwise this important segment of the system will not be able to continue to contribute as it has in the past and this will lead to a lesser amount of Canadian content and lower quality content.

Conclusion

These are difficult and challenging times. It is critical for the ongoing health and vitality of the Canadian broadcasting system that both broadcasters and the Commission's regulatory regime adapt to the new multi‐platform environment. In our view, if the Commission establishes an economically logical and flexible regulatory regime, it can be confident that the system as a whole will meet the needs of Canadians and fulfill the objectives of the Broadcasting Act for the foreseeable future.

Thank you. We would be happy to answer any questions you may have.

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