Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 11 - Evidence for February 22, 2005
OTTAWA, Tuesday, February 22, 2005
The Standing Senate Committee on Transport and Communications met this day at 9:32 a.m. to examine the current state of Canadian media industries; emerging trends and developments in these industries; the media's role, rights and responsibilities in Canadian society; and current and appropriate future policies relating thereto.
Senator Joan Fraser (Chairman) presiding.
[Translation]
The Chairman: Honourable senators, welcome to this meeting of the Standing Committee on Transport and Communications. We continue our study of Canadian media industries and the role that the State should play in helping the media remain vibrant, independent and diversified in light of the upheavals within the industry in recent years, specifically globalization, technological change, convergence and concentration of ownership.
[English]
Today, we have the pleasure of welcoming Mr. Ken Stein from Shaw Communications Inc. Shaw Communications Inc. is a diversified Canadian telecommunications company whose core business is providing broadband cable television, Internet and satellite direct-to-home services.
Thank you for being with us this morning. We ask you to make a statement of 10 minutes or so, and then we will ask you questions.
Mr. Ken Stein, Senior Vice-president, Corporate and Regulatory Affairs, Shaw Communications Inc.: I am looking forward more to the questions. I will try to make my remarks as brief as possible. Thank you for inviting me, and thanks for the introduction.
Honourable senators, first, I would like to thank you for asking us to appear here today. Shaw Communications Inc. is ready to be of any assistance that we can in this significant review that you have undertaken. The importance of news, information and the diversity of the sources of that news and information is very important to Canadians. It is something that we deal with on a daily basis as we try to run our company. Cynthia Rathwell is here today to assist me, if I need it.
I will keep my presentation short in order to maximize the time for questions and discussion. I would like to simply address four particular areas. First, I would like to give you an overview of Shaw Communications Inc., one of the leading broadband companies in the world. Second, I would like to give you a sense of the tremendous change our industry has seen, with more yet to come. Third, I would like to give you some sense of why this revolution is so important to Canadians. Fourth, I would like to address particular government and regulatory issues that are of concern.
First, we handed out the presentation from our annual general meeting and I will go through some of the highlights. You do not need to refer to it. It is what we have gone through over the past number of years as we built our company. We are no longer the cable guys. Ten years ago, we were based in Edmonton and we were primarily a cable television provider. Since that time, however, we have grown to three million customers across Western Canada and we supply cable, digital cable, Internet and satellite services. Last week, we launched our digital phone service. It completes the transformation of our company into a broadband telecommunications company. Under the old rules, we were defined as a broadcast distributor. We then came under the BDU regulations, or broadcast distribution undertaking regulations, those arcane forms. We hope the regulator will move along with this. For the most part, they have. We think our future will be exciting, based on our ability to provide that whole range of service to our customers.
In terms of our particular objectives, enhancing our existing products and services is crucially important. The Shaw digital phone deployment that we launched last week, which is based on billions of dollars that we have invested in our system, now allows us, with very careful and focused capital expenditures over the forthcoming months, to be able to roll that out significantly. We launched it first in Calgary and will be launching it across Western Canada to improve the overall experience of our customers in whatever community it is that they live.
One important thing about Shaw is that we focus on providing services to the smaller and more remote communities as well as to the urban centres. We used to be proud of the fact that, at Fort McMurray, we had more high speed Internet customers than AT&T had in San Francisco.
We continue to grow across all of our businesses. In the face of strong competition, our basic cable has still grown, just not as much as we had been used to in the past, but at one and a half per cent in a significant competitive market it has been strong.
We are growing in terms of rolling out digital terminals. For digital television, that has grown by 15 per cent over the past year; the Internet has grown at 14 per cent; and the satellite side has stayed stable. We continue to grow across all our businesses.
There is a specific significant chart that at some time you should look at. It shows what we call ``the numbers speak for themselves.'' What Shaw Communications Inc. has been able to do in terms of high speed Internet penetration is that 50 per cent of our cable subscribers take a high speed Internet connection. That is the highest in the world for any provider. Bell would be about 21 per cent; Time Warner is at 34 per cent and 50 per cent of our commerce takes high speed Internet. The demand for high speed only increases. There is more demand for superhighband of the Korean experience that people would like to see.
That is something we focus on in terms of our customers and very much where we see our future in terms of being able to continue to invest and grow the system to be able to provide new and improved services to our customers.
There is another chart that basically indicates our capital plans, and this is significant in terms of our issues with respect to foreign investment controls. Leading up to 2001, we were pretty much running at an annual capital investment rate of about $1 billion a year. This has blown the doors off companies. We are a TSE top 35 company, still relatively small, but not in terms of spending money. We used to say putting out $5 million a day was a significant number for us to be looking at. Since we made that investment and built our system out, we are now more focussed and our capital expenditures have run in the range of $300 to $400 million per year. That is what we call success-based investment. That is still sufficient capital in terms of being able to deliver the services we need.
The other information I would like to talk to you about is the Internet. The Internet has been one of the most exciting things we have seen happen. When we started to build the system 10 years ago, we were talking about things like video way and interactive television. When I go back through the stats that we had 10 years ago, I do not see mention of the Internet. We talked about the information highway, and so forth, but the Internet became huge, particularly with Canadians. This is something we tried to study. Why is it of such interest to Canadians and why do they continue to grow it? The CCTA, the Canadian Cable Telecommunications Association, has done some studies and have another one coming out in a week. The demand is not slowing down. People who do not have high speed Internet connections want to get them. It goes across all age groups. People who are connected range from 15 to 90. That is 89 per cent, but even with people who are 50-plus, 56 per cent are connected with a high speed Internet connection. Across all age groups there is a demand for this service.
The interesting thing is what people use it for. The primary use is research and information. That is interesting because the diversity of access to news sources, to other information sources, to blogs, to all the things you read about is strong and people's demand for those services is insatiable.
The second application, 21 per cent of the work done by the Strategic Council, is for email. It goes beyond that to leisure activities and then a whole range of activity after that including surfing, business work, banking and so on. Obviously, the primary uses are information search, email and leisure activities.
You combine that with confidential focus groups that we have run in our company which look at what you primarily watch on television. Fifty per cent of the viewing is for news. This survey was taken before the hockey season was cancelled, but Canadian demand is still very strong for news information on television itself. The primary means by which Canadians want to get that news and information is from Canadian sources. Services like the CBC, CTV, and Global are seen to be the primary means by which they get that news and information.
The one thing that Canadians hate is being denied access to other sources. They do not understand why they are prevented from receiving other choices and other services when the technologies can provide them. Canadians are huge embracers of technology and they feel that Canadian services should be supported, but at the same time they do not think it should be denied. There is a sense that there is too much protectionism on the broadcasting side, and that a system that used to be competitive in terms of broadcasting has, with things such as genre protection techniques, become less competitive. We think that this is inconsistent with the kind of competition that exists in our environment at Shaw.
In Winnipeg, you can choose seven different providers to obtain your television signals. Two of them are illegal, and five of them are legal. You can get your service from Shaw, from Manitoba Telephone System, from Star Choice, from Bell ExpressVu and from a terrestrial system run by the Craigs, which is called Sky Cable. Then you can go off air or go to Blockbuster and rent your video. The competition in video delivery is huge. You combine that competition with the revolutionary change that has happened in our company and it becomes a challenge in terms of trying to provide people with the kind of services that they want.
What does this mean? We think it is important in four ways: The first is the economic growth for Canada. We have to be proud of the fact that we are in the top three in terms of our broadband capability in the world. We are up there with Korea and the Netherlands, in terms of our capability. That is important because from that kind of capability other economic growth opportunities will come. The ability to be able to build on that capability will be crucially important.
Second, it is important for business itself. The efficiency of the banking system, trucking, transportation, all these things are important, and the extent to which we have a strong information technical capability in this area is crucially important to all businesses in Canada. Even the way in which people buy things is so dependent on the Internet.
Third, it is crucial to our social services. It is crucial to the development of education and health care. Those kinds of services are really important.
I have a personal interest in this. My son, who is doing research in the United States, is going to China because Bill Gates has told him that the most interesting research in the computer sciences interactivity is in Beijing. I wish it could be in Ottawa, but it is not.
The fourth area of concern is the consumers themselves. The consumer is what we focus on, in terms of providing services. I have indicated earlier, it is a competitive environment. They understand competition.
In one of our focus groups, a person was working at Canadian Tire and we were talking about Canadian broadcasting services and the extent to which they are protected. He responded by saying, ``No one protected us. When Home Depot came in and Staples came in and Wal-Mart came in, no one said that we had to be worried about those people at Canadian Tire.'' He said, ``We had to change. We changed the company and we strengthened the company and became more competitive. It is a competitive environment, but we are competing in that environment.''
For Shaw, it strengthened us. We poured those billions of dollars out there because we knew we had to be competitive. We knew the old preferred distributor model, under the old silo definition, was no longer appropriate. We feel that this is what people are looking for in the future.
This brings me to conclude: What are the key issues in terms of what we see out there as being government and regulatory issues? The first is that economic strength in investment is really important. Foreign ownership limits, in our view, must be eliminated. It is not in a sense that we want to sell out. We do not. We like being masters of our company and having the kinds of opportunities we have for our people and our employees. However, you become too insular and too domestically focussed in a world where you need to become internationally and world focussed. To be able to expand means you have to have access to investment from all sources, and particularly on the distribution side.
We understand that there are concerns with respect to ownership in terms of broadcasting and other kinds of activities, but in terms of distribution, we do not see the rationale for it. We operated systems in Houston and in Florida. Americans did not care, as long as we followed the rules. I do not think we should care in Canada as long as whoever owns a system follows the rules that are set out properly by government.
The second is the black market. The failure of the Canadian government, even in light of the increasing recognition by individual Canadians that it is wrong, to take more stringent measures and move with the legislation that had been before the House of Commons to deal with the black market is of real concern to us. Basically, what it means is that services that we, as a Canadian company, are prevented from offering to our customers, they then go to a foreign company to obtain. People seem to think that is okay. We invest the billions of dollars that we have invested in building a satellite company and our services and somebody else who has not made any investment can come and reap the benefit. We do not agree that Canadians should be limited in any event. We believe that Canadians should be entitled to receive any signals they wish, as long as they pay for them. In that sense, we would be competitive and be able to compete with the other people. All we ask is that it should be level in that way.
The third area is basically regulatory reform. The regulator, the CRTC, has in most cases got it pretty right. I think that one of the most important reviews that the CRTC undertook was when they looked at the development of new media and the Internet some five years ago, following on with the information highway work and the work on convergence. The commission is unique in the annals of regulatory history. They said ``We looked at this area, and we could regulate it if we wanted to in certain ways, but it is thriving, dynamic and growing, and there is a great deal of Canadian stuff, so we are going to let it rip.'' That was a hugely important decision and led to the kinds of billions of dollars of investment that we made because the regulator cannot respond to a market.
That is one of the issues when you look at regulatory history, in general. The most famous one is the history of U.S. rail, where the regulators took 50 years to discover that it was competitive. For the most part, the CRTC got it right. We think they got it right in terms of telecommunications. We think that the problem on the regulatory side is primarily that it gets too protectionist. Alfred Kahn who led the deregulation of the airlines in the United States said: ``The problem with regulators is that they fundamentally do not like competition.'' In other words, they like to have an orderly transition. As entrepreneurs, orderly transitions are anathema. That is not how you succeed. You succeed by guerrilla warfare, by exploiting the other guy's weaknesses. Like hockey, the ability to move fast and be quick is really important. We think that is an attitude that needs to be brought to bear more frequently on the broadcasting side.
The broadcasting industry in this country is probably stronger than it has ever been. I have been involved in this area for quite some period of time, off and on through the years, and I remember sitting with a minister when Global got started and people came to the minister and said that ``If we do not get some breaks here, we are going dark on Sunday night.'' The response was ``Too bad.'' Fortunately, it did not go black, but went through some difficult times. It survived on its own.
The broadcasting system in Canada has always been a competitive system. However, recently there has been a sense that it has to be more protected; things like no competition, genre protection, and licensing and niche services. Niche services have gone too far. That is something I do not think Canadians do accept or appreciate.
That concludes my remarks. They may have been longer than I intended them to be, but I look forward to your questions.
The Chairman: Before we go to the question, I was interested in what you said about your focus groups. I want to ask you, without betraying commercially confidential information, if you could give any kind of written material relating to what those groups showed?
Mr. Stein: We could do that.
Senator Tkachuk: When you were doing your research on the Internet, did you take weather into consideration? Perhaps in the winter time, I find when the sun comes out, it is goodbye Internet.
Mr. Stein: We had some small systems in Florida that we ultimately sold because they were too spread out. It was interesting. There is high use of Internet in Florida, too.
Senator Tkachuk: Outside of the major networks, ABC, NBC, CBC, Global, you know what I am talking about, how many other news and information services are there that you would consider news and information cable services that Shaw Communication Inc. delivers?
Mr. Stein: I would be going from memory, but with respect to the other services, we have ROB television that we distribute. We have CPAC. We have NewsWorld, CTV NewsNet. That is four. We have in French language, RDI. We also have pretty strong local television news services across Canada. Those would be the primary sources on television, I would think, for people's news. The surveys — and the sample may not be large enough — indicate that people look to the major networks for their news services so they go to Global, CBC or CTV.
Senator Tkachuk: Is regulation the reason why there has not been a CNN developed in Canada? It seems strange to me that we have such very poor cable news services. The CBC and CTV, I consider terrible cable channels. Nonetheless, that is all we have. Is it regulation that has prevented entrepreneurs from delivering a cable news channel that makes sense for Canadians?
Mr. Stein: That is not really an area of my expertise. I would have to make a comment based on what we see in a number of different services, whether it is sports, news or whatever, and that is that people like choices. They do not understand restrictions. CTV NewsNet — my wife is a former broadcaster — used to hate that 15-minute break, because here you have some 9/11 event going on, but you have to break off because the CRTC says so, and give your local headline news. That did not seem to make sense to anybody. That has probably had a hampering effect on that situation. Most news people are extremely competitive themselves. To put them in an environment where they are put in niches seems to be inconsistent with the whole sense of it. I would think that more freedom might have developed there.
In terms of commenting on the news services, you have to face the fact that CNN has those resources to be able to carry out their mission. They are tough businesses to run.
Senator Tkachuk: I remember everyone saying, when they started, that it would not work. It would be a failure; that it was ridiculous. Yet, it did work.
Mr. Stein: Ted Turner was a revolutionary.
Senator Tkachuk: You talked about the Internet and I noticed that Google is now providing local news on its search engine. When you get that on your computer, you get international news and national news, and now you can get local news. What kind of money does Shaw Communication Inc. spend on local news in its own markets? You have sort of a local channel in Saskatoon. Do you have to offer this by regulation? Can you sell advertising on it? How does that work?
Mr. Stein: We are obliged to spend a certain amount of money on the community channel. Having that obligation is one thing, but making it relevant to the local community is quite important to us.
Aside from the obligation, there is an emphasis in our company on making sure that what we now call Shaw TV is relevant to the community — that people watch it and that they find it informative. We have tried a whole range of different techniques with Shaw Television to make it relevant to the community and provide them with information. People primarily want to know what goes on in their community. I would say the regulator has been pretty supportive of what we try to do in that arena. There are concerns raised about it, but for the most part, with Shaw Television as a community channel kind of orientation, we are able to do what we want to.
Senator Tkachuk: When you say it is a community channel, are you saying Shaw runs it as a community channel, or is there some non-profit organization that runs it for you?
Mr. Stein: No, we run it.
Senator Tkachuk: Have you thought of that, that a local community organization could run it as a separate community channel?
Mr. Stein: No, I do not think we would want to do that.
Senator Munson: As an aside, you talked about your son going to Beijing for computer sciences. In 1987, when I went there for CTV, we could just get the BBC World Service on radio, and I had to send my scripts by telex machine, the old ticker.
You talked about the black market, and you said you want more stringent measures. Can you be more specific about what you would like to see?
Mr. Stein: I would say that Bill C-2 was important — I am not sure if that is the number of it now, but it was the last time we dealt with it. Basically, what it did was that it allowed measures to be put in place to control import of product at the border. It made it easier to seize product that was not authorized in Canada. That would be the number one thing. It would still offer cross-border transportation of legally purchased services' systems, but not ones that were not authorized to go back and forth.
Number two is it allowed for what is called statutory damages. We did not have to prove damages; as long as somebody was doing something wrong, then the damage would be automatic. Proving statutory damages is a very time-consuming and problematic process. Therefore, statutory damages would be good.
Certainly, the legislation did not go as far as the initiatives in the United States, and we were not asking for those initiatives. We did not think people should be thrown into jail for copying music and those types of things. In fact, Shaw led the charge in the courts to basically ensure that our customers were protected from people trying to seize their records on that. They were allowed to do that in the United States. We were not advocating those kinds of measures, but we felt some measure of protection, as defined in that legislation, would be necessary.
The secondary issue is just the whole area of enforcement. Enforcement falls to the RCMP, which has a range of priorities to deal with. It was generally felt that this was an area where people said, ``Well, maybe it is a grey market,'' even though the Supreme Court has said that the grey market is illegal. We said ``Do not worry about that; we are worried about the black market.'' We are still worried about it.
There is now a new device called the blackbird, which allows people to receive encrypted signals in a more effective way. In Thunder Bay, electronics dealers openly advertise the blackbird and the kinds of things that it can do. We think that is unacceptable, because whether you are stealing furniture or stealing television signals, you are still stealing.
Senator Munson: The issue leads me to foreign ownership. You talked about the entrepreneurial vigour in your industry, and how it is like a hockey game — let us go at them and beat the competitor and make some money, and so on, and provide good value. What are your views on foreign ownership and restrictions on Canadians?
Mr. Stein: We feel very strongly that they should not be there; they should be eliminated. The main reason is that we live in an international financial market. We have created a situation where there are no borders in terms of raising capital and financing. When you go out and start trying to raise money for certain initiatives, people then go through a checklist. When they come down to foreign ownership restrictions, they mark an X beside you. That affects your ability to get that investment, as well as the cost of that investment. It is a negative, and we do not see the rationale for it being there.
Senator Munson: There are some questions to which we need answers. Some observers treat Corus Entertainment and Shaw Communications as a single media company. What is the relationship between the two companies, especially with respect to the setting of corporate policy?
Mr. Stein: The companies are two distinct companies. You had Mr. Cassidy, who is the CEO of Corus, here before you. The people at Corus have done a phenomenal job of building that company up over the past decade, in terms of both television and radio. It is a separate company; it is listed separately on the New York Stock Exchange and on the Toronto Stock Exchange. The common element is the ownership by JR Shaw, but that is it. There is no other relationship. In fact, because of that common relationship at the top, we have to be more careful of the separation of the two companies. Because it is considered to be an affiliated company, we have to make sure that anything that is done is totally, clearly, open between the two companies. There cannot be anything that goes back and forth between the two that is not open and disclosed. That comes under the appropriate regulations, both in the United States and in Canada. Fundamentally, we also disagree on issues.
Senator Munson: I have other questions, but I am sure other senators have questions as well, so I will come back in another round. I was startled when I came back in 1992 — I live in Bedford, Nova Scotia — and found that Shaw Cable was in Bedford. I could not figure that out for a while.
Senator Johnson: It is great to hear, in your remarks this morning, that broadcasting is stronger than it has ever been. Also, you are right about Winnipeg, in terms of the service. It is quite a situation.
That leads me to ask you about the CRTC. It does not regulate the Internet, but does regulate broadcasters, including cable companies. Does the fact that you have an Internet arm mean that the CRTC can regulate the Internet directly?
Mr. Stein: Our view would be that it cannot. The commission's responsibilities fall under the broadcasting and telecommunications acts. I think that it has always been quite appropriate for it to regulate broadcasting distributed to Canadians.
I am not a lawyer, I am an engineer, but there have always been issues with respect to the definition of programming and the provision of content to a wide audience, and how that is judged. I think the commission has decided on its own that it does have jurisdiction over that kind of area.
Canadians would probably be hard-pressed to accept that there is some control and regulation over their access to services over the Internet. Other than general applicable rules and laws with respect to behaviour and other criminal activities, people would primarily understand it as being unregulated.
Senator Johnson: What guarantee is there that Shaw will not act as a gatekeeper with its Internet business?
Mr. Stein: We do not want to be a gatekeeper. That was the whole issue when we went to court, that people were trying to act, and to tell us that we were gatekeepers, and we were saying that we were not. What we do is provide the means for people to access the system, and to access information wherever they may want to access it.
Senator Johnson: I am also very curious about your specialty services. Are they profitable, and how successful has the specialty channel strategy been of focusing on specific segments of the fragmented television market?
Mr. Stein: Let me comment overall on the industry itself. We think that, overall, the broadcast programming industry has never been stronger than it is right now. We have very strong companies. The measures that were put in place in the 1990s in order to foster and develop specialty services and cable services in Canada were the right ones, because we did not have CNN and TBS, and those type of things. The measures were put in place to develop those. What has happened is they are now successful. It was interesting when we appeared before the Tassé committee and heard the comments that were made about the maze of regulations that existed in terms of licensing services. From our point of view at Shaw, we tend to think that people should get whatever they want. If people want to be able to get RAI and do not want anything else, that is fine with us. We do not have a problem with that. We think people should have that kind of access, and we think Canadian specialty services are now strong enough, and in fact would be stronger in terms of moving forward if they had to deal with the marketplace that allowed a whole range of services to be available. The kinds of protections that were put in place are probably no longer appropriate.
Senator Johnson: Are you generally happy with the government regulatory situation now? Do you have any further insights for me? I am not an expert in this field, but I am a user and I am on this committee, and we have been doing a lot of work on this subject. I am curious to know.
Mr. Stein: I would think that the regulator, CRTC, has managed to get a lot of things right in the ways that it has moved with respect to telecommunications and the development of the Internet and those kinds of areas. I am a regulatory person in the company and I see regulatory models all around the world, and I see the advantages and disadvantages of that. You have to take what you have and then try to make it better. I think that is the most important thing for regulators.
Broadcasting telecommunications, no matter where you go in the world, are regulated. One way or another, they are regulated because they are so important to people. People say to us, ``What about the Broadcasting Act? Should it be reviewed?'' We think the Broadcasting Act is great. We think that the Broadcasting Act, established in 1968, when you look at it, the objectives that were set out for it were terrific.
I remember at one point someone from the CRTC appeared before the standing committee in the last year and saying, ``We cannot bring in all these services because the Broadcasting Act prohibits it.'' I almost fell off my chair. We microwaved Atlantic Canada to bring in U.S. signals. We did the same in Western Canada. Through the 1960s and 1970s, we actively built systems to bring foreign services to Canadians wherever they may be. We built satellite systems to bring to remote mining camps and communities across Canada. The Broadcasting Act is a tremendous act in terms of liberating and giving people access to these services, but how the regulator interprets that sometimes becomes a problem.
In the last announcement they made on third languages, they did indicate that they were willing to look at more openness in terms of that area. I think that would be hugely important to Canadians, and I think that the programming services in this country are now strong enough that they would be able to withstand that kind of competition.
Canadians do not understand it; they can go out and buy The New York Times or they can go out and buy anybody's book. Who is being protected here? We are not protecting artists. Our artists do not get protection. Our writers do not get protection.
Senator Johnson: I was about to get into that, but I am out of question time. Do you have anything further to say on that subject?
Mr. Stein: I think I will stop there.
Senator Johnson: Somebody has picked up on that.
Senator Phalen: A February 11 news release from the Coalition Against Satellite Signal Theft, or CASST, applauded the RCMP for recent raids that they conducted in Montreal on people suspected of dealing in unauthorized satellite equipment. The press release described satellite theft as taking over $400 million a year from Canadian broadcasters. Can you explain to this committee how criminals are stealing the signals; what you as an industry are doing to block their ability to do so and what the federal government should be doing, legislatively, to ensure deterrence of this crime?
Mr. Stein: First of all, we think that the nature of the problem is understated. We think there are about 750,000 to one million illegal dishes out there. I remember going to a dish dealer who sold a U.S. dish, but he would put whatever brand on it you wanted so that your neighbour would not know you were using a black market dish. He would put Star on it, or Bell, or whatever you wanted. I was putting gas in my car the other day, and I was looking automatically at this apartment building at the corner of Dufferin and Roselawn in Toronto, and I counted seven illegal dishes. They probably all have cable as well, but they have the dishes. It is a huge problem, and the frustration for us is that people claim they are doing it because they cannot get those services from us. That is what is really annoying. Two summers ago, I think, we applied for Home Box Office and ESPN; our application did not even get a hearing. The commission sent it back and said, ``We do not want to consider this.'' They have moved in terms of Fox and NFL Network and smaller niche services. That whole area is a problem in terms of us not being able to provide people with those services.
In terms of the initiatives that the government can take, I think that CASST is right in congratulating the police in Montreal for that raid. That is important, and what is also important is moving forward with charges. There have been a number of charges laid across Canada, and moving those through the courts is really important. We do have the Quebec court decision where the judge said that the Broadcasting Act was being misapplied in terms of controlling this practice. That is an issue that is out there that will have to be clarified, but the Canadian government has appealed that decision and we are quite sure that they will win on appeal.
Other than that, the enforcement activity is important. We have argued for a separate enforcement initiative that would deal with that situation in the same way that was done for video. I remember in the 1970s there was a video store in Ottawa, on Carling Avenue, where you could go in and buy any video you wanted; he had it all in stock. That was shut down. That kind of activity on the enforcement side would deal with the black market situation.
Finally, in terms of what the government could do, Bill C-2 was an important piece of legislation. The only objection we heard when we went through the committee proceedings, in terms of that legislation was that we would be denying Canadians services that they should probably get. We kept saying, ``Yes, we agree with that, we think Canadians should get those services.'' We argued with the Conservative Party and with the NDP and the Liberals and everybody that had this view that Canadians should get what they wanted. That was the view of the members, and we agreed with that view. However, we feel that the theft of signals is really bad. It is an important issue because our economy is shifting. People seem to think if you steal a good, that that is bad and you should be thrown in jail for that. When you move from a goods economy to a services economy, then stealing services is a problem. The whole economics of producing a service is destroyed if people can readily steal it.
Senator Phalen: There has been recent media attention on the subject of advertising directed toward children in Quebec. It is prohibited by the Quebec Consumer Protection Act. Would you make any comments on what would be the impact of a similar ban nationwide?
Mr. Stein: This would be more a question that you would probably want to address to Corus. I really would not want to comment on that area in those terms.
Senator Trenholme Counsell: I have heard a great many people in my part of the world brag about the black market with all these systems. I did not know about it until recently; I thought everybody paid.
I wanted to ask, in a huge company like yours, which is entering so many people's lives in one way or another, what do you have in your philosophy or your statement of principles about social responsibility? I do not know whether this is on the topic or off, but I wondered — and I underline pay-per-view movies because I am concerned about our young people and what they see — whether you have a statement of principles and social responsibility? You know what I am speaking of.
Mr. Stein: Yes. Under pay-per-view, there is a code that is in place with the Canadian Broadcast Standards Council, and we adhere to that rigorously. We also respond to our customers in terms of any complaints that they may have. We want to be able to make sure that we deal with that appropriately and respond to those complaints because we do not want to be providing products or entertainment that are offensive to people. Particularly when you are focused on the communities on which we are focused, that is a responsibility that we know we have. At Shaw, we do have a pay-per- view licence to offer those services, and we know we have a responsibility to ensure that we meet the standards of the community in terms of those products — to deal with the complaints that are out there and meet the standards that are set out. We work quite actively to ensure that we do that.
Senator Trenholme Counsell: That does not seem to link with the statement you made, which was ``we tend to think Canadians should be able to get whatever they want.'' However, that was not in this context, so perhaps you did not quite mean that with your comment.
Mr. Stein: Maybe I did. In terms of whatever they want, subject to appropriate standards and regulations; that goes without saying, in terms of our comments.
Senator Trenholme Counsell: I suppose your company would think that if you do not provide it, somebody else will.
The Chairman: There are about 25 areas I wanted to ask you about, but I will not keep you that long. First of all, there are two thinigs with respect to the black market. First, you said in Thunder Bay or North Bay, somebody is actually advertising the blackbirds. Where are they advertising it? If this is an illegal product, how do they get away with advertising it?
Mr. Stein: They are advertising it in Thunder Bay — electronics dealers, probably in newspapers ads.
The Chairman: You could go to the publisher and say ``You are abetting illegal actions.''
Mr. Stein: We try to deal with the problem.
The Chairman: In the black market, something I do not understand at all is the price structure. How does our price structure for the legal services compare — not with paying nothing at all, or only paying for the gizmo — but compare with, for example, the Americans price structure? In other words, have we set up a system that is maybe too expensive for what the market will bear?
Mr. Stein: If you paid what the system actually costs, you would be paying a huge amount. American satellite services are very expensive.
The Chairman: More than ours?
Mr. Stein: Absolutely more than ours. One of the advantages of the Canadian system, in terms of all of our services — cable, Internet, cable-television, telephone, et cetera — is that they are all significantly lower in cost. Those of you who go to the U.S. will see that in terms of your own bills. If you go there for a week or two and get to pay the bills, you will see that. They are significantly less in Canada, which has an advantage, in a sense, for Canadians. It is a disadvantage in terms of the kind of capital that is available to reinvest and develop new products, but that is another question.
Somebody who is going to the black market is primarily gaining access to those services for a nominal charge. They may be paying a dealer to fix their cards, or pay certain amounts of money for their box, but they certainly are not making the level of payment that they would make for legal services.
There used to be more of a grey market. However, when people found out that they did not have to pay, they just stopped paying. We have tried to ask the U.S. providers to take more initiative in trying to shut down that kind of activity. They have done it in civil cases, but we think they could do more. It is still out there. If you just went out and bought a dish and went to a U.S. service, you would pay a lot more money than for a Canadian service.
The Chairman: On the regulatory system, where do you think news ranks in the CRTC's list of priorities?
Mr. Stein: I know there has been a focus on Canadian content in the last while. Mr. Dalfen has made it clear that that is something that he is trying to address in terms of English language television. There is that issue.
In terms of news, I think the commission did get a little bit into situations with respect to newspaper ownership, et cetera, which probably raised questions in people's minds about whether that was the appropriate role for the CRTC. What the CRTC primarily looks at are things such as the CKAC situation in Quebec. Primarily, what the CRTC looks to is balance, and offensive remarks and that type of thing more than anything else.
The Chairman: You have explained to us that you do not feel in a position to comment on Corus, but it is your sister company and it has been much in the news in Quebec. Having bought the largest private radio news operation in the province, it is now close to closing it.
I was reading the CRTC decision this morning, just before I came down, and the CRTC did not really seem to be focussed on that element of the consequences of its decision. Is that an anomaly, or is that standard, in your experience?
Mr. Stein: I think the CRTC, on the radio side, has done a very good job of strengthening Canadian radio. When you go back a number of years ago, and look at the kinds of choices that were there compared to now, at the kinds of concerns that were being felt by the Canadian Association of Broadcasters about radio, et cetera, I think that the policy that was then put in place immensely strengthened radio, and Canadians' affection for it. I do think they have paid attention to these things, frankly.
The Chairman: I have more questions, but we are into a second round.
Senator Tkachuk: Just to follow up on specialty channels and the black market, what is the difference between your company saying that they have no responsibility for the fact that people are offering music on the Internet free of charge and saying in the courts that a person in Thunder Bay cannot pick up a satellite dish and watch whatever he wants on television? How do you explain the philosophical problem between doing those two things?
Mr. Stein: They are two different issues. The first issue, in respect of the moves on the record industry, was that they wanted us to provide, without any evidence of wrongdoing, a list of customers and IP addresses. We felt that that was inappropriate. That was the whole basis of our objection. We did not feel that people should be subjected to fishing expeditions. We felt that if the authorities are able to indicate that somebody is committing a certain act, then yes, obviously, we would cooperate and that action should not be tolerated, but to provide lists of customer, their habits and their usage of the system, we thought that was inappropriate. The judge agreed with us.
However, stealing is wrong. It does not matter whether it is music or videos, but if somebody is stealing something and you can prove that they are stealing it or selling products so that people can steal it, that is wrong.
Senator Tkachuk: Would it be better to have more regulation than less regulation, in other words allow the cable providers in Canada to provide a wide array of services from throughout the world that people want to buy rather than, in my case, buying tons of channels that I never watch and never will, and probably pay for indirectly in some way when I could be buying something else.
Mr. Stein: Absolutely, I agree with you. We think there should be no limits on what people are able to receive. There is no need for it.
Senator Munson: I just have a couple of other questions. The Shaw family controls 78 per cent of the voting shares of Shaw Communications Inc.?
Mr. Stein: Yes.
Senator Munson: What are the implications of that, and would the cost of capital be lower if the voting shares were more widely held?
Mr. Stein: The issue here is foreign ownership. The Shaw family shareholdings are A shares. There are other A shareholders as well, but the Shaws do have the controlling interest, and they are required to be Canadian. It flows from those kinds of definitions, no different than any other media company in Canada.
Senator Munson: I do not know if it is a fair question but do you have any views on cross-media ownership, as we have seen, for example, with CanWest in Vancouver and Global TV and BCTV, the Vancouver Sun. the Vancouver Province, and 21 community newspapers? I am asking you this question just as a citizen.
Mr. Stein: As a Chairman of CPAC? I think I will pass.
Anything that creates more ability to produce information and entertainment in innovative ways is probably something that should be explored. I will not take turns on this, but the marketplace of ideas is a pretty healthy marketplace, in our view. I do not think there is any view out there that those kinds of cross-ownership issues result in a lessening of people's access to news, and it might improve their ability to access it in different ways. It might serve to strengthen Canadian companies in terms of providing the kinds of news information that Canadians want.
Basically, with the Internet, as a company you must compete with everyone, so your ability to do that and take advantage of those services, whether it be web-streaming, providing information on the web and so forth, the benefits of being familiar with a whole range of media is a tremendous advantage to any company that is able to do that. However, you do not want to go overboard on that. People have said that if you can do print, you can do television. That does not work. The mediums are different enough that the skill sets can be different in terms of how the news and information is provided to people. What I am saying is that we do not have an opinion on that subject, per se.
Senator Munson: I just have a small observation — and Senator Tkachuk could back me up on this: Cable swears that it covers everything and goes everywhere in the country. When we were in Saskatchewan, a group of people told us that they get nothing. This would be somewhere in the southern part of Saskatchewan. They said that no one cares about them. They cannot get CBC NewsWorld or anything. I think it should be said, and put on the record to challenge Canadian cable companies to give access to such communities.
Mr. Stein: I would like to get the name of that community, and we will send in some Star Choice salesmen.
I would think the only issue for rural areas would be high speed Internet. That is a real issue and we try to work with governments, et cetera, to be able to do that. Maybe SaskTel, as a Crown corporation, should use more of its public money to provide more services there rather than undercutting private enterprise.
The Chairman: If I could come back to the capital question. In the same way that there are advantages and disadvantages to having rules about foreign ownership in the Canadian media, one of the disadvantages is that when you go south to look for money, it is harder to get or may cost more. In the same way, it has been suggested that there are advantages and disadvantages to what you rightly note is the sort of classic Canadian pattern of having, with the exception of BCE, closely held, closely controlled media companies. The advantages, I think, are fairly obvious: You are not subject to raids by unscrupulous people who might do nasty things. It has been suggested that one disadvantage is that a closely held, closely controlled company has to pay more for its capital. Do you know if that is true?
Mr. Stein: We do not find that at all is an issue. In fact, I would say it is the opposite. I should comment that this is not the area that I deal with in the company, per se. In terms of anything that we do, the fact is that the company is responsible to all the shareholders. The fact is that there is control of the company, but if you take that point of view, you ignore the fact that we have a board of directors with a number of very independent people who have responsibility to the company, and who ensure that it grows and does good things for all the shareholder, including the holders of the B shares, which are widely distributed. I think there is a responsibility to all the shareholders that is felt by the company, and certainly all of us as officials, as senior officers of the company, feel that responsibility, and not just in terms of the laws that apply in the U.S. and Canada, but beyond that because there is a board of directors. We have gone through the reviews of governance and accountability. The Honourable Don Mazankowski has played a leading role to ensure that our company has stepped up to the line in terms of ensuring that we do have that kind of accountability in place. He has done an excellent job and has been recognized for it. I would not agree with those remarks at all.
The Chairman: I have two other things: First, could you describe to us what happened with MSNBC Canada and Bloomberg Canada? Why did it not work and what lessons can we learn from that?
Mr. Stein: Canadians did not like the fact that they were not getting what was there. If they want to watch Canadian news, they will watch Canadian news. It was like getting The New York Times and having the middle section taken out. After a while, the middle section becomes more interesting, more intriguing. It became a self-defeating argument. We said that it would not fly. When Canadians buy The New York Times, they want The New York Times. When they buy MSNBC, they want MSNBC, and when they buy Fox, they want Fox.
The Chairman: It is that straightforward?
Mr. Stein: Yes. I know that because I was on the board of MSNBC so I can talk about that directly. Shaw were 100 per cent owners of the television licence of Bloomberg Canada.
The Chairman: That is why you were the one whom we wanted to ask about that situation. I did not know whether there were other factors or if it was just that straightforward. They want the real thing or not at all.
You talked about the requirements for transparency and rigour and all that in our dealings with Corus. Whose requirements are we talking about? Is it CRTC? Is it competition? Who sets the rules and what are they?
Mr. Stein: Both, I would think. In terms of my own area of responsibility, very much the CRTC, in terms of the structural separation of the two companies, as a senior official, by the fact that they are listed separately on the stock exchanges in Toronto and New York.
The Chairman: Is there a single CRTC decision setting out its rules or are there a bundle of decisions that we need to plough through in order to figure out what is going on?
Mr. Stein: I would think that there is probably one. I would have to check on that specifically.
The Chairman: Would you mind doing that and letting us know, giving us the appropriate reference?
Mr. Stein: I will check. There may be more than one.
The Chairman: This really is my last question, but it is a subsidiary of that other one. To your knowledge, when the CRTC is licensing Shaw to do whatever it is doing, what are the rules for Shaw's carriage of Corus products, stations, networks?
Mr. Stein: Well, bizarre. For example, we could not carry SCREAM, which was a Corus-owned service, and the CRTC said that we could not; that we had to have a five-to-one ratio. If we had put on SCREAM, we would have had to put on five more Canadian services. We were at the limit of where we were, and so we put on SCREAM because we interpreted the rules in a certain way, and the commission told us to take it off, so we did.
The basic point we made was that Rogers can offer SCREAM; Star Choice, Bell can offer SCREAM; MTS can offer SCREAM. It is a hugely popular service and we are prevented from offering it only because our sister company owns it. It does not make any sense to us.
The Chairman: Any references concerning those relationships would be helpful. If you have a digest of how it all stacks up, it would be more than helpful.
Mr. Stein: Certainly.
The Chairman: We want to thank you, Mr. Stein. This has been an interesting session.
We will suspend our hearing for three minutes at this time before proceeding in camera to consider the future business of the committee.
The committee continued in camera.