Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 41 - Evidence - October 24, 2018
OTTAWA, Wednesday, October 24, 2018
The Standing Senate Committee on Transport and Communications met this day at 6:47 p.m. to examine how the three federal communications statutes (the Telecommunications Act, the Broadcasting Act, and the Radiocommunication Act) can be modernized to account for the evolution of the broadcasting and telecommunications sectors in the last decades.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Transport and Communications. Last June, the Senate authorized the committee to examine and report on modernizing the three federal communications statutes: the Telecommunications Act, the Broadcasting Act and the Radiocommunication Act.
This evening, we continue our special study. I would like to welcome our witnesses. From the Movie Theatre Association of Canada, we have Michael Paris; from the Forum for Research and Policy in Communications, Monica Auer, Executive Director; and from the Alliance des producteurs francophones du Canada, Carol Ann Pilon, Executive Director; and Michel Houle, Consultant, Cultural Industries and Communications.
I thank you all for coming here today. We look forward to a lively discussion on the three communications and broadcasting acts.
Michael Paris, Movie Theatre Association of Canada: Good evening, honourable members of the Senate. Thank you for the opportunity to present to the committee tonight.
The Movie Theatre Association of Canada is the trade organization representing the interests of the exhibitors behind more than 3,000 cinema screens across Canada. We are exactly as the name suggests: We are cinema operators and lovers of cinema. We act for both chains and hundreds of independent cinemas across Canada. Our members sell the tickets, scoop the popcorn and ensure the films are presented in the way the creators intended on the big screen.
Although we are not directly governed by the legislation that is the subject of this review, our membership has a vested stake in any modernization of broadcasting and telecommunications legislation, because the changes occurring in those sectors directly affect the business of cinema.
I have some quick things to tell you about our members. First, exhibitors rent films from distributors. We have producers, distributors and exhibitors at the end of the chain. They keep less than 50 per cent of any ticket they sell, and they don’t effectively control the product that we show. The CEO of Cineplex will tell you we serve the dinner but we don’t cook the steak. That describes the role of exhibitors in the chain.
As a sector of the film industry, we are more than 80 per cent Canadian-owned, and that includes mom-and-pop locations in places big and small.
We employ tens of thousand of Canadians. We are a leading first-time employer. Like any business, exhibitors are extremely cost-sensitive and are not immune from the disruption affecting the retail sector generally or, specifically, disruption in the entertainment industry.
As an industry, exhibition is facing a tremendous amount of disruption to a well-established business model. I know, from reviewing the transcripts, that has been the subject of much discussion before this committee.
As Telefilm noted in a 2016 study, while theatres still attract two thirds of Canadians from time to time over the course of a year, Canadians are increasingly turning to streaming options. Before the question is asked, I am happy to admit off the top that, yes, I do have a Netflix account. We love movies and many of our members do as well.
Perhaps most relevant for some of the questions I anticipate, I should say that exhibitors are business owners who own buildings, employ Canadians directly, and we make significant tangible investments in our local communities.
To be blunt, the challenge for any out-of-home service provider is to persuade Canadians to leave the house. That is why you see cinema operators investing in upgrades to their physical facilities, adding VIP cinema experience options and programming alternative forms of content, nontraditional cinema, e-sports events, live opera, theatre, sporting events, et cetera.
Our competitors include traditional broadcasters, streaming services and options made possible by content theft and piracy.
We are not broadcasters or telecoms. We have no desire to attract that form of regulation. The comments provided tonight are intended to respond to the first item in the committee’s terms of reference, which asks you to examine how the three statutes may promote the creation, production and distribution of competitive, quality Canadian content in both French and English.
The simple request from our membership is that the legislation under review be amended to ensure a level playing field.
How do we get there? We have two recommendations. First, to provide the CRTC with the tools to address piracy at home and abroad. Second, to address streaming that is akin to broadcasting.
On the first point, piracy. Our proposal would be to provide the CRTC with express power to address piracy by disabling access to websites the CRTC determines are blatantly, structurally or overwhelmingly engaged in content theft. This may be done via an independent body answerable to a court, provided that authority is empowered to act swiftly.
This isn’t a new proposal, but it is one borne of an unprecedented consensus. The Fair Play Coalition that proposed this, and is continuing to propose it before various committees on the Hill as recently as a week ago, brings together Canadian artists, content creators, unions, guilds, producers, performers, broadcasters, distributors and exhibitors.
Turning to the Telecommunications Act, specifically, section 36 gives the CRTC the power to authorize but not to require ISPs to block access to a website. In our view, that should be amended with a subsection that provides the CRTC with the power to require all ISPs to disable access to websites that are blatantly, structurally or overwhelmingly engaged in piracy.
Similar regimes exist in 42 countries around the world, including the U.K. and Australia. In our view, the CRTC should have the same power.
Some before this committee have raised net neutrality concerns. It is important the committee consider the limits of that concept and what it truly means. There is some content that we, as a society, have agreed we are not neutral about and to which the concept of net neutrality doesn’t apply.
The communication of hate speech, child pornography and piracy are all forms of prohibited content covered under provisions of the Criminal Code. Regulators should be given the power and practical tools to deal with the unlawful content efficiently. Doing so supports and shelters the growth and development of quality Canadian content. It also protects people who make investments in that content.
Turning to the second point, addressing streaming that is akin to broadcasting. I have spoken about what we view as unfair competition vis-à-vis piracy. There are other foreign sources of content who gain the benefits of accessing the Canadian market without carrying any obligation to invest. Some don’t even pay tax in Canada.
I will quote the former chair of the CRTC who was here a few weeks ago and said it succinctly:
. . . for the life of me, I don’t understand. If you subscribe to Netflix, you don’t pay HST. If you subscribe to CraveTV, which is the Canadian version, you pay. What on earth are we doing? We have a cultural policy to favour Canadian production, but we discrimination against Canadian distributors in favour of American ones.
For its part, I note that Cineplex, a Canadian company, does operate an online rental-and-purchase service and charges HST on its transactions.
It will not surprise anyone in this room to hear that cinema operators are in favour of uniform rules for content distributors such as Netflix. But more to the point, there should be a uniform regime for businesses offering services to Canadians and extracting benefits from their access to the Canadian market.
In that regard, if a streaming service is operating in Canada and providing services to retail customers, it follows that entity should be required to report as a Canadian business with equivalent regulatory tax and funding obligations of their fellow broadcast competitors, particularly as it concerns support for Canadian film.
I am sure the more you hear from industry groups, the more this committee will hear different versions of level playing fields. That is the view from the cinema balcony.
On behalf of our members, we thank you for your invitation and time tonight. I am pleased to respond to any questions, Mr. Chair.
Monica Auer, Executive Director, Forum for Research and Policy in Communications: Thank you for the invitation to appear.
FRPC is a non-profit corporation that conducts research and policy analysis about communications. Our research and public submissions are online at FRPC.net.
Generally, the forum believes the problems in Canada’s communications systems today centre on costs, content and governance.
For many families, cell phones and the Internet are now essential services. Live-saving weather warnings sent to cell phones saved lives in Ottawa when it was hit by six tornadoes this past September.
Without regulation by the CRTC or the market, however, the prices paid by Canada’s families and the economy for these services are too high, especially in rural areas and the North.
As for content, most broadcast programming, 50 years after the CRTC’s creation, is foreign. Under the CRTC’s regulations, only a third of private radio, music and discretionary TV programming need be Canadian. And in 2017, the CRTC lowered Canadian content requirements for private TV stations from 55 per cent to 17 per cent.
Under CRTC supervision, private TV stations reduced spending on Canadian drama from $93 million in 2003 to $41 million in 2017.
As for online programming services, the CRTC’s 20-year-old digital media exemption order means no rules at all, even for collecting data, let alone ensuring that Canadian programs are available, discoverable and recommended.
Some of these problems arise from governance issues. First and foremost, the CRTC lacks direction and meaningful oversight. Just 5 of the 40 policy objectives in the Broadcasting Act are mandatory; none of the 10 policy objectives in the Telecommunications Act is mandatory.
The CRTC publishes very little data showing whether these objects are being met. When it deregulated basic cable rates in the late 1990s, for instance, it stopped collecting data on basic cable costs altogether, preventing evaluation of the affordability of cable.
The statute’s current grant of discretion to the CRTC has tied the courts’ hands; the lack of data hinders Parliament.
A second critical problem is the current laws do not require the CRTC to place the public interest first. This may explain why the CRTC often seems to care more about regulated companies’ financial standing than subscriber costs.
As for content, the CRTC has said news is critical to democracy. Yet when Rogers cancelled Canadian local news on its Ethnic TV stations five months before the 2015 federal election, the CRTC waited until 2016 to announce it would not act.
Its Let’s Talk TV policy weakened all local TV news by redefining the concept of news to include talk shows and documentaries.
Whose interests, then, will the CRTC place first if faced with a new crisis — if broadcasters close stations altogether, for instance?
The forum suggests Canada’s communications systems be placed on a new path in three steps. In the short term, the Governor-in-Council should revise the 20-year-old foreign ownership direction so the CRTC may authorize non-Canadian online programming services’ operation in Canada and set appropriate contributions to the country’s broadcasting system. Until the direction is changed, the CRTC cannot revise its outdated, discriminatory digital exemption order; it cannot even collect data from these services.
In the medium term, the forum believes that Parliament should amend the Income Tax Act to require non-Canadian programming platforms to pay sales taxes on Canadian subscriptions and to eliminate the deductibility of foreign Internet advertising.
In the longer term, say by 2024, Parliament should amend its communications legislation, focusing its policy objectives on measurable and mandatory goals that serve the public interest. It should also require the collection and publication of relevant data about its goals and mandate decision-making transparency by regulatory authorities.
To conclude, Mr. Chair and honourable senators, our key message today is, unless Parliament begins to act quickly, Canadians could very well lose control over their communications systems. Without professional newsgathering and stories by and for Canadians, whose values will our children adopt? What will the world know of Canada?
By enacting communications legislation for the 21st century, Parliament will ensure that Canada retains its cultural sovereignty, it will promote new sources of revenue, more employment opportunities and will strengthen Canada’s global brand. Thank you so much.
The Chair: Thank you.
Ms. Pilon, please go ahead.
[Translation]
Carol Ann Pilon, Executive Director, Alliance des producteurs francophones du Canada: Mr. Chair, honourable senators, thank you for having us.
We believe that the reform of the Broadcasting Act should be based on the fundamental principle set out by the CRTC in its report on the future of programming distribution in Canada, and I quote:
. . . ensure that all players benefiting from Canada and Canadians participate in appropriate and equitable — though not necessarily identical — ways to benefit Canadians and Canada.
To do that, legislative amendments must clearly and explicitly subject any audio or video service provided on Canadian soil or collecting revenue from Canadians to the legislation, and integrate these into the broadcasting system. This should apply to traditional or new services, whether Canadian or not.
In addition, any new or revised legislation should be based on the principle of access for all Canadians to high-quality audio and video content created for and by Canadians, as well as the best international content, on any platform, device or technology they wish to use.
We could hold a lengthy discussion about the implementation modalities of these principles and perhaps we could do so during the question period, but since we have limited time for this presentation, we will focus on certain aspects that affect our members more directly, as well as the communities they come from.
As you know, the APFC speaks for the audiovisual and francophone production sector, and our members are the French-speaking independent producers from all regions of Canada outside Quebec.
We hope that the new Broadcasting Act will state, much more clearly than it does currently, that through its programming, the Canadian broadcasting system provides both a space for the expression of producers, creators and artists from official language minority communities, and a window into the situation, aspirations and achievements of those communities. We also wish to see the OLMCs represented at the CRTC, the regulatory body for that system.
To achieve that objective, we submit a series of concrete suggestions that could be put into effect, and which your committee could recommend.
The first suggestion would be to add two national commissioners to the CRTC. The CRTC Act provides that the council may not have more than 13 members. A few years ago, with budget savings in mind, the government decided to appoint only nine members: a chairman, two vice-chairs, one for broadcasting and the other for telecommunications, and six commissioners representing a province or a group of provinces and territories. That situation created a deficit in francophone representation within the council and, in 2015, this forced it to postpone a review of the regulations governing commercial French-language radio, because there were not enough French-speaking commissioners to make up a quorum following the resignation of the francophone vice-chair, Mr. Pentefountas. The process was relaunched in 2016 and still has not come to fruition. The council finally decided to include it in a broader process involving francophone and anglophone radio.
Moreover, given the current structure of the board, OLMCs have little chance of being represented; the commissioners representing the mostly anglophone provinces or regions are generally anglophones, and the Quebec representative is generally francophone.
We invite the Standing Senate Committee on Transport and Communications to recommend that a national commissioner representing francophone communities outside Quebec be added by statute to the CRTC, as well as a national commissioner representing the anglophone communities of Quebec. In that way, those representatives will be able to participate in developing the council’s regulations and policies, as well as in the discussion of requests submitted by different categories of broadcasting enterprises.
Our second suggestion would be to include a response to the needs of the OLMCs among the objectives pursued by the entire system. Regarding the objectives to be pursued by the entire broadcasting system, the Canadian broadcasting policy mentions reflecting linguistic duality but does not mention OLMCs. The objective of reflecting the situation and the particular needs of both official language communities, including those of minorities of one or the other language, falls exclusively to CBC/Radio-Canada. Of course, we want CBC/Radio-Canada to continue to pursue that goal, and hope it will have funding based on objective per-capita criteria to do so, rather than on discretionary and variable criteria.
We are certain that that important objective cannot be achieved if its implementation falls strictly on the national public broadcaster, especially in the current multi-platform shattered environment. The Canadian broadcasting system as a whole must contribute to that objective. We invite the Standing Senate Committee on Transport and Communications to recommend that that objective also be included among those to be pursued by the Canadian broadcasting system in paragraphs 3(1)(d) or 3(1)(i). Such a change would bolster the mandatory distribution status for basic services under paragraph 9(1)(h) of the act, to the benefit of services such as TV5 and Unis TV, which play an important role both in supporting creation and reflecting the situation of francophone communities outside of Quebec.
Our third suggestion would be an explicit reference to independent producers from OLMCs. Subparagraph 3(1)(i)(iv) indicates that Canadian broadcasting system programming should make liberal use of independent Canadian producers. That is a fundamental provision for all of the Canadian independent producers’ associations, and for all the people they employ: screenwriters, directors, singers, technicians, set designers, musicians, and so on. Once again, this paragraph omits any mention of independent producers from official language minority communities who allow all of the creators and artists from those communities to express themselves and make their voices heard.
That is why we invite the Standing Senate Committee on Transport and Communications to recommend that the following passage be added at the end of that paragraph: “including producers working within official language minority communities.”
We remain convinced that these few very concrete amendments, which are very simple to implement, would have extremely positive repercussions on our members’ communities, and would align perfectly with the objectives of the Official Languages Act.
In closing, we would like to insist on the importance of access to high-speed broadband Internet for some of the communities we serve, which are often rural communities. One of the fundamental objectives of the legislative amendments being considered should be to see to it that all Canadians have access to cutting-edge and very effective communication infrastructure.
We thank you for your attention, and we will be pleased to answer your questions.
[English]
The Chair: Thank you, Ms. Pilon.
I have a question for Mr. Paris. You mentioned HST. How does Netflix get away from not paying it? They have a Canadian company, do they not? There are different products on the Canadian platform than on the American platform of Netflix.
Mr. Paris: I think there’s a legal answer to that question that I don’t have in my back pocket.
The people at Netflix I’m sure can tell you. I think it has to do with where the service is located and being received, whether it’s effectively being received by a company outside. Where the service is being paid for and received depends whether HST applies to it.
The Chair: I subscribe to it and they have a credit card and they wrap it through, if they do it in the States, they don’t have to pay for it. They would have to do it in Canada to apply the HST?
Mr. Paris: That’s my very superficial understanding.
Ms. Pilon: I might have an answer for you.
The company that operates in Canada is producing. The company that was set up in Canada last year with the announcement of the new investment, that’s the production side of that company. The distribution of the content is based in the U.S. Therefore, they’re not subject at the moment as other online services and providers of services and goods are not subject to charging HST.
The Chair: Maybe you could comment, Mr. Paris, on pirated products. Where are pirated products shown? Do people access it through the Internet? Is that what you’re talking about? I’m a latecomer to YouTube. I started to notice they have pirated products on there. They have to be the biggest thief in North America for movies. People are obviously shooting them in the movie theatre with a camera. I don’t know how they do this. I don’t know the intricacies of it. You can access movies and it is obvious they are pirated.
Mr. Paris: I’ll confine my comments to piracy that the Fairplay coalition is targeting. YouTube is subject to various safe harbour protections in the United States. There are notice and takedown provisions where rights holders are able to assert their power to take down content. It’s a bit of a whack-a-mole game on YouTube.
When I address piracy in my comments, I’m not so much thinking about the unauthorized use of content on YouTube. I’ll give you an example. There are set top boxes about the size of a hockey puck you can buy at a local gas station that are loaded with software called Kodi. These devices provide access to trackers that allow for digital storage lockers located offshore to provide access to movies, television and live broadcasts.
The Chair: Can you get cable?
Mr. Paris: In some instances, yes, television piracy is a reality. These devices provide access to what are out-and-out illegal streams. They’re hosted offshore beyond the reach of Canadian courts. That is the real rival to legitimate streaming services or offerings in a cinema that we are having to deal with.
The average person walks off the street and says, “Can I get this product for free? Can I get free unrestricted access to this content for one price? Why would I pay for the subscription to cable? Why would I pay for a cinema ticket? Why would I pay to rent or to a legitimate streaming service when I can get it for a much lower price?”
The Chair: Do people do that because it’s too expensive?
Mr. Paris: I don’t know that it’s too expensive. Piracy is unequivocally less expensive, it’s free.
The Chair: That’s what I’m getting at.
Mr. Paris: Free is better.
The Chair: Not necessarily. The music industry went through this whole revolution starting around 2000. Pirates were stealing music and just giving it away to each other. People were giving it away to each other. Slowly Amazon and Apple figured out that people wanted to be able to buy this on the Internet; I think it’s solving the problem.
Mr. Paris: The two forms of media are different. The music industry managed to create a better mouse trap. They made it easier to pay for legitimate access to a universe of content with the advent of Spotify and other similar services. You’re seeing some of that in film and television with the advent of CraveTV and Netflix. The capital involved to produce a film is quite an order different than the capital involved to create a piece of music.
You’re seeing different levels of investment, different amounts of labour and capital being expended to create those cultural products. The risks are different.
The Chair: Thank you.
Senator Dawson: To add my two cents worth on Netflix. Both the previous government and actual government never asked Netflix. They both decided not to have a Netflix tax. These are administrative problems. They decided wrongly, as far as I’m concerned, to not tax Netflix. They tax CraveTV and a whole bunch of products.
It was a political decision taken by the governments and duly elected, even though I don’t agree with them, that is why we don’t have a Netflix tax. It’s not because it’s complicated. Everything can be taxed. Trust me, they normally tax a whole bunch of things.
The previous Quebec government had decided to tax it and they were setting up a system. Netflix, to be very honest, never refused. They’re not paying the tax. The tax is being paid by the consumers. Senator Tkachuk will pay a Netflix tax because he uses Netflix. We call it a Netflix tax, but in the case of Senator Tkachuk, it’s the Senator Tkachuk tax.
Both governments decided not to tax it. I wanted to clarify that. It’s an important clarification because it was a political decision taken by two consecutive governments.
The Chair: Did Amazon sell their products tax-free?
Senator Dawson: We can tax them too. We just didn’t ask them.
The Chair: They don’t tax Amazon either.
Senator Dawson: The previous government, as well as the existing government, are afraid that both of them will say, “Oh, my God, you’re taxing.” Anyway, that was a political commentary. It’s not a question.
What about Cineplex? How much of the big market is controlled by the big players versus the fact there are a lot of mom and pop shops?
Mr. Paris: My understanding is the Cineplex market share is in the order of 80 per cent. Full disclosure, I’m here on behalf of the Movie Theatre Association of Canada. I am also employed by Cineplex. I’m happy to answer that question.
Senator Dawson: I wanted to clarify that.
Mr. Paris: To respond very briefly on the tax, I’d add that in some municipalities and provinces historically there have been special amusement taxes applied to cinemas which still exist today; Saskatchewan, for example.
There are layers upon layers of taxes, depending on where you’re located, if you are an operator of a cinema.
Senator Dawson: What about the Canada Media Fund? You talked about this $40 million being spent on expenditures on drama.
Ms. Auer: These are the telecast expenditures by broadcasters. Part of that may include CMF funding. My purpose in providing that information was merely to show that to the extent that foreign production in Canada has increased significantly over the last decade, drama by Canadians has fallen. That’s the only purpose. This tells us what private broadcasters are actually spending.
Senator Dawson: But production in Canada has grown over the years?
Ms. Auer: It includes a great deal of foreign programming. Production of foreign drama has not increased.
One of the limitations I spoke of earlier, in terms of the lack of data is, for instance, the CRTC does not publish, although it collects, the number of original hours of drama that are broadcast each year. It has the data. It doesn’t publish it. We don’t know where the money is going and what it’s actually achieving.
Senator Dawson: One last comment.
[Translation]
I want to apologize to Ms. Pilon; two of the senators who are members of our committee are very active in defending the interests of francophones outside Quebec, but they are absent because they also sit on the Standing Senate Committee on Official Languages, which is currently holding meetings outside of the city. We have among us a new senator who will, I am sure, defend your interests soon, but I simply wanted to explain why those senators are absent, and that is because they are defending your interests before another audience.
Ms. Pilon: Thank you. They did let us know that they wouldn’t be here.
[English]
Senator Mercer: Thank you for being here with us. I appreciate it.
Mr. Paris, you talked about blocking piracy. How can we do that and at what cost?
Mr. Paris: There are more than 40 countries in the world where these regimes exist. The proposal put forward by FairPlay — and I don’t suggest for one moment that there is only one way to do this — there are views about this potentially leading to a slippery slope of censorship and what the rules should be. The proposal was to institute an independent body, governed by the CRTC, that would hear applications much in the same way that someone might apply for an injunction from an ordinary court whereby there would be a burden of proof to establish that a foreign website was structurally engaged in content theft and piracy. You would have an independent body assess that and then, assuming that burden had been met and satisfied, the CRTC would then issue an order for ISPs to block access to particular websites as directed.
Those ISPs, subject to the governance of the CRTC, would then be subject to carry out that order.
Senator Mercer: The second part of my question was how much does it cost?
Mr. Paris: The fees, as I understand the proposal, would be borne by the applicants. That is, the people seeking to block access to the particular website.
Senator Mercer: I’m a Netflix user myself. It seems you have to confess before you ask a question about Netflix.
However, if we were to tax Netflix and other providers. Would it be right that we say the money that you receive from those taxes be reinvested in the industry of providing services to Canadians?
Mr. Paris: I know broadcasters are regulated and required to make certain contributions to things like the Canadian media fund. That’s not the subject of my proposal today. Our proposal is quite limited in the sense that we would desire a level playing field. In our view it’s inequitable that you can operate a streaming service in Canada, be required to apply and remit sales tax, and yet we have foreign services that aren’t subject to the same burden, let alone regulatory burden, of another entity.
Ms. Pilon: I think there are different ways of doing it. If we’re talking about a sales tax, what we’re talking about is trying to even out the playing field. It’s not fair that Canadian over the top services have to charge consumers sales tax and the foreign ones don’t have to. It makes for unfair competition.
All the other elements of the system profiting from providing content to Canadians —
[Translation]
— are not required to pay into a system that supports Canadian content, as is required of Canadian distributors. Foreign services don’t have that requirement. We call it a levy, a corporate income tax, if you will, on the revenues these corporations make from benefiting from a system and accessing Canadian consumers by selling them services.
[English]
Ms. Auer: In the broadcasting system, it is cable and satellite companies which are distributors of programming content that contribute to the CMF. Broadcasters being television, programming undertakings can then apply for some of those funds.
In a way, the point is that the system asks distributors, in particular, to contribute towards the system. Private broadcasters and, of course, the CBC has its own special mandate so it doesn’t require conditions of licence from the CRTC to require it to support Canadian content.
Senator Mercer: The suggestion earlier was that we give more power to the CRTC. I get a little nervous about that, that more power is an omnipresent organization in the industry. We need to be careful that we don’t give too much power to one agency. That’s a comment as opposed to a question, chair.
The Chair: It’s a good comment.
[Translation]
Senator Boisvenu: I’d like to welcome the witnesses. My question is for Mr. Paris. Do American Netflix users pay tax on their subscriptions?
[English]
Mr. Paris: I would defer to my fellow witnesses. I can’t speak to the American situation.
[Translation]
Michel Houle, Consultant, Cultural Industries and Communications, Alliance des producteurs francophones du Canada: In the U.S., it depends on the state. The state imposes the tax, not the federal government. Generally speaking, consumer tax is usually imposed at the state, rather than federal, level.
Senator Boisvenu: As I understand it, Americans are taxed on this American product, but not Canadians.
Mr. Paris, when your customers buy a ticket to the movies, do they pay tax?
[English]
Mr. Paris: They are paying HST, absolutely.
[Translation]
Senator Boisvenu: When you watch a movie on Netflix, you don’t pay the government tax, but when you do it in a movie theatre, you do. Is that correct?
[English]
Mr. Paris: As I said earlier, in some instances you might be paying more than one tax. In Regina, for example, you’ll pay a municipal amusement tax. In that particular circumstance you would pay federal sales tax in addition to that amusement tax. In Ontario, you pay HST and in the ordinary course in virtually every other province you will pay sales tax.
[Translation]
Senator Boisvenu: Do you view the decision not to tax Netflix as unfair to your industry?
[English]
Mr. Paris: Exactly my point.
[Translation]
Senator Boisvenu: I have a question for Ms. Auer. You talked about costs earlier. I’m always shocked at the cost of Internet service. In Montreal, I pay $160 a month for Internet, but just $120 for heating and hot water. I pay less for a basic service like electricity than I do for what I would call an entertainment service, even though the Internet is now considered a basic service. My Internet bill is higher than my electricity bill.
[English]
Ms. Auer: I gather the CRTC is going to be appearing before you shortly. You could ask the chair why that is.
[Translation]
Senator Boisvenu: Mr. Thomson from the Canadian Communication Systems Alliance told the committee that the thing his members were most concerned about was the anti-competitive behaviour of large vertically integrated companies. They integrate nearly everything now because of their market dominance. That anti-competitive behaviour can limit the communications choices available and frustrate competition and innovation. That’s specific to Canada. In Europe, the industry has, to some extent, been deregulated, as in the U.S. The lack of competition is unique to Canada. Do you not think the government should finally show some leadership and open up the market, especially in rural areas where some places still don’t have Internet service, including in Quebec. These people don’t have Netflix.
[English]
Ms. Auer: CRTC’s theory beginning in the 1990s was to permit consolidated ownership, particularly in television but then also in cable, on the theory that larger players would do more for the system.
I used to work at the CRTC.
I did a study there. In 1968, there were 68 television stations in Canada and 66 owners. We are now down to 93-odd television stations and 15 owners. We are highly concentrated. I didn’t put the data in; I would be happy to provide them in terms of revenues. However, when you look both on the telecom and broadcasting side, the top three are taking in over three quarters of all revenues.
We are past the notion this is a competitive marketplace. I can say this because my father was an economist. I had Adam Smith drilled into me from my childhood. But Adam Smith was arguing for many competitors and many buyers. What we have is very few competitors and many buyers.
The issue for the commission is that no one has ever directed it to define what it means by “competition.” There are very few competitors. They all work hard to make more money. Does that make them competitive? I think not, because prices have gone up. I mentioned in my presentation that when the commission stopped regulating the basic rate you pay for cable, it stopped collecting the data. That is incredible, because it collects the information but they literally threw away the data. I know this because I submitted an access to information request, and I asked for it. They said, “We can’t give it to you anymore.”
The point is if you don’t have this kind of information, you don’t know what impact the concentration of ownership has. You don’t know what is happening with prices.
[Translation]
Senator Boisvenu: In Quebec, we have two companies, Bell and Vidéotron. Customers use the technique of calling up their service provider to say that the competitor is offering them a better deal. That’s how they get a better price from their service provider. Is it normal to use that kind of strategy to make customers believe that they are getting better service at a better price?
[English]
Ms. Auer: That assumes consumers are perfectly informed and that they know all of the deals out there. I challenge any real consumer — none of us is real in a sense; we all have some knowledge of a sector. My mother would never know what to do. My kids don’t. My neighbours are clueless. We assume that everyone has the capacity and power to negotiate —
Senator Dawson: They won’t be happy listening to you tonight.
Ms. Auer: They don’t like me anyway. It’s no loss. I won’t make any friends here.
The point is I find it difficult to imagine that either Bell or Rogers cares enough about my $100-a-month account so I can negotiate with a billion-dollar company. I am up against that. We are talking about a sector that made $44 billion two years ago. Each of us — millions of Canadians — are supposed to individually exercise our market power and challenge them.
That, however, is why the CRTC was created. Was it not created to regulate this sector in the public interest?
The Chair: I remember in the initial stages of cable, in the City of Nippawan, Saskatchewan, a group of people got together and formed a co-op. Using satellite, they were going to bring the information and sell it. They would have their only little cable company, which would have been just as good as any other cable company. The police shut it down.
Are we past that? Could people still do it if it was allowed? Regina has its own cable company. It is a co-op. It’s their own.
Ms. Auer: It has been allowed, provided you obtain a licence and you can convince the commission to grant it. The commission allows what’s called “over-build” — you can have two cable systems serving the same location.
The challenge is sometimes when co-ops form, the people who formed them eventually retire or current members lose interest, and they are bought out. There was a case, I believe last year, where a very good local community co-op was bought out by one of the large players.
The Chair: One of the large ones, yes.
Ms. Auer: We are not past the point, but the issue is when we are thinking of the concept of market dominance, who decides? Is it Parliament, or is it the large players who say, “Hey, if you don’t grant us this particular deregulatory request, you can see 12 stations close tomorrow.” I have heard that threat to close television stations since 2000. This is what the commission is concerned about, as well. If it takes the wrong step, will Bell simply close stations? Rogers has already cut a great deal of service.
The Chair: Someone else will start one.
Ms. Auer: I am only talking about over-the-air conventional television stations. We have had 93 TV stations for the last 20 years. I recall there was a set of applications filed in the late 1990s to start new TV stations across Canada’s major cities. The commission denied the application. It turned and said that it wanted discretionary satellite-based services. We have more than 200 of those.
I have a wonderful statistic I will share with you: There are 112 specialty services that made profits two years ago. Of the 112, 22 operated with zero staff. They made $38 million in profits.
The Chair: I can believe that.
Ms. Auer: My point is the act calls for employment opportunities. Why is the commission allowing 22 players worth $38 million in profits not to hire a single person to create a single bit of programming?
The Chair: The whole initial idea of cable, as I understand it, was they would be given a licence, and then they would invest in Canadian content. That was the whole idea behind it. Now, when you watch cable, unless you are watching sports, that isn’t happening.
Ms. Auer: Cable has a long history in Canada. It predates the CBC. The interesting thing is that, until 1968, of course, it was regulated not by the Department of Communications but by — and I confess, it might have been Transportation. Cable, as I understand it, having read some of the history, did not want to be regulated as a provincial telecommunications company, purely distributing content. It wanted to be regulated by the CRTC. That is where community channels arose. The quid pro quo to be regulated as a broadcaster was to do some broadcast content.
Senator MacDonald: I hope you don’t think we are picking on you, Ms. Auer, but I am going back to you.
There are some things you raised in your presentation —
The Chair: If anyone else wants to comment —
Senator Miville-Dechêne: It seems to be more of a conversation between you and the witnesses.
The Chair: I have a right to ask questions, senator.
Senator Miville-Dechêne: I know. I am just saying we haven’t asked any questions.
The Chair: We have been here less than an hour, senator. You will have an opportunity to ask questions.
Senator MacDonald: You highlighted the drop in private TV broadcasts expenditure and drama from $93 million in 2003 to 2017. Was that a directive of the CRTC, or was it a response to a request from those who produce in trying to save money?
Ms. Auer: The commission has never directed any broadcaster in Canada to reduce spending on CanCon, but it allowed it to happen.
Senator MacDonald: There must have been a reason why they would allow it to happen. There must have been a complaint or concern put forward to the CRTC by the producers.
Ms. Auer: It wasn’t so much the producers but the broadcasters were interested in saving money. If the commission reduces its requirements, either through its policies or its conditions of licence, it would be difficult for a private-sector company to spend more than the CRTC requires, because that company has a duty to its shareholders to make profits.
If the commission lowers the requirements, a dutiful company will reduce spending.
Senator MacDonald: Yes, but is it a chicken-and-egg thing? What happened first?
Ms. Auer: What happened first is the commission in the late 1980s began to impose requirements on spending linked to growth and revenues. This was Chairman André Bureau. That was a successful policy for seven years. We had some excellent Canadian programs made. I’m sure Carol Ann can speak to that.
[Translation]
Ms. Pilon: During the last licence renewal process for the large broadcast ownership groups, the CRTC lowered the requirements for spending on Canadian programming, and the entire sector came together to denounce the decision. Both the anglophone and francophone players mobilized to urge the government, through the Governor-in-Council, to ask the CRTC to review its decision. The CRTC did so and sided with the production sector, bringing spending levels back up to where they were.
[English]
Ms. Auer: The challenge will be getting back that $50 million. If you have cut it in half, will we get that expenditure back in drama? It’s going to be difficult. Will we grow?
[Translation]
Mr. Houle: In its decision to adopt a group-based approach to licensing, the CRTC introduced two types of obligations: an overall expenditure requirement to support Canadian programming — any type of programming — and an expenditure requirement to support so-called programs of national interest, which include dramas, documentaries and variety shows. Broadcasters now have to meet a dual requirement. However, when the CRTC established the principle in 2010, it said that it would base the percentage on the historical average of the previous three years. For instance, if a broadcaster had spent 32 per cent over the previous three years, it would have to spend 32 per cent for the next five years.
When it went through the process in 2015, before the reference, spending decreased significantly because the CRTC had stopped applying the same percentage principle for each year. In some cases, the percentage spent in relation to actual practice dropped. That’s what led to the complaint Ms. Pilon talked about earlier and the subsequent CRTC review.
The CRTC increased the spending requirement for programs of national interest, which include dramas. It did not raise the overall spending requirement for Canadian content. That means there should be an increase in the coming years as a result of the review, which wouldn’t have happened had the sector not complained to the federal government.
[English]
Senator MacDonald: I want to go back to what you mentioned with regard to foreign production in Canada. You seem to be establishing the correlation between foreign production in Canada and the drop of domestic production.
I am from Nova Scotia. I have friends in the film industry. They have had a really good film industry over the last decade, 15, 20 years dropping 7, 15, $20 million a pop into film production in Nova Scotia, in Halifax. I believe most of the reason they come there is the cost of production. The people who come mostly from the States are there because they can turn a profit by producing there. Surely we don’t want to chase that out of the country and the province. They are probably dropping more money there than the CBC is.
Ms. Auer: I think it is terrific that Canada has grown so strongly in the audiovisual sector and is attracting so much foreign investment. The concern would be in fact we are producing more foreign content than we are Canadian content. There is nothing wrong with producing foreign content. The issue is how much Canadian content do we want? Do we want any?
Senator MacDonald: What means Canadian content? The person who has signed the cheque is a Canadian or the people who are acting in it are Canadian? What determines Canadian content?
Ms. Auer: Well, in fact the CRTC would have held a number of proceedings to try to come up with an empirical definition of “Canadian content.” They looked at various indicators, for instance, whether the director was Canadian, the script writer, the main actors were Canadian, where it was being done, I think where it was being produced or edited afterwards. There were 10 to 15 different indicia.
Mr. Houle: You need to have six out of 10 points that are related to key creators of the production, the location, the control of the company. There is also the fact it reflects Canadian situations.
[Translation]
It has to reflect the aspirations of Canadians and so forth. That is how Canadian content is subjectively defined. If you see a show that takes place in Halifax, features people from the province and addresses the concerns of those people, that’s not the same as a show that was filmed in Halifax but is meant to look like it takes place on the U.S. west coast.
[English]
Senator Miville-Dechêne: Ms. Auer, I am a little puzzled by your recommendation here.
Ms. Auer: Which page?
Senator Miville-Dechêne: The one saying, “the CRTC may authorize non-Canadian online programming services operations in Canada and set appropriate contributions.”
This has not been permitted. One of the rationales for it was that our system stayed Canadian. I would like you to explain why you think this is the way to go, considering you are quite favourable to Canadian content and a different Canadian broadcasting system.
How do you justify this particular recommendation?
Ms. Auer: Well, I am Canadian. I’m going to support Canada. My parents were immigrants; they chose to come here and they wanted to be in Canada. I am biased.
One of the issues is we keep talking about dealing with Netflix. Netflix is bringing in several hundred million dollars in revenues every year. Very few other private broadcasters in Canada are doing that. The question is: If it is attracting that many subscribers, if it is attracting that many audiences, if it is effectively doing business here and benefiting from access to Canada, should it not contribute back to the system the way every private broadcaster in Canada does? We are not talking about allowing ABC, NBC, CBS to establish here. What we are talking about is some of the few very large services that might have the capacity to support the broadcasting system. Under the CRTC’s exemption power, it may only exempt people from broadcasting if they cannot make a material contribution to the system. Netflix is big enough that it can make a material contribution and it is benefiting from its relationship with Canada.
However, it cannot be dealt with because of the foreign ownership direction. We have one system in Canada for broadcasting. We have one regulatory authority for broadcasting. The direction prohibits it from issuing any kind of authorization to Netflix to operate. If we want it to contribute, we have to authorize it.
Senator Miville-Dechêne: Okay, but isn’t there a danger by authorizing many operators to come here once you open the door?
Ms. Auer: I think that is a possibility which could be addressed by setting up ade minimis requirement. For instance, we choose to ignore certain services that might have 20 subscribers or 1,000 subscribers. Currently the CRTC has exempted hundreds of small cable systems with very few subscribers; we can do the same in reverse for very large systems.
I think over time, if we had the ability to authorize their operations so they could contribute to the system, the other thing we can do is introduce the discoverability framework which involves not just ensuring there is Canadian content available, but it is also discoverable through algorithms and it recommends programming that is Canadian.
Ms. Pilon: If I can add something: They are already operating here. They are providing their service here.
Senator Miville-Dechêne: It wouldn’t make a difference?
Ms. Pilon: There is nothing right now to prevent them or to prevent you from subscribing to Netflix.
Senator Miville-Dechêne: No, but they don’t have a proper licence.
Ms. Pilon: They can do whatever they want.
Ms. Auer: Because there is nothing to constrain them.
Ms. Pilon: They don’t have any requirements to spend on Canadian content. They don’t have any requirements to present Canadian content or even to showcase it, yet.
Senator Miville-Dechêne: It is obsolete. You are saying the rule is obsolete?
Ms. Auer: I am saying that times have changed and the technology has changed and our ability to interface has changed.
Let’s take advantage of it. It’s a lemon. Let’s make lemonade.
[Translation]
Senator Miville-Dechêne: Of course, you’ve recommended improvements as far as French-language production goes. I’d like to know, however, whether Radio-Canada buys content from you? It’s clear that there aren’t any rules on that.
Ms. Pilon: Yes.
Senator Miville-Dechêne: Yes, there are specific rules?
Ms. Pilon: Yes, because Radio-Canada has licence requirements, further to which it has to spend a certain percentage of its revenues on independent production.
Senator Miville-Dechêne: Outside Quebec?
Ms. Pilon: It lumps together production outside Quebec and in Quebec’s regions. It has to spend 6 per cent of its revenue on production outside Montreal.
Senator Miville-Dechêne: Is that enough?
Ms. Pilon: No. Even then, the figures are hard to come by. The last time the public broadcaster’s licence was renewed, the CRTC imposed slightly more stringent requirements on the corporation. Now, it also has to report how much it spends to the CRTC. However, the system the corporation uses to report data is one it created itself. It’s not filling out forms provided by the CRTC, so figuring out exactly where the money has been spent, internally and externally, on productions outside Quebec versus those within Quebec, and in which category, is like solving a puzzle. Untangling all of that information is a real challenge. We are working very closely with the CRTC. In fact, we’ve recommended models that the public broadcaster could use. We’re just a little guy in the eyes of the CRTC — the APFC has just one employee — and, as you can appreciate, the processes are complex. We’ve asked the commission for greater data transparency so that we can do our job and properly represent our members.
Senator Miville-Dechêne: Thank you.
[English]
Senator Galvez: Thank you very much for your interesting presentations and statements. I am far from this field. The more I listen, the more I think it is complex and very complicated.
One word that comes to me often is it is obsolete, it is old and not coherent with what is happening today. We have three acts — the Telecommunications Act, Broadcasting Act and Radiocommunication Act — and in the middle of that, we have the CRTC. We have to wrap up with recommendations.
You put it in terms of cost, content and governance. We are hearing it in terms of the one who produces the content, the one who distributes and the one who broadcasts, takes and distributes it elsewhere. In light of that, do you think these acts should be integrated or separated in a different way? How far do we go?
Ms. Auer, you have said, to conclude, “unless Parliament begins to act quickly, Canadians could very well lose control over their communications system.”
I think we have lost control of our communications system. We need to repair it and address the situation. What could it be?
Ms. Auer: Thank you for that question. I know that Carol Ann and Michael will have something to say.
The one point I would like to make is technology may be obsolete, but what people like to do is not. People like to watch TV and listen to music. When I say “watch TV,” I mean watch screens. They like audio-visual content. The theme is the same; they need to have access to content. It has to be reasonably priced and available to them.
The technology has changed. I can remember watching the moon landing with an antenna TV. Now we have a more sophisticated thing. The technology has changed; however, it is important to remember both acts are technologically neutral. What is preventing a certain amount of action, in my view, has been the authority responsible for the acts.
I would like to comment briefly that, of course, you are looking at the Telecommunications Act, the Broadcasting Act and the Radiocommunication Act, but there is also the CRTC Act itself. That bears some scrutiny as well.
Insofar as converge legislation or separate legislation, those are critical questions. You will notice I said that in the longer term we could discuss that. I am not able today to say, yes, it should be one act. One act speaks to the notion that we are stuck with converged ownership structures. Two acts, one for distribution and one for content, speak to the idea that we are looking at function, not ownership.
I thought the former CRTC chairperson, Konrad von Finckenstein, made some excellent points about his views. He is very well placed to understand why one might want to consider seriously two acts.
[Translation]
Ms. Pilon: The two acts have different objectives. I am by no means an expert on the Telecommunications Act, but I would say that, to some extent, it serves to regulate a commercial regime. The Broadcasting Act is what provides for the preservation of culture, a notion that isn’t really entrenched in the Telecommunications Act. If the committee studying the issue were to recommend merging the two acts, those underlying principles would have to be maintained.
An important part of the discussion is whether we need one or two statutes. The services regulated under the Telecommunications Act are increasingly involved in distribution and programming. Content creation as it relates to programming also comes into play. Conventional TV broadcasters are no longer the only ones making content available. Telecommunications companies are providing content as well. That’s where the distinction comes in, so what has to be examined is the actual activity. What is the activity and how should it be regulated?
The practice whereby people watch their favourite shows on their cell phones gives rise to a number of questions. Should cell phones be regulated with respect to content distribution and available programming? That has to be considered. More and more, that is how young people consume content. Cell phone providers charge you so much a month for data. Users are accessing TV content on their phones as opposed to their TVs. Why shouldn’t those people contribute to the system? There isn’t a good reason. There’s no rationale as to why they shouldn’t. The problem is that phone service is regulated by the Telecommunications Act. With companies switching back and forth between activities and becoming vertically integrated, increasingly, the same company is managing all three activities. We haven’t yet decided whether they should be combined or separated. We are still thinking it over.
Mr. Houle: Ultimately, that’s the last question that has to be answered. The first thing we have to determine is which direction we want to head in and what we need to do to get there. Once we’ve answered that, we’ll be better-equipped to say whether we should have one, two or three statutes. To address that question, we first need to know what we want to achieve.
There’s no doubt that the interface between telephone and broadcasting companies has become highly integrated, and not just in terms of ownership. In Quebec, people can access the programming service Illico on the Internet or on cable. When it’s through cable, it’s considered a broadcast distribution activity, but not when it’s via the Internet. How does that make any sense? It’s easy to wonder. The two platforms provide the same programming service, so why are they seen as separate?
First, we need to answer the meaningful questions. Where do we want to go and what do we want to achieve? After we do that, we’ll know how many statutes we should have.
[English]
Mr. Paris: I’ll colour outside of the lines of my expertise a little bit — to lend some perspective from a private industry player, although, granted, one not regulated by these acts. You have three separate acts. I agree with all of my colleagues, the more you decide to amend and change those acts — potentially integrate them — the more uncertainty you are going to introduce into what is a very well-established system. You have three different acts and three separate bodies of law that emanate from those acts. It may make all the logical sense in the world at some point to arrive at the conclusion where you have the perfect single act or approach to divide up the different functions of these pieces of legislation.
I don’t know you are going to find the answer in the committee. I think you need to deal with the problems before you today. Then, at a future date, you can then look back and decide if it’s appropriate to reframe the legislative context in a way that perhaps makes more sense.
[Translation]
Senator Forest-Niesing: My questions are for the Alliance des producteurs francophones du Canada representatives. I was told that previous witnesses had said that French-speaking Canadians tend to consume more French-language Canadian content than English-speaking Canadians consume in relation to English-language Canadian content. Former CRTC Chair Konrad von Finckenstein apparently suggested that this difference need not be recognized in Canada’s broadcasting regulatory regime. How should the differences between Canada’s anglophone and francophone markets be taken into consideration when modernizing the three statutes?
Ms. Pilon: I would begin by saying that we are very familiar with the viewership data for Quebec, but not as familiar with the viewing habits of francophones outside Quebec. We have a lot of trouble measuring that audience. The APFC just conducted a study with Telefilm Canada to measure viewing habits.
That’s one of the questions we have. Currently, the system recognizes the difference between the two markets, but the funding isn’t necessarily allocated on an equitable basis as far as that difference goes. In other words, the characteristics of the system are not considered the same in both markets. The number of producers, broadcasters and cable companies isn’t the same. The difference between the two markets should be recognized.
Historically, Canada decided that French-language Canadian production needed greater support — in other words, a larger investment — than the market’s demographic weight in order to preserve that market. If we look at francophone versus anglophone market share in Canada, the numbers more or less match the demographic weight associated with that language distinction. However, greater investment is needed in French-language production in order to maintain that market share.
Although producers in minority communities represent 14.4 per cent of Canada’s francophone population, Canada’s French-language producers only have 5 per cent of the market. Without measures requiring that the two communities be taken into account, without addressing those communities in legislation and policies, that 5 per cent would clearly not be attainable. Measures are needed to make sure the Canadian market is home to a diversity of voices. Specific measures are necessary to support that production.
Mr. Houle: What you’re saying is absolutely true. Domestically, people in French-speaking Quebec watch a lot more Canadian programming than in English-speaking Canada. The 20 highest-rated French-language TV shows during the regular season are all Canadian. On the English-language side, however, 18 of the 20 most popular shows are American.
It’s important, though, to look at the bigger picture. Trade in English-language content is significantly higher in the international arena, because English is the lingua franca of today. The cultural export market is much more favourable for English-language products, whether music, films or TV shows. Anglophone producers are able to obtain a much higher level of funding from foreign co-producers and distributors.
The act should distinguish between French-language and English-language broadcasting and provide for the different needs of the two sectors. That ensures the distinctions are taken into account, in terms of funding as well as national and international distribution. The fact of the matter is that the two systems are quite different.
[English]
The Chair: Are you good, senator?
Senator Forest-Niesing: I have one more question.
The Chair: Please go ahead. Then we’ll move on.
[Translation]
Senator Forest-Niesing: My question is for anyone who feels comfortable answering it. It’s not an easy one.
Generally speaking, where do you stand on the way that responsibilities are currently divided among the Minister of Heritage, the Minister of Innovation, Science and Economic Development, the Competition Bureau and the CRTC? If you were tasked with reorganizing the powers and responsibilities of these organizations, who would be responsible for what?
Ms. Pilon: This goes back to what we were saying earlier regarding whether there should be one or two acts. It’s also a matter of the activity area.
The APFC deals more with the Department of Canadian Heritage, although the role of the Department of Innovation, Science and Economic Development has changed in recent years. There’s more networking. The department is involved in exports and business development. That said, the notion of cultural sovereignty still exists. This notion is very important and is enshrined in the current Broadcasting Act. We mustn’t lose sight of these objectives.
Which one is in the better position? Canadian Heritage’s mandate clearly defines this responsibility. Without having studied this issue in depth, although the matter has also been discussed with my colleagues, I believe that Canadian Heritage shouldn’t necessarily be excluded from its role with regard to the parts of the Broadcasting Act that we want to preserve in a revision of the act.
Mr. Houle: I just want to add one more point. One thing that currently isn’t working very well is the fact that companies aren’t treated in a consistent manner. The system must have some consistency to ensure that all distributors of broadcasting content are treated the same way. I think that, according to the reflection currently under way, the act states that there’s a broadcasting system and a single regulator, the CRTC. However, this doesn’t include regulations across the spectrum.
In order to ensure consistency, some unity must also be restored at the political level, in terms of both departmental management and organizations. The more things are divided up among different institutions that have overlapping jurisdictions, the harder it may be to ensure consistency.
[English]
Ms. Auer: I was very fortunate when I was in law school. I wrote a paper on this subject, whether the Competition Bureau should be dealing with matters before the CRTC.
What I found puzzling was in one decision involving, I think, Astral’s purchase of a number of radio stations in Quebec, the Competition Bureau decided to impose some kind of content-based requirements on the sale, which puzzled me because they have no content authorization powers.
If Parliament decides competition is important in broadcasting and/or telecommunication, then surely it could give direction to the CRTC within the act so whatever body is responsible for each sector has the authority to act in that area; otherwise, you risk having court cases. I would have argued the Competition Bureau was ultra vires its jurisdiction. It had no business telling radio stations what to do in terms of news.
Mr. Houle: At times there was a review of the sector. The Competition Bureau say yes; the CRTC say no or vice versa.
[Translation]
So the company involved in the court case, which is the company subject to the regulations, appears before two federal institutions that provide contradictory results. When I was talking about consistency, this is an example where it may become difficult for the company involved in the court case to have to respond to several organizations that have different concerns. I’m not saying that the concerns aren’t legitimate. The Competition Bureau is more interested in advertising and advertising expenditure control issues. CRTC could handle content, the diversity of voices and work on regional and local programming. These are very different concerns, but if these concerns are assigned to two institutions, it leads to these contradictory results.
[English]
Senator MacDonald: Are we at the point where we have to clean the slate and go back to ground zero when it comes to this stuff? I’m reading some of your remarks here.
One of the things that bothers me most about the CRTC is the inability of the CRTC to create real competition in this country. That’s the big sticking point for me and most Canadians, this costs a fortune. We are one of the most expensive jurisdictions in the world when it comes to these providers.
You mentioned in your remarks, and Senator Galvez mentioned it as well, we have lost control over our communication system.
I don’t think I ever had any control over it myself, that’s for sure. The CRTC strikes me as another bureaucracy that just muddles along and gets by. I’m not sure that’s fair or unfair.
I’ll give you an example. You mentioned professional news gathering and what they are going to show us. I can turn on CBS, CNN, NBC, and I can hear a reporter from the Washington Post and somebody from the New York Times raging on about the same old stuff, or I can turn on CBC and watch them interview somebody from the Washington Post or the New York Times. They’re not giving me anything I can’t get elsewhere. I’m not watching it on the other provider. Why would I watch it on my own?
I find if I want real news, I have to go online to get it. It’s all just homogenized mush.
Ms. Pilon: Don’t you want that Canadian perspective of what’s going on in the world?
Senator MacDonald: I’m not sure the perspective from Toronto is anymore relevant to me than the perspective from Vancouver or the perspective from Boston or New York as far as I’m concerned.
If they’re bringing me the same stuff, the same narrative by rote it’s not giving me something I can’t get somewhere else.
The Chair: We get the Toronto perspective. That’s what we and the rest of the country get.
Ms. Auer: This concern has been brought to the commission repeatedly over the last 40 years.
When I spoke before, I mentioned the commission lacks oversight. This is not for want of trying by members of the House or members of the Senate. As we’ve been discussing here, this is not ridiculously simple stuff. This is often complex and there are trade-offs.
However, one of the fundamental things is the CRTC is not telling you whether it is achieving the objectives that Parliament laid out. There are 40 competing objectives in section 3 of the act, many of them are measurable. Why isn’t the CRTC giving you a report card on how well the system is doing?
With respect to the lack of diversity in terms of news reporting, as you’ll recall earlier we were discussing concentration of ownership. There used to be 66 TV owners who were competing with each other for the first news scoop. Now we’re down to 17. Of those 17, four of them have huge interests elsewhere; media and news are last.
If you recall, there was a bit of an issue a couple of years ago where one television company ordered its staff not to interview the chair of the CRTC because they disagreed with the chair’s decision in a matter.
You asked whether we should just start all over. It’s tempting, but it’s a very complex system. I don’t think we want to throw that much uncertainty into the financial markets. However, nothing prevents the Senate and the House from examining what has been happening. Have the objectives been achieved? If not, why not? And if you want something else to happen, I don’t see why it is not open to Parliament to say, “If we’re going to have this trade-off between large, highly concentrated industries in the public interest, where is that benefit now?”
I have the numbers here. I don’t want to throw more numbers at you, but in the last few years we have lost thousands and thousands of jobs in broadcasting primarily, not just in drama and production, but also news.
To give you an example of how little we know, I wrote the CRTC under the Access to Information Act to ask how many TV and radio news bureaus are there in Canada? News is democracy. How many do we have? The CRTC did not collect the data.
Senator MacDonald: They didn’t know.
Ms. Auer: They say they don’t have the data so they can’t tell me. I asked them how many radio and TV reporters there are in Canada. They were unable to tell me.
There are things the commission maybe ought to be learning about so it can inform Parliament whether its policies are being implemented.
I have a very messy house. There are days when I would really like to raze it to the ground because that seems like the only solution. It’s a big capital investment. I think my husband would be a little miffed. I have decided not to do that when he’s not there. The point is we can rebuild.
Senator MacDonald: Thank you.
[Translation]
Mr. Houle: I want to go back to what I was saying earlier. As soon as a clear objective has been established, the tools fall into place. I think that it would be a good idea for the Senate to consider local programming. I’m really talking about local news, not a station in the Atlantic provinces that’s called local. This doesn’t work.
There are all kinds of tools available in the legislation, but the system is complex. For things to work, there are also tax policies and tax credits that support the production. For the time being, they can’t support the production of local news. This aspect can be reviewed. A subsidy for local advertisements could be provided. There are measures regarding the deduction for advertising through foreign companies. A subsidy could be given for local news advertisements. If this objective exists, the first step is to state the objective very clearly in the legislation, then to try to determine all the tools that can be implemented. I think it’s true that CRTC hasn’t been very successful at this time, despite significant efforts to strengthen local television programming. However, there are other possible tools. If CRTC had had a clearer mandate, a requirement under the act to do so, we could have held it accountable more insistently than we’re able to do right now.
Ms. Pilon: Only Radio-Canada is required to represent the regions under its mandate. Other broadcasters aren’t required to have regional representation, including for the news. I agree with Mr. Houle. If we want this, we can ask for it.
[English]
Ms. Auer: I would add that a number of television and radio stations, but in particular television stations, do have conditions of licence requiring them to provide local news. The catch is it doesn’t have to be original local news. What that means is you get yesterday’s news this morning over and over again. The simple solution is to say: Provide original, local news. I have been participating in panels for 10 years asking for that with no success so far. We can keep trying.
Senator Miville-Dechêne: After what you said about CBC and Canadian perspective, that obviously there is a difference between Radio-Canada, where I would say there is a definite Canadian perspective, a Quebec perspective to the news.
I would agree, however, to the fact it’s more montréalocentriste as you said with Toronto. On the French side, we are accused in Montreal of being a little too Montreal centric. Yes, we are.
For us, it’s very different to listen to news at Radio-Canada than news coming from France or Washington. There is no comparison.
We have Canadian journalists based elsewhere. It makes a difference.
We were talking about getting rid of everything else and starting over, which seems to be quite a big contract. I’m wondering if there are things in the system now that, for you, are “sacred” and — I’m thinking about Radio-Canada/CBC — would you keep it as it is? Would you give it more regular money so it could be a real national network? I’m talking about Radio-Canada. What would you do?
Ms. Auer: I think you have to think about the timeframe you’re looking at. If you’re looking at a new statute, a new statute is going to take — from today — probably five years to get through.
What should the statute accomplish and when? If you want the statute in five years, in 2023, where do you want the CBC, if we have a CBC, to be in 2023?
If you know where you want to go, then you can set up the statute to accomplish that.
I had the good fortune at one point to do research for the Lincoln committee when it made its report. One of the things I happened to collect was information on the CBC’s parliamentary operating appropriation from the origins in the early 1920s.
The thing is, in constant dollars, the total operating appropriation is going down, both in overall terms and per capita. The requirements of the CBC are not going down. They have increased over time. This is not a whine about how the poor CBC has to do more with less. I’m not saying that.
I’m saying the corporation plays a critical role. As we lose the capacity to licence, which we will, because we cannot have licences for the Internet, nor should we want licences for the Internet. We don’t want to licence every single programming service. That really will be astronomical. We can get programming authorizations for some of the large ones that are able to make a contribution to the system. We can ensure that a publicly oriented corporation, with long-term, stable funding is in place to provide a good level of Canadian content for the regions, for the country and for francophones and anglophones.
I don’t think we can eliminate the CBC and assume a number of private sector players will be able to take its place. Even if they wanted to, they may not be able to. We already have this tool, we have this entity. Why not exploit it?
The Chair: We hear this question of production all the time. Culture isn’t only about producing TV shows and a few movies. It’s about sports, dance, theatre, symphony orchestras, art galleries — it’s about all these things in our community that all need money. They are in competition with what’s happening in broadcasting.
Isn’t part of our problem the fact we produce extremely talented people who leave? When you look at what’s going on in the United States, we have actors, producers, and directors there — people making great drama there and all the rest of it. They just leave. Isn’t that a good thing? Aren’t we getting our culture on to the American network? Isn’t that kind of what’s happening?
Ms. Auer: I’m sure the Americans would be very happy to know they’re being inundated with Canadian values.
The Chair: They are happy. They don’t care.
Ms. Auer: I don’t know if it’s a good thing for Canada’s culture to be covert. For Canadians who live here overtly, what is available for them? As you were speaking, I know many talented people have found opportunities elsewhere and more power to them. One could say it could be they weren’t able to find the same opportunities here in Canada and that should be a concern.
Suppose we were talking about the health care system and our best doctors were leaving because they couldn’t get jobs. We would be concerned about that. Like many other people, I have to —
The Chair: Unless doctors do leave and we import them from somewhere else. That’s what we do.
Ms. Auer: Sometimes, but many of them stay. I’ve had the same family doctor for 30 years. He’s mean. He tells me to lose weight.
The Chair: They all tell you that.
Ms. Auer: I’m lucky to have enjoyed his high quality of service.
I think culture is a funny beast. It’s ephemeral. It does really important things. If we don’t have it, do we still have a country? If we don’t have our own culture, why do we have a border?
The Chair: What I’m saying, in all these other areas we do have our own culture.
All we’re talking about, video and movies, I don’t know —
Ms. Auer: We’re consuming it roughly 40 to 50 hours a week. We’re not going to the theatre 40 to 50 hours a week. We’re not going to the museums.
The Chair: We have a serious problem then because, I believe, Canadians are talented enough to produce programming that people would actually watch.
Ms. Auer: They do.
The Chair: Well, they do? If they’re watching it, then they should be making money on it. Are they watching it?
Senator Housakos: If I could say —
The Chair: Let’s get down to brass tax here.
Mr. Houle: You just said, if I understood correctly, if there are people to watch it you must be —
The Chair: You don’t make money.
Mr. Houle: Well, depending on the size of the market, all the programming is there. If you produce in the United States a $10-million series and you have 300 million people to finance it, that’s something. If you are in Quebec and you have 8 million people and 7 million who speak French, if you make a series for $10 million you will never succeed. There are series going between 1 million and 1.2 million viewers each day. Those are daily dramas in Quebec French television. There is no American series that has that share of the market in the United States. That is impossible. We do it, but it is not enough to finance because we are just 1.2 million, not 300 million. That is part of the problem.
The other point — because I agree when you say there is not only film and television, there is also symphonic orchestra, literature, et cetera — is the one key to success of the French system is there is a link. In Quebec, on French television, you can see people who dance, the orchestra, theatre and people who write novels go there. Yannick Nézet-Séguin is known as a big star and he is the director of a symphonic orchestra. Everyone knows him because he’s often on television. It’s the same for theatre and the arts. We have to create a link. It is not because it is television. It is because television can bring art to large audiences in many forms.
The Chair: That is the point I’m trying to make. You are getting money for film and programming in Quebec and people are watching it. That is a good thing.
Mr. Houle: Yes.
The Chair: That doesn’t happen in the rest of Canada.
Mr. Houle: One must make a product that could be competitive in Quebec and outside of Quebec with a small budget because you have a small number of people who can watch it in North America.
The Chair: That system is working if Quebec. It’s not working in the rest of Canada. That is the point I’m trying to make. Maybe we are doing it all wrong.
Mr. Houle: In the rest of Canada they have the opportunity to sell their program in many English-speaking countries, such as Australia, New Zealand, Great Britain and many African and other countries that operate in English to compensate for the fact that they are not popular in their own market. We are in a reverse situation. We are very popular in our own market. It’s tough to go to other markets.
The Chair: We spent $1.4 billion or $1.5 billion on CBC and then we force Canadians to watch channels they can’t watch, which is a tax, really, that’s rolling into cable companies that are supposed to be producing. We tax people and we give them funds. We make movies and we call it Telefilm, or whatever they call that government department that makes movies. We spend all this money but no one watches. Why am I tuning into an American network to watch rather than a Canadian network? Because the American one is better. That’s why. What’s going on here? Where is all that money going and what is it for?
Ms. Auer: First, I think the CRTC can let you know what the statistics are and the amount of original program production. I don’t know if it can tell you anything about employment because I have a feeling it may not necessarily know that.
In terms of the CBC, what are we paying? I think at this point we are at $1 billion for the parliamentary operating appropriation for French TV, English TV, French radio, English radio, the networks and the stations, as well as, I believe, Radio-Canada International. We are not paying for one service, we are paying for several.
The Chair: I understand that.
Ms. Auer: For that money, it is reasonable. If you were to compare it internationally — many people have done that — my point is that CBC offers choice.
I will make a personal confession. It’s probably a dangerous one. I loathe sports. Why get up early and run around on a field? I don’t get it. I won’t do it. I won’t watch it. But I pay for the sports programming so that other people who enjoy it can get it.
This is the firehouse system of public utility theory where, when your house is burning down, it’s too late to build the fire station. You build the fire station and everyone contributes. Some people will be lucky, they never get hit by fire. Other people will at least be saved. The CBC offers the choice that otherwise simply won’t be there.
Senator Galvez: I think there are a few things that have been made clear in this meeting. One is that we need to talk to the CRTC.
The Chair: Yes. Next week we’re talking to them.
Senator Galvez: I will ask the analysts to take into consideration the topics that have been discussed and the questions posed by this panel. It’s very important.
Another thing that becomes clear from our conversation is that Radio-Canada and CBC don’t work in the same way nor do they have the same objectives. It might be because the CRTC is not there to make the objectives clear or to set up the contents clearly.
Correct me if I’m wrong, but I see Radio-Canada and CBC as tools to convey culture and unify the country. In the case of Quebec, and with the francophones in other areas, this work is done. However, with respect to CBC on the anglophone side, on this objective of unifying and diffusing Canadian culture, we are not there.
Mr. Paris: I will identify two ways of looking at culture. One is the product perspective you’re talking about now. You’re talking about artifacts, music, movies and opera. Culture is also something that people do. Speaking from the perspective of someone in theatrical exhibitions, the stories we tell about ourselves matter. That is important. That is what CBC does. CBC not only produces television shows and artifacts, but it also tells stories about what Canadians are doing in different parts of the country. It communicates that narrative in a central way. That’s its purpose as a public service.
The distinction in Quebec, where you have an existing system conveyor belt, a star system, a reliable, economically viable system of cultural production, is that it arises from the fact that there is a relative uniformity within the province to consume all of that, which is not necessarily competing with a nation to the south of 300 million people producing the stuff. That is really it.
How do you achieve that same amount of uniformity and ubiquity in English Canada? Well, it is difficult. It has to be really good and be able to capture the attention and imagination of people across the country. When you do that, it attracts the attention of people in the south. We can look no further than “Letterkenny” for that. It’s a popular show, produced in Canada, that has all of the tropes of Canadiana embedded into it. It’s very popular. “Trailer Park Boys,” from out East, is a similar story, and “Corner Gas.”
We often get asked for our thoughts on Canadian film. One of the main differences that we go back to — and this is something we said in the context of the culture review and way outside CRTC’s mandate — is marketing; telling Canadians about these shows that are out there.
Oftentimes you fund the production of these products and you don’t allocate enough money to tell people where they are and that they’re good. That is, again, outside the subject of your review today. I’m sure my colleagues can talk about this.
[Translation]
Senator Galvez: You mentioned that, to achieve its goal, Radio-Canada should provide funding based on objective criteria per capita rather than on discretionary and variable criteria. What do you mean by that?
Ms. Pilon: A study conducted in 2012, I believe, compared different countries’ investments in their public broadcasters. Canada ranked eighth.
We know that, depending on the governing party and its relationship with the public broadcaster, the parliamentary appropriation granted to the public broadcaster tends to fluctuate. The recent budgets of the current government have included an infusion of investments in Radio-Canada, but we also suffered from cuts for years under a number of different governments. During this time, the public broadcaster’s mandate has stayed the same. The mandate is written in the Broadcasting Act. However, the public broadcaster’s resources fluctuate greatly. For example, if an amount per person were established, in any case, it would significantly help.
Senator Miville-Dechêne: Because we’re a much smaller percentage.
Ms. Pilon: I was proposing a calculation per person, and not per language. At this time, the separation is two thirds to one third. However, we would propose this, rather than the government determining the parliamentary appropriation to grant to the public broadcaster each year.
[English]
The Chair: Thank you very much, witnesses. This was an interesting discussion.
Ms. Auer, maybe your neighbours don’t like you, but we love you.
Thank you all so much.
(The committee adjourned.)