Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 11 - Evidence
OTTAWA, Tuesday, March 11, 1997
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-216, to amend the Broadcasting Act (broadcasting policy), met this day at 6:09 p.m. to give consideration to the bill.
Senator Lise Bacon (Chair) in the Chair.
[English]
The Chairman: Honourable senators, before we hear our witnesses, there are a few words I want to say.
Bill C-216 was referred to this committee by order of the Senate dated December 3, 1996. Aside from today's witnesses, the committee has heard from Mr. Roger Gallaway, Professor Martha Jackman and the Consumers' Association of Canada. The Canadian Association of Broadcasters and the Fédération des communautés francophones et acadiennes du Canada have been scheduled for April 8, 1997, following the Easter recess.
As honourable senators know, this committee has not been idle. The subcommittee on communications has been holding public hearings on its special study of Canada's international competitive position in communications. It has also travelled to Boston for a series of meetings and a visit to the MIT media lab.
The subcommittee on transportation safety has also been holding public hearings in Ottawa, Yellowknife, Edmonton, Vancouver and Montreal. It will soon be travelling to Halifax for three days of public hearings.
The full committee held one meeting on Bill C-57.
The committee takes seriously its responsibility to give proper consideration to all legislation coming before it. At the same time, the committee is fully aware that its consideration must be timely. To this end, the steering committee recommends the following course of action with respect to Bill C-216.
We will immediately contact all potential witnesses who have not yet appeared before the committee. They will be invited to make written representation to the committee by April 8, 1997 and all remaining witnesses will be heard on that day, in a marathon session if necessary. Once public testimony has concluded, the committee will proceed to clause-by-clause consideration of the bill and will thereafter report to the Senate.
If committee members agree with this proposed course of action, Bill C-216 should be reported back to the Senate by Thursday, April 10.
Is it your pleasure, honourable senators, to adopt this course of action?
Honourable Senators: Agreed.
The Chairman: We have today witnesses from the Public Interest Advocacy Centre.
Please make your presentation and then we will have questions for you.
Mr. Michael Janigan, Executive Director and General Counsel, Public Interest Advocacy Centre: Thank you for the opportunity to address this committee on Bill C-216. We availed ourselves of the same opportunity when this matter came before the heritage committee of the House of Commons in June of 1996.
We have made available to the clerk a document based on the document put together by counsel to the committee, with questions that seemed to be directed toward the proponent MP, Mr. Gallaway. These questions were interesting and we took the opportunity to provide answers to them in a written form. The committee may find that useful in its deliberations.
For over 20 years, the Public Interest Advocacy Centre has been involved in issues associated with telecommunications and broadcasting, representing the interests of ordinary consumers and, in particular, vulnerable consumers in Canada. We provide legal and research assistance to the National Anti-Poverty Organization, the Consumers' Association of Canada and other groups and organizations across Canada in regulatory proceedings, chiefly before the CRTC and the Ontario Energy Board, but also before such regulatory tribunals as the National Transportation Agency.
We wish to first deal with the merits of this legislation; specifically, the mischief at which it is directed. It has been unsettling to hear from some quarters that the practices that will be prohibited by this statute are characterized as a kind of irritant to Canadian cable consumers, a wrong somewhat akin to an offensive TV commercial.
The elimination of the practice of negative option marketing to some appears to be little more than an exercise in doing something warm and fuzzy for Canadian TV viewers who are overwrought with the shenanigans of the cable industry.
When the legislative remedy proposed in Bill C-216 is relegated to this kind of status, it is little wonder that opponents have had the opportunity to seize the high moral ground. We will deal with the merits of the opponents' claims concerning the effect of Bill C-216 upon Canadian broadcasting services elsewhere in the submission. However, I should like to first return to the reasons behind the bill itself.
Commercial contracts, whether for building materials, utility to services or, for that matter, gumdrops, have for centuries had their basis in the consent of a willing and informed buyer and a willing and informed seller to a sales transaction. Over the years, courts and statutes have intervened in the open market on behalf of a buyer or a seller whenever conduct by either party interferes with the prerequisites for a commercial contract. For example, under most sale of goods or consumer protection legislation, parties to a sales transaction cannot misrepresent the nature and the quality of the goods that are being sold. By law, as well, a vendor cannot deliver unsolicited goods and expect payment. A vendor cannot employ bait and switch tactics to boost sales.
In each of these examples, the conduct that is prohibited or which gives rise to liability for damages, is conduct that attacks the nature of the informed consent of one of the parties to the sales transaction. This informed consent is the essence of commerce and commercial law and underpins the societal reasons for enforcing contracts in the first place.
Negative option marketing is tremendously successful because it evades this essential part of the ordinary rule of commerce; the prerequisite of having an informed buyer. In this case, the buyer pays for the services which he or she may or may not know he or she is receiving or wishes to receive unless he or she objects to the receipt of the services.
The legality of this practice on the part of Canadian cable companies and, in particular, its vulnerability to attack via class action on behalf of unsuspecting customers, has frequently been mooted.
It is far from a decided issue, regardless of the passage of this legislation, whether cable companies employing this practice could successfully defend against an action in restitution by implying consent based upon the normal course of their operations.
It is abundantly clear that it is a practice that offends against the principles associated with contract and commercial law for more centuries than this nation has existed.
An indication of the success of this masquerade is revealed in the context of a 1993 survey done for the Friends of Canadian Broadcasting, which showed that while 92 per cent of Canadians subscribe to extended basic service, 66 per cent of cable user respondents believed they had the bare bones basic service. These figures attest to the successful marketing by negative option of the extended basic service by the cable industry in 1990.
Before we deal with the possible threat to the viability of some or all of Canadian broadcasting services by this bill, we would emphasize that what is under consideration, leaving aside whatever collateral benefits are provided by the continuation of this practice, is a straightforward prohibition of a sleazy but lucrative practice. The onus should not be on the proponents of this bill to allay possible side effects, but on the practitioners to justify its use.
We wish to also look at whatever collateral benefits may allegedly be lost if this bill passes.
Mr. Reddick will now deal with matters concerning the regulation of basic service and other programming by the CRTC.
Mr. Andrew Reddick, Director of Research, Public Interest Advocacy Centre: I should like to make a few comments about Bill C-216 and basic service. Bill C-216 specifically addresses non-mandatory pay and non-mandatory specialty programming services. It does not apply to the existing basic service packages; however, it will affect services offered in the future.
Basic cable services is the standard package of services that is provided to all subscribers in a cable service area. It consists of a number of mandatory or priority Canadian programming services such as CBC English and French network services, local and regional stations, provincial education services and a community channel. It also includes various optional services, both Canadian specialty services and U.S. networks.
Specialty services introduced before 1994 have dual carriage status, which means that they are generally offered as part of basic unless the specialty service licensee consents to distribution on an optional or discretionary higher tier.
Most speciality services introduced after 1994 have modified dual status. This means they are offered as part of an optional discretionary package of services, unless both the distributor and programmer agree to carry on the basic tier. As such, a spate of new services expected in the coming years will be offered as discretionary, not basic, unless an agreement is made between the programmer and cable company or if the CRTC decides a service should be part of basic.
The consumer is missing in all this decision making. As it now stands, the cable companies and the companies providing programming service decide among themselves what consumers will watch and how much they will pay for it. Bill C-216 puts Canadian consumers into this decision-making process where they rightfully belong.
We live in a time when the broadcasting marketplace is dynamic and changing, as are the needs of consumers. Changes in technology will offer new ways of accessing content services such as digitalization which will facilitate more individual choice of products. In this context, we believe that Bill C-216 is flexible enough to accommodate these changes. For example, Bill C-216 is flexible in that it will allow the inclusion of a mandatory service for the substitution of a speciality service in basic. Such substitutions will likely arise when the needs of consumers in a market change or the market changes in some way.
What about a programming service, even a new one, which is considered essential for some or all Canadians? This could apply to English or French-speaking consumers in different parts of Canada and may be relevant in terms of content or have linguistic relevance or some other justification. Certainly not all programming services are likely to be considered essential, but a number will. If a service is considered essential or mandatory for all or some Canadians, then such a service can be deemed so by the CRTC on its own initiative or through successful application by individuals, groups or companies to the CRTC.
I will give you three examples of such procedures. In CRTC Public Notice 1996-69, the CRTC stated, on page 15, that it intended to require all Class 1 and Class 2 cable distributors the carriage of CPAC or a similar type of public affairs program service because it was in the public interest. After a public process, the CRTC has decided not to require this as a mandatory service, based on submissions. In Public Notice CRTC 1996-104, Expressvu Canada applied to the CRTC to amend its licence to change the services contained in basic service. This was a public process which allowed anyone else in Canada to comment on the proposal and make other recommendations. In CRTC Public Notice 97-69, the decision on this application, in fact basic service was expanded for the licensee to include up to five U.S. channels. They also denied Expressvu's application to delete the CTV from the French language basic service package.
For French language specialty services, for example, the CRTC had determined that RDI will be offered on all cable systems as part of basic service unless the specialty service consents to distribution on a discretionary basis. As well, starting in September of 1997, Canadian DTH distributors, cable systems with more than 6,000 subscribers, and major wireless distributors in the francophone market will offer the newly licensed French language speciality services either on their basic service or within a discretionary package. These services are Le Canal Vie, Musique Max, Teletune, and Le Canal Nouvelle. The point is that if there are specific services which are seen as essential for cultural, linguistic, social or policy objectives, then the process already exists through the CRTC to have these included in basic, not as a specialty or optional service. Moreover, Bill C-216 accommodates such changes in a manner which does not penalize consumers.
It is also useful to point out that, with the roll-out of DTH satellite over the next while, it is expected that consumers will be able to have much more control over the choice of programming that they wish to watch and buy. DTH will be addressable in subscribers' residences, and this will allow them more choice to select the service to meet their own needs. For example, CRTC Decision 97-16 this year authorized Canal Vie to be distributed by all DTH undertakings across Canada, and decisions 97-17 and 18 make similar determinations with respect to Canal Famille and Super Écran.
We believe that Bill C-216 is good for consumers. It makes consumers a partner in decision-making about the services they want and pay for, and the bill preserves the importance of basic and essential services while protecting consumers against paying for unwanted optional services.
Mr. Janigan: We would be happy to take any questions from the committee concerning our presentation.
The Chairman: How do you think Bill C-216 will change the relationship between the consumers and cable companies, or will it change that relationship? Do you believe that the economic and cultural interests of Canadian consumers are safeguarded with Bill C-216?
Mr. Janigan: I believe that there continues to be safeguards within the bill that deal with the way in which the CRTC operates in terms of its ability to mandate that certain services deemed to be essential to the linguistic and cultural health of the nation be put on basic service.
In terms of the effect of the bill on cable companies and consumers, that is a difficult point on which to speculate. The surveys that have been done by a number of different groups, including the cable companies, show that the events of 1995 had a very corrosive effect on the public's view of the cable companies. Some surveys show up to three or four to one would prefer to have the telephone company deliver those services rather than the cable company.
I do not know whether this bill will help repair the problems of the public image that the cable companies have enjoyed with the public to date, but I do know that it likely will help those cable companies which have always operated in a straightforward manner maintain a better image with the public and will deter those that have resorted to practices which have come under sanction in the past from resorting to them again.
Senator Adams: My question concerns programming and choice. Can I chose how many channels I want? If I want to pay less and receive less programming, is that a choice I as a consumer can make?
Mr. Reddick: We are in a strange transition time in terms of services. If we argue about today only, we are dealing with an analogue environment. There is a certain package. You must pay for basic, and then there are certain tiers.
As you move ahead in the next two to five years, we will move into the digital system. We will probably still see an essential basic package for which people will pay as part of broad policy, and that will cost a certain amount. We are hoping there will be more choice and more flexibility on individual packages or channels so that you can buy one particular channel or take different packages. Hopefully, through competition, that will also happen. We would be the first to argue that there should be a core package which will cost a specified amount. That is part of being Canadian. We cannot get away from that, and that is important. However, the people we are talking with accept the fact that, beyond that core level, you should have some choice over what your total package is and what you can give up and where you can get your service.
Senator Adams: Many people are still buying the small 18-inch dishes and receiving programming from the States. Will Bill C-216 affect them, or can they still receive the programming they want?
Mr. Reddick: If they are using the American signals, they will not get much Canadian. They may be getting a few Canadian channels that the American satellites or companies are already putting up on the signal. The Canadian direct-to-home satellites are required to carry a preponderance of Canadian content in addition to a small basic package. They will have much more choice through DTH, I would expect, although I am not sure since they have not started service yet. Presumably, over time they should have more choice than people using wire-line based cable because it is digital. Using addressable sets, I assume they will have more choice of the channels or packages they want to receive, but we are still skeptical until we see it .
When we first heard about competition in cable with DTH, everyone assumed prices would drop. Early indications are the monthly charge for DTH will probably be the same or more than the basic cable package, so I am not quite sure what they will be competing over.
Senator Adams: You mentioned competition. Can anyone apply for a broadcasting licence after Bill C-216 has been passed?
Mr. Reddick: I do not think Bill C-216 will affect that. That determines other issues. For example, last summer or last fall the CRTC had the last major hearing for Canadian companies to apply for a whole slate of new channels. I think 23 were approved. Recently, they issued a public notice for Canadian sponsors of foreign programming, so cable companies and others are now sponsoring American channels which they will add to the Canadian package in the future.
I do not think Bill C-216 has an impact on whether the CRTC will entertain applications for new speciality channels or broadcasting licences. That is a separate issue. The bigger issue is that there is not enough capacity in the system to accommodate the 23 new Canadian channels, let alone another 20 or 30 American channels, until everything goes digital. The impact will be if new services are licensed. If they are not deemed mandatory or necessary in the basic tier, then they will have to be offered as an optional package and you will need the consent of the consumer. However, it is a discretionary or optional service.
I believe that there is a lot of important material in the basic service now. However, I am hard pressed to believe that some of the things in the applications for many of the new channels, such as the gambling network and the games network, need to be in the basic package. Why should I pay to subsidize someone else getting on-line games? That should be an optional service. It depends what is an important, basic service.
Senator Adams: If we start off in Ontario want to get into Manitoba, Alberta, Saskatchewan or B.C., how will that be affected? Can you broadcast right across Canada if you want to?
Mr. Reddick: On direct-to-home satellite, you can do it that way. If you are a local or regional broadcaster, you would have to apply for a licence to expand your broadcasting province wide. However, if you have a national licence, like direct-to-home satellite, you would have a national feed. It depends on the terms and conditions of your licence.
Senator Adams: Does it matter how many subscribers you have? Can you go up to 200,000 or 300,000?
Mr. Reddick: It depends on how you design your business plan and who is your intended market.
In the last round last year, some of the speciality channels applied for regional licences. They just wanted to broadcast in western Canada, eastern Canada or central Canada. Others applied for a national programming licence. It depends on what each company thinks their target market is, but that is their decision.
The Chairman: There is a legal view according to which consumer protection is the responsibility of the provinces. Indeed Quebec, British Columbia and Nova Scotia have passed legislation in this area. Could a successful court challenge be made claiming that the proposed federal law is ultra vires?
Mr. Janigan: As you probably know, most of the constitutional law written in Canada involves a challenge concerning one or the other of the jurisdictions, either the province or federal government, having the exclusive jurisdiction to deal with a particular question. We examined this first when we requested that negative-option marketing be banned by the government. We are satisfied that the federal government has the jurisdiction under its broadcasting powers to outlaw marketing practices associated with a cable licensee.
The ancillary question is whether the provincial governments have powers under their consumer protection powers and the property and civil rights provisions of the Constitution to ban such practices when it involves a cable distribution undertaking. That is somewhat unclear. At best, it may hold concurrent jurisdiction to deal with that, and the federal government's legislation would probably be paramount in the event of any conflict.
I think probably the better view is that this is a matter of federal jurisdiction because it involves the regulation of cable distribution undertakings, which falls under the broadcasting powers of the federal government.
It is interesting that in 1995, when we first requested the Minister of Heritage Canada to look at this, he indicated initially that he believed this was a matter of provincial jurisdiction. Upon reflection, the ministry has now come to the conclusion that it is a matter of federal jurisdiction.
When this matter came before the House of Commons, a spokesperson for the Bloc Québécois indicated the opposition of the Bloc based on the premise that it was an intrusion on the right of Quebec to regulate this issue as a matter of consumer protection, that this practice had been banned by Quebec under section 230 of the Consumer Protection Act. When this matter came up for a vote, that position was reversed. It was not banned in Quebec, and this presented a matter which outlawed the practice.
This issue has had a very tortuous background in terms of the number of different opinions expressed, but we concur with the opinion offered by Professor Jackman. It is identical to the one we decided was correct last year; that this is a matter of federal jurisdiction and a practice which can be banned by this legislation.
The Chairman: The CRTC has been quite reluctant to stipulate the conditions governing the marketing of new speciality services. It seems to have the regulatory powers to do so. Would this issue not be better solved by regulation instead of legislation?
Mr. Janigan: You are quite correct. The CRTC has been asked on a number of occasions to use its powers, such as they may be, to ban this practice. It may be that they exercise those powers as a condition of a licence issued to a cable distribution undertaking. They may have the power to issue regulations.
The problem is that the CRTC's jurisdiction under the Broadcasting Act is quite a bit different than the jurisdiction it exercises under the Telecommunications Act. You can read the Broadcasting Act long and hard before you come to a section that proposes or propounds a consumer objective. Its objective primarily is in the facilitation of the industry and the support of the industry and of Canadian culture. It is very difficult to fit a regulation within the context of the objectives of the Broadcasting Act that is associated with consumer protection. There may be a problem in terms of fit under the Broadcasting Act. There may not be if they take an approach of dealing with it as a condition of license. It has been urged upon them to no great effect.
As this matter is so significantly before what are essentially their parliamentary masters, in the event that it is not successful at this level, I think they would be loath to take up the challenge again to issue a regulation at their own behest.
Senator Poulin: I have a question regarding Canadian speciality channels.
You will remember that in 1987 when Newsworld was newly licensed it became part of the basic service in most of the provinces. When RDI was licensed a few year later, it became part of basic service mainly in Quebec and certain parts of Ontario. In 1997, the viewing of both news channels has surpassed all expectations that both channels had set regarding revenues. Based on this, do you feel that Canadians will still have the opportunity to choose wisely the Canadian specialty channels under the provisions of Bill C-216?
Mr. Reddick: I do not see a problem, senator. There are two parts to my observation. On the one hand, I think most of the important channels are already out there and part of basic or extended basic. I refer to Newsworld, RDI and the others. Over the last several months in working on this file, and others, we were looking at the new applications for speciality channels. In looking at what was coming forward, whether it is the pony network, or what have you, I kept asking myself what we are missing. We have the history network and various other networks, which meet much of the historical, political and social needs of Canadians. I am hard pressed to think of something we do not have which would be offered that does not belong in an upper tier. If something comes along in the future which should be part of basic, then it could be substituted.
I do not see this bill changing what already exists in terms of the basic package. The bill affects what will happen from now on. That is important.
One of my greater concerns now with the new channels coming in is that, for example, Ottawa used to have the Carleton TV Education Channel on the lower tier. It is an analogue station. They are losing that this year. It is being pushed up to a high-end digital tier. That is more problematic in the sense that we may lose something because the cable company wants to change its marketing strategy. That is much more likely to affect something that consumers want than is Bill C-216. That is another whole set of issues. I see this bill affecting the future, not what is in place now.
Senator Poulin: Over the years, Canadians have not had enough opportunity to develop a high degree of pride in our own products. We are getting there, but we are not quite there. Because of the high quality of American television, we have to give a double opportunity to our Canadian channels, which are also extremely high quality but are not yet perceived as being high quality.
It is our responsibility as senators to ensure that the environment permits good opportunities for good Canadian products to be viewed firsthand by all Canadians from coast to coast. I am sure that you as protectors of the consumers share that view.
Mr. Reddick: Not only am I a protector of the consumers now, in a previous life I worked as a film and television producer. I agree that we do make good quality shows and we do need that support.
The Chairman: Thank you very much.
Mr. Reddick: Thank you very much for having us here today. We appreciate it.
[Translation]
The Chairman: We will now hear from the Cable Television Standards Foundation, in the person of Mr. Gérald Lavallée, President and Chief Executive Officer.
[English]
Mr. Gérald Lavallée, President & Chief Executive Officer, Cable Television Standards Foundation: Madam Chairman, at the outset I should like to state that I am not here as an expert on this legislation, nor am I here to defend or criticize any particular marketing practice. However, I am pleased to be able to bring you up to date on the cable industry customer service standards and to give you a factual report on the launch of specialty services in January 1995.
[Translation]
Madam Chairman, I would like to tell you who we are and what we do. The foundation was established by the cable television industry in 1988 as a self-regulatory organization to administer industry standards.
Ninety six per cent of all Canadian cable companies are voluntary members of the Foundation. They collectively operate 1,338 systems from coast to coast. The licensees of specialty, pay TV and pay-per-view services also belong to the foundation as associate members.
[English]
The foundation also appointed in 1988 an independent, arm's length council to receive, review and respond to complaints from customers on all aspects of the services provided by our members. The council is made up of three people -- an independent chair, a consumer representative and a representative from the cable industry. Our role is similar to that of an ombudsman. I serve as the council's secretary general.
Our complaint services are available to 7.2 million cable customers across Canada. We register complaints by telephone through our 1-800 number, from letters we receive from customers and through referrals from the CRTC.
In 1990, the cable television industry, along with the CRTC, initiated a public consultation process to develop standards for consumers and a mechanism allowing them to express their concerns about the service provided. The council administers these standards, which include customer service standards, community channel standards, as well as marketing and advertising standards.
As I said in my opening remarks, I am here today to give you an overview of the complaints we processed related to the launch of specialty services in January 1995. You will find details in our 1994-95 annual report and three-year review which I have tabled with the committee.
During the first few months of 1995, we received more than 2,300 complaints, just on the launch of the services. These are the highlights of the concerns expressed by the cable television customers from whom we heard. Some 33 per cent of customers were unhappy with the repackaging of services. Some 25 per cent of customers said they wanted more choice in selecting the services they want to watch and to pay for. Concerns about negative option billing came third, with 17 per cent of customers opposed to this practice. Another 13 per cent of complaints received related to the cost of these new services. The remaining 12 per cent were concerned with channel realignment and the deletion of certain services to make room for the new ones.
[Translation]
For all Canadian regions except Quebec, the breakdown of complaints was virtually the same. But in Quebec, the launch of the services took a different form than the launch in the rest of Canada. For example, Videotron provided the specialty services as part as the basic service, while the customers of COGECO Cable and CF Cable were for the first time given the choice of refusing the services.
[English]
In the Quebec market, the major concern was the cost of services. This concern translated into 27 per cent of the complaints received. Approximately 22 per cent of customers expressed an interest in an à-la-carte selection of services while 20 per cent were opposed to the way the services had been packaged.
The level of objection to negative option marketing was the same in Quebec as in the rest of Canada; namely, 17 per cent of the complaints received.
The remaining 14 per cent of complaints involved concerns about channel realignment, deletion of services and general comments about these new services.
[Translation]
And that is what customers told us about the launch of specialty services in 1995. The statistics I have just cited are public and, as I said earlier, featured in our 1994-1995 annual report which was filed with the cable television industry and the CRTC. Thank you for your kind attention and I would be happy to answer any questions you might have.
The Chairman: Thank you, Mr. Lavallée.
[English]
Senator Atkins: I am a little surprised that cost is third in the ranking of complaints. I would have thought it would have been first.
Mr. Lavallée: Those were the complaints as we registered them. The highest level of complaint was opposition to how these services were packaged, followed by customers telling us it is time they are given an opportunity to make up their own menu of services. The cost, generally a $3 addition to the bill for all the services in the anglophone market, did not seem to upset the customers as one might think.
Senator Atkins: When you say "packaging," do you mean basic services?
Mr. Lavallée: No, I mean the level of discretionary services that they could refuse to take and so indicate by the negative option marketing. They would say, "Why is there not another mix of services?"
People have different tastes and would prefer to have different services in the package. That was the number one concern that was expressed to us.
Senator Adams: You service mainly the Northern Quebec area, do you not?
Mr. Lavallée: We receive complaints from everywhere in Canada through a 1-800 number, including customers in Quebec.
Senator Adams: I do not know exactly what is available for people in Quebec who mostly speak French. How do you describe your services to your customers? For example, some people may say, "I want to be able to receive a lot of channels on my TV, but I do not speak English." Do they have choices of different types of programs?
Mr. Lavallée: In Quebec, Vidéotron offered the new services as part of the basic service. The services that are available in the Vidéotron market that are discretionary are more the premium pay television services. The COGECO market, which serves Trois-Rivières and smaller communities in the province of Quebec, as well as CF, which serves a good portion of the Montreal market, offer a basic service. They also have a tier of discretionary services that includes specialty services which customers can decline to receive. That is the way the services are offered in the Quebec market.
I do not know if I understood your question. I hope I am answering it.
Senator Adams: My concern is that you edit and some films may have to be translated into French. How does it cost more for English consumers? My concern is competition with the rest of Canada. How do you compete in broadcasting on cable television?
Mr. Lavallée: People who will appear here after me will probably be able to answer that question more accurately, but to my understanding DTH services have been licensed by the CRTC. They will offer certain packages in French as well. Quebec customers will be able to choose from whom they receive their service; that is, either from a DTH supplier or from a cable company.
[Translation]
Senator Poulin: Mr. Lavallée, thank you for your excellent presentation. Can you tell us, finally, whether your funding comes from your members?
Mr. Lavallée: The funding comes from the member cable companies. It is voluntary, and a volunteer service. Ninety six per cent of cable operators throughout the country participate. There is an annual fee that is set by our Board of directors, which determines our operational expenses. Afterwards, we bill our members for the amount of money we need. Our funding comes entirely from cable operators.
Senator Poulin: Since your organization is still quite young and since you are trying to make Canadian men and women aware of your existence, do you think that the complaints you receive are representative of major current issues, problems which Canadians have with cable broadcasting?
Mr. Lavallée: I believe the answer is yes, and you are quite right when you say that we are raising our profile. We really began in 1988, but the complaint service was only started in 1992, when I was named president of the foundation. It has been quite a bit of work making ourselves known. The level of complaints has been increasing on a yearly basis, which lets us know that an increasing number of people are aware of our existence. When people call to complain about something or other this means that the CRTC has done a good job of telling clients that we exist, and we have also taken steps to meet with groups of consumers throughout the country. If we are known to consumers groups, when a cable customer calls them about a problem, they will refer him to us. To facilitate things, we have a 1-800 line and we record complaints. People don not need to send in written complaints; we record them on the telephone, and afterwards, we send the client a transcript. We make the job quite easy.
In 1994-95, we certainly received 4,000 complaints, and we have 7.6 million subscribers. We still have work to do to raise our profile. We are doing it.
Senator Poulin: What is your relationship, Mr. Lavallée, with the CRTC, since the CRTC must review certain complaints? What is your legal and operational relationship with the CRTC?
Mr. Lavallée: We have a direct relationship with the CRTC. The main purpose of our annual reports is that we must submit a report to the CRTC on an annual basis listing the complaints we have received by region, the nature of these complaints and how we dealt with them. The CRTC also sends us a list of the complaints it receives. If we go back in time a little, the cable industry defined the standards for client service in cooperation with the CRTC. The CRTC had to ratify those standards. The industry did not set its own standards. This was done with the support of the CRTC and its approval. We administer those standards. The CRTC sends us complaints which fall under one of those standards, but we do have the obligation of submitting an annual report to the CRTC, as you can see.
Senator Poulin: Has your association never felt itself in an awkward situation? Let me give you an example: a complaint is made against a member who is one of the financial contributors and this is a complaint that you must report to the CRTC because you know that the complaint reveals the fact that that cable broadcaster is not respecting the conditions of his license.
Mr. Lavallée: That does arise and that is why there is a neutral and independent Standards Council. The Standards Council is made up of a president who has no affiliation, who is neutral, independent, and has legal experience. The other member, Ms. Cram, represents consumers. There's also a representative of cable broadcasters. Those three persons make up the Tribunal that receives the complaint and analyzes it in light of the standards; if a standard has not been met, a decision is handed down and it is final.
The cable distributor cannot appeal a decision handed down by the Council to the CRTC. If a client, however, is not pleased with the Council's decision, he or she may appeal to the CRTC; the cable distributor cannot, and the decision is final.
Senator Poulin: That sheds considerable light on that topic.
The Chairman: The vast majority of cable distribution companies in Canada have indicated that they had no intention of using negative option billing in the future. Does this not convince you that this marketing technique is obsolete? If it is obsolete, why must we amend the Broadcasting Act to prohibit a practice which no longer exists?
Mr. Lavallée: As I said at the beginning of my intervention, I am not a legal expert; it is up to a court to assess cases. We are not at liberty to express approval or criticism of a marketing practice. We are not in a position to help you in that regard.
The Chairman: What is the reaction of cable distributors? They are your clients, after all.
Mr. Lavallée: Yes. There has not necessarily been any reaction from cable distributors one way or another. They of course will respect the law if it is passed. As for us, we shall continue to administer the standards sent to us in an impartial way. That marketing practice is not prohibited and there are standards; if there is a complaint we will assess it according to the standards. If a law were to be passed, it would replace the standard and we would assess the complaint in light of that. I cannot give you the reaction of cable distributors, because I don't know what it is.
The Chairman: I would like to get back to the figure you quoted; 33 per cent of clients are unhappy with the repackaging of services. Do you expect the same level of complaints when a new--.
Mr. Lavallée: When the new services are launched--.
The Chairman: When the new services are introduced. Are the cable distribution companies making plans to make sure this causes as few problems as possible?
Mr. Lavallée: Whenever there is a launch of new services we always have complaints but we don not always make the same mistakes. Of course, when we provide a package of services, some people are happy with it, and others are not. And in that regard, I think that we shall receive the same type of complaints when the specialized services are launched in 1997. Some people will certainly complain that we could have put such and such a channel with such and such another, rather than what we did.
As for negative option billing, the cable industry did indicate clearly that they did not intend to offer their services in that way this year. Whenever cable distributors market new services, they have to realign channels and people don not like that and complain. If the programs they like suddenly moves to another channel, people do complain. So we expect to receive complaints, there is no doubt about that.
It will not be the same type of complaint as those we had in 1995, but people will express themselves on their choices and what they would like to see.
The Chairman: But surely the cable distribution companies are planning in order to lessen the shock of the introduction of these new channels?
Mr. Lavallée: Yes, always. Of course it is not in the interest of the cable distributor to see his telephone lines jammed up with client complaints. He wants the client to accept the new services in an orderly fashion. A lot of efforts are made by cable distributors to market these services in a way that will be acceptable to their clients.
The Chairman: Thank you very much, Mr. Lavallée.
The meeting stands adjourned.